Attachment 1 - Draft Comprehensive Annual Financial Report - FY Ended 6.30.19CALIFORNIA
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Comprehensive Annual Financial Report
Fiscal Year ending June 30, 2019 Draft 12-12-2019Attachment 1
Cover Photo: Chris Bryant [Cat photo] Draft 12-12-2019
TOWN OF LOS GATOS
CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2019
PREPARED BY THE
OFFICE OF THE TOWN MANAGER Draft 12-12-2019
Draft 12-12-2019
TOWN HISTORY
The name Los Gatos comes from “El Rancho de Los Gatos.” A ranch established in 1839 by a
Mexican land grant and so named because of the large number of mountain lions in the area. In
1854, James Alexander Forbes purchased some of this land and built a flour mill. In 1860, the
first hotel was opened to provide a stage stop on the toll road which had been built between San
Jose and Santa Cruz.
Wheat production gave way to orchards, and rapid growth ensued when the railroad reached
Los Gatos in 1878. The residential subdivisions of Broadway, Bayview, Fairview, and Almond
Grove were built in the 1880’s. By 1887, the population had grown to 1,500 and Los Gatans voted
to incorporate.
Fruit industries faded slowly during the Depression and World War II, but the postwar period
brought an influx of people and associated residential and commercial development. Highway
17 was constructed through the center of Town. Growth levelled off in the early 1970’s, leaving
Los Gatos with its small‐town atmosphere and pedestrian‐oriented downtown.
Because of its distance from other centers of population, Los Gatos developed as a complete
community including residential, business and industrial elements. Preserving Los Gatos as a
complete and well balanced community has been and remains a prominent goal of the
community. From the first 100‐acre Town site in 1890 with a population of 1,652, Los Gatos grew
slowly so that by 1963 the area was 6.3 square miles, with a population of 11,750. Today Los
Gatos covers between 14 and 15 square miles and has a population of 30,998. This growth over
the last 80 years resulted in a community with vibrant business districts, well maintained
neighborhoods, and lovely parks and open spaces.
As it exists now, the Town’s boundaries encompass a wide variety of terrain, ranging from level
land to steep and densely wooded hillsides. The sharp visual contrasts among these features and
charming architecture create a picturesque setting of the Town. In the midst of the growth of
Silicon Valley, Los Gatos attracts people with a preference for the Town’s distinctive, high quality
natural and urban environment.
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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
TABLE OF CONTENTS
INTRODUCTORY SECTION:
Letter of Transmittal ........................................................................................................................... 1
Organization Chart .............................................................................................................................. 7
Principal Officers ................................................................................................................................. 8
GFOA Award ....................................................................................................................................... 9
FINANCIAL SECTION:
Independent Auditor’s Report .......................................................................................................... 13
Management’s Discussion and Analysis ............................................................................................ 18
Basic Financial Statements:
Government‐Wide Financial Statements:
Statement of Net Position ....................................................................................................... 38
Statement of Activities ............................................................................................................. 39
Fund Financial Statements:
Governmental Funds:
Balance Sheet ....................................................................................................................... 42
Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position ................................................................................................ 43
Statement of Revenues, Expenditures and Changes in Fund Balances ................................ 44
Reconciliation of Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities ......................................... 45
Statement of Revenue, Expenditures and Changes in Fund Balances –
Budget and Actual (GAAP) General Fund ......................................................................... 46
Proprietary Funds – Internal Service Funds:
Statement of Net Position .................................................................................................... 48
Statement of Revenue, Expenses and Changes in Net Position ........................................... 49
Statement of Cash Flows ...................................................................................................... 50
Fiduciary Funds:
Statement of Fiduciary Net Position .................................................................................... 52
Statement of Changes in Fiduciary Net Position .................................................................. 53
Notes to the Basic Financial Statements ......................................................................................... 56
Required Supplementary Information:
Schedule of Proportionate Share of Net Pension Liability:
CalPERS Misc. Agent‐Multiple Employer Plan ............................................................................. 94
CalPERS Safety Cost‐Sharing Plan ................................................................................................ 95
Schedule of Pension Plans Contributions
Miscellaneous Agent Multiple‐Employer Plan ............................................................................ 96
Safety Cost‐Sharing Plan .............................................................................................................. 96
Actuarial Methods and Assumptions used for Pension Actuarially
Determined Contributions ........................................................................................................... 96
Schedule of Changes in Net OPEB Liability and Related Ratios ...................................................... 97
Schedule of Employer Contributions .............................................................................................. 97
Actuarial Methods and Assumptions used for 2017/18 OPEB Actuarially
Determined Contribution ............................................................................................................ 98 Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
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 ............................................................ 101
Nonmajor Governmental Funds:
Combining Balance Sheets .............................................................................................................. 102
Combining Schedule of Revenues, Expenditures and Changes in
Fund Balances .............................................................................................................................. 104
Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual (GAAP) .............................................................. 106
Internal Service Funds:
Combining Statement of Net Position ............................................................................................ 110
Combining Statement of Revenue, Expenses and Changes in Net Position ................................... 111
Combining Statement of Cash Flows .............................................................................................. 112
Private Purpose Trust Funds:
Combining Statement of Fiduciary Net Position ............................................................................. 114
Combining Statement of Changes in Fiduciary Net Position........................................................... 115
STATISTICAL SECTION:
Net Position by Component ............................................................................................................ 121
Changes in Net Position .................................................................................................................. 122
Fund Balances, Governmental Funds .............................................................................................. 124
Changes in Fund Balances, Governmental Funds ........................................................................... 126
Assessed Value and Estimated Actual Value of Taxable Property .................................................. 128
Direct and Overlapping Property Tax Rates .................................................................................... 129
Principal Property Tax Payers ......................................................................................................... 130
Property Tax Levies and Collections ................................................................................................ 134
Ratios of Outstanding Debt by Type ............................................................................................... 135
Direct and Overlapping Governmental Activities Debt ................................................................... 136
Legal Debt Margin ........................................................................................................................... 138
Demographic and Economic Statistics ............................................................................................ 140
Principal Employers ......................................................................................................................... 142
Full‐time Equivalent Town Government Employees by Function/Program ................................... 146
Operating Indicators by Function/Program .................................................................................... 148
Capital Assets Statistics by Function/Program ................................................................................ 150
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 ................................................................................................. 155 Draft 12-12-2019
INTRODUCTORY SECTION Draft 12-12-2019
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TOWN OF LOS GATOS
OFFICE OF THE TOWN MANAGER
(408) 354-6832
FAX: (408) 399-5786
December XX, 2019
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, 2019. 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, 2019, along with additional disclosures
and financial information designed to enable the reader to gain an understanding of the
Town’s financial activities.
This report was prepared as prescribed in Governmental Accounting Standards Board
(GASB) Statement No. 34, Basic Financial Statements and Management’s Discussion and
Analysis for State and Local Governments (GASB 34). This GASB Statement requires
management to provide a narrative introduction, overview, and analysis to accompany
the basic financial statements in the form of a Management’s Discussion and Analysis
(MD&A). This letter of transmittal is designed to complement the MD&A and should be
read in conjunction with it. The MD&A can be found immediately following the
Independent Auditor’s Report.
This Comprehensive Annual Financial Report is organized into three sections:
I. The Introductory Section includes the table of contents, letter of transmittal,
listing of elected officials, Town administrative personnel, and an organization
chart delineating organizational structure.
II. The Financial Section includes the independent auditors’ opinion, the MD&A, the
basic financial statements, notes to the financial statements, combining
statements of non‐major funds, and required supplemental information.
III. The Statistical Section includes both financial and non‐financial data about the
Town.
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Mayor and Town Council
December xx, 2019
The Comprehensive Annual Financial Report is prepared in accordance with Generally
Accepted Accounting Principles (GAAP) promulgated by the Governmental Accounting
Standards Board (GASB) and includes the audit report of Badawi & Associates, the
Town’s independent certified public accountants.
This Comprehensive Annual Financial Report will be submitted to the Government
Finance Officers Association for consideration of its Achievement of Excellence Award in
financial reporting certification. This award is granted only to entities whose reports
meet the highest standards of municipal financial reporting.
THE REPORTING ENTITY AND ITS SERVICES
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 30,988. This growth over the last 80 years resulted in
a community with vibrant business districts, well maintained neighborhoods, and lovely
parks and open spaces. Preserving Los Gatos as a complete and well‐balanced
community has been, and remains a prominent goal for the community.
The Town maintains a Council‐Manager form of government which combines the strong
political leadership of elected officials with the strong managerial experience of an
appointed Town Manager. Five Council members are elected at large for staggered
four‐year terms to govern the Town. The Mayor and Vice‐Mayor are appointed by the
Council from its own ranks and serve for one‐year terms. The Town Manager and Town
Attorney are appointed and supervised directly by the Council. The Town Manager
oversees traditional municipal services such as Public Safety, Parks and Public Works,
Community Development, a Public Library, and Town Administration including Human
Resources and Finance.
ECONOMIC CONDITIONS AND OUTLOOK
Consistent with other Silicon Valley communities, the economy has remained strong and
economically sensitive revenues, such as Property Tax, Sales Tax, and Transient
Occupancy revenues have increased as projected. The Town continues seeing
indications of softening in the housing market with homes for sale staying on the market
longer than the previous year. However, the value of the home sales remains high. A
median list price per square foot in Los Gatos is 42% higher than the San Jose‐
Sunnyvale‐Santa Clara Metropolitan Statistical Area median list price according to Zillow
Home Value Index.
General Fund revenues (including transfer‐ins) increased 7.6% from the prior year.
Property tax revenues are a significant source of support for General Fund operations,
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Mayor and Town Council
December xx, 2019
comprising approximately 40% of General Fund revenues in FY 2018/19. For FY 2018/19
property tax receipts of $17.3 million were $1.4 million higher than the prior year’s
collection, reflecting the continued desirability of the Town, its environment, culture,
and educational opportunities. Based on valuation projections by the 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 methodology due to the dissolution of the
California redevelopment agencies. It should be noted that this increase represents a
small portion of the total loss of redevelopment tax increment previously collected prior
to the aforementioned redevelopment dissolution which occurred in February 2012.
The Town relies heavily on sales tax revenues to support General Fund operations,
comprising approximately 18.7% of General Fund revenues in FY 2018/19. For FY
2018/19 sales tax receipts of $8.2 million were $0.8 million higher than the prior year’s
collection. Sales tax revenues increased due partially to the first receipt of $228,130.91
in the final quarter of the fiscal year of a new additional 1/8 cent District Sales Tax for
the Town of Los Gatos approved by the voters in the fall of 2018.
The Town is preparing for continued increases in pension employer rates. The Town’s
pension plans over the past several decades, like all other CalPERS participants, have
experienced unfavorable investment returns, changes in actuarial assumptions, and
demographic shifts which have outweighed any positive plan experiences. To date, the
Council has adopted or programmed additional discretionary pension strategies in
excess of $16.0 million and prefunded $13.1 million towards OPEB obligations.
While the Town Council has been proactively working to manage the anticipated cost
escalation in its pension and other post employment benefits (OPEB), pension and OPEB
related obligations continue to be one of the Town’s greatest long‐term cost drivers.
Data from the most recent actuarial valuations show total Net Pension ($59.3 $53.6)
and OPEB ($10.1) liabilities of $69.4 $63.7 million.
Readers are cautioned that in considering the amount of the pension and OPEB
liabilities, and other actuarial data as reported by CalPERS and the Town’s actuary, this
is “forward looking” information. Such “forward looking” information reflects the
judgment of the Board of Administration of CalPERS, its actuaries, and the Town’s
actuary as to the amount of assets which the pension and OPEB plans will be required to
accumulate to fund future benefits. These judgments are based upon a variety of
assumptions, one or more of which may prove to be inaccurate or that may change with
the future experience of the pension and OPEB plans. The actuarial methods and
assumptions could be changed by CalPERS and the Town’s actuary at any time based on
their professional judgement. Such changes could cause the Town’s obligations to the
pension and OPEB plans to be higher or lower in any particular year.
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Mayor and Town Council
December xx, 2019
For detailed information about the Town employees’ retirement plan please refer to
Note 9 of the Notes to Basic Financial Statements Section. In addition, the Town
provides extensive information on pension and OPEB information on the Towns
website.
Despite the reductions to various sources of local government revenue such as the
elimination of redevelopment tax increment in 2012, and increasing costs associated
with unfunded federal and state mandates, the Town has managed to maintain high
service levels increased efficiency and prudent fiscal management as evidenced by
General Fund’s strong fiscal health through FY 2018/19. The Town continues its
outreach to the community, the League of California Cities, and local legislators to
prevent and limit any future revenue losses and mandated cost increases.
MAJOR INITIATIVES
Major initiatives addressing the critical capital asset and infrastructure needs of the
Town were a priority for the fiscal year. Approximately $8.0 million in Town
infrastructure and other capital asset improvements were expended in FY 2018/19,
including $2.9 million in street improvement projects Town‐wide to major arterials and
neighborhood collector streets to enhance pedestrian and traffic safety. Other
investments included $0.7 million in vehicle and equipment, and approximately $0.5
million on Town facilities, retaining walls, and park improvements. In addition, the
Town invested $5.0 million in various projects that are currently in progress, including
approximately $3.0 million on the Almond Grove Street project, and other facility, park,
and infrastructure improvement projects.
Additional infrastructure improvements are scheduled in accordance with the Town’s
approved Capital Improvement Plan, and will continue into future years. All of these
improvements are funded either through grants, or via revenues accumulated from
prior year budget savings and/or excess revenues per Town Council policy.
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,
2) accuracy and reliability of accounting data, and
3) adherence to managerial policy.
The concept of reasonable assurance recognizes that the cost of internal control should
not outweigh the benefits, and that management must make estimates and judgments
in evaluating these costs and benefits.
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Mayor and Town Council
December xx, 2019
All governmental fund types use the modified accrual basis of accounting. This means
that revenues are recorded when measurable and available rather then when received.
Measurable means the amount can be determined and available means the cash is
received within sixty days after the end of the fiscal year. Expenditures are recorded
when the liability is incurred, rather than when paid. An exception to this rule is
principal and interest on general long‐term debt, which is not recognized by debt service
funds until it is due.
Proprietary (internal service) funds are accounted for using the accrual basis of
accounting, similar to that used by corporations. Proprietary fund revenues are
recognized when they are earned rather than when the cash is received, even if the cash
is not available and proprietary fund expenses are recognized when they are incurred.
With the implementation of GASB 34, the Town prepares its Basic Financial Statements
on the accrual basis.
Internal accounting procedures have been developed to provide reasonable assurance
regarding the safeguarding of assets and the reliability of financial records for preparing
financial statements and maintaining asset accountability.
An annual operating budget, five‐year budget forecast, and five‐year capital
improvement plan is adopted by the Town Council consistent with generally accepted
accounting principles. All budget adjustments and transfers between funds must be
approved by the Town Council during the fiscal year. The Town Manager is authorized
to transfer unencumbered appropriations within a budget category, within a fund.
Appropriations are valid for each fiscal year and lapse at year‐end.
AWARDS
The Town’s Comprehensive Annual Financial Report for the fiscal year ended June 30,
2018 was awarded a Certificate of Achievement for Excellence in Financial Reporting by
the national Government Finance Officers Association. This is the 24th consecutive year
that the Town has received the award. This prestigious award recognizes the report’s
conformance with strict accounting and reporting standards established by the
Government Accounting Standards Board and government finance organizations. This
award is annual in nature and valid for one year only. This year’s report will be
submitted for award consideration by this organization, as we believe it continues to
meet these standards.
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Mayor and Town Council
December xx, 2019
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; and Diane Howard, Payroll
Technician for their efforts in preparing this report.
Respectfully submitted,
____________________________ ___________________________________
Laurel Prevetti Stephen D. Conway
Town Manager Director of Finance
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TOWN OF LOS GATOS ORGANIZATIONAL CHART FY 2018/19
COMMUNITY
DEVELOPMENT
CDD Administration
Development Review
Code Compliance
Inspection Services
Advanced Planning
BMP Housing Program
POLICE
Police Administration
Records/Communications
Patrol
Investigations
Traffic
Support Services
Parking Management
PARKS &
PUBLIC WORKS
PPW Administration
Park Services
Engineering Development
Engineering Program
Streets & Signals
Building Maintenance
Landscape & Lighting
Environmental Services
LIBRARY
Library Administration
Reference Services
Children's Program
Reading/Literacy Program
Collection Maintenance
Circulation & System
Administration
Los Gatos History Program
HUMAN
RESOURCES
Recruitment
Benefits Management
Training
Employee Relations
Organizational Development
FINANCE
General Ledger
Accounts Payable
Accounts Receivable
Payroll
Business License Tax
Purchasing
Budget Administration
Financial Reporting
Treasury & Investments
CLERK &
ADMINISTRATIVE
PROGRAMS
Records ManagementBoards & CommissionsElection CoordinationClaims & InsuranceCustomer Service CenterLegislative CoordinationPublic InformationCable/Broadcasting ManagementArts & CultureCommunity Grants
INFORMATION
TECHNOLOGY
Technology Support
IT Systems Management
Technology Planning &
Implementation
Website Management
TOWN MANAGER
ASSISTANT
TOWN MANAGER
ELECTED
TOWN COUNCIL
BOARDS &
COMMISSIONSTOWN ATTORNEY
RESIDENTS of LOS GATOS
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TOWN OF LOS GATOS
PRINCIPAL OFFICERS
JUNE 30, 2019
TOWN COUNCIL
Mayor Steven Leonardis
Vice Mayor Marcia Jensen
Council Member Rob Rennie
Council Member Marico Sayoc
Council Member Barbara Spector
COUNCIL APPOINTEES
Town Manager Laurel Prevetti
Town Attorney Robert Schultz
APPOINTED OFFICIALS
Assistant Town Manager Arn Andrews
Chief of Police Peter Decena
Community Development Director Joel Paulson
Parks and Public Works Director Matt Morley
Library Director Ryan Baker
Finance Director Stephen Conway
Human Resources Director Lisa Velasco
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FINANCIAL SECTION
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INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the Town Council of the
Town of Los Gatos
Los Gatos, California
Report on the Financial Statements
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,
2019, 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.
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To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
Page 2
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, each major fund, and the aggregate remaining fund information
of the Town as of June 30, 2019, and the respective changes in financial position and, where applicable, cash flows
thereof for the year then ended in accordance with accounting principles generally accepted in the United States of
America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, budgetary comparison information, pension‐related schedules and OPEB‐related
schedules on pages 18‐33, 46, and 94‐98 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, major funds (other than
General fund and Special revenue funds) budgetary schedules, combining and individual nonmajor fund financial
statements, and statistical section are presented for purposes of additional analysis and are not a required part of
the basic financial statements.
The major funds (other than General fund and Special revenue funds) budgetary schedules, combining and
individual nonmajor fund financial statements are the responsibility of management and were derived from and
relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial statements
and certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the
United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly
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.
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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
Change in Accounting Principle
As described in Note 1 to the financial statements, in 2019, the City adopted new accounting guidance, GASBS No. 84,
Fiduciary Activities. Our opinion is not modified with respect to this matter.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated DATE, 2019 on our
consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s
internal control over financial reporting and compliance.
Badawi and Associates
Certified Public Accountants
Berkeley, California
DATE, 2019
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Management’s Discussion and Analysis
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MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of the Town of Los Gatos’s Comprehensive Annual Financial Report (CAFR) presents
management’s discussion and analysis of the Town’s financial performance during the fiscal year
that ended on June 30, 2019. This analysis should be read in conjunction with the Transmittal
Letter at the front of this report and the accompanying Basic Financial Statements.
FINANCIAL HIGHLIGHTS
Town assets exceeded liabilities at the close of FY 2018/19 by $114,819,109 (net position).
The Town’s total net position increased by $4.3 $4.4 million during the fiscal year largely as a
result of an approximate $3.1 million excess of total governmental funds revenues, other
financing sources above expenditures, and uses of financial resources.
Reported unrestricted net position is negative ($4,642,167) compared to $170,590 the prior
year. The decrease in unrestricted net position resulted largely from the use of approximately
$8.0 million in unrestricted cash balances in the Town’s General Fund Appropriated Reserve
(GFAR) fund during the year to invest in the Town’s infrastructure and equipment.
Unrestricted net position represents all resources not included as net investment in capital
or restricted assets. These amounts are considered usable for any legal purpose by the Town.
Total fund balances for all governmental funds at year end were $53,634,826, an increase of
$3,074,054 (6.1%) from the prior year. Fund balances increased due to total governmental
revenues above expenditures of approximately $221K (excluding transfers) and one‐time
proceeds from the sale of Town land in the amount of approximately $1.9 million. Added to
this amount was the transfer of residual fund balances of approximately $1.1 million from
the closing of two Internal Service Funds (Vehicle Maintenance and Stores) during the year.
At the end of FY 2018/19, fund balance for the General Fund was $37,970,527, approximately
100% of General Fund expenditures for the current fiscal year excluding transfers‐out to the
Town’s capital projects funds.
During the fiscal year, the Town’s General Fund placed $3,578,913 in its recently established
Town’s IRS Section 115 Pension Trust.
The Town’s total capital assets increased by $5,443,859 to $107,542,588 net of depreciation.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of the CAFR contains the following information: Independent Auditor’s
Report, Management’s Discussion and Analysis (this section), the Basic Financial Statements, and
the Required Supplementary Information. The CAFR also includes a Supplementary Information
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section, which presents combining and budgetary schedules for individual non‐major funds. The
Basic Financial Statements are comprised of three components: 1) Government‐Wide Financial
Statements, 2) Fund Financial Statements, and 3) Notes to the Financial Statements. The
Management’s Discussion and Analysis is intended to be an introduction to the Basic Financial
Statements.
Government‐Wide Financial Statements
The Government‐Wide Financial Statements present the financial picture of the Town from an
economic resources measurement focus using the accrual basis of accounting. An economic
resources measurement focus is when a body of financial statements report all inflows, outflows,
and balances affecting or reflecting an entity’s net position.
The Statement of Net Position presents information on all of the Town’s assets and liabilities,
with the difference between the two reported as net position. Over time, increases or decreases
in net position may serve as a useful indicator of whether the financial position of the Town is
improving or deteriorating.
The Statement of Activities presents information showing how the Town’s net position changed
during the most recent fiscal year. All changes in net position are reported as soon as the
underlying event giving rise to the change occurs, regardless of the timing of related cash flows.
Thus, revenues and expenses are reported in this Statement for some items that will only result
in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).
Both of the Government‐Wide Financial Statements distinguish functions of the Town that are
principally supported by taxes and intergovernmental revenues (governmental activities) from
other functions that are intended to recover all or a significant portion of their costs through user
fees and charges (business–type activity). The governmental activities of the Town include public
safety, parks and public works, community development, library, community services, debt
service, and general government. The Town has no business‐type activities for accounting
purposes.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have
been segregated for specific activities or objectives. The Town, like other local governments,
uses fund accounting to ensure and demonstrate compliance with finance‐related legal
requirements. The funds of the Town are segregated into three categories: governmental funds,
proprietary funds, and fiduciary funds.
Governmental funds – The Town’s basic services are reported in governmental funds, which focus
on how money flows into and out of those funds and the balances left at year‐end that are
available for spending. These funds are reported using the modified accrual basis of accounting,
19Draft 12-12-2019
which measures cash and other financial assets that can readily be converted to cash. The
Governmental Fund Statements provide a detailed short‐term view of the Town’s general
government operations and the basic services it provides. Governmental fund information helps
determine whether there are more or fewer financial resources that can be spent in the near
future to finance the Town’s operations. Both the governmental fund balance sheet and the
governmental fund statement of revenues, expenditures, and changes in fund balances provide
a reconciliation to facilitate this comparison between governmental funds and governmental
activities.
Proprietary funds – The Town maintains one type of proprietary fund: internal service funds.
Proprietary funds are reported using the accrual basis of accounting. Internal service funds are
an accounting tool used to accumulate and allocate costs internally among the Town’s various
functions. The Town uses internal service funds to account for its fleet of vehicles, computer
equipment, risk management activities, and other items. The Internal Service funds are included
within governmental activities in the Government‐Wide Financial Statements.
Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of parties
outside the Town. Fiduciary funds are not reflected in the Government‐Wide Financial
Statements because the resources of those funds are not available to support the Town’s own
programs.
Included in fiduciary funds is the Redevelopment Successor Agency private‐purpose Trust Fund
created upon the dissolution of the former Redevelopment Agency (RDA) in 2012. The Trust
Fund was created to hold the assets of the former Redevelopment Agency until they are
transferred for governmental purposes to other entities or distributed to the underlying taxing
jurisdictions in Santa Clara County after the payment of enforceable obligations. Additional
information on the dissolution of the RDA and this fiduciary fund can be found in Note 12 in the
notes to basic financial statements.
Notes to Basic Financial Statements
The notes provide additional information to facilitate a full understanding of the data provided
in the Government‐Wide and Fund Financial Statements. The notes to the Basic Financial
Statements can be found on pages 56‐91 of this report.
