Quarterly Financial Report
Fiscal Year to Date: July 1, 2025, to September 30, 2025 Administrative Services 10/21/25 Q1 2025/26
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 first quarter of Fiscal Year (FY) 2025/26 (July 1, 2025, through September 30, 2025) 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, 2025.
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, insurance, and other dues, are typically incurred at the beginning of the Fiscal Year, so appear high through the 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
• November 18th – Council Acceptance of Audited Financial Statements for Fiscal Year 2024/25 • January 8th/20th – Measure S Oversight Committee Meeting Annual Report for fiscal year 2024/25 • January 27th – Mid-Year Financial Update
• April 28th – Third Quarter Financial Update for Fiscal Year 2024/25 • June 23rd – Council Final Budget for 2024/25 Renewal and Revised FY 2026/27 * January
Mid-Year &
Financial
Performance
Review
February-May
Internal Budget Review,
Strategic/Long-Term
and Capital Planning
June
Budget
Renewal
NOW*
July - December
Financial Evaluations
Budget Adjustments as
Approved by Council
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 from 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 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-cleardoc.cleargov.com/11305 on the City’s transparency portal at www.tinyurl.com/CotatiProjects.
• Water and Wastewater Expenses are slightly higher than 25 percent primarily due to the lump sum payment of insurance at the beginning of the fiscal year. Additionally, the City has performed a couple one-time emergency repairs to systems during this quarter. See further discussion on page 6.
General Fund: Operating Revenues
The following table includes cumulative revenue comparisons through the first quarter of the Fiscal Year 2024/25 and a revenue budget to actual comparison for Fiscal Year 2025/26.
General Fund operating revenues for the first quarter are approximately $99K, or 9.1% below the same period in FY 2024/25. Although revenues are only 8.8% of the annual budget, this is in line with the previous year’s comparison, which was at 9.9% of the budget through September 30, 2024.
The percentage of receipts of revenues is typically less than 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 over $2 million, in line with the County’s proposed allocation, for Fiscal Year 2025/26.
- Sales Tax revenues for the first quarter are approximately 18.3% or $98,000 less than last year’s cumulative first quarter ending balance. Adjusting the sales tax for the known receipt pending for October, when you annualize the revenue and compare it to budget the total receipts are approximately 23%. If this trend continued this would present a $370K reduction in Sales tax from budget. As these are just two receipts out of the year staff do not believe there is any reason to adjust the overall annual projections for sales tax currently. However, we will continue to monitor receipts and come back to council with any significant items.
- Other Taxes are primarily made up of Cannabis Business Tax which are due to the City after the quarter in which the taxes are collected. Taxes received seem to have decreased in the current fiscal year compared to the prior year, but final receipts for the quarter are yet to be received. Staff are continuing to monitor this revenue account.
- 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. This revenue source has continued to improve as more events are planned and with the expansion with the management of the Veterans Building.
- Other Agencies decreased from the previous year due to a one-time receipt in the prior year for the State Mandated Cost from the State.
- Charges for Services have mostly 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 decreased primarily due to pending investment allocations for the quarter, decreased invested balances in the prior year, decreased pooled cash balances subject to the interest allocation, and decreased overall interest rates.
- 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 2024/25 and Fiscal Year 2025/26 and an expenditure budget to actual comparison for Fiscal Year 2025/26.
Expenditures by Type
Overall, cumulative mid-year General Fund expenditure increased from the previous year by approximately 34.4% or $826K. Most of the increase was due to the timing of transfers out for capital projects, increased contract services primarily IT services contracts and program services for Faletti Ranch and one time removal of damaged trees for safety.
Expenditures by Department
Spending by General Fund Departments is consistent with the prior year. Most of the increases are related to the proportional share of allocated expenses for insurance and tech and data management. Other increases for the City Managers Department pertain to special legal charges and for Administrative Services includes a software renewal for debt and lease management as well as the payment for the Cannabis Revenue Audits which are billed back to the Cannabis businesses.
