12 Staff Report - FY 2009/10 Mid Year Budgetn
DATE:
TO:
FROM:
SUBJECT:
MEETING DATE: 2/16/2010
ITEM NO: a..
COUNCIL/AGENCY AGENDA REPORT
FEBRUARY 11, 2010
MAYOR AND TOWN COUNCIL/
CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY
GREG LARSON, TOWN MANAGER/EXECUTIVE DIRECTOR
FY 2009/10 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2009 .
A. ACCEPT 2009/10 MID -YEAR SECOND QUARTER BUDGET
PERFORMANCE STATUS REPORT, INCLUDING FY 2009/10-
FISCAL YEAR FINANCIAL PROJECTIONS
B. AUTHORIZE BUDGET ADJUSTMENTS AS RECOMMENDED IN
THE ATTACHED SECOND QUARTER BUDGET PERFORMANCE
REPORT
RECOMMENDATION:
1. Accept the FY 2009/10 Mid -Year Budget Performance and Status report, including FY
2009/10 Fiscal Year Financial Projections.
2. Authorize budget adjustments as recommended in the attached second quarter budget
performance report (Attachment 1).
PURPOSE:
The purpose of this report is to provide the Town Council with a status of the FY 2009/10
Adopted Budget at the mid -year point, including an overview of revenue and expenditure trends
and financial projections for the current fiscal year. The report also includes a brief discussion of
the Town's current year General Fund Reserve status, and an update to the Town's five-year
financial projections (FY 10-15) to provide a context for the FY 2010/11 budget development
process and recommended budget approach.
PREPARED BY: STEPS CONY
Finance & Admi strative Services Director
N:\FINANCE\Qtrly Financial Reports\FY 201012nd Qtr12010_Mid_Year Budget Report.doc
Reviewed by: Assistant Town Manager/Deputy Director
Counsel Clerk Administrator/Secretary ,Sa.- Finance
Community Development
own Attorney/General
PAGE 2
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2009/10 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2009
February 11, 2010
DISCUSSION:
FY 2009/10 MID YEAR BUDGET STATUS
Budget Performance Report
The Budget Performance Report (Attachment 1) is a mid -year report covering a six month period
beginning July 1, 2009 and ending December 31, 2009. The Budget Performance Report
provides an analysis and recommendations related to the current year's adopted budget revenue
and expenditures and the projected financial condition of all Town funds.
General Fund Revenue Highlights FY 2009/10
An analysis of FY 2009/10 General Fund revenue confirms that the Town is not immune from
the current economic recession. Key economically sensitive revenues such as sales tax, transient
occupancy tax, and fees and services have all experienced declines. As a result, staff
recommends a $700,000 net reduction in adopted budget levels not including the $3.1 million
one time funding from reserves for the purchase of land for a future Multi -Purpose Recreational
Facility. The proposed revenue changes include:
• A $300,000 decrease in estimated sales tax from $8,677,460 to $8,377,460.
• A $300,000 decrease in licenses and permits (mostly building permit fees) from
$2,204,610 to $1,904,610.
• A $280,000 decrease in investment earnings, reflecting lower revenues on average
investment balances from $1,430,000 to $1,150,000.
• A $100,000 decrease in estimated transient occupancy taxes from $1,080,000 to
$980,000, reflecting lower occupancy rate and discounted hotel room prices.
• A $50,000 decrease in Motor Vehicle in Lieu payments from the State of California.
• A $50,000 decrease in Proposition 172 Public Safety Sales Tax.
■ A $25,000 decrease in Police Department Tow Franchise Fees.
• An $11,000 decrease in Neighborhood Center rental income.
• Revenue increases above estimates include, $301,000 increase in property tax, $100,000
increase in parking citation revenue, $50,000 increase in cable franchise fee, and $5,500
increase in hourly staffing charges.
General Fund Expenditure Highlights FY 2009/10
Current departmental expenditures are trending below the expected 50% of budget level, which
may result in expenditure savings at year end. This savings could help alleviate potential
impacts of adjusting adopted budget revenues downward due to the slow economy. Proposed
expenditure changes include:
■ An $8,000 increase in credit card fees due to an increased number of credit card
payments for Town services.
T
L)
PAGE 3
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2009/10 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2009
February 11, 2010
• A $7,500 increase in banking fees due to lower average account balance.
• A $95,200 savings in building maintenance expenses as a result of leasing out the
Neighborhood Center to the Los Gatos -Saratoga Recreation Department.
• An $84,500 salary and benefit savings by eliminating a Senior Coordinator position and
temporary sharing of administrative staff through a joint agreement with the Los Gatos -
Saratoga Recreation Department.
As part of the FY 2010/11 operating budget development, the Department of Parks and Public
Works will be proposing a re -organization of its maintenance services delivery model. The
management of the Facilities Maintenance and Parks Services Divisions will be combined into a
single position. The combining of work will result in operational efficiencies, ongoing general
fund budget savings, and a reduction in management staffing.
In addition, a temporary Library Project Manager position will be created that will report to the
Town Engineer and manage all construction activities related to the project. This position will
also coordinate all public outreach regarding construction and coordinate periodic closures of
local streets and parking areas related to the construction. While this assignment was originally
planned to start in July, it has become necessary to initiate it sooner. The Depai tiiient proposes
beginning this assignment in April. As such, funding for the balance of 2009-10 must be
allocated to this position. GFAR funds will be allocated in the amount of $39,600 to fund this
position from April through June, 2010. Funding for the duration of the Library project will be
brought forward to Council as part of the Proposed FY 2010/11-14/15 Capital Improvement
program. It is expected that this position will be needed for up to two years.
With regard to the consolidation of the Parks and Facilities management position, two Supervisor
level positions will be combined into a single Superintendent level position over both divisions.
PPW will begin recruiting for this position in March with the intention of filling it in April. No
budget adjustments are required at this time with regard to this change. There is sufficient salary
savings in the PPW operating budget to fund the upgrade of the position. In addition, this
consolidation will allow for a greater level of ongoing savings. A proposal further detailing this
will be presented to Council as part of the 2010-11 operating budget process.
General Fund Projected Year End Balances June 30, 2010
Current fiscal year end projections for FY 2009/10 anticipate an excess of operating revenues
above operating expenditures of approximately $150,000, beyond the approximate $1 million
planned set aside of internet retail sales tax, allocated to the Revenue Stabilization and Capital
Project Reserves. The Town Reserve policy provides that once legally restricted reserves are
funded as required, excess General Fund year end balances are to be designated equally to the
Reserve for Future Capital and Special Projects and the Town Revenue Stabilization Reserve.
As Council is aware, the availability of excess balances resulting from current fiscal year
expenditure reductions or revenue increases beyond the adopted budget is an important funding
source for the Future Capital and Special Projects Reserve and Revenue Stabilization Reserve.
PAGE 4
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2009/10 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2009
February 11, 2010
This is particularly important for the Future Capital and Special Projects Reserve as it has limited
alternative sources of funding.