ANALYSIS OF GOVERNMENT‐WIDE FINANCIAL STATEMENTS
The Government‐Wide Financial Statements provide long‐term and short‐term information
about the Town’s overall financial condition. This analysis addresses the financial statements of
the Town as a whole, utilizing data from throughout the CAFR to describe the changes between
2018 and 2019.
20Draft 12-12-2019
Net Position Discussion
As shown below, the Town’s combined net position for the year ended June 30, 2019 was $114.8
million, increasing $4.3 $4.4 million over the prior year. The increase is largely attributable to
the excess of governmental revenues over expenditures of approximately $3.0 million and the
excess of revenue above expenses in proprietary funds in the amount of approximately $1.6
million for the year. Net position was restated for the prior fiscal, increasing by $1,206,851 for
amounts placed into trust formerly reported as part of the Fiduciary Funds statements which are
now reported as General Fund restricted assets for the Town’s pension liabilities. An additional
$3.6 million was placed into the pension trust during the fiscal year with investment earnings
bringing the total restricted assets to the balance of approximately $5.0 million for year ended
June 30, 2019. restatement of the amounts placed in trust for the Town’s pension and other
post‐employment benefits (OPEB) this fiscal year. Assets in the trust increased by $3.8 million
from an $1.2 million balance as of June 30, 2018 to a current balance of $5.6 million in restricted
assets. Additionally, another $0.6 million of the total increase in net position was generated by
Town operations. In general, net position can serve as an important indicator of whether the
Town’s overall financial condition is improving or deteriorating over time.
Current and other assets increased $0.7 million for the year. This is primarily due to a $3.8 million
increase in restricted cash for pension and OPEB, and increases in accounts and
intergovernmental and interest receivables totaling approximately $0.9 million. These increases
are offset by decreases in cash and investments for the year of approximately $4.1 million,
reflecting use of cash balances of approximately $9.5 million to invest in Town infrastructure and
2019 2018
Current and Other Assets 79,464,869$ 78,734,160$
Capital Assets 107,542,588 102,098,729
Total Assets 187,007,457$ 180,832,889$
Deferred Outflows ‐ Pension/OPE 13,521,349 19,177,172
Current Liabilities 17,375,600 19,125,206
Long‐Term Liabilities Outstanding 66,148,603 66,492,020
Total Liabilities 83,524,203$ 85,617,226$
Deferred Inflows ‐ Pension/OPEB 2,185,494 3,923,918
Net Position
Net Investment in Capital Assets 107,542,588 102,098,729
Restricted 11,918,688 8,199,598
Unrestricted (4,642,167) 170,590
Total Net Position 114,819,109$ 110,468,917$
Town of Los Gatos
Net Position
Governmental Activites
For the Year Ended June 30, 2019
21Draft 12-12-2019
other special projects. Capital assets increased $5.4 million net of depreciation expense totaling
approximately $3.9 million for the year, much of which is related to the infrastructure
investments made throughout the Town including approximately $3.0 million for the Almond
Grove Street Rehabilitation project, $1.5 million in energy efficiency upgrades made to the
Town’s facilities, and approximately $1.2 in street repair and resurfacing.
Current liabilities decreased $1.8 million primarily due to a decrease in accounts payable, claims
payable, and unearned revenue, offset by an increase in deposits payable.
Long‐term liabilities decreased $300K. The decrease is primarily due to small increases of
approximately $400K in the net pension liability coupled with an approximate $300K increase in
compensated absences offset by decreases of approximately `$1.1 million in the OPEB obligation
required with the implementation of GASB 75. See Note (10 9) and Note (11 10) of Notes to the
Financial Statements for more information.
The largest segment of the Town’s net position, representing $107.5 million of net position,
reflects the net investment in capital assets (e.g. land, buildings, infrastructure, and equipment)
less accumulated depreciation and related outstanding debt used to acquire those assets. The
Town uses these capital assets to provide infrastructure and services to our residents. Therefore,
they do not represent a liquid financial resource to the Town and consequently are not readily
available for funding current obligations.
Restricted net position totaled approximately $11.9 million representing approximately $6.7
million for capital projects and $5.0 million for pension/OPEB obligations.
As of June 30, 2019, unrestricted net position reports a deficit of approximately $4.6 million. The
unrestricted net position reported the prior year was approximately $171K. The decrease in
unrestricted net position resulted largely from the use of approximately $8.0 million in
unrestricted cash balances in the Town’s General Fund Appropriated Reserve (GFAR) fund during
the year to invest in the Town’s infrastructure and equipment.
Governmental Activities
Governmental activities are generally financed through taxes, intergovernmental revenues, and
other non‐exchange revenues. The Statement of Activities is intended to illustrate how the cost
of governmental activities is financed and determine the annual change in net position.
Net position was restated for the prior fiscal, increasing by $1,206,851 for amounts placed into
trust formerly reported as part of the Fiduciary Funds statements which are now reported as
General Fund restricted assets for the Town’s pension liabilities.
22Draft 12-12-2019
2019 2018
Revenues:
Program revenues:
Charges for Services 11,350,345$ 11,982,107$
Operating Grants and Contributions 2,175,277 1,906,224
Capital Grants and Contributions 146,792 348,437
General Revenues:
Property Taxes 17,321,347 15,958,406
Sales Taxes 8,158,152 7,466,253
Franchise Taxes 2,475,916 2,474,814
Other Taxes 2,726,743 2,667,840
Motor Vehicle in Lieu 14,689 16,483
Investment Earnings 1,809,128 333,120
Miscellaneous 2,407,840 622,105
Total Revenues 48,586,229 43,775,789
Expenses:
Police Department 16,635,726 15,545,521
Parks and Public Works 10,627,716 10,047,003
General Government 8,163,991 7,948,968
Community Development 5,064,637 4,667,609
Library Services 3,059,294 3,087,684
Sanitation 684,673 536,296
Total Expenses 44,236,037 41,833,081
Change in Net Position 4,350,192 1,942,708
Net Position, beginning 110,468,917 117,027,779
Prior Period Adjustments ‐ GASB 75/84 (8,501,570)
Net Position, as restated ‐ GASB 75/84 108,526,209
Net Position, Ending 114,819,109$ 110,468,917$
Town of Los Gatos
Statement of Activities
For the Year Ended June 30, 2019
23Draft 12-12-2019
Governmental Activities Revenue Discussion
The Statement of Activities shown above details how the $48.6 million in Governmental Activities
revenue was derived. As categorized in the Statement of Activities as program revenues,
approximately $11.4 million or 22.6% of the revenues were recorded from those who directly
benefited from the program as a charge for service. Another $2 .3 million or 4.7% of the revenues
were sourced from operating/capital grants and contributions. The remaining $34.9 million or
72.7% represents general revenues of the Town, including taxes, intergovernmental revenues,
and other miscellaneous revenues.
Program revenues decreased by approximately $600K from the prior year. This is largely due to
some substantial permit revenues recognized the prior fiscal year as part of a large proposed
residential/commercial development project.
The Town’s general revenues related to Governmental Activities increased $4.8 million from the
prior year due to increases in property taxes, sales taxes, transient occupancy taxes, other taxes,
investment earnings and other miscellaneous revenues.
Property tax is the largest individual revenue source for the Town and collections finished the
year $1.46 million higher than the previous year. This increase was mostly due to an increase in
secured taxes as demand for residential Town property continued due to a strong economy and
new developments driving property values higher.
At $8.2 million, sales taxes represent the second largest individual revenue source for the Town.
Sales taxes increased $0.7 million from the previous year due partially to the first receipt in the
final quarter of the fiscal year of a new additional 1/8 cent District Sales Tax approved by the Los
Gatos voters in the fall of 2018.
Franchise taxes, the Town’s third largest revenue source, finished the year at $2.4 million,
reflecting only a very small increase from the previous fiscal year.
Investment earnings increased substantially ($1.4 million) from the prior year. Three factors
were responsible for this growth: (1) for much of the fiscal year, yields in the Town’s portfolio
were trending upwards; (2) the Town experienced approximately $270K in net investment gains
in its IRS Section 115 Trust during the year; and (3) interest rates fell toward the end of the year
leading to year end substantial ($643K) additional investment gains as a result of the “mark to
market value” procedure required by GASB 31.
Miscellaneous revenues increased by approximately $1.8 from the prior year. The substantial
increase is due to a gain on sale of property, the largest segment of which was the approximate
$1.9 million gain on sale of the Winchester land sale finalized in May 2019.
24Draft 12-12-2019
Governmental Activities Expenditures Discussion
The Town provides residents and visitors with the following functional services: General
Government is comprised of six departments (Town Council, Town Clerk, Town Manager, Town
Attorney, Human Resources, Information Technology, and Finance) providing services in general
governance, information technology, executive management, economic vitality, legal, records
management, risk management, human resources, finance, and accounting.
The Town’s Police Department (public safety) provides general law enforcement, crime
prevention, dispatch and responses to emergency and non‐emergency calls for services. Parks
and Public Works provides engineering, construction and maintenance of public streets, street
lighting, Town owned buildings, parks, and related infrastructure; as well as traffic engineering
and engineering evaluation of private development proposals. Community Development
provides planning and zoning services; and building plan check and inspection; and code
enforcement services. The Library Department provides library, local history and cultural services
to the community.
Total expenditures increased $2.4 $1.2 million from the prior year. The increase was driven
largely by the combination of the following factors:
General Government expenditures increased decreased $215K $3.3 $1.0 million from the
prior year. The largest driver of this change was negotiated salary increases ($310K) to
Town staff, removing Information Technology staff charges from the Internal Service Fund
to the General Fund General Government category ($540K), miscellaneous increases
across programs ($215K) offset by lower OPEB pre‐funding contributions ($500K) due to
lower actually determined contributions, and approximately $300K lower costs of final
leave payouts and changes to compensated absences than the prior year. The chief cause
for this decrease is the payments made to the Town’s IRS Section 115 pension trust in the
prior year were considered expenditures and have been reclassified to General Fund
restricted cash in the current year due to implementation of Governmental Accounting
Standards Board (GASB) 84.
Public safety expenditures grew by approximately $3.3 $1.1 million from the prior year
driven primarily by a FY 18/19 negotiated salary increase and increasing pension
expenses.
Community Development and Parks and Public Works expenditures increased by $380K
$400K and $670K $580K respectively for the year. Expenditure increases were primarily
from negotiated salary increases to Town staff and pass‐through expenditures for private
development activity.
Sanitation (Urban Runoff – Non‐Point Source) costs increased $147K $148K from the prior
year due to increasing efforts to adhere to clean water standards imposed by Federal and
State agencies.
25Draft 12-12-2019
FINANCIAL ANALYSIS OF THE TOWN’S FUNDS
Governmental Funds
Recognizing the financial resources measurement focus, the Town’s Governmental Funds
provide information on near‐term inflows and outflows, and balances of spendable resources.
This information is useful in assessing the Town’s financing requirements and may serve as a
useful measure of a government’s net resources available for spending at the end of the fiscal
year. Unlike the Statement of Activities which does not include transfers, the Governmental
Funds Balance Sheet does include transfers in and out.
Fund Balance – As discussed below, the Town’s Governmental Funds Balance Sheet reports the
following fund balances.
Restricted Fund Balance – The Town has $11.9 million in fund balance classified as restricted to
indicate that it has an externally imposed restriction on how the money may be spent. Of the
$11.9 million restricted fund balance, $5.0 million is in the General Fund representing amounts
placed in an IRS Section 115 trust dedicated as to use for either pension or OPEB expenses. $6.7
million is restricted for capital projects, and $0.2 million for maintenance and repairs.
Committed Fund Balance – The Town has $17.7 million in fund balance classified as committed
to indicate that the Town Council has committed how the money will be spent. Of the $17.7
million committed fund balance, $15.1 million is committed to the General Fund, of which $10.8
million is for budget stabilization and catastrophes and $4.2 million is for pension and OPEB
unfunded liabilities. The remaining committed balances are in the Town’s GFAR capital projects
fund totaling $2.6 million.
Assigned Fund Balance – The Town has $24.1 million in fund balance which is not restricted or
committed and is classified as assigned to indicate the Town Council’s intent to be used for
specific purposes. The largest assigned fund balance is the Reserve for Capital and Special
projects with a balance of approximately $17.6 million which is the primary funding source for
the Town’s five‐year capital improvement plan.
Additional information on the Town’s Fund Balance can be found in Note (8) of the Notes to the
Financial Statements.
Net position was restated for the prior fiscal, the result of decreasing General Fund expenditures
by $1,206,851 for amounts placed into trust formerly reported as General Fund expenditures and
reported as part of the Fiduciary Funds statements which are now reported as General Fund
restricted assets for the Town’s pension liabilities.
Major Governmental Funds results for the year included the following:
26Draft 12-12-2019
REVENUES 2019 2018
Property Taxes 17,359,435 15,992,980
Sales Taxes 8,158,152 7,592,206
Other Taxes 2,726,742 2,667,840
Licenses & Permits 5,173,876 5,937,044
Intergovernmental 2,310,655 2,124,903
Charges for Services 5,584,504 5,395,057
Fines and Forfeitures 510,266 676,212
Franchise Fees 2,475,916 2,474,814
Interest 1,809,164 332,938
Use of Property 32,960 32,206
Other 579,755 640,844
Total Revenues 46,721,425 43,867,044
EXPENDITURES
Current:
General Government 8,004,254 7,563,231
Public Safety 14,945,407 14,423,554
Parks and Public Works 7,962,135 7,125,686
Community Development 4,577,495 4,192,165
Library Services 2,493,617 2,529,017
Sanitation and Other 628,240 521,147
Capital Outlay 7,888,914 9,778,058
Total Expenditures 46,500,062 46,132,858
Excess Revenues over Expenditures 221,363 (2,265,814)
Proceeds from sales of assets 1,912,316 378,219
Transfers in 4,264,131 3,176,760
Tranfers out (3,323,756) (3,880,131)
Total Other Financing Sources (Uses) 2,852,691 (325,152)
Net Changes in Fund Balances 3,074,054 (2,590,966)
Beginning/Ending Fund Balances As Restated 50,560,772 53,151,738
Ending Fund Balances 53,634,826 50,560,772
Total Governmental Funds Revenues, Expenditures and Changes in Fund Balances
Town of Los Gatos
For the Year Ended June 30, 2019
27Draft 12-12-2019
Overall, Governmental Funds revenues finished $2.9 million or 6.1% higher than the prior year,
while expenditures finished $0.8 million or 1.8% lower than the prior year. The net result is that
Governmental Funds income before transfers and other financing sources and uses increased by
$3.7 million. Actual General Fund revenues totaled $43.6 million or nearly 93% of total of the
$46.7 million governmental fund revenues. Total General Fund operating revenues increased by
$3.1 million, resulting from a $1.4 million increase in property tax collections, an approximate
$1.5 million in investment income, and a $0.6 million increase in sales tax collections for the year,
offset by small decreases in license and permits and intergovernmental revenues among others.
Governmental Funds expenditures increased approximately $370K for the year were $0.9 million
lower than the prior year. General Fund expenditures represent approximately $38.0 million of
the total Governmental Fund expenditures of $46.5 million compared to $37.0 $35.8million of
total Governmental Funds expenditures of $43.9 $46.1 million in the prior year. The General
Fund expense increase from the prior year resulted from negotiated salary increases effective
during the year and increased costs for pension expenses. Town pension contributions mandated
by CalPERS resulted in the employer contribution rate increasing 16.4% for the safety plan and
12.4% for the miscellaneous plan from the prior year. The increase decrease in total
Governmental expenditures is largely the result of lower capita l projects costs in the Town’s GFAR
fund of approximately $6.8 million compared to $8.9 million in the prior year offset by increases
across all other government expenditures categories totaling approximately $2.3 million.
Proprietary Funds
The Town’s Proprietary Funds (Internal Service Funds) presented in the Fund Financial
Statements section basically provide the same type of information in the Government‐Wide
Financial Statements and include individual segment information.
Total net position in the Internal Service Funds increased $1.6 million in the current year. This
was mostly due to the removal of budgeted staff to Internal Service funds resulting in the
elimination of net pension/OPEB liabilities of approximately $2.2 million (total pension and OPEB
liabilities for all Town employees are reported in the Town’s Statement of Net Position) and
operating revenue above expenses totaling approximately $2.0 million in the Equipment
Replacement ($600K), Workers Compensation ($222K), Self‐Insurance ($318K), Information
Technology ($657K), and Facilities Maintenance ($775K). This increase was offset by the closing
of two Internal Service Funds (Vehicle Maintenance and Stores Fund) with a transfer of
approximately $1.1 million of residual net position fund balance to the Town’s General Fund.
GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to the Original Budget
Comparing the FY 2018/19 original budget (or adopted) General Fund expenditures of
$42,827,777 (excluding budgeted transfers‐out and debt payments that are reimbursed) to the
final adjusted budget of $45,318,031 indicates a net increase of approximately $2.5 million.
28Draft 12-12-2019
Additions to the original expenditure budget included approved encumbrance carry‐forwards of
$34,452 and additions of $2,333,111 of miscellaneous adjustments approved by Town Council
throughout the fiscal year.
Original Budget +
Approved
Carrry‐
Forwards
+
Prior Year
Encumbrances
+
Misc.
Adjustments &
Mid‐Year
Adjustments
=
Final
Budget
$42,827,777 $0 $99,927 $2,390,327 $45,318,031
The increase in General Fund appropriations occurred primarily from the following selected
budget adjustments made during the fiscal year.
$1,566,866 increase to salary and benefits for FY 2018/19 reflecting raises (2.5%) for all
Town bargaining units as a result of collective bargaining and unrepresented employee
labor agreements approved by Town Council during the year and new contracts for the
Town Manager and Town Attorney.
$600,000 additional appropriations for pass‐through revenues to be used for plan review
and inspection services associated with the Town’s North 40 development.
$80,065 of additional funding reflecting various mid‐year expenditure budget
adjustments including additional funding for Americans with Disabilities Act training
($16K), additional crossing guard services to reflect collective bargaining process with City
of San Jose ($9.5K), well testing ($12K), tuition reimbursements for Police personnel
($11K), receipt of grant funds for bullet proof vests ($5.9K), among others.
$50,000 increase for below market price housing program.
$47,000 for additional tree trimming services.
Approximately $41,000 increase to reflect receipt of a Public Library Foundation grant.
$36,500 for Town branding consultant services.
$27,718 to create a Deputy Town Clerk classification including salary and benefits costs.
$20,000 to the Chamber of Commerce for it to procure Property and Business
Improvement District consulting services.
$15,500 to perform a study and provide recommendations for private sector
requirements for public arts funding.
$15,000 to fund additional services provided by the Town of Los Gatos Chamber of
Commerce.
Variance with the Final General Fund Budget
The General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance‐Budget
and Actual (GAAP) for Fiscal Year Ended June 30, 2019 reports an approximate overall favorable
29Draft 12-12-2019
variance with the final budget of approximately $10.8 million. This favorable variance was
created largely by the following factors:
The reclassification of approximately $3.6 million in pension transfers made to the PARS
trust treated in the adopted budget as expenditures, reclassified and not treated as an
expenditure but as a reclass from General Fund cash to restricted cash for pension
liabilities.
$2.4 million in overall revenue gains above budget as explained in the following analysis
of overall governmental funds revenues.
Approximately $900K of expenditures below budget for FY 18/19 work paid from
General Plan Update fees (a dedicated revenue source which funds this expenditure).
All savings in this budget are carried over to the next fiscal year to be continue the
General Plan Update project.
$1.0 million favorable balance in the General Fund Transfers in Other Financing Sources
reflecting Town Council’s May 2019 decision to close the balance of two Internal Service
Funds (Vehicle Maintenance and Stores Fund), transferring these amounts to the
General Fund as assigned reserves.
Actual revenues ended the fiscal year at $2.5 million above final budgeted revenues. Significant
factors contributing to the variance are summarized as follows:
A favorable variance of $1.4 million in investment earnings for year. The Town received
additional investment earnings for the year in its pension/OPEB trust which was not
anticipated during FY 18/19 budget development and a positive trend of interest rates
leading to additional interest accrued in year end mark to market valuations.
A favorable variance of $602K in property taxes was due to valuation changes caused by
an increase in property values from new construction, renovations, the general strong
demand for housing in the Town of Los Gatos, and an increase in residual pass‐through
taxes arising from the dissolution of the Redevelopment Agencies.
Sales tax collections indicated a favorable variance of $528K reflecting increased
collections from local businesses beyond budget estimates and the effects of initial
receipts of the newly adopted District 1/8 cent sales tax approved by Town voters in
November 2018.
An unfavorable variance of ($374K) in licenses and permits reflecting lower than
anticipated activity related to development activity and business licenses.
An unfavorable variance in fines and forfeitures reflecting staff vacancies for parking
enforcement, and changes in parking enforcement and library software technology
leading to lower fines.
30Draft 12-12-2019
Significant factors affecting actual expenditures include:
Non‐departmental expenditures reflect a $3.7 million favorable variance due to the early
implementation of GASB 84 wherein budgeted transfers out expenditures to the pension
trust were eliminated from year end actual expense as the trust is now accounted for as
a restricted asset in the General Fund. Actual transfers of $3,578,913 were made to the
Town’s IRS Section 115 trust during the fiscal year and this trust has been merged into the
General Fund for reporting purposes hence fund transfer expenditure actuals report $3.5
million less than actual transfer expenditures.
Community Development expenditures reflected a $1.2 million favorable variance
explained largely by staff vacancies with salary and benefit savings of approximately
$347K, and the General Plan Update expenditures being approximately $883K lower than
budgeted because the budget reflected the entire contract amount which has not been
fully executed through the end of the fiscal year.
Public safety expenditures had a favorable variance of approximately $768K reflecting
limited term vacancies in Police Officer, Executive Assistant, Dispatcher, and Parking
Control Officer positions.
Administrative Services reflected a favorable balance of approximately $710K in large
measure due to savings in salary and benefits due to vacancies in Information Technology
and Town Manager’s Office positions.
Parks and Public Works reflects a favorable variance of approximately $685K reflecting
the underfilling of three positions and three Parks and Maintenance Worker position
vacancies.
Library services reflected a favorable variance of $191K due mainly to salary and benefit
savings from staff vacancies in the Librarian position and other temporary vacancies.
CAPITAL ASSETS
As of June 30, 2019, the Town’s investment in capital assets for its governmental activity is
recorded at $107,542,588 (net of accumulated depreciation). The investment in capital assets
includes land, buildings and improvements, infrastructure, construction in progress, and
machinery and equipment. During FY 2018/19, the Town’s approximate $8 million investment
in capital assets for the current year represented approximately 4.3% of total assets for
governmental activities. Major capital asset events during the current fiscal year include the
following:
$5.0 million net increase to Construction in Progress, the majority of that amount ($3.0
million) expended on the Almond Grove Street Rehabilitation Project.
31Draft 12-12-2019
$2.9 million addition to street improvement projects including improvements to major
arterials and neighborhood collector streets to enhance bicycle, pedestrian, and traffic
safety Town‐wide.
$700K in equipment purchases, including approximately $545K in vehicle fleet
replacements, $20K for a skidsteer loader, $18K for a license plate reader, and
approximately $49K for public safety radio communications upgrade.
Approximately $475K expended on building improvements, retaining walls, park
improvements, and parking lot improvement projects.
Additional information on the Town’s capital assets is found in Note 5 of this financial report.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
A product of an ongoing examination of how the Town provides cost‐effective services, the
Town’s budget emphasizes outcomes or results for the community and allows for longer‐term
financial planning decisions.
During the development and adoption of the Town’s FY 2019/20 budget, the Town Council and
management considered the following factors:
The Town continues to focus on priority issues that involve maintaining public safety and
Town infrastructure including streets and parks; and providing library, community
development, and other services. These priorities are coordina ted with other Core Goals that
protect the Town’s fiscal health and ensure cost efficient and effective delivery of Town‐wide
administrative services. The Town’s proactive approach to reducing operating expenditures,
identifying revenue enhancements, and implementing operating efficiencies has been an
effective fiscal approach.
Governmental
Activities
Infrastructure 48,616,553$
Buildings 22,255,726
Land 20,294,810
Equipment 2,657,493
Construction in Progress 13,718,006
107,542,588$
Net Investment in Capital Assets
Town of Los Gatos
For the Year Ended June 30, 2019
32Draft 12-12-2019
Reflecting the continued strength of the local economy, the FY 2019/20 operating budget is
a balanced budget, with use of General Fund reserves dedicated for one‐time uses. The FY
2019/20 Budget maintains existing service levels while recommending modest additions in
strategically important areas. This budget incorporates investments toward future
equipment replacement, additional annual discretionary pension payments, and increased
capacity for the Town’s burgeoning technology infrastructure. The FY 2019/20 budget has
been balanced largely due to revenue enhancements, resulting from the positive economy
and the Town’s growth in the economically sensitive revenue sources such as Property Tax,
Transient Occupancy Tax, and Business Licenses. In regard to expenditures, the Town’s
employer‐paid benefits are expected to increase for the foreseeable future, including
obligated pension contributions, the pre‐funding of premiums for retiree health coverage,
and the increasing costs of current health plans.
