12 Attachment 11
TOWN OF LOS GATOS
MID-YEAR BUDGET REPORT
JULY 1 - DECEMBER 31, 2020
February 11, 2021
FINANCIAL OVERVIEW AND EXECUTIVE SUMMARY: STATUS OF FY 2020/21 ADOPTED BUDGET
The purposes of the Mid-Year Report are to provide the Town Council with a status of the
Adopted Fiscal Year 2020/21 Operating Budget after the first six months and to make any
adjustments to ensure the continuity of municipal services and operations for the remainder of
the fiscal year. The Report is one of several periodic updates to the Town Council on the status
of the current year’s revenues and expenditures and the projected financial condition of all
Town funds compared with the Adopted Operating Budget. The updates typically focus on the
Town’s General Fund.
On January 26, 2021, the Town Council determined the Strategic Priorities for 2021-2023,
providing guidance to Town staff and Commissions on workload prioritization. The Town
Council reaffirmed its Core Goals, including: Community Character, Good Governance, Fiscal
Stability, Quality Public Infrastructure, Civic Enrichment, and Public Safety. Even with the
significant budgetary challenges associated with the COVID-19 pandemic, many of Council’s
primary goals and priorities will continue to be programed in the FY 2021-22 Operating and
Capital Budgets. Specifically, the Council emphasized wildfire safety; senior services; diversity,
equity, and inclusion; sustainability; implementing parking study recommendations; and
exploring increased revenue options (see the following page).
Based on the Town Council’s identified Strategic Priorities, staff has started budget
development work, including an update of the Five-Year Financial Forecast, identification of
critical Town needs, contractual obligations, unfunded mandates, potential adjustments to the
Fee and Fine Schedule, and other analyses. Staff is actively engaged in the 2021/22 budget
process with the primary focus of ensuring that the available Town resources are allocated to
meet the priority service needs of the community. The Town Council is scheduled to hold a
public hearing on the Proposed FY 2021/22 Budget on May 18, 2021.
Current fiscal year-end projections for FY 2020/21 reflect an anticipated $1.2 million deficit of
operating revenues over expenditures. This represents a 2.3% deviation from the FY 2020/21
adjusted General Fund Budget of $53.3 million in total revenues and reserve transfers.
ATTACHMENT 1
2
3
Revenues
Expenses
Variance FY
2020/21 Budget vs.
FY 2020/21
Estimate
Total General
Fund
($2,603,789)
$1,565,612
($1,232,566)
As discussed in greater detail later in this Report, the primary driver of the projected deficit is
projected reductions in the key revenues of Property Tax, Sales Tax, Business License Tax, and
Transient Occupancy Tax (TOT). ln contrast to the revenue projections, staff is estimating that
there will be year-end operating expenditure savings. Staff anticipates savings attributable to
reduced use of office supplies, travel restrictions, special event cancellations, and limited
crossing guard services due to school closures. In addition, for FY 2020/21, salaries were
budgeted at actual salary plus a one step increase, which was a significant budgeting
methodology change from previous practice. As a result, staff is anticipating lower year-end
salary savings compared to previous years.
With current projected deficits into the close of FY 2020/21, staff presented several initial
budget balancing options to the Finance Commission on February 8, 2021. Given the episodic
nature of the revenue impacts associated with the pandemic, staff is primarily targeting one-
time budget balancing solutions for FY 2020/21. If revenue impacts during FY 2021/22 appear
to become more sustained/structural in nature (such as TOT), staff will evaluate initial ongoing
expense reduction options. In the event further expense reductions become necessary, the
Council may choose to direct staff to initiate community-wide discussions regarding potential
changes in service levels in addition to exploring new revenue generation opportunities as
identified in the Council’s Strategic Priorities.
Following are the legally available options for consideration:
1. General Fund Reserve Policy – Catastrophic and Budget Stabilization Reserves
The revenue shortfalls directly correlated to the pandemic could be cured utilizing the
Catastrophic and/or Budget Stabilization Reserves per the Council adopted General fund
Reserve Policy. The Policy language describing the Reserves is presented below for reference.
Catastrophic Reserve
Funds reserved under this category shall be used to mitigate costs associated with unforeseen
emergencies, such as a disaster or catastrophic event. Should unforeseen and unavoidable
events occur that require the expenditure of Town resources beyond those provided for in the
annual budget, the Town Manager or designee shall have authority to approve Catastrophic
Reserve appropriations. The Town Manager or designee shall then present to the Town Council
a budget amendment confirming the nature of the emergency and authorizing the
appropriation of reserve funds.
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The Town currently commits to maintaining this Reserve at a minimum of 12.5% ($5,427,603)
of General Fund ongoing operating expenditures (minus one-time expenditures).
Budget Stabilization Reserve
Funds reserved under this category shall be used to mitigate annual revenue shortfalls (actual
revenues less than projected revenues) due to changes in the economic environment and/or
one-time uses that will result in future efficiencies and/or budgetary savings. Examples of
“economic triggers” and one-time uses include, but are not limited to:
• An unplanned, major event such as a catastrophic disaster requiring expenditures
which exceed the General Fund Catastrophic Reserve;
• Drop in projected/actual revenue of more than five percent in property or sales tax,
or other economically sensitive revenues;
• Budgeted revenue taken over by another entity exceeding $100,000;
• Loss of businesses considered to be significant sales tax generators;
• Reductions in projected/actual revenue of more than five percent due to actions by
the state/federal government;
• Workflow/technical system improvements to reduce ongoing, personnel costs and
enhance customer service;
• One-time maintenance of service levels due to significant economic/budget
constraints; and
• One-time transitional costs associated with organizational restructuring to secure
long-term personnel cost savings.
The Town currently commits to maintaining this Reserve at a minimum of 12.5% ($5,427,603)
of General Fund ongoing operating expenditures (minus one-time expenditures).
2. Other Post-Employment Benefits (OPEB) Prefunding
Since 2009 the Town has been proactively prefunding its OPEB which consists of a retiree
healthcare plan. While this is considered a best practice, it is not mandated similar to payment
of the required annual contributions for pension benefits to CalPERS. For FY 2020/21, the
adopted budget provided OPEB prefunding of $591,000.
3. Utilization of OPEB IRS 115 Trust for Pay Go Retiree Healthcare Expenses
In 2009 the Town initiated the prefunding of the retiree healthcare unfunded benefit
obligation. Since that time the IRS Section 115 OPEB Trust has accumulated $23,560,833 in
Trust assets as of December 31, 2020. IRS regulations allow Trust assets to be used for
payment of healthcare expenses. The FY 2020/21 budget programmed $1.3 million in
anticipated Pay-go healthcare expenses and $1.4 million in projected Pay-go healthcare
expenses in FY 2021/22.
4. Sale of Winchester Property to Santa Clara County Fire District
During the development of the FY 2020/21 budget, the Town Council left $1,200,000 in
property sale proceeds unprogrammed as a contingency to mitigate potential impacts to
revenues from the pandemic.
5
5. Delayed or canceled Capital Improvement Plan (CIP) projects
Each year as part of the budget process, Council adopts a Five-Year Capital Improvement
Program. Attachment 6 to the Five-Year Forecast staff report prepared for the February 16,
2021 Town Council meeting contains a matrix summarizing the budget for each capital project,
source of funds, amount expended/encumbered to date, and status. This information conveys
the level of investment and commitment of particular projects, and the potential opportunity
for reallocation to other Town priorities or future capital needs.
