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FY 204/15 Mid-Year Budget Performance & Status Report1NM °F MEETING DATE: 03/03/15 �O8 sA��g ITEM NO: is COUNCIL AGENDA REPORT DATE: FEBRUARY 25, 2015 TO: MAYOR AND TOWN COUNCIL FROM: GREG LARSON, TOWN MANAGER SUBJECT: FY 2014/15 MID-YEAR BUDGET PERFORMANCE AND STATUS REPORT - SIX MONTHS ENDING DECEMBER 31, 2014 A. ACCEPT FY 2014/15 MID-YEAR BUDGET PERFORMANCE AND STATUS REPORT, INCLUDING FY 2014/15 YEAR -END PROJECTIONS B. CONSIDER AUTHORIZING BUDGET ADJUSTMENTS AS RECOMMENDED IN THE ATTACHED SECOND QUARTER BUDGET PERFORMANCE REPORT C. CONSIDER AUTHORIZING REIMBURSEMENT OF $6,436.34 TO THE VETERANS FOUNDATION OF LOS GATOS D. CONSIDER SUPPORT AND SPONSORSHIP OF THE 2015 PLEIN AIR FINE ART EXHIBITION AND SALE RECOMMENDATION: 1. Accept the FY 2014/15 Mid -Year Budget Performance and Status Report, including FY 2014/15 year -end projections. 2. Consider authorizing budget adjustments as recommended in the attached Second Quarter Budget Performance Report (Attachment 1). 3. Consider authorizing reimbursement of $6,436.34 to the Veterans Foundation of Los Gatos. 4. Consider support and sponsorship of the 2015 Plein Air Exhibition and Sale. BACKGROUND: The purpose of this report is to provide the Town Council with a status of the FY 2014/15 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 2015 -20) to provide a context for the FY 2015/16 budget development process and recommended budget approach. PREPARED BY: S' AY Administrative gervices and Finance Director Reviewed by: CP LAssistant Town Manager SA97own Attorney Finance NAF1NANCEQtrIy Financial Reports\FY 2015 Mid- Year\2014- 15_Mid_Year_Budge�_Staff Reporuloc PAGE MAYOR AND TOWN COUNCIL SUBJECT: FY 2014/15 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT - SIX MONTHS ENDING DECEMBER 31, 2014 FEBRUARY 25, 2015 DISCUSSION: FY 2014/15 MID -YEAR BUDGET STATUS Budget Performance Report The attached Budget Performance Report (Attachment 1) is a mid -year report covering a six - month period beginning July 1, 2014 and ending December 31, 2014. 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 Projected Year -End Balances June 30, 2015 Current fiscal year -end projections for FY 2014/15 reflect an anticipated $800,000 surplus of operating revenues over expenditures. As discussed in Attachment 1, revenues are tracking higher than budgeted and actual expenses typically occur lower than budgeted. FY 2014/15 MID -YEAR BUDGET UPDATE TRENDS Operating Revenue Trends Revenue collections from economically sensitive sources such as property tax, motor vehicle in lieu fee, transient occupancy tax and business license revenue all point to strong signs that the economy continues to trend in a positive direction. In addition, increased and deferred activity in the Community Development Department helped to bring in increased revenues as well as rising workloads. 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. While many of these revenues are increasing, sales tax income continues to trend low. Staff continues to monitor all of these revenue sources on a regular basis to ensure that budget projections are being met. Operating Expenditure Trends The 2014/15 budget provided some work load pressure relief, primarily using one -time temporary funding measures due to the uncertainty with rising benefit and other costs. Staff continues to be fiscally conservative and focus on reduction strategies when possible. This prudence has helped to keep current departmental expenditures below the expected 50% of budget level, which could result in expenditure savings at year -end. Veterans Foundation of Los Gatos The Veterans Foundation of Los Gatos (VFLG) is requesting reimbursement from the Town in the amount of $6,436.34 for costs associated with the development of the Call for Artists and the conceptual Memorial design proposal that the Council evaluated in November 2014 and January 2015. The reimbursement request is detailed as follows: PAGE 3 MAYOR AND TOWN COUNCIL SUBJECT: FY 2014/15 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT - SIX MONTHS ENDING DECEMBER 31, 2014 FEBRUARY 25, 2015 DISCUSSION (cont'd): • $2,000.00 stipend to artist Frank Morris for development of conceptual drawings for Veterans Memorial • $2,000.00 stipend to artist Tony Lynott for development of conceptual drawings for Veterans Memorial • $647.70 airfare for Frank Morris to fly from Tennessee to California to attend the December 11, 2014 Arts and Culture Public Art Sub Committee — Veterans Memorial Meeting • $475.00 to Western States Arts for the posting of the Call for Artists • $340.12 to ARC Documents Solution for copies of the Civic Center architectural plans • $173.52 to Anna Dolive (Associate to Frank Morris for development of conceptual drawings for Veterans Memorial) Previously, the VFLG has requested funds from the Town Council for the development of conceptual drawings for a Memorial project in the amount of a $20,000 grant in November 2012 and again in November 2014 and in both instances the grant requests were not funded. The VFLG is requesting the reimbursement to contribute to its development of a new Memorial design in either the Redwood Grove or the Fountain area of the Upper Deck per the Council direction given at the January 20, 2015 Town Council meeting. It is Council's discretion to consider this request and allocate one -time funds for reimbursement of costs associated with the initial Memorial conceptual design. Should Council elect to approve this request funds are available in the Manager's Contingency fund and no additional budget appropriation is required. Plein Air Sponsorship Request At the February 18, 2015 Arts and Culture Commission meeting, the Commission reviewed the request from the Los Gatos Morning Rotary Charitable Foundation for Town sponsorship of the 2015 Los Gatos Plein Air Exhibit and Sale to