The Docket · Government Meeting · DKT-2026-000774

On the agenda: Los Gatos meeting — license plate recognition (Dec 7)

Past ⚠ Agenda Watch Los Gatos, California · Monday, December 7, 2020 — 6 years ago

About this record

The published agenda for this December 7 meeting contains: "license plate recognition". The meeting has passed; the record and its outcome live here permanently.

WhenMonday, December 7, 2020
Check the agenda document for the meeting time.

WhereLos Gatos, California

Money$59,981,525 was at stake

On the record“license plate recognition”

The agenda, word for word

Government public record — the full text of the published document, archived September 7, 2026. Gold highlighting of key terms is ours, not the original’s. Read the original document ↗

229 pages · scroll to read

Page 1 of 229

TOWN OF LOS GATOS
COUNCIL FINANCE COMMITTEE AGENDA
DECEMBER 07, 2020
110 EAST MAIN STREET
LOS GATOS, CA
5:00 PM
Marcia Jensen, Mayor
Barbara Spector, Vice Mayor
Ron Dickel, Committee Member
Terry Duryea, Committee Member
Rick Tinsley, Committee Member

IMPORTANT NOTICE REGARDING THE DECEMBER 7, 2020
COUNCIL FINANCE COMMITTEE MEETING
This meeting is being conducted utilizing teleconferencing and electronic means consistent with State of
California Executive Order N-29- 20 dated March 17, 2020, regarding the COVID- 19 pandemic. The live
stream of the meeting may be viewed on television and/or online at
www.losgatosca.gov/AgendasAndVideos. In accordance with Executive Order N-29- 20, the public may
only view the meeting on television and/or online and not in the Council Chamber.
PARTICIPATION
If you are not interested in providing oral comments real-time during the meeting, you can view the live
stream of the meeting on television (Comcast Channel 15) and/or online at
https://www.youtube.com/channel/UCFh35XRBWer1DPx-F7vvhcg.
If you are interested in providing oral comments real-time during the meeting, you must join the Zoom
webinar in one of the following ways:
 Join from a PC, Mac, iPad, iPhone or Android device: click this link https://losgatoscagov.zoom.us/j/83700938045. Password: 009352. You can also type in 83700938045 on the
“Join a Meeting” page on the Zoom website at https://zoom.us/join.
 Join by telephone: Dial: USA 636 651 0008 US Toll or USA 877 336 1839 US Toll-free.
Conference code: 986172
During the meeting:
 When the Chair announces the item for which you wish to speak, click the “raise hand” feature in
Zoom. If you are participating by phone on the Zoom app, press *9 on your telephone keypad to
raise your hand. If you are participating by calling in, press #2 on your telephone keypad to raise
your hand.
 When called to speak, please limit your comments to three (3) minutes, or such other time as the
Chair may decide, consistent with the time limit for speakers at a Committee meeting.
If you are unable to participate in real-time, you may email to [email protected] with the
subject line “Public Comment Item #__ ” (insert the item number relevant to your comment) or “Verbal
Communications – Non Agenda Item.” Comments will be reviewed and distributed before the meeting if
received by 3:00 p.m. on the day of the meeting. All comments received will become part of the record.
The Chair has the option to modify this action on items based on comments received.

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Page 2 of 229

REMOTE LOCATION PARTICIPANTS
The following Committee Members are listed to permit them to appear electronically or
telephonically at the Council Finance Committee meeting: COUNCIL MEMBER ROB RENNIE,
COUNCIL MEMBER MARICO SAYOC, COMMISSIONER RON DICKEL, COMMISSIONER TERRY
DURYEA, COMMISSIONER RICK TINSLEY. All votes during the teleconferencing session will be
conducted by roll call vote. All votes during the teleconferencing session will be conducted by
roll call vote.
MEETING CALLED TO ORDER
ROLL CALL
CONSENT ITEMS (Items appearing on the Consent Items are considered routine and may be
approved by one motion. Any member of the Council or public may request to have an item
removed from the Consent Items for comment and action. A member of the public may request
to pull an item from Consent by following the Participation Instructions contained on Page 2 of
this agenda. If an item is pulled, the Mayor has the sole discretion to determine when the item
will be heard. Unless there are separate discussions and/or actions requested by Council, staff,
or a member of the public, it is requested that items under the Consent Items be acted on
simultaneously.)
1.
2.
3.
4.

Approve Minutes of the August 10, 2020 Council Finance Committee.
Approve Minutes of the October 12, 2020 Council Finance Committee.
Receive the First Quarter Investment Report (July through September 2020) for Fiscal
Year 2020/21.
Receive Information on the Implementation of the Town Finance Commission.

VERBAL COMMUNICATIONS (Members of the public are welcome to address the Committee on
any matter that is not listed on the agenda consistent with the Participation Instructions
contained on Page 2 of this agenda. To ensure all agenda items are heard and unless additional
time is authorized by the Chair, this portion of the agenda is limited to 30 minutes and no more
than three (3) minutes per speaker. In the event additional speakers were not able to be heard
during the initial Verbal Communications portion of the agenda, an additional Verbal
Communications will be opened prior to adjournment.)
OTHER BUSINESS (Up to three minutes may be allotted to each speaker on any of the following
items consistent with the Participation Instructions contained on Page 2 of this agenda.)
5.

Discuss and Provide Comments to the Town Council Regarding the Draft Comprehensive
Annual Financial Report for the Fiscal Year Ended June 30, 2020.

ADJOURNMENT

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Page 3 of 229

TOWN OF LOS GATOS
COUNCIL FINANCE COMMITTEE

MEETING DATE: 12/7/2020

AGENDA REPORT

ITEM NO: 1

DRAFT
Minutes of the Council Finance Committee Meeting
August 10, 2020
The Council Finance Committee of the Town of Los Gatos conducted a meeting via
teleconference via COVID-19 Shelter in Place Guidelines on Monday, August 10, 2020, at 5:00
p.m.
MEETING CALLED TO ORDER AT 5:00 P.M.
ROLL CALL
Present: Council Members Rob Rennie and Marico Sayoc, and Committee Members Ron Dickel,
Terry Duryea, and Rick Tinsley.
Absent: None
Staff Present: Town Manager Laurel Prevetti, Town Attorney Rob Schultz, Assistant Town
Manager Arn Andrews, Finance Director Stephen Conway, and Finance and Budget Manager
Gitta Ungvari.
CONSENT ITEMS (TO BE ACTED UPON BY A SINGLE MOTION)
1. Approve Council Finance Committee Meeting Draft Minutes of June 8, 2020.
2. Receive Final Account Summary Reports for the Town of Los Gatos PARS IRS Section 115
Pension Trust for the Periods Ending November 30, 2019 through June 30, 2020.
3. Receive Market Value Summary Quarterly Reports for the Period Ending December 31,
2019, the Period Ending March 31, 2020, and the June 30, 2020, Performance Report for the
California Employers’ Retiree Benefit Trust (CERBT).
4. Receive the Town of Los Gatos Retiree Healthcare Plan June 30, 2019 Actuarial and its
Assumptions as Prepared by Bartel Associates, LLC., and Approved by the Pension/OPEB
Oversight Committee.
Items #1 and #4 were pulled by members of the Committee.
MOTION: Motion by Council Member Rob Rennie to approve Items 2 and 3 on the Consent
Calendar. Seconded by Council Member Marico Sayoc.
VOTE: Motion passed unanimously.

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110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov

Page 4 of 229

PAGE 2 OF 3
SUBJECT: Draft Minutes of the Council Finance Committee Meeting of August 10, 2020
DATE:
December 7, 2020
Pulled Consent Item #1
1. Approve Council Finance Committee Meeting Draft Minutes of June 8, 2020.
Committee Member Duryea suggested language for the summary of item 3.
MOTION: Motion by Council Member Rob Rennie to approve the June Minutes by replacing
the language for item 3 per Committee Member Duryea as follows: “After
discussion by all, nonvoting members wondered why this item was put on the
agenda since it did not appear feasible to reach a compromise with the ballot
initiative authors. In addition, there was not sufficient time remaining in meeting to
have a meaningful discussion of the topic since the meeting had a hard
stop. Therefore, the discussion ended.” Seconded by Council Member Marico
Sayoc.
VOTE: Motion passed unanimously.
Pulled Consent Item #4
4. Receive the Town of Los Gatos Retiree Healthcare Plan June 30, 2019 Actuarial and its
Assumptions as Prepared by Bartel Associates, LLC., and Approved by the Pension/OPEB
Oversight Committee.
Committee members noted that the report was not available for the Committee and the public
in a timely manner and that the discount rate used in the assumptions is optimistic. In addition,
Committee members noted that there was a numerical error on page E-19 and E-20 of the
exhibit. Staff confirmed that it is in the purview of the Finance Committee to recommend a
different asset allocation strategy for the OPEB Trust which in turn would require the lowering
of the discount rate for actuarial reporting purposes. Committee members confirmed that they
do not want to recommend changes to the current asset allocation strategy. In addition,
Committee members commented that OPEB is not a legally required benefit.
MOTION: Motion by Council Member Rob Rennie to receive the Town of Los Gatos Retiree
Healthcare Plan June 30, 2019 Actuarial and Assumptions as Prepared by Bartel
Associates, LLC. Seconded by Council Member Marico Sayoc.
VOTE: Motion passed unanimously.

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PAGE 3 OF 3
SUBJECT: Draft Minutes of the Council Finance Committee Meeting of August 10, 2020
DATE:
December 7, 2020
VERBAL COMMUNICATIONS
Matthew Hudes
- Commented on the talent of the Finance Committee and recommended that the
Committee should be used more broadly in an advisory capacity for Town Council, and
items should be discussed by the Finance Committee before they are discussed by the
Pension/OPEB Oversight Committee.
OTHER BUSINESS
5. Input to the Annual Financial Audit (FY 19/20) Currently Being Performed by the Town’s
Independent Auditors, Badawi & Associates.
Mr. Badawi, the Town’s independent auditor, presented slides describing the audit process.
Committee members discussed the information with staff and Mr. Badawi. The Committee
provided comments on preparation of the Draft CAFR, emphasizing the importance of the
pension discount rate and the sensitivity analysis around changes in the discount rate.
Committee members emphasized the importance of including additional information within the
Pension Footnote and not using CalPERS language.
Opened Public Comment.
Phil Koen
- Commented that it is the management’s responsibility to support to determine whether the
CalPERS assumption are a reasonable result of the fair representation of the Financial
Statements and disclose it in the Footnote.
Closed Public Comment.
ADJOURNMENT:
The meeting adjourned at 6:38 p.m.

This is to certify that the foregoing is a true
and correct copy of the minutes of the
August 10, 2020 meeting as approved by the
Council Finance Committee.

Gitta Ungvari, Finance and Budget Manager

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TOWN OF LOS GATOS
COUNCIL FINANCE COMMITTEE

MEETING DATE: 12/7/2020

AGENDA REPORT

ITEM NO: 2

DRAFT
Minutes of the Council Finance Committee Meeting
October 12, 2020
The Council Finance Committee of the Town of Los Gatos conducted a meeting via
teleconference via COVID-10 Shelter in Place Guidelines on Monday, October 12, 2020, at 5:00
p.m.
MEETING CALLED TO ORDER AT 5:01 P.M.
ROLL CALL
Present: Council Members Rob Rennie and Marico Sayoc, and Committee Members Ron Dickel,
Terry Duryea, and Rick Tinsley. (All participating remotely.)
Absent: None
Staff Present: Town Manager Laurel Prevetti, Town Attorney Rob Schultz, Assistant Town
Manager Arn Andrews, Finance Director Stephen Conway, and Finance and Budget Manager
Gitta Ungvari.
CONSENT ITEM (TO BE ACTED UPON BY A SINGLE MOTION)
1. Approve Council Finance Committee Meeting Draft Minutes of August 10, 2020.
Items #1 was pulled members of the Committee and by a member of the public.
Committee members discussed the item.
Opened Public Comment.
Phil Koen
- Commented that item 5 of the August minutes should reflect his public comment that it is
the management’s responsibility to determine whether the CalPERS assumptions are a
reasonable result of the fair representation of the Financial Statements and disclose it in the
Footnote.
Closed Public Comment.
Committee Member Tinsley suggested modifying the minutes to include Mr. Koen’s comment.

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110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov

Page 7 of 229

PAGE 2 OF 3
SUBJECT: Draft Minutes of the Council Finance Committee Meeting of October 12, 2020
DATE:
December 7, 2020
Consent Item #1 – continued
MOTION: Motion by Council Member Marico Sayoc to bring back the August Minutes for
approval to the next Finance Committee meeting incorporating the suggestion of
Committee Member Rick Tinsley. Seconded by Council Member Rob Rennie.
VOTE: Motion passed unanimously.
VERBAL COMMUNICATIONS
None.
OTHER BUSINESS
5.

Review the Town’s Operating Portfolio Investment Policy and Forward a
Recommendation of Approval to the Town Council.

Arn Andrew presented the staff report. Committee members discussed the item and staff
addressed Committee member questions.
Opened Public Comment.
None
Closed Public Comment.
The Committee discussed the item.
MOTION: Motion by Council Member Rob Rennie recommending that the Council approve
the update to the Investment Policy with modifications that the Quarterly
Investment Report should include the Town’s portfolio Environmental, Social and
Governance (ESG) ratings and should be presented to the Council Finance
Committee. Seconded by Council Member Marico Sayoc.
VOTE:

Page 7

Motion passed unanimously.

Page 8 of 229

PAGE 3 OF 3
SUBJECT: Draft Minutes of the Council Finance Committee Meeting of October 12, 2020
DATE:
December 7, 2020
ADJOURNMENT:
The meeting adjourned at 5:38 p.m.

This is to certify that the foregoing is a true
and correct copy of the minutes of the
October 12, 2020 meeting as approved by the
Council Finance Committee.

Gitta Ungvari, Finance and Budget Manager

Page 8

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TOWN OF LOS GATOS

MEETING DATE: 12/07/2020

COUNCIL FINANCE COMMITTEE
REPORT

ITEM NO: 3

DATE:

November 24, 2020

TO:

Council Finance Committee

FROM:

Laurel Prevetti, Town Manager

SUBJECT:

Receive the First Quarter Investment Report (July through September 2020)
for Fiscal Year 2020/21.

RECOMMENDATION:
Receive the First Quarter Investment Report (July through September 2020) for Fiscal Year
2020/21.
BACKGROUND:
On October 12, 2020, the Council Finance Committee reviewed the Investment Policy and
recommended that the Quarterly Investment Report should include the Town portfolio
Environmental, Social and Governance (ESG) scores and should be provided to the Council
Finance Committee.
On November 3, 2020, the Town Council received the Committee’s recommendations and
adopted both.
DISCUSSION:
As of September 30, 2020, the Town’s weighted portfolio yield was 1.86% which trended above
the Local Agency Investment Fund (LAIF) yield of 0.69%. This favorable yield differential was
primarily due to the LAIF portfolio’s weighted average maturity (WAM) of 169 days and the
Town’s longer WAM of 556 days. The Town’s weighted average rate of return of 1.86% for the
first quarter remained stable relative to the first quarter return of 2.02% in 2019.
In the months prior to the COVID-19 outbreak, staff in consultation with the Town’s investment
advisor had been extending maturities to capture higher yields currently associated with longer
dated securities. In recent months, the economic fallout associated with the pandemic has led
PREPARED BY:

Stephen Conway
Director of Finance

Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney

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110 E. Main Street Los Gatos, CA 95030 ● (408)354-6832
www.losgatosca.gov

Page 10 of 229

PAGE 2 OF 2
SUBJECT: FY 2020-21 1Q Investment Report
DATE:
November 24, 2020
DISCUSSION (continued):
to Treasury yields falling dramatically. For example, on September 30, 2020, ten-year US
Treasury notes were yielding 0.69% versus 1.69% on September 30, 2019.
During the first quarter, staff in coordination with the Town’s investment advisor started
investing most maturing investments into the State Local Agency Investment Fund (LAIF) pool
to capture the higher short-term yields. The State LAIF pool typically lags the market when
current market yields are either increasing or decreasing. However, with LAIF’s WAM of 169
days, staff is expecting a steady decline in LAIF portfolio yields until the LAIF portfolio reflects
the low short-term investment yields available in the market.
The Federal Reserve (Fed) projects no change to its policy until late 2023. The Fed said it is
committed to keeping the target range for the federal funds rate at 0% to 0.25% until “labor
market conditions have reached levels consistent with the Committee's assessment of
maximum employment”.

Attachments:
1. First Quarter Investment Report for FY 2020/21 (July through September 2020)
2. Public Comment Received for the November 13, 2020 Town Council Meeting

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Town of Los Gatos
Summary Investment Information
September 30, 2020

Weighted Average YTM Portfolio Yield:

Portfolio Balance

1.86%

Weighted Average Maturity (days)

This Month
$59,981,525

Last Month
$60,272,540

One year ago
$61,720,311

1.86%
0.69%
0.11%
0.10%
0.13%
0.28%
0.69%

1.86%
0.92%
0.11%
0.12%
0.13%
0.27%
0.71%

2.02%
2.28%
1.82%
1.82%
1.62%
1.55%
1.67%

Benchmarks/ References:
Town's Average Yield
LAIF Yield for month
3 mo. Treasury
6 mo. Treasury
2 yr. Treasury
5 yr. Treasury (most recent)
10 Yr. Treasury

556

Portfolio Maturity Profile

3 - 5 years
15%

0 - 1 year
30%

2 - 3 years
25%
1 - 2 years
30%

Compliance: The Town's investments are in compliance with the Town's investment policy dated November 3, 2020
and also in compliance with the requirements of Section 53601 of the California State Code. Based on the information available, the Town has
sufficient funds to meet the cash demands for the next six months.

Page 11

Page 1

ATTACHMENT 1

Page 12 of 229

Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
September 30, 2020
Fund Balances - Beginning of Month/Period
Receipts
Disbursements
Fund Balances - End of Month/Period

Month
$60,272,540.27
4,017,155.42
(4,308,171.03)
$59,981,524.66

Portfolio Allocation:

YTD
$72,729,892.43
11,825,725.95
(24,574,093.72)
$59,981,524.66
% of Portfolio

BNY MM
US Treasury Notes
Government Agency Debenture Notes
Corporate Medium Term Bonds
Local Agency Investment Fund
Subtotal - Investments
Reconciled Demand Deposit Balances

$340,145.64
$7,723,416.42
$24,340,417.75
$14,514,839.51
10,210,051.74
57,128,871.06
2,852,653.60

Total Treasurer's Fund

$59,981,524.66

Max. % 0r $ Allowed Per State Law or Policy

0.60%
13.52%
42.61%
25.41%
17.87%
100.00%

20% of Town Portfolio
No Max. on US Treasuries
No Max. on Non-Mortgage Backed
30% of Town Portfolio
$75 M per State Law

Portfolio Investment Allocation
BNY MM
0.60%

Local Agency Investment Fund
17.9%

US Treasury Notes
13.52%

Government Agency Debenture Notes
42.61%

Corporate Medium Term Bonds
25.4%

74000000

Treasurer's Fund Balances

72000000
70000000
68000000
66000000
64000000
62000000
60000000
Sep-19

Page 12

Oct-19

Nov-19

Dec-19

Jan-20

Feb-20

Mar-20

page 2

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Page 13 of 229

Non-Treasury Funds:

Town of Los Gatos
Non-Treasury Restricted Fund Balances
September 30, 2020
SEP 20
Beginning
Deposits
Realized Gain/Adj.
Balance

Cert. of Participation 2002 Series A Reserve Fund
Cert. Of Participation 2010 Ser A Lease Pymt Fund
Cert. of Participation 2002 Lease Payment Fund
Cert. of Participation 2010 Series Reserve Fund
Total Restricted Funds:

SEP 20

Ending
Balance

Withdrawals

`
$

CEPPT IRS Section 115 Trust
Grand Total COP's and CEPPT Trust

SEP 20
Interest/
Earnings

686,268.48
3.62
0.15
1,298,066.97
1,984,339.22

$0.00

688,026.00

0.00

2,672,365.22

0.00
0.00

5.89 $
2.51
0.30
31.84
$40.54

$
$
$

$0.00

(5,181.38)
$

(5,140.84) $

686,274.37
6.13
0.45
1,298,098.81
$1,984,379.76

Note 1
Note 1
Note 1
Note 2

682,844.62
-

2,667,224.38

These accounts are not part of the Treasurer's fund balances reported elsewhere in this report, as they are for separate and distinct
entities.

Note 1: The three original funds for the Certificates of Participation 2002 Series A consist of construction funds which will be expended over the
next few years, reserve funds which will guarantee the payment of lease payments, and a third fund for the disbursement of lease payments
and initial delivery costs.
Note 2: The 2010 COP Funds are all for the Library construction, reserves to guarantee lease payments, and a lease payment fund for the
life of the COP issue. The COI fund was closed in September 2010.
Note 3: The CEPPT Section IRS Section 115 Trust was established as an irrevocable trust dedicated to accumulate resources to fund the Town's unfunded liabilities related to pension and other po

Page 13

Page 3

Page 14 of 229

Town of Los Gatos
Statement of Interest Earned
September 30, 2020

Interest by Month
July 2020
August 2020
September 2020
October 2020
November 2020
December 2020
January 2021
February 2021
March 2021
April 2021
May 2021
June 2021

$78,263.77
78,263.76
75,077.38

$231,604.91

Page 14

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Page 15 of 229

Town of Los Gatos Investment Schedule September
2020
Deposit
Date

Institution

CUSIP #

Security

Treasury
Toyota Motor Credit
Toyota Motor Credit
FFCB
FFCB
FNMA
IBM
Oracle
US Treasury
American Express
Freddie Mac
FFCB
Treasury
Freddie Mac
US Treasury
American Honda
JP Morgan Chase
Honeywell Int'l.
Disney
FNMA
US Bancorp
FFCB
FFCB
PNC Financial
FHLB
FNMA
JP Morgan Chase
American Honda
FHLB
FNMA
FNMA
Treasury
Treasury
BankAmerica Corp
Treasury
Treasury
Wells Fargo
FFCB
Freddie Mac

912828WR7
89236TDP7
89236TCZ6
3133EKMX1
3133ELVV3
3136G0AW1
459200HG9
68389XBL8
912828R28
0258M0EB1
3137EAEN5
3133EKVF0
912828L57
3137EADB2
912828Y20
02665WCZ2
46625HJE1
438516BW5
254687CK0
3135G0V75
91159HHV5
3133EKCS3
3133EKQA7
693476BN2
313379Q69
3135G0V59
46625HJT8
02665WDH1
3130AABG2
3135G0Q89
3135G0J20
912828M80
912828U57
06051GGS2
912828X70
912828XT2
94988J6A0
3133EJ3Q0
3133EKKT2

US Treasury Note
Corporate Bond
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture
Gov. Agency Debenture
Corporate Bond
Corporate Bond
US Treasury Note
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture
US Treasury Note
Gov. Agency Debenture
Gov. Agency Debenture
Corporate Bond
Gov. Agency Debenture
Corporate Bond
Corporate Bond
Gov. Agency Debenture
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture
Corporate Bond
Corporate Bond
US Treasury Note
Gov. Agency Debenture
Gov. Agency Debenture
US Treasury Note
US Treasury Note
Corporate Bond
US Treasury Note
US Treasury Note
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture

4/2/2019
05/20/19
3/13/2020
8/2/2019
4/8/2020
12/13/2017
8/8/2019
7/8/2019
7/2/2019
2/11/2020
7/19/2019
7/22/2019
7/22/2019
1/17/2020
1/31/2020
11/27/2019
2/11/2020
11/20/2019
3/4/2020
10/17/2019
12/24/2019
3/21/2019
10/21/2019
8/15/2019
7/22/2019
11/27/2019
9/23/2019
2/14/2020
4/15/2019
2/10/2020
2/10/2020
7/22/2019
7/31/2019
4/30/2020
12/30/2019
10/31/2019
6/24/2020
8/28/2019
6/24/2019

Subtotal

BNY MM
LAIF

Matured Assets
FNMA

Par
Value

Original
Cost

1,000,000.00
1,100,000.00
500,000.00
1,000,000.00
1,600,000.00
2,000,000.00
1,000,000.00
1,000,000.00
500,000.00
1,000,000.00
2,000,000.00
1,000,000.00
1,200,000.00
2,100,000.00
1,000,000.00
1,000,000.00
900,000.00
1,000,000.00
1,000,000.00
1,100,000.00
1,000,000.00
1,400,000.00
1,000,000.00
1,000,000.00
1,000,000.00
1,540,000.00
1,400,000.00
600,000.00
1,000,000.00
1,000,000.00
1,000,000.00
1,000,000.00
1,000,000.00
1,300,000.00
1,000,000.00
1,000,000.00
1,350,000.00
1,500,000.00
1,550,000.00

995,625.00
1,102,596.00
504,440.00
1,014,400.00
1,600,000.00
2,017,900.00
995,010.00
1,008,880.00
497,246.09
1,007,210.00
2,072,358.00
999,630.00
1,197,988.40
2,132,039.70
1,016,601.56
1,012,410.01
934,587.00
1,014,660.00
1,029,080.00
1,105,833.30
1,049,040.00
1,403,262.00
1,019,780.00
1,029,280.00
1,006,960.00
1,562,924.44
1,485,414.00
603,756.00
988,250.00
998,702.00
998,882.00
1,006,175.23
1,011,875.00
1,302,314.00
1,010,589.29
1,015,667.41
1,370,749.50
1,587,503.75
1,573,188.00

44,640,000.00

N/A

3133EHYM9

Gov. Agency Debenture

9/21/2017

1,300,000.00

45,282,807.68

Market
Value
1,015,000.00
1,132,335.35
504,186.80
1,066,655.41
1,600,245.52
2,001,842.68
1,030,096.03
1,051,766.25
519,101.56
1,009,968.75
2,135,202.18
1,038,370.79
1,238,812.50
2,160,618.12
1,019,687.50
1,058,224.52
951,281.83
1,066,416.20
1,015,665.65
1,160,982.15
1,088,038.71
1,414,974.79
1,069,965.29
1,039,601.37
1,033,240.43
1,589,858.22
1,544,493.48
621,099.40
1,019,983.17
1,012,368.18
1,004,995.55
1,040,351.56
1,061,835.94
1,300,000.00
1,064,687.50
1,065,976.56
1,369,092.78
1,626,578.42
1,624,507.76
$

46,368,108.90

436,084.15
11,210,051.74

$56,928,943.57

$58,014,244.79

1,295,866.00

Total Interest FY 20_21 Matured and Current

Market to Cost Position Report
Institution
BNY Assets
BNY MM
LAIF
Totals:

0-1 year
1-2 years
2-3 years
3-5 years

2,437.92

Maturity
Date or
Call Date
6/30/2021
1/11/2022
4/8/2021
2/23/2024
4/8/2022
10/16/2020
8/1/2022
7/15/2023
4/30/2023
4/4/2021
6/19/2023
1/17/2023
9/30/2022
1/13/2022
7/15/2021
6/27/2024
9/23/2022
7/15/2024
2/15/2021
7/2/2024
1/5/2024
3/11/2021
9/10/2024
2/6/2022
6/10/2022
4/12/2022
2/1/2024
5/10/2023
11/29/2021
10/7/2021
2/26/2021
11/30/2022
11/30/2023
10/1/2020
4/30/2024
5/31/2024
9/9/2021
12/21/2023
2/8/2023

Amount
$23,292,199.95
$11,415,762.14
$9,893,808.72
12,327,172.76
$56,928,943.57

Amortized
Cost
$45,282,807.68
436,084.15
11,210,051.74
$56,928,943.57

Page 15
Page 5

Yield to
Maturity
or Call
2.33%
2.50%
1.06%
1.90%
0.93%
2.02%
2.05%
2.18%
1.77%
1.66%
1.79%
1.89%
2.09%
2.12%
1.47%
2.12%
1.74%
1.64%
1.39%
1.63%
2.12%
2.43%
1.66%
2.12%
1.87%
1.61%
2.39%
1.75%
2.34%
1.38%
1.48%
1.81%
1.84%
1.21%
1.75%
1.64%
0.80%
2.12%
1.82%

2,437.92

Interest
Earned
Prior Yrs.

Interest
Received
to Date

Interest
Earned
Current FY

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

26,474.45
32,651.67
659.72
29,175.83
110,058.33
18,385.42
28,466.67
6,734.04
5,250.00
50,416.67
18,489.58
25,016.39
24,383.34
11,971.16
24,733.34
18,037.50
16,483.33
20,125.00
13,956.25
20,718.75
52,558.33
18,431.11
35,108.33
18,770.83
12,993.75
46,413.89
4,745.00
21,041.67
2,177.08
7,486.11
17,158.47
17,708.33
(2,437.92)
7,703.30
11,639.34
5,357.48
35,098.96
47,856.25

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

28,917.32
30,798.33
1,599.24
17,466.66
3,456.44
103,715.85
18,296.32
21,374.17
8,819.78
6,215.30
34,741.74
17,771.06
20,385.25
15,274.50
6,138.62
12,601.45
6,148.83
12,127.88
4,687.49
12,682.51
11,183.73
43,563.60
11,615.55
18,589.78
17,755.82
14,793.93
26,688.85
3,955.80
28,121.02
5,614.15
5,724.31
17,118.04
16,990.40
4,141.23
9,805.98
11,040.77
163.99
19,226.80
29,033.70

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

5,847.02
6,961.78
1,349.81
4,825.62
3,831.23
10,260.06
5,147.59
5,492.80
2,229.18
4,084.34
9,211.07
4,752.73
5,451.87
8,516.69
3,740.09
5,367.28
4,040.66
5,003.43
3,654.65
4,540.04
5,443.93
8,582.12
4,223.84
5,344.56
4,748.65
6,301.12
8,737.99
2,656.45
5,853.24
3,663.14
3,735.01
4,578.08
4,666.02
6,245.80
4,929.78
4,180.04
2,514.48
5,761.78
7,180.38

861,997.75

678,346.17

203,654.35

0.00%
0.69%

9/14/2020

Total Investments "Matured"

Maturity Profile

Purchased
Interest

23,601.78
$

861,997.75

678,346.17

227,256.13

1.61% $

58,120.83

57,964.67

4,348.78

231,604.91

Days
to
Maturity
273
468
190
1241
555
16
670
1018
942
186
992
839
730
470
288
1366
723
1384
138
1371
1192
162
1441
494
618
559
1219
952
425
372
149
791
1156
1
1308
1339
344
1177
861

1
1

Page 16 of 229

Town of Los Gatos
Summary Investment Information
August 31, 2020

Weighted Average YTM Portfolio Yield:

Portfolio Balance

1.86%

Weighted Average Maturity (days)

This Month
$60,272,540

Last Month
$60,339,136

One year ago
$62,530,263

1.86%
0.92%
0.11%
0.12%
0.13%
0.27%
0.71%

1.86%
0.92%
0.10%
0.10%
0.11%
0.21%
0.53%

1.99%
2.34%
2.07%
2.07%
1.87%
1.83%
2.02%

Benchmarks/ References:
Town's Average Yield
LAIF Yield for month
3 mo. Treasury
6 mo. Treasury
2 yr. Treasury
5 yr. Treasury (most recent)
10 Yr. Treasury

577

Portfolio Maturity Profile

3 - 5 years
15%

0 - 1 year
30%

2 - 3 years
25%
1 - 2 years
30%

Page 16

Page 1

Page 17 of 229

Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
August 31, 2020

Month
$60,339,136.48
4,194,315.64
(4,260,911.85)
$60,272,540.27

Fund Balances - Beginning of Month/Period
Receipts
Disbursements
Fund Balances - End of Month/Period
Portfolio Allocation:

YTD
$72,729,892.43
7,808,570.53
(20,265,922.69)
$60,272,540.27
% of Portfolio

BNY MM
US Treasury Notes
Government Agency Debenture Notes
Corporate Medium Term Bonds
Local Agency Investment Fund
Subtotal - Investments
Reconciled Demand Deposit Balances

$340,145.64
$7,723,416.42
$24,340,417.75
$14,514,839.51
10,210,051.74
57,128,871.06
3,143,669.21

Total Treasurer's Fund

$60,272,540.27

Max. % 0r $ Allowed Per State Law or Policy

0.60%
13.52%
42.61%
25.41%
17.87%
100.00%

20% of Town Portfolio
No Max. on US Treasuries
No Max. on Non-Mortgage Backed
30% of Town Portfolio
$75 M per State Law

Portfolio Investment Allocation
BNY MM
0.60%

Local Agency Investment Fund
17.9%

US Treasury Notes
13.52%

Government Agency Debenture Notes
42.61%

Corporate Medium Term Bonds
25.4%

74000000

Treasurer's Fund Balances

72000000
70000000
68000000
66000000
64000000
62000000
60000000
Aug-19

Page 17

Sep-19

Oct-19

Nov-19

Dec-19

Jan-20

page 2a

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Page 18 of 229

Non-Treasury Funds:

Town of Los Gatos
Non-Treasury Restricted Fund Balances
August 31, 2020
AUG 20
Beginning
Deposits
Realized Gain/Adj.
Balance

AUG 20

Ending
Balance

Withdrawals

`
$

CEPPT IRS Section 115 Trust
Grand Total COP's and PARS Trust

AUG 20
Interest/
Earnings

686,262.59
1,057,162.50
535,306.25
1,297,995.22
1,987,621.42

$0.00

684,349.85

0.00

2,671,971.27

0.00
0.00

5.89 $
3.62
0.15
71.75
$9.66

$
1,057,162.50 $
535,306.25 $
$1,592,468.75

3,676.15
$

3,685.81

686,268.48
3.62
0.15
1,298,066.97
$1,984,339.22

Note 1
Note 1
Note 1
Note 2

688,026.00
$

1,592,468.75

2,672,365.22

These accounts are not part of the Treasurer's fund balances reported elsewhere in this report, as they are for separate and distinct
entities.

Page 18

Page 3

Page 19 of 229

Town of Los Gatos
Statement of Interest Earned
August 31, 2020

Interest by Month
July 2020
August 2020
September 2020
October 2020
November 2020
December 2020
January 2021
February 2021
March 2021
April 2021
May 2021
June 2021

$78,263.77
78,263.76

$156,527.53

Page 19

Page 4

Page 20 of 229

Town of Los Gatos Investment Schedule August 2020

Deposit
Date

Institution

CUSIP #

Security

Treasury
Toyota Motor Credit
Toyota Motor Credit
FFCB
FFCB
FNMA
FNMA
IBM
Oracle
US Treasury
American Express
Freddie Mac
FFCB
Treasury
Freddie Mac
US Treasury
American Honda
JP Morgan Chase
Honeywell Int'l.
Disney
FNMA
US Bancorp
FFCB
FFCB
PNC Financial
FHLB
FNMA
JP Morgan Chase
American Honda
FHLB
FNMA
FNMA
Treasury
Treasury
BankAmerica Corp
Treasury
Treasury
Wells Fargo
FFCB
Freddie Mac

912828WR7
89236TDP7
89236TCZ6
3133EKMX1
3133ELVV3
3133EHYM9
3136G0AW1
459200HG9
68389XBL8
912828R28
0258M0EB1
3137EAEN5
3133EKVF0
912828L57
3137EADB2
912828Y20
02665WCZ2
46625HJE1
438516BW5
254687CK0
3135G0V75
91159HHV5
3133EKCS3
3133EKQA7
693476BN2
313379Q69
3135G0V59
46625HJT8
02665WDH1
3130AABG2
3135G0Q89
3135G0J20
912828M80
912828U57
06051GGS2
912828X70
912828XT2
94988J6A0
3133EJ3Q0
3133EKKT2

US Treasury Note
Corporate Bond
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture
Gov. Agency Debenture
Gov. Agency Debenture
Corporate Bond
Corporate Bond
US Treasury Note
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture
US Treasury Note
Gov. Agency Debenture
Gov. Agency Debenture
Corporate Bond
Gov. Agency Debenture
Corporate Bond
Corporate Bond
Gov. Agency Debenture
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture
Corporate Bond
Corporate Bond
US Treasury Note
Gov. Agency Debenture
Gov. Agency Debenture
US Treasury Note
US Treasury Note
Corporate Bond
US Treasury Note
US Treasury Note
Corporate Bond
Gov. Agency Debenture
Gov. Agency Debenture

Subtotal

4/2/2019
05/20/19
3/13/2020
8/2/2019
4/8/2020
9/21/2017
12/13/2017
8/8/2019
7/8/2019
7/2/2019
2/11/2020
7/19/2019
7/22/2019
7/22/2019
1/17/2020
1/31/2020
11/27/2019
2/11/2020
11/20/2019
3/4/2020
10/17/2019
12/24/2019
3/21/2019
10/21/2019
8/15/2019
7/22/2019
11/27/2019
9/23/2019
2/14/2020
4/15/2019
2/10/2020
2/10/2020
7/22/2019
7/31/2019
4/30/2020
12/30/2019
10/31/2019
6/24/2020
8/28/2019
6/24/2019
$

BNY MM
LAIF

Par
Value

Original
Cost

1,000,000.00
1,100,000.00
500,000.00
1,000,000.00
1,600,000.00
1,300,000.00
2,000,000.00
1,000,000.00
1,000,000.00
500,000.00
1,000,000.00
2,000,000.00
1,000,000.00
1,200,000.00
2,100,000.00
1,000,000.00
1,000,000.00
900,000.00
1,000,000.00
1,000,000.00
1,100,000.00
1,000,000.00
1,400,000.00
1,000,000.00
1,000,000.00
1,000,000.00
1,540,000.00
1,400,000.00
600,000.00
1,000,000.00
1,000,000.00
1,000,000.00
1,000,000.00
1,000,000.00
1,300,000.00
1,000,000.00
1,000,000.00
1,350,000.00
1,500,000.00
1,550,000.00

995,625.00
1,102,596.00
504,440.00
1,014,400.00
1,600,000.00
1,295,866.00
2,017,900.00
995,010.00
1,008,880.00
497,246.09
1,007,210.00
2,072,358.00
999,630.00
1,197,988.40
2,132,039.70
1,016,601.56
1,012,410.01
934,587.00
1,014,660.00
1,029,080.00
1,105,833.30
1,049,040.00
1,403,262.00
1,019,780.00
1,029,280.00
1,006,960.00
1,562,924.44
1,485,414.00
603,756.00
988,250.00
998,702.00
998,882.00
1,006,175.23
1,011,875.00
1,302,314.00
1,010,589.29
1,015,667.41
1,370,749.50
1,587,503.75
1,573,188.00

45,940,000.00

N/A

Market
Value

46,578,673.68

Purchased
Interest

1,016,171.88
1,134,153.53
504,722.92
1,066,943.82
1,601,254.18
1,300,656.28
2,005,588.60
1,030,994.25
1,056,686.20
519,707.03
1,011,725.63
2,139,784.96
1,039,390.68
1,240,406.26
2,164,267.79
1,021,367.19
1,058,466.92
952,641.00
1,068,600.31
1,018,729.13
1,160,757.66
1,093,669.57
1,417,609.05
1,069,202.57
1,042,408.32
1,034,853.52
1,592,849.58
1,549,260.96
622,457.58
1,021,515.27
1,013,367.94
1,006,037.97
1,041,757.81
1,063,476.56
1,302,036.58
1,066,015.62
1,067,304.69
1,371,280.31
1,627,879.02
1,627,066.71
$

47,743,065.85

340,145.64
10,210,051.74

$57,128,871.06

$58,293,263.23

2,437.92
8,197.87

Maturity
Date or
Call Date
6/30/2021
1/11/2022
4/8/2021
2/23/2024
4/8/2022
9/14/2020
10/16/2020
8/1/2022
7/15/2023
4/30/2023
4/4/2021
6/19/2023
1/17/2023
9/30/2022
1/13/2022
7/15/2021
6/27/2024
9/23/2022
7/15/2024
2/15/2021
7/2/2024
1/5/2024
3/11/2021
9/10/2024
2/6/2022
6/10/2022
4/12/2022
2/1/2024
5/10/2023
11/29/2021
10/7/2021
2/26/2021
11/30/2022
11/30/2023
10/1/2020
4/30/2024
5/31/2024
9/9/2021
12/21/2023
2/8/2023

Yield to
Maturity
or Call
2.33%
2.50%
1.06%
1.90%
0.93%
1.61%
2.02%
2.05%
2.18%
1.77%
1.66%
1.79%
1.89%
2.09%
2.12%
1.47%
2.12%
1.74%
1.64%
1.39%
1.63%
2.12%
2.43%
1.66%
2.12%
1.87%
1.61%
2.39%
1.75%
2.34%
1.38%
1.48%
1.81%
1.84%
1.21%
1.75%
1.64%
0.80%
2.12%
1.82%

10,635.79

Interest
Earned
Prior Yrs.

