Operating and Capital Budgetsw x o
t COUNCIL AGENDA REPORT
DATE: MAY 16, 2012
MEETING DATE: 5/21/12
ITEM NO: V
TO: MAYOR AND TOWN COUNCIL_
FROM: GREG LARSON, TOWN MANAGER
SUBJECT: OPERATING AND CAPITAL BUDGETS
A. CONSIDER THE TOWN OF LOS GATOS PROPOSED OPERATING AND
CAPITAL BUDGET FOR FISCAL YEAR 2012 -2013
B. CONSIDER THE TOWN OF LOS GATOS PROPOSED CAPITAL
IMPROVEMENT PROGRAM FOR FISCAL YEAR 2012 -2017
C. PROVIDE DIRECTION REGARDING INCLUSION OF THE FOLLOWING IN
THE FISCAL YEAR 2012 -2013 OPERATING AND CAPITAL BUDGET:
1. PLANNING AND DEVELOPMENT FEE ADJUSTMENTS
2. FUNDING FOR ADDITION OF LIBRARY WEEKEND HOURS
3. FUNDING FOR LIVE OAK ADULT DAY SERVICES AND CASE
180M:C re3�lV510h
4. ALLOCATION OF FUNDING FOR ARTS ORGANIZATIONS
5. ADDITIONAL REVENUE RECOGNITION
RECOMMENDATION
1. Consider the Town of Los Gatos Proposed Operating and Capital Budget for Fiscal Year 2011-
2012
2. Consider the Town of Los Gatos Proposed Capital Improvement Program for Fiscal Year 2011-
2016
3. Provide Direction Regarding Inclusion of the Following In The Fiscal Year 2012 -2013 Operating
And Capital Budget:
a. Planning And Development Fee Adjustments
b. Funding For Addition Of Library Weekend Hours
c. Funding For Live Oak Adult Day Services And Case Management
d. Allocation Of Funding For Arts Organizations
e. Additional Revenue Recognition
PREPARED BY : PAMELA JACOBS "4 to"
Assistant Town Manager
Reviewed by: Assistant Town Manager ` Town Attorney _Finance
N: MMAdnilnWorkFiles\2012 Council Repods�5.21.12 Budget Staff Report FY 2012- 2013.doc
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
BACKGROUND
The Proposed Operating and Capital Budget for FY 2012/13 (Attachment 1, previously submitted)
represents the Town Manager's recommended comprehensive financial plan to provide services to the
Town of Los Gatos given limited resources. The Proposed FY 2012 -2017 Capital Improvement
Program (Attachment 2, previously submitted) is a comprehensive five -year capital improvement plan
identifying 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 21 budget
hearing will be incorporated in the implementing documents to be presented for Council approval on
June 4, 2012.
DISCUSSION
Overview of Proposed Operating and Capital Budgets
The transmittal letter in the FY 2012/13 Proposed Operating Budget provides an executive summary of
the budget, including budget development principles and strategies, an overview of revenue and
expenditure assumptions, and future challenges affecting the Town's fiscal situation.
This staff report provides:
• a summary of budget balancing actions recommended in the proposed budget;
• discussion of an updated Five -Year Financial Forecast;
• presentation of issues for consideration in the proposed budget and to be explored during FY
2012/13;
• a summary of the proposed Capital Improvement Program; and,
• information regarding the budget presentation to be made on May 21, 2012
While the local economy is showing initial signs of improvement, the FY 2012/13 budget reflects
approximately $32.3 million in total revenue (excluding transfers), a 2% reduction compared to the prior
year. This is primarily due to a decline in sales tax revenue, largely resulting from a change in Netflix'
business model, and a decrease in charges for Town services because of the loss of the former
Redevelopment Agency reimbursement revenue for administrative and housing support. Projections for
other revenue sources, including property tax, Transient Occupancy Tax, license and permits, and
private development fees, all show moderate growth. These revenue impacts, combined with continuing
increases in salaries and benefits, require adjustments in the Town budget totaling $1.8 million. The
$1.8 million shortfall represents slightly over 5% of the General Fund Operating budget.
As in prior years, the Town's conservative financial practices and prompt action in response to the
economic recession have positioned the Town relatively well to address the budget shortfall projected
for FY 2012/13. The Town is not proposing layoffs or significant public service reductions next year.
