The City of Sonoma’s five-year financial projection looks grim

The City of Sonoma General Fund Budget for 2024/25 shows a deficit of $2,856,287, roughly two million dollars more than the previous year’s budget. What’s more, a five-year forecast prepared by the City Manager and Finance Department indicates that deficits will continue, with a deficit of at least $2 million in each of the next five years, as the chart below shows.

During this budget cycle, increases in the cost to the city for police services (provided by contract with the Sonoma County Sheriff’s Office) and firefighters (though a contract with Sonoma Valley Fire and Rescue) amounted to roughly $1 million over the previous year.

While solutions to narrowing the budget deficit were not specifically identified during the City Council’s recent budget approval hearings, City Manager David Guhin noted the steps the city is already taking and others that he feels should be taken. Included among the steps already taken are:

• Refine department budgets
• Delay non-essential capital improvement projects
• Utilize unallocated reserves for one-tome additional expenses
• Evaluate revenue ballot measure for November 2024 to enhance services

In addition, he identified steps to be taken in the immediate future to address the budget deficit. These include:

• Evaluate actual sales tax, property tax and TOT revenue at Mid-year and update 5-year forecast
• Update 2023/24 unspent funds from budget closeout to finalize actual reserves
• Review actual revenue and unrestricted fund level, reevaluate 2024/25 on-going budget additions
• Conduct Fee Study for Impact Fees to address infrastructure needs from development
• Evaluate PERS unfunded liability funding strategies (Pension Funding Policy) including presentation by CalPERS actuary
• Create/update policies with the Finance Committee: New surplus utilization, new policy, budget administration policy, reserves level policy
• Bring revenue Ballot Measure for the 2024 Ballot to Council in July for consideration

“The General Fund reserve has grown to approximately $13.3 million over the past years, more than adequate to weather a modest downturn or even a more serious recession,” he noted in his report, but also concedes that “If the above strategy types do not yield sufficient fiscal savings to the General Fund, the City will need to explore service level reduction strategies in order to achieve fiscal sustainability. This is considered a strategy of least desirability due to negative impacts on residents, and municipal infrastructure.”

Report by Larry Barnett