Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: RESOLUTION OF INTENTION TO FORM AN ENHANCED
INFRASTRUCTURE FINANCING DISTRICT (EIFD);
ESTABLISH THE COTATI EIFD PUBLIC FINANCE
AUTHORITY
Date: June 23, 2026
Written by: Damien O'Bid, City Manager
Recommendation
It is recommended that the City Council adopt a Resolution declaring its intention to establish the Cotati Enhanced Infrastructure Financing District (EIFD) and establishing the Cotati EIFD Public Financing Authority (PFA) and authorizing the City Manager to proceed to Phase 3 (Implementation) of the EIFD feasibility study.
Background
As a result of the elimination of redevelopment agencies in California, the City of Cotati (“City”) lost a tax increment financing (TIF) tool to invest in public facilities supporting the development of communities. In 2014, SB 628 created a new tax increment financing tool called the Enhanced Infrastructure Financing District (EIFD). The original legislation has been amended to modify the EIFD formation procedural requirements and requirements to issue bonds to finance infrastructure.
On November 18, 2025, the City Council authorized entering into an agreement with Kosmont to evaluate the feasibility of an enhanced infrastructure financing district (EIFD) in a joint study with the City of Rohnert Park. The initial authorization included proceeding up to Phase 2, if the EIFD appeared to be promising. The scope of work is broken into three phases, as follows:
• Phase 1: Initial Feasibility Analysis
• Phase 2: Fiscal Impact Analysis and Pursuit of Taxing Entity Partnership • Phase 3: Implementation
On April 28, 2026, the City Council received a presentation following the completion of Phase 1 on the potential district boundary, initial feasibility analysis, as well as the summary of initial discussions with the County.
Currently, the Sonoma County and City of Santa Rosa EIFD is the only district in the county.
However, in addition to the potential Cotati & Rohnert Park EIFDs, there is a West County EIFD that is significantly advanced and other conversations about EIFDs in Cloverdale, the City of Sonoma and potentially the City of Sebastopol. Given this, there was a desire to generally understand the impact of EIFDs to the County more broadly as these potentially proliferate in Sonoma County. In addition, specific feedback for our proposed EIFD included:
• Projects should catalyze or accelerate development, such that there is a clear nexus to increasing property values. Projects such as beautification or trail projects were cited as inappropriate for EIFDs, as the connection to improved property values is weak at best in the view of the County.
• Although the County has an EIFD policy, to determine their percent commitment to the EIFD, they will need to see the Fiscal Impact Report. Per policy, the County will not commit more than the City, by percent.
• They may need to get a third-party review of the Fiscal Impact Report. It is uncertain at this time, but would have scheduled implications if the County ultimately determines that they want a third-party review.
• Our schedule to get this done by December 2026 was aggressive in the view of the County.
At this time, the City has concluded Phase 2 of the feasibility analysis. The fiscal analysis that is attached is the primary work product from Phase 2. The remaining phase is Phase 3, Implementation, as described below.
STATEMENT OF FACTS
EIFDs aid cities in funding public facilities and other public investments to foster future development and increase property values. By capturing tax increment revenue generated within the district as new development occurs and property values increase over time, similar to a redevelopment project area, a portion of tax increment revenue is redirected from participating taxing entities to the EIFD. Importantly, the establishment of EIFDs does not increase property taxes or any other taxes for landowners within or outside the EIFD boundaries.
The following chart illustrates how tax TIF captures that new revenue from new development into the EIFD (note these dollars are for illustrative purposes only):
For this feasibility study, the City has been evaluating the use of an EIFD to facilitate economic development in the Gravenstein Corridor and Downtown / Cotati Depot Priority Development Areas (PDAs) via investment into critical infrastructure. To date, staff and consultants for Kosmont Companies have prepared detailed analysis and conducted initial outreach to the County regarding a potential partnership in an EIFD, as discussed previously.
Analysis/Discussion
The Fiscal Analysis summarizes the anticipated impact of the EIFD on the City’s General Fund over time. Essentially, the model uses the City’s current development pipeline and assumes that residential, commercial and industrial space is built and comes on-line in a linear fashion over the next 10 years. These are projects that have all been approved, but not yet built. Additionally, as new development comes on-line, assumed levels of new revenue and new service costs are modeled to get the ”net” revenue from new projects.
