08 Attachment 1 - Budget Performance Report for the Six Months Ending December 31 2019BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
1
INTRODUCTION
Purpose
This Mid-Year Report covers the first and second
quarters for Fiscal Year (FY) 2019/20, reflecting the
six-month period ending December 31, 2019. 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.
Overview
This Mid-Year Report presents an overview of the
Town’s operating revenues and expenditures for the
period ending December 31, 2019 as compared to
previous years and explains any notable changes or
trends in these numbers. The 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
are final until the Town has completed its annual
comprehensive audit and finalized its Comprehensive
Annual Financial Report (CAFR), which is released
annually in early December 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. This report adjusts
property and sales tax revenue projections and the
revenues listed in on page 12.
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. A
more detailed analysis of anticipated year-end
estimates is part of the Proposed FY 2020/21
Operating Budget. This represents a snapshot of
Town expenditures at a certain point in time and does
not reflect final adjustments completed for the
Town’s CAFR.
Table of Contents
Introduction .............................................................. 1
Budget Context ......................................................... 2
Status of FY 2019/20 Adopted Budget ....... 2
Federal Economic Outlook ......................... 2
State Budget Update .................................. 2
General Fund – Key Revenue Analysis ...................... 3
General Fund – Salaries and Benefits Analysis ....... 12
FY 2019/20 Recommended Budget Adjustments ... 13
Summary of Key Recommended Adjustments ....... 14
Financial Summaries and Estimates ....................... 17
General Fund ............................................ 18
Special Revenue Funds ............................. 19
Capital projects Funds .............................. 20
Internal Service Funds .............................. 21
Trust and Agency Funds ........................... 22
Conclusion .............................................................. 22
ATTACHMENT 1
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
2
BUDGET CONTEXT
Status of FY 2019/20 Adopted Budget
Overall, second quarter FY 2019/20 General Fund
revenues are trending slightly higher than the second
quarter of Fiscal Year 2018/19. Due to some
projected revenue increases, staff is recommending a
net General Fund revenue increase of $1.1 million
from the adopted budgeted estimates, offset by $0.1
million in expenditure increases. This adjustment
does not include the $4.2 million transfer from the
Pension/OPEB Reserve to CalPERS which is described
in greater detail on page 12. The current estimates
show an increase in economically sensitive revenues
such as property tax, motor vehicle in lieu fee, and
sales tax. Revenues such as licenses and permits, and
fees for services are all trending favorably, another
indication of the strength in the economy (see
summary detail on page 17).
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 46% 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 further budget adjustments be
necessary to balance operating revenue and
expenditures, staff will advise the Council
accordingly.
Expenditure additions at this time include water
utility costs, tree lighting services, and traffic signal
updates (see page 12 for details).
The continued provision of existing service levels in
this and future fiscal years will require economically
sensitive revenues (Property, Sales, Transient
Occupancy Tax (TOT)) to keep pace with anticipated
increases in salaries and benefits and other
expenditure increases. The FY 2019/20 Adopted
Budget is the sixth budget in five years that did not
require any service reductions to balance the budget.
The FY 2020/21 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 13, 2020 publication indicated that it
expects 2019 to conclude with a real Gross Domestic
Product (GDP) growth rate of 2.3%. The report
noted that 2.3% is somewhat above its estimate of
the economy’s long-run sustainable growth rate of
slightly below 2%. Given the waning effects of
federal fiscal policy, the report projects that GDP
growth will slow towards trend (2%) by 2022. In
addition, the report noted that following the
conclusion of its December 11, 2019 meeting, the
Federal Open Market Committee announced its
decision to maintain the target range for the federal
funds rate at 1½ to 1¾%. The Committee noted that
while labor market conditions and household
spending remained strong, business fixed
investment and exports were weak.
State Budget Update
The 2020-21 Governor’s Budget proposes spending of
$222.2 billion in total state funds, consisting of
approximately $153 billion from the General Fund,
$63.8 billion from special funds, and $5.4 billion from
bond funds. The Budget continues to build reserves
and make strategic investments that promote
opportunity, address affordability, and strengthen
the State’s readiness and emergency capabilities.
The State Budget promotes enhancing California’s
ability to prevent and respond to emergencies, and
continues critical work to bring government services
into the digital age, including enhancing California’s
ability to prevent and respond to cyber threats .
After decades of underproduction, Californians
continue to face a staggering housing crisis. The
Budget includes $1.75 billion to increase housing
supply, including funding to local governments for
planning and infrastructure, an investment in the
state's housing loan program, and an expansion of
state housing tax credits. The Administration also
launched an effort to reuse excess State properties
for innovative housing projects and worked to
leverage additional capital from the private sector to
build more housing.