The Finance Commission had a detailed discussion of each of the options and formed consensus
around several areas. Of note, all Commissioners agreed that the Catastrophic and Budget
Stabilization Reserves should not be considered at this time and should remain intact in the
event the pandemic impacts become even greater in severity or the Town experiences a serious
event (e.g., earthquake or wildfire). While Commissioners acknowledged the unprecedented
nature of the pandemic, they felt it prudent to maintain the reserves as other unforeseen
disasters could befall the Town. In addition, the Commission had general consensus that both
of the OPEB options were reasonable given the benefit has less legal constraints as compared
to pension benefits. However, it was noted that the removal of assets from the OPEB IRS 115
Trust would be contrary to the long-standing practice of trying to prefund benefit obligations.
At the conclusion of the discussion, the Finance Commission recommended that the budget
balancing options of Winchester property proceeds, OPEB Prefunding, and the utilization of
OPEB IRS 115 Trust for Pay Go healthcare expenses be programmed in that order.
In addition to the options provided by staff, a conversation emerged regarding the future
funding of the Capital Improvement Plan (CIP) utilizing the Measure G District Tax. Discussions
revolved around having the District Tax become a dedicated funding source for the General
Fund Appropriated Reserve (GFAR) accounts which typically fund capital projects. Staff will
bring this item back to the Finance Commission and Town Council for consideration during the
development of the FY 2021/22 Proposed Operating and Capital Budgets in the spring. And
lastly, the Finance Commission discussed the need for a greater understanding of the Town’s
expenditure cost structure and historic cost escalation of Town services.
Providing services to the community in this and future fiscal years will require a strong return
to pre-pandemic performance of the Town’s economically sensitive revenues to offset
continued projected cost increases. The FY 2021/22 budget development process will endeavor
to maintain essential public services while controlling operational costs in light of the five-year
fiscal forecast, which predicts operating revenue shortfalls in subsequent fiscal years.
6
CONTENT OVERVIEW
The remainder of this Report focuses on the General Fund and provides analyses of key
revenues and expenditures, including historic data by Town Department/Service Area. The
next section contains descriptions of recommended revenue and expenditure budget
adjustments. The Report also includes financial summaries of other funds as well as a table of
General Fund Operating Revenues Versus Operating Expenditures for the second quarter of FY
2020/21 which includes comparison information from the prior year.
GENERAL FUND - KEY REVENUE ANALYSIS FY 2020/21
The following information provides a recap of the General Fund budgeted significant revenue
sources, including estimated year end collection as of the second quarter ending December 31,
2020. Staff is monitoring developments in each major revenue source closely for potential
adjustments to budgeted revenues as recommended in this Report.
Property Tax and Motor Vehicle in Lieu Fee (VLF)
Property tax and VLF are the single largest revenue source for the Town and comprised
approximately 42% of total Town General Fund projected revenues for FY 2020/21. 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
7
thereafter. However, when property changes hands or new construction occurs, property is
than reassessed at its current market value.
The County of Santa Clara provides property tax collection updates and projections throughout
the year. The current County estimate indicates a modest deviation from budget of
approximately $700,000 which is primarily the result of the Redevelopment Agency (RDA)
residual payment decrease, which the County has already retained, and staff modeling a 50%
reduction in Educational Revenue Augmentation Fund (ERAF) payments both of which are
unrelated to the COVID pandemic.
The Town has been monitoring developments regarding the distribution of excess ERAF funds.
A portion of property tax revenue goes to the ERAF to support local school districts. When the
amount contributed to ERAF is more than the minimum cost of funding local schools, excess
funds have traditionally been returned to the county, cities, and special districts. Five counties,
including Santa Clara, have been using a redistribution allocation formula that is now being
contested by the State. The Town's Adopted FY 2020/21 Budget had ERAF base revenue
estimated at $433,000. However, the most recent County property tax estimate included $1.8
million of additional excess ERAF funds. If the State is successful in contesting ERAF distribution
of excess funds, the result would be a negative impact on budgeted revenues. Given that the
distribution of ERAF excess funds is a binary outcome, staff is modeling a 50% reduction in ERAF
into yearend.
Property tax distributions are largely received in the third and fourth quarters. Second quarter
receipts are trending similar to those received during the second quarter of the previous fiscal
year and are at 27% of budgeted totals. Based on current County projections and staff
recommendations to reduce ERAF projections by 50% as a contingency, staff recommends a
$649,916 decrease in General Property Tax and Motor Vehicle in Lieu Fee collections.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
2nd Quarter Actual Revenues 4,274,774$ 4,604,788$ 4,785,479$ 4,785,479$ 5,017,946$ Fiscal Year Total Actual Revenues 14,756,212$ 15,958,406$ 17,321,346$ 18,330,427$ Fiscal Year Total Estimated Revenues 18,002,123$ Fiscal Year Budgeted Revenues 18,652,039$
2nd Quarter Percent of Total 29%29%28%26%27%
Recommended Budget Revision (649,916)$
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Property Tax and VLF -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Budgeted Revenues Fiscal Year Total Estimated Revenues
8
Sales Tax
Sales tax is the second largest revenue source for the Town’s General Fund, accounting for 18%
of budgeted General Fund projected revenues for FY 2020/21 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%) district sales tax for 20 years.
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. The MuniServices estimates also include additional
proceeds from internet sales due to the 2018 Wayfair Court decision. Current estimates
include anticipated $1,004,300 proceeds from the Measure G one-eight cent district tax. Actual
receipts net of administrative fees collected by the State will be confirmed at the close of the
fiscal year.
For FY 2020/21 second quarter receipts are trending lower than in the same period last fiscal
year. Staff recommends a $324,347 budget decrease to reflect the MuniServices current
estimates.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
2nd Quarter Actual Revenues 4,069,524$ 2,662,601$ 2,568,415$ 2,755,208$ 2,813,652$
Fiscal Year Total Actual Revenues 9,171,373$ 7,592,206$ 8,158,152$ 7,531,425$
Fiscal Year Total Estimated Revenues 7,662,900$
Fiscal Year Budgeted Revenues 7,987,247$
2nd Quarter Percent of Total 44%35%31%37%35%
Recommended Budget Revision (324,347)$
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Sales Tax -Quarterly and Annual Revenues5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Budgeted Revenues Fiscal Year Total Estimated Revenues
9
Franchise Fees
Franchise fees are collected by the Town for the privilege of operating a utility service within
Los Gatos, and as a fee in lieu of a business license tax. Franchise fees are currently received
from Comcast for cable television, PG&E for gas and electric services, West Valley Collection
and Recycling for solid waste collection services, and AT&T and Comcast for video services.
Franchise fees represent 6% of projected General Fund revenues in FY 2020/21.
