Staff for the City of Cotati presented its mid-year budget review for fiscal year 2017-18 to the city council at its last meeting.
The review was based on operating results through Dec. 31, 2016. But it also serves as a precursor to City Manager Damien O’Bid’s recommended budget for fiscal year 2017-18 because of revenue and expenditure results as well as projections for the remainder of the current fiscal year. Norm Velosa, Cotati’s Director of Administrative Services, presented the review to the council.
City staff chose to emphasize an analysis of Cotati’s General Fund revenues but it also evaluated the General Fund expenditures, the Water Fund, Sewer Fund and Capital Projects funds.
Cotati’s General Fund revenues, according to a staff report, are performing as well or slightly better than expected and says property tax growth is strong.
The city’s net taxable increase of 5.9 percent for this fiscal year’s tax roll kept pace with the countywide increase of 5.9 percent, and residential values continued to increase from their levels of the previous year.
The median sale price of a single-family home in Cotati from January to August 2016 was $430,000. This represents a $50,000 (13.2 percent) increase in median sale price from 2015.
Sales tax, which is near the budget estimate, is expected to grow moderately and reflects a continued shift of sales to online platforms which increases the overall value of the pooled funds for Sonoma County, which Cotati has a proportional share. Sales tax revenue does not include the true up or clean up amount for December.
When this budget was adopted by the council in June last year, some of the highlights included: a 25 percent contingency reserve; the prioritization of economic development, infrastructure and community; enhancement of service levels, operational improvements and transparency in city government; the increase of funding to support basic maintenance of streets, parks and civic buildings; and the completion of major grant-funded capital projects improving infrastructure.
Cotati resident Laurie Alderman had questioned why there was only $2,700 in the fund for street maintenance.
“That money is designated for street maintenance after all the expenses were included in budget,” Velosa said. “That is the remaining cash available moving forward. We accumulate revenues for future use. For example, you try to save as much money knowing in 15 years you’ll have to change roof. When comes 15th year you use revenues you’ve accumulated for 15 years. We tried to be diligent for saving as much we could for the rainy days.”
Overall, staff says the General Fund revenue is in a better position when compared to the adopted fiscal year 2016-17 budget and staff anticipates a slight increase in revenue above budget if they remain consistent with the first two quarters of the year.
Former Cotati councilman George Barich chided the entire budget process.
“This budget is not on target or you set the bar very low,” Barich said. “The budget is not balanced because you have not put in future anticipated expenditures. This building we’re standing in is not earthquake safe. We need a new city hall. There are a lot of projects in Cotati not funded for needed repairs.”
Councilman John Dell’Osso said Barich had a point about the city not budgeting in anticipated expenditures, but he provided added nuance.
“That makes perfect sense but incomes are not projected at this time,” Dell’Osso said. “It’s apples and oranges. You can’t say we there’s a $3 million retrofit for city hall, but we’re not projecting what any of revenues are when it’s time for that project. This is not smoke and mirrors. It’s always nice to see at midyear we’ve collected more and spent a little bit less.”
The water fund revenue is tracking at 18 percent above budget estimates, and expenses to mid-year are close to the budgeted amount. The general operational incomes were higher, the staff report said, mostly because of unbudgeted development fees.
The sewer fund revenues and expenditures are currently tracking at and just below budget estimates, respectively. The general operational incomes were higher, also primarily because of unbudgeted development fees. Expenses are slightly lower as the capital projects budgeted were not initiated during the first six months of the fiscal year.
Though the revenues for sewer were higher than anticipated, at half the budget amount for the year, a significant portion of this increase was because of one-time payments, and revenue from service charges had decreased from prior years. This revenue decrease reflects the recalculation of sewer usage based on drought years as well as having no change in the billing rate applied per 1,000 gallons used. Cotati currently is performing a rate study that will analyze the sewer rates with respect to current and planned operational and infrastructure expenses.