Staff Report with attachments
PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022 ITEM NO: 7
DATE: December 13, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Annual Comprehensive Financial Report (ACFR):
a. Receive the Annual Comprehensive Financial Report (ACFR) for the Fiscal
Year Ended June 30, 2022, and
b. Adopt a Resolution Confirming June 30, 2022 Fund Balances in
Accordance Fiscal Year 2021/22 Final Audit and Town Council General
Fund Reserve Policy
RECOMMENDATION:
Annual Comprehensive Financial Report (ACFR):
a. Receive the Annual Comprehensive Financial Report (ACFR) for the Fiscal Year Ended June
30, 2022 (Attachment 1) as recommended by the Finance Commission, and
b. Adopt a Resolution Confirming June 30, 2022 Fund Balances in Accordance with Fiscal Year
2021/22 Final Audit and Town Council General Fund Reserve Policy.(Attachment 2)
BACKGROUND:
The Town contracts with an independent certified public accountant to examine the books,
records, inventories, and reports of all officers and employees who receive, handle, or disburse
public funds each fiscal year (FY). The FY 2021/22 audit was performed by Chavan and
Associates, LLP an experienced firm specializing in audit services for California public agencies.
The firm also compiled the Draft ACFR for the Town of Los Gatos.
The information contained in the ACFR provides detailed financial information which the Los
Gatos community and others can use to better understand the fiscal standing of the Town. In
addition, the financial information contained in the document is one element that the credit
rating agencies review annually to affix a credit rating for the Town’s outstanding debt
obligations.
PAGE 2 OF 4 SUBJECT: Receive 2022 Annual Comprehensive Financial Report DATE: December 13, 2022
BACKGROUND (continued):
With the passage of Measure A, the Finance Commission has been tasked with several
mandated duties as described in the provisions of the adopted Ordinance. Section 2.50.225. –
Duties states that:
(a) The Finance Commission shall:
(3) Review the Town Manager's draft Annual Comprehensive Financial Report (ACFR)
for the preceding fiscal year and provide written comments and recommendations
to the Town Manager.
(A) The Town Manager shall respond in writing to the Finance Commission
providing his or her rationale for accepting or rejecting each of the Finance
Commission's comments and recommendations prior to presenting the ACFR to
the Town Council for formal consideration.
(B) The Town Manager may not present the ACFR to the Town Council for
formal consideration unless or until he or she considers and responds in writing
to all of the Finance Commission's comments and recommendations.
DISCUSSION:
On December 12, 2022, the Commission received the Fiscal Year 2021/22 Draft Annual
Comprehensive Financial Report (ACFR) for the Commission’s consideration per Measure A
including a presentation from the Town’s auditor Chavan and Associates, LLP (Attachment 3).
During the meeting, the Commission provided feedback on the Fiscal Year 2021/22 Draft
Annual Comprehensive Financial Report (Attachment 1). Of note the Commission requested
that given recent inflationary trends, staff should provide language that illustrates the effect
long-term inflation could have on the Town’s pension liabilities (pg. 4). In addition, the
Commission requested that staff expand Note 15 to include the FY 2020/21 ARPA expenditures
of $200,000 (pg. 97). Commissioners also requested that Note 16 make it clear that the
potential waste hauler revenue loss is an annual number (pg. 98).
On December 15, 2022, the Finance Commission will conclude its review of the Fiscal Year
2021/22 Draft Annual Comprehensive Financial Report (ACFR). Any additional
recommendations received from the Commission at the December 15th meeting will be
communicated to the Town Council through the addendum process.
In addition to the review and input provided by the Finance Commission, staff also provided
continuous review and updates to the Fiscal Year 2021/22 Draft Annual Comprehensive
Financial Report (ACFR) accordingly (pages 4, 19, 31, 83, and 85).
PAGE 3 OF 4 SUBJECT: Receive 2022 Annual Comprehensive Financial Report DATE: December 13, 2022
DISCUSSION (continued):
The redline version of the attached ACFR represents the culmination of recommended
enhancements and changes based on Finance Commission comments, continued staff analysis,
and continued auditor review while maintaining appropriate ACFR presentation based on
governmental accounting and municipal standards.
Highlights of the draft audited financial results include:
Independent Auditor’s Report
The auditor has given the Town’s financial statements a “clean” audit opinion for the year
ended June 30, 2022 giving reasonable assurance that the financial statements are “free of
material misstatement.” (Attachment 3)
Management’s Discussion and Analysis (MD&A)
The MD&A section of the report summaries for the Town on an entity-wide basis and fund type
basis. Information is provided in this section with a year-to-year view, explaining how fund
balances have changed between fiscal years ending June 30, 2020, June 30, 2021, and June 30,
2022. Information is also presented on the adopted General Fund budget to actuals and any
significant budget adjustments made during FY 2021/22.
Statement of Net Position
The Statement of Net Position serves as a useful indicator of a government’s financial position.
The Town had net assets of $138.4 million at fiscal year-end as compared to $113.5 million the
prior year, an overall increase of $24.9 million over the prior fiscal year. The increase was
largely attributed to the combined net result of an approximate $37 million decrease in total
long-term liabilities outstanding, a $16 million dollar increase in capitalized assets including a
$12.2 million historic Los Gatos Theatre contribution and a $3.7 million addition to non-
capitalized capital outlay expenses from the prior year
The largest portion of the net assets, $127.8 million, represents the Town’s investment in its
capital assets and infrastructure. Restricted assets of $10.2 million are resources that are
subject to external restrictions on how they may be used. As of June 30, 2022, unrestricted net
position is $1.8 million compared to a negative ($4.7 million) the prior year.
Basic Financial Statements
This section contains basic financial statements, including the “entity-wide” Statement of Net
Position and Statement of Activities, financial statements for the fund types including
Governmental Funds (such as the General Fund), Proprietary Funds, and the Private Purpose
Trust Funds (Redevelopment Successor Agency). The footnotes section provides details on
significant items such as the Town’s cash and investments (Note 2), Note 4 which illustrates the
new implementation of GASB 87 for leases, its long term obligations (Certificates of
Participation) related to bonded debt (Note 7), the net pension liability for both the Town’s
PAGE 4 OF 4 SUBJECT: Receive 2022 Annual Comprehensive Financial Report DATE: December 13, 2022
DISCUSSION (continued):
miscellaneous and safety pension plans (Note 10), and a discussion of the Town’s other post-
employment benefit plan (Note 11).
Required Supplementary Information
The Schedules of Pension Plan Contributions are provided in this section.
Supplementary Information
This section provides budget to actual information for “non-major” funds which represent less
than 10% of the Town’s total assets/liabilities/revenues or expenditures.
Statistical Section
This section presents demographic statistics and ten-year historical financial data for the Town,
including information on assessed valuations, fund balances, debt, property tax rates,
personnel (full-time equivalent) history, principle employers, and other financial and
demographic disclosures.
CONCLUSION:
As noted in the auditor’s opinion, the ACFR fairly presents the fiscal year ending June 30, 2022
financial activity for the Town of Los Gatos.
FISCAL IMPACT:
There is no fiscal impact associated with this item.
Attachments:
1. Draft Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2022.
2. Fund Balance Resolution Establishing June 30, 2022 Fund Balances
3. Independent Auditor Presentation to the Council Finance Commission
ATTACHMENT 1
TOWN OF LOS GATOS
CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2022
PREPARED BY THE OFFICE OF THE TOWN MANAGER
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022
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 ........................................................................................... 19
Basic Financial Statements:
Government-Wide Financial Statements: .................................................................................... 40 Statement of Net Position ..................................................................................................... 41
Statement of Activities ......................................................................................................... 42
Fund Financial Statements: Governmental Funds: ........................................................................................................... 43
Balance Sheet ................................................................................................................... 44 Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position .............................................................................................. 45 Statement of Revenues, Expenditures and Changes in Fund Balances ............................. 46
Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities ...................................... 47
Statement of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) General Fund .................................................................... 48
Proprietary Funds – Internal Service Funds: ....................................................................... 49 Statement of Net Position ................................................................................................. 50
Statement of Revenue, Expenses and Changes in Net Position ........................................ 51 Statement of Cash Flows .................................................................................................. 52
Fiduciary Funds: .................................................................................................................. 53 Statement of Fiduciary Net Position ................................................................................. 54
Statement of Changes in Fiduciary Net Position .............................................................. 55 Notes to the Basic Financial Statements ...................................................................................... 58
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of Pension Plan Contributions...................................................................................... 101
Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost Sharing Plan ................................................................................................................. 102 Schedule of Proportionate Share of Net Pension Liability – CalPERS Misc. Agent-Multiple Employer Plan ............................................................................................ 103 Schedule of OPEB Contributions ................................................................................................ 104 Schedule of Changes in Net OPEB Liability ............................................................................... 105
TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022 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 ................................................... 109 Nonmajor Governmental Funds: Combining Balance Sheets .......................................................................................................... 110 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ...................................................................................................................... 113 Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) ................................................... 116 Internal Service Funds: Combining Statement of Fiduciary Net Position ......................................................................... 122 Combining Statement of Revenue, Expenses and Changes in Net Position ................................ 123 Combining Statement of Cash Flows .......................................................................................... 124 STATISTICAL SECTION .............................................................................................................. 127 Net Position by Component ......................................................................................................... 129 Changes in Net Position .............................................................................................................. 130 Fund Balances, Governmental Funds .......................................................................................... 132 Changes in Fund Balances, Governmental Funds ....................................................................... 134 Assessed Value and Estimated Actual Value of Taxable Property ............................................. 136 Direct and Overlapping Property Tax Rates ................................................................................ 137 Principal Property Tax Payers ..................................................................................................... 138 Property Tax Levies and Collections ........................................................................................... 140 Ratios of Outstanding Debt by Type ........................................................................................... 141 Direct and Overlapping Governmental Activities Debt............................................................... 142 Legal Debt Margin ...................................................................................................................... 143 Demographic and Economic Statistics ........................................................................................ 145 Principal Employers .................................................................................................................... 146 Full-time Equivalent Town Government Employees by Function/Program ............................... 148 Operating Indicators by Function/Program ................................................................................. 149 Capital Assets Statistics by Function/Program ............................................................................ 151 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 ................................................................................................. 153
INTRODUCTORY SECTION
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Page 1
December 6, 2022
Honorable Mayor and Town Council,
I am pleased to submit the Town’s Annual Comprehensive Financial Report (ACFR) for the fiscal year
ending June 30, 2022. In coordination with the Town Manager’s Office, this report was prepared by
the Finance Department, which assumes responsibility for the accuracy of the data, the
completeness and fairness of the presentation, and all disclosures. The information in this report
presents 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, 2022, 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 Annual Comprehensive 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 Auditor’s opinion, the MD&A, the basic
financial statements, notes to the financial statements, combining statements of nonmajor
funds, and required supplemental information.
III. The Statistical Section includes both financial and nonfinancial data about the Town.
The Annual Comprehensive Financial Report is prepared in accordance with Generally Accepted
Accounting Principles (GAAP) promulgated by the Governmental Accounting
Mayor and Town Council December 6, 2022
Page 2
Standards Board (GASB) and includes the audit report of Chavan & Associates, the Town’s
independent certified public accountants.
This Annual Comprehensive 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 legal framework of California in 1887. The
Town is located in the foothills and level terrain of southwestern Santa Clara Valley, referred to
internationally as “Silicon Valley.” From the first 100acre 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 33,062
(California Department of Finance, January 2022). The growth over the last 80 years resulted in a
community with vibrant business districts, well-maintained neighborhoods, and lovely parks and
open spaces. Preserving the unique charm of Los Gatos as a complete and well-balanced community
while meeting its economic and housing needs, has been, and remains a key goal for the Town.
The Town maintains a CouncilManager 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 ViceMayor are appointed by the Council from its own ranks and serve one-
year terms. The Town Manager and Town Attorney are appointed and supervised directly by the
Council. The Town Manager oversees all municipal services such as Public Safety, Parks and Public
Works, Community Development, Library, and Town Administration including Human Resources,
Information Technology, and Finance.
ECONOMIC CONDITIONS AND OUTLOOK
This past year the Town continued to see a modest return to economic normalcy after the initial
economic impacts associated with the pandemic. However, the Town’s economically sensitive
Transient Occupancy Tax (TOT) remains near historic lows and Sales Tax receipts are still below FY
2018/19 levels. Property Tax revenues remained steady as suburban communities continued to
benefit from urban flight and remote work remained viable for certain occupations.
General Fund revenues (not including transfers in) increased 8.8% from the prior year. Property tax
revenues remain the largest and most consistent source of support for General Fund operations,
comprising approximately 45.3% of General Fund revenues in FY 2021/22. For FY 2021/22 property
tax receipts of $21.1 million were $1.2 million higher than the prior year’s collection, reflecting the
continued desirability of the Town, its environment, culture, and educational opportunities.
Mayor and Town Council December 6, 2022
Page 3
The Town also relies heavily on sales tax revenues to support General Fund operations, comprising
approximately 18.2% of General Fund revenues in FY 2021/22. For FY 2021/22 sales tax receipts of
$8.5 million were $0.6 million higher than the prior year’s collection. Sales tax revenues were
supported by significant increases in gas prices, strong auto sales, and the continued resurgence of
the restaurant sector. The Town’s 1/8 cent District Sales Tax continued to perform well as the
District Tax captures a larger share of the increase in online sales versus the County pool collections.
In addition to the Town’s revenue sources the Town continues to benefit from the federal American
Rescue Plan Act (ARPA). The Act will allocate $7,229,744 to the Town over a two-year period with
the first nonrecurring payment of $3,614,872 received on July 13, 2021. The funding provided
critical support for budget stabilization, economic vitality, and social welfare initiatives. For more
information regarding the two federal programs please refer to Note 15.
As with most municipalities, services are provided directly by employees to the Town’s residents,
businesses, and visitors. As a service delivery enterprise, the cost of salaries and benefits are a
significant portion of the Town’s expenditures. Salaries are largely dictated by regional market
forces as evidenced by fierce competition for talent in the San Francisco Bay Area, and inflationary
pressures nationwide. During FY 2021/22, the Town successfully completed negotiations with all
bargaining units. While important for the consistent delivery of high-quality services for the Town,
these actions exacerbated an already existing imbalance between revenues and expenditures.
The Town also continues to adjust and prepare for pension employer costs to continue to be a
primary expense in conjunction with salaries. The Town’s pension plans over the past several
decades, like all other CalPERS participants, have experienced changes in actuarial assumptions,
demographic changes, and volatile investment returns which have outweighed any positive plan
experiences. The outcome of these unfavorable economic and demographic conditions is the
creation of unfunded pension and Other Postemployment Benefits (OPEB) obligations for the Town.
According to the 2021 CalPERS actuarial valuations, the unfunded actuarial liability for pensions was
$36.8 million and $5.5 million for OPEB as of June 30, 2021.
To address the escalation in pension costs, current and previous Councils have allocated additional
discretionary pension funding totaling $10.4 million. These additional discretionary payments will
ultimately yield an approximate $12.7 million in pension contribution savings. In addition to the
management of the Town’s pension obligations, prior Councils have worked to curb cost escalation
in Other Postemployment Benefits (OPEB). In 2009, the Town initiated prefunding of the retiree
healthcare benefit and has since established approximately $23.2 million in OPEB assets from zero
in 2009.
