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DATE:
TO:
FROM:
SUBJECT:
MEETING DATE: 6/16/15
ITEM NO: G 11
COUNCIL AGENDA REPORT
JUNE 10, 2015
MAYOR AND TOWN COUNCIL }
LES WHITE, INTERIM TOWN MAN R `✓
TOWN OF LOS GATOS FISCAL YEAR 2015/16 OPERATING BUDGET
AND FY 2015/16 — FY 2019/20 CAPITAL IMPROVEMENT PROGRAM
(CIP), NEW APPROPRIATIONS, AND OTHER APPROVED ADJUSTMENTS
AND MINOR CORRECTIONS
RECOMMENDATION:
1. Consider the Town of Los Gatos Proposed Operating and Capital Budget for Fiscal Year
2015/16
2. Provide direction regarding any of the following changes to the Fiscal Year 2015/16
Operating and Capital Budget or the Fiscal Years 2016 -2020 Capital Improvement
Budget:
a. Authorization to adjust General Fund expenditures and revenues by $164,000 to
fund an entry level Officer
b. Authorization to create an Operating Budget Reserve with $300,000 on unspent
FY 2014/15 dollars.
3. Adopt resolution approving the Operating Budget for Fiscal Year 2015/16
4. Consider the Town of Los Gatos Proposed Capital Budget for Fiscal Years 2016 -2020
5. Adopt Resolution approving the Capital Improvement Program Budget for Fiscal Years
2016 -202
BACKGROUND:
On June 2, 2015, a public hearing was held to discuss the Proposed FY 2015/16 Town Operating
and Capital Summary Budget and Proposed FY 2015/16 — FY 2019/20 Capital Improvement
PREPARED BY: STEPHE
Finance and Administr ve Services Director
Reviewed by:
Town Manager Town Attorney inance
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PAGE
MAYOR AND MEMBERS OF THE TOWN COUNCIL
SUBJECT: TOWN OF LOS GATOS FISCAL YEAR 2015/16 OPERATING BUDGET AND
FY 2015/16 — FY 2019/20 CAPITAL IMPROVEMENT PROGRAM (CIP), NEW
APPROPRIATIONS, AND OTHER APPROVED ADJUSTMENTS AND MINOR
CORRECTIONS
JUNE 10, 2015
BACKGROUND (cont'd)•
Program (CIP). The Town Council considered a portion of the Proposed FY 2015/16 Town
Operating Budget and provided staff with the following direction:
A. Transfer $100,000 in FY 2014/15 year -end surplus to the NPDES Fund
B. Transfer $500,000 from the Town's Vehicle Maintenance Fund to the Town's
General Liability ABAG Fund
C. Increase Vehicle Impact Fee revenue in the General Fund Appropriated Reserve
(GFAR) by $136,000
D. Retain the Hunan Services and Arts Grants Allocation funding as recommended by
the Community and Senior Services Commission and Arts and Culture Commission,
$90,000 and $19,800 respectively.
Two outstanding issues remain for Council to address and provide direction on:
1. Authorization to adjust General Fund expenditures and revenues by $164,000 to fund
an entry level Officer
2. Authorization to create an Operating Budget Reserve with $300,000 of unspent FY
2014/15 dollars.
DISCUSSION:
The attached Operating Budget resolution incorporates the following actions directed by the
Council at the June 2, 2015 budget hearing.
A. Transfer $100,000 in FY 2014/15 year -end surplus to the NPDES Fund
B. Transfer $500,000 from the Town's Vehicle Maintenance Fund to the Town's
General Liability ABAG Fund
C. Increase Vehicle Impact Fee revenue in the General Fund Appropriated Reserve
(GFAR) by $136,000
Further direction is needed from Council regarding the following two items:
Entry level Police Officer
Staff recommends adjusting Proposed FY 2015/16 expenditures, in the amount of $164,000 to
fund an entry level Police Officer position within the Police Department. This is an additional
$164,000 and is not included in the proposed FY 2015/16 operating budget because the Interim
Town Manager recommended the position after the budget was prepared. Staff anticipates that
the increase in budgeted expenditures will be offset in FY 2015/16 through a combination of
vacancy salary savings, overtime savings and increased General Fund revenue from property and
sales tax. These estimated savings and increased revenue amounts will be confirmed during the
FY 2015/16 mid -year budget review.
