Town of Los Gatos FY 2006/07 Recommended Budget Debra Figone Town Manager Steve Conway Director of Finance May 15, 2006

Agenda Current Year Budget Status Five Year Financial Plan Set Stage for FY 2006/07 Budget Development Operating Budget Highlights State Budget Developments Proposed Departmental Recommendations Proposed FY 2006/07 – FY 2010/11 Capital Improvement Plan To then be refined and retooled based upon Town Council direction and to be incorporated into the Manager’s Recommended Budget delivered in May 2004.

General Fund Budget Status FY 2005/06 General Fund Budget Status Expenditure reduction/efficiency efforts continue Adjusted Budget estimated to be 97.3% expended Proactive reductions: (1) delaying Mgmt raises (estimated $55K) (2) partial FTE reductions implemented (3) cell phone provider change (20k) (4) reduce temporary support in Town Manager Office, Clerks Office, HR and Finance (5) reduce employee training (30k)

FY 2005/06 Budget Status Revenue Projections: GF Revenue Projections Exceed Adopted Budget Estimates By Approximately $1.6 Million (Plus $2.4 Million from One-Time Sale of Sewer Infrastructure Assets) Major Revenue Increases Include: Sales Tax - $487,000 Increase Property Tax and VLF Backfill - $500,000 Increase Transient Occupancy Taxes - $80,000 Increase Other Revenue Increases = approximately $533,000

Five Year Financial Forecast Informed Budget Development Revenue Assumptions: Moderate recovery in locally generated revenues State budget Restoration of $476K of Property Tax Continuing COP’S Grant Program $200K Expenditure Assumptions: Moderate growth Labor agreement salary adjustments included Actuarial updates for benefit costs

FY 2006/07 Forecast Prior forecasts indicated General Fund revenue shortfalls of varying levels: Summer 2003 projection -$2.6 million revenue shortfall for FY 2006/07. Fall 2005 projection -$500K shortfall Spring 2006 projection - indicates a small surplus of operating revenues $800K Future Year Forecasts Revenue shortfalls projected to recur again in FY 2009/10 - with $500,000 to $1.0 million in potential annual revenue shortfalls

Summer 2003 Forecast Update

Fall 2005 Forecast Update

Spring 2006 Forecast Update

FY 2006/07 Budget Development Recommended Status Quo Budget: FY 2006/07 Budgets to Fund Current Levels of Service Inflationary Related Increases Incorporated into Budget Service Enhancements – Factors to Consider Cost Neutral Identified Service Deficiencies (PPW/Library) Provides Opportunity for Organizational Alignment

Proposed General Fund FY 2006/07 Balanced Budget

Continuing Vulnerabilities Unanticipated factors which may influence Recommended Budget: Local Revenue Downturns Governor’s 2006 State Budget Impacts ERAF III ends ($476K) COPS Grant protected ($200K) Booking Fee Revenue eliminated ($84K) Other Various Revenues Partially Funded

Vulnerabilities

FY 2006/07 Budget Implementation Strategy Monitor State budget developments Track local revenues Adjust assumptions at mid-year if required PPW workload and service level study is planned for FY 2006/07 Town service level prioritization efforts will continue to be refined and will inform future budget planning

FY 2005/06 Reserve Practice Recommendations Revenue Stabilization Reserve GFOA Recommended “best practice” One time source for short term downturns Provides more consistent delivery of services over the long term Not intended as replacement of organizational alignment and/or rightsizing Reserve for Capital / Special Projects

Projected General Fund Reserves

Redevelopment Agency Highlights: Continue Affordable Housing initiatives Downtown Street Reconstruction project ERAF III is ($350K) is not anticipated to be taken by the State in FY 2006/07