Cotati City Council
Agenda Staff Report
Item type: STUDY SESSION
To: City Council
Subject: Budget Study Session for Enterprise (Water, Sewer) Funds and Capital Funds for Fiscal Year 2023/24
Date: April 18, 2023
Written by: Angela Courter, Director of Administrative Services Recommendation
Study session on Enterprise and Capital Funds for Budget Planning for Fiscal Year 2023/24. No action will be taken.
Background/Analysis
The goal of this study session is to provide an overview of the City Council Members and other interested parties and to address comments or questions about proposed budget details. Each budget workbook shows the historical actual balances for three years (FY 19/20, FY 20/21, and FY21/22), the adopted budget for 2022/23, the estimated budget for 2022/23 and the proposed budget for 2023/24. The budget format is consistent with how it was presented in prior fiscal years.
While putting together a City Budget, we must take into consideration the limited resources of any budget, the various levels of uncertainty with different funding source, and how to best use the funding or City staff to meet the needs of most of the community. The drafted budget strives to strike a balance between continued delivery of efficient city services to our residents and business owners, continuing development of key capital projects, and continuing to pursue further economic development.
As always, community input is appreciated and necessary to ensure a budget that best meets the needs of the community in the City’s areas of responsibility. For this budget study session, it is the goal to obtain feedback going into the development of our final annual budget for adoption by the Council in May.
Executive Summary:
With the guidance provided by the City Council and the community during the strategic planning session held on March 7, 2023, and followed with discussions on prioritizations of projects during our first budget study session on April 4th, 2023, staff have updated the projects and related expenditures for the capital plan, related required transfers out of resources, confirmed allocation of staffing levels and increased insurance levels within the General Fund and the proportionate allocation for the implications to the enterprise funds.
The primary Goals and Objectives that are reflected within the capital projects and enterprise funds are:
Enterprise Funds: 3. - Provide core services consistent with best-in-class community service levels.
A. Objective: Ensure community safety and quality (Police, Planning, Building, Public Works, and Code Enforcement)
C. Objective: Improve emergency preparedness, including wildfire preparedness Capital Projects 1. Ensure long-term
vitality for the City.
C. Facilitating affordable housing, new development, and new infrastructure consistent with vision and goals of the General Plan and EIR.
D. Preserve City infrastructure to meet community needs.
Fiscal Impact
Budgets for Enterprise and Capital Projects are primarily developed by the Director of Public Works and Engineering using already developed Rate Studies for the Enterprise Funds as well as our Capital Improvement Plan, consistent with the General Plan and related infrastructure capital and master plans.
Enterprise Funds
· Estimated Combined Enterprise Funds - The proposed budget includes a combination of conservative revenue projections and conservative operational expenditure projections. - Revenues for the rest of fiscal year 2022/23 are approximately 7.5% lower than the adopted budget and less than 1% higher than last year’s, FY 2021/22 actuals. The proposed budget is conservatively proposing a further reduction in revenues of approximately $300K or 5% of the estimated actuals. These decreases are a continued function of increased conservation, some driven by the return to work, as well as reduced expectations of connection fees from developments and final payment of the interfund debt service between the Water Fund and Wastewater fund of $552,000.
- Expenditures for Fiscal Year 2022/23 are anticipated to decrease by just over $775,000 or 9.3%. This decrease is primarily driven by removal of the allocation of the contribution to the vehicle replacement fund due to timing for the purchase of their related equipment, reduced expenditures for capital improvement projects incurred during the year, specifically the W. Sierra Ave. Sewer Replacement Project, as well as delayed rollout of the Portal, Mercantile and Aaron Replacement budgeted projects that were in design.
Expenditures for the combined Water and Wastewater fund in proposed fiscal year 2023/24 are decreasing by approximately 18% or $1.4M due to the completion of the debt service between the Water and Wastewater fund, which reduced the debt service by $582,000 as well as reduced costs for capital projects as they are aligned with the rate study timing to accumulate fund balance and afford the least impact to our customers.
The water rate and wastewater treatment cost changes have been taken into consideration assuming consumption remains consistent with the prior year usage. Any change in consumption would adjust the expense as well as the charges to customers on their volumetric part of their utility bill.
The City currently utilizes bi-monthly billing which was previously consistent with most other water and sewer districts due to the requirements of manual meter reading. The City invested in digital meter reading infrastructure just under 10 years ago to better inform all water users of possible leaks and to increase efficiency of the utility billing process. With the adoption of automatic meter reading (AMR) improved ERP billing systems, and the desire to provide smaller more regular bills to customers, more local governments and water districts are moving towards providing monthly bills to their utility customers. Currently this is a project under the Administrative Services department to reach out to the community for customer service feedback and to analyze evaluate a potential move the City to monthly billing. Included with the proposed budget for both water and sewer are assumed adjustments for increased expenses related to items for billing including print and postage as well as merchant service fees.
Enterprise Capital funds include decreased revenues due to reduced connection fees for both fiscal year 2022/23 as well as proposed fiscal year 2023/24. Major capital investments for the water fund include:
o Water portion of the Scada System,
o Well 1A Maintenance
o Water Hydrant Meter Installation and system integration.
Major projects for the wastewater/sewer system are estimated at $740,000 and include:
o Sewer portion of the Scada System
o Cypress sewer replacement, which was advanced due to timing of the proposed and partially grant funded street improvement project.
With these proposed projects the capital funds are using their fund balance and will be continuously monitored to make sure we are meeting project needs with fund balance available.
Capital Projects
Capital Projects are funded with a combination of Special Revenue Funds and General Funds as well as matching grant resources. Currently the budget for fiscal year 2023/24 includes capital projects totaling $4.8M of which $1.9M in offsetting grant funds are expected. These were presented within the Special Revenues Budget workbook. Other capital projects that are not anticipated to include matching grant funds are included within the capital project fund 605. Total projects are estimated at $1.3M for fiscal year 2023/24 compared to $6.4M for fiscal year 2022/23.
Capital projects are subject to timing based on City planning and implementation of the pavement management plan or parks master plan. Significant funding was invested in City streets for fiscal year 2021/22 through 2022/23 due to the availability of borrowed street funding obtained in 2021/22. Major projects proposed for fiscal year 2023/24 include:
o Design for Falletti Ranch Barns
o Design of Park Improvements work for Sunflower Park and Putnam Park o 2024 Streets Improvement
o Continued Implementation of Annual Bike Ped Safety Improvements o La Plaza Park Digital Marquee
o Design of Hwy 116/W. Cotati Intersection
o Redwood Drive & Cypress Pavement Rehab
o Sidewalk Gap Closure Projects
o Civic Center Parking Lot Improvements
Summary
Overall, the budgets are in line with the best estimates of City revenues at this time, using independent tax forecasting experts who develop estimates based on Cotati’s specific mix of businesses. The proposed budget is conservative in both expenditure and revenue forecasts. The City Council has continued to prioritize supporting robust reserves more than the required reserve of 25% of operating expenditures to protect city services against economic disruptions.
Therefore, this fiscally conservative approach allows the proposed budget to protect essential operations.
Attachments:
2023-24 Enterprise and Capital Projects Funds Budget Study Presentation (PDF) Enterprise Funds (Water & Wastewater) Proposed Budget Workbooks (PDF) General Fund - Updated Transfers for Proposed Capital Projects (PDF) Capital Project Funds Budget Workbooks 2023-24 (PDF)
Single and Multi Year Capital Improvements Plan (PDF)