11 Staff Report - 2008/09 Mid-Year Budget Performance and Status Report
)I DATE: TO: FROM: SUBJECT: MEETING DATE: 2/17/2009 ITEM NO: COUNCIL/AGENCY AGE DA REPORT FEBRUARY 10,2009 MAYOR A D TO CO CIL! CHAfR A 0 MEMBERS OF THE REDEVELOPMENT AGENCY GREG
LARSON, TOWN MAl AGERlEXECUTIVE DIRECTOR FY 2008/09 MID-YEAR BUDGET PERFORMANCE A 0 STATUS REPORTSIX MONTHS ENDiNG DECEMBER 31. 2008 A. ACCEPT 2008/09 MID-YEAR SECO 0 QUARTER BUDGET
PERFOIU"lA CE STATUS REPORT, INCLUDING FY 2008/09FISCAL YEAR FINANCIAL PROJECTIONS B. AUTHORIZE BUDGET ADJUSTMENTS AS RECOMME OED IN THE ATTACHED SECOND QUARTER BUDGET PERFORMA CE REPORT
RECOMMENDATION: I. Accept the FY 2008/09 Mid-Year Budget Performance and Status report, including FY 2008/09 Fiscal Year Financial Projections 2. Authorize budget adjustments as recommended
in the attached second quarter budget performance report (Attaclunent I). PURPOSE: The purpose of this report is to provide the Town Council with a status of the FY 2008/09 Adopted Budget
at the mid-year point, including an overview of revenue and expenditure trends and financial projections for the current fiscal year. The report also includes a brief discussion on the
Town's current year General Fund Reserve status and an update of the FY 2009110 budget development process and recommended budget approach. PREPARED BY: N: FINANCE Qlrly Financial ReponslFY
2009 2nd Qtrl2009_Mid_ draft JH.doc Reviewed by: eS-:J Assistant Town Manager/Deputy Director__Town Attomey/General Counsel __ Clerk Administrator/Secretary
__Finance __Community Development
D MEMBERS OF THE REDEVELOPMENT CE AND STATUS REPORTPAGE 2 MAYOR AND TOWN COUNCIL/CHAIR A AGE CY SUBJECT: FY 2008/09 MID-YEAR BUDGET PERFORMA SIX MONTHS END G DECEMBER 31,2008 FebruGlY
II, 2009 DISCUSSION: FY 2008/09 MID YEAR BUDGET STATUS Budget Peljorl1lQnce Report The Budget Perfonnance Repo11 (Attaclunent I) is a mid-year repol1 covering a six month period beginning
July 1,2008 and ending December 31, 2008. The Budget Perfonnance Report provides an analysis and recommendations related to the cun'ent year's adopted budget revenue and expenditures
and the projected financial condition of all Town funds. General Fund Revenue Highlights FY 2008109 An analysis of FY 2008/09 General Fund revenue confinns that the Town is not immune
from the current economic recession. Key economically sensitive revenues such as sales tax, property tax, transient occupancy tax, franchise tax, and fees and services have been impacted
by the economy. As a result, staff proposes a 51.1 million net reduction in adopted budget levels. The proposed revenue changes include: • A 5858,300 decrease in estimated sales tax
from 59,058,300 to 58,200,000. • A 5295,223 decrease in estimated revenues for charges for services (mostly building plan check fees) from 52,271,678 to 51,976,455. • A 5188,720 decrease
in licenses and pennits (mostly building pem1it fees) from 52,350,150 to 52,161,430. • AS 168,980 decrease in property taxes from 57,093,300 to 56,924,320. • A S I 10,000 decrease in
estimated transient occupancy taxes from S I,21 0,000 to 51, I00,000. • A S I00,000 decrease in estimated franchise fee revenue from S1,756, I00 to 51,656, I00. • Revenue increases above
estimates include a 56 million increase in sale of land revenues related to the Vasona land sale, 5130,000 increase in parking citation revenue, and a 5470,138 increase to estimated
investment earnings, reflecting higher revenues on greater than anticipated average investment balances. General Fund Expenditure Highlights FY 2008109 Current expenditures are trending
below the expected 50% of budget level, which could result in expenditure savings at year end. This savings may help alleviate potential impacts of adjusting adopted budget revenues
downward as a result of the slow economy.
PAGE 3 MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: FY 2008/09 MID-YEAR BUDGET PERFORMANCE AND STATUS REPORTSIX MONTHS ENDING DECEMBER 31, 2008 February
n, 2009 General Fund Projected Year End Balances June 30, 2009 Current fiscal year end projections for FY 2008/09 anticipate an excess of operating revenues above operating expenditures
of approximately $498,000. This amount does not include the $6 million sale ofTown-owned property in Vasona Park. The Town Reserve policy provides that once legally restricted reserves
are funded as required, excess General Fund year end balances are to be designated equally to the Reserve for Future Capital and Special Projects and the Town Revenue Stabilization Reserve.
As Council is aware, the availability of excess balances resulting from current fiscal year expenditure reductions or revenue increases beyond the adopted budget is an important funding
source for the Future Capital and Special Projects Reserve and Revenue Stabilization Reserve. This is particularly important for the Future Capital and Special Projects Reserve as it
has limited alternative sources of funding. FY 2008/09 MID-YEAR BUDGET UPDATE TRENDS The FY 2008/09 mid-year budget update validates the Town's prior decisions to make strategic cost
reductions dating back to FY 2001/02. The current FY 2008/09 adopted budget includes 23 full time equivalent "de-funded" positions with an annual salary and benefit savings of approximately
$2.7 million dollars. Though the Town has been fiscally conservative, challenges still remain as explained in the following discussion. Operating Revenue Trends • Adopted • Revised 2008/09
Budget Revenue Revision $1,000,000 S2.OOO.OOO ,,",,000,000 $3,000,000 $8,000,000 . $7,000,000 $8.000,000 $9,000,000 15,000,000 $10,000,000 -" - The FY 2008/09 mid-year update reflects
reductions in estimates across most of the large sources of economically sensitive revenues including Sales Tax, Property Tax, Franchise Fee Tax, Transient Occupancy Tax, and Licenses
and Permits/Charges for Services, among others. Cumulatively, the FY 2008/09 mid-year budget estimates that the General Fund total revenues, not including the $6 million sale of Town-owned
property in Vasona Park or use of other funding sources, will need to be adjusted approximately $1.1 million lower than the adopted budget estimates as shown in the graph to the left.
s,;,1.. &U.. General Charges for ue.n..... & Tn.nslent Fn,nchl.. Two of the more significant T'Il( Property Tax service.. Permits Occupancy F.... ..
revenue reductions include sales and use tax and licenses and permits and charges for services.
