Attachment 01BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
1
INTRODUCTION
Purpose
This Mid-Year Report covers the first and second
quarters for the Fiscal Year (FY) 2018/19, reflecting
the six month period ending December 31, 2018. The
purposes of this public reporting are twofold. First,
the report enables the Town to monitor its revenues
and expenditures consistently so that it can
proactively respond to unanticipated changes or
emerging trends. Second, and equally important, the
report increases the transparency of the Town’s
finances. The Town is ultimately accountable to its
residents to use the revenue it brings in efficiently
and effectively to provide the highest quality services,
and public reporting provides taxpayers with
information that demonstrates the Town is
committed to this goal.
Content
This Mid-Year Report presents an overview of the
Town’s operating revenues and expenditures for the
period ending December 31, 2018 as compared to
previous years, and explains any notable changes or
trends in these numbers. This report also provides
information on recommended budget adjustments
for the current fiscal year.
Timeframe and Limitations
The information in this report is the most accurate
and up-to-date information available at the time of
publication. However, this report is not an audited
financial statement and the numbers provided herein
are preliminary and subject to change as the year
progresses. No data on revenues and expenditures is
final until the Town has completed its annual
comprehensive audit and finalized its Comprehensive
Annual Financial Report (CAFR), which is released in
December of each year for the prior fiscal year.
With respect to revenues: To develop a more
accurate picture of the Town’s anticipated year-end
financial position, the Town regularly monitors and
adjusts its year-end revenue projections based on
revenue performance and other developments that
may affect Town revenues.
With respect to expenditures: The expenditure
information in this report is extracted directly from
the Town’s financial management system, and
adjustments are made to account for certain known
payments, reimbursements, or transfers between
Town Departments and funds that have not yet been
processed in the system at the time of publication. It
represents a snapshot of Town expenditures at a
certain point in time and does not reflect final
adjustments made to prepare the Town’s CAFR.
Table of Contents
Introduction .............................................................. 1
Budget Context ......................................................... 2
Status of FY 2018/19 Adopted Budget ....... 2
Federal Economic Outlook ......................... 2
State Budget Update .................................. 2
General Fund – Key Revenue Analysis ...................... 3
Property Tax ............................................... 4
Sales Tax ..................................................... 5
Franchise Fees ............................................ 6
Business License Tax ................................... 7
Transient Occupancy Tax ............................ 8
Interest Income .......................................... 9
Charges for Services ................................. 10
Licenses & Permits ................................... 11
FY 2018/19 Recommended Budget Adjustments ... 12
Summary of Key Recommended Adjustments ....... 14
Financial Summaries and Estimates ....................... 16
General Fund ............................................ 16
Special Revenue Fund .............................. 17
Capital projects Funds .............................. 18
Internal Service Funds .............................. 19
Trust and Agency Funds ........................... 20
Conclusion .............................................................. 20
ATTACHMENT 1
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
2
BUDGET CONTEXT
Status of FY 2018/19 Adopted Budget
Overall, second quarter FY 2018/19 General Fund
revenues are trending in line with the second quarter
of Fiscal Year 2017/18. Due to some projected
revenue increases, staff is recommending a net
General Fund revenue increase of $1.0 million from
the adopted budgeted estimates, offset by $0.1
million in expenditure increases (see page 12 for
details). The current forecast expects a better than
expected increases in property tax, motor vehicle in
lieu, and transient occupancy tax (TOT) due to the
continued surge in the local economy as well as
tourism within the Bay Area. Sales tax revenues are
declining compared to the same quarter last fiscal
year primarily due to the impact of online retail sales
and reduced taxable transactions from Netflix.
Revenues such as licenses and permits, and fees for
services are all trending favorably, another indication
of the strong economy (see summary detail on page
16).
General Fund expenditure totals for the second
quarter are trending in accordance with forecasts,
with total operational expenditures at the end of the
second quarter at about 42% of the adopted budget.
With six months of data now available, it is expected
that the next six months of expenditure trends will be
within budget, although unexpected costs can still
occur. Should any budget adjustments be necessary
to balance operating revenue and expenditures, staff
will advise the Council accordingly.
Expenditure additions at this time include legal
services, mandatory well testing expenses, crossing
guard services costs, funding to provide for additional
Americans with Disability Act (ADA) trainings, and
tuition reimbursement expenses (see page 12 for
details).
