Loading...
2011051614 - Proposed Operating and Capital Budget�o�N of MEETING DATE: 05 -16 -11 ITEM NO: f toss= Gp.� ,COUNCIL /AGENCY AGENDA REPORT DATE: MAY 11, 2010 TO: MAYOR AND TOWN COUNCIL/ CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY FROM: GREG LARSON, TOWN MANAGER/EXECUTIVE DIRECTOR SUBJECT: OPERATING AND CAPITAL BUDGETS A. CONSIDER THE TOWN OF LOS GATOS PROPOSED OPERATING AND CAPITAL BUDGET FOR FISCAL YEAR 2011 -2012 B. CONSIDER THE TOWN OF LOS GATOS PROPOSED CAPITAL IMPROVEMENT PROGRAM FOR FISCAL YEAR 2011 -2016 C. ADOPT GENERAL FUND RESERVE POLICY D. AUTHORIZE THE TOWN MANAGER TO ENTER INTO DISCUSSIONS WITH THE AGENTS FOR THE FORMER BORDERS SPACE, LOS GATOS CINEMA, AND LOS GATOS HIGH SCHOOL REGARDING POTENTIAL COMMUNITY USE OF FACILITIES FOR PERFORMING ARTS E. ADOPT RESOLUTION AMENDING THE COMMUNITY SERVICES COMMISSION ENABLING RESOLUTION AND RESCINDING RESOLUTION 2009 -101 TO CHANGE THE NAME OF THE COMMISSION TO THE COMMUNITY AND SENIOR SERVICES COMMISSION 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 hnprovement Program for Fiscal Year 2011 -2016 3. Adopt General Fund Reserve Policy 4. Authorize the Town Manager to enter into discussions with the agents for the former Borders space, Los Gatos Cinema, and Los Gatos High School regarding potential community use of facilities for performing arts 5. Adopt resolution amending the Community Services Commission enabling resolution and rescinding resolution 2009 -101 to change the name of the Commission to the Community and Senior Services Commission PREPARED BY : PAMELA JACOBS L€i ASSISTANT TOWN MANAGER Reviewed by: Assistant Town Manager/D pty Director Q Town Attorney /General Counsel Clerk Administrator /Secretor l Finance ( _Community Development PAGE 2 MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 BACKGROUND The Proposed Operating and Capital Budget for FY 2011/12 (Attaclunent 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 2011 -2016 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. An Y changes to the proposed operating and /or capital budgets directed by Council at the May 16" budget hearing will be incorporated in the implementing documents to be presented for Council approval on June 6, 2011. DISCUSSION Overview of Proposed Operating and Capital Budgets The transmittal letter in the FY 2011/12 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 2011/12; • a summary of the proposed Capital Improvement Program; and, • information regarding the budget presentation to be made on May 16, 2011 The slow recovery of the unprecedented economic recession continues to impact the Town's revenues, leading to projections of modest growth in the Town's two largest revenue sources: property taxes and sales taxes. Projections for other revenue sources, including Transient Occupancy Tax, license and permits, and private development fees, are either flat or show declines. These revenue impacts, combined with significant increases in salaries and benefits, require adjustments in the Town budget totaling $1.3 million, after eliminating a previously planned $800,000 increase to the Town reserves. The remaining $1.3 million shortfall represents approximately 5% of the General Fund Operating budget. PAGE 3 MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 Fortunately, the Town's past conservative financial practices and prompt action in response to the economic crisis have positioned the Town relatively well to address the budget shortfall projected for FY 2011/12. Unlike some other local jurisdictions, the Town is not requiring layoffs or significant public service reductions next year. The outlook for the following year and beyond remains guarded, however, as discussed later in this report. Due to continued reductions in staffing levels through attrition, the Town will be 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. Limited 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 -term 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 every year for the foreseeable future. These future reductions will likely directly impact Town residents, visitors, and businesses in significant ways. The inevitable loss of Netflix sales tax revenue and potential infrastructure failure (e.g., retaining wall failure) will only exacerbate these difficulties in the years ahead. 