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Third Quarter Financial Report
Fiscal Year to Date: July 1, 2024, to March 31, 2025
Administrative Services 4/15/25 Q1-Q3 2024/25
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Introduction
This financial report provides an overview of where we are within the budget cycle, then a summary of the City’s financial position through the third quarter of Fiscal Year (FY) 2024/25 (July 1, 2024, through March 31, 2025) for (1) Citywide Revenues and Expenses, (2) the General Fund, (3) Enterprise Funds, and (4) Summary of Cash and Investments. Notable cumulative prior year for the same 9 months to current year actuals as well as preliminary amended budget to current year actuals comparisons are included in this report.
The following factors should be taken into consideration when analyzing mid-year data:
Revenues reported herein are calculated based on actual receipts through March 31, 2025. Some revenues are received later in the year, and as such can appear to be low 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 they appear high 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 Budget Year 2025/26 – 2026/27 Budget Workshops:
Tuesday - February 20th - Strategic Planning Session - Completed Tuesday - April 1st - General Fund Budget Study Session - Completed Monday – April 15th - Enterprise Funds, Special Revenues and Capital Budget Study Session Tuesday – June 10th – Budget Adoption
January
Mid-Year & Financial
Performance Review
February-March
Internal Budget Review,
Strategic/Long-Term and
Capital Planning
NOW* April - May
Draft Budget
Workshops
June
Budget Adoption
Salary Schedule
Adoption
Fiscal Policies
July - December
Financial Evaluations
Budget Adjustments as
Approved by Council
November-December
City Manager and Admin.
Services Budget Planning
Meetings
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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, K9 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 65 percent or expenditures are greater than 85 percent of budget as of this third quarter 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. 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 be constructed. For more information on the City projects they are displayed online both on the City budget at https://city-cotati-ca-budgetbook.cleargov.com/4249 on the City’s transparency portal at www.tinyurl.com/CotatiProjects. Internal Service revenues and expenditures are reflective of the timing of transferred funds required for the purchase of replacement fleet vehicles or to cover employee payouts. This transfer is expected to be complete by the end of the fiscal year.
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General Fund: Operating Revenues
The following table includes cumulative revenue comparisons through the three quarters of the Fiscal Year 2023/24 and a revenue budget to actual comparison for Fiscal Year 2024/25.
General Fund operating revenues for the fiscal year through the third quarter are approximately $310,000, or 4.7% above the same period in FY 2023/24. Overall revenues are at 63.6% of the budget.
The percentage throughout the year is typically less than the percentage of the fiscal year completed, or 75% for the third quarter, 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 received to date have increased over the prior year by approximately 3.2% which is primarily due to increased valuations of properties. We anticipate meeting the total annual budget for the Fiscal Year 2024/25 with the remaining receipts for this fiscal year to be received in April and again in July.
- Sales Tax revenues decreased by $152K and or 4.4% from the prior year. Compared to budget, these revenues are in line with expectations as we have received seven out of the twelve annual payments from the state due to the two month lag as mentioned above.
As of mid-year, staff proposed an adjustment to the budget for fiscal year 2024/25 to reduce the projected sales tax receipts by $50K. Staff continued to review the revenue by annualizing the total receipts to date which are at 71.5% instead of the anticipated 75%.
This revenue stream will continue to be
monitored, and staff will provide the City
Council with updated information during
development of the FY 2024/25 budget.
- 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. Financial and compliance reviews of each cannabis businesses was concluding during this quarter, and no significant items were noted. - Licenses, Permits and Franchises are subject to timing as most franchise payments are due annually near the end of the fiscal year.
- Rents are primarily related to revenue from renting community facilities and park space. These revenues are also subject to variation based on whether conditions for events and time available to rent space.
