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Mid-Year Financial Report
Fiscal Year to Date: July 1, 2023, to December 31, 2023 Administrative Services 1/15/24 Q1-Q2 2023/24
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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) 2023/24 (July 1, 2023, through December 31, 2023) 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, 2023.
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 2024/25 Budget Workshops:
• February 20th - Strategic Planning Session
• April 2nd - General Fund Budget Study Session
• May 7th - Enterprise Funds Budget Study Session
* NOW* January
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
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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. • Other Special Revenues Expenditures are related to a one-time transactions and projects including the Park and Ride lot construction projects which utilizes Excess Bond Proceed Special Revenue Funds as well as the purchase or land at La Plaza View with Inclusionary Housing Special Revenue Funds.
• 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 timeframes vary 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-ca-budgetbook.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 $ 4,350,260 $ 10,694,333 40.7% $ 4,721,610 $ 14,529,062 32.5% Wastewater 1,627,856 3,231,839 50.4% 1,868,718 4,212,328 44.4% Water 1,267,005 2,295,500 55.2% 1,032,389 2,389,166 43.2% Other Special Revenues * 759,506 1,412,258 53.8% 3,259,103 4,766,358 68.4% Capital Projects 1,650,161 7,487,628 22.0% 1,866,021 7,503,128 24.9% Internal Service 162,969 456,480 35.7% 162,969 500,710 32.5% Total For All Funds $ 9,817,757 $ 25,578,038 38.4% $ 12,910,810 $ 33,900,752 38.1% 215,860
Revenues Expenses
$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 $5.0
General
Wastewater
Water
Other Special Revenues *
Capital Projects
Internal Service
Millions
Expenses Revenues
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General Fund: Operating Revenues
The following table includes cumulative revenue comparisons through the first half of the Fiscal Year 2022/23 and a revenue budget to actual comparison for Fiscal Year 2023/24.
General Fund operating revenues through the mid-year are approximately $243,000, or 5.9% above the same period in FY 2022/23. Although revenues are only at 40.7%, this increased from the previous year’s comparison which was at 39.9% of the budget through mid-year. The percentage at mid-year is typically less than 50% 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 the prior year by approximately 6.8% 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 2023/24. - Sales Tax revenues are approximately 1.8% or $36,000 greater than last year’s cumulative mid-year balance. 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 2023/24 are estimated to end 1.6% or $98,000 below the original adopted budget. This would lead to a combined sales tax revenue of just under $6.0 million, down $37,450 or 0.6% from the previous year’s actual balance of $6.0 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 2024/25 budget.
- Other Taxes are primarily made up of Cannabis Business Tax. Last year had a decrease in taxes received which seems to have improved in the current fiscal year. Staff are continuing to monitor this revenue account. Financial reviews of each cannabis business are concluding currently, and no significant items were noted, and all revenue appears properly reported to the City. - Licenses, 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, post covid, are planned.
FY 2022/32 FY 2023/24 $ Variance % Variance FY 2023/24
Budget
% Budget
Property Tax $ 1,086,868 $ 1,161,066 $ 74,198 6.8% $ 2,131,758 54.5% Sales Tax 2,018,952 2,054,491 35,539 1.8% 6,084,000 33.8% Other Taxes 246,643 255,800 9,157 3.7% 652,300 39.2%
Licenses, Permits & Franchises 223,746 182,860 (40,886) -18.3% 556,500 32.9% Rents 52,105 82,577 30,471 58.5% 78,000 105.9%
Other Agencies 75,025 158,902 83,877 111.8% 207,150 76.7% Community Development Charges 156,992 172,959 15,967 10.2% 367,876 47.0% Public Works Charges 32,608 40,338 7,730 23.7% 67,800 59.5% Public Safety Charges 25,305 38,434 13,128 51.9% 58,000 66.3% Code Enforcement Charges 389 11,516 11,127 2858.5% 10,000 115.2% Other Revenues 90,275 47,224 (43,050) -47.7% 221,049 21.4% Investment Earnings 9,324 83,578 74,254 796.4% 45,600 183.3% Contributions 7,230 9,793 $ 2,563 35.5% 12,300 79.6%
Transfers In 82,000 50,722 (31,278) -38.1% 202,000 25.1% Total: $ 4,107,462 $ 4,350,260 $ 242,798 5.9% $ 10,694,333 40.7% Mid-Year Actuals Comparison
(July 1 - December 31) Budget to Actual Comparison General Fund Revenues P a g e 4 | 7
- Other Agencies increased from the previous year due to the timing of receipts for the State Mandated Cost from the State and the timing of receipts from SSU for the negotiated Dispatching Contract. - Charges for Services have increased over the last year as Community Development, Public Works, and the Public Safety Department are again working on new development projects or engaging in more reimbursable activities.