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
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, 2019.
All revenue sources are closely monitored and staff may recommend certain revenue adjustments based on revenue
actuals or State budget action(s).
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
4
Property Tax
Property tax is the largest revenue source for the Town’s General Fund, accounting for 31.3% of budgeted General
Fund revenues in FY 2019/20. 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 similar than those received during the second quarter
of the previous fiscal year and are at 35% of budgeted totals. Based on current County projections, staff recommends
a $302,266 increase in General Property Tax.
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
2nd Quarter Actual Revenues 4,017,963$ 4,274,774$ 4,604,788$ 4,785,479$ 5,017,946$
Fiscal Year Total Actual Revenues 10,779,448$ 11,518,257$ 12,510,822$ 13,636,099$
Fiscal Year Budgeted Revenues 14,174,700$
2nd Quarter Percent of Total 37%37%37%35%35%
Recommended Budget Revision 302,266$
PROPERTY TAX
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
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 2019/20
5
Sales Tax
Sales tax is the second largest revenue source for the Town’s General Fund, accounting for 17.7% of budgeted
General Fund revenues for FY 2019/20. The Town currently receives 1.125 cent 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 enacting a one-eight cent (0.125%) sales tax for 20 years.
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. 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 including the additional district tax. In addition, the
MuniServices estimates include additional proceeds from internet sales due to the 2018 Wayfair Court decision.
For FY 2019/20 second quarter receipts are trending higher than in the same period last fiscal year. Staff
recommends a $721,083 budget increase to reflect the MuniServices current estimates.
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
2nd Quarter Actual Revenues 2,397,533$ 4,069,524$ 2,662,601$ 2,568,415$ 2,755,208$
Fiscal Year Total Actual Revenues 7,501,175$ 9,171,373$ 7,592,206$ 8,158,152$
Fiscal Year Budgeted Revenues 8,001,917$
2nd Quarter Percent of Total 32%44%35%31%34%
Recommended Budget Revision 721,083$
SALES TAX
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total
Actual Revenues
Fiscal Year Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
6
Franchise Fees
Franchise fees are collected by the Town for the privilege of operating a utility service within Los Gatos, and as a fee
in lieu of a business license tax. Franchise fees are currently received fro m Comcast for cable television, PG&E for
gas and electric services, West Valley Collection and Recycling for solid waste collection services, and AT&T and
Comcast for video services. Franchise fees represent 5.4% of budgeted General Fund revenues in FY 2019/20.
Analysis – Historically, franchise payments are not remitted equally throughout the fiscal year; therefore, second
quarter receipts are not necessarily predictive of future receipts. Total franchise fee revenues are trending slightly
higher than those of the second quarter in FY 2018/19. Staff recommends no budget adjustment to this revenue
source.
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
2nd Quarter Actual Revenues 755,451$ 794,077$ 832,583$ 840,555$ 864,849$
Fiscal Year Total Actual Revenues 2,258,892$ 2,366,908$ 2,474,814$ 2,475,916$
Fiscal Year Total Budgeted Revenues 2,458,520$
2nd Quarter Revenue Percent of Total 33%34%34%34%35%
Recommended Budget Revision
Franchise Fees
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
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 2019/20
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,
with retail being capped at $975. These gross receipt activities account for approximately 25% of annual business
licenses, while the remaining 75% are flat fee business es. Annual renewal payments are due on January 2 of each
year. Payments for new flat-fee-based businesses are pro-rated by quarter.
Analysis – Business license tax revenue for the current fiscal year was budgeted in line with prior years based on staff
analysis. Second quarter revenues are trending lower compared to prior year second quarter revenue, due to a
Finance staff vacancy which delayed the business license renewal process. Staff anticipates collecting the majority of
the business license revenue during the third quarter. Staff recommends no budget adjustment to this revenue
source.
FY 15/16 FY 16/17 FY 17/18
2nd Quarter Actual Revenues $ 870,249*435,696$ 199,045$ 240,293$ 30,600$
Fiscal Year Total Actual Revenues 1,465,547$ 1,720,980$ 1,686,251$ 1,526,894$
Fiscal Year Total Budgeted Revenues 1,400,000$
2nd Quarter Revenue Percent of Total 53%53%59%16%2%
Recommended Budget Revision
* Includes 2014 actual gross receipt adjustment for Netflix at the first time
Business License Tax
FY 18/19 FY 19/20
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Total
Budgeted Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
8
Transient Occupancy Tax
The Town levies a 12% transient occupancy tax (TOT) on all hotel and motel rooms within the municipal limits of Los
Gatos. This tax helps to fund Town services provided to visitors to Los Gatos. At the November 8, 2016 election, the
Town of Los Gatos residents approved a ballot measure increase in the TOT from 10% to 12%. The 12% rate has been
in effect since January 1, 2017.
