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15 Staff Report.Revenue Ballot Measure with attachments PREPARED BY: Katy Nomura Assistant Town Manager Reviewed by: Town Manager, Town Attorney, and Finance Director 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov TOWN OF LOS GATOS COUNCIL AGENDA REPORT MEETING DATE: 02/20/2024 ITEM NO: 15 DATE: February 15, 2024 TO: Mayor and Town Council FROM: Laurel Prevetti, Town Manager SUBJECT: Provide Direction on Any Ballot Measures to Consider for Polling RECOMMENDATION: Provide direction on any ballot measures to consider for polling. BACKGROUND: While costs of providing services and programs for residents have significantly increased over the years, Town revenues have not kept pace. Los Gatos is facing the same economic pressures as many other cities and businesses, including inflation and the uneven recovery from the pandemic. In addition, unfunded mandates by the State have also reduced the Town's available funds. The Town maintains a relatively stable and low staffing level. Even so, costs per employee continue to escalate as evidenced by pension benefit costs having increased 35% in the last five years. The Town Council has taken several proactive steps to reduce the Town’s pension liability, including Additional Discretionary Payments for the Pension Plans and curbing cost escalation in Other Post-Employment Benefits (OPEB). Other cost drivers, such as medical benefits, have been fluctuating and increasing in recent years by as much as 11% in a single year. Unfortunately, revenues are not increasing by double digits. PAGE 2 OF 5 SUBJECT: Potential Revenue Ballot Measure Options DATE: February 15, 2024 BACKGROUND (continued): Los Gatos has taken the following proactive cost-cutting measures during major economic downturns to reduce budget expenditures and control costs while maintaining high service levels: • Staffing levels significantly reduced from 2001 – 2005 and have not returned to those levels, despite an increase in population since then, unfunded mandates, and service demands, • Imposed wage freezes and unpaid furloughs, and • Reduced employee benefit costs. Town budgets are reviewed annually by an independent auditor. Los Gatos has earned recognition for its fiscal responsibility with the highest credit rating (AAA bond rating by Moody’s) and annual awards by the Government Finance Officers Association for its high quality and transparent budgeting practices. On November 17, 2022, the Finance Commission reviewed several cost reduction measures and recommended that the Town further work toward operational efficiencies and researching additional revenue options. On January 24, 2023, the Town Council determined its Strategic Priorities for 2023-2025, which included exploring new revenue opportunities. On June 20, 2023, the Town Council authorized the Town Manager to issue a Request for Qualifications (RFQ) for revenue ballot measure consulting services. After conducting the RFQ process, the Town selected NBS. On October 17, 2023, Town Council authorized the Town Manager to enter into an agreement for the initial phase of the work for an amount not to exceed $44,600, with direction to return to Council with revenue modeling prior to beginning any polling. On December 19, 2023, Town Council reviewed the Revenue Modeling Report prepared by NBS (Attachment 1) and continued the item to February 20, 2024 to consider it at the same time as the five-year forecast. On February 12, 2024, the Finance Commission discussed the NBS report and made the following recommendation to Council: The Finance Commission unanimously passed a motion recommending that the Town Council not rely upon the NBS Report’s conclusions regarding deficit reductions because the financial analysis was based on an outdated 5-Year Forecast which did not include actual results for Fiscal Year 2022/23. The Finance Commission did find that the incremental revenue contribution for the revenue options analyzed are credible and can be used for modeling purposes. PAGE 3 OF 5 SUBJECT: Potential Revenue Ballot Measure Options DATE: February 15, 2024 BACKGROUND (continued): While the Commission did not make a motion regarding any potential ballot measure, individual Commissioners questioned the need for it at this time. One Commissioner expressed that there may or may not be merit to the 1/8th cent tax measure and indicated this was the reason they declined to opine. On February 13, 2024, the Council updated its Strategic Priorities and removed the detailed bullets under “Develop a Five-Year Structurally Balanced and Sustainable Operating Forecast,” including reference