Grover Beach council approves interfund-advance policy, asks staff for loan-repayment scenarios and timing on water studies

The Grover Beach City Council on May 12 received a fiscal update for the 2025–27 budget cycle, adopted a formal interfund-advance policy and pressed staff for options to accelerate repayment of interfund loans tied to the wastewater fund.

Administrative Services Director (presented as) Zomet and Assistant City Manager Chris Erickson summarized the two-year budget framework staff will present at the public hearings. Staff said the proposed budget aims to remain balanced while keeping reserves above the council’s 25% target. Staff described the principal proposals in the draft: a 3% cost-of-living adjustment for labor agreements, $100,000 in capital funding for ADA work, $433,000 for an equipment reserve to support vehicle leases, and assumptions for a 3.3% increase in the Fire Authority contract and inflationary increases to insurance premiums.

Zomet and Erickson said enterprise funds will be adjusted under current planning assumptions: the water fund is modeled with a 4% increase and the wastewater fund with a 2% increase (both per the expired 2021 rate structure assumptions). Staff also listed some specific capital items under consideration: $100,000 for electrical work on Well 4 and $300,000 set aside for a water-resiliency study. Staff noted that wastewater and water rate studies are part of the work program and that a new wastewater rate structure would be implemented if adopted by council.

Council considered a proposed interfund advance policy that would formalize short- and long-term loans between city funds. The policy as approved requires city council approval by resolution for any advance and an accompanying repayment schedule and recognizes that loans cannot be made from restricted or legally encumbered funds without the city attorney’s written authority. Council members requested stronger language clarifying that interfund advances should be used only in exceptional circumstances and confirmed that any legal review of encumbered funds would occur before council action.

Council discussion focused heavily on previously disclosed interfund loans from the general fund to wastewater and on the timeline to repay those loans. Several council members and members of the public urged the city to accelerate repayment; staff said that fully repaying all loans within two years would likely require lowering reserves below policy levels and that a six-year repayment window had been modeled. Council asked staff to return to the public budget hearings with multiple repayment scenarios (for example, two-, three- and six-year schedules) and with analysis of possible impacts to reserves and other services. Staff said the rate consultant had indicated accelerating loan repayments would not materially change the wastewater rate calculation, but council still requested scenario modeling before final adoption.

Council and staff also discussed the $40,000 placeholder in the draft for a water-rate study. Some council members argued the study could wait until outcomes of the Lopez pipeline investigation and other supply-resiliency work; others expressed concern about letting a rate structure lapse without an updated study. No final action was taken to remove the study allocation at the May 12 meeting.

The council voted to approve the interfund-advance policy with the clarifying language directing that advances require council approval, accompanied repayment schedules, and prior city-attorney review for legally encumbered or restricted funds. The vote was recorded as unanimous by roll call.

Council directed staff to return to the upcoming budget hearings with: (1) repayment-schedule scenarios for existing interfund loans; (2) revised materials that clearly show developer impact fees and what developers currently pay toward water and wastewater capacity; and (3) clarified timing and triggers for the water-resiliency study and any water-rate study.