Interest
Received
to Date

Interest
Earned
Current FY

Days
to
Maturity

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

26,474.45
32,651.67
659.72
29,175.83
48,370.83
110,058.33
18,385.42
16,466.67
6,734.04
5,250.00
50,416.67
18,489.58
14,516.39
24,383.34
11,971.16
24,733.34
3,412.50
16,483.33
20,125.00
13,956.25
20,718.75
34,708.33
8,031.11
18,608.33
18,770.83
12,993.75
46,413.89
4,745.00
21,041.67
2,177.08
7,486.11
17,158.47
17,708.33
(2,437.92)
7,703.30
11,639.34
(8,197.87)
35,098.96
47,856.25

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

28,917.32
30,798.33
1,599.24
17,466.66
3,456.44
57,964.67
103,715.85
18,296.32
21,374.17
8,819.78
6,215.30
34,741.74
17,771.06
20,385.25
15,274.50
6,138.62
12,601.45
6,148.83
12,127.88
4,687.49
12,682.51
11,183.73
43,563.60
11,615.55
18,589.78
17,755.82
14,793.93
26,688.85
3,955.80
28,121.02
5,614.15
5,724.31
17,118.04
16,990.40
4,141.23
9,805.98
11,040.77
163.99
19,226.80
29,033.70

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

3,940.38
4,691.64
909.66
3,252.05
2,581.92
3,547.69
6,914.39
3,469.03
3,701.67
1,502.27
2,752.49
6,207.46
3,202.92
3,674.09
5,739.51
2,520.49
3,617.08
2,723.05
3,371.88
2,462.92
3,059.59
3,668.74
5,783.60
2,846.50
3,601.77
3,200.18
4,246.40
5,888.64
1,790.22
3,944.58
2,468.63
2,517.07
3,085.23
3,144.49
4,209.12
3,322.24
2,816.99
1,694.54
3,882.94
4,838.95

814,938.23

736,310.84

140,793.01

0.00%
0.78%

15,734.52
$

814,938.23

736,310.84

156,527.53

Matured Assets
Total Investments "Matured"

Total Interest FY 19_20 Matured and Current

Maturity Profile

Market to Cost Position Report
Institution
BNY Assets
BNY MM
LAIF
Totals:

0-1 year
1-2 years
2-3 years
3-5 years

Amount
$22,121,377.94
$12,786,511.64
$9,893,808.72
12,327,172.76
$57,128,871.06

Amortized
Cost
$46,578,673.68
340,145.64
10,210,051.74
$57,128,871.06

Page 20
Page 5

156,527.53

303
498
220
1271
585
14
46
700
1048
972
216
1022
869
760
500
318
1396
753
1414
168
1401
1222
192
1471
524
648
589
1249
982
455
402
179
821
1186
31
1338
1369
374
1207
891

1
1

Page 21 of 229

Town of Los Gatos
Summary Investment Information
July 31, 2020

Weighted Average YTM Portfolio Yield:

Portfolio Balance

1.86%

Weighted Average Maturity (days)

This Month
$60,339,136

Last Month
$72,729,892

One year ago
$65,922,912

1.86%
0.92%
0.10%
0.10%
0.11%
0.21%
0.53%

1.86%
1.22%
0.15%
0.19%
0.15%
0.29%
0.66%

1.98%
2.38%
2.07%
2.07%
1.87%
1.83%
2.02%

Benchmarks/ References:
Town's Average Yield
LAIF Yield for month
3 mo. Treasury
6 mo. Treasury
2 yr. Treasury
5 yr. Treasury (most recent)
10 Yr. Treasury

583

Portfolio Maturity Profile

3 - 5 years
15%

0 - 1 year
30%

2 - 3 years
25%
1 - 2 years
30%

Page 21

Page 1

Page 22 of 229

Town of Los Gatos
Portfolio Allocation & Treasurer's Fund Balances
July 31, 2020
Fund Balances - Beginning of Month/Period
Receipts
Disbursements
Fund Balances - End of Month/Period

Month
$72,729,892.43
3,614,254.89
(16,005,010.84)
$60,339,136.48

Portfolio Allocation:

YTD
$72,729,892.43
3,614,254.89
(16,005,010.84)
$60,339,136.48
% of Portfolio

BNY MM
US Treasury Notes
Government Agency Debenture Notes
Corporate Medium Term Bonds
Local Agency Investment Fund
Subtotal - Investments
Reconciled Demand Deposit Balances

$217,297.23
$7,723,416.42
$24,340,417.75
$14,514,839.51
12,210,051.74
59,006,022.65
1,333,113.83

Total Treasurer's Fund

$60,339,136.48

Max. % 0r $ Allowed Per State Law or Policy

0.37%
13.09%
41.25%
24.60%
20.69%
100.00%

20% of Town Portfolio
No Max. on US Treasuries
No Max. on Non-Mortgage Backed
30% of Town Portfolio
$75 M per State Law

Portfolio Investment Allocation
BNY MM
0.37%

Local Agency Investment Fund
20.7%

US Treasury Notes
13.09%

Government Agency Debenture Notes
41.25%

Corporate Medium Term Bonds
24.6%

74000000

Treasurer's Fund Balances

72000000
70000000
68000000
66000000
64000000
62000000
60000000
Jul-19

Page 22

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-20

page 2

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Page 23 of 229

Non-Treasury Funds:

Town of Los Gatos
Non-Treasury Restricted Fund Balances
July 31, 2020
JULY 20
Beginning
Deposits
Realized Gain/Adj.
Balance

JULY 20

Ending
Balance

Withdrawals

`
$

CEPPT IRS Section 115 Trust
Grand Total COP's and CEPPT Trust

JULY 20
Interest/
Earnings

686,256.89
732.26
2,722.23
1,297,910.04
1,987,621.42

$2,121,598.27

85.18
$90.89

669,978.13

0.00

14,371.72

2,657,599.55

1,589,014.25
532,584.02

2,121,598.27

5.70
0.01

14,462.61

532,584.02

$
$
$

$532,584.02

686,262.59
1,057,162.50
535,306.25
1,297,995.22
$3,576,726.56

Note 1
Note 1
Note 1
Note 2

684,349.85
$

532,584.02

4,261,076.41

These accounts are not part of the Treasurer's fund balances reported elsewhere in this report, as they are for separate and distinct
entities.

Page 23

Page 3

Page 24 of 229

Town of Los Gatos
Statement of Interest Earned
July 31, 2020

Interest by Month
July 2020
August 2020
September 2020
October 2020
November 2020
December 2020
January 2021
February 2021
March 2021
April 2021
May 2021
June 2021

$78,263.77

Page 24

Page 4

Page 25 of 229

Town of Los Gatos Investment Schedule July 2020

Deposit
Date

Institution

CUSIP #

Security

Subtotal

BNY MM
LAIF

Par
Value

Original
Cost

45,940,000.00

N/A

Market
Value

46,578,673.68

Purchased
Interest

1,018,046.88
1,135,475.00
505,664.96
1,070,267.19
1,602,207.89
1,302,019.81
2,009,023.06
1,031,999.71
1,057,070.39
520,625.00
1,013,246.81
2,145,928.40
1,040,569.80
1,242,187.50
2,167,420.56
1,023,710.94
1,061,433.09
954,476.60
1,071,906.73
1,021,649.47
1,163,444.66
1,096,164.11
1,420,405.06
1,072,159.18
1,044,399.57
1,035,401.12
1,595,335.31
1,556,712.00
622,583.70
1,023,028.12
1,014,630.05
1,006,939.34
1,043,710.94
1,066,093.75
1,304,005.87
1,068,906.25
1,070,312.50
1,372,329.49
1,631,796.80
1,628,734.06
$

47,832,021.67

217,297.23
12,210,051.74

$59,006,022.65

$60,259,370.64

2,375.00

2,437.92
8,197.87

13,010.79

Interest
Received
to Date

Interest
Earned
Prior Yrs.

Interest
Earned
Current FY

Days
to
Maturity

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

26,474.45
32,651.67
659.72
18,025.83
48,370.83
110,058.33
9,010.42
16,466.67
6,734.04
5,250.00
50,416.67
18,489.58
14,516.39
24,383.34
11,971.16
12,733.34
3,412.50
4,983.33
(2,375.00)
13,956.25
3,843.75
34,708.33
8,031.11
18,608.33
18,770.83
12,993.75
19,288.89
4,745.00
21,041.67
2,177.08
611.11
17,158.47
17,708.33
(2,437.92)
7,703.30
11,639.34
(8,197.87)
35,098.96
30,418.75

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

1,970.19
2,345.82
454.83
1,626.03
1,290.96
1,773.84
3,457.20
1,734.51
1,850.84
751.14
1,376.25
3,103.73
1,601.46
1,837.04
2,869.75
1,260.25
1,808.54
1,361.53
1,685.94
1,231.46
1,529.80
1,834.37
2,891.80
1,423.25
1,800.89
1,600.09
2,123.20
2,944.32
895.11
1,972.29
1,234.32
1,258.54
1,542.61
1,572.25
2,104.56
1,661.12
1,408.49
847.27
1,941.47
2,419.47

680,100.73

736,310.84

70,396.51

0.00%
0.92%

7,867.26
$

680,100.73

736,310.84

78,263.77

Matured Assets
Total Investments "Matured"

Total Interest FY 19_20 Matured and Current

Maturity Profile

Market to Cost Position Report
Institution
BNY Assets
BNY MM
LAIF
Totals:

0-1 year
1-2 years
2-3 years
3-5 years

Amount
$23,998,529.53
$11,791,501.64
$10,888,818.72
12,327,172.76
$59,006,022.65

Amortized
Cost
$46,578,673.68
217,297.23
12,210,051.74
$59,006,022.65

Page 25
Page 5

334
529
251
1302
616
45
77
731
1079
1003
247
1053
900
791
531
349
1427
784
1445
199
1432
1253
223
1502
555
679
620
1280
1013
486
433
210
852
1217
62
1369
1400
405
1238
922

1
1

Page 26 of 229

Town of Los Gatos
Insight ESG Ratings as of September 30, 2020
Security Description

Maturity Date

Par/Shares

Insight ESG Rating

Environment

Social

Governance

HONEYWELL INTERNATIONAL 2.3% 15AUG2024 (CALLABLE 15JUL24)

8/15/2024

$ 1,000,000

AMERICAN EXPRESS CREDIT 2.25% 05MAY2021 (CALLABLE 04APR21)

5/5/2021

$ 1,000,000

A-

AMERICAN HONDA FINANCE 2.4% 27JUN2024

6/27/2024

$ 1,000,000

A-

ORACLE CORP 2.4% 15SEP2023 (CALLABLE 15JUL23)

9/15/2023

$ 1,000,000

TOYOTA MOTOR CREDIT CORP 2.6% 11JAN2022

1/11/2022

$ 1,100,000

A+

WALT DISNEY COMPANY/THE 4.5% 15FEB2021

2/15/2021

$ 1,000,000

A-

WELLS FARGO BANK NA 2.082% 09SEP2022 (CALLABLE 09SEP21)

9/9/2022

$ 1,350,000

Aa2

A+

TOYOTA MOTOR CREDIT CORP 1.9% 08APR2021

4/8/2021

500,000

A+

JPMORGAN CHASE & CO 3.25% 23SEP2022

9/23/2022

900,000

A-

US BANCORP 3.375% 05FEB2024 (CALLABLE 05JAN24)

2/5/2024

$ 1,000,000

A+

PNC FINANCIAL SERVICES 3.3% 08MAR2022 (CALLABLE 06FEB22)

3/8/2022

$ 1,000,000

A-

IBM CORP 1.875% 01AUG2022

8/1/2022

$ 1,000,000

BANK OF AMERICA CORP 2.328% 01OCT2021 (CALLABLE 01OCT20)

10/1/2021

$ 1,300,000

A-

JPMORGAN CHASE & CO 3.875% 01FEB2024

2/1/2024

$ 1,400,000

A-

AMERICAN HONDA FINANCE 1.95% 10MAY2023

5/10/2023

A-

3.1

1.5

3.4

3.5

Total/Average

600,000

$ 15,150,000

Moody Rating S&P Rating

*ESG ratings are from 1 to 5, with 1 as the highest rating and 5 as the lowest. All ratings are weighted by industry rankings, based on the importance of the category within the individual industry.

Page 26

Page 27 of 229

Subject:

Agenda #2 Item

-----Original Message----From: Phil Koen <[email protected]>
Sent: Friday, November 13, 2020 9:05 AM
To: Rob Rennie <[email protected]>; Marico Sayoc <[email protected]>; BSpector
<[email protected]>; Marcia Jensen <[email protected]>
Cc: Laurel Prevetti <[email protected]>; Stephen Conway <[email protected]>; Matthew Hudes
>; Maria Ristow

>; mar

Subject: Agenda #2 Item
Dear Council Members,
In comparing the Ql FY 21 investment report to the same report prior year, total cash receipts have increased $4.Sm or
61% and total disbursements have also increased $6.9m or 40% year over year.
These are material changes and the report does not discuss the reason for these changes. I am aware that part of the
increase in cash disbursements was caused by the second ADP being made to CALPERS in July. But that does not explain
all of the increase.
One other point that the Council may find interesting, in comparing Ql FY 21 to Ql FY 19 investment reports, receipts
are up $5.lm or 235% and disbursements have increased $19.9m or 425%. Again there is no explanation given for these
changes.
Would it be possible for Staff to disclose what drove the increase in cash receipts and cash disbursements so the Council
and residents can have more transparency and a better understanding of the report?
Thank you.
Phil Koen

ATTACHMENT 2
Page 27

Page 28 of 229

TOWN OF LOS GATOS

MEETING DATE: 12/07/2020

COUNCIL FINANCE COMMITTEE
REPORT

ITEM NO: 3
DESK ITEM

DATE:

December 7, 2020

TO:

Council Finance Committee

FROM:

Laurel Prevetti, Town Manager

SUBJECT:

Receive the First Quarter Investment Report (July through September 2020)
for Fiscal Year 2020/21.

REMARKS:
Staff responses to the Committee Member questions are below.
Question: Regarding the Investment Report, you have been extending the portfolio's maturities
to a weighted average of 556 days, yielding a return of 1.86%. How do you view the risk of
increasing maturities? If it was riskless, you would have always had increased maturities before
presumably.
Answer: Staff invests operating funds per the California Government Code mandate of Safety,
Liquidity, and lastly Yield. That said, staff is cognizant of changes in the yield curve and the
trade-offs between risk and return. Longer duration portfolios tend to work well in periods of
stable to falling interest rates, while shorter duration portfolios tend to perform well in
scenarios of rising interest rates.
Interest rates have been dropping since the fall of 2018 and the Federal Reserve is projecting
that interest rates will remain low for an extended period of time, possibly through end of
calendar year 2023. Accordingly, and when appropriate, staff in consultation with the Town’s
investment advisor see some opportunities currently in extending maturities and riding down
the yield curve.
Question: Also, assuming that the current treasury and other bonds yields hold steady, how
much will the yield of 1.86% decline by the end of FY 2021?

PREPARED BY:

Stephen Conway
Director of Finance

Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney

Page 28

110 E. Main Street Los Gatos, CA 95030 ● (408)354-6832
www.losgatosca.gov

Page 29 of 229

PAGE 2 OF 3
SUBJECT: FY 2020-21 1Q Investment Report
DATE:
December 7, 2020
REMARKS (continued):
Answer: Staff expects the overall yield to fall to approximately 1.30% through calendar year
2021. The drop in yield was factored into interest rate estimates for the current fiscal year (FY
20/21) and also factored into the Town’s Five-Year Forecast.
Question: Finally, $24,500,000 has been withdrawn YTD compared to $11,800,000
deposited. How does this compare to prior years and do you anticipate more net withdrawals
for the year?
Answer: FY 20/21 First Quarter disbursements included $1.5M of debt service checks issued
and mailed to Bank of New York (trustee) due in August for the 2002 and 2010 COPs that a
week later required an immediate stop payment order issued by the Town. This action was
necessary because BNY staff alerted Town staff that they were not able to physically enter their
building for a couple of weeks in August 2020 because of a COVID-19 outbreak in their
downtown Los Angeles office and thereby could not negotiate the mailed checks.
To avoid late payments to bondholders, BNY requested that the Town replace the check
payment by paying by wire which was approved by the Town. Upon receipt of the original
cancelled checks from BNY Trust and verification of outstanding checks, accounts payable staff
officially voided the checks. There will be corresponding -$1.5M reverse disbursement that will
be entered into the Town’s general ledger and will reduce disbursements on the second
quarter’s report.
Adjusting the balance leaves a net disbursement of approximately $23.0M for the first quarter.
The Town also made a one-time $3.6M payment to CalPERS in July 2020 that should be
eliminated for comparison purposes to the prior fiscal year. There was also a September
“disbursement” from the Town’s main checking account of $1M and a corresponding $1M
receipt booked for a placement of the same amount as an investment in the Town’s Local
Agency Investment Account (LAIF), so these amounts should be deducted from both quarterly
totals.
In July 2020 the Town received $1.2M from the County’s Central Fire District which was also a
“one-time” revenue for a property purchase from the Town and should be adjusted for
comparison purposes.
Every year, the Town has first quarter expenses that exceed revenue. These expenses include
our summer capital projects and upfront payments due to CalPERS and other entities. The
Town receives minimal property tax revenue from the County until late November or early
December of each fiscal year. Therefore, it is not unusual in the Town’s operating cycle to see
cash and investment balances decline in the first quarter and begin to grow back again in the
second quarter as property taxes are received. As depicted below, the net reduction of cash
and investments excluding the one-time ADP payment, the $1.5 BNY debt service payment, and

Page 29

Page 30 of 229

PAGE 3 OF 3
SUBJECT: FY 2020-21 1Q Investment Report
DATE:
December 7, 2020
REMARKS (continued):
the exclusion of the $1.2M one-time Winchester land sale received in July 2020, indicated a
lower use of cash and investments balances than the prior year’s first quarter. Some of this
remaining difference between quarters can be the timing of payment dates of bi-weekly
payrolls and construction payments which are dependent on the timing of receipt of invoices
from contractors.
Changes to Cash & Inv per
First Quarter First Quarter
1st Qtr 20/21 First Quarter First Quarter 1st Qtr 19/20
Quarterly Investment Report
FY 20/21
FY 20/21
Change to
FY 19/20
FY 19/20
Change to
(In Millions)
Receipts
Disbursements Cash & Inv
Receipts Disbursements Cash & Inv
Per September 30 Inv Report
$
11.8 $
24.6 $
(12.8) $
7.3 $
17.6 $
(10.3)
Adjust for BNY COP Debt Service
$
(1.5) $
1.5
Adjust for July 2020 ADP to CalPERS
$
(3.6) $
3.6
Adjust for LAIF deposit
$
(1.0) $
(1.0) $
1.0
Sale of Winchester Land
$
(1.2)
$
(1.2)
Adjusted Receipts/ Disbursements

9.6 $

18.5 $

(7.9) $

7.3 $

17.6 $

Attachments (previously received with the Staff Report):
1. First Quarter Investment Report for FY 2020/21 (July through September 2020)
2. Public Comment Received for the November 13, 2020 Town Council Meeting
Attachment (received with this Desk Item):
3. Committee Member Comments

Page 30

(10.3)

Page 31 of 229

From:
To:
Cc:
Subject:
Date:

Ronald Dickel
Stephen Conway; Gitta Ungvari
Arn Andrews; Laurel Prevetti
Finance Meeting Monday
Sunday, December 6, 2020 3:29:54 PM

Steve and Gitta
First, thanks Gitta for printing out the CAFR and agenda items. Much appreciated.
I look forward to the discussion Monday, but want to list out the following various
comments and questions for discussion. I would appreciate this being distributed
appropriately with the Brown Act to members of the finance committee.
Investment Report
Regarding the Investment Report, you have been extending the portfolio's
maturities to a weighted average of 556 days, yielding a return of 1.86%. How do
you view the risk of increasing maturities? If it was riskless, you would have
always had increased maturities before presumably.
Also, assuming that the current treasury and other bonds yields hold steady, how
much will the yield of 1.86% decline by the end of FY 2021?
Finally, $24,500,000 has been withdrawn YTD compared to $11,800,000
deposited. How does this compare to prior years and do you anticipate more net
withdrawals for the year?
CAFR
It would be very useful for the Town Council to have a standalone paragraph on
page 3 discussing the COVID impact on revenue in Q4. You discuss how much
sales tax went down, but knowing the actual decline in Q4 revenue for all fees and
taxes in Q4 would allow a better forecast of decreased revenue in 2021.
On page 4, it would be very good to note as on page 24 a $4,000,000 decline in net
position in 2020 compared to 2019.
On page 4 in the pension paragraph detailing amounts, add that the liabilities are
based on a 7.15% investment return and a change of 1% would result in an
increased liability of $X as shown on page 84 and also that the 2020 Calpers return
was 4.7%. Want to give more perspective that the liability is understated.
On page 4, in the third paragraph, delete "from zero in 2019." Duplicative.
Page 31

ATTACHMENT 3

Page 32 of 229

On page 18 in the second bullet point paragraph, may want to add the page 29 line
of 2020 excess revenues over expenditures of negative $4,350,379 compared to a
positive $221,363 in 2019. Shows a $4 mln decline year on year.
On page 25, new operational and capital grants of $1.3 mln were noted. Are these
recurring or one-time?
On page 26, the paragraph on salary increases should note the effective date and the
$ impact in 2020.
On page 35, in the pension paragraph add that the 2020 Calpers return was 4.7%.
On page 48, why was interest under forecast by $1.6 mln?
On page 48, what was the anticipated sale gain of $1.2 mln that did not occur?
On page 81, in the discount rate paragraph line 6 delete "adequate and the use of"
and insert "used rather than the municipal bond rate" and delete "calculation is not
necessary."
On page 95 under Covid, need to have more specific dollar estimates of declines in
revenue in 2021, including actual declines in Q4 2020.
Thanks for all the hard work on the CAFR in these trying covid times. See you
tomorrow.
Ron

Page 32

Page 33 of 229

TOWN OF LOS GATOS

MEETING DATE: 12/07/2020

COUNCIL FINANCE COMMITTEE
REPORT

ITEM NO: 4

DATE:

November 24, 2020

TO:

Council Finance Committee

FROM:

Laurel Prevetti, Town Manager

SUBJECT:

Receive Information on the Implementation of the Town Finance Commission

RECOMMENDATION:
Receive information on the implementation of the Town Finance Commission.
BACKGROUND:
On November 3, 2020, the residents of Los Gatos voted to approve ballot Measure A “A
Citizen’s initiative Measure to Establish a Town Finance Commission.” Among other items, the
initiative amends the Los Gatos Town Code to disband both the Finance Committee and Sales
Tax Oversight Committee.
The new Finance Commission is to be established consisting of seven (7) members – five (5)
voting citizen members and two (2) non-voting Council Members. Individual Town Council
members are responsible for appointing a citizen member. The initiative also stipulated
professional experience criteria for citizen appointees. The Finance Commission appointee
process will ensue after the certification of election results on December 8, 2020. In addition,
upon certification of the election results the current Finance Committee will be disbanded.
DISCUSSION:
Similar to other Council Boards, Committees, and Commissions, Finance Commission citizen
appointees will be selected through a competitive application and interview process. In
preparation for the election certification, the Town Attorney and Town Clerk have established
an application submittal process and tentative citizen appointee interview dates. The Finance
Commission application can be found at https://www.losgatosca.gov/385/Application-Process
and in Attachment 1. As stated in the application, interested applicants need to submit
applications before 4:00 p.m. Friday, January 8, 2021.
PREPARED BY:

Arn Andrews
Assistant Town Manager

Reviewed by: Town Manager, Town Attorney, and Finance Director

Page 33

110 E. Main Street Los Gatos, CA 95030 ● (408)354-6832
www.losgatosca.gov

Page 34 of 229

PAGE 2 OF 2
SUBJECT: Finance Commission Implementation
DATE:
November 24, 2020
DISCUSSION (continued):
Applications received after the deadline will be held for the next recruitment cycle. Interviews
for accepted applicants will be held Tuesday, January 19, 2021, tentatively scheduled at 5 p.m.
Applicants must interview to be considered for appointment. Upon completion of the
interview process, Council members will make their individual selections on January 19 based
on a predetermined ordering.
The Council member appointees to the Finance Commission as well as other Town Committees
and outside agencies will be considered at the December 15, 2020 Town Council meeting.
Attachment:
1. Finance Commission Application

Page 34

Page 35 of 229

TOWN OF LOS GATOS

BOARD, COMMISSION, COMMITTEE APPLICATION
Contact: Clerk Department

110 East Main Street, Los Gatos, CA 95030
(408) 354-6888 or [email protected]

General eligibility requirements: A resident of the incorporated limits of the Town
of Los Gatos. Other requirements may apply to specific Boards, Commissions, or
Committees.
If you would like to apply for more than one Board, Commission, or Committee, place a number
next to the Board, Commission, or Committee, in order of your preference, for which you would
like to apply. A separate application is required to be submitted for each Board, Commission,
or Committee you are applying for. Only applications for current openings will be considered
at this time. Applications for future openings will be kept on file for one year. Qualified
applicants will be notified for an interview with Town Council.
__ Arts and Culture Commission
__ Building Board of Appeals
__ Community Health and Senior Services Commission
__ Complete Streets and Transportation Commission
__ Finance Commission
__ General Plan Committee
__ Historic Preservation Committee
__ Library Board
__ Parks Commission
__ Personnel Board
__ Planning Commission

IMPORTANT NOTICES
Please note that all information provided on the application becomes a public record after
it is officially filed. All appointed applicants are required to file the Fair Political Practices
Commission (FPPC) Statements of Economic Interest (Form 700), which are also a public
record. Applicants appointed to the Planning Commission and Finance Commission are
also required to complete Ethics Training AB 1234 every two years.
CONTINUE TO NEXT PAGE
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ATTACHMENT1

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FINANCE COMMISSION MEMBER APPLICATION
Contact: Clerk Department

First Name

110 East Main Street, Los Gatos, CA 95030
(408) 354-6888 or [email protected]
Last Name

City

Street Address

Cell Phone

Work Phone

Zip

Home Phone

Employer

Job Title

How long have you lived in Los Gatos?
Are you a Registered Voter in the Town of Los Gatos?
Are you:
• A Certified Public Accountant, or
• A Chartered Financial Analyst, or
• Do you have a business, finance, economics or accounting degree?
Do you have at least five years experience in at least one of the following:
• Corporate, business, or government financial experience?
• Principal or officer at a financial auditing firm?
• Investment banking?
• Finance or budget management?

Yes

Yes
Yes
Yes

No
No
No

Yes
Yes
Yes
Yes

No
No
No
No

*If appointed your name, phone number, and email address will be made available to the public.

Please list all previously held elected or
appointed governmental positions.
Include the Position/Office held and the
associated dates.
(e.g. Mayor, City of San Jose, 1990-1994)

Please list any civic and/or charitable
organizations you have belonged to.
Include the Position/ Office held and the
associated dates.
(e.g. Coach, Little League, 1982-1989)

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Please list any schools that you have
attended or are currently attending.
Include your major subject area and/or
grade level. (e.g San Jose State University,
BA in History)

Why are you interested in serving on the
Finance Commission?

In your opinion, what are the key financial
issues facing the Town and why?

CONTINUE TO NEXT PAGE
Page 37

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Describe how you meet the required
qualifications of five years of experience in
at least one of the following:
a. Financial experience in a corporate,

business, or government setting;
b. Principal or officer at a financial auditing
firm;
c. Investment banking;
d. Finance or budget management;

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The application deadline is 4:00 p.m. Friday, January 8, 2021. Applications received after the deadline
will be held for the next recruitment.

Interviews will be held Tuesday, January 19, 2021, tentatively scheduled to begin at 5:00 p.m. You
will be notified via email of the interview time and be requested to RSVP no later than 4:00 p.m. Friday,
January 15, 2021. All applicants are required to be interviewed to be considered for appointment as a
Commissioner.
I understand the scheduled interview date and time is Tuesday, January 19, 2021, 5:00 p.m.
Signature:

Date:

IN COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT, IF YOU NEED SPECIAL ASSISTANCE TO
PARTICIPATE IN THE INTERVIEW PROCESS, PLEASE CONTACT THE CLERK DEPARTMENT AT (408) 354-6834.
NOTIFICATION 48 HOURS BEFORE THE MEETING WILL ENABLE THE TOWN TO MAKE REASONABLE
ARRANGEMENTS TO ENSURE ACCESSIBILITY [28 CFR §35.102-35.104]

Submit Via Email

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PAGE 5

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TOWN OF LOS GATOS

MEETING DATE: 12/7/2020

COUNCIL FINANCE COMMITTEE
REPORT

ITEM NO: 5

DATE:

November 30, 2020

TO:

Council Finance Committee

FROM:

Laurel Prevetti, Town Manager

SUBJECT:

Discuss and Provide Comments to the Town Council Regarding the Draft
Comprehensive Annual Financial Report for the Fiscal Year Ended June 30,
2020.

RECOMMENDATION:
Discuss and provide comments to the Town Council regarding the Draft Comprehensive Annual
Financial Report for the Fiscal Year Ended June 30, 2020.
BACKGROUND:
The Town contracts with an independent certified public accountant to examine the books,
records, inventories, and reports of all officers and employees who receive, handle, or disburse
public funds each fiscal year. The FY 2019/20 audit was performed by Badawi & Associates, an
experienced firm specializing in audit services for California public agencies. The firm also
prepared the Draft CAFR for the Town of Los Gatos (see Attachment 1).
The information contained in the CAFR provides detailed financial information which the Los
Gatos community and others can use to better understand the fiscal standing of the Town. In
addition, the financial information contained in the document is one element that the credit
rating agencies review annually to affix a credit rating for the Town’s outstanding debt
obligations. In 2020, Moody’s rating service affirmed the Town’s general credit rating of Aaa,
the highest rating possible.
DISCUSSION:
At the meeting, Town’s Independent Auditor will present to the Town Council Finance
Committee the draft audited Comprehensive Annual Financial Report (CAFR) dated June 30,
PREPARED BY:

Stephen Conway
Finance Director

Reviewed by: Town Manager and Assistant Town Manager

Page 40

110 E. Main Street Los Gatos, CA 95030 ● 406-354-6832
www.losgatosca.gov

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PAGE 2 OF 3
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020
DISCUSSION (continued):
2020. Staff and the Town’s independent auditor will be available for the Committee’s
discussion.
Highlights of the draft audited financial results include:
Independent Auditor’s Report (pages 13 through 15)
The auditor has given the Town’s financial statements a “clean” audit opinion for the year
ended June 30, 2020 (see the first paragraph on Page 14) giving reasonable assurance that the
financial statements are “free of material misstatement.”
Management’s Discussion and Analysis (MD&A) (pages 18 through 36)
Page 18 of the CAFR begins the MD&A section of the report wherein summaries are presented
for the Town on an entity-wide basis and fund type basis. Information is provided in this
section with a year-to-year view, explaining how fund balances have changed between fiscal
years ending June 30, 2019 and June 30, 2020. Information is also presented on the adopted
General Fund budget to actuals and any significant budget adjustments made during FY
2019/20 (page 31 through 33).
Statement of Net Position (page 40)
The Statement of Net Position serves as a useful indicator of a government’s financial position.
The Town had net assets of $114.85 million at fiscal year end as compared to $114.82 million
the prior year, an overall small increase of $30K over the prior fiscal year.
The largest portion of the net assets, $111.7 million, represents the Town’s investment in its
capital assets and infrastructure. Restricted assets of $7.1 million are resources that are subject
to external restrictions on how they may be used. As of June 30, 2020, unrestricted net
position reports a deficit of approximately $3.97 million. The unrestricted net position reported
the prior year was a deficit of approximately $4.64 million. The deficit in unrestricted net
position is primarily due to the Town’s outstanding long term pension and Other Post
Employment Benefit (OPEB) liabilities.
Basic Financial Statements (pages 39 through 96, including footnotes)
This section contains basic financial statements, including the “entity-wide” Statement of Net
Position and Statement of Activities, financial statements for the fund types including
Governmental Funds (such as the General Fund), Proprietary Funds, and the Private Purpose
Trust Funds (Redevelopment Successor Agency).
The footnotes section provides details on significant items such as the Town’s cash and
investments (Note 2 beginning on page 69), its long term obligations (Certificates of

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PAGE 3 OF 3
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020
DISCUSSION (continued):
Participation) related to bonded debt (Note 6 page 74), the net pension liability for both the
Town’s miscellaneous and safety pension plans (Note 9 page 78), and a discussion of the
Town’s other post-employment benefit plan (Note 10 page 88).
Required Supplementary Information (pages 98 through 102)
The Schedules of Pension Plan Contributions are provided in this section.
Supplementary Information (pages 104 through 119)
This section provides budget to actual information for “non-major” funds which represent less
than 10% of the Town’s total assets/liabilities/revenues or expenditures.
Statistical Section (pages 123 through 153)
This section presents demographic statistics and ten-year historical financial data for the Town,
including information on assessed valuations, fund balances, debt, property tax rates,
personnel (full-time equivalent) history, principle employers, and other financial and
demographic disclosures.
CONCLUSION:
Mr. Ahmed Badawi, C.P.A., managing partner of Badawi & Associates, will be participating in
the Committee meeting. If you have questions prior to the meeting, please contact Director
Conway and staff will share responses to the questions to the full Committee. Upon review and
discussion of the draft CAFR by the Council Finance Committee, the final CAFR is scheduled for
Town Council consideration on Tuesday, December 15, 2020. The Committee is welcome to
provide comments to the Council.
FISCAL IMPACT:
There is no fiscal impact to provide recommendation to the Town Council for this report.

Attachment:
1. Draft Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2020.

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C A L I F O R N I A

Comprehensive Annual Financial Report
Page 43

For the Fiscal Year Ended June 30, 2020

Attachment 1

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20
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Cover Photos: Ken Benjamin and Liv Ames

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TOWN OF LOS GATOS
CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT

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FOR THE FISCAL YEAR ENDED
JUNE 30, 2020

PREPARED BY THE
OFFICE OF THE TOWN MANAGER

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TOWN HISTORY

The name Los Gatos comes from “El Rancho de Los Gatos.” A ranch established in 1839 by a
Mexican land grant and so named because of the large number of mountain lions in the area. In
1854, James Alexander Forbes purchased some of this land and built a flour mill. In 1860, the
first hotel was opened to provide a stage stop on the toll road which had been built between San
Jose and Santa Cruz.

Wheat production gave way to orchards, and rapid growth ensued when the railroad reached
Los Gatos in 1878. The residential subdivisions of Broadway, Bayview, Fairview, and Almond
Grove were built in the 1880’s. By 1887, the population had grown to 1,500 and Los Gatans voted
to incorporate.

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Fruit industries faded slowly during the Depression and World War II, but the postwar period
brought an influx of people and associated residential and commercial development. Highway
17 was constructed through the center of Town. Growth levelled off in the early 1970’s, leaving
Los Gatos with its small‐town atmosphere and pedestrian‐oriented downtown.
Because of its distance from other centers of population, Los Gatos developed as a complete
community including residential, business and industrial elements. Preserving Los Gatos as a
complete and well balanced community has been and remains a prominent goal of the
community. From the first 100‐acre Town site in 1890 with a population of 1,652, Los Gatos grew
slowly so that by 1963 the area was 6.3 square miles, with a population of 11,750. Today Los
Gatos covers between 14 and 15 square miles and has a population of 31,493. This growth over
the last 80 years resulted in a community with vibrant business districts, well maintained
neighborhoods, and lovely parks and open spaces.
As it exists now, the Town’s boundaries encompass a wide variety of terrain, ranging from level
land to steep and densely wooded hillsides. The sharp visual contrasts among these features and
charming architecture create a picturesque setting of the Town. In the midst of the growth of
Silicon Valley, Los Gatos attracts people with a preference for the Town’s distinctive, high quality
natural and urban environment.

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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
TABLE OF CONTENTS
INTRODUCTORY SECTION:
Letter of Transmittal ...........................................................................................................................
Organization Chart..............................................................................................................................
Principal Officers.................................................................................................................................
GFOA Award .......................................................................................................................................

1
7
8
9

FINANCIAL SECTION:
Independent Auditor’s Report ..........................................................................................................

Management’s Discussion and Analysis............................................................................................

Basic Financial Statements:

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Government‐Wide Financial Statements:
Statement of Net Position .......................................................................................................
Statement of Activities.............................................................................................................
Fund Financial Statements:
Governmental Funds:
Balance Sheet .......................................................................................................................
Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position ................................................................................................
Statement of Revenues, Expenditures and Changes in Fund Balances ................................
Reconciliation of Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities .........................................
Statement of Revenue, Expenditures and Changes in Fund Balances –
Budget and Actual (GAAP) General Fund .........................................................................
Proprietary Funds – Internal Service Funds:
Statement of Net Position ....................................................................................................
Statement of Revenue, Expenses and Changes in Net Position ...........................................
Statement of Cash Flows ......................................................................................................
Fiduciary Funds:
Statement of Fiduciary Net Position ....................................................................................
Statement of Changes in Fiduciary Net Position ..................................................................
Notes to the Basic Financial Statements .........................................................................................

40
41

44
45
46
47
48
50
51
52
54
55
58

Required Supplementary Information:

Schedule of Proportionate Share of Net Pension Liability:
CalPERS Misc. Agent‐Multiple Employer Plan .............................................................................
CalPERS Safety Cost‐Sharing Plan ................................................................................................
Schedule of Pension Plans Contributions
Miscellaneous Agent Multiple‐Employer Plan ............................................................................
Safety Cost‐Sharing Plan ..............................................................................................................
Actuarial Methods and Assumptions used for Pension Actuarially
Determined Contributions...........................................................................................................
Schedule of Changes in Net OPEB Liability and Related Ratios ......................................................
Schedule of Employer Contributions ..............................................................................................
Actuarial Methods and Assumptions used for 2019/20 OPEB Actuarially
Determined Contribution ............................................................................................................

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98
99
100
100
100
101
101
102

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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
TABLE OF CONTENTS
SUPPLEMENTARY INFORMATION:
Major Governmental Fund Schedules (other than the General Fund):
Schedule of Revenue, Expenditures and Changes in Fund Balance –
Budget and Actual (GAAP) Appropriated Reserves Fund ............................................................

106
108
110

Nonmajor Governmental Funds:
Combining Balance Sheets ..............................................................................................................
Combining Schedule of Revenues, Expenditures and Changes in
Fund Balances ..............................................................................................................................
Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual (GAAP)..............................................................

105

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Internal Service Funds:
Combining Statement of Net Position ............................................................................................
Combining Statement of Revenue, Expenses and Changes in Net Position ...................................
Combining Statement of Cash Flows ..............................................................................................
Private Purpose Trust Funds:
Combining Statement of Fiduciary Net Position .............................................................................
Combining Statement of Changes in Fiduciary Net Position...........................................................

114
115
116

118
119

STATISTICAL SECTION:

Net Position by Component ............................................................................................................
Changes in Net Position ..................................................................................................................
Fund Balances, Governmental Funds..............................................................................................
Changes in Fund Balances, Governmental Funds ...........................................................................
Assessed Value and Estimated Actual Value of Taxable Property ..................................................
Direct and Overlapping Property Tax Rates ....................................................................................
Principal Property Tax Payers .........................................................................................................
Property Tax Levies and Collections................................................................................................
Ratios of Outstanding Debt by Type ...............................................................................................
Direct and Overlapping Governmental Activities Debt ...................................................................
Legal Debt Margin ...........................................................................................................................
Demographic and Economic Statistics ............................................................................................
Principal Employers .........................................................................................................................
Full‐time Equivalent Town Government Employees by Function/Program ...................................
Operating Indicators by Function/Program ....................................................................................
Capital Assets Statistics by Function/Program ................................................................................

125
126
128
130
132
133
134
136
137
138
140
142
144
148
150
152

OTHER INDEPENDENT AUDITOR’S REPORTS:
Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards .................................................................................................

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INTRODUCTORY SECTION

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TOWN OF LOS GATOS
OFFICE OF THE TOWN MANAGER
(408) 354‐6832
FAX: (408) 399‐5786

December XX, 2020
Honorable Mayor and Town Council,

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I am pleased to submit the Town’s Comprehensive Annual Financial Report (CAFR) for
the fiscal year ending June 30, 2020. This report was prepared by the Finance
Department in conjunction with the Town Manager’s Office, which assumes
responsibility for the accuracy of the data and the completeness and fairness of the
presentation and all disclosures. The information in this report is intended to present
the reader with a comprehensive view of the Town’s financial position and the results of
its operations for the fiscal year ending June 30, 2020, along with additional disclosures
and financial information designed to enable the reader to gain an understanding of the
Town’s financial activities.
This report was prepared as prescribed in Governmental Accounting Standards Board
(GASB) Statement No. 34, Basic Financial Statements and Management’s Discussion and
Analysis for State and Local Governments (GASB 34). This GASB Statement requires
management to provide a narrative introduction, overview, and analysis to accompany
the basic financial statements in the form of a Management’s Discussion and Analysis
(MD&A). This letter of transmittal is designed to complement the MD&A and should be
read in conjunction with it. The MD&A can be found immediately following the
Independent Auditor’s Report.
This Comprehensive Annual Financial Report is organized into three sections:
I. The Introductory Section includes the table of contents, letter of transmittal,
listing of elected officials, Town administrative personnel, and an organization
chart delineating organizational structure.

II. The Financial Section includes the independent auditors’ opinion, the MD&A, the
basic financial statements, notes to the financial statements, combining
statements of non‐major funds, and required supplemental information.
III. The Statistical Section includes both financial and non‐financial data about the
Town.
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Mayor and Town Council
December xx, 2020
The Comprehensive Annual Financial Report is prepared in accordance with Generally
Accepted Accounting Principles (GAAP) promulgated by the Governmental Accounting
Standards Board (GASB) and includes the audit report of Badawi & Associates, the
Town’s independent certified public accountants.
This Comprehensive Annual Financial Report will be submitted to the Government
Finance Officers Association for consideration of its Achievement of Excellence Award in
financial reporting certification. This award is granted only to entities whose reports
meet the highest standards of municipal financial reporting.
THE REPORTING ENTITY AND ITS SERVICES

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Los Gatos is a general law Town, incorporated under the laws of California in 1887. The
Town is located in the foothills and level terrain of the Santa Clara Valley, in an area
referred to internationally as “Silicon Valley.” From the first 100‐acre Town site and an
1890 population of 1,652, Los Gatos grew slowly so that by 1963 the area was 6.3
square miles, with a population of 11,750. Today Los Gatos covers approximately 15
square miles with a population of 31,439. This growth over the last 80 years resulted in
a community with vibrant business districts, well maintained neighborhoods, and lovely
parks and open spaces. Preserving the unique charm of Los Gatos as a complete and
well‐balanced community while meeting its economic and housing needs has been, and
remains a key goal for the Town.
The Town maintains a Council‐Manager form of government which combines the strong
political leadership of elected officials with the strong managerial experience of an
appointed Town Manager. Five Council members are elected at large for staggered
four‐year terms to govern the Town. The Mayor and Vice‐Mayor are appointed by the
Council from its own ranks and serve for one‐year terms. The Town Manager and Town
Attorney are appointed and supervised directly by the Council. The Town Manager
oversees all municipal services such as Public Safety, Parks and Public Works,
Community Development, Library, and Town Administration including Human
Resources, Information Technology, and Finance.
ECONOMIC CONDITIONS AND OUTLOOK

Like other communities across the nation and Silicon Valley, the Town was confronted
with the societal and economic realities associated with the global COVID‐19 pandemic.
The Town entered the new Fiscal Year (FY) in a relatively strong economic environment;
however, from the initial COVID‐19 cases reported in January 2020, to the ultimate
sequestering of the local economy in March, FY 2019/20 concluded against recessionary
winds. Economically sensitive revenues, such as Sales Tax and Transient Occupancy Tax
(TOT), experienced immediate contractions as the public was only allowed limited
access to businesses, and leisure and business travel temporarily ceased. The Town’s
Property Tax revenues remained relatively strong into the close of the FY as inventories

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Mayor and Town Council
December xx, 2020
of available homes remained low and suburban communities benefited from a flight
from more urban markets.
General Fund revenues (not including transfer‐ins) decreased 2.1% from the prior year.
Property tax revenues remain a significant source of support for General Fund
operations, comprising approximately 43% of General Fund revenues in FY 2019/20. For
FY 2019/20 property tax receipts of $18.3 million were $1.0 million higher than the prior
year’s collection, reflecting the continued desirability of the Town, its environment,
culture, and educational opportunities. While the impacts of remote work and work
from home on property values are yet to be fully understood, it should be noted that
valuation projections by the Santa Clara County Assessor’s Office in the 2020‐2021
Annual Report caution that 2021 could be a significant transition year for real estate
values.

