Staff Report�pw N 0�
tos .�A"os COUNCIL AGENDA REPORT
DATE: NOVEMBER 24, 2015
MEETING DATE: 12/01/15
ITEM NO:
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER 9#2�( ,
SUBJECT: FISCAL YEAR 2015/16 FIRST QUARTER BUDGET PERFORMANCE AND
STATUS REPORT FOR THE PERIOD JULY 1, 2015 - SEPTEMBER 30, 2015
RECOMMENDATION:
Receive the Fiscal Year (FY) 2015/16 First Quarter Budget Performance Report for the period
Julyl, 2015 through September 30, 2015.
PURPOSE:
This report has two primary goals. First, the report informs the Town Council on the status of the
Town's Fiscal Year 2015/16 Adopted Budget during the first quarter. Second, staff provides the
Town Council an update on the preliminary General Fund financial results (unaudited) as of June
30, 2015.
BACKGROUND:
The attached Quarterly Budget Report covers the first three months of the fiscal year beginning
July 1, 2015 and ending September 30, 2015. 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.
DISCUSSION: w�va�rj !' S% `leil CD/7Cf/,
y
PREPARED BY: STEPHEN D. CONWAY
Finance and Administrative Services Director
n/-\ , e
Reviewed by: -�L Assistant Town Manager X�n Attorney
N:\FINANCE\Qtrly Financial ReportsTY 2016\1 st Quarter Council Report\2015-16 1 Q Budget Memo for Council doc.doc
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: FISCAL YEAR 2015/16 FIRST QUARTER BUDGET PERFORMANCE AND
STATUS REPORT FOR THE PERIOD JULY 1, 2015 - SEPTEMBER 30, 2015.
NOVEMBER 24, 2015
The attached First Quarter Budget Report includes a recap (subject to final audit) of the prior
fiscal year's General Fund fiscal results. The preliminary balance of approximately $5.8M in FY
2014/15 revenues above expenditures is reflective of a number of events impacting the year end
results. The $5.8 million includes $1.5 million in personnel vacancy savings; $800,000 savings
in Public Employee Retirement System (PERS) employer rate reductions as a result of the PERS
side fund payoff at June 30, 2014; $2.6 million from General Fund revenues coming in stronger
than expected including transient occupancy tax, business license tax, property tax, and
development related licenses and permit revenues; and $900,000 "one-time" revenues including
unexpected excess Educational Revenue Augmentation Fund (ERAF) revenues, business license,
and State mandated cost reimbursement revenues.
It is from these excess balances that, upon final audit, reserve accounts will be balanced as
provided for in the Town Council's approved General Fund reserve policy. The final year end
reserve balances will be adjusted in FY 2015/16 for the specific allocation of approximately
$12.2 million designated for the Almond Grove Street project per Council action in October
2015. Staff also anticipates bringing forward to Council during the mid -year budget process
consideration to allocate some of these additional funds to partially reimburse the PERS side
fund reserve and Internal Service funds that have been reallocated to the Almond Grove project
reserve.
An analysis of FY 2015/16 General Fund revenue confirms that the Town is tracking slightly
behind budgeted revenues for the first quarter when compared to prior years. Key economic
revenues such property tax, sales tax, business license tax, franchise fees, and charges for
services have all experienced small decreases from prior year first quarter results. It should be
noted that transient occupancy tax, and licenses and permits revenues are currently trending
higher than last year during the same period.
Staff also reviewed first quarter budget results for all Town departments and found that General
Fund expenditures are trending well below budgeted levels as is typical at this point in the fiscal
year. Staff cautions that first quarter results cannot be relied on for projecting year end results
since this report only covers the first three months of the fiscal year.
CONCLUSION:
In spite of prior year favorable closing result; the available first quarter preliminary data cautions
staff to continue the conservative fiscal planning and efforts to sustain the Town economically
sensitive revenues. 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.
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: FISCAL YEAR 2015/16 FIRST QUARTER BUDGET PERFORMANCE AND
STATUS REPORT FOR THE PERIOD JULY 1, 2015 - SEPTEMBER 30, 2015.
