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Item C. 1. Report on Community Forums on Town's Financial FutureTOWN OF LOS GATOS COUNCIL AGENDA REPORT DATE: January 5, 1995 TO: MAYOR AND TOWN COUNCIL FROM: TOWN MANAGER SUBJECT: REPORT ON COMMUNITY FORUMS ON TOWN'S FINANCIAL FUTURE COUNCIL AGENDA DATE: 1 /7/94 ITEM NO. C. 1. ATTACHMENT 2 BACKGROUND: Staff presented revenue and expenditure projections through Fiscal Year 1999-2000 at the October 11 and November 8, 1993 financial altematives study sessions. These projections suggested that reducing staff and restructuring produced a relatively stable budget for Fiscal Year 1994-95, but that problems will begin to develop in Fiscal Year 1995-96 and an annual operating deficit of dose to $1 million will occur by Fiscal Year 1999-2000, even assuming commercial development at the intersection of Highways 85 and 17. At Council request, staff conducted six community forums between July and September 1994. The community forums conducted at various locations provided the public an opportunity to learn of the long- term fiscal situation and to propose alternatives. Three focus groups of community leaders with diverse opinions met in June 1994 to help plan the agenda and the presentation for the community forums. More than 220 Los Gatans actively participated in the focus groups and community forums. Results were presented in a public hearing before Council on October 17, 1994. Several citizens testified at the public hearing. Forum results and testimony presented at the public hearing showed the following: ► Citizens do not want additional service cuts. Los Gatans were generally satisfied with Town services. However, further savings by contracting for services, departmental consolidations and productivity improvements need to be pursued. ► Landscape and lighting districts, assessment districts and parcel taxes were not seen as viable revenue generating alternatives. ► If new revenue is needed, a utility user's tax was supported by most participants. A cap for large users and a sunset clause were also suggested. ► Economic development was the number one choice to replace Town revenues seized by the State, but economic development must be balanced with the quality of our neighborhoods and must be accomplished without damaging our community values. ► Some interest was expressed in financing large capital projects such as street repairs and resisting State take-aways was expressed. PREPARED BY: MARK UND R,'A "istant Town Manager ML:pm MGRO80 A:\CNCLRPTS\1-7-1 Reviewed by: Attorney Clerk Finance Treasurer COUNCIL ACTION/ACTION DIRECTED TO: PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: REPORT ON COMMUNITY FORUMS ON TOWN'S FINANCIAL FUTURE January 5, 1995 Council directed staff to return with additional information and recommendations on: 1. Possible savings by merging existing departments and more contracting for services 2. A utility user's tax on gas, electric or phone service that includes a cap 3. A more focused economic development strategy 4. Financing of capital projects such as street repairs 5. A lobbying strategy to oppose further State take-aways and unfunded State and Federal mandates Management staff at its annual strategic planning workshop identified facilities and infrastructure improvements as a high priority. These include street repair, storm drain repair, sidewalk repair, undergrounding utilities, and civic center renovations. This priority corresponds with Council members' concern regarding Town capital improvements and will be addressed in the discussion section of this report. DISCUSSION: The community expressed support for the current level of Town services and a desire to maintain these services through economic development activities. The suggested actions are an effort to comprehensively address this direction. Economic Development Economic development without damage to community ambiance emerged as the preferred strategy for long term financial health. Economic development that produces consistent revenues for the Town and does not disadvantage the neighborhoods takes time and money. Current economic development activities include streamlining Planning and Building/Engineering