[Document title]
Fiscal Year to Date: July 1, 2022, to December 31, 2022 Kevin Patterson [Date] [Course title]
Introduction This financial report provides an overview of our where we are within the budget cycle, then a summary of the City’s financial position through the mid-year of Fiscal Year (FY) 2022/23 (July 1, 2022, through December 31, 2022) for (1) Citywide Revenues and Expenses, (2) the General Fund, (3) Enterprise Funds, and (4) Summary of Cash and Investments. Notable cumulative mid-year to midyear and preliminary amended budget to actual comparisons are included in this report.
The following factors should be taken into consideration when analyzing mid-year data:
• Revenues reported herein are calculated based on actual receipts through December 31, 2022.
Some revenues are received later in the year, and as such can appear to be low at mid-year with variances smoothing out over the Fiscal Year.
• Some costs, such as subscription services and other dues, are typically incurred at the beginning of the Fiscal Year, so appear high at mid-year but are on-budget for the fiscal year, with variances smoothing out over the Fiscal Year.
• Construction projects, specifically streets improvements, have a different project cycle which is offset from the Fiscal Year. As such, major projects are typically funded across two or more Fiscal Years.
Standard Budget Process Cycle - Where We Are Now & Next Steps:
Tentative Schedule for Budget Year 2022/23 Budget Workshops:
• March 7th - Strategic Planning Session
• April 4th - General Fund Budget Study Session
• April 18th - Enterprise Funds Budget Study Session
* NOW* February
Mid-Year & Financial
Performance Review
February-March
Internal Budget
Review, Strategic/LongTerm and Capital
Planning
April
Draft Budget
Workshops
May
Budget Adoption
June
Budget Rollout
July - December
Financial Evaluations
Budget Adjustments as
Approved by Council
NovemberDecember
City Manager and
Admin. Services Budget
Planning Meetings
Citywide Revenues and Expenses
*Other Special Revenues consists of the following funds: Grants, CDBG Grants, Gas Tax, MTC Streets, RMRA, Traffic Mitigation Fees, Park-In-Lieu, PEG, Public Safety, K9 Program, Inclusionary Housing, Linkage Affordable Housing, Community Facilities Districts, Measure M Parks, PEG, Bed Tax, and all Local Landscaping and Maintenance Districts.
City-wide Significant Variances
Fund type variances where revenues were less than 40 percent or expenditures are greater than 60 percent of budget as of mid-year were evaluated as follows:
• General Fund Revenues – The difference is primarily due to pending receipts for sales tax and other taxes. See further discussion on pages 3-4 herein. • Capital Projects are subject to construction timing of the projects. The City has programed over $12 million in capital projects, utilizing funding from a combination of funding sources including the Streets Improvement Lease Revenue Bond, State and Local Grants, Special Revenue Funds, and General Fund Contributions. Capital Projects are subject to expanded timeframes due to design and review processes before construction as well as the time to construct. For more information on the City projects they are displayed online both on the City budget at https://city-cotati-cabudget-book.cleargov.com/4249 on the City’s transparency portal at www.tinyurl.com/CotatiProjects.
• Internal Service revenues indicate as low due to the timing of transferred funds required for the purchase of replacement fleet vehicles. This transfer is expected to be complete by the end of the fiscal year.
Fund Actual Annual Budget %
Budget Actual Annual Budget % Budget
General $ 4,107,462 $ 10,289,067 39.9% $ 3,947,321 $ 13,299,223 29.7% Wastewater 2,025,442 3,708,787 54.6% 2,544,596 4,812,353 52.9% Water 1,149,817 2,204,700 52.2% 1,537,455 3,481,536 44.2% Other Special Revenues * 632,621 842,239 75.1% 232,616 1,222,840 19.0% Capital Projects 1,782,483 12,462,300 14.3% 1,782,235 12,433,200 14.3% Internal Service 263,546 520,480 50.6% 263,546 515,480 51.1% Total For All Funds $ 9,961,370 $ 30,027,573 33.2% $ 10,307,768 $ 35,764,632 28.8% Revenues Expenses
General Fund: Operating Revenues The following table includes cumulative revenue comparisons through the first half of the Fiscal Year 2021/22 and a revenue budget to actual comparison for Fiscal Year 2022/23.