Specific trends affecting the fund balance forecast include:
o General property tax collections represent approximately 31.3% (not including the State’s
property tax “backfill” shifts) of the Town’s General Fund revenues. Property tax
collections are expected to increase 3.9% in FY 19/20 from the prior year’s tax collections.
This forecast is based on data from the Santa Clara County Tax Assessor’s Office.
o The Town anticipates a small increase in general sales tax for FY 2019/20. Sales tax
estimates of $8.0 million for FY 2019/20 were budgeted reflecting a 3.3% increase from
the prior year’s adopted sales tax budget. At the November 6, 2018 election, the Town
of Los Gatos residents approved a ballot measure enacting a one‐eighth cent ($0.125%)
sales tax for 20 years, providing about $800,000 annually, requiring Independent Citizens
Oversight with public review of spending, and all revenues controlled locally. The Sales
Tax Measure was effective starting April 1, 2019. Staff incorporated the estimated new
sales tax figures in the FY 2019/20 budget.
o The Town’s investment portfolio experienced a slight increase in its overall weighted
average annual yield, rising from 1.75% at June 30, 2018 to 2.05% at June 30, 2019.
Anticipating increasing interest rates for FY 2019/20 coupled with reduced cash balances
due to capital expenditures, investment earnings are expected to remain at the same level
as the prior fiscal year.
o Transient Occupancy Tax (TOT) revenues are expected to be higher in FY 2019/20 as
personal and business‐related travel is expected to remain strong.
o The Town’s pension plans over the past several decades, like all other CalPERS
participants, have experienced unfavorable investment returns, changes in actuarial
assumptions, and demographic shifts which have outweighed any positive plan
experiences. To address this unfunded status, the Town took proactive steps including
initiating the prefunding of OPEB obligations, budgeting and programming additional
discretionary pension payments to accelerate reduction of unfunded liabilities, and
33Draft 12-12-2019
recently partnering with the Town’s employee groups to eliminate the existing retiree
healthcare benefit for new employees. Even with these proactive steps, the Town
continues to be impacted by the continuing rising cost of pension related benefits. Over
the next five fiscal years, the Town’s five‐year forecast includes increasing pension costs
due to further changes in actuarial assumptions or lowering the discount rate. The
Town’s net pension liability is $22.7 million for the safety cost sharing plan and $30.9
million for the miscellaneous plan based upon data from CalPERS. To illustrate the
sensitivity of the net pension liability to changes in the discount rate, CalPERS estimates
that a 1 % reduction in the discount rate from 7.15% to 6.15% would increase the total
net pension liability for both Miscellaneous and Safety by $25.7 million. Conversely, an
increase in the discount rate from 7.15% to 8.15% would decrease the total net pension
liability for both Miscellaneous and Safety by $21.1 million.
o In addition, CalPERS provides a hypothetical termination liability estimate of the plans
should the contract with CalPERS be terminated. The plan liability on a termination
basis is calculated differently from the plans’ ongoing funding liability. Since no future
employer contributions would be made in the hypothetical termination, benefit
payments are secured by risk‐free assets. For the Miscellaneous plan, a 3.25%
termination return rate results in a $90.9 million termination liability. For the Safety
plan, a 3.25% termination return rate results in a $87.8 million termination liability.
o For detailed information about the Town employees’ retirement plan please refer to
Note 9 of the Notes to Basic Financial Statements Section.
Requests for Information
This financial report is designed to provide residents, taxpayers, customers, investors, and
creditors with a general overview of the Town’s finances and to demonstrate the Town’s
accountability for the money it receives. Questions about this report or requests for any
additional information, should be directed to Stephen Conway, Director of Finance, at 110 East
Main Street, Los Gatos, California, 95030; email at sconway@losgatosca.gov; or phone at (408)
354‐6828.
34Draft 12-12-2019
Basic Financial Statements
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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
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 acco unted 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.
37Draft 12-12-2019
Governmental
Activities
ASSETS
Cash and investments 69,882,523$
Restricted cash and investments 5,114,653
Receivables:
Accounts 1,750,427
Interest 318,578
Intergovernmental 2,138,115
Materials, supplies and deposits 22,821
Long term notes receivables 237,752
Capital Assets:
Nondepreciable 34,012,816
Depreciable, net of accumulated depreciation 73,529,772
Total Assets 187,007,457
DEFERRED OUTFLOWS OF RESOURCES
Pension contributions subsequent to measurement date 5,333,436
Pension related amounts 5,781,277
OPEB contributions subsequent to measurement date 2,406,636
Total Deferred Outflows of Resources 13,521,349
LIABILITIES
Accounts payable 3,349,666
Accrued payroll and benefits 1,415,748
Due to other governments 77,768
Unearned Revenue 4,193,759
Deposits 6,857,798
Claims payable 1,108,233
Long‐term liabilities:
Due within one year:
Compensated absences 372,628
Due in more than one year:
Net OPEB liability 10,055,468
Net pension liabilities 53,627,829
Compensated absences 2,465,306
Total Liabilities 83,524,203
DEFERRED INFLOWS OF RESOURCES
Pension related amounts 1,827,262
OPEB related amounts 358,232
Total Deferred Inflows of Resources 2,185,494
NET POSITION
Net investment in capital assets 107,542,588
Restricted for:
Capital projects 6,695,233
Pension 5,015,316
Lighting and landscape repairs and maintenance 208,139
Total Restricted Net Position 11,918,688
Unrestricted (4,642,167)
Total Net Position 114,819,109$
TOWN OF LOS GATOS
STATEMENT OF NET POSITION
JUNE 30, 2019
The notes to the financial statements are an integral part of this statement.
38Draft 12-12-2019
Net (Expense)
Revenues and
Changes in
Net Position
Operating Capital
Charges for Grants and Grants and Governmental
Functions/Programs Expenses Services Contributions Contributions Activities
Governmental Activities:
General government 8,163,991$ 1,562,683$ ‐$ ‐$ (6,601,308)$
Public safety 16,635,726 1,745,889 826,643 ‐ (14,063,194)
Parks and public works 10,627,716 2,910,936 1,301,152 146,792 (6,268,836)
Community development 5,064,637 4,155,231 ‐ ‐ (909,406)
Library services 3,059,294 9,476 47,482 ‐ (3,002,336)
Sanitation 684,673 966,130 ‐ ‐ 281,457
Total Governmental Activities 44,236,037$ 11,350,345$ 2,175,277$ 146,792$ (30,563,623)
General revenues:
Taxes:
Property taxes 17,321,347
Sales taxes 8,158,152
Franchise taxes 2,475,916
Other taxes 2,726,743
Motor vehicle in lieu 14,689
Investment earnings 1,809,128
Miscellaneous 2,407,840
Total general revenues 34,913,815
Change in Net Position 4,350,192
Net Position ‐ Beginning, as restated 110,468,917
Net Position ‐ Ending 114,819,109$
TOWN OF LOS GATOS
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
Program Revenues
The notes to the financial statements are an integral part of this statement.
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TOWN OF LOS GATOS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
FUND FINANCIAL STATEMENTS &
MAJOR GOVERNMENTAL FUNDS
______________________________________________________________________________
Fund Financial Statements
The Fund Financial Statements only present major funds individually while nonmajor funds are combined in a
single column. Major funds are generally defined as having significant activities or balances in the current year.
Major Governmental Funds:
The Town determined that the following funds were major funds for the year ended June 30, 2018. 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.
41Draft 12-12-2019
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
ASSETS
Cash & Investments 40,178,169$ 12,299,971$ 7,732,508$ 60,210,648$
Restricted Cash & Investments 5,015,316 ‐ ‐ 5,015,316
Receivables:
Accounts 1,389,919 82,022 167,051 1,638,992
Interest 318,578 ‐ ‐ 318,578
Intergovernmental 1,979,601 ‐ 158,514 2,138,115
Other assets 22,821 ‐ ‐ 22,821
Due from other funds 1,443 ‐ ‐ 1,443
Long term notes 159,000 ‐ 78,752 237,752
Total Assets 49,064,847$ 12,381,993$ 8,136,825$ 69,583,665$
LIABILITIES
Accounts payable 1,052,910$ 1,005,965$ 970,902$ 3,029,777$
Accrued payroll and benefits 1,412,428 ‐ 3,320 1,415,748
Due to other governments 27,263 50,363 ‐ 77,626
Unearned revenue 1,371,293 2,757,671 64,855 4,193,819
Deposits 6,857,798 ‐ ‐ 6,857,798
Due to Other Funds ‐ ‐ 1,443 1,443
Compensated absences 372,628 ‐ ‐ 372,628
Total Liabilities 11,094,320 3,813,999 1,040,520 15,948,839
FUND BALANCE
Restricted for:
Capital Outlay ‐ 133,169 6,562,064 6,695,233
Pension 5,015,316 ‐ ‐ 5,015,316
Repairs and Maintenance ‐ ‐ 208,139 208,139
Committed to:
Budget Stabilization 5,419,222 ‐ ‐ 5,419,222
Catastrophic 5,419,222 ‐ ‐ 5,419,222
CalPERS/OPEB 4,232,500 ‐ ‐ 4,232,500
Almond Grove Street Project ‐ 2,579,997 ‐ 2,579,997
Assigned to:
Open Space 562,000 ‐ ‐ 562,000
Parking ‐ 1,460,210 ‐ 1,460,210
Sustainability 140,553 ‐ ‐ 140,553
Capital Projects 13,262,303 4,344,618 ‐ 17,606,921
Carryover Encumbrances 413,729 ‐ ‐ 413,729
Comcast PEG ‐ 50,000 ‐ 50,000
Vehicle Maintenance & Stores Reserve 1,040,375 ‐ ‐ 1,040,375
To Workers' Comp 1,232,654 ‐ ‐ 1,232,654
Compensated Absences 1,232,653 ‐ ‐ 1,232,653
Special Revenue Funds ‐ ‐ 326,102 326,102
Total Fund Balances 37,970,527 8,567,994 7,096,305 53,634,826
Total Liabilities and Fund Balances 49,064,847$ 12,381,993$ 8,136,825$ 69,583,665$
TOWN OF LOS GATOS
GOVERNMENTAL FUNDS
JUNE 30, 2019
BALANCE SHEET
The notes to the financial statements are an integral part of this statement.
42Draft 12-12-2019
53,634,826$
107,542,588
8,454,443
11,114,713
(1,827,262)
2,406,636
(358,232)
Net Pension Liability (53,627,829)$
Net OPEB Liability (10,055,468)
Compensated absences (2,465,306) (66,148,603)
114,819,109$
TOWN OF LOS GATOS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO
THE GOVERNMENT‐WIDE STATEMENT OF NET POSITION‐GOVERNMENTAL ACTIVITIES
JUNE 30, 2019
Fund Balance ‐ Total Governmental Funds
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.
DEFERRED OUTFLOWS OF RESOURCES
Contributions subsequent to the measurement date will not be included in the calculation of the
Town's net pension liability of the plan year included in this report and have been deferred and
reported as deferred outflows of resources.
DEFERRED INFLOWS OF RESOURCES
In the Government‐Wide financial statements certain pension amounts are deferred and amortized
over a period of time, however, in the governmental funds no transactions are recorded.
DEFERRED OUTFLOWS OF RESOURCES
Contributions subsequent to the measurement date will not be included in the calculation of the
Town's net OPEB liability of the plan year included in this report and have been deferred and
reported as deferred outflows of resources.
DEFERRED INFLOWS OF RESOURCES
In the Government‐Wide financial statements certain OPEB amounts are deferred and amortized
over a period of time, however, in the governmental funds no transactions are recorded.
LONG‐TERM LIABILITIES
Long‐term liabilities are not due and payable in the current
period and, therefore, are not reported in the Governmental Funds.
Net Position ‐ Governmental Activities
The notes to the financial statements are an integral part of this statement.
43Draft 12-12-2019
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
REVENUES
Property Taxes 17,321,344$ ‐$ 38,091$ 17,359,435$
Sales Taxes 8,158,152 ‐ ‐ 8,158,152
Other Taxes 2,698,352 ‐ 28,390 2,726,742
Licenses & Permits 4,586,788 181,691 405,397 5,173,876
Intergovernmental 950,380 30,582 1,329,693 2,310,655
Charges for Services 4,643,715 595,509 345,280 5,584,504
Fines and Forfeitures 510,266 ‐ ‐ 510,266
Franchise Fees 2,475,916 ‐ ‐ 2,475,916
Interest 1,682,347 44,161 82,656 1,809,164
Use of Property 32,960 ‐ ‐ 32,960
Other 562,714 17,041 ‐ 579,755
Total Revenues 43,622,934 868,984 2,229,507 46,721,425
EXPENDITURES
Current:
General Government 8,004,254 ‐ ‐ 8,004,254
Public Safety 14,945,407 ‐ ‐ 14,945,407
Parks and Public Works 7,934,869 ‐ 27,266 7,962,135
Community Development 4,577,495 ‐ ‐ 4,577,495
Library Services 2,493,617 ‐ ‐ 2,493,617
Sanitation and Other ‐ ‐ 628,240 628,240
Capital Outlay 38,307 6,860,026 990,581 7,888,914
Total Expenditures 37,993,949 6,860,026 1,646,087 46,500,062
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 5,628,985 (5,991,042) 583,420 221,363
OTHER FINANCING SOURCES (USES)
Proceeds from sales of assets 1,912,316 ‐ ‐ 1,912,316
Transfers in 1,578,911 2,685,220 ‐ 4,264,131
Transfers (out) (2,785,220) (427,616) (110,920) (3,323,756)
Total Other Financing Sources (Uses) 706,007 2,257,604 (110,920) 2,852,691
NET CHANGES IN FUND BALANCES 6,334,992 (3,733,438) 472,500 3,074,054
BEGINNING FUND BALANCES, AS RESTATED 31,635,535 12,301,432 6,623,805 50,560,772
ENDING FUND BALANCES 37,970,527$ 8,567,994$ 7,096,305$ 53,634,826$
TOWN OF LOS GATOS
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
The notes to the financial statements are an integral part of this statement.
44Draft 12-12-2019
NET CHANGE IN FUND BALANCES ‐ TOTAL GOVERNMENTAL FUNDS 3,074,054$
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)9,275,428$
Proceeds from sale of assets (1,912,316)
Gain on sale of assets 1,864,810
Current Year Depreciation (3,783,509) 5,444,413
OPEB PLAN CONTRIBUTIONS AND EXPENSE
In governmental funds, actual contributions to OPEB plans are reported as expenditures in the year
incurred. However, in the Government‐Wide Statement of Activities, only the current year OPEB
expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred
inflows and outflows of resources.523,623
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.(5,961,900)
ALLOCATION ON INTERNAL SERVICE FUND ACTIVITY
Internal service funds are used by management to charge the costs of certain activities to
individual funds. The net revenue of the internal service fund is reported with governmental activities.1,612,796
COMPENSATED ABSENCES EXPENSE
In governmental funds, compensated absences such as vacations and sick leave are expenditures
when taken. However, in the Government‐Wide Statement of Activities, the current year change in
the compensated absences liability is reported.(342,794)
CHANGE IN NET POSITION ‐ GOVERNMENTAL ACTIVITIES 4,350,192$
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
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
The notes to the financial statements are an integral part of this statement.
45Draft 12-12-2019
Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Property Taxes 15,989,131$ 16,718,348$ 17,321,344$ 602,996$
Sales Taxes 7,744,208 7,629,879 8,158,152 528,273
Other Taxes 2,279,500 2,629,500 2,698,352 68,852
Franchise Fees 2,386,910 2,386,910 2,475,916 89,006
Licenses & Permits 4,961,199 4,961,199 4,586,788 (374,411)
Intergovernmental 685,759 845,718 950,380 104,662
Charges for Services 4,491,868 4,596,416 4,643,715 47,299
Fines and Forfeitures 631,400 631,400 510,266 (121,134)
Interest 267,806 267,806 1,682,347 1,414,541
Use of Property 31,959 31,959 32,960 1,001
Other 445,308 466,308 562,714 96,406
Total Revenues 39,915,048 41,165,443 43,622,934 2,457,491
EXPENDITURES
Current:
General Government:
Town Council 223,036 230,280 205,903 24,377
Town Attorney 556,183 597,768 562,542 35,226
Administrative Services 4,290,959 4,641,901 3,931,807 710,094
Non‐Departmental 7,015,300 7,043,251 3,304,002 3,739,249
Total General Government 12,085,478 12,513,200 8,004,254 4,508,946
Public Safety 14,976,514 15,713,469 14,945,407 768,062
Community Development 5,583,158 5,786,501 4,577,495 1,209,006
Parks & Public Works 7,626,361 8,619,883 7,934,869 685,014
Library Services 2,556,267 2,684,979 2,493,617 191,362
Capital Outlay ‐ ‐ 38,307 (38,307)
Total Expenditures 42,827,778 45,318,032 37,993,949 7,324,083
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES (2,912,730) (4,152,589) 5,628,985 9,781,574
OTHER FINANCING SOURCES (USES)
Proceeds from sale of assets 1,000 1,906,000 1,912,316 6,316
Transfers In 538,536 538,536 1,578,911 1,040,375
Transfers Out (2,785,220) (2,785,220) (2,785,220) ‐
Total Other Financing Sources (Uses)(2,246,684) (2,246,684) 706,007 1,046,691
NET CHANGES IN FUND BALANCES (5,159,414)$ (6,399,273)$ 6,334,992 10,828,265$
BEGINNING FUND BALANCE 31,635,535
ENDING FUND BALANCE 37,970,527$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
TOWN OF LOS GATOS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
The notes to the financial statements are an integral part of this statement.
46Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
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.
47Draft 12-12-2019
Governmental
Activities
Internal Service
Funds
ASSETS
Cash & investments 9,671,877$
Restricted cash & investments 99,337
Accounts Receivable 111,495
Total Assets 9,882,709
LIABILITIES
Current Liabilities:
Accounts payable 319,891
Due to other governments 142
Total current liabilities 320,033
Noncurrent liabilities:
Claims payable 1,108,233
Total noncurrent liabilities 1,108,233
Total Liabilities 1,428,266
NET POSITION
Restricted for workers compensation claims 99,337
Unrestricted 8,355,106
Total Net Position 8,454,443$
TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2019
The notes to the financial statements are an integral part of this statement.
48Draft 12-12-2019
Governmental
Activities
Internal Service
Funds
OPERATING REVENUES
Charges for services 3,678,124$
Interest 8
Use of money and property 229,559
Other local taxes 28,390
Other 556,696
Total Operating Revenues 4,492,777
OPERATING EXPENSES
Salaries and related expenses 413
Depreciation 558
Services and Supplies 4,145,774
Total Operating Expenses 4,146,745
Operating Income 346,032
Transfer of net position to General Fund (1,040,375)
Transfer of pension amounts to General Fund 2,207,139
Transfers in (Note 4)450,000
Transfers out (Note 4)(350,000)
Net transfers 1,266,764
Change in Net Position 1,612,796
BEGINNING NET POSITION 6,841,647
ENDING NET POSITION 8,454,443$
TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
The notes to the financial statements are an integral part of this statement.
49Draft 12-12-2019
Governmental
Activities
Internal Service
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 4,519,095$
Payments to suppliers (4,060,882)
Payments to employees (2,243,024)
Claims paid (495,834)
Net cash provided (used) by operating activities (2,280,645)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers In/(Out)1,266,764
Net cash provided (used) by noncapital financing activities 1,266,764
Net Increase(Decrease) in Cash and Investments (1,013,881)
Cash and investments ‐ beginning of year 10,785,095
Cash and investments ‐ end of year 9,771,214$
FINANCIAL STATEMENT PRESENTATION
Cash & investments 9,671,877$
Restricted cash & investments 99,337
Total 9,771,214$
Reconciliation of Operating Income to Cash Flows
from Operating Activities:
Operating Income 346,032$
Adjustments to reconcile operating income to cash flows
from operating activities:
Depreciation 558
Change in assets and liabilities:
Receivables, net 26,318
Material and supplies 28,011
Deferred outflows of resources 588,282
Net pension liabilities (2,748,907)
Deferred inflows of resources (46,460)
Accounts payable 56,739
Accrued payroll and benefits (35,526)
Claims payable (495,834)
Due to other government 142
Cash Flows From Operating Activities (2,280,645)$
TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
The notes to the financial statements are an integral part of this statement.
50Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
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.
51Draft 12-12-2019
Total
Private
Purpose Trust
Funds
ASSETS
Cash and investments (Note 2)2,262,128$
Restricted cash and investments (Note 2)2,003,810
Accounts receivable 8,750
Loans receivable (Note 3)575,425
Capital assets (Note 5):
Nondepreciable 5,257,422
Depreciable, net of accumulated depreciation 1,525,393
Total Assets 11,632,928
LIABILITIES
Accounts payable 3,184
Due to other governments (Note 13)112
Interest payable 306,297
Long‐term debt (Note 6):
Due within one year 1,195,000
Due in more than one year 15,749,200
Total Liabilities 17,253,793
NET POSITION
Held in trust (5,620,865)
Total Net Position (5,620,865)$
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2019
The notes to the financial statements are an integral part of this statement.
52Draft 12-12-2019
Total
Private
Purpose Trust
Funds
ADDITIONS
Property taxes 1,945,763$
Investment earnings 53,998
Gifts, bequests and endowments 82,213
Other 1,909,073
Total Additions 3,991,047
DEDUCTIONS
Program expenses of former RDA 1,920,655
Interest and fiscal agency expenses of RDA 701,449
Library services 69,029
Capital outlay 21,048
Depreciation expense 101,692
Total Deductions 2,813,873
CHANGE IN NET POSITION 1,177,174
NET POSITION ‐ BEGINNING OF YEAR (6,798,039)
NET POSITION ‐ END OF YEAR (5,620,865)$
‐$
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
The notes to the financial statements are an integral part of this statement.
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54Draft 12-12-2019
Notes to Basic Financial Statements
55Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
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, 2019 was 30,988.
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 solely to the
Town.
C. Description of Joint Ventures and Public Entity Risk Pool
As described in Note 11, the Town participates in two joint ventures and public entity risk pool activities
through formally organized separate legal entities. The financial activities of the Pooled Liability Assurance
Network Joint Powers Authority (PLAN JPA) and the Local Agency Workers’ Compensation Excess Joint
Powers Authority (LAWCX) are not included in the accompanying basic financial statements as boards are
separate from and independent of the Town administration.
D. Basis of Presentation
The Town’s Basic Financial Statements are prepared in conformity with accounting principles generally
accepted in the United States of America. The Government Accounting Standards Board (“GASB”) is the
acknowledged standard setting body for establishing accounting and financial reporting standards followed
by governmental entities in the U.S.A.
The accompanying financial statements are presented on the basis set forth in Government Accounting
Standards Board Statements No. 34, Basic Financial Statements—and Management’s Discussion and
Analysis—for State and Local Governments, No. 36, Recipient Reporting for Certain Non‐exchange Revenues,
an Amendment of GASB Statement No. 33, No. 37, Basic Financial Statements—and Management’s
Discussion and Analysis—for State and Local Governments; Omnibus, and No. 38, Certain Financial
Statement Note Disclosures.
These Statements require that the financial statements described below be presented.
56Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Government‐wide Statements: The Statement of Net Position and the Statement of Activities display
information about the primary government (the Town). These statements include the financial activities of
the overall Town government, except for fiduciary activities. Eliminations have been made to minimize the
double counting of internal activities. However, interfund services provided and used are not eliminated in
the process of consolidation. These statements present governmental activities of the Town. Governmental
activities generally are financed through taxes, intergovernmental revenues, and other non‐exchange
transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each
function of the Town’s governmental activities. Direct expenses are those that are specifically associated
with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues
include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and
contributions that are restricted to meet the operational needs of a particular program and (c) fees, grants
and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues
that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the Town's funds,
including fiduciary funds and blended component units. Separate statements for each fund category—
governmental, proprietary and fiduciary—are presented. The emphasis of fund financial statements is on
major individual governmental funds, each of which is displayed in a separate column. All remaining
governmental funds are aggregated funds and reported as non‐major funds.
Internal service funds of the Town (which provide services primarily to other funds of the Town) are
presented, in summary form, as part of the proprietary fund financial statements. Since the principal users
of the internal services are the Town’s governmental activities, financial activities of the internal service
funds are presented in the governmental activities column when presented at the government‐wide level.
The costs of these services are allocated to the appropriate function/program in the Statement of Activities.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions
associated with the principal activity of the fund. Exchange transactions are those in which each party
receives and gives up essentially equal values. Non‐operating revenues, such as subsidies and investment
earnings, result from non‐exchange transactions or ancillary activities.
E. Major Funds
GASB defines major funds and requires that the Town’s major governmental funds be identified and
presented separately in the fund financial statements. All other funds, called non‐major funds, are
combined and reported in a single column, regardless of their fund‐type.
