Cotati reviews multi-year budget; staff proposes water/sewer rate adjustments and details capital priorities

Cotati City Council on May 15 held a special budget study session to review proposed budgets for fiscal years 2025–26 and 2026–27, focusing on enterprise funds (water and sewer), capital projects, and special revenues and internal service funds. Staff outlined proposed rate changes, capital project lists and reserve assumptions and answered council questions about project timing and funding.

The presentation was led by Angela Quarter, director of administrative services, who summarized enterprise fund assumptions and a prioritization approach that groups capital work into A (funded) and B (contingent) lists. "In this section, we'll go over the enterprise funds, capital funds budgets for these years," Quarter said. She told the council the budget incorporates a required reserve equal to 33% of operating expenses for each enterprise fund and that proposed water-rate adjustments follow a rate study presented to council in February and mailed to customers as notices on Feb. 18.

Staff told the council the water rate change for 2025–26 is based on the rate-study schedule and was presented as roughly 10.6% (characterized in the materials as 11% when rounded). For sewer, staff said the larger change reflected a higher subregional charge that Cotati pays rather than a local Cotati rate increase; council members distinguished the citys own rate study (about 10% for both water and sewer going forward) from outside subregional charges that affect sewer bills. Quarter said the city expects the public hearing on rates in May and, if adopted, implementation on June 15.

The staff presentation listed capital projects and estimated costs. Street capital in 2025–26 was shown at just over $3.0 million including the Highway 116/E. and W. Cotati Avenue intersection (design and phased construction) and a 2026 street preservation program of about $1.0 million; an additional traffic signal at William George was identified as unfunded and would require roughly $1.4 million. Parks capital in 2025–26 totaled about $3.2 million, driven by Sunflower Park improvements (about $3.0 million) with a grant match of $531,000 noted in the packet. Building capital included a police building reroof estimated at just under $700,000 and a microgrid planning item of roughly $100,000.

Quarter said the proposed city budget includes transfers to capital and other funds of $3.6 million for fiscal year 2024–25 (a reduction from an adopted $4.1 million) and additional transfers of about $3.5 million in 2025–26 and $250,000 in 2026–27; those transfers are drawn from reserves above the councils 25% general fund policy. "Were meeting the operating reserve requirements for both the water and sewer funds," Quarter said, but she cautioned that drawing on excess reserves makes the citys margin thinner and staff will monitor trends closely.

Council members asked for clarifications on specific projects and reserves. Vice Mayor Lemus suggested a minor wording change to the updated mission statement: "If we're going to say building fiscal strength, we should engage in the community," he said during the goals discussion. Council Member Savage pressed staff about the Cypress water storage tank project (sometimes referenced in the packet as the Cypress tank). Staff said the Cypress tank replacement is not funded in the 2025–26 and 2026–27 budgets as presented and that components of the project had been staged so the city could pursue external financing or bonds for full replacement when appropriate. When asked whether money set aside for Cypress could be earmarked if construction is delayed, staff said the council can encumber or earmark funds at the time of budget adoption and that when a contract/bid is issued the encumbrance would be superseded by the actual contract.

On sewer projects, staff noted some lift-station and collection-system projects are on hold pending available funding; staff prioritized a sewer master plan to guide future work. Council members also raised questions about insurance estimates and an upcoming fee study; Quarter said staff is awaiting final insurance numbers and will update the council before budget adoption.

Other items discussed included special revenue funds (gas tax/RMRA, park Measure M, bed tax, inclusionary housing funds) and internal service funds (vehicle replacement and compensated-absences funds). Staff said the gas-tax and RMRA revenues are conservatively estimated because vehicle electrification may reduce gas tax receipts over time. For the vehicle replacement schedule, staff said the 2025–26 plan currently includes one patrol vehicle, upfits for two police vehicles and a public works field truck; the city will evaluate electric or non-fossil alternatives when purchases come due.

The packet identified a Sunflower Park project and related grant match; it also listed park in-lieu and linkage housing funds, and staff said large development projects could materially change those revenue projections. Quarter noted the Planning Commission had found the multi-year capital plan consistent with the general plan on May 17.

Questions remain before budget adoption, including final insurance numbers and whether council will encumber funds for deferred projects. Staff said the budget adoption hearing is planned for June 10 and that the rate public hearing is scheduled for May. The council approved the meeting minutes from the April 1 special meeting by voice vote earlier in the session and then concluded the study session and moved on to the next budget topic.