Attachment 1Town o Los GATOS
CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
Cover Photos: Sophia Constantine and Liv Ames
TOWN OF LOS GATOS
CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2017
PREPARED BY THE
OFFICE OF THE TOWN MANAGER
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 Gatos voted to incorporate.
Fruit industries faded slowly during the Depression and World War II, but the postwar period brought an
influx of people producing 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 31,314. This relatively slow growth over the first 80 years resulted in a human scale
community with narrow streets and small buildings.
As it exists now Los Gatos' 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 an increasingly uniform urban
complex, this setting has attracted people with a preference for the Town's distinctive, high quality
natural and urban environment.
The slow growth of the Town over an extended number of years has left the Town with a heritage of
older, established residential areas and a downtown with many historic buildings representing the various
eras in the Town's history. Protection of these historic resources is an important community goal. The
Town's two museums, known as Tait Avenue and Forbes Mill museums, also help to preserve the Town's
valued history.
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
TABLE OF CONTENTS
INTRODUCTORY SECTION:
Letter of Transmittal 1
Organizational Chart 7
Principal Officers 8
GFOA Award 9
FINANCIAL SECTION:
Independent Auditor's Report 11
Management's Discussion and Analysis 15
Basic Financial Statements:
Government -Wide Financial Statements: 29
Statement of Net Position 30
Statement of Activities 31
Fund Financial Statements:
Governmental Funds: 33
Balance Sheet 34
Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position 35
Statement of Revenues, Expenditures and Changes in Fund Balances 36
Reconciliation of Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities 37
Statement of Revenue, Expenditures and Changes in Fund Balances —
Budget and Actual (GAAP) General Fund 38
Proprietary Funds — Internal Service Funds: 39
Statement of Net Position 40
Statement of Revenue, Expenses and Changes in Net Position 41
Statement of Cash Flows 42
Fiduciary Funds: 43
Statement of Fiduciary Net Position 44
Statement of Changes in Fiduciary Net Position 45
Notes to the Basic Financial Statements 47
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of Changes in the Net Pension Liability and Related Ratios — Ca1PERS
Miscellaneous Agent Multiple Employer Plan 88
Schedule of Proportionate Share of Net Pension Liability — Ca/PERS Safety
Cost Sharing Plan 89
Schedule of Pension Plans Contributions — Miscellaneous Agent -Multiple Employer Plan 90
Schedule of Pension Plans Contributions — Safety Cost Sharing Plan 91
Funded Status of Other Post -Employment Benefits (OPEB) Plan . 92
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
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 95
Nonmajor Governmental Funds:
Combining Balance Sheets 96
Combining Schedule of Revenues, Expenditures and Changes in
Fund Balances 98
Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances — Budget and Actual (GAAP) 100
Internal Service Funds:
Combining Statement of Net Position 104
Combining Statement of Revenue, Expenses and Changes in Net Position 105
Combining Statement of Cash Flows 106
Private Purpose Trust Funds:
Combining Statement of Fiduciary Net Position 108
Combining Statement of Changes in Fiduciary Net Position 109
STATISTICAL SECTION 111
Net Position by Component 112
Changes in Net Position 113
Fund Balances, Governmental Funds 114
Changes in Fund Balances, Governmental Funds 115
Assessed Value and Estimated Actual Value of Taxable Property 116
Direct and Overlapping Property Tax Rates 117
Principal Property Tax Payers 118
Property Tax Levies and Collections 119
Ratios of Outstanding Debt by Type 120
Direct and Overlapping Governmental Activities Debt 121
Legal Debt Margin 122
Demographic and Economic Statistics 123
Principal Employers 124
Full-time Equivalent Town Government Employees by Function/Program 125
Operating Indicators by Function/Program 126
Capital Assets Statistics by Function/Program 127
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 131
Introductory Section
TOWN OF LOS GATOS
OFFICE OF THE TOWN MANAGER
(408) 354-6832
FAX: (408) 399-5786
December 13, 2017
Honorable Mayor and Town Council,
I am pleased to submit the Town's Comprehensive Annual Financial Report (CAFR) for
the fiscal year ending June 30, 2017. 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, 2017, 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.
The Comprehensive Annual Financial Report is prepared in accordance with Generally
Accepted Accounting Principles (GAAP) promulgated by the Governmental Accounting
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Mayor and Town Council
December 13, 2017
Standards Board (GASB) and includes the 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 to be awarded its Achievement of
Excellence 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
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 31,314. This relatively slow growth over the last 80
years resulted in a human scale community with narrow streets and small buildings.
Preserving Los Gatos as a complete and well-balanced community has been, and
remains a prominent goal for the community.
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 traditional municipal
services such as Public Safety, Parks & Public Works, Community Development, a Public
Library, and Town Administration including Human Resources and Finance.
This report includes all funds of the Town of Los Gatos. As of February 1, 2012, in
accordance with Assembly Bill 1X26, the Redevelopment Agency (RDA) for the Town of
Los Gatos was dissolved. Until its dissolution, the Town of Los Gatos Redevelopment
Agency was governed by a board that was the same as the Town's governing body.
Therefore, the financial activities of the Redevelopment Agency through January 31,
2012 had been blended into the Town's basic financial statements. As a result of the
dissolution, the RDA Successor Agency private -purpose trust fund was created while the
Certificates of Participation (COP) RDA Debt Service Fund and Redevelopment Agency
Low & Moderate Housing Capital Projects Fund were closed out as of June 30, 2012 and
are now being held in the Successor Agency Trust fund.
ECONOMIC CONDITIONS AND OUTLOOK
Consistent with other Silicon Valley communities, the economy continues to improve
and economically sensitive revenues, such as Property Tax, Transient Occupancy Tax,
Business License Tax and License and Permit revenues increased.
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Mayor and Town Council
December 13, 2017
In past years, the Town has implemented a number of strategies to keep operating
revenues in balance with ongoing operating expenditures. These steps included
organizational realignments, job sharing, and departmental cost saving efficiencies,
among other strategies, that allowed the Town to remain fiscally balanced during
challenging economic times. Despite the ongoing strategic reductions made in staffing
and operating expenditures salary and benefits was the Town's largest expenditure,
reflecting the personal touch required to deliver high quality services such as public
safety, community development, and parks and public works.
General Fund revenues (including transfer -ins) increased 7.7% from the prior year.
Property tax revenues are a significant source of support for General Fund operations,
comprising approximately 34% of General Fund revenues in FY 2016/17. The FY
2016/17 $14.8 million property tax receipts were $1.0 million higher than the prior
year's collection, reflecting the continued desirability of the Town, its environment,
culture and educational opportunities. Based on valuation projected by Santa Clara
County Assessor's Office, Los Gatos property values are anticipated to continue with
moderate growth rates for the near term. Property taxes also increased moderately
due to a change in property tax distribution due to the dissolution of the California
redevelopment agencies, though this increase was a small portion of the loss of
redevelopment tax increment previously collected prior to the redevelopment
dissolution which occurred in February 2012.
The Town relies heavily on sales tax revenues to support General Fund operations,
comprising approximately 20.5% of General Fund revenues in FY 2016/17. The FY
2016/17 $8.9 million sales tax receipts were $1.4 million higher than the prior year's
collection. The FY 2016/17 proceeds include a one-time "triple flip" final payment and
other sales tax revenue reclassified to this period. Notwithstanding the increase
mentioned above, the general sales tax revenues are trending lower due to the negative
impact associated with increased online versus brick and mortar shopping, decreased
gasoline prices and the continued impact of the 2011 business model change in Netflix.
In prior years the Town Council appropriated funds in a deferred revenue deposit
account to be used as a funding source for future CaIPERS required employer
contributions. Due to robust investment earnings during the "dot com" years preceding
2001, the Town's pension trust was determined by CaIPERS to be " superfunded." As
such, the Town was not required in those years to make pension contributions to the
CaIPERS pension trust. The Town conservatively elected to charge itself its required
contributions and placed them into a General Fund deposit account dedicated for future
CaIPERS employer pension costs. The total remaining amount as of July 1, 2016 not used
by the Town for employer contributions to CaIPERS was $1.8 million. Upon review of its
prior accounting for the amounts as deferred revenue, the Town reclassified the $1.8
million deposit account as a prior period adjustment, increasing the General Fund
Reserve for CaIPERS/OPEB and decreasing the same amount from the deferred revenue
CaIPERS deposit liability account.
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Mayor and Town Council
December 13, 2017
Effective February 1, 2012, redevelopment agencies were dissolved and suspended all
activities, with the exception of the implementation of existing contracts and payment
of enforceable obligations entered into prior to February 1, 2012. While the Successor
Agency will continue to receive tax increment revenue to pay enforceable obligations,
like debt service, funding for administrative services and various program
reimbursements has been significantly reduced.
The Town is also preparing for an increase in pension employer rates due to changes to
economic and demographic actuarial assumptions adopted by CaIPERS. Town Council
and staff are considering future opportunities to pro -actively manage and control cost
escalation in its pension and other post employment benefits.
Despite the reductions to various sources of local government revenue and increasing
costs due to unfunded federal and state mandates, the Town has maintained high
service levels due to the General Fund's strong fiscal health through FY 2016/17. 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 INITIATIVES
Major initiatives addressing the critical capital asset and infrastructure needs of the
Town were a priority for the fiscal year. Approximately $7.6 million in Town
infrastructure and other capital asset improvements were made in FY 2016/17,
including $1.2 million in building repairs and improvements, $0.6 million in vehicle and
equipment, $0.3 million in annual curb, gutter, sidewalk and retaining walls and parking
lot improvements, and $1.9 million for street improvement projects including
improvements to major arterials and neighborhood collector streets to enhance
pedestrian and traffic safety Town -wide. In addition, the Town invested $3.6 million in
construction in progress in various streets, building improvements and park projects.
Additional infrastructure improvements were 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.
ACCOUNTING SYSTEM AND BUDGETARY CONTROL
The effectiveness of internal control is considered 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,
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Mayor and Town Council
December 13, 2017
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.
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 forty-five 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 now 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 and five-year capital improvement plan is adopted by the
Town Council on a basis 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.
AWARDS
The Town's Comprehensive Annual Financial Report for the fiscal year ended June 30,
2016 was awarded a Certificate of Achievement for Excellence in Financial Reporting by
the national Government Finance Officers Association. This prestigious award
recognizes the report's conformance with strict accounting and reporting standards
established by the Government Accounting Standards Board and government finance
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Mayor and Town Council
December 13, 2017
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.
INDEPENDENT AUDIT
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, Payroll
Specialist; and Kenneth Stiles, Administrative Technician for their efforts in preparing
this report.
Respectfully submitted,
Laurel Prevetti
Town Manager
0
Director of Fin
6
Town of Los Gatos
Organizational Structure
RESIDENTS of LOS GATOS
ELECTED
TOWN COUNCIL
TOWN ATTORNEY
CBD.5dminstration
Development Review
Code Compliance
Inspection Services
Advanced Planning
HIP dousing Program
TOWN MANAGER
ASSLST_ NT
TOWN MANAGER
POLICE
Police Administration
Record sCommunica Lions
Patrol
Investigations
Traffic
Support Services
Parking 14tanagement
HL7 LAN
RE SOURCE S
Recruitm
Benefits Management
Training
Employee Relations
Organizational Development
General Ledger
Accounts Payable
Accounts Receivable
Payroll
Business License Tax
Purchasing
Budget _Administration
Financial Reporting
Treasury& Investments
BOARDS &
cols •HSSIONS
PARKS &
PPW Admws halion
Park Serves
Engineering development
Engineering Program
Streets& Signals
Budding Maintenance
Landscape& Lighting
Environmental Services
CLERK &
AD1 llMSTRATIV
ROG• ,.
Records Managem But
Boards & Commissions
Election Coordination
Claims &Insurance
Customer Service Centex
Legista live Coordination
Public Information
Cable:Broadcas Ling Itanagement
Arts & Culture
Community Grants
Website Management
Library Administration
Reference Services
Children s Program
ReadingiLitemcy Program
Collection Maintenance
Circulation & System
Administration
L os Gatos History Program
INFOR11MATION
TEC
Technology 5 upport
IT Systems Ivfimgement
Technology Planning &
Implementation
7
TOWN OF LOS GATOS
PRINCIPAL OFFICERS
JUNE 30, 2017
TOWN COUNCIL
Mayor
Vice Mayor
Council Member
Council Member
Council Member
COUNCIL APPOINTEES
Town Manager
Town Attorney
APPOINTED OFFICIALS
Assistant Town Manager
Interim Chief of Police
Community Development Director
Parks and Public Works Director
Interim Library Director
Finance Director
Human Resources Director
Marico Sayoc
Rob Rennie
Marcia Jensen
Steven Leonardis
Barbara Spector
Laurel Prevetti
Robert Schultz
Arn Andrews
Michael D'Antonio
Joel Paulson
Matt Morley
Jane Light
Stephen Conway
Lisa Velasco
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Government Finance Officers Association
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, 2016
Executive Director/CEO
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10
Financial Section
1
COD
► BADAWI&ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
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
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, 2017, 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's Responsibility for the Financial Statements
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.
Address: 180 Grand Avenue, Suite 1500 Oakland, CA 94612 • Phone: "0 7E8.8251 • Fax: 10.768.8249
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, 2017, and the respective changes in financial position and, where
applicable, cash flows thereof and the respective budgetary comparison for the General Fund for the year then
ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis, pension related schedules and OPEB funded status information on
pages 15-26 and 87-92 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.
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, combining and
individual nonmajor fund financial statements, the budgetary comparison schedule on page 95, 100 — 102, and
statistical section are presented for purposes of additional analysis and are not a required part of the basic
financial statements.
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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
The combining and individual nonmajor fund financial statements and budgetary comparison schedule on
page 95, 100 - 102 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 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
In accordance with Government Auditing Standards, we have also issued our report dated December 13, 2017 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 Oakland,
California
December 13, 2017
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14
Management's Discussion and Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
Our discussion and analysis of the Town of Los Gatos financial performance provides an
overview of the Town's financial activities for fiscal year ending June 30, 2017. This information
is presented in conjunction with the audited financial statements that follow this section.
FINANCIAL HIGHLIGHTS
• Town assets exceeded its liabilities at the close of FY 2016/17 by $117,027,779 (net
position). Of this amount, $15,134,420 (unrestricted net position) may be used to meet the
Town's ongoing obligations to citizens and creditors.
• The Town's Net position increased by $4,513,273 due primarily to General Fund revenues
above expenditures and a $2.2 million increases from prior year adjustments.
• Total fund balances for governmental funds at year end were $53,091,909, an increase of
$2,517,637 (5%) from the prior year. Fund balances increased primarily due to higher than
expected property tax, transient occupancy tax, and license and permits revenues,
operational salary savings due to staff vacancies, and prior year adjustments.
• At the end of FY 2016/17, fund balance for the General Fund was $29,180,624,
approximately 74% of General Fund expenditures for the current fiscal year.
• The Town's total capital assets increased by $2,881,797 to $96,265,562 net of depreciation.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial statements presented herein include all of the activities of the Town and its
component units using the integrated approach as prescribed by GASB Statement No. 34.
GOVERNMENT -WIDE FINANCIAL STATEMENTS
The government -wide financial statements present the financial picture of the Town from the
economic resources measurement focus using the accrual basis of accounting.
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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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).
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.
The government -wide financial statements include not only the Town itself (known as the
primary government), but also a legally separate Town of Los Gatos Redevelopment Agency (the
Agency) for which the Town was financially accountable. In accordance with Assembly Bill (AB)
1X26 which provides for the dissolution of all redevelopment agencies in the State of California,
the Town of Los Gatos agreed to serve as the successor agency and thereby to hold the assets
until they were distributed to other units of state and local government. In accordance with AB
1X26, the Town of Los Gatos Redevelopment Agency dissolved and ceased to operate as a legal
entity on February 1, 2012.
Prior to February 1, 2012, the final seven months of activity of the redevelopment agency
continued to be reported in the governmental funds of the Town. After February 1, 2012, the
assets and activities of the dissolved redevelopment agency are reported in a fiduciary fund
(RDA Successor Agency private -purpose trust fund) in the financial statements of the Town.
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.
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
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
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 device 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 and computer
equipment, and for its risk management activities. The Internal Service funds have been
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.
Included in fiduciary funds is the RDA Successor Agency private -purpose trust fund created upon
the dissolution of the former Redevelopment Agency. 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.
Notes to basic financial statements
The notes provide additional information essential to a full understanding of the data provided
in the government -wide and fund financial statements. The notes to basic financial statements
can be found on pages 47-85 of this report.
Government -wide Financial Analysis
Net position may serve over time as a useful indicator of a government's financial position. In
the case of the Town, assets exceeded liabilities by $117 million at the end of the current fiscal
year.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS
Town of Los Gatos
Net Position
Governmental Activities
For the Year Ended June 30, 2017
Current and other Assets
Capital Assets
Total Assets
Deferred Outflows of Resources
Current Liabilities
Long -Term Liabilities Outstanding
Total Liabilities
Deferred Inflows of Resources
Net Position
Net Investment in Capital Assets
Restricted
Unrestricted
Total Net Position
2017 2016
$ 76,851,804 $ 76,803,285
96,265,652 93,383,855
173,117,456 170,187,140
15,666,410 6,648,152
15,368,467
50,630,426
15,658,568
38,417,287
65,998,893 54,075,855
5,778,114 10,244,931
96,265,652
5,627,707
15,134,420
93,383,855
6,386,014
12,744,637
$ 117,027,779 $ 112,514,506
Capital assets represent approximately 51% of the Town's total assets consisting of investments
made by the Town in permanent or long-lived assets (e.g., land, buildings, infrastructure,
machinery and equipment), less any related debt used to acquire those assets still outstanding.
The Town uses these capital assets to provide services to citizens and customers; consequently,
these assets are not available for future spending. Although the Town's investment in its capital
assets is reported net of related debt, it spage 19hould be noted that the resources needed to
repay this debt must be provided from other sources since the capital assets themselves cannot
be used to liquidate these liabilities.
For the current year, Net Investment in Capital Assets increased by $2,881,797 as a result of
approximately $5.7 million, net of construction in progress, in capital improvements made
during the fiscal year, offset by $2.8 million in capital assets depreciation and retirements.