FY 2009/10 MID -YEAR BUDGET UPDATE TRENDS
The FY 2009/10 mid -year budget update validates the Town's prior decisions to make strategic
cost reductions dating back to FY 2001/02. Though the Town has continued to be fiscally
conservative, challenges still remain as explained in the following discussion.
Operating Revenue Trends
The FY 2009/10 mid -year update reflects reductions in estimates across most of the large sources
of economically sensitive revenues including Sales Tax, Franchise Fee Tax, Transient
Occupancy Tax, and Licenses and Permits/Charges for Services, among others.
2009/10 Budget Revenue Revision
PracerlyTax Sales Tin licenses & Franchise Fro Interest
Pernits
Business Transient
License Tax Occupancy
cy
Tax
o adopted
• Revised
Cumulatively, the FY 2009/10 mid -year budget estimates that the General Fund total revenues,
not including the $3.1 million one time transfer from reserves for the purchase of land for a
future Multi -Purpose Recreational Facility, will need to be adjusted approximately $500,000
lower than the adopted budget estimates. With the exception of property tax and franchise fees,
the graph above shows significant revenue reductions including Sales and Use Tax, Licenses and
Permits and Charges for Services and Interest Income.
Sales and Use Tax
Due to the slow economy, staff recommends revising the sales and use tax approximately
$300,000 lower than the adopted budget. Revenues are down across a number of segments of the
economy, with auto sales and service stations at record lows for the fiscal quarter ending
PAGE 5
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2009/10 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2009
February 11, 2010
September 30, 2009. Auto parts and auto repairs have also recorded low revenues in the last
three years. On a positive note, internet retail experienced a 6.8% gain.
The new revised sales tax of approximately $8.4 million is a very important component of the
Town's revenue sources, representing approximately 30% of the Town's General Fund operating
revenues. However, the Town's need to diversify its portfolio of sales tax producers continues to
be a concern for the future.
Licenses & Permits and Charges for Services
The mid -year budget update also includes a reduction of approximately $300,000 in licenses and
permits and charges for services. The majority of this revenue reduction comes from decreased
fees for private development activity. Given its limited revenue base, the Town must charge
adequate fees to recover the cost of specialized services. This will ensure that public subsidies
are not created for private development and other specialized services. Staff is currently engaged
in a User Fee and Cost Allocation Study and expects to bring forward the results to Council in
March 2010.
In sum, total current year revenues and use of resources is expected to be less than then adopted
budget by $1,620 K.
Operating Expenditure Trends
Anticipating that the Town's economically sensitive revenues would be impacted by the
recession, staff proactively implemented cost reduction strategies this fiscal year, including
targeted hiring freezes, furlough days, redeployment of staff, and reduction in materials and
supply costs. These efforts were in addition to the 23 positions defunded in prior years.
Current estimates of the Town's General Fund expenditures anticipate actual expenditures will
be approximately $$1,762K below the FY 2009/10 adopted budget. Given the decreased
operating revenue streams, the expected savings will be crucial in maintaining a balanced budget
for the fiscal year. Staff anticipates that despite the reduction in revenues, the General Fund will
still be able to capture a small surplus of approximately $150,000, beyond the approximate $1
million planned set aside of internet retail sales tax, allocated to the Revenue Stabilization and
Capital Project Reserves, at the close of the fiscal year.
State Budget Impacts to Local Governments
Although details about the California State Budget are not available, local government remains
concerned that revenue such as property tax and other funding sources are at risk for reduction or
elimination. While Proposition 1A provides some protections for local agencies, the State has
the ability to declare a "fiscalemergency" which would allow the state to take local revenue
PAGE 6
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2009/10 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2009
February 11, 2010
sources like property tax for a limited time. The Town should consider property taxes and
Redevelopment Agency tax increment to be at risk until the state can make ongoing structural
changes to its budget. The FY 2009/10 Budget Bill reintroduced a new Supplemental
Educational Revenue Augmentation (SERAF) payment. The Town FY 2009/2010 SERAF
payment of $2,219,276 - due in May, 2010 - is dependent on the outcome of recent lawsuit
between California Redevelopment Association (CRA) and the State of California.
Other funding sources such as the $100,000 Community Oriented Policing (COPS) grant, vehicle
license fees, and the state mandated cost reimbursements also remain at risk. Staff is working
proactively with the League of Cities, legislators, and professional organizations such as the
Association of California Police Chiefs to protect these vital revenue sources.
GENERAL FUND RESERVE STATUS
As of June 30, 2009, Town's FY 2008/09 General Fund balance was approximately $25 million,
all of which is legally reserved or designated for special purposes by Council. Included in this
amount are approximately $3.7 million in reserves for Economic Uncertainty, $3.6 million for
Future Capital and Special Projects, and $4.7 million for Revenue Stabilization. These reserves
remain intact and available at the mid year point of FY 2009/10.
FY 2010/11 BUDGET DEVELOPMENT PROCESS
Concurrent with the update of the Five Year Financial Plan and in anticipation that service
reductions would be necessary for the FY 2010/11 budget, staff began the budget process for
next year in December 2009. This process includes the development of conceptual budget
reduction proposals for the Town Manager. Limited revenue enhancements, including
adjustments to the User Fee Schedule will also be considered to offset reductions. Staff is
currently evaluating the feasibility and impact of budget options which will be brought forward
to Council in early May 2010.
FIVE-YEAR FINANCIAL PLAN UPDATE
The Five -Year Financial Plan is an independent financial tool that is based upon current costs
and revenue forecasts, but is designed to be more fluid in nature, allowing staff to build various
funding scenarios and test "what if' assumptions.
The updated plan for FY 2010/11 forecasts a deficit of $1.8 million and projects significant
deficits in subsequent years if structural and ongoing adjustments are not made. Estimates for
FY 2010/11 include preliminary budget assumptions and estimates. Additional revenue and
expenditure updates, including impacts of State budget actions will be incorporated into the Five
Year Plan and presented at the May 2010 budget presentation. Future deficit projections in the
Town's Five -Year Financial Plan are based upon conservative, yet realistic revenue growth rates
and operating expenditure trends. As in prior years, the revenue forecast is dependent upon the
PAGE 7
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2009/10 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2009
February 11, 2010
stability of economically sensitive local revenue sources such as sales tax and assumes no loss of
major sales tax contributors, such as a significant Internet retailer.
Town of Los Gatos
Forecast Summary Worksheet
February 2010
In SMillions
2009/10
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
Revenue Category
Budget
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Property Tax
VLF Backfill Property Tax
Sales & Use Tax
Franchise Fees
Transient Occupancy Tax
Business License Tax
Licenses & Permits
Intergovernmental
Charge for Services
Fines & Forfeitures
Interest
Other Sources
TOTAL REVENUES
6.9 $
2.3
8.7
1.7
1.1
1.1
2.2
0.8
2.4
0.5
1.6
2.5
31.8 €
7.2 $ 7.3 $
2.3 2.4
8.4 8.5
1.7 1.8
1.0 1.0
1.1 1.1
1.8 1.9
0.7 0.7
2.4 2.4
0.6 0.6
1.3 1.3
2.1 2.1
30.7 31.0
7.4 $ 7.4 5 7.5 S 7.6
2.4 2.4 2.4 2.5
8.5 8.6 8.7 8.8
1.8 1.8 1.8 1.9
1.0 1.0 1.0 1.0
1,1 1.2 1.2 1.2
1.9 1.9 1.9 1.9 .