Analysis – CBRE Hotels Americas Research in its December 2019 Hotel Horizon report anticipates a continued
industry slowdown through 2021. According to the research, year-over-year demand is expected to decelerate,
and for occupancy levels to decrease in 2020 and 2021. For 2020, CBRE is forecasting an overall 0.7 percent
decrease in occupancy for the nation’s 60 major markets. The San Jose-Santa Cruz, market is forecast to lead the
nation in supply growth with an increase of 9.2 percent. The average number of rooms per project in the
development pipeline in San Jose-Santa Cruz is 122 rooms.
Based on the current trend staff is not recommending any change in the current fiscal year.
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
2nd Quarter Actual Revenues 766,651$ 817,061$ 917,019$ 994,581$ 910,806$
Fiscal Year Total Actual Revenues 1,943,166$ 2,322,910$ 2,628,927$ 2,692,043$
Fiscal Year Total Budgeted Revenues 2,848,730$
2nd Quarter Revenue Percent of Total 39%35%35%37%32%
Recommended Budget Revision -$
Transient Occupancy Tax
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Total Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
9
Interest Income
The Town earns interest income by investing monies not immediately required for daily operations in a number of
fixed income and money market instruments. These investments are made within the parameters stated in the Town
Council’s Investment Policy. The Town’s investment goal is to achieve a competitive rate of return while protecting
the safety of its funds. Interest income revenue is primarily dependent on two factors: the cash balance in the Town’s
investment portfolio and the yield on those funds.
Analysis – Second quarter receipts are trending above those in the same period in the prior fiscal year. During the
quarter ending December 31, 2019, the Federal Reserve Open Market Committee (FOMC) lowered interest rates 25
basis points, targeting a federal funds rate of 1.5% to 1.75%. For the calendar year, the FOMC lowered rates 25 basis
points three consecutive times. At the conclusion of the final FOMC meeting for 2019 , Federal Reserve Chairman
Powell stated, “Our economic outlook remains a favorable one despite global developments and ongoing risks .” In
addition Chairman Powell stated, “As long as incoming information about the economy remains broadly consistent
with this outlook, the current stance of monetary policy likely will remain appropriate.” Therefore, indicating that no
further rate reductions would be necessary for the foreseeable future. This recent Federal action is consistent with
staff’s strategy to extend maturity lengths on new purchases of securities to take advant age of higher yielding
securities in the 2 to 3-year maturity range. Staff recommends no change to this revenue source at this time.
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
2nd Quarter Actual Revenues 146,500$ 197,065$ 284,009$ 422,729$ 482,400$
Fiscal Year Revenues 620,895$ 401,961$ 603,017$ 801,729$
Fiscal Year Total Budgeted Revenues 739,774$
2nd Quarter Revenue Percent of Total 24%49%47%53%65%
Recommended Budget Revision
Interest Income
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues
Fiscal Year Revenues
Fiscal Year Total Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
10
Charges for Services
Town Service revenues consist primarily of planning, building, inspections, and engineering fees assessed on local
building and development activity. Development fees and charges are assessed based on cost recovery formulas,
which reflect approximate costs of providing these regulatory services.
Analysis – Second quarter Town Service revenues, specifically Charges for Services, are trending higher than in the
second quarter compared to the previous fiscal year, with 73% of budgeted revenues already received. Typically,
development fees are collected in advance for projects and recognized as revenue in the fiscal year the work is
performed. Staff anticipates that the increased use of building and engineering inspection contract services during
North 40 building activity will offset the increase in charges for services. Staff recommends no budget adjustment to
this revenue source.
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
2nd Quarter Actual Revenues 2,284,873$ 2,244,464$ 2,567,814$ 2,905,238$ 3,158,722$
Fiscal Year Total Actual Revenues 3,489,253$ 3,471,553$ 4,630,893$ 4,643,715$
Fiscal Year Total Budgeted Revenues 4,344,336$
2nd Quarter Revenue Percent of Total 65%65%55%63%73%
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
$5,000,000
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Total Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
11
Licenses and Permits
Licenses and Permits consist mainly of planning and building permit fees which are collected by the Town to offset
administrative costs associated with evaluating development proposals to ensure compliance with codes and policies .
Licenses and Permits revenue was budgeted slightly higher than FY 2018/19 in anticipation of additional North 40
permitting process development activity.