Historically, franchise payments are not remitted equally throughout the fiscal year; therefore,
second quarter receipts are not necessarily predictive of future receipts. Total franchise fee
revenues are trending slightly lower than those of the second quarter in FY 2019/20. Staff
recommends no budget adjustment to this revenue source.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
2nd Quarter Actual Revenues 794,077$ 832,583$ 840,555$ 864,849$ 807,833$
Fiscal Year Total Actual Revenues 2,366,908$ 2,474,814$ 2,475,916$ 2,495,792$
Fiscal Year Total Estimated Revenues 2,521,970$
Fiscal Year Budgeted Revenues 2,532,289$
2nd Quarter Revenue Percent of Total 34%34%34%35%32%
Recommended Budget Revision
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Franhise Fees -Quarterly and Annual Revenues 5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Total Estimated Revenues Fiscal Year Total Estimated Revenues
10
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 businesses. Annual renewal payments are due on January 2 of
each year. Payments for new flat-fee-based businesses are pro-rated by quarter.
Business license tax revenue for the current fiscal year was budgeted in line with prior years
based on staff analysis and other anticipated business closures and relocation. Staff anticipates
lower gross retail activities and additional business license closures due to the pandemic. In
addition, Council authorized to give a calendar year first quarter exemption to hair and nail
service providers who were not able to operate due to Santa Clara Public Health Order
restrictions and omit late business license penalties for all businesses in 2021. Staff anticipates
collecting the majority of the business license revenue during the third quarter. Staff
recommends a $200,000 budget decrease to this revenue source.
FY 16/17 FY 17/18 FY 18/19 FY 19/20
2nd Quarter Actual Revenues 435,696$ 199,045$ 240,293$ 60,500$ 190,656$
Fiscal Year Total Actual Revenues 1,720,980$ 1,686,251$ 1,526,894$ 1,357,080$
Fiscal Year Total Estimated Revenues 1,100,000$
Fiscal Year Budgeted Revenues 1,300,000$
2nd Quarter Revenue Percent of Total 53%53%59%4%17%
Recommended Budget Revision (200,000)$
FY 20/21
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Business License Tax -Quarterly and Annual Revenues5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Budgeted Revenues Fiscal Year Total Estimated Revenues
11
Transient Occupancy Tax
TOT is an important revenue source for the Town and comprised approximately 3.4% of total
Town budgeted revenues of $2.3 million for FY 2020/21. The Town levies a 12% transient
occupancy tax (TOT) on all hotel and motel rooms within the municipal limits of Los Gatos. The
12% rate has been in effect since January 1, 2017 after the voters approved a ballot measure to
increase in the TOT from 10% to 12% at the November 8, 2016 election. This tax helps to fund
Town services provided to visitors to Los Gatos. .
The FY 2020/21 Adopted Budget modeled a steep contraction with subsequent rebound for a
net 15% reduction over the course of the year in TOT revenues from the prior January 21, 2020
initial forecast projection. In addition to the initial Shelter-in-Place (SIP) and Stay-at-Home
restrictions instituted on March 17, 2020, on November 28, 2020, Santa Clara County issued new
mandatory directives which included that hotels and other lodging facilities will be open only for
essential travel and for use to facilitate isolation or quarantine. Given that the November
restrictions remain as of this writing, staff anticipates that the current Health Order will continue
to degrade TOT revenues for the remainder of the year resulting in YOY declines of 69%.
Based on the current trend staff is recommending a $1,579,948 budget decrease.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
2nd Quarter Actual Revenues 817,061$ 917,019$ 994,581$ 910,806$ 399,620$
Fiscal Year Total Actual Revenues 2,322,910$ 2,628,927$ 2,692,043$ 1,869,685$
Fiscal Year Total Estimated Revenues 707,723$
Fiscal Year Budgeted Revenues 2,287,671$
2nd Quarter Revenue Percent of Total 35%35%37%49%17%
Recommended Budget Revision (1,579,948)$
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
TOT -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Budgeted Revenues Fiscal Year Total Estimated Revenues
12
Interest Income
The Town earns interest income by investing monies not immediately required for daily
operations in a number of fixed income and money market instruments. These investments are
made within the parameters stated in the Town Council’s Investment Policy and State
regulation. The Town’s investment goal is to achieve a competitive rate of return while
protecting the safety of its funds. Interest income revenue is primarily dependent on two
factors: the cash balance in the Town’s investment portfolio and the yield on those funds.
As of December 31, 2020, the Town’s weighted portfolio yield was 1.62% which trended above
the Local Agency Investment Fund (LAIF) yield of 0.62%. This favorable yield differential was
primarily due to the LAIF portfolio’s weighted average maturity (WAM) of 169 days and the
Town’s longer WAM of 579 days. Despite the pandemic, the Town’s weighted average rate of
return of 1.62% for the second quarter remained relatively stable when compared to the second
quarter return of 1.93% in 2020.
In the months prior to the COVID-19 outbreak, staff in consultation with the Town’s investment
advisor had been extending maturities to capture higher yields currently associated with longer
dated securities. In recent months, the economic fallout associated with the pandemic has led to
Treasury yields falling dramatically. Staff recommends no change to this revenue source at this
time.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
2nd Quarter Actual Revenues 197,065$ 284,009$ 422,729$ 482,517$ 343,813$
Fiscal Year Total Actual Revenues 401,961$ 603,017$ 801,729$ 1,145,538$
Fiscal Year Total Estimated Revenues 736,409$
Fiscal Year Budgeted Revenues 736,409$
2nd Quarter Revenue Percent of Total 49%47%53%42%47%
Recommended Budget Revision
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Interest -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues
Fiscal Year Budgeted Revenues Fiscal Year Total Estimated Revenues
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Charges for Services
Town Service revenues consist primarily of planning, building, inspections, and engineering fees
assessed on local building and development activity. Development fees and charges are
assessed based on cost recovery formulas, which reflect approximate costs of providing these
regulatory services. This category includes charges for school resource officer and crossing
guards’ services.
Second quarter Town Service revenues, specifically Charges for Services, are trending higher
than in the second quarter compared to the previous fiscal year, with 87% 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 a $158,073
budget decrease consisting of lower revenues from the school districts for School Resource
Officer services (-$140,444), decreased crossing guard services (-$65,954 ) offset by increases to
this revenue related to engineering service work funded from the General Plan Update deposit
account estimated at $48,325.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
2nd Quarter Actual Revenues 2,244,464$ 2,567,814$ 2,905,238$ 3,258,027$ 3,424,216$
Fiscal Year Total Actual Revenues 3,454,666$ 4,625,136$ 4,580,511$ 4,447,213$
Fiscal Year Total Estimated Revenues 3,935,178$
Fiscal Year Budgeted Revenues 4,179,712$
2nd Quarter Revenue Percent of Total 65%56%63%73%87%
Recommended Budget Revision (158,073)$
$-
$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
$5,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Charges for Services -Quarterly and Annual Revenues 5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Total Estimated Revenues Fiscal Year Total Estimated Revenues
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Licenses and Permits
Licenses and Permits consist mainly of planning and building permit fees which are collected by
the Town to offset administrative costs associated with evaluating development proposals to
ensure compliance with codes and policies. Licenses and Permits revenue was budgeted slightly
lower than FY 2019/20 in anticipation of slower development activity.