0.7 0.7 0.7 0.7
2.4 2.4 2.5 2.5
0.6 0.6 0.6 0.6
1.3 1.3 1.4 1.4
2.1 2.1 2.1 2,1
31.3 31.6 31.9 32.2
Fund Transfers In
0.3 0.3 0.3 0.3 0.3
0.3 0.3
TOTAL REVENUES & TRANSFERS
$ 32.1 $ 30.9 5 31.3 $ 31.6 $' 31.9 5 32.2 S 32.5
2009/10
2009/10
2010/11
2011/12
2012/13
2013134
2014/15
Expenditure Category
Budget
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Salary
Elected Officials
Temporary Employees
Overtime
Other Salary
Benefits
Supplies, Materials, & Services
Grants & Awards
Utilities
Fixed Assets
Interest
Internal Service Charges
:Purchased Land & Buildings
Building & Facilities Maintenance
Debt Service
TOTAL EXPENDITURES
13.8
0.0
0.5
0.4
0.1
5.8
5.6
0.2
0.4
5
13.0
0.0
0.5
0.5
0.3
5.3
5.0
0.3
0.3
3.4 3.2
3.1
0.9 0.9
31.2 32.5
$
14.3
0.0
0.5
0.5
0.3
5.3
5.2
0.2
0.4
3.5
$
15.4
0.0
0.5
0.5
0.3
5.5
5.4
0.2
0.5
5
15.3
0.0
0.5
0.5
0.3
5.6
5.8
0.2
0.5
$
15.4
0.0
0.5
0.5
0.3
5.8
6.0
0.2
0.5
$
15.6
0.0
0.5
0.5
0.3
5.9
6.1
0.2
0.5
3.6 3.9 4.1 4.2
0.9 0.9 0.9
31.2 32.9 33.5
0.9 0.7
34.1 34.5
GASB 45 Retiree Medical Actuarial
Operating Transfers Out
............... .
Transfer to Capital and Future Projects Reserve
Transfer to Stabilization Reserve
0.6 0.6 0.8
0.8
0.8
1.0
0.6
1.0
1.1 1.4 1.6 1.7
0.6
1.0
0.6
1.0
0.6
1.0
1.0
TOTAL EXPENDITURES & TRANSFERS S 32.6
S 34.9
$ 33.6
$ 355
$ 36.5
$ 37.3
$ 37.2
Capital & Special Protects Reserve
Carryfwds
Ongoing Shortfall Mitigation
Other Funding Sources
0.83 0.83 ! 0.60 0.60 0.60 0.55
(0.3) 3.3
0.5 4.1 0.6
1.7 1.6 2.4 2.1
2.3 2.2 3.0 2.1
0.0 $ 0.2 5 (1.7)$ (1.6) 5 (2.4)', 5 (2.1) $ (2.6).
PAGE 8
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2009/10 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2009
February 11, 2010
CONCLUSION
Overall, for the current year, the Town is in the enviable position of having implemented
sufficient expenditure reductions to offset the continuing loss of ongoing tax revenues. However,
due to projected flat and/or declining revenue growth, staff is identifying, up to 2 million of
potential budget reductions and limited revenue enhancement options for FY 2010/11 and
beyond. Understanding the likely growth limitations of key revenues and anticipated increases in
operating costs, such as employer retiree medical costs and other personnel costs, the Town's
highest fiscal priority will be to contain its operating costs on an ongoing basis.
ENVIRONMENTAL ASSESSMENT:
This budget report is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
The Second Quarter Budget Performance Report includes a number of recommended budget
adjustments necessary for FY 2009/10. Current projections forecast a moderate surplus of
operating revenues over operating expenses for the fiscal year ending June 30, 2010. As
discussed earlier in this report, staff is currently engaged in the FY 2010/11 budget development
process which incorporates plans for a moderate level of reductions, contingent upon the
performance of the local economy and any budget actions taken by the State of California to
balance its budget.
Attachments:
Attachment 1- Budget Performance Report for the Six Months Ended December 31, 2009
L)
TOWN OF LOS GATOS
BUDGET PERFORMANCE REPORT
FOR THE SIX MONTHS ENDED DECEMBER 31, 2009
February 11, 2010
FINANCIAL OVERVIEW — EXECUTIVE SUMMARY
Status of FY 2009/10 Adopted Budget:
Second quarter General Fund revenues confirm that the broader economic recession has impacted the
Town. Overall, General fund revenues are recommended to be adjusted lower by a cumulative amount of
approximately $0.7 million from adopted budget estimates. The closure of three automobile dealerships
in prior years and another this fiscal year, along with a dramatic slump in new car sales, led to record lows
in sales tax collected on new automobiles. The current forecast expects Sales Tax to be lower than
revenue estimates by approximately $300,000 this fiscal year. The decrease is moderated by the growth in
the general retail category, led by continued growth of an internet commerce company, the Town's largest
provider of sales tax revenues. The success of Netflix has allowed the Town to sustain the loss of five of
the top ten businesses in the Town's portfolio of sales tax generators in recent years without a dramatic
decline in sales tax. Restaurant sales taxes, the second largest economic segment, were down 9.5% from
the prior year for the period ending at September 30, 2009.
Despite concerns about real estate, "sub -prime" lending, and the recession, property tax collections are
tracking 3% higher than the adopted budget estimates. Based on current year receipts, staff recommends a
$300,000 increase to property tax revenues for this year from the adopted budget estimates. Despite a
very slow real estate market, the sustained positive growth is largely attributable to the turnover of local
housing stock and new construction/remodels, reflecting the continuing desirability of the and new
commercial developments being added to the property tax rolls.
Department expenditure totals for the second quarter FY 2009/10 are also favorable, with spending at the
end of the second quarter averaging 46% expended, or 4% below the 50% benchmark level used for 6
months of operations. Because of expected lower operating revenues, staff began strategic cost reductions
to contain the rise of operating costs. With six months of data now available, staff can better predict the
next six months of expenditure trends, but unexpected costs can arise outside of the norm. Consequently,
further adjustments may be necessary during the fiscal year. Any further course corrections or budget
adjustments necessary to balance operating revenue and expenditures will be brought to Town Council's
attention at the earliest opportunity.
Providing services to the community in this and future fiscal years will continue to require strong
performance by economically sensitive revenues to offset cost increases. The FY 2009/10 budget
development process will endeavor to maintain essential public services while controlling increases in
operating costs in light of the five-year fiscal forecast which predicts operating revenue shortfalls in
subsequent fiscal years.