Providing existing service levels to the community in
this and future fiscal years will require performance
of economically sensitive revenues (Property, Sales,
TOT) to keep pace with anticipated benefit and other
cost increases. The FY 2018/19 budget is the fifth
budget in five years that did not require any service
reductions to balance the budget. The FY 2019/20
budget is also expected to be “status quo,” and
maintain the Town’s high service levels while
recognizing the Town’s contractual obligations and
unfunded mandates.
Federal Economic Outlook
The Federal Reserve Bank of San Francisco (FRBSF) in
a January 10, 2019 publication indicated that the
economy has continued to grow at a robust pace,
primarily driven by solid gains in consumer income
and spending. The report projects that the Gross
Domestic Product (GDP) growth rate averaged 3.1%
for 2018. However, the report forecasts that growth
will slow down to 2.0% in 2019, as monetary policy
continues to normalize and fiscal stimulus wanes and
continue to fall gradually to an estimated long-term
potential rate of 1.7%.
State Budget Update
Given federal political uncertainty, the risks to the
current economic forecast, and the need for a solid
fiscal foundation, the State Budget allocates $13.6
billion to building budgetary resiliency and paying
down the state’s unfunded pension liabilities. This
includes:
•$4 billion investment that eliminates all
outstanding budgetary debt as well as
deferrals
•$4.8 billion to build reserves, bringing
the state’s Rainy Day Fund to more than $15
billion this year (the largest amount ever)
and nearly $20 billion over four years
•$4.8 billion to pay down unfunded
retirement liabilities
The Budget’s remaining spending prudently charts
the path toward building a long-term fiscal
foundation. Over 86 percent of the new spending
contained in the Budget is one-time, and in each of
the out-years the Budget has a positive operating
balance. The Budget also more than quadruples the
size of the state’s Safety Net Reserve, strengthening
programs that provide the first-line of defense for
families during an economic downturn.
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
3
GENERAL FUND – KEY REVENUE ANALYSIS
The following discussion provides a status of significant General Fund revenue sources as of the second quarter,
ending December 31, 2018.
Staff monitors each revenue source closely and may recommend certain revenue adjustments based on revenue
actuals or state budget action.
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
4
Property Tax
Property tax is the largest revenue source for the Town’s General Fund, accounting for 29.5% of budgeted General
Fund revenues in FY 2018/19. 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 thereafter. However, when property changes hands
or new construction occurs, property is than reassessed at its current market value. Real property values critically
impact property tax revenues received by the Town. With the passage of Proposition 13, voters limited the tax rate
that can be imposed on property. With the limitation on rates higher property tax revenues are primarily generated
by a higher aggregate property value.
Analysis – Property tax distributions are largely received in the third and fourth quarters. Property tax budget
projections are based on valuations projected by the Santa Clara County Assessor’s Office, given the value and
quantity of home sales. Second quarter receipts are trending slightly higher than those received during the second
quarter of the previous fiscal year and are at 38% of budgeted totals. Based on County projections and these trends,
staff recommends a $526,030 increase in General Property Tax.
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
2nd Quarter Actual Revenues 3,690,329$ 4,017,963$ 4,274,774$ 4,604,788$ 4,785,479$
Fiscal Year Total Actual Revenues 9,054,908$ 10,779,448$ 11,518,257$ 12,510,822$
Fiscal Year Budgeted Revenues 12,507,071$
2nd Quarter Percent of Total 41%37%37%37%38%
Recommended Budget Revision 526,030$
PROPERTY TAX
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
5
Sales Tax
Sales tax is the second largest revenue source for the Town’s General Fund, accounting for 18.3% of budgeted
General Fund revenues for FY 2018/19. The Town currently receives 1 cent for every 9 cents of sales tax paid per
dollar on retail sales and taxable services transacted within Los Gatos. At the November 6, 2018 election the Town
of Los Gatos residents approved ballot Measure G enacting a one-eight cent (0.125%) sales tax for 20 years, providing
about $800,000 annually, requiring Independent Citizens Oversight with public review of spending, an all revenues
controlled locally. The Sales Tax Measure will be effective starting April 1, 2019. These revenues are placed in the
General Fund for unrestricted uses.
