ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 23
To assist with identifying potential expenditure reduction scenarios, the project team leveraged the County’s program-based budget. This data allowed for easier translation of estimated savings amounts and service level impact. This relationship is critical for policymakers to have a clear understanding of the trade-offs associated with no longer providing a service or reducing the current service level. Given a much shorter time horizon for the financial analysis and Task Force facilitation (three months) compared to traditional budget development (nine or more months), the savings estimates required simplified assumptions and instead focused on understanding what programs might be feasible to reduce (e.g., are not mandated) and the net tax levy support that could be realized as potential savings. This information was then used to help guide the Task Force discussion around service level priorities and willingness to reduce certain services.
The figure below provides the scope of service level reductions following the logic described above, beginning with the adopted FY2024 Budget to the approximately $38 million of discretionary services where tax levy savings could be achieved. Nearly all of these services would need to be reduced/eliminated to achieve the $30 million of targeted expenditure reductions that solve the County’s projected budget gap over the next six years. Discretionary is a subjective term. Many of the programs included in this amount still include core services that may have mandated components. For example, law enforcement is mandated for unincorporated areas of the County and, based on resident priorities, would likely not be classified as “discretionary;” however, tax levy support is highest among this functional area, and as such, resource allocation could be reduced by adjusting staffing levels, which may in turn increase response time or limit availability to respond to non-violent calls for service. What constitutes a core service is unique to each locality. Core services are the essential functions and services provided to ensure the well-being, safety, and effective functioning of the community.
Figure 8: Scope of Expenditure Reductions
The nearly $38 million of potential service reductions was also broken down by functional area, as shown below.
This was based on underlying program budget data. The proportion of savings is correlated with how the County spends tax levy revenue by functional area.
ITEM NO. 7.
24 WAUKESHA COUNTY, WI
Figure 9: Scope of Expenditure Reductions by Functional Area
REVENUE ENHANCEMENTS
The County has three tax-related revenue enhancements it could consider to address the budget gap. There are also non-tax revenue enhancements, though many are less impactful on the $30 million target based on the scale of fees or charges that the County has the authority to adjust. Each available revenue option is described in greater detail below.
Exceed Allowable Levy Increase
Waukesha County staff estimate that the value of new construction will increase by approximately 1.4% annually between 2024 and 2030, which means that the County’s levy increase is estimated to be capped at 1.4% per year per State law. However, counties do have the option of increasing their levy limit if a resolution is approved by the County Supervisors, and then voters approve the increase in a referendum. Referendums must specify the amount of the increase, whether the increase is one-time or ongoing, and the purpose for the increase.29 Other counties in the state have requested levy increases in public referendums, with mixed responses from voters.
The following table lists examples of four recent referendums, along with the results of the votes.
Table 15: Results of Levy Increase Referendums in 2024
County Requested Funding
Increase Duration Purpose Adopted?
Forest $2 million (32% of levy) Ongoing Fund ongoing
operations NO; failed 70/30
Green $800,000 (5%) Through 2030 Fund County-owned
nursing home YES; passed 65/35
St. Croix $900,000 (2%) Ongoing Fund public safety
positions YES; passed 54/46
Washington $4 million (10%) Ongoing Fund Anti-Crime Plan NO; failed 56/44 29 Wisconsin Statutes § 66.0602(4).
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 25
Estimated Revenue
The basic rule of thumb for new levy growth in the County is a 1% increase which equals approximately $1 million in new revenue. Based on the expenditure and revenue trends discussed in the Financial Trend Analysis section, the County would need to increase total tax levy by approximately $30 million above allowable levy growth under state levy limits to close the budget gap between 2025 and 2030. Even with the infusion of additional levy dollars through a referendum, the underlying limits on levy growth would likely yield future budget gaps.
With a noteworthy history of managing budgets and minimizing taxpayer impact, the County would likely request a levy increase between 2% and 10%. The structure of the requested increase would be ongoing and cite a specific policy purpose. It is worth noting that the calculated amount of increase for the referendum would remain the same each year until ended by the Board of Supervisors or until a new amount was approved by voters in a referendum.
The base levy, inclusive of the additional ongoing referendum amount, would be subject to the net new construction growth factor each year. The following table illustrates what the estimated revenue would be with an increase of $3 million per year in 2025 (3% increase over the 2024 levy) or $6 million per year (6% increase).
Figure 10: Estimated Levy Increase Revenue, FY2025 – FY2030 Impact on Taxpayers
The median home value in Waukesha County is estimated to be approximately $417,000 in 2025, based on past trends. If the levy is increased by $3 million (3%) in 2025, the median homeowner is projected to pay $566 in County property taxes, which is $14 more than they would pay without the levy increase. If the levy is increased by $6 million, the median homeowner’s taxes are projected to increase by $28 per year.
Vehicle Registration Fee (Wheel Tax)
Another revenue generation option afforded to counties by the legislature is a vehicle registration fee, known colloquially as a wheel tax. The state allows counties and municipalities to enact an annual flat fee via ordinance affecting most vehicles weighing 8,000 pounds or less.30 There is no limit to the fee charged, but funds may only be used for transportation-related purposes.
30 Wisconsin Statutes § 341.35.
$0
$20
$40
$60
$80
$100
$120
$140
$160
2025 2026 2027 2028 2029 2030
Millions
Revenue Generated by a 3% and 6% Increase,
2025 – 2030
ITEM NO. 7.
26 WAUKESHA COUNTY, WI
As of June 2024, 13 Wisconsin counties along with 41 municipalities have adopted wheel taxes. The counties with wheel tax are listed below, along with their annual fee. Fees range from $15 to $30, with an average fee of $23.
None of the municipalities that have enacted wheel tax are in Waukesha County.
Table 16: County Wheel Tax Rates in 2024
County Wheel Tax Amount
Langlade $15
Crawford $20
Dunn $20
Green $20
Iowa $20
Richland $20
St. Croix $20
Marathon $25
Vernon $25
Dane $28
Eau Claire $30
Milwaukee $30
Portage $30
Estimated Revenue
According to the Wisconsin Department of Transportation, Waukesha County had approximately 341,000 registered vehicles eligible for a wheel tax, as of 2023, and the number of vehicles increased by an average of 0.7% per year between 2013 and 2023.31 Based on these factors, a $30 wheel tax would generate the County approximately $10.5 million per year, as illustrated in the following figure. 31 “Vehicle Registrations.” Wisconsin DOT, https://wisconsindot.gov/Documents/dmv/shared/rpt-12-cal-23.pdf.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 27
Figure 11: Estimated Wheel Tax Revenue, FY2025 – FY2030 It is important to note that this figure assumes that the County would have at least $10.5 million in transportation expenditures per year that could be funded by the wheel tax. The County’s FY2024 Transportation Fund budget is $18.1 million, but only $3.6 million is funded through levy. However, this figure does not consider capital spending on transportation projects or any deferred maintenance needs that could be funded with the new revenue.
Impact on Taxpayers
Waukesha County vehicle owners already pay $85 per year in state fees. If the County imposed a wheel tax of $30, the total cost would rise to $115 per vehicle. There is also the potential for costs to further increase if any Waukesha County municipalities opt to enact a wheel tax.
Sales Tax
Another option for generating additional revenue is for the County to adopt a sales tax. Wisconsin state law allows counties to adopt a 0.5% sales tax via an ordinance passed by the County Board of Supervisors. Per state law, the tax may only be used “for the purpose of directly reducing the property tax levy,” 32 which can be implemented in
multiple ways, including replacing property tax levy in the operating budget; reducing borrowing for capital projects, which lowers levy-funded debt principal and interest payments in the future; or defraying the cost of budgetary items that otherwise would be funded with property tax levy. However, state law also allows for counties to “distribute all or a portion of the amount it receives to the towns, villages, cities, and school districts in the county.”33 The county sales tax rate is fixed at 0.5% and would require state legislation to enact a different amount.
Recently the state allowed Milwaukee County to increase its tax to 0.9% and the City of Milwaukee to enact a sales tax of 2%.34 As of August 2024, 69 of the 72 Wisconsin counties have adopted the sales tax, including Manitowoc County’s recent adoption. The three counties that have not adopted the tax are Racine, Winnebago, and Waukesha.
32 Wisconsin Statutes § 77.70(1).
33 Wisconsin Statutes § 77.76(3).
34 “Tax Rates.” State of Wisconsin Department of Revenue, https://www.revenue.wi.gov/Pages/FAQS/pcs-taxrates.aspx. $10.4 $10.4 $10.5 $10.6 $10.6 $10.7
$0
$2
$4
$6
$8
$10
$12
2025 2026 2027 2028 2029 2030
Millions
Estimated Wheel Tax Revenue, 2025 – 2030
ITEM NO. 7.
28 WAUKESHA COUNTY, WI
The sales tax has been a significant source of revenue for the counties that have adopted it. The following table illustrates revenue for some benchmark counties, chosen because they have adopted the 0.5% sales tax and because they have a population of at least 150,000 and/or are in the Milwaukee metropolitan area. Benchmark counties’ sales tax revenue increased by between 6.9% and 7.7% per year between 2019 and 2023 Table 17: Sales Tax Revenue in Benchmark Counties
County 2023 Sales Tax Revenue
($M)
Average Annual Change,
2019 – 2023
Brown $38.0 7.5%
Dane $83.3 7.5%
Kenosha $20.4 6.9%
Outagamie35 $25.8 7.6%
Ozaukee $11.6 7.0%
Rock $19.4 6.9%
Washington $16.8 7.7%
Estimated Revenue
If Waukesha County adopted a 0.5% sales tax and revenue trends were similar to its peers, Raftelis analysis indicates the tax could be expected to generate approximately $50 to $60 million in revenue in 2025, enough to close the projected budget gap. Alternatively, the County could petition the legislature to adopt a lower sales tax rate. This action may result in the state transitioning to a range of allowable sales tax, given the recent legislative adjustment for Milwaukee County and the City of Milwaukee.
Impact on Taxpayers
The average Waukesha County household is estimated to spend approximately $32,00036 on taxable purchases in 2025, based on Bureau of Labor Statistics (BLS) data on purchasing patterns in the Midwest. The following table illustrates taxable expenditures by category for the median household in 2022, per the BLS. 35 Outagamie County did not adopt a sales tax until 2020. 36 Total expenditures were $32,178 for the median household in 2022; the model increases the figure to $35,000 to account for inflation.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 29
Table 18: Average Taxable Expenditures by Category per Midwest Household, 202237 Category Expenditures Percent of Taxable
Expenditures
Percent of Total
Expenditures
Alcohol $667 2% 1%
Apparel and services $1,757 5% 3%
Entertainment $3,688 11% 5%
Food away from home $3,128 10% 5%
Household furnishings and equipment $2,754 9% 4%
Household operations $1,592 5% 2%
Housekeeping $773 2% 1%
Personal care $813 3% 1%
Reading $111 0% 0%
Tobacco/smoking $435 1% 1%
Transportation $11,059 34% 16%
Utilities, fuels, and public services $1,021 3% 2%
Miscellaneous other taxable spending $4,380 14% 7%
Total Taxable Spending38 $32,178 100% 48%
Other non-taxable expenditures (e.g.,
housing, healthcare, groceries) $35,149 N/A 52%
If a household makes 85% of its purchases in the County, this would translate to approximately $142 in additional sales tax cost per year for a 0.5% sales tax. However, this figure does not account for the cost savings associated with property tax relief. It is also important to note that this is a general estimate based on expenditure data for the Midwest overall, not specifically Waukesha County or the Milwaukee metropolitan area.
Economic Analysis
A portion of the sales tax generated would come from non-residents spending money in the County. The exact portion contributed by non-residents is difficult to quantify, but the United States Census reports that as of 2021, 151,673 individuals, the equivalent of approximately 37% of the County population, live outside of Waukesha County but come into the County to work. Additionally, the Wisconsin Department of Tourism estimates $852.2 million in direct tourism spending in Waukesha County in 2022.39 If the sales tax had been in place, this would have translated to approximately $4.3 million in sales tax revenue, or 7% of the estimated total sales tax revenue. 37 “Consumer Expenditure Surveys.” Bureau of Labor Statistics, www.bls.gov/cex/tables/geographic/mean.htm. 38 Figures may not sum due to rounding.
39 “Economic Impact.” Wisconsin Department of Tourism, www.industry.travelwisconsin.com/research/economicimpact/.
ITEM NO. 7.
30 WAUKESHA COUNTY, WI
Other Potential Revenue Generating Options
There may be other potential non-tax options to generate revenue. One consideration is opportunities to raise or implement fees to offset service costs. The County provides police and/or fire/EMS dispatch services for 34 communities and the Sheriff’s Department, with a budgeted operating cost of $7.6 million in FY2024. The vast majority of support for this service comes from a tax levy of $6.6 million. One option for generating revenue would be to apply cost-sharing obligations for participating municipalities. While this would shift some operating costs onto municipalities, the municipalities would still be benefiting from the cost savings of having a shared regional 911 center rather than having to establish and operate a standalone service. However, several municipalities entered into County dispatch understanding that it would be more efficient for taxpayers to consolidate and that no fees would be charged. Implementing a fee at this stage would be complicated.
There may also be one-time revenue opportunities available, such as selling land, facilities, or equipment. Some Wisconsin governments also generate funding by selling naming rights to County facilities. For example, in 2020, Dane County sold 10-year naming rights to its exposition center for $4.8 million40 and Brown County sold 20-year naming rights to its exposition center for $10.0 million.41 However, these facilities are much larger than anything in Waukesha County, so the revenue generated from Waukesha County naming rights would likely not be as significant.
40 “Approving Renewal of Alliant Energy Center Naming Rights Agreement.” Dane County, Dec. 18, 2019, https://dane.legistar.com/View.ashx?M=F&ID=7975410&GUID=F43DB352-9972-487D-8067-9F6D4D2E32D1. 41 “Resch Secures Naming Rights for New Brown County Expo Center.” WBAY, Feb. 12, 2020, www.wbay.com/content/news/Sponsor-buys-naming-rights-to-Brown-County-Expo-Center-567816221.html.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 31
Budget Task Force
The Fiscal Health Assessment section of this report speaks to a strong history of prudent financial management by the County as well as the current and future budgetary challenges as the cost to continue operations outpace annual revenue growth. The County’s budget is rooted in resident priorities gathered as part of the Strategic Planning process. However, the budget shortfalls projected in the coming years point to a clear need to make revenue and expenditure policy decisions to help secure the County’s financial future. The County convened a Budget Task Force to advise the Board of Supervisors on how to proceed.
The Budget Task Force was comprised of a representative group of County and municipal elected officials, business leaders, and engaged residents convened to provide valuable input and direction for the future of County resourcing and service delivery expectations. The 34 members met four times in the spring and summer of 2024 to gain a better understanding of the County’s financial position, engage in meaningful conversation with fellow Task Force members that offered unique perspectives, and ultimately provide strategic direction and prioritization for the next five to 10 years for the County. A summary of the Task Force composition, topics and discussions from each session, and member recommendations for the County’s future is captured below.
COMPOSITION
The Budget Task Force was appointed by the County Executive with the goal of achieving broad representation from backgrounds, experiences, perspectives, and geographic balance across the County. Public members and business leaders brought expertise in public safety, construction and development, non-profit community organizations, and many other relevant industries. Mayors from four municipalities within the County as well as six County Supervisors, were also part of the Task Force and brought expertise in governance and municipal and County financial decision-making. A complete list of Task Force members is provided below.
ITEM NO. 7.
32 WAUKESHA COUNTY, WI
Table 19: County Budget Task Force Members
Role Members
County Supervisors
• Supervisor Larry Bangs
• Supervisor Wayne Euclide
• Supervisor Brian Meier
• Supervisor Chris Mommaerts
• Supervisor Gary J. Szpara
• Supervisor Jeremy Walz
Municipal Elected Officials
• Mayor Bob Magnus – Oconomowoc
• Mayor Rick Petfalski – Muskego
• Mayor Steve Ponto – Brookfield
• Mayor Shawn Reilly – Waukesha
Public Members/Business
Leaders
• Pete Bacon
• Lisa Bruce
• Mary Dietz
• Matt Fennig
• Dean Frederick
• Jeff Hoffmann
• Buck Jurken
• Laura Krohn
• Bonnie Lee
• Angela Mancuso
• Germaine McKenna
• Danny Merkt
• Matt Moroney
• Mark Nelson
• Amanda Payne
• Heather Pfalz
• Renne Ramirez
• Joe Reider
• Jeffery Searle
• Jeremy Smith
• Stan Sugden
• Tom Schreibel
• John Siepmann
• Susan Van Aartsen
SESSION 1: SETTING THE STAGE – DEVELOPING VALUES AND SERVICE PRIORITIES The first Task Force session focused on setting the stage for the group’s work to inform and make recommendations about the County’s future, given the budgetary challenges. Before providing relevant financial and economic context, Task Force members introduced themselves and shared one word that captured their sentiment about participating in the Task Force. Member one-word responses are captured below, with bolded words shared by multiple members.
• Open
• Interested
• Excited
• Humbled
• Curious
• Optimistic
• Future
• Expectant
• Ready
• Intrigued
• Eager
• Unbreakable
• Lead
• Confident
• Hopeful
• Learning
After introductions, Raftelis provided an overview of the Task Force timeline and budgetary challenges facing the County. As described in greater detail in the Fiscal Health Assessment section, the Task Force was brought together to understand the County’s financial outlook over the next five to 10 years. The County’s budget outlook projects a budget gap, where anticipated revenue collections are not expected to cover the anticipated cost to continue providing the same level of services provided by the County today. The theme of the discussion was “the solution is not complicated, but the decisions are hard.”
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 33
As part of the project scope, Raftelis developed an independent financial model using the County’s financial data.
We evaluated the County’s financial management policies against industry best practices and the firm’s experience providing financial services for local governments and public-sector utilities across the Country. Task Force Members were provided relevant context that emphasized how well managed the County’s finances are and the underlying economic conditions that have created the fiscal challenges that lie ahead.
Property taxes are the single largest local tax source to fund service delivery, and the largest driver of the County’s financial challenges is state restrictions on property tax levy growth. While the revenue tax base is among the strongest in Wisconsin, state policy ties the amount of property tax revenue growth that can occur annually to the growth in net new construction. Since the Great Recession, historically, this growth has averaged less than two percent per year. In comparison, the BLS reports that inflation grew by an average of 3% per year between 2010 and 2024.42 Further, many of the County's cost drivers exceed the Consumer Price Index reported by the BLS, including health insurance and the cost of software contracts.
Based on recent trend analysis, the financial model assumes growth of 1.4% annually. This growth curve is far less than the underlying property value growth over the same period. Capped revenue growth requires prudent expenditure control; however, recent inflationary and wage pressure has resulted in a growing divide between revenue generation and cost to continue. As a result, the County has faced budget gaps annually as part of the budget development process that has required service-level reductions or strategic use of one-time funds to meet balanced budget requirements.
After level setting the County’s financial condition, the primary objective of the first session was to understand the Task Force member values and service area priorities. This important framework would then be used in subsequent sessions to help guide discussion and inform recommendations.
Values
Members were given a handout of 11 common values from Raftelis with space to add new values. The discussion began with determining whether any values were missing. The group agreed the 11 values largely captured what they would expect and discussed the sequencing of values versus desired outcomes like quality of life and customer satisfaction. In small groups members discussed the criteria they used to select values and which values best align with the County’s future. After the discussion, each member was given three dot stickers to indicate their values.
The top four values, all earning more double-digit votes, are reflected below. 42 “Consumer Price Index Inflation Calculator.” BLS, https://data.bls.gov/cgibin/cpicalc.pl?cost1=1.00&year1=201001&year2=202401.
ITEM NO. 7.
34 WAUKESHA COUNTY, WI
Figure 12: Task Force Value Voting Results
Service Area Priorities
After discussing and voting on values, the Task Force evaluated potential service level reductions to help mitigate the funding shortfall. Raftelis discussed at a high level how the $391 million budget breaks down into service areas that the County can impact or effect change to meet balanced budget requirements. The largest source of revenue— intergovernmental revenue from the state—is almost entirely designated for specific mandated services. Tax levy revenue of $115 million is where the County has greater control; however, more than one-third supports mandated services. This leads to approximately $38 million in service level costs that could be reduced in order to address the projected budget gap.
Ahead of Session 2, members were given a list of common service areas for the County and asked to discuss in small groups how they might prioritize some of these services for reduction, along with any services they would like to see additional resources allocated. Each group provided a summary of their conversation. Then individual members were asked to vote on their service priorities, using six red stickers for services to reduce and six green stickers for services to enhance. Members were required to use all of their service level reduction votes but did not have to use all of the service level enhancement votes. The results of the voting are captured in the table below, sorted by “net” votes. A negative () net vote indicates greater prioritization for service level reduction compared to a positive net vote indicating prioritization for service level enhancement. 0 0
0 1
2 2
4 15
17 17
26 Transparency
Flexibility
Customer Satisfaction
Operational Optimization (or Efficiency)
Sustainability
Fairness
Sustainable Infrastructure
Fiscally Responsible and Financially Viable
Quality of Life
Infrastructure Stability
Public Safety
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 35
Table 20: Task Force Service Priority Voting Results
Service Area Votes to Reduce Votes to
Enhance “Net” Votes
County-wide Communication (21) 0 (21)
Land Use (18) 0 (18)
Grounds Maintenance (17) 0 (17)
Substance Abuse Treatment (16) 0 (16)
Talent Acquisition (Recruiting) (13) 1 (12)
Public Health (12) 1 (11)
Drug Prevention (13) 2 (11)
Emergency Preparedness (11) 2 (9)
Debt Borrowing (4) 0 (4)
Parks and Open Space (6) 2 (4)
911 Communications (5) 2 (3)
Employee Benefits (3) 1 (2)
Law Enforcement (Patrol
Operations) (6) 4 (2)
Traffic Safety (4) 3 (1)
Crime Investigations (6) 5 (1)
Maintaining County Facilities (2) 2 0
Corrections (Jail) (1) 6 5
Mental Health Support (3) 8 5
Well-maintained Roads
(Including in the Winter) (2) 8 6
Court Operations (1) 8 7
Support for Vulnerable
Populations (Elderly, Disabled) 0 9 9
Infrastructure Development (3) 12 9
Economic Development (1) 14 13
SESSION 2: SERVICE LEVEL REDUCTIONS
The second Task Force session focused on expenditure reductions as a strategy to close the projected budget gap.
The values and service reduction priorities developed during the first session were used to help guide discussion for service level reductions. The Task Force was presented with their target goal of achieving approximately $30 million in expenditure savings to close the projected budget gap through 2030. The consulting team worked with County staff to identify $12.7 of potential expenditure reductions to initiate the exercise and get feedback on the prioritization of cuts.
ITEM NO. 7.
36 WAUKESHA COUNTY, WI
Service Level Adjustments
Before diving into the details of potential service reductions, the facilitators provided context about the various layers of service level reductions. The process of identifying expenditure reductions can be nuanced and timeconsuming. For this reason, annual budget development takes at least nine months of the year. When assessing service reductions there are multiple layers, with most organizations opting to choose reductions that result in the least amount of impact on residents or constituents. Most of the 200+ programs/subprograms and services provided by the County contain value-added, core, and mandated components. Often service-level reductions focus on community prioritization of value-added services and avoid core service reductions. Mandated services are legally required and cannot be eliminated, though they may be trimmed to levels that make carrying out the services increasingly difficult. The pyramid of service level adjustments is used to identify and consider required versus desired service levels for County residents within the finite pool of resources available. The figure below provides definitions for each of the service-level components.
Figure 13: Service Level Adjustment Pyramid
Value-Added Service Level Reductions
To begin evaluation of service level reductions, the Task Force was provided a handout that summarized their prioritization of the service areas presented in Session 1 with potential service level impact for further reductions and estimated value-added cost savings. The table below summarizes each of the service areas considered for reduction, sorted by net score, where a negative value indicates greater prioritization for reduction and a positive value indicates prioritization for additional resource allocation to enhance existing service levels. The estimated cost savings for all value-added service reductions was approximately $12.7 million, or 42% of the budget savings target of $30 million.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 37
Table 21: Value-added Service Level Reductions
Service Reduction Net
Score Service Level Impact Estimated Savings
County-wide Communication (21) Messaging, lack of coordination, reactive communication, minimal community engagement, emergency comms $270,000
Land Use (18) Delayed development permitting and customer satisfaction and increased cost to applicants $415,000
Grounds Maintenance (17) Aesthetic decline, health hazards, decreased property values $370,000 Drug Prevention/Substance
Abuse Treatment43 (14) Higher healthcare costs, overcrowded treatment facilities, public safety impacts $220,000 Talent Acquisition (12) Longer vacancies, poor candidate quality, broad decline in public service delivery $100,000
Public Health (11) Health disparities for vulnerable populations, inadequate health surveillance and emergency response $1,000,000
Emergency Preparedness (9) Delayed crisis management response, prolonged recovery $160,000 Parks and Open Space (4) Limited access, lower quality of life, reduced air quality, removes community meeting space, Muskego Park closure $110,000
911 Communications (3) Higher overall cost to taxpayers due to loss of economies of scale and duplication at the municipal level $4,800,000
Public Safety Staffing44 (1)
Fewer sworn staff resulting in less traffic enforcement and investigation, decreased quality of life, reduced deterrent, increased OT, and deputy quality of life decline
$2,000,000
Infrastructure Maintenance
and Development45 5
Higher taxes due to interest expense on higher debt levels and significant increases in asset life cycle cost $3,000,000 Economic Development 13 Business growth stagnates, fewer job creation and business retention initiatives $250,000
Task Force members spent time individually reviewing the value-added service level reductions and then joined small groups to discuss and evaluate which reductions they would like to propose toward the budget gap target of $30 million. To guide the conversation, members were provided a scorecard with three of the four Task Force values: public safety, infrastructure stability, and quality of life. The fourth value, fiscally responsible/financially viable, was omitted since any cost savings would contribute to this value. For the remaining three values, members were asked to evaluate each reduction using that value lens and assign a ranking of one to three. One indicated low impact, two indicated neutral impact, and three indicated high impact. The scale of ranking for a given reduction could range from three (scoring one on all three values) to nine (scoring three on all three values), with a higher total value score reflecting less desire to pursue the reduction. A high-level summary of the service level reduction exercise is provided below:
44 Services were combined from Session 1 with an average net score reflected. Public safety staffing includes law enforcement, traffic safety, and crime investigation services. 45 Infrastructure maintenance and development includes maintaining County facilities, well-maintained roads, and infrastructure development.
ITEM NO. 7.
38 WAUKESHA COUNTY, WI
• There are low-priority service areas that could be reduced, such as County-wide communications, land use, grounds maintenance, drug prevention and substance abuse, and talent acquisition. • Some reductions like 911 dispatch services may help the County’s budget but merely shift (and likely increase) costs to municipalities.
• The County should evaluate where duplicative services with municipalities happen to assess opportunities for consolidation or reimagining service delivery.
The service level prioritization exercises in Session 1 and Session 2 provided an opportunity to compare how the County spends tax levy revenue with the Task Force priorities. The figure below depicts how one dollar of tax levy is spent across each of the functional areas in the County and includes the prioritization (net score total) for services that fall within that functional area. Overall, the Task Force routinely prioritized service areas where the County allocates most of its tax levy dollars, showing strong alignment between County operations and community priorities.
Figure 14: Task Force Service Prioritization and County Tax Levy Spending It is important to note that participants used all their reduction votes but not all of their enhanced votes, so the sum of net votes is negative. Justice and Public Safety and Health and Human Services had lower net reductions than other categories, indicating prioritization.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 39
Core Service Level Reductions
After the value-added service level reduction exercise, the conversation moved to Core services, the next layer of the pyramid. The County has faced preliminary budget gaps since at least the Great Recession and state-imposed revenue caps on levy growth. The exercise the Task Force went through to identify service level reductions or opportunities to achieve greater efficiencies mirrored the work of the County over the past decade. The underlying structural imbalance between revenue and expenditure growth patterns means that opportunities for value-added expenditure reduction options continue to diminish, leading to core service area reductions to meet balanced budget requirements. While economic conditions will continue to shift over time, the current environment has placed significant cost pressures on service delivery. To mitigate otherwise immediate and adverse impacts for highly prioritized services like public safety and infrastructure maintenance and development, the County has relied on one-time revenue sources in the short run to balance the budget with plans to phase in future ongoing revenue support after one-time sources are no longer available. However, the ability to phase in costs is getting more difficult as scarce levy growth is needed to meet other budget gaps.
Session 2 wrapped up with a discussion about the difficulty of having adequate context and details to inform service level reductions in a short period of time. This is especially true for core services that have mandated requirements. The session ended with a preview of the revenue-generating options to be considered in Session 3.
SESSION 3: REVENUE GENERATING OPTIONS
The third Task Force session focused on revenue-generating options to close the projected budget gap. The project team, along with County staff, assessed available options for new revenue allowed under state law and presented the Task Force with important context and analysis for each option. This included requirements to enact new revenue sources, benchmarking analysis of various counties or municipalities in Wisconsin that have enacted such sources, and fiscal impact to the County and taxpayers. Details of each revenue-generating option are included in the Gap Closure Scenario section above.
Revenue Generating Options – Advantages and Disadvantages After presenting each of the revenue-generating options to the Task Force, members engaged in a discussion regarding the advantages and disadvantages of each option, with a particular focus on exceeding the levy limit and wheel tax options. While the group exercise for sales tax focused on structure, key themes from Task Member group discussions and individual voting related to this tax option are also captured in the table below.
