Los Gatos City Council
February 20, 2024

PAGE 14 OF 22
SUBJECT: Five-Year Forecast (FY 2024/25 – 2028/29)
DATE: February 9, 2024
DISCUSSION (continued):

The following table illustrates Business License FY 2022/23 actuals, the FY 2022/23 Adjusted Budget, and FY 2023/24 year-end collection estimates.

For purposes of the Forecast, the “Base Case” utilizes a growth factor as illustrated above and the “Greater Growth” and “Lower Growth” scenarios utilize a 2% differential from the Base Case.

Business License
Staff is asking Finance Commission to select which option to recommend for inclusion in the forecast.

Staff recommendation is Option B highlighted in orange.

Garbage Franchise Fee
Franchise fees are collected by the Town for the privilege of operating a utility service within Los Gatos, and as a fee in lieu of a business license tax. Franchise fees are currently received from Comcast for cable television, PG&E for gas and electric services, West Valley Collection and Recycling for solid waste collection services, and AT&T and Comcast for video services.

Franchise fees represent 6% of projected General Fund revenues in FY 2023/24.

FY 20232/23 Actual FY 2023/24
Adjusted Budget
FY 2023/24 Year-end
Estimate
Business License Tax $2.36 M $2.44 M $2.43 M
2023/24 2024/25 2025/26 2026/27 2027/28
Forecast Forecast Forecast Forecast Forecast
Proposed Growth 3% 3% 3% 3% 3%
Estimated Revenues $2.5 M $2.6 M $2.7 M $2.7 M $2.8 M
Business License Tax
2023/24
Forecast
2024/25
Forecast
2025/26
Forecast
2026/27
Forecast
2027/28
Forecast
($M) ($M) ($M) ($M) ($M)
Option A - Lower Growth 1% $2.45 $2.48 $2.50 $2.53 $2.55 Option B - Base Case 3% $2.50 $2.58 $2.65 $2.73 $2.82
Option C- Greater Growth 4% $2.53 $2.63 $2.73 $2.84 $2.96 Business License Tax

PAGE 15 OF 22
SUBJECT: Five-Year Forecast (FY 2024/25 – 2028/29)
DATE: February 9, 2024
DISCUSSION (continued):

As the Town previously disclosed in the FY 2021/22 Annual Comprehensive Financial Report (ACFR), the California Supreme Court recently issued an opinion in a case challenging the franchise fees that the City of Oakland charges to certain waste hauling companies. In Zolly v.

City of Oakland, the court concluded that it did not have enough evidence to rule as a matter of law that the fees are exempt from the voter approval requirements that apply to taxes under Proposition 26, Article XIII C of the California Constitution.

However, there are several exceptions to the general rule that a tax must be approved by the voters. One exception (Article IIIC, section 1 (e)(1)) is for “a charge imposed for a specific benefit conferred or privileged granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege.”
Town anticipated the impact starting on March 1, 2024 when the new garbage hauler contract goes into effect and reduced the Adopted Budget accordingly. The Town has a seat on the Board of the West Valley Solid Waste Management Authority (WVSWMA), a Joint Powers Authority (JPA) that manages the solid waste contracts. The West Valley Solid Waste Management Authority recently completed Franchise Valuation Study indicates that prior level of proceeds will be restored. Staff is recommending $1,097,703 increase in garbage franchise fee collection to restore the prior year levels of proceeds, and a $94,530 increase in PG&E Franchise Fee collection.

The following table illustrates Franchise Fee FY 2022/23 actuals, the FY 2022/23 Adjusted Budget, and FY 2023/24 year-end collection estimates.

For purposes of the Forecast, the “Base Case” utilizes a growth factor as illustrated above and the “Greater Growth” and “Lower Growth” scenarios utilize a 2% differential from the Base Case.

FY 20232/23 Actual FY 2023/24
Adjusted Budget
FY 2023/24 Year-end
Estimate
Franchise Fees $3.07 M $2.12 M $3.31 M
2023/24 2024/25 2025/26 2026/27 2027/28
Forecast Forecast Forecast Forecast Forecast
Proposed Growth 3% 3% 3% 3% 3%
Estimated Revenues $3.4 M $3.5 M $3.6 M $3.7 M $3.8 M
Franchise Fees

PAGE 16 OF 22
SUBJECT: Five-Year Forecast (FY 2024/25 – 2028/29)
DATE: February 9, 2024
DISCUSSION (continued):

Franchise Fees:

Staff is asking Finance Commission to select which option to recommend for inclusion in the forecast.

Staff recommendation is Option B highlighted in orange.

Operating Expense Trends and Five-Year Forecast Scenarios Forecasts of future operating expenditures take into account two key factors: cost escalation and new operating expenditures. New operating expenditures refer to costs created by new or enhanced service programs approved during the annual budget process. Attachment 4 contains the expenditure assumptions.

Cost escalation refers to largely unavoidable increases in the cost of doing business. It includes inflation, multi-year contract costs, health care costs, and unfunded State mandates. Cost escalation also includes other unavoidable cost increases unique to a government organization, such as a rise in wages consistent with collective bargaining agreements and annual pension payments mandated by CalPERS. The Town has three bargaining units, including the Town Employees’ Association (TEA), the American Federation of State, County and Municipal Employees (AFSCME), and the Police Officers’ Association (POA). The unrepresented groups are Management and Confidential.

For FY 2023/24, General Fund Estimated Operating expenditures (not including debt payment and transfers out) are $51.6 million. The delivery of Town services is highly dependent on talent which comprises 67.4% of estimated General Fund expenditures. Given the high dependence on labor for service delivery, the Town has helped manage salary escalation (and benefits) through the maintenance of lower staffing levels.

Mandated pension payments to CalPERS has consistently been one of the major cost drivers for the Town over the past decade with persistent unanticipated increases in pension costs. The Town’s plans over the past several decades, like all other CalPERS participants, have 2023/24
Forecast
2024/25
Forecast
2025/26
Forecast
2026/27
Forecast
2027/28
Forecast
($M) ($M) ($M) ($M) ($M)
Option A - Lower Growth 1% $3.34 $3.38 $3.41 $3.44 $3.48 Option B - Base Case 3% $3.41 $3.51 $3.62 $3.72 $3.84
Option C- Greater Growth 4% $3.44 $3.58 $3.72 $3.87 $4.03 Franchise Fees

PAGE 17 OF 22
SUBJECT: Five-Year Forecast (FY 2024/25 – 2028/29)
DATE: February 9, 2024
DISCUSSION (continued):
experienced unfavorable investment returns, changes in actuarial assumptions, and demographic changes which have outweighed any positive plan experiences. The outcome of these unfavorable economic and demographic results is the development of unfunded pension and Other Post-Employment Benefit (OPEB) obligations for the Town. To address the escalation in pension costs, previous Councils have allocated additional discretionary pension funding. totaling $10.4 million. These additional discretionary payments will ultimately yield an approximate additional $12.7 million in contribution savings.

The Town and its bargaining groups have also worked to contain benefit costs. The Town closed the CalPERS retiree Tier 1 benefit for non-safety employees and created a new Tier 2 for nonsafety new employees in 2012, implemented the Public Employees’ Pension Reform Act (PEPRA) for all new non-classic employees starting in 2013, and participates in the CalPERS discounted prepayment option.

In addition to the management of the Town’s pension obligations, prior Councils and the Town’s bargaining groups have worked to curb cost escalation in OPEB. In 2009, the Town initiated prefunding of the retiree healthcare benefit and has since established approximately $23.4 million in OPEB assets (as of 9/31/2023) from zero in 2009. In 2016, the Town’s bargaining groups approved the introduction of dependent cost sharing and a reimbursement cap to Medicare eligible employees, and in 2018 the elimination of the Town's existing retiree healthcare benefit prospectively.

While these collective measures have helped to slow the growth in salary and benefit expenses, the Forecast anticipates continued increases in the Town’s pension obligations.

Provided below are the expense assumptions for salary and benefits and alternate case scenarios for pension contributions. The majority of other expenses are assumed to increase at 3% per annum. Detailed expenditure assumptions and factors can be found in Attachment 4.

Salary and Benefits
Salary
The Town has historically budgeted vacant and non-sworn positions at top step of the range for the position. Sworn and management positions are budgeted at one step higher of current step in anticipation of any merit increases expected to be awarded in the upcoming fiscal year.

Based on Council’s direction for FY 2021/22, salaries were budgeted at actual salary plus a one step increase, which was a significant budgeting methodology change from previous practice.

In addition, the FY 2023/24 budget built in a 4.6% vacancy factor. These methodologies will be continued for the development of FY 2024/25 budget unless modified by the Town Council.

PAGE 18 OF 22
SUBJECT: Five-Year Forecast (FY 2024/25 – 2028/29)
DATE: February 9, 2024
DISCUSSION (continued):

For the Forecast, positions are budgeted at the actual rate of pay of employees including benefits as of January 2023. Then, by position, salary costs are updated in accordance with the applicable Memorandum of Understanding (MOU) between the Town and its bargaining units.

The Memoranda of Understanding that outline the individual agreements between the Town and each unit related to compensation, health benefits, leave time, and grievance procedures will expire with TEA and AFSCME on June 30, 2024. POA’s MOU will expire on September 30, 2024. The Management and Confidential groups are unrepresented.

In addition to the economic terms of the MOUs, the Forecast assumes step increases for employees in applicable positions, and merit increases for Management and Confidential employees. In addition, based on prior Council guidance, 2% cost of living wage adjustments (COLA) are included in the Forecast for each year starting in 2024/25 and a 4.6% vacancy factor.

Pension and Other Benefits
For purposes of the Forecast, staff utilizes estimates provided by each plan’s most recent actuarial valuation received from CalPERS. The employer contribution rates reflect percentages of covered payroll. Rates shown for FY 2023/24 are actual rates as prescribed by CalPERS.

Forecasted rates for FY 2024/25 and subsequent years are based on the most recent CalPERS Actuarial Valuation Reports as adjusted by the impact related to the FY 2022/23 CalPERS actual investment return and forecasted payroll.

Beginning in FY 2021/22, the estimates of employer contributions were credited with an anticipated reductions associated with the approximate $4.8 million additional discretionary payment (ADP) toward the 2016 unfunded amortization base paid off in October 2019 and the total of approximately $5.8 million in ADPs toward unfunded 2013 and 2015 amortization bases that were paid off in FY 2020/21. Other Benefits includes health insurance, life insurance and workers’ compensation insurance premium. The forecast models a $500,000 increase in the Premium Townwide in FY 2024/25 with a 3% growth in the out years to properly recover the cost of the program.

Salaries
(2%)
2024/25
Forecast
2025/26
Forecast
2026/27
Forecast
2027/28
Forecast
2028/29
Forecast
($M) ($M) ($M) ($M) ($M)
Base Case $23.10 $23.62 $24.09 $24.63 $25.17
Pension
Benefits
2024/25
Forecast
2025/26
Forecast
2026/27
Forecast
2027/28
Forecast
2028/29
Forecast
($M) ($M) ($M) ($M) ($M)
Base Case $8.98 $9.15 $9.72 $10.32 $11.22

PAGE 19 OF 22
SUBJECT: Five-Year Forecast (FY 2024/25 – 2028/29)
DATE: February 9, 2024
DISCUSSION (continued):

Given that investment returns have one of the largest impacts on contribution variability, CalPERS provides projected employer Unfunded Actuarial Liability (UAL) contributions under alternate investment returns. Analysis using the investment return scenarios from the Asset Liability Management process completed in 2021 was performed to determine the effects of various future investment returns on required employer contributions.

The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The projected normal cost rates reflect that the rates are anticipated to decline over time as new employees are hired into lower-cost benefit tiers. The projections also assume that all other actuarial assumptions will be realized and that no further changes in assumptions, contributions, benefits, or funding will occur. The table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8% annually. These alternate investment returns were chosen because 90% of long-term average returns are expected to fall between these levels over the 20-year period ending June 30, 2041.

CalPERS Actuarial Valuations as of June 30, 2022.

For the year ending June 30, 2023, the Public Employees Retirement Fund (PERF) returned

6.1%. The table below illustrates the historic investment returns for five years, ten years, twenty years, and thirty years.

Workers’ Compensation and Liability Self Insurance Internal Service Charges Workers’ Compensation Fund and Joint Powers Authority Pooled Liability Network (PLAN) SelfInsurance Fund finance and account for workers’ compensation and general liability services for the entire Town.

Other Benefits 2024/25
Forecast
2025/26
Forecast
2026/27
Forecast
2027/28
Forecast
2028/29
Forecast
($M) ($M) ($M) ($M) ($M)
Base Case $5.59 $5.78 $5.97 $6.18 $6.39
UAL Town Contributions
(Misc & Safety)
2025/26
Forecast
2026/27
Forecast
2026/27
Forecast
2027/28
Forecast
2028/29
Forecast
Greater Investment Return Scenario (10.8%) $5,492,000 $5,650,000 $5,540,000 $5,469,000 $1,453,000 Base Investment Return Case (3.0%) $5,797,000 $6,564,000 $7,381,000 $8,580,000 $9,526,000 CalPERS Compound Annual Rates of Return
(as of June 30, 2022) 5 Years 10 Years 20 Years 30 Years Compound Annual Return 8.30% 7.10% 8.50% 8.60%

PAGE 20 OF 22
SUBJECT: Five-Year Forecast (FY 2024/25 – 2028/29)
DATE: February 9, 2024
DISCUSSION (continued):

Increased premium rates and increased claim activities require the Town to increase its Liability Internal Service charges to increase by $450,000 or 58% percent to assure cost recovery. Staff recommends increasing the internal service rate by $500,000 or 45% percent to assure cost recovery in the Workers’ Compensation Internal Service Fund. Staff incorporated this increase starting FY 2024/25 in the forecast.

Staff recommends including the increase in the Forecast; however, the Finance Commission can select not to include the rate increase to the Forecast. One-time General Fund transfers will be required at year end if the fund balance is trending negative.

Five-Year Financial Forecast Alternative Scenarios
The tables below present the “Base Case” forecast contrasted against the two alternative revenue scenarios of “Greater Growth” and “Lower Growth.” All scenario includes a 4.6% salary saving factor. The fourth scenario presents the predicted results without workers’ compensation and self-insurance rate increase. As illustrated in the tables, even modest changes to the “Base Case” forecast can result in either additional surpluses or deficits during the forecast period.

Alternatice Scenario
Other Benefits
Without Workers' Comp
Rate Increase
2024/25
Forecast
2025/26
Forecast
2026/27
Forecast
2027/28
Forecast
2028/29
Forecast
($M) ($M) ($M) ($M) ($M)
$5.09 $5.28 $5.47 $5.68 $5.89
Alternatice Scenario
Internal Service Charges
Without General Liability
Rate Increase
2024/25
Forecast
2025/26
Forecast
2026/27
Forecast
2027/28
Forecast
2028/29
Forecast
($M) ($M) ($M) ($M) ($M)
$3.59 $3.76 $3.94 $4.11 $4.28
5 Year Forecast
"Base Case"
with 4.6% Vacancy Factor
2024/25
Forecast
($M)
2025/26
Forecast
($M)
2026/27
Forecast
($M)
2027/28
Forecast
($M)
2028/29
Forecast
($M)
Total Revenues &
Transfers and Use of
Reserves
$54.5 $56.3 $58.1 $59.6 $61.4
Total Expenditures &
Reserve Allocations $56.8 $58.1 $60.1 $61.7 $63.8
Surplus/Deficit ($2.3) ($1.8) ($2.0) ($2.1) ($2.4)

PAGE 21 OF 22
SUBJECT: Five-Year Forecast (FY 2024/25 – 2028/29)
DATE: February 9, 2024
DISCUSSION (continued):

CONCLUSION:

The Finance Commission should review and discuss the elements and select the assumptions of the initial Five-Year Forecast and other budget considerations. The “Base Case” Forecast estimates deficits at this time. Staff looks forward to answering the Finance Commission questions and receiving any recommendations for Council consideration for the preparation of the proposed FY 2024/25 Operating Budget that results from the discussion.

