Mid year Budget"" n< MEETING DATE: 2/21/2012
ITEM NO: 8
tay cAi�s TOWN COUNCIL/TOWN COUNCIL AS SUCCESSOR AGENCY
AGENDA REPORT
DATE: FEBRUARY 16, 2012
TO: MAYOR AND TOWN COUNCIL/MEMEERS OF THE , ���a !/
SUCCESSOR AGENCY
FROM: GREG LARSON, TOWN MANAGER/EXECUTIVE DIRECTOR
SUBJECT: FY 2011/12 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31.2011
A. ACCEPT FY 2011/12 MID-YEAR BUDGET PERFORMANCE AND
STATUS REPORT, INCLUDING FY 2011/12 FINANCIAL
PROJECTIONS
B. AUTHORIZE BUDGET ADJUSTMENTS AS RECOMMENDED IN
THE ATTACHED SECOND QUARTER BUDGET PERFORMANCE
REPORT
C. AUTHORIZE AMENDMENT OF FY 2011/12 COMPREHENSIVE FEE
SCHEDULE - LIBRARY INTERNET PRINTING FEE
RECOMMENDATION:
1. Accept the FY 2011/12 Mid -Year Budget Performance and Status Report, including FY
2011 /12 financial projections.
2. Authorize budget adjustments as recommended in the attached Second Quarter Budget
Performance Report (Attachment 1).
3. Authorize amendment of the Town FY 2011/12 Comprehensive Fee Schedule, Library
Internet Printing Fee.
The purpose of this report is to provide the Town Council with a status of the FY 2011/12
Adopted Operating Budget at the mid -year point, including an overview of revenue and
expenditure trends and financial projections for the current fiscal year. This report also includes
a brief discussion of the Town's current year General Fund Reserve status and an update to the
Town's five -year financial projections (FY 2012 -2017) to provide a context for the FY 2012/13
budget development process d recd ended budget approach.
PREPARED BY: A
sistant Budg ance Director
NAF1NANCRQtrly Financial Reports\FY 201212nd Quartw12011 _Mid_Year_Budget_Report Final.doc
Reviewed by: Y_�_JAssistant Town Manager Town Attorney T��Finance
PAGE 2
MAYOR AND TOWN COUNCIL/MEMBERS OF THE SUCCESSOR AGENCY
SUBJECT: FY 2011/12 MID-YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2011
February 16, 2012
DISCUSSION
FY 2011/12 MID -YEAR BUDGET STATUS
Budget Performance Report
The attached Budget Performance Report is a mid -year report covering a six -month period
beginning July 1, 2011 and ending December 31, 2011. The report provides analysis and
recommendations related to the current year's adopted budget revenue and expenditures and the
projected financial condition of all Town funds.
General Fund Revenue Highlights FY 2011112
Overall, key economically sensitive General Fund revenues are trending positively compared to
the prior year, with the one significant exception being the declining Netflix sales tax receipts
previously collected on video streaming subscriptions when they were combined with DVD
memberships. As a result, staff recommends a $667,515 net decrease in adopted budget levels.
The proposed revenue changes include:
• A $110,000 decrease in Motor Vehicle In -Lieu (VLF) Property Tax Backfill
• An $800,000 decrease in Sales Tax, from $9.4 million to $8.6 million
• A $203,780 increase in Franchise Fees, from $1.7 million to $1.9 million
• A $66,980 increase in Transient Occupancy Tax (TOT), from $900,000 to $1 million
• A $85,725 increase in Intergovernmental Fees, from $700,000 to $900,000
• An $114,000 decrease in Interest Income, from $700,000 to $600,000
General Fund Expenditure Highlights FY 2011112
Current departmental expenditures are trending below the expected 50% of budget level, which
may result in expenditure savings at year -end.
General Fund Projected Year -End Balances June 30, 2012
Current fiscal year -end projections for FY 2011/12 reflect a balance of operating revenue and
expenditures. This has been achieved by incorporating an additional $800,000 prudently set
aside at the close of FY 2010/11 to address anticipated budget impacts due to the State deficit.
Without the additional funding, operating revenues were forecast to be below FY 2011/12
adopted budget levels. This decline was in line with projections influenced by both the
announcement of Netflix's business model change and the adopted California State legislation to
dissolve redevelopment agencies.
While the change in Netflix's business model will result in a $1 million sales tax decline, the FY
2011/12 adopted sales tax revenues have been revised downward in the Five -Year Forecast by
approximately $800,000 due to growth in other sales tax revenue segments. While the Five -Year
Forecast reflects an $800,000 net decline in total revenues, staff recommends only $667,515 in
revenue adjustments at this time. Approximately $132,485 of anticipated revenue declines
reflected in the Five -Year Forecast are not recommended as formal budgetary adjustments due to
PAGE 3
MAYOR AND TOWN COUNCILIMEMBERS OF THE SUCCESSOR AGENCY
SUBJECT: FY 2011/12 MID-YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2011
February 16, 2012
the speculative nature of the revenue reductions projected as a result of the impacts associated
with the dissolution of the redevelopment agency.
FY 2011/12 MID-YEAR BUDGET UPDATE TRENDS
Operating Revenue Trends
As discussed earlier, the FY 2011/12 mid -year update reflects a decrease in the general retail
category of sales tax, which is the Town's largest and most economically sensitive source of
revenue. The current recession has greatly impacted the Town's sales tax revenue, which has
experienced declines over the past two years. Sales tax financial assessments reflect a decrease
in sales tax revenue due to business model changes by Netflix, a retail internet commerce
company. Internet commerce sales tax revenue ( Netflix) previously accounted for nearly 40% of
the Town's sales tax revenue, and now provides 29% of revenue, which is expected to continue
to decline incrementally over time. On a positive note, other segments in general retail and
various sales tax categories are showing signs of growth.
The Town's revenue forecast is dependent upon the stability of economically sensitive revenues,
including sales tax, property tax, transient occupancy tax, franchise fees, and interest income.
Given Netflix's business model change, the volatile nature of sales tax is evident, underscoring
the importance of diversifying the Town's economic portfolio.
Due to the decrease in sales tax, the current sales tax revenue forecast will be revised from $9.4
million to $8.6 million. Total FY 2011/12 revenue will be adjusted approximately $667,515
lower than the adopted budget.
Operating Expenditure Trends
Anticipating that some of the Town's economically sensitive revenues would be impacted by the
recession, staff proactively implemented cost reduction strategies this fiscal year, including
targeted hiring freezes, unpaid furlough days, redeployment of staff, and reduction in materials
and supply costs. Many of these reduction strategies have helped to keep current departmental
expenditures below the expected 50% of budget level, which could result in expenditure savings
at year -end.
