FY 2014/15 First Quarter Budget Performance & Status ReportMEETING DATE: 11/04/14
ITEM NO: r2
tos sF�os COUNCIL AGENDA REPORT
DATE: OCTOBER 28, 2014
TO: MAYOR AND TOWN COUNCIL
FROM: GREG LARSON, TOWN MANAGER
SUBJECT: FISCAL YEAR 2014/15 FIRST QUARTER BUDGET PERFORMANCE AND
STATUS REPORT FOR THE PERIOD JULY 1, 2014 - SEPTEMBER 30 2014
ACCEPT 2014/5 FIRST QUARTER BUDGET PERFORMANCE STATUS
REPORT
RECOMMENDATION:
Accept Fiscal Year 2014/15 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 2014/15 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, 2014.
BACKGROUND:
The attached Quarterly Budget Report covers the first three months of the fiscal year beginning
July 1, 2014 and ending September 30, 2014. The report presents analysis 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: ST Y
Finance an d A lstrative Services Director
Reviewed by: L g r Assistant Town Manager
Attorney
N:\AIGR\AdminWorkFilm\2014ComeiI ReportsWov 4\2014 -15 1Q Budget Memo for Council
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: FISCAL YEAR 2014/15 FIRST QUARTER BUDGET PERFORMANCE AND
STATUS REPORT FOR THE PERIOD JULY 1, 2014 - SEPTEMBER 30, 2014.
OCTOBER 28, 2014
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 $1.1 million
dollars in excess general fund monies. While these monies would have been added to reserves
per Town Policy, given special Council authority in June 2014 these excess monies were used to
pay down the Town's Pension side -fund liability of $4.5 million. The $4.5 million pay -off was
comprised of the $1.1 M in excess fund balance from higher revenues, $2 million from the
Budget Stabilization Reserve in excess of the Council Policy specified 12.5% reserve, and $1.4
million from the existing PERS reserve established during the Town's pension "Holiday" in the
late 1990's. As a result of paying -off this side fund, the Town has realized an employer pension
rate reduction of approximately 14% which is equivalent to FY 14/15 savings of approximately
$750,000. Forecasted savings resulting from this side fund pay -off are anticipated to increase up
to $900,000 over the following five years.
An analysis of FY 2013/14 General Fund revenue confirms that the Town is tracking ahead of
budgeted revenues for the first quarter when compared to prior years. Key economic revenues
such property tax, business license tax, Transient Occupancy Tax, Franchise Fees and charges
for services have all experienced slight increases from prior year first quarter results. It should
be noted that sales tax is currently trending lower than last year during the same period; however,
the Town is anticipating a positive true -up during the fiscal year. Overall, the Town, much like
the rest of the country, continues to show signs of economic growth and staff will continue to
identify opportunities to enhance revenues and reduce expenditures.
Expenditures are also tracking well below budgeted levels as is typical at this point in the fiscal
year, but cannot yet be relied on for projecting year end results since this report only covers the
first three months of the fiscal year.
No budget changes are recommended at this time, with the exception of a Police Department
restructuring described below which has no net impact on the Police Department budget.
Police Department Restructuring:
After a thorough evaluation of the Police Department's strategic direction, goals and objectives,
a cost neutral restructure of the department is proposed to increase oversight to advance the
mission and vision of the department while maintaining if not increasing the delivery of Patrol
services. This restructure focuses on increased performance and fiscal accountability, personnel
training and support, reduced exposure to potential liabilities, and improved alignment around
Departmental effectiveness and vision.
With the cooperation of the Police Officer's Association (POA), including key structural changes
addressing salary compaction, it is now possible to create a new Lieutenant rank to increase
performance and accountability throughout the organization.
PAGE 3.
MAYOR AND TOWN COUNCIL
SUBJECT: FISCAL YEAR 2014/15 FIRST QUARTER BUDGET PERFORMANCE AND
STATUS REPORT FOR THE PERIOD JULY 1, 2014 - SEPTEMBER 30, 2014.