Alternative Scenario
"Greater Growth"
with 4.6% Vacancy Factor
2024/25
Forecast
($M)
2025/26
Forecast
($M)
2026/27
Forecast
($M)
2027/28
Forecast
($M)
2028/29
Forecast
($M)
Total Revenues &
Transfers and Use of
Reserves
$55.5 $57.5 $59.6 $61.8 $64.2
Total Expenditures &
Reserve Allocations $56.8 $58.1 $60.1 $61.7 $63.8
Surplus/Deficit ($1.3) ($0.6) ($0.5) $0.1 $0.4
Alternative Scenario
"Lower Growth"
with 4.6% Vacancy Factor
2024/25
Forecast
($M)
2025/26
Forecast
($M)
2026/27
Forecast
($M)
2027/28
Forecast
($M)
2028/29
Forecast
($M)
Total Revenues &
Transfers and Use of
Reserves
$53.1 $54.4 $55.7 $57.1 $58.5
Total Expenditures &
Reserve Allocations $56.8 $58.1 $60.1 $61.7 $63.8
Surplus/Deficit ($3.7) ($3.7) ($4.4) ($4.6) ($5.3)
Alternative Scenario
"Base Case"
with 4.6% Vacancy Factor
Without Workers Comp and
General Liability Rate
Increase
2024/25
Forecast
($M)
2025/26
Forecast
($M)
2026/27
Forecast
($M)
2027/28
Forecast
($M)
2028/29
Forecast
($M)
Total Revenues &
Transfers and Use of Reserves $54.5 $56.3 $58.1 $59.6 $61.4 Total Expenditures &
Reserve Allocations $55.9 $57.1 $59.1 $60.7 $62.7
Surplus/Deficit ($1.3) ($0.8) ($1.0) ($1.1) ($1.3)

PAGE 22 OF 22
SUBJECT: Five-Year Forecast (FY 2024/25 – 2028/29)
DATE: February 9, 2024
CONCLUSION (continued):

The preparation of the FY 2024/25 Operating and Capital Budgets is taking into account the Town’s current economic reality and long term fiscal picture, as well as maintaining the Town’s high level of municipal services. This is considered a “status quo” approach with no major new initiatives or staffing. Key budget principles include:
• Develop and recommend a balanced budget that maintains service levels; • Address projected deficits;
• Continue to make progress on Strategic Priorities identified by the Town Council; and • Identify opportunities to maintain or enhance service delivery through new revenue sources and technology.

The Capital Improvement Program and direction will be discussed separately at the March meeting. The Finance Commission may also discuss budget assumptions. The Draft FY 2024/25 Operating and Capital Budgets will be available in April for the Finance Commission elaboration with the budget hearing tentatively scheduled for May 21, 2024.

COORDINATION:

This Report was prepared by the Finance Department and the Town Manager’s Office.

ENVIRONMENTAL ASSESSMENT:

This is not a project defined under CEQA, and no further action is required.

Attachments:

1. Annual Budget Process

2. Base Case Five-Year Forecast

3. Forecast Revenue Assumptions

4. Forecast Expense Assumptions

5. Additional Information on ERAF

6. Additional Sales Tax Context from MuniServices

7. Commissioner Comments

December
January
February
May
June
July
December
Prior FY
(2022/23)
June 30, 2023 ACFR finalized and
presented for Council approval.

ACFR surpluses assigned per the
Council Reserve Policy as of June 30,
2023
Council deliberates Strategic
Priorities and Budget direction for FY
2024/25.

Review of Five-year Forecast and
assumptions.

Council determines if previously
assigned surpluses should be
reallocated for FY 2024/25.

Council adoption of the FY 2024/25
Operating & Capital Budgets End of June 30, 2024 ACFR period June 30, 2024 ACFR finalized and
presented for Council approval.

ACFR surpluses assigned per the Council
Reserve Policy as of June 30, 2024
ATTACHMENT 1
All Council deliberations and actions include opportunities for public input Current FY
(2023/24)
Next FY
(2024/25)
Start of new FY 2024/25 Operating
Budget year
Council considers Mid-Year Budget
adjustments through 12/31/2023 for
FY 2023/24 Budget.
͌
Public hearing on FY 2024/25
Operating & Capital Budgets

Finance Commission review and
comment on Proposed FY 2024/25
Operating & Capital Budgets.

April

December
January
February
May
June
July
December
Prior FY
(2022/23)
June 30, 2023 ACFR finalized and
presented for Council approval.

ACFR surpluses assigned per the
Council Reserve Policy as of June 30,
2023
Council deliberates Strategic
Priorities and Budget direction for FY
2024/25.

Review of Five-year Forecast and
assumptions.

Council determines if previously
assigned surpluses should be
reallocated for FY 2024/25.

Council adoption of the FY 2024/25
Operating & Capital Budgets End of June 30, 2024 ACFR period June 30, 2024 ACFR finalized and
presented for Council approval.

ACFR surpluses assigned per the Council
Reserve Policy as of June 30, 2024
ATTACHMENT 1
All Council deliberations and actions include opportunities for public input Current FY
(2023/24)
Next FY
(2024/25)
Start of new FY 2024/25 Operating
Budget year
Council considers Mid-Year Budget
adjustments through 12/31/2023 for
FY 2023/24 Budget.
͌
͌
Public hearing on FY 2024/25
Operating & Capital Budgets

Finance Commission review and
comment on Proposed FY 2024/25
Operating & Capital Budgets.

April

ATTACHMENT 2
General Fund 5-Year Forecast - Base Case
(in $ million)
Revenue Category FY 2022/23
Actuals
FY 2023/24
Adjusted
Budget
FY 2023/24
Estimates
FY 2024/25
Forecast
FY 2025/26
Forecast
FY 2026/27
Forecast
FY 2027/28
Forecast
FY 2028/29
Forecast
Property Tax $ 18.2 $ 18.6 $ 19.0 $ 18.6 $ 19.5 $ 20.4 $ 21.3 $ 22.3 VLF Backfill Property Tax 4.6 4.7 4.9 4.9 5.2 5.4 5.7 6.0 Sales & Use Tax 7.5 7.9 7.0 7.0 7.2 7.2 7.3 7.5
Measure G District Sales Tax 1.3 1.3 1.2 1.3 1.3 1.4 1.4 1.4 Franchise Fees 3.1 2.1 3.3 3.4 3.5 3.6 3.7 3.8
Transient Occupancy Tax 2.2 2.4 2.3 2.3 2.4 2.5 2.5 2.6 Business License Tax 2.4 2.4 2.4 2.5 2.6 2.7 2.7 2.8
Licenses & Permits 3.3 2.9 3.3 2.9 3.0 3.1 3.2 3.3
Intergovernmental 1.6 1.2 1.4 0.9 0.9 1.0 0.9 0.9
Town Services 4.6 4.4 5.1 4.2 4.3 4.4 4.5 4.6
Fines & Forfeitures 0.4 0.2 0.4 0.4 0.4 0.4 0.4 0.4
Interest 0.6 1.0 1.6 1.7 1.6 1.5 1.4 1.3
Other Sources 8.1 3.9 4.1 3.1 3.1 3.2 3.3 3.2
Fund Transfers In 0.5 0.5 0.6 0.5 0.5 0.5 0.5 0.5
$ 58.4 $ 53.5 $ 56.6 $ 53.7 $ 55.5 $ 57.3 $ 58.8 $ 60.6 Use of Capital/Special Projects Reserve 2.4 2.1 0.8 0.8 0.8 0.8 0.8 0.8 Use of Pension/OPEB Reserve 0.3 - 0.3 - - - - -
Use of Council Priorites - Economic Recovery - 1.6 1.5 - - - - - $ 61.1 $ 57.2 $ 59.2 $ 54.5 $ 56.3 $ 58.1 $ 59.6 $ 61.4 Expenditure Category FY 2022/23
Actuals
FY 2023/24
Adjusted
Budget
FY 2023/24
Estimates
FY 2024/25
Forecast
FY 2025/26
Forecast
FY 2026/27
Forecast
FY 2027/28
Forecast
FY 2028/29
Forecast
Salary $ 20.4 21.3 21.5 23.2 23.7 24.2 24.8 25.3
Overtime 1.4 0.6 1.2 0.6 0.6 0.6 0.6 0.6
CalPERS Benefits 7.1 8.2 7.3 9.0 9.1 9.7 10.3 11.2
All Other Benefits 3.8 4.7 4.2 5.6 5.8 6.0 6.2 6.4

4.6% Salary and Benefits Savings - - - (1.8) (1.8) (1.9) (1.9) (2.0) OPEB Pay as You Go 1.5 1.6 1.6 1.8 1.9 2.0 2.0 2.0
Operating Expenditures 11.7 10.0 10.9 8.7 8.8 9.2 9.4 9.7 Grants & Awards 0.6 0.9 0.9 0.4 0.3 0.3 0.3 0.3
Utilities 0.6 0.6 0.7 0.7 0.7 0.8 0.8 0.8
Internal Service Charges 2.6 3.4 3.3 4.0 4.2 4.4 4.6 4.8 Debt Service 2.0 2.1 2.1 2.1 2.1 2.1 2.1 2.1
$ 51.8 $ 53.4 $ 53.8 $ 54.2 $ 55.5 $ 57.5 $ 59.1 $ 61.2 Additional Discretionary Payment - Pension 0.7 0.4 0.7 0.4 0.4 0.4 0.4 0.4 $ 52.5 $ 53.8 $ 54.5 $ 54.6 $ 55.9 $ 57.9 $ 59.5 $ 61.6 Capital Transfers Out to GFAR 2.4 1.6 1.6 1.1 1.1 1.1 1.1 1.1 Allocate ERAF Risk Reserve 0.7 0.7 0.8 - - - - -
Allocate to Pension Trust 0.7 0.4 0.7 0.4 0.4 0.4 0.4 0.4 $ 56.2 $ 57.2 $ 57.5 $ 56.8 $ 58.1 $ 60.1 $ 61.7 $ 63.8 $ 4.9 $ - $ 1.7 $ (2.3) $ (1.8) $ (2.0) $ (2.1) $ (2.4) * Due to rounding of individual categories FY 2022/23 Actual total revenues, and FY 2023/24 Estimated total expenditures includes $0.1 million.

NET REVENUES , TRANSFERS IN, USE OF RESERVES

LESS EXPENDITURES, TRANSFERS IN, AND RESERVE

ALLOCATIONS

TOTAL REVENUES, TRANSFERS, AND USE OF

RESERVES

TOTAL EXPENDITURES & RESERVE ALLOCATIONS
TOTAL OPERATING REVENUES & TRANSFERS*

TOTAL OPERATING EXPENDITURES

TOTAL OPERATING & DISCRETIONARY

Revenue Baselines and Projection Factors
ATTACHMENT 3
Type of
Revenue
FY 2023/24
Estimates
Baseline
FY 2024/25
Forecast
FY 2025/26
Forecast
FY 2026/27
Forecast
FY 2027/28
Forecast
FY 2028/29
Forecast
Property
Tax/VLF
Backfill
Current
baseline set by
SCC Assessor
Office February
2024 report

5.1% 5.1% 5.1% 5.1% 5.1%
Motor
Vehicle
License in
Lieu (VLF)
Current
baseline set by
SCC Assessor
Office February
2024 report

5.1% 5.1% 5.1% 5.1% 5.1%
ERAF
Current
baseline set
100% of SCC
Assessor Office
November
2023 report
Reserving 30%
to ERAF Risk
Reserve
$1.25 million $1.25 million $1.25 million $1.25 million $1.25 million Sales Tax
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
Sales Tax -
Measure G
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
MuniServices
January 2024
Most Likely
Estimates
Franchise Fee
Current
baseline set by
FY 2023/24
Estimates
3% 3% 3% 3% 3%
Transient
Occupancy
Tax
Current
baseline set by
FY 2023/24
Estimates
3% 3% 3% 3% 3%
Business
License Tax
Current
baseline set by
FY 2023/24
Estimates
2% 2% 2% 2% 2%
License &
Permits
Current
baseline set by
FY 2023/24
Estimates
3% 3% 3% 3% 3%

Revenue Baselines and Projection Factors
ATTACHMENT 3
Type of
Revenue
FY 2023/24
Estimates
Baseline
FY 2024/25
Forecast
FY 2025/26
Forecast
FY 2026/27
Forecast
FY 2027/28
Forecast
FY 2028/29
Forecast
Town
Services
Current
baseline set by
FY 2023/24
Estimates
3% 3% 3% 3% 3%
Fine &
Forfeitures
Current
baseline set by
FY 2023/24
Estimates
Varies Varies Varies Varies Varies
Interest
Current
baseline set by
FY 2023/24
Actuals
4% 4% 3% 3% 3%
Other Sources
Current
baseline set by
FY 2023/24
Estimates
Varies Varies Varies Varies Varies

ATTACHMENT 4

EXPENDITURE BASELINE AND PROJECTION FACTORS
Beginning in FY 2020/21, the Town started budgeting salaries at the actual salary plus a one-step increase. In the Five-Year Forecast, positions are forecasted at the actual rate of pay including salaries and benefits as of December 31, 2023. Beginning FY 2023/24 the total budget includes 4.6% vacancy factor. *Salary increases are based on actual step increases and approved Memoranda of Understanding with the bargaining units plus the Council’s assumption of 2% per year cost of living adjustment. ** Benefit increase estimates are provided by CalPERS/Public Employees’ Medical and Hospital Care Act (PEMHCA)
*** Based on historical trends.

Type of
Expenditure
FY 2023/24
Budget
FY 2024/25
Forecast
FY 2025/26
Forecast
FY 2026/27
Forecast
FY 2027/28
Forecast
FY 2024/25
Forecast
Salaries*(TEA,
Conf, Temp) 3% 2% 2% 2% 2% 2%
Salaries *(POA) 3% 2% 2% 2% 2% 2%
Salaries*(AFSCME) 3% 2% 2% 2% 2% 2%
Salaries *
(Management) 3% 2% 2% 2% 2% 2%
Benefit -
Medical** 7% 7% 7% 7% 7% 7%
Operating
Expenditures*** 3% 3% 3% 3% 3% 3%
Grants & Awards 0% 0% 0% 0% 0% 0%
Utilities*** Varies 3% 3% 3% 3% 3%
Workers Comp
Charges
Based on
projected
payroll
Additional
$0.5 M to the
base
3% 3% 3% 3%
General Liability
Charges
Based on
projected
payroll
Additional
$0.45 M to
the base
3% 3% 3% 3%
Other Internal
Service
Charges***
Based on
operating
cost and
scheduled
replacement
Based on
operating
cost and
scheduled
replacement
Based on
operating
cost and
scheduled
replacement
Based on
operating
cost and
scheduled
replacement
Based on
operating
cost and
scheduled
replacement
Based on
operating
cost and
scheduled
replacement
Debt Service Debt Service Schedules

ATTACHMENT 4
The Town’s required employer contribution rate estimates were developed using data provided by each plan’s most recent CalPERS actuarial valuation. The employer contribution rates reflect percentages of covered payroll. Rates shown for FY 2023/24 are actual rates as prescribed by CalPERS. Forecasted rates for FY 2024/25 and subsequent years are based on the most recent CalPERS actuarial valuation Reports as adjusted by the impact related to the FY 2022/23 CalPERS 6.1% investment return and forecasted payroll.

