Desk Item.Item #14 - Mid-Year Budget Performance Report
PREPARED 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
COUNCIL AGENDA REPORT
MEETING DATE: 02/21/2023 ITEM NO: 14 DESK ITEM
DATE: February 21, 2023
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Mid-Year Budget Report - July 1 - December 31, 2022:
a. Receive FY 2022/23 Mid-Year Budget Report;
b. Authorize Budget Adjustments as Recommended in the Mid-Year Budget
Report; and
c. Provide Direction of the Order of Authorized Funding Source to Balance
the FY 2022/23 Operating Budget, if Necessary, at the Final Close of the
Fiscal Year.
REMARKS:
Attachment 4 includes public comments received between 11:01 a.m. on Friday February 17,
2023, and 11:01 a.m. on Tuesday February 21, 2023. Attachment 5 contains replacement page
2 of the Staff Report and Attachment 6 contains replacement pages 3 of the Mid-Year Budget
Performance Report to correct date from June 7, 2023 to June 7, 2022 as was observed by the
public commenter.
Attachments previously received with the Staff Report and Addendum:
1. Mid-Year Budget Report - July 1 - December 31, 2022 as Presented at the Finance
Commission February 13, 2023 Meeting.
2. Public Comments Receive before Posting the Staff Report.
3. Public Comments received after publishing the Staff Report and before 11:01 a.m. on Friday
February 17.
Attachments received with this Desk Item:
4. Public Comments received between 11:01 a.m. on Friday February 17, 2023, and 11:01 a.m.
on Tuesday February 21, 2023.
5. Replacement Page 2 of 4 of the Staff Report.
6. Replacement Page 3 of 33 of Mid-Year Budget Performance Report.
ATTACHMENT 4
From: Lee Fagot
Sent: Monday, February 20, 2023 5:51 PM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Subject: Error in Council Agenda document
[EXTERNAL SENDER]
Gitta,
Thanks for all the work you are doing for our community.
Reading the agenda documents for tomorrow nights council meeting I found a possible error in a
document you prepared. And, its very simple:
Item 14, Page 225 mid page - I think you have the wrong year -
On June 7, 2023, the Town Council adopted the combined use of American Rescue Plan Act
(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.
Thanks
Lee Fagot
From: Lee Fagot
Sent: Monday, February 20, 2023 5:56 PM
To: Gitta Ungvari <GUngvari@losgatosca.gov>
Subject: Re: UPDATE Error in Council Agenda document
[EXTERNAL SENDER]
And, I just noticed the same error on page 231 of this report -
On June 7, 2023, the Town Council adopted the combined use of ARPA funding, residual
Measure G
On Feb 20, 2023, at 5:51 PM, Lee Fagot wrote:
Gitta,
Thanks for all the work you are doing for our community.
Reading the agenda documents for tomorrow nights council meeting I found a possible error in a
document you prepared. And, its very simple:
Item 14, Page 225 mid page - I think you have the wrong year -
On June 7, 2023, the Town Council adopted the combined use of American Rescue Plan Act
(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.
Thanks
Lee Fagot
PAGE 2 OF 4 SUBJECT: Mid-Year Budget Performance Report – Six Months Ending December 31, 2022 DATE: February 15, 2023
REMARKS (continued):
Highlights of the Mid-Year Budget Report include:
Financial Overview and Executive Summary
As discussed in the Report, the 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.
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, 2022, the Town Council adopted the combined use of American Rescue Plan Act
(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 first. The Finance Commission did not agree with the staff
recommendation. It preferred using the ARPA source last so as to give Council more resources
to reprogram.
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
ATTACHMENT 5
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, 2022 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
ATTACHMENT 6