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
DATE: February 8, 2023
TO: Finance Commission
FROM: Laurel Prevetti, Town Manager
SUBJECT: Review and Provide Comments to the Town Council Regarding Mid-Year
Budget Report
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:
1.Town Council Draft FY 2022/23 Mid-Year Budget Report
2.Commissioner Communication Received before Publishing the Staff Report
ATTACHMENT 1
1
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
2
3
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 $1,643,281
Measure G Residual for Operation $679,443
OPEB Trust Reimbursement for Retiree Medical $902,579
Total $3,225,303
Planned Use of One-Time Sources Balancing the FY 2022/23 Operating Budget
4
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.
5
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 $617,332 increase in
estimated General Property Tax and Motor Vehicle in Lieu Fee collections.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues 4,785,479$ 4,785,479$ 5,481,928$ 5,761,081$ 6,141,998$ Fiscal Year Total Actual Revenues 17,321,346$ 18,330,427$ 19,878,834$ 21,129,080$ Fiscal Year Total Estimated Revenues 21,525,226$ Fiscal Year Budgeted Revenues 20,907,894$
2nd Quarter Percent of Total 28%26%28%27%29%
Recommended Budget Revision 617,332$
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
$22,000,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Property Tax and VLF -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Y ear To tal Actu al Revenu es Fiscal Year Budgeted Revenues Fiscal Y ear To tal Est imated Revenue s
6
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 $327,688 budget decrease to reflect the MuniServices current estimates.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues 2,568,415$ 2,755,208$ 2,813,652$ 2,556,341$ 2,821,421$
Fiscal Year Total Actual Revenue 8,158,152$ 7,531,425$ 7,933,604$ 8,483,673$
Fiscal Year Total Estimated Revenues 8,847,256$
Fiscal Year Budgeted Revenues 9,174,944$
2nd Quarter Percent of Total 31% 37% 35% 30% 31%
Recommended Budget Revision (327,688)$
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Sales Tax & Measure G Tax -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Rev enues
7
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 $2.4 million annually.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues 840,555$ 864,849$ 807,833$ 968,181$ 1,044,055$
Fiscal Year Total Actual Revenues 2,475,916$ 2,495,792$ 2,499,463$ 2,822,515$
Fiscal Year Total Estimated Revenues 2,716,470$
Fiscal Year Budgeted Revenues 2,493,870$
2nd Quarter Revenue Percent of Total 34% 35% 32% 34% 38%
Recommended Budget Revision 222,600$
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Franhise Fees -Quarterly and Annual Revenues 5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Rev enues
8
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 $1,056,500 increase to this revenue source. Staff anticipates
collecting the majority of the business license revenue during the third quarter. Staff is closely
monitoring the activities and will return with any recommended adjustments in May.
FY 18/19 FY 19/20 FY 20/21 FY 21/22
2nd Quarter Actual Revenues 240,293$ 60,500$ 224,388$ 167,942$ 97,974$
Fiscal Year Total Actual Revenues 1,526,894$ 1,357,080$ 1,386,943$ 1,481,667$
Fiscal Year Total Estimated Revenues 2,444,000$
Fiscal Year Budgeted Revenues 1,387,500$
2nd Quarter Revenue Percent of Total 53% 53% 59%11%4%
Recommended Budget Revision 1,056,500$
FY 22/23
$- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 $2,200,000 $2,400,000 $2,600,000
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
2nd Quarter Actual Revenues Fiscal Year Total Actual Rev enues
9
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 $357,540 budget increase.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues 994,581$ 910,806$ 399,620$ 711,861$ 875,715$
Fiscal Year Total Actual Revenues 2,692,043$ 1,869,685$ 1,044,820$ 1,895,064$
Fiscal Year Total Estimated Revenues 2,000,000$
Fiscal Year Budgeted Revenues 1,642,460$
2nd Quarter Revenue Percent of Total 37% 49% 38% 38% 53%
Recommended Budget Revision 357,540$
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
TOT -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Rev enues
10
Interest Income
The Town earns interest income by investing monies not immediately required for daily operations in a
number of fixed income and money market instruments. These investments are made within the
parameters stated in the Town Council’s Investment Policy and State regulation. The Town’s investment
goal is to achieve a competitive rate of return while maintaining sufficient liquidity and protecting the
safety of its funds. Interest income revenue is primarily dependent on two factors: the cash balance in
the Town’s investment portfolio and the yield on those funds.
As of December 31, 2022, the Town’s weighted portfolio yield was 2.28% which exceeded by 11 basis
points the Local Agency Investment Fund (LAIF) yield of 2.17% for the same reporting period. Currently
the LAIF portfolio’s weighted average maturity (WAM) is 304 days versus the Town’s longer WAM of 439
days. This slightly longer maturity allows the Town to pick up higher yields available on the later
maturities. The Town’s weighted average rate of return of 2.28% at the close of December was 25 basis
points higher when compared to the prior months return of 2.03% reported as of November 30, 2022.
Staff recommends no change to this revenue source at this time.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues 422,729$ 482,517$ 343,813$ 227,164$ 145,002$
Fiscal Year Total Actual Revenues 801,729$ 1,145,538$ 838,649$ 610,975$
Fiscal Year Total Estimated Revenues 517,379$
Fiscal Year Budgeted Revenues 432,947$
2nd Quarter Revenue Percent of Total 53% 42% 41% 37% 33%
Recommended Budget Revision
* GASB 31 Market Adjustment is not Included
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Interest -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues
Fiscal Year Budgeted Revenues Fiscal Year Total Estimated Revenues
11
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 $660,314 budget
increase in selected items to reflect increased activities in planning and engineering services as explained
in the next section of this Report.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues 2,567,814$ 2,905,238$ 3,258,027$ 3,906,577$ 3,284,766$
Fiscal Year Total Actual Revenues 4,672,407$ 4,469,963$ 4,851,273$ 5,460,608$
Fiscal Year Total Estimated Revenues 5,105,701$
Fiscal Year Budgeted Revenues 4,445,635$
2nd Quarter Revenue Percent of Total 55% 65% 67% 72% 64%
Recommended Budget Revision 660,314$
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
$5,500,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Charges for Services -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Rev enues
12
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 $95,545 increase in selected
items in this category as explained in the next section of this Report.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
2nd Quarter Actual Revenues 1,498,864$ 1,692,252$ 1,584,098$ 3,373,287$ 1,602,633$
Fiscal Year Total Actual Revenues 3,036,390$ 2,673,706$ 1,984,400$ 4,814,650$
Fiscal Year Total Estimated Revenues 2,841,374$
Fiscal Year Budgeted Revenues 2,735,029$
2nd Quarter Revenue Percent of Total 49% 63% 80% 70%59%
Recommended Budget Revision 95,545$
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Licenses & Permits -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Rev enues
13
GENERAL FUND – EXPENDITURE ANALYSIS
For FY 2022/23, General Fund Operating expenditures (not including debt payment and transfers out)
are programmed at $47.7 million. The delivery of Town services is highly dependent on talent which
comprises 67.5% of budgeted General Fund expenditures for FY 2022/23. During the fiscal year, the
Town Council has approved several budget adjustments, which are tracked against the Adopted Budget.