State Budget Impacts to Local Governments
The State of California is facing a budget shortfall of more than $13 billion for FY 2012 /13. The
State's current budget proposal includes a reduction in Motor Vehicle In -Lieu Property Tax
(VLF), resulting in an $110,000 revenue loss to the Town. More significant is the impact of
legislation which eliminates California's 400+ redevelopment agencies, which account for an
estimated $5 billion in property tax. revenues statewide.
On June 28, 2011, the Governor signed ABxl 26 and ABxl 27 into law. ABxl 26 (the
"Dissolution Act ") proposed to eliminate redevelopment agencies as of October 1, 2011, and
essentially restricted redevelopment agencies from entering into new agreements, borrowing or
lending funds, or acquiring or disposing of real property prior to dissolution. ABxl 27 (the
PAGE
MAYOR AND TOWN COUNCIL/MEMBERS OF THE SUCCESSOR AGENCY
SUBJECT: FY 2011/12 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2011
February 16, 2012
"Voluntary Program Act ") would have allowed redevelopment agencies to remain in existence
and be exempt from ABx 126 if certain `voluntary" payments were made to the State in FY 2012
and in each fiscal year thereafter. This legislation was later challenged and considered by the
California Supreme Court. On December 29, 2011, the California Supreme Court issued its
decision in the California Redevelopment Association v. Matosantos case, finding the ABxl 26
Dissolution Act constitutional and the ABxl 27 ( "Alternative Redevelopment Program Act ")
unconstitutional.
Effective February 1, 2012, all California redevelopment agencies ( "RDAs ") were dissolved and
their assets and functions have been transferred to successor agencies and housing functions
successors, to "wind- down" the activities of the former RDAs. The Town elected and has been
designated to serve as the "Successor Agency" to the former Los Gatos Redevelopment Agency.
The Town has also elected to retain and accept specified affordable housing assets, obligations,
and housing functions of the former Redevelopment Agency and will serve as the "Housing
Functions Successor."
While the implementation associated with the legislation is evolving, staff and legal counsel
continue to work closely with the California Redevelopment Association (CRA), League of
California Cities, California Society of Municipal Finance Officers (CSMFO), and other legal
entities to understand and monitor the current and future impacts of the dissolution of the Town's
Redevelopment Agency.
COMPREHENSIVE FEE SCHEDULE AMENDMENT
New computer software has been installed to manage printing activities from internet terminals
through copy machines in the new library. This change will require an amendment to the
existing library internet printing fee, which currently provides ten free pages and charges $0.10
per page thereafter. Since the new software manages printing activities via copy machines and
cannot provide free printing, staff recommends that the internet printing fee be aligned to the
library copy fee, which is $0.15 per page.
GENERAL FUND RESERVE STATUS
As of June 30, 2011, Town's FY 2011/12 General Fund balance was approximately $25.7
million, all of which is legally reserved or designated for special purposes by Council. Included
in this amount are approximately $3.7 million in reserves for Economic Uncertainty, $5.7 million
for Capital and Special Projects, and $7.9 million for Revenue Stabilization. These reserves
remain intact and available at the mid -year point of FY 2011/12. Changes to our reserve
designations and allocations are required by new general accounting standards (GASB 54) and
will be considered with the proposed budget in May 2012.
PAGE 5
MAYOR AND TOWN COUNCIL/MEMBERS OF THE SUCCESSOR AGENCY
SUBJECT: FY 2011/12 MID-YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2011
February 16, 2012
FY 2012/13 BUDGET DEVELOPMENT PROCESS
Concurrent with the update of the Five -Year Financial Plan and in anticipation that service
reductions would be necessary for the FY 2012/13 budget, staff began informal budget
development discussions in December 2011. This process includes the conceptual development
of budget reduction scenarios, limited revenue enhancements, and adjustments to the User Fee
Schedule. Staff is currently evaluating the feasibility and impact of budget options, which will
be brought forward to Council in early May 2012, based on direction provided during the
Council's January 2012 retreat.
FIVE -YEAR FINANCIAL PLAN UPDATE
The Five -Year Financial Plan is an independent financial tool used to forecast current and future
revenues and expenses. This tool is designed to be more fluid in nature to build various funding
scenarios and test "what if' assumptions, providing a range of budget strategies for
consideration.
The updated Plan for FY 2012/13 forecasts a deficit of $1.8 million, as presented at the January
2012 Council Retreat, and projects continued deficits in subsequent years if structural and
ongoing adjustments are not made. Current and future deficit projections in the Town's Five -
Year Financial Plan are based upon conservative, yet realistic, revenue and expenditure growth
rates and trends.
The estimates for FY 2012 /13 include preliminary budget assumptions and revenue and
expenditure updates as discussed in this report. Upon consultation with the Town's sales tax
advisor and given Netflix's business model change, adjustments have been made to the FY
2012/13 sales tax revenue to reflect the latest projections. All adjustments to the forecast will be
presented to Council at the upcoming budget discussions in May 2012.
PAGE
MAYOR AND TOWN COUNCIL/MEMBERS OF THE SUCCESSOR AGENCY
SUBJECT: FY 2011/12 MID-YEAR BUDGET PERFORMANCE AND STATUS REPORT-
SIX MONTHS ENDING DECEMBER 31, 2011
February 16, 2012
Town of Los Gatos General Fund
Updated Fire -fear Financial Plan
F7. hP) I Fry
Account
Renvnie Categon
2010;11
Budget
2010'11
Actual,
2011112
Budget
201112
Forecast
201213
Forecast
201314
Forecast
2014'15
Forecast
201616
Forecast
201617
Forecast
41DO Property Tm
S 73
2A
8A
1.9
1.0
1.1
2.1
0.7
23
0.6
12
38
0.4
S 73
23
10.0
1.9
1.0
Ll
2.0
0.8
2.7
0.7
0.6
23
1 0.4
S 75
2A
9A
1.7
0.9
1.1
2.0
0.7
25
0.6
0.7
35
0.4
S 7A
2}
8.6
1.9
1.0
1.1
1.9
0.8
2.1
0.6
0.6
35
1 OA
S 78
23
7.7
1.9
1.0
13
1.9
OP
2.0
0.6
0.6
3.6
I 0.4
S 81
23
7.6
2.0
1.0
1A
2.0
0.8
2.0
0.7
0.6
3.4
1 02
S 8.6
23
72
2.0
1.1
IA
2.0
08
2.0
0.7
0.6
3.4
1 02
S 9.0
23
7.1
2.0
1.1
15
2.1
OA
2.0
0.7
0.6
3.4
1 0.1
S 95
2.4
7.1
2.1
1.1
IS
2.1
0.8
2.1
0.7
0.7
35
0.1
4110 VLF Rakfdl Property Tax
_
4200 Sales &Use Tax
4250 Frandiise Fees
_
4251 Trmsient Oavpanry Ta,
4400 Busmesa License Tax
_
4400 U.. & Permits
4500 Interpvenmmtal
_
4600 Charge for Services
4700 Ed. &Forfeitures
4800 Interest
4850 Other Sours
4900 Fwd Transfers In
TOTALREVFNUFS
331
33.1
33A
32.2
31.9
322
32}
32.6
33.6
1 sc.FRegaces/Uopsits
0.9 13
3.7
45
0.7
0.8
OA
OA
0.1
TOTAL RFYEN FES & 1'I21NSFTR5 _._
5 34.1
S 34.4
S 37.1
S 36.7
S 32.6
S 33.0
S 33.1
5 33.4
5 33.7
deco..(
Ecp..dture Categ.n
2010,11
Budeet
2 010111.
