PREPARED BY: Wendy Wood
Town Clerk
Reviewed by: Town Manager and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 07/01/2024
ITEM NO: 1
DESK ITEM
DATE: July 1, 2024
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Adopt a Resolution to Place a 1/8th Cent Sales Tax on the November 2024 Ballot as a General Tax, Introduce an Ordinance to Approve the Tax Ordinance, Adopt a Resolution to Add a Companion Advisory Measure, and Authorize a Budget Adjustment in the Amount of $132,000 from the Available Capital/Special Projects Reserve
ORDINANCE TITLE: AN ORDINANCE OF THE TOWN COUNCIL OF THE TOWN
OF LOS GATOS APPROVING THE ORDINANCE TO BE SUBMITTED TO THE VOTERS OF THE TOWN OF LOS GATOS AT THE NOVEMBER 5, 2024, GENERAL
MUNICIPAL ELECTION THAT PROPOSES TO IMPOSE A ONE-EIGHTH OF ONE
PERCENT GENERAL TRANSACTIONS AND USE TAX IN THE TOWN OF LOS GATOS
REMARKS:
Attachment 7 contains public comment received public comments received after 11:00 a.m.
Friday, June 28 and before 11:00 on Monday, July 1, 2024.
Attachments Previously Received with the Staff Report:
1. Draft General Tax Resolution with Exhibit A: General Tax Ordinance
2. Draft Ordinance Approving Proposed Ordinance with Exhibit A: General Tax Ordinance
3. Resolution Approving Advisory Measure to General Tax
4. Examples of Approved General Taxes with Advisory Measures
5. Responses to Questions from Council Members
6. Public Comment
7. Public Comment Received After 11:00 a.m. on Friday, June 28 This Page Intentionally Left Blank
From: Jim Foley
To: Council
Cc: Clerk; Jennifer Lin ([email protected]); Subject: Chamber of Commerce comments on Sales Tax Measure Date: Friday, June 28, 2024 3:25:42 PM
Attachments: image002.png
[EXTERNAL SENDER]
Honorable Mayor and Town Council,
We appreciate your consideration of our recent feedback on the Sales Tax measure. Our understanding is that there is new information providing that there is less urgency to pass the ballot measures in November of 2024 because any revenue measure passed by Santa Clara County no longer precludes Los Gatos from passing a sales tax measure that otherwise could have exceeded the maximum tax allowed by the State of California and thus not be allowed.
As such, the Chamber of Commerce believes it would be wise to take additional time for more broad outreach and garner strong support for the measures to ensure their success, and consider it on a future ballot.
Thank you,
Jim Foley
Committee on Economic Vitality and Government Affairs – Chair Los Gatos Chamber of Commerce
Jim Foley
Principal/Broker-Owner
DRE # 01841825
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ATTACHMENT 7
From: Phil Koen
To: Mary Badame; Matthew Hudes; Rob Rennie; Maria Ristow; Rob Moore; Joe; Andrew Howard; Ashby Monk
Cc: Laurel Prevetti; Gabrielle Whelan; Wendy Wood
Subject: Agenda Item #1 - Sales Tax Resolution
Date: Saturday, June 29, 2024 5:51:19 PM
Attachments: Pages from Pages from MEET-Packet-f28b4d8d27984eb1a497d3481f1fad0b(1).pdf Pages from MEET-Packet-f8e64916cd514d08a245697ea657aaa0(2).pdf NBS Memorandum- December 2023.pdf
[EXTERNAL SENDER]
Dear Honorable Mayor and Town Council Members,
In my capacity as Chair of the Finance Committee, I am
writing to the Town Council to make it clear the Finance Commission’s recommendation on May 13 to pursue the
1/8 specific sales tax was based on unequivocal
statements made by both the Town Manager and the
Assistant Town Manager (refer to the meeting’s voice
recording from 2 hour 28 minutes to 2 hours 32 minutes) that the County of Santa Clara had an exemption to exceed the State’s sales tax cap and as a result was able to
compete with the Town’s ability to increase the local sales tax rate.
Solely because of this concern, the Finance Commission
made a recommendation to the Town Council to pursue a
specific sales tax. Based on the 5-year financial forecasts prepared by Staff and reviewed by the Finance
Commission, it was also concluded the 5-year forecasts
should not be relied upon because they were
unrealistically conservative in the revenue growth
assumptions. The Finance Commission further concluded
there was no objective evidence to suggest additional
sales tax revenues were immediately required to balance the Town’s general fund budgets because a more
reasonable forecast of future revenues based on historical trends coupled with reasonable cost containment
measures indicated revenue growth was sufficient to
continue to provide essential town services at existing levels with no cuts in service levels required.
The recommendation to proceed with the sales tax
increase was based on Staff’s representation that if the Town did not act quickly, there was a chance the Town
would forever lose the ability to increase the local sales tax rate by an additional 1/8 cent. It now appears that the Finance Commission relied upon inaccurate information.
