Los Gatos‑Saratoga trustees approve second interim report, shift RDA pass‑through to meet maintenance requirement

The Los Gatos‑Saratoga Union High School District Board of Trustees on March 1 approved the district's second interim financial report and authorized staff to apply about $2.5 million in Redevelopment Agency (RDA) pass‑through revenue to meet California's Routine Restricted Maintenance (RRM) requirement, a move staff said will eliminate more than 90% of the district's projected deficit this fiscal year.

Patrick Bernhardt, executive director of business services, told trustees the second interim covers actuals through Jan. 31 and projections through June and shows a modest net revenue increase of roughly $829,000 offset by expenditure increases of about $300,000 and a material change of approximately $2.5 million in net transfers. "The proposed budgetary change we bring to you tonight ... is to let us use about $2,500,000 of this pass through revenue in the General Fund to fulfill the RRM requirement," Bernhardt said, adding that the shift would immediately relieve an equivalent amount of unrestricted general fund dollars.

Bernhardt explained that RDA pass‑through money historically was treated as capital‑restricted by the original 1991 agreements but that state law enacted during RDA dissolution in 2011 limits those dollars to facilities‑related uses and allows them to satisfy the RRM requirement. He said staff consulted legal counsel, the county office of education, external auditors and FCMAT and concluded the funding can be used in this way. "Once we learned that there is no restriction from the RDA document on this money, the only restriction that exists is state law," Bernhardt said in the presentation.

Board members pressed staff about long‑term consequences for facilities funding, the district's reserve trajectory and assumptions about labor costs. Bernhardt said the change would increase the projected reserve to an estimated 11.6% at the end of this year and 12.5% by the end of the third year under current projections; he cautioned the benefit reduces the district's available ongoing facilities revenue and recommended the Board consider capital options, including a future general obligation bond, to cover large replacements and emergency repairs.

Superintendent Rocha described complementary measures to address the district's structural gap: reorganizations, position reclassifications, and other planned expenditure reductions that staff estimate will yield roughly $720,000 in ongoing savings. "These changes will free up... annual ongoing savings and help us meet the 10% reserve requirement," Rocha said while outlining next steps and personnel items expected at subsequent meetings.

Trustees moved and seconded approval of the second interim report and to file a positive certification with the Santa Clara County Superintendent of Schools. The Board approved the motion by roll call: President Bond — yes; Vice President Hussain — yes; Trustee Chen — yes; Trustee Davies — yes.

Staff noted caveats: the RDA pass‑through will cease when the successor agency completes final debt service in roughly 2032‑33, after which the revenue will revert to secured property tax and the district may see different long‑term fiscal effects. Bernhardt said current Fund 14 balances and projected bond support give the district several years of cushion but that future decisions about bonds and expenditures will affect long‑term sustainability.

Next steps: the board approved the staff recommendation and directed related personnel and budget adoption items to appear in upcoming agendas; staff will submit the second interim to the county and state as required.