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5N N OF X08 sates COUNCIL AGENDA REPORT DATE: December 9, 2013 TO: MAYOR AND TOWN COUNCIL FROM: GREG LARSON, TOWN MANAGER MEETING DATE: 12/16/13 ITEM NO: SUBJECT: FISCAL YEAR 2013/14 FIRST QUARTER BUDGET PERFORMANCE AND STATUS REPORT FOR THE PERIOD JULY 1 2013 - SEPTEMBER 30 2013 ACCEPT 2013/14 FIRST QUARTER BUDGET PERFORMANCE STATUS REPORT RECOMMENDATION: Accept Fiscal Year 2013/14 First Quarter Budget Performance and Status Report PURPOSE: This report has two primary goals. First, the report informs the Town Council on the status of the Town's Fiscal Year 2013/14 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, 2013. BACKGROUND: The attached Quarterly Budget Report covers the first three months of the fiscal year beginning July 1, 2013 and ending September 30, 2013. The report presents analysis and recommendations related to key General Fund revenues by category and expenditures by fund. 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. PREPARED BY: Stephen D. Finance and NAFINANCE \Qtrly Financial Reports \FY 2014 \lst Quarter\2013 -14 I vices Director Memo for Council doc.doc Reviewed by: _Assistant Town Manager(( _Town Attorney z�Fmance PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: FISCAL YEAR 2013/14 FIRST QUARTER BUDGET PERFORMANCE AND STATUS REPORT FOR THE PERIOD JULY 1, 2013 - SEPTEMBER 30, 2013. December 2, 2013 DISCUSSION: The attached first quarter budget report includes a recap (prior to final audit) of last year's General Fund fiscal results. Year end results were sufficient to find approximately $350k in one- time compensation adjustments for non -sworn employees, including rescission of the FY 2013 /14 furlough. Per Town policy, the remaining balance of $1.9 in will be placed for future use subject to Council determination during the budget process. An analysis of FY 2013/14 General Fund revenue confirms that the Town is tracking well against budgeted revenues for the first quarter. Key economic revenues such as sales tax, property tax, franchise fees, business license tax and transient occupancy tax have all experienced slight increases from prior year first quarter results. However, it should be noted interest is trending below that of the prior fiscal year's first quarter results. The Town is still facing a challenging economic climate and will continue to identify opportunities to enhance revenues and reduce expenditures. In addition, during last fiscal year midyear budget review, the Town increased anticipated Police overtime by $200,000 due to the Kumra homicide response and investigation. Simultaneously, the Town increased budget revenues by $200,000 based on a request for funding from the City of Monte Sereno. The City of Monte Sereno will be considering this request on Tuesday January 14, 2013. CONCLUSION: Based on the preliminary first quarter data that is available and results from the prior fiscal year the continued conservative fiscal planning and efforts to sustain the Town economically sensitive revenues appear to be obtaining positive results. While the long -range outlook for the Town indicates a more positive fiscal year ahead, staff will continue to examine revenue and expenditure activity and work to identify opportunities to enhance revenue to support current and future operating capital and service needs. FORMAT 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 2013/14 financial outlook and a summary of the performance of the Town's primary General Fund revenue sources. ENVIRONMENTAL ASSESSMENT: This budget report is not a project defined under CEQA, and no further action is required. PAGE 3 MAYOR AND TOWN COUNCIL SUBJECT: FISCAL YEAR 2013/14 FIRST QUARTER BUDGET PERFORMANCE AND STATUS REPORT FOR THE PERIOD JULY 1, 2013 - SEPTEMBER 30, 2013. December 2, 2013 FISCAL IMPACT: The attached First Quarter Budget Performance Report provides an overview of the first quarter budget performance. Attachment: Budget Performance Report for the Three Months Ended September 30, 2013 THIS PAGE INTENTIONALLY LEFT BLANK BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 rOS s�� INTRODUCTION Purpose With respect to revenues: The Town regularly monitors and adjusts its year -end revenue This is the first quarterly budget performance report projections based on revenue performance and for the Fiscal Year 2013/14, for the three month other developments that may affect Town revenues in order to develop a more accurate picture of the period ending September 30, 2013. The purpose of Town's anticipated year -end financial position. this quarterly public reporting is twofold. First, it ensures that the Town is consistently