NOVEMBER 24, 2015
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 2015/16 financial outlook and a summary
of the performance of the Town's primary General Fund revenue sources.
ENVIRONMENTAL ASSESSMENT:
This budget report is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
The attached First Quarter Budget Performance Report provides an' overview of the first quarter
budget performance.
Attachment:
Budget Performance Report for the Three Months Ended September 30, 2015.
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(!� BUDGET PERFORMANCE REPORT - 1ST UARTER FY 2015/16
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INTRODUCTION
Purpose
This is the first quarterly budget performance report
for Fiscal Year 2015/16, for the three month period
ending September 30, 2015. 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 the Council
and 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, 2015, as compared to
previous years, and explains any notable changes 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 are 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 2015/16 Adopted Budget
....... 2
Prior Fiscal Year Closing Results .................
2
General Fund Reserve Status ....................................
2
U.S. Economic Outlook...............................3
State Budget Update..................................3
General Fund — Key Revenue Analysis .....................4
Property Tax ...............................................
5
SalesTax .....................................................
6
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 ..............................
16
Capital Projects Funds..............................17
Internal Service Funds..............................18
Trust and Agency Funds ...........................19
Conclusion..............................................................20
ATTACHMENT 1
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
EXECUTIVE SUMMARY
Status of FY 2015/16 Adopted Budget dissolution of the Town of Los Gatos Redevelopment
Agency (RDA), the Town no longer has restricted
First quarter revenues are generally trending lower
when compared to the first quarter of Fiscal Year
2014/15. Charges for Services, Transient Occupancy
Tax, and Franchise Fees increased when compared
to the prior year's first quarter results, while
Property Tax, Business License Tax, and Sales Tax are
trending lower.
General Fund expenditure totals for the first quarter
are trending favorably, with total operational
expenditures at the end of the first quarter at about
17% 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 2014/15 closing financial results
affirm the positive effects of the Town's budgetary
actions taken in response to prior downturns in key
operating revenues. Conservative budgeting,
vacancy savings, receipt of "one-time" revenues, and
a recovering economy, coupled with ongoing Town -
wide expenditure reductions, generated a favorable
General Fund closing balance of approximately $5.8
million (excluding capital transfers out) of available
revenues over expenditures at fiscal year-end, June
30, 2015. This amount is preliminary and subject to
final audit.
General Fund Reserve Status - 6/30/15
General Fund reserves are classified into two
reserves.
General Fund Reserves closed on June 30, 2015 with
a balance of approximately $21.8 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.
Designated General Fund Reserses
Amount
Millions
Desi nated for Capital andSpecial Projects
$3.0
Designated for Budget Stablization Reserve
6.7
Designated for Catastrophic Reserve
4.2
Designated for Open Space
0.6
Designated for Special Studies
0.5
Vasona land Sale
0.4
Retiree Medical Acturial
0.4
Sustanabt[ Reserve
Desi Hated for Marva efs Contin enc and Productivity
A%ailablefor Allocation (Subject to Final Audit)
AS21.8
Total Designated General Fund 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 General Fund Appropriated Reserves
(GFAR), which is the Town's Capital Improvement
Fund. This reserve functions as a potential funding
source for new capital projects or augmentations to
authorized projects funded through the Town's Five
Year Capital Improvement Program (CIP).
The Budget Stabilization Reserve was established to
serve as a transitional "bridge" funding source to
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.
categories — Restricted and Designated. Restricted
These funds are referred to as Designated General
reserves are those which are restricted in use by
Fund reserves since these are established by Council
accounting standards or legal agreements and are
Policy for their intended purpose. The availability of
not considered as available for use for another
approximately $21.8 million in Designated General
purpose. Designated reserves are established by
Fund reserves provides the Town with resources to
Council Policy for an intended purpose. With the
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
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manage through current and/or future fiscal
challenges and opportunities.
U.S. Economic Outlook
The Congressional Budget Office (CBO) anticipates
that the economy will expand at a solid pace over
the next few years. Real Gross Domestic Product
(GDP) is aniticipated to grow by about 3% in 2015
and 2016 and by 2.5% in 2017. By the CBO's
projections, increased hiring will reduce the
unemployment rate from 5.7% in the fourth quarter
of 2014 to 5.3% in the fourth quarter of 2017, which
is close to the expected natural rate of
unemployment. That increased hiring will also
encourage more people to enter or stay in the labor
force.