ITEM NO. 7.
40 WAUKESHA COUNTY, WI
Table 22: Advantages and Disadvantages of New Tax Revenue Options Revenue
Option
Estimated
Revenue
Generated, 2025
Advantages Disadvantages
Referendum for
Levy Increase
$3 to $6 million
(ongoing lump
sum levy
increase)
• Taxpayers have a say in whether
to increase revenue
• Raises awareness of County
budget issues
• Use of funds can be specifically
targeted
• More stable source of revenue,
once approved would remain in
place
• No restriction on the amount of
increase (pending voter approval)
or on how the funding is used
• Low per-household impact
• Would not be likely to fully
address the budget gap
• Referendum would be required
for any changes – unlikely to
achieve broad support, high risk
of failure
• Frequency of school referendums
might detract voter support
• All funding would be contributed
by property owners, with limited
contribution from non-residents
who use County services
• Would require significant
information campaign ahead of
the vote about a topic that can be
hard to message
Wheel Tax
$10.5 million
($30 per vehicle)
• Could be enacted by the County
Board
• No restriction on fee amount,
though typical annual amounts
are relatively small (i.e.,
affordable)
• Raises revenue from more
people than property owners
(e.g., user tax)
• Creates higher funding potential
for road/infrastructure
maintenance, a high priority of
the Task Force
• Easy for public to understand
• Can only be used for
transportation purposes
• Would not fully address the
budget gap (minimal impact)
• Revenue does not grow with
inflation (tied to population and
number of vehicles)
• Unpopular “tax” among residents,
mandated by the government
• No out-of-County taxpayers
• No voter say
Sales Tax
$50 to $60 million
(0.5% sales tax)
• Allows non-residents who take
advantage of County services to
contribute to the cost of those
services
• Would generate enough revenue
to fully address the budget
shortfall
• Would allow for some property
tax relief
• Could be enacted by the County
Board
• Sales taxes are regressivelarger impact on lower-income individuals
• The amount of the sales tax is
fixed and cannot be increased or
decreased (without a legislative
change)
• Adverse impact to the business
community
• Brings in more revenue than is
needed
• May lose sight of other revenues
or operational efficiencies over
time
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 41
Before breaking into small groups to discuss the sales tax structure, Raftelis shared additional context related to enacting a sales and/or wheel tax among other counties in the state. The chart below shows the historical timeline of when counties throughout the state chose to enact a sales and/or wheel tax. Many counties moved forward with a sales tax as soon as the option was made available to them by the state (1986 – 1995). During the economic boom of the early 2000s, little activity occurred, followed by more counties exercising a wheel tax after the 2011 state legislation limiting property tax levy growth and the fiscal challenges associated with the Great Recession and Global Pandemic. The ability of Waukesha County to have weathered the recent economic challenges without either of these new revenue-generating options, when nearly all counties elected one if not both, speaks to their level of operational efficiency.
Figure 15: Sales and Wheel Tax Timeline – Adoption by Year Sales Tax Structure
The Task Force then spent time in small groups discussing how they might structure a 0.5% sales tax, knowing that it would generate revenue for the County beyond what is needed to close the budget gap over the next few years.
As required by the state and prioritized among County officials, some of the revenue would be used to directly reduce the property tax levy for residents. Beyond that, Task Force members were asked to brainstorm and discuss other opportunities that aligned with the values and service level priorities developed in Session 1.
Two somewhat competing themes emerged from this activity:
• While there is general understanding and support for new revenue, there is a preference not to collect more than the County’s estimated budget gap. Throughout the project team’s review of County financial practices and then during conversations with County staff and Task Force members, there is great pride in the County’s ability to efficiently deliver services with the lowest impact possible to taxpayers. Low percapita spending rates and continuing to “sharpen the pencil” are valued characteristics of the County’s financial management policies. Many Task Force members did not like that the sales tax amount is currently fixed at 0.5% by state law. They understood it would require lobbying the state for greater autonomy over how much sales tax to enact but acknowledged such a preference.
ITEM NO. 7.
42 WAUKESHA COUNTY, WI
• Municipalities in the County face similar budgetary challenges and would support the County’s desire to enact a sales tax. The funding mechanisms for municipalities in Wisconsin follow a similar pattern to County revenue sources. As such, municipalities continue to face significant fiscal constraints with limited ability to increase the property tax levy. This is especially true for municipalities that are largely built out and focused on redevelopment because of the net new construction limitations. Municipal and County leaders on the Task Force informed members of the inherent challenges of lobbying the state for higher Shared Revenue when they had not yet enacted other revenue options available to them. They also added that a new revenue source might actually encourage greater economic development and improvements to the housing stock.
A summary of each group’s discussion regarding a sales tax structure is provided below.
Table 23: Summary of Sales Tax Structure Considerations Group How to Use or Structure Additional Revenue Generated from 0.5% Sales Tax Group 1
• Economic Development – small business grants, façade improvements, municipal downtown revitalization
• Waukesha County Technical College Public Safety Academy to assist with recruiting pipeline and public safety operations
Group 2
• Seems like too easy of a fix
• Lose sight of other revenues and efficiencies – ability to sharpen the pencil • A nice structure might be 60% to County, 40% to municipalities • Within the County’s 60%, does as needed but includes direct property tax relief
Group 3
• Acknowledged the group had different perspectives
• Municipal leaders in the group like 60% to the County and 40% to the municipalities
• Other emphasized the importance of a direct property tax offset and not inventing new things to spend money on
Group 4
• Many in the group were not favorable of raising more dollars than needed • Additional revenue could pay down debt, which also lowers property tax levy • Investment in public safety, infrastructure, and amenities like bike and walking paths
Group 5
• Shouldn’t tax for more than is needed, would prefer a process that looks at expenditure reductions, user fees, surplus carryover, reforms, excess property sales, and then revenue enhancements
• If revenue enhancement is required, they agreed sales tax was the preferred method but would like to ask for only what is needed
• Acknowledged the business community would not like the impact of a sales tax
Group 6
• Preferred requesting something less, realizing the odds of achieving this with the state legislature and other counties would be difficult • A shared revenue with municipalities tied to public safety, expansion of the jail knowing it is reaching capacity, and infrastructure investments • Opportunities for assisting municipalities with transitioning to full-time firerescue services.
SESSION 4: GUIDANCE FOR COUNTY EXECUTIVE AND BOARD OF SUPERVISORS The goal of the last Task Force session was to provide the County Executive and County Board of Supervisors guidance on how to navigate the County’s fiscal challenges over the next decade. Raftelis led a review of the key themes that emerged from the first three sessions and shared with the Task Force the scenario voting results from Session 3.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 43
Scenario Prioritization Voting Results
Task Force members who were not present at the third meeting were also able to offer feedback on the same questions via an online survey. A total of 29 individuals provided comment, including 27 who were present at the meeting and two who were not present. The following sections summarize the results of these polls. More detailed responses by statement are included as Appendix A.
Feedback on the County’s Overall Strategy Moving Forward Participants were given several statements about Waukesha County’s overall strategy to address the budget shortfall moving forward. They were asked to rate their level of agreement on a scale from one (least agreement) to 10 (most agreement). The statements were as follows:
• Service Reductions: The County should focus on service reductions and expenditure cuts to address the budget shortfall.
• New Revenue: All revenue options available to the County should be explored. • Service Reductions and New Revenue: The County should explore new revenue options and continue to reduce ongoing expenditures.
All three strategies had strong support from participants, with an average agreement rating of more than seven out of 10. The service reduction strategy had the lowest average approval, and the balanced strategy had the highest, as illustrated in the figure below.
Figure 16: Average Task Force Agreement Rating by Strategy to Address Budget Gap Participants were also asked about their agreement with the statement, “The County’s current budget is aligned with my funding priorities.” The average rating was 6.69, with only two participants (7%) rating their agreement as less than a five out of 10.
7.21 7.52 7.86
0 1
2 3
4 5
6 7
8 9
Service Reductions New Revenue New Revenue and Service
Reductions
Average Agreement Rating by Strategy
ITEM NO. 7.
44 WAUKESHA COUNTY, WI
Feedback on Revenue Generation Options
Participants were asked to rate their agreement with the following options for generating additional revenue:
• Implementing a 9-1-1 fee
• Putting forth a referendum to raise the levy limit
• Implementing a sales tax
• Implementing a wheel tax
Of the four options, only the sales tax had an average agreement rating of more than five out of 10, as illustrated in the figure below. The sales tax agreement represents the maximum level of agreement- specific sales tax options are discussed in the subsection below.
Figure 17: Average Task Force Agreement Rating by Revenue Option Sales Tax Strategy Options
Participants were asked to react to a series of statements with options for a sales tax if implemented. Options included:
• Petitioning the State Legislature to allow the County to enact a sales tax of less than 0.5% • Using the sales tax for property tax relief
• Using the sales tax for property tax relief and economic development in the County • Using the sales tax for property tax relief and aid to municipalities for economic development • Using the sales tax for property tax relief and aid to municipalities for infrastructure • Using the sales tax for property tax relief and aid to municipalities for public safety • Using the sales tax for property tax relief and general aid to municipalities Two options, offering general aid to municipalities and petitioning the Legislature to allow a lower sales tax, had average levels of agreement of more than 6.5, as illustrated in the figure below. The lowest average levels of agreement were with options that would provide funding for economic development efforts.
2.55 3.04
4.55 5.55
0 1
2 3
4 5
6 Referendum Wheel Tax 9-1-1 Fee Sales Tax
Average Agreement Rating by Revenue
Generation Option
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 45
Figure 18: Average Task Force Agreement Rating by Revenue Option It is important to note that there were significant levels of disagreement among participants on many of these options. For example, while 45% of respondents generally agreed (rating of six or higher) with the statement, “The County should consider implementing a 0.5% sales tax that funds local property tax relief and provides aid to local municipalities for infrastructure,” another 41% generally disagreed (rating of four or lower). Additionally, 48% agreed with the statement, “The County should consider implementing a 0.5% sales tax that funds local property tax relief.,” while 38% disagreed. The specific agreement by statement is illustrated in Appendix A.
Task Force Key Themes
After reviewing the takeaways from the first three sessions, Raftelis identified the key themes that emerged from the facilitated sessions and asked members of the Task Force to review and identify if anything was missing or should be changed. Members in attendance agreed that the five themes presented below largely captured the group's work.
After reaching a consensus on each key theme, Task Force members were asked to write down on a sticky note the most important message they would like to convey to the County Executive and Board for each theme. Individual thoughts were then collected and grouped by theme. After that, members broke into groups, with one group per theme, tasked with reviewing the individual notes from fellow Task Force members and then drafting a statement that reflected the message for that theme. Individual notes are reflected in Appendix B, and the group statements for each key theme are provided below.
Importance of fiscal responsibility
• Continue to focus on measurable cost-cutting, and efficiency improvements and publicize wins. • Push the state for equitable funding and release of some portion of surplus funds to counties and municipalities.
• Continue actions to maintain Aaa/AAA bond rating and other fiscal processes and checks and balances.
3.68 4.14
5.07 5.48 5.55
6.59 6.72
0 1
2 3
4 5
6 7
8 County
economic
development
Economic
development
aid to
municipalities
Infrastructure
aid to
municipalities
Public safety
aid to
municipalities
Sales tax with
property tax
relief
General aid to
municipalities
Less than 0.5%
Average Approval Rating by Sales Tax Option
ITEM NO. 7.
46 WAUKESHA COUNTY, WI
Targeted budgetary service level reductions and enhancements • Allocate funds to preserve the services most valued by the community:
o Public safety
o Infrastructure
o Potential shared services
• Eliminate the expansion of services for the sake of spending projected surplus from sales tax, etc.
Desire to explore revenue options
• There is an appetite for a sales tax of 0.5% to a minimum of what is needed to balance the budget. • The “Waukesha Way” needs to be honored by utilizing grants, collaboration, and all other revenue options and savings that are currently being used during tight budget times. • There is recognition that extra sales tax revenue can be shared with local municipalities to address similar budgetary issues.
Support for infrastructure and economic development
• All commenters but 2 indicated it is an essential priority. 1 indicated infrastructure development should favor commercial development. 1 indicated that if the sales tax went to debt reduction, then the future of infrastructure development would be more economical.
• Overall, the answers were that infrastructure development is something that should not be reduced but that it needs to be maintained or increased.
Evaluate shared services and shared revenue
• There is support for the concept of shared services among similarly sized communities, recognizing that larger communities like Brookfield have higher service expectations due to their advanced infrastructure.
This difference in service levels can present challenges in partnerships with smaller communities. As an example, the City of Brookfield can respond to an accident within five minutes of notice at any location within the city.
• Shared revenues are also essential to address the universal structural funding challenges faced by local municipalities. While a sales tax is a short-term solution, it is the most viable alternative to raise revenue in the current environment. It is imperative that the state legislature develops a sustainable funding model that provides local governments with more flexibility.
At the conclusion of the Task Force session, the County Executive thanked each of the members for their commitment and dedication to this important work. Members were notified that Raftelis would present the results of the fiscal health assessment and Task Force work to the County Board of Supervisors at the end of August at which time the final report would be shared with the Board and Task Force.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 47
Conclusion
Waukesha County has a longstanding history of prudent financial management and efficient use of taxpayer resources to provide valued services to residents. County staff are to be commended for their ability to accurately forecast service needs alongside available resources. State-imposed growth restrictions on the largest local revenue source – property tax levy – have led to increased fiscal constraint, especially in the past five years as the County has grappled with an increasing cost to continue providing services that exceed annual revenue growth. Despite these challenges, the County has effectively managed to meet service level expectations with the lowest per capita spending levels in the state.
46 Future financial projections indicate the need for more extensive policy actions to balance resident service priorities with fewer available resources. The Budget Task Force was created to provide guidance and direction for the County’s financial future over the next decade. The work they conducted over the course of four in-person sessions reflects their dedication and commitment to the County’s future success. The key themes that emerged from the Task Force helped to both build awareness within the community about the fiscal realities the County faces and provide invaluable policy guidance for the County Executive and County Board of Supervisors as they weigh critical policy decisions in the near term that will chart a path to financial sustainability in the long-term. 46 Forward Analytics, The Green Book, A Book of County Facts, 6th Edition. 2023. https://www.forwardanalytics.net/wp-content/uploads/2023/09/Waukesha-County-Insert.pdf.
ITEM NO. 7.
48 WAUKESHA COUNTY, WI
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ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 49
APPENDIX A:
Scenario Prioritization
Voting Results
ITEM NO. 7.
50 WAUKESHA COUNTY, WI
The following figures illustrate the distribution of responses for statements about options for addressing the budget gap. A total of 29 individuals provided feedback. All statements are rated on a scale from one (least agreement) to 10 (most agreement).
Feedback on the County’s Overall Strategy Moving Forward Figure 19: Task Force Agreement Rating on New Revenue
Figure 20: Task Force Agreement Rating on Service Reductions 0 1
2 3
4 5
6 7
8 9
10 1 2 3 4 5 6 7 8 9 10
I believe all revenue options available to the
County should be explored.
0 2
4 6
8 10
12 1 2 3 4 5 6 7 8 9 10
The County should focus on service reductions
and expenditure cuts to address
the budget shortfall.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 51
Figure 21: Task Force Agreement Rating on New Revenue and Service Reductions Figure 22: Task Force Agreement Rating on the Current Budget 0 2
4 6
8 10
12 1 2 3 4 5 6 7 8 9 10
The County should explore new revenue options
and continue to reduce ongoing
expenditures.
0 1
2 3
4 5
6 7
8 1 2 3 4 5 6 7 8 9 10
The County’s current budget is aligned with my
funding priorities.
ITEM NO. 7.
52 WAUKESHA COUNTY, WI
Feedback on Revenue Generation Options
Figure 23: Task Force Agreement Rating on a 9-1-1 Fee
Figure 24: Task Force Agreement Rating on a Levy Increase Referendum 0 1
2 3
4 5
6 7
8 1 2 3 4 5 6 7 8 9 10
The County should explore implementing an
annual service fee to fund 9-1-1 dispatch
operations.
0 2
4 6
8 10
12 1 2 3 4 5 6 7 8 9 10
The County should consider proposing a
referendum to exceed the levy limit in
order to address the budget shortfall.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 53
Figure 25: Task Force Agreement Rating on a Wheel Tax
Feedback on Sales Tax Strategy Options
Figure 26: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief 0 1
2 3
4 5
6 7
8 9
1 2 3 4 5 6 7 8 9 10
The County should consider implementing a
wheel tax to address the budget
shortfall.
0 1
2 3
4 5
6 1 2 3 4 5 6 7 8 9 10
The County should consider implementing a .5%
sales tax that funds local
property tax relief.
ITEM NO. 7.
54 WAUKESHA COUNTY, WI
Figure 27: Task Force Agreement Rating on a Sales Tax of Less Than 0.5% Figure 28: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and General Municipal Aid
0 2
4 6
8 10
12 14
16 1 2 3 4 5 6 7 8 9 10
The County should lobby the state legislature to
allow for a sales tax less than .5%.
0 1
2 3
4 5
6 7
8 9
1 2 3 4 5 6 7 8 9 10
The County should consider implementing a .5%
sales tax that funds local
property tax relief and provides general aid to
local municipalities.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 55
Figure 29: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Municipal Aid for Infrastructure
Figure 30: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Municipal Aid for Public Safety
0 1
2 3
4 5
6 7
8 9
1 2 3 4 5 6 7 8 9 10
The County should consider implementing a .5%
sales tax that funds local
property tax relief and provides aid to local
municipalities for infrastructure.
0 1
2 3
4 5
6 7
8 1 2 3 4 5 6 7 8 9 10
The County should consider implementing a .5%
sales tax that funds local
property tax relief and provides aid to local
municipalities for public safety.
ITEM NO. 7.
56 WAUKESHA COUNTY, WI
Figure 31: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Municipal Aid for Economic Development
Figure 32: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Economic Development
0 1
2 3
4 5
6 7
8 9
10 1 2 3 4 5 6 7 8 9 10
The County should consider implementing a .5%
sales tax that funds local property tax relief and
provides aid to local municipalities for economic
development.
0 1
2 3
4 5
6 7
8 9
1 2 3 4 5 6 7 8 9 10
The County should consider implementing a .5%
sales tax that that funds
local property tax relief and assists with
economic development.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 57
Feedback on the Process
Figure 33: Task Force Agreement Rating on the Effectiveness of the Task Force Process 0 1
2 3
4 5
6 7
8 1 2 3 4 5 6 7 8 9 10
This process has helped me better understand
the County’s financial
picture.
ITEM NO. 7.
58 WAUKESHA COUNTY, WI
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ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 59
APPENDIX B:
Task Force Member Comments
by Key Theme
ITEM NO. 7.
60 WAUKESHA COUNTY, WI
The following table captures the individual Task Force member comments for each of the five key themes identified. The comments are transcribed verbatim from the last session.
Task Force Member Comments by Theme
Importance of Fiscal Responsibility
• Use shared revenue to pay down debt and reduce County property tax. Leads to County budget that will not grow as fast due to inflation and increased costs as debt payment will significantly decrease. • First and foremost [value] in running the County and formulating budgets. • County should not collect more than needed to close critical services gap. Need to continue to lobby state to fix shared revenue and modernize property [tax] caps.
• I believe the County is already fiscally responsible. • Push Madison for more funding.
• How best to address budget excesses – Why do they occur, can budgets be more precise, how best to use excess dollars at end of year.
• Maintain existing standard of fiscal responsibility, which allows us to provide/maintain a high level of services. • The County should “sharpen the pencil” as required.
• Elected messaging; inherent by past decisions; current State communication; our County versus other similar county.
• Caution – The relief created by Sales Tax option could take focus off of need to constantly look for reduction options.
• Do not grow government.
• I believe County and municipal service levels are generally appropriate and would try to avoid major cuts. • What does the future look like when we experience another budget shortfall in spite of a sales tax? • [The] Waukesha Way is to emphasize fiscal restraint and only introduce a new tax as a last resort and only to the extent needed. Tools to use first: 1) use previous surplus; 2) sell surplus property; 3) increase user fees; 4) cut in shortage; 5) look for efficiencies (shared services).
• Maintain the AAA bond rating. Continue to be prudent with taxpayer resources. • The Waukesha Way is to solve our fiscal problems through responsible spending. Sharpen the pencil. • Should always be a priority under every revenue generation scenario. • Focus on fiscal responsibility doesn’t include generating more revenue than needed. • How do we control size of government with so much money available? • Maintain.
Targeted Budgetary Service Level Reductions and Enhancements • Have municipalities pay the cost of shared dispatch.
• Big on collaboration of shared services. Is it the County’s job to provide revenue to municipalities? • Would like to see each department head[‘s] ideas on cost reductions. Also need administrative infrastructure across County organization. For example: telephones; does every department need marketing, communications, administrators, etc.
• Deep dive on service statistics, # and $ impact related to cost. • The services that can be reduced currently; one year fix? [or] more than [that]. • Do not reduce services that enhance quality of life – Keep Waukesha County as a desirable place to live, etc. • This is the first tool to use to balance the budget after use of the surplus. • We must continue to provide a safe and secure place to live. • Invest in maximum impact – safety, infrastructure, government functions. • With 37 municipalities each responsible for their own public safety, why do we need to expand County Sheriff’s department?
• Continue the important work of adjusting service levels and finding efficiencies – despite any revenue options. • Explore reduction of Health & Human Services spending. • I favor sharing services where feasible and more efficient. I believe the ½% sales tax revenue should be: 40% County, 20% Real estate tax reduction, 40% local governments. • Think creatively about spending. There is room in all budgets to reduce spending. We should use a holistic approach taking all opportunities into account.
• Increase funding for services supporting families, veterans, and victims of domestic violence/abuse or trafficking. • Some departments are fully funded by the services they offer, leave these alone. Some departments are fully tax level funding; if core service, leave alone. If partially funded by tax levy, focus some reduce. • Clean up public safety budgeting issues.
ITEM NO. 7.
BUDGET TASK FORCE ANALYSIS AND FACILITATION 61
Desire to Explore Revenue Options
• Approve sales tax at 0.5%. 40% to municipalities, 20% to property tax relief, 20% to County budget, 20% to paying down debt.
• Consider increasing taxes for all who use County services (e.g., include non-residents). • I would suggest a referendum first – if voted down, propose sales tax 5.3%. Sales tax is regressive hitting low income hardest and businesses. Would be head wind to economic development. • Increased sales tax seems to be the only option that “solves” the problem. • 1) Sales tax 0.5%. 2) Legislature work on shared revenues. • Sales tax is the only responsible revenue increase option – collects revenue from other county’s residents which we pay to them when we shop there.
• Implement a ¼% sales tax, increase so we do not collect more than we need. • Explore grants in all areas. Donations and sponsorships to Parks & Health and Human Services. Last option sales tax at less than ½%.
• New revenue source as the last resort and then only take what is necessary to solve the budget issue. Taking more than needed is not responsible or the Waukesha Way. Plus eats at future needs. Partial sales tax is better. • The conservative approach in this County necessitates communicating impact to educate residents, regardless of which option is selected.
• Explore state change to allow for less than 0.5%.
• Fees, naming rights, sponsorships, property tax, grow economy. Infrastructure and development best-in-class. • Sustainability prediction, time implications.
• Each revenue option should be taken seriously. The wheel tax will provide some revenue although it is obviously not enough to offset the entire deficit.
• I believe the best revenue option is the ½% sales tax and I would not attempt to reduce that. • Tough decision equals long-term solutions.
• If a sales tax is necessary and the state is essentially forcing the County’s hand, think big. This is about a lot more than just a sales tax.
• Explore sale of County lands to resolve short-term deficits and allow expansion of tax increment. • Exceed [property tax] levy: No. Vehicle registration fee: No. Sales tax: Yes, if… 1) reduce property taxes, 2) county ordinance has flexibility to adjust property tax levy, general fund, build a buffer into the plan.
Support for Infrastructure and Economic Development
• Paying down debt with sales tax $’s allows for future where infrastructure can become paid for with incoming dollars. Big win for all property owners.
• Most important responsibility for County and Government. We are behind in this area. • Though not rated as high as Public Safety, extremely important to value to keep this County growing, attractive. • Continue (or increase) focus on Economic Development to increase tax revenue on commercial (versus residential).
• Focus more on innovation. Waukesha Version 2.0.
• This area should be a strong priority.
• Infrastructure, Public Safety, and Health Services should be protected to the greatest extent possible. • Think creatively about where we are able to reduce funding to Infrastructure and Development by identifying risk and proportionally addressing reductions.
• Maintaining existing infrastructure and focusing on new development will translate to economic growth, as strong infrastructure attracts business.
• I believe County and municipal expenditures on infrastructure and development are currently appropriate and would avoid major changes.
• Necessities now. 5 years from now.
• Roads are very important to residents and commerce. Investment here is usually appreciated and often noticed by taxpayers.
• Visibility to residents and visitors speaks volumes about our County. • Continue economic development but maintain the character of the county—preserve the reason people moved here!
• High priority to continue to maintain and expand infrastructure allowing for housing/building development to expand. Creates an avenue for revenue growth under current state statutes. • Roads are critical. Shared revenue if implemented needs to account for differences in infrastructure from cities, villages, and rural towns. For example, no public pools in the Town of Oconomowoc or Town of Eagle. • Boost business and housing market growth. Draw businesses and homeowners from surrounding communities.
ITEM NO. 7.
62 WAUKESHA COUNTY, WI
Evaluate Shared Services and Shared Revenue
• All municipalities in County are not cities. Most towns in County do not want shared revenue but are very interested in shared services.
• Continue working on sharing services. Sales tax (40%) shared with municipalities based upon population. • Look for strategies and cuts with the least reduction in core service to citizens. • Explore all options to realize efficiencies by sharing services. • Advantages and impacts, time implications.
• Encourage and explore opportunities to consolidate services among the County and municipalities. • Shared services and revenues will help the cities with their own budget issues. • I believe the County and municipal governments are currently fiscally responsible, and I would try to avoid major cuts.
• Share revenue to encourage municipalities to cooperate. Municipalities using 911 Dispatch should pay for service. Use shared revenue to encourage Fire & Rescue consolidation. • Think creatively to combine services and reform to identify savings possibilities. • Shared Revenue [from] 0.5% [sales tax], 50% County, 35% Municipalities, 15% Tax Relief. • Budget issues impact local municipalities same as County—great opportunity to get property tax relief for County and local tax bills.
• Brainstorm more options for shared services—e.g., public road plowing and maintenance, mowing near roads, charging for 911.
• Remain committed to intentional, creative eye to consolidate services whenever possible. • Focus on shared services, collaboration, and consolidated services. • Shared Services and Revenue → Slippery slope, what happens if County needs to grow? • Benefits to municipalities, directly benefits residents, making tough revenue decisions more palatable • Believe there is limited (small amount) revenue to be shared. Likely some communities will be uncooperative (recall 9-1-1 consolidation). Overall a great idea.
• Yes, to splitting excess revenue to communities with simple ordinance, but vigorous accounting calculations.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 1 (FISCAL CONDITION) AND STUDY 2 (FISCAL IMPACT) APPENDIX E: RICHARDS RANCH FISCAL IMPACT REPORT
ITEM NO. 7.
CITY OF SANTA MARIA AND
COUNTY OF SANTA BARBARA
RICHARDS RANCH FISCAL IMPACT STUDY
ADMINISTRATIVE REVIEW DRAFT
JULY 24, 2025
Oakland Office Corporate Office Other Regional Offices
66 Franklin Street 27368 Via Industria Orlando, FL
Suite 300 Suite 200 Plano, TX
Oakland, CA 94607 Temecula, CA 92590 Washington, DC
Tel: (510) 832-0899 Tel: (800) 755-6864
Fax: (951) 587-3510
www.willdan.com
ITEM NO. 7.
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ITEM NO. 7.
Table of Contents
EXECUTIVE SUMMARY............................................................................. I Background and Study Objectives i
Summary of Results i
1. INTRODUCTION...................................................................................1
2. METHODOLOGY .................................................................................4
3. FISCAL IMPACTS ................................................................................5 Revenues 5
Project Demographics 9
Santa Maria Revenue Projections 9
Santa Maria Expenditures 11
County of Santa Barbara Revenues 12
County of Santa Barbara Expenditures 13
Sales Tax Revenues 14
Property Tax Revenues 18
ITEM NO. 7.
i
Executive Summary
This report identifies the estimated fiscal and economic impacts of the Richards Ranch Project on the City of Santa Maria and the County of Santa Barbara.
Background and Study Objectives
The project proponent, MD3 Investments, proposes to construct a mixed-use project on the border of the City of Santa Maria in the unincorporated community of Orcutt. The project proponent and the County have proposed annexing the project into the City of Santa Maria. The Santa Barbara County Local Agency Formation Commission requires that a proposed annexation consider the fiscal impacts of an annexation to ensure that municipal services can be provided to the project. A fiscal impact study considers the costs and revenues to the City and County associated with the project, especially tax revenues and services such as public protection.
The project proponent had a prior fiscal impact study prepared by the Natelson Dale Group, Inc. This analysis relies heavily upon data from that study, but Willdan has made its own judgments regarding methodology and assumptions and has modified the analysis accordingly. The analysis assumes that the project will be annexed into the City of Santa Maria, which has implications (most notably, services are provided by the City of Santa Maris, tax and fee revenues accrue to the City, and the municipal property tax allocation is shared between the City and the County). As part of the evaluation process, the City and the County have engaged Willdan Financial Services to evaluate the Natelson report and prepare an independent fiscal impact analysis.