services, supporting the Los Gatos Downtown Association, holding individual meetings with business leaders, pursuing an active customer service program, supporting the Los Gatos Boulevard Community Alliance and the Los Gatos Boulevard vision process, and zoning to attract commercial development. These are all exciting activities and are beginning to produce results. Sales tax and business license tax revenues are at an all time high. Business and residents are actively participating in the Downtown Association and the Boulevard Community Alliance. Staff is also active in the Joint Venture Silicon Valley Economic Development Roundtable. Missing from the current program is a focused business recruitment and retention program, financing of infrastructure improvements such as parking, street and sidewalk repairs, public/private joint ventures to develop key parcels, a strategy for additional housing to support the commercial development, and an assurance that vital public services will be sustained. Also the plans developed by the Boulevard visioning processing will need further financial support as will the Downtown streetscape and beautification plans. Staff recommends developing and implementing a focused economic development strategic plan that includes: Establishing a special economic development account to encourage economic development activities such as the recent Los Gatos Boulevard vision process, support of Downtown commercial activities and support of an active recruitment and retention program. The account would be between $300,000 and $400,000. PAGE 3 MAYOR AND TOWN COUNCIL SUBJECT: REPORT ON COMMUNITY FORUMS ON TOWN'S FINANCIAL FUTURE January 5, 1995 ► Developing a business recruitment and retention task force that includes representatives from the Town, Chamber of Commerce, Downtown Association, Boulevard Community Alliance, Board of Realtors, residents, and school districts. The task force would identify types of businesses to recruit and implement strategies to recruit them. The task force will also consider business retention activities. ► Integrating redevelopment activities with an overall economic development program. Many of the redevelopment projects will improve the economic climate of the Town through infrastructure improvements, beautification projects, housing programs and various financing strategies. ► Develop strategies and actions to encourage a mix of businesses that generate sales tax, business license tax or transient occupancy tax. Utility User's Tax Payoff from a focused economic development program will take from three to five years. Selective use of a utility user's tax can insure the stability of Town services and provide a funding mechanism for important capital improvements. Staff proposes developing a utility user's tax ordinance that has the following elements: ► 2.5% tax on electric and gas with a $2500 annual cap and a five year sunset provision. This 2.5% tax would generate an estimated $700,000 per year in 1995-96 and approximately $900,000 per year by 1999-2000. ► A 3% tax on telephone with a $3,000 annual cap and a 20 year sunset. This tax would be dedicated to capital projects. This 3% tax would generate approximately $600,000 annually and allow the Town to borrow and pay back $6 to $7 million over a 20 year period. The money could be used to repair streets, underground utilities and other worthy capital improvement projects that would enhance economic vitality. Specific projects would be considered as part of the 1995-2000 Capital Improvement Project budget. Neither of these utility user taxes requires an election. However, if an advisory election is desired it could be held in November 1995 with specific Council action to place the matter on the ballot no later than May 1, 1995. Council needs to vote to have an election at least 180 days prior to the date of the election. May 1 is more than 180 days from the November election date. Other Capital Improvement Financing Strategies There are other strategies that could be used to finance specific projects such as parking or infrastructure improvements in the redevelopment area. The Town has very low debt and a very high credit rating. As a result, the Town's cost for borrowing