Lodi Finance Committee - March 11, 2026

Lodi

Mar 11

Lodi Finance Committee – Special Meeting, March 11, 2026

Meeting Summary

This Special Meeting of the Lodi Finance Committee covers two substantive items: approval of minutes from the February 4, 2026 Special Meeting, and a Fiscal Year 2027 Budget Cycle Discussion. The February minutes document a PARS/OPEB presentation and the formal introduction of the Annual Comprehensive Financial Report (ACFR) to the committee by auditors LSL (Lance, Soll & Lunghard, LLP). The FY 2024–25 ACFR is expected to be finalized in March 2026. The committee is also beginning forward planning for the FY 2026–27 budget amid a projected $4.8 million structural deficit expected to emerge over the next five years.

Agenda

A. Call to Order / Roll Call

The meeting is called to order and attendance of committee members is recorded.

B. Regular Calendar

B.1 — Approve Minutes: February 4, 2026 (Special Meeting) (Attachment 1)
B.2 — Fiscal Year 2027 Budget Cycle Discussion

D. Adjournment

Pursuant to Section 54954.2(a) of the Government Code of the State of California, this agenda was posted at least 24 hours in advance at a public place freely accessible to the public 24 hours a day.

Public Comment Options

Public Comment may be submitted in the following ways:

In-person at the meeting
Email: cjaromay@lodi.gov — received no later than two hours prior to the meeting
Mail: City Manager's Office, P.O. Box 3006, Lodi, CA 95241
Hand Delivered: City Manager's Office, 221 W. Pine Street, Lodi, CA 95240 — received no later than two hours prior to the meeting

Public comment received via email, mail, or hand delivery will be provided to the City Council and included in the official minutes record, but will not be read aloud at the meeting.

B.1 — Approve Minutes: February 4, 2026 Special Meeting

Prepared by Monica Calderon, Administrative Assistant – Confidential. The recommended action is to approve the minutes of the February 4, 2026 Special Meeting as prepared (Attachment 1). The meeting was held at the Police Department Community Room, 215 West Pine Street, Lodi, at 10:00 a.m., called to order at 10:06 a.m.

Present: Chair Hothi, Vice Chair Yepez, Committee Member Woehl | Absent: None

Also Present: Interim City Manager Lindsay, Interim Administrative Services Director Christina Jaromay, Budget Manager Baker-Bechthold, Accounting Manager Lor, and Budget Analyst Howell

B.1a — Minute Meeting Approval (Jan. 27, 2026)

Member Woehl motioned, seconded by Vice Chair Yepez, to approve the minutes of the January 27, 2026 meeting.

Ayes: Chair Hothi, Vice Chair Yepez, and Member Woehl | Noes: None | Absent: None | Motion carried.

B.1b — PARS Presentation (OPEB & Investment Performance)

PARS (Public Agency Retirement Services) representatives Matt Spooner and Angela Tang attended in person; Dennis Mullins participated virtually. Tang provided an overview of Other Post-Employment Benefits (OPEB), and Mullins presented a virtual overview of investment performance.

Chair Hothi inquired about the use of U.S. Bank as fund trustee — Mullins confirmed U.S. Bank serves as trustee and that PARS maintains an established relationship with the institution.
Member Woehl asked whether the 6.8% assumed rate of return reflected market adjustments — Mullins confirmed this rate includes market adjustment considerations, which is in line with public agency OPEB fund benchmarks.

B.1c — Introduction of ACFR to Committee

LSL (Lance, Soll & Lunghard, LLP) Representatives Jayme Lambert and Christian Townes introduced themselves and provided background information. Key points discussed:

The final ACFR report is expected in March 2026.
It will take one year to cycle out the PERS modified opinion (related to prior underreporting of unused holiday cash-outs to CalPERS for some retired employees).
Member Woehl confirmed that LSL findings did not affect the City of Lodi's bond rating.
Interim City Manager Lindsay reported no new findings; data review is ongoing.
LSL is in its one-year extension period; an RFP process will be initiated following contract expiration.
Interim Administrative Services Director Jaromay assumed the City Treasury role upon Council appointment at its February 18th meeting, pending hiring of a new Administrative Services Director with an anticipated start date of April 2026.

B.2 — Fiscal Year 2027 Budget Cycle Discussion

This item launches formal planning for the Fiscal Year 2026–27 budget. The City held an all-day planning session on January 28, 2026 to kick off the process. Context from the current fiscal year is critical to understanding the budgetary environment for FY 2027.

