01 Staff Report.Joint Council Finance Meeting
PREPARED BY: Arn Andrews
Assistant Town Manager
Reviewed by: Town Manager, Town Attorney, and Finance Director
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 01/28/2021 ITEM NO: 1
DATE: January 22, 2021
TO: Mayor and Town Council and Finance Commission
FROM: Laurel Prevetti, Town Manager
SUBJECT: Joint Council and Finance Commission Orientation
BACKGROUND:
On November 3, 2020, voters of Los Gatos approved the Measure A ballot initiative establishing
a new Finance Commission and disbanding both the Finance Committee and Sales Tax
Oversight Committee (see Attachment 1).
DISCUSSION:
The Town of Los Gatos produces many comprehensive documents and reports throughout the
year; with, the Town’s Annual Operating Budget and the Comprehensive Annual Financial
Report (CAFR) being among the most important documents to understand the Town’s finances.
In addition, prior to the adoption of the new Finance Commission, the Town adopted a new
Finance Committee governance structure in 2017 which included three non-voting members of
the public and two voting Councilmembers. Over the years, the prior Committee researched
and advised on a multitude of financial areas which can provide useful insights into the Town’s
finances.
To assist Committee members in preparing for this initial meeting and subsequent meetings,
staff has assembled a list of reference materials and resources the Commission and Council may
find useful. It is not required that the Council and Finance Commission read all of the materials
contained in the links prior to the Study Session. These are being provided in this Report to
provide a single summary of these resources.
The summary includes links to the most recent Comprehensive Annual Financial Report,
Proposed Operating Budget/Capital Improvement Plan, Five-year Forecast, Actuarial Reports,
PAGE 2 OF 5 SUBJECT: Joint Council Finance Commission Orientation DATE: January 22, 2021
DISCUSSION (continued):
and other relevant reports. In addition, many of these items can be located at a single location
at the Town’s Financial Transparency webpage https://www.losgatosca.gov/2565/Financial-
Transparency.
Five-Year Forecast & Budget Assumptions
On January 21, 2020, the Town Council received the Five-Year Forecast and budget assumptions
for development of the FY 2020/21 Operating and Capital Budgets. Please refer to the Council
Meeting for 1/21/2020 and Agenda Item #12 at the following link.
https://meetings.municode.com/PublishPage/index?cid=LOSGATOS&ppid=a7cef0f9-a4a2-
40e7-a6e3-056a78898413&p=1
Operating and Capital Improvement Budgets
In June 2020 the Town Council adopted the FY 2020/21 Operating and Capital Budget, the FY
2020/21-FY 2024/25 Capital Improvement Plan, and expenditure and revenue adjustments for
FY 2019/20. The final Budget included an updated Five-Year Forecast that reflected the COVID-
19 pandemic and some of its economic consequences.
https://www.losgatosca.gov/DocumentCenter/View/24515/Budget-Item-Council-Meeting-
May-19-2020-700-PM
Comprehensive Annual Financial Report
On December 15, 2020, the Town Council received the CAFR for the Fiscal Year ended June 30,
2020 and adopted a resolution confirming June 30, 2020 fund balances.
https://www.losgatosca.gov/DocumentCenter/View/26586/FY-201920-CAFR?bidId=
Actuarial Reports
Actuarial valuations are performed each year for the Town’s pension plans and every other year
for the Retiree Healthcare Plan. The CalPERS actuaries provide the pension valuations and the
Town retains the services of Bartel and Associates to analyze the respective assets and liabilities
of the Retiree Healthcare Plan. Provided below are links to the most recent valuations.
https://www.losgatosca.gov/1861/CalPERS-and-OPEB-Actuarial-Valuation-Rep
PAGE 3 OF 5 SUBJECT: Joint Council Finance Commission Orientation DATE: January 22, 2021
DISCUSSION (continued):
In addition to Bartel and Associates performing the Healthcare valuations starting in 2018, the
Town contracted with Bartel to provide an expanded review and analysis of the CalPERS
valuation reports. The review of the 2019 valuation is expected to be presented at the March
Finance Commission meeting.
