Cotati adopts two-year budget; council warns sewer fund remains constrained

The Cotati City Council on June 10 adopted the city’s two-year budget for fiscal years 2025–26 and 2026–27 and authorized the city manager to request PG&E fleet EV program participation. Council approved the budget by a 5-0 vote after staff presented revenue, expenditure and capital-project estimates and after council questions about sewer fund reserves and capital needs.

Staff said the city moved to a two-year budget cycle to allow longer-term planning and more frequent quarterly updates. Staff presented a conservative revenue outlook driven by slow growth and continued economic uncertainty; sales tax and property tax together were presented as the largest portion of general fund revenue (roughly 73% combined). Staff said the general fund shows modest operating surpluses in the two-year plan and that the ending general fund balance would remain above the city’s 25% policy threshold in both years, but warned continued monitoring is needed given possible sales-tax softness and state funding uncertainty.

Council and staff discussed capital projects and priorities. Staff reported parks and streets capital projects scheduled across the two years, including revised, lower-cost bids for Sunflower Park, design work for the street-rehab program and a planned set-aside for traffic safety and pathways. The budget includes planned debt service and full lump-sum CalPERS payments; staff said discretionary additional CalPERS prepayments were not included and would be considered later if fiscal space allows.

Council members expressed concern about the sewer fund, which staff said would fall below the city’s 33% reserve guideline (sitting near 23% for the sewer operating fund in the plan). Staff explained the sewer fund’s capital deficit would need to be funded from operations, reserves or an interfund loan and that the adopted sewer rate adjustments are intended to stabilize the fund over time. Council and staff discussed ongoing asset-management work — including CCTV inspection and targeted repairs to reduce inflow and infiltration — as part of efforts to contain sewer costs.

Staff recommended adoption of the budget across funds, along with adopting related budget policies and a staff recommendation to sign a PG&E letter seeking participation in EV fleet programs to support future electrification of city vehicles; council approved both the budget and the PG&E letter 5-0.

The council asked staff to provide quarterly financial updates, continue monitoring of the sewer fund, and return with options if CalPERS actuarial reports or other financial changes require adjustments.

Vote: 5-0 to adopt the two-year budget and authorize a letter requesting PG&E EV program participation.