Attachment 1 - Finance Commission Mid-Year Starff Report with AttachmentsPREPARED BY:
Gitta Ungvari Finance Director
Reviewed by: Town Manager and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● (408)354-6832 www.losgatosca.gov
TOWN OF LOS GATOS
FINANCE COMMISSION REPORT
MEETING DATE: 02/13/2023
ITEM NO: 5
RECOMMENDATION:
Review and provide comments to the Town Council regarding Mid-Year Budget Report. DISCUSSION:
With the passage of Measure A, the Finance Commission has been tasked with several mandated duties as described in the provisions of the adopted Ordinance. Section 2.50.225. – Duties
states that:
(a) The Finance Commission shall:
Serve as an on-going. substantive and expert advisory body to the Town and Town Council so that the Town and Town Council can make informed decisions about the Town's financial, budgetary
and investment matters and operations related thereto.
On February 21, 2023, the Town Council will consider the FY 2022/23 Mid-Year Budget Report and recommendations for budget adjustments (see Attachment 1). Staff will provide the Finance
Commission comments to the Town Council for the February 21, 2023 meeting.
Attachment:
Town Council Draft FY 2022/23 Mid-Year Budget Report
Commissioner Communication Received before Publishing the Staff Report
ATTACHMENT 1
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TOWN OF LOS GATOS MID-YEAR BUDGET REPORT JULY 1 - DECEMBER 31, 2022
February 9, 2023
FINANCIAL OVERVIEW AND EXECUTIVE SUMMARY: STATUS OF FY 2022/23 ADOPTED BUDGET
The purposes of the Mid-Year Report are to provide the Town Council with a status of the Adopted Fiscal Year (FY) 2022/23 Operating Budget after the first six months and to make any
adjustments to ensure the continuity of municipal services and operations for the remainder of the fiscal year. The Report is one of several periodic updates to the Town Council on
the status of the current year’s revenues and expenditures and the projected financial condition of all Town funds compared with the Adopted Operating Budget. The updates typically
focus on the Town’s General Fund.
On January 24, 2023, the Town Council determined the Strategic Priorities for 2023-2025, providing guidance to Town staff and Commissions on workload prioritization. The Council affirmed
its Strategic Priorities to be multi-year efforts focused on Safety, Prudent Financial Management, Traffic/Transportation, and Quality of Life. Under these broad topics, the Council
added a few new items including: Hazardous Tree Management, Develop a Five-Year Structurally Balanced and Sustainable Operating Forecast, Develop a Five-Year Full Funded Capital Plan,
Traffic Calming/Safety for All Users, Streamline Permit Process, Work with Town Partners to Support Needs of Unhoused Residents, and Redefine Town Commissions in Alignment with Strategic
Priorities. (see the following page).
Based on the Town Council’s identified Strategic Priorities, staff has started budget development work for the next fiscal year, including an update of the Five-Year Financial Forecast,
identification of critical Town needs, contractual obligations, unfunded mandates, potential adjustments to the Fee and Fine Schedule, and other analyses. Staff is actively engaged
in the FY 2023/24 budget process with the primary focus of ensuring that the available Town resources are allocated to meet the priority service needs of the community. The Town Council
is scheduled to hold a public hearing on the Proposed FY 2023/24 Budget on May 17, 2022.
The prior fiscal year closed with approximately $0.9 million surplus operating revenues over expenditures. The actual net change in fund balance was $2,982,171, of which $2,065,302 are
proceeds from the second tranche of American Rescue Plan Act (ARPA) payments that has not been expended yet.
Current fiscal year-end projections for FY 2022/23 reflect an anticipated $0.7 million surplus of operating revenues and planned use of reserves over expenditures compared to the anticipated
$3.2 million deficit in the Adopted Budget.
ATTACHMENT 1
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2
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As discussed in greater detail later in this Report, the primary drivers of the reduction in the projected deficit are estimated increases in property tax, business license tax, Transient
Occupancy Tax (TOT), and franchise fee distribution. ln addition to the improvement in revenue projections, staff is estimating that there will be year-end operating expenditure savings.
Staff anticipates savings attributable to Departmental vacancies and lower cost structures associated with retiree replacements. In addition, for FY 2022/23, salaries were again budgeted
at actual salary plus a one step increase, which was a significant budgeting methodology change from previous practice.
On June 7, 2023, the Town Council adopted the combined use of ARPA funding, residual Measure G proceeds, and Other Post-Employment Benefits (OPEB) Trust reimbursement to balance the
FY 2022/23 budget as illustrated in the table below.
The significant revenue increases combined with projected expenditure savings indicate that the approved sources might not be necessary; however it can only be determined at the time
of the final close of the fiscal year. Staff recommends not to re-program the proposed sources until the fiscal year is closed. Since it is probable that not all sources will be utilized,
staff is asking for Council direction regarding what source should be utilized first to cure current fiscal year deficit, if needed. Due to the fact that OPEB Trust withdrawal should
be requested in June, significantly earlier than the final numbers are available, staff recommend to not utilizing the Trust Reimbursement.
Providing services to the community in this and future fiscal years will require a strong return to pre- pandemic performance of the Town’s economically sensitive revenues to offset
continued projected cost increases. The FY 2023/24 budget development process will endeavor to maintain essential public services while controlling operational costs in light of the
five-year fiscal forecast, which predicts operating revenue shortfalls in subsequent fiscal years.
ARPA Replacement Reveneue Measure G Residual for Operation
OPEB Trust Reimbursement for Retiree Medical
$1,643,281
$679,443
$902,579
Total $3,225,303
Planned Use of One-Time Sources Balancing the FY 2022/23 Operating Budget
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CONTENT OVERVIEW
The remainder of this Report focuses on the General Fund and provides analyses of key revenues and expenditures, including historic data by Town Department/Service Area. The next section
contains descriptions of recommended revenue and expenditure budget adjustments. The Report also includes financial summaries of other funds as well as a table of General Fund Operating
Revenues Versus Operating Expenditures through the second quarter of FY 2022/23 which includes comparison information from the prior year.
GENERAL FUND - KEY REVENUE ANALYSIS FY 2022/23
The following information provides a recap of the General Fund budgeted significant revenue sources, including estimated year end collection as of the second quarter ending December
31, 2022. Staff is monitoring developments in each major revenue source closely for potential adjustments to budgeted revenues as recommended in this Report.
Property Tax and Motor Vehicle in Lieu Fee (VLF)
Property tax and VLF are the single largest revenue source for the Town and comprise approximately 42% of total Town General Fund estimated revenues for FY 2022/23. Property tax is levied
by the Santa Clara County Assessor’s Office at 1% of a property’s assessed value, of which the Town receives approximately 9.3 cents per dollar paid on property located within the municipal
limits of Los Gatos. In compliance with Proposition 13, the assessed value of real property is based on the 1975/76 assessment roll value, adjusted by a 2% inflation factor annually
thereafter. However, when property changes hands or new construction occurs, the property is then reassessed at its current market value.
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The County of Santa Clara provides property tax collection updates and projections throughout the year. The current County estimate indicates $617,332 of more than the Adopted Budget.
The increase is a combined effect of higher than expected Redevelopment Agency (RDA) Residual Apportionment, and VLF allocation, as well as decreases in secured property tax estimates,
and no change to property transfer tax and the Educational Revenue Augmentation Fund (ERAF) estimates.
The Town has been monitoring ongoing developments regarding the distribution of excess ERAF funds. A portion of property tax revenue goes to the ERAF to support local school districts.
When the amount contributed to ERAF is more than the minimum cost of funding local schools, excess funds have traditionally been returned to the county, cities, and special districts.
Five counties, including Santa Clara, have been using a redistribution allocation formula that has been contested by the State. The Town received the full amount for FY 2021/22; however,
the Santa Clara County Assessor’s Office recommends budgeting only 70% of the FY 2022/23 projected number. The Adopted FY 2022/23 Budget included a $1. 5 million ERAF estimate, 70%
of the current ERAF base revenue estimate is still the same.
Property tax distributions are largely received in the third and fourth quarters. Second quarter receipts are trending similar to those received during the second quarter of the previous
fiscal year and are at 29% of budgeted totals. Based on current County projections, staff recommends a $617,332 increase in estimated General Property Tax and Motor Vehicle in Lieu
Fee collections.
Property Tax and VLF - Quarterly and Annual Revenues 5-Year History
$22,000,000
$20,000,000
$18,000,000
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2n d Q uarter Act ual Reven ues Fiscal Y ear To tal Actu al Revenu es Fiscal Y ear Budge ted Reven ues Fiscal Y ear To tal Est imated Revenue s
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Sales Tax
Sales tax is the second largest revenue source for the Town’s General Fund, accounting for 18% of budgeted General Fund projected revenues for FY 2022/23. The Town currently receives
1.125 cents for every 9.125 cents of sales tax paid per dollar on retail sales and taxable services transacted within Los Gatos, including the Town of Los Gatos residents’ approved
ballot Measure G in 2018 enacting a one- eighth cent (0.125%) district sales tax for 20 years.
Sales tax estimates are based on actual sales tax data and annual sales tax estimates for five years provided by the Town’s consultant, MuniServices. In addition to brick-and-mortar
sales tax generation, the MuniServices estimates include several online sales tax projections. The 2018 Wayfair Decision resulted in e-commerce vendors utilizing the Amazon platform
to collect sales tax based on destination; however, items shipped directly from Amazon fulfillment centers are collecting sales tax based on the point of distribution. Regular sales
tax collected through online transactions are distributed through the Santa Clara County pool for which the Town receives a pro rata share of the sales tax generated in Santa Clara
County for that particular quarter. The Town directly receives the one-eighth district tax portion of the sales tax generated by the residents of Los Gatos. Current total sales tax
estimates include
$7,559,566 ($301,422 decrease) in proceeds from regular sales tax and $1,287,690 ($26,266 decrease) in proceeds from the Measure G one-eighth cent district tax. Actual receipts net of
administrative fees collected by the State will be confirmed at the close of the fiscal year and per prior Council direction, the Measure G funds are allocated 50% for capital improvement
projects and 50% for operating expenses.
While FY 2022/23 second quarter receipts are trending slightly higher than in the same period last fiscal year, staff recommends a $327,688 budget decrease to reflect the MuniServices
current estimates.