Analysis – FY 2016/17 marked the end of the State sales tax distributing mechanism commonly known as the triple
flip and included a $900,000 final “triple-flip” true-up payment from previous fiscal years as illustrated in the table
below. For FY 2018/19 second quarter receipts are trending behind those in the same period last fiscal year. The
reduction in receipts is associated with increased on-line sales versus brick and mortar shopping and by the
continuing impact of the reduced taxable transactions from Netflix since 2011. Staff recommends a $114,329 budget
decrease to reflect the combined effect of declining sales tax projections of $314,199 partially offset by the
anticipated addition of $200,000 collected from the additional one-eight cent sales tax during the last quarter of the
fiscal year.
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
2nd Quarter Actual Revenues 2,532,086$ 2,397,533$ 4,069,524$ 2,662,601$ 2,568,415$
Fiscal Year Total Actual Revenues 8,029,571$ 7,501,175$ 9,171,373$ 7,592,206$
Fiscal Year Budgeted Revenues 7,744,208$
2nd Quarter Percent of Total 32%32%44%35%33%
Recommended Budget Revision (114,329)$
SALES TAX
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total
Actual Revenues
Fiscal Year Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
6
Franchise Fees
Franchise fees are collected by the Town for the privilege of operating a utility service within Los Gatos, and as a fee
in lieu of a business license tax. Franchise fees are currently received from Comcast for cable television, PG&E for
gas and electric services, West Valley Collection and Recycling for solid waste collection services, and AT&T and
Comcast for video services. Franchise fees represent 4.1% of budgeted General Fund revenues in FY 2018/19.
Analysis – Historically, franchise payments are not remitted equally throughout the fiscal year; therefore second
quarter receipts are not necessarily predictive of future receipts. Total franchise fee revenues are trending slightly
higher than those of the second quarter in FY 2017/18. Staff recommends no budget adjustment to this revenue
source.
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
2nd Quarter Actual Revenues 735,550$ 755,451$ 794,077$ 832,583$ 840,555$
Fiscal Year Total Actual Revenues 2,063,756$ 2,258,892$ 2,366,908$ 2,474,814$
Fiscal Year Total Budgeted Revenues 2,386,910$
2nd Quarter Revenue Percent of Total 36%33%34%34%35%
Recommended Budget Revision
Franchise Fees
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Total Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
7
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. Fees for
activities such as wholesale sales and manufacturing are charged on a sliding scale based on gross receipts, as is retail,
and retail is capped at $975. These 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 pro-rated by quarter.
Analysis – As a result of the projected increase in economic activity, business license tax revenue for the current fiscal
year was budgeted slightly higher than the prior year. Second quarter revenues are trending higher compared to
prior year second quarter revenue. FY 2014/15 actual revenues reflected below include a one-time prior year
adjustment for business license tax collection from Netflix. This adjustment was due to a reclas sification that
happened in the first quarter of FY 2014/15. Current year revenues are trending in line with prior results. Staff
recommends no budget adjustment to this revenue source.
FY 14/15 FY 15/16 FY 16/17
2nd Quarter Actual Revenues $ 945,846*$ 870,249**435,696$ 199,045$ 240,293$
Fiscal Year Total Actual Revenues 1,130,020$ 1,465,547$ 1,720,980$ 1,686,251$
Fiscal Year Total Budgeted Revenues 1,650,000$
2nd Quarter Revenue Percent of Total 59%53%59%12%15%
Recommended Budget Revision
* Incudes "one-time" prior years adjustments due to Netflix recalssification to E-Commerce business
** Includes 2014 actual gross receipt adjustment for Netflix at the first time
Business License Tax
FY 17/18 FY 18/19
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Total
Budgeted Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
8
Transient Occupancy Tax
The Town levies a 12% transient occupancy tax (TOT) on all hotel and motel rooms within the municipal limits of Los
Gatos. This tax helps to fund Town services provided to visitors to Los Gatos. At the November 8, 2016 election, the
Town of Los Gatos residents approved a ballot measure increase in the TOT from 10% to 12%. The 12% rate was
effective from January 1, 2017.
Analysis – Visit California reported that the total number of visitors to California grew 2% in 2017 and the forecast for
California visitation is an increase of 2.9% in 2018. Personal and business related travel has remained strong in the
Bay Area. Second quarter TOT revenues are trending higher than those of the second quarter of 2017/18. Based on
the positive trend and the continued effect of the increased TOT rate, staff is recommending a budget increase of
$350,000.
