CITY OF SEBASTOPOL CITY COUNCIL
AGENDA ITEM REPORT FOR MEETING OF: March 4, 2025
=========================================================================================== To: Honorable Mayor and City Councilmembers
From: Ana Kwong – Administrative Services Director
Mark Rincon-Ibarra – Director of Public Works/City Engineer Toni Bertolero – Interim Engineering Director
Subject: FY24-25 Quarter 2 Financial Update for Enterprise Funds =========================================================================================== RECOMMENDATION:
Staff recommends the Sebastopol City Council receive year-to-date financial information for the enterprise funds.
EXECUTIVE SUMMARY:
Based on the best available information as of December 31, 2024, the city's water fund has billed 49% of budgeted revenue for the full fiscal year. Expenses are at 49% of full fiscal year. Wastewater has billed 43% of budgeted revenue of full year. Expenses are 44% of full year. These results are in line with what we would expect.
BACKGROUND:
The attachments summarize the financial results for the Water and Wastewater enterprise funds as of this writing.
The Water and Wastewater enterprise funds have been substantially underfunded until rate increases began on July 1
, 2024. All activities to maintain these services, including operations, maintenance, billing and collections, administration, financing, and related debt service, are accounted for in these funds. The principal sources of revenue are chargesto customersfor water consumption,wastewater collection, and feesrelated to providing new water and wastewater services. For revenues, the "Year to Date Actual" columns reflects billing of usage through November. The City has recognized more revenue due to the recent water and wastewater rate increases.
On the expenditure side,water istrending close to the 49% mark for the second quarter,while wastewater is below this mark, which is due to the non-linear nature of expenses. For expenses the “ Year to Date Actual” columns reflects expenses through December.
ANALYSIS:
Water:
The quarterly report for the water fund encompasses the billing period from July to November. Historically, water usage tends to be higher in the first and second quarters due to the summer months, which typically see increased water consumption. As we transition into the winter months, we expect water usage to decline. However, it is anticipated that water revenue will eventually align with the projected revenue as the year progresses. Operating expenditures, which include salaries and wages, benefits, contracted services, debt service payments, cost allocation plan, and transfers out, are tracking at 49%, which is on target for this time of year.
Wastewater:
The quarterly report for the wastewater fund covers the billing period from July to November. This fund's revenue is at 43%, while expenditures are at 44%, which is below the 50% mark mainly due to timing of the Subregional contract with Santa Rosa for use of their water treatment plant. The Subregional invoicing and payment for the second quarter is for only 5 months and not 6 months and at the end of the fiscal year, the full contractual cost will be expended.
Agenda Item Number 7
Agenda Item Number 8
City Council Meeting Packet of March 4, 2025
In the December billing statement, the City included a flyer that provides information and education on managing your water and wastewater usage. This flyer offers valuable tips on how to save water and money. To reinforce these important messages, the same flyer will be included as an insert in the February billing statement. This repetition aims to remind customers of effective ways to manage their water and wastewater usage.
Based on the two quarters of results since implementing the new rates, staff recommends continuing to track revenues and expenses quarterly.
FUTURE BILLING: Alignment of Billing Cycles and Rate Changes:
The City bills for water and wastewater every two months. Past practice includes usage in June and July being combined into one bill. This becomes problematic when rates change, as bills reflect June rates for some usage and July rates for other usage. This occurred last year, which caused considerable confusion among residents.
For the coming summer, we plan to change the billing cycle to align it with timing of upcoming rate changes. For example, July billing this year will only cover June, while in the prior years it covered June and July. September billing will cover July and August and reflect the rate increase that becomes effective July 1st.
The recent and upcoming billing cycles will be as follows:
• February 2025: Covers December 2024 and January 2025
• April 2025: Covers February 2025 and March 2025
• June 2025: Covers April 2025 and May 2025
• July 2025: Covers June 2025 only
• September 2025: Covers July 2025 and August 2025 (New water/sewer rates will be applied) Following this pattern ensures that utility statements issued in the new fiscal year will reflect only the new rates.
PUBLIC COMMENT:
As of the writing of this staff report, the City has not received any public comment on this item. However, if staff receives public comment from interested parties following the publication and distribution of this staff report,such comments will be provided to the City Council as supplemental materials before or at the meeting.
