Revenue loss in Rio Communities brings budget concerns

RIO COMMUNITIES—The city of Rio Communities is facing significant budget challenges this year as previously-committed funding is set to sunset this summer.

Cassandra Montano, the city’s finance officer, warned the council and mayor at last week’s regular meeting that they will soon have to make some difficult decisions in order to create and adopt a balanced budget.

Before Montano made her presentation to the governing body, City Manager Marty Moore explained they are analyzing what the city’s revenue needs will be.

“Part of the reason for this discussion ... before we start any actual budget discussions ... I want you to know where we stand and how we could absorb expenses such as the recruitment and retention grant expenses,” Moore said.

Montano went through the city’s actual revenues and expenditures, as well as the projected numbers for the new fiscal year, which begins on July 1. The finance director said the city has several options moving forward.

“The purpose of this presentation is to provide a clear picture of where our revenues and expenses are headed, identify projected budget gaps and provide several options,” Montano said.

The current year’s revenue for the general fund is on track to bring in $1,981,338, with funds coming in from the usual sources, such as gross receipts tax, property tax, franchise tax, licenses and permits, charges for services and others.

Montano is estimating the revenue for the next fiscal year will total about $1,912,175 — $59,000 less than this year. She said the reason for the decrease is the reduction in the state share of tax distribution and permit activity.

The city’s finance director explained they are projecting some major expense increases for fiscal year 2027, including a $30,000 payment increase for the Valencia Regional Emergency Communications Center — from $77,500 to $107,500.

Montano also said two recruitment funds the city had been using — the law enforcement recruitment fund ($56,250) and firefighter recruitment fund ($431,250) — to staff positions in both departments will be ending on June 30.

“We also have a 10 percent contingency ($193,373), which is considered best practice,” Montano said, “providing for unexpected expenses and budget overruns.”

She also pointed to the city’s reserve fund of $225,000, which the city maintains for financial stability expectations and helps protect against GRT revenue volatility.

“When we look at the projected general fund expenses for fiscal year 2027 is about $3.07 million,” Montano said. “This is assuming that all current staffing and service levels remain the same. What we’re seeing here is not the result from major expansions; it reflects the cost of maintaining the city’s level of operations.”

Montano said when she compared the projected expenses ($3.7 million) to the projected revenues ($1.9 million), there is a $1.16 million gap.

“The gap represents the difference between what it costs to operate under the current level and revenue that is expected to come into the general fund,” the finance director explained. “We want to bridge that gap.”

There are several different ways to bridge that gap, including reduce spending, such as freezing vacant positions, freezing discretionary spending, and implementing conservation measures, such as electric, water, fuel and supplies. Montano also mentioned a reduction in capital spending to grants only, consulting contracts and reducing staffing levels.

She also gave the governing body suggestions to augment revenues, such as increase property taxes, increase the local option GRT by .45, which would require a referendum by voters. The city could also obtain new no-match or low-match grants for community infrastructure projects, apply for federal recruitment grants for vacant positions only and action excess assets, such as furniture, equipment and vehicles.

Montano did not recommend that the city reduce its reserve levels or use available cash.

Councilor Matthew Marquez asked if they did decide to increase property taxes, how long would it be for the city to receive that funding. Moore told the councilor it would take a half-year’s worth of revenue, but it wouldn’t be realized until next fiscal year.

The manager said an increase of .45 in GRT would bring about $75,000 a year, and it wouldn’t be available until next year.

Moore said one grant Montano is working on is an allocation from the federal government for recruitment and retention of police officers. He said it could bring in between $300-400,000. He also said the Law Enforcement Protection Fund, which had been mandated to use for equipment is now available for salaries as well.

The city manager did have a good piece of news for the council, saying Rio Communities received $200,000 more from the Small Cities Assistance Fund than they anticipated. Montano said the city took in a total of $651,310 this year, which will help.

“I think messing with property taxes is a very hot-button issue right now, especially now that the rates are erroneous,” said Councilor Michael Melendez. “We need to market the city more, and realizing that Rio Communities is a quiet, rural community, it’s going to develop and that’s a good thing. The residents and the governing body will determine how that will occur.”