Staff Report.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
DATE: February 9, 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:
The purposes of the Mid-Year Report (Attachment 1) are to provide the Town Council with a
status of the adopted Fiscal Year (FY) 2021/22 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
primarily focus on the Town’s General Fund. The analysis and recommendations are contained
in Attachment 1.
PAGE 2 OF 4 SUBJECT: Mid-Year Budget Performance Report – Six Months Ending December 31, 2021 DATE: February 9, 2022
REMARKS (continued):
Highlights of the Mid-Year Budget Report include:
Financial Overview and Executive Summary
As discussed in the Report, the projected deficit for FY 2021/22 is less than originally estimated
due to projected increases in Educational Revenue Augmentation Funds (ERAF) property tax
distributions and Transient Occupancy Tax (TOT). ln addition to the slight improvement in
revenue projections, staff is estimating that there will be year-end operating expenditure
savings. Staff anticipates savings attributable to Departmental vacancies and lower cost
structures associated with retiree replacements. In addition, for FY 2021/22, salaries were
again budgeted at actual salary plus a one step increase, which was a significant budgeting
methodology change from previous practice. Current fiscal year-end projections for FY 2021/22
reflect an anticipated $1.4 million deficit of operating revenues over expenditures compared to
the anticipated $1.9 million deficit in the Adopted Budget.
General Fund Revenue Analysis
The current forecast expects decreases in economically sensitive revenues such as sales tax,
property tax, and franchise fee; however, transient occupancy tax, and revenues related to
development activities are performing significantly better. Business license tax for the current
fiscal year was budgeted anticipating the continued impact of lower gross retail activities and
additional business license closures due to the pandemic and no adjustments are needed at this
time. The combined recommended mid-year revenue adjustments total a net increase of $1.0
million. While staff conducted a detailed analysis of all General Fund revenues and provided
the expected year-end estimates, only major revenue sources are recommended for
adjustment at this time.
General Fund Expenditure Analysis
General Fund expenditure totals are trending in accordance with the Adjusted Budget, with
total operational expenditures at the end of the second quarter at or about 47% of the
Adjusted Budget. With six months of data now available, staff expects that the next six months
of expenditures will be within the Adjusted Budget, although unexpected costs can still occur
which may require future Council action. The staff analysis examines potential salary and other
expenditure savings; however, budget adjustments are only recommended in certain instances
as outlined in the next section of the Report. The recommended General Fund mid-year
expenditure adjustments total a net increase of $0.5 million.
PAGE 3 OF 4 SUBJECT: Mid-Year Budget Performance Report – Six Months Ending December 31, 2021 DATE: February 9, 2022
REMARKS (continued):
FY 2021/22 Recommended Budget Adjustments and Summary of Key Recommended Budget
Adjustments
All recommended revenue and expenditure adjustments are contained in these sections along
with a description of the major adjustments.
General Fund Financial Summaries and Estimates
This section introduces the Schedule of General Fund Operating Revenues Versus Operating
Expenditures for the second quarter of FY 2021/22 which includes comparison information from
the prior year.
Financial Summaries of Other Funds
This section provides financial summaries and presents 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.
COORDINATION:
All Town Departments participated in the data collection and analysis that informed the
preparation of the Mid-Year Report and proposed budget adjustments.
CONCLUSION AND NEXT STEPS:
Staff is continuing to monitor all revenues and expenditures during the preparation of the
Proposed Operating and Capital Budgets for FY 2022/23. Should any additional budget
adjustments be necessary to balance operating revenue and expenditures prior to the FY
2021/22 close, staff will advise the Council accordingly. The Draft FY 2022/23 Operating and
Capital Budgets will be available in May with the budget hearing tentatively scheduled for May
17, 2022.
Staff recommends that the Town Council approve the proposed revenue and expenditure
budget adjustments as described in Attachment 1 and adopt the updated Town Council and
Management Classifications Salary Schedule (Attachment 2). In additon, staff looks forward to
answering the Town Council’s questions.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
PAGE 4 OF 4 SUBJECT: Mid-Year Budget Performance Report – Six Months Ending December 31, 2021 DATE: February 9, 2022
Attachments:
1. Mid-Year Budget Report - July 1 - December 31, 2021.
2. Town Council and Management Classifications Salary Schedule