Second quarter License and Permit revenue is trending 51% of budgeted revenue slightly lower
than second quarter results from the previous fiscal year. Staff recommends no budget
adjustment to this revenue source.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
2nd Quarter Actual Revenues 1,867,300$ 1,498,864$ 1,692,252$ 1,584,098$ 1,513,500$
Fiscal Year Total Actual Revenues 3,042,166$ 3,011,309$ 3,067,994$ 2,996,457$
Fiscal Year Total Estimated Revenues 2,886,708$
Fiscal Year Budgeted Revenues 2,996,898$
2nd Quarter Revenue Percent of Total 61%50%55%53%51%
Recommended Budget Revision
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Licenses & Permits -Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Total Estimated Revenues Fiscal Year Total Estimated Revenues
15
GENERAL FUND – EXPENDITURE ANALYSIS
For FY 2020/21, General Fund Operating expenditures (not including debt payment and
transfers out) were programmed at $47.9 million. The delivery of Town services is highly
dependent on labor which comprises 59.5% of budgeted General Fund expenditures for FY
2020/21. General Fund expenditure totals are trending in accordance with the Adopted
Budget, with total operational expenditures at the end of the second quarter at or about 51%
of the Adopted Budget. With six months of data now available, staff expects that the next six
months of expenditures will be within the Adopted Budget, although unexpected costs can still
occur which may require future Council action.
As with most municipalities, services are provided directly by employees to the Town’s
residents, businesses, and visitors. As a service delivery enterprise, the cost of salaries and
benefits are a significant portion of the budget. As the table below illustrates, at mid-year,
actual salaries are trending at 49% of budgeted salaries, while benefits are trending at 69% of
the Adopted Budget. Benefits are trending higher than 50% because the Town submits its
entire annual amortization of the Town’s unfunded liability upfront in July 2020 as a lump sum
pension payment as a cost savings measure, saving approximately $80,000 in interest expense.
While actual vacancies vary during the course of the fiscal year, there were five vacant positions
as of 2/8/2021.
The graph below represents the Town General Fund estimated operating expenditures.
Program expenditures are reviewed and anticipated savings are provided for each program.
Also provided are historical program costs, year over year (YOY) percentage changes in actual
expenditures and five-year average changes per the Finance Commission’s suggestion. YOY
percentage changes are, in many cases, impacted by the timing of one-time expenditures that
occur during the fiscal year. Historical analysis has been provided in selected cases to provide
explanations for some of the fluctuations between fiscal years.
FY 2019/20
Actuals
FY 2019/20
2Q
Q2% of
FY 2019/20
Actuals
Q2% of
FY 2020/21
Estimated
FY 2020/21
2Q
FY 2020/21
Estimated
Salaries 19,254,973$ 8,999,620$ 47%49%9,977,252$ 20,298,287$
Benefits 9,678,594$ 6,556,546$ 68%69%6,981,902$ 10,123,224$
Total Salary & Benefit 28,933,567$ 15,556,166$ 54%56%16,959,154$ 30,421,511$
FY 2019/20 Upfront Annual Payment to CalPERS in July 2019 $3,689,063
FY 2020/21 Upfront Annual Payment to CalPERS in July 2020 $3,954,819 (not including ADP)
General Fund Salaries & Benefits
16
17
Town Council
The Town Council is the elected legislative body that represents the residents and provides
policy direction for the delivery of services and capital improvements for the Town of Los Gatos.
Town Council expenditures are trending lower than same quarter in prior year. This program did
not have staff vacancy as of 12/31/2021; however, one Council seat was vacant during the first
two quarters of the fiscal year. Staff anticipates approximately $30,000 expenditures savings in
this program. Savings is anticipated in travel and training, office supplies and medical benefits.
Staff does not recommend any expenditure budget adjustment in this program.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Second Quarter Actual Expenditures 86,480$ 94,520$ 100,209$ 112,711$ 99,310$
Fiscal Year Total Actual Expenditures 193,584$ 193,183$ 205,903$ 206,163$
Fiscal Year Total Estimated Expenditure 212,263$
Fiscal Year Budgeted Expenditures 243,486$
Second Quarter Percentage of Total 45%49%49%55%41%
Recommended Budget Revision
YOY Percentage Changes 12.86%-0.21%6.58%0.13%2.96%
5-year Average Percentage Change 4.46%
$-
$500,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Town Council -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
18
Town Attorney
The Town Attorney is the legal advisor to the Town Council, Successor Agency to the former
Redevelopment Agency, and Town Staff. In this capacity, the office of the Town Attorney
provides a wide range of legal services to ensure that Town actions and activities are legally
sound. Town Attorney program expenditures are trending lower than same quarter in prior
year. This program has a part time Deputy Town Attorney vacancy as of 12/31/2020. The
office eliminated the Deputy Attorney position and replaced with the Legal Administrative
Assistant. It is anticipated that the position will be filled either the third or fourth quarter of
this fiscal year. Staff anticipates approximately $40,000 expenditures savings in this program.
Savings is anticipated in staff salaries and benefits, travel and training, and office supplies. Staff
does not recommend any expenditure budget adjustment in this program.
FY 2016/17 the Town had a significant legal expense related to the North 40 lawsuit. In
addition, beginning in FY 2018/19 all personnel costs that were previously budgeted in Internal
Service funds were transferred to the General Fund. While overall expenditures did not
increase, salary and benefit costs that were formerly reported as an Internal Service Fund
expense effective with the change became a General Fund expense.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Second Quarter Actual Expenditures 145,707$ 158,095$ 310,219$ 296,424$ 311,592$
Fiscal Year Total Actual Expenditures 426,548$ 354,205$ 562,542$ 559,010$
Fiscal Year Total Estimated Expenditure 619,766$
Fiscal Year Budgeted Expenditures 658,831$
Second Quarter Percentage of Total 34%45%55%53%47%
Recommended Budget Revision
YOY Percentage Changes 75.95%-16.96%58.82%-0.63%10.87%
5-year Average Percentage Change 25.61%
$-
$500,000
$1,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Town Attorney -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
19
Administrative Services
The Town Manager provides overall management, administration, and direction for the entire
Town organization, reporting to the full Town Council. Administrative Services incorporates six
key programs; Town Manager’s Office, Clerk Department, Finance Department, Human
Resources Department, and Information Technology.
Administrative Services program expenditures are trending lower than same quarter
expenditures in prior year. This program does not have any vacancy as of December 31, 2020.
Staff anticipates approximately $280,000 expenditures savings in this program. Savings are
anticipated in staff salaries and benefits, expenditures related special events, travel and training,
and office supplies. Staff does not recommend any expenditure budget adjustment in the
Administrative Services.
Beginning in FY 2018/19, all personnel that were previously budgeted in Internal Service funds
were transferred to the General Fund. While overall expenditures did not increase, salary and
benefit costs that were formerly reported as an Internal Service Fund expense effective with
the change became a General Fund expense. Both FY 2019/20 and FY 2020/21 include a limited
two-year temporary position to assist the Town with its emergency preparedness and response
operations.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Second Quarter Actual Expenditures 1,212,612$ 1,567,002$ 2,069,839$ 2,204,552$ 2,476,978$
Fiscal Year Total Actual Expenditures 2,825,082$ 3,193,995$ 3,931,807$ 4,380,504$
Fiscal Year Total Estimated Expenditure 4,709,166$
Fiscal Year Budgeted Expenditures 4,993,047$
Second Quarter Percentage of Total 43%49%53%50%50%
Recommended Budget Revision
YOY Percentage Changes -2.06%13.06%23.10%11.41%7.50%
5-year Average Percentage Change 10.60%
$-
$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 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Administrative Services -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
20
Community Development Services
The Community Development Department works with elected and appointed officials, other
Departments, and the community to guide the physical growth, development, and preservation
of the Town.