In addition, it should be noted that the net pension obligation varies annually depending upon the
plan’s actual investment earnings compared to the assumed rate of return during the plan’s
measurement periods. The Net Pension Obligation (NPO) reported in the Town’s ACFRs has
experienced a high degree of variability in recent years, with Net Pension Obligation reported in the
June 30, 2017 ACFR in the amount of $33.4 million rising to $58.02 million in fiscal year 2020/21.
The NPO reported in this year’s financial statements (ACFR 2021/22) has decreased 52.6% to the
Mayor and Town Council
December 6, 2022
current NPO of $27.48 million. Due to CalPERS preliminary negative returns of 7.4%, staff
expects the NPO to rise significantly in the next fiscal year reporting period. It should be noted that
CalPERS has recently cautioned in their annual review of funding and risks that recent and current
increases in the Consumer Price Index (CPI) are expected to have a material impact on the pension
liabilities in future actuarial valuation reports for both retirees (due to cost of living increases) and
the active members (due to future salary increases).
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. This sensitivity to changes in actuarial
assumptions is especially evident in changes to the Discount Rate as illustrated in Note 10 and
changes to Healthcare Trend and Discount rates as illustrated in Note 11
For detailed information about the Town employees’ retirement plan please refer to Note 10 of the
Notes to Basic Financial Statements Section. For detailed information about the Town
OPEB obligations please refer to Note 11 of the Notes to Basic Financial Statements Section. In
addition, the Town provides extensive information on pension and OPEB information on the Town’s
website.
Despite revenue constraints and increasing costs associated with unfunded federal and state
mandates, the Town has managed to maintain high service levels through increased efficiencies in
Town operations and prudent fiscal management. 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. For example, the Town is currently evaluating a
recent California Supreme Court case that could negatively impact the collection of waste hauler
franchise fees. For more information see Note 16.
MAJOR CAPITAL PROJECT INITIATIVES
Major capital asset and infrastructure initiatives were once again the priority for the fiscal
year. Approximately $21.4 million in Town infrastructure and other capital asset
improvements and contributions were invested in FY 2021/22, including a $12.2 million Los Gatos
Theater contribution, a $1.5 million parking lot acquisition, and $3.9 million in Town-wide street
projects to improve the pavement condition. In addition, $3.7 million was invested in
construction in progress including, roads, bridges, storm drains, park, pathways, building
improvements, and downtown revitalization efforts.
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. Page 4
Mayor and Town Council December 6, 2022
Page 5
ACCOUNTING SYSTEM AND BUDGETARY CONTROL
The effectiveness of internal controls is a primary consideration in the development and evaluation
of the Town’s accounting system. Internal accounting controls are designed to provide reasonable
but not absolute assurance regarding:
1)safeguarding of assets against loss from unauthorized loss or disposition,
2)accuracy and reliability of accounting data, and
3)adherence to managerial policy.
The concept of reasonable assurance recognizes that the cost of internal controls should not
outweigh the benefits, and that management must make estimates and judgments in evaluating
these costs and benefits.
All governmental fund types use the modified accrual basis of accounting. This means that revenues
are recorded when measurable and available rather than 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 yearend.
AWARDS
The Town’s Annual Comprehensive Financial Report for the fiscal year ended June 30, 2021 was
awarded a Certificate of Achievement for Excellence in Financial Reporting by the national
Government Finance Officers Association. This is the 27th 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
Mayor and Town Council December 6, 2022
Page 6
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.
INDEPENDENT AUDIT
State law requires an annual audit of the Town’s accounts by independent certified public
accountants. The accounting firm of Chavan & Associates LLP performs this function for the Town of
Los Gatos, and their report is included in the financial section of the ACFR.
ACKNOWLEDGEMENTS
The preparation of this Annual Comprehensive 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 Mark Gaeta, Accountant; Melissa Ynegas, Finance Analyst; Diane Howard, Finance
Analyst; and Maurice De Castro, Accountant; Wayne Chen, Administrative Technician; Steve
Conway, Former Finance Director; and Arn Andrews Assistant Town Manager for their efforts in
preparing this report. The Town’s Finance Commission is also recognized for its contributions to
strengthening the ACFR through its review, discussion, and comments.
Respectfully submitted,
Laurel Prevetti Gitta Ungvari
Town Manager Director of Finance
Page 7
Town of Los Gatos
Organizational Structure
Page 8
TOWN OF LOS GATOS
PRINCIPAL OFFICERS
JUNE 30, 2022
TOWN COUNCIL
Mayor Rob Rennie
Vice Mayor Maria Ristow
Council Member Mary Badame
Council Member Matthew Hudes
Council Member Marico Sayoc
COUNCIL APPOINTEES
Town Manager Laurel Prevetti
Town Attorney Gabrielle Whelan
APPOINTED OFFICIALS
Assistant Town Manager Arn Andrews
Chief of Police Jamie Field
Community Development Director Joel Paulson
Interim Parks and Public Works Director Tim Borden
Library Director Ryan Baker
Interim Finance Director Stephen Conway
Human Resources Director Salina Flores
Page 9
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FINANCIAL SECTION
Page 12
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Page 13 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
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, General Fund budgetary statement, and the aggregate remaining fund information of the Town of Los Gatos (the “Town"), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise Town’s basic financial statements as listed in the table of contents.
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, General Fund budgetary statement, and the aggregate remaining fund information of the Town of Los Gatos, as of June 30, 2022,
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.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Town and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of a Matter
During the year, the Town implemented GASB Statement No. 87, Leases. As a result, the Town recorded lease receivables of $1,826,417 and net deferred inflows of resources of $1,156,412, increasing beginning fund balance and net position by $687,399. See note 4 for additional information. Our opinion was not modified for this matter.
Responsibilities of Management for the Financial Statements
Town management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Page 14 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159 info@cnallp.com • www.cnallp.com
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is
not a guarantee that an audit conducted in accordance with GAAS will always detect a material
misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and GAGAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit 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 Town’s internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit. Other Matters Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and required supplementary information, as listed in the table of contents, 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.
Page 15 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s financial statements as a whole. The introductory section, supplementary budgetary comparison schedules, combining individual non-major fund schedules, combining internal service fund
schedules, and statistical data, are presented for purposes of additional analysis and are not a required part
of the financial statements.
The combining and individual nonmajor fund financial statements and combining internal service fund schedules 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 and combining internal service fund schedules are fairly stated in all material respects in relation to the basic financial statements as a whole.
The introductory, supplemental budgetary and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 6, 2022 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.
Chavan & Associates, LLP Certified Public Accountants December 6, 2022 Morgan Hill, California
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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 Annual Comprehensive Financial Report (ACFR) presents
Management’s Discussion and Analysis (MD&A) of the Town’s financial performance during the
fiscal year that ended on June 30, 2022. 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 and deferred outflows of resources exceeded its liabilities and deferred inflows
of resources at the close of Fiscal Year (FY) 2021/22 by $138,406,981 (total net position).
•The Town’s total net position increased by $24,888,881 during the fiscal year largely as a
combined net result of an approximate $37 million decrease in total long‐term liabilities
outstanding, a $16 million dollar increase in capitalized assets including a $12.2 million
historic Los Gatos Theatre contribution and a $3.7 million addition to non‐capitalized capital
outlay expenses from the prior year. Non‐capitalized project expenditures reduce net
position as they are not added back to total assets as new infrastructure or
capital investments. Major non‐capitalized expense projects included approximately
$849K in bicycle lane safety improvements, $58K for parking program implementation, and
$77K for traffic safety. Depreciation expenses allocated to all Town Departments
increased by approximately $439K from the prior year reflecting the significant additional
investments and contributions made in the Town’s infrastructure through FY 2021/22.
•The decrease in long‐term liabilities was mostly attributed to the decline in net pension
liabilities of $30.5 million. The decline was due to each plan’s actual investment earnings
having far exceeded the actuarial return assumptions during the plan’s measurement
periods (July 1, 2020 through June 30, 2021). Also contributing to the decrease in the net
pension liabilities were the Town’s additional discretionary payments (ADPs) in
excess of the contractually required contributions in prior fiscal years that are now
recognized in the FY 2021/22 financial statements.
•Total pension expense calculated for the Town’s miscellaneous and safety plans is
$3,389,540 after a credit of $3,168,358 as a result of GASB 68 adjustment. This credit led to
reduced pension expense in both the miscellaneous and safety plans as a result of better
than projected investment earnings versus the projected assumed investment returns on
pension plan investments as of the June 30, 2021 measurement date. A more detailed
discussion of the Town’s unfunded pension liabilities can be found in Note 10.
•Reported unrestricted net position is $1,785,294 compared to negative ($4,735,103) the
prior year. Unrestricted net position represents all resources not included as net
investment in capital or restricted assets.
•During FY 2021/22, the Town implemented GASB Statement No. 87 Leases. As a result, the
Town recorded long‐term lease receivables of $1,826,417 and net deferred inflows of leases
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of $1,156,412, increasing beginning fund balance and net position by $0.7 million. See Note
4 for additional information.
The Town received the first tranche payment of $3,614,872 from the American Rescue Plan
Act (ARPA) grant on July 13, 2021. For FY 2020/21, $200K of ARPA proceeds was recognized
as revenue to reimburse the Town for qualifying expenditures under the provisions of the Act
including boosting economic recovery and providing rent forgiveness and direct grants to
non‐profit and social welfare organizations. For FY 2021/22, the Town recognized $3.4
million in ARPA revenues related to recovery of revenue loss.
Despite the ongoing economic impacts resulting from the nationwide pandemic, the Town’s
economically sensitive major revenues of property tax, sales tax, and business license tax
were able to record gains from amounts reported the prior fiscal year. Property taxes
collected increased $1.3 million, sales taxes increased $0.6 million, while business license tax
increased by a modest $94K from amounts collected the prior year.
The economic impacts related to the pandemic and initial travel restrictions continued into
FY 2021/22. FY 2021/22 Transient Occupancy Tax (TOT) revenue collection increased by
$840K compared to the level collected in FY 2020/21. However, the current year proceeds
of $1.9 million is still $0.8 million lower than FY 2019/20 level of TOT collection.
Total expenses as reported in the Statement of Activities increased $2.2 million from the prior
year. The increase primarily was driven by a one‐time $6.9 million State pass‐through grant
payment in General Government for wildfire protection. Excluding the one‐time payment,
total expenses actually decreased from the prior year by $4.7 million primarily due to the $3.1
million calculated pension expense credit, salary and benefit savings, and other miscellaneous
operational savings. As previously noted, the pension expense credit was mostly from actual
investment earnings in excess of estimated assumed investment earnings and additional
discretionary payments in excess of contractually required contributions.
The cost of all governmental activities as presented in the Statement of Activities this year
was $52.7 million. The Town’s governmental program revenues were $41.2 million including
charges for services of $12.8 million, operating grants and contributions of $6.2 million, and
capital grants and contributions of $22.2 million. After taking governmental program
revenues into consideration, the net amount of taxpayer supported governmental activities
was $11.5 million. The Town paid for the remaining “public benefit” portion of governmental
activities from total taxes and general revenues of $35.7 million. This $11.5 million in net cost
of governmental activities is net of the $12.2 million Los Gatos Theatre contribution that
occurred during FY 2021/22. Excluding the theatre contribution, the net cost of
governmental activities would be $23.7 million which represents an approximate 32%
decrease from the prior fiscal year ($35.1 million). The decrease reflects reduced costs
related to the pension credit and increased governmental grant revenues from the prior year.
At the end of FY 2021/22, the General Fund balance was $26,896,789 compared to
$23,914,618 in the prior year. The ending fund balance of $26,896,789 represents
approximately 62% of General Fund expenditures for the current fiscal year excluding
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transfers‐out to the Town’s capital projects funds and internal service funds. The $3.6 million
increase in General Fund ending fund balances was primarily due to the combined effect of
favorable year end increases in economically sensitive revenues coupled with operational
savings, and approximately $3.5 million transfer (including $2.9 million General Fund
Reserves and 50% of the FY 2021/22 Measure G proceeds in the amount of $0.6 million) to
the Town’s capital projects fund to provide resources for Town infrastructure improvements.
Fund balances for all governmental funds at year end were $50,862,138, an increase of
approximately $3.0 million or (6.3%) from the prior year. Governmental fund balances
increased primarily due to approximately $3.3 million of excess operating revenues above
operating expenditures offset for capital use. Much of the surplus was due to an increase in
property taxes, sales taxes, other taxes, licenses and permits, charges for services and
franchise fees of $4.7 million over the prior year. These increased revenues were partially
offset by mark‐to‐market declines which are recognized as negative interest income in FY
2021/22 of $1.2 million versus positive interest income of $300K the prior year.
At fiscal year end, the Town’s General Fund restricted cash assets reported a $690K balance
in the Town’s IRS Section 115 Pension Trust.
As of June 30, 2022, the Town’s investment in capital assets for its governmental activity is
recorded at $127,770,566 ($101,704,464 net of accumulated depreciation and $26,066,102
nondepreciable). During FY 2021/22, the Town’s investment and contribution in capitalized
assets were $21.4 million with depreciation totaling $5.0 million. The Capital asset increased
by $16.4 million for the current year.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of the ACFR 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 ACFR also includes a Supplementary Information
section, which presents combining and budgetary schedules for individual non‐major funds. The
Basic Financial Statements are comprised of three components: 1) Government‐Wide Financial
Statements, 2) Fund Financial Statements, and 3) Notes to the Financial Statements. The
Management’s Discussion and Analysis is intended to be an introduction to the Basic Financial
Statements.
Government‐Wide Financial Statements
The Government‐Wide Financial Statements present the financial picture of the Town from an
economic resources measurement focus using the accrual basis of accounting. An economic
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
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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. Governmental activities typically include financial data
for all governmental funds. Internal service funds are typically incorporated into governmental
activities as well. Business‐type activities typically include financial data for all enterprise funds.
The Town has no enterprise funds and therefore reports no business‐type activities.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have
been segregated for specific activities or objectives. The Town, like other local governments,
uses fund accounting to ensure and demonstrate compliance with finance‐related legal
requirements. The funds of the Town are segregated into three categories: governmental funds,
proprietary funds, and fiduciary funds.
Governmental funds – The Town’s basic services are reported in governmental funds, which focus
on how money flows into and out of those funds and the balances left at year‐end that are
available for spending. These funds are reported using the modified accrual basis of accounting,
which measures cash and other financial assets that can readily be converted to cash. The
Governmental Fund Statements provide a detailed short‐term view of the Town’s general
government operations and the basic services it provides. Governmental fund information helps
determine whether there are more or fewer financial resources that can be spent in the near
future to finance the Town’s operations. Both the governmental fund balance sheet and the
governmental fund statement of revenues, expenditures, and changes in fund balances provide
a reconciliation to facilitate this comparison between governmental funds and governmental
activities.
Proprietary funds – The Town maintains one type of proprietary fund: Internal Service Funds.