Major funds are defined as funds that have assets, deferred outflows of resources, liabilities, deferred
inflows of resources, revenues or expenditures/expenses equal to ten percent of their fund‐type total and
five percent of the grand total. The General Fund is always a major fund. The Town may also select other
funds it believes should be presented as major funds.
57Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
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 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 Project Private Purpose Trust Fund was established to provide for the servicing of
donations, bequests, grant monies and expenditures to the history project partnership of Los
Gatos Public Library and the Museum of Los Gatos.
Clelles Ness Private Purpose Trust Fund was established by Ansten R. Ness, M.D. and the Board
of Library Trustees for the Town of Los Gatos, as a memorial to his wife, Clelles Ness to use the
income and principal of the trust estate to provide materials and services not ordinarily available
from public funds.
Susan E. (Betty) McClendon Private Purpose Trust Fund is a bequest to the Los Gatos Public
Library from the estate of Susan McClendon 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.
58Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
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.
Pension Trust Fund accounts for the assets accumulated for the purpose of funding future increases in
pension contribution
F. Basis of Accounting
The government‐wide, proprietary and fiduciary fund financial statements are reported using the economic
resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned
and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take
place.
Governmental funds are reported using the current financial resources measurement focus and the modified
accrual basis of accounting. Under this method, revenues are recognized when measurable and available.
The Town considers property tax revenues reported in the governmental funds to be available if the
revenues are collected or are reasonably expected to be collected within sixty days after year‐end. For
revenues other than property taxes, the Town generally applies the sixty‐day period rule but would make
exceptions considering the measurable and available criteria. Expenditures are recorded when the related
fund liability is incurred, except for principal and interest on general long‐term debt, which is recognized
upon becoming due and payable; and except for claims, judgments and compensated absences, which are
recognized when estimable and probable. Governmental capital asset acquisitions are reported as
expenditures in governmental funds. Proceeds of governmental long‐term debt and acquisitions under
capital leases are reported as other financing sources.
Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental revenues,
and interest revenue. Fines, forfeitures, licenses and permits, and charges for services are not susceptible to
accrual because they are not measurable until received in cash.
Non‐exchange transactions, in which the Town gives or receives value without directly, receiving or giving
equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue
from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants,
entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been
satisfied.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Town may fund programs with a combination of cost‐reimbursement grants, categorical block grants
and/or general revenues. Thus, both restricted and unrestricted net position may be available to finance
program expenditures. The Town’s policy is to first apply restricted grant resources to such programs
followed by general revenues as necessary.
Certain indirect costs are included in program expenses reported for individual functions and activities.
The Town applies all applicable GASB pronouncements for certain accounting and financial reporting
guidance including those applicable to accounting and reporting for proprietary operations. In December of
2010, GASB issued GASBS No. 62, Codification of Accounting and Financial Reporting Guidance Contained in
Pre‐November 30, 1989 FASB and AICPA Pronouncements. This statement incorporates pronouncements
issued on or before November 30, 1989 into GASB authoritative literature. This includes pronouncements
by the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinions (APB), and the
Accounting Research Bulletins of the American Institute of Certified Public Accountants' (AICPA) Committee
on Accounting Procedure, unless those pronouncements conflict with or contradict with GASB
pronouncements.
Pension ‐ For purposes of measuring the net pension liability and deferred outflows/inflows of resources
related to pensions, and pension expense, information about the fiduciary net position of the Town’s
California Public Employees’ Retirement System (CalPERS) plans (the Plans) and additions to/deductions
from the Plans’ fiduciary net position have been determined on the same basis as they are reported by
CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized
when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of
resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Town’s
plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been
determined on the same basis. For this purpose, benefit payments are recognized when currently due and
payable in accordance with the benefit terms. Investments are reported at fair value. Generally accepted
accounting principles require that the reported results must pertain to liability and asset information within
certain defined timeframes. For this report, the following timeframes are used:
Valuation Date June 30, 2017
Measurement Date June 30, 2018
Measurement Period July 1, 2017 to June 30, 2018
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).
60Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction. In determining this amount, three valuation techniques are available:
Market approach ‐ This approach uses prices generated for identical or similar assets or liabilities. The
most common example is an investment in a public security traded in an active exchange such as the
NYSE.
Cost approach ‐ This technique determines the amount required to replace the current asset. This
approach may be ideal for valuing donations of capital assets or historical treasures.
Income approach ‐ This approach converts future amounts (such as cash flows) into a current discounted
amount.
Each of these valuation techniques requires inputs to calculate a fair value. Observable inputs have been
maximized in fair value measures, and unobservable inputs have been minimized.
Materials, Supplies and Deposits ‐ These assets are held for consumption and are stated at cost using the
first‐in, first‐out method. The costs are recorded as expenditures at the time the item is consumed.
Interfund Receivables and Payables ‐ Transactions between funds that are representative of
lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “advances
to/advances from other funds”. All other outstanding balances b etween 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 exceed $10,000.
As required by GASB, the Town depreciates capital assets with limited useful lives over their estimated useful
lives. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the
life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata
share of the cost of capital assets. The Town depreciates using the straight line method which means the
cost of the asset is divided by its expected useful life in years and the result is charged to expense each year
until the asset is fully depreciated.
61Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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
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 25.0%
For employees under contract 60‐119 months 37.5%
For employees under contract 120 months or more 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:
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 planned retirements are reported in the fund financial statements.
Beginning Balance $ 2,445,237
Addition 2,140,474
Payments (1,747,777)
Ending Balance $ 2,837,934
Compensated Absences Current Portion $ 372,628
62Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Unearned Revenue ‐ Unearned revenue arises when assets are received before revenue recognition criteria
have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded
as unearned revenue. In the governmental fund financial statements, receivables associated with non‐
exchange transactions that will not be collected within the availability period have been recorded as
deferred inflows from unavailable revenue.
Long‐Term Liabilities ‐ In the government‐wide financial statements and private‐purpose trust funds long‐
term debt and other long‐term obligations are reported as liabilities in the applicable statement of net
position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life
of the bonds using the straight‐line method. Bonds payable are reported net of the applicable bond premium
or discount.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well
as bond issuance costs, during the current period. The face amount of debt issued is reported as other
financing sources. Premiums received on debt issuances are reported as other financing sources while
discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld
from the actual debt proceeds received, are reported as debt service expenditures.
Deferred Outflows/Deferred Inflows of Resources ‐ Deferred outflows of resources is a consumption of net
position by the Town that is applicable to a future reporting period, for example, contributions to pension
and OPEB plans that are after the actuarial measurement date.
Deferred inflows of resources is an acquisition of net position by the Town that is applicable to a future
reporting period, for example, unavailable revenue.
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 unassi gned 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:
63Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Non‐spendable includes fund balance amounts that cannot be spent either because it is not in spendable
form or because of legal or contractual constraints.
Restricted includes fund balance amounts that are constrained for specific purposes which are externally
imposed by providers, such as creditors or amounts constrained due to constitutional provisions or
enabling legislation.
Committed includes fund balance amounts that are constrained for specific purposes that are internally
imposed by the government through Council Resolution which is a formal action of the highest level of
decision making authority and does not lapse at year‐end. Committed fund balances are imposed by the
Town Council.
Assigned includes fund balance amounts that are intended to be used for specific purposes that are
neither considered restricted or committed. Fund balance may be assigned by the Town Manager or the
Finance Director.
Unassigned includes fund balances within the funds which have not been classified within the above
mentioned categories. The general fund is the only fund that reports a positive unassigned fund balance
amount. In other governmental funds it is not appropriate to report a positive unassigned fund balance
amount. However, in governmental funds other than the general fund, if expenditures incurred for specific
purposes exceed the amounts that are restricted, committed, or assigned to those purposes, it may be
necessary to report a negative unassigned fund balance in that fund.
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 g enerally 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 DATE, 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.
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.
64Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
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:
Secured Unsecured
Valuation/lien dates January 1 January 1
Levy dates January 1 January 1
Due dates (delinquent as of) 50% on November 1 (December 10) March 1 (August 31)
50% on February 1 (April 10)
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, 2019.
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.
65Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
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. 83, Certain Asset Retirement Obligations – The objective of this statement is to
provide financial statement users with information about asset retirement obligations (AROs) that
were not addressed in GASB standards by establishing uniform accounting and financial reporting
requirements for these obligations. The requirements of this statement did not apply to the Town
for the current fiscal year.
GASB Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct
Placements – The objective of this statement is to improve consistency in the information that is
disclosed in notes to government financial statements related to debt, including direct borrowings
and direct placements, and to provide financial statement users with additional essential
information about debt. The requirements of this statement did not apply to the Town for the
current fiscal year.
GASB Statement No. 84, Fiduciary Activities – The objective of this Statement is to improve guidance
regarding the identification of fiduciary activities for accounting and financial reporting purposes
and how those activities should be reported. The Town implemented this statement in the fiscal
year ending June 30, 2019 by combining the Pension Trust Fiduciary Fund with the General Fund.
NOTE 2 ‐ CASH AND INVESTMENTS
The Town pools cash from all sources and all funds except Restricted Cash and Restricted Investments so that it
can be invested at the maximum yield, consistent with 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 next in the order of liquidity, since they may be withdrawn without
penalty. U.S. Treasuries, U.S. Agencies and Certificates of Deposit are the Town’s least liquid investments, since
they must be held to maturity.
Cash Deposits with Banks and Custodial Credit Risk ‐ California Law requires banks and savings and loan
institutions to pledge government securities with a fair value of 110% of the Town’s cash on deposit, first trust
deed mortgage notes with a value of 150% of the deposit, or letters of credit issued by the Federal Home Loan
Bank of San Francisco with a value of 100% of the deposit as collateral. Under California Law this collateral is
held in the Town’s name and places the Town ahead of general creditors of the institution. The Town’s cash
deposits are collateralized under this law.
The bank balance of the Town’s cash deposits was $13,359,592 and the book balance was $13,380,172 as of
June 30, 2019. The bank balance and the carrying amount differed due to deposits in transit and outstanding
checks.
66Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 2 ‐ CASH AND INVESTMENTS, CONTINUED
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 is
under the day to day administration of the State Treasurer. As of June 30, 2019, the Town had approximately
$6.4 million in LAIF. Of that amount, 98.23% is invested in non‐derivative financial products and 1.77% in
structured notes and asset‐backed securities. These investments are described as follows:
1. Structured Notes are debt securities (other than asset‐backed securities) whose cash flow characteristics
(coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have
embedded forwards or options.
2. Asset‐Backed Securities, the bulk of which are mortgage‐backed securities, entitle their purchasers to
receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool
of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.
Risk Disclosures
Interest Rate Risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to
the changes in market interest rates. One of the ways that the Town manages its exposure to interest rate risk
is by purchasing a combination of shorter term and longer term investments and by timing cash flows from
maturities so that a portion of the portfolio is maturing or co ming 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 risk is measured by the assignment of
a rating by a nationally recognized statistical rating organization. The summary of cash and investments table on
the following page shows the minimum rating under the actual rating of the Town’s investments at year end.
67Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 2 ‐ CASH AND INVESTMENTS, CONTINUED
Risk Disclosures, Continued
Custodial Credit Risk is the risk that in the event of the failure of the counterparty (e.g., broker‐dealer) to a
transaction, a government will not be able to recover the value of its investment or collateral securities that are
in the possession of another party. The Town’s money market fund and investment in LAIF are not categorized
as to custodial credit risk. Its U.S. Government Agency Securities investment is held by a third‐party financial
institution under the third party’s trust department’s name and thus not exposed to custodial credit risk.
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, 2019.
The following table summarizes the Town’s policy related to maturities and concentration of investments:
The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30, 2019:
Investment Type/Cash Deposit
Available for
Operations Restricted Total
Concentration
of Credit Risk
Minimum
Rating
Input
level
Time to
Mature
(Years)
Weighted
Average
Maturity
US Treasury Securities 14,697,063$ ‐$ 14,697,063$ 25.02% Aaa 2 0‐2 0.64 years
US Instrumentality Security 30,897,721 ‐ 30,897,721 52.60% Aaa 2 0‐4 0.85 years
Corporate Securities 6,692,423 ‐ 6,692,423 11.39% A1 2 0‐3 0.72 years
Government Securities Money
Market Mutual funds 29,757 ‐ 29,757 0.05% Not Rated 2 n/a n/a
LAIF 6,425,281 ‐ 6,425,281 10.94% Not Rated n/a n/a n/a
Total investments 58,742,245 ‐ 58,742,245 100.00%
Cash Deposit with Banks 13,380,172 99,337 13,479,509
Money Market Accounts 17,384 2,003,810 2,021,194
Investment held in pension trust 5,015,316 5,015,316
Cash on hand at Town 4,850 ‐ 4,850
Town Cash and Investments 72,144,651$ 7,118,463$ 79,263,114$
Investment Type
Maximum
Maturity
Maximum
Portfolio
Percentage
US Treasury Obligations 5 years None
US Agency Obligations 5 years None
Bankers Acceptances 180 days 30%
Commercial Paper 270 days 25%
Medium Term Notes 5 years 30%
Collateralized CD's 5 years 30%
CA LAIF N/A 65m
Money Market Funds N/A 20%
68Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 2 ‐ CASH AND INVESTMENTS, CONTINUED
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.
NOTE 3 ‐ LONG‐TERM NOTES RECEIVABLE
The Town had the following long‐term notes receivable as of June 30, 2019 :
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, 2019, no interest or principal payments
have been made.
Total Town Fiduciary Funds Total
Cash and Investments available for operations 69,882,523$ 2,262,128$ 72,144,651$
Restricted cash and investments 5,114,653 2,003,810 7,118,463
Total cash and investments 74,997,176$ 4,265,938$ 79,263,114$
Description Interest Rate Maturity Balance
General Fund:
Rehab Loan to Charities Various Various 159,000$
Total General Fund 159,000
Community Development Block Grant Fund (CDBG):
Housing Conservation Loans 0‐5%Various 78,752
Total CDBG 78,752
Total Long Term Notes Receivable ‐ Government‐Wide Statement of Net Position 237,752
Successor Agency Affordable Housing
Project Match Various Various 575,425
Total Long Term Notes Receivable 813,177$
69Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
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 pay for
capital projects or capital outlays, lease or debt service payments, operating expenses and low and moderate‐
income housing projects. Transfers between funds during the fiscal year ended June 30, 2019 were as follows:
NOTE 5 ‐ CAPITAL ASSETS
Changes in the Town’s capital assets during the fiscal year are shown as follows:
Transfer In Transfer Out
General Fund 1,578,911$ 2,785,220$
Appropriated Reserve Fund 2,685,220 427,616
Non‐major Gov't Funds 110,920
Internal Service Funds 450,000 1,390,375
Total Transfers 4,714,131$ 4,714,131$
Balance at Adjustments Transfers and Balance at
June 30, 2018 and Additions Retirements June 30, 2019
Capital Assets not being Depreciated
Land 20,333,684$ ‐$ (38,874.00)$ 20,294,810$
Construction in Progress 10,564,654 4,988,969 (1,835,617) 13,718,006
Total Capital Assets not being Depreciated 30,898,338 4,988,969 (1,874,491) 34,012,816
Capital Assets being Depreciated
Buildings and Improvements 29,690,945 381,878 106,149 30,178,972
Equipment & Vehicle 11,420,005 324,675 (259,919) 11,484,761
Infrastructure ‐ All Other 22,718,449 827,530 1,729,468 25,275,447
Infrastructure ‐ Streets 60,665,806 2,752,376 (403,382) 63,014,800
Total Capital Assets being Depreciated 124,495,205 4,286,459 1,172,316 129,953,980
Less Accumulated Depreciation for:
Buildings and Improvements 7,276,863 646,383 7,923,246
Equipment & Vehicle 8,459,985 618,571 (251,288) 8,827,268
Infrastructure ‐ All Other 5,734,439 697,195 ‐ 6,431,634
Infrastructure ‐ Streets 31,823,527 1,821,915 (403,382) 33,242,060
Total accumulated depreciation 53,294,814 3,784,064 (654,670) 56,424,208
Net Capital Assets being Depreciated 71,200,391 502,395 1,826,986 73,529,772
Governmental Activity Capital Assets, Net 102,098,729$ 5,491,364$ (47,505)$ 107,542,588$
70Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 5 ‐ CAPITAL ASSETS, CONTINUED
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:
Changes in the RDA Successor Agency trust fund capital assets during the fiscal year are shown as follows:
Depreciation
Governmental Activities Expense
General Government 180,838$
Community Services 53,828
Public Safety 474,004
Parks & Public Works 2,658,132
Library 376,926
Sanitation 40,336
Total Governmental Activities 3,784,064$
Balance at Adjustments Transfers and Balance at
June 30, 2018 and Additions Retirements June 30, 2019
Capital Assets not being Depreciated
Land 5,257,422$ ‐$ ‐$ 5,257,422$
Total Capital Assets not being Depreciated 5,257,422 ‐ ‐ 5,257,422
Capital Assets being Depreciated
Buildings and Improvements 4,067,708 ‐ ‐ 4,067,708
Total Capital Assets being Depreciated 4,067,708 ‐ ‐ 4,067,708
Less Accumulated Depreciation for:
Buildings and Improvements 2,440,624 101,691 ‐ 2,542,315
Total accumulated depreciation 2,440,624 101,691 ‐ 2,542,315
Net Capital Assets being Depreciated 1,627,084 (101,691) ‐ 1,525,393
Successor Agency Capital Assets, Net 6,884,506$ (101,691)$ ‐$ 6,782,815$
71Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 6 ‐ LONG‐TERM OBLIGATIONS
The Town generally incurs long‐term debt to finance projects or purchase assets, which will have useful lives
equal to or greater than the related debt. As of February 1, 2012, the Town transferred long‐term debt issued
by the Redevelopment Agency to the Successor Agency trust as a part of the RDA dissolution. The following
summarizes the changes in long‐term debt in the Successor Agency trust fund during the fiscal year ended June
30, 2019:
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, $15,675,000 of 2010 COPs were issued to
finance the acquisition, construction, and improvement of a library on the Town’s Civic Center campus, to be
owned and operated by the Town. Principal payments are due annually on August 1, with interest payments due
semi‐annually on February 1 and August 1.
To assist the Town in paying the cost of acquisition and construction of various projects, the Town and its
Redevelopment Agency entered into lease and reimbursement agreements in 2002 and 2010. Under the
agreements, the Agency will use available net tax increment revenues resulting from the projects’ effect on land
values to repay the Town for all lease payments made by the Town to the Agency under the lease agreements
for the projects. Net tax increment revenues are all taxes allocated to and paid into the Successor Agency private‐
purpose trust fund.
Future debt service requirements of the 2002 and 2010 Certificates of Participation are as follows:
Long Term Debt
Interest
Rate
Maturity
Date
Original
Issue
Beginning
Balance Deletion
Ending
Balance
Due Within
One Year
Due in More
Than One
Year
2002 COP 2.5 ‐5% 8/1/2031 10,725,000$ 6,780,000$ 350,000$ 6,430,000$ 365,000$ 6,065,000$
2010 COP 2.5 ‐ 4.25% 8/1/2028 15,675,000 10,900,000 800,000 10,100,000 830,000 9,270,000
Subtotal COP 26,400,000 17,680,000 1,150,000 16,530,000 1,195,000 15,335,000
Premiums 735,095 451,855 37,655 414,200 ‐ 414,200
Total Long‐Term Debt 27,135,095$ 18,131,855$ 1,187,655$ 16,944,200$ 1,195,000$ 15,749,200$
Fiscal Year
Ended June 30,Principal Interest Total
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 1,355,000 538,713 1,893,713
2024 1,415,000 479,550 1,894,550
2025‐2029 8,155,000 1,396,500 9,551,500
2030‐2032 1,860,000 142,500 2,002,500
Total COP Debt Service 16,530,000$ 4,525,631$ 21,055,631$
72Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 6 ‐ LONG‐TERM OBLIGATIONS, CONTINUED
The Successor Agency must maintain a required amount of cash and investments with the trustee under the
terms of the COPs’ debt agreements. These funds are pledged as reserves to be used if the Successor Agency
fails to meet its obligations under the debt agreements and totaled $1,961,718 as of June 30, 2019. The California
Government Code requires these funds to be invested in accordance with Town ordinances, bond indentures or
State statues. All these funds have been invested as permitted under the Code.
NOTE 7 ‐ SPECIAL ASSESSMENT DISTRICT DEBT WITHOUT COMMITMENT
Special assessment districts are established in various parts of the Town to provide improvements to properties
located in those districts. Properties are assessed for the cost of the improvements. These assessments are
payable over the term of the debt issued to finance the improvements and are used to pay debt service on debt
issued to fund the improvements.
The Town is acting only as an agent and has no legal liability with respect to the payment of any indebtedness
of the Downtown Parking Assessment District. There was no non‐obligated debt outstanding as of June 30,
2019.
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.
73Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 8 ‐ FUND BALANCES, CONTINUED
As of June 30, 2019, fund balances were classified as follows:
Restricted
Capital Outlay funded from storm drain fees, construction taxes and debt proceeds are legally restricted for
major capital projects.
Repairs and Maintenance reflects legally restricted balances for repairs and maintenance of lighting and
landscape property and open space property that are financed with special tax assessments on the benefiting
property.
Pension amounts are cash and investments held for the purpose of paying for the pension liabilities. Monies are
held in an IRS Section 115 Trust over which the Town has control.
Beginning
Balance Adjustments
Adjusted
Beginning
Balance Additions Deletions
Ending
Balance
Restricted for
Capital Outlay 6,794,063$ ‐ 6,794,063 374,937 473,767 6,695,233$
Pension ‐ 1,206,851 1,206,851 3,808,465 ‐ 5,015,316
Repairs and Maintenance 198,684 ‐ 198,684 9,455 ‐ 208,139
Committed to:‐ ‐
Budget Stabilization 5,037,243 ‐ 5,037,243 381,979 ‐ 5,419,222
Catastrophic 5,037,243 ‐ 5,037,243 381,979 ‐ 5,419,222
CalPERS/OPEB Reserve 2,878,913 ‐ 2,878,913 1,353,587 ‐ 4,232,500
Almond Grove Street Project 5,571,087 ‐ 5,571,087 ‐ 2,991,090 2,579,997
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 129,090 ‐ 129,090 ‐ 129,090 ‐
Capital Projects 19,034,405 ‐ 19,034,405 ‐ 1,427,484 17,606,921
Carryover Encumbrances 99,927 ‐ 99,927 313,802 ‐ 413,729
Comcast PEG 50,000 ‐ 50,000 ‐ ‐ 50,000
Vehicle Maintenance &
Stores Reserve ‐ ‐ ‐ 1,040,375 ‐ 1,040,375
Workers' Compensation ‐ ‐ ‐ 1,232,654 ‐ 1,232,654
Compensated Absences 2,122,512 ‐ 2,122,512 ‐ 889,859 1,232,653
Special Revenue Funds 237,991 ‐ 237,991 88,111 ‐ 326,102
Total Fund Balance ‐ All
Governmental Funds 49,353,921$ ‐ 50,560,772 4,792,487 5,437,523 53,634,826$
74Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
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.
CalPERS/OPEB Reserve committed fund balance will be used to fund net pension liabilities for the Town's
Miscellaneous and Safety pension plans administered by CALPERS. In the fiscal year ending June 30, 2018 the
Town approved an update to its General Fund reserve policy providing to the extent possible that additional
annual deposits be calculated and placed into this reserve with the goal of moving the payment of the unfunded
pension liability from a 29 year to a 20 year amortization period and reducing the net OPEB liability.
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.
Parking assigned fund balance will be used to mitigate parking issues within the Town.
Sustainability assigned fund balance will be used to fund ongoing sustainability initiatives and programs.
Capital 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.
75Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 8 ‐ FUND BALANCES, CONTINUED
Comcast PEG assigned fund balance will be used to fund capital improvements linked to the televising of council
and planning commission meetings.
Vehicle Maintenance & Stores Reserve assigned fund balance is to be used for maintaining the Town’s fleet and
providing mail and printing services.
To Workers’ Comp assigned fund balance is to be used for future payments to employees due to illness or injury
as a result of being employed by the Town.
Compensated Absences assigned fund balance will be used for vacation and sick‐pay benefits owed to employees
as of June 30, 2019 that were not an obligation of the General Fund because of their long‐term nature.
Special Revenue Fund assigned fund balance will be used for the activities of the respective revenue funds.
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN
(a) General Information about the Pension Plans
Plan Description ‐ All qualified employees are eligible to participate in the Town’s pooled Safety Plan, a cost‐
sharing multiple‐employer defined benefit pension plan and the Town’s Miscellaneous (all other) Plan, an agent
multiple‐employer defined benefit pension plan administered by the California Public Employees' Retirement
System (CalPERS), which acts as a common investment and administrative agent for its participating member
employers. Benefit provisions under the Plans are established by State statute and Town resolution. CalPERS
issues publicly available reports that include a full description of the pension plans regarding benefit provisions,
assumptions and membership information that can be found on the CalPERS website. Audited financial
statements of CalPERS can be obtained from its website https://www.calpers.ca.gov/page/forms‐publications.