Community Development program expenditures are trending lower than same quarter
expenditures in prior year. This program does not have any vacancy as of December 31, 2020;
however, there was an Executive Assistant position that was vacant and was filled beginning the
second quarter of the fiscal year. Staff anticipates approximately $190,000 expenditures savings
in this program. Savings are anticipated in staff salaries and benefits, travel and training, and
office supplies. Staff does not recommend any expenditure budget adjustment in the
Community Development Department expenditure budget.
Community Development Department expenditures varies year to year based on the
development activity and pass through services. FY 2020/21 includes one-time special project
related services to the General Plan update.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Second Quarter Actual Expenditures 1,662,604$ 2,012,335$ 2,104,258$ 2,245,767$ 2,589,502$
Fiscal Year Total Actual Expenditures 3,793,929$ 4,192,165$ 4,577,495$ 4,473,790$
Fiscal Year Total Estimated Expenditure 5,280,003$
Fiscal Year Budgeted Expenditures 5,517,030$
Second Quarter Percentage of Total 44%48%46%50%47%
Recommended Budget Revision
YOY Percentage Changes -6.28%10.50%9.19%-2.27%18.02%
5-year Average Percentage Change 5.83%
$- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 $5,500,000 $6,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Community Development -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
21
Police Services
The Los Gatos-Monte Sereno Police Department provides Police services to the Town of Los
Gatos and contractually to the city of Monte Sereno. The Department is committed to ensuring
public safety with integrity, compassion, and professionalism, by providing exceptional law
enforcement services, building community partnerships, and engaging the community in
problem solving.
Police services program expenditures are trending lower than the same quarter prior year
expenditures. This program had a couple of vacancies in Police Officer and Dispatcher positions
during the first two quarters of the fiscal year due to retirements. Open Police Officer positions
are filled with trainees and temporary employees are presently filling in for the vacant
Dispatcher position. There were two vacant Communication Dispatchers and one vacant Police
Officer position as of December 31, 2020. Staff anticipates approximately $846,000
expenditures savings in this program. Savings are anticipated in staff salaries and benefits,
crossing guards’ services, parking management administration services, travel and training, and
office supplies. Staff recommends $235,236 expenditure budget decreases related to crossing
guard services and parking management as explained in the next section of this Report.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Second Quarter Actual Expenditures 6,816,759$ 7,197,220$ 7,832,251$ 8,504,636$ 9,037,569$
Fiscal Year Total Actual Expenditures 13,251,291$ 14,423,554$ 14,948,952$ 15,793,815$
Fiscal Year Total Estimated Expenditure 16,684,133$
Fiscal Year Budgeted Expenditures 17,687,825$
Second Quarter Percentage of Total 51%50%52%54%51%
Recommended Budget Revision (235,236)$
YOY Percentage Changes -4.48%8.85%3.64%5.65%5.64%
5-year Average Percentage Change 3.86%
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Police -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
22
Parks and Public Works Services
Parks and Public Works Department constructs and maintains the Town’s public parks, facilities,
roadways, right -of -ways, and other infrastructure. Six organizational units work in
coordination to achieve the Department’s overarching goal of ensuring the Town’s facilities are
safe, functional, and attractive.
Parks and Public Works services program expenditures are trending lower than prior year same
quarter expenditures. This program had a couple of vacancies during the first two quarters of
the fiscal year; however, the Department hired temporary replacement in order to deliver
services until vacancies are filled. There was one vacant Maintenance Worker position as of
December 31, 2020. Staff anticipates approximately $300,000 expenditures savings in this
program. Savings are anticipated in fuel cost, travel and training, and office supplies. Staff
recommends $48,325 expenditure budget increase related to General Plan Update engineering
services from the available General Plan Update deposit fund.
Beginning in FY 2018/19, all personnel that were previously budgeted in Internal Service funds
were transferred to the General Fund. While overall expenditures did not increase, salary and
benefit costs that were formerly reported as an Internal Service Fund expense effective with the
change became a General Fund expense.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Second Quarter Actual Expenditures 3,051,952$ 3,422,553$ 3,717,900$ 3,864,874$ 4,189,004$
Fiscal Year Total Actual Expenditures 6,597,744$ 7,099,527$ 7,969,631$ 8,139,106$
Fiscal Year Total Estimated Expenditure 7,858,200$
Fiscal Year Budgeted Expenditures 8,152,045$
Second Quarter Percentage of Total 46%48%47%47%51%
Recommended Budget Revision 48,325$
YOY Percentage Changes 5.63%7.61%12.26%2.13%-3.45%
5-year Average Percentage Change 4.83%
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Parks and Public Works -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
23
Library Services
The Los Gatos Library fosters curiosity and community connection and strives to be at the heart
of an engaged and vibrant community.
Library services program expenditures are trending lower than prior year same quarter
expenditures. This program does not have any vacancies as of as of December 31, 2020. Staff
anticipates approximately $100,000 expenditures savings in this program. Savings are
anticipated in temporary employee salaries, travel and training, and office supplies. Staff does
not recommend any expenditure budget adjustment to this program.