Beginning in FY 2021/22, the estimates of employer contributions were credited with an anticipated reductions associated with the approximate $4.8 million additional discretionary payment (ADP) toward the 2016 unfunded amortization base paid off in October 2019 and the total of approximately $5.8 million in ADPs toward unfunded 2013 and 2015 amortization bases that were paid off in FY 2020/21.

Type of
Expenditure
FY 2023/24
Forecast
FY 2024/25
Forecast
FY 2025/26
Forecast
FY 2026/27
Forecast
FY 2027/28
Forecast
FY2028/29
Forecast
Safety
POA

81.31% 96% 98.7% 102.3% 106.1% 116.0%
Safety
Management
POA

84.31% 99% 101.7% 105.3% 109.1% 118%
Safety

POA - PEPRA

14.5% 15.6% 15.6% 15.7% 16.0% 16.0%
Miscellaneous
TEA/AFSCME/Con
fidential/
Management

29.97% 30.6% 296% 31.0% 32.3% 33.8%
Miscellaneous
TEA/AFSCME/Con
fidential/
Management
PEPRA
Separate PEPRA
rate for
Miscellaneous has
not been
established yet by
CalPERS.

29.97% 30.6% 296% 31.0% 32.3% 33.8%

ATTACHMENT 5
The Town has been monitoring and providing periodic update to the Finance Commission and to the Town Council on the ongoing developments regarding the distribution of excess ERAF funds. A portion of property tax revenue goes to the ERAF to support local school districts.

When the amount contributed to ERAF is more than the minimum cost of funding local schools, excess funds have traditionally been returned to the county, cities, and special districts. Five counties, including Santa Clara, have been using a redistribution allocation formula that has been contested by the State. Santa Clara County provided an update on the Excess ERAF at its September property tax meeting. The Third District Court of Appeal has affirmed the Trial Court decision in the California School Boards Association (CSBA) case, ruling that CSBA did not establish that charter schools are entitled to ERAF. However, in January the Santa Clara County advised the Town that the FY 2024/25 State Budget Governor proposes legislation allocating ERAF to charter schools, potentially reversing the recent appellate decision the County and State Controller’s Office obtained holding that charter schools do not get ERAF. Annual negative impact on local jurisdiction’s Excess ERAF is approximately 8 % which may fluctuate annually.

Proposing In August 2023, the State Controller’s Office (SCO) issued a negative audit finding to Marin County regarding inclusion of the redevelopment dissolution revenue in the Excess ERAF calculation, asserting that this violated Health & Safety Code section 34188(d). Excess ERAF counties do not agree with this finding and are currently working to find a resolution. The annual at-risk percentage is now at about 22% of the distribution both on an ongoing basis and going back to the distribution in Fiscal Year 2020/21. The County filed a lawsuit against the State Controller’s Office on this matter in late December. The County also provided the updated projection for FY 2023/24 Excess ERAF distribution ($2,500,000) based on the latest State-released information. The amounts provided are before any provision to account for the State Controller’s audit finding or other annual adjustments in the calculation. The County will provide an updated estimates for the FY 2023/24 excess ERAF distribution and estimates for FY 2024/25 excess ERAF distribution in March 2024.

The following table illustrates the potential at-risk amount from FY 2020/21.

With the adoption of the FY 2023/24 budget, Council directed a 30% ERAF Risk Reserve. The ERAF Risk Reserve is estimated at $1,439,607 and the at-risk amount from FY 2020/21 is estimated at $2,027,079.

Los Gatos
Bradley Burns 1% Sales & Use Tax Forecast Comparison Summary As of 01/18/2024
A Revenue forecast was provided on 10/13/23 based on 2023Q2 Sales Tax data.

A Revenue forecast was provided on 01/03/24 based on 2023Q3 Sales Tax data.

This analysis compares those forecasts.

COMPARISON:

FY 22 - 23 FY 23 - 24 FY 24 - 25 FY 25 - 26 FY 26 - 27 FY 27 - 28 FY 28 - 29 FY 29 - 30 Previous Forecast 7,452,000 7,284,000 7,364,000 7,490,000 7,605,000 7,709,000 7,802,000 7,884,000 Current Forecast 7,452,000 6,961,000 7,041,000 7,152,000 7,256,000 7,349,000 7,433,000 7,508,000 Change 0 (323,000) (323,000) (338,000) (349,000) (360,000) (369,000) (376,000) % Change 0.0% -4.4% -4.4% -4.5% -4.6% -4.7% -4.7% -4.8% % COMPARISON:

FY 22 - 23 FY 23 - 24 FY 24 - 25 FY 25 - 26 FY 26 - 27 FY 27 - 28 FY 28 - 29 FY 29 - 30 Previous Forecast 4.6% -2.3% 1.1% 1.7% 1.5% 1.4% 1.2% 1.1% Current Forecast 4.6% -6.6% 1.1% 1.6% 1.5% 1.3% 1.1% 1.0% % Change 0.0% -4.3% 0.1% -0.1% -0.1% -0.1% -0.1% 0.0%
The current forecast is lower in all forecast years. Overall Growth Rates vary, due to the anticipation when and to what extent inflation will begin to decline.

The current forecast incorporates a Disinflation Scenario, with the CPI-U hitting a target of 2.8% by the middle of 2025.

Category FY 22 - 23 FY 23 - 24 FY 24 - 25 FY 25 - 26
General Retail (110,000) (144,000) (160,000) Category declined by -9.4% QTR over QTR in 2023Q3, grew by +10.5% in 2023Q2 County Pool (143,000) (160,000) (161,000) Category declined by -28.4% QTR over QTR in 2023Q3, grew by +2.2% in 2023Q2 -$1.4 million in corrections caused a -$2.1 million swing in 2023Q3 Santa Clara Countywide Pool Revenues
All (70,000) (19,000) (17,000) Various other factors
-$ $ (323,000) $ (323,000) $ (338,000) Total Forecast Change NON-CONFIDENTIAL 1 of 1 Avenu Insights & Analytics
ATTACHMENT 6

Los Gatos
Bradley Burns 1% Sales & Use Tax Forecast Comparison Summary As of 10/16/2023
A Revenue forecast was provided on 06/28/23 based on 2023Q1 Sales Tax data.

A Revenue forecast was provided on 10/13/23 based on 2023Q2 Sales Tax data.

This analysis compares those forecasts.

COMPARISON:

FY 22 - 23 FY 23 - 24 FY 24 - 25 FY 25 - 26 FY 26 - 27 FY 27 - 28 FY 28 - 29 FY 29 - 30 Previous Forecast 7,396,000 7,379,000 7,609,000 7,829,000 8,034,000 8,223,000 8,397,000 Current Forecast 7,452,000 7,284,000 7,364,000 7,490,000 7,605,000 7,709,000 7,802,000 7,884,000 Change 56,000 (95,000) (245,000) (339,000) (429,000) (514,000) (595,000) % Change 0.8% -1.3% -3.2% -4.3% -5.3% -6.3% -7.1%
% COMPARISON:

FY 22 - 23 FY 23 - 24 FY 24 - 25 FY 25 - 26 FY 26 - 27 FY 27 - 28 FY 28 - 29 FY 29 - 30 Previous Forecast 3.8% -0.2% 3.1% 2.9% 2.6% 2.4% 2.1%
Current Forecast 4.6% -2.3% 1.1% 1.7% 1.5% 1.4% 1.2% 1.1% % Change 0.8% -2.0% -2.0% -1.2% -1.1% -1.0% -0.9%
The current forecast is lower in all forecast years. Overall Growth Rates vary, due to the anticipation when and to what extent inflation will begin to decline.

The current forecast incorporates a Recession Inflation Scenario, with the CPI-U hitting a target of 2.2% at the end of 2024.

Category FY 22 - 23 FY 23 - 24 FY 24 - 25 FY 25 - 26
General Retail 70,000 Category grew by +9.4% QTR over QTR in 2023Q2, declined by -11.3% in 2023Q1, better than expected. Apple Stores, (23.9% of General Retail), grew by +132.4% QTR over QTR in 2023Q2, by +31.7% in 2023Q1.

Transportation (30,000) (75,000) (100,000) (160,000) Category declined by -15.6% QTR over QTR in 2023Q2, -14.8% in 2023Q1.

Zero Emission Vehicles (ZEVs) comprised 24.3% of the sales of new light vehicles in CA for the first six months of 2023. Forecast includes a -40% reduction of Service Station Sales Tax Revenues by 2030, -75% reduction by 2035 and a -90% reduction by 2040.

All 16,000 (20,000) (145,000) (179,000) Various other factors $ 56,000 $ (95,000) $ (245,000) $ (339,000) Total Forecast Change NON-CONFIDENTIAL 1 of 1 Avenu Insights & Analytics Page 302 Los Gatos
Bradley Burns 1% Sales & Use Tax Forecast Comparison Summary As of 08/16/2023
A Revenue forecast was provided on 03/13/23 based on 2022Q4 Sales Tax data.

A Revenue forecast was provided on 06/28/23 based on 2023Q1 Sales Tax data.

This analysis compares those forecasts.

COMPARISON:

FY 21 - 22 FY 22 - 23 FY 23 - 24 FY 24 - 25 FY 25 - 26 FY 26 - 27 FY 27 - 28 FY 28 - 29 Previous Forecast 7,125,000 7,684,000 7,876,000 8,128,000 8,410,000 8,685,000 8,950,000 9,207,000 Current Forecast 7,125,000 7,396,000 7,379,000 7,609,000 7,829,000 8,034,000 8,223,000 8,397,000 Change 0 (288,000) (497,000) (519,000) (581,000) (651,000) (727,000) (810,000) % Change 0.0% -3.7% -6.3% -6.4% -6.9% -7.5% -8.1% -8.8% % COMPARISON:

FY 21 - 22 FY 22 - 23 FY 23 - 24 FY 24 - 25 FY 25 - 26 FY 26 - 27 FY 27 - 28 FY 28 - 29 Previous Forecast 5.9% 7.8% 2.5% 3.2% 3.5% 3.3% 3.1% 2.9% Current Forecast 5.9% 3.8% -0.2% 3.1% 2.9% 2.6% 2.4% 2.1% % Change 0.0% -4.0% -2.7% -0.1% -0.6% -0.7% -0.7% -0.8% The current forecast is lower in all forecast years. Overall Growth Rates vary, due to the anticipation when and to what extent inflation will begin to decline.

The current forecast incorporates a Recession Inflation Scenario, with the CPI-U hitting a target of 2.2% at the end of 2024.

Category FY 21 - 22 FY 22 - 23 FY 23 - 24 FY 24 - 25
General Retail (65,000) (195,000) (227,500) Category declined by -12.4% QTR over QTR in 2023Q1, grew by 6.2% in 2022Q4.

Miscellaneous Retail, (38% of this category), declined by -11.5% QTR over QTR in 2023Q1 Furniture / Appliance, (23% of this category), declined by -12.8% QTR over QTR in 2023Q1 Drug Stores, (12% of this category), declined by -11.6% QTR over QTR in 2023Q1 Transportation (70,000) (210,000) (245,000) Category declined by -15.9% QTR over QTR in 2023Q1, grew by +7.6% in 2022Q4.

Prices for gasoline have plummeted from $6.20 in June 20222 to $4.27 in January 2023.

Auto Sales declined by -19.0% QTR over QTR in 2023Q1, grew by +10.7% in 2022Q4.

All (153,000) (92,000) (46,500) Various other factors, including using a Recession Inflation Scenario with 2.2% target -$ $ (288,000) $ (497,000) $ (519,000) Total Forecast Change NON-CONFIDENTIAL 1 of 1 Avenu Insights & Analytics Page 303 From: Phil Koen
To: Laurel Prevetti; Gitta Ungvari
Cc: Linda Reiners; Mary Badame
Subject: Refund of ERAF funds
Date: Tuesday, February 13, 2024 8:28:08 AM
[EXTERNAL SENDER]
Hello Laurel,
At last nights FC meeting when Andrew Howard asked staff if the Town had ever refunded ERAF money you stated that we had done that one time in the past.

You then explained that it was tied to the end of the redevelopment agency (?) and that the refund was over a three year period. Frankly I didn’t fully understand the explanation and I am sure a number of the Commissioners also didn’t understand.

Given the amount of time we spent discussing the ERAF revenue, and Staff’s concern about the possibility of a clawback of funds, would you please provide a more detail explanation of what actually occurred in the past so the FC can access those facts and make an informed decision regarding the likelihood of there being a claw back given the current facts. In my mind what occurred in the past had a very different set of facts than the issue today and therefore perhaps a different outcome.

Thank you,
Phil Koen
Sent from my iPhone
ATTACHEMENT 2

PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager, Town Attorney, and Assistant Town Manager 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 02/20/2024
ITEM NO: 14

ADDENDUM
ad
DATE: February 16, 2024
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Review the Five-Year Forecast (Fiscal Year 2024/25 -FY 2028/29) and the Finance Commission Recommendations, Determine Key Assumptions for the Five- Year Forecast, and Provide Direction for the Preparation of the FY 2024/25 Operating Budget
REMARKS:

Attachment 3 contains Santa Clara County Letter to Senator Cortese regarding the Governor’s budget proposal on charter schools’ eligibility for Educational Revenue Augmentation Fund (ERAF). The County shared this letter with the Town and other Santa Clara County Cities late afternoon on Thursday February 15, 2024.

Attachments previously distributed with the Staff Report:

1. Five-Year Forecast Report to the Finance Commission with Attachments 1 through 6

2. Public comment received after the Finance Commission’s February 12, 2024 meeting and prior to 11 a.m. on February 15, 2024
Attachment distributed with this Addendum:

3. County of Santa Clara Letter to Senator Cortese Regarding Excess ERAF

Impacts of Re-Directing Excess ERAF from Counties

BACKGROUND
The California Constitution requires the State to
guarantee that schools receive a certain
minimum level of funding. In 1992, to reduce
the impact of this mandate on the State general
fund, the State required each county to
establish an Educational Revenue Augmentation
Fund (ERAF) where local property tax dollars are
taken from the county, cities, and special
districts, deposited in ERAF, and used to bring
school districts up to their minimum funding
levels. Importantly, despite its name, ERAF does
not increase school funding—it merely offsets
the State’s school funding obligations, dollarfor-dollar. When more local property tax revenue is diverted to ERAF than is needed to
meet school districts’ minimum funding needs,
that revenue is deemed “excess ERAF” and
returned to the county, cities, and special
districts whose taxes were diverted to ERAF.

CHARTER SCHOOL FUNDING
Charter schools also have minimum funding
guarantees, but they do not receive ERAF.i
Instead, they receive “in lieu” payments from
their host school district. If the in lieu payment
is not enough to meet the charter school’s
minimum funding level, the State makes up the
difference.

PROBLEM
The California Department of Finance (DOF) has
engaged in numerous efforts over many years
to shift excess ERAF away from local
governments to benefit the State budget.

One of DOF’s recent efforts was to assert,
without any legal basis, that charter schools
receive ERAF. DOF even supported the California
School Boards Association’s unsuccessful lawsuit
challenging the State Controller’s determination
that charter schools do not receive ERAF.

DOF’s response to that judicial defeat is to
propose unconstitutional budget legislation that
would give charter schools ERAF, thereby
shifting funds away from local governments.

The estimated impact to Santa Clara County
from DOF’s proposal would be $32 million per
year. Our 15 cities and 11 special districts
would also lose roughly $10 million per year.

Losing these additional local property tax
dollars would put critical safety net services—
such as behavioral health care, supportive
housing, and health services for children and
families—at significant risk.

DOF’s proposal is also unconstitutional because
Article XIII, § 25.5(a) restricts the State’s
authority to use or redirect local property taxes
from counties, cities and special districts. But
DOF seems undeterred by this inconvenient fact.

We are asking our delegation to stay very alert
for any proposed legislation entitling charter
schools to ERAF.