to new revenue opportunities. DISCUSSION: NBS conducted a comprehensive evaluation of options to increase revenue for the Town and associated revenue modeling. This included an evaluation of a property transfer tax increase, utility user tax (UUT), special assessment districts, transient occupancy tax (TOT), business license tax, sales tax, and parcel tax scenarios. Franchise fees were discussed as part of the UUT analysis. Each of these options is outlined in NBS’ revenue modeling report (Attachment 1). Of the options, NBS recommended either a sales tax or a parcel tax. Sales Tax As mentioned in the NBS report, “the current sales tax rate in the Town is 9.25%, of which the Town’s share is 1% (not including the Measure G sales tax rate of 0.125%). The Town has the capacity to raise its sales tax rate by an additional 0.125%...If structured as a general sales tax, the Town would only need to secure approval from a majority of the registered voters within the Town to increase the sales tax rate. NBS recommends that the Town move quickly on this option, if desired, as the Town’s remaining capacity for a sales tax increase could be utilized by another government agency within the County during the next election cycle.” The following table shows NBS’ revenue modeling for FY 2025/26 through FY 2028/29: Parcel Tax Among other scenarios, NBS explored revenue modeling for a parcel tax with senior/low- income exemptions and a parcel tax on commercial buildings over 25,000 square feet. Any parcel tax would require a two-thirds approval from voters to pass. In order for a parcel tax with senior/low-income exemptions to generate an estimated $1M annually, it would need to be roughly $97.70 per parcel, $0.0055 per lot square foot, or $0.04 per building square foot. Potential Sales Tax Increase Potential New Total Sales Tax % Additional Revenue 2025/26 Projected Additional Revenue 2026/27 Projected Additional Revenue 2027/28 Projected Additional Revenue 2028/29 Projected 0.125%9.375%1,062,500$ 1,087,500$ 1,125,000$ 1,162,500$ PAGE 4 OF 5 SUBJECT: Potential Revenue Ballot Measure Options DATE: February 15, 2024 DISCUSSION (continued): In order for a parcel tax on commercial buildings over 25,000 square feet to generate an estimated $1M annually, it would need to be roughly $0.83 per building square foot. Only 35 parcels in the Town have commercial buildings over 25,000 square feet that would be subject to such a parcel tax. Polling Next Steps Regarding a revenue measure for the 2024 ballot, the Town is not in a position to determine whether a measure should be placed on the ballot or not as polling has not been conducted. Polling is a targeted effort to survey a statistically representative sample of likely voters to test potential ballot measures, ballot language, and potential services to fund (see Attachment 2). In other smaller cities, samples sizes as low as 90 likely voters have yielded reliable and ultimately successful results. The results of any polling should give proper guidance for specific recommendations and for the Council to make its decision. Polling will also inform public messaging around any potential revenue ballot measure. Draft messaging is included in Attachment 3 and updated messaging would return to Council with the polling results, should polling occur. If polling is conducted, a summary of the results would be brought to the Finance Commission for a recommendation to the Council as to whether or not to pursue placing a measure on the 2024 ballot. The results and the Finance Commission’s recommendation would then be brought to the Council for consideration. CONCLUSION: Staff looks forward to Council’s discussion and direction on which potential revenue measures to consider for polling, if any. NBS recommends that no more than two options should be polled. COORDINATION: The preparation of this report was coordinated with the Town Manager, Town Attorney, and Director of Finance. FISCAL IMPACT: On October 17, 2023, Council authorized the Town Manager to enter into an agreement for the initial phase of the work for amount not to exceed $44,600. The cost for polling for potential revenue ballot measures was already included in this amount. After polling is complete, Council will have the option to decide whether to allocate additional funding to pursue placing a measure on the 2024 ballot. PAGE 5 OF 5 SUBJECT: Potential Revenue Ballot Measure Options DATE: February 15, 2024 ENVIRONMENTAL ASSESSMENT: This is not a project defined under CEQA, and no further action is required. Attachment: 1. NBS Revenue Modeling Report 2. Polling Overview 3. Draft Messaging This Page Intentionally