Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: BUDGET STUDY SESSION FOR GENERAL FUND FOR
FISCAL YEARS 2025/26 AND 2026/27
Date: April 1, 2025
Written by: Angela Courter, Director of Administrative Services Recommendation
It is recommended that the City Council facilitate a budget study discussion on the General Fund Operations Revenues and Expenditures for Fiscal Years 2025/26 and 2026/27.
Background
Summary
With the guidance provided by the City Council and the community during the facilitated Budget Planning Workshop on January 21, 2025 and the Strategic Planning Session held on February 18, 2025, 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 2025/26 and 2026/27 budgets. To build this budget, each department started with a zero expenditure budget and re-built their budgets verifying and justifying every expense. - Estimated General Fund Revenues for the rest of fiscal year 2024/25 (inclusive of Measure S) are estimated to be approximately 4% higher than the adopted budget. - General Fund Revenues for budget year 2025/26 assume an approximate 2% increase when compared to the Adopted Budget for FY (Fiscal Year) 2024/25. Budget Year 2026/27 assumes an approximate 3% increase when compared to the Proposed Budget for FY (Fiscal Year) 2025/26.
Proposed General Fund expenditures for FY 2025/26 include increases for continuity of operations with key increases due to:
- Operating Contracts such as property and liability insurance, health insurance, and legal is expected to continue to have annual large cost increases, projected at between 15-20% for FY 25-26, which adds approximately $100k in new expense each year with the total cost of insurance now exceeding $1M per year. Utility Costs (PG&E) for are still increasing higher than CPI and estimated to increase 7% for Fiscal Year 2025/26, along with planned changes in water costs in accordance with the water/sewer rate study.
We also have a new contract proposed for evaluating an Enhanced Infrastructure Financing District (EIFD) as well as third party evaluation of the City’s permitting processes to further institute best practices. IT contractor costs are shown as flat in the draft budget, as City staff are still working through the planned work and associated costs. Finally, the budget includes approximately $70k in additional legal costs for FY 25-26 and $35k in FY 26-27 to fund current litigation outside of CIRA.
- Personnel Costs - minor staffing changes related to expected promotions including police department Seargent and Corporal vacant positions and the city mangers City Clerk position.
- All effective MOU’s are included with projected costs. The CEA Labor Union agreement will expire before 2026/27 as such the budget estimates a CPI increase in the second year but no other adjustments. The Non-Rep group agreement will be subject to negotiations during 2026/27 and such the budget includes only contract amounts for required salary studies. - In all departments, the budget assumes that all positions are filled for the full year, which is a conservative assumption, as actual staff costs are likely to be less due to vacancies.
Additionally, Police overtime accounts for most of the potential overtime costs at the current vacancy factor. If positions remain filled, the salary costs will be closer to the budgeted estimate, but overtime costs should be less than budgeted, or vice versa. - The City Council budget includes the annual contribution budget ($25k).
- There are no additional CalPERS Additional Discretionary Payments (ADP’s) planned for either budget years 2025/26 or 2026/27. This will be evaluated with Ridgeline consultants and brought back to council during the budget years for consideration.
Repairs and Maintenance
City Staff have included funds for repairs to be made to the Cotati Room including reflooring, lighting, paint. Additionally, to continue to improve security and access controls around City Hall, we have also included funds to start installation of a digital lock system.
Vehicle Replacements
The draft budget includes 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.
For fiscal year 2024/25 the intended vehicles for purchase were reevaluated and the police department used minor funds to repurpose the existing fleet, and the public works department did not require the heavy vehicle as was budgeted. For the budget years the vehicles currently planned for replacement consist of one police vehicle and one public works utility truck each proposed budget year. Additionally, included are some minor equipment replacements for the public works.
Professional Services
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 $200k). 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. The charges for SAFE will be presented with the next presentation as the charges are accounted for within the Grants fund due to grant funds available from Measure O. Both expenditures are the largest discretionary operating expenses in the General Fund.
Analysis/Discussion
Overall, the budgets are in line with the best City revenues estimates now, 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 $1.8M ($11.4M in net revenue and $9.6M in operating expenses) for Fiscal Year 2024/25. For both budget years 2025/26 and 2026/27 the estimated Net Operating Revenues are $692K and $796K respectively.
While this budget does include the annual pre-payment of the pension UAL, it does not include Additional Discretionary Payments (ADPs) or UAL re-amortization costs. The proposed budget does include capital equipment, repairs and maintenance and debt service costs, but does not include any capital improvement expenses, which will be discussed at the next budget study session.
The total estimated actual General Fund revenues for FY 2025-26 are $11,224,828, of which $5,867,000 or 52% is from Sales Tax (including Measure S sales tax). Then in FY 2026/27 the total estimated actual General Fund revenues are $11,529,761, of which $6,054,950 or 53% is from Sales Tax (including Measure S sales tax).
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.