Staff Report.FiveYearForecast
PREPARED BY: Gitta Ungvari
Interim Finance Director
Reviewed by: Town Manager, Town Attorney, and Assistant Town Manager
110 E. Main Street Los Gatos, CA 95030 ● (408)354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 08/11/2022 ITEM NO: 1
DATE: August 8, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Receive the Updated Five-Year Financial Forecast to Reflect the Town’s New
Labor Agreements
RECOMMENDATION:
Receive the updated Five-Year Financial Forecast to reflect the Town’s new labor agreements.
BACKGROUND:
An important aspect of the Town’s budget development process is taking a multi-year approach
to understand revenue and expenditure trends over time. Serving as the foundation of the
budget planning process, the Town develops a Five-Year Financial Forecast (“Forecast”)
beginning in the late fall of each year. The Forecast takes a forward look at the Town's General
Fund revenues and expenditures and is updated regularly. Its purpose is to identify financial
trends, potential shortfalls, and other issues so the Town can proactively address them and
budget accordingly.
The Five-Year Financial Forecast is not a budget, nor a proposed plan. The Five-Year Financial
Forecast sets the stage for the upcoming budget process and is a tool in facilitating both the
Town Council and Town Manager in establishing priorities and allocating resources
appropriately.
DISCUSSION:
On May 17, 2022, the Town Council received the Fiscal Year 2022-23 Proposed budget including
the Five-Year forecast. Since the presentation of the Proposed Operating Budget on May 17,
2022, the Town successfully completed negotiations with all bargaining units. To meet the
financial terms of the agreements, the Council adopted a balanced budget at the June 21, 2022
PAGE 2 OF 3 SUBJECT: Updated Five-Year Forecast to reflect the Town’s new Labor Agreements DATE: August 8, 2022 DISCUSSION (continued):
meeting utilizing additional funding from the OPEB 115 Trust to fund retiree pay-go medical
payments directly and allocating the remaining residual Measure G balance to the General Fund
for FY 2022/23.
Given the recent budget adoption, the Forecast on the following page has been updated to
reflect only the adjustments to salary and benefit costs.
Staff anticipates updating revenues and other elements of the Forecast in the coming months
as part of the normal Mid-Year Budget and Forecast development cycle.
The following table illustrates the previous projected deficits relative to the updated Forecast.
Original 5 Year Forecast 2023/24
Forecast
($M)
2024/25
Forecast
($M)
2024/25
Forecast
($M)
2024/25
Forecast
($M)
2024/25
Forecast
($M)
Original Surplus/Deficit ($2.2) ($2.9) ($2.3) ($2.5) ($2.6)
Updated Surplus/Deficit ($3.8) ($4.3) ($3.7) ($4.0) (4.0)
This information was presented to the Finance Commission at its August 8, 2022 meeting. The
Commission did not provide any specific comments on the updated Forecast. Rather, the
Forecast provided a starting point for the Commission to identify the types of information it will
need to evaluate costs and revenues and recommend deficit reduction options pursuant to
Town Council direction.
PAGE 3 OF 3 SUBJECT: Updated Five-Year Forecast to reflect the Town’s new Labor Agreements DATE: August 8, 2022 DISCUSSION (continued):
Account Revenue Category 2021/22 Adjusted Budget
