LIVE OAK, CA (MPG) - The Live Oak City Council reviewed a midyear budget report Feb. 18 for fiscal year 2025-2026, which ends in June, as city leaders continued to confront a structural deficit across multiple funds.

Finance Director Ethan Gutierrez said the midyear review compares actual cash flow to the budget adopted last year.

The city closed fiscal year 2024-2025 with $1.64 million in the general fund. For 2025-2026, revenues are projected at $4.56 million while expenditures are projected at $5.64 million. The general fund is expected to end the year with $567,270, an improvement from the $196,617 projected when the budget was adopted.

The water fund ended 2024-2025 with a $37,000 deficit. For 2025-2026, revenues are projected at $1.42 million and expenditures at $2.5 million. The fund deficit is projected to reach $1.12 million by year’s end, improved from the $1.7 million deficit anticipated at budget adoption.

The sewer fund ended last fiscal year with $2.7 million. Projected revenues of $3.1 million fall short of $3.7 million in expenditures. The fund is expected to end the year with $2 million, up from the originally projected $1.4 million.

City Manager Ben Moody said city expenditures continue to outpace revenues. “It’s not good,” Moody said.

In the general fund, salaries and benefits total $1.89 million, or 26.3% of expenditures. Services and supplies account for $1.2 million, or 17.2%. The city’s contracts with Sutter County for police and fire services total $2.8 million and $1.2 million, respectively, and represent 56.6% of general fund expenditures.

Gutierrez said rising public safety contract costs, particularly for police services, have increased in recent years. The city is renegotiating those agreements with Sutter County in an effort to establish more sustainable costs.

Gutierrez warned that the city faces long-term consequences if it does not address the imbalance. “As an entire city, all our funds within the city, we are bleeding red right now. … It’s catching up to us,” he said. He added that several funds operate with structural deficits. “We’re already not starting off on the right foot,” Gutierrez said.

To reduce expenses, the city has delayed capital projects unless they are required for safety or operations. Staff are reviewing the city’s fee schedule to ensure charges reflect the cost of service. The council recently reduced development impact fees to encourage economic activity and support long-term revenue growth.

Moody said many remaining expenses are fixed costs necessary to maintain operations. He said staff will present options to address the deficit at future meetings.

The budget review was informational only. The council took no action.

The next meeting of the Live Oak City Council is scheduled for March 4.