OCTOBER 28, 2014
The establishment of the Lieutenant rank, while cost neutral with other changes, will allow the
department to remain supported by 26 officers. The Department will eliminate a Captain
position, freeze a Corporal position, and create the two new Lieutenant positions. This
restructure will provide the necessary oversight and support needed to meet the Department's
strategic goals, direction and objectives, once vacant positions are filled. The reorganization as
recommended is outlined below:
1 ne Uorporat position would remain vacant
pending future staffing and budget decisions
As the above chart demonstrates one Captain position would be deleted and one Corporal
position will remain unfilled, resulting in no net cost increase to the Town.
The overall proposed reorganization would be continuously evaluated to assess the effectiveness
and sustainability of the reorganization and to consider any changing needs of the Department.
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 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 2014/15 financial outlook and a summary
of the performance of the Town's primary General Fund revenue sources.
Adopted
FY 2014/15
Revised
FY 2014/15
Officer
26
26
Corporal*
5
4
Sergeant
6
6
Lieutenant
0
2
Captain
2
1
Chief
1
1
Total Sworn
40
40
1 ne Uorporat position would remain vacant
pending future staffing and budget decisions
As the above chart demonstrates one Captain position would be deleted and one Corporal
position will remain unfilled, resulting in no net cost increase to the Town.
The overall proposed reorganization would be continuously evaluated to assess the effectiveness
and sustainability of the reorganization and to consider any changing needs of the Department.
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 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 2014/15 financial outlook and a summary
of the performance of the Town's primary General Fund revenue sources.
PAGE 4
MAYOR AND TOWN COUNCIL
SUBJECT: FISCAL YEAR 2014/15 FIRST QUARTER BUDGET PERFORMANCE AND
STATUS REPORT FOR THE PERIOD JULY 1, 2014 - SEPTEMBER 30, 2014.
OCTOBER 28, 2014
ENVIRONMENTAL ASSESSMENT:
This budget report is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
The attached First Quarter Budget Performance Report provides an overview of the first quarter
budget performance, and no budget changes are recommended at this time.
Attachment:
Budget Performance Report for the Three Months Ending September 30, 2014
*bhl BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
INTRODUCTION
Purpose
This is the first quarterly budget performance report
for the Fiscal Year 2014/15, for the three month
period ending September 30, 2014. The purpose of
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, 2014, 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.
u - .04
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.
1
With respect to revenues: The Town regularly
monitors and adjusts its year -end revenue
projections based on revenue performance and
other developments that may affect Town revenues
in order to develop a more accurate picture of the
Town's anticipated year -end financial position.
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 2014/15 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
SalesTax .... ............. ..............................5
Property Tax ............... ..............................7
Franchise Fees ................ ..............................8
Business License Tax ..... ..............................9
Transient Occupancy Tax ...........................
10
Charges for Services ..... .............................11
Licenses & Permits .......... .............................12
Interest Income ............. .............................13
Financial Summaries and Projections ......................14
General Fund ................ .............................14
Special Revenue Fund ... .............................15
Capital projects Funds .... .............................15
Internal Service Funds .... .............................16
Trust and Agency Funds . .............................16
Conclusion ....................................... .............................17
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I BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
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EXECUTIVE SUMMARY
Status of FY 2014/15 Adopted Budget General Fund Reserve Status - 6/30/14
First quarter revenues are generally trending
favorably when compared to the first quarter of
Fiscal Year 2013/14. Property Tax, Charges for
Services, Business License Tax, Transient Occupancy
Tax, and Franchise Fees increased when compared
to the prior year's first quarter results. We should
note that sales tax is currently trending lower than
that of last year's during the same period; however,
the Town is anticipating a positive tru -up during the
fiscal year.