Analysis – Second quarter License and Permit revenue is trending 47% of budgeted revenue slightly lower than second
quarter results from the previous fiscal year. Staff recommends no budget adjustment to this revenue source.
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
2nd Quarter Actual Revenues 1,465,547$ 1,867,300$ 1,498,864$ 1,692,252$ 1,592,059$
Fiscal Year Total Actual Revenues 3,512,019$ 3,038,511$ 3,011,309$ 3,059,894$
Fiscal Year Total Budgeted Revenues 3,382,534$
2nd Quarter Revenue Percent of Total 42%61%50%55%47%
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
$4,000,000
FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20
Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual
Revenues
Fiscal Year Total Actual
Revenues
Fiscal Year Total Budgeted
Revenues
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
12
GENERAL FUND – SALARIES AND BENEFITS ANALYSIS
As with most municipalities, services are provided directly by employees to the Town’s residents, businesses, and
visitors. As a service delivery enterprise, the cost of salaries and benefits are a significant portion of the budget.
At mid-year, actual salaries are trending at 45% of budgeted salaries, while benefits are trending at 60% of the
Adopted Budget. Benefits are trending higher than 50% because the Town submits its entire annual normal
pension payment upfront in July 2019 as a cost savings measure. While actual vacancies vary during the course of
the fiscal year, there were 12 vacant positions as of 12/31/2019.
FY 2018/19
Actuals
FY 2018/19
2Q
Q2% of
FY 2018/19
Actuals
Q2% of
FY 2019/20
Adopted
FY 2019/20
2Q
FY 2019/20
Adopted
FY 2019/20
Adjusted
through
12/31/2019
Salaries 17,942,181$ 8,366,169$ 47%45%8,955,010$ 19,990,048$ 20,012,717$
Benefits 8,861,043$ 5,920,037$ 67%60%6,601,154$ 10,920,311$ 10,920,311$
Total Salary & Benefit 26,803,224$ 14,286,206$ 53%50%15,556,164$ 30,910,359$ 30,933,028$
FY 2018/19 Upfront Annual Payment to CalPERS in July 2018 $3,088,308
FY 2019/20 Upfront Annual Payment to CalPERS in July 2019 $3,689,063
General Fund Salaries & Benefits
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
13
FY 2019/20 Recommended Mid-Year Budget Adjustments
Budget adjustments are recommended for the following revenues and expenditures at the second quarter:
Fund Program Account
111 1201 411XX Property Tax 302,266$
111 1201 41141 Motor Vehicle In Lieu Fee 80,114
111 1201 41211 Sales & Use Tax 721,083
111 1201 41311 Miscellanious Revenue 1,555
111 4303 43338 REACT Task Force Reimbursement 40,000
111 36222 Use of Pension/OPEB Reserve 4,232,500
TOTAL GENERAL FUND REVENUES 5,377,518$
Fund Program Account
111 1201 62119 Payment to CalPERS 4,232,500$
111 5301 62613 Increased Water Utility Cost for Parks 50,000
111 5401 63364 Outdated Traffic Signal Replacement 16,156
111 5401 63364 Additional Ornamental and Bridge Lighting Services 6,521
111 5407 5111X Temporary FTE Hours from Facility Maintenance Fund 16,165
111 7101 62317 Office Equipment 1,555
TOTAL GENERAL FUND EXPENDITURES 4,322,897$
FY2019/20 MID-YEAR BUDGET ADJUSTMENT REQUESTS - GENERAL FUND
General Fund Revenues
General Fund Expenditures
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
14
Fund Program Account Other Fund Revenues -
481
481 481-811-9901 82405 Increased Gas Tax Projections for Street Repair 48,894
48,894$
711
711 7301 45452 Anticipated Donation Not Received (5,000)
(5,000)$
731
36222 Use of PARS 115 Trust Balance 5,057,367
5,057,367$
TOTAL OTHER FUNDS REVENUES 5,101,261$
Fund Program Account
232
232 5502 63363 Additional Tree Services 7,092
7,092$
235
235 5505 63363 Additional Tree Services 4,148
4,148$
481
481 481-811-9901 82405 Increased Gas Tax Projections for Street Repair 48,894
48,894$
612
2202 63323 Lock Out Tag Out Procedures Development 59,750
2202 65521 Inceased Third Party Administration Fee 40,100
99,850$
633
633 5404 63218 Temporary Hours to Facilities Maintenance staffing (16,165)
5404 82025 Civic Center Emergency Boiler Replacement 27,056
5404 82025 Adult Recreation Center Water Heater Replacement 27,000
37,891$
711
711 7301 62424 Anticipated Donation Not Received (5,000)
(5,000)$
731 1231 62119
Payment to CalPERS from the PARS Trust 5,057,367
5,360,769$
TOTAL OTHER FUNDS EXPENDITURES 5,553,644$
Library Trust
Kennedy Meadows LLD
PARS 115 Trust
Gas Tax
Vasona Heights LLD
Gas Tax
FY 2019/20 MID-YEAR BUDGET ADJUSTMENT REQUESTS - OTHER FUNDS
Facilities Maintenance
Workers Compensation
Pension Trust Fund
Library Trust Fund
Other Fund Expenditures
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
15
SUMMARY OF KEY RECOMMENDED BUDGET ADJUSTMENTS
General Fund Revenues and Expenditures
▪ Use of Pension/OPEB Reserve: Staff recommends use of the available Pension /OPEB Reserve in the amount
of $4,232,500 be transferred to the CalPERS California Employees’ Pension Prefunding Trust (CEPPT) to
make additional discretionary payments (ADPs) per direction from the Town Pension/OPEB Oversight
Committee.