Sales Tax & Measure G Tax - Quarterly and Annual Revenues
5-Year History
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues
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Franchise Fees
Franchise fees are collected by the Town for the privilege of operating a utility service within Los Gatos, and as a fee in lieu of a business license tax. Franchise fees are currently
received from Comcast for cable television, PG&E for gas and electric services, West Valley Collection and Recycling for solid waste collection services, and AT&T and Comcast for video
services. Franchise fees represent 5% of projected General Fund revenues in FY 2022/23.
Historically, franchise payments are not remitted equally throughout the fiscal year; therefore, second quarter receipts are not necessarily predictive of future receipts. Total franchise
fee revenues are trending higher than those of the second quarter in FY 2021/22 especially in the garbage franchise fee category. Staff recommends a $222,600 budget increase to this
revenue source.
As the Town previously enclosed in the FY 2021/22 Annual Comprehensive Financial Report (ACFR), the California Supreme Court recently issued an opinion in a case challenging the franchise
fees that the city of Oakland charges to certain waste hauling companies. In Zolly v. City of Oakland, the court concluded that it did not have enough evidence to rule as a matter of
law that the fees are exempt from the voter approval requirements that apply to taxes under Proposition 26, Article XIII C of the California Constitution. However, there are several
exceptions to the general rule that a tax must be approved by the voters. One exception (Article IIIC, section 1 (e)(1)) is for “a charge imposed for a specific benefit conferred or
privileged granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit
or granting the privilege.” In the event the Town is unable to utilize one of the exceptions, the potential impact is a loss of approximately $2.4 million annually.
FY 18/19
FY 19/20
FY 20/21
FY 21/22
FY 22/23
Franhise Fees - Quarterly and Annual Revenues 5-Year History
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
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Business License Tax
The Town requires all businesses located within Los Gatos and/or those that operate within Los Gatos to obtain a business license. The amount of business license tax paid by each business
is based on its business activity. In November 2022, Los Gatos voters approved Measure J, which modernized the Town’s business license tax program. This is the first update to the program
since 1991, strengthening funding for core Town services that are enjoyed by Town businesses. Measure J included a 30% increase on flat rate fees, a 40% increase in retailing gross
receipts, and a 120% increase in e-commerce, manufacturing, wholesaling, and jobbing gross receipts. Fees for activities such as wholesale sales and manufacturing are charged on a sliding
scale based on gross receipts, as is retail, with retail being capped at $1,365. These gross receipt activities account for approximately 25% of annual business licenses, while the
remaining 75% are flat fee businesses. Annual renewal payments are due on January 2 of each year. Payments for new flat-fee-based businesses are prorated by quarter.
The Town is partnering with HdL Companies (HdL) to provide dedicated business license support to Los Gatos businesses. The Town’s business license application and renewal process is
now streamlined by offering online business license applications and renewals. Council authorized the omission of late business license penalties for all businesses in 2023 to assist
with the business license management transition.
Business license tax revenue for the current fiscal year was budgeted at the prior tax rate, current estimates based on the updated tax rate predict a significant increase for the business
license tax revenue. Staff is recommending a $1,056,500 increase to this revenue source. Staff anticipates collecting the majority of the business license revenue during the third quarter.
Staff is closely monitoring the activities and will return with any recommended adjustments in May.
FY 18/19
FY 19/20
FY 20/21
FY 21/22
FY 22/23
Business License Tax - Quarterly and Annual Revenues 5-Year History
$2,600,000
$2,400,000
$2,200,000
$2,000,000
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
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Transient Occupancy Tax
TOT is an important revenue source for the Town and comprises approximately 4% of total Town estimated revenues in the amount of $2.0 million for FY 2022/23. The Town levies a 12% transient
occupancy tax (TOT) on all hotel and motel rooms within the municipal limits of Los Gatos. The 12% rate has been in effect since January 1, 2017, after the voters approved a ballot
measure to increase in the TOT from 10% to 12% at the November 8, 2016 election.
The FY 2022/23 Adopted Budget modeled a 17.3% increase from FY 2021/22 adjusted budget. During the pandemic, TOT experienced the most significant percentage decline relative to historical
adopted budgets. Due to a significant rebound in leisure “staycation” travel and modest improvements in business travel, current TOT collections are trending higher than anticipated
and average occupancy rates are rebounding as well.
Staff will continue to monitor this revenue source since current estimates, however, based on the current trend and occupancy data analysis staff is recommending a $357,540 budget increase.
TOT - Quarterly and Annual Revenues 5-Year History
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues
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Recommended Budget Revision
* GASB 31 Market Adjustment is not Included
Interest Income
The Town earns interest income by investing monies not immediately required for daily operations in a number of fixed income and money market instruments. These investments are made
within the parameters stated in the Town Council’s Investment Policy and State regulation. The Town’s investment goal is to achieve a competitive rate of return while maintaining sufficient
liquidity and protecting the safety of its funds. Interest income revenue is primarily dependent on two factors: the cash balance in the Town’s investment portfolio and the yield on
those funds.
As of December 31, 2022, the Town’s weighted portfolio yield was 2.28% which exceeded by 11 basis points the Local Agency Investment Fund (LAIF) yield of 2.17% for the same reporting
period. Currently the LAIF portfolio’s weighted average maturity (WAM) is 304 days versus the Town’s longer WAM of 439 days. This slightly longer maturity allows the Town to pick up
higher yields available on the later maturities. The Town’s weighted average rate of return of 2.28% at the close of December was 25 basis points higher when compared to the prior months
return of 2.03% reported as of November 30, 2022.
Staff recommends no change to this revenue source at this time.
Interest - Quarterly and Annual Revenues 5-Year History
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
FY 18/19 FY 19/20
2nd Quarter Actual Revenues
FY 20/21 FY 21/22 FY 22/23
Fiscal Year Total Actual Revenues
Fiscal Year Budgeted Revenues
Fiscal Year Total Estimated Rev enues
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Charges for Services
Town Service revenues consist primarily of planning, building, inspections, and engineering fees assessed on local building and development activity. Development fees and charges are
assessed based on cost recovery formulas, which reflect approximate costs of providing these regulatory services. This category includes charges for the School Resource Officer and
crossing guard services.
Second quarter Town Service revenues, specifically Charges for Services, are trending lower than in the second quarter compared to the previous fiscal year. Typically, development fees
are collected in advance for projects and recognized as revenue in the fiscal year the work is performed. Fiscal Year estimated revenues includes all revenue line item in this category.
Staff recommends a $660,314 budget increase in selected items to reflect increased activities in planning and engineering services as explained in the next section of this Report.
Charges for Services - Quarterly and Annual Revenues 5-Year History
$5,500,000
$5,000,000
$4,500,000
$4,000,000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues
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Licenses and Permits
Licenses and Permits consist mainly of planning and building permit fees which are collected by the Town to offset administrative costs associated with evaluating development proposals
to ensure compliance with codes and policies. Licenses and Permits revenue was budgeted slightly lower than FY 2021/22 in anticipation of slower development activity.
Second quarter License and Permit revenue is trending 59% of budgeted revenue. Fiscal Year estimated revenues includes all revenue line item in this category. Staff recommends a $95,545
increase in selected items in this category as explained in the next section of this Report.
Licenses & Permits - Quarterly and Annual Revenues 5-Year History
$5,000,000
$4,500,000
$4,000,000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues
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GENERAL FUND – EXPENDITURE ANALYSIS
For FY 2022/23, General Fund Operating expenditures (not including debt payment and transfers out) are programmed at $47.7 million. The delivery of Town services is highly dependent
on talent which comprises 67.5% of budgeted General Fund expenditures for FY 2022/23. During the fiscal year, the Town Council has approved several budget adjustments, which are tracked
against the Adopted Budget. The net effect is an Adjusted Budget. General Fund expenditure totals are trending in accordance with the Adjusted Budget, with total operational expenditures
at the end of the second quarter at or about 44% of the Adjusted Budget. With six months of data now available, staff expects that the next six months of expenditures will be within
the Adjusted Budget, although unexpected costs can still occur which may require future Council action.
As with most municipalities, services are provided directly by employees to the Town’s residents, businesses, and visitors. As a service delivery enterprise, the cost of salaries and
benefits are a significant portion of the budget. As the table below illustrates, at mid-year, actual salaries are trending at 46% of budgeted salaries, while pension benefits and other
benefits are trending at 46% and 40% respectively to the Adjusted Budget.
Salaries and benefits savings are anticipated due to vacancies and reduced cost structure due to replacements after retirements. In addition, vacant positions are often filled with temporary
unbenefitted positions, which translate into additional benefit savings. Actual vacancies during the course of the first half of fiscal year are illustrated in the table below.
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The pie chart below represents the Departmental proportion of Town General Fund estimated operating expenditures. The subsequent pages review program expenditures and any anticipated
savings are provided for each program. Also provided are historical program costs, year over year (YOY) percentage changes in actual expenditures, and five-year average changes per
the Finance Commission’s suggestion. YOY percentage changes are, in many cases, impacted by the timing of one-time expenditures that occur during the fiscal year. Historical analysis
has been provided in selected cases to provide explanations for some of the fluctuations between fiscal years. The FY 2022/23 Estimated figures also include analysis on potential salary
and other expenditure savings; however, budget adjustments are only recommended as identified in this Report.
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Town Council
The Town Council is the elected legislative body that represents the residents and provides policy direction for the delivery of services and capital improvements for the Town of Los
Gatos. Town Council expenditures are trending lower than the same quarter in prior year. Staff anticipates minimal expenditures savings in this program. Savings are anticipated in office
supplies and medical benefits.
Staff does not recommend any expenditure budget adjustment in this program.
$-
Town Council - Quarterly and Annual Expenditures 5-Year History
$500,000
FY 18/19 FY 19/20
Second Quarter Actual Expenditures
FY 20/21 FY 21/22 FY 22/23
Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
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Beginning in FY 2018/19, all personnel costs that were previously budgeted in Internal Service funds were transferred to the General Fund. While overall expenditures did not increase,
salary and benefit costs that were formerly reported as an Internal Service Fund expense effective with the change became a General Fund expense.