Proprietary funds are reported using the accrual basis of accounting. Internal Service Funds are
an accounting tool used to accumulate and allocate costs internally among the Town’s various
functions. The Town uses Internal Service Funds to account for its fleet of vehicles, computer
equipment, risk management activities, and other items. Internal Service Funds help smooth the
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variability of certain expenses and insulate the Town from large unanticipated costs. The Internal
Service Funds are included within governmental activities in the Government‐Wide Financial
Statements.
Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of parties
outside the Town. Fiduciary funds are not reflected in the Government‐Wide Financial
Statements because the resources of those funds are not available to support the Town’s own
programs.
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.
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 ACFR to describe the changes between
2021 and 2022. Given the unique nature of the economic impacts of the COVID‐19 pandemic
during the reporting period, 2020 data have also been provided to provide additional context.
Net Position Discussion
As shown below, the Town’s combined net position for the year ended June 30, 2022 was
$138.4 million, reflecting an increase of approximately $24.8 million to the prior year’s net
position of $113.5 million. In general, net position can serve as an important indicator of
whether the Town’s overall financial condition is improving or deteriorating over time.
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Current and other assets increased $6.2 million from the prior year, primarily due to an $2.9
million increase in cash/restricted cash and investments, $1.8 million increase in Long Term Lease
Receivable, and $1.2 million increases in Long Term Note Receivable.
Capital assets increased $16.4 million to $127.8 million for the year reflecting current year’s
capital asset additions less the annual depreciation expense. Capital infrastructure activity
includes the following:
$12.2 million added including $4.3 million to land , building and improvements ($7.7
million) and equipment ($205K) related to the donation of the historic Los Gatos Theatre
to the Town;
$1.5 million 224 West Main parking lot acquisition added to the to the Town assets. The
parking lot was previously purchased by the Los Gatos Redevelopment Agency to develop
below market housing. The Town reimbursed the Redevelopment financing to acquire
the land and placed the funds into the Below Market Housing Program deposit account
for future below market housing projects;
$3.9 million in street repair and resurfacing and curb and gutter work Town‐wide; and
$3.7 million construction in progress.
Deferred Outflows for Pension and Other Post‐Employment Benefits (OPEB) decreased $6.5
million primarily due to the difference between projected assumed investment returns and
actual investment earnings on pension and OPEB investments, the change in the Town’s
proportionate share for the pooled safety pension plan, and the fact that the Town did not
contribute additional discretionary payments during FY 2021/22.
2022 2021 2020
Current and other Assets 78,302,210$ 72,065,091$ 75,995,161$
Capital Assets 127,770,566 111,416,264 111,700,225
Total Assets 206,072,776$ 183,481,355$ 187,695,386$
Deferred Outflows ‐ Pension/OPEB 13,232,279 19,746,595 17,441,310
Current Liabilities 17,537,678 16,334,887 18,093,199
Long‐Term Liabilities Outstanding 34,368,351 71,339,626 69,465,025
Total Liabilities 51,906,029$ 87,674,513$ 87,558,224$
Deferred Inflows ‐ Pension/OPEB 28,992,045 2,335,387 2,727,441
Net Position
Net Investment in Capital Assets 126,418,275 109,894,936 111,700,225
Restricted 10,203,412 8,269,330 7,117,984
Unrestricted 1,785,294 (4,646,166) (3,967,178)
Total Net Position 138,406,981$ 113,518,100$ 114,851,031$
Town of Los Gatos
Net Position
Governmental Activites
For the Year Ended June 30, 2022
Page 25
Long‐term liabilities decreased by $37 million. The decrease is primarily due to a pension liability
decrease of $30.5 million and a decrease of OPEB liabilities of $6.0 million. See Note 10 and Note
11 of Notes to the Financial Statements for more information on Town’s pension and OPEB plans.
Deferred Inflows increased by $26.7 resulting primarily from the difference between projected
assumed investment returns and actual investment earnings on pension and OPEB investments.
The pension inflows increased $20.7 million and the OPEB plan increased $4.9 million. In
addition, the implementation of GASB 87 Leases added $1.2 million of deferred inflows of
resources.
The largest segment of the Town’s net position, representing $126.4 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 the 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 $10.2 million representing approximately $8.8
million for capital projects and maintenance, $0.7 million for restricted pension trust, $0.6 million
placed in a special revenue trust accounts for Library services, and $0.1 million for workers’
compensation.
As of June 30, 2022, unrestricted net position reports an approximate $6.5 million increase from
a deficit of approximately ($4.74 million) the prior year to an ending balance of approximately
$1.78 million.
Governmental Activities
Governmental activities are generally financed through taxes, intergovernmental revenues, and
other non‐exchange revenues. The Statement of Activities is intended to illustrate how the cost
of governmental activities is financed and determine the annual change in net position.
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Governmental Activities Revenue Discussion
The Statement of Activities shown above details how the $76.9 million in Governmental Activities
revenues and contributions were derived. As categorized in the Statement of Activities as
program revenues, approximately $12.8 million or 16.6% of the revenues were recorded from
fees paid by residents/businesses who directly benefited from the program or service. Another
$28.4 million or 36.9% of the revenues were sourced from operating/capital grants and
2022 2021 2020
Revenues:
Program revenues:
Charges for Services 12,773,746$ 11,353,932$ 10,288,351$
Operating Grants and Contributions 6,179,842 3,287,564 3,854,188
Capital Grants and Contributions 22,226,206 846,345 850,113
General Revenues:
Property Taxes 21,132,098 19,878,835 18,330,426
Sales Taxes 8,483,673 7,933,604 7,531,425
Franchise Taxes 2,822,515 2,499,463 2,495,792
Other Taxes 2,042,580 1,126,887 1,911,774
Motor Vehicle in Lieu 35,624 23,058 24,526
Developer Fee 1,735,571
Investment Earnings (1,278,978) 227,136 2,428,470
Miscellaneous 755,400 1,528,039 323,940
Total Revenues 76,908,277 48,704,863 48,039,005
Expenses:
Police Department 15,093,308 19,808,230 20,446,188
Parks and Public Works 12,969,615 13,141,034 11,803,005
General Government 15,681,345 7,452,136 7,405,368
Community Development 5,827,001 6,481,075 5,001,958
Library Services 2,969,954 3,496,153 3,347,523
Sanitation 178,575 185,981 3,041
Total Expenses 52,719,798 50,564,609 48,007,083
Change in Net Position 24,188,479 (1,859,746) 31,922
Net Position ‐ Beginning 113,518,100 115,377,846 114,819,109
Prior Period Adjustment ‐ Principal Payments 13,003
Prior Period Adjustment ‐ GASB 87 Leases 687,399
Net Position ‐ Beginning, Adjusted 114,218,502
Net Position, Ending 138,406,981$ 113,518,100$ 114,851,031$
Town of Los Gatos
Statement of Activities
For the Year Ended June 30, 2022
Page 27
contributions. Significant grants and contributions include the donated $12.2 million historic Los
Gatos Theatre, one‐time $6.9 million State pass‐through wildfire grant contribution, and $3.4
million in recognized ARPA proceeds. The remaining $35.7 million or 46.5% represents general
revenues of the Town, including taxes, intergovernmental revenues, and other miscellaneous
revenues.
Program revenues increased by approximately $25.7 million from the prior year. This is largely
due to a $21.4 million increase in capital grants and contributions, $2.8 million increase in
operating grants and contributions, and $1.4 million revenue increases from charges for services.
The Town’s General Revenues related to Governmental Activities increased by approximately
$2.5 million from the prior year. The increase is attributable to a combination of approximately
$1.25 million increase in property taxes, a $550K increase in sales tax, $824K increases in
Transient Occupancy Tax (TOT), $323K increase in franchise fees, and $86K increase in business
license tax collections. The increases were offset by $700K decrease in miscellaneous revenues
and nearly $1.5 million reduction in investment earnings from the prior year as result of lower
mark‐to‐market values on the Town’s investment portfolio.
Property tax is the largest individual revenue source for the Town and collections finished the
year $1.25 million higher than the previous year. This increase was mostly due to an increase of
$596K in general property tax collection, $329K in secured taxes received as a rebate of excess
property taxes collected and available from the State of California’s Educational Revenue
Augmentation Fund (ERAF), $176K increase in VLF Property Tax In‐Lieu fee, and $148K increase
in property transfer tax as strong demand for residential Town property continued. In addition,
new development helped to drive property values higher. It is important to note that assessed
valuations for FY 2021/22 were established on the tax roll in January 2021 and collected in FY
2021/22.
At $8.5 million, sales taxes represent the second largest individual revenue source for the Town.
Sales taxes increased $550K from the previous year largely due to significant increases in gas
prices, strong auto sales, and the continued resurgence of the restaurant sector . The increase
was aided by the Town’s 1/8 cent District Tax which captures a larger share of the increase in
online sales versus those receipts provided by the County pool collections.
Franchise taxes, the Town’s third largest revenue source, finished the year at $2.8 million,
reflecting only an increase of $332K from the previous fiscal year. As discussed in more detail in
Note 15, a recent California case indicates that jurisdictions may not be able to collect waste
franchise fees in the future.
Investment earnings decreased $1.5 million from the prior year. The primary factor responsible
for this decline was the lower total mark‐to‐market value above historical investment cost than
the prior year for the Town’s investment portfolio. These non‐cash or paper gains/losses are
recognized as investment income/loss as a result of the “mark to market value” procedure
required by GASB 31.
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Governmental Activities Expenses Discussion
The Town provides residents, businesses, and visitors with an array of high quality municipal
services. General government strategic support is comprised of six departments (Town Council,
Town Clerk, Town Manager, Town Attorney, Human Resources, Information Technology, and
Finance) which provide in information technology, executive management, economic vitality,
legal, records management, risk management, human resources, finance, and accounting
services. The Town’s Police Department (public safety) provides general law enforcement, crime
prevention, dispatch, and responses to emergency and non‐emergency calls for service. 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
compliance services. The Library Department provides library, local history, and cultural services
to the community.
Total expenses of $52.7 million as reported in the Statement of Activities increased $2.2 million
from $50.5 million the prior year. The increase was primarily driven by the following:
The increase of $6.9 million one‐time State pass‐through grant payment for wildfire
protection.
Pension and OPEB expense credit of $4.4 million calculated under accounting standards
and allocated for the current fiscal year compared to a $2.6 million credit for the last fiscal
year. The calculated pension and OPEB expense credit of $4.4 million was applied across
all operating Departments as follows:
o Public Safety ‐ $1.7 million
o General Government ‐ $1.3 million
o Parks and Public Works ‐ $0.7 million
o Community Development ‐ $0.5 million
o Library ‐ $0.2 million
o Sanitation ‐ $16K
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.
Page 29
Restricted Fund Balance – The Town has $10.1 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
$10.1 million restricted fund balance, $8.7 million is restricted for capital projects, $0.7 million
for pension, $0.6 million for Library special revenue trust accounts, and $0.2 million for
maintenance and repairs.
Committed Fund Balance – The Town has $12.9 million in fund balance classified as committed
to indicate that the Town Council previously committed how the money will be spent. Of the
$12.9 million, $12.0 million is for budget stabilization ($6.0 million) and catastrophe response
($6.0 million).
Assigned Fund Balance – The Town has $27.7 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 assignments of fund balance are the Reserve for Capital/Special
Projects with a balance of approximately $11.1 million and the Capital Projects Reserve of $13.6
million which are the primary funding sources for the Town’s five‐year capital improvement plan
and special projects as budgeted by the Town.
Additional information on the Town’s Fund Balance can be found in Note (9) of the Notes to the
Financial Statements.
Major Governmental Funds results for the year included the following:
Page 30
Overall, Total Governmental Funds revenues finished $16.9 million or 35.8% higher than the prior
year, while total expenditures finished $8.2 million or 15.6% higher than the prior year. One of
the major driving forces in increased revenues and expenditures is the one‐time State pass‐
through wildfire grant in the amount of $6.9 million. The approximate $3.0 million increase in
total governmental fund balance is the net result. The majority of excess revenues over
REVENUES 2022 2021 2020
Property Taxes 21,167,722$ 19,917,428$ 18,368,466$
Sales Taxes 8,483,673 7,933,604 7,531,425
Other Taxes 1,976,198 1,126,887 1,911,774
Licenses & Permits 6,055,040 5,212,831 4,818,671
Intergovernmental 15,492,982 3,746,587 4,292,453
Charges for Services 6,925,359 6,035,659 5,309,470
Fines and Forfeitures 319,170 103,468 271,117
Franchise Fees 2,822,515 2,499,463 2,495,792
Developer Fees 1,735,571
Interest (1,278,983) 227,940 2,428,453
Use of Property 144,901 40,372 31,039
Other 349,145 423,115 376,922
Total Revenues 64,193,293$ 47,267,354$ 47,835,582$
EXPENDITURES
Current:
Public Safety 16,451,190$ 16,570,836$ 15,793,815$
General Government 15,953,968 14,040,134 13,024,146
Parks and Public Works 8,639,128 8,229,944 8,168,599
Community Development 6,313,511 5,195,302 4,473,790
Library Services 2,827,210 2,847,988 2,700,802
Sanitation and Other 194,969 166,173 162,837
Capital Outlay 10,478,670 5,746,447 7,861,972
Debt Service
Principal 156,034
Total Expenditures 61,014,680$ 52,796,824$ 52,185,961$
Excess Revenues over Expenditures 3,178,613$ (5,529,470)$ (4,350,379)$
Proceeds from sales of assets 2,151 1,201,369 1,566
Proceeds from issuance of debt ‐ 1,560,336
Transfers in 8,154,307 4,053,535 8,935,260
Tranfers out (8,310,685) (3,940,015) (8,628,719)
Total Other Financing Sources (Uses)(154,227)$ 2,875,225$ 308,107$
Net Changes in Fund Balances 3,024,386 (2,654,245) (4,042,272)
Beginning/Ending Fund Balances As Restated 47,837,752$ 50491997 54,007,454
Ending Fund Balances 50,862,138$ 47,837,752$ 49,965,182$
TOWN OF LOS GATOS
TOTAL GOVERNMENTAL FUNDS REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2022
Page 31
expenditures was due to an increase in property taxes, sales taxes, other taxes, licenses and
permits, charges for services and franchise fees of $4.7 million over the prior year. This was offset
by lower mark‐to‐market values which are recognized as decreases to interest income in FY
2021/22.
General Fund revenues totaled $46.6 million or nearly 72.6% of the total $64.2 million in Total
Governmental Fund revenues.
Total Governmental funds revenues increased by $16.9 million, resulting from the net effect of:
•$11.7 million increase in intergovernmental revenue including the $6.8 million pass‐
through grant, $3.4 million ARPA proceeds;
•$1.8 million increase in development fees recognized for affordable housing loan and
developer fee contributions include the appropriated reserves fund for capital projects;
•$1.3 million increase in property tax collections;
•$0.9 million increase in charge of services reflecting current development activities;
•$0.8 million increase in in licenses and permits;
•$0.8 million increase in TOT collection;
•$0.6 million increase in sales tax collection;
•$0.3 million increase in franchise fees;
•$0.2 million increase in fines and forfeitures;
•$0.1 million increase in use of property and other receipts; and
•$1.5 million decrease in investment income.