Acmals
2011112
Budget
2011112
- Forecast'
2012 13_
FOeead
2013 /U
Forecast
201415
Forecast
2015,96.
Fareeut
201647
Forecast
�I ID Salay _ _ _ _
_ 5130 Teopocary Employees _
5140 Overtime _ _
5170 Other Salary
5200 Benefits
S 13.2
0.6
05
0.1
5.6
5.7
02
0.4
3.1
22
S 12.5
0.8
05
0}
55
4.6
0.2
0.4
3.0
1.4
S 13.0
0.6
OA
0.4
6.4
53
02
0.4
3.1
2.1
S 12.7
0.8
03
03
61
5.2
0.2
0.4
3.1
2.2
S 13.2
0.6
03
0.4
65
5.4
01
0.4
33
2.2
S 131
0.6
03
0.4
6.7
5.6
0.2
OA
3.4
2.0
S 13.2
0.6
03
0.4
71
5.7
01
0.4
35
1 2.0
S 13.2
0.6
03
OA
75
5.8
02
0.4
3.6
2.0
5 132
0.6
03
0.4
7.8
6.0
02
OS
3.7
1 2.0
6000 Supplim,Mazerials, &Services
7100 Gmts &Awards
7400 UtiOties
_
8060 In ternal Service Charges
8900 Debt Service
TOTALEXYENDITIIRFS
5 31.6
5 29.2
S 31.9
S 31.4
S 32.5
5 32A
S 335
5 34.0
5 34.7
- - --
9900 RDA Ransom
9900 Operating Tmnsfm Out
9900 Capital Transfers Out to GFAR
9900 GASB 45 Rethee Medical Actuarial
0.9
0.8
0.8
0.8
33
1.1
3A
1.1
0.7
1.2
-
0.8
13
0.8
1A
-
08
15
0.1
lb
TOTALBUDGETID EXPENDITURES
333
30.8
363
35.9
34.4
34.9
35.7
363
36A
9900 legally Required Reserve Allocation
9900 Reserve
9900 Transfer to Stabilization Reserve
0.6
1.8
0.8
0.8
08
0.8
-
TOTAL EXPENDITLRFS & AUOCATIOSS
S 33.9
1 5 34.2
1 S 37.1
S 36.7
S 34.4
S 34.9
1 S 35.7
36A
REVENUES LETPF.4DITLRFB
S 0.2 S 0.2
S
S
5 1.8
S 1.9
S 2.6
436.3S
2.7
ONGOING SHORTFALL N ITIGITION
5
S 1.8
S 1.9
2.9
NETRPtTNUFS LESS EXPENDITURES -
S 02 S 02
S
S
5 11.8)
S (0.1)
S (0.7)
01
PAGE
MAYOR AND TOWN COUNCIL/MEMBERS OF THE SUCCESSOR AGENCY
SUBJECT: FY 2011/12 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2011
February 16, 2012
CONCLUSION:
hi spite of a decline in sales tax revenue, the Town's outlook at mid -year is encouraging due to
its planned expenditure reductions and the prudent set -aside of funds to address impacts of the
State budget deficit. Staff will incorporate Council feedback as discussed at the January 2012
Council Retreat, outlining service prioritizations, budget reductions, and limited revenue
enhancement options to address the FY 2012/13 projected $1.8 million deficit. Understanding
the growth limitations of key revenues and expected increases in operating costs, such as
employer retiree medical costs and other personnel costs, the Town's highest fiscal priority will
be to contain its operating costs on an ongoing basis.
ENVIRONMENTAL ASSESSMENT
This budget report is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT
The Second Quarter Budget Performance Report includes a number of recommended budget
adjustments necessary for FY 2011/12. As discussed earlier in this report, staff is currently
engaged in the FY 2012/13 budget development process, which will identify a variety of service
reductions and limited revenue enhancements, contingent upon the performance of the local
economy and any budget actions taken by the State of California to balance its budget.
Attachments:
Attachment 1- Budget Performance Report for the Six Months Ended December 31, 2011
THIS PAGE
INTENTIONALLY
LEFT BLANK
TOWN OF LOS GATOS
BUDGET PERFORMANCE REPORT
FOR THE SIX MONTHS ENDED DECEMBER 31, 2011
February 16, 2012
FINANCIAL OVERVIEW — EXECUTIVE SUMMARY
Status of FY 2011/12 Adopted Budget:
Overall, second quarter General Fund revenues are trending moderately lower and are recommended to be adjusted
downward by a cumulative amount of approximately $667,515 from adopted budget estimates. The current
forecast expects sales tax revenue to decrease by approximately $800,000 this fiscal year. This decline was largely
due to a change in the general retail category, primarily Netflix, an internet commerce company that is the Town's
largest provider of sales tax revenues. General property tax for the second quarter is trending as expected, however,
Motor Vehicle In Lieu Property Tax Backfill revenue has been adjusted downward in the amount of $110,000 due
to State budget takes. Modifications have also been made to interest income, which has decreased due to the slow
economy and low investment returns.
Revenues trending positively include Franchise Fees and Transient Occupancy Tax (TOT). Compared to the prior
year second quarter, Franchise Fees and TOT have increased by 6% and 11 % respectively.
Department expenditure totals for the second quarter FY 2011/12 are trending as expected with spending at the end
of the second quarter averaging 47 %. Because of expected lower operating revenues, staff implemented strategic
cost reductions to contain the rise of operating costs. With six months of data now available, staff can better predict
the next six months of expenditure trends, although unexpected costs can occur. Should any budget adjustments be
necessary to balance operating revenue and expenditures, staff will advise Council accordingly.