An additional portion of the Town's net position (4.8%) represents resources that are subject to
external restrictions on how they may be used. The balance of unrestricted net position may be
used to meet the Town's ongoing obligations to citizens, customers, and creditors. The Town's
unrestricted net position represents approximately 12.9% of the Town's net position at year end.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS
Governmental Activities:
Town of Los Gatos
Statement of Activities
For the Year Ended June 30, 2017
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
Total Revenues
Expenses:
Police Department
Parks and Public Works
General Government
Community Development
Library Services
Redevelopment (Pmts to SA)
Interest and Fees
Sanitation
Total Expenses
Change in Net Position
Net Position, beginning
Prior Period Adjustments
Net Position, Beginning Adjusted
2017
$ 10,162,547
1,503,108
779,880
14,756,214
8,925,276
2,366,908
2,351,223
14,056
192,260
528,946
41,580,418
14,587,597
9,502,707
6,771,628
5,093,459
2,868,748
466,762
39,290,901
2,289,517
2016
$ 11,085,856
874,957
1,610,657
13,763,458
7,501,175
2,258,892
1,997,497
12,308
698,324
598,170
40,401,294
12,825,688
8,320,623
6,993,661
3,227,224
2,522,142
528,580
34,417,918
5,983,376
112,514,5 06 106,531,130
2,223,756
114,738,262
Net Position, Ending $ 117,027,779 $ 112,514,506
20
MANAGEMENT'S DISCUSSION AND ANALYSIS
As shown in the schedule above, the Town's net position increased by $4,513,273. Key elements of the
increase in net position are as follows:
• Property tax revenues collected for the Town accounted for 35.5% of total Town revenues.
Property tax revenues for Town activities increased by $0.9 million or 7.2%, from FY 2015/16
due primarily to the continued strong economy and the continued strong demand for housing in
Los Gatos coupled with the impacts of several new developments being added to the tax roll.
• Sales tax revenue of $8.9 million accounted for approximately 21.5% of Town total revenues for
the year. The 19% increase of approximately $1.4 million from the prior year collections is
largely due to the timing of the final "triple flip" payment and other sales tax revenue
reclassified to this period.
• Other taxes revenue of $2.4 million accounted for 5.7% of total revenues, increasing by 17.7%
from the prior year. This increase was primarily the result of the higher amount of Transient
Occupancy Tax collected in FY 2016/17 as compared to the prior year.
• Total expenditures increased by approximately $4.9 million from the prior year. This increase
was primarily due to increased pension expense, capital project expenditures not capitalized,
and additional $1.0 million OPEB contribution.
• Prior period adjustments of $2.2 million were made reflecting the Town's reclassification of
approximately $1.8 million of amounts recorded in prior years as a deposit/deferred revenue
and a $0.4 million change in the recognition of the sales tax revenue period received subsequent
to fiscal year end. In prior years the Town Council appropriated funds in a deferred revenue
deposit account to be used as a funding source for future CaIPERS required employer
contributions. Due to robust investment earnings during the "dot corn" years preceding 2001,
the Town's pension trust was determined by CaIPERS to be "superfunded". As such, the Town
was not required in those years to make pension contributions to the CaIPERS pension trust.
The Town conservatively elected to charge itself its required contributions and placed them into
a General Fund deposit account dedicated for future CaIPERS employer pension costs. The total
remaining amount as of July 1, 2016 not used by the Town for employer contributions to
CaIPERS was $1.8 million. Upon review of its prior accounting for the amounts as deferred
revenue, the Town reclassified the $1.8 million deposit account as a prior period adjustment,
increasing the General Fund Reserve for CaIPERS/OPEB and decreasing the same amount from
the deferred revenue CaIPERS deposit liability account.
• Unrestricted fund balance of $15.1 million as of June 30, 2017 reflecting a $2.4 million increase
from the prior year. Staff anticipates this balance to be impacted by the implementation of
GASB 75 in the next fiscal year. For additional information, please refer to Note 1.H and Note 10.
FINANCIAL ANALYSIS OF THE TOWN'S FUNDS
The Town uses fund accounting to ensure and demonstrate compliance with finance -related legal
requirements.
Governmental funds
21
MANAGEMENT'S DISCUSSION AND ANALYSIS
The focus of the Town's governmental funds is to provide information on near -term inflows, outflows,
and balances of spendable resources. As of the end of FY 2016/17, the Town's governmental funds
reported combined ending fund balances of $53,091,909 an increase of $2,336,547 in comparison with
the prior year. Fund balances increased primarily due to higher than expected property tax, transient
occupancy tax, license and permits revenues combined with operational salary savings due to staff
vacancies.
Approximately 89% or $47 million of the total amount of governmental fund balances of $53,091,909 is
committed, assigned or unassigned fund balance, which is available for spending subject to Town
direction and approval. The remainder of fund balance is restricted therefore not available for new
spending but limited as to use for (1) providing for appropriated capital projects ($5,428,064); and (2) to
provide for dedicated repair and maintenance in lighting and landscape districts ($199,643).
General Fund - The General Fund is the chief operating fund of the Town. It accounts for all financial
resources except those required to be accounted for in another fund. At the end of the current fiscal
year, the General Fund net fund balance decreased by approximately 1.3% from prior year balances to
$29,180,624. This decrease reflects the combined effect of capital transfer to the Almond Grove Street
Rehabilitation project and higher than expected receipt of economically sensitive revenues, combined
with operational expenditure savings experienced during the year.
Other Major Funds
General Fund Appropriated Reserve (GFAR) Capital Projects Fund. The GFAR fund is used as the primary
capital projects fund for the Town and is used for the acquisition and construction of major capital
projects in the Town. Fund balance increased by $3,485,982 to $18,102,031. The increase is primarily
due to capital transfer from General Fund and was not expended in the current year.
Other Non -Major Other Governmental Funds. These funds consist primarily of special revenue funds
used to account for specific revenue sources for which expenditures are restricted by law or regulation
to finance particular functions or activities of the Town and other non -major capital projects funds.
Total fund balances for other non -major other governmental funds increased by $755,787 to
$5,809,254.
Proprietary funds
The Town's proprietary funds provide the same type of information found in the government -wide
financial statements, but in more detail.
Internal Service Funds - The Town has seven Internal Service Funds: Workers' Compensation, Self -
Insurance, Stores, Vehicle Maintenance, Facilities Maintenance, Information Technology, and Equipment
Replacement funds. Revenues to these funds are generated from fees charged to the Town's operating
programs for services provided.
The Equipment Replacement Fund charges replacement costs while the Vehicle Maintenance Fund
charges vehicle maintenance costs to all user departments based on equipment assignment and usage
of equipment. Net operating income before transfers at year end for both funds was $41,729 and
$101,507 respectively versus $492,162 and $107,692 in the prior year. The decrease in operating
income in the Vehicle Maintenance Fund from the prior year is attributable to increased operating
22
MANAGEMENT'S DISCUSSION AND ANALYSIS
expenses incurred during the fiscal year. The small decrease in the Equipment Replacement Fund is
attributable to the cyclical nature of fleet purchases in accordance with the Town's fleet replacement
schedule.
The Facilities Maintenance, Stores, and Information Technology funds charge premiums based on use
and labor charges to provide Town -wide building maintenance, mail and office inventory and
duplication charges, and management information services. Net operating income (loss) before
transfers at year end was $66,390, $17,309, and $84,540 respectively. Expenditures exceeded revenues
in the Building Maintenance Fund due to increased heating, ventilation and air conditioning
maintenance and unscheduled repair costs experienced during the year. All three funds experienced
savings on anticipated maintenance, repairs and replacements.
The Workers' Compensation and Self -Insurance Funds charge premiums based on exposure levels by
department for liability, property, workers' compensation and self-insurance costs. Net operating
income before transfers at year end was ($123,074) ($250,079) respectively, versus ($289,718) and
($146,868) in the prior year. The decrease in net position for the year for these funds reflects the
adverse experience of loss claims in the fiscal year as compared to the prior year, in both the Workers'
Compensation and general liability claim payments and settlements.
GOVERNMENT FUNDS BUDGETARY HIGHLIGHTS:
Budget Adjustments
Comparing the FY 2016/17 original budget (or adopted) General Fund Expenditures of $34,931,270
(excluding budgeted transfers -out) the final budget amount of $36,587,211 shows a net increase of
$1,655,950. Additions to the original budget included approved encumbrance carry -forwards of
$54,939, and additions of $1,601,011 in net miscellaneous adjustments approved by Town Council
throughout the fiscal year.
Original Budget
Approved Carry- Prior Year
forwards Encumbrances
Mis. Adjustments
& Mid -Year
Adjustments
Final Budget
$ 34,931,270 $ 54,939 $ 1,601,002 $ 36,587,211
The increase in General Fund appropriations occurred primarily from the following selected budget
adjustments made during the fiscal year.
• $1,000,000 increase to provide funding for additional Other Post -Employment Benefits payment.
• $300,000 transfer from the General fund to provide funding support for cut through management.
• $130,000 transfer from the General fund to provide funding support for the Stonybrook/Kennedy
Sidewalk Improvements capital project.
• $114,419 transfer from the General fund to provide funding support for the Curb/Gutter/Sidewalk
Maintenance capital project.
• $100,000 related to the North 40 litigation legal costs.
• $75,000 increase due to increased water utility cost for parks.
23
MANAGEMENT'S DISCUSSION AND ANALYSIS
• $75,000 increase to supplement the annual funding of $100,000 for tree maintenance and
emergency removals due to recent storm activity.
• $47,000 budget adjustment for additional legal and negotiation services.
• $54,939 increase due to approved encumbrance carry -forwards.
• $35,000 increase to budget to accept a Partnership to Improve Community Health (PICH) grant from
Santa Clara County for smoking prevention and safe routes to school programs.
• $34,414 transfer from the General fund to provide funding support for the Pageant Way Parking Lst
Reconstruction capital project.
• $28,000 budget adjustment for the larger than usual expense associated with the Sales Tax
recovering activities.
• $24,000 increase for additional recruitment services for the Assistant Town Manager position.
• $20,946 increase to meet the rising cost of crossing guard services.
• $17,628 increase for well testing and monitoring required by the County of Santa Clara. Before
1990, an underground oil tank leaked into the surrounding soil.
• $17,112 increase to fund the Outside the Box Phase 2 program.
• $11,000 in grant dollars to purchase new laptops for the Emergency Operation Center.
Comparing the FY 2016/17 final amended budget to the actual result shows $2 million in savings due to
operational cost savings primarily from savings related to staff vacancies.
Capital Assets
As of June 30, 2017, the Town's investment in capital assets for its governmental activity is recorded at
$96,265,652 (net of accumulated depreciation). The investment in capital assets includes land, buildings
and improvements, infrastructure, construction in progress and machinery and equipment. During FY
2016/17 the Town's $7.5 million investment in capital assets for the current year represented
approximately 8% of total assets for governmental activities. Major capital asset events during the
current fiscal year include the following:
• $3.6 million added to Construction in Progress for streets, building improvements and park projects;
• $1.9 million for street improvements;
• $1.2 million for facilities improvements;
• $0.6 million in equipment purchases including $0.4 million in fleet replacements, $42,000 in
computer —aided dispatch and automated records management system upgrades, and $138,000 in
Silicon Valley Regional Interoperability Infrastructure improvements.
• $0.3 million for retaining walls and parking lot improvements.
24
MANAGEMENT'S DISCUSSION AND ANALYSIS
Town of Los Gatos
Net Investment in Capital Assets
June 30, 2017
Governmental
Activities
Infrastructure $ 44,101,321
Buildings 23,260,209
Land 20,333,684
Equipment 2,941,421
Construction in Progress 5,629,017
$ 96,265,652
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
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 2016/17 budget, the Town Council and
management considered the following factors:
• As a result of factors including collectively bargained increases to pension benefits during the early
2000's when the economy was booming; the losses sustained in the California Public Employees
Retirement System (CaIPERS) pension plan's investment portfolio in the great recession coupled
with ongoing changes in assumptions made by CaIPERS actuaries about expected earnings in the
fund (i.e. "discount rate") and life expectancies of its annuitant, the Town's pension plan funding
levels went from surplus to unfunded. To address this unfunded status the Town took proactive
steps including the payoff of the Town's pension plan "side fund" and the creation of two new
pension tiers with associated lower costs of employer pension benefits for both public safety and
miscellaneous employees. However, 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 plan includes
increasing costs in this expense and further changes in actuarial assumptions or lowering the
discount rate (this change was approved by the CaIPERS board in December 2016) are likely to
increase this cost beyond current estimates. The Town's pension plan with CaIPERS is currently
funded at 72.8% for safety group and 68.2% for miscellaneous group based upon the June 30, 2016
Actuarial Valuation.
• General property tax collections represent approximately 28.9% (not including the State's property
tax "backfill" shifts) of the Town's General Fund revenues. Property tax collections were expected
to increase 4% from the prior year's tax collections. This forecast is based on data from the Santa
Clara County Tax Assessor's Office. Los Gatos is one of the few cities in Santa Clara County that did
not encounter significant loss of assessed valuation during the recent recession and expects positive
growth for FY 2017/18.
25
MANAGEMENT'S DISCUSSION AND ANALYSIS
• The Town anticipates a decrease in general sales tax for FY 2017/18. Sales tax estimates of $8.0
million for FY 2017/18 were budgeted reflecting a 2.4% decrease from the prior year's adopted sales
tax budget. FY 2016/17 sales tax proceeds include the final one-time triple flip true up proceeds.
The negative impact is associated with increased online versus brick and mortar shopping,
decreased gasoline prices, and by the continuing impact of the 2011 business model change in
Netflix. Currently, Netflix represents approximately 16% of total sales taxes collected annually.
With sales tax representing approximately 20.3% of the Town's General Fund revenues, any
fluctuation in local sales tax collections will significantly impact the Town.
• The Town's investment portfolio experienced a slight increase in its overall weighted average annual
yield, rising from 0.78% at June 30, 2016 to 1.25% at June 30, 2017. Anticipating continued low
interest rates for FY 2017/18 coupled with reduced cash balances due to capital expenditures,
investment earnings are expected to remain at the same level as the prior fiscal year.
• Transient Occupancy Tax (TOT) revenues are expected to be higher in FY 2017/18 as personal and
business related travel is expected to remain strong. In addition at the November 8, 2016 election
the Town of Los Gatos residents approved a ballot measure increase to the TOT from 10% to 12%.
Given the increase in travel activity, the FY 2016/17 TOT revenues were budgeted at $2.1 million
reflecting a 5% increase from the FY 2016/17 amended budget of $2.0 million.
Requests for Information
This financial report is designed to provide citizens, 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. If you have any questions about this report or need any additional information, contact
Stephen Conway, Director of Finance, at 110 East Main Street, Los Gatos, California, 95030, or phone
(408) 354-6828.
26
Basic Financial Statements
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28
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
GOVERNMENT WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES
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 of the entire Town's transactions is
accounted for, regardless of when cash changes hands, and all material internal transactions between
funds have been eliminated.
The Statement of Net Position report 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 the reader 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.
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.
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 term "Basic Financial
Statements" replaced the term "General Purpose Financial Statements" which is no longer used.
29
TOWN OF LOS GATOS
STATEMENT OF NET POSITION
JUNE 30, 2017
Governmental
Activities
ASSETS
Cash and investments $ 73,636,226
Restricted cash and investments 46,698
Receivables:
Accounts 1,068,933
Interest 148,655
Intergovernmental 1,688,577
Materials, supplies and deposits 24,963
Long term notes receivables 237,752
Capital Assets:
Nondepreciable 25,962,701
Depreciable, net of accumulated depreciation 70,302,951
Total Assets 173,117,456
DEFERRED OUTFLOWS OF RESOURCES
Pension contributions subsequent to measurement date
Pension related amounts
4,145,646
11,520,764
Total Deferred Outflows of Resources 15,666,410
LIABILITIES
Accounts payable 1,676,779
Accrued payroll and benefits 1,237,899
Due to other governments 17,240
Unearned Revenue 4,566,735
Deposits 6,441,664
Claims payable 1,348,391
Long-term liabilities:
Due within one year:
Compensated absences 79,759
Due in more than one year:
Postemployment benefits 897,603
Net pension liabilities 47,271,733
Compensated absences 2,440,170
Total Liabilities 65,977,973
DEFERRED INFLOWS OF RESOURCES
Pension related amounts 5,778,114
Total Deferred Inflows of Resources 5,778,114
NET POSITION
Net investment in capital assets 96,265,652
Restricted for:
Capital projects 5,428,064
Lighting and landscape repairs and maintenance 199,643
Total Restricted Net Position 5,627,707
Unrestricted 15,134,420
Total Net Position $ 117,027,779
The notes to the financial statements are an integral part of this statement.
30
TOWN OF LOS GATOS
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
Functions/Programs
Expenses
Program Revenues
Net (Expense)
Revenues and
Changes in
Net Position
Charges for
Services
Operating
Grants and
Contributions
Capital
Grants and
Contributions
Governmental
Activities
Governmental Activities:
General government
Public safety
Parks and public works
Community development
Library services
Sanitation
Total Governmental Activities
$ 6,771,628
14,587,597
9,502,707
5,093,459
2,868,748
466,762
$ 1,669,020
2,076,688
2,155,841
3,803,626
46,746
410,626
$ - $
837,329
665,779
770,600
9,280
$ (5,102,608)
(11,673,580)
(5,910,487)
(1,280,553)
(2,822,002)
(56,136)
$ 39,290,901
$ 10,162,547 $ 1,503,108 $ 779,880 $ (26,845,366)
General revenues:
Taxes:
Property taxes
Sales taxes
Franchise taxes
Other taxes
Motor vehicle in lieu
Investment earnings
Miscellaneous
Total general revenues
Change in Net Position
Net Position - Beginning, as restated
Net Position - Ending
The notes to the financial statements are an integral part of this statement.
14,756,214
8,925,276
2,366,908
2,351,223
14,056
192,260
528,946
29,134,883
2,289,517
114,738,262
$ 117,027,779
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32
TOWN OF LOS GATOS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR YEAR ENDED JUNE 30, 2017
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. No distinction is made between fund types and the practice of combining
like funds and presenting their totals in separate columns has been discontinued along with the use of
the General Fixed Assets and General Long -Term Debt Account Groups.
Major Governmental Funds:
The Town determined that the following funds were major funds for the year ended June 30, 2017.
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.
Appropriated Reserves Fund is used to account for resources provided for capital projects not fully
funded from other sources.
33
TOWN OF LOS GATOS
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2017
General
Other
Nonmajor Total
Appropriated Governmental Governmental
Reserves Funds Funds
ASSETS
Cash & Investments $ 36,038,845 $ 22,235,821 $ 5,599,227 $ 63,873,893
Receivables:
Accounts 848,096 29,036 146,181 1,023,313
Interest 148,655 - 148,655
Intergovernmental 1,626,100 62,477 1,688,577
Long term notes 159,000 78,752 237,752
Total Assets
$ 38,820,696 $ 22,264,857 $ 5,886,637 $ 66,972,190
LIABILITIES
Accounts Payable $ 575,582 $ 868,034 $ 7,974 $ 1,451,590
Accrued Payroll and Benefits 1,192,893 - 4,554 1,197,447
Due to other governments 17,073 - - 17,073
Unearned revenue 1,207,148 3,294,792 64,855 4,566,795
Deposits 6,441,664 - - 6,441,664
Compensated Absences 79,759 - - 79,759
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue
9,514,119 4,162,826
77,383 13,754,328
125,953 125,953
FUND BALANCE
Restricted for:
Capital Outlay - 5,428,064 5,428,064
Repairs and Maintenance - 199,643 199,643
Committed to:
Budget Stabilization 4,969,847 4,969,847
Catastrophic 4,969,847 4,969,847
CaIPERS/OPEB Reserve 3,388,913 3,388,913
Almond Grove Street Project 1,801,318 10,354,584 12,155,902
Assigned to:
Open Space 562,000 - 562,000
Parking 1,460,210 1,460,210
Sustainability 140,553 - 140,553
Strategic Planning 2,600,000 - 2,600,000
Capital Projects 8,273,124 6,237,237 14,510,361
Carryover Encumbrances 34,852 - 34,852
Comcast PEG 50,000 50,000
Compensated Absences 2,440,170 2,440,170
Special Revenue Funds 181,547 181,547
Total Fund Balances
Total Liabilities, Deferred Inflow of Resources and
Fund Balances
29,180, 624 18,102,031
5,809,254 53,091,909
$ 38,820,696 $ 22,264,857 $ 5,886,637 $ 66,972,190
The notes to the financial statements are an integral part of this statement.
