It wasn't easy, but the tiny burg of Isleton has succeeded, finally, in redirecting its fiscal future by authorizing the sale of $1 million in bonds to get the city out of hock.

City Manager Bruce Pope said approval means that Nollenberger Capital Management of San Francisco will purchase the bonds, enabling the city to pay delinquent debts from garbage collections to longstanding legal fees.

"It gets rid of all the bankruptcy discussion," Pope said Tuesday. "It makes the city solvent."

The council voted 3-1 Monday night to authorize the bond.

The decision seeks to rectify a painful period for Isleton, one in which the city had arguably one of the worst records of financial management among cities in California.

When Pope came on board in March 2007, he inherited dual tasks of satisfying the grand jury's request for information about the dysfunctional city and of reconstructing years of mismanaged city budgets.

By then the city had been the focus of repeated Sacramento County grand jury reports. A February 2008 report delved into years of civic tumult and described the city as being "in a state of perpetual crisis." Isleton needed to fix its problems, the watchdog panel said, or take steps to dissolve itself and become part of Sacramento County.

Still, not everyone in the half-square-mile city believes the debt financing plan was the best option.

"I would say if they can't pay people back within a timely manner, then they should become part of the county," said Jean Yokotobi, who was readying her new restaurant, 25 Main Street Deli, for opening in about two weeks. "That ($1 million) is a huge debt, and this is a small community."

Besides, she said, no one knows what the economy will be like in two decades, when the bond is paid off.

The city of about 830 does show signs of financial distress. But much of it comes from the same economic downturn that affects cities across the state.

Buildings near City Hall are boarded up. On Main Street, aging structures built in the 1920s stand in disrepair. A handful of eateries drew patrons on Tuesday. But other businesses were closed or appeared so.

That lack of business helped reduce city revenues.

But the city's $1 million in deficit stemmed from a much larger problem.

It was spawned by years of faulty recordkeeping, improper shifts of funds to cover operating expenses, and out-of-whack spending plans, according to the Sacramento County grand jury and work by Pope.

In 2006, the City Council improperly adopted a new budget with only two members in support, short of the required three votes.

About the same time, the city used the garbage fees it collected from city residents to fund general city business, failing to pay the amounts owed to the city's own garbage contractor, Waste Management.

At last check, the city still owed about $210,000 to the company, which these days bills customers directly, bypassing the city.

More recently, a law firm won a $325,000 judgment against the city for past legal services.

Once Isleton has the funds from the bonds sale in hand and pays its debts, Sacramento County is poised to contract with the city for accounting services.

The city expects to pay about $130,000 a year to bondholders from property tax proceeds over a 20-year period. The interest rate will be determined by market forces.

Pope said the city's operating budget already has been cut to offset the payments.

And whatever the city's issues, Yokotobi said she's been an Isleton fan for years.

"It's a place where I feel safe," she said. "I like the serenity."

Call The Bee's Loretta Kalb, (916) 321-1073.