Recommended Budget Revision
Town Attorney
The Town Attorney is the legal advisor to the Town Council, Successor Agency to the former Redevelopment Agency, and Town staff. In this capacity, the office of the Town Attorney provides
a wide range of legal services to ensure that Town actions and activities are legally sound. Town Attorney program expenditures are trending at 47%. Staff estimates approximately $26,000
expenditures savings in this program. Savings is anticipated in staff salaries and benefits, travel and training, and office supplies. Staff does not recommend any expenditure budget
adjustment in this program.
Town Attorney - Quarterly and Annual Expenditures 5-Year History
$1,000,000
$-
$500,000
FY 18/19 FY 19/20
Second Quarter Actual Expenditures
FY 20/21 FY 21/22 FY 22/23
Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
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Beginning in FY 2018/19, all personnel that were previously budgeted in Internal Service funds were transferred to the General Fund. While overall expenditures did not increase, salary
and benefit costs that were formerly reported as an Internal Service Fund expense effective with the change became a General Fund expense. This program budget includes a limited temporary
position to assist the Town with its emergency preparedness and response operations since FY 2019/20.
FY 18/19
FY 19/20
FY 20/21
FY 21/22
FY 22/23
Administrative Services
The Town Manager provides overall management, administration, and direction for the entire Town organization, reporting to the full Town Council. Administrative Services incorporates
five key programs: Town Manager’s Office, Clerk Department, Finance Department, Human Resources Department, and Information Technology.
Administrative Services program expenditures are trending similar compared to the same quarter expenditures in prior year. This program had some vacancies during the course of the first
half of the fiscal year including Finance and Accounting Manager, Special Event Coordinator, Deputy Clerk and Temporary Emergency Services Coordinator. The Special Event Coordinator,
Deputy Clerk positions are filled and the recruitment for the other two vacant positions has already started. Staff estimates approximately $326,000 expenditures savings in this program.
Savings are anticipated in staff salaries and benefits, travel and training, and office supplies.
Administrative Services - Quarterly and Annual Expenditures 5-Year History
$5,500,000
$5,000,000
$4,500,000
$4,000,000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
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Community Development Department expenditures vary year to year based on the development activity and pass through services.
Community Development Services
The Community Development Department works with elected and appointed officials, other Departments, and the community to guide the physical growth, development, and preservation of the
Town.
Community Development program expenditures are trending lower than the same quarter expenditures in prior year due to increased development activities in the Department Building and
Pass Through programs. The Pass Through program collects the required developer deposits for various review services. The Town provides those services through consultants and the consultants
are paid out of the applicant’s account. At the close of a project, all remaining fees collected will be refunded to the applicant. This program is fully staffed as of December 31,
2022; however, the Associate Planner and Planning Technician positions were partially vacant during the first half of the fiscal year. Staff is requesting to increase an Associate Planner
position form 0.75 Full Time Equivalent (FTE) to 1 FTE to assist the Department with the current and future workload pertaining to unfunded State mandates and other work. In addition,
staff recommends expenditure budget adjustments for building permit services ($150,000) and redepositing the first proceed ($300,00) of the affordable loan repayment. Both of these
requested items have dedicated revenue sources and cost neutral. Not counting the last two items, staff anticipates approximately $420,000 expenditures savings in this program. Savings
are anticipated in staff salaries and benefits, travel and training, and office supplies.
Community Development - Quarterly and Annual Expenditures 5-Year History
$6,500,000
$6,000,000
$5,500,000
$5,000,000
$4,500,000
$4,000,000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
FY 18/19 FY 19/20
Second Quarter Actual Expenditures Fiscal Year Budgeted Expenditures
FY 20/21 FY 2021/22 FY 22/23
Fiscal Year Total Actual Expenditures Fiscal Year Total Estimated Expenditure
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$-
Police Services
The Los Gatos-Monte Sereno Police Department provides Police services to the Town of Los Gatos and contractually to the City of Monte Sereno. The Department is committed to ensuring
public safety with integrity, compassion, and professionalism, by providing exceptional law enforcement services, building community partnerships, and engaging the community in problem
solving.
Staff is continuing to monitor Police service program revenues and expenditures. Staffing levels remain a challenge for the Police Department with dedicated ongoing recruitment for open
positions.
Whenever feasible, open positions are filled with trainees, per diems, and temporary employees until positions are filled. The Police Department does not anticipate any budgetary concerns
at mid-year. Staff anticipates approximately $420,000 expenditures savings in this program. Savings are anticipated in staff salaries and benefits, travel and training, and office supplies.
Staff recommends $27,151 expenditure budget increase to expend the proceeds of an Opioid Settlement disbursement for opioid preventative and awareness education and additional costs
related to increased parking ticket collection administration.
Police - Quarterly and Annual Expenditures 5-Year History
$20,000,000
$15,000,000
$10,000,000
$5,000,000
FY 18/19 FY 19/20
Second Quarter Actual Expenditures
FY 20/21 FY 21/22 FY 22/23
Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
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Beginning in FY 2018/19, all personnel that were previously budgeted in Internal Service funds were transferred to the General Fund. While overall expenditures did not increase, salary
and benefit costs that were formerly reported as an Internal Service Fund expense effective with the change became a General Fund expense.
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Parks and Public Works Services
The Parks and Public Works Department constructs and maintains the Town’s public parks, facilities, roadways, right-of-way, and other infrastructure. Six organizational units work in
coordination to achieve the Department’s overarching goal of ensuring the Town’s facilities are safe, functional, and attractive.
The Parks and Public Works services program expenditures are trending lower than prior year same quarter expenditures. This program experienced vacancies in couple of positions including
Parks and Public Works Director, Senior Civil Engineer, Transportation and Mobility Manager, and Town Engineer during the course of the first half of the fiscal year. Staff is requesting
the deletion of the hire-ahead one- time Urban Forest Manager position. Funding for the current fiscal year of the position is available from the tree replacement deposit fund while
in future years the Department is proposing to reclassify the Town Arborist position as it becomes vacant.
Staff anticipates approximately $570,000 expenditures savings in this program. Savings are anticipated in staff salaries and benefits, travel and training, and office supplies. Staff
recommends an expenditure budget increase of $283,112 attributed to the additional contractual obligations, increased pass through activities and defunding the Urban Forest Manager
position as explained in the next section of this Report.
Parks and Public Works - Quarterly and Annual Expenditures 5-Year History
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
FY 18/19 FY 19/20
Second Quarter Actual Expenditures
FY 20/21 FY 21/22 FY 22/23
Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
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Library Services
The Los Gatos Library fosters curiosity and community connection and strives to be at the heart of an engaged and vibrant community.
Library services program expenditures are trending lower than prior year same quarter expenditures. This program had Librarian and Senior Library Page vacancies during the first half
of the fiscal year. Staff anticipates approximately $46,000 expenditures savings in this program. Savings are anticipated in temporary employee salaries, travel and training, and office
supplies. Staff recommends a $2,735 budget increase to authorize spending of a State Library Grant received by the Department.
Library - Quarterly and Annual Expenditures 5-Year History
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
FY 18/19 FY 19/20
Second Quarter Actual Expenditures
FY 20/21 FY 21/22 FY 22/23
Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures
Fiscal Year Total Estimated Expenditure
21
22
FY 2022/23 RECOMMENDED BUDGET ADJUSTMENTS
Budget adjustments are recommended for the following revenues and expenditures at the second quarter as described below:
TOTAL GENERAL FUND EXPENDITURES
$ 1,369,124
FY 2022/23 MID-YEAR BUDGET ADJUSTMENT REQUESTS - GENERAL FUNDS
22
23
SUMMARY OF KEY RECOMMENDED BUDGET ADJUSTMENTS
General Property Tax and Motor Vehicle in Lieu Fee: Staff recommends a decrease in projected revenues of approximately $417,682 in General Property Tax and an increase of $199,650 Motor
Vehicle in Lieu fee which are in line with the estimates and forecasts provided to the Town from Santa Clara County.
Sales and Use Tax: Staff recommends a $301,422 budget decrease to reflect current sales tax trends based on MuniServices most likely projections.
Fund Program
251
23
Fund
Program
Account Other Fund Expenditures
231
8,608
$
FY 2022/23 MID-YEAR BUDGET ADJUSTMENT REQUESTS - OTHER FUNDS
Account Other Fund Revenues
Los Gatos Theatre
Blackwell LLD
24
24
Measure G – District Sales Tax: Staff recommends a $36,266 budget decrease to reflect the current trends of the one-eight cent sales tax based on MuniServices most likely projections.
Transient Occupancy Tax (TOT): Staff recommends a $357,540 budget increase based on the current trends.
PG&E Franchise Fee:: Staff recommends an increase in projected revenues of approximately
$50,000 in cable franchise fee based on last year actuals.
Garbage Franchise Fee: Staff recommends an increase in projected revenues of approximately
$172,600 in cable franchise fee based on current activities and trends.
Business License Tax: Staff recommends a $1,056,500 budget increase based on the estimated collection per the new business license tax.
Plan Check and Other Service Fee: Staff recommends a $57,500 budget decrease based on the current plan check activities.
Building Inspection Services: Staff recommends a $150,000 revenue and budget increase for building inspection services from available developer contribution.
Additional 0.25 FTE Associate Planner: Staff recommendsan expenditure budget increase in the amount of $6,962 toprovide additional 0.25 FTE Associate Planner hours due to ongoing long
range planning efforts and unfunded mandates from yearly State Legislation that has and continues to be enacted.
Affordable Loan Repayment: Staff recommends $300,000 revenue and budget increase for receiving a partial repayment of the Dittos Lane affordable housing loan and redepositing the proceeds
to Below Market Housing Deposit Account.
Prop 172 – Public Safety Sales Tax: Staff recommends a $37,300 budget increase to reflect the current trends of the Prop 172- Public Safety Sales Tax based on MuniServices projections.
Opioid Settlement Proceeds: Staff recommends a $14,150 revenue and expenditure budget increase to recognize the receipt of Opioid Settlement disbursement. The Settlement requires funds
be used primarily for opioid abatement; the Police Department will follow the fiscal guidelines outlined in the Settlement agreement. The Police Department identified utilizing the
funding for specific advancedofficer training in recognition, response, treatment, and management of an opioid overdose crisis, and to supplement opioid preventative and awareness education
training for youth through the School Resource Officer drug awareness program.
