Logo courtesy of the City of Live Oak

LIVE OAK, CA (MPG) - At the Oct. 1 meeting of the Live Oak City Council, a resident spoke during public comment to share plans for a citizens’ initiative in the next election. The city contracts with Sutter County Fire Department for fire services, and as a fire captain in the department, she said she understands the city’s financial challenges in covering those costs. The initiative will be a fire-only tax measure specific to Live Oak. If approved by the voters, the tax would be levied per parcel, with revenues going to the city to cover fire services. 

The council considered an updated Memorandum of Understanding (MOU) with Public Employees Union Local No. 1. City Manager Ben Moody said the city and the union were able to work together to reach a reasonable agreement: a two-year term, with a 1.75% cost-of-living increase this fiscal year and a 1.25% increase the following year. Also included is a uniform allowance for maintenance workers to cover the cost of new steel-toe boots. 

Moody said the fiscal impact to the city’s budget will be an additional $19,000 this year.

Councilmember Nancy Santana said, “Our union rep is usually pretty fair with us. And they definitely deserve some boots.”

The council voted unanimously to approve the Memorandum of Understanding. 

City Manager Moody then presented an in-depth budget analysis with options to help “course correct the city.” He said there needs to be some “tough discussions. The city has a severe structural deficit. High level, we’re bringing in $10 million, we’re spending $15 [million]. That just doesn’t work.”

Moody said while costs everywhere are increasing, the city’s revenues are flat — mostly coming from property taxes, water and sewer rates, vehicle licensing, sales tax and community facilities district (CFD) fees on homes built after 2004.

The water fund is operating at a deficit, but Moody said that will course correct over the next few years due to the recent rate increases. 

But in the sewer fund, “rates are not keeping up with operational costs,” said Moody. The city built a new sewer facility in 2013, and rates have not increased since that time. And there are not enough service connections in the city to offset the increasing operational costs. So, Moody said that fund is now running into a structural deficit as well. 

Looking at citywide cashflow, including the general fund and all restricted funds, Moody said, “We’re starting this [fiscal] year with $7 million in the bank, all in. We’re taking in revenues of $10.5 [million]. Total outflow is $15.3 [million]. And so, you carry that over to next year…July 1, 2026, you’re going to have $2 million in the bank, all in. And by the end of the year, you’re going to be -$400,000 if we don’t do anything different.” 

Moody said the city is already operating with very limited staff, and even if every employee were laid off, “you’re still barely treading water.” While he recommended maintaining some existing vacancies, cutting employees won’t solve the problem and would cause significant issues to vital operations: “You can’t just cut your way out of this.”

There are many capital improvement projects planned for this year, but Moody recommended some be delayed until the financial situation improves — such as the pool resurfacing project, Garden Glen Park improvements, Ash Street sewer hatch and water infrastructure improvements.  

Other recommendations included increasing revenues by updating the Master Fee Schedule to align with actual costs and municipal code updates to spur new development. Revenue could also be generated through modifying the existing special property taxes, implementing new public safety property taxes, or a general sales tax initiative.  

Moody also suggested sending notices to Sutter County Sheriff and Fire Departments to initiate a potential termination of the existing annual service contracts — $2.7 million for police and $1.3 million for fire. The 12-month process would need to begin soon, in order to be eligible to end next November. Moody said the contracts could be renegotiated to levels the city can afford, or they can be maintained without change if new revenue sources are identified in the meantime. 

“Something has to change very soon,” said Moody, otherwise those bills are going to come due, and the city won’t be able to pay them. 

Councilmember Santana agreed that it would make sense to delay capital improvement projects, but she did not agree with sending termination notices to the police department, and especially not to the fire department.

“They save lives here; they save properties here. I think that’s an insult to them,” Santana said.

Santana asked how there was a deficit in the sewer fund, since she believes the rates in Live Oak are higher than neighboring areas. 

Moody explained that under the current sewer rates, the city collects $2.5 million per year but spends $4.3 million, so they have burned through the fund’s reserves. 

Vice Mayor Aaron Pamma thanked Moody for the analysis: “It puts a lot into perspective.”

Pamma asked whether the city would even have enough money to pay the police and fire contracts next year if no changes are made. 

Moody said he doesn’t want to cut the contracts, but “you’re going to run out of money,” and the city will still be legally responsible for paying the costs of the contracts. He clarified that the notices do not officially terminate the contracts but provide an ability to make changes if needed. 

Pamma said there is only so much the city can cut from the budget without sacrificing quality of life for the residents, so he didn’t want to see increases to resident fees for programs or services. He recommended focusing on attracting new developments to collect more impact fees and sales taxes. He also suggested selling some city-owned properties to bring in immediate revenue. 

Moody agreed that new development would provide long-term benefits but won’t solve the immediate cash flow issues. He also explained that the sale of city-owned properties are bound by Surplus Land Act restrictions, and some parcels are deed-restricted for public use. 

Councilmember Bob Woten said he felt uneasy sending notices to the police and fire departments, but he understood it was strategic placeholder in case they need to make changes.

“I don’t think any of us want to cut services. It’s just a rock and a hard place,” said Woten. “We just have to move forward and keep exploring and making decisions as to what we think is the best path.”

Councilmember Ashely Hernandez said, “Your costs can’t exceed what’s coming in; it just doesn’t make sense. You just can’t sustain that. … We respect and love our fire department and sheriff. It’s just at what point do we leave them high and dry for services that we can’t pay for? That’s offensive to do to them. They deserve those payments.” 

“We’re really in a bad position,” said Hernandez, and she suggested that the city manager bring back all his recommendations for more detailed council discussions. She also agreed that she didn’t want to raise fees for residents. 

Mayor Jeramy Chapdelaine said the initial sewer rate study from 2013 predicted a deficit if rates weren’t raised periodically over time, so the “decisions of the past eventually catch up.” 

Chapdelaine made it clear that the city appreciates the services of the police and fire departments. He said, “To not make a decision would be extremely irresponsible,” because if the city is unable to pay for services and ends up in debt to these other agencies, “that could be the difference between fiscal restructuring and actual bankruptcy.”

“It’s a pretty dire situation. These are hard conversations,” said Chapdelaine, but he was clear that the city will work with their county partners to find solutions. 

Councilmember Santana continued to express confusion about the sewer fund deficit and asked about the possibility of conducting a new rate study. 

Mayor Chapdelaine said with the city’s financial situation, they are unlikely to afford the cost of a rate study at this time. City Manager Moody added that a rate study would certainly recommend increasing the rates. 

During public comments, Patrol Captain Jason Piazza said the Sutter County Sheriff’s Department understands the position the city is in and wants to be good partners by negotiating a reasonable contract that maintains public safety. 

Councilmember Woten made a motion to send notices to the police and fire departments, along with the establishment of an ad hoc committee to oversee any renegotiations. The motion was seconded by Vice Mayor Pamma and approved 4-1, with Santana dissenting. 

The council also reached general consensus to direct City Manager Moody to look at all the other options in more detail and bring recommendations back for council consideration.