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The Town relies heavily on sales tax revenues to support General Fund operations,
comprising approximately 18% of General Fund revenues in FY 2019/20. For FY 2019/20
sales tax receipts of $7.5 million were $0.6 million lower than the prior year’s collection.
Sales tax revenues decreased because of the unprecedented disruption to business
activity due to COVID‐19 mitigation restrictions. One bright spot in sales tax receipts
were steady increases in the Town’s 1/8 cent District Sales Tax as the local tax captured
a larger share of the increase in online sales during shelter‐in‐place.
The Town is preparing for continued increases in pension employer rates. The Town’s
pension plans over the past several decades, like all other CalPERS participants, have
experienced unfavorable investment returns relative to the assumed rate of return,
changes in actuarial assumptions, and demographic shifts which have outweighed any
positive plan experiences. Recognizing these challenges, the Council has adopted or
programmed additional discretionary pension funding strategies in excess of $20.0
million including the first additional discretionary payment (ADP) directly to CalPERS of
$4,753,965 in October 2019. In addition, the Council initiated the prefunding of other
post‐employment benefit (OPEB) obligations beginning from zero funding status in 2009
leading to the current 67.9% funding status from zero in 2019.
While the Town Council has been proactively working to manage the anticipated cost
escalation in its pension and OPEB expense, pension and OPEB related obligations
continue to be one of the Town’s greatest long‐term cost drivers. Data from the June
30, 2019 actuarial valuations show total Net Pension ($57.2) and OPEB ($9.1) liabilities
of $66.3 million.
Readers are cautioned that in considering the amount of the pension and OPEB
liabilities, and other actuarial data as reported by CalPERS and the Town’s actuary, this
is “forward looking” information. Such “forward looking” information reflects the
judgment of the Board of Administration of CalPERS, its actuaries, and the Town’s
actuary as to the amount of assets which the pension and OPEB plans will be required to

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Mayor and Town Council
December xx, 2020
accumulate to fund future benefits. These judgments are based upon a variety of
assumptions, one or more of which may prove to be inaccurate or that may change with
the future experience of the pension and OPEB plans. The actuarial methods and
assumptions could be changed by CalPERS and the Town’s actuary at any time based on
their professional judgement. Such changes could cause the Town’s obligations to the
pension and OPEB plans to be higher or lower in any particular year. This sensitivity to
changes in actuarial assumptions is especially evident in changes to the Discount Rate as
illustrated in Note 9 and changes to Healthcare Trend and Discount rates as illustrated in
Note 10.

For detailed information about the Town employees’ retirement plan please refer to
Note 9 of the Notes to Basic Financial Statements Section. For detailed information
about the Town OPEB obligations please refer to Note 10 of the Notes to Basic Financial
Statements Section. In addition, the Town provides extensive information on pension
and OPEB information on the Town’s website.

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Despite the reductions to various sources of local government revenue such as the
elimination of redevelopment tax increment in 2012 and increasing costs associated
with unfunded federal and state mandates, the Town has managed to maintain high
service levels through increased efficiency and prudent fiscal management as evidenced
by General Fund’s resilience through the unprecedented events of FY 2019/20. The
Town continues its outreach to the community, the League of California Cities, and local
legislators to prevent and limit any future revenue losses and mandated cost increases.
MAJOR CAPITAL PROJECT INITIATIVES

Major capital asset and infrastructure initiatives were once again a priority for the fiscal
year. Approximately $7.8 million in Town infrastructure and other capital asset
improvements were expended in FY 2019/20, including $5.8 million in street
improvement projects Town‐wide to major arterials and neighborhood collector streets
to improve the pavement condition of the Town’s streets. Other investments included
$0.7 million in equipment purchases, $0.4 million in traffic signal improvements, $0.4
million in building improvements, ad $0.3 million in bicycle and pedestrian projects to
enhance user safety.
Additional infrastructure improvements are scheduled in accordance with the Town’s
approved Capital Improvement Plan, and will continue into future years. All of these
improvements are funded either through grants, or via revenues accumulated from
prior year budget savings and/or excess revenues per Town Council policy.

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Mayor and Town Council
December xx, 2020

ACCOUNTING SYSTEM AND BUDGETARY CONTROL
The effectiveness of internal control is a primary consideration in the development and
evaluation of the Town’s accounting system. Internal accounting controls are designed
to provide reasonable but not absolute assurance regarding:
1) safeguarding of assets against loss from unauthorized loss or disposition,
2) accuracy and reliability of accounting data, and
3) adherence to managerial policy.

The concept of reasonable assurance recognizes that the cost of internal control should
not outweigh the benefits, and that management must make estimates and judgments
in evaluating these costs and benefits.

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All governmental fund types use the modified accrual basis of accounting. This means
that revenues are recorded when measurable and available rather then when received.
Measurable means the amount can be determined and available means the cash is
received within sixty days after the end of the fiscal year. Expenditures are recorded
when the liability is incurred, rather than when paid. An exception to this rule is
principal and interest on general long‐term debt, which is not recognized by debt service
funds until it is due.
Proprietary (internal service) funds are accounted for using the accrual basis of
accounting, similar to that used by corporations. Proprietary fund revenues are
recognized when they are earned rather than when the cash is received, even if the cash
is not available and proprietary fund expenses are recognized when they are incurred.
With the implementation of GASB 34, the Town prepares its Basic Financial Statements
on the accrual basis.
Internal accounting procedures have been developed to provide reasonable assurance
regarding the safeguarding of assets and the reliability of financial records for preparing
financial statements and maintaining asset accountability.
An annual operating budget, five‐year budget forecast, and five‐year capital
improvement plan is adopted by the Town Council consistent with generally accepted
accounting principles. All budget adjustments and transfers between funds must be
approved by the Town Council during the fiscal year. The Town Manager is authorized
to transfer unencumbered appropriations within a budget category, within a fund.
Appropriations are valid for each fiscal year and lapse at year‐end.

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Mayor and Town Council
December xx, 2020

AWARDS

INDEPENDENT AUDIT

The Town’s Comprehensive Annual Financial Report for the fiscal year ended June 30,
2019 was awarded a Certificate of Achievement for Excellence in Financial Reporting by
the national Government Finance Officers Association. This is the 25th consecutive year
that the Town has received the award. This prestigious award recognizes the report’s
conformance with strict accounting and reporting standards established by the
Government Accounting Standards Board and government finance organizations. This
award is annual in nature and valid for one year only. This year’s report will be
submitted for award consideration by this organization, as we believe it continues to
meet these standards.

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State law requires an annual audit of the Town’s accounts by independent certified
public accountants. The accounting firm of Badawi & Associates performs this function
for the Town of Los Gatos, and their report is included in the financial section of the
CAFR.
ACKNOWLEDGEMENTS
The preparation of this Comprehensive Annual Financial Report, as presented herein, is
the result of the combined efforts and dedicated services of the excellent staff of the
Department of Finance. Special thanks to Gitta Ungvari, Finance and Budget Manager,
Mark Gaeta, Accountant; Melissa Ynegas, Finance Analyst; Diane Howard, Finance
Analyst; and Maurice De Castro, Accountant and Finance Analyst for their efforts in
preparing this report.
Respectfully submitted,

____________________________
Laurel Prevetti
Town Manager

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___________________________________
Stephen D. Conway
Director of Finance

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TOWN OF LOS GATOS ORGANIZATIONAL CHART FY 2019/20
RESIDENTS of LOS GATOS

ELECTED
TOWN COUNCIL

BOARDS &
COMMISSIONS

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ASSISTANT
TOWN MANAGER

TOWN MANAGER

TOWN ATTORNEY

COMMUNITY
DEVELOPMENT

CDD Administration
Development Review
Code Compliance
Inspection Services
Advanced Planning
BMP Housing Program

HUMAN
RESOURCES

Recruitment
Benefits Management
Training
Employee Relations
Organizational Development

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POLICE

Police Administration
Records/Communications
Patrol
Investigations
Traffic
Support Services
Parking Management

FINANCE

General Ledger
Accounts Payable
Accounts Receivable
Payroll
Business License Tax
Purchasing
Budget Administration
Financial Reporting
Treasury & Investments

PARKS &
PUBLIC WORKS

PPW Administration
Park Services
Engineering Development
Engineering Program
Streets & Signals
Building Maintenance
Landscape & Lighting
Environmental Services

CLERK &
ADMINISTRATIVE
PROGRAMS

Records Management
Boards & Commissions
Election Coordination
Claims & Insurance
Customer Service Center
Legislative Coordination
Public Information
Cable/Broadcasting Management
Arts & Culture
Community Grants

LIBRARY

Library Administration
Reference Services
Children's Program
Reading/Literacy Program
Collection Maintenance
Circulation & System
Administration
Los Gatos History Program

INFORMATION
TECHNOLOGY

Technology Support
IT Systems Management
Technology Planning &
Implementation
Website Management

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TOWN OF LOS GATOS
PRINCIPAL OFFICERS
JUNE 30, 2020
TOWN COUNCIL
Marcia Jensen
Barbara Spector
Rob Rennie
Marico Sayoc

Mayor
Vice Mayor
Council Member
Council Member

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COUNCIL APPOINTEES

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Town Manager
Town Attorney

Laurel Prevetti
Robert Schultz

APPOINTED OFFICIALS
Assistant Town Manager
Chief of Police
Community Development Director
Parks and Public Works Director
Library Director
Finance Director
Human Resources Director

Arn Andrews
Peter Decena
Joel Paulson
Matt Morley
Ryan Baker
Stephen Conway
Lisa Velasco

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Government Finance Officers Association

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Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to

Town of Los Gatos
California

For its Comprehensive Annual
Financial Report
For the Fiscal Year Ended
June 30, 2019

Executive Director/CEO

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FINANCIAL SECTION

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INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the Town Council of the
Town of Los Gatos
Los Gatos, California
Report on the Financial Statements

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Management’s Responsibility for the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the Town of Los Gatos, California, as of and for the year ended June 30,
2020, and the related notes to the financial statements, which collectively comprise the Town’s basic financial
statements as listed in the table of contents.

Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit
in accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no
such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.

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To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
Page 2
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, each major fund, and the aggregate remaining fund information
of the Town as of June 30, 2020, and the respective changes in financial position and, where applicable, cash flows
thereof for the year then ended in accordance with accounting principles generally accepted in the United States of
America.
Other Matters
Required Supplementary Information

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Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, budgetary comparison information, pension‐related schedules and OPEB‐related
schedules on pages 18‐36, 48, and 98‐102 be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental Accounting
Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied certain limited
procedures to the required supplementary information in accordance with auditing standards generally accepted in
the United States of America, which consisted of inquiries of management about the methods of preparing the
information and comparing the information for consistency with management’s responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do
not express an opinion or provide any assurance on the information because the limited procedures do not provide
us with sufficient evidence to express an opinion or provide any assurance.
COVID‐19 Pandemic

As discussed in Note 15 to the basic financial statements, the City was impacted by the COVID‐19 pandemic during
the year. Our opinion is not modified with respect to this matter.
Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise
the Town of Los Gatos, California’s basic financial statements. The introductory section, major funds (other than
General fund and Special revenue funds) budgetary schedules, combining and individual nonmajor fund financial
statements, and statistical section are presented for purposes of additional analysis and are not a required part of
the basic financial statements.
The major funds (other than General fund and Special revenue funds) budgetary schedules, combining and
individual nonmajor fund financial statements are the responsibility of management and were derived from and
relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial statements
and certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the
United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly

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To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
Page 3

stated, in all material respects, in relation to the basic financial statements as a whole.
The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of
the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards

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In accordance with Government Auditing Standards, we have also issued our report dated DATE, 2020 on our
consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s
internal control over financial reporting and compliance.

Badawi and Associates
Certified Public Accountants
Berkeley, California
DATE, 2020

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Management’s Discussion and Analysis

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MANAGEMENT’S DISCUSSION AND ANALYSIS

This section of the Town of Los Gatos’s Comprehensive Annual Financial Report (CAFR) presents
management’s discussion and analysis of the Town’s financial performance during the fiscal year
that ended on June 30, 2020. This analysis should be read in conjunction with the Transmittal
Letter at the front of this report and the accompanying Basic Financial Statements.
FINANCIAL HIGHLIGHTS
Town assets exceeded liabilities at the close of FY 2019/20 by $114,851,031 (total net
position).



The Town’s total net position increased by $32,000 during the fiscal year largely as a result of
a small excess of total governmental activities revenues above governmental expenses and
uses of financial resources.



Reported unrestricted net position is negative ($3,967,178) compared to ($4,642,167) the
prior year. The improvement in unrestricted net position resulted largely from the use of
approximately $8.0 million in unrestricted cash balances in the Town’s General Fund
Appropriated Reserve (GFAR) fund during the year to invest in the Town’s infrastructure and
equipment. Unrestricted net position represents all resources not included as net investment
in capital or restricted assets.

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

Page 70



The Town’s economically sensitive major revenues of sales tax and transient occupancy taxes
(TOT) were negatively impacted by the COVID‐19 pandemic and its related disruptions to
normal local economic activity. Sales taxes declined $0.6 million from the prior year while
TOT declined $0.8million from the prior period. The impacts to revenues began in March
2020, as shelter‐in‐place orders were instituted and continued through the end of the fiscal
year.



The decline in sales taxes and TOT was partially offset by continued growth in property tax
revenues ($1.0 million).



Total expenses increased $3.8 million from the prior year. The increase was driven by a
combination of



different factors detailed under the Government Activities Expenditures Discussion.



At the end of FY 2019/20, General Fund balance was $29,335,497 compared to $38,343,155
in the prior year. The ending fund balance of $29,335,497 represents approximately 66.3%
of General Fund expenditures for the current fiscal year excluding transfers‐out to the Town’s
capital projects funds and internal service funds. The reduction in General Fund ending fund
balances was primarily from:

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$4.8 million of General Fund restricted cash balances for an additional
discretionary payment (ADP) made to CalPERS in October 2019. The ADP to
CalPERS was to pay down a portion of the Town’s actuarially determined
unfunded pension liability beyond the mandated annual payments.
o Additionally, the General fund transferred approximately $7.0 to the Town’s
capital projects fund to provide funding for Town infrastructure improvements.
o $1.0 million transfer to the Town’s workers compensation internal service fund
from General Fund reserves to provide additional funding available to meet
ongoing claims activity.
o This reduction of General fund balance was partially offset by an approximate $3.1
million excess operating revenues above operating expenditures (excluding the
ADP payment and transfers out to other funds) for the year.
o

Total fund balances for all governmental funds at year end were $50,170,882, a decrease of
approximately $3.4 million or (6.4%) from the prior year. Governmental fund balances
decreased primarily due to:
o $7.8 million of capital outlay expenditures made from the Town’s capital projects
funds.
o $4.8 million ADP payment made to CalPERS in October 2019 from the General
fund.
o These uses were partially offset by the Town’s capital projects funds recording
approximately $2.2 million in increases from the prior year’s level of receipts of
intergovernmental (grants) revenues during the fiscal year.

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

At fiscal year end, the Town’s General Fund restricted cash assets included $669,978 placed
in its recently established Town’s IRS Section 115 Pension Trust.



The Town’s total capital assets increased by $4,157,637 to $111,700,225 net of depreciation.

OVERVIEW OF THE FINANCIAL STATEMENTS

The financial section of the CAFR contains the following information: Independent Auditor’s
Report, Management’s Discussion and Analysis (this section), the Basic Financial Statements, and
the Required Supplementary Information. The CAFR also includes a Supplementary Information
section, which presents combining and budgetary schedules for individual non‐major funds. The
Basic Financial Statements are comprised of three components: 1) Government‐Wide Financial
Statements, 2) Fund Financial Statements, and 3) Notes to the Financial Statements. The
Management’s Discussion and Analysis is intended to be an introduction to the Basic Financial
Statements.
Government‐Wide Financial Statements
The Government‐Wide Financial Statements present the financial picture of the Town from an
economic resources measurement focus using the accrual basis of accounting. An economic

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resources measurement focus is when a body of financial statements report all inflows, outflows,
and balances affecting or reflecting an entity’s net position.
The Statement of Net Position presents information on all of the Town’s assets and liabilities,
with the difference between the two reported as net position. Over time, increases or decreases
in net position may serve as a useful indicator of whether the financial position of the Town is
improving or deteriorating.
The Statement of Activities presents information showing how the Town’s net position changed
during the most recent fiscal year. All changes in net position are reported as soon as the
underlying event giving rise to the change occurs, regardless of the timing of related cash flows.
Thus, revenues and expenses are reported in this Statement for some items that will only result
in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).

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Both of the Government‐Wide Financial Statements distinguish functions of the Town that are
principally supported by taxes and intergovernmental revenues (governmental activities) from
other functions that are intended to recover all or a significant portion of their costs through user
fees and charges (business–type activity). The governmental activities of the Town include public
safety, parks and public works, community development, library, community services, debt
service, and general government. The Town has no business‐type activities for accounting
purposes.
Fund Financial Statements

A fund is a grouping of related accounts that is used to maintain control over resources that have
been segregated for specific activities or objectives. The Town, like other local governments,
uses fund accounting to ensure and demonstrate compliance with finance‐related legal
requirements. The funds of the Town are segregated into three categories: governmental funds,
proprietary funds, and fiduciary funds.
Governmental funds – The Town’s basic services are reported in governmental funds, which focus
on how money flows into and out of those funds and the balances left at year‐end that are
available for spending. These funds are reported using the modified accrual basis of accounting,
which measures cash and other financial assets that can readily be converted to cash. The
Governmental Fund Statements provide a detailed short‐term view of the Town’s general
government operations and the basic services it provides. Governmental fund information helps
determine whether there are more or fewer financial resources that can be spent in the near
future to finance the Town’s operations. Both the governmental fund balance sheet and the
governmental fund statement of revenues, expenditures, and changes in fund balances provide
a reconciliation to facilitate this comparison between governmental funds and governmental
activities.

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Proprietary funds – The Town maintains one type of proprietary fund: Internal Service Funds.
Proprietary funds are reported using the accrual basis of accounting. Internal Service Funds are
an accounting tool used to accumulate and allocate costs internally among the Town’s various
functions. The Town uses Internal Service Funds to account for its fleet of vehicles, computer
equipment, risk management activities, and other items. Internal Service Funds help smooth the
variability of certain expenses and insulate the Town from large unanticipated costs. The Internal
Service Funds are included within governmental activities in the Government‐Wide Financial
Statements.
Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of parties
outside the Town. Fiduciary funds are not reflected in the Government‐Wide Financial
Statements because the resources of those funds are not available to support the Town’s own
programs.

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Included in fiduciary funds is the Redevelopment Successor Agency private‐purpose Trust Fund
created upon the dissolution of the former Redevelopment Agency (RDA) in 2012. The Trust
Fund was created to hold the assets of the former Redevelopment Agency until they are
transferred for governmental purposes to other entities or distributed to the underlying taxing
jurisdictions in Santa Clara County after the payment of enforceable obligations. Additional
information on the dissolution of the RDA and this fiduciary fund can be found in Note 12 in the
notes to basic financial statements.
Notes to Basic Financial Statements

The notes provide additional information to facilitate a full understanding of the data provided
in the Government‐Wide and Fund Financial Statements. The notes to the Basic Financial
Statements can be found on pages 58‐120 of this report.
ANALYSIS OF GOVERNMENT‐WIDE FINANCIAL STATEMENTS

The Government‐Wide Financial Statements provide long‐term and short‐term information
about the Town’s overall financial condition. This analysis addresses the financial statements of
the Town as a whole, utilizing data from throughout the CAFR to describe the changes between
2019 and 2020.
Net Position Discussion

As shown below, the Town’s combined net position for the year ended June 30, 2020 was
$114.85 million, reflecting a small increase of approximately $30K to the prior years’ net
position of $114.82 million. In general, net position can serve as an important indicator of
whether the Town’s overall financial condition is improving or deteriorating over time.

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2019
$ 79,464,869
107,542,588
$ 187,007,457
13,521,349
17,002,972
66,521,231
$ 83,524,203
2,185,494

Town of Los Gatos
Net Position
Governmental Activites
For the Year Ended June 30, 2020
2020
Current and other Assets
$ 75,995,161
Capital Assets
111,700,225
Total Assets
$ 187,695,386
Deferred Outflows ‐ Pension/OPEB
17,441,310
Current Liabilities
18,093,199
Long‐Term Liabilities Outstanding
69,465,025
Total Liabilities
$ 87,558,224
Deferred Inflows ‐ Pension/OPEB
2,727,441
Net Position
Net Investment in Capital Assets
111,700,225
Restricted
7,117,984
Unrestricted
(3,967,178)
Total Net Position
$ 114,851,031

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107,542,588
11,918,688
(4,642,167)
$ 114,819,109

Current and other assets decreased $3.5 million from the prior year, primarily due to an
approximate $4.8 million decrease in restricted cash deposits. The decrease is primarily related
to the budgeted October 2019 additional discretionary payment (ADP) made by the Town to
CalPERS to reduce the Town’s actuarial unfunded pension liability beyond the mandated annual
payments. Capital assets increased $4.2 million net of depreciation expense totaling
approximately $3.9 million for the year, much of which is related to the infrastructure
investments made throughout the Town including:
 Approximately $5.8 million in street repair and resurfacing and curb and gutter work
Town‐wide,
 Approximately $0.7 million to complete the Almond Grove Street Rehabilitation
project,
 $0.3 million in bicycle and pedestrian improvements, and
 $0.2 million in energy efficiency upgrades made to the Town’s facilities among other
current year capital projects.
Current liabilities increased $1.1 million from the prior year primarily due to increases in accounts
payable ($400K) and accrued payroll ($285K), claims payable ($141K), and unearned revenue
($403K), offset by an decrease in deposits payable and amount due to other governments
($161K).
Long‐term liabilities increased $3.0 million. The increase is primarily due to the $3.6 million
increases in pension liabilities measured as of June 30, 2019. Due to the actuarial measurement

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date the ADP payment of approximately $4.8 made by the Town in October 2019 will be reflected
in the subsequent actuarial valuation. There was an additional increase of $343K for
compensated absences from the prior year. These increases were offset by a $900K reduction in
net other post employment benefits (OPEB) liabilities due to the continued additional
discretionary funding of the unfunded OPEB liability. See Note (9) and Note (10) of Notes to the
Financial Statements for more information on Town’s pension and other post retirement benefit
plans.
The largest segment of the Town’s net position, representing $111.7 million of net position,
reflects the net investment in capital assets (e.g., land, buildings, infrastructure, and equipment)
less accumulated depreciation and related outstanding debt used to acquire those assets. The
Town uses these capital assets to provide infrastructure and services to our residents. Therefore,
they do not represent a liquid financial resource to the Town and consequently are not readily
available for funding current obligations.

Restricted net position totaled approximately $7.1 million representing approximately $6.4
million for capital projects and $670K placed in trust for unfunded pension/OPEB obligations.

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As of June 30, 2020, unrestricted net position reports an approximate $675K increase from a
deficit of approximately (‐$4.64 million) the prior year to an ending deficit balance of
approximately (‐$3.97 million). The deficit in governmental unrestricted net position is primarily
due to the Town’s outstanding long term pension and OPEB liabilities. It is not uncommon for
governments with these types of long term liabilities to report a deficit in unrestricted net
position. A deficit in unrestricted net position is not the only measure to assess the Town’s fiscal
health, other factors can also be important to consider such as an expanding and growing
property tax base and the condition of the Town’s infrastructure including streets, parklands,
civic center and library, police operations building , neighborhood center, corporation yard and
other improvements.
Governmental Activities

Governmental activities are generally financed through taxes, intergovernmental revenues, and
other non‐exchange revenues. The Statement of Activities is intended to illustrate how the cost
of governmental activities is financed and determine the annual change in net position.

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Town of Los Gatos
Statement of Activities
For the Year Ended June 30, 2020
2020

10,288,351
3,854,188
850,113

$ 11,350,345
2,175,277
146,792

18,330,426
7,531,425
2,495,792
1,911,774
24,526
2,428,470
323,940

17,321,347
8,158,152
2,475,916
2,726,743
14,689
1,809,128
2,407,840

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Revenues:
Program revenues:
Charges for Services
Operating Grants and Contributions
Capital Grants and Contributions
General Revenues:
Property Taxes
Sales Taxes
Franchise Taxes
Other Taxes
Motor Vehicle in Lieu
Investment Earnings
Miscellaneous

2019

Total Revenues

48,039,005

48,586,229

20,446,188
11,803,005
7,405,368
5,001,958
3,347,523
3,041

16,635,726 (1)
10,627,716
8,163,991 (1)
5,064,637
3,059,294
684,673

48,007,083

44,236,037

Change in Net Position

31,922

4,350,192

Net Position, beginning

114,819,109

110,468,917

Net Position, Ending

$ 114,851,031

$ 114,819,109

Expenses:

Police Department
Parks and Public Works
General Government
Community Development
Library Services
Sanitation

Total Expenses

(1) In staff’s review of the prior year’s Statement of Activities it was discovered an error had been made
in the reversal of current year OPEB contributions which was allocated across all departments in error.
The credit should have only been charged to general governmental expenses in the prior year. This
correction has no effect on net position but changes the expense totals by function but no effect on
total expenses on the Statement of Activities for the prior fiscal year ending June 30. 2019.

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Governmental Activities Revenue Discussion
The Statement of Activities shown above details how the $48.0 million in Governmental Activities
revenue was derived. As categorized in the Statement of Activities as program revenues,
approximately $10.3 million or 21.4% of the revenues were recorded from those who directly
benefited from the program as a charge for service. Another $4.7 million or 9.8% of the revenues
were sourced from operating/capital grants and contributions. The remaining $33.0 million or
68.8% represents general revenues of the Town, including taxes, intergovernmental revenues,
and other miscellaneous revenues.
Program revenues increased by approximately $1.3 million from the prior year. This is largely
due to the Town’s effort to qualify for a number of new operational and capital grants from the
federal and state government.

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The Town’s revenues related to Governmental Activities decreased by approximately $1.9 million
from the prior year, a combination of approximately $1.0 million increase in property taxes and
$620K increase in investment earnings offset by approximately $630K declines in sales taxes,
$815K in other taxes the majority of the decline coming from loss of transient occupancy taxes,
and a $2.0 million reduction in miscellaneous revenues explained largely by the $1.8 million one‐
time gain on the sale recorded to miscellaneous revenues in the prior fiscal year associated with
the Winchester land sale.
Property tax is the largest individual revenue source for the Town and collections finished the
year $1.0 million higher than the previous year. This increase was mostly due to an increase in
secured taxes as strong demand for residential Town property continued, the approval of the
annexations of County pockets with tax revenues accruing to the Town effective FY 2019/20, and
new developments driving property values higher. It’s important to note that assessed valuations
for FY 2019/20 were established on the tax roll in January 2019 and collected in FY 2019/20 and
accordingly do not reflect COVID‐19 impacts to secured or unsecured property.
At $7.5 million, sales taxes represent the second largest individual revenue source for the Town.
Sales taxes decreased $0.6 million from the previous year largely due to the economic impacts
related to COVID‐19 which began in March 2020. The decline was slowed by the receipt for the
full fiscal year of FY 2019/20 of a new additional 1/8 cent District Sales Tax approved by the Los
Gatos voters in the fall of 2018.
Franchise taxes, the Town’s third largest revenue source, finished the year at $2.5 million,
reflecting only a very small increase $20K from the previous fiscal year.

Investment earnings increased $619K from the prior year. The primary factor responsible for this
growth was the increase in the value of portfolio investments due to the dramatic reduction in
prevailing interest rates as a result of the market’s reaction to COVID‐19. As interest rates decline
interest bearing investments increase in value which led to year end ($1.2M of which
approximately $600K had been recognized in the previous fiscal year) additional investment

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gains. These non‐cash or paper gains are recognized as investment income as a result of the
“mark to market value” procedure required by GASB 31.
Miscellaneous revenues decreased by approximately $2.0 million from the prior year. The
substantial decrease is due to a gain on sale of property recognized the prior fiscal year, the
largest segment of which was the approximate $1.9 million gain on sale of the Winchester land
sale finalized in May 2019.
Governmental Activities Expenses Discussion

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The Town provides residents and visitors with the following functional services: General
Government is comprised of six departments (Town Council, Town Clerk, Town Manager, Town
Attorney, Human Resources, Information Technology, and Finance) providing services in general
governance, information technology, executive management, economic vitality, legal, records
management, risk management, human resources, finance, and accounting. The Town’s Police
Department (public safety) provides general law enforcement, crime prevention, dispatch and
responses to emergency and non‐emergency calls for services. Parks and Public Works provides
engineering, construction and maintenance of public streets, street lighting, Town owned
buildings, parks, and related infrastructure; as well as traffic engineering and engineering
evaluation of private development proposals. Community Development provides planning and
zoning services; and building plan check and inspection; and code enforcement services. The
Library Department provides library, local history and cultural services to the community.
Total expenses increased $3.8 million from the prior year. The increase was driven largely by the
combination of the following factors:

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

Negotiated salary increases and subsequent benefit increases. All non‐sworn and
management employees received a 3% across the board salary increase and sworn
employees received a 4% across the board salary increase.



General Government expenses increased $1.2 million from the prior year. The largest
share of this increase is a result of a $416K allocation of this cost center’s share of Internal
Service Fund expenses over revenues in FY 2019/20 for which the prior year allocation
was a decrease to this cost center of $346K for its share of Internal Service Fund revenue
above expenses. The net difference between fiscal years for this allocation is
approximately $762K between fiscal years.



Public safety expenses grew by approximately $2.7 million from the prior year. There are
three chief drivers of this increase. First, $1.9 million of the increase is the pension
expense calculated for the Town’s safety risk pool pension plan for the current fiscal year
of $5,646,706 compared to $3,706,313 expensed in the prior fiscal year. Second, lower
position vacancies throughout the fiscal year compared to the prior year added to the
increase. Third, the cost of negotiated salary increases and related benefits including the

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increased pension contributions for miscellaneous or “non‐safety” pension plan positions
contributed.
Parks and Public Works expenses grew by approximately $0.7 million from the prior year
driven primarily by negotiated salary increases and related benefits, increased required
employer pension contributions, and increases to depreciation expenses for Town
infrastructure.



Community Development expenses decreased by $360K for the year due to
approximately $221K lower volume in “pass‐through” expenditures for private
development activity offsetting cost increases from negotiated salary increases and
related benefits and increased required employer pension contributions.



Library Services expense increased approximately $288K from the prior year primarily
from negotiated salary increases and related benefits and increased required employer
pension contributions.



Sanitation expenses for urban runoff decreased approximately $682K from the prior year.
In the prior fiscal year, the Town received program management fees from the West
Valley Sanitation District and expensed those fees for program management. Effective
fiscal year 2019/20, the West Valley Clean Water Authority receives its funding through
property tax bill assessments and related expenses are paid through the Authority.

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

FINANCIAL ANALYSIS OF THE TOWN’S FUNDS
Governmental Funds

Recognizing the financial resources measurement focus, the Town’s Governmental Funds
provide information on near‐term inflows and outflows, and balances of spendable resources.
This information is useful in assessing the Town’s financing requirements and may serve as a
useful measure of a government’s net resources available for spending at the end of the fiscal
year. Unlike the Statement of Activities which does not include transfers, the Governmental
Funds Balance Sheet does include transfers in and out.
Fund Balance – As discussed below, the Town’s Governmental Funds Balance Sheet reports the
following fund balances.
Restricted Fund Balance – The Town has $7.2 million in fund balance classified as restricted to
indicate that it has an externally imposed restriction on how the money may be spent. Of the
$7.2 million restricted fund balance, $0.7 million is in the General Fund representing amounts
placed in an IRS Section 115 trust dedicated as to use for pension expenses. $6.3 million is
restricted for capital projects, and $0.2 million for maintenance and repairs.

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Committed Fund Balance – The Town has $15.4 million in fund balance classified as committed
to indicate that the Town Council previously committed how the money will be spent. Of the
$15.4 million committed fund balance, $15.1 million is committed to the General Fund, of which
$10.9 million is for budget stabilization and catastrophe response and $4.5 million is for
additional discretionary payments toward pension and OPEB unfunded liabilities.
Assigned Fund Balance – The Town has $27.5 million in fund balance which is not restricted or
committed and is classified as assigned to indicate the Town Council’s intent to be used for
specific purposes. The largest assigned fund balance is the Reserve for Capital and Special
projects with a balance of approximately $10 million which is the primary funding source for the
Town’s five‐year capital improvement plan and special projects as budgeted by the Town.
Additional information on the Town’s Fund Balance can be found in Note (8) of the Notes to the
Financial Statements.

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Major Governmental Funds results for the year included the following:

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TOWN OF LOS GATOS
TOTAL GOVERNMENTAL FUNDS REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2020
2020
18,368,466
7,531,425
1,911,774
4,818,671
4,292,453
5,309,470
271,117
2,495,792
2,428,453
31,039
376,922

2019
17,359,435
8,158,152
2,726,742
5,173,876
2,310,655
5,584,504
510,266
2,475,916
1,809,164
32,960
579,755

47,835,582

46,721,425

REVENUES
Property Taxes
Sales Taxes
Other Taxes
Licenses & Permits
Intergovernmental
Charges for Services
Fines and Forfeitures
Franchise Fees
Interest
Use of Property
Other

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Total Revenues

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EXPENDITURES
Current:
Public Safety
General Government
Parks and Public Works
Community Development
Library Services
Sanitation and Other
Capital Outlay

15,793,815
13,024,146
8,168,599
4,473,790
2,700,802
162,837
7,861,972

14,945,407
8,004,254
7,962,135
4,577,495
2,493,617
628,240
7,888,914

Total Expenditures

52,185,961

46,500,062

Excess Revenues over Expenditures

(4,350,379)

221,363

Proceeds from sales of assets
Transfers in
Tranfers out
Total Other Financing Sources (Uses)

1,566
8,935,260
(8,628,719)
308,107

1,912,316
4,264,131
(3,323,756)
2,852,691

Net Changes in Fund Balances
Beginning/Ending Fund Balances As Restated
Ending Fund Balances

(4,042,272)
54,007,454
49,965,182

3,074,054
50,560,772
53,634,826

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Overall, Total Governmental Funds revenues finished $1.3 million or 2.8% higher than the prior
year, while total expenditures finished $5.7 million or 12.2% higher than the prior year. The net
result is that Governmental Funds income before transfers and other financing sources and uses
decreased by $3.8 million. Of Total Governmental Funds revenues, General Fund revenues
totaled $42. million or nearly 89% of the total $48.0 million. Total General Fund operating
revenues decreased by $900K, resulting from the net effect of:
 $1.0 million increase in property tax collections,
 $600K increase in investment income,
 $150K increase in intergovernmental revenues for the year,
 $800K decreases in other taxes,
 $600K decrease in sales tax, and
 $500K decrease in licenses and permits.

The declines in revenues from the prior year were impacted by the COVID‐19 pandemic and its
related restrictions which began in March 2020 and continued through the end of the fiscal year.
COVID‐19 and its associated economic impacts are expected to continue across the entire
spectrum of economic activity both locally and nationally.

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General Fund expenditures represent approximately $44.3 million of the Total Governmental
Fund expenditures of $52.2 million compared to $38.0 million of total Governmental Funds
expenditures of $46.5 million in the prior year. The increase in governmental funds expenditures
was led by an approximate $5.0M increase in general governmental and an $850K increase in
public safety expenditures from the prior year. The increase in general governmental
expenditures was largely attributable to a $4.8 million ADP paid in October 2019 to pay down an
additional portion of the Town’s actuarial unfunded pension liability beyond mandated annual
payments. Increases in public safety expenditures from the prior year were influenced by lower
levels of staff vacancy savings and associated increases in salary and benefits from the prior year.
Additionally, salary and benefit cost increases resulting from labor negotiations and mandated
increases in employer pension contribution rates were also a contributing factor to increases to
all Town departments and services.
Proprietary Funds

The Town’s Proprietary Funds (Internal Service Funds) presented in the Fund Financial
Statements section basically provide the same type of information in the Government‐Wide
Financial Statements and include individual segment information.
Total net position in the Internal Service Funds decreased $0.7 million in the current year. This
decrease reflects the use of approximately $788K transferred from the Town’s Facilities
Maintenance Fund to provide a funding source for the Town’s Capital projects for the Civic center
and Recreation building restroom renovations, waterproofing, deck railing repairs, and fire
suppression for the Town’s IT server room. Equipment Replacement net position was reduced
by scheduled fleet and equipment replacements totaling approximately $540K and transfers out

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of approximately $580K to be used as a funding source for the computer aided dispatch system
for the Police department ($525K) and the purchase of a new patrol vehicle ($55K). These uses
of net position were offset by an approximate $1.1 million transfer from the Town’s General Fund
to the Town’s Workers Compensation Internal Service fund.
GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to the Original Budget
Comparing the FY 2019/20 original budget (or adopted) General Fund expenditures of
$43,256,352 (excluding budgeted transfers‐out and debt payments that are reimbursed) to the
final adjusted budget of $47,997,219 indicates a net increase of approximately $4.7 million.
Additions to the original expenditure budget included adjustments approved by Town Council
throughout the fiscal year.
=
Final
Budget
$47,997,219

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$43,256,352

+
Misc. Adjustments &
Mid‐Year Adjustments
$4,740,867

Original Budget
GF Expenditures

The increase in General Fund appropriations occurred primarily from the following selected
budget adjustments made during the fiscal year.
















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Use of $4,232,500 of Pension/OPEB Reserve to make additional discretionary payments
(ADPs)
$122,820 expenditure budget adjustment for Transportation Analysis Guideline
development consultation services from available General Plan Deposit Account
$102,000 expenditure budget adjustment for police safety equipment utilizing grant
received by the Town
$54,797 budget expenditure for tasers and cameras from available Equipment
Replacement Fund balance
$50,000 expenditure budget increase due to increased water utility costs for Town Parks.
$47,000 for tree service expenses from available Tree Replacement account
$24,219 increase expenditures for Youth Collection to utilize Library Grant received by
the Town
$22,677expenditure budget adjustment traffic signal controller’s equipment and service
$22,669 increase to salary and benefits for the Town Manager and the Town Attorney
$16,165 expenditure budget increase to move temporary FTE hours inadvertently
budgeted in the Facilities Maintenance Internal Service Fund.
$15,000 to fund additional services by the Town of Los Gatos Chamber of Commerce
$10,800 expenditure budget increase for Emergency Operation Center equipment
utilizing grant received by the Town

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

$20,220 miscellaneous budget increase in various programs

Variance with the Final General Fund Budget
The General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance‐Budget
and Actual (GAAP) for Fiscal Year Ended June 30, 2020 reports an approximate overall favorable
variance with the final budget of approximately $2.1 million. This favorable variance was created
largely by the net effect of the following factors:
Approximately $661K of expenditures below budget for FY 19/20 work paid from
General Plan Update fees (a dedicated revenue source which funds this expenditure).
All savings in this budget are carried over to the next fiscal year to be continue the
General Plan Update project.



Actual revenues ended the fiscal year at $1.6 million below final budgeted revenues.
Unfavorable variances from budget were experienced beginning in March 2020 related
to the COVID‐19 pandemic and its related restrictions. The following economically
sensitive revenues experienced declines:
 An unfavorable variance of ($1.2 million) sales tax collections
 An unfavorable variance of ($1.0 million) Transient Occupancy Tax collections
 An unfavorable variance of ($619K) in licenses and permits
 An unfavorable variance of (213K) in fines and forfeitures
 An unfavorable variance of (202K) in charges for services

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

A favorable variance of $1.6 million in investment earnings for year. The Town received
additional investment earnings for the year in its pension/OPEB trust which was not
anticipated during FY 19/20 budget development and a positive trend of interest rates
leading to additional interest accrued in year end mark to market valuations.

Significant factors affecting actual expenditures include:

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

Community Development expenditures reflected a $1.3 million favorable variance
explained largely by staff vacancies with salary and benefit savings of approximately
$332K, and the General Plan Update expenditures being approximately $661K lower than
budgeted because the budget reflected the entire contract amount which has not been
fully executed through the end of the fiscal year. An additional $208K favorable variance
reflects the fiscal year actual activity in the Department pass through program that
depends on the timing and the volume of the development projects.



Public safety expenditures had a favorable variance of approximately $1.2 million. An
$839K saving is reflecting limited term vacancies in Police Officer, Police Record Specialist,

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and Dispatcher positions, and savings of $363K due to decreased service cost of crossing
guards and parking violation services, and travel activity due to the Shelter in Place order.
Administrative Services reflected a favorable balance of approximately $501K in large
measure due to savings in salary and benefits due to partial year vacancies in the Finance
and Clerk Departments positions and savings in special events cost due to cancellation of
events.



Parks and Public Works reflects a favorable variance of approximately $190K reflecting
partial vacancies during the year.



Library services reflected a favorable variance of $260K due mainly to salary and benefit
savings from staff vacancies in the Library Technology Specialist position and other
temporary vacancies.



CAPITAL ASSETS

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As of June 30, 2020, the Town’s investment in capital assets for its governmental activity is
recorded at $111,700,225 (net of accumulated depreciation). The investment in capital assets
includes land, buildings and improvements, infrastructure, construction in progress, and
machinery and equipment. Capital assets increased $4.2 million net of depreciation expense
totaling approximately $3.9 million for the year.
During FY 2019/20, the Town’s approximate $7.8 million investment in capital assets for the
current year represented approximately 4.1% of total assets for governmental activities. Major
capital asset events during the current fiscal year include the following:







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$5.8 million in street repair and resurfacing and curb and gutter work Town‐wide,
approximately $0.7 million to complete the Almond Grove Street Rehabilitation project;
$0.7 million in equipment purchases, including $0.5 million in vehicle fleet replacements,
and $0.2 million in mobile cash barriers, license plate recognition system, and other
building improvements;
$0.4 million in traffic signal improvements;
$0.4 million expended on building improvements, retaining walls, park improvements,
and parking lot improvement projects;
$0.3 million in bicycle and pedestrian improvements; and
$0.2 million in energy efficiency upgrades made to the Town’s facilities among other
current year capital projects.