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
The outlook for the following year and beyond continues to remain guarded, however, as discussed later
in this report.
Due to continued reductions in staffing levels through attrition, the Town will remain limited in its
capacity to take on new special projects or initiatives. Longer response times for non - priority calls for
service and customer referrals are also expected. Health and safety responses will continue to take
priority over aesthetic concerns. Workforce furloughs and closures will reduce customers' access to
service, as well as employees' salaries; however, the recommended schedule for furloughs and closures
will minimize the impact to the public. Staff will be available at the budget hearing to address any
specific questions regarding impacts of departmental reductions.
Of persistent concern, however, is the long -tern fiscal outlook, largely due to rapidly rising employee
pension and medical costs. Even with a continued modest recovery, additional budget and service
reductions are anticipated in future years. These future reductions may directly impact Town residents,
visitors, and businesses in significant ways. The inevitable loss of Netflix DVD sales tax revenue and
deferred infrastructure maintenance will only exacerbate these difficulties in the years ahead.
Fortunately, the Town is implementing a new lower "second tier" for non -sworn and management staff
and will soon be negotiating for medical cost - sharing, retiree medical and police salary and benefit
reforms as well.
Nonetheless, the core assets of Los Gatos remain strong, including an enviable downtown, a beautiful
environmental setting, proximity to Silicon Valley, fundamentally strong real estate, and an active and
engaged population. Further, the economic crisis has not impacted special one -time projects with
separate funding sources, including completion of the new Libray, the Los Gatos Creekside Sports Park,
and three significant street projects (University/Hwy9, Blossom Hill, and Wedgewood). These will all
contribute to maintaining and enhancing Los Gatos' high quality of life.
Recommended Budget Balancing Actions
At the first quarter budget review last fall, a $4 million budget shortfall was projected. This was due
primarily to the loss of Redevelopment and the anticipated relocation of the Netflix DVD sales -tax
generating business. With the assistance of an expert in sales tax law and practice, the Town
successfully reversed the planned re- allocation of sales tax and retained the revenue for the Town.
Combined with improved redevelopment projections, this maintenance of revenue reduced the budget
gap to just under $2 million.
The proposed operating budget incorporates reductions in staffing and other expenses and revenue
enhancements totaling approximately $1.8 million, sufficient to balance the FY 2012/13 budget.
Recommended budget balancing actions include:
• unavoidable increased operating costs ($308,000)
• improved revenue projections ($548,000)
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
• implementation of Tier I budget balancing strategies previously identified by Council at the
January retreat ($$1,088,000)
Remaining is a $472,000 shortfall which will be covered with an estimated $500,000 of awailable fund
balance from the current year resulting from conservative revenue projections and/or reduced
expenditures. Alternatively, the Council may direct staff to include some or all these expected revenue
sources to balance next year's budget:
■ One -time proceeds from the dissolution of the Redevelopment Agency. Early in FY 2012/13,
the Town expects to receive 9.3% of distributions (estimated to be $750,000) related to the final
audit and close -out of remaining unobligated Redevelopment fund balances.
One -time residual receipts from the private sale and purchase of the Villa Vasona affordable
senior apartments (also estimated at $750,000) in late 2012 or early 2013. Note that this
transaction in no way reduces or eliminates the provision of senior affordable housing. The
Town proceeds simply result from the Town's underlying ownership and dedication of the land
to this project 30 years ago.
Another alternative to using fund balance or recognizing revenue noted above is to implement further
expenditure reductions. Attachment 3 shows the adjustments included in the budget, and options for
further reductions. The options for further reductions include items from Tier 1 and Tier 2 that are not
included in the recommended budget.
Five -Year Forecast
The Five -Year Financial Plan is an independent financial tool that is based on current and projected
costs and revenues. It is designed to be fluid in nature, allowing staff to build various funding scenarios
and test "what if' assumptions. Staff has updated the forecast last prepared for the Council Retreat
earlier this year to now incorporate the FY 2012/13 proposed budget changes.
The information presented in the forecast on page 6 includes conservative estimates of revenues, based
on generally moderate recovery levels for FY 2012/13, with growth rates of 1 to 3.5% for most major
revenue categories in FY's 2013/14 through 2017/18. Based upon significant business model changes
that became effective in the fall of 2011, the updated forecast also includes an assumption of steadily
declining sales tax revenue from Netflix due to emerging technology and market forces, as well as
continuation of an outdated state tax structure which ignores the purchase of digital and out of state
goods and services.
