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11 Staff Report - FY 2009/10 First Quarter Budget Performance1 0MEETING DATE: 10/19/09 ~ f ITEM NO: cos caCOUNCIL/AGENCY AGENDA REPORT DATE: OCTOBER 19, 2009 TO: MAYOR AND TOWN COUNCIL/ CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY FROM: GREG LARSON, TOWN MANAGER/EXECUTIVE DIRECTOR SUBJECT: FISCAL YEAR 2009110 FIRST OUARTER BUDGET PERFORMANCE AND STATUS REPORT FOR THE PERIOD JULY 1, 2009 - SEPTEMBER 30, 2009 A. ACCEPT 2009/10 FIRST QUARTER BUDGET PERFORMANCE STATUS REPORT B. AUTHORIZE BUDGET ADJUSTMENTS AS RECOMMENDED IN THE ATTACHED FIRST QUARTER BUDGET PERFORMANCE REPORT. RECOMMENDATION: I . Accept Fiscal Year 2009/ 10 First Quarter Budget Performance and Status Report. 2. Authorize budget adjustments as recommended in the attached First Quarter Budget Performance report. P1 JRPOSP: The purpose of this report has three primary goals. First, the report informs the Town Council on the status of the Town's Fiscal Year 2009110 Adopted Budget and status of the local economy at the first quarter. Second, staff provides the Town Council an update on the preliminary General Fund financial results (unaudited) as of June 30, 2009. Third, the report includes an update on the state budget's impact to the Town and Redevelopment Agency, and staffs most recommended budget adj usti-nents for FY 2009110 as of the first quarter. BACKGROUND The attached Budget Performance Report covers the first three months of the fiscal year beginning July 1, 2009 and ending September 30, 2009. The report presents analysis and recommendations related to key General Fund revenues by category and expenditures by fund. PREPARED BY: STEPtlh~ ' CO . AY Finance and Admi strative Services Director FINANCE Qtrly Financial Reports FY 20101st Qtr t0-19-09 1st Qtr Budget Report.doc Reviewed by: Assistant Town Manager/Deputy Director Town Attorney/General Counsel lerk Administrator/Secretaryinance Community Development PAGE 2 MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: FISCAL YEAR 2009/10 FIRST QUARTER BUDGET PERFORMANCE AND STATUS REPORT FOR THE PERIOD JULY 1, 2009 - SEPTEMBER 30, 2009. OCTOBER 14, 2009 Staff provides to Town Council periodic updates on the status of the current year's adopted budget revenues and expenditures and the projected financial condition of Town funds, concentrating on the Town's General Fund. Though financial results are limited to the first three months, staff is able to provide an update based on early revenue trends for the current fiscal year, and to advise on potential future revenue and expenditure challenges which may materialize during the fiscal year. DISCUSSION: The attached first quarter budget report includes a recap (prior to final audit) of last year's General Fund fiscal results. The General Fund closed FY 2008/09 with a moderate amount of revenue over expenditures, primarily from budget savings, cost containment strategies and property tax revenues exceeding earlier estimates. These dollars (approximately S525K) at year end are available to aid in addressing revenue shortfalls this fiscal year, and/or to supplement the limited dollars set aside in the General Fund for capital improvements. State Budget Impacts: Upon passage of the State's FY 2009110 budget, two major takes from the Town and the Redevelopment Agency were approved by state lawmakers. The State proposes to take in the form of a loan approximately 5980,000 of the Town's local property tax. The enabling legislation provides a mechanism referred to as Prop IA Securitization, wherein the Town can sell its property tax state loan and receive full payment in kind through the securitization proceeds of the amount borrowed. If the securitization is successful, no fiscal impact is expected to the Town. A separate item authorizing staff to proceed with the securitization is part of the October 19t", 2009 Council Agenda. The State also proposes to take approximately 52.7 million (52.2 million in 09/10 and $0.5 million in 10/11) from the Town's Redevelopment Agency. Similar to the take attempted by the State in FY 2008/09, which was found to be unconstitutional, the California Redevelopment Association believes this take will also be found unconstitutional and unenforceable. The CRA intends on filing a lawsuit this year and staff has assisted the CRA in that effort by providing information about the Agency's project area. Once the lawsuit has been filed, more news about the status of the lawsuit and the state "take" may be available during the spring FY 2010/11 budget development. In the meantime, staff will include the "take" in its mid-year budget adjustments, if necessary. There has also been concern that the Town's COP'S Grant monies (S200K) are also vulnerable due to state budget problems. Staff is monitoring this item very closely, and support for the program is being communicated strongly to the legislature by the various groups including the California Police Chiefs Association. There is also increased certainty with this revenue source due to a linkage with the vehicle license fees. No action or budget change is recommended at this time. Other small local government program funding (e.g.certain state mandate PAGE 3 MAYOR AND TOtiVN COUNCIL CHAIR Al D MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: FISCAL YEAR 2009 10 FIRST QUARTER BUDGET PERFORMANCE AND STATUS REPORT FOR THE PERIOD JULY 1, 2009 - SEPTEMBER 30. 