CONTACT
James R. Williams, County Executive
Funding At Risk for Santa Clara County Communities
Annual Revenue
Loss
County of Santa Clara $32 M
15 Cities $7.9M
11 Special Districts $2M
Total Revenue Loss $41.9M
i California School Bds. Ass’n v. Cohen, 2023 WL 4853693 (3rd Dist. Court of Appeal, unpublished) (“CSBA”). Although the appellate decision is unpublished, it constitutes a final judicial determination that charter schools do not receive ERAF.

PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager, Town Attorney, and Assistant Town Manager 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 02/20/2024
ITEM NO: 14

DESK ITEM
ad
DATE: February 20, 2024
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Review the Five-Year Forecast (Fiscal Year 2024/25 -FY 2028/29) and the Finance Commission Recommendations, Determine Key Assumptions for the Five- Year Forecast, and Provide Direction for the Preparation of the FY 2024/25 Operating Budget
REMARKS:

Attachment 4 contains public comment received between 11:01 a.m. Friday, February 16, 2024, and 11:00 a.m. Tuesday, February 20, 2024.

Attachments previously distributed with the Staff Report:

1. Five-Year Forecast Report to the Finance Commission with Attachments 1 through 6

2. Public comment received after the Finance Commission’s February 12, 2024 meeting and prior to 11 a.m. on February 15, 2024
Attachment previously distributed with the Addendum:

3. County of Santa Clara Letter to Senator Cortese Regarding Excess ERAF Attachment received with this Desk Item:

4. Public comments received between 11:01 a.m. Friday, February 16, 2024, and 11:00 a.m.

Tuesday, February 20, 2024

From: Phil Koen
To: Mary Badame; Matthew Hudes; Rob Rennie; Rob Moore; Maria Ristow Cc: Linda Reiners; Laurel Prevetti; Gitta Ungvari; Wendy Wood; Gabrielle Whelan Subject: Agenda item #14 - 5 year forecast
Date: Sunday, February 18, 2024 5:13:55 PM
Attachments: adopted Resolutions - Item # 4.docx
General Fund Exepnditure Analysis - FY 22 - FY 29.xlsx
General Fund Exepnditure Analysis - FY 22 - FY 29 - Adjusted Case.xlsx [EXTERNAL SENDER]
Dear Honorable Mayor and Town Council Members,
I am writing to you in my capacity as Chair of the Finance Commission. Unfortunately, because of the timing of the Council meeting, the entire Commission has not had an
opportunity to review and comment on this memo. I take full responsibility for its content. I believe the major points expressed by the Finance Commission have been captured and the memo is accurate.

Summary Comments
The Finance Commission discussed for over an hour the Staff’s 5 Year Forecast, analyzing the forecast as a whole and carefully listening to the Staff’s presentation and comments. The agenda called for the Finance Commission to make a
recommendation to the Town Council to either accept or
reject the forecast as presented. The Finance Commission’s role was not to opine on individual assumptions but rather to review and determine whether the Council should rely on the Staff’s work product taken as a whole.

ATTACHMENT 4

There was considerable discussion and comments provided to Staff regarding the underlying assumptions and the
reasonableness of the forecast. It is important to note that based on the 5 Year Forecast, Staff concluded “the persistent presence of a deficit indicates that the Town needs to
consider new revenue measures if it wants to maintain high levels of municipal services” (Executive Summary, page 1 of the Staff report). Given this conclusion the Finance
Commission took extra care to probe the reasonableness of the 5 Year Forecast.

Additionally, the Finance Commission considered in FY 22 and FY 23 the Town’s General Fund had an operating surplus of $4.4 million and $5.7 million. It was difficult for the Finance Commission to bridge from a $5.7 million operating surplus in FY 23 to an operating deficit of $1.5m by FY 25. That would be a negative turnaround of $7.2m in two years, which was never adequately explained by Staff.

In a unanimous decision, the Finance Commission made a
finding the 5 Year Forecast total tax revenues were too conservative compared to historic growth rates, and operating expenditures could be managed through cost containment and productivity measures to reduce the forecasted growth rates.

If adjustments were made to property tax and sales tax growth rates to align with more closely, but remain below, historic growth rates and cost containment and productivity measures

were reasonably applied to internal service costs to reduce the projected growth rate from 10.8% to 7.1%, the Town would realize persistent future surpluses and not deficits.

Based on the above, the Finance Commission unanimously
voted not to recommend the Staff’s 5 Year Forecast to the Town Council and did not agree with Staff’s conclusion that “the persistent presence of a deficit indicates that the Town needs to consider new revenue measures if it wants to
maintain high levels of municipal services”.

Additional Detail Comments
Attached are two schedules which the Finance Committee
referenced in making its finding but were not included in the Town Council package.

The first schedule – General Fund Expenditure Analysis – FY 22-FY 29 – presents in a simplified format the Staff’s 5 Year Plan. As you can see the Staff has assumed a compounded annual growth rate (CAGR) of 3.7% for property taxes. During the discussion Staff confirmed the 6-year historical growth rate has been approximately 7.4%. Additionally, the Staff’s forecast has assumed a 10.8% CAGR in internal service charges which reflect the growth in operating expenses for equipment
replacement, workers compensation, self-insurance,
information technology and facilities maintenance. There are

no salary and pension expenses included in internal service charges.

The second schedule – General Fund Expenditure Analysis – FY22-FY29 – adjusted case – presents an alternative to the Staff forecast which increases the property tax CAGR to 5.5%, slightly increases sales tax growth rate to 1.7% CAGR and moderates the forecasted growth rate in internal service charges to 7.1% CAGR. The result is operating surpluses for every year starting at $1.2m in FY 25 and growing to $3.2m by FY 29.

Additionally, the Staff report does not disclose that two resolutions were approved by the Finance Commission. Both resolutions are attached. The report includes the second resolution but omits the first resolution which was equally important. This resolution addressed a fundamental weakness in the Town’s reporting of financial information. The Finance Commission found that a lack of consistency in the reporting formats used to report actual results, mid-year updates, and five-year forecasts makes it very difficult for the Town Council and members of the public to understand the financial
information presented. This prohibits the ability to compare results between reports, decreases transparency and inhibits the ability to draw reasonable conclusions. The Finance Commission’s recommendation is to adopt a consistent format in reporting financial results such as the format used in the

ACFR.

Comments regarding ERAF not discussed by the Finance
Commission during the February 12 meeting.

Staff has provided additional comments in their February 14 report about excess ERAF that were not provided to the
Finance Commission at the February 12 meeting. For example, the comment that “there is no guarantee for funding in the future” is not based on any independent analysis or known facts. Excess ERAF has been around for decades. In a report by the Legislative Analyst’s Office dated March 20, 2020, it was reported that:
“In 2006-07 counties reported excess ERAF totaling about $100m – equating to about 1.5% of all property tax
revenue allocate from ERAF accounts statewide. Over the next decade, excess ERAF grew steadily. Within the past three years, however, growth in excess ERAF has
accelerated. Preliminary reports show excess ERAF
totaling $820 million in 2018-19 equating to about 8% of all funding allocated from ERAF statewide”.

The reason excess ERAF has grown substantially over the past few years is because the acceleration in property valuations.

The ERAF was created in 1992 and redirects a share of
property taxes statewide from cities, counties, and special

districts to K-14 schools. ERAF offsets funding K-14 schools would otherwise receive from the State General Fund. It is very difficult to see how $94.9m that is currently projected to be distributed in FY 24 excess ERAF to the cities in Santa Clara County would go to zero. How exactly this would happen was not explained in the Staff report.

For FY 24, Santa Clara County has already indicated the Town will receive $2.5m in excess ERAF which is an 8.7% increase over FY 23 ERAF of $2.3m received. Staff did not explain why it would be reasonable to assume receiving a 50% reduction in excess ERAF revenue in FY 25 of $1.25m (option b) and holding at revenue level through FY 29.

The February 14 Staff report mentions “the Governor’s most recent budget assumes the approval of legislation allocating ERAF to charter schools, potentially reversing the recent appellate decision that charter schools do not get ERAF”. It is correct the budget proposes statutory changes that would clarify that charter schools are eligible for funding from the ERAF. Charter Schools were established the same year as ERAF, and it had never been clarified if they are eligible for this funding until the ruling California School Boards Association vs Malia M Cohen dated July 31, 2023, which determined that charter schools were not intended to be included in the calculation or allocation of excess ERAF. This concluded the legal challenge brought by CSBA.

If the Governor’s proposal is adopted, it would be on a “go forward” basis and would modify the calculation of future excess ERAF so charter schools would receive an automatic allocation of property tax revenue. The Staff has reported the potential impact could be an annual reduction of
approximately 8% of the excess ERAF the Town is projected to receive.

Please let me know if you have any questions. The Finance Commission takes seriously its responsibility to serve as an ongoing substantive and expert advisory body to the Town Council so that the Council can make informed decisions about the Town’s financial matters.

Thank you.

Phil Koen

Adopted Resolu�ons – Item #4
• The Finance Commission recommends the Town Council request Staff to adopt a consistent format for repor�ng revenues, expenditures and change in fund balance which will be used in the annual plan, the 5-year forecast and the mid-year update reports to improve visibility and comparability. All reports must be prepared in accordance with GAAP. • The Finance Commission recommends the Town Council not accept, nor rely upon the current version of the FY 24 5-Year Plan. Given the importance of the 5-Year forecast in establishing tax policy, the Finance Commission makes a finding the dra� forecast of a 2.9% CAGR in total tax revenue is too conserva�ve compared to historic growth rates and the 4.9% CAGR in opera�ng expenditures needs to be reduced through cost containment and produc�vity measures. The Finance Commission does not agree with Staff’s conclusion that “the persistent presence of a deficit indicates that the Town needs to consider new revenue measures if it wants to maintain high levels of municipal services” as stated on page 1 of the Staff report.

General Fund Model - FY 22 - FY 29 FY 22 FY 23 FY 24 FY 24 FY 25 FY 26 FY 27 FY 28 FY 29 CAGR Town's Base Case - no $1.9 payment Act Act adopted Feb 12 Est Feb 12 2024 5 Year Forecast FY 23 - FY 29 Revenues
Property Tax 21.1 22.7 22.6 23.9 23.5 24.7 25.8 27.0 28.3 3.7% Sales Tax 8.5 8.8 9.2 8.2 8.3 8.5 8.6 8.7 8.9 0.2%
TOT Tax 1.9 2.2 2.4 2.3 2.3 2.4 2.5 2.5 2.6 2.8%
FranchiseTax 2.8 3.1 2.1 3.3 3.4 3.5 3.6 3.7 3.8 3.5%
Business License 1.5 2.4 2.4 2.4 2.5 2.6 2.7 2.7 2.8 2.6% >Total Tax Revenue 35.8 39.2 38.7 40.1 40.0 41.7 43.2 44.6 46.4 2.9% Use of Money (1.4) 0.8 1.0 1.6 1.7 1.6 1.5 1.4 1.3 8.4% Functional Revenue 12.2 10.6 8.4 10.2 8.4 8.6 8.9 9.0 9.2 -2.3% other Sources 1.7 2.2 1.2 1.2 1.3 1.4 1.3
Total Revenue - Agrees to ACFR 46.6 50.6 49.8 54.1 51.3 53.1 54.9 56.4 58.2 2.4% Expenditures
Salaries and Benefits 20.1 21.9 23.2 22.7 23.8 24.3 24.8 25.4 25.9 2.8%

4.6% Vacancy Savings (1.7) (1.8) (1.8) (1.9) (1.9) (2.0) Calpers Benefits 6.5 7.1 8.2 7.3 9.0 9.1 9.7 10.3 11.2 7.9% ADP to Calpers 0.4 0.7 0.4 0.4 0.4 0.4 0.4
All other benefits 5.1 5.3 6.3 5.8 7.4 7.7 8.0 8.2 8.4 8.0% Operating Expenditures 8.2 6.9 9.6 11.7 9.4 9.5 10.0 10.2 10.5 7.2% Fixed Assets 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Grants and Award 0.6 0.6 0.8 0.9 0.4 0.3 0.3 0.3 0.3 -10.9% Principal 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Internal Service Charges 2.6 2.6 3.4 3.3 4.0 4.2 4.4 4.6 4.8 10.8% Total Expenditures - Agrees to ACFR 43.3 44.9 50.4 52.6 52.8 53.9 55.9 57.7 59.7 4.9% Excess (Deficit) Revenues over Expenditures 3.3 5.7 (0.6) 1.5 (1.5) (0.8) (1.0) (1.3) (1.5) Gain from asset sale 0.1 0.1 0.0 0.0
Transfers - In 4.0 4.1 0.5 0.5 0.5 0.5 0.5 0.5 0.5
Transfers - Out 4.4 7.2 1.6 1.6 1.1 1.1 1.1 1.1 1.1
Net Changes in Fund Balance 3.0 2.7 (1.7) 0.4 (2.1) (1.4) (1.6) (1.9) (2.1)

General Fund Model - FY 22 - FY 29 FY 22 FY 23 FY 24 FY 24 FY 25 FY 26 FY 27 FY 28 FY 29 CAGR Adjusted Case Act Act adopted Feb 12 Est Feb 12 2024 5 Year Forecast FY 23 - FY 29 Revenues
Property Tax 21.1 22.7 22.6 23.9 25.2 26.6 28.1 29.6 31.2 5.5% Sales Tax 8.5 8.8 9.2 8.2 8.5 8.8 9.1 9.4 9.7 1.7%
TOT Tax 1.9 2.2 2.4 2.3 2.4 2.4 2.5 2.5 2.6 2.8%
FranchiseTax 2.8 3.1 2.1 3.3 3.5 3.5 3.6 3.7 3.8 3.5%
Business License 1.5 2.4 2.4 2.4 2.5 2.6 2.7 2.7 2.8 2.6% >Total Tax Revenue 35.8 39.2 38.7 40.1 42.1 43.9 46.0 47.9 50.2 4.2% Use of Money (1.4) 0.8 1.0 1.6 1.7 1.6 1.5 1.4 1.3 8.4% Functional Revenue 12.2 10.6 8.4 10.2 8.4 8.6 8.9 9.0 9.2 -2.3% other Sources 1.7 2.2 1.2 1.2 1.3 1.4 1.3
Total Revenue - Agrees to ACFR 46.6 50.6 49.8 54.1 53.4 55.3 57.7 59.7 62.0 3.4% Expenditures
Salaries and Benefits 20.1 21.9 23.2 22.7 23.8 24.3 24.8 25.4 25.9 2.8%

4.6% Vacancy Savings (1.7) (1.8) (1.8) (1.9) (1.9) (2.0) Calpers Benefits 6.5 7.1 8.2 7.3 9.0 9.1 9.7 10.3 11.2 7.9% ADP to Calpers 0.4 0.7 0.4 0.4 0.4 0.4 0.4
All other benefits 5.1 5.3 6.3 5.8 7.4 7.7 8.0 8.2 8.4 8.0% Operating Expenditures 8.2 6.9 9.6 11.7 9.4 9.5 10.0 10.2 10.5 7.2% Fixed Assets 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Grants and Award 0.6 0.6 0.8 0.9 0.4 0.3 0.3 0.3 0.3 -10.9% Principal 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Internal Service Charges 2.6 2.6 3.4 3.3 3.4 3.5 3.7 3.8 3.9 7.1% Total Expenditures - Agrees to ACFR 43.3 44.9 50.4 52.6 52.2 53.2 55.2 56.9 58.8 4.6% Excess (Deficit) Revenues over Expenditures 3.3 5.7 (0.6) 1.5 1.2 2.1 2.5 2.8 3.2 Gain from asset sale 0.1 0.1 0.0 0.0
Transfers - In 4.0 4.1 0.5 0.5 0.5 0.5 0.5 0.5 0.5
Transfers - Out 4.4 7.2 1.6 1.6 1.1 1.1 1.1 1.1 1.1
Net Changes in Fund Balance 3.0 2.7 (1.7) 0.4 0.6 1.5 1.9 2.2 2.6

For Town Council Meeting 2-20-24
Item 14
Dear Councilmembers,
As you know, the Finance Commission unanimously voted that the Five-Year Forecast is wrong. It is wrong because the Town knew, and still used, old, outdated numbers. You should ask yourself why they did that. The incorrect Five-Year Forecast has been issued to you with misinformation. How are you to make an intelligent decisions for this town of 33,000 when you are fed bad information? Mr. Koen gave you a lot of data and below are a couple more observations I have made.