PAGE4 MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: FY 2008/09 MID-YEAR BUDGET PERFORMANCE AND STATUS REPORTSIX MONTHS ENDING DECEMBER 31,2008 FebruQlY
11, 2009 Sales and Use Tax Due to the slow economy, staff recommends revising sales and use tax approximately $860,000 lower than the adopted budget. Revenues are down across a number
of segments of the economy, with auto sales recording record lows for the fiscal quarter ending September 30, 2008. Auto parts and auto repairs have also recorded low revenues in the
last three years. On a positive note, internet retail experienced a 7% gain, and service station sales tax revenue is at a three year high due to the high summer 2008 gas prices. The
new revised sales tax of approximately $8.2 million is a very important component of the Town's revenue sources, representing approximately 30% of the Town's General Fund operating revenues.
However, the Town's declining diversity in its portfolio of sales tax producers continues to be a a concern for the future. The current sales tax generators by category are presented
in the pie chart below: Town Sales TaxMix New Autos Sales Tax (In $ Millions) Projected 2008109 Sales Tax Revenues 51.82 M l.OOO,OOO S1.72M S1.56M S1.66M InterMll R.QlI
$1.47M -----52.3 III "_.0" Otto.. SUM 128.OW" \400,000 1:».3'41 .. UOO,IMIO \000,000 100,000 100,000 AulO o.,lell .",000 ". (ll.8lt'Jlo) 100,0'0 (lownlDwn SUN 2003 2004 2005
2006 2007 2008 l21U5'Jl,1 Fiscal Years A challenge to the sales tax base is the portion attributable to the Town's auto dealerships. As depicted in the Sales Tax Mix Chart, the Town's
auto dealerships account for approximately 12% of the Town's total annual sales tax. This percentage has fallen from five years ago when this sector provided approximately 30% of the
annual sales tax collections. Another concern is the importance of retaining technology-based businesses which contribute to the Town's revenue, one of which is now our largest provider
of sales tax annually, contributing nearly 28% of the Town's sales tax revenue. Having a well balanced sales tax base continues to be an important objective so the Town can better weather
the effects of economic cycles and their impact on the delivery of services to the community.
PAGE 5 MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPME T AGENCY SUBJECT: FY 2008/09 MID-YEAR BUDGET PERFORl'vlANCE Al D STATUS REPORTSIX MONTHS ENDING DECEMBER 31,2008 Febl"llwy
II, 2009 Licenses & Permits and Charges for Services The mid-year budget update also includes a reduction of approximately 5483,000 in licenses and pennits and charges for services.
The majority of this reduction comes from decreased fees for private development activity and related fees and pennits. Given its limited revenue base, the Town must charge adequate
fees to recover the cost of specialized services. This will ensure that public subsidies are not created for private development and other specialized services. In that regard, staff
is intending to bring forward for Council approval, a fee review/update this spring as part 0 f the budget process. Operating Expenditure Trends Anticipating that the Town's economically
sensitive revenues would be impacted by recession, staff proactively implemented strategic cost reduction strategies this fiscal year, including targeted hiring freezes, redeployment
of staff, and reduction in materials and supply costs. These efforts were in addition to the 23 positions defunded in prior years. CUITent estimates of the Town's General Fund expenditures
anticipate actual expenditures will be approximately $780,000 below the FY 2008/09 adjusted budget. Given the decreased operating revenue streams, the expected savings will be crucial
in maintaining a balanced budget for the fiscal year. Staff anticipates that despite the reduction in revenues, the General Fund will still be able to capture a small surplus of approximately
$498,000 at the close of the fiscal year. State Budget Impacts to Local Governments Although Califomia State legislators appear to have reached agreement on the State budget, details
are not yet available. Local govemment remains concemed that revenue such as property tax and other funding sources are at risk for reduction or elimination. While Proposition IA provides
some protections for local agencies, the State has the ability to declare a "fiscal emergency" which would allow the state to take local revenue sources like propel1y tax for a limited
time. The Town should consider property taxes and Redevelopment Agency tax increment to be at risk until the state can make ongoing structural changes to its budget. Other funding sources
such as the $100,000 Community Oriented Policing (COPS) grant, vehicle license fees, and the state mandated cost reimbursements also remain at risk. Staff is working proactively with
the League of Cities, legislators, and professional organizations such as the Association of Cali fomi a Police Chiefs to protect these vital revenue sources. GENERAL FUND RESERVE STATUS
As of June 30, 2008, Town's FY 2007/08 General Fund balance was approximately $19.3 million, all of which is legally reserved or designated for special purposes by Council. Included
in this amount are approximately 53.7 million in reserves for Economic Uncel1ainty, $4.4 million
D TOWN COU CIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT PAGE 6 MAYOR A AGENCY SUBJECT: FY 2008/09 MID-YEAR BUDGET PERFORMANCE A SIX MOl THS ENDI G DECEMBER 31, 2008 FebruaJy II, 2009 D
STATUS REPORTin reserves for Future Capital and Special Projects, and $4.4 million in Revenue Stabilization reserves that remain intact and available at the mid year point of FY 2008/09.
FY 2009/10 BUDGET DEVELOPMENT PROCESS ConculTent with the update of the Five Year Financial Plan and in anticipation that service reductions would be necessary for the FY 2009110 budget,
staff began the budget process for next year in early January 2009. This process includes the development of conceptual budget reduction proposals for the Town Manager and Council consideration.
Limited revenue enhancements will also be considered to offset reductions. Staff is currently evaluating the feasibility and impact of the proposals before they are brought forward to
Council for discussion at the March 7, 2009 Council Retreat. FIVE-YEAR FINANCIAL PLAN UPDATE The Five-Year Financial Plan is an independent financial tool that is based upon current
costs and revenue forecasts, but is designed to be more fluid in nature, allowing staff to build various funding scenarios and test "what if' assumptions. Last Fall, staff updated the
Five-year Financial Plan which included preliminary budget work based on an assumption of a deficit gap in FY 200911 0 of approximately $800,000 lising to approximately $1.5 million
in FY 20 I0111. That projected gap was not due primarily to the recession, which was just beginning to be felt at a national level. Rather, the gap was due to projected expenditures
growing at levels above projected revenues, leading to ongoing future deficits if structural and ongoing adjustments were not made. The scheduling of the Five Year Plan for presentation
at the Council retreat in early March will allow staff to incOIvorate more reliable data into the revenue estimates as more "actual" numbers on economically sensitive revenues become
known. It may also provide more time to determine what, ifany, effects will be felt by the Town resulting from the State ofCalifolllia's budget deliberations. CONCLUSION Overall, for
the current year, the Town is in the enviable position of having moderately higher revenues than expenditures when fully accounting for all intelllet-based retail sales. This could result
in a small increase in General Fund operating and capital reserves. However, due to projected flat and or declining revenue growth, staff is developing budget reduction and llimited
revenue enhancement options for FY 2009/10 and beyond. Given the potential recessionary impacts to Town revenues and anticipated increases in Town operating costs, particularly employer
retiree medical costs and other personnel costs, the Town's highest fiscal priority should be to contain its operating costs on an ongoing basis.
D TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT PAGE 7 MAYOR A AGE CY SUBJECT: FY 2008/09 MID-YEAR BUDGET PERFORMA SIX MONTHS El DrNG DECEMBER 3\,2008 FebrtlCllJI 11, 2009 CE A!
D STATUS REPORTThis budget report is not a project defined under CEQA, and no further action is required. FISCAL IMPACT: The Second QUal1er Budget Perfonnance Report includes a number
of recommended budget adjustments necessary for FY 2008/09. Upon approval of the recommended budget adjustments by Town Council, current projections forecast a moderate surplus of operating
revenues over operating expenses for the fiscal year ending June 30, 2009. As discussed earlier in this report, staff is clllTently engaged in FY 200911 0 budget development process
which incorporates plans for a moderate level of budgetary rightsizing, contingent upon the perfonnance of the local economy and any unforeseen budgetary actions taken by the State of
California to balance its budget. Attachments: Attachment 1-Budget Performance Report for the Six Months Ended December 31, 2008
TOWN OF LOS GATOS BUDGET PERFORMANCE REPORT FOR THE SIX MONTHS ENDED DECEMBER 31, 2008 February 17,2009 FINANCIAL OVERVIEW -EXECUTIVE SUMMARY Status of FY 2008/09 Adopted Budget: Second
quarter General Fund revenues confinn that the broader economic recession has impacted the Town. Overall, General fund revenues are recommended to be adjusted lower by a cumulative amount
of approximately $1.1 million from adopted budget estimates. The closure of two automobile dealerships the prior year and another this fiscal year, along with a dramatic slump in new
car sales, led to record lows in sales tax collected on new automobiles. The current forecast expects Sales Tax to be lower than revenue estimates by approximately $860,000 this fiscal
year. The decrease is moderated by the growth in the general retail category, led by continued growth of an intemet commerce company, the Town's largest provider of sales tax revenues.
Auto dealerships as a whole have declined to approximately 12% of total Town sales tax, compared to approximately 30% five or more years ago. The success of Netflix has allowed the Town
to sustain the loss of four of the top ten businesses in the Town's p011folio of sales tax generators in recent years without a dramatic decline in sales tax. Restaurant sales taxes
for the period ending September 30, 2008 were the highest generated in the past three years, up 5% from the prior year. Despite concems relating to the real estate sector rising from
the "sub-prime" lending problems and the recession, propel1y tax collections are tracking very close to the adopted budget estimates. Property tax appears to be tracking at approximately
3% growth, approximately I% lower than projected during the development of the FY 2008/09 budget. Based on current year receipts, staff reconmlends a $168,980 decrease to property tax
revenues for this year from the adopted budget estimates. Despite a very slow real estate market, the sustained positive growth is largely attributable to the tumover of local housing
stock, and new construction/remodels reflecting the continuing desirability of the Town's housing stock and new commercial developments being added to the property tax rolls. Department
expenditure totals for the second quarter FY 2008/09 are also favorable, with spending at the end of the second quarter averaging 48% expended, or 2% below the 50% benclunark level used
for 6 months of operations. Because of expected lower operating revenues, staff began strategic cost reductions to constrain the rise of operating costs. With six months of data now
available, staff can better predict the next six months of expenditure trends, but unexpected costs can arise outside of the nonn. Consequently, further adjustments may be necessary
during the fiscal year. Any further course corrections or budget adjustments necessary to balance operating revenue and expenditures will be brought to Town Council's attention at the
earliest opportunity. Providing services to the conmlllnity in this and future fiscal years will continue to require strong perfonnance in the Town's economically sensitive revenues
to offset likely cost increases. The FY 2009110 budget preparation, including updated fees, will try to protect essential public services while limiting operating cost escalation in
light of the five-year fiscal forecast update in March which is likely to predict operating revenue shortfalls in the coming fiscal years. General Fund Reserve Status -June 30, 2008
General Fund reserves are classified into two categories-Restricted and Designated. Restricted reserves are those which are restricted in use by accounting standards or legal agreements
and are not considered
as available for use for another purpose. Designated reserves are established by Council policy for an intended purpose. Current Restricted Reserves are presented below: Restricted Gelleral
FUlld Reserves: Amoullt Reserved for RDA Loan $1,500,000 Reserved for LT Notes Receivable 548,261 Total Restricted General Fund Reserves $2,048,261 As stated earlier the total General
Fund Reserves closed at a balance of approximately $19.2 million at June 30, 2008. In addition to the approximate $4.7 million of General Fund Reserves set aside for restricted purposes,
the Town has approximately $16.4 million in designated reserves established in accordance with Town financial policies and operating and capital budget requirements. The Designated Reserves
presented below include the Revenue Stabilization Reserve created by the Town upon the adoption of the FY 2005106 budget. Desi ated Resen'es: Designated for Capital & S ecial Projects
Designated for Revenue Stabilization Designated for Economic Uncertainty Designated for for Compensated Absences Designated for YearEnd Budget Adjustments Designated for Open Space Designated
for Market Fluctuation Designated for Mgr's Contingency & Prod. Desi ated for Grants Funds & Covers Total Desi nated Reserves $4,351,921 4,369,355 3,678>001 2,154,952 1,432,000 562,000
456,430 200,000 31,910 $17,236,569 The Reserve for Capital and Special projects, whose source is derived from half of the atmual available General Fund budget savings, serves as the
primary source for replenishment to the Town's Capital Improvement Fund (GFAR) in addition to the annual budgeted transfer from the General Fund's operations of $1,100,000 in the current
fiscal year. As such it represents the potential source for a large number of unfunded needs identified during the annual capital improvement plan process. This reserve also functions
as a designated programmed funding source for new capital proj ects or augmentations to authorized projects funded through the Town's Five-Year Capital Improvement Program (CW). The
Town continues to be challenged in identifying an ongoing source of funds to meet the atmual $1.5 million recommended street repair and maintenance program and other priority infrastructure
improvements like sidewalk repair and replacement. In its public communications, staff refers to the $17.2 million in Designated General Fund reserves as the Town's "reserves" since
these reserves are established by Council policy for their intended purpose. The availability of approximately $17.2 million in Designated General Fund reserves provides the Town with
resources to manage through future fiscal challenges and opportunities, mindful of the many competing priorities for resource allocation, ranging from restoration of core services to
the 'community and a large amount of unfunded capital improvements. GENERAL FUND-KEY REVE UE ANALYSIS FY 2008/09 The following presentation provides a recap of significant General Fund
revenue sources as of the second quarter ending December 31, 2008. Staff is monitoring developments in each major revenue source closely for potential adjustments to budgeted revenues
as recommended in this report. 2
BUDGET PERFORMANCE REPORT FY 2008/09 • Sales Tax Revenue • Description The State Board of Equalization, with the implementation of the "triple flip," now allocates .75 cents of the 8.25
cents of local sales tax collected by merchants on retail sales and taxable services transacted within the Town of Los Gatos. This .25 cents of local sales tax is being replaced by the
state with an equal amount of property tax. Revenues are remitted to the Town on a monthly basis. This revenue is placed in the General Fund for unrestricted uses. Analysis According
to a recent update from the Town's sales tax analysis consultant, jurisdictions across California experienced slowdowns or declines in sales tax revenue in the third quarter of 2008.