2009. OCTOBER l4, ?009 reimbursements) has also been reduced or eliminated; those revenue changes will be quantified at the mid-vear budget rcview. CONCLUSION: Despite a severe recession, the state budget crisis. and a troubled real estate market. the Town continues to manage effectively throu-h the current fiscal challenges. Shortfalls were dealt ~'vith. priority services maintained, and General Fund contingency reserves are preserved. Key goals are to n1n11mIZe the impact on Town services, rnalntaln the community's quality of life. and remain a competitive employer while sustaining the Toxn's fiscal health. FORtiIAT OF THE REPORT The attached Budget Performance Report includes a financial overview comprised of: a brief discussion of the Town's financial condition: the FY 200910 financial outlook; a sulnmarv of the performance of the Town's primary General Fund revenue sources and necessary budget adjustments. NVIRONMENTAL ASSESSMEN This budget report is not a project defined under CEQA,. and no further action is required. FISCAL IMPACT: The attached First Quarter Budget Performance Report includes a section providing a detailed list of recommended expenditure and re-%-enue budget adjustments recommended for the first quarter of FY 2009,,10. Upon approval of the recommended budget adjustments by Town Council, the adopted appropriations for the fiscal year will be adjusted accordingly. Attachment: Budgget Performance Report for the Three Months Ended September 30. 2009 TOWN OF LOS GATOS BUDGET PERFORMANCE REPORT FOR THE THREE \IONTIIS ENDED SEPTEMBER 30, 2009 October 19, 2009 FINANCIAL OVERVIEW- EXECu,rlN'E SUMMARY Status of FY 2009110 Adopted Budget: First Quarter revenue trends are mixed. Staff was pleased that the Town's property tax receipts for the year ending June 30, 2009 achieved an approximate 6"a growth rate from the prior year in a eery tousgh real estate enviromncnt. Despite the worst national recession in seven years. and the loss in recent vears of fire autornobile dealerships that were in the top ten sales tax providers. sales tax receipts for the first quarter are trending slightly ahead of collections for the prior year. The chief reasons for this are the continued success of Nettli.r' and a state "trUC-up" payment relating to an underpayment of sales tax based on state estimates the prior fiscal year. Despite this favorable trend, the Towns sales tax revenue of S8.7 million may need to be lowered by approximately 5300 to S500K at the mid-year budget review due to the loss of one car dealership six months earlier than plaruled in the financial estimates and the general effect of the recession across all sectors of the local economy. Department expenditure totals for the first quarter FY 2009 10 are also trending favorably. with departmental spending at the end of the first quarter averaging 21% expended, or 4' 0 below the 259/0 benclunark level used for 3 months of 12 months operations. With only three months of data available. it is difficult to predict revenues and expenditures for the whole year. The uncertainty of the economic effects of potential rises in energy costs or a more dramatic downturn in the local real estate market may impact consumer behavior. In light of this uncertainty and being fully aware that the local economy's recovery remains vulnerable, staff continues to be cautiously optimistic while monitoring fiscal developments very closely. Consequently, further adjustments may be necessary during the fiscal year. Any mid-year course corrections or budget adjustments necessary to balance operating revenue and expenditures ~zill be brought to Town Council's attention at the earliest opportunity. Prior Fiscal Year Closing Results: The FY 200S,09 closing financial results continue to affirm the positive effects of the Town's budgetary actions taken in response to the continuing flat revenue «rowth or downturns in key operating revenues the Town experienced since FY 2001 02. In developing the FY 2008:09 status quo" budget. Town Council approved a combination of budgetary initiatives that held the line on service level delivery coupled with revenue adjustments in the Town's "Charges for Services" catcuory. The bulk of these fees are to reeoNer costs related to private development acti\ itv aliuming fens charged for sere ices «ith the current cost incurred by the Town. This strategy coupled with the effect of Town-wide expenditure reduction strategics continued horn prior years and other revenue gains like continued strong performance by Netflix sales tax generated a favorable General Fund closing balance of approximately S-525K of available revenues over expenditures at fiscal year end June 30, 2009. The Town's General Fund rese«es closed the year (unaudited) at a total of approximately 522.7 million (including the Town's Reserve for Economic Uncertainty intact at S3,678,000). compared to S17.1 million balance upon the close of the prior year, an increase of approximately S5.6M in total General Fund rescv~ es. This large increase comes primarily from the receipt of the sale of Town land in Vasona park for S6 million, all of which was in a designated reserve at June 30, 2009. The following factors led to the S525K from FY 2008 09 savings to be available for the Town's Revenue Stabilization Reserve and Reserve for Future and Special Projects: • Property tax revenue final collections exceeded mid-year estimates by approximately S600K due primarily to stronger than expected real estate assessed values and property turnover. • Sales tax estimates exceeded FY 2008;09 mid-year estimates by approximately S300K due primarily to stronger performance by Nettlix than staffs estimates. • Investment earnings exceeded mid-year estimates by approximately 5416,000 largely due to increases in the overall interest yield market. • These revenue grains were offset by plan check and building permit fees which were approximately S550K below estimates made at mid-year FY200& 09. Revenues collected last year for work to be performed in this fiscal year were recorded as unearlied revenue, earmarked as such in the General Fund, and accordinuly were not included in the determination of revenues available for reserve designation at fiscal year end. • General fund expenditures were approximately S1.8 million FY 2008,09 below adjusted budget levels. due primarily to salary and benefit savings (SIA million) obtained from hirinu freezes, reomanizations and other successful cost containment strategies. In each fiscal year it is likely that the Town's cost of services will be impacted by potential or pre-bargained labor and benefit cost increases and other operating expenditure increases. It is reasonable to anticipate these costs to trend upward in the future foi- no other reason than inflationary pressures. This reality will continue to require strong, performance in the Town's economically-sensitive revenues to offset the cost increases likely to occur. The To«Wn's efforts over the past tiye years, including expenditure reductions, alignment of user fees to cost of service delivery', operational reviews and service lcv el adjustments. along with ongoing efficiency efforts, ham e allowed the Town's revenue base to keep pace with the cost of proyidin services and provide funding for much needed capital improvements such as road resurfacing. sidcxalk repairs. retaining walls. and trail and park tacility refurbishments. General Fund Reserve Status - June 30, 2009 General Fund reserves are classified into two categories - Restricted and Desig_,iiated, Restricted reserves are those which are restricted in use by accounting standards or legal agreements and are not considered as a%ailable for use for another purpose. Desi~snated reserves are established by Council policy for an intended purpose. Currently Restricted Reserves in the General Fund are approximately $2.1 million as presented below. Restricted General Fund Reserves: Amount (.1fillionS) Reserved for RDA Loan S 1.5 Reserved for LT Notes Receivable 0.6 Total Restricted General Fund Reserves $ 2.1 As stated earlier the total General Fund Reserves closed at a balance of approximately S22.7 million at June 30, 2009. In addition to the approximate 52.1 million of General Fund Reserves set aside for restricted purposes, the Town has approximately 520.6 million in designated reserves established in accordance with Town financial policies and operating and capital budget requirements. - Designated Reserves: Amount (~Will io►rs) Vasona Land Sale S 6.1 Designated for Revenue Stabilization 4.6 Designated for Economic Uncertainty 17 Designated for Capital & Special Projects 3.7 Market Fluctuations 0.8 Designated for Open Space 0.6 Retiree Medical Acturial 0.4 Sustainability Reserve 0.2 Designated for Mgr's Contingency & Prod. 0.2 YE Savings Budget Adjustments 0.2 Designated for Authorized Carryforwards 0.1 Total Designated Reserves $ 20. The Reserve for Capital and Special projects, whose source is derived from half of the annual available General Fund budget savings, serves as the primary source for replenishment to the Town's Capital Improvement Fund (GFAR) in addition to the budgeted transfer from the General Fund (SS50,000 in FY 09110). As such, it represents the source for a large number of unfunded needs identified during the annual capital improvement plan process. 'This reserve also functions as a potential funding source for new capital projects or augmentations to authorized projects funded through the Town's Five Year Capital Improvement Program (CIP). The Town continues to be challenged in identifying an ongoing source of funds to meet the annual $1.5 million recommended for the street repair and maintenance program and other priority infrastructure improvements such as sidewalk repair and replacement. The Revenue Stabilization Reserve was established to serve as a transitional or "bridge" funding source that could be used to mitigate or smooth out cyclical ups and downs in locally generated revenues due to temporary downturns in the local economy or "one-time" revenue losses where recovery of the revenue base is deemed likely to be restored in the near future. 3 In its public conu7lurrications, staff refers to the 530.1 million in Designated General Fund reserves as the Town's "reserves" since these are established by Council policy for their intended purpose. The availabilih- of approximately 530.1 million in Designated General Fund reserves provides the Ton n i,,-itli 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 to a large amount of unfunded capital improvements. GENERAL FUND - KEY REVENUE ANALYSIS FY 2009110 The following provides the status of significant General Fund revenue sources as of the first quarter ending September i0. 