For the purposes of the Fiscal Analysis, it was assumed that the City is using 50% of the incremental increases in property tax revenue, as well as 50% of new motor vehicle in-lieu (of property tax) revenue and dedicating it to the EIFD. Additionally, the model assumes 33% of the County’s incremental increases in property tax revenue would be dedicated to the EIFD. This is significantly less than the City’s percent contribution (to comply with the County policy), but is close to the dollar contribution of the City and maintains positive net revenue for the County.
It is also worth pointing out that in initial models, even assuming 0% of the City’s tax increment is dedicated to the EIFD, future net revenue was negative. This was due to the service costs of new housing (expense) and the services Community Facilities District (CFD) revenue was not fully accounted for, clearly illustrating the importance of requiring new housing to annex into the CFD. The City currently requires this for discretionary projects, but a future item is anticipated to clarify the need for ministerial projects, given the rapid changes in state law.
The Fiscal Analysis indicates that future City revenue, with the CFD, will continue to grow at the same rate or faster than future service costs with a 50% tax increment contribution to the EIFD.
Although this results in lower total General Fund revenue, it allows for a significant increase in infrastructure funding, including participation from the County, that would otherwise not be available to the City. Many of the planned park and street projects would likely be funded by the City‘s General Fund, so it can be viewed as an enhanced infrastructure fund, moving some or all of the financial obligation for these projects out of the General Fund (or other funds) and into the EIFD, managed by the PFA.
Adoption of the City Council’s Resolution of Intention provides for the following:
1. Preliminary boundaries of the EIFD. The proposed EIFD boundaries are noted in color in Exhibit A of the Resolution of Intention. Though the exact boundaries of the EIFD are subject to further review and refinement as the formation process continues, the current boundary totals approximately 162 acres (approximately
13.5% of the City) within City limits and an additional approximately 45 acres outside of the City limits that would only be considered if the County of Sonoma (County) were to eventually agree to partner with the City on the EIFD.
2. The public facilities and development proposed to be financed by the EIFD.
The activities listed under the Resolution of Intention include all eligible activities under the EIFD legislation and are listed in Exhibit B to the Resolution of Intention (more specific projects will be delineated in the required Infrastructure Financing Plan prior to district formation). Discussions so far at the staff level have identified the following examples of potential projects to be funded:
▪ Water and sewer (e.g., Downtown sewer trunk main, Well #4, additional water storage tanks)
▪ Roadway improvements (e.g., Highway 116, Old Redwood Highway, East Cotati Avenue)
▪ La Plaza Park and adjacent roadway
▪ Downtown parking improvements
▪ Alder Avenue roadway improvements in the unincorporated area (in the scenario of County partnership).
3. Use of Incremental Tax Revenue. The Resolution of Intention anticipates that a portion (not all) of the City’s future property tax increment revenue generated within the EIFD will be allocated to the EIFD. The exact amounts will be determined in future resolutions adopted by the City Council. To move forward with the formation of the EIFD, staff recommend that it be conditioned on the County also electing to participate in the EIFD, in which case, a portion of the County’s property tax increment revenue would also be allocated to the EIFD.
4. Establishes a Public Financing Authority to serve as the governing board of the EIFD. Assuming County participation in the EIFD, the PFA membership would be proposed as two members of the City Council, one County Supervisor, one member of the public appointed by the City Council and one member of the public appointed by the County Board of Supervisors. EIFD law requires that the majority of the PFA are either City Councilmembers or County Supervisors, and there must be at least two members of the public on the PFA. An alternate PFA board member will also be appointed to represent the City Council in the absence of a regular member. No action is recommended on appointments at this time, subject to the County electing to participate.
5. Sets a time and place for the first public hearing on the EIFD to be conducted by the Public Financing Authority. The first public hearing is tentatively scheduled for November 10, 2026, at 5:00 p.m., or as soon thereafter as the matter may be heard, in the City Hall Council Chambers, 201 W. Sierra Avenue, Cotati, CA 94931. Again, this would be subject to the County committing to participate. If the County delays the commitment, this date would be postponed or if there is no commitment, ultimately canceled.
Approval of the Resolution of Intention is intended to show a commitment to the County and request their participation. If the County commits to participate, city staff would schedule a future agenda item where the City Council would move forward with appointments to the PFA.
This would also lead to a series of activities that will take place over the following several months, primarily by the PFA Board. The following schedule outlines the various key tasks and milestones in the formation process. As the following proposed schedule indicates, the final City Council approvals would follow later in calendar year 2026. These timeframes may ultimately slide to ensure coordination with the County’s adoption schedule.