ABAG economists predict a continued slowdown or flat to negative economic growth for the next two fiscal years. After adjusting for inflation, the Town experienced a negative (-1.5%).growth
rate as compared to a negative (-2.8%) growth rate for the Northern Califorina region for the year ended September 30, 2008. With the closure of four auto dealerships in recent years
that were "top ten sales tax" generators, the fact that sales tax collections are down only moderately from the prior year's pace is very encouraging. The continued success of Netflix
and the addition of some new sales tax contributors have helped to prevent a more dramatic decline in sales tax projections for the current year. However, relying on one major source
of sales tax for service delivery is not recommended. More diversification of the revenue base continues to be vital for this revenue category. The Town continues to seek more balance
in business sectors that generate sales tax. Quarterly and Annual Revenues 5-Year History $ 10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $-11l2nd Quaner YTD' Revenues o Fiscal
Year Total AClUal Revenues • Fiscal Year Budgeted Revenues FY 04/05 FY 05/06 FY 06/07 FY 07108 FY 08/09 S 9,058,300 FY 08/09 S 3,236,975 FY 07/08 S 3,326,298 S 9,345,432 FY 06/07 $ 3,214,488
S 9,253,891 FY 05/06 $ 3,131,898 $ 8,655,565 FY 04/05 $ 3,179,238 $ 7,904,130 2nd Quarter YTD Revenues Fiscal Year Total Actual Revenues Fiscal Year Budgeted Revenues FY 1004105 forward
will reflect the Sales Tax I" Lie" puid by 5alll« C!tlrU COUllty 2nd Quarter Percenl ofTotal 40.22% 36.18% 34.74% 35.59% 35.73% Recommended Revision S (860,000) 3
BUDGET PERFORMANCE REPORT FY 2008/09 • Property Tax Revenue • Description Property Tax is one of the Town's largest revenue sources, accounting for 21.8% of the Town's budgeted General
Fund revenue for FY 2008/09. Property Tax distributions are largely received in the third and fourth quarters of the fiscal year, meaning revenue receipts are not reflected proportionately
by quarter in the chart below. Property Tax is levied at I% of a property's assessed value, of which the Town currently receives approximately 9.5 cents on each dollar paid to the County
Assessor's Office. The assessed value of real property appraised by the County Assessor is the 1975-76 assessment role value, adjusted by a two percent inflation factor thereafter. However,
when property changes hands or new construction occurs, property is reassessed at its current market value. Real property values critically impact revenues. With the passage of Proposition
13, voters in California limited the tax rate that can be imposed by the Town on property. With the limitation on rates, the higher the aggregate property value, the higher the revenue
generated. Analysis Property taxes are moderately lower than budget estimates but because of uncertainty resulting from the fallout from the sub-prime lending problems experienced in
other locales, further reductions to estimates may be necessary. The Santa Clara County Assessor's roll for July I, 2008 lien date indicates a 3.06% (I% below adopted budget estimates)
growth in total assessed value for the Town. Los Gatos is near the top of the range of cities in the county still anticipating positive assessed valuation growth for FY 2008/09. r PROPERTY
TAX Quarterly and Annual Revenues 5-Year History 510.000.000 58.000,000 56,000,000 54,000,000 52,000,000 5-FY 05/06 FY 06/07 FY 07108 FY 08/09 II 2nd Quarter YTD Revenues o Fiscal YearTOlal
Actual Revenues • Fiscal Year Budgeted Revenues 33.99% $ 9,299,500 FY 08/09 $ 3,160,810 FY 07/08 $ 3,061,873 $ 9,178,869 FY 06/07 $ 2,806,731 $ 8,584,612 FY 05/06 $ 2,678,416 $ 7,755,200
FY 04/05 $ 2,497,953 $ 6,856,993 2nd Quarter YTD Fiscal Year TOlal Actual Revenues Fiscal Year Budgeted Revenues FY 1004105forward will reflect all increase ill Property
Tax due to "Permallellt" ReaUg",lIell1 of VLF 2nd Quarter Percent of Total 36.43% 34.54% 32.69% 33.36% Recommended Budget Revision 5 (168,980) 4
BUDGET PERFORMANCE REPORT FY 2008/09 • Interest Income Revenue • Description The Town earns Interest Income revenue by investing cash not immediately required for daily operations in
a number of money market instruments. These investments are made within parameters as stated in the Investment Policy approved by the Town Council. The Town's goal is to achieve a competitive
rate of return while protecting the safety of those funds. Interest Income revenue for the Town is primarily dependent upon two factors: the cash balance in the Town's investment portfolio,
and the yield on those funds. Analysis The Town's Interest Income earning has been impacted this fiscal year years by use of Town funds to make significant investments in Town infrastructure,
most notably the purchase of land for the new police services building, among other infrastructure investments made in carrying out the Town's approved capital improvements plan. Current
year interest revenues are tracking positively against budget estimates. Actual LAIF yields have declined moderately to an average yield of 2.353% in December 2008, from 4.801% in December
2007, and but is still above the LAIF record low of 1.42% set
in May 2004. Despite very low yields available in the market, there is more average dollar balances available for investment than staff had estimated in the spring of 2008. Staff recommends
an increase of $400,000 to interest revenue. L--:...._----'''------=I:::n:.:.te::.:r:..::e:.::s.:..t.:..In:.:.c::.:o::.:m:::·-=e Quarterly and Annual Revenues
5-Year History 52,000,000 51,500,000 51,000,000 5500,000 5-FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08 II 2nd Quarter YTD Revenues o Fiscal Year Revenues • Fiscal Year TOial Budgeted
Revenues FY 03/04 FY 04105 FY 05/06 FY 06/07 FY 07/08 2nd Quarter YTD Revenues 5 594,001 5 513,338 5 684,427 5 936,08\ 5 1,011,756 Fiscal Year Revenues 5 795,488 5 884,203 5 1,439,685
5 1,977,233 Fiscal Year Total Budgeted Revenues 5 \,348,300 2nd Quarter Percent orTolal 74.7% 58.1% ·47.5% 47.3% 75.0% Recommended Budget Revision 5 400,000 5
BUDGET PERFORMANCE REPORT FY 2008/09 • Franchise Fee • Description Franchise Fees are collected by the Town for the privilege of operating a utility service within Town limits, and as