General Fund operating revenues through the mid-year are approximately $228,000, or 5.3% below the same period in FY 2021/22. Although revenues are only at 39.9% of the budget through the mid-year of the current year, this is primarily due to the timing associated with receiving some of the larger revenue sources. For instance, sales tax is the largest General Fund revenue source, but the receipts are received two months after the period paid by the consumers. The following is an explanation of other variations in revenues:
- Property Taxes received to date increased over prior year by approximately 8.7% which is primarily due to additional Prop. 8 Recapture which added a combined $16 million of residential and commercial values, and the values of developed home sales by Richmond American Homes at Kessing Ranch. We anticipate meeting the total annual budget for the Fiscal Year 2022/23. - Sales Tax revenues are approximately 2.6% or $51,000 greater than last year’s cumulative mid-year balance. The primary source of this increase is due to increased cost of goods, including fuel at service stations and food service at restaurants. During this period taxes show a continued return of purchases which were delayed during the Covid-19 shutdowns. Compared to budget, these revenues are in line with expectations as we have received four out of the twelve annual payments from the state due to the two month lag as mentioned above.
Based on the latest sales tax forecast, combined revenues for Fiscal Year 2022/23 are estimated to end 0.2% or $13,000 below the original adopted budget. This would lead to a combined sales tax revenue of just over $6.0 million, down $174,000 or 2.8% from prior years actual balance of $6.2 million. Due to the continued uncertainty of the economic environment, staff are proposing to retain the budget as it was adopted. This revenue stream will continue to be monitored and staff will provide the City Council with updated information during development of the FY 2023/24 budget. - Other Taxes are primarily made up of Cannabis Business Tax. The change from prior year is primarily due to decreased sales from the existing businesses and timing of receipts. Staff are continuing to monitor this revenue account as additional businesses came online during the last quarter of calendar year 2022.
- Licensees, Permits and Franchises are subject to timing as most franchise payments are due annually near the end of the fiscal year.
- Rents are primarily related to revenue from renting out community facilities and park space. This revenue source has continued to improve as more events are planned post covid-19 as families and organizations look to host more in person events in reasonably priced facilities in the county.
FY 2021/22 FY 2022/23 $ Variance % Variance FY 2022/23
Budget % Budget
Property Tax $ 999,507 $ 1,086,868 $ 87,360 8.7% $ 2,012,395 54.0% Sales Tax 1,967,699 2,018,952 51,253 2.6% 6,070,000 33.3% Other Taxes 350,484 246,643 (103,841) -29.6% 751,700 32.8% Licenses, Permits & Franchises 216,223 223,746 7,523 3.5% 537,900 41.6% Rents 41,164 52,105 10,941 26.6% 77,400 67.3%
Other Agencies 93,654 75,025 (18,630) -19.9% 203,600 36.8% Community Development Charges 232,252 156,992 (75,259) -32.4% 249,250 63.0% Public Works Charges 81,173 32,608 (48,566) -59.8% 56,000 58.2% Public Safety Charges 18,396 25,305 6,909 37.6% 64,800 39.1% Code Enforcement Charges 13,335 389 (12,946) -97.1% 6,000 6.5% Other Revenues 227,157 90,275 (136,883) -60.3% 47,900 188.5% Investment Earnings 6,055 9,324 3,269 54.0% 26,500 35.2% Contributions 6,211 7,230 $ 1,019 16.4% 6,300 114.8%
Transfers In 82,000 82,000 - 0.0% 179,322 45.7%
Total: $ 4,335,311 $ 4,107,462 $ (227,849) -5.3% $ 10,289,067 39.9% Mid-Year Actuals Comparison
(July 1 - December 31) Budget to Actual Comparison
General Fund Revenues
- Other Agencies decreased from prior year and are less than budget due to timing of receipts for the State Mandated Cost from the State and from SSU for the renegotiated Dispatching Contract. - Charges for Services have primarily decreased for Community Development and Public Works compared due to completion of larger development projects. - Other revenues are misc. other receipts received by the City for general purposes. The increase in the beginning of fiscal year 2022/23 was primarily due to a $200,000 deposit transfer for the 147 St.
Joseph Way property to a different fund for accounting purposes.
General Fund: Department Operating Expenditures
The following table includes cumulative mid-year actual expenditure comparisons by department and again by expenditure type for Fiscal Year 2021/22 and Fiscal Year 2022/23 and an expenditure budget to actual comparison for Fiscal Year 2022/23.