Online Parking Ticket: Staff recommends a $25,000 revenue budget increase to reflect recent parking citation revenue and $13,000 expenditure budget increase to increased administrative
and processing cost related to inceased parking citation revenue collection.
Encroachment Permits: Staff recommends a revenue budget increase of $50,000 to recognize increased developments happening in Town.
25
25
Engineering Services: Staff recommends a revenue budget increase of $50,000 to recognize increased developments happening in Town.
Oak Meadow Park Parking Fee: Staff recommends a decrease in the Oak Meadow Park Parking fee revenue in the amount of $20,000. Staff is in the process of procuring a pay station that
will integrate with the Town’s current parking enforcement efforts.
Safety Grant: Staff recommends $10,347 revenue and $3,756 expenditure budget increase to recognize the receipt of safety grant for paygorund safety. The payground safety work was partially
budgeted before the grant was identified.
West Valley Solid Waste Management Joint Powers Agency (JPA) Revenue Realignment between Programs: Staff recommends a revenue budget increase of in the amount of $67,545 to reflect the
current contribution for different Town programs based on the agreement signed with the Joint Powers Authority after the original budget was adopted.
Donation – Benches: Staff recommends revenue and expenditure budget increase of $10,347 to recognize donation received for bench installation.
Town Share of Retiree Medical: Staff recommends an expenditure budget increase of $143,130 to recognize increased cost related the retiree medical services due to additional recent retirements.
Additional Payment to IRS Pension Trust: Staff recommends an expenditure budget increase in the amount of $300,000 for additional payment to the IRS Pension Trust from available Pension/OPEB
Reserve.
PG&E Loan Principal Payment: Staff recommends an expenditure budget increase in the amount of $156,034 for PG&E Loan Payment. The Town utilized an interest fee loan from PG&E for energy
efficiency improvements for various Town buildings. The payments were suspended by PG&E due to the pandemic during budget development, but the payment schedule was since reinstated.
Software License Maintenance: Staff recommends an expenditure budget increase of $7,460 for software license maintenance.
Landscape Maintenance: Staff recommends an expenditure budget increase of $37,234 for increased landscape maintenance services.
Urban Forest Manager: Staff recommends revenue and expenditure budget decrease of
$234,260 to defund the one-time hire ahead Urban Forest Manager position.
Plan Check Services: Staff recommends a $485,575 revenue and budget increase forplan check services from available developer contribution.
Other Fund Revenues and Expenditures
26
26
Landscape Maintenance: Staff recommends an expenditure budget increase in the amount of
$9,622 to the various Park Light and Landscaping Districts for increased landscape maintenance services.
Theatre Needs: Staff recommends $68,000 revenue increase to recognize the current tenants anticipated rent proceeds and $55,814 expenditure budget increase from available rent proceeds
for initial set-up, utility cost and additional expenses related to the Los Gatos Theatre Building maintenance and repairs.
Gas Tax: Staff recommends revenue and expenditure budget decrease in the amount of $67,218 reflecting most recent gas tax projections.
West Valley Sanitation District Annual Fee: Staff recommends an expenditure budget increase in the amount of $8,608 to for additional water meter connected and increased water usage
fee.
Library Trust programming: Staff recommends $5,000 revenue and expenditure adjustment to recognize additional donation from the Friends of the Los Gatos Library. The Friends were able
to donate an additional of $5,000 this year. Staff anticipated spending $5,000 of the additional donation in the current fiscal year.
American Rescue Plan Act (ARPA) Fund:
In accordance with ARPA, the Town was awarded an ARPA grant in the amount of $7,229,744 paid to the Town in two separate payments, the first payment of $3,618,872 was received in early
July 2022 and the second payment of $3,614,872 was received in early July 2023.
Based on initial guidance of eligible uses of ARPA funds the Town allocated these funds to various purposes to respond and support the impacts of the pandemic on Town residents, non-profits,
the business community including the construction of downtown parklets, non-profit fee and rent waivers, enhanced senior services, promenades, and increased funding for Town infrastructure
capital improvements, among other initiatives.
Upon Treasury’s release of the simplified reporting process for entities awarded less than $10 million in ARPA funding and additional guidance received on federal compliance issues,
the Town recognized the
$3.4 M of FY 2021/22 and the recommending recognizing the second tranche of $3.6M cash collections of ARPA revenues in FY 2022/23 as qualified revenue loss under the Treasury provisions
for use in
providing government services. To further aid in compliance with federal uniform guidance and Single Audit requirements, staff claimed the lost revenue for use in providing essential
government services and accounted for the use of ARPA revenue loss revenues for eligible public safety payroll costs for in FY 2021/22 and proposing the same for FY 2022/23.
The recommended action as illustrated in the below worksheet will allocate all ARPA “replacement” revenues to the General Fund which in turn will unencumber other General Fund operating
revenues which were previously dedicated for public safety costs. The newly unencumbered General Fund revenues can then be allocated to the ARPA pandemic responses as identified.
27
Council has already allocated all the $7.2 million proceeds for various priorities as illustrated in the below table. Staff will bring back any residual balance not used for the original
purpose after completing the program for Council re-programming reconsideration
While the Town already recognized the full first tranche of the ARPA proceeds during FY 2020/21 and FY 2021/22, only $1,549,570 was utilized during those fiscal years, $2,065,302 is
part of the General Fund balance and tracked by staff to ensure that the proceeds are spent by Council adopted uses.
The FY 2022/23 budget was adopted prior to the simplified guideline so staff is proposing the following budget adjustments to recognize the revenue and track the Council approved uses.
AMERICAN RESCUE PLAN ACT (ARPA) SUMMARY WORKSHEET
27
28
GENERAL FUND FINANCIAL SUMMARIES AND ESTIMATES
The following table is the Schedule of General Fund Operating Revenues Versus Operating Expenditures
for the second quarter of FY 2022/23which includes comparison information from the prior year.
The FY 2022/23 Adjusted Budget column includes the adopted budget and items that Council approved during the course of the first two quarters of the fiscal year, such as additional funding
for legal services, and miscellaneous carry over grants from prior fiscal year.
The FY 2022/23 Estimated column contains projections of final balances for the current fiscal year based upon staff analysis, the early trends observed through the second quarter in
sales tax and property tax projections, and the proposed mid-year adjustments as listed in this report.
The FY 2022/23 Estimated figures also include analysis on potential salary and other expenditure savings; however, budget adjustments are only recommended as identified in this Report.
Staff continues to fine tune the detailed analysis of the FY 2022/23 year-end estimated revenue and expenditure numbers and an update will be provided with the presentation of the Proposed
Fiscal Year 2023/24 Operating Budget.
The following table illustrates the summary of the General Fund balance status based on current estimates and prior year result.
The table in the following page provides the details of the Revenues and Use of Reserve and Total Expenditures and Reserve Allocations.
GENERAL FUND
SUMMARY OF REVENUES AND EXPENDITURES
28
29
FY 2021/22
Actuals
FY 2021/22 Q2
FY 2022/23 Q2
FY 2022/23
Adjusted Budget
FY 2022/23
Year End Estimates Including Proposed
Mid-Year Adjustments
Revenues
Property Tax
VLF Backfill Property Tax Sales & Use Tax
Measure G Sales & Use Tax Franchise Fees
Transient Occupancy Tax Business License Tax Licenses & Permits Intergovernmental Town Services
Fines & Forfeitures Interest
Use of Property Miscellanious Other Park Construction Tax
Debt Service - Entry Eliminated for ACFR
ARPA Income Replacement - Entry Eliminated for ACFR Pension Trust Income - Entry Eliminated for ACFR Measure G for Operations - Entry Eliminated for ACFR Proceeds for Sales of Assets
Fund Transfer In
Total Revenues & Transfers In
$ 16,899,618
4,229,462
7,177,597
1,306,076
2,822,515
1,895,064
1,481,667
4,814,650
1,263,352
5,460,608
319,170
(1,404,526)
32,400
311,040
14,752
1,899,850
556,316
690,000
629,147
2,151
$ 5,761,081
6,141,998
$
$ 16,551,544 $
4,356,350
7,860,988
1,313,956
2,493,870
1,642,460
1,387,500
2,735,029
1,124,093
4,445,635
201,750
432,947
16,969,226
4,556,000
7,559,566
1,287,690
2,716,470
2,000,000
2,444,000
2,841,374
1,250,731
5,105,701
232,129
517,379
-
-
2,143,460
412,881
968,181
711,861
167,942
3,373,287
370,615
3,906,577
118,809
(211,169)
2,398,925
426,496
1,044,055
857,715
97,974
1,602,633
379,739
3,284,766
151,615
145,003
-
-
-
-
150,622
457,906
7,680
3,280,749
7,000
1,893,713
626,066
8,280
1,893,713
-
-
-
-
-
4,047,313
$ 54,448,222
104,659
$ 17,978,806
102,000
$ 17,098,505
538,536 538,536
$ 50,266,120 $ 50,546,861
Use of Other Funding Sources:
Use of Reserves - Capital/Special Projects - Capital Use of Reserves - Surplus Property
Use of Reserve - Pension/OPEB
Use of Reserve - Accumulated Measure G
Total Other Funding Sources
550,000
1,200,000
300,000
$
-
$
$
1,100,000
$ 3,150,000
-
$ -
$ 17,978,806
-
$ -
$ 17,098,505
- $ 2,350,000 $ 2,350,000
300,000
679,443
$ 3,029,443 $ 2,650,000
$ 53,295,563 $ 53,196,861
Total Revenues and Use of Reserves Expenditures
Town Council Attorney
Administrative Services Non- Departmental Community Development Police
Parks & Public Works Library
Principal
Total Department Expenditures
Debt Service - Entry Eliminated for ACFR
ARPA Income Replacement - Entry Eliminated for ACFR Transfer to Pension Trust Fund - Entry Eliminated for ACFR Measure G Transfer - Entry Eliminated for ACFR
Transfers Out
Total Additional Non-Departmental Expenditures
$ 57,598,222
189,569
629,935
5,441,605
2,792,857
6,313,505
16,451,189
8,605,455
2,752,401
$
91,800
226,377
2,583,281
1,160,520
3,460,301
8,266,432
4,010,181
1,356,415
$
91,822
332,183
2,438,472
1,222,789
2,394,537
8,957,541
4,226,049
1,442,555
217,238 $
711,426
5,310,119
3,617,671
5,960,379
19,225,986
9,798,966
3,144,450
$
216,231
685,473
4,983,530
3,823,598
5,990,576
18,695,679
9,221,597
3,097,584
156,034
$ 43,332,550
$ 21,155,307
$ -
$ 21,105,948
$ 47,986,235
156,034
$ 46,870,302
$ 1,899,850
$ 1,899,850
556,316
690,000
629,148
- $
$
1,893,713
4,358,188
$ 8,133,502
$ 51,466,052
-
$ -
$ 21,155,307
-
$ -
$ 21,105,948
3,006,978 3,006,978
$ 4,900,691 $ 4,906,828
$ 52,886,926 $ 51,777,130
Total Operating Expenditures
Allocate to Budget Stabilization/Catastrophis Reserve Allocate to Carryover Encumbrances
Allocate to Pension/OPEB Reserve
Allocate to Restricted Pension Trust
Excess (Deficiency) of Revenues Over Expenditures
1,062,162
33,145
300,000
$ 4,736,863 ** $ (3,176,501) * $
(4,007,443) * $
690,000
729,731
390,000
18,637 $
GENERAL FUND
SUMMARY OF REVENUES AND EXPENDITURES
*FY 2021/22 and FY 2022/23 2Q Net Operating Revenues are negative because some revenues budgeted for the entire fiscal year are received in the third or fourth quarters and fund expended
in the first or second quarters.