34
TOWN OF LOS GATOS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO
THE GOVERNMENT -WIDE STATEMENT OF NET POSITION -GOVERNMENTAL ACTIVITIES
JUNE 30, 2017
Fund Balance - Total Governmental Funds $ 53,091,909
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.
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.
DEFERED OUTFLOWS OF RESOURCES
Contributions and similar items will not be included in the calculation of the City's net
pension liability of the plan year included in this report and have been deferred and
reported as deferred outflows of resources.
DEFERRED INFLOWS OF RESOURCES
The difference between projections and actual results in pension plans is not included in the
plan's actuarial study until the next fiscal year and are reported as deferred inflows of
resources in the Statement of Net Position.
LONG-TERM LIABILITIES
Long-term liabilities are not due and payable in the current
period and, therefore, are not reported in the Governmental Funds.
96, 264,146
6,278,071
15,138,352
(5,751,601)
Net Pension Liabilities (44,781,278)
Postemployment Benefits (897,603)
Compensated absences (2,440,170) (48,119,051)
LONG-TERM NOTES RECEIVABLES
In governmental funds, certain revenues are not available to pay for current
period expenditures and, therefore, are offset by deferred inflow of resources.
125,953
Net Position - Governmental Activities $ 117,027,779
The notes to the financial statements are an integral part of this statement.
35
TOWN OF LOS GATOS
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
General
Other
Nonmajor Total
Appropriated Governmental Governmental
Reserves Funds Funds
REVENUES
Property Taxes $ 14,756,214 $
Sales Taxes 8,799,323
Other Taxes 2,328,058
Licenses & Permits 4,759,492
Intergovernmental 908,285
Charges for Services 3,269,714
Fines and Forfeitures 917,105
Franchise Fees 2,366,908
Interest 124,457
Use of Property 32,096
Other 484,471
Total Revenues
$ 38,369 $ 14,794,583
8,799,323
- 23,165 2,351,223
149,763 166,248 5,075,503
193,040 614,255 1,715,580
598,614 341,846 4,210,174
- 917,105
- 2,366,908
21,335 47,186 192,978
32,096
523,474 3,994 1,011,939
38,746,123 1,486,226
EXPENDITURES
Current:
General Government 8,390,959
Public Safety 13,251,288
Parks and Public Works 6,597,748
Community Development 3,793,930
Library Services 2,508,677
Sanitation and Other -
Capital Outlay -
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Proceeds from sales of assets
Transfers in
Transfers (out)
Total Other Financing Sources (Uses)
NET CHANGES IN FUND BALANCES
BEGINNING FUND BALANCES, AS RESTATED
ENDING FUND BALANCES
1,235,063 41,467,412
36,000
466,762
5,391,206 1,475,828
34,542,602 5,391,206
4,203,521 (3,904,980)
4,435
313,825
(7,298,187)
(6,979,927)
(2,776,406)
31,957,030
7,593,867
(202,905)
7,390,962
3,485,982
14,616,049
$ 29,180,624 $
18,102,031
8,390,959
13,251,288
6,633,748
3,793,930
2,508,677
466,762
6,867,034
1,978,590 41,912,398
(743,527) (444,986)
(110,920)
4,435
7,907,692
(7,612,012)
(110,920) 300,115
(854,447) (144,871)
6,663,701 53,236,780
$
5,809,254 $ 53,091,909
The notes to the financial statements are an integral part of this statement.
36
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, 2017
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
Amounts reported for Governmental Activities in the Statement of Activities are
different because of the following:
CAPITAL ASSET TRANSACTIONS
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) 6,432,214
Proceeds from sale of assets (4,435)
Gain on sale of assets 2,344
Current Year Depreciation (3,547,369)
ACCRUAL OF NON -CURRENT ITEMS
The amount below included in the Statement of Activities does not require the use
of current financial resources and therefore is not reported in the governmental funds:
Compensated absences
Postemployment benefits
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.
ALLOCATION ON INTERNAL SERVICE FUND ACTIVITY
$ (144,871)
2,882,754
(350,329)
1,796,973
(440,037)
Internal service funds are used by management to charge the costs of certain activities to
individual funds. The net revenue of the internal service fund is reported with governmental activities. (357,358)
LONG TERM NOTES RECEIVABLES AND ASSOCIATED DEFERRED REVENUE
Loans receivable written off were not recorded in governmental funds because they were not available to (1,223,568)
pay for current year expenditures and therefore were deferred
In governmental funds, certain revenues are not available to pay for current
period expenditures and, therefore, are offset by deferred inflow of resources. 125,953
CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES $ 2,289,517
The notes to the financial statements are an integral part of this statement.
37
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, 2017
REVENUES
Property Taxes
Sales Taxes
Other Taxes
Franchise Fees
Licenses & Permits
Intergovernmental
Charges for Services
Fines and Forfeitures
Interest
Use of Property
Other
Total Revenues
EXPENDITURES
Current:
General Government:
Town Council
Town Attorney
Administrative Services
Non -Departmental
Total General Government
Public Safety
Community Development
Parks & Public Works
Library Services
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
BEGINNING FUND BALANCE, AS RESTATED
ENDING FUND BALANCE
Original
Budget
$
13,472,473
8,164,403
1,907,000
2,191,120
4,214,793
717,684
3,050,910
656,500
750,587
31,959
809,267
35,966,696
198,327
347,008
3,301,286
3,948,923
7,795,544
13,903,297
4,109,302
6,436,026
2,687,101
34,931,270
1,035,426
Final
Budget
$ 14,065,776
8,814,956
2,007,000
2,221,120
4,414,793
990,920
3,179,461
656,500
690,587
31,959
544,947
37,618,019
198,327
468,647
3,401,124
5,031,323
9,099,421
13,961,880
4,132,694
6,689,115
2,704,101
36,587,211
1,030,808
Actual
$
Variance With
Final Budget
Positive
(Negative)
14,756,214 $ 690,438
8,799,323 (15,633)
2,328,058 321,058
2,366,908 145,788
4,759,492 344,699
908,285 (82,635)
3,269,714 90,253
917,105 260,605
124,457 (566,130)
32,096 137
484,471 (60,476)
38,746,123 1,128,104
193,584
426,550
2,825,081
4,945,744
8,390,959
13,251,288
3,793,930
6,597,748
2,508,677
34,542,602
4,203,521
4,743
42,097
576,043
85,579
708,462
710,592
338,764
91,367
195,424
2,044,609
3,172,713
1,000 1,000 4,435 3,435
363,428 363,428 313,825 (49,603)
(9,859,973) (10,194,387) (7,298,187) 2,896,200
(9,496,545) (9,830,959) (6,979,927) 2,846,597
$
(8,461,119) $ (8,800,151) (2,776,406) $ 6,019,310
31,957,030
$ 29,180,624
The notes to the financial statement are an integral part of this statement
38
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
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.
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.
39
TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2017
ASSETS
Current Assets:
Cash & investments
Restricted cash & investments
Accounts Receivable
Materials, supplies, and deposits
Total current assets
Noncurrent Assets:
Capital assets, net of accumulated depreciation
Governmental
Activities
Internal Service
Funds
9,762,331
46,698
45,680
24,963
9,879,672
1,514
Total Assets 9,881,186
DEFERRED OUTFLOWS OF RESOURCES
Pension contributions subsequent to measurement date
Pension related amounts
214,987
313,071
Pension contributions 528,058
LIABILITIES
Current Liabilities:
Accounts payable 225,195
Accrued payroll and benefits 40,452
Due to other governments 167
Total current liabilities 265,814
Noncurrent liabilities:
Claims payable 1,348,391
Net pension liability 2,490,455
Total noncurrent liabilities 3,838,846
Total Liabilities 4,104,660
DEFERRED INFLOWS OF RESOURCES
Pension related amounts 26,513
26,513
NET POSITION
Net Investment in capital assets 1,514
Unrestricted 6,276,557
Total Net Position
$ 6,278,071
The notes to the financial statements are an integral part of this statement.
40
TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
OPERATING REVENUES
Charges for services
Interest
Use of money and property
Other local taxes
Other
Governmental
Activities
Internal Service
Funds
$
4,667,639
8
215,093
23,165
318,661
Total Operating Revenues 5,224,566
OPERATING EXPENSES
Salaries and related expenses 1,318,991
Insurance expenses 722,341
Depreciation 957
Services and Supplies 3,243,955
Total Operating Expenses
Operating Income
Transfers out (Note 4)
Net transfers
5,286,244
(61,678)
(295,680)
(295,680)
Change in Net Position (357,358)
BEGINNING NET POSITION 6,635,429
ENDING NET POSITION $ 6,278,071
The notes to the financial statements are an integral part of this statement.
41
TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers
Payments to employees
Claims paid
Governmental
Activities
Internal Service
Funds
5,205,539
(3,261,668)
(1,350,806)
(527,488)
Net cash provided (used) by operating activities 65,577
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers Out (295,680)
Net cash provided (used) by noncapital financing activities (295,680)
Net Increase(Decrease) in Cash and Investments (230,103)
Cash and investments - beginning of year 10,039,132
Cash and investments - end of year
Financial Statement Presentation
Cash and investment
Restricted and investment
Total
$ 9,809,029
9,762,331
46,698
$ 9,809,029
Reconciliation of Operating Income to Cash Flows
from Operating Activities:
Operating Income $ (61,678)
Adjustments to reconcile operating income to cash flows
from operating activities:
Depreciation 957
Change in assets and liabilities:
Receivables, net (19,027)
Material and supplies (7,859)
Deferred outflows of resources (326,050)
Net pension liabilities 420,609
Deferred inflows of resources (130,821)
Accounts payable (9,929)
Accrued payroll and benefits 4,447
Claims payable 194,853
Due to other government 75
Cash Flows From Operating Activities
$ 65,577
The notes to the financial statements are an integral part of this statement.
42
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
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.
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.
43
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2017
Total
Private
Purpose Trust
Funds
ASSETS
Cash and investments (Note 2) $ 2,192,485
Restricted cash and investments (Note 2) 1,967,497
Loans receivable (Note 3) 563,761
Capital assets (Note 5):
Nondepreciable 5,257,422
Depreciable, net of accumulated depreciation 1,728,777
Total Assets 11,709,942
LIABILITIES
Accounts payable 5,244
Due to other governments (Note 13) 70
Interest payable 348,518
Long-term debt (Note 6):
Due within one year 1,105,000
Due in more than one year 18,169,510
Total Liabilities 19,628,342
NET POSITION
Held in trust
Total Net Position
The notes to the financial statements are an integral part of this statement
(7,918,400)
$ (7,918,400)
44
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
Total
ADDITIONS
Property taxes $ 1,964,636
Investment earnings 10,934
Gifts, bequests and endowments 79,760
Other 1,923,303
Total Additions 3,978,633
DEDUCTIONS
Program expenses of former RDA 1,930,143
Interest and fiscal agency expenses of RDA 802,166
Library services 75,499
Depreciation expense 101,692
Total Deductions 2,909,500
CHANGE IN NET POSITION 1,069,133
NET POSITION - BEGINNING OF YEAR (8,987,533)
NET POSITION - END OF YEAR $ (7,918,400)
The notes to the financial statements are an integral part of this statement
45
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46
Notes to Basic Financial Statements
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
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, 2017 was 31,314.
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
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 entirely 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 ABAG PLAN Corporation
("ABAG") and the Local Agency Workers' Compensation Excess Joint Powers Authority ("LAWCX") are not
included in the accompanying basic financial statements as boards 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.
48
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
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
nonexchange 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.
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 are aggregated and reported as nonmajor 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 nonmajor 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
outflows 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.
49
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
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, stores, vehicle
maintenance, building maintenance, information technology (called management information systems),
and equipment replacement.
Fiduciary Funds include Private -Purpose Trust Funds and agency 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:
• History Protect 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 was 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 was 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.
50
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
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, 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 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. Agency funds have no measurement focus.
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.
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.
51
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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 GASB 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.
Pension Expense - 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
City's California Public Employees' Retirement System (CaIPERS) 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 CaIPERS. 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.
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. This statement changed the
definition of fair value and is effective for periods beginning after June 15, 2015.
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.
52
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
• 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.
For the purpose of the statement of cash flows, the Town considers all pooled cash and investments
(consisting of cash and investments and restricted cash and investments) held by the Town as cash and
cash equivalents because the pool is used essentially as a demand deposit account from the standpoint of
the funds. The Town also considers all non -pooled cash and investments (consisting of cash with fiscal
agent and restricted cash and investments held by fiscal agent) as cash and cash equivalents because
investments meet the criteria for cash equivalents defined above.
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.
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 estimated fair 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 exceeds $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:
Buildings 25-40 years
Improvements 25-40 years
Machinery and equipment 2-20 years
Furniture and fixtures 5-12 years
Software 5-7 years
Infrastructure 20-40 years
53
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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
25.0%
37.5%
50.0%
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 $ 2,339,843
Addition 1,727,217
Payments (1,547,131)
Ending Balance
Compensated Absences Current Portion
$ 2,519,929
$ 79,759
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 related to terminated employees are reported in the fund financial statements.
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 deferred inflows from 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 unearned revenue.
54
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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 effective interest 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, prepaid items and
deferred charges.
Deferred inflows of resources is an acquisition of net position by the Town that is applicable to a future
reporting period, for example, unearned revenue and advance collections.
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 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."
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.
55
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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 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 13, 2017, 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 other than described in Note 15.
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.
56
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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 Unsecured
January 1
January 1
50% on November 1 (December 10)
50% on February 1 (April 10)
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.
Budgets and Budgetary Accounting - The Town follows the procedures below when establishing the
budgetary data reflected in the financial statements:
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 amendments
were not material in relation to original appropriations.
Excess of Expenditures over Appropriations - There were no significant expenditures in excess of budget
during for the year ended June 30, 2017.
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.
57
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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
GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans —
The objective of this Statement is to improve the usefulness of information about postemployment
benefits other than pensions (other postemployment benefits or OPEB) included in the general purpose
external financial reports of state and local governmental OPEB plans for making decisions and assessing
accountability. This Statement results from a comprehensive review of the effectiveness of existing
standards of accounting and financial reporting for all postemployment benefits (pensions and OPEB) with
regard to providing decision -useful information, supporting assessments of accountability and interperiod
equity, and creating additional transparency. The requirements of this statement were not applicable to
the Town.
GASB Statement No. 77, Tax Abatement Disclosure- This Statement addresses the financial statements
prepared by state and local governments in conformity with generally accepted accounting principles
provide citizens and taxpayers, legislative and oversight bodies, municipal bond analysts, and others with
information they need to evaluate the financial health of governments, make decisions, and assess
accountability. This information is intended, among other things, to assist these users of financial
statements in assessing (1) whether a government's current -year revenues were sufficient to pay for
current -year services (known as interperiod equity), (2) whether a government complied with finance -
related legal and contractual obligations, (3) where a government's financial resources come from and
how it uses them, and (4) a government's financial position and economic condition and how they have
changed over time. There was no impact on net position as a result of implementation of this statement.
GASB Statement No. 78, Pension Provided through Certain Multiple -Employer Defined Benefit Pension
Plans— The objective of this Statement is to address a practice issue regarding the scope and applicability
of Statement No. 68, Accounting and Financial Reporting for Pensions. This issue is associated with
pensions provided through certain multiple -employer defined benefit pension plans and to state or local
governmental employers whose employees are provided with such pensions. The requirements of this
statement were not applicable to the Town.
GASB Statement No. 80, Blending Requirements for Certain Component Units — An Amendment of GASB
Statement No. 14 - The objective of this Statement is to improve financial reporting by clarifying the
financial statement presentation requirements for certain component units. This Statement amends the
blending requirements established in paragraph 53 of Statement No. 14, The Financial Reporting Entity, as
amended. This Statement amends the blending requirements for the financial statement presentation of
component units of all state and local governments. The additional criterion requires blending of a
component unit incorporated as a not -for -profit corporation in which the primary government is the sole
corporate member. The additional criterion does not apply to component units included in the financial
reporting entity pursuant to the provisions of Statement No. 39, Determining Whether Certain
Organizations Are Component Units. The requirements of this statement were not applicable to the Town.
58
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
GASB Statement No. 82, Pension Issues — An Amendment of GASB Statement No. 67, No. 68, and No. 73.
This Statement addresses certain issues that had been raised with respect to Statements No. 67, Financial
Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73,
Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB
Statement No. 68, and Amendments to Certain Provisions of GASB No. 67 and No. 68. Specifically, this
Statement addresses issues regarding (1) the presentation of payroll -related measures in the required
supplementary information, (2) the selection of assumptions and the treatment of deviations from the
guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of
payments made by employers to satisfy employee (plan member) contribution requirements. The Town
updated covered employee payroll information in the required supplementary information as part of
implementation of this accounting standard.
H. Upcoming Accounting and Reporting Changes
GASB Statement No. 75 — Accounting and Financial Reporting for Postemployment Benefits Other Than
Pensions. Issue date: 06/15. Effective date: the provisions in Statement 75 are effective for fiscal years
beginning after June 15, 2017. The primary objective of this Statement is to improve accounting and
financial reporting by state and local governments for postemployment benefits other than pensions
(other postemployment benefits or OPEB). It also improves information provided by state and local
governmental employers about financial support for OPEB that is provided by other entities. This
Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by
Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB
Measurements by Agent Employers and Agent Multiple -Employer Plans, for OPEB. Statement No. 74,
Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes new
accounting and financial reporting requirements for OPEB plans.
The scope of this Statement addresses accounting and financial reporting for OPEB that is provided to the
employees of state and local governmental employers. This Statement establishes standards for
recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and
expense/expenditures. For defined benefit OPEB, this Statement identifies the methods and assumptions
that are required to be used to project benefit payments, discount projected benefit payments to their
actuarial present value, and attribute that present value to periods of employee service. Note disclosure
and required supplementary information requirements about defined benefit OPEB also are addressed.
In addition, this Statement details the recognition and disclosure requirements for employers with
payables to defined benefit OPEB plans that are administered through trusts that meet the specified
criteria and for employers whose employees are provided with defined contribution OPEB. This Statement
also addresses certain circumstances in which a non -employer entity provides financial support for OPEB
of employees of another entity.
