Just one month after approving a roughly $6.86 million balanced budget, the city of Dos Palos is facing a cash-flow squeeze.
Officials postponed authorizing payment of the city’s bills at their Tuesday council meeting due to fears the city would be unable to pay its employees during its next payroll.
The council’s decision follows a July 15 special meeting where members approved transferring up to $150,000 from the city’s investment account to make its July 20 payroll. During the meeting, Dos Palos Finance Director and Assistant City Manager Manuela Sousa warned that if the council could not assure future payroll, it could direct city employees to not report for additional work beginning the next day.
“We currently don’t have the revenues to meet our expenses,” Dos Palos City Councilmember Marcus Porter said. “Unfortunately, that’s through mismanagement.”
City officials were presented with bills totaling over $405,000 at their July 21 meeting, which included electricity, water costs, fuel, software, consultants and payments to local businesses. Mayor Katy Reed said the city could not pay every bill on the list while preserving enough cash for its upcoming Aug. 5 payroll.
During the recent meetings, Sousa characterized the city’s problem as a cash flow shortage. City staff told the council that July through September are typically difficult months because revenue does not arrive evenly throughout the year.
City officials said Tuesday that they intended to meet again Friday, July 24, at 5 p.m. for a special meeting to determine which bills should be paid immediately and which bills can wait. The aim is to prioritize bills that will keep essential services operating, Reed said, with a secondary consideration for local businesses.
However, the July 24 special meeting agenda includes only one business item for the city council: to consider authorizing Sousa to transfer funds to ensure timely payroll processing. It does not list the pending expenses for discussion or action.
“Can it be fixed? I believe it can,” Porter said. “We’ve been behind (the) times for quite a few years, and I think we need to update our processes.”
To address the financial bind, Porter said he wants the city to consider a half-cent sales tax increase, an idea he said he first proposed six years ago. Just last year during a special election, Dos Palos voters approved a half-cent sales tax, Measure S, to raise money for fire service.
Councilmember Claudia Bautista said she believes cuts may be necessary for the city to meet its expenses in the coming months. Fellow Councilmember Armando Bravo did not return a request for comment.
Finance Director Sousa declined to be interviewed for this story.
Dos Palos resident Laura Andrews, who attended the city council meeting, said she believes the city finances can recover, but she wants residents and city employees included in developing a long-term plan. Potential rate increases for city utilities, she noted, would be challenging for residents living on fixed incomes.
“I’m born and raised here. I don’t think we’ve ever seen anything like this before,” Andrews said. “We’ve been in some tough spots … so, that’s why I don’t think it’s unrecoverable.”
The financial woes for the city of Dos Palos come on the heels of a revelation that the officials misused roughly $2.2 million in Measure V funds to cover city expenses and shortages. The most recent city budget does not account for repayment of those funds to the Measure V account.
The Merced County Association of Governments (MCAG), which oversees Measure V distributions, has requested a formal repayment plan from the city and is holding new Measure V distributions in an interest-bearing trust account. The funds will not be released to until Dos Palos restores the $2.2 million to its Measure V account with interest, according to Mayor Reed.
MCAG has not given the city a deadline for the plan to be submitted, nor a deadline for payments to begin, according to Reed. The mayor, who also sits on the MCAG board, said MCAG is “very aware” of the city’s financial situation.
“Given the information we got (during our last meeting), I don’t see how it would be feasible to do any kind of payback and maintain employees,” Reed said.
MCAG Executive Director Stacie Guzman was unavailable for comment.