Task Target Date Notes
Initial meeting of Public
Financing Authority (PFA)
August 2026 PFA will review the EIFD, potentially
adopt bylaws, direct the preparation of the
draft Infrastructure Financing Plan (IFP)
PFA meets to review draft
IFP
October 2026
City Council considers
resolution approving the IFP
and allocation of property tax
increment
October /
November 2026
(If the County participates)
County Board of Supervisors
considers resolution
approving the IFP and
allocation of property tax
increment
October /
November 2026
PFA holds Public Hearing #1 November 2026 Additional comments taken; PFA takes action to modify or reject IFP, or
otherwise proceed to Public Hearing #2
PFA holds Public Hearing #2
and Protest Proceeding
December 2026 If majority protest exists – PFA takes
action to terminate EIFD. If no majority
protest, PFA can propose adoption of the
IFP and formation of the EIFD
Staff files EIFD with State
Board of Equalization (BOE)
December 2026
The IFP referenced in the timeline above becomes the roadmap for the work to be accomplished by the EIFD. The IFP will analyze the tax increment anticipated to be generated by the properties in the EIFD boundary, consider the cost of various infrastructure options to be considered for investment, evaluate the bonding capacity created by the tax increment generated, estimated general fund fiscal impacts, and provide a plan for how the EIFD will capture tax increment to fund infrastructure investments. The IFP contents would be provided in draft format to the public, PFA, and City Council in accordance with the schedule above.
Public information is an important part of the EIFD formation process. A web page would be developed that would serve as a resource to interested stakeholders throughout the formation process. Landowners and residents within the EIFD boundaries would also receive mailed notifications of public meetings and hearings throughout the formation process, and public hearings would additionally be advertised via local newspaper. In the event of a majority protest by property owners or residents within the boundaries, the district formation proceedings would be discontinued.
Financial Considerations
There is no immediate fiscal impact for establishing the Cotati EIFD or PFA. If ultimately established, formation costs could be recovered, and the EIFD would create the opportunity to use tax increment financing to fund targeted infrastructure investments in the City. Further information regarding fiscal impact will be analyzed as part of the development of the IFP, which will be presented to the PFA and City Council as noted in the timeline above. However, the initial fiscal impact analysis indicates a net positive impact at an assumed 50% contribution to the EIFD, likely the highest percent that will be considered. The fiscal analysis also indicates the importance of the service Community Facilities District in supporting the General Fund as new housing is added to the community, which would otherwise be negative - even with no funding transferred to the EIFD due to the services demand created by the new housing.
In the adopted FY 25-26 budget, the City Council authorized $100,000 from the General Fund (101-11-80187). The City has entered into a reimbursement agreement with the City of Rohnert Park to reimburse the City for 50% of the consulting costs for the feasibility study. The phase budgets are as follows (for the formation of two separate districts [Cotati and Rohnert Park]):
Phase Total Budget Cost to Date
(Invoiced through April 2026)
Status
1 & 2 $ 88,320 $54,639 Complete
Pending Final Invoices
3 $ 97,020 $ 0 Pending
Totals $185,340 $54,639
If the City Council elects to continue with Phase 3, the total cost to the City, assuming Rohnert Park participation in Phase 3, will be no more than $92,670, which is less than the budgeted amount. If Rohnert Park does not participate in Phase 3, the total cost to the City may be up to $140,000. At this time, Rohnert Park staff are anticipating to also recommend moving to implementation (Phase 3) at an upcoming City Council meeting. Given that the anticipated total is under the budgeted amount, no budget adjustment is necessary.
Environmental Issues
The City Council’s adoption of the Resolution of Intention and establishment of the PFA are exempt from the California Environmental Quality Act (CEQA) as they are actions solely related to the creation of a government funding mechanism and the administrative or organizational activities of the City. Therefore, these actions do not constitute a “project” pursuant to CEQA Guidelines Sections 15378(b)(4) and 15378(b)(5). Neither of these actions could result in a physical change in the environment because the City has not committed itself to any specific project(s) that could be funded by the EIFD. As a separate and independent ground, these actions are exempt from the requirements of CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines because it can be seen with certainty that there is no possibility that they will have a significant effect on the environment. However, future actions (such as the approval of infrastructure improvements using funding from the EIFD) will be subject to environmental review in accordance with CEQA.