The net effect is an Adjusted Budget. General Fund expenditure totals are trending in accordance with
the Adjusted Budget, with total operational expenditures at the end of the second quarter at or about
44% of the Adjusted Budget. With six months of data now available, staff expects that the next six
months of expenditures will be within the Adjusted Budget, although unexpected costs can still occur
which may require future Council action.
As with most municipalities, services are provided directly by employees to the Town’s residents,
businesses, and visitors. As a service delivery enterprise, the cost of salaries and benefits are a
significant portion of the budget. As the table below illustrates, at mid-year, actual salaries are trending
at 46% of budgeted salaries, while pension benefits and other benefits are trending at 46% and 40%
respectively to the Adjusted Budget.
Salaries and benefits savings are anticipated due to vacancies and reduced cost structure due to
replacements after retirements. In addition, vacant positions are often filled with temporary
unbenefitted positions, which translate into additional benefit savings. Actual vacancies during the
course of the first half of fiscal year are illustrated in the table below.
FY 2021/22
Actuals
FY 2021/22
2Q
2Q % of
FY
22021/22
Actuals
2Q % of
FY 2022/23
Adjusted
Budget
FY 2022/23
2Q
FY 2022/23
Estimated
FY 2022/23
Adjusted
Budget
Salaries 19,981,412$ 9,805,293$ 49% 46% 10,801,348$ 21,951,228$ 23,260,024$
Pension Benefits 6,531,958$ 3,259,216$ 50% 46% 3,493,382$ 7,128,830$ 7,666,660$
Other Benefits 3,679,378$ 1,868,661$ 51% 40% 1,841,519$ 3,931,260$ 4,561,640$
Total Salary & Benefit 30,192,748$ 14,933,170$ 49% 45% 16,136,249$ 33,011,318$ 35,488,324$
General Fund Salaries & Benefits
14
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.
Department Position
Town Attorney Legal Admin Assistant Separation Filled with Temp Filled - Permanent
Clerk Deputy Clerk Separation Vacant
Admin Services Emergency Manager - Temp Separation Vacant
Admin Services Finance Director Retirement Filled Interim Filled - Permanent
Admin Services Finance Manager Promotion Vacant
Admin Services IT Technician Separation Vacant Filled - Permanent
Admin Services Events and Mark Specialist Separation Vacant Filled - Permanent
Community Development Associate Planner Separation Vacant Filled - Permanent
Community Development Permit Technician Retirement Vacant Filled - Permanent
Police Police Dispatcher Separation Vacant
Police Police Dispatcher Separation Vacant
Police Police Dispatcher Separation Vacant
Police Police Dispatcher Separation Vacant
Police Police Officer Separation Filled - PermanentPolicePolice Officer Separation Vacant Filled
Police Police Officer Retirement
Police Police Officer Retirement Filled
Police Police Officer Retirement FilledPolicePolice Officer Separation Vacant
Police Police Captain Promotion Vacant Filled - Permanent
Police Records & Com Manager Separation Vacant
Police Police Record Specialist Promotion Vacant Filled - Permanent
Police Police Record Specialist Separation Vacant Filled - Permanent
Police Senior Parking Control Officer Retirement Vacant Filled - Permanent
Parks & Public Works Parks & Public Works Director Separation Filled - Permanent
Parks & Public Works Senior Civil Engineer Separation Vacant Filled - Permanent Vacant
Parks & Public Works Transp and Mob Manager Separation Vacant Filled
Parks & Public Works Town Engineer Separation Vacant Interim
Library Senior Library Page Separation Filled with Temp Filled - Permanent
Library Librarian Separation Vacant Filled - Permanent
Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22
15
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.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Second Quarter Actual Expenditures 100,209$ 112,711$ 99,787$ 91,800$ 91,822$
Fiscal Year Total Actual Expenditures 205,903$ 206,163$ 192,280$ 189,569$
Fiscal Year Total Estimated Expenditure 216,231$
Fiscal Year Budgeted Expenditures 217,238$
Second Quarter Percentage of Total 49% 55% 52% 48% 42%
Recommended Budget Revision
YOY Percentage Changes 6.58% 0.13% -6.73% -1.41% 14.06%
5-year Average Percentage Change 2.53%
$-
$500,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Town Council -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
16
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 $26,000 expenditures savings
in this program. Savings is anticipated in staff salaries and benefits, travel and training, and office
supplies. Staff does not recommend any expenditure budget adjustment in this program.
Beginning in FY 2018/19, all personnel costs that were previously budgeted in Internal Service funds
were transferred to the General Fund. While overall expenditures did not increase, salary and benefit
costs that were formerly reported as an Internal Service Fund expense effective with the change became
a General Fund expense.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Second Quarter Actual Expenditures 310,219$ 296,424$ 311,520$ 226,377$ 332,183$
Fiscal Year Total Actual Expenditures 562,542$ 559,010$ 537,296$ 629,935$
Fiscal Year Total Estimated Expenditure 685,473$
Fiscal Year Budgeted Expenditures 711,426$
Second Quarter Percentage of Total 55% 53% 58% 36% 47%
Recommended Budget Revision
YOY Percentage Changes 58.82% -0.63% -3.88% 17.24% 8.82%
5-year Average Percentage Change 16.07%
$-
$500,000
$1,000,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Town Attorney -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
17
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 $326,000 expenditures savings in this program. Savings are anticipated in staff salaries
and benefits, travel and training, and office supplies.
Beginning in FY 2018/19, all personnel that were previously budgeted in Internal Service funds were
transferred to the General Fund. While overall expenditures did not increase, salary and benefit costs
that were formerly reported as an Internal Service Fund expense effective with the change became a
General Fund expense. This program budget includes a limited temporary position to assist the Town
with its emergency preparedness and response operations since FY 2019/20.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Second Quarter Actual Expenditures 2,069,839$ 2,204,552$ 2,467,813$ 2,583,281$ 2,483,472$
Fiscal Year Total Actual Expenditures 3,931,807$ 4,380,504$ 4,667,995$ 5,441,605$
Fiscal Year Total Estimated Expenditure 4,983,530$
Fiscal Year Budgeted Expenditures 5,310,119$
Second Quarter Percentage of Total 53% 50% 53% 47% 47%
Recommended Budget Revision
YOY Percentage Changes 18.77% 11.41% 6.56% 16.57% -8.42%
5-year Average Percentage Change 8.98%
$-
$500,000 $1,000,000
$1,500,000 $2,000,000
$2,500,000 $3,000,000
$3,500,000 $4,000,000
$4,500,000 $5,000,000
$5,500,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Administrative Services -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
18
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 $420,000 expenditures savings in this program. Savings are anticipated in staff
salaries and benefits, travel and training, and office supplies.
Community Development Department expenditures vary year to year based on the development activity
and pass through services.