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Town of Los Gatos
Net Investment in Capital Assets
For the Year Ended June 30, 2020
Governmental
Activities
$ 63,337,364
23,341,210
20,294,810
2,682,698
2,044,143
$ 111,700,225

Infrastructure
Buildings
Land
Equipment
Construction in Progress

Additional information on the Town’s capital assets is found in Note 5 of this financial report.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES

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A product of an ongoing examination of how the Town provides cost‐effective services, the
Town’s budget emphasizes outcomes or results for the community and allows for longer‐term
financial planning decisions.
During the development and adoption of the Town’s FY 2020/21 budget, the Town Council and
management considered the following factors:


In response to the economic impact of COVID‐19 pandemic, the Town modified its revenue
forecast downward in the FY 2020/21 Budget. For additional details, see Note 15. The FY
2020/21 operating budget is a balanced budget, with the use of General Fund reserves
dedicated for one‐time uses. The FY 2020/21 Budget reflect maintaining high service levels
with little to no increases in the employee headcount. The budget identified contingencies
should revenues come in below projected amounts. The Town is carefully monitoring its
revenues sources and will identify any modification at the mid‐year budget discussion.



The Town continues to focus on priority issues that involve maintaining public safety and
Town infrastructure including streets and parks; and providing library, community
development, and other services. These priorities are coordinated with other Core Goals that
protect the Town’s fiscal health and ensure cost efficient and effective delivery of Town‐wide
administrative services. The Town’s proactive approach to reducing operating expenditures,
identifying revenue enhancements, and implementing operating efficiencies has been an
effective fiscal approach.



Specific trends affecting the fund balance forecast include:
o General property tax collections represent approximately 32.1% (not including the State’s
property tax “backfill” shifts) of the Town’s General Fund revenues. Property tax
collections are expected to increase 3.9% in FY 19/20 from the prior year’s tax collections.

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This increase is primary due to the additional tax collection from the recently annexed
parcels. This forecast is based on data from the Santa Clara County Tax Assessor’s Office.
The Town closely monitor its actual collection and other legislative changes regarding
property tax. See Note 16 for more detail.
o The Town anticipates a decrease in general sales tax for FY 2020/21. Sales tax estimates
of $7.9 million for FY 2020/21 were budgeted reflecting a 0.2% decrease from the prior
year’s adopted sales tax budget.

o The Town’s investment portfolio experienced a slight decrease in its overall weighted
average annual yield, reducing from 2.05% at June 30, 2019 to 1.86% at June 30, 2020.
Prevailing interest rates at the end of fiscal year were at historic lows due to economic
impacts of the COVID‐19 pandemic and were anticipated to remain at these low levels for
the foreseeable future which will likely lower yields on the investment portfolio in the
future.

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o Transient Occupancy Tax (TOT) revenues are expected to be lower in FY 2020/21 as
personal and business‐related travel are susceptible to the economic impact of Covid‐19
pandemic.
o The Town’s pension plans over the past several decades, like all other CalPERS
participants, have experienced unfavorable investment returns, changes in actuarial
assumptions, and demographic shifts which have outweighed any positive plan
experiences. To address this unfunded status, the Town took proactive steps including
initiating the prefunding of OPEB obligations, budgeting and programming additional
discretionary pension payments to accelerate reduction of unfunded liabilities, and
recently partnering with the Town’s employee groups to eliminate the existing retiree
healthcare benefit for new employees. Even with these proactive steps, the Town
continues to be impacted by the continuing rising cost of pension related benefits. Over
the next five fiscal years, the Town’s five‐year forecast includes increasing pension costs
due to further changes in actuarial assumptions or lowering the discount rate. The Town’s
net pension liability is $24.7 million for the safety cost sharing plan and $32.5 million for
the miscellaneous plan based upon data from CalPERS. To illustrate the sensitivity of the
net pension liability to changes in the discount rate, CalPERS estimates that a 1 %
reduction in the discount rate from 7.15% to 6.15% would increase the total net pension
liability for both Miscellaneous and Safety by $26.7 million. Conversely, an increase in the
discount rate from 7.15% to 8.15% would decrease the total net pension liability for both
Miscellaneous and Safety by $22.0 million.
o In addition, CalPERS provides a hypothetical termination liability estimate of the plans
should the contract with CalPERS be terminated. The plan liability on a termination basis
is calculated differently from the plans’ ongoing funding liability. Since no future
employer contributions would be made in the hypothetical termination, benefit
payments are secured by risk‐free assets. For the Miscellaneous plan, a 3.25%

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termination return rate results in a $103.1 million termination liability. For the Safety
plan, a 3.25% termination return rate results in a $91.9 million termination liability.
o For detailed information about the Town employees’ retirement plan please refer to
Note 9 of the Notes to Basic Financial Statements Section.
Requests for Information

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This financial report is designed to provide residents, taxpayers, customers, investors, and
creditors with a general overview of the Town’s finances and to demonstrate the Town’s
accountability for the money it receives. Questions about this report or requests for any
additional information, should be directed to Stephen Conway, Director of Finance, at 110 East
Main Street, Los Gatos, California, 95030; email at [email protected]; or phone at (408)
354‐6828.

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20
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Basic Financial Statements

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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
GOVERNMENT WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES
The Statement of Net Position, Statement of Activities, fund financial statements and the notes to financial
statements comprise the Basic Financial Statements of the Town.
The purpose of the Statement of Net Position and the Statement of Activities is to summarize the entire financial
activities and financial position of the Town. They are prepared on the same basis of accounting (accrual) used
by most businesses, which means they include all the Town’s assets and liabilities, as well as its revenues and
expenses. The effect is the entire Town’s transactions are accounted for, regardless of when cash changes
hands, and all material internal transactions between funds have been eliminated.

The Statement of Net Position reports the Town’s total assets, deferred outflows of resources, liabilities, and
deferred inflows of resources, including capital assets and long‐term debt, and presents similar information to
the old balance sheet format while focusing on the composition of the Town’s net position (assets minus
liabilities). The Statement of Net Position summarizes the financial position of the Town’s governmental
activities in a single column.

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The Town’s governmental activities include the activities of the General Fund, Special Revenue Funds, Capital
Projects Funds and Debt Service Funds. These funds are serviced by the Town’s Internal Service Funds; therefore
internal service activities are consolidated with governmental activities after eliminating inter‐fund transactions
and balances.
The Statement of Activities reports increases and decreases in the Town’s net position and is prepared on the
full accrual basis of accounting, which means it includes all the Town’s revenues and expenses regardless of
when cash changed hands. This differs from the “modified accrual” basis of accounting used in the fund financial
statements, which reflect only current assets, current liabilities, available revenues and measurable
expenditures.
The format of the Statement of Activities presents the Town’s expenses before revenues and by program.
Program revenues (revenues generated directly by specific programs) are deducted from program expenses to
arrive at the net expense of each governmental program, which is offset by general revenues as listed before
the change in net position. From these components, the change in net position is computed and reconciled to
the Statement of Net Position.

Both of these statements include the financial activities of the Town.

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TOWN OF LOS GATOS
STATEMENT OF NET POSITION
JUNE 30, 2020

Governmental
Activities
ASSETS
Cash and investments
Restricted cash and investments
Receivables:
Accounts
Interest
Intergovernmental
Materials, supplies and deposits
Long term notes receivables
Long‐term prepaid pension obligations
Capital Assets:
Nondepreciable
Depreciable, net of accumulated depreciation

1,459,473
317,209
1,555,607
30,960
237,752

22,338,953
89,361,272

Total Assets

187,695,386
10,753,665
4,179,339
2,508,306

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DEFERRED OUTFLOWS OF RESOURCES
Pension contributions subsequent to measurement date
Pension related amounts
OPEB contributions subsequent to measurement date
Total Deferred Outflows of Resources

17,441,310

LIABILITIES
Accounts payable
Accrued payroll and benefits
Due to other governments
Unearned Revenue
Deposits
Claims payable
Long‐term liabilities:
Due within one year:
Compensated absences
Due in more than one year:
Net OPEB liability
Net pension liabilities
Compensated absences

3,772,685
1,700,778
37,969
4,596,403
6,736,953
1,248,411

335,642
9,126,387
57,230,935
2,772,061

Total Liabilities

87,558,224

DEFERRED INFLOWS OF RESOURCES
Pension related amounts
OPEB related amounts

2,098,547
628,894

Total Deferred Inflows of Resources

2,727,441

NET POSITION
Net investment in capital assets
Restricted for:
Capital projects
Pension
Lighting and landscape repairs and maintenance

111,700,225
6,257,756
669,978
190,250

Total Restricted Net Position
Unrestricted
Total Net Position
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71,609,969
784,191

7,117,984
(3,967,178)
The notes to the financial statements are an integral part of this statement.

114,851,031

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TOWN OF LOS GATOS
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Expenses

Total Governmental Activities

Program Revenues
Operating
Grants and
Contributions

7,405,368
20,446,188
11,803,005
5,001,958
3,347,523
3,041

1,470,324
1,549,207
3,674,222
3,351,753
11,522
231,323

48,007,083

10,288,351

12,290
952,045
2,824,638
15,864
49,351
‐

3,854,188

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General revenues:
Taxes:
Property taxes
Sales taxes
Franchise taxes
Other taxes
Motor vehicle in lieu
Investment earnings
Miscellaneous

Capital
Grants and
Contributions
8,258
9,100
832,755
‐
‐
‐

Governmental
Activities
$

Functions/Programs
Governmental Activities:
General government
Public safety
Parks and public works
Community development
Library services
Sanitation

Charges for
Services

Net (Expense)
Revenues and
Changes in
Net Position

850,113

Total general revenues

(33,014,431)

18,330,426
7,531,425
2,495,792
1,911,774
24,526
2,428,470
323,940
33,046,353

Change in Net Position

31,922

Net Position ‐ Beginning

114,819,109

Net Position ‐ Ending

Page 93

(5,914,496)
(17,935,836)
(4,471,390)
(1,634,341)
(3,286,650)
228,282

The notes to the financial statements are an integral part of this statement.

114,851,031

Page 94 of 229

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Page 95 of 229

TOWN OF LOS GATOS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
FUND FINANCIAL STATEMENTS &
MAJOR GOVERNMENTAL FUNDS
______________________________________________________________________________
Fund Financial Statements
The Fund Financial Statements only present major funds individually while nonmajor funds are combined in a
single column. Major funds are generally defined as having significant activities or balances in the current year.
Major Governmental Funds:
The Town determined that the following funds were major funds for the year ended June 30, 2020. Individual
non‐major funds can be found in the supplemental section.

General Fund is the general operating fund of the Town and is used to account for all financial resources except
those required to be accounted for in another fund.

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Appropriated Reserves Fund is used to account for resources provided for capital projects not fully funded from
other sources.

Page 95

Page 96 of 229

TOWN OF LOS GATOS
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2020

36,974,140
669,978

Total
Governmental
Funds

930,815
317,209
1,414,965
30,960
159,000

Total Assets

6,598,756
‐

‐
‐
480,888
‐
‐

40,497,067

957,782
1,696,044
37,969
1,732,822
6,736,953

19,277
‐
140,642
‐
78,752

Total Liabilities

62,524,217
669,978
950,092
317,209
2,036,495
30,960
237,752

19,432,209

6,837,427

66,766,703

2,561,695
‐
‐
2,798,786
‐

4,181
4,734
‐
64,855
‐

3,523,658
1,700,778
37,969
4,596,463
6,736,953

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LIABILITIES
Accounts payable
Accrued payroll and benefits
Due to other governments
Unearned revenue
Deposits

18,951,321
‐

General
ASSETS
Cash & Investments
Restricted Cash & Investments
Receivables:
Accounts
Interest
Intergovernmental
Other assets
Long term notes

Appropriated
Reserves

Other
Nonmajor
Governmental
Funds

11,161,570

5,360,481

73,770

16,595,821

DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue

‐

205,700

‐

205,700

Total deferred inflows of resources

‐

205,700

‐

205,700

‐
669,978
‐

88,937
‐
‐

6,168,819
‐
190,250

6,257,756
669,978
190,250

5,427,603
5,427,603
4,532,500

‐
‐
‐

5,427,603
5,427,603
4,532,500

410,000
‐
140,553
9,969,120
‐
1,218,732
1,539,408
‐
‐

‐
1,460,210
‐
‐
50,000
‐
‐
12,266,881
‐

‐
‐
‐
‐
‐
‐
‐
‐
404,588

410,000
1,460,210
140,553
9,969,120
50,000
1,218,732
1,539,408
12,266,881
404,588

29,335,497

13,866,028

6,763,657

49,965,182

FUND BALANCE
Restricted for:
Capital Outlay
Pension
Repairs and Maintenance
Committed to:
Budget Stabilization
Catastrophic
Pension/OPEB
Assigned to:
Open Space
Parking
Sustainability
Capital/Special Projects
Comcast PEG
Market Fluctuations
Compensated Absences
Capital Projects
Special Revenue Funds
Total Fund Balances

Total Liabilities and Fund Balances
Page 96

40,497,067

19,432,209

The notes to the financial statements are an integral part of this statement.

6,837,427

66,766,703

Page 97 of 229

TOWN OF LOS GATOS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO
THE GOVERNMENT‐WIDE STATEMENT OF NET POSITION‐GOVERNMENTAL ACTIVITIES
JUNE 30, 2020

Fund Balance ‐ Total Governmental Funds

49,965,182

Amounts reported for Governmental Activities in the Statement of Net Position are
different from those reported in the Governmental Funds because of the following:
CAPITAL ASSETS
Capital assets used in the Governmental Activities are not financial resources and,
therefore, are not reported in the Governmental Funds.

111,700,225

7,731,080

DEFERRED INFLOWS OF RESOURCES
Revenues from grants that are funded in this fiscal year that will not be collected for several
months after the Town's fiscal year end are not considered available and are classified as
deferreed inflows of resources in the governmental funds.

205,700

ALLOCATION OF INTERNAL SERVICE FUND NET POSITION
Internal service funds are used by management to charge the cost of management of
certain activities such as insurance, central services and maintenance to individual
governmental funds. The net current assets of the internal service funds are therefore
included as Governmental Activities in the Statement of Net Position.

14,933,004

DEFERRED INFLOWS OF RESOURCES
In the Government‐Wide financial statements certain pension amounts are deferred and amortized
over a period of time, however, in the governmental funds no transactions are recorded.

(2,098,547)

DEFERRED OUTFLOWS OF RESOURCES
Contributions subsequent to the measurement date will not be included in the calculation of the
Town's net OPEB liability of the plan year included in this report and have been deferred and
reported as deferred outflows of resources.

2,508,306

DEFERRED INFLOWS OF RESOURCES
In the Government‐Wide financial statements certain OPEB amounts are deferred and amortized
over a period of time, however, in the governmental funds no transactions are recorded.

(628,894)

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DEFERRED OUTFLOWS OF RESOURCES
Contributions subsequent to the measurement date will not be included in the calculation of the
Town's net pension liability of the plan year included in this report and have been deferred and
reported as deferred outflows of resources.

LONG‐TERM LIABILITIES
Long‐term liabilities are not due and payable in the current
period and, therefore, are not reported in the Governmental Funds.
Net Pension Liability
Net OPEB Liability
Compensated absences

Net Position ‐ Governmental Activities

Page 97

(57,230,935)
(9,126,387)
(3,107,703)

(69,465,025)
$

The notes to the financial statements are an integral part of this statement.

114,851,031

Page 98 of 229

TOWN OF LOS GATOS
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Appropriated
Reserves

General
$

‐
‐
‐
407,340
1,938,684
862,257
‐
‐
47,219
‐
69,110

38,041
‐
34,436
357,794
1,249,694
‐
‐
‐
115,100
‐
‐

42,715,907

3,324,610

1,795,065

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Total Revenues

18,330,425
7,531,425
1,877,338
4,053,537
1,104,075
4,447,213
271,117
2,495,792
2,266,134
31,039
307,812

Total
Governmental
Funds

REVENUES
Property Taxes
Sales Taxes
Other Taxes
Licenses & Permits
Intergovernmental
Charges for Services
Fines and Forfeitures
Franchise Fees
Interest
Use of Property
Other

Other
Nonmajor
Governmental
Funds

18,368,466
7,531,425
1,911,774
4,818,671
4,292,453
5,309,470
271,117
2,495,792
2,428,453
31,039
376,922
47,835,582

EXPENDITURES
Current:
General Government
Public Safety
Parks and Public Works
Community Development
Library Services
Sanitation and Other
Capital Outlay

13,024,146
15,793,815
8,139,106
4,473,790
2,700,802
‐
138,384

‐
‐
‐
‐
‐
‐
5,919,125

‐
‐
29,493
‐
‐
162,837
1,804,463

13,024,146
15,793,815
8,168,599
4,473,790
2,700,802
162,837
7,861,972

Total Expenditures

44,270,043

5,919,125

1,996,793

52,185,961

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES

(1,554,136)

(2,594,515)

(201,728)

(4,350,379)

OTHER FINANCING SOURCES (USES)
Proceeds from sales of assets
Transfers in
Transfers (out)

656
599,669
(8,053,847)

910
8,325,591
(433,952)

‐
10,000
(140,920)

1,566
8,935,260
(8,628,719)

Total Other Financing Sources (Uses)

(7,453,522)

7,892,549

(130,920)

308,107

NET CHANGES IN FUND BALANCES

(9,007,658)

5,298,034

(332,648)

(4,042,272)

BEGINNING FUND BALANCES, as restated

38,343,155

8,567,994

7,096,305

54,007,454

ENDING FUND BALANCES

Page 98

29,335,497

13,866,028

The notes to the financial statements are an integral part of this statement.

6,763,657

49,965,182

Page 99 of 229

TOWN OF LOS GATOS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES TO
THE GOVERNMENT‐WIDE STATEMENT OF ACTIVITIES ‐ GOVERNMENTAL ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
NET CHANGE IN FUND BALANCES ‐ TOTAL GOVERNMENTAL FUNDS

(4,042,272)

Amounts reported for Governmental Activities in the Statement of Activities are
different because of the following:
CAPITAL ASSET TRANSACTIONS

$ 7,995,690
(1,566)
(904)
(3,835,585)

4,157,635

Governmental funds report capital outlays as expenditures. However, in the Statement of
Activities the cost of those assets is capitalized and allocated over their estimated useful
lives and reported as depreciation expense.
Expenditures for capital assets (additions)
Proceeds from sale of assets
Loss on sale of assets
Current Year Depreciation

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UNAVAILABLE REVENUES
Revenues from grants that are funded in this fiscal year that will not be collected for several
months after the Town's fiscal year end are not considered available and are classified as
deferreed inflows of resources in the governmental funds.

205,700

OPEB PLAN CONTRIBUTIONS AND EXPENSE
In governmental funds, actual contributions to OPEB plans are reported as expenditures in the year
incurred. However, in the Government‐Wide Statement of Activities, only the current year OPEB
expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred
inflows and outflows of resources.

760,089

PENSION PLAN CONTRIBUTIONS AND EXPENSE
In governmental funds, actual contributions to pension plans are reported as expenditures in the year
incurred. However, in the Government‐Wide Statement of Activities, only the current year pension
expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred
inflows and outflows of resources.

(56,098)

ALLOCATION ON INTERNAL SERVICE FUND ACTIVITY
Internal service funds are used by management to charge the costs of certain activities to
individual funds. The net expense of the internal service fund is reported with governmental activities.

(723,363)

COMPENSATED ABSENCES EXPENSE
In governmental funds, compensated absences such as vacations and sick leave are expenditures
when taken. However, in the Government‐Wide Statement of Activities, the current year change in
the compensated absences liability is reported.

(269,769)

CHANGE IN NET POSITION ‐ GOVERNMENTAL ACTIVITIES

Page 99

The notes to the financial statements are an integral part of this statement.

31,922

Page 100 of 229

TOWN OF LOS GATOS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Original
Budget
$

42,837,572

18,352,880
8,723,000
2,857,285
2,458,520
4,672,534
1,165,460
4,649,235
483,950
629,774
35,793
286,077

18,330,425
7,531,425
1,877,338
2,495,792
4,053,537
1,104,075
4,447,213
271,117
2,266,134
31,039
307,812

44,314,508

42,715,907

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Total Revenues

17,970,500
8,001,917
2,855,730
2,458,520
4,672,534
988,441
4,454,336
483,950
629,774
35,793
286,077

Actual

REVENUES
Property Taxes
Sales Taxes
Other Taxes
Franchise Fees
Licenses & Permits
Intergovernmental
Charges for Services
Fines and Forfeitures
Interest
Use of Property
Other

Final
Budget

Variance With
Final Budget
Positive
(Negative)

EXPENDITURES
Current:
General Government:
Town Council
Town Attorney
Administrative Services
Non‐Departmental
Total General Government
Public Safety
Community Development
Parks & Public Works
Library Services
Capital Outlay
Total Expenditures

EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES

OTHER FINANCING SOURCES (USES)
Proceeds from sale of assets
Transfers In
Transfers Out

Total Other Financing Sources (Uses)
NET CHANGES IN FUND BALANCES

(1,598,601)

240,605
621,391
4,815,138
3,873,255
9,550,389
16,940,786
5,760,099
8,070,068
2,935,010
‐

240,605
628,793
4,881,105
8,201,520
13,952,023
16,995,583
5,760,099
8,328,730
2,960,784
‐

206,163
559,010
4,380,504
7,878,468
13,024,145
15,793,815
4,473,790
8,139,106
2,700,802
138,384

34,442
69,783
500,601
323,052
927,878
1,201,768
1,286,309
189,624
259,982
(138,384)

43,256,352

47,997,219

44,270,042

3,727,177

(418,780)

(3,682,711)

(1,554,135)

2,128,576

1,000
538,536
(7,753,140)

1,201,000
593,333
(8,053,847)

656
599,669
(8,053,847)

(1,200,344)
6,336
‐

(7,214,604)

(7,460,514)

(7,453,522)

(1,194,008)

(7,633,384)

$ (11,143,225)

(9,007,657)

BEGINNING FUND BALANCE

38,343,155

ENDING FUND BALANCE

Page 100

(22,455)
(1,191,575)
(979,947)
37,272
(618,997)
(61,385)
(202,022)
(212,833)
1,636,360
(4,754)
21,735

The notes to the financial statements are an integral part of this statement.

29,335,498

934,568

Page 101 of 229

TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
PROPRIETARY FUNDS – INTERNAL SERVICE FUNDS

Internal service funds account for Town operations financed and operated in a manner similar to a private
business enterprise. The intent of the Town is that the cost of providing goods and services to other Town funds
be financed through user charges to those funds.

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The concept of major funds does not extend to internal service funds because they are used for internal activities
only. In the Government‐Wide Statement of Activities, the net revenues and expenses of the internal service
funds are allocated to the Town Departments or programs that generated them, thus eliminating internal service
funds.

Page 101

Page 102 of 229

TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2020

Governmental
Activities
Internal Service
Funds
ASSETS
Cash & investments
Restricted cash & investments
Accounts Receivable

9,085,752
114,213
28,553
9,228,518

LIABILITIES
Current Liabilities:
Accounts payable

249,027

Total Assets

Total current liabilities

249,027

Noncurrent liabilities:
Claims payable

1,248,411

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Total noncurrent liabilities
Total Liabilities

Restricted for workers compensation claims
Unrestricted
Total Net Position

Page 102

The notes to the financial statements are an integral part of this statement.

1,248,411
1,497,438
114,213
7,616,867
7,731,080

Page 103 of 229

TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Governmental
Activities
Internal Service
Funds
OPERATING REVENUES
Charges for services
Interest
Use of money and property
Other local taxes
Other

Total Operating Revenues

3,209,982
7
165,652
34,437
596,752
4,006,830

OPERATING EXPENSES
Services and Supplies

3,549,649

Total Operating Expenses

4,423,652

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Operating Income

Transfers in (Note 4)
Transfers out (Note 4)

(416,822)

1,061,256
(1,367,797)

Net transfers

(306,541)

Change in Net Position

(723,363)

BEGINNING NET POSITION

8,454,443

ENDING NET POSITION

Page 103

The notes to the financial statements are an integral part of this statement.

7,731,080

Page 104 of 229

TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Governmental
Activities
Internal Service
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers
Payments to employees
Claims paid

Net cash provided (used) by operating activities

4,089,772
(3,620,655)
‐
(733,825)
(264,708)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers In/(Out)

(306,541)

Net cash provided (used) by noncapital financing activities

(306,541)

Net Increase(Decrease) in Cash and Investments

(571,249)

9,771,214

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Cash and investments ‐ beginning of year
Cash and investments ‐ end of year

9,199,965

9,085,752
114,213

9,199,965

(416,822)

FINANCIAL STATEMENT PRESENTATION
Cash & investments
Restricted cash & investments
Total

Reconciliation of Operating Income to Cash Flows
from Operating Activities:
Operating Income
Adjustments to reconcile operating income to cash flows
from operating activities:
Depreciation
Change in assets and liabilities:
Receivables, net
Material and supplies
Deferred outflows of resources
Net pension liabilities
Deferred inflows of resources
Accounts payable
Accrued payroll and benefits
Claims payable
Due to other government

Cash Flows From Operating Activities

Page 104

The notes to the financial statements are an integral part of this statement.

‐
82,942
‐
‐
‐
‐
(70,864)
‐
140,178
(142)
(264,708)

Page 105 of 229

TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
FIDUCIARY FUNDS

Trust funds are used to account for assets held by the Town as a trustee agent for individuals, private
organizations and other governments. The financial activities of these funds are excluded from the government‐
wide financial statements, but are presented in separate Fiduciary Fund financial statements.
Library Private Purpose Trust Fund was established to provide for the servicing of donations and bequests to
the Town's Library Program.

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RDA Successor Agency Private Purpose Trust Fund was established to account for the assets and liabilities
transferred from the dissolution of the Town’s former Redevelopment Agency and the continuing operations
related to existing Redevelopment Agency obligations.

Page 105

Page 106 of 229

TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2020

Total
Private
Purpose Trust
Funds
ASSETS
Cash and investments (Note 2)
Restricted cash and investments (Note 2)
Accounts receivable
Loans receivable (Note 3)
Capital assets (Note 5):
Nondepreciable
Depreciable, net of accumulated depreciation

2,343,505
1,987,621
8,750
575,425
5,257,422
1,423,701
11,596,424

Total Assets
LIABILITIES
Accounts payable
Due to other governments (Note 13)
Interest payable
Long‐term debt (Note 6):
Due within one year
Due in more than one year

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3,064
2
285,390

1,250,000
14,461,545

Total Liabilities

16,000,001

NET POSITION
Held in trust

(4,403,577)

Total Net Position

Page 106

(4,403,577)

The notes to the financial statements are an integral part of this statement.

Page 107 of 229

TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Total
Private
Purpose Trust
Funds
ADDITIONS
Property taxes
Investment earnings
Gifts, bequests and endowments
Other

Total Additions

1,949,284
53,652
61,809
1,905,024
3,969,769

DEDUCTIONS
Program expenses of former RDA
Interest and fiscal agency expenses of RDA
Library services
Depreciation expense

1,916,701
651,462
82,626
101,692

2,752,481

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Total Deductions
CHANGE IN NET POSITION

1,217,288

NET POSITION ‐ BEGINNING OF YEAR

(5,620,865)

NET POSITION ‐ END OF YEAR

Page 107

$
$

(4,403,577)
‐

The notes to the financial statements are an integral part of this statement.

Page 108 of 229

20
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Page 108

Page 109 of 229

20
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Notes to Basic Financial Statements

Page 109

Page 110 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Description of the Financial Reporting Entity
The Town of Los Gatos (the “Town”) operates under a Council‐Manager form of government and provides
the following services: public safety (including police and emergency management), parks and public works,
community development, library, public improvements, planning and zoning, and general administration
services. Redevelopment services were provided primarily through the Redevelopment Agency of the Town
which was dissolved on February 1, 2012.
The Town is largely a residential community located in the foothills of the Santa Cruz Mountains and was
incorporated as a municipal corporation in 1887. The Town’s population as of January 1, 2020 was 31,439.

As required by generally accepted accounting principles, these financial statements present the Town as the
Primary Government and any component units for which the Town is considered financially accountable.
B. Description of Blended Component Units

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The Town did not report any component units as a part of the primary government because the Town
Council was not the governing body of any entities and no separate entity provided services solely to the
Town.

C. Description of Joint Ventures and Public Entity Risk Pool

As described in Note 11, the Town participates in two joint ventures and public entity risk pool activities
through formally organized separate legal entities. The financial activities of the Pooled Liability Assurance
Network Joint Powers Authority (PLAN JPA) and the Local Agency Workers’ Compensation Excess Joint
Powers Authority (LAWCX) are not included in the accompanying basic financial statements as these boards
are separate from and independent of the Town administration.

D. Basis of Presentation

The Town’s Basic Financial Statements are prepared in conformity with accounting principles generally
accepted in the United States of America. The Government Accounting Standards Board (“GASB”) is the
acknowledged standard setting body for establishing accounting and financial reporting standards followed
by governmental entities in the U.S.A.
The accompanying financial statements are presented on the basis set forth in Government Accounting
Standards Board Statements No. 34, Basic Financial Statements—and Management’s Discussion and
Analysis—for State and Local Governments, No. 36, Recipient Reporting for Certain Non‐exchange Revenues,
an Amendment of GASB Statement No. 33, No. 37, Basic Financial Statements—and Management’s
Discussion and Analysis—for State and Local Governments; Omnibus, and No. 38, Certain Financial
Statement Note Disclosures.
These Statements require that the financial statements described below be presented.

Page 110

Page 111 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Government‐wide Statements: The Statement of Net Position and the Statement of Activities display
information about the primary government (the Town). These statements include the financial activities of
the overall Town government, except for fiduciary activities. Eliminations have been made to minimize the
double counting of internal activities. However, interfund services provided and used are not eliminated in
the process of consolidation. These statements present governmental activities of the Town. Governmental
activities generally are financed through taxes, intergovernmental revenues, and other non‐exchange
transactions.

The Statement of Activities presents a comparison between direct expenses and program revenues for each
function of the Town’s governmental activities. Direct expenses are those that are specifically associated
with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues
include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and
contributions that are restricted to meet the operational needs of a particular program and (c) fees, grants
and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues
that are not classified as program revenues, including all taxes, are presented as general revenues.

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Fund Financial Statements: The fund financial statements provide information about the Town's funds,
including fiduciary funds and blended component units. Separate statements for each fund category—
governmental, proprietary and fiduciary—are presented. The emphasis of fund financial statements is on
major individual governmental funds, each of which is displayed in a separate column. All remaining
governmental funds are aggregated funds and reported as non‐major funds.
Internal service funds of the Town (which provide services primarily to other funds of the Town) are
presented, in summary form, as part of the proprietary fund financial statements. Since the principal users
of the internal services are the Town’s governmental activities, financial activities of the internal service
funds are presented in the governmental activities column when presented at the government‐wide level.
The costs of these services are allocated to the appropriate function/program in the Statement of Activities.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions
associated with the principal activity of the fund. Exchange transactions are those in which each party
receives and gives up essentially equal values. Non‐operating revenues, such as subsidies and investment
earnings, result from non‐exchange transactions or ancillary activities.

E. Major Funds

GASB defines major funds and requires that the Town’s major governmental funds be identified and
presented separately in the fund financial statements. All other funds, called non‐major funds, are
combined and reported in a single column, regardless of their fund‐type.
Major funds are defined as funds that have assets, deferred outflows of resources, liabilities, deferred
inflows of resources, revenues or expenditures/expenses equal to ten percent of their fund‐type total and
five percent of the grand total. The General Fund is always a major fund. The Town may also select other
funds it believes should be presented as major funds.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Town reported the following major governmental funds in the accompanying financial statements:
General Fund is the general operating fund of the Town and is used to account for all financial resources
except those required to be accounted for in another fund.
Appropriated Reserves Fund is used to account for resources provided for capital projects not fully
funded from other sources.
The Town also reports the following fund types:

Internal Service Funds are used to account for services, which are provided to other departments on a cost‐
reimbursement basis. Those services include workers compensation, self‐insurance, facilities maintenance,
information technology, and equipment replacement.

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Fiduciary Funds include Private‐Purpose Trust Funds used to account for assets held by the Town as an agent
for individuals, private organizations, and other governments. The financial activities of this fund are
excluded from the government‐wide financial statement but are presented in a separate Fiduciary Fund
financial statement.
The Town reported the following Fiduciary Funds in the accompanying financial statements:
Library Private Purpose Trust Fund provides for the servicing of donations and bequests to the Town's
Library Program and includes the following:

Page 112



History Project Private Purpose Trust Fund was established to provide for the servicing of
donations, bequests, grant monies and expenditures to the history project partnership of Los
Gatos Public Library and the Museum of Los Gatos.



Clelles Ness Private Purpose Trust Fund was established by Ansten R. Ness, M.D. and the Board
of Library Trustees for the Town of Los Gatos, as a memorial to his wife, Clelles Ness to use the
income and principal of the trust estate to provide materials and services not ordinarily available
from public funds.



Susan E. (Betty) McClendon Private Purpose Trust Fund is a bequest to the Los Gatos Public
Library from the estate of Susan McClendon established to be used solely for children's services.



Barberra J. Cassin Private Purpose Trust Fund is a bequest to the Town from the estate of
Barberra J. Cassin established to be distributed to the Los Gatos Public Library for the purpose
of establishing an endowment fund, which is to be used for the support of science, the arts and
humanities projects.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RDA Successor Agency Private Purpose Trust Fund accounts for the assets, liabilities and operations
transferred from the dissolution of the Town’s Redevelopment Agency in 2012, which includes the
following:





Certificates of Participation issued to finance several capital improvement projects throughout
the Town.
Redevelopment projects and related property tax revenue.
Affordable Housing Set‐Aside Program obligations.
Repayment of obligations incurred by the Town’s Redevelopment Agency prior to its dissolution.

F. Basis of Accounting

The government‐wide, proprietary and fiduciary fund financial statements are reported using the economic
resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned
and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take
place.

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Governmental funds are reported using the current financial resources measurement focus and the modified
accrual basis of accounting. Under this method, revenues are recognized when measurable and available.
The Town considers property tax revenues reported in the governmental funds to be available if the
revenues are collected or are reasonably expected to be collected within sixty days after year‐end. For
revenues other than property taxes, the Town generally applies the sixty‐day period rule but would make
exceptions considering the measurable and available criteria. Expenditures are recorded when the related
fund liability is incurred, except for principal and interest on general long‐term debt, which is recognized
upon becoming due and payable; and except for claims, judgments and compensated absences, which are
recognized when estimable and probable. Governmental capital asset acquisitions are reported as
expenditures in governmental funds. Proceeds of governmental long‐term debt and acquisitions under
capital leases are reported as other financing sources.
Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental revenues,
and interest revenue. Fines, forfeitures, licenses and permits, and charges for services are not susceptible to
accrual because they are not measurable until received in cash.
Non‐exchange transactions, in which the Town gives or receives value without directly, receiving or giving
equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue
from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants,
entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been
satisfied.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Town may fund programs with a combination of cost‐reimbursement grants, categorical block grants
and/or general revenues. Thus, both restricted and unrestricted net position may be available to finance
program expenditures. The Town’s policy is to first apply restricted grant resources to such programs
followed by general revenues as necessary.
Certain indirect costs are included in program expenses reported for individual functions and activities.

The Town applies all applicable GASB pronouncements for certain accounting and financial reporting
guidance including those applicable to accounting and reporting for proprietary operations. In December of
2010, GASB issued GASBS No. 62, Codification of Accounting and Financial Reporting Guidance Contained in
Pre‐November 30, 1989 FASB and AICPA Pronouncements. This statement incorporates pronouncements
issued on or before November 30, 1989 into GASB authoritative literature. This includes pronouncements
by the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinions (APB), and the
Accounting Research Bulletins of the American Institute of Certified Public Accountants' (AICPA) Committee
on Accounting Procedure, unless those pronouncements conflict with or contradict with GASB
pronouncements.

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Pension ‐ For purposes of measuring the net pension liability and deferred outflows/inflows of resources
related to pensions, and pension expense, information about the fiduciary net position of the Town’s
California Public Employees’ Retirement System (CalPERS) plans (the Plans) and additions to/deductions
from the Plans’ fiduciary net position have been determined on the same basis as they are reported by
CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized
when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Generally accepted accounting principles require that the reported results must pertain to liability and asset
information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date
Measurement Date
Measurement Period

June 30, 2018
June 30, 2019
July 1, 2018 to June 30, 2019

Other Postemployment Benefits (OPEB)

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of
resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Town’s
plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been
determined on the same basis. For this purpose, benefit payments are recognized when currently due and
payable in accordance with the benefit terms. Investments are reported at fair value. Generally accepted
accounting principles require that the reported results must pertain to liability and asset information within
certain defined timeframes. For this report, the following timeframes are used:
Valuation Date
Measurement Date
Measurement Period

Page 114

June 30, 2019
June 30, 2019
July 1, 2018 to June 30, 2019

Page 115 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Cash and Cash Equivalents ‐ The Town’s cash and cash equivalents are considered to be cash on hand,
demand deposits, and short‐term investments with original maturities of three months or less from the date
of acquisition.
State of California statutes and the Town’s investment policy authorize the Town to invest in obligations of
the U.S. Treasury, its agencies and instrumentalities, collateralized, non‐negotiable certificates of deposits,
commercial paper rated A‐1/P‐1, medium‐term corporate notes rated A or its equivalent or better by
Moody’s or Standard & Poor’s, asset backed corporate notes, bankers’ acceptances, mutual funds, and the
State Treasurer’s investment pool (Local Agency Investment Fund).
The Town does not enter into repurchase or reverse repurchase agreements.

Investments ‐ Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value
Measurement and Application. Accordingly, the change in fair value of investments is recognized as an
increase or decrease to investment assets and investment income.

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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction. In determining this amount, three valuation techniques are available:


Market approach ‐ This approach uses prices generated for identical or similar assets or liabilities. The
most common example is an investment in a public security traded in an active exchange such as the
NYSE.



Cost approach ‐ This technique determines the amount required to replace the current asset. This
approach may be ideal for valuing donations of capital assets or historical treasures.



Income approach ‐ This approach converts future amounts (such as cash flows) into a current discounted
amount.

Each of these valuation techniques requires inputs to calculate a fair value. Observable inputs have been
maximized in fair value measures, and unobservable inputs have been minimized.
Materials, Supplies and Deposits ‐ These assets are held for consumption and are stated at cost using the
first‐in, first‐out method. The costs are recorded as expenditures at the time the item is consumed.
Interfund Receivables and Payables ‐ Transactions between funds that are representative of
lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “advances
to/advances from other funds”. All other outstanding balances between funds are reported as “due to/from
other funds”.
Advances ‐ Advances between funds are offset by a nonspendable fund balance in applicable Town funds to
indicate the extent to which they are not available for appropriation and are not expendable available
financial resources.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Capital Assets ‐ Capital assets are valued at historical cost or estimated historical cost if actual historical cost
is not available. Contributed capital assets are valued at their acquisition value on the date contributed.
Donated capital assets, donated works of art and similar items, and capital assets received in a service
concession arrangement are reported at acquisition value. Capital assets, including infrastructure, are
recorded if acquisition or construction costs exceed $10,000.

As required by GASB, the Town depreciates capital assets with limited useful lives over their estimated useful
lives. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the
life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata
share of the cost of capital assets. The Town depreciates using the straight line method which means the
cost of the asset is divided by its expected useful life in years and the result is charged to expense each year
until the asset is fully depreciated.
The Town has assigned the useful lives listed below to capital assets:

25‐40 years
25‐40 years
2‐20 years
5‐12 years
5‐7 years
20‐40 years

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Buildings
Improvements
Machinery and equipment
Furniture and fixtures
Software
Infrastructure

Major capital outlay for capital assets and improvements are capitalized as projects are constructed.
Capital assets may be acquired using federal and state grants, contributions from developers, and
contributions or grants from other governments. GASB 34 requires that these contributed assets be
accounted for as revenue at the time they are contributed.
Deferred Compensation Plan ‐ The Town established a deferred compensation plan created in accordance
with California Government Code Section 53212 and Internal Revenue Code Section 457. The plan, available
to all Town employees, permits them to defer a portion of their salary until future years. The deferred
compensation is not available to employees until termination, retirement, death, or unforeseeable
emergency. Deferred compensation plans are not reported as part of the Town’s assets or liabilities, as the
deferred compensation plan trustees hold those funds in trust on behalf of employees until the employees
are eligible to receive the benefits.
Compensated Absences ‐ Accumulated Vacation, Sick Pay and Other Employee Benefits are accrued as
earned. Upon termination, employees are paid for all unused vacation at their current hourly rates. Sick
leave earned is cashed out based on the following schedule for employees with at least 150 hours accrued
and up to a maximum amount as specified under labor contract provisions:
For employees under contract 1‐59 months
For employees under contract 60‐119 months
For employees under contract 120 months or more

Page 116

25.0%
37.5%
50.0%

Page 117 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Town’s liability for compensated absences is determined annually. For all governmental funds, amounts
expected to be paid out of current financial resources are recorded as liabilities of each fund; the long‐term
portion is recorded in the Statement of Net Position. The changes of the compensated absences were as
follows:
Beginning Balance
Addition
Payments
Ending Balance

2,837,934
1,705,099
(1,435,330)
3,107,703

Compensated Absences Current Portion

335,642

Compensated absences are liquidated by the fund that has recorded the liability. The long‐term portion of
governmental activities compensated absences is liquidated primarily by the General fund. Only
compensated absences liabilities related to retirements as of the end of the fiscal year are reported in the
fund financial statements.

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Unearned Revenue ‐ Unearned revenue arises when assets are received before revenue recognition criteria
have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded
as unearned revenue. In the governmental fund financial statements, receivables associated with non‐
exchange transactions that will not be collected within the availability period have been recorded as
deferred inflows from unavailable revenue.
Long‐Term Liabilities ‐ In the government‐wide financial statements and private‐purpose trust funds long‐
term debt and other long‐term obligations are reported as liabilities in the applicable statement of net
position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life
of the bonds using the straight‐line method. Bonds payable are reported net of the applicable bond premium
or discount.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well
as bond issuance costs, during the current period. The face amount of debt issued is reported as other
financing sources. Premiums received on debt issuances are reported as other financing sources while
discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld
from the actual debt proceeds received, are reported as debt service expenditures.
Deferred Outflows/Deferred Inflows of Resources ‐ Deferred outflows of resources is a consumption of net
position by the Town that is applicable to a future reporting period, for example, contributions to pension
and OPEB plans that are after the actuarial measurement date.
Deferred inflows of resources is an acquisition of net position by the Town that is applicable to a future
reporting period, for example, unavailable revenue.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Net Position ‐ In the government‐wide financial statements, net position is classified in the following
categories:
Net Investment in Capital Assets ‐ This amount consists of capital assets net of accumulated depreciation
and reduced by outstanding debt that is attributed to the acquisition, construction, or improvement of the
assets. In addition, deferred outflows of resources and deferred inflows of resources that are attributable to
the acquisition, construction, or improvement of those assets or related debt also are included in the net
investment in capital assets component of net position.
Restricted Net Position ‐ This amount is restricted by external creditors, grantors, contributors, or laws or
regulations of other governments.