- Investment Earnings have increased primarily due to active investment management and increased interest rate earnings. City staff have proposed a mid-year budget adjustment to increase the expected income from earnings to an annual budget amount of just over $165,000. - Other revenues are misc. other receipts received by the City for general purposes. These are made up of one-time unbudgeted receipts.
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 2022/23 and Fiscal Year 2023/24 and an expenditure budget to actual comparison for Fiscal Year 2023/24.
Expenditures by Type
Overall, cumulative mid-year General Fund expenditures increased from the previous year by approximately 19.6% or $774,000. Most of the increase was due to the timing of transfers out for capital projects. The increase in Contract Services primarily related to insurance, IT services, as well as contracts for ongoing operations and maintenance at Falletti Ranch and the SAFE team.
Expenditures by Department
Spending by General Fund Departments are consistent with the prior year with noted increases in Police, Public Works, Administrative Services, and the City Managers office. The majority of the increases are related to the proportional share of allocated expenses for insurance and tech and data management. Other increases for the Police department are related to increased Tech Projects for the camera system and dispatch wiring repairs as well as increased overtime related to coverage for time off and training.
General Fund Expenditures by Type FY 2022/23 FY 2023/24 $ Variance % Variance FY 2023/24 Budget
% Budget
Salaries & Benefits $ 2,301,288 $ 2,373,540 $ 72,252 3.1% $ 5,683,475 41.8% Contract Services 851,303 1,042,529 191,226 22.5% 1,881,461 55.4% Materials & Supplies 44,797 46,332 1,534 3.4% 76,762 60.4% Utilities 150,833 156,785 5,952 3.9% 381,817 41.1%
Repairs & Maintenance 60,206 77,349 17,143 28.5% 211,200 36.6% Other Expenses 225,497 267,081 41,584 18.4% 1,213,111 22.0% Transfers Out 313,397 757,995 444,598 141.9% 5,081,236 14.9% Total: $ 3,947,321 $ 4,721,610 $ 774,289 19.6% $ 14,529,062 32.5% Cumulative Mid-Year Actual Comparison
(July 1 - December 31) Budget to Actual Comparison
General Fund Expenditures by
Department FY 2022/23 FY 2023/24 $ Variance % Variance FY 2023/24 Budget % Budget
City Council $ 59,891 $ 64,101 $ 4,211 7.0% $ 170,457 37.6% City Manager 296,055 322,660 26,606 9.0% 741,811 43.5%
Admin Services 163,644 203,593 39,949 24.4% 508,290 40.1% Community Development 410,964 408,529 (2,434) -0.6% 1,159,735 35.2% Public Works 549,910 644,758 94,848 17.2% 1,400,181 46.0% Police 1,953,274 2,111,781 158,507 8.1% 5,017,822 42.1% Recreation 200,186 208,191 8,005 4.0% 449,530 46.3%
Transfers Out 313,397 757,995 444,598 141.9% 5,081,236 14.9% Total: $ 3,947,321 $ 4,721,610 $ 774,289 19.6% $ 14,529,062 32.5% Cumulative Mid-Year Actual Comparison
(July 1 - December 31) Budget to Actual Comparison
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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 32.5% of the budget. Overall expenditure is in line with staff expectations.
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 operating revenues for the Water and Wastewater Funds (removing one-time interfund debt service and investment earnings) have increased compared to the prior year primarily due to applied rates. For Fiscal Year 2023/24, most expenses are in line with budget at mid-year.
