Santa Fe Springs budget workshop flags water fund shortfall, $27.6 million in remaining CIP work

At a council budget workshop, Director of Finance Julio Morales told the Santa Fe Springs City Council that special-revenue transfers and one-time carryovers are covering an operating shortfall but the city’s water utility is running a structural deficit driven by rising imported-water costs and contaminated local wells.

Morales said special funds will transfer roughly $2.3 million back to the general fund to cover part of an earlier $1.5 million operating gap. He also told council members that the city shows about $9 million in restricted fund balances and roughly $12.7 million in capital projects currently planned.

"Half of our budget is the cost of imported water," Morales said. He said most of the city’s imported supply comes from the Metropolitan Water District, at roughly $1,300 per acre-foot, and that some local wells are offline because of contamination. "We have wells — four wells — that are all out of commission. They're all contaminated," he said, adding that remediation estimates run "anywhere from $3 to $5 million per well times four." Morales warned the council that Metropolitan Water District rate increases — 2.7% in 2024 and proposed double-digit increases in coming years, he said — will continue to pressure the utility budget.

Morales summarized: "In summary, we are in an unenviable position of running the structural deficit in the water department and cannot easily fix that without addressing the fundamental rate structure." He urged the council to approve the budget while the city develops longer-term financial solutions.

Public-works/CIP staff member James (last name not specified in the transcript) presented a snapshot of the capital improvement program. He said the city adopted a three-year CIP in 2022 that originally listed roughly 41 projects totaling about $27.8 million; the program has grown with additional projects and now shows roughly $27.6 million remaining to deliver. "I call our snapshot of where we are with our capital improvement program a snapshot because CIP is a continuously changing program," James said, noting that projects move from design to construction and costs are refined when actual contracts are awarded.

Workshop highlights and budget figures Morales identified during the presentation include: a $94.5 million starting general-fund figure discussed during prior sessions; an identified $1.5 million gap between requested budget additions and available revenue; transfers from special funds totalling about $2.3 million; about $7 million in annual grant revenues across funds; a starting special-fund balance near $19 million; and an estimated $9 million in restricted fund balances. Morales also described the waste-management fund with a prior balance of about $5.3 million and expected annual revenue of about $3.125 million from haulers, minus roughly $1 million in direct charges and a similar amount in salaries.

Council members and staff discussed the distribution formulas used by regional agencies and the impact on road and transit funding. Morales and other staff noted that some state and county formulas allocate funding by population rather than road miles or business activity, which the city said works against heavy commercial traffic in Santa Fe Springs. The council also heard that Measure SFS funds ($30 million held by a bond trustee) and Measure A homelessness allocations appear in other accounts and were not included in the general-fund report.

James said several CIP projects remain in design (about $3.3 million) and under construction (about $10 million), with future projects and regional coordination adding to the overall list. He told the council that some federal grant funds linked to projects such as Slauson remain tied up in federal review and therefore appear as future projects until funds are released.

Council and staff next steps: staff will prepare the formal budget books and follow up with more detailed fund-by-fund summaries; the city manager and finance staff indicated final adoption will be considered at the next regular meeting cycle. Morales and staff repeatedly emphasized that several balances are restricted by grant or program rules and are not available for general-purpose spending.

Ending: The workshop was informational; no ordinance or rate action was taken at the session. Council members signaled they will review staff-provided detail and consider the longer-term water-rate and capital funding options in subsequent meetings.