General Fund Reserve Status - June 30, 2009
General Fund reserves are classified into two categories: Restricted and Designated. Restricted reserves
are those which are restricted in use by accounting standards or legal agreements and are not considered
as available for use for another purpose. Designated reserves are established by Council policy for an
intended purpose. Current Restricted Reserves are presented below:
1
Restricted General Fund Reserves: Amount
Reserved for RDA Loan
Reserved for LT Notes Receivable
$1,500,000
548,261
Total Restricted General Fund Reserves $2,048,261
General Fund Reserves closed at a balance of approximately $25 million at June 30, 2009. In addition to
the approximate $2 million of General Fund Reserves set aside for restricted purposes, the Town has
approximately $22.9 million in designated reserves established in accordance with Town financial
policies and operating and capital budget requirements. The Designated Reserves presented below
include the Revenue Stabilization Reserve created by the Town upon the adoption of the FY 2005/06
budget.
Designated Reserves:
Vasona Land Sale $6,078,967
Designated for Revenue Stabilization 4,692,515
Designated for Economic Uncertainty 3,678,001
Designated for Capital & Special Projects 3,670,083
Designated for Compensated Absences 2,318,082
Designated for Market Fluctuation 785,908
Designated for Open Space 562,000
Post Retirement Medical 400,000
Sustainability 240,553
Designated for Mgr's Contingency & Prod. 200,000
Designated for Year End Budget Adjustments 175,000
Designated for Grants Funds & Carryovers 139,610
Total Designated Reserves $22,940,899
The Reserve for Capital and Special projects, whose source is derived from half of the annual available
General Fund budget savings, serves as the primary source for replenishment to the Town's Capital
Improvement Fund (GFAR) in addition to the annual budgeted transfer from the General Fund's
operations of $825,000 in the current fiscal year. As such it represents the potential source for a large
number of unfunded needs identified during the annual capital improvement plan process. This reserve
also functions as a designated programmed funding source for new capital projects or augmentations to
authorized projects funded through the Town's Five -Year Capital Improvement Program (CIP). The
Town continues to be challenged in identifying an ongoing source of funds to meet the annual $1.5
million recommended street repair and maintenance program and other priority infrastructure
improvements like sidewalk repair and replacement.
In its public communications, staff refers to the $22.9 million in Designated General Fund reserves as the
Town's "reserves" since these reserves are established by Council policy for their intended purpose. The
$22.9 million in Designated General Fund reserves provides the Town with resources to manage through
future fiscal challenges and opportunities, mindful of the many competing priorities for resource
allocation.
GENERAL FUND -KEY REVENUE ANALYSIS FY 2009/10
The following presentation provides a recap of significant General Fund revenue sources as of the second
quarter ending December 31, 2009. Staff is monitoring developments in each major revenue source
closely for potential adjustments to budgeted revenues as recommended in this report.
2
BUDGET PERFORMANCE REPORT FY 2009/10
'
• Sales Tax Revenue
Description
The State Board of Equalization, with the
implementation of the "triple flip," now
allocates .75 cents of the 8.25 cents of local
sales tax collected by merchants on retail sales
and taxable services transacted within the Town
of Los Gatos. This .25 cents of local sales tax is
being replaced by the state with an equal
amount of property tax. Revenues are remitted
to the Town on a monthly basis. This revenue is
placed in the General Fund for unrestricted uses.
Analysis
According to a recent update from Muni
Services, the Town's sales tax analysis
consultant, a majority of jurisdictions across
California experienced significant declines in
sales tax revenues, averaging 14.8% statewide
in early 2009. The Town's decline is
approximately 9.5% for the same time period,
which is slightly better than the statewide
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
•
average The UCLA Anderson Forecast for the
California economy concludes that the worst
recession in seven decades likely ended in third
calendar quarter of 2009, but it expects the
negative impact of the downturn will last well
into the next decade.
With the closure of five auto dealerships in
recent years that were "top ten sales tax"
generators, the fact that sales tax collections are
down only moderately from the prior year's
pace is encouraging. The continued success of
Netflix has prevented a more dramatic decline
in sales tax. Staff recommends adjusting sales
tax downward sales tax adjustment by $300K
based upon MuniServices "most likely"
projection. As always, diversification of the
revenue base continues to be a goal for this
revenue category. The Town continues to seek
more balance in business sectors that generate
sales tax.
Quarterly and Annual Revenues
5-Year History
• 2nd Quarter
Actual Revenues
o Fiscal Year Total
Actual Revenues
■ Fiscal Year
Budgeted
Revenues
FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 09/10
2nd Quarter Actual Revenues
Fiscal Year Total Actual Revenues
Fiscal Year Budgeted Revenues
FY 2004/05 forward will reflect the Sales
2nd Quarter Percent of Total
Tax In Lieu paid by Santa Clara County
36.18% 34.74% 35.59% 38.14% 37.13%
FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 09/10
$ 3,131,898 $ 3,214,488 $ 3,326,298 $ 3,236,975 $ 3,221,690 *
$ 8,655,565 $ 9,253,891 $ 9,345,432 $ 8,487,000
$ 8,677,460
Recommended Budget Revision
* Includes a true -up from FY 08/09
8 (300,000)
3
BUDGET PERFORMANCE REPORT FY 2009/10
• Property Tax Revenue •
Description
Property Tax is one of the Town's largest
revenue sources, accounting for 21.8% of the
Town's budgeted General Fund revenue for FY
2008/09.
Property Tax distributions are largely received
in the third and fourth quarters of the fiscal year,
meaning revenue receipts are not reflected
proportionately by quarter in the chart below.
Property Tax is levied at 1% of a property's
assessed value, of which the Town currently
receives approximately 9.5 cents on each dollar
paid to the County Assessor's Office. The
assessed value of real property appraised by the
County Assessor is the 1975-76 assessment role
value, adjusted by a two percent inflation factor
thereafter. However, when property changes
hands or new construction occurs property is
reassessed at its current market value.
Real property values critically impact revenues.
With the passage of Proposition 13, voters in
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
FY 05/06
2nd Quarter Actual Revenues
Fiscal Year Total Actual Revenues
Fiscal Year Budgeted Revenues
FY 2004/05 forward will reflect an
2nd Quarter Percent of Total
California limited the tax rate that can be
imposed by the Town on property. With the
limitation on rates, the higher the aggregate
property value, the higher the revenue
generated.
Analysis
Property taxes unexpectedly performed better in
FY 2009/10. However, given the economic
impacts of the national — state housing market,
FY 2009/10 property tax revenues were
budgeted below prior year actual. The Santa
Clara County Assessor's January 2010 monthly
report indicates a 2.0 % growth in total assessed
value for the Town. Los Gatos is one of the few
cities in Santa Clara County that is expected to
experience positive assessed valuation growth
for FY 2009/10.
Staff recommends a budget revenue revision of
$300,000.