In this Statement, distinctions are made regarding the particular requirements depending upon whether
the OPEB plans through which the benefits are provided are administered through trusts that meet the
following criteria:
• Contributions from employers and non -employer contributing entities to the OPEB plan and earnings
on those contributions are irrevocable.
59
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
• OPEB plan assets are dedicated to providing OPEB to plan members in accordance with the benefit
terms.
• OPEB plan assets are legally protected from the creditors of employers, non -employer contributing
entities, the OPEB plan administrator, and the plan members.
Based on the information disclosed in note 10, the Town anticipates that a liability close to the unfunded
actuarial liability of $12.6 million, reported as of June 30, 2017, will have to be recorded in the June 30,
2018 government -wide financial statements. Assuming all factors included in the valuation were to
remain the constant.
GASB Statement No. 81 — Irrevocable Split -Interest Agreements. Issue date: 03/16. Effective date: The
requirements of this Statement are effective for financial statements for periods beginning after December
15, 2016, and should be applied retroactively. The objective of this Statement is to improve accounting and
financial reporting for irrevocable split -interest agreements by providing recognition and measurement
guidance for situations in which a government is a beneficiary of the agreement.
Split -interest agreements are a type of giving agreement used by donors to provide resources to two or
more beneficiaries, including governments. Split -interest agreements can be created through trusts —or
other legally enforceable agreements with characteristics that are equivalent to split -interest
agreements —in which a donor transfers resources to an intermediary to hold and administer for the
benefit of a government and at least one other beneficiary. Examples of these types of agreements include
charitable lead trusts, charitable remainder trusts, and life -interests in real estate.
This Statement requires that a government that receives resources pursuant to an irrevocable split -
interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the
agreement. Furthermore, this Statement requires that a government recognize assets representing its
beneficial interests in irrevocable split -interest agreements that are administered by a third party, if the
government controls the present service capaTown of the beneficial interests. This Statement requires
that a government recognize revenue when the resources become applicable to the reporting period.
The Town does not anticipate a material financial statement impact related to this statement.
GASB Statement No. 85 — Omnibus. Issued date: 03/17. Effective date: The requirements of this
Statement are effective for reporting periods beginning after June 15, 2017. Earlier application is
encouraged. This Statement addresses a variety of topics including issues related to blending component
units, goodwill, fair value measurement and application, and postemployment benefits (pensions and
other postemployment benefits [OPEB]). Specifically, this Statement addresses the following topics:
• Blending a component unit in circumstances in which the primary government is a business -type
activity that reports in a single column for financial statement presentation
• Reporting amounts previously reported as goodwill and "negative" goodwill
• Classifying real estate held by insurance entities
• Measuring certain money market investments and participating interest -earning investment
contracts at amortized cost
• Timing of the measurement of pension or OPEB liabilities and expenditures recognized in financial
statements prepared using the current financial resources measurement focus
60
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
• Recognizing on -behalf payments for pensions or OPEB in employer financial statements.
• Presenting payroll -related measures in required supplementary information for purposes of
reporting by OPEB plans and employers that provide OPEB.
• Classifying employer -paid member contributions for OPEB.
• Simplifying certain aspects of the alternative measurement method for OPEB.
• Accounting and financial reporting for OPEB provided through certain multiple -employer defined
benefit OPEB plans.
The requirements of this Statement will enhance consistency in the application of accounting and financial
reporting requirements. Consistent reporting will improve the usefulness of information for users of state
and local government financial statements.
The Town does not anticipate a material financial statement impact related to this statement.
GASB Statement No. 86 —Certain Debt Extinguishment Issues. Issued date: 05/17. Effective date: The
requirements of this Statement are effective for reporting periods beginning after June 15, 2017.
Earlier application is encouraged. The primary objective of this Statement is to improve consistency in
accounting and financial reporting for in -substance defeasance of debt by providing guidance for
transactions in which cash and other monetary assets acquired with only existing resources —resources
other than the proceeds of refunding debt —are placed in an irrevocable trust for the sole purpose of
extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance
on debt that is extinguished and notes to financial statements for debt that is defeased in substance.
The requirements of this Statement will increase consistency in accounting and financial reporting for debt
extinguishments by establishing uniform guidance for derecognizing debt that is defeased in substance,
regardless of how cash and other monetary assets placed in an irrevocable trust for the purpose of
extinguishing that debt were acquired. The requirements of this Statement also will enhance consistency
in financial reporting of prepaid insurance related to debt that has been extinguished. In addition, this
Statement will enhance the decision -usefulness of information in notes to financial statements regarding
debt that has been defeased in substance.
The Town does not anticipate a material financial statement impact related to this statement.
NOTE 2 - CASH AND INVESTMENTS
The Town pools cash from all sources and all funds except Restricted Cash and Investments so that it can be
invested at the maximum yield, consistent with safety and liquidity, while 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 net 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.
61
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
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 or first
trust deed mortgage notes with a value of 150% of the deposit as collateral for these deposits. 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 has waived collateral requirements for the portion of deposits covered by Federal
Depository Insurance Corporation (FDIC).
The bank balance of the Town's cash deposits was $18,949,250 and the book balance was $18,955,224 as of
June 30, 2017. The bank balance and the carrying amount differed due to deposits in transit and outstanding
checks. The FDIC insured the bank balances up to $250,000 for each bank. As of June 30, 2017, the Town's
cash balances exceeded FDIC by $18,709,424 but were collateralized as discussed above.
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.
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
under the day to day administration of the State Treasurer. As of June 30, 2017, LAIF had approximately $77
billion in investments. Of that amount, 97.11% is invested in non -derivative financial products and 2.89% 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.
62
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 2 - CASH AND INVESTMENTS, CONTINUED
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 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 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 investment in money market fund and LAIF is 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.
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, 2017.
The following table summarizes the Towns policy related to maturities and concentration of investments:
Investment Type
Maximum
Maximum Portfolio
Maturity Percentage
US Treasury Obligations 5 years None
US Agency Obligations 5 years None
Bankers Acceptances 180 days 30%
Commercial Paper 180 days 25%
Medium Term Notes 3/5 years 30%
Collateralized CD's 5 years 30%
CA LAIF NA 65 M per State Law
Money Market Funds NA 20%
63
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
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, 2017:
Time to Weighted
Investment Type/Cash Available for Concentration Input Mature Average
Deposit Operations Restricted Total of Credit Risk Rating level (Years) Maturity
US Treasury Securities $ 7,991,844 $ $ 7,991,844 14.05% Aaa 1 1-3 1.31 years
US Instrumentality Security 29,183,872 29,183,872 51.32% Aaa 2 1-3 1.07 years
Corporate Securities 13,320,532 - 13,320,532 23.42% A1, A2, Aa1, Aa2, Aa3 2 1-3 1.4 years
Government Securities Money
Market Mutual funds 159,162 159,162 0.28% Not Rated 2 n/a n/a
LAIF 6,213,877 - 6,213,877 10.93% Not Rated n/a 1 n/a
Total investments 56,869,287
Cash Deposit with Banks 18,955,224
Money Market Accounts
Cash on hand at Town 4,200
46,698
1,967,497
56,869,287 100.00%
19,001,922
1,967,497
4,200
Town Cash and Investments $ 75,828,711 $ 2,014,195 $ 77,842,906
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.
Cash and Investments available for operations
Restricted cash and investments
Total cash and investments
NOTE 3 - LONG-TERM NOTES RECEIVABLE
Fiduciary
Total Town Funds Total
$ 73,636,226 $ 2,192,485 $ 75,828,711
46,698 1,967,497 2,014,195
$ 73,682,924 $ 4,159,982 $ 77,842,906
The Town had the following long-term notes receivable as of June 30, 2017:
Dscription Interest Rate Maturity Balance
General Fund:
Rehab Loan to Charities
Total General Fund
Community Development Block Grant Fund (CDBG):
Housing Conservation Loans
Total CDBG
Various
Various $ 159,000
159,000
0-5% Various 78,752
78,752
Total Long Term Notes Receivable - Government -wide Statement of Net Position 237,752
Successor Agency Affordable Housing
Project Match Various Various 563,761
Total Long Term Notes Receivable $ 801,513
64
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
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, 2017, 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.
Transfers - With Council approval resources may be transferred from one fund to another. Transfers routinely
reimburse funds that have made an expenditure on behalf of another fund. Transfers may also be made to 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, 2017 were
as follows:
Transfer In Transfer Out
General Fund $ 313,825 $ 7,298,187
Appropriated Reserve Fund 7,593,867 202,905
Non -major Gov't Funds - 110,920
Internal Service Funds - 295,680
Total Transfers $ 7,907,692 $ 7,907,692
65
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
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, 2016 and Additions Retirements June 30, 2017
Capital Assets not being Depreciated
Land $ 20,333,684 $
Construction in Progress 3,220,930
Total Capital Assets not being Depreciated
Capital Assets being Depreciated
Buildings and Improvements
Equipment & Vehicle
Infrastructure - All Other
Infrastructure - Streets
Total Capital Assets being Depreciated
3,569,657 (1,161,570)
23,554,614 3,569,657
28,818,259
10,522,613
22,138,795
54,871,196
1,221,348
583,629
298,178
1,884,861
116,350,863 3,988,016
$ 20,333,684
5,629,017
1,161,570) 25,962,701
(217,069)
36,111
30,039,607
10,889,173
22,473,084
56,756,057
180,958) 120,157,921
Less Accumulated Depreciation for:
Buildings and Improvements 6,185,389 594,009 6,779,398
Equipment & Vehicle 7,586,270 576,460 (214,978) 7,947,752
Infrastructure - All Other 4,253,985 737,960 4,991,945
Infrastructure - Streets 28,495,978 1,639,897 30,135,875
Total accumulated depreciation
Net Capital Assets being Depreciated
Governmental Activity Capital Assets, Net
46,521,622 3,548,326
69,829,241 439,690
214,978) 49,854,970
34,020 70,302,951
$ 93,383,855 $ 4,009,347 $ (1,127,550) $ 96,265,652
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:
Govern menta I Acti vi ti es
Depreciation
Expense
General Government $ 134,689
Public Safety 388,088
Parks & Public Works 2,499,755
Community Services 44,601
Li bra ry 391,339
Sanitation 89,854
Total Governmental Activities $ 3,548,326
66
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 5 - CAPITAL ASSETS, CONTINUED
Changes in the RDA Successor Agency trust fund capital assets during the fiscal year are shown as follows:
Balance at
June 30, 2016
Adjustments Transfers and Balance at
and Additions Retirements June 30, 2017
Capital Assets not being Depreciated
Land $ 5,257,422 $
Total Capital Assets not being Depreciated
Capital Assets being Depreciated
Buildings and Improvements
Total Capital Assets being Depreciated
Less Accumulated Depreciation for:
Buildings and Improvements 2,237,239
Total accumulated depreciation 2,237,239
Net Capital Assets being Depreciated 1,830,469
Governmental Activity Capital Assets, Net
$ $ 5,257,422
5,257,422 5,257,422
4,067,708 - - 4,067,708
4,067,708 - - 4,067,708
NOTE 6 - LONG-TERM OBLIGATIONS
101,692 - 2,338,931
101,692 - 2,338,931
(101,692) - 1,728,777
$ 7,087,891 $ (101,692) $ - $ 6,986,199
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, 2017:
Beginning Due Within One Due in More Than
Long Term Debt Interest Rate Maturity Date Original Issue Balance Deletion Ending Balance Year One Year
2002 COP 2.5-5% 2031 $ 10,725,000 $ 7,435,000 $ 320,000 $ 7,115,000 $ 335,000 $ 6,780,000
2010 COP 2.5-4.25% 2028 15,675,000 12,415,000 745,000 11,670,000 770,000 10,900,000
Subtotal COP 26,400,000 19,850,000 1,065,000 18,785,000 1,105,000 17,680,000
Premiums 735,095 527,165 37,655 489,510 489,510
Total Long -Term Debt $ 27,135,095 $ 20,377,165 $ 1,102,655 $ 19,274,510 $ 1,105,000 $ 18,169,510
67
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 6 - LONG-TERM OBLIGATIONS, CONTINUED
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.
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 (collectively the "COPs")
as of June 30, 2017, were as follows:
Fiscal Year
EndedJune30, Principal Interest Total
2018 $ 1,105,000 $ 809,739 $ 1,914,739
2019 1,150,000 759,073 1,909,073
2020 1,195,000 710,024 1,905,024
2021 1,250,000 658,494 1,908,494
2022 1,300,000 599,850 1,899,850
2023-2027 7,430,000 2,070,788 9,500,788
2028-2032 5,355,000 486,475 5,841,475
Total COP Debt Service $18,785,000 $ 6,094,443 $ 24,879,443
The Successor Agency must maintain a required amount of cash and investments with the trustee under the
terms of the COPs issues. These funds are pledged as reserves to be used if the Successor Agency fails to meet
its obligations under the COPs issue and totaled $1,967,497 as of June 30, 2017. The California Government
Code requires these funds to be invested in accordance with Town ordinance, bond indentures or State
statues. All these funds have been invested as permitted under the Code.
68
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
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,
2017.
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.
As of June 30, 2017, fund balances were classified as follows:
Beginning
Balance
Reclassifications
Reclassified
Beginning
Balance
Additions
Deletions Ending Balance
Restricted for
Capital Outlay $ 6,200,681 $ $ 6,200,681 $ - $ (772,617) $ 5,428,064
Repairs and Maintenance 185,333 185,333 14,310 - 199,643
Committed to:
Budget Stabilization 6,621,808 (1,984,402) 4,637,406 332,441 - 4,969,847
Catastrophic 4,637,406 - 4,637,406 332,441 - 4,969,847
CaIPERS/OPEB Reserve 300,000 3,788,913 4,088,913 300,000 (1,000,000) 3,388,913
Almond Grove Street Project 12,155,973 12,155,973 (71) 12,155,902
Assigned to:
Open Space 562,000 - 562,000 - - 562,000
Parking 1,460,210 - 1,460,210 - - 1,460,210
Sustainability 140,553 - 140,553 - - 140,553
Strategic Planning 2,600,000 2,600,000 2,600,000
Capital Projects 13,473,231 - 13,473,231 1,037,130 - 14,510,361
Carryover Encumbrances 99,284 - 99,284 - (64,432) 34,852
Comcast PEG 50,000 - 50,000 - - 50,000
Compensated Absences 2,089,843 - 2,089,843 350,327 - 2,440,170
Special Revenue Fund 179,040 - 179,040 2,507 - 181,547
Unassigned - - - - - -
Total Fund Balance -API Governmental Funds
Restricted
$ 50,755,362 $ 1,804,511 $ 52,559,873 $ 2,369,156 $ (1,837,120) $ 53,091,909
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.
69
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 8 - FUND BALANCES, CONTINUED
Committed
Stabilization Arrangements
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.
PERS Unfunded Liability committed fund balance will be used to fund net pension liabilities for the Town's
Miscellaneous and Safety pension plans administered by CaIPERS.
Almond Grove Street Project committed fund balance will be 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.
Postemployment Medical assigned fund balance will be used to aid in funding actuarially determined
requirements for retiree medical costs.
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.
Strategic Planning assigned fund balance will be used to fund Town Council identified strategic priorities
including infrastructure, unfunded liability reduction, and strategic operating budget allocations based upon
Town Council direction.
70
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 8 - FUND BALANCES, CONTINUED
Productivity Enhancements assigned fund balance will be used to fund requests that result in streamlining or
improving existing service levels.
Capital Projects assigned fund balance will be used for the acquisition and construction of capital facilities.
Carryover Encumbrances assigned fund balance will be used for encumbered items re -appropriated in the
following year.
Comcast PEG assigned fund balance will be used to fund capital improvements linked to the televising of
council and planning commission meetings.
Compensated Absences assigned fund balance will be used for vacation and sick -pay benefits owed to
employees as of June 30, 2017 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 fund.
NOTE 9 - EMPLOYEES' RETIREMENT PLAN
(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 (CaIPERS), 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. CaIPERS 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 CaIPERS
website.
Benefits Provided - CaIPERS 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
71
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 9 - EMPLOYEES' RETIREMENT PLAN, CONTINUED
(a) General Information about the Pension Plan, Continued
Benefit, Lump Sum, 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, 2017, are summarized as follows:
Hire Date
Benefit Formula
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
Employees Covered
Miscellanious
Tier 1
Prior to
September 15,
2012
2.5% @ 55
5 years
Monthly for Life
55
2% to 2.5%
8.00%
26.956%
Tier 2
Prior to
September 15,
2012 and
before January
1, 2013 with
reciprocity or
member of
2% @ 60
5 years
Monthly for Life
60
1% to 2.5%
7.00%
12.00%
PEPRA
On or after
January 1, 2013
2% @ 62
5 years
Monthly for Life
62
1.5% to 2.5%
6.50%
12.00%
N/A
Safety
Tier 1 PEPRA
Before January
1, 2013 with
reciprocity or
member of
CaIPERS
3% @ 50
5 years
Monthly for Life
62
3%
9.00%
21.23%
$755,232
On or after
January 1, 2013
2.7% @ 57
5 years
Monthly for Life
62
2% to 2.7%
12.25%
12.821%
N/A
At June 30, 2016, the following employees were covered by the benefit terms for the Miscellaneous and Safety
Plans:
Active
Transferred
Separated
Retired
Total
Miscellaneous
112
91
80
216
Safety
39
14
2
71
499 126
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 CaIPERS. The actuarially determined rate is the
estimated amount necessary to finance the cost of benefits earned by employees during the year, with an
additional amount to finance any unfunded accrued liability. The Town is required to contribute the difference
between the actuarially determined rate and the contribution rate of employees.
72
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 9 - EMPLOYEES' RETIREMENT PLAN, CONTINUED
(a) General Information about the Pension Plan, Continued
(b) Net Pension Liability
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.
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, 2016, using an annual
actuarial valuation as of June 30, 2015 rolled forward to June 30, 2016 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 dates June 30, 2015 and June
30, 2016 were as follows:
Proportion - June 30, 2015
Proportion - June 30, 2016
Proportionate
Share of Net
0.14860%
0.22394%
Change - Increase (Decrease) 0.07534%
A summary of principal assumptions and methods used to determine the net pension liability is
shown on the following page.
73
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 9 - EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, continued
Actuarial Assumptions - The total pension liabilities in the June 30, 2014 actuarial valuations were
determined using the following actuarial assumptions:
Valuation Date
Measurement Date
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate
Inflation
Salary Increases
Investment Rate of Return (1)
Mortality (2)
Post Retirement Benefit Increase
(1)
(2)
(3)
Miscellaneous Agent
Multiple Employer Plan
June 30, 2015
June 30, 2016
Safety Cost Sharing Plan
June 30, 2015
June 30, 2016
Entry -Age Normal Cost Method
7.65% 7.65%
2.75% 2.75%
Varies by Entry Age and Service
7.50% 7.50%
Derived using CaIPERS' Membership Data for all Funds
Contract COLA up to 2.75% until Purchasing Power
Protection Allowance Floor on Purchasing Power applies,
2.75% thereafter
Depending on age, service, and type of employment
Net of pension plan administrative expenses
The mortality table used was developed based on CaIPERS' specific data. The table
incudes 20 years of mortality improvements using Society of Actuaries Scale BB. For
more details on this table, please refer to the 2014 experience study report.
