item_9.desk_item_-_fiscal_analysis_for_planned_growth
PREPARED BY: Joel Paulson, AICP
Community Development Director
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, Finance Director, and
Community Development Director
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 11/19/2024 ITEM NO: 9 DESK ITEM
DATE: November 19, 2024
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Consider and Provide Direction to Staff regarding the Finance Commission’s
Recommendation that the Town Council Engage a Professional Consulting
Firm to Prepare a Comprehensive Fiscal Impact Analysis, Including Scenario
Sensitivity Analysis, with Risks and Opportunities, which will Evaluate the
Potential Fiscal Impact of Planned Growth
REMARKS:
Attachment 1 contains public comment received prior to 11:00 a.m. on Tuesday, November 19,
2024.
Attachment Received with this Desk Item:
1. Public comment received prior to 11:00 a.m. on Tuesday, November 19, 2024
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From: Phil Koen
Sent: Monday, November 18, 2024 7:19 PM
To: Mary Badame <MBadame@losgatosca.gov>; Matthew Hudes <MHudes@losgatosca.gov>; Rob
Rennie <RRennie@losgatosca.gov>; Maria Ristow <MRistow@losgatosca.gov>; Rob Moore
<RMoore@losgatosca.gov>
Cc: Chris Constantin <CConstantin@losgatosca.gov>; Wendy Wood <WWood@losgatosca.gov>; Gitta
Ungvari <GUngvari@losgatosca.gov>; Linda Reiners
Subject: Fwd: Importance of a Fiscal Impact Analysis - key Priority for FY 2022
[EXTERNAL SENDER]
Dear Honorable Mayor and Town Council Members,
I am resubmitting an email I sent in 2022 as background material as you consider agenda
item 9.
Back in 2022 the Town was urged to do a FIA while drafting the 2040 General Plan.
Unfortunately this didn’t happen.
The fiscal questions regarding the impact of growth on the Town which were raised in 2022
still remain unanswered. It’s time to do a thoughtful and complete FIA so the TC has a
reasonable understanding of the impact of growth on the Town.
Thank you,
Phil Koen
Begin forwarded message:
From: Phil Koen
Date: January 25, 2022 at 6:44:03 AM HST
To: Rob Rennie <RRennie@losgatosca.gov>
Cc: jak vannada
Subject: Importance of a Fiscal Impact Analysis - key Priority for FY 2022
Hello Rob,
I spent the time this weekend listening to the October 2021 FC meeting. It was at that meeting the FC
discussed the merits of a FIA. It was clear the Town Manager was biased against doing a FIA. The
discussion ended with the FC not taking any action even though a number of members saw the merit of
completing a FIA.
I also heard two issues that were raised and never answered – 1) what other cities have done a FIA for
GP amendments and 2) did the FIA result in any change?
Let me try to answer each question.
ATTACHMENT 1
What cities have done a FIA as part of the GP updates
I did a quick search and here is a short list of cities that have prepared a FIA as part of the GP
amendment process– Menlo Park (right now), Palo Alto, San Jose, Sacramento, Vallejo, Fresno,
Huntington Beach. I could go on, but you get the idea. Preparing a FIA to evaluate the fiscal impact of a
general plan amendment is common.
A FIA is a powerful tool that enables local government to evaluate alternative general plan land use
development scenarios by focusing on growth rates, service costs, and capital spending. The fiscal
impact analysis enables the comparison of new revenues to new costs and capital investment resulting
from the land uses in the general plan update.
It is particularly important for LG to do this because of the 30% growth that is being induced by the 2040
general plan, the material increase in land use densities, the mix of development which heavily is
weighted toward residential with little employment and the mix between BMR vs MR housing. These
changes collectively will have material impacts on new tax revenue, service costs and capital investment
over the next 20 years.
Did the FIA result in any change
This is like asking did an EIR result in any “change” to the General Plan? The short answer is “yes” for
both an EIR and a FIA . Both are critical to the proper development of a 20 -year General Plan.