Unrestricted Net Position ‐ This amount is all net position that does not meet the definition of "net
investment in capital assets" or "restricted net position."

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Fund Balances ‐ The Town does not have a policy identifying a minimum unassigned fund balance. Because
amounts in the nonspendable, restricted, committed, and assigned categories are subject to varying
constraints on their use, the remaining fund balances are otherwise unassigned.
In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and Governmental
Fund Type Definitions, the Town classifies governmental fund balances as follows:
Non‐spendable includes fund balance amounts that cannot be spent either because it is not in spendable
form or because of legal or contractual constraints.
Restricted includes fund balance amounts that are constrained for specific purposes which are externally
imposed by providers, such as creditors or amounts constrained due to constitutional provisions or
enabling legislation.
Committed includes fund balance amounts that are constrained for specific purposes that are internally
imposed by the government through Council Resolution which is a formal action of the highest level of
decision making authority and does not lapse at year‐end. Committed fund balances are imposed by the
Town Council.
Assigned includes fund balance amounts that are intended to be used for specific purposes that are
neither considered restricted or committed. Fund balance may be assigned by the Town Manager or the
Finance Director.
Unassigned includes fund balances within the funds which have not been classified within the above
mentioned categories. The general fund is the only fund that reports a positive unassigned fund balance
amount. In other governmental funds it is not appropriate to report a positive unassigned fund balance
amount. However, in governmental funds other than the general fund, if expenditures incurred for specific
purposes exceed the amounts that are restricted, committed, or assigned to those purposes, it may be
necessary to report a negative unassigned fund balance in that fund.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Town uses restricted/committed amounts to be spent first when both restricted and unrestricted fund
balance is available unless there are legal documents/contracts that prohibit doing this, such as a grant
agreement requiring dollar for dollar spending. Additionally, the Town would first use committed, then
assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made.
Use of Estimates ‐ The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent asset and liabilities at the dates of the financial statements
and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual
results could differ from those estimates.

Subsequent Events ‐ Management has considered subsequent events through December 11, 2020, the date
which the financial statements were available to be issued. The financial statements include all events or
transactions, including estimates, required to be recognized in accordance with generally accepted
accounting principles. Management has determined that there are no non‐recognized subsequent events
that require additional disclosure.

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Property Tax Levy, Collection and Maximum Rates ‐ State of California Constitution Article XIII A provides
that the combined maximum property tax rate on any given property may not exceed 1% of its assessed
value unless an additional amount for general obligation debt has been approved by voters. Assessed value
is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2%
per year unless the property is sold, transferred, or substantially improved. The State Legislature has
determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school
districts and other districts.
The County of Santa Clara assesses properties, bills for and collects property taxes on the following schedule:

Valuation/lien dates
Levy dates
Due dates (delinquent as of)

Secured
January 1
January 1
50% on November 1 (December 10)
50% on February 1 (April 10)

Unsecured
January 1
January 1
March 1 (August 31)

The term "unsecured" refers to taxes on personal property other than land and buildings. These taxes are
secured by liens on the property being taxed. Property taxes levied are recorded as revenue and receivables
when they are collected during the fiscal year of levy or within 60 days of year‐end.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Budgets and Budgetary Accounting ‐ The Town follows the procedures below when establishing the
budgetary data reflected in the financial statements:

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1. The Town Manager submits to the Town Council a proposed operating and capital improvement budget
for the fiscal year commencing the following July 1. The budgets include the proposed expenditures and
the means of financing them.
2. Public hearings are conducted to obtain taxpayer comments.
3. The budget is legally enacted through adoption of Town resolution by Council.
4. The Town Manager is authorized to implement the programs as approved in the adopted budget. Within
a specific fund, the Town Manager may transfer appropriations between categories, departments,
projects and programs as needed to implement the adopted budget, whereas the Town Council must
authorize budget increases and decreases, and transfers between funds.
5. Budgets are adopted on a basis consistent with generally accepted accounting principles except for
proprietary funds which budget for capital outlays but not depreciation. Budgets were adopted for the
General Fund, Special Revenue Funds, Internal Service Funds and Capital Projects Funds.
6. Budgeted amounts are as originally adopted or as amended by Town Council. Individual budget
adjustments or amendments were not material in relation to original appropriations, except for an
increase in non‐departmental expenditures related to a discretionary lump‐sum payment to CalPERS for
the pension liability.
Excess of Expenditures over Appropriations ‐ There were no significant expenditures in excess of budget
during the year ended June 30, 2020.

Encumbrances ‐ Under encumbrance accounting, purchase orders, contract and other commitments for
expenditures are recorded in order to reserve that portion of the applicable appropriation. Encumbrance
accounting is employed as an extension of formal budgetary integration in all funds. Encumbrances
outstanding at year‐end are reported as restrictions, commitments or assignments of fund balances since
they do not constitute expenditures or liabilities; unexpended and unencumbered appropriations lapse at
year end in all funds. Encumbered appropriations are carried forward to the following year.
Reclassifications ‐ Certain accounts in the prior‐year financial statements have been reclassified for the
presentation in the current‐year financial statements.

G. Accounting and Reporting Changes

In fiscal year 2020, the City did not adopt any new GASB statements.

NOTE 2 ‐ CASH AND INVESTMENTS
The Town pools cash from all sources and all funds except Restricted Cash and Restricted Investments so that it
can be invested at the maximum yield, consistent with the primary objectives of safety and liquidity, while
ensuring existing funds have cash available for expenditures.
Cash and Investments Defined ‐ The Town includes only cash deposits in banks as cash. Investments in LAIF and
government securities mutual funds are next in the order of liquidity, since they may be withdrawn without
penalty. U.S. Treasuries, U.S. Agencies and Certificates of Deposit are the Town’s least liquid investments, since
they must be held to maturity.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 2 ‐ CASH AND INVESTMENTS, CONTINUED
Cash Deposits with Banks and Custodial Credit Risk ‐ California Law requires banks and savings and loan
institutions to pledge government securities with a fair value of 110% of the Town’s cash on deposit, first trust
deed mortgage notes with a value of 150% of the deposit, or letters of credit issued by the Federal Home Loan
Bank of San Francisco with a value of 100% of the deposit as collateral. Under California Law this collateral is
held in the Town’s name and places the Town ahead of general creditors of the institution. The Town’s cash
deposits are collateralized under this law.
The bank balance of the Town’s cash deposits was $15,285,669 and the book balance was $13,801,981 as of
June 30, 2020. The bank balance and the carrying amount differed due to deposits in transit and outstanding
checks.

Investments ‐ The Town and its fiscal agent invest in individual investments and in investment pools. Individual
investments are evidenced by specific identifiable pieces of paper called “securities instruments,” or by an
electronic entry registering the owner in the records of the institution issuing the security, called the book entry
system. In order to maximize security, the Town employs the Trust department of a bank as the custodian of all
its investments, regardless of their form.

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Fair Value Measurements ‐ GASB 72 established a hierarchy of inputs to the valuation techniques above. This
hierarchy has three levels:





Level 1 inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are quoted market prices for similar assets or liabilities, quoted prices for identical or
similar assets or liabilities in markets that are not active, or other than quoted prices that are not
observable
Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal.

Local Agency Investment Fund (LAIF) ‐ The Town invests in the California State Treasurer’s Local Agency
Investment Fund. LAIF, established in 1977, is regulated by California Government Code Section 16429 and is
under the day to day administration of the State Treasurer. As of June 30, 2020, the Town had approximately
$12.2 million in LAIF and used a fair value factor of 1.004912795 to calculate the fair value of the investments in
LAIF. Of that amount, 96.63% is invested in non‐derivative financial products and 3.37% in structured notes and
asset‐backed securities. These investments are described as follows:
1. Structured Notes are debt securities (other than asset‐backed securities) whose cash flow characteristics
(coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have
embedded forwards or options.
2. Asset‐Backed Securities, the bulk of which are mortgage‐backed securities, entitle their purchasers to
receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool
of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.

Risk Disclosures
Interest Rate Risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to
the changes in market interest rates. One of the ways that the Town manages its exposure to interest rate risk
is by purchasing a combination of shorter term and longer term investments and by timing cash flows from
maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary
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Page 122 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 2 ‐ CASH AND INVESTMENTS, CONTINUED
to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values
of the Town's investments to market interest rate fluctuations is provided in the summary of cash and
investments table on the following page that shows the distribution of the Town's investments by maturity.
Credit Risk is the risk of loss due to the failure of the security issuer. This risk is measured by the assignment of
a rating by a nationally recognized statistical rating organization. The summary of cash and investments table on
the following page shows the minimum rating under the actual rating of the Town’s investments at year end.

Custodial Credit Risk is the risk that in the event of the failure of the counterparty (e.g., broker‐dealer) to a
transaction, a government will not be able to recover the value of its investment or collateral securities that are
in the possession of another party. The Town’s money market fund and investment in LAIF are not categorized
as to custodial credit risk. Its U.S. Government Agency Securities investment is held by a third‐party financial
institution under the third party’s trust department’s name and thus not exposed to custodial credit risk.

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Concentration of Credit Risk is the risk that the Town’s investments are exposed because the types of
investments have been too limited. The Town’s Policy states that, with the exception of US Treasury securities
and LAIF, no more than 50% of the Town’s total investment portfolio will be invested in one single security type
or with a single financial institution. The Town was in compliance with this policy as of June 30, 2020.
Risk Disclosures, Continued

The following table summarizes the Town’s policy related to maturities and concentration of investments:

Investment Type

US Treasury Obligations
US Agency Obligations
Bankers Acceptances
Commercial Paper
Medium Term Notes
Collateralized CD's
CA LAIF
Money Market Funds

Page 122

Maximum
Maturity

Maximum
Portfolio
Percentage

5 years
5 years
180 days
270 days
5 years
5 years
N/A
N/A

None
None
30%
25%
30%
30%
$65 million
20%

Page 123 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 2 ‐ CASH AND INVESTMENTS, CONTINUED
The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30, 2020:

‐
‐
‐

Total
$ 8,054,756
23,940,487
15,802,160

145,920
12,185,932

‐
‐

145,920
12,185,932

0.24%
20.27%

Total investments

60,129,255

‐

60,129,255

100.00%

Cash Deposit with Banks
Money Market Accounts
Investment held in pension trust
Cash on hand at Town

13,801,981
17,388
‐
4,850

2,101,834
‐
669,978
‐

15,903,815
17,388
669,978
4,850

Town Cash and Investments

$ 73,953,474

$ 2,771,812

$ 76,725,286

Input
level
2
2
2

Time to
Mature
(Years)
1‐4
0‐4
0‐4

Weighted
Average
Maturity
2.58 years
2.02 years
2.38 years

2
n/a

n/a
n/a

Not Rated
Not Rated

Restricted

Concentration Minimum
of Credit Risk
Rating
13.40%
Aaa
39.82%
Aaa
26.28%
A3

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Investment Type/Cash Deposit
US Treasury Securities
US Instrumentality Security
Corporate Securities
Government Securities Money
Market Mutual funds
LAIF

Available for
Operations
$ 8,054,756
23,940,487
15,802,160

Cash and investments are classified in the financial statements as shown below, based on whether or not their
use is restricted by Town debt or Agency agreements.
Total Town

Fiduciary Funds

Total

Cash and Investments available for operations
Restricted cash and investments

71,609,969
784,191

2,343,505
1,987,621

73,953,474
2,771,812

Total cash and investments

72,394,160

4,331,126

76,725,286

NOTE 3 ‐ LONG‐TERM NOTES RECEIVABLE

The Town had the following long‐term notes receivable as of June 30, 2020:
Description
General Fund:
Rehab Loan to Charities
Total General Fund

Interest Rate

Community Development Block Grant Fund (CDBG):
Housing Conservation Loans
Total CDBG

Maturity

Various

0‐5%

Various

Balance
$

78,752
78,752

Total Long Term Notes Receivable ‐ Government‐Wide Statement of Net Position
Successor Agency Affordable Housing
Project Match

Various

Total Long Term Notes Receivable

Page 123

237,752
Various

587,090
$

159,000
159,000

824,842

Page 124 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 3 ‐ LONG‐TERM NOTES RECEIVABLE, CONTINUED
Active Home Loans and Housing Conservation Loans ‐ The Town used CDBG Funds (funded through federal
grants) to assist low and moderate income homeowners to improve their homes and to fund low income housing
rental properties acquisition and rehabilitation. These loans are secured by deeds of trust.
Project Match ‐ The Successor Agency has a loan agreement with Project Match, a nonprofit benefit corporation,
to acquire and rehabilitate four‐ or five‐bedroom single‐family homes. The property is to provide affordable
housing rental to very low income senior households. The loan receivable is evidenced by a promissory note and
secured by a deed of trust. From inception of the loan through June 30, 2020, no interest or principal payments
have been made.
NOTE 4 ‐ INTERFUND TRANSACTIONS

Interfund Receivables and Payables ‐ Amounts due to or due from other funds reflect interfund balances for
services rendered or short‐term loans expected to be repaid in the next fiscal year. Advances to or from other
funds are long‐term loans between funds that are to be repaid in their entirety over several years.

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Transfers ‐ With Council approval resources may be transferred from one fund to another. Transfers pay for
capital projects or capital outlays, lease or debt service payments, operating expenses and low and moderate‐
income housing projects. Transfers between funds during the fiscal year ended June 30, 2019 were as follows:

General Fund
Appropriated Reserve Fund
Non‐major Gov't Funds
Internal Service Funds
Total Transfers

Page 124

Transfer In
599,669
8,325,591
10,000
1,061,256
9,996,516

Transfer Out
8,053,847
433,952
140,920
1,367,797
$
9,996,516

Page 125 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 5 ‐ CAPITAL ASSETS
Changes in the Town’s capital assets during the fiscal year are shown as follows:
Balance at

Adjustments

Transfers and

Balance at

June 30, 2019

and Additions

Retirements

June 30, 2020

$ 20,294,810

Capital Assets not being Depreciated
Land
Construction in Progress
Total Capital Assets not being Depreciated

‐

20,294,810

13,718,006

2,294,775

(13,968,638)

2,044,143

34,012,816

2,294,775

(13,968,638)

22,338,953

Capital Assets being Depreciated
30,178,972

51,645

1,664,497

31,895,114

Equipment & Vehicle

11,484,761

654,980

(403,346)

11,736,395

Infrastructure ‐ All Other

25,275,447

922,122

‐

26,197,569

Infrastructure ‐ Streets

63,014,800

4,072,168

10,631,392

77,718,360

129,953,980

5,700,915

11,892,543

147,547,438

7,923,246

630,658

‐

8,553,904

Total Capital Assets being Depreciated

Buildings and Improvements

Less Accumulated Depreciation for:

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Buildings and Improvements
Equipment & Vehicle

8,827,268

627,306

(400,877)

9,053,697

Infrastructure ‐ All Other

6,431,634

775,417

‐

7,207,051

Infrastructure ‐ Streets

33,242,060

1,802,203

(1,672,749)

33,371,514

Total accumulated depreciation

56,424,208

3,835,584

(2,073,626)

58,186,166

Net Capital Assets being Depreciated

73,529,772

1,865,331

13,966,169

89,361,272

Governmental Activity Capital Assets, Net

$ 107,542,588

4,160,106

(2,469)

111,700,225

Depreciation expense is charged to functions and programs based on their usage of the related assets. The
amount allocated to each function or program is as follows:

Governmental Activities
General Government
Community Services
Public Safety
Parks & Public Works
Library
Sanitation
Total Governmental Activities

Page 125

Depreciation
Expense
$
181,357
52,599
476,528
2,747,628
377,217
255
$
3,835,584

Page 126 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 5 ‐ CAPITAL ASSETS, CONTINUED
Changes in the RDA Successor Agency trust fund capital assets during the fiscal year are shown as follows:

Ca pi ta l As s ets not bei ng Depreci a ted
La nd

Ba l a nce a t
June 30, 2019

Adjus tments
a nd Addi ti ons

Tra ns fers a nd
Reti rements

Ba l a nce a t
June 30, 2020

‐

$ 5,257,422

‐

5,257,422

‐

5,257,422

4,067,708

‐

4,067,708

‐

4,067,708

Les s Accumul a ted Depreci a ti on for:
Bui l di ngs a nd Improvements

2,542,315

101,692

‐

2,644,007

Tota l a ccumul a ted depreci a ti on

2,542,315

101,692

‐

2,644,007

Net Ca pi ta l As s ets bei ng Depreci a ted

1,525,393

(101,692)

‐

1,423,701

Ca pi ta l As s ets bei ng Depreci a ted
Bui l di ngs a nd Improvements
Tota l Ca pi ta l As s ets bei ng Depreci a ted

6,782,815

(101,692)

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Successor Agency Capital Assets, Net

Tota l Ca pi ta l As s ets not bei ng Depreci a ted

5,257,422

‐

6,681,123

NOTE 6 ‐ LONG‐TERM OBLIGATIONS

The Town generally incurs long‐term debt to finance projects or purchase assets, which will have useful lives
equal to or greater than the related debt. As of February 1, 2012, the Town transferred long‐term debt issued
by the Redevelopment Agency to the Successor Agency trust as a part of the RDA dissolution. The following
summarizes the changes in long‐term debt in the Successor Agency trust fund during the fiscal year ended June
30, 2020:
Interest
Maturity
Long Term Debt
Rate
Date
2002 COP
2.5 ‐5%
8/1/2031
2010 COP
2.5 ‐ 4.25% 8/1/2028
Subtotal COP
Premiums
Total Long‐Term Debt

Original
Issue
$ 10,725,000
15,675,000
26,400,000
735,095
$27,135,095

Beginning
Balance
$ 6,430,000
10,100,000
16,530,000
414,200
$16,944,200

Deletion
365,000
830,000
1,195,000
37,655
$ 1,232,655
$

Ending
Balance
$ 6,065,000
9,270,000
15,335,000
376,545
$15,711,545

Due Within
One Year
$ 385,000
865,000
1,250,000

$ 1,250,000

Due in More
Than One
Year
$ 5,680,000
8,405,000
14,085,000
376,545
$ 14,461,545

2002 Certificates of Participation (2002 COPs) ‐ On July 18, 2002, the Town and the Los Gatos Redevelopment
Agency issued $10,725,000 in 2002 COPs, Series A, to finance the acquisition, construction, rehabilitation,
equipping and improvement of several capital improvement projects. The Town had pledged lease payments of
real property and facilities comprised of the Parks and Public Works Service Center and Baseball Field, as well as
Parking Lot No. 1, 2, and 3, as collateral for the repayment of the Certificates. Principal payments are due
annually on August 1st, with interest payments due semi‐annually on February 1st and August 1st.
2010 Certificates of Participation (2010 COPs) ‐ On June 1, 2010, $15,675,000 of 2010 COPs were issued to
finance the acquisition, construction, and improvement of a library on the Town’s Civic Center campus, to be
owned and operated by the Town. Principal payments are due annually on August 1, with interest payments due
semi‐annually on February 1 and August 1.

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Page 127 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 6 ‐ LONG‐TERM OBLIGATIONS, CONTINUED
To assist the Town in paying the cost of acquisition and construction of various projects, the Town and its
Redevelopment Agency entered into lease and reimbursement agreements in 2002 and 2010. Under the
agreements, the Agency will use available net tax increment revenues resulting from the projects’ effect on land
values to repay the Town for all lease payments made by the Town to the Agency under the lease agreements
for the projects. Net tax increment revenues are all taxes allocated to and paid into the Successor Agency private‐
purpose trust fund.
Future debt service requirements of the 2002 and 2010 Certificates of Participation are as follows:
Fiscal Year
Ended June 30,
2021

Principal

Interest

Total

658,494

1,908,494

2022

1,300,000

599,850

1,899,850

2023

1,355,000

538,713

1,893,713

1,250,000

1,415,000

479,550

1,894,550

1,485,000

417,300

1,902,300

2026‐2030

6,670,000

979,200

7,649,200

2031‐2032

1,860,000

142,500

2,002,500

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2024
2025

Total COP Debt Service

15,335,000

3,815,607

19,150,607

The Successor Agency must maintain a required amount of cash and investments with the trustee under the
terms of the COPs’ debt agreements. These funds are pledged as reserves to be used if the Successor Agency
fails to meet its obligations under the debt agreements and totaled $1,987,621 as of June 30, 2020. The California
Government Code requires these funds to be invested in accordance with Town ordinances, bond indentures or
State statues. All these funds have been invested as permitted under the Code.
NOTE 7 ‐ SPECIAL ASSESSMENT DISTRICT DEBT WITHOUT COMMITMENT

Special assessment districts are established in various parts of the Town to provide improvements to properties
located in those districts. Properties are assessed for the cost of the improvements. These assessments are
payable over the term of the debt issued to finance the improvements and are used to pay debt service on debt
issued to fund the improvements.
The Town is acting only as an agent and has no legal liability with respect to the payment of any indebtedness
of the Downtown Parking Assessment District. There was no non‐obligated debt outstanding as of June 30,
2020.
NOTE 8 ‐ FUND BALANCES
Fund balance for governmental funds is reported in classifications (nonspendable, restricted, committed,
assigned, and unassigned) that comprise a hierarchy based primarily on the extent to which the government is
bound to honor constraints on the specific purposes for which amounts in those funds can be spent.

Page 127

Page 128 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 8 ‐ FUND BALANCES, CONTINUED
As of June 30, 2020, fund balances were classified as follows:

Addi ti ons

Del eti ons

Endi ng
Ba l a nce

‐

$ 6,695,233
5,015,316
208,139

$ 1,522,139
420,459
41,603

$ (1,959,616)
(4,765,797)
(59,492)

$ 6,257,756
669,978
190,250

5,419,222
5,419,222
4,232,500
2,579,997

‐
‐
‐
‐

5,419,222
5,419,222
4,232,500
2,579,997

8,381
8,381
300,000
‐

‐
‐
‐
(2,579,997)

5,427,603
5,427,603
4,532,500
‐

562,000
1,460,210
140,553
13,262,303
413,729
50,000
‐

‐
‐
‐
‐
‐
‐
‐

562,000
1,460,210
140,553
13,262,303
413,729
50,000
‐

1,040,375
1,232,654
1,232,653
4,344,618
326,102

‐
‐
372,628
‐
‐

372,628

$ 6,695,233
5,015,316
208,139

‐

‐
‐
‐
2,615,303
‐
‐
1,218,732

(152,000)
‐
‐
(5,908,486)
(413,729)
‐
‐

410,000
1,460,210
140,553
9,969,120
‐
50,000
1,218,732

1,040,375
1,232,654
1,605,281
4,344,618
326,102

‐
‐
‐
11,650,201
78,486

(1,040,375)
(1,232,654)
(65,873)
(3,727,938)
‐

‐
‐
1,539,408
12,266,881
404,588

$ 54,007,454

$ 15,879,484

$(15,121,052)

$ 49,965,182

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Restricted for
Ca pi ta l Outl a y
Pens i on
Repa i rs a nd Ma i ntena nce
Committed to:
Budget Sta bi l i za ti on
Ca ta s trophi c
Pens i on/OPEB Res erve
Al mond Grove Street Project
Assigned to:
Open Spa ce
Pa rki ng
Sus ta i na bi l i ty
Ca pi ta l /Speci a l Projects
Ca rryover Encumbra nces
Comca s t PEG
Ma rket Fl uctua ti ons
Vehi cl e Ma i ntena nce &
Stores Res erve
Workers ' Compens a ti on
Compens a ted Abs ences
Ca pi ta l Projects
Speci a l Revenue Funds
Tota l Fund Ba l a nce ‐ Al l
Governmenta l Funds

Adjus tments

Adjus ted
Begi nni ng
Ba l a nce

Begi nni ng
Ba l a nce

$ 53,634,826

Restricted

Capital Outlay funded from storm drain fees, construction taxes and debt proceeds are legally restricted for
major capital projects.
Repairs and Maintenance reflects legally restricted balances for repairs and maintenance of lighting and
landscape property and open space property that are financed with special tax assessments on the benefiting
property.
Pension amounts are cash and investments held for the purpose of paying for the pension liabilities. Monies are
held in an IRS Section 115 Trust over which the Town has control.

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Page 129 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 8 ‐ FUND BALANCES, CONTINUED
Committed
Stabilization Arrangements

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The Town Council has established by resolution the budget stabilization arrangement and the catastrophe
arrangement. The total balances in these arrangements are to be maintained at 25% of annual General Fund
ongoing, operating expenditures, excluding one‐time expenditures, divided equally between both
arrangements. When either arrangement is used, Town Council will develop a 1 to 5 year reserve replenishment
plan to meet the minimum threshold of 25% of General Fund ongoing, operating expenditures, excluding one‐
time expenditures. The arrangements can be used when:
 Unforeseen emergencies, such as a disaster or catastrophic event occur
 Significant decrease in property or sales tax, or other economically sensitive revenues
 Loss of businesses considered to be significant sales tax generators
 Reductions in revenue due to actions by the state /federal government
 Workflow /technical system improvements to reduce ongoing, personnel costs and enhance customer
service
 One ‐time maintenance of service levels due to significant economic /budget constraints
 One ‐time transitional costs associated with organizational restructuring to secure long‐term personnel
cost savings.
Should any of the events listed above occur that require the expenditure of Town resources beyond those
provided for in the annual budget, the Town Manager or designee shall have authority to approve catastrophic
or budget stabilization arrangement appropriations. The Town Manager or designee shall then present to the
Town Council a budget amendment confirming the nature of the event and authorizing the appropriation of
reserve funds.
Pension/OPEB Reserve committed fund balance will be used to fund net pension liabilities for the Town's
Miscellaneous and Safety pension plans administered by CALPERS. In the fiscal year ending June 30, 2018 the
Town approved an update to its General Fund reserve policy providing to the extent possible that additional
annual deposits be calculated and placed into this reserve with the goal of moving the payment of the unfunded
pension liability from a 29‐year to a 20‐year amortization period.
Almond Grove Street Project committed fund balance was used for the infrastructure repairs, improvements and
construction along Almond Grove Street.
Assigned

Open Space assigned fund balance will be used to make selective open space acquisitions.

Parking assigned fund balance will be used to mitigate parking issues within the Town.
Sustainability assigned fund balance will be used to fund ongoing sustainability initiatives and programs.
Capital/Special Projects assigned fund balance will be used for the acquisition and construction of capital
facilities as well as special projects or activities as directed by the Town Council.
Carryover Encumbrances assigned fund balance is used for encumbered items re‐appropriated in the following
year.
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Page 130 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 8 ‐ FUND BALANCES, CONTINUED
Comcast PEG assigned fund balance will be used to fund capital improvements linked to the televising of council
and planning commission meetings.
Vehicle Maintenance & Stores Reserve assigned fund balance is to be used for maintaining the Town’s fleet and
providing mail and printing services.
To Workers’ Comp assigned fund balance is to be used for future payments to employees due to illness or injury
as a result of being employed by the Town.
Compensated Absences assigned fund balance will be used for vacation and sick‐pay benefits owed to employees
as of June 30, 2020 that were not an obligation of the General Fund because of their long‐term nature.

Special Revenue Fund assigned fund balance will be used for the activities of the respective revenue funds.

NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN

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Summary of Pension Amounts

Miscellaneous Plan

Safety Plan

Total Plans

Deferred Employer Pension Contributions

8,188,460

2,565,205

10,753,665

Deferred Outflows ‐ Pension Related Amounts

761,117

3,418,222

4,179,339

Net Pension Liability

32,535,248

24,695,687

57,230,935

Deferred Inflows ‐ Pension Related Amounts

482,198

1,616,347

2,098,545

Pension Expense

5,163,057

5,646,706

10,809,763

(a) General Information about the Pension Plans

Plan Description ‐ All qualified employees are eligible to participate in the Town’s pooled Safety Plan, a cost‐
sharing multiple‐employer defined benefit pension plan and the Town’s Miscellaneous (all other) Plan, an agent
multiple‐employer defined benefit pension plan administered by the California Public Employees' Retirement
System (CalPERS), which acts as a common investment and administrative agent for its participating member
employers. Benefit provisions under the Plans are established by State statute and Town resolution. CalPERS
issues publicly available reports that include a full description of the pension plans regarding benefit provisions,
assumptions and membership information that can be found on the CalPERS website. Audited financial
statements of CalPERS can be obtained from its website https://www.calpers.ca.gov/page/forms‐publications.
The Town relies upon actuarial and investment data provided by CalPERS for inclusion and analysis in this report.
Benefits Provided ‐ CalPERS provides service retirement and disability benefits, annual cost of living adjustments
and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on
years of credited service, equal to one year of full time employment. Members with five years of total service
are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non‐duty disability
benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, Lump Sum,

Page 130

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(a) General Information about the Pension Plan, Continued
or the 1959 Survivor Benefit. The cost of living adjustments for each plan are applied as specified by the Public
Employees’ Retirement Law.
The Plan’s provisions and benefits in effect at June 30, 2020, are summarized as follows:

Hire Date
Prior to
September 15,
2012

Benefit Formula

2.5% @ 55
5 years
Monthly for Life
55
2% to 2.5%
8.00%

5 years
Monthly for Life
60
1% to 2.5%
7.00%
10.226%
$ 2,328,669

Safety
PEPRA

Tier 1

PEPRA

On or after
January 1, 2013

Before January
1, 2013 with
reciprocity or
member of
CalPERS

On or after
January 1, 2013

2% @ 62

3% @ 50

2.7% @ 57

5 years
Monthly for Life
62
1.5% to 2.5%
6.75%

5 years
Monthly for Life
50
3%
9.00%
23.654%
$1,485,723

5 years
Monthly for Life
57
2% to 2.7%
12.75%
13.900%
$6,600

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Benefit vesting schedule
Benefit payments
Retirement age
Monthly benefits as a % of eligible compensation
Required employee contribution rates
Required employer contribution rates
Required payment of unfunded liability

Miscellaneous
Tier 2
Prior to
September 15,
2012 and
before January
1, 2013 with
reciprocity or
member of
CalPERS
2% @ 60

Tier 1

Employees Covered

At June 30, 2020, the following employees were covered by the benefit terms for the Miscellaneous and Safety
Plans:

Active
Transferred
Separated
Retired
Total

Miscellaneous
120
95
79
249
543

Safety

35
9
33
83
160

Contributions – Section 20814 (c) of the California Public Employees’ Retirement Law requires that the employer
contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective
on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined
annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount
necessary to finance the cost of benefits earned by employees during the year. The Town is required to
contribute the difference between the actuarially determined rate and the contribution rate of employees. In
addition, the Town is solely responsible for any annual costs associated with payments toward any unfunded
accrued liability.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability
Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for
Pensions, an amendment of GASB Statement No. 27 (GASB 68), requires public employers to comply with
accounting and financial reporting standards related to the recognition and calculation of pension obligations.
Under GASB 68, employers that participate in a defined benefit pension plan administered as a trust or
equivalent arrangement are required to record their portion of the net pension liability, pension expense, and
deferred outflows/deferred inflows of resources related to pensions in their financial statements as part of their
financial position.

The Town’s net pension liability for the Miscellaneous Plan is measured as the total pension liability, less the
pension plan's fiduciary net position.

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GASB 68 requires that the reported results must pertain to liability and asset information within certain defined
timeframes. For this report, the following timeframes are used. For the Safety Plan, net pension liability is
measured as the proportionate share of the net pension liability. The net pension liability of each of the Plans is
measured as of June 30, 2019, using an annual actuarial valuation as of June 30, 2018 rolled forward to June 30,
2018 using standard update procedures. The Town’s proportion of the net pension liability (Safety Plan) was
based on a projection of the Town’s long‐term share of contributions to the pension plans relative to the
projected contributions of all participating employers, actuarially determined. The Town’s proportionate share
of the net pension liability for the Safety Plan as of the measurement date June 30, 2019 was as follows:
Proportionate Share of
Net Pension Liability

Proportion ‐ June 30, 2018

0.235831%

Proportion ‐ June 30, 2019

0.241003%
0.005172%

Change ‐ Increase (Decrease)

A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Page 132

Page 133 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, continued
Actuarial Assumptions ‐ The June 30, 2018 valuation was rolled forward to determine the June 30, 2019 total
pension liability, based on the following actuarial methods and assumptions:

Contract COLA up to 2.50% until Purchasing Power
Protection Allowance Floor on Purchasing Power
applies

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Mortality Rate Table
Post Retirement Benefit Increase

7.15%
7.15%
2.50%
2.50%
Varies by Entry Age and Service
Derived using CalPERS' Membership Data for all Funds

Valuation Date
Measurement Date
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate
Inflation
Salary Increases

Miscellaneous Agent
Multiple Employer Plan
Safety Cost Sharing Plan
June 30, 2018
June 30, 2018
June 30, 2019
June 30, 2019
Entry‐Age Normal Cost Method

1. The mortality table used was developed based on CalPERS‐specific data. The table includes 15 years of
mortality improvements using the Society of Actuaries Scale 90% of scale MP 2016. For more details on this
table, please refer to the December 2017 experience study report that can be found on the CalPERS
website.

Discount Rate ‐ The discount rate used to measure the total pension liability was 7.15% for the Plan and reflects
the long‐term expected rate for the Plan net of investment expenses and without reduction for administrative
expenses. To determine whether the municipal bond rate should be used in the calculation of a discount rate
for each plan, CalPERS conducted cash flow projections for plans with a higher likelihood of running out of
assets with too high of a discount rate. Based on the testing, none of the tested plans ran out of assets.
Therefore, the current 7.15 percent discount rate is adequate and the use of the municipal bond rate
calculation is not necessary. The long term expected discount rate of 7.15 percent will be applied to all plans
in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report
that can be obtained from the CalPERS website.
Long‐term Expected Rate of Return – Every four years, CalPERS performs an Asset Liability Management
(ALM) review of possible asset allocation alternatives for the Public Employees’ Retirement Fund (PERF)
investment portfolio. The review examines potential new investment policy portfolios and their impact on the
CalPERS Fund. The ALM review also incorporates actuarial‐based information to reflect the implications of the
various asset allocation alternatives on parameters such as the employer contribution rate. This periodic
review is the primary process by which the PERF investment portfolio and actuarial assumptions evolve to
reflect the market opportunity set, demographic assumptions and experience, and plan status.
The last ALM was performed in 2017 and the long‐term expected rate of return on pension plan investments
was determined using a building‐block method in which expected future real rates of return (expected returns,
net of pension plan investment expense and inflation) are developed for each major asset class.

Page 133

Page 134 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, continued
In determining the long‐term expected rate of return, CalPERS took into account both short‐term and long‐term
market return expectations as well as the expected pension fund cash flows. Using historical returns of all the
funds’ asset classes, expected compound (geometric) returns were calculated over the short‐term (first 10 years)
and the long‐term (11+ years) using a building‐block approach. Using the expected nominal returns for both
short‐term and long‐term, the present value of benefits was calculated for each fund. The expected rate of
return was set by calculating the single equivalent expected return that arrived at the same present value of
benefits for cash flows as the one calculated using both short‐term and long‐term returns. The expected rate
of return was then set equivalent to the single equivalent rate calculated above and adjusted to account for
administrative expenses.

New
Strategic
Allocation

Real Return
Years 1 ‐ 10(a)

Real Return
Years 11+(b)

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Asset Class

The table below reflects the long‐term expected real rate of return by asset class. The rate of return was
calculated using the capital market assumptions applied to determine the discount rate and asset allocation.

Global Equity
Global Fixed Income
Inflation Sensitive
Private Equity
Real Estate
Liquidity
Total

50.00%
28.00%
‐
8.00%
13.00%
1.00%

4.80%
1.00%
0.77%
6.30%
3.75%
‐

5.98%
2.62%
1.81%
7.23%
4.93%
‐0.92%

100%

(a) An expected inflation of 2.00% used for this period.
(b) An expected inflation of 2.92% used for this period.

In addition to the expected returns by asset class, the table below reflects the short‐term, long‐term, and
blended expected rate of return for the total PERF asset allocation as of the 2017 ALM.
Expected Compound Return (1‐10 years)
Long Term Expected Return (11‐60 years)
Blended Return (1‐60 years)

Page 134

6.10%
8.30%
7.00%

Page 135 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, continued

The table below shows historical compound annual returns of the Public Employees Retirement Fund for various
time periods ending on June 30, 2019 (figures are reported as gross of fees). The compound annual return is the
average rate per year compounded over the indicated number of years. It should be recognized that in any given
year the rate of return is volatile. The portfolio has an expected volatility of 11.4 percent per year based on the
most recent Asset Liability Modelling study. The volatility is a measure of the risk of the portfolio expressed in
the standard deviation of the fund’s total return distribution, expressed as a percentage. Consequently, when
looking at investment returns, it is more instructive to look at returns over longer time horizons.

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CalPERS reported a preliminary 4.7% net return on investments for the 12‐month period ended June 30, 2020.
The preliminary Fiscal Year 2019‐20 return brings total fund performance to 6.3% for the five‐year time period,
8.5% for the 10‐year time period, and 5.5% for the 20‐year time period. Over the past 30 years, the PERF has
returned an average of 8.0% annually.

The change in the Net Pension Liability for the Miscellaneous Plan is as follows:
Mi s cel l a neous Pl a n

Begi nni ng Ba l a nce

Tota l
Pens i on
Li a bi l i ty

104,134,737

Fi duci a ry
Net
Pens i on

73,232,175

Net
Pens i on
Li a bi l i ty
$

30,902,562

Servi ce Cos ts
Interes t on Tota l Pens i on Li a bi l i ty

1,771,368
7,381,846

Cha nges of As s umpti ons
Di fference Between Actua l a nd Expected Experi ence
Net Pl a n to Pl a n Res ource Movement

‐
1,082,289

‐

‐
1,082,289
‐

Empl oyer Contri buti ons
Empl oyee Contri buti ons

3,049,748
846,125

(3,049,748)
(846,125)

Net Inves tment Income
Empl oyee Contri buti on Refunds a nd Benefi t Pa yments

4,759,034
(5,720,232)

(4,759,034)
‐

(52,260)
170

52,260
(170)

2,882,585

1,632,686

(5,720,232)

Admi ni s tra ti ve Expens es
Other Mi s cel l a neous Income
Net Cha nges
Endi ng Ba l a nce

Page 135

4,515,271
$

108,650,008

76,114,760

32,535,248

Page 136 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(c) Changes in the Net Pension Liability, Continued
For the measurement period ended June 30, 2019, the Town contributed $2,325,357 for the safety Cost‐Sharing
Plan.
As of June 30, 2020, the Town reported net pension liabilities for its proportionate share of the net pension
liability of the safety Cost‐Sharing Plan of $24,695,687.

Sensitivity to Changes
in the Discount Rate

Sensitivity of the Net Pension Liability to Changes in the Discount Rate ‐ The following presents the net
pension liability of the Town for each plan, calculated using the discount rate for the Plan, as well as what
the Local Government’s net pension liability would be if it were calculated using a discount rate that is 1‐
percentage point lower or 1‐percentage point higher than the current rate:
Miscellaneous
Agent Multiple
Employer Plan

Safety Cost
Sharing Plan

Total

46,452,350

37,518,167

83,970,517

Current Discount Rate (7.15%)
Net Pension Liability

32,535,248

24,695,687

57,230,935

1% Increase (8.15%)
Net Pension Liability

21,037,757

14,183,262

35,221,019

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1% Decrease (6.15%)
Net Pension Liability

Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is
available in a separately issued CalPERS financial report.
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

For the year ended June 30, 2020, the Town recognized pension expense of $5,163,057 for the Miscellaneous
Agent Multiple Employer Plan and $5,646,706 for the Safety Cost Sharing Plan. The Town recognized total
pension expense for all plans of $10,809,763.

Page 136

Page 137 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
At June 30, 2020, the Town reported deferred outflows of resources and deferred inflows of resources related
to pension from the following sources for the Miscellaneous Agent Multiple Employer Plan:
Miscellaneous
Deferred
Outflows of
Resources
8,188,460
‐
761,117

‐

‐
(85,505)
‐

8,949,577

(396,694)

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Totals

Pension contributions subsequent to
measurement date
Changes in assumptions
Difference between expected and actual experiences
Net differences between projected and actual
earnings on plan investments

Deferred Inflows
of Resources

(482,199)

$8,118,460 reported as deferred outflows of resources related to contributions subsequent to the measurement
date will be recognized as a reduction of the net pension liability in the year ended June 30, 2021. Other amounts
reported as deferred outflows of resources and deferred inflows of resources related to pensions will be
recognized as pension expense as follows:
Fiscal Year Ended June
30,
2020
2021
2022
2023
2024
Thereafter

Page 137

Deferred
Outflows/(Inflows) of
Resources
$
776,699
(462,531)
(116,574)
81,324
‐
‐

Page 138 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
At June 30, 2020, the Town reported deferred outflows of resources and deferred inflows of resources related
to pensions from the following sources for the Safety Cost‐Sharing Plan:
Safety
Deferred
Outflows of
Resureces
2,565,205
1,012,233
1,612,405
793,584

Totals

‐
(197,536)
‐
(68,685)

‐

(1,010,396)

‐

(339,731)

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Pension contributions subsequent to
measurement date
Changes in assumptions
Difference between expected and actual experiences
Changes in employer's proportion
Differences between the employer's contributions and
the employer's proportionate share of contributions
Net differences between projected and actual
earnings on plan investments

Deferred Inflows
of Resources

5,983,427

(1,616,348)

$2,565,205 reported as deferred outflows of resources related to contributions subsequent to the measurement
date will be recognized as a reduction of the net pension liability in the fiscal year ending June 30, 2021. Other
amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will
be recognized as pension expense as follows:
Fiscal Year Ended
June 30,
2021
2022
2023
2024
2025

Deferred
Outflows/(Inflows) of
Resources
$
1,609,739
(101,848)
227,882
66,101
‐

Thereafter

‐

(e) Payable to the Pension Plan
At June 30, 2020, the Town reported a payable of $99,593 and $82,168 for the outstanding amount of
contributions to the Miscellaneous Agent Multiple‐Employer Plan and the Safety Cost‐Sharing Plan.

Page 138

Page 139 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(f) IRS Section 115 Trust
In March 2018, the Town established an IRS Section 115 Trust (Trust) with Public Agencies Retirement Services
(PARS), an entity independent of CalPERS, in order to prefund the pension liabilities for both the Miscellaneous
and Safety defined‐benefit pension plans. The Town closed the Trust for the fiscal year ending June 2020 and
used it to pay $4,753,965 more than the unfunded liability payment required by CalPERS for the Miscellaneous
Plan. This payment is included in the deferral amount of $8,188,460 for contributions made after the
measurement date for the Miscellaneous Plan.

