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October 1, 2022
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Council leaves some Covid-relief money in the kitty

Town starts to grapple with post-pandemic financial challenges

The Los Gatos Town Council approved moving $3.77 million to the General Fund Appropriated Reserve for use in capital projects, at a regularly scheduled meeting May 17.

It also agreed to take $2.2 million of Covid-19 relief (American Rescue Plan Act) funding for the same purpose.

This was lower than the $3.7 million staff had recommended, as Council members spoke about not wanting to deplete the pot of money entirely or not wanting to commit to ambitious Town improvements that might be hard to sustain since Los Gatos would have otherwise been in the red.

The Town had been projecting revenue growth that hasn’t materialized; it’s now expecting deficits in the order of $2-$3 million per year.

Councilmember Matthew Hudes said $1 million of ARPA funds have already been used to cover Town operating expenses.

“I am encouraged and hopeful that we may be able to return that, as we did last year, and not use that,” he said. “That would give us a balance of $2.5 million for next year.”

Council put off a decision on whether to dissolve a workers’ compensation fund and run the money through the General Fund, so the new town attorney could provide more input at a future budget meeting.

Los Gatos also officially acknowledged the Finance Commission’s finding that the Town is running a “structural financial deficit,” which means there’s a fundamental imbalance baked into the Town’s accounting.

‘We don’t see much in the way of business travel coming back to our community.’

—Arn Andrew, assistant town manager

The elected officials directed the commission to research just how bad things have gotten, and to come up with possible ways to fix the problem.

In addition, Hudes proposed a staff-led effort to “measure key processes” and find 3.5%-5% worth of operational efficiencies, as well as to develop five-year goals for departments.

Vice Mayor Maria Ristow voted against the motion, saying she thought only $1 million of the coronavirus money should go toward the Town’s capital agenda.

After all, she said, in the next few months Los Gatos will learn if it’s going to get $1.5 million in money from FEMA.

“I just don’t want to be overcommitting our ARPA money right now,” she said. “I won’t be able to support this motion if it stays at $2.2 million.”

And Ristow said the Town is already understaffed so she disagrees with directing employees to find a specific number of “cutbacks,” and suggested the proposal relies on too many assumptions.

Hudes clarified that he wasn’t talking about specific cost-reductions, but a bottom-up method of streamlining local operations.

Town Manager Laurel Prevetti said the type of work Hudes pitched is similar to what she previously had to do while working for the City of San Jose.

Mayor Rob Rennie was the deciding vote, with Councilmember Marico Sayoc joining Ristow in opposition and Councilmember Mary Badame voting yes.

After this series of decisions, Assistant Town Manager Arn Andrews said that left a $700,000 deficit for Fiscal Year 2022/23.

So, Council voted to take this from the remaining $1.5 million in ARPA funding—which now leaves just $800,000 of the pandemic money, which originated with the $1.9 trillion approved by the Biden Administration in March 2021.

Andrews said there are big challenges ahead Los Gatos will have to deal with—including less hotel tax revenue due to fewer people traveling to Silicon Valley for work.

“We’re usually (getting) spillover from the big conventions in San Jose and that’s just not happening,” he said. “We don’t see much in the way of business travel coming back to our community.”

Drew Penner
Drew Penner is an award-winning Canadian journalist whose reporting has appeared in the Globe and Mail, Good Times Santa Cruz, Los Angeles Times, Scotts Valley Press Banner, San Diego Union-Tribune, KCRW and the Vancouver Sun. Please send your Los Gatos and Santa Cruz County news tips to [email protected]

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