** This schedule includes fund balance uses. Total Revenues and Transfers In ($54,448,222) minuesTotal Operating Expenditures ($51,466,052) equals $2,982,171 with rounding.
29
30
30
FINANCIAL SUMMARIES OF OTHER FUNDS
The group of financial summaries on the following pages present data by governmental, proprietary and fiduciary fund types. For each, the fund information starts with a beginning fund
balance, adds current year revenues, and subtracts current year expenditures, resulting in an ending fund balance. Adopted budget amounts are provided as a basis for comparison of actuals
to date.
Special Revenue Funds (Governmental Fund Type)
Special Revenue Funds account for the proceeds derived from specific revenue sources that are legally restricted or assigned to special purposes. The Town’s Special Revenue Funds are
Community Development Block Grant Fund, Housing Conservation Program Fund, Urban Runoff Source Fund (Non- Point Source), and several Landscaping Lighting District (LLD) Funds, American
Recovery Program Act (ARPA) Fund, and Theatre Fund, and Library Trusts Funds. Staff recommends recognizing the second tranche of ARPA in the amount of $3,614,872 as revenue replacement
in the current fiscal year following the federal streamlined process. Staff also recommends $68,400 revenue budget adjustment to recognize Theatre tenant lease revenues and $55,814
expenditure budget adjustment for Theatre related expenses from available rent proceeds.
Special Revenue Funds Budget to Actuals Comparisons
31
31
Capital Projects Funds (Governmental Fund Type)
Capital Projects Funds account for resources used for the acquisition and construction of capital facilities by the Town. Funds in this category are the GFAR (General Fund Appropriated
Reserve) Fund, Traffic Mitigation Fund, Grant Funded CIP Projects Fund, Utility Underground Fund, Gas Tax Fund, and three Storm Drain Funds. Staff recommends revenue and expenditure
budget adjustments in the amount of
$67,276 to reflect decreased gas tax projections. Staff will continue to monitor these revenues and expenditures throughout the remainder of the year. 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. The reimbursements eventually result with the fund “breaking even” or a zero fund balance.
Capital Project Funds Budget to Actuals Comparisons
* GFAR, Traffic Mitigation, and Grant Funds balances are combined in the FY 2022 ACFR. The combined balance of
$14,240,753 is presented as an Appropriated Reserve.
32
32
Internal Service Funds (Proprietary Fund Type)
Internal Service Funds finance and account for special activities and services performed by a designated Town Department for other Town Departments on a cost reimbursement basis. Included
in this fund type are the Equipment Replacement Fund, Workers’ Compensation Fund, Joint Powers Authority Pooled Liability Network (PLAN) Self-Insurance Fund, Information Technology
Fund, and the Facilities Maintenance Fund.
Staff recommends a $8,606 expenditure budget adjustment to cover additional expenses related to the West Valley Sanitation District annual fee increase from the available Facilities
Maintenance Fund. Staff will continue to monitor expenditures and propose a revised cost allocation if needed during the FY 2023/24 budget preparation.
Internal Service Funds Budget to Actuals Comparisons
33
33
Trust and Agency Funds (Fiduciary Fund Type)
AB1x26 is the “Dissolution Bill” that eliminated the Town’s Redevelopment Agency effective February 1, 2012. AB 1484 is the “clean-up” bill that revised and attempted to clarify AB1x26.
In accordance with the law, the Successor Agency continues to wind down the affairs and operations of the former Redevelopment Agency by implementing programs and activities in accordance
with the State-approved Recognized Obligation payment Schedule (ROPS). The Successor Agency monies are now accounted for in a Private Purpose Trust fund and no longer part of the Town’s
Financial Statements. The fund balance reported is the actual fund balance that incorporated the full accrual of long term debt related to the outstanding bonds payable to the 2002
and 2010 Certificates of Participations. The approved ROPS schedule includes full funding related to the obligation for this debt.
Trust & Agency Fund Budget to Actuals Comparisons
SA
Trust
34
Subject: Attachments:
FW: Follow up to Investment Report discussed at the FC meeting Pages from FY-202122-ACFR - (5).pdf; July investment report.pdf
From: Phil Koen
Sent: Friday, January 13, 2023 3:09 PM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Cc: Arn Andrews <aandrews@losgatosca.gov>;
Subject: Follow up to Investment Report discussed at the FC meeting
EXTERNAL SENDER
Hello Gitta,
It was great to see you on the FC meeting call this past Tuesday. I appreciate your patience in answering my questions. There is a lot to absorb, and I only learn by asking questions.
I’ll try to keep them to a minimum going forward.
I would like to circle back to the investment report. I have attached a page from the July Investment Report which shows a “beginning funds balances” totaling $72,886,942. I have also
attached a portion of footnote #2 from the ACFR which shows the total cash and investments held by the Town and Fiduciary Funds totaling $74,096,537. Can you explain the source of the
$72,886,942 shown on the Investment Report?
Also, could you clarify the description “Fund Balances” on the investment report. What does that exactly mean? As far as I can tell this is not the total of all fund balances for the
Town. According to the ACFR, the total fund balance for all Governmental Funds was $50,862,138 and the fund balance for all Proprietary Funds was $8,240,282. That would mean the total
fund balances for the Town was $59,102,420, leaving an unexplained gap of $13,784,522.
I think it is important that we use terminology which is accurate to avoid any confusion for members of the TC and the public. My concern here is the term “funds balances” as used on
the Investment report really means the total of all financial assets being invested. Could you please clarify what the term “funds balances” as used on the investment report means.
All the best, Phil Koen
ATTACHMENT 2
1
35
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2022
The following table summarizes the Towns policy related to maturities and concentration of investments:
Maximum
Maximum Portfolio
Investment Type Maturity Percentage
Page 74
The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30, 2022:
Total Cash and Investments $ 71,312,174 $ 2,784,363 $ 74,096,537
Cash and investments are classified in the financial statements as shown below, based on whether or not their use is restricted by Town debt or Agency agreements.
Description
Total Town
Fiduciary Funds
Totals
$ 69,392,044 $ 1,920,130 $ 71,312,174
819,929 1,964,434 2,784,363
Cash and Investments Available for Operations Restricted Cash and Investments
Total Cash and Investments
$ 70,211,973 $ 3,884,564 $ 74,096,537
DRAFT
72,132,11
36
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances July 31, 2022
Month
YTD
Portfolio Allocation:
% of Portfolio
Max. % 0r $ Allowed Per State Law or Policy
US Treasury Notes 18.75%
Government Agency Debenture Notes 42.89%
Corporate Medium Term Bonds 24.9%
Local Agency Investment Fund 12.9%
Portfolio Investment Allocation
BNY MM 0.55%
90000000
80000000 Treasurer's Fund Balances
70000000
60000000
50000000
40000000
30000000
20000000
10000000
0
Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22
page 2
Page 19
Item 2.
-
37
1
Subject: Attachments:
FW: Mid-Year Update Review Request
Mid Year revie- General Fund Budget vs Actual.pdf; FY 23 General Fund and Capital Fund - Budget.pdf
From: Phil Koen
Sent: Thursday, January 19, 2023 10:21 PM
To: Laurel Prevetti <LPrevetti@losgatosca.gov>
Cc: Gitta Ungvari <GUngvari@losgatosca.gov>; Arn Andrews <aandrews@losgatosca.gov>; Rick Tinsley
Subject: Mid‐Year Update Review Request
EXTERNAL SENDER
Hello Laurel,
Please find attached two schedules – the first is the mid‐year budget vs actual schedule used last year for the budget update discussion in February and the other schedules are the general
fund and capital project fund budgets found in the FY 23 budget book.
I would request that the Staff prepare 1 additional schedule for the mid‐year budget review which will show FY 22 actuals, FY 23 year to date actuals, a most probable FY 23 year forecast
and the adopted FY 23 Budget and variances using the same revenue and expense classifications found in the budget book. This will provide insight into budget vs actual variances for
revenue and expense categories (such as salaries and operating expenditure) that were used in preparing the FY 23 budget and the 5‐year forecast. Since 67% of the general fund expenditures
comprise salary and benefits, being able to gain insight as to how those expenses are tracking would be valuable. This type of analysis has never been presented at a mid‐year review.
Additionally, using in the budget book format will highlight the change in fund balances as opposed to the sources and uses format which does not show the impact on fund balances. This
will quickly show whether the Town is structurally balanced and will provide the reader with a better understanding of the Town’s evolving financial condition.
The information to populate this one additional schedule should not require much effort and the benefits would be significantl. I realize you are concerned about staff workload, but
I believe this report is well worth the minimal extra effort to prepare it.