The Town relies upon actuarial and investment data provided by CalPERS for inclusion and analysis in this report.
Benefits Provided ‐ CalPERS provides service retirement and disability benefits, annual cost of living adjustments
and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on
years of credited service, equal to one year of full time employment. Members with five years of total service
are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non‐duty disability
benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, Lump Sum,
Summary of Pension Amounts
Miscellaneous Plan Safety Plan Total Plans
Deferred Employer Pension Contributions 3,008,079$ 2,325,357$ 5,333,436$
Deferred Outflows ‐ Pension Related Amounts 1,252,868$ 4,528,409$ 5,781,277$
Net Pension Liability 30,902,562$ 22,725,267$ 53,627,829$
Deferred Inflows ‐ Pension Related Amounts 451,658$ 1,375,604$ 1,827,262$
Pension Expense 5,381,906$ 3,706,315$ 9,088,221$
76Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(a) General Information about the Pension Plan, Continued
or the 1959 Survivor Benefit. The cost of living adjustments for each plan are applied as specified by the Public
Employees’ Retirement Law.
The Plan’s provisions and benefits in effect at June 30, 2019, are summarized as follows:
Employees Covered
At June 30, 2019, the following employees were covered by the benefit terms for the Miscellaneous and Safety
Plans:
Contributions – Section 20814 (c) of the California Public Employees’ Retirement Law requires that the employer
contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective
on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined
annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount
necessary to finance the cost of benefits earned by employees during the year, 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.
Tier 1 Tier 2 PEPRA Tier 1 PEPRA
Hire Date
Prior to
September 15,
2012
Prior to
September 15,
2012 and
before January
1, 2013 with
reciprocity or
member of
CalPERS
On or after
January 1, 2013
Before January
1, 2013 with
reciprocity or
member of
CalPERS
On or after
January 1, 2013
Benefit Formula 2.5% @ 55 2% @ 60 2% @ 62 3% @ 50 2.7% @ 57
Benefit vesting schedule 5 years 5 years 5 years 5 years 5 years
Benefit payments Monthly for Life Monthly for Life Monthly for Life Monthly for Life Monthly for Life
Retirement age 55 60 62 50 57
Monthly benefits as a % of eligible compensation 2% to 2.5% 1% to 2.5% 1.5% to 2.5% 3% 2% to 2.7%
Required employee contribution rates 8.00%7.00%7.25%9.00%12.75%
Required employer contribution rates 22.346% 12.965%
Required payment of unfunded liability 1,998,006$ $1,197,652 $4 ,507
Miscellaneous Safety
10.001%
Miscellaneous Safety
Active 113 37
Transferred 99 13
Separated 87 2
Retired 236 79
Total 535 131
77Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 9 ‐ EMPLOYEES' RETIREMENT 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, 2018, using an annual actuarial valuation as
of June 30, 2017 rolled forward to June 30, 2018 using standard update procedures. The Town’s proportion of
the net pension liability (Safety Plan) was based on a projection of the Town’s long‐term share of contributions
to the pension plans relative to the projected contributions of all participating employers, actuarially
determined. The Town’s proportionate share of the net pension liability for the Safety Plan as of the
measurement date June 30, 2018 was as follows:
A summary of principal assumptions and methods used to determine the net pension liability is shown below.
Actuarial Assumptions ‐ The June 30, 2017 valuation was rolled forward to determine the June 30, 2018 total
pension liability, based on the following actuarial methods and assumptions:
Proportionate Share of
Net Pension Liability
Proportion ‐ June 30, 2017 0.22603%
Proportion ‐ June 30, 2018 0.23583%
Change ‐ Increase (Decrease) 0.00980%
Miscellaneous Agent
Multiple Employer Plan Safety Cost Sharing Plan
Valuation Date June 30, 2017 June 30, 2017
Measurement Date June 30, 2018 June 30, 2018
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate 7.15% 7.15%
Inflation 2.50% 2.50%
Salary Increases
Mortality Rate Table1
Post Retirement Benefit Increase
Entry‐Age Normal Cost Method
Varies b y Entr y Age and Service
Derived using CalPERS' Membership Data for all Funds
Contract COLA up to 2.00% until Purchasing Power
Protection Allowance Floor on Purchasing Power
a pplies, 2.50% thereafter
1. The mortality table used was developed based on CalPERS‐specific data. The table includes 15 years of
mortality improvements using the Society of Actuaries Scale 90% of scale MP 2016. For more details on this
table, please refer to the December 2017 experience study report that can be found on the CalPERS
website.
78Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, continued
Discount Rate ‐ The discount rate used to measure the total pension liability was 7.15% for the Plan and reflects
the long‐term expected rate for the Plan net of investment expenses and without reduction for administrative
expenses. To determine whether the municipal bond rate should be used in the calculation of a discount rate
for each plan, CalPERS conducted cash flow projections for plans with a higher likelihood of running out of
assets with too high of a discount rate. Based on the testing, none of the tested plans ran out of assets.
Therefore, the current 7.15 percent discount rate is adequate and the use of the municipal bond rate
calculation is not necessary. The long term expected discount rate of 7.15 percent will be applied to all plans
in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report
that can be obtained from the CalPERS website.
Long‐term Expected Rate of Return – The long‐term expected rate of return on pension plan
investments was determined using a building‐block method in which expected future real rates of
return (expected returns, net of pension plan investment expense and inflation) are developed for
each major asset class.
In determining the long‐term expected rate of return, CalPERS took into account both short‐term and long‐term
market return expectations as well as the expected pension fund cash flows. Using historical returns of all the
funds’ asset classes, expected compound (geometric) returns were calculated over the short‐term (first 10 years)
and the long‐term (11+ years) using a building‐block approach. Using the expected nominal returns for both
short‐term and long‐term, the present value of benefits was calculated for each fund. The expected rate of
return was set by calculating the single equivalent expected return that arrived at the same present value of
benefits for cash flows as the one calculated using both short‐term and long‐term returns. The expected rate
of return was then set equivalent to the single equivalent rate calculated above and adjusted to account for
administrative expenses.
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.
New
Strategic Real Return Real Return
Asset Class Allocation Years 1 ‐ 10(a) Years 11+(b)
Global Equity 50.00% 4.80% 5.98%
Global Fixed Income 28.00% 1.00% 2.62%
Inflation Sensitive ‐ 0.77% 1.81%
Private Equity 8.00% 6.30% 7.23%
Real Estate 13.00% 3.75% 4.93%
Liquidity 1.00% ‐ ‐0.92%
Total 100%
(a) An expected inflation of 2.00% used for this period.
(b) An expected inflation of 2.92% used for this period.
79Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, continued
In addition to the long‐term real rate of return by asset class table provided above the following table shows
the historical geometric mean annual returns of the Public Employees Retirement Fund (PERF) for various time
periods ending June 30, 2018 (figures are reported gross of fees).
(c) Changes in the Net Pension Liability
The change in the Net Pension Liability for the Miscellaneous Plan follows:
For the measurement period ended June 30, 2018, the Town contributed $1,951,711 for the safety Cost‐Sharing
Plan.
As of June 30, 2019, the Town reported net pension liabilities for its proportionate share of the net pension
liability of the safety Cost‐Sharing Plan of $22,725,267.
1 year 5 year 10 year 20 year 30 year
Geometric Return 8.6% 7.9% 5.7% 6.0% 8.3%
History of CalPERS Geometric Mean Rates
Miscellaneous Plan Total Fiduciary Net
Pension Net Pension
Liability Pension Liability
Beginning Balance 100,469,377$ 69,680,823$ 30,788,554$
Service Costs 1,700,438 1,700,438
Interest on Total Pension Liability 7,073,843 7,073,843
Changes of Assumptions (655,541) (655,541)
Difference Between Actual and Expected Experience 994,994 994,994
Net Plan to Plan Resource Movement (170) 170
Employer Contributions 2,669,104 (2,669,104)
Employee Contributions 761,705 (761,705)
Net Investment Income 5,883,868 (5,883,868)
Employee Contribution Refunds and Benefit Payments (5,448,374) (5,448,374) ‐
Administrative Expenses (108,582) 108,582
Other Miscellaneous Income (206,199) 206,199
Net Changes 3,665,360 3,551,352 114,008
Ending Balance 104,134,737$ 73,232,175$ 30,902,562$
80Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(c) Changes in the Net Pension Liability, Continued
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:
Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is
available in a separately issued CalPERS financial report.
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2019, the Town recognized pension expense of $5,381,906 for the Miscellaneous
Agent Multiple Employer Plan and $3,706,315 for the Safety Cost Sharing Plan. The Town recognized total
pension expense for all plans of $9,088,221.
At June 30, 2019, 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:
Sensitivity to Changes
in the Discount Rate
Miscellaneous
Agent Multiple
Employer Plan
Safety Cost
Sharing Plan Total
1% Decrease (6.15%)
Net Pension Liability $ 44,320,856 $ 35,022,750 $ 79,343,606
Current Discount Rate (7.15%)
Net Pension Liability $ 30,902,562 $ 22,725,267 $ 53,627,829
1% Increase (8.15%)
Net Pension Liability $ 19,825,605 $ 12,649,681 32,475,286$
Deferred
Outflows of
Resources
Deferred Inflows
of Resources
Pension contributions subsequent to
measurement date 3,008,079$ ‐$
Changes in assumptions 498,312 (370,523)
Difference between expected and actual experiences 562,388 (81,135)
Net differences between projected and actual
earnings on plan investments 192,168 ‐
Totals 4,260,947$ (451,658)$
Miscellaneous
81Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
$3,008,079 reported as deferred outflows of resources related to contributions subsequent to the measurement
date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Other amounts
reported as deferred outflows of resources and deferred inflows of resources related to pensions will be
recognized as pension expense as follows:
At June 30, 2019, the Town reported deferred outflows of resources and deferred inflows of resources related
to pensions from the following sources for the Safety Cost Sharing Plan:
Fiscal Year Ended June
30,
Deferred
Outflows/(Inflows) of
Resources
2019 1,478,926$
2020 244,420
2021 (724,237)
2022 (197,899)
2023 ‐
Thereafter ‐
Deferred
Outflows of
Resureces
Deferred Inflows
of Resources
Pension contributions subsequent to
measurement date 2,325,357$ ‐$
Changes in assumptions 2,229,745 (300,832)
Difference between expected and actual experiences 488,289 (1,852)
Changes in employer's proportion 1,656,514 (154,538)
Differences between the employer's contributions and
the employer's proportionate share of contributions ‐ (918,382)
Net differences between projected and actual
earnings on plan investments 153,861 ‐
Totals 6,853,766$ (1,375,604)$
Safety
82Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
$2,325,357 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, 2019. Other amounts
reported as deferred outflows of resources and deferred inflows of resources related to pensions will be
recognized as pension expense as follows:
(e) Payable to the Pension Plan
At June 30, 2019, the Town reported a payable of $83,235 and $54,145 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, 2019.
(f) IRS Section 115 Trust
In March 2018, the Town established an IRS Section 115 Trust (Trust) with Public Agencies Retirement Services
(PARS), an entity independent of CalPERS, in order to prefund the pension liabilities for both the Miscellaneous
and Safety defined‐benefit pension plans. The Town contributed $3,578,913 to the Trust for the fiscal year
ending June 2019 which is not reflected in any of the deferral amounts in the tables above as it is separate from
the plans.
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS
Plan Description ‐ The Town makes contributions to California Employer’s Retiree Benefit Trust (CERBT), an
agent multiple‐employer defined benefit healthcare plan administered by CalPERS. The purpose of the CERBT
Fund is to provide California government employers with a trust through which they may prefund retiree medical
costs and Other Post‐Employment Benefits (OPEB). The Town uses CERBT as its investment vehicle and requests
disbursements on an as needed basis to reimburse the Town for the cost of retiree health insurance benefits.
Benefit provisions and all other requirements are established by state statute and Town ordinance. Copies of
PERS' annual financial report may be obtained from their Executive Office, 400 P Street, Sacramento, CA 95814.
In accordance with the Public Employees' Medical and Hospital Care Act (PEMHCA), employees qualify for
retiree health benefits upon five (5) years of service if they meet the vesting requirements as set forth by Cal
PERS and take a service or disability retirement from Town employment. Additionally, the employee must
actually draw a CalPERS pension within ninety (90) days of separation from the Town, provided the employee
remains with the Town's health plan through COBRA. For employees who retire on or after February 1, 2016,
Fiscal Year Ended
June 30,
Deferred
Outflows/(Inflows) of
Resources
2020 2,754,778$
2021 1,113,929
2022 (558,497)
2023 (157,407)
2024 ‐
Thereafter
83Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
at Medicare eligibility, the Town will align contributions to the full cost of the employee’s enrollment, including
enrollment of family members, in a health benefits plan or plans up to a maximum of 100% Single Party and
90% Dependents for Kaiser Bay Area Basic/Medicare/Combo per month.
Upon retirement, employees have the option to roll over their sick leave accrual into a Town‐managed fund.
Employees can request reimbursement of medical expenses from the fund up to the value of their sick leave at
retirement.
Contributions ‐ The contribution requirements of plan members and the Town are established and may be
amended by the Town. The required contribution is based on projected pay‐as‐you‐go financing requirements,
with an additional amount to prefund benefits as determined by the Town. For the measurement period July 1,
2017‐June 30, 2018, the Town contributed $2,935,313 to the plan which included $1,138,313 of cash benefit
payments, administrative fees of $9,000, and $188,000 of implied subsidy benefit payments. All related
obligations are paid from the Town’s General Fund.
Covered Participants
Actuarial Methods and Assumptions ‐ Projections of benefits for financial reporting purposes are based on the
substantive plan (the plan as understood by the employer and the plan members) and include the types of
benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between
the employer and plan members to that point. Actuarially determined amounts are subject to continual revision
as actual results are compared with past expectations and new estimates are made about the future. The
actuarial methods and assumptions used include techniques that are designed to reduce the effects of short‐
term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long‐term
perspective of the calculations.
Inactive employees or beneficiaries
currently receiving benefits 126
Inactive employees entitled to but
not yet receiving benefits 50
Active employees 149
Total 325
84Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
For the June 30, 2017 actuarial valuation, the actuarial assumptions used are as follows:
Valuation Date June 30, 2017
Measurement Date June 30, 2018
Actuarial Cost Method Entry‐Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 6.75%
Inflation 2.75%
Contribution Policy Pre‐funded through CERBT with the Strategy 1 asset allocation
Town contributes at least the ADC
Salary Increases Agreegate ‐ 3% annually
Meerit ‐ CalPERS 1997‐2015 Experience Stud y
Projected Salary Increase 3.00%
Investment Rate of Return 6.75%
Mortality, Retirement,
Diability, Termination
CalPERS 1997‐2015 Experience Study
Mortality Improvement Post‐retirement mortality projected fully generational with
Scale MP‐2017
Healthcare Trend Non‐Medicare ‐ 7.5% for 2019, decreasing to an ultimate rate of
4.0% in 2076 and later years
Medicare ‐ 6.5% for 2019, decreasing to an ultimate rate of 4.0%
in 2076 and later years
Participation at Retirement Actives in insurance program: 100%
Actives in cash allocation program: 90%
Waived retirees aged <65: 20%
Waived retirees aged ≥65: 0%
Retirees with sickleave conversion accounts will continue to
participate after account exhausted
85Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
The long‐term expected rate of return on OPEB plan investments was determined using a building‐ block method
in which expected future real rates of return (expected returns, net of OPEB plan investment expense and
inflation) are developed for each major asset class. These ranges are combined to produce the long‐term
expected rate of return by weighting the expected future real rates of return by the target asset allocation
percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of
return for each major asset class are summarized in the following table:
Discount Rate ‐ The discount rate used to measure the total OPEB liability was 6.75 percent. The projection of
cash flows used to determine the discount rate assumed that Town contributions will be made at rates equal to
the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net
position was projected to be available to make all projected OPEB payments for current active and inactive
employees and beneficiaries. Therefore, the long‐term expected rate of return on OPEB plan investments was
applied to all periods of projected benefit payments to determine the total OPEB liability.
Target Expected Real
Asset Class Allocation* Rate of Return
Public Equity 57.00%4.82%
Fixed Income 27.00%1.47%
TIPS 5.00% 1.29%
Commodities 3.00% 0.84%
REITS 8.00% 3.76%
Assumed Long‐Term Rate of Inflation 2.75%
Expected Long‐Term Net Rate of Return, Rounded 6.75%
* Policy target effective on the measurement date (June 30, 2018). Changes to the target
investment allocation effective October 1, 2018 do not have a significant impact on the
expected long‐term rate of return
The long‐term expected real rates of return are presented as geometric means
86Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
Net OPEB Liability – The net OPEB liability is calculated by subtracting the fiduciary net position (FNP) of the
Plan from the total OPEB liability as determined by the actuary. The table that follows displays the changes that
applied to the total OPEB liability, FNP, and Net OPEB liability during the measurement period of July 1, 2017
through June 30, 2018.
Due to these changes, the Town achieved an OPEB Plan funding status of 61.8% for the June 30, 2018
measurement date.
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability/(Asset)
Balance at June 30, 2018
(6/30/17 measurement date) $ 24,773,000 $ 13,608,000 $ 11,165,000
Changes in the year:
Service cost 1,168,227 ‐ 1,168,227
Interest on the total pension liability 1,706,270 ‐ 1,706,270
Differences between actual and
expected experience ‐ ‐ ‐
Changes in assumptions ‐ ‐ ‐
Changes in benefit terms ‐ ‐ ‐
Contributions ‐ employer ‐ 2,935,313 (2,935,313)
Contributions ‐ employee ‐ ‐ ‐
Net investment income ‐ 1,082,977 (1,082,977)
Administrative expenses ‐ (34,261) 34,261
Benefit payments , including refunds
of employee contributions (1,326,313) (1,326,313) ‐
Net changes 1,548,184 2,657,716 (1,109,532)
Balance at June 30, 2019
(6/30/18 measurement date) $ 26,321,184 $ 16,265,716 $ 10,055,468
Increase (Decrease)
6/30/2019 6/30/2018
Measurement Date 6/30/2018 6/30/2017
Total OPEB Liability (TOL)26,321,184 24,773,000
Fiduciary Net Position (FNP)16,265,716 13,608,000
Net OPEB Liability (NOL)10,055,468 11,165,000
Funded Status (FNP/TOL)61.8%54.9%
Fiscal Year Ending
87Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
Sensitivity of Actuarial Assumptions – The following tables indicate how much the net OPEB liability varies if
the discount rate and healthcare trend rate used to calculate the liability are increased or decreased by one
percentage point.
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB ‐ Gains and losses related to
changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over
time. Partial amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining
amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be
recognized in future OPEB expense. The recognition period differs depending on the source of the gain or loss.
The measurement period July 1, 2017 through June 30, 2018 gains and losses are spread evenly over a 5‐year
period. The total OPEB expense recognized in the fiscal year ending June 30, 2019 was $1,883,013 and the Town
reported deferrals from the following sources:
Discount Rate 1% Decrease Current Rate 1% Increase
(5.75%)(6.75%)(7.75%)
Net OPEB Liability $ 13,428,106 10,055,468$ 7,226,415$
Healthcare Trend
1% Decrease Current Trend 1% Increase
Net OPEB Liability $ 7,459,605 10,055,468$ 12,779,309$
Deferred
Outflows of
Resources
Deferred Inflows
of Resources
● Employer contribuƟons made subsequent to the
measurement date 2,406,636$ ‐$ gp
● Net difference between projected and actual ‐ 358,232
Totals 2,406,636$ 358,232$
OPEB
88Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
The $2,406,636 reported as deferred outflows of resources related to contributions subsequent to the June 30,
2018 measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ending
June 30, 2019. Other amounts reported as deferred outflows of resources related to OPEB will be recognized as
expense as follows:
NOTE 11 ‐ RISK MANAGEMENT
The Town participates in the following public entity risk pools through formally organized and separate legal
entities. The Town does not have an equity interest in the joint ventures. These entities exercise full powers and
authorities within the scope of the related agreements including the preparation of annual budgets,
accountability for all funds, the power to make and execute contracts and the right to sue and be sued.
Obligations and liabilities of the separate entities are not those of the Town, although the Town retains an
ongoing financial interest or an ongoing financial responsibility.
Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA) ‐ The Town participates in PLAN, which
covers general liability claims in the amount up to $5,000,000 plus $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. PLAN 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, PLAN becomes responsible for payment of all claims up to the limit. Financial
statements may be obtained from PLAN at 375 Beale Street, San Francisco, CA 94105.
Local Agency Workers’ Compensation Joint Powers Authority (LAWCX) ‐ The Town is a member of LAWCX for
coverage of workers’ compensation claims. The Town has a $250,000 self‐insured retention level or uninsured
liability for all employees. Once the Town’s deductible is met, LAWCX becomes responsible for claims up to
$1,000,000. For claims greater than $1,000,000, LAWCX has a commercial policy providing coverage. Financial
statements may be obtained from LAWCX at 1750 Creekside Oaks Dr., Suite 200, Sacramento, California, 95833.
The Town has not significantly reduced its insurance coverage from the prior year and settlements have not
exceeded insurance coverage for the past three years.
Liability for Uninsured Claims ‐ The Town is required to record its liability for uninsured claims and to reflect the
current portion of this liability as an expenditure in its financial statements. As discussed above, the Town has
coverage for such claims, but it has retained the risk for the deductibles, or uninsured portion of these claims.
Fiscal Year Ended June
30,
Deferred
Outflows/(Inflows) of
Resources
2020 (108,058)$
2021 (108,058)$
2022 (109,058)$
2023 (33,058)$
2024 ‐
Thereafter
89Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE 11 ‐ RISK MANAGEMENT, CONTINUED
The change in Workers’ Compensation and Self‐Insurance Service Funds’ claims liabilities, is based on historical
trend information provided by its third party administrator and was computed as follows as of June 30, 2019:
NOTE 12 ‐ REDEVELOPMENT AGENCY DISSOLUTION
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.
Workers'Self‐
Compensation Insurance
Internal Internal
Service Fund Service Fund Total
Claims payable balance ‐ June 30, 2017 1,099,736$ 248,656$ 1,348,392$
Claims incurred 1,028,359 105,000 1,133,359
Claims paid (655,770) (221,913) (877,683)
Claims payable balance ‐ June 30, 2018 1,472,324 131,743 1,604,067
Claims incurred 1,161,312 29,999 1,191,311
Claims paid (1,581,441) (105,704) (1,687,145)
Claims payable balance ‐ June 30, 2019 1,052,195$ 56,038$ 1,108,233$
90Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
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, 2019, the Successor Agency Trust fund reported a net deficit of $6,158,880.
Encumbrances ‐ As of June 30, 2019, the Town had the following encumbered balances that were carried into
the next fiscal year:
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 $24 million to be granted to the
Town for the following projects:
a. Expansion and improvement of current and new downtown parking
b. Highway 9 improvements from Highway 17 to Monte Sereno
c. Almond Grove Area street, sidewalk and other improvements
d. Downtown Los Gatos gateways, signage, banners and art
e. Storm drain, retaining wall, street and other improvements
f. New Los Gatos library building
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement
were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its Redevelopment
Agency.
General Fund 413,729$
Appropriated Reserves Fund 2,841,182
Non‐major Governmental Funds 721,100
Proprietary Funds 229,734
Total Encumbrances 4,205,745$
91Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2019
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 $16
million to be granted to the Town for the following projects:
a. Development of affordable housing at 224 Main St.
b. Development of affordable housing at Dittos Lane
c. Partnership with Senior Housing Solutions for the creation of senior housing in Los Gatos
d. Partnerships for the conversion of existing residential developments dedicated to affordable housing
e. Grants to the Santa Clara County Housing Trust for the development of affordable housing.
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement
were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its Redevelopment
Agency.
