Cotati City Council
Agenda Staff Report
Item type: STUDY SESSION
To: City Council
Subject: Budget Study Session for Enterprise (Water, Sewer, & Internal Service) Funds and Capital Funds for Fiscal Year 2022/23
Date: May 17, 2022
Written by: Angela Courter, Director of Administrative Services Recommendation
Study session on Enterprise and Capital Funds for Budget Planning for Fiscal Year 2022/23. No action will be taken.
Background
With the guidance provided by the City Council and the community during the strategic planning session held on February 15, 2022, staff has compiled the attached draft budget of the Enterprise Funds which includes the Water, Water Capital, Sewer and Sewer Capital Funds, as well as the Internal Service Funds.
Staff have also compiled updated projects for capital improvements for City infrastructure including streets, parks, and buildings. The complete multi-year capital improvement program was presented to planning commission May 16, 2022 and included herein for council review.
Lastly, as requested by the City Council, staff have updated the departmental projects lists based on feedback received during the strategic planning session. Note that some currently in-process ordinance work not shown include updates to the noise ordinance (CM), park dog ordinance (CM), woonerf ordinance (CD), and agricultural ordinances (CD). Each of these are expected to continue into the first half of FY 2022/2023.
Analysis
Water and Wastewater Funds
For Fiscal Year 2022/23, the city enterprise funds are going to continue to invest in technology upgrades and security to the software systems currently in place. These upgrades will provide easier access to information and customer requests as well as provide additional redundant backups security around the SCADA systems. Additionally, we are also continuing to dedicate funding for both public education programs and water conservation rebates.
Water and Wastewater revenues are subject to revision based on the current rate proposal that was presented to council on April 12, 2022, and tentatively coming back for council consideration on June 14, 2022. Staff have presented proposed budgets including the proposed rate increases as well as a sample of the budgets without any increase.
Expenditures for fiscal year 2021/22 are primarily impacted due to the CalPERS Additional Discretionary Payment (ADP) which was funded through an interfund loan from the General Fund.
Expenditures for fiscal year 2022/23 are in line with historical expenditures with increases due to increased cost of Water Procurement (6%), Subregional Wastewater Treatment (6.8%), Insurance (approx. 50% increase), and Water Other Expense increase of $60,000 due to new waterline flushing program.
During fiscal year 2022/23, we are estimating total capital improvement expenses of approximately $759,000 and $1,250,000 for Water and Wastewater Funds respectively. The most significant project is $1,100,000 for the West Sierra Sewer Replacement in advance of future repaving. Other projects include $300,000 dedicated to the SCADA system update, and $609,000 for the Water Main Replacement at Portal, Mercantile and Aaron Streets to address fire flow capacity limitations.
Along with the physical infrastructure, the water and sewer enterprise participate in the vehicle replacement and maintenance program for vehicles used by these enterprises. The goal of this internal service fund is to smooth out vehicle replacement expenses, so that unexpected expenses don’t impact on-going operations.
Internal Service Funds
The City utilizes a Vehicle Replacement Fund and a Compensated Absences Fund to account for the financing of goods or services provided by one department or agency to other departments or agencies of the governmental unit, or to other governmental units, on a cost reimbursement basis.
During fiscal year 19/20, the City had fully transitioned to maintain the city fleet of vehicles within a single internal service fund, which is then billed out to the departments and funds utilizing those fleet assets.
For the Fiscal Year 2021/22 the City proposed to cease all future purchases of internal combustion engine (ICE) vehicles for police patrol and purchase and test the first battery electric vehicle (BEV) for police patrol. The current ICE patrol vehicles have an average fuel efficiency of 9 mpg, are more expensive to operate and maintain than a BEV and have a lower resale value at end of life. Of course, BEV’s also do not emit any emissions and would be recharged on 100% renewable Sonoma Clean Power Evergreen electricity. Although the BEV is more expensive to purchase upfront, based on fuel savings alone, it will be less expensive to operate over its service life.
For Fiscal Year 2022/23 there are a few vehicles that are listed as subject for replacement.
However, we will evaluate the current deployment of the BEV vehicle to see if a like vehicle should be deployed. Additionally, all equipment currently earmarked for replacement will be evaluated to ensure that replacement is required before purchase. Said purchases would be brought to council for review and approval.
The Compensated Absences Fund for Fiscal Year 22/23 is proposed based on meeting current payout expectations derived from historical drawdowns on employee balances. The total expected expenditures for Fiscal Year 22/23 are approximately $126,000.