a fee in lieu of business license tax. Franchise Fees are currently received from Comcast for cable television services, PG&E for gas and electric service, and Green Valley for solid
waste collection services. Analysis Second quarter results are pacing ahead of the budget estimates at mid-year and are significantly higher than the prior year due to the change in
the way franchise fees are collected. With the transition in the spring of 2007 to the new garbage contract, the franchise fees were established at 16%. The prior contract provided for
a 10% franchise fee and approximately $300,000 in annual surcharge fees for solid waste program expenses. The new contract increases the franchise fees but eliminated the solid waste
surcharge fees. Due to solid waste franchise tax revenues exceeding estimates for the current fiscal year, staff recommends a $100,000 increase to this revenue source. Quarterly and
Annual Revenues 5-Year History $2,000,000 $1,500,000 $1,000,000 $500,000 $-II 2nd Quaner YIl) Revenues o Fiscal Year Total AClual Revenues • Fiscal Year TOIaI Budgeted Revenues FY 04/05
FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 06107 FY 07/08 FY 08109 S 274,603 $ 547,508 $ 548,795 $ 1,162,037 $ 1,659,829 $ 1,756,100 23.63% 32.99% 31.25% (100,000) 24.16% FY 05106 246,980
$ 248,860 942,647 S 1,030,189 26.20% FY 04105 $$ Recommended Budget Revision 2nd Quarter YTD Revenues Fiscal Year Total Actual Revenues Fiscal Year TOlal Budgeted Revenues FY 2007108
Increase Due /0 lIew cOlltraclfor Garbage Frallc/lise Fees 2nd Quarter Percent ofTotal 6
BUDGET PERFORMANCE REPORT FY 2008/09 • Busil/ess Licel/se Tax Revel/ue • Description The Town of Los Gatos requires businesses to obtain a business license if a business is located within
Town limits, or if an agent of a business conducts operations within Town limits. The Business License Tax is based on the type of business activity. Activities such as retail sales,
wholesale, and manufacturing are based on estimated gross receipts, on a sliding scale, and comprise approximately 40% of the Business License Tax revenue. Other Business License Tax
revenues are based on flat fees as set forth in the Town Code, and make up the remaining 60% of revenue. AlUlUal business license renewals are due and payable in advance on January 2nd
of each year. New business license applications for flat-fee based businesses are pro-rated by quarter, from the date of application to the end of the year. Analysis The Business License
Tax revenue received in the first quarter is primarily comprised of new Business License fees. The majority of revenues come from renewals, which are received in the second and third
quarters. The actual second quarter collections trail the year but this is likely due to timing issues resulting from the financial system upgrades impact to the nomlal billing cycle.
Actual collections for the prior year benefitted in part from additional audit efforts conducted by staff which netted approximately $75K in additional "one-time" revenue from unlicensed
businesses operating fiscal year. Staff intends on conducting additional audit efforts again this fiscal year. Quarterly and Annual Revenues 5-Year History 1,200,000 1,000,000 800,000
600,000 400,000 200,000 a:l2nd Quarter YTD Revenues o Fiscal Year Total Actual Revenues • Fiscal Year Total Budgeted Revenues FY 04/05 FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 04/05 Fy
05/06 fy 06107 FY 07108 FY 08/09 2nd Quarter YTD Revenues 396,773 343,358 452,346 447,514 376,704 Fiscal Year TOial Actual Revenues S 1,056,814 S 1,019,386 S 1,176,422 S 1,138,057 Fiscal
Year TOlal Budgeted Revenues S 1,100,000 2nd Quarter Percent arTOlal 37.54% 33.68% 38.45% 39.32% 34.25% Recommended Budget Revision No Change 7
BUDGET PERFORMANCE REPORT FY 2008/09 • Trallsiellt Occupallcy Tax • Description The Town of Los Gatos levies a 10 per cent Transient Occupancy Tax on all hoteUmotel rooms within Town
limits as a method to help fund Town services provided to transitory lodgers. Analysis The Transient Occupancy Tax revenues received in the second quarter of FY 2008/09 reflect a small
increase in collections compared to the prior year, a positive development in light of the current recession. This year the State of California is projecting flat to modest growth in
domestic and international visitation compared to the prior year. Overall, the Town expects the occupancy rates to remain comparable to the fIrst six months of the fiscal year. However,
due to reports from local hoteliers of lower occupancy rates, staff recommends a moderate revision of $110,000 less in TOT revenues for the fiscal year. Quarterly and Annual Revenues
5-Year History 51,400,000 51,200,000 IA-----"'''' 51,000,000 IA-f'l---I 5800,000 5600,000 5400,000 5200,000 5-LoOIIiI...I!:= FY 04/05 FY 05/06 FY 06/07 FY 07108 FY 08/09 • 2nd Quarter
YTO Revenues ([) Fiscal Year TOlal AClUal Revenues • Fiscal Year Total Budgeted Revenues FY 04105 FY 05/06 FY 06/07 FY 07/08 FY 08/09 2nd Quarter YTO Revenues 5 301,725 5 382,190 S 371,333
5 435,891 5 436,515 Fiscal Year Total Actual Revenues 5 868,908 5 1,028,664 5 1,108,257 5 1,245,078 Fiscal Year TOlal Budgeted Revenues 5 1,210,000 2nd Quarter Percent OrTOlal 34.72%
37.15% 33.51% 35.01% 36.08% Recommended Budget Revision S (110,000) 8
FY 2008109 RECOMMENDED BUDGET ADJUSTMENTS Garbage Fees Permit Fees Charge for Services Other Sources Intergovernmental S 6,000,000 S 400,000 S 130,000 S (168,930) S (860,000) S (110,000)
S (100,000) S (t65,000) S (289,000) S (26,100) S (22,000) S 4,788,970 Increase bOlh revenues and expenditures on Pass Thru and Propeny Damage Accounts to equal amoutll received -appro,x
S95K * Budget adjustments are reconunended for the following revenues and expenditures at the first quarter as described below: General Fund Revenues Sale of Vasona Land Interest Parking
Tickets Property Taxes Sales Tax TOT S (456,910) S 2,801 S 2,801 $ (7,942) S 7,942 S 2,80t Grallt Fuuds * ADA Public Facilities -reallocate old balance * ADA Public Facilities -reallocate
to Curb CUIS * Curb CUIS -reallocate from ADA Public Facilities Other Funds Revenues RDAERAF Shift CDBG * ADA Curb Cuts -reallocate old bal Admin * Per transfer requested (0 the County.