Left Blank helping communities fund tomorrow since 1996 nbsgov.com | 800.676.7516 NBS TOWN OF LOS GATOS MEMORANDUM TO: Laurel Prevetti, Town Manager, Town of Los Gatos FROM: Nick Dayhoff, Senior Consultant DATE: December 14, 2023 SUBJECT: Revenue Modeling Scenarios a Purpose The Town of Los Gatos (the “Town”) has requested a comprehensive evaluation of options to increase revenue to address the Town’s forecasted budget deficits in the near term. This evaluation includes modeling for increases to sales tax and transient occupancy tax (“TOT”) rates, and a limited model for a new utility user tax (“UUT”) and a new parcel tax. This Memorandum summarizes additional revenues that could be generated via a new parcel tax based on various revenue targets, the estimated revenue generated by potential increases to the Town’s sales tax and TOT rates, and the estimated revenue generated by the implementation of a UUT. Projected Budget Deficits According to the Town’s Operating and Capital Summary Budget for Fiscal Year 2023/24, the following table shows the forecasted budget deficits for Fiscal Years 2025/26 through 2028/29: Non-Viable and Not-Recommended Revenue Options Property Transfer Tax Increase Only Charter cities can increase the property transfer tax rate above the general law maximum of $0.55 per $1,000 of value (city rate). The Town is not a Charter city. Limited UUT for Cable, Gas, and Electric Utilities A UUT may be imposed by the Town on the consumption of utility services, including (but not limited to) electricity, gas, water, sewer, telephone (including cell phone and long distance), sanitation and cable television. ATTACHMENT 1 Town of Los Gatos Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 2 The Town does not currently levy UUTs, so modeling what the potential revenues might be from a new UUT relies on the limited amount of information received from the Town, including historical franchise fee collections from its cable, electric, and gas franchises. Since any UUT would be based upon the gross receipts of each utility, NBS has had to estimate the gross receipts of the gas, electric, and cable utilities based on forecasted franchise fee collections and franchise fee rates for the Town’s cable, electric, and gas franchises. The Town does not collect franchise fees for the water, sewer, or telephone utilities, so we cannot estimate what the gross receipts of those utilities might be. As such, we have not included these utilities in our estimate of potential UUT revenue. In addition, NBS is not including a UUT on the Town’s garbage utility as part of this analysis, as the contract between the hauler and the Town is currently being negotiated and the service may no longer be categorized as a “Franchise” moving forward. According to the Town, the following table shows the forecasted cable, electric, and gas franchise fee collections for Fiscal Years 2025/26 through 2028/29: From here, we can estimate what the gross receipts of the cable and gas/electric utility are, as the cable franchise fee is 5.00% of gross revenues, and the gas/electric franchise fee is 2.00% of gross revenues. The following table shows the potential revenue generated via various UUT rates for the cable, gas, and electric utilities for Fiscal Years 2025/26 through 2028/29: Title 2025/26 2026/27 2027/28 2028/29 CABLE FRANCHISE FEE 530,450$ 546,360$ 562,750$ 579,630$ PG&E FRANCHISE FEE 441,830 455,080 468,730 482,790 TOTAL 972,280$ 1,001,440$ 1,031,480$ 1,062,420$ Title 2025/26 2026/27 2027/28 2028/29 CABLE @ 5% FF 10,609,000$ 10,927,200$ 11,255,000$ 11,592,600$ PG&E @ 2% FF 22,091,500 22,754,000 23,436,500 24,139,500 TOTAL 32,700,500$ 33,681,200$ 34,691,500$ 35,732,100$ Potential UUT Potential New Total UUT % Additional Revenue 2025/26 Projected Additional Revenue 2026/27 Projected Additional Revenue 2027/28 Projected Additional Revenue 2028/29 Projected 1.00% 1.00% 327,005$ 336,812$ 346,915$ 357,321$ 2.00% 2.00% 654,010 673,624 693,830 714,642 3.00% 3.00% 981,015 1,010,436 1,040,745 1,071,963 4.00% 4.00% 1,308,020 1,347,248 1,387,660 1,429,284 5.00% 5.00% 1,635,025 1,684,060 1,734,575 1,786,605 Town of Los Gatos Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 3 The following table shows how the maximum estimated UUT revenue (5.00%) in the table above would affect the Town’s forecasted deficits: Based on these revenue estimates, the Town would still be in deficit in the near term; however, if combined with the following other recommended revenue options, the Town could potentially close its deficit. The approval of a majority of registered voters within the Town is needed to implement a UUT. In