110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 03/16/2026
ITEM NO: 1
DESK ITEM
DATE: March 16, 2026
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Receive Presentation on Potential Revenue Options and Provide Feedback REMARKS:
Attachments three and four contain Commissioner questions, comments, and documents.
Attachments provided with Staff Report:
1. Presentation
2. Draft FY 2026-27 Forecast and History
Attachment received with this Desk Item:
3. Commissioner questions and comments
4. Commissioner submitted documents
Questions from Finance Commissioner
Responses provided by Finance and Parks and Public Works staff Q1: Can you refresh my memory as to what is in the $6.3m of other sources of revenue for FY 26? And why does it decrease to $3.8m in FY 27?
A1: Other category includes various minor miscellaneous revenue, but major revenues include Measure G proceeds, Pension Trust Fund contributions, and the sale of property.
The drop of from $6.3 to $3.8 is primarily due to the anticipated 1x sale of property for 4 Tait.
Q2a: Can you clarify what comprises the $172.7m for street pavement and infrastructure that is in the presentation as an unfunded need?
A2a: This includes all the projects related to street improvements and street repair/maintenance and safety as presented in Tier 3 of the 25/26 CIP (attached for reference).
Please note that $172.7M is primarily driven by five projects:
1. Winchester Blvd, Complete Streets Improvements from Knowles to Blossom Hill Road
2. Townwide Traffic Signal Replacements
3. Townwide ADA Compliance Work
4. Highway 17 at Route 9, Interchange Reconstruction (Town cost share +10%)
5. Los Gatos Almaden Road, Sidewalk gap closure around Los Gatos Almaden Road to Peach Blossom
This list of unfunded needs is not prioritized and there is no differentiation between what is “new” versus “lifecycle” versus “repair/rebuild” as was discussed in the staff report for Town Council for the 3/17/2 meeting (item 8). Many of these projects would be considered NEW and so may be of lower priority than repair / rebuild projects.
Q2b: Are these investments beyond the annual street maintenance expenditures that are included the annual CIP? As you know 100% of the annual street maintenance is funded by taxes or bond measure proceeds.
A1b: Yes. They are included as Tier 3 projects but are not presented for funding at this time.
ATTACHMENT 3
Input to the Joint Town Council and Finance Commission Meeting – March 16, 2026 As I am currently out of the country on business and unable to attend, I submit the following comments.
1. Refine the unfunded needs assessment for accuracy - figure out what really is required vs. a wishlist of capital projects
• The $285.7–$307.2 million total appears overstated and headline-driven rather than precise. • Unfunded pension liabilities (CalPERS UAL) are omitted; as of June 30, 2024, the combined UAL is ~$67 million, with the Town paying 6.8% interest and annual amortization of $6.4 million, projected to rise to $7.5 million by FY 2029/30—include these explicitly. • The $172.7 million streets/roads figure requires further inspection and is not supported by the current all-time high PCI rating of 82 (“Good” category). The number appears aspirational rather than thoughtfully developed and informed by a specific target maintenance level. Notably, 100% of current street maintenance is funded by grants, gas taxes, county bond measures, and impact fees; no funding is drawn from the General Fund.
2. The five-year forecast continues to lack reliability and precision and suffers from biased assumptions which produce meaningless forecasts
• The February 2025 forecast projects an implausible shift from a $4.3 million surplus in FY 2025/26 to a $3.1 million deficit in FY 2026/27 and ongoing deficits. • February 2026 mid-year updates show a revised FY 2025/26 surplus (~$4.3 million from vacancies, interest, and deferrals), highlighting volatility.
3. Defer any TUT or parcel tax until the long-term model is complete - finish your homework then decide
• No TUT or parcel tax, including November 2026 ballot preservation, should proceed before NHA Advisors completes the long-term fiscal model.
• Proceeding without validated analysis is the equivalent of fiscal malpractice and obscures whether new revenue is needed or internal discipline suffices. • The 2024 NBS study, which informed the deferred 0.125% general sales tax effort, failed to forecast the current surplus, underscoring short-term projection limitations.