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
2nd Quarter Actual Revenues 882,406$ 766,651$ 817,061$ 917,019$ 994,581$
Fiscal Year Total Actual Revenues 1,512,846$ 1,943,166$ 2,322,910$ 2,628,927$
Fiscal Year Total Budgeted Revenues 2,386,910$
2nd Quarter Revenue Percent of Total 58%39%35%35%42%
Recommended Budget Revision 350,000$
Transient Occupancy Tax
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Total Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
9
Interest Income
The Town earns interest income by investing monies not immediately required for daily operations in a number of
fixed income and money market instruments. These investments are made within the parameters stated in the Town
Council’s Investment Policy. The Town’s investment goal is to achieve a competitive rate of return while protecting
the safety of its funds. Interest income revenue is primarily dependent on two factors: the cash balance in the Town’s
investment portfolio and the yield on those funds.
Analysis – Second quarter receipts are trending above those in the same period in the prior fiscal year. Financial
analysts throughout the market are predicting a slight increase in yields. The increase of the interest earnings
experienced this fiscal year are reflective of the Town’s total portfolio yield increasing from 1.53% as of December 31,
2017 to the current yield of 1.94% as of December 31, 2018.
Because of the interest forecast, staff is continuing to focus on the purchase of new short -term (two years or less in
maturity) investments as the reward for longer term investments in the three to five year maturity do not have
adequate spreads to justify the additional risk of holding longer term maturities. While the current trend shows a
slight increase staff recommends no budget adjustment at this time.
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
2nd Quarter Actual Revenues 146,723$ 146,500$ 197,065$ 284,009$ 422,729$
Fiscal Year Revenues 430,476$ 310,887$ 401,961$ 603,016$
Fiscal Year Total Budgeted Revenues 378,724$
2nd Quarter Revenue Percent of Total 34%47%49%47%112%
Recommended Budget Revision
Interest Income
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Revenues
Fiscal Year Total Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
10
Charges for Services
Town Service revenues consist primarily of planning, building, inspections, and engineering fees assessed on local
building and development activity. Development fees and charges are assessed based on recovery formulas, which
reflect approximate costs of providing these regulatory services.
Analysis – Second quarter Town Service revenues, specifically Charges for Services, are trending in line in the second
quarter compared to the previous fiscal year, with 52% of budgeted revenues already received. Typically
development fees are collected in advance for projects and recognized as revenue in the fiscal year the work is
performed. Staff recommends no budget adjustment to this revenue source.
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
2nd Quarter Actual Revenues 1,329,584$ 199,836$ 1,885,794$ 2,063,371$ 2,304,693$
Fiscal Year Total Actual Revenues 3,978,125$ 3,458,531$ 3,454,666$ 4,625,136$
Fiscal Year Total Budgeted Revenues 4,461,638$
2nd Quarter Revenue Percent of Total 33%6%55%45%52%
Recommended Budget Revision
Charges for Services
$-
$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
$5,000,000
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Total Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
11
Licenses and Permits
Licenses and Permits consist mainly of planning and building permit fees which are collected by the Town to offset
administrative costs associated with evaluating development proposals to ensure compliance with codes and policies .
Licenses and Permit revenue was budgeted slightly higher than FY 2017/18 in anticipation of the North 40 permitting
process development activity.
Analysis – Second quarter License and Permit revenue is trending 51% of budgeted revenue similar to and slightly
higher than second quarter results from the previous fiscal year. Staff recommends no budget adjustment to this
revenue source.