In an EIR, the result is a comprehensive understanding of the impact of the general plan on the
environment and a determination of the severity of impacts and if they can be mitigated. Through that
analysis all parties in the general plan development gain a clearer understanding of the environmental
impacts from the growth induced by the general plan. What an EIR does not do, is to inform anyone as
to the fiscal impacts associated with the general plan growth.
Let me point out just one example in Town’s draft 2040 GP EIR. The EIR states that “much of the Town’s
storm drainage system is outdated, shallow and undersized”. Additionally, the EIR states that “all storm
drainage in Los Gatos discharges into creeks that drain to the Guadalupe River in San Jose and ultimately
to the southern San Francisco Bay. The discharge from these storm drains is not treated”. The EIR also
states that the “implementation of the 2040 General Plan could have a significant effect on
…..stormwater conveyance……..IF DEMAND ASSOCIATED with projected growth would result in…….the
construction of new storm water drainage,……the construction of which would cause significant
environmental effects”. The EIR then goes on to evaluate the construction impact on the
environment and concludes the impacts from physical disturbancefor new and expanded storm water
systems and infrastructure would be less than significant. With this, the EIR states no mitigation would
be required.
The EIR never discusses the dollar investment required to increase the capacity nor the dollar
investment required to treat storm water discharge to comply with Federal and State laws. The only
fiscal comment the EIR makes is “the Town is working to upgrade these systems as resources are
programmed and allocated”. What does that mean?
Even worse, the Council approved a “Green Stormwater Infrastructure (GSI) Plan” on August 20, 2019,
which was based on an “increase by around 600 households through 2040”. The draft 2040 General Plan
is now proposing over 3,900 new households through 2040! So, there is an immediate disconnect
between the draft 2040 GP and the GIS as to assumed growth. To put a very sharp point on this, the GIS
states that “implementation of these projects is contingent upon the Town identifying funding sources
for GSI planning, design, construction and maintenance”. That is not very encouraging.
Given this, it is very fair for voters to question if the 2040 GP is truly fiscally stable and responsible since
there is no indication as to how the Town will pay for these needed critical infrastructure improvements
let alone if these improvements will ever be made. Wouldn’t you agree that to approve the 2040 GP
without having any idea if the Town can actually make the required storm water infrastructure
improvements would be irresponsible?
Enter a FIA. At the most basic level, a fiscal analysis brings a realistic sense of the costs of growthinto
the planning discussion. Properly done, a FIA provides an objective screen so that all parties in the
general plan development gain a clearer understanding of the likely fiscal results. In the example above,
the analysis would inform the Council and the public of the dollar investment required and discuss
specific funding sources, whether it be seeking federal or state grants or a potential parcel tax. The point
is that an FIA would discuss the fiscal impacts and make recommendations regarding necessary actions
that need to be taken to fund these investments.
Ideally the FIA would have been done while the 2040 GP was being drafted. That way alternative growth
and land use mix/density scenarios could have been tested to measure the impact on tax revenues,
service costs and infrastructure spending. For example, studies have shown that residential
development requires $1.15 of new services for every $1 of tax revenue contributed. The draft 2040 GP
heavily promotes residential development and virtual no employment development. What is the long-
term impact of this development strategy on revenues and service costs? We don’t know.
Additionally, the residential growth is at much higher land use intensities. Studies have shown that
municipal costs increase with the intensity of land uses. How does that impact service costs over the
next 20 years? We don’t know.
The draft 2040 GP assumes a 30% population growth for the next 20 years which is extraordinary
compared to the past 20 years actual growth rate, which has been basically flat. Given this, historical
service costs per capita are not relevant especially since the Town Manager has stated that the Town
today has no excess capacity to deliver more services. If the Town is today at maximum service capacity,
how much will it cost to build more capacity across all services to handle a 30% growth in population
over the next 20 years? We don’t know.
All of this could have been evaluated and adjustments made to the draft 2040 GP. Ultimately the
changes that could be made are to the growth assumptions, the mix of land use and land use intensity.
I hope this shows how important a FIA is to the development of a fiscally stable and responsible GP and
why it must be a critical priority for the Town to complete this analysis before the 2040 GP can be
reviewed/adopted by the PC and TC.
Thanks.
Phil
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