monitoring its revenues and expenditures so that it can proactively respond to unanticipated changes or emerging trends. Second, and equally important, these reports increase the transparency of the Town's finances. The Town is ultimately accountable to its residents to use the revenue it brings in efficiently and effectively to provide the highest quality services, and quarterly public reporting provides taxpayers with information that demonstrates the Town is meeting this standard. Content This quarterly report presents an overview of the Town's operating revenues and expenditures for the quarter ending September 30, 2013, as compared to previous years, and explains any notable aberrations or trends in these numbers. This report also provides information on any recommended budget adjustments. Timeframe and Limitations The information in this report is the most accurate and up -to -date information available at the time of publication. However, this report is not an audited financial statement and the numbers provided herein are preliminary and subject to change as the year progresses. No data on revenues and expenditures is final until the Town has completed its annual comprehensive audit and finalized its Consolidated Annual Financial Report (CAFR), which is released in the winter of each year for the prior fiscal year. With respect to expenditures: The expenditure information in this report is extracted directly from the Town's financial management system, and adjustments are made to account for certain known payments, reimbursements, or transfers between Town departments and funds that have not yet been processed in the system at the time of publication. It represents a snapshot of Town expenditures at a certain point in time and does not reflect final adjustments made to prepare the Town's CAFR. Table of Contents Introduction................................. ..............................1 Executive Summary ..................... ..............................2 Status of FY 2013/14 Adopted Budget ........2 Prior Fiscal Year Closing Results ..................2 General Fund Reserve Status .......................2 Greater Economic Outlook ............................3 State Budget Update ........ ..............................3 General Fund — Key Revenue Analysis .....................4 Sales Tax .... ............. ..............................5 Property Tax ............... ..............................6 Franchise Fees ................ ..............................7 Business License Tax ..... ..............................8 Transient Occupancy Tax .............................9 Charges for Services ..... .............................10 Licenses & Permits .......... .............................11 Interest Income ............. .............................12 Financial Summaries and Projections ......................13 General Fund ................ .............................13 Special Revenue Fund ... .............................14 Capital projects Funds .... .............................14 Internal Service Funds .... .............................15 Trust and Agency Funds . .............................15 Conclusion .............................17 wailo BUDGET PERFORMANCE REPORT -1ST QUARTER FY 2013/14 EXECUTIVE SUMMARY Status of FY 2013/14 Adopted Budget First quarter revenue trends are higher when compared to the first quarter of Fiscal Year 2012/13. Licenses & Permit and Charges for Services revenues increased when compared to the prior year's first quarter results, because of the timing of one -time development projects. Other economically sensitive revenues such sales tax, property tax as franchise fees and transient occupancy tax show slight growth; while others, such as interest have declined. General Fund expenditure totals for the first quarter are trending favorably, with total operational expenditures at the end of the first quarter at about 22% of budget. With only three months of data available, however, it is difficult to predict revenues and expenditures for the remainder of the year. In light of this, staff continues to be cautiously optimistic while monitoring fiscal developments very closely. Prior Fiscal Year Closing Results The Fiscal Year 2012/13 closing financial results affirm the positive effects of the Town's budgetary actions taken in response to the continuing flat revenue growth and prior downturns in key operating revenues. In developing the 2013/14 budget, Town Council approved a combination of budgetary initiatives that held the line of service levels and also structurally reorganized positions and departments. This strategy, coupled with ongoing Town -wide expenditure reductions, generated