Staff Report
PREPARED BY: STEPHEN CONWAY
FINANCE DIRECTOR
Reviewed by: Town Manager and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 05/16/2017
ITEM NO: 7
DATE: MAY 8, 2017
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: OPERATING AND CAPITAL BUDGETS
A. CONSIDER THE TOWN OF LOS GATOS PROPOSED OPERATING AND
CAPITAL BUDGET FOR FISCAL YEAR (FY) 2017/18
B. CONSIDER THE TOWN OF LOS GATOS PROPOSED CAPITAL
IMPROVEMENT PROGRAM FOR FY 2017/18 – FY 2012/22
RECOMMENDATION:
1. Consider the Town of Los Gatos Proposed Operating and Capital Budget for FY 2017/18
2. Consider the Town of Los Gatos Proposed Capital Improvement Program for FY 2017/18 –
FY 2021/22.
BACKGROUND:
The Proposed Operating and Capital Budget for FY 2017/18 (Attachment 1, previously
distributed) is the Town Manager’s recommended comprehensive financial plan to provide
services to the Town of Los Gatos and address the priorities set by the Town Council. The
Proposed FY 2017/18 – 2021/22 Capital Improvement Program (Attachment 2, previously
distributed) is a five-year capital improvement plan which identifies projects to construct and
maintain the Town’s infrastructure. Any changes to the Proposed Operating and/or Capital
Budgets directed by Council at the May 16, 2017 budget hearing will be incorporated into the
implementing documents to be presented for Council approval on June 6, 2017.
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SUBJECT: OPERATING AND CAPITAL BUDGETS
DATE: MAY 8, 2017
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DISCUSSION:
Both budget documents were prepared with contributions from all Town Departments. Of
particular note, the Finance Department took the lead in developing revenue and expenditure
forecasts, ensuring that the most current information was used in the preparation of the
proposed budgets. In addition, the Department of Parks and Public Works provided guidance
on the development of the Capital Budget based on its familiarity with the Town’s facilities,
equipment, and infrastructure, and its work with various Town Commissions on these assets.
In January 2017, the Town Council determined the Strategic Priorities for 2017-2019, providing
guidance to Town staff on workload prioritization, operating budget needs, and direction on
capital projects given a FY 2015/16 budget surplus available for programming in the upcoming
budget. In addition, the Town Council reaffirmed its Core Goals, including Community
Character, Good Governance, Fiscal Stability, Quality Public Infrastructure, Civic Enrichment,
and Public Safety (see page A-14 of the Proposed Operating Budget, Attachment 1).
The Proposed Budgets are based on the following principles:
Develop and recommend balanced budget maintaining services and prudent reserves,
Continue to make progress on Strategic Priorities identified by the Town Council , and
Identify opportunities to enhance service delivery through technology and open
government.
FY 2017/18 Operating Budget
The transmittal letter in the Proposed FY 2017/18 Operating Budget provides an executive
summary of the budget, including the fiscal outlook, key budget assumptions, and proposed
adjustments to the operating budget (beginning on page A-1, Attachment 1). Reflecting the
positive economy, the FY 2017/18 budget is balanced and the five-year financial forecast
projects limited surpluses in FY 2017/18 and small deficits in the out years due to conservative
revenue forecasts and anticipated increases in benefit costs.
The Proposed FY 2017/18 Operating Budget includes the Council’s direction from the January
2017 Strategic Priorities session for the use of FY 2015/16 savings. Specifically, the Town
identified legal mandates, increased tree services, and a new Traffic and Transportation
Mobility Manager to assist with Measure B projects in the Town. The Proposed Budget also
includes all of the salary increases that were negotiated with the Town’s bargaining units ,
funding the Town’s reserves, expected employee benefit cost increases, retiree healthcare and
pension payments, and other anticipated expenses. Taken together, the FY 2017/18 budget
proposes to maintain existing service levels and provide for minimal staffing changes.
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DISCUSSION (cont’d):
As in most municipalities, services are provided directly by employees to the Town’s residents,
businesses, and visitors. These key services reflect the Town Council’s Core Goals and include
public safety, Town infrastructure (such as streets and parks), library, community development,
and other items. As a result, the costs of salaries and benefits account for 46.8% of the Town’s
total expenditures. The Town’s proactive approach to reducing operating expenditures,
identifying revenue enhancements, and implementing operating efficiencies continues to be an
effective fiscal approach.
FY 2017/18 – FY 2021/22 Capital Improvement Program
The FY 2017/18 – FY 2021/22 Capital Improvement Program (CIP) sets forth a five year plan for
proposed street-related, parks, and public facility projects. The transmittal letter contained in
the CIP (see Attachment 2, beginning on page A-1) provides a summary of the program
including funding sources, recently completed projects, and the proposed projects for FY
2017/18. Only the first year of the plan is formally adopted with funds appropriated by the
Town Council as part of the budget process.
During the January 2017 Strategic Priorities discussion, the Town Council affirmed its interest in
completing the Phase II of the Almond Grove streets, investing in bicycle and pedestrian
improvements, addressing cut-through traffic, and improving the condition of the Town’s
streets. In addition, the Council identified new projects for public art, Forbes Mill Footbridge
lighting, and trash capture devices to comply with pollution prevention requirements. These
projects as well as others, such as annual street maintenance, are recommended as part of the
CIP. The Proposed CIP includes a total budget of $25.4 million.
Donation Opportunities - FY 2017/18 List of Town Needs
As part of the budget development process, the List of Town Needs is updated per Town
Council Donation Policy to reflect goods, services, and other contributions that would help
enhance Town services, programs, and events (see Attachment 3).
Budget Hearing and Next Steps
At its May 16, 2017 meeting, the Council will have an opportunity to listen to public testimony,
ask questions, and direct changes to the Proposed Operating and/or Capital Improvement
Program Budgets. In particular, the Council may wish to discuss the proposed use of the
combined FY 2015/16 savings and Almond Grove project excess due to the lower than
anticipated bid (see discussion on pages A-2 and A-3 of Attachment 1). Any changes to the
Proposed Operating and/or Capital Budgets directed by Council or identified by staff (such as
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DISCUSSION (cont’d):
“clean-up” items) will be included for Council consideration in the resolution formally adopting
the Budgets to be considered by Council in June.
COORDINATION:
The preparation of the budget documents involved the participation of all Town Departments.
FISCAL IMPACT:
The fiscal impact is presented in summary form in the Financial Summaries chapter of the
Proposed Operating and Capital Budget for FY 2017/18. The total proposed budget is $57.7
million, a decrease of $15 million from the FY 2016/17 Adopted Budget.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachments:
1. FY 2017/18 Proposed operating and Capital Budget (Previously Submitted)
2. FY 2017/18 – FY 2021/22 Proposed Capital Improvement Program Budget (Previously
Submitted)
3. Town of Los Gatos Donation Opportunities: FY 2017/18 List of Town Needs