FY 18/19 FY 19/20 FY 20/21 FY 2021/22 FY 22/23
Second Quarter Actual Expenditures 2,104,258$ 2,245,767$ 2,589,502$ 3,460,301$ 2,394,537$
Fiscal Year Total Actual Expenditures 4,577,495$ 4,473,790$ 4,994,391$ 6,313,505$
Fiscal Year Total Estimated Expenditure 5,990,576$
Fiscal Year Budgeted Expenditures 5,960,379$
Second Quarter Percentage of Total 46% 50% 52% 55% 40%
Recommended Budget Revision 456,962$
YOY Percentage Changes 8.42% -2.27% 11.64% 26.41% -5.11%
5-year Average Percentage Change 7.82%
$- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 $5,500,000 $6,000,000 $6,500,000
FY 18/19 FY 19/20 FY 20/21 FY 2021/22 FY 22/23
Community Development -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
19
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 $27,151
expenditure budget increase to expend the proceeds of an Opioid Settlement disbursement for opioid
preventative and awareness education and additional costs related to increased parking ticket collection
administration.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Second Quarter Actual Expenditures 7,832,251$ 8,504,636$ 9,041,998$ 8,266,432$ 8,957,541$
Fiscal Year Total Actual Expenditures 14,948,952$ 15,793,815$ 16,570,836$ 16,451,189$
Fiscal Year Total Estimated Expenditure 18,695,679$
Fiscal Year Budgeted Expenditures 19,225,986$
Second Quarter Percentage of Total 52% 54% 55% 50% 47%
Recommended Budget Revision 27,151$
YOY Percentage Changes 3.51% 5.65% 4.92% -0.72% 13.64%
5-year Average Percentage Change 5.40%
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Police -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
20
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 $283,112 attributed to the additional contractual obligations, increased pass through
activities and defunding the Urban Forest Manager position as explained in the next section of this
Report.
Beginning in FY 2018/19, all personnel that were previously budgeted in Internal Service funds were
transferred to the General Fund. While overall expenditures did not increase, salary and benefit costs that
were formerly reported as an Internal Service Fund expense effective with the change became a General
Fund expense.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Second Quarter Actual Expenditures 3,717,900$ 3,864,874$ 4,185,306$ 4,010,181$ 4,226,049$
Fiscal Year Total Actual Expenditures 7,969,631$ 8,139,106$ 8,175,987$ 8,605,455$
Fiscal Year Total Estimated Expenditure 9,221,597$
Fiscal Year Budgeted Expenditures 9,798,966$
Second Quarter Percentage of Total 47% 47% 51% 47% 43%
Recommended Budget Revision 283,112$
YOY Percentage Changes 10.92% 2.13% 0.45% 5.25% 7.16%
5-year Average Percentage Change 5.18%
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Parks and Public Works -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
21
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 $2,735 budget
increase to authorize spending of a State Library Grant received by the Department.
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Second Quarter Actual Expenditures 1,280,179$ 1,404,285$ 1,445,899$ 1,365,415$ 1,442,555$
Fiscal Year Total Actual Expenditures 2,493,617$ 2,700,802$ 2,828,873$ 2,752,401$
Fiscal Year Total Estimated Expenditure 3,097,584$
Fiscal Year Budgeted Expenditures 3,144,450$
Second Quarter Percentage of Total 51% 52% 51% 50% 46%
Recommended Budget Revision 2,735$
YOY Percentage Changes -1.42% 8.31% 4.74% -2.70% 12.54%
5-year Average Percentage Change 4.29%
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23
Library -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
22
FY 2022/23 RECOMMENDED BUDGET ADJUSTMENTS
Budget adjustments are recommended for the following revenues and expenditures at the second
quarter as described below:
Fund Program Account111 1201 411XX Property Tax 417,682$ Based on Santa Clara County Property Tax Estimates November 2022 111 1201 41141 Motor Vehicle In Lieu Fee 199,650 Based on Santa Clara County Property Tax Estimates November 2022 111 1201 41211 Sales & Use Tax (301,422) Based on MuniServices Most Probable January 2023 Sales Tax Estimates 111 1221 41214 Measure G - District Sales Tax (36,266) Based on MuniServices Most Probable January 2023 Sales Tax Estimates 111 1201 41311 Transient Occupancy Tax 357,540 Funds Received
111 1201 41612 PG&E Franchise Fee 50,000 Funds Anticipated 111 1201 41613 Garbage Franchise Fee 172,600 Funds Anticipated 111 2301 41411 Business License Tax 1,056,500 Funds Anticipated 111 3201 44214 Other Service Fees (12,500) Funds are not Received 111 3201 44412 Plan Check (45,000) Funds are not Received 111 3301 44422 Building Inspections 150,000 Funds Anticipated 111 3501 45111 Affordable Hosuing Loan -Repayment 300,000 Funds Received 111 4202 43336 Prop 172 - Public Safety Sales Tax 37,300 Based on MuniServices Most Probable January 2023 Sales Tax Estimates 111 4301 45922 Opioid Settlement Account 14,151 Funds are Available
111 4304 45126 Online Parking Ticket 25,000 Funds Anticipated
111 5202 42514 Encroachment Permits 50,000 Funds Anticipated 111 5202 44621 Engineering Services 50,000 Funds Anticipated 111 5301 43531 Plan JPA Safety Grant 7,236 Funds Anticipated 111 5301 42512 OMP- Parking Fee (20,000) Funds are not Received 111 5301 45421 Donation - Benches 10,347 Funds are Available 111 5302 42522 HHW Fee 8,466 Funds Anticipated 111 5302 42523 JPA Fee 126,177 Funds Anticipated 111 5302 43521 AB 939 2,000 Funds Anticipated 111 5401 42521 Street Sweeping Fees (69,098) Funds are not Received
111 5401 48621 From Tree Replacement Deposit - Defund Urban Forest Ma (234,260) Funds are Available
111 5999 48416 Plan Check - Pass Thorugh 458,575 Funds Received 111 7801 43343 Public Library Fund Grant 2,735 Matching Expenditure
TOTAL GENERAL FUND REVENUES 2,777,413$
Fund Program Account111 1201 62113 Town Share of Retiree Medical 143,130$ Funds are not Expended 111 1201 62119 Additional Payment to IRS Pension Trust 300,000 From Avaialable Reserve 111 1201 72111 PG&E Loan Principal Payment 156,034 Funds are Partially Expended 111 3301 63381 Building Inspections 150,000 Funds are Partially Expended
111 3201 5XXXX Additional 0.25 FTE Associate Planner 6,962 Funds are not Expended
111 3501 XXXXX Loan Repayment to BMP 300,000 Funds are Expended 111 4301 64111 Training 14,151 Funds are not Expended 111 4304 62223 SCC Court and Jail Construction Fee 10,000 Funds are Partially Expended 111 4304 63344 Parking Citation Service 3,000 Funds are Partially Expended 111 5203 63332 Software License Maintenance 7,460 Funds are Partially Expended 111 5301 61224 Playground Safety 3,756 Funds are Expended 111 5301 63363 Landscape Maintenance 37,234 Funds are Partially Expended 111 5301 68622 Benches 10,347 Funds are Expended 111 5401 5****Urban Forest Manager (234,260) Funds are not Expended
111 5999 68416 Plan Check - Pass Through 458,575 Funds are Partially Expended
111 7801 61172 Youth Collections 2,735 Matching Revenue
TOTAL GENERAL FUND EXPENDITURES 1,369,124$
FY 2022/23 MID-YEAR BUDGET ADJUSTMENT REQUESTS - GENERAL FUNDS
General Fund Revenues
General Fund Expenditures
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 $301,422 budget decrease to reflect current sales tax
trends based on MuniServices most likely projections.