a favorable General Fund closing balance of approximately $1.9 million of available revenues over expenditures , before special items, at fiscal year -end, June 30, 2013. In addition, year end results were sufficient to find approximately $350k in one- time compensation adjustments for non -sworn employees, including rescession of the FY 2013/14 furlough. General Fund Reserve Status - 6/30/12 General Fund reserves are classified into two categories — Restricted and Designated. Restricted reserves are those which are restricted in use by accounting standards or legal agreements and are not considered as available for use for another purpose. Designated reserves are established by Council Policy for an intended purpose. With the dissolution of the RDA the Town no longer has restricted reserves. General Fund Reserves closed at a balance of approximately $25.9 million at June 30, 2012 in designated reserves which is in accordance with Town financial policies and operating and capital budget requirements, and includes a $4.2 million dollar Economic Uncertainty. Designated General Fund Reserves Amount (Millions) unappropriated 5 0 Designated for Budget Stablization Reserve 6.7 Designated for Economic Uncertainty 4.1 Designated for Capital and Special Projects 11.4 Designated forVasona Land Sale 0.4 Designated for Open Space 0.5 Designated for Y/E Carryover PO's 0 Designated for Y/E Savings Budget Adj. 1 Designated for Retiree Medical Acturia1 0.4 Designated for Special studies /Incentives 0.5 Designated for Sustanability Reserve 0.1 Designated for Manager's Contingency and Productivity 0.1 Total Deisgnated General Fund Reserves 15.9 The reserve for Capital and Special Projects, funded from annual available General Fund budget savings, serves as the primary source for replenishment to the Town's Capital Improvement Fund (GFAR). As such, it represents a limited 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 Budget Stabilization Reserve was established to serve as a transitional "bridge' funding source to BUDGET PERFORMANCE REPORT -1ST QUARTER FY 2013/14 mitigate or smooth out cyclical ups and downs in locally generated revenues due to fluctuations in the local economy or "one- time" revenue losses where the revenue base is likely to be restored in the near future. These funds are referred to as Designated General Fund reserves since these are established by Council policy for their intended purpose. The availability of approximately $25.9 million in Designated General Fund reserves provides the Town with resources to manage through current and /or future fiscal challenges and opportunities. Greater Economic Outlook The Congressional Budget Office (CBO) expects the economic recovery to continue at a modest pace for the remainder of the calendar year, with real (inflation- adjusted) GDP growing at an annual rate of about 1.4% in this year. The national unemployment rate is expected to remain above 7.5 %through next year, with 2014 being the 6`h consecutive year with unemployment exceeding 7.5% of the labor force. The CBO also estimates that the rate of inflation is estimated to decline to 1.3% this year, compared with 1.5 %in 2012. If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $845 billion, or 5.3 % of gross domestic products, its smallest size since 2008. Current law leaves many key budget issues unresolved, and this year, lawmakers were facing three significant budgetary deadlines • Automatic reductions in spending are scheduled to be implemented. • The continuing resolution that currently provides operational funding for much of the government will expire • The statutory limit on federal debt, temporarily removed, will take effect again In addition, lawmakers still face the longer -term budget issues posed by the large current and projected federal debt and the implementation of rising health care costs and the aging population. On a more positive note, the Commerce Department reported that home construction rose 11% since last year. In addition, national sales of new homes were up nearly 12.6% in August compared to the same month last year. State Budget Update Many of the same economic rebounds experienced by the nation as a whole are holding true for the State. Although the State's unemployment rate is the sixth highest in the nation, it continues to show improvement in recent months with the latest data showing a rate of 8.7% in October. Based on current laws and the State economic forecast, expenditures are projected to grow less rapidly than revenues resulting in a $1 billion surplus in 2014/15. Furthermore, recent press articles are noting that Silicon Valley's unemployment rate is lower than the