Governmental Funds expenditures increased by $8.2 million. General Fund expenditures
represent approximately $43.3 million of the Total Governmental Fund expenditures of $61.0
million compared to $46.2 million of General Fund expenditures and total Governmental Funds
expenditures of $52.8 million in the prior year.
Decreases in public safety expenditures from the prior year of approximately $0.1 million were
due primarily to vacancy savings experienced during the fiscal year.
The $1.9 million increase in general governmental expenditures was attributable to the
combined effect of the one‐time $6.9 million State pass‐through wildfire safety grant, coupled
with salary and benefit cost increases resulting from labor negotiations and mandated increases
in employer pension contribution rates. Another factor was that the Town only contributed
nonrecurring additional $0.1 million toward the OPEB 115 Trust compared to approximately $5.6
million toward a pension Additional Discretionary Payment and additional OPEB Trust
contributions paid in the prior fiscal year.
Increases in Parks and Public Works were primarily due to salary and benefit cost increases
resulting from labor negotiations and mandated increases in employer pension contribution
rates.
Decreases in Library services expenditures from the prior year of approximately $28K were due
primarily to vacancy savings during the fiscal year.
Page 32
Increases in Community Development were primarily due to expensing the $1.2 million
affordable housing loan through the Below Market Housing program. In addition, plan check and
building inspection expenses increased moderately from the prior year.
Appropriated Reserves Fund capital projects fund balances decreased $0.9 million from the
prior year reflecting increased capital activity during the fiscal year. The $4.5 million of general
government and capital outlay expenditures above operating revenues was offset by $3.6
million net transfers. The one‐time $6.9 million pass through grant payment for wildfire
protection was reported as an intergovernmental revenue with an offsetting general
government expenditure. Transfers in included $0.6 million in ARPA revenue replacement
funds.
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 by $629K a combined effect of GASB 87
increase adjustment of $687K and a $57K decrease in the current year due primarily to excess
expenses over revenues for workers’ compensation and general liability costs including
administration, insurance premiums, and claims expense.
GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to the Original Budget
Comparing the FY 2021/22 original budget (i.e., the Adopted Budget) General Fund expenditures
of $43,641,983 (excluding budgeted transfers‐out and debt payments that are reimbursed) to
the final adjusted budget of $45,416,443 indicates a net increase of approximately $1.8 million.
Additions to the original expenditure budget included adjustments approved by Town Council
throughout the fiscal year.
The increase in General Fund appropriations occurred primarily from the following selected
budget adjustments made during the fiscal year.
$550K expenditure budget increase for Community Grants to recognize Council
authorized spending of ARPA in the FY 2021/22.
$240K expenditure budget increase to cover the cost for special studies related to Justice,
Equity, Diversity, and Inclusion (JEDI) services; the Business Tax Ordinance Review;
Council Retreat; and NUMU Antique Map, and compensation study.
Original Budget
GF Expenditures
+
Misc. Adjustments &
Mid‐Year Adjustments
=
Final
Budget
$43,641,983 $1,774,460 $45,416,443
Page 33
$220K expenditure budget increase to recognize increased cost related the retiree
medical services due to additional recent retirements.
$129K temporary salary reimbursement from capital projects.
$105K expenditure budget increase for the Urban Forrest Manager position.
$100K expenditure budget increase for tree maintenance services.
$86K expenditure budget increase for dispatch salary increase based on compensation
survey.
$80K expenditure budget increase for Chamber Thursday Promenade special event
series.
$68K expenditure budget increase for executive recruitment services.
$55K expenditure budget increase for the Los Gatos Chamber destination marketing.
$49K for traffic signalization.
$33K expenditure budget increase to recognize the increased construction activities
related to underground utility services.
$26K for miscellaneous and safety repairs.
$14K expenditure budget increase for crossing guard services.
$10K expenditure budget adjustments for park benches.
$9K to recognize and spend the Public Library Grant proceeds for Library Youth
collections.
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, 2022 reports an approximate overall favorable
variance with the final budget of approximately $4.9 million. This favorable variance was created
largely by the net effect of the following factors:
Actual revenues ended the fiscal year at $2.8 million above final budgeted revenues. The
$2.8 million total variance represents a combined effect of $4.6 million favorable
variances of the economic sensitive revenues from budget, $1.2 million development
revenue used for affordable housing loan, and an unfavorable variance of $1.9 million in
investment earnings for year, and an unfavorable $0.2 million variance in sales tax
collected.
Significant factors affecting actual expenditures include:
Public safety expenditures had a favorable variance of approximately $0.9 million. $0.8
million in savings is reflective of limited term vacancies in Police Chief, Police Captain,
Police Officer, Dispatcher, Police Record Specialist, and Police Records and
Communication Manager positions, savings of $62K in miscellaneous operating saving,
and $47K salary related internal service charges savings.
Community Development expenditures reflected a $0.9 million negative variance. The
main reason of the negative variance is that the $1.2 million loan provided to the Dittos
Lane Below Market Housing Developer was expensed through the Below Market Housing
Page 34
Program. The expenditure was fully funded from available developer contributions. Not
counting the $1.2 million loan expenditures, Community Development operating
expenditures include $349K combined savings on vacancies and miscellaneous operating
expenditures. Planning Manager, Assistant Planner, Senior Planner, and Permit Counter
Technician positions were partially unfilled during the fiscal year. The Department utilized
temporary staffing agency contract to provide Building Counter services.
Administrative Services reflected a favorable balance of approximately $524K due to
savings in salary and benefits ($184K) due to partial year vacancies in the Emergency
Manager, Special Event Coordinator, Administrative Technician, and Finance Director
positions, $235K saving on community grant due to timing of the grant distribution,
savings in special events cost due to cancellation of events, and decreased travel activity,
and other miscellaneous operational savings ($105K).
Parks and Public Works reflects a favorable variance of approximately $475K largely due
to vacancies savings due to partial year vacancies in the Parks and Public Works Director,
Urban Forest Manager, Streets Maintenance Worker, and Administrative Assistant
positions and other miscellaneous operational savings.
Library services reflected a favorable variance of $310K due mainly to salary and benefit
savings from partial staff vacancies in the Librarian, Library Specialist, and Senior Library
Page positions and other temporary vacancies.
Town Attorney reflected a favorable balance of approximately $40K in large measure due
to savings in salary and benefits due to partial year vacancies of the Legal Administrative
and Town Attorney positions.
Town Council reflected a favorable balance of approximately $13K due to benefit savings,
and decreased travel and training activity, and other miscellaneous operational savings.
CAPITAL ASSETS
As of June 30, 2022, the Town’s investment in capital assets for its governmental activity is
recorded at $127,770,566 (net of accumulated depreciation). The investment in capital assets
includes land, buildings and improvements, infrastructure, construction in progress, machinery
and equipment. Capital assets increased $16.4 million net of depreciation expense, totaling
approximately $5.0 million for the year.
$12.2 million added including $4.3 million to land, building and improvements ($7.7
million), and equipment ($205K) related to the contribution of the historic Los Gatos
Theatre to the Town;
$1.5 million 224 West Main parking lot acquisition added to the to the Town assets. The
parking lot was previously purchased by redevelopment financing to develop below
market housing. The Town reimbursed the redevelopment financing to acquire the land
and placed the funds into the Below Market Housing Program deposit account for future
below market housing projects;
Page 35
$3.9 million in street repair and resurfacing and curb and gutter work Town‐wide;
$3.7 million of construction in progress including:
o $835K in street repair in resurfacing;
o $813K for Town‐wide traffic signal improvements;
o $555K million for downtown revitalization;
o $450K for bridges;
o $263K for Town’s corporation yard building replacement;
o $210K in building improvements Town‐wide;
o $196K in parking lots improvements;
o $157K pathways improvements;
o $118K for curb and gutter work Town‐wide;
o $84 K equipment for fire suppression and IT disaster recovery;
o $40K for park improvements; and
o $26K in storm drain improvements.
Additional information on the Town’s capital assets is found in Note 6 of this financial report.
LONG‐TERM DEBT
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. The Town long‐term debt is related to the
PG&E on‐bill financing loan used for facility efficiency project updates totaling $1.2 million at
6/30/2022. The long‐term debt in the Successor Agency Trust Fund is related to the 2002 COP
and 2010 COP totaling $11.7 million. Additional information on the Town’s Long‐Term Debt is
found in Note 7 of this financial report.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
A product of an ongoing examination of how the Town provides cost‐effective services, the
Town’s budget emphasizes outcomes or results for the community and allows for longer‐term
financial planning decisions.
Governmental
Activities
Infrastructure 61,933,593$
Buildings 29,481,922
Land 26,066,103
Equipment 2,510,873
Construction in Progress 7,778,075
127,770,566$
Capital Assets
Town of Los Gatos
For the Year Ended June 30, 2022
Page 36
During the development and adoption of the Town’s FY 2022/23 budget, the Town Council and
management considered the following factors:
The FY 2022/23 Budget reflects maintaining high service levels with little to no increases in
the employee headcount. However during FY 2021/22, the Town successfully completed
negotiations with all bargaining units. While important for the consistent delivery of high
quality services for the Town, these actions exacerbated an already existing imbalance
between revenues and expenditures. The Town is carefully monitoring its revenue and
expenditures and will identify any required modifications at the mid‐year budget discussion.
Several Strategic Priorities are not one‐time projects, but rather are ongoing commitments
due to their critical significance to ensure the Town’s fiscal and infrastructure stability and
the safety and quality of life for Los Gatos residents, businesses, and visitors. These
commitments include continuing to address the Town’s unfunded pension and OPEB
obligations; transportation demand management initiatives; exploration of new revenue
opportunities, efforts to support community and economic vitality and the enhancement of
emergency preparedness and community wildfire resilience.
In terms of capital projects, the Town Council affirmed its interest in investing in bicycle and
pedestrian improvements and implementing elements of the Comprehensive Parking Study.
In addition to capital projects, the Council identified new policy priorities which include
community policing and implementing diversity, equity, and inclusion efforts.
Other Strategic Priorities should position the Town well for its future. The Council completed
the General Plan update in FY 2021/22 and is preparing the Housing Element update. These
efforts engage the community in land use planning and policies to guide development for the
next couple of decades and address environmental sustainability and climate resiliency.
Other Priorities included parking study implementation and completing the parklet program.
Specific trends affecting the fund balance forecast include:
o General property tax collections represent approximately 34.2% (not including the State’s
property tax “backfill” shifts) of the Town’s General Fund revenues. Property tax
collections are expected to increase 5.5% in FY 2022/23 from the prior year’s tax
collections. This increase reflects the continued strong property assessment values
through the Town. This forecast is based on data from the Santa Clara County Tax
Assessor’s Office. The Town closely monitors its actual collection and other legislative
changes regarding property tax.
o The Town anticipates an increase in sales tax for FY 2022/23. General sales tax estimates
of $7.9 million and $1.3 million in dedicated district sales tax revenue for FY 2022/23 were
budgeted reflecting a 5.8% combined increase from the prior year’s adjusted sales tax
budget.
Page 37
o The Town’s investment portfolio yield was 1.37% as of June 30, 2022 which trended the
same as the average yield of June 30, 2021. Prevailing interest rates are rising based on
Federal Reserve actions.
o Transient Occupancy Tax (TOT) is expected to increase by 17.3% from FY 2021/22
adjusted budget. During the pandemic, TOT experienced the most significant percentage
decline relative to historical adopted budgets. Due to a significant rebound in leisure
“staycation” travel and modest improvements in business travel, current TOT collections
are trending higher than anticipated and average occupancy rates are rebounding as well.
Given the uncertainty around physical business travel resuming at prior levels, as opposed
to a continuation of remote work and online meeting forums, staff believes TOT revenues
will continue to remain below FY 2018/19 levels.
o The Town’s pension plans over the past several decades, like all other CalPERS
participants, have experienced volatile investment returns, changes in actuarial
assumptions, and demographic shifts which have outweighed any positive plan
experiences. To address this unfunded status, the Town took proactive steps including
initiating the prefunding of OPEB obligations, budgeting and programming additional
discretionary pension payments to accelerate reduction of unfunded liabilities, and
recently partnering with the Town’s employee groups to eliminate the existing retiree
healthcare benefit for new employees. Even with these proactive steps, the Town
continues to be impacted by the continuing rising cost of pension related benefits. Over
the next five fiscal years, the Town’s five‐year forecast includes increasing pension costs
due to further changes in actuarial assumptions or lowering the discount rate. The Town’s
net pension liability is $16.7 million for the safety cost sharing plan and $10.7 million for
the miscellaneous plan based upon data from CalPERS as of 6/30/2021.
o 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 $28.5 million.
Conversely, an increase in the discount rate from 7.15% to 6.15% would decrease the
total net pension liability for both Miscellaneous and Safety by $23.6 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 2.25%
termination return rate results in a $117.7 million termination liability. For the Safety
Classic and PEPRA plans, a 2.25% termination return rate results in a $124.1 million
termination liability.
o For detailed information about the Town employees’ retirement plan please refer to
Note 11 of the Notes to Basic Financial Statements Section.
Page 38
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 Gitta Ungvari, Finance Director, at 110 East Main
Street, Los Gatos, California, 95030; email at gungvari@losgatosca.gov; or phone at (408) 354‐
6805.
Page 39
Basic Financial Statements
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022
GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES
Page 40
The Statement of Net Position, Statement of Activities, fund financial statements and the notes to financial statements comprise the Basic Financial Statements of the Town.
The purpose of the Statement of Net Position and the Statement of Activities is to summarize the entire financial activities and financial position of the Town. They are prepared on the same basis of accounting (accrual) used by most businesses, which means they include all the Town’s assets and liabilities, as well as its revenues and expenses. The effect of the entire Town’s
transactions is accounted for, regardless of when cash changes hands, and all material internal
transactions between funds have been eliminated.
The Statement of Net Position report the Town’s total assets, deferred outflows of resources, liabilities, and deferred inflows of resources, including capital assets and long-term debt, and
presents similar information to the old balance sheet format while focusing the reader on the
composition of the Town’s net position (assets minus liabilities). The Statement of Net Position summarizes the financial position of the Town’s governmental activities in a single column.
The Town’s governmental activities include the activities of the General Fund, Special Revenue
Funds, Capital Projects Funds and Debt Service Funds. These funds are serviced by the Town’s Internal Service Funds; therefore internal service activities are consolidated with governmental activities after eliminating inter-fund transactions and balances.
The Statement of Activities reports increases and decreases in the Town’s net position and is
prepared on the full accrual basis of accounting, which means it includes all the Town’s revenues and expenses regardless of when cash changed hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures.
The format of the Statement of Activities presents the Town’s expenses before revenues and by program. Program revenues (revenues generated directly by specific programs) are deducted from program expenses to arrive at the net expense of each governmental program, which is offset by general revenues as listed before the change in net position. From these components, the change in net position is computed and reconciled to the Statement of Net Position.
Both of these statements include the financial activities of the Town.
