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Desk Item PREPARED BY: STEPHEN CONWAY 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: 05/16/2017 ITEM NO: 7 DESK ITEM DATE: MAY 16, 2017 TO: MAYOR AND TOWN COUNCIL FROM: LAUREL PREVETTI, TOWN MANAGER SUBJECT: OPERATING AND CAPITAL BUDGETS A. CONSIDER THE TOWN OF LOS GATOS PROPOSED OPERATING AND CAPITAL BUDGET FOR FISCAL YEAR (FY) 2017/18 B. CONSIDER THE TOWN OF LOS GATOS PROPOSED CAPITAL IMPROVEMENT PROGRAM FOR FY 2017/18 – FY 2012/22 REMARKS: After the release of the staff report and budget documents, staff found a typographical error. The Workers’ Compensation Internal Service Fund revenue was published at $696,547 in error. The correct figure is $969,547. There is no General Fund implication of the typographical error; however, the Workers’ Compensation year end fund balance and the total Town year end fund balance should be $273,000 higher. Staff will bring forward the corrected number with the budget adoption and include the correction into the final budget document. In addition, a Council Member’s question regarding the Forbes Mill Footbridge Improvements Project helped staff realize that the project description was incomplete as published. Attachment 5 contains the replacement page and clarifies that the project includes new children’s artwork. Below are responses to other Council inquiries regarding the proposed budget documents. PAGE 2 OF 4 SUBJECT: OPERATING AND CAPITAL BUDGETS DATE: MAY 16, 2017 S:\COUNCIL REPORTS\2017\05-16-17\Budget\Staff Report Desk Item FINAL.docx 5/16/2017 12:44 PM SLL REMARKS (cont’d): 1. What are the current versus desired levels of the equipment and facilities funds? The desired level of the Equipment Replacement Fund is $2,500,000. The FY 2017/18 estimated year end fund balance is $1,717,320. Staff is recommending that $300,000 of the Almond Grove excess be added to this Fund. The Equipment Replacement Fund allows the Town to replace vehicles and equipment using funds that were previously set aside by Departments. While replacement schedules can be adjusted to extend the useful life of the vehicles, it is very important to keep safety and reliability of Town equipment as primary drivers of the replacement schedules. The desired level of the Facilities Maintenance Fund is $900,000. The FY 2017/18 estimated year end fund balance is $489,596. Staff is recommending that $300,000 of the Almond Grove excess be added to this Fund. The Fund pays for major repairs to aging Town Facilities. 2. What is the priority list for the $2 million used in the Strategy Reserve as noted on page C- 23? What is the expected use of the balance of $600,000? Staff recommended the combined use of Almond Grove Surplus and Strategy Reserve ($5.5 million) as summarized below: The capital needs list includes items that Council identified in the January Priority Setting Session and needs identified by staff. The complete list of items with the proposed capital funding are included below: General Fund Use - One Time 446,595$ Traffic & Mobility Manager 217,808 Capital Projects 1,864,419 Budget Stabilization & Catastrophic Reserve 663,882 CalPERS/OPEB Reserve 1,000,000 General Fund Capital Reserve 703,496 Facilities Fund 300,000 Equipment Replacement Fund 300,000 Total Use 5,496,200$ Proposed Use of Funds PAGE 3 OF 4 SUBJECT: OPERATING AND CAPITAL BUDGETS DATE: MAY 16, 2017 S:\COUNCIL REPORTS\2017\05-16-17\Budget\Staff Report Desk Item FINAL.docx 5/16/2017 12:44 PM SLL REMARKS (cont’d): The $600,000 currently listed under the Strategy Reserve is the proposed transfers to the Equipment Replacement and Facilities Maintenance Funds. If Council desires to replenish those Funds, the General Fund Strategy Reserve will decrease by $600,000 and the Facilities Maintenance and Equipment Replacement Funds will each increase by $300,000. The Council created the Strategy Reserve in 2017 with FY 2015/16 year end savings. Based on prior Council action, $300,000 was also transferred to the CalPERS/OPEB Reserve at that time. Per the General Fund Reserve Policy, staff will transfer an additional $300,000 to the CalPERS/OPEB Reserve from available year end savings upon closing FY 2016/17. 3. Why are all response times longer (page D-149)? The figures stated for FY 2017/18 are goals that have been in place for the last couple of years. The Police Department’s performance consistently exceeds the goals with faster response times as shown in the table on page D-149. 4. Why are we using GFAR instead of the Strategy Reserve for the Mobility Manager (page D - 184)? The Transportation and Mobility Manager position is funded from the Strategy Reserve in FY 2017/18. The Strategy Reserve provides only the first year of funding for the position. The position is tracked under General Fund Appropriated Reserves (GFAR) in anticipation of future VTA funds to cover eligible administration costs related to delivering transportation projects. 5. Why are costs rising so much from $673,000 to $808,000 on page D-194? Footbridge Lighting Project 45,000$ Public Arts - Gateway Project 25,000$ Bicycle & Pedestrian Improvements 300,000$ Cut-Through Traffic Mitigation 300,000$ Stromwater Master Plan 200,000$ Stormwater System - Pollution Prevention Compliance 300,000$ HVAC Chiller Repair 125,000$ Belgatos Park Restroom Improvements 25,000$ Annual Curb, Gutter & Sidewalk (Item 5 May,2 2017)114,419$ Stonybrook/Kennedy Sidewalk Repair - Additional Funding 130,000$ Street Maintenance - FY 2017/18 Additional Funding 300,000$ Total Capital Projects Funding 1,864,419$ Capital Projects PAGE 4 OF 4 SUBJECT: OPERATING AND CAPITAL BUDGETS DATE: MAY 16, 2017 S:\COUNCIL REPORTS\2017\05-16-17\Budget\Staff Report Desk Item FINAL.docx 5/16/2017 12:44 PM SLL The Engineering Development Services Program’s FY 2016/17 budget was $753,496. The $673,234 represents the estimated cost for FY 2016/17. The year -end estimate was based on available information in early March. The actual number will be determined at the close of the fiscal year after the audit in October. The FY 2017/18 budget increased by $54,638 or 8 % from the FY 2016/17 budgeted expenditures. The change includes increases in salaries and benefits, and the increased cost of providing mandatory utility locator services. In addition, the program includes $18,000 expenditure and revenue for map check fees that previously were tracked under the Pass-Through Program. Attachments 1-3 (Previously distributed on May 11, 2017): 1. FY 2017/18 Proposed Operating and Capital Budget 2. FY 2017/18 – FY 2021/22 Proposed Capital Improvement Program Budget 3. Town of Los Gatos Donation Opportunities: FY 2017/18 List of Town Needs Attachment 4 (Previously received with Addendum on May 15, 2016): 4. Public Comments Attachment 5 received with this Desk Item: 5. Replacement page D - 14of the FY 2017/18 – FY 2021/22 Proposed Capital Improvement Program.