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
2nd Quarter Actual Revenues 2,259,700$ 1,958,363$ 1,870,955$ 1,498,964$ 1,700,352$
Fiscal Year Total Actual Revenues 3,206,310$ 3,512,019$ 3,042,166$ 3,011,309$
Fiscal Year Total Budgeted Revenues 3,311,429$
2nd Quarter Revenue Percent of Total 70%56%62%50%51%
Recommended Budget Revision
Licenses & Permits
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Total Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
12
FY 2018/19 Recommended Budget Adjustments
Budget adjustments are recommended for the following revenues and expenditures at the second quarter:
Fund Program Account
111 1201 411XX Property Tax 526,030$
111 1201 41141 Motor Vehicle In Lieu Fee 203,187
111 1201 41211 Sales & Use Tax (114,329)
111 1201 41311 Transient Occupancy Tax 350,000
111 3301 45953 SB 1186 ADA Training 16,000
111 4201 45919 Lease for PD Tower - SVRCS Reimbursement 5,000
111 4302 44512 Crossing Guard Services - Reimbursements from Schools 7,548
111 4811 43213 Department of Justice Grant 5,941
TOTAL GENERAL FUND REVENUES 999,377$
Fund Program Account
111 2201 63214 Liebert Cassidy Whitmore - Special Services 16,000$
111 3301 64232 ADA Training 16,000
111 4201 62522 Lease for PD Tower 5,000
111 4301 64291 Tuition Reimbursement per MOU 11,350
111 4302 63342 Crossing Guard Services 9,475
111 4811 61145 Safety Uniforms 5,941
111 5301 62376 Pest Control 4,340
111 5302 63219 Special Studies - Well Testing & Monitoring 11,959
TOTAL GENERAL FUND EXPENDITURES 80,065$
FY 2018/19 MID-YEAR BUDGET ADJUSTMENT REQUESTS - GENERAL FUND
General Fund Revenues
General Fund Expenditures
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
13
Fund Program Account Other Fund Revenues -
411
411 411-xxx-xxxx 49633 Police Headquarter Building Roof Repair- from Facilities 50,000
50,000$
481
481 481-811-9901 82405 Decreased Gas Tax Revenue Projections for Street Repair (178,776)
(178,776)$
711
711 7301 45452 Additional Revenue from the Friends of the Library 9,500
9,500$
TOTAL OTHER FUNDS REVENUES (119,276)$
Fund Program Account
411
411 411-xxx-xxxx 82405 Police Headquarters Roof 50,000
50,000$
481
481 481-811-9901 82405 Decreased Gas Tax Revenue Projections for Street Repair (178,766)
(178,766)$
633
633 5404 63332 Software License & Maintenance 12,500
99411 Police Headquarter Roof Repair 50,000
62,500$
711
711 7301 624xx Additional Programs supported by the Friends of the Library 9,500
9,500$
TOTAL OTHER FUNDS EXPENDITURES (56,766)$
Library Trust
GFAR
Gas Tax
Gas Tax
GFAR
FY 2018/19 MID-YEAR BUDGET ADJUSTMENT REQUESTS - OTHER FUNDS
Facilities Maintenance
Library Trust Fund
Other Fund Expenditures
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
14
SUMMARY OF KEY RECOMMENDED BUDGET ADJUSTMENTS
General Fund Revenues and Expenditures
▪ General Property Tax and Motor Vehicle in Lieu Fee: Staff recommends an increase in projected revenues
of approximately $526,030 in General Property Tax and $203,187 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 $114,329 budget decrease to reflect the combined effect of
declining sales tax projections of $314,199 partially offset by the anticipated addition of $200,000 from the
additional one-eight cent sales tax during the last quarter of the fiscal year.
▪ Transient Occupancy Tax: Actual receipts and Visit California forecasts indicate steady growth in travel
thereby staff recommends recognizing a revenue increase of $350,000.
▪ Americans with Disabilities Act (ADA) Training: ADA training is funded through SB1186 State Mandated Fee,
which is collected with every business license and placed in a deferred revenue account. Staff recommends
revenue and expenditure budget increases of $16,000 to provide ADA training for the Community
Development Building Division staff.
▪ Silicon Valley Regional Interoperability Authority (SVRIA): Staff recommends revenue and expenditure
budget increases of $5,000 to recognize continued infrastructure developments at the Stickney radio site
located at 40 Fairview Plaza, Los Gatos.
▪ Crossing Guard Services: The Town contracts with All City Management Services, Inc. to provide crossing
guard services at selected school crossing locations within Los Gatos. Costs for these services are shared
between the Town and Los Gatos Union School District and Union School District. Staff recommends $7,548
revenue budget and $9,745 expenditure budget adjustments to reflect the current contract obligations.
The net cost increase to the Town is $1,926 in FY 18/19.
▪ Patrol Uniforms: Staff recommends a $5,491 revenue and expenditure budget adjustments to recognize
awarded grant funds by the Bureau of Justice Assistance (BJA) for the 2018 Bulletproof Vest Partnership
(BVP) grant.
▪ Special Services: Staff recommends a $16,000 expenditure budget adjustment to support consultation
services related to employee relations.
▪ Tuition Reimbursement: Staff recommends a $11,350 expenditure budget adjustment to cover non-
anticipated tuition reimbursements that are mandated through the approved Memorandum of
Understanding (MOU).
▪ Pest Control Services: Staff recommends a $4,340 expenditure budget adjustment to provide funding for
the increased cost of pest services.
