2011022206 - 2010/11 Mid Year Budget Reportwx MEETING DATE: 2/22/2011
ITEM NO:
t s p�os COUNCIL /AGENCY AGENDA REPORT
DATE: FEBRUARY 16, 2011
TO: MAYOR AND TOWN COUNCIL/
CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY
FROM: GREG LARSON, TOWN MANAGER/EXECUTIVE DIRECTOR
SUBJECT: FY 2010/11 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31.2010
A. ACCEPT FY 2010 /11MID -YEAR SECOND QUARTER BUDGET
PERFORMANCE STATUS REPORT, INCLUDING FY 2010/11
FINANCIAL PROJECTIONS
B. AUTHORIZE BUDGET ADJUSTMENTS AS
V
THE ATTACHED SECOND QUARTER BUDGET PERFORMANCE
REPORT
RECOMMENDATION
1. Accept the FY 2010/11 Mid -Year Budget Performance and Status report, including FY
2010/11 Financial Projections.
2. Authorize budget adjustments as recommended in the attached Mid -Year Second Quarter
Budget Performance Report (Attachment 1).
PURPOSE
The purpose of this report is to provide the Town Council with a status of the FY 2010/11
Adopted Budget at the mid -year point, including an overview of revenue and expenditure trends
and financial projections for the current fiscal year. The 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 2011 -2016) to provide a context for the FY 2011/12 budget
development process and recommended budget approach.
PREPARED BY : S- C NWAY
Finance & Administrative Services Director
NAFlNANCaQtrly Financial ReportslFY 201112nd QtrU01 I_Mid_Year Budget_RepoRtinal.dcc
Reviewed by: Assistant Town Manager/Deputy Director Town Attorney /General
Counsel Finance _Community Development
PAGE
MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2010/11 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2010
February 15, 2010
DISCUSSION
FY 2010/11 MID YEAR BUDGET STATUS
Budget Performance Report
The attached Budget Performance Report is a mid -year report covering a six month period
beginning July 1, 2010 and ending December 31, 2010. The report provides an 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 Revenue Highlights FY 2010/11
Overall, key economically sensitive General Fund revenues are trending positively compared to
the prior year. Asa result, staff recommends an $855,000 net increase in adopted budget levels.
The proposed revenue changes include:
• A $750,000 increase in estimated sales tax from $8.3 million to $9.1 million.
• A $75,000 increase in franchise fees from $1.9 million to $2 million.
• A $175,000 increase in licenses and permits from $1.9 to $2.1 million.
• A $45,000 decrease in fines and forfeitures from $645,000 to $600,000.
• A $100,000 decrease in investment earnings, reflecting lower revenues on average
investment balances from $1.2 million to $1.1 million.
General Fund Expenditure Highlights FY 2010111
Current departmental expenditures are trending below the expected 50% of budget level, which
may result in expenditure savings at year end.
General Fund Projected Year End Balances June 30, 2011
Current fiscal year end projections for FY 2010/11 anticipate an excess of operating revenues
above operating expenditures by $855,000, beyond the approximate $1.2 million planned set
aside of internet retail sales tax, allocated to the Revenue Stabilization and Capital Project
Reserves. The Town Reserve policy provides that once legally restricted reserves are funded as
required, excess General Fund year end balances are to be designated equally between the
Reserve for Future Capital and Special Projects and the Town Revenue Stabilization Reserve.
Given the State's budget proposal to eliminate redevelopment agencies, which would result in an
estimated one -time loss of approximately $800,000 and an ongoing loss of up to $400,000, staff
recommends setting aside the excess General Fund year -end balance to mitigate any potential
state takings, as discussed at the Council Retreat. Excess funds would be placed in an RDA
State Take Reserve, which would be included in the General Fund Designated Reserves.
PAGE 3
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2010/11 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2010
February 15, 1010
FY 2010/11 MID -YEAR BUDGET UPDATE TRENDS
Operating Revenue Trends
As discussed earlier, the FY 2010/11 mid -year update reflects increases in sales tax - one of the
Town's largest and most economically sensitive sources of revenue. The current recession has
greatly impacted the Town's sales tax, which has experienced declines over the past two years.
However, mid -year financial assessments indicate an increase in sales tax revenue generated by
Netflix, an internet retail company. Internet commerce sales tax revenue ( Netflix) accounts for
35% of the Town's sales tax revenue and is the Town's largest growing sales tax generator when
compared to other top economic segments. While this is positive news, it should not be
considered a trend at this time until it is confirmed through further sales data analysis by the
Town's sales tax advisor this Spring.
Sales Tax Growth
6%
5X
a%
a`
6 ;% ' aPr '
� 0 41 ,y.
]%
o%
_% — --
The Town's revenue forecast is dependent
upon the stability of economically
sensitive revenue, including sales tax, and
currently assumes no loss of major sales
tax contributors like Netflix. While Netflix
has helped to offset sales tax declines in
other economic segments, diversification
of the Town's revenue base continues to
be of concern. The volatile nature of sales
tax, as evident in prior years' adopted and
actual budgets, underscores the
importance of diversifying the Town's
economic portfolio.
Due to the increase in sales tax, the current revenue forecast will be revised from $8.3 million to
$9.1 million. The sales tax revenue for FY 2010/11 will be adjusted approximately $750,000
higher than the adopted budget.
Operating Expenditure Trends
Anticipating that the Town's economically sensitive revenues would be impacted by the
recession, staff proactively implemented cost reduction strategies this fiscal year, including
targeted hiring freezes, furlough days, redeployment of staff, and reduction in materials and
supply costs. Many of these reduction strategies have helped to keep current departmental
expenditures below the expected 50% of budget level, which could result in expenditure savings
at year end.
PAGE
MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2010/11 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2010
February 15, 2010
State Budget Impacts to Local Governments
The State of California is facing a budget shortfall of $6 billion in the current fiscal year and
more than $19 billion for FY 2011/12. The governor recently released figures showing that the
State will lose another $2.7 billion from federal estate taxes, increasing the shortfall through June
2012 to $28.1 billion.
According to State Legislative Analyst's Office, the Governor's FY 2011/12 budget proposal
involves the elimination of California's 400+ redevelopment agencies, which account for an
estimated $5 billion in property tax revenues. While the mechanism and legality of this proposal
is unclear, the Governor reportedly plans on using the RDA funding to backfill the State budget
in the current year and to fund schools and county services in subsequent years.
Although Proposition 22, a ballot measure designed to further protect local revenue and
redevelopment monies from state raids was passed by voters in November 2010, there is
speculation that the State may have authority to eliminate redevelopment altogether or, at least,
place a measure on the June ballot for such elimination or redirection of funds. However, recent
reports from the CRA and League of California Cities indicate that there may be a compromise
in which redevelopment agencies would turn over a greater share of their property tax revenues
to other local government entities. Staff is monitoring this development and will advise Council
as more information becomes available.