The CBO also estimates that the rate of inflation will
move up gradually to the Federal Reserve's goal of 2
percent, hitting that mark in 2017 and beyond.
The CBO expects that the interest rates on Treasury
securities, which have been exceptionally low since
the recession, will rise in the next few years, but
remain lower than they were, on average, in
previous decades.
In addition, federal lawmakers still face the longer-
term budget issues posed by the large projected
national debt and the implementation of rising
health care costs and the aging population.
The US Department of Commerce reported that
home construction rose 4.7% since last year. In
addition, national sales of new homes were up
nearly 2% in September 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
California. Although the State's unemployment rate
is among the highest in the nation, it continues to
show improvement in recent months with the latest
data showing a rate of 5.9% in September. Based on
current laws and the State economic forecast,
General Fund revenues are forecasted to grow
moderately, providing about $1.2 billion into the
state's rainy day fund and an additional $1.2 billion
to pay off state debts, by the end of the year.
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. Strong 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 2015/16
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, 2015.
Staff monitors each revenue source closely and may recommend certain revenue adjustments based on revenue
actuals or state budget action.
4
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
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Property Tax
Property tax is the largest revenue source for the Town's General Fund, accounting for 24.4% of budgeted General
Fund revenues in FY 2015/16. 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 slightly down 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 2015/16 was budgeted slightly higher than previous year's
budgeted revenues based on these facts and projected Consumer Price Index rate. Prior year property tax
revenues are up due to receipt of "one-time" excess Educational Revenue Augmentation Funds (ERAF) from the
County and higher than expected property transfer tax collection. 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
s-
Quarterly and Annual Revenues
5 -Year History
FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16
lst Quarter Actual Revenues
Fiscal Year Total Actual Revenues
Fiscal Year Budgeted Revenues
1st Quarter Percent of Total
■ 1st Quarter Actual
Revenues
OFiscal Yea Total
Actual Revenues
0 Fiscal Year
BalgeW Revenues
FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16
77,619 $ 76,842 $ 123,394 $ 125,091 $ 109,027
9,864,539 $ 9,672,235 $ 9,031,871 $10,087,210
$ 9,106,697
0.790A 0.79% 1.378/o 1.24% 1.20%
Recommended Budget Revision No Change
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
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Sales Tax
Sales tax is the second largest revenue source for the Town's General Fund, accounting for 22.2% of budgeted
General Fund revenues for FY 2015/16. 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 —Based on the most recent Sales Tax and Economic Review update from Muni Services, the Town's sales
tax analysis consultant, first quarter sales tax receipts statewide grew by 3.8%, while the Town of Los Gatos Sales
Tax revenues grew by only 0.1%. First quarter receipts are trending behind those in the same period last fiscal
year. The negative impact associated with the Netflix change in business model continues to impact the Town as is
the trend of increased on-line retail versus local mortar and brick shopping compounded by lower gasoline prices.
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
Quarterly and Annual Revenues
5 -Year History
FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16
■ 1st Quarter
Actual Revenues
oFiscal Year Total
Actual Revenues
■Fiscal Yea
Budgeted
Revenues
FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16
1st Quarter Actual Revenues $ 1,184,526 $ 601,176 $ 1,243,903 $ 914,843 $ 871,410
Fiscal Year Total Actual Revenues $ 9,889,100 $ 8,757,428 $ 8,029,571 $ 8,202,678
Fiscal Year Budgcted Revenues $ 8,337,029
1St Quarter Percent of Total 11.98% 6.86% 15.49% 11.15% 10.45%
Recommended Budget Revision No Change
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
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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 and construction
areas when compared to same quarter results from the prior fiscal year.
Sales Tax By Major Business Group
(Latest Quarterly Data Available)
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02nd Or 2014
■ 2nd Qtr 2015
Staff will continue to monitor these revenues through the mid -year to determine if a budget adjustment will be
recommended at that time.
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
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 2015/16.
