Desk Item.Mid-Year Budget Performance Report
PREPARED BY: Stephen Conway
Finance Director
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 02/15/2022 ITEM NO: 11 DESK ITEM
DATE: February 15, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Mid-Year Budget Report - July 1 - December 31, 2021:
a. Receive FY 2021/22 Mid-Year Budget Report;
b. Authorize Budget Adjustments as Recommended in the Mid-Year Budget
Report; and
c. Adopt the Town Council and Management Classifications Salary Schedule
Updated with the Urban Forest Manager Position.
RECOMMENDATION:
Staff recommends that the Town Council take the following actions regarding the Mid-Year
Budget Performance Report - July 1 - December 31, 2021:
a. Receive FY 2021/22 Mid-Year Budget Report (Attachment 1);
b. Authorize budget adjustments as recommended in the Mid-Year Budget Report; and
c. Adopt the Town Council and Management Classifications Salary Schedule updated with the
Urban Forest Manager Position (Attachment 2).
REMARKS:
On February 14, 2022, the Finance Commission received the FY 2021/22 Mid-Year Budget
Report. After a brief presentation by staff, the Commission asked questions and provided input
regarding the FY 2021/22 Mid-Year Budget Report. Below is a summary of the primary areas of
review and comment provided by the Finance Commission.
• Commissioners asked about the transfer of funds for the 224 West Main property. Staff
confirmed that it is an internal fund transfer and has no impact on the General Fund.
• Commissioners asked about the recommended expense for the Los Gatos Theatre and
anticipated future revenues for the Theatre. Staff explained that the two retail tenants
PAGE 2 OF 3 SUBJECT: Mid-Year Budget Performance Report – Six Months Ending December 31, 2021 DATE: February 15, 2022
REMARKS (continued):
are providing monthly rent revenue and that the Request for Proposals that was issued
for the operation and management of the Theatre is seeking a business model that will
not require General Fund subsidies.
• Councilmembers and Commissioners inquired about the reduction in projected interest
income. Staff confirmed that the reduction is predicated on lower estimated portfolio
yields and not a factor of mark-to-market adjustments.
• Commissioners commented that the vacancy table appears to confirm that the Town
routinely has about 10 to 12 vacancies throughout the year. Commissioners
commented that the vacancy rate is consistent with typical organizational turnover.
• Questions were asked regarding the potential savings associated with the vacancies.
Staff provided that vacancies have both a positive savings component and some
offsetting increased costs. For example, savings associated with vacant sworn
positions are partially offset by increased overtime to maintain sufficient staffing.
Savings associated with Dispatchers are partially offset by hiring contract Dispatchers.
• Commissioners inquired about the debt service component of the revenue pie chart.
Staff described that the debt service is a passthrough component for the outstanding
Certificates of Participation issuance for the Library and the former Redevelopment
Agency Capital Projects. Corresponding expense offsets the revenue.
• Commissioners asked if the retiree medical increase will be a continuing, ongoing
increase in expenditures. Staff confirmed that it would be an ongoing increase in total
healthcare funding. The recommended increase in retiree health care expense is
partially offset by a reduced cost structure in new hires.
• Commissioners commented that going forward proposed revenue and expenditure
budget adjustments should be identified as ongoing or onetime in nature.
Commissioners commented that it will be important for Council to better understand
which costs increase the total expenditure base relative to onetime additional costs.
Staff explained that the majority of the recommended adjustments are onetime with
the exception of the Urban Forestry position and retiree medical.
• Commissioners commented that some of the information contained in the Mid-Year
staff report would be helpful with the development of the Commission’s Key
Performance Indicators (KPIs).
• Commissioners inquired if the Urban Forest Manager position was the only Full Time
Equivalent position addition. Staff confirmed that it was the only recommended staffing
addition.
• A Councilmember inquired if staff agreed with a member of the public’s written
statement regarding a “structural deficit of $3.1 M for FY 2022” (see Attachment 3).
Staff clarified that the public’s analysis incorrectly included a $2.8 M transfer to the
General Fund Appropriated Reserve (GFAR). Transfers out from the General Fund to
GFAR are for one-time infrastructure projects and not an ongoing obligation. The
PAGE 3 OF 3 SUBJECT: Mid-Year Budget Performance Report – Six Months Ending December 31, 2021 DATE: February 15, 2022
projected deficit is approximately $1.4 M for FY 2021/22 and the Council has allocated
American Rescue Plan Act (ARPA) funds to cover this amount.
• Councilmembers and Commissioners acknowledged that while the transfer may be
considered a onetime accounting expense, the Council should identify additional
ongoing budgeted funds for capital improvements to maintain Town assets.
• A Councilmember suggested that capital funding should at a minimum cover asset
depreciation.
• A Councilmember commented that given the continued reduction in Transient
Occupancy Tax revenues, the use of ARPA funds is appropriate currently; however,
future potential structural deficits will ultimately need to be addressed.
There were no verbal public comments on the Mid-Year Budget Report.
Attachments previously received with the Staff Report:
1. Mid-Year Report: July 1 – December 31, 2021
2. Town Council and Management Salary Schedule
Attachment received with this Desk Item:
3. Public Comment Received by the Finance Commission