money is very low. For example, a method to fund additional parking in downtown without using tax revenues would be to refinance the existing parking assessment district debt, install meters on a portion of the municipal lots and dedicate the revenues from the meters to maintenance and financing payments. Staff estimates that meters on the upper levels of the current Tots would generate over $500,000 per year. Debt service for a lot similar to Parking Lot 4 is $253,000 per year. The assessment district is important to guarantee bond payment if the meters are eliminated in the future or fail to generate anticipated revenues. If Council is interested in exploring this approach, staff will present the concept to the Parking Commission for a recommendation. The Los Gatos Redevelopment Agency can use tax increment bond financing to pay for many important improvements in the central business district. Redevelopment money is also used to improve the Town's moderate and low income housing stock. PAGE 4 MAYOR AND TOWN COUNCIL SUBJECT: REPORT ON COMMUNITY FORUMS ON TOWN'S FINANCIAL FUTURE January 5, 1995 General obligation bonds are repaid through a levy on property. $20 million could be raised with a $57 per $100,000 of assessed value levy on property. A general obligation bond requires an election and a two- thirds vote. Staff estimates that street, sidewalk and storm drain repair, civic center renovation, an additional parking garage and undergrounding all utilities in Town would cost around $40 million. A combination of redevelopment, utility user's tax, parking assessment bonds and general obligation bonds could accomplish this ambitious program. If there is interest in pursuing a major capital improvement program, staff would prepare more precise cost estimates and a complete analysis of financing alternatives. Expenditure Reductions Community forum participants did not support further reductions in services. However, there was interest in exploring additional efficiencies and productivity improvements. Council asked staff to look at further consolidation of departments, contracting for services and providing our services to other agencies where mutually beneficial. Staff believes additional savings can be found in scrutinizing all non -departmental costs such as utilities, insurance and various contracts for services. Recent installation of energy -saving lights will save $30,000 annually. The audit contract is scheduled to go out to bid this year and savings may result. These and other non -departmental expenditure reductions could yield $50,000 to $75,000 per year. Staff will evaluate various non -departmental expenses and include possible reductions in the proposed 1995-96 budget. Consolidating Building/Engineering with Parks, Forestry & Maintenance into a Public Works Department or the consolidating Planning and Building & Engineering into a Community Development Department would produce mixed results. The savings are limited to having one less department head. The Town does not have any employee who's only job is to supervise. All our Supervisors spend the majority of their time working on essential Town activities. The Parks, Forestry & Maintenance Director, for example, is the staff support to the Park Commission, the Trails & Bikeways Committee, the Bicycle Advisory Sub -Committee, the Downtown Association Beautification Committee, and the Los Gatos Creek Trail Inter -Agency Committee. He writes the agenda staff reports for his department, coordinates street repair activities with the Police Department, responds to citizen complaints and concerns, manages the Animal Control Program, runs the Bi-annual Terminal (BIT) Program, and manages the maintenance portion of our Non -Point Source Program. He also manages 5 open space, landscaping and lighting districts with the citizen participation involved in that activity, manages all maintenance capital improvement projects, coordinates special events in the parks and on the trails, supervises the substantial volunteer effort on behalf of our parks and trails, is the staff support to the Open Space District, and among a large number of other activities, locks up the building after Town Council meetings. Considering