PAGE
MAYOR AND MEMBERS OF THE TOWN COUNCIL
SUBJECT: TOWN OF LOS GATOS FISCAL YEAR 2015/16 OPERATING BUDGET AND
FY 2015/16 — FY 2019/20 CAPITAL IMPROVEMENT PROGRAM (CIP), NEW
APPROPRIATIONS, AND OTHER APPROVED ADJUSTMENTS AND MINOR
CORRECTIONS
JUNE 10, 2015
DISCUSSION (cont'd):
After reviewing the Town's police budget under the management of the Town's Police Chief,
staff determined that the Chief has successfully managed the Department's overtime use and
reduced overtime when compared to prior years. In the last seven years, starting with FY
2007/08, the Police Department's overtime usage exceeded budgeted amounts in a range of
$77,500 to $420,000. This range was in excess of budgeted overtime and absorbed within the
Police Department's budget as a result of vacancies and other salary savings or with mid -year
budget adjustments.
Under the direction of the Chief of Police, through focused monitoring and administrative
controls the use of overtime in FY 2014/15 is tracking within the authorized budget amount.
Overtime is regarded as an unavoidable cost within any Police Department as shift coverage is
necessary to cover training absences, court appearances and other absences such as vacation, sick
time and work - related injuries. In addition, when critical incidents occur, overtime is often
necessary as shifts may need to be extended or officers are called in on their days off.
The focused efforts of controlling overtime within the Department have not been without its
challenges. During FY 2014/15 the department experienced unprecedented vacancies coupled
with several workers' compensation injuries with as many as five at one time and at least two
serious injuries resulting in absences for the entire fiscal year.
Similar to many other agencies of comparable size, 1.5 to 2.0 full -time equivalent positions are
lost each year due to work - related illnesses and injuries. The majority of workers' compensation
hours have covered significant cases such as cancer, hepatitis, and major back, neck and knee
surgeries that were deemed unavoidable.
Other absence hours include court appearances, training, vacation and sick time. These absences
total approximately 3.5 to 4.0 FTE's each year. Many of these absence hours are not backfilled,
while a portion of the hours are filled through overtime (the department's overtime budget is
$380k). The requested position will help alleviate the reduced staffing levels due to these
absences and may also result in reducing overtime. Using budgeted positions in this manner is a
common practice in other Police Departments.
The Department has projected shift schedules and determined that adding this entry level
position, once hired and fully- trained to be field ready, (assuming that the Department is fully
staffed and there are no major critical incidents such as another homicide or natural disaster), the
Department's overtime could be reduced by approximately $30,000 (a year) in future years with
additional anticipated offsets to workers' compensation injuries.
Operating Reserve
Staff is recommending designating an operating reserve in the amount of $300,000 from FY
2014/15 General Fund anticipated savings to be available for use in future operating budgets for
PAGE
MAYOR AND MEMBERS OF THE TOWN COUNCIL
SUBJECT: TOWN OF LOS GATOS FISCAL YEAR 2015/16 OPERATING BUDGET AND
FY 2015/16 — FY 2019/20 CAPITAL IMPROVEMENT PROGRAM (CIP), NEW
APPROPRIATIONS, AND OTHER APPROVED ADJUSTMENTS AND MINOR
CORRECTIONS
JUNE 10, 2015
DISCUSSION (cont'd
restoration of services, revenue declines and various possible on -going expenditure increases and
salary and benefit augmentations.