Fund Program Account Other Fund Revenues
251
Theatre Tenant Rent 68,400 Funds Anticipated
68,400$
234
234 5504 41152 L&L Assessment 4,500 Funds Anticipated
5504 42515 Interest Income 465 Funds Anticipated
4,965$
481481 411-811-6004 82405 Increased Gas Tax Projections for Street Repair (67,218) Based on California City Finance Projection May 2022 (67,218)$ 711711 7301 45452 Additional Donation Received 5,000 Funds Received 5,000$
TOTAL OTHER FUNDS REVENUES 11,147$
Fund Program Account
231
232 5501 63363 Landscape Maintenance (194) Funds are not Expended
(194)$
232
232 5502 63363 Landscape Maintenance 5,875 Funds are Partially Expended
5,875$
233
233 5503 63363 Landscape Maintenance (606) Funds are not Expended
(606)$
234
234 5504 63363 Landscape Maintenance 2,270 Funds are Partially Expended
2,270$
235
235 5505 63363 Landscape Maintenance 2,352 Funds are not Expended
2,352$
236
236 5506 63363 Landscape Maintenance (75) Funds are not Expended
(75)$
251
5408 61214 General Maintenance Supplies 1,000 Funds are Partially Expended
61241 Office Furniture Equipment 3,000 Funds are Partially Expended
62371 Building Maintenance and Repairs 47,000 Funds are Partially Expended
62611 Utilities - Electric 4,091 Funds are Partially Expended
62612 Utilities - Gas 8 Funds are Partially Expended
62613 Utilities - Water 715 Funds are Partially Expended
55,814$
481
481 481-811-9901 82405 Decreased Gas Tax Projections for Street Repair (67,276) Based on California City Finance Projection May 2022
(67,276)$
633
633 5404 62161 WVS Annual Fee 8,608 From Available Facilities Maintenance Internal Service Fund
8,608$
711
711 7301 62420 Additional Donation Received 2,500 Funds are not Expended
711 7301 62424 Additional Donation Received 2,500 Funds are not Expended
TOTAL OTHER FUNDS EXPENDITURES 9,268$
FY 2022/23 MID-YEAR BUDGET ADJUSTMENT REQUESTS - OTHER FUNDS
Facilities Maintenance
Library Trust Fund
Hillbrook Drive LLD
Other Fund Expenditures
Gemini Court LLD
Vasona Heights LLD
Gas Tax
Los Gatos Theatre
Kennedy Meadows LLD
Gas Tax
Santa Rosa Heights LLD
Blackwell LLD
Santa Rosa Heights LLD
Los Gatos Theatre
Library Trust
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
• 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
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, $2,065,302 is part of the General Fund
balance and tracked by staff to ensure that the proceeds are spent by Council adopted uses.
The FY 2022/23 budget was adopted prior to the simplified guideline so staff is proposing the following
budget adjustments to recognize the revenue and track the Council approved uses.
FY 2020/21 GRAND
BUDGET ADJ.
ACTUALS ESTIMATED ACTUALS BAL REMAINING ESTIMATED EST. MID-YEAR TOTALARPA FUNDS REVENUE RECOGNIZED 200,911$ 3,413,961$ 3,614,872$ 7,229,744$
GOV SERVICES (WAIVERS,CUP&ADA,DIRECT GRANTS)200,911 200,911
REVENUE LOSS -GOV SERVICES (PUBLIC SAFETY)3,413,961 3,413,961 3,614,872 7,028,833
200,911$ 3,413,961$ 3,614,872$ 7,229,744$
GENERAL FUND ARPA REPLACEMENT REVENUES AVAILABLE 200,911$ 3,413,961$ 3,614,872$ 7,229,744$
LESS APPROVED USES TO BE BUDGETED: PARKLETS (DOWNTOWN IMPVTS PROJECT)-$ 680,000$ 466,428$ 213,572$ 250,000$ -$ 930,000$ RENT WAIVERS 121,255 341,452 341,452 - 283,756 746,463
CUP/ADA FEE WAIVERS 19,656 27,672 27,672 - 27,672 75,000
DESTINATION MARKETING 55,000 55,000 - 55,000
K-RAILS (DOWNTOWN IMPVTS PROJECT)68,000 88,654 (20,654) 68,000
PROMENADES 80,000 69,855 10,145 120,000 90,628 200,000
DIRECT GRANTS 60,000 50,000 50,000 - 110,000 ENHANCED SENIOR SERVICES 500,000 249,597 250,403 500,000 CAPITAL IMPROVEMENT PROGRAM SUPPORT TRANSFERS 2,900,000 580,000 2,900,000
REQUIRED FOR GF BALANCING OF OPERATING REV_EXP 1,645,281 1,645,281
TOTAL ALLOCATIONS OF GENERAL FUND ARPA REPLACEMENT REVENUES 200,911$ 1,802,124$ 1,348,659$ 453,465$ 5,226,709$ 670,628$ 7,229,744$
AMERICAN RESCUE PLAN ACT (ARPA) SUMMARY WORKSHEET
FY 2022/23FY 2021/22
Fund Program Account
111 4301 48219 ARPA - Intergovernmental Revenue 3,614,872
111 5301 48219 ARPA - Intergovernmental Revenue 40,431
111 3201 48219 ARPA - Intergovernmental Revenue 27,672
111 2101 48219 ARPA - Intergovernmental Revenue 120,000
411 411-813-0235 48219 ARPA - Intergovernmental Revenue 250,000
633 5404 48219 ARPA - Intergovernmental Revenue 243,325
241 1241 43217 ARPA - Intergovernmental Revenue 2,310,176
6,606,476$
241 1241 68219 ARPA - Income Replacement Expense 2,310,176
111 1201 68219 ARPA - Income Replacement Expense 3,581,428
5,891,604$
American Rescue Plan Act (ARPA) Fund
FY 2022/23 MID-YEAR BUDGET ADJUSTMENT REQUESTS - ARPA RECLASSIFICATION
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.
