Staff Report.Budget
PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 06/06/2023 ITEM NO: 13
DATE: May 30, 2023
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Operating and Capital Budgets
a. Adopt a Resolution Approving the Town of Los Gatos Fiscal Year (FY)
2023/24 Operating Budget and FY 2023/24 – 2027/28 Capital
Improvement Program (CIP), New Appropriations, Additional Council
Actions on May 16, 2023; American Rescue Plan Act Budget Adjustment,
Minor Corrections, and Carry-Forward Appropriations.
b. Adopt a Resolution Approving Commitment of Fund Balances under
GASB 54.
c. Approve FY 2022/23 Budget Adjustments:
1. Major Revenue Adjustments to Match Year-End Estimated Revenues
as Directed by the Town Council on May 16, 2023 and as Determined
from Updated Information
i. Property Tax revenue Increase in the Amount of $140,000,
ii. Educational Realignment Augmentation Fund (ERAF) Revenue
Increase in the Amount of $818,891.60 and Reserve 30%
(689,607.60) of the Total Proceeds ($2,298,691.60) in an ERAF
Risk Reserve,
iii. Transient Occupancy Tax Increase in the Amount of $348,547,
iv. Interest Revenue Increase in the Amount of $237,074,
v. Sales Tax Revenue Increase in the Amount of $121,878
($124,851 Increase in Regular Sales Tax and $2,973 Decrease in
Measure G Sales Tax),
vi. Business License Tax Revenue Decrease in the Amount of
$133,890,
vii. Plan Check Pass Through Service Revenue Increase in the
Amount of $125,000,
PAGE 2 OF 6 SUBJECT: Operating and Capital Budgets DATE: May 30, 2023
viii. Map Plan Check Pass Through Service Revenue Increase in the
Amount of $120,000,
ix. OPEB Trust Withdrawal Revenue Decrease in the Amount of
$902,579 as Current Year End Estimates FY 2022/23 Surplus,
x. Recognize $140,195 General Fund Salary Reimbursement for
Capital Improvement Staff Work,
xi. Recognize Additional Police Foundation Donation Received in
the Amount of $50,195, and
xii. Recognize up to $20,000 General Fund Salary Reimbursement
for Enterprise Resource Upgrade Project Staff Work.
2. Expenditure Increases:
i. In the Amount of $140,195 for General Fund Salary
Reimbursement for Capital Improvement Staff Work,
ii. In the Amount of $125,000 for Plan Checking Pass Though
Services,
iii. In the Amount of $100,000 for Map Plan Checking Pass Though
Services,
iv. In the Amount of $50,195 to Authorize the Spending the
Additional Police Foundation Donation Received,
v. In the Amount of $32,000 to Cover Third Party Business License
Administrator Services, and
vi. In the Amount of up to $20,000 General Fund Salary
Reimbursement for Enterprise Resource Upgrade Staff Work.
3. Approve American Rescue Plan Act (ARPA) Replacement Revenue
Tracking Pass Through Revenue and Expenditures Budget
Adjustments in the Amount of $453,465.
d. Adopt the Following Salary Schedules:
1. Salary Schedule for Management Classifications Effective April 2,
2023,
2. American Federation of State, County, and Municipal Employees
(AFSCME) Salary Schedule Effective July 9, 2023,
3. Police Officer Association (POA) Salary Schedule Effective July 9, 2023,
4. Town Employees’ Association (TEA) Salary Schedule Effective July 9,
2023,
5. Salary Schedule for Confidential Classifications Effective July 9, 2023,
6. Salary Schedule for Management Classifications Effective July 9, 2023,
and
7. Salary Schedule for Temporary/Hourly Classifications Effective July 9,
2023.
PAGE 3 OF 6 SUBJECT: Operating and Capital Budgets DATE: May 30, 2023
RECOMMENDATION:
Operating and Capital Budgets
a. Adopt a Resolution Approving the Town of Los Gatos Fiscal Year (FY) 2023/24 Operating
Budget and FY 2023/24 – 2027/28 Capital Improvement Program (CIP), New
Appropriations, Additional Council Actions on May 16, 2023; American Rescue Plan Act
Budget Adjustment, Minor Corrections, and Carry-Forward Appropriations.
b. Adopt a Resolution Approving Commitment of Fund Balances under GASB 54.