Summary of Results
Following is a summary of the analysis, also included below in Table 1, explained in further detail in the body of the report.
• The projected impact to the City of Santa Maria general fund is a fiscal surplus of $93,000 annually.
• The projected impact to the County of Santa Barbara general fund is a fiscal surplus of $276,000 annually.
• Additionally, the report calculates the rate of property tax sharing at which the City and County would have an estimated fiscal impact of approximately zero. For the City this figure is 30 percent, and for the County 33 percent.1 1 Consistent with the Natelson report, the Willdan analysis assumes that the City receives fifty percent of the fire district revenue and twenty-five percent of general fund property tax revenue generated by the project, for an overall share of approximately thirty-eight (38.4) percent. This calculation is explained in further detail in Table 19.
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study ii
Table 1
Summary of Results
Richards Ranch Fiscal Impact Analysis
Item Amount
City Net Fiscal Surplus (at 25/50% share, 38% overall) $ 92,989 City "breakeven" property tax share 30%
County Net Fiscal Impact (at 75/50% share, 62% overall) $ 275,823 County "breakeven" propety tax share 33%
Willdan Financial Services, 2025
ITEM NO. 7.
1 1. Introduction
MD3 Investments has proposed construction of a mixed residential and commercial project in Orcutt, an unincorporated community adjacent to the City of Santa Maria. The City and County are considering annexation of the project into the City. The City and County have engaged Willdan to prepare a report that estimates the fiscal impacts of the project after annexation, building on a prior report prepared by the Natelson Dale Group, Inc., for the project proponent. The proposed project will consist of 484 multi-family rental and single-family for-sale residential units and 195,000 square feet of commercial development, including a retail center and mini storage. Tables 2 and 3, on the following pages, detail the residential and commercial elements of the project, and estimate the assessed value (based on sales price) and expected residents and employees for the project.
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 2 In Table 2, Willdan has increased the estimated residents in each development type to more closely match the average household size of 3.7 in Santa Maria. Willdan has also reduced the estimated monthly rent and townhome sales price based on its evaluation of the Santa Maria market.
Table 2
Residential Project Description
Richards Ranch Fiscal Impact Analysis
Type Units Value/DU Total Value HH Size Tot Residents
Apartments
1-BR 120 410,032 49,203,819 1.5 180
2-BR 176 503,221 88,566,875 2.5 440
3-BR 88 615,048 54,124,201 3.5 308
Total/Mean 384 499,726 191,894,895 2.42 928
Townhomes 100 600,000 60,000,000 3.75 375
Grand Total/Mean 484 520,444 251,894,895 2.69 1303
Sources: Willdan Financial Services, Inc.; The Natelson Dale Group, Inc.
Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 3 Table 3 provides detail regarding the commercial component of the project, including 94,000 square feet of commercial strip center and a 101,000 square foot mini storage facility.
Table 3
Commercial Project Description
Richards Ranch Fiscal Impact Analysis
Type Sq. Feet
Employees/
1K sf Employees AV/sf
Assessed
Value
Commercial Strip Center 93,863 2 188 410 38,483,830
Mini Storage 101,265 N/A 3 150 15,189,750
Total/Mean 195,128 191 53,673,580
Source: The Natelson Dale Group, Inc.
Willdan Financial Services, 2025
ITEM NO. 7.
4 2. Methodology
Willdan has prepared a model based in broad terms on the analysis prepared by Natelson.
In broad terms, the fiscal analysis uses two basis methods of estimating revenues and expenditures. For most categories the model assumes that revenues and expenditures will increase in proportion to the project, by using the existing per capita figures for the City and County and applying the expected new residents and employees in the project to estimate the impact on each item. For certain items Willdan uses a “case study” approach, in which the details of the project are used to estimate certain items. For example, Willdan uses estimated taxable sales to project sales tax revenue and expected assessed value to estimate property tax revenue.
ITEM NO. 7.
5 3. Fiscal Impacts
Revenues
Table 4 provides a more detailed summary of the expected revenues and expenditures expected from the project for the City of Santa Maria. As shown in Table 4, the major revenue sources are taxes, including Measure U, and the major expenditure categories are public safety. Willdan has adjusted these from the Natelson methodology. The most notable change in Table 4 is the exclusion from the analysis of the County Measure A revenue, which is administered separately used primarily for capital projects (and therefore not a general fund revenue to the City and not generally available to fund services). As shown in Table 4, Willdan projects a surplus of $93,000 annually for the City.
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 6 Table 4
City Net Fiscal Impacts (annual recurring)
Richards Ranch Fiscal Impact Analysis
Fund Amount
General Fund
Property Tax $ 368,217
Property Tax In Lieu of VLF 288,926
Sales and Use Tax 186,435
Public Safety Tax 641
Franchises 41,380
Business Licenses 2,602
Property Transfer Tax 11,467
Licenses, Permits & Fees 1,310
Revenue from Other Agencies 2,326
Recreation Programs 1,850
Recreation Income 2,964
Aquatics 2,697
Other Misc. 713
Measure U Transaction and Use Tax $ 164,260
Total General Fund Revenue $ 1,075,787
Other Revenues
County Measure A N/A
State Gas Tax 51,503
Total Other Revenues $ 51,503
Total Revenues $ 1,127,290
Expenditures
Police $ 552,015
Fire 243,617
Public Works 31,980
Recreation and Parks 141,087
Community Development 16,108
General Government $ 49,493
Total Expenditures $ 1,034,301
Net $ 92,989
Sources: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 7 Table 5 details the estimated revenues and expenditures from the project for the County of Santa Barbara. Although the analysis assumes annexation (and therefor provision of primary services by the City of Santa Maria), there are still County expenditures that reflect County services provided to all residents within the County (as opposed to certain County services, such as public protection, that are provided primarily to residents of unincorporated areas). As shown in Table 5, Willdan projects a surplus to the County of $276,000 annually, primarily from the retention of significant property tax revenues and the public safety sales tax.
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 8 Table 5
County Net Fiscal Impacts (annual recurring)
Richards Ranch Fiscal Impact Analysis
Fund Amount
General Fund
Property Tax $ 588,439
Property Tax In Lieu of VLF 205,683
Property Transfer Tax 11,467
Fines, Forfeitures & Penalties 11,265
Use of Money and Property 7,619
Intergovernmental Revenue State 704
Intergovernmental Revenue Federal -
Public Safety Sales Tax $ 80,077
Total General Fund Revenue $ 905,253
Expenditures
Policy and Executive $ 32,434
Public Safety 324,151
Health and Human Services 109,469
Community Resources and Public Facilties 84,259
General Government and Support Services 75,636
General County Programs $ 3,481
Total Expenditures $ 629,430
Net $ 275,823
Sources: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 9 Project Demographics
Table 6 details the estimated residents and employees for the project. The model uses two different measures of population for the purposes or estimating fiscal impacts. The first, residents, is simply the number of residents living in the new units. This figure is used to estimate revenues that are allocated by population, such as gas tax, and for services that are primarily for residents, such as parks and recreation (for the City) or health and human services (for the County). As second measure, “service population,” is the sum of residents and 50 percent of the estimated new employees. This measure is used for proportional estimates for revenues and expenditures that are expected to be impacted by both new residents and new businesses, such as police and fire protection. Willdan has increased the resident estimate from the Natelson report but the employee estimate remains unchanged.
Santa Maria Revenue Projections
Table 7 below details the revenue calculations for the City of Santa Maria. The table summarizes the City budget and provides an estimation methodology where appropriate.
In many cases the model assumes proportional growth in revenue, using the current ratio of revenue to population in the City to estimate the additional revenue from new development. In some case the methodology is “case study” in which case the calculation is provided on a subsequent table.
Table 6
Project Population
Richards Ranch Fiscal Impact Analysis
Item Amount
Residents 1,303
Empoyees 191
Employee Weighting Factor 50%
Total Service Population 1,398
Sources: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 10 Table 7
City of Santa Maria Revenue Calculation
Richards Ranch Fiscal Impact Analysis
Item Revenue
NonRecurring Not ProjectedRecurring
Projected
Methodology/Units of
Measure
Unit
Amount
Revenue
Factor
Projected
Units
Percent
Variable Amount
Taxes
Property Secured $ 14,304,503 $ - $ - $ 14,304,503 Case Study N/A N/A N/A N/A 368,217 Property Unescured 506,424 - 506,424 - Not Projected N/A N/A N/A N/A N/A In Lieu of VLF 10,884,750 - - 10,884,750 Case Study N/A N/A N/A N/A 288,926 Sales & Use 31,793,709 - - 31,793,709 Case Study N/A N/A N/A N/A 186,435 Sales & Use - Safety 394,157 - - 394,157 Case Study N/A N/A N/A N/A 641 Franchises 4,979,094 - - 4,979,094 Per Service Population 134,608 36.99 1,398 80% 41,380 Transient Occupancy 4,273,426 - 4,273,426 - Not Projected N/A N/A N/A N/A N/A Busincess License 818,500 - - 818,500 Per Employee 48,000 17.05 191 80% 2,602 Property Transfer 310,896 - - 310,896 Case Study N/A N/A N/A N/A 11,467 Subtotal Taxes $ 68,265,459 $ - $ 4,779,850 $ 63,485,609 $ 899,668 Licenses, Permits & Fees
Construction Permits $ 3,070,974 $ - $ 3,070,974 $ - Not Projected N/A N/A N/A N/A N/A Taxi & Mobile Home Fees 24,700 - - 24,700 Not Projected N/A N/A N/A N/A N/A Criminal Fines & Penalties 157,660 - - 157,660 Per Service Population 134,608 1.17 1,398 80% $ 1,310 Subtotal $ 3,253,334 $ - $ 3,070,974 $ 182,360 1,310
Revenue from Use of Money and Property
Interest Earned $ 2,285,796 $ - $ 2,285,796 $ - Not Projected N/A N/A N/A N/A N/A Rental Income 673,717 - 673,717 - Not Projected N/A N/A N/A N/A N/A Subtotal $ 2,959,513 $ - $ 2,959,513 $ - $ -
Revenue from Other Agencies
Motor Vehicle License Fees $ 112,660 $ - $ - $ 112,660 Per Capita 110,608 1.02 1,303 1 1,062 Homeowners' Tax Relief 50,416 - - 50,416 Per Capita 110,608 0.46 1,303 1 475 Property Tax In Lieu 94,900 - - 94,900 Per Service Population 134,608 0.71 1,398 1 789 Mandated Costs 43,401 - 43,401 - Not Projected N/A N/A N/A N/A N/A P.O.S.T. 43,773 - 43,773 - Not Projected N/A N/A N/A N/A N/A Other Subventions 141,336 - - 141,336 Not Projected N/A N/A N/A N/A N/A Subtotal $ 486,486 $ 87,174 $ 399,312 $ 2,326
Charges for Service
Recreation Programs $ 196,260 $ - $ 196,260 Per Capita 110,608 1.77 1,303 1 1,850 Recreation Income 314,478 - 314,478 Per Capita 110,608 2.84 1,303 1 2,964 Aquatics 286,200 - 286,200 Per Capita 110,608 2.59 1,303 1 2,697 Zoning & Subdivision Fees 690,950 690,950 - Not Projected N/A N/A N/A N/A N/A Law Enforcement 979,921 - 979,921 - Not Projected N/A N/A N/A N/A N/A Fire Services 1,686,005 - 1,686,005 - Not Projected N/A N/A N/A N/A N/A Engineering Reimbursements 677,699 - 677,699 - Not Projected N/A N/A N/A N/A N/A Comm. Dev. Reimbursements 312,400 - 312,400 - Not Projected N/A N/A N/A N/A N/A Weed Abatement - - - - Not Projected N/A N/A N/A N/A N/A Services Rendered Other Agencies 1,085 - 1,085 - Not Projected N/A N/A N/A N/A N/A Eng. Plan Check & Inspections 853,981 853,981 - - Not Projected N/A N/A N/A N/A N/A Impacted Soils 100,000 - 100,000 - Not Projected N/A N/A N/A N/A N/A Subtotal $ 6,098,979 $1,544,931 $ 3,757,110 $ 796,938 $ 7,511 Other Revenue
Prior Year & Damage Recovery $ 3,000 $ - $ 3,000 - Not Projected N/A N/A N/A N/A N/A Sale of Real Property 4,250 - 4,250 - Not Projected N/A N/A N/A N/A N/A Sale of Maps, Plans and & Other 134,660 - 134,660 - Not Projected N/A N/A N/A N/A N/A Other Misc. Revenue 85,746 - - 85,746 Per Service Population 134,608 0.64 1,398 1 713 Operating Transfers In 4,627,624 - 4,627,624 - Not Projected N/A N/A N/A N/A N/A Cost Allocation Transfers 4,917,037 - 4,917,037 - Not Projected N/A N/A N/A N/A N/A Subtotal $ 9,772,317 $ - $ 9,686,571 $ 85,746 $ 713
Measure U
Measure U Tax $ 26,715,000 $ - $ - 26,715,000 Case Study N/A N/A N/A N/A 164,260 Interest Income 171,354 - 171,354 - Not Projected N/A N/A N/A N/A N/A Subtotal $ 26,886,354 $ - $ 171,354 $ 26,715,000 164,260 Total General Fund $ 117,722,442 $1,544,931 $ 24,512,546 $ 91,664,965 $ 1,075,787 Other Fund Revenues
County Measure A Sales Tax 7,456,129 - 7,456,129 - Not Estimated N/A N/A N/A N/A N/A State Gas Tax 5,464,920 - - 5,464,920 Per Capita 110,608 49.41 1,303 80% 51,503 Total Other Fund Revenues $ 51,503
Grand Total Revenues $ 1,127,290
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 11 Santa Maria Expenditures
Table 8 estimates the expenditures by the City of Santa Maria. For each expenditure item the model calculates the future expenditures from the current ratio of costs on a per capita or per service population basis.
Table 8
City of Santa Maria Expenditure Calulation
Richards Ranch Fiscal Impact Analysis
Item Expenditures
Methodology/Units of
Measure
Unit
Amount
Revenue
Factor
Projected
Units
Percent
Variable Amount
Public Safety
Police $ 53,137,621 Per Service Population 134,608 395 1,398 100% 552,015 Fire 23,450,833 Per Service Population 134,608 174 1,398 100% 243,617 Subtotal Public Safety $ 76,588,454 $ 795,632
Public Works $ 3,848,022 Per Service Population 134,608 29 1,398 80% 31,980 Recreation & Parks 14,970,631 Per Capita 110,608 135 1,303 80% 141,087 Community Development 1,938,203 Per Service Population 134,608 14.40 1,398 80% $ 16,108 Subtotal 20,756,856 $ 189,175
General Government
Mayor & Council $ 210,816 Per Service Population 134,608 1.57 1,398 25% 548 City Attorney 1,816,868 Per Service Population 134,608 13.50 1,398 25% 4,719 City Manager 13,045,242 Per Service Population 134,608 96.91 1,398 25% 33,880 Finance 3,984,369 Per Service Population 134,608 29.60 1,398 25% 10,348 Subtotal General Government $ 19,057,295 $ 49,494
Grand Total Expenditures $ 116,402,605 $ 1,034,301
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 12 County of Santa Barbara Revenues
Table 9 below details the revenue calculations for the County of Santa Barbara. The table summarizes the County budget and provides an estimation methodology where appropriate. In many cases the model assumes proportional growth in revenue, using the current ratio of revenue to population in the County to estimate the additional revenue from new development. In some case the methodology is “case study” in which case the calculation is provided on a subsequent table.
Table 9
County of Santa Barbara Revenue Calculation
Richards Ranch Fiscal Impact Analysis
Item Revenue
Methodology/Units of
Measure
Unit
Amount
Revenue
Factor
Projected
Units
Percent
Variable Amount
Property Tax $ 333,963,000 Case Study N/A N/A N/A N/A 805,589 Licenses, Permits and Franchises 3,597,600 N/A (unincorporated only) N/A N/A N/A N/A N/A Fines, Forfeitures & Penalties $ 5,554,000 Per Service Population 551,543 10.07 1,398 80.00% 11,265 Use of Money and Property 3,756,500 Per Service Population 551,543 6.81 1,398 80.00% 7,619 Intergovernmental Revenue-State
Motor Vehicle In Liue In Excess $ 300,000 Per Capita 444,500 0.67 1,303 80% 704 Homeowners' Tax Relief 685,000 Not Estimated N/A N/A N/A N/A N/A Stat Off Hwy Mtr. Veh LF 1,000 Not Estimated N/A N/A N/A N/A N/A Subtotal $ 986,000 $ 704
Intergovernmental Revenue-Federal 2,159,300 Not Estimated N/A N/A N/A N/A N/A Charges for Services 21,972,700 Not Projected N/A N/A N/A N/A N/A Misc Revenue 95,000 Not Estimated N/A N/A N/A N/A N/A
Total General Fund Revenue 372,084,100 825,176
Prop 172 - Public Safety Sales Tax 48,831,700 Case Study N/A N/A N/A N/A 80,077 Total Revenues 420,915,800 905,253
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 13 County of Santa Barbara Expenditures
Table 10 estimates the expenditures for the County of Santa Barbara. For each expenditure item the model calculates the future expenditures from the current ratio of costs on a per capita or per service population basis.
Table 10
County of Santa Barbara Expenditure Calculation
Richards Ranch Fiscal Impact Analysis
Item Expenditures
Operating
Revenues
Recurring
Revenue
Methodology/Units of
Measure
Unit
Amount
Revenue
Factor
Projected
Units
Percent
Variable Amount
Policy & Executive
Board of Supervisors $ 4,142,600 $ - $ 4,142,600 Per Service Population 551,543 7.51 1,398 50% 5,252 County Executive Office 62,815,700 53,620,700 9,195,000 Per Service Population 551,543 16.67 1,398 50% 11,656 County Counsel 12,614,200 366,600 12,247,600 Per Service Population 551,543 22.21 1,398 50% 15,526 Subtotal General Government $ 79,572,500 $ 53,987,300 $ 25,585,200 $ 32,434 Public Safety
District Attorney $ 34,344,300 $ 13,224,100 $ 21,120,200 Per Capita 444,500 47.51 1,303 50% 30,956 Probation 70,195,300 44,969,700 25,225,600 Per Capita 444,500 56.75 1,303 50% 36,973 Public Defender 20,289,300 557,200 19,732,100 Per Capita 444,500 44.39 1,303 25% 14,461 Court Special Services 12,916,000 5,289,300 7,626,700 Per Capita 444,500 17.16 1,303 25% 5,589 Fire 120,928,100 44,103,500 76,824,600 Per Service Population 551,543 139.29 1,398 50% 97,389 Sheriff (non custody ops) 109,045,400 49,665,600 59,379,800 Not Estimated N/A N/A N/A N/A N/A Sheriff (custody ops) 90,894,900 22,471,000 68,423,900 Per Service Population 551,543 124.06 1,398 80% 138,784 Subtotal Public Safety $ 458,613,300 $ 180,280,400 $ 278,332,900 $ 324,151 Health & Human Services
Public Health $ 102,583,200 $ 87,758,600 $ 14,824,600 Per Capita 444,500 33.35 1,303 100% 43,457 Behavioral Wellness 175,660,900 171,167,600 4,493,300 Per Capita 444,500 10.11 1,303 100% 13,172 Social Services 222,738,400 205,562,700 17,175,700 Per Capita 444,500 38.64 1,303 100% 50,349 Child Support Services 11,272,000 11,272,000 - Per Capita 444,500 - 1,303 100% - First 5, Children & Families 3,723,900 2,873,600 850,300 Per Capita 444,500 1.91 1,303 100% 2,493 Subtotal Health & Human Services $ 515,978,400 $ 478,634,500 $ 37,343,900 $ 109,469 Community Resources & Public Facilities
Agricultural Commissioner/W&M $ 7,912,800 $ 5,804,400 $ 2,108,400 Not Estimated N/A N/A N/A N/A N/A Community Services 74,837,200 41,925,000 32,912,200 Per Service Population 551,543 59.67 1,398 50% 41,722 Planning & Development 29,853,200 22,524,600 7,328,600 Per Service Population 551,543 13.29 1,398 50% 9,290 Public Works 173,327,200 147,100,900 26,226,300 Per Service Population 551,543 47.55 1,398 50% 33,247 Subtotal Community Resources & Public Facilities $ 285,930,400 $ 217,354,900 $ 68,575,500 $ 84,259 General Government & Spport Services
Auditor-Controller $ 10,674,500 $ 1,407,000 $ 9,267,500 Per Service Population 551,543 16.80 1,398 50% 11,748 Clerk-Recorder-Assessor 21,695,100 7,042,600 14,652,500 Per Service Population 551,543 26.57 1,398 50% 18,575 Debt Service 1,246,900 1,384,900 - Not Estimated N/A N/A N/A N/A N/A General Services 49,964,100 29,303,300 20,660,800 Per Service Population 551,543 37.46 1,398 50% 26,191 Human Resources 10,572,600 2,598,300 7,974,300 Per Service Population 551,543 14.46 1,398 50% 10,109 Information Technology 28,240,200 27,232,100 1,008,100 Per Service Population 551,543 1.83 1,398 50% 1,278 Treasurer-Tax Collector 9,579,200 3,477,800 6,101,400 Per Service Population 551,543 11.06 1,398 50% 7,735 Subtotal General Government $ 131,972,600 $ 72,446,000 $ 59,664,600 $ 75,636 General County Programs
General County Programs 11,090,700 8,345,100 2,745,600 Per Service Population 551,543 4.98 1,398 50% 3,481 Subtotal General Government $ 11,090,700 $ 8,345,100 $ 2,745,600 $ 3,481 Total Expenditures $ 1,483,157,900 $1,011,048,200 $ 472,247,700 $ 629,430 Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 14 Sales Tax Revenues
Willdan has estimated the sales tax revenue that could be generated by the project, detailed in Table 11. For this analysis Willdan has calculated only the revenue from the commercial center. The Natelson analysis estimated both this revenue and the new taxable sales generated by new residents. Willdan believes this approach is too aggressive, as new stores do not themselves necessarily generate new sales and to any new sales to the City would come in significant part from the new residents. As a result, Willdan’s approach to sales tax in mixed-use projects is to calculate both the on-site sales and the resident-generated sales and use the higher figure in its analysis, but not both.
Table 11
Onsite Taxable Sales
Richards Ranch Fiscal Impact Analysis
Land Use Square Feet Sales/SF Total Sales % Taxable (1) Taxable Sales Commercial Center 93,863 250 23,465,750 70.00% 16,426,025 Mini Storage 101,265 0 0 0 0
Total 195,128 23,465,750 16,426,025
(1) Not all establishments will sell goods, and not all goods sold will be taxable.
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 15 Table 12 calculates the revenue resulting from the onsite sales, both directly from the City’s one percent share of sales tax collections and an allocation of countywide pools.
Table 12
Estimated Sales Tax Revenue
Richards Ranch Fiscal Impact Analysis
Item Total
Total Taxable Sales $ 16,426,025
Local Sales Tax Rate 1.0%
Sales Tax Revenue $ 164,260
On-Site Sales Tax Revenue as a Shareo of Total Sales & Use Tax (1) 86.5% Estimated Sales Tax Revenue Allocation Generated by Base Sales Tax $ 22,175 Total Revenue $ 186,435
(1) According to HdL and Natelson, 12-15% of a local jurisdiciton's total sales and use tax revenue are derived from their share of countywide pools.
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 16 The City of Santa Maria also has a local tax measure, Measure U, that collects an additional one percent of local taxable sales. Table 13 calculates the Measure U revenue generated by the project.
Table 13
Estimated Measure U Sales Tax Revenue
Richards Ranch Fiscal Impact Analysis
Item Total
Total On-Site Taxable Sales $ 16,426,025
Total Resident Santa Maria Taxable Expenditures -
Total Taxable Sales $ 16,426,025
Measure U Sales Tax Rate 1.0%
Total Measure U Sales Tax Revenue $ 164,260
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 17 Table 14 calculates the 0.5% public safety tax collected and the allocation between the County and the City.
Table 14
Estimated Public Safety Sales Tax Revenue
Richards Ranch Fiscal Impact Analysis
Item Total
Total On-Site Taxable Sales $ 16,426,025
Total Resident Santa Maria Taxable Expenditures -
Total Taxable Sales $ 16,426,025
Public Safety Sales Tax Rate 0.5%
Total Public Safety Sales Tax Revenue $ 82,130
County Revenue
County Share of Public Safety Tax 97.5%
County Public Safety Tax Revenue $ 80,077
City Revenue
City Share of Public Safety Tax 0.8%
City Public Safety Tax Revenue $ 641
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 18 Property Tax Revenues
The most significant source of revenue from the development of the project is property tax revenue, which is calculated in the following tables. Table 15 details the allocation of the basis ad valorem tax of one percent of assessed value for the proposed project parcel, tax rate area 080-041. The two allocations relevant to the analysis are the Santa Barbara County General Fund, 0001, and the SB County Fire Protection District, 2280. As shown in Table 15, the analysis assumes that twenty-five percent of the general fund tax and fifty percent of the fire district tax will be allocated to the City, with the remainder retained by the County.
Table 15
Propety Tax Allocation Factors
Richards Ranch Fiscal Impact Analysis
District Name TRA 080-041 (1)
Post Annexation City
Allocation (2)
County Share Post
Annexation
0001 Santa Barbara County General Fund 0.144139 25% 0.10810425 2140 CSA 5 0.006563
2280 SB County Fire Protecton District 0.168935 50% 0.08446750 2400 SB County Flood Cntrl/Wtr Cnsrv 0.002668
2510 Orcutt Flood Zn 3 0.005465
2670 North County Lighting District 0.008701
3050 Santa Barbara County Wtr Agency 0.003431
3210 Santa Maria Public Airport Dist 0.011144
3320 Santa Maria Cemetary Dist 0.005800
4160 SB Mosquito/Vector Dist 0.000186
4500 Cachuma Resource Cnsrv Dist 0.000479
7401 Orcutt Union Elem Dist General 0.235767
8301 Santa Maria Jt HS Dist General 0.195338
9401 Allen Hancock CC Dist General 0.051965
9801 County School Srvc Fund 0.035912
9802 ERAF 0.123508
Total (3) 1.000001 0.19257175
(1) Tax Rate Area
(2) Analysis assumes that 25 percent of GF revenue and 50 percent of fire revenue go to City. (3) Figures from Natelson and should add up to exactly 1. Willdan has not had the opportunity to reconcile this number given the compressed time frame of the analysis. The difference is de minimus .
Source: The Natelson Group, Inc.; Santa Barbara County Auditor-Controller's Office Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 19 Table 16 calculates the property tax revenues for the project for the City and County based on the assessed value from Tables 2 and 3 and the allocation factors in Table 15.
Table 16
Estimated Property Tax Revenue
Richards Ranch Fiscal Impact Analysis
Item Amount
Estimated Project Assessed Value $ 305,568,475
Base Ad Valorem Tax 1.00%
Base Ad Valorem Revenue $ 3,055,685
City General Fund Revenue, Post Annexation
City General Fund Post ERAF Share of AV Tax 3.6%
Total City Property Tax Post Annexation $ 110,111
City Fire District Revenue, Post Annexation
City Fire District Post ERAF Share 8.45%
City Fire District Property Tax Post Annexation $ 258,106 County General Fund Revenue, Post Annexation
County General Fund Post ERAF Share of AV Tax 10.8%
Total County Property Tax Post Annexation $ 330,333
County Fire District Revenue, Post Annexation
County Fire District Post ERAF Share of AV Tax 8.45%
County Fire District Property Tax Post Annexation $ 258,106 Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 20 In addition to the property tax factors, each jurisdiction receives additional revenue in lieu of vehicle license fee (VLF) revenue. This amount is calculated as a proportion of incremental additional assessed value applied to the previous year’s VLF revenue. Table 17 calculates the incremental additional VLF swap revenue resulting from the development of the project for the City and the County.
Table 17
Estimated Vehicle License Fee (VLF)/Property Tax Revenue Richards Ranch Fiscal Impact Analysis
Item Amount
Santa Barbara County
County VLF Swap Revenue (2024) $ 74,128,000
County AV, FY 2023-24 $ 110,126,900,000
Project Value $ 305,568,475
Percentage Increase over Base AV 0.28%
Incremental Additional VLF Swap Revenue $ 205,683
City of Santa Maria
City VLF Swap Revenue (2024) $ 10,884,750
City AV, FY 2023-24 $ 11,511,734,000
Project Value $ 305,568,475
Percentage Increase over Base AV 2.65%
Incremental Additional VLF Swap Revenue $ 288,926
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 21 The City and County collect transfer tax upon the sale of real estate, $1.10 per $1,000 of valuation, divided equally. The fiscal model assumes that for sale residential units will be sold every seven years, and the commercial properties (including rental apartments) every twenty years. Table 18 calculates the average annual revenue that would be received from these transactions.
Integral to the projection of the fiscal impacts of the project to the City and County is an assumption regarding the allocation of the property tax generated by the project. Consistent with the Natelson study, this analysis assumes a split between the City and County of 25%/75% for the general fund revenue and 50% each for the fire district revenue, for an overall allocation of 38%/62%. These calculations are included in Table 16, above. Additionally, Willdan has estimated the minimum property tax revenue needed for each municipality to be fiscally neutral (a net impact of approximately $0, or “breakeven”). Table 19 calculates the minimum property tax allocation for the City and County to achieve breakeven. As shown in Table 19, City must receive at least 30 percent of the property tax revenue to remain fiscally neutral, and the County must receive at least 33 percent of the property tax revenue to remain fiscally neutral.