Pension Obligation Reduction Strategies
Since 2019, the Finance Committee in conjunction with the Town Council Pension and OPEB
Oversight Committee started reviewing Additional Discretionary Payment (ADPs) strategies to
reduce the Town’s unfunded pension obligations. Following are staff reports detailing the ADP
discussions and ultimate strategy.
September 3, 2019 – Please refer to the Council Meeting for 9/3/2019 and Agenda Item #4 in
the link below.
https://meetings.municode.com/PublishPage/index?cid=LOSGATOS&ppid=a7cef0f9-a4a2-
40e7-a6e3-056a78898413&p=1
March 3, 2020 - Please refer to the Town Pension and OPEB Oversight Trust Meeting for
3/3/2020 and Agenda Item #2 in the link provided below.
https://meetings.municode.com/PublishPage/index?cid=LOSGATOS&ppid=aeaa9fb1-945d-
471d-90e6-a6733cd280fd&p=0
April 21, 2020 - Please refer to the Town Pension and OPEB Oversight Trust Meeting for
4/21/2020 and Agenda Item #2 in the link provided below.
https://meetings.municode.com/PublishPage/index?cid=LOSGATOS&ppid=aeaa9fb1-945d-
471d-90e6-a6733cd280fd&p=0
August 4, 2020 - Please refer to the Town Pension and OPEB Oversight Trust Meeting for
8/4/2020 and Agenda Item #5 in the link provided below.
https://meetings.municode.com/PublishPage/index?cid=LOSGATOS&ppid=aeaa9fb1-945d-
471d-90e6-a6733cd280fd&p=0
PAGE 4 OF 5 SUBJECT: Joint Council Finance Commission Orientation DATE: January 22, 2021
DISCUSSION (continued):
In addition to the aforementioned amortization base payoff strategy, the Council adopted an
enhanced amortization payment schedule from a 30-year amortization cycle to a 20-year
payoff. Please refer to the link below.
http://weblink.losgatosca.gov/Weblink/0/doc/895230/Page1.aspx
Catastrophic/Budget Stabilization and Internal Service Fund Review
The Town Council received a detailed independent analysis of its Catastrophic and Budget
Stabilization General Fund Reserve Policies, resulting in no changes to the existing Policy.
http://weblink.losgatosca.gov/Weblink/0/doc/1082779/Page1.aspx
In addition, the Finance Committee and Town Council received reviews of both Town wide fund
level cash positions and Town Internal Service Funds. The review resulted in the
recommendation to close both the Vehicle Maintenance and Stores Internal Service Funds. The
closure resulted in the residual balance of approximately $1.0 million being available for
reallocation in the FY 2019/20 Operating Budget.
https://legistarweb-production.s3.amazonaws.com/uploads/attachment/pdf/283767/Staff_Report.pdf
Revenue Enhancements
The Town Council has also sought to enhance revenues through successful ballot initiatives for
both the Transient Occupancy Tax (TOT) and Sales Tax.
August 2, 2016 – Please refer to the Council Meeting of 8/2/2016 and Agenda Item #9 at the
link provided below.
http://weblink.losgatosca.gov/Weblink/Browse.aspx?startid=275983
March 6, 2018 - Please refer to the Council Meeting of 8/2/2016 and the Power Point
presentation of Agenda Item #9 at the link provided below.
http://weblink.losgatosca.gov/Weblink/Browse.aspx?startid=275983
PAGE 5 OF 5 SUBJECT: Joint Council Finance Commission Orientation DATE: January 22, 2021
CONCLUSION AND NEXT STEPS:
At Thursday’s Study Session, the Council and Finance Commission will have an opportunity to
learn more about the Town Finance Team and Consultant Support; Finance Commission, Town
Council, and Town Manager Roles and Responsibilities; Finance Commission Ordinance
Overview; Finance Commission Tentative Work Plan; Financial Stewardship to Date; and Town
Budget Overview.
Attachment:
1. Ordinance 2314 – Establish a Finance Commission