DeskItem.Item#1-FiveYearForecast
Reviewed by: Town Manager, Town Attorney, Assistant Town Manager, and Interim 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: 08/11/2022 ITEM NO: 1 DESK ITEM
DATE: August 11, 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
REMARKS:
One of the key responsibilities of the Town Manager is to keep the Town Council apprised of
the Town’s financial condition and future needs, and to make recommendations to the Town
Council to address these issues. The financial circumstances of the Town have been a high
priority for the Town for many years. Working with the former Council Finance Committee,
current Finance Commission, and directly with the Council, staff has brought forward many
recommendations to ensure that the Town maintains an annual balanced budget, plans for
future needs, anticipates trends, and prepares accordingly. To this end, the following items
have been brought forward and acted upon by the Town Council:
• The Town Council approved placing a ballot measure for the November 2016 election to
increase the Transient Occupancy Tax (TOT) from 10 percent to 12 percent. The voters
approved Measure T and the 2% increase raises approximately $400,000 annually in
additional revenue.
• In 2016, the Town’s bargaining groups approved the introduction of dependent cost
sharing and a reimbursement cap to Medicare eligible employees.
• May 2018, the Council updated the General Fund Reserve Policy to provide for
additional discretionary payments (ADPs) of $400,000 per year to address the unfunded
pension liability. Under the updated Policy, a 20-year amortization equivalence will be
achieved through additional Unfunded Actuarial Liability (UAL) payments of
approximately $400,000 per year. The total savings associated with the ADP
methodology is approximately $13.8 million.
PAGE 2 OF 3 SUBJECT: Updated Five-Year Forecast to Reflect the Town’s New Labor Agreements DATE: August 11, 2022
REMARKS (continued):
• The Town Council approved placing a ballot measure for the November 2018 election to
create a 1/8 cent dedicated district sales tax for a 20-year period. The voters approved
Measure G and the dedicated tax provides approximately $1,200,000 annually in
additional revenue.
• In 2018, the bargaining groups agreed to the elimination of the Town's existing retiree
healthcare benefit prospectively. The Normal Cost per employee per year will go from
$8,300 to $1,800 or a difference of $6,500 per year. When calculated for 150
employees, this results in an ongoing savings of $975,000 per year. In addition, the
Town currently has 37 employees in this group out of 150.
• In February 2019, Council approved an Ordinance allowing regulated short-term rentals
subject to TOT. Approximately $60,000 of additional TOT is collected annually.
• In March 2019, the Town entered into a Public/Private Partnership with Imwalle Asset
Management for the renovation/lease up of 4 Tait Avenue and Forbes Mill properties.
• In May 2019, the Town sold 148000 Winchester Blvd to Santa Clara County Fire District
(“County Fire”) for $1.9 million.
• In June 2019, the Council voted to annex 24 unincorporated County pockets. This action
results in approximately $1,000,000 in property taxes remaining in the Town instead of
being diverted to the County.
• From 2019 to the present, allocated additional discretionary pension funding totaling
$10.4 million. These additional discretionary payments will ultimately yield an
approximate $12.7 million in contribution savings.
• Beginning in February 2019, staff began providing scenarios (sensitivity analyses) of
economically sensitive revenues and costs as part of the Five-Year Forecast discussion,
anticipating a future downturn.
• In April 2020, the Town sold 14850 Winchester Blvd to Santa Clara County Fire District
(“County Fire”) for $1.2 million.
• In Summer 2022, the Council is considering placing a ballot measure for the November
2022 election to modernize the Town’s Business License program. Approximately
$1,200,000 of additional revenue would be received annually if the Council places it on
the ballot and it is passed by the voters.
PAGE 3 OF 3 SUBJECT: Updated Five-Year Forecast to Reflect the Town’s New Labor Agreements DATE: August 11, 2022
REMARKS (continued):
As the Council considers the updated Five-Year Financial Forecast, the Town Manager’s Office is
already preparing for future fiscal year budgets. Staff is fully aware that the budget balancing
options of the past are not going to be available in the future and therefore, it is critical that the
Town begin planning proactively now. The Manager’s Office together with other Department
Directors will be evaluating the cost structure of different services to identify potential savings
without significantly reducing service levels. Management is also looking at potential cost
controls and other mechanisms to save resources and plan for the future. Staff also carefully
monitors revenues and expenses throughout the budget year. All of this work builds upon the
Council’s past actions that provide significant savings over the short and long term as described
above.
In addition, staff is supporting the Finance Commission in its Council directed consideration of
potential recommendations to the Town Council regarding cost savings and enhanced
revenues.
Attachment Provided with Previous Addendum:
1. Public Comment