Lindsay dives into water fund woes

Lindsay reveals a struggling water fund in annual review, sees $2.4 million surplus in the general fund

LINDSAY – The good, the bad and the ugly of Lindsay’s previous fiscal year was highlighted at their city council meeting, revealing terrible water fund woes and positive revenue growth. 

On Sept. 27, Lindsay’s finance director Juana Espinoza informed council members of the city’s revenue and expenditures growth over the 2021-2022 fiscal year that ended on July 1. Lindsay received significantly more in the general fund, the primary operating fund of the city, than years prior. However, the city’s water fund continues to lack revenue, with the expenditures overwhelming the revenue. Despite living in a year full of unexpected financial burdens, such as inflation and drought related expenditures, Espinoza said the city’s finances have been predicted and accounted for.

“We knew from the beginning, in May 2021, that our expenditures were going to grow out of pace,” Espinoza said at the meeting. “That doesn’t mean, however, that we were caught off guard and we failed to plan for these new changes.”

THE BAD NEWS FIRST

Though revenue and expenditures are reflecting positive growth, the revenue coming from the city’s water fund is severely lacking. There is no significant revenue source coming into the water fund except for a reimbursement from the state, which came after there was an unsuccessful water well test performed in 2019. Outside of that reimbursement, there is not enough money coming into the fund than what is being spent, according to Espinoza.

“Our [water revenue] inflows are significantly less than anticipated,” Espinoza said. “Still better than the year before, but significantly less than we anticipated.”

All debts to outside water sources have been paid, but the city is struggling with internal water operating costs. There is currently no savings for operations, emergencies or capital reserves. Any funding needed for water will have to be supported by the general fund. It is difficult to project how much could be taken from the general fund in case of an emergency, as water emergencies can get quickly out of hand, according to Espinoza.

The city is not operating at 100% collections, which means there are some residents who have not paid their water bills. Espinoza said making these accounts delinquent could help, as it would encourage users to pay their bill on time. When an account becomes delinquent, the city can send a notice that the user’s water will be shut off until payment is received. The state mandates that bills unpaid after 60 days can be considered delinquent. 

In the year prior, the general fund provided $104,000 to continue water operations, which was better than expected, as Espinoza had predicted $300,000 would have to be taken from the general fund for water expenses. Espinoza said this is not a position Lindsay wants to be in, but it is not as bad as they originally thought it would be. Capital projects will be funded by ARPA for the foreseeable future since there are no reserves left for these projects.

City manager Joe Tanner said that the city was far behind in water delinquencies, so a solution would be to put these delinquencies on the tax roll to ensure collection. This method was stopped during the pandemic, but is an option for the future. However, even if the city was operating at 100% collections, there would still not be enough funding for the water fund, according to Tanner.

“If you need to raise revenue, there are only so many options,” Tanner said. “You either increase collection, you add users or you could potentially raise rates, but we are not proposing that at this time.”

With California’s drought, water is only getting more expensive, Espinoza said. In order to prepare for the future, the city will have to do more analysis. One solution would be to reach out to the state for more funding for water infrastructure in order to better cope with drought conditions, but nothing is in the works yet.

“We not only have to prepare for the future and think about that, but we also have to catch up to the present [water fund expenditures],” Espinoza said.

THE GOOD NEWS

The general fund’s total inflows were 7.9 million for fiscal year 2022. There was a $2.4 million surplus, which was growth that is both significant and out of the norm from prior years according to Espinoza. 

Lindsay exceeded revenue growth in many key categories from last year, such as sales tax, which accounted for nearly $400,000 of the surplus, according to Espinoza. The city budgeted for less property tax revenue than what was received, exceeding expectations from last year. 

Overall outflows of the general fund were higher than the year before, totaling $5.4 million compared to the prior year’s $4.9 million. Some departments planned to purchase more equipment or new positions which made their expenditures higher, but this growth was accounted for and necessary, according to Espinoza. 

“I’m very proud of this, coming in this close to your expected expenditures is pretty impressive,” Espinoza said.

A large part of expenditures this year were new positions added to departments. The public works department hired a planning manager, animal control hired a new officer and a fire lieutenant was hired for the public safety department. 

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