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 in line with those in first
quarter in FY 2014/15. 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 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16
❑ 1st Quarter Actual
Revers
❑Fiscal Year Total
Actual Revenues
0 Fiscal Year Total
Budgeted Revenues
E
FY 11/12
FY 12/13
FY 13/14
FY 14/15
FY 15/16
1st Quarter Actual Revenues
$ 245,533
S 251,349
$ 247,426
$ 275,097
$ 266,431
Fiscal Year Total Actual Revenues
$ 1,952,488
$ 2,028,903
$ 2,063,756
$ 2,215,430
Fiscal Year Total Budgeted Revenues
$ 2,127,660
1 at Quarter Revenue Percent of Total
12.58%
12.39%
11.990/0
12.42%
12.52%
Recommended Budget Revision
No Change
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
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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 business licenses are capped at $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 budgeted number. First quarter revenues are significantly
lower compared to prior year first quarter revenue, however first quarter revenue is trending higher when
compared to revenues prior to FY 2014/15. FY 2014/15 actual revenues reflected below include a one-time prior
year adjustment for business license tax collection from Netflix. This adjustment was due to a reclassification that
happened in the first quarter of FY2014/15. Generally the first quarter payments are primarily made up of
adjustments to businesses' gross receipts for 2014. 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.
As directed by Town Council in September, staff will continue its auditing efforts and will issue a request for
proposal (RFP) for business license audit services. Staff will bring forth to Council the result of the RFP and
recommendation to enter into an agreement for business license audit services and offering a business license
amnesty program in early 2016.
1800000
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
Quarterly and Annual Revenues
5-1kar History
FY 11/12 FY 12/13 FY 13/14 FY 14115 FY 15/16
FY 11/12
1st Quartet Actual Revenues $ 43,%9
Fiscal Year Total Actual Revenues $ 1,077,620
Fiscal Year Total Budgeted Revenues
1 st Quarter Revenue Percent of Total 4.08%
■ 1st Quarter Actual
Revenues
E3 Fiscal Year Total
Actual Revenues
■Fiscal Year Total
Budgeted Revenues
FY 12/13 FY 13/14 FY 14/15 FY 15/16
$ 44,393 $ 52,124 $ 472,024« $ 82,439*"
$ 1,151,579 $ 1,130,020 $ 1,779,307
$ 1,250,000
3.85% 4.61% 26.53% 6.60%
Recommended Budget Revision No Change
* Incudes one-time"prioryears adjustments due to Netjlu recalssffcation to E -Commerce business
Includes 2014 actual gross receipt adjustment for Ne#hr at the first time
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
Transient Occuaancv 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 3.5% in 2014. The forecast for California visitation is increasing by 2.1% in 2015 and by
2.3% in 2016. Personal and business related travel is gaining strength. First quarter TOT revenues are trending 16%
higher than the first quarter of 2014/15. Staff will continue to monitor this funding source closely to assess the need
for future budget adjustments.
$2,000,000
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
Quarterly and Annual Revenues
5 -Year History
FY 11/12 FY 12/13 FY 13/14 FY 14115 FY 15/16
FY 11/12
1st Quarter Actual Revenues $ 131,567
Fiscal Year Total Actual Revenues $ 1,174,485
Fiscal Year Total Budgeted Revenues
1st Quarter Revenue Percent of Total 11.20%
■ 1 st Quarter Actual
Revenues
C3 Fiscal Year Total Actual
Revenues
®Fiscal Year Total
Budgeted Revenues
FY 12/13 FY 13/14 FY 14/15 FY 15/16
$ 135,452 $ 169,632 $ 132,202 $ 153,102
$ 1,295,887 $ 1,512,846 $ 1,896,721
$ 1,500,000
10.45% 11.21% 6.97% 10.21%
Recommended Budget Revision No Change
10
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BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
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Charees 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 significantly lower
than first quarter results from the previous fiscal year at 34.6%. Development permits revenues are projected to
be lower than last fiscal year due to the slowing down of large scale building projects, but are tracking at levels
above the budgeted amount for FY 2015/16. Staff will continue to monitor this revenue source, however no budget
revisions are recommended at this time.
