JOHN DAY — The city of John Day has a cash carryover problem and the city’s urban renewal agency is not generating the amount of revenue necessary to fund its debt service.

A presentation by City Recorder Rob Gaslin to the John Day City Council on April 23 revealed that the city has between $600,000 and $700,000 in cash in the bank, enough to comfortably run the city for about a month and a half.

That’s not enough, Gaslin said: Ideally, the city should have three to six months of cash carryover in the bank, or somewhere between two and four times what it currently has on hand.

The reasons for the city’s low cash flow are twofold, according to Gaslin: First, the city overestimated the amount of revenue it would be receiving during the current budget year. Second, there’s been a steady stream of unexpected bills trickling in that weren’t accounted for in the budget.

“In the nine months I’ve been working with the city, all I’ve had are unexpected expenditures,” Gaslin said.

The risk with those unexpected expenditures is a scenario where the city receives a large bill that puts it in a questionable financial position.

Gaslin said he’s not sure exactly how the city’s finances got to this point, but it is impossible to believe that the city’s high staff turnover rate and extended time without a permanent city manager in 2023 didn’t play a role in the current cash carryover bind.

“I can’t say the full magnitude is attributable entirely to it,” he said. “But I can say that, yeah, if you had consistent accounting, support and all those things, like you’d had multiple years ago, we would have probably a different situation than we are in now.”

Gaslin also pointed to problems with the urban renewal fund.

The John Day Urban Renewal Agency used borrowed money — $900,000 from a $1.8 million line of credit — to make a significant investment in housing development, but the increase in property values within the urban renewal district so far has not generated enough tax revenue to keep up with the payments on the loan, Gaslin said. As a result, the city has been subsidizing the cost of development in the urban renewal district with tax revenues that are not associated with the development project.

The financial crunch leaves city administrators looking for the best way forward.

John Day could use some of the remaining $900,000 in the line of credit to bring its cash balance up to a more secure level while waiting for more development in the urban renewal district to generate more property tax revenue.

But tapping that $900,000 in funds would increase the amount of the monthly loan payment, and the city has already had to suspend incentive payments to property owners within the urban renewal district because of a lack of funds.

Gaslin said under those circumstances, the city would continue to subsidize the urban renewal agency from other funds within the city budget until development catches up and the URA is generating enough tax revenue to make the loan payments on its own.

“If everything goes as planned, it’s probably fine,” Gaslin said of the budget concerns.

Still, there is the risk of an unforeseen expense coming in and blowing those plans out of the water.

“If everything goes smooth sailing from there, I’m sure we’re fine,” Gaslin said. “If, all of a sudden, we get a bill we didn’t expect for $400,000, we’re not fine, and only time will tell on how that works.”

Gaslin said if anybody has opinions regarding how things should be handled, now is the time to talk to the city council, especially with the weighty decisions pertaining to the URA imminent.

“I think the council would appreciate hearing kind of where people stand on that, and then also they need support on which way to go,” he said.