Staff is projecting a FY 2014/15 General Fund surplus of $2.7 million. Per Town Policy, excess
year -end surplus is rolled in the Budget and Economic Catastrophe Reserves until a funding level
of 25% of operating expenditures is maintained. The Town has retained a level of funding above
the 25% threshold for several years and therefore, absent Council directive otherwise, all FY
2014/15 General Fund year -end surplus would go into the Capital Improvement Plan (CIP) for
funding of CIP projects.
Staff s recommendation allocates approximately 11 % or $300,000 from current year FY 2014/15
General Fund year- savings to fund operations with the remaining balance (approximately $2.0 to
$2.6 million exclusive of Council allocation of $100,000 allocated to NPDES) to the Capital
Improvement Program (CIP) Budget. Should the $300,000 reserve not be utilized during FY
2015/16 staff would recommend that it be rolled over into the CIP budget at year -end with 1I-
15% of FY 2015/16 General Fund year -end surplus being designated for operations in each
subsequent year.
While the Town of Los Gatos has not historically done so, it is common local government
practice to designate excess year -end funds for future operating expenditures. These reserves are
commonly used for unanticipated operating expenditures such as fuel cost and utility increases as
well as under - budgeted items and labor related costs. This practice is in use in many cities and is
a recommended Government Finance Officers Association (GFOA) best budget practice.
The current five -year financial forecast does not include cost impacts for any future salary
increases as a result of the bargaining process or staff adjustments. Negotiations for all
bargaining units will begin in the spring/summer of 2016.
FISCAL IMPACT:
The fiscal impact of the Town Operating and Capital Budgets is provided in the 'Financial
Summaries section of the budget document including estimates of Fund Reserves at June 30,
2016. Staff will bring forward applicable budget adjustments as part of the Town's mid -year
budget review.
COORDINATION
The contents of this staff repot were drafted in collaboration with the Department of Police,
Human Resources Department, and Town Manager's Office.
PAGE 5
MAYOR AND MEMBERS OF THE TOWN COUNCIL
SUBJECT: TOWN OF LOS GATOS FISCAL YEAR 2015/16 OPERATING BUDGET AND
FY 2015/16 — FY 2019/20 CAPITAL IMPROVEMENT PROGRAM (CIP), NEW
APPROPRIATIONS, AND OTHER APPROVED ADJUSTMENTS AND MINOR
CORRECTIONS
JUNE 10, 2015
Attachments:
1. Resolution of the Town Council Approving FY 2015/16 Operating Budget
2. Resolution of the Town Council Approving FY 2015/16 — FY 2019/20 Capital Improvement
Program (CIP)
RESOLUTION 2015 -XXX
RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
APPROVING THE FY 2015/16 GENERAL FUND OPERATING BUDGET AND OTHER
APPROVED APPROPRIATIONS AND MINOR CORRECTIONS
WHEREAS, Section 2.30.295(b) of the Los Gatos Town Code requires the Town Manager
to annually prepare and submit a budget to the Town Council and be responsible for its administration;
and
WHEREAS, the Town Manager submitted a proposed budget for the FY 2015/16 to the
Town Council; and
WHEREAS, the Town Council has considered and reviewed said proposed budget during
public hearings.
RESOLVED, that the Town Council hereby adopts as the budget for the Town of Los
Gatos for the 2015/16 fiscal year the schedule entitled "Total Town Revenues By Fund and Total Town
Expenditures By Fund" excluding Capital Projects Funds (Exhibit A).