Please let me know if you have any questions. Thank you. Phil Koen
38
28
FY 2020/21
Actuals
FY 2020/21 Q2
FY 2021/22
Adjusted Budget
FY 2021/22
Estimated YE Including Mid-Year
Proposed
Revenues
Property Tax
VLF Backfill Property Tax Sales & Use Tax
Measure G Sales & Use Tax
Franchise Fees Transient Occupancy Tax Business License Tax Licenses & Permits Intergovernmental Town Services
Fines & Forfeitures Interest
GASB 31 to Market Use of Property Miscellanious Other Park Construction Tax
Debt Service - Entry Eliminated for ACFR
ARPA Income Replacement - Entry Eliminated for ACFR
Proceeds for Sales of Assets Fund Transfer In
Total Revenues & Transfers In
$ 15,826,162
4,052,672
6,794,218
1,139,386
2,499,463
1,044,820
1,386,943
2,999,711
1,573,697
4,835,962
103,467
876,460
(780,399)
36,372
335,906
14,921
1,908,494
79,176
1,201,369
$ 5,481,928
$ 5,761,081
$ 15,881,866
4,154,320
7,213,540
964,319
2,597,630
920,040
1,250,000
2,641,779
3,881,836
3,834,579
203,450
551,233
(110,000)
$ 15,401,391
4,229,462
7,069,045
1,173,733
2,503,560
1,400,000
1,250,000
3,065,997
1,130,125
4,152,549
218,120
551,233
(110,000)
-
-
2,429,968
383,684
807,883
399,620
224,388
1,494,487
818,352
3,691,233
31,638
(1,485,278)
517,744
2,143,460
412,881
968,181
711,861
167,942
2,180,000
370,615
3,854,415
118,809
(85,001)
(126,168)
-
-
-
-
1,367,206
153,036
7,680
626,631
7,000
1,899,850
964,163
8,280
1,899,850
-
-
-
-
-
652,056
$ 46,580,856
104,659
$ 16,267,512
104,659 633,352 633,352
$ 16,743,451 $ 47,151,425 $ 45,540,860
$ 3,401,479
-
$
$
- $ 550,000 $ 550,000
$ 250,596 $ 250,596
$ 4,532,500
-
-
-
-
-
-
590,581
1,200,000
590,581
1,200,000
- 1,444,021
$ 7,933,979
$ 54,514,835
$ -
$ 16,267,512
$ -
$ 16,743,451
550,000
$ 3,141,177 $ 4,035,198
$ 50,292,602 $ 49,576,058
Use of Other Funding Sources:
Use of Reserves - Capital/Special Projects - Capital Use of Reserves - Capital/Special Projects - Other Use of Reserve - Pension/OPEB
Use of Reserve - Accumulated Measure G Use of Reserves - Surplus Property
Use of ARPA - Income Replacement
Use of ARPA - Community Grants
Total Other Funding Sources
Total Revenues and Use of Reserves Expenditures
Town Council Attorney
Administrative Services
Non- Departmental Community Development Police
Parks & Public Works Library
Capital Outlay
Total Department Expenditures
Debt Service - Entry Eliminated for ACFR
ARPA Income Replacement - Entry Eliminated for ACFR
Transfers Out
Total Additional Non-Departmental Expenditures
192,280
537,296
4,667,995
8,642,563
4,994,391
16,570,836
8,175,987
2,828,873
$
$ 99,787
311,520
2,467,813
4,437,554
2,589,502
9,041,998
4,185,306
1,445,899
-
$ 24,579,379
$ -
-
$ -
$ 24,579,379
91,800
226,341
2,584,905
1,159,874
3,460,301
8,266,574
4,020,953
1,356,415
-
$ 21,167,163
$ -
-
$ -
$ 21,167,163
$ 202,891
669,733
5,701,385
3,628,466
5,461,716
17,376,333
8,605,418
3,053,708
$ 193,559
554,137
5,501,110
4,046,008
5,094,473
17,289,979
8,332,422
2,886,606
2,365
$ 46,612,586
- -
$ 44,699,650 $ 43,898,294
$ 1,908,494
$ 79,176
$ 1,899,850 $ 1,899,850
3,401,479
$ 5,389,149
$ 52,001,735
2,801,047 2,801,047
$ 4,700,897 $ 4,700,897
$ 49,400,547 $ 48,599,191
Total Operating Expenditures
Allocate to Budget Stabilization/Catastrophis Reserve Allocate to Compensated Absences
Allocate to Surplus Property Reserve Allocate to Sale of Property Reserve Allocate to Pension/OPEB Reserve Allocate to Measure G - Capital Allocate to Restricted Pension Trust
Excess (Deficiency) of Revenues Over Expenditures
65,764
110,509
1,200,000
5,302
300,000
586,867
390,000
$ 831,525 $ (8,311,867) * $ (4,423,712) *
-
482,160
390,000
$ 19,895 $
GENERAL FUND
SUMMARY OF REVENUES AND EXPENDITURES
*FY 2020/21 and FY 2021/22 Q2 Net Operating Revenues are negative because some revenues budgeted for the entire fiscal year are received in the third or fourth quarters and fund expended
in the first or second quarters.
** FY 2021/22 General Fund Budget included the ARPA revenue receipt, now the ARPA revenue is budgeted in a Special Revenue Fund.
Page 105
Qc 92
actuate
FY 2021/22 Q2
Gar
a b
e
39
Total Town
REVENUES AND EXPENDITURES
* Year End Fund Balance represents General Fund 111 (Long Term Compensated Absences were accounted in Fund 961 prior to FY 2018/19, Pension Trust Fund 731 was incorported in FY 2018/19).
C - 8
40
Total Town
REVENUES AND EXPENDITURES
Capital Project Funds
TOTAL REVENUES
$ 6,162,615 $ 13,382,083 $ 9,024,113 $ 8,913,964 $ 15,653,575
EXPENDITURES
Ending Fund Balance
$ 15,130,063 $ 20,034,855 $ 22,660,013 $ 19,192,746 $ 18,865,037
C - 11
41
Wendy Wood
Subject:
1
FW: Pre meeting to review mid year review information
From: Phil Koen
Sent: Monday, January 30, 2023 3:08 PM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Cc: Laurel Prevetti <LPrevetti@losgatosca.gov>; Rick Tinsley Subject: Re: Pre meeting to review mid year review information
[EXTERNAL SENDER]
Gitta,
Thank you for the quick reply. Understand completely. How about 9am on the 10th?
Also can you confirm you will be able to prepare the additional schedules I requested for the mid‐year review? Thanks.
Phil
Sent from my iPhone
On Jan 30, 2023, at 5:37 PM, Gitta Ungvari <GUngvari@losgatosca.gov> wrote:
Hello Phil,
Our team is working on the February 13th Finance Commission Agenda items. We are publishing the items late Thursday afternoon. We can meet on Friday the 10th of February. I am available
on Friday from 9 a.m. to 10:45 a.m. or between noon and 3 p.m.
Let me know what time would work for you to schedule an hour meeting.
Thanks, Gitta
‐‐‐‐‐Original Message‐‐‐‐‐ From: Phil Koen
Sent: Sunday, January 29, 2023 6:03 PM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Cc: Laurel Prevetti <LPrevetti@losgatosca.gov>; Rick Tinsley Subject: Pre meeting to review mid year review information
[EXTERNAL SENDER]
Hello Gitta,
42
2
I was hoping we could meet on Thursday afternoon Feb 9 to review the FC package with a particular focus on the mid year financial information. I think it would be helpful to jointly
review the material in advance of the meeting and address any potential questions. That will make the meeting more efficient.
I have asked Rick to join us, but his schedule may not allow him to join. I’ll let him wade in on this. I think we can cover everything in about an hour.
Please let me know if Thursday afternoon would be convenient for you and the best time to meet. Thank you.
Phil Koen
43
Subject: Attachments:
FW: Pages from FY-202122-ACFR - ARPA Discussion for mid year review Pages from FY-202122-ACFR - (11)(1).pdf
From: Phil Koen
Sent: Tuesday, January 31, 2023 11:46 PM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Cc: Laurel Prevetti <LPrevetti@losgatosca.gov>; Rick Tinsley
Subject: Pages from FY‐202122‐ACFR ‐ ARPA Discussion for mid year review
[EXTERNAL SENDER]
Gitta,
As part of the mid‐year review I would respectfully request that we review the use of the $3,413,961 ARPA funds recognized as revenue in FY22 and the $3,614,872 recognized as revenue
in FY 23. My concern is there is a perception that the Town is on the razor edge and does not have any discretionary funds available for very worthy projects. It is important that the
Town provide a complete accounting of the “uses” of the ARPA funds received so there is complete transparency and agreement on how these funds were actually deployed.
Regarding the $3,413,961 in FY 22 revenue, based on the audited financials all of the ARPA revenue was recorded in the other non‐major ARPA fund and then transferred to the General Fund.
There were no expenses recorded in the ARPA fund, so the entire $3,413,961 was transferred. You can see this in the attached schedules.
In a prior update given to the FC, the plan was to use $1,433,000 of the FY22 ARPA revenue for various expenditures such as destination marketing, k rails, promenades, enhanced senior
services, grants and parklets. It appears all of these expenditure were made from the General Fund, not the ARPA Fund, and are an element of the $43.3m in total general fund expenditures
for FY 22.
In addition the plan was to “backfill” $369,124 in general fund revenue for the “loss” of rental revenue from rental waivers.The backfill and the incremental expenditures noted above,
total $1,802,124 in “uses” earmarked for the FY 22 ARPA funds.
In trying to understand the flow of the $3,413,161, while acknowledging money is fungible, the financial statements show growth in all general fund tax revenues was more than sufficient
to fund all of the earmarked expenditures AND all of the rent waivers. Total tax revenues alone exceeded the adopted plan by $2,381,516. That means none of the
$3,413,161 in ARPA funds were used as planned. In fact, the General Fund reported a surplus of $3,290,895 in excess revenues over expenditures (note there was no ARPA funds in the General
Fund revenues), even after absorbing the planned $1,802,124 in additional uses of funds.
