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Los Gatos council adopts FY 2026–27 budget, creates $3 million capital reserve
Summary
The Los Gatos Town Council unanimously approved the fiscal year 2026–27 operating budget, a five-year capital plan and a new $3 million long-term community benefit reserve after staff presented updated revenue estimates and methodological changes. Council also approved modest midyear adjustments to FY 25/26.
Los Gatos — The Town Council unanimously adopted the town’s final budget for fiscal year 2026–27 on a vote that also included a new $3 million capital reserve and several adjustments to internal service transfers and year-end estimates.
Administrative Services Director Christina Alfaro presented the plan during a public hearing, saying the council should expect a $2.4 million increase in general fund expenses alongside a $3.8 million rise in transfers out. “We transferred $3 million from the general fund to create a new capital long-term community benefit fund,” Alfaro said, describing the committed reserve and several facility project commitments included in the capital program.
The presentation focused on changes since the proposed budget, including a $1.5 million reduction in internal service fund charges and an $8.8 million increase in revenue associated with transfers into the facilities internal service fund. Alfaro also described the staff’s year-end estimate methodology: rather than using only midyear payroll projections, staff applied a trend analysis and a straight-line payroll projection to improve accuracy.
Why it matters: The council will adopt the published budget in July and expects to bring final advisor reports to the Finance Commission in August, with a return to council in late August or September to review the findings. Alfaro said the revised methodology produced two scenarios: a $1.3 million surplus under the current estimate and a $4.9 million surplus under an alternate method. “Using our current year-end estimate…we assume we’ll end the year in a positive $1.3 million. Using our alternate estimate methodology, we’re assuming a $4.9 million surplus,” Alfaro said.
Council members pressed staff on the methodology. Vice Mayor Risto asked whether the alternate approach was overly optimistic; Alfaro replied the alternate approach had closely matched recent actuals and that staff expect results closer to the higher figure than the lower one.
The adopted budget includes the five-year capital improvement program and a revised approach to year-end estimates. The council also approved FY 25/26 midyear adjustments, including a projected revenue reduction tied to the postponed Tate property sale and smaller adjustments in several funds.
What comes next: The town will publish the adopted budget in July. Staff expect to present the final advisor reports to the Finance Commission in August and return to the council either the second meeting in August or the first meeting in September. The council also directed staff to continue refining year-end estimates and to report back with midyear financials in February 2027.
The council voted unanimously to adopt the resolutions approving the FY 2026–27 budget, fund commitments and FY 25/26 adjustments.
