Hollister council agrees to declare fiscal emergency

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$178. That is how much money the city of Hollister reported in its general fund bank account for the week of Sept. 21, City Manager Ana Cortez told the city council and the public in attendance at an Oct. 2 special meeting. 

In response, the Hollister City Council agreed to declare a fiscal emergency by a 3-0 vote with two council members missing.

The council also approved an $18 million interfund loan to cover operating expenses such as payroll, and agreed to pursue a state exemption that would allow Hollister to raise its sales tax by as much as 1% as a way to increase revenue.

All the items were discussed but did not include powerpoints or other visual elements, something former mayor Mia Casey said should have occurred.

Mayor Roxanne Stephens and council members Rudy Picha and Priscilla De Anda cast the only votes, but did not engage in any substantive discussion.

Councilmember Dolores Morales attended remotely but City Clerk Merab Talamantes announced she “dropped off” the meeting minutes before the council cast its vote on the emergency declaration, the first item on the agenda. It is unclear if it was a technical issue, but she did not return. 

Councilmember Rolan Resendiz, whose police records were released days prior, was absent. 

Ahead of the meeting, about 20 employees rallied outside City Hall before voicing their opposition during public comments on potential cuts and the emergency declaration. 

Cortez has warned throughout the 2026-27 budget process that cuts are inevitable. 

To begin the meeting, Cortez told the council the city was holding the special meeting because it did not have money in its general fund to cover payroll due the week of Oct. 5. She also noted the city did not have any reserves to cover the deficit.

The situation, she said, triggered the consideration of the emergency declaration, the loan proposal and discussion of a possible sales tax increase.  

Cortez blamed the city’s financial status on decade-long practices including not conducting audits of its finances and bank statement reconciliations since the 2021-22 fiscal year; not imposing or increasing rates for services; and using the general fund to subsidize various funds that are supposed to be self-sustaining.

Finance Director Jessica O’Connell said previous administrations have used restricted revenues to cover general fund expenses.

“Which is a crime,” she said. “It’s Illegal.”

The general fund is used by the city to pay for most operational costs. 

Cortez said up-to-date audits are not only important for knowing the city’s financial standing but “crucial” to obtaining grants.

Cortez said the emergency declaration was a way of acknowledging the situation and documenting a strategy to resolve the fiscal challenges. 

Among the city’s stated goals are a reduction in expenditures, which may include workforce and contract reductions, collecting revenues owed to the city such as rents and leases, and selling or leasing surplus assets and service rate increases, according to the staff report included in the agenda..

Several city employees donning Service Employees International Union purple shirts opposed the emergency declaration, demanding to see a breakdown of the finances.

Frank Garcia, an employee in the city’s storm water department, demanded the city “reconcile” numbers in his department’s reported $6.63 million deficit. He said the city should outline the $5.63 million in reimbursements and $6.12 million in capital expenditures. 

“It does not show what it costs to operate the storm water department,” Garcia said. “That distribution matters before this figure is used to justify decisions about employees.”

Animal Services supervisor Alyssa Carrillo voiced opposition to cuts in her department and the declaration.

“In my experience, city administration and (the) council have been less than forthcoming about the city’s financial condition,” Carrillo said. “Employees and residents deserve a complete, understandable account of the deficit, available reserves, spending commitments and alternatives to cutting positions.”

Several community members also opposed the $18 million loan from the traffic impact and park dedication impact funds, of which $11 million is intended for the general fund and $7 million for the water department.

O’Connell said the loan was a matter of timing because the city needs to cover payroll, utilities and other operating costs before the next wave of quarterly revenues are available. 

“Without bridge funding or reserves, we cannot be confident we can meet [payroll],” she said.

O’Connell said the loan includes a 4% interest rate and that it must be paid by the end of the fiscal year, which is June 30, 2027.

Casey argued the city should present numbers such as a cash flow forecast before making the decision. 

“I was expecting a presentation with numbers and showing us those balance sheets,” she said. “We didn’t even get a presentation.”

Casey also questioned the gap between the reported deficit of a combined $5.4 million between the general and water fund, and the $18 million the city was borrowing.

O’Connell said the city will pay other expenses such as Employment Development Department claims.

Regarding a potential sales tax increase, Cortez said the process to get legislation approved and have a fiscal analysis of the potential measure to present to voters is expected to take six months. 

She said the process also includes polls to get an indication if the measure is likely to pass.

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