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Second Quarter Actual Expenditures 1,204,043$ 1,289,625$ 1,280,179$ 1,404,285$ 1,446,308$
Fiscal Year Total Actual Expenditures 2,508,678$ 2,529,017$ 2,493,617$ 2,700,802$
Fiscal Year Total Estimated Expenditure 2,854,192$
Fiscal Year Budgeted Expenditures 2,952,802$
Second Quarter Percentage of Total 48% 51% 51% 52% 49%
Recommended Budget Revision
YOY Percentage Changes -2.74% 0.81% -1.40% 8.31% 5.68%
5-year Average Percentage Change 2.13%
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21
Library -Quarterly and Annual Expenditures
5-Year History
Second Quarter Actual Expenditures Fiscal Year Total Actual Expenditures
Fiscal Year Budgeted Expenditures Fiscal Year Total Estimated Expenditure
24
FY 2020/21 RECOMMENDED BUDGET ADJUSTMENTS
Budget adjustments are recommended for the following revenues and expenditures at the
second quarter as described below:
Fund Program Account
111 36222 Use of Pension/OPEB Reserve 300,000
111 1201 411XX Property Tax (729,196)$
111 1201 41141 Motor Vehicle In Lieu Fee 79,280
111 1201 41211 Sales & Use Tax (374,664)
111 1201 41214 Measure G - District Sales Tax 50,317
111 1201 41311 Transient Occupancy Tax (1,579,948)
111 1201 43216 Corona Virus Relief Fund 388,181
111 1201 45921 Sales Of Winchester Property 1,200,000
111 2301 41411 Business License Tax (200,000)
111 2301 42321 Business License Processing Fee (15,000)
111 4302 44512 Crossing Guards' Services (65,954)
111 4303 44515 School Resource Officer Services (140,444)
111 4304 45126 Electronic Parking Ticket (280,000)
111 4303 45127 SCC Park bail Tickets (60,000)
111 5201 44417 General Plan Update - Engineering Services 48,325
111 5391 42511 OMP Parking Reservation Fee (70,000)
111 5301 42512 OMP- Parking Fee (15,000)
TOTAL GENERAL FUND REVENUES (1,464,103)$
Fund Program Account
111 1201 62119 CalPERS Discretionary Payment 300,000$
111 4302 63342 Crossing Guards' Services (82,786)
111 4304 62223 Parking Administration - SCC Court and Jail Constructions (108,000)
111 4304 63116 Parking Administration CA- DMV Admin Fee (6,000)
111 4304 63344 Parking Administration - Citation Services (15,000)
111 4304 63345 Valet Parking Services (23,500)
111 5201 68422 General Plan Update - Engineering Services 48,325
TOTAL GENERAL FUND EXPENDITURES 113,039$
General Fund Revenues
General Fund Expenditures
FY 2020/21 MID-YEAR BUDGET ADJUSTMENT REQUESTS - GENERAL FUNDS
25
Fund Program Account Other Fund Revenues
222
222 5203 44613 Non-Point Source Management - Not in Town (353,000)
(353,000)$
421
421 421-813-0227 43407 Traffic Signal Modernization Project (306,738)
421 421-813-0803 43405 Highway 17 Bicycle and Pedestrian Bridge (456)
(307,194)$
633
633 5404 49631 Police Operation Building Camera Update - From Equipment's 33,000
33,000$
711711 7301 45452 Anticipated Donation Not Received (44,500) (44,500)$
TOTAL OTHER FUNDS REVENUES (605,694)$
Fund Program Account
222
222 5203 62369 Non-Point Source Management - Not in Town (353,000)
(353,000)$
411
411 411-832-4508 82405 From Vegetation Management (250,000)
411 411-812-0130 82405 To Roadside Fire Fuel Reduction 250,000
411 411-811-6004 82405 From Fire Suppression for Server Room (50,000)
411 411-821-2118 82405 To Police Headquarters Roof Repair 50,000
-$
421
421 421-813-0227 82405 Traffic Signal Modernization Project (306,738)
421 421-813-0803 82405 Highway 17 Bicycle and Pedestrian Bridge (456)
(307,194)$
612
2202 63323 COVID 19 Testing 65,000
65,000$
631
5402 99633 Police Operation Building Camera Update - To Facilities 33,000
33,000$
633
633 5404 82025 HVAC Cooling System 58,970
5404 62379 Police Operation Building Camera Update 33,000
91,970$
711
711 7301 62424 Anticipated Donation Not Received (65,500)
(65,500)$
TOTAL OTHER FUNDS EXPENDITURES (535,724)$
FY 2020/21 MID-YEAR BUDGET ADJUSTMENT REQUESTS - OTHER FUNDS
Facilities Maintenance
Workers Compensation
Equipment Replacement
Library Trust Fund
Other Fund Expenditures
Non Point Sources
GFAR
Grants
Library Trust
Facilities Maintenance
Grants
Non-Point Source
26
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 $300,000 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. The additional $300,000
was put in the Pension/OPEB Reserve per policy at the close at the FY 2019/20 and was
not available at the time of the FY 2020/21 budget adoption.
General Property Tax and Motor Vehicle in Lieu Fee: Staff recommends a decrease in
projected revenues of approximately $729,196 in General Property Tax and an increase
of $79,280 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 $374,664 budget decrease to reflect current
trends sales tax based on MuniServices conservative projections.
Measure G – District Sales Tax: Staff recommends a $50,317 budget increase to reflect
the current trends of the one-eight cent sales tax based on MuniServices conservative
projections.
Transient Occupancy Tax (TOT): Staff recommends a $1,579,948 budget decrease based
on the current trends.
Corona Virus Relief Fund: Staff recommends a $388,181 budget increase to recognize
the receipt of the Corona Virus Relief Fund.
Sale of Winchester Property: Staff recommends a revenue budget increase in the
amount of $1,200,000 for the Winchester property sale. The proceeds will be placed
into the Surplus Property Reserve that was previously identified by the Town Council to
address potential COVID-19 economic impacts.
Business License Tax and Business License Processing Fee: Staff recommends a decrease
in projected revenues of approximately $200,000 in Business License Tax and a decrease
of $15,000 Business License Processing Fee based on current activities and trends.
Crossing Guards’ Services: The Town contracts with All City Management Services, Inc.
(ACMS) to provide crossing guard services at selected school crossing locations in the
Town of Los Gatos. The Town of Los Gatos manages the accounting of the service
contract and oversees Crossing Guard staff in coordination with a local ACMS manager.
The Town contracts with ACMS and the expenses for Crossing Guard services are shared
between the Town, Los Gatos Union School District, and Union School District. Town
expenditures for the contract account for approximately twenty percent of the annual
cost.
27
Effective March 16, 2020, Santa Clara County Health Orders required remote learning
instruction at all schools, thus impacting any Crossing Guard service delivery. The
expenditure has decreased and corresponding revenue received from both school
districts has also declined. In early February the Town received information that
elementary students from both school districts would transition back to the campus
environment, thus partial Crossing Guard services will resume. Expenditures are
reduced by $82786. Combined revenue received from both school districts is reduced by
$65,974. Given the nature of the pandemic, staff notes service delivery using Crossing
Guards for the remainder of the fiscal year is subject to swift variations. Staff
recommends a 50% decrease both the crossing guard related revenue and expenditure
budget.
School Resource Officer Services: The School Resource Officer (SRO) agreement was
amended as a result of the State and Santa Clara County Health Orders which required
remote instruction, thus impacting SRO service delivery. Staff recommends a revenue
budget decrease of $140,444.
The Parking Management Program: The COVID-19 pandemic has significantly impacted
the visitation and parking patterns to parking enforcement areas. Residential, visitation
and parking in areas with ticketing enforcement were reduced by exponential
levels. The Parking Management Program is estimated to have a revenue shortfall of
$340,000. Due to the revenue decrease, there is a corresponding reduction in
expenditure forecasted at $152,500. The reduction in expenditure includes $23,500
usually paid for Holiday Valet Parking Services. This fiscal year, the Town did not
implement the annual Holiday Valet Parking Program to reduce potential health
impacts. Staff recommends a revenue budget decrease of $340,000 and the expenditure
budget decrease of $152,500.
• General Plan Update Engineering: Staff recommends an expenditure and revenues
budget increase in the amount of $48,325 to recognize engineering General Plan update
work that carried forward from FY 2019/20 into FY 2020/21 from available General Plan
Update deposits.
• Oak Meadow Park Reservation Fee: Staff recommends $70,000 decreases in the Oak
Meadow Park Reservation Fee revenue budget to recognize lower activity. Santa Clara
County Health Department orders have limited groups gathering in parks town wide.
• Oak Meadow Park Parking Fee: Staff recommends a decrease the Oak Meadow Park
Parking Fee revenue budget in the amount of $15,000 to recognize lower activity and
the inability to fill a booth attendant position. Staff is in the process of procuring a
parking pay station that will integrate with the Town’s current parking enforcement
efforts.