that a Department Head costs approximately 10%-15% more than a senior staff member, the savings from eliminating a Department Head would be rather small. As the Town needs to make further staff reductions, the Manager will propose specific reductions as part of the proposed budget. Currently the Town contracts for custodian services, tree trimming, street resurfacing, and engineering services. These contracts have saved the Town over $100,000 per year. Contracting with the Sheriff for police services is the only prospect that could produce $500,000 to $1 million annually based on the cost to Cupertino for the Sheriff's services. Cupertino's costs are approximately $4 million and the Town's are $5 million. However, The Town receives considerably more services especially crime prevention, school liaison, investigations and participation of a large number of volunteers. The Town is proud of its Police Department and there is no support for contracting with the Sheriff. PAGE 5 MAYOR AND TOWN COUNCIL SUBJECT: REPORT ON COMMUNITY FORUMS ON TOWN'S FINANCIAL FUTURE January 5, 1995 Contracting for attorney services has been mentioned. Examinations of this question shows that it will cost the Town more to contract for services than to have an in-house attorney. For example, Cupertino's attorney services cost the same as the Town's, but Cupertino has a three-quarter time attorney and must pay an additional $125 per hour after the 30 hours a week is exceeded. The Town also benefits by having the in-house attorney review activities in progress which limits future litigation. Morgan Hill recently switched from a contract attorney to an in-house attorney to reduce litigation costs. Focused Lobbvina Effort Further State take-aways and unfunded State and Federal mandates still loom in the future. The State's economic picture is improving, but a $7 billion dollar debt looms for Fiscal Year 1995-96. Pushing more mandates down to local government without funds will continue to be a method to reduce the Federal or State budget without increasing taxes. Community forum participants recognized this threat and recommended that the Town collaborate with other cities to oppose these actions. Staff has taken several actions to develop a more collaborative and focused lobbying strategy. First, an intern was assigned to evaluate all State legislation for impact on the Town. This work is complete and the results provide a good foundation for future lobbying activities. Second, the Town has invested in City Link. This is a service of the League of California Cities. It enables Town staff to have immediate access to status of all legislation. It also provides E-mail link to all participating cities. Many California cities are on City Link. The Town actively participates in other League of California Cities' programs. Planning Commissioner Abkin and the Town Manager are on the League's Revenue and Taxation Committee, Larry Todd chairs the Police Chiefs' Department, and Regina Falkner chairs the Community Services Department. Third, the Town is an active participant with Joint Venture Silicon Valley's Tax and Fiscal Policy Committee. The Tax and Fiscal Policy committee is a public/private alliance that examines the impact of state and federal legislation and takes coordinated action. Recent efforts by this body helped keep the 1994-95 raids to a minimum. Fourth, the Town is active in the Santa Clara County Cities Association. The Cities Association coordinates legislative lobbying by informing cities of pending legislation and recommending specific actions to be taken. Finally, the Town is a member of PERS PAC. This is a coalition of public agencies participating in PERS. Much of the legislation that impacts the Town's finances relate to PERS retirement policy. PERS PAC has a lobbying staff in Sacramento and sends out bulletins to participating cities. PERS PAC has already been helpful in stopping abuses of the PERS system and opposing costly golden handshake plans. To provide more focus to these efforts, staff will consult with League of Cities staff and develop a plan for presentation to Council and to the Santa Clara County Cities Association. Staff will also continue to be active in the above