One additional item that Ms Prevetti stated that the town has incurred, and implies will continue to incur, will be ”unfunded state mandates”. If that is true, one could reasonably expect that expenditures could exceed revenues over time. In the 10 year analysis, that hasn’t happened. If it hasn’t happened in 10 years, what is going to happen in the future that will increase de cits and where is Ms Prevetti’s justi cation for this statement?
Here are two “views” of the Town’s nancial condition using data from the audited Annual Comprehensive Financial Report (ACFR). One example is in numbers from the ACFR showing that expenses as a percent of revenue actually decreased in 2023:

Below is a visual graphic perspective that shows how expenses track to revenues for 10 years. The one increase of expenses over revenues was incurred by the large $10.4M ADP to CalPers that eventually will save the town over $12M:

Lastly, below is a graph of the property taxes for the past 10 years and ask yourself why the Town’s reduction from an annual Compounded Annual Growth Rate of 7.7% to 3.7% is a reasonable reduction given the 10 year CAGR?
Jak Van Nada -
Los Gatos Community Alliance
Facts Matter; Transparency Matters; Honesty Matters

PREPARED BY: Katy Nomura
Assistant Town Manager
Reviewed by: Town Manager, Town Attorney, and Finance Director 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 02/20/2024
ITEM NO: 15
DATE: February 15, 2024
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Provide Direction on Any Ballot Measures to Consider for Polling RECOMMENDATION:

Provide direction on any ballot measures to consider for polling.

BACKGROUND:

While costs of providing services and programs for residents have significantly increased over the years, Town revenues have not kept pace. Los Gatos is facing the same economic pressures as many other cities and businesses, including inflation and the uneven recovery from the pandemic. In addition, unfunded mandates by the State have also reduced the Town's available funds.

The Town maintains a relatively stable and low staffing level. Even so, costs per employee continue to escalate as evidenced by pension benefit costs having increased 35% in the last five years. The Town Council has taken several proactive steps to reduce the Town’s pension liability, including Additional Discretionary Payments for the Pension Plans and curbing cost escalation in Other Post-Employment Benefits (OPEB).

Other cost drivers, such as medical benefits, have been fluctuating and increasing in recent years by as much as 11% in a single year. Unfortunately, revenues are not increasing by double digits.

PAGE 2 OF 5
SUBJECT: Potential Revenue Ballot Measure Options
DATE: February 15, 2024
BACKGROUND (continued):

Los Gatos has taken the following proactive cost-cutting measures during major economic downturns to reduce budget expenditures and control costs while maintaining high service levels:
 Staffing levels significantly reduced from 2001 – 2005 and have not returned to those levels, despite an increase in population since then, unfunded mandates, and service demands,
 Imposed wage freezes and unpaid furloughs, and
 Reduced employee benefit costs.

Town budgets are reviewed annually by an independent auditor. Los Gatos has earned recognition for its fiscal responsibility with the highest credit rating (AAA bond rating by Moody’s) and annual awards by the Government Finance Officers Association for its high quality and transparent budgeting practices.

On November 17, 2022, the Finance Commission reviewed several cost reduction measures and recommended that the Town further work toward operational efficiencies and researching additional revenue options.

On January 24, 2023, the Town Council determined its Strategic Priorities for 2023-2025, which included exploring new revenue opportunities.

On June 20, 2023, the Town Council authorized the Town Manager to issue a Request for Qualifications (RFQ) for revenue ballot measure consulting services. After conducting the RFQ process, the Town selected NBS.

On October 17, 2023, Town Council authorized the Town Manager to enter into an agreement for the initial phase of the work for an amount not to exceed $44,600, with direction to return to Council with revenue modeling prior to beginning any polling.

On December 19, 2023, Town Council reviewed the Revenue Modeling Report prepared by NBS (Attachment 1) and continued the item to February 20, 2024 to consider it at the same time as the five-year forecast.

On February 12, 2024, the Finance Commission discussed the NBS report and made the following recommendation to Council: The Finance Commission unanimously passed a motion recommending that the Town Council not rely upon the NBS Report’s conclusions regarding deficit reductions because the financial analysis was based on an outdated 5-Year Forecast which did not include actual results for Fiscal Year 2022/23. The Finance Commission did find that the incremental revenue contribution for the revenue options analyzed are credible and can be used for modeling purposes.

PAGE 3 OF 5
SUBJECT: Potential Revenue Ballot Measure Options
DATE: February 15, 2024
BACKGROUND (continued):

While the Commission did not make a motion regarding any potential ballot measure, individual Commissioners questioned the need for it at this time. One Commissioner expressed that there may or may not be merit to the 1/8th cent tax measure and indicated this was the reason they declined to opine.

On February 13, 2024, the Council updated its Strategic Priorities and removed the detailed bullets under “Develop a Five-Year Structurally Balanced and Sustainable Operating Forecast,” including reference to new revenue opportunities.

DISCUSSION:

NBS conducted a comprehensive evaluation of options to increase revenue for the Town and associated revenue modeling. This included an evaluation of a property transfer tax increase, utility user tax (UUT), special assessment districts, transient occupancy tax (TOT), business license tax, sales tax, and parcel tax scenarios. Franchise fees were discussed as part of the UUT analysis. Each of these options is outlined in NBS’ revenue modeling report (Attachment 1). Of the options, NBS recommended either a sales tax or a parcel tax.

Sales Tax
As mentioned in the NBS report, “the current sales tax rate in the Town is 9.25%, of which the Town’s share is 1% (not including the Measure G sales tax rate of 0.125%). The Town has the capacity to raise its sales tax rate by an additional 0.125%...If structured as a general sales tax, the Town would only need to secure approval from a majority of the registered voters within the Town to increase the sales tax rate. NBS recommends that the Town move quickly on this option, if desired, as the Town’s remaining capacity for a sales tax increase could be utilized by another government agency within the County during the next election cycle.” The following table shows NBS’ revenue modeling for FY 2025/26 through FY 2028/29:

Parcel Tax
Among other scenarios, NBS explored revenue modeling for a parcel tax with senior/lowincome exemptions and a parcel tax on commercial buildings over 25,000 square feet. Any parcel tax would require a two-thirds approval from voters to pass.

In order for a parcel tax with senior/low-income exemptions to generate an estimated $1M annually, it would need to be roughly $97.70 per parcel, $0.0055 per lot square foot, or $0.04 per building square foot.

Potential Sales Tax
Increase
Potential New Total
Sales Tax %
Additional Revenue
2025/26 Projected
Additional Revenue
2026/27 Projected
Additional Revenue
2027/28 Projected
Additional Revenue
2028/29 Projected

0.125% 9.375% $ 1,062,500 $ 1,087,500 $ 1,125,000 $ 1,162,500

PAGE 4 OF 5
SUBJECT: Potential Revenue Ballot Measure Options
DATE: February 15, 2024
DISCUSSION (continued):

In order for a parcel tax on commercial buildings over 25,000 square feet to generate an estimated $1M annually, it would need to be roughly $0.83 per building square foot. Only 35 parcels in the Town have commercial buildings over 25,000 square feet that would be subject to such a parcel tax.

Polling Next Steps
Regarding a revenue measure for the 2024 ballot, the Town is not in a position to determine whether a measure should be placed on the ballot or not as polling has not been conducted.

Polling is a targeted effort to survey a statistically representative sample of likely voters to test potential ballot measures, ballot language, and potential services to fund (see Attachment 2).

In other smaller cities, samples sizes as low as 90 likely voters have yielded reliable and ultimately successful results. The results of any polling should give proper guidance for specific recommendations and for the Council to make its decision. Polling will also inform public messaging around any potential revenue ballot measure. Draft messaging is included in Attachment 3 and updated messaging would return to Council with the polling results, should polling occur.

If polling is conducted, a summary of the results would be brought to the Finance Commission for a recommendation to the Council as to whether or not to pursue placing a measure on the 2024 ballot. The results and the Finance Commission’s recommendation would then be brought to the Council for consideration.

CONCLUSION:

Staff looks forward to Council’s discussion and direction on which potential revenue measures to consider for polling, if any. NBS recommends that no more than two options should be polled.

COORDINATION:

The preparation of this report was coordinated with the Town Manager, Town Attorney, and Director of Finance.

FISCAL IMPACT:

On October 17, 2023, Council authorized the Town Manager to enter into an agreement for the initial phase of the work for amount not to exceed $44,600. The cost for polling for potential revenue ballot measures was already included in this amount. After polling is complete, Council will have the option to decide whether to allocate additional funding to pursue placing a measure on the 2024 ballot.

PAGE 5 OF 5
SUBJECT: Potential Revenue Ballot Measure Options
DATE: February 15, 2024
ENVIRONMENTAL ASSESSMENT:

This is not a project defined under CEQA, and no further action is required.

Attachment:

1. NBS Revenue Modeling Report

2. Polling Overview

3. Draft Messaging

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NBS

TOWN OF LOS GATOS MEMORANDUM
TO: Laurel Prevetti, Town Manager, Town of Los Gatos
FROM: Nick Dayhoff, Senior Consultant
DATE: December 14, 2023
SUBJECT: Revenue Modeling Scenarios
a
Purpose
The Town of Los Gatos (the “Town”) has requested a comprehensive evaluation of options to increase revenue to address the Town’s forecasted budget deficits in the near term. This evaluation includes modeling for increases to sales tax and transient occupancy tax (“TOT”) rates, and a limited model for a new utility user tax (“UUT”) and a new parcel tax. This Memorandum summarizes additional revenues that could be generated via a new parcel tax based on various revenue targets, the estimated revenue generated by potential increases to the Town’s sales tax and TOT rates, and the estimated revenue generated by the implementation of a UUT.

Projected Budget Deficits
According to the Town’s Operating and Capital Summary Budget for Fiscal Year 2023/24, the following table shows the forecasted budget deficits for Fiscal Years 2025/26 through 2028/29:

Non-Viable and Not-Recommended Revenue Options
Property Transfer Tax Increase
Only Charter cities can increase the property transfer tax rate above the general law maximum of $0.55 per $1,000 of value (city rate). The Town is not a Charter city.

Limited UUT for Cable, Gas, and Electric Utilities
A UUT may be imposed by the Town on the consumption of utility services, including (but not limited to) electricity, gas, water, sewer, telephone (including cell phone and long distance), sanitation and cable television.

ATTACHMENT 1

Town of Los Gatos
Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 2 The Town does not currently levy UUTs, so modeling what the potential revenues might be from a new UUT relies on the limited amount of information received from the Town, including historical franchise fee collections from its cable, electric, and gas franchises. Since any UUT would be based upon the gross receipts of each utility, NBS has had to estimate the gross receipts of the gas, electric, and cable utilities based on forecasted franchise fee collections and franchise fee rates for the Town’s cable, electric, and gas franchises.

The Town does not collect franchise fees for the water, sewer, or telephone utilities, so we cannot estimate what the gross receipts of those utilities might be. As such, we have not included these utilities in our estimate of potential UUT revenue. In addition, NBS is not including a UUT on the Town’s garbage utility as part of this analysis, as the contract between the hauler and the Town is currently being negotiated and the service may no longer be categorized as a “Franchise” moving forward.

According to the Town, the following table shows the forecasted cable, electric, and gas franchise fee collections for Fiscal Years 2025/26 through 2028/29:

From here, we can estimate what the gross receipts of the cable and gas/electric utility are, as the cable franchise fee is 5.00% of gross revenues, and the gas/electric franchise fee is 2.00% of gross revenues.

The following table shows the potential revenue generated via various UUT rates for the cable, gas, and electric utilities for Fiscal Years 2025/26 through 2028/29:

Title 2025/26 2026/27 2027/28 2028/29
CABLE FRANCHISE FEE 530,450$ 546,360$ 562,750$ 579,630$ PG&E FRANCHISE FEE 441,830 455,080 468,730 482,790
TOTAL 972,280$ 1,001,440$ 1,031,480$ 1,062,420$
Title 2025/26 2026/27 2027/28 2028/29
CABLE @ 5% FF 10,609,000$ 10,927,200$ 11,255,000 $ 11,592,600$ PG&E @ 2% FF 22,091,500 22,754,000 23,436,500 24,139,500 TOTAL 32,700,500$ 33,681,200$ 34,691,500$ 35,732,100$
Potential UUT
Potential New Total
UUT %
Additional Revenue
2025/26 Projected
Additional Revenue
2026/27 Projected
Additional Revenue
2027/28 Projected
Additional Revenue
2028/29 Projected

1.00% 1.00% 327,005$ 336,812$ 346,915$ 357,321$

2.00% 2.00% 654,010 673,624 693,830 714,642

3.00% 3.00% 981,015 1,010,436 1,040,745 1,071,963

4.00% 4.00% 1,308,020 1,347,248 1,387,660 1,429,284

5.00% 5.00% 1,635,025 1,684,060 1,734,575 1,786,605

Town of Los Gatos
Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 3 The following table shows how the maximum estimated UUT revenue (5.00%) in the table above would affect the Town’s forecasted deficits:

Based on these revenue estimates, the Town would still be in deficit in the near term; however, if combined with the following other recommended revenue options, the Town could potentially close its deficit. The approval of a majority of registered voters within the Town is needed to implement a UUT. In general, obtaining voter approval for a new UUT where none existed is difficult to achieve. In addition, when Town voters were asked about a new UUT in a 2016 poll, opposition was twice that of support, with 62% opposed and 31% in favor. We see no reason why this sentiment should have changed enough since then to make a new UUT a viable option for the Town. In addition, from 2002 through 2020, 85 cities asked for voter approval of a new UUT, and just 28 (33%) were successful, even though approval required only a majority vote.

UUT for Streaming Video Services
In 2021, a judge in Los Angeles ruled that local utility laws don’t cover streaming services, so imposing a UUT on streaming services may not be a viable option. NBS recommends that the Town obtain a legal opinion on this matter.

Special Assessment Districts
Several statutes authorize cities to levy assessment for specific services and facilities. General law cities considering assessments are limited to the services and facilities types listed in each statute and must comply with the substantive and procedural requirements in Article XIII D of the California Constitution, added by Proposition 218, and the Proposition 218 Omnibus Implementation Act.

The following are some of the most used authorizing statutes for assessments and the kinds of services and facilities for which they can be used:

Landscaping and Lighting Act of 1972: Authorizes assessments for such things as the installation, construction, and maintenance of landscaping; ornamentation; street lighting, including traffic signals; curbs, gutters, sidewalks, and drainage; parks and recreational facilities; community centers, auditoriums, and public performance space.

Benefit Assessment Act of 1982: Authorizes assessments for the maintenance of drainage; flood control; street lighting; and streets, roads, or highways.

Improvement Act of 1911 (“1911 Act”): Authorizes assessments for a variety of public improvements, such as streets and sidewalks, including decorative features; sewers; storm drains; lighting; pipes and hydrants for fire protection; levees and walls for the protection of streets and to prevent beach erosion or promote accretion to beaches; water supply; gas supply; bomb shelters; trees and landscaping; mooring; land Item
FY
2025/26
FY
2026/27
FY
2027/28
FY
2028/29
Forecasted Surplus/(Deficit), in Millions ($2.8) ($3.1) ($3.3) ($3.8) UUT Revenue @ 5.00%, in Millions 1.6 1.7 1.7 1.8
Forecasted Surplus/(Deficit), in Millions ($1.2) ($1.4) ($1.6) ($2.0)

Town of Los Gatos
Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 4 stabilization improvements. It also allows assessment revenue to be used for limited acquisition of land related to the authorized improvements.