2009. Staff monitors each revenue source closely and at this time recommends certain revenue adjustments based on revenue actuals or state budget actions. Adjustments necessary (if any) will be brought forward to Town Council for approval at mid-year (approximately February 1-0 10). wlicn more revenue data is available. BUDGET PERFORMANCE REPORT FY 2009/10 ♦ 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. Analvsis According to a recent update from Muni Services, the Town's sales tax analysis consultant, a majority of jurisdictions across California experienced significant declines in sales tax revenues, averaging 8.2% statewide in early 2009. The 4Town's decline is approximately 6.4% for the same time period, which is slightly better than the statewide average The UCLA Anderson Forecast for the California economy concludes that the worst recession in seven decades likely ended in third calendar quarter of 2009, but it expects the negative impact of the downturn will last well into the next decade. With the closure of five 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 encouraging. The continued success of Netflix has prevented a more dramatic decline in sales tax, but staff believes that at mid-year, it may have to adjust sales tax for 2009/10 downwards by approximately S300K to S500K in 2009110, based upon Muni Services "most likely" projection and some other factors whose outcome is unknown at this time. As always, diversification of the revenue base continues to be a goal 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 s 10,000,000 S8,000,000 56,000,000 54,000,000 52.000,000 S- ® Ist Quarter Actual Re% enues ❑ Fiscal Year Total Actual Revenues 4 Fiscal Year Budgeted Rerenues FY 0 06 FY 06,07 FY 0- 08 FY 0309 1stQuan Actual Revenues S 1.391150 S 1.407.99' S 1,563,305 5 1,503,079 Fiscal Year Total Actual Re%enues 5 5.655.565 S 9,2= 3,391 5 9.345,432- S 3,487.000 Fiscal Year Budgeted ReNenues FY 2004/05 fanvard will reflect the Sales Tax [it Lieu paid by Santa Clara County FY 09;' 10 S 1.672,973 ° S 3,6-',460 IstQuarter Percent ofTotai 16.08°° 15.' l6. 9°° 17.77n Recommended Budget Recision No Change * Includes a true-up from Ft 0,y 09 5 FY 05 06 FY 06:07 FY 0703 FY 08!09 F)'09'10 BUDGET PERFORMANCE REPORT FY 2009110 ♦ 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 2008109. 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 1% 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. Analvsis Property taxes performed better than expected in FY 2008109 (approximately 6% increase from the prior year) which was budgeted for flat revenue growth. 2009110 property tax was budgeted at a minimal growth, but is below the amount received the prior year, so it may need to be adjusted positively at mid-year. The Santa Clara County Assessor's 2010/11 roll for July 1, 2010 lien date indicates a 2.09 % growth in total assessed value for the Town. Los Gatos is in the top four of the cities in the county still anticipating positive assessed valuation growth for FY 2009110. Quarterly and Annual Revenues 5-Year History s 10.000.000 S6A00,000 56.000.000 Sa.000MD S-.01111.000 S- ® Ist Quarter Actual Res enues DFiscal Year Total Actual Revenues N Fiscal Year Budgeted Resenues FY 06,06 FY 0607 FY 070`3 FY 03;09 t'Y 09!10 Is( Quarter Actual Revenues S 105.271 S 75,831 S 136,916 S 91,597 S 65,623 Fiscal Year Total Actual Re%enues S 7,755,200 S 3.584,612 S 9,178,869 S 9,72 4,070 Fiscal Year Budgeted Re%enues S 9.248,120 FY 200-1/05 forward will reflect an increase in Property Tar due to "Permairent" Realignment of VLF 1st Quarter Percent or total 1.36% 0AVO 1.51% 0.940u 0.71°u Recommended Budget Revision No Change 6 FY 05 06 FY 06 07 FY 07 08 FY 08 N FY 09 10 BUDGET PERFORMANCE REPORT FY ?009'10 ♦ Transient Occupancy Tax Description The Town of Los Gatos levies a 10 per cent Transient Occupancy Tax on all hoteUrnotel rooms within Town limits as a method to help fund Town services provided to transitory lodgers. Analvsis The Transient Occupancy 'Tax revenues received in the first quarter of FY 2009,10 reflect a decrease in collections compared to the prior year. This year the State of California is projecting flat growth in domestic and international visitation compared to the prior year. The California Travel & Tourism Commission reports for the period ending June 30, 2009 that domestic travel spending statewide was approximately $79.2 billion, compared to its forecast of approximately 579.3 billion. Due to the lower than expected first quarter collections, staff may advise a change in estimate for '1009. to at the Town's laid-year budget review. Quarterly and Annual Revenues 5-Year History 51.000.000 ® 1st Quarter :actual S1,200,000 Revenues 51,000,000 r S800,000 47 Fiscal Year Total S600.000 " - - - Actual Revenues S000,000 _ 5300,000 a Fiscal Year Total S Budgeted Revenues FY 05 06 FY 06 07 FY 0708 FY 08 09 FY 09 10 FY 05.06 FY 06 07 FY 07 08 FY 08 09 FY 09 10 I st Quarter Actual Revenues 5 107,529 S 116.119 S 90,367 S 134,569 S 99,179 Fiscal Year Total Actual Revenues 5 1.028.664 S 1.108.257 S 1.245.078 S 966.638 Fiscal Year Totai Budgeted Rcvenues S 1.080.000 lst Quarter Revenue Percent of Total 10-45°,u 10.48% 7 '6"'0 13.929. 