FY 2021/22 FY 2021/22
2Q % of
FY 2021/22
2Q % of
FY 2022/23 FY 2022/23 FY 2022/23 FY 2022/23
Actuals Q2 Actuals Adjusted
Budget
as of 12/31/2022
Q2 Adjusted
Budget
Year End Estimates
Including
Proposed
Mid-Year
Adjustments
Total Revenues & Transfers In 54,448,222$ 17,978,806$ 33%34%17,098,505$ 50,266,120$ 50,546,861$
Total Expenditures 51,466,052 21,155,306 41%40%21,105,947 52,886,926 51,777,130
Net Increase (Decrease)2,982,171$ (4,007,441)$ (2,620,805)$ (1,230,268)$
Beginning Fund Balance 23,914,618 26,896,789 26,896,789 26,896,789
Ending Fund Balance 26,896,789$ 22,889,348$ 24,275,983$ 25,666,521$
GENERAL FUND
SUMMARY OF REVENUES AND EXPENDITURES
29
FY 2021/22 FY 2021/22
2Q % of
FY 2021/22
2Q % of
FY 2022/23 FY 2022/23 FY 2022/23 FY 2022/23
Actuals Q2 Actuals AdjustedBudget
as of
12/31/2022
Q2 AdjustedBudget Year End EstimatesIncluding
Proposed
Mid-Year
Adjustments
Revenues
Property Tax 16,899,618$ 5,761,081$ 34.1% 37.1%6,141,998$ 16,551,544$ 16,969,226$
VLF Backfill Property Tax 4,229,462 - 0.0% 0.0%- 4,356,350 4,556,000
Sales & Use Tax 7,177,597 2,143,460 29.9% 30.5%2,398,925 7,860,988 7,559,566
Measure G Sales & Use Tax 1,306,076 412,881 31.6% 32.5%426,496 1,313,956 1,287,690
Franchise Fees 2,822,515 968,181 34.3% 41.9%1,044,055 2,493,870 2,716,470
Transient Occupancy Tax 1,895,064 711,861 37.6% 52.2%857,715 1,642,460 2,000,000
Business License Tax 1,481,667 167,942 11.3% 7.1%97,974 1,387,500 2,444,000
Licenses & Permits 4,814,650 3,373,287 70.1% 58.6%1,602,633 2,735,029 2,841,374
Intergovernmental 1,263,352 370,615 29.3% 33.8%379,739 1,124,093 1,250,731
Town Services 5,460,608 3,906,577 71.5% 73.9%3,284,766 4,445,635 5,105,701
Fines & Forfeitures 319,170 118,809 37.2% 75.1%151,615 201,750 232,129
Interest (1,404,526) (211,169) 15.0% 33.5%145,003 432,947 517,379
Use of Property 32,400 - 0.0%- - -
Miscellanious Other 311,040 150,622 48.4% 14.0%457,906 3,280,749 626,066
Park Construction Tax 14,752 - 7,680 7,000 8,280
Debt Service - Entry Eliminated for ACFR 1,899,850 - 0.0% 0.0%- 1,893,713 1,893,713
ARPA Income Replacement - Entry Eliminated for ACFR 556,316
Pension Trust Income - Entry Eliminated for ACFR 690,000
Measure G for Operations - Entry Eliminated for ACFR 629,147
Proceeds for Sales of Assets 2,151 - 0.0%-
Fund Transfer In 4,047,313 104,659 2.6% 18.9%102,000 538,536 538,536
Total Revenues & Transfers In 54,448,222$ 17,978,806$ 33% 34%17,098,505$ 50,266,120$ 50,546,861$
Use of Other Funding Sources:
Use of Reserves - Capital/Special Projects - Capital 550,000$ -$ 0.0% 0.0%-$ 2,350,000$ 2,350,000$
Use of Reserves - Surplus Property 1,200,000
Use of Reserve - Pension/OPEB 300,000 300,000
Use of Reserve - Accumulated Measure G 1,100,000 - - 679,443
Total Other Funding Sources 3,150,000$ -$ 0% 0%-$ 3,029,443$ 2,650,000$
Total Revenues and Use of Reserves 57,598,222$ 17,978,806$ 31% 32%17,098,505$ 53,295,563$ 53,196,861$
Expenditures
Town Council 189,569$ 91,800$ 48.4% 42.3%91,822 217,238$ 216,231$
Attorney 629,935 226,377 35.9% 46.7%332,183 711,426 685,473
Administrative Services 5,441,605 2,583,281 47.5% 45.9%2,438,472 5,310,119 4,983,530
Non- Departmental 2,792,857 1,160,520 41.6% 33.8%1,222,789 3,617,671 3,823,598
Community Development 6,313,505 3,460,301 54.8% 40.2%2,394,537 5,960,379 5,990,576
Police 16,451,189 8,266,432 50.2% 46.6%8,957,541 19,225,986 18,695,679
Parks & Public Works 8,605,455 4,010,181 46.6% 43.1%4,226,049 9,798,966 9,221,597
Library 2,752,401 1,356,415 49.3% 45.9%1,442,555 3,144,450 3,097,584
Principal 156,034 156,034 Total Department Expenditures 43,332,550$ 21,155,307$ 49% 44%21,105,948$ 47,986,235$ 46,870,302$
Debt Service - Entry Eliminated for ACFR 1,899,850$ -$ 0.0% 0.0%-$ 1,893,713$ 1,899,850$
ARPA Income Replacement - Entry Eliminated for ACFR 556,316
Transfer to Pension Trust Fund - Entry Eliminated for ACFR 690,000
Measure G Transfer - Entry Eliminated for ACFR 629,148
Transfers Out 4,358,188 - 0.0% 0.0%- 3,006,978 3,006,978
Total Additional Non-Departmental Expenditures 8,133,502$ -$ 0% 0%-$ 4,900,691$ 4,906,828$
Total Operating Expenditures 51,466,052$ 21,155,307$ 41% 40%21,105,948$ 52,886,926$ 51,777,130$
Allocate to Budget Stabilization/Catastrophis Reserve 1,062,162 Allocate to Carryover Encumbrances 33,145 Allocate to Pension/OPEB Reserve 300,000 Allocate to Restricted Pension Trust 390,000 690,000
Excess (Deficiency) of Revenues Over Expenditures 4,736,863$ **(3,176,501)$ *(4,007,443)$ *18,637$ 729,731$
SUMMARY OF REVENUES AND EXPENDITURES
GENERAL FUND
*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.
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 $55,814 expenditure budget adjustment for Theatre
related expenses from available rent proceeds.
CDBG Non-Point LLD's LIBRARY
Grants Source ARPA THEATRE TRUSTS
Beginning Fund Balance 166,654$ 451,558$ 174,237$ -$ 19,500$ 555,252$
Budgeted Revenues - 359,950 34,680 1,304,696 68,400 76,250
Total Actual Revenues - 2nd Qtr -$ 160,698$ -$ 3,614,872$ 17,850$ 45,175$
Budgeted Expenditures - 190,911 100,562 1,304,696 55,814 121,255
Total Actual Expenditures - 2nd Qtr - 95,587 2,315 - 3,375 30,093
2nd Quarter Ending Fund Balance 166,654$ 516,669$ 171,922$ 3,614,872$ 33,975$ 570,334$
Special Revenue Funds
Budget to Actuals Comparisons
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
$67,276 to reflect decreased gas tax projections. Staff will continue to monitor these revenues and
expenditures throughout the remainder of the year. The Grant Funded CIP fund displays a deficit
balance because this grant fund expends Town dollars first, then provides documentation of these
expenditures to the State of California or other granting agencies and is reimbursed for those costs. The
reimbursements eventually result with the fund “breaking even” or a zero fund balance.