Municipal Improvement Act of 1913 (“1913 Act”): Generally authorizes assessments for the acquisition of land and construction of a wide array of public works and improvements, including but not limited to utilities. It also allows for the financing of some improvements to private property, such as seismic strengthening and fire safety.

In calculating an assessment, a city must first determine the entire cost of the facility or service to be funded. It must then separate the benefits of the service or facility to the general public from the benefits to property owners who will be subject to the assessment. That means, in part, determining the proportionate special benefit that each parcel subject to the assessment derives from the service or facility.

Finally, the assessment imposed on each parcel cannot exceed the cost of the special benefit conferred on the parcel.

An option to fund general city services via special assessment does not exist in California. In addition, assessment districts may not fund general public-safety services, as those services have been deemed to provide general benefits to entire communities, and not special benefits to certain properties.

Transient Occupancy Tax
The Town currently levies a TOT in the amount of 12% of the rent charged by the operator for the privilege of occupancy in any hotel. It’s worth noting here that Palo Alto has a 15.50% TOT rate, Los Altos and Milpitas have a 14.00% TOT rate, Santa Clara, Sunnyvale, and the unincorporated areas of Santa Clara County have a 12.50% TOT rate, Campbell and Cupertino have a 12.00% TOT rate, Morgan Hill, Mountain View, San Jose and Saratoga have a 10.00% TOT rate, and Gilroy has a 9.00% TOT. Los Altos Hills and Monte Serreno do not currently have a TOT.

According to the Town’s Operating and Capital Summary Budget for Fiscal Year 2023/24, the following table shows the forecasted TOT collections for Fiscal Years 2025/26 through 2028/29, including what each 1% yields:
1 - Current TOT rate is 12%

FY
Forecasted TOT
Collections Each 1% Yields 1
2025/26 2,600,000$ 216,667$
2026/27 2,600,000 216,667
2027/28 2,600,000 216,667
2028/29 2,700,000 225,000

Town of Los Gatos
Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 5 The following table shows the potential revenue generated via various increases in the Town’s TOT rate for Fiscal Years 2025/26 through 2028/29:

The following table shows how the maximum estimated additional TOT revenue (3.50% increase) in the table above would affect the Town’s forecasted deficits:

NBS does not recommend increasing the TOT rate, as any potential increase doesn’t raise that much additional revenue to support the Town’s budget deficit.

Business License Tax Modification
The Town may also have an interest in exploring a modification to its Business License Tax to add a charge per employee. NBS is not modeling what the rate per employee would be as the Town does not yet know the number of employees that would be subject to the tax. It’s also worth noting here that voters in the Town approved an increase to the Business License Tax in November 2022 (Measure J), so perhaps it’s too soon to ask the voters for another modification.

Recommended Revenue Options
Sales Tax Rate Modeling
The current sales tax rate in the Town is 9.25%, of which the Town’s share is 1% (not including the Measure G sales tax rate of 0.125%). The Town has the capacity to raise its sales tax rate by an additional 0.125%.

Potential TOT
Increase
Potential New Total
TOT %
Additional Revenue
2025/26 Projected
Additional Revenue
2026/27 Projected
Additional Revenue
2027/28 Projected
Additional Revenue
2028/29 Projected

0.25% 12.25% 54,167$ 54,167$ 54,167$ 56,250$

0.50% 12.50% 108,333 108,333 108,333 112,500

0.75% 12.75% 162,500 162,500 162,500 168,750

1.00% 13.00% 216,667 216,667 216,667 225,000

1.25% 13.25% 270,833 270,833 270,833 281,250

1.50% 13.50% 325,000 325,000 325,000 337,500

1.75% 13.75% 379,167 379,167 379,167 393,750

2.00% 14.00% 433,333 433,333 433,333 450,000

2.25% 14.25% 487,500 487,500 487,500 506,250

2.50% 14.50% 541,667 541,667 541,667 562,500

2.75% 14.75% 595,833 595,833 595,833 618,750

3.00% 15.00% 650,000 650,000 650,000 675,000

3.25% 15.25% 704,167 704,167 704,167 731,250

3.50% 15.50% 758,333 758,333 758,333 787,500
Item
FY
2025/26
FY
2026/27
FY
2027/28
FY
2028/29
Forecasted Surplus/(Deficit), in Millions ($2.8) ($3.1) ($3.3) ($3.8) TOT Revenue @ 15.50%, in Millions 0.8 0.8 0.8 0.8
Forecasted Surplus/(Deficit), in Millions ($2.0) ($2.3) ($2.5) ($3.0)

Town of Los Gatos
Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 6 According to the Town’s Operating and Capital Summary Budget for Fiscal Year 2023/24, the following table shows the forecasted sales tax collections for Fiscal Years 2025/26 through 2028/29, including what each 1% yields:
1 - Current sales tax rate is 9.25%, of which the City receives 1% (does not include Measure G sales tax rate of 0.125%)
The following table shows the potential revenue generated via a 0.125% increase in the Town’s sales tax rate for Fiscal Years 2025/26 through 2028/29:

The following table shows how the estimated additional sales tax revenue would affect the Town’s forecasted deficits:

It’s worth noting here that Campbell, Milpitas, and San Jose already have a 9.375% sales tax rate, while all other cities (excluding the Town) in Santa Clara County and the unincorporated areas of Santa Clara County are currently subject to a sales tax rate of 9.125%.

The amount of revenue generated by a potential sales tax increase does not completely fill the Town’s budget deficit, but it is higher than the potential revenue generated by an increase in the Town’s TOT rate and could potentially serve as a “first step” for the Town to raise additional revenue. If structured as a general sales tax, the Town would only need to secure approval from a majority of the registered voters within the Town to increase the sales tax rate. NBS recommends that the Town move quickly on this option, if desired, as the Town’s remaining capacity for a sales tax increase could be utilized by another government agency within the County during the next election cycle.

FY
Forecasted Sales Tax
Collections Each 1% Yields 1
2025/26 8,500,000$ 8,500,000$
2026/27 8,700,000 8,700,000
2027/28 9,000,000 9,000,000
2028/29 9,300,000 9,300,000
Potential Sales Tax
Increase
Potential New Total
Sales Tax %
Additional Revenue
2025/26 Projected
Additional Revenue
2026/27 Projected
Additional Revenue
2027/28 Projected
Additional Revenue
2028/29 Projected

0.125% 9.375% 1,062,500$ 1,087,500$ 1,125,000$ 1,162,500$ Item
FY
2025/26
FY
2026/27
FY
2027/28
FY
2028/29
Forecasted Surplus/(Deficit), in Millions ($2.8) ($3.1) ($3.3) ($3.8) Sales Tax Revenue, in Millions 1.1 1.1 1.1 1.2
Forecasted Surplus/(Deficit), in Millions ($1.7) ($2.0) ($2.2) ($2.6)

Town of Los Gatos
Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 7 Parcel Tax Scenarios
For purposes of modeling a new parcel tax, the Town has provided four revenue target scenarios to fill its projected operating deficits: a consensus target of $3.5MM, a high target of $4MM, a middle target of $2MM, and a low target of $1MM, as shown below:

Our analysis assumes that the parcel tax, if approved in November 2024, would be collected beginning in Fiscal Year 2025/26, and rates would increase by 3% per year. The following table shows how each of the four revenue target scenarios for a potential parcel tax would affect the Town’s forecasted deficits:

Based on the latest Santa Clara County Assessor’s data from July 2023, there are a total of 11,230 parcels within the Town that would be Taxable, and an additional 365 parcels that would be Non-Taxable (generally publicly owned parcels, utilities, common areas, mobile homes, or other parcels with no assessed value).

We provide below three parcel tax scenarios for each of the four revenue targets scenarios: (1) a uniform rate per parcel, (2) a uniform rate per lot square foot, (3) a uniform rate per building square foot, (4) a uniform rate per parcel with senior/low-income exemptions, (5) a uniform rate per lot square foot with senior/low-income exemptions, and (6) a uniform rate per building square foot with senior/low-income exemptions.

Without Senior/Low-Income Exemptions

Revenue Target Amount
High 4,000,000$
Consensus 3,500,000$
Middle 2,000,000$
Low 1,000,000$
Description Rate - High Rate - Consensus Rate - Mid Rate - Low Taxable Parcels - per Parcel 356.19$ 311.67$ 178.09$ 89.05$ Taxable Parcels - per Lot Square Foot 0.0203$ 0.0178$ 0.0102$ 0.0051$ Taxable Parcels - per Building Square Foot 0.14$ 0.12$ 0.07$ 0.03$

Town of Los Gatos
Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 8 The average taxes on SFR and Condo parcels under the consensus revenue target for the three different apportionment methods are shown below:

With Senior/Low-Income Exemptions
For the purposes of this analysis, we have assumed that 10% of Taxable single-family residential parcels, 10% of Taxable single-family residential lot area, or 10% of Taxable single-family residential building area could qualify for a senior/low-income exemption, if offered.

The average taxes on SFR and Condo parcels under the consensus revenue target for the three different apportionment methods are shown below:

Commercial/Office/Industrial Parcels Only
The Town has also requested a scenario for a parcel tax that would only apply to Taxable Commercial/Office/Industrial Properties at a rate per building square foot over 25k building square feet.

The rates per building square foot over 25k building square feet for each of the revenue targets are shown below:

There are 35 Commercial/Office/Industrial parcels with buildings of 25,000 square feet or more and the resulting annual tax per owner would range from approximately $4,600 to $612,000.

Average of
Parcel Tax - By
Parcel
Average of
Parcel Tax - By
LotSqFt
Average of
Parcel Tax - By
BldgSqFt
311.67$ 254.10$ 262.08$
Description Rate - High Rate - Consensus Rate - Mid Rate - Low Taxable Commercial/Office/Industrial Parcels - per Building Square Foot > 25K 3.31$ 2.90$ 1.66$ 0.83$

Town of Los Gatos
Parcel Tax, Sales Tax, TOT Analysis, and UUT Revenue Modeling Scenarios Memorandum Page 9 The parcel tax option is the only reliable way to correct the Town’s projected deficits with one funding mechanism, however attaining two-thirds approval from voters at the rates that meet that objective may be difficult. I look forward to our upcoming meeting to discuss these revenue scenarios and the resulting model results. Please contact me with any questions or comments; I can be reached at 800. 676.7516 or via email at [email protected].

Sincerely,
Nick Dayhoff
Senior Consultant

Polling Objectives and Methodology
By NBS and Gene Bregman and Associates
ATTACHMENT 2
Voter poll will achieve the following objectives:
 Explore the current image of the Town of Los Gatos, voters' attitudes towards the Town, and their assessments of the strengths and weaknesses of local government  Determine voter perceptions of the needs of the Town and the priorities that voters set for those needs
 Determine voter attitudes towards revenue measures for the Town, and the optimum amount to place before the voters
 Evaluate voters' top priorities for money raised in order to design a measure that best addresses the desires of the community
 Determine the most effective and important reasons for your voters to support a ballot measure
Polling Methodology:

Telephone interviews are conducted by a regularly employed staff of full-time professional interviewers who specialize in conducting interviews for public opinion surveys. Gene Bregman and Associates (GBA) supervises the interviewing process and verifies that interviews are conducted according to specifications. Supervisory procedures include continuous on-site and telephone monitoring of interviews. GBA follows established industry standards for call backs of busy or "not-at-home" numbers designed specifically to maintain the randomness of interviewee selection and the validity of the survey.

A regularly employed staff of full-time professional interviewers conducts interviews. Nowadays, it is also important to contact voters via text or email so they can complete the interview on-line.

Voters will be asked if they would vote for a proposed funding measure early in the survey, without providing background information, mirroring some voters’ experience when voting. Then respondents will be provided with a series of statements that provide additional information about the Town’s revenue needs and asked a second time, knowing more, how they would vote on a proposed measure.

Respondents will also be asked about a series of Town programs and services to understand their priorities for how funds are spent.

The survey will use up-to-date voter registration files to survey a representative sample of likely voters based upon voter history. This will provide statistically reliable data to understand the community’s priorities and level of support for a local funding measure.

ATTACHMENT 3
Maintaining Quality of Life in the Town of Los Gatos
Known for its family-oriented environment and commitment to safety, Los Gatos is more than just a town; it's a vibrant, sustainable community that takes pride in its unique qualities: historic neighborhoods and lively, accessible downtown, local culture and arts scene, excellent schools, and healthy local economy.

Additional Funding Would Help Address Community Needs
Additional reliable, ongoing funding would allow the Town to maintain and improve public safety and meet other community priorities.

The Town is exploring options to increase revenues to maintain the high level of municipal services Los Gatos residents have come to expect, emphasizing community character, good governance, fiscal stability, quality public infrastructure, civic enrichment, and public safety.

Additional revenues would be used to fund essential services and community-desired programs, such as:
 Provide high quality public safety and law enforcement services by adding additional officers  Reduce the risk of wildfire and prepare for potential emergencies with more resources for these ongoing efforts
 Maintain rapid 911 response
 Keep parks and public areas safe and clean
 Support services for seniors to thrive
 Provide free, vibrant Library services and programs for all ages  Support unhoused residents
 Pave streets, remove potholes, and improve traffic safety Challenges Facing Los Gatos
While costs of providing services and programs for residents have significantly increased over the years, Town revenues have not kept pace. Los Gatos is facing the same economic pressures of many other cities and businesses, including inflation and the uneven recovery from the pandemic. In addition, unfunded mandates by the State have also reduced the Town's available funds.

Fiscally Responsible Budget Measures Enacted
Los Gatos has taken the following proactive cost-cutting measures during major downturns to reduce budget expenditures and control costs while maintaining high service levels:
 Staffing levels significantly reduced from 2001 – 2005 and have not returned to those levels, despite an increase in population since then, unfunded mandates, and service demands  Imposed wage freezes and unpaid furloughs
 Reduced employee benefit costs
Town budgets are reviewed annually by an independent auditor. Los Gatos has earned recognition for its fiscal responsibility with the highest credit rating (AAA bond rating by Moody’s) and annual awards by the Government Finance Officers Association for its high quality and transparent budgeting practices.

We welcome your feedback and questions as the Town explores funding strategies and revenue enhancements so Los Gatos can address these needs and thrive in the years ahead.

PREPARED BY: Katy Nomura
Assistant Town Manager
Reviewed by: Town Manager, Town Attorney, and Finance Director 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 02/20/2024
ITEM NO: 15

DESK ITEM
DATE: February 20, 2024
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Provide Direction on Any Ballot Measures to Consider for Polling REMARKS:

Attachment 4 contains public comment received between 11:01 a.m. Friday, February 16, 2024, and 11:00 a.m. Tuesday, February 20, 2024.

Attachments received with the Staff Report:

1. NBS Revenue Modeling Report

2. Polling Overview

3. Draft Messaging
Attachment received with this Desk Item:

4. Public comment received between 11:01 a.m. Friday, February 16, 2024, and 11:00 a.m.

Tuesday, February 20, 2024

From: Phil Koen
To: Mary Badame; Matthew Hudes; Rob Rennie; Rob Moore; Maria Ristow Cc: Linda Reiners; Laurel Prevetti; Gabrielle Whelan; Wendy Wood Subject: Agenda Item 15 - Ballot Measure Polling
Date: Monday, February 19, 2024 9:22:54 AM
Attachments: Pages from MEET-Packet-f8e64916cd514d08a245697ea657aaa0(1).pdf Pages from Fin Com Feb 12 - initial posting (5).pdf
Pages from Fin Com Feb 12 - initial posting (5).pdf
[EXTERNAL SENDER]
Dear Honorable Mayor and Council Members,
There is no need to waste $30,000 of resident’s money (which has not been spent) on polling for a potential ballot measure.