statewide average. Better job growth was largely the result of recent improvements in sectors that were hit hardest by the recession and have only recently started to turn around. A rebound in travel and tourism has lifted leisure and hospitality employment. Rebounding real estate markets helped construction and financial activities sectors. The Town's real estate values remain strong and show positive growth for the short term. BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 GENERAL FUND - KEY REVENUE ANALYSIS The following discussion provides a status of significant General Fund revenue sources as of the first quarter, ending September 30, 2013. Staff monitors each revenue source closely and may recommend certain revenue adjustments based on revenue actuals or state budget action. 4 BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 Sales Tax Sales tax is the largest revenue source for the Town's General Fund, accounting for 23.1% of budgeted General Fund revenues for FY 2013/14. The Town receives 1 cent for every 8.75 cents of sales tax paid per dollar on retail sales and taxable services transacted within Los Gatos. Since the implementation of the mechanism commonly known as the "triple flip;' the State Board of Equalization 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 revenue. 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 — First quarter receipts are trending ahead at those in the same period in the past fiscal year The most recent Sales Tax and Economic Review update from Muni Services, the Town's sales tax analysis consultant, states that while sales tax receipts statewide grew by 6.6 %, Town of Los Gatos Sales Tax revenues are down by 2.2 %, mostly from the continuing decline due to the Netflix change in business model. It should be noted that the Town anticipated these impacts to continue, albeit at a slower pace, in the future and budgeted revenues at 5% less than FY 2012/13. $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 RE Quarterly and Annual Revenues 5 -Year History FY 09/10 FY 10 /11 FY 11/12 FY 12/13 FY 13/14 1st Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Budgeted Revenues 1st Quarter Percent of Total Olaf Qtab Ac Wel xre�� O Fiscal Y� Total Acml Rcvcu,es ®Fiscal Ym Budget ]te.eosa FY 09/10 FY 10 /11 FY 11/12 FY 12/13 FY 13/14 $1,672,973 $1,582,344 $1,184,526 $ 601,716 $ 1,243,903 $8,317,217 $9,971,409 $9,889,100 $ 8,757,428 $ 7,797,615 20.11% 15.87.0/0 11.98% 6.87% 15.95% Recommended Budget Revision No Change As indicated in the graph below, this reduction is primarily due to the local effect of Netfli 1s change in its business model. As depicted in the graph there is a significant decrease in the sales tax revenue in the general retail category. However, it should be noted that sales tax revenue has increased at least slightly in the food products and transportation when compared to same quarter results from the prior fiscal year. BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 Sales Tax By Major Business Group $900,000 $800,000 I- $700,000 $600,000 -- $500,000 - - -- $400,000 $300,000 _ —_ • 1st Qtr 2012 $200,000 1st Qtr 2013 $100,000 o 1,001, �aceQ ey o t 5 Sic Staff will continue to monitor these revenues through the mid -year to determine if a budget adjustment will be recommended at that time. 6 tow x of BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013114 Property Tax Property tax is the second largest revenue source for the Town's General Fund, accounting for 23% of budgeted General Fund revenues in FY 2013/14. 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 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. First quarter receipts are 61% up when compared to the first quarter of the previous fiscal year. Property tax budget projections are based on valuations projected by the Santa Clara County Assessor's Office, given increased home sales, coupled with anticipated adjustments in property tax distribution due to the dissolution of California redevelopment agencies. Property tax revenue for FY 2013/14 was budgeted slightly higher than previous year's actual revenues based on these facts and projected CPI rate. Staff will continue to monitor these revenues through the mid -year to determine if a budget adjustment will be recommended at that time. $10,000,000 $8,000,000 $6,000,000 $4,000.000 $2,000,000 Quarterly and Annual Revenues 5 -Year History FY 09/10 FY 10/11 FY 11/12 FY 12/13 FY 13/14 1st Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Budgeted Revenues 1st Quarter Percent of Total FY 09/10 FY 10 /11 $ 65,628 $ 57,225 $ 9,775,954 $ 9,597,378 0.67% 0.600/. B19 Q®MA.0 Rw—m Re�m,rs aFiu YmBWs WRmmm FY 11/12 FY 12/13 $ 