Richmond staff give council update on city finances, Chevron settlement

After city staff warned in September that Richmond's day-to-day operations ran $9.8 million in the red last year, City Council members asked for a second opinion.

The report they got Tuesday left that year out.

The presentation covered three years of audited results and told the council the city's finances were "stable" and "very solid." It did not include preliminary results for 2025-26, the fiscal year that ended June 30. During that year, preliminary figures show the city’s general fund reserve fell below the city’s minimum until staff moved in $3.4 million in one-time interest from other funds, according to the city’s Finance Department.

Staff said the city's municipal advisor recommended using only audited years for a consistent comparison. The 2025-26 audit won't be finished until late February or early March.

A second opinion

At the September 15 meeting, then-City Manager Shasa Curl and finance staff warned that the city's day-to-day operations ran $9.8 million in the red and that forecasts had shown operating deficits for years. Curl urged the council to hold off on the public process for spending the Chevron settlement until labor negotiations were finished.

Staff reports deficit, council votes to start process on how to spend Chevron settlement funds

The Richmond City Council voted Tuesday to move forward with a public process for spending the city's $550 million settlement with Chevron, after city officials disclosed that Richmond's day-to-day operations ran $9.8 million in the red this year. The council also rejected a proposal to

Grandview IndependentSoren Hemmila

The council voted to start the process anyway. Vice Mayor Doria Robinson asked for an outside review of the city's finances, and on October 6 the council directed staff to report on the city's financial condition with a review by a municipal advisor.

Curl has since left the city. Mark Scott took over as interim city manager.

"For the broader financial presentation, the municipal advisor recommended using the three most recent years of completed audited results to provide a consistent comparison," Finance Director Emily Combs wrote in an email Wednesday. "Because the FY 2025-26 close and audit are not complete, that year was not included in the audited-results table."

Mark Northcross of the advisory firm, NHA Advisors, told the council the city is in good shape.

"You are solid, and you're above average, in my opinion," Northcross said.

The written staff report acknowledged that "City staff's preliminary Q4 projection anticipates a year-end negative operating balance," but gave no dollar figure.

What the missing year showed

The $9.8 million figure came from the fourth-quarter report presented in September. Excluding the first $50 million Chevron settlement payment, the general fund spent about $9.8 million more than it took in.

Combs confirmed the figure. She said the city's annual audited financial report likely won't show an overall deficit, because the settlement payment is counted as general fund revenue.

The city's reserve policy requires keeping 21 percent of budgeted general fund spending on hand. Preliminary figures put the reserve at $54.6 million, or about 19.8 percent, at the end of 2025-26, short of the roughly $58 million target.

“Applying the interest increased the projected reserve to the 21 percent target,” Combs wrote.

The interest came from the city's federal American Rescue Plan Act funds and its Environmental and Community Investment Agreement fund, which holds money from a 2014 agreement with Chevron. The council approved the transfer in September.

The reserve has declined from $65.3 million, or 26 percent of budgeted general fund spending, in 2023-24, to $62.8 million, or 24 percent, in 2024-25, to about $58 million after last year's transfer.

The September presentation described a broader pattern. Without the Chevron settlement, the city's day-to-day spending has outpaced its revenue, and staff forecasts going back to 2024 show that gap continuing. The city has balanced its budget with one-time money and savings from unfilled positions.

Combs said the numbers could change as the city completes year-end entries. She said that revenue came in about $1.8 million above budget and spending about $6.2 million below, and said it was too early to say whether the final result would be better or worse than the September estimate.

'Is that hiding a deficit?'

Robinson said she requested the report after residents asked her whether settlement money was being used to fill budget gaps. She said she had also heard the city was hiding deficits.

"When we have an audit of financials that shows a surplus, is that hiding a deficit?" Robinson asked.

"I don't know how you'd hide a deficit when we report out our annual comprehensive financial report that is presented in an open session annually," Combs said.

Scott said the city compares well with others he has managed.

"I've worked with many cities that don't hold a 21 percent reserve. We've got needs like everybody else, but I would consider this a very solid financial situation," Scott said.

Robinson called the report "a breath of fresh air."

"I hope we get lots more clear financial reports like this, so that the community can really understand and doesn't go away with lots of uncertainty and feeling like everything's falling apart when we're actually in a really good situation," Robinson said.

Combs responded with a caution.

"I do want to add though that we have relied pretty significantly on vacancy savings to balance our budget," she said.

The current budget assumes about 12 percent of city positions will remain vacant, worth about $16.5 million, according to the September presentation. No council member mentioned the reserve shortfall Tuesday. Councilmember Cesar Zepeda asked for the actual result for 2025-26.

"We'll know that in February," Combs said.

Scott later said the audit would show "some deficit," calling the last fiscal year "a miserably difficult year to budget." He did not say whether he meant an operating gap excluding the settlement or an overall deficit.

Combs said none of the settlement money had been spent, though she could not be certain until the audit. The city estimated the balance at $99.7 million as of September 30.

The council will consider a contract with Dalberg Advisors on November 10 to begin community engagement on how to spend it.