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After hearing Hollister City Manager Ana Cortez’s presentation on two possible scenarios for the fiscal year 2026-27 recommended budget, neither of which would ultimately avoid layoffs, the Hollister City Council offered no suggestions on how to move toward approving it.
“The reality of this city is that workforce reductions are necessary, whether it’s this year or next year,” Cortez told the council. “It’s a bad situation but there you have it.”
By the end of her presentation, none of the four council members on the dais (Rolan Resendiz was absent) could venture any alternative solutions to the interdepartmental loans Cortez proposed as a way to forestall layoffs. Instead, they asked her to bring something different to the June 22 meeting. They did not, however, define what that should look like.
During her presentation, Cortez reminded the council that on April 20 she had asked for directions on a framework or policy for the budget. On June 9, she said a proposed 20% reserve was not feasible and that the city had been operating under a deficit for at least 10 years.
She then asked for directions on how to come up with zero reserves, meaning there would be no cushion to address unforeseen issues, and that even though reductions in personnel were being discussed, the city must maintain a status quo where union members were concerned in order to honor contracts between the unions and the city.
She said there were two budget options that she called “R” and “S.” She said the R budget was consistent with the April 20 framework, which she said was fiscally conservative and balanced the city’s general fund through workforce reductions and other cost saving measures.
“It supports long-term financial sustainability,” she said, adding that in the 10-year projection she was presenting there would be hard choices the first few years but by the eighth year the city would reach a 20% reserve.
Cortez said the S scenario was based on the framework discussed at the June 9 meeting, which she described as a “service preservation model that avoids workforce reductions this year,” but not next year.
In order to carry out the S scenario, she said the general fund would be balanced through two interfund loans of $5.5 million and $17.3 million.
This option was questioned by one public speaker who suggested it was not legal. Cortez called this the “sewer fund credit card,” and said it would prevent reductions in staffing and employee benefits but would not have a cost of living allowance. In this scenario, the reserves, she said, would be “zeroed out.”
By borrowing from the sewer fund to support both the general fund and the water fund, Cortez said staffing levels would be maintained at 14 full-time positions in the water and storm water funds, and would reduce the sewer fund by 46%.
However, for 2027, Cortez said, “We will not have a line of credit with the sewer fund.” In a back-and-forth exchange between three of the council members and Cortez, no one proposed any alternatives.
Council members indicated they understood that under both options, revenues of $50 million were estimated, and that no increases of regularly occurring tax sources were on the horizon.
As discussed in previous meetings, the first layoffs would occur in the water and stormwater departments, Cortez said.
Asked how the reduction in water and stormwater staff would affect the city, Cortez said that the “level of service will decrease.” When pressed, she said that if something happened in the middle of the night now, a crew would most likely show up. Under the reduction, she said, perhaps one worker would come, or maybe none would be available, which elicited an outcry from some in the audience.
In response to public commenters, she said, “This is real. This is the moment of truth. This situation wasn’t created last week. or last year. This has been going on since 2018, and as for the practice of swiping credit cards, (for) a long time. There is no happy news that I’m going to give you. I could swipe the credit card again because it’s so much easier to do that. And then by next year, I’ll probably move on to another job.”
Councilmember Rudy Picha repeatedly asked about past mistakes and what the city might be able to sell off to cover the deficit, but Cortez said she didn’t want to think about the past and wanted guidance from the council on how to move forward.
“We are looking at every scenario and we’re trying to collect funds,” Cortez said. “What we’re finding is that we’re trying to collect funds from poverty itself. Folks don’t necessarily have the ability to pay us. But, one point of clarification, though. I have not made this point before. We are protecting public safety. We are proposing more firefighters. Same thing for police. We are proposing to make those two departments whole. We are seeking to create 11 more positions in the fire department and to continue to recruit for the seven (positions) that we currently have under police.”
During public comment, Hollister resident John Casey noted the city budget does not contain an inter-fund loan agreement, or a repayment schedule, interest rate, term limit, or an authorizing resolution.
“The Sewer Enterprise Fund is a Prop 218 Enterprise Fund, and its revenues are restricted under Article 8D, Section 6 of the California Constitution,” he said. “These funds can only be used for sewer operations, maintenance, capital projects, and debt service. They cannot be transferred to the general fund unless the transfer is either a documented cost of service reimbursement or a temporary interfund loan that complies with state law.”
He said there must be a written loan agreement, a repayment schedule, an interest rate, and a finding that the loan will not impair the sewer’s ability to provide the service, which, he said, has to be approved in an open meeting.
“None of these elements appear anywhere in the budget,” he said, adding that if the sewer system needs repairs, it made no sense to take from one fund to provide money to other departments, as he referenced Cortez’s “credit card” plan.
“If the city intends to use CFD {Community Facilities District) or bond-related sewer funds, those are restricted by bond covenants and cannot be diverted to unrelated purposes,” Casey said. “Why is the budget being adopted without the legally required documentation? And if this is not a loan, how is the city legally transferring restricted sewer revenues to the general fund without violating Prop 218 and the government code?”
Hollister resident Christine Camarillo said the numbers from Cortez were “absolutely ridiculous.”
“You have to be out of touch with reality if you think that a city of over 40,000 people can be managed with five people in a department,” she said. “For the city manager to stand up here and say if you have a water break, we might send somebody out if we have time or if we have staff is beyond a disconnection with reality. I guarantee if there was a water break in front of the city manager’s house, there would be staff there. Our real problem here on top of financial issues is the reality check that our city manager needs to be reeled in. And you guys sitting up there need to ask her hard questions.”
Mayor Roxanne Stephens concluded the hearing by saying the council would “leave the hearing open as we continue to process this presentation for the next City Council meeting.”
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