During the fiscal year ending June 30, 2020, the Town established an alternate IRS Section 115 Trust with the
CalPERS California Employer’ Pension Prefunding Trust (CEPPT) program.

NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS

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Plan Description ‐ The Town makes contributions to California Employer’s Retiree Benefit Trust (CERBT), an
agent multiple‐employer defined benefit healthcare plan administered by CalPERS. The purpose of the CERBT
Fund is to provide California government employers with a trust through which they may prefund retiree medical
costs and Other Post‐Employment Benefits (OPEB). The Town uses CERBT as its investment vehicle and requests
disbursements on an as needed basis to reimburse the Town for the cost of retiree health insurance benefits.
Benefit provisions and all other requirements are established by state statute and Town ordinance. Copies of
PERS' annual financial report may be obtained from their Executive Office, 400 P Street, Sacramento, CA 95814.
In accordance with the Public Employees' Medical and Hospital Care Act (PEMHCA), employees qualify for
retiree health benefits upon five (5) years of service if they meet the vesting requirements as set forth by
CalPERS and take a service or disability retirement from Town employment. Additionally, the employee must
actually draw a CalPERS pension within ninety (90) days of separation from the Town, provided the employee
remains with the Town's health plan through COBRA. For employees who retire on or after February 1, 2016,
at Medicare eligibility, the Town will align contributions to the full cost of the employee’s enrollment, including
enrollment of family members, in a health benefits plan or plans up to a maximum of 100% Single Party and
90% Dependents for Kaiser Bay Area Basic/Medicare/Combo per month. During negotiations in fiscal year
2018/19, the Town’s discretionary retiree medical benefit contribution was eliminated for all future hires.
Upon retirement, employees have the option to roll over their sick leave accrual into a Town‐managed fund.
Employees can request reimbursement of medical expenses from the fund up to the value of their sick leave at
retirement.

Contributions ‐ The contribution requirements of plan members and the Town are established and may be
amended by the Town. The required contribution is based on projected pay‐as‐you‐go financing requirements,
with an additional amount to prefund benefits as determined by the Town. For the measurement period July 1,
2018‐June 30, 2019, the Town contributed $2,406,636 to the plan which included $1,104,025 of cash benefit
payments, administrative fees of $8,013, and $194,598 of implied subsidy benefit payments. All related
obligations are paid from the Town’s General Fund.

Page 139

Page 140 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
Covered Participants
Ina cti ve empl oyees or benefi ci a ri es
currentl y recei vi ng benefi ts
Ina cti ve empl oyees enti tl ed to but
not yet recei vi ng benefi ts

130
45

Acti ve empl oyees

149

Tota l

324

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Actuarial Methods and Assumptions ‐ Projections of benefits for financial reporting purposes are based on the
substantive plan (the plan as understood by the employer and the plan members) and include the types of
benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between
the employer and plan members to that point. Actuarially determined amounts are subject to continual revision
as actual results are compared with past expectations and new estimates are made about the future. The
actuarial methods and assumptions used include techniques that are designed to reduce the effects of short‐
term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long‐term
perspective of the calculations.
For the June 30, 2019 actuarial valuation, the actuarial assumptions used are as follows:
Va l ua ti on Da te
Mea s urement Da te
Actua ri a l Cos t Method
Actua ri a l As s umpti ons :
Di s count Ra te
Infl a ti on
Contri buti on Pol i cy

June 30, 2019
June 30, 2019
Entry‐Age Norma l Cos t Method

6.75%

2.75%
Pre‐funded through CERBT wi th the Stra tegy 1 a s s et a l l oca ti on
Town contri butes a t l ea s t the ADC

Sa l a ry Increa s es

Aggrega te ‐ 3% a nnua l l y
Meri t ‐ Ca l PERS 1997‐2015 Experi ence Study
3.00%
6.75%
Ca l PERS 1997‐2015 Experi ence Study

Projected Sa l a ry Increa s e
Inves tment Ra te of Return
Morta l i ty, Reti rement,
Di s a bi l i ty, Termi na ti on
Morta l i ty Improvement

Pos t‐reti rement morta l i ty projected ful l y genera ti ona l wi th
Sca l e MP‐2019

Hea l thca re Trend

Non‐Medi ca re ‐ 7.25% for 2021, decrea s i ng to a n ul ti ma te ra te
of 4.0% i n 2076
Medi ca re ‐ 6.3% for 2021, decrea s i ng to a n ul ti ma te ra te of 4.0%
i n 2076

Pa rti ci pa ti on a t Reti rement

Page 140

Ti er 1 Acti ves i n i ns ura nce progra m: 100%
Ti er 1 Acti ves i n ca s h a l l oca ti on progra m: 80%
Ti er 2 Acti ves i n i ns ura nce progra m: 60%
Ti er 2 Acti ves i n ca s h a l l oca ti on progra m:
Agency s ervi ce < 3 months : 60%
Agency s ervi ce >= 3 months : 40%
Wa i ved reti rees a ged <65: 20%
Wa i ved reti rees a ged ≥65: 0%

Page 141 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
The long‐term expected rate of return on OPEB plan investments was determined using a building‐ block method
in which expected future real rates of return (expected returns, net of OPEB plan investment expense and
inflation) are developed for each major asset class. These ranges are combined to produce the long‐term
expected rate of return by weighting the expected future real rates of return by the target asset allocation
percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of
return for each major asset class are summarized in the following table:

As s et Cl a s s
Publ i c Equi ty
Fixed Income
TIPS
Commodi ti es
REITs

Ta rget

Expected Rea l

Al l oca ti on*

Ra te of Return

59%
5%
3%
8%

2.75%
6.75%

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As s umed Long‐Term Ra te of Infl a ti on
Expected Long‐Term Net Ra te of Return, Rounded

4.82%
1.47%
1.29%
0.84%
3.76%

25%

The long‐term expected real rates of return are presented as geometric means
* Policy target effective October 1, 2018.

Discount Rate ‐ The discount rate used to measure the total OPEB liability was 6.75 percent. The projection of
cash flows used to determine the discount rate assumed that Town contributions will be made equal to the
actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position
was projected to be available to make all projected OPEB payments for current active and inactive employees
and beneficiaries. Therefore, the long‐term expected rate of return on OPEB plan investments was applied to
all periods of projected benefit payments to determine the total OPEB liability.

Page 141

Page 142 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
Net OPEB Liability – The net OPEB liability is calculated by subtracting the fiduciary net position (FNP) of the
Plan from the total OPEB liability as determined by the actuary. The table that follows displays the changes that
applied to the total OPEB liability, FNP, and Net OPEB liability during the measurement period of July 1, 2018
through June 30, 2019.
Increa s e (Decrea s e)
Pl a n Fiduci a ry
Net Pos i ti on

Tota l OPEB
Li a bi l i ty
$

Changes in the year:
Servi ce cos t
Interes t on the tota l pens i on l i a bi l i ty
Di fferences between a ctua l a nd
expected experi ence
Cha nges i n a s s umpti ons
Cha nges i n benefi t terms
Contri buti ons ‐ empl oyer
Contri buti ons ‐ empl oyee
Net i nves tment i ncome
Admi ni s tra ti ve expens es

26,321,184

16,265,716

1,203,274
1,814,072

‐
‐

1,203,274
1,814,072

‐
‐
‐
2,406,636
‐
1,009,315
(11,502)

(149,297)
(392,681)
‐
(2,406,636)
‐
(1,009,315)
11,502

(1,298,623)

‐

1,176,745

2,105,826

(929,081)

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(149,297)
(392,681)
‐
‐
‐
‐
‐

Benefi t pa yments , i ncl udi ng refunds
of empl oyee contri buti ons

Net changes

Balance at June 30, 2020
(6/30/19 measurement date)

10,055,468

Balance at June 30, 2019
(6/30/18 measurement date)

Net OPEB
Li a bi l i ty/(As s et)

27,497,929

18,371,542

9,126,387

Due to these changes, the Town achieved an OPEB Plan funding status of 66.8% for the June 30, 2019
measurement date.
Fi s ca l Yea r Endi ng

6/30/2020

Mea s urement Da te

Page 142

6/30/2019

6/30/2018

Tota l OPEB Li a bi l i ty (TOL)

27,497,929

26,321,184

Fiduci a ry Net Pos i ti on (FNP)

18,371,542

16,265,716

Net OPEB Li a bi l i ty (NOL)

9,126,387

10,055,468

Funded Sta tus (FNP/TOL)

66.8%

61.8%

Page 143 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
Sensitivity of Actuarial Assumptions – The following tables indicate how much the net OPEB liability varies if
the discount rate and healthcare trend rate used to calculate the liability are increased or decreased by one
percentage point.
Discount Rate
Net OPEB Liability

1% Decrease
(5.75%)
$
12,620,092

Current Rate
(6.75%)
$
9,126,387

1% Increase
(7.75%)
$
6,231,928

Healthcare Trend
Net OPEB Liability

1% Decrease
6,581,769

Current Trend
9,126,387

1% Increase
11,778,962

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OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB – Gains and losses related to
changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over
time. Partial amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining
amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be
recognized in future OPEB expense. The recognition period differs depending on the source of the gain or loss.
The measurement period July 1, 2018 through June 30, 2019 investment gains and losses are spread evenly over
a 5‐year period. All other deferred outflows and inflows created during the measurement period are recognized
over a 5.9‐year period. The total OPEB expense recognized in the fiscal year ending June 30, 2020 was $1,748,217
and the Town reported deferrals from the following sources:
OPEB

Deferred
Outflows of
Resources

● Employer contribu ons made subsequent to the
measurement date
● Changes in assump ons
● Diﬀerence between expected and actual experiences
● Net diﬀerence between projected and actual
earnings on plan investments
Totals

Page 143

2,508,306
‐
‐

‐

Deferred Inflows
of Resources

2,508,306

‐
(326,125)
(123,992)
(178,777)
(628,894)

Page 144 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
The $2,508,306 reported as deferred outflows of resources related to contributions subsequent to the June 30,
2019 measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ending
June 30, 2021. Other amounts reported as deferred outflows of resources related to OPEB will be recognized as
expense as follows:
Fiscal Year Ended June
30,

2021
2022
2023
2024
2025
Thereafter

Deferred
Outflows/(Inflows) of
Resources
$
(182,070)
$
(183,070)
$
(107,070)
$
(74,011)
(82,673.00)
‐

NOTE 11 ‐ RISK MANAGEMENT

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The Town participates in the following public entity risk pools through formally organized and separate legal
entities. The Town does not have an equity interest in the joint ventures. These entities exercise full powers and
authorities within the scope of the related agreements including the preparation of annual budgets,
accountability for all funds, the power to make and execute contracts and the right to sue and be sued.
Obligations and liabilities of the separate entities are not those of the Town, although the Town retains an
ongoing financial interest or an ongoing financial responsibility.

Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA) ‐ The Town participates in PLAN, which
covers general liability claims in the amount up to $5,000,000 plus $25,000,000 in excess liability for total
coverage of $30,000,000 per occurrence. The Town has a deductible or uninsured liability of up to $50,000 per
claim. PLAN also provides all risk property coverage of $1,000,000,000, excluding flood and earthquake
coverage. The Town has a $5,000 deductible for property and vehicle damage. Once the Town’s deductible is
met, PLAN becomes responsible for payment of all claims up to the limit. Financial statements may be obtained
from PLAN at 375 Beale Street, San Francisco, CA 94105.

Local Agency Workers’ Compensation Joint Powers Authority (LAWCX) ‐ The Town is a member of LAWCX for
coverage of workers’ compensation claims. The Town has a $250,000 self‐insured retention level or uninsured
liability for all employees. Once the Town’s deductible is met, LAWCX becomes responsible for claims up to
$5,000,000. For claims greater than $5,000,000, LAWCX has a commercial policy providing coverage. Financial
statements may be obtained from LAWCX at 1750 Creekside Oaks Dr., Suite 200, Sacramento, California, 95833.
The Town has not significantly reduced its insurance coverage from the prior year and settlements have not
exceeded insurance coverage for the past three years.
Liability for Uninsured Claims ‐ The Town is required to record its liability for uninsured claims and to reflect the
current portion of this liability as an expenditure in its financial statements. As discussed above, the Town has
coverage for such claims, but it has retained the risk for the deductibles, or uninsured portion of these claims.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 11 ‐ RISK MANAGEMENT, CONTINUED
The change in Workers’ Compensation and Self‐Insurance Service Funds’ claims liabilities, is based on historical
trend information provided by its third party administrator and was computed as follows as of June 30, 2020:

NOTE 12 ‐ COMMITMENTS AND CONTINGENCIES

Self‐
Insurance
Internal
Service Fund
$
131,743
29,999
(105,704)
56,038
2,786
(1,799)
$
57,025

Total
1,604,067
1,191,311
(1,687,145)
1,108,233
1,291,596
(870,480)
1,529,349

Claims payable balance ‐ June 30, 2018
Claims incurred
Claims paid
Claims payable balance ‐ June 30, 2019
Claims incurred
Claims paid
Claims payable balance ‐ June 30, 2020

Workers'
Compensation
Internal
Service Fund
$
1,472,324
1,161,312
(1,581,441)
1,052,195
1,288,810
(868,681)
$
1,472,324

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Federal and State Grants ‐ The Town participates in several federal and state grant programs. These are subject
to examination by grantors and the amount, if any, of disallowed expenditures cannot be determined at this
time. The Town expects such amounts, if any, to be immaterial.
Litigation ‐ The Town is subject to litigation arising from the normal course of business. The Town Attorney
believes there is no pending litigation which is likely to have a material adverse effect on the financial position
of the Town.
Successor Agency ‐ As of June 30, 2020, the Successor Agency Trust fund reported a net deficit of $4,929,016.
Encumbrances ‐ As of June 30, 2020, the Town had the following encumbered balances that were carried into
the next fiscal year:
Appropriated Reserves Fund
Non‐major Governmental Funds
Proprietary Funds
Total Encumbrances

3,029,398
4,500
139,391

3,173,289

NOTE 13 ‐ TOWN/SUCCESSOR AGENCY GRANTS, COOPERATIVE AGREEMENTS
Public Improvement Grants and Cooperative Agreements

In January of 2011, the Redevelopment Agency entered into a public improvement grant and cooperative
agreement with the Town for the purpose of funding the acquisition of public land and designing and
constructing various public improvements to be owned by the Town provided that the projects were in
accordance with the Redevelopment Agency’s five year implementation plan and redevelopment plan.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 13 ‐ TOWN/SUCCESSOR AGENCY GRANTS, COOPERATIVE AGREEMENTS, CONTINUED
The improvement plan, as identified in the agreement, called for approximately $24 million to be granted to the
Town for the following projects:
a.
b.
c.
d.
e.
f.

Expansion and improvement of current and new downtown parking
Highway 9 improvements from Highway 17 to Monte Sereno
Almond Grove Area street, sidewalk and other improvements
Downtown Los Gatos gateways, signage, banners and art
Storm drain, retaining wall, street and other improvements
New Los Gatos library building

During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement
were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its Redevelopment
Agency.
Affordable Housing Cooperative Agreement

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In March of 2011, the Redevelopment Agency entered into an affordable housing cooperative agreement with
the Town for the purpose of funding affordable housing projects and programs to be developed and/or
administered by the Town in accordance with the Redevelopment Agency’s five year implementation plan and
redevelopment plan. The improvement plan, as identified in the agreement, called for approximately $16
million to be granted to the Town for the following projects:
a.
b.
c.
d.
e.

Development of affordable housing at 224 Main St.
Development of affordable housing at Dittos Lane
Partnership with Senior Housing Solutions for the creation of senior housing in Los Gatos
Partnerships for the conversion of existing residential developments dedicated to affordable housing
Grants to the Santa Clara County Housing Trust for the development of affordable housing.

NOTE 14 – PRIOR PERIOD ADJUSTMENTS

The Town recorded a prior period adjustment due to a change in how short‐term compensated absences are
recorded. The Town conformed the accounting to GASB 16, resulting in a restatement of net position:

Fund Financial Statements:
General Fund

Page 146

Net Position, as
Previously
Reported

Prior Period
Adjustment
Removal of short‐
term
compensated
absences

Net Position as
Restated

37,970,527

372,628

38,343,155

Page 147 of 229

TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 15 – COVID‐19 PANDEMIC
During December 2019, a novel coronavirus disease (COVID‐19) was discovered. COVID‐19 was subsequently
declared a world‐wide pandemic by the World Health Organization on March 11, 2020. On March 4, 2020,
California State Governor Gavin Newsom proclaimed a State of Emergency as a result of the threat of the COVID‐
19 in the State of California, leading the Santa Clara County Health Officer to issue a stay‐at‐home directive
effective on March 17, 2020. This halted all business within Santa Clara County outside of essential activities.

COVID‐19 had an immediate impact on the Town of Los Gatos’ tax revenues. While 2019‐20 property tax
revenues were insulated from COVID‐19 due to the lien date (and change in California Consumer Price Index) of
January 1, 2019, preceding the onset of COVID‐19 in March 2020, as clearly evident in the Town’s basic financial
statements, sales tax and transient occupancy tax (TOT) were susceptible to the economic impact of COVID‐19.
The reduction in sales tax revenue reflects the closure, and later reduced activity of non‐essential businesses in
response to the restrictions from the shelter‐in‐place order, while the drop in TOT revenues was directly
attributable to the restrictions on the travel industry.
Non‐tax revenues were also impacted by COVID‐19, largely in permits and fees, caused by some delays in private
construction projects and fewer renewals of business licenses.

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In response to the economic impact the Town modified its revenue forecasts downward for the Fiscal Year
2020/21 Budget. The Budget identified contingencies should revenues come in below projected amounts.
Expenditures reflect maintaining high service levels with little to no increase in employee headcount. To date,
the contingencies have not needed to be used, and the Town is carefully monitoring actual revenues and
expenditures.
NOTE 16 – SUBSEQUENT EVENTS

Court Decision Regarding Redevelopment Agency (RDA) Distributions

The Town was recently informed that the County of Santa Clara intends on withholding approximately $1.6
million over the next two fiscal years to recapture excess RDA residual property tax revenues distributed to the
Town. County Counsel has advised the Auditor/Controllers office to "look back" three fiscal years to determine
the total amount to be recaptured from the Town and paid back over two fiscal years. The immediate impact to
the Town Budget will be an unanticipated withholding of approximately $789K in FY 2020/21.
The County has informed the Town that this action is necessary to comply with a recent appellate court decision
[City of Chula Vista v. Sandoval, 49 Cal. App. 5th 539 (2020)] that held that any funds remaining each RDA
property tax trust fund (RPPTF) must be distributed in accordance with the taxing entities pro‐rata shares
without any caps or reductions to the distributions of RPTTF residuals to taxing entities that received pass‐
through payments.
The County explained that the court concluded that pass‐through payments are to be treated as enforceable
obligation payments and not considered as part of the property tax increment remaining in the RPTTF. Since the
RPTTF's were established, many auditor‐controllers, including the County of Santa Clara, had been reducing the
RPPTF residual property tax distributions to taxing entities that received pass‐through payments. Of note is that
when the Town Redevelopment Agency was created, it negotiated property tax pass‐through agreements with
nearly all of the taxing jurisdictions in the RDA project area with the biggest share allocated was in pass‐through
agreements with the school districts.

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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 16 – SUBSEQUENT EVENTS, CONTINUED
The County has informed the Town that these reductions will no longer occur and the RPTTF residuals will be
distributed to all taxing entities in accordance with their property tax shares. After the two‐year recapture of
residual property tax, the Town will continue to receive RPTTF residual property taxes but at lower levels than
previously allocated under the County's old allocation method.
Educational Revenue Augmentation Fund (ERAF)

The Town is continuing to monitor developments regarding the distribution of excess ERAF funds. A portion of
property tax revenue goes to the ERAF to support local school districts. When the amount contributed to ERAF
is more than the minimum cost of funding local schools, excess funds are returned to the County, Cities, and
Special Districts. Five counties, including Santa Clara have been using a redistribution' allocation formula that is
being contested by the State. The Town's Adopted FY 20/21 Budget has ERAF revenue estimated at $433,000.

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The State's Legislative Analyst Office (LAO) requested Governor Newsom's administration to examine five
counties (including Santa Clara County) whose allocation methods for ERAF were questioned by the LAO in three
areas: (I) excluding charter school students from the calculations, (2) accounting for the school district's share
of property tax formerly allocated to redevelopment agencies, and (3) applying State law for the provision of
minimum State aid to schools. The LAO asserts that the counties' interpretation of applicable State law is shifting
monies away from schools in favor of local agencies.
The County believes that the Chula Vista ruling (see item above) will help the County with its excess ERAF
calculation. Santa Clara and other excess ERAF counties have sent a letter to the State Controller's Office (SCO)
to ask the SCO to take the court's decision into consideration when they develop further guidelines for the excess
ERAF allocation by counties.
If the LAO were to prevail, the possibility of a revenue claw back could reduce the current year's budgeted ERAF
amount to zero. Should the County prevail, the amounts budgeted could actually increase for the current fiscal
year. The State is expected to decide this issue in December 2020.

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20
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Required Supplementary Information

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Page 150 of 229

TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Schedule of Proportionate Share of Net Pension Liability – CalPERS Misc. Agent‐Multiple Employer Plan

Measurement Date

6/30/2019

Total Pension Liablity
Service Cost
Interest on total pension liability
Difference between expected and actual
experience
Changes in assumptions
Changes in benefits
Benefit payments, including refunds of employee
contributions
Net change in total pension liability
Total pension liability ‐ beginning
Total pension liability ‐ ending (a)

1,771,368
7,381,846

6/30/2018
$

1,700,438
7,073,843

6/30/2017
$

1,651,550
6,820,536

6/30/2016
$

1,560,679
6,697,247

6/30/2015
$

1,491,925
6,483,032

6/30/2014
$

1,579,547
6,268,015

994,994
(655,541)
‐

(892,479)
5,481,432
‐

(357,870)
‐
‐

(623,495)
(1,513,132)
‐

(5,720,232)
4,515,271
104,134,737
$ 108,650,008

(5,448,374)
3,665,360
100,469,377
$ 104,134,737

(5,138,083)
7,922,956
92,546,421
$ 100,469,377

(4,953,756)
2,946,300
89,600,121
$ 92,546,421

(4,748,786)
1,089,544
88,510,577
$ 89,600,121

(4,241,487)
3,606,075
84,904,502
$ 88,510,577

3,049,748
846,125
‐
‐

2,669,104
761,705
(170)
‐

2,407,496
682,891
‐
‐

2,223,782
691,770
(28,866)
‐

1,941,765
679,796
22,561
‐

1,796,079
668,167
‐
4,328,173

‐
4,759,034
‐

‐
5,883,868
‐

‐
7,171,443
‐

‐
369,185
‐

‐
1,470,873
‐

1,166,344
4,665,374

(5,720,232)
(52,260)

(5,448,374)
(108,582)

(5,138,083)
(95,455)

(4,953,756)
(40,462)

(4,748,786)
(74,706)

(4,241,487)
‐

Other Miscellaneous Income/(Expense)
Net change in plan fiduciary net position
Plan fiduciary net position ‐ beginning
Plan fiduciary net position ‐ ending (b)

170
2,882,585
73,232,175
$ 76,114,760

(206,199)
3,551,352
69,680,823
$ 73,232,175

‐
5,028,292
64,652,531
$ 69,680,823

‐
(1,738,347)
66,390,878
$ 64,652,531

‐
(708,497)
67,099,375
$ 66,390,878

‐
8,382,650
58,716,725
$ 67,099,375

Net pension liability ‐ ending (a) ‐ (b)

$ 32,535,248

$ 30,902,562

$ 30,788,554

$ 27,893,890

$ 23,209,243

$ 21,411,202

70.05%

70.32%

69.36%

69.86%

74.10%

75.81%

10,211,967

9,576,157

9,024,370

9,198,318

8,487,940

8,406,315

318.60%

322.70%

341.17%

303.25%

273.44%

254.70%

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Plan fiduciary net position
Contributions ‐ employer
Contributions ‐ employee
Plan to plan resource movement
Projected Earnings on Plan Investments
Recognized Difference between Projected and Actual
Earnings
Net Investment Income
Net Difference between Projected and Actual Earnings
Benefit payments, including refunds of employee
contribution
Administrative Expenses
1

Plan fiduciary net position as a percentage of the
total pension liability
Covered payroll

Net pension liability as a percentage of covered payroll

‐
‐
‐

1,082,289
‐
‐

1. During Fiscal Year 2017‐18, as a result of GASB No.75, CalPERS reported its proportionate share of activity related to postemployment benefit for participation in the State of California's
agent OPEB plan. Accordingly, CalPERS recorded a one‐time expense as a result of the adoption of GASB75. Additionally, CalPERS employees participate in various State of California agent
pension plans and during FY2017‐18, CalPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to pensions in
accordance with GASB Statement No.68.

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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost‐Sharing Plan

Measurement Date

6/30/2018

6/30/2017

6/30/2016

6/30/2014

0.24100%

0.23583%

0.22603%

0.22394%

0.14860%

0.28588%

Proportionate share of the net pension liability

$24,695,687

$ 22,725,267

$ 22,415,954

$19,377,843

$10,199,904

$17,788,690

Covered payroll*

$ 4,445,061

$ 5,079,440

$ 4,941,138

$ 5,022,498

$ 4,897,104

$ 4,916,535

Proportionate share of the net pension liability
as percentage of covered payroll

555.58%

447.40%

453.66%

385.82%

208.28%

361.81%

Plan fiduciary net position as a percentage of
of the total pension liability

75.26%

73.31%

74.06%

78.40%

75.66%

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* For the year ending on the measurement date.

Page 151

6/30/2015

Proportion of the net pension liability

6/30/2019

Page 152 of 229

TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Schedule of Pension Plan Contributions – Miscellaneous Agent Multiple‐Employer Plan
Fiscal Year

2020

2019

2018

2017

2016

2015

Actuarially Determined Contribution
$ 3,366,304
Contributions in Relation to the Actuarially
Determined Contribution
(8,188,460)
Contribution Deficiency (Excess)
$(4,822,156)

$ 3,049,748

$ 2,669,133

$ 2,407,496

$ 2,223,782

$ 1,941,765

(3,049,748)
‐

(2,669,133)
‐

(2,407,496)
‐

(2,223,782)
‐

Covered Payroll

11,743,677

10,211,967

9,576,157

9,024,370

9,198,318

8,487,940

28.66%

29.86%

27.87%

26.68%

24.18%

22.88%

Contributions as a Percentage of Covered
Payroll

(1,941,765)
‐

*Fiscal year 2015 was the 1st year of implementation, therefore only six years are shown.

Schedule of Pension Plan Contributions – Safety Cost‐Sharing Plan
Fiscal Year

2020

2018

$ 2,325,357

$ 1,951,711

2017

302,911

2016

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Actuarially Determined Contribution
$ 2,565,205
Contributions in Relation to the Actuarially
Determined Contribution
(2,565,205)
Contribution Deficiency (Excess)
$
‐

2019

Covered Payroll

Contributions as a Percentage of Covered
Payroll

297,000

295,000

(297,000)
‐

(295,000)
‐

(2,325,357)
$
‐

(1,951,711)
$
‐

4,928,821

4,445,061

5,079,440

4,941,138

5,022,498

4,897,104

52.05%

52.31%

38.42%

6.13%

5.91%

6.02%

(302,911)
‐

*Fiscal year 2015 was the 1st year of implementation, therefore only six years are shown.

Actuarial Methods and Assumptions used for Pension Actuarially Determined Contributions
Actua ri a l Cos t Method

Entry Age Norma l

Amorti za ti on Method

For deta i l s , s ee June 30, 2016 Ca l PERS Fundi ng Va l ua ti on Report

Amorti za ti on Peri od

For deta i l s , s ee June 30, 2016 Ca l PERS Fundi ng Va l ua ti on Report

As s et Va l ua ti on Method

Fair Value of Assets. For details, see June 30, 2016 CalPERS
Funding Valuation Report

Infl a ti on

2.75%

Sa l a ry Increa s es

Va ri es by Entry Age a nd Servi ce

Pa yrol l Growth

3.00%

Inves tment Ra te of Return 7.375% Net of Pens i on Pl a n Inves tment a nd Admi ni s tra ti ve
Expens es ; i ncl udes Infl a ti on.

Page 152

2015

Reti rement Age

Ca l PERS 1997‐2011 experi ence s tudy

Morta l i ty

Ca l PERS 1997‐2011 experi ence s tudy
Pre‐reti rement a nd pos t‐reti rement morta l i ty ra tes i ncl ude 20
yea rs of projected morta l i ty i mprovement us i ng Sca l e BB
publ i s hed by the Soci ety of Actua ri es .

100

Page 153 of 229

TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Schedule of Changes in Net OPEB Liability and Related Ratios
Measurement Date
Changes in Total OPEB Liablity
Service Cost
Interest on net liability
Difference between expected and actual
experience
Changes in assumptions
Benefit payments
Net change in total OPEB liability
Total OPEB liability ‐ beginning
Total OPEB liability ‐ ending (a)

6/30/2019

(149,297)
(392,681)
(1,298,623)
1,176,745
26,321,184
$ 27,497,929

‐
‐
(1,326,313)
1,548,184
24,773,000
$ 26,321,184

‐
‐
(1,269,000)
1,472,000
23,301,000
$ 24,773,000

Changes in plan fiduciary net position
Contributions ‐ employer
Contributions ‐ employee
Net Investment Income
Benefit payments
Administrative Expenses
Net change in plan fiduciary net position
Plan fiduciary net position ‐ beginning
Plan fiduciary net position ‐ ending (b)

2,406,636
‐
1,009,315
(1,298,623)
(11,502)
2,105,826
16,265,716
$ 18,371,542

2,935,313
‐
1,082,977
(1,326,313)
(34,261)
2,657,716
13,608,000
$ 16,265,716

3,878,000
‐
1,049,000
(1,269,000)
(14,000)
3,644,000
9,964,000
$ 13,608,000

Net OPEB liability ‐ ending (a) ‐ (b)

9,126,387

$ 10,055,468

$ 11,165,000

66.8%

61.8%

54.9%

17,338,201

16,192,060

14,985,716

52.64%

62.10%

74.50%

1,203,274
1,814,072

1,168,227
1,706,270

6/30/2017
$

1,134,000
1,607,000

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6/30/2018

Plan fiduciary net position as a percentage of the
total OPEB liability
Covered payroll

Net pension liability as a percentage of covered
payroll

Schedule of Employer Contributions
Fiscal Year

2020

Actuarially Determined Contribution (ADC)

2,172,000

2,108,000

2018
$

2,129,000

Actual Contributions

2,508,306

2,406,636

2,935,000

Contribution deficiency/(excess)

(336,306)

(298,636)

(806,000)

17,406,541

17,338,201

14,985,716

14.4%

13.9%

19.6%

Covered employee payroll
Contributions as a percentage of covered payroll

Page 153

2019

101

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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Actuarial Methods and Assumptions used for 2019/20 OPEB Actuarially Determined Contribution
June 30, 2017

Actua ria l Cos t Method

Entry Age Norma l , Level percenta ge of pa y

Amortiza ti on Method

Level percenta ge of pa y

Amortiza ti on Peri od

19‐year fixed period for 2019/20

As s et Va l ua ti on Method
Di s count Ra te

Inves tment ga i ns a nd l os s es s prea d over 5‐yea r
rol l i ng peri od
6.75%

Genera l Infl a ti on

2.75%

Medi ca l Trend

Non‐medi ca re ‐ 7.5% for 2019, decrea s i ng to a n
ul ti ma te ra te of 4.0% i n 2076
Medi ca re ‐ 6.5% for 2019, decrea s i ng to a n
ul ti ma te ra te of 4.0% i n 2076
Ca l PERS 1997‐2015 experi ence s tudy

Morta li ty Improvement

Pos t‐reti rement morta l i ty projected ful l y
genera ti ona l wi th Sca l e MP‐2017

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Morta li ty

Va l ua ti on Da te

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102

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Supplementary Information

Page 155

103

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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
MAJOR GOVERNMENTAL FUND BUDGET SCHEDULES
(OTHER THAN THE GENERAL FUND) AND
NONMAJOR GOVERNMENTAL FUNDS

Schedule of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP):
Appropriated Reserves Fund is used to account for resources provided for capital projects not fully funded from
other sources.
Capital Projects Funds:

Storm Drain Basin Funds were established to account for fees paid in conjunction with the development in
specified drainage areas.
Construction Tax Funds were established to account for tax levies on building additions or alterations including
capital improvements, underground utilities and parks.

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Gas Tax Fund was established to account for revenue and expenditures under the State of California Streets and
Highways Code Sections 2106, 2107 and 2107.5, as well as for the Roads Maintenance Rehabilitation Act. The
revenues must be used for the maintenance and construction of streets.
Special Revenue Funds:

Community Development Block Grant Fund was established to account for grant funds received and expended
under the Community Development Act of 1974.
Non‐Point Source Maintenance Fund was established to comply with obligations under the National Pollutant
Discharge Elimination system permit issued by the California Regional Water Quality Control Board.
Lighting and Landscape Fund was established to account for maintenance of trees, landscaping, irrigation
systems and lighting within the boundaries of Tract No. 8439.

Page 156

104

Page 157 of 229

TOWN OF LOS GATOS
APPROPRIATED RESERVES FUND
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Original
Budget
REVENUES
Other taxes
Licenses & permits
Intergovernmental
Charges for services
Interest
Other

Total Revenues

110,000
1,903,527
840,289
‐
326,446

3,205,095

3,180,262

‐
‐
11,014,724

Variance
Positive
(Negative)

Actual
$
$

‐
407,340
1,938,684
862,257
47,219
69,110

$
$

3,324,610

‐
297,340
35,157
21,968
47,219
(257,336)
144,348

EXPENDITURES
Parks and public works
Payments to Successor Agency
Capital outlay

110,000
1,627,763
1,446,577
‐
20,755

Final
Budget

‐
‐
3,386,457

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES

(7,809,629)

(6,125,320)

(2,594,515)

3,530,805

OTHER FINANCING SOURCES (USES)
Proceeds from sale of assets
Transfers in
Transfers (out)

‐
7,994,884
(427,616)

‐
8,325,591
(427,616)

910
8,325,591
(433,952)

910
‐
(6,336)

7,567,268

7,897,975

7,892,549

(5,426)

1,772,655

5,298,034

11,014,724

‐
‐
5,919,125

9,305,582

5,919,125

3,386,457

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Total Expenditures

‐
‐
9,305,582

Total Other Financing Sources (Uses)

CHANGE IN FUND BALANCE

(242,361)

BEGINNING FUND BALANCE

8,567,994

ENDING FUND BALANCE

Page 157

105

13,866,028

3,525,379

Page 158 of 229

TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2020

CAPITAL PROJECTS FUNDS
Construction
Tax
Fund

$ 2,760,276

$ 3,118,173

‐
‐
‐

$ 2,760,276

$ 3,118,173

Receivables:
Accounts
Intergovernmental Receivable
Long Term Notes Receivable
Total Assets

‐
‐
‐

Total Liabilities

Community
Development
Fund

208,412

$ 6,086,861

‐
81,958
‐

290,370

$ 6,168,819

231,508

‐
‐
‐

‐
‐
64,855

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LIABILITIES
Accounts Payable
Accrued Payroll and Benefits
Unearned revenue

Total
Capital
Projects
Funds

Gas
Tax
Fund

‐
‐
‐

94,412
‐
58,344
78,752

ASSETS
Cash & Investments

Storm
Drains
Funds

‐

64,855

‐
2,760,276

‐
3,118,173

‐
290,370

‐
6,168,819

‐
‐

166,653
‐

2,760,276

3,118,173

290,370

6,168,819

166,653

$ 2,760,276

$ 3,118,173

290,370

$ 6,168,819

FUND BALANCE

Restricted for:
Repairs and Maintenance
Capital Projects
Assigned for:
Special Revenue Funds
Unassigned
Total Fund Balances

Total Liabilities and Fund Balances

Page 158

‐

106

‐

231,508

(Continued)

Page 159 of 229

Non‐Point
Source
Maintenance

Lighting and
Landscaping

Total
Total
Nonmajor
Special Revenue Governmental
Funds
Funds

225,099
19,277
‐
‐

192,384
‐
340
‐

511,895

$ 6,598,756

19,277
58,684
78,752

19,277
140,642
78,752

244,376

192,724

668,608

$ 6,837,427

1,707
4,734
‐

2,474
‐
‐

4,181
4,734
64,855

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4,181
4,734
64,855

SPECIAL REVENUE FUNDS

6,441

2,474

73,770

‐
‐

190,250
‐

190,250
6,168,819

237,935
‐

‐
‐

404,588
‐

237,935

190,250

594,838

6,763,657

668,608

$ 6,837,427

244,376

192,724

(Concluded)

Page 159

107

Page 160 of 229

TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

REVENUES
Property Taxes
Other Taxes
License and permits
Intergovernmental
Interest

Total Revenues

‐
‐
126,471
‐
46,248
172,719

EXPENDITURES
Current:
Parks and Public Works
Community Services
Sanitation and Other
Capital Outlay

‐
11,000

Total Expenditures

Total
Capital Projects
Funds

‐
34,436
‐
‐
53,052

87,488

‐
‐
‐
1,249,694
12,238
1,261,932

‐
34,436
126,471
1,249,694
111,538
1,522,139

‐

‐
49,000

‐
1,719,384

‐
‐
‐
1,779,384

11,000

49,000

1,719,384

1,779,384

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES

161,719

38,488

(457,452)

(257,245)

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out)

‐
(30,000)

‐
‐

‐
(106,000)

‐
(136,000)

Total Other Financing Sources (Uses)

(30,000)

‐

(106,000)

(136,000)

Changes in Fund Balances

131,719

38,488

(563,452)

(393,245)

2,628,557

3,079,685

853,822

6,562,064

$ 2,760,276

$ 3,118,173

290,370

$ 6,168,819

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‐

CAPITAL PROJECTS FUNDS
Construction
Gas
Tax
Tax
Fund
Fund

Storm
Drain
Funds

Fund Balances ‐ Beginning of year
Fund Balances ‐ End of year

Page 160

108

(Continued)

Page 161 of 229

Community
Development
Fund

SPECIAL REVENUE FUNDS
Non‐Point
Source
Lighting and
Maintenance
Landscaping

Total
Special Revenue
Funds

‐
‐
‐
‐
‐

‐
‐
231,323
‐
‐

38,041
‐
‐
‐
3,562

38,041
‐
231,323
‐
3,562

Total
$

38,041
34,436
357,794
1,249,694
115,100

231,323

41,603

272,926

1,795,065

‐

29,493

‐
‐

162,837
‐

‐
25,079

29,493
‐
162,837
25,079

29,493
‐
162,837
1,804,463

‐

162,837

54,572

217,409

1,996,793

‐

68,486

(12,969)

55,517

(201,728)

‐
‐

10,000
‐

‐
(4,920)

10,000
(4,920)

10,000
(140,920)

‐

10,000

(4,920)

5,080

(130,920)

‐

78,486

(17,889)

60,597

(332,648)

166,653

159,449

208,139

534,241

7,096,305

594,838

$ 6,763,657

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‐

166,653

237,935

190,250

(Concluded)

Page 161

109

Page 162 of 229

TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

STORM DRAIN FUNDS

Budget

CONSTRUCTION TAX

Variance
Positive
(Negative)

Actual

Budget

Variance
Positive
(Negative)

Actual

REVENUES
Property taxes

‐

‐
92,500

‐
126,471

‐
33,971

30,000
‐

34,436
‐

4,436
‐

Intergovernmental
Charges for services

‐
‐

Interest

12,040

46,248

34,208

22,490

53,052

30,562

Total Revenues

104,540

172,719

68,179

52,490

87,488

34,998

EXPENDITURES
Parks and public works
Sanitation and other
Capital outlay

‐
‐
11,000

‐
‐
‐

‐
‐
49,000

‐
‐
‐

Total Expenditures

11,000

‐

49,000

‐

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES

93,540

161,719

68,179

3,490

38,488

34,998

OTHER FINANCING SOURCES (USES)
Operating transfers in
Operating transfers (out)

‐
(30,000)

‐
‐

(30,000)

‐

63,540

131,719

3,490

38,488

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Other taxes
License and permits

Total Other Financing Sources (Uses)

CHANGE IN FUND BALANCE

BEGINNING FUND BALANCE
ENDING FUND BALANCE

Page 162

68,179

2,628,557

3,079,685

$ 2,760,276

$ 3,118,173

110

34,998

(Continued)

Page 163 of 229

COMMUNITY DEVELOPMENT
BLOCK GRANT
Variance
Positive
Budget
Actual
(Negative)

GAS TAX

Budget

Actual
‐

‐

Budget
$

Variance
Positive
(Negative)

Actual
‐

‐

‐
‐

‐
231,323

‐
‐

1,363,738
‐

1,249,694
‐

(114,044)
‐

‐
‐

‐
353,071

‐
‐

‐
(353,071)

1,210

12,238

11,028

‐

1,364,948

1,261,932

(103,016)

‐

584,394

231,323

(353,071)

‐
‐
1,719,384

‐
‐
‐

‐
579,173
‐

‐
162,837
‐

‐
416,336
‐

1,719,384

‐

579,173

162,837

416,336

(354,436)

(457,452)

(103,016)

‐

5,221

68,486

63,265

‐
(106,000)

‐
‐

‐

‐
‐

10,000
‐

‐
‐

(106,000)

‐

10,000

‐

$ (460,436)

(563,452)

$ (103,016)

‐

15,221

78,486

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‐
‐

Variance
Positive
(Negative)

NON‐POINT
SOURCE MAINTANENCE

Page 163

853,822

166,653

$ 290,370

$ 166,653

111

‐

63,265

159,449
237,935
(Continued)

Page 164 of 229

TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

LIGHTING AND LANDSCAPING
Variance
Positive
Budget
Actual
(Negative)

TOTALS

Budget

Actual

Variance
Positive
(Negative)

REVENUES
Property taxes

38,220

38,041

(179)

38,220

38,041

(179)

‐
‐

30,000
323,823

34,436
357,794

4,436
33,971

Intergovernmental
Charges for services

‐
‐

1,363,738
353,071

1,249,694
‐

(114,044)
(353,071)

Interest

1,460

3,562

2,102

37,200

115,100

77,900

Total Revenues

39,680

41,603

1,923

2,146,052

1,795,065

(350,987)

EXPENDITURES
Parks and public works
Sanitation and other
Capital outlay

44,057
‐
67,579

29,493
‐
25,079

14,564
‐
42,500

44,057
579,173
1,846,963

29,493
162,837
1,804,463

14,564
416,336
42,500

Total Expenditures

111,636

54,572

57,064

2,470,193

1,996,793

473,400

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES

(71,956)

(12,969)

58,987

(324,141)

(201,728)

122,413

OTHER FINANCING SOURCES (USES)
Operating transfers in
Operating transfers (out)

‐
(4,920)

‐
‐

10,000
(140,920)

‐
‐

(4,920)

‐

(130,920)

‐

(76,876)

(17,889)

58,987

$ (455,061)

(332,648)

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Other taxes
License and permits

Total Other Financing Sources (Uses)

CHANGE IN FUND BALANCE

BEGINNING FUND BALANCE
ENDING FUND BALANCE

Page 164

208,139

190,250

112

122,413

7,096,305
$

6,763,657
(Concluded)

Page 165 of 229

TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
PROPRIETARY FUNDS
INTERNAL SERVICE FUNDS

Internal Service Funds are used to finance and account for special activities and service performed by a
designated department for other departments in the Town on a cost reimbursement basis.
The concept of major funds does not extend to internal service funds because they are used for internal activities
only. In the Government‐Wide Statement of Activities, the net revenues and expenses of the internal service
funds are allocated to the Town departments or programs that generated them, thus eliminating internal service
funds

However, internal service funds are still presented separately in the fund financial statements and include the
following funds:
Equipment Replacement Fund was established to account for the replacement of major Town equipment and
all vehicle replacement.