Expenditures by Type
Overall, cumulative mid-year General Fund expenditures decreased from the previous year by approximately 5.4% or $224,000. Most of the decrease was due to decreased timing of transfers out. The decrease in Salaries and Benefits is offset by the increases in most other expenses specifically Contract Services, and Other Expenses and Utilities. Increase in Contract Services primarily related to insurance, IT services, as well as contracts for ongoing operations and maintenance at Falletti Ranch.
Expenditures by Department
Spending by General Fund Departments are consistent with the prior year with noted increases in Administrative Services, Community Development and Recreation. The increases in Administrative Services and Community Development are primarily related to the additional staff added to each team to meet community and state reporting requirements. This increased staffing generates additional salary and benefits cost as well as proportionally increased allocated costs which are applied based on full time equivalency (FTE) of staff City Wide. The Recreation Department incurred additional costs due to continued expansion of programs after the Covid-19 shutdown.
The first six months, as compared to budget, General Fund expenditures are mostly tracking as expected with all operating departments (all departments except transfers out) averaging 29.7% of the budget. Overall expenditures are in line with expectations and no adjustment is being proposed currently.
General Fund Expenditures by Type FY 2021/22 FY 2022/23 $ Variance % Variance FY 2022/23 Budget % Budget
Salaries & Benefits $ 2,415,545 $ 2,301,288 $ (114,257) -4.7% $ 5,343,200 43.1% Contract Services 822,891 851,303 28,412 3.5% 1,721,441 49.5% Materials & Supplies 29,039 44,797 15,758 54.3% 88,860 50.4% Utilities 120,587 150,833 30,246 25.1% 264,550 57.0%
Repairs & Maintenance 73,168 60,206 (12,962) -17.7% 117,000 51.5% Other Expenses 173,581 225,497 51,916 29.9% 1,257,543 17.9% Transfers Out 536,558 313,397 (223,161) -41.6% 4,506,629 7.0% Total: $ 4,171,369 $ 3,947,321 $ (224,049) -5.4% $ 13,299,223 29.7% Cumulative Mid-Year Actual Comparison
(July 1 - December 31) Budget to Actual Comparison
General Fund Expenditures by
Department FY 2021/22 FY 2022/23 $ Variance % Variance FY 2022/23 Budget % Budget
City Council $ 50,451 $ 59,891 $ 9,440 18.7% $ 152,689 39.2% City Manager 291,330 296,055 4,725 1.6% 645,775 45.8%
Admin Services 135,906 163,644 27,739 20.4% 443,068 36.9% Community Development 381,835 410,964 29,129 7.6% 1,110,569 37.0% Public Works 594,467 549,910 (44,557) -7.5% 1,399,279 39.3% Police 2,000,300 1,953,274 (47,026) -2.4% 4,652,725 42.0% Recreation 180,523 200,186 19,663 10.9% 388,489 51.5%
Transfers Out 536,558 313,397 (223,161) -41.6% 4,506,629 7.0% Total: $ 4,171,369 $ 3,947,321 $ (224,049) -5.4% $ 13,299,223 29.7% Cumulative Mid-Year Actual Comparison
(July 1 - December 31) Budget to Actual Comparison
Enterprise Funds: Operating Revenue
The following table includes cumulative revenue and expenses comparisons through the first half of the Fiscal Year 2021/22 and 2022/23 and a revenue budget to actual comparison for Fiscal Year 2022/23 for the Enterprise Funds.
The Water and Wastewater Fund revenues are made up of charges for services, connection fees other revenues, and development fees. The revenues for both the Water and Wastewater Funds have decreased compared to the prior year primarily due to the absence of connection fees associated with Kessing Ranch, Jamie Lane and other developments collected in the prior year. For Fiscal Year 2022/23, most expenses are in line with budget at mid-year.
Water Funds – Revenues for the water funds charges for services are tracking at 2.2% above budget but 1.9% less than the same period in the last year. This decrease is primarily related to decreased in water usage due to the continuing drought as well as the reduced connection fees as described above.
Expenses as of mid-year are below budget but in line with expectations Aqueduct water usage continues to be the main operating expense for the fund at approximately $218,000 and we expect this cost to increase for the next two quarters as the community goes back to more normalized water use and irrigation. The major capital projects for the water fund are currently in design and scheduling for construction. The last major expense for sewer is the Salaries and Benefits. These costs though at 4.8% higher than budget at mid-year were evaluated and noted to be due to additional onetime benefit payouts.