be held June 16 -20, 2015. Sponsorship of the annual event helps to sustain and grow art and science youth educational programs serving K -12 students in Los Gatos and Santa Clara County. A sponsor packet is provided as Attachment 2. The Commission recommends for Council consideration, an allocation of one -time funds for the 2015 Los Gatos Morning Rotary Plein Air event sponsorship at either the Van Gogh level of $1,500 or the Matisse level of $2,500. The Commission also recommends that Council direct the Los Gatos Morning Rotary to apply for future event sponsorship for the Plein Air event through the annual Community Grant Program that begins each year in January. Just prior to publishing this report, the Los Gatos Morning Rotary submitted a modified request for support of the Plein Air event, including: • event marketing and promoting • waiver of fees • banner displays The materials from the Morning Rotary will be provided as an addendum on Friday. PAGE 4 MAYOR AND TOWN COUNCIL SUBJECT: FY 2014/15 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT - SIX MONTHS ENDING DECEMBER 31, 2014 FEBRUARY 25, 2015 DISCUSSION fcont'dl: The materials from the Morning Rotary will be provided as an addendum on Friday State Budget Impacts to Local Governments With the Governor's proposed 15/16 budget, the Department of Finance recently released new projections for the FY 2014/15 gas tax revenues that forecast the Town would receive $89,000 in additional gas tax monies. However, the same projections forecast that gas tax revenues will decrease for FY 2015/16 due to Prop 42 sales tax on gasoline. In addition, in 2013 the CalPERS Board adjusted and changed actuarial assumptions regarding discount rates and smoothing methodologies which resulted in increased plan costs in the near term. Ca1PERS continued to make changes with adjustments to mortality and retirement age, both of which impact employer contribution rates now and in the future. It was projected that these changes could increase costs by up to 34% over the next ten years. However, in June of 2014, with Council approval and direction, the Town paid off the Ca1PERS liability side -fund in the amount of $4.5 million which significantly reduced the costs incurred by the Town in FY 2014/15 and through the next four years. In FY 2014 /15 alone, as a result of this pay off, staff is projecting a year -end surplus of approximately $800,000. GENERAL FUND RESERVE STATUS As of June 30, 2014, Town's General Fund balance was approximately $25.2 million, all of which is legally reserved or designated for special purposes by Council. Included in this amount are approximately $4.2 million in reserves for Economic Uncertainty, $10.2 million for Capital and Special Projects, and $6.7 million for Budget Stabilization and $4.3 million in designated reserves. These reserves remain intact at the mid -year point of FY 2014/15. FY 2015/16 BUDGET DEVELOPMENT PROCESS Concurrent with the update of the Five -Year Financial Plan and in anticipation that service and staffing restorations may be possible for the FY 2015/16 budget, staff began budget development discussions in late January 2015. This process includes the conceptual development of staffing changes, revenue enhancements, and adjustments to the User Fee Schedule. Staff is currently working on preparing the FY 2015/16 budget which will be presented to Council in May 2015. Staff is continuing to use the budget proposals prioritization matrix adopted by Council last year. PAGES MAYOR AND TOWN COUNCIL SUBJECT: FY 2014/15 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT - SIX MONTHS ENDING DECEMBER 31, 2014 FEBRUARY 25, 2015 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 the current year projects a surplus of $400,000 for FY 2015/16 as well as operating surpluses in the future years. A current and future projection in the Five -Year Plan are based upon conservative revenue and expenditure growth rates and trends and does not anticipate another downturn in the economy. Updated Five -Year Financial Plan rvr+ AeNVVI Ilereaee CeteBOry 201L13 Atfaale MM14 AdWkd 30124 M W: M14115 Budget 3014x5 Petlwhd 2015A6 F.. 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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 2014/15. As discussed earlier in this report, staff is currently engaged in the FY 2015/16 budget development process, which will continue with restricted expenditures and 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: 1. Budget Performance Report for the Six Months Ended December 31, 2014 2. Plein Air 2015 Sponsor Packet BUDGET PERFORMANCE REPORT - 2ND OUARTER FY 2014/15 INTRODUCTION Purpose This is the second quarterly budget performance report for the Fiscal Year 2014 -15, for the three month period ending December 31, 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 December 31, 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. 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 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 General Fund Reserve Status ......................2 Greater Economic Outlook ...........................3 State Budget Update ..... ............................... 3 General Fund — Key Revenue Analysis .....................4 SalesTax ..................... ..............................4 Property Tax ................. ..............................5 . Franchise Fees .................. ..............................6 Business License Tax ...... ..............................7 Transient Occupancy Tax ...........................B Interest Income .......... ..............................9 Charges for Services ... .............................10 Licenses & Permits .......... .............................11 FY 2014/15 Recommended Budget Adjustments .... 12 Summary of Key Recommended Adjustments ......14 Financial Summaries and Projections ....................16 General Fund ................ .............................16 Special Revenue Fund ... .............................17 Capital projects Funds .... .............................1g Internal Service Funds .... .............................19 Trust and Agency Funds . .............................20 Redevelopment Agency . .............................20 Conclusion...................................... .............................20 1 ATTACHMENT BUDGET PERFORMANCE REPORT - 2ND EXECUTIVE SUMMARY Status of FY 2014/15 Adopted Budget Overall second quarter General Fund revenues are trending favorably when compared to the second quarter of Fiscal Year 2013/14. Due to some projected revenue increases, staff is recommending a net general fund increase of revenues, offset by expenditure increases, of approximately $856,561 from adopted budgeted estimates. The current forecast expects a substantial increase in Property Tax, Motor Vehicle in Lieu, and Transient Occupancy Tax (TOT) due to the continued surge in the local economy as well as tourism within the Bay Area. Revenues such as Business License Tax, Licenses and Permits, Franchise Fees and VLF Backfill Property Tax are all trending favorably, a strong indication that the economy continues to rebound. General Fund expenditure totals for the second quarter are trending in accordance with forecasts, with total operational expenditures at the end of the second quarter at about 44% of budget. 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. Expenditure additions at this time include planning services for the North 40 specific plan, Medical exams due to increased town - wide hiring and vehicle lease agreements. Providing services to the community in this and future fiscal years will continue to require strong performance by economically sensitive revenues to offset benefit and other cost increases. The FY 2015/16 budget is the second budget in five years that is not projected to be a deficit budget where cuts are needed to balance. FY 2015/16 budget will continue to fund essential public services as well as focus on relieving workload pressures that have built up over the past years when budget cuts reduced the workforce but workloads remained constant or have grown as a result of the improved economy. 2 ARTER FY 2014 General Fund Reserve Status - 6/30/14 General Fund reserves closed at a balance of approximately $25.2 million at June 30, 2014 in designated reserves which is in accordance with Town financial policies and operating and capital budget requirements, and includes a $4.2 million Economic Uncertainty Reserve. 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 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. Designated General Fund Reserves Amount (Millions) Designated for Capital and Special Projects $10.2 Designated for Budget Stabilization 6.7 Designated for Economic Uncertainty 4.2 Designated for Compensated Absences 2.0 Designated for Open Space 0.6 Designated for Special Studies/Incentives 0.5 Designated for Vasona Land Sale 0.4 Designated for Retiree Medical Actuarial 0.4 Designated for Manager's Contingencyand Productivity 0.1 Designated for YIE Carryover PO's 0.1 Total Designated General Fund Balance Reserve $252 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). BUDGET PERFORMANCE REPORT - 2ND 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. The Town has not yet had to rely on or use this reserve during the "Great Recession." These funds are referred to as Designated General Fund reserves since these are established by Council polity for their intended purpose. The availability of approximately $25.2 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 According to the Congressional Budget Office (CBO), the economy projected to expand at a solid pace in 2015 and for the next few years. Real (inflation - adjusted) GDP grew at an annual rate of only 0.9 percent during the first half of this calendar year, the CBO expects stronger growth during the second half of the year, in part because the effects of some restraining factors in the first part of the year, such as bad weather, have abated and because recent data, particularly regarding employment, indicate that the economic expansion is on firmer ground. Real GDP will increase by 1.5 percent from the fourth quarter of 2013 through the fourth quarter of 2014, CBO estimates. CBO projects that the growth of real GDP will pick up after this year, to an annual average rate of 3.4 percent from 2014 through. CBO anticipates that growth over the next few years will be stronger than growth this year for three main reasons: • In response to increased demand for their goods and services, businesses will increase their investments in new structures and equipment at a faster pace and will continue to expand their workforces. • Consumer spending will also grow more rapidly, spurred by recent gains in 3 household wealth and —with an improving labor market —gains in labor income. • Fewer vacant housing units, more rapid formation of new households, and further improvement in mortgage markets will lead to larger increases in home building. Revenues are projected to grow by $1.8 trillion between 2014 and 2024, or at an annual rate of 4.9 percent. Provisions of law that have recently taken effect (such as the expiration of certain tax provisions) and, to a lesser extent, the ongoing economic expansion mostly explain a projected jump in federal revenues from this year to next, from 17.5 percent of GDP to 18.3 percent. Greater receipts from individual income taxes (up from 8.1 percent of GDP in 2014 to 8.5 percent in 2015) and corporate income taxes (rising from 1.8 percent of GDP to 2.2 percent) largely account for that increase. State Budget Update Since 2011 the State of California's fiscal situation has dramatically turned around making substantial progress in addressing prior, persistent state