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 the new Library, the Los Gatos Creekside Sports Park, the N. 40 Specific Plan, and significant street projects. These will all contribute to Los Gatos' high quality of life. Recommended Budget Balancing Actions The proposed operating budget incorporates reductions in staffing and other expenses and revenue enhancements totaling approximately $1.3 million, sufficient to balance the FY 2011/12 budget after eliminating a previously planned $800,000 increase to the Town reserves. Recommended budget balancing actions include: • staffing, salary and benefit reductions for a cost savings of approximately $800,000; • reductions in operating expenses for a cost savings of approximately $425,000, and; • fund transfers, cost recovery fee increases, and other revenue totaling approximately $120,000. While the majority of the budget balancing actions will result in ongoing cost savings and ongoing revenue enhancements, approximately $180,000 of the net savings are one -time or PAGE MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 temporary adjustments. One -time savings do not help to correct the structural imbalance between ongoing revenues and expenditures, and thus, do not contribute to a long -term fiscal solution. 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 in February, 2011 to incorporate the FY 2011/12 proposed budget changes. The information presented in the forecast on page 5 includes conservative estimates of revenues, based on generally slow growth for FY 2011/12, with growth rates of I to 3% for most major revenue categories in FY's 2012 /13 through 2016/17. The forecast continues to set aside as portion of Netflix revenues for future capital and one -time projects. However, the updated forecast also includes an assumption of rapidly 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 2011/12 proposed budget and carries these forward in future years. The five -year forecast assumes no employee COLA increases or furlough savings, with the exception of FY 2011/12, which includes a 4% salary increase for police officers on July 1, 2011. Beginning in FY 2011/12, the forecast reflects significant increases in PERS employer contribution rates (rising from 34% to 39% for sworn police staff and from 14% to 19 % for non -sworn staff) to fund substantial investment losses sustained in FY 2008/09. The Financial Plan reviewed by Council in early 2011 projected a deficit of approximately $2.1 million for FY 2011/12. The proposed FY 2011/12 budget now projects a balanced budget, eliminating the projected deficit due to staffing and salary reductions and revenue enhancements, and suspending a previously planned $800,000 increase to the Town reserves. A deficit of approximately $1.1 million was previously projected for FY 2012/13, but is now anticipated to be $1.8 million as a result of lowered revenue expectations from Netflix. Balancing the FY 2012/13 budget will likely include the potential for strategic use of reserves set aside for economic downturns, accelerated use of PERS deposits set aside for PERS rate increases, and may also include layoffs and service reductions unless a more robust economic turnaround occurs and /or there are significant reductions in ongoing retirement and benefit costs. The forecast continues to reflect future ongoing challenges with deficits projected to reach a combined total of nearly $7 million through the five year period ending FY 2016/17. 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. PAGE 5 MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 10- May -11 Town of Los Gatos General Fund Updated Five -Year Financial Plan FY 1 FY 2 FY 3 4100 Property Tax $ 7.5 S 7.5 $ 7.7 $ 7.8 $ 8.0 $ 8.2 ,. . _._ 4110 VLF Backfll Proyerty 2.4 2.4 2.4 2.4 2.5 2.5 4200 Sales & Use Tax 9.4 9.1 8.6 8.3 7.9 7.8 4250 Francluse Fees 1.7 1.7 1.7 1.8 1.8 1.9 4251 Tr ansient Occupancy Tax, 0.9 0.9 1.0 1.0 1.0 1.0 4400 Business License Tax 1.1 1.1 1.1 1.1 1.1 1.1 4400 Licenses & Permits 2.0 2.0 2.1 2.1 2.2 2.2 4500 Intergovernmental 0.7 0.7 0.7 0.7 0.7 0.7 4600 Charge for Sernces 2.5 2.4 2.5 2.5 2.6 2.6 _ 4700 Fines & Forfeitures 0.6 0.6 0.7 0.7 0.7 0.7 4800 Interes 0.7 0.7 0.7 0.7 0.8 0.8 4850 Odrer Sources 3.5 3.5 3.5 3.6 3.7 3.8 4900 Fund Transfers In 0.4 0.4 0,2 0.2 0.1 0.1 TOTAL REVENUES 33.4 1 33.2 32.9 33.0 32.8 33.4 Use of Reserves/Deposits 3.6 0.7 0.8 0.8 0.8 0.1 TOTAL REVENU$$ & = $ 37.0 $ 33.9 $ 33.6 $ 33.8 $ 33.6 $ 33.5 = 2011/12 201263 2413/14 ' 20L4115 2.415/16 K ,,3016/17' _ _ Account, -� Eap'endilurc'CBtegorl _� = Butlg31 F_tir_ecasf_ Boiecast Poiecast "_ForecnsY E6recasf _ 51 Salary, _ .__ _ $ 13.0 $ 13.2 $ 13.2 $ 13.2 $ 13.2 $ 13.2 5120 Elected Officials 0.0 0.0 0.0 0.0 0.0 0.0 5130 TemporaryEmployees - 0.6 0.4 0.4 0.4 0.4 0.4 5140 Overiitne 0.4 0.4 0.4 0.4 0.4 0.5 5170 Other Salary _.., 0.4 0.3 0.3 0.3 0.3 0.3 .,_ 5200 Benefits 6.4 6.7 7.3 7.6 7.9 8.1 6000 Supplies, Matennls, & Services _ 5.3 5.6 5.8 5.9 6.0 6.2 7200 Grants & Awards 0.2 0.2 0.2 0.2 0.2 0.2 7400 UOlilies 0.4 0.4 0.5 0.5 0.5 0.5 770D Fixed Assets _ - - 9900 Operating Transfers Out - - - - - 8060 Internal Service Charges_ _ _ . 