The expenditure forecast includes permanent reductions made in the FY 2012/13 proposed budget and
carries those forward in future years. Beyond next year, the five -year forecast assumes no employee
COLA increases or ongoing furlough savings. Beginning in FY 2013/14, the forecast reflects continued
increases in PERS employer contribution rates (rising from 39.3% to 4 1. 1 % for sworn police staff and
from 19.6% to 20.6 % for non -sworn staff) to fund substantial investment losses sustained in the recent
recession and changes in actuarial assumptions.
PAGES
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
The Forecast reviewed by Council at its retreat in early 2012 projected a deficit of approximately $1.8
million for FY 2012 /13. The proposed FY 2012/13 budget eliminates most of the projected shortfall
through staffing reductions, furloughs, targeted use of selected reserves and revenue enhancements. A
deficit of approximately $1.9 million was previously projected for FY 2013 /14. This update now
projects a deficit of $1.4 million, largely as a result of improved revenue expectations as the economy
begins to show signs of recovery. Balancing the FY 2013/14 budget will likely include continued use of
selected reserves as well as further staffing and service reductions unless a more robust economic
turnaround occurs and/or there are significant reductions in rising employee retirement and benefit costs.
The forecast continues to reflect future ongoing challenges with deficits projected to reach a combined
total of nearly $10.2 million through the five year period ending FY 2017 /18. The forecast also
assumes no new dedicated source of funding for ongoing infrastructure needs as the use of a portion of
the Netflix revenues decline. This means that the Town can expect not only service level challenges for
the future, but also infrastructure challenges as well.
Fortunately, the Council's adopted Strategic Goals include a review of potential infrastructure funding
opportunities. Staff will update the Council on existing one -time funding opportunities during next
fiscal year and will develop ongoing opportunities for Council consideration.
PAGE 6
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
Updated 5/16/2012
Town of Los Gatos General Fund
Updated Five -Year Financial Plan
FYI FY2 FY3 FY4 FY5
4100 Properly Tax
$ 7.4
S 8.0
$ 82
$ 83
$ 85
2015A6
S 9.1
4110 VLF Backfi0 Property Tax
23
23
2011/12
2012/13
I
2013114
2014115
Foreas
2016/17
2017/18
Account
Resenue Category
Forecast
Budget
Forecast
Forecast
t
Forecast
Forecast
4100 Properly Tax
$ 7.4
S 8.0
$ 82
$ 83
$ 85
$ 8.8
S 9.1
4110 VLF Backfi0 Property Tax
23
23
23
23
23
2.4
2.4
4200 Sales &Use Tax
8.6
7.9
7.6
7.2
7.1
7.1
7.1
4250 Francbise Fees
1.9
1.9
2.0
2.0
2.1
2.1
2.2
4251 Transient Occupancy Tax
1.0
1.1
1.1
1.1
1.2
1.2
1.2
4400 Business License Tax
1.1
13
1.4
1.4
1.5
1.5
15
_
4400 Licenses & Permits
2.2
2.1
2.1
2.1
2.1
2.2
23
4500 Interg>veturetal
0.8
0.8
08
0.8
0.8
0.9
0.9
4600 Charge for Services - - --
2.7
2.2
2.1
2.0
2.1
2.1
2.2
_
& F
0.7
0.7
0.7
0.7
0.7
0.7
08
_ _4700 _Fines
4800 Interest
0.6
0.6
0.6
0.6
0.6
0.7
0.7
4850 Other Sources
3.4
3.4
33
3.4
3.4
3.4
35
4900 Fond Trmsfers In
0.4
1 OS
1 0.2
1 0.2
1 0.1
1 0.1
0.1
TOTALREVESUFS
33.1
32.8
32.4
32.1
1 32.4
33.1
33.9
Use of Reserves/Deposits
13
1.9
0.8
1 0.8
1
0.1
$33.3
TOTALREVENLES &TRANSFERS
S 34.4
1 $ 34.7
$ 33.2
1 $ 32.9
$33.2
$ 33.2
$ 33.9
&ALLOCATIONS I S 34.4 1 S
