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Interim finance director reports improved interest earnings, cautions on budget outlook
Summary
Interim Finance Director Terry Schuster told the council the city's LGIP and longer-term US Bank bonds are earning higher interest, producing a favorable variance in the general fund; staff cautioned revenue timing and upcoming audits will shape the 2026 budget process.
Interim Finance Director Terry Schuster briefed the Shelton City Council on July 15 on city investment balances, year-to-date revenues and the 2026 budget schedule, saying interest earnings have increased but cautioning that revenue timing and summer expenditures will influence final balances.
The report matters because stronger interest income and careful spending could narrow the city's budget gap for 2026, but staff said it is too early in the year to assume current trends will hold.
Schuster told the council the city holds approximately $6.5 million in US Bank bonds and about $18.7 million in the Local Government Investment Pool (LGIP). She said the LGIP was yielding about 4.38 percent and that citywide interest income for 2024 totaled about $638,000, compared with $412,000 in 2023 and an eight-year average of about $202,000. Schuster said investment maturities from US Bank have been rolled into LGIP to capture higher returns.
On the general fund, Schuster said the May report shows an ending fund balance of just under $6 million and reminded the council of its 20 percent reserve policy. She said sales-tax collections in the packet reflect a two-month state reporting lag and that business-and-occupation tax collections have been strong; miscellaneous revenue gains were driven in part by investment income. Schuster also reported two department vacancies (community development and storm drain utility) since April.
Regarding audits, Schuster said she has a pre-audit meeting scheduled with the state auditor's office and that the city faces a federal single audit for grants that must be completed by Sept. 30. She said the timing and scope of financial and federal single audits could affect the reporting schedule.
Council members asked whether the city budgets revenues evenly by month or uses historical averages; staff said the budget uses historical trends and that spending and revenue timing can fluctuate seasonally. Schuster and other staff said they would continue monitoring revenues and expenditures and present tighter projections as the budget process advances toward preliminary and final budgets in the fall.
Next steps: staff will continue to monitor the 2025 revenue and expenditure trends, complete required audits and provide updated budget projections to council during the 2026 budget process.