The State is also exploring the extension of existing tax increases via a ballot measure to address
its current and future budget issues. Should a measure be placed on the ballot and fail, the Town
could lose up to $200,000 in Community Oriented Policing (COPS) grant funding. Additionally,
vehicle license fees and state- mandated cost reimbursements remain at risk. Staff is working
proactively with the League of Cities, legislators, and professional organizations such as the
Association of California Police Chiefs to protect these vital revenue sources.
GENERAL FUND RESERVE STATUS
As of June 30, 2010, Town's FY 2010/11 General Fund balance was approximately $23.1
million, all of which is legally reserved or designated for special purposes by Council. Included
in this amount are approximately $3.7 million in reserves for Economic Uncertainty, $4.1 million
for Future Capital and Special Projects, and $5.8 million for Revenue Stabilization. These
reserves remain intact and available at the mid year point of FY 2010/11.
FY 2011/12 BUDGET DEVELOPMENT PROCESS
Concurrent with the update of the Five Year Financial Plan and in anticipation that service
reductions would be necessary for the FY 2011/12 budget, staff began informal budget
development discussions in December 2010. This process includes the conceptual development
of budget reduction scenarios, limited revenue enhancements and adjustments to the User Fee
PAGE 5
MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2010/11 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2010
February 15, 2010
Schedule. Staff is currently evaluating the feasibility and impact of budget options which will be
brought forward to Council in early May 2011.
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 FY 2011/12 forecasts a deficit of $2.1 million and projects significant
deficits in subsequent years if structural and ongoing adjustments are not made. Current and
future deficit projections in the Town's Five -Year Financial Plan are based upon conservative,
yet realistic revenue and expenditure growth rates and trends, and follows Council's past practice
of designating year -end savings equally between the Revenue Stabilization and Capital and
Special Projects Reserves. However, at the January 2011 Council Retreat, as a strategic budget
measure, Council directed staff to preserve funding to the Capital and Special Projects Reserve
and temporarily suspend the budgeted set -aside of year -end savings to the Revenue Stabilization
Reserve, reducing next year's forecasted deficit to $1.3 million.
The estimates for FY 2011/12 include preliminary budget assumptions and revenue and
expenditure updates as discussed in this report. While sales tax revenue will be increased in the
current year, adjustments have not been made to FY 2011/12 revenue projections. Any changes
to the forecasted FY 2011/12 sales tax revenue will be done upon consultation with the Town's
sales tax advisor to determine if the increase in the current year sales tax is an ongoing trend.
Any adjustments to the forecast will be presented to Council at the upcoming budget discussions
in May 2011.
Additionally, fiscal impacts associated with the State budget, such as the potential elimination of
redevelopment, have not been incorporated in the forecast at this time. Rather, it is
recommended that anticipated excess year -end funds (beyond the required set aside for the
Revenue Stabilization and Capital and Special Projects Reserves) be placed in a RDA State Take
Reserve to address the potential loss of redevelopment funding.
PAGE
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2010 /11 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2010
February 15, 2010
Town of Los Gatos General Fund
Updated Five -Year Financial Plan
FYI FY FY FY FY5
2010111
2010111
.2011112
2012113.
2013/14
2014/15
2015/16
Account
Revenue Category
Budget
Forecast
- Forecast
Forecast
Forecast
Forecast
Forecast
4100 Prom Tax _
$ 73
S 73
S 7.4
S 75
S 7.6
S 7.7
S 7.9
4110_ VLF Ba.kfiO Property Tax _
2.4
23
2.4
2.4
2.4
2.4
25
_ 4200 _ Saks& Lse Tax
8.4
9.1
8.4
8.6
8.2
8.0
7.9
4250 Frandwe Fees
1.9
2.0
1.7
1.7
1.7
1.8
1.8
_ 4251_ Transept Occupancy Tax
1.0
1.0
0.9
0.9
1.0
1.0
1.0
4400 Business L cerae Tax
1.1
1.1
1.1
1.1
1.1
1.1
1.1
4400 Lirenses & Permits
2.1
2.1
1.0
2.0
2.0
2.1
2.1
_4500 hllergovernraental
0.7
0.6
0.8
0.8
0.8
0.8
0.8
_ 460 C harge for Servces
23
25
25
25
2.6
2.6
2.7
470 Fines & Forfeitures
0.6
0.6
0.6
0.6
0.6
0.6
0.7
480 I nterest
1.2
1.1
0.9
0.9
0.9
0.9
0.9
4850 Other Sources
3.8
3.6
3.8
3.8
3.8
3.9
4.0
4900 Fund Tranfers in
0.4
0.4
0.3
03
0.1
0.1
0.1
TOTAL RE \ESL ES
33.2
33.7
32.7
33.1
32.9
33.1
33A
Lsc oMser,cs Vc posfts
0.9 13
0.9
0.6
0.6
0.4
05
TOTAL REVENUES & TRANSFERS
S 34.5 S 35.0
S 33.9
S 34.0
S 33.6
S 33.2
S 33 5
2010/11
2010/11
2011112
2012/13
2013114
2014115
2015/16
Account
Expenditure Category
Budget
Forecast
Forecmt
Forecast
Forecast
Forecast
Forecast
5110 Salary _
S 13.2
5 12.9
S 13.1
S 13.1
S 13.1
$ 13.1
S 13.1
5120 Ek,wd Officials
0.0
0.0
0.0
0.0
0.0
0.0
0.0
5130 Tempmaq _
0.6
05
0.5
0.5
0.5
0.5
05
5140 Overfune
05
0.4
0.5
05
0.5
0.5
0.5
5170 _Other SH6ry
0.1
03
03
03
03
03
03
5200 Benefits
5.6
5.6
63
6.9
73
7.6
7.8
600 Sup es Mate S ervices
5.7
5.6
5.7
6.0
6.2
6.4
6.5
710 Grants &Awards
0.2
0.4
0.2
0.4
0.2
0.4
0.2
0.4
02
05
0.2
05
0.2
05
740 Ut08fes
7100 Fixed Assets
-
3.1
-
3.1
_
3.2
_
3.6
_
3.7
_
3.8
_
3.9
8060_ _ Internal Servce Char
8900 Debt Service
2.2
2.2
1 2.2
2.2
1 22
2.0
1 2.0
TOTAL EXPENDITURES
S 31.6
S 313
$ 32.6
S 33.8
S 34.6
S 34.9
S 353
9900 Operating Transfers Out
-
-
-
-
-
-
-
990 Capital Transfers Out to GFAR
0.9
0.9
0.9
0.6
0.6
0.4
05
9900 GASB 45 Retrace Medical Actuarial
0.8
0.8
1.1
1A
1.6
1.8
1.8
TOTALBUDGETED
EXPENDITURES
333
33.0
34.5
35.8
36.8
372
37.6
9900 RDA Potential Take Reserve
0.8
Transfer to Capital and Future Projects
990 Reserve
0.6
0.6
0.8
0.7
0.7
0.6
0.6
9900 Transfer to Stabd ®non Reserve
0.6
0.6
0.8
0.7
0.7
0.6
0.6
TOTAL EXPENDITURES & ALLOCATIONS
S 34.5
I S 2.0
S 36.0
i s 37.2
1 $ 38.1
I S 38A
S 38.7
REVENUES LESS EXPENDITURES
$ 0.1 Is 0.0
1 S 2.1
S (3.2)
S 45
$ (5.1)1 S 5.2
ONGOING SHORTFALL MMGATION
I $
S 2.1
1 S 3.2
1 S 45 S 5.8
NET REVENUES LESS EXPENDITURES
L $ 0.1 1 1 0.0
S (2.11
S (1.1)
S (13)
S 13) S 131
PAGE 7
MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT
AGENCY
SUBJECT: FY 2010/11 MID -YEAR BUDGET PERFORMANCE AND STATUS REPORT -
SIX MONTHS ENDING DECEMBER 31, 2010
February 15, 2010
CONCLUSION
Overall, the Town's outlook at mid -year is encouraging due to its planned expenditure reductions
and conservative spending practices, coupled with an unexpected increase in sales tax revenue,
which will be set aside at year -end to offset any potential RDA revenue takes by the State.
