Key Findings from City of Ukiah’s FY2023-2024 Report Raises Concerns for Potential Ukiah Annexation

The city's financial outlook reveals several red flags, casting doubt on the advisability of annexing new areas. These Key issues include:

1. General Fund Under Pressure
   The General Fund balance fell by $572,182 due to underperforming tax and intergovernmental revenues, despite spending cuts. Continued reliance on reserves may become unsustainable without a recovery in revenue.

2. Deeply Negative Unrestricted Net Position
   Governmental activities report an unrestricted net position of -$40.62 million, worse than last year’s -$39.34 million. Pension liabilities and long-term debt are significant contributors to this growing deficit.

3. Measure P Failing to Keep Up
   Measure P, designed to fund police and fire services, is not generating sufficient revenue to match rising public safety costs. The General Fund is increasingly bearing the burden, limiting resources for other services.

4. Measure Y Running a Deficit
   The Measure Y fund, which supports street infrastructure, shows a -$2.25 million deficit. Revenue is being outpaced by debt payments and capital project expenses, straining the ability to maintain current infrastructure.

5. Rising Long-Term Liabilities
   Liabilities have increased by $5.57 million, driven by growing pension obligations and landfill closure costs. These long-term financial pressures underscore the city's limited fiscal flexibility.

6. Concerns Over Financial Reporting
   Recent error corrections in financial reports raise concerns about internal controls and could undermine public trust and audit confidence.

Why Annexation May Be Ill-Advised

Annexation would place additional demands on public safety, infrastructure, and administrative services—all areas already underfunded and facing personnel constraints. Police staffing has declined, and while fire staffing has improved, it remains heavily dependent on stagnant Measure P revenues.

With slow sales tax growth and no clear new revenue sources, annexation risks further stretching limited resources. Infrastructure backlogs within the current city boundaries already go unmet, and expanding the city’s footprint could dilute existing services and reduce service quality for current residents. Given the city’s strained finances, rising liabilities, and uncertain revenue outlook, annexation at this time could exacerbate fiscal and service delivery challenges.