Table 18
Estimated Property Transfer Tax Revenue
Richards Ranch Fiscal Impact Analysis
Item Residential (TH) Residential (APT) Commercial Total Estimated Property Value $ 60,000,000 $ 191,894,895 $ 53,673,580 $ 305,568,475 Mean holding period (years) 7 20 20
Tax Rate (1) 0.055% 0.055% 0.055%
Annual Revenue $ 4,714 $ 5,277 $ 1,476 $ 11,467
(1) The City and County Share a transfer tax of $1.10 per $1,000 of valuation.
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study 22 Table 19
Property Tax "Breakeven" Analysis
Richards Ranch Fiscal Impact Analysis
Item Amount
Estimated Project Assessed Value $ 305,568,475
Base Ad Valorem Tax 1.00%
Base Ad Valorem Revenue $ 3,055,685
GF Allocation TRA 080-041 14.41%
Revenue $ 440,443
Fire District Allocation TRA 080-041 16.89%
Revenue $ 516,212
Total Combined GF and FD Allocation TRA 080-041 31.31%
Revenue $ 956,655
City Breakeven Estimate
City General Fund Revenue, Post Annexation
City General Fund Post ERAF Share of AV Tax 4.32%
Total City Property Tax Post Annexation $ 132,133
City Fire District Revenue, Post Annexation
City Fire District Post ERAF Share 5.07%
City Fire District Property Tax Post Annexation $ 154,864 Resulting City Fiscal Impact $ 11,769
Percentage Allocation of Project Property Tax Revenue 30% County Breakeven Estimate
County General Fund Revenue, Post Annexation
County General Fund Post ERAF Share of AV Tax 4.76%
Total County Property Tax Post Annexation $ 145,346
County Fire District Revenue, Post Annexation
County Fire District Post ERAF Share of AV Tax 5.57%
County Fire District Property Tax Post Annexation $ 170,350 Resulting County Fiscal Impact $ 3,081
Percentage Allocation of Project Property Tax Revenue 33% Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 1 (FISCAL CONDITION) AND STUDY 2 (FISCAL IMPACT) APPENDIX F: NHA’S REQUIRED MUNICIPAL ADVISOR DISCLOSURES
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 1 (FISCAL CONDITION) AND STUDY 2 (FISCAL IMPACT) Fiduciary Duty
NHA Advisors, LLC (“NHA”) is registered as a Municipal Advisor with the U. S. Securities and Exchange Commission (“SEC”) and Municipal Securities Rulemaking Board (“MSRB”). As such, NHA has a fiduciary duty to the Town and must provide both a Duty of Care and a Duty of Loyalty that entail the following.
Duty of Care:
a) exercise due care in performing its municipal advisory activities; b) possess the degree of knowledge and expertise needed to provide the Town with informed advice;
c) make a reasonable inquiry as to the facts that are relevant to the Town’s determination as to whether to proceed with a course of action or that form the basis for any advice provided to the Town; and
d) undertake a reasonable investigation to determine that NHA is not forming any recommendation on materially inaccurate or incomplete information; NHA must have a reasonable basis for:
i. any advice provided to or on behalf of the Town;
ii. any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by the Town, any other party involved in the municipal securities transaction or municipal financial product, or investors in the Town securities; and iii. any information provided to the Town or other parties involved in the municipal securities transaction in connection with the preparation of an official statement.
Duty of Loyalty:
NHA must deal honestly and with the utmost good faith with the Town and act in the Town’s best interests without regard to the financial or other interests of NHA. NHA will eliminate or provide full and fair disclosure (included herein) to the Town about each material conflict of interest (as applicable). NHA will not engage in municipal advisory activities with the Town as a municipal entity, if it cannot manage or mitigate its conflicts in a manner that will permit it to act in the Town’s best interest.
Conflicts of Interest and Other Matters Requiring Disclosures As of the commencement date of the Project, there are no actual or potential material conflicts of interest, other than those potential conflicts noted below, that NHA is aware of that might impair its ability to render unbiased and competent advice or to fulfill its fiduciary duty. If NHA becomes aware of any material potential conflict of interest that arises after this disclosure, NHA will disclose the detailed information in writing to the Town in a timely manner.
Pursuant to MSRB Rule G-42, on Duties of Non-Solicitor Municipal Advisors, Municipal Advisors are required to make certain written disclosures to clients which include, amongst other things, Conflicts of Interest and any Legal or Disciplinary events of NHA and its associated persons.
The following are potential conflicts of interest to be considered. • NHA represents that in connection with the issuance of municipal securities, NHA may receive compensation from the Town for services rendered, which compensation is contingent upon the successful closing of a transaction and/or is based on the size of a transaction. Consistent with the
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 1 (FISCAL CONDITION) AND STUDY 2 (FISCAL IMPACT) requirements of MSRB Rule G-42, NHA hereby discloses that such contingent and/or transactional compensation may present a potential conflict of interest regarding NHA’ ability to provide unbiased advice to enter into such transaction. The contingent fee arrangement creates an incentive for NHA to recommend unnecessary financings or financings that are disadvantageous to the Town, or to advise the Town to increase the size of the issue. This potential conflict of interest will not impair NHA’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the Town.
• NHA’ fees under this potential agreement may be based on hourly fees of NHA’ personnel, with the aggregate amount equaling the number of hours worked by such personnel times an agreedupon hourly billing rate. This form of compensation presents a potential conflict of interest because it could create an incentive for NHA to recommend alternatives that would result in more hours worked. This conflict of interest will not impair NHA’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the Town. • NHA’ fees under this potential agreement may be a fixed amount established at the outset of this potential agreement. The amount is usually based upon an analysis by the Town and NHA of, among other things, the expected duration and complexity of the transaction and the scope of services to be performed by NHA. This form of compensation presents a potential conflict of interest because, if the transaction requires more work than originally contemplated, NHA may suffer a loss. Thus, NHA may recommend less time-consuming alternatives, or fail to do a thorough analysis of alternatives. This conflict of interest will not impair NHA’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the Town. • The fee paid to NHA increases the cost of investment to the Town. The increased cost occurs from compensating NHA for municipal advisory services provided. • NHA serves a wide variety of other clients that may, from time to time, have interests that could have a direct or indirect impact on the interests of another NHA client. For example, NHA serves as municipal advisor to other municipal advisory clients and, in such cases, owes a regulatory duty to such other clients just as it does to the Town. These other clients may, from time to time and depending on the specific circumstances, have competing interests. In acting in the interests of its various clients, NHA could potentially face a conflict of interest arising from these competing client interests. NHA fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith with the Town.
• Gerald Craig Hill, the Managing Principal of NHA is currently serving as an outside director for the HdL Companies based in Diamond Bar, CA. HdL Companies is a software and professional services consulting company providing revenue data and collections information to local governments, potentially including NHA’s clients. HdL Companies have affiliates including, but not limited to, HdL Coren & Cone. From time to time, NHA utilizes the services of HdL Coren & Cone for its clients. NHA is mindful of this conflict of interest and fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith when this situation arises.
• NHA does not have any affiliate that provides any advice, service, or product to or on behalf of the Town that is directly or indirectly related to the municipal advisory activities to be performed by NHA.
• NHA has not made any payments directly or indirectly to obtain or retain NHA’ municipal advisory business.
• NHA has not received any payments from third parties to enlist NHA’ recommendation to the Town of its services, any municipal securities transaction, or any municipal finance product. • NHA has not engaged in any fee-splitting arrangements involving NHA and any provider of investments or services to the Town.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 1 (FISCAL CONDITION) AND STUDY 2 (FISCAL IMPACT) • NHA does not have any legal or disciplinary event that is material to the Town’s evaluation of the municipal advisory or the integrity of its management or advisory personnel. • NHA does not act as principal in any of the transaction(s) related to this potential agreement.
Legal Events and Disciplinary History
NHA does not have any legal events and disciplinary history on its Form MA and Form MA-I, which includes information about any criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, arbitrations and civil litigation. The Town may electronically access NHA’ most recent Form MA and each most recent Form MA-I filed with the Commission at the following website:
www.sec.gov/edgar/searchedgar/companysearch.html
There have been no material changes to a legal or disciplinary event disclosure on any Form MA or Form MA-I filed with the SEC.
Recommendations
If NHA makes a recommendation of a municipal securities transaction or municipal financial product or if the review of a recommendation of another party is requested in writing by the Town and is within the scope of the engagement, NHA will determine, based on the information obtained through reasonable diligence of NHA whether a municipal securities transaction or municipal financial product is suitable for the Town. In addition, NHA will inform the Town of:
• the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation;
• the basis upon which NHA reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for the Town; and • whether NHA has investigated or considered other reasonably feasible alternatives to the recommendation that might also or alternatively serve the Town objectives.
If the Town elects a course of action that is independent of or contrary to the advice provided by NHA, NHA is not required on that basis to disengage from the Town.
Municipal Securities Rulemaking Board Rule G-10 Disclosure Pursuant to MSRB Rule G-10, on Investor and Municipal Advisory Client Education and Protection, Municipal Advisors are required to provide certain written information to their municipal entity and obligated person clients which include the following:
• NHA is currently registered as a Municipal Advisor with the SEC and MSRB. • Within the MSRB website at www.msrb.org, the Town may obtain the Municipal Advisory client brochure that is posted on the MSRB website. The brochure describes the protections that may be provided by the MSRB Rules along with how to file a complaint with financial regulatory authorities.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 1 (FISCAL CONDITION) AND STUDY 2 (FISCAL IMPACT) Record Retention
Effective July 1, 2014, pursuant to the SEC record retention regulations, NHA is required to maintain, in writing, all communication and created documents between NHA and the Town for five (5) years.
If there are any questions regarding the above, please do not hesitate to contact NHA.
ITEM NO. 7.
s
SEPTEMBER 22,
2025 TOWN OF LOS GATOS
PROPOSAL FOR STUDY 3:
ASSET LIABILITY MANAGEMENT STUDY
PROVIDED IN RESPONSE TO
REQUEST FOR PROPOSALS DATED AUGUST 20, 2025:
FISCAL CONDITION ANALYSIS WITH FIVE-YEAR AND LONGTERM FORECAST, FISCAL IMPACT ANALYSIS, AND ASSET
LIABILITY MANAGEMENT STUDY
SUBMITTED BY
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION) Table of Contents
1. COVER LETTER .......................................................................................................................................... 1
2. COMPLETED CERTIFICATION FORMS ............................................................................................................. 1
3. SCOPE COMMENTS AND METHODOLOGY ...................................................................................................... 6
4. EXPERIENCE AND EXPERTISE ...................................................................................................................... 11
5. KEY PERSONNEL AND RESUMES ................................................................................................................. 14
6. TIMELINE AND WORK PLAN ...................................................................................................................... 16
7. SAMPLES OF COMPARABLE PROJECTS ......................................................................................................... 16
8. DISCLOSURE OF ABSENCE OF LITIGATION OR DISCIPLINE OVER LAST FIVE YEARS................................................. 17
9. REFERENCES ........................................................................................................................................... 18
10. PRELIMINARY FEE SCHEDULES ................................................................................................................... 20
11. STATEMENT OF INSURANCE COVERAGE ....................................................................................................... 22
12. TOOLS, DATA SOURCES, AND USE OF AI...................................................................................................... 22 APPENDIX A: SAMPLE OF PENSION EXPENSE MODELING FOR THE CITY OF WALNUT CREEK..............................................
APPENDIX B: SAMPLE OF WILDFIRE BUFFER ZONE BUDGET MODELING FOR THE GREATER PARADISE AREA........................
APPENDIX C: RESUMES FOR ASSIGNED NHA TEAM...................................................................................................
APPENDIX D: NHA’S REQUIRED MUNICIPAL ADVISOR DISCLOSURES............................................................................
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
1. COVER LETTER
September 22, 2025
Attn: Gitta Ungvari, Finance Director
[email protected]
Town of Los Gatos
110 E. Main Street
Los Gatos, CA 95030
RE: Request for Proposals for Study 3: Asset Liability Management Dear Ms. Ungvari,
NHA Advisors, LLC (“NHA”) is pleased to submit this proposal to provide municipal advisory services to the Town of Los Gatos (the “Town”) in relation to its Asset Liability Management (“ALM”) Study requested as Task 3/Study 3 in your August 20th RFP. Please note that NHA Advisors has also submitted as part of a team including Raftelis and Willdan for Task 1/Study 1 and Task 2/Study 2. Our role in that proposal is a Team Manager. For Task 3/Study 3, NHA is the sole service provider. In addition to the scope requested in the Town’s RFP, we are also submitting an unsolicited proposal in this document for what we call Task 4 - a funding plan for long-term wildfire risk mitigation for the Town.
NHA, as a registered municipal advisor and has an extensive practice in advising public agencies in California on asset/liability issues for CalPERS, and for the long-term management of debt. We are also familiar with OPEB management issues for our client base.
With respect to our proposed Task 4/Study 4, NHA is a leader statewide in the development of funding plans for climate change adaptation, including wildfire risk. Detailed background on our experience in CalPERS and debt management, as well as wildfire risk reduction funding, is contained in this proposal.
Collaboration is key to our approach: As with our proposal for Study 1 and Study 2, collaboration is key to our approach for Study 3. We see a key output of Study 3 as framing key scenarios to be analyzed by the completed Study 1 fiscal condition model. The future performance of CalPERS can have a major impact, good or bad, on the fiscal condition of the Town. Major new development, including its infrastructure needs can have an equivalent impact. Finally, we see the use of the Study 1 model as a key tool in determining whether the Town's current and future projected cash reserves are sufficient to handle "Black Swan" events.
As noted in our cover letter for the combined Study 1 and Study 2 Proposal, NHA team staff have extensive and long-term experience in translating complex CalPERS and debt burden analysis into decision support packages that are clear, actionable and accessible to governing bodies and the public. We have deep experience in multi-lateral negotiations between multiple stakeholders over both debt funding and financial management issues.
As requested in the RFP, we accept the provisions of the sample contract contained in the RFP. While we emphasize our team commitment to collaboration, we also will accommodate the Town individually selecting one of our team members for a particular task but not selecting other team members for their assigned tasks.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
We are very pleased to deliver this proposal for the kind of integrated financial management work that we see as integral and pivotal for the future of Los Gatos, as well as so many other local governments in our team's collective client base.
We are proud of the reputation we have earned as a trusted municipal advisor and are excited about the potential to work with the Town.
As requested in the RFP, NHA provides the following statements as part of this cover letter:
• Mark Northcross is the primary contact authorized to bind the firm. • NHA Advisors confirms acceptance of the Town’s Sample Consultant Services Agreement Please feel free to contact us directly with any questions regarding this proposal.
Thank you for your consideration.
Mark Northcross
Principal
Mike Meyer
Vice President
[email protected] [email protected]
(415) 785-2025 x2002 (415) 785-2025 x2004
NHA Advisors, LLC
4040 Civic Center Drive, Suite 200, San Rafael, CA 94903
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
2. COMPLETED CERTIFICATION FORMS
Conflict of Interest Statement
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
Non-Collusion Declaration
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
References
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
Statement Regarding Insurance Coverage and Worker’s Compensation Insurance Acknowledgement Certificate
See previous page
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
3. SCOPE COMMENTS AND METHODOLOGY
As noted in our cover letter, we believe that the collaborative partnership of NHA Advisors, Raftelis and Willdan will ensure a truly comprehensive approach to executing all three requested studies in an integrated manner for the Town of Los Gatos. While NHA has similar experience to Raftelis in developing the type of long-range forecasting model that will be a core component for Study 1, the experience required for Study 3 is most in line with the qualifications of NHA, specifically related to debt management (bonds, pension, OPEB) and capital funding strategies. As the #1 ranked municipal advisor to California cities for bond funded capital projects, while also having served over 100 CalPERS members on pension cost management strategy and policy, NHA is well suited to carrying out Study 3, while seamlessly weaving in the various scenario impacts to the work being completed in Studies 1 and 2.
Study 3: ALM Study Scope Comments and Methodology
For our engagement related to the scope of services identified under Section E of the RFP, specifically under the “Study 3 – Asset Liability Management (ALM) Study” heading, NHA proposes the approach and timeline described below. As required by the RFP, this material can be considered as a stand-along proposal for NHA to prepare Study 3, should the Town choose to retain NHA, but not Raftelis and/or Willdan.
Task 3.1: Inventory & Evaluate Liabilities
• Data Collection and Review – Review last 10 years of CalPERS actuarial reports, Section 115 Trust statements, and other internal documentation related to the Town’s recent track record of Additional Discretonary Payments and policy driven set asides (as discussed here: Town Pension and OPEB Plans Information (updated 10-18-2022) | The Los Gatos CA Official Site!) • Model Development – Using data taken directly from CalPERS actuarial reports and the CalPERS Pension Outlook Tool, NHA will develop a customized model for the Town that includes detailed amortization base analysis as well as a customized Section 115 Trust smoothing model. These models will assist in quickly analyzing the impacts of various ADP and/or Section 115 trust strategies, with simple excel outputs that can be easily incorporated into the Long-Range Financial Modeling occuring in Study 1.
• CalPERS ALM Study Update – The Town’s proposed schedule for this project dovetails perfectly with the CalPERS ALM study that will be completed this November. New actuarial assumptions (discount rate, inflation, mortality, etc.) will be announced and by Deceember, should be able to be modeled out which will proviee the most accurate long term picture of the Town’s future pension liabilities.
Task 3.2: Funding Needs and Risk Reduction Analysis:
• Cost Management Strategy Analysis – once the “baseline” has been established using the fresh results of the CalPERS ALM study, a variety of cost management strategies will be analyzed, including ADPs, Section 115 Smoothing and Fresh Start accelerated payment options. These scenarios will necessarily be informed by the results of the long-range forecasting model to better understand financial resources and constraints.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
• Funding Needs and Risk Reduction Analysis – as part of the cost management strategy evaluation, multiple scenarios related to future “downside risk” will be incorporated to see how these strategies might play out in the future if various assumptions aren’t met. NHA will frame scenarios for analysis using the Task 1/Study 1 fiscal conditions model. These include potential recessionary scenarios, poor investment returns by CalPERS, and significant changes to future actuarial assumptions, like the discount rate. The ability of new development to support infrastructure needs, as forecast by Willdan and the Task 1/Study 1 model, will be evaluated.
Where appropriate, NHA will recommend potential revenue enhancements to address projected shortfalls. NHA is flexible as to what these scenarios look like and beyond our own recommendations, will be collaborating with Town Staff, Raftelis and Willdan to ensure cohesion between the 3 studies.
• Stakeholder Engagement and Feedback (Optional) – NHA will be available to meet with staff and stakeholders as much as needed during the process. It may be helpful to have multiple meetings, with the initial ones focused on educating stakeholders about how the pension liability works, how the Town has been tackling it in the past, and what things might be impacting these costs moving forward. After “setting the table” with this basic education, subsequent meetings can be focused on the pros/cons of various cost management strategies and the impact they might have on other key variables being assessed in these studies: namely, capital funding opportunities and reserve levels.
Task 3.3: ALM Modeling:
• ALM modeling for Fund Balance sustainabcility and Risk Exposure: NHA will work with Raftelis and Willdan to frame scenarios for "Black Swan" events to test fund balance sustainability and risk exposure. NHA will recommend mitigation measures, including revenue enhancements, for scenarios where the Town's cash reserves are projected to be inadequate. For the start of a discussion about "Black Swan" scenarios, we offer the following suggestions:
o Sustained national economic downturn
o Major natural disaster, such as an earthquake or wildfire. Consider modeling fiscal impact with minimal FEMA support, based on current proposals from the Trump administration. o Sustained weak financial performance from CalPERS
o A reduction in the CalPERS actuarial discount rate
• We see two key elements for ALM modeling, both of which need to inform the Task 1 fiscal condition model:
o Potential long term cash flow impacts from the Town's CalPERS obligations. Our task here, as we see it, is to develop a range of scenarios for such variable as CalPERS financial performance an a potential lowering of the CalPERS actuarial discount rate for scenario analysis through the Task 1 fiscal condition model. As part of this analysis, NHA will offer options for revenue enhancements/tax increases legally available for cities in California. • Capacity of the General Fund to fund or finance major future infrastructure needs. For this deliverable we will (1) discuss with Town staff their existing CIP and (2) and discuss with Town
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
staff the potential infrastructure needs for new development. Note that Activity 2 under the Task 1 Raftelis proposal includes analysis of the Town's CIP. Based on the Task 2 Willdan fiscal impact model, we will determine how much of the infrastructure needs for new development can reasonably be expected to be funded through (1) impact fees or (2) directly by developers or (3) any long term fiscal surplus arising from new development. Where there are gaps, we will design scenarios, in conjunction with the Town's current CIP, to run under the Task 1 fiscal condition model. We will look at both pay-go and long-term lease revenue bond financing options. As part of this analysis, NHA will offer options for revenue enhancements/tax increases legally available for cities in California.
Task 3.4 Reserve Guidance:
• Reserve guidance, recommendations and policy refinements: Based on the results of the prior work, and feedback from staff and the Town’s stakeholders, NHA will provide strategy and policy recommendations that aim to secure long term sustainablity and risk mititgation, using future cash reserves as projected by the Task 1/Study 1 model as a key metric. • We will use the outcomes from the Study 1 Fiscal Condition Analysis with Five-Year Forecast to determine the adequacy of the Town's current cash reserves to meet the defined "Black Swan" events, and offer suggestions for increased reserved levels, if so indicated.
Task 3.5 Execution (As Needed)
• To the extent that the Town needs assistance from NHA to help execute on a preffered strategy, NHA can spearhead those efforts on the Town’s behalf working directly with CalPERS, the Town’s Section 115 Trust provider and investment advisor, actuaries, and others.
Optional Study 4: Wildfire Risk Mitigation Consulting Scope Comments and Methodology
The following material is provided by NHA for an optional Study 4 as an unsolicited proposal. We believe that NHA can deliver a major value to the Town through developing a realistic funding plan for wildfire risk mitigation, primarily through the long-term reduction of what are called "ladder fuels" along the Town's wildland urban interface ("WUI") with the Santa Cruz Mountains. As required by the RFP, this material can be considered as a stand-along proposal for NHA to prepare Study 4, should the Town choose to retain NHA, but not Raftelis and/or Willdan.
Specific NHA Qualifications for Study 4 - NHA is the leading municipal advisor in the State of California on funding for climate change adaptation. Since 2017 we have prepared funding plans for the following adaptation projects:
• Resilient by Design, a nine Bay Area county-wide collaboration to develop sea level rise adaptation and funding plans, funded by the Rockefeller Foundation. • Funding Pathways for Adaptation to Climate Change in California. Describes public finance funding options for wildfire risk reduction, sea level rise adaptation, drought and extreme heat in California.
Prepared under a grant from the Resources Legacy Fund.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
• Municipal Advisor to the Town of Paradise. Assist the Town in funding recovery through funding wildfire risk mitigation at the parcel, community and regional levels. Developing a funding strategy for the recovery of downtown Paradise.
• Oakland Alameda Adaptation Committee. Prepared a funding and governance plan for long term funding for sea level rise for the section of San Francisco Bay stretching from the Bay Bridge to the Oakland Airport.
• Illustrative Statewide Budget for Wildfire Risk Mitigation. Prepared an illustrative budget for combined state, regional and local government intervention to reduce wildfire risk statewide, including cost estimates and potential public finance funding mechanisms. Prepared under a grant from the Resources Legacy Fund.
• Paradise Recreation and Parks District. Preparing a funding plan for full implementation of a 30,000- acre wildfire buffer zone around the greater Paradise community. The plan includes funding for acquisition of easements and/or fee title for high priority parcels, as well as treatment costs. Polling for a parcel tax is part of the program, as well as grant applications to both FEMA and CalFire. The work is funded under a grant from the Governor's Office of Planning & Research.
Framing Our Approach - The key element in our approach is to address the major disconnect between good wildfire risk reduction practices by both public agencies and property owners in California and the insurance industry. The bottom line and increasingly intense, political issue is tax payers and property owners losing coverage or receiving huge premium increases despite doing good risk mitigation work.
From our experience both in Paradise, and statewide, we see two major reasons for this:
a. There is a difference of opinion between the important "local knowledge" of community level fire safety professionals and the catastrophe modelers ("cat modelers") used by the insurance industry to determine risk from a windstorm-driven wildfire. The primary risk driving non-renewals and premium increases in California is that of a windstorm driven wildfire. To deliver not only more public safety to the Los Gatos community, but better insurance availability as well, the local knowledge is ideally supplemented by data from a cat model of a windstorm driven wildfire igniting in the Santa Cruz Mountains.
b. The information on wildfire risk mitigation work needs to be made available to cat modelers in a fully "curated" way. That means it is regularly updated and verified as being accurate. It also means, ideally, that the data is available through a GIS on a parcel specific level. This needs implies two other major needs: regular inspections of parcels and a curated "data commons" for wildfire risk mitigation information. The biggest challenge for the data commons is maintaining confidentiality for homeowners.
Based on our extensive experience in Paradise in particular, we offer the following scope of services:
• Task 4.1 Identify Treatment Areas of Highest Priority: Work with local fire safety professional to identify the areas in the Santa Cruz Mountains south of the Town that have the highest priority for treatment for wildfire fuel reduction on a long term basis. Support any ongoing work regarding "Zone Zero", or a 5' defensible space zone around structures. Retrofit home hardening work for structures in the Town we believe to beyond the scope of this analysis. Both the scale and the
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
level of funding needed, in our opinion, are beyond what is plausible for a public funding intervention.
o Task 4.1a (optional): Retain a "cat modeler" (catastrophe modeler used by insurance companies) to model windstorm driven wildfire pathways from an ignition point south of Town into the Town. This work identifies priority parcels for treatment that might differ from local fire safety professionals.
• Task 4.2 Develop Annual Treatment Budget for Wildfire Risk Mitigation: Work with local fire safety professional to develop an annual budget for treatment for priority parcels. Local fire safety professionals will provide guidance on likely costs per acre for different types of treatment in the greater Santa Clara County area, types of treatment recommended and the appropriate recurrence interval for such treatment. In addition, based on work being done in other jurisdictions, such as the Marin Wildfire Prevention Authority and the Town of Paradise, prepare a budget for funding annual inspections of parcels within the proposed buffer zone, as well as parcels within the Town.
• Task 4.3 Present Preliminary Results: Present the preliminary results of Task 2 to senior management at the Town, and with approval from the Town, present the preliminary results to senior management at neighboring cities, such as the Cities of Monte Sereno, Saratoga, Los Altos Hills and San Jose. Based on NHA's work on climate change adaptation in both the wildfire and sea level rise space, we believe regional collaboration between vulnerable public entities is the best pathway to success. Our goal would be to use the preliminary results of Task 2 as an illustration of what could be accomplished through regional collaboration for a wildfire buffer zone for Santa Clara County's WUI along the Santa Cruz Mountains. o Task 4.3a (optional): If Task 3 results in strong interest from other neighboring cities, we will work with staff at all stakeholders to develop a non binding MOU on collaboration to develop a funded regional entity to deliver long term wildfire fuel reduction in the cities collective WUI with the Santa Cruz Mountains
• Task 4.4 Funding Plan Development: Develop a funding plan to deliver the Task 2 budget. We will look at Prop 3 grants, FEMA Hazard Mitigation Grants, any potential General Fund support, and then solve for the level of a parcel tax required to fully fund the budget. o Task 4.4a: (optional). Develop both the cost analysis, similar to Task 2, and the funding analysis, as in Task 4.4, for other cities party to the potential non-binding MOU. • Task 4.5 Present Refined Cost & Funding Plan: Present the combined cost and revenue budget to the Town and any parties to a potential non-binding MOU. • Task 4.6 (optional): Work with the Town and other stakeholders to determine how a "data commons" for wildfire risk mitigation work by the Town and/or parties to the MOU could be established.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
• Task 4.7 (optional): Retain a polling consultant to gauge the feasibility of any parcel tax required to deliver full funding for the wildfire buffer zone.
4. EXPERIENCE AND EXPERTISE
Firm Qualifications
NHA Advisors, LLC is an Independent Registered Municipal Advisor registered with the SEC and MSRB and headquartered in San Rafael, California. NHA has been providing municipal advisory services (like the size and scope requested by the Town’s RFP) to California cities, special districts, and other public agencies since 2000 (formerly known as Northcross Hill & Ach, Inc. from 2000-2011). NHA has provided comprehensive financial and consulting services to over 175 public agencies throughout California, with a primary focus on California cities. NHA’s bond and
consulting groups are currently working with public
agencies to develop project funding solutions,
financial policies, pension liability, fiscal sustainability and climate adaptation strategies.
NHA’s experience with California cities spans from
rural, small cities to major metropolitan agencies,
which informs NHA of the problems facing public
agencies across the State and allows NHA to bring
creative examples and solutions to our clients. We
understand the time and staff resource constraints
required to develop funding strategies and financing
plans and believe our holistic approach allows us to be an “extension of staff” that will integrate with Town
staff to provide the best solution and process for
projects. Combined, the NHA team has over 190 years
of individual experience of providing these services.
Regarding special consulting projects, NHA has
developed eight specialized practice groups that focus
on key areas within municipal finance. These groups
enable us to provide guidance on a wide range of
NHA Clients Served*
*Dots represent client engagements from 2012 - Present
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
municipal finance issues. Of particular note is our Pension and Fiscal Sustainability Practice Group, which has been actively engaged with agencies across California. A summary of this work is also included below.