However, due to anticipated flat and/or declines in revenues in FY 2011/12, staff is strategically
identifying budget reductions and limited revenue enhancement options to address a projected
$1.3 million deficit. 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 2010/11. Current projections forecast a surplus of operating
revenues over operating expenses for the fiscal year ending June 30, 2010. As discussed earlier
in this report, staff is currently engaged in the FY 2010/11 budget development process which
will identify variety of service reductions and limited 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:
Attachment 1- Budget Performance Report for the Six Months Ended December 31, 2010
TOWN OF LOS GATOS
BUDGET PERFORMANCE REPORT
FOR THE SIX MONTHS ENDED DECEMBER 31, 2010
February 16, 2011
FINANCIAL OVERVIEW — EXECUTIVE SUMMARY
Status of FY 2010/11 Adopted Budget:
Overall, second quarter General Fund revenues are trending positively and are recommended to be adjusted upward
by a cumulative amount of approximately $855,000 from adopted budget estimates. The current forecast expects
sales tax to be higher than original revenue estimates by approximately $750,000 this fiscal year. This increase is
due to growth in the general retail category, primarily Netflix, an internet commerce company that is the Town's
largest provider of sales tax revenues. The success of Netflix has allowed the Town to sustain the loss of other
significant sales tax generators in recent years without a dramatic decline in total sales tax. In addition, restaurant
sales taxes, which are the Town's second largest economic segment, have increased by 1.7 %, compared to the prior
year for the period ending at September 30, 2010.
It is anticipated that property tax revenue will hold steady and could experience some limited growth by the end of
the fiscal year. The stability of Los Gatos' property tax during this uncertain economic period is an indicator that
the Town remains a desirable place to live as evident by continued housing turnover and new construction/remodel
activity.
Department expenditure totals for the second quarter FY 2010 /11 are also favorable, with spending at the end of the
second quarter averaging 45% expended, or 5% below the 50% benchmark level used for 6 months of operations.
Because of expected lower operating revenues, staff began strategic cost reductions to contain the rise of operating
costs. 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.
Providing services to the community in this and future fiscal years will continue to require strong performance by
economically sensitive revenues to offset cost increases. The FY 2010/11 budget development process will
endeavor to maintain essential public services while controlling operational costs in light of the five -year fiscal
forecast, which predicts operating revenue shortfalls in subsequent fiscal years.
General Fund Reserve Status - June 30, 2010
General Fund reserves are classified into two categories: Restricted and Designated. Restricted reserves are those
which are restricted in use by accounting standards or legal agreements and are not considered as available for use
for another purpose. Designated reserves are established by Council policy for an intended purpose. Current
Restricted Reserves are presented below:
Restricted General Fund Reserves: Amount
Reserved for RDA Loan $1,500,000,
Total Restricted General Fund Reserves $1,500,000
General Fund Reserves closed at a balance of approximately $23.1 million at June 30, 2010. In addition to the
approximate $1.5 million of General Fund Reserves set aside for restricted purposes, the Town has approximately
$21.6 million in designated reserves established in accordance with Town financial policies and operating and
capital budget requirements. The Designated Reserves presented below include the Revenue Stabilization Reserve
created by the Town as part of the FY 2005/06 budget process.
Designated Reserves:
Designated for Vasona Land Sale
$2,991,589
Designated for Revenue Stabilization
5,776,180
Designated for Economic Uncertainty
3,678,001
Designated for Capital & Special Projects
4,103,746
Designated for Compensated Absences
2,318,082
Designated for Market Fluctuation
526,525
Designated for Open Space
562,000
Designated for Post Retirement Medical
400,000
Designated for Special Studies
255,000
Designated for Sustainability
190,553
Designated for Mgr's Contingency &
100,000
Productivity.
Designated for Year End Budget Adjustments
175,000
Designated for Grants Funds & Carryovers
127,340
Total Desi nated Reserves
$21,586,573
The Reserve for Capital and Special projects, whose source is derived from half of the annual available General
Fund budget savings, serves as the primary source for replenishment to the Town's Capital Improvement Fund
(GFAR) in addition to the annual budgeted transfer from the General Fund's operations of $600,000 in the current
fiscal year. As such it represents the potential source for a large number of unfunded needs identified during the
annual capital improvement plan process. This reserve also functions as a designated programmed funding source
for new capital projects or augmentations to authorized projects funded through the Town's Five -Year Capital
Improvement Program (CIP). The Town continues to be challenged in identifying an ongoing source of funds to
meet the annual $1.5 million recommended street repair and maintenance program and other priority infrastructure
improvements like sidewalk repair and replacement.
In its public communications, staff refers to the $21.6 million in Designated General Fund reserves as the Town's
"reserves" since these reserves are established by Council policy for their intended purpose. The $21.6 million in
Designated General Fund reserves provides the Town with resources to manage through future fiscal challenges
and opportunities, mindful of the many competing priorities for resource allocation.