No adjustments were deemed needed at this time.
Sewer Funds – Revenues are currently tracking above budget in total. However, the operations and capital portion of revenues are tracking just below budget at 47.5%. The decrease in revenues is primarily due to the ongoing reduction in water usage due to the drought. This reduced water usage which leads to a lower wintertime average consumption which is used as the volume metric for Enterprise Funds FY 2021/22 FY 2022/23 $ Variance % Variance FY 2022/23 Budget % Budget
-
Water Operations & Capital
Revenues $ 1,172,263 $ 1,149,817 $ (22,446) -1.9% $ 2,204,700 52.2% Expenses
Salaries & Benefits 363,980 382,483 18,503 5.1% 698,370 54.8% Contract Services 118,689 147,558 28,869 24.3% 303,384 48.6% Other Expenses 114,995 196,081 81,086 70.5% 393,916 49.8% Aqueduct Water Usage 216,233 218,675 2,442 1.1% 600,000 36.4% Capital Outlay - 66,541 66,541 100.0% 808,900 8.2%
Interfund Debt * 26,117 526,117 500,000 0.0% 676,966 77.7% Total Expenses $ 840,014 $ 1,537,455 $ 697,441 83.0% $ 3,481,536 44.2% Net Income $ 332,249 $ (387,638) $ (1,276,836)
Wastewater Operations & Capital
Revenues
Operations & Capital $ 1,582,828 $ 1,499,325 (83,503) -5.3% 3,156,567 47.5% Interfund Debt 26,117 526,117 500,000 1914.5% 552,220 95.3% Total Revenues 1,582,828 2,025,442 442,614 28.0% 3,708,787 54.6% Expenses
Salaries & Benefits 348,619 381,584 32,965 9.5% 694,870 54.9% Contract Services 240,684 106,389 (134,295) -55.8% 181,602 58.6% Other Expenses 44,872 67,973 23,101 51.5% 233,779 29.1% Wastewater Treatment 1,072,753 1,383,851 311,098 29.0% 2,308,408 59.9% Capital Outlay - 587,925 587,925 100.0% 1,250,000 47.0% Interfund Debt 16,874 16,874 - 0.0% 143,694 11.7%
Total Expenses $ 1,723,802 $ 2,544,596 $ 820,794 47.6% $ 4,812,353 52.9% Net Income $ (140,974) $ (519,154) $ (1,103,566)
Cumulative Mid-Year Actual Comparison
(July 1 - December 31) Budget to Actual Comparison
wastewater max usage for billing purposes. Additionally, compared revenues to the prior year, the City has brought in less connection fees due to the completion of other development projects. Operating Expenses at mid-year have increased by approximately $232,000 or 12% compared to the prior fiscal year. This is primarily due to the increase cost of Wastewater Treatment. Additionally, during this year, the City has already incurred almost $600,000 in capital project work related to the sewer main replacement on W. Sierra where there was no project in the prior year.
These funds will continue to be monitored and staff will provide the City Council with updated information during development of the FY 2023/24 budget.
Cash and Investments
The tables below show the cash and investments held by the City as of December 31, 2022. The current cash and investment balances are in line with the City adopted investment policy and as budgeted are enough to meet the City’s expenditure requirements for the remainder of the fiscal year.
Cash and Investment Detail by Composition
Conclusion
Except for identified variances, expenditures and revenues are tracking as expected. Staff will continue to monitor these variances and provide updated information to the City Council during budget development for Fiscal Year 2023/24.
Name of Investment Maturity Date Yield
Balance at
12/31/2022
Local Agency Investment Funds - (LAIF)
Local Agency Investment Fund - Pooled Investments N/A 0.21% $ 15,597,227 Local Agency Investment Fund - Sucessor Agency N/A 0.21% 5,196 Total Local Agency Investment Funds - (LAIF) $ 15,602,423 Sonoma County Investment Pool - SCIP N/A 0.50% $ 425,367 RBC Wealth Manangement
Total RBC Wealth Manangement $ 510,497
Exchange Bank Operating & Payroll Accounts N/A N/A $ 3,175,106 Total Cash and Investments $ 19,713,393
FISCAL YEAR 2022/23
AS OF DECEMBER 31, 2022