3.1 0.7 3.5 0.8 3.6 0.1 3.6 1.1 3.7 1.6 3.9 8900 Debt Service 1.8 2.1 36.2 2.2 36.3 2.2 37.3 2.0 - 2.0 2.0 TOTAL EXPENDITURES S 31.8 $ 33.0 $ 33.9 $ 34.2 $ 34.7 $ 35.2 cTn'I'Ar EXPENIliT11RES &AtTclOA '. �' $ 37.0 $ 35.7 $ 36.7 $ 37.2 $ 37.5 $ 37.2 9900 Transfer to RDA Take Reserve 9900 Operating Transfers Out - - - - - 9900 Capital Transfers Out to GFAR 3.3 0.7 0.8 0.8 0.8 0.1 9900 GASB 45 Retiree Medical Actuarial 1.1 1.4 1.6 1.8 1.8 1.8 TOTAL BUDGETED EXPENDITURES 36.2 35.1 36.3 36.8 37.3 37.1 9900 Legally Rerfuved Reserve Allocation 9900 Transfer to Capital& Special Project Reserve 0.8 0.6 0.5 0.3 0.2 0.1 9900 T ransfer to Stabiliaat Reserve cTn'I'Ar EXPENIliT11RES &AtTclOA '. �' $ 37.0 $ 35.7 $ 36.7 $ 37.2 $ 37.5 $ 37.2 S PAGE 6 MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 Issues for Consideration Following are several issues addressed in or raised by the proposed budget. They are highlighted here because they maybe of special interest to Council. Oreanizational Restruc The proposed FY 2011/12 budget includes several recommended actions to improve operational efficiencies and /or to reduce costs. The most significant restructuring is proposed for the Community Services Department (CSD), Administrative Services Department (ASD) and Town Offices. With last year's successful transition of the management of senior services and the Adult Recreation Center to LGS Recreation, and the transfer of affordable housing - related programs to the Community Development Department (CDD), the opportunity arises to realign the remaining services of CSD with other programs. The proposed restructuring eliminates the CSD, reassigns the Director to Deputy Town Manager in the Town Manager's Office, eliminates the Administrative Analyst, Volunteer Coordinator and Administrative Secretary positions, and reallocates two of the positions to other positions in the ASD (Staff Technician) and the Parks and Public Works Department (Environmental Services Coordinator). Further restructuring consolidates customer service in the Town Manager's Office and combines clerk functions with a reclassified Deputy Town Attorney position in the Town Attorney's Office. These restructuring actions create operational efficiencies and enhance services. In addition, they create capacity to reallocate an existing management employee to a new position as Community Outreach Coordinator focusing on Council's strategic goals relating to community outreach and emergency preparedness. The Community Outreach Coordinator will be funded in the non - departmental program, and will report to the Personnel and Community Services Sergeant in charge of the Town's emergency preparedness efforts, with oversight by the Town Manager. Single position restructuring is also proposed in the Police Department and the Parks and Public Works Department (PPW) to better align positions with work demands and to reduce costs. In Police, an extra sergeant position resulting from the move to four 12 -hour shifts in Patrol will be eliminated when a vacancy occurs in early 2012. In PPW, a tree trimmer position will be eliminated and the work will be absorbed with increased reliance on contractual services. The incumbent will be transferred to an existing vacant maintenance worker position. Management and Non - Management Salary Actions The FY 2011/12 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 a 4% salary increase effective July 1, 2011 costing approximately $200,000 per year. FY 2011/12 will be the fourth year in a row with no cost of living increase PAGE 7 MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 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. One of the adjustments proposed in the FY 2011/12 budget is a reduction of $340,000 in staff costs (1.9% of payroll) achieved through five days of workforce furloughs in FY 2011/12. 