$5,500,000
$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 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16
FY 11/12
Ist Quarter Actual Revenues $ 907,005
Fiscal Year Total Actual Revenues $ 3,879,826
Fiscal Year Total Budgeted Revenues
Ist Quarter Revenue Percent of Total 23.38%
■ 1 st Quarter Actual
Revemm
OFiscal Year Total
Actual Revenues
a3Fiscal Yea Total
Budgeted Revenues
FY 12/13
FY 13/14
FY 14/15
FY 15/16
$ 1,153,201
$ 2,299,931
$ 2,576,211
$ 1,608,255
$ 4,712,570
$ 4,715,202
$ 5,177,733
$ 4,646,022
24.47%
48.78%
49.76%
34.62%
Recommended Budget Revision No Change
11
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
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 higher than first quarter results from the previous
fiscal year. First quarter collections include approximately $300,000 deferred revenues from FY 2014/15 collections
as some of the big -scale development project started in last year were not completed in FY 2014/15. Staff will
continue to monitor this funding source closely to assess the need for mid -year budget adjustments, however no
budget revisions are recommended at this time.
$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 13istory
FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16
1st Quarter Actual Revenues
Fiscal Year Total Actual Revenues
Fiscal Year Total Budgeted Revenues
1st Quarter Revenue Percent of Total
■ ]at QuarterActual
Revenues
OFiscal Yea Total
Actual Revenues
®Fiscal Year Total
Budgeted Revenues
FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16
$ 550,905 $ 837,937 $ 1,143,264 $ 1,130,049 $ 1,177,581
$ 1,831,308 $ 2,643,899 $ 3,108,247 $ 3,299,038
$ 2,469,892
30.08% 31.69% 36.78% 34.25% 47.68%
Recommended Budget Revision No Change
12
OVI.N Of
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
!ps ti ASIS
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 above those in the same period in the prior fiscal year, largely because
of small rises in interest rate levels experienced during the past twelve months. The Town's investement advisors
expect interest rates to continue to rise gradually in calendar year 2016. The increase of the interest earnings
experienced this fiscal year as of first quarter are reflective of the Town's total portfolio yield increasing from 0.68%
as of September 30, 2014 to the current yield of 0.81% as of September 30, 2015 as reflected in the Town Q1
Investment Report.
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 at this time.
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
Quarterly and Annual Revenues
5 -Year History
FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16
■ 1st Quarter Actual
Revenues
13Fiscal Year Revenues
® Fiscal Year Total
Budgeted Revenues
13
FY 11/12
FY 12/13
FY 13/14
FY 14/15
FY 15/16
1st Quarter Actual Revenues
$ 183,979
$ 111,401
$ 169,558
$ 65,282
$ 99,172
Fiscal Year Revenues
$ 606,454
$ 386,919
$ 374,287
$ 261,127
Fiscal Year Total Budgeted Revenues
$ 412,340
1st Quarter Revenue Percent of Total
30.3%
28.8%
45.3%
25.0%
24.1%
Recommended Budget Revision
No Change
13
/ BUDGET PERFORMANCE REPORT -1ST QUARTER FY 2015/16
FINANCIAL SUMMARIES, PROJECTIONS, AND RECOMMENDATIONS
General Fund
The following table in the next page is the Schedule of General Fund Operating Revenues versus Operating
Expenditures for the first quarter of FY 2015/16, which includes comparison information from the prior year. In
the last column are projections of unaudited, final balances for the current fiscal year based upon the early trends
observed through the first quarter.
