Attachment 09Subject:
Attachments:
Questions regarding the Staff Memo for Agenda Item 12 - please include in the Council
material
Attachment_5_-_FY_2017-18_General_Fu nd_Reserve_Activity.pdf
From: Phil Koen <pkoen@monteropartners.com>
Sent: Tuesday, February 19, 2019 8:35 AM
To: Laurel Prevetti <LPrevetti@losgatosca.gov>; Steven Leonardis <SLeonardis@Iosgatosca.gov>; Marcia Jensen
<MJensen@losgatosca.gov>; Marico Sayoc <MSavoc@losgatosca.gov>; BSpector <BSpector@losgatosca.gpv>; Rob
Rennie <RRennie@losgatosca.gov>
Cc: jvannada@gmail.com; tduryea@AOL.COM; Rick Tinsley
Subject: Questions regarding the Staff Memo for Agenda Item 12 - please include in the Council material
Dear Laurel,
Background
On page 13 of the Staff Memo for Agenda Item #12, it was reported that the close of the 2018 CAFR resulted in a $3.7m
surplus. This $3.7m was then allocated to the Capital/Special Project Reserve in accordance with the Council Reserve
Policy. At the Strategic Priority discussion the Council was asked to identify various priorities that would be candidates
for reallocation of the $3.7m surplus.
Questions
• In reviewing the 2018 CAFR, the actual surplus of revenues over expenditures was $1,188,231 not $3.7m as
reported in the Staff memo. Can you please explain the difference in the two numbers? This is very confusing.
• Attachment #5 of the Staff Memo is a detail schedule which shows for every general fund reserve account
(including the undesignated fund balance) the movement from the CAFR balance as of June 30, 2017 to CAFR
balance as of June 30, 2018. In reviewing the Capital/Special Projects Reserve (account #36207) there is no
amount corresponding to the $3.7m surplus that was mentioned in the memo. Why is this if this was the
amount allocated to the reserve?
• There is an entry which increases the Capital/Special Projects Reserve by $7,063,092 with the notation "Year End
Adjustment". It is the single largest number on the entire schedule. Could you please explain what this is and
how the $7,063,092 was computed/determined?
• There is another entry which reduces the Capital/Special Projects Reserve by $390,000 with the notation PERS
Adjustment. This entry appears to be transferring funds from the Capital/Special Projects Reserve to the
Pension/OPEB Reserve (account #36222). Why were funds transferred from the Capital/Special Projects Reserve
to the Pension/OPEB Reserve?
• On page 14 of the Staff memo it was reported that "$3.99m of funds were previously allocated by Council action
during the adoption of the FY 2019 budget" from the Capital/Special Projects Reserve. The budget resolution
authorizing the FY 2019 budget called for $2,785,220 to be used from the reserve as a "one-time use". Could
you please explain how the remaining $1.2m ($3.99m - $2.79) has been allocated.
• In attachment #4 the Staff has noted some baseline assumptions for expenditures. Could you please explain:
a. Why are no salary increases assumed for FY 21— FY 24 when Calpers assumes a 3% annual increase in
computing the mandatory payments. Shouldn't the Town make the same assumptions as Calpers?
b. The pension payment assumptions for both the Safety and Miscellaneous plans do not agree with either
the Calpers projections included in the most recent actuarial report or the Bartels projections. Can you
please explain? (The percentage for the Safety Plan for FY 24 appears to be a typo.)
1
ATTACHMENT 9
For Council Consideration and Action
The Staff provided a forecast in the FY 19 Budget Transmittal Letter (schedule A-9) which showed $5,096,518 as the
projected balance for the Capital/Special Projects Reserve at June 30, 2019. In that letter, Staff stated that the June,
2019 balance would be sufficient to fund all future Capital Projects. That would indicate that the Council has $9,324,685
($14,421,203 - $5,096,518) to allocate this fiscal year. In addition there is $120,090 from the Strategic Planning Reserve
available for reallocation, which brings the total to $9,444,775. It should be noted that this amount does not include any
potential surplus from FY 2019 which would be allocated to the Capital/Special Projects Reserve. It is highly likely that
there will be a material surplus for FY 2019.
The Council review should start with the Council revisiting all previous commitments (it is unclear as to how much this
is - $3.99m vs $2.8m) and agreeing whether or not that these commitments are still valid given changing priorities. Once
this is completed, the Council will now know exactly how much money is available to be reallocated from the
$9,444,775.
I would recommend that the Council complete this analysis before finalizing the planned uses shown on page 15 of the
Staff Memo. It is important to first fully understand the amount which is available.
Thank you for your time. It is important that members of the public fully understand the Town's finances and the Town
be fully transparent. I have also copied the resident members of the Finance Committee since they reviewed the CAFR.