2021/22
Estimates
2022/23 Proposed Budget
2023/24
Forecast
2024/25
Forecast
2025/26
Forecast
2026/27
Forecast
2027/28
Forecast
4100 Property Tax 15.4$ 15.7$ 16.6$ 15.7$ 16.1$ 16.6$ 17.1$ 17.6$
4110 VLF Backfill Property Tax 4.2 4.2 4.4 4.5 4.6 4.8 4.9 5.1
4200 Sales & Use Tax 7.0 7.5 7.9 8.2 8.5 8.8 9.1 9.3
4200 Measure G District Sales Tax 1.2 1.2 1.3 1.4 1.4 1.5 1.5 1.5
4250 Franchise Fees 2.5 2.4 2.5 2.6 2.6 2.7 2.8 2.9
4251 Transient Occupancy Tax 1.4 1.4 1.6 1.7 1.8 1.9 1.9 2.0
4400 Business License Tax 1.3 1.3 1.4 1.4 1.4 1.4 1.4 1.4
4400 Licenses & Permits 3.1 3.1 2.8 2.8 2.9 3.0 3.1 3.2
4500 Intergovernmental 4.0 1.1 1.1 1.0 1.0 1.0 1.2 1.1
4600 Town Services 4.2 4.3 3.5 4.0 4.1 4.1 4.2 4.3
4700 Fines & Forfeitures 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
4800 Interest 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3
4850 Other Sources 2.6 2.4 3.8 2.2 2.2 2.2 2.3 2.2
4900 Fund Transfers In 0.6 0.6 0.5 0.5 0.5 0.5 0.5 0.5
48.1$ 45.8$ 48.0$ 46.5$ 47.6$ 49.0$ 50.5$ 51.6$
Use of Capital/Special Project Reserve - Capital 0.6 0.6 2.4 0.8 0.8 0.8 0.8 0.8
Use of Pension/OPEB Reserve - 0.3 - - - - - -
Use of Property Surplus Reserve 1.2 1.2 - - - - - -
Use of Measure G Reserve 1.1 1.1 0.7 - - - - -
ARPA Replacement Revenue - - 1.6 - - - - -
51.0$ 49.0$ 52.7$ 47.3$ 48.4$ 49.8$ 51.3$ 52.4$
Account Expenditure Category
2021/22
Adjusted Budget
2021/22 Estimates
2022/23
Proposed Budget
2023/24 Forecast 2024/25 Forecast 2025/26 Forecast 2026/27 Forecast 2027/28 Forecast
5110 Salary 20.9 19.2 23.2 23.0 23.5 23.9 24.5 25.0
5120 CalPERS Benefits 7.3 6.2 7.7 7.9 8.3 8.1 8.4 8.5
5200 All Other Benefits 4.2 3.4 4.6 4.4 4.5 4.6 4.7 4.8
6211 OPEB Pay as You Go 1.5 1.5 1.5 1.5 1.6 1.7 1.8 1.9
6000 Operating Expenditures 6.4 7.0 6.9 6.8 7.1 7.1 7.4 7.5
7200 Grants & Awards 1.0 0.8 0.2 0.2 0.2 0.2 0.2 0.3
7400 Utilities 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7
8060 Internal Service Charges 2.7 2.6 2.7 2.9 3.1 3.4 3.7 3.8
8900 Debt Service 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9
46.6$ 43.3$ 49.3$ 49.2$ 50.8$ 51.6$ 53.3$ 54.4$
GASB 45 Retiree Medical Actuarial 0.1 0.1 - - - - - -
Additional Discretionary Payment - Pension 0.4 0.7 0.4 0.4 0.4 0.4 0.4 0.4
47.1$ 44.1$ 49.7$ 49.6$ 51.2$ 52.0$ 53.7$ 54.8$
Capital Transfers Out to GFAR 2.8 2.8 2.3 0.8 0.8 0.8 0.8 0.8
Capital Transfer Out - 1/2 of Measure G Proceeds 0.6 0.6 0.7 0.7 0.7 0.7 0.8 0.8
Allocate to Budget Stabilization/Catastrophic - 0.5 - - - - - -
Allocate to Compensated Absences - - - - - - - -
Allocate to Market Fluctuation - - - - - - - -
Allocate to CalPERS/Pension - 0.3 - - - - - -
50.5$ 48.3$ 52.7$ 51.1$ 52.7$ 53.5$ 55.3$ 56.4$
0.5$ 0.6$ -$ (3.8)$ (4.3)$ (3.7)$ (4.0)$ (4.0)$
* Due to rounding of individual categories FY 2021/22 Total Expenditures and Reserve Allocations includes $0.1 million.
General Fund (111) Forecast does not include Pension Trusts activities.
Town of Los Gatos General Fund 5-Year Forecast
(in $ million)
NET REVENUES RESERVE TRANSFERS LESS EXPENDITURES &
RESERVE ALLOCATIONS FOR FINAL ALLOCATION AFTER YEAR END
CLOSE
TOTAL REVENUES, TRANSFERS, AND USE OF RESERVES
TOTAL EXPENDITURES & RESERVE ALLOCATIONS
TOTAL OPERATING REVENUES & TRANSFERS*
TOTAL OPERATING EXPENDITURES
TOTAL OPERATING & DISCRETIONARY EXPENDITURES
AMOUNTS AVAILABLE FOR RESERVE ALLOCATIONS