Cotati City Council
Agenda Staff Report
Item type: STUDY SESSION
To: City Council
Subject: BUDGET STUDY SESSION FOR GENERAL FUND FOR
FISCAL YEAR 2024/25
Date: April 2, 2024
Written by: Angela Courter, Director of Administrative Services Recommendation
It is recommended the City Council for the City of Cotati facilitate a budget study discussion on the General Fund Operations Revenues and Expenditures for Fiscal Year 2024/25 Background
Summary
With the guidance provided by the City Council and the community during the strategic planning session held on February 20, 2024, staff has compiled the attached draft budget of the Operating General Fund which includes the following:
- All departments evaluated budget needs based on the City’s priorities when preparing their 2024/25 budgets.
- Estimated General Fund Revenues for the rest of fiscal year 2023/24 (inclusive of Measure S) are estimated to be approximately 2% higher than the adopted budget. - General Fund Revenues for budget year 2024/25 assume an approximate 3% increase when compared to the Adopted Budget for FY (Fiscal Year) 2023/24.
Proposed General Fund expenditures for FY 2024/25 include increases for continuity of operations with key increases due to:
- Operating Contracts such as Utilities, Legal, Property and liability insurance is expected to continue to have annual large cost increases, projected at between 15-17% for FY 24-25.
PG&E costs are expected to increase by 21%.
- Personnel Costs - minor staffing changes related to expected promotions including police department Seargent and Corporal vacant positions and the city mangers deputy city clerk, potentially promoting to City Clerk.
- All effective MOU’s are included with projected costs. No salary assumptions are included for the CPOA or CPMA labor unions currently under negotiations. If negotiations are concluded before the budget is adopted, the adjusted budget with the full cost will be provided to the City Council with the budget adoption. If the budget is adopted before the negotiations are concluded, staff will provide the anticipated budget effect to the City Council, which will most likely be adjusted at mid-year.
- In all departments, the budget assumes that all positions are filled for the full year, which is a conservative assumption.
- The City Council budget includes the annual contribution budget ($25k), with is anticipated to be reserved for the Chamber of Commerce ($15k) and the small community grant program ($10k). Historical waivers of fees for events are no longer explicitly budgeted in this account. - Includes the additional discretionary payment to CalPERS based on the proposal provided by Ridgeline to pay the interest expense for the prior year's losses to remove the negative amortization and compounded expense for the City in the future. The total distributed to the General Fund for the additional ADP is approximately $273,000.
Vehicle Replacements
Continued investment in vehicle replacements and operating funds for minor repairs at City Parks, along streets and in City buildings. Major repairs will be included in the forthcoming Capital Improvement Program budget.
The vehicles currently planned for replacement consist of specific heavy equipment and equipment that more than ten years old within the Public Works department, as well as the Police Chiefs‘ Vehicle, which is now nine years old.
Professional Services
In the current year, City staff removed the professional service agreements that serve the Community Development and Public Works departments for cost recovery work (development projects that fund staff and consultant time to process applications). These entitlement costs are primarily managed within a different fund and can be highly variable with passthrough costs covered by entitlement projects.
Other Professional service agreements for both Public Works and Community Development that pertain to pass-through work for Permit Services are continued in the General Fund but have been broken out within the Expense Detail reports. These costs are directly accounted for with offsetting revenues within the charges for services from building permit issuance.
In addition to the allocated contracts provided in the attached budget summary, the budget assumes funding for an updated impact fee study update ($42k), Economic Development work ($25k), elections expenses ($20k), and a contingency reserve for design for a Microgrid/EV Charging Infrastructure Design project ($75k). Note that no General Fund update funding is included in this draft budget.
Veronda Falletti Ranch & SAFE
Lastly, this budget has continuing operating expenses related to the Veronda-Falletti Ranch (approximately $201k). The General Fund will also continue to fund the SAFE team (approximately $145k) with operating transfers to the Grant Fund which holds the program costs due to previously received grant matching from the County. Both of these expenditures are the largest discretionary operating expenses in the General Fund.
Pension and Additional Discretionary Payment (ADP)
Comparative Year Note - Due to the $6M additional discretionary pension payment (ADP) made to CalPERS at mid-year, there is a one-time increase in expenditures shown as departmental expenses in FY 21/22 following governmental accounting requirements. Approximately $4.8M of the $6M is attributable to the General Fund, which is allocated across the departments. The rest was distributed to the Enterprise Funds. Following the plan approved by the City Council, $2M of the $6M is from General Fund reserves with the remaining $4M that was a loan designed to preserve the reserve funds while maximizing avoided interest from future CalPERS unfunded pension liability payments.
The proposed budget includes a combination of conservative revenue projections and conservative operational expenditure projections. Proposed capital expenditures will be presented to the community and City Council on April 18, 2024, when a full detail of the fund balance due to transfers will be provided.
Analysis/Discussion
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 terms of 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..
Financial Considerations
General Fund
Preliminary General Fund budget projects an operating surplus of approximately $1.2M ($11.0M in net revenue and $9.8M in operating expenses). While this does include the pension UAL ADP and re-amortization costs, it does not include any capital or debt service costs, or any capital improvement expenses, which will be discussed at the next budget study session. It also does not include any potential salary or benefit impacts resulting from the currently on-going POA/PMA negotiations.
The total estimated actual General Fund revenues for FY 2023-24 are $10,940,860, of which $5,990,807 or 55% is from Sales Tax (including Measure S sales tax). Estimated operational expenditures for FY 2023-24 total $9,127,785 of which $4,830,279 is to support public safety and $1,498,411 is for public works, our largest departments.
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 foreseeable indirect physical change in the environment, pursuant to CEQA Guideline section 15378.