budgetary problems. This progress has been facilitated by a recovering economy, a stock market that has been soaring, increased revenues from the temporary taxes of Proposition 30, and the Legislature's recent decisions to make few new ongoing spending commitments outside of Proposition 98. The Governor's 2015/16 budget proposal continues to focus on paying down the "wall of debt," a selection of budgetary liabilities the state incurred in addressing its past budget problems. Having coped with a more severe recession than that of the nation as a whole, California has come back over the last 18 months with growth that has outpaced the nation. California's Gross State Product grew by 2% last year, well above the U.S. rate of 1.8 %. In addition, the growing housing market and retail and hospitality industry are providing increased revenues for the state. BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 tos QA`as GENERAL FUND— KEY REVENUE ANALYSIS The following discussion provides a status of significant General Fund revenue sources as of the second quarter, ending December 31, 2014. Staff monitors each revenue source closely and may recommend certain revenue adjustments based on revenue actuals or state budget action. 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 6.2 %, Town of Los Gatos Sales Tax revenues are up by 3.0 %. In developing the FY 2014/15 budget, staff assumed a 4% growth rate (excluding Netflix) which has not materialized to this level and therefore, staff recommends a $224,685 budget decrease. $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- Quartedy and Annual Revenues 5 -Year History FY FY FY FY FY 10 /11 11/12 12/13 13/14 14/15 O2nd Quarkr Actual Revmues nFisml YearTotal Actual Revers es • Fiscal Year Budgeled Revmues 4 FY 10/11 FY 11/12 FY 12/13 FY 13/14 FY 14115 2nd Quarter Actual Revenues $ 4,776,828 $ 3,667,071 $ 2,975,082 $ 2,825,414 $ 2,532,086 Fiscal Year Total Actual Revenues $ 9,971,409 $ 9,889,100 $ 8,757,428 $ 8,029,571 Fiscal Year Budgeted Revenues $ 8,303,962 2nd Quarter Percent of Total 47.91% 37.08% 33.97% 35.19% 30.49°/6 Recommended Budget Revision $ (224,685) 4 BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 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 9.3 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. Property tax budget projections are based on valuation 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. Second quarter receipts are trending significantly higher than those received during the second quarter of the previous fiscal year and are at 45% of budgeted totals. Based on these trends staff recommends a $138, 569 increase in General Property Tax. $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 S Quarterly and Annual Revenues 5 -Year History FY 10 /I1 FY 11/12 FY 12/13 FY 13/14 FY 14115 1112nd Qumler Actual Revenues OFucal Year Total Actual Revenues • Fiscal Year Budgeed Revenues FY 12/13 FY 13/14 $ 3,753,004 $ 3,462,424 $ 9,477,043 $ 9,031,871 39.60'O/a 38.34% FY 14/15 $ 3,690,329 $ 8,192,240 45.05% Recommended Budget Revision $ 138,596 5 FY 10/11 FY 11/12 2nd Quarter Actual Revenues $ 3,763,165 $ 3,155,476 Fiscal Year Total Actual Revenues $ 7,289,897 $ 7,532,073 Fiscal Year Budgeted Revenues 2nd Quarter Percent of Total 51.62% 41.89% 1112nd Qumler Actual Revenues OFucal Year Total Actual Revenues • Fiscal Year Budgeed Revenues FY 12/13 FY 13/14 $ 3,753,004 $ 3,462,424 $ 9,477,043 $ 9,031,871 39.60'O/a 38.34% FY 14/15 $ 3,690,329 $ 8,192,240 45.05% Recommended Budget Revision $ 138,596 5 toil 8 F l 1 BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 !ga QA� 9 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 second quarter receipts are not necessarily predictive. Total franchise fee revenues are trending slightly higher than those of the second quarter in FY 2013/14. No budget adjustment recommended this time. $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 Quarterly and Annual Revenues 5 -Year History FY FY FY FY FY 10 /11 11112 12/13 13/14 14/15 2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Total Budgeted Revenues 2nd Quarter Percent of Total 02nd Quarter Actual Revenues 0 Fiscal Year Total Actual Revenues ■Fiscal Year Total Budgeted Revenues FY 10/11 FY 11/12 FY 12/13 FY 13/14 FY 14/15 $ 626,592 $ 669,186 $ 685,308 $ 681,431 $ 735,550 $ 1,901,605 $ 1,952,488 $ 2,028,903 $ 2,063,756 $ 2,076,030 32.95% 34.27% 33.78% 33.02a/a 35.43% Recommended Budnet Revision $ - 11 BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 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 retail is capped at $975. These activities account for approximately 25% of annual business licenses, while the remaining 75% are flat fee businesses. 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 and the anticipated change of reclassification of Netflix from a retail to an e- commerce business category, business license tax revenue for the current fiscal year was budgeted at approximately 25% higher than prior year actuals. The second quarter revenues reflected below include a one -time prior year adjustment in collections from Netflix due to the reclassification. Current year second quarter revenues are trending significantly higher than those of the previous year, consistent with the trending economic forecast, improved economic outlook and the one -time adjustment. Therefore, staff recommends a budget increase of $188,490. 