GENERAL FUND -KEY REVENUE ANALYSIS FY 2010/11
The following presentation provides a recap of significant General Fund revenue sources as of the second quarter
ending December 31, 2010. Staff is monitoring developments in each major revenue source closely for potential
adjustments to budgeted revenues as recommended in this report.
BUDGET PERFORMANCE REPORT FY 2010/11
4 Sales Tax Revenue 4
Description
The State Board of Equalization, with the
implementation of the "triple flip," now
allocates .75 cents of the 8.25 cents of local
sales tax collected by merchants on retail sales
and taxable services transacted within the Town
of Los Gatos. This .25 cents of local sales tax is
being replaced by the state with an equal
amount of property tax. Revenues are remitted
to the Town on a monthly basis. This revenue is
placed in the General Fund for unrestricted uses.
Analysis
According to a recent update from Muni
Services, the Town's sales tax analysis
consultant, a majority of California jurisdictions
in early 2010 experienced an uptick in sales tax
revenues, averaging 7.3% statewide. The
Town's increase was 15.5 %, largely due to
Netflix, an internet commerce company. A
recent release by the UCLA Anderson Forecast
for the California economy indicated
"imperceptibly slow growth until the end of this
year." In order to return to pre - recession levels,
California must re- employ 1.3 million workers,
while finding jobs for all the new entrants to the
work force in the past two and a half years.
Although the Town has lost several top sales tax
generators, including the closure of five auto
dealers over several years, the sales tax revenue
outlook compared to the prior year is
encouraging. The continued success of Netflix
has mitigated the impact of other sales tax
declines in Town. Recognizing the need to
diversify its sales tax base, the Town continues
to indentify strategies to adjust its sales tax
portfolio.
Staff recommends an increase in sales tax
revenue by $750,000.
SALES T.
Quarterly and Annual Revenues
5 -Year History
$10,000,000
$8,000,000
$6,000,000
54,000,000
$2.000,000
102nd(i � Adual
Rc..
Wism1 Yea Taal
Ad" Rev ..s
I•FSol
Budge d Rcvmms
FY 09/10 FY 10/11
3221,690 S 4,776,828
8 ,317216
$ 8 .350,000
38.74% 5721%
Recouweaded Budeet Revision $ 750,000
3
FY 06/07 FY 07108 FY 08/09 FY 09110 FY 10 111
FY ON07
FY 07108
FY 0&09
2nd Quarter Actual Revenues
S 3214,488
$ 3 ,326298
$ 3236,975
Fiscal Year Total Actual Revenues
S 9253,891
S 9,345,432
S 8,487,000 1
Fiscal Year Budgeted Revenues
FY 2004/05 forward will reflect the
Sales Tae In lieu paid by Santa Clara County
2nd Quarter Percent of Total
34.74%
35.59%
38.14%
102nd(i � Adual
Rc..
Wism1 Yea Taal
Ad" Rev ..s
I•FSol
Budge d Rcvmms
FY 09/10 FY 10/11
3221,690 S 4,776,828
8 ,317216
$ 8 .350,000
38.74% 5721%
Recouweaded Budeet Revision $ 750,000
3
FY 06/07 FY 07108 FY 08/09 FY 09110 FY 10 111
BUDGET PERFORMANCE REPORT FY 2010/11
♦ Property Tax Revenue
Description
Property Tax is one of the Town's largest
revenue sources, accounting for 29.1% of the
Town's budgeted General Fund revenue for FY
2010/11.
Property Tax distributions are largely received
in the third and fourth quarters of the fiscal year,
meaning revenue receipts are not reflected
proportionately by quarter in the chart below.
Property Tax is levied at 1 % of a property's
assessed value, of which the Town currently
receives approximately 9.5 cents on each dollar
paid to the County Assessor's Office. The
assessed value of real property appraised by the
County Assessor is the 1975 -76 assessment role
value, adjusted by a two percent 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 in
California limited the tax rate that can be
imposed by the Town on property. With the
limitation on rates, the higher the aggregate
property value, the higher the revenue
generated.
Analysis
It is anticipated that property tax revenue will
hold steady and could experience some limited
growth by the end of the fiscal year. The
stability of Los Gatos' property tax during this
uncertain economic period is an indicator that
the Town remains a desirable place to live as
evident by continued housing turnover and new
construction/remodel activity.
At this time, staff recommends no change to
budgeted property tax revenue.
PROPERTY TAX
Quarterly and Annual Revenues
5 -Year History
$10,000,000
58,000,000
$6,00D,000
$4,000,000
$2,000,000
OR
92nd Quaver Aaual
Revenues
OFi [Y.. To d
Actual R...
■Fluid YC.Budgded
R..,
4
FY 06/07 FY 07108 FY 08/09 FY09 /10 FY 10/11
FY 06/07
FY 07/08
FY 08/09
FY 09/10
FY 10111
2nd Quarter Actual Revenues
S 2,&16,731
S 3,061,873
S 3,160,810
S 3,191286
$ 4,898,434
Fiscal Year Total Actual Revenues
$ 8584,612
S 9,17$869
S 9,721,070
S 9,775,945
Fiscal Year Budgeted Revenues
S 9,667,770
ltd Quarter Percent of Total
32.69%
33.36
3251%
3264%
50.67°/
Recommended Budget Revision
No ch+nge
4
FY 06/07 FY 07108 FY 08/09 FY09 /10 FY 10/11
BUDGET PERFORM REPORT FY 2010/11
♦ Franchise Fee
Description
Franchise Fees are collected by the Town for the
privilege of operating a utility service within
Town limits, and as a fee in lieu of business
license tax.
Franchise Fees are currently received from
Comcast for cable television services, PG &E for
gas and electric service, and West Valley
Collection and Recycling for solid waste
collection services.
Analysis
Second quarter results are pacing ahead of
revenue collected in the prior year, achieving
32.43% of budget versus 31.82 % of budget
collected at the first quarter in FY 2009/10.
Staff recommends a budget revenue revision of
$75,000.
Franchise Fees
Quarterly and Annual Revenues
5 -Year History
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
Revmues
1Feeal Year Total Ad.al
Revenues
l Fisol YewTotal
Budgeted Revmues
FY 06/07 FY 07/08 FY 08/09 FY 09110 FY 10/11
2nd Quarter Actual Revenues $ 274,603 $ 547,508 $ 548,795 $ 553,434 $ 626,592
Fiscal Year Total Actual Revenues $ 1,162,037 $ 1,659,829 $ 1,656,100 $ 1,739 ,260
Fiscal Year Total Budgeted Revenues $ 1,931,950
FY 2007/08 Tool Actual Revenges reflect increased revenge based on increase of Garbage Franchise Agreement
2nd Quarter Percent of Total
23.63 32.99°/. 33.14 31.82% 32.43%
Recommended Budget Revision $ 75,000
FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY 10 /11
BUDGET PERFORMANCE REPORT FY 2 010/11
♦ Interest Income Revenue
Description
The Town earns Interest Income revenue by
investing cash not immediately required for
daily operations in a number of money market
instruments. These investments are made
within parameters as stated in the Investment
Policy approved by the Town Council. The
Town's goal is to achieve a competitive rate of
return while protecting the safety of those funds.