14
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
Town of Los Gatos
Schedule of General Fund
Operating Revenues vs. Operating Expenditures
For the period ended September 30, 2015
15
Unaudited
FY14/15
FY14/15
FY14/15
FY14/15 FY15/16
FY15/16
FY15/16
FY15/16
FY15/16
Final
Adjusted
1st Qtr
%
Adopted
Adjusted
1st Qtr
%
Finance
Balance
Budget
Actuals
YTD
Budget
Budget
Actuals
YTD
Projection
Revenues
General Property Tax
$10,087,210
$ 8,192,240
$ 125,091
2%
$ 9,106,967
$ 9,106,967
$ 109,027
1%
$ 9,106,967
Prop Tax Car Tax Backfill
-
138,063
-
16,760
16,760
-
00/0
16,760
Saks & Use Tax
8,202,678
8,079,277
914,843
11%
8,337,029
8,337,029
871,410
10%
8,337,029
Franchise Fees
2,215,430
2,076,030
275,097
13%
2,127,660
2,127,660
266,431
13%
2,127,660
Transient Occ Tax
1,896,721
1,500,000
132,202
9%
1,500,000
1,500,000
153,102
10%
1,500,000
Business License Tax
1,779,307
1,600,000
472,024
300%
1,250,000
1,250,000
82,439
7%
1,250,000
Licenses & Permits
3,299,038
2,771,892
1,130,049
41%
2,469,892
2,469,892
1,177,581
48%
2,469,892
Motor Vehicle In Lieu
2,818,316
2,683,980
-
00%
2,833,750
2,833,750
-
0%
2,833,750
Intergovernmental
1,004,661
659,725
4,866
1%
765,964
765,964
32,711
4%
765,964
Charges for Services
5,177,733
4,618,761
2,576,211
560/.
4,646,022
4,646,022
1,608,453
35%
4,646,022
Fines & Forfeitures
868,547
743,170
90,088
12%
686,870
686,870
151,807
22%
686,870
Interest
261,127
412,340
65,282
16%
424,140
424,140
(45,230)
-11%
424,140
GASB Investment To Market Per Audit 138,267
(102,000)
377,456
-370%
(104,550)
(104,550)
239,189
-229%
(104,550)
Miscellaneous/Other
2,792,069
2,948,388
486,257
16%
2,939,229
2,939,229
425,519
14%
2,939,229
Fund Transfers
311,810
679,420
22,005
3%
4749218
474,218
38,072
8%
474,218
Total Operating Revenues
40,852,914
37,001,286
6,671,471
18%
37,473,951
37,473,951
5,110,511
14%
37,473,951
Use of0therFunding Sources:
Use of Reserves - Capital Projects
7,271,491
6,720,743
400,000
400,000
400,000
Vasona Land Sale Reserve
320,948
Carryforward Reserve
48,767
2,422
78,944
78,944
Special Studies
379,451
Total Other Funding Sources
7,271,491
7,469,909
402,422
478,944
-
478,944
Total Revenues plus Reserves
$48,124,405
$44,471,195
$6,671,471
$37,876,373
$37,952,895 $ 5,110,511
$37,952,895
Expenditures (includes c/fbut no encumbrances)
Mayor & Council
208,491
211,561
43,078
20%
184,557
184,557
36,738
20%
184,557
Treasurer
_
_
_
_
Attorney
260,740
264,684
48,285
18%
268,592
318,592
52,422
16%
318,592
Administrative Services
2,884,889
3,010,850
550,181
18%
3,219,106
3,219,106
636,522
20%
3,219,106
Comm Development
4,233,465
4,099,200
840,654
21%
4,046,424
4,055,091
664,751
16%
4,055,091
Police
13,862,029
14,286,051
2,447,507
17%
14,910,621
14,910,621
3,170,928
21%
14,910,621
Parks & Public Works
5,690,355
6,075,113
1,150,841
19%
6,370,221
6,370,221
1,102,328
17%
6,370,221
Library
2,268,844
2,349,939
451,814
19%
2,463,638
2,463,638
575,053
23%
2,463,638
Total Dept Expenses
$29,408,813 $30,297,398 $5,532,360
18%
$31,463,159
$31,521,826 $ 6,238,742
200/
$31,521,826
Non -Dept Expenditures and other uses
General Government
12,853,933
13,705,487
296,839
0
6,413,214
6,431,069
301,160
5%
6,431,069
Special Item
Total Non -Dept Expenses
$12,853,933
$13,705,487
$ 296,839
2%
$ 6,413,214
$ 61431,069
$ 301,160
5%
$ 61431,069
Total Operating Expenditures
$42,262,746
$44,002,885
$5,829,199
13%
$37,876,373
$37,952,895
$ 6,539,902
17%
$37,952,895
Net Operating Revenues
$ 5,861,659
$ 468,310
$ 842,272
$ -
$ -
$(1,429,391)
$ -
15
1pw N OF
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
The following financial summaries 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, Non -Point Urban Runoff Source Fund, and several Landscaping and Lighting
District Funds. The revenue from the Non -Point Source Program fund continues to lag the expenses. This largely
results from increased requirements associated with theTown's storm water permit, including increased isnpections
and monitoring, trash reduction requirements, and administrative costs. Staff will develop a plan to move the
program toward a sustainable cost recovery model as part of the FY 16/17 budget process. As indicated in the chart
below, Non -Point Source fund balance is negative. It is anticipated that revenues fo the Non -Point Source program
will be received by the end of the second quarter and will be reflected in the mid -year budget report.