Quarterly and Annual Revenues
5-Year History
FY 06/07 FY 07/08 FY 08/09
FY 05/06 FY 06/07
$ 2,678,416 $ 2,806,731
$ 7,755,200 $ 8,584,612
In 2nd Quarter Actual
Revenues
❑ Fiscal Year Total
Actual Revenues
In Fiscal Year
Budgeted Revenues
FY 09/10
FY 07/08 FY 08/09
$ 3,061,873 $ 3,160,810
$ 9,178,869 $ 9,724,070
increase in Property Tax due to "Permanent" Realignment of VLF
34.54% 32.69% 33.36% 32.51%
FY 09/10
$ 3,191,286
$ 9,248,120
34.51 %
Recommended Budget Revision $ 300,000
4
BUDGET PERFORMANCE REPORT FY 2009/10
u
• Franchise Fee
Description
Franchise Fees are collected by the Town for the
privilege of operating a utility service within
Town limits, and as a fee in lieu of business
license tax.
Franchise Fees are currently received from
Comcast for cable television services, PG&E for
gas and electric service, and West Valley
Collection and Recycling for solid waste
collection services.
Analysis
Second quarter results are pacing slightly behind
the percentage collected the prior year,
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
•
achieving 32.76% of budget versus 33.14% of
budget collected at the first quarter in FY
2008/09. However cable television franchise
fees are trending at $97K- $99K per quarter and
recent news reports have indicated an increase
in cable subscriptions. Additionally solid waste
franchise fees are also tracking over budgeted
revenue.
As a result of these trends, staff recommends a
budget revenue revision of $50,000.
Quarterly and Annual Revenues
5-Year History
FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 09/10
II 2nd Quarter Actual
Revenues
o Fiscal Year Total
Actual Revenues
■ Fiscal Year Total
Budgeted Revenues
FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 09/10
2nd Quarter Actual Revenues $ 248,860 $ 274,603 $ 547,508 $ 548,795 $ 553,434
Fiscal Year Total Actual Revenues $ 1,030,189 $ 1,162,037 $ 1,659,829 $ 1,656,100
Fiscal Year Total Budgeted Revenues $ 1,689,260
FY 2007/08 Total Actual Revenues reflect increased revenue based on increase of Garbage Franchise Agreement
2nd Quarter Percent of Total
24.16% 23.63% 32.99% 33.14% 32.76%
Recommended Budget Revision $ 50,000
5
BUDGET PERFORMANCE REPORT FY 2009/10
• Interest Income Revenue •
Description
The Town earns Interest Income revenue by
investing cash not immediately required for
daily operations in a number of money market
instruments. These investments are made
within parameters as stated in the Investment
Policy approved by the Town Council. The
Town's goal is to achieve a competitive rate of
return while protecting the safety of those funds.
Interest Income revenue for the Town is
primarily dependent upon two factors: the cash
balance in the Town's investment portfolio, and
the yield on those funds.
Analysis
The Town's Interest Income earning has been
impacted this fiscal year years by use of Town
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
funds to make significant investments in Town
infrastructure facilities, most notably the
acquisition of land for a new multi purpose
Recreational Center, among other infrastructure
investments made in carrying out the Town's
approved capital improvements plan.
Current year interest revenues are tracking
below budget estimates due to historical low
yields available in the market. Actual LAIF
yields have declined significantly to an average
yield of 0.61 % in November 2009 (a new record
low), from 2.57% from a year ago. Staff
recommends adjusting the budget revenue
downward to $280,000.
Quarterly and Annual Revenues
5-Year History
FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 09/10
2nd Quarter Actual Revenues
Fiscal Year Revenues
Fiscal Year Total Budgeted Revenues
2nd Quarter Percent of Total 35.7%
■ 2nd Quarter Actual
I Revenues
o Fiscal Year
Revenues
• Fiscal Year Total
Budgeted Revenues
FY 05/06 FY 06/07 FY 07/08
$ 513,338 $
$ 1,439,685 $
FY 08/09 FY 09/10
684,427 $ 936,081 $ 1,011,756 $ 537,571
1,977,233 $ 2,221,338 $ 1,627,727
$ 1,430,000
34.6% 42.1% 62.2% 37.6%
Recommended Budget Revision $ (280,000)
6
BUDGET PERFORMANCE REPORT FY 2009/10
u
• Business License Tax Revenue
Description
The Town of Los Gatos requires businesses to
obtain a business license if a business is located
within Town limits, or if an agent of a business
conducts operations within Town limits.
The Business License Tax is based on the type
of business activity. Activities such as retail
sales, wholesale, and manufacturing are based
on estimated gross receipts, on a sliding scale,
and comprise approximately 40% of the
Business License Tax revenue. Other Business
License Tax revenues are based on flat fees as
set forth in the Town Code, and make up the
remaining 60% of revenue.
Annual business license renewals are due and
payable in advance on January 2nd of each year.
New business license applications for flat -fee
1,200,000
1,000,000
800,000
600,000
400,000
200,000
•
based businesses are pro -rated by quarter, from
the date of application to the end of the year.
Analysis
The Business License Tax revenue received in
the first and second includes new Business
License fees and renewal fess. The majority of
revenues come from renewals, which are
received in the second and third quarters.
The actual second quarter collections are
trending positively in comparison to prior years
due to some significant past due collections
from various businesses. Depending on staff
workload -capacity, additional audit efforts are
anticipated to occur through the remainder of
this fiscal year.
Quarterly and Annual Revenues
5-Year History
FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 09/10
FY 05/06
2nd Quarter Actual Revenues 343,358
Fiscal Year Total Actual Revenues $ 1,019,386 $
Fiscal Year Total Budgeted Revenues
2nd Quarter Percent of Total 33.68%
■ 2nd Quarter
Actual Revenues
O Fiscal Year Total
Actual Revenues
■ Fiscal Year Total
Budgeted
Revenues
FY 06/07 FY 07/08 FY 08/09 FY 09/10
452,346 447,514 376,704 470,833
1,176,422 $ 1,138,057 $ 1,139,107
$ 1,122,000
38.45% 39.32% 33.07% 41.96%
Recommended Budget Revision No Change
7
BUDGET PERFORMANCE REPORT FY 2009/10
• Transient Occupancy Tax •
Description
The Town of Los Gatos levies a 10 per cent
Transient Occupancy Tax on all hotel/motel
rooms within Town limits as a method to help
fund Town services provided to transitory
lodgers.
Analysis
The Transient Occupancy Tax revenues
received in the first quarter of FY 2009/10
reflect a decrease in collections compared to the
prior year. This year the State of California is
projecting flat growth in domestic and
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
international visitation compared to the prior
year.
According to the California Tourism
Commission report, travel to California is
expected to contract 4.2% this year, being led by
declines in business and international markets.
As expected, domestic day trips have been more
resilient than domestic overnight trips which are
on course to fall 6.5% this year.
Anticipating further decline in travel and
tourism, staff recommends adjusting the budget
revenue downward to $100.000.