TOWN OF LOS GATOS, CALIFORNIA STATEMENT OF NET POSITION JUNE 30, 2022
Page 41
Governmental
Activities
ASSETS
Cash and investments 69,392,044$
Restricted cash and investments 819,929
Receivables:
Accounts 2,319,026
Interest 193,357
Intergovernmental 2,176,777
Other assets 136,908
Long-term leases receivable 1,826,417
Long-term notes receivables 1,437,752
Capital Assets:
Nondepreciable 26,066,102
Depreciable, net of accumulated depreciation 101,704,464
Total Assets 206,072,776$
DEFERRED OUTFLOWS OF RESOURCES
Pension adjustments 10,598,492$
OPEB adjustments 2,633,787
Total Deferred Outflows of Resources 13,232,279$
LIABILITIES
Accounts payable 2,670,371$
Accrued payroll and benefits 1,114,106
Due to other governments 162,804
Unearned Revenue 5,312,407
Deposits 6,893,875
Claims payable 1,384,115
Long-term liabilities:
Due within one year
Compensated absences 220,293
Loans payable 156,034
Due in more than one year
Net OPEB liability 2,491,580
Net pension liabilities 27,486,187
Compensated absences 2,818,000
Loans payable 1,196,257
Total Liabilities 51,906,029$
DEFERRED INFLOWS OF RESOURCES
Leases 1,156,412
Pension adjustments 22,132,955
OPEB adjustments 5,702,678
Total Deferred Inflows of Resources 28,992,045$
NET POSITION
Net investment in capital assets 126,418,275$
Restricted for:
Library 555,253
Capital projects 8,357,393
Lighting and landscape repairs and maintenance 174,239
Pensions 690,000
VTA 296,598
Worker's compensation claims 129,929
Total Restricted Net Position 10,203,412
Unrestricted 1,785,294
Total Net Position 138,406,981$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS, CALIFORNIA STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2022
Page 42
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 15,681,345$ 1,725,857$ 2,766,833$ 12,205,050$ 1,016,395$
Public safety 15,093,308 1,596,313 1,144,226 - (12,352,769)
Parks and public works 12,969,615 5,090,014 1,482,896 10,021,156 3,624,451
Community development 5,827,001 4,129,718 670,929 - (1,026,354)
Library services 2,969,954 521 114,958 - (2,854,475)
Sanitation 178,575 231,323 - - 52,748
Total Governmental Activities 52,719,798$ 12,773,746$ 6,179,842$ 22,226,206$ (11,540,004)
General revenues:
Taxes:
Property taxes 21,132,098
Sales taxes 8,483,673
Franchise taxes 2,822,515
Other taxes 2,042,580
Motor vehicle in lieu 35,624
Developer fees 1,735,571
Investment earnings (1,278,978)
Miscellaneous 755,400
Total general revenues 35,728,483
Change in Net Position 24,188,479
Net Position - Beginning 113,518,100
Prior Period Adjustment, Principal Payments 13,003
Prior Period Adjustment, GASB 87 - Leases 687,399
Net Position - Beginning, Adjusted 114,218,502
Net Position - Ending 138,406,981$
Program Revenues
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022
FUND FINANCIAL STATEMENTS & MAJOR GOVERNMENTAL FUNDS
Page 43
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, 2022. 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.
TOWN OF LOS GATOS, CALIFORNIA GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2022
Page 44
Other Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
ASSETS
Cash & investments 33,524,572$ 17,435,006$ 9,419,042$ 60,378,620$ Restricted cash & investments 690,000 - - 690,000 Receivables:
Accounts 1,813,336 396,644 63,244 2,273,224
Interest 193,357 - - 193,357
Intergovernmental 1,938,789 47 237,941 2,176,777
Other assets 136,908 - - 136,908
Lease receivable - 331,696 - 331,696Long term note receivable 1,359,000 - 78,752 1,437,752Total Assets 39,655,962$ 18,163,393$ 9,798,979$ 67,618,334$
LIABILITIES
Accounts payable 1,453,060$ 982,744$ 4,450$ 2,440,254$
Accrued payroll and benefits 1,109,010 - 5,096 1,114,106
Due to other governments 62,712 100,000 42 162,754 Unearned revenue 3,240,516 2,007,096 64,795 5,312,407 Deposits 6,893,875 - - 6,893,875 Total Liabilities 12,759,173 3,089,840 74,383 15,923,396
DEFERRED INFLOWS OF RESOURCES
Leases - 327,100 - 327,100
Unavailable revenue - 505,700 - 505,700Total Deferred Inflows of Resources - 832,800 - 832,800
FUND BALANCE
Nonspendable:
Loans receivable 159,000 - - 159,000 Restricted for:Library - - 555,253 555,253 Capital projects - - 8,357,393 8,357,393
Repairs and maintenance - - 174,239 174,239
Pensions 690,000 - - 690,000 VTA - 296,598 - 296,598Committed to:
Budget stabilization 5,991,566 - - 5,991,566Catastrophic5,991,566 - - 5,991,566Pensions/OPEB 300,000 - - 300,000
Special revenue funds - - 637,711 637,711 Assigned to:
Open Space 410,000 152,000 - 562,000Parking- 100,000 - 100,000Sustainability140,553 - - 140,553Capital/Special projects 11,071,231 13,642,155 - 24,713,386
Carryover encumbrances 33,145 - - 33,145 Comcast PEG - 50,000 - 50,000Compensated Absences 1,519,147 - - 1,519,147Measure G 2018 district sales tax 590,581 - - 590,581 Total Fund Balances 26,896,789 14,240,753 9,724,596 50,862,138 Total Liabilities, Deferred Inflowsof Resources and Fund Balances 39,655,962$ 18,163,393$ 9,798,979$ 67,618,334$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS, CALIFORNIA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENT-WIDE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES JUNE 30, 2022
Page 45
Fund Balance - Total Governmental Funds 50,862,138$
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.127,770,566
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. 8,240,282
DEFERED OUTFLOWS AND INFLOWS OF RESOURCES
The differences from benefit plan assumptions and estimates versus actuals are not included in the
plan's actuarial study until the next fiscal year and are reported as deferred inflows or deferred
outflows of resources in the statement of net position.
Deferred outflows of resources:
PERS Miscellaneous Plan adjustments 3,663,900$
PERS Safety Plan adjustments 6,934,592
OPEB plan adjustments 2,633,787 13,232,279
Deferred Inflows of resources:
PERS Miscellaneous Plan adjustments (10,235,294)$
PERS Safety Plan adjustments (11,897,661)
OPEB plan adjustments (5,702,678) (27,835,633)
DEFERRED INFLOWS OF RESOURCES
Revenues from grants that are funded in this fiscal year that will not be collected for several
months after the Town's fiscal year end are not considered available and are classified as
deferreed inflows of resources in the governmental funds.505,700
LONG-TERM LIABILITIES
Long-term liabilities are not due and payable in the current
period and, therefore, are not reported in the Governmental Funds.
Loans payable (1,352,291)$
Net Pension Liabilities (27,486,187)
Net OPEB Liability (2,491,580)
Compensated absences (3,038,293) (34,368,351)
Net Position - Governmental Activities 138,406,981$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS, CALIFORNIA GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2022
Page 46
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
REVENUES
Property Taxes 21,129,082$ -$ 38,640$ 21,167,722$
Sales Taxes 8,483,673 - - 8,483,673
Other Taxes 1,909,816 - 66,382 1,976,198
Licenses & Permits 5,096,318 420,055 538,667 6,055,040
Intergovernmental 1,263,352 9,400,918 4,828,712 15,492,982
Charges for Services 5,460,613 1,464,746 - 6,925,359
Fines and Forfeitures 319,170 - - 319,170
Franchise Fees 2,822,515 - - 2,822,515
Developer Fees 1,200,000 535,571 - 1,735,571
Interest (1,404,527) 34,805 90,739 (1,278,983)
Use of Property 32,400 93,001 19,500 144,901
Other 311,040 - 38,105 349,145
Total Revenues 46,623,452 11,949,096 5,620,745 64,193,293
EXPENDITURES
Current:
General Government 9,053,968 6,900,000 - 15,953,968
Public Safety 16,451,190 - - 16,451,190
Parks and Public Works 8,605,457 - 33,671 8,639,128
Community Development 6,313,511 - -6,313,511
Library Services 2,752,397 - 74,813 2,827,210
Sanitation and Other - - 194,969 194,969
Capital Outlay - 9,570,780 907,890 10,478,670
Debt service:
Principal 156,034 - - 156,034
Total Expenditures 43,332,557 16,470,780 1,211,343 61,014,680
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,290,895 (4,521,684) 4,409,402 3,178,613
OTHER FINANCING SOURCES (USES)
Gain from sale of assets 2,151 - - 2,151
Transfers in 4,047,313 4,074,141 32,853 8,154,307
Transfers (out)(4,358,188) (427,616) (3,524,881) (8,310,685)
Total Other Financing Sources (Uses)(308,724) 3,646,525 (3,492,028) (154,227)
NET CHANGES IN FUND BALANCES 2,982,171 (875,159) 917,374 3,024,386
BEGINNING FUND BALANCES 23,914,618 15,115,912 8,807,222 47,837,752
ENDING FUND BALANCES 26,896,789$ 14,240,753$ 9,724,596$ 50,862,138$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS, CALIFORNIA RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2022
Page 47
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS 3,024,386$
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)9,180,716$
Current year depreciation (5,030,087)
Donated capital assets 12,205,050 16,355,679
Gains and losses from the disposal of capital assets are not considered current financial resources and
are not recorded in the governmental fund statement of revenues and expenditures but are
recorded in the government-wide statement of activities because they are economic resources.(1,375)
LONG-TERM DEBT PROCEEDS AND PAYMENTS
Repayment of debt principal is an expenditure in the governmental funds, but the repayment
reduces long-term liabilities in the Statement of Net Position.
Certificates of participation 156,034
UNAVAILABLE REVENUE
Revenues from grants that are funded in this fiscal year that will not be collected for several
months after the Town's fiscal year end are not considered available and are classified as
deferred inflows of resources in the governmental funds.23,997
COMPENSATED ABSENCES
In governmental funds, compensated absences such as vacations and sick leave are expenditures
261,542
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.1,257,776
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.3,168,358
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.(57,918)
CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES 24,188,479$
The notes to the financial statements are an integral part of this statement.
when taken. However, in the Government Wide Statement of Activities, the current year change in
the compensated absences liability is reported.
TOWN OF LOS GATOS, CALIFORNIA GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (GAAP) FOR THE FISCAL YEAR ENDED JUNE 30, 2022
Page 48
Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Property Taxes 20,036,156$ 20,138,320$ 21,129,082$ 990,762$
Sales Taxes 8,177,859 8,671,606 8,483,673 (187,933)
Other Taxes 927,040 1,482,000 1,909,816 427,816
Licenses & Permits 3,869,779 4,477,907 5,096,318 618,411
Intergovernmental 3,881,836 1,148,993 1,263,352 114,359
Charges for Services 3,882,490 4,385,547 5,460,613 1,075,066
Fines and Forfeitures 203,450 213,450 319,170 105,720
Franchise Fees 2,597,630 2,514,020 2,822,515 308,495
Developer Fees - - 1,200,000 1,200,000
Interest 440,833 440,833 (1,404,527) (1,845,360)
Use of Property 32,400 32,400 32,400 -
Other 290,898 290,898 311,040 20,142
Total Revenues 44,340,371 43,795,974 46,623,452 2,827,478
EXPENDITURES
Current:
General Government:
Town Council 201,499 202,890 189,569 13,321
Town Attorney 660,229 669,733 629,936 39,797
Administrative Services 5,087,207 5,965,803 5,441,604 524,199
Non-Departmental 3,546,680 3,581,965 2,792,859 789,106
Total General Government 9,495,615 10,420,391 9,053,968 1,366,423
Public Safety 17,239,480 17,390,966 16,451,190 939,776
Parks & Public Works 8,494,629 9,080,666 8,605,457 475,209
Community Development 5,395,864 5,461,713 6,313,511 (851,798)
Library Services 3,016,395 3,062,707 2,752,397 310,310
Debt Service:
Principal - - 156,034 (156,034)
Total Expenditures 43,641,983 45,416,443 43,332,557 2,083,886
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES 698,388 (1,620,469) 3,290,895 4,911,364
OTHER FINANCING SOURCES (USES)
Gain from sale of assets 600 600 2,151 1,551
Transfers In 633,352 4,047,313 4,047,313 -
Transfers Out (2,801,047) (3,833,094) (4,358,188) (525,094)
Total Other Financing Sources (Uses)(2,167,095) 214,819 (308,724) (523,543)
NET CHANGES IN FUND BALANCE (1,468,707)$ (1,405,650)$ 2,982,171 4,387,821$
BEGINNING FUND BALANCE 23,914,618
ENDING FUND BALANCE 26,896,789$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022 PROPRIETARY FUNDS - INTERNAL SERVICE FUNDS
Page 49
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.
TOWN OF LOS GATOS, CALIFORNIA PROPRIETARY FUNDS - STATEMENT OF NET POSITION JUNE 30, 2022
Page 50
Governmental
Activities
Internal Service
Funds
ASSETS
Current Assets:
Cash & investments 9,013,424$
Restricted cash & investments 129,929
Accounts Receivable 45,802
Total current assets 9,189,155
Noncurrent Assets:
Leases receivable 1,494,721
Total Assets 10,683,876$
LIABILITIES
Current Liabilities:
Accounts payable 230,117$
Due to other governments 50
Total current liabilities 230,167
Noncurrent liabilities:
Claims payable 1,384,115
Total Liabilities 1,614,282$
DEFERRED INFLOWS OF RESOURCES
Leases 829,312$
NET POSITION
Restricted for workers compensation claims 129,929$
Unrestricted 8,110,353
Total Net Position 8,240,282$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS, CALIFORNIA PROPRIETARY FUNDS - STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2022
Page 51
Governmental
Activities
Internal Service
Funds
OPERATING REVENUES
Charges for services 3,680,107$
Interest 5
Use of money and property 115,091
Other local taxes 66,382
Other revenue and reimbursements 303,683
Total Operating Revenues 4,165,268
OPERATING EXPENSES
Insurance expenses 2,116,969
Services and Supplies 2,262,595
Total Operating Expenses 4,379,564
Operating Income (Loss)(214,296)
Transfers in 251,194
Transfers out (94,816)
Net transfers 156,378
Change in Net Position (57,918)
BEGINNING NET POSITION 7,610,801
PRIOR PERIOD ADJUSTMENT GASB 87 687,399
BEGINNING NET POSITION, ADJUSTED 8,298,200
ENDING NET POSITION 8,240,282$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS, CALIFORNIA PROPRIETARY FUNDS - STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2022
Page 52
Governmental
Activities
Internal Service
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 3,227,027$
Payments to suppliers (4,441,834)
Insurance reimbursements 258,472
Claims paid (192,074)
Net cash provided (used) by operating activities (1,148,409)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers In 251,194
Transfers Out (94,816)
Net cash provided (used) by noncapital financing activities 156,378
Net Increase(Decrease) in Cash and Investments (992,031)
Cash and investments - beginning of year 9,447,985
Cash and investments - end of year 8,455,954$
Reconciliation of Operating Income to Cash Flows
from Operating Activities:
Operating Income (214,296)$
Change in assets and liabilities:
Accounts receivables (14,838)
Leases receivable (1,494,721)
Due from other funds 478
Deferred inflows of resources 829,312
Accounts payable 57,646
Due to other governments (33)
Claims payable (311,957)
Cash Flows From Operating Activities (1,148,409)$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022
FIDUCIARY FUNDS
Page 53
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.
