Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: First Quarter Financial Report for Fiscal Year 2023/24 including update on Cash and Actively Managed Investments
Date: November 14, 2023
Written by: Angela Courter, Director of Administrative Services Recommendation
It is recommended that the City Council receive the presentation on the un-audited financial position and status of Investments for the City as of the First Quarter Fiscal Year 2023/24 Background
City staff are committed to continued financial updates and report on receipt of key revenues and the overall City cash position.
Analysis/Discussion
General Fund:
Revenues:
The City of Cotati’s main revenue sources as a percent of total General Fund Sources are Sales Taxes at 32.4%, Voter Approved Local Revenue (Measure S) at 31.7%, Community Development Charges at 6.2%, Licenses, Permits and Franchise Fees at 5.9%, Other Taxes at
5.3%, and all other revenue combined for 18.5%.
Overall Revenues for the General Fund are $1,568,525 or 9.1% above the same period in Fiscal year 2022/23.
Significant changes to the total revenues for the General Fund were:
Sales Tax was approximately $7,100 or 0.7% less. While this is close, we believe the decline is in line with expectations with the change in consumer activity away from retail purchases due to higher interest rates and the higher cost of goods in the market. The total annual budget is in line with expectations and budget
Other Taxes, primarily made up of cannabis business taxes, had decreases of approximately 18.4% over prior year due to the slowing of customer activity and change in cannabis businesses within the City. There are still a couple tax submissions pending for local business that are not included. We believe that once these additional payments are adjusted for, revenue will be more in line with budget expectations. Property Taxes are received from the County in December and April. The annual budgeted balance is in line with the County’s projections.
Expenditures:
Overall, cumulative General Fund expenditures increased from the previous year by approximately 17% or $396,000. This change was due to the increase in transfers required for capital projects ($308,045) and increased insurance premiums ($122,110) affecting the entire CIRA pool. This is offset by decreased CalPERS Unfunded Pension Liability contributions ($80,610) due to the recent refunding. Both CalPERS and insurance are allocated over the staffing FTE (Full-Time Equivalent), therefore changes in proportional staffing levels impact the allocation and thus overall expenditure in the given department.
By department, total dollar increases were noted in Police, Recreation, City Manager and Administrative Services Departments. These increases are primarily due to higher insurance allocations. For the Recreation Department, this first quarter is also above the estimated budget coverage of 25%. Staff believe this is due to the volume of events during the period and the increased utilization of seasonal staffing to facilitate these events. Staff will continue to monitor these costs and discuss any proposed budget adjustments at the Mid-Year Budget Review. All other department budgets are within expectations for budget.
Enterprise Funds:
The Water and Wastewater Funds revenues include charges for services, connection fees, other revenues, and development fees. Utility accounts are currently billed every two months.
Therefore, within the first quarter of the fiscal year, only one of six billing cycles for the year had been completed.
Revenues:
The revenues for the Water and Wastewater Funds have increased primarily due to increased water consumption and rate increases. Due to the ongoing drought in 2022/23, Cotati residents and businesses continued decreasing water consumption, which also decreased the volume factor for the utility billing. With water restrictions eased and good weather, customers have slowly increased water use when compared to the prior year first fiscal year quarter.
However, we anticipate that water usage will decrease in fiscal quarters Q2 and Q3 if there is ample rainfall and thus reduced irrigation. Overall, City Staff believe the revenues are still in line with expectations for the budget but will continue to evaluate this on an ongoing basis.
Expenditures:
For Fiscal Year 2022/23, most expenses are in line with budget at year-end. Insurance, Wastewater Treatment, and Water Procurement costs continue to be the most impactful expenditures for these funds moving into fiscal year 2023/24. One new expenditure for this quarter compared to the prior year is the funds submission of debt service back to the General Fund for their portion of the Additional Discretionary Payment (ADP) made to CalPERS towards the funds Unfunded Pension Liability.
The Wastewater Fund, Other Expenditures are at 44% of the budget for the fiscal year. These expenditures, while decreasing compared to last year, are a significant amount of the annual budget. Most other expenses are one-time purchases and as such seem appropriate. We will monitor these expense balances going forward and will evaluate and bring to the City Council any proposal for budget adjustments or reclassifications at the Mid-Year Budget Review.
City-Wide Cash and Investments:
Cash and Investments remain stable at $21.1M, where most of the funds are held in laddered investments at US Bank (48%), a Pooled Investment Fund held at California Asset Managment Program (CAMP) (31%), Escrow Restricted Cash Account for the Park and Ride Project (11%), and the General Operating Cash Accounts at Exchange Bank (9%). The reminder of the City’s funds is held in the Sonoma County Investment Pool (SCIP), Local Agency Investment Fund (LAIF), and other minor fiduciary funds (1%).
Financial Considerations
There is no immediate fiscal impact or budget action necessary. City Staff will continue to report to Council and the community quarterly. Additionally, to continue to improve financial reporting, staff are working to generate a City-Wide long range financial projections to be used for strategic planning later this year.
Environmental Issues
This action is exempt from the California Environmental Quality Act (CEQA) because it is not a project which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, pursuant to CEQA Guideline section 15378.