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Capitola treasurer reports tight summer cash flow; staff outlines short-term options
Summary
Finance staff told the council the city's cash balances run lowest from July through December due to timing of revenues and large early-year expenditures; staff cited grant reimbursement lags, a negative CIP position and potential options including spreading CalPERS payments or issuing short-term notes.
Capitola city staff on Oct. 9 presented a monthly treasurer’s report and cash-position update showing seasonal cash pressure in the first half of the fiscal year and several project-specific reimbursement lags.
Staff explained the city typically runs its lowest cash balances from July through December because major revenue streams such as sales tax and transient-occupancy tax lag the months in which the activity occurs. On the expenditure side, the city pays significant costs early in the fiscal year, including insurance and a large CalPERS unfunded-accumulated-liability (UAL) payment when made as a lump sum.
"There is a seasonality to our cash flow and we typically run our lowest balances from July through December," the treasurer’s presenter said, adding that the city keeps a $500,000 general-fund operating balance and a $2.5 million contingency reserve but that even a 1% shortfall in sales tax (approaching $10 million annually) would materially affect reserves.
Staff flagged several reimbursements still outstanding, including federal grant reimbursements tied to the Jade Street Community Center and storm-damage reimbursements related to The Wharf. The capital-improvement program (CIP) fund was shown in a negative position, in part because the city has been delivering projects with grant-funded reimbursements pending.
Short-term options described by staff included spreading the CalPERS UAL payment across the fiscal year (which staff estimated would increase cost by about 3.4 percent, roughly $100,000), drawing on the city’s retirement trust to capture savings, gradually increasing contingency reserves over multiple budget cycles, or—if needed—issuing a tax-revenue anticipation note to cover the summer shortfall.
Council members thanked finance staff and public works staff for delivering projects despite the cash timing challenges. "Thank you for doing this. I thought it was very informative and it's hard for people to understand how the cash flow in cities often work," one councilmember said. Director Jessica Khan was singled out by council for leading project delivery that contributed to temporary cash pressure.
The council moved to receive the monthly treasurer’s report and cash-position update; staff will continue to review cash-management options as part of next year’s budget process.