Providing services to the community in this and future fiscal years will continue to require strong performance by
economically sensitive revenues to offset cost increases. The FY 2012/13 budget development process will
endeavor to maintain essential public services while controlling operational costs in light of the five -year fiscal
forecast, which predicts operating revenue shortfalls in subsequent fiscal years.
General Fund Reserve Status - June 30, 2011
General Fund reserves closed at a balance of approximately $25.7 million at June 30, 2011. General Fund reserves
are classified into three categories: Non - Spendable, Restricted, and Assigned. Non - spendable reserves represent
amounts that are not available in spendable form, such as accounts receivable. Restricted funds represent a mix of
restricted reserves that have been legally appropriated for a specific use. Assigned funds are those that have been
dedicated for specific purposes via Council policy. Total restricted reserves include a $1.5 million loan to what is
now known as the former Los Gatos Redevelopment Agency. In addition to the restricted reserves, the Town has
approximately $24.2 million in designated reserves established in accordance with Town financial policies and
operating and capital budget requirements. The chart on the next page reflects Assigned Reserve balances as of
June 30, 2011.
ATTACHMENTI
Assigned Reserves:
Assigned for Vasona Land Sale
$2,834,779
Assiened for Revenue Stabilization
7,563,931
Assigned for Economic Uncertainty
3,678,001
Assiened for Capital & Special Projects
5,718,997
Assigned for Compensated Absences
2,318,082
Assigned for Market Fluctuation
247,705
Assigned for Open Space_,AMWIL
562,000
Assigned for Post Retirement Medical
400,000
Assigned for Special Studies m T
255,000
Assiened for Sustainability
140,553
Assigned for Productivity Enhancements
100,000
Assigned for Year End Budget Adjustments
175,000
Total Assigned Reserves $24,240,337 I
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 funding source to replenish the Town's General Fund Appropriated
Reserve (GFAR) in addition to the annual budgeted transfer from the General Fund's operations of $650,000 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 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 street repair and maintenance program and other priority
infrastructure improvements like sidewalk repair and replacement.
In its public communications, staff refers to the $24.2 million in Assigned General Fund reserves as the Town's
"reserves" since these reserves are established by Council policy for their intended purpose. The $24.2 million in
Assigned 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.
GENERAL FUND -KEY REVENUE ANALYSIS FY 2011/12
The following presentation provides a recap of significant General Fund revenue sources as of the second quarter
ending December 31, 2011. Staff is monitoring developments in each major revenue source closely for potential
adjustments to budgeted revenues as recommended in this report.
SALES T.
Description
Sales tax is the largest revenue source for the Town's General Fund, accounting for 28.1% of budgeted
General Fund revenues in FY 2011 /12. The Town receives 1 cent for every 8.25 cents of sales tax paid
per dollar on retail sales and taxable services transacted within Los Gatos. The State Board of
Equalization, since the implementation of the mechanism commonly known as the "triple flip," retains
0.25 cents of the Town's 1 -cent share and requires the Santa Clara County Auditor to replace it with an
equal amount of property tax revenues. Revenues are remitted from the State to the Town on a monthly
basis, and from the County to the Town on a biannual basis. These revenues are placed in the General
Fund for unrestricted uses.
Analysis
Total second quarter receipts are trending behind those in the same period last fiscal year. This overall
trend is the net of two shifts: first, a sizeable decrease in sales tax revenues attributable to Netflix; and
second, a relatively small increase in non -Netflix sales tax revenues. The increase in non -Netflix sales tax
revenues, about 4.5% from September 30, 2010 to September 30, 2011, ameliorates the potential hit from
the change in Netflix's change in its business model. Staff believes it is prudent to assume a 3.5% growth
in non -Netflix revenues, and to include all of the Netflix revenues, when projecting revenues through the
end of this fiscal year. The net effect is a recommendation for a revenue budget reduction of $800,000.
Quarterly and Annual Revenues
5 -Year History
slo,000,000
58,000,000
56,000,000
54,000,000
$2,000,000
$-
2nd Quarter Actual Revenues
Fiscal Year Total Actual Revenues
Fiscal Year Budgeted Revenues
2nd Quarter Percent of Total
FY 07/08 FY 08/09 FY 09/10
�26d l2usrter Actual
Revenues
OFucal Yea Told
Acnul Revenues
■F_al Yea Budgeted
Revea�es
FY 10/11 FY 11/12
S 3,326,298 $ 3,236,975 S 3,221,690 $ 4,776,828 $ 3,667,071
$ 9,345,432 $ 8,487,000 $ 8,317,216 $ 9,971,409
$ 9,400,000
3559% 38.14 38.74% 47.91% 39.01%
Recom ®ended Budget Revision $ (800,000)
FY 07/08 FY 08/09 FY 09/10 FY 10/11 FY 11/12
PROPERTY TAX
Description l
Property tax is the second largest revenue source for the Town's General Fund and accounts for 28.1% of
budgeted General Fund revenues in FY 2011/12. Property tax is levied by the Santa Clara County
Assessor's Office at 1% of a property's assessed value, of which the Town receives approximately 9.5
cents per dollar paid on property located within the municipal limits of Los Gatos. In compliance with
Proposition 13, the assessed value of real property is based on the 1975/76 assessment roll value, adjusted
by a 2% inflation factor 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 limited the tax rate that can be imposed by the Town on property.
With the limitation on rates, therefore, higher revenues are generated by a higher aggregate property
value.
Analysis
Property tax distributions are largely received in the third and fourth quarters of each fiscal year;
therefore, revenue receipts are not reflected proportionately by quarter in the chart below. Property tax is
trending as expected, although second quarter receipts reflect a 15% decrease compared to the same
period in the prior year. This is because of an early tax payment received in December 2010. However,
due to State budget takes, Motor Vehicle in Lieu Property Tax Backfill revenue will be reduced, resulting
in a budget reduction of $110,000.
Quarterly and Annual Revenues
5 -Year History
510,000,000
58,000,000
56,000,000
54,000,000
52,000,000
U
02nd Quarter
Actual Revenues
OFiscal Year Total
Actual Revenues
a Fiscal Year
Budgeted
Revenues
Ct
FY 07/08 FY 08/09 FY 09/10 FY 10 /11 FY 11/12
FY 07/08
FY 08/09
FY 09/10
FY 10/11
FY 11/12
2nd Quatter Actual Revenues $
3,061,873
S 3,160,810
$ 3,191,286
S 3,763,165
$ 3,186,558
Fiscal Year Total Actual Revenues S
9,178,869
$ 9,724,070
S 9,809,365
$ 9,597,378
Fiscal Year Budgeted Revenues
S 9,799,400
2nd QuatterPercentofTotal
33.36
32.51%
3233%
39.21%
32.52%
Recoaassended Budget Revision
$ (110,000)
Ct
FY 07/08 FY 08/09 FY 09/10 FY 10 /11 FY 11/12
FRANCHISE FEES
Description
Franchise fees are collected by the Town for the privilege of operating a utility service within Los Gatos,
and as a fee in lieu of a business license tax. Franchise fees are currently received from Comcast for cable
television services, PG &E for gas and electric services, West Valley Collection and Recycling (WVC &R)
for solid waste collection services, and AT &T and Comcast for video services. Franchise fees represent
5.1% of budgeted General Fund revenues in FY 2011/12.