General Fund expenditure totals for the first quarter
are trending favorably, with total operational
expenditures at the end of the first quarter at about
18% of the 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 2013/14 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. Conservative budgeting,
practices coupled with ongoing Town -wide
expenditure reductions, generated a favorable
General Fund closing balance of approximately $1.1
million of available revenues over expenditures
before special items (PERS Side Fund payoff) at fiscal
year -end, June 30, 2014. In developing the 2014/15
budget, Town Council approved revenue
enhancements and expense augmentations
reflective of the recovering economy and needs of
the Town.
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 Town of Los Gatos Redevelopment
Agency (RDA), the Town no longer has restricted
reserves.
General Fund Reserves closed on June 30, 2014 with
a balance of approximately $23.3 million in
designated reserves which is in accordance with
Town financial policies and operating and capital
budget requirements, and includes a $4.2 million
dollar Catastrophic Reserve for economic
uncertainty.
Desinstd General Flmd Reserres
Amount
Illons
Designated for Capital andSpecial Projects
$9.8
Designated for Budget Stablization Reserve
4.7
Designated for Catastrophic Reserve
4.2
Unallocated (Ptiorto Final Audit )
2.0
Designated for Open Space
0.6
YE Savings/Budget Amendment
0.5
Designated for special Studies
0.5
Vasona land Sale
Retiroe Medical Actnnal
Sustanabibt Reserve
1$23.3
Designated for Mana ees Contingency and Pmductivit
Total Designated General Flsnd Reserves
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 General Fund
Appropriated Reserves (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).
.towx of
l BUDGET PERFORMANCE REPORT -1ST QUARTER FY 2014/15
The Budget Stabilization Reserve was established to
serve as a transitional "bridge" funding source to
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 $23.3 million in Designated General
Fund reserves provides the Town with resources to
manage through current and /or future fiscal
challenges and opportunities.
Federal Economic Outlook
The Congressional Budget Office (CBO) anticipates
that the economy will grow slowly this year, on
balance, and then at a faster but still moderated
pace over the next few years. CBO projects that the
growth of real Gross Domestic Product (GDP) will
pick up after this year to an annual average rate of
3.4% from 2014 through 2016. The national
unemployment rate is expected to fall from 6.2% in
the second quarter of 2014 to 5.6% by the fourth
quarter of 2017. The CBO also estimates that the
rate of inflation is estimated to remain below to 2%
during the next few years.
The federal budget deficit for fiscal year 2014 will
amount to $506 billion, CBO estimates, roughly $170
billion lower than the shortfall recorded in 2013. At
2.9 % of GDP, this year's deficit will be much smaller
than those of recent years; however, by CBO's
estimates, federal debt held by the public will reach
74 percent of GDP at the end of this fiscal year —
more than twice what it was at the end of 2007 and
higher than in any year since 1950.
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.
The Department of Commerce reported that home
construction rose 8% since last year. In addition,
national sales of new homes were up nearly 17% 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 seventh highest in the nation, it continues to
show improvement in recent months with the latest
data showing a rate of 7.3% in October. Based on
current laws and the State economic forecast,
General Fund revenues are expected to grow faster
than expenditures through 2017/18, when the
state's projected operating surpluses reach $9.6
billion. Furthermore, recent press articles are noting
that Silicon Valley's unemployment rate is lower
than the statewide average due to job growth in the
areas of health services and government sectors.
Rebounding real estate markets help construction
and financial activities sectors. The Town's real
estate values remain strong and show positive
growth.
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
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, 2014.
Staff monitors each revenue source closely and may recommend certain revenue adjustments based on revenue
actuals or state budget action.
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
Sales Tax
Sales tax is the largest revenue source for the Town's General Fund, accounting for 23% of budgeted General Fund
revenues for FY 2014/15. 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 —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 4.0 %, Town of Los Gatos Sales Tax
revenues are up by 8.2 %. First quarter receipts are trending behind those in the same period last fiscal year
because of the timing of the sales tax revenue transfer by the State and prior year sales tax revenue adjustment
due to the local effect of Netflix's change in its businesss model.