▪ Mandated Well Testing and Monitoring: Staff recommends an adjustment of $11,959 for well testing and
monitoring required by the County of Santa Clara. Before 1990, an underground oil tank leaked into the
surrounding soil. The Town began cleanup operations but did not complete the ongoing monitoring
element. Town staff began testing in FY 2014/15, and as a result, more testing and samples were required
by the County. The County has required that this project be closed out. The funds will be used to destroy
seven groundwater monitoring wells, two soil gas vapor probes, and all additional related work and
certification to close the case with Santa Clara Department of Environmental Health.
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
15
Other Fund Revenues and Expenditures
▪ Police Headquarter Building Roof Repair: Staff recommends a $50,000 expenditure budget increase from
available Facilities Maintenance Fund balance. The roof for the Police Headquarters wing of the civic center
has reached the end of its useful life. The roof has a history of water leaks and since the removal of the
HVAC system over the old dispatch center, the leaks have increased. This project will replace the roof with
a new roof membrane to match the museum wing roof completed in 2017.
▪ Gas Tax: Staff recommends a $178,776 revenue and expenditure budget decrease due to an updated gas
tax revenue forecast from the State of California.
▪ Police Operation Building (POB) Card Reader System Update: Staff recommends a $12,500 expenditure
budget increase from available Facilities Maintenance Fund balance. This request will augment existing
funding to install additional security card readers at POB and also replace the antiquated camera system at
POB which has become unsupported with a new system supported by The Alarm Company, the Town’s
current vendor. In FY 18/19 $20,000 was budgeted in the Facilities Maintenance Fund for software licensing
and maintenance associated with card access. The total anticipated cost for these improvements is $32,500.
▪ Library Donation: Staff recommends a $9,500 revenue and budget increase to recognize the additional
Library Trust donation for building a collection of foreign language titles for adults ($4,000), providing
additional resources for archival preservation ($1,000), and funding the purchase of a children’s activity
table in the Library ($4,500).
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
16
FINANCIAL SUMMARIES, ESTIMATES, AND RECOMMENDATIONS
General Fund
The following table is the Schedule of General Fund Operating Revenues Versus. Operating Expenditures for the
second quarter of FY 2018/19 which includes comparison information from the prior year. The last column
contains projections of final balances for the current fiscal year based upon the early trends observed through the
second quarter and the proposed mid-year adjustments.
FY 2017/18 FY 2017/18
Q2 % of
FY 2017/18
Q2 % of
FY 2018/19 FY 2018/19 FY 2018/19 FY 2018/19
Actuals Q2 Actuals Adopted Q2 Adopted Estimates
Revenues
Property Tax 12,510,822$ 4,604,788$ 36.8%38.3%4,785,479$ 12,507,071$ 13,033,101$
Sales & Use Tax 7,592,206 2,662,601 35.1%33.2%2,568,415 7,744,208 7,629,879
VLF Backfill Property Tax 3,447,584 - 0.0%0.0%- 3,482,060 3,685,247
Franchise Fees 2,474,814 832,583 33.6%35.2%840,555 2,386,910 2,386,910
Transient Occupancy Tax 2,628,927 917,019 34.9%43.8%994,581 2,272,500 2,622,500
Business License Tax 1,686,251 199,045 11.8%14.6%240,293 1,650,000 1,650,000
Licenses & Permits 3,011,309 1,498,964 49.8%51.3%1,700,352 3,311,429 3,311,429
Intergovernmental 1,010,166 367,503 36.4%45.3%310,803 685,759 691,700
Town Services 4,625,136 2,063,371 44.6%51.7%2,304,693 4,461,638 4,461,638
Fines & Forfeitures 676,212 273,170 40.4%32.9%207,631 631,400 638,948
Interest 603,016 284,009 47.1%111.6%422,729 378,724 378,724
GASB 31 to Market (358,254) (267,176) 74.6%-466.8%517,744 (110,918) (110,918)
Use of Property 32,206 - 0.0%- - -
Miscellanious Other 589,021 751,652 127.6%184.4%950,152 515,267 536,267
Debt Service - Entry Eliminated for CAFR 1,914,739 - 0.0%0.0%- 1,909,073 1,909,073