Quarterly and Annual Revenues
5-Year History
FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 09/10
2nd Quarter Actual Revenues
Fiscal Year Total Actual Revenues
Fiscal Year Total Budgeted Revenues
2nd Quarter Percent of Total
FY 05/06
$ 382,190
$ 1,028,664
37.15%
• 2nd Quarter Actual
Revenues
O Fiscal Year Total
Actual Revenues
• Fiscal Year Total
Budgeted Revenues
FY 06/07 FY 07/08 FY 08/09 FY 09/10
$ 371,333 $ 435,891 $ 436,515 $ 354,551
$ 1,108,257 $ 1,245,078 $ 966,638
$ 1,080,000
33.51% 35.01% 45.16% 32.83%
Recommended Budget Revision $ (100,000)
8
FY 2009/10 RECOMMENDED BUDGET ADJUSTMENTS
Budget adjustments are recommended for the following revenues and expenditures at the second quarter
as described below:
General Fund Revenues
Property Tax $ 301,000
Sales Tax $ (300,000)
Transient Occupancy Tax $ (100,000)
Cable Franchise Fees $ 50,000
Building Permits $ (300,000)
Prop 172 Public Safety Sales Tax $ (50,000)
Parking Tickets $ 100,000
Interest $ (280,000)
Hourly Staffing Charges $ 5,500
N C Room Rental $ (11,000)
PD Tow Franchise Fees $ (25,000)
MVL State payments $ (50,000)
TOTAL GENERAL FUND REVENUES
$ (660,500)
General Fund Expenditures
Bank Service Fees $ 7,500
Credit Card Fees $ 8,000
Senior Coordinator Salary Savings $ (63,000)
LG Rec Rev for Sec II 50% of 6 months salary $ (21,500)
Building Maintenance US for Neighborhood Ctr $ (95,200)
TOTAL GENERAL FUND EXPENDITURES
One-time Funding front Reserves
Land Acquisition - Sports Facility
Other Funds Revenues
Traffic Mitigation
Consultant Fees - Traffic Mitigation
RDA
RDA Tax Increment - Interest
Building Maintenance
Internal Service Charges for Neighborhood Ctr
$ (164,200)
$ 3,116,300
$ 40,000
$ 185,000
$ (95,200)
TOTAL OTHER FUNDS REVENUES
$ 129,800
Other Funds Expenditures
GFAR
ABAG Grant EOC/Police Estimated $ 40,000
License Plate Reader from Parking Reserve $ 60,000
(with all additional required Transfers)
Storm Basins
Bicknell Road Storm Basin
Traffic Mitigation
Consultant Fees - Traffic Mitigation
$ 100,000
$ 10,000
$ 10,000
$ 40,000
$ 40,000
RDA
S Santa Cruz / Wood Gateway $ (65,000)
Pageant Park Enhancements $ 65,000
Affordable Housing $ 150,000
RDA Housing Land Acquisition $ 1,000,000
$ 1,150,000
TOTAL OTHER FUNDS EXPENDITURES
$ 1,300,000
9
RECOMMENDED BUDGET ADJUSTMENTS
General Fund Revenues
• Property Taxes — Actual tax collections through December 2009 indicate a need to raise budget
estimates for all categories of Town property tax by $300,000.
• Sales Tax —Actual receipts are running below adopted budget estimates, primarily due to the
decline in new automobile sales and smaller decreases in other categories. Staff recommends a
decrease of $300,000 in estimated revenues for the year.
• Permit Fees and Charges for Services - Staff recommends lowering these revenues by a total of
$300,000 reflecting a slowdown in private development activity due to the national recession.
• Interest —Actual receipts are running below of adopted budget estimates due to lower average
balances available for investment.
■ Parking Citations —Actual receipts indicate a need to increase this revenue source by an additional
$100,000 for the fiscal year.
• Franchise Fees - The cable television franchise fees are trending higher at mid -year, so staff
recommends a $50,000 revenue increase.
• Hotel Tax — Staff recommends a $100,000 decrease to this revenue source based upon reports of
lower occupancy and discounted room rates from local hoteliers.
• Miscellaneous Revenues — Staff recommends a decrease of $130,500 in various other
miscellaneous General Fund revenues.
General Fund Expenditures
• Banking Fees — Staff recommends $8,000 increase in credit card fees due to an increased number
of credit card payments for Town services.
■ Credit Card Processing Fee — Staff advises $7,500 increase in banking fees due to lower average
account balance.
• Building Maintenance Fund — The Town anticipates $95,200 savings in building maintenance
expenses as a result of leasing out the Neighborhood Center to the Los Gatos -Saratoga Recreation
Department.
• Salary Savings — The Town anticipates $84,500 in salary and benefit savingsthrough the
elimination of a Senior Coordinator position and joint agreement to temporary share
administrative staff with the Los Gatos -Saratoga Recreation Department.
Other Funds Revenues
• Land Acquisition — Staff recommends a one time funding of $3,116,300 from reserves to cover
expenses related to the purchase of land for a future Multi —Purpose Recreation Facility.
• RDA Fund - Staff recommends $185,000 increase to RDA tax increment due to higher interest
earnings.
■ Building Maintenance — Staff recommends a $95,200 decrease to reflect savings from leasing out
the Neighborhood Center.
10
Other Funds Expenditures
• Storm Drain Fund — Staff recommends a $10,000 expenditure increase to improve storm drain
system at end of Bicknell Road to prevent flooding.
■ Traffic Mitigation — Staff recommends a $40,000 increase in Traffic Mitigation to implement an
Road and Traffic Impact Fee Study.
• ABAG ( Grants Fund) — The Town is eligible to receive ABAG grant revenues estimated to be
$40 K to be used for improvements at the new policy Facility, including but not limited to
emergency operations.
General Fund Appropriated Reserve (GFAR) Fund
• Staff recommends reallocating the $65,000 project balance from the S. Santa Cruz/Wood
Gateway project to the Pageant Park Enhancements for project design.
• Staff recommends a $1,000,000 expenditure increase to cover expenses related to purchase of
properties on 224 W. Main Street and Dittos Lane.
• Vehicle License Plate Reader — To enhance productivity in the Parking program, staff
recommends one time funding in the amount of $60,000 for a Vehicle License Plate Reader.
GFAR will be replenished from the parking Fund next fiscal year.
Special Revenues
■ CDBG Fund — Through the Santa Clara Urban County CDBG Program, the Town receives
federal CDBG funds for activities which benefit primarily very low and low income households.
Each year, all of the funds received are directed to specific projects and activities; if any funds
remain at the end of a fiscal year, they may be rolled over, but must be re -allocated to a new
project or activity if they are to be used for a different, eligible project or activity. Currently, the
Town has some CDBG funds remaining (approximately $28,639) from previous fiscal years and
recommends that they be re -allocated as loan capital for the Housing Rehabilitation Program.
The Town partners with the Housing Trust of Santa Clara County (Trust) to provide funding for
two programs: the First Time Home Buyers Loan and Developer Loans. Staff recommended a
$150,000 expenditure increase in the RDA Affordable Housing Fund to contribute to the Trust
two-year fundraising campaign for "1000 homes — 1000 families."
Organizational Restructuring
As part of the FY 2010/11 operating budget development, the Department of Parks and Public Works will
be proposing a re -organization of its maintenance services delivery model. The management of the
Facilities Maintenance and Parks Services Divisions will be combined into a single position. The
combining of work will result in operational efficiencies, ongoing general fund budget savings, and a
reduction in management staffing.
