In July of 2016, several of us got together to discuss the town’s budget; something we were viewing with alarm but could not understand why the town did not seem to be taking aggressive steps to resolve. Since starting these meetings, five of us have put in between 300 to 500 hours each meeting with council, staff, etc. , while learning the complicated nature of government accounting.
The town has had a financial committee made up of two town council people who met once to at best 2x per year until we became more interested in the process. The council are all smart people in their own worlds, but none have financial backgrounds and yet they are charged with approving the Comprehensive Annual Financial Report and making many complicated decisions that may affect the financial well being of the town.
Once we dug in, we immediately found errors and questioned the current method of doing business. Two of us have been a CFO and/or CEO of a public company; two have run small businesses as CEO’s and one has been in large company sales and marketing executive positions.
The largest challenge facing the town are the unfunded pension liabilities and the costs of keeping up the infrastructure. Pensions are a monumental problem with almost all towns and cities in California, as well as many cities across the United States. Several have already filed bankruptcy, and if they don’t change the way they’re doing business, many more will likely file in the future.
On 1/31/2017 at the Town Council meeting, our citizens committee proposed a change from the existing Financial Committee model of two council members to now include three citizens with strong financial credentials. The council, in a very bold move, agreed that a change to the old way of doing business and agree to move into the future of town financial management. We are not the only town to do this, but one of the few that do.
We are now looking for volunteers to join this committee to help resolve the pension liability, and create a better financial model for our future. Below is a shortened version of my speech to the council on 1/31/17 which briefly outlines the request, the need and the next steps as we develop this committee. If you are interested, and feel qualified, please contact me at firstname.lastname@example.org. The Council will make the final decisions as to who is on this committee in the very near future. One of our group, a CFO level for a public company, is applying for this committee. We need two more. Though there are many issues in running a town with limited revenues, we have only addressed the pension and the infrastructure costs as we feel they are critical to resolving the other problems within Los Gatos.
To Provide additional resources to assist Council and Staff to identify and evaluate options to:
- Pay down the Town’s significant post-employment liabilities related to Los Gatos Police and Administrative Employees currently standing at $45,902,305. Annual interest costs are $11,316,000 for the fiscal year ending 2016; money that could be spent on infrastructure, traffic solutions, etc. !
- Fund infrastructure to maintain community quality and character, currently in the $20 Million range just for streets to get up to recommended levels.
- Provide recommendations which may broaden the charter and responsibilities of the current Finance Committee
We asked the Council to appoint 3 Town resident volunteers with executive level financial and problem solving experience to work with the Council Finance Committee and Staff to achieve this vision. We believe this needs to be accomplished well before the finalization of the budget; ideally by April 1st in time for some recommendations to be in place. The Council approved forming this Committee with 100% consensus.
We believe this is critical now before the Pension Liabilities overwhelm all other community needs should we defer addressing them in the upcoming budget cycle. The Town’s infrastructure requirements are a quality of life metric for our community. The sooner we begin to address these funding needs, the less costly the solutions will be.
- If the new FC is approved, we would recommend recruitment of the citizen volunteers at the Council’s earliest convenience.
- Next, the Finance Committee, Staff and the public could get the ball rolling by setting more frequent meetings. The citizens, if not an ad hoc committee, could meet more freely, cost the town nothing and bring assigned work to the FC and Staff to review in publicly scheduled meetings.
The Finance Committee, staff and the citizens committee, would be charged with developing the following:
During the Formation Phase (now until April 1)
- Recommend a Charter that establishes the following for the immediate term:
- Help establish the Roles of Council, Staff and the non-voting citizen members
- Assess the town’s current position on Pension Debt, Infrastructure and other costs.
- Prioritize the issues as we see them currently.
- Help to develop goals and time lines with the new Finance Committee and Staff
- Commence an exploration of options associated with paying down debt, financing the infrastructure and other debt issues that need to be addressed.
Following the Formation process and the election of the 3 citizens, the Finance Committee and staff would move forward with the newly elected citizens to solve problems that not only afflicts Los Gatos, but most cities in the United States. We aren’t the only city or town who are recognizing these problems, but we’re early in the process.
As I have said, this is a very bold move for the Town Council, and the pressure to produce viable solutions will be ours.