Analysis
Historically, franchise fee payments are not remitted equally throughout the fiscal year; therefore, second
quarter receipts are not necessarily predictive. The FY 2011/12 budget was prepared during FY 2010/11,
before all of the franchise fee receipts for the year were received; therefore, an estimate of total receipts
was used as a basis for developing the 2011/12 budget. The total receipts for 2010/11 were higher than
estimated, and, as a result, the 2011/12 revenue budget is somewhat below actuals. In addition, current
year remittances from WVC &R, which provides approximately 59% of franchise fee revenue, are
trending ahead by 6 %. This increase is attributable to increased construction activity and the addition of
new homes to the customer base. Staff recommends a revenue budget increase of $203,780.
Quarterly and Annual Revenues
5 -Year History
S2,0o0,000
51,500,000
S1,000,000
5500,000
S-
M2nd Quartcr Actual
Revenues
OFiscal Year Total
Actual Revenues
MFucal Year Total
Budgeted Revenues
FY 07/08 FY 08/09 FY 09/10 FY 10 /I1 FY 11/12
FY 07/08
FY 08/09
FY 09/10
FY 10/11
FY 11/12
2nd Quarter Actual Revenues
$- 547,508
$ 548,795
$ 553,434
$ 626,592
$ 669,186
Fiscal Year Total Actual Revenues
$ 1,659,829
$ 1,656,100
$ 1,699,850
S 1,901,605
Fiscal Year Total Budgeted Revenues
$ 1
2nd Quarter Percent of Total
32.99%
33.14%
32.56%
32.95%
38.98%
Recommended Budget Revision
S 203,780
FY 07/08 FY 08/09 FY 09/10 FY 10 /I1 FY 11/12
BUSINESS LICENSE TAX
Description
The Town requires all businesses located within Los Gatos, or those that operate within Los Gatos, to
obtain a business license. The amount of business license tax paid by each business is based on its
business activity. Fees for activities such as wholesale sales and manufacturing are charged on a sliding
scale based on gross receipts, as is retail, but only to a cap of $975. These activities account for
approximately 40% of annual business license tax revenues. Fees for other activities, as specified in the
Town Code, are assessed as flat fees; these make up approximately 60% of annual business license tax
revenues. Annual renewal payments are due on January 2 of each year. Payments for new flat - fee -based
businesses are pro -rated by quarter.
Analysis
Due to local, state, and national economic challenges, business license tax revenue for the current fiscal
year was budgeted at approximately 4.5% less than the prior year actuals. Businesses assessed by gross
receipts are confirming this expected decrease in their submitted revenue estimates for 2012. Second
quarter revenue is indeed trending below that of the previous year, but to a greater degree than might be
expected. This significantly lower second quarter revenue collection is primarily due to the timing of the
business license payment processing, which was affected by furlough closures in December and reduced
staffing for the business license function. End of January business license fee revenues are trending in
line with budgeted revenue. There are no recommended budget changes to this revenue source.
Quarterly and Annual Revenues
5 -Year History
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
god Quarter Actual Revenues
Fiscal Year Total Actual Revenues
Fiscal Year Total Budgeted Revenues
2nd Quarter Percent of Total
FY07 /08 FYO&09
o 2nd Quarter
Act
Revers us
❑ Fiscal Year
Total Actual
Revenues
■ Fiscal Year
Total Budgeted
Revenues
FY 09/10 FY 10/11
447,514 376,704 470,833 368,757
S 1,138,057 S 1,139,107 S 1,220,802 S 1,136,511
FY 11/12
209,377
S 1,085,000
39.32% 33.07% 38.57% 32.45% 1930'/0
Recainmended Budget Revision No Change
FY 07/08 FY 08/09 FY 09/10 FY 10/ 11 FY 11/12
TRANSIENT OCCUPANCY TAX
Description
The Town levies a 10% transient occupancy tax (TOT) on all hotel and motel rooms within the municipal
limits of Los Gatos. This tax helps to fund Town services provided to transitory visitors to Los Gatos.
Analysis
Visit California, formerly the California Travel and Tourism Commission, reports that visitors to
California spent $95.1 billion in 2010, a 7.5% increase from 2009, as both the state and national travel
industries began to recover during 2010. It predicts that visits to California will increase by an additional
3.8% in 2011, surpassing the pre- recession peak of 2007. Second quarter TOT revenue supports this
state -wide trend, showing an increase from the prior year of about 11 %. Given the slow economic
recovery, TOT revenue for the current fiscal year was budgeted at 7.1 % less than prior year actuals. Staff
recommends a revenue budget increase of $66,980.
Quarterly and Annual Revenues
5-Year History
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
FY
FY FY FY
FY
07/08
08/09 09/10 10 /11
11/12
FY 07/08 FY08/09
FY09 110
FY 10 /11
FY 11/12
2nd Quarter Actual Revenues
S 435,891 S
436,515
S 354,551
S 380,129
$ 422,059
Fiscal Year Total Actual Revenues
$ 1,245,078 $
966,638
S 923,783
$ 1,004,659
Fiscal Year Total BudWted Revenues
S 933,020
2nd Quarter Percent of Total
m2nd Quarter Actual
Revenues
Fiscal Year Total
Aced Revenues
Year Total
35.01% 45.16% 38.38 37.84% 45.24%
Recommended Budget Revision S 66,980
7
INTEREST INCOME
Description \
The Town earns interest income by investing monies not immediately required for daily operations in a
number of money market instruments. These investments are made within the parameters stated in the
Town Council's Investment Policy. The Town's investment goal is to achieve a competitive rate of return
while protecting the safety of its funds. Interest income revenue is primarily dependent on two factors:
first, the cash balance in the Town's investment portfolio; and second, the yield on those funds.
Analysis
Second quarter receipts are trending significantly below those in the same period in the four previous
fiscal years. Financial indicators during the same period show mixed results. For example, between
December 2010 and December 2011 the Dow Jones Industrial Average showed growth of about 5.5 %, the
S &P 500 remained flat, and the NASDAQ showed decline of about 1.7 %. The LAW yield declined from
0.46% to 0.38 %, and the three -month Treasury declined from 0.12% to 0.02 %. In January 2011, the
Federal Reserve policymaking committee announced that it now expects to keep its key short-term
interest rate near zero until late 2014, as it expects any growth in the economy to remain modest.
