Staff Report
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, and Finance Director
TOWN OF LOS GATOS
STUDY SESSION REPORT
MEETING DATE: 1/31/17
ITEM NO: 3
DATE: JANUARY 24, 2016
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: PRIORITY SETTING STUDY SESSION
RECOMMENDATION:
Identify Strategic Priorities for 2017 – 2019 and provide direction on the preparation of the
Draft Fiscal Year 2017/18 Operating and Capital Budgets, including the use of approximately
$2.1 million of savings from FY 2015/16.
DISCUSSION:
On January 31, 2017, the Town Council will have an opportunity to consider a variety of ideas
that have come forward from Town Commissions, the community, and Town Departments. Dr.
Shawn Spano will facilitate the Study Session. This report transmits background information for
the Town Council’s consideration and preparation for the Session.
Five Year Financial Forecast
After restoring the Budget Stabilization Reserve to FY 2014/15 levels, the Town completed FY
2015/16 with a savings of approximately $2.9 million. The savings were due to vacancy savings
and lower expenditures than budgeted. To date, the Council has committed $434,414 of this
amount as follows, with approximately $2.5 million remaining for priority setting.
$300,000 for CalPERS Reserve
$100,000 for North Forty Litigation
$ 34,414 for Pageant Way Parking Lot Improvements
As discussed later in this report, Town Departments have identified approximately $380,000 of
required expenses for FY 2017/18 to maintain service levels and meet new requirements,
resulting in approximately $2.1 million available for priority setting.
In addition, the Town Council Finance Committee earlier this week inquired about the
availability of funds from the Town’s Budget Stabilization Reserve for priority setting. This
Reserve has $2 million over the required amount of 12.5% of projected General Fund revenue.
The Council, by resolution, may approve the use of some or all of the “excess” for priority
PAGE 2 OF 5
SUBJECT: PRIORITY SETTING STUDY SESSION
DATE: JANUARY 24, 2017
S:\COUNCIL REPORTS\2017\01-31-17 Priority Setting\1-31 Study Session.doc
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
setting. This discussion should occur during the Review and Discussion of Background Materials
portion of the Study Session. If Council decides to add this amount, the reso lution will come to
Council at a subsequent regular meeting.
The Finance Department has completed a forecast of the next five years based on available
data, trends, and expert advice (see Attachment 1). The Forecast document explains the
methodology and assumptions.
For the FY 2016/17, the forecast estimates a $0.2 million surplus after accounting for changes in
revenue assumptions and approved salary increases. The Departments are currently reviewing
expenditures to date against the adopted FY 2016/17 budget, and at the Mid-Year Budget
Review in late February, the Council will learn how the current year is progressing.
For FY 2017/18, the forecast projects a surplus of $0.4 million. For FY 2018/19 to FY 2020/21,
shortfalls range from $0.3 to $1 million. By FY 2021/22, a surplus of $0.2 million is projected.
Even though the near term estimates with any forecast are easier to determine compared with
longer term projections, it important to run the numbers to be aware of and plan accordin gly
for potential future trends.
The Town has not yet received the actual costs of the CalPERS Board’s decision to reduce its
investment target from 7.5% to 7%. The impact of this change is expected to be distributed
over the next eight years, starting in FY 2018/19. The forecast does anticipate increased
pension costs as a subset of benefits. The costs of Other Post-Employment Benefits are also in
the forecast as an annual $1.6 million expenditure. Based on past Town performance, the
Town’s budget should be able to absorb 3 to 5% increases in expenditures over the forecast
period.
Town Department Work Plans
Attachment 2 contains the work plans of all Town Departments and Divisions. As a service
organization, each Department devotes approximately 80% of its staff time and other budget
resources providing core services to the community of Los Gatos. The remaining 20% of
Department resources are allocated to special projects, such as Strategic Priorities.
The work plans have been updated to include work that can no longer be absorbed without
some staff resources (such as additional temporary hours in the Police Department to handle
increased case load), new Occupational Safety and Health Administration (OSHA) requirements,
and the annual costs associated the Town’s Clean Energy Option (to be decided at a Town
Council meeting in February). These items are proposed to be included in the FY 2017/18
PAGE 3 OF 5
SUBJECT: PRIORITY SETTING STUDY SESSION
DATE: JANUARY 24, 2017
S:\COUNCIL REPORTS\2017\01-31-17 Priority Setting\1-31 Study Session.doc
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
Operating Budget with a total estimated cost of approximately $380,000. This amount should
be deducted from the available $2.5 million, leaving $2.1 million for Priority Setting.