This operating surplus combined with the transfer in of the $3,413,961 in ARPA funds and additional transfers in from other funds of $633,353 combined to create a gross surplus in the
General Fund, before transfers out, of $7,338,208. Again, $3,413,961 was directly attributable to ARPA.
It is at this point we lose all traceability for the ARPA funds. All we know is $4,358,188 was transferred out of the General Fund, leaving $2,980,020 of the $7,338,208 in the General
Fund balance. This balance was then allocated across
1
44
2
a number of general fund balance reserve accounts. Was some of this ARPA funds? We don’t know since the ARPA footnote does not provide the reader with any insight.
Regarding the $4,358,188 that was transferred out, we have no idea if any or all of that was the ARPA funds. Since money is fungible, we could just declare that the entire $3,413,961
was included in that transfer out. That would make it simpler in tracing the funds.
If we make that assumption, that means all $3,413,188 is still available since it is in the GAFR ending fund balance of
$14,240,753.
In addition to the FY 22 ARPA revenues, the Town has received $3,614,872 in FY 23. These funds were received in July 2022 and recorded in the ARPA fund as revenue. And like FY 22, most
likely no expenses were recorded in the ARPA fund, with all of the funds ultimately being transferred into the General Fund.
As part of the mid‐year update it would be helpful to provide an analysis of the use of the FY 23 funds. If FY 23 is like FY 22, the General Fund Tax revenues will most likely be stronger
than the adopted plan and therefore no ARPA funds will be necessary to “backfill” rental waivers or planned revenue shortfalls. The revenue over achievement combined with the savings
from open positions that could be as much as $2m, suggest the General Fund will experience another year where revenues exceed expenditures. That means that no ARPA funds would be necessary
to balance the F23 general fund.
Given the above, It is entirely possible that the full $7m in ARPA funds is still available to the TC for allocation. We need to confirm this.
Let’s work together to develop the analysis to show what happened in FY 22 and the most likely outcome for FY 23 to the ARPA funds. I am concerned that without better clarity, the Town
will miss an opportunity to help many worthy programs.
Thank you, Phil
45
46
of $1,156,412, increasing beginning fund balance and net position by $0.7 million. See Note 4 for additional information.
The Town received the first tranche payment of $3,614,872 from the American Rescue Plan Act (ARPA) grant on July 13, 2021. For FY 2020/21, $200K of ARPA proceeds was recognized
as revenue to reimburse the Town for qualifying expenditures under the provisions of the Act
including boosting economic recovery and providing rent forgiveness and direct grants to
non-profit and social welfare organizations. For FY 2021/22, the Town recognized $3.4
million in ARPA revenues related to recovery of revenue loss. L
Despite the ongoing economic impacts resulting from the nationwide pandemic, the Town’s economically sensitive major revenues of property tax, sales tax, and business license tax were
able to record gains from amounts reported the prior fiscal year. Property taxes collected increased $1.3 million, sales taxes increased $0.6 million, while business license tax increased
by a modest $94K from amounts collected the prior year.
The economic impacts related to the pandemic and initial travel restrictions continued into FY 2021/22. FY 2021/22 Transient Occupancy Tax (TOT) revenue collection increased by
$840K compared to the level collected in FY 2020/21. However, the current year proceeds of $1.9 million is still $0.8 million lower than FY 2019/20 level of TOT collection.
Total expenses as reported in the Statement of Activities increased $2.2 million from the prior year. The increase primarily was driven by a one-time $6.9 million State pass-through
grant payment in General Government for wildfire protection. Excluding the one-time payment, total expenses actually decreased from the prior year by $4.7 million primarily due to the
$3.1 million calculated pension expense credit, salary and benefit savings, and other miscellaneous operational savings. As previously noted, the pension expense credit was mostly from
actual investment earnings in excess of estimated assumed investment earnings and additional discretionary payments in excess of contractually required contributions.
The cost of all governmental activities as presented in the Statement of Activities this year was $52.7 million. The Town’s governmental program revenues were $41.2 million including
charges for services of $12.8 million, operating grants and contributions of $6.2 million, and capital grants and contributions of $22.2 million. After taking governmental program
revenues into consideration, the net amount of taxpayer supported governmental activities was $11.5 million. The Town paid for the remaining “public benefit” portion of governmental
activities from total taxes and general revenues of $35.7 million. This $11.5 million in net cost of governmental activities is net of the $12.2 million Los Gatos Theatre contribution
that occurred during FY 2021/22. Excluding the theatre contribution, the net cost of governmental activities would be $23.7 million which represents an approximate 32% decrease
from the prior fiscal year ($35.1 million). The decrease reflects reduced costs related to the pension credit and increased governmental grant revenues from the prior year.
At the end of FY 2021/22, the General Fund balance was $26,896,789 compared to
$23,914,618 in the prior year. The ending fund balance of $26,896,789 represents approximately 62% of General Fund expenditures for the current fiscal year excluding
Page 20
47
TOWN OF LOS GATOS, CALIFORNIA GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
4,047,313
4,074,141 32,853
Transfers in Transfers (out)
(4,358,188)
(427,616) (3,524,881)
8,154,307
(8,310,685)
Total Other Financing Sources (Uses)
(308,724)
3,646,525 (3,492,028)
(154,227)
ENDING FUND BALANCES $ 26,896,789 $ 14,240,753 $ 9,724,596 $ 50,862,138
The notes to the financial statements are an integral part of this statement.
II
b
ayyy
oooo
Page 46
48
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2022
Partnerships for the conversion of existing residential developments dedicated to affordable housing
Grants to the Santa Clara County Housing Trust for the development of affordable housing.
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement were transferred to the Successor Agency Trust Fund as a part of the
Town’s dissolution of its Redevelopment Agency.
NOTE 15 - COVID-19 PANDEMIC PROGRAMS
On March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law by President Biden. The $1.9 trillion package (the Act) provided financial aid to families, governments, businesses,
schools, nonprofits and others impacted by the COVID19 public health crisis. Of the $1.9 trillion, $350 billion is being directed toward state and local governments. All 19,000 municipal
governments are entitled to a direct, noncompetitive federal formula grant from the U.S. Treasury Department. The portion allocated to cities, towns, and villages totals $65.1 billion
of which $19.5 billion is obligated toward cities with less than 50,000 residents. The Act will allocate $7,229,744 to the Town over a two- year period. The first tranche payment of
$3,614,862 was received on July 13, 2021, and the second payment no earlier than 12 months after the first payment.
Section 603. CORONAVIRUS LOCAL FISCAL RECOCERY FUND of the Act identified four eligible uses for funding, as follows:
Respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19) or its negative economic impacts, including assistance to households, small businesses,
and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;
Respond to workers performing essential work during the COVID–19 public health
emergency by providing premium pay to eligible workers of the metropolitan city, nonentitlement unit of local government, or county that are performing such essential work,
or by providing grants to eligible employers that have eligible workers who perform essential work;
Provide government services to the extent of the reduction in revenue of such metropolitan city, nonentitlement unit of local government, or county due to the COVID–19 public health
emergency relative to revenues collected in the most recent full fiscal year of the metropolitan city, nonentitlement unit of local government, or county prior to the emergency; or
Make necessary investments in water, sewer, or broadband infrastructure.
During the fiscal year ended June 30, 2022 , the Town recognized $3,413,961 as operating grant revenue in the ARPA special revenue fund and transferred $3,413,961 to other funds, reimbursing
the Town for qualifying expenditures under the provisions of the Act. For FY 2020/21, the Town recognized the initial $200K of ARPA proceeds as revenue to reimburse the Town for qualifying
expenses.
different
ru
hee
Page 97
49
Page 119
50
Subject:
FW: Pages from FY-202122-ACFR - ARPA Discussion for mid year review
From: Phil Koen
Sent: Thursday, February 2, 2023 7:25 AM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Cc: Laurel Prevetti <LPrevetti@losgatosca.gov>; Rick Tinsley
Subject: Re: Pages from FY‐202122‐ACFR ‐ ARPA Discussion for mid year review
[EXTERNAL SENDER]
Terrific. Let’s review that when we get together.
It is very reasonable to claim that all $7m is still available since the GF ran a very strong operating surplus in FY 22. Understanding how the capital was deployed is really important.
We all need to be on the same page so we can make a recommendation to the TC.
Thanks!
Phil
Sent from my iPhone
On Feb 2, 2023, at 3:46 PM, Gitta Ungvari <GUngvari@losgatosca.gov> wrote:
Phil,
Thanks for your email. The Finance Team is already incorporating a recap of the Council Direction regarding ARPA proceeds spending in the mid‐year budget review report.
Gitta
From: Phil Koen
Sent: Tuesday, January 31, 2023 11:46 PM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Cc: Laurel Prevetti <LPrevetti@losgatosca.gov>; Rick Tinsley
Subject: Pages from FY‐202122‐ACFR ‐ ARPA Discussion for mid year review
[EXTERNAL SENDER]
Gitta,
As part of the mid‐year review I would respectfully request that we review the use of the $3,413,961 ARPA funds recognized as revenue in FY22 and the $3,614,872 recognized as revenue
in FY 23. My concern is there is a perception that the Town is on the razor edge and does not have any discretionary funds available for very worthy projects. It is
1
51
2
important that the Town provide a complete accounting of the “uses” of the ARPA funds received so there is complete transparency and agreement on how these funds were actually deployed.
Regarding the $3,413,961 in FY 22 revenue, based on the audited financials all of the ARPA revenue was recorded in the other non‐major ARPA fund and then transferred to the General Fund.
There were no expenses recorded in the ARPA fund, so the entire $3,413,961 was transferred. You can see this in the attached schedules.
In a prior update given to the FC, the plan was to use $1,433,000 of the FY22 ARPA revenue for various expenditures such as destination marketing, k rails, promenades, enhanced senior
services, grants and parklets. It appears all of these expenditure were made from the General Fund, not the ARPA Fund, and are an element of the $43.3m in total general fund expenditures
for FY 22.
In addition the plan was to “backfill” $369,124 in general fund revenue for the “loss” of rental revenue from rental waivers.The backfill and the incremental expenditures noted above,
total $1,802,124 in “uses” earmarked for the FY 22 ARPA funds.