Reallocation of unspent S's all outstanding projects to be redirected 10 on-going ADA project. S 7,000 $ 9,000 S (9,000) S 7,000 S to.OOO $ 50.000 S 50.000 S tOO,OOO S 2.801 S (7,942)
$ 7,942 S 2,801 Grallt Funds * ADA Public Facilities -reallocate old balance * ADA Public Facilities -reallocate to Curb Cuts * Curb Cuts -reallocate from ADA Public Facilities Otller
Funds Expenditures Vehicle ll'laintellalJCe Air Compressor Fuel System -Fixed Asset Fuel System· Fixed Asset Workers CompeusatiolJ GFAR Town Beautification -Turf@Plaza Railroad Crossing@Winchester-Fu
nd Balance 9
Recommended Budget Adjustments Gel/eral FIII/d Revel/lies Sale of Vasona Land. Staff recommends a $6,000,000 revenue adjustment to Sale of Land for the Vasona land sale. Tllis amount
will be held in a designated reserve in the General Fund for future acquisition and maintenance of open space. Any interest eamed on tllis balance will accrue to tllis reserve. Sales
Tax-Actual receipts are rumling below adopted budget estimates, primarily due to the decline in new automobile sales and smaller decreases in other categories. Staff reconunends a decrease
of 5860,000 in estimated revenues for the year. Interest-Actual receipts are running ahead of adopted budget estimates largely due to lligher average balances available for investment
than staff had projected for the FY 2008/09 adopted budget. Parking Citations. Actual receipts indicate a need to increase this revenue source by an additional 5130,000 for the fiscal
year. Property Taxes-Actual tax collections through December 2008 indicate a need to lower budget estimates for all categories ofTown property tax by 5168,930. Francllise Fees-The new
garbage contract provides for increased franchise fees and eliminates solid waste program funding reimbursements, Staff recommends an adjustment of 5100,000 less in garbage francllise
fees for the year due to lower than anticipated gross garbage collection revenues estimated to be collected through the fiscal year end. Hotel Tax-Staff reconunends an 5110,000 decrease
to this revenue source based upon repot1s of lower occupancy from local hoteliers, however the actual six months of receipts tlu'ough December 2008 are trending at the same pace as the
prior year. Permit Fees and Charges for Services. Staff reconunends lowering these revenues by a total of 5454,000 reflecting a slowdown in private development activity due to the national
recession. Miscellaneous Revenues-Staff recommends a decrease of 548, I00 in various other nliscellaneous General Fund revenues. Olher FIII/ds RDA Fund Staff recommends a 5456,910 decrease
to RDA tax increment to reflect the State of Califomia's FY 2008/09 budget Educational Reallocation Augmentation Fund (conunonly referred to as "ERAF take" from the Town's RDA Vehicle
Maintenance. Staff reconunends a budget adjustment of 57,000 for an Air Compressor and S9,000 for a new fuel system funded by replacement funds set aside in the Vehicle Maintenance Fund.
Workers Compensation. The Town was awarded an ABAG grant of SIO,OOO in recognition of the Town's risk reduction efforts. The funds will be appropriated in the safety adnlinistration
program to be used for new security alanns and panic alanns in Town facilities. GFAR, CDBG Capital Projects Funds • Staff recommends a 52,801 and 57,942 remaining balance ofCDBG funds
to be reallocated to the ADA Curb Cuts project. • Staff reconunends a 550,000 increase to the Turf Repair at Town Plaza project to be funded by a transfer of550,000 from the Town Beautification
Project. 10
• Staff reconunends a $50,000 project for improvements at the Railroad Crossing at Winchester to be funded by available fund balance in the Town's GFAR fund. This project will repair
Winchester Avenue after the railroad has impacted it from its improvement of its railroad crossing on Winchester. FlNAJ'ICIAL SUMMARIES, PROJECTIONS AND RECOMMENDATIONS General Fund
Presented below is the Schedule of FY 08109 Geueral Fund Operating Revenues vs. Operating Expendi/llres for the second quarter and comparison infonnation from the prior year. In the
last column, the Finance Department projects final balances for the fiscal year based upon the early trends observed through the first quarter. 1'0\\ n of Los Caws Srhrdulr of General
Fund Operating Ren'nurs \"S. Opl'raling For the period rndec! Drcembef J 1.2008 n'07/OI1 n'Oi/OIl H07/0S FY011011 F\"OlllO'1 FY08J09
FYO&09 F\'Ollf09 F\'OIl/09 Final Ad/u!ltd 2nd Qt. •• Adoplrd 2nd Qlr •• Financf fblantt Butl::fl ACluals YTI) Bud::"'1 Butlg.... ....cwals nD Projecllon RrHnun Gener31
Prop<."T1y 13-, 7.036.876 ].061.873 S 7.093.300 7,093.300 3.160.810 -45'. 6.91-t.Jl0 Prop Ta.• Car fa.' Backfill 2.1-41.99-4 1.030.360 I 1.206.150 2.206.250
0', D01.lS6 Sales & Use T3.\ 9.H'H)! 8.781.100 3.326.299 3800 I 9.058.300 9.058.300 3.236.975 3600 8.200.000 Franchise F«s 1.659.829 1.103,180 541,508 3200 I 1.156.100 l.i56.100 5-18.795
31 00 1.656,100 Transienl Occupancy Tu U-15,078 1.100.000 -135,891 -1000 I 1.210,000 UIO,ooo -136.515 3600 1.100.000 Business License T;1\ 1.138.057 1,050,000 -1-17,51-1 -13 0 0 S 1.100.000
1.100,000 376.70-1 3-1 0 0 1.100.000 Licen= &. I'ermils 2A57A18 2.669.250 1.502.lJ3 560 0 I 2350.ISO 2.350.150 1.101.608 -170 0 2,161.-130 Motor Vehicle In Lieu 137.330 163.200 67,959
-1200 I 168.100 168,100 38M2 2300 I-IIASO 69U89 310.226 -ISOo I 695.980 695.950 232,036 3300 671.573 for SCTI ices 1.851.638
2,067,620 1.-132.096 6900 I l.187.28-1 5700 1.976AS5 Fines &. Forfeitures -177,120 153,1-15 3200 I -112.-100 227,119