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 staff, including management, would be subject to the furloughs and the loss of pay. For certain operations (i.e., police patrol, dispatch, library and parks), an equivalent reduction in pay will be achieved through individually- scheduled unpaid furlough hours. In the case of sworn employees, an alternative approach to achieving a 1.9% reduction is being explored. Reserve Policy and One -Time Use of Reserves Per Council direction at the 2011 Council Retreat, staff has developed a proposed Reserve Policy (Attachment 3) addressing the targeted minimurn level of designated reserves in the General Fund and the guidelines for use of the reserves. The Finance Committee, consisting of Vice Mayor Steve Rice and Council member Diane McNutt (substituting for Council member Barbara Spector who was unavailable for Committee meetings at this time), has reviewed the proposed policy and is recommending its approval to the Town Council. Currently, the Town exceeds the overall minimum requirement called for in the proposed Reserve Policy. Given the expected need to use reserves in response to the anticipated decline of Netflix sales tax revenues, the only alternative presented for Council consideration at this time is to use $65,000 of reserves to keep Sunday hours at the Library. In addition, staff is considering shorter library hours on Wednesday mornings with the opening of the new Library to minimize parking conflicts with the Adult Recreation Center, but this is not anticipated to generate any budget savings. Support of Non - Profits The Town's proposed operating budget includes continued support of local non- profits through nearly $130,000 in direct grant funds. The Town also provides in -kind donations through subsidized leases to three agencies: A Place for Teens, 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): PAGE 8 MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 The Venue /A Place for Teens 3,260 sq ft $ 97,799 LGS Recreation Headquarters 6,479 sq ft $178,693 Tait & Forbes Mill Museums 5,160 sq ft $151,799 In addition to the above, beginning in January 2010, Los Gatos Saratoga Recreation (LGS) entered into a lease with the Town for the Neighborhood Center, renamed the Adult Recreation Center (ARC). In exchange for providing and expanding senior services, the facility is leased to LGS at below market rate. The net estimated value of this in -kind donation is approximately $254,000. Staff will be negotiating a lease extension with LGS for their headquarters facility at 123 Main St. Staff has prepared an amendment to the lease agreement with the Los Gatos Museum Association (LGMA), extending the contract one year to end June 30, 2012 with the same terms. The one -year amendment allows LGMA to complete its recently initiated strategic planning process. During next fiscal year, staff w411 negotiate a new lease agreement with LGMA representatives. It is anticipated that a new lease agreement will be presented to the LGMA Board and Council for approval in Spring 2012. In FY 2008 /09, the Town appropriated $88,000 for the purpose of stabilizing and strengthening A Place for Teens, the non - profit agency that operates a teen center in a Town -owned facility. The grant dollars have been completely drawn -down and will be used to provide services through February 2012 when the current lease expires. Staff has become aware of a potential opportunity to work with non - profit entities and the private sector toward a long -term community desire for a performing arts venue. While this opportunity is indeterminate at this time, staff is seeking Council authorization to explore it with agents representing several facilities in Town, including the former Borders space, Los Gatos Cinema, and Los Gatos High School. Staff will come to Council in Closed Session for negotiating parameters should an actual opportunity develop. Staff is currently negotiating the annual agreement with the Los Gatos Chamber of Commerce. The agreement provides funding for the Leadership Los Gatos program, which is managed by the Chamber, and for the Town Information Center, which operates out of Chamber offices. Scheduled to open its new office in June, the Chamber will be located in a more central downtown location that is likely to attract more visitors. The Chamber has requested a 10% increase in the contract amount for the Information Center to cover costs associated with the Center being open some weekend hours to meet the needs of visitors. Staff recommends approval of a $2,000 increase, subject to the Center being open some weekend hours. One grant request not included in the proposed budget is from the Santa Clara Family Health Foundation. As Council is aware, a representative for that organization appeared before Council at the meeting forwarding the Community Services Commission and Arts and Culture PAGE 9 MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 Commission recommendations. The organization had requested a significantly larger grant of $20,640; the Community Services Commission recommended a grant of $1,110. In its report, the Commission stated: "The Commission recommends