The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2015
valuation were based on the results of a January 2014 actuarial experience study for the period 1997 to 2011.
Further details of the Experience Study can found on the CaIPERS website.
Discount Rate - The discount rate used to measure the total pension liability was 7.65% for the Plan. To
determine whether the municipal bond rate should be used in the calculation of a discount rate for each
plan, CaIPERS stress tested plans that would most likely result in a discount rate that would be different
from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets.
Therefore, the current 7.65 percent discount rate is adequate and the use of the municipal bond rate
calculation is not necessary. The long term expected discount rate of 7.65 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 CaIPERS website.
74
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 9 - EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, Continued
According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without
reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in
this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15
basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this
lower discount rate has resulted in a slightly higher Total Pension Liability and Net Pension Liability. CaIPERS
checked the materiality threshold for the difference in calculation and did not find it to be a material
difference.
CaIPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management
(ALM) review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will
require Board action and proper stakeholder outreach. For these reasons, CaIPERS expects to continue using a
discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18
fiscal year. CaIPERS will continue to check the materiality of the difference in calculation until such time as we
have changed our methodology. The long-term expected rate of return on pension plan investments was
determined using a buildingblock method in which best -estimate ranges of expected future real rates of return
(expected returns, net of pension plan investment expense and inflation) are developed for each major asset
class.
In determining the long-term expected rate of return, CaIPERS 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 returns were calculated over the short-term (first 10 years) and
the long-term (11-60 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 rounded down to the
nearest one quarter of one percent.
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.
Asset Class
New
Strategic Real Return Real Return
Allocation Years 1 - 10(a) Years 11+(b)
Global Equity 51.00% 5.25% 5.71%
Global Fixed Income 20.00% 0.99% 2.43%
Inflation Sensitive 6.00% 0.45% 3.36%
Private Equity 10.00% 6.83% 6.95%
Real Estate 10.00% 4.50% 5.13%
Infrastructure and Forestland 2.00% 5.60% 5.09%
Liquidity 1.00% -0.55% -1.05%
Total 100%
(a) An expected inflation of 2.5% used for this period.
(b) An expected inflation of 3.0% used for this period.
75
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 9 - EMPLOYEES' RETIREMENT PLAN, CONTINUED
(c) Changes in the Net Pension Liability
The change in the Net Pension Liability for the Miscellaneous Plan follows:
Miscellaneous Plan
Total Fiduciary Net
Pension Net Pension
Liability Pension Liability
Beginning Balance $ 89,600,121 $ 66,390,878 $ 23,209,243
Service Costs
Interest on Total Pension Liability
Changes of Assumptions
Difference Between Actual and Expected Experience
Net Plan to Plan Resource Movement
Employer Contributions
Employee Contributions
Net Investment Income
Employee Contribution Refunds and Benefit Payments
Administrative Expenses
Other Miscellaneous Income
1,560,679
6,697,247
(357,870)
(4,953,756)
Net Changes 2,946,300
1,560,679
6,697,247
(357,870)
(28,866) 28,866
2,223,782 (2,223,782)
691,770 (691,770)
369,185 (369,185)
(4,953,756) -
(40,462) 40,462
(1,738,347) 4,684,647
Ending Balance $ 92,546,421 $ 64,652,531 $ 27,893,890
For the measurement period ended June 30, 2016, the Town contributed $1,586,129 for the Safety Cost
Sharing Plan.
As of June 30, 2017, the Town reported net pension liabilities for its proportionate share of the net pension
liability of the Safety Cost Sharing Plan of $19,377,843.
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:
76
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 9 - EMPLOYEES' RETIREMENT PLAN, CONTINUED
(c) Changes in the Net Pension Liability, Continued
Miscellaneous Agent Multiple
Employer Plan
1% Decrease
Net Pension Liability $
Current Discount Rate
Net Pension Liability $
1% Increase
Net Pension Liability $
Safety Cost Sharing Plan Total Plans
39,567,384 $
27,893,890 $
18,225,532 $
29,851,702 69,419,086
19,377,843 47,271,733
10,779,878 29,005,410
Pension Plan Fiduciary Net Position — Detailed information about the pension plan's fiduciary net position is
available in a separately issued CaIPERS financial report.
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2017, the Town recognized pension expense of $1,982,015for the Miscellaneous
Agent Multiple Employer Plan and $2,548,057 for the Safety Cost Sharing Plan.
At June 30, 2017, 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:
Pension contributions subsequent to
measurement date
Changes in assumptions
Difference between expected and actual experiences
Change in employer's proportion and differences between
the employer's contri buti ons and the employer's
proportionate share of contri butions
Net differences between projected and actual
earnings on plan investments
Miscellaneous
Deferred
Outflows of Deferred Inflows
Resources of Resources
$ 2,407,496
3,506,890
72,054
224,893
Totals $ 5,914,386 $ 296,947
77
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 9 - EMPLOYEES' RETIREMENT PLAN, CONTINUED
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
$2,407,496 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,
2018. 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
2017
2018
2019
2020
2021
Thereafter
Deferred
Outflows/(Inflows)
of Resources
207,641
439,522
1,638,399
924,381
At June 30, 2017, 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 Deferred
Outflows of Inflows of
Resureces Resources
Pension contributions subsequent to
measurement date $ 1,738,150
Changes in assumptions 545,070
Difference between expected and actual experiences 125,014
Changes in employer's proportion 3,536,301 4,511,616
Differences between the employer's contributions and
the employer's proportionate share of contributions 1,799,668 299,466
Net differences between projected and actual
earnings on plan investments 2,677,904
Totals $ 9,752,024 $ 5,481,167
$1,738,150 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 end June
30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of
resources related to pensions will be recognized as pension expense as follows:
78
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 9 - EMPLOYEES' RETIREMENT PLAN, CONTINUED
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
Deferred
Fiscal Year Ended June Outflows/(Inflows)
30 of Resources
2018 $ (305,659)
2019 79,097
2020 2,062,132
2021 697,137
(e) Payable to the Pension Plan
At June 30, 2017, the Town reported a payable of $63,003 and $55,421 for the outstanding amount of
contributions to the Miscellaneous Agent Multiple Employer Plan and the Safety Cost Sharing Plan for the year
ended June 30, 2017.
NOTE 10 - OTHER POSTEMPLOYMENT BENEFITS
The Town recognizes the cost of postemployment healthcare in the year when employee services are received,
reports the accumulated liability from prior years, and provides information useful in assessing potential
demands on the Town's future cash flows based on GASB Statement No. 45, Accounting and Financial
Reporting by Employers for Postemployment Benefits Other Than Pensions (GASB 45). Because the Town
adopted the requirements of GASB 45 prospectively, recognition of the liability accumulated from prior years
will be phased in over ten years, commencing with the 2009 liability.
Plan Description - The Town makes contributions to California Employer's Retiree Benefit Trust (CERBT), an
agent multiple -employer defined benefit healthcare plan administered by the PERS. 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.
Funding Policy - 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 year ended June 30, 2017,
the Town contributed $3,640,357 to the plan. All related obligations are paid from the Town's General Fund.
Annual OPEB Cost and Net OPEB Obligation - As of June 30, 2017 and for the year then ended, the Town's Net
OPEB Obligation (NOO) and Annual OPEB Cost were as follows:
79
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 10 - OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
Trend Information
Year
NOO as of June 30, 2016
Annual Required Contribution
Interest on NOO
NOO adjustment
Net annual OPEB cost
Contributions made (includes bi
NOO as of June 30, 2017
$ 2,694,576
2,067,000
195,357
(190,161)
2,072,196
(3,869,169)
$ 897,603
Actuarial
annual OPEB Employer Percentage Net OPEB
Cost Contribution Contributed Obligation
2015 $ 1,323,856 $ 2,159,470 163% $ 3,212,390
2016 1,925,610 2,443,424 127% 2,694,576
2017 2,072,196 3,869,169 187% 897,603
Plan Actuarial Value and Funding Progress
As of June 30, 2015, the plan was funded as follows:
Actuarial accrued liability (AAL)
Value of plan assets
Unfunded actuarial accrued liability (UAAL)
Funded ratio (value of plan assets/AAL)
Projected covered payroll (active Plan Members)
UAAL as a percentage of covered payroll
$ 20,977,000
8,238,000
$ 12,739,000
39.27%
$ 15,059,000
84.59%
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 Tong -term perspective of the calculations.
In the June 30, 2015 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial
assumptions used in the valuation are listed on the following page.
80
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 10 - OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
1. Ultimate investment return of 7.25% (upward trend 0.25%-0.3% per year to 7.25% in FY 18/19)
2. Projected salary increases of 3.25%.
3. The annual healthcare cost trend ultimate rate is 5%. The select rates were 7.5%-7.8% depending on plans
but were reduced to the ultimate rate in 2021.
4. Total inflation is assumed to increase 3% annually.
5. Amortization method: Level percentage of payroll.
6. Amortization period:
a. 30-year closed period for initial unfunded actuarial accrued liability (UAAL) (22 years remaining as
of June, 30, 2015);
b. 20-year closed period for method, assumption, and plan changes;
c. 15-year closed period for gains and losses; and
d. Maximum 30 year combined period.
7. Actuarial method for valuing assets: Investment gains and losses spread over a 5-year rolling period, not
less than 80% or more than 120% of market value.
Funded Status per Valuation Date (Required Supplementary Information)
Valuation Entry Age
Date Accrued Liability
Unfunded
Actuarial (overfunded)
Value of Assets Liabilities
Funded
Ratio
Annual Covered
Payroll
Unfunded
(Overfunded)
Liability as%of
Payrol I
6/30/2011 $ 22,121,000
6/30/2013 19,211,000
6/30/2015 20,977,000
NOTE 11- RISK MANAGEMENT
$ 1,947,000
4,652,000
8,238,000
$ 20,174,000
14,559,000
12,739,000
8.80% $ 14,123,000
24.20% 14,440,000
39.27% 15,059,000
142.80%
100.80%
84.59%
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.
Association of Bay Area Governments PLAN Corporation (ABAG) - The Town participates in ABAG, which
covers general liability claims in the amount up to $5,000,000 plus $15,000,000 in excess liability for total
coverage of $20,000,000 per occurrence. The Town has a deductible or uninsured liability of up to $50,000 per
claim. ABAG also provides all risk property coverage of $100,000,000, excluding flood and earthquake
coverage. The Town has a $5,000 deductible for property damage and a $10,000 deductible for vehicle
damage. Once the Town's deductible is met, ABAG becomes responsible for payment of all claims up to the
limit. Financial statements may be obtained from ABAG at 375 Beale Street, San Francisco, CA 94105.
81
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 11- RISK MANAGEMENT, CONTINUED
Local Agency Workers' Compensation Joint Powers Authority (LAWCX) - The Town is a member of LAWCX for
workers compensation claims coverage. 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
$1,000,000. For claims greater than $1,000,000, 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.
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, 2017:
Claims payable balance - June 30, 2015
Claims incurred
Claims paid
Claims payable balance - June 30, 2016
Claims incurred
Claims paid
Claims payable balance - June 30, 2017
Workers'
Compensation
Internal
Service Fund
$ 869,224
1,059,523
(894,681)
1,034,066
716,153
(650,483)
Self -
Insurance
Internal
Service Fund
$ 132,848
474,639
(488,015)
119,472
229,151
(99,967)
$ 1,099,735 $ 248,656
NOTE 12 - REDEVELOPMENT AGENCY DISSOLUTION
Total
$ 1,002,072
1,534,162
(1,382,696)
1,153,538
945,304
(750,450)
$ 1,348,391
On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 ("the Bill") that provides for
the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting
entity of the Town that previously had reported a redevelopment agency as a blended component unit.
In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December
29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal
entity as of February 1, 2012.
In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay
the estimated annual installment payments on enforceable obligations of the former redevelopment agency
until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have
been liquidated.
82
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 13 - COMMITMENTS AND CONTINGENCIES
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, 2017, the Successor Agency trust fund reported a net deficit of $8,450,357.
Encumbrances - As of June 30, 2017, the town had the following encumbered balances that were carried into
the next fiscal year:
General Fund $ 34,852
Appropriated Reserves Fund 9,740,512
Non -major Governmental Funds 75,621
Total Encumbrances $ 9,850,985
NOTE 14 - 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.
The improvement plan, as identified in the agreement, called for approximately $24 million to be granted to
the Town for the following projects:
a. Expansion and improvement of current and new downtown parking
b. Highway 9 improvements from Highway 17 to Monte Sereno
c. Almond Grove Area street, sidewalk and other improvements
d. Downtown Los Gatos gateways, signage, banners and art
e. Storm drain, retaining wall, street and other improvements
f. 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.
83
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 14 - TOWN/SUCCESSOR AGENCY GRANTS, COOPERATIVE AGREEMENTS, CONTINUED
Affordable Housing Cooperative Agreement
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. Development of affordable housing at 224 Main St.
b. Development of affordable housing at Dittos Lane
c. Partnership with Senior Housing Solutions for the creation of senior housing in Los Gatos
d. Partnerships for the conversion of existing residential developments dedicated to affordable housing
e. Grants to the Santa Clara County Housing Trust for the development of affordable housing.
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.
NOTE 15 - SUBSEQUENT EVENT CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM LOWERS
DISCOUNT RATE
In an effort to enhance the long terms fiscal sustainability of its pension plans state-wide, the California Public
Employees' Retirement System (CaIPERS) Board of Administration voted on December 21, 2016 to lower the
discount rate from 7.5 percent to 7.0 percent over the next three years. The discount rate changes are to be
implemented over three fiscal years in the following step reductions:
• FY 2017-2018: 7.375%
• FY 2018-2019: 7.25%
• FY 2019-2020: 7.00%
Lowering the discount rate, also known as the assumed rate of return, is expected to result in increased
employer required contributions for Town's miscellaneous and safety plans for normal costs and the payment
related for amortization of the Town's unfunded actuarial liabilities. Active members hired after January 1,
2013, under the Public Employees' Pension Reform Act will also see their contribution rates rise. Normal cost is
the cost of pension benefits for one year.
The three-year reduction of the discount rate will result in average employer rate increases of about 1 percent
to 3 percent of normal cost as a percent of payroll for most miscellaneous retirement plans, and a 2 percent to
5 percent increase for most safety plans. Additionally, CaIPERS reported that the Town can expect a 30 to 40
percent increase in their current unfunded accrued liability payments.
84
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2017
NOTE 15 - SUBSEQUENT EVENT CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM LOWERS
DISCOUNT RATE, CONTINUED
No actuarial valuations or future employer contribution rates are available from CALPERS at this time. The
Town estimates the potential financial impact beginning in fiscal year 2018/19 is that barring unanticipated
asset valuation gains, the annual Town employer pension contributions may rise above current five year
forecast projections in a range from $355,000 to $950,000 per year based upon the CALPERS press release
projections.
NOTE 16 — PRIOR PERIOD ADJUSTMENTS
The Town recorded prior period adjustments to adjust sales tax accrual, remove the CalPERS Deposit account,
remove custodial account amortization for investments, and remove the unavailable revenue relating to loans
receivable in the General fund and Community Development fund.
Government -wide Statements
Prior Period Adjustments
Net Position, as Net Position
Previously Sales Tax CaIPERS Custodial as
Reported Accrual Deposits Amortization Restated
Government -Wide
Statements
Governmental
Activities $ 112,514,506 $ 372,050 $ 1,804,511 $ 47,197 $ 114,738,262
Fund Financial Statements
Governmental Funds
Prior Period Adjustments
Fund Balance Fund Balance
as Previous Sales Tax CaIPERS Custodial Unavailable as
Reported Accrual Deposits Amortization Revenue Restated
General Fund $ 29,574,272 $ 372,050 $ 1,804,511 $ 47,197 $ 159,000 $ 31,957,030
Community Development Fund
Special Revenue Fund $ 70,010 $ - $ $ $ 98,660 $ 168,670
85
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86
Required Supplementary Information
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
Schedule of Changes in the Net Pension Liability and Related Ratios - CalPERS Misc. Agent -Multiple
Employer Plan
Meausrement Date 6/30/2016 6/30/2015 6/30/2014
Total Pension Liability
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)
1,560,679 $ 1,491,925 $ 1,579,547
6,697,247 6,483,032 6,268,015
(357,870)
(623,495)
(1,513,132)
(4,953,756) (4,748,786) (4,241,487)
2,946,300 1,089,544 3,606,075
89,600,121 88,510,577 84,904,502
92,546,421 $ 89,600,121 $ 88,510,577
Plan fiduciary net position
Contributions - employer 2,223,782 1,941,765 1,796,079
Contributions - employee 691,770 679,796 668,167
Plan to plan resource movement (28,866) 22,561 -
Projected Earnings on Plan Investments 4,328,173
Recognized Difference between Projected and Actual Earning 1,166,344
Net Investment Income 369,185 1,470,873
Net Difference between Projected and Actual Earnings 4,665,374
Benefit payments, including refunds of employee contribution (4,953,756) (4,748,786) (4,241,487)
Administrative Expenses (40,462) (74,706) Net change in plan fiduciary net position (1,738,347) (708,497) 8,382,650
Plan fiduciary net position - beginning 66,390,878 67,099,375 58,716,725
Plan fiduciary net position - ending (b) $ 64,652,531 $ 66,390,878 $ 67,099,375
Net pension liability - ending (a) - (b) $ 27,893,890 $ 23,209,243 $ 21,411,202
Plan fiduciary net position as a percentage of the
total pension liability
Covered payroll
Net pension liability as a percentage of covered
payroll
69.86% 74.10% 75.81%
9,198,318 8,487,940 8,406,315
303.25% 273.44% 254.70%
Notes to Schedule:
Benefit changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred
after June 30, 2014. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit.
Changes in assumptions: For 2015, the discount rate was changed from 7.5% (net of administrative expense) to 7.65%.
*Fiscal year 2015 was the 15t year of implementation, therefore only three years are shown.
88
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
Schedule of Proportionate Share of Net Pension Liability - Ca1PERS Safety Cost -Sharing Plan
Measurement Date
6/30/2016 6/30/2015 6/30/2014
Proportion of the net pension liability 0.22394% 0.14860% 0.28588%
Proportionate share of the net pension liability $ 19,377,843 $ 10,199,904 $ 17,788,690
Covered payroll $ 5,022,498 $ 4,897,104 $ 4,916,535
Proportionate share of the net pension liability
as percentage of covered payroll 385.82% 208.28% 361.81%
Plan fiduciary net position as a percentage of
of the total pension liability 74.06% 78.40% 75.66%
Notes to Schedule:
Benefit changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred
after June 30, 2014 as they have minimal cost impact. This applies for voluntary benefit changes as well as any offers of Two Years
Additional Service Credit.