▪ Sales and Use Tax: Staff recommends a $721,083 budget increase to reflect the combined effect current
trends and the one-eight cent sales tax based on MuniServices projections.
▪ General Property Tax and Motor Vehicle in Lieu Fee: Staff recommends an increase in projected revenues
of approximately $251,552 in General Property Tax and $80,114 Motor Vehicle in Lieu fee which are in line
with the estimates and forecasts provided to the Town from Santa Clara County.
▪ Regional Enforcement Allied Computer Team (REACT): Staff recommends a $40,000 revenue adjustment to
recognize the potential REACT grant proceeds. Regional Enforcement Allied Computer Team (REACT) is a
high technology/cybercrime and identity theft task force. Quarterly reimbursement is directly related to
the Los Gatos-Monte Sereno Detective assigned to the Task Force. This revenue can fluctuate depending
on the Detective’s assigned hours.
▪ Water Utility: Staff recommends a $50,000 expenditure budget increase due to increased water utility costs
for Town Parks.
▪ Temporary Facilities FTE Hours: Staff recommends $16,165 expenditure budget increase to move
temporary FTE hours inadvertently budgeted in the Facilities Maintenance Internal Service Fund.
▪ Traffic Signal: Staff recommends $16,156 expenditure budget adjustment for actual costs for replacing
outdated traffic signal controllers and a portion of the maintenance for Caltrans -owned traffic signals.
Lastly, this covers an unbudgeted solar radar purchase to replace the sign at the Pollard and Wedgewood
Road intersection.
▪ Tree Lighting Maintenance Services: Staff recommends a $6,521 budget increase due to increased cost for
ornamental tree and bridge lighting services.
▪ Emergency Stair Evacuation Chair: Staff recommends a $1,555 expenditure and revenue budget adjustment
to reflect the reimbursement revenue from the Town’s excess Workers’ Compensation Provider for
emergency stair evacuation chair purchased by the Library Department.
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
16
Other Fund Revenues and Expenditures
▪ Additional Tree Maintenance Services in Light and Landscaping Districts (LLDs): Staff recommends a $7,092
increase for tree services needed in the Kennedy Meadows LLD and $4,148 increase for tree services
needed in the Vasona Heights LLD. There are sufficient fund available to cover the additional services.
▪ Gas Tax: Staff recommends a $48,894 revenue and expenditure budget increase due to an updated gas tax
revenue forecast from the State of California.
▪ Lock Out Tag Out Procedure Development: Staff recommends a $59,750 expenditure budget increase from
available Workers Compensation Fund balance. Staff will work with safety vendor to develop Lock Out Tag
Out procedures for equipment and machinery in all Town facilities to be compliant with Cal/OSHA
regulations.
▪ Workers’ Compensation Third Party Administration Fees: Staff recommends a $40,100 expenditure budget
increase from available Workers’ Compensation Fund balance. Increase in Department of Industrial
Relations assessment based on increased claims exposure in FY 18/19.
▪ Civic Center Emergency Boiler Repairs: Staff recommends a $27,056 expenditure budget increase from
available Facilities Maintenance Fund balance. The boiler was replaced at the Civic Center when the boiler
structure failed and was unrepairable. The new boiler is now in place and operational.
▪ Adult Recreation Center Commercial Water Heater Replacement: Staff recommends $27,000 expenditure
budget adjustment for replacing the failed commercial water heater at the Adult Recreation Center and hot
water piping asbestos abatement at the Civic Center. There are sufficient funds available in the Facilities
Maintenance Fund to cover the additional expenditures.
