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Staff Report MEETING DATE: 05/17/16 5 ITEM NO : COUNCIL AGENDA REPORT DATE: MAY 12, 2016 TO: MAYOR AND TOWN COUNCIL FROM: LAUREL PREVETTI, TOWN MANAGER SUBJECT: OPERATING AND CAPITAL BUDGETS A.CONSIDER THE TOWN OF LOS GATOS PROPOSED OPERATING AND CAPITAL BUDGET FOR FISCAL YEAR (FY) 2016/17 B.CONSIDER THE TOWN OF LOS GATOS PROPOSED CAPITAL IMPROVEMENT PROGRAM FOR FISCAL YEARS 2016-2021 RECOMMENDATIONS: 1.Consider the Town of Los Gatos Proposed Operating and Capital Budget for FY 2016/17 2.Consider the Town of Los Gatos Proposed Capital Improvement Program for FYs 2016-2021 BACKGROUND: The Proposed Operating and Capital Budget for FY 2016/17 (Attachment 1, previously distributed) is the Town Manager’s recommended comprehensive financial plan to provide services to the Town of Los Gatos and address the priorities set by the Town Council. The Proposed FY 2016-2021 Capital Improvement Program (Attachment 2, previously distributed) is a five-year capital improvement plan which identifies 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 17, 2016 budget hearing will be incorporated into the implementing documents to be presented for Council approval on June 7, 2016. DISCUSSION: Both budget documents were prepared with contributions from all Town Departments. Of particular note, the Finance Department took the lead in developing revenue and expenditure forecasts, ensuring that the most current information was used in the preparation of the documents. In addition, the Department of Parks and Public Works provided guidance on the development of the Capital Budget based on its familiarity with the Town’s facilities, equipment, and infrastructure. In September 2015, the Town Council reaffirmed its Core Goals (community character, good governance, fiscal stability, quality public infrastructure, civic enrichment, and public safety), and Reviewed by: Assistant Town Manager Town Attorney Finance S:\COUNCIL REPORTS\2016\05-17-16\Budget & CIP\Staff Report - Budget FINAL.docx PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: OPERATING AND CAPITAL BUDGETS MAY 17, 2016 DISCUSSION (Cont’d): established the 2015-17 Strategic Priorities (see page A-11 of the proposed Operating Budget, Attachment 1). The Proposed Budgets are based on the following principles: 1.Develop and recommend balanced budget maintaining services and prudent reserves, 2.Continue to make progress on Strategic Priorities identified by the Town Council; and 3.Identify opportunities to enhance service delivery through technology and open government. FY 2016/17 Operating Budget The transmittal letter in the FY 2016/17 Proposed Operating Budget provides an executive summary of the budget, including the fiscal outlook, key budget assumptions, and proposed adjustments to the operating budget (beginning on page A-1, Attachment 1). The Town continues to focus on priority issues that involve maintaining public safety and Town infrastructure including streets and parks; and providing library, community development, and other services. Those services are coordinated with other Core Goals that protect the Town’s fiscal health and ensure cost efficient and effective delivery of Town-wide administrative services. The Town’s proactive approach to reducing operating expenditures, identifying revenue enhancements, and implementing operating efficiencies has been an effective fiscal approach. Reflecting the positive economy, the FY 2016/17 budget is balanced and the five-year financial forecast projects limited surpluses in the next five years. As in most municipalities, services are provided directly by employees to the Town’s residents, businesses, and visitors. As a result, the costs of salaries and benefits account for 34.6% of the Town’s total expenditures. The Proposed Operating Budget does not include any potential results from the labor negotiations that are currently underway with two of the Town’s three bargaining groups and the negotiations that are about to start with the third union. The FY 2016/17 Proposed Budget includes funding the Town’s reserves, anticipated employee benefit cost increases, retiree healthcare and pension payments, and other anticipated expenses. For these reasons, the FY 2016/17 budget proposes to maintain service levels and provide for minimal staffing changes. FY 2016-20 Capital Improvement Program The FY 2016-2020 Capital Improvement Program (CIP) sets forth a five year plan for proposed street-related, parks, and public facility projects. The transmittal letter contained in the CIP (see Attachment 2, beginning on page A-1) provides a summary of the program including funding sources, completed projects, and the proposed projects for FY 2016/17. Only the first year of the plan is formally adopted with funds appropriated by the Town Council as part of the budget process. During the September 2015 Strategic Priorities discussion, the Town Council identified several capital budget priorities, including Almond Grove Street rehabilitation project funding, downtown parking, traffic and parking around the schools, and other initiatives. These priorities are reflected in the proposed CIP. The proposed five year plan includes the full funding for the Almond Grove streets to enable a bid of the remaining eight streets in early 2017. PAGE 3 MAYOR AND TOWN COUNCIL SUBJECT: OPERATING AND CAPITAL BUDGETS MAY 17, 2016 DISCUSSION (Cont’d): Several additional items are not included at this time because two efforts are underway to inform specific projects. One effort is the completion of the Traffic and Parking around Schools Study and the other is the preparation of the Bicycle and Pedestrian Master Plan. We look forward to completing this work for Council consideration and bringing forward specific improvements in future budget discussions. Budget Discussion At its May 17, 2016 meeting, the Council will have an opportunity to listen to public testimony, ask questions, and direct changes to the Proposed Operating and/or Capital Improvement Program Budgets. Any changes to the Proposed Operating and/or Capital Budgets directed by Council or identified by staff as a “clean-up” items will be included for Council consideration in the resolution formally adopting the Budgets to be considered by Council in June. COORDINATION: The preparation of the budget documents involved the participation of all Town Departments. FISCAL IMPACT: The fiscal impact is presented in summary form in the Financial Summaries chapter of the Proposed Operating and Capital Budget for FY 2016/17. ENVIRONMENTAL ASSESSMENT: Is not a project defined under CEQA, and no further action is required. Attachments: 1.FY 2016/17 Proposed Operating and Capital Budget (Previously Submitted) 2.FY 2016-2020 Proposed Capital Improvement Program Budget (Previously Submitted)