REVENUES LESS EXPENDITURES $ $ (OS) $ (1.4) $ ( 2.2 ) S (2.4) $ (23) $ (1.9)
ONGOING SHORTFALL MITIGATION $ - I $ ( 0.0) $ 1.4 $ 2.2 S 2.4 S 2.40
NEFREVFNUFS LESS EXPEND1TURES I $ I S (05) $ (1.4) S (0.8)1 $ (0.2)1 S 0.1 1 S 05 1
2011112
2012/13 1
2013/14
2014115 1
Famas 1
2016/17
2017118
Account
Fspenditure Category
Forecast
Budget I
Forecast
Forecastj
t I
Forecast
Forecast
5110 Salary
$ 12.8
$ 13.0
S 13.2
$ 13.2
$ 13.2
$ 13.2
$ 13.2
5120 Elected Officials
-
-
-
-
-
-
-
5130 Temporary Employees
0.9
0.8
0.7
0.7
0.7
0.7
0.7
5140 Overt one
M
03
03
03
03
03
03
5170 Other Salary
0.2
0.4
0.4
0.4
0.4
0.4
0.4
5200 Benefits
6.2
65
65
6.7
6.9
7.1
72
6000 Supplies, Materials, & Services
4.7
5.2
53
5.4
5.5
5.7
58
7200 Grants & Awards
0.2
0.2
0.2
0.2
0.2
0.2
0.2
7400 Utilities
0.4
0.4
0.4
0.4
0.4
0.4
05
7700 Fixed Assets
-
-
-
-
-
-
-
8060 Internal Service Charges
32
33
35
3.6
3.7
3.8
3.9
8900 Debt Service
2.1
1 2.0
1 2.0
2.0
1 2.0
1 2.0
2.0
TOTAL EXPENDITURES
S 31.2
$ 32.1
S 325
S 32.9
$33.3
S 33.8
$ 342
9900 RDA Ransom
-
-
-
-
-
9900 Operating Transfers Out
-
-
-
-
-
-
-
9900 Capital Transfers Out to GFAR
13
1.9
0.8
0.8
0.8
0.1
-
9900 GASB 45 Retiree M edical Actuarial
1.1
1.2
13
1.4
1.5
1.6
1.6
EXPENDITURES
33.6
35.2
34.6
35.1
35.6
355
358
9900 Legally Required Reserve Allocation
9900 Reserve 0.8
-
-
9900 Transfer to Stabilization Reserve -
-
-
-
-
-
&ALLOCATIONS I S 34.4 1 S
REVENUES LESS EXPENDITURES $ $ (OS) $ (1.4) $ ( 2.2 ) S (2.4) $ (23) $ (1.9)
ONGOING SHORTFALL MITIGATION $ - I $ ( 0.0) $ 1.4 $ 2.2 S 2.4 S 2.40
NEFREVFNUFS LESS EXPEND1TURES I $ I S (05) $ (1.4) S (0.8)1 $ (0.2)1 S 0.1 1 S 05 1
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
Issues for Consideration
Following are a number of issues for consideration by Council for inclusion in the FY 2012/13 budget,
or having budget implications for the future.
Library Weekend Hours
When the new library opened in February 2012, Council approved the use of budget reserves to fund the
provision of three additional hours on Saturday mornings (from 10:00 am to 1:00 pm) until the end of
this fiscal year. The addition reflected the increased demand generated by the opening of the new
library. Sunday hours remained the same.
Per Council direction, funding for these additional hours was not included in the proposed base budget
pending an assessment of the value of the increased hours. If the Council would like to add weekend
hours to the library schedule, staff provides two alternatives:
Adding one hour on both Saturday and Sunday from 12:00 to 1:00 pm at an annual cost of
$25,000.
Adding three hours on Saturday from 10:00 to 1:00 pm at an annual cost of $50,000.
Of these two options, staff recommends the addition of one hour on both weekend days.
Anecdotal information from Library staff indicates that Saturday mornings have slower traffic than other
mornings, while Sundays experience more intense use overall. Door count data shows a higher average
number of visitors per hour on Sundays. Weekend afternoons tend to be the most used of weekly library
hours. Adding one hour to each weekend day would also make the schedule more consistent, and thus
easier for patrons to remember. The consistent schedule is also beneficial from an operational/
scheduling standpoint.
However, staff recognizes the Council's prior discussion and direction that Saturday morning hours may
meet the scheduling needs of some residents, so has provided that alternative for Council consideration
as well.
