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Los Gatos staff tell council: midyear outlook improved but FY26-27 still shows deficit; CIP focus stays on finishing tier-one projects
Summary
Town staff reported a preliminary $4.3 million midyear surplus driven by investment income and vacancies but projected a $3.1 million deficit for FY26-27 under conservative assumptions; council pressed staff on specific CIP items including a community garden, downtown restroom, a planned fleet audit and a large grant-funded trail project.
Town staff told the Los Gatos Town Council that the town currently estimates about a $4.3 million midyear surplus, but cautioned the number is an estimate dependent on investment income and department-year-end results. For the next fiscal year (FY26-27) staff—stimated a conservative $3.1 million deficit unless revenues or other assumptions change.
Chris Merritt (referred to in the transcript as Mr. Merritt/Chris) said higher-than-expected investment earnings, vacancies and some stronger tax receipts contributed to the midyear outlook. He cautioned the town historically projects deficits and sometimes ends the year in surplus, but warned market shifts, pension costs, deferred maintenance and filling vacancies could rapidly change the picture.
On capital projects, parks and public works director Nicole Burnham said the town adopted a tiered CIP structure last year: tier-one projects are funded and staff-ready, tier-two projects are deferred. She told the council the adopted CIP currently contains 36 tier-one projects; eight should close this fiscal year and 28 will carry forward into the next year. She emphasized the staff focus is on finishing existing tier-one work rather than adding many new projects.
Council members pressed staff on several visible community projects: the downtown public restroom (current contract slated to be rebid; staff said they would explore temporary trailer-mounted units as an interim improvement), the community garden (staff had performed sampling and determined additional site preparation was needed; the project was moved to tier 2 pending further environmental and design work), and the Lynn Avenue pathway (council asked for a scaled-down option to provide a minimum safe pedestrian/cyclist route).
Council members also asked about a planned fleet audit (outside consultant scope being developed) intended to evaluate vehicle utilization and recommend divestment or right-sizing where appropriate, and about the large grant the staff presentation referenced for a trail connector: staff presented the trail connector as an $8 million grant-funded project; a council member later used a different figure in remarks, which the transcript shows as a conflicting number and requires staff confirmation.
Staff said additional budget detail will be provided at the next council meeting and cautioned that funding for any newly directed projects would need to be identified in the preliminary budget or through supplemental appropriations.