28
Other Fund Revenues and Expenditures
West Valley Clean Water Program Administration: Staff recommends revenue and
expenditure budget decrease in the amount of $353,000 for the Town’s participation in
the West Valley Clean Water Program. Upon creation of the West Valley Clean Water
Program Authority, management of the program fees and expenditures was shifted to
the Authority.
COVID Testing: Staff recommends a $65,000 expenditure budget increase from the
available Workers Compensation Fund balance to provide regular testing for Town’s
essential workers.
HVAC Cooling System: Staff recommends a $58,970 expenditure budget increase from
available Facilities Maintenance Fund balance.
Police Headquarters Roof Replacement: Staff recommends $50,000 expenditure budget
transfer from the Fire Suppression for Server Room project to the Police Headquarters
Roof Replacement project. This action increases the Police Headquarters Roof Repair
budget for structural and permanent mounting of the microwave radio antenna prior to
the roof replacement. This is critical for public safety communications.
Transfer from Vegetation Management to Roadside Fire Fuel Reduction Project: Staff
recommends $250,000 expenditure budget transfer from the Vegetation Management
Project to the Roadside Fire Fuel Reduction project. The Town Council approved an
agreement with West Coast Arborist for this project which is partially funded by a
transfer from the Vegetation Management – Town-wide project. This action recognizes
the transfer. This action increases the Roadside Fire Fuel Reduction project by $250,000
and decreases the Vegetation Management – Town-wide project by the same amount.
Traffic Signal Modernization Project: Staff recommends revenue and expenditure
budget decrease in the amount of $306,738 in the Traffic Signal Modernization project.
This reduction recognizes an erroneous double counting of a grant, as well as a change
in the federal grant amount.
Highway 17 Bicycle & Pedestrian Bridge: Staff recommends a revenue and budget
increase in the amount of $456 in the Highway 17 Bicycle & Pedestrian Bridge Project as
a technical adjustment. The grant was rounded during the annual budget process and
should reflect the true grant award. Increase
Police Operation Building Surveillance Camera and Video System Update: Staff
recommend an expenditure budget transfers in the amount of $33,000 from the
Equipment Replacement Fund to the Facilities Maintenance Fund for the replacement of
the surveillance camera and video system at the Police Operations Building (POB). The
Facilities Maintenance Fund currently has $20,000 budgeted, and this transfer will fund
the remainder of the project. This is a critical security measure for a Law Enforcement
Facility. The current system is over 11 years old and several cameras are no longer
functional. These cameras are located in the interrogation rooms and on the perimeter
29
of the POB. Cameras are currently monitored by PD Dispatch and the control room at
POB. The new system software would allow multiple viewing locations (on PCs) making
viewing more accessible and convenient. The system would also accommodate future
expansion and be able to tie in cameras at additional Town facility locations.
Library Trust programming: Library Trust consists of funds that are received from
philanthropic donation from the non-profit fundraising organization Friends of the Los
Gatos Library. Due to impacts from COVID-19, the Friends normal fundraising operations
were greatly reduced resulting in a donated amount far less than received in previous
years. This is also factored into the loss of revenue for this line item. Expenditures have
been reduced to offset revenue shortfalls by cutting back on Library hosted community
programming.
30
FINANCIAL SUMMARIES AND ESTIMATES
General Fund
The following table is the Schedule of General Fund Operating Revenues Versus Operating
Expenditures for the second quarter of FY 2020/21 which includes comparison information from
the prior year.
The FY 2020/21 Adjusted Budget column includes the adopted budget and items that Council
approved during the course of the first two quarters of fiscal year, such as additional funding
for Police use of SLESF funds, salary adjustments for Council appointed employees, and
miscellaneous carry over grants from prior fiscal year.
The FY 2020/21 Estimated column contains projections of final balances for the current fiscal
year based upon staff analysis, the early trends observed through the second quarter in sales
tax and property tax projections and the proposed mid-year adjustments as listed in this report.
The FY 2020/21 Estimated figures also include analysis on potential salary and other
expenditure savings; however, budget adjustments are only recommended as identified in this
Report.
Staff continues to fine tune the detailed analysis of the FY 2020/21 year-end estimated revenue
and expenditure numbers and an update will be provided with the presentation of the
Proposed Fiscal Year 2021/22 Operating Budget.
31
FY 2019/20 FY 2019/20
Q2% of
FY 2019/20
Q2% of
FY 2020/21 FY 2020/21 FY 2020/21 FY 2020/21ActualsQ2ActualsAdjusted
Budget
Q2 Adjusted Estimated YE
Including
Mid-YearProposed
Revenues
Property Tax 14,454,513$ 5,017,946$ 34.7%37.3%5,481,928$ 14,678,319$ 13,949,123$
Sales & Use Tax 7,531,425 2,755,208 36.6%35.2%2,813,652 7,987,247 7,662,900
VLF Backfill Property Tax 3,875,914 - 0.0%0.0%- 3,973,720 4,053,000
Franchise Fees 2,495,792 864,849 34.7%31.9%807,883 2,532,289 2,521,970
Transient Occupancy Tax 1,869,685 910,806 48.7%17.5%399,620 2,287,671 707,723
Business License Tax 1,357,080 60,500 4.5%14.7%190,656 1,300,000 1,100,000
Licenses & Permits 2,696,457 1,584,098 58.7%50.5%1,513,500 2,996,898 2,886,708
Intergovernmental 1,104,075 410,882 37.2%84.4%818,352 969,385 1,272,328
Town Services 4,447,213 3,258,027 73.3%81.9%3,424,216 4,179,712 3,935,178
Fines & Forfeitures 271,117 134,707 49.7%5.9%25,587 434,950 99,207
Interest 1,145,538 (183,415) -16.0%-114.3%(841,366) 736,409 736,409
GASB 31 to Market 1,092,564 517,744 47.4%114.7%(126,168) (110,000) (110,000)
Use of Property 31,039 - 0.0%- - -
Miscellanious Other 680,439 134,336 19.7%57.6%167,206 290,144 338,409
Park Construction Tax 7,653 - - 7,000 7,000
Debt Service - Entry Eliminated for CAFR 1,905,024 - 0.0%0.0%- 1,908,494 1,908,494
Proceeds for Sales of Assets 656 - 0.0%1,200,000 - 1,200,000
Fund Transfer In 599,669 102,000 17.0%17.0%104,659 616,834 616,834
Total Revenues & Transfers In 45,565,853$ 15,567,688$ 34%36%15,979,725$ 44,789,072$ 42,885,283$
Use of Other Funding Sources:
Use of Reserves - Capital/Special Projects - Capital 8,053,847$ -$ 0.0%0.0%-$ 3,401,479$ 3,401,479$
Use of Reserve - Pension/OPEB - - - 4,232,500 4,532,500
Use of Reserves - Capital/Special Projects - One-Time - - - 901,267 901,267
Total Other Funding Sources 8,053,847$ -$ 0%0%-$ 8,535,246$ 8,835,246$
Total Revenues and Use of Reserves 53,619,700$ 15,567,688$ 29%30%15,979,725$ 53,324,318$ 51,720,529$
Expenditures
Town Council 206,163$ 112,711$ 54.7%40.8%99,310$ 243,486$ 212,263$
Attorney 559,010 296,424 53.0%47.3%311,592 658,831 619,766
Administrative Services 4,380,504 2,204,552 50.3%49.6%2,476,978 4,993,047 4,709,166
Non- Departmental 3,505,098 1,166,054 33.3%55.6%4,339,030 7,803,668 8,068,199
Community Development 4,473,790 2,245,767 50.2%46.9%2,589,502 5,517,030 5,280,003
Police 15,793,815 8,504,636 53.8%51.1%9,037,569 17,687,825 16,841,333
Parks & Public Works 8,139,106 3,864,874 47.5%51.4%4,189,004 8,152,045 7,858,200
Library 2,700,802 1,404,285 52.0%49.0%1,446,308 2,952,802 2,854,192
Capital Outlay 138,384 - - - -
Total Department Expenditures 39,896,672$ 19,799,303$ 50%51%24,489,293$ 48,008,734$ 46,443,122$
Debt Service - Entry Eliminated for CAFR 1,905,024$ -$ 0.0%0.0%-$ 1,908,494$ 1,908,494$
Transfers Out 8,053,847 - 0.0%0.0%- 3,401,479 3,401,479
Total Non-Departmental Expenditures 9,958,871$ -$ 0%0%-$ 5,309,973$ 5,309,973$
Total Operating Expenditures 49,855,543$ 19,799,303$ 40%46%24,489,293$ 53,318,707$ 51,753,095$
Allocate to Surplus Property Reserve (1,200,000)
Excess (Deficiency) of Revenues Over Expenditures 3,764,157$ (4,231,615)$ *(8,509,568)$ *5,611$ (1,232,566)$
SUMMARY OF REVENUES AND EXPENDITURES
*FY 2019/20 and FY 2020/21 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.