organizations. PAGE 6 MAYOR AND TOWN COUNCIL SUBJECT: REPORT ON COMMUNITY FORUMS ON TOWN'S FINANCIAL FUTURE January 5, 1995 SUMMARY AND CONCLUSION: Actions to assure the Town's financial future are nearing completion. This report recommends an active economic development program, development of an ordinance for a short term utility user's tax to enhance the long term economic development efforts, consideration of other capital improvement financing strategies and a more focused and coordinated lobbying effort at the state and federal level. Staff also recommends areas for possible cost savings. The report does not recommend further contracts for services or departmental consolidations. The report does not recommend any significant service cuts. Participants in the community forums on the Town's financial future supported economic development in harmony with neighborhoods, a utility user's tax, certain capital improvements and no significant cuts in current Town services. ENVIRONMENTAL ASSESSMENTS: This report is not a project subject to CEQA. FISCAL IMPACT: The results of the community forums, the October 17 public hearing and the recommendations in this report do not impact the Town's Fiscal Year 1994-95 operating budget. However, the Town does face a projected revenue shortfall of $530,700 beginning in Fiscal Year 1995-96_ This gap grows to a projected $955,800 by Fiscal Year 1999-00. The recommendations address this gap and reflect opinions of those participating in the community forum process. Distribution: Jae Abel 296 Garden Hill Drive Los Gatos, CA 95030 Mike Abkin 122 El Olivar Los Gatos, CA 95030 Norman Abrahams 208 Montclair Road Los Gatos, CA 95030 Neil Anderson 204 Cerro Chico Los Gatos, CA 95032 Bill Arit 117 Belwood Gateway Los Gatos, CA 95032 Frank Argo 119 Anne Way Los Gatos, CA 95032 Adu Bagley 15235 Karl Avenue Monte Sereno, CA 95030 Eva Bailey 223 Danville Drive Los Gatos, CA 95032 Dolores Baker 44 Broadway Los Gatos, CA 95030 Dru Barth 18237 Constitution Ave Los Gatos, CA 95030 Jo Bartlett 166 Oak Hill Way Los Gatos, CA 95032 Steve Benbow 154 Kensington Way Los Gatos, CA 95032 Bill & Anne Bilkiwitz 170 Lester Lane Los Gatos, CA 95032 Toni Blackstock 15561 Benedict Lane Los Gatos, CA 95032 Roberta Blake 17155 Pine Avenue Los Gatos, CA 95032 Mary Blice 484 Woodland #43 Los Gatos, CA 95030 Jennifer Boruarda 1 N Santa Cruz Ave Los Gatos, CA 95030 Mark Brodsky 17306 Grosvenor Los Gatos, CA 95030 PAGE 7 MAYOR AND TOWN COUNCIL SUBJECT: REPORT ON COMMUNITY FORUMS ON TOWN'S FINANCIAL FUTURE January 5, 1995 Dale Bryant Los Gatos Weekly Times PO Box 339 Los Gatos, CA 95031 Susan Buxton 118 Robin Way Los Gatos, CA 95032 Dan & Joleen Calldear 209 Highland Terrace Los Gatos, CA 95032 Hugh & Rachel Chisum 14530 Blossom Hill Road Los Gatos, CA 95032 Beth Cilker-Smith c/o Cilker Orchards 1631 Willow Street, #225 San Jose, CA 95125 Cal Clauer 126 Calle Larga Los Gatos, CA 95030 Victor Collord 399 Nicholson Los Gatos, CA 95030 Chuck & Judy Coe 202 Garden Hill Drive Los Gatos, CA 95030 Paul Comey 143 Belridge Drive Los Gatos, CA 95032 J.D. & Kathy Cusick 163 Eastridge Dr Los Gatos, CA 95032 Allen Daily 14545 Eastview Drive Los Gatos, CA 95030 Sandy Decker 201 Belmont Avenue Los Gatos, CA 95030 Karen Deloumi 107 Aurora Lane Los Gatos, CA 95032 Lewis Desch 16971 Frank Avenue Los Gatos, CA 95032 Leslie Dill 220 Wilder Avenue Los Gatos, CA 95030 Diane Disbrow 17 N Santa Cruz Ave Los Gatos, CA 95030 Jeanne Drexel 325 Harding Ave Los Gatos, CA 95032 Bob Dulci PO Box 2346 San Jose, CA 95109 Kim Easter 207 Glenridge Los Gatos,CA 95030 Sandy Eddy 95 Church Street Los Gatos, CA 95032 David Egli 15883 Camino del Cerro Los Gatos, CA 95032 Lisa Ekers 39 Reservoir Los Gatos, CA 95032 Tom Engelman 16345 Los Gatos Blvd #23 Los Gatos, CA 95032 Messrs. Erdei 148-A Belwood Court Los Gatos, CA 95032 Thomas Ferrito 9 Simons Way Los Gatos, CA 95032 Bruce Frank 507 Clearview Drive Los Gatos, CA 95030 Mariellen Furia 16310 Camellia Terrace Los Gatos, CA 95032 Arun Gaikwad 109 Sierra Linda Los Gatos, CA 95030 Ken Gehrkens 3 N Santa Cruz Ave Los Gatos, CA 95030 Mike Gibbs 239 Vista de Sierra Los Gatos, CA 95032 Cindy Godsell 116 Loma Vista Court Los Gatos, CA 95032 Dave Gray 5455 Camden