Changes in assumptions: For 2015, the discount rate was changed from 7.5% (net of administrative expense) to 7.65%.
*Fiscal year 2015 was the 1st year of implementation, therefore only three years are shown.
89
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
Schedule of Pension Plan Contributions - Miscellaneous Agent -Multiple Employer Plan
Fiscal Year 2017 2016 2015
Actuarially Determined Contribution
Contributions in Relation to the Actuarially
Determined Contribution
Contribution Deficiency (Excess)
$ 2,407,496 $ 2,223,782 $ 1,941,765
(2,407,496) (2,223,782) (1,941,765)
$
Covered Payroll 9,190,767
$ - $
9,198,318 8,487,940
Contributions as a Percentage of Covered
Payroll 26.19% 24.18% 22.88%
*Fiscal year 2015 was the 1st year of implementation, therefore only three years are shown.
90
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
Schedule of Pension Plan Contributions - Safety Cost -Sharing Plan
Fiscal Year 2017 2016 2015
Actuarially Determined Contribution
Contributions in Relation to the Actuarially
Determined Contribution
Contribution Deficiency (Excess)
$ 1,738,150 $ 1,586,129 $ 1,999,757
(1,738,150) (1,586,129) (1,999,757)
$
Covered Payroll 4,941,138
5,022,498 4,897,104
Contributions as a Percentage of Covered
Payroll 35.18% 31.58% 40.84%
*Fiscal year 2015 was the 1st year of implementation, therefore only three years are shown.
91
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
Other Post -Employment Benefits (OPEB)
Schedule of funding progress for the pass three actuarial valuation is presented below:
Valuation Entry Age
Date Accrued Liability
Actuarial
Value of Assets
Unfunded
(overfunded)
Liabilities
Funded Annual Covered
Ratio Payroll
Unfunded
(Overfunded)
Liability as%of
Payroll
6/30/2011 $ 22,121,000
6/30/2013 19,211,000
6/30/2015 20,977,000
$ 1,947,000
4,652,000
8,238,000
$ 20,174,000
14,559,000
12,739,000
8.80% $ 14,123,000
24.20% 14,440,000
39.27% 15,059,000
142.80%
100.80%
84.59%
92
Supplementary Information
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
MAJOR GOVERNMENT FUND 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.
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. 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.
94
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, 2017
Original Final
Budget Budget
Actual
Variance
Positive
(Negative)
REVENUES
Licenses & permits $ 80,000 $ 80,000 $ 149,763 $ 69,763
Intergovernmental 160,000 190,307 193,040 2,733
Charges for services 471,000 485,693 598,614 112,921
Interest 20,000 20,000 21,335 1,335
Other 992,000 950,474 523,474 (427,000)
Total Revenues
EXPENDITURES
Capital outlay
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out)
1,723,000 1,726,474
12,897,748 5,332,458
12,897,748 5,332,458
(11,174,748) (3,605,984)
9,859,973
(209,808)
10,490,067
(209,808)
1,486,226 (240,248)
5,391,206 (58,748)
5,391,206 (58,748)
(3,904,980) (298,996)
7,593,867
(202,905)
(2,896,200)
6,903
Total Other Financing Sources (Uses) 9,650,165 10,280,259 7,390,962 (2,889,297)
CHANGE IN FUND BALANCE $ (1,524,583) $ 6,674,275 3,485,982 $ (3,188,293)
BEGINNING FUND BALANCE 14,616,049
ENDING FUND BALANCE $ 18,102,031
95
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2017
ASSETS
Cash & Investments
Receivables:
Accounts
Intergovernmental Receivable
Long Term Notes Receivable
Total Assets
CAPITAL PROJECTS FUNDS
Storm Construction
Drains Tax
Funds Fund
Gas
Tax
Fund
Total
Capital Community
Projects Development
Funds Fund
$ 1,807,691 $ 2,929,116 $ 693,506 $ 5,430,313 $ 94,412
58,344
78,752
$ 1,807,691 $ 2,929,116 $ 693,506 $ 5,430,313 $ 231,508
LIABILITIES
Accounts Payable $ 2,249 $ $ $ 2,249 $
Accrued Payroll and Benefits - -
Unearned revenue - - - -
64,855
Total Liabilities 2,249 - - 2,249 64,855
FUND BALANCE
Restricted for:
Repairs and Maintenance
Capital Projects
Assigned for:
Special Revenue Funds
1,805,442 2,929,116
693,506 5,428,064
166,653
Total Fund Balances 1,805,442 2,929,116 693,506 5,428,064 166,653
Total Liabilities and Fund Balances $ 1,807,691 $ 2,929,116 $ 693,506 $ 5,430,313 $ 231,508
(Continued)
96
SPECIAL REVENUE FUNDS
Total
Non -Point Total Nonmajor
Source Lighting and Special Revenue Governmental
Maintenance Landscaping Funds Funds
$ (124,387) $ 198,889 $ 168,914 $ 5,599,227
146,181
4,133
146,181 146,181
62,477 62,477
78,752 78,752
$ 21,794 $ 203,022 $ 456,324 $ 5,886,637
$ 2,346 $ 3,379 $ 5,725 $
4,554 - 4,554
64,855
6,900 3,379 75,134
199,643 199,643
7,974
4,554
64,855
77,383
199,643
5,428,064
14,894 - 181,547 181,547
14,894 199,643 381,190 5,809,254
$ 21,794 $ 203,022 $ 456,324 $ 5,886,637
(Concluded)
97
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
REVENUES
Property Taxes
Other Taxes
License and permits
Intergovernmental
Charges for Services
Interest
Other
CAPITAL PROJECTS FUNDS
Storm Construction Gas Total Community
Drain Tax Tax Capital Projects Development
Funds Fund Fund Funds Fund
$ - $ - $ - $ - $
23,165 - 23,165
135,468 - - 135,468
604,975 604,975
14,670 24,450
6,496 45,616
9,280
3,994
Total Revenues 150,138 47,615 611,471 809,224 13,274
EXPENDITURES
Current:
Parks and Public Works
Sanitation and Other
Capital Outlay
Total Expenditures
12,750
1,463,078 1,475,828
12,750 - 1,463,078
15,291
1,475,828 15,291
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 137,388 47,615 (851,607) (666,604) (2,017)
OTHER FINANCING SOURCES (USES)
Transfers (out) - - (106,000) (106,000)
Total Other Financing Sources (Uses) - - (106,000) (106,000)
Changes in Fund Balances 137,388 47,615 (957,607) (772,604) (2,017)
Fund Balances - Beginning of year, as restated 1,668,054 2,881,501 1,651,113 6,200,668 168,670
Fund Balances - End of year $ 1,805,442 $ 2,929,116 $ 693,506 $ 5,428,064 $ 166,653
(Continued)
98
SPECIAL REVENUE FUNDS
Non -Point Total
Source Lighting and Special Revenue
Maintenance Landscaping Funds
$
30,780
341,846
Total
$ 38,369 $ 38,369 $ 38,369
23,165
30,780 166,248
9,280 614,255
341,846 341,846
1,570 1,570 47,186
3,994 3,994
372,626 39,939
425,839 1,235,063
20,709 36,000 36,000
466,762 - 466,762 466,762
- 1,475,828
466,762 20,709 502,762 1,978,590
(94,136) 19,230 (76,923) (743,527)
(4,920) (4,920) (110,920)
(4,920) (4,920) (110,920)
(94,136) 14,310 (81,843) (854,447)
109,030 185,333 463,033 6,663,701
$ 14,894 $ 199,643 $ 381,190 $ 5,809,254
(Concluded)
99
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, 2017
REVENUES
Property taxes
Other taxes
License and permits
Intergovernmental
Charges for services
Interest
Other
Total Revenues
EXPENDITURES
Parks and public works
Sanitation and other
Capital outlay
COMMUNITY DEVELOPMENT NON -POINT
BLOCK GRANT SOURCE MAINTENANCE
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
$
70,000
$ - $ - $ - $ - $
30,780 30,780 -
9,280 (60,720) -
336,684 341,846 5,162
3,994 3,994
70,000 13,274
(56,726) 367,464
15,291 (15,291)
Total Expenditures - 15,291
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
70,000 (2,017)
372,626 5,162
- 516,882 466,762 50,120
(15,291) 516,882
(72,017) (149,418)
466,762 50,120
(94,136) 55,282
OTHER FINANCING SOURCES (USES)
Operating transfers (out) - - - - -
Total Other Financing Sources (Uses)
CHANGE IN FUND BALANCE $ 70,000 (2,017) $ (72,017) $ (149,418) (94,136) $ 55,282
BEGINNING FUND BALANCE, AS RESTATED 168,670 109,030
ENDING FUND BALANCE $ 166,653 $ 14,894
(Continued)
100
LIGHTING AND LANDSCAPING
STORM DRAIN FUNDS CONSTRUCTION TAX
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
Budget
$ 37,775 $ 38,369 $ 594 $ - $ - $
30,000
92,500 135,468 42,968
Variance
Positive
Actual (Negative)
$ $
23,165 (6,835)
641 1,570 929 13,380 14,670 1,290 20,000 24,450
38,416
20,250
20,250
18,166
39,939 1,523
20,709 (459)
20,709 (459)
19,230 1,064
(4,920) (4,920)
(4,920) (4,920)
$ 13,246
105,880 150,138
44,258 50,000
12,750 (12,750)
12,750 (12,750)
105,880 137,388
47,615 (6,835)
31,508 50,000 47,615 (2,385)
14,310 $ 1,064 $ 105,880 137,388 $ 31,508 $ 50,000 47,615 $ (2,385)
185,333 1,668,054 2,881,501
$ 199,643 $ 1,805,442 $ 2,929,116
(Continued)
101
GAS TAX TOTALS
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes $ - $ - $ $ 37,775 $ 38,369 $ 594
Other taxes - - - 30,000 23,165 (6,835)
License and permits - - - 123,280 166,248 42,968
Intergovernmental 604,244 604,975 731 674,244 614,255 10,011
Charges for services - - 336,684 341,846 5,162
Interest 1,000 6,496 5,496 35,021 47,186 7,715
Other - 3,994 3,994
Total Revenues
605,244 611,471
6,227 1,237,004
1,235,063 63,609
EXPENDITURES
Parks and public works - 20,250 36,000 (15,750)
Sanitation and other - - 516,882 466,762 50,120
Capital outlay 1,463,077 1,463,078 (1) 1,463,077 1,475,828 (12,751)
Total Expenditures 1,463,077 1,463,078 (1) 2,000,209 1,978,590 21,619
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
(857,833) (851,607)
6,226 (763,205)
OTHER FINANCING SOURCES (USES)
Operating transfers (out) (106,000) (106,000) - (110,920)
Total Other Financing Sources (Uses) (106,000) (106,000) (110,920)
CHANGE IN FUND BALANCE $ (963,833) (957,607) $ 6,226 $ (874,125)
BEGINNING FUND BALANCE, AS RESTATED 1,651,113
(743,527) 19,678
(110,920)
(110,920)
(854,447) $ 19,678
6,663,701
ENDING FUND BALANCE $ 693,506 $ 5,809,254
(Concluded)
102
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
PROPRIETARY FUNDS
INTERNAL SERVICE FUNDS
Internal service funds are used to finance and account for special activities and service performed by a
designed 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.
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.
Stores Fund was established to account for the purchase of photocopy equipment, postage and bulk meter
expenses.
Information Technology Fund was established to account for the replacement of management information
computer systems and components.
Vehicle Maintenance Fund was established to account for preventative maintenance and repair provided
for all Town vehicles and equipment.
Building Maintenance Fund was established to account for preventative maintenance and repair for all
Town buildings.
103
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30, 2017
Equipment Worker's Self Information Vehicle Building
Replacement Comp Insurance Stores Technology Maintenance Maintenance Total
ASSETS
Cash & Investments $ 1,908,901 $ 2,159,114 $ 1,404,277 $ 200,846 $ 3,028,259 $ 519,115 $ 541,819 $ 9,762,331
Restricted Cash & Investments - 46,698 46,698
Receivables:
Accounts 1,589 1,856 42,235 45,680
Materials, Supplies and Deposits 25,020 25,020
Equipment (Net) - - 1,514 1,514
Total Assets 1,910,490 2,205,812 1,404,277 200,846 3,030,115 544,135 585,568 9,881,243
Deferred Outflows of Resources
Pension contribution subsequent to
measurement date - 19,948 28,438 76,597 34,921 55,083 214,987
Pension related amounts 29,057 41,425 111,575 50,867 80,147 313,071
Total Deferred Outflows of Resources - 49,005 69,863 - 188,172 85,788 135,230 528,058
LIABILITIES
Accounts Payable 16,110 15,644 2,286 409 55,661 31,295 103,850 225,255
Accrued Payroll and Benefits 326 3,547 4,762 14,382 7,185 10,250 40,452
Due to Other Governments - 167 167
Claims Payable - 1,099,735 248,656 - - - - 1,348,391
Net Pension Liabilities - 231,120 329,488 - 887,466 404,600 637,781 2,490,455
Total Liabilities 16,436 1,350,046 585,192 409 957,509 443,247 751,881 4,104,720
Deferred Inflows of Resources
Pension related amounts 2,461 3,508 9,448 4,306 6,787 26,510
Total Deferred Inflows of Resources - 2,461 3,508 - 9,448 4,306 6,787 26,510
NET POSITION
Net investment in capital assets 1,514 1,514
Unrestricted 1,894,054 902,310 885,440 200,437 2,251,330 182,370 (39,384) 6,276,557
Total Net Position $ 1,894,054 $ 902,310 $ 885,440 $ 200,437 $ 2,251,330 $ 182,370 $ (37,870) $ 6,278,071
104
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDDED JUNE 30, 2017
Equipment Worker's Self Information Vehicle Building
Replacement Comp Insurance Stores Technology Maintenance Maintenance Total
OPERATING REVENUES
Charges for services $ 381,323 $ 868,527 $ 497,401 $ 130,519 $ 1,091,467 $ 573,865 $ 1,124,537 $ 4,667,639
Interest - 8 - - - - 8
Use of money and property - - - - - 215,093 215,093
Other local taxes - - - - - 23,165 23,165
Other 77,366 157,820 - - 18,894 3,810 60,771 318,661
Total Operating Revenues 458,689 1,026,355 497,401 130,519 1,110,361 577,675 1,423,566 5,224,566
OPERATING EXPENSES
Salaries and benefits 9,921 90,695 164,890 - 474,126 233,624 345,735 1,318,991
Insurance expenses - 272,899 449,442 - - - 722,341
Depreciation expenses - - - - 957 957
Services and supplies 407,039 785,835 133,148 113,210 551,695 242,544 1,010,484 3,243,955
Total Operating Expenses 416,960 1,149,429 747,480 113,210 1,025,821 476,168 1,357,176 5,286,244
Operating Income (loss) 41,729 (123,074) (250,079) 17,309 84,540 101,507 66,390 (61,678)
Transfers (out) (295,680) - - - - - - (295,680)
Net Transfers (295,680) - - - - - - (295,680)
Change in Net Position (253,951) (123,074) (250,079) 17,309 84,540 101,507 66,390 (357,358)
BEGINNING NET POSITION 2,148,005 1,025,384 1,135,519 183,128 2,166,790 80,863 (104,260) 6,635,429
ENDING NET POSITION $ 1,894,054 $ 902,310 $ 885,440 $ 200,437 $ 2,251,330 $ 182,370 $ (37,870) $ 6,278,071
105
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
Equipment Worker's Self Information Vehicle Building
Replacement Comp Insurance Stores Technology Maintenance Maintenance Total
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers $ 457,100 $ 1,026,355 $ 497,401 $ 130,519 $ 1,114,076 $ 577,675 $ 1,402,413 $ 5,205,539
Payments to suppliers (391,735) (782,414) (149,713) (119,169) (583,331) (232,721) (1,002,585) (3,261,668)
Payments to employees (9,862) (92,816) (169,789) (484,999) (238,992) (354,348) (1,350,806)
Claims paid (207,230) (320,258) - (527,488)
Net Cash Provided (Used) by
Operating Activities 55,503 (56,105) (142,359) 11,350 45,746 105,962 45,480 65,577
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers Out (295,680) - - - (295,680)
Net Cash Provided (Used) by
Noncapital Financing Activities
Net Increase(Decrease) in Cash and Investments
Cash and investments - beginning of year
(295,680) (295,680)
(240,177) (56,105) (142,359) 11,350 45,746 105,962 45,480 (230,103)
2,149,078 2,261,917 1,546,636 189,496 2,982,513 413,153 496,339 10,039,132
Cash and investments - end of year $ 1,908,901 $ 2,205,812 $ 1,404,277 $ 200,846 $ 3,028,259 $ 519,115 $ 541,819 $ 9,809,029
Financial Statement Presentation
Cash and investment $ 1,908,901 $ 2,159,114 $ 1,404,277 $ 200,846 $ 3,028,259 $ 519,115 $ 541,819 $ 9,762,331
Restricted and investment 46,698 - - - - - 46,698
Total $ 1,908,901 $ 2,205,812 $ 1,404,277 $ 200,846 $ 3,028,259 $ 519,115 $ 541,819 $ 9,809,029
Reconciliation of Operating Income to Cash
Flows from Operating Activities:
Operating Income $ 41,729 $ (123,074) $ (250,079) $ 17,309 $ 84,540 $ 101,507 $ 66,390 $ (61,678)
Adjustments to reconcile operating income to
cash flows from operating activities:
Depreciation - - - 957 957
Change in assets and liabilities:
Receivables, net (1,589) - - 3,715 (21,153) (19,027)
Material and supplies 3,509 2,167 (13,535) (7,859)
Deferred outflows of resources (30,258) (43,137) (116,187) (52,970) (83,498) (326,050)
Net pension liabilities 39,034 55,647 149,883 68,332 107,713 420,609
Deferred inflows of resources (12,140) (17,307) - (46,616) (21,254) (33,504) (130,821)
Accounts payable 11,883 3,421 (16,565) (8,122) (31,636) 23,191 7,899 (9,929)
Accrued payroll and benefits 59 1,243 (102) - 2,047 524 676 4,447
Claims payable 65,669 129,184 - 194,853
Due to other government (88) - (4) - 167 - 75
Cash Flows From Operating Activities $ 55,503 $ (56,105) $ (142,359) $ 11,350 $ 45,746 $ 105,962 $ 45,480 $ 65,577
106
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
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.
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.