FY 2025–26 Budget Context

Lodi adopted a $291 million citywide budget for FY 2025–26 — an 8.35% increase over the prior year, driven by rising personnel costs and materials.
Despite a balanced budget, the city faces a projected $4.8 million structural deficit expected to emerge over the next five years.
Mitigation strategies employed in FY 2025–26 include:
- Using $2.23 million from reserves for workers' compensation and insurance liabilities
- Nearly $1 million in departmental trimming
- Elimination of a proposed $2 million Facility Internal Service Fund

Annual Comprehensive Financial Report (ACFR) — Detailed Overview

The ACFR is the City of Lodi's most comprehensive annual financial document, independently audited by Lance, Soll & Lunghard, LLP (LSL). The most recently completed ACFR covers FY 2023–24 (ending June 30, 2024), released in July 2025. The FY 2024–25 ACFR is the report referenced in the February 4 meeting minutes, currently expected to be finalized in March 2026.

FY 2023–24 Key Financial Metrics

Metric	Amount	Year-over-Year Change
Net Position	$379.5 million	+$49.4 million
Capital Assets	$412.8 million	+$6.5 million (+1.6%)
Long-Term Debt	$167.0 million	-$7.7 million (-4.4%)
Net Pension Liability (CalPERS)	$182.3 million	+$62.0 million (increase)
OPEB Liability	$25.6 million	-$2.5 million (decrease)

FY 2023–24 ACFR Key Financial Figures ($ Millions)

Audit Opinions — FY 2023–24

No fraud, waste, or abuse was detected in the audit.
Unmodified (clean) opinion issued on the General Fund and Streets Fund.
Modified opinion on certain enterprise funds due to past underreporting to CalPERS of unused holiday cash-outs for some retired employees. City staff are working with CalPERS to resubmit corrected data.
An independent financial investigation by CPA Kevin Harper also found no fraud in the Utility Deposit/Holding Account or procurement card use, but recommended strengthening internal controls over procurement cards.

Understanding the "PERS Modified Opinion"

A modified (qualified) audit opinion means the auditor found a specific scope limitation or departure from generally accepted accounting principles in a particular area — in this case, pension reporting to CalPERS. The underlying cause was that unused holiday cash-outs for certain retired employees had been underreported to CalPERS, affecting pension-related figures in certain enterprise funds.

The February 4 meeting noted it will take one year to cycle out the PERS modified opinion. Once Lodi resubmits corrected data to CalPERS and the correction is reflected in the next reporting cycle, the modified opinion is expected to be resolved and a clean opinion restored. Importantly, this issue did not affect the city's bond rating.

GASB 96 Implementation

During FY 2023–24, the City implemented GASB Statement No. 96, which governs accounting for subscription-based information technology arrangements (SBITAs). This added a $4.9 million subscription asset and a corresponding $4.8 million subscription liability to the financial statements — reflecting the capitalized value of long-term software subscriptions.

GFOA Certificate of Achievement

The Government Finance Officers Association (GFOA) has awarded Lodi its Certificate of Achievement for Excellence in Financial Reporting for 30 consecutive years. The FY 2023–24 ACFR was submitted for a 31st consecutive award. This recognition affirms that Lodi's ACFR meets the highest standards of government accounting and financial transparency.

Background & Clarifications

LSL (Lance, Soll & Lunghard, LLP)

LSL is Lodi's external auditor, currently in a one-year contract extension. Per the February 4 meeting, an RFP (Request for Proposals) process to select a new auditor will be initiated following contract expiration. LSL specializes in California public agency audits and has offices in Orange County, CA.

PARS (Public Agency Retirement Services)

PARS administers Lodi's OPEB trust, with a 6.8% assumed rate of return. U.S. Bank serves as the fund trustee. The assumed rate includes market adjustment considerations, consistent with industry benchmarks for public agency retiree benefit trusts.

OPEB (Other Post-Employment Benefits)

OPEB refers to healthcare and other non-pension benefits promised to retired city employees — for example, retiree health insurance contributions. This is a significant long-term liability tracked separately from pension obligations (CalPERS). Lodi's OPEB liability stood at $25.6 million as of FY 2023–24, down $2.5 million from the prior year.

CalPERS — Net Pension Liability

The California Public Employees' Retirement System (CalPERS) administers Lodi's pension program. The city's Net Pension Liability increased by $62.0 million in FY 2023–24 per CalPERS valuation — a significant year-over-year jump that reflects actuarial adjustments, investment performance, and benefit accruals. Managing this growing liability will be a central challenge in the FY 2027 budget cycle discussions.

References & Sources

Lodi Finance CommitteeMeeting Summary

Don Bradford