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
Quarterly and Annual Revenues
5 -Year His to ry
FY 10/11 FY 11/12 FY 12113 FY 13/14 FY 14/15
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R..00
FY 10 111 FY 11/12 FY 12113 FY 13/14 FY 14115
Ist Quarter Actual Revenues $ 1,582,344 $ 1,184,526 $ 601,176 $ 1,243,903 $ 914,843
Fiscal Year Total Actual Revenues $ 9,971,409 $ 9,889,100 $ 8,757,428 $ 8,029,571
Fiscal Year Budgeted Revenues $ 8,303,962
1 st Quarter Percent of Total 15.87% 11.98% 6.86% 15.49% 11.02%
Recommended Budget Revision No Change
5
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
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As depicted in the graph there is not significant change in the sales tax revenue in the general retail category;
however, it should be noted that sales tax revenue has increased slightly in the food products, transportation and
construction areas when compared to same quarter results from the prior fiscal year.
Sales Tax By Major Business Group
$800,000
$600,000
$400,000
$200,000
13
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1st Qtr 2013
• 1st Qtr 2014
Staff will continue to monitor these revenues through the mid -year to determine if a budget adjustment will be
recommended at that time.
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
1pS Q A� S
Property Tax
Property tax is the second largest revenue source for the Town's General Fund, accounting for 22.7% of budgeted
General Fund revenues in FY 2014/15. 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 up 1.4% 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 2014/15 was budgeted slightly higher than previous year's actual revenues
based on these facts and projected Consumer Price Index 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 10/11 FY 11/12 FY 12/13 FY 13/14 FY 14/15
Rw ®a
Remm
GFina Yw BWo, Rn=a
FY 10/11
FY 11/12
FY 12/13
FY 13/14
FY 14/15
1st Quarter Actual Revenues
$ 57,225
$ 77,619
$ 76,842
$ 123,394
$ 125,091
Fiscal Year Total Actual Revenues
$ 9,597,378
$ 9,864,539
$ 9,672,235
$ 9,031,871
Fiscal Year Budgeted Revenues
$ 8,192,240
1st Quarter Percent of Total
0.60%
0.79%
0.79'/0
1.37%
1.53%
Recommended Budget Revision
No Change
I BUDGET PERFORMANCE REPORT - 1ST OUARTER FY 2014/15
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 5.7% of budgeted General Fund revenues in FY 2014/15.
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 11%
above first quarter in FY 2013/14. Staff will continue to monitor trending of this revenue source and 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 10/11 FY 11/12 FY 12/13 FY 13/14 FY 14/15
B In Qtvtc Aaul Ram®
prictlYm Tml Auual Reav�eu
arixtlYw T" ButoW
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FY 10 /11
FY 11/12
FY 12/13
FY 13/14
FY 14/15
1st Quarter Actual Revenues
$ 224,256
$ 245,533
$ 251,349
$ 247,426
$ 275,097
Fiscal Year Total Actual Revenues
$ 1,901,605
$ 1,952,488
$ 2,028,903
$ 2,063,756
Fiscal Year Total Budgeted Revenues
$ 2,076,030
Ist Quarter Revenue Percent of Total
11.79%
12.58%
12.39%
1 1.99%
13.25%
Recommended Budget Revision
No Change
8
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I. BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
SOS c��o.
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 licenses. 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 slightly higher than prior year actuals. Current year first quarter revenues are trending
siginificantly higher than those of the previous year due to the reclassification of Netflix from a retail to an e-
commerce business category. The first quarter revenues reflected below include a one -time prior year adjustment
business license tax collection from Netflix due to the reclassification. Generally the first quarter payments are
primarily made up of adjustments to businesses' gross receipts for 2013, 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 quarters 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 businesses to collect fees.
