Cathedral City staff present biannual general fund budget showing near-term deficit, reserves above policy

City Manager Charles McClendon and Financial Services Director Kevin Biersack presented Cathedral City’s biannual general fund overview at the council’s April 9 study session, laying out revenue projections, staffing levels and a set of one-time or deferrable items staff called “springs.”

Biersack said the city currently projects recurring revenues and expenditures of about $141 million and a first‑year shortfall just under $900,000, with a projected surplus in the second year if the assumptions hold. He said staff are using historical data, private forecasting (HDL), state and county estimates, and internal analysis to produce the plan. “There’s quite a bit of uncertainty in the financial world out there right now,” McClendon said, and staff built the budget “based on the best information that’s available now.”

The presentation emphasized a conservative approach to revenue forecasting and higher-end budgeting for expenditures. Taxes make up roughly 70% of the city’s General Fund revenue; salaries and benefits account for about 57%–58% of expenditures, producing an overall “people‑heavy” budget where roughly 85% of operating costs are labor and related services.

Staff identified a set of ‘‘springs’’ — one‑time discretionary items or deferrable projects — that can be postponed if revenues soften. Examples include parking garage repairs, fleet replacement allocations, other post‑employment benefit (OPEB) contributions and a modest parks program allocation. Biersack told the council some of those items are budgeted now but can be brought back for council direction to delay or cancel if revenues weaken.

Pension and retiree liabilities were singled out as required and discretionary items. Biersack explained the city must pay its annual California Public Employees’ Retirement System (PERS) current allocation; additional prepayments toward the unfunded actuarial liability (UAL) are discretionary and not included in the proposed budget. He noted the city pays PERS in advance to obtain a discount and has previously made optional payments from insurance fund savings. OPEB allocations appear in the draft budget as an annual payment staff may recommend postponing if revenue softening occurs.

Staff proposed staffing modifications and additions across departments. The proposed 231 full‑time equivalent (FTE) positions include public safety increases: two dispatch positions to re‑establish emergency medical dispatch (EMD) capability and, in the second half of fiscal year 2026–27, a new community service officer. The fire department’s proposed increase of eight positions (six funded by Measure W) would raise department FTEs; the council was told the city currently has three battalion chiefs and four chiefs when counting the fourth ambulance concept.

One‑time capital and maintenance items listed in the draft budget include: parking structure repairs and safety panels, solar panel replacements, HVAC replacement and roof and facility repairs across city properties, a potential modest neighborhood splash pad (budgeted at $400,000 in year two), and an entry monument program that staff modeled as a $125,000 annual commitment over 11 years. Staff told council the splash pad estimate has ranged as high as $900,000 in prior analysis and that the $400,000 figure reflects a modest design and funding mix including an environmental fund contribution.

Staff also noted legal services projections were reduced by $70,000 in the coming budget through better charge allocation across departments, and that investment holdings are conservative — primarily Local Agency Investment Fund and bank accounts — yielding roughly 3–4% interest in the current environment.

On reserves, staff presented multiple budget scenarios. The city’s projected fund balance reserve would remain above the 33% policy minimum across the scenarios shown: with the one‑time items included the result would be a projected reserve in the mid‑40% range in the two years displayed; excluding one‑time items yields a higher ongoing reserve. Biersack said the budget binder will be refined prior to the May proposed budget and that staff will return with updates at the regular May meeting and with department budgets in subsequent study sessions.

The April 9 session was presentation and discussion only; there were no formal votes on the budget at this meeting. Staff will return with the proposed budget for adoption in May.