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Financial Summaries of Other Funds
The group of financial summaries on the following pages present data by governmental,
proprietary and fiduciary fund types. For each, the fund information starts with a beginning
fund balance, adds current year revenues, and subtracts current year expenditures, resulting in
an ending fund balance. Adopted budget amounts are provided as a basis for comparison of
actuals to date.
Special Revenue Funds (Governmental Fund Type)
Special Revenue Funds account for the proceeds derived from specific revenue sources that are
legally restricted or assigned to special purposes. The Town’s Special Revenue Funds are
Community Development Block Grant Fund, Housing Conservation Program Fund, Urban Runoff
Source Fund (Non-Point Source), and several Landscaping and Lighting District (LLD) Funds.
Staff recommends revenue and expenditure budget decrease in the amount of 353,000 for the
Town’s participation in the West Valley Clean Water Program. Upon creation of the West Valley
Clean Water Program Authority, management of the program fees and expenditures was
shifted to the Authority.
CDBG Non-Point LLD's
Grants Source
Beginning Fund Balance 166,653$ 237,936$ 190,250$
Budgeted Revenues - 584,394 39,680
Total Actual Revenues - 2nd Qtr -$ 125,912$ -$
Budgeted Expenditures - 559,077 37,737
Total Actual Expenditures - 2nd Qtr - 88,634 15,810
2nd Quarter Ending Fund Balance 166,653$ 275,214$ 174,440$
Special Revenue Funds
Budget to Actuals Comparisons
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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 budget transfer between
capital projects and reducing both grant fund revenue and expenditure by $307,194 to match
funds received and awarded. Staff will continue to monitor these revenues and expenditures
throughout the remainder of the year. The Grant Funded CIP fund displays a deficit balance
because this grant fund expends Town dollars first, then provides documentation of these
expenditures to the State of California or other granting agencies and is reimbursed for those
costs. The reimbursements eventually result with the fund “breaking even” or a zero fund
balance.
GFAR*Traffic *Grant Funds*Storm Utility Gas
Fund Mitigation CIP Drains Undergd Tax
Beginning Fund Balance 13,861,073$ 2,636,215$ (343,705)$ 2,760,276$ 3,118,174$ 290,370$
Budgeted Revenues 8,648,481 1,795,438 6,930,235 104,340 3,863,048 1,233,317
Total Actual Revenues - 2nd Qtr 2,494,888 - 140,352 83,384 33,228 578,206
Budgeted Expenditures 17,892,744 1,795,438 7,256,019 485,058 6,836,204 1,397,952
Total Actual Expenditures - 2nd Qtr 1,644,955 126,848 169,170 - - -
2nd Quarter Ending Fund Balance 14,711,006$ 2,509,367$ (372,523)$ 2,843,660$ 3,151,402$ 868,576$
Capital Project Funds
Budget to Actuals Comparisons
* GFAR, Traffic Mitigation, and Grant Funds balances are combined in the CAFR. The combined balance of $13,866,028 is presented as an
Appropriated Reserve. The Traffic Mitigation Fund balance includes $2,287,555 deferred revenue.
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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 $58,970 expenditure budget adjustment to cover the Civic Center HVAC
Cooling System repair, and $33,000 transfer from the Equipment Replacement Fund for the
Police Headquarter Surveillance Camera Update project. In addition, staff recommends
expenditure adjustments in amount of $65,000 from the available Workers’ Compensation Fund
to provide COVID 19 Testing for essential Town employees. Staff will continue to monitor
expenditures and propose a revised cost allocation if needed during the FY 2021/22 budget
preparation.
Equipment Workers Self Information Facility
Replacemt Compensation Insurance Technology Maint.
Beginning Fund Balance 1,925,054$ 1,808,740$ 1,290,614$ 2,604,203$ 102,469$
Budgeted Revenues 297,546 1,185,906 418,135 917,219 1,148,757
Total Actual Revenues - 2nd Qtr 191,768 698,452 205,763 484,004 456,916
Budgeted Expenditures 1,523,121 1,835,050 668,059 1,070,891 1,169,722
Total Actual Expenditures - 2nd Qtr 87,134 576,940 501,245 212,915 517,241
2nd Quarter Ending Fund Balance 2,029,688$ 1,930,252$ 995,132$ 2,875,292$ 42,144$
Internal Service Funds
Budget to Actuals Comparisons
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Trust and Agency Funds (Fiduciary Fund Type)
Town Trust and Agency Funds have estimated fund balances as of December 31, 2020 of
$525,815 for the Library Trust Funds and $229,795 for the Successor Agency (SA) Trust Fund.
AB1x26 is the “Dissolution Bill” that eliminated the Town’s Redevelopment Agency effective
February 1, 2012. AB 1484 is the “clean-up” bill that revised and attempted to clarify AB1x26. In
accordance with the law, the Successor Agency continues to wind down the affairs and
operations of the former Redevelopment Agency by implementing programs and activities in
accordance with the State-approved Recognized Obligation payment Schedule (ROPS). The
Successor Agency monies are now accounted for in a Private Purpose Trust fund and no longer
part of the Town’s Financial Statements.
Staff recommends a $44,500 revenue budget decrease and a $65,500 expenditure budget
decrease in the Library Trust since an expected donation was never received.
Library SA
Trust Trust
Beginning Fund Balance 526,815$ 229,905$
Budgeted Revenues 74,100 12,500
Total Actual Revenues - 2nd Qtr 3,236 -
Budgeted Expenditures 74,100 11,803
Total Actual Expenditures - 2nd Qtr 5,030 110
2nd Quarter Ending Fund Balance 525,021$ 229,795$
Trust & Agency Funds
Budget to Actuals Comparisons
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