GFAR*Traffic *Grant Funds*Storm Utility Gas
Fund Mitigation CIP Drains Undergd Tax
Beginning Fund Balance 14,783,787$ 405,570$ (948,604)$ 3,218,811$ 3,302,514$ 1,836,068$
Budgeted Revenues 10,505,492 923,455 11,984,439 105,080 52,490 1,536,413
Total Actual Revenues - 2nd Qtr 2,111,705 671,640 744,808 58,876 60,327 625,666
Budgeted Expenditures 23,414,582 923,455 10,984,377 670,300 347,576 3,258,618
Total Actual Expenditures - 2nd Qtr 992,728 671,640 452,251 1,916 - 1,510,293
2nd Quarter Ending Fund Balance 15,902,764$ 405,570$ (656,047)$ 3,275,771$ 3,362,841$ 951,441$
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
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 $8,606 expenditure budget adjustment to cover additional expenses related to the
West Valley Sanitation District annual fee increase from the available Facilities Maintenance Fund. Staff
will continue to monitor expenditures and propose a revised cost allocation if needed during the FY
2023/24 budget preparation.
Equipment Workers Self Information Facility
Replacemt Compensation Insurance Technology Maint.
Beginning Fund Balance 2,222,395$ 1,295,185$ 803,293$ 2,990,931$ 928,481$
Budgeted Revenues 686,837 1,033,315 429,249 714,309 1,262,247
Total Actual Revenues - 2nd Qtr 328,419 584,101 205,798 371,373 481,561
Budgeted Expenditures 1,351,124 1,840,000 846,940 1,741,242 1,240,344
Total Actual Expenditures - 2nd Qtr 299,565 812,582 784,661 395,392 430,810
2nd Quarter Ending Fund Balance 2,251,249$ 1,066,704$ 224,430$ 2,966,912$ 979,232$
Internal Service Funds
Budget to Actuals Comparisons
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.
SA
Trust
Beginning Fund Balance (7,607,527)$ *
Budgeted Revenues 3,799,926
Total Actual Revenues - 2nd Qtr 1,893,713
Budgeted Expenditures 3,799,877
Total Actual Expenditures - 2nd Qtr 3,537,259
2nd Quarter Ending Fund Balance (9,251,073)$
Trust & Agency Fund
Budget to Actuals Comparisons
1
Subject:FW: Follow up to Investment Report discussed at the FC meeting
Attachments: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
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2022
Page 74
The following table summarizes the Towns policy related to maturities and concentration of
investments:
Maximum
Maximum Portfolio
Investment Type Maturity Percentage
US Treasury Obligations 5 years None
US Agency Obligations 5 years None
Bankers Acceptances 180 days 30%
Commercial Paper 270 days 25%
Medium Term Notes 5 years 30%
Collateralized CD's 5 years 30%
CA LAIF NA $65 million
Money Market Funds NA 20%
The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30,
2022:
Available Concentration Time to Weighted
for of Credit Input Mature Average
Operations Restricted Total Risk Rating Level (Years)Maturity
US Treasury Securities 15,212,639$ -$ 15,212,639$ 29.29%n/a 2 0-3 1.35
Government Agencies 15,995,919 - 15,995,919 30.79%n/a 2 0-4 1.52
Corporate Bonds 13,664,652 - 13,664,652 26.31%A3 2 0-3 1.33
Market Mutual Funds 253,599 - 253,599 0.49%Not Rated 2 n/a n/a
LAIF 6,816,565 - 6,816,565 13.12%Not Rated n/a n/a n/a
Total Investments 51,943,374 - 51,943,374 100.00%
Cash Deposits with Banks 19,349,009 2,094,363 21,443,372
Money Market Accounts 17,391 - 17,391
Pension Trust - 690,000 690,000
Cash on Hand at Town 2,400 - 2,400
Total Cash and Investments 71,312,174$ 2,784,363$ 74,096,537$
Description
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.
Fiduciary
Description Total Town Funds Totals
Cash and Investments Available for Operations 69,392,044$ 1,920,130$ 71,312,174$
Restricted Cash and Investments 819,929 1,964,434 2,784,363
Total Cash and Investments 70,211,973$ 3,884,564$ 74,096,537$ DRAFT72,132,11
Month YTD
Fund Balances - Beginning of Month/Period $72,886,942.83 $72,886,942.83
Receipts 6,045,229.86 6,045,229.86
Disbursements (11,248,320.72)(11,248,320.72)
Fund Balances - End of Month/Period $67,683,851.97 $67,683,851.97
Portfolio Allocation:% of Portfolio Max. % 0r $ Allowed Per State Law or Policy
BNY MM $292,775.99 0.55%20% of Town Portfolio
US Treasury Notes $10,046,915.87 18.75%No Max. on US Treasuries
Government Agency Debenture Notes $22,975,336.40 42.89%No Max. on Non-Mortgage Backed
Corporate Medium Term Bonds $13,339,223.01 24.90%30% of Town Portfolio
Local Agency Investment Fund $6,918,398.79 12.91%$75 M per State Law
Subtotal - Investments 53,572,650.06 100.00%
Reconciled Demand Deposit Balances 14,111,201.91
Total Treasurer's Fund $67,683,851.97
Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
July 31, 2022
BNY MM
0.55%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
0
10000000
20000000
30000000
40000000
50000000
60000000
70000000
80000000
90000000
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
Treasurer's Fund Balances
page 2Page 19
Item 2.