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Workers’ Compensation Fund was established to account for future claims that may occur related to workers
compensation injuries.
Self‐Insurance Fund was established to account for future general liability claims against the Town.

Information Technology Fund was established to account for the replacement of management information
computer systems and components.

Facilities Maintenance Fund was established to account for preventative maintenance and repair for all Town
buildings.

Page 165

113

Page 166 of 229

FY 2019 Values
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30, 2020

Equipment

Workers'

Self

Information

Facilities

Replacement

Comp

Insurance

Technology

Maintenance

1,925,053

$ 2,888,558

$ 1,347,639

$ 2,732,385

‐

114,213

‐

1,925,053

Accounts Payable

Total

ASSETS
Cash & Investments
Restricted Cash &
Investments
Receivables:
Accounts

192,117

$ 9,085,752

‐

114,213

‐

2,443

26,110

28,553

3,002,771

1,347,639

2,734,828

218,227

9,228,518

‐

2,644

‐

130,625

115,758

249,027

Claims Payable

‐

1,191,386

57,025

‐

1,248,411

Total Liabilities

‐

1,194,030

57,025

130,625

115,758

1,497,438

Total Assets

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NET POSITION

LIABILITIES

Restricted for:
Workers comp‐
ensation claims
Unrestricted

Total Net Position

Page 166

‐

114,213

‐

114,213

1,925,053

1,694,528

1,290,614

2,604,203

102,469

7,616,867

1,925,053

$ 1,808,741

$ 1,290,614

$ 2,604,203

102,469

$ 7,731,080

114

Page 167 of 229

TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Equipment
Replacement

Other local taxes
Other
Total Operating
Revenues

199,095
‐

Self
Insurance

903,434
7

378,133
‐

Information
Technology

Facilities
Maintenance

881,936
‐

Total

847,384
‐

$ 3,209,982
7

‐

165,652

‐
36,987

‐
526,552

‐
‐

34,437
33,213

34,437
596,752

236,082

1,429,993

378,133

881,936

1,080,686

4,006,830

‐

529,241

344,762

‐

874,003

OPERATING
REVENUES
Charges for
services
$
Interest
Use of money and
property

Workers'
Comp

540,036

996,348

56,061

796,201

1,161,003

3,549,649

Total Operating
Expenses

540,036

1,525,589

400,823

796,201

1,161,003

4,423,652

Operating Income
(loss)

(303,954)

(95,596)

(22,690)

85,735

(80,317)

(416,822)

Transfers in
Transfers out

‐
(579,797)

1,061,256
‐

‐
‐

‐
(788,000)

1,061,256
(1,367,797)

Net Transfers

(579,797)

1,061,256

‐

(788,000)

(306,541)

Change in Net
Position

(883,751)

965,660

(22,690)

85,735

(868,317)

(723,363)

2,808,804

843,081

1,313,304

2,518,468

970,786

8,454,443

1,925,053

$ 1,808,741

$ 1,290,614

$ 2,604,203

102,469

$ 7,731,080

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OPERATING
EXPENSES
Insurance
expenses
Services and
supplies

BEGINNING NET
POSITION
ENDING NET
POSITION

Page 167

115

Page 168 of 229

TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Equipment
Replacement

Net Cash Provided (Used)
by Operating Activities
CASH FLOWS FROM
NONCAPITAL FINANCING
ACTIVITIES
Transfers In/(Out)
Net Cash Provided (Used)
by Noncapital Financing
Activities

1,497,589
(1,009,831)
(390,050)

378,133
(71,599)
(343,775)

Information
Technology

Facilities
Maintenance

881,405
(741,233)
‐

1,096,563
(1,172,525)
‐

Cash and investments ‐ beginning of
year
Cash and investments ‐ end of year
Reconciliation of Operating
Income to Cash Flows
from Operating Activities:
Operating Income

Cash Flows From Operating Activities

140,172

(75,962)

(264,708)

(579,797)

1,061,256

‐

(788,000)

(306,541)

(579,797)

1,061,256

‐

(969,182)

1,158,964

(37,241)

1,925,053

‐

(303,954)

Page 168

4,089,772
(3,620,655)
(733,825)

(37,241)

Due to other government

97,708

2,894,235

Change in assets and liabilities:
Receivables, net
Accounts payable
Claims payable

Total

(389,385)

‐

(788,000)

(306,541)

140,172

(863,962)

(571,249)

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Net Increase(Decrease) in Cash and
Investments

236,082
(625,467)
‐

Self
Insurance

CASH FLOWS FROM
OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers
Claims paid

Worker's
Comp

1,843,807

3,002,771

1,384,880

1,347,639

‐

(95,596)

(22,690)

67,596
(13,483)
139,191

‐
(15,538)
987

(53)

‐

97,708

2,732,385

1,056,079

‐

‐
(85,378)

(389,385)

2,592,213

116

(37,241)

192,117

9,771,214
$

‐

85,735

(531)
54,968
‐
‐

140,172

(80,317)

9,199,965
‐

(416,822)

15,877
(11,433)
‐

82,942
(70,864)
140,178

(89)

(142)

(75,962)

(264,708)

Page 169 of 229

TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
FIDUCIARY FUNDS
PRIVATE PURPOSE TRUST FUNDS

Library Private Purpose Trust Fund was established to provide for the servicing of donations and bequests
to the Town's Library Program.

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RDA Successor Agency Private Purpose Trust Fund was established to account for the assets and liabilities
transferred from the dissolution of the Town's former Redevelopment Agency and the continuing
operations related to existing Redevelopment Agency obligations.

Page 169

117

Page 170 of 229

TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2020

RDA
Successor
Agency

Library
ASSETS
Cash and investments (Note 2)
Restricted cash and investments (Note 2)
Accounts receivable
Loans receivable (Note 3)
Capital assets (Note 5):
Nondepreciable
Depreciable, net of accumulated depreciation

1,822,438
1,987,621
‐
575,425

LIABILITIES
Accounts payable
Due to other governments
Interest payable
Long‐term debt (Note 6):
Due within one year
Due in more than one year

5,257,422
1,423,701

529,817

11,066,607

11,596,424

64
‐
285,390

3,064
2
285,390

‐
‐

1,250,000
14,461,545

3,002

15,996,999

16,000,001

526,815

(4,930,392)

(4,403,577)

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NET POSITION
Held in trust

Total Net Position

118

2,343,505
1,987,621
8,750
575,425

‐
‐

3,000
2
‐

Total Liabilities

Page 170

Total Assets

521,067
‐
8,750
‐

Total

526,815

(4,930,392)

(4,403,577)

Page 171 of 229

TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2020

RDA
Successor
Agency

Library
ADDITIONS
Property taxes
Investment earnings
Gifts, bequests and endowments
Other

Total Additions

1,949,284
44,035
‐
1,905,024

3,898,343

3,969,769

‐
‐
82,626
‐
‐

1,916,701
651,462
‐
‐
101,692

1,916,701
651,462
82,626
‐
101,692

82,626

2,669,855

2,752,481

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Total Deductions

1,949,284
53,652
61,809
1,905,024

71,426

DEDUCTIONS
Program expenses
Interest and fiscal agency expenses of RDA
Library services
Capital Outlay
Depreciation expense

‐
9,617
61,809
‐

Total

CHANGE IN NET POSITION

(11,200)

1,228,488

1,217,288

NET POSITION ‐ BEGINNING OF YEAR

538,015

(6,158,880)

(5,620,865)

NET POSITION ‐ END OF YEAR

Page 171

119

526,815

(4,930,392)

(4,403,577)

Page 172 of 229

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STATISTICAL SECTION

Page 173

121

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STATISTICAL (UNAUDITED)
This part of the Town of Los Gatos Comprehensive Annual Financial Report (“CAFR”) presents the detailed
information as a context for understanding what the information in the financial statements, note disclosures,
and required supplementary information says about the Town’s overall financial health.
Financial Trends
These schedules contain trend information to help the reader understand how Town’s financial
performance and well‐being have changed over time. (Schedule 1, Schedule 2, Schedule 3, and Schedule
4).
Revenue Capacity

These schedules contain information to help the reader assess one of the Town’s most significant local
revenue source, the property tax (Schedule 5, Schedule 6, Schedule 7, and Schedule 8).

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Debt Capacity

These schedules present information to help the reader assess the affordability of the Town’s current
levels of outstanding debt and its ability to issue additional debt in the future (Schedule 9, Schedule 10,
and Schedule 11)

Demographic and Economic Information

These schedules offer demographic and economic indicators to help the reader understand the
environment within which the Town’s financial activities take place (Schedule 12, Schedule 13, and
schedule 14).

Operating Information

These schedules contain service and infrastructure data to help the reader understand how the
information in the Town’s CAFR relates to the services the Town provides and activities it performs
(Schedule 15 and Schedule 16).

Page 175

123

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124

Page 177 of 229

Town of Los Gatos
Net Position by Component
Last Ten Fiscal Years
(Accrual Basis of Accounting)

Schedule 1

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120,000,000
115,000,000
110,000,000
105,000,000
100,000,000
95,000,000
90,000,000
85,000,000
80,000,000
75,000,000
70,000,000
65,000,000
60,000,000
55,000,000
50,000,000
45,000,000
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
-5,000,000
-10,000,000
-15,000,000

Net Investment in Capital Assets

Fiscal

Restricted

Unrestricted

Net Investment

Total

Year

in Capital Assets

Restricted

Unrestricted

Net Position

2011

72,567,355

14,652,823

29,017,520

116,237,698

2012

90,333,451

5,167,236

37,192,210

132,692,897

2013

92,558,523

3,949,583

41,480,377

137,988,483

2014

93,251,117

4,485,246

44,393,265

142,129,628

2015

93,687,029

5,663,182

7,180,919

106,531,130

2016

93,383,855

6,386,014

12,744,637

112,514,506

2017
2018
2019
2020

96,265,652
102,098,729
107,542,588
111,700,225

5,627,707
8,199,598
11,918,688
7,117,984

15,134,420
170,590
‐4,642,167
‐3,967,178

117,027,779
110,468,917
114,819,109
114,851,031

(1)

(2)

(4)
(3)

(1) The decrease in Restricted Net Position from FY 2010 to FY 2011 was primarily due to the issuance of the $15.7 million
Certificates of Participation in FY 2010.
(2) The decrease in Restricted Net Position GASB 68 Implementation of Unfunded Pension Liability of Statement of Net
Position.
(3) The decrease in unrestricted net position resulted largely from the use of approximately $8.0 million in unrestricted
cash balances in the Town’s GFAR fund during the year to invest in the Town’s infrastructure and equipment.
(4) Net position was restated for Fy 2018 for amounts placed intofiduciary funds, reclassified to General Fund Restricted
Asset.

Page 177

125

Page 178 of 229

Town of Los Gatos
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)

2011/12

5,180,153
13,495,885
7,155,905
3,099,269
666,015
1,892,805
342,893
16,794,022
1,278,381
49,905,328

1,156,931
2,153,843
810,022
3,097,192
98,803
39,491
135,000

2012/13

6,145,143
14,124,798
7,827,332
3,434,551
‐
1,938,577
158,205
919,821
1,123,842
35,672,269

1,131,424
2,324,397
1,215,382
3,448,433
‐
37,662
135,000

General Revenues

Property Taxes
Sales Taxes
Franchise Taxes
Other Taxes
Motor Vehicle in Lieu
Investment Earnings
Loss on Disposal of Capital Assets
Sale of Property
Miscellaneous
Extraordinary Gain (Loss) Dissolution of RDA
Total General Revenues

Change in Net Position

Page 178

2013/14

6,564,768
13,731,754
7,829,315
4,094,188
‐
2,128,823
393,205
1,277,063
‐
36,019,116

$ 6,955,804
14,119,786
8,154,616
4,424,040
‐
2,234,431
363,180
21,687
‐
$ 36,273,544

1,416,593
2,450,630
3,044,401
4,649,444
‐
50,696
403,294

$ 2,179,077
3,206,579
1,550,867
5,156,061
‐
51,775
328,648

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Program Revenues
Charges for Services:
General Government
Police Department
Parks and Public Works
Community Development
Community Services
Library Services
Sanitation
Operating Grants and Contributions:
General Government
Police Department
Parks and Public Works
Community Services
Library Services
Sanitation
Capital Grants and Contributions:
General Government
Police Department
Parks and Public Works
Community Development
Total Program Revenues

2010/11

Expenses
Governmental Activities:
General Government
Police Department
Parks and Public Works
Community Development
Community Services
Library Services
Sanitation
Redevelopment
Interest and Fees
Total Governmental Activities

15,638
27,748
809,272
182,683
10,662
9,002

6,453
29,980
993,827
‐
109
‐

8,406
91,360
835,724
‐
40
‐

‐
42,661
994,096
‐
14,662
‐

‐
‐
2,375,759
‐
10,922,046

‐
‐
641,811
‐
9,964,478

169,270
‐
2,757,660
‐
15,877,518

‐
‐
2,274,879
19,360
$ 15,818,665

2010/11

2011/12

2012/13

2013/14

18,226,001 $
9,971,409
‐
2,906,264
139,814
760,905
‐
(870,127)
41,943
‐

14,088,866
9,889,100
‐
3,698,753
15,238
331,420
‐
‐
2,275,160
11,864,453

11,968,377 $ 11,712,312
8,757,428
8,029,571
‐
‐
3,324,791
3,718,405
15,790
13,068
(133,375)
772,200
‐
‐
54,425
‐
1,154,647
350,468
295,101
‐

31,176,209

42,162,990

25,437,184

$ 24,596,024

(7,807,073) $
126

16,455,199

5,295,586

$ 4,141,145

Page 179 of 229

Schedule 2

2015/16

2016/17

2017/18

2018/19

2019/20

$ 6,465,852
12,644,221
8,069,352
4,047,738
‐
2,553,414
491,359
‐
‐
$ 34,271,936

$ 6,993,661
12,825,688
8,320,623
3,227,224
‐
2,522,142
528,580
‐
‐
$ 34,417,918

$ 6,771,628
14,587,597
9,502,707
5,093,459

$ 7,948,918
15,545,521
10,047,003
4,667,609

$ 8,163,991
16,635,726
10,627,716
5,064,637

$ 7,405,368
20,446,188
11,803,005
5,001,958

2,868,748
466,762
‐
‐
$ 39,290,901

3,087,684
536,296
‐
‐
$ 41,833,031

3,059,294
684,673
‐
‐
$ 44,236,037

3,347,523
3,041
‐
‐
$ 48,007,083

$ 1,888,213
3,529,166
2,206,765
5,027,497
‐
53,123
328,868

$ 1,517,012
3,278,585
1,516,108
4,359,146
‐
46,192
368,813

$ 1,669,020
2,076,688
2,155,841
3,803,626
‐
46,746
410,626

$ 1,701,146
1,888,359
4,150,068
3,456,390
‐
14,702
771,442

$ 1,562,683
1,745,889
2,910,936
4,155,231
‐
9,476
966,130

$ 1,470,324
1,549,207
3,674,222
3,351,753
‐
11,522
231,323

‐
24,838
907,745
‐
4,062
‐

15,291
98,138
749,300
‐
12,228
‐

‐
837,329
665,779
‐
‐
‐

‐
895,730
953,294
‐
57,200
‐

‐
826,643
1,301,152
‐
47,482
‐

12,290
952,045
2,824,638
15,864
49,351
‐

176,705
‐
2,338,154
‐
$ 16,485,136

‐
‐
1,610,657
‐
$ 13,571,470

‐
‐
770,600
9,280
$ 12,445,535

‐
‐
348,437
‐
$ 14,236,768

‐
‐
146,792
‐
$ 28,665,066

8,258
9,100
832,755
‐
$ 14,992,652

2014/15

2015/16

2016/17

2017/18

2018/19

2019/20

$ 12,931,603
8,202,678
2,215,430
2,062,893
‐
428,772
‐
‐
813,324
‐

$ 13,763,458
7,501,175
2,258,892
1,997,497
12,308
698,324
‐
‐
598,170
‐

$ 14,756,214
8,925,276
2,366,908
2,351,223
14,056
192,260
‐
‐
528,946
‐

$ 15,958,406
7,466,253
2,474,814
2,667,840
16,483
333,120
‐
‐
622,105
‐

$ 17,321,347
8,158,152
2,475,916
2,726,743
14,689
1,809,128
‐
‐
2,407,840
‐

$ 18,330,426
7,531,425
2,495,792
1,911,774
24,526
2,428,470
‐
‐
323,940
‐

$ 26,654,700

$ 26,829,824

$ 29,134,883

$ 29,539,021

$ 34,913,815

$ 33,046,353

$ 8,867,900

$ 5,983,376

$ 2,289,517 $ 1,942,758
127

$ 19,342,844

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2014/15

Page 179

31,922

Page 180 of 229

Town of Los Gatos
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)

2010/11
‐
‐
1,500,000
‐

‐
‐
‐
‐

Total Fund Balances

Page 180

‐
‐
‐
‐

21,806,781
2,433,556
$ 25,740,337

21,992,886
4,019,409
$ 26,012,295

20,758,156
7,502,446
$ 28,260,602

23,791,749
1,363,376
$ 25,155,125

‐

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All Other Governmental Funds
Reserved
Unreserved, reported in:
Special Revenue Funds
Capital Project Funds
Debt Service Funds
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total All Other Governmental Funds

Fiscal
2013/14

2012/13

General Fund
Reserved
Unreserved
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total General Fund

2011/12

‐

‐
‐
‐
‐
‐
‐
‐
14,764,334
5,167,236
‐
‐
4,786,547
5,389,674
(23,889)
107,107
$ 19,526,992 $ 10,664,017

‐
‐
‐

3,949,583
‐
6,097,182
157,208
$ 10,203,973

4,485,246
‐
8,191,823
183,045
$ 12,860,114

$ 45,267,329

$ 38,464,575

$ 38,015,239

128

$ 36,676,312

Page 181 of 229

Schedule 3

‐
‐
‐
‐

2016/17
$

‐
‐
‐
‐
15,129,925
14,050,699
‐
$ 29,180,624

24,121,256
‐
$ 24,121,256

‐
‐
‐
‐
20,019,187
9,555,085
‐
$ 29,574,272

‐

2017/18

‐

2018/19

‐
‐
‐
1,206,851
12,953,399
17,475,285
‐
$ 31,635,535

‐

2019/20

‐
‐
‐
5,015,316
15,070,944
18,256,895
‐
$ 38,343,155

‐
‐
‐
669,978
15,387,706
13,277,813
‐
$ 29,335,497

‐

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2015/16

Year
2014/15

Page 181

‐

‐
‐
‐

5,663,182
‐
15,346,558
206,875
$ 21,216,615

6,386,014
3,696,000
11,099,076
‐
$ 21,181,090

5,627,707
10,354,584
7,928,994
‐
$ 23,911,285

6,992,747
5,571,087
6,361,403
‐
$ 18,925,237

6,903,372
2,579,997
6,180,930
‐
$ 15,664,299

6,448,006
‐
14,181,679
‐
$ 20,629,685

$ 45,337,871

$ 50,755,362

$ 53,091,909

$ 50,560,772

$ 54,007,454

$ 49,965,182

129

Page 182 of 229

Town of Los Gatos
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
Fiscal Year

Total Revenues

31,549,352
3,248,303
4,107,386
2,967,819
691,022
737,903
‐
38,502
2,904,862

27,676,719
1,669,729
5,550,671
3,242,348
291,484
809,790
‐
38,974
5,412,328

46,245,149

44,692,043

13,004,041
5,222,504
2,973,587
663,645
1,806,611
314,899
6,318,706
18,958,126
15,839,303

13,392,953
5,440,960
3,226,195
‐
1,805,479
116,607
8,046,794
3,282,155
10,929,491

485,000
1,019,881

2012/13

2013/14

24,596,799 $
2,615,191
6,529,234
4,015,871
(133,380)
688,125
‐
38,910
4,577,584

23,475,393
2,440,127
5,837,581
5,343,265
772,164
795,720
‐
37,741
3,648,277

42,928,334

42,350,268

Total Expenditures

Excess (Deficiency) of Revenues
Over (Under) Expenditures

Other Financing Sources(Uses):
Debt Issuance
Transfers In
Transfers Out
Proceeds from Sale of Property
Proceeds from Issuance of Debt

Total Other Financing Sources(Uses)

Debt Service as a Percentage
of Non Capital Expenditures

Page 182

23,208,820
2,921,002
5,794,386
6,467,771
428,735
868,564
2,215,430
32,209
3,130,975
45,067,892

13,742,189
5,611,283
4,335,599
‐
2,131,438
322,817
8,499,854
21,687
4,097,662

13,747,198
5,840,097
4,218,500
‐
2,268,844
411,863
8,647,451
‐
3,800,478

934,167
1,143,185

‐
‐

66,606,303

48,317,986

41,814,015

38,762,529

38,934,431

(20,361,154)

(3,625,943)

1,114,319

3,587,739

6,133,461

‐
3,928,107
(3,545,168)

‐
3,735,440
(3,661,894)

‐
2,841,881
(2,463,850)

‐
3,418,872
(2,921,409)

‐
8,977,220
(7,788,049)

‐

382,939

73,546

378,031

497,463

1,189,171

‐
‐
‐

‐
(5,038,620)
‐

‐
295,913
‐

‐
‐
(4,534,538)

‐
‐
‐

(19,978,215) $

(3,552,397) $

1,492,350

2.96%

5.56%

Special Item:
Sale of Property
Extraordinary Gain (Loss) RDA Dissolution
Prepayment of Pension Obligations
Net Change in Fund Balances

2014/15

13,370,032
5,616,197
4,235,832
‐
2,055,069
359,725
8,331,444
1,277,063
6,568,653

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Expenditures:
Current
Public Safety
Public Works
Community Development
Community Services
Library Services
Sanitation & Other
General Government
Redevelopment
Capital Outlay
Debt Service
Principal Repayment
Interest and Fiscal Charges

2011/12

2010/11
Revenues:
Taxes
Intergovernmental
Charges for Service
Licenses & Permits
Investment Income
Fines and Forfeitures
Franchise Fees
Use of Property
Other

130

0.00%

4,085,202

0.00%

7,322,632

0.00%

Page 183 of 229

Schedule 4

2015/16
23,269,892
2,573,475
4,773,001
5,442,133
698,308
879,277
2,258,892
31,723
2,396,992

2017/18

25,945,129
1,715,580
4,210,174
5,075,503
192,978
917,105
2,366,908
32,096
1,011,939

2018/19

26,253,026
2,124,903
5,395,057
5,937,044
332,938
676,212
2,474,814
32,206
640,844

2019/20

28,244,329
2,310,655
5,584,504
5,173,876
1,809,164
510,266
2,475,916
32,960
579,755

27,811,665
4,498,153
5,309,470
4,818,671
2,428,453
271,117
2,495,792
31,039
376,922

41,467,412

43,867,044

46,721,425

48,041,282

13,763,316
6,307,266
3,695,504
‐
2,332,268
452,726
9,144,797
‐
3,241,657

13,251,288
6,633,748
3,793,930
‐
2,508,677
466,762
8,390,959
‐
6,867,034

14,423,554
7,125,686
4,192,165
‐
2,529,017
521,147
8,770,082
‐
9,778,058

14,945,407
7,962,135
4,577,495
‐
2,493,617
628,240
8,004,254
‐
7,888,914

15,793,815
8,168,599
4,473,790
‐
2,700,802
162,837
13,024,146
‐
7,861,972

‐
‐

38,937,534

41,912,398

47,339,709

46,500,062

52,185,961

3,386,159

(444,986)

(3,472,665)

221,363

(4,144,679)

‐
3,315,846
(1,284,514)

‐
7,907,692
(7,612,012)

‐
4,264,131
(3,323,756)
1,912,316
‐

‐
8,935,260
(8,628,719)
1,566
‐

42,323,693

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2016/17

‐

4,435

‐
3,176,760
(3,880,131)
378,219
‐

2,031,332

300,115

(325,152)

2,852,691

308,107

‐
‐
‐

5,417,491

0.00%

Page 183

(144,871)

0.00%

(3,797,817)

0.00%

131

3,074,054

0.00%

(3,836,572)

0.00%

Page 184 of 229

Town of Los Gatos
Assessed Value and Estimated Actual Value of Taxable Property
Last Ten Fiscal Years

Schedule 5

14000
12000

Millions

10000
8000
6000

4000
2000

2012

2013

2014

2015

2016

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20

0
2011

Unsecured Property

Fiscal
Year

Utility
and
Unsecured
Property

2011

217,353,236

‐9.92%

8,044,692,600

2012

217,297,593

‐0.03%

2013

211,268,609

‐2.77%

2014

224,079,502

2015

227,331,042

2016

2017

2019

2020

Secured Property

Total
Assessed

Estimated
Full Market

Total
Direct
Tax Rate

‐0.39%

8,262,045,836

32,178,770,400

1.0555

8,152,459,157

1.34%

8,369,756,750

32,609,836,628

1.0499

8,465,420,032

3.84%

8,676,688,641

33,861,680,128

1.0508

6.06%

9,238,816,900

9.14%

9,462,896,402

36,955,267,600

1.0493

1.45%

9,767,782,505

5.73%

9,995,113,547

39,071,130,020

1.0544

217,035,545

‐4.53%

10,417,804,357

6.65%

10,634,839,902

41,671,217,428

1.0533

304,443,013

40.27%

11,240,554,198

7.90%

11,544,997,211

44,962,216,792

1.0560

2018

330,504,877

8.56%

11,969,049,272

6.48%

12,299,554,149

47,876,197,088

1.0659

2019

359,276,665

8.71%

12,795,393,103

6.90%

13,154,669,768

51,181,572,412

1.0607

2020

331,517,212

‐7.73%

13,510,676,336

5.59%

13,842,193,548

54,042,705,344

1.0598

Percent
Change

Secured
Property

Percent
Change

Source: Santa Clara County Assessed Value Report

Page 184

2018

132

Page 185 of 229

Town of Los Gatos
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years

Schedule 6

1.25

1.00

0.50

0.25

Per Hundred $

0.75

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0.00

Santa Clara Valey Water District County
County Bonds and Levies
School District Bonds and Loans
Basic County Wide Levy

Santa Clara

School

Fiscal
Year

Basic County
Wide Levy

County Bonds
and Levies

Valley Water
District

District Bonds
and Loans

Total

2011

1.0000

0.0483

0.0072

0.1449

1.2004

2012

1.0000

0.0435

0.0064

0.1393

1.1892

2013

1.0000

0.0439

0.0069

0.1523

1.2031

2014

1.0000

0.0423

0.0070

0.1417

1.1910

2015

1.0000

0.0479

0.0065

0.1442

1.1986

2016
2017

1.0000
1.0000

0.0476
0.0474

0.0057
0.0086

0.1381
0.1223

1.1914
1.1783

2018

1.0000

0.0597

0.0062

0.1177

1.1836

2019

1.0000

0.0565

0.0042

0.1006

1.1613

2020

1.0000

0.0557

0.0041

0.0935

1.1533

Source: Santa Clara County Book of Tax Rates

Page 185

133

Page 186 of 229

Town of Los Gatos
Principle Property Tax Payers
Last Five Fiscal Years *
2015/16

Taxable
Assessed
Value

ASSESSEE NAME
$

19,379,620

0.19%

24,188,966

Taxable
Assessed
Value
$

2017/18
Percentage
of Total City
Taxable
Assessed
Value

Total ‐ All real properties assessed by the Town (1)

0.18%

0.23%

24,557,845

0.22%

25,048,998

21,617,318

0.21%

21,918,921

0.20%

22,211,650

16,293,163

0.16%

21,980,568

0.21%

25,241,863

26,477,160

0.25%

19,880,366

0.19%

23,449,975
20,089,903

0.23%
0.19%

24,744,983
49,167,836
30,134,614

0.24%
0.47%
0.29%

61,947,284

0.59%

17,507,261
15,497,395
15,676,113

0.17%
0.15%
0.15%

31,070,572

0.28%

37,081,049

0.36%

38,710,728

0.34%

24,394,468
41,202,805

141,348,894
44,930,482
31,744,252

1.36%
0.43%
0.30%

143,442,269
42,240,994
32,228,351

1.28%
0.38%
0.29%

146,317,944
43,071,837
32,872,917

18,274,508
109,100,000
84,000,000

0.16%
0.97%
0.75%
0.00%
7.24%

53,872,083

‐
663,137,202

$10,416,786,877

(1) Assessed value includes only net secured real properties.
(2) Excludes the value of tax‐exempt properties
Source Data: California Municipal Statistics, Inc.

Page 186

Taxable
Assessed
Value

19,675,159

22,315,770
22,799,599
26,880,933

0.20%
0.20%
0.24%

22,402,756

0.20%

20,396,274

0.18%

25,122,131
49,917,644
30,105,945
29,004,169

0.22%
0.44%
0.27%
0.26%

D
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750 University LLC
980 JR LLC
Alberto Way Holdings LLC
Ann R. Desantis
Boccardo Corporation
CH Realty IV Downing LP
D&K Los Gatos LLC
David A. and Shari Flick Trustee
Donahue Schriber Realty Group LP
DS Downing Los Gatos LLC
DS Village Square
El Camino Hospital
Equestrian 3 Investments LLC
Fox Creek Fund LLC
Good Samaritan Hospital LP
Grade Way Associations VI
Green Eyes LLC
Grosvenor USA Ltd.
Health Care REIT Inc,
International Hotel
Kay Kaoru and Go Sasaki Sr., Trustees
Knowles Los Gatos LLC
KSL Capital Partners
Leland E Lester, Trustee
LG Business Park Bldg 3 LLC
LG Business Park Bldg 4 LLC
LG Business Park LLC
LG Hotel LLC
Los Gatos Hotel Corp.
Lyon Baytree Apartments LLC
Preylock Los Gatos LLC
Safeway Inc.
San Jose Water Works
Serramonte Corporate Center LLC
SI 32 LLC
Sobrato Interests IV LLC
SRI Old Town LLC
Summerhill N40 LLC
Summerhill Prospect Avenue LLC
Wealthcap Los Gatos 121
Wealthcap Los Gatos 31
Windrose Los Gatos Properties LLC
Total ‐ Principal taxpayers

2016/17
Percentage
of Total City
Taxable
Assessed
Value

134

0.00%
6.37%

814,164,568.00

$11,239,536,718

23,353,576
29,584,251
22,516,823

30,144,617
25,624,027
50,915,995
25,893,946
53,465,724
43,937,857

111,282,000
85,680,000
$

916,633,381.00
$11,968,031,792

Page 187 of 229

Schedule 7

2018/19
Percentage
of Total City
Taxable
Assessed
Value

26,261,632

0.19%

24,158,350

0.18%

23,099,314

0.17%

56,370,186

0.44%

57,497,587

0.43%

0.22%
0.22%
0.17%
0.18%

30,789,155
25,525,880

0.23%
0.19%

0.19%

28,596,104
28,563,864
21,558,664
22,934,274

0.21%

25,746,699
19,277,879
25,549,975

0.20%
0.15%
0.20%

0.19%

22,651,732

0.45%

0.20%
0.25%

Taxable
Assessed
Value
$

Percentage
of Total City
Taxable
Assessed
Value

23,391,289

0.17%

0.25%
0.21%
0.43%
0.22%

30,747,509
26,135,962
51,934,313
26,411,820

0.24%
0.20%
0.41%
0.21%

31,362,458
28,864,942
52,972,998
33,069,058

0.23%
0.21%
0.39%
0.24%

89,141,472
25,752,231
47,777,432
204,861,501
152,166,578
44,781,377
34,200,980
56,244,782

0.66%
0.19%
0.35%
1.52%
1.13%
0.33%
0.25%
0.42%

115,777,792

0.86%

1,127,696,808.00

8.35%

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0.21%

Taxable
Assessed
Value

2019/20
Percentage
of Total City
Taxable
Assessed
Value

0.45%
0.37%

0.20%
0.34%
1.22%
0.36%
0.27%

46,150,577
200,844,610
149,208,182
43,919,879
33,530,374

0.36%
1.57%
1.17%
0.34%
0.26%

0.93%
0.72%

113,507,640
87,393,600

0.89%
0.68%

1,061,033,843.00

8.29%

7.66%

$12,793,751,423

Page 187

$13,509,034,656

135

Page 188 of 229

Town of Los Gatos
Property Tax Levies and Collections
Last Ten Fiscal Years

Schedule 8

Tax Levied

Value of Property

$17.0
$16.0
$15.0

$13.0

Billions

Millions

$14.0

$12.0
$11.0
$10.0
$9.0
$8.0

D
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$7.0

$16.5
$16.0
$15.5
$15.0
$14.5
$14.0
$13.5
$13.0
$12.5
$12.0
$11.5
$11.0
$10.5
$10.0
$9.5
$9.0
$8.5
$8.0
$7.5
$7.0

$18.0

Fiscal
Year

Town
Property Tax
Levied and
Collected

Redevelopment
Property Tax
Levied and
Collected

Total Property
Tax Levied
and
Collected

Value of Town
Property subject
to Local Tax
Rate

Value of
Redevelopment
Agency
Property
Subject to
Local
Tax Rate

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

7,567,880
7,520,265
8,253,442
9,120,626
9,787,519
10,388,424
11,345,588
12,060,228
12,924,592
13,559,587

6,861,650
3,349,254
‐
‐
‐
‐
‐
‐
‐
‐

14,429,530
10,869,519
8,253,442
9,120,626
9,787,519
10,388,424
11,345,588
12,060,228
12,924,592
13,559,587

8,262,045,836
8,369,756,750
8,676,688,641
9,462,896,402
9,995,113,547
10,634,839,902
11,544,997,211
12,299,554,149
13,154,669,768
13,842,193,548

1,117,973,351
1,109,305,673
1,167,752,021
1,249,873,303
1,318,214,863
1,395,509,489
1,537,577,241
1,650,746,473
1,717,358,555
1,809,729,058

Sources: Santa Clara County Auditor‐Controller Office and the Town of Los Gatos

Page 188

136

Value of
Property
Subject to
Local
Tax Rate
9,380,019,187
9,479,062,423
9,844,440,662
10,712,769,705
11,313,328,410
12,030,349,391
13,082,574,452
13,950,300,622
14,872,028,323
15,651,922,606

Page 189 of 229

Town of Los Gatos
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years

Fiscal
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Governmental Activities
2010
Certificate
Total
Total
of
Governmental
Primary
Participation
Activities
Government
15,675,000
24,780,000
24,780,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐

Percentage of
Personal
Income
19.7%
1)
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%

Debt was transferred to the Successor Agency Trust Fund as a part of the RDA dissolution

D
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2002
Certificate
of
Participation
8,865,000
‐
‐
‐
‐
‐
‐
‐
‐
‐

1992
Certificate
of
Participation
240,000
‐
‐
‐
‐
‐
‐
‐
‐
‐

Schedule 9

Page 189

137

Per
Capita
835.72
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Page 190 of 229

Town of Los Gatos
Direct and Overlapping Governmental Activities Debt
As of June 30, 2020

Schedule 10

2019/20 Assessed Valuation:

$13,842,193,548

DIRECT AND OVERLAPPING BONDED DEBT:
Overlapping Tax & Assesment Debt

% Applicable

Total Debt at
June 30, 2020

(1)

Estimated Share
of Direct and
Overlapping Debt
at June 30, 2020

Santa Clara County

2.685%

881,455,000

West Valley‐Mission Community College District

9.282%

617,330,000

57,300,571

Campbell Union High School District

7.875%

369,655,000

29,110,331

Los Gatos‐Saratoga Joint Union High School District

34.723%

88,930,000

30,879,164

Cambrian School District

0.454%

48,499,944

220,190

Campbell Union High School District

7.818%

218,860,233

17,110,493

Los Gatos Union School District

71.118%

76,655,000

54,515,503

23,667,067

0.032%

21,227,353

6,793

20.485%

112,109,206

22,965,571

Midpeninsula Regional Open Space District

4.423%

88,810,000

3,928,066

Saratoga Union School District
Union School District

Santa Clara Valley Water District Benefit Assessment District
Total Overlapping Tax and Assesmet Debt

65,495,000

$
$

1,758,541
241,462,290

Overlapping General Fund Debt
Santa Clara County General Fund Obligations

2.685%

966,725,100

25,956,569

Santa Clara County Pension Obligations

2.685%

346,996,639

9,316,860

Santa Clara County Board of Education Certificates of Participation

2.685%

3,480,000

93,438

West Valley‐Mission Community College District General Fund Obligations

9.282%

50,780,000

4,713,400

Campbell Union High School District General Fund Obligations

7.875%

20,000,000

1,575,000

Los Gatos‐Saratoga Joint Union High School District Certificates of Participation

34.723%

2,634,000

914,604

Campbell Union School District General Fund Obligations

7.818%

2,440,000

190,759

Saratoga Union School District Certificates of Participation

0.032%

3,150,000

1,008

Santa Clara County Vector Control District Certificates of Participation

2.685%

2,010,000

53,969

4.423%

111,985,600

$
$
$
$

4,953,123
47,768,730
1,969,609
45,799,121

$
$

15,335,000
15,335,000

Total Direct Debt
Total Gross Overlapping Dept
Total Net Overlapping Debt

$
$

$0
304,566,020
302,596,411

Gross Combined Total Debt
Net Combined Total Debt

$
$

304,566,020
302,596,411

D
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2.685%

Midpeninsula Regional Open Space Park District General Fund Obligations
Total Gross Overlapping General Fund Debt
Less: Santa Clara County Supported Obligations
Total Overlapping General Fund Debt

Overlapping Tax Increment Debt ( Successor Agency)
Town of Los Gatos Certificated of Participations
Total of Overlapping Tax Increment Debt

(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages
were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by
the distric's total taxable asessed value.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non‐bonded capital lease obligations.
Ratios to 2019/20 Assessed Valuation:
Total Overlapping Tax and Assessment Debt: 1.74%
Total Direct Debt: 0.00%
Gross Combined Total Debt: 2.20%
Net Combined Total Debt: 2.19%
Ratios to Redevelpment Incremental Valuation ( $1,471,897,930):
Total Overlapping Tax Increment Debt: 1.040%

Page 190

Source Data: California Municipal Statistics, Inc.

138

(2)

Page 191 of 229

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Page 192 of 229

Town of Los Gatos
Legal Debt Margin Information,
Last Ten Fiscal Years
(In Thousands of Dollars)

Fisca

Debt Limit

Debt Applicable to Limit
Legal Debt Margin

1,204,551 $
‐

1,204,551 $

2012/13

1,195,035 $
‐
1,195,035 $

2013/14

1,216,131 $

0.00%

2014/15

1,263,138 $

‐

1,216,131 $

0.00%

1,379,254

‐

1,263,138 $

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Total Net Debt
Applicable to the Limit
as a Percentage
of Debt Limit

2011/12

2010/11

‐
1,379,254

0.00%

Notes:
(1) The Town of Los Gatos is a general law city and has a debt limit of 15%.
(2) Excludes RDA asessed valuation and debt transferred to the Successor Agency trust as a part of the RDA dissolution.

Page 192

140

0.00%

Page 193 of 229

Schedule 11

Legal Debt Margin Calculation
for Fiscal Year 2019/20

13,842,193,548
2,076,329,032

Legal Debt Margin

2,076,329,032

2016/17

1,444,943 $
‐
1,444,943 $

2017/18

1,556,252 $

1,679,736 $

‐
1,556,252 $

2018/19

‐
1,679,736 $

2019/20

1,789,097 $
‐

1,789,097 $

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0.00%

Page 193

0.00%

141

2,076,329

al Year
2015/16

Assessed Value
Debt Limit
Debt Applicable to Limit:

0.00%

‐

2,076,329

0.00%

Page 194 of 229

Town of Los Gatos
Demographic and Economic Statistics
Last Ten Fiscal Years

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Population
(1)

Personal
Income
(thousands
of dollars)
(2)

Per Capita
Personal
Income
(3)

29,651
29,808
30,247
30,443
30,505
31,376
31,314
30,601
30,998
31,439

1,833,410
1,854,892
2,140,641
2,267,912
2,197,885
2,286,087
2,281,569
2,290,638
2,365,178
2,546,748

61,833
62,228
70,772
74,497
72,050
72,861
72,861
74,855
76,301
81,006

Median
Age
(4)

Public
School
Enrollment
(5)

County
Unemployment
Rate
(6)

6,184
6,352
6,420
6,522
6,622
6,646
6,631
6,588
6,544
6,520

10.3%
8.7%
6.8%
5.7%
3.8%
3.5%
3.8%
2.6%
2.6%
10.7%

44.22
42.64
45.8
45.80
46.10
46.30
46.50
46.81
46.72
46.83

Fiscal
Year
Ended

Schedule 12

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Source:
(1) California State Dept. of Finance ‐ Population Research Unit (January 2019)
(2) California State Dept. of Finance ‐ Estimate equals county per capita average times population
(3) US Census Bureau ‐ QuickFacts
(4) Claritas demographic snapshot report
(5) Los Gatos Saratoga Joint Union and Los Gatos Union Elementary School Districts
(6) State of California, Employment Development Dept., Labor Market Info. Div.

