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Mid-Year Financial Report
Fiscal Year to Date: July 1, 2025, to December 31, 2025 Administrative Services 2/6/26 Q1-Q2 2025/26
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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 mid-year of Fiscal Year (FY) 2025/26 (July 1, 2025, through December 31, 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 mid-year data:
Revenues reported herein are calculated based on actual receipts through December 31, 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 and other dues, are typically incurred at the beginning of the Fiscal Year, so they appear high at 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 Financial Reporting Schedule:
February 10th – Strategic Projects Update
April 21st – Third Quarter 2025/26 Financial Update
June 23rd – Fiscal Year 2025/26 Financial Review and Financial Policies Update P a g e 2 | 7
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
Typically, the City provides detailed variance descriptions on funds where the revenues were less than 40 percent or expenditures are greater than 60 percent of budget. However, all funds were outside of this variance range. As such we have provided a summary for the non-major fund classes that are not detailed in subsequent pages.
Other Special Revenues and Expenditures are related to timing of receipts and use of funds for special purposes. Most significant expenditures to date are for transfers for contributions to capital projects and debt services interest expense. Year to date the special revenue funds have accrued almost $66,000 in investment interest earnings.
Capital Projects are subject to construction timing of the projects. The City has programed over $5.5 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/11305/351805/d and on the City’s transparency portal at www.tinyurl.com/CotatiProjects.
Internal Service revenues indicate as low due to the timing of transferred funds required for the purchase of replacement fleet vehicles. This transfer is expected to be completed by the end of the fiscal year.
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General Fund: Operating Revenues
The following table includes cumulative revenue comparisons through the first half of the Fiscal Year 2024/25 and a revenue budget to actual comparison for Fiscal Year 2025/26.
General Fund operating revenues through mid-year are approximately $123,000, or 2.7% above the same period in FY 2024/25. Although revenues are only at 40.9%, this is a decrease from the previous year’s comparison, which was at 42.1% of the budget through mid-year. The percentage at mid-year is typically less than 50% 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 2.8%, which is primarily due to property valuations compared to the prior year. This is a slight decrease from the prior year which had a 3.2% increase. We anticipate meeting the total annual budget for Fiscal Year 2025/26.
- Sales Tax revenues are approximately 1.5% or $30,000 less than last year’s cumulative mid-year balance. Using an annualized basis, projected sales tax would come in at approximately 3.4% or $200,000 less than budget. In working with our sales tax consultants, they have provided updated forecasts where the combined sales tax revenues should be decreased by approximately $92K. As such staff have proposed this adjustment to the budget.
With the new proposed budget, total sales tax would have a combined sales tax revenue of just under $5.78 million, down $49,889 or 0.9% from the previous year’s actual balance of $5.83 million. Due to the continued uncertainty of the economic environment, staff are proposing to reduce the existing budget to remain conservative. This revenue stream will continue to be monitored, and staff will provide the City Council with updated information during the next quarterly financial update.
The fiscal year 2026/27 estimated sales taxes receipts compared to the adopted budget have also been reduced by approximately $100K or 2.3%. Staff are not proposing an adjustment at this time but will be monitoring economic changes and putting forth an adjustment with the budget update. - Other Taxes are primarily made up of Cannabis Business Tax. Staff are continuing to monitor this revenue account. Financial reviews of each cannabis business have concluded, and two significant items were noted. One business had missing taxable income, and another had overstated income. We are subsequently applying credits for the business who are overpaid and working with the other business to gain compliance. As these adjustments are still forthcoming no amounts have been included herein. These changes will continue to be monitored for possible adjustments in budget.
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- 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 and subject to variability in timing. Even with the decrease from the previous year, the total rental revenues are on track to surpass the adopted budget.
- Other Agencies increased from the previous year due to the timing of receipts for the State Mandated Cost from the State and the timing of receipts from SSU for the negotiated Dispatching Contract. - Charges for Services have increased over the last year for both Community Development and Public Works due to continued development projects. Community Development has already exceeded budget, as such staff are proposing an adjustment to increase the budget by $18K for the year. The Public Safety Department charges for services have seen a slowdown compared to prior year but is expected to meet budget.