Phil Koen
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ATTACHMENT 5
From: John Shepardson <shepardsonlaw@me.com>
Date: February 15, 2019 at 10:44:37 PM PST
To: Steven Leonardis <SLeonardis@losgatosca.gov>, Marcia Jensen <MJensen@losgatosca.gov>,
Bspector <BSpector@losgatosca.gov>, Marico Sayoc <msayoc@losgatosca.gov>, Rob Rennie
<rrennie@losgatosca.gov>, Laurel Prevetti <LPrevetti@losgatosca.gov>, Robert Schultz
<RSchultz@losgatosca.gov>
Subject: Comments for Town Council Meeting 2/19/19
Dear Mayor Steve Leonardis, Other Council Members Marcia Jensen, Barbara Spector, Marico
Sayoc, and Rob Rennie, Town Manager Laurel
Prevetti, and Town Counsel Robert Schultz:
The following are my thoughts for your consideration on council agenda items for the
scheduled 2/19/19 meeting:
1. Annexation
FISCAL IMPACT:
Once the annexation is certified by the State Board of Equalization, the Town will receive
approximately 9.6 percent of the property taxes.
What is the cost of services on an approximate basis? My understanding is town services for residential
property exceeds the revenue received. If we don't have the approximate cost of the services, how can
we fairly consider
the fiscal impact? Should we be taking on more net debt obligations at this time? Would that be fiscally
prudent?
2. Budget
Use additional funds for unfunded liabilities and fire protection?
3. RESOLUTION 2019-
DRAFT RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS
ADOPTING A COMPLETE STREETS POLICY FOR THE TOWN OF LOS GATOS
WHEREAS, the California Global Warming Solutions Act of 2006 (known as AB 32) sets a
mandate for the reduction of greenhouse gas emissions in California, and the Sustainable
Communities and Climate Protection Act of 2008 (known as SB 375) requires emissions
reductions through coordinated regional planning that integrates transportation, housing, and
land -use policy, and achieving the goals of these laws will require significant increases in travel
by public transit, bicycling, and walking; and
Looks like a winner.
4. PPW Job Number 18-811-9901 Annual Street Repair and Resurfacing Project (Rubber Cape Seal) A.
Authorize contract award to the project low bidder, American Pavement Systems, in an amount not to
exceed $1,053,800, including a ten percent construction contingency.
B. Authorize staff to execute potential change orders within the ten percent construction contingency.
C. Recognize $414,061 of project reimbursements and authorize a revenue and expenditure budget
adjustment of $414,061 to the Annual Street Repair and Resurfacing Project.
D. Authorize a revenue decrease of $178,000 in Gas Tax revenue to the Annual Street Repair and
Resurfacing Project.
E. Authorize a revenue increase of $10,650 in GFAR revenue to the Annual Street Repair and Resurfacing
Project.
Staff Report
Attachment 1- Street List for Project 18-811-9901
Can we seal with cool colors? White, off-white, light green? Get the seal and reduction in street
ambient air temperature? Less use of air conditioning? Enhanced property values and tax revenues?
Creatively address Climate Change?
5. Conditional Use Permit Application U-18-020. Project Location: 114 S. Santa Cruz Avenue. Property
Owner: 102 S. Santa Cruz, LP. Applicant: Brian Edwards.
The promoters, as I recall from reading about them, demonstrated a tremendous work ethic on
the sports field and in the classroom at LGHS. Supposing they
bring that same ethic to their enterprise, they seem poised to benefit the town citizenry. I can envision
them being respectful of the nearby residents.
6. Budget
If the VanNada/Koen concept for paying down unfunded liabilities will not jeopardize
the town's financial reserves to an imprudent level, it seems to me it is worthy of careful and
thorough review. Their coming up with
creative ways to deal with the liabilities is to be lauded. I feel the town citizenry owes them a
"debt of gratitude".
As you can see, both Scenario's 1+2 have their advantages. Scenario 1 requires a $10,895,100 ADP
but has a $18,956,000 overall reduction to pension liabilities over 26 years. Scenario 2 was an
Alternative Mr. Koen devised if the $10,895,100 was too high for some of you.
Scenario 2 requires a $7,006,000 ADP, but reduces pension liabilities by $8,795,000 over 14 years
with 61 % coming in the first 6 years and 87% within the first 10 when we need pension reductions
the most.
We believe that the $11 million can come from the three sources:
1. Excess Capital Project Reserve
2. Excess Internal Service Funds
3. Proceeds from the sale of surplus property
Total
$6,500,000 $3,000,000 $1,900,000
$11,400,000
In addition to the above, the Town could elect to use some of the current 115 Pension Trust balan
to help fund an ADP. For example, if the Town elected to withdraw $2.5m from the current 115
Pension Trust balance, the Town would only need to find an incremental $4.5m from the source
listed above for Scenario 2.
We hope you find this helpful. We feel that the most important thing Council can do would be to
make as big a payment to Ca1PERS as possible. I think the above should help you feel better that I
we'll not be shooting ourselves in the financial foot. With either scenario, there will be annual cash
flows in terms of annual payment reductions to the present and future budgets. Our interest is to I
provide information to the Council and the Staff that helps with the overall success of the Town byl
thinking of creative ways to extricate ourselves from the pension debt.
Jak VanNada Phil Koen
Respectfully,
John Shepardson, Esq.