9,18% Recommended Budget Recision No Change 7 BUDGET PERFORMANCE REPORT FY 2009110 ♦ Intet•est 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 downtown, among other infrastructure investments made in carrying out the Town's approved capital improvements plan. Current year interest revenues are tracking below budget estimates due to historical low yields available in the market. Actual LAIF yields have declined significantly to an average yield of 0.75% in September 2009 (a new record low), from 4.801% as recently as December 2007. Despite very low yields available in the market, with the receipt of property tax in the second quarter, more average dollar balances will be available for investment. Staff recommends no adjustment to budgeted revenues at this time. Quarterly and Annual Revenues 5-Year History 52,500,000 S,,000,000 51,500,000 S l .000-000 5500.000 S- ®1si Quarter Actual Revenues 0 Fiscal Year Re%cnues 0 Fiscal Year Total Budgeted Res enues FY 05-06 FY 06 07 FY 07 08 FY W09 FY 0910 1 st Quarter Actual Res enues 5 272,325 S 489.730 S 562,339 S 461,985 S -210.301 Fiscal Year Revenues S 1,439.685 S 1,977.233 5 2.331,333 S 1,6'_7,7'_' Fiscal Year Total Budgeted Revenues 5 1,430,000 Is[ Quarter Re%enue Percent of local 18.900 '_4.8°u '_5.300 23.400 14.716 Recommended Budget Revision No Change * Estimated 8 FY C1; 06 FY 06 0- FY 07 U8 FY 03.09 FY 09 10 BUDGET PERFORMANCE REPORT FY 2009!10 ♦ Business License Tax Reverirte 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 snake up the remaining 60% of revenue. Annual 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. Analvsis 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 first quarter collections are trending positively in comparison to prior years due to some significant collections on amounts past due from various businesses either that were unlicensed and or had become delinquent in payments. Because of this success, 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 IS I st Quarter :actual Revenues © Fiscal Year Total .-actual Rcvcnues 0 Fiscal Year Total Budgeted Rey enues FY 0S 06 FY 06 0- FY 0- 08 Fl' 08 09 FY 09 10 Ist Quarter Actual Revenues 42,402 63,057 55,900 65,830 99,1'9 Fiscal Year Total Actual Revenues S 1.019.336 5 1.1 .76.422 S 1.138,057 S 1,139,10- Fiscal Ycur Total Budeeted Revenues S t,080.000 I st Quarter Revcnue Percent of rota) 4.16°0 5,36°0 4.91°0 5.78°0 9.13°0 Recommended Budget Revision No Change - 9 FY 05 06 FY 06 07 FY 07 08 FY 08 09 FY 09 10 BUDGET PERFORMANCE REPORT FY 2009110 ♦ 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 West Valley Collection and Recycling for solid waste collection services. Analvsis First quarter results are pacing slightly behind the percentage collected the prior year, S2,000.000 , Ff S1,500.000 S 1.000.0oo i S500.000 S- ® l st Quarter Actual Revenues Fl- 05 06 FY 06 07 FY 07 08 F1- 08 09 FY 09 10 Ist Quarter Actual Re%enues Fiscal Year Total Actual Revenues Fiscal Year Total Budgeted Revenues FY2007108 Total.dcutal Revenues l sl Quarter Revenue Percent of Total achieving 11.75% of budget versus 11.87% of budget collected at the first quarter in FY 2008109. 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. Staff recommends no change to this revenue source. Quarterly and Annual Revenues 5-Year History FY 0506 S 22,70'_ S 1,030,199 ,eflect in creased revers 2Oou FY 06,0? 5 23,661 S 1,162,037 rte based air inc 2.47oa ❑ Fiscal Year Tula[ Actual Revenues 4 Fiscal Year Total Budgeted Revenue, FY 07 03 FY 08,09 FY 09r 10 5 215,935 S 196,630 S 198,399 S 1,659,529 S 1,656,100 S 1,699,'_60 rease of Garbage Fran Arise Agreement 13.01°o 11.8700 11.75oo Recommended Budget Revision No Change IO Budget aclittstments are reconnttended for the followinP rev canes atld erpcndittu-zs at the first quarter as described belo« : RECOMMENDED BUDGET ADJUSTMENTS General Fluid Revenues JAG Grant fineludim, lntcrestl S 14.100 Other Fund Revenues GEAR Pollard Crosswalk Project liom El Camino 1lospital 1 x.6-10 Blossom hill Urnivcrsity U,ndergroundinLI Project- transfer to G1=.-kR 23_260 Grant Funds Transportation Dcvelopnient Si&walks 15.000 Grant Funded - fi otu .it1Z1 102,000 General Fund Expenditures Art in the Council Chambers Receptions S 500 JAG Grant - Interest 14.100 Other Fttttds Fxpeuditures GEAR Pollard Crosswalk Project 15,6?0 Blossom Hill Unix crsinv Undcn-,roundinL~ Project '3.260 Utility Undergroundung Fund Utilit, Undzr2rouidimv Fund - transfer to GFAR 23?60 Grant Frnuled Rebuild To<aeiher Silicon Valhe - reallocate from CDBG 51.000 lllitchcll Avenue Sidewalks fi-om Transportaiion Del elopmmt Act ?5.L100 Prospect Avenue Resurfacing ) 0?.C)00 Storm Drain ##1 Hernandez Ave Storm Drain Pipe Replacement 11,000 Equipment Replacement Fund Urban Runoff Equipment 1 J,-1G (Justicc°Jssislancc Grant) - 514.100 This in-ant is available tluou«h the American Recm erv and Rcimeshnent Act of 2009. The Ton n intends to use these funds for the purchase of sof fare and COMPuter equipment used II] the Police Deparmem's propeny and evidence functions. Comnunitt- Stwviccs DIT(wwwnt: _ rf7 in the Comwil Chambers RCcclition - 5500 :Art in the Council Chambers is a series of rotatim« exhibits in the COLIneII Chambers of «ork b%- local artists. crated by the Arts and Culture Commission. Traditionally. the opening, of each rtes;- exhibit is celebrated with an opening night reception, There are not currently any funds budgeted for refreshments to be provided at these receptions. so the artist. or in some cases an Arts and Culture Commission inember. have paid for reception food. It is recommcrnded fliat S500 per fiscal year. for five fiscal years. be directed to the .arts in the Council Chambers opening night receptions fa total of S2.500 ov el, fire years). Community Dc ve1optmcnt Block Grim S5, 000 I« FY 2006 07. 