NOTE 15 – PRIOR PERIOD ADJUSTMENTS
The Town recorded a prior period adjustment due to the implementation of GASB Statement 84 – Fiduciary
Activities. The town combined the Pension Trust Fiduciary Fund with the General Fund, resulting in a
restatement of net position:
Government‐wide Statements
Fund Financial Statements
Prior Period
Adjustment
Net Position, as
Previously
Reported
Net Position of
Pension Trust
Net Position as
Restated
Government‐Wide Statements
Governmental Activities 109,262,066$ 1,206,851$ 110,468,917$
Fund Balance as
Previously
Reported
Net Position of
Pension Trust
Fund Balance as
Restated
Governmental Funds
General Fund $ 30,428,684 1,206,851$ $ 31,635,535
92Draft 12-12-2019
Required Supplementary Information
93Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
Schedule of Proportionate Share of Net Pension Liability – CalPERS Misc. Agent‐Multiple Employer Plan
Measurement Date 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014
Total Pension Liablity
Service Cost 1,700,438$ 1,651,550$ 1,560,679$ 1,491,925$ 1,579,547$
Interest on total pension liability 7,073,843 6,820,536 6,697,247 6,483,032 6,268,015
Difference between expected and actual
experience 994,994 (892,479) (357,870) (623,495)‐
Changes in assumptions (655,541) 5,481,432 ‐ (1,513,132)‐
Changes in benefits ‐ ‐ ‐ ‐ ‐
Benefit payments, including refunds of employee
contributions (5,448,374) (5,138,083) (4,953,756) (4,748,786) (4,241,487)
Net change in total pension liability 3,665,360 7,922,956 2,946,300 1,089,544 3,606,075
Total pension liability ‐ beginning 100,469,377 92,546,421 89,600,121 88,510,577 84,904,502
Total pension liability ‐ ending (a)104,134,737$ 100,469,377$ 92,546,421$ 89,600,121$ 88,510,577$
Plan fiduciary net position
Contributions ‐ employer 2,669,104 2,407,496 2,223,782 1,941,765 1,796,079
Contributions ‐ employee 761,705 682,891 691,770 679,796 668,167
Plan to plan resource movement (170) ‐ (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 5,883,868 7,171,443 369,185 1,470,873
Net Difference between Projected and Actual Earnings ‐ ‐ ‐ ‐ 4,665,374
Benefit payments, including refunds of employee
contribution (5,448,374) (5,138,083) (4,953,756) (4,748,786) (4,241,487)
Administrative Expenses (108,582) (95,455) (40,462) (74,706) ‐
Other Miscellaneous Income/(Expense)1 (206,199) ‐ ‐ ‐ ‐
Net change in plan fiduciary net position 3,551,352 5,028,292 (1,738,347) (708,497) 8,382,650
Plan fiduciary net position ‐ beginning 69,680,823 64,652,531 66,390,878 67,099,375 58,716,725
Plan fiduciary net position ‐ ending (b)73,232,175$ 69,680,823$ 64,652,531$ 66,390,878$ 67,099,375$
Net pension liability ‐ ending (a) ‐ (b)30,902,562$ 30,788,554$ 27,893,890$ 23,209,243$ 21,411,202$
Plan fiduciary net position as a percentage of the
total pension liability 70.32% 69.36% 69.86% 74.10% 75.81%
Covered payroll 10,382,134 9,024,370 9,198,318 8,487,940 8,406,315
Net pension liability as a percentage of covered payroll 297.65%341.17% 303.25% 273.44% 254.70%
1. During Fiscal Year 2017‐18, as a result of GASB No.75, CalPERS reporte its proportionate share of activity related to poste mployment benefit for participation in the
State of California's agent OPEB plan. Accordingly, CalPERS recorded a one‐time expense as a result of the adoption of GASB75. Additionally, CalPERS employees
participate in various State of California agent pension plans and during FY2017‐18, CalPERS recorded a correction to previously reported financial statements to
properly reflect its proportionate share of activity related to pensions in accordance with GASB Statement No.68.
94Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost‐Sharing Plan
Measurement Date 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014
Proportion of the net pension liability 0.23583% 0.22603% 0.22394% 0.14860% 0.28588%
Proportionate share of the net pension liability 22,725,267$ 22,415,954$ 19,377,843$ 10,199,904$ 17,788,690$
Covered payroll*5,079,440$ 4,941,138$ 5,022,498$ 4,897,104$ 4,916,535$
Proportionate share of the net pension liability
as percentage of covered payroll 447.40%453.66% 385.82% 208.28% 361.81%
Plan fiduciary net position as a percentage of
of the total pension liability 75.26% 73.31% 74.06% 78.40% 75.66%
* For the year ending on the measurement date.
95Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
Schedule of Pension Plan Contributions – Miscellaneous Agent Multiple‐Employer Plan
*Fiscal year 2015 was the 1st year of implementation, therefore only five years are shown.
Schedule of Pension Plan Contributions – Safety Cost‐Sharing Plan
*Fiscal year 2015 was the 1st year of implementation, therefore only five years are shown.
Actuarial Methods and Assumptions used for Pension Actuarially Determined Contributions
Fiscal Year 2019 2018 2017 2016 2015
Actuarially Determined Contribution 3,008,079$ 2,669,133$ 2,407,496$ 2,223,782$ 1,941,765$
Contributions in Relation to the Actuarially
Determined Contribution (3,008,079) (2,669,133) (2,407,496) (2,223,782) (1,941,765)
Contribution Deficiency (Excess)‐$ ‐$ ‐$ ‐$ ‐$
Covered Payroll 10,760,226 10,382,134 9,024,370 9,198,318 8,487,940
Contributions as a Percentage of Covered
Payroll 27.96% 25.71%26.68% 24.18% 22.88%
Fiscal Year 2019 2018 2017 2016 2015
Actuarially Determined Contribution 2,325,357$ 1,951,711$ 302,911$ 297,000$ 295,000$
Contributions in Relation to the Actuarially
Determined Contribution (2,325,357) (1,951,711) (302,911) (297,000) (295,000)
Contribution Deficiency (Excess)‐$ ‐$ ‐$ ‐$ ‐$
Covered Payroll 5,634,617 5,079,440 4,941,138 5,022,498 4,897,104
Contributions as a Percentage of Covered
Payroll 41.27% 38.42%6.13% 5.91% 6.02%
Actuarial Cost Method Entry Age Normal
Amortization Method For details, see June 30, 2014 CalPERS Fundi ng Valuation Report
Amortization Period For details, see June 30, 2014 CalPERS Fundi ng Valuation Report
Asset Valuation Method Market Value of Assets. For details, see June 30, 2014 CalPERS
Funding Valuation Report
Inflation 2.75%
Salary Increases Varies by Entry Age and Service
Payroll Growth 3.00%
Investment Rate of Return 7.5% Net of Pension Plan Investment an d Administrative
Expenses; includes Inflation.
Retirement Age CalPERS 1997‐2011 experience study
Mortality CalPERS 1997‐2011 experience study
Pre‐retirement and post‐retirement mortality rates include 20
years of projected mortality improvement using Scale BB
published by the Society of Actuaries.
96Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
Schedule of Changes in Net OPEB Liability and Related Ratios
Schedule of Employer Contributions
Measurement Date 6/30/2018 6/30/2017
Changes in Total OPEB Liablity
Service Cost 1,168,227$ 1,134,000$
Interest on net liability 1,706,270 1,607,000
Difference between expected and actual ‐ ‐
experience ‐ ‐
Changes in assumptions ‐ ‐
Changes in benefits ‐ ‐
Benefit payments (1,326,313) (1,269,000)
Net change in total OPEB liability 1,548,184 1,472,000
Total OPEB liability ‐ beginning 24,773,000 23,301,000
Total OPEB liability ‐ ending (a)26,321,184$ 24,773,000$
Changes in plan fiduciary net position
Contributions ‐ employer 2,935,313 3,878,000
Contributions ‐ employee ‐ ‐
Net Investment Income 1,082,977 1,049,000
Benefit payments (1,326,313) (1,269,000)
Administrative Expenses (34,261) (14,000)
Net change in plan fiduciary net position 2,657,716 3,644,000
Plan fiduciary net position ‐ beginning 13,608,000 9,964,000
Plan fiduciary net position ‐ ending (b)16,265,716$ 13,608,000$
Net OPEB liability ‐ ending (a) ‐ (b)10,055,468$ 11,165,000$
Plan fiduciary net position as a percentage of the 61.8%54.9%
total OPEB liability
Covered payroll 16,192,060 14,985,716
Net pension liability as a percentage of covered 62.10%74.50%
payroll
Fiscal Year 2019 2018
Actuarially Determined Contribution (ADC)2,108,000$ 2,129,000$
Actual Contributions 2,406,636 2,935,000
Contribution deficiency/(excess)(298,636) (806,000)
Covered employee payroll 17,338,201 14,985,716
Contributions as a percentage of covered payroll 13.9%19.6%
97Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
Actuarial Methods and Assumptions used for 2018/19 OPEB Actuarially Determined Contribution
Valuation Date June 30, 2017
Actuarial Cost Method Entry Age Normal, Level percentage of pay
Amortization Method Leverl percentage of pay
Amortization Period 20‐year fixed period for 2018/19
Asset Valuation Method Investment gains and losses spread over 5‐year
rolling period
Discount Rate 6.75%
General Inflation 2.75%
Medical Trend Non‐medicare ‐ 7.5% for 2019, decreasing to an
ultimate rate of 4.0% in 2076
Medicare ‐ 6.5% for 2019, decreasing to an
ultimate rate of 4.0% in 2076
Mortality CalPERS 1997‐2015 experience study
Mortality Improvement Post‐retirement mortality projected fully
generational with Scale MP‐2017
98Draft 12-12-2019
Supplementary Information
99Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
MAJOR GOVERNMENTAL FUND BUDGET SCHEDULES
(OTHER THAN THE GENERAL FUND) AND
NONMAJOR GOVERNMENTAL FUNDS
Schedule of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP):
Appropriated Reserves Fund is used to account for resources provided for capital projects not fully funded from
other sources.
Capital Projects Funds:
Storm Drain Basin Funds were established to account for fees paid in conjunction with the development in
specified drainage areas.
Construction Tax Funds were established to account for tax levies on building additions or alterations including
capital improvements, underground utilities and parks.
Gas Tax Fund was established to account for revenue and expenditures under the State of California Streets and
Highways Code Sections 2106, 2107 and 2107.5, as well as for the Roads Maintenance Rehabilitation Act. The
revenues must be used for the maintenance and construction of streets.
Special Revenue Funds:
Community Development Block Grant Fund was established to account for grant funds received and expended
under the Community Development Act of 1974.
Non‐Point Source Maintenance Fund was established to comply with obligations under the National Pollutant
Discharge Elimination system permit issued by the California Regional Water Quality Control Board.
Lighting and Landscape Fund was established to account for maintenance of trees, landscaping, irrigation
systems and lighting within the boundaries of Tract No. 8439.
100Draft 12-12-2019
Variance
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Licenses & permits 110,000$ 110,000$ 181,691$ 71,691$
Intergovernmental 580,663 1,739,323 30,582 (1,708,741)
Charges for services 591,429 631,271 595,509 (35,762)
Interest 20,000 20,000 44,161 24,161
Other 23,250 278,622 17,041 (261,581)
Total Revenues 1,325,342 2,779,216 868,984 (1,910,232)
EXPENDITURES
Capital outlay 3,893,086 19,070,401 6,860,026 12,210,375
Total Expenditures 3,893,086 19,070,401 6,860,026 12,210,375
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (2,567,744) (16,291,185) (5,991,042) 10,300,143
OTHER FINANCING SOURCES (USES)
Transfers in 2,635,220 2,685,220 2,685,220 ‐
Transfers (out)(427,616) (427,616) (427,616) ‐
Total Other Financing Sources (Uses)2,207,604 2,257,604 2,257,604 ‐
CHANGE IN FUND BALANCE (360,140)$ (14,033,581)$ (3,733,438) 10,300,143$
BEGINNING FUND BALANCE 12,301,432
ENDING FUND BALANCE 8,567,994$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
TOWN OF LOS GATOS
APPROPRIATED RESERVES FUND
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
101Draft 12-12-2019
Total
Storm Construction Gas Capital Community
Drains Tax Tax Projects Development
Funds Fund Fund Funds Fund
ASSETS
Cash & Investments 2,628,557$ 3,079,685$ 1,713,551$ 7,421,793$ 94,412$
Receivables:
Accounts ‐ ‐ ‐ ‐ ‐
Intergovernmental Receivable ‐ ‐ 100,152 100,152 58,344
Long Term Notes Receivable ‐ ‐ ‐ ‐ 78,752
Total Assets 2,628,557$ 3,079,685$ 1,813,703$ 7,521,945$ 231,508$
LIABILITIES
Accounts Payable ‐$ ‐$ 959,881$ 959,881$ ‐$
Accrued Payroll and Benefits ‐ ‐ ‐ ‐ ‐
Due to other funds ‐ ‐ ‐ ‐ ‐
Unearned revenue ‐ ‐ ‐ ‐ 64,855
Total Liabilities ‐ ‐ 959,881 959,881 64,855
FUND BALANCE
Restricted for:
Repairs and Maintenance ‐ ‐ ‐ ‐ ‐
Capital Projects 2,628,557 3,079,685 853,822 6,562,064 ‐
Assigned for:
Special Revenue Funds ‐ ‐ ‐ ‐ 166,653
Unassigned ‐ ‐ ‐ ‐ ‐
Total Fund Balances 2,628,557 3,079,685 853,822 6,562,064 166,653
Total Liabilities and Fund Balances 2,628,557$ 3,079,685$ 1,813,703$ 7,521,945$ 231,508$
‐$ ‐$ (Continued)
CAPITAL PROJECTS FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2019
102Draft 12-12-2019
Total
Non‐Point Total Nonmajor
Source Lighting and Special Revenue Governmental
Maintenance Landscaping Funds Funds
‐$ 216,303$ 310,715$ 7,732,508$
167,051 ‐ 167,051 167,051
‐ 18 58,362 158,514
‐ ‐ 78,752 78,752
167,051$ 216,321$ 614,880$ 8,136,825$
2,839$ 8,182$ 11,021$ 970,902$
3,320 ‐ 3,320 3,320
1,443 ‐ 1,443 1,443
‐ ‐ 64,855 64,855
7,602 8,182 80,639 1,040,520
‐ 208,139 208,139 208,139
‐ ‐ ‐ 6,562,064
159,449 ‐ 326,102 326,102
‐ ‐ ‐ ‐
159,449 208,139 534,241 7,096,305
167,051$ 216,321$ 614,880$ 8,136,825$
(Concluded)
SPECIAL REVENUE FUNDS
103Draft 12-12-2019
Storm Construction Gas Total
Drain Tax Tax Capital Projects
Funds Fund Fund Funds
REVENUES
Property Taxes ‐$ ‐$ ‐$ ‐$
Other Taxes ‐ 28,390 ‐ 28,390
License and permits 168,947 ‐ ‐ 168,947
Intergovernmental ‐ ‐ 1,195,072 1,195,072
Charges for Services ‐ ‐ ‐ ‐
Interest 3,312 53,311 22,483 79,106
Total Revenues 172,259 81,701 1,217,555 1,471,515
EXPENDITURES
Current:
Parks and Public Works ‐ ‐ ‐ ‐
Sanitation and Other ‐ ‐ ‐ ‐
Capital Outlay 29,700 ‐ 960,881 990,581
Total Expenditures 29,700 ‐ 960,881 990,581
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 142,559 81,701 256,674 480,934
OTHER FINANCING SOURCES (USES)
Transfers (out) ‐ ‐ (106,000) (106,000)
Total Other Financing Sources (Uses) ‐ ‐ (106,000) (106,000)
Changes in Fund Balances 142,559 81,701 150,674 374,934
Fund Balances ‐ Beginning of year 2,485,998 2,997,984 703,148 6,187,130
Fund Balances ‐ End of year 2,628,557$ 3,079,685$ 853,822$ 6,562,064$
(Continued)
CAPITAL PROJECTS FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
104Draft 12-12-2019
Community Non‐Point Total
Development Source Lighting and Special Revenue
Fund Maintenance Landscaping Funds Total
‐$ ‐$ 38,091$ 38,091$ 38,091$
‐ ‐ ‐ ‐ 28,390
‐ 236,450 ‐ 236,450 405,397
‐ 134,621 ‐ 134,621 1,329,693
‐ 345,280 ‐ 345,280 345,280
‐ ‐ 3,550 3,550 82,656
‐ 716,351 41,641 757,992 2,229,507
‐ ‐ 27,266 27,266 27,266
‐ 628,240 ‐ 628,240 628,240
‐ ‐ ‐ ‐ 990,581
‐ 628,240 27,266 655,506 1,646,087
‐ 88,111 14,375 102,486 583,420
‐ ‐ (4,920) (4,920) (110,920)
‐ ‐ (4,920) (4,920) (110,920)
‐ 88,111 9,455 97,566 472,500
166,653 71,338 198,684 436,675 6,623,805
166,653$ 159,449$ 208,139$ 534,241$ 7,096,305$
(Concluded)
SPECIAL REVENUE FUNDS
105Draft 12-12-2019
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
Other taxes ‐ ‐ ‐ 30,000 28,390 (1,610)
License and permits 92,500 168,947 76,447 ‐ ‐ ‐
Intergovernmental ‐ ‐ ‐ ‐ ‐ ‐
Charges for services ‐ ‐ ‐ ‐ ‐ ‐
Interest 8,610 3,312 (5,298) 14,310 53,311 ‐
Total Revenues 101,110 172,259 71,149 44,310 81,701 (1,610)
EXPENDITURES
Parks and public works ‐ ‐ ‐ ‐ ‐ ‐
Sanitation and other ‐ ‐ ‐ ‐ ‐ ‐
Capital outlay 203,058 29,700 173,358 2,330,000 ‐ 2,330,000
Total Expenditures 203,058 29,700 173,358 2,330,000 ‐ 2,330,000
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (101,948) 142,559 244,507 (2,285,690) 81,701 2,367,391
OTHER FINANCING SOURCES (USES)
Operating transfers (out)‐ ‐ ‐ ‐ ‐ ‐
Total Other Financing Sources (Uses)‐ ‐ ‐ ‐ ‐ ‐
CHANGE IN FUND BALANCE (101,948)$ 142,559 244,507$ (2,285,690)$ 81,701 2,367,391$
BEGINNING FUND BALANCE 2,485,998 2,997,984
ENDING FUND BALANCE 2,628,557$ 3,079,685$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
COMMUNITY DEVELOPMENT
STORM DRAIN FUNDS
NON‐POINT
CONSTRUCTION TAX
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
(Continued)
106Draft 12-12-2019
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative)
‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ 231,323 236,450 5,127
1,144,218 1,195,072 50,854 ‐ ‐ ‐ 134,621 134,621 ‐
‐ ‐ ‐ ‐ ‐ ‐ 353,071 345,280 (7,791)
1,210 22,483 21,273 ‐ ‐ ‐ ‐ ‐ ‐
1,145,428 1,217,555 72,127 ‐ ‐ ‐ 719,015 716,351 (2,664)
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ 705,191 628,240 76,951
1,325,215 960,881 364,334 ‐ ‐ ‐ ‐ ‐ ‐
1,325,215 960,881 364,334 ‐ ‐ ‐ 705,191 628,240 76,951
(179,787) 256,674 436,461 ‐ ‐ ‐ 13,824 88,111 74,287
(106,000) (106,000) ‐ ‐ ‐ ‐ ‐ ‐ ‐
(106,000) (106,000) ‐ ‐ ‐ ‐ ‐ ‐ ‐
(285,787)$ 150,674 436,461$ ‐$ ‐ ‐$ 13,824$ 88,111 74,287$
703,148 166,653 71,338
853,822$ 166,653$ 159,449$
(Continued)
COMMUNITY DEVELOPMENT
GAS TAX BLOCK GRANT
NON‐POINT
SOURCE MAINTANENCE
107Draft 12-12-2019
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes 38,220$ 38,091$ (129)$ 38,220$ 38,091$ (129)$
Other taxes ‐ ‐ ‐ 30,000 28,390 (1,610)
License and permits ‐ ‐ ‐ 323,823 405,397 81,574
Intergovernmental ‐ ‐ ‐ 1,278,839 1,329,693 50,854
Charges for services ‐ ‐ ‐ 353,071 345,280 (7,791)
Interest 1,460 3,550 2,090 25,590 82,656 18,065
Total Revenues 39,680 41,641 1,961 2,049,543 2,229,507 140,963
EXPENDITURES
Parks and public works 32,817 27,266 5,551 32,817 27,266 5,551
Sanitation and other ‐ ‐ ‐ 705,191 628,240 76,951
Capital outlay 75,093 ‐ 75,093 3,933,366 990,581 2,942,785
Total Expenditures 107,910 27,266 80,644 4,671,374 1,646,087 3,025,287
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (68,230) 14,375 82,605 (2,621,831) 583,420 3,205,251
OTHER FINANCING SOURCES (USES)
Operating transfers (out)(4,920) (4,920) ‐ (110,920) (110,920) ‐
Total Other Financing Sources (Uses)(4,920) (4,920) ‐ (110,920) (110,920) ‐
CHANGE IN FUND BALANCE (73,150)$ 9,455 82,605$ (2,732,751)$ 472,500 3,205,251$
BEGINNING FUND BALANCE 198,684 6,623,805
ENDING FUND BALANCE 208,139$ 7,096,305$
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
TOTALS
(Concluded)
LIGHTING AND LANDSCAPING
108Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
PROPRIETARY FUNDS
INTERNAL SERVICE FUNDS
Internal Service Funds are used to finance and account for special activities and service performed by a
designated department for other departments in the Town on a cost reimbursement basis.
The concept of major funds does not extend to internal service funds because they are used for internal activities
only. In the Government‐Wide Statement of Activities, the net revenues and expenses of the internal service
funds are allocated to the Town departments or programs that generated them, thus eliminating internal service
funds
However, internal service funds are still presented separately in the fund financial statements and include the
following funds:
Equipment Replacement Fund was established to account for the replacement of major Town equipment and
all vehicle replacement.
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.
109Draft 12-12-2019
Equipment Workers' Self Information Vehicle Facilities
Replacement Comp Insurance Stores Technology Maintenance Maintenance Total
ASSETS
Cash & Investments 2,894,235$ 1,744,470$ 1,384,880$ ‐$ 2,592,213$ ‐$ 1,056,079$ 9,671,877$
Restricted Cash &
Investments ‐ 99,337 ‐ ‐ ‐ ‐ ‐ 99,337
Receivables:
Accounts ‐ 67,596 ‐ ‐ 1,912 ‐ 41,987 111,495
Total Assets 2,894,235 1,911,403 1,384,880 ‐ 2,594,125 ‐ 1,098,066 9,882,709
LIABILITIES
Accounts Payable 85,378 16,127 15,538 ‐ 75,657 ‐ 127,191 319,891
Due to Other
Governments 53 ‐ ‐ ‐ ‐ ‐ 89 142
Claims Payable ‐ 1,052,195 56,038 ‐ ‐ ‐ ‐ 1,108,233
Total Liabilities 85,431 1,068,322 71,576 ‐ 75,657 ‐ 127,280 1,428,266
NET POSITION
Restricted for:
Workers comp‐
ensation claims ‐ 99,337 ‐ ‐ ‐ ‐ ‐ 99,337
Unrestricted 2,808,804 743,744 1,313,304 ‐ 2,518,468 ‐ 970,786 8,355,106
Total Net Position 2,808,804$ 843,081$ 1,313,304$ ‐$ 2,518,468$ ‐$ 970,786$ 8,454,443$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30, 2019
110Draft 12-12-2019
Equipment Workers' Self Information Vehicle Facilities
Replacement Comp Insurance Stores Technology Maintenance Maintenance Total
OPERATING
REVENUES
Charges for
services 610,000$ 875,419$ 365,155$ 130,956$ 437,232$ 376,655$ 882,707$ 3,678,124$
Interest ‐ 8 ‐ ‐ ‐ ‐ ‐ 8
Use of money and
property ‐ ‐ ‐ ‐ ‐ ‐ 229,559 229,559
Other local taxes ‐ ‐ ‐ ‐ ‐ ‐ 28,390 28,390
Other 22,495 412,667 ‐ 10,983 5 29,180 81,366 556,696
Total Operating
Revenues 632,495 1,288,094 365,155 141,939 437,237 405,835 1,222,022 4,492,777
OPERATING
EXPENSES
Salaries and
benefits ‐ 413 ‐ ‐ ‐ ‐ ‐ 413
Depreciation
expenses ‐ ‐ ‐ ‐ ‐ ‐ 558 558
Services and
supplies 601,961 1,270,216 338,617 104,345 567,082 252,206 1,011,347 4,145,774
Total Operating
Expenses 601,961 1,270,629 338,617 104,345 567,082 252,206 1,011,905 4,146,745
Operating Income
(loss)30,534 17,465 26,538 37,594 (129,845) 153,629 210,117 346,032
Transfer of net
position to General
Fund ‐ ‐ ‐ (265,384) ‐ (774,991) ‐ (1,040,375)
Transfer of pension
amounts to General
Fund ‐ 204,834 291,997 ‐ 786,505 358,571 565,232 2,207,139
Transfers in 450,000 ‐ ‐ ‐ ‐ ‐ ‐ 450,000
Transfers out ‐ ‐ ‐ ‐ (300,000) ‐ (50,000) (350,000)
Net Transfers 450,000 204,834 291,997 (265,384) 486,505 (416,420) 515,232 1,266,764
Change in Net
Position 480,534 222,299 318,535 (227,790) 356,660 (262,791) 725,349 1,612,796
BEGINNING NET
POSITION 2,328,270 620,782 994,769 227,790 2,161,808 262,791 245,437 6,841,647
ENDING NET
POSITION 2,808,804$ 843,081$ 1,313,304$ ‐$ 2,518,468$ ‐$ 970,786$ 8,454,443$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
111Draft 12-12-2019
Equipment Worker's Self Information Vehicle Facilities
Replacement Comp Insurance Stores Technology Maintenance Maintenance Total
CASH FLOWS FROM
OPERATING ACTIVITIES
Receipts from customers 632,495$ 1,339,424$ 365,155$ 141,939$ 437,417$ 406,147$ 1,196,518$ 4,519,095$
Payments to suppliers (533,733) (1,279,438) (323,516) (105,702) (611,880) (230,888) (975,725) (4,060,882)
Payments to employees (343) (208,623) (297,158) ‐ (800,577) (364,773) (571,550) (2,243,024)
Claims paid ‐ (420,129) (75,705) ‐ ‐ ‐ ‐ (495,834)
Net Cash Provided (Used)
by Operating Activitie 98,419 (568,766) (331,224) 36,237 (975,040) (189,514) (350,757) (2,280,645)
CASH FLOWS FROM
NONCAPITAL FINANCING
ACTIVITIES
Transfers In/(Out) 450,000 204,834 291,997 (265,384) 486,505 (416,420) 515,232 1,266,764
Net Cash Provided (Used)
by Noncapital Financing
Activities 450,000 204,834 291,997 (265,384) 486,505 (416,420) 515,232 1,266,764
Net Increase(Decrease) in
Cash and Investments 548,419 (363,932) (39,227) (229,147) (488,535) (605,934) 164,475 (1,013,881)
Cash and investments ‐
beginning of year 2,345,816 2,207,739 1,424,107 229,147 3,080,748 605,934 891,604 10,785,095
Cash and investments ‐
end of year 2,894,235$ 1,843,807$ 1,384,880$ ‐$ 2,592,213$ ‐$ 1,056,079$ 9,771,214$
‐$ ‐ ‐ ‐ ‐ ‐ ‐
Reconciliation of Operating
Income to Cash Flows
from Operating Activities:
Operating Income 30,534$ 17,465$ 26,538$ 37,594$ (129,845)$ 153,629$ 210,117$ 346,032$
Adjustments to reconcile
operating income to
cash flows from
operating activities:
Depreciation ‐ ‐ ‐ ‐ ‐ ‐ 558 558
Change in assets and
liabilities:
Receivables, net ‐ 51,330 ‐ ‐ 180 312 (25,504) 26,318
Material and supplies ‐ ‐ ‐ 173 ‐ 27,838 ‐ 28,011
Deferred outflows of
resources ‐ 54,592 77,823 ‐ 209,619 95,566 150,682 588,282
Net pension liabilities ‐ (255,060) (363,674) ‐ (979,569) (446,588) (704,016) (2,748,907)
Deferred inflows of
resources ‐ (4,312) (6,146) ‐ (16,555) (7,549) (11,898) (46,460)
Accounts payable 68,175 (9,222) 15,101 (1,530) (44,798) (6,520) 35,533 56,739
Accrued payroll and
benefits (343) (3,430) (5,161) ‐ (14,072) (6,202) (6,318) (35,526)
Claims payable (420,129) (75,705) ‐ ‐ ‐ ‐ (495,834)
Due to other
government 53 ‐ ‐ ‐ ‐ ‐ 89 142
Cash Flows From
Operating Activities 98,419$ (568,766)$ (331,224)$ 36,237$ (975,040)$ (189,514)$ (350,757)$ (2,280,645)$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
112Draft 12-12-2019
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
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.