Proceeds for Sales of Assets 378,219 - 0.0%- - -
Fund Transfer In 538,536 102,000 18.9%18.9%102,000 538,536 538,536
Total Revenues & Transfers In 43,360,910$ 14,289,529$ 33%38%15,945,427$ 42,363,657$ 43,363,034$
Use of Other Funding Sources:
Use of Reserves - Capital/Special Projects 3,243,595$ -$ 0.0%0.0%-$ 2,785,220$ 2,998,931$
Use of Reserve - Pension/OPEB - 1,800,000 3,188,913 3,188,913
Total Other Funding Sources 3,243,595$ -$ 0%30%1,800,000$ 5,974,133$ 6,187,844$
Total Revenues and Use of Reserves 46,604,505$ 14,289,529$ 31%37%17,745,427$ 48,337,790$ 49,550,878$
Expenditures
Mayor and Council 192,183$ 94,520$ 49.2%44.6%99,480$ 223,036$ 231,198$
Attorney 354,205 158,095 44.6%55.1%310,194 562,723 584,490
Administrative Services 3,193,995 1,567,002 49.1%48.3%2,071,887 4,290,959 4,470,209
Community Development 4,192,165 2,012,335 48.0%37.7%2,106,707 5,590,899 5,819,124
Police 14,423,554 7,197,220 49.9%52.3%7,833,043 14,976,514 15,575,573
Parks & Public Works 7,099,527 3,422,553 48.2%50.2%3,859,545 7,684,056 7,991,484
Library 2,529,017 1,289,625 51.0%50.1%1,280,304 2,556,267 2,652,856$
Total Department Expenditures 31,984,646$ 15,741,350$ 49%49%17,561,160$ 35,884,454$ 37,324,934$
General Government 5,029,699$ 805,624$ 16.0%37.2%2,622,053$ 7,043,251$ 7,043,251$
Debt Service - Entry Eliminated for CAFR 1,914,739 - 0.0%0.0%- 1,909,073 1,909,073
Transfers Out 3,243,595 - 0.0%0.0%- 2,785,220 2,844,024
Total Non-Departmental Expenditures 10,188,033$ 805,624$ 8%22%2,622,053$ 11,737,544$ 11,796,348$
Total Operating Expenditures 42,172,679$ 16,546,974$ 39%42%20,183,213$ 47,621,998$ 49,121,282$
Net Operating Revenues 4,431,826$ (2,257,445)$ (2,437,786)$ *715,790$ 429,594$
* FY 2018/19 Q2 Net Operating Revenues are negative because some revenues budgeted for the entire fiscal year are received in the third or fourth quarters.
General Fund
Fund 111
SUMMARY OF REVENUES AND EXPENDITURES
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
17
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 and
Lighting District Funds. The revenue from the Non-Point Source Program fund continues to lag expenses. This largely
results from increased requirements associated with the Town’s storm water permit, including increased inspections
and monitoring, trash reduction requirements, and administrative costs. Staff has developed a plan to move the
program toward a sustainable cost recovery model as part of the FY 2017/18 budget process. As indicated in the
chart below, Non-Point Source fund balance is negative. It is anticipated that revenues for the Non-Point Source
program will be received by the end of the fiscal year and therefore no budget adjustment is being recommended at
this time. Staff will continue to monitor these revenue funds to ensure payments are received.
CDBG Non-Point LLD's
Grants Source
Beginning Fund Balance 166,654$ 71,339$ 198,685$
Budgeted Revenues - 584,394 39,680
Total Actual Revenues - 2nd Qtr -$ 101,513$ -$
Budgeted Expenditures - 559,482 112,830
Total Actual Expenditures - 2nd Qtr - 308,731 12,871
2nd Quarter Ending Fund Balance 166,654$ (135,879)$ 185,814$
Special Revenue Funds
Budget to Actuals Comparisons
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
18
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. Capital Projects
Funds are generally tracking in accordance with the FY 2018/19 adopted budget. Staff recommends increasing GFAR
revenue budget by $50,000 to recognize the transfer from Facilities Maintenance Fund to cover the Police
Headquarter Building Roof Repair and the expenditure budget adjustment for the same project. Staff recommends
to decrease both gas tax revenue and expenditure by $178,776 to match current Gas Tax estimates. Staff will
continue to monitor these expenditures throughout the remainder of the year. The Grant Funded CIP fund displays
a deficit balance because this grant fund expends Town dollars first, then provides documentation of these
expenditures to the State of California or other granting agencies and is reimbursed for those costs. The
reimbursements eventually result with the fund “breaking even” or a zero fund balance.