General Fund funding in the amount of $1,110 for the Santa Clara Family Health Foundation, which requested CDBG funds. Our local representative for the U.S: Department of Housing and Urban Development (HUD), which administers the CDBG program, has stated that ongoing insurance premiums, for which the Santa Clara Family Health Foundation is requesting funding, may not be paid for with CDBG funds. General Fund grants do not have this restriction. This agency has applied for funding before, and the Commission would like to show its support of its work." Santa Clara Family Health Foundation was not the only agency to receive less than the amount requested; 17 agencies submitted applications totaling $155,813 for $118,464 in available hrunan services and arts grant funding. Staff does not recommend increasing the grant to the Santa Clara Family Health Foundation or other non -profit organizations at this time due to forecasted ongoing fiscal challenges. Senior Services Although LOS Recreation has taken the lead role in providing services to our senior and adult community, the Town still has a keen interest and active role in assuring that seniors' needs are met. The following are some of the actions staff has taken to assure that the Town organization is well informed of senior issues and needs, and is poised to appropriately influence and /or adopt policies, as appropriate: management staff attends monthly LOS Recreation Board meetings; the Community Services Commission receives regular reports from the LOS Recreation Supervisor who oversees senior programs; staff attends Senior Consortium meetings when warranted. To underscore the Community Service Commission's role as Council's advisory body on senior issues, staff recommends that the Commission name be changed to "Community and Senior Services Commission." The revised enabling resolution making this change is included as Attachment 4. Town Council Expense Allocation In December, 2010, the Town Council adopted a Town Council and Board Member Expense Reimbursement Policy consistent with the requirements of AB 1234 and clarifying the types of activities that are authorized for reimbursement. Pursuant to a request from the Policy Committee, staff recorrnnended that the question of allocation of the Council's budget for meetings, events, training and travel be addressed as part of the annual budget process. The issue to be considered was how to allocate the Council's budget to ensure sufficient funding for full- Council events, activities associated with official appointments, and equitable access for authorized individual Council activities. PAGE 10 MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 Although staff anticipated being able to recommend specific allocations for each of these categories, the data available does not allow staff to specifically estimate the amounts required for official full Council and individual appointment purposes, which must be determined prior to allocating the remaining funds for individual activities. Staff proposes to set up an internal accounting process to track the costs over the course of next fiscal year to more accurately estimate the amounts required for particular purposes, and thus inform a recommendation for the following year's allocation. In the meantime, staff recommends that a small allocation of $300 be earmarked for each Council member to attend individual activities throughout the year. This would be separate from expenses incurred related to official appointments or to official Council purposes. The $1,500 total allocation for individual activities is not likely to jeopardize funding available for official activities. Should an individual Council member expend his /her allocation and request additional funds, it is suggested that the Mayor and Manager discuss the current status of funds available and determine whether additional funds can be allocated. Given that the Council's budget for these activities has not been fully spent in at least the past decade, it is anticipated that this approach should work until a more comprehensive allocation approach can be, developed. Donation Opportunities - FY 2011/12 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 2011 /12 list (Attachment 5) has been updated to include public art contributions and contributions that support public safety - related programs and events. In addition, the list has been modified to reflect that donations related to senior services are best directed to LGS. State Budget Impacts The May Revised Governor's budget is expected to be released on May 16"'. Staff -Aril] monitor state actions to identify any potential impacts to the Town's budget, and apprise Council through a Desk Item on May 16` if possible. FY 2011 -2016 Capital Improvement Program The FY 2011 -2016 Capital Improvement Program will also be presented at the May 16 °i 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. PAGE I1 MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 The CIP transmittal letter includes a summary of the significant projects recommended for FY 2011/12. 