Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: QUARTERLY FINANCIAL UPDATE FOR THE UNAUDITED
FISCAL YEAR END 2025/26
Date: September 8, 2026
Written by: Angela Courter, Director of Administrative Services Recommendation
It is recommended that the City Council receive and file the Fiscal Year 2025/26 Fourth Quarter Unaudited Financial Report for the period ending June 30, 2026, including the investment report, and fiscal resilience report for the same quarter ended. No action will be taken.
Background
The City prepares quarterly financial updates to provide the City Council and community with timely information regarding revenues, expenditures, enterprise operations, and cash and investments. This report presents preliminary year-end results for Fiscal Year 2025/26 and compares current-year activity with the prior fiscal year and the amended budget.
The figures remain unaudited and may change as year-end entries and accruals are completed.
Revenues shown in the report include receipts attributable to the fiscal year that were received through August 31, 2026. In addition, construction and street-improvement projects commonly extend across more than one fiscal year, so capital revenue and expenditure timing may differ from the City's annual budget cycle.
Analysis/Discussion
Overall, the City's preliminary financial results are generally consistent with the adopted budget.
Across all funds, the City received approximately $25.1 million in revenue, equal to 99.5% of the amended revenue budget, and incurred approximately $24.5 million in expenditures, equal to
89.4% of the amended expenditure budget. Below is a snapshot of the financial measures for City-wide revenues and expenditures as outlined within the quarterly attached report.
Financial Measure Actual As of
06/30/2026
Amended Budget % of Budget
All Funds - Revenues $25,061,490 $25,199,061 99.5%
All Funds - Expenditures $24,463,305 $27,363,250 89.4%
General Fund - Revenues $11,792,990 $11,390,361 103.5%
General Fund - Expenditures $12,833,639 $13,520,166 94.9% Water Fund - Revenues $3,029,599 $2,854,860 106.1%
Water Fund - Expenditures $2,186,609 $2,701,254 80.9%
Wastewater Fund - Revenues $4,121,436 $4,141,267 99.5%
Wastewater Fund - Expenditures $3,671,519 $3,918,034 93.7% Citywide Results
Overall revenues and expenditures were in line with the budget. Funds where the revenues or expenses were outside of a 95% variance include Capital Project Funds Revenues and Internal Service Fund Expenditures. Capital Project revenues were below budget primarily because revenue recognition and transfers follow the timing of the related projects. Internal Service Fund expenditures exceeded budget because a vehicle purchased with grant funding and initially budgeted as a capital project was transferred to the Vehicle Replacement Fund for ongoing financial reporting and management.
General Fund Revenues
General Fund operating revenues totaled approximately $11.8 million, which was $252,445, or
2.2%, higher than Fiscal Year 2024/25 and 103.5% of the amended budget. Growth in Property Tax and Community Development charges were partially offset by lower Other Taxes, Other Revenues, Investment Earnings, and Transfers-In. Sales tax receipts appeared to stabilize with marginally higher revenue (1.8% over FY 24-25) and 2.6% over the amended budget. Below is a summary of the primary reasons for each decreased revenue stream for the General Fund during this Fiscal Year:
Revenue Result Primary Explanation
Property Tax
+$145K /
106.8% of
budget
Higher residual Redevelopment Property Tax Trust Fund distributions after recognized redevelopment obligations were paid.
Other Taxes 84.4% of
budget
Lower cannabis tax revenue following the closure of a business that historically generated approximately $148,000 annually.
Community
Development Charges
+$434K year
over year
Building permit revenue follows development activity, while codeenforcement revenue depends on when established receivables become collectible.
Other Revenues 43.0% of
budget
Includes a $57,000 allowance for doubtful aged receivables and approximately $108,000 less administrative reimbursement revenue.
Investment Earnings
$145K /
113.0% of
budget
Portfolio yield declined from 4.21% to 4.03%, and lower General Fund balances reduced the fund's proportional investment earnings.
Note: Budget in this table refers to the final amended budget General Fund Expenditures
General Fund expenditures totaled approximately $12.8 million, an increase of $386,832, or
3.1%, over Fiscal Year 2024/25, with total expenditures ending at 94.9% of the amended budget.
Salaries, benefits and payouts, compared to prior year, increased by approximately $323,000.
Contract services and legal costs increased by almost $270,000 combined, reflecting insurance costs, the EFID evaluation, mobile home park litigation, code-enforcement matters, and other one-time work.
Repairs and maintenance increased primarily because of a budgeted $156,000 Police Department contribution to the Vehicle Replacement Fund. Other expenses increased due to technology subscriptions, bank and merchant processing fees, and payments under the downtown parking lot lease. Department-level changes also reflect employee compensation adjustments, Police fieldtraining hours, Community Development inspections, and the incorporation of Veronda-Falletti Ranch operations into the Recreation Department (they were previously recorded under Public Works-Parks).
Enterprise Funds
Water Fund revenue increased by approximately $224,000, or 8.0%, over the prior year, while Wastewater Fund revenue increased by approximately $437,000, or 11.9%. The increases primarily reflect adopted utility rates, partially offset by lower water consumption. Wastewater revenue also reflects re-averaging based on the prior year's higher water use.
Most enterprise-fund expenses were within budget. The principal year-over-year increases relate to one-time capital outlay for the water fund for the emergency pipeline repairs on Highway 116 and increased wastewater treatment costs. Salaries and benefits declined primarily because actuarial pension gains for CalPERS Fiscal Year 2024/25 reduced the unfunded pension liability recognized for financial-reporting purposes.
Cash and Investments
As of June 30, 2026, the City held $16,241,077 in cash and investments. The portfolio was consistent with the City's adopted investment policy, and available balances were sufficient to meet more than six months of operating requirements.
Fiscal Resilience
Overall, the City’s financial position at the close of the fourth quarter and fiscal year continues to reflect a stable financial foundation and responsible fiscal management. Revenues and expenditures across the City’s major funds remained generally consistent with budget expectations, with year-end variances primarily reflecting the timing of revenues and expenditures, project activity, and other normal fluctuations in operations.
Year-end results demonstrate the City’s continued ability to manage changes in revenue performance, service costs, and capital investment while maintaining overall financial stability.
As the City moves into Fiscal Year 2026/27, staff will continue to closely monitor key revenue sources, including sales tax and cannabis-related revenues, expenditure trends, and the timing and funding of capital projects. These results will also help inform ongoing budget monitoring, adjustments that may be appropriate during the FY 2026/27 mid-year budget review, and the budget development early next calendar year.
Financial Considerations
The report provides preliminary year-end information for monitoring the City's financial position. Receiving and filing the quarterly financial report does not incur any costs outside of staff time.
Staff are not proposing any budget amendments or additional appropriations for the Fiscal Year ended June 30, 2026.
Environmental Issues
The review of financial information is not a project which has a reasonable possibility to create a significant effect on the environment, and as such 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 non-action review of finances 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.