-
1
Subject:FW: Mid-Year Update Review Request
Attachments: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
28
FY 2020/21 FY 2020/21
Q2% of
FY 2019/20
Q2% of
FY 2020/21 FY 2021/22 FY 2021/22 FY 2021/22
Actuals Q2 Actuals Adjusted
Budget
Q2 Adjusted
Budget
Estimated YE
Including
Mid-Year
Proposed
Revenues
Property Tax 15,826,162$ 5,481,928$ 34.6%36.3%5,761,081$ 15,881,866$ 15,401,391$
VLF Backfill Property Tax 4,052,672 - 0.0%0.0%- 4,154,320 4,229,462
Sales & Use Tax 6,794,218 2,429,968 35.8%29.7%2,143,460 7,213,540 7,069,045
Measure G Sales & Use Tax 1,139,386 383,684 33.7%42.8%412,881 964,319 1,173,733
Franchise Fees 2,499,463 807,883 32.3%37.3%968,181 2,597,630 2,503,560
Transient Occupancy Tax 1,044,820 399,620 38.2%77.4%711,861 920,040 1,400,000
Business License Tax 1,386,943 224,388 16.2%13.4%167,942 1,250,000 1,250,000
Licenses & Permits 2,999,711 1,494,487 49.8%82.5%2,180,000 2,641,779 3,065,997
Intergovernmental 1,573,697 818,352 52.0%9.5%370,615 3,881,836 1,130,125
Town Services 4,835,962 3,691,233 76.3%100.5%3,854,415 3,834,579 4,152,549
Fines & Forfeitures 103,467 31,638 30.6%58.4%118,809 203,450 218,120
Interest 876,460 (1,485,278) -169.5%-15.4%(85,001) 551,233 551,233
GASB 31 to Market (780,399) 517,744 -66.3%114.7%(126,168) (110,000) (110,000)
Use of Property 36,372 - 0.0%- - -
Miscellanious Other 335,906 1,367,206 407.0%24.4%153,036 626,631 964,163
Park Construction Tax 14,921 - 7,680 7,000 8,280
Debt Service - Entry Eliminated for ACFR 1,908,494 - 0.0%0.0%- 1,899,850 1,899,850
ARPA Income Replacement - Entry Eliminated for ACFR 79,176
Proceeds for Sales of Assets 1,201,369 - 0.0%-
Fund Transfer In 652,056 104,659 16.1%16.5%104,659 633,352 633,352
Total Revenues & Transfers In 46,580,856$ 16,267,512$ 35%36%16,743,451$ 47,151,425$ 45,540,860$
Use of Other Funding Sources:
Use of Reserves - Capital/Special Projects - Capital 3,401,479$ -$ 0.0%0.0%-$ 550,000$ 550,000$
Use of Reserves - Capital/Special Projects - Other 250,596$ 250,596$
Use of Reserve - Pension/OPEB 4,532,500$
Use of Reserve - Accumulated Measure G - - - 590,581 590,581
Use of Reserves - Surplus Property - - - 1,200,000 1,200,000
Use of ARPA - Income Replacement - 1,444,021
Use of ARPA - Community Grants 550,000
Total Other Funding Sources 7,933,979$ -$ 0%0%-$ 3,141,177$ 4,035,198$
Total Revenues and Use of Reserves 54,514,835$ 16,267,512$ 30%33%16,743,451$ 50,292,602$ 49,576,058$
Expenditures
Town Council 192,280$ 99,787$ 51.9%45.2%91,800 202,891$ 193,559$
Attorney 537,296 311,520 58.0%33.8%226,341 669,733 554,137
Administrative Services 4,667,995 2,467,813 52.9%45.3%2,584,905 5,701,385 5,501,110
Non- Departmental 8,642,563 4,437,554 51.3%32.0%1,159,874 3,628,466 4,046,008
Community Development 4,994,391 2,589,502 51.8%63.4%3,460,301 5,461,716 5,094,473
Police 16,570,836 9,041,998 54.6%47.6%8,266,574 17,376,333 17,289,979
Parks & Public Works 8,175,987 4,185,306 51.2%46.7%4,020,953 8,605,418 8,332,422
Library 2,828,873 1,445,899 51.1%44.4%1,356,415 3,053,708 2,886,606
Capital Outlay 2,365 - - - -
Total Department Expenditures 46,612,586$ 24,579,379$ 53%47%21,167,163$ 44,699,650$ 43,898,294$
Debt Service - Entry Eliminated for ACFR 1,908,494$ -$ 0.0%0.0%-$ 1,899,850$ 1,899,850$
ARPA Income Replacement - Entry Eliminated for ACFR 79,176$
Transfers Out 3,401,479 - 0.0%0.0%- 2,801,047 2,801,047
Total Additional Non-Departmental Expenditures 5,389,149$ -$ 0%0%-$ 4,700,897$ 4,700,897$
Total Operating Expenditures 52,001,735$ 24,579,379$ 47%43%21,167,163$ 49,400,547$ 48,599,191$
Allocate to Budget Stabilization/Catastrophis Reserve 65,764 Allocate to Compensated Absences 110,509
Allocate to Surplus Property Reserve 1,200,000
Allocate to Sale of Property Reserve 5,302 Allocate to Pension/OPEB Reserve 300,000
Allocate to Measure G - Capital 482,160 586,867 Allocate to Restricted Pension Trust 390,000 390,000
Excess (Deficiency) of Revenues Over Expenditures 831,525$ (8,311,867)$ *(4,423,712)$ *19,895$ -$
SUMMARY OF REVENUES AND EXPENDITURES
GENERAL FUND
*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 Garactuateab
e
C - 8
TOTAL TOWN
REVENUES AND EXPENDITURES
GENERAL FUND
2018/19 2019/20 2020/21 2021/22 2022/23
Actuals Actuals Actuals Estimated Adopted
REVENUES
Property Tax 13,636,099$ 14,454,513$ 15,826,162$ 15,908,858$ 16,551,544$
VLF Backfill 3,685,247 3,875,914 4,052,672 4,229,462 4,356,350
Sales & Use Tax 7,930,021 6,535,034 6,794,218 7,497,873 7,934,189
Measure G - District Sales Tax 228,131 996,391 1,139,386 1,173,733 1,240,755
Franchise Fees 2,475,916 2,495,792 2,499,463 2,435,800 2,493,870
Transient Occupancy Tax 2,692,043 1,869,685 1,044,820 1,475,000 1,642,460
Other Taxes 1,526,894 1,357,080 1,386,943 1,425,000 1,387,500
Licenses & Permits 3,059,894 2,696,457 2,999,711 3,065,997 2,757,029
Intergovernmental 945,191 1,104,075 1,573,697 1,130,125 1,051,814
Town Services 4,648,904 4,447,213 4,835,962 4,295,407 4,235,261
Internal Srvc Reimbursement - - - - -
Fines & Forfeitures 510,266 271,117 103,467 218,120 201,750
Interest 1,682,347 2,266,134 96,061 441,233 432,947
Other Sources 6,093,211 1,381,187 2,217,072 1,140,853 3,287,749
Debt Service Reimbursement 1,909,073 1,905,024 1,908,494 1,899,850 1,893,713
Transfers In 1,578,911 599,669 1,833,218 633,352 538,536
TOTAL REVENUES 52,602,148$ 46,255,285$ 48,311,346$ 46,970,663$ 50,005,467$
EXPENDITURES
Salaries & Benefits 26,803,225$ 28,933,568$ 30,297,504$ 30,160,568$ 35,472,825$
Operating Expenditures 11,955,327 13,397,031 14,276,602 9,849,151 9,318,742
Grants & Awards 248,533 274,249 298,303 800,000 241,000
Fixed Assets 38,307 138,384 2,365 - -
Interest - - 52,011 - -
Internal Service Charges 2,527,470 2,188,211 2,314,305 2,619,672 2,711,652
Capital Projects - - - - -
Capital Acquisitions - - - - -
Debt Service 1,909,073 1,905,024 1,908,494 1,899,850 1,893,713
Transfers Out 2,785,220 8,053,847 4,582,641 3,423,211 3,006,978
TOTAL EXPENDITURES 46,267,155$ 54,890,314$ 53,732,225$ 48,752,452$ 52,644,910$
Net Increase (Decrease)6,334,993 (8,635,029) (5,420,879) (1,781,789) (2,639,443)
Beginning Fund Balance 31,635,533 37,970,526 29,335,497 23,914,618 22,132,829
Ending Fund Balance 37,970,526$ 29,335,497$ 23,914,618$ 22,132,829$ 19,493,386$
GENERAL FUND
* 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 - 11
TOTAL TOWN
REVENUES AND EXPENDITURES
CAPITAL PROJECT FUNDS
2018/19 2019/20 2020/21 2021/22 2022/23
Actuals Actuals Actuals Estimated Adopted
REVENUES
Property Tax -$ -$ -$ -$ -$
VLF Backfill - - - - -
Sales & Use Tax - - - - -
Franchise Fees - - - - -
Transient Occupancy Tax - - - - -
Other Taxes 28,390 34,437 67,146 34,562 30,000
Licenses & Permits 844,064 1,153,364 1,340,530 764,465 1,074,300
Intergovernmental 1,641,511 3,161,010 1,818,494 3,153,295 7,789,892
Town Services 52,094 223,318 34,417 306,210 -
Internal Srvc Reimbursement - - - - -
Fines & Forfeitures - - - - -
Interest 127,251 158,756 122,705 35,801 36,405
Other Sources 784,085 325,607 2,239,342 1,198,207 3,016,000
CIP Proj Reimbursement - - - - -
SCC RPTTF Reimbursement - - - - -
Transfers In 2,685,220 8,325,591 3,401,479 3,421,424 3,706,978
TOTAL REVENUES 6,162,615$ 13,382,083$ 9,024,113$ 8,913,964$ 15,653,575$
EXPENDITURES
Salaries & Benefits -$ -$ 31,085$ -$ -$
Operating Expenditures - - 496 - -
Grants & Awards - - - - -
Fixed Assets - - - - -
Interest - - - - -
Internal Service Charges - - - - -
Capital Projects 8,987,510 7,907,339 5,833,758 11,847,615 15,447,668
Capital Acquisitions - - - - -
Debt Service - - - - -
Transfers Out 533,616 569,952 533,616 533,616 533,616
TOTAL EXPENDITURES 9,521,126$ 8,477,291$ 6,398,955$ 12,381,231$ 15,981,284$
Net Increase (Decrease)(3,358,511) 4,904,792 2,625,158 (3,467,267) (327,709)
Beginning Fund Balance 18,488,574 15,130,063 20,034,855 22,660,013 19,192,746
Ending Fund Balance 15,130,063$ 20,034,855$ 22,660,013$ 19,192,746$ 18,865,037$
1
Wendy Wood
Subject: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,
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
1
Subject:FW: Pages from FY-202122-ACFR - ARPA Discussion for mid year review
Attachments: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
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
Page 20
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
nonͲprofit and social welfare organizations. For FY 2021/22, the Town recognized $3.4
million in ARPA revenues related to recovery of revenue loss.
