Cotati City Council
Agenda Staff Report
Item type: STUDY SESSION
To: City Council
Subject: Budget Study Session for Special Revenues and Internal Service Funds (Fiscal Year 2023/24)
Date: April 18, 2023
Written by: Angela Courter, Director of Administrative Services Recommendation
Study session on Special Revenues and Internal Service Funds Planning for Fiscal Year 2023/24.
No action will be taken.
Executive Summary:
With the guidance provided by the City Council and the community during the strategic planning session held on March 7, 2023, staff has updated the attached draft budget of the Special Revenues and Internal Service Funds.
Background/Analysis
The goal of this study session is to provide an overview to the Council Members and other interested parties, and to address comments or questions about proposed budget details. Each fund shows the historical balances for three years: the adopted budget for 2022/23, the estimated actual 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.
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 at the end of May.
Fiscal Impact
Special Revenue Funds
The Special Revenue Funds are a group of accounts established by a government for restricted use to ensure that certain revenue sources are used or earmarked only for their specific purpose. Each department manages the special revenue funds that are primarily coordinated with that department’s purpose. The Administrative Services Department works with the Departments to estimate the revenues and account for proposed expenditures and use of fund balance for the purpose of the designated revenue sources.
For the proposed budgeted funds, as provided in the attached workbooks, there are no significant changes for inflows or outflows of resources. In total, close to $1,200,000 is estimated to transfer out of restricted special revenue funds to support capital projects for fiscal year 2022/23 and $700,000 is proposed to be transferred for capital projects in fiscal year 2023/24. Some of this special revenue funding facilitates the over $1.900,000 in grants funds that the City is proposing to receive for fiscal year 2023/24. More detail on the capital projects being funded will be presented within the Capital Project budget study session.
Included within the Special Revenues is the Grants Fund, as it now supports more than just capital projects and has been reclassified by our auditors as a Special Revenue Fund. Recently City staff were made aware of possible additional grant funds to be provided. These additions, which are not included within the proposed budgets include (1) continued County reimbursements to the City for a portion of the expenses related to our S.A.F.E. program and (2) potential Federal Funding for the Caltrans Hwy 116/W. Cotati Intersection improvements. Additional information is forthcoming, and we hope to have revised numbers available for the final budget.
Internal Service Funds
These funds finance the 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. Currently the City utilizes a Vehicle Replacement Fund and a Compensated Absences Fund for these purposes.
The proposed vehicle replacement fund has earmarked expenditures and correlated transfers in for the procurement of two Police SUV’s. Additionally, the Public Works department is working to procure a replacement flatbed dump truck. Each vehicle would be evaluated for fuel efficiency and ability to procure vehicles that reduce GHG, including electric vehicles if available in that vehicle category and financially viable.
The Compensated Absences Fund is designed to maintain the government wide compensated absences liability by billing out proportionate usage and balance to the appropriate funds and departments. The City has worked hard to improve the fund balance and for fiscal year 2023/24 we have incorporated the expected use rates as well as increases for changes in Salaries and Benefits Schedules. However, these balances are estimates and could be significantly changed based on attrition through staffing turnover or retirements. These balances will continue to be monitored.
Summary
Overall, the budgets are in line with the current best estimates of City inflows and outflows. Some special revenues are derived from development activity, and we have used a very conservative estimate of limited or no development for 2023/24. Other inflows of resources that are derived using sales tax or other tax measures are evaluated consistent with our independent tax forecasting experts or other experts in the field. Based on the best available data at this time, the proposed budget is conservative in both expenditure and revenue forecasts. All funds are also considered to be compliant with the proposed use of funds for their designated special purposes.
Attachments:
2023-24 Budget Study Presentation - Special Revenues and Internal Service Funds (PDF) Special Revenue And Internal Service Funds Descriptions (DOCX)
Special Revenue Funds - Proposed Budget Workbooks (PDF) Internal Service Funds - Proposed Budget Workbooks (PDF)