Mid-Year Financial Report
Fiscal Year to Date: July 1, 2024, to September 30, 2024 Administrative Services 10/15/24 Q1 2024/25
9
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 mid-year of Fiscal Year (FY) 2024/25 (July 1, 2024, through September 30, 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 first quarter data:
• Revenues reported herein are calculated based on actual receipts through September 30, 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 Financial Reporting & Budget Year 2025/26 and 2026/27 Planning:
• November 12th – Council Acceptance of Audited financial statements for Fiscal Year 2023/24 • December 6th – Measure S Oversight Committee Meeting on annual report for fiscal year 2023/24 • January 21st – Mid-Year Financial Update
• February 18th – Strategic Planning Session
• March 18th – Budget Study #1 - General Fund - Revenues and Expenditures, Special Revenues • April 15th – Budget Study#2 - Enterprise Funds, Capital Projects, Special Revenues • April 22nd – Third Quarter Financial Update for Fiscal Year 2024/25 • June 10th – Council Adoption of Biennial Budget For FY 2025/26 and 2026/27 * January
Mid-Year & Financial
Performance Review
February-March
Internal Budget Review,
Strategic/Long-Term and
Capital Planning
April
Draft Budget
Workshops
May
Budget Adoption
June
Budget Rollout
NOW* July -
December
Financial Evaluations
Budget Adjustments as
Approved by Council
NovemberDecember
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, K-9 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 20 percent or expenditures are greater than 25 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. • Revenues for Special Revenues funds are primarily derived for other special taxes which are reported to the City months after collection, so accrual of revenue lags significantly. • 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/14567 on the City’s transparency portal at www.tinyurl.com/CotatiProjects. • Internal Service revenues indicate as low due to the timing of transferred funds required for the purchase of replacement fleet vehicles. 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 quarter of the Fiscal Year 2023/24 and a revenue budget to actual comparison for Fiscal Year 2024/25.
General Fund operating revenues through the first quarter are approximately $45,000, or 4.3% above the same period in FY 2023/24. Although revenues are only at 9.9% of the annual budget, this is in line with the previous year’s comparison, which was at 9.1% of the budget through September 30, 2023. The percentage of receipts of revenues is typically less 25% 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 are received in December and April of the Fiscal Year, and as such are not included in this report to date. We have budgeted for over $2 million, in line with the County’s proposed allocation, for Fiscal Year 2024/25.
- Sales Tax revenues are approximately 5.0% or $27,600 greater than last year’s cumulative first quarter ending balance. Adjusting the sales tax on an annualized basis, the revenue compared to budget is in line with budgetary expectations at approximately 27% (consistent with one quarter of the year).
- 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 reviews of each cannabis business are concluding currently, 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.
SALES TAX BUDGET
ADJUSTMENT
FY 2024/25
Budget
Actual 1
Months
Receipts
Annualized 3
Months
FY 2024/25
% Variance
Annualized to
Budget
Sales Tax $ 6,027,000 $ 534,892 $ 1,604,676 26.6%
Bradley Burns $ 2,912,000 256,990 770,970 26.5%
Measure S $ 3,115,000 277,902 833,706 26.8%
- 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 as Community Development, Public Works, and the Public Safety Department are again working on new development projects or engaging in more reimbursable activities.
- Investment Earnings have increased primarily due to active investment management and increased interest rate earnings.
- Other revenues are misc. other receipts received by the City for general purposes. These are made up of one-time unbudgeted receipts.
General Fund: Department Operating Expenditures
The following table includes cumulative first quarter actual expenditure comparisons by department and again by expenditure type for Fiscal Year 2023/24 and Fiscal Year 2024/25 and an expenditure budget to actual comparison for Fiscal Year 2024/25.
Expenditures by Type
Overall, cumulative mid-year General Fund expenditures decreased from the previous year by approximately 18.7% or $569,000. Most of the decrease was due to the timing of transfers out for capital projects. The increase in Contract Services is primarily related to insurance and IT improvements.
Expenditures by Department
General Fund Expenditures by Type FY 2023/24 FY 2024/25 $ Variance % Variance FY 2024/25 Budget % Budget
Salaries & Benefits $ 1,251,821 $ 1,290,208 $ 38,387 3.1% $ 5,937,120 21.7% Contract Services 843,828 964,072 120,244 14.2% 2,586,064 37.3% Materials & Supplies 18,249 18,376 127 0.7% 73,416 25.0% Utilities 66,754 93,046 26,292 39.4% 435,700 21.4%
Repairs & Maintenance 8,908 41,883 32,975 370.2% 206,200 20.3% Other Expenses 76,030 71,878 (4,152) -5.5% 747,646 9.6% Transfers Out 783,292 (75) (783,366) -100.0% 4,101,000 0.0% Total: $ 3,048,882 $ 2,479,389 $ (569,493) -18.7% $ 14,087,146 17.6% Un-Audited Actuals Comparison
(July 1 - Sept 30) Budget to Actual Comparison
General Fund Expenditures by
Department FY 2023/24 FY 2024/25 $ Variance % Variance FY 2024/25 Budget % Budget City Council $ 43,209 $ 50,976 $ 7,767 18.0% $ 183,606 27.8% City Manager 192,404 197,289 4,885 2.5% 935,990 21.1%
Admin Services 115,430 126,035 10,605 9.2% 531,160 23.7% Community Development 221,407 266,194 44,787 20.2% 942,168 28.3% Public Works 276,339 378,519 102,180 37.0% 1,738,486 21.8% Police 1,279,270 1,306,983 27,713 2.2% 5,152,304 25.4%
Recreation 137,532 153,467 15,935 11.6% 502,432 30.5%
Transfers Out 783,292 (75) (783,366) -100.0% 4,101,000 0.0% Total: $ 3,048,882 $ 2,479,389 $ (569,493) -18.7% $ 14,087,146 17.6% Un-Audited Actuals Comparison
(July 1 - Sept 30) Budget to Actual Comparison
Spending by General Fund Departments are consistent with the prior year. The majority of the increases are related to the proportional share of allocated expenses for insurance and tech and data management. Other increases for the Public Works include current year work on tree removal and park maintenance. The increase in community development is related to the software purchase for online permit submittal and processing as well as their proportional allocation of increased insurance.