4. Restrict any new tax to special-purpose designation such as safety services, or deferred facility maintenance or pension ADP’s
• Due to demonstrated discretionary spending priorities over long-term obligations, any new tax (especially TUT) must be special-purpose (two-thirds approval), restricting proceeds to verified uses (e.g., pension UAL or deferred maintenance) for guardrails and transparency. • Evidence: ARPA funds largely used operationally with few lasting capital results; repeated non-implementation of Finance Commission ADP recommendation to Safety Plan UAL (saving ATTACHMENT 4
millions in 6.8% interest); unclear use of ~$1 million Winchester land sale proceeds; February 2026 advocacy to increase Council travel/entertainment budgets amid deficits. • Include independent oversight, annual reporting, and sunset provisions to ensure accountability.
5. Explore a Proposition 218 Benefit Assessment to fund Wildfire Mitigation and critical infrastructure needs
• The City of Santa Barbara’s Wildland Fire Suppression Assessment District (WFSAD), established in 2006 under Proposition 218, provides a successful model for targeted wildfire funding.
• It applies to approximately 3,200 parcels in high-risk zones, raising about $290,000 annually. • By limiting scope to “special benefits” (e.g., direct services like a community chipping program for brush pickup from assessed properties and a dedicated Fire Services Specialist serving only district residents), it avoids legal challenges under Proposition 218. • Key advantage: Requires only a majority weighted vote (50% +1) for approval, far easier than two-thirds for taxes.
• This narrow, benefit-focused approach could be adapted for Los Gatos’ hillside wildfire needs, potentially as a special fire assessment district, offering a lower-threshold, transparent mechanism for dedicated funding without broad tax implications.
6. Invert the budgeting philosophy: adopt a revenue-constrained service delivery mindset - not a spend then tax mindset
• The current approach appears to establish a target expense base and then seek revenue mechanisms (e.g., taxes) to cover it. This risks unsustainable growth in expenditures. • The philosophy should be inverted: determine available revenue first (based on realistic, conservative forecasts), then define an acceptable level of services that fits within that constraint.
• To support this shift, adopt performance-based budgeting principles: link resource allocation to clearly defined outcomes, service levels, and performance metrics rather than incremental expense growth.
• Provide clear visibility into specific, actionable expense-control initiatives (e.g., structured vacancy management, program prioritization/deferral, non-personnel efficiency measures, or personnel cost containment strategies).
• Document these with timelines, responsible parties, projected savings, and monitoring mechanisms. Without such transparency, it is difficult to assess whether structural balance is achievable through discipline alone or if additional revenue is genuinely required.
Thank you for your consideration.
Phil Koen
Finance Commissioner
PREPARED BY: Wendy Wood
Town Clerk
Reviewed by: Town Manager and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 07/01/2024
ITEM NO: 1
DESK ITEM
DATE: July 1, 2024
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Adopt a Resolution to Place a 1/8th Cent Sales Tax on the November 2024 Ballot as a General Tax, Introduce an Ordinance to Approve the Tax Ordinance, Adopt a Resolution to Add a Companion Advisory Measure, and Authorize a Budget Adjustment in the Amount of $132,000 from the Available Capital/Special Projects Reserve
ORDINANCE TITLE: AN ORDINANCE OF THE TOWN COUNCIL OF THE TOWN
OF LOS GATOS APPROVING THE ORDINANCE TO BE SUBMITTED TO THE VOTERS OF THE TOWN OF LOS GATOS AT THE NOVEMBER 5, 2024, GENERAL
MUNICIPAL ELECTION THAT PROPOSES TO IMPOSE A ONE-EIGHTH OF ONE
PERCENT GENERAL TRANSACTIONS AND USE TAX IN THE TOWN OF LOS GATOS
REMARKS:
Attachment 7 contains public comment received public comments received after 11:00 a.m.
Friday, June 28 and before 11:00 on Monday, July 1, 2024.
Attachments Previously Received with the Staff Report:
1. Draft General Tax Resolution with Exhibit A: General Tax Ordinance
2. Draft Ordinance Approving Proposed Ordinance with Exhibit A: General Tax Ordinance
3. Resolution Approving Advisory Measure to General Tax
4. Examples of Approved General Taxes with Advisory Measures
5. Responses to Questions from Council Members
6. Public Comment
7. Public Comment Received After 11:00 a.m. on Friday, June 28 ATTACHMENT 4