Avenue San Jose, CA Alice Hansen 17611 Foster Rd Los Gatos, CA 95032 Carol Hargett Dolce Spazio 221 N Santa Cruz Ave Los Gatos, CA 95030 Joe Hargett 29 E Main St Los Gatos, CA 95032 Ken & Beverly Haughton 16200 Kennedy Road Los Gatos, CA 95032 Ted Hebert 114 Dardanelli Lane #20 Los Gatos, CA 95030 Dale Hill 150 Robin Way Los Gatos, 95032 PAGE 8 MAYOR AND TOWN COUNCIL SUBJECT: REPORT ON COMMUNITY FORUMS ON TOWN'S FINANCIAL FUTURE January 5, 1995 C. Hoffmann 105 Garden Hill Drive Los Gatos, CA 95030 Ann Holley 116 Hilow Court Los Gatos, CA 95032 Judy Howell 16793 Farley Road Los Gatos, CA 95032 Jai Hudes 300 N Santa Cruz Ave Los Gatos, CA 95030 Doug and Kelly Hus 53 N Santa Cruz Ave Los Gatos, CA 95030 Egon Jensen 182 Lester Lane Los Gatos, CA 95032 Linda Kilduff 249 Montclair Los Gatos, CA 95030 Kay Knapp 68 Mariposa Court Los Gatos, CA 95030 Guizizar Kristensen 206 Gregg Drive Los Gatos, CA 95032 Sandy Lambie 108 Larga Vista Court Los Gatos, CA 95032 Kyle Lanza 15276 Karl Avenue Los Gatos, CA 95030 John Lein 196 College Avenue Los Gatos, Ca 95032 G. Lemons 54 N Santa Cruz Ave Los Gatos, CA 95030 Derek Lentz 17400 Phillips Avenue Los Gatos, CA 95032 Dr. Tod Likins 17421 Farley Rd West Los Gatos, CA 95030-3390 • Mike & April Maiten 136 Belvue Drive Los Gatos, CA 95032 Betty Manix 308 N Santa Cruz Ave Los Gatos, CA 95030 John McCarthy 149 El Altillo Los Gatos, CA 95030 Mike & Portia Mendenhau 136 Old Orchard Drive Los Gatos, CA 95032 Bill Meyer 15 Oak Hill Way Los Gatos, CA 95032 Marion Michel 540 Roxbury Lane . Los Gatos, CA 95030 Miles Mikasa 123 Capistrano Place Los Gatos, CA 95030 Scott Milener 39 Reservoir Los Gatos, CA 95032 Colleen Miller 49 N Santa Cruz Ave Los Gatos, CA 95030 Bob Montonye 15531 Corinne Drive Los Gatos, CA 95032 Bob Morgan 141 Gemini Court Los Gatos, CA 95032 Kathy Morgan 142 Wheeler Avenue Los Gatos, CA 95032 Rex Morton 51 University, Ste 1 Los Gatos, CA 95030 Phil Nielsen 144 Blueberry Hill Los Gatos, CA 95032 Arlene Okerlund 265 Barbara Drive Los Gatos, CA 95032 Mike Orlando 221 N Santa Cruz Ave Los Gatos, CA 95030 Joe Papa 121 Stacia Street Los Gatos, CA 95032 Howard & Nancy Parks 200 Jackson Los Gatos, CA 95032 Renee Patton 326 Bella Vista Avenue Los Gatos, CA 95032 Wes Peyton 208 Elm Wood Ct Los Gatos, CA 95030 Harriet Pierce 72 Mariposa Los Gatos, CA 95030 Joe Pirzynski 350 Los Gatos Boulevard Los Gatos, CA 95032 Bill Quigley 103 Belridge Drive Los Gatos, CA 95032 Bill Reese 5288 Escover Lane San Jose, CA 95118 PAGE 9 MAYOR AND TOWN COUNCIL SUBJECT: REPORT ON COMMUNITY FORUMS ON TOWN'S FINANCIAL FUTURE January 5, 1995 Diane Richards 1 N Santa Cruz Ave Los Gatos, CA 95030 Judy Richardson LG Chamber of Commerce PO Box 1820 Los Gatos,CA 95031 Cynthia Rostankowski 333 Johnson Avenue Los Gatos, CA 95032 Jonathan Scanlan 227 Danville Drive Los Gatos, CA 95032 Campbell & Joyce Scott 405 Montclair Road Los Gatos, CA 95030 Dorothy Shattuck 116 Towne Terrace #3 Los Gatos, CA 95030 Gary Shepcard 17 N Santa Cruz Ave Los Gatos, CA 95030 Pete & Dianne Siemens 69 Ellenwood Los Gatos, CA 95030 Gene R. Signor 16354 E. La Chiquita Ave Los Gatos, CA 95032 Bob Slutmau 119 Hillbrook Drive Los Gatos, CA 95032 D. Smith 56 1/2 N. Santa Cruz Ave Los Gatos, CA 95030 Elizabeth Smith 17551 Vineland Avenue Los Gatos, CA 95030 Shel Smith 14225 Lora Drive Los Gatos, CA 95030 John Snelham 247 Old Adobe Road Los Gatos, CA 95030 John Spaur 1184 Longfellow Avenue Campbell, CA 95008 Edward Strong 115 Mary Way Los Gatos, CA 95032 Ed & Betty Stahl 110 Twin Oaks Los Gatos, CA 95032 James Sugai 241 Carlton Court Los Gatos, CA 95032 Marionette Tack 329 Bachman Avenue Los Gatos, CA 95030 Howard Theobold 125 Blossom Glen Way Los Gatos, CA 95032 Robin Tole, Dist. Mgr General Telephone Co 930 University Avenue Los Gatos, CA 95030-2319 Barbra Toren 15933 Orange Blossom Ln Los Gatos, CA 95032 Michael & Toni Traipani 121 Cherry Wood Court Los Gatos, CA 95030 Frank & Roberta Treseder 408 Bella Vista Los Gatos, CA 95032 Morris Trevithick 308 Westhill Los Gatos, CA 95032 Carryl Walker 107 Callecita Los Gatos, CA 95030 Judy Wallen 58 N Santa Cruz Ave Los Gatos, CA 95030 Jacqueline Williams 206 Blossom Villa Way Los Gatos, CA 95032 Norma Williams 14840 Las Flores Lane Los Gatos, CA 95032