As the Town's investment policy requires investment in conservative vehicles such as the LAIF and
Treasury bills, their continued low returns will greatly affect interest income returns. Staff recommends a
revenue budget reduction of $151,182.
Quarterly and Annual Revenues
5 -Year History
S2,500,000
S2,000,000
$1,500,000
$1,000,000
$500,000
S.
FY 07/08 FY 08/09 FY 09/10 FY 10 /11 FY 11/12
2ad Quarter Actual Revenues
Fiscal Year Revenues
Fiscal Year Total Budgeted Revenues
2nd Quarter Percent of Total
FY 07/08 FY 08/09
$ 936,081 S 1,011,756 $
$ 2,221,338 S 1,627,727 $
42.1% 621%
Wed Quarter Actual
Revenues
OFiscal Year Revenues
at Fiscal Year Total
Budgeted Revenues
FY 09/10 FY 10/11 FY 11/12
687,571 S 545,913 S 291,074
1,129,895 S 942,977
$ 717,981
60.9% 57.9% 40.5%
Recommended Budget Revision $ (151,182)
FY 2011/12 RECOMMENDED BUDGET ADJUSTMENTS
Budget adjustments are recommended for the following revenues and expenditures at the second quarter as
described below:
General Fund Revenues
Motor Vehicle In Lieu (VLF) Property Tax Backfi8
(110,000)
Saks & Use Tax
(800,000)
Franchise Fees
203,780
Transient Occupancy Tax
66,980
Motor Vehicle In Lieu Fee
47,690
Intergovernmental
38,035
Interest
(114,000)
TOTAL GENERAL FUND REVENUES
$ (667,515)
Other Funds Revenues
GFAR
University Sidewalk/Sports Park
9,000
Lark/LG Blvd Intersection Restripmg Design
2,000
11,000
Grants
ADA Compliance - Live Oak Manor Park
(93,000)
ADA Compliance - Civic Center
(23,806)
(116,806)
Equipment Replacement
ABAG - Replace PA System at the Civic Center
18,000
Reimbursement for Street Sweeper Replacement
217,000
235,000
TOTAL OTHER FUNDS REVENUES
$ 119,194
Other Funds Expenditures
GFAR
University Sidewalk/Sports Park
9,000
Lark/LG Blvd Intersection Restripmg Design
2,000
11,000
Grants
ADA Compliance - Live OakManor Park
(93,000)
ADA Compliance - Civic Center
(23,806)
(116,806)
ABAG Town Liability
Claim against the Town
72,500
72,500
MIS Fund
Tmepoint Training for Accela
28,000
28,000
Equipment Replacement
ABAG - Replace PA System at the Civic Center
18,000
Replacement of Six Patrol Vehicles
47,286
Reimbursement for Sweeper Replacement
217,000
282,286
TOTAL OTHER FUNDS EXPENDITURES
$ 176,988
It
SUMMARY OF KEY RECOMMENDED BUDGET ADJUSTMENTS
General Fund Revenues
• Sales Tax: Actual receipts are trending low, primarily due to the change in Netflix's business model. Staff
recommends a revenue budget reduction of $800,000.
• Property Tax: Staff recommends a revenue reduction of $110,000 in Motor Vehicle in Lieu Property Tax
Backfill revenue due to State budget takes.
• Franchise Fees: Actual receipts are trending above those estimated on partial actuals from the previous
year. Staff recommends a revenue budget increase of $203,780.
• Transient Occupancy Tax: Actual receipts support the state -wide trend of increased travel, showing an
increase from the prior year of about 11 %. Staff recommends a revenue budget increase of $66,980.
• Intergovernmental: Intergovernmental revenues are trending slightly higher than adopted budget levels.
Staff recommends a budget increase of $38,035.
• Interest Income: The continued low returns from key investment vehicles will greatly affect interest
income returns. Staff recommends a revenue budget reduction of $114,000.
General Fund and Other Funds
• Street Sweeper Reimbursement: Reimbursement funding has been received from ABAG to replace a street
sweeper damaged by fire. A revenue budget increase of $217,000 is recommended.
• Police Vehicle Replacement: Six police patrol vehicles were approved for replacement as part of the FY
2011/12 budget. However, funding for police vehicle computer equipment was inadvertently left out. A
budget expenditure increase of $47,286 is recommended.
General Fund Appropriated Reserve (GEAR) Fund
University Avenue Sidewalk Design: A budget expenditure of $9,000 is recommended to fund the design
(including plans and specifications) of a new ADA accessible sidewalk along the University Avenue from
Lark Avenue south to the new Sports Park. This funding will allow to design to begin this current fiscal
year. Construction will begin in early FY 2012/13 and will be completed by October 2012 to coincide with
the completion of the Sports Park project.
• Lark Avenue/Los Gatos Blvd Improvements: A budget expenditure of $2,000 is recommended to fund the
design of pedestrian and bicycle improvements at the intersection of Lark Avenue and Los Gatos
Blvd. The design will begin this fiscal year and will address ADA accessibility as well as pedestrian and
bicycle safety improvements. Construction will begin in early FY 2012/13 and will be funded separately in
the FY 2012/13 CIP.
10
FINANCIAL SUMMARIES, PROJECTIONS AND RECOMMENDATIONS
Presented below is the Schedule of FY 2011112 General Fund Operating Revenues vs. Operating Expenditures for
the second quarter and comparison information 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 second quarter.
To" of Los Gatos
Schedule of General Fund
Operating Revenues vs. Operating Expenditures
For the period ended December 31, 2011
11
Unsaddled
F \90/11
FY10111
FY10 /I1
FY10 111
FYII /12
FYII 112
FYII 112
FYII 112
FV11 /12
Final
Adjusted
2nd Qtr
%
Adopted
Adjusted
grid Qtr
%
Finance
Balance
Budget
Actual.