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. • Highway 91University Avenue 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, bicycle lanes, and a storm drain system. • AImond Grove Street Rehabilitation Project, including the design and multi -year reconstruction of neighborhood streets. • Installation of a new traffic signal at University and Lark avenues. Parks Projects: • Implementation of Phase 2 of the Pageant Grounds Access Improvement Project, enhancing pedestrian access to the park area from the new Library. • Construction of the new Los Gatos Creekside Sports Park, beginning in winter 2011/12. • Construction of a new, ADA compliant pathway at Live Oak Manor Park. Public Facilities Projects.: • Completion of the new Library, including approximately 9 million of carry forward funds. • Conceptual design and planned reuse of the existing Library space at the Civic Center. Budget Presentation At the May 16, 2011 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 6, 2011. PAGE 12 MAYOR AND TOWN COUNCIL /CHAIR AND MEMBERS OF THE REDEVELOPMENT . AGENCY SUBJECT: OPERATING AND CAPITAL BUDGETS May 11, 2011 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 2011/12 Proposed Operating and Capital Budget (Previously Submitted) 2. FY 2011 — 2016 Proposed Capital Improvement Program Budget (Previously Submitted) 3. Proposed General Fund Reserve Policy 4. Resolution amending the Community Services Commission enabling resolution and rescinding resolution 2009 -101 5. FY 2011/12 List of Town Needs GENERAL FUND RESERVE POLICY BACKGROUND: General Fund reserves are classified into two categories: Restricted and Designated. Restricted reserves are those which are not considered available due to financial, accounting, or legal restrictions. Designated reserves are established by Council policy for an intended purpose and are available for use per Council direction. GUIDING PRINCIPLES: Following sound financial practices and adhering to the Government Finance Officers' of American (GFOA) recommendations, the Town's designated reserves include reserves for known and unknown contingencies, which take into consideration the: • Diversity of revenue base • Cyclical nature of revenue • Changes in community priorities • Frequency of budget surpluses /deficits • Cash flow management practices POLICY PURPOSE: The purpose of this policy is to establish a target minimum level of designated reserves in the General Fund to: • Reduce the risk of financial impacts resulting from a natural disasters or other catastrophic events; • Respond to the challenges of a changing economic environment, including prolonged downturns in the local, state, or national economy; and • Demonstrate continued prudent fiscal management and creditworthiness. POLICY: Reserve Levels The Town currently sets aside funds into three designated reserves to address unforeseen emergencies or disasters, significant changes in the economic environment, and key infrastructure and capital projects. These include the Catastrophic Reserve, Budget Stabilization Reserve, and Capital and Special Projects Reserve. ATTACHMENT The Town commits to maintaining these reserves at a minimum of 25% of General Fund annual operating expenditures (minus one -time expenditures), equally divided between the Catastrophic Reserve (12.5 %) and Budget Stabilization Reserve (12.5 %), excluding the Capital and Special Projects Reserve. The General Fund Reserve Policy is reviewed by the Town Council as part of the annual operating budget review and adoption process. Appropriations of any General Fund reserves require formal Council authorization. Should a catastrophic disaster or loss of a significant source of the Town's sales tax revenue occur, the required reserve level should be adequate to meet the Town's immediate financial needs. For example, in the event of natural disaster, the Catastrophic Reserve would provide necessary coverage for basic operating expenses for approximately 60 days, including salary and benefits for safety and non - safety Town employees, while still meeting debt service obligations. This time frame would enable the Town to explore other