Council considers resolution prioritizing repayment of internal loan and directing reserve-policy review

Councilmember Vivian introduced a proposed resolution on Oct. 21 asking the council to state its intent to prioritize repayment of a recently issued internal loan and to direct administration to address reserve-policy language during the 2026 mid-biennium modifications.

The problem addressed: The city's existing fund-balance and reserve-replenishment schedule does not explicitly account for the need to concurrently repay an internal loan. Vivian said the resolution would not itself change the financial policy but would instruct staff to incorporate loan-repayment priorities into the 2026 policy updates and mid-biennium budget adjustments.

Key points from discussion: Councilmembers agreed the legal repayment schedule must be respected. Will noted statutory timing requirements related to loan repayment that govern the city's repayment window; others emphasized that operational spending increases should be deferred until after reserves are rebuilt. Michelle recommended simplifying a parenthetical phrase that referenced a policy revision by council in 2026; council members agreed to remove that parenthetical to avoid implying an automatic policy change.

Why it matters: The resolution is intended to be a public statement of fiscal priorities (repay the loan first; then rebuild reserves up to policy targets) and to instruct administration to return to council with specific policy and budget adjustments. Staff said the mayor and finance director are coordinating further on reserve targets and that administration will return proposed revisions to the financial policy for council consideration.

Next steps: Staff will include the resolution language in the mid-biennium discussion and will bring back proposed policy changes and a schedule to reconcile loan repayment and reserve replenishment. Council did not take a final vote in the committee; staff proposed placing the resolution on the next consent agenda.