Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: DISCUSSION ON BI-ANNUAL BUDGETING FOR THE
PERIOD OF FY 2025/26 - FY 2026/27
Date: February 20, 2024
Written by: Damien O'Bid, City Manager
Recommendation
It is recommended that the City Council discuss the staff recommended shift to a two-year budget for fiscal years 2025/26 – 2026/27, provide feedback to staff on this recommendation, as well as what additional materials or planning meetings the City Council would like to see if the City transitioned to a two-year budget. No changes are proposed to the planned fiscal year 2024/25 budget.
Background
In Sonoma County, several cities currently adopt two-year budgets, including the Town of Windsor, City of Healdsburg and City of Cloverdale. There are examples of other cities in surrounding counties also budget on a two year cycle. Currently, the City of Cotati and the cities of Santa Rosa, Petaluma, Rohnert Park, Sebastopol and Sonoma adopt single year budgets.
During the fiscal year 2023/24 budget development process, staff initially broached the potential for a two-year budget with the City Council. At that time, initial feedback was that the City Council would need more in-depth study sessions and potentially additional information to be comfortable budgeting on a two year cycle.
Analysis/Discussion
Essentially, two-year budgets function like an extended single year budget, except that the ”midyear” adjustment that we currently do would be more robust and occur at the end of the first year.
Commonly cited advantages of biennial budgets include:
• Reducing the total amount of time spent budgeting over a two-year period and freeing up time for other projects in year two,
• Encouraging the jurisdiction to think strategically over multiple years instead of just balancing the budget for a single year, and
• For cities in particular, de-politicizing the budget somewhat because under state law cities may only adopt biennial budgets in even-numbered (non-election) years.
Commonly cited disadvantages include:
• More time and effort required to develop the budget in year one, • A perceived loss of control by the legislative body, since they are approving the budget for two years at a time,
• More difficulty and uncertainty forecasting revenues/expenditures further into the future, and
• Some jurisdictions spending too much time on budget amendments or the mid-biennium review and adjustment, eliminating any time savings in year two.
If the City were to transition to a two-year budget, the proposed budget process would be similar to what is outlined for Santa Monica here (https://finance.smgov.net/about/fiscal-policies) Attached is whitepaper from the former Finance Director of San Luis Obispo, which summarizes the benefits from his experience.
Financial Considerations
This is a preliminary discussion only, so there are no direct financial impacts. If a two year budget were implemented, there would likely be additional staff time required to produce the two year budget, which would be expected to be offset by staff savings every other year.
Environmental Issues
Not Applicable.