77,619 $ 76,842 $ 9,864,539 $ 9,672,235 0.79% 0.79% FY 13/14 $ 123,394 $ 10,190,806 1.21% Recommended Budget Revision No Chanee 7 __ BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 Franchise Fees 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, PG &E for gas and electric services, West Valley Collection and Recycling for solid waste collection services, and AT &T and Comcast for video services. Franchise fees represent 6% of budgeted General Fund revenues in FY 2013/14. Analysis — Historically, franchise payments are not remitted equally throughout the fiscal year; therefore first quarter receipts are not necessarily predictive. Total franchise fee revenues are trending approximately 2% below first quarter in FY 2012/13. Staff will continue to monitor trending of this revenue source but no budget adjustment is recommended at this time. $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 Quarterly and Annual Revenues 5 -Year History FY 09/10 FY 10 /lI FY I I/12 FY 12/13 FY 1.3/14 Clgt Q,r�v ACNd RLYCNC9 OFi dyer Toml Aceal R�vewes ®FSCd YQ To I Butkcl j Bcvc,ucs FY 09110 FY 10/11 FY 11/12 FY 12/13 FY 13/14 Ist Quarter Actual Revenues $ 198,499 $ 224,256 $ 245,533 $ 251.349 $ 247.426 Fiscal Year Total Actual Revenues $ 1,699,840 $ 1,901,605 $ 1,952,488 $ 2,028,903 Fiscal Year Total Budgeted Revenues $2,040,030 FY2010 11 ]forward reflects revenue adjustments due to changes in the Garbage Franchise Agreement 1st Quarter Revenue Percent of Total 11.68% 11.79% 12.58% 12.39% 12.13% Recommended Budget Revision No Change 8 10wh F BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 �ossF,os Business License Tax 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 25% of annual business licenses, while the remaining 75% are flat fee business. Annual renewal payments are due on January 2 of each year. Payments for new flat- fee -based businesses are pro -rated by quarter. Analysis — As a result of the projected increase in economic activity, business license tax revenue for the current fiscal year was budgeted at approximately 6% higher than prior year actuals. Current year first quarter revenues are trending 17% higher than with those of the previous year. It should be noted that a key factor in these figures is that first quarter payments are primarily made up of adjustments to businesses' gross receipts for 2012, a year in which many businesses started to experience small growth. However, annual business license tax renewal revenue is primarily received in the second and third quarter of each year; therefore, first quarter performance is not necessarily predictive. Staff will continue its auditing efforts this year to bring past due accounts current and work with business to collect fees. 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 Quarterly and Annual Revenues 5 -Year History FY 09/10 FY 10 /11 FY 11/12 FY 17/13 FY 13/14 1st Quarter Actual Revenues Fiscal Year Total Actual Revenues $ Fiscal Year Total Budgeted Revenues 1st Quarter Revenue Percent of Total FY09 /10 FY 10 /11 FY 11/12 74,890 1,220,802 6.13% 69,782 43,969 $ 1,136,511 $ 1,077,620 $ 6.14% 4.08% M 1st Quarter Aaual RN®uP OFitcal Ycar Toml Actu R�vmu6 EF&al Ycar ToW Budgeted Revenues FY 12/13 FY 13/14 44,393 52,124 1,151,579 $ 1,361,510 3.85% 3.83% Recommended Budget Revision No Change 9 ~wxoF BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 !p S +�ASp4 Transient Occupancy Tax 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 $106.4 billion in 2012, a 4.5% increase from 2011 spending, as both State and national travel industries are recovering from the recession. The forecast for California visitation in 2013 is for modest growth, increasing 2.6% in 2014 and 2.7% in 2015. First quarter TOT revenues are trending 25 % higher than the first quarter of 2012/13. Personal and business related travel is gaining strength. Staff will continue to monitor this funding source closely to assess the need for future budget adjustments. $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 Quarterly and Annual Revenues 5 -Year History FY09 /10 FY 10 /11 FY 11/12 FY 12/13 FY 13/14 Ist Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Total Budgeted Revenues 1st Quarter Revenue Percent of Total 0 tst Qu Mr Aauil Re mues OFiscel Ycar Tom] Actu Rmmu6 aFi al Year Tote) Rudgaw Rwmua FY09 /10 FY 10/11 FY 11/12 FY 12/13 $ 99,179 $ 107,453 $ 131,567 $ 135,452 $ 923,783 $ 1,004,659 $ 1,174,485 $ 1,295,887 FY 13/14 $ 169,632 $ 1,015,000 10.74% 10.70% 1.1.200/a 10.45% 16.71% Recommended Budget Revision No Change 10 tow �� of BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 Charges for Services Town Service revenues consist primarily of