Interest Income revenue for the Town is
primarily dependent upon two factors: the cash
balance in the Town's investment portfolio, and
the yield on those funds.
Analysis
The Town's Interest Income earning has been
impacted this fiscal year years by use of Town
funds to make significant investments in Town
infrastructure facilities, most notably the
acquisition of land for a new Creekside Sports
Park, among other infrastructure investments
made in carrying out the Town's approved
capital improvements plan.
Current year interest revenues are tracking
below budget estimates due to historical low
yields available in the market. Actual LAIF
yields have declined to an average yield of
0.45% in November 2010 compared to 0.61%
from a year ago. Staff recommends adjusting the
budget revenue downward to $100,000
Interest Income k I
Quarterly and Annual Revenues
5 -Year History
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
El
2nd Quarter Actual Revenues
Fiscal Year Revenues
Fiscal Year Total Budgeted Revenues
2nd Quarter Percent of Total
02nd Quarter Actual
Revenues
OFiscal Year Revenues
■ Fiscal Year Total
Budgeted Revenues
FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY 10/11
$ 684,427 $ 936,081 $ 1,011,756 $ 687,571 $ 545,913
$ 1,977,233 $ 2,22138 $ 1,627,727 $ 1,129,895
$ 1 ,205,410
34.6 42.1% 62.2 60.9 45.3%
Recommended Budget Revision $ (100,000)
FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY 10 /1l
BUDGET PERFORMANCE REPORT FY 2010/11
♦ Business License Tax Revenue
Description
The Town of Los Gatos requires businesses to
obtain a business license if a business is located
within Town limits, or if an agent of a business
conducts operations within Town limits.
The Business License Tax is based on the type
of business activity. Activities such as retail
sales, wholesale, and manufacturing are based
on estimated gross receipts, on a sliding scale,
and comprise approximately 40% of the
Business License Tax revenue. Other Business
License Tax revenues are based on flat fees as
set forth in the Town Code, and make up the
remaining 60% of revenue.
Annual business license renewals are due and
payable in advance on January 2 nd of each year.
New business license applications for flat -fee
Bus iness License Tax
Quarterly and Annual Revenues
5-Year History
1,400,000
1200,000
1,000,000
800,000
600,000
400,000
200,000
132nd Quar rACaal
Revenues
o Fiscal Year ToW
Actual Revenues
■Fiscal Year Total
Budgeted Revenues
based businesses are pro -rated by quarter, from
the date of application to the end of the year.
Analysis
The Business License Tax revenue received in
the fast and second includes new Business
License fees and renewal fees. The majority of
revenues come from renewals, which are
received in the second and third quarters.
The actual second quarter collections are
trending lower in comparison to the prior year
due to the timing and receipt of business license
renewals and payments. Total revenue collected
to date is consistent with revenue collected in
FY 2009/10. No budget revision is
recommended.
FY 06/0 7 FY 07108 FY 08109 FY 09110 FY 10 /1I
FY Ob/D7
FY 07/08
Fy 08/09
FY 09110
FY 10/11
god Quarter Actual Revenues
452,W
447 ,514
376,704
470,833
368,757
Fecal Year Total Actual Revenues
S 1,176,422 S
1,138,057 S
1,139,107 $
1220JW
Fiscal Year Total Budgeted Revenues
S 1,095,000
god Quarter Percent of Total
38.451%
393rA
33.07
38.57%
33.99%
Reeouunersded Budget Revision
No Cbanee
BUDGET PERFORMANCE REPORT FY 2010/11
♦ Transient Occupancy Tax
Description
The Town of Los Gatos levies a 10 per cent
Transient Occupancy Tax on all hotel/motel
rooms within Town limits as a method to help
fund Town services provided to transitory
lodgers.
Analysis
The Transient Occupancy Tax (TOT) revenues
received in the second quarter of FY 2010/11
reflect an increase in collections compared to
the prior year. The State of California continues
to project flat growth in domestic and
international visitation compared to the prior
year, with the potential for a slight increase
toward the end of 2011.
According to the California Tourism
Commission report, travel to California is
expected to be modest with an expected increase
of 2.8 %; business and international markets
continue to remain flat. As expected, domestic
day trips have been more resilient than domestic
overnight trips which reflect low growth.
Staff recommends no change to the budgeted
TOT revenue.
Transient Occupancy Tax
Quarterly and Annual Revenues
5-Year History
$1,400,000
$1,200,000
$1,000,000
$800,000
5600,000
$400,000
$200,000
11112nd Quarter Actual
Revenues
OFscal Year Total
Actual Revenues
■Fiscal Year Total
Budgeted Revenues
FY 07/08 FY 08109 FY 09/10 FY IO/l1
S 435,891 $ 436 ,515 $ 354 ,551 S 380,129
S 1245,078 S 966,638 S 923,783
S 989,800
35.01% 45.16 3838% 38.40%
Recommended Budeet Revision No chance
8
FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY 10 /11
FY 06/07
2nd Quarter Actual Revenues
$ 37133
Fiscal Year Total Actual Revenues
S 1,108257
Fiscal Year Total Budgeted Revenues
2nd Quarter Percent of Total
33.51%
11112nd Quarter Actual
Revenues
OFscal Year Total
Actual Revenues
■Fiscal Year Total
Budgeted Revenues
FY 07/08 FY 08109 FY 09/10 FY IO/l1
S 435,891 $ 436 ,515 $ 354 ,551 S 380,129
S 1245,078 S 966,638 S 923,783
S 989,800
35.01% 45.16 3838% 38.40%
Recommended Budeet Revision No chance
8
FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY 10 /11
FY 2010/11 RECOMMENDED BUDGET ADJUSTMENTS
Budget adjustments are recommended for the following revenues and expenditures at the second quarter as
described below:
General Fund Revenues
S 32,756
Saks Tax
S 750,000
Licenses and Permits
S 175,000
Franchise Fee
75000
Interest
H0W)
Fares and Forfeitures
(45,000)
TOTAL GENERAL FUND REVENUES
S 855,000
General Fund Expenditures
22,000
Town Attorney
S 30,000
Tree Services
6,000
TOTAL GENERAL FUND EXPENDITURES
S 36,000
One -time Funding from Reserves
70.000
Other Funds Revenues
76,000
GFAR
Prop 42
S (301,698)
Safeway Developer Fees - Interestion Imp at AMrews/NSC
32,756
Safeway Developer Fees - Interestion Imp at Union/BHR
12,721
Grants
301,698
Federal Sti nulus Energy Efficiency Conservation Block Grant
162,712
VTA Grant for Project Read
22,000
Traffic Mitigation
3.253
Traffic Mitigation Fees
6,000
Traffic Mitigation Fees
70,000
Gas Tax
4,000
Prop 42
301,698
History Project
5 683,140
Library History Project
4,000
TOTAL OTHER FUNDSREVENUES
S 310,188
Other Funds Expenditures
GFAR
Intersection Imp at Andrews/NSC
S 32,756
Intersection Imp at UniorVBHR
12,721
Hwy 9 Phase 3 project
28,000
New Fence at Winchester loaves to Blanchard)
25,000
98,477
Grants
Energy Efficient Lighting Project
162,712
Project Read
22,000
184,712
Traffic Mitigation
Electronic Speed Display at BHR
6,000
Lark/Univ / Chaser Oaks Traffic Analysis
70.000
76,000
Storar Droins
Bkknen Storm Basin Imps
15,000
15,000
Gas Tax
Street Repair S Resurfacing
301,698
301,698
Equipment Replacement
DPF Filter SCP 17 for Asset 05940
3.253
3,253
llistary Project
Library History Project
4,000
4,000
TOTAL OTHER FUNDS EXPENDITURES
5 683,140
W
SUMMARY OF KEY RECOMMENDED BUDGET ADJUSTMENTS
General Find Revenues
• Sales Tax — Actual receipts are running higher than adopted budget estimates, primarily due increases in
Netflix membership sales. Staff recommends an increase of $750,000 in estimated revenues for the year.