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 /11 FY 11/12 FY 12/13 FY 13/14 FY 14/15 a 2nd Quarter Actual Revenues 0 Fiscal Year Total Actual Revenues ®Fiscal Year Total Budgeted Revenues 7 FY 10 /11 FY 11/12 FY 12113 FY 13/14 FY 14/15 2nd Quarter Actual Revenues 368,757 209,377 327,237 352,049 945,846 Fiscal Year Total Actual Revenues $ 1,136,511 $ 1,077,620 $ 1,151,579 $ 1,130,020 Fiscal Year Total Budgeted Revenues $ 1,411,510 2nd Quarter Percent of Total 32.45% 19.43% 28.42% 31.15% 67.01% Recommended Budget Revision $ 188,490 7 tow x e l BUDGET PERFORMANCE REPORT — 2ND QUARTER FY 2014/15 1ps�s�ptOS 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 visitors to Los Gatos. Analysis —Visit California, formerly the California Travel and Tourism Commission, reports that the total number of visitors to California grew 3.4% in 2014 as both State and national travel industries are booming. The forecast for California visitation in 2015 is projected to grow by 2.3 %. Second quarter TOT revenues are trending significantly higher than those of the second quarter of 2013/14, and as a result staff is recommending a budget increase of $225,800 $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 /11 FY 11/12 FY 12/13 FY 13/14 FY 14/15 o2nd Quarter Actual Revenues ❑Fiscal Year Total Actual Revenues III Fiscal Year Total Budgeted Revenues - — 8 - FY 10 /11 FY 11112 FY 12/13 FY 13/14 FY 14115 2nd Quarter Actual Revenues $ 380,129 $ 422,059 $ 434,419 $ 562,906 $ 882,406 Fiscal Year Total Actual Revenues $ 1,004,659 $ 1,174,485 $ 1295,887 $ 1,512,846 Fiscal Year Total Budgeted Revenues $ 1,274,200 2nd Quarter Percent of Total 37.84% 35.94% 33.52% 37.21% 69.25% Recommended Budget Revision $ 225,800 - — 8 - BUDGET PERFORMANCE REPORT - 2ND 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 — Second quarter receipts are trending below those in the same period in the prior fiscal year. Financial indicators throughout the market are predicting a slight increase. For example, from December 2013 to December 2014 the LAW yield stayed at 0.27 %; however the five -year Treasury increased from 1.3% to 1.75 %, the six -month treasure increased from 0.08% to 0.12 %, and the three -month Treasury declined from 0.05% to 0.03 %. 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. As the Town's Investment Policy requires investment in conservative vehicles such as the LAW and Treasury bills, their continued low returns will greatly affect interest income returns. No budget adjustment is recommended this time. $1,000,000 $800,000 $600,000 $400,000 $200,000 Quarterly and Annual Revenues 5 -Year History FY FY FY FY FY 10/11 11/12 12/13 13/14 14/15 Actual Revenues DFiscal Year Revenues ■ Fiscal Year Total Budgeted Revenues 9 FY 10 /11 FY 11/12 FY 12/13 FY 13/14 FY 14/15 2nd Quarter Actual Revenues $ 545,913 $ 476,653 $ 303,305 $ 251,835 $ 161,825 Fiscal Year Revenues $ 942,977 $ 606,454 $ 424,669 $ 321,555 Fiscal Year Total Budgeted Revenues $ 412,340 2nd Quarter Percent of Total 57.9% 78.60% 71.40/a 78.3% 39.2% Recommended Budget Revision $ - 9 I BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 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 — Second quarter Town service revenues, specifically Charges for Services, are trending well ahead of second quarter results from the previous fiscal year, with 83% of budgeted revenues already collected. The increase is largely the result of an increase in building activity and development. Typically development fees are collected in advance for projects and recognized as revenue in the fiscal year the work is performed. Staff recommends a $66,265 revenue increase at mid -year. $5,000,000 $4,500,000 S4,000,000 $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 Flistory FY 10/11 FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 10 /11 FY 11/12 2nd Quarter Actual Revenues $ 2,039,800 $ 2,303,940 Fiscal Year Total Actual Revenues $ 3,360,607 $ 3,683,044 Fiscal Year Total BudWed Revenues 2nd Quarter Percent of Total 60.70% 62.56% IZOd Qurkr Actual Raeuucs 3Fmd Y ®r TObl AmID Rev .O IFi.9 Y ®r TOW Bud�¢d Revcoues FY 12/13 FY 13/14 FY 14/15 $ 2,211,225 $3,303,248 $3,582,016 $ 4,105,015 $4,870,038 $4,333,262 53.87% 67.83% 82.66% Recommended Budget Revision $ 66,265 10 FYI M OF .•.• BUDGET PERFORMANCE REPORT - 2ND 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 licensing aspects of development. Licenses and Permit revenue was budgeted slightly higher than FY13 /14 in anticipation increased development activity. Analysis — Second quarter License and Permit revenue is trending well ahead of second quarter results from the previous fiscal year, with an increase of 25 %. Therefore, staff recommends a budget revenue increase of $180,455. $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 14/15 2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Total Budgeted Revenues 2nd Quarter Percent of Total Rc e,..a n Fmcd Year rurel Acme Rmnucs OFmA Ym Tcul audgewd Revenues FY 10 /11 FY 11/12 FY 12/13 FY 13/14 FY 14115 $ 1,151,498 $ 1,218,432 $ 1,566,216 S 1,950,393 $ 2,274,129 $ 2,040,811 $ 2,361,510 $ 3,060,948 $ 3,235,122 $ 2,909,666 56.42% 51.60% 51.17% 60.29% 78.16% Recommended Budget Revision $ 180,455.00 11 0 X F BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 1pB��A`Q9 FY 2014/15 Recommended Budeet Adjustments Budget adjustments are recommended for the following revenues and expenditures at the second quarter as described below: Fund Program Account General Fund Revenues 111 1201 45432 Property Tax 138,596 111 1201 43311 Motor Vehicle In Lieu Fee 121,713 111 1201 41211 Sales & Use Tax (224,685) 111 1201 41311 Transient Occupancy Tax 225,800 111 2301 41411 Business License Tax 188,490 111 3201 42413 Planning Permit 200,000 1 I 1 3202 44412 Special Projects 50,000 111 3201 44414 Development Review 30,000 111 3202 44417 General Plan Reimbursement (90,000) 111 3202 44418 Noth 40 TLG Reimbursement 90,000 111 3301 42411 Building Permit Fees 100,000 111 3301 42412 Title 24 Fees 50,000 111 3301 44421 Building Plan Check Fee (75,000) i l l 3501 45921 Sate of Land / Property(Net of Account 42713) 9,455 111 3501 45319 BMP Housing Rent Decrease - Property Sold (10,848) 111 4302 44512 Grossing Guard Contract Revenue 10,845 111 4303 44515 SRO Funding from School District to LG 40,000 1 l 1 4806 4xxxx Alcoholic Beverage Control Mini Grant Revenue 11,775 