5-5.000 of the Town's federal Corummiity Development Block Grant (CDBG) funds was allocated to Rebuilding Together Silicon Vallee, a local nonprofit agency. Rebuilding Toi,,ether did 110t use these funds in 2006 07. but they remained a~ ailable to be drawn down from the CDBG program. The Town has signed a contract extension with Rebuilding Together to allow them to use these funds in the current fiscal year. but a buds=et adjustment is also required in order to alloNv the funds to be drawn down from the federal CDBG program and passed throunh to Rebuilding Together. The funds are targeted for the "House of Hope" project, a joint effort of NVest Valley Con-imunity Services. Calvary Church, and Rebuilding Together. This project has converted a facility owned by the church into a place to provide food pantry and case manauement services to low-income families from the Los Gatos area. Rebuildimy To_rether's work included plumbing, flooring, painting. and installation of an ADA-compliant restroom. Ai) Open House for the remodeled facility was held September 17. Hernamle= Avenue Storer Drain pipe t•cplacenicttt: - 511,000 The Toxvn was notified of a collapsed storm drain pipe on upper part of Hernandez Avenue iii early October 2009. After inspection. it was noticed that an old corrugated metal pipe across the road which has been rusted over the years has collapsed and created a sink hole on the road. To keep the roadway safe. the collapsed section of road was barricaded and covercd with steel plates until pipe could be replaced. Staff leas solicited bids from several contractors for this storm drain pipe replacement and the lo,, vest bid for the project is about 511.000. This storm drain pipe is located nvithin Town Storm Drain basin =1. Sufficient fund balance is available to field this project. -Mitchell,4 vc uc Sielewalks: - S28,000 The Town of Los Gatos has received a Transportation Development Act (TDA) grant from State of California for construction of side«alks and related improrements on Mitchell Avenue from Fisher Avenue to George Street. This section of roadway is in direct route to Fisher N fiddle School and does not hale a safe and functional u-ay for pedestrians to walk due. to lack of sidcwalks. This project will construct concrete curb. gutter. and sidewalk and related improvements oil Mitchell Avenue to provide safe way for pedestrians to walk to and from school. Blossom Hill Z r~ii etsit~h~tc~.ecctio~r C iihiv Ulidcru1mmdim - S23,?60 'I 11e 1 pn"n has receiti ed Fcdcral Stimulus Grant Funding for the con,tructioii of improvements to the intersection oC University Avenue and Blossom Hill Road. 'I his project will replace the old and outdated traffic sicanal at University Avenue Blossom Ifill Road with a new. more functional traffic signal system. Additionally. there will be dedicated left turn lanes constructed to improve the operation of this intersection. Sidewalks will be built along University Aye-rue adjacent to Oak Meadow Park in order to fill in missing sections of' existing sidcwalks and provide safe access for pedestrians. There will also be pavement repairs and storm drainage iinpro\ elments as part of this project. In conjunction with this project. sections of overhead electric lines oil Ulllyel"slty lVcnue at this intersection will be relocated into underL11-cn1ul system to not only enhance the aesthetic aspects of the site, but also accommodate the location of new traffic signal posts. The relocation and undergrounding of the overhead electric lines will be performed by PG&-p;. 'lie cost of this undergrouiiding. 523,260 will be paid by the Town from the Town utility underMroundinQ funds. 12 Tier? Sibmiltrs Pi-gjcct: Pn).~I)ect_tivnite Rcsw-10cilI(, 5102.000 The -l o« n of Los Gatos has received a federal Grant as part of The American Reco%erv and Reinvestment Act (ARRA) of 2009. The Town was informed by Caltrans that there is an additional grant related to the American RecoN cr and Reim eshnent Act which thc Toys n has received and it can be used for resurfacin4' projects. Since this Tier 2 grant is relatively small. it is recommended to be used to resurface Prospect Avenue area to complete the resurfacing that was done to Colle~~e A~ enue in the same neighborhood earlier this year as a part of another State grant El Camino Ho.iI)ital G-os mrfrlk - S15,0_10 The location of El Camino Los Gatos Hospital on Pollard Road and alignment of the roadway do not prop ide an ideal crosswalk placement for pedestrians who want to access the hospital from other side of the road. The Town has reeei%ed a number of inquires in the past about construction of a formal and safe crosswalk for pedestrians in this s icinity. The Town has worked with the nes,,- El Camino Los Gatos Hospital and %'TA on seleetingy a new crosswalk location at intersection of Pollard Road and Teakwood Avenue which will provide much improved access to the hospital for pedestrians. The construction of this project will be fully reimbursed by the El Camino Los Gatos Hospital Eytripmcni ReplaCeMC17t Ftrttrl - 51 ?.?75 Parks and Public Works Department has advised staff that an important vehicle used for debris rem(-- al requires extensive maintenance and repair prior to the rainy season. Sufficient funds are available in the Town's Equipment Replacement fiend. FINANCIAL SUMMARIES, PROJECTIONS AND RECOMMENDATIONS General Fund The followl'112 page presents the Schedule of FY 0910 General Fmid Operating Revenues vS, Operating FYI)enclinwe.s for the first quarter and comparison information fi-om the prior year. III the last column, the Finance Department projects final balances for the fiscal year based upon the early trends observed through the first quarter. 