▪ Library Donation: Staff recommends a $5,000 revenue and expenditure budget decrease since an
anticipated donation was never received.
▪ Restricted Pension Trust Fund: Staff recommends a $5,057,367 expenditure budget increase to transfer the
IRS 115 PARS Trust balance to CalPERS California Employees’ Pension Payment Trust (CEPPT) per direction
of the Town Pension/OPEB Oversight Committee. The first additional discretionary payment (ADP) of
$4,753,965 for payment of the 2016 gain/loss amortization base was transferred to CalPERS from PARS on
October 11, 2019. As of December 31, 2019, the PARS account has a residual balance of $303,402. The
balance will be transferred to CalPERS during the current Fiscal Year.
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
17
FINANCIAL SUMMARIES, ESTIMATES, AND RECOMMENDATIONS
General Fund
The following table is the Schedule of General Fund Operating Revenues Versus Operating Expenditures for the
second quarter of FY 2019/20 which includes comparison information from the prior year. The FY 2019/20 Adopted
column represents the General Fund Adopted Budget. The FY 2019/20 Adjusted column includes items that Council
approved during the course of the first two quarters of fiscal year, such as additional funding for vegetation
management grant match requirements from the available Capital/Special Project Reserve, additional funding for
Traffic Engineering Services from the available General Plan Update Deposit account, and salary adjustments for
Council appointed employees. The FY 2019/20 Estimated column contains projections of final balances for the
current fiscal year based upon the aforementioned Council actions during the current fiscal year, the early trends
observed through the second quarter in sales tax and property tax projections and the proposed mid-year
adjustments as listed in this report. The FY 2019/20 Estimated figures do not include analysis on potential salary
and other expenditure savings. More detailed analysis for the FY 2019/20 year-end estimated revenue and
expenditure numbers will be provided with the presentation of the proposed Fiscal Year 2020/21 budget.
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
18
FY 2018/19 FY 2018/19
Q2% of
FY 2018/19
Q2% of
FY 2019/20 FY 2019/20 FY 2019/20 FY 2019/20 FY 2019/20
Actuals Q2 Actuals Adopted Q2 Adopted Adjusted
Council
Action
through
12/31/2019
Estimated
Including
Mid-Year
Proposed
Revenues
Property Tax 13,636,099$ 4,785,479$ 35.1%35.4%5,017,946$ 14,174,700$ 14,174,700$ 14,476,966$
Sales & Use Tax 8,158,152 2,568,415 31.5%34.4%2,755,208 8,001,917 8,001,917 8,723,000
VLF Backfill Property Tax 3,685,247 - 0.0%0.0%- 3,795,800 3,795,800 3,875,914
Franchise Fees 2,475,916 840,555 33.9%35.2%864,849 2,458,520 2,458,520 2,458,520
Transient Occupancy Tax 2,692,043 994,581 36.9%32.0%910,806 2,848,730 2,848,730 2,848,730
Business License Tax 1,526,894 240,293 15.7%4.3%60,500 1,400,000 1,400,000 1,400,000
Licenses & Permits 3,059,894 1,692,252 55.3%47.1%1,592,059 3,382,534 3,382,534 3,382,534
Intergovernmental 950,380 310,803 32.7%41.6%410,882 988,441 988,441 1,028,441
Town Services 4,643,715 2,905,238 62.6%72.7%3,158,772 4,344,336 4,467,156 4,467,156
Fines & Forfeitures 510,266 207,631 40.7%27.8%134,707 483,950 483,950 483,950
Interest 801,729 212,238 26.5%56.4%417,197 739,774 739,774 739,774
GASB 31 to Market 643,911 517,744 80.4%114.7%(126,168) (110,000) (110,000) (110,000)
Use of Property 32,960 - 0.0%- - - -
Miscellanious Other 562,712 223,684 39.8%41.6%134,336 322,870 322,870 324,425
Park Construction Tax 6,309 - - 7,000 7,000 7,000
Debt Service - Entry Eliminated for CAFR 1,909,073 - 0.0%0.0%- 1,905,024 1,905,024 1,905,024
Closing Fund 961 to 111 - Entry Elimintated for CAFR 1,928,865 - - - - -
Proceeds for Sales of Assets 1,912,316 - 0.0%- - - -
Fund Transfer In 1,578,911 102,000 6.5%18.9%102,000 538,536 538,536 538,536
Total Revenues & Transfers In 50,715,392$ 15,600,913$ 31%34%15,433,094$ 45,282,132$ 45,404,952$ 46,549,970$
Use of Other Funding Sources:
Use of Reserves - Capital/Special Projects 2,785,220$ -$ 0.0%0.0%-$ 6,691,884$ 6,982,591$ 6,982,591$