YID
Budget
Budget
Morals
YID
Projection
Revenuer
General Property Tax
S 7,270,325
S 7300.840
S 3,734,908
51% S
7,432.470
S 7.432,470
S 3.171320
43%
S ].432,4]0
VLF Becklill Property Taa
2 ,327,053
2366,930
1,163 ,527
49%
2366,930
2 ,366,930
-
2,256,930
Sales &U. Tax
9,971,409
9.100.000
4,776,828
52%
9,400,000
9,400,000
3.667,071
39%
8,600,000
Franchise Fees
1,901,605
2,006,950
626.592
31%
1,716,830
1,716,830
669,185
39%
1,920.610
Trdsient()ccupadcy Tai
1,004,659
989,800
380.129
38%
933,020
933,020
422,059
45%
1,000,000
MVL Fee
139,814
95,950
28,258
93,520
93520
15,238
16%
141,210
Business License Tae
1,136511
1,085,000
368,766
34%
1,085,000
1,083,000
209,377
19%
1,085,000
Licenses &Permits
1,831308
1,972,200
1,049,351
53%
1,757,050
1,757,050
1,140228
65%
1.757,050
inlergoammental
694,898
602,660
243.577
40%
646473
646373
274,858
43%
681.563
Changes for Services
3570,110
3,786,936
2.141,947
57%
3,641,736
3,641,736
2,378,412
65%
3233,006
FInes &Forfeitures
737,903
600,000
277,396
46%
671.596
671,596
314,683
47%
671.596
Interest
904,474
1,105,410
623,067
56%
979,960
828,778
271,457
33%
866,001
GASB Investment to Mld per Audit
(278,820)
-
-
(261,979)
(261,979)
-
(261,979)
Miscellaneous /Other
1,584,394
2,641449
1,465,832
55%
2545,457
2545,457
2258,070
89%
2545,457
Fund Transfers
437,755
438.920
382,716
87%
416,920
416,920
62,829
15%
416,920
Taw Berea..
33233588
34,092,945
17262,894
51%
33,424,883
33273,701
14,854,787
45%
32345,834
Use of Other Funding Sources:
Use of Rescnes- Capital Projects
900,000
650,000
650,000
650,000
Use of Reserves - Special Studies
252,000
_
V... Land Safe Resale
2,700,000
2,700,000
2,700,000
Fwd Balance Reallocauna
(1215,000)
-
Year EndSaings
700,000
Caryforuard Allocatious
150,000
-
PF]4S Liability Account
300,000
300,000
300,000
300,000
Use of Internal Service Reseraes
194,000
-
TowOnceFundiogsourses
-
581,000
-
3,650,000
3,650,000
-
4350.000
Total Revenues plus Reserves
S 33.233.588
S 34.673.945
S 17262.894
S
37.074.883
S 36.923.701
$ 14.854.797
S 36.695.834
Bvpeodlmm (includes erteur no encumbrances)
Mayor &Couc,i1
163,417
180,542
73201
41%
209,182
209,182
91,533
44%
204,998
Treasurer
-
-
-
_
_
Accuracy
197,716
251,341
97,474
39%
227,041
227,041
105.277
46%
222,500
Admidishratia Smites
2294.655
2331539
1,159.777
50%
2,863,055
2,863,055
1227522
43%
2.805,794
Comm Develnpmcut
2,991,866
3,343,745
1351,401
40%
3,210,624
3210,624
1530.151
48%
3,146,412
Police
13,103 .808
13,080,815
6,444,133
49%
13,484,876
13,484,876
6.627,132
49%
13215,178
park; &Public Worl
5,105.809
5,472,797
2507,634
0%
5,720,908
5.720,908
2,614322
46%
5,606,490
Commwity5m6ced
618,641
852,407
315,484
37%
-
-
-
Libray
1,817,842
1,879235
923,041
49%
1,921329
1,921429
929.483
48%
1,882,902
Tow Bear Eapema
S 26293284
S 27.392.421
S 12.872.145
47% S
27.637.015
S 27.637.015
S 13.125.420
471.
S 27.084275
Nov -Dept lRe,an itmes and other ores
General GOSammeut
4.471,662
6.063 .876
2.435.096
40%
8.684.922
8.684.922
2.982,880
34%
8.811559
Tow Boo-Dept Exposes
".471.66
S 6.063.876
$ 2.435.096
40% S
8.684.922
S 8.684.922
S 2.982,980
34%
S 8.811559
Tow Oncoming expenditures
S 30.765.416
S 33456297
$ 15307241
46% S
36321.937
S 36321.937
S 16.108300
44% S 35 .895,834
Bel Operning Rereoues Be6rt Cspiul Tnhs
d Budgeted Beg Fund Balance
S 2.468,142 S 123].648
S 1.955.653
$
752.946
S 601]64 S (1253513)
S 804000
Reserve Allbcalibns
Capital ProjecueSpeclal Projects
800.000
Tow Budgeted Use orReserves
$
$
$
0% S
S
S
0 ° e
S 800.000
ear Burnie. ur(0e)nt Reserves
$ 2.468.142
S 1217,648
S 1.955.653
O °: S
752,946
S 601.764 S (1253513)
0
S
11
Guide to Presentation:
Each of the following groups of financial summaries present data by governmental fund type. These funds are Special Revenue Funds,
Capital Projects Funds, Internal Service Funds, and Redevelopment Agency Funds. In each of the following projections similar forma[ is
presented. The fund information starts with beginning fund balances and adds current year revenues and subtracts current year
expenditures which give the endingfund balance. Budgeted amounts are also providedfor revenues and expenditures, these are useful for
comparing actual amounts received or spent to date versus budgeted for PY 2011112.
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 Community Development Block
Grant 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
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
2nd Quarter Ending Fund Balance
Capital Projects Funds - Capital Projects Funds are utilized to account for resources used for acquisition and
construction of capital facilities by the Town. Funds included in this category are the GFAR Fund (General Fund
Appropriated Reserve), Traffic Mitigation Fees Fund, Grant Funded CIF's Fund, Storm Drains Fund, Utility
Undergrounding Fund, and the Gas Tax Fund. Capital Project Funds are tracking in accordance with the FY
2011/12 adopted budget. Staff is recommending no changes at this time.
CDBG
Grants
Non Point
Source
/.IDs
(82,032)
58,143
111,511
223,094
135,000
40,200
2,993
-
397
222,031
135,900
37,100
97
55,229
7,903
(79,136)
2,914
104,005
Capital Project Funds
Budget to Actuals Comparisons
Beginning Fund Balance
GFAR Traffic Grant Fund Storm Utility Gas
Fund Mitigation CIP's Drains Undergd Tax
13,416,625 4,129,135 35,827 866,456 2,385,666 73,264
9,884,475 2,526,536
676,314 -
19,988,103 2,526,536
5,997,069 76,204
1,752,862 102,540 51,010 843,310
- 118,863 27,755 429,512
1,751,752 285,000 - 756,000
3,556 - 4,707 -
Budgeted Revenues
Actual Revenues - 2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
2nd Quarter Ending Fund Balance
8,095,870 4,052,932
32,271 985,319 2,408,714 502,776
While this is not the case for the current year, occasionally the Grant Funded CIP Fund displays a deficit balance.