general, obtaining voter approval for a new UUT where none existed is difficult to achieve. In addition, when Town voters were asked about a new UUT in a 2016 poll, opposition was twice that of support, with 62% opposed and 31% in favor. We see no reason why this sentiment should have changed enough since then to make a new UUT a viable option for the Town. In addition, from 2002 through 2020, 85 cities asked for voter approval of a new UUT, and just 28 (33%) were successful, even though approval required only a majority vote. UUT for Streaming Video Services In 2021, a judge in Los Angeles ruled that local utility laws don’t cover streaming services, so imposing a UUT on streaming services may not be a viable option. NBS recommends that the Town obtain a legal opinion on this matter. Special Assessment Districts Several statutes authorize cities to levy assessment for specific services and facilities. General law cities considering assessments are limited to the services and facilities types listed in each statute and must comply with the substantive and procedural requirements in Article XIII D of the California Constitution, added by Proposition 218, and the Proposition 218 Omnibus Implementation Act. The following are some of the most used authorizing statutes for assessments and the kinds of services and facilities for which they can be used: Landscaping and Lighting Act of 1972: Authorizes assessments for such things as the installation, construction, and maintenance of landscaping; ornamentation; street lighting, including traffic signals; curbs, gutters, sidewalks, and drainage; parks and recreational facilities; community centers, auditoriums, and public performance space. Benefit Assessment Act of 1982: Authorizes assessments for the maintenance of drainage; flood control; street lighting; and streets, roads, or highways. Improvement Act of 1911 (“1911 Act”): Authorizes assessments for a variety of public improvements, such as streets and sidewalks, including decorative features; sewers; storm drains; lighting; pipes and hydrants for fire protection; levees and walls for the protection of streets and to prevent beach erosion or promote accretion to beaches; water supply; gas supply; bomb shelters; trees and landscaping; mooring; land Item FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 Forecasted Surplus/(Deficit), in Millions ($2.8) ($3.1) ($3.3) ($3.8) UUT Revenue @ 5.00%, in Millions 1.6 1.7 1.7 1.8 Forecasted Surplus/(Deficit), in Millions ($1.2) ($1.4) ($1.6) ($2.0) Town of Los Gatos Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 4 stabilization improvements. It also allows assessment revenue to be used for limited acquisition of land related to the authorized improvements. Municipal Improvement Act of 1913 (“1913 Act”): Generally authorizes assessments for the acquisition of land and construction of a wide array of public works and improvements, including but not limited to utilities. It also allows for the financing of some improvements to private property, such as seismic strengthening and fire safety. In calculating an assessment, a city must first determine the entire cost of the facility or service to be funded. It must then separate the benefits of the service or facility to the general public from the benefits to property owners who will be subject to the assessment. That means, in part, determining the proportionate special benefit that each parcel subject to the assessment derives from the service or facility. Finally, the assessment imposed on each parcel cannot exceed the cost of the special benefit conferred on the parcel. An option to fund general city services via special assessment does not exist in California. In addition, assessment districts may not fund general public-safety services, as those services have been deemed to provide general benefits to entire communities, and not special benefits to certain properties. Transient Occupancy Tax The Town currently levies a TOT in the amount of 12% of the rent charged by the operator for the privilege of occupancy in any hotel. It’s worth noting here that Palo Alto has a 15.50% TOT rate, Los Altos and Milpitas have a 14.00% TOT rate, Santa Clara, Sunnyvale, and the unincorporated areas of Santa Clara County have a 12.50% TOT rate, Campbell and Cupertino have a 12.00% TOT rate, Morgan Hill, Mountain View, San Jose and Saratoga have a 10.00% TOT rate, and Gilroy has a 9.00% TOT. Los Altos Hills and Monte Serreno do not currently have a TOT. According to the Town’s Operating and Capital Summary Budget for Fiscal Year 2023/24, the following table shows the forecasted TOT collections for Fiscal