Revenue Adjustments
Planning and Development Fees
On April 16, 2012, the Council approved the FY 2012/13 fee schedule, which included CPI increases for
many of the fees, as previously directed by Council. The staff report noted that staff would bring
forward additional increases for certain building and planning fees with the adoption of the FY 2012/13
budget. A separate public hearing for proposed amendments to the FY 2012/13 Fee Schedule is
scheduled for June 4, 2012.
PAGE
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
The proposed budget assumes $50,000 generated by increased fees over and beyond the CPI
adjustments already approved by the Town Council. Following is a discussion of the rationale for
proposing increased fees and a summary of the various increases staff will recommend. Staff is seeking
Council policy direction regarding bringing these fee increases forward and including the revenue
generated by them in the proposed FY 2012/13 budget.
With regard to building fees, the proposed increases are associated with the transition from using the
International Conference of Building Officials (ICBO) Building Standards publication of November-
December 2002 to the International Code Council (ICC), which replaced the ICBO Building Standards.
The ICC provides national average construction costs per square foot in its Building Valuation Data
publication. The national average construction costs are further refined through regional adjustments
that reflect local building costs. It is anticipated that this transition to the updated standards would
increase most building permit fees on the order of 10% to 12 %.
A comprehensive fee study for the Town was conducted by FCS Group in April 2010. The study
indicated that the Planning Division of the Community Development Department was recovering only
9% to 57% of its cost to process development applications. Only one application fee, Home Occupation
permits, was fully cost recovery. The study further concluded that to be cost recovery, development fees
would need to be increased from 11% to 813 %. The Town's cost for processing most development
applications are high due to the amount of staff time involved to process the application. These costs are
attributed to the Town's high standards for quality development and extensive community involvement.
Although Council Policy has been to strive to be 100% cost recovery, staff recognizes that fee increases
need to be sensitive to Town residents and local business owners.
Staff is recommending fee increases and modifications to better align fees with costs, resulting in both
increases and decreases in certain fees. Proposed increases will include an additional 10% on most
planning fees (in addition to the CPI increase already adopted by the Council). Increases greater than
10% are recommended for certain fees that do not impact single family applications. An increase of
30% will be proposed for Architecture and Site applications for non - residential and multiple, and for a
new second tier in the Major Restaurants category. This tier would be for restaurants that have alcohol
and/or entertainment, which involve significant review and processing time. One significant fee
increase that will be proposed is for CDAC applications and Administrative Land Use Permits for
wireless telecommunications facilities. Another one is for A &S applications for duplexes; the current
fee schedule is in error in that the fee is lower than the fee for a single - family residence.
Modified fees will be proposed for Planned Development and Rezoning applications by charging on a
time and material basis. For major projects, the fee would be similar to or higher than the current fee.
For minor PD's, the fee would be lower. Other decreases to fees that will be proposed is for certain
Architecture and Site applications and subdivisions.
Support for Non - Profits
The Town's proposed operating budget includes continued support of local non - profits through
approximately $130,000 in grant funds, including $20,500 of CDBG funding.
PAGE 9
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
The Town also provides in -kind donations through subsidized leases to two agencies: the Los Gatos
Museum Association and Los Gatos - Saratoga Community Education and Recreation (LGS Recreation)
at the following annual amounts (based on $2.50 per sq. ft. less any direct rent paid by the
organization):
Facility Square Feet In -Kind Donation
LGS Recreation Headquarters 6,479 $178,693
LGS Adult Recreation Center 12,000 $236,000
Tait & Forbes Mill Museums 5,160 $151,799
With regard to the Museums of Los Gatos, the Town also provides a $12,000 annual grant and provides
non - custodial maintenance at the existing facilities.
Live Oak Day Services and Case Management
In prior years, Live Oak Adult Day Services received CDBG grants through the Town. Santa Clara
County will now be administering these funds directly and is limiting grants to projects providing
homeless and housing services only (as well as Town - administered ADA projects). As FY 2012/13 is in
the middle of the two -year cycle for funding local non - profits through Town community grants, Live
Oak is not able to apply for funding. The previous grant provided to Live Oak was $12,988. Staff
recommends adding funding for this non -profit to the FY 2012/13 budget, and advising Live Oak to
apply for funds through the community grant process next year.