111 5301 44614 Sports Park Annual Use Fee 10,420 111 4202 43527 SCCSET /ABI09 Realingment (70,000) 111 7101 49711 From Library Trust Fund 50,000 12 General Fund Expenditures 111 2102 62512 MIEV Vehicle Lease 3,236 111 4301 62512 MIEV Vehicle Lease 9,703 111 5302 62512 MIEV Vehicle Lease 3,234 111 1301 51111 Town Attorney Contract 5,700 111 2102 67213 LGS Case Management Grant 7,000 111 2202 64431 Increased Town -wide H iring Caused Medical Examin Costs 15,000 111 3202 63221 Planning Services 25,000 TOTAL GENERAL FUND EXPENDITURES $ 68,873 12 BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 Fund Program Account Other Fund Revenues - 411 GFAR 411 411 -811 -9903 43329 Increase in VTA Measure B - Pavement Rehab Crack Seal 23,262 411 411 -821 -2303 49633 PPW Building Improvements 40,207 $ 63,469 711 Library Trust Fund 711 7301 45452 Per Friends of the Library Contract 50,000 $ 50,000 481 Gas Tax 481 481 433xx Increased Gas Tax Revenue Projections 89,214 $ 89,214 TOTAL OTHER FUNDS REVENUES $ 202,683 Fund Program Account Other Fund Expenditures - 411 GFAR 411 411- 811 -9903 82405 Increase in VTA M ensure B - Pavement and Rehab Crack Seal 23,262 411 411 - XXX -XXXX 82405 Adult Recreation Cen ter - Emergency Roof Repair 50,000 411 411 - XXX -XXXX 82405 Adult Recreation Center - Cable and Control System Repair 25,000 411 411- 813 -0215 82405 Electric Vehicle Charging Stations - Grant Funded (90,635) $ 7,627 481 Gas Tax 481 481 -811 -9901 82405 Increased Gas Tax Revenue Projections for Steet Repair 89,214 $ 89,214 Workers Compensation 612 2202 65532 Field Investigations 65,000 $ 65,000 Strom Drain 462 462- XXX -XXXX 82405 Frank Ave Storm Drain - Emergency Repair 150,000 $ 150,000 Facilities Maintenance 633 5404 99411 PPW Building Improvements 40,207 633 5404 51310 Part Time Electrician - Contractual Services 35,000 $ 75,207 Library Trust Fund 711 7301 99111 To Library Administration 50,000 $ 50,000 Cleless Ness Trust Fund 713 7302 61178 Passive Noise Solution in Library 14,950 S 14,950 TOTAL OTHER FUNDS EXPENDITURES $ 451,998 13 wit of BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 SUMMARY OF KEY RECOMMENDED BUDGET ADJUSTMENTS General Fund Revenues • Transient Occupancy Tax: Actual receipts and Visit California forecasts indicate a steady growth in travel and therefore, staff recommends a budget increase of $225,800. • Business License: Staff recommends a budget increase of $188, 490 as a result of an increase in business license activity and some one -time late payments that were received during the period. • Licenses and Permits: The recommended increase of $180,455 is primarily due to the increase in revenues from the Building and Planning departments which has resulted from deferred revenues from 2013/14. The deferred revenues are based on larger projects that came in close to fiscal year end and the work is not completed until the next fiscal year. General Property Tax and Motor Vehicle in Lieu Fee: Staff recommends an increase in projected revenues of approximately $138,596 in General Property Tax and $121,713 Motor Vehicle in Lieu fee which are in line with the estimates and forecasts provided to the Town from Santa Clara County. • Charges for Services: Staff recommends an increase of $66,265 in this revenue sources primarily due to increased revenues being received for development related services. • Due to the sale of a BMP housing unit staff is recommending a revenue increase of $179,000 from the proceeds of the sale as well as a corresponding revenue reduction of $10,848 as the Town will no longer be collecting rent from this unit. • Friends of the Library: Staff recommends a budget increase of $50,000 from proceeds earned by the Friends of the Library. • Alcoholic Beverage Control Mini Grant: The Town received $11,775 in grant funding to be used for alcohol related issues incluicing progams targeted at driving under the influence, sale of alcohol to minors, and local business owner education. Staff recommends a budget increase of $11,775. • AB109 Realignment Money: staff recommends a budget decrease of $70,000 as the Town will not be receiving anticipated realignment money. Sales and Use Tax: Staff recommends a budget decrease of approximately $224,685 as a result of the most recent economic outlook provided by MuniServises, The Town Sales Tax advisor. 14 BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 General Fund and Other Funds Expenditures • Planning Services: To provide additional information and analysis of the potential econimic impacts of the North 40 Specific Plan area on Downtown Los Gatos, staff recommends a $25,000 budget adjustment. • Medical Exam Costs: Due to increased town -wide hiring staff recommends a $15,000 budget adjustment for additional medical exams for new hires. • LGS Case Management Grant: Staff recommends a budget increase of $7,000 to provide 100 hours of senior case management at the Los Gatos Saratoga recreation center. • Electric Vehicle Mitsubishi Vehicles (MIEV): The Town entered into a lease agreement for use of five Mitsubishi electric vehicles, used by the Police Department, Parks and Public Works Department and Town Manager's Office. For FY 14/15 the cost of the vehicle lease increased and therefore staff is recommending a budget adjustment of $16,173 for these vehicles. • Frank Avenue Storm Drain: Staff recommends a budget adjustment of $150,000 from the Storm Drain Fund for emergency repairs at the Frank Avenue storm drain. • Emergency Repairs: Staff recommends a budget adjustment of $75,000 from the Capital Reserve for emergency repairs needed at the Adult Recreation Center for the roof, as well as the interior cable and control system . • Streets Repair and Resurfacing: Staff recommends a budget increase of $89,214 to the Street Repair and Resurfacing capital project due to an increase in gas tax revenue received by the Town. • Pavement