3 days ago
City of Isleton seeks $800,000 loan from Sacramento County to avoid bankruptcy
The Isleton City Council will send a loan request to the Sacramento County Board of Supervisors to avoid filing for bankruptcy or ceasing operations entirely.
On Tuesday night, the council voted to send a two-page letter to county leadership outlining the city's need for an $800,000 loan. The request is an attempt to avoid filing for bankruptcy or defaulting on payments.
Isleton currently has $4.7 million in debt owed to multiple creditors, according to the letter sent to Sacramento County officials, down from $5.1 million in debt earlier this year.
At the beginning of the year, the city hired a finance team to assist in balancing the books and budget, bringing the city out of financial ruin.
Acting Finance Director Jessica Bigby told CBS Sacramento on Tuesday that the loan request will not fix all of the city's financial issues, but if approved, it could provide financial support in the short term, quickly.
"With the state of financials the way that they are, it is very difficult for Isleton to find someone to lend them money, and so, we are hoping that our partners at Sacramento County find it in their hearts to invest in Isleton," said Bigby.
She added that the city is on the brink of bankruptcy without the county loan.
Over the last six months, Isleton has made lay-offs, asset sales, and restructured the fire department to run on a mostly volunteer basis to save money and stabilize the city's finances.
Bigby told the council and public in attendance at Tuesday's meeting that the city doesn't have enough assets to sell and money coming into the city to get out of debt without assistance. The bulk of the city's income, she explained, is property taxes.
Bigby called the loan request the "best shot" and said that now it was up to Isleton to put their "best foot forward" as the Sacramento County Board of Supervisors is set to review the request.
"[Sacramento County] also has to decide whether that is politically prudent. Is that something you want to invest in? It's scary to invest in something that's talking bankruptcy," said Bigby.
The proposal from Isleton to Sacramento County is to extend the loan over a 10-year term to safeguard the city's cash flow and its long-term viability. They also requested a six-month deferral on repayments.
The loan would go toward three of the city's outstanding debts: $500,000 bridge loan secured by past city management, currently under an extension/forbearance without a viable repayment plan; $195,000 owed to the Employment Development Department for assessed unpaid taxes, penalties, and interest for periods spanning June of 2007 through September of 2013; any remaining funds would be applied to the $145,000 in arrears owed to the Small Cities Organized Risk Effort.
In its letter, the city said:
"Without refinancing or assistance with these debts, Isleton may be forced to file bankruptcy or cease operations entirely, which would have severe repercussions for county residents and taxpayers."
The City of Isleton is set to send the loan request letter to the Sacramento County Board of Supervisors by Thursday.
