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

2. 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.

3. 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)

4. 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

5. 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

6. 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

7. Summer 2003 Forecast Update

8. Fall 2005 Forecast Update

9. Spring 2006 Forecast Update

10. 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

11. Proposed General Fund FY 2006/07 Balanced Budget

12. 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

13. Vulnerabilities

14. 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

15. 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

16. Projected General Fund Reserves

17. 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