Cudahy council warned of widening budget shortfall; staff to explore ballot extension and cost options

City staff told the Cudahy City Council on Tuesday that preliminary work on the fiscal year 2026-27 budget shows a general-fund shortfall of about $1.8 million and a deteriorating fund balance if current revenue and cost trends continue.

Kaye Godby, who joined the meeting remotely as the presenter of a five-year financial forecast, said the model assumes essentially flat revenues and modest inflation in expenses. "We're going from 1.8 this year to 2.3 next year to over 4,000,000 the following year" after the expiration of a 0.75 percentage-point sales tax measure, Godby said, referring to the loss of that one-time revenue stream in 2028.

The city manager framed the presentation as an educational item rather than a decision tonight and highlighted long-term structural gaps: audited figures provided in the staff packet showed revenues rose to about $13.4 million while expenditures reached about $17.2 million in the most recent audited year, producing a roughly $3.8 million shortfall in FY23-24. Staff also noted a $5.1 million debt issuance in FY22-23 that temporarily improved cash but does not resolve ongoing imbalances.

Council members pressed staff on why those projections differ from earlier presentations. One councilmember said the council had previously been given a rosier picture and accused prior staff of withholding or misrepresenting information; the councilmember added, "we were lied to" about the city’s earlier financial posture. City staff responded that differences can arise between the adopted budget, midyear reports and audited statements and that some construction-related revenues and inter-period allocations had been overestimated in prior projections.

Council members and staff discussed a range of policy responses. The city manager outlined three broad approaches: (1) pursue revenue enhancements to maintain current service levels, (2) align expenditures to a lower revenue baseline, or (3) pursue a blend of both strategies. Staff recommended several near-term actions including presenting audited financial statements to the council, completing a fee-for-service study, and embedding departmental budget ownership and more frequent forecasting.

Several council members supported exploring a ballot measure to continue the expiring sales-tax measure rather than increasing taxes, with staff directed to work with the city attorney on timing and required resolutions. Staff noted a July 7, 2026 filing deadline if the council wants an item on the November ballot. Councilmembers also discussed alternative revenue ideas — from bonds for capital projects like parks to grant seeking and streamlining permitting — and urged a robust community education plan if the city pursues a ballot measure.

Public works staff also briefed the council on the capital improvement program: Raul Diaz said the public works department identified 10 projects for FY26-27 with estimated total costs a little over $36,000,000; most projects are at the design stage and a minority (about 30–40 percent) are expected to move into construction next year, and Carrée Park was cited as starting construction in May using grant funds.

The council took no final votes on the preliminary budget during the meeting; the item was received for information and staff said they will return with additional analyses and options (including user-fee study results and proposed voter-education materials) as the budget process continues. The meeting adjourned at 7:56 p.m.