Years 2025/26 through 2028/29, including what each 1% yields: 1 - Current TOT rate is 12% FY Forecasted TOT Collections Each 1% Yields 1 2025/26 2,600,000$ 216,667$ 2026/27 2,600,000 216,667 2027/28 2,600,000 216,667 2028/29 2,700,000 225,000 Town of Los Gatos Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 5 The following table shows the potential revenue generated via various increases in the Town’s TOT rate for Fiscal Years 2025/26 through 2028/29: The following table shows how the maximum estimated additional TOT revenue (3.50% increase) in the table above would affect the Town’s forecasted deficits: NBS does not recommend increasing the TOT rate, as any potential increase doesn’t raise that much additional revenue to support the Town’s budget deficit. Business License Tax Modification The Town may also have an interest in exploring a modification to its Business License Tax to add a charge per employee. NBS is not modeling what the rate per employee would be as the Town does not yet know the number of employees that would be subject to the tax. It’s also worth noting here that voters in the Town approved an increase to the Business License Tax in November 2022 (Measure J), so perhaps it’s too soon to ask the voters for another modification. Recommended Revenue Options Sales Tax Rate Modeling The current sales tax rate in the Town is 9.25%, of which the Town’s share is 1% (not including the Measure G sales tax rate of 0.125%). The Town has the capacity to raise its sales tax rate by an additional 0.125%. Potential TOT Increase Potential New Total TOT % Additional Revenue 2025/26 Projected Additional Revenue 2026/27 Projected Additional Revenue 2027/28 Projected Additional Revenue 2028/29 Projected 0.25% 12.25% 54,167$ 54,167$ 54,167$ 56,250$ 0.50% 12.50% 108,333 108,333 108,333 112,500 0.75% 12.75% 162,500 162,500 162,500 168,750 1.00% 13.00% 216,667 216,667 216,667 225,000 1.25% 13.25% 270,833 270,833 270,833 281,250 1.50% 13.50% 325,000 325,000 325,000 337,500 1.75% 13.75% 379,167 379,167 379,167 393,750 2.00% 14.00% 433,333 433,333 433,333 450,000 2.25% 14.25% 487,500 487,500 487,500 506,250 2.50% 14.50% 541,667 541,667 541,667 562,500 2.75% 14.75% 595,833 595,833 595,833 618,750 3.00% 15.00% 650,000 650,000 650,000 675,000 3.25% 15.25% 704,167 704,167 704,167 731,250 3.50% 15.50% 758,333 758,333 758,333 787,500 Item FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 Forecasted Surplus/(Deficit), in Millions ($2.8) ($3.1) ($3.3) ($3.8) TOT Revenue @ 15.50%, in Millions 0.8 0.8 0.8 0.8 Forecasted Surplus/(Deficit), in Millions ($2.0) ($2.3) ($2.5) ($3.0) Town of Los Gatos Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 6 According to the Town’s Operating and Capital Summary Budget for Fiscal Year 2023/24, the following table shows the forecasted sales tax collections for Fiscal Years 2025/26 through 2028/29, including what each 1% yields: 1 - Current sales tax rate is 9.25%, of which the City receives 1% (does not include Measure G sales tax rate of 0.125%) The following table shows the potential revenue generated via a 0.125% increase in the Town’s sales tax rate for Fiscal Years 2025/26 through 2028/29: The following table shows how the estimated additional sales tax revenue would affect the Town’s forecasted deficits: It’s worth noting here that Campbell, Milpitas, and San Jose already have a 9.375% sales tax rate, while all other cities (excluding the Town) in Santa Clara County and the unincorporated areas of Santa Clara County are currently subject to a sales tax rate of 9.125%. The amount of revenue generated by a potential sales tax increase does not completely fill the Town’s budget deficit, but it is higher than the potential revenue generated by an increase in the Town’s TOT rate and could potentially serve as a “first step” for the Town to raise additional revenue. If structured as a general sales tax, the Town would only need to secure approval from a majority of the registered voters within the Town to increase the sales tax rate. NBS recommends that the Town move quickly on this option, if desired, as the Town’s remaining capacity for a sales tax increase could be utilized by another government agency within the County during the next election cycle. FY Forecasted Sales Tax Collections Each 1% Yields 1 2025/26 8,500,000$ 8,500,000$ 2026/27 8,700,000 8,700,000 2027/28 9,000,000 9,000,000 2028/29 9,300,000 9,300,000 Potential Sales Tax Increase Potential New Total Sales Tax % Additional Revenue 2025/26 Projected Additional Revenue 2026/27 Projected Additional Revenue 2027/28 Projected Additional Revenue 2028/29 Projected 0.125% 9.375% 1,062,500$ 