Water Funds – Revenues for the water funds charges for services are tracking at 3.6% above budget and 6.6% greater than the same period in the last year. This increase is primarily related to continued water usage with increased rates. 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 $304,000 and we expect this cost to increase for the next two quarters as the community Enterprise Funds FY 2022/23 FY 2023/24 $ Variance % Variance FY 2023/24 Budget
% Budget
- Water Operations & Capital
Revenues Operating Revenues $ 1,149,817 $ 1,225,682 $ 75,865 6.6% $ 2,288,800 53.6% Investment Earnings - 41,323 41,323 100.0% 6,700 100.0% Total Revenues $ 1,149,817 $ 1,267,005 $ 117,188 10.2% $ 2,295,500 55.2% Expenses
Salaries & Benefits 382,483 305,233 (77,250) -20.2% 726,080 42.0% Contract Services 147,558 97,197 (50,361) -34.1% 322,656 30.1% Other Expenses 196,081 196,674 593 0.3% 472,161 41.7%
Aqueduct Water Usage 218,675 303,537 84,862 38.8% 531,300 57.1% Capital Outlay 66,541 22,939 (43,602) 100.0% 232,500 9.9% Interfund Debt * 526,117 106,809 (419,308) 0.0% 104,469 102.2% Total Expenses $ 1,537,455 $ 1,032,389 $ (505,066) -32.9% $ 2,389,166 43.2% Net Income $ (387,638) $ 234,615 $ (93,666)
Wastewater Operations & Capital
Revenues Operations & Capital $ 1,499,325 $ 1,568,915 69,590 4.6% 3,226,839 48.6% Interfund Debt 526,117 - (526,117) -100.0% - 0.0%
Investment Earnings - 58,941 58,941 100.0% 5,000 1178.8% Total Revenues 2,025,442 1,627,856 (397,586) -19.6% 3,231,839 50.4% Expenses
Salaries & Benefits 381,584 305,206 (76,378) -20.0% 722,520 42.2% Contract Services 106,389 43,733 (62,656) -58.9% 138,963 31.5% Other Expenses 67,973 127,003 59,030 86.8% 171,897 73.9% Wastewater Treatment 1,383,851 1,181,584 (202,267) -14.6% 2,416,450 48.9% Capital Outlay 587,925 143,694 (444,231) 100.0% 695,000 20.7% Interfund Debt 16,874 67,498 50,624 0.0% 67,498 100.0%
Total Expenses $ 2,544,596 $ 1,868,718 $ (675,878) -26.6% $ 4,212,328 44.4% Net Income $ (519,154) $ (240,862) $ (980,489)
Cumulative Mid-Year Actual Comparison
(July 1 - December 31) Budget to Actual Comparison
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goes back to more normalized water use and irrigation during the summer. The water main flushing project is expected to run again during the spring of 2024 bringing the capital expenditures in line with expectations. The last major expense for sewer is the Salaries and Benefits. These costs though are both in line with the budget and prior year’s costs. No adjustments were deemed needed at this time.
Sewer Funds – Revenues are currently tracking at budget at 50.4 percent. However, the operations and portion of revenues are tracking just below budget at 48.6%. The decrease in revenues is primarily due to the ongoing reduction in water usage due to the drought and the related re-averaging of estimated sewer consumption. This reduced water usage which leads to a lower wintertime average consumption which is used as the volume metric for wastewater max usage for billing purposes. Operating Expenses at mid-year have decreased by approximately $232,000 or 12% compared to the prior fiscal year. This is primarily due to the decrease in the cost of Wastewater Treatment. Additionally, during this period last year, the City had already incurred almost $600,000 in capital project work related to the sewer main replacement on W. Sierra and the current project for Cypress has just completed design and is looking to be built during the remaining two quarters of fiscal year 2023/24.
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, 2023. 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.
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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)
LAIF - Pooled Investments - Net FMV N/A 1.35% $ 11,474
Sonoma County Investment Pool - SCIP N/A 0.50% $ 86,059 US Bank Trust
Managed Investments in CD's and Treasuries 1.85 years 4.69% $ 8,618,766 Accrued Interest $ 98,235
California Asset Management Program (CAMP)
Pooled Investment Funds - 5.56% $ 8,268,683
Fiduciary Funds N/A 1.20% $ 285,535
Exchange Bank Operating & Payroll Accounts - N/A $ 715,420 Restricted Escrow Account - N/A $ 1,238,492
Funds held for payment on Park and Ride Project
Total Cash and Investments $ 19,224,430
FISCAL YEAR 2023/24
AS OF DECEMBER 31, 2023