13 r01xn of Los Galol ScheduleofGene raI fund Operating, Revenues xs. Operating, Expenditures For the period ended September 30. 2000 I naudited F108 09 FS 08 119 1:108 09 F'108 09 F1 09 10 FS 09 10 F1.09 10 F109 10 F\-119. 10 Final Adjussed ial (Jlr \dapted Adjustcd tst Qtr .o Finance Gila nce tau dt"et %mais 111) Rud'_ct Bud-,et \cluals I FD Projection R,-... ProFen'. T? T 3s' C:;r Tai 13_i hit l] 4 s~1 Fr h_r Fe._ E.6 r•ti,: L,2 ~.1C-. I C~_. C S I. S 1„,a„,'! la, J'1: I_ ~ l h4a.'e.rJ I r_..a ) 1.._.. '.n .la.l" o>.: S l ePl Dom. rL:.en:e Ta, 1-I'u, ly, S I iJ l.1'2'J'JI Lien-cs&P-nlls :I' S ~1 :.1 :4 _.S 146[[ 144'. 144.'36 144.E - Imerrrmnemal ,,.I_cl;I 5 (111 col I", S 6o: ;G; ;er ~Jr.iz,: C11 i~4.'.1 1.o-3=1,'_ =1 .11: S 15 nl: ;Ip.:o~ _ Ff - & F-t,,mr_, 'I,.-- : II,,y, I 4:,__ I•'. S 40..."4h S Ac'v'!146 1l,i..." '4". 5 4116,-,41, 9mzrr~[ l. 1.^' r~J .blf _ _ S IS Y!.S0 S 15:.. S ].S: 6.%1B In' 1-_ Ir lil co n,z~~e[ pzr audF. 4"a - S S S - ~Ir..ei'.ane„u: Ott er ` ' I~:eJ T: ansYrr_ 4=-.•1 1 \)4.. 4:; ;i,.. S 4-;. S 4-_ ~''1 w4.1 } To-tsfRrvrnurs S41) 1.421' ".411 4,141-.-_y II', -_.'4n dl"I _~4b-a]•I X4.'14 Ise of Other Fundin,- Soureesr Ji X24e1 e5 i 1. 0'.1 I.?°U: , I :;4 . -'~.I ci-l• . - Fu r.d 13 z1 ann• Re.;iL-::;tian> , 1.J f 1 n-.1 it 1-a-8na Rescn: C 1T.r..nl and ,lH.~enl,on= 20!* 1MI,;'j 1~`r!J'3 16U.:=~ PFR.11.I Nict, Aunt L-..f lmCrital San i:d Re<e.^.ei L"4.2;Ir0 ia4,=1,i las nr,n Tr[t'al Other runein; Snore,% Taral Rmrnuea plus Rc-sencs S i ,44+.al- j r,a ['.+.:I ) ;.],r; 5.4.41 i.>'3 S' i l:S S sacs-.r 5'4.'05,>]? F., p, odiluees ( inelunes c 1 but no rneurnhrancrsl Vla it l.1I 1.=4.?. \ 1.;,SI r"I ...--1 1,1^, ro-.__1 1' ._]1 q!',, c, __a9 _ '4-01-1 4a-6'~ =U' 'L?. _ '1 F.'%I' 41.`12_ .-1J-ni.m~w c...n lc.. .._."S. 'I, ,.44, _.--1,,s41 1.4-I1 Camw i)et elnpme n r 41r'1 Pehtz 2 r, I'~r4s VPuhlG 4l ar's fl'-G 14. c'i ..i l-.4; 1.')o- 1.1-= 1•?°, =.61-.:.. I.I 14. 116 1_'!._"J 1-_-~.1-1 I .11) --4 216-.11ri '_L'11 X11' 441„4r~ ' I I,.,) Pt Total Pcpt to pe nsn S :4^ ?'`I S '4' -1, 71' ' S'+ n-L?ept FcpareJil u_-and ather,l-e- lieRerll 6,,,-11111111 4 _ 4"-1..'r Inc - 4: 0-11 4.14,_1 :'1 _ ,•I1 4.:4 1'111 Total \oc3-Rrpl Fspro scs S 4 , - 5 Ins,-1241 i 4."~:, S 4.145.1"u .v.!-I'.I„ 2i Tats! Op-,Ii- Fspruditurri J _ S S ^ 4'+ - S - _ _ - 1' - j - X24•: la> j _ _ '1 Srt 0It II n'_ Rr, roots Bctorc C;q,11,I l ntr. .f trod;errJ nr; F~n,4 R.tl:,ncr -l it lh urired ['se of Rcse n vs I-oral I3a d;rtcd 1\c a1 Iir.rn es Guide to Presentation. Lich of the fOlk)wino ar-oups of financial summctries present data by governmental 11aid type the n'pcs arc Special Rc've11t1e Ftntds, Capital Projects Funds, Internal Service Funds, and Rede velopn1c11t Igerlc_l, Funds. In each t11,t1reJollolrill" prnjectilms a similar. format is presented. The IWO information Starts 1vith hegilnliu~r Jinx1 hcllances and adds Current year revernles and Sithtracts LYl1TC111 lrecll" expendltlu•Cs resultil7 in eliding f1Uid halanc'e. BccdtiCt amounts are also provi(Icd fir rc> C111tes cntd expendiuires, 1i.Selitl Jur Conrpar1 . 11~0 actual arnololts received or spent to data versus bttdr~ct Ivr FY 009 10, 14 Special Revenue Fund - Special Revenue Funds. which aecount for the proceeds derived from specific revenue sources that are legally restricted or assigned to special pul)oses includin~~ the Cortln1urlity Development Block Grant Fund. 'Non Point Source Fund. Landscaping= and Lighting District Funds. and the Operating Grants Fund. Special Revenue Funds Burluct to actuals Comparisons Beginning Fund Balance (Pre-audit) Bud,eted Rcticuuc; Actual Rv%cnues - Ist Qtr Budtteted Expcnditura; Total Actual Expenditures - 1st Qtr CDBG Non Point Grants Source LIDS 475,999 20.131 96,980 !40.319 1 0000 ?~-YbU 2.565 135.000 69 3.347 23.456 610 Ist Quarter Endin- Fund Balance 475,217 131,725 96,-!09 Capital Projects Funds - Capital Projects Funds are utilized to account for resources used for acquisition and construction of capital facilities by the Totivn. Funds included in this category are the GFP.R Fund (General Fund Appropriated Reserve), Traffic Nfiti17ation Fees Fund, Grant Funded CIP's Fund, Stone Drains Fund, Utility Undergrounding Fund. and the Gas Tar Fund. Capital Project Funds are tracking i11 accordance with the FY 2009 10 adopted budget. If operating revenues will support it, the FY 2009 10 budget inclucles a General Fun ds current year transfer of designated Future Years Capital Special Projects reset-yes its the amount of S850.000 in support of the first year of the Town's adopted Five-Year Capital Improvement Plan. Capital Project Funds Budget to Actuals Comparisons GFAR Traffic Grant Fund Storm t tilitN Gas Fund Mitigation C 111's Dr ain% L ader,d Tax Be,iruriw, Fluid Balance 9,528,699 4.117.527 (161.410) 681.867 2,462.596 683.180 BULILC 1 ReNenur~ 15.i 2X. j(-3 6_i_001} khral Re`enucs - Ist Qtr 79,899 - 21.248 1,971 BudLclcdExpenditure. 