1,087,500$ 1,125,000$ 1,162,500$ Item FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 Forecasted Surplus/(Deficit), in Millions ($2.8) ($3.1) ($3.3) ($3.8) Sales Tax Revenue, in Millions 1.1 1.1 1.1 1.2 Forecasted Surplus/(Deficit), in Millions ($1.7) ($2.0) ($2.2) ($2.6) Town of Los Gatos Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 7 Parcel Tax Scenarios For purposes of modeling a new parcel tax, the Town has provided four revenue target scenarios to fill its projected operating deficits: a consensus target of $3.5MM, a high target of $4MM, a middle target of $2MM, and a low target of $1MM, as shown below: Our analysis assumes that the parcel tax, if approved in November 2024, would be collected beginning in Fiscal Year 2025/26, and rates would increase by 3% per year. The following table shows how each of the four revenue target scenarios for a potential parcel tax would affect the Town’s forecasted deficits: Based on the latest Santa Clara County Assessor’s data from July 2023, there are a total of 11,230 parcels within the Town that would be Taxable, and an additional 365 parcels that would be Non-Taxable (generally publicly owned parcels, utilities, common areas, mobile homes, or other parcels with no assessed value). We provide below three parcel tax scenarios for each of the four revenue targets scenarios: (1) a uniform rate per parcel, (2) a uniform rate per lot square foot, (3) a uniform rate per building square foot, (4) a uniform rate per parcel with senior/low-income exemptions, (5) a uniform rate per lot square foot with senior/low-income exemptions, and (6) a uniform rate per building square foot with senior/low-income exemptions. Without Senior/Low-Income Exemptions Revenue Target Amount High 4,000,000$ Consensus 3,500,000$ Middle 2,000,000$ Low 1,000,000$ Description Rate - High Rate - Consensus Rate - Mid Rate - Low Taxable Parcels - per Parcel 356.19$ 311.67$ 178.09$ 89.05$ Taxable Parcels - per Lot Square Foot 0.0203$ 0.0178$ 0.0102$ 0.0051$ Taxable Parcels - per Building Square Foot 0.14$ 0.12$ 0.07$ 0.03$ Town of Los Gatos Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 8 The average taxes on SFR and Condo parcels under the consensus revenue target for the three different apportionment methods are shown below: With Senior/Low-Income Exemptions For the purposes of this analysis, we have assumed that 10% of Taxable single-family residential parcels, 10% of Taxable single-family residential lot area, or 10% of Taxable single-family residential building area could qualify for a senior/low-income exemption, if offered. The average taxes on SFR and Condo parcels under the consensus revenue target for the three different apportionment methods are shown below: Commercial/Office/Industrial Parcels Only The Town has also requested a scenario for a parcel tax that would only apply to Taxable Commercial/Office/Industrial Properties at a rate per building square foot over 25k building square feet. The rates per building square foot over 25k building square feet for each of the revenue targets are shown below: There are 35 Commercial/Office/Industrial parcels with buildings of 25,000 square feet or more and the resulting annual tax per owner would range from approximately $4,600 to $612,000. Average of Parcel Tax - By Parcel Average of Parcel Tax - By LotSqFt Average of Parcel Tax - By BldgSqFt 311.67$ 254.10$ 262.08$ Description Rate - High Rate - Consensus Rate - Mid Rate - Low Taxable Commercial/Office/Industrial Parcels - per Building Square Foot > 25K 3.31$ 2.90$ 1.66$ 0.83$ Town of Los Gatos Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 9 The parcel tax option is the only reliable way to correct the Town’s projected deficits with one funding mechanism, however attaining two-thirds approval from voters at the rates that meet that objective may be difficult. I look forward to our upcoming meeting to discuss these revenue scenarios and the resulting model results. Please contact me with any questions or comments; I can be reached at 800. 