News Analysis City Manager Ray Kerridge oversees a city government that is struggling with major controversies in its Community Development and Utilities departments. Council members are reacting to claims in a Jan. 6 grand jury report that the city may be breaking Proposition 218, a state law that mandates how city funds are used. City officials are also confronting findings from an investigation into the department’s approval last year of 35 permits in a Natomas flood zone. The offices of the city attorney and city manager note in a recent report that the department broke federal rules by approving the permits. The report lists new issues, including possible violations of city planni