Third Quarter Financial Report
Fiscal Year to Date: July 1, 2023, to March 31, 2024
Administrative Services 4/15/24 Q1-Q3 2023/24
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 third quarter of Fiscal Year (FY) 2023/24 (July 1, 2023, through March 31, 2024) 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 March 31, 2024. 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 street 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:
• Tuesday - February 20th - Strategic Planning Session - Completed • Tuesday - April 2nd - General Fund Budget Study Session - Completed • Monday - May 13th - Enterprise Funds Budget Study Session • Tuesday – June 11th – Budget Adoption
January
Mid-Year & Financial
Performance Review
February-March
Internal Budget Review,
Strategic/Long-Term and
Capital Planning
NOW* April - May
Draft Budget
Workshops
June
Budget Adoption
Salary Schedule
Adoption
Fiscal Policies
July - December
Financial Evaluations
Budget Adjustments as
Approved by Council
November-December
City Manager and Admin.
Services Budget Planning
Meetings
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 65 percent or expenditures are greater than 85 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, property 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 are reflective of the timing of transferred funds required for the purchase of replacement fleet vehicles or to cover employee payouts. This transfer is expected to be complete by the end of the fiscal year.
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 third quarter are approximately $467,000, or 7.7% above the same period in FY 2022/23. Overall revenues are at 61.4% of the budget. The percentage throughout the year is typically less than the percent of the fiscal year completed, or 75% for the third quarter, 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 with the remaining receipts for this fiscal year to be received in April and again in July. - Sales Tax revenues are very slightly up with an increase of $3,000 and less than 0.1% from the prior year. Compared to budget, these revenues are in line with expectations as we have received seven 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. This is consistent with the report provided at Mid-Year. 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 and compliance reviews of each cannabis businesses was concluding during this quarter 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. - 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 for Community Development are again working on new development projects or engaging in more reimbursable activities. Charges for Services for Public Works and Public Safety have slightly declined from the same period last year due to the timing of activities. Staff will continue to monitor these activities for possible adjustment for the proposed budget.
- 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 $220,000. - Other revenues are misc. other receipts received by the City for general purposes. These are from 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 third quarter General Fund expenditures increased from the previous year by approximately 14.1% or $1.1M. Most of the increase was due to the timing of transfers out for capital projectsfollowed by Salaries and Benefits which increased due to additional discretionary payments made to CalPERS to address the increasing unfunded pension liability from prior years CalPERS losses.
Consistent with the budget presentation, staff have now separated out insurance costs from other Expenses to better track the expenditures for financial reporting. The increase in Contract Services primarily related to 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 is consistent with the prior year with noted increases in Police, Public Works, Administrative Services, and the Community Development Department. Most of the increases are related to the proportional share of allocated expenses for the additional discretionary payment (ADP) to CalPERS and tech and data management. Other increases for the Administrative Services Department are related to one-time expenditure on recruiting efforts. Each department is anticipated to complete the fiscal year within the adopted budget.
The first nine months, as compared to budget, General Fund expenditures are mostly tracking as expected with all operating departments (all departments except transfers out) averaging 65.5% of the budget. Overall expenditure is in line with staff expectations.
Enterprise Funds: Operating Revenues and Expenses
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 the budget as of the third quarter.
Water Funds – Revenues for the water funds charges for services are tracking at 2.5% above budget and 22.3% greater than the same period in the last year. This increase is primarily related to moving to monthly billing where revenues are more closely correlated with the reporting period compared to the previous year. Other factors for the increase include the adopted rate increases. Expenses as of the third quarter are below budget but in line with expectations Aqueduct water usage continues to be the main operating expense for the fund at approximately $421,000 or 31.1% of all water expenses for the period. We are expecting this cost to increase into the fourth quarter as rain slows and the community goes back to more normalized water use and irrigation during the summer. The last major expense for sewer is the Salaries and Benefits which have increased based on the allocation of the CalPERS ADP. Overall, the expenses are in line with the budget and no adjustments were deemed needed at this time.
Sewer Funds – Revenues are currently tracking at budget at 79.8%, 4.8% above expected at 75%.
This increase is due to the move to monthly billing as well as the increased rates. Operating Expenses at the third quarter have increased by less than 2.0% or $47K with just over $2.5M in expenses. The most significant cost for the fund is the Wastewater treatment charges paid to Santa Rosa which are 68.9% of the expenses to date for this fund. Overall, the expenses are in line with the budget and no adjustments were deemed needed at this time.
These funds will continue to be monitored and staff will provide the City Council with updated information during development of the FY 2024/25 budget.
Cash and Investments
The tables below show the cash and investments held by the City as of March 31, 2024. 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.
Gen. Operating , $3,593,131
Special Revenues , $3,243,329
Successor Agency , $1,189,521 Water Operating and Capital , $3,680,855
Wastewater Operating and Capital ,
$3,577,187
Internal Service Funds , $602,977
Debt Service Capital Projects, $387,118 , $1,824,494
Cash and Investment Value By Funds - $18.1 Million
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 2024/25.
Exchange Bank Operating &
Payroll Accounts , $135,630 , 1%
Local Agency Investment Funds -
(LAIF), $11,713 , 0%
Sonoma County Investment Pool
- (SCIP), $18,766 , 0%
US Bank Trust - Laddered
Investments, $8,769,578 , 48%
California Asset Management
Program (CAMP), $7,970,669 ,
44%
Cash Held In Escrow , $1,192,255
, 7%
Cash & Investments by Holding - $18.1 Million