$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 10 /I l FY 11/12 FY 12113 FY 13/14 FY 14/15
FY 10 /11
1st Quarter Actual Revenues $ 69,782
Fiscal Year Total Actual Revenues $ 1,136,511
Fiscal Year Total Budr.ted Revenues
1st Quarter Revenue Percent of Total 6.14%
In QuarAmul
RcKmcs
RCKYK9
seKO�:
FY 11/12
FY 12/13
FY 13/14
FY 14/15
$ 43,969
$ 44,393
$ 52,124
$ 471,762
$ 1,077,620
$ 1,151,579
$ 1,130,020
$ 1,411,510
4.08%
3.85%
4.61%
33.42%
Recommended Budeet Revision No Change
0
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
1
Transient Occuoancv 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 the total number of
visitors to California grew 5.5% in 2013 , as both State and national travel industries are recovering from the
recession. The forecast for California visitation is increasing by 2.6% in 2014 and by 2.6% in 2015. Personal and
business related travel is gaining strength. First quarter TOT revenues are trending 14% higher than the first quarter
of 2013/14. Staff will continue to monitor this funding source closely to assess the need for future budget
adjustments.
$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 Mtory
FY 10/11 FY 11/12 FY 12/13 FY 13/14 FY 14/15
1 st Quarter Actual Revenues
Fiscal Year Total Actual Revenues
Fiscal Year Total Budgeted Revenues
1st Quarter Revenue Percent of Total
R,vmw
Rewnms
FY 10 /11 FY 11/12 FY 12/13 FY 13/14 FY 14/15
$ 107,453 $ 131,567 $ 135,452 $ 169,632 $ 192,946
$ 1,004,659 $ 1,174,485 $ 1,295,887 $ 1,512,846
$ 1,274,200
10.700/c 11.200/c 10.45% 11.21% 15.14%
Recommended Budget Revision No Chance
10
1 Wa
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
SOS CA {�S
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.
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 12 %. 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
Quarterly and Annual Revenues
5 -Year History
FY 10/11 FY 11/12 FY 12/13 FY 13/14 FY 14115
1st Quarter Actual Revenues
Fiscal Year Total Actual Revenues
Fiscal Year Total Budgeted Revenues
1st Quarter Revenue Percent of Total
FY 10/11 FY 11/12
$ 815,237 $ 907,005
$ 3,570,110 $ 3,879,826
!lu Q.A WNam®
aFicd Ym, red AeW Namur
IFi WYM Ted Buke
Nam®
FY 12/13 FY 13/14 FY 14/15
$ 1,153,201 $ 2,299,931 $ 2,576,211
$ 4,712,570 $ 4,715,202
$ 4,552,496
22.84% 23.38% 24.47% 48.78% 56.59%
Recommended Budget Revision No Change
11
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
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 permitting aspects of development.
Analysis — First quarter License and Permit revenue is trending slightly lower than of first quarter results from the
previous fiscal year, with a 1% decrease. Staff will continue to monitor this revenue source; however, no budget
revisions are recommended at this time.
$3,500,000
$3,000,000
$2,500,000
$2,00(1,000
$1,500,000
$1,000,000
$500,000
Quarterly and Annual Revenues
5 -Year History
FY 10/11 FY 11/12 FY 12/13 FY 13/14 FY 14/15
FY 10 /I1
1st Quarter Actual Revenues $ 583,524
Fiscal Year Total Actual Revenues $ 1,831,308
Fiscal Year Total Budgeted Revenues
Ist Quarter Revenue Percent of Total 31.86%
aWQ WAtl Ra
T" Ac R—.
T" Bi*y
FY 1 1/12 FY 12/13 FY 13/14 FY 14/15
$ 550,905 $ 837,937 $ 1,143,264 $ 1,130,049
$ 1,831,308 $ 2,643,899 $ 3,108,247
$ 2,421,892
30.08% 31.69% 36.78% 46.66%
Recommended Budget ReNision No Change
12
BUDGET PERFORMANCE REPORT -1ST QUARTER FY 2014/15
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 slightly below those in the same period in the prior fiscal year.
