Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: GENERAL FUND LONG-RANGE FINANCIAL FORECAST -
FISCAL YEARS 2025-26 THROUGH 2035-36
Date: May 12, 2026
Written by: Angela Courter, Director of Administrative Services Recommendation
It is recommended that the City Council receive a report on the General Fund Long-Range Financial Forecast (LRFF) for FY 2025-26 through FY 2035-36.
Background
The City of Cotati’s General Fund supports core municipal services with an adopted FY 2025-26 operating budget of approximately $11.2 million and 49 full-time equivalent positions. The Long-Range Financial Forecast (LRFF) is a planning tool used to evaluate the City’s long-term fiscal condition and identify potential financial challenges early, allowing for proactive decisionmaking.
The LRFF builds on prior financial planning efforts with ongoing budget management and complements the City’s adopted Fiscal Resiliency Policy, which provides a structured framework for monitoring financial indicators and responding to potential economic downturns.
The forecast is not a budget but rather a projection based on current assumptions, trends, and available data.
Analysis/Discussion
The LRFF evaluates the City’s General Fund over a 10-year period using three scenarios to assess financial sustainability under varying conditions:
• Baseline Scenario (Flat Growth): Assumes moderate and steady growth in revenues such as property tax and sales tax, alongside rising expenditures driven primarily by personnel costs, insurance, utilities, and pension obligations. This scenario reflects continued operations without major economic disruption or new revenue sources. • Baseline with Hotel Development: Builds upon the baseline scenario and incorporates the potential fiscal benefits of a proposed hotel completion and operation in FY 2027-28.
This scenario includes increased property tax, sales tax, and transient occupancy tax (TOT) revenues, improving the City’s long-term revenue outlook. • Recession Scenario: Models the potential impacts of a significant economic downturn beginning in FY 2026-27, including sharp declines in key revenue sources such as sales tax and property tax, with continuing operating expenditures. This scenario of expenses is not intended to be a realistic projection, but rather to represent the magnitude of cuts that would need to be made to City Operations in this scenario. This highlights the City’s fiscal vulnerability to severe economic shocks and underscores the importance of proactive planning.
Across all scenarios, expenditures are projected to grow due to contractual labor obligations, rising health insurance costs, increasing insurance premiums, pension liabilities, and inflationary pressures on operations. The forecast excludes one-time revenues and capital project transfers to focus on ongoing operational sustainability.
Key Risks to Forecast
The forecast identifies several risks that could significantly impact the City’s financial condition, including:
• Economic volatility affecting tax revenues, particularly sales tax • Potential State actions to borrow or reallocate local revenues • Continued increases in insurance and healthcare costs • Unfunded pension liabilities and market-driven fluctuations • Future labor contract negotiations and staffing needs • Unanticipated one-time expenditures or emergencies
Conclusion
• The LRFF demonstrates the importance of ongoing financial monitoring and long-term planning to maintain fiscal stability. While the baseline scenario suggests manageable growth with closely managed expenditures, the recession scenario highlights potential structural imbalances without corrective action. The hotel development scenario presents a meaningful opportunity to strengthen revenues and operating surplus to fund future capital projects or other City improvements.
• The LRFF, in conjunction with the City’s Fiscal Resiliency Policy, provides a framework for early identification of financial challenges and implementation of strategic responses to preserve service levels and maintain financial health.
Financial Considerations
The LRFF itself has no direct fiscal impact, other than required staff time to generate the report, but serves as a critical planning tool to inform future budget decisions and policy direction.
Environmental Issues
The review of the General Fund Long-Range Financial Report is not subject to CEQA. 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 resolution 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.