Sebastopol council narrowly adopts budget, projecting deficit of at least $850,000 in 2026-27

After more than a year under a fiscal state of emergency, the Sebastopol City Council adopted a budget last week on a split vote over a spending plan already expected to generate a shortfall of at least $850,000.

The budget was approved Tuesday, June 16, on a 3-2 vote, with Mayor Jill McLewis and Council Member Stephen Zollman dissenting, saying the spending plan did not go far enough to address the city's structural imbalance as Sebastopol continues to recover from years of financial turmoil.

The vote came after the council continued its June 2 budget hearing, postponing a decision to allow staff additional time to identify spending reductions and other cost-saving measures.

The overall $31.1 million spending plan projects about $15.6 million in general fund revenue and $16.6 million in expenditures for the fiscal year beginning July 1.

City officials said staffing reductions, vacant positions and one-time savings have helped narrow that shortfall from about $960,000 to roughly $850,000, while still preserving vital city services.

But long-term financial forecasts continue to show the city's revenues failing to keep pace with expenses.

The budget reflects rising costs across several departments. Notably, police expenditures are set to increase by more than $300,000 due to higher CalPERs contributions, insurance costs and expanded animal control services - expenses city officials say are largely unavoidable.

During the meeting, City Manager Mary Gourley said staff reduced the projected deficit through measures that included suspending recruitment for the vacant assistant city manager position, filling the city clerk role with an entry-level salary and identifying additional savings in department budgets.

Those changes, Gourley said, brought the projected deficit down by more than $250,000, but the council later approved additional spending for items including $10,000 set aside for a Charles Schulz public art mural and $75,000 in funding for an Enhanced Infrastructure Financing District, or EIFD, study.

"Staff is trying to live within its means and we cut where we can," Gourley said at the June 2 meeting, adding that rising insurance and pension costs remain largely outside of the city's control.

Vice Mayor Sandra Maurer, who serves on the city's budget committee, said though the city faced a $960,000 budget deficit at the start of negotiations, city staff already identified more than $200,000 in spending reductions.

Maurer also noted that more than $500,000 of the remaining deficit reflects road projects carried over from the current fiscal year rather than any major new spending commitments.

"This budget makes sense to me," Maurer said.

Zollman, however, said he could not support a budget that still projects a significant deficit and argued the council was leaving future leaders to grapple with the city's long-standing fiscal imbalance.

"I am not in any hurry to get this budget passed," Zollman said, urging the council to find more expenses to cut. "I am not going to approve a budget where we are not close to resolving a deficit given our various scenarios … I am not going to be part of that."

Zollman also said the city could incur major expenses due to the sudden closure of the city-owned library building earlier this month after black mold and dry rot was discovered in the walls. During the meeting, Zollman revealed that the city's insurance would not cover the remediation or repair work, leaving the city responsible for expenses that have yet to be determined. The council is set to discuss the cost of that work during its July 7 meeting.

Over the next decade, without major changes, Sebastopol faces an average annual structural shortfall of roughly $1.3 million, meaning ongoing revenues are expected to lag behind expenditures without additional spending reductions or new revenue sources, according to a financial forecast presented to the council June 2.

By 2030, the city's reserves are expected to fall below state recommendations for minimum levels.

The financial projections hinge on several uncertainties, including whether the proposed Barlow hotel is built; renewal of the city's Measure U half-cent, 12-year sales tax, passed in 2024; and repayment of a sewer fund loan. Those variables could greatly impact the city's budget.

You can reach Staff Writer Anna Armstrong at 707-521-5254 or at anna.armstrong@pressdemocrat.com. On X (Twitter) @annavarmstrongg.

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This story was originally published June 22, 2026 at 6:41 PM.