The Staff report has it backwards when it states: “the Town is not in a position to determine a measure should be placed on the ballot or not as polling has not been conducted”.

A ballot measure to raise taxes should only be put forth when a clearly demonstrated need exists and there are specific and committed uses for the tax revenues. The determination to place a ballot measure increasing the resident’s taxes should never be based on an opinion poll.

In 2018, the Town listed in the ballot measure a few critical uses for a proposed sales tax increase, including enhancing neighborhood police patrol and local crime prevention
programs, to give the appearance the sales tax proceeds would be committed to these programs. Unfortunately, the fine print of the ballot measure swept away all the “promises” and did not commit to any particular action and imposed no restrictions on the use of the sales tax. The ballot measure ATTACHMENT 4

passed, but unfortunately the underlying concerns of
adequate policing and crime prevention still exist. This “bait and switch” should never happen again.

The Finance Commission unanimously voted last week to not recommend the Staff’s 5 Year forecast finding that it was overly conservative and furthermore the Commission did not agree with the Staff’s conclusion “of persistent future deficits and the need to consider new revenue measures”. An
alternative forecast reviewed by the Finance Commission which adjusted for historical property tax growth rates and more reasonable sales tax growth among other adjustments determined the Town would have persistent future surpluses not deficits.

Additionally, in FY 22 the Town experienced a surplus of General Fund revenues over expenditures of $4.4m and in FY 23 the Town experienced a surplus of $5.7m. The Town’s most recent Mid-Year Forecast for FY 24 is projecting a $1.7m surplus and makes budget adjustments increasing General Fund FY 24 revenues by $2.2m. Based on all the financial information available, the Finance Commission expressed that, at this time, there doesn't appear to be the need for a ballot measure to increase taxes.

Lastly, I wish to address the accuracy of draft messaging regarding “fiscally responsible budget measures enacted “ in

attachment 3 which is attached to this email. Let me address each of the “claims”:

While it is true budgeted staffing levels from 2001-2005 were higher than FY 24 budgeted levels, actual staffing levels have never been historically reported. The Town has been unable to produce actual historical headcount, so it is impossible to know the historical trend in actual
headcount.

Staff does not explain why selecting a period that is over 20 years ago and pre-dates even the introduction of
Apple’s i-Phone is a relevant comparison to today’s
budgeted headcount. The Staff fails to disclose that since FY 2013 budgeted headcount has increased approximately
13% while the Town population has increased
approximately 9%.

While the Town imposed wage freezes and unpaid
furloughs in 2008 - 2009, these actions were taken during the great recession. More recently since FY 2018, the
Town’s total salary expense has grown at an annual
compounded growth rate of 5%.

While it is true the Town adopted the PEPRA Safety Plan for new hires, the Town has not reduced any employee
pension benefits for those employees in the Miscellaneous and Safety Pension Plans. The total pension contribution for these two plans has increased from $4.6M in FY 2018 to $7.1m in F& 2023, which is an annual compounded

increase of 9%.

Town budgets are not “reviewed” annually by an
independent auditor.

Taken collectively, the statements in the section are
misleading and create a false message in an apparent attempt to garner support for a ballot measure. I hope the Town Council values the special relationship you have with the people of the Town and will promise to always engage in forthright and complete disclosures, so residents are
adequately informed of the facts rather than communication which puts a “thumb on the scale” to influence public opinion.

Lastly, it might be useful for the Town Council to review the results of the last poll the Town took regarding community priorities. I have attached the results and doubt they have changed. Given all of this, why is it worth spending $30,000 to confirm what each of you already know?
Thank you,
Phil Koen
.

ATTACHMENT 3
Maintaining Quality of Life in the Town of Los Gatos
Known for its family-oriented environment and commitment to safety, Los Gatos is more than just a town; it's a vibrant, sustainable community that takes pride in its unique qualities: historic neighborhoods and lively, accessible downtown, local culture and arts scene, excellent schools, and healthy local economy.

Additional Funding Would Help Address Community Needs
Additional reliable, ongoing funding would allow the Town to maintain and improve public safety and meet other community priorities.

The Town is exploring options to increase revenues to maintain the high level of municipal services Los Gatos residents have come to expect, emphasizing community character, good governance, fiscal stability, quality public infrastructure, civic enrichment, and public safety.

Additional revenues would be used to fund essential services and community-desired programs, such as:
 Provide high quality public safety and law enforcement services by adding additional officers  Reduce the risk of wildfire and prepare for potential emergencies with more resources for these ongoing efforts
 Maintain rapid 911 response
 Keep parks and public areas safe and clean
 Support services for seniors to thrive
 Provide free, vibrant Library services and programs for all ages  Support unhoused residents
 Pave streets, remove potholes, and improve traffic safety Challenges Facing Los Gatos
While costs of providing services and programs for residents have significantly increased over the years, Town revenues have not kept pace. Los Gatos is facing the same economic pressures of many other cities and businesses, including inflation and the uneven recovery from the pandemic. In addition, unfunded mandates by the State have also reduced the Town's available funds.

Fiscally Responsible Budget Measures Enacted
Los Gatos has taken the following proactive cost-cutting measures during major downturns to reduce budget expenditures and control costs while maintaining high service levels:
 Staffing levels significantly reduced from 2001 – 2005 and have not returned to those levels, despite an increase in population since then, unfunded mandates, and service demands  Imposed wage freezes and unpaid furloughs
 Reduced employee benefit costs
Town budgets are reviewed annually by an independent auditor. Los Gatos has earned recognition for its fiscal responsibility with the highest credit rating (AAA bond rating by Moody’s) and annual awards by the Government Finance Officers Association for its high quality and transparent budgeting practices.

We welcome your feedback and questions as the Town explores funding strategies and revenue enhancements so Los Gatos can address these needs and thrive in the years ahead.

May 2016
Community Priorities
(n=471)
Note: The above rating questions have been abbreviated for charting purposes, and responses were recoded to calculate mean scores:
“Much More Likely” = +2, “Somewhat More Likely” = +1, “No Effect” = 0, “Somewhat Less Likely” = -1, and “Much Less Likely” = -2.

Somewhat
More Likely
Somewhat
Less Likely
Much Less
Likely
-2 -1 0 1 2
Provide traffic calming projects
Maintain and improve curbs, gutters and sidewalks
Maintain neighborhood parks
Repair storm drains to prevent disastrous failures
Make traffic signal improvements, restripe town streets Reconstruct and resurface neighborhood streets
Maintain neighborhood police patrols
Repair the Town's 112 miles of streets and roads
Maintain and repair the neighborhood streets
Fix potholes and repair town and neighborhood streets
Maintain 9-1-1 response times
Improve traffic flow to reduce traffic congestion

0.65 0.75

0.76 0.83

0.86 0.89

0.92 0.94

0.97 1.02

1.07 1.08
Much More
Likely
Sample A
Sample B
Tier 2
T-3 Tier 1

Item 5.

May 2016
Community Priorities (Cont.)
(n=471)
Note: The above rating questions have been abbreviated for charting purposes, and responses were recoded to calculate mean scores:
“Much More Likely” = +2, “Somewhat More Likely” = +1, “No Effect” = 0, “Somewhat Less Likely” = -1, and “Much Less Likely” = -2.

Somewhat
More Likely
Somewhat
Less Likely
Much Less
Likely
-2 -1 0 1 2
Beautify downtown
Add new bike lanes throughout Town
Provide a Town community and, or senior center
Acquire property for downtown parking
Upgrade aging park playground equipment
Upgrade park restrooms
Repair retaining walls
Upgrade Town parks
Install money saving LED streetlights
Upgrade the Los Gatos Creek Trail and other trails
Maintain public facilities
Acquire property for open space and parks
Improve the quality of life in Los Gatos

0.21 0.24

0.25 0.27

0.38 0.41

0.41 0.46

0.47 0.52

0.53 0.57

0.59 Much More
Likely
Sample A
Sample B
Tier 4 Tier 3

Item 5.

PREPARED BY: Jocelyn Shoopman
Associate Planner
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, Community Development Department Director, and Finance Director
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 02/20/2024
ITEM NO: 16
DATE: February 15, 2024
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Hear Protests and Adopt a Resolution Making Determinations and Approving the Reorganization of an Uninhabited Area Designated as Blackberry Hill Road No. 06, Approximately 2.1 Acres on Property Pre-Zoned HR-2½. APN 532-25- 011. Annexation Application AN23-001. Project Location: 15405 Blackberry Hill Road. Property Owner/Applicant: Maurice Brewster.

RECOMMENDATION:

Open public hearing to hear any protests and adopt a resolution (Attachment 1) making determinations and approving the reorganization of an uninhabited area designated as Blackberry Hill Road No. 06, approximately 2.1 acres, located at 15405 Blackberry Hill Road (APN 532-25-011).

BACKGROUND:

The Town has an agreement with Santa Clara County that requires annexation of any property located within the Town's Urban Service Area boundary that is either contiguous to a Town boundary or within 300 feet of a Town maintained roadway if a use is proposed to intensify.

The subject property is contiguous to a Town boundary. Section 56757 of the Cortese-KnoxHertzberg Local Government Reorganization Act of 2000 gives cities in Santa Clara County the authority to annex territory without application to and hearing by the Santa Clara County Local Agency Formation Commission (LAFCO).

Annexation has been requested by the property owner of 15405 Blackberry Hill Road in anticipation of a future application for a new single-family residence. The total annexation area (approximately 2.1 acres) includes no County street right-of-way.

PAGE 2 OF 2
SUBJECT: Blackberry Hill Road No. 06/AN23-001
DATE: February 15, 2024
BACKGROUND (continued):

The Town is required to hold a protest proceeding even if the area proposed for annexation is uninhabited (less than twelve registered voters) and all property owners have consented to the annexation. This annexation was introduced at the February 6, 2024, Town Council meeting and the protest proceedings are set for February 20, 2024.

DISCUSSION:

The Town has received a petition requesting annexation to the Town of Los Gatos from Maurice Brewster, owner of the property at 15405 Blackberry Hill Road. The property is located on the southern side of Blackberry Hill Road in an unincorporated County pocket.

The property is in the Town's Urban Service Area, is contiguous to a Town boundary, and is prezoned HR-2½ (Hillside Residential, 2½ to 10 acres for each dwelling unit). Annexation would allow Town services to be extended to the property and reduce an existing County pocket.

The Santa Clara County Planning Division was notified in writing of the annexation request.

COORDINATION:

The preparation of this report was coordinated with the County of Santa Clara Infrastructure Development Division, LAFCO, County of Santa Clara Assessor, County of Santa Clara Surveyor, and the County of Santa Clara Planning Division.

FISCAL IMPACT:

Once the annexation is certified by the State Board of Equalization, the Town will receive approximately 9.3 percent of the property taxes.

ENVIRONMENTAL ASSESSMENT:

The project is exempt pursuant to the California Environmental Quality Act Guidelines under Section 15061(b)(3): Review for Exemption, in that it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. A Notice of Exemption will not be filed.

Attachments:

1. Resolution, with Exhibits A and B

2. Location Map

1 of 4
Draft Resolution 2024- Date
DRAFT RESOLUTION 2024-

RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS

MAKING DETERMINATIONS AND APPROVING THE REORGANIZATION

OF AN UNINHABITED TERRITORY DESIGNATED AS
BLACKBERRY HILL ROAD NO. 06
APN: 532-25-011
APPROXIMATELY 2. 1 ACRES
ANNEXATION APPLICATION: AN23-001
PROPERTY LOCATION: 15405 BLACKBERRY HILL ROAD
PROPERTY OWNER/APPLICANT: MAURICE BREWSTER
WHEREAS, the Town Council of the Town of Los Gatos has received a request for annexation of territory designated as Blackberry Hill Road No. 06 from Maurice Brewster; and WHEREAS, the property, is approximately 2.1 acres, located at 15405 Blackberry Hill Road, APN: 532-25-011, is contiguous to a Town boundary, and within the Town’s Urban Service Area; and
WHEREAS, no special districts would be affected by the proposal; and WHEREAS, the annexation would provide for use of Town services; and WHEREAS, the Town Council enacted Ordinance 1453 in 1980 pre-zoning the subject territory with an HR-2½ (Hillside Residential, 2½ to 10 acres for each dwelling unit) zoning designation; and
WHEREAS, the Town of Los Gatos, as Lead Agency for environmental review for the reorganization, has determined annexation of the subject property is exempt from the California Environmental Quality Act guidelines, pursuant to Section 15061(b)(3); and WHEREAS, the County Surveyor of Santa Clara County has found the description and map (Exhibits A and B) to be in accordance with Government Code Section 56757, the boundaries to be definite and certain, and the proposal to be in compliance with LAFCO’s road Draft Resolution to
be modified by Town
Council deliberations
and direction.

ATTACHMENT 1

2 of 4
Draft Resolution 2024- Date
annexation policies; and
WHEREAS, as provided in Government Code Section 56757, the Town Council of the Town of Los Gatos shall be the conducting authority for a reorganization including an annexation to the Town; and
WHEREAS, the territory is uninhabited and all owners of land included in the proposal have consented to this annexation; and
WHEREAS, the Town Council held a public hearing to hear any protests on February 20, 2024.

NOW, THEREFORE, BE IT RESOLVED, that the that the Town Council of the Town of Los Gatos does as follows:

1. That it is the conducting authority pursuant to Section 56757 of the Government Code for the annexation of property designated as Blackberry Hill Road No. 06, more particularly described in Exhibits A and B;

2. That the following findings are made by the Town Council of the Town of Los Gatos:
a. Said territory is uninhabited and comprises approximately 2.1 acres; b. The annexation is consistent with the orderly annexation of territory within the Town’s Urban Service Area and is consistent with the Town policy of annexing when required by the Town’s agreement with the County of Santa Clara; c. The project is exempt from the California Environmental Quality Act (CEQA) under Title 14 Code of Regulations, Chapter 3: Guidelines for the Implementation of CEQA Section 15061(b)(3): Review for Exemption; d. The Town Council enacted Ordinance 1453 in 1980 pre-zoning the subject territory with an HR-2½ (Hillside Residential, 2½ to 10 acres for each dwelling unit) zoning designation;
e. The territory is within the Town’s Urban Service Area as adopted by the Local Agency Formation Commission of Santa Clara County;

3 of 4
Draft Resolution 2024- Date
f. The County Surveyor has determined the boundaries of the proposed annexation to be definite and certain, and in compliance with the Commission’s road annexation policies. The County Surveyor has been reimbursed for the actual cost incurred by the County Surveyor in making this determination; g. The proposed annexation will not create an area in which it would be difficult to provide municipal services;
h. The proposed annexation does not split lines of assessment or ownership; i. The proposed annexation is consistent with the Town’s General Plan; j. The territory to be annexed is located within 300 feet of a Town boundary; and k. The Town has complied with all conditions imposed by the Commission for inclusion of the territory in the Town’s Urban Service Area.

3. That all owners of land within the affected territory have provided written consent to the reorganization and no protests have been received;

4. That upon completion of these reorganization proceedings the territory described in Exhibit A will be annexed to the Town of Los Gatos; and

5. That upon completion of these reorganization proceedings the territory reorganized will be taxed on the regular County assessment roll, including taxes for existing bonded indebtedness.