c. Approve FY 2022/23 Budget Adjustments:
1. Major Revenue Adjustments to Match Year-End Estimated Revenues as Directed by
the Town Council on May 16, 2023; and as Determined from Updated Information
i. Property Tax revenue Increase in the Amount of $140,000,
ii. Educational Realignment Augmentation Fund (ERAF) Revenue Increase in the
Amount of $818,891.60 and Reserve 30% (689,607.60) of the Total Proceeds
($2,298,691.60) in an ERAF Risk Reserve,
iii. Transient Occupancy Tax Increase in the Amount of $348,547,
iv. Interest Revenue Increase in the Amount of $237,074,
v. Sales Tax Revenue Increase in the Amount of $128,878 ($124,851 Increase in
Regular Sales Tax and $2,973 Decrease in Measure G Sales Tax),
vi. Business License Tax Revenue Decrease in the Amount of $133,890,
vii. Plan Check Pass Through Service Revenue Increase in the Amount of
$125,000,
viii. Map Plan Check Pass Through Service Revenue Increase in the Amount of
$120,000,
ix. OPEB Trust Withdrawal Revenue Decrease in the Amount of $902,579 as
Current Year End Estimates FY 2022/23 Surplus,
x. Recognize $140,195 General Fund Salary Reimbursement for Capital
Improvement Staff Work,
xi. Recognize Additional Police Foundation Donation Received in the Amount of
$50,195, and
xii. Recognize $20,000 General Fund Salary Reimbursement for Enterprise
Resource Upgrade Project Staff Work.
2. Expenditure Increases:
i. In the Amount of $140,195 General Fund Salary Reimbursement for Capital
Improvement Staff Work,
ii. In the Amount of $125,000 for Plan Checking Pass Though Services,
iii. In the Amount of $100,000 for Map Plan Checking Pass Though Services,
iv. In the Amount of 50,195 to Authorize the Spending the Additional Police
Foundation Donation Received,
v. In the Amount of $32,000 to Cover Third Party Business License
Administrator Services, and
vi. In the Amount of $20,000 General Fund Salary Reimbursement for Enterprise
Resource Upgrade Staff Work.
PAGE 4 OF 6 SUBJECT: Operating and Capital Budgets DATE: May 30, 2023
3. Approve ARPA Replacement Revenue Tracking Pass Through Revenue and
Expenditure Adjustments in the amount of $453,465.
d. Adopt the Following Salary Schedules:
1. Salary Schedule for Management Classifications Effective April 2, 2023,
2. American Federation of State, County, and Municipal Employees (AFSCME) Salary
Schedule Effective July 9, 2023,
3. Police Officer Association (POA) Salary Schedule Effective July 9, 2023,
4. Town Employees’ Association (TEA) Salary Schedule Effective July 9, 2023,
5. Salary Schedule for Confidential Classification Effective July 9, 2023,
6. Salary Schedule for Management Classifications Effective July 9, 2023, and
7. Salary Schedule for Temporary/Hourly Classifications Effective July 9, 2023.
BACKGROUND:
On April 17, 2023, the Proposed FY 2023/24 Operating and Capital Budgets were posted to the
Town’s website. Per Measure A, the Finance Commission received the Proposed Budgets 21
business days before May 16, 2023, which is the first meeting at which the Proposed Budgets
were considered by the Town Council. The Finance Commission held three public meetings at
which Commissioners discussed the Proposed Budgets and provided recommendations to the
Town Council per Measures A and G.
On May 16 2023, the Town Council conducted public hearings to discuss the proposed FY
2023/24 Operating and Capital Summary Budget and Proposed FY 2023/24– 2027/28 Capital
Improvement Program. The Town Council considered public testimony, discussed both
documents, considered the Finance Commission recommendations, and directed staff to bring
back the documents for final approval incorporating the Council recommendations.
DISCUSSION:
The draft resolution (Attachment 1) incorporates the budget direction provided by the Council
at the May 16, 2023 budget hearing including building in a 4.6% vacancy factor.
Attachment 2 contains the resolution to formally move General Fund balances based on the
Town Council General Fund Reserve Policy and additional Council direction consistent with
General Accounting Standards Board (GASB) 54.
In May, the Council directed that the proposed revenues reflect 100% of the projected
Education Realignment General Fund (ERAF) revenue. This is built into the Resolution for the
adoption of the budget (Attachment 1).
As requested by Town Council, at least three other jurisdictions in Santa Clara County with ERAF
proceeds over $1 million have started to reserve the at-risk amount since FY 2021/22 (Milpitas
PAGE 5 OF 6 SUBJECT: Operating and Capital Budgets DATE: May 30, 2023
DISCUSSION (continued):
30%, Palo Alto 25%, and Santa Clara 30%). Mountain View and Sunnyvale are recognizing the
ERAF revenue as a one-time revenue.