The first three months, as compared to budget, General Fund expenditures are mostly tracking as expected with all operating departments, after adjusting for insurance allocations. Without adjusting for insurance, the first quarter expenditure for the General Fund are at 23.1% 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 2024/25 and 2025/26 and a revenue budget to actual comparison for Fiscal Year 2025/26 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 have increased compared to the prior year primarily due to applied rates as well as connection fees at 902 E.
Cotati Ave. For Fiscal Year 2025/26, most expenses are in line with the budget apart from (1) Contract Services and Insurance for both funds, (2) Aqueduct Water for the Water fund, and (3) Other Expenses for the Water fund. Discussion on these differences is included within the funds discussion as follows.
Water Funds – Revenues for the water funds charges for services are tracking at 35.8% of the budget and 25.9% greater than the same period in the last year. This increase is primarily related to the increased water consumption and rates as well as inclusion of one-time connection fees for development.
Expenses as of the first quarter in total are at 29.6% of budget where payments for aqueduct water usage continue to be the main operating expense for the fund at approximately $254K. We expect water usage to decline over the next two quarters as weather changes and irrigation usage is significantly reduced.
Other expenses that are increased compared to budget are contract services, other expenses, and insurance. Contract services compared to budget are increased primarily due to the water funds proportion of the IT software subscriptions for Itron and Temetra which are incurred at the beginning of the fiscal year. As stated previously, the insurance charges were also incurred at the beginning of the fiscal year. For other expenses compared to budget the primary drivers of increased costs compared to budget are for utilities as well as one-time charges for repairs and maintenance related to emergency repairs. Overall, these costs are in line with the budget, and no adjustments were deemed needed at this time.
Sewer Funds – Revenues are currently tracking at 28.7% of the budget and increased 29.7% from the prior year. Consistent with the water fund, the increase in revenues is due to increased rates, as well as one time connection charges. Operating Expenses for the first quarter decreased by approximately $56K or 5.4% compared to the prior fiscal year. This is primarily due to the decreased other expenses primarily renegotiated bank and merchant fees, which have decreased by $10K and a one-time repair during the prior year. Contract Services, Insurance, Wastewater Treatment have increased consistently with Water as mentioned above.
These funds will continue to be monitored, and staff will provide the City Council with updated information during the mid-year quarterly financial update.
Cash and Investments
The tables below show the cash and investments held by the City as of September 30, 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.
Gen. Operating,
$2,658,201
Special Revenues,
$2,955,328
Successor Agency,
$973,915 Water Operating and
Capital, $4,165,374
Wastewater Operating
and Capital, $3,222,036
Internal Service Funds,
$273,924
Capital Projects,
$621,500
Deposit Accounts,
$51,444
Cash and Investment Value By Funds - $14.9 Million
OPERATING CASH,
$358,321 , 2%
LAIF, $6,579 , 0%
US BANK, $6,235,430 , 42%
CAMP, $8,236,72
Investment Portfolio Composition - $14.9 Million
Cash and Investment Detail by Composition
Fiscal Resilience
During the first quarter of FY 2025–26, several indicators showed outlier performance when compared to established fiscal goals.
In the General Fund, cash coverage was lower due to early-year expenditure patterns, while revenues— particularly sales tax receipts (Bradley Burns and Measure S)—were below budget and prior-year levels (see page 3), reflecting timing delays in remittances. The overall revenues-to-expenditures ratio was below target, consistent with typical first-quarter trends when property tax payments have not yet been received.
In the Water Fund, expenses exceeded budget projections due to front-loaded costs, and wholesale water rates from the Sonoma County Water Agency increased by 3% above projections.
In the Sewer Fund, expenses were below budget and revenue performance improved, though the revenueto-expenditures ratio remained slightly under the target threshold. These variances are attributed to timing and cyclical cash flow factors and will continue to be monitored through mid-year.
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 updates for the current and next fiscal year.