Third Quarter Financial Report
Fiscal Year to Date: July 1, 2025, to March 31, 2026
Administrative Services 4/28/26 Q1-Q3 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 third quarter of Fiscal Year (FY) 2025/26 (July 1, 2025, through March 31, 2026) 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 partial year data:
Revenues reported herein are calculated based on actual receipts through March 31, 2026. 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 Financial Reporting Schedule:
April 28th - Third Quarter 2025/26 Financial Update
May 12th - Strategic Financial Forecast and Strategic Projects Update June 9th - 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
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 $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://www.cotaticity.gov/188/City-Budgets 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 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 three quarters of the Fiscal Year 2024/25 and a revenue budget to actual comparison for Fiscal Year 2025/26.
General Fund operating revenues for the fiscal year through the third quarter are approximately $166,600, or 2.5% above the same period in FY 2024/25. Overall revenues are at 63.1% of budget, a decrease from the prior year which was 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 2.8%, which is primarily due to increased valuations of properties. We anticipate meeting the total annual budget for the Fiscal Year 2025/26 with the remaining receipts for this fiscal year to be received in April and again in July.
- Sales Tax revenues increased by $26K and or 0.8% 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, council approved an adjustment to the budget for fiscal year 2025/26 to reduce the projected sales tax receipts by $91K. Staff continued to review the revenue by annualizing the total receipts to date which are at 74.6% 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 estimated budget actuals for FY 2025/26 and amendments for FY 2026/27 budget.
- Other Taxes are primarily made up of Cannabis Business Tax. The City is pending financial and compliance reviews of each cannabis businesses to be performed in the next fiscal quarter. We did note that one distribution facility is closing this quarter and this represents $30K in cannabis business taxes a quarter which will no longer be received.
- 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.
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- 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 also slightly increased 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 decreased due to decreased invested balance as funds are used for capital infrastructure projects.
- 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 2024/25 and Fiscal Year 2025/26 and an expenditure budget to actual comparison for Fiscal Year 2025/26.
Expenditures by Type
Overall, cumulative third quarter General Fund expenditures increased from the previous year by approximately 9.8% or approximately $892K. Adjusting for capital and reimbursable expenditures to get total operating expenditures, the total General Fund expenditures have increased by $217K or 3.1%. Other reimbursable expenses are primarily cost incurred which are to be reimbursed through insurance claims for damage to City property.
Overall major increases are within the Contract Services and Other Expenses categories. Contract Services include legal and special project services for the City. The increase in other expenses pertains mostly to increases in regulatory fees for stormwater by $20K and increased permit expense of $64K related to permit reviews processed by outside consultants. These permit expenses are paid for by the correlating permit fees.
Expenditures by Department
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Spending by General Fund Departments is consistent with the prior year with noted decreases for City Council and increases for Community Development. For City Council the primary decrease was due to decreased expenditure on health insurance coverage. For the Community Development Department, the increase in the aforementioned permit expenses as well as contract services for code enforcement.
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 66.5% 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 2024/25 and 2025/26 and a revenue budget to actual comparison for Fiscal Year 2025/26 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 2025/26, 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 9.18% above budget (75%) and 8.2% greater than the same period in the last year. This increase is primarily related to the adopted rate increases, increased connection fees for projects, and continued performance of investment earnings as allocated to the fund. Expenses as of the third quarter are below budget but in line with expectations Aqueduct water usage continues to be one of the main operating expense for the fund at approximately $488,004 or 26.6% 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 77.4% which is aligned with expectations and 10.8% above the prior year. This increase from prior year is due to the same factors outlined for Water fund above. Operating Expenses as of the third quarter have increased by 3.5% or $89K over the prior year. The most significant cost for the fund is the Wastewater treatment charges paid to Santa Rosa which are 65.7% 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 estimated actuals of FY 2025/26 and adjusted 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 revisions for Fiscal Years 2025/26 – 2026/27.