Beyond bond financings, many clients rely on NHA for strategic financial planning, policy advice, and crosscollaboration with other engineers and consultants to support Town staff on a wide range of issues. NHA’s eight practice groups address critical financial expertise like revenue measures (ad valorem, special tax, assessment and parcel taxes), voter-approval processes, budgetary projection work, as well as climate change impacts (e.g., wildfire risks), pensions, P3/economic development negotiations, and post-issuance compliance (continuing disclosure and arbitrage rebate) to provide meaningful ideas and advice to our clients when those issues arise. Since 2018, NHA staff has completed over 400 advisory projects, many of which did not result in a financing. Our “extension of staff” style has become a core component of our services and a critical benefit to many of our public agency clients NHA has eight registered municipal advisors dedicated to California cities and special districts. NHA is led by Principals Craig Hill, Mark Northcross, and Eric Scriven, each of whom have 30+ years of public finance experience. The Principals are supported by three Vice Presidents, an Associate, and three Analysts (two of whom are in process of passing their Series 50 Licensing examination to become licensed Municipal Advisors). NHA professionals maintain their Series 50 License in good standing. NHA’s services to the Town will be provided through NHA’s sole office in San Rafael, California.
Pension Consulting and Community Engagement
Over the past 10 years, NHA’s Pension Group, led by Mike Meyer, has worked with more than 100 California public agencies, to help develop strategies and policy to better manage CalPERS liabilities.
The table below highlights some of the agencies we have recently worked with, and the type of services requested. Our expertise and services include technical quantitative analysis on historical trends and projected costs, sensitivity/risk analysis and scenario modeling, translating options to address rising costs (i.e., Section 115 Trust, UAL pay-downs (ADPs), Hard and Soft Fresh Starts, pension bonds, etc.), and presenting findings and alternatives to elected officials, staff, and union representatives at public and informal meetings. NHA’s ability to translate complex information and be agile in meeting our clients’ needs is one of our strongest attributes (based on comments from existing clients). We expect that our skill in translating information will be helpful in properly engaging with the Los Gatos community during the duration of this project.
Mike Meyer has been a frequent speaker (recently for CDIAC, CSMFO, Govinvest) on the subject of pension liability management and our Pension Group consistently publishes newsletters, called “NHAlerts” when there is pertinent information that we feel our local agency clients and their stakeholders should be aware of. You can find our most recent NHAlert here: CalPERS Beats Expectations Again | NHA Advisors.
Recent Work Product (Appendix A): NHA worked with the City of Walnut Creek in early 2025 to (1) educate stakeholders about their CalPERS pension liability, (2) provide stress testing scenario modeling to account for potential changes to the discount rate in the future, (3) develop a customized model that helped optimize the timing and amounts of Section 115 Trust deposits and withdrawals, and (4) review and support potential changes to the City’s pension funding policy. The presentation in Appendix A showcases our ability to translate the complex world of CalPERS and develop dynamic tools that allow for prudent, long term decision making by stakeholders.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
Top-Ranked Municipal Advisor to Cities
Over the past five years (since 2020), NHA has been the #1 municipal advisor, by number of bond transactions for California cities (Source: California State Treasurer as of July 15, 2025; excludes commercial paper and conduit financings; January 2020-present). Financing amounts have ranged from below $1,000,000 to over $400,000,000 and have included all methods of sale (competitive sale, negotiated sale, and private placement). Our work in developing holistic funding plans to meet the infrastructure needs of our local agency clients will be extremely useful with helping the Town of Los Gatos evaluate the pros and cons or various capital funding tools available.
CalPERS Education / Budget
Workshops
NHA Pension Report (8-
Page Report Distilling
Historical Actuarial Report
Trends)
Cost Management Strategy
Evaluation Process /
Workshops (Section 115
Trust, ADPs)
POB Workshops /
Evaluation Process
(Pros/Cons, Options and
Risks) POB (UAL Restructuring)
Alameda, City of
Arcata, City of
Auburn, City
Calaveras Cnty. Water Dist.
Carmel-by-the-Sea, City of
Chico, City of
Chula Vista, City of
Corcoran, City of
Corte Madera, Town of
El Cerrito, City of
El Monte, City of
Farmersville, City of
Fort Bragg, City of
Gilroy, City of
Grass Valley, City of
Grover Beach, City of
Hanford, City of
Hayward, City of
Lakeport, City of
Lancaster, City of
Lincoln, City of
Lompoc, City of
Martinez, City of
Monterey, City of
Morro Bay, City of
National City, City of
Newark, City of
North County Fire Prot. Dist.
Novato Sanitary District
Oroville, City of
Oxnard, City of
Palos Verdes Library District
Paso Robles, City of
Pittsburg, City of
Rialto, City of
Richmond, City of
Riverbank, City of
Riverside, City of
Salinas, City of
Sausalito, City of
San Carlos, City of
San Miguel Fire
Scotts Valley, City of
Sebastopol, City of
Selma, City of
Stanislaus Consolidated FPD
Torrance, City of
Ukiah, City of
Walnut Creek, City of
West Covina, City of
Winters, City of
NHA Pension Group Experience
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
5. KEY PERSONNEL AND RESUMES
NHA Team Assigned to the Town
NHA’s proposed project team will
consist of the following advisors: Mark
Northcross (Principal), Mike Meyer
(Vice President), and Matt DeFilippis
(Senior Analyst). Mark Northcross will
serve as the day-to-day relationship
manager for the Town. An
organization chart of the NHA team
identifying the staff assigned to the
Town is shown to the right. Additional
members of NHA can be made
available as expert resources to the
Town as needed.
All advisors providing financial
advisory services to the Town will be managed out of the San Rafael, CA office. All advisors providing financial advisory services to the Town will be available for the full duration of the contract. Information regarding each team member’s experience and qualifications is described below. Full resumes are included as Appendix C.
98 81
78 69
65 40
21 19 17 15
NHA
Advisors
Urban
Futures
PRAG Fieldman
Rolapp
PFM
Group
KNN
Public Finance
CSGAdvisors Wulff
Hansen
Harrell &
Company
Kosmont
Companies
MUNICIPAL ADVISOR RANKINGS FOR CALIFORNIA CITIES
Transactions (January 2020 - Present)¹
1 Source: California State Treasurer as of 7/15/2025; excludes commercial paper and conduit financings Craig Hill
Managing Principal
Mark Northcross*
Principal
Eric Scriven
Principal
Rob Schmidt
Vice President
Christian Sprunger
Vice President
Matt DeFilippis*
Associate
NHA Advisors, LLC
Mike Meyer*
Vice President
Adrian Gonzalez
Analyst
Kevin Ellis
Analyst
Mohamed Maxamed
Analyst
*Assigned to Support The Town for this Engagement
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
Mark Northcross, Principal. Role: Lead Advisor
Mr. Northcross has more than 40 years of public finance experience in California. He is a leading advisor on climate change infrastructure and leads NHA’s alternative financing practice that focuses on “holistic” funding solutions, with special emphasis on SRF, WIFIA, Federal and State grants. Mr. Northcross has also managed the formation of CFDs for P3’s throughout the State since 1987 and is a leader in California in negotiating both public-private partnerships for both land-secured debt and redevelopment. He holds a B.A. in Social Sciences from the University of California, Irvine. He maintains his MSRB Series 50 License.
Mike Meyer, Vice President. Role: Project Manager
Mr. Meyer has worked in public finance for 21 years, with over half of his time spent as an underwriter. Mr. Meyer manages NHA’s Pension and Fiscal Sustainability Group and has analyzed pensions and POB structuring solutions since 2006. He has worked on each of the firm’s pension consulting and POB engagements over the last five years, totaling $1.7 billion in par. Mike is also an experienced generalist, having completed over 200 bond financings using all types of structures, including utility revenue, lease revenue, sales tax and transportation revenue, TABs, and land secured. Mr. Meyer holds a B.S. in Management Science, from the University of California, San Diego. He maintains his MSRB Series 50 License.
Matt DeFilippis, Senior Analyst. Role: Quantitative Support & Project Support Mr. DeFilippis will provide credit, quantitative, and research support to the assigned NHA team. Mr. DeFilippis has worked in public finance since 2021. Since then, he has provided project management and deal support on a variety of California financings totaling over $450 million in par. Mr. DeFilippis’ recent projects have included educational workshops on pension cost management, general fund forecasting, and credit rating analysis. Mr. DeFilippis holds a B.A. in Applied Mathematics, from the University of California, Berkeley. He maintains his MSRB Series 50 License.
Subcontractors for Study 3 (ALM Study)
None.
Subcontractors for Optional Study 4 (Wildfire Risk Mitigation) Other than the potential of retaining a Geographic Information System (“GIS”) mapping consultant for managing the parcel database as part of the wildfire buffer zone analysis and consulting, NHA does not plan to use any subcontractors for this engagement. NHA does not have a pre-selected GIS mapping consultant for this engagement and would coordinate with the Town for engaging any future consultant to ensure we comply with the Town’s bidding practices.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
6. TIMELINE AND WORK PLAN
Study 3 (ALM Study) Timeline
Based on the scope of services identified in the Town’s RFP for Study 3 (ALM Study), NHA proposes the following realistic schedule. This schedule assumes that the Town enters into contract negotiation and execution the week of September 29, 2025, as outlined in the RFP.
Task Estimated Completion Date
3.1: Inventory & Evaluate Liabilities December 2025
3.2: Funding Needs & Risk Reduction Analysis March 2026
3.3: ALM Modeling March 2026
3.4: Reserve Guidance April 2026
3.5: Execution (As Needed) TBD based on Desired Strategy Optional Study 4 (Wildfire Risk Mitigation) Timeline
Based on the proposed Scope of Services identified in Section 3 of this Proposal for the Optional Study 4, we propose the following schedule for delivery of NHA’s services. This schedule assumes that the Town enters into contract negotiation and execution the week of September 29, 2025, as outlined in the RFP.
Task Estimated Completion Date
4.1: Identify Areas of Highest Priority November 2025
4.2: Develop Annual Treatment Budget for Wildfire Risk Mitigation December 2025
4.3: Present Preliminary Results February 2026
4.4: Funding Plan Development March 2026
4.5: Present Refined Cost & Funding Plan April 2026
Consequently, we estimate that completion of the non-optional tasks will take about 6 months from the date of engagement. Below is a summary of the estimated timeline for the additional optional services identified under Study 4:
• Optional Task 4.1a (Retain Cat Modeler) will take about 8 weeks, not counting going out to RFP. • Optional Task 4.3a (Develop MOU for Collaboration Across Cities) will take approximately 8 weeks from start to finish.
• Optional Task 4.4a (Funding Plan for Other Cities pursuant to MOU) can proceed concurrently with Task 4.4.
• Optional Task 4.6 (Data Commons Work) will take an additional 16 weeks, in our experience. • Optional Task 4.7 (Polling Consultant Engagement) will take an additional 12 weeks
7. SAMPLES OF COMPARABLE PROJECTS
Sample 1: Pension Expense Modeling for the City of Walnut Creek As mentioned above under Section 4, NHA worked with the City of Walnut Creek in early 2025 to (1) educate stakeholders about their CalPERS pension liability, (2) provide stress testing scenario modeling to account for potential changes to the discount rate in the future, (3) develop a customized model that helped optimize the timing and amounts of Section 115 Trust deposits and withdrawals, and (4) review and support potential changes to the City’s pension funding policy. The presentation in Appendix A
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
showcases our ability to translate the complex world of CalPERS and develop dynamic tools that allow for prudent, long-term decision making by stakeholders.
Sample 2: Wildfire Buffer Zone Budget Modeling for the Greater Paradise Area NHA prepared a detailed budget for annualized treatment costs and other expenses for a 30,000-acre community wildfire buffer zone for the greater Paradise area. Appendix B includes a slide deck prepared by NHA on funding the proposed Paradise Community Wildfire Buffer Zone.
8. DISCLOSURE OF ABSENCE OF LITIGATION OR DISCIPLINE OVER LAST FIVE YEARS There have been no instances in the last five years where a client terminated NHA Advisors midway through a contract for providing advisory/consulting services.
There are no pending legal actions alleging violations of law against the firm, any partner of the firm, or any employee of the firm by any Federal or State regulatory agency.
No Conflicts of Interest and other Disclosures
NHA has not engaged in any finder’s fees, fee splitting, payments to consultants, or other contractual arrangements which would constitute a real or perceived conflict of interest.
NHA does not have an affiliation or relationship with any broker-dealer, nor has any NHA personnel who would provide advice to the Town been has associated with a broker-dealer firm within the two years preceding this RFP.
NHA has no known conflicts of interest in serving as the municipal advisor to the Town. NHA has no financial, business or other relationship with the Town. NHA has no current clients who may have a financial interest in the outcome of this contract. NHA is not suspended from practice in the State of California. Further, NHA, focused upon cities as our core mission / business, does not serve any other public entities and so are free from those potential direct conflicts of interest that some of our competitors have from serving two different public agencies with differing goals or direct conflicts.
NHA, under its fiduciary duty as a SEC-Registered Municipal Advisor, must deal honestly and with the utmost good faith with the Town and act in the Town’s best interests without regard to the financial or other interests of NHA. NHA will eliminate or provide full and fair disclosure to the Town about each material conflict of interest (as applicable). NHA will not engage in municipal advisory activities with the Town if it cannot manage or mitigate its conflicts in a manner that will permit it to act in the Town’s best interests.
As a general statement, NHA represents that in connection with the issuance of municipal securities, NHA may receive compensation from the Town for services rendered. If this compensation is contingent upon the successful closing of a transaction and/or is based on the size of a transaction then, consistent with the requirements of MSRB Rule G-42, NHA hereby discloses that such contingent and/or bond sizedetermined transactional compensation may present a potential conflict of interest regarding NHA’s ability to provide unbiased advice to Town to enter into such transaction. This conflict of interest will not impair NHA’s ability to give unbiased and competent advice or to fulfill its fiduciary duty to the Town. If NHA becomes aware of any additional potential or actual conflict of interest after this disclosure, NHA will disclose the detailed information in writing to the Town in a timely manner. NHA will never be
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
compensated based upon the size of a transaction. NHA has a duty to reasonably establish its fees in relation to metrics that are fair and understandable to our clients such as amount of firm resources deployed, complexity of the deal, breadth of services rendered, risks associated with completion, among many other considerations.
9. REFERENCES
NHA’s references will provide the Town with a frank, detailed evaluation of our approach and processes.
We encourage you to reach out for more information about how NHA approaches projects with a goal of providing an unparalleled level of municipal advisory and consulting services.
References for Study 3 (ALM)
Reference: City of Ukiah
Contact: Dan Buffalo, Finance Director
Contact Address: 300 Seminary Avenue, Ukiah, CA 95482
Contact Phone & Email Address: (707) 463-6220 | [email protected] Start & End Date of Services: July 2016 - Present
Description of Services:
CalPERS Pension Stakeholder Education, Cost Management
Strategy Evaluation, UAL Restructuring (Lease Revenue Bond), Internal Pension Reserve Policy Analysis, ADP/Fresh Start Analysis, Ongoing Stakeholder Updates/Workshops
Fees Charged:
Pension Education, Stress Testing + Lease Revenue UAL
Restructuring Bond: $112,500
Ongoing Annual Pension Update/Cost Management Strategy
Analysis: $5,750 - $7,500
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
Reference: Walnut Creek
Contact: Kirsten LaCasse, Administrative Services Director Contact Address: 1666 North Main Street, Walnut Creek, CA 94596 Contact Phone & Email Address: (925) 943-5810 | [email protected] Start & End Date of Services: October 2024 – March 2025 Description of Services:
CalPERS Pension Stakeholder Education, Cost Management
Strategy Evaluation, Customized Section 115 Trust Model, 115 Trust Deposit/Withdrawal Analysis, Policy Recommendations Fees Charged:
$15,000
Reference: Riverside
Contact: Edward Enriquez, Assistant City Manager/CFO and Treasurer Contact Address: 3900 Main Street, Riverside, CA 92522
Contact Phone & Email Address: (951) 826-5553| [email protected] Start & End Date of Services: 2018 to Present
Description of Services:
CalPERS Pension Stakeholder Education, Cost Management
Strategy Evaluation, $430 Million POB, Pension Policy
Development, Customized Section 115 Trust Model, 115 Trust Deposit/Withdrawal Analysis, Annual Stakeholder Updates, POB Performance Comparison, “CalPERS Challenge” Assistance
(CalPERS Challenge | City Manager's Office)
Fees Charged:
Pension Obligation Bond (POB): $125,000
Pre-POB Consulting: $25,000
Annual Pension Update/Cost Management Strategy
Recalibration: $7,500 to $15,000
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
Reference for Study 4 (Wildfire Risk Mitigation)
Reference: Paradise Recreation and Park District
Contact: Dan Efseaff, District Manager
Contact Address: 6626 Skyway, Paradise CA 95969
Contact Phone & Email Address: (530) 872-6393 | [email protected] Start & End Date of Services: 2023 to Present
Description of Services:
Community Wildfire Buffer Zone Funding Plan for the Greater Paradise Region
Fees Charged:
$85,000 (funded in part through OPR Grant)
10. PRELIMINARY FEE SCHEDULES
Fee Schedule for Study 3 (ALM Study):
For work described in this proposal’s Section 3 (Scope Comments and Methodology) for Study 3 (ALM Study), NHA proposes to a compensation structure based on time and materials required at the hourly rate schedule shown below. We propose a not-to-exceed budget for these services of $50,000. The table below provides the itemized fee proposal as requested in the RFP and provides a “low-end” estimate and a “high-end” estimate based on our experience on other projects.
In-Person Meetings (Upon Request) – NHA will be available to attend virtual meetings and conference calls at the hourly rates shown above and the budget shown above factors in the time for virtual meetings and conference calls in order to deliver the study to the Town. In the event that the Town requests inperson meetings, NHA proposes a travel fee of $1,500 (per attendee) for each in-person meeting.
Fixed Fee Fee
Engagement/Administrative Setup
(Contract, Insurance, etc.) $500
Study 3 (ALM Study) - Budget Worksheet
Task Blended
Hourly Rate*
Estimated Hours
(Low End)
Estimated Budget
(Low End)
Estimated Hours
(High End)
Estimated Budget
(High End)
3.1: Inventory & Evaluate Liabilities 285 35.0 $9,975 45.0 $12,825
3.2: Funding Needs & Risk Reduction Analysis 285 35.0 $9,975 60.0 $17,100
3.3: ALM Modeling 285 35.0 $9,975 45.0 $12,825
3.4: Reserve Guidance 285 18.0 $5,130 25.0 $7,125
3.5: Execution (As Needed) TBD TBD TBD TBD TBD
Total Low-End
Estimate
$35,055 Total High-End
Estimate
$49,875
*Blended hourly rate assumes the following approximate allocations of work among NHA staff: principal 20%, vice president 30%, support staff 50%
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
Professional Services (Hourly) 2025
Rates(1)(2)
Principal $360
Director / Senior Vice President $335
Vice President $310
Assist. Vice President / Sr. Associate $285
Associate $260
Senior Analyst $230
Analyst $205
Administrative $130
1) Hourly rates will escalate by 3% annually each January 1st (rounded to the nearest five dollars based on the
prior year’s rounded amount).
2) Effective hourly rates shown in invoices may be reduced to incorporate non-billable time.
Fee Schedule for Optional Study 4 (Wildfire Risk Mitigation):
For work described in this proposal’s Section 3 (Scope Comments and Methodology) for Optional Study 4 (Wildfire Risk Mitigation Consulting), NHA proposes to be compensated based on time and materials required at the hourly rates shown in the section directly above. We propose a not-to-exceed budget for these services of $45,000. This budget is specific the Tasks 4.1, 4.2, 4.3, 4.4 and 4.5 discussed in that section and excludes the optional tasks in that scope. Should the Town desire the optional tasks, below is a summary of the budget for those tasks:
• Optional Task 4.1a (Retain Cat Modeler): The cost to retain a cat modeler would be a separate budget, based on the proposals received from cat modeling firms. • Optional Task 4.3a (Develop MOU for Collaboration Across Cities): Time and Materials, subject to a fee cap of $15,000
• Optional Task 4.4a (Funding Plan for Other Cities Pursuant to MOU): Time and Materials, subject to a fee cap of $10,000
Expenses for Optional Study 4
Our $45,000 fee cap for the non-optional tasks already includes $6,000 potential expenses for retaining a consultant to prepare GIS layers for parcels within the proposed wildfire buffer zone, including priority treatment parcels.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
11. STATEMENT OF INSURANCE COVERAGE
As summarized in the table below, NHA meets the insurance requirements in the Town’s Sample Consultant Services Agreement. NHA will maintain this coverage for the term of the contract if selected by the Town for this engagement.
Coverage Type Town’s Requirements
in Sample CSA NHA's Coverage
Carriers N/A
• Valley Forge Insurance Company
• Hartford Casualty Insurance Company
• Underwriters at Lloyd’s, London
General Liability
(per occurrence) $2M $2M
General Liability
(aggregate) Not specified $4M
Auto Liability $1M (per accident) $1M (per accident)
Worker's Comp (per
occurrence) $1M $1M
Professional Liability $1M per occurrence $1M per occurrence / $2M aggregate
12. TOOLS, DATA SOURCES, AND USE OF AI
Our pension advisory practice utilizes multiple data sources, including data taken directly from CalPERS actuarial reports and the CalPERS Pension Outlook Tool. This data provides inputs into our proprietary models that we have developed over years of pension consulting and advisory experience. Validation of the accuracy of these tools is extremely important to us and we review the output of these models regularly as part of each engagement.
As noted above, we will retain a consultant to prepare GIS layers for priority treatment parcels. Here is a link to the GIS layers website our consultant prepared for Paradise:
https://experience.arcgis.com/experience/767e8d6173de49efb4978e142b00c523 NHA uses an Enterprise Artificial Intelligence (“AI”) in a limited capacity. We use an enterprise subscription (vs Open Web AI) to maintain privacy of our documents and control on the outputs. To date, we have not used AI as a tool to generate or develop any of our models, since most of our models were developed years before the advent of AI. Generally speaking, we approach the use of AI in any consulting or financing engagements with healthy dose skepticism while also seeking strategic ways we can benefit our clients through improving our efficiency on projects. We recognize that there is a concerted marketing effort underway across the globe to promote widespread AI adoption, but we also recognize that AI is a tool, not a replacement for an experienced advisory staff. Any outputs of AI must be thoroughly vetted and reviewed before being incorporated into any body of work to minimize the impact from any “hallucinations” in AI outputs producing a flawed product.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
APPENDIX A: SAMPLE OF PENSION EXPENSE MODELING FOR THE CITY OF
WALNUT CREEK
ITEM NO. 7.
3/20/2025
1 PENSION TRUST & RESERVE ANALYSIS AND USE POLICY
CITY COUNCIL
MARCH 18, 2025
TODAY’S
DISCUSSION
• Considerations
Pension Trust & Reserve Use Strategy
• Historical and Projected CalPERS Costs
Pension Program Review
• Section 115 Trust Analysis
• Scenarios
Cost Management Strategy Overview
• Proposed Policy Language
Takeaways and Recommendation
1 2
ITEM NO. 7.
3/20/2025
2 REQUESTED ACTION
Provide Feedback
Accept the report and adopt a
Resolution establishing the Pension
Trust and Reserve Use Policy
THINGS TO CONSIDER….
When do we use?
How much do we use?
What latitude should the policy provide?
How can we be mindful of using one-time dollars for ongoing costs? How do we balance use with other reserves?
3 4
ITEM NO. 7.
3/20/2025
3 THE NHA
ADVISORS
TEAM
Michael Meyer
Vice President
Pension Group Manager
Craig Hill
Managing Principal
Matt DeFilippis
Senior Analyst
Adrian Gonzalez
Analyst
CITY OF WALNUT CREEK
CALPERS PENSION PROGRAM REVIEW AND
COST MANAGEMENT STRATEGY ASSESSMENT
MARCH 18, 2025
5 6
ITEM NO. 7.
3/20/2025
4 7
Today’s Discussion
I. Background on CalPERS Costs
II. Historical and Projected CalPERS Costs
III. Cost Management Strategy Overview
IV. City’s Section 115 Trust
I. Overview
II. Objectives
III. Analysis
I. BACKGROUND ON CALPERS COSTS
7 8
ITEM NO. 7.
3/20/2025
5 9
City of Walnut Creek CalPERS Summary
The City has a $155M CalPERS Unfunded Accrued Liability (UAL), as of 6/30/2024, per the CalPERS Pension Outlook Tool projections Miscellaneous Plan: $82M | Safety Plan: $73M
City has been proactive in addressing rising pension costs $28.7M in the Section 115 Trust as of 9/30/2024
$1.9M in the General Fund Pension Reserve
Effective funded ratio increases when including these assets The City makes two types of payments to CalPERS: Normal Cost & UAL 10 Normal Cost = Annual Cost for Current Employees
Amount needed to fund
future retirement benefits
based on actuarial
calculations (life expectancy,
payroll increases, etc.)
Benefits are funded as they
are earned
Maintains the long‐term
stability of the pension
system
Normal
Cost
Calculation
Employer
Contributions
Employee
Contributions
Assumptions
Used
9 10
ITEM NO. 7.
3/20/2025
6 11
Unfunded Accrued Liability (UAL)
Shortfall between the promised
pension benefits and the funds
currently available in the CalPERS
system to pay for those benefits
Increases or decreases based on
CalPERS investment returns
Impacts amortized over 20 years
Irregular payment shape as UAL
comprised of over 30 layers; each with
its own term/shape
Funded Ratio
ெ௧ ௨ ௦௦௧௦
௨ௗ ௧௬ ൌ 70.3%
Market Value of
CalPERS Assets:
$367 Million
Accrued Liability:
$521 Million
Shortfall (UAL):
$155 Million
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
Millions
City of Walnut Creek
CalPERS Pension Funded Status
Source: CalPERS Pension Outlook Tool. Assumes 9.3% investment returns in FY 2023‐24. 12 Discount Rate & Asset Liability Management (“ALM”)
• An assumed rate of return; a way to assess the risk of CalPERS’ investment portfolio
• The interest rate charged on the City’s UAL debt
Discount Rate
• Occurs every four years to balance the expected cost of pension payments with the expected investment returns
• Review of CalPERS’ investment portfolios and retirement plan liabilities (based on demographic & economic
factors, including membership, payroll growth,
retirement ages, inflation, and life expectancy)
Asset Liability
Management
2025 ALM Study in progress
11 12
ITEM NO. 7.
3/20/2025
7 13
Now …
Sluggish investment returns (not
meeting assumptions)
Assumptions have changed/grown
more conservative
Discount Rate: 8.25% → 7.00% → 6.80%
Inflation rate (prices going up)
Mortality rates (people living longer)
Shorter, more conservative
amortizations
Why CalPERS Costs Have Trended Higher
Then (late 1990s)…
Robust investment returns (10%+)
Retirement plans were “Super‐
Funded” through the late 1990s
Earnings on funds were more than
adequate to cover retirement costs
Super‐funded status induced
widespread retirement benefits
enhancements….
Past funding policies led to
contribution holidays and “free”
benefit improvements
Historical PERS
Returns
5-Year: 6.6%
10-Year: 6.2%
20-Year: 6.7%
30-Year: 7.7%
14 CalPERS Historical Preliminary Investment Returns (Time‐Weighted)
12.2% 11.9%
18.8%
‐2.9%
‐23.6%
11.1%
20.7%
1.0%
12.5%
18.4%
2.4%
0.6%
11.2%
8.6%
6.7% 4.7%
21.3%
‐6.1%
5.8%
9.3%
‐30.0%
‐25.0%
‐20.0%
‐15.0%
‐10.0%
‐5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Annual Return Target Discount Rate
13 14
ITEM NO. 7.
3/20/2025
8 15
How CalPERS Benefits Get Funded
Pre‐2008
Investment
earnings used to
make up a higher
percentage of
total contributions
As investments
underperform
assumptions,
employers must
make up the
difference, unless
the additional
costs are
negotiated with
employees
16 City’s CalPERS Retirement Plans
2 Main CalPERS plans; Miscellaneous & Safety
Miscellaneous: 1,352 covered members; $82M UAL
Safety: 285 covered members; $73M UAL
PEPRA (effective 2013) helpful to manage long term pension costs for new employees
Enacted revised benefit levels for new plan members
Higher employee contribution rates mean more normal cost is being paid by the employee
However, 98% of current UAL comes from Classic plans and is not impacted by PEPRA
15 16
ITEM NO. 7.
3/20/2025
9 17
72.4% 67.0% 63.0% 60.2% 53.6% 48.8% 44.0% 39.3% 34.6% 29.8% 25.1% 20.4% 15.6% 10.9% 6.2% 1.5%
27.6% 33.0% 37.0%
39.8%
46.4%
51.2%
56.0% 60.7% 65.4% 70.2% 74.9% 79.6% 84.4% 89.1% 93.8% 98.5% $0
$10
$20
$30
$40
$50
$60
2019202020212022202320242025202620272028202920302031203220332034 Millions
Total Classic Payroll Total PEPRA Payroll
Historical & Projected PEPRA Transition
Classic vs. PEPRA % of Payroll
Source: 2019‐2024 payroll data is sourced from the City’s CalPERS Actuarial Valuation Reports. 2025‐2034 payroll data is sourced from the CalPERS Pension Outlook Tool. 2025‐2034 projections assume the PEPRA % continues to grow at a historical average (2020‐2024) of approximately 4.7 percentage points per year.