107
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2017
ASSETS
Cash and investments (Note 2)
Restricted cash and investments (Note 2)
Loans receivable (Note 3)
Capital assets (Note 5):
Nondepreciable
Depreciable, net of accumulated depreciation
Library
RDA
Successor
Agency
Total
$ 537,231 $ 1,655,254 $ 2,192,485
1,967,497 1,967,497
563,761 563,761
5,257,422
1,728,777
5,257,422
1,728,777
Total Assets 537,231 11,172,711 11,709,942
LIABILITIES
Accounts payable
Due to other governments
Interest payable
Long-term debt (Note 6):
Due within one year
Due in more than one year
5,204 40 5,244
70 - 70
348,518 348,518
Total Liabilities 5,274
NET POSITION
Held in trust
531,957
1,105,000 1,105,000
18,169, 510 18,169, 510
19,623,068 19,628,342
(8,450,357) (7,918,400)
Total Net Position $ 531,957 $ (8,450,357) $ (7,918,400)
108
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
ADDITIONS
Property taxes
Investment earnings
Gifts, bequests and endowments
Other
Library
$
RDA
Successor
Agency
Total
- $ 1,964,636 $ 1,964,636
4,624 6,310 10,934
79,760 79,760
- 1,923,303 1,923,303
Total Additions 84,384
DEDUCTIONS
Program expenses
Interest and fiscal agency expenses of RDA
Library services
Depreciation expense
Total Deductions
CHANGE IN NET POSITION
NET POSITION - BEGINNING OF YEAR
75,499
75,499
3,894,249 3,978,633
1,930,143
802,166
101,692
1,930,143
802,166
75,499
101,692
2,834,001 2,909,500
8,885 1,060,248 1,069,133
523,072
(9,510,605) (8,987,533)
NET POSITION - END OF YEAR $ 531,957 $ (8,450,357) $ (7,918,400)
109
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110
Statistical Section
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).
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).
111
Town of Los Gatos
Net Position by Component
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Schedule 1
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
ONet Investment in Capital Assets MI Restricted OUnrestricted
Fiscal Net Investment
Year in Capital Assets
Restricted
Total
Unrestricted Net Position
2008 48,581,378 18,459,776 42,884,826 109,925,980
2009 52,665,506 15,663,436 51,619,635 119,948,577
2010 50,129,550 26,723,994 47,191,225 124,044,769
2011 72,567,355 14,652,823 29,017,520 116,237,698 (1)
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 (2)
2016 93,383,855 6,386,014 12,744,637 112,514,506
2017 96,265,652 5,627,707 15,134,420 117,027,779
(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.
112
Town of Los Gatos
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Expenses
Schedule 2
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Governmental Activities:
General Government $ 5,233,730 $ 5,323,467 $ 4,647,801 $ 5,180,153 $ 6,145,143 $ 6,564,768 $ 6,955,804 $ 6,465,852 $ 6,993,661 $ 6,771,628
Police Department 12,313,637 13,467,503 13,266,849 13,495,885 14,124,798 13,731,754 14,119,786 12,644,221 12,825,688 14,587,597
Parks and Public Works 6,958,449 8,671,678 7,458,085 7,155,905 7,827,332 7,829,315 8,154,616 8,069,352 8,320,623 9,502,707
Community Development 3,064,865 3,389,151 3,522,477 3,099,269 3,434,551 4,094,188 4,424,040 4,047,738 3,227,224 5,093,459
Community Services 1,060,922 1,162,284 1,270,240 666,015 - - - - - -
Library Services 1,956,767 2,067,476 2,038,009 1,892,805 1,938,577 2,128,823 2,234,431 2,553,414 2,522,142 2,868,748
Sanitation 502,196 407,048 655,713 342,893 158,205 393,205 363,180 491,359 528,580 466,762
Redevelopment 3,360,585 2,939,550 6,992,935 16,794,022 919,821 1,277,063 21,687
Interest and Fees 670,415 631,159 612,700 1,278,381 1,123,842 - - - - -
Total Governmental Activities $ 35,121,566 $ 38,059,316 $ 40,464,809 $ 49,905,328 $ 35,672,269 $ 36,019,116 $ 36,273,544 $ 34,271,936 $ 34,417,918 $ 39,290,901
Program Revenues
Charges for Services:
General Government $ 1,149,911 $ 1,155,409 $ 1,337,772 $ 1,156,931 $ 1,131,424 $ 1,416,593 $ 2,179,077 $ 1,888,213 $ 1,517,012 $ 1,669,020
Police Department 895,569 1,358,361 2,110,357 2,153,843 2,324,397 2,450,630 3,206,579 3,529,166 3,278,585 2,076,688
Parks and Public Works 576,107 637,933 779,300 810,022 1,215,382 3,044,401 1,550,867 2,206,765 1,516,108 2,155,841
Community Development 2,954,123 2,700,614 3,404,087 3,097,192 3,448,433 4,649,444 5,156,061 5,027,497 4,359,146 3,803,626
Community Services - 147,895 134,366 98,803 - - - - - -
Library Services 60,123 56,932 57,633 39,491 37,662 50,696 51,775 53,123 46,192 46,746
Sanitation 166,660 135,000 135,000 135,000 135,000 403,294 328,648 328,868 368,813 410,626
Operating Grants and Contributions:
General Government 54,242 8,834 10,237 15,638 6,453 8,406 - - 15,291 -
Police Department 744,347 538,629 81,997 27,748 29,980 91,360 42,661 24,838 98,138 837,329
Parks and Public Works 565,857 633,923 594,775 809,272 993,827 835,724 994,096 907,745 749,300 665,779
Community Services 146,236 190,447 124,287 182,683 - - - - -
Library Services 11,409 10,462 13,996 10,662 109 40 14,662 4,062 12,228 -
Sanitation 41,044 39,891 25,103 9,002
Capital Grants and Contributions:
General Government 169,270 176,705
Parks and Public Works 2,020,121 1,330,638 3,074,453 2,375,759 641,811 2,757,660 2,274,879 2,338,154 1,610,657 770,600
Community Development - - - - - - 19,360 - 9,280
Total Program Revenues $ 9,385,749 $ 8,944,968 $ 11,883,363 $ 10,922,046 $ 9,964,478 $ 15,877,518 $ 15,818,665 $ 16,485,136 $ 13,571,470 $ 12,445,535
General Revenues
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Property Taxes $ 17,311,052 $ 18,343,063 $ 18,856,081 $ 18,226,001 $ 14,088,866 $ 11,968,377 $ 11,712,312 $ 12,931,603 $ 13,763,458 $ 14,756,214
Sales Taxes 9,345,432 8,487,000 8,317,217 9,971,409 9,889,100 8,757,428 8,029,571 8,202,678 7,501,175 8,925,276
Franchise Taxes - - - - - - - 2,215,430 2,258,892 2,366,908
Other Taxes 2,904,908 2,664,698 2,623,622 2,906,264 3,698,753 3,324,791 3,718,405 2,062,893 1,997,497 2,351,223
Motor Vehicle in Lieu 137,330 101,265 92,595 139,814 15,238 15,790 13,068 - 12,308 14,056
Investment Earnings 4,190,951 2,949,119 1,155,929 760,905 331,420 (133,375) 772,200 428,772 698,324 192,260
Loss on Disposal of Capital Assets - - - - - - - -
Sale of Property 6,525,000 (870,127) 54,425
Miscellaneous 9,842 66,802 52,459 41,943 2,275,160 1,154,647 350,468 813,324 598,170 528,946
Extraordinary Gain (Loss) Dissolution of RDA 11,864,453 295,101
Total General Revenues $ 33,899,515 $ 39,136,947 $ 31,097,903 $ 31,176,209 $ 42,162,990 $ 25,437,184 $ 24,596,024 $ 26,654,700 $ 26,829,824 $ 29,134,883
Change in Net Position
$ 8,163,698 $ 10,022,599 $ 2,516,457 $ (7,807,073) $ 16,455,199 $ 5,295,586 $ 4,141,145 $ 8,867,900 $ 5,983,376 $ 2,289,517
a. Investment Earnings revenue was down due to the economy downturn
b. Investment Earnings revenue was down due to declining interest rates and reduced cash balances
113
Town of Los Gatos
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
Schedule 3
Fiscal Year
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
General Fund
Reserved $ 4,732,394 $ 2,048,261 $ 8,165,607 $ 4,491,589 $ - $ $ - $ - $ - $ $
Unreserved 16,406,211 17,236,569 16,861,752 18,594,984 - - - -
Nonspendable - - 1,500,000
Restricted -
Committed 20,019,187 15,129,925
Assigned - - - - 21,806,781 21,992,886 20,758,156 23,791,749 24,121,256 9,555,085 14,050,699
Unassigned - - - 2,433,556 4,019,409 7,502,446 1,363,376 - - -
Total General Fund $ 21,138,605 $ 19,284,830 $ 25,027,359 $ 23,086,573 $ 25,740,337 $ 26,012,295 $ 28,260,602 $ 25,155,125 $ 24,121,256 $ 29,574,272 $ 29,180,624
All Other Governmental Funds
Reserved $ 15,820,345 $ 14,917,629 $ 15,265,127 $ 10,525,384 $ - $ - $ - $ - $ - $ - $
Unreserved, reported in:
Special Revenue Funds 836,191 1,030,161 522,105 225,509 -
Capital Project Funds 8,169,857 11,719,905 11,203,521 24,454,347 - - - -
Debt Service Funds 3,849,382 5,747,185 7,526,557 6,953,732 -
Nonspendable - -
Restricted 14,764,334 5,167,236 3,949,583 4,485,246 5,663,182 6,386,014 5,627,707
Committed 3,696,000 10,354,584
Assigned - 4,786,547 5,389,674 6,097,182 8,191,823 15,346,558 11,099,076 7,928,994
Unassigned - - (23,889) 107,107 157,208 183,045 206,875
Total All Other Governmental Funds $ 28,675,775 $ 33,414,880 $ 34,517,310 $ 42,158,972 $ 19,526,992 $ 10,664,017 $ 10,203,973 $ 12,860,114 $ 21,216,615 $ 21,181,090 $ 23,911,285
Total Fund Balances $ 49,814,380 $ 52,699,710 $ 59,544,669 $ 65,245,545 $ 45,267,329 $ 36,676,312 $ 38,464,575 $ 38,015,239 $ 45,337,871 $ 50,755,362 $ 53,091,909
114
Town of Los Gatos
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
Fiscal Year
Schedule 4
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Revenues:
Taxes $ 29,773,634 $ 29,643,262 $ 29,967,385 $ 31,549,352 $ 27,676,719 $ 24,596,799 $ 23,475,393 $ 23,208,820 $ 23,269,892 $ 25,945,129
Intergovernmental 3,128,239 2,134,352 4,082,725 3,248,303 1,669,729 2,615,191 2,440,127 2,921,002 2,573,475 1,715,580
Charges for Service 2,996,660 3,421,131 4,418,074 4,107,386 5,550,671 6,529,234 5,837,581 5,794,386 4,773,001 4,210,174
Licenses & Permits 3,337,822 2,692,187 2,977,199 2,967,819 3,242,348 4,015,871 5,343,265 6,467,771 5,442,133 5,075,503
Investment Income 4,190,955 2,949,120 1,174,203 691,022 291,484 (133,380) 772,164 428,735 698,308 192,978
Fines and Forfeitures 369,292 618,771 662,699 737,903 809,790 688,125 795,720 868,564 879,277 917,105
Franchise Fees - - - - - - 2,215,430 2,258,892 2,366,908
Use of Property 60,749 51,948 38,502 38,974 38,910 37,741 32,209 31,723 32,096
Other 1,180,063 1,581,078 2,105,333 2,904,862 5,412,328 4,577,584 3,648,277 3,130,975 2,396,992 2,935,242
Total Revenues
44,976,665 43,100,650 45,439,566 46,245,149 44,692,043 42,928,334 42,350,268 45,067,892 42,323,693 43,390,715
Expenditures:
Current
Public Safety 12,214,891 12,971,105 12,821,499 13,004,041 13,392,953 13,370,032 13,742,189 13,747,198 13,763,316 13,251,288
Public Works 5,261,706 5,785,584 5,152,745 5,222,504 5,440,960 5,616,197 5,611,283 5,840,097 6,307,266 6,633,748
Community Development 3,035,240 3,280,856 3,452,914 2,973,587 3,226,195 4,235,832 4,335,599 4,218,500 3,695,504 3,793,930
Community Services 1,056,835 1,149,290 1,261,981 663,645 - - - -
Library Services 1,946,595 2,007,518 1,999,430 1,806,611 1,805,479 2,055,069 2,131,438 2,268,844 2,332,268 2,508,677
Sanitation & Other 470,660 375,483 642,512 314,899 116,607 359,725 322,817 411,863 452,726 466,762
General Government 5,120,970 5,145,355 5,483,753 6,318,706 8,046,794 8,331,444 8,499,854 8,647,451 9,144,797 10,314,262
Redevelopment 3,284,847 3,861,525 8,692,216 18,958,126 3,282,155 1,277,063 21,687 - -
Capital Outlay 8,697,478 7,759,577 16,141,561 15,839,303 10,929,491 6,568,653 4,097,662 3,800,478 3,241,657 6,867,034
Debt Service
Principal Repayment 429,167 445,000 465,000 485,000 934,167 - - - - -
Interest and Fiscal Charges 676,913 638,221 620,356 1,019,881 1,143,185
Total Expenditures 42,195,302 43,419,514 56,733,967 66,606,303 48,317,986 41,814,015 38,762,529 38,934,431 38,937,534 43,835,701
Excess (Deficiency) of Revenues
Over (Under) Expenditures
2,781,363 (318,864) (11,294,401) (20,361,154) (3,625,943) 1,114,319 3,587,739 6,133,461 3,386,159 (444,986)
Other Financing Sources(Uses):
Debt lssuance 16,428,095
Transfers In 8,810,379 5,370,708 4,028,905 3,928,107 3,735,440 2,841,881 3,418,872 8,977,220 3,315,846 7,907,692
Transfers Out (8,706,409) (4,731,885) (3,461,724) (3,545,168) (3,661,894) (2,463,850) (2,921,409) (7,788,049) (1,284,514) (7,612,012)
Proceeds from sales of capital assets - - - - - - - - - 4,435
Total Other Financing Sources(Uses) 103,970 638,823 16,995,276 382,939 73,546 378,031 497,463 1,189,171 2,031,332 300,115
Special Item:
Sale of Property - 6,525,000 - - - - - -
Extraordinary Gain (Loss) RDA Dissolutior - - - - (5,038,620) 295,913 - - -
Prepayment of Pension Obligations - - (4,534,538)
Net Change in Fund Balances $ 2,885,333 $ 319,959 $ 5,700,875 $ (19,978,215) $ (3,552,397) $ 1,492,350 $ 4,085,202 $ 7,322,632 $ 5,417,491 $ (144,871)
Debt Service as a Percentage
of Non Capital Expenditures
3.30% 3.04%
2.67% 2.96% 5.56% 0.00% 0.00% 0.00% 0.00% 0.00%
1 Increase due to SERAF payment to State in the amount of $2.2M and increased Pass Through Payments
2 The increase in capital outlay is due to purchases of land for low -moderate housing projects in the amount of $4.3M and purchase of land for a sports park in the amount of $3.1N
115
Town of Los Gatos
Assessed Value and Estimated Actual Value of Taxable Property
Last Ten Fiscal Years
12000
10000
8000
6000
4000
Fiscal
Year
2008 $
2009
2010
2011
2012
2013
2014
2015
2016
2017
Utility
and
Unsecured
Property
201,629,315
216,402,089
241,286,055
217,353,236
217,297,593
211,268,609
224,079,502
227,331,042
217,035,545
304,443,013
■Utility and Unsecured Property
rn Secured Property
Percent
Change
3.83% $
7.33%
11.50%
- 9.92%
-0.03%
- 2.77%
6.06%
1.45%
-4.53%
40.27%
Source: Santa Clara County Assessed Value Report
Secured
Property
7,392,958,751
7,949,991,620
8,076,101,607
8,044,692,600
8,152,459,157
8,465,420,032
9,238,816,900
9,767,782,505
10,417,804,357
11, 240,554,198
Percent
Change
8.08%
7.53%
1.59%
-0.39%
1.34%
3.84%
9.14%
5.73%
6.65%
7.90%
Total
Assessed
$ 7,594,588,066
8,166,393,709
8,317,387,662
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
Schedule 5
Total
Estimated Direct
Full Market Tax Rate
$ 29,571,835,004 1.0459
31,799,966,480 1.0449
32,304,406,428 1.0584
32,178,770,400 1.0555
32,609,836, 628 1.0499
33,861, 680,128 1.0508
36, 955, 267, 600 1.0493
39,071,130,020 1.0544
41, 671, 217, 428 1.0533
44,962,216,792 1.0560
116
Town of Los Gatos
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
Per Hundred $
1.25
1.00
0.75
0.50
0.25
0.00
1
ti0 �00 ti06i, ti00') ti0�0 ti0"\� ti0\� �0\^) O�� � C�
�O 01 0\1
ti
Santa Clara Valey Water District County
Retirement Levy / Hospital Bond
School District Bonds and Loans
Basic County Wide Levy
County
Retirement Levy Santa Clara School
Fiscal Basic County and County Valley Water District Bonds
Year Wide Levy Hospital Bond District and Loans
Schedule 6
Total
2008 1.0000 0.0388 0.0071 0.1032 1.1491
2009 1.0000 0.0388 0.0061 0.0970 1.1419
2010 1.0000 0.0510 0.0074 0.1021 1.1605
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 1.0000 0.0476 0.0057 0.1381 1.1914
2017 1.0000 0.0474 0.0086 0.1223 1.1783
Source: Santa Clara County Book of Tax Rates
117
Town of Los Gatos
Principle Property Tax Payers
Last Five Fiscal Years *
ASSESSEE NAME
2012/13 2013/14 2014/15 2015/16 2016/17
Schedule 7
Percentage Percentage Percentage Percentage Percentage
of Total City of Total City of Total City of Total City of Total City
Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed
Value Value Value Value Value Value Value Value Value Value
Sobrato Interests IV/Sobrato Land Holdings $157,559,245 1.86% $168,808,676 2.01% $20,868,338 0.21% $44,830,482 0.43% $42,240,994 0.38%
Boccardo Corporation $37,550,368 0.44% $38,617,912 0.46% $38,772,905 0.40% $21,617,318 0.21% $21,918,921 0.20%
Knowles Los Gatos LLC $47,045,834 0.56% $47,886,850 0.57% $48,204,708 0.49% $49,167,836 0.47% $48,817,644 0.44%
SRI Old Town LLC $30,374,286 0.36% $30,981,771 0.37% $31,122,427 0.32% $31,744,252 0.30% $32,228,351 0.29%
CH Realty IV Downing LP $18,525,827 0.23% $18,816,443 0.24% - 0.00% - 0.00%
Hercules Holding II LLC 0.00% 0.00% 0.00% 0.00%
Health Care REIT Inc, $19,223,348 0.23% $20,671,860 0.24% $20,765,810 0.21% $20,088,803 0.19% $20,396,274 0.18%
750 University LLC $12,137,999 0.14% $18,600,000 0.22% $19,000,000 0.19% $19,379,620 0.19% $19,675,159 0.18%
Grosvenor USA Ltd. $22,437,962 0.27% $22,886,720 0.27% $22,990,624 0.24% $23,449,975 0.23%
Alberto Way Holdings LLC $23,145,064 0.27% $23,607,964 0.28% $23,715,141 0.24% $24,188,966 0.23% $24,557,845 0.22%
D&K Los Gatos LLC $15,590,010 0.18% $15,801,808 0.19% $15,974,003 0.16% $16,293,163 0.16%
CHL Ventures LP $20,671,962 0.24% 0.00% 0.00%
San Jose Water Works $30,882,008 0.36% $33,626,381 0.40% 536,683,453 0.38% 537,081,049 0.36% $38,710,728 0.34%
Tot House Hotel LLC 0.00% 0.00% 0.00%
Grade Way Associations VI $14,788,651 0.17% 515,084,623 0.18% $15,163,152 0.16% 0.00%
Lyon Baytree Apartments LLC $14,430,123 0.17% $14,674,716 0.17% 0.00%
KSL Capital Partners $42,532,721 0.50% $43,383,370 0.51% $43,580,326 0.45% $30,134,614 0.29% $30,105,945 0.27%
Los Gatos Hotel Corp. $15,617,134 0.18% $18,134,182 0.21% $15,573,314 0.16% $15,676,113 0.15%
David A. and Shari Flick Trustee $15,018,971 0.18% 0.00% $15,388,884 0.16% 0.00%
Pter R. Hofman - 0.00% - 0.00% - - 0.00%
Paul H. Roskoph $13,416,452 0.16% - 0.00% - 0.00%
Good Samaritan Hospital LP $19,530,183 0.23% $19,710,897 0.23% $19,602,594 0.20% $19,880,366 0.19% $22,402,756 0.20%
Windrose Los Gatos Properties LLC 0.00% 0.00% 0.00%
Park Row East Apartments Ltd. - 0.00% 0.00% 0.00%
LG Business Park LLC - 0.00% $47,276,977 0.56% $39,347,485 0.40% 517,507,261 0.17% $31,070,572 0.28%
Green Eyes LLC $12,542,555 0.15% $12,793,404 0.15% -
Go and Kay Karou Sasaki 0.00% $22,752,809 0.27% $24,744,983 0.24% $25,122,131 0.22%
Ann R. Desantis - 0.00% $13,823,779 0.16% 0.00%
DS Downing Los Gatos LLC - 0.00% - 0.00% $20,006,861 0.20% $21,880,568 0.21% $22,315,770 0.20%
El Camino Hospital - 0.00% - 0.00% $20,803,609 0.21% $26,477,160 0.25% $26,880,933 0.24%
LG Hotel LLC 0.00% - 0.00% $15,448,057 0.16% $15,487,385 0.15%
SI 32 LLC - 0.00% - 0.00% $150,563,119 1.54% $141,348,894 1.36% $143,442,269 1.28%
Wealthcap Los Gatos 121 - 0.00% - 0.00% 0.00% 0.00% $109,100,000 0.97%
Wealthcap Los Gatos 31 - 0.00% - 0.00% 0.00% 0.00% $84,000,000 0.75%
Leland E Lester, Trustee 0.00% 0.00% 0.00% 0.00% $28,004,168 0.26%
DS Village Square - 0.00% - 0.00% - 0.00% - 0.00% $22,799,599 0.20%
Summerhill Prospect Avenue LLC - 0.00% - 0.00% - 0.00% - 0.00% $18,274,508 0.16%
LG Business Park Bldg 1, 2 &3 LLC 0.00% 0.00% 0.00% $61,947,284 0.59%
Total -Principal taxpayers $ 584,030,904 6.90% $ 650,252,243 7.68% $ 633,585,810 6.49% $ 663,137,202 6.37% $814,164,568 7.24%
Total - All real properties assessed by the Town (1) $8,464,491,112
(1) Assessed value includes only net secured real properties.