Last year's transfer of senior services to Los Gatos Recreation Funding is working well. Senior services
have expanded under LGS management and the drop -in lounge has been improved. One area that LGS
was not obligated to provide is case management for seniors, which was previously provided by Town
staff assigned to senior services. Case management is a valuable service that helps seniors connect with
other needed resources. While Live Oak Adult Day Services provides informal case management, more
targeted case management provided by a skilled professional would be beneficial to the senior
community. Staff recommends including funding in the FY 2012/13 budget in the amount of up to
$7,000 for the provision of case management services. If funding is approved, staff will work with the
Town's senior service partners to identify the appropriate organization to manage this service.
Arts Funding
The Arts and Culture Commission reviews arts, cultural and education service agency grant applications
on a two -year funding cycle and makes recommendations to Council. Applications were received and
approved last year for both FY 2011/12 and FY 2012 /13. Allocations made for the first year are
generally repeated in the second year, contingent on the availability of funds.
PAGE 10
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
Following are the allocations approved last year:
Organization 2011 /12 Allocation
Arts Docents of Los Gatos $4,000
Festival Theatre Ensemble $1,000
Los Gatos Community Concert Association $1,000
Photographic Guild of Los Gatos $1,000
St. Luke's Sunset Concert Series $1,000
Total $8,000
Staff recommended to the Arts and Cultural Commission status quo funding allocations for FY 2012/13
for these non - profits as per prior Council direction. The Arts and Cultural Commission is
recommending that the grant to the Arts Docents be decreased to $2,000 and that the other grants be
eliminated, and that the remaining $6,000 be allocated to fund the Arts Plan. The Arts Plan is alos
eligible for $9,800 in Art Car donation funds, which should be sufficient for the footbridge mural project
and a new public art project, if approved by Council. It is anticipated that the banner project may not
proceed due to lack of response. Staff recommends maintaining the level of funding provided to all the
arts organizations last year, and authorizing the use of the Art Cat donation funds for public art projects
guided by the Arts and Culture Commission.
Interim Management Assignments
On May 7, 2012, Town Council authorized the Town Manager to enter into an agreement with LGS
Recreation to provide interim executive director services. Regina Falkner, Deputy Town Manager, has
assumed the interim position for a three to eight month period. LGS Recreation is fully reimbursing the
Town for salary and benefits associated with this position.
A second interim management assignment is expected beginning July 1, 2012. Following the retirement
of the current Library Director on June 30, 2012, the two Library Managers will assume interim co-
management responsibility for a period up to six months. This will provide an opportunity to assess the
options for ongoing management and staffing of the new library.
In both cases, salary savings will be used to backfill services as needed and to conduct analysis related
to reorganization opportunities as has been the practice associated with other interim assignments.
Donation Opportunities - FY 2012/13 List of Town Needs
As part of the budget development process, the Donation and Solicitation Policy List of Town Needs is
updated to reflect goods, services, and other contributions that would help enhance
Town services, programs, and events. The attached FY 2012 /13list (Attachment 4) has been updated to
include new specific donation opportunities for the library, including digital services, collections, and
children's and teen's programs. Inclusion of these items on the donation list provides an opportunity for
the Friends of the Library to target funds to meet these expanding needs at the library. Funding for
capital improvements needed for re- purposing the former library space has also been added to the list.
PAGE 11
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
Management and Non - Management Salary Actions
The FY 2012/13 proposed operating budget does not include a cost of living increase for employees,
with the exception of sworn police personnel in the POA bargaining group. The POA is scheduled to
receive the last scheduled salary increase of 2% last effective January 1, 2013,
costing approximately $75,152 per year. FY 2012/13 will be the fifth year in a row with no cost of
living increase for management staff, while the non -sworn bargaining groups each received one increase
during this period and sworn staff has received increases ranging from 2% to 4% per year. The long
term management pay freeze is leading to compaction with hourly employees, particularly in the Police
Department, with police sergeants often earning more than their supervisors. Per Council direction at
the January 2012 retreat, further analysis of this issue will need to occur during the next year.
One of the adjustments proposed in the FY 2012/13 budget is a reduction of $200,000 in staff costs
achieved through five days of non -sworn workforce furloughs in FY 2012/13. The unpaid furloughs for
most employees would occur in connection with a Town closure over the winter holidays, on Veteran's
Day, and on a "floating furlough day" to be determined with supervisors' approval. All non -sworn
staff, including management, would be subject to the furloughs and a 2% loss of pay. For certain
operations (i.e., dispatch, library and parks), an equivalent reduction in pay will be achieved through
individually- scheduled unpaid furlough hours.