• Licenses and Permits — Various development fee receipts are trending higher at mid -year. Staff
recommends a $175,000 revenue budget increase.
• Franchise Fees — Actual franchise fee collections through December 2010 indicate a need to revise budget
estimates by $75,000.
• Interest — Actual receipts are running below adopted budget estimates due to historical low yields available
in the market. Staff recommends decreasing budgeted interest revenue by $100,000.
• Fines and Forfeitures — Staff recommends that fines and forfeitures be reduced by $45,000 due to low
second quarter revenue levels.
General Fund and Other Funds
• Town Attorney Program — Staff recommends a $30,000 increase in the Town Attorney's expenditure
budget to address one -time contractual and transition issues.
• Tree Services —Staff recommends a $6,000 increase for tree trimming services.
• DPF Filter — Staff recommends a $3,253 increase for replacement of a vehicle filter as required by the
California Air Resources Board.
• History Project— Staff recommended a $4,000 increase for expenses related to the Library History Project.
• Energy Efficient Lighting —This project, funded by a $162, 712 Federal Stimulus Energy Efficiency Grant,
will install 176 LED energy efficient lighting fixtures and bulbs in 16 different Town -owned parking lots
and parks.
• Electronic Speed Display Replacement — Approximately $6,000 in community benefit funding was
received from Chase Bank. It is recommended that this funding be used for the replacement of an
electronic speed display sign at Blossom Hill Road near Fisher Middle School.
• Bicknell Storm Basin Improvements — This project will install 2 new catch basins and a section of
underground storm drain pipe to prevent street flooding. The cost of the project is $15,000.
General Fund Appropriated Reserve (GFAR) Fund
• Proposition 42 — Due to changes in State funding distribution, Proposition 42 monies are required to be
located in the Gas Tax Fund. Approximately $301,698 will be transferred from GFAR to the Gas Tax.
• Traffic Signal Update — Approximately $128,000 in community benefit funding was received for traffic
signal upgrades and other related public improvements as a result of the Safeway development project, on
North Santa Cruz Avenue. Staff recommends using $44,000 to upgrade a traffic signal at Andrews/North
Santa Cruz Avenue and Blossom Hill/Union Avenue.
• Highway 9 Improvement Phase III — This project, led by the City of Saratoga, involves bicycle safety
improvements at intersections located on Highway 9 and Austin Way, Fruitvale Avenue, Quito Road,
North Santa Cruz Avenue, Alberto Way and Los Gatos Boulevard. The Town's cost of the project is
approximately $28,000.
[to]
Winchester Fence Replacement - This project will remove and dispose of the failing block wall along
Winchester Boulevard (from Daves Avenue towards Blanchard Drive) and construct a new redwood fence.
The anticipated replacement cost is $25,000.
FINANCIAL SUMMARIES, PROJECTIONS AND RECOMMENDATIONS
Presented below is the Schedule of FY 2010/11 General Fund Operating Revenues vs. Operating Expenditures for
the second quarter and comparison information from the prior year. In the last column, the Finance Department
projects final balances for the fiscal year based upon the early trends observed through the second quarter.
ratio of Los Gatos
Schedule of General Fund
Operating Revenues vs. Operating Expenditures
For the period ended December 31, 2010
Unaudited
FY09110 FY09110 FY09110 FY09110 FYI 0111 FYI 0/11 FY10 111 FY10 111 FY10 /11
Final Adusted 2nd Qtr %Final Adopted Adjusted 2nd Qtr %-Adj Finance
Balance Budget Aetesals YID Budget Budget kraals YI13 Projection
Revenues
533.664.104
535.704118
S 18!40438
52'. 533.25
7.703 S
?3.3 2 _97 S I4.S56.013
43 - . 533.055.695
Mayor & Council
General Property T.
S 7,432,460 S
7222.920
$ 3.191_
43o,
S 7300,840
S 7300,640
S 3.734,908
SI55
S 7300,908
Prop Tar Car To Backfill
S 2,343,495 S
2,325,200
S -
0'.
S 2366,930
S 2366,930
S 1,163527
49%
S 2327,052
Sales &Use Tax
S 9.317216 S
8377.460
S 3221.690
39'.
S 8350.000
S 8350.000
S 4,776,828
57%
S 9.100,000
Franchise Fees
5 1.699.839 S
1.739.260
S 553,434
33'.
S 1,931,950
S 1.931,950
S 626592
32%
5 2,006.950
Transient Ore Tax
S 923 ,783 S
980.000
S 354,551
381.
S 989,800
S 989,800
S 380.1'_9
38 °5
5 989.300
Business License To
S 1.220,802 S
1.122.000
S 470,833
39'.
S 1.085.000
S 1,085,000
S 368,266
34 °5
S 1,085,000
Licenses &Petunia
S 2,039,660 S
1,879,610
S 933.922
46 -o
S 1,924,000
S 1,924.000
S 1,157374
60%
S 2,100.000
Motor Vehicle In Lieu
S 92.595 S
94280
S 20.406
__m
S 95,950
S 95.950
S 28258
29'.
