One West Valley town may have to brace for some rocky years as it faces multimillion-dollar shortfalls.
Los Gatos could be looking at an estimated $5.6 million deficit for fiscal year 2025-26, a significant number for a town with a roughly $60 million budget for the current fiscal year. The shortfall is largely due to anticipated revenue not keeping pace with rising costs and inflation, according to the town’s mid-year fiscal report and five-year forecast released last month.
The forecast predicts deficits will persist in the coming years, ranging from an estimated $7.2 million in fiscal year 2026-27 to $8 million by fiscal year 2030-31. The mid-year report suggests the town control expenses and use one-time funds to cover the gap in the short term, but that won’t solve the potential five-year deficit.
Los Gatos relies on its property tax and car licensing fees, along with sales tax, for more than half of its general fund. Property tax and fee revenues are projected to climb to $29.8 million by fiscal year 2029-30, or 15% from fiscal year 2025-26. Sales tax revenue is anticipated to hit just under $7 million, or jump 7% over the same time period. Even with the tax revenue increase, the report states the town needs to better pair its proceeds with its services and expenditure needs.
Mayor Matthew Hudes said while the projected numbers shouldn’t be taken lightly, he’s not seriously concerned about the town’s financial future. He said in the five years he’s been on the Town Council, the five-year fiscal projections have mostly been lower than the town’s actual revenue. Town Manager Chris Constantin requested an analysis of the town’s finances to determine the accuracy of the projections.
“The town is very well managed financially, and the council and the town manager and staff are engaged in understanding the potential causes and the ideas to work on solutions that could mitigate any potential deficits,” Hudes told San José Spotlight.
Some residents are concerned about the effects of the potential shortfalls in a town where officials have balanced the budget for years. The last time Los Gatos experienced a deficit was in fiscal year 2019-20, when there was a $1.5 million shortfall.
Kathy Mlinarich, executive director of the Live Oak Senior Nutrition Center, said she’s worried about the town’s ability to fund grants the program relies on. Live Oak provides free and reduced-price lunches to nearly 100 older adults Monday through Friday, along with free groceries. The town council supported the program with $48,000 in grants last year.
Mlinarch said the nutrition program will be detrimentally affected if the community grant program is deprioritized in budget discussions due to the deficits. She said Hudes could advocate for the program as a staunch supporter.
“What will happen if they have to cancel those grants for us is we’re going to have to turn seniors away, right?” Mlinarich told San José Spotlight. “And that’s just really devastating, especially in this economy with all the inflation and cost of food.”
Steve Hall, a member of the homeless hotel program core team with St. Vincent de Paul’s at St. Mary of the Immaculate Conception, is less concerned. The program provides overnight stays in local hotels to homeless residents during rainy and cold weather and periods of unhealthy air quality.
Hall said the program receives some town funding, but also relies heavily on donations from the faith community. He trusts the town to allocate money thoughtfully.
“The way I look at it is that we all work together to figure out how we close the gap, or how do we cut down on what we do? Are there better ways of doing it?” he told San José Spotlight. “The best we can do is doing what we do very well and under budget because we’re responsible.”
The draft budget for fiscal year 2025-26 will be available on April 22, with town council deliberation slated for May 21.
Contact Annalise Freimarck at [email protected] or follow @annalise_ellen on X.
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