Potential Mid -Year Budget Issues
Street Sweeping Funding
The West Valley Solid Waste JPA recently approved a variety of rate increases will go into effect on
July 1, 2012. The total rate increase will be approximately 6.3 %. The most significant portion of this
(approximately 3.5 %) comes as a result of a recalibration of actual expenses by the garbage hauler.
However, also included is a 1.64% increase which is expected to generate approximately $135,000
annually. This will be used to fund the Town's Street Sweeping program. The street sweeping funding
shift has been a topic of discussion of interest in the past and was identified as a priority for follow up at
Council's retreat in January of this year.
Since these fee rate increases were approved relatively late in the current fiscal year, this issue could not
be thoroughly analyzed as part of the FY 2012/13 budget process. Staff will monitor the rate at which
this newly proposed revenue will be accumulated in the first part of the fiscal year and then formalize
the changes as part of the mid -year budget review. If the revenue comes in as expected, staff will shift
the Town's Street Sweeping Program expenses to the new Solid Waste funding source. This will then
free up resources (storm sewer revenue) to better address the requirements of the non -point source
program, and provide relief to the general fund in the amount of approximately $60,000 annually.
PAGE 12
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
Police Department Fundine
Prior years' budget reductions recommended by the Police Department included reduced funding for
training and overtime. These reductions are proving difficult to sustain, and the Police Department may
request at mid -year to allocate salary savings generated through the receipt of a Domestic Violence grant
to these needs on a one -time basis. Also, as noted in the proposed budget, the department is exploring
alternative shift and staffing structures to best manage department operations, which will be reported to
Council during the next fiscal year.
State Budget Impacts
The May Revised Governor's budget was released May 14. Staff reviewed the Governor's budget and
did not identify any immediate potential impacts to the Town's budget that were not expected. Staff will
continue to monitor State actions for future impacts to the budget.
FY 2012 -2017 Capital Improvement Program
The FY 2012 -2017 Capital Improvement Program will also be presented at the May 21 Town Council
meeting. The five -year plan sets forth the schedule for street- related, parks and public
facility projects to be completed during this period. Only the first year of the plan is formally adopted
with funds appropriated by the Town Council as part of the budget process.
The CIP transmittal letter includes a summary of the significant projects recommended for FY 2012/12.
Of those significant projects, staff would like to highlight the following:
Street Program Projects:
• Blossom Hill Road street improvements, including roadway widening and sidewalk, bicycle
lane, and crosswalk construction between Cherry Blossom and Camino del Cerro.
• Highway 9/University Avenue intersection traffic system improvements, including dedicated left
turn lanes, new traffic signal and sidewalks, and ADA improvements.
• Wedgewood Avenue street improvements, including the construction of sidewalks, a stone drain
system, and new landscaping.
• Almond Grove Street Rehabilitation Project, including the design and first phase of
reconstruction of neighborhood streets after funding has been allocated.
• Installation of a new traffic signal at University and Lark avenues and ADA accessible
crosswalks.
• University Avenue Resurfacing project, including base repairs, storm drain improvements,
sidewalk and retaining wall construction, and street resurfacing from Shelboume Way north to
the Vasona Dam.
Parks Projects:
• Completion of Pageant Grounds.
• Completion of the new Los Gatos Creekside Sports Park.
• Construction of a new, ADA compliant pathway and bicycle trail at Live Oak Manor Park.
PAGE 13
MAYOR AND TOWN COUNCIL
SUBJECT: OPERATING AND CAPITAL BUDGETS
MAY 16, 2012
Public Facilities Projects:
• Completion of LEED certification for the new Library.
• Conceptual design and improvements for planned reuse of the former Library space at the Civic
Center.
Budget Presentation
At the May 21, 2012 Town Council meeting, the Council will consider the proposed Operating and
Capital Improvement Program budgets. The review and discussion of the proposed budgets will occur
following the format outlined below:
• Opening Comments
• Operating Budget Overview
• Operating Budget Highlights
• Capital Budget Overview
• Public Comment
• Council direction
Town Manager
Finance Director
Assistant Finance/Budget Director
Parks & Public Works Director
Public
Town Council
Departmental staff will be available to respond to specific Council questions. Any changes to the
proposed operating and/or capital budget directed by Council and/or identified by staff as a "clean-up"
item will be included for Council consideration in the resolution formally adopting the budget to be
considered by Council on June 4, 2012.