113Draft 12-12-2019
RDA
Successor
Library Agency Total
ASSETS
Cash and investments (Note 2)532,514$ 1,729,614$ 2,262,128$
Restricted cash and investments (Note 2)‐ 2,003,810 2,003,810
Accounts receivable 8,750 ‐ 8,750
Loans receivable (Note 3)‐ 575,425 575,425
Capital assets (Note 5):
Nondepreciable ‐ 5,257,422 5,257,422
Depreciable, net of accumulated depreciation ‐ 1,525,393 1,525,393
Total Assets 541,264 11,091,664 11,632,928
LIABILITIES
Accounts payable 3,137 47 3,184
Due to other governments 112 ‐ 112
Interest payable ‐ 306,297 306,297
Long‐term debt (Note 6):
Due within one year ‐ 1,195,000 1,195,000
Due in more than one year ‐ 15,749,200 15,749,200
Total Liabilities 3,249 17,250,544 17,253,793
NET POSITION
Held in trust 538,015 (6,158,880) (5,620,865)
Total Net Position 538,015$ (6,158,880)$ (5,620,865)$
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2019
114Draft 12-12-2019
RDA
Successor
Library Agency Total
ADDITIONS
Property taxes ‐$ 1,945,763$ 1,945,763$
Investment earnings 10,135 43,863 53,998
Gifts, bequests and endowments 82,213 ‐ 82,213
Other ‐ 1,909,073 1,909,073
Total Additions 92,348 3,898,699 3,991,047
DEDUCTIONS
Program expenses ‐ 1,920,655 1,920,655
Interest and fiscal agency expenses of RDA ‐ 701,449 701,449
Library services 69,029 ‐ 69,029
Capital Outlay 21,048 ‐ 21,048
Depreciation expense ‐ 101,692 101,692
Total Deductions 90,077 2,723,796 2,813,873
CHANGE IN NET POSITION 2,271 1,174,903 1,177,174
NET POSITION ‐ BEGINNING OF YEAR 535,744 (7,333,783) (6,798,039)
NET POSITION ‐ END OF YEAR 538,015$ (6,158,880)$ (5,620,865)$
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2019
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116Draft 12-12-2019
STATISTICAL SECTION
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118Draft 12-12-2019
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).
119Draft 12-12-2019
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120Draft 12-12-2019
Town of Los Gatos Schedule 1
Net Position by Component
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Fiscal Net Investment Total
Year in Capital Assets Restricted Unrestricted Net Position
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
2018 102,098,729 8,199,598 170,590 110,468,917 (4)
2019 107,542,588 11,918,688 ‐4,642,167 114,819,109 (3)
(1) The decrease in Restricted Net Position from FY 2010 to FY 2011 was primarily due to the issuance of the $15.7 million
Certificates of Participation in FY 2010.
(2) The decrease in Restricted Net Position GASB 68 Implementation of Unfunded Pension Liability of Statement of Net
Position.
(3) The decrease in unrestricted net position resulted largely from the use of approximately $8.0 million in unrestricted
cash balances in the Town’s GFAR fund during the year to invest in the Town’s infrastructure and equipment.
(4) Net position was restated for Fy 2018 for amounts placed intofiduciary funds, reclassified to General Fund Restricted
Asset.
-15,000,000
-10,000,000
-5,000,000
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
55,000,000
60,000,000
65,000,000
70,000,000
75,000,000
80,000,000
85,000,000
90,000,000
95,000,000
100,000,000
105,000,000
110,000,000
115,000,000
Net Investment in Capital Assets Restricted Unrestricted
121Draft 12-12-2019
Town of Los Gatos
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Expenses 2009/10 2010/11 2011/12 2012/13
Governmental Activities:
General Government 4,647,801$ 5,180,153$ 6,145,143$ 6,564,768$
Police Department 13,266,849 13,495,885 14,124,798 13,731,754
Parks and Public Works 7,458,085 7,155,905 7,827,332 7,829,315
Community Development 3,522,477 3,099,269 3,434,551 4,094,188
Community Services 1,270,240 666,015 ‐ ‐
Library Services 2,038,009 1,892,805 1,938,577 2,128,823
Sanitation 655,713 342,893 158,205 393,205
Redevelopment 6,992,935 16,794,022 919,821 1,277,063
Interest and Fees 612,700 1,278,381 1,123,842 ‐
Total Governmental Activities 40,464,809$ 49,905,328$ 35,672,269$ 36,019,116$
Program Revenues
Charges for Services:
General Government 1,337,772$ 1,156,931$ 1,131,424$ 1,416,593$
Police Department 2,110,357 2,153,843 2,324,397 2,450,630
Parks and Public Works 779,300 810,022 1,215,382 3,044,401
Community Development 3,404,087 3,097,192 3,448,433 4,649,444
Community Services 134,366 98,803 ‐ ‐
Library Services 57,633 39,491 37,662 50,696
Sanitation 135,000 135,000 135,000 403,294
Operating Grants and Contributions:
General Government 10,237 15,638 6,453 8,406
Police Department 81,997 27,748 29,980 91,360
Parks and Public Works 594,775 809,272 993,827 835,724
Community Services 124,287 182,683 ‐ ‐
Library Services 13,996 10,662 109 40
Sanitation 25,103 9,002 ‐ ‐
Capital Grants and Contributions:
General Government ‐ ‐ ‐ 169,270
Parks and Public Works 3,074,453 2,375,759 641,811 2,757,660
Community Development ‐ ‐ ‐ ‐
Total Program Revenues 11,883,363$ 10,922,046$ 9,964,478$ 15,877,518$
General Revenues 2009/10 2010/11 2011/12 2012/13
Property Taxes 18,856,081$ 18,226,001$ 14,088,866$ 11,968,377$
Sales Taxes 8,317,217 9,971,409 9,889,100 8,757,428
Franchise Taxes ‐ ‐ ‐ ‐
Other Taxes 2,623,622 2,906,264 3,698,753 3,324,791
Motor Vehicle in Lieu 92,595 139,814 15,238 15,790
Investment Earnings 1,155,929 760,905 331,420 (133,375)
Loss on Disposal of Capital Assets ‐ ‐ ‐ ‐
Sale of Property ‐ (870,127) ‐ 54,425
Miscellaneous 52,459 41,943 2,275,160 1,154,647
Extraordinary Gain (Loss) Dissolution of RDA ‐ ‐ 11,864,453 295,101
Total General Revenues 31,097,903$ 31,176,209$ 42,162,990$ 25,437,184$
Change in Net Position 2,516,457$ (7,807,073)$ 16,455,199$ 5,295,586$
122Draft 12-12-2019
Schedule 2
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
6,955,804$ 6,465,852$ 6,993,661$ 6,771,628$ 7,948,918$ 8,163,991$
14,119,786 12,644,221 12,825,688 14,587,597 15,545,521 16,635,726
8,154,616 8,069,352 8,320,623 9,502,707 10,047,003 10,627,716
4,424,040 4,047,738 3,227,224 5,093,459 4,667,609 5,064,637
‐ ‐ ‐
2,234,431 2,553,414 2,522,142 2,868,748 3,087,684 3,059,294
363,180 491,359 528,580 466,762 536,296 684,673
21,687 ‐ ‐
‐ ‐ ‐ ‐
36,273,544$ 34,271,936$ 34,417,918$ 39,290,901$ 41,833,031$ 44,236,037$
2,179,077$ 1,888,213$ 1,517,012$ 1,669,020$ 1,701,146$ 1,562,683$
3,206,579 3,529,166 3,278,585 2,076,688 1,888,359 1,745,889
1,550,867 2,206,765 1,516,108 2,155,841 4,150,068 2,910,936
5,156,061 5,027,497 4,359,146 3,803,626 3,456,390 4,155,231
‐ ‐ ‐
51,775 53,123 46,192 46,746 14,702 9,476
328,648 328,868 368,813 410,626 771,442 966,130
‐ ‐ 15,291
42,661 24,838 98,138 837,329 895,730 826,643
994,096 907,745 749,300 665,779 953,294 1,301,152
‐ ‐ ‐
14,662 4,062 12,228 57,200 47,482
‐ ‐ ‐
‐ 176,705 ‐
2,274,879 2,338,154 1,610,657 770,600 348,437 146,792
19,360 ‐ ‐ 9,280
15,818,665$ 16,485,136$ 13,571,470$ 12,445,535$ 14,236,768$ 13,672,414$
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
11,712,312$ 12,931,603$ 13,763,458$ 14,756,214$ 15,958,406$ 17,321,347$
8,029,571 8,202,678 7,501,175 8,925,276 7,466,253 8,158,152
‐ 2,215,430 2,258,892 2,366,908 2,474,814 2,475,916
3,718,405 2,062,893 1,997,497 2,351,223 2,667,840 2,726,743
13,068 ‐ 12,308 14,056 16,483 14,689
772,200 428,772 698,324 192,260 333,120 1,809,128
‐ ‐ ‐
‐ ‐ ‐
350,468 813,324 598,170 528,946 622,105 2,407,840
‐ ‐ ‐ ‐
24,596,024$ 26,654,700$ 26,829,824$ 29,134,883$ 29,539,021$ 34,913,815$
4,141,145$ 8,867,900$ 5,983,376$ 2,289,517$ 1,942,758$ 4,350,192$
123Draft 12-12-2019
Town of Los Gatos
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2009/10 2010/11 2011/12 2012/13
General Fund
Reserved 4,491,589$ ‐$ ‐$ ‐$
Unreserved 18,594,984 ‐ ‐ ‐
Nonspendable ‐ 1,500,000 ‐ ‐
Restricted ‐ ‐ ‐ ‐
Committed
Assigned ‐ 21,806,781 21,992,886 20,758,156
Unassigned ‐ 2,433,556 4,019,409 7,502,446
Total General Fund 23,086,573$ 25,740,337$ 26,012,295$ 28,260,602$
All Other Governmental Funds
Reserved 10,525,384$ ‐$ ‐$ ‐$
Unreserved, reported in:
Special Revenue Funds 225,509 ‐ ‐ ‐
Capital Project Funds 24,454,347 ‐ ‐
Debt Service Funds 6,953,732 ‐ ‐ ‐
Nonspendable ‐ ‐ ‐
Restricted ‐ 14,764,334 5,167,236 3,949,583
Committed ‐ ‐ ‐ ‐
Assigned ‐ 4,786,547 5,389,674 6,097,182
Unassigned ‐ (23,889) 107,107 157,208
Total All Other Governmental Funds 42,158,972$ 19,526,992$ 10,664,017$ 10,203,973$
Total Fund Balances 65,245,545$ 45,267,329$ 36,676,312$ 38,464,575$
124Draft 12-12-2019
Schedule 3
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
‐$ ‐$ ‐$ ‐$ ‐$ ‐$
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ 1,206,851 5,015,316
20,019,187 15,129,925 12,953,399 15,070,944
23,791,749 24,121,256 9,555,085 14,050,699 17,475,285 17,884,267
1,363,376 ‐ ‐ ‐ ‐ ‐
25,155,125$ 24,121,256$ 29,574,272$ 29,180,624$ 31,635,535$ 37,970,527$
‐$ ‐$ ‐$ ‐$ ‐$ ‐$
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐
4,485,246 5,663,182 6,386,014 5,627,707 6,992,747 6,903,372
‐ ‐ 3,696,000 10,354,584 5,571,087 2,579,997
8,191,823 15,346,558 11,099,076 7,928,994 6,361,403 6,180,930
183,045 206,875 ‐
12,860,114$ 21,216,615$ 21,181,090$ 23,911,285$ 18,925,237$ 15,664,299$
38,015,239$ 45,337,871$ 50,755,362$ 53,091,909$ 50,560,772$ 53,634,826$
Fiscal Year
125Draft 12-12-2019
Town of Los Gatos
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2009/10 2010/11 2011/12 2012/13
Revenues:
Taxes 29,967,385$ 31,549,352$ 27,676,719$ 24,596,799$
Intergovernmental 4,082,725 3,248,303 1,669,729 2,615,191
Charges for Service 4,418,074 4,107,386 5,550,671 6,529,234
Licenses & Permits 2,977,199 2,967,819 3,242,348 4,015,871
Investment Income 1,174,203 691,022 291,484 (133,380)
Fines and Forfeitures 662,699 737,903 809,790 688,125
Franchise Fees ‐ ‐ ‐ ‐
Use of Property 51,948 38,502 38,974 38,910
Other 2,105,333 2,904,862 5,412,328 4,577,584
Total Revenues 45,439,566 46,245,149 44,692,043 42,928,334
Expenditures:
Current
Public Safety 12,821,499 13,004,041 13,392,953 13,370,032
Public Works 5,152,745 5,222,504 5,440,960 5,616,197
Community Development 3,452,914 2,973,587 3,226,195 4,235,832
Community Services 1,261,981 663,645 ‐ ‐
Library Services 1,999,430 1,806,611 1,805,479 2,055,069
Sanitation & Other 642,512 314,899 116,607 359,725
General Government 5,483,753 6,318,706 8,046,794 8,331,444
Redevelopment 8,692,216 18,958,126 3,282,155 1,277,063
Capital Outlay 16,141,561 15,839,303 10,929,491 6,568,653
Debt Service
Principal Repayment 465,000 485,000 934,167 ‐
Interest and Fiscal Charges 620,356 1,019,881 1,143,185 ‐
Total Expenditures 56,733,967 66,606,303 48,317,986 41,814,015
Excess (Deficiency) of Revenues
Over (Under) Expenditures (11,294,401) (20,361,154) (3,625,943) 1,114,319
Other Financing Sources(Uses):
Debt Issuance 16,428,095 ‐ ‐ ‐
Transfers In 4,028,905 3,928,107 3,735,440 2,841,881
Transfers Out (3,461,724) (3,545,168) (3,661,894) (2,463,850)
Proceeds from Sale of Property
Proceeds from Issuance of Debt ‐ ‐ ‐ ‐
Total Other Financing Sources(Uses)16,995,276 382,939 73,546 378,031
Special Item:
Sale of Property ‐ ‐ ‐ ‐
Extraordinary Gain (Loss) RDA Dissolution ‐ ‐ (5,038,620) 295,913
Prepayment of Pension Obligations ‐ ‐ ‐ ‐
Net Change in Fund Balances 5,700,875$ (19,978,215)$ (3,552,397)$ 1,492,350$
Debt Service as a Percentage
of Non Capital Expenditures 2.67%2.96%5.56%0.00%
126Draft 12-12-2019
Schedule 4
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
23,475,393$ 23,208,820$ 23,269,892$ 25,945,129$ 26,253,026$ 28,244,329$
2,440,127 2,921,002 2,573,475 1,715,580 2,124,903 2,310,655
5,837,581 5,794,386 4,773,001 4,210,174 5,395,057 5,584,504
5,343,265 6,467,771 5,442,133 5,075,503 5,937,044 5,173,876
772,164 428,735 698,308 192,978 332,938 1,809,164
795,720 868,564 879,277 917,105 676,212 510,266
‐ 2,215,430 2,258,892 2,366,908 2,474,814 2,475,916
37,741 32,209 31,723 32,096 32,206 32,960
3,648,277 3,130,975 2,396,992 1,011,939 640,844 579,755
42,350,268 45,067,892 42,323,693 41,467,412 43,867,044 46,721,425
13,742,189 13,747,198 13,763,316 13,251,288 14,423,554 14,945,407
5,611,283 5,840,097 6,307,266 6,633,748 7,125,686 7,962,135
4,335,599 4,218,500 3,695,504 3,793,930 4,192,165 4,577,495
‐ ‐ ‐
2,131,438 2,268,844 2,332,268 2,508,677 2,529,017 2,493,617
322,817 411,863 452,726 466,762 521,147 628,240
8,499,854 8,647,451 9,144,797 8,390,959 8,770,082 8,004,254
21,687 ‐ ‐
4,097,662 3,800,478 3,241,657 6,867,034 9,778,058 7,888,914
‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐
38,762,529 38,934,431 38,937,534 41,912,398 47,339,709 46,500,062
3,587,739 6,133,461 3,386,159 (444,986) (3,472,665) 221,363
‐ ‐ ‐ ‐
3,418,872 8,977,220 3,315,846 7,907,692 3,176,760 4,264,131
(2,921,409) (7,788,049) (1,284,514) (7,612,012) (3,880,131) (3,323,756)
378,219 1,912,316
‐ ‐ ‐ 4,435
497,463 1,189,171 2,031,332 300,115 (325,152) 2,852,691
‐ ‐ ‐ ‐
‐ ‐ ‐ ‐
(4,534,538) ‐ ‐ ‐ ‐ ‐
4,085,202$ 7,322,632$ 5,417,491$ (144,871)$ (3,797,817)$ 3,074,054$
0.00%0.00%0.00%0.00%0.00%0.00%
Fiscal Year
127Draft 12-12-2019
Town of Los Gatos Schedule 5
Assessed Value and Estimated Actual Value of Taxable Property
Last Ten Fiscal Years
Utility
and Total
Fiscal Unsecured Percent Secured Percent Total Estimated Direct
Year Property Change Property Change Assessed Full Market Tax Rate
2010 241,286,055 11.50%8,076,101,607 1.59% 8,317,387,662 32,304,406,428 1.0584
2011 217,353,236 ‐9.92%8,044,692,600 ‐0.39% 8,262,045,836 32,178,770,400 1.0555
2012 217,297,593 ‐0.03%8,152,459,157 1.34% 8,369,756,750 32,609,836,628 1.0499
2013 211,268,609 ‐2.77%8,465,420,032 3.84% 8,676,688,641 33,861,680,128 1.0508
2014 224,079,502 6.06%9,238,816,900 9.14% 9,462,896,402 36,955,267,600 1.0493
2015 227,331,042 1.45%9,767,782,505 5.73% 9,995,113,547 39,071,130,020 1.0544
2016 217,035,545 ‐4.53%10,417,804,357 6.65% 10,634,839,902 41,671,217,428 1.0533
2017 304,443,013 40.27%11,240,554,198 7.90% 11,544,997,211 44,962,216,792 1.0560
2018 330,504,877 8.56%11,969,049,272 6.48% 12,299,554,149 47,876,197,088 1.0659
2019 359,276,665 8.71%12,795,393,103 6.90% 13,154,669,768 51,181,572,412 1.0607
Source: Santa Clara County Assessed Value Report
0
2000
4000
6000
8000
10000
12000
14000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Millions
Series1 Secured Property
128Draft 12-12-2019
Town of Los Gatos Schedule 6
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
Santa Clara School
Fiscal Basic County County Bonds Valley Water District Bonds
Year Wide Levy and Levies District and Loans Total
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
2018 1.0000 0.0597 0.0062 0.1177 1.1836
2019 1.0000 0.0565 0.0042 0.1006 1.1613
Source: Santa Clara County Book of Tax Rates
0.00
0.25
0.50
0.75
1.00
1.25
Per Hundred $Santa Clara Valey Water District County
County Bonds and Levies
School District Bonds and Loans
Basic County Wide Levy
129Draft 12-12-2019
Town of Los Gatos
Principle Property Tax Payers
Last Five Fiscal Years *
Percentage Percentage
of Total City of Total City
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
ASSESSEE NAME Value Value Value Value
750 University LLC 21,000,000$ 0.26%20,950,229$ 0.26%
980 JR LLC
Alberto Way Holdings LLC 20,927,018 0.26%20,877,418 0.26%
Ann R. Desantis ‐ 0.00%
Boccardo Corporation 37,747,020 0.47%36,839,021 0.46%
CH Realty IV Downing LP 29,391,300 0.37%19,000,000 0.24%
D&K Los Gatos LLC 20,400,000 0.26%20,351,651 0.25%
David A. and Shari Flick Trustee ‐ 0.00% 14,614,447 0.18%
Donahue Schriber Realty Group LP
DS Downing Los Gatos LLC ‐ 0.00%
DS Village Square
El Camino Hospital ‐ 0.00%
Equestrian 3 Investments LLC
Fox Creek Fund LLC
Good Samaritan Hospital LP ‐ 0.00%‐ 0.00%
Grade Way Associations VI 14,434,261 0.18%14,400,050 0.18%
Green Eyes LLC ‐ 0.00%‐ 0.00%
Grosvenor USA Ltd.20,958,858 0.26%20,909,185 0.26%
Health Care REIT Inc,24,969,600 0.31%19,720,749 0.25%
International Hotel
Kay Kaoru and Go Sasaki Sr., Trustees ‐ 0.00%
Knowles Los Gatos LLC 32,000,000 0.40%45,778,757 0.57%
KSL Capital Partners 14,030,096 0.18%39,960,114 0.50%
Leland E Lester, Trustee
LG Business Park Bldg 3 LLC
LG Business Park Bldg 4 LLC
LG Business Park LLC ‐ 0.00%‐ 0.00%
LG Hotel LLC ‐ 0.00%
Los Gatos Hotel Corp.13,906,273 0.17%15,978,009 0.20%
Lyon Baytree Apartments LLC 14,161,525 0.18%14,111,407 0.18%
Safeway Inc.
San Jose Water Works 20,162,848 0.25%23,313,978 0.29%
Serramonte Corporate Center LLC
SI 32 LLC ‐ 0.00%
Sobrato Interests IV LLC 156,934,561 1.94%150,781,092 1.87%
SRI Old Town LLC 29,626,371 0.37%29,556,155 0.37%
Summerhill Prospect Avenue LLC
Wealthcap Los Gatos 121
Wealthcap Los Gatos 31
Windrose Los Gatos Properties LLC ‐ 0.00%‐ 0.00%
Total ‐ Principal taxpayers 560,999,695$ 6.95%582,218,627$ 7.24%
Total ‐ All real properties assessed by the Town (1) $8,075,202,207 $8,043,793,200
(1) Assessed value includes only net secured real properties.