COMMUNITY OUTREACH:
This item has been noticed in accordance with the Ralph M. Brown Act and was available for public viewing and review at least 72 hours prior to the scheduled meeting date.
FISCAL IMPACT:
There is no fiscal impact in receiving this informational financial update.
RESTATED RECOMMENDATION:
That the City Council receive year-to-date financial information.
OPTIONS:
There are no options to consider.
ATTACHMENTS:
Quarterly Financial Reports
Power Point Presentation
Agenda Item Number 7
Agenda Item Number 8
City Council Meeting Packet of March 4, 2025
APPROVALS:
Department Head Approval: Approval Date: __2/1/25____
CEQA Determination (Planning): Approval Date: ___N/A_______ The proposed action is / is not exempt from the requirements of the California Environmental Quality Act (CEQA) Administrative Services/Financial Approval: Approval Date: ___2/1/25___ Costs authorized in City Approved Budget: ☐ Yes ☐ No N/A Account Code (f applicable) ___________________________ City Attorney Approval: Approval Date: ____N/A_______
City Manager Approval: Approval Date: ___2/6/25_____
Agenda Item Number 7
Agenda Item Number 8
City Council Meeting Packet of March 4, 2025
Description
2023-24
Actual
2024-25
Adopted
Budget
2024-25
Adjusted
Budget
Preliminary
Year-end
Projection
Y-T-D
Actual
12/31/24
Footnotes
% of
Adjusted
Budget
OPERATING REVENUE
Usage Charges - Residential 2,238,915 3,191,860 1,691,860 1,691,860 838,079 1 49.5% Usage Charges - Commerical -0 -0 1,500,000 1,500,000 716,942 1 47.8% Interest Income 82,780 75,000 75,000 75,000 46,642 62.2% Backflow Inspections -0 650 650 650 -0 0.0%
New Service Fee 8,700 36,600 36,600 36,600 5,250 14.3%
Water Meter Sales 190 8,600 8,600 8,600 -0 0.0%
Penalties 21,591 15,000 15,000 15,000 9,397 62.6%
Other Charges 279 2,145 2,145 2,145 -0 0.0%
Insurance Claims 515 -0 -0 -0 -0 0.0%
Miscellaneous Income 155,392 43,000 43,000 43,000 874 2.0% TOTAL REVENUE 2,508,362 3,372,855 3,372,855 3,372,855 1,617,184 47.9%
OPERATING EXPENDITURE
Salaries & Wages 320,497 357,977 374,777 347,220 165,939 44.3% Benefits 158,712 223,277 223,966 201,320 98,125 43.8%
Contracted Services 338,990 255,820 255,820 261,320 73,485 28.7% Services & Supplies 135,842 183,350 183,350 193,350 64,199 35.0% Special Programs 12,596 22,200 22,200 22,200 10,266 46.2% Equipment (under $10K) - - - - - 0.0%
Vehicle Expense 48 10,000 10,000 10,000 - 0.0%
Conference & Training Expense 2,865 5,000 5,000 5,000 3,694 73.9% Utilities 197,837 247,250 247,250 305,000 155,748 63.0% Telecommunications 5,729 7,350 7,350 7,000 2,658 36.2%
Bad Debt Expense 13,205 10,000 10,000 10,000 393 3.9%
Allocated Insurance 90,730 79,530 79,530 79,530 25,912 32.6% Capital Outlay - 27,750 27,750 27,750 13,852 49.9%
Debt Service Payments 380,175 318,656 318,656 318,656 277,508 87.1% Cost Allocation Plan 1,261,494 852,863 852,863 852,863 426,431 50.0% Transfers Out 940,341 120,000 120,000 120,000 24,233 20.2% TOTAL EXPENDITURES 3,859,061 2,721,023 2,738,512 2,761,209 1,342,443 49.0% Net Surplus/(Deficit) (1,350,699) 651,832 634,343 611,646 274,741
WATER OPERATING FUND
FY24-25 QUARTER 2 REPORTING
1. The year-to-date amount reflects data billing from July-November billing, as the City operates on a bi-monthly billing cycle. Consequently, the billing for December and January will occur in February.