GFAR*Traffic *Grant Funds*Storm Utility Gas
Fund Mitigation CIP Drains Undergd Tax
Beginning Fund Balance 12,175,060$ 2,421,723$ (134,112)$ 2,485,998$ 2,997,984$ 703,149$
Budgeted Revenues 4,964,695 1,370,384 1,080,928 101,110 44,310 1,324,204
Total Actual Revenues - 2nd Qtr 694,013 8,779 85,718 92,083 16,663 448,541
Budgeted Expenditures 16,117,435 1,380,384 2,795,570 203,058 2,330,000 1,787,981
Total Actual Expenditures - 2nd Qtr 3,614,578 84,097 317,257 - - 999
2nd Quarter Ending Fund Balance 9,254,495$ 2,346,405$ (365,651)$ 2,578,081$ 3,014,647$ 1,150,691$
Capital Project Funds
Budget to Actuals Comparisons
* GFAR, Traffic Mitigation, and Grant Funds balances are combined in the CAFR. The combined balance of $12,301,4321 is
presented as an Appropriated Reserve. The Traffic Mitigation Fund balance includes $2,161,239 deferred revenue.
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
19
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, Association of Bay Area Governments (ABAG) Self-
Insurance Fund, Office Stores Fund, Management Information Systems Fund, Vehicle Maintenance Fund, and the
Facilities Maintenance Fund.
Staff recommends a $62,500 budget adjustment to cover the Police headquarter Roof Repair and the additional cost
to update the Police Operational Building card access system. Staff will continue to monitor expenditures and propose
a revised cost allocation if needed, during FY 2019/20 budget preparation.
Equipment Workers Self Office Information Vehicle Facility
Replacemt Comp Insurance Stores Technology Maint.Maint.
Beginning Fund Balance 2,328,273$ 620,727$ (*)994,769$ (*)227,791$ 2,161,808$ (*)262,790$ (*)245,436$
Budgeted Revenues 1,070,000 878,386 376,187 118,000 334,478 379,655 1,209,089
Total Actual Revenues - 2nd Qtr 325,826 659,707 159,889 64,879 191,132 188,329 607,197
Budgeted Expenditures 1,665,187 1,218,202 641,361 134,500 1,224,791 376,655 1,151,086
Total Actual Expenditures - 2nd Qtr 242,254 967,285 362,788 36,775 295,031 112,558 396,920
2nd Quarter Ending Fund Balance 2,411,845$ 313,149$ 791,870$ 255,895$ 2,057,909$ 338,561$ 455,713$
15%79%57%27%24%30%34%
(*) Reflects CAFR Net Position Adjusted for Net Pension Liability
Internal Service Funds
Budget to Actuals Comparisons
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2018/19
20
Trust and Agency Funds (Fiduciary Fund Type)
Town Trust and Agency Funds have estimated fund balances as of December 31, 2019 of $584,744 for the Library
Trust Funds and $1,806,925 for the Successor Agency (SA) Trust Fund. Staff recommends a $9,500 revenue and
expenditure budget adjustment for the donation received in the Library Trust. The budget adjustments were
discussed in the budget adjustment section of this report.
Successor Agency to the Redevelopment Agency
AB1x26 is the “Dissolution Bill” that eliminated the Town’s Redevelopment Agency effective February 1, 2012. AB
1484 is the “clean-up” bill that revised and attempted to clarify AB1x26. In accordance with the law, the Successor
Agency continues to wind down the affairs and operations of the former Redevelopment Agency by implementing
programs and activities in accordance with the State-approved Recognized Obligation payment Schedule (ROPS). The
Successor Agency monies are now accounted for in a Private P urpose Trust fund and no longer part of the Town’s
Financial Statements.
CONCLUSION
The financial results from the prior fiscal year, coupled with the FY 2018/19 second quarter data, confirm that the
second quarter financial results are stable and improving. Staff is actively engaged in the 2019/20 budget process
with the primary focus of ensuring that the available Town resources are allocated to meet the priority service needs
of the community.
Library SA
Trust Trust
Beginning Fund Balance 535,744$ 3,348,443$
Budgeted Revenues 78,650 3,828,296
Total Actual Revenues - 2nd Qtr 64,668 1,909,073
Budgeted Expenditures 73,500 3,831,229
Total Actual Expenditures - 2nd Qtr 16,387 3,450,591
2nd Quarter Ending Fund Balance 584,025$ 1,806,925$
22%90%
Trust & Agency Funds
Budget to Actuals Comparisons
* Certification of Participation Long Term Debt ($16,530,000) and net land and
building value ($6,884,507) are not presented in the Fund Balance