S 95,950
Inlergoaersunental
S 286.061 S
615,885
S 255.976
33'.
S 530.660
S 580.660
S 2435]]
42%
S 580.660
Charges for services
S 2.565,137 S
2358.515
S 1.641.824
64 -.
S 2,471.336
S 2,486,336
S 1,685,430
68%
S 2.484336
Fnes &Forfeitures
S 662.699 S
596.040
S 287,426
43%
S 645.000
$ 645,000
S 277,396
43%
S 600.000
Interest
S 1.129.895 S
1300,000
S 68]5]1
61%
$ 1205.410
S 1 ,205.410
S 545,913
4516
S 1,105.410
GASB imestmem to market peraudil
S (259.383) S
-
S -
S -
S -
S -
S -
MiscellaneourLabor
S 2,398.382 S
2.527.903
S 1.554,258
65°'.
S 3.495,895
S 3509,149
S 1,391.161
40%
S 3309.149
Fond Transfers
S 440326 S
475.920
S 368322
84%
S 438.920
S 438,920
S 382.716
87:%
S 438.920
Tout Revenues
31,793.466
31.914.993
13341,998
43%
32.881,691
32,909,945
16.762572
51%
33.526.135
Use.fOthar Funding sources:
Use of Reserves - Capital Projem
3,941.295
3,941,295
900,000
900.000
900,000
Use of Reserves- Special Studies
255.000
255,000
255.000
Fond Monte Reallocations
967,106
967.106
(1215,000)
(1215.000)
(1215,000)
Fund Balance RDA Take Reserve
(825,000)
Carryf.tuard Allocarioos
12,270
12.270
150,000
150,000
150.000
PERS Liability Account
300.000
300.000
300.000
Total Other Funchal, Sources
4.920.671
4,920,671
390.000
390,000
(435.000)
Told Revenues Plus Reserves
536.914.137 536.535.664
S 13.541,998
533.271.691
533299.945
S 16,762572
533.091.135
Expendeturts orieludes dlbut no encumbrances)
533.664.104
535.704118
S 18!40438
52'. 533.25
7.703 S
?3.3 2 _97 S I4.S56.013
43 - . 533.055.695
Mayor & Council
160.202
166,015
75.763
47%
181.429
181.429
72,963
40%
179.615
Aa.me,
251,667
261.056
99.299
39 1 .
223.105
223.105
97,474
44%
220.874
Admiwsuatiae Scivices
2,
2.375.636
1.]]6324
50;5
2 1 81341
2386,861
1,160219
49;5
2,362,992
Comm Development
3.405.712
3,917.957
15]3.1]9
4696
3.365.012
336$,012
1351.401
40%
3,331362
Police
1
12,950.329
6.351.381
5015
13.106.916
13,126336
6,444,713
49 °5
13.060,704
Paris &Public Works
5,13],185
5.641552
2419,624
47%
5.462382
5 ,466,142
2510572
46%
5,411,481
Community Services
925291
1.142
531.639
5715
842.018
855272
315.434
371 1 .
846.719
Library
1.994569
2144.866
1.004513
50;%
1.861210.
1.889.170
923.683
49%
1,870278
Total Deft Expemer
- S 27.015,154
3
S 13231]
46°%
S2 ?4
52].49332]
5 0,376509
4] °'.
5
Non -Dept Expenditures and other uses
General Governors.,
6.648.650
7104.335
5.208116
Me
53342-0
5.829.970
2.009309
34%
5771.670
Tutnl SumOep, Expenaes
S 4648.650
S 7.104335
S 5205'16
73'.
S 5,334.270
S 5.329.970
S 2.009509
34%
S 5771.670
Used Operaang Expenditures
533.664.104
535.704118
S 18!40438
52'. 533.25
7.703 S
?3.3 2 _97 S I4.S56.013
43 - . 533.055.695
Net OpemJng Revenues Beare
Capital T mfia
& Budgeted Be, Fond BA ... e
S 1050.033
S 1.1,1.546
S (4.898.4401
S
13.988 S
(2335_
5
15.440
Guide to Presentation:
Each of the following groups of financial summaries present data by governmental fffnd type. These funds are Special Revenue Funds,
Capital Projects Funds, Internal Service Funds, and Redevelopment Agency Funds. In each of the following projections similar format is
presented. The fffnd iffornmtion starts it idn beginning find balances and adds current year revenues and subtracts current year
expendintres which give the ending fiord balance. Budgeted amounts are also provided for revenues and expenditures, these are usefid for
comparing actual amounts received or spent to date versus budgeted for FY 2010111.
I1
Special Revenue Funds - Special Revenue Funds, which account for the proceeds derived from specific revenue
sources that are legally restricted or assigned to special purposes including the Community Development Block
Grant Fund, Non Point Source Fund, Landscaping and Lighting District Funds. CBDG Grant Fund revenues
reflecting below budget at mid -year is a timing issue, the revenues received are largely based on reimbursements of
expenditures that occurred in the prior quarter.
Special Revenue Funds
Budget to Actuals Comparisons
Beginning Fund Balance
CDBG Non Point
Grants Source LiDs
489,309 40,204 105,632
Budgeted Revenues
Actual Revenues -2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
244.545
135.000
40,200
5,396
135,000
38,655
481,861
137,434
40,700
8,750
60,583
7,828
2nd Quarter Ending Fund Balance 485,955 114,621 136,459
Capital Projects Funds - Capital Projects Funds are utilized to account for resources used for acquisition and
construction of capital facilities by the Town. Funds included in this category are the GFAR Fund (General Fund
Appropriated Reserve), Traffic Mitigation Fees Fund, Grant Funded CIF's Fund, Storm Drains Fund, Utility
Undergrounding Fund, and the Gas Tax Fund. Capital Project Funds are tracking in accordance with the FY
2010/11 adopted budget. Staff is recommending no changes at this time.
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, which eventually should result with the fund "breaking even" or a zero fund balance
(dollars expended will be received back in grant reimbursements in equal amounts).
Internal Service Funds - Internal Service Funds are used to finance and account for special activities and services
performed by a designated Town department for other departments on a cost reimbursement basis. Included in this
fund type are the Equipment Replacement Fund, Worker's Compensation Fund, General Liability Self Insurance
Fund, Stores Fund, Management Information Systems Fund, Vehicle Maintenance Fund, and the Building
Maintenance Fund.