available cash alternatives, including the use of internal service funds. Likewise, should the Town experience a loss of a primary sales tax contributor, the reserve level in the Budget Stabilization Fund would provide for a 3 year transition period, giving the Town adequate time to realign its operating costs with available resources, while minimizing service impacts. Key General Fund Designated Reserves Catastrophic Reserve. Funds reserved under this category shall be used to mitigate costs associated with unforeseen emergencies, including natural disasters or catastrophic events. Should unforeseen and unavoidable events occur that require the expenditure of Town resources beyond those provided for in the annual budget, the Town Manager or designee, shall have authority to approve Catastrophic Reserve appropriations. The Town Manager or designee shall then present to the Town Council a budget amendment confirming the nature of the emergency and authorizing the appropriation of reserve funds. Budget Stabilization Reserve. Funds reserved under this category shall be used to mitigate, should they occur, annual budget revenue shortfalls (actual revenues less than projected revenues) due to changes in the economic environment and /or one -time expenditures that will result in future efficiencies and /or budgetary savings. Examples of "economic triggers" and one -time uses include, but are not limited to: • Significant decrease in property or sales tax, or other economically sensitive revenues; • Loss of businesses considered to be significant sales tax generators; • Reductions in revenue due to actions by the state /federal government; • Workflow /technical system improvements to reduce ongoing, personnel costs and enhance customer service; One -time maintenance of service levels due to significant economic /budget constraints; and One -time transitional costs associated with organizational restructuring to secure long- term personnel cost savings. Capital and Special Projects Reserve. Funds reserved under this category are designated for key infrastructure and capital /special projects as identified in the Town 5 -year Capital Improvement Plan, as there is no ongoing funding source to support the Town's capital needs. Replenishment of Unreserved Fund Balance In keeping with the principles discussed in this policy, when either fund is used, Town Council will develop a 1 to 5 year reserve replenishment plan to meet the minimum threshold of 25% of General Fund ongoing, operating expenditures, excluding one -time expenditures. Excess Fund Balance At the end of each fiscal year, the Finance and Administrative Services Department reports on the audited year -end budgetary fiscal results. Should actual General Fund revenues exceed expenditures and encumbrances, a year -end operating surplus shall be reported. Any year -end surplus which results in the General Fund fund balance exceeding the level required by the reserve policy shall be available for allocation for the following, subject to Council approval: • Offset projected future deficits • Anticipated intergovernmental fiscal impacts • One -time funding, non - recurring needs Upon funding of the above, any remaining surplus balances shall be divided equally between the Budget Stabilization Reserve and Capital and Special Projects Reserve for appropriation within the Capital Improvement Program budget. THIS PAGE INTENTIONALLY LEFT BLANK COMMUNITY AND SENIOR SERVICES COMMISSION RESOLUTION RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS AMENDING THE COMMUNITY SERVICES COMMISSION ENABLING RESOLUTION AND RESCINDING RESOLUTION 2009 -101 RESOLVED by the Town Council of the Town of Los Gatos, that the Town Council does hereby establish the terms and conditions for appointment to and conduct of the Community and Senior Services Commission. The Commission is advisory to the Town Council and operates in the manner hereinafter prescribed. Membership - Organization a. The Community and Senior Services Commission consists of nine (9) voting members. Seven (7) are members over eighteen (18) years of age. Their terms of office are three (3) years and until their successors are appointed. Two (2) members of the Commission shall, at the time of their appointment, have completed the ninth (9` grade, shall be students enrolled in an accredited school, and shall be no more than eighteen (18) years old. Their terms of office are one (1) year and until their successors are appointed. The Commission's membership shall, to the extent possible, reflect the social and economic diversity of the Los Gatos community. The members' terms of