Rehab and Crack Seal: Due to increased VTA Measure B revenues, staff recommends an budget increase of $23,262 to the capital project for pavement rehab. • Staff recommends a $35,000 expenditure increase from the facilities reserve to fund a part -time electrician to perform on -going electrical work. • Staff recommends $40,207 expenditure increase for the Parks and Public Works building improvement project to fund office reconfiguration and ergonomic furnishings. Staff recommends a budget reduction of $90,635 for the electric vehicle charging station capital project as this project was completed primarly using county grant funds. • Expenditures in Workers Compensation are trending high due to adjustments in insurance premiums and claim activity and therefore staff recommends a $65,000 increase to adopted Workers Compensation fund expenditures. • To fund passive noise solutions at the library, staff recommends a budget increase of $14,950 from the Clelles Ness Trust Fund. 15 BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 FINANCIAL SUMMARIES, PROJECTIONS AND RECOMMENDATIONS General Fund The following table is the Schedule of General Fund Operating Revenues. Vs. Operating Expenditures for the second quarter of FY 2014/15 this 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 second quarter. Town of Les Gatos Schedule of General Fund Operating Revenues vs. Operating Expenditures For the period ended December 31, 2014 as of Other noting Sources: PAT 3/14 FY13 114 FY13/14 FY13 /14 FYl4 115 FY14115 FY14/15 FY14A5 FY14 115 Use of Res erves - Capital Projects Final Adjusted 2nd Qtr % Adopted Adjusted tad Qtr % Flaaace Use ofAeserves - Special Studies Balance Budget Aetoch WD Budget Budget Atlanta YID Pmjecdw aevenues 320,948 320,948 320,948 General Property Tax S 9,031,871 $ 8,022,421 S 3,462,424 43% S 8,192,240 5 8,192,740 S 3,690329 45% S 8330,836 VLF BackBg Property Tax 2,657,406 2,657,404 - Ode 2,683,980 2,683,980 - 2,805,693 Saks & Use Tax 8,029,571 7,868,092 2,825,414 36% 8,303,962 8,303,962 2,532,086 30% 8,07977 Franchise Fees 2,063,756 2,040,030 681,431 33% 2,076,030 2,076,030 735,550 35% 2,076,030 Transient Occupancy Tax 1,512,846 1,200,000 562,906 47% 1,274200 1,274,200 882,405 6914 1300,000 MVL Fee 13,068 16,030 13,068 16,350 16,350 - 0% 16,350 Business license Tax 1,130,020 1361 ,510 352,069 26% 1,411,510 1,411,510 945,846 67% 1,600,000 Licenses & Pounds 3,235,122 2,826,413 1,950,393 69% 2,909,666 2,909,666 2,274,129 78% 3,090,121 Intergovernmental 804,631 756,186 212,086 28% 717,950 717,950 219,254 31% 659,725 Charges for Services 4,870,038 3,590,091 3,303,248 92% 4333 ,262 4,333,262 3,582,016 83% 4399,527 Fuses & Forkdures 795,684 612,520 233,414 38% 743,170 743,170 362,158 49% 743,170 Interest 321 ,555 402,290 251,835 63% 412,340 412,340 161,825 39% 412,340 GASB Investment to M13 perAudk 303,743 (100,000) 681,199 44% (102,000) (102,000) 377,456 3,939399 (102,000) Miscellaneous /Other 3,585246 2.643,365 2,277,772 86% 2,527,645 2,527,645 382,477 15% 2,745,797 Fund Transfers 325938 671,623 45,722 7% 629,420 629,420 54,033 9% 629,420 Total Revenues 38,686,493 34,567,975 16,852,961 49% 36,129,725 36,129,725 16,199,565 45% 36,986286 as of Other noting Sources: Use of Res erves - Capital Projects 2,683,746 2,683,746 6,720,743 7,069,540 7,049 ,540 Use ofAeserves - Special Studies - " Vasona land Sale Reserve 320,948 320,948 320,948 Food Balance Reagocations Year ad Savings /Budget Amendment 490,000 - Budget StabilimtionReseve 114,191 2,000,000 Specul Studies 379,451 379,451 379,451 Carryforsvard Reserve " PERS L.iabdfty Account 1 ,556,105 - Use oflnteroal Service Reserves - Total Other Funding Sources 2,797,937 6,729,851 - 7, 421,142 7,749,939 - 7,749,939 Total Revenues plus Reserves S 41.454,430 $ 41297,826 S 16,852,961 $ 43,550,867 $ 43,879,664 $ 16,199,565 S 44736 ,225 Expenditures (includes Of but no enmmbran es) Mayor &Council 188,111 199,537 86,805 44% 211 ,561 211,561 98,806 47% 211,561 Attorney 238,253 227,027 114,028 50% 258,984 258,984 117,947 46% 264,684 Ad®nunotive Services 2,707,809 2,786,649 1,256,578 45% 2,971,714 2,979214 1,311,044 44% 3,004,450 Cons, Developmeet 4320,634 3,939399 1,992216 51% 4,076,729 4,082,867 1,998,051 49% 4,107,867 Police 13,673270 13,485,623 6257,841 46% 14205,213 14,261348 6,016,595 42% 14271,051 Parts &Public Works 5,580,769 5,874,868 2,639,320 45% 6,035,432 6,071,879 2,656312 44% 6,075,113 Library 2,131,438 2229,556 1,058,956 47% 2349,939 2,349,939 1,117244 48% 2349,939 Total Dept Expenses 8 28,840281 8 26,742.609 E 13,405,744 47% $ 30,109,572 $ 30,215792 S 13315,999 44% 30284,665 Non -Dept Expenditures and other uses Cr:neral Govenceent 12,644,146 12,555217 2,685479 21% 13,383,842 13,663,842 965,163 7% 13,663,842 Total N. -D", Expense. S 12,644,146 $ 12,555217 $ 2,685,479 21% E 13383,842 E 13,663,842 S 965,163 7% 13,663,842 Total Operating Expenditure. S 41484,430 $ 41297,826 S 16,091,223 39% S 43,493,414 E 43,879,634 $ 14,281,162 33% $ 43,948,507 Net Operating Revenues Before Spedu S E $ 761,739 $ 57,453 S 30 $ 1,918,403 $ 787,718 16 BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 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. 