12
Capital Project Funds
Budget to
Actuals Comparisons
GFAR
Traffic
Grant Fund
Storm
Utility
Gas
Fund
Mitigation
CIP's
Drains
Undergd
Tax
Beginning Fund Balance
23,900,468
3,945,936
474,646
722,709
2,323,015
359,469
Budgeted Revenues
1,393,698
454,000
3,157,046
106,540
47,240
494,350
Actual Revenues - 2nd Qtr
879,898
-
282,505
121,186
45,569
241,265
Budgeted Expenditures
21,502,826
454,000
3,594,219
10,000
164,913
718,848
Total Actual Expenditures - 2nd Qtr
5,248,640.
54,445
1,535,554
-
-
106,000
2nd Quarter Ending Fund Balance
19,531,726
3,891,491
(778,402)
843,895
2,368,584
494,734
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, which eventually should result with the fund "breaking even" or a zero fund balance
(dollars expended will be received back in grant reimbursements in equal amounts).
Internal Service Funds - Internal Service Funds are used to finance and account for special activities and services
performed by a designated Town department for other departments on a cost reimbursement basis. Included in this
fund type are the Equipment Replacement Fund, Worker's Compensation Fund, General Liability Self Insurance
Fund, Stores Fund, Management Information Systems Fund, Vehicle Maintenance Fund, and the Building
Maintenance Fund.
12
Internal Service Funds
Budget to Actuals Comparisons
Internal Service Funds are tracking in accordance with the FY 2010/11 Adopted Budget. No revision to adopted
revenues or expenditures is required at this time. Staff believes there is still some potential for further operating
transfers in future years from these funds as excess balances exist in amounts needed for funding in a number of
these funds.
Trust and Agency Funds - Town Trust and Agency Funds have fund balances as of July 1, 2010 of $199,707 for
Parking District 988 and $334,549 in the Library Trust Funds. No budget revisions are contemplated at this time
for these funds.
Redevelopment Agency - The Agency's FY 2010/11 and FY 2010 -2015 C apital Improvement Plan adopted
budgets are incorporated into the Redevelopment Agency's financial statements and year -to -date actuals as
presented below:
Redevelopment Agency Funds
Budget to Actuals Comparisons
Capital Debt Low /Mod Total
Proiects Service Housing RDA Funds
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
1,409,013 7,419,223 5,140,056 13,968,292
635,000
Equipment
workers
Self
Office
\lmgt Info
Vehicle
Building
838242
Replacemt
Comp
Insurance
Stores
svuems
Maint.
\laint.
Beginning Fund Balance
3,096,960
2,725,375
2,078,635
256,357
2,210,653
428,529
820,170
BWgeted Revenues
334,560
675,590
511,820
124,500
1,003,390
487,600
1,006,700
Actual Revenues - 2nd our
173,535
349,421
266,719
53,818
522,722
243,924
507,960
Budgeted Expenditures
351,403
632,463
647,392
143,000
1,114,436
537,428
1,07-
Total Actual Expenditures -2nd Qtr
261,738
342,745
440,095
66,155
431,108
211,419
376,908
2nd Quarter Ending Fund Balance
3,008,757
2,732,051
1,905,259
244,020
2,302,267
461,034
951,222
Internal Service Funds are tracking in accordance with the FY 2010/11 Adopted Budget. No revision to adopted
revenues or expenditures is required at this time. Staff believes there is still some potential for further operating
transfers in future years from these funds as excess balances exist in amounts needed for funding in a number of
these funds.
Trust and Agency Funds - Town Trust and Agency Funds have fund balances as of July 1, 2010 of $199,707 for
Parking District 988 and $334,549 in the Library Trust Funds. No budget revisions are contemplated at this time
for these funds.
Redevelopment Agency - The Agency's FY 2010/11 and FY 2010 -2015 C apital Improvement Plan adopted
budgets are incorporated into the Redevelopment Agency's financial statements and year -to -date actuals as
presented below:
Redevelopment Agency Funds
Budget to Actuals Comparisons
Capital Debt Low /Mod Total
Proiects Service Housing RDA Funds
Beginning Fund Balance
Budgeted Revenues
Actual Revenues - 2nd Qtr
Budgeted Expenditures
Total Actual Expenditures - 2nd Qtr
1,409,013 7,419,223 5,140,056 13,968,292
635,000
8,823,720
1,730,890
11,189,610
604,931
4,535,103
843,241
5,983,275
838242
9,412,880
3,527,548
13,778,670
602,563
2,619,777
755,454
3,977,794
2nd Quarter Ending Fund Balance 1,411,381 9,334,549 5,227,843 15,973,773
Since 1992 redevelopment agencies across the state have been required to make Educational Revenue
Augmentation Fund (ERAF) payments to the State of California. Over the years, cities have experienced increases
in their respective ERAF payments to the State. In FY 2008/09, the State introduced a new Supplemental
Educational Revenue Augmentation ( SERAF) payment, which was legally challenged and won by the California
Redevelopment Association (CRA). A second SERAF payment was adopted by the State in FY 2009/10 and was
paid over a period of two fiscal years totaling approximately $2,689,276. The CRA filed another lawsuit over the
second SERAF payment, which continues to be litigated.
Complicating matters more is the Governor's recent budget proposal to address the State's budget shortfall for the
current and next fiscal year, which is estimated to be $28 billion. According to State Legislative Analyst's Office,
the budget proposal involves the elimination of California's 400+ redevelopment agencies, which account for an
estimated $5 billion in property tax revenues. While the mechanism and legality of this proposal is unclear, the
Governor reportedly plans on using the RDA funding to backfill the State budget in the current year and fund
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schools and county services in subsequent years. If implemented, the fiscal impact to the Town would be a one-
time loss of approximately $800,000 and an ongoing loss of up to $400,000.
Although the passage of Proposition 22 last November was intended to protect local government and
redevelopment agencies from further state raids, there is speculation that the state may have authority to eliminate
redevelopment altogether or, at least, to place a measure on the June ballot for such elimination or redirection of
funds. However, there have been recent reports from the CRA and League of California Cities that there may be a
compromise in which Redevelopment agencies would turn over a greater share of their property tax revenues to
other local government entities. Staff is monitoring this recent development and will advise Council of its status as
more information becomes available.
CONCLUSION
The financial results from the prior fiscal year and data collected through the second quarter of FY 2010/11 are
somewhat encouraging given how the Town's economically sensitive revenues have performed during the
economic recession. This is especially important in light of the recent loss of auto dealerships. The Five -Year
Financial Plan continues to project challenging revenue shortfalls. Given this forecast, staff continues to closely
monitor all revenue and expenditure activity, mindful of the necessity to explore options to enhance revenue
sources for current and future operating and capital needs. Equally important is to ensure that the Town's current
limited resources are allocated to meet the basic priority service needs of the community.
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