Capital Projects Funds
For Fiscal Year 2022/23 the City is proposing the prioritization of the following projects. This extraordinary 1-year push of projects is possible due to the lease funding as part of the UAL reduction strategy. The focus on street work is to complete the majority of the expensive reconstructions to gradually move to a lower cost maintenance program over the next several years. ◦ Streets Improvements - $10,661,245
2020 Street Construction and Improvements - Part 2 (Quick Strike) ◦ This project completes the 2020 Street Construction and Improvements Project and consists of rehabilitating La Plaza and West Sierra Avenue and bicycle and pedestrian safety improvements. Consists of rehabilitating 1 mile of streets. ◦ Budget $2,890,000
2023 Pavement Rehabilitation
◦ This Project is to reconstruct approximately 2 miles of streets. ◦ Budgeted $3,210,000
2023 Pavement Preservation
◦ Low-cost street maintenance project consisting of dig-outs and slurry seal treatments on streets in medium to good condition to maintain these streets in good condition. The streets in this project total approximately 5.4 miles. ◦ Budgeted $940,382
Highway 116/West Cotati Avenue Intersection Safety Improvements ◦ The Project will realign and signalize the intersection of State Highway 116 and West Cotati Avenue. The Project will widen Highway 116 east and west of the proposed signalized intersection and create turn lanes and install bicycle and pedestrian features to improve safety and community connectivity. Proposed work in FY 22/23 is design only to position the project for construction funding in a future year.
◦ Budgeted $500,000
Redwood Drive and Cypress Avenue Pavement Rehabilitation ◦ Project will rehabilitate Redwood Drive and Cypress Avenue and include replacing faded and worn signage, upgrade bike lanes, enhance traffic calming features including striping to narrow lanes and create bike lane buffer, and upgrade noncompliant ADA ramps. Proposed work in FY 22/23 is design only to position the project for federal aid grants.
◦ Budgeted $282,000
Gateway Signage
◦ This effort will focus on enhancing the City’s monuments at entrance points as well as converting the La Plaza bulletin board to digital. In FY22/23, the Gateway monument areas will be designed. Post-mounted entry signs at minor streets entering Cotati will be installed in FY 22/23. The major gateways into Cotati will be constructed in subsequent years.
◦ Budgeted $100,000
Design and other Misc. Projects under $100K –
◦ Bicycle Pedestrian Safety Improvements $50,000,
◦ Loretto & Marsh to McGinnis Pathway Resurfacing $ 61,000 (carryover costs) ◦ Bench Installation at ORH and 116 Pedestrian Plaza $46,000 ◦ Park Improvements - $2,326,500
Kotate Park Improvements
◦ Implements Park Capital Plan improvements for Kotate Park, including replacement of park play equipment, relandscaping planter areas, new bollard lights, and restroom.
◦ Budget $2,210,000
Putnam Park
◦ This project includes the design of a Dog park, perimeter pathway and pedestrian bridge across the Laguna de Santa Rosa, baseball field fencing, and various related park amenities. Construction is planned for FY 23/24, pending funding availability.
◦ Budget $35,500
Pocket Park
◦ Design and construction of pathways, bollard lights, and benches in the pocket park food forest.
◦ Budget $81,000 (carryover costs)
◦ Building Improvements - $1,038,000
Civic Center Windows & Exterior Repairs:
◦ Replacement of City Hall windows and trim along West. Sierra Avenue, Civic Center Windows, as well as trim replacement and repainting of City Hall, Civic Center, and the Cotati Room.
◦ Budget $1,038,000
Attached to the staff report is the sample multi-year capital improvements listing as is included within the online budget book that the City is working on for the FY 22/23 budget.
General Funds Updates:
On April 19, 2022, City staff presented the study session on the Operating Revenues and Expenditures for the General Fund and Special Revenue Funds. Staff have prepared the completed proposed budget for the General Fund including the Other Sources and (Uses) and the Transfers In/(Out).
Significant items within the other sources and uses include the general fund source addition of $4,000,000 for the Bond Issuance for Pension Obligation ADP, the Interfund Loans to Water and Sewer for their Proportionate Allocation of Pension Obligation Bond totaling $1,938,120, as well as the new 2022/23 Debt Payment for the same Pension Obligation Bond.
Changes within the Transfers In/(Out) are the transfer in of $1.7 million from the ARPA 2021 fund for revenue replacement and the reduced transfers out for streets projects due to the Streets Bonds funding source.
Summary
Overall, the budgets are in line with historical trends but with a more conservative look at revenues related to the timing for development, water usage, and other fees. This year proposes to continue the heavy investment in streets; both reconstructing streets in poor condition and maintaining streets to keep them in good condition. Additionally, the budget also proposes to start the major park renovations, beginning with Kotate Park. We will continue to meet and exceed the required operating reserve of 33% of operating expenditures and anticipate a total combined reserve in Water and Wastewater funds of approximately $945,000 and $1.8M respectively.
However, the City must continue to closely monitor the sewer and water operating funds to ensure that we stay on track to stabilize and begin growing fund balances while also undertaking the necessary infrastructure maintenance and upgrades.
Attachments:
2022-23 Enterprise and Capital Projects Funds Budget Study Presentation (PPTX) Combined Departmental Projects Revised (PDF)
Enterprise Funds Proposed Budget Workbooks (PDF)
General Fund - Updated Transfers for Proposed Capital Projects (PDF) Capital Project Funds Budget Workbooks 2022-23 (PDF)
Multi Year Capital Improvements Plan 2022/23 (PDF)