(2) Excludes the value of tax-exempt properties
Source Data: California Municipal Statistics, Inc.
$9,237,887,980 $9,766,765,025
$10,416,786,877 $11,239,536,718
118
Town of Los Gatos
Property Tax Levies and Collections
Last Ten Fiscal Years
it
0
$18.0
$17.0
$16.0
$15.0
$14.0
$13.0
$12.0
$11.0
$10.0
$9.0
$8.0
$7.0
Fiscal
Year
Tax Levied
Town
Property Tax
Levied and
Collected
2008 $ 6,901,935
2009 7,465,403
2010 7,608,137
2011 7,567,880
2012 7,520,265
2013 8,253,442
2014 9,120,626
2015 9,787,519
2016 10,388,424
2017 11,345,588
Redevelopment
Property Tax
Levied and
Collected
$ 8,072,176
8,574,251
9,022,863
6,861,650
3,349,254
0
0
Total Property
Tax Levied
and
Collected
$ 14,974,111
16,039,654
16,630,999
14,429,530
10,869,519
8,253,442
9,120,626
9,787,519
10,388,424
11,345,588
$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
Schedule 8
Value of Property
Value of Town
Property subject
to Local Tax
Rate
$ 7,594,588,066
8,166,393,709
8,317,387,662
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
Sources: Santa Clara County Auditor -Controller Office and the Town of Los Gatos
11' \Q 1`" 1� �1
1° ,LO ,LO ,yam .ti0
Value of
Redevelopment
Agency
Property
Subject to
Local
Tax Rate
$ 1,081,483,541
1,096,883,582
1,134,135,499
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
Value of
Property
Subject to
Local
Tax Rate
$ 8,676,071,607
9,263,277,291
9,451,523,161
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
119
Town of Los Gatos
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
Fiscal
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Schedule 9
Governmental Activities
1992 2002 2010
Certificate Certificate Certificate
of of of
Participation Participation Participation
$ 890,000 $ 9,610,000 $ -
685,000 9,370,000 -
470,000 9,120,000 15,675,000
240,000 8,865,000 15,675,000
Total
Governmental
Activities
$ 10,500,000
10,055,000
25,265,000
24,780,000
Total
Primary
Government
$ 10,500,000
10,055,000
25,265,000
24,780,000
1) Debt was transferred to the Successor Agency Trust Fund as a part of the RDA dissolution
Percentage of
Personal
Income
6.2%
5.5%
19.4%
19.7%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
1)
Per
Capita
348.03
329.70
820.24
835.72
0.00
0.00
0.00
0.00
0.00
0.00
120
Town of Los Gatos
Direct and Overlapping Governmental Activities Debt
As of June 30, 2017
2016/17 Assessed Valuation: $11,544,997,211
Schedule 10
Estimated Share
of Direct and
Debt at Overlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT: % Applicable (1) June 30, 2016 at June 30, 2017
Overlapping Tax & Assesment Debt
Santa Clara County 2.756% $ 784,845,000 $ 21,630,328
West Valley -Mission Community College District 9.535% $ 407,295,973 $ 38,835,671
Campbell Union High School District 8.154% $ 215,895,000 $ 17,604,078
Los Gatos -Saratoga Joint Union High School District 34.161% $ 114,990,000 $ 39,281,734
Cambrian School District 0.265% $ 51,149,944 $ 135,547
Campbell Union High School District 8.346% $ 181,299,080 $ 15,131,221
Los Gatos Union School District 70.441% $ 89,255,000 $ 62,872,115
Saratoga Union School District 0.035% $ 30,006,318 $ 10,502
Union School District 20.885% $ 109,727,657 $ 22,916,621
Midpeninsula Regional Open Space District 4.716% $ 44,225,000 $ 2,085,651
Santa Clara Valley Water District Benefit Assessment District
Total Overlapping Tax and Assesmet Debt
2.756% $ 90,945,000 $ 2,506,444
$ 223,009,912
Overlapping General Fund Debt
Santa Clara County General Fund Obligations 2.756% $ 634,190,521 $ 17,478,291
Santa Clara County Pension Obligations 2.756% $ 362,470,957 $ 9,989,700
Santa Clara County Board of Education Certificates of Participation 2.756% $ 5,690,000 $ 156,816
West Valley -Mission Community College District General Fund Obligations 9.617% $ 63,175,000 $ 6,075,225
Campbell Union High School District General Fund Obligations 8.154% $ 15,165,000 $ 1,236,554
Los Gatos -Saratoga Joint Union High School District Certificates of Participation 34.161% $ 5,495,000 $ 1,877,147
Campbell Union School District General Fund Obligations 8.346% $ 3,090,000 $ 257,891
Saratoga Union School District Certificates of Participation 0.035% $ 4,260,000 $ 1,491
Santa Clara County Vector Control District Certificates of Participation 2.756% $ 2,685,000 $ 73,999
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
4.716% $ 112,143,611 $ 5,288,693
$ 42,435,807
$ 10,869,760
$ 31,566,047
$ 18,785,000
$ 18,758,000
Total Direct Debt $0
Total Gross Overlapping Dept $ 284,230,719
Total Net Overlapping Debt $ 273,360,959
Gross Combined Total Debt
Net Combined Total 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 2015/16 Assessed Valuation:
Total Overlapping Tax and Assessment Debt: 1.93%
Total Direct Debt: 0.00%
Gross Combined Total Debt: 2.46%
Net Combined Total Debt: 2.37%
Ratios to Redevelpment Incremental Valuation ( $1,217,279,316):
Total Overlapping Tax Increment Debt: 1.54%
$ 278,230,719 (2)
$ 273,360,959
Source Data: California Municipal Statistics, Inc.
121
Town of Los Gatos
Legal Debt Margin Information,
Last Ten Fiscal Years
(In Thousands of Dollars)
Fiscal Year
Schedule 11
Legal Debt Margin Calculation
for Fiscal Year 2016/17
Assessed Value $ 10,375,010,557
Debt Limit 1,556,251,584
Debt Applicable to Limit: -
Legal Debt Margin $ 1,556,251,584
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Debt Limit $ 1,019,970 $ 1,102,766 $ 1,185,727 $ 1,204,551 $ 1,195,035 $ 1,216,131 $ 1,263,138 $ 1,379,254 $ 1,444,943 $ 1,556,252
Debt Applicable to Limit - - -
Legal Debt Margin $ 1,019,970 $ 1,102,766 $ 1,185,727 $ 1,204,551 $ 1,195,035 $ 1,216,131 $ 1,263,138 $ 1,379,254 $ 1,444,943 $ 1,556,252
Total Net Debt
Applicable to the Limit
as a Percentage
of Debt Limit
0.00% 0.00%
0.00% 0.00%
0.00% 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.
0.00% 0.00%
0.00% 0.00%
122
Town of Los Gatos
Demographic and Economic Statistics
Last Ten Fiscal Years
Schedule 12
Personal
Income Per Capita Public County
Fiscal (thousands Personal Median School Unemployment
Year Population of dollars) Income Age Enrollment Rate
Ended (1) (2) (3) (4) (5) (6)
2008 30,170 $ 1,781,780 $ 59,058 44.86 5,870 6.0%
2009 30,497 1,701,153 55,781 45.35 6,006 11.8%
2010 30,802 1,787,070 58,018 45.09 6,100 11.3%
2011 29,651 1,833,410 61,833 44.22 6,184 10.3%
2012 29,808 1,854,892 62,228 42.64 6,352 8.7%
2013 30,247 2,140,641 70,772 45.80 6,420 6.8%
2014 30,443 2,267,912 74,497 45.80 6,522 5.7%
2015 30,505 2,197,885 72,050 46.10 6,622 3.8%
2016 31,376 2,286,087 72,861 46.30 6,646 3.5%
2017 31,314 2,281,569 72,861 46.50 6,631 3.8%
Source:
(1) California State Dept. of Finance - Population Research Unit (January 2016)
(2) California State Dept. of Finance - Estimate equals county per capita average times population
(3) California State Dept of Finance - county per capita at: labormarketinfo.edd.ca.gov
(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.
123
Town of Los Gatos
Principal Employers
Last Ten Fiscal Years
Pricipal Employers
Schedule 13
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Percentage Percentage Percentage Percentage Percentage Percentage Percentage Percentage Percentage Percentage
of Total Town of Total Town of Total Town of Total Town of Total Town of Total Town of Total Town of Total Town of Total Town of Total Town
Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment
Columbia Health Care Assoc/Mission Oaks Hospital 2,000 12.89% 2,000 12.31% 2,000 12.17% 2,000 12.60% 2,000 13.89% 2,000 13.29% 2,000 13.52% - 0.00% 0.00% 0.00%
El Camino Hospital, Los Gatos 0.00% 800 4.92% 700 4.26% 700 4.41% 700 4.86% 700 4.65% 700 4.73% 560 3.73% 560 3.53% 560 3.49%
Los Gatos Union School District 300 1.93% 300 1.85% 300 1.83% 300 1.89% 275 1.91% 275 1.83% 237 1.60% 273 1.82% 280 1.76% 274 1.71%
Los Gatos -Saratoga High School District 300 1.93% 300 1.85% 300 1.83% 300 1.89% 270 1.88% 270 1.79% 256 1.73% 157 1.05% 157 0.99% 370 2.30%
Netflix 280 1.80% 0.00% 280 1.70% 800 5.04% 800 5.56% 900 5.98% 825 5.58% 1,530 10.19% 1,976 12.45% 1,864 11.61%
Safeway 250 1.61% 200 1.23% 250 1.52% 250 1.57% 250 1.74% 250 1.66% 250 1.69% 314 2.09% 314 1.98% 314 1.95%
Alain Pine! Realtors 220 1.42% 0.00% 220 1.34% 220 1.39% 150 1.04% 150 1.00% 156 1.05% 156 1.04% 146 0.92% 148 0.92%
Verizon 200 1.29% 200 1.23% 0.00% - 0.00% 0.00% 0.00% - 0.00% 0.00% 0.00% 0.00%
Courtside Tennis Club 200 1.29% 200 1.23% 200 1.22% 200 1.26% 200 1.39% 200 1.33% 295 1.99% 440 2.93% 440 2.77% 468 2.91%
Town of Los Gatos 135 0.87% 189 1.16% 148 0.90% 138 0.87% 136 0.94% 138 0.92% 144 0.97% 157 1.05% 158 1.00% 160 1.00%
Whole Foods 130 0.84% 0.00% 0.00% - 0.00% 0.00% 0.00% - 0.00% 179 1.19% 179 1.13% 179 1.11%
Vasona Creek Health Care Center 130 0.84% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% 233 1.55% 233 1.47% 233 1.45%
Good Samaritan Regional Cancer Center 130 0.84% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% 200 1.33% 200 1.26% 200 1.25%
Roku - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% 487 3.07% 554 3.45%
Terraces of Los Gatos - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% 228 1.44% 228 1.42%
124
Town of Los Gatos
Full -time -Equivalent Employees by Function/Program
Last Ten Fiscal Years
Full -time -Equivalent Employees as of June 30
Schedule 14
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Function/Program
General Government 20.50 19.95 18.35 18.90 20.15 20.40 20.73 20.97 20.97 21.35
Police 61.00 61.00 60.00 59.50 60.50 58.00 57.50 60.00 59.00 59.00
Culture and Recreation 5.25 5.25 5.25 3.25 - - - - - -
Economic Development 1.00 1.00 1.00 1.00 1.00 - 0.50 0.63 0.63 0.63
Library 10.35 10.35 10.35 8.60 8.60 8.60 10.30 10.80 11.00 12.25
Planning 18.80 18.80 17.80 15.00 16.00 17.50 17.50 19.50 19.00 19.26
Public Works 34.00 37.00 35.00 32.50 32.00 31.00 31.50 32.00 33.50 33.50
Total 150.90 153.35 147.75 138.75 138.25 135.50 137.53 143.90 144.10 145.98
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.
125
Town of Los Gatos
Operating Indicators
Last Ten Fiscal Years
FUNCTION/PROGRAM
Schedule 15
Fiscal Year
General government 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Building Permits Issued
Residential Permits Issued 747 738 813 805 899 744
Residential Permits Value 66,072,341 75,227,889 87,307,822 76,896,111 85,000,754 53,625,891
Commercial Permits Issued 107 137 139 133 147 135
Commercial Permits Value 17,663,124 46,855,615 138,676,507 178,195,997 20,185,884 50,024,177
Publically Owned Permits Issued - - - -
Publically Owned Permits Value - -
Residential Parking Permits
Number of Special Event Permits Issued 89 125 133 127 107 118
Number of Annual Permits Issued 1,223 1,320 1,376 1,570 1,363 1,251
City Clerk
Number of Council Resolutions Passed 59 74 86 72 61 69
Number of Ordinances Passed 13 20 16 9 11 5
Number of Contracts Passed 227 220 196 222 283 240
General Services
Number of Purchase Orders Issued 358 318 301 277 334 331
Police
Physical Arrests 690 648 641 695 987 1,030
Parking Violations 12,938 11,991 14,421 13,321 13,975 12,863
Traffic Violations 2,908 3,333 4,747 4,633 5,400 4,634
DUI Arrests 89 86 62 48 58 60
Library
Circulated e-audiobooks 3,388 4,774 2,414 * 5,867 * 7,761 10,006
Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles) 8.0 8.0 10.0 1.8 8.0 10.0
ADA Compliance: Curb Ramps 19 19 19 23 11 30
Traffic Circles 1 1 - 1 1 1
Street Poles 1,611 1,611 1,611 1,609 1,609 1,609
Planning and Development Department
Building & Safety Inspections Performed
Redevelopment: Number of active projects
11,738 11,902
12,764 11,652
* July 2013 the Library separated from Northern CA Digital Library, Patrons had no longer access to collections of multiple libraries. By
2014 the Library has expanded its contents giving patrons access to more materials.
Source: Town of Los Gatos, Finance Department
8,655 14,722
126
Town of Los Gatos
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
Fiscal Year
Schedule 16
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Function/Program
Police
Number of Stations 1 1 2 2 2 2 2 2 2 2
Number of Patrol Units 15 15 14 14 14 14 14 14 14 14
Parking Enforcement Vehicles 3 3 2 2 2 2 2 2 2 2
Other Public Works
Streets (miles) 112 112 112 112 112 112 112 112 112 112
Streetlights 2,190 2,190 2,112 2,115 2,116 2,116 2,109 1,609 1,609 1,609
Traffic Signals 28 28 28 28 29 29 29 29 30 30
Parks and Recreation
Number of Parks 12 12 12 12 12 12 12 12 12 12
Number of Community Centers 1 1 1 1 1 1 1 1 1 1
Parking
Number of Parking Garages 1 1 1 1 1 1 1 1 1 1
Number of Parking Lots 22 22 22 22 22 22 22 22 22 22
Number of Off Street Parking Garage Spaces 1,126 1,126 1,126 1,126 1,126 1,126 1,126 1,126 1,126 1,126
Source: Town of Los Gatos, Finance Department
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128
Other Independent Auditor's Reports
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130
1
toe
► BADAWI&ASSOCIATES
CERTIFIED PUBLIC ACCOUN T AN I 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
To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
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, 2017, 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 13, 2017.
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.
Address: 180 Grand Avenue, Suite 1500 Oakland, CA 94612 • Phone: 510.768.8251 • Fax: 510.768.8249
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
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.
Bilaox 4Aamtld
Badawi & Associates
Certified Public Accountants
Oakland, California
December 13, 2017
132