On November 12, 2002, the Citizens’ Advisory Committee for Finance (CACF) presented our recommendations to the Los Altos School District Board. Of course, no decisions were made at that meeting. The Board will publish their timeline for making decisions around the recommendations.

At the request of the District’s Board of Trustees, the CACF undertook a study of the District’s long-term financial projections and developed a proposed six-year financial plan that assumes no increases in parcel tax revenues beyond those approved by the voters in the recent election.

To prepare our recommendations, the full committee met seven times over the last two months, including a joint study session with the Board of Trustees. We also created several sub-committees that met separately to study specific areas. And we worked closely with members of the District’s Administrative Council to understand areas that have programmatic as well as financial implications.

We started with a review of all issues impacting the District’s current and future finances. We then determined which of these have the potential to impact the District’s finances over the next six years.

STAFF TURNOVER: We looked at a series of staffing issues, including projected staff turnover, retirement rates and experience levels of new hires. Based on a survey of teachers 55 or older, we determined that the current estimate of five retirements per year is reasonable, although slightly conservative. A review of the 20-30 new teachers hired by the District each year shows that more than half are hired with only one or two years’ experience. We could save up to $120,000 per year by requiring that all new hires enter the District with no more than two years’ experience but we don’t recommend this because it would lower the overall staff quality.

STATE FUNDING: Although the District has no control over state funding levels, this is a key variable in all of our projections. We have assumed the continuation of all state funding at current levels. This is a major risk factor.

BASIC AID STATUS: We conducted a detailed analysis of the potential for the District’s becoming a Basic Aid District. Currently Los Altos is a Revenue Limit District that means the amount recouped from property taxes is capped and coupled with a fix amount from the State. Basic Aid, in contrast, allows the District to collect and keep all of the school related property taxes with no upper limits. A District must qualify for Basic Aid by generating a baseline property tax revenue amount. The CACF subcommittee looked at the possibility of the District becoming Basic Aid by including high, medium and low estimates of increases in asset valuation of properties within the District. The key variable is not the anticipated market value of homes in the District, but the anticipated turnover of the 35% of the houses in the District that are still assessed at less than $200,000. In all three cases, our analysis shows the District will become a Basic Aid District in fiscal 2004/05. The benefit to the District varies substantially depending on which growth rate we assume, however. Please refer to the table attached to this report for details of the high, medium and low cases and to the separate Basic Aid Analysis prepared by our Basic Aid Subcommittee for further details and risk analysis.

INTER-DISTRICT TRANSFERS: We also looked at the impact of inter-district transfers on Basic Aid and determined that a change in policy in this area would have no significant impact. Until the District becomes Basic Aid, it still benefits from inter-district transfers. A significant reduction in inter-district transfers might result in the District becoming Basic Aid one year earlier, but at a lower revenue level that would negatively impact the District. Once the District becomes Basic Aid, the financial impact of inter-district transfers is minimal. (Continued next page)

RENTING EXCESS SPACE: A separate subcommittee looked into the possibility of renting out unused campuses. Although the market has softened considerably in the last two years, the consultant they contacted is confident that we could easily lease out any of our campuses. He believes it would be substantially easier to rent a campus to a single tenant since there currently is little demand for renting to several small tenants as the District did with Covington. Whether or not the campus to be rented had been previously renovated would not significantly impact the rental rate. The lease term would need to be for a minimum of 20 years, although there is a possibility of negotiating an early release clause in 10-12 years if the District determines it needs to reopen the campus. For purposes of our projections, we have assumed leasing out a 20,000 sq. ft. facility (small campus) at a medium projected rate of $1.50 per sq. ft. We have assumed rental income would begin in the middle of fiscal 2003/04.

COSTS OF OPENING ANOTHER CAMPUS: We asked the District and the Administrative Council to take another look at the costs of opening another campus. They confirmed that the estimated incremental site costs of $450,000 are still valid. In addition, however, they identified an estimated $100,000 in additional District costs that would be required to support a seventh elementary campus.

RESERVES: Because of the uncertainty of the District’s revenues as discussed under Risk Factors, we believe that the state mandated minimum reserve level of 3% is inadequate. We recommend that the District adopt a policy of gradually increasing its reserves to 6% during the 6-year period of the plan.

As requested, we have prepared 6-year projections on both a six-elementary/two middle school basis and a seven-elementary/two middle school basis. We have also prepared a projection on a five-elementary/two middle school basis to put some of the programmatic tradeoffs in perspective. We also looked at the possibility of moving 6^th grade to the middle schools, but determined that this would have neither a positive nor a negative financial impact so did not pursue the option further.

GENERAL ASSUMPTIONS: As requested by the Board, all scenarios started with the District’s 2001/02 programs as a baseline. This means no future SOS (Save our Staff, a special fundraising campaign) revenues, no support from PTA’s beyond their historic levels, the reduction of LAEF (Los Altos Educational Foundation) support to a more traditional $800.000 per year, the reinstatement of all middle-school electives to previous levels, etc. Changes were then made to program levels to bring the scenarios into balance. All scenarios assume the Medium Case for Basic Aid Benefits and include a targeted reserve of approximately 6% by 2008/09.