Special Revenue Funds
Budget to Actuals Comparisons
CDBG Non -Point LLD's
Grants Source
Beginning Fund Balance (Pre -audit) $ 60,582 $ 142,943 $ 182,740
Budgeted Revenues 70,000 416,684 28,399
Total Actual Revenues - 1st Qtr $ 67 $ - $ -
Budgeted Expenditures 70,000 499,053 22,811
Total Actual Expenditures - 1st Qtr - 202,862 5,017
1st Quarter Ending Fund Balance $ 60,649 $ (59,919) $ 177,723
16
tow M of
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
toy sAjos
Capital Projects 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 General Fund Appropriated Reserve Fund (GFAR), 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 2015/16 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 - 1st Qtr
1st Quarter Ending Fund Balance
GFAR Traffic Grant Fund Storm Utility Gas
Fund Mitigation CIP's Drains Undergd Tax
$ 6,760,298 $ 3,167,120 $ (369,988) $ 1,615,997 $ 2,854,501 $ 1,084,647
1,763,078 605,000 462,813 105,120
62,145 - 576,968 25,537
13,176,135 1,685,012 411,038 150,000
260,225 28,595 - 17,303
60,000 658,623
5,313 186,715
28,000 1,495,214
$ 6,562,218 $ 3,138,525 $ 206,980 S 1,624,231 $ 2,859,814 $ 1,271,362
17
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
jos s�`og
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.
Some of the internal service funds are funded at a level higher than required (Vehicle Maintenance and Equipment
Maintenance). Other funds are at less than recommended funding levels (Workers Compensation and ABAG Self
Insurance). To begin restoring these funds, the FY 2015/16 Adopted Budget incorporated a 1.5% increase in
Workers' Compensation rates for all employees and a budget transfer of $500,000 from the Town's Vehicle
Maintenance Fund to the ABAG Self Insurance Fund. Internal Service Funds are generally tracking in accordance
with the FY 2015/16 adopted budget. 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 FY 2016/17 budget
preparation.
Internal Service Funds
Budget to Actuals Comparisons
1st Quarter Ending Fund Balance $ 3,519,259 $ 1,851,381 $ 1,113,499 $ 132,032 $ 2,705,994 $ 792,114 $ 1,462,588
18
Equipment
Workers
Self
Office
Mmgt Info
Vehicle
Building
Replacemt
Comp
Insurance
Stores
Systems
Maint.
Maint.
Beginning Fund Balance
$ 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
142,325
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 $ 3,519,259 $ 1,851,381 $ 1,113,499 $ 132,032 $ 2,705,994 $ 792,114 $ 1,462,588
18
pow N of
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
tos `s �Sos
Trust and Agency Funds
Town Trust and Agency Funds have fund balances as of July 1, 2015 of $651,734 for the Library Trust Funds and
$3,610,218 for Successor Agency Trust. No budget revisions are recommended at this time for these funds.
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 1st Qtr
Budgeted Expenditures
Total Actual Expenditures - 1st Qtr
1st Quarter Ending Fund Balance
19
Library SA
Trust Trust
$ 651,734 $ 3,610,218
59,911 3,989,479
35,750 17
235,750 3,992,425
8,410 1,488,954
$ 679,074 $ 2,121,281
1owM of
BUDGET PERFORMANCE REPORT - 1ST QUARTER FY 2015/16
CONCLUSION
The financial results from the prior fiscal year, coupled with the FY 2015/16 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. 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.
go