Page 194

142

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Page 196 of 229

Town of Los Gatos
Principal Employers
Last Ten Fiscal Years

Columbia Health Care Assoc/Mission Oaks Hospital
El Camino Hospital, Los Gatos
Los Gatos Union School District
Los Gatos‐Saratoga High School District
Netflix
Safeway
Alain Pinel Realtors
Verizon
Courtside Tennis Club
Town of Los Gatos
Whole Foods
Vasona Creek Health Care Center
Good Samaritan Regional Cancer Center
Roku
Terraces of Los Gatos

2,000
700
300
300
800
250
220
‐
200
138
‐
‐
‐
‐
‐

12.60%
4.41%
1.89%
1.89%
5.04%
1.57%
1.39%
0.00%
1.26%
0.87%
0.00%
0.00%
0.00%
0.00%
0.00%

Source: Town of Los Gatos, Finance Department and Muniservices

Page 196

144

Emp.
2,000
700
275
270
800
250
150
‐
200
136
‐
‐
‐
‐
‐

2011/12
Percentage
of Total Town
Employment

Emp.

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Principal Employers

2010/11
Percentage
of Total Town
Employment

13.89%
4.86%
1.91%
1.88%
5.56%
1.74%
1.04%
0.00%
1.39%
0.94%
0.00%
0.00%
0.00%
0.00%
0.00%

Page 197 of 229

Schedule 13

13.29%
4.65%
1.83%
1.79%
5.98%
1.66%
1.00%
0.00%
1.33%
0.92%
0.00%
0.00%
0.00%
0.00%
0.00%

2,000
700
237
256
825
250
156
‐
295
144
‐
‐
‐
‐
‐

Emp.

13.52%
4.73%
1.60%
1.73%
5.58%
1.69%
1.05%
0.00%
1.99%
0.97%
0.00%
0.00%
0.00%
0.00%
0.00%

‐
560
273
157
1,530
314
156
‐
440
157
179
233
200
‐
‐

2014/15
Percentage
of Total Town
Employment

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0/
20

2,000
700
275
270
900
250
150
‐
200
138
‐
‐
‐
‐
‐

Emp.

2013/14
Percentage
of Total Town
Employment

Page 197

0.00%
3.73%
1.82%
1.05%
10.19%
2.09%
1.04%
0.00%
2.93%
1.05%
1.19%
1.55%
1.33%
0.00%
0.00%

Emp.

2012/13
Percentage
of Total Town
Employment

145

Page 198 of 229

‐
560
280
157
1,976
314
146
‐
440
158
179
233
200
487
228

0.00%
3.53%
1.76%
0.99%
12.45%
1.98%
0.92%
0.00%
2.77%
1.00%
1.13%
1.47%
1.26%
3.07%
1.44%

Emp.
‐
560
274
370
1,864
314
148
‐
468
160
179
233
200
554
228

Page 198

146

2016/17
Percentage
of Total Town
Employment

Emp.

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Principal Employers

2015/16
Percentage
of Total Town
Employment

0.00%
3.49%
1.71%
2.30%
11.61%
1.95%
0.92%
0.00%
2.91%
1.00%
1.11%
1.45%
1.25%
3.45%
1.42%

Page 199 of 229

Schedule 13

560
267
367
2,117
314
131

Emp.

0.00%
3.49%
1.75%
2.28%
14.41%
1.95%
0.82%
0.00%
3.37%
1.00%
0.78%
1.45%
1.25%
3.21%
1.42%

560
281
367
2,314
314
131

2019/20
Percentage
of Total Town
Employment

560
281
367
2,314
314
131

542
160
125
233
200
516
228

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542
159
179
233
200
664
228

0.00%
3.43%
1.64%
2.25%
12.98%
1.92%
0.80%
0.00%
3.32%
0.97%
1.10%
1.43%
1.23%
4.07%
1.40%

Emp.

2018/19
Percentage
of Total Town
Employment

Page 199

0.00%
3.49%
1.75%
2.28%
14.41%
1.95%
0.82%
0.00%
3.37%
1.00%
0.78%
1.45%
1.25%
3.21%
1.42%

Emp.

2017/18
Percentage
of Total Town
Employment

147

Page 200 of 229

Town of Los Gatos
Full‐time‐Equivalent Employees by Function/Program
Last Ten Fiscal Years

Schedule 14

Full‐time‐Equivalent Employees as of June 30
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Function/Program
20.15
60.50
‐
1.00
8.60
16.00
32.00

20.40
58.00
‐
‐
8.60
17.50
31.00

20.73
57.50
‐
0.50
10.30
17.50
31.50

20.97
60.00
‐
0.63
10.80
19.50
32.00

Total

147.75

138.75

138.25

135.50

137.53

20.97
59.00
‐
0.63
11.00
19.00
33.50

21.35
59.00
‐
0.63
12.25
19.26
33.50

21.97
59.00
‐
0.75
12.25
19.63
34.50

22.16
59.00
‐
0.75
12.50
20.08
34.50

21.80
60.00
‐
0.75
12.50
20.08
34.50

144.10

145.98

148.10

148.99

149.63

18.90
59.50
3.25
1.00
8.60
15.00
32.50

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General Government
Police
Culture and Recreation
Economic Development
Library
Planning
Public Works

Full‐time equivalent employment is calculated as one or more employee positions totaling one full year
of service or approximately 2,080 hours a year.
Page C‐42 of Town Budget 19‐20

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Page 202 of 229

Town of Los Gatos
Operating Indicators
Last Ten Fiscal Years
FUNCTION/PROGRAM
2010/11

2011/12

2012/13

2013/14

711
42,974,043
128
31,289,431
11
40,000

747
66,072,341
107
17,663,124
‐
‐

738
75,227,889
137
46,855,615
‐
‐

813
87,307,822
139
138,676,507
‐
‐

Residential Parking Permits
Number of Special Event Permits Issued
Number of Annual Permits Issued

96
713

89
1,223

125
1,320

133
1,376

City Clerk
Number of Council Resolutions Passed
Number of Ordinances Passed
Number of Contracts Passed

76
6
218

General Services
Number of Purchase Orders Issued

336

Police
Physical Arrests
Parking Violations
Traffic Violations
DUI Arrests

General government
Building Permits Issued
Residential Permits Issued
Residential Permits Value
Commercial Permits Issued
Commercial Permits Value
Publically Owned Permits Issued
Publically Owned Permits Value

74
20
220

86
16
196

358

318

301

872
14,377
2,718
98

690
12,938
2,908
89

648
11,991
3,333
86

641
14,421
4,747
62

Library
Circulated e‐audiobooks

1,994

3,388

4,774

2,414 *

Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles)
ADA Compliance: Curb Ramps
Traffic Circles
Street Poles

4.7
17
1
1,708

8.0
19
1
1,611

10.0
19
‐
1,611

Planning and Development Department
Building & Safety Inspections Performed
Redevelopment: Number of active projects

10,977
1

11,738
1

11,902
‐

12,764

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59
13
227

‐

* July 2013 the Library separated from Northern CA Digital Library, Patrons had no longer access to collections of multiple libraries. By 20
patrons access to more materials.
** The Town streamlined the special event application where multiple events require only one permit.

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150

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Schedule 15

Fiscal Year
2014/15

2015/16

2016/17

2017/18

2018/19

2019/20
898
47,961,529
92
12,389,688

899
85,000,754
147
20,185,884
‐
‐

744
53,625,891
135
50,024,177
‐
‐

849
63,083,249
105
16,626,196

814
80,030,846
122
13,295,999

127
1,570

107
1,363

118
1,251

113
1,342

78
1,395

72
9
222

61
11
283

69
5
240

69
17
262

1,400

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59
11
245

57
24
242

277

334

331

322

343

359

695
13,321
4,633
48

987
13,975
5,400
58

1,030
12,863
4,634
60

1,164
11,784
4,757
51

1,138
6,817
2,877
70

616
4,023
1,225
64

5,867 *

7,761

10,006

8,844

12,130

57,839

1.8
23
1
1,609

8.0
11
1
1,609

10.0
30
1
1,609

2.6
68
1
1,762

5.8
49
1
1,830

16.2
68
1
1,830

11,652

8,655

14,722

13,918

13,966

13,633

‐

014 the Library has expanded its contents giving

Page 203

805
76,896,111
133
178,195,997
‐
‐

151

‐

Page 204 of 229

Town of Los Gatos
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years

2010/11

2011/12

2012/13

2013/14

Fiscal Year
2014/15

2015/16

2
14
2

132
2,115
28

132
2,116
29

132
2,109
29

132
1,609
29

132
1,609
30

12
1

N/A

Police
Number of Stations
Number of Patrol Units
Parking Enforcement Vehicles
Other Public Works
Streets (miles)
Streetlights
Traffic Signals
Parks and Recreation
Number of Parks
Number of Community Centers
Number of Parks & Open Spaces

12
1

N/A

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Parking
Number of Parking Garages
Number of Parking Lots
Number of Off Street Parking Garage Spaces
Number of Downtown Off‐Street Parking Spaces

Function/Program

1
22
1,126

N/A

Source: Town of Los Gatos, Finance Department

Page 204

152

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Schedule 16

2017/18

2018/19

2
14
2

132
1,609
30

132
1,762
30

132
1,830
31

12
1

N/A

1
17

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1
17

2019/20

2016/17

Page 205

1
22
1,126

1
22

N/A

1,269

153

1
22

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154

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OTHER INDEPENDENT AUDITOR’S REPORT

Page 207

155

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REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California

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We have audited, in accordance with the auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States, the financial statements of the governmental activities, the business‐
type activities, each major fund, and the aggregate remaining fund information of the Town of Los Gatos,
California, as of and for the year ended June 30, 2020, and the related notes to the financial statements, which
collectively comprise the Town of Los Gatos, California’s basic financial statements, and have issued our report
thereon dated December xx, 2020.
Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the Town of Los Gatos,
California’s internal control over financial reporting (internal control) to determine the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not
for the purpose of expressing an opinion on the effectiveness of the Town of Los Gatos, California’s internal
control. Accordingly, we do not express an opinion on the effectiveness of the Town of Los Gatos, California’s
internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements
will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough
to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or,
significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal
control that we consider to be material weaknesses. However, material weaknesses may exist that have not been
identified.

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157

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To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
Page 2

Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town of Los Gatos, California’s financial
statements are free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a
direct and material effect on the determination of financial statement amounts. However, providing an
opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not
express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters
that are required to be reported under Government Auditing Standards.

Purpose of this Report

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The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.

Badawi and Associates
Certified Public Accountants
Berkeley, California
December xx, 2020

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159

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Page 212

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Page 213 of 229

TOWN OF LOS GATOS

MEETING DATE: 12/7/2020

COUNCIL FINANCE COMMITTEE
REPORT

ITEM NO: 5
DESK ITEM

DATE:

December7, 2020

TO:

Council Finance Committee

FROM:

Laurel Prevetti, Town Manager

SUBJECT:

Discuss and Provide Comments to the Town Council Regarding the Draft
Comprehensive Annual Financial Report for the Fiscal Year Ended June 30,
2020.

REMARKS:
Staff received comments from Committee members and the public. Attachment 2 contains
Committee Member’s comments. Attachment 3 contains public comments received after
publication of the Staff report and before 11:01 a.m. Monday December 7, 2020. In addition,
one Committee member found typographical errors which will be corrected:



Page 18, Management discussion bullet 7 should be the continuation of the sentence in
bullet 6.
Page 34, last line should be FY20/21 not FY19/20.

Staff and the Auditor will be available to respond questions during the meeting.
Staff responses to the Committee Members’ questions are below.
Questions on the MD&A
Question: Page 19 talks about $2.2M in increases in intergovernmental grant revenues. What
is the source of the grant the contributed to the increase and how are the funds used?
Answer: The majority of the approximate $2.0M increase in Intergovernmental revenues was
attributed to the approximate $1.0M increase in revenues received from the VTA Measure B
funding. There was an additional receipt of approximately $500K higher revenues received
from MTC ($182K) and from the VTA/TFCA ($353K) capital grants. All of these monies were
dedicated as funding sources for local street and road improvement projects.
PREPARED BY:

Stephen Conway
Finance Director

Reviewed by: Town Manager and Assistant Town Manager

Page 213

110 E. Main Street Los Gatos, CA 95030 ● 406-354-6832
www.losgatosca.gov

Page 214 of 229

PAGE 2 OF 9
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020

REMARKS (continued):
Question: Page 24 note 1 talks about a reclassification of 2019, although the reclassification
doesn’t appear to be made in the 2019 numbers. What is the dollar amount? And how and
when was the misclassification identified? Also, since you disclose the need for the
reclassification, do you want to change the 2019 numbers?
Answer: In staff’s review of the changes in expenses by fiscal year and functional category in
the prior year’s Statement of Activities, it was discovered an error had been made in the
reversal of the FY 2019 OPEB contributions which was allocated across all departments instead
of being limited to the general government category. The credit should have only been charged
to general governmental expenses in the prior year. This correction has no effect on net
position but changes the expense totals by function. Total expenses did not change but the
categories were affected on the Statement of Activities for the prior fiscal year ending June 30.
2019 as follows:
Question: Page 26 discussion of the Governmental Activities Expenses explains the increase in
General Government expense is due to large swings in the amount allocated with the current
year allocation adjustment increasing costs while the prior year allocation adjustment
decreased costs. What is the reason for the large swing?
Answer: Please see the following table for details of error correction.
DETAILS OF FYE 2019 STATEMENT OF ACTIVITIES CORRECTION
Reverse
As Previously
Correct
Prior Year
Functions/Programs
Reported
2019
2019
Expenses: Expenses: Expenses:
2019
OPEB Contrib. Credit OPEB Contrib Credit
Police Department
$
16,635,726
$
1,089,749
Parks and Public Works
$
10,627,716
$
482,861
General Government
$
8,163,991 $
(2,406,637) $
383,505
Community Development
$
5,064,637
$
297,983
Library Services
$
3,059,294
$
152,539
Sanitation
$
684,673
$
44,236,037 $
(2,406,637) $
2,406,637

$
$
$
$
$
$
$

REVISED
2019
Expense
17,725,475
11,110,577
6,140,859
5,362,620
3,211,833
684,673
44,236,037

Question: Page 26 discussion of Governmental Activities Expenses explains that Sworn
employees received a 4% raise while all Non-sworn and management employees received 3%.
What was the reason Sworn officers received a larger increase than the non-sworn employees?
I’m particularly sensitive to this given the much larger per person pension costs for sworn
officers.

Page 214

Page 215 of 229

PAGE 3 OF 9
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020
REMARKS (continued):
Answer: In recognition for POA’s willingness to contribute to the Town’s unfunded pension
liability, they received a slightly higher raise than non-sworn employees. Sworn employees also
did not receive the 1.5% one-time bonus that the other bargaining units received in 2018.
Question: Page 27 indicates there is $700K in the Restricted Fund Balance that represents
amounts placed in an IRS Section 115 trust. Restricted cash in the Government Fund on the
Governmental Funds balance sheet reflects a similar amount. When do you expect to pay the
funds to the Section 115 IRS Trust?
Answer: The funds have been placed in a CEPPT (IRS 115 qualified Trust). These funds are
anticipated to be used in FY 20/21 to pay off a selected amortization base (CalPERS liability) as
identified and recommended to the Town Council by staff after consultation with the Town’s
Finance Commission and the Town’s actuary, Bartel and Associates.
Question: Page 28 indicates the Governmental Funds Balance Sheet has $4.5M identified in the
Committed Fund Balance for additional discretionary payments toward pension and OPEB
unfunded liabilities. How do you expect to use the $4.5M and when will the funds in the
Committed Reserve be utilized/paid to CALPERs?
Answer: $3.6M of the General Fund Pension/OPEB reserve was used in July 2020 for additional
discretionary payment made to CalPERS, the balance will be available to fund future ADP’s to
pay down the Town’s unfunded pension liability.
Question: Page 29 has a table of Total Governmental Funds Revenues, Expenditures and
Changes in Fund Balances year over year. How does the $4.8M in Intergovernmental Revenues
tie to the aggregate of the $8,854K plus $850K for Grants and Contributions in the Town-wide
Statement of Activities on page 41, and to the $2.2M increase over prior year receipts for
“intergovernmental (grants) revenues” on page 19?
Answer: Intergovernmental revenues is just one subset of Grants and Contributions which
included contributions from Non Gov sources. The total Operating Grants and Contributions
($3,854,188) and Capital Grants and Contributions ($850,111) reported on page 41 of the draft
CAFR appear to add to $4,704,301. (Intergovernmental listed under program revenue include;
public safety sales tax & supp law enforcement grant, PPW includes Measure B & gas tax.)
Question: Page 32 discusses General Fund Variances from budget for revenues and
expenditures. It indicates that 5 revenue categories declined a total of $3.2M due to COVID
over 4 months. If you annualize the 4 months to a year, it is $9.7M. Total revenue for the year
from these 5 categories per the Statement on page 48 is $18,179K. This implies that for the 4
month period, revenues from these 5 categories declined 53%. Is this a realistic analysis, and if
so, how much does the current 2020-2021 budget assume revenue from these categories
decline over prior year non COVID impacted revenue?

Page 215

Page 216 of 229

PAGE 4 OF 9
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020
REMARKS (continued):
Answer: The variance from budget is not equivalent to a revenue decline per se. Revenues
could actually improve from the prior fiscal year but still have a negative variance from budget
if the budget had forecasted larger growth than was met in the actuals collected. The variance
from budget is for the entire fiscal year, though a major factor, not all of the variance from
budget was due to COVID 19. Staff will be providing an update to major revenue trends in FY
20/21 on December 15, 2020.
Question: Page 34 under Economic Factor and Next Year’s Budgets talks about the Town having
identified contingencies should there be a revenue shortfall. Without going into specifics, what
are the nature and type of actions the Town would consider?
Answer: Possible contingencies include the use of one-time revenues, operational savings
initiatives, and the possible use of reserves upon recommendation by staff and Town Council
approval.
Questions on the Basic Financial Statements
Statement of Position—Town-wide
Question: Why the $11.7M decrease to $22.3M in Nondepreciable assets year over year? Note
5 indicates there were $13.97M of Transfers and Retirements. Was this change primarily
transfers of completed projects for street infrastructure that are now depreciable?
Answer: These changes in asset classification reflect amounts held in construction in progress
(non-depreciable) that upon completion in FY 19/20 were reclassified and become
“depreciable” assets once completed and placed into service.
Statement of Activities—Town-wide
Question: Compensated absences liability is growing. Can the Town do anything to manage it
down, potentially to conserve cash, even if it’s necessary to wait to address in the next labor
negotiations?
Answer: Compensated absence accruals are the result of labor negotiations with all the Town
bargaining units. There are leave balance caps on some of the leave types.
Governmental Funds Balance Sheet
Question: It looks like you broke Capital projects into 2 categories this year. The total of the 2
reserves increased $4.7M. What is the purpose of splitting the account into 2 categories? Also,
from Note 8, it looks like the Capital Projects fund increased from $4.3M to $12.2M year over
year? Why the large increase that was effectively a transfer from the Capital/Special Projects
fund?

Page 216

Page 217 of 229

PAGE 5 OF 9
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020
REMARKS (continued):
Answer: The use of the title was to keep it distinct from the General Fund’s Capital and Special
Projects Reserve for tracking purposes. If the same title was used for the GFAR fund balance it
would be combined into a much larger amount than the amount that correlates specifically to
the General Fund Reserve for Capital and Special Projects. All amounts in GFAR not restricted
or assigned for parking or Comcast PEG are considered assigned for capital projects.
Question: What is the Market Fluctuations Reserve? How does it different from other reserves,
if it is?
Answer: Market Fluctuations is an assigned reserve to identify fund balance for unrealized
investment gains recorded as interest revenue for the year under GASB 31 that are not
available as a cash asset unless sold. The Town typically holds all of its investments until
maturity.
Question: Note 8: I would suggest that the purpose of the Capital Projects Reserve Fund and
the Market Fluctuations Reserve Fund also be disclosed in Note 8.
Answer: Noted. We had no balance the prior year in Market Fluctuations, staff will add a short
description to the CAFR footnote.
Reconciliation of Governmental Funds Balance Sheet to Government-Wide Net Position—
Governmental Activities
Question: What is reason for 8.5% decrease in Allocation of Internal Service Funds Net Position
to $7,731 amount from the prior year of $8,454?
Answer: The primary reason can be found on page 115 of the June 30, 2020 CAFR Combining
Statement of Revenues and Changes in Net Position. The Town’s Facilities Maintenance fund
transferred out $788K to the Town’s GFAR fund in FY 19/20 to fund five separate projects as
planned in Town’s FY 19/20 Capital Improvement plan including $183K of ADA Restrooms in the
Adult Recreation Building, $300K for ADA restrooms and HR offices, $30K for Civic Center Plaza
Railings, $75K for waterproofing, and $200K for fire suppression for the Town’s IT Server Room.
An additional 580K was also transferred out of the Equipment Replacement Fund to provide
funding source for the Computer Aided Dispatch $525K and $55K to the Town’s General Fund
for Body Worn Cameras and Energy Weapons. These reductions in net position were offset by
a $1.1M transfer from the Town’s General Fund to the Town’s Workers Compensation Internal
Service fund to provide additional resources to address future claims. The effect of these
transfers ($306K) and use of Equipment Replacement net position to purchase scheduled fleet
and equipment replacements ($540K) were the primary drivers of the overall $723K reduction
in net position between fiscal years.

Page 217

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PAGE 6 OF 9
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020
REMARKS (continued):
Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance—page
46
Question: Note 4 explains the nature of the Transfers in and out, but it doesn’t give the dollar
magnitude of any of the categories. For transfers that are reported as $1M or more in the
footnote, what are the dollar amounts for capital projects & outlays, lease or debt payments,
operating expense, and low and moderate-income housing projects in the General Fund,
Appropriated Reserve Fund, and Internal Service Funds transfers?
Answer: The table in note 4 is a standard note presentation of fund transfers in and out
between Town funds that is found in most governmental CAFRS. The most significant transfers
were transfers out of the Town’s General Fund $6,982,591 to the Town’s GFAR fund to provide
funding sources for the Town’s capital improvement plan. The General Fund also transferred
$1,061,256 to the Worker’s Compensation Internal Service Fund as described in the answer
regarding the change in total net position in the Internal Service funds. There were no transfers
for lease or debt service payments or low and moderate income housing projects, this is legacy
language that could be omitted in the final draft. The transfers out of Internal Service funds
were also discussed previously in the discussion of the change in Internal Service Fund net
position.
General Fund Statement of Revenues, Expenditures and Changes in Fund Balance—Budget to
Actual
Question: When comparing Actual results to the Final Budget, the Town has a negative variance
for every operating revenue account which is a swing from the prior year when the Town had a
positive variance in all categories except 2 of the smaller accounts. The revenue variance in
2019 was a positive $2.4M and the variance in 2020 was a negative $1.6M, a swing of $4.0
million. The explanation on page 32 of the MD&A on the impact from COVID explains $3.2M of
the swing. But even in the absence of COVID there is still a $600K decline in the favorable
revenue variance. In addition, the favorable Expenditures variance declined significantly in
2020 from $7.3M to $3.7M year over year. The swing appears to be more than a statistical
budgetary aberration. Was there a structural reason for the decline in favorable variances? I
did not in the discussion on pages 32 and 33, there continued to be favorable expense variance
incurred for unfilled staff positions.
Answer: The bulk of the variance from budget is attributed as you have mentioned to the
economic impacts of the COVID -19 pandemic. There are other factors which may have played
a role such as the cyclical nature of private development and its effects on building permit
revenues and charges for services. Other revenues impacted were lower parking fines due to
Council approved changes to downtown parking enforcement to aid the downtown’s economic
recovery and rent forgiveness for use of Town facilities. These actions, among other factors,
could be considered additional collateral effects to revenues sustained as a result of the COVID19 pandemic. (sale of land was not completed until FY 2021)

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PAGE 7 OF 9
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020
REMARKS (continued):
Proprietary Funds—Internal Service Funds Statement of Revenue, Expenses and Changes in Net
Position—page 51
Question: Why did the Charges for services decrease for 13% year over year to $3,029K. Were
services less or costs of services reduced?
Answer: IT Internal Service Fund charges were reduced because staff charges were moved to
the General Fund and funded there with General Fund operating revenues. The reduction in
staffing costs allowed the Charges for Services charged to Town departments for IT services to
be lowered to recover non-personnel costs which are still paid out of the IT Internal Service
Fund. (Two smaller internal service funds closed with activity now accounted for in the general
Fund)
Question/Observation: It would be very useful for the Town Council to have a standalone
paragraph on page 3 discussing the COVID impact on revenue in Q4. You discuss how much
sales tax went down, but knowing the actual decline in Q4 revenue for all fees and taxes in Q4
would allow a better forecast of decreased revenue in 2021.
Answer: The CAFR document includes much discussion of COVID-19 anticipated impacts to the
FY 20/21 budget in the MD&A’s Economic Factors and Next Year’s Budgets and Rates section
beginning on page 34 through page 36 of the draft CAFR.
Question: On page 4, it would be very good to note as on page 24 a $4,000,000 decline in net
position in 2020 compared to 2019.
Answer: There was actually a small increase to total net position of $32,000 between FY 2020
and 2019.
Question: On page 4 in the pension paragraph detailing amounts, add that the liabilities are
based on a 7.15% investment return and a change of 1% would result in an increased liability of
$X as shown on page 84 and also that the 2020 CalPERS return was 4.7%. Want to give more
perspective that the liability is understated.
Answer: The measurement period for the net pension liability is actually presented in the June
30, 2020 CAFR is actually as of June 30, 2019. CalPERS reported a return on asset for the fiscal
year ended June 30, 2019 of 6.7%. Net pension liability is presented fairly according to
generally accepted accounting principles. The following paragraph on page 4 provides detailed
cautionary language that the selection and potential changes in underlying pension
assumptions could result in obligations being higher or lower and directs the reader to the
discount rate sensitivity in Note 9.
Question: On page 4, in the third paragraph, delete "from zero in 2019." Duplicative.
Answer: Noted.

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PAGE 8 OF 9
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020
REMARKS (continued):
Question: On page 18 in the second bullet point paragraph, may want to add the page 29-line
of 2020 excess revenues over expenditures of negative $4,350,379 compared to a positive
$221,363 in 2019. Shows a $4 million decline year on year.
Answer: The increase in governmental expenditures is explained more thoroughly on page 30
of the MD&A. The increase largely resulted from the General Governmental expenditures
recording a $4.8M expenditure related to the October 2019 additional discretionary payment
made to CalPERS.
Question: On page 25, new operational and capital grants of $1.3 million were noted. Are
these recurring or one-time?
Answer: The increase was largely attributable to increases receipt of VTA Measure B grant
funding. Part of the VTA grants are formula based, the others are based on a competitive basis
with other governments.
Question: On page 26, the paragraph on salary increases should note the effective date and the
$ impact in 2020.
Answer: Noted.
Question: On page 35, in the pension paragraph add that the 2020 CalPERS return was 4.7%.
Answer: Noted. The pension discussion on page 35 reports the June 30, 2019 measurement
date. CalPERS return for that fiscal year was 6.7%. To help illustrate the variability of future
investment returns staff added the table on page 82 which reflects CalPERS short-term, longterm, and blended expected rate of return for the PERF fund.
Question: On page 48, why was interest under forecast by $1.6 million?
Answer: Page 48 reports a positive variance of $1.6M (interest revenues exceeding budget)
mostly due to a dramatic decline of prevailing interest leading to an approximate $1.2M GASB
31 “mark to market” increase to interest earned at June 30, 2020. At time of the FY 19/20
budget preparation, interest rates were slowly stable, tending to slowly fall or remain flat,
hence no expectation of large portfolio market gains based on prevailing rates. The Town holds
its investments to maturity so it would not be wise to budget the speculative interest gain as an
operational revenue as the Town would have to sell its positions in the bonds in order to
actually receive this market value gain in cash.
Question: On page 48, what was the anticipated sale gain of $1.2 million that did not occur?
Answer: The anticipated sale was the Town’s Winchester lot (fire station parcel) sold to the
County’s Central Fire District. Escrow on the sale was finalized and payment received in July
2020.

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PAGE 9 OF 9
SUBJECT: Draft Comprehensive Annual Financial Report for the Fiscal Year Ended
June 30, 2020
DATE:
December 7, 2020
REMARKS (continued):
Question: On page 81, in the discount rate paragraph line 6 delete "adequate and the use of"
and insert "used rather than the municipal bond rate" and delete "calculation is not necessary."
Answer: Noted however the language is the standard GASB 67 disclosure for this item. The
result of the mandated cash flow calculation tests determines which discount rate to be utilized
Question: On page 95 under COVID, need to have more specific dollar estimates of declines in
revenue in 2021, including actual declines in Q4 2020.
Answer: FY 2020/21 revenue estimates will be discussed at Town Council on December 15,
2020. Because of the nature of sales taxes collected in the Town, it is not possible to discern
specific dollar amounts related exclusively to COVID-19 versus other factors.

Attachment (previously distributed):
1. Draft Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2020.
Attachment (distributed with this Desk Item):
2. Committee Member Comments
3. Public Comment Received after distributing the Staff Report and before11:01 a.m.
Monday December 7, 2020.

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Comments from Terry Duryea, Finance Committee Member:
Hi Laurel, Arn and Steve
Hope each of you are weathering the unrelentless, but rainless, Covid storm as well as possible.
Here are my comments, which are mostly questions, on the draft CAFR. The questions are to help
better understand the 2020 financial story and reasons for changes from 2019. I also have one key
question on the impact of Covid on 2020/2021 based on the 4 month impact on 2020 that I'd like you to
address. I’ve tried to include questions on the basic financial statements only if I couldn’t find the
answers in the MD&A.
Questions on the MD&A
• Page 19 talks about $2.2M in increases in intergovernmental grant revenues. What are the
source of the grant the contributed to the increase and how are the funds used?
• Page 24 note 1 talks about a reclassification of 2019, although the reclassification doesn’t
appear to be made in the 2019 numbers. What is the dollar amount? And how and when was
the misclassification identified? Also, since you disclose the need for the reclassification, do you
want to change the 2019 numbers?
• Page 26 discussion of the Governmental Activities Expenses explains the increase in General
Government expense is due to large swings in the amount allocated with the current year
allocation adjustment increasing costs while the prior year allocation adjustment decreased
costs. What is the reason for the large swing?
• Page 26 discussion of Governmental Activities Expenses explains that Sworn employees received
a 4% raise while all Non-sworn and management employees received 3%. What was the reason
Sworn officers received a larger increase than the non-sworn employees. I’m particularly
sensitive to this given the much larger per person pension costs for sworn officers.
• Page 27 indicates there is $700K in the Restricted Fund Balance that represents amounts placed
in an IRS Section 115 trust. Restricted cash in the Government Fund on the Governmental Funds
balance sheet reflects a similar amount. When do you expect to pay the funds to the Section
115 IRS Trust?
• Page 28 indicates the Governmental Funds Balance Sheet has $4.5M identified in the
Committed Fund Balance for additional discretionary payments toward pension and OPEB
unfunded liabilities. How do you expect to use the $4.5M and when will the funds in the
Committed Reserve be utilized/paid to CALPERs?
• Page 29 has a table of Total Governmental Funds Revenues, Expenditures and Changes in Fund
Balances year over year. How does the $4.8M in Intergovernmental Revenues tie to the
aggregate of the $8,854K plus $850K for Grants and Contributions in the Townwide Statement
of Activities on page 41, and to the $2.2M increase over prior year receipts for
“intergovernmental (grants) revenues” on page 19?
• Page 32 discusses General Fund Variances from budget for revenues and expenditures. It
indicates that 5 revenue categories declined a total of $3.2M due to Covid over 4 months. If you
annualize the 4 months to a year, it is $9.7M. Total revenue for the year from these 5 categories
per the Statement on page 48 is $18,179K. This implies that for the 4 month period, revenues
from these 5 categories declined 53%. Is this a realistic analysis, and if so, how much does the
current 2020-2021 budget assume revenue from these categories decline over prior year non
Covid impacted revenue?

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ATTACHMENT 2

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•

Page 34 under Economic Factor and Next Year’s Budgets talks about the Town having identified
contingencies should there be a revenue shortfall. Without going into specifics, what are the
nature and type of actions the Town would consider?

Questions on the Basic Financial Statements
Statement of Position—Town wide
• Why the $11.7M decrease to $22.3M in Nondepreciable assets year over year? Note 5 indicates
there were $13.97M of Transfers and Retirements. Was this change primarily transfers of
completed projects for street infrastructure that are now depreciable?
Statement of Activities—Town wide
• Compensated absences liability is growing. Can the Town do anything to manage it down,
potentially to conserve cash, even if it’s necessary to wait to address in the next labor
negotiations?
Governmental Funds Balance Sheet
• It looks like you broke Capital projects into 2 categories this year. The total of the 2 reserves
increased $4.7M. What is the purpose of splitting the account into 2 categories? Also, from
Note 8, it looks like the Capital Projects fund increased from $4.3M to $12.2M year over year?
Why the large increase that was effectively a transfer from the Capital/Special Projects fund?
• What is the Market Fluctuations Reserve? How does it different from other reserves, if it is?
• Note 8: I would suggest that the purpose of the Capital Projects Reserve Fund and the Market
Fluctuations Reserve Fund also be disclosed in Note 8.
Reconciliation of Governmental Funds Balance Sheet to Government-Wide Net Position—Governmental
Activities
• What is reason for 8.5% decrease in Allocation of Internal Service Funds Net Position to $7,731
amount from the prior year of $8,454?
Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance—page 46
• Note 4 explains the nature of the Transfers in and out, but it doesn’t give the dollar magnitude
of any of the categories. For transfers that are reported as $1M or more in the footnote, what
are the dollar amounts for capital projects & outlays, lease or debt payments, operating
expense, and low and moderate-income housing projects in the General Fund, Appropriated
Reserve Fund, and Internal Service Funds transfers?
General Fund Statement of Revenues, Expenditures and Changes in Fund Balance—Budget to Actual
• When comparing Actual results to the Final Budget, the Town has a negative variance for every
operating revenue account which is a swing from the prior year when the Town had a positive
variance in all categories except 2 of the smaller accounts. The revenue variance in 2019 was a
positive $2.4M and the variance in 2020 was a negative $1.6M, a swing of $4.0 million. The
explanation on page 32 of the MD&A on the impact from Covid explains $3.2M of the swing.
But even in the absence of Covid there is still a $600K decline in the favorable revenue variance.
In addition, the favorable Expenditures variance declined significantly in 2020 from $7.3M to
$3.7M year over year. The swing appears to be more than a statistical budgetary aberration.
Was there a structural reason for the decline in favorable variances? I did not in the discussion

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on pages 32 and 33, there continued to be favorable expense variance incurred for unfilled staff
positions.
Proprietary Funds—Internal Service Funds Statement of Revenue, Expenses and Changes in Net
Position—page 51
• Why did the Charges for services decrease for 13% year over year to $3,029K. Were services
less or costs of services reduced?

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From:
To:
Cc:
Subject:
Date:

Ronald Dickel
Stephen Conway; Gitta Ungvari
Arn Andrews; Laurel Prevetti
Finance Meeting Monday
Sunday, December 6, 2020 3:29:54 PM

Page 226 of 229

Page 226

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Subject:

Comments of CAFR

From: Phil Koen <[email protected]>
Sent: Monday, December 7, 2020 10:22 AM
To: Laurel Prevetti <[email protected]>
Cc: Marico Sayoc <[email protected]>; Rob Rennie <[email protected]>; Stephen Conway
<[email protected]>; Terry Duryea
>; Ron Dickel
>; Rick Tinsley

>·

Subject: Comments of CAFR
Hello Laurel,

Due to a conflict I will not attend the Finance Committee meeting tonight, so I am sending you my written comments in
advance of the meeting for your review and consideration. I have also copied the Finance Committee members on this
email.
Since perhaps not all members of the Committee are equally versed in the reporting requirements outline by GASB 34
for the MD&A section of the CAFR, I have attached a brief background piece that discusses those reporting
requirements and the linkage to the transmittal letter. Hopefully, everyone will find this educational and helpful.
In an effort to be constructive I have taken the time to redraft the Financial Highlights section of the MD&A with the goal
of providing a balanced discussion of both the positive and negative changes from prior year and to provide more
disclosure regarding a) the negative unrestricted net position, b) the Town's net pension liability and the cost of the
pension plans, and c) the trend in government-wide revenue and expenses. Please note that I have broken the Highlights
into a section that discusses Government-Wide results vs. Fund Level results. The current draft does not make that
distinction clear.
I am aware that members of the Finance Committee have already shared their comments with you, many of which I
agree with. Not wanting to duplicate those comments, I will focus on my top four concerns.
Unrestricted Net Position
On page 18 of the CAFR an explanation of the $675k decrease in the negative unrestricted net position is provided. I do
not agree with the explanation and would ask that the auditors to confirm the explanation. At a high level, the
improvement was due to a slightly larger year over year increase in spendable assets and deferred outflows versus the
increase in total liabilities and deferred inflows. I am not of the opinion that use of restricted cash to invest in
infrastructure is the cause for the slight improvement in unrestricted net position. Additionally, I think it is important to
fully disclose that a negative unrestricted net position indicates that the Town does not have sufficient assets to meet its
long-term obligations such as the pension and OPEB plans as of the end of the fiscal year. As pointed out in the CAFR,
this is not an uncommon occurrence when governments overly rely on a pay-as-you-go model vs funding the accrued
liability. Having a negative unrestricted net position is not a positive financial metric and should not be minimized.
Total Net Pension and Deferred Outflows
In the transmittal letter the Town mentions that the net pension liability is $57.2 million and the OPEB net liability is $9.1
million. I would suggest that all comments regarding the pension and OPEB liabilities be moved from the transmittal
letter to the Highlights section of the MD&A and further comments provided. For example, there is no discussion in the
Highlights section that the ADP of $4.8 million discussed in the transmittal letter is included in the Deferred Outflows
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ATTACHMENT 3

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and accounts for the entire increase in Deferred Outflows from prior year. Additionally, there is no disclosure that total
pension and OPEB expense in the government‐wide expenses totaled $12.6m and increased 14.6% from prior year. The
rate of increase in pension and OPEB expenses relative to the rate of increase in Government‐wide total revenues
(which grew only 1.1%) has a material impact on the Town’s long‐term financial health. There needs to be more
discussion regarding the recent trends and expected future trends.
Economic Factors, trends affecting the forecasted fund balance and Footnotes 15 and 16
The CAFR discusses the impact of COVID 19 on the Town’s financial position in footnote 15. Specifically, it discusses that
sale tax and TOT receipts decreased in FY 20 from FY 19 actual levels. However, the CAFR is confusing in its discussion of
the budget for FY 21 and potentially misleads the reader into thinking that the FY 21 budget is conservative in its
revenue forecast. Specifically, on page 35 the CAFR discusses that both sales tax and TOT receipts were budgeted to
reflect decreases from “prior year’s adopted” budget, not prior year’s actual results. While on the surface that sounds
conservative, however, the FY 21 approved budget for both revenue streams represent an INCREASE from FY 20 actual
levels. In the case of sales tax, the increase is approximately $400k, and for TOT receipts the increase is also
approximately $400k. Given the prolonged impact of COVID 19 on the local economy, it is highly unlikely that these
budgets are to be achieved and it is more likely than not there will be material shortfall from the adopted budget for
both tax receipts.
Footnote 15 goes on to mention that the budget identified “contingences should revenues come in below projected
amounts” and that the “Town is carefully monitoring actual revenues and expenditures”. While that might indeed be the
case, the footnote should disclose what those “contingences” are and should also provide the reader with some insight
into the likelihood of such contingences being acted upon. I am not aware of any actual revenues or expenditures for Q1
FY 21 being published, so there is no context for the reader to judge the conditions that are expected to have a
significant impact on the current year results from operations and financial position.
My concern is further heightened when footnote 16 is taken into consideration. Footnote 16 warns the reader that
there could be an additional $1.2 million negative impact on the FY 21 operating results arising from the claw back of
RDA distributions and ERAF distributions. When we combine this with the highly likely shortfall in sales and TOT receipts,
the Town could be facing at least $2.0 million in known potential FY 21 revenue shortfalls. Please note that this does not
include other COVID sensitive revenue streams such as permits and fees, and business licenses and it also assumes that
sale tax and TOT receipts are equal to prior years. How the Town plans to address a potential material shortfall in
revenue should be discussed in the CAFR.
General Fund Unassigned Fund Balance
Again, in FY 20, the Staff has classified the entire general fund balance of $29.3 million into restricted, committed and
assigned fund balances, choosing not to keep any of the general fund balance as unassigned. I believe this misleads the
reader into thinking that the assigned fund balances are truly assigned. History has shown that whenever a budget
expenditure adjustment is proposed which needs resources to fund, the Staff has pulled such funding from the
Capital/Special Projects assigned fund balance. The Capital/Special Projects fund balance has been used to fund
everything from incremental headcount, on‐going tree trimming services and engineering consultants in addition to
funding the Capital Improvement Fund.
GASB 54 addresses the fund balance distinctions. When funds are “assigned”, the government is setting these funds
aside for the specific purpose identified. This indicates to the reader that the resources are at a minimum intended to be
used for that purpose. In the case of the Capital/Special Projects footnote 8 in the CAFR states, “the Capital/Special
Projects assigned fund balance will be used for the acquisition and construction of capital facilities as well as special
projects or activities as directed by the Town Council.”
Given the history of using this fund balance to routinely provide resources for budget expenditure adjustments, I
recommend that some amount of the General Fund balance, perhaps $2 million, remain “unassigned”. This will indicate
to the reader that these funds are available to the Council to be used as directed and improves the integrity of the

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Capital/Special Projects assigned balance. If you look at many cities in Santa Clara county, most have some amount of
the General Fund balance as “unassigned”.
There is one other point that should be made while we are discussing fund balances. The resolution passed in June 2020
which approved the fund balance under GASB 54 specifically established a Surplus Property Revenue General Fund
Reserve to receive the monies from the sale of surplus property and assigned approximately $1.2 million to the Surplus
Property Reserve as of the closing of FY 20. That reserve does not appear in the General Fund balance sheet presented
in the CAFR. Instead there is a new assigned fund balance called “Market fluctuations”. There is no explanation in the
CAFR about this change nor the intent of the “market fluctuations” assigned fund balance. Furthermore since the
Surplus Property Revenue General Fund Reserve was established by a Council Resolution which would indicate that the
reserve is a “committed reserve” like the budget stabilization and catastrophic reserves, I am not sure that the Staff has
the power to change this fund designation to a “assigned” fund balance. I am under the impression that only a Council
resolution can reassign monies from a committed to an assigned fund balance. This point needs to be closely examined.

Thank you for considering the above. I apologize for the length of this email, but getting the CAFR correct is very
important.
Phil Koen

Page 229

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