Projected
II. HISTORICAL AND PROJECTED CALPERS COSTS
17 18
ITEM NO. 7.
3/20/2025
10 19
History of the City’s UAL Balance & Funded Ratio
Funded Ratio includes Section 115 Trust Assets & General Fund Pension Reserve $123 $129
$138
$102
$159 $164 $155
73.7% 75.0% 74.1%
84.3%
72.7% 72.9% 75.9%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
$‐
$20
$40
$60
$80
$100
$120
$140
$160
$180
2018 2019 2020 2021 2022 2023 2024
Millions
UAL Funded Ratio (Includes Section 115 Trust Assets & General Fund Pension Reserve) CalPERS Returns: 8.4% 6.5% 5.0% 22.4% ‐7.5% 6.1% 9.3% (Prelim) 20 60.6%
66.6% 70.1% 71.1% 72.9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Concord Antioch Livermore Pleasanton Walnut Creek
Source: CalPERS Actuarial Reports and city audited financial statements CalPERS Funded Ratio Comparison (As of June 30, 2023)
Funded Ratio Includes Trust Assets & Pension Reserves
$261M UAL
Assets:
Section 115
Trust ($0)
$294M UAL
Assets:
Section 115
Trust ($46M)
$166M UAL
Assets:
Section 115
Trust ($0)
$176M UAL
Assets:
Section 115
Trust ($0)
$164M UAL
Assets:
Section 115
Trust ($25M)
+ Pension
Reserve
($1.9M)
19 20
ITEM NO. 7.
3/20/2025
11 21
$0
$5
$10
$15
$20
$25
2018201920202021202220232024202520262027202820292030203120322033203420352036203720382039204020412042204320442045 Millions
Historical & Projected CalPERS Payments (UAL + Normal Cost) UAL + Normal Cost
payments projected to
increase from $18M to
$23M (+24%) by FY 2032
City’s UAL payments rising
to $16.6M by FY 2032
28% higher than FY 2025
UAL payment ($13M)
Annual Normal Cost
contributions going
forward projected to range
between $5.4M and
$7.5M through FY 2045
Source: CalPERS Actuarial Valuation Reports & CalPERS Pension Outlook Tool *Assumes FY 2023‐24 investment returns of 9.3% and 6.8% investment returns thereafter.
Normal Cost
Hypothetical UAL Payments*
(9.3% FY 2023‐24 Returns)
III. COST MANAGEMENT STRATEGY OVERVIEW
21 22
ITEM NO. 7.
3/20/2025
12 23
Pension Cost‐Management Strategies – Not Mutually Exclusive Prepay UAL early in Fiscal Year (≈ 3.3% discount) City Does This Negotiate Cost Sharing With Employees
• New employees already governed by lower cost/benefit PEPRA plans • Negotiate cost sharing of the City’s share
Use Cash Reserves to Pay Extra
• Section 115 Pension Trust – Separate trust solely dedicated to pension • City’s annual UAL cost and Normal Cost can be supplemented with the Section 115 Trust
• Additional Discretionary Payments (“ADPs”) – direct payments to CalPERS to reduce UAL • Can be funded with Section 115 or annual surplus (not recommended at this time given City’s projected budget deficits)
IV. CITY’S SECTION 115 TRUST
OVERVIEW, OBJECTIVES & ANALYSIS
23 24
ITEM NO. 7.
3/20/2025
13 25
Section 115 Pension Trust ‐ Overview
What is it? Restricted Account for pension
Advantages:
Potential Higher Investment Returns in Managed Account Longer‐Term Benefit: Trust funds can grow over time and pay off a large % of UAL in the future Shorter‐Term Benefit: Apply funds to “smooth” payment spikes in UAL and/or Normal Cost Flexibility – more investment options than CalPERS and the City can decide when and how to use
Potential shock absorber for volatility from CalPERS investment performance & assumption changes
Disadvantages:
Doesn’t directly reduce UAL until funds are transferred to CalPERS Requires reserves/surplus contributions to build account balance Investment risk (dependent on type of investment portfolio) 26 Section 115 Trust – City’s Objectives
LEVEL/LOWER ANNUAL PAYMENT: Use Trust judiciously to
flatten the pension curve (“mountain peak”)
LIQUIDITY: Maintain (don’t fully deplete) minimum trust balance to protect against future unknowns
VOLATILITY MITIGATION: Mitigate budgeting impacts of
increasing/fluctuating pension costs
25 26
ITEM NO. 7.
3/20/2025
14 27
Section 115 Pension Trust & Pension Reserve
City’s Section 115 Pension Trust has $28.7 million of assets as of 9/30/2024 Balanced investment objective: 50% Equity / 50% Fixed Income 10.89% investment return for FY 2024; 5.87% investment return since inception (FY 2019) Historical Contributions: Total = $19,876,600
August 2018: $13,895,400
April 2019: $2,989,000
July 2019: $2,992,200
General Fund Pension Reserve has $1.9M
Key Considerations for City
Is it time to stop growing trust?
Timing and size of optimal withdrawals
How would a discount rate change or recession change the strategy? 28 Section 115 Trust – Customized Modeling & Analysis
Using a customized model that can be updated periodically Model out various scenarios using CalPERS Pension Outlook Tool Estimating withdrawals from the Trust to create different payment smoothing strategies
Scenarios
#1 – STATUS QUO; 9.3% FY 2023‐24 Returns, 6.8% Returns After, No Assumption Changes
#2 – DISCOUNT RATE REDUCTION; CalPERS lowers discount rate from 6.8% to 6.5% #3 – DEFICIT MITIGATION; Withdrawals from Trust to mitigate City’s forecasted deficits
27 28
ITEM NO. 7.
3/20/2025
15 29
$‐
$2
$4
$6
$8
$10
$12
$14
$16
$18
20262027202820292030203120322033203420352036203720382039204020412042204320442045 Millions
Scenario #1 – STATUS QUO
Assumptions:
CalPERS Discount Rate: 6.8%
(no change)
CalPERS Investment Returns:
9.3% in FY 2023‐24; 6.8%
thereafter
Beginning Trust Balance:
$28.7M (as of 9/30/2024)
Additional Trust Contributions:
$0
Trust Annual Investment
Earnings: 5.28%
Ending Trust Balance: $0
UAL Payments
Net Payments
Smoothing Level: $12.1M
Withdrawals from Trust
30 $‐
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
202620272028202920302031203220332034203520362037203820392040204120422043204420452046 Millions
Assumptions:
CalPERS Discount Rate: 6.5%
CalPERS Investment Returns:
9.3% in FY 2023‐24; 6.5%
thereafter
Trust Balance: $28.7M (as of
9/30/2024)
Additional Trust Contributions:
$0
Trust Annual Investment
Earnings: 5.28%
Ending Trust Balance: $0
Scenario #2 – DISCOUNT RATE REDUCTION
6.5% CalPERS Discount Rate – UAL Increase from $155M to $175M UAL Payments
Net Payments
Smoothing Level: $13.7M
Withdrawals from Trust
29 30
ITEM NO. 7.
3/20/2025
16 31
Scenario #3 – DEFICIT MITIGATION
Withdrawals from Trust to Mitigate City’s Forecasted Deficits (Moderate Recession) Assumptions:
Assumes net operating results
from City’s Moderate Recession
financial forecast
FY 2026‐27 Recession: 18‐month
downturn; 3‐year recovery
‐2% Property Tax; ‐6.25% Sales
Tax & TOT; ‐5% Other Revenues
Assumes Trust offsets 100% of
deficits through FY 2034 and a
portion of the deficit in FY
2035, before exhausted
32 Comparison of Trust Deposits and Withdrawals
Scenario #1 (Status Quo) Scenario #2 (Discount Rate Reduction) Scenario #3 (Deficit Mitigation) Fiscal Year Deposits to Trust Withdrawals from Trust Deposits to Trust Withdrawals from Trust Deposits to Trust Withdrawals from Trust 2026 $0 $1,317,707 $0 $0 $0 $3,100,000
2027 $0 $2,124,510 $0 $2,306,566 $0 $6,800,000
2028 $0 $2,724,510 $0 $2,896,566 $0 $8,900,000
2029 $0 $4,164,510 $0 $4,306,566 $0 $7,800,000
2030 $0 $4,344,510 $0 $4,496,566 $0 $3,500,000
2031 $0 $4,484,510 $0 $4,636,566 $0 $0
2032 $0 $4,454,510 $0 $4,606,566 $0 $0
2033 $0 $4,334,510 $0 $4,486,566 $0 $0
2034 $0 $3,734,510 $0 $3,886,566 $0 $3,500,000
2035 $0 $3,384,510 $0 $3,546,566 $0 $723,598
2036 $0 $2,784,510 $0 $2,956,566 $0 $0
2037 $0 $1,704,510 $0 $1,886,566 $0 $0
2038 $0 $0 $0 $0 $0 $0
2039 $0 $0 $0 $0 $0 $0
2040 $0 $0 $0 $0 $0 $0
2041 $0 $0 $0 $0 $0 $0
2042 $0 $0 $0 $0 $0 $0
2043 $0 $0 $0 $0 $0 $0
2044 $0 $0 $0 $0 $0 $0
Total $0 $39,557,314 $0 $40,012,229 $0 $34,323,598
31 32
ITEM NO. 7.
3/20/2025
17 33
QUESTIONS
KEY TAKEAWAYS
The trust is intended to be used.
Pension costs are projected to increase through 2033;
decrease beginning in 2034.
City’s healthy Section 115 Trust balance and reserve can be leveraged over the next 10-12 years.
Staff recommends adopting a policy for the use of
pension resources.
33 34
ITEM NO. 7.
3/20/2025
18 PROPOSED POLICY KEY PROVISIONS
Only using the
Pension Resources
during deficit years to
maintain service levels
Balance use of the
Pension Resources
with other reserves
Avoid relying on onetime funds for
ongoing expenses
General Fund
surpluses may be
deposited into the
trust
Continue pre-paying
pension liabilities
when feasible to
achieve cost savings
Take steps to ensure
that the Pension
Resources last until at
least FY 2034
RECOMMENDED ACTION
Provide Feedback
Accept the report and
adopt a Resolution
establishing the
Pension Trust and
Reserve Use Policy
35 36
ITEM NO. 7.
3/20/2025
19 QUESTIONS?
BACK-UP SLIDES
BEYOND THIS
POINT
37 38
ITEM NO. 7.
3/20/2025
20 OBJECTIVES, POLICIES AND PRINCIPALS
Objectives:
• Mitigate budget impacts of increasing and fluctuating pension costs in a sustainable manner. • Use the pension resources judiciously to flatten the curve of rising pension costs. • Ensure the trust lasts at least until pension costs are projected to begin decreasing (estimated by CalPERS to be 2034 per Attachment 1)
• Be mindful of using one-time funds for ongoing costs; minimize withdrawals with a long-term plan for the use of the trust.
• Balance the use of the trust with other reserves during challenging economic conditions, when appropriate.
OBJECTIVES, POLICIES AND PRINCIPALS (CONTINUED)
Policies and Guiding Principles:
• The Pension Resources may be utilized during fiscal years in which a structural deficit is present to ensure the continuation of existing service levels, and not to enhance or increase services. • The trust would not be used to offset pension costs in years in which there is a structural surplus. • Pension Resources will be used in a fiscally responsible manner. While the pension resources would be budgeted as a funding source, the amount withdrawn from the trust will be determined at year-end based on actual revenues compared to actual expenditures in the General Fund. To maximize investment earnings and ensure judicious use of the funding, only the amount budgeted, or actual amount needed to close the gap, whichever is less, would be withdrawn from the trust. • In any fiscal year in which there is a year-end surplus in the General Fund, Council may choose to deposit some or all of the year-end surplus in the trust. 39 40
ITEM NO. 7.
3/20/2025
21 OBJECTIVES, POLICIES AND PRINCIPALS (CONTINUED)
Policies and Guiding Principles:
• The Pension Resources are intended to be used under this policy through FY2034, when pension costs are projected to begin to decrease. At that time, all remaining funds, if any, would remain in the trust to offset future pension costs or until the City Council provides further direction. • The City will continue to pre-pay the Unfunded Actuarial Liability (UAL) payment annually, when feasible, to achieve budgetary savings from the discount offered by CalPERS (half of the discount rate percentage). • In any fiscal year in which there is a year-end surplus in the General Fund, Council may choose to deposit some or all of the year-end surplus in the trust.
• The Pension Resources are intended to be used under this policy through FY2034, when pension costs are projected to begin to decrease. At that time, all remaining funds, if any, would remain in the trust to offset future pension costs or until the City Council provides further direction. • The City will continue to pre-pay the Unfunded Actuarial Liability (UAL) payment annually, when feasible, to achieve budgetary savings from the discount offered by CalPERS (half of the discount rate percentage).
APPENDIX –ADDITIONAL RESOURCES
41 42
ITEM NO. 7.
3/20/2025
22 43
Classic vs. PEPRA Pension Example Comparison
Employee #1 is a Classic member and Employee #2 is a PEPRA member – both have served for 25 years and have a final average compensation of $125K
Employee #2 will have a lower pension than Employee #1 due to a lower benefit factor, and will also retire at 57 years old instead of 50 years old like the Classic member The City will save money from PEPRA’s lower pension amount and because PEPRA’s pension may be paid out for a shorter amount of time due to retirement occurring 7 years later compared to Classic The difference in pension between Classic and PEPRA is even more apparent at higher compensation levels, as there is a pensionable compensation limit of approximately $175K for PEPRA and $330K for Classic Service
Credit
Benefit
Factor
Final
Compensation
Annual
Pension
Employee #1 (Classic)
25 Years x 3.0% @ 50 x $125,000 = $93,750
Employee #2 (PEPRA)
25 Years x 2.7% @ 57 x $125,000 = $84,375
44 Cost of PEPRA vs. No PEPRA
PEPRA is projected to lower Normal Cost and UAL costs for the City Source: CalPERS Pension Outlook Tool. Assumes no PEPRA implementation in orange bar projections.
$0
$2
$4
$6
$8
$10
$12
$14
202520272029203120332035203720392041204320452047204920512053 Millions
Projected Normal Cost
No PEPRA PEPRA
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
20252027202920312033203520372039204120432045
Millions
Projected UAL Balance
No PEPRA PEPRA
43 44
ITEM NO. 7.
3/20/2025
23 45
Additional Discretionary Payment (“ADP”)
What is it? City makes ADP directly to CalPERS and CalPERS eliminates payments associated with the portion of the UAL paid off, essentially giving the City credit at the discount/interest rate (currently 6.8%) Advantages:
Reduced UAL / higher CalPERS funding ratio
Reduced future payments
Broader, less restrictive CalPERS investment portfolio has potential for higher returns Disadvantages:
Requires reserves / surplus to fund
Re‐investment and market timing risk with ADP funds
Less budgetary flexibility and investment control (vs. Section 115 Trust option) 46 Section 115 Trust vs. CalPERS ADP Comparison
OPTION Section 115 Trust CalPERS ADP
No Yes Reduced UAL & UAL Payments
with CalPERS
Yes No (Show up as an asset on the
City’s financial statements)
Reduced Pension Liability in
Financial Report (ACFR)
Yes No Control of Investment
Strategy
Funds Managed By Trust Administrator CalPERS
Flexibility in Uses Yes No
Yes No Enhanced Budgetary
Flexibility
Immediate; Length of time
varies based on which
amortization component is paid
off
Varies; Depends on when City
utilizes funds to pay liabilities Savings
45 46
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION)
APPENDIX B: SAMPLE OF WILDFIRE BUFFER ZONE BUDGET MODELING FOR THE
GREATER PARADISE AREA
ITEM NO. 7.
DRAFT BUDGET AND POTENTIAL PARCEL TAX ANALYSIS
FOR WILDFIRE BUFFER ZONE FOR THE GREATER PARADISE
AREA
PRELIMINARY ESTIMATES ON HOW TO FUND BOTH ACQUISITION OF A WILDFIRE BUFFER ZONE AND
LONG-TERM TREATMENT
July 30, 2025
ITEM NO. 7.
2 Our Goals for this Analysis
Define sustainable, long-term wildfire fuel reduction funding Identify major cost drivers
Recommend tax structure to meet funding needs
Outline governance for funding + operations
Set timeline for governance setup and tax measure
ITEM NO. 7.
3 Constraints on the Analysis
Wide variation in treatment costs per acre
No consensus on best treatment by region/vegetation/topography No proven link between mitigation spending and insurance benefits No regional governance entity ready to implement large-scale buffer zone
ITEM NO. 7.
4 A Draft Budget for Wildfire Risk Reduction for the Greater Paradise Area: Background
PRPD has worked with both the Butte Fire Safe Council and Xyloplan to develop a list of priority parcels for wildfire fuel reduction Targeted parcels protect structures in the Paradise, Concow and Magalia areas The Xyloplan parcels are the result of a comprehensive fire spread model based on wind-storm patterns
The Butte Fire Safe Council parcels are based on local knowledge of local fire safety professionals
The PRPD team merged both parcel lists to come up with an approximately 900 parcel combined list comprising nearly 3,000 acres.
Nevertheless, the original study in 2023 funded by The Nature Conservancy identified about 30,000 acres of area on the periphery of Paradise, Concow and Magalia that may require treatment
The prioritization process enables a more cost-efficient budget to be developed for long term wildfire risk mitigation
ITEM NO. 7.
5 Determining Treatment Costs for Target Parcels
Multiple sources on treatment costs per acre for different treatments, landscape, and topography:
CalFire
Butte Fire Safe Council
County of Plumas
Sierra Nevada Conservancy
California Air Resources Board.....and many others
There is no consensus regionally or statewide on treatment types, recurrence intervals or treatment costs for different climate zones and types of terrain Approach: use relatively high treatment costs per acre, and lower (more frequent) recurrence intervals for a conservative budget
ITEM NO. 7.
6 A Wide Rang of Treatment Cost Estimates
For more detailed cost estimates, see Appendix.
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
CalFire (Forest) CalFire (Shrubland) CalFire (Herbaceous) CalFire (Woodland) 2C Land ECO Firestorm Paul Roen
Atlas Bella GE Forestry Mountain View Reforestation
Professional Slahbusting BK&Son Red Mtn. Butte County
Plumas County SNC (High)
ITEM NO. 7.
7 Prevailing wage, Prescribed Burn and Grazing, First Treatment Prevailing wage likely to add 20% to costs for state/local wildfire treatments First-time treatment costs ~2.5x higher than long-term CalFire provides a liability insurance policy of $2 million for each prescribed burn
In the very unlikely event of an “escape”, for a prescribed burn on private land, this limit is inadequate
While prescribed burns, notwithstanding the shortage of experienced staff, are scalable on public property, such burns are not scalable on private property Grazing, where appropriate, is a very effective low-cost treatment but scalability is uncertain
For purposes of a draft budget, we assume no prescribed burns and minimal grazing
ITEM NO. 7.
8 Treatment Costs and Recurrence Interval Assumptions Used in this Analysis
ITEM NO. 7.
9 Treatment Cost Overview
Treatment costs are on the high side of the range
Recurrence intervals are on the low side of the range Annualized costs are about $1.5 million/year
These annual costs do not include administration – we estimate this at $500,000/year
Consequently, we estimate that annual operating cost budget to be $4.5 million/year for the first 5 years, and then about $2 million per year thereafter
These figures do not include any inflation assumptions
ITEM NO. 7.
10 Administrative Costs
Fully scaled treatment for 600+ acres per year (3,000 acres on a 5-year recurrence interval) requires administrative organization The treatment crews need management, prescribed burns need liability insurance
Acquisition of easements or fee title for nearly 3,000 acres will require experienced property negotiators, similar to those used for ROW acquisition There will be legal expenses for acquisitions of easements or fee title If eminent domain needs to be used, this can be an expensive process
ITEM NO. 7.
11 Operational Cost Assumptions
ITEM NO. 7.
12 Target Parcel Acquisition Cost Assumptions
PRPD retained Integra Realty to do a high-level appraisal of the costs of acquiring access to the circa 900 target parcels for treatment While PRPD and Butte Fire Safe Council have had good experience using “good will” to gain access for treatment, we do not believe that a long term fully scaled budget should rely on 100% good will to provide access to key parcels on a regular basis There are three options for securing access
Purchase of fee title
Purchase of an easement
Long-term access to a parcel through the good will of the parcel owner Integra valued both fee title and easement acquisition costs, establishing a range from low to high for such costs
ITEM NO. 7.
13 Parcel Access Acquisition Cost Assumptions
ITEM NO. 7.
14 Why Debt Financing for Access Acquisition and First Treatment Costs?
Costs for both access acquisition and first-time treatment costs make annual funding need much higher in the first 5 years
Assumes all 3,000 acres are ”acquired” for access purposes in the first 5 years Assumes all 3,000 acres receive a treatment, likely their first treatment, in the first 5 years. Expenses funded on “pay-go” basis means the annual tax requirements are much higher over the first 5 years
Ballot approval will require disclosure of the highest potential tax, not an “average” tax over the life of the exaction
The higher tax for the first 5 years will result in more “no” votes on a ballot measure Debt Financing
Spreads costs evenly over time
Steadier tax rate
More electable measure
Bottom line: debt financing makes a tax measure more electable
ITEM NO. 7.
15 Debt Financing Assumptions
Assumes all bonds are issued with a taxable interest rate., Debt service is higher in the first 5 years because the higher initial treatment costs are being funded by the bond issue. This means no treatment costs are funded on a “pay-go” basis over the first 5 years.
ITEM NO. 7.
16 Use of Grants
FEMA and Prop 4 grants could significantly reduce access acquisition and firsttime treatment costs, further reducing both the debt required and the annual budget
There is uncertainty over the future of the FEMA BRIC program Cal OES recommends that we consider applying for FEMA grants for access acquisition in a phased or “batched” process
Several Prop 4 authorizations can potentially be used to fund either access acquisition or first-time treatment costs
ITEM NO. 7.
17 Tax Levy Options
Local jurisdictions may raise funds, with voter approval, through the following mechanisms:
ITEM NO. 7.
18 A Parcel Tax is Better than a Sales Tax or TOT increase The tax base for both sales tax and TOT in the Town of Paradise (where nearly all the outlets producing sales and TOT are located) is too small to support the projected annual budget requirement
Only a parcel tax (otherwise known as a Mello Roos tax) allows for great flexibility in how the tax is levied on a given parcel (land use, parcel size, vegetation, vulnerability, etc.
ITEM NO. 7.
19 What is the potential tax base for a parcel tax?
Four public entities overlap the general area where the prioritized parcels for treatment are located:
Paradise Recreation and Parks District – 21,869 parcels Paradise Unified School District – 20,639 parcels
Town of Paradise – 11,978 parcels
Paradise Irrigation District – 11,788
While we believe that the actual boundaries for any tax to fund treatment for the prioritized parcels will need to be carefully considered, for purposes of this analysis, we will use the parcel count for PRPD
We included unsecured parcels as well as secured parcels because the unsecured parcels oftentimes represent leasehold estates
All parcel count figures are from the County of Butte for FY 2023-2024
ITEM NO. 7.
20 Scenario Design
The key determinants of long-term annual costs are shown below:
Level of grant support
Whether or not debt is issued
Whether access acquisition costs are on the “low” or “high” side of the range determined by Integra
If bonds are issued, whether the bonds can be issued on a tax exempt or taxable basis Since we determined that the overall difference in annual budget requirements resulting from the use of tax-exempt interest rates vs. taxable interest rates was less than 5%, we are just showing the taxable interest rate scenarios
ITEM NO. 7.
21 Scenarios Modeled for a Draft Budget
Low Access Acquisition High Access Acquisition
Grants Debt Grants Debt
None None None None
50% None 50% None
None First 5 Years None First 5 Years
50% First 5 Years 50% First 5 Years
ITEM NO. 7.
22 Scenario 1 Estimated Cash Flows: Low Acquisition Costs, No Grant Funding, No Debt
Annual budget requirement ranges from about $2 million/year to $6.25 million/year
ITEM NO. 7.
23 Scenario 2 Estimated Cash Flows: Low Acquisition Costs, 50% Grant Funding, No Debt
Annual budget requirement ranges from about $2 million/year to $3.4 million/year
ITEM NO. 7.
24 Scenario 3 Estimated Cash Flows: Low Acquisition Costs, No Grant Funding, Debt for First 5 Years Costs
Annual budget requirement is about $4 million/year
ITEM NO. 7.
25 Scenario 4 Estimated Cash Flows: Low Acquisition Costs, 50% Grant Funding, Debt Financing for First 5 Year’s Costs
Annual budget requirement is about $2.7 million/year
ITEM NO. 7.
26 Scenario 5 Estimated Cash Flows: High Acquisition Costs, No Grant Funding, No Debt
Annual budget requirement ranges from about $2 million/year to $8.25 million/year
ITEM NO. 7.
27 Scenario 6 Estimated Cash Flows: High Acquisition Costs, 50% Grant Funding, No Debt
Annual budget requirement ranges from about $2 million/year to $4.4 million/year
ITEM NO. 7.
28 Scenario 7 Estimated Cash Flows: High Acquisition Costs, No Grants, Includes Debt
Annual budget requirement is about $4.85 million/year
ITEM NO. 7.
29 Scenario 8 Estimated Cash Flows: High Acquisition Costs, 50% Grant Funding, Includes Debt
Annual budget requirement is about $2.8 million/year
ITEM NO. 7.
30 Summary of Estimated Average Annual Tax Per Parcel
$-
$50
$100
$150
$200
$250
$300
$350
$400
No grants With
Grants
With debt With debt
and grants
No grants With
Grants
With debt With debt
and grants
Low Low Low Low High High High High
First 5 Years Next 15 Years
ITEM NO. 7.
31 Major Cost Drivers
50% grant funding for access acquisition costs and first-time treatment costs reduce the annual budget requirements long-term by about 1/3 Assumes debt is used to fund access acquisition costs and first-time treatment costs Use of debt reduces the required budget over the first 5 years by about 40% Assuming the use of debt, the combined annual budget required for the “low” access acquisition costs is about 20% lower than the combined annual budget for the “high” access acquisition costs
The annual budget for high acquisition costs, with both grants and debt, is 65% lower than the annual budget for high acquisition costs without grant and debts over the first 5 years
Taxable interest rates on debt lower the annual budget by 5% compared with tax exempt interest rates
ITEM NO. 7.
32 Governance Requirements for the Wildfire Buffer Zone Governance entity needs the following powers:
Levy and administer a parcel tax
Hire staff and/or subcontractors to do wildfire risk reduction work Acquire and own fee title or access easements for parcels in the buffer zone Power of eminent domain to acquire and own fee title or access easements where required for wildfire risk reduction
Power to legislate and mandate wildfire risk reduction standards on private property owners
The governance entity jurisdiction should include the following:
All parcels prioritized for treatment
All parcels benefitting from such treatment
ITEM NO. 7.
33 The following stakeholders should be considered for collaboration under a new governance entity
Paradise Recreation and Park District
Town of Paradise
County of Butte
Butte Fire Safe Council
Camp Fire Collaborative
Rebuild Paradise
California’s Joint Powers Authority law allows NGO’s to be voting members of a JPA
The NGO members cannot vote on amending the JPA, but can vote on budget and staffing issues
We recommend that these stakeholders begin a dialogue on forming a governance entity to implement the wildfire buffer zone Governance Options
ITEM NO. 7.
34 JPA powers are limited to the powers share in common by all members of the JPA
This means its powers are the same as its least powerful member (excluding NGO’s) There is often a concern amongst member public entities of a “loss of power” by turning over a key function to a JPA
Cost sharing amongst the parties can become an issue
These concerns can be resolved by seeking special State legislation to address loss of power concerns. Examples:
Requiring a super majority to approve certain actions Specifying which types of projects can be undertaken by the JPA, and which can only be done by a member, but with JPA funding
”Locking in” the role of NGOs in the JPA
A Joint Powers Authority – Some Details
ITEM NO. 7.
35 A Ballot Measure in November, 2026?
There is more than sufficient time to prepare a November 2026 regional ballot measure and governance entity for a wildfire buffer zone in the greater Paradise area
If there is sufficient community support to get the measure on the ballot through a petition, approval would only require a simple majority There is also discussions in Sacramento about a statewide ballot measure for wildfire risk reduction on the November 2026 ballot
What if the statewide ballot measure matched local ballot measures with revenues? What if CDI mandated a dollar or dollar reduction in insurance premium for parcel owners paying a parcel tax dedicated solely to wildfire risk reduction? Key question: is there enough community support to not only do a successful citizen initiative for a ballot measure, but to get a 50%+1 successful vote?
ITEM NO. 7.
36 Next Steps
We begin the polling process
Survey question design
Polling system: phone calls, focus groups or both
Determine the potential tax base
Identify zone of benefit for prioritized parcels
Get detailed parcel data on all parcels within potential tax base Using polling data, develop an “electable” tax structure and levy maximum Present findings to all public, private and NGO stakeholders Start dialogue on implementation, including potential governance entity and ballot measure
ITEM NO. 7.
APPENDIX
ITEM NO. 7.
38 A Wide Range of Treatment Cost Estimates: CalFire Treatment Cost Assumptions
ITEM NO. 7.
39 A Wide Range of Treatment Cost Estimates: Butte Fire Safe Council Treatment Cost Bid Results
ITEM NO. 7.
