# Los Gatos introduces new budget calculations, predicts a healthy surplus > Source: > Published: 2026-06-24 14:02:04+00:00 **Getting your** [Trinity Audio](//trinityaudio.ai)player ready...The Town of Los Gatos employed new methods of balancing the budget, leading to a significant surplus and the ability to move money around to increase grants for nonprofits serving the area. [In February](https://www.mercurynews.com/2026/02/13/los-gatoss-projected-budget-deficit-is-now-a-surplus/), town manager Chris Constantin informed the council that a projected deficit of $3.1 million was anticipated to become a surplus of $4.3 million due to a combination of savings from staffing vacancies, high interest earnings and deferred maintenance. On June 2, administrative services director Kristina Alfaro announced that the town was able to balance its budget without the use of reserved funds and will potentially end the fiscal year with a surplus of $1.3 million to $4.9 million. In her presentation to the council, Alfaro said general fund expenses had increased by $2.4 million. Around $134,000 of that was due to increased contract costs for parks and public works maintenance. However, the expenses were impacted by moving about $1.5 million from the general fund to the Internal Service Fund to save on internal vehicle and equipment costs. The largest expense was a $3 million transfer out of the town’s capital fund to create a new Long-Term Community Benefit reserve fund to be used for future community capital projects. Without the transfer, the town had initially planned for a small surplus of around $6,500. Alfaro also reported a $3.4 million drop in revenue. She explained that property taxes were down by $200,000 and sales taxes were down $300,000. However, the major hit for revenue was a delay in the receiving payment for the sale of the firehouse at [4 Tait Ave.](https://www.mercurynews.com/2026/02/03/know-your-rights-training-to-be-held-in-los-gatos-on-feb-7/), which will not come in until next fiscal year. Additionally, the town maximized the use of revenue from Measure G, a one-eighth cent sales tax passed by voters in 2018, and funneled any leftovers from past capital projects for the Shannon Road Repair Project so that the project could continue to be funded without additional resources. Town staff also identified balances that could be carried over into the new year. The town council voted in January 2025 to set aside [$1 million for emergency management](https://www.mercurynews.com/2025/01/22/los-gatos-directs-1-million-for-emergency-management-in-wake-of-southern-california-fires/), but around $850,000 still remains in the account, so it was rolled over to fund the next fiscal year’s emergency budget. The town also has around $18 million in previously approved funding for ongoing capital infrastructure projects, so that balance was carried over as well. While Los Gatos has traditionally planned its budget based on the worst-case scenario, Alfaro and town staff examined how money was actually spent in the current fiscal year up until March 31. The town had initially expected a 4.6% savings due to anticipated employment vacancies, but that didn’t quite happen because some departments kept positions fully staffed. However, Alfaro explained that by finding the actual cost of the town’s payroll up until March 31, calculating the average cost per pay period and multiplying that by the number of paychecks left in the fiscal year, they found that the town could save $2.6 million on salaries and benefits. Knowing that municipalities don’t typically spend their entire budgets by March, Alfaro said she and town staff analyzed the town’s historical spending patterns and came up with a new tracking method that calculated last year’s expenditures with 99% accuracy. Alfaro said the new method revealed an additional $1 million in savings on operational expenses. Despite this, the staff report from the meeting expressed a pessimistic financial outlook for the town. The report acknowledged that the general fund budget is balanced through planned use of reserves, but added that expenses will continue to outpace revenues. “As the town continues its efforts to address this structural deficit, it must be mindful that it cannot continue to support the current level of operational investment without either identifying new ongoing revenue sources or reducing programs and services to bring expenditures in line with recurring revenues,” stated the staff report.