EDUCATIONAL PROGRAMS: Each scenario results in a different educational program within the District. At our request, the Administrative Council made suggestions for each level. These suggestions are summarized on the attached exhibit.

SCENARIO A: This scenario is based on the current six-elementary/two middle school configuration. It is the same as the baseline projection presented at the study session on October 7 except that the Basic Aid Benefit has been adjusted to the Medium Case and the projected rental of one vacant campus has been added. It allows for a slight reduction in class size from the baseline – from 28 to 27 in grades 4 to 6, and provides a reserve of approximately 6% in 2008/09. Assuming school boundaries were adjusted appropriately, each elementary school campus would have approximately 500 students, which the Administrative Council believes would be a manageable size and would, in fact, offer some additional program flexibility at each site.

SCENARIO B: This scenario assumes the opening of a seventh elementary school. It assumes no rental income, $450,000 in incremental site costs, and another $100,000 in District support. It requires average annual cuts of $900,000 to the District’s educational program. The Administrative Council has suggested that these cuts could be made by increasing class sizes in grades 4-6 to 31 and increasing class sizes in grades 6-8 to 29. We were also advised that raising the average middle school class size to 29 would reduce the District’s ability to offer middle school electives. Average elementary campus size would be 430.

SCENARIO C: This scenario assumes operating only 5 elementary schools. It includes some savings in incremental site costs and the revenue from renting out an additional campus. This provides $710,000 in annual savings that would be available to increase the District’s educational program. The Administrative Council has suggested that these additional funds could be used to decrease class sizes in grades 4-6 to 24 and decrease class sizes in grades 7-8 to 23. Average elementary campus size would increase to over 600, which we were advised might become more difficult to manage without additional site staff. (Continued next page)

Following are the major risk factors to these long-range financial projections that we have identified.

STATE FUNDING: We have assumed that all state funding sources continue at current levels. Given the extraordinary budgetary pressures the state is expected to face over the next several years, there is a real possibility that some state funding will be cut. We were unable to quantify this risk, however.

BASIC AID BENEFITS: Projected Basic Aid Benefits are based on projected increases in assessed property values within the District. We believe that there is more upside than downside potential, especially over the long term. But assessed property values do not grow at constant rates, so there is a significant possibility that individual years could be significantly higher or lower than projected.

STAFF SALARIES: We did not review staff salaries and assumed that salaries plus benefits will continue to increase at the same rate as COLA (Cost of Living Adjustment). If they were to increase at higher rates, this would have a negative impact on our projections.

ENROLLMENT: As long as the District remains a Revenue Limit District, changes in enrollment will continue to have a significant impact on District revenues. Once the District becomes a Basic Aid District, the impact of changes of enrolment will be relatively minor. We do not believe there is a significant risk of changes in projected enrolment affecting when the District becomes a Basic Aid District.

If you have any questions, do not hesitate to contact any of the members listed below.

Dick Hasenpflug, Chair, Wyatt Allen, Robin Abrams, Amy Gaffney, Eric Clow, Francis La Poll, Jim Lodestro, John Farwell, Kim Graham, Lois Sangster, Lou Becker, Marge Bruno, Marge Gratiot, Mark Goines, Randy Kenyon, Roy Lave, Tim Laehy

More years ago than I care to remember my wife said that if I would take dancing lessons with her she would get up and get my breakfast. We have been avid ballroom dancers ever since then. Not only is it something we can do together, but also it is great exercise. Dances like Westcoast Swing, Cha cha, Viennese Waltz and Eastcoast Swing can be rather fast and energetic. Waltz, Foxtrot, Rumba and Tango are slower and probably more romantic.

* GH Dancers, dance lessons Monday evening (call Bill Beedle 650-839-0181)

* Practice dancing Wednesday afternoon (call Jean Thornley 650-851-8245)

* Dance Club potluck & dance (call Ruth Erickson 650-948-1385)

* Carousel Ballroom Dance Club (call Bill Beedle 650-839-0181)

Two fairly large dance clubs meet on alternate months for dinner and dancing at the Palo Alto Elks:

* Debonair Dancers (call Vergil Givens 408-867-5412)

* Mates and Dates Dance Club (call Edwina Farrington 650-493-0707)

The cost for these two dance clubs is about $50 per couple per event. Music may be a live band or a DJ. The music is very danceable with combinations of Latin, Swing, Foxtrot and Waltz. Seating is at round tables of eight.

Dancing can also be found at Sunnyvale and Los Gatos Elks Lodges. Call the lodges for information. Put on your dancing shoes and join the fun.

Some additional thoughts on a theater in downtown Los Altos.