5500 -197,150 Imerest 2.371.33$ IA9$,300 l,J3H38 8900 I 1.290.800 51 00 1.760,938 GASB inveslmenl to mar1<et per audil :"liscel1aneous
Olher 1,7115S8 2.150.505 1.296.083 5900 7.809.1-14 Fund Transfer.; 1-18.369 18·UIO 1-16A69 8000 IS-1,370 ISUiO 137.892
1-14.370 TGtal H.flenuel 13,057,650 31.372.7S-I 1-1.060.635 -1500 n.175.653 19.635.292 61 00 Use of Other Funtlin:; SGurrts: Resen'es 6,099,59-1
5.169.086 S2S.OOO 1.100,000 1.105.000 1,105.000 1.105.000 PERS Liabilily Accounl 300.000 300.000 300.000 300.000 300.000 C F Reser...es Sustainablihy YE s.wings 19-1.500 19-1.500 1.006,000
TOIa! Other fundin::Snuru. 6.099,89-1 5.569.086 815,000 159-1500 1.599.500 1.105.000 2.-111.000 TOUt Rflcnurs plu. H.escnes S 39.157,5-1-1 S 36,9-11,8-10 S 1-1.885.635 S 33.770.153 S
S 39539.957 E,prnditures (includes cJr but nn rnrunlbranrrsl 150.2-17 169500 72ASS -1300 183,800 183,800 73,286
-100 0 172.133 Tr<'asurrr 9-1.7S3 106.650 -100 0 109.050 109,050 -13.371 -100 0 6-IA86 251.65-1 257.750 113.777 -1400 2-17.900 2-17.900 110.16-1 -1-100
Administrali' e Sen ices 2.-I33.S68 2.-162.300 1.086.951 -1-100 2.510,800 2,510,800 1.1-13.779 -1600 2.333.907 Comm De' e!(Ipment 3.037,-183 3,656.585 1.335.002 3700 ).9-11.520 3,9-17.520
2.366.725 60', p(I\ice 12.B2.-I6-1 11.978.23-1 5.502.93-1 -1600 12.917,130 6,211.578 -1800 12.983.-11-1 Parks &. Public Works S.2-11.603
2,311.077 -1300 6.091.2-10 6.091.2-10 2.753.250 -1500 5.680.13S Sen'lces 1.009.005 1.037.272 -147.162 -1300 1.375.510 1.375510 567,977 -11 0 0 l.107,-I9(} l.ibrat;o
1.9-18,016 2.066.260 9OS.097 -1-100 2.111.060 2.111.060 977.761 -1600 2.016.880 fOial Dr-p' E,prn,rs S 26.399.09-1 S S 11.820.-151 -1-100 S 29.-18S.010 S 29.5-12.810
S -1Soo 28.301.889 Non·D<'Pt E.\pendilures and other uses Gencr.ll Government 8.262,-111 21 0• -I.2SI.8-10 -I.2S0.8-10 2.•118.2r
-1,739,908 Total ,",on-l>rpt [,pen,... 8.532,707 1.733.671 2\ •• -1.280,$-10 2.318_2-17 5-10• Tntal Oprra,ln::
.:,p.nJiturrs S S 35.389,087 S 13.55-1.123 380 • S .13.769.850 S .1.1.S23.650 S 16,566.139 -19 0 0 33.0-11.-')7 -"rt Opera'in:: R".nurs Brrore Capit:ll Tnfn
Uudllrtrd r"nd Ilal.nrr I I 1.55".753 I 1.331.512 ]OJ 303 I -1.17-1,152 :-.'A 6.-198.160 lin or Resen. es Capital Projects 6.099.S9'!
5.269.086 525.000 1.100.000 1.105.000 1.105.000 TGI.I Cse or Resenn 6.099.89-1 5.269.056 1.100.000 1.105.000 1.105.000 1.916.500
..... Surplus or tl:.e) or llrs.... e. Or-l.1511 13.716__1331 806512 0.099.69-} 11.IO-l.6'n 3.069.152 -1.581.660 Gllide 10 Presentafion: Each ofthelollOl ..ing grollps offil/al/cial
slIIlImaries presem data by governmentalfill1d type. Thesefill1ds are Special Revenue Funds, Capital Projecfs Funds, Il1fernal Service Funds, and Redevelopmenr Agency FIII/ds. [II each
ofthe Iollowil/g projections similarformat is presemed. Thefimd informatiol/starts ,..ilh II
beginning fillld balances and adds currelll year revenues c/lld subtracts currelll year expendilllres lIhich give the eudingfillld balance. Budgeled amoullls are also providedfor reveuues
and expenditures, these are usefidfor comparing aClllal amoullls received or spelll 10 dare versus budgeledfor FY 2006107. Special Revenue Funds -Special Revenue Funds, which account
for the proceeds derived from specific revenue sources that are legally restricted or assigned to special purposes including the Solid Waste Fund (moved to the General Fund in FY 2008/09),
Community Development Block Grallt Fund, Non Point Source Fund, Landscaping and Lighting District Funds. CBDG Grant Fund revenues reflecting below budget at mid-year is a timing issue,
the revenues received are largely based on reimbursements of expenditures that occurred in the prior quarter. Special Revenue Funds Budget to Actuals Comparisons Solid CDBG Non Point
Waste Grants Source LIDs Beginning Fund Balance (Prc-audit) 296,553 8t5,147 88,550 100,685 Budgeted Revenues 165.994 135,000 36,090 Actual Revenues -2nd Qtr 12,958 135,000 35,020 Budgeted
Expenditures 354,124 184,100 43,290 Total Actual Expenditures -2nd Qrr 57,1(4 96,031 (9,356 2nd Quarter Ending Fund Balance 296,553 770,991 127,519 116,349 Cap;lal Projects Fuutls -Capital
Projects Funds are utilized to account for resources used for acquisition and construction of capital facilities by the Town. Funds included in tlus category are the GFAR Fund (General
Fund Appropriated Reserve), Traffic Mitigation Fees Fund, Grant Funded CIP's Fund, Stonn Drains Fund, Utility Undergrounding Fund, and the Gas Tax Fund. Capital Project Funds are tracking
in accordance with the FY 2007108 adopted budget. Staff is reconU11ending no changes at tlus time. If operating revenues will support it, staff intends to maintain the General Fund's
current year 5575,000 revenue conU11itment to the Town's Capital Improvement Plan. Capiral Projcct Funds Budg('l to Aetuals Comparisons GFAR Traffic Granl fund Storm Utility Cas Fund
i\i\litigatioll CIP's Drains Uudcrgtl Tax Beginning Fund Bal:ltlce 11,9-t6,38-t 79,232 (305,711) 890,626 2,375,244 640,219 Budgeted Revenul"S 2.788,861 50.000 3,007.156 428.855 Actual
RCHnues -2nd Qtr 2,715,6-tO 378,278 Budgeted Expenditures 25.637.27.t 50.000 2.663.127 428A-t3 839.22-t Tolal Actual Expcnditures -2nd Qlr 877,567 3,521 183,-t97 2nd Quarter Ending Fund
Balance 1J.78-t,-t57 75,711 (t 10,930) 890,626 2.375,2-t-t 6-tO,119 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 Califomia or other granting agencies and is reimbursed for those costs, which eventually should result with the fund "breaking even"