I would also remind the Town Council, that at the May 7 Council meeting, the Council specifically requested the Finance Commission to review the polling results, discuss next steps regarding the proposed sales tax initiative and provide a recommendation to the Town Council. The
Finance Commission quickly reacted to the Council’s
request and at its May 13 meeting thoroughly reviewed the sales tax proposals.
For sale of clarity, the Staff first made the claim regarding the County of Santa Clara in their report to Council dated February 15, 2024, which is also attached. It appears Staff relied upon a December 14, 2023 NBS memorandum
which urged the Town to “move quickly on this option (e.g., sales tax increase), if desired, as the Town’s remaining capacity for a sales tax increase could be utilized by
another government agency within the County the next
election cycle”. No objective evidence was provided by
NBS to substantiate this claim and it appears Staff at the time did not review the accuracy of the claim. I have
attached the NBS memorandum for your review.
It appears that between the December 14, 2023 NBS
memorandum and the February 15, 2024 Staff report, a
statutory change came into effective on January 1, 2024 that neither Staff nor NBS was aware of. The change was first disclosed in the June 26, 2024 staff report –
approximately 6 months after the change. As Chair of the Finance Commission, I was not contacted and only
learned of this because I read the June 26 Staff report.
Given what has now been disclosed, the Town Council
should not rely on the Finance Commission’s May 13
recommendation. It is clear the Finance Commission had
been provided inaccurate information and had not been
informed on a timely manner of the statutory changes that were enacted January 1, 2024. This may be a moot point, because it appears the Town Council has not relied upon the Finance Commission’s recommendation regarding a
specific sales tax any way.
Furthermore, the Town Council should note the “whereas” statement in the proposed general sales tax resolution that “the cost of providing Town services and programs to
residents have significantly increased over the years and Town revenues have not kept pace” is not supported by the audited financial statements the Finance Commission has reviewed, nor by a reasonable review of the Staff’s 5-year forecasts. In FY 23 the General Fund reported a $5.7m
excess of revenues over expenditures which was a 72%
increase over the FY 22 results of a $3.3m excess of
revenues over expenditures.
Lastly, the Finance Commission discussed the need for
the Town Council to be fully transparent regarding the use of sales tax proceeds and to legally bind the use of the tax proceeds through a specific sales tax and not a general sales tax. The proposed ballet box language does not
reflect the Finance Commission’s recommendation and is
misleading. Please refer to the Finance Commission’s
discussion of this by reviewing the audio recording of the May 13 meeting.
I would urge the Town Council to take these comments
under serious consideration so as to avoid a potential legal challenge to a general sales tax initiative which uses the proposed ballot box language.
Thank you,
Phil Koen
Chair of the Finance Commission
From: Phil Koen
To: Mary Badame; Matthew Hudes; Rob Rennie; Maria Ristow; Rob Moore Cc: Gabrielle Whelan; Laurel Prevetti; Wendy Wood
Subject: 10 year Trend of change in net position
Date: Monday, July 1, 2024 9:41:42 AM
Attachments: Pages from Town%20of%20Los%20Gatos%20FY%202022-23%20Final%20ACFR(2).pdf [EXTERNAL SENDER]
Dear Honorable Mayor and Council Members,
To remove any doubt or uncertainty, attached is a 10 year trend report taken from the FY 2023 ACFR which reports the annual change in net position. Please note that every year with the exception of FY 2021 during the peak of COVID, the Town reported a positive increase. In fact in FY 2022 the change was $24.2m and in FY 2023 $15.1m This demonstrates revenue growth has consistently exceeded the growth in total government expenses for 9 out of the 10 years. An increase in net position can only happen if revenues exceed expenditures.
Please be advised the Town’s website which claims that revenue growth has not kept pace with the growth in expenses, as measured by the Statement of Activities which reports consolidated results on an accrual basis, is incorrect.
The Town’s website must be corrected so residents understand the true historical performance of the Town.