(2) Excludes the value of tax‐exempt properties
Source Data: California Municipal Statistics, Inc.
2010/112009/10
130Draft 12-12-2019
Schedule 7
Percentage Percentage Percentage
of Total City of Total City of Total City
Taxable Taxable Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed Assessed Assessed
Value Value Value Value Value Value
‐$ 0.00%12,137,999$ 0.14%18,600,000$ 0.20%
21,034,623 0.26%23,145,064 0.27%23,607,964 0.26%
‐ 0.00%‐ 0.00%13,823,779 0.15%
37,173,877 0.46%37,550,368 0.44%38,617,912 0.42%
19,143,068 0.23%19,525,927 0.23%19,916,443 0.22%
15,284,324 0.19%15,590,010 0.18%15,901,809 0.17%
14,724,487 0.18%15,018,971 0.18%
‐ 0.00%‐ 0.00%
‐ 0.00%
‐ 0.00%‐ 0.00%
19,372,795 0.24%19,530,183 0.23%19,710,897 0.21%
14,508,482 0.18%14,798,651 0.17%15,094,623 0.16%
‐ 0.00%12,542,555 0.15%12,793,404 0.14%
21,066,630 0.26%22,437,962 0.27%22,886,720 0.25%
19,869,245 0.24%19,223,348 0.23%20,671,960 0.22%
‐ 0.00%‐ 0.00%22,752,809 0.25%
46,123,468 0.57%47,045,934 0.56%47,986,850 0.52%
41,698,751 0.51%42,532,721 0.50%43,383,370 0.47%
‐ 0.00%
‐ 0.00%
18,342,931 0.23%‐ 0.00%47,276,977 0.51%
‐ 0.00%‐ 0.00%
15,683,979 0.19%15,617,134 0.18%18,134,182 0.20%
14,177,039 0.17%14,430,123 0.17%14,674,716 0.16%
29,369,137 0.36%30,882,009 0.36%33,626,381 0.36%
‐ 0.00%‐ 0.00%
157,554,525 1.93%157,559,245 1.86%169,809,676 1.84%
29,778,712 0.37%30,374,286 0.36%30,981,771 0.34%
‐ 0.00%
‐$ 0.00%
‐$ 0.00%
‐ 0.00%‐ 0.00%‐ 0.00%
583,795,249$ 7.16%584,030,904$ 6.90%650,252,243$ 7.68%
$8,151,530,237 $8,464,491,112 $9,237,887,980
2011/12 2012/13 2013/14
131Draft 12-12-2019
Percentage Percentage
of Total City of Total City
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
ASSESSEE NAME Value Value Value Value
750 University LLC 19,000,000$ 0.19%19,379,620$ 0.19%
980 JR LLC
Alberto Way Holdings LLC 23,715,141 0.24%24,188,966 0.23%
Ann R. Desantis
Boccardo Corporation 38,772,905 0.40%21,617,318 0.21%
CH Realty IV Downing LP
D&K Los Gatos LLC 15,974,003 0.16%16,293,163 0.16%
David A. and Shari Flick Trustee 15,388,884 0.16%
Donahue Schriber Realty Group LP
DS Downing Los Gatos LLC 20,006,861 0.20%21,980,568 0.21%
DS Village Square
El Camino Hospital 20,803,609 0.21%26,477,160 0.25%
Equestrian 3 Investments LLC
Fox Creek Fund LLC
Good Samaritan Hospital LP 19,602,594 0.20%19,880,366 0.19%
Grade Way Associations VI 15,163,152 0.16%
Green Eyes LLC
Grosvenor USA Ltd.22,990,624 0.24%23,449,975 0.23%
Health Care REIT Inc,20,765,810 0.21%20,089,903 0.19%
International Hotel
Kay Kaoru and Go Sasaki Sr., Trustees 24,744,983 0.24%
Knowles Los Gatos LLC 48,204,708 0.49%49,167,836 0.47%
KSL Capital Partners 43,580,326 0.45%30,134,614 0.29%
Leland E Lester, Trustee
LG Business Park Bldg 3 LLC 61,947,284 0.59%
LG Business Park Bldg 4 LLC
LG Business Park LLC 39,347,485 0.40%17,507,261 0.17%
LG Hotel LLC 15,448,057 0.16%15,497,395 0.15%
Los Gatos Hotel Corp.15,573,314 0.16%15,676,113 0.15%
Lyon Baytree Apartments LLC
Safeway Inc.
San Jose Water Works 36,693,453 0.38%37,081,049 0.36%
Serramonte Corporate Center LLC
SI 32 LLC 150,563,119 1.54%141,348,894 1.36%
Sobrato Interests IV LLC 20,869,338 0.21%44,930,482 0.43%
SRI Old Town LLC 31,122,427 0.32%31,744,252 0.30%
Summerhill Prospect Avenue LLC
Wealthcap Los Gatos 121
Wealthcap Los Gatos 31
Windrose Los Gatos Properties LLC ‐ ‐ 0.00%
Total ‐ Principal taxpayers 394,337,473$ 6.49%663,137,202$ 6.37%
Total ‐ All real properties assessed by the Town (1) $9,766,765,025 $10,416,786,877
(1) Assessed value includes only net secured real properties.
(2) Excludes the value of tax‐exempt properties
Source Data: California Municipal Statistics, Inc.
2015/162014/15
132Draft 12-12-2019
Schedule 7
Percentage Percentage Percentage
of Total City of Total City of Total City
Taxable Taxable Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed Assessed Assessed
Value Value Value Value Value Value
19,675,159$ 0.18%25,241,863$ 0.21%25,746,699$ 0.20%
19,277,879 0.15%
24,557,845 0.22%25,048,998 0.21%25,549,975 0.20%
21,918,921 0.20%22,211,650 0.19%22,651,732 0.18%
53,872,083 0.45%56,370,186 0.44%
22,315,770 0.20%
22,799,599 0.20%
26,880,933 0.24%23,353,576 0.20%28,596,104 0.22%
29,584,251 0.25%28,563,864 0.22%
21,558,664 0.17%
22,402,756 0.20%22,516,823 0.19%22,934,274 0.18%
20,396,274 0.18%
30,144,617 0.25%30,747,509 0.24%
25,122,131 0.22%25,624,027 0.21%26,135,962 0.20%
49,917,644 0.44%50,915,995 0.43%51,934,313 0.41%
30,105,945 0.27%25,893,946 0.22%26,411,820 0.21%
29,004,169 0.26%
53,465,724 0.45%
43,937,857 0.37%
31,070,572 0.28%
24,394,468 0.20%
38,710,728 0.34%41,202,805 0.34%46,150,577 0.36%
200,844,610 1.57%
143,442,269 1.28%146,317,944 1.22%149,208,182 1.17%
42,240,994 0.38%43,071,837 0.36%43,919,879 0.34%
32,228,351 0.29%32,872,917 0.27%33,530,374 0.26%
18,274,508 0.16%
109,100,000 0.97%111,282,000 0.93%113,507,640 0.89%
84,000,000 0.75%85,680,000 0.72%87,393,600 0.68%
0.00%
814,164,568.00$ 7.24% 916,633,381.00$ 7.66% ###############8.29%
$11,239,536,718 $11,968,031,792 $12,793,751,423
2019/202017/182016/17
133Draft 12-12-2019
Town of Los Gatos Schedule 8
Property Tax Levies and Collections
Last Ten Fiscal Years
Value of
Redevelopment
Agency Value of
Town Redevelopment Total Property Value of Town Property Property
Property Tax Property Tax Tax Levied Property subject Subject to Subject to
Fiscal Levied and Levied and and to Local Tax Local Local
Year Collected Collected Collected Rate Tax Rate Tax Rate
2010 7,608,137 9,022,863 16,630,999 8,317,387,662 1,134,135,499 9,451,523,161
2011 7,567,880 6,861,650 14,429,530 8,262,045,836 1,117,973,351 9,380,019,187
2012 7,520,265 3,349,254 10,869,519 8,369,756,750 1,109,305,673 9,479,062,423
2013 8,253,442 ‐ 8,253,442 8,676,688,641 1,167,752,021 9,844,440,662
2014 9,120,626 ‐ 9,120,626 9,462,896,402 1,249,873,303 10,712,769,705
2015 9,787,519 ‐ 9,787,519 9,995,113,547 1,318,214,863 11,313,328,410
2016 10,388,424 ‐ 10,388,424 10,634,839,902 1,395,509,489 12,030,349,391
2017 11,345,588 ‐ 11,345,588 11,544,997,211 1,537,577,241 13,082,574,452
2018 12,060,228 ‐ 12,060,228 12,299,554,149 1,650,746,473 13,950,300,622
2019 12,924,592 ‐ 12,924,592 13,154,669,768 1,717,358,555 14,872,028,323
Sources: Santa Clara County Auditor‐Controller Office and the Town of Los Gatos
$7.0
$7.5
$8.0
$8.5
$9.0
$9.5
$10.0
$10.5
$11.0
$11.5
$12.0
$12.5
$13.0
$13.5
$14.0
$14.5
$15.0
$15.5
BillionsValue of Property
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
$18.0
MillionsTax Levied
134Draft 12-12-2019
Town of Los Gatos Schedule 9
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
1992 2002 2010
Certificate Certificate Certificate Total Total Percentage of
Fiscal of of of Governmental Primary Personal Per
Year Participation Participation Participation Activities Government Income Capita
2010 470,000 9,120,000 15,675,000 25,265,000 25,265,000 19.4%820.24
2011 240,000 8,865,000 15,675,000 24,780,000 24,780,000 19.7%835.72
2012 ‐ ‐ ‐ ‐ ‐ 0.0%
1)0.00
2013 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2014 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2015 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2016 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2017 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2018 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2019 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
1)Debt was transferred to the Successor Agency Trust Fund as a part of the RDA dissolution
Governmental Activities
135Draft 12-12-2019
Town of Los Gatos Schedule 10
Direct and Overlapping Governmental Activities Debt
As of June 30, 2019
2018/19 Assessed Valuation:$13,154,669,768
Estimated Share
of Direct and
Total Debt at Overlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT:% Applicable (1)June 30, 2019 at June 30, 2019
Overlapping Tax & Assesment Debt
Santa Clara County 2.724%947,220,000$ 25,802,273$
West Valley‐Mission Community College District 9.343%635,310,000$ 59,357,013$
Campbell Union High School District 8.094% 389,345,000$ 31,513,584$
Los Gatos‐Saratoga Joint Union High School District 34.664%95,760,000$ 33,194,246$
Cambrian School District 0.287%49,514,944$ 142,108$
Campbell Union High School District 8.210%194,775,237$ 15,991,047$
Los Gatos Union School District 71.107%80,975,000$ 57,578,893$
Saratoga Union School District 0.033%23,580,378$ 7,782$
Union School District 20.788%103,253,148$ 21,464,264$
Midpeninsula Regional Open Space District 4.595%92,460,000$ 4,248,537$
Santa Clara Valley Water District Benefit Assessment District 2.724%73,570,000$ 2,004,047$
Total Overlapping Tax and Assesmet Debt 251,303,794$
Overlapping General Fund Debt
Santa Clara County General Fund Obligations 2.724%710,539,120$ 19,355,086$
Santa Clara County Pension Obligations 2.724%352,378,882$ 9,598,801$
Santa Clara County Board of Education Certificates of Participation 2.724%4,255,000$ 115,906$
West Valley‐Mission Community College District General Fund Obligations 9.343%62,200,000$ 5,811,346$
Campbell Union High School District General Fund Obligations 8.094%10,000,000$ 809,400$
Los Gatos‐Saratoga Joint Union High School District Certificates of Participation 34.664%3,538,000$ 1,226,412$
Campbell Union School District General Fund Obligations 6.224%3,535,000$ 220,028$
Saratoga Union School District Certificates of Participation 0.052%2,245,000$ 1,167$
Santa Clara County Vector Control District Certificates of Participation 2.724%2,245,000$ 61,154$
Midpeninsula Regional Open Space Park District General Fund Obligations 4.595%117,450,600$ 5,396,855$
Total Gross Overlapping General Fund Debt 42,596,155$
Less: Santa Clara County Supported Obligations 8,767,697$
Total Overlapping General Fund Debt 33,828,458$
Overlapping Tax Increment Debt ( Successor Agency)
Town of Los Gatos Certificated of Participations 16,350,000$
Total of Overlapping Tax Increment Debt 16,350,000$
Total Direct Debt $0
Total Gross Overlapping Dept 310,429,949$
Total Net Overlapping Debt 301,662,252$
Gross Combined Total Debt 310,429,949$ (2)
Net Combined Total Debt 301,662,252$
Ratios to 2018/19 Assessed Valuation:
Total Overlapping Tax and Assessment Debt: 1.91%
Total Direct Debt: 0.00%
Gross Combined Total Debt: 2.36%
Net Combined Total Debt: 2.29%
Ratios to Redevelpment Incremental Valuation ( $1,408,818,209):
Total Overlapping Tax Increment Debt: 1.17%
Source Data: California Municipal Statistics, Inc.
(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages
were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by
the distric's total taxable asessed value.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non‐bonded capital lease obligations.
136Draft 12-12-2019
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137Draft 12-12-2019
Town of Los Gatos
Legal Debt Margin Information,
Last Ten Fiscal Years
(In Thousands of Dollars)
2009/10 2010/11 2011/12 2012/13 2013/14
Debt Limit 1,185,727$ 1,204,551$ 1,195,035$ 1,216,131$ 1,263,138$
Debt Applicable to Limit ‐ ‐ ‐ ‐ ‐
Legal Debt Margin 1,185,727$ 1,204,551$ 1,195,035$ 1,216,131$ 1,263,138$
Total Net Debt
Applicable to the Limit
as a Percentage
of Debt Limit 0.00% 0.00% 0.00% 0.00% 0.00%
Notes:
(2) Excludes RDA asessed valuation and debt transferred to the Successor Agency trust as a part of the RDA dissolution.
(1) The Town of Los Gatos is a general law city and has a debt limit of 15%.
Fisca
138Draft 12-12-2019
Schedule 11
Assessed Value 11,927,312,472$
Debt Limit 1,789,096,871
Debt Applicable to Limit:
Legal Debt Margin 1,789,096,871$
2014/15 2015/16 2016/17 2017/18 2018/19
1,379,254$ 1,444,943$ 1,556,252$ 1,679,736$ 1,789,097$
‐ ‐ ‐ ‐ ‐
1,379,254$ 1,444,943$ 1,556,252$ 1,679,736$ 1,789,097$
0.00%0.00%0.00%0.00%0.00%
Legal Debt Margin Calculation
for Fiscal Year 2018/19
al Year
139Draft 12-12-2019
Town of Los Gatos Schedule 12
Demographic and Economic Statistics
Last Ten Fiscal Years
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)
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%
2018 30,601 2,290,638 74,855 46.81 6,588 2.6%
2019 30,998 2,365,178 76,301 46.72 6,544 2.6%
Source:
(1) California State Dept. of Finance ‐ Population Research Unit (January 2019)
(2) California State Dept. of Finance ‐ Estimate equals county per capita average times population
(3) 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.
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141Draft 12-12-2019
Town of Los Gatos
Principal Employers
Last Ten Fiscal Years
Percentage Percentage
of Total Town of Total Town
Principal Employers Emp. Employment Emp. Employment
Columbia Health Care Assoc/Mission Oaks Hospital 2,000 12.17% 2,000 12.60%
El Camino Hospital, Los Gatos 700 4.26% 700 4.41%
Los Gatos Union School District 300 1.83% 300 1.89%
Los Gatos‐Saratoga High School District 300 1.83% 300 1.89%
Netflix 280 1.70% 800 5.04%
Safeway 250 1.52% 250 1.57%
Alain Pinel Realtors 220 1.34% 220 1.39%
Verizon ‐ 0.00% ‐ 0.00%
Courtside Tennis Club 200 1.22% 200 1.26%
Town of Los Gatos 148 0.90% 138 0.87%
Whole Foods ‐ 0.00% ‐ 0.00%
Vasona Creek Health Care Center ‐ 0.00% ‐ 0.00%
Good Samaritan Regional Cancer Center ‐ 0.00% ‐ 0.00%
Roku ‐ 0.00% ‐ 0.00%
Terraces of Los Gatos ‐ 0.00% ‐ 0.00%
Source: Town of Los Gatos, Finance Department and Muniservices
2009/10 2010/11
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Schedule 13
Percentage Percentage Percentage Percentage
of Total Town of Total Town of Total Town of Total Town
Emp. Employment Emp. Employment Emp. Employment Emp. Employment
2,000 13.89% 2,000 13.29% 2,000 13.52% ‐ 0.00%
700 4.86% 700 4.65% 700 4.73% 560 3.73%
275 1.91% 275 1.83% 237 1.60% 273 1.82%
270 1.88% 270 1.79% 256 1.73% 157 1.05%
800 5.56% 900 5.98% 825 5.58% 1,530 10.19%
250 1.74% 250 1.66% 250 1.69% 314 2.09%
150 1.04% 150 1.00% 156 1.05% 156 1.04%
‐ 0.00% ‐ 0.00% ‐ 0.00% ‐ 0.00%
200 1.39% 200 1.33% 295 1.99% 440 2.93%
136 0.94% 138 0.92% 144 0.97% 157 1.05%
‐ 0.00% ‐ 0.00% ‐ 0.00% 179 1.19%
‐ 0.00% ‐ 0.00% ‐ 0.00% 233 1.55%
‐ 0.00% ‐ 0.00% ‐ 0.00% 200 1.33%
‐ 0.00% ‐ 0.00% ‐ 0.00% ‐ 0.00%
‐ 0.00% ‐ 0.00% ‐ 0.00% ‐ 0.00%
2014/152011/12 2012/13 2013/14
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Percentage Percentage
of Total Town of Total Town
Principal Employers Emp. Employment Emp. Employment
Columbia Health Care Assoc/Mission Oaks Hospital ‐ 0.00% ‐ 0.00%
El Camino Hospital, Los Gatos 560 3.53% 560 3.49%
Los Gatos Union School District 280 1.76% 274 1.71%
Los Gatos‐Saratoga High School District 157 0.99% 370 2.30%
Netflix 1,976 12.45% 1,864 11.61%
Safeway 314 1.98% 314 1.95%
Alain Pinel Realtors 146 0.92% 148 0.92%
Verizon ‐ 0.00% ‐ 0.00%
Courtside Tennis Club 440 2.77% 468 2.91%
Town of Los Gatos 158 1.00% 160 1.00%
Whole Foods 179 1.13% 179 1.11%
Vasona Creek Health Care Center 233 1.47% 233 1.45%
Good Samaritan Regional Cancer Center 200 1.26% 200 1.25%
Roku 487 3.07% 554 3.45%
Terraces of Los Gatos 228 1.44% 228 1.42%
2015/16 2016/17
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Schedule 13
Percentage Percentage
of Total Town of Total Town
Emp. Employment Emp. Employment
0.00% 0.00%
560 3.43% 560 3.49%
267 1.64% 281 1.75%
367 2.25% 367 2.28%
2,117 12.98% 2,314 14.41%
314 1.92% 314 1.95%
131 0.80% 131 0.82%
0.00%0.00%
542 3.32% 542 3.37%
159 0.97% 160 1.00%
179 1.10% 125 0.78%
233 1.43% 233 1.45%
200 1.23% 200 1.25%
664 4.07% 516 3.21%
228 1.40% 228 1.42%
2018/192017/18
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Town of Los Gatos Schedule 14
Full‐time‐Equivalent Employees by Function/Program
Last Ten Fiscal Years
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
Function/Program
General Government 18.35 18.90 20.15 20.40 20.73 20.97 20.97 21.35 21.97 22.16
Police 60.00 59.50 60.50 58.00 57.50 60.00 59.00 59.00 59.00 59.00
Culture and Recreation 5.25 3.25 ‐‐‐‐‐‐
Economic Development 1.00 1.00 1.00 ‐ 0.50 0.63 0.63 0.63 0.75 0.75
Library 10.35 8.60 8.60 8.60 10.30 10.80 11.00 12.25 12.25 12.50
Planning 17.80 15.00 16.00 17.50 17.50 19.50 19.00 19.26 19.63 20.08
Public Works 35.00 32.50 32.00 31.00 31.50 32.00 33.50 33.50 34.50 34.50
Total 147.75 138.75 138.25 135.50 137.53 143.90 144.10 145.98 148.10 148.99
Full‐time equivalent employment is calculated as one or more employee positions totaling one full year
of service or approximately 2,080 hours a year.
Page C‐38 of Town Budget 18‐19
Full‐time‐Equivalent Employees as of June 30
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Town of Los Gatos
Operating Indicators
Last Ten Fiscal Years
FUNCTION/PROGRAM
General government 2009/10 2010/11 2011/12 2012/13
Building Permits Issued
Residential Permits Issued 733 711 747 738
Residential Permits Value 51,090,808 42,974,043 66,072,341 75,227,889
Commercial Permits Issued 117 128 107 137
Commercial Permits Value 7,908,146 31,289,431 17,663,124 46,855,615
Publically Owned Permits Issued 11 11 ‐ ‐
Publically Owned Permits Value 5,732,014 40,000 ‐ ‐
Residential Parking Permits
Number of Special Event Permits Issued 87 96 89 125
Number of Annual Permits Issued 686 713 1,223 1,320
City Clerk
Number of Council Resolutions Passed 167 76 59 74
Number of Ordinances Passed 16 6 13 20
Number of Contracts Passed 206 218 227 220
General Services
Number of Purchase Orders Issued 365 336 358 318
Police
Physical Arrests 831 872 690 648
Parking Violations 11,512 14,377 12,938 11,991
Traffic Violations 3,008 2,718 2,908 3,333
DUI Arrests 110 98 89 86
Library
Circulated e‐audiobooks 1,852 1,994 3,388 4,774
Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles)4.7 4.7 8.0 8.0
ADA Compliance: Curb Ramps 13 17 19 19
Traffic Circles 1 1 1 1
Street Poles 1,605 1,708 1,611 1,611
Planning and Development Department
Building & Safety Inspections Performed 9,055 10,977 11,738 11,902
Redevelopment: Number of active projects 3 1 1 ‐
* July 2013 the Library separated from Northern CA Digital Library, Patrons had no longer access to collections of multiple libraries. By 20
patrons access to more materials.
** The Town streamlined the special event application where multiple events require only one permit.
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Schedule 15
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
813 805 899 744 849 814
87,307,822 76,896,111 85,000,754 53,625,891 63,083,249 80,030,846
139 133 147 135 105 122
138,676,507 178,195,997 20,185,884 50,024,177 16,626,196 13,295,999
‐ ‐ ‐ ‐
‐ ‐ ‐ ‐
133 127 107 118 113 78 **
1,376 1,570 1,363 1,251 1,342 1,395
86 72 61 69 69 59
16 9 11 5 17 11
196 222 283 240 262 245
301 277 334 331 322 343
641 695 987 1,030 1,164 1,138
14,421 13,321 13,975 12,863 11,784 6,817
4,747 4,633 5,400 4,634 4,757 2,877
62 48 58 60 51 70
2,414 *5,867 * 7,761 10,006 8,844 12,130
10.0 1.8 8.0 10.0 2.6 5.8
19 23 11 30 68 49
‐ 1 1 1 1 1
1,611 1,609 1,609 1,609 1,762 1,830
12,764 11,652 8,655 14,722 13,918 13,966
‐ ‐ ‐ ‐ ‐ ‐
014 the Library has expanded its contents giving
Fiscal Year
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Town of Los Gatos
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Function/Program
Police
Number of Stations 2 2 2 2 2 2
Number of Patrol Units 14 14 14 14 14 14
Parking Enforcement Vehicles 2 2 2 2 2 2
Other Public Works
Streets (miles)132 132 132 132 132 132
Streetlights 2,112 2,115 2,116 2,116 2,109 1,609
Traffic Signals 28 28 29 29 29 29
Parks and Recreation
Number of Parks 12 12 12 12 12 12
Number of Community Centers 1 1 1 1 1 1
Number of Parks & Open Spaces N/A N/A N/A N/A N/A N/A
Parking
Number of Parking Garages 1 1 1 1 1 1
Number of Parking Lots 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
Number of Downtown Off‐Street Parking Spaces N/A N/A N/A N/A N/A N/A
Source: Town of Los Gatos, Finance Department
Fiscal Year
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Schedule 16
2015/16 2016/17 2017/18 2018/19
2 2 2 2
14 14 14 14
2 2 2 2
132 132 132 132
1,609 1,609 1,762 1,830
30 30 30 31
12 12 12
N/A
1 1 1 1
N/A N/A N/A 18
1 1 1 1
22 22 22 22
1,126 1,126 1,126
N/A
N/A N/A N/A 1,269
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OTHER INDEPENDENT AUDITOR’S REPORT
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REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
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, 2019, 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 DATE, 2019.
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.
155Draft 12-12-2019
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.
Badawi and Associates
Certified Public Accountants
Berkeley, California
DATE, 2019
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