Use of Reserve - Pension/OPEB 3,181,758 1,800,000 - - - 4,232,500
Use of Compansated Absences - - - 1,061,256 1,061,256 1,061,256
Total Other Funding Sources 5,966,978$ 1,800,000$ 30%0%-$ 7,753,140$ 8,043,847$ 12,276,347$
Total Revenues and Use of Reserves 56,682,370$ 17,400,913$ 31%29%15,433,094$ 53,035,272$ 53,448,799$ 58,826,317$
Expenditures
Mayor and Council 205,903$ 100,209$ 48.7%45.3%109,011$ 240,605$ 240,605$ 240,605$
Attorney 562,542 310,219 55.1%47.7%296,424 621,391 628,793 628,793
Administrative Services 3,931,807 2,069,839 52.6%45.8%2,204,552 4,815,138 4,830,405 4,830,405
Non- Departmental 3,304,002 827,150 25.0%30.2%1,169,739 3,873,255 3,898,255 3,898,255
Community Development 4,577,495 2,104,258 46.0%39.0%2,245,767 5,760,099 5,760,099 5,760,099
Police 14,945,407 7,832,251 52.4%50.2%8,501,570 16,940,786 16,940,786 16,940,786
Parks & Public Works 7,934,869 3,717,900 46.9%48.3%3,893,808 8,070,068 8,192,888 8,281,730
Library 2,493,617 1,280,179 51.3%51.0%1,497,419 2,935,010 2,935,010 2,936,565
Capital Outlay 38,307 - - - - -
Total Department Expenditures 37,993,949$ 18,242,005$ 48%46%19,918,290$ 43,256,352$ 43,426,841$ 43,517,238$
Debt Service - Entry Eliminated for CAFR 1,909,073$ -$ 0.0%0.0%-$ 1,905,024$ 1,905,024$ 1,905,024$
Transfers Out 2,785,220 - 0.0%0.0%- 7,753,140 8,043,847 8,043,847
Transfer to Pension Trust Fund - Entry Eliminated for CAFR 3,571,758 1,800,000 - - - 4,232,500
Total Non-Departmental Expenditures 8,266,051$ 1,800,000$ 22%0%-$ 9,658,164$ 9,948,871$ 14,181,371$
Total Operating Expenditures 46,260,000$ 20,042,005$ 43%38%19,918,290$ 52,914,516$ 53,375,712$ 57,698,609$
Excess (Deficiency) of Revenues Over Expenditures 4,455,392$ **(4,441,092)$ *(4,485,196)$ *120,756$ 73,087$ 1,127,708$
General Fund
Fund 111
SUMMARY OF REVENUES AND EXPENDITURES
** FY 2018/19 and FY 2019/20 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. See reconciliation below.
**FY 2018/19 and FY 2019/20 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.
GENERAL FUND REVENUES ABOVE EXPENDITURES FUND 111 ONLY **4,455,391.95$
ADD
Remove GF contributions to PARS Trust treated as expenditures 3,578,913.00$
Investment Earnings on PARS not included in GF Revenues Above 236,706.94$
Transfers-out not included above but in other sources in CAFR 2,785,220.00$
LESS
Proceeds from Sales of Assets included above but in other sources in CAFR (1,912,316.00)$
PARS Trust fees (Fund 731) not included in GF (7,155.09)$
Transfers-In not included above but in other sources CAFR (1,578,911.07)$
Elimination of Fund 961 FB as a negative to CAFR Revenues (1,928,864.00)$
EXCESS OF REVENUE OVER EXPENDITURES PER CAFR 5,628,985.73$
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
19
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 (LLD) 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. Staff will
continue to monitor these revenue funds to ensure payments are received. Staff recommends $11,240 expenditure
budget adjustments to provide additional tree maintenance services for the Kennedy meadows and Vasona Height
L&L Districts.
CDBG Non-Point LLD's
Grants Source
Beginning Fund Balance 166,653$ 159,451$ 208,137$
Budgeted Revenues - 594,394 39,680
Total Actual Revenues - 2nd Qtr -$ 96,385$ -$
Budgeted Expenditures - 579,173 101,513
Total Actual Expenditures - 2nd Qtr - 79,197 11,610
2nd Quarter Ending Fund Balance 166,653$ 176,639$ 196,527$
Special Revenue Funds
Budget to Actuals Comparisons
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
20
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
increasing both gas tax revenue and expenditure by $48,984 to match current Gas Tax estimates. Staff will continue
to monitor these revenues and expenditures throughout the remainder of the year. The Grant Funded CIP fund
displays a deficit balance because this grant fund expends Town dollars first, then provides documentation of these
expenditures to the State of California or other granting agencies and is reimbursed for those costs. The
reimbursements eventually result with the fund “breaking even” or a zero fund balance.
