This month’s subject is easily identified: the appearance of orange netting on the North 40 site, an event that has triggered many opinions and much passion by the public. My intent here is to provide background information so that individuals will better understand what is happening at this time.

The property commonly referred to as the “North 40” is generally bordered by Lark Avenue, Los Gatos Boulevard, Highway 17 and Highway 85. The Yuki family acquired the land in the 1940s, and it has historically been a walnut orchard that included some residential and commercial uses. In approximately 2010, Grosvenor USA and the Yukis began discussing the sale and development of the property.

Between that time and June of 2015, the Town of Los Gatos engaged in a process to prepare a Specific Plan governing the development of that property. A North 40 Specific Plan Advisory Committee was formed consisting of representatives of the Town Council, Planning Commission, Town residents, and business and property owners. The meetings were held over a 2-½ year period.

Before submitting their input to the Town Council, the Planning Commission held hearings on the North 40 Specific Plan. In June, 2015, the Plan was adopted by the Council in a 3-2 vote. It is important to note that only a plan for the entire 40 acres was approved, and did not include approval for any specific development.

Recently, Grosvenor USA has come forward with a development application for 20 acres in the southern portion of the 40-acre parcel. The multistory proposal includes homes, restaurants and other commercial uses. The orange netting is constructed on that part of the property being considered for development, not the entire 40 acres, and is required by the Town to give notice of the project and its mass.

Going forward, the Grosvenor application must ultimately be heard by the Planning Commission and approved by the Town Council. Such an approval will require findings of the project’s consistency with the North 40 Specific Plan. All meetings are noticed and open to the public. Interested parties are encouraged to review the Specific Plan by clicking here: North 40 Specific Planor at Town Hall, 110 E.Main Street.

On November 8th, the United States will be electing its next President. On that same date, the Valley Transportation Authority (VTA) may also be asking residents of Santa Clara County to support a ½ cent sales tax increase to fund transportation measures. If approved, that measure would be expected to raise more than $6 billion over 30 years. It would also raise the sales tax in Los Gatos from 8-¾ to 9-¼ cents, which would be ¼ cent less than the maximum allowable under State law.

Working with regional organizations, the VTA has been exploring this tax measure for the past several years, conducting both meetings and polling. During that time frame, many cities in our County have expressed concern about the proposed sales tax increase because monies from past VTA measures have disproportionately been used to fund BART to San Jose. As a result, those city officials are requesting that the new VTA measure include allocations for specific local projects. Palo Alto, for example, has been advocating for Caltrain and for grade separations that could cost in excess of $1 billion of the amount raised.

I attended my first North County/West Valley Mayors’ meeting in January 2016 to discuss the transportation tax measure. At that time, I was presented with a proposed allocation that could contain some potential benefits for our Town such as pro rata funding for street maintenance and pot hole repair. However, considering that Los Gatos would be paying additional sales taxes for 30 years, I have been working with staff and council members to include, in the tax measure’s allocation, items directly beneficial to our Town. Those additional funds, for example, could be used for a school busing system, a corporate Park-and-Ride lot, on demand VTA “Flex” shuttles using a mobile app, traffic signal upgrades and the Vasona Light Rail extension.

It will be the VTA board that decides if the tax measure will be placed on the November ballot and which projects will be funded. That board is comprised of 12 members, including 5 who represent the City of San Jose, and 2 representing the County of Santa Clara.

It will, however, ultimately be the voters of Santa Clara County who by a 67% vote must decide whether or not to approve VTA’s proposed sales tax measure.



Unfunded Liabilities

You may have heard and read about them. But what are they? And what should you know?

By state law, Los Gatos employees are entitled to a pension administered by CalPERS (California Public Employees Retirement System), the nation’s largest public pension fund. Under this law, many towns and cities are required to contribute to CalPERS, which in turn provides benefits to public employees after retirement.

Historically, CalPERS has used these funds to invest in stocks, bonds and other commodities, and assumed a 7.5% return-on-investment. However, there were times, such as during the Great Recession that ended in 2009, when CalPERS did not achieve its anticipated return. As a result, Los Gatos and other municipalities were required under state law to make up the difference out of their annual operating budgets.

Because these unfunded liabilities can be substantial, the State of California does not require that the shortfall be paid into CalPERS all at once. Los Gatos, for example, currently has an operating budget of $37 M and unfunded pension liabilities of $34 M, making it impractical to rapidly eliminate the debt.

However, the state’s pay-over-time plan comes with an interest assessment on the amount owed of 7.5% per year. Additionally, government entities are mandated under state law (code sections 53600-53610) to safeguard principal and conservatively invest any surplus funds. Because of low interest rates, recent return-on-investments for Los Gatos and other municipalities has been in the range of 1%.

Los Gatos is fiscally responsible in budgeting and spending, and has always met its mandated CalPERS payments. In fact because of the disparity between the interest payments required by CalPERS (7.5%) and interest the Town earns (1% or less), the Council is considering the use of surplus funds to pay down the principal more quickly. Additionally, in renegotiated union contracts, employee contribution toward their benefit packages has increased.

The good news is that Council and staff understand the issue and are working on an effective way to reduce the unfunded liabilities,without impacting Town services and the quality-of-life residents and businesses have come to expect.