- Investment Earnings have decreased primarily due to reduced interest earnings rates as well as reduced proportional cash held within the general fund. - Other miscellaneous revenues are 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 mid-year 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 21.3% or $1.3 million. Most of the increase was due to the timing of transfers out for capital projects. The increase in Contract Services is primarily related to legal and IT services, as well as contracts for ongoing operations and maintenance at Falletti Ranch. Staff are proposing a budget amendment for the legal services associated with Code Enforcement due to unusual on-going matters which were unplanned for in the adopted budget for the fiscal year. Increased salaries & benefits are derived from MOU negotiated increases as well as one-time payouts incurred at the beginning of the fiscal year.
Expenses compared to budget have increased from 43.9% of budget to 53.6% of the annual budget as of December 31, 2025. This increase is also primarily due to the timing of both transfers out for capital projects as well as Other Expenses during the same period of time. With the proposed adjustments for contract services staff anticipate that expenses will be in line with the budget.
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Expenditures by Department
Spending by the General Fund Departments is consistent with the prior year with noted increases in Community Development due to ongoing code enforcement items which were noted previously. The other departments include increases in City Managers’ department due to increased legal activity as was budgeted, and for the Public Works department which is due to timing of repairs and maintenance for streets and on-going contract services including Veronda-Falletti Ranch operations.
The first six months, as compared to budget, General Fund expenditures are mostly tracking as expected with all operating departments (all departments except transfers out) averaging 48.3% 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 half of the Fiscal Year 2024/25 and 2025/26 and a revenue budget to actual comparison for Fiscal Year 2025/26 for the Enterprise Funds.
Water Funds
General Fund Expenditures by
Department FY 2024/25 FY 2025/26 $ Variance % Variance FY 2025/26 Budget % Budget
City Council $ 98,151 $ 72,150 $ (26,001) -26.5% $ 172,515 41.8% City Manager 368,223 450,607 82,384 22.4% 995,952 45.2% Admin Services 241,480 244,825 3,345 1.4% 549,770 44.5% Community Development 476,124 631,891 155,767 32.7% 969,243 65.2% Public Works 816,973 849,785 32,812 4.0% 1,970,547 43.1% Police 2,479,055 2,467,402 (11,653) -0.5% 5,381,939 45.8% Recreation 272,205 248,163 (24,042) -8.8% 508,729 48.8% Transfers Out 1,432,568 2,536,637 1,104,069 77.1% 3,443,589 73.7% Total: $ 6,184,779 $ 7,501,459 $ 1,316,680 21.3% $ 13,992,284 53.6% Mid-Year Actuals Comparison
(July 1 - December 31) Budget to Actual Comparison
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Wastewater 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 primarily compared to the prior year due to applied rates. For Fiscal Year 2025/26, most expenses are in line with budget at mid-year.
Water Funds – Operating Revenues for the water funds charges for services are tracking at 11.2% above budget and 5.1% greater than the same period in the last year. This increase is primarily related to continued water usage with increased rates. The investment earnings for this fund have exceeded the budget expectations. As such staff are proposing a budget increase of $30,000 for the year to a total of $102,500.
Expenses as of mid-year are below budget but in line with expectations. Aqueduct water usage continues to be the main operating expense for the fund at approximately $403,000 and we expect this cost to increase for the next two quarters as the community goes back to more normalized water use and irrigation during the summer. Contract Services and Other Expenses are the other major expenses for water funds. Contract services have primarily been agreements for the IT SCADA system maintenance and updates including a move from one software service to another which will save the City approximately $10K per year. Other Expenses have been related to repairs and maintenance for emergency hydrant work which was approximately $100K for this period. No adjustments to expenses are deemed required for these funds at this time.
Sewer Funds – Revenues are currently tracking above budget at 53.3%. Other Non-Operating revenues increased due to receipt of funds related to connection fees of $63K received for a development.
This was an unbudgeted receipt and as such staff have proposed a budget adjustment to increase the revenues to include this balance. Investments in the sewer funds are also exceeding expectations and as such staff are proposing increasing the budget by $30,000 to a new adjusted budget of $98,600.
Operating Expenses at mid-year decreased by approximately $97,000 or 4.9% compared to the prior fiscal year. This is primarily due to the amount of debt payments outstanding and the timing of capital outlay projects. Increased expenses compared to budget are primarily contract services. These funds will continue to be monitored, and staff will provide the City Council with updated information at the next financial update.
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Cash and Investments
The tables below show the cash and investments held by the City as of December 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.
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 financial updates for the remainder for Fiscal Year 2025/26 and into next budget year 2026/27.