or a zero fund balance (dollars expended will be received back in grant reimbursements in equal amounts). 12
Illterllal Service Funds -Internal Service Funds are used to finance and account for special activities and services perfonned by a designated Town department for other departments on
a cost reimbursement basis. Included in this fund type are the Equipment Replacement Fund, Worker's Compensation Fund, General Liability Self Insurance Fund, Stores Fund, Management
IIIfunuatiun Systems Fund, Vehicle Maintenance Fund, and the Building Maintenance Fund. Inlernal Sen icc Funds BudgClIO Acluals Comparisons Equipml'nl \\'ork('rs Sl'lf Oflicl' 'Imgllnfo
\'('hide Building Rl'placl'ml COml) Insurancl' SlOrl":5 :\lainl. :\lainl. Ill'g;nning Fund Balance 3.090.851 2.58·.t056 1.855...143 237.928 2.11·&.081 231.302 968.509
Budge-led Re\ enue-s 4210470 652.800 5180400 1240480 1.074.970 637.100 I.l 38.200 Aclual Rl'H'nUl":5 . 2nd Qlr 208.260 314.281 267.742 78.718 522.781 317J71 565.534 Budgel.:d Expenditures
320.900 66HHO 610.900 144.SJO 1.528.200 639.300 1.596.500 TOlal Aelual Expendilurl":5 -2nd Qlr I··H.696 316.0-16 -188.938 59.514 613.528 285.766 88-1.177 2nd Quaner Ending Fund B:alance
3.1560415 2.582.291 1.63..\.1-17 257.131 2.033J35 272.907 6-19.866 Internal Service Funds are tracking in accordance with the FY 2008/09 Adopted Budget. No revision to adopted revenues
or expenditures is required at this time. Staff believes there is still some potential for further operating transfers in future years from these funds as excess balances exist in amounts
needed for funding in a number of these funds. Trtlst (lnd Agency Funds -Town Trust and Agency Funds have fund balances as of June 30, 2008 of $213,451 for Parking District #88 and $313,425
in the Library Trust Funds. No budget revisions are contemplated at this time for these funds. Redevelopment Agency -The Agency's FY 08/09 and FY 2008-13 Capital Improvement Plan adopted
budgets are incorporated into the Redevelopment Agency's financial statements and year-to-date actuals as presented below: Redevelopment Agency Funds Budget to ACluals Comparisons Cupital
Debt Low/J\lod Total Projects Service Housing RDA Funds Beginning Fund Balance 2.997,775 6,29t.675 7,198,50t 16,487,950 Budgc:tc:d Rt:\ t:llllt:S 672.850 7.409.970 1.743.660 8.840.140
Actual Revenues -2nd Qtr 614,Q92 3.505.014 757.320 5,862.766 Budgeh:d Expenditures 2.360.626 6.194.890 8.959.t46 Total Aclual Expenditures -2nd Qtr 62M32 2.161,462 267,702
3,054.096 2nd Quarter Ending Fund Balance 2,986.935 7.635.227 7,688,119 19,296.620 Since 1992 redevelopment agencies across Ihe slate have been required 10 make Educational Revenue Augmentation
Fund (ERAF) payments to the Slate. In accordance wilh the Stale budgel agreemem, Ihe ERAF payment was increased 5303,000 for FY 2004/05 & FY 2005/06. The State suspended Ihis "take"
for FY's 2006/07 & 2007/08, but the FY 2008/09 Budget Bill reintroduced a new ERAF paymem of approximalely $456,910, disallowing the Agency 10 relain tllis amount of tax increments to
be used for importam future Agency projects. Proposition IA approved in 2004 does not contain specific proteclions for redevelopmem agencies. These were not included because there are
exisling legal opinions Ihat conclude thai redevelopment agency tax increment revenue is constitutionally protected from state revenue takes. t3
It is imponant that the Town continue to monitor developments regarding Redevelopment Agencies to discourage the legislature from funher State takes from Redevelopment Agency Tax Increment.
Protecting Redevelopment Agency funds for all cities is also a strategic priority for the League of California cities. It is essential to preserve the Agency's tax increment revenue
as any take from this source will reduce the alUlUa) revenue stream. If a larger revenue take is enacted, the lowered revenue stream will reduce the total amount of bonds the Agency
can issue in the future. CONCLUSIO The financial results from the prior fiscal year and data collected through the second quaner of FY200S/09 are encouraging in terms of the Town's economically
sensitive revenues and how they have perfOlmed despite a very trouble national economy. This is especially important in light of the recent loss of four auto dealerships which were in
the top ten sales tax providers of last fiscal year. Staff expects the Five-Year Financial Financial Plan update scheduled for March 2009 to continue to project challenging future revenue
shonfalls. These challenges will be made less so if the Town's economically sensitive revenues can recover their momentum and the cost of delivery of core services can be kept in check.
It is the overall [mancial strength of the Town that enables the Town to effectively manage the current economic recession. The Town continues to carefully monitor revenue and expenditure
trends take pro-active steps before a financial crisis presses upon the Town. Staff continues to closely monitor all current year revenue and expenditure activity, mindful of the necessity
to balance operating revenues with operating expenditures. Staff continues its effons to explore options for enhancing revenue sources for ongoing operating and capital needs of the
conununity for the future. It is equally imponant to ensure that the Town's current limited resources are allocated to meet the basic priority service needs of the conununity. N: MGR\Adll1inWorkFiles
Annual BudgCl\budgcl pcrfonnance FY 2008-09 draft one.doc t4