•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 oneͲtime $6.9 million State passͲthrough grant
payment in General Government for wildfire protection. Excluding the oneͲtime 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 $26,896,789 represents
approximately 62% of General Fund expenditures for the current fiscal year excluding
L
TOWN OF LOS GATOS, CALIFORNIA
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
Page 46
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
REVENUES
Property Taxes 21,129,082$ -$ 38,640$ 21,167,722$
Sales Taxes 8,483,673 - - 8,483,673
Other Taxes 1,909,816 - 66,382 1,976,198
Licenses & Permits 5,096,318 420,055 538,667 6,055,040
Intergovernmental 1,263,352 9,400,918 4,828,712 15,492,982
Charges for Services 5,460,613 1,464,746 - 6,925,359
Fines and Forfeitures 319,170 - - 319,170
Franchise Fees 2,822,515 - - 2,822,515
Developer Fees 1,200,000 535,571 - 1,735,571
Interest (1,404,527) 34,805 90,739 (1,278,983)
Use of Property 32,400 93,001 19,500 144,901
Other 311,040 - 38,105 349,145
Total Revenues 46,623,452 11,949,096 5,620,745 64,193,293
EXPENDITURES
Current:
General Government 9,053,968 6,900,000 - 15,953,968
Public Safety 16,451,190 - - 16,451,190
Parks and Public Works 8,605,457 - 33,671 8,639,128
Community Development 6,313,511 - -6,313,511
Library Services 2,752,397 - 74,813 2,827,210
Sanitation and Other - - 194,969 194,969
Capital Outlay - 9,570,780 907,890 10,478,670
Debt service:
Principal 156,034 - - 156,034
Total Expenditures 43,332,557 16,470,780 1,211,343 61,014,680
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,290,895 (4,521,684) 4,409,402 3,178,613
OTHER FINANCING SOURCES (USES)
Gain from sale of assets 2,151 - - 2,151
Transfers in 4,047,313 4,074,141 32,853 8,154,307
Transfers (out)(4,358,188) (427,616) (3,524,881) (8,310,685)
Total Other Financing Sources (Uses)(308,724) 3,646,525 (3,492,028) (154,227)
NET CHANGES IN FUND BALANCES 2,982,171 (875,159) 917,374 3,024,386
BEGINNING FUND BALANCES 23,914,618 15,115,912 8,807,222 47,837,752
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
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2022
d.Partnerships for the conversion of existing residential developments dedicated to affordable
housing
e.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 - COVID19 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 $3,614862 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:
$5espond 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;
%5espond 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;
&3URYLGHgovernment 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
'0DNH 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. )RU )< WKH 7RZQ
UHFRJQL]HGWKHLQLWLDO.RI$53$SURFHHGVDVUHYHQXHWRUHLPEXUVHWKH7RZQIRUTXDOLI\LQJ
H[SHQVHV
Page 97
different
ru hee
Page 119
1
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
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.
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
1
Subject:FW: ARPA Update.pdf
Attachments: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,
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
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
REPORT REPORT
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
Page 156
Item 2.
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.
Page 157
Item 2.
I
11
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.
Page 158
Item 2.
1
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
Subject:FW: Meeting on Friday
Attachments: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,
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
1.Discuss the mid‐year financial update 30 mis
2.Review of $7m in ARPA fund flows 15 mins
3.Discussion of GAFR FY 22 10 mins
4.Information request from Jan FC 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 $4.1m more in capital outlay than was originally planned? That is a material increase and I do not
know what caused that.
I am asking this so I have a better understanding of what might happen in FY 23 based on how FY 22 played out. Could
we receive more intergovernmental revenues that weren’t planned but are on the horizon? Could capital outlays be
materially different from the adopted FY 23 budget? These are the issues we should explore.
Thanks,
Phil
Page 109
Variance
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Licenses & permits 160,000 160,000 420,055 260,055
Intergovernmental 1,691,069 16,912,649 9,400,918 (7,511,731)
Charges for services 755,676 2,693,556 1,464,746 (1,228,810)
Developer fees 20,000 20,000 535,571 515,571
Interest - - 34,805 34,805
Use of Property - - 93,001 93,001
Total Revenues 2,626,745 19,786,205 11,949,096 (7,837,109)
EXPENDITURES
Current:
General government - 7,000,000 6,900,000 100,000
Capital outlay 5,414,872 10,894,632 9,570,780 1,323,852
Total Expenditures 5,414,872 17,894,632 16,470,780 1,423,852
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (2,788,127) 1,891,573 (4,521,684) (6,413,257)
OTHER FINANCING SOURCES (USES)
Transfers in 2,841,047 3,584,047 4,074,141 490,094
Transfers (out)(427,616) (427,616) (427,616) -
Total Other Financing Sources (Uses)2,413,431 3,156,431 3,646,525 490,094
CHANGE IN FUND BALANCE (374,696)$ 5,048,004$ (875,159) (5,923,163)$
BEGINNING FUND BALANCE 15,115,912
ENDING FUND BALANCE 14,240,753$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
TOWN OF LOS GATOS
APPROPRIATED RESERVES FUND
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
og
o_0
A