ENVIRONMENTAL ASSESSMENT
Is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT
The fiscal impact is presented in summary form in the Financial Summaries chapter of the Proposed
Operating and Capital Budget for FY 2011/12.
Attachments:
1. FY 2012/13 Proposed Operating and Capital Budget (Previously Submitted)
2. FY 2012 — 2017 Proposed Capital Improvement Program Budget (Previously Submitted)
3. Budget Adjustment Alternatives
4. FY 2012/13 List of Town Needs
THIS PAGE
INTENTIONALLY
LEFT BLANK
FY 2012/13 Budget Adjustments
Department
Tier 1
Amount
ADM
Internal Service Fund Reductions
$43,000
Non - Departmental Expenditure Reductions
$43,300
Eliminate Staff Technician
$83,100
PPW
Transfer Engineering and Inspection Expenditures $100,000
PD
Eliminate Vacant Police Officer Position
$226,000
Consolidation of Personnel /Community Services
$143,000
TOWN -WIDE
Implement Furloughs
$200,000
Tier 1 Subtotal $838,400
ADJUSTMENTS
Increased Use of PERS "Holiday" Fund
$100,000
Transfer from Workers Compensation Fund
$100,000
Proposed Cost Recovery Fee Increases (Pending Council Consideration) $50,000
Adjustment Subtotal $250,000
Total Tier 1 Reductions and Adjustments $1,088,400
Under Staff Review
Department Tier 1 Amount
TOWN -WIDE
Sell /Lease Town -owned Property $200,000
Reduce Retiree Medicare Age $100,000
FY 2012/13 Budget Alternatives
ADM
CDD
PPW
PD
T1" Budget /HR Staffing Reductions $100,000
Elimination of Building Inspector Position; reduced code enforcement $105,000
Reduce Administrative Support $90,000
Eliminate Community Service Officer Position $105,000
TOWN -WIDE
T1- Impact Fees $100,000
Tier 2 Subtotal $500,000
-TI: Tier 1 Reduction not Implemented as part of Proposed FY 12/13 Budget
ATTACHMENT 3
TOWN OF LOS GATOS DONATION OPPORTUNITIES
FY 2012/13 LIST OF TOWN NEEDS
To ensure that all donations and contributions are sought and accepted in an
ethical manner, the Council established a Donation and Solicitation Policy. A list
of Town needs was developed to identify goods, services, and other
contributions to enhance Town services, programs, and events. The
recommended needs for FY 2012/13 are:
PUBLIC SAFETY
• Volunteer Program Materials and Equipment
• Specialized Public Safety Equipment and Supplies, including Support for
Canine Program
• Training Support for Public Safety Staff and Volunteers
• Equipment for New Police Operations Headquarters
• Community Outreach Program Supplies
LIBRARY SERVICES
• Children, Youth, and Adult Program Collections, Supplies and Services
- Teen Room Librarian to Support Year - Around or Summer
Programming
• Library Book and Audio/Visual Collections
• Funding to Support Technological Enhancements, including Digital
Services
• Equipment and Services to Support Historical Preservation Efforts
• Funding to Support Public Art for the New Library
• Resource Support for Collection Development and Reference, Local
History, and Library Policy
SENIOR SERVICES
• Senior Program Supplies, Materials, and Services
• Cell Phone and other Telecommunications Equipment
COMMUNITY EVENTS
■ Supplies, Materials, and Services for Special Community and Volunteer
Events and Activities
TOWN PARKS AND FACILITIES
• Beautification Materials and Services for Town Parks, Open Space, and
Infrastructure
• Contributions Supporting Recreation or Expansion of Athletic Fields
• Contributions for the Re- Purposing of Former Library Space
SUSTAINABILITY
Contributions that would help minimize impacts on local, regional, and
global ecosystems through conservation, reduced pollution, increased
efficiency, efficiency, and protection of wildlife, vegetation, and other
ecosystems.
ATTACHMENT4
THIS PAGE
INTENTIONALLY
LEFT BLANK