planning, building, inspections, and engineering fees assessed on local building and development activity. Development fees and charges are assessed based on recovery formulas, which reflect approximate costs of providing these regulatory services. FY 13/14 Charges for Service were budgeted at 15% less than FY 12/13 because of the loss of redevelopment reimbursement for administrative and housing support. Analysis — First quarter Town service revenues, specifically Charges for Services, are trending well ahead of first quarter results from the previous fiscal year, with an increase of 33%. The increase is largely the result of an increase in building activity and development. Staff will continue to monitor this revenue source, however, no budget revisions are recommended at this time. $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 Quartedy and Annual Revenues 5 -Year History FY09 /10 FY 10 /11 FY 11/12 FY 12/13 FY 13/14 1 st Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Total Budgeted Revenues 1st Quarter Revenue Percent of Total FY 09/10 FY 10 /11 $ 938,223 $ 815,237 $ 4,055,322 $ 3,570,110 23.14% 22.84% 01st Q—m Acid R.— 0FXMY =Tn And Rn = RFms Y= To eu*p R.— FY 11/12 FY 12/13 FY 13/14 $ 907,005 $ 1,153,201 $ 1,535,531 $ 3,879,826 $ 4,712,570 $ 1,535,531 23.38% 24.47% 100.00% Recommended Budget Revision No Channe 11 �pWN f tas s'�1 s BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 Licenses and Permits Licenses and permits consist mainly of Building Permit fees which are collected by the Town to offset administrative costs associated with overseeing the proper licensing aspects of development. Licenses and Permit revenue was budgeted slightly more than in FY12/13 in anticipation increased development activity. Analysis — First quarter License and Permit revenue is trending well ahead of first quarter results from the previous fiscal year, with an increase of 34 %. The growth is mainly due to one -time development projects planned in 2013/14. Staff will continue to monitor this revenue source, however, no budget revisions are recommended at this time. $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 Quarterly and Annual Revenues 5 -Year History FY 09/10 FY 10/11 FY 11/12 FY 12/13 FY 13/14 1 st Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Total Budgeted Revenues 1st Quarter Revenue Percent of Total 0191 Q�A "Rcvcmca OF.9 Y. Tagil kW fl Revewes WV.J Y. Rml 84 w R�vc,uca FY 09/10 FY 10/11 FY I1 /12 FY 12/13 FY 13/14 $ 428,946 $ 583,524 $ 550,905 $ 837,937 $1,143,264 $ 1,756,397 $ 1,831,308 $ 1,831,308 $ 2,643,899 $2,214,300 24.42% 31.86% 30.08% 31.69% 51.63% Recommended Budget Revision No Change 12 10WM ,F BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 Interest Income 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 — First quarter receipts are trending below those in the same period in the prior fiscal year. Financial indicators throughout the market are mixed. For example, from September 2012 to September 2013 the LAIF yield increased from 0.11% to 0.26 %; however the three -month Treasury decreased from 0.11% to 0.01 %, the six- month Treasury decreased from 0.14% to 0.04 %, and the five -year Treasury increased from 0.65% to 1.41 %. The strategy for the foreseeable future continues to be to remain fairly short -term and to invest in callable agency bonds in order to attempt to pick up a few basis points over non - callable agencies and treasuries. Treasuries are being added into the mix of investments to attempt to keep the portfolio somewhat balanced, even though this has the effect of lowering the overall rate of return. The Town also attempts to find good solid corporate bonds when possible. There are no recommended changes to this revenue source. $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 Quarterly and Annual Revenues 5 -Year History FY 09/10 FY 10/11 FY 11/12 FY 12/13 FY 13/14 ®1st Quarter Actual Rwmues OFiscal Ycar Rcvcnucs ■Fiscal Ycar TMI BudgdW Rana. 13 FY 09/10 FY 10 /11 FY 11/12 FY 12/13 FY 13/14 1st Quarter Actual Revenues $ 259,807 $ 205,707 $ 183,979 $ 111,401 $ 86,094 Fiscal Year Revenues $ 1,627,727 $ 904,474 $ 606,454 $ 386,919 Fiscal Year Total Budgeted Revenues $ 577,970 1st Quarter Revenue Percent of Total 16.0° /a 22.7% 30.3% 28.8% 14.9% Recommended Budget Revision No Chance 13 BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 !138 ,Alps FINANCIAL SUMMARIES, PROJECTIONS AND RECOMMENDATIONS General Fund The following table is the Schedule of General Fund Operating Revenues. Vs. Operating Expenditures for the first quarter of FY 2012/13, which includes comparison information from the prior year. In the last column are projections of final balances for the current fiscal year based upon the early trends observed through the first quarter. Town of Loa Gatos SehedWe of General Food Operation Revenues vs. Opernthln ExpendiM1rres Forthe period ended Sephaedlaer 30, 2013 9beofO ecreo ...I Dawmed Ca F.i: Uae offteserves- GphalPmjats 1M2113 M2/13 FV12/13 M2113 M3114 M3114 M3114 M3114 M3114 Use ofRese - Special Studice now Aymled Is4Q % Adopted ANasnd frt()rr % Mo.