Jonathan Baer did a good job introducing the many issues regarding a movie theater in LANN’s November newsletter. Since LANN has no official position on a theater, an article is presumed to be free of bias. However, Mr. Baer lives on Pepper Street near San Antonio Road and is understandably sensitive to potential increases in Downtown traffic and overflow parking on his side of the road. I believe a negative bias showed through in page two of his article. I have asked LANN to let me make a few supplementary comments to help balance the discussion.

I can only represent my own thoughts. It is too early for specific proposals and council decisions. I think our only decision so far is that any displaced parking due to a theater footprint would have be replaced somewhere nearby.

Why is the council considering a theater? My reason is that our General Plan states the need for more entertainment and pedestrian traffic downtown in the evenings. The reason is to help our restaurants be successful and provide more foot traffic for any retail stores that chose to stay open. There is a desire to avoid a negative spiral of store closings during recessions and a theater would continue to bring people downtown. A second reason is that many residents in the greater Los Altos area want to have something to do in their own Downtown in the evenings and on weekends.

What kind of movies would be shown and what kind of people would be attracted? There are two theater groups interested so far, Century Cinearts, and Camera Cinema. I’ll suggest one example for each. Palo Alto Square is run by Cineart, has two screens with a total of 750 seats. The Los Gatos Theater is run by Camera Cinema and also has two screens. Both theaters open around 5 PM on weekdays and noon on weekends and have done so for

many years. Go to a movie and you will see your neighbors and people just like them. Independently produced films today, including selected foreign films, draw audiences that fit our Los Altos area. While thoughtful young people appreciate many of the movies shown in these theaters, the movies are not designed to attract them.

How will a theater fit into our Village Atmosphere? We had one on Main Street with about 500 seats so it is historically appropriate. But one or two screens that change movies every six weeks would not serve our needs and would require a wide regional draw to survive. The main complaint about the Los Gatos Theater by city residents is this issue of variety. The question is how to have a compact and tasteful 6-screen theater with about 750 seats total that will not displace many parking stalls. Using 16,000 square feet with half of the theaters underground would provide a compact footprint displacing about 24 parking spaces. Such designs have been successful and should be considered.

Why should a theater be given any economic breaks? Any entertainment that would fit our Village atmosphere with a local draw cannot compete with retail and office markets. The Bus Barn live theater is an example. But we can get a theater built and operated without using tax money and we can presumably negotiate a profit share land lease. I would propose that any such revenue be dedicated for parking and/or funding Downtown improvements and maintenance.

We cannot at this time be assured that a viable plan will emerge, but I am hoping for a constructive dialog with all residents, including those who live nearby, and with business and property owners to optimize our chance for a consensus. I hope we can avoid becoming emotionally polarized before we even begin.

When Debbie Torok and Claudia Hevel agreed to join the Measure A parcel tax campaign last January, they had no idea what they had committed themselves to do. But they knew the passage of Measure A was vital if our children were to continue to receive the excellent education we have come to expect in Los Altos. So they rolled up their sleeves and got to work organizing the hundreds of volunteers needed to pass a school tax by the required two-thirds margin.

After the heartbreaking loss of Measure A by only 159 votes, Debbie and Claudia didn’t give up. They were active in the SOS campaign that raised $1.5 million to save many of the district’s excellent teachers from being laid of. As soon as SOS was completed, they rolled up their sleeves again and started back to work on Measure H, the tax increase that eventually passed on November 5 by a resounding margin of 70.6%. With the help of Katie Matice, they put together the extraordinary team of dedicated, hard working volunteers who made the passage of Measure H possible.

Debbie and Claudia have dedicated the last 10 months to making sure we in Los Altos will continue to enjoy excellent schools. Their hard work will benefit many future generations of children in our community and for that we owe them a debt of gratitude.

This month marks the first time that we have included the actual square footage planned for each new home as well as the square footage planned for new additions to existing homes. Listed here are three applications for new two-story homes, one planned two-story addition to an existing home, a single-story home on a flag lot, two setback variance applications, and a request to subdivide a lot

The City of Los Altos has recently been awarded four grants for pedestrian / bicycle improvement projects. The grants include:

Two grants from the Valley Transportation Authority (VTA) for two separate projects:

* Hetch Hetchy Pathway from Los Altos Avenue to El Camino Real

Two grants for pedestrian/bicycle improvements on El Monte Road at South Clark:

* A Transportation Fund for Clean Air grant for $40,000

* A Safe Routes to School grant for $270,000

LANN Candidates

The LANN candidate subcommittee is on a roll! We have identified many possible candidates for next year's city council and school board elections as well as our own board. Although we have not contacted all of them yet, Los Altos is a unique community in that so many care so much and are willing to, at least, consider stepping up to fill important elected positions in our town.

If you know an extraordinary resident who you think LANN should contact about possibly running for school board, city council or consideration on the LANN board call or email us, we'll do the rest! 949-5560 or lannonline@aol.com