In a last-ditch effort to avoid bankruptcy, the City of Isleton requested an $800,000 loan from Sacramento County. But in a report ahead of budget hearings, county staff does not recommend the county give the delta city the money. 

The recommendation is included in documents provided to the Sacramento County Board of Supervisors ahead of the multi-day budget hearings this week. The loan request was submitted last month, signed by the Isleton city manager, 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 last month 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.

The loan request includes a plan to repay the county over 10 years with interest after an initial 6-month repayment deferment. The requested money would go towards repaying a $500,000 bridge loan from a private lender and the remaining money would go towards debts to the state Employment Development Department and Small Cities Organized Risk Effort. 

As part of the request, the city noted loan payments, if not made, would be deducted from city property tax revenues. 

In their report, staff noted they did not include the loan request in the budget and it was not recommended because the requested amount makes up half of the annual general fund revenue. Staff highlighted a grand jury report that found Isleton did not have independent audits since 2020-2021 fiscal year and had been operating without timely adopted budgets in recent years. 

"Additionally, Isleton already owes the County approximately $600,000 for unpaid Sheriff services and for the County's share of a prior city loan from the redevelopment agency," the staff report notes, as one of the reasons supervisors should not approve a loan for Isleton. 

The staff report notes that the loan would provide immediate cash flow, but would not address the "larger structural issue that a city of Isleton's size is unlikely to generate sufficient tax revenue to sustainably fund city administration, debt service, and service delivery." 

The Mayor of Isleton, David Kent, told CBS Sacramento on Tuesday he hopes the county makes a decision to keep Isleton's history alive -- as the next option is, potentially, bankruptcy. 

"Is Isleton's valuation able to be supported by its tax base? And the answer is resoundingly, yes. So, you can start from there. Now, you're going to have a legacy of payment plans, you're going to have a legacy of obligations and interests, that all has to be managed. But that is absolutely not inconceivable," said Kent. 

Sacramento County budget hearings begin on Wednesday and are scheduled through the end of the week.