RDA Successor Agency Private Purpose Trust Fund was established to account for the assets and liabilities transferred from the dissolution of the Town’s former Redevelopment Agency and the continuing operations related to existing Redevelopment Agency obligations.
Page 54
RDASuccessorAgency
ASSETS
Cash and investments 1,920,130$
Restricted cash and investments 1,964,434
Loans receivable 610,418
Capital assets:
Depreciable, net of accumulated depreciation 1,220,316
Total Assets 5,715,298$
LIABILITIES
Accounts payable 68$
Interest payable 236,521
Long-term debt:
Due within one year 1,355,000
Due in more than one year 11,731,235
Total Liabilities 13,322,824$
NET POSITION
Restricted for RDA (7,607,526)$
Total Net Position (7,607,526)$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2022
Page 55
RDA
Successor
Agency
ADDITIONS
Property taxes 1,937,791$
Investment earnings 15,562
Total Additions 1,953,353
DEDUCTIONS
Program expenses of former RDA 5,200
Interest and fiscal agency expenses of RDA 535,361
Depreciation expense 101,693
Total Deductions 642,254
Gain (loss) on sale of property (5,257,421)
CHANGE IN NET POSITION (3,946,322)
NET POSITION - BEGINNING OF YEAR (3,661,204)
NET POSITION - END OF YEAR (7,607,526)$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
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This Page Left Intentionally Blank
Page 57
Notes to Basic Financial Statements DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 58
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 andprovides the following services; public safety (including police and emergency management),parks and public works, community development, library, public improvements, planning andzoning, and general administration services. Redevelopment services were provided primary
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 Mountainsand was incorporated as a municipal corporation in 1887. The Town’s population as of January 1,2022 was 33,062 (California Department of Finance).
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 consideredfinancially accountable.
B.Description of Blended Component Units
The Town did not report any component units as a part of the primary government because theTown Council was not the governing body of any entities and no separate entity provided services
entirely to the Town.
C.Description of Joint Ventures and Public Entity Risk Pool
As described in Note 11, the Town participates in two joint ventures and public entity risk poolactivities through formally organized separate legal entities. The financial activities of the PooledLiability Assurance Network Joint Powers Authority (PLAN JPA) and the Local Agency Workers’
Compensation Excess Joint Powers Authority (“LAWCX”) are not included in the accompanyingbasic financial statements as boards separate from and independent of the Town administer them.
D.Basis of Presentation
The Town’s Basic Financial Statements are prepared in conformity with accounting principlesgenerally accepted in the United States of America. The Government Accounting Standards Board
(“GASB”) is the acknowledged standard setting body for establishing accounting and financialreporting standards followed by governmental entities in the U.S.A.
The accompanying financial statements are presented on the basis set forth in GovernmentAccounting 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 LocalGovernments; Omnibus, and No. 38, Certain Financial Statement Note Disclosures.
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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These Statements require that the financial statements described below be presented.
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. These statements present governmental activities of the Town. Governmental activities generally are financed through taxes,
intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Town’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or
services offered by the programs, (b) grants and contributions that are restricted to meet the operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the Town's
funds, including fiduciary funds and blended component units. Separate statements for each fund category—governmental, proprietary and fiduciary—are presented. The emphasis of fund financial statements is on major individual governmental funds, each of which is displayed in a separate column. All remaining governmental are aggregated and reported as nonmajor funds.
Internal service funds of the Town (which provide services primarily to other funds of the Town)
are presented, in summary form, as part of the proprietary fund financial statements. Since the principal users of the internal services are the Town’s governmental activities, financial activities of the internal service funds are presented in the governmental activities column when presented at the government-wide level. The costs of these services are allocated to the appropriate function/program in the Statement of Activities.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from non-exchange transactions or ancillary activities.
E.Major Funds
GASB defines major funds and requires that the Town’s major governmental funds be identified and presented separately in the fund financial statements. All other funds, called nonmajor funds, are combined and reported in a single column, regardless of their fund-type.
Major funds are defined as funds that have assets, deferred outflows of resources, liabilities,
deferred outflows of resources, revenues, or expenditures/expenses equal to ten percent of
their fund-type total and five percent of the grand total. The General Fund is always a major fund. The Town may also select other funds it believes should be presented as major funds.DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 60
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 that are provided to other departments on a cost-reimbursement basis.Those services include workers compensation, self-insurance, facilities maintenance, information technology, and equipment fund.
Fiduciary Funds include Private-Purpose Trust Funds and agency funds used to account for assets
held by the Town as an agent for individuals, private organizations, and other governments. The financial activities of this fund are excluded from the government-wide financial statement but are presented in a separate Fiduciary Fund financial statement.
The Town reported the following Fiduciary Funds in the accompanying financial statements:
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 projectsthroughout 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 itsdissolution.
F.Basis of Accounting
The government-wide and fiduciary fund (except for agency funds) financial statements arereported 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 themodified accrual basis of accounting. Under this method, revenues are recognized whenmeasurable 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 withinsixty days after year-end. For revenues other than property taxes, the Town generally applies the
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 61
sixty-day period rule but would make exceptions considering the measurable and available criteria.
Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which is recognized upon becoming due and payable; and except for claims, judgments and compensated absences, which are recognized when estimable and probable. Governmental capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of governmental long-term debt and acquisitions under capital leases are reported
as other financing sources.
Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental revenues, and interest revenue. Fines, forfeitures, licenses and permits, and charges for services are not susceptible to accrual because they are not measurable until received in cash.
Non-exchange transactions, in which the Town gives or receives value without directly, receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in
which all eligibility requirements have been satisfied.
The Town may fund programs with a combination of cost-reimbursement grants, categorical block grants and/or general revenues. Thus, both restricted and unrestricted net position may be available to finance program expenditures. The Town’s policy is to first apply restricted grant resources to
such programs followed by general revenues as necessary.
Certain indirect costs are included in program expenses reported for individual functions and activities.
The Town applies all applicable GASB pronouncements for certain accounting and financial reporting guidance including those applicable to accounting and reporting for proprietary operations. In December of 2010, GASB issued GASB No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA
Pronouncements. This statement incorporates pronouncements issued on or before November 30,
1989 into GASB authoritative literature. This includes pronouncements by the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinions (APB), and the Accounting Research Bulletins of the American Institute of Certified Public Accountants' (AICPA) Committee on Accounting Procedure, unless those pronouncements conflict with or contradict with
GASB pronouncements.
Pensions - For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City’s California Public Employees’ Retirement System (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. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 62
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, 2020 Measurement Date June 30, 2021 Measurement Period July 1, 2020 to June 30, 2021
Other Post -Employment Benefit (OPEB) Expense -
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 Retiree Benefits Plan (the OPEB Plan) and additions to/deductions from the OPEB Plan's fiduciary net position have been determined on the same basis as they are reported by
the OPEB Plan. For this purpose, the OPEB Plan recognizes benefit payments when due and
payable in accordance with the benefit terms. Investments are reported at fair value. Generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date June 30, 2021
Measurement Date June 30, 2021 Measurement Period July 1, 2020 to June 30, 2021
Cash and Cash Equivalents - The Town’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.
State of California statutes and the Town’s investment policy authorize the Town to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, collateralized, non-negotiable certificates of deposits, commercial paper rated A-1/P-1, medium-term corporate notes rated A or its equivalent or better by Moody’s or Standard & Poor’s, asset backed corporate notes, bankers’ acceptances, mutual funds, and the State Treasurer’s investment pool (Local Agency Investment
Fund).
The Town does not enter into repurchase or reverse repurchase agreements.
Restricted Cash and Investments - Certain restricted cash and investments are held by fiscal agents
for pension stabilization, worker’s compensation insurance and Successor Agency debt service obligations.
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.
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 63
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 orliabilities. 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 (Other Assets) - These assets are held for consumption and are stated at cost using the first-in, first-out method. The costs are recorded as expenditures at the time the item is consumed.
Interfund Receivables and Payables - Transactions between funds that are representative of
lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “advances to/advances from other funds”. All other outstanding balances between funds are reported as “due to/from other funds."
Advances - Advances between funds and due from/to other 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. Capital assets, including infrastructure, are recorded if acquisition or
construction costs exceeds $10,000.
As required by GASB, the Town depreciates capital assets with limited useful lives over their estimated useful lives. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets. The Town depreciates using the
straight-line method which means the cost of the asset is divided by its expected useful life in years
and the result is charged to expense each year until the asset is fully depreciated. The Town has assigned the useful lives listed below to capital assets:
Buildings 25-40 years
Improvements 25-40 years
Machinery and equipment 2-20 yearsFurniture and fixtures 5-12 yearsSoftware 5-7 yearsInfrastructure 20-40 yearsDRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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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.
Leases Receivable - In accordance with Government Accounting Standard Board 87, Leases, the Town’s leases receivable are measured at the present value of lease payments expected to be received during the lease terms. The present value, net of accumulated amortization, is reported as deferred inflows of resources is recorded for leases. Deferred inflows of resources are recorded at the initiation of the leases in an amount equal to the initial recording of the leases
receivable, plus incentive payments received. Amounts recorded as deferred inflows of resources from the leases are amortized on a straight-line basis over the term of the lease.
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 aspart of the Town’s assets or liabilities, as the deferred compensation plan trustees hold those fundsin 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:
Beginning Balance 3,299,835$
Additions 1,487,446
Payments (1,748,988)
Ending Balance 3,038,293$
Compensated Absences Current Portion 220,293$
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
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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fund. Only compensated absences related to terminated employees are reported in the fund
financial statements.
Unearned Revenue - Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as deferred inflows from unearned revenue. In the governmental
fund financial statements, receivables associated with non-exchange transactions that will not be collected within the availability period have been recorded as deferred inflows from 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 effective interest method. Bonds payable are reported net of the applicable bond premium or discount.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service
expenditures.
Deferred Outflows/Deferred Inflows of Resources - Deferred outflows of resources is a consumption of net position by the Town that is applicable to a future reporting period, for
example, 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." DRAFT
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Fund Balances - The Town does not have a policy identifying a minimum unassigned fund
balance. Because amounts in the nonspendable, restricted, committed, and assigned categories are subject to varying constraints on their use, the remaining fund balances are otherwise unassigned. In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and Governmental Fund Type Definitions, the Town classifies governmental fund balances as follows:
Non-spendable includes fund balance amounts that cannot be spent either because it is not in spendable form or because of legal or contractual constraints.
Restricted includes fund balance amounts that are constrained for specific purposes which are externally imposed by providers, such as creditors or amounts constrained due to constitutional
provisions or enabling legislation.
Committed includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through 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 generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the dates of the financial statements and the reported amounts of revenues and expenditures/expenses
during the reporting periods. Actual results could differ from those estimates.
Subsequent Events - Management has considered subsequent events through November 23, 2022, 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 DRAFT
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generally accepted accounting principles. Management has determined that there are no non-
recognized subsequent events that require disclosure other than as summarized in Note 16.
Property Tax Levy, Collection and Maximum Rates - State of California Constitution Article XIII A provides that the combined maximum property tax rate on any given property may not exceed 1% of its assessed value unless an additional amount for general obligation debt has been
approved by voters. Assessed value is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2% per year unless the property is sold, transferred, or substantially improved. The State Legislature has determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school districts and other districts.
The County of Santa Clara assesses properties, bills, 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 must provide budget to the Finance Commission at leasttwenty (20) business days before the first meeting at which the proposed budget
is considered by the Town Council.
2.The Town Manager submits to the Town Council a proposed operating and capitalimprovement budget for the fiscal year commencing the following July 1. The budgets includethe proposed expenditures and the means of financing them.3.Public hearings are conducted to obtain taxpayer comments.
4.The budget is legally enacted through adoption of Town resolution by Council.
5.The Town Manager is authorized to implement the programs as approved in the adoptedbudget. Within a specific fund, the Town Manager may transfer appropriations betweencategories, 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.
6.Budgets are adopted on a basis consistent with generally accepted accounting principles exceptfor proprietary funds which budget for capital outlays but not depreciation. Budgets wereadopted for the General Fund, Special Revenue Funds, Internal Service Funds and CapitalProjects Funds.
7.Budgeted amounts are as originally adopted or as amended by Town Council. Individual
amendments were not material in relation to original appropriations.DRAFT
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Excess of Expenditures over Appropriations - There were no significant expenditures in excess
of budget during for the year ended June 30, 2022.
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 commitments or assignments of fund balances since they do not constitute expenditures or liabilities; unexpended and unencumbered appropriations lapse at year end in all funds. Encumbered appropriations are carried forward to the following year.
Reclassifications - Certain accounts in the prior-year financial statements have been reclassified for the presentation in the current-year financial statements.
G.Accounting and Reporting Changes
GASB Statement No. 87, Leases
The objective of this statement is to better meet the information needs of financial statement usersby improving accounting and financial reporting for leases by governments. This statementincreases the usefulness of governments’ financial statements by requiring recognition of certainlease assets and liabilities for leases that previously were classified as operating leases and
recognized as inflows of resources or outflows of resources based on the payment provisions of thecontract. It establishes a single model for lease accounting based on the foundational principle thatleases are financings of the right to use an underlying asset. Under this statement, a lessee isrequired to recognize a lease liability and an intangible right-to-use lease asset, and a lessor isrequired to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the
relevance and consistency of information about governments’ leasing activities. As of June 30,2022, the Town recognized three contracts as a lease and implemented the applicable accountingand reporting requirements of a lessor under GASB 87. The following schedule summarizes thelease balances and the impact on beginning net position and fund balance:
Lease Deferred Inflows Prior Period
Description Receivable of Resources Adjustment
Initial Net Present Value 2,692,765$ 2,692,765$ -$
Accumulated Amortization - (1,333,252) 1,333,252
Other adjustments - 1,717 (1,717)
Principal Payments (644,136) - (644,136)
Beginning Balances 7/1/2021 2,048,629 1,361,230 687,399
Current Amortization - (204,818) -
Valuation Expense (133,807) - -
Current Principal Payments (88,405) - -
Ending Balances 6/30/2022 1,826,417$ 1,156,412$ 687,399$
Governmental Funds 331,696$ 327,100$ -$
Internal Service Funds 1,494,721 829,312 687,399
Total 1,826,417$ 1,156,412$ 687,399$ DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial
Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans
The statement (1) requires that a Section 457 plan be classified as either a pension plan or another employee benefit plan depending on whether the plan meets the definition of a pension plan and (2) clarifies that Statement 84, as amended, should be applied to all arrangements organized under IRC
Section 457 to determine whether those arrangements should be reported as fiduciary activities.