Core Goals and Status of Current Strategic Priorities
Attachment 3 contains the Core Goals for the Town of Los Gatos, which are Community
Character, Good Governance, Fiscal Stability, Quality Public Infrastructure, Civic Enrichment,
and Public Safety. These goals guide the work of the Town as a local government in meeting
the needs of the community. As part of the Study Session Agenda, the Council will be asked to
affirm these goals and elaborate on their definitions to set a foundation for priority setting.
Attachment 3 also contains a list of completed priorities and the current status of FY 2014 –
2016 and FY 2015 – 2017 Strategic Priorities. At this time, staff is assuming that the Town
Council would like to complete all existing Strategic Priorities. At the Study Session, the Council
will have the opportunity to provide direction on these existing Strategic Priorities.
Input from Commissions on Potential Priorities
Attachment 4 includes input from several Town Commissions regarding items that they would
like to work on with Town staff support. Some of the ideas, such as the Age Friendly
Community designation, could be considered by the Town Council as a potential new Strategic
Priority for 2017 – 2019. Other ideas, such as park and transportation improvements, could be
considered as priorities for the next Capital Budget. The Council may also choose to accelerate
a Commission idea ahead of an existing Strategic Priority.
List of Potential Ordinances
In coordination with all Town Departments, the Town Attorney has provided a list of potential
ordinance amendments to the Town Code in Attachment 5. This list is in priority order based
on State laws and service delivery issues, such as resolving difficult code compliance cases.
Input from Staff on Potential Service Enhancements and Capital Projects
Attachment 6 contains the ideas from all Town Departments regarding potential service
enhancements (Operating Budget) and potential capital projects, including maintenance and
equipment needs. Cost estimates are provided. Each Department ranked the ideas in priority
order.
PAGE 4 OF 5
SUBJECT: PRIORITY SETTING STUDY SESSION
DATE: JANUARY 24, 2017
S:\COUNCIL REPORTS\2017\01-31-17 Priority Setting\1-31 Study Session.doc
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
Ideas from the Community
Over the last year or so, several additional ideas have been suggested by community members
for consideration as new Strategic Priorities (see Attachment 7). These ideas have been
organized into the categories of potential ordinances and policies, service enhancements, and
capital projects. Estimated costs of some of these ideas are pr ovided for items that could be
estimated without additional Council direction.
Attachment 8 contains public comment. New idea(s) from the public comments that have not
already been identified in other attachments have been added to Attachment 7. As add itional
public comments come forward, other new ideas will be added and the Council will receive an
updated Attachment 7 for its use prior to the Study Session.
Priority Setting Process
After review and discussion of the background materials and public testimony, the Council will
go through the following steps to set priorities:
1. Identify any additional items for priority setting.
2. Determine the allocation of the $2.1 million (or up to $4.1 million) between Operating
Budget service enhancements, Capital projects, and unfunded pension and OPEB
liabilities.
3. Decide if the current Strategic Priorities should be completed.
4. Prioritize the list of potential ordinances and policies.
5. Prioritize potential Operating Budget enhancements.
6. Prioritize potential Capital Budget projects.
CONCLUSION:
The Town of Los Gatos provides a high level of service to residents and businesses by providing
key local government services of public works, parks, library, police, and community
development with the necessary support services of information technology, finance, and
human resources. The Town Manager’s Office leads and guides these administrative duties and
closely collaborates with the Town Attorney’s Office to support the work of the Town Council.
From the Council’s priority setting, the work of the Town Departments and Commissions can be
aligned to these priorities. The Council’s direction will also guide the preparation of the FY
2017/18 Operating and Capital Budgets for Council consideration in May.
PAGE 5 OF 5
SUBJECT: PRIORITY SETTING STUDY SESSION
DATE: JANUARY 24, 2017
S:\COUNCIL REPORTS\2017\01-31-17 Priority Setting\1-31 Study Session.doc
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
COORDINATION:
The preparation for the Study Session was done in coordination with all Town Departments.
FISCAL IMPACT:
The Study Session outcomes are intended to provide direction for the preparation of the Draft
Fiscal Year 2017/18 Operating and Capital Budgets, including the use of approximately $2.1
million of savings from FY 2015/16.
CEQA:
The Council’s work associated with the Study Session is not a project under the California
Environmental Quality Act and no environmental review is required.
Attachments:
1. Five Year Financial Forecast
2. Town Department Work Plans
3. Core Goals and Status of Current Strategic Priorities
4. Input from Commissions on Potential Priorities
5. List of Potential Ordinances
6. Input from Staff on Potential Operating (Service) Enhancements and Capital Projects
7. Ideas from the Community
8. Public Comment