office are staggered and overlapped so that the terms of no more than three (3) of the adult members expire each year. The Town Council shall fill any vacancies occurring during the term of the Commission. The Community Services Commission shall appoint and prescribe the tern of office for its Chair and Vice - Chair. b. Five (5) voting members of the Commission shall constitute a quorum for the purpose of transacting business. Any member shall have the right to present a minority view to the Town Council in reference to any report or recommendation the Commission makes. c. Commission members shall serve without compensation, provided that, with advance budgetary approval of the Town Council, the actual and necessary expenses (if any) incurred by the members in the conduct of Town business shall be reimbursable pursuant to the provisions of the current Administrative Policy. d. The Commission shall establish a regular time and location for its meetings and shall otherwise call and conduct its meetings in compliance with the provisions of the Ralph M. Brown Act (Government Code Sections 54950 and following). e. A record of all minutes and resolutions of the Commission shall be kept and shall be a public record. ATTACHMENT4 f Residency and meeting attendance requirements will conform with current Town n °°ns Policies. 2. Duties and Functions a. The function of the Commission shall be to serve in an advisory capacity to the Town Council regarding Town policies within its scope of expertise; specifically, on the housing and human service needs of the community. With the prior approval of, and /or at the direction of, the Town Council or its delegate, the Commission shall receive public input, evaluate options, and make recommendations on policy issues including, but not limited to, the following: 1. The goals and objectives contained in the Human Service Element of the Town's General Plan; and 2. The coordination of senior and other community services programs between the Town and other agencies, both public and private; and 3. Emerging community needs, including demographic and economic trends. b. The Commission shall make recommendations to Town Council concerning projects to be included in funding applications under the Housing and Community Development Act of 1974 and perform the duties necessitated by the Act upon the request of Town Council. c. In developing recommendations to the Town Council, the Commission should: 1. Elicit the interest and support of various relevant community individuals and groups. 2. Evaluate the effectiveness of existing programs and make constructive suggestions for improvement. 3. Examine ways to minimize and/or eliminate overlapping and duplicative services. d. The Commission may send representatives, when appropriate, to other bodies or corrunissions. e. The Commission shall perform other duties as assigned by the Town Council. BE IT FURTHER RESOLVED that Resolution 2009 -101 is hereby rescinded. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the 16th day of May, 2011, by the following vote: 2 • 1\ 1_ U_ _ 111: : _ AYES: NAYS: ABSENT: ABSTAIN: SIGNED: MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA ATTEST: CLERK ADMINISTRATOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA THIS PACE INTENTIONALLY LEFT BLANK TOWN OF LOS GATOS DONATION OPPORTUNITIES FY 2011112 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 is developed annually to identify goods, services, and other contributions to enhance Town services, programs, and events. The recommended needs for FY 2011/12 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 Police facilities • Community Outreach program supplies • Support of events, ceremonies, and programs LIBRARY SERVICES • Children, youth, and adult program materials, supplies and services • Library book and audio /visual collections • Funding to support technological enhancements • Equipment and services to support historical preservation efforts • Funding to support furniture, fixtures, equipment and public art for the new Library SENIOR SERVICES (May be directed to Los Gatos - Saratoga Recreation) • Senior Program supplies, materials, and services COMMUNITY EVENTS AND PUBLIC ART • Supplies, materials, and services for special community and volunteer events and activities • Public art as a loan or gift for pre - selected sites. TOWN PARKS AND FACILITIES • Materials and services for Town parks, open space, and infrastructure • Contributions that support recreation or expansion of athletic fields 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. ATTACHMENT 5 THIS PAGE INTENTIONALLY DEFT BLANK