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 (Non -Point Source), and several landscaping and Lighting District Funds. As indicated in the chart below the Town has not yet received a payment which is to be credited to the Non -Point Source fund. It is anticipated that this payment will be received prior to year end and therefore no budget adjustment is being recommended at this time. Staff will continue to monitor these revenue funds to ensure payments are received. Special Revenue Funds Budget to Actuals Comparisons 17 CDBG Non Point Grants Source LEDs Beginning Fund Balance (Pre-audit) 57,109 125,936 169,256 Budgeted Revenues 70,000 336,684 38,938 Total Actual Revenues -2nd Qtr 10,740 - - Budgeted Expenditures 70,000 442,616 22,811 Total Actual Expenditures - 2nd Qtr - 212,577 7,899 god Quarter Ending Fund Balance 67,849 (86,641) 161,357 17 BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 Capital Proiects Funds 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 2014/15 adopted budget. Staff recommends increasing Gas Tax Expenditure Budget by $89,214 to match Gas Tax revenues available to spend this fiscal year. Staff will continue to monitor these expenditures throughout the remainder of the year. Capital project Funds Budget to Actuals Comparisons The Grant Funded CIP fund displays a deficit balance because this grant fund expends Town dollars first, then provides documentation of these expenditures to the State of California or other granting agencies and is reimbursed for those costs. The reimbursements eventually result with the fund "breaking even" or a zero fund balance. K-1 GFAR Traffic Grant Fund Storm Utility Gas Fund Mitigation CIP's Drains Undergd Tax Beginning Fund Balance 8,302,327 2,920,988 (288,730) 1,330,895 2,519,548 169,346 Budgeted Revenues 9,251,749 1,370,443 1,127,991 105,120 60,000 792,000 Total Actual Revenues - 2nd Qtr 1,729,472 - 61,200 136,046 17,785 475,245 Budgeted Expenditures 13,008,446 1,370,443 955,785 - - 806,000 Total Actual Expenditures -2nd Qtr 689,400 24,916 315,262 - - - 2nd Quarter Ending Fund Balance 9,342,399 2,896,072 (542,792) 1,466,941 2,537,333 644,591 The Grant Funded CIP fund displays a deficit balance because this grant fund expends Town dollars first, then provides documentation of these expenditures to the State of California or other granting agencies and is reimbursed for those costs. The reimbursements eventually result with the fund "breaking even" or a zero fund balance. K-1 tow x BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 ��8 GAt�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 and Self- Insurance Liability Funds are trending significantly higher due to adjustments in insurance premiums and claim activity. The staff recommends a $65,000 increase to the workers compensation adopted expenditures due to these adjustments. 19 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 3,429,643 1,576,698 1,056,559 149,293 2,661,264 740,861 1,319,864 Budgeted Revenues 430,243 687,833 527,683 85,000 1,051,339 569,300 1,215,317 Total Actual Revenues -2nd Qtr 184,982 385,469 240,291 65,113 5429224 284,650 593,083 Budgeted Expenditures 647,689 1,060,179 784,592 127,150 1,205,414 569,252 2,188,812 Total Actual Expenditures- 2nd Qtr 33,940 777,382 564,533 34,532 411,188 207,023 19157„585 2nd Quarter Ending Fund Balance 3,580,685 1,184,785 732,317 179,874 2,792,300 818,488 755,362 19 1pN N of BUDGET PERFORMANCE REPORT - 2ND QUARTER FY 2014/15 !ps GA1 S Trust and Aeencv Funds Town Trust and Agency Funds have fund balances as of December 31, 2014 of $717,088 for the Library Trust Funds and $2,094,346 for the SA Trust Fund. No budget revisions are contemplated at this time for these funds. Trust & Agency Funds Budget to Actuals Comparisons During the second quarter, the Successor Agency Board and staff continued to work diligently to satisfy the many requirements and deadlines established by the state through AB1x26 and AB1484. AB1x26 is the "Dissolution Bill" that eliminated the Town's Redevelopment Agency effective February 1, 2012. AB 1484 is the "clean -up" bill that revised and attempted to clarify AB1x26. In accordance with the law, the Successor Agency continues to wind down the affairs and operations of the former Redevelopment Agency by implementing programs and activities in accordance with the State - approved Recognized Obligation payment Schedule (ROPS). The Successor Agency monies are now accounted for in a Private Purpose Trust fund and no longer part of the Town's Financial Statements. CONCLUSION The financial results from the prior fiscal year, coupled with the FY 2014/15 second quarter data, confirm that the second quarter financial results are stable and improving. Staff is cautiously optimistic as the five -year financial plan projects that Town's financial outlook in future years is improved with no shortfalls forecasted in the next five years. Therefore, as staff is actively engaged in the 2015/16 budget process, the primary focus will continue to be on ensuring that the available Town resources are allocated to meet the priority service needs of the community. 011 Library SA Trust Fund Trust Beginning Fund Balance 694,920 3,615,497 Budgeted Revenues 39,099 4,047,182 Total Actual Revenues - 2nd Qtr 37,032 - Budgeted Expenditures 110,700 4,040,766 Total Actual Expenditures -2nd Qtr 14,864 1,521,151 2nd Quarter Ending Fund Balance 717,088 2,094,346 During the second quarter, the Successor Agency Board and staff continued to work diligently to satisfy the many requirements and deadlines established by the state through AB1x26 and AB1484. AB1x26 is the "Dissolution Bill" that eliminated the Town's Redevelopment Agency effective February 1, 2012. AB 1484 is the "clean -up" bill that revised and attempted to clarify AB1x26. In accordance with the law, the Successor Agency continues to wind down the affairs and operations of the former Redevelopment Agency by implementing programs and activities in accordance with the State - approved Recognized Obligation payment Schedule (ROPS). The Successor Agency monies are now accounted for in a Private Purpose Trust fund and no longer part of the Town's Financial Statements. CONCLUSION The financial results from the prior fiscal year, coupled with the FY 2014/15 second quarter data, confirm that the second quarter financial results are stable and improving. Staff is cautiously optimistic as the five -year financial plan projects that Town's financial outlook in future years is improved with no shortfalls forecasted in the next five years. 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