The requirements of this Statement are effective as follows:
•The requirements in (1) paragraph 4 of this Statement as it applies to defined contribution
pension plans, defined contribution OPEB plans and other employee benefit plans and (2)paragraph 5 of this Statement are effective immediately
•The requirements in paragraphs 6–9 of this Statement are effective for fiscal years beginningafter June 15, 2021
•All other requirements of this Statement are effective for reporting periods beginning after June
15, 2021
The Town did not report any significant accounting changes from the implementation of this Statement during the year ended June 30, 2022.
H.Upcoming Accounting and Reporting Changes
The Town is currently analyzing its accounting practices to determine the potential impact on thefinancial statements of the following recent GASB Statements:
GASB Statement No. 91, Conduit Debt Obligations
The objectives of this Statement are to provide a single method of reporting conduit debtobligations by issuers and eliminate diversity in practice associated with (1) commitments extended
by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note
disclosures. This Statement also clarifies the existing definition of a conduit debt obligation;establishing that a conduit debt obligation is not a liability of the issuer; establishing standards foraccounting and financial reporting of additional commitment and voluntary commitments extendedby issuers and arrangements associated with the debt obligations; and improving required note
disclosures. The requirements of this Statement were initially to be effective for financial
statements for periods beginning after December 15, 2020 but have been delayed to periodsbeginning after December 15, 2021, pursuant to GASB Statement No. 95. Earlier application isencouraged.
GASB Statement No. 94, Public-Private Partnerships and Public-Public Partnerships and
Availability Payment Arrangements
The primary objective of this Statement is to improve financial reporting by addressing issuesrelated to public-private and public-public partnership arrangements (PPPs). As used in thisDRAFT
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Statement, a PPP is an arrangement in which a government (the transferor) contracts with an
operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction. Some PPPs meet the definition of a service concession arrangement (SCA), which the Board defines in this Statement as a PPP in which (1) the operator collects and is compensated by fees
from third parties; (2) the transferor determines or has the ability to modify or approve which services the operator is required to provide, to whom the operator is required to provide the services, and the prices or rates that can be charged for the services; and (3) the transferor is entitled to significant residual interest in the service utility of the underlying PPP asset at the end of the arrangement. This Statement also provides guidance for accounting and financial reporting for
availability payment arrangements (APAs). As defined in this Statement, an APA is an arrangement in which a government compensates an operator for services that may include designing, constructing, financing, maintaining, or operating an underlying nonfinancial asset for a period of time in an exchange or exchange-like transaction. The requirements of this Statement are to be effective for financial statements for periods beginning after June 15, 2022. Earlier
application is encouraged.
GASB Statement No. 96, Subscription-Based Information Technology Arrangements
GASB 96 provides guidance on accounting for Subscription-Based Information Technology
Arrangements (SBITA) where the government contracts for the right to use another party’s software. The standards for SBITAs are based on the standards established in GASB Statement No. 87, Leases. GASB 96 is effective for fiscal years beginning after June 15, 2022.
GASB Statement No. 99, Omnibus 2022
Omnibus statements are issued by GASB to address practice issues identified after other standards have been approved for implementation. Omnibus statements “clear up the loose ends” for recent prior statements GASB has issued. This Omnibus addresses recent pronouncements, including
GASB 87 – Leases, GASB 94 – Public-Private and Public-Public Partnerships and Availability
Payment Arrangements, and GASB 96 – Subscription-Based Information Technology
Arrangements.
Effective Date: The requirements of this Statement are effective as follows:
•The requirements related to extension of the use of LIBOR, accounting for SNAP distributions,disclosures of nonmonetary transactions, pledges of future revenues by pledging governments,clarification of certain provisions in Statement 34, as amended, and terminology updates relatedto Statement 53 and Statement 63 are effective upon issuance
•The requirements related to leases, PPPs, and SBITAs are effective for fiscal years beginning
after June 15, 2022, and all reporting periods thereafter.
•The requirements related to financial guarantees and the classification and reporting ofderivative instruments within the scope of Statement 53 are effective for fiscal years beginningafter June 15, 2023, and all reporting periods thereafter.DRAFT
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Earlier application is encouraged and is permitted by topic.
GASB Statement No. 100, Accounting Changes and Error Corrections—an amendment of GASB Statement No. 62
This Statement defines accounting changes as changes in accounting principles, changes in
accounting estimates, and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. This Statement also prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections in previously issued financial statements. The requirements of this Statement are effective for accounting changes and error corrections made in fiscal years beginning after June 15, 2023, and
all reporting periods thereafter. Earlier application is encouraged.
GASB Statement No. 101, Compensated Absences
This Statement requires that liabilities for compensated absences be recognized for (1) leave that
has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required
to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However,
leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences.
This Statement requires that a liability for certain types of compensated absences—including
parental leave, military leave, and jury duty leave—not be recognized until the leave commences.
This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used.
This Statement also establishes guidance for measuring a liability for leave that has not been used,
generally using an employee’s pay rate as of the date of the financial statements. A liability for
leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. Certain salary-related payments that are directly and incrementally associated with payments for leave also should be included in the measurement of the liabilities.
With respect to financial statements prepared using the current financial resources measurement focus, this Statement requires that expenditures be recognized for the amount that normally would be liquidated with expendable available financial resources. The requirements of this Statement are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. DRAFT
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NOTE 2 - CASH AND INVESTMENTS
The Town pools cash from all sources and all funds except Restricted Cash and Investments so that it can be invested at the maximum yield, consistent with safety and liquidity, while existing funds have cash available for expenditures.
Cash and Investments Defined
The Town includes only cash deposits in banks as cash. Investments in LAIF and government securities mutual funds are net in the order of liquidity, since they may be withdrawn without penalty. U.S. Treasuries, U.S. Agencies and Certificates of Deposit are the Town’s least
liquid investments since they must be held to maturity.
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 $18,986,118 and the carrying amount was $19,366,398 as of June 30, 2022. The bank balance and the carrying amount differed due to deposits in transit and outstanding checks.
Investments
The Town and its fiscal agent invest in individual investments and in investment pools. Individual investments are evidenced by specific identifiable pieces of paper called “securities
instruments,” or by an electronic entry registering the owner in the records of the institution
issuing the security, called the book entry system. In order to maximize security, the Town employs the Trust department of a bank as the custodian of all its investments, regardless of their form.
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 quotedprices that are not observable
•Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal.DRAFT
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Local Agency Investment Fund (LAIF)
The Town invests in the California State Treasurer’s Local Agency Investment Fund. LAIF, established in 1977, is regulated by California Government Code Section 16429 and under the day-to-day administration of the State Treasurer. As of June 30, 2022, LAIF had approximately $232 billion in investments. Of that amount, 99.96% was invested in non-derivative financial products and 0.04% 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 flowcharacteristics (coupon rate, redemption amount, or stated maturity) depend upon one or moreindices and / or that have embedded forwards or options.
2.Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasersto receive a share of the cash flows from a pool of assets such as principal and interest repaymentsfrom a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.
Risk Disclosures
Interest Rate Risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to the changes in market interest rates. One of the ways that the Town manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to
maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the Town's investments to market interest rate fluctuations is provided in the summary of cash and investments table on the following page that shows the distribution of the Town's investments by maturity.
Credit Risk is the risk of loss due to the failure of the security issuer. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The summary of cash and investments table on the following page shows the minimum rating under the actual rating of the Town’s investments at year end.
Custodial Credit Risk is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Town’s investment in money market fund and LAIF is not categorized as to custodial credit risk. Its U.S. Government Agency Securities
investment is held by a third party financial institution under the third party’s trust department’s name
and thus not exposed to custodial credit risk.
Concentration of Credit Risk is the risk that the Town’s investments are exposed because the types of investments have been too limited. The Town’s Policy states that, with the exception of US Treasury
securities and LAIF, no more than 50% of the Town’s total investment portfolio will be invested in one
single security type or with a single financial institution. The Town was in compliance with this policy as of June 30, 2022. DRAFT
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The following table summarizes the Towns policy related to maturities and concentration of investments:
Maximum
Maximum Portfolio
Investment Type Maturity 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 NA $65 million
Money Market Funds NA 20%
The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30,
2022:
Available Concentration Time to Weighted
for of Credit Input Mature Average
Operations Restricted Total Risk Rating Level (Years)Maturity
US Treasury Securities 15,212,639$ -$ 15,212,639$ 29.29%n/a 2 0-3 1.35
Government Agencies 15,995,919 - 15,995,919 30.79%n/a 2 0-4 1.52
Corporate Bonds 13,664,652 - 13,664,652 26.31%A3 2 0-3 1.33
Market Mutual Funds 253,599 - 253,599 0.49%Not Rated 2 n/a n/a
LAIF 6,816,565 - 6,816,565 13.12%Not Rated n/a n/a n/a
Total Investments 51,943,374 - 51,943,374 100.00%
Cash Deposits with Banks 19,349,009 2,094,363 21,443,372
Money Market Accounts 17,391 - 17,391
Pension Trust - 690,000 690,000
Cash on Hand at Town 2,400 - 2,400
Total Cash and Investments 71,312,174$ 2,784,363$ 74,096,537$
Description
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.
Fiduciary
Description Total Town Funds Totals
Cash and Investments Available for Operations 69,392,044$ 1,920,130$ 71,312,174$
Restricted Cash and Investments 819,929 1,964,434 2,784,363
Total Cash and Investments 70,211,973$ 3,884,564$ 74,096,537$ DRAFT
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NOTE 3 - LONG-TERM NOTES RECEIVABLE
The Town had the following long-term notes receivable as of June 30, 2022:
Interest
Rate Maturity Balance
General Fund:
Rehab Loan to Charities Various Various 159,000$
BMP Loans Various Various 1,200,000
Total General Fund 1,359,000
Housing Conservation 0-5% Various 78,752
Total CDBG 78,752
Total Long-Term Notes Receivable - Government-Wide Statement of Net Position 1,437,752
Project Match Various Various 610,418
Total Long-Term Notes Receivable 2,048,170$
Community Development Block Grant Fund (CDBG):
Description
Successor Agency Affordable Housing:
BMP Loans - The purpose of the Below Market Price (BMP) Housing Program is to provide adequate
housing for Los Gatos residents, regardless of age, income, race, or ethnic background. As required by the State, the Town plans and facilitates the construction of housing adequate for future populations consistent with environmental limitations and in a proper relationship to community facilities, open space, transportation, and small-town character.
Active Home Loans and Housing Conservation Loans - The Town used Community Development Block Grant Funds (a federal grant) 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, 2022, no interest or principal payments have been made.
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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NOTE 4 - LEASES RECEIVABLE
In January of 2010, the Town entered into a twenty-year lease with the Los Gatos Saratoga Recreation (LGS) allowing LGS to use the property at 123 East Main Street. Under the lease, LGS paid the Town $19,950 per year at the beginning of the lease. After cumulative CPI adjustments, the payment in the final year of the lease will be $30,216. The lease receivable is measured as the present value of the future minimum rent payments expected to be received during the lease term at a discount rate of 6.6%. The outstanding balance on the lease at year end was $165,056.
In January of 2010, the Town entered into a twenty-year lease with the Los Gatos Saratoga Recreation (LGS)
allowing LGS to use the property at 208 East Main Street. Under the lease, LGS paid the Town $90,000 per year at the beginning of the lease. After cumulative CPI adjustments, the payment in the final year of the lease will be $243,435. The lease receivable is measured as the present value of the future minimum rent payments
expected to be received during the lease term at a discount rate of 6.6%. The outstanding balance on the lease at year end was $1,329,665.
In March of 2021, the Town entered into a five-year lease with Tesla Motor Cars (Tesla) allowing Tesla to use the property at 10065 Donner Pass Road. Under the lease, Tesla pays the Town $96,000 per year during the term of the lease. The lease receivable is measured as the present value of the future minimum rent payments
expected to be received during the lease term at a discount rate of 2%. The outstanding balance on the lease at year end was $331,696.
The following summarizes the leases as of June 30, 2022:
Deferred Deferred
Lease Inflows Lease Inflows
Description Receivable of Resources Receivable of Resources
Beginning Balance 420,101 418,384 179,329 109,393
Current Amortization - (91,284) - (12,997)
Valuation Expense - -- -
Current Principal Payments (88,405) - (14,273) -
Ending Balance 331,696$ 327,100$ 165,056$ 96,396$
Deferred Deferred
Lease Inflows Lease Inflows
Description Receivable of Resources Receivable of Resources
Beginning Balance 1,449,199 831,736 2,048,629 1,359,513
Current Amortization - (98,820) - (203,101)
Valuation Expense - -- -
Current Principal Payments (119,534) - (222,212) -
Ending Balance 1,329,665$ 732,916$ 1,826,417$ 1,156,412$
Totals
Tesla LGS 123 E. Main St
LGS 208 E. Main StDRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 77
NOTE 5 - INTERFUND TRANSACTIONS
Inter-fund Receivables and Payables - Amounts due to or due from other funds reflect inter-fund 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. As of June 30, 2022, there were no interfund receivables or payables.
Transfers - With Council approval resources may be transferred from one fund to another. Transfers routinely reimburse funds that have made an expenditure on behalf of another fund. Transfers may also be made to pay for capital projects or capital outlays, lease or debt service payments, operating expenses and low and moderate-income housing projects. Transfers between funds during the fiscal
year ended June 30, 2022 were as follows:
Transfers In Transfers Out
General Fund 4,047,313$ 4,358,188$
Appropriated Reserves Fund 4,074,141 427,616
Nonmajor Gov't Funds 32,853 3,524,881
Internal Service Funds 251,194 94,816
Total Transfers 8,405,501$ 8,405,501$
NOTE 6 - CAPITAL ASSETS
Changes in the Town’s capital assets during the fiscal year are shown as follows:
Balance at June
30, 2021
Adjustments
and Additions
Transfers and
Retirements
Balance at June
30, 2022
Capital Assets not Being Depreciated:
Land 20,254,950$ 5,811,153$ -$ 26,066,103$
Construction in Progress 5,452,048 3,747,677 (1,421,650) 7,778,075
Total Capital assets not Being Depreciated 25,706,998 9,558,830 (1,421,650) 33,844,178
Capital Assets Being Depreciated:
Buildings and Improvements 31,741,121 7,697,000 175,502 39,613,623
Equipment & Vehicle 12,394,588 345,811 (184,782) 12,555,617
Infrastructure - All Other 26,362,567 710,706 461,227 27,534,500
Infrastructure - Streets 77,988,356 3,073,418 130,578 81,192,352
Total capital Assets Being Depreciated 148,486,632 11,826,935 582,525 160,896,092
Less Accumulated Depreciation for:
Buildings and Improvements 9,312,289 819,412 - 10,131,701
Equipment & Vehicle 9,619,882 612,396 (187,534) 10,044,744
Infrastructure - All Other 8,013,205 811,283 - 8,824,488
Infrastructure - Streets 35,831,991 2,786,996 (650,216) 37,968,771
Total Acccumulated Depreciation 62,777,367 5,030,087 (837,750) 66,969,704
Net Capital Assets Being Depreciated 85,709,265 6,796,848 1,420,275 93,926,388
Governmental Activity Capital Assets, Net 111,416,263$ 16,355,678$ (1,375)$ 127,770,566$ DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 78
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:
Depreciation
Expense
General Government 355,685$
Public Safety 432,622
Parks & Public Works 3,804,766
Community Development 52,600
Library 384,159 Sanitation 255
Total Governmental Activities 5,030,087$
Governmental Activities
Changes in the RDA Successor Agency trust fund capital assets during the fiscal year are shown as follows:
Balance at June
30, 2021
Adjustments
and Additions Retirements
Balance at June
30, 2022
Capital Assets not Being Depreciated:
Land 5,257,422$ -$ (5,257,422)$ -$
Capital Assets Being Depreciated:
Buildings and Improvements 4,067,708 - - 4,067,708
Less Accumulated Depreciation for:
Buildings and Improvements 2,745,700 101,692 - 2,847,392
Net Capital Assets Being Depreciated 1,322,008 (101,692) - 1,220,316
Scucessor Agency Capital Assets, Net 6,579,430$ (101,692)$ (5,257,422)$ 1,220,316$
NOTE 7 - 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.
