Oakley finance staff outline $473,000 general‑fund shortfall after Franzen Lane rebuild; council to use capital funds to cover gap

City finance staff told Oakley City Council that a major unplanned expense — a near‑total rebuild of Franzen Lane — pushed the streets budget well over estimates and is the primary driver of a projected general‑fund shortfall for fiscal year 2025.

Finance staff said the city originally budgeted roughly $125,000 for a street project on Franzen Lane but the work required excavation and a new road base, with actual costs about $490,000. After accounting for routine revenue and previously planned transfers, staff said the city faces a projected general‑fund gap of about $473,000 as the fiscal year closes.

Staff outlined two main options for covering the shortfall:

- Option 1 (staff preference presented): Keep the city’s previously committed $125,000 annual transfer to the water fund (required under earlier council commitments), apply restricted Class C road reserves ($234,092), and transfer roughly $238,003.37 from the capital fund to cover the remainder. That would leave an estimated $375,000 in unassigned capital reserves.

- Option 2: Forego the $125,000 water‑fund transfer and instead apply the Class C road reserves plus about $113,003.37 from the capital fund; that approach would leave the capital fund with roughly $500,306 in unassigned reserves but would delay the water transfer the council previously committed to.

Finance staff emphasized tradeoffs. Keeping the water transfer preserves the city’s prior commitment but reduces capital reserves; skipping the transfer increases capital cushion but breaks a prior funding plan the council adopted after a truth‑in‑taxation process.

Councilmembers asked about other variables. Staff noted the city’s capital account carries an $862,000 fund balance as of April 30, of which $135,000 is restricted to a specific grant project and $114,000 is encumbered by an outstanding contract with an engineering firm, leaving about $613,000 unrestricted before any transfers. Staff also reminded the council that the capital fund is limited to capital‑related spending while the general fund’s unassigned balance is unrestricted.

Councilmembers discussed the arena/rodeo master‑plan work, the possibility of using rodeo or restaurant‑tax revenues for some planning costs, and the timing uncertainties tied to the city’s well replacement project and its USDA financing. Several councilmembers said they favored preserving the council’s commitment to the water transfer and covering the remainder from capital to maximize general‑fund flexibility; staff said that approach was workable provided the council accepted the lower capital cushion.

Finance staff also warned of an additional financing risk tied to the well replacement project. The city is relying on USDA loans for major well financing; staff said USDA has signaled the city’s funding is contractually obligated but that USDA wants the well rebuild substantially completed before it will disburse its portion. That delay raises the prospect of longer interim financing and an incremental interest cost if the USDA portion closes later than expected. Staff said the interest‑rate differential could be roughly a percentage point or more, and the city’s exact dollar exposure depends on timing and final amortization schedules.

Council gave direction to staff to prepare the fiscal 2026 budget materials and to proceed with the option to preserve the $125,000 water transfer while applying Class C road reserves and a capital transfer to cover the immediate shortfall. Staff said they would return with final budget documents for public posting and the scheduled budget hearing.