Agenda Item Number 7 Agenda Item Number 8
City Council Meeting Packet of March 4, 2025
Description
2023-24
Actual
2024-25
Adopted
Budget
2024-25
Adjusted
Budget
Preliminary
Year-end
Projection
Y-T-D
Actual
12/31/24
Footnotes
% of
Adjusted
Budget
OPERATING REVENUE
Service Charge - Residential 2,813,939 4,647,523 2,277,323 2,277,323 994,467 1 43.7% Service Charge - Commercial -0 -0 2,370,200 2,370,200 985,476 1 41.6% Interest Income 20,194 -0 -0 -0 11,880 0.0%
Penalties 15,153 2,500 2,500 2,500 8,203 328.1%
Insurance Claims -0 8,729 8,729 8,729 -0 0.0%
Miscellaneous Income 32,552 1,000 1,000 1,000 -0 0.0%
Transfers In -0 -0 -0 -0 -0 0.0%
TOTAL REVENUE 2,881,838 4,659,752 4,659,752 4,659,752 2,000,026 42.9%
OPERATING EXPENDITURE
Salaries & Wages 282,963 306,893 322,383 322,383 137,471 42.6% Benefits 139,103 194,998 195,644 195,644 84,151 43.0%
Contracted Services 84,665 105,550 105,550 105,550 17,964 17.0% Subregional Cost 1,952,842 2,118,435 2,118,435 2,118,435 882,682 41.7% Services & Supplies 29,971 97,200 97,200 97,200 11,897 12.2% Special Programs - 1,000 1,000 1,000 - 0.0%
Vehicle Expense 11,834 10,000 10,000 10,000 1,708 17.1% Conference & Training Expense 8,458 8,000 8,000 8,000 1,267 15.8% Utilities 61,875 78,852 78,852 78,852 26,092 33.1%
Telecommunications 1,692 2,500 2,500 2,500 536 21.4%
Bad Debt Expense 19,020 10,000 10,000 10,000 577 5.8%
Allocated Insurance 68,625 55,735 55,735 55,735 27,868 50.0% Capital Outlay - - - - - 0.0%
Debt Service Payments 181,237 178,656 178,656 178,656 150,645 84.3% Cost Allocation Plan 1,041,462 908,934 908,934 908,934 454,467 50.0% Transfers Out 800,532 32,000 32,000 32,000 32,105 100.3% TOTAL EXPENDITURES 4,684,279 4,108,753 4,124,889 4,124,889 1,829,430 44.4% Net Surplus/(Deficit) (1,802,441) 550,999 534,863 534,863 170,596
WASTEWATER OPERATING FUND
FY24-25 QUARTER 2 REPORTING
1. The year-to-date amount reflects data billing from July-November billing, as the City operates on a bi-monthly billing cycle.
Consequently, the billing for December and January will occur in February.
Agenda Item Number 7
Agenda Item Number 8
City Council Meeting Packet of March 4, 2025
FY 2024-25
2ND QUARTER FINANCIAL
UPDATE
ENTERPRISE FUND
March 4, 2025
Agenda Item Number 7
Agenda Item Number 8
City Council Meeting Packet of March 4, 2025
FY 2024/25 Q2 Water Fund
The city's water fund has billed 48% of budgeted revenue.
Expenses are at 49% of full fiscal year.
Operating expenditures are at 49%, which is on target for this time of year.
Agenda Item Number 7
Agenda Item Number 8
City Council Meeting Packet of March 4, 2025
FY 2024/25 Q2 Wastewater Fund
The city's water fund has billed 43% of budgeted revenue.
Expenses are at 44% of full fiscal year.
Operating expenditures are at 44%, which is on target for this time of year.
Agenda Item Number 7
Agenda Item Number 8
City Council Meeting Packet of March 4, 2025
Future Billing Realignment
Agenda Item Number 7
Agenda Item Number 8
City Council Meeting Packet of March 4, 2025
COUNCIL
QUESTIONS/DISCUSSIONS
Agenda Item Number 7
Agenda Item Number 8
City Council Meeting Packet of March 4, 2025