Staff Report
PREPARED BY : ROBERT SCHULTZ
Town Attorney
Reviewed by: Town Manager, Assistant Town Manager, and Finance Director
110 E. Main Street Los Gatos, CA 95030 ● 40 8 -354 -68 32
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 06 /05 /2018
ITEM NO: 17
D ATE : May 2 9 , 2018
TO : MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVITTI, TOWN MANAGER
ROBERT SCHULTZ, TOWN ATTORNEY
SUBJECT: ADOPTION OF A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN
OF LOS GATOS, CALIFORNIA, SUBMITTING A LOCAL GENERAL REVENUE
TAX MEASURE TO THE VOTERS AT THE TUESDAY, NOVEMBER 6, 2018
GENERAL MUNICPAL ELECTION AND INTRODUCTION OF AN ORDINANCE
OF THE TOWN OF LOS GATOS, CALIFORNIA IMPOSING A G ENERAL
TRANSACTIONS AN D USE TAX
RECOMMENDATION :
Staff recommends that Town Council accept public comment and then move :
1. For a dopt ion of a Resolution submitting a local general revenue tax measure to the
voters at the Tuesday, November 6, 2018 general municipal election ; and
2. For the introduction and first reading of an Ordinance, by title only, imposing a general
transaction and use tax for a period of twenty years .
BACKGROUND :
On October 4, 2017 , December 4, 2018 , and February 12, 2018 , the Council Finance Committ ee
discussed placing a 1/8 cent general sales tax on the November 2018 ballot and recommended
to the Town Council to proceed with preparing a ballot measure to place a 1/8 cent general
sales tax on the November 2018 ballot .
On March 6, 2018, the Town Council reviewed the recommendation of the Council Finance
Committee and directed staff to move forward with a general tax, and return to Council with
b allot language, ordinance, and resolution.
PAGE 2 OF 3
SUBJECT: ADOPTION OF A RESOLUTION SUBMITTING A LOCAL GENERAL REVENUE TAX
MEASURE TO THE VOTERS AND INTRODUCTION OF AN ORDINANCE OF THE
TOWN OF LOS GATOS, CALIFORNIA IMPOSING A GENERAL TRANSACTIONS
AND USE TAX
M AY 29, 2018
S:\COUNCIL REPORTS \2018 \06 -05 -18 \17 Sales Tax Ordinance \Staff Report.FINAL.docx 5/31/2018 10:58 AM
DISCUSSION:
The Town of Los Gatos has a long tradition of fiscal pru dence with balanced budgets and
development of strategic catastrophic and budgetary emergency reserves. H owever, despite
these efforts the Town has over $70 million in deferred capital maintenance needs . T here is
currently inadequate funding to fully address our aging infrastructure needs such as streets,
sidewalks, and facilities . In addition, most economists advise that a recession is likely within the
next five years. I n order for the Town to m aintain the high quality base level of services our
residents currently enjoy during the next recession and work towards funding deferred
maintenance needs , additional revenues will be necessary .
Pursuant to all applicable authority, including the California Constitution and the California
Elections Code, the Town Council may place a general tax measure on the ballot for the
November 6 , 201 8 General Municipal Election. Staff has prepared the following ballot language
based upon Council’s direction at the March 6, 2018 Council meeting :
Shall the measure to fund essential Town services such as maintaining neighborhood
police patrols; improving traffic flow to reduce congestion; repairing potholes and
fixing neighborhood streets; a nd maintaining the Town’s long -term financial stability,
shall a one -eighth cent ($0.125%) sales tax for 20 years, providing about $800,000
annually, requiring Independent Citizens Oversight with public review of spending, and
all revenues controlled local ly be adopted?
Pursuant to State law, the Council must adopt the proposed ordinance corresponding to th e
measure, and approve the resolution corresponding to that measure. The proposed ordinance
safeguards the use of public funds and ensures transparency and accountability. The ordinance
requires independent citizens’ oversight and annual mandatory financial audits to ensure that
all funds are spent as promised. Specifically, the Town Council would be required to appoint a
citizens’ oversight committee th at would meet annually to review expenditures and an external
auditor’s report on the use of these funds and report independently to the Town Council.
T he resolution, if adopted, will submit the Council's ballot measure to voters at the November
6 , 201 8 regular municipal election. A two -thirds (2/3) vote of the City Council is required to
adopt the resolution. A majority vote of the City's qualified voters will be needed to approve
the ballot measure if the Council decides to place the general tax on th e ballot.
Importantly, funds received from this one -eighth sales tax would be locally generated and
therefore could not be taken by the State. By placing this matter on the ballot, the community
will have the opportunity to consider a sales tax dedicat ed solely to the Town.
PAGE 3 OF 3
SUBJECT: ADOPTION OF A RESOLUTION SUBMITTING A LOCAL GENERAL REVENUE TAX
MEASURE TO THE VOTERS AND INTRODUCTION OF AN ORDINANCE OF THE
TOWN OF LOS GATOS, CALIFORNIA IMPOSING A GENERAL TRANSACTIONS
AND USE TAX
M AY 29, 2018
S:\COUNCIL REPORTS \2018 \06 -05 -18 \17 Sales Tax Ordinance \Staff Report.FINAL.docx 5/31/2018 10:58 AM
CONCLUSION :
Council should move for the first reading of the introduction and adoption of the attached
Ordinance by title only and move for adoption of the attached Resolution .
FISCAL IMPACT :
If approved by voters in November, a one -eighth cent sales tax would take effect on nearly all
taxable transactions in Los Gatos as of April 1, 201 9 . While a precise estimate of the revenue
impact cannot be made, a fairly conservative estimate i ndicates that a one -eighth cent sales tax
would generate approximately $800,000 annually. These funds would be locally generated and
therefore be safe from seizure by the State. In addition, they would enable the Town t o invest
in services and infrastructu re that the community values. Total election costs for the Town for
three Council seats and one ballot measure are yet to be determined; however, the cost for
two seats and one ballot measure in 2016 was approximately $120,000. In addition, under the
Reven ue and Taxation Code section 7272, the Board of Equalization (BOE) will bill a new special
taxing jurisdiction for preparatory charges to administer the new district tax based on actual
costs after the tax has been submitted by the various BOE units’ actua l charges. The statutory
maximum amount of preparatory costs shall not exceed $175,000.
Attachments:
1. Draft Resolution
2. D raft Ordinance