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Staff proposes interfund loan to prevent negative general-fund balance; council to consider transfers
Summary
City staff warned the general fund could fall into the negative and recommended an interfund loan (proposed $280,000 total from the capital improvement fund) split across several funds to produce a balanced budget for 2026, with payback terms to be set later.
Staff presented two draft ordinances for the 2026 fiscal year and highlighted a projected general-fund shortfall in excess of $100,000. To address the imbalance, staff recommended an interfund loan to cover temporary deficits while the council and incoming mayor work on longer-term revenue and expenditure adjustments.
The staff member outlined the proposed loan amounts: $105,000 to the general fund, $57,000 to the cemetery fund, $5,000 to the city street fund, $103,000 to the water fund and $61,000 to the garbage fund, with approximately $280,000 proposed to come from the capital improvement fund (real-estate excise-tax-supported). “I recommend that the council approve an interfund loan,” the staff member said, noting that state rules require that loans come from funds that can afford them and be repayable with interest.
Staff cautioned that using capital improvement funds requires a capital improvement plan for some expenditures and that certain funds such as CDBG carry federal restrictions on use. The staff recommendation included preparing a later resolution to move the funds and a repayment schedule (likely with a small interest rate) and that the first payments would be due in 2027.
Council discussion focused on the timing, legality and the need for a capital improvement plan before spending specific capital-tax funds; staff recommended approving the budget with the interfund-loan option and deferring detailed transfers to a 2026 resolution.
