Addendum
PREPARED BY: STEPHEN CONWAY
Director of Finance and Administrative Services
Reviewed by: Town Manager
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
STUDY SESSION
MEETING DATE: 01/31/2017
ITEM NO: 3
ADDENDUM
DATE: JANUARY 27, 2016
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: PRIORITY SETTING STUDY SESSION
REMARKS:
The initial publication of the January 31 agenda included Public Comment (Attachment 8). A
Council member asked if the following statements made in a communication from Mr. Van
Nada were true:
Overview of Town Finances from the Draft 2016 CAFR (unless otherwise referenced):
The Town’s 2015/16 revenues are $1.5M less than they were 10 years earlier. In
fact they are lower than any year in the last 10 years. [Page 116 of 2016 CAFR]
The Town’s daily operating expenditures increased from 65% of revenues to
84%. [Computed from data on page 116 of the Draft 2016 CAFR and exclude
redevelopment, capital outlay and debt service]
It is true that page 116 of the CAFR presents governmental revenues of $43.8M which in total
were higher in FY 2006/07 than governmental revenues reported for FY 15/16. It is important
to note that the FY 2006/07 governmental funds on p age 116 of the CAFR included
approximately $8.0 million in Redevelopment Agency (RDA) property taxes that have been lost
in recent years due to RDA dissolution. This increment was limited to funding only about $300K
of Town operating costs, the rest was dedicated for Redevelopment capital projects or for the
provision of low and moderate income housing pursuant to State law.
To truly compare governmental operating revenues, the Redevelopment dollars need to be
backed out, leaving a comparison of $35.8M excluding RDA compared to $42.3 million in FY
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SUBJECT: PRIORITY SETTING STUDY SESSION
DATE: JANUARY 27, 2017
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REMARKS (cont’d)
2015/16 excluding RDA. Comparing Town revenues without the effect of RDA, the Town
revenue trend is positive, this despite the annual loss of approximately $1.3 M in sales tax from
the loss of car dealerships and the slow recovery from the 2008/09 recession.
In addition, expenditures as a percent of revenues is not a completely sound metric because in
the majority of the ten years reviewed not all of the Town’s operating revenues were budg eted
for operations and the inclusion of RDA revenues in operating revenues skews the percentages.
In fact, in FY 2006/07 the Town recognized that certain revenues (such as half of then $2.0M in
Netflix revenue) may not be sustainable in the future. As a result, the operating budget that
was adopted did not include half of those operating revenues as being available for budgeted
operations. Hence, looking back at prior years when Netflix was a bigger part of the total
revenue mix, the Town’s proactive policy of not budgeting or spending half of the revenue
collected makes the percent gap look larger in comparison to more recent years when the
Town has lesser impacts from the loss of “non-sustainable” revenues like Netflix.