40 A Wide Range of Treatment Cost Estimates: Butte Fire Safe Council Treatment Cost Assumptions
ITEM NO. 7.
41 A Wide Range of Treatment Cost Estimates: Plumas County Treatment Cost Assumptions
ITEM NO. 7.
42 A Wide Range of Treatment Cost Estimates: Sierra Nevada Conservancy
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION) APPENDIX C: RESUMES FOR ASSIGNED NHA TEAM
ITEM NO. 7.
Mark Northcross, Principal
During a California public finance career that spans back to 1981, Mark Northcross has structured debt for nearly every kind of issuer and nearly every kind of revenue source legally available in the State.
Mr. Northcross is a leader in statewide work on climate change adaptation.
He managed the delivery of a comprehensive funding guide for Resilience by Design, a Rockefeller Foundation funded program for the Bay Area. He works with the Bay Conservation and Development Commission, Bay Area Regional Collaborative, the Southern California Association of Governments and the Resources Legacy Fund on climate change adaptation issues. Mr. Northcross also serves on special climate change committees under the aegis of the City of Sacramento, the West County Wastewater District and the Coastal Hazards Adaptation Resiliency Group. With expertise in wildfire risk mitigation and funding, Mr. Northcross was invited by the Federal Reserve Bank of San Francisco to prepare an article on that subject for their Community Development Innovation Review publication, which was published in October 2019. A link to that article is available here:
https://www.frbsf.org/community-development/publications/community-developmentinvestment-review/2019/october/rebuild-to-fail-or-rebuild-to-adapt-how-cra-lending-canguide-climate-change-disaster-response/ Mr. Northcross was an integral team member for the California Resilience Challenge project in the Town of Paradise. That project was completed in April 2023 and featured groundbreaking work quantifying potential reductions in fire related losses and in insurance premiums in the wildlandurban Interface through fire mitigation methods. More detail about that project can be found here: https://www.bayareacouncil.org/press-releases/new-studyshows-how-communities-in-the-wildland-urban-interface-can-drastically-reduce-fire-risk-andreduce-insurance-premiums/ Mr. Northcross is also leader in negotiating both public-private partnerships and the workout of defaulted debt. He has negotiated public-private partnerships for the successful development of major mixed-use projects, including such diverse communities as Davis, Fort Ord Reuse Authority, Hemet, Mammoth Lakes, Palmdale, Rocklin, South Lake Tahoe, and West Covina. He is also a leader in negotiating joint ventures between different public agencies – with notable success in putting together bond funded risk sharing programs for cities, counties, and school districts in California.
With a practice in water and sewer financing dating back to 1983, Mr.
Northcross is very active in water and sanitation policy issues in California.
He presently serves on the California Association of Sanitation Agencies SRF committee.
Mr. Northcross also has hands-on experience as a CFO, serving since 2001 as treasurer for the West Point Inn Association, which runs a 117-year-old hikein hotel in the parklands of Marin County.
Public Finance
Professional Since:
1981
Expertise
• Public Policy
• Utility Financing
• Climate Change
Infrastructure
• Development/LandSecured Financing
• Economic
Development
• Developer
Negotiations
• Pension Financing
Education
• B.A. Social Sciences
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Staff Resumes – NHA Advisors, LLC
ITEM NO. 7.
Mike Meyer, Vice President
Since 2003, Mr. Meyer has been providing a high level of support to California municipalities as an advisor, consultant, and an investment banker. He manages NHA’s Pension and Fiscal Sustainability Group.
Mr. Meyer has executed all types of financings available to California municipalities, including pension obligation bonds, utility revenue (water/wastewater/storm drain), general fund backed leases, tax increment, general obligation, transportation, land secured, housing and sales tax transactions.
As the firm’s resident pension expert, Mr. Meyer also manages NHA’s Pension and Fiscal Sustainability Group, which has advised over 80 California local agencies on topics ranging from basic CalPERS education, to UAL cost management strategies (Section 115 Trusts, Additional Discretionary Payments, etc.), to UAL restructuring projects. In 2015, he led the firm’s efforts to pioneer some of the first UAL “smoothing” transactions, which were executed as privately placed lease revenue bonds given that POBs were not feasible at that time. During the re-emergence of the POB market, Mr. Meyer worked on over $2.0 billion of pension bond transactions for cities, utilities districts and fire districts. This experience includes all types of UAL financing structures: both privately placed debt as well as publicly offered, validated and non-validated POBs, as well as alternative structured like lease revenue bonds and utility revenue bonds.
Mr. Meyer has worked on several unique financing programs in his career including the 2004 Vehicle License Fee (VLF) pooled financing (>100 different city participants), 2009 Beverly Hills OPEB Buyout, 2016 Berkeley Parking Revenue Bonds for a new downtown garage, transportation revenue secured financings (gas tax and local sales tax return) for Oxnard and Lancaster, and lease bonds to fund CalPERS UAL in the cities of Torrance, Ukiah, West Covina, Lakeport and Arcata.
Prior to NHA Advisors, Mr. Meyer served as a Principal with Eric Scriven (NHA partner) at p2 Capital Advisors (2012 to 2014), providing independent consulting and advisory work to numerous California public agencies. Prior to that, he served as a Vice President at De La Rosa Investment Bankers.
From 2013 to 2017, Mr. Meyer also helped coach the Division I UC Davis Men’s Tennis team and obtain the program’s first national ranking and NCAA tournament berth. Mr. Meyer enjoys being active and in nature, spending his free time backpacking, hiking, surfing, playing sports and is a dedicated practitioner of yoga and meditation.
Public Finance
Professional Since:
2003
Expertise
• Fiscal Sustainability
• General Fund
Financing
• Pension Obligations
• Project Management
• Financial Modeling
• Credit Analysis and
Presentations
Education
• B.S. Management
Science
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Staff Resumes – NHA Advisors, LLC
ITEM NO. 7.
Public Finance
Professional Since:
2021
Expertise
• General Fund
Financing
• Pension Obligations
• Utility Financing
• Financial Modeling
• Credit Research and
Presentations
Education
• B.A. Applied
Mathematics
Licenses & Registrations
• Registered with the
SEC and MSRB
• Series 50 License
Matt DeFilippis, Senior Analyst
Since joining NHA in 2021, Mr. DeFilippis has provided quantitative, research, and management support to his colleagues so that NHA can best serve California special districts and cities. His work has covered a variety of assignments, including CalPERS pension liability analysis and modeling, coverage analysis for utility financings, refinancing discovery and analysis, and more. Mr. DeFilippis has assisted on multiple financings for California agencies, totaling over $450 million in par.
Most recently, Mr. DeFilippis provided municipal advisory services on two California utility bond transactions that closed in late 2024 for the City of Gonzales and Laguna Beach County Water District. Mr. DeFilippis also assisted the city of Fort Bragg and Rincon del Diablo Municipal Water District in financing solar panels through an equipment lease/purchase agreement.
Mr. DeFilippis has provided advisory services to multiple California fire districts, including Sonoma County Fire District (2022 Pension Liability Refunding), San Miguel Consolidated Fire Protection District (2022 Pension Liability Refunding), and North County Fire Protection District in San Diego County (CalPERS pension analysis and financial forecast modeling).
When not working on bond financings, Mr. DeFilippis provides support for a variety of NHA’s other projects, including financial forecast modeling and CalPERS pension liability analysis and education for public agencies.
Mr. DeFilippis received his B.A. in Applied Mathematics from the University of California, Berkeley.
In his spare time, Mr. DeFilippis enjoys exploring the outdoors, both on foot and on bike. Some of his favorite trips include backpacking Southern Oregon/Northern California, climbing Mount Shasta, and watching the sunrise from Half Dome.
Staff Resumes – NHA Advisors, LLC
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION) APPENDIX D: NHA’S REQUIRED MUNICIPAL ADVISOR DISCLOSURES
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION) Fiduciary Duty
NHA Advisors, LLC (“NHA”) is registered as a Municipal Advisor with the U. S. Securities and Exchange Commission (“SEC”) and Municipal Securities Rulemaking Board (“MSRB”). As such, NHA has a fiduciary duty to the Town and must provide both a Duty of Care and a Duty of Loyalty that entail the following.
Duty of Care:
a) exercise due care in performing its municipal advisory activities; b) possess the degree of knowledge and expertise needed to provide the Town with informed advice;
c) make a reasonable inquiry as to the facts that are relevant to the Town’s determination as to whether to proceed with a course of action or that form the basis for any advice provided to the Town; and
d) undertake a reasonable investigation to determine that NHA is not forming any recommendation on materially inaccurate or incomplete information; NHA must have a reasonable basis for:
i. any advice provided to or on behalf of the Town;
ii. any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by the Town, any other party involved in the municipal securities transaction or municipal financial product, or investors in the Town securities; and iii. any information provided to the Town or other parties involved in the municipal securities transaction in connection with the preparation of an official statement.
Duty of Loyalty:
NHA must deal honestly and with the utmost good faith with the Town and act in the Town’s best interests without regard to the financial or other interests of NHA. NHA will eliminate or provide full and fair disclosure (included herein) to the Town about each material conflict of interest (as applicable). NHA will not engage in municipal advisory activities with the Town as a municipal entity, if it cannot manage or mitigate its conflicts in a manner that will permit it to act in the Town’s best interest.
Conflicts of Interest and Other Matters Requiring Disclosures As of the commencement date of the Project, there are no actual or potential material conflicts of interest, other than those potential conflicts noted below, that NHA is aware of that might impair its ability to render unbiased and competent advice or to fulfill its fiduciary duty. If NHA becomes aware of any material potential conflict of interest that arises after this disclosure, NHA will disclose the detailed information in writing to the Town in a timely manner.
Pursuant to MSRB Rule G-42, on Duties of Non-Solicitor Municipal Advisors, Municipal Advisors are required to make certain written disclosures to clients which include, amongst other things, Conflicts of Interest and any Legal or Disciplinary events of NHA and its associated persons.
The following are potential conflicts of interest to be considered. • NHA represents that in connection with the issuance of municipal securities, NHA may receive compensation from the Town for services rendered, which compensation is contingent upon the successful closing of a transaction and/or is based on the size of a transaction. Consistent with the
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION) requirements of MSRB Rule G-42, NHA hereby discloses that such contingent and/or transactional compensation may present a potential conflict of interest regarding NHA’ ability to provide unbiased advice to enter into such transaction. The contingent fee arrangement creates an incentive for NHA to recommend unnecessary financings or financings that are disadvantageous to the Town, or to advise the Town to increase the size of the issue. This potential conflict of interest will not impair NHA’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the Town.
• NHA’ fees under this potential agreement may be based on hourly fees of NHA’ personnel, with the aggregate amount equaling the number of hours worked by such personnel times an agreedupon hourly billing rate. This form of compensation presents a potential conflict of interest because it could create an incentive for NHA to recommend alternatives that would result in more hours worked. This conflict of interest will not impair NHA’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the Town. • NHA’ fees under this potential agreement may be a fixed amount established at the outset of this potential agreement. The amount is usually based upon an analysis by the Town and NHA of, among other things, the expected duration and complexity of the transaction and the scope of services to be performed by NHA. This form of compensation presents a potential conflict of interest because, if the transaction requires more work than originally contemplated, NHA may suffer a loss. Thus, NHA may recommend less time-consuming alternatives, or fail to do a thorough analysis of alternatives. This conflict of interest will not impair NHA’ ability to render unbiased and competent advice or to fulfill its fiduciary duty to the Town. • The fee paid to NHA increases the cost of investment to the Town. The increased cost occurs from compensating NHA for municipal advisory services provided. • NHA serves a wide variety of other clients that may, from time to time, have interests that could have a direct or indirect impact on the interests of another NHA client. For example, NHA serves as municipal advisor to other municipal advisory clients and, in such cases, owes a regulatory duty to such other clients just as it does to the Town. These other clients may, from time to time and depending on the specific circumstances, have competing interests. In acting in the interests of its various clients, NHA could potentially face a conflict of interest arising from these competing client interests. NHA fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith with the Town.
• Gerald Craig Hill, the Managing Principal of NHA is currently serving as an outside director for the HdL Companies based in Diamond Bar, CA. HdL Companies is a software and professional services consulting company providing revenue data and collections information to local governments, potentially including NHA’s clients. HdL Companies have affiliates including, but not limited to, HdL Coren & Cone. From time to time, NHA utilizes the services of HdL Coren & Cone for its clients. NHA is mindful of this conflict of interest and fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith when this situation arises.
• NHA does not have any affiliate that provides any advice, service, or product to or on behalf of the Town that is directly or indirectly related to the municipal advisory activities to be performed by NHA.
• NHA has not made any payments directly or indirectly to obtain or retain NHA’ municipal advisory business.
• NHA has not received any payments from third parties to enlist NHA’ recommendation to the Town of its services, any municipal securities transaction, or any municipal finance product. • NHA has not engaged in any fee-splitting arrangements involving NHA and any provider of investments or services to the Town.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION) • NHA does not have any legal or disciplinary event that is material to the Town’s evaluation of the municipal advisory or the integrity of its management or advisory personnel. • NHA does not act as principal in any of the transaction(s) related to this potential agreement.
Legal Events and Disciplinary History
NHA does not have any legal events and disciplinary history on its Form MA and Form MA-I, which includes information about any criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, arbitrations and civil litigation. The Town may electronically access NHA’ most recent Form MA and each most recent Form MA-I filed with the Commission at the following website:
www.sec.gov/edgar/searchedgar/companysearch.html
There have been no material changes to a legal or disciplinary event disclosure on any Form MA or Form MA-I filed with the SEC.
Recommendations
If NHA makes a recommendation of a municipal securities transaction or municipal financial product or if the review of a recommendation of another party is requested in writing by the Town and is within the scope of the engagement, NHA will determine, based on the information obtained through reasonable diligence of NHA whether a municipal securities transaction or municipal financial product is suitable for the Town. In addition, NHA will inform the Town of:
• the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation;
• the basis upon which NHA reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for the Town; and • whether NHA has investigated or considered other reasonably feasible alternatives to the recommendation that might also or alternatively serve the Town objectives.
If the Town elects a course of action that is independent of or contrary to the advice provided by NHA, NHA is not required on that basis to disengage from the Town.
Municipal Securities Rulemaking Board Rule G-10 Disclosure Pursuant to MSRB Rule G-10, on Investor and Municipal Advisory Client Education and Protection, Municipal Advisors are required to provide certain written information to their municipal entity and obligated person clients which include the following:
• NHA is currently registered as a Municipal Advisor with the SEC and MSRB. • Within the MSRB website at www.msrb.org, the Town may obtain the Municipal Advisory client brochure that is posted on the MSRB website. The brochure describes the protections that may be provided by the MSRB Rules along with how to file a complaint with financial regulatory authorities.
ITEM NO. 7.
LOS GATOS – PROPOSAL FOR STUDY 3 (ALM) AND OPTIONAL STUDY 4 (WILDFIRE RISK MITIGATION) Record Retention
Effective July 1, 2014, pursuant to the SEC record retention regulations, NHA is required to maintain, in writing, all communication and created documents between NHA and the Town for five (5) years.
If there are any questions regarding the above, please do not hesitate to contact NHA.
ITEM NO. 7.
Town of Los Gatos
REQUEST FOR PROPOSALS
FISCAL CONDITION ANALYSIS WITH FIVE-YEAR AND LONGTERM FORECAST, FISCAL IMPACT ANALYSIS, AND ASSET
LIABILITY MANAGEMENT STUDY
Date Issued: 8/20/2025
Proposal Submittal Deadline: 9/22/2025, by 4:00 p.m. Pacific Standard Time Issued By:
Issued By:
Town of Los Gatos – Finance Department
110 E Main Street, Los Gatos, CA 95030
www.losgatosca.gov
[email protected]
ITEM NO. 7.
TABLE OF CONTENTS
A. Purpose
B. Overview
C. Minimum Qualifications
D. General Provisions and Requirements
E. Scope of Services
F. Proposal Format and Submittal Requirements
G. Evaluation Process
H. Additional Information
I. Attachments
ATTACHMENT 1 - CONFLICT OF INTEREST STATEMENT (FOR SUBMITTAL) ATTACHMENT 2 - NON-COLLUSION DECLARATION (FOR SUBMITTAL) ATTACHMENT 3 - REFERENCES (FOR SUBMITTAL)
ATTACHMENT 4 - STATEMENT REGARDING INSURANCE COVERAGE AND WORKER’S COMPENSATION INSURANCE ACKNOWLEDGMENT
CERTIFICATE (FOR SUBMITTAL)
ATTACHMENT 5 - STANDARD CONSULTANT SERVICES AGREEMENT
Schedule of Activities (Tentative):
Activity Anticipated Date
RFP Release 8/20/2025
Deadline for Questions 9/15/2025
Last Day to Issue Addenda
Proposal Submission Deadline (4:00 p.m.)
9/17/2025
9/22/2025
Proposal Evaluation Week of September 22, 2025
Consultant Interviews (if necessary) Week of September 29, 2025 Contract Negotiation and Execution Week of September 29, 2025 Town Contacts:
Gitta Ungvari, Finance Director
Email: [email protected]
ITEM NO. 7.
A. PURPOSE
The Town of Los Gatos is seeking proposals from qualified firms to perform one or combined studies including:
1. A Fiscal Condition Analysis with Five-Year and Long-Term Financial Projections, and or
2. A Fiscal Impact Analysis for proposed and planned growth.
And to provide a separate proposal not to be combined for the following
3. An Asset Liability Management (ALM) Study.
Proposers may submit responses for each of the first two studies individually and as a combined packaged. For the third study, the Town is looking for a proposal that is not combined with the first two studies.
The three studies are listed in priority order with the most time sensitive being the fiscal condition analysis with five-year and long-term financial projections. Based on the proposals, the Town will determine which of the proposals to accept with emphasis on the most time sensitive analysis.
The Town reserves the right, at its sole discretion, to cancel, withdraw, postpone, or modify this RFP at any time, including after receipt of proposals, without incurring any obligation or liability to any proposer. The Town also reserves the right, after contract execution, to terminate the agreement for convenience, without cause, upon thirty (30) days written notice, with no liability beyond payment for work satisfactorily performed to the date of termination.
Issuance of this RFP does not commit the Town to award a contract, to pay any costs incurred in the preparation of a proposal, or to procure or contract for any services.
B. OVERVIEW
The Town is undertaking this analysis to obtain an independent, data-driven assessment of its fiscal condition and near-term outlook. Current internal five-year projections indicate structural operating deficits, and the Town seeks third-party validation of assumptions, methodologies, and results to inform decision-making by staff, the Finance Commission, and the Town Council. The selected Consultant will evaluate historical trends and structural drivers, develop a transparent five-year multi-scenario forecast, and quantify risks, sensitivities, and reserve implications, while clearly distinguishing one-time from ongoing resources. The objective is to provide a public-facing foundation for budget strategy, service level planning, and proactive risk management.
Concurrently, the Town faces multiple large development proposals, including affordable housing projects associated with the General Plan and Housing Element. The Town requires a clear understanding of the net fiscal effects of this growth—revenues and costs, operating and capital, timing and step-cost triggers (e.g., staffing, equipment, facilities)—under best-case, baseline, and worst-case scenarios through 2040. In addition, the Town seeks to inventory and evaluate key asset-liability exposures (pension, OPEB, bonded debt, and unfunded infrastructure needs) to guide prudent funding strategies, reserve calibration, and long-term sustainability. Together, these efforts will produce integrated tools and findings that support transparent policymaking and durable fiscal health.
ITEM NO. 7.
At the April 14, 2025 Finance Commission meeting, the Commission recommended consolidating prior scope efforts for these studies into a single Request for Proposal process. The Commission approved eight key recommendations:
1. Consolidate scopes into a single RFP with three separate line items:
o Fiscal Analysis and Five-Year Forecast
o Long-Term Outlook (to 2040, aligned with the General Plan and Housing Element) o Optional standalone ALM Study
2. Require scenario planning using defined sets of assumptions for:
o Best, worst, and most likely cases
o National and macroeconomic conditions (e.g., recession, tariffs, labor costs) o Risk and opportunity matrix
o Consultant’s own recommended scenario modifications or additions
3. Stakeholder engagement including interviews with internal staff and external partners (e.g., Sewer District, Fire Department).
4. Define accounting basis and format (e.g., government-wide vs. fund-based reporting) to ensure clarity, usability, and reconciliation across documents.
5. Include cost as a decision matrix criterion to evaluate overall value of proposals.
6. Require explanation of tools and methodologies, including the use of AI, data sources, forecasting models, and technical platforms.
7. Request work samples similar to proposed scopes to assess consultant capability.
8. Articulate specific questions to be answered:
o What is the Town's fiscal condition over the next five years? (Study 1) o What is the long-term financial outlook? (Study 1 and/or Study 2) o What is the fiscal impact of projected development under the 2040 Plan and Housing Element? (Study 2)
C. MINIMUM QUALIFICATIONS
To the satisfaction of the Town of Los Gatos, each proposer shall ensure their proposal, as applicable, includes sufficient information to facilitate the following • Demonstrated experience conducting fiscal analyses and long-range financial forecasting for California municipalities.
• Familiarity with local government budgeting, finance, infrastructure liabilities, pensions, economic development analysis, and General Plan documents. • Experience engaging with a wide variety of constituencies including but not limited to internal departments, elected officials, and other non-Town constituencies. • Strong presentation, communication, and public reporting skills. • Ability to deliver user-friendly financial models and documentation.
D. GENERAL PROVISIONS AND REQUIREMENTS
The Town may establish general provisions and requirements related to the work being performed including but not limited to:
1. Possession of all licenses required to perform services in California, if applicable.
2. Town approval required for any key personnel changes.
3. All deliverables must be provided in PDF and native editable formats.
ITEM NO. 7.
4. All materials prepared or supporting prepared deliverables become the property of the Town.
E. SCOPE OF SERVICES
Study 1 — Fiscal Condition Analysis with Five-Year Forecast Objective. Provide a rigorous, view of the Town’s current fiscal condition; produce a five-year multiscenario operating forecast; quantify risks and opportunities; and deliver a transparent, staffmaintainable model aligned with GAAP, GFOA, and State Controller conventions. The work product will tie, where applicable, to other authoritative documentation such as the ACFR/CAFR, adopted budget, State Controller’s Report, or other relevant document. 1) Project Initiation & Workplan
• Kickoff meeting: Confirm goals, deliverables, scope boundaries, schedule, and communication cadence; finalize the assumptions governance process (how assumptions are proposed, reviewed, approved, and versioned).
• Detailed workplan: Activities, dates, responsibilities, dependencies, and review milestones; identify critical path items.
• Stakeholder map: Identify internal staff, department contacts, and external partners (e.g., special districts) for interviews and data validation.
2) Data Intake, Validation & Controls
• Minimum data (at least 10 years): ACFR/CAFRs; California State Controller’s reports; adopted budgets and mid-year updates; trial balances; revenue detail (property, sales, TOT, fees/permits/fines, franchise, business license, transfers); labor MOUs; position and pay schedules; CalPERS actuarial reports (normal cost, UAL, amortization bases, projected employer rates); OPEB actuarial valuations; debt schedules and official statements; CIP, deferred maintenance reports, and life-cycle/asset management reports; grants and one-time funds; reserve policies.
• Data Quality Assurance/Quality Control: Reconcile to audited financial statements or other applicable document; identify reclassifications and one-time items; maintain a Data Sources Register with date, owner, and quality notes. Implement process to ensure the accuracy, consistency, and completeness of the information presented in deliverables. • Accounting basis: Specify fund-based vs. government-wide views used in analysis; provide crosswalks/reconciliations.
3) Methodology & Assumptions Framework
• Method statement: Document forecasting structure, drivers, and equations utilized; define how scenario variants are applied.
• Assumptions log: Centralized register for economic (AV growth, inflation/CPI, wage growth, medical trend), operational (vacancy, hiring, service levels), policy (fees, taxes), financial (interest rates, investment earnings), and actuarial (CalPERS/OPEB) assumptions. Include source, rationale, date, owner.
• Standards compliance: Where applicable, align with guidance from, but limited to, GAAP, GFOA best practices, and State Controller reporting.
ITEM NO. 7.
4) Fiscal Condition Assessment (Current State)
• Liquidity & reserves: Trends vs. policy targets; one-time vs. ongoing resource use; working capital indicators.
• Revenues: Composition, concentration, and volatility of General Fund revenues (property, sales, TOT, utility/franchise, fees/permits, transfers). Analyze seasonality, elasticity, collection risk, and extraordinary items.
• Expenditures: Personnel (base pay, steps, COLA, vacancy/backfill, overtime), benefits (health, workers’ comp), pension and OPEB contributions, non-personnel (contracts, utilities, insurance, fleet, fuel), and internal service charges; identify structural cost pressures and unfunded mandates.
• Liabilities & commitments: Pensions (UAL by amortization base, rate trajectories), OPEB (pay-go vs. prefunding status), bonded debt (coverage, covenants), leases, and deferred capital/maintenance backlogs.
• Structural balance: Historical ongoing revenues vs. ongoing expenditures; reliance on one-time resources; identification of structural gaps.
• Practices Modeling: Provide data showing the historical and current condition based on recognized models, such as the ICMA Fiscal Trend Monitoring System, the League of California Cities Municipal Financial Health Diagnostic, or other tools appropriate to provide collective insight to fiscal condition.
• Benchmarking (if applicable): Contextualize key ratios versus peer agencies and/or recommended practice ranges.
5) Five-Year Operating Forecast (Baseline, Best-Case, Worst-Case) • Baseline (“most likely”): Reflect adopted policies, existing MOUs, known program changes, and consensus macro assumptions.
• Best-case: Favorable macro trajectory (higher taxable sales, steady AV growth, stable TOT), improved investment returns, successful cost containment and vacancy savings. • Worst-case: Recessionary path(s), slower or negative AV growth, elevated wage/medical inflation, lower TOT/consumer spending, state takeaways/mandates, and higher CalPERS rates or revised amortization schedules.
• Revenue modeling: Property tax (AV growth components, Prop 13 reassessment dynamics); sales tax (category mix, elasticity to income/price indices); TOT recovery curve; fees/permits (activity volumes/fee policy); other taxes and intergovernmental sources. • Expenditure modeling: Wage steps/COLA per MOU; staffing plan and vacancy factors; health trend; CalPERS employer rates and UAL amortization payments; OPEB contributions; operations & maintenance inflation; known contracts and step-cost triggers. • Sensitivity analysis: Run targeted shocks (e.g., ±1–2% AV growth, ±0.5–1.0 pts sales growth/elasticity, ±2–3% medical trend, ±50–100 bps investment earnings, pension discount-rate changes) and show fiscal effects. Determine reasonable and appropriate ranges for use in the analysis.
• Reserves tracking: Model policy floors, replenishment rules, and draw triggers under each scenario.
ITEM NO. 7.
6) Risk, Opportunity & Stress Testing
• Risk/Opportunity Matrix: Probability × impact scoring for high-leverage drivers (economy, tax base, tourism/TOT, labor/benefits, state policy, disasters, grant volatility); quantify fiscal exposure ranges.
• Macro stresses: Multi-year recession and recovery paths; interest rate shocks; investment earnings variance; inflation spikes.
• Operational stresses: Hiring lag or higher vacancy; higher overtime; insurance/premium shocks; major contract repricing; supply chain spikes.
• Event stresses: Disaster scenarios (i.e. wildfire/earthquake/flood) with plausible cost and revenue effects; state action (takeaways, deferrals).
• Mitigation levers: Revenue measures (policy options), expenditure pacing, capital deferral windows, position management, reserve deployment/replenishment strategies, each with indicative fiscal effect, lead time, and dependencies where reasonable. 7) Reserves & Policy Analysis
• Adequacy tests: Compare forecast reserves to policy targets under all scenarios and stresses; estimate time to restore reserves if drawn.
• Policy review: Evaluate reserve policy structure (levels, triggers, replenishment) and recommend enhancements consistent with GFOA guidance.
8) Model Specifications (Editable & Maintainable)
• Workbook architecture: Separate Inputs/Assumptions, Drivers, Revenue Modules, Expenditure Modules, Pensions/OPEB, Results by Fund, Reserves, Stress/Sensitivity, Charts & Tables, Reconciliation.
• Controls: Version control; cell protections where appropriate; color-coded inputs vs. formulas; scenario toggles; sensitivity sliders; documentation panel/tooltips. • Reconciliation: Crosswalks to audited financials and to adopted budget for Year 1; one-time vs. ongoing segmentation; fund-to-government-wide alignment notes. • User guide: Embedded data dictionary, instructions for updating, and a checklist for annual refresh.
9) Engagement & Validation
• Department interviews: Validate workload/demand drivers, pipeline initiatives, service level commitments, step-cost triggers, and risks.
• Finance collaboration: Agree on key inputs (e.g., macro path, labor/benefit assumptions, revenue elasticities); coordinate with actuaries/auditors as needed. • External partners (as relevant): Validate assumptions with external partners (i.e. sewer, stormwater, etc.) on joint cost drivers or pass-throughs. 10) Deliverables
• Kickoff packet: Final workplan, data request, and engagement calendar. • Interim Findings Memo: Early condition read-out; emerging risks/opportunities; preliminary assumptions for staff review.
ITEM NO. 7.
• Five-Year Forecast Model (editable): With scenarios, sensitivities, reconciliation tabs, and print-ready exhibits.
• Risk & Opportunity Matrix + Stress-Test Pack.