Thank you,
Phil Koen
Chair of the Finance Commission
Town of Los Gatos Schedule 2
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
2013/14 2014/15 2015/16 2016/17 2017/18
Expenses
Governmental Activities:
General Government $ 6,955,804 $ 6,465,852 $ 6,993,661 $ 6,771,628 $ 7,948,918 Public Safety 14,119,786 12,644,221 12,825,688 14,587,597 15,545,521 Parks and Public Works 8,154,616 8,069,352 8,320,623 9,502,707 10,047,003 Community Development 4,424,040 4,047,738 3,227,224 5,093,459 4,667,609 Library Services 2,234,431 2,553,414 2,522,142 2,868,748 3,087,684 Sanitation 363,180 491,359 528,580 466,762 536,296
Redevelopment 21,687 - - - -
Interest and Fees - - - - -
Total Governmental Activities 36,273,544 34,271,936 34,417,918 39,290,901 41,833,031 Program Revenues
Charges for Services:
General Government 2,179,077 1,888,213 1,517,012 1,669,020 1,701,146 Public Safety 3,206,579 3,529,166 3,278,585 2,076,688 1,888,359 Parks and Public Works 1,550,867 2,206,765 1,516,108 2,155,841 4,150,068 Community Development 5,156,061 5,027,497 4,359,146 3,803,626 3,456,390 Library Services 51,775 53,123 46,192 46,746 14,702
Sanitation 328,648 328,868 368,813 410,626 771,442
Operating Grants and Contributions:
General Government - - 15,291 - -
Public Safety 42,661 24,838 98,138 837,329 895,730
Parks and Public Works 994,096 907,745 749,300 665,779 953,294 Community Development - - - - -
Library Services 14,662 4,062 12,228 - 57,200
Capital Grants and Contributions:
General Government - 176,705 - - -
Public Safety - - - - -
Parks and Public Works 2,274,879 2,338,154 1,610,657 770,600 348,437 Community Development 19,360 - - 9,280 -
Total Program Revenues 15,818,665 16,485,136 13,571,470 12,445,535 14,236,768 General Revenues and Special Items:
Property Taxes 11,712,312 12,931,603 13,763,458 14,756,214 15,958,406 Sales Taxes 8,029,571 8,202,678 7,501,175 8,925,276 7,466,253 Franchise Taxes - 2,215,430 2,258,892 2,366,908 2,474,814 Other Taxes 3,718,405 2,062,893 1,997,497 2,351,223 2,667,840 Motor Vehicle in Lieu 13,068 - 12,308 14,056 16,483
Developer Fees - - - - -
Investment Earnings 772,200 428,772 698,324 192,260 333,120 Sale of Property - - - - -
Miscellaneous 350,468 813,324 598,170 528,946 622,105
Insurance recoveries - - - - -
Total General Revenues and Special Items 24,596,024 26,654,700 26,829,824 29,134,883 29,539,021 Change in Net Position $ 4,141,145 $ 8,867,900 $ 5,983,376 $ 2,289,517 $ 1,942,758 Continued
Fiscal Year
Town of Los Gatos Schedule 2
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
2018/19 2019/20 2020/21 2021/22 2022/23
Expenses
Governmental Activities:
General Government $ 8,163,991 $ 7,405,368 $ 7,086,377 $ 15,681,345 $ 10,522,568 Public Safety 16,635,726 20,446,188 19,808,230 15,093,308 17,428,923 Parks and Public Works 10,627,716 11,803,005 13,141,034 12,969,615 12,258,626 Community Development 5,064,637 5,001,958 6,846,834 5,827,001 5,215,961 Library Services 3,059,294 3,347,523 3,496,153 2,969,954 3,653,642 Sanitation 684,673 3,041 185,981 178,575 208,262
Redevelopment - - - - -
Interest and Fees - - - - 29,221
Total Governmental Activities 44,236,037 48,007,083 50,564,609 52,719,798 49,317,203 Program Revenues
Charges for Services:
General Government 1,562,683 1,470,324 1,894,080 1,725,857 2,635,527 Public Safety 1,745,889 1,549,207 1,288,358 1,596,313 1,846,312 Parks and Public Works 2,910,936 3,674,222 4,209,048 5,090,014 3,590,936 Community Development 4,155,231 3,351,753 4,063,776 4,129,718 3,971,336 Library Services 9,476 11,522 - 521 2,039
Sanitation 966,130 231,323 299,478 231,323 359,950
Operating Grants and Contributions:
General Government - 12,290 - 2,766,833 -
Public Safety 826,643 952,045 1,061,344 1,144,226 4,622,373 Parks and Public Works 1,301,152 2,824,638 1,547,102 1,482,896 1,735,608 Community Development - 15,864 223,129 670,929 616,937
Library Services 47,482 49,351 55,181 114,958 174,663
Capital Grants and Contributions:
General Government - 8,258 2,365 12,205,050 -
Public Safety - 9,100 - - -
Parks and Public Works 146,792 832,755 843,980 10,021,156 3,915,175 Community Development - - - - -
Total Program Revenues 13,672,414 14,992,652 15,487,841 41,179,794 23,470,856 General Revenues and Special Items:
Property Taxes 17,321,347 18,330,426 19,878,835 21,132,098 22,746,842 Sales Taxes 8,158,152 7,531,425 7,933,604 8,483,673 8,806,477 Franchise Taxes 2,475,916 2,495,792 2,499,463 2,822,515 3,074,624 Other Taxes 2,726,743 1,911,774 1,126,887 2,042,580 2,292,008 Motor Vehicle in Lieu 14,689 24,526 23,058 35,624 34,406 Developer Fees - - - 1,735,571 614,820
Investment Earnings 1,809,128 2,428,470 227,136 (1,278,978) 797,587 Sale of Property - - - - -
Miscellaneous 2,407,840 323,940 1,528,039 755,400 1,029,864 Insurance recoveries - - - - 1,565,000
Total General Revenues and Special Items 34,913,815 33,046,353 33,217,022 35,728,483 40,961,628 Change in Net Position $ 4,350,192 $ 31,922 $ (1,859,746) $ 24,188,479 $ 15,115,281 Concluded
Fiscal Year