-. VmonalendsaleReaervc Bsluaee Bad'. Actual, VID Budget eudno A.0, VFD ProJeedou R<w 490,000 43,782 132,899 137,899 Gevml6Pmppty Tax $ 2,2343746 S 9,848,064 S 26,842 1% S 2,266,806 S 7,7*Q 5 123,395 2% S 8,148,951 Pmp TaxG Tax BrG 15129) 15,790 15,290 16,030 16,030 13,068 82% 16,30 Sales &Use Tax 8,252,428 7,44 ?856 W1,216 8% 2,292,615 2,29),615 1,243,903 16% &03,.00, Francs.. Fees 2,028,903 2,00 %940 251j49 13% ?010,030 ?0401030 2A 7,426 12% 2052,102 T....,O .Tex 1,295,887 I,000,WO 65A7 7% 1,015,000 1,015,000 169,632 ITh I'mono Busmeaa Doen,e TSx 11151,979 1,285,510 0,393 3% 1,361,510 1,361,510 52,1731 4% 1,20'000 Iiceoses&Prank, 2,643,893 2,2Wa55 832,932 38% ?214,302 2,214,300 1,143,264 52% 2,323,125 MolorVehicle In lieu 2,437,489 2,400,000 - M 242,000 2,424,000 - 0% 2,424,000 ha"aOvemmentel 858,862 252,504 53,020 2% M'655 Mass 159,830 22% 240,25 Ch.'. 16, 5wbea 4j31,249 4,238,540 1,153,201 22% 3,528,428 3,5)8428 1,535,531 43% 3,592,251 Fin. &F.ffeft , 688,110 638,809 54,399 9% 73 ?520 732,520 121,105 1376 3770,120 Inle¢,t 386,919 421,656 111,401 26% 522,920 522,9ID sa,m 15% MQIXr2 Q SS NVertnml m mars. peraudh (549,990) - - 36,619,09 S 8,015,579 (1001000) (100,000) - 19892U 51,839 M.ccUrneous /(hhm 3438,371 2,873,460 240,940 8% 2,816,905 2,816,905 2,310,062 82% ;816,365 F..dT -fv. 546,793 516,920 21,934 4% 261,920 761,920 12,612 $ 4,193,351 S 246,920 Toml Rewau.. 35^552 33,654,304 3,528,209 10% 33,26,739 33,226,739 7,22205(1 21% ],431,432 9beofO ecreo ...I Ca F.i: Uae offteserves- GphalPmjats )0'000 700,000 2,754,401 2,254,401 2.751,401 Use ofRese - Special Studice - VmonalendsaleReaervc 1,234,no 1,200,000 - V Savings/Budget Aalcadmcnt 490,000 43,782 132,899 137,899 PFRSWbbey A. Unr 300,000 - Ten10t6erVUUAn85au- 1,934,230 2,693,100 2798,183 2,892,30 - 2,892300 Taml Rewouee pue Reeerw. 3 37,401,282 S 36.34,304 5 3,528,209 S 36.524,922 S 36.619,039 3 7123,050 _ S 37,323,37 ExpeoAl.... l od.."eH but uo eucumbranme) Moyot &Councal 185,084 211,516 43,347 20% 201,104 199,537 39484 20% 19),00) Anomey 207,745 225,451 43,170 19% 230,327 227,027 46,995 21% 225,138 Ad -oadve rives 2,664,269 2,874,922 580,016 2f N/ 2,814,031 2,))5,124 516,509 19% ?752,131 Noo- Depll.( Cml Cnvemment 7,004,594 7%23,456 1,225,315 17% 7,716,219 7,942179 2274,019 19% 7,876,092 feow Developmanl 4y5,832 3,935,966 747,050 19% 3,940,380 3,935,487 713,805 18% 31932740 Policc 13,403,435 13,28,877 2,750,855 20% 13,492115 13,487,359 28,328 1036 13,375,131 Pedo &Public Wo& 5,565,529 5,813,969 1,251,693 22% 5,899,429 5,839,80 1,182684 204 5,791,209 Linty 2,055,069 2,174,308 507,431 13% 2231,3)7 2,212424 48),)55 22% 2194,014 Taml Oper.neg Rxp.uees S 35,411,558 $ 36.292465 S 2148.877 20% S 34524,922 S 36,619,09 S 8,015,579 372% S 36,314,331 Net Opmmlag Rewuaes Befaee S'd.a llemc 19892U 51,839 - 3620,658 0 0 - 792529 1,003,404 Sp,W ft-( Doe -Time ra.d Sule &11DA Dierolulluu) S 2,203,627 S - 3 - Net Surplur a,(U..W R,.eew. $ 4,193,351 S 51,839 (3620668) 3 - 6 - (192529) 1.009.404 The groups of financial summaries on the following pages present data by governmental fund type: Special Revenue Funds, Capital Project Funds, Internal Service Funds, and Trust and Agency Funds. For each, the fund information starts with a beginning fund balance, adds current year revenues, and subtracts current year expenditures, resulting in an ending fund balance. Adopted budget amounts are provided as a basis for comparison of actuals to date. it] BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 Special Revenue Fund Special Revenue Funds account for the proceeds derived from specific revenue sources that are legally restricted or assigned to special purposes. The Town's Special Revenue Funds are Community Development Block Grant Fund, Housing Conservation Program Fund, Urban Runoff Source Fund, and several Landscaping and Lighting District Funds. As indicated in the chart below, Non Point Source fund balance is negative. This is because the Town has not yet received a payment which is to be credited to this fund. It is anticipated that this payment will be received and updated during the mid -year budget report. Beginning Fund Balance (Pre- audit) Budgeted Revenues Total Actual Revenues -1st Qtr Budgeted Expenditures Total Actual Expenditures - 1st Qtr 1st Quarter