A Sacramento County grand jury released a report this week detailing the small city of Isleton’s failure to operate properly amid its yearslong financial crisis.

Among the findings of the investigation released on Wednesday: financial mismanagement by the Isleton City Council or management staff, the council’s failure to provide oversight of city operations and spending, failure to follow state law and municipal code and council members “ignoring their code of conduct.”

By law, the report requires responses within 90 days from the Isleton City Council and Sacramento County Superior Court Judge Bunmi Awoniyi for all findings and recommendations.

The historic town with a small population along the Sacramento River Delta faces filing for bankruptcy or insolvency to combat an estimated $4.83 million in debt. The grand jury report said it was the 10th such investigation into Isleton over the past 35 years.

“All residents of Sacramento County deserve effective municipal government,” the report said. “It is the residents of Isleton who suffer by facing increased taxes or a lower level of service, or both, when they don’t have a competent City Council.”

The report comes months after a January council meeting when Isleton unanimously voted to lay off the city’s paid firefighters, the assistant city manager, the accounts payable clerk and the city building inspector due to the dire financial situation.

“Regarding the city,” Isleton Mayor Iva Walton said in a phone interview, “I do with every fiber of my being believe that the city should survive and be its own sovereign city. I think that’s mostly the will of the people. So I’m hopeful that can happen now.”

Isleton is roughly 36 miles south of downtown Sacramento, minutes east of Rio Vista and the convergence of the Cache Slough, Steamboat Slough and Sacramento River. It has a population of roughly 800 people and was known for its canneries which supplemented the surrounding agricultural suppliers, which have since closed. It’s also hosted an annual crawdad festival each summer that draws thousands of tourists.

Should the city become insolvent, it would likely get absorbed by Sacramento County and force residents to rely on the county for infrastructure needs and public services.

“It’s been very hard,” Walton said. “There’s never been a time when I felt like I can finally work with staff and collaborate, and move forward with Isleton.”

Walton, whose term began this year, was asked how she felt about Isleton’s long-term future and bleak financial picture.

“Oh, terrible,” she said.

Walton was mentioned in the report for operating outdoor seating into the street for her business, the Mei Wah Beer Room at 35 Main Street, without proper permitting. Such seating became common after the pandemic, and Walton said she remains in compliance and continues to use the space for live music events on weekends.

“I never did anything inappropriate,” Walton said. “It was always done by the advice of what the city recommends for any business owner to do, and there is no conflict of interest.”

Grand jury details Isleton finances

The grand jury report offers a timeline beginning in 2023 outlining the city’s financial downfall beginning with rain and windstorms threatening the structure of the city’s sewer ponds, which nearly collapsed. In June 2024, city officials discovered that Isleton owed an estimated $5 million in debts and did not have enough money to keep city employees on staff.

Additionally, the report documented how the city lost significant revenue because of the “council’s failure” to oversee and ensure compliance for local cannabis businesses, some of which have left town and “ghosted” the city without paying outstanding sales taxes and fees.

In April of this year, after turnover on the five-person council and city manager roles, city Finance Director Jessica Bigby said, “The community, council and management remain committed to forging the best path forward, which unequivocally means remaining outside of bankruptcy.”

The grand jury in the report made recommendations for Isleton to button up its finances and timing of its budgets and audits — and for the city manager to ensure the city’s books are kept properly for all city operations by the end of the year.

Walton said her term as mayor runs through November 2026. Mayors are elected by council members who have staggered four-year terms and are elected by citizens.

Walton teared up when speaking about the future of the city.

“Sadly,” she said, “I was asked to run for council, and so I did. I want nothing more than for the city to succeed. I just don’t think I’m going to be able to be there when it does.

“I really hope we get there, and don’t slide back into the bad behavior of hiring too many people to do not a lot, and overpaying staff and having no accountability for how money’s being spent, and no real budgets and audits for the council to understand what’s going on.

“It’s been very difficult to navigate.”