GFAR*Traffic *Grant Funds*Storm Utility Gas
Fund Mitigation CIP Drains Undergd Tax
Beginning Fund Balance 8,518,983$ 2,551,088$ (255,636)$ 2,628,557$ 3,079,685$ 853,820$
Budgeted Revenues 13,177,383 2,218,282 3,211,080 104,540 52,490 1,375,804
Total Actual Revenues - 2nd Qtr 983,474 - 74,006 80,583 9,521 582,528
Budgeted Expenditures 20,162,008 2,238,282 3,472,206 321,058 2,449,201 1,907,282
Total Actual Expenditures - 2nd Qtr 1,195,026 25,998 168,900 7,175 - 688,096
2nd Quarter Ending Fund Balance 8,307,431$ 2,525,090$ (350,530)$ 2,701,965$ 3,089,206$ 748,252$
Capital Project Funds
Budget to Actuals Comparisons
* GFAR, Traffic Mitigation, and Grant Funds balances are combined in the CAFR. The combined balance of $10,814,435 is
presented as an Appropriated Reserve. The Traffic Mitigation Fund balance includes $2,246,441 deferred revenue.
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
21
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 $37,891 expenditure budget adjustment to cover the Civic Center Emergency Boiler
Replacement, the Adult Recreation Center Water Heater replacement, and to remove temporary FTE hours
inadvertently budgeted in the Facilities Maintenance Fund. In addition, staff recommends expenditure adjustments
in amount of $99,850 from the available Workers’ Compensation Fund to develop a Lock Out Tag Out Safety
Procedure and increased Workers’ Compensation Administration expenditures based on increased claims exposure
in FY 2018/19. Staff will continue to monitor expenditures and propose a revised cost allocation if needed during the
FY 2020/21 budget preparation.
Equipment Workers Self Information Facility
Replacemt Compensation Insurance Technology Maint.
Beginning Fund Balance 2,808,804$ 843,080$ 1,313,304$ 2,518,467$ 970,786$
Budgeted Revenues 229,093 2,087,485 443,727 859,223 1,173,757
Total Actual Revenues - 2nd Qtr 136,535 478,543 192,559 533,260 571,110
Budgeted Expenditures 2,186,240 1,657,210 680,137 955,575 1,961,752
Total Actual Expenditures - 2nd Qtr 70,654 758,429 407,246 315,031 470,924
2nd Quarter Ending Fund Balance 2,874,685$ 563,194$ 1,098,617$ 2,736,696$ 1,070,972$
3%46%60%33%24%
Internal Service Funds
Budget to Actuals Comparisons
BUDGET PERFORMANCE REPORT – MID-YEAR FY 2019/20
22
Trust and Agency Funds (Fiduciary Fund Type)
Town Trust and Agency Funds have estimated fund balances as of December 31, 2019 of $582,230 for the Library
Trust Funds and $2,807,395 for the Successor Agency (SA) Trust Fund. Staff recommends a $5,000 revenue and
expenditure budget decrease in the Library Trust since an expected donation was never received.
Successor Agency to the Redevelopment Agency
AB1x26 is the “Dissolution Bill” that eliminated the Town’s Redevelopment Agency effective February 1, 2012. AB
1484 is the “clean-up” bill that revised and attempted to clarify AB1x26. In accordance with the law, the Successor
Agency continues to wind down the affairs and operations of the former Redevelopment Agency by implementing
programs and activities in accordance with the State-approved Recognized Obligation payment Schedule (ROPS). The
Successor Agency monies are now accounted for in a Private P urpose Trust fund and no longer part of the Town’s
Financial Statements.
CONCLUSION
The financial results from the prior fiscal year, coupled with the FY 2019/20 first and second quarter data, confirm
that the mid-year financial results are stable and improving. Staff is actively engaged in the 2020/21 budget process
with the primary focus of ensuring that the available Town resources are allocated to meet the priority service needs
of the community.
Library SA
Trust Trust
Beginning Fund Balance 538,015$ 2,807,505$
Budgeted Revenues 74,150 3,823,202
Total Actual Revenues - 2nd Qtr 61,784 -
Budgeted Expenditures 128,255 3,823,202
Total Actual Expenditures - 2nd Qtr 17,569 110
2nd Quarter Ending Fund Balance 582,230$ 2,807,395$
14%0%
Trust & Agency Funds
Budget to Actuals Comparisons