In addition, a temporary Library Project Manager position will be created that will report to the Town
Engineer and manage all construction activities related to the project. This position will also coordinate
all public outreach regarding construction and coordinate periodic closures of local streets and parking
areas related to the construction. While this assignment was originally planned to start in July, it has
become necessary to initiate it sooner. The Department proposes beginning this assignment in April. As
such, funding for the balance of 2009-10 must be allocated to this position. GFAR funds will be allocated
in the amount of $39,600 to fund this position from April through June, 2010. Funding for the duration of
the Library project will be brought forward to Council as part of the Proposed FY 2010/11-14/15 Capital
Improvement program. It is expected that this position will be needed for up to two years.
With regard to the consolidation of the Parks and Facilities management position, two Supervisor level
positions will be combined into a single Superintendent level position over both divisions. PPW will
begin recruiting for this position in March with the intention of filling it in April. No budget adjustments
are required at this time with regard to this change. There is sufficient salary savings in the PPW
operating budget to fund the upgrade of the position. In addition, this consolidation will allow for a
11
greater level of ongoing savings. A proposal further detailing this will be presented to Council as part of
the 2010-11 operating budget process.
FINANCIAL SUMMARIES, PROJECTIONS AND RECOMMENDATIONS
General Fund
Presented below is the Schedule of FY 09/10 General Fund Operating Revenues vs. Operating
Expenditures for the second quarter and comparison information from the prior year. In the last column,
the Finance Department projects final balances for the fiscal year based upon the early trends observed
through the second quarter.
Town of Los Gatos
Schedule of General Fund
Operating Revenues vs. Operating Expenditures
For the period ended December 30, 2009
Unaudited
FY08/09 FY08/09 FY08/09 FY08/09 FY09/10 FY09/10 FY09/10 FY09/10 FY09/10
Final Adjusted 2nd Qtr % Final Adopted Adjusted 2nd Qtr % Adj Finance
Balance Budget Actnals YTD Budget Budget AMuals YTD Projection
Revenues
General Property Tax $ 7,417,030 $ 6,924,370 $ 3,160,810 43% $ 6,922.920 $ 6.922,920 $ 3,191,286 46% $ 7,228.546
Prop Tax Car Tax Backfi6 2.307.040 2,206,250 0% $ 2,325,200 $ 2,325,200 $ - 0% $ 2.343.494
Sales & Use Tax 8,487,000 8,198.300 3,236,975 38% $ 8,677,460 $ 8,677,460 $ 3,221,690 37% $ 8,377,460
Franchise Fees 1,698,061 1,656,100 548,795 32% $ 1,689.260 $ 1,689,260 $ 553,434 33 % $ 1,739,260
TransientOccTax 966.638 1,100,000 436,515 45% $ 1,080,000 $ 1,080,000 $ 3554,551 33% $ 980,000
Business License Tax 1,139,107 1,100,000 376,704 33% $ 1,122,000 $ 1,1.22,000 $ 470,833 42% $ 1,122.000
Licenses & Permits 1,823,205 2,185,150 1,123,517 62% $ 2.204,610 $ 2,204.610 $ 933,922 42% $ 1,843,869
Motor Vehicle In Lieu 101,265 168,100 38,042 38% $ 144,280 $ 144,280 $ 20.406 14% $ 95.000
Intergovernmental 533,316 679,980 232.036 44% $ 651,810 $ 665,885 $ 255,976 38% $ 600,385
Charges for Services 2,054,601 1,982,678 1,288,090 63% $ 2.353.015 $ 2,353,015 $ 1,641,824 70% $ 2,359,755
Fines & Forfeitures 618.771 500,000 227,311 37% $ 496,040 $ 496,040 $ 287.426 58% $ 603.875
Interest 1.777,726 1,690,800 1.042.369 59% $ 1,580,000 $ 1,580,000 S 687,571
44% $ I,300,000
GASB investment to market per audit 329,479 - S - $ $ - $ -
MiscellaneousiOther 8,807,329 8,836,783 7,809,142 89% $ 2,524,395 $ 2,524,395 $ 1,360258 54% $ 2,068.177
Fund Transfers 437,925 184,370 137,892 31% $ 281,920 $ 281.920 S 368.822 131% $ 281,920
Total Revenues 38,498,493 37,412,881 19,658,198 51% 32.052,910 32.066,985 13,347,998 42% 30,943,741
Use of Other Funding Sources:
Use of Reserves 2,437,000 1,175,000 1,175,000 975,000 975,000
Fund Balance Reallocations (1,411.609) (1,154,082) (1,154,082) (1,304,082)
Vasona Reserve (6,078,967) 3,116,300
Carryforwards - 139,610 139.610 139.610
PERS Liability Account 300,000 300.000 300.000 -
Use of Internal Service Reserves 194.000 194,000 194,000 194,000
Total Other Funding Sources (5,053,576) 514,918 654,528 1,608,610 3.120.828
Total Revenues plus Reserves $ 33,444,917 $ 37,412.381 $ 19.658.198 $ 32.567,828 $ 32.721.513 $ 14.956.608 $ 34,064.569
Expenditures (includes cif but no encumbrances)
Mayor & Council 164,386 183.800 73,409 45% 159,321 159,321 75,163 47% 138,951
Attorney 229,978 247,900 110,164 48% 214,912 214,912 99,299 46% 254,550
Administrative Services 2.443,581 2,628,170 1,189,617 49% 2,361,440 2,361.440 1,174,610 50% 2,359,431
Comm Development 3.297,602 3,954.460 1,580,559 48% 3,843.824 3,843,824 1,572,197 41% 3,181,977
Police 13,055,759 13.037,030 6,216,031 48% 12,926.566 12.940,666 6,343,960 49% 12,844,739
Parks & Public Works 5,791.776 6,314,768 2,690.587 46% 5.617,569 5.627,569 2,417,860 43% 5.029,999
Cotnmunity Services 1,145,186 1,386,350 556,027 49% 1,283,151 1,303,537 531,068 41% 982,863
Library 2,018,590 2,122,880 980,173 49% 2.067.116 2,111,270 1,003,986 48% 1,983,611
Total Dept Expenses
Non -Dept Expenditures and other uses
General Government
Total Non -Dept Expenses
$ 28,146,858 $ 29.875.358 $ 13,396,567 45% $ 28.473.899 $ 28,562,539 $ 13218,143 46% $ 26.776.121
4.772.235 4.871.200 3,115,409 65% 4,086.970 4.174.970 5.225539 125°a 7.138,145
$ 4.772,235 $ 4,871.200 $ 3.115.409 64% $ 4,086,970 $ 4.174.970 $ 5.225.539 125°0 $ 7,138,145
Total Operating Expenditures $ 32.919,093 S 34.746.558 $ 16.511,976 48% $ 32.560.869 $ 32.737.509 $ 18.443,682 56% $ 33.914 266
Net Operating Revenues Before Capital Trsfrs
& Budgeted Beg Fund Balance S 525.824 $ 2.666,323 $ 3.146.222 $ 6,959 $ (15.996) $ (3,487,074) $ 150.303
Guide to Presentation:
Each of the following groups of financial summaries present data by governmental fund type. These funds
are Special Revenue Funds, Capital Projects Funds, Internal Service Funds, and Redevelopment Agency
Funds. In each of the following projections similar format is presented. The fund information starts with
beginning fund balances and adds current year revenues and subtracts current year expenditures which
12
give the ending fund balance. Budgeted amounts are also provided for revenues and expenditures, these
are useful for comparing actual amounts received or spent to date versus budgeted for FY 2009/10.