6;.11110 j3O110 W 041.601 Total AdUal Ecpenditures - Ist Qu- 1.30 6.375 21,699 - 23.261) 153,135 Ist Quarter Ending Fund Bahoce 8.347.248 4,111.153 (183.108) 703.115 2.443.3116 530,1145 Internal Service Funds - hiterlial See ice Funds are used to finance anti account for special activities and setN ices performed by a designated Town department for other departments o11 a cost reimbursement basis. Included in this hued type are the Equipment Replacement Fund. lz; Worker's Compensation Fund, General Liability Self Insurance Fund. Stores Fund. iMat7ageniettt Information Svstems Fund. Vehicle Maintenance Fund. and the Building 1%laintenance Fund. Internal Service Funds are traekina in accordance with the adopted FY 2009. 10 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. if needed, from these funds as excess balances exist in amounts needed for fundin[.x in a number of these finds. internal Sen ice Funds Budget w Actuals Comparisons Equipment 1Vorkers selr Office Mm2t Info Vehicle Ruildiny Replacemt Carne Insurance stores ss sterns NI:(im. M:Iint. Rc~,innln, Fund Ralance 3.078.191 '-.583'80 2.0911699 2(,3,41-1 2,175,717 268.731 716.;00 i3u,i--,a dJ Ze,ciwU ; i 69'. I I 1 1'4.,60 LUIS 411) (,1\.4014 1.IJS~.'UIJ %Lctual Re,enues- Isr Qtr 83.644) 26?26 105.035 154.650 171.463 sud_aed [sptndimrr: 4"b'15 35.' l 6100.sC 146.U1!U 1,111,410 hEo.1 4 1.171.'4; Iutal Actual Expendnures - tst Qtr 70.783 191.771 407.775 36.760 240.993 90.468 177.85' Ist Quarter Ending Fund Balance 3.091.048 2,391.514 1.683.923 253.011 1.1140.162 332.513 810.311 Trust and Aueucv Funds - Town Trust and Agency Funds have fund balances as of June 30, 2009 of S206,258 for Parkim! District `88 and $328,526 in the Library Trust Fluids. No budget revisions are contemplated at this time for these funds. Redevelopment Abency - The Agency's FY 09.10 and FY 2009-14 Capital Improvement Plan adopted budgets are incorporated into the Redevelopment Agency's financial statements and year-to-date actuals as presented belong. The Capital Projects Fund balances include approximately 5144,935 dollars of remaining unexpended funds at September 30. 2009 from the Agency's 510.7 million dollar 2002 COP issue. Approximately S65.000 of the ren4ainiliQ proceeds are encumbered to be spent on the S. Santa Cruz Wood Road Gateway project, and S78.080 for Almond Grove Concrete Rehabilitation Pilot project. Redeielopwent Agency Funds Budget to .actuals Comparisons Capital Debt Loi%/NIod Total Projects Sen ice Ilousi ig, RDA Funds Bcyinrting Fund Balance 2.065,621 7,988.113 8,631.135 18.684,861 Budsetcd Rc%cnucs 6. ~.f100 6,744.4911 1.771.-431) 9,150.920 Actual ReNenues - Is( Qtr' 575,000 96.096 8,721 679.817 Budgeted Espentliturc I .4 4.7 214 6.?95. ;f11! ; t= t 3.10_ . ; i Total Actual Expenditures - 1st Qtr 428,468 1,169.348 1.366 266 2,964,082 Ist Quarter Ending Fund Balance 2,212,156 6,914.861 7.273.580 16.400.597 Sines 1992 redevelopment agencies across the state have been required to make Educational Re\enue .Augmentation Fund (FRAY) payments to the State. In accordance with the State budget aareement, the ERAF payment was increased S30'.000 for FY 200 l 05 K' FY 200506. The State suspended this "take" for FY's '_006.07 & 2007 OS. but the FY 2008,09 Budget Bill 16 reintroduced a new ER.A~F payment of approximately S-156,910 which Was eVe11tUa11V ruled to he unconstitutional. Once at,ain, the State has proposed an additional ER_1F take: of approximately S-'.2 million for FY- 2009 10. disallowing the Lenev to retain this amount of tax increments to be used for important future agency projects. The California Redevelopment association expects to file a second lawsuit on this "take- and that it will once aa-ain be found to be UnCOnstltutlollal. Proposition IA approved in 2004 does not contain specific protections for redevelopment a encics. These were not included because there are existin<, legal opinions that conclude that redevelopment agency tar increment revenue is constitutionally protected from state revenue takes. It is important that the Town continue to monitor developments regarding Redevelopment AL,encies to discourage the leLislature from further State takes from Rcde,clopment Aoencv Tar Increment. Protecting Redevelopment Agency funds for all cities is also a strategic priority for the Lealue of California cities. It is essential to preserve the Agency's tar increment reVetiue as any take from this source will reduce the annual revenue stream. If a larger rcyenue take is enacted, the lowercd revenue stream will reduce the total amount of bonds the ALyency can issue in the future. CONCLUSION The financial results from the prior fiscal year coupled with the FY 2009r 10 first quat-ter data point towards c017tinued adherence to cot7serN atiN e fiscal platuiing and efforts to sustain and dc~ clop the Town's sources of economically-sensititi e revenues. This is especially important in bight of the loss of five top ten sales tax providers in the past three years. Though the update to the Five-Year Financial Plan presented in the spring 2009 10 bud~llet process projected future revenue shortfall cllallen<,es. these challen17cs will be made less so if the Town's economically- sensitir e revenues call sustain their momentum and the cost of core service delivery can be kept in check.