The first three months, as compared to budget, General Fund expenditures are mostly tracking as expected with all operating departments (all departments except transfers out) averaging 24.8% of the budget. Overall expenditure is in line with staff expectations.
Enterprise Funds: Operating Revenue
The following table includes cumulative revenue and expenses comparisons through the first quarter of the Fiscal Year 2023/24 and 2024/25 and a revenue budget to actual comparison for Fiscal Year 2024/25 for the Enterprise Operational 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 2024/25, most expenses are in line with the budget apart from (1) Contract Services for both funds, (2) Aquaduct Water for the Water fund, and (3) Other Expenses for the Wastewater fund. Discussion on these differences is included within the funds discussion as follows.
Enterprise Funds FY 2023/24 FY 2024/25 $ Variance % Variance FY 2024/25 Budget % Budget
-
Water Operations & Capital
Revenues $ 467,829 $ 730,335 $ 262,506 56.1% $ 2,370,900 30.8% Expenses
Salaries & Benefits 161,934 161,294 (639) -0.4% 724,960 22.2% Contract Services 148,451 169,834 21,383 14.4% 399,427 42.5% Other Expenses 47,040 55,496 8,456 18.0% 375,266 14.8%
Aquaduct Water 93,414 219,336 125,922 134.8% 694,460 31.6% Capital Outlay - - - 100.0% 72,500 0.0%
Interfund Debt 13,915 10,971 (2,944) -21.2% 104,469 10.5% Total Expenses $ 464,752 $ 616,931 $ 152,179 32.7% $ 2,371,082 26.0% Net Income $ 3,077 $ 113,404 $ (182)
Wastewater
Revenues $ 559,114 $ 827,643 $ 268,529 48.0% $ 3,445,300 24.0% Expenses
Salaries & Benefits 161,917 161,885 (33) 0.0% 701,290 23.1% Contract Services 93,429 120,221 26,792 28.7% 225,713 53.3% Other Expenses 18,790 69,364 50,575 269.2% 208,210 33.3% Wastewater Treatment 587,238 626,704 39,467 6.7% 2,506,900 25.0% Capital Outlay - - - 0.0% 118,695 0.0%
Interfund Debt 20,810 16,096 (4,714) -22.7% 67,498 23.8% Total Expenses $ 882,184 $ 994,270 $ 112,086 12.7% $ 3,828,306 26.0% Net Income $ (323,070) $ (166,627) $ (383,006)
Un-Audited Actuals Comparison
(July 1 - Sept 30) Budget to Actual Comparison
Water Funds – Revenues for the water funds charges for services are tracking at 30.8% of the budget and 56.1% greater than the same period in the last year. This increase is primarily related to the move to monthly billing as well as increased water consumption and rates compared to the prior year.
For this quarter the prior year accounted for one billing cycle covering two months where we have covered three full months. Additionally, with continued warmer weather and less regulation on irrigation, consumption has increased over the prior year when drought restrictions were still in place for nonessential irrigation of ornamental lawns. Expenses as of the first quarter in total are at budget where payments for aqueduct water usage continues to be the main operating expense for the fund at approximately $219,000. We expect the water usage to decline over the next two quarters as weather changes and irrigation along with the practice for outdoor irrigation. Other expenses that are increased compared to budget are contract services which is primarily derived from the water funds proportion of the insurance and IT infrastructure updates. The water main flushing project is expected to run again during the spring of 2024 bringing the capital expenditures in line with expectations. The last major expense for sewer is the Salaries and Benefits. These costs though are both in line with the budget and prior year’s costs. No adjustments were deemed needed at this time.
Sewer Funds – Revenues are currently tracking at 24.0% of the budget and increased 48% from the prior year. Consistent with the water fund, the increase in revenues is due to the change to monthly billing as well as the increased consumption of water after the prior year drought restrictions. The City has processed the annual re-averaging for the wastewater consumption charges and anticipates the consumption to rebound after multiple years of strict water usage during fiscal years 2021/22 and 2022/23. Operating Expenses for the first quarter have increased by approximately $112,000 or 12.7% compared to the prior fiscal year. This is primarily due to the increased cost of Wastewater Treatment, Contract services and Other Expenses. Contract services are increased due to the insurance and IT Services allocation for improvement projects. Other expenses increased due to an emergency repair that was required along old redwood highway totaling approximately $45,000.
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 September 30, 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.
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 2025/26.
Name of Investment Maturity Date Yield
Balance at
09/30/2024
Local Agency Investment Funds - (LAIF)
LAIF - Pooled Investments - Net FMV N/A 4.58% $ 6,288
Sonoma County Inestment Pool - SCIP N/A 1.96% $ 141,845 US Bank Trust
Managed investments in CD's and Treasuries Various 4.12% $ 7,851,417 Accrued Interest $ 27,645
California Asset Management Program (CAMP)
Pooled Investment Funds N/A 5.29% $ 6,470,416
Fiduciary Funds N/A 1.20% $ 163,193
Restricted Escrow Account
Funds held for payment on Park and Ride Project N/A $ 79,668 Exchange Bank Operating & Payroll Accounts N/A N/A $ 620,074 Total Cash and Investments $ 15,360,545
FISCAL YEAR 2024/25
AS OF SEPTEMBER 30, 2024