Special Revenue Funds - Special Revenue Funds, which account for the proceeds derived from specific
revenue sources that are legally restricted or assigned to special purposes including the Community
Development Block Grant Fund, Non Point Source Fund, Landscaping and Lighting District Funds.
CBDG Grant Fund revenues reflecting below budget at mid -year is a timing issue, the revenues received
are largely based on reimbursements of expenditures that occurred in the prior quarter.
Special Revenue Funds
Budget to Actuals Comparisons
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
CDBG Non Point
Grants Source L1Ds
677,489 20,181 103,615
184,438 135,000 35,860
5,971 135,000 34,559
379,438 147,335 43,290
221,618 50,651 18,543
2nd Quarter Ending Fund Balance 461,843 104,530 119,631
Capital Projects Funds - Capital Projects Funds are utilized to account for resources used for acquisition
and construction of capital facilities by the Town. Funds included in this category are the GFAR Fund
(General Fund Appropriated Reserve), Traffic Mitigation Fees Fund, Grant Funded CIP's Fund, Storm
Drains Fund, Utility Undergrounding Fund, and the Gas Tax Fund. Capital Project Funds are tracking in
accordance with the FY 2009/10 adopted budget. Staff is recommending no changes at this time.
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
2nd Quarter Ending Fund Balance
Capital Project Funds
Budget to Actuals Comparisons
GFAR Traffic Grant Fund Storm Utility Gas
Fund Mitigation CIP's Drains Undergd Tax
9,754,199 3,973,880 (161,410) 681,867 2,462,596 683,180
15,344,184 65,000 2,693,646 105,850 52,080 595,670
944,829 - 175,156 37,943 31,911 179,102
24,152,325 65,000 2,494,275 66,000 373,260 941,601
4,146,865 24,559 404,401 63,070 23,260 856,080
6,552,163 3,949,321 (390,655) 656,740 2,471,247 6,202
The Grant Funded CIP fund displays a deficit balance because this grant fund expends Town dollars first,
then provides documentation of these expenditures to the State of California or other granting agencies
and is reimbursed for those costs, which eventually should result with the fund "breaking even" or a zero
fund balance (dollars expended will be received back in grant reimbursements in equal amounts).
Internal Service Funds - Internal Service Funds are used to fmance and account for special activities and
services performed by a designated Town department for other departments on a cost reimbursement
basis. Included in this fund type are the Equipment Replacement Fund, Worker's Compensation Fund,
General Liability Self Insurance Fund, Stores Fund, Management Information Systems Fund, Vehicle
Maintenance Fund, and the Building Maintenance Fund.
13
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
2nd Quarter Ending Fund Balance
Internal Service Funds
Budget to Actuals Comparisons
Equipment Workers Self Office Mmgtlnfo Vehicle Building
Replacemt Comp Insurance Stores Systems Maint. Maint.
3,286,022 2,583,280 2,091,699 263,444 2,175,717 268,331 716,699
339,280 692,510 528,990 124,500 1,038,420 618,400 1,085,200
167,280 298,872 228,172 60,722 478,081 310,336 546,071
487,973 648,781 606,812 146,000 1,151,488 610,324 1,171,245
447,660 275,427 445,660 95,762 499,886 355,575 518,187
3,005,642 2,606,725 1,874,211 228,404 2,153,912 223,092 744,582
Internal Service Funds are tracking in accordance with the FY 2009/10 Adopted Budget. No revision to
adopted revenues or expenditures is required at this time. Staff believes there is still some potential for
further operating transfers in future years from these funds as excess balances exist in amounts needed for
funding in a number of these funds.
Trust and Agency Funds - Town Trust and Agency Funds have fund balances as of June 30, 2009 of
$328,060 for Parking District #88 and $333,556 in the Library Trust Funds. No budget revisions are
contemplated at this time for these funds.
Redevelopment Agency - The Agency's FY 09/10 and FY 2009-14 Capital Improvement Plan adopted
budgets are incorporated into the Redevelopment Agency's financial statements and year-to-date actuals
as presented below:
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 2nd Qtr
Redevelopment Agency Funds
Budget to Actuals Comparisons
Capital Debt Low/Mod Total
Projects Service Housing RDA Funds
2,065,624 7,988,113 8,631,125 18,684,862
635,000 6,744,490 1,771,430 9,150,920
586,570 3,652,859 745,732 4,985,161
Budgeted Expenditures 1,424,724 6,295,300 3,883,354 11,603,378
Total Actual Expenditures - 2nd Qtr 1,141,270 2,170,000 4,695,655 8,006,924
2nd Quarter Ending Fund Balance 1,510,924 9,470,972 4,681,202 15,663,098
Since 1992 redevelopment agencies across the state have been required to make Educational Revenue
Augmentation Fund (ERAF) payments to the State. In accordance with the State budget agreement, the
ERAF payment was increased $303,000 for FY 2004/05 & FY 2005/06. The State suspended this "take"
for FY's 2006/07 & 2007/08, but the FY 2008/09 Budget Bill reintroduced a new Supplemental
Educational Revenue Augmentation (SERAF) payment. The California Redevelopment Association
(CRA) challenged the State in court in FY2008/09 and won the case. The second SERAF was adopted by
the State in FY 2009/10. The Town FY 2009/10 SERAF payment of $2,219,276, due in May 2010, is
dependent on the outcome of recent lawsuit between CRA and the State of California.
Proposition 1A approved in 2004 does not contain specific protections for redevelopment agencies.
These were not included because there are existing legal opinions that conclude that redevelopment
agency tax increment revenue is constitutionally protected from state revenue takes.
It is important that the Town continue to monitor developments regarding Redevelopment Agencies to
discourage the legislature from further State takes from Redevelopment Agency Tax Increment.
Protecting Redevelopment Agency funds for all cities is also a strategic priority for the League of
California cities. It is essential to preserve the Agency's tax increment revenue as any take from this
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source will reduce the annual revenue stream. If a larger revenue take is enacted, the lowered revenue
stream will reduce the total amount of bonds the Agency can issue in the future.
CONCLUSION
The financial results from the prior fiscal year and data collected through the second quarter of
FY2009/10 are somewhat encouraging given how the Town's economically sensitive revenues have
performed during the economic recession. This is especially important in light of the recent loss of four
auto dealerships. The Five -Year Financial Plan continues to project challenging revenue shortfalls. Given
this forecast, staff continues to closely monitor all revenue and expenditure activity, mindful of the
necessity to explore options to enhance revenue sources for current and future operating and capital
needs. Equally important is to ensure that the Town's current limitedresources are allocated to meet the
basic priority service needs of the community.
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