Financial indicators throughout the market are staying flat or predicting slight increase. For example, from
September 2013 to September 2014 the Local Agency Investment Fund yield stayed at 0.26 %; the six -month
Treasury stayed 0.04 %; however, the three -month Treasury increased from 0.01% to 0.02 %, and the five -year
Treasury increased from 1.41% to 1.76 %.
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.
$1,000,000
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
Quarterly and Annual Revenues
5 -Year History
FY 10 /11 FY 11/12 FY 12/13 FY 13/14 FY 14/15
1 at Quarter Actual Revenues
Fiscal Year Revenues
Fiscal Year Total Budgeted Revenues
1st Quarter Revenue Percent of Total
■Ie1Qu,ltAmulRe+mua
OF.4Y ®rRe ..,
WF r Y ®,TOW andga d
Re,..s
FY 10 /11 FY 11/12 FY 12113 FY 13/14
$ 205,707 $ 183,979 $ 111,401 $ 169,558
$ 904,474 $ 606,454 $ 386,919 $ 374,287
22.7% 30.3% 28.8% 45.3%
FY 14/15
$ 161,907
$ 412,340
39.3%
Recommended Budget Revision No Change
13
1 NN f.
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
tos cif s
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 2014/15, 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.
Mayor &CAu cll
188,111
199,537
39,495
MM
211,561
211,561
41,885
20/
211,561
Tonn of Loa Gatos
238353
227,027
47,@0
21%
Who
259,584
48,217
Schedule of General Fund
258,954
Adminstntive Services
2,707,809
2.796.619
517,883
1956
Opeeadou
Revenues vs. Operating Flapenditums
554412
18%
2,975214
CommDCvekPemnt
4321,179
3,939349
For the
period ended September 30, 2014
4.078729
Am2867
832850
204
4,082867
mn&nd
13,673,270
13,485,623
2755,277
MM
14,205,213
14,261318
2500.10
M3114
W13114
M3 /11 FY13114 W14/15
M4115
Fri4/15
M4115
M4115
8035,432
Flaw
A4[usled
IatQR % AM1p4d
Aasfmted
Iet Qtr
%
In..
488309
seems,
Bud,.
Armed, YID Bu @n
Bud,.
Actual.
YID
Pr.jemm
Renna
29.742609 S
5,748,272
MA S 30.10372 $ 30218792 I
51581,511
18% S
30215,792
Non -Dept Esprndduse and other uses
Ceoted ROpWy Tag
S 9.01,871 S
8,022.21 S
1n39a 2% S ll,ln20 5
81192240
s 125,W1
2% s
8,192,240
Prop Tae Car Tag B.cIdll
13,08
16,00
13,068 16,350
16,350
-
0%
182150
Sales as Us. Tax
8,029,571
7,868,092
I.W'oU 16% 8130,962
8,303,%2
914,843
11%
8,303,962
Fnnchisc Fee
2,063,756
2,010,030
247,4M 12% 207cm
2016,00
275,097
13%
2,06,W0
Transient Me Tara
1,512,846
I'2K W
169,632 14% 1,274.200
1,274,200
192,916
15%
1,274,260
Business license Taa
1,130,00
1,361,510
52124 4% 1,411,510
1,411,510
471,762
33%
1.11310
1,eeps. &Pemuls
3,109,747
2,423,300
1,143,264 47% 2421,892
2421,892
1,1301049
47%
2421AW
Motorvenckin Sisu
2,657,404
2,657,40
IM 26s3w
2653,980
0%
2,683,980
hum.Vemmental
804101
750,186
39,830 5% 717,950
717,950
4,866
1%
717,950
am" toe Service
4,715,20
3,772811
2292931 61% 4.552496
4,552496
2,576,211
5%
4,552,496
Fines &FOfind..
