Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: FISCAL YEAR 2024/25 - BUDGET STUDY SESSION #2 -
SPECIAL REVENUES AND INTERNAL SERVICE FUNDS
Date: May 13, 2024
Written by: Angela Courter, Director of Administrative Services Recommendation
Study session on Special Revenues and Internal Service Funds Planning for Fiscal Year 2024/25.
No action is proposed.
Background
With the guidance provided by the City Council and the community during the strategic planning session held on February 20, 2024, and April 2, 2024, staff has updated the attached draft budget of the Special Revenues and Internal Service Funds.
This study session's goal is to provide an overview to Council Members and the public, as well as address comments or questions about proposed budget details. Each fund shows the historical balances for three years: the adopted budget for 2023/24, the estimated actual budget for 2023/24 and the proposed budget for 2024/25. The budget format is consistent with how it was presented in prior fiscal years.
As always, community input is appreciated and necessary to ensure a budget that best meets the needs of the community in the City’s areas of responsibility. For this budget study session, it is the goal to obtain feedback going into the development of our final annual budget for adoption by the Council in June.
Analysis/Discussion
Special Revenue Funds
The Special Revenue Funds are a group of accounts established by a government for restricted use to ensure that certain revenue sources are used or earmarked only for their specific purpose. Each department manages the special revenue funds that are primarily coordinated with that department’s purpose. The Administrative Services Department works with the departments to estimate the revenues and account for proposed expenditures and use of fund balance for the purpose of the designated revenue sources.
For the proposed budgeted funds, as provided in the attached workbooks, there are no significant changes for inflows or outflows of resources. In total, close to $457,000 is estimated to transfer out of restricted special revenue funds to support capital projects for fiscal year 2023/24 and $1,177,000 is proposed to be transferred for capital projects in fiscal year 2024/25. Some of this special revenue funding facilitates the over $604,000 in grants funds that the City is proposing to receive for fiscal year 2024/25. More detail on the capital projects being funded will be presented within the Capital Project budget study session.
Included within the Special Revenues is the Grants Fund, as it supports more than just capital projects and has been reclassified by our auditors as a Special Revenue Fund. For Grants, City Staff have assumed $65,000 in funding from Sonoma County Measure O funds which partially offsets the general fund cost of the S.A.F.E. program. The final funding, if any, has not been confirmed by the county, so additional funds may be required from the General Fund for operations funding for the program.
Not included within the special revenue funds are the Landscape and Lighting Funds, as this is proposed to be presented to the City Council with the proposed assessment public hearing. As such, any new requirements for funding from the general fund to support the districts are not included within the proposed General Fund.
Other funds not presented include the pass-through funds representing the debt service management and the successor agency private purpose trust fund. No significant changes are proposed in these funds as they primarily serve to manage for non-discretionary debt service Internal Service Funds
These funds finance the goods or services provided by one department or agency to other departments or agencies of the governmental unit, or to other governmental units, on a cost reimbursement basis. Currently the City utilizes a Vehicle Replacement Fund and a Compensated Absences Fund for these purposes.
The proposed vehicle replacement fund has earmarked expenditures and correlated transfers for the procurement of one police SUV, one public works truck as well as several pieces of equipment including a dump truck, a generator, a forklift, a woodchipper, and trailer. Each vehicle will be evaluated for fuel efficiency and ability to procure vehicles that reduce GHG, including electric vehicles if available in that vehicle category and financially viable. In the proposed budget year 2024/25, we have further isolated the repairs and maintenance costs for vehicles and equipment and included the budgetary expenditures and corresponding billed revenues within the vehicle maintenance fund. Staff are proposing to track all expenses for repairs and maintenance (excluding fuel) within the vehicle fund and then bill out to the corresponding managing fund and department.
This is consistent budgetary and financial reporting practices of agencies with fleet management funds.
The Compensated Absences Fund is designed to maintain the government wide compensated absences liability to offset impacts to other funds by retirements or other significant usage of compensated absences. This is accomplished by billing out proportionate usage and balance to the appropriate funds and departments. The City has worked hard to improve the fund balance, and for fiscal year 2024/25 we incorporated the expected use rates and increases in Salaries and Benefits Schedules. For fiscal year 2024/25 the ending fund balance represents 30% of the compensated absences liability as of June 30, 2023. However, these balances are estimates and could be significantly changed based on attrition through staffing turnover or retirements. These balances will continue to be monitored.
Financial Considerations
Overall, the budgets are in line with the current best estimates of City inflows and outflows.
Some special revenues are derived from development activity, and we have used a very conservative estimate of limited or no development for 2024/25. Other inflows of resources that are derived using sales tax or other tax measures are evaluated consistent with our independent tax forecasting experts or other experts in the field.
Based on the best available data, the proposed budget is conservative in terms of expenditure and revenue forecasts. All funds are considered compliant with the proposed use for their designated special purposes.
Environmental Issues
Not applicable. The proposed action does not meet the definition of a project under CEQA.