• Final Report (PDF + native): Executive summary; current condition; five-year forecast (all scenarios); long-term outlook; risk/stress results; reserve analysis; recommended actions (timing, indicative fiscal effect); appendices (assumptions log, data sources, reconciliation tables, benchmarking).
• Presentations: At least two public meetings (Finance Commission and Town Council) and staff work sessions.
• Training & Handover: Live walkthrough, update playbook, and placement of all files per Town direction.
12) Schedule (Illustrative)
• Weeks 1–2: Kickoff; data intake; interview scheduling; method statement. • Weeks 3–6: Condition diagnostics; interim findings memo. • Weeks 7–10: Five-year forecasting; scenario build; sensitivities. • Weeks 11–12: Reserves/policy analysis; risk matrix; stress tests. • Weeks 13–14: Draft report/model; staff review and revisions. • Weeks 15–16: Final report/model; presentations; training and handover. 13) Town Support (Anticipated)
• Timely access to financials, audit and actuarial reports, MOUs/position data, CIP/backlog, development and fee pipelines, debt/grants, and reserve policies; scheduling of interviews; facilitation of external partner conversations as needed.
Study 2 — Fiscal Impact Analysis
The Consultant will complete a robust Fiscal Impact Analysis mirroring the analytical structure and depth of the 2020 Comprehensive Plan Fiscal Impact Analysis for Annapolis, Maryland or equivalent (Attachment 6). The analysis shall include:
1) Growth-Based Cost Modeling
• Distinguish fixed vs. variable General Fund operating costs. • Project variable operating and staffing costs by department (e.g., General Government, Police, Parks and Public Works, Library) using appropriate demand bases (residential population, service population, or employment).
• Disaggregate costs into staffing vs. non-staffing components and identify per-unit cost escalators.
2) Revenue Modeling
• Property tax and related in-lieu components based on development assumptions (e.g., housing units, commercial sq. ft.).
• Sales and use tax, transient occupancy tax (TOT), franchise fees, business license tax, and fees/permits/fines using Town-specific volumes and policy assumptions. • Other locally controlled revenues (i.e. third party partners).
ITEM NO. 7.
3) Scenario-Based Forecasts
• Develop best-case, baseline, and worst-case scenarios over a 20-year horizon. • Conduct sensitivity testing on service-population growth, property values, cost escalation, and revenue volatility (including recession simulations).
4) Capital Cost Estimation
• Provide rough-order-of-magnitude (ROM) capital cost estimates tied to infrastructure demands generated by new growth.
• Recommend methodologies the Town can reuse for site-specific capital forecasting. 5) Results & Communication
• Estimate net fiscal impact (revenues vs. costs) at buildout and annually through 2040. • Present findings with clear charts/tables comparing revenue/cost deltas and stress-tested variance bands.
• Highlight fiscal implications by development type (e.g., residential vs. commercial) and intensity/density.
6) Methodological Transparency
• Clearly define data sources, modeling assumptions, and calibration approach. • Collaborate with staff to validate variables and use Town-specific historical financials, land use policies, and demographic projections.
Study 3 — Asset Liability Management (ALM) Study
The Consultant shall:
• Inventory & Evaluate Liabilities: Provide an inventory and evaluation of key liabilities including but not limited to pension, OPEB, bonded debt, and unfunded infrastructure needs. • Funding Needs & Risk Reduction: Offer a standalone analysis of long-term funding needs and identify strategies to reduce risk.
• ALM Modeling: Present model outputs showing fund balance sustainability and risk exposure across scenarios.
• Reserve Guidance: Provide guidance on optimal reserves and potential reserve policy enhancements.
Combined Studies —Study 1 and 2
The Consultant shall deliver a unified analysis that:
• Integrates the Fiscal Condition & Forecast (Study 1) with the Fiscal Impact Analysis (Study 2) to provide a coherent picture of short and long-term fiscal sustainability. • Ensure consistency in assumptions across the impact and forecast models, using development assumptions and infrastructure costs as key inputs.
• Packages results into a single report with distinct sections, shared assumptions, and harmonized formats.
ITEM NO. 7.
All Studies — Required Elements
All proposals for all Studies must include:
• Scenario analysis with well-documented assumptions, covering macroeconomic and local risks. • A risk & opportunity matrix that quantifies high-impact variables and their fiscal effects. • Interviews with all Town departments and relevant external agencies (e.g., Sewer District, Fire Department) to inform assumptions.
• Accounting/Reporting transparency, specifying whether analyses are government-wide or fundbased, source of the information, and how they reconcile. • Editable deliverables (e.g., Excel models, PowerPoint decks) with a documented methodology and user guide.
• Public presentations: at least two meetings (Finance Commission and Town Council), plus staff work sessions as needed.
• Work samples of comparable scope and complexity.
• Disclosure of AI/data tools: clarify if/how AI or specialized analytics are used in modeling. • Standards compliance: GAAP, GFOA, and California State Controller standards. • Usability & training: a clear plan for long-term usability, including staff training where needed.
F. PROPOSAL FORMAT AND SUBMITTAL REQUIREMENTS
1 Proposal Format and Organization
Proposals shall be clear, concise, and organized in the order below. Provide one (1) searchable PDF and any native files specifically requested (e.g., Excel models), using the section headers shown to facilitate review.
1. Cover Letter (maximum 2 pages)
Briefly summarize qualifications and project understanding; identify the primary contact authorized to bind the firm. Confirm acceptance of the Town’s Sample Consultant Services Agreement (Attachment 5) or list any specific exceptions/edits requested.
2. Completed Certification Forms (Attachments 1–4)
o Attachment 1 – Conflict of Interest Statement
o Attachment 2 – Non-Collusion Declaration
o Attachment 3 – References
o Attachment 4 – Statement Regarding Insurance Coverage and Worker’s Compensation Insurance Acknowledgment Certificate
3. Scope Comments and Methodology
Comment on the Scope of Services and describe the proposed approach, specialized methods/tools, milestones, QA/QC, and how deliverables will be provided to the Town (including assumptions governance and documentation practices).
4. Experience and Expertise
Demonstrate experience performing similar studies for California municipalities, including fiscal condition analysis, forecasting, fiscal impact analysis, and ALM. Include relevance to local government budgeting, finance, infrastructure liabilities, pensions/OPEB, and General Plan/Housing Element contexts.
5. Key Personnel and Resumes
Identify the Project Manager and key staff; provide brief role descriptions and relevant qualifications. Commit to maintaining the proposed team; note any planned subcontractors.
ITEM NO. 7.
6. Timeline and Work Plan
Provide a realistic schedule with major tasks, interim deliverables, review points, and public meetings (Finance Commission and Town Council). Indicate opportunities for phasing.
7. Samples of Comparable Projects (1–3)
Provide recent examples demonstrating similar scope, scale, and complexity (links or PDFs).
8. Disclosure of Litigation/Discipline (last 5 years)
Disclose and explain any relevant matters; indicate status/outcome.
9. References (Attachment 3)
Provide a minimum of three (3) current references from comparable engagements within the past five (5) years, including contact information.
10. Preliminary Fee Schedule (itemized by Study)
Provide an itemized fee proposal for Study 1, Study 2, Study 3, and/or Combined Study 1 and 2 (as applicable), inclusive of travel and incidental expenses. Identify personnel classifications, hourly rates, estimated hours by task, and optional services.
11. Statement of Insurance Coverage (Attachment 4)
Identify carriers, types, and limits; confirm ability to meet Town requirements if selected.
12. Tools, Data Sources, and Use of AI
Summarize data sources, technical platforms, and any AI/advanced analytics used in modeling; describe transparency, validation, and human-in-the-loop review. 2 Submittal Instructions
• Due Date/Time: Proposals must be received electronically by 9/22/2025, 4:00 p.m. Pacific Time. Late submittals will be deemed non-responsive.
• Delivery Method: Email the proposal PDF (and any required native files) to [email protected]. If using a file-sharing link, include access permissions that do not expire before award. The Proposer is responsible for confirming receipt due to potential email size limits.
• Email Subject Line: “Town of Los Gatos – Fiscal Analysis Proposal (Studies 1, 2, 3, or Combined 1 and 2)”.
• Single Proposal: Each Proposer may submit only one proposal; alternate proposals are not permitted unless requested by the Town. Providing separate complete documents for each study option will collectively be considered only one proposal. • Format: One (1) searchable PDF is preferred. Provide Excel versions for any financial models included in the submittal. Bookmark major sections and use consistent tab labels in workbooks. 3 Questions and Addenda
• Questions: Direct all questions in writing to the Town’s Contact at [email protected] by 9/15/2025 (see Schedule of Activities). Do not contact other Town officials or evaluators.
Responses will be issued only by Addendum.
• Addenda: The Town will issue addenda on its website. Proposers are responsible for checking for updates and must acknowledge all addenda in the proposal. The last day to issue addenda is 9/17/2025 (see Schedule of Activities).
4 Proposal Conditions
ITEM NO. 7.
• Responsibility for Delivery: Proposers assume full responsibility for timely delivery. The Town is not responsible for email transmission issues or access restrictions on shared links. Proposals received after the deadline will not be considered.
• RFP Schedule: See Schedule of Activities. The Town reserves the right to amend the schedule as necessary.
• Use of Town Forms/Attachments: Proposers shall submit Town forms (Attachments 1–4) as provided in this RFP.
• Contract Template: The Town’s Sample Consultant Services Agreement (Attachment 5) is provided for reference; proposers shall accept or propose specific exceptions in the Cover Letter. • Acceptance or Rejection: The Town reserves the right to accept or reject any and all proposals for any reason, including but not limited to, lack of budget for studies, etc. • Public Records: All materials may become public records per the California Public Records Act.
5 Acknowledgment of Minimum Qualifications
By submitting, the Proposer affirms it meets the Minimum Qualifications and agrees to the General Provisions and Requirements as stated in Sections C and D of this RFP.
G. EVALUATION PROCESS
Proposals will be evaluated based on:
1. Conflict of Interest/Non-Collusion Declarations (Pass/Fail)
2. Proposal Completeness and Organization (15 points)
3. Understanding of Scope and Methodology (20 points)
4. Qualifications and Experience (20 points)
5. Accessibility and Communication (15 points)
6. References and Work Samples (10 points)
7. Pricing and Cost-Effectiveness (20 points)
The Town reserves the right to conduct interviews. Evaluation is at the sole discretion of the Town.
Selection will be based on best fit as determined by the Town and will not be solely determined on points or price. The point values and evaluation criteria described herein are guidelines only; the Town reserves the right to weigh, interpret, or disregard criteria at its sole discretion. Any changes to the Town’s standard contract for service will also be considered in the evaluation.
The Town may, at its sole discretion, terminate evaluation of any or all proposals at any time and may reopen, cancel, or postpone the procurement process without award. Proposals shall remain valid for a period of one hundred twenty (120) days from the proposal due date unless otherwise agreed in writing by the Town. Proposers may not withdraw their proposal within this period without the written consent of the Town. Proposers shall have no claim whatsoever for compensation or reimbursement in such event.
H. ADDITIONAL INFORMATION
• All costs incurred in the preparation, submission, or presentation of a proposal in response to this RFP, including but not limited to, travel, interviews, presentations, and negotiation activities,
ITEM NO. 7.
shall be borne solely by the proposer. The Town shall have no obligation for any such costs, regardless of whether a contract is awarded.
• All materials may become public under the California Public Records Act (PRA). The Town will not be liable for the disclosure of any materials submitted in response to this RFP that are required to be disclosed under the PRA or other applicable law. The Town reserves the right to reject any or all proposals.
• Equal opportunity requirements apply.
• All work must comply with local, state, and federal law. • Selection of a proposer and commencement of negotiations does not obligate the Town to execute a contract. The Town may terminate negotiations and select another proposer, issue a new RFP, or take no further action.
• Any communication, verbal or written, made by the Town or its representatives during this solicitation process shall be considered non-binding unless incorporated into a formal, written agreement executed by the Town.
• Any dispute arising under or related to this RFP shall be governed by the laws of the State of California, and the venue for any legal action shall be the Superior Court of California in and for the County of Santa Clara. The Town's total liability in connection with this RFP shall be limited to the amount, if any, payable under a duly executed contract.
I. ATTACHMENTS
1. Conflict of Interest Statement
2. Non-Collusion Declaration
3. References Form
4. Insurance Certification
5. Sample Consultant Services Agreement
6. 2020 Comprehensive Plan Fiscal Impact Analysis for Annapolis, Maryland The Town of Los Gatos thanks you for your interest in this important initiative.
ITEM NO. 7.
ATTACHMENT 1 - CONFLICT OF INTEREST STATEMENT
THIS FORM MUST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE
PROPOSAL
FISCAL CONDITION ANALYSIS WITH FIVE-YEAR AND LONG-TERM FORECAST,
FISCAL IMPACT ANALYSIS, AND ASSET LIABILITY MANAGEMENT STUDY The undersigned declares:
I/We ___________________________ (Insert Name) have the following financial, business, or other relationship with Town of Los Gatos that may have an impact upon the outcome of the contract. If none, please specify that no other relationships may have an impact on this contract or Project.
I/We (Insert Name) have the following current clients who may have a financial interest in the outcome of this contract. If none, please specify that no other clients may have a financial interest with an impact on this contract or Project.
Pursuant to Government Code section 1090 and any other laws, rules and regulations that may apply, the Proposer covenants that neither it, its subcontractors nor employees presently have an interest, and shall not acquire any interest, direct or indirect, financial or otherwise that would conflict in any manner or degree with contract awarded from this RFP. Proposer certifies that to the best of its knowledge, no one who has or will have any financial interest in the contract awarded from this RFP is an officer or employee of the Town. Through its submittal of a proposal, Proposer acknowledges that it is familiar with Section 87100 et seq. and Section 1090 et seq. of the Government Code of the State of California and will immediately notify the Town if it becomes aware of any facts concerning the contract to be awarded that constitute a violation of said provisions.
Furthermore, if there is reason to believe that collusion exists among the Proposers, the Town may refuse to consider proposals from participants in such collusion. No person, firm, or corporation under the same or different name, shall make, file, or be interested in more than one proposal for the same work unless alternate proposals are called for. A person, firm, or corporation who has submitted a sub-proposal to a Proposer, or who has quoted prices on materials to a Proposer, is not thereby disqualified from submitting a sub-proposal or quoting prices to other Proposers. Reasonable ground for believing that any Proposer is
ITEM NO. 7.
interested in more than one proposal for the same work will cause the rejection of all proposals for the work in which a Proposer is interested. If there is reason to believe that collusion exists among the Proposers, the Town may refuse to consider proposals from participants in such collusion. Proposers shall submit as part of their proposals documents the completed Non-Collusion Declaration provided herein.
I, on behalf of the Proposer, declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct and that this declaration is executed on __________________ [date], at ___________________[city], _______________[state]. _________________________________ ___________________________________ Proposer Name (Person, Firm, Corp.) Title of Authorized Representative _________________________________ __________ _________________________ Address Name of Authorized Representative
_________________________________
City, State, Zip
________________ ___________________________________
(Date) (Signed)
ITEM NO. 7.
ATTACHMENT 2 – NON-COLLUSION DECLARATION
THIS FORM MUST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE
PROPOSAL
FISCAL CONDITION ANALYSIS WITH FIVE-YEAR AND LONG-TERM FORECAST,
FISCAL IMPACT ANALYSIS, AND ASSET LIABILITY MANAGEMENT STUDY The undersigned declares:
I am the ______________________ [Insert Title] of ____________________________,[Insert name of company, corporation, LLC, partnership or joint venture] the party making the foregoing proposal.
The proposal is not made in the interest of, or on behalf of, any undisclosed person, partnership, company, association, organization, or corporation. The proposal is genuine and not collusive or sham.
The Respondent has not directly or indirectly induced or solicited any other respondent to put in a false or sham proposal. The Respondent has not directly or indirectly colluded, conspired, connived, or agreed with any bidder or anyone else to put in a sham proposal, or to refrain from responding. All statements contained in the proposal are true.
Any person executing this declaration on behalf of a respondent that is a corporation, partnership, joint venture, limited liability company, limited liability partnership, or any other entity, hereby represents that he or she has full power to execute, and does execute, this declaration on behalf of the respondent.
I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct and that this declaration is executed on ________[date], at ______________[city], ___[state].
By: _____________________
Name: _____________________
Title: _____________________
ITEM NO. 7.
ATTACHMENT 3 - REFERENCES
THIS FORM MUST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE
PROPOSAL
FISCAL CONDITION ANALYSIS WITH FIVE-YEAR AND LONG-TERM FORECAST,
FISCAL IMPACT ANALYSIS, AND ASSET LIABILITY MANAGEMENT STUDY List three (3) references for work of a similar nature to the Services performed within the last five (5) years. Use additional sheets as necessary.
1. ____________________________________________________________ ___________ Name of Agency Agency Address
_________________________________ ________________________________________ Contact Name Contact Title
_________________________________ ________________________________________ Contact Telephone Contact Email Address
_________________________________ ________________________________________ Contract Period Contract Amount
___________________________________________________________________________ ___________________________________________________________________________ Description of services performed including costs.
2. ________________________________________________________________________ Name of Agency Agency Address
_________________________________ ________________________________________ Contact Name Contact Title
_________________________________ ________________________________________ Contact Telephone Contact Email Address
_________________________________ ________________________________________ Contract Period Contract Amount
___________________________________________________________________________ ___________________________________________________________________________ Description of services performed including costs.
3. ________________________________________________________________________ Name of Agency Agency Address
_________________________________ ________________________________________ Contact Name Contact Title
_________________________________ ________________________________________ Contact Telephone Contact Email Address
_________________________________ ________________________________________ Contract Period Contract Amount
___________________________________________________________________________
ITEM NO. 7.
___________________________________________________________________________ Description of services performed including costs.
I hereby certify that the Proposer performed the work listed above. _____________________ ______________________ ____________________ Signature of Proposer Name Date
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ATTACHMENT 4 - STATEMENT REGARDING INSURANCE COVERAGE AND WORKER’S COMPENSATION INSURANCE ACKNOWLEDGMENT CERTIFICATE
THIS FORM MUST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE
PROPOSAL
FISCAL CONDITION ANALYSIS WITH FIVE-YEAR AND LONG-TERM FORECAST,
FISCAL IMPACT ANALYSIS, AND ASSET LIABILITY MANAGEMENT STUDY PROPOSER HEREBY CERTIFIES that the Proposer has reviewed and understands the insurance coverage requirements specified in the RFP. Should the Proposer be awarded a contract for Services, Proposer further certifies that the Proposer can meet the specified requirements for insurance, including insurance coverage of any subcontractors, and agrees to name the Town as additional insured for the Services specified.
By certifying this form, the Proposer also understands the Worker’s Compensation insurance requirement per the California Labor Code, Sections 1860 and 1861:
I am aware of the provisions of Section 3700 of the Labor Code, which require every employer to be insured against liability for worker's compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the work of this contract. _____________________________________________
Name of Proposer (Person, Firm, or Corporation)
_____________________________________________
Signature of Proposer's Authorized Representative
_____________________________________________
Name & Title of Authorized Representative
____________________
Date of Signing
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ATTACHMENT 5 – SAMPLE CONSULTANT SERVICES AGREEMENT
[ATTACHED BEHIND THIS PAGE]
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AGREEMENT FOR CONSULTANT SERVICES
THIS AGREEMENT is made and entered into on ______________(DATE) by and between TOWN OF LOS GATOS, a California municipal corporation, (“Town”) and ___________________ NAME OF COMPANY, (“Consultant”), whose address is _____________ ADDRESS OF COMPANY. This Agreement is made with reference to the following facts.
I. RECITALS
1.1 The Town desire to engage Consultant to provide XXXXXXXXX.
1.2 The Consultant represents and affirms that it is willing to perform the desired work pursuant to this Agreement.
1.3 Consultant warrants it possesses the distinct professional skills, qualifications, experience, and resources necessary to timely perform the services described in this Agreement.
Consultant acknowledges Town has relied upon these warranties to retain Consultant.
II. AGREEMENTS
2.1 Scope of Services. Consultant shall provide services as described in that certain proposal sent to the Town on (DATE), which is hereby incorporated by reference and attached as Exhibit A.
2.2 Term and Time of Performance. This contract will remain in effect from _____ to ________. Consultant shall perform the services described in this agreement as follows:
XXXXXXXX.
2.3 Compliance with Laws. The Consultant shall comply with all applicable laws, codes, ordinances, and regulations of governing federal, state and local laws. Consultant represents and warrants to Town that it has all licenses, permits, qualifications and approvals of whatsoever nature which are legally required for Consultant to practice its profession. Consultant shall maintain a Town of Los Gatos business license pursuant to Chapter 14 of the Code of the Town of Los Gatos.
2.4 Sole Responsibility. Consultant shall be responsible for employing or engaging all persons necessary to perform the services under this Agreement.
2.5 Information/Report Handling. All documents furnished to Consultant by the Town and all reports and supportive data prepared by the Consultant under this Agreement are the Town’s property and shall be delivered to the Town upon the completion of Consultant's services or at the Town's written request. All reports, information, data, and exhibits prepared or assembled by Consultant in connection with the performance of its services pursuant to this Agreement are confidential until released by the Town to the public, and the Consultant shall not make any of the these documents or information available to any
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individual or organization not employed by the Consultant or the Town without the written consent of the Town before such release. The Town acknowledges that the reports to be prepared by the Consultant pursuant to this Agreement are for the purpose of evaluating a defined project, and Town's use of the information contained in the reports prepared by the Consultant in connection with other projects shall be solely at Town's risk, unless Consultant expressly consents to such use in writing. Town further agrees that it will not appropriate any methodology or technique of Consultant which is and has been confirmed in writing by Consultant to be a trade secret of Consultant.
2.6 Compensation. Compensation for Consultant's professional services shall not exceed $XXXX, inclusive of all costs. Payment shall be based upon Town approval of each task.
2.7 Billing. Billing shall be monthly by invoice within thirty (30) days of the rendering of the service and shall be accompanied by a detailed explanation of the work performed by whom at what rate and on what date. Also, plans, specifications, documents or other pertinent materials shall be submitted for Town review, even if only in partial or draft form.
Payment shall be net thirty (30) days. All invoices and statements to the Town shall be addressed as follows:
Invoices:
Town of Los Gatos
Attn: Accounts Payable
P.O. Box 655
Los Gatos, CA 95031-0655
Email preferred: [email protected]
2.8 Availability of Records. Consultant shall maintain the records supporting this billing for not less than three years following completion of the work under this Agreement.
Consultant shall make these records available to authorized personnel of the Town at the Consultant's offices during business hours upon written request of the Town.
2.9 Assignability and Subcontracting. The services to be performed under this Agreement are unique and personal to the Consultant. No portion of these services shall be assigned or subcontracted without the written consent of the Town.
2.10 Independent Contractor. It is understood that the Consultant, in the performance of the work and services agreed to be performed, shall act as and be an independent contractor and not an agent or employee of the Town. As an independent contractor he/she shall not obtain any rights to retirement benefits or other benefits which accrue to Town employee(s). With prior written consent, the Consultant may perform some obligations under this Agreement by subcontracting, but may not delegate ultimate responsibility for performance or assign or transfer interests under this Agreement. Consultant agrees to testify in any litigation brought regarding the subject of the work to be performed under this Agreement. Consultant shall be compensated for its costs and expenses in preparing for, traveling to, and testifying in such matters at its then current hourly rates of compensation, unless such litigation is brought by Consultant or is based on allegations of Consultant's negligent performance or wrongdoing.
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2.11 Conflict of Interest. Consultant understands that its professional responsibilities are solely to the Town. The Consultant has and shall not obtain any holding or interest within the Town of Los Gatos. Consultant has no business holdings or agreements with any individual member of the Staff or management of the Town or its representatives nor shall it enter into any such holdings or agreements. In addition, Consultant warrants that it does not presently and shall not acquire any direct or indirect interest adverse to those of the Town in the subject of this Agreement, and it shall immediately disassociate itself from such an interest, should it discover it has done so and shall, at the Town's sole discretion, divest itself of such interest. Consultant shall not knowingly and shall take reasonable steps to ensure that it does not employ a person having such an interest in this performance of this Agreement. If after employment of a person, Consultant discovers it has employed a person with a direct or indirect interest that would conflict with its performance of this Agreement, Consultant shall promptly notify Town of this employment relationship, and shall, at the Town's sole discretion, sever any such employment relationship.
2.12 Equal Employment Opportunity. Consultant warrants that it is an equal opportunity employer and shall comply with applicable regulations governing equal employment opportunity. Neither Consultant nor its subcontractors do and neither shall discriminate against persons employed or seeking employment with them on the basis of age, sex, color, race, marital status, sexual orientation, ancestry, physical or mental disability, national origin, religion, or medical condition, unless based upon a bona fide occupational qualification pursuant to the California Fair Employment & Housing Act.
III. INSURANCE AND INDEMNIFICATION
3.1 Minimum Scope of Insurance:
i. Consultant agrees to have and maintain, for the duration of the contract, General Liability insurance policies insuring him/her and his/her firm to an amount not less than: two million dollars ($2,000,000) combined single limit per occurrence for bodily injury, personal injury and property damage. ii. Consultant agrees to have and maintain for the duration of the contract, an Automobile Liability insurance policy ensuring him/her and his/her staff to an amount not less than one million dollars ($1,000,000) combined single limit per accident for bodily injury and property damage. iii. Consultant shall provide to the Town all certificates of insurance, with original endorsements effecting coverage. Consultant agrees that all certificates and endorsements are to be received and approved by the Town before work commences.
iv. Consultant agrees to have and maintain, for the duration of the contract, professional liability insurance in amounts not less than $1,000,000 which is
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sufficient to insure Consultant for professional errors or omissions in the performance of the particular scope of work under this agreement.
General Liability:
i. The Town, its elected and appointed officials, employees, and agents, are to be covered as insured as respects: liability arising out of activities performed by or on behalf of the Consultant; products and completed operations of Consultant, premises owned or used by the Consultant. This requirement does not apply to the automobile or professional liability insurance required for professional errors and omissions.
ii. The Consultant's insurance coverage shall be primary insurance as respects the Town, its elected and appointed officials, employees, and agents. Any insurance or self-insurances maintained by the Town, its elected and appointed officials, employees, and agents, shall be excess of the Consultant's insurance and shall not contribute with it. iii. Any failure to comply with reporting provisions of the policies shall not affect coverage provided to the Town, its elected and appointed officials, employees, and agents.
iv. The Consultant's insurance shall apply separately to each insured against whom a claim is made or suit is brought, except with respect to the limits of the insurer's liability.
3.2 All Coverages. Each insurance policy required in this item shall be endorsed to state that coverage shall not be suspended, voided, cancelled, reduced in coverage or in limits except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the Town. Current certification of such insurance shall be kept on file at all times during the term of this agreement with the Town Clerk.
3.3 Workers’ Compensation. In addition to these policies, Consultant shall have and maintain Workers' Compensation insurance as required by California law and shall provide evidence of such policy to the Town before beginning services under this Agreement. Further, Consultant shall ensure that all subcontractors employed by Consultant provide the required Workers' Compensation insurance for their respective employees.
3.4 Indemnification. The Consultant shall save, keep, hold harmless and indemnify and defend the Town, its elected and appointed officials, employees, and agents, from all damages, liabilities, penalties, costs, or expenses in law or equity that may at any time arise or be set up because of damages to property or personal injury received by reason of, or in the course of performing the work described in this contract.
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IV. GENERAL TERMS
4.1 Waiver. No failure on the part of either party to exercise any right or remedy hereunder shall operate as a waiver of any other right or remedy that party may have hereunder, nor does waiver of a breach or default under this Agreement constitute a continuing waiver of a subsequent breach of the same or any other provision of this Agreement.
4.2 Governing Law and Venue. This Agreement, regardless of where executed, shall be governed by and construed to the laws of the State of California. Venue for any action regarding this Agreement shall be in the Superior Court of the County of Santa Clara.
4.3 Termination of Agreement. The Town and the Consultant shall have the right to terminate this agreement with or without cause by giving not less than fifteen days (15) written notice of termination. In the event of termination, the Consultant shall deliver to the Town all plans, files, documents, reports, performed to date by the Consultant. In the event of such termination, Town shall pay Consultant an amount that bears the same ratio to the maximum contract price as the work delivered to the Town bears to completed services contemplated under this Agreement, unless such termination is made for cause, in which event, compensation, if any, shall be adjusted in light of the particular facts and circumstances involved in such termination.
4.4 Amendment. No modification, waiver, mutual termination, or amendment of this Agreement is effective unless made in writing and signed by the Town and the Consultant.
4.5 Disputes. In any dispute over any aspect of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, including costs of appeal.
4.6 Notices. Any notice required to be given shall be deemed to be duly and properly given if mailed postage prepaid, and addressed to:
Town of Los Gatos
Attn: Town Clerk
110 E. Main Street
Los Gatos, CA 95030
CONSULTANT NAME
Attn:
ADDRESS
or personally delivered to Consultant to such address or such other address as Consultant designates in writing to Town.
4.7 Order of Precedence. In the event of any conflict, contradiction, or ambiguity between the terms and conditions of this Agreement in respect of the Products or Services and any attachments to this Agreement, then the terms and conditions of this Agreement shall prevail over attachments or other writings.
4.8 Entire Agreement. This Agreement, including all Exhibits, constitutes the complete and exclusive statement of the Agreement between the Town and Consultant. No terms, conditions, understandings or agreements purporting to modify or vary this Agreement,