Staff Report
PREPARED BY: STEPHEN CONWAY
FINANCE DIRECTOR
Reviewed by: Town Manager, Assistant Town Manager and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 05/15/2018
ITEM NO: 6
DATE: MAY 8, 2018
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) 2018/19
B. CONSIDER THE TOWN OF LOS GATOS PROPOSED CAPITAL
IMPROVEMENT PROGRAM FOR FY 2018/19 – FY 2022/23
RECOMMENDATION:
1. Consider the Town of Los Gatos Proposed Operating and Capital Budget for FY 2018/19
2. Consider the Town of Los Gatos Proposed Capital Improvement Program for FY 2018/19 –
FY 2022/23.
BACKGROUND:
The Proposed Operating and Capital Budget for FY 2018/19 (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 2018/19 – 2022/23 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 15, 2018 budget hearing will be incorporated into the
implementing documents to be presented for Council approval on June 5, 2018.
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SUBJECT: OPERATING AND CAPITAL BUDGETS
DATE: MAY 8, 2018
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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
proposed budgets. 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 , and its work with various Town Commissions on these assets.
In February 2018, the Town Council determined the Strategic Priorities for 2018-2020,
providing guidance to Town staff on workload prioritization. In addition, the Town Council
reaffirmed its Core Goals, including Community Character, Good Governance, Fiscal Stability,
Quality Public Infrastructure, Civic Enrichment, and Publ ic Safety (see page A-5 of the Proposed
Operating Budget, Attachment 1c).
The Proposed Budgets are based on the following principles:
Develop and recommend balanced budget maintaining services and prudent reserves,
Continue to make progress on Strategic Priorities identified by the Town Council, and
Identify opportunities to enhance service delivery through technology and open
government.
FY 2018/19 Operating Budget
The transmittal letter in the Proposed FY 2018/19 Operating Budget provides an overview of
the Town’s fiscal prudence to date followed by 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 1c). Reflecting the continuation of a positive economy, the
FY 2018/19 budget is balanced and a modest surplus is also anticipated in FY 2019/2020.
However, the remainder of the five-year financial forecast projects limited surpluses with very
little room for growth in service delivery.
The Proposed FY 2018/19 Operating Budget includes the Council’s direction from the February
2018 Strategic Priorities session. Specifically, the Town identified a desire to maintain a focus
on ongoing strategic commitments including; address ing the Town’s unfunded pension and
other post-employment benefits (OPEB) obligations, developing Measure B transportation
projects, fostering emergency preparedness, and participating in regional communication
infrastructure. The Proposed Budget also includes investments toward future equipment
replacement and increased capacity for the Town’s burgeoning technology infrastructure.
Taken together, the FY 2018/19 budget proposes to maintain existing service levels and provide
for minimal staffing changes.
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DISCUSSION (cont’d):
As in most municipalities, the majority of services are provided directly by employees to the
Town’s residents, businesses, and visitors. These key services reflect the Town Council’s Core
Goals and include public safety, Town infrastructure (such as streets and parks), library,
community development, and other items. As a result of being a service industry, the costs of
salaries and benefits account for 40.5% of the Town’s total expenditures. The FY 2018/2019
proposed budget does not include any increases in salaries since negotiations with the Town’s
unions are pending. The Town’s proactive approach to reducing operating expenditures,
identifying revenue enhancements, and implementing operating efficiencies continues to be an
effective fiscal approach.
FY 2018/19 – FY 2022/23 Capital Improvement Program
The FY 2018/19 – FY 2022/23 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 2a, beginning on page A-1) provides a summary of the program
including funding sources, recently completed projects, and the proposed projects for FY
2018/19. 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 February 2018 Strategic Priorities discussion, the Town Council affirmed its interest
in completing the remaining reconstruction of the Almond Grove streets, investing in bicycle
and pedestrian improvements, and improving the condition of the Town’s streets. In addition,
the Council identified new projects which include preparing a comprehensive parking plan,
exploring transportation demand management (TDM) ideas (such as the prospect of a
community shuttle), and piloting one-way streets in downtown to alleviate congestion. These
projects as well as others, such as annual street maintenance, are recommended as part of the
CIP. The Proposed CIP for FY 2018/2019 includes a total budget of $28.4 million of new and
carry-forward funding.
Donation Opportunities - FY 2018/19 List of Town Needs
As part of the budget development process, the List of Town Needs is updated per Town
Council Donation Policy to reflect goods, services, and other contributions that would help
enhance Town services, programs, and events (see Attachment 3).
Budget Hearing and Next Steps
At its May 15, 2018 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
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DISCUSSION (cont’d):
Program Budgets. Any changes to the Proposed Operating and/or Capital Budgets directed by
Council or identified by staff (such as “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 2018/19. The total proposed budget is $67.5
million, an increase of $9.2 million from the FY 2017/18 Adopted Budget.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachments:
1. FY 2018/19 Proposed Operating and Capital Budget (Previously Submitted)
2. FY 2018/19 – FY 2022/23 Proposed Capital Improvement Program Budget (Previously
Submitted)
3. Town of Los Gatos Donation Opportunities: FY 2018/19 List of Town Needs