Ending Fund Balance Capital Proiects Funds CDBG Grants Non Point Source LIDs 37,102 120,106 149,846 68,689 332,000 39,054 2,108 - _ 60,000 359,045 24,665 - 187,077 3,759 39,210 (66,971) 146,087 Capital Projects Funds account for resources used for the acquisition and construction of capital facilities by the Town. Funds in this category are the GFAR (General Fund Appropriated Reserve) Fund, Traffic Mitigation Fund, Grant Funded CIP Projects Fund, Utility Underground Fund, Gas Tax Fund, and three Storm Drain Funds. Capital Projects Funds are generally tracking in accordance with the FY 2013/14 adopted budget. Projects budgeted from Traffic Mitigation and Gas Tax sources are starting later this fiscal year. It is expected that Gas Tax expenditures would be high during the second and third quarters. Staff will continue to monitor these expenditures throughout the remainder of the year. Capital Project Funds Budget to Actuals Comparisons 1st Quarter Ending Fund Balance 5,411,942 2,389,756 (677,630) 1,141,542 2,541,817 324,041 15 GFAR Traffic Grant Fund Storm Utility Gas Fund Mitigation CIP's Drains Undergd Tax Beginning Fund Balance 6,613,127 2,399,546 (671,976) 1,110,841 2,519,548 169,346 Budgeted Revenues 3,633,746 1,596,266 2,020,958 105,120 45,000 833,290 Total Actual Revenues - 1st Qtr 164,594 - - 30,701 22,269 154,695 Budgeted Expenditures 7,906,703 1,449,564 1,596,266 - - 1,041,000 Total Actual Expenditures -1st Qtr 1,365,779 9,790 5,654 1st Quarter Ending Fund Balance 5,411,942 2,389,756 (677,630) 1,141,542 2,541,817 324,041 15 (*1 BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 Internal Service Funds Internal Service Funds finance and account for special activities and services performed by a designated Town department for other Town departments on a cost reimbursement basis. Included in this fund type are the Equipment Replacement Fund, Workers' Compensation Fund, ABAG Self Insurance Fund, Office Stores Fund, Management Information Systems Fund, Vehicle Maintenance Fund, and the Facilities Maintenance Fund. Internal Service Funds are generally tracking in accordance with the FY 2013/14 adopted budget, although expenditures in the Workers' Compensation and Self- Insurance Liability Funds are trending slightly higher due to adjustments in insurance premiums and claim activity. No revisions to adopted revenues or expenditures are required at this time. Internal Service Funds Budget to Actuals Comparisons Equipment Workers Self Office Mmgt Info Vehicle Building Replacemt Comp Insurance Stores Systems Maint. Maint. Beginning Fund Balance 3,260,532 2,246,914 1,352,034 159,213 2,495,698 608,566 1,258,328 Budgeted Revenues 473,929 655,549 503,815 117,000 1,023,191 528,600 1,222,014 Total Actual Revenues - ist Qtr 118,483 154 ,536 110,142 1,271 251,553 132,437 334,743 Budgeted Expenditures 603,720 764,422 699,926 143,150 1,171,234 531,091 1,790,518 Total Actual Expenditures -1st Qtr 2,352 239,992 607,363 16,197 161,203 85,440 180,438 tat Quarter Ending Fund Balance 3,376,663 29161,458 854,813 144,287 2,586,048 655,563 1,412,633 Trust and Agency Funds Town Trust and Agency Funds have fund balances as of July 1, 2013 of $224,156 for Parking District #88, $658320 for the Library Trust Funds and $3,852,331 for Successor Agency Trust. No budget revisions are contemplated at this time for these funds. Trust & Agency Funds Budget to Actuals Comparisons Beginning Fund Balance Budgeted Revenues Actual Revenues - 1st Qtr Budgeted Expenditures Total Actual Expenditures - 1st Qtr 1st Quarter Ending Fund Balance 16 Library Parking SA Trust District Trust 658,320 224,156 3,852,331 46,004 - 4,195,209 36,135 - 1,936,833 180,167 140,366 4,195,066 5,925 146,366 3,653,783 688,530 77,790 2,135,381 owN °,r BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2013/14 SOS ci,� s CONCLUSION The financial results from the prior fiscal year, coupled with the FY 2013/14 first quarter data, confirm the Town's continued conservative fiscal planning and efforts to sustain its economically sensitive revenues. This is especially important in light of the ongoing loss of Netflix sales tax revenue and other key sales tax projections. The long - range outlook for the Town indicates that revenues are moderately improving, with small excess revenues beyond expenditures forecast for the short term, potentially allowing the Town to plan for some small restoration of services versus planning for reductions. As the fiscal year progresses, staff will continue to closely monitor revenue and expenditure activity and work to identify opportunities to enhance revenue to support current and future operating capital needs. 17 THIS PAGE INTENTIONALLY LEFT BLANK