- Other Agencies decreased from the previous year due to the timing of receipts for the State Mandated Cost reimbursements from the State and the timing of receipts from SSU for the negotiated SALES TAX BUDGET ADJUSTMENT Actual Months FY 2023/24 Actual Months FY 2024/25 Annualized 9 Months FY 2024/25 % Variance Annualized to Budget Sales Tax $ 5,977,000 $ 3,323,909 $ 4,273,598 71.5%
Bradley Burns $ 2,892,000 1,563,776 2,010,569 69.5%
Measure S $ 3,085,000 1,760,133 2,263,029 73.4%
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Dispatching Contract.
- Charges for Services have increased over the last year for Community Development and Public Works primarily for permit fees and development projects charges reimbursable activities. Charges for Services for Public Safety have slightly declined from the same period last year due to the timing of activities. Staff will continue to monitor these activities for possible adjustment to the proposed budget.
- Investment Earnings have increased due to active investment management and increased interest rate earnings. The Council adopted a mid-year adjustment to the budget, increasing the expected income from earnings to an annual budget amount of just over $25,000. - Other revenues are misc. other receipts received by the City for general purposes. These are from one-time unbudgeted receipts.
General Fund: Department Operating Expenditures
The following table includes cumulative mid-year 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 third quarter General Fund expenditures decreased from the previous year by approximately 0.2% or approximately $20K. This decrease is due to capital outlay for vehicle replacement costs which were incurred in the prior year of approximately $275K. Major changes in the vehicle replacements in the current year have been delayed due to evaluation of vehicles in place and the best replacement. These decreases were offset by increases in all other categories including increased repair and maintenance driven by repairs for damage to City Property which is covered by other income from insurance claims. There has also been more work on repairs and maintenance of the existing fleet as they are upfit for alternative best fit options. The increased insurance, contract services, and utilities were all accounted for as a part of the adopted budget and a known trend in increased costs for the City. The increase in other expenses pertains mostly to increases in Bank and Merchant Fees assessed by our merchant services.
Expenditures by Department
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Spending by General Fund Departments is consistent with the prior year with noted increases 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 or replacement tables for the Cotati Room for approximately $14K.
Each department is anticipated to complete the fiscal year within the adopted budget.
The first nine months, as compared to budget, General Fund expenditures are mostly tracking as expected with all operating departments (all departments except transfers out) averaging 64.6% of the budget. Overall expenditure is in line with staff expectations.
Enterprise Funds: Operating Revenues and Expenses
The following table includes cumulative revenue and expenses comparisons through the first three quarters of the Fiscal Year 2023/24 and 2024/25 and a revenue budget to actual comparison for Fiscal Year 2024/25 for the Enterprise 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 as of the third quarter.
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Water Funds – Revenues for the water funds charges for services are tracking at 13.4% above budget (75%) and 18.5% greater than the same period in the last year. This increase is primarily related to moving to monthly billing where revenues are more closely correlated with the reporting period compared to the previous year. Other factors for the increase include the adopted rate increases. Expenses as of the third quarter are below budget but in line with expectations Aqueduct water usage continues to be the main operating expense for the fund at approximately $566,000 or 28.8% of all water expenses for the period. We are expecting this cost to increase into the fourth quarter as rain slows and the community goes back to more normalized water use and irrigation during the summer. Overall, the expenses are in line with the budget and no adjustments were deemed needed at this time.
Sewer Funds – Revenues are currently tracking at budget at 75.4% are aligned with expectations and a 7.8% above the prior year. This increase from prior year is due to the move to monthly billing as well as the increased rates. Operating Expenses at the third quarter have increased by 22.5% or $565K over the prior year. The most significant cost for the fund is the Wastewater treatment charges paid to Santa Rosa which are 61.2% of the expenses to date for this fund. Overall, the expenses are in line with the budget and no adjustments were deemed needed at this time.
These funds will continue to be monitored and staff will provide the City Council with updated information during development of the FY 2025/26 and 2026/27 budgets.
Cash and Investments
The tables below show the cash and investments held by the City as of March 31, 2025. 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.
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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 Years 2025/26 – 2026/27.