795,684
612520
121,10 20% 743,1711
743,170
mtm s,
374,287
400,290
169359 42% 412,310
4MW
16,90
39%
412340
QASB Investment to modest per sued
681,199
(104000)
681,199 681% (102000)
(1%00)
-
0%
(10.00)
Mkcellaneom /Other
2,841,168
2863,758
2310.062 81% 2796,185
2796,185
367,356
13%
2798185
Fund Transfers
328.938
671,623
17,617 3% 625420
6291420
12,970
2%
629.20
TW10mnt1.g ne n.uea
38,088.892
34,567,975
8,632,113 25% 38129,.3
36,129,725
6323,186
18%
38129,725
Ike of Other Funding Sources!
Use ofRmerve- CoasilalP ,oets
26113,746
8724743
8724743
6,720.743
UswtReerve- Special Studies
-
VasonaUsedSaleResete
320,918
nh%8
320,998
Fund Bases. EmBecatmes
59;250
YESrvmg./BUdgrt Almndmvt
-
Ce'lorwaN Reserve
4.%7
48.767
Budge Srabdrvts,n Reserve
2000,000
21001000
Special Studks
379,451
379.51
379,451
PM 11bnky Around
1,451,525
1,451,825
-
UseoOnlemalSeve eRaeeves
-
Total OnlrF..d1eBS.unea
3,451,825
8729.851
7,421,142
7,469,90
7,469,909
Tutat Re-sm ptm Reveres
S 41,540.717 S
41292826 S
8,02.113 S 43,554867 S
43.599,634 S 6323.186
$
43599,631
6pe.tilam p.d.&I O lmm ma- lus.nn
Mayor &CAu cll
188,111
199,537
39,495
MM
211,561
211,561
41,885
20/
211,561
Anumey
238353
227,027
47,@0
21%
Who
259,584
48,217
19%
258,954
Adminstntive Services
2,707,809
2.796.619
517,883
1956
291,714
2979 .214
554412
18%
2,975214
CommDCvekPemnt
4321,179
3,939349
716.871
IB%
4.078729
Am2867
832850
204
4,082867
Police
13,673,270
13,485,623
2755,277
MM
14,205,213
14,261318
2500.10
Im
14.261,348
Pads &PUbbc WOeks
5384769
5,574,868
1,183.17
20%
8035,432
80711879
1,1 54,006
19%
6,01,80
Library
2131,438
2,229356
488309
n%
21491939
2345939
453.00
19%
2345939
Tan. uep fa,sm"
S 28,840.829 S
29.742609 S
5,748,272
MA S 30.10372 $ 30218792 I
51581,511
18% S
30215,792
Non -Dept Esprndduse and other uses
OrnmlC vememm
8,165350 8020.679 22.351
0
13.383.842
13.383,842
24907
2%
13,383,842
Special Item
43N,538
4.534.538
Tom) Nw -uep Fepe.sea
S 12,699.888 S
12.555,217 S
220351
=8% S
13.383842 S
13,38318,42 I
24507
_% S
13]83,842
Tatl Opend.g Exile. &arcs
S 41.540.717 S
41,297,876 S
8,018,6D
19% S 43.491414 S
0,599.614 S 5830.568
13% $
43,599,634
Nel Openlieg Pereovo
S - 5 S 601.90 I 57,453 S - S 49.618 $ -
NeetImpt.or Na.)dReser.ee s S $ 603490.0 S A.45sM S S 49261820 $
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.
14
tpW M OF
/ I BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
�OS's��ps
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, Non -Point 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
CaDital Projects Funds
CDBG
Grants
Non -Point LLD's
Source
$ 44,751
$ 125,936 $ 169,257
70,000
336,684 38,938
9,280
- -
70,000 442,616 22,811
- 202,862 5,017
$ 54,031 $ (76,926) $ 164,240
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 Capital Improvement Projects Fund, Utility Underground Fund, Gas Tax Fund, and three Storm Drain
Funds. Capital Projects Funds are generally tracking in accordance with the FY 2014/15 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.
