Attachment 3 - Finance Commission Recommendation
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
ATTACHMENT 3
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 05/17/2022 ITEM NO:
DATE: May 10, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager on behalf of the Finance Commission
SUBJECT: Receive Fiscal Year (FY) 2022/23 Proposed Operating and Capital Budget
Recommendations from the Town Finance Commission per Measure A
RECOMMENDATION:
Receive Fiscal Year (FY) 2022/23 Proposed Operating and Capital Budget recommendations
from the Town Finance Commission per Measure A.
BACKGROUND:
On April 18, 2022, the Town Manager’s Proposed FY 2022/23 Operating and Capital Budgets
were posted on the Town’s website for the public’s review and comment. The Proposed
Budgets were published 21 business days before May 17, 2022 (Council’s public hearing on the
Budgets), in accordance with Measure A.
With the passage of Measure A, the Finance Commission has been tasked with several
mandated duties as described in the provisions of the adopted Ordinance. Section 2.50.225. –
Duties states that:
(a) The Finance Commission shall:
(2) Review the Town Manager's annual proposed budget prepared in accordance with
section 2.30.295(6) of the Town Code. and provide written comments and
recommendations to the Town Council.
(A) The Finance Commission's comments and recommendations shall include a
recommendation about whether the Town Council should approve or disapprove
the proposed budget. The Finance Commission may make a recommendation of
PAGE 2 OF 4 SUBJECT: Finance Commission FY 2022/23 Budget Recommendations DATE: May 10, 2022
approval of the budget conditional upon the Town Council's acceptance of one or
more of the Finance Commission's recommendations.
(B) The Town Manager must provide a proposed budget to the Finance Commission at
least twenty (20) business days before the first meeting at which the proposed
budget is considered by the Town Council.
The Finance Commission established the following schedule to discuss and provide comments
on the Proposed Budgets and Measure G allocation (meeting Agenda and Minutes link
provided):
• April 25, 2022 – Special Finance Commission meeting
• May 2, 2022 – Special Finance Commission meeting
• May 9, 2022 – Regular Finance Commission meeting
https://losgatos-ca.municodemeetings.com/
In addition, the meeting schedule provided ample opportunities for the public to engage in the
process either through written comment or verbal comment through Zoom.
The discussion section of this report details the deliberations of the Finance Commission and its
recommendations to the Town Council.
DISCUSSION:
Finance Commission Current Budget Cycle Deliberations
Over the course of the Commission’s budget proceedings, the Commission received
presentations on the Proposed Operating and Capital Budgets, evolution of forecasted budget
deficits, allocated/unallocated American Rescue Plan Act (ARPA) funding, historic base salary,
and benefit expenditures, historic Capital Improvement Program (CIP) expenditures, employee
vacancies, and a summary of the Community Survey results. In addition, staff provided
responses to Commission and public inquiries throughout the process.
The Commission’s deliberations coalesced around the following goals and observations:
• The Commission’s interest for continued enhancement of transparency in budget
development, budget assumptions, and budget presentation.
• The Proposed Budget continues to restrict capital expenditures relative to historic
allocations.
• The Proposed Capital Improvement Program (CIP) continues to be challenged by a lack
of dedicated funding.
PAGE 3 OF 4 SUBJECT: Finance Commission FY 2022/23 Budget Recommendations DATE: May 10, 2022
• The higher percentage increases in the primary expenditures of Salary and Benefits
relative to revenues is constraining other investments.
• The Forecast projects deficits throughout the forecast period.
• The Commission’s continued review of the Town’s Internal Service Funds.
Based on the aforementioned areas of emphasis, the Commission ultimately made four
recommendations to the Town Council. In addition, the Commission made a recommendation
to approve both the Proposed Operating and Capital Budgets based on acceptance of the
following four recommendations:
Capital Improvement Program Recommendations
As previously mentioned, Commissioners expressed that the Town needed to plan and budget
proactively for its capital needs and find reliable funding source(s). The Commission agreed
that the previous approach that created year-end surpluses was inadequate. As such, the
Commission recommended that additional funding be programmed to ensure continued
investment in critical Town infrastructure.
Motion by Commissioner Rick Tinsley to recommend to Council the allocation of
$3.77 million to the General Fund Appropriated Reserve (GFAR) for FY 2022/23.
Seconded by Chair Ron Dickel.
Motion passed unanimously
Motion by Chair Ron Dickel to recommend to Council the allocation of approximately
$3.7 million of unallocated ARPA funds to the GFAR for FY 2022/23. Seconded by Vice
Chair Kyle Park.
Motion passed unanimously
Operating Budget Recommendations
As previously mentioned, Commissioners expressed interest in the Town’s current use of
Internal Service Funds and concerns about projected deficits.
Motion by Chair Ron Dickel to recommend to Council the dissolution of the Workers
Compensation and Self Insurance Internal Service Funds starting in FY 2022/23 with
remaining balances being transferred to the General Fund. Seconded by
Commissioner Loreen Huddleston.
Motion passed unanimously
Motion by Commissioner Kyle Park to inform Council the Commission believes that a
“Structural Financial Deficit” currently exists and for Council to acknowledge the
Commission’s finding and direct the Commission to work with Town management to
PAGE 4 OF 4 SUBJECT: Finance Commission FY 2022/23 Budget Recommendations DATE: May 10, 2022
confirm the actual amount of the deficits that the Town is facing and come back to the
Council with suggestions/ideas on how we can fix this “Structural Financial Deficit” and
fund capital projects. Seconded by Chair Ron Dickel.
Motion passed unanimously
CONCLUSION:
Per Measure A, this report provides written comments and recommendations to the Town
Council regarding the Commission’s review of the Proposed FY 2022/23 Operating and Capital
Budgets.
COORDINATION:
This staff report was coordinated with the Town Manager, Town Attorney, Director of Finance,
and Finance Commission Chair.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.