4 of 4
Draft Resolution 2024- Date
PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the 20th day of February 2024, by the following vote:

COUNCIL MEMBERS:

AYES:

NAYS:

ABSENT:

ABSTAIN:

SIGNED:

MAYOR OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA
DATE: __________________
ATTEST:

TOWN CLERK OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA
DATE: __________________

EXHIBIT "A"
BLACKBERRY HILL ROAD NO. 6

ANNEXATION TO THE CITY OF LOS GATOS

GEOGRAPHIC DESCRIPTION
SITUATE the County of Santa Clara, State of California, within Township 8, South Range 1 West, Mount Diablo Base and Meridian, and being the lands described in the Trust Transfer Grant Deed to Maurice Brewster and Rhonda Brewster, Trustees of the Brewster Family Revocable Trust, dated December 6, 2021, recorded on June 6, 2022, as Document Number 25314481, Official Records of Santa Clara County.

BEGINNING on the Southerly line of the MIREVAL ROAD ANNEXATION NO. 2 at the Northwesterly corner of BLACKBERRY HILL ANNEXATION NO. 5 being the lands described in the Grant Deed from Ruth C.M. Young to John William Panighetti, recorded February 21, 1951, in book 2156 of Official Records, page 325, Santa Clara County records;
Thence from said POINT OF BEGINNING, the following courses:
1) Along the Westerly line of said BLACKBERRY HILL ANNEXATION NO. 5; SOUTH 02°00'00" WEST, 390.68 feet to a point;
2) Continuing along said Westerly line, SOUTH 02°00'00" WEST, 38.32 feet to an angle therein;
3) Leaving said Blackberry Hill Annexation line, SOUTH 80°13'00" WEST, 88.28 feet;
4) NORTH 89°
37'00" WEST, 41.28 feet;
5) NORTH 89°
37'00" WEST, 84.76 feet to a point on the Easterly line of EUGENIA WAY ANNEXATION NO. 2;
6) Along said Easterly line, NORTH 02°
00'00" EAST, 53.91 feet;
7) Continuing along said Easterly line, NORTH 02°
00'00" EAST, 390.68 feet to the
Southwesterly corner of MIREVAL ROAD ANNEXATION NO. 2
8) Along the said Southerly line of Mireval Road Annexation No.2, SOUTH 89°
37'00" EAST, 212.50 feet to the POINT OF BEGINNING.

DISCLAIMER: FOR ASSESSMENT PURPOSES ONLY. THIS DESCRIPTION OF LAND IS NOT A

LEGAL PROPERTY DERSCRIPTION AS DEFINED IN THE SUBDIVISION MAP ACT AND MAY

NOT BE USED FOR TRANSFER, CONVEYANCE, SALE, OR ANY OTHER PURPOSES OTHER THAN THOSE RELATED TO THE ANNEXATION.

Vicinity Map
(not .. -)
APN
532-25-085
)
DISCLAIMER: FOR ASSESSMENT PURPOSES ONLY. THIS DESCRIPTION OF LAND IS NOT A LEGAL PROPERTY DERSCRIPllON AS DEFINED

IN THE SUBDIVISION MAP ACT AND MAY NOT BE USED FOR

TRANSFER, CONVEYANCE, SALE, OR ANY OTHER PURPOSES OTHER THEN THOSE RELATED TO THE ANNEXATION.

APN
532-25-055
MIREVAL RD. ANNEXATION NO. 2
APN 532-25-054

1. 2.

3. 4.

5. 6.

7. 8.
,...., ,....,,
(S8f
137'00"E) /l (212.50')
@
Point of Beginning
APN 532-25-011
Brewster
Doc. No. 25314481

2.1 Acres.

Courses:
szoo 'oo ''W, 390. 68'
szoo'oo'W. 38.32'
S80'13'00"W, 88.28'
N89'371
00'W, 41.28'
� Scale 1" = 60'
�
� � APN 532-25-010
� f::::
} 1--
�, ::::i �I
� APN 532-25-009
vi
N89'37'001'W, 84. 76'
N2'00'00"E, 53.91'
N2'00'00"E, 390.68'
-.....J..____-20' Ri2!:!_t �y
S89'37'00"£, 212.50' l
- -
__} (2) \ (38.32') --@ -- ✓ --:Iiszoo' oo w)
(53.91 1
) - - / (NZ'00' 00" E} �
/ @(N8
,. W - ---
f137' 00"W) 4 sact 13:J
0 --=(84.76') (41.28'} (88• 28·)
.....;;_J....:..::::._;:w._�'--==-4==---�PN 532-25-013 APN 532-25-012 LEGEND EXHIBI "B"
BLACKBERRY HILL ROAD NO. 6

PROPOSED ANNEXATION TO THE TOWN OF LOS GATOS

OF ASSESSOR'S PARCEL NUMBER
532-25-011
Scale 1" = 60' 11/8/2023
___ - - - - Boundary of prop. annex
-
, Existing town limits
- - - Other property line -- - -- Rignt of way line -- -- Abandoned parcel line 0 60 120

Los
Gatos
Los
Gatos

CYPRESS WAY

RAVIN IAWAY
C
O
W
ELL RD

AZTEC RIDGE DR

TERESITA
W AY

EUGENIA
WAY

MIREVALRD
M

RI EVAL ROAD

MAYA WAY

INCA CT

PASEOCARMELO

P HILLIPS AVE

BLACKBERRY

HILL RD
TW
ELVE

OAKS RD
¯ 0 250
Feet
·|}þ17 LOS
GATOS
SAN
JOSE

EXHIBIT A
Blackberry Hill Road No. 6

2.1 acres +/-
Prepared for the Office of the County Surveyor
November 8, 2023
August Hanks, County Surveyor
County of Santa Clara
Department of Planning and Development
County Government Center, East Wing
70 West Hedding St., 7th Floor
San Jose, California 95110
Blackberry Hill Road No. 6
Unincorporated Lands
Area of Annexation
Incorporated Lands
ATTACHMENT 2

This Page
Intentionally
Left Blank

Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, and Finance Director 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 2/20/2024
ITEM NO: 17
DATE: February 12, 2024
TO: Mayor and Town Council
FROM: Gabrielle Whelan, Town Attorney
SUBJECT: Adopt Resolution Repealing the Building Board of Appeals (BBA) Enabling Resolutions and Introduce “An Ordinance of the Town Council of the Town of Los Gatos Designating the Town Council to Hear Appeals from Decisions of the Building Official.”
RECOMMENDATION:

Adopt resolution repealing the Building Board of Appeals (BBA) enabling resolutions (Attachment 1) and introduce “An Ordinance of the Town Council of the Town of Los Gatos Designating the Town Council to Hear Appeals from Decisions of the Building Official” (Attachment 3).

BACKGROUND:

The Town currently has Building Board of Appeals. As authorized by Section 1.8.8 of the California Building Code, the Town’s Building Board of Appeals was established in 1991 to hear appeals from decisions of the Town’s Building Official. Examples of appealable decisions are:
the application or interpretation of specific California Building Code provisions, such as those related to occupancy load, exiting, or accessibility; or the rejection of requests to use alternative materials or methods not explicitly authorized by the California Building Code. The Building Board of Appeals does not have the ability to waive California Building Code requirements altogether. Since the Building Board of Appeals was established, no appeals have been submitted or heard.

Section 1.8.8 of the California Building Code does provide that a Town Council can assume the duties of hearing appeals from decisions of the Building Official instead of having a separate Building Board of Appeals.

PAGE 2 OF 2
SUBJECT: Building Board of Appeals
DATE: February 12, 2024
DISCUSSION:

This topic was scheduled for a discussion at the January 16, 2024 Town Council to determine whether:
1) A separate Building Board of Appeals should be retained; or 2) The existing Building Board of Appeals should be disbanded and provide that the Town Council will assume the duties of the Building Board of Appeals and hear appeals from decisions of the Building Official.

The Town Council voted to disband the existing Building Board of Appeals and assume the duties of the Building Board of Appeals. A resolution rescinding the enabling resolutions (Attachment 1) and an amendment to the ordinance (Attachments 2 and 3) are attached for the Town Council’s consideration.

COORDINATION:

This report was coordinated with the Town Attorney’s Office, Community Development Department, and Building Official.

FISCAL IMPACT:

The discussion and possible action will not affect the Town’s Budget.

ENVIRONMENTAL ASSESSMENT:

This is not a project defined under CEQA, and no further action is required.

Attachments:

1. Building Board of Appeals Resolution

2. Ordinance Redline

3. Proposed Ordinance

1 of 2
Resolution 20 - February 20, 2024
ATTACHMENT 1
RESOLUTION NO. 2024 - xx

RESOLUTION OFTHETOWN COUNCIL OF THE TOWN OF LOS GATOS
RESCINDING RESOLUTIONS 1991-279, 1995-44, AND 1996-31,

ENABLING A BUILDING BOARD OF APPEALS
WHEREAS, the Town Council, in adopting Resolution 1991-279, which was later amended by Resolutions 1995-44, 1996-31, and 2021-040;
WHEREAS, the Building Board of Appeals has not heard any appeals since its inception;
WHEREAS, California Building Code Section 1.8.8 authorizes the Town Council to serve as a Building Board of Appeals; and
WHEREAS, the Town Council now desiresto rescind the enabling resolution to disband the Building Board of Appeals and assume its duties.

NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES HEREBY RESOLVE THAT:
1) Resolutions 1991-279, 1995-44, 1996-31, and 2021-040 are rescinded. 2) The Building Board of Appeals is disbanded and in accordance with the California Building Code Section 1.8.8, the Town Council will hear appeals from decisions of the Building Official.

PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the 20th day of February, 2024 by the following vote:

COUNCIL MEMBERS:

AYES:

NAYS:

ABSENT:

ABSTAIN:

2 of 2
Resolution 20 - February 20, 2024
ATTACHMENT 1
SIGNED:
_______________________________

MAYOR OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA
DATE: __________________
ATTEST:
___________________________________

TOWN CLERK OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA
DATE: __________________

Created: 2023-12-19 13:00:29 [EST]
(Supp. No. 93)

ATTACHMENT 2
Sec. 29.20.755. Town Council.

The Town Council:
(1) May initiate and refer general plan amendments and specific plans or amendments to the Planning Commission for recommendation.
(2) Hears and determines Planning Commission recommendations for the adoption or amendment of the general plan or any specific plans and conditional use permits for establishments selling alcoholic beverages for on premises consumption (excluding restaurants) and for retail sales of firearms, ammunition and/or destructive devices.
(3) Adopts ordinances.
(4) May initiate and refer zone changes and amendments to this chapter to the Planning Commission for recommendation. Nonsubstantive ordinance amendments may, but need not be, referred to the Planning Commission.
(5) Hears appeals from decisions of the Planning Commission Building Official. (6) Hears appeals from decisions of the Planning Commission. (6)(7) Determines whether to extend suspension under section 29.80.285. (7)(8) Determines applications for permits for signs on public property, including but not limited to community-oriented bulletin boards and kiosks.
(8)(9) Determines mobile home park conversion permit applications. (9)(10) Appoints Historic Preservation Committee members. (10)(11) Determines requests for reasonable accommodation when action is not required of the Planning Commission, Development Review Committee, or the Planning Director. (Ord. No. 1316, § 5.60.300, 6-7-76; Ord. No. 1328, 8-2-76; Ord. No. 1375, 11-21-77; Ord. No. 1758, § VIII, 8-1-88; Ord. No. 1762, § II, 9-19-88; Ord. No. 2220, § I(Exh. A), 10-7-13; Ord. No. 2222, § II(Exh. A), 10-21-13; Ord. No. 2304 , § II, 2-18-20)

1 of 3
Ordinance Council Meeting Date
ATTACHMENT 3

DRAFT ORDINANCE

AN ORDINANCE OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS

DESIGNATING THE TOWN COUNCIL TO HEAR APPEALS FROM DECISIONS OF THE

BUILDING OFFICIAL
WHEREAS, the Town is required to designate an appeal body to hear appeals from decisions of the Building Official;
WHEREAS, in 1991, the Town established a Building Board of Appeals; WHEREAS, due to a lack of appeals since the Building Board of Appeals was established, the Town Council has rescinded the enabling resolutions establishing a Building Board of Appeals; WHEREAS, California Building Code Section 1.8.8 authorizes city councils to assume the duties of a Building Board of Appeals;
WHEREAS, the Town Council has opted to assume the duties of a Building Board of Appeals; and
WHEREAS, Town Code Section 29.50.755 lists the Town Council duties; WHEREAS, the proposed ordinance will revised the listed duties of the Town Council to add hearing appeals from decisions of the Building Official; NOW, THEREFORE, BE IT ORDAINED by the Town Council of the Town of Los Gatos as follows:

SECTION I. Section 29.20.755, “Town Council,” of the Town Code is hereby amended to read as follows:

Sec. 29.20.755. Town Council.

The Town Council:
(1) May initiate and refer general plan amendments and specific plans or amendments to the Planning Commission for recommendation.
(2) Hears and determines Planning Commission recommendations for the adoption or amendment of the general plan or any specific plans and conditional use permits for establishments selling alcoholic beverages for on premises consumption (excluding restaurants) and for retail sales of firearms, ammunition and/or destructive devices. (3) Adopts ordinances.

2 of 3
Ordinance Council Meeting Date
ATTACHMENT 3
(4) May initiate and refer zone changes and amendments to this chapter to the Planning Commission for recommendation. Nonsubstantive ordinance amendments may, but need not be, referred to the Planning Commission.
(5) Hears appeals from decisions of the Building Official. (6) Hears appeals from decisions of the Planning Commission. (7) Determines whether to extend suspension under section 29.80.285. (8) Determines applications for permits for signs on public property, including but not limited to community-oriented bulletin boards and kiosks. (9) Determines mobile home park conversion permit applications. (10) Appoints Historic Preservation Committee members.
(11) Determines requests for reasonable accommodation when action is not required of the Planning Commission, Development Review Committee, or the Planning Director. (Ord. No. 1316, § 5.60.300, 6-7-76; Ord. No. 1328, 8-2-76; Ord. No. 1375, 11-21-77; Ord. No. 1758, § VIII, 8-1-88; Ord. No. 1762, § II, 9-19-88; Ord. No. 2220, § I(Exh. A), 10-7-13; Ord. No. 2222, § II(Exh. A), 10-21-13; Ord. No. 2304 , § II, 2-18-20) SECTION II. Severability.

In the event that a court of competent jurisdiction holds any Section, subsection, paragraph, sentence, clause, or phrase in this Ordinance unconstitutional, preempted, or otherwise invalid, the invalid portion shall be severed from this Section and shall not affect the validity of the remaining portions of this Section. The Town hereby declares that it would have adopted each Section, subsection, paragraph, sentence, clause, or phrase in this Section irrespective of the fact that any one or more Sections, subsections, paragraphs, sentences, clauses or phrases in this Section might be declared unconstitutional, preempted, or otherwise invalid.

SECTION III. CEQA.

Adopting this Ordinance is not a project subject to CEQA because it can be seen with certainty that it will not impact the environment (CEQA Guidelines Section 15378).

SECTION IV. Publication.

In accordance with Section 63937 of the Government Code of the State of California, this Ordinance takes effect 30 days from the date of its passage. The Town Council hereby directs the City Clerk to cause this Ordinance or a summary thereof to be published or posted in accordance with Section 36933 pf the Government Code of the State of California.

SECTION V. Effective Date.

3 of 3
Ordinance Council Meeting Date
ATTACHMENT 3
This Ordinance was introduced at a regular meeting of the Town Council of the Town of Los Gatos on the ___ day of _____ 20 , and adopted by the Town Council of the Town of Los Gatos at its regular meeting on the ____ day of _____ 20 , by the following vote:

COUNCIL MEMBERS:

AYES:

NAYS:

ABSENT:

ABSTAIN:

SIGNED:
_______________________________

MAYOR OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA
DATE: __________________
ATTEST:
___________________________________

TOWN CLERK OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA
DATE: __________________