Beginning Fund Balance
Budgeted Revenues
Total Actual Revenues - 1st Qtr
Budgeted Expenditures
Total Actual Expenditures - tat Qtr
tat Quarter Ending Fund Balance
Capital Project Funds
Budget to Actuals Comparisons
GFAR Traffic Grant Fund Storm Utility Gas
Fund Mitigation Clip's Drains Undergd Tax
$ 8,302,327 $ 2,868,794 $ (288,730) $ 1,386,272 $ 2,687,790 $ 297,303
8,317,330 1,356,974
117,192 -
12,003,407 1,356,974
289,853 17,993
961,981 105,120 60,000 792,000
50,217 8,842 166,624
937,735
11,143
- 806,000
$ 8,129,666 $ 2,850,801 $ (299,873) $ 1,436,489 $ 2,696,632 $ 463,927
15
w f
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014/15
(pa Ch'�S
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 2014/15 adopted budget, although
expenditures in the Workers' Compensation, Self- Insurance Liability and Office Store Funds are forecasting
decreasing fund balances. No revisions to adopted revenues or expenditures are required at this time, and staff will
continue to monitor expenditures and propose a revised cost allocation during 2015/16 budget preparation.
Internal Service Funds
Budget to Actuals Comparisons
1st Quarter Ending Fund Balance S 3,519,259 $ 1,851,381 $ 1,113,499 $ 132,032 $ 2,705,994 S 792,114 $ 1,462,588
Trust and Agency Funds
Town Trust and Agency Funds have fund balances as of July 1, 2014 of $694,920 for the Library Trust Funds and
$3,615,497 for Successor Agency Trust. No budget revisions are recommended 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 SA
Trust Trust
$ 694,920 S 3,615,497
39,099 4,047,182
35,905 -
110,700 4,040,766
3,880 1,477,239
$ 726,945 $ 2,138,258
Equipment
workers
Self
Office
almgt Info
Vehicle
Building
Replacemt
Comp
Insurance
Stores
Systems
Moist.
Meant.
Beginning Fund Balance
S 3,429,643
$ 1,972,902
$ 1,052,003 $
149,293
$ 2,661,264
$ 735,229
$ 1,320,821
Budgeted Revenues
430,243
687,833
527,683
85,000
1,051,339
569,300
1,215,317
Total Actual Revenues -1st Qtr
92,491
141,962
109,023
1,189
255,764
142,315
322,205
Budgeted Expenditures
647,689
1,060,179
784,592
127,150
1,205,415
569,252
1,334,394
Total Actual Expenditures -1st Qtr
2,875
263,483
47,527
18,450
211,034
85,440
180,438
1st Quarter Ending Fund Balance S 3,519,259 $ 1,851,381 $ 1,113,499 $ 132,032 $ 2,705,994 S 792,114 $ 1,462,588
Trust and Agency Funds
Town Trust and Agency Funds have fund balances as of July 1, 2014 of $694,920 for the Library Trust Funds and
$3,615,497 for Successor Agency Trust. No budget revisions are recommended 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 SA
Trust Trust
$ 694,920 S 3,615,497
39,099 4,047,182
35,905 -
110,700 4,040,766
3,880 1,477,239
$ 726,945 $ 2,138,258
(*.�UDGET PERFORMANCE REPORT - 1ST QUARTER FY 2014115
CONCLUSION
The financial results from the prior fiscal year, coupled with the FY 2014/15 first quarter data, confirm the Town's
continued conservative fiscal planning and efforts to sustain its economically sensitive revenues. Based on available
information at the time of this report and expected receipts, the long -range outlook for the Town indicates that
revenues continue to improve, with small excess revenues beyond expenditures forecasted, potentially allowing the
Town to continue to plan for restoration of services versus planning for reductions as in years past. 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.
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