In trying to understand the flow of the $3,413,161, while acknowledging money is fungible, the financial statements show growth in all general fund tax revenues was more than sufficient
to fund all of the earmarked expenditures AND all of the rent waivers. Total tax revenues alone exceeded the adopted plan by $2,381,516. That means none of the
$3,413,161 in ARPA funds were used as planned. In fact, the General Fund reported a surplus of $3,290,895 in excess revenues over expenditures (note there was no ARPA funds in the General
Fund revenues), even after absorbing the planned $1,802,124 in additional uses of funds.
This operating surplus combined with the transfer in of the $3,413,961 in ARPA funds and additional transfers in from other funds of $633,353 combined to create a gross surplus in the
General Fund, before transfers out, of $7,338,208. Again, $3,413,961 was directly attributable to ARPA.
It is at this point we lose all traceability for the ARPA funds. All we know is $4,358,188 was transferred out of the General Fund, leaving $2,980,020 of the $7,338,208 in the General
Fund balance. This balance was then allocated across a number of general fund balance reserve accounts. Was some of this ARPA funds? We don’t know since the ARPA footnote does not provide
the reader with any insight.
Regarding the $4,358,188 that was transferred out, we have no idea if any or all of that was the ARPA funds. Since money is fungible, we could just declare that the entire $3,413,961
was included in that transfer out. That would make it simpler in tracing the funds.
If we make that assumption, that means all $3,413,188 is still available since it is in the GAFR ending fund balance of
$14,240,753.
In addition to the FY 22 ARPA revenues, the Town has received $3,614,872 in FY 23. These funds were received in July 2022 and recorded in the ARPA fund as revenue. And like FY 22, most
likely no expenses were recorded in the ARPA fund, with all of the funds ultimately being transferred into the General Fund.
As part of the mid‐year update it would be helpful to provide an analysis of the use of the FY 23 funds. If FY 23 is like FY 22, the General Fund Tax revenues will most likely be stronger
than the adopted plan and therefore no ARPA funds will be necessary to “backfill” rental waivers or planned revenue shortfalls. The revenue over achievement combined with the savings
from open positions that could be as much as $2m, suggest the General Fund will experience another year where revenues exceed expenditures. That means that no ARPA funds would be necessary
to balance the F23 general fund.
Given the above, It is entirely possible that the full $7m in ARPA funds is still available to the TC for allocation. We need to confirm this.
52
3
Let’s work together to develop the analysis to show what happened in FY 22 and the most likely outcome for FY 23 to the ARPA funds. I am concerned that without better clarity, the Town
will miss an opportunity to help many worthy programs.
Thank you, Phil
53
Subject: Attachments:
FW: ARPA Update.pdf ARPA Update.pdf
From: Phil Koen
Sent: Thursday, February 2, 2023 10:05 PM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Cc: Laurel Prevetti <LPrevetti@losgatosca.gov>; Rick Tinsley
Subject: ARPA Update.pdf
[EXTERNAL SENDER]
Hi Gitta,
1
I have attached the last update the FC received on the deployment of the ARPA funds.
Let’s review what actually happened in FY 22 and discuss the plan for FY 23 taking into consideration our best thinking on most likely outcome for FY 23 operating surplus.
Greatly appreciate you walking me through this. Phil
Sent from my iPhone
54
ATTACHMENT 5
PREPARED BY:
Stephen Conway Finance Director
Reviewed by: Town Manager and Assistant Town Manager
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov
TOWN OF LOS GATOS FINANCE COMMISSION
MEETING DATE: 06/13/2022
DATE:
June 8, 2022
TO:
Finance Commission
FROM:
Laurel Prevetti, Town Manager
SUBJECT:
Receive Update on American Rescue Plan Act Administration
RECOMMENDATION:
Receive update on American Rescue Plan Act (ARPA) administration. BACKGROUND:
In accordance with ARPA, the Town was awarded an ARPA grant in the amount of $7,229,744 paid to the Town in two separate payments, the first payment of $3,618,872 was received in early
July 2021 and the second payment of $3,614,872 is expected to be received in early July 2022.
Based on initial guidance of eligible uses of ARPA funds the Town allocated these funds to various purposes to respond and support the impacts of the pandemic on Town residents, non-
profits, the business community including the construction of downtown parklets, non-profit fee and rent waivers, enhanced senior services, promenades, and increased funding for Town
infrastructure capital improvements, among other initiatives.
Since receipt of ARPA funds staff has been following the evolution of the federal guidelines for the use of ARPA funding as well as regularly participating in ARPA focused webinars presented
by the US Department of the Treasury (Treasury) staff and the ARPA sub-group sponsored by the Government Finance Officers Association. During the initial ARPA implementation period
Treasury received a tremendous number of inquiries from ARPA grant recipients on how best to comply with the complex and evolving federal regulations and guidance for calculating pandemic
related revenue loss and complying with federal uniform guidance on eligible uses of ARPA funds. Treasury responded to this demand by revising its initial requirements in their
Item 2.
Page 156
55
PAGE 2 OF 3
SIBJECT: Receive Update on American Rescue Plan Act (ARPA) Administration DATE: June 8, 2022
BACKGROUND (continued):
Final Interim Rule to allow certain non-entitlement units (NEUs) like the Town of Los Gatos a simplified procedure for claiming and reporting revenue loss. To be eligible for the simplified
claiming procedures, the NEU must receive a total ARPA award of less than $10 million.
DISCUSSION:
Upon Treasury’s release of the simplified reporting process for entities awarded less than $10 million in ARPA funding and additional guidance received through staff review of federal
compliance issues, staff recommends that the Town recognize the $3.4 M of FY 2021/22 and the anticipated $3.6M FY 2022/23 cash collections of ARPA revenues as qualified revenue loss
under the Treasury provisions for use in providing government services. To further aid in compliance with federal uniform guidance and Single Audit requirements, staff is intending
to claim the lost revenue for use in providing essential government services and intends to account for the use of ARPA revenue loss revenues for eligible public safety payroll costs
for both FY 2021/22 and FY 2022/23.
The recommended action as illustrated in the below worksheet will allocate all ARPA “replacement” revenues to the General Fund which in turn will unencumber other General Fund operating
revenues which were previously dedicated for public safety costs. The newly unencumbered General Fund revenues can then be allocated to the ARPA pandemic responses as identified, approved
and allocated by Town Council since receipt of the $7.2 million ARPA award.
Item 2.
I
11
Page 157
56
PAGE 3 OF 3
SIBJECT: Receive Update on American Rescue Plan Act (ARPA) Administration DATE: June 8, 2022
CONCLUSION:
The worksheet illustrates budget adjustments related to the necessary ARPA and General Fund revenue and expense adjustments and recaps the total ARPA grant award of $7,229,744 and the
Council directed uses approved or proposed through June 7, 2022. In addition, the worksheet provides the detail staff will use to adjust the ARPA and General Fund budgets to recognize
the ARPA grant award for revenue loss to be used to reimburse public safety response. It will also be used to recognize and budget FY 2021/22 matching General Fund ARPA replacement
revenues and expenditure budgets for use in supporting the ARPA objectives as approved/proposed and directed by Town Council since original receipt of the ARPA grant award.
Item 2.
Page 158
57
Subject:
FW: Follow up to the FC meeting
From: Phil Koen
Sent: Monday, February 6, 2023 5:49 PM
To: Gitta Ungvari <GUngvari@losgatosca.gov> Cc: Laurel Prevetti <LPrevetti@losgatosca.gov> Subject: FW: Follow up to the FC meeting
[EXTERNAL SENDER]
Hello Gitta,
I was going through my open item list and noticed that Arn had never responded to my email below. This was a follow up note for more information coming from the last FC meeting.
If you have time, it would be great if you could provide the information requested. Phil
From: Phil Koen
Sent: Thursday, January 12, 2023 5:00 PM
To: Arn Andrews <aandrews@losgatosca.gov>
Cc:
Subject: Follow up to the FC meeting
Hello Arn,
Just a quick follow up note regarding information requests from the FC meeting last Tuesday evening. Staff was going to provide the FC with the gross amount of the market‐to‐market adjustment
that was netted in the “net” investment income of $(1,404,563).
Also, there were a couple of questions regarding the balance of the development deposits for General Plan Revenue ($698,302 in revenue was recognized) and the balance of the development
deposits for the Below Market Housing Program ($1,200,000 in revenue was recognized). I am assuming that all these various development fee deposits are consolidated and reported in
the $6.8m deposits on the General Fund balance sheet. Is my understanding correct? How many different deposit accounts are consolidated into the $6.8m?
I had one last question which I forgot to ask last. On page 35 of the transactions report, under the private purpose trust fund column there is a $5,899,675 deduction. Could you provide
some detail about this deduction?
Thank you.
Phil Koen
1
58
Subject: Attachments:
FW: Meeting on Friday
Pages from FY-202122-ACFR - (12).pdf
From: Phil Koen
Sent: Tuesday, February 7, 2023 11:19 AM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Cc: Laurel Prevetti <LPrevetti@losgatosca.gov>; Rick Tinsley
Subject: Meeting on Friday
[EXTERNAL SENDER]
Hi Gitta,
1
I’m looking forward to our meeting on Friday. Since we only have 1 hour, we will need to be efficient with our time. I would propose the following agenda
Discuss the mid‐year financial update
Review of $7m in ARPA fund flows
Discussion of GAFR FY 22
Information request from Jan FC
30 mis
15 mins
10 mins
5 mins
I have attached a schedule from the 2022 ACFR which shows the budget vs actual for the GAFR. I am interested in understanding the variance from the adopted budget for intergovernmental
revenues and the capital outlay. I know that
$6.9m of intergovernmental revenue is the pass‐through grant for wildfire which was not planned. What were the other
$1m in revenues that were recorded as revenue that weren’t in the original adopted budget? Also, what projects accounted for the $4.1m more in capital outlay than was originally planned?
That is a material increase and I do not know what caused that.
I am asking this so I have a better understanding of what might happen in FY 23 based on how FY 22 played out. Could we receive more intergovernmental revenues that weren’t planned but
are on the horizon? Could capital outlays be materially different from the adopted FY 23 budget? These are the issues we should explore.
Thanks, Phil
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TOWN OF LOS GATOS APPROPRIATED RESERVES FUND
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
og
60