This is because Town dollars are expensed first before receiving reimbursement from the State of California or
other granting agencies. This process eventually results with the fund "breaking even" or a zero fund balance.
12
Internal Service Funds - Internal Service Funds are used to finance and account for special activities and services
performed 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 Information Systems Fund, Vehicle Maintenance Fund, and the Building
Maintenance Fund.
Internal Service Funds
Budget to Acluals Comparisons
2nd Quarter Ending Fund Balance 3,086,112 2,663,925 1,763,227 238,534 2,345,595 515,398 969,458
Internal Service Funds are tracking in accordance with the FY 2011/12 Adopted Budget, although expenditures in
Workers' Compensation and the Self- Insurance Liability Funds are trending slightly higher than average due to
adjustments in insurance premiums and claim activity. 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.
Trust and Agency Funds - Town Trust and Agency Funds have fund balances as of July 1, 2010 of $324,857 for
Parking District #88 and $1.6 million in the Library Trust Funds. No budget revisions are contemplated at this time
for these funds.
Successor Agency to the Fornfer Los Gatos Redevelopment Agency - The Successor Agency's FY 2011/12 and
FY 2011 -2016 Capital Improvement Plan adopted budgets are incorporated into the Successor Agency's financial
statements and year -to -date actuals which are presented below. Revenue and expenses are tracking in accordance
with the adopted budget, with the exception of the Low/Moderate Housing Fund. The deficit shown in the
Low/Moderate Housing Fund is due to a timing issue as the tax increment revenue was not received in January
2012. The bulk of the expenditures are the remaining obligations associated with the Public Improvement Grant
and Cooperation Agreement.
Redevelopment Agency Funds
Budget to Actuals Comparisons
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
Capital Debt Law/Mod Total
Projects Service Housing RDAFunds
1,262,758 1,454,311 - 2,717,069
660,000 8,810,055
354,286 4,520,937
1,666,032 11,136,087
656,184 5,531,407
754,232 8,849,535
530,100 4,204,650
406,091 10,009,858
727,135 5,461,885
2nd Quarter Ending Fund Balance 1,086,944 1,770,598 (70,951) 2,786,591
13
Equipment
workers
Self
Office
Mmgt Info
Vehicle
Building
Replacemt
Comp
Insurance
Stores
Systems
blaint
Maint
Beginning Fund Balance
3,093,890
2,809,884
2,066,068
245,645
2,265,502
438,816
853,445
Budgeted Revenues
319,819
687,085
532,958
118,500
1,001,546
540,100
1,050,300
Actual Revenues -2nd Qtr
159,910
350,153
266,610
48,154
453,612
267,775
552,748
Budgeted Expenditures
417,893
623,097
625,224
134,050
1,056,207
536,200
1,142,733
Total Actual Expenditures - 2nd Qtr
167,687
496,112
569,451
55,265
373,519
191,193
436,735
2nd Quarter Ending Fund Balance 3,086,112 2,663,925 1,763,227 238,534 2,345,595 515,398 969,458
Internal Service Funds are tracking in accordance with the FY 2011/12 Adopted Budget, although expenditures in
Workers' Compensation and the Self- Insurance Liability Funds are trending slightly higher than average due to
adjustments in insurance premiums and claim activity. 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.
Trust and Agency Funds - Town Trust and Agency Funds have fund balances as of July 1, 2010 of $324,857 for
Parking District #88 and $1.6 million in the Library Trust Funds. No budget revisions are contemplated at this time
for these funds.
Successor Agency to the Fornfer Los Gatos Redevelopment Agency - The Successor Agency's FY 2011/12 and
FY 2011 -2016 Capital Improvement Plan adopted budgets are incorporated into the Successor Agency's financial
statements and year -to -date actuals which are presented below. Revenue and expenses are tracking in accordance
with the adopted budget, with the exception of the Low/Moderate Housing Fund. The deficit shown in the
Low/Moderate Housing Fund is due to a timing issue as the tax increment revenue was not received in January
2012. The bulk of the expenditures are the remaining obligations associated with the Public Improvement Grant
and Cooperation Agreement.
Redevelopment Agency Funds
Budget to Actuals Comparisons
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
Capital Debt Law/Mod Total
Projects Service Housing RDAFunds
1,262,758 1,454,311 - 2,717,069
660,000 8,810,055
354,286 4,520,937
1,666,032 11,136,087
656,184 5,531,407
754,232 8,849,535
530,100 4,204,650
406,091 10,009,858
727,135 5,461,885
2nd Quarter Ending Fund Balance 1,086,944 1,770,598 (70,951) 2,786,591
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On June 28, 2011, the Governor signed ABxl 26 and ABxl 27 into law. ABxl 26 (the "Dissolution Act ") proposed
to eliminate redevelopment agencies as of October 1, 2011, and essentially restricted redevelopment agencies from
entering into new agreements, borrowing or lending funds, or acquiring or disposing of real property prior to
dissolution. ABxl 27 (the "Voluntary Program Act ") would have allowed redevelopment agencies to remain in j
existence and be exempt from ABx1 26 if certain "voluntary" payments were made to the State in FY 2012 and in
each fiscal year thereafter. This legislation was later challenged and considered by the California Supreme Court.
On December 29, 2011, the California Supreme Court issued its decision in the California Redevelopment
Association v. Matosantos case, finding the ABxl 26 Dissolution Act constitutional and the ABxl 27 ("Alternative
Redevelopment Program Act ") unconstitutional.
Effective February 1, 2012, all California redevelopment agencies ( "RDAs ") were dissolved and their assets and
functions have been transferred to successor agencies and housing functions successors, to "wind - down" the
activities of the former RDAs. The Town elected and has been designated to serve as the "Successor Agency" to
the former Los Gatos Redevelopment Agency. The Town has also elected to retain and accept specified affordable
housing assets, obligations, and housing functions of the former Redevelopment Agency and will serve as the
"Housing Functions Successor."
While the implementation associated with the legislation is evolving, staff and legal counsel continue to work
closely with the California Redevelopment Association (CRA), League of California Cities, California Society of
Municipal Finance Officers (CSMFO), and other legal entities to understand and monitor the current and future
impacts of the dissolution of the Town's Redevelopment Agency.
CONCLUSION
The financial results from the prior fiscal year and data collected through the second quarter of FY 2011 /12 are
stable in light of the reduction in sales tax revenue. The Five -Year Financial Plan continues to project challenging
revenue shortfalls, requiring a continued examination of revenue and expenditure activity and need to explore
options to enhance revenue to support current and future operating and capital needs. Equally important is to
ensure that the Town's current limited resources are allocated to meet the priority service needs of the community.
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