Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: AWARD CONSULTING AGREEMENT FOR EVALUATION OF
A TAX INCREMENT FINANCING DISTRICT
Date: November 18, 2025
Written by: Damien O'Bid, City Manager
Recommendation
It is recommended that the City Council adopt a motion authorizing the City Manager to execute an agreement with Kosmont Companies to evaluate the feasibility of a tax increment financing district (Phase 1) and take any necessary actions to complete a reimbursement agreement to partner with the City of Rohnert Park.
Background
On September 26, 2025, the City of Cotati and City of Rohnert Park (Cities) jointly posted a request for proposals to explore the viability of a tax increment financing district, such as an Enhanced Infrastructure Financing District (EIFD). Following the dissolution of the Redevelopment Agencies, a variety of tax increment finance districts have been created in State law, including:
• Enhanced Infrastructure Financing Districts (EIFDs)
o (SB 628/AB 313/SB 63/AB 1568/SB 1145/SB 961)
• Community Revitalization and Investment Authorities (CRIAs) o (AB 2/AB 2492)
• Infrastructure and Revitalization Financing Districts (IRFDs) o (AB 229)
• Climate Resilience Districts (CRDs)
o (SB 852)
• Disaster Recovery Districts
o (SB 782)
• Downtown Revitalization and Economic Recovery Financing Districts o (AB 1445).
The EIFDs [California Government Code (§53398.50–§53398.88)] can be used for a variety of purposes, including:
• Public infrastructure
• Affordable housing
• Economic development projects
• Community facilities
• Environmental and sustainability projects
• Transit-oriented development and infill development
• Facilities to move goods
Prohibited uses generally include:
• Operating and maintenance costs
• Private development subsidies
• Non-public facilities
• K-12 school district costs
• Projects outside the district boundaries.
Creating a tax increment financing district does not result in any new taxes, it simply sets a property tax baseline in the formation year and then re-directs a certain amount of future property tax growth, the tax increment, into the tax district for certain defined uses.
Notably, these new districts cannot use property tax increment from school districts, which are one of the primary recipients of property tax, thus they are also barred from receiving funding from the districts. The other significant recipient of property tax is the County. The City receives a relatively minor share of property tax at around 10% of the 1% property tax. For example, for a property with an assessed value of $500,000, the 1% property tax is $5,000 and the City’s 10% share is $500 per year.
In Sonoma County, the City of Santa Rosa and the County of Sonoma have formed a joint EIFD.
The County has also explored a joint EIFD between the City of Sebastopol and adjacent unincorporated areas and is in discussions with the City of Sonoma for an EIFD in Sonoma Valley. The increased interest in EIFDs was catalyzed by the County of Sonoma’s adoption of an EIFD policy (Exhibit A), which provided a clear policy framework to explore this potential funding mechanism.
Forming an EIFD, in most cases, only makes sense if another significant recipient of property tax (such as the County of Sonoma), joins the EIFD. Otherwise, forming an EIFD would just tie up future property tax increment that otherwise would be unrestricted General Fund revenue.
Generally, the EIFD should fund improvements that catalyze new development, which increases the property values for the forming agencies and/or meets other policy goals of the forming agencies.
Analysis/Discussion
The Cities received proposals from four consulting firms:
• Century Urban, partnered with Jones Hall LLP
• David Taussig and Associates (DTA)
• Kosmont Companies (Exhibit B)
• RSG, Inc.
Staff from the Cities reviewed all of the proposals and found that Kosmont Companies and DTA had the strongest overall proposals, both with work experience in a variety of tax increment districts, as well as experience here in Sonoma County.
Locally, DTA assisted the City of Santa Rosa in the formation of their joint EIFD with the County of Sonoma. In California, DTA states that they have been involved in the formation of eight (8) EIFDs (including Santa Rosa) and are working on a half dozen more currently. DTA also currently works with the City of Cotati on the formation of Community Facility Districts, which is a type of tax benefit district.
Kosmont assisted the County of Sonoma with the formation of the EIFD with the City of Santa Rosa. They are also currently assisting the County of Sonoma with the EIFD study in Sebastopol. In California, Kosmont states that they have been involved in the formation of 22 of the 34 fully formed EIFDs in the State. Kosmont is also actively engaged in over 50 other city and county TIF/EIFD evaluations and formations currently underway across California.
According to their proposal, Kosmont has successfully facilitated the formation of six (6) citycounty EIFD partnerships thus far and is currently involved in two (2) additional city-county EIFD partnerships currently in the formation hearing phase. The City of Cotati has no prior direct experience with Kosmont.
Both Kosmont and DTA were interviewed by staff of the Cities and references checked. Based on this evaluation process, staff from both Cities are recommending that Kosmont be selected for their statewide experience, local experience, and experience with the County of Sonoma. If the tax increment districts make sense financially, participation by the County of Sonoma will be a key factor. Having the relationships and direct experience with the County of Sonoma is expected to facilitate that discussion.
The scope of work is broken up into 3 phases:
• Phase 1: Initial Feasibility Analysis
• Phase 2: Fiscal Impact Analysis and Pursuit of Taxing Entity Partnership • Phase 3: Implementation
The first phase includes a review of the tax increment vehicles to determine if an EIFD is the best option, conduct a preliminary funding and financing analysis with potential district boundaries and engage with potential partners with the goal of determining feasibility. If tax increment district appears to be feasible, Phase 2 would focus on the fiscal analysis to determine how the district(s) would financially affect the agencies partnering in the district. If it still seemed feasible, Phase 3 would result in the creation of the new district(s).
The total time to create a district, assuming no significant delays, is approximately 12 months.
This schedule is important, as it will be necessary to form by December 1 to set the baseline property values and be added to the assessor's tax rolls for the following property tax year.
Missing this deadline can result in significant development getting to occupancy and re-assessing at significantly higher property values.
Financial Considerations
Kosmont provided costs using two potential scenarios; one where Cotati and Rohnert Park form a single district and one where we form two separate districts. The following are the total costs for each:
Single District Two Districts
Phase 1 $47,060 $47,060
Phase 2 $41,260 $41,260
Phase 3 $50,760 $97,020
Total $139,760 $185,340
In the proposed partnership with Rohnert Park, staff are recommending that costs are split 50/50 while we are working together on the tax increment district. Therefore, the costs for the City of Cotati would be half of the costs above. This reduces the cost for the City of Cotati, compared to if we formed a tax increment district by ourselves. It also provides opportunities for partnership throughout the process and maintains the City of Cotati as an equal partner during the process.
It should be pointed out that if it makes sense to form a tax increment district (Phase 3), there are other associated costs, such as engineering survey to survey the district boundaries, mailing costs to property owners, and fees to record the map with the state Board of Equalization. However, those costs would be determined and separately authorized at that time.
At this time, staff is requesting authorization for Phase 1 only. Once Phase 1 is completed, staff will present the results to the City Council, including a recommendation to either continue into Phase 2 or terminate the project.
In the adopted FY 25-26 budget, the City Council authorized $100,000 from the General Fund (101-11-80187). It is expected that the City of Cotati will contract for the entire Phase 1 amount of $47,060 and Rohnert Park will reimburse the City for 50% of the cost ($23,530) through a reimbursement agreement. Given that the total is under the budgeted amount, no budget adjustment is necessary.
Environmental Issues
Where it can be determined with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA review.
This general rule can be applied to activities which could be subject to the CEQA process, but which logic dictates should not be subject to CEQA review. Therefore, based on the information provided above, the proposed action is exempt from CEQA pursuant to Section 14.03.021 of the CEQA Guidelines in that there is no possibility that the activity may have a significant impact on the environment.