BE IT FURTHER RESOLVED, that the final adopted budget includes approved
appropriations for unspent prior year allocations, and that there be carried forward from prior years
Reserve for Encumbrances within each fund an amount sufficient to cover approved outstanding
encumbrances as of June 30, 2015; and
PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los
Gatos, California, held on the 16" day of June, 2015 by the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTACHMENT
TOTAL TOWN REVENUES BY FUND AND TOTAL TOWN EXPENDITURES BY FUND
(EXCLUDING CAPITAL PROJECTS FUND)
2015/16 Estimated 2015/16
Proposed Budget Recommended
Budget Revision Budget
TOWN REVENUES & OTHER FUNDING SOURCES
General Fund $ 37,475,461 $ 37,475,461
Special Revenue Funds 525,622 525,622
Internal Service Funds 4,963,261 4,963,261
Trust & Agency Funds 59,911 59,911
Capital Project Funds (does not include carryforwards)*
Successor Agency Funds 3,989,479 3,989,479
TOTAL TOWN REVENUES & OTHER FUNDING SOURCES $ 47,013,734 $ - $ 47 013,734
TOTAL TOWN EXPENDITURES, TRANSFERS OUT & CARRYFORWARD APPROPRIATION
General Fund
$ 37,875,462
$ 37,875,462
Special Revenue Funds
591,864
591,864
Internal Service Funds
6,381,737
6,381,737
Trust & Agency Funds
235,750
235,750
Capital Project Funds (does not include canyforwards)*
Successor Agency Funds
3,989,479
3,989,479
TOTAL TOWN EXPENDITURE& OTHER FUNDING USES
$ 49,074,292 $
- $ 49,074,292
TOTAL SOURCE(USE) OF FUND BALANCES $ (2,060,558) $ - $ (2,060,558)
* Capital Projects Funds are included in a separate Resolution.
EXHIBIT A
RESOLUTION 2015 -XXX
RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
APPROVING THE FY 2015116 — FY 2019120 CAPITAL BUDGET AND OTHER APPROVED
APPROPRIATIONS AND MINOR CORRECTIONS
WHEREAS, Section 2.30.295(b) of the Los Gatos Town Code requires the Town Manager
to annually prepare and submit a budget to the Town Council and be responsible for its administration;
and
WHEREAS, the Town Manager submitted a proposed five -year capital improvement plan
for FY 2015/16 — FY 2019/20; and
WHEREAS, the Town Council has considered and reviewed said capital improvement plan
during public hearings.
RESOLVED, that the Town Council hereby adopts the first year (FY 2015/16) of the
Town's Capital Improvement Program budget as contained in the Town's FY's 2015/16 — 2019/20
Capital Improvement Plan.
BE IT FURTHER RESOLVED, that the final adopted budget includes approved
appropriations for unspent prior year allocations, and that there be carried forward from prior years
Reserve for Encumbrances within each fund an amount sufficient to cover approved outstanding
encumbrances as of June 30, 2015; and
PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los
Gatos, California, held on the 16 °i day of June, 2015 by the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTACHMENT
TOTAL TOWN CAPITAL IMPROVEMENT PROGRAM REVENUES BY FUND AND TOTAL TOWN
CAPITAL IMPROVEMENT PROGRAM EXPENDITURES BY FUND
EXPENDITURES, TRANSFERS OUT& CARRYFORWARD APPROPRIATION
Capital Project Funds (does not include carryforwards)
$ 5,574,932 $ - $ 5,574 932
TOTAL EXPENDITURE& OTHER FUNDING USES $ 5,574,932 $ $ 5,574,932
TOTAL SOURCRUSE) OF FUND BALANCES $ (2778189) $ 136,000 $ (2642189)
EXHIBIT A
2015 /16
Estimated
2015/16
Proposed
Budget
Recommended
Budget
Revision
Budget
REVENUES & OTIIER FUNDING SOURCES
Capital Project Funds (does not include carryforwards)
$ 2,796.743
$ 136,000
$ 2,932,743
TOTAL REVENUES & OTHER FUNDING SOURCES
$ 2,796,743
$ 136,000
$ 2,932,743
EXPENDITURES, TRANSFERS OUT& CARRYFORWARD APPROPRIATION
Capital Project Funds (does not include carryforwards)
$ 5,574,932 $ - $ 5,574 932
TOTAL EXPENDITURE& OTHER FUNDING USES $ 5,574,932 $ $ 5,574,932
TOTAL SOURCRUSE) OF FUND BALANCES $ (2778189) $ 136,000 $ (2642189)
EXHIBIT A