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.
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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.
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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
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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
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