Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: ADOPTION OF RESOLUTION APPROVING THE FISCAL
YEAR 2024/25 BUDGET
Date: June 25, 2024
Written by: Angela Courter, Director of Administrative Services Recommendation
It is recommended that the City Council Adopt a Resolution Approving the City of Cotati Budget for Fiscal Year 2024/25.
Background
The City Council held a Strategic Planning Study Session on February 20, 2024, where the City Council, the public, and staff reviewed and updated the goals and objectives, as well as the project priorities for Fiscal Year 2024/2025.
Subsequently, the City Council held two Budget Study Sessions, on April 2nd and May 13th, to review the draft proposed Fiscal Year 2024/25 budget, take public comment, and provide direction to staff.
City Staff have been continuing work to improve the City’s third online budget book that is available to the public at:
https://city-cotati-ca-budget-book.cleargov.com/14567
Analysis/Discussion
Budget Summary
Following the review of the Draft Budget presented to the City Council, there were only minor corrections and updates made to the projections.
Council Goals and Objectives:
During the strategic planning sessions, the City Council provided feedback on the goals and objectives for the City. Key Goals were also then summarized for linking departmental goals and objectives. The final version of these goals is incorporated within the final budget documents presented and attached herein for approval.
Highlights of the overall FY Budget are;
• Conservative 2024/25 budget outlook.
• Balanced budget maintaining prudent fund balances.
• Continue to prioritize council goals of economic development, infrastructure, and community, while integrating equity and climate resilience in our daily operations and planning.
General Fund Highlights:
• Balanced Operating Budget for the 16th straight year. • The General Fund Operating Revenue exceeds Operating Expenditures by approximately $0.5M.
• The General Fund maintained a reserve of 25% of operating expenses, per Resolution No. 2009-50.
• The General Fund has an additional reserve of $1.6M for a total reserve of 42% of the proposed operating expenditures.
• General Fund Ending Fund Balance of $4.2M
General Fund Risks:
• Annual net operating surplus must be $1.5M or more to support basic maintenance/grant matching capital programs in future fiscal years. Surplus currently estimated at $0.5M in the FY 24/25 budget and estimated at $0.8M for FY 23/24. • Continued planned mid-year discussion on CalPERS actuarial results and associated UAL strategies that require prefunding to minimize interest costs • Petaluma is moving to expand cannabis retail, which may negatively affect cannabis retail revenues in Cotati. Petaluma currently allows two delivery-only retailers and an unlimited number of manufacturing, processing and testing operations. Proposed changes anticipated include the addition of three storefront retailers.
Capital Projects Highlights:
The proposed City budget includes the full 5 year CIP for the City, for planning purposes. For Fiscal Year 24/25, General Fund funding for the CIP is $4.4M, for a total of $7.4M in capital projects (All funds) to improve the community, including:
• 2025 St. Improvements Projects
• 2026 St Improvements Projects
• Annual Bike/Ped Safety Projects
• Annual Landscaping Improvements Projects
• Class 1 Pathway Maintenance Project
• Gateway Signage Marquee and Main Entrance Points
• Cator Field Improvements
• Sunflower Park Improvements Phase 1
• Putnam Park Phase 1
• Veronda Falletti Ranch Barns
• Trash Implementation Plan Phase 1
• Landscaping Improvements
• Sidewalk Gap Closures
• Design Hwy 116/W. Cotati Ave
• Design- Falletti Ranch Barns
• City Hall Public Meetings Streaming System Improvements Internal Service Funds Highlights:
Vehicle Maintenance and Replacement
o $527,000 in funding across City Funds based on fleet usage. o Purchase of replacement police vehicles and various public works equipment and vehicles as needed.
o Evaluation of all-electric vehicles for replacements going forward, as applicable.
Compensated Absences Fund
o $119,480 funding provided by City wide allocation costing.
Enterprise Fund Highlights:
• The Enterprise Funds budget includes a combined $1.3 Million in various water and sewer capital projects including:
o SCADA Water/Sewer Server Replacement and Relocation
o Wastewater System Emergency Generator Project
o Well 1A/Well 3 Treatment Renewal and Replacement
o West Sierra Tank Recoating
The sewer operating fund has been operating with a negative operating balance. This was accounted for in the most recent rate studies approved by the City Council, with a “soft landing“ approach to turn around the annual operating deficit through short term use of reserves. This approach is intended to avoid customer rate shock with sudden rate adjustments. However, unanticipated cost pressures, most significantly the cost of wastewater treatment, has created an on-going challenge for this fund. As discussed during budget development, staff will review enterprise rates again to determine if the current approach will meet the City’s objectives or if adjustments are needed.
The Budget document attached to the resolution contains narrative summaries for each department, the City Managers message, and some of the graphics from the budget presentations Financial Considerations
The City has continued strategic projects and has not significantly reduced the reserve funds. The recommended budget includes a General Fund that is balanced with the estimated annual operating revenues exceeding the budget operating expenditures. However, as previously mentioned under General Fund Risks, the City must work to increase its’ net surplus operating revenue to perform future infrastructure maintenance, grant matching and re-build reserves. Due to the expense associated with reconstruction work currently underway, infrastructure in the general fund is supported with historical reserves. The overall fund total reserve is estimated to be $4.1M, or 42% of operating expenditures. This is an increase over prior years adopted budget which was estimated at $3.7M or 40% of operating expenses, but still higher than the required reserve of 25%.
Environmental Issues
The creation of an Annual Budget is not a project under the California Environmental Quality Act (CEQA), per the definition of a project identified in Section 15378 of CEQA in that there will be no direct, or reasonably foreseeable indirect physical change in the environment