Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: FISCAL YEAR 2024/25 - THIRD QUARTER - FINANCIAL UPDATE
Date: May 13, 2025
Written by: Angela Courter, Director of Administrative Services Recommendation
It is recommended that the City Council receive the presentation on the un-audited financial position for the City as of the Third Quarter Fiscal Year 2024/25 and receive the investment report for the quarter ended March 31, 2025.
Background
The quarterly financial updates are an opportunity for staff to update the City Council on current year budget performance based on actual operating results through March 30, 2025. This report's intent is to update the Council on how major revenue sources and operating expenditures are trending compared to the approved budget and propose any amendments to the budget if needed. Emphasis is placed on an analysis of the City’s major General Fund revenues, as the overall health of those revenues is instrumental to the City’s ability to help, and potentially enhance, services in the future. In addition to the General Fund revenues, we will also evaluate the General Fund expenditures and the Water Fund, Sewer Fund, and Cash and Investments.
The City hired Optimized Investment Partners (OIP) in May 2023 to help improve the investment returns for the city and to ensure compliance with California Government Code by ensuring safety of principal and sufficient liquidity for operations. The independently generated investment report for the quarter ended December 31, 2024, is attached along with the Quarterly Financial Report and Fiscal Resilience Report for consistency with prior quarters and compliance. This report is provided to meet the reporting requirements in the California Government Code Sections 53600 et seq. and the City of Cotati Investment Policy and Guidelines.
Analysis/Discussion
The City of Cotati’s main revenue sources as a percentage of total General Fund Sources are Bradley Burns sales taxes at 26.6%, voter approved local revenue (Measure S) at 27.75%, property taxes at 17% then other Taxes, Charges for Services, Permits and Licenses for a combined 29.2%.
Overall Revenues for the General Fund are $309,051 or 4.7% above the same period in Fiscal year 2023/24. There are additional accrued payments still pending and will be adjusted within the annual audited financial statements. Significant changes to the total revenues for the General Fund were:
• Other Taxes, primarily made up of cannabis business taxes, had increases of approximately 13.3% over prior year due to additional businesses operations. • Licenses, Permit & Franchises increased 20.0% primarily due to corrections in franchise fees - primarily cable franchise fees compared to the prior fiscal year. • Community Development changes have increased by approximately 31.6% primarily driven from permit fees and other charges for services. • Transfers in have increased by $284K or 526% primarily related to transfers back to the general fund from grants that were refunded back from the matching grants.
Expenditures:
Overall, cumulative General Fund expenditures decreased from the previous year by approximately 0.2% or $20K. This change was due to decreased transfers for capital projects offset by increases in other types of expenses, primarily insurance, utilities and repairs and maintenance.
By department, total dollar increases were noted in City Council, City Manager, Public Works, and Recreation Department. For City Council the primary increase was due to the timing of the contributions made as $15K has been made in the current fiscal year and $0 had been processed as of the prior year. For the City Managers Department, the primary increase pertains to Contract Service for the Council Workshops and Legal Services related to ongoing litigation. Public Works has increased primarily related to staffing changes and contract services related to parks, of which $35K is to be reclassed to the annual landscaping capital project. The Recreation increased other expenses pertaining to the purchase of a complete set of replacement tables for the Cotati Room for approximately $14K. Each department is anticipated to complete the fiscal year within the adopted budget.
Enterprise Funds:
The revenues for the Water Funds and Wastewater have continued to increase primarily related to the move to monthly billing and approved water rates. For Fiscal Year 2024/25, most of the expenses are in line with the budget at year-end. Overall expenses are expected to be in line with the budget at the end of the fiscal year.
City-Wide Cash and Investments:
Cash and Investments remain stable at $15.0M, where most of the funds are held in California Asset Management Program [CAMP] (59%) . Followed by liquid pooled investment funds at US Bank Trust laddered investments (38%), Operating Cash held in Exchange Bank at 3%, Local Agency Investment Funds (LAIF) and Sonoma County Investment Pool (SCIP), and accrued Investments with less than 1%. The balances within the checking accounts are managed very closely to match availability of funding requirements while optimizing investments to earn higher returns.
Fiscal Resilience:
Staff reviewed the financial status of the City funds and all criteria are alighted with our expectations with the outlying yellow ratios identified consistent with the mid-year report as the General fund and Sewer Fund current Fiscal Year Revenues to Operating Expenses goal of Greater than 110% to accrue reserves, where it is currently only 99% (General Fund) and 97% (Sewer). Additionally, the Water Operating Fund Supporting Agency Rates are above the budgeted 6% change, as Sonoma Water’s rate change was actually 9.98%. While this doesn’t make up all expenses in the Water Enterprise, if not corrected over time, it will gradually erode the operational and capital resources in the Water Fund.
Financial Considerations
There is no immediate fiscal impact or budget action necessary. City Staff will continue to report to Council and the community quarterly.
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 reasonably foreseeable indirect physical change in the environment, pursuant to CEQA Guideline section 15378.