676.7516 or via email at ndayhoff@nbsgov.com. Sincerely, Nick Dayhoff Senior Consultant This Page Intentionally Left Blank Polling Objec�ves and Methodology By NBS and Gene Bregman and Associates ATTACHMENT 2 Voter poll will achieve the following objectives: • Explore the current image of the Town of Los Gatos, voters' attitudes towards the Town, and their assessments of the strengths and weaknesses of local government • Determine voter perceptions of the needs of the Town and the priorities that voters set for those needs • Determine voter attitudes towards revenue measures for the Town, and the optimum amount to place before the voters • Evaluate voters' top priorities for money raised in order to design a measure that best addresses the desires of the community • Determine the most effective and important reasons for your voters to support a ballot measure Polling Methodology: Telephone interviews are conducted by a regularly employed staff of full-time professional interviewers who specialize in conducting interviews for public opinion surveys. Gene Bregman and Associates (GBA) supervises the interviewing process and verifies that interviews are conducted according to specifications. Supervisory procedures include continuous on-site and telephone monitoring of interviews. GBA follows established industry standards for call backs of busy or "not-at-home" numbers designed specifically to maintain the randomness of interviewee selection and the validity of the survey. A regularly employed staff of full-time professional interviewers conducts interviews. Nowadays, it is also important to contact voters via text or email so they can complete the interview on-line. Voters will be asked if they would vote for a proposed funding measure early in the survey, without providing background information, mirroring some voters’ experience when voting. Then respondents will be provided with a series of statements that provide additional information about the Town’s revenue needs and asked a second time, knowing more, how they would vote on a proposed measure. Respondents will also be asked about a series of Town programs and services to understand their priorities for how funds are spent. The survey will use up-to-date voter registration files to survey a representative sample of likely voters based upon voter history. This will provide statistically reliable data to understand the community’s priorities and level of support for a local funding measure. This Page Intentionally Left Blank ATTACHMENT 3 Maintaining Quality of Life in the Town of Los Gatos Known for its family-oriented environment and commitment to safety, Los Gatos is more than just a town; it's a vibrant, sustainable community that takes pride in its unique quali�es: historic neighborhoods and lively, accessible downtown, local culture and arts scene, excellent schools, and healthy local economy. Addi�onal Funding Would Help Address Community Needs Addi�onal reliable, ongoing funding would allow the Town to maintain and improve public safety and meet other community priori�es. The Town is exploring op�ons to increase revenues to maintain the high level of municipal services Los Gatos residents have come to expect, emphasizing community character, good governance, fiscal stability, quality public infrastructure, civic enrichment, and public safety. Addi�onal revenues would be used to fund essen�al services and community-desired programs, such as: • Provide high quality public safety and law enforcement services by adding addi�onal officers • Reduce the risk of wildfire and prepare for poten�al emergencies with more resources for these ongoing efforts • Maintain rapid 911 response • Keep parks and public areas safe and clean • Support services for seniors to thrive • Provide free, vibrant Library services and programs for all ages • Support unhoused residents • Pave streets, remove potholes, and improve traffic safety Challenges Facing Los Gatos While costs of providing services and programs for residents have significantly increased over the years, Town revenues have not kept pace. Los Gatos is facing the same economic pressures of many other ci�es and businesses, including infla�on and the uneven recovery from the pandemic. In addi�on, unfunded mandates by the State have also reduced the Town's available funds. Fiscally Responsible Budget Measures Enacted Los Gatos has taken the following proac�ve cost-cu�ng measures during major downturns to reduce budget expenditures and control costs while maintaining high service levels: • Staffing levels significantly reduced from 2001 – 2005 and have not returned to those levels, despite an increase in popula�on since then, unfunded mandates, and service demands • Imposed wage freezes and unpaid furloughs • Reduced employee benefit costs Town budgets are reviewed annually by an independent auditor. Los Gatos has earned recogni�on for its fiscal responsibility with the highest credit ra�ng (AAA bond ra�ng by Moody’s) and annual awards by the Government Finance Officers Associa�on for its high quality and transparent budge�ng prac�ces. We welcome your feedback and questions as the Town explores funding strategies and revenue enhancements so Los Gatos can address these needs and thrive in the years ahead.