Based on this information, staff recommends establishing an ERAF Risk Reserve and reserve
30% of the anticipated proceeds in FY 2022/23 and FY 2023/24. Staff recommends continuing
to reserve the at-risk amount until the lawsuit is resolved. If the result of the lawsuit in
unfavorable to the Town, the County will reduce the Town Property Tax distribution by the at-
risk amount; in this case, this reserve would provide the funding gap. If the lawsuit result is
favorable to the Town, staff will come back to Council for direction on how to spend the
accumulated reserve.
Upon Treasury’s release of the simplified reporting process for entities awarded less than $10
million in American Rescue Plan Act (ARPA) funding and additional guidance received through
staff review of federal compliance issues, the Town recognized the $3.4M in FY 2021/22 and
will recognize the $3.6M FY 2022/23 cash collections of ARPA revenues as qualified revenue
loss under the Treasury provisions for use in providing essential government services. To
further aid in compliance with federal uniform guidance and Single Audit requirements, staff
claimed the lost revenue for use in providing essential government services and eligible public
safety payroll costs for both FY 2021/22 and FY 2022/23. This action allocates all ARPA
“replacement” revenues to the General Fund which in turn will unencumber other General
Fund operating revenues which were previously dedicated for public safety costs.
Once the ARPA Revenues were fully recognized as loss revenue, it became part of General Fund
and available for Council direction for any lawful government service. Staff is tracking the $7.2
million total revenue received against Council directed use through pass through revenues and
expenditures (Attachment 3). Staff is recommending establishing a Council Priorities –
Economic Recovery Reserve to track any unallocated amount of the $7.2 million.
In anticipation of the end of the 2022/23 fiscal year, the Council is being asked to make several
revenue and expenditure budget adjustments. These adjustments recognize circumstances
that have changed since the Mid-Year Review last February and assist with the annual audit.
As part of the Budget adoption process, the Town Council needs to adopt the salary schedules
as separate actions (Attachment 4 through 10). As described in the Proposed Operating
Budget, the schedules reflect an approved 3% cost of living increase in the Memoranda of
Understanding with the bargaining units. All unrepresented staff would receive the same cost
of living increase. In addition, unrepresented Management did not receive a 5% market
increase last summer as did all other employees. The Proposed Budget includes a 3% market
increase for Management classifications retroactive to April (Attachment 4).
PAGE 6 OF 6 SUBJECT: Operating and Capital Budgets DATE: May 30, 2023
CONCLUSION:
Staff recommends approval of FY 2022/23 budget adjustments, establishment of ERAF Risk and
Council Priorities – Economic Recovery Reserves, adoption of a Resolution approving the Town
of Los Gatos Fiscal Year (FY) 2023 /24 Operating Budget and FY 2023/24 – 2027/28 Capital
Improvement Program (CIP), approval of American Rescue Plan Act Budget Adjustments ARPA
Loss Revenue and Expenditure Tracking Adjustments for FY 2022/23, adoption of a Resolution
approving commitment of Fund Balances under GASB 54, and adoption of the Salary Schedules
for Management effective April 2, 2023, and Salary Schedules for AFSCME, TEA, POA,
Confidential, Management and Temporary/Hourly Classifications effective July 9, 2023.
COORDINATION:
The preparation of the budget documents involved the participation of all Town Departments.
FISCAL IMPACT:
The fiscal impact is presented in summary form in the Financial Summaries chapter of the
Proposed Operating and Capital Budget for FY 2023/24.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachments:
1. Resolution of the Town Council Approving FY 2023/24 Operating Budget and FY 2023/24 –
2027/28 Capital Improvement Program (with Exhibit A)
2. Resolution of the Town Council of the Town of Los Gatos Approving Commitments of Fund
Balance under GASB 54
3. ARPA Revenue Replacement Proceeds Tracking
4. Salary Schedule for Management Classifications Effective April 2, 2023
5. American Federation of State, County, and Municipal Employees (AFSCME) Salary Schedule
Effective July 9, 2023
6. Police Officer Association (POA) Salary Schedule Effective July 9, 2023
7. Town Employees’ Association (TEA) Salary Schedule Effective July 9, 2023
8. Salary Schedule for Confidential Classification Effective July 9, 2023
9. Salary Schedule for Management Classifications Effective July 9, 2023
10. Salary Schedule for Temporary/Hourly Classifications Effective July 9, 2023
11. Public comments received before publishing the staff report