By Right Development

This past June, as a condition of approving our legislature’s state budget, Governor Jerry Brown wanted to expand “By Right” housing development. For the Town of Los Gatos, this would mean no public consideration of “By Right” housing projects by the Planning Commission, Town Council, or community. Instead, such applications would be approved administratively by the Town’s planning staff.

The Mayors of Campbell, Cupertino, Los Gatos, Monte Sereno and Saratoga submitted a joint letter in opposition to this proposal because local opportunities for public involvement, in addition to environmental and design reviews, would be eliminated.

The idea behind Governor Brown’s proposal is to expedite the development process, reduce developer costs, and thereby create affordable housing. Conceptually, more housing, including affordable units, would be constructed. However, since only 10% – 20% of a project would be required to consist of affordable housing, as many as 90% of those homes would remain market priced units. Yet all would be developed without community input.

Although Governor Brown’s “By Right” development has not been enacted, local jurisdictions must still comply with the State’s existing “Density Bonus Law.” This law mandates that a density bonus of 35% shall be given to a developer, provided that a certain percentage of affordable units (i.e., 11%) be included in the project.

In contrast to the expanded “By Right” development proposal, local jurisdictions and the public currently have the right to provide input on the underlying project at public meetings.

But that may soon change. Assemblyman Evan Low, who represents Los Gatos, has co-authored AB 2501. This bill would modify State law by limiting the time frame within which a city must act on a density bonus and by reducing the opportunities for public input.

Los Gatos has always used its review process to seamlessly integrate affordable and market rate units within the Town. In 1979, Los Gatos was one of the first municipalities to require Below Market Price (BMP) units in every development with 5 or more homes. As these developments moved through the public process, the BMP units have been designed to comply with the guidelines of market rate units. Likewise, our community character has also been maintained in the numerous secondary units (such as garage and carriage house conversions) that were officially recognized as legitimate housing by our Town in 1983.

“By Right” and other proponents of expedited development have argued that it is costly, frustrating and time consuming for developers to address concerns about traffic, parking and other impacts. By contrast, community members argue that they deserve a voice in the development process, and that the elimination of their input can only lead to a distrust of government and a further erosion of public transparency.


Beach Traffic

“Close the Santa Cruz Avenue access to Highway 17 every weekend!”

“Only close it on Saturdays, not Sundays.”

“Closing access is hurting our business.”

“Beach traffic is causing us to lose business.”

“We live in the Santa Cruz Mountains and need the on ramp open to return to our homes from town.”

“Block access to Tait and Massol from Highway 9.”

“Don’t block it.”

The input from the community has been intense and conflicting. No one is “right” or “wrong,” and the Town Council must balance staff and community input against applicable state and local laws.

Los Gatos does not have absolute jurisdiction over on-ramp and street closures: Highways 9 and 17 are under the control of the State of California through Caltrans. However, State Vehicle Code 21101(f) has provisions for temporary closures to implement the Transportation Element of our General Plan. One of the provisions of that General Plan allows Los Gatos to work with the State to develop effective ways to reduce regionally generated Highway 17 congestion and cross-town traffic.

During recent summer weekends, the town has been collecting information relating to vehicle counts and travel times between various locations in Los Gatos, both with and without closures. Caltrans considers the closures of on ramps, even temporary and partial, significant. Fortunately, however, the State has been cooperating with the town’s data-gathering efforts. This information will help the town to develop a long-term Traffic Management Plan.

Staff and council understand that when the data-gathering period ends after Labor Day, Los Gatos must undertake the difficult job of addressing next season’s cut-through beach traffic in a manner acceptable to Caltrans, state law and our General Plan. This is a complex task due to our burgeoning regional population, hot weather and traffic mapping applications–none of which is controlled by our town.

What form traffic mitigation measures might take in the future is not now known. What is known is that the 8-month time frame between Labor Day and the return of beach traffic in May is a relatively short period in which to address this complex and controversial issue. As a result, town council and staff will be using this time to find the best possible solution for our residents, businesses and visitors.


The North 40 What’s Next?

On September 1, 2016, by a 3-2 vote, the Los Gatos Town Council denied the North 40 application, the largest development proposal in the history of the town. Mayor Barbara Spector, Vice-Mayor Marico Sayoc, and Councilman Steve Leonardis voted to reject the project, while Council Members Marcia Jensen and Rob Rennie voted to approve it.

In making their decision, the council majority expressed concern that the application’s 49 affordable senior units above a market hall, with all other units to be sold at market rate, did not address Los Gatos’ unmet need for affordable housing.

So what happens next? The answer to this question is neither simple nor straightforward.

  • The Yuki family, the largest property holder in the North 40, has several options: The Yukis may continue to work with the Grosvenor Developers (Grosvenor, Eden Housing, Summerhill Homes) and submit a different application; they may select another developer; they may decide not to improve their property at this time; they may sell all or part of their ownership interest.
  • The Grosvenor Developers may follow through on their threat to file a lawsuit against the town. Litigation can be a lengthy process that will create uncertainty both as to its outcome and as to the timing of any future development.
  • The town may, or may not, choose to amend the current North 40 Specific Plan. Any modification would require public hearings before the planning commission and the council. Any future application would be required to comply with the Specific Plan in effect at the time.

There is much uncertainty surrounding the future of the North 40. What is certain, however, is that the process in which the town has been engaged was a learning experience that can provide future direction for all involved.