The following summarizes the changes in long-term debt in the Town during the fiscal year ended June 30, 2022:
Interest Maturity Original Beginning Additions/Ending
Long-Term Debt Rate Date Issue Balance Adjustments Deletions Balance
Direct Borrowings:
PG& Loan 0% 2031 1,560,336$ 1,521,328$ (13,003)$ 156,034$ 1,352,291$
Due Within One Year 156,034
Due in More Than One Year 1,196,257$ DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 79
Future debt service requirements of the PG&E loan were as follows:
For the Year
Ending June 30,Principal Interest Total
2023 156,034$ -$ 156,034$
2024 156,034 - 156,034
2025 156,034 - 156,034
2026 156,034 - 156,034
2027 156,034 - 156,034
2028-2032 572,121 - 572,121
Total Debt Service 1,352,291$ -$ 1,352,291$
The following summarizes the changes in long-term debt in the Successor Agency trust fund during the
fiscal year ended June 30, 2022:
Interest Maturity Original Beginning Ending
Long-Term Debt Rate Date Issue Balance Deletions Balance
2002 COP 2.5-5% 2031 10,725,000$ 5,680,000$ 400,000$ 5,280,000$
2010 COP 2.5-4.25% 2028 15,675,000 8,405,000 900,000 7,505,000
Subtotal COP's 26,400,000 14,085,000 1,300,000 12,785,000
Premiums 753,095 338,892 37,657 301,235
Total Long-Term Debt 27,153,095$ 14,423,892$ 1,337,657$ 13,086,235$
Due Within One Year 1,355,000
Due in More Than One Year 11,731,235$
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, $15,675,000 of 2010 COPs were issued to finance the acquisition, construction, and improvement of a library on the Town’s Civic
Center campus, to be owned and operated by the Town. Principal payments are due annually on
August 1, with interest payments due semi-annually on February 1 and August 1.
To assist the Town in paying the cost of acquisition and construction of various projects, the Town and its Redevelopment Agency entered into lease and reimbursement agreements in 2002 and 2010. Under
the agreements, the Agency will use available net tax increment revenues resulting from the projects’
effect on land values to repay the Town for all lease payments made by the Town to the Agency under the lease agreements for the projects. Net tax increment revenues are all taxes allocated to and paid into the Successor Agency private-purpose trust fund. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 80
Future debt service requirements of the Certificates of Participation were as follows:
For the Year
Ending June 30,Principal Interest Total
2023 1,355,000$ 538,713$ 1,893,713$
2024 1,415,000 479,550 1,894,550
2025 1,485,000 417,300 1,902,300
2026 1,550,000 351,850 1,901,850
2027 1,625,000 283,375 1,908,375
2028-2032 5,355,000 486,475 5,841,475
Total Debt Service 12,785,000$ 2,557,263$ 15,342,263$
The Successor Agency must maintain a required amount of cash and investments with the trustee
under the terms of the COPs issues. These funds are pledged as reserves to be used if the Successor Agency fails to meet its obligations under the COPs issue and totaled 1,964,434 as of June 30, 2022. The California Government Code requires these funds to be invested in accordance with Town ordinance, bond indentures or State statues. All these funds have been invested as permitted under the
Code.
NOTE 8 - 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, 2022.
NOTE 9 - 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. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 81
As of June 30, 2022, fund balances were classified as follows:
Beginning Ending
Balance Additions Deletions Balance
Nonspendable
Loans Receivable 159,000$ -$ -$ 159,000$
Restricted:
Library 552,877 77,189 (74,813) 555,253
Capital projects 7,544,097 1,827,186 (1,013,890) 8,357,393
Repairs and maintenance 172,356 40,476 (38,593) 174,239
Pensions - 690,000 - 690,000
VTA 293,323 3,275 - 296,598
Total Restricted 8,562,653 2,638,126 (1,127,296) 10,073,483
Committed:
Budget stabilization and catastrophes 5,460,485 531,081 - 5,991,566
Catastrophic 5,460,485 531,081 - 5,991,566
Pension/OPEB Reserve 300,000 300,000 (300,000) 300,000
Special revenue funds 537,892 294,788 (194,969) 637,711
Total Committed 11,758,862 1,656,950 (494,969) 12,920,843
Assigned:
Open Space 562,000 - - 562,000
Parking 1,460,210 100,000 (1,460,210) 100,000
Sustainability 140,553 - - 140,553
Capital/Special projects 20,125,734 6,347,187 (1,759,535) 24,713,386
Carryover encumbrances - 33,145 - 33,145
Comcast PEG 50,000 - - 50,000
Sale of property 1,200,000 - (1,200,000) -
Market Fluctuations 438,333 - (438,333) -
Compensated Absences 1,649,917 - (130,770) 1,519,147
Measure G 2018 District Sales Tax - Residual 590,581 - - 590,581
Measure G 2018 District Sales Tax - Capital 1,139,909 1,306,076 (2,445,985) -
Total Assigned 27,357,237 7,786,408 (7,434,833) 27,708,812
Total Fund Balance - Gov't Funds 47,837,752$ 12,081,484$ (9,057,098)$ 50,862,138$
Restricted
Library reflects fund balance from donations and bequests held in trust for the benefit of the Town’s
library.
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.
VTA are funds provided by the Valley Transportation Authority’s Measure B restricted for the
pavement/crack seal rehabilitation project.
Pension restricted are amounts paid into a separate legal trust for the Town's Miscellaneous and Safety pension plans administered by CALPERS. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 82
Committed
Budget Stabilization and Catastrophic fund balance has been committed per Town Council resolution. 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 onetime 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 enhancecustomer service.
•One-time maintenance of service levels due to significant economic budget constraints
•One-time transitional costs associated with organizational restructuring to secure long-termpersonnel cost savings.
Should any of the events listed above occur that require the expenditure of Town resources beyond those provided for in the annual budget, the Town Manager or designee shall have authority to approve catastrophic or budget stabilization arrangement appropriations. The Town Manager or designee shall then present to the Town Council a budget amendment confirming the nature of the event and authorizing the appropriation of reserve funds.
Pension/OPEB Reserve committed fund balance will be used to fund net pension liabilities for the Town's Miscellaneous and Safety pension plans administered by CALPERS. Town policy provides, to the extent possible, that additional annual deposits be calculated committed with the goal of moving the payment of the unfunded pension liability from a 29-year to a 20-year amortization period.
Special Revenue Fund committed fund balance will be used for the activities of the respective special revenue funds.
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. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 83
Capital/Special Projects assigned fund balance will be used for the acquisition and construction of
capital facilities as well as special projects or activities as directed by the Town Council.
Comcast PEG assigned fund balance will be used to fund capital improvements linked to the televising of council and planning commission meetings.
Sale of Property is intended to be spent on capital projects.
Market Fluctuations assigned fund balance is used to represent fund balance amounts for unrealized investment gains that have been recorded as investment income in the financial statements in accordance with the requirements of GASB 31.
Compensated Absences assigned fund balance will be used for vacation and sick-pay benefits owed to
employees as of June 30, 2022 that were not an obligation of the General Fund because of their long-term nature.
Measure G 2018 District Sales Tax assigned fund balances for operational and capital will be used to track receipt and use of the 1/8 cents District tax funds collected by the Town for operational and capital expenditures.
NOTE 10 - EMPLOYEES' RETIREMENT PLAN
The following summarizes the pension balances as of year-end:
Misc Safety Total
Deferred outflows of resources 3,663,900$ 6,934,592$ 10,598,492$
Deferred inflows of resources 10,235,294$ 11,897,661$ 22,132,955$
Net pension liabilities 10,723,589$ 16,762,598$ 27,486,187$
Pension expense (credit)$ 703,247 $ 2,686,293 $ 3,389,540
Defined Benefit Plans
Plan Descriptions 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/formspublications. The Town relies upon actuarial and investment data provided by CalPERS for inclusion and analysis in this report. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 84
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 nonduty disability benefits after 10 years of service. The death benefit is one of the following: the
Basic Death Benefit, Lump Sum, or the 1959 Survivor Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.
The Plans’ provisions and benefits in effect on June 30, 2022, are summarized as follows:
Tier 1 Tier 2 PEPRA Tier 1 PEPRA
Benefit formula 2.5% @ 55 2% @ 60 2% @ 62 3.0% @ 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 55 62 50 57
Monthly benefits as a
% of eligible compensation 2.0% to 2.5% 1% to 2.5% 1.5% to 2.5%3.00% 2-2.70%
Required employee contribution rates 8.00%7% to 8%7.25% 9.000% 13.75%
Required employer contribution rates 10.37% 10.37% 14.43% 25.59% 13.98%
Required payment of unfunded liability $2,515,583 $2,515,583 $2,515,583 $2,317,133 $19,258
Miscellaneous Safety (Police)
Employees Covered At June 30, 2022, the following employees were covered by the benefit terms for the Plans:
Miscellaneous Safety
Active 120 35
Transferred 101 13
Separated 88 2
Retired 247 84
Total 556 134
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 the Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rates are the estimated amount necessary to finance the costs of benefits earned by employees during the year. The Town is required to contribute the difference between the actuarially determined rate and the
contribution rate of employees. In addition, the Town is solely responsible for any annual costs
associated with payments toward any unfunded accrued liability.
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 85
For the year ended June 30, 2022, the contributions recognized as part of pension expense for the Plans
were as follows:
Miscellaneous Safety
Contributions - employer $ 3,472,727 $ 3,072,032
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions Pension Liability
As of June 30, 2022, the Town reported net pension liabilities for each plan as follows:
Miscellaneous
Safety
Total
Net Pension
Liability/(Asset)
$ 10,723,589
16,762,598
$ 27,486,187
The Town’s net pension liability for the Safety Plan is measured as the proportionate share of the net pension liability while the Miscellaneous plan’s net pension liability is a direct calculation based on its actuarial study and is not proportionate. The net pension liability of all the Plans are measured as of
June 30, 2021, and the total pension liability for the Plans used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2020. The Town’s proportion of the net pension liability for the 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 June
30, 2021 and 2022 was as follows:
Safety
Proportion - June 30, 2021 0.40751%
Proportion - June 30, 2022 0.47764%
Change - Increase/(Decrease)0.07012%
For the year ended June 30, 2022, the Town recognized a pension expense of
$3,389,540. It should be noted that the net pension obligation varies annually depending upon the
plan's actual investment earnings compared to the assumed rate of return during the plan's
measurement periods. The Net Pension Obligation (NPO) reported in the Town's ACFRs has experienced a high degree of variability in recent years.
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 86
The following is a summary of the changes in the total pension liability, fiduciary net position and net
pension liability of the Town’s Miscellaneous Plan as of June 30, 2022:
Total Fiduciary Net
Pension Net Pension
Liability Position Liability
Beginning Balance 113,816,919$ 82,943,586$ 30,873,333$
Service Costs 2,062,486 - 2,062,486
Interest on Total Pension Liability 7,943,404 - 7,943,404
Difference Between Actual and Expected Experience (581,801) - (581,801)
Employer Contributions - 9,160,680 (9,160,680)
Employee Contributions - 889,649 (889,649)
Net Investment Income - 19,606,360 (19,606,360)
Employee Contribution Refunds and Benefit Payments (6,339,615) (6,339,615) -
Administrative Expenses - (82,856) 82,856
Net Changes 3,084,474 23,234,218 (20,149,744)
Ending Balance 116,901,393$ 106,177,804$ 10,723,589$
At June 30, 2022, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Changes of Assumptions -$ -$ -$ -$
Differences between Expected and Actual Experience 191,173 339,384 2,863,875 -
Differences between Projected and Actual Investment Earnings - 9,895,910 - 9,976,968
Differences between Employer's Contributions and
Proportionate Share of Contributions - - - 1,920,693
Change in Employer's Proportion - - 998,684 -
Pension Contributions Made Subsequent to Measurement Date 3,472,727 - 3,072,032 -
Total 3,663,900$ 10,235,294$ 6,934,592$ 11,897,661$
SafetyMiscellaneous
The Town reported $6,544,759 as deferred outflows of resources related to contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ended June 30, 2023. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 87
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to
pensions will be recognized as pension expense as follows:
Miscellaneous Safety Total
(2,551,456)$ (1,423,116)$ (1,423,116)$
(2,399,281) (1,701,049) (1,701,049)
(2,383,639) (2,165,414) (2,165,414)
(2,709,745) (2,745,523) (2,745,522)
- - -
- - -
(10,044,121)$ (8,035,102)$ (8,035,101)$
2023
Total
2024
2025
2026
Thereafter
2027
Deferred Outflows/(Inflows) of
ResourcesFiscal Year Ending
June 30:
Actuarial Assumptions The total pension liabilities in the June 30, 2020 actuarial valuations were determined using the
following actuarial assumptions:
Safety Miscellaneous
Valuation Date June 30, 2020 June 30, 2020
Measurement Date June 30, 2021 June 30, 2021
Actuarial Cost Method Entry-Age Normal
Cost Method
Entry-Age Normal
Cost Method
Actuarial Assumptions:
Discount Rate 7.15%7.15%
Inflation 2.50%2.50%
Payroll Growth 2.75%2.75%
Projected Salary Increase (1)(1)
Investment Rate of Return 7.00% (2) 7.00% (2)
Mortality (3)(3)
(1) Varies by entry age and service
(2) Net of pension plan investment expenses, including inflation
(3) Derived using CalPERS' membership data for all funds
The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2020 valuation were based on the results of a December 2017 actuarial experience study for the period
1997 to 2016. Further details of the Experience Study can found on the CalPERS website.
Discount Rate The discount rate used to measure the total pension liability was 7.15 percent for the Plans. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the
Plans, CalPERS stress tested plans that would most likely result in a discount rate that would be DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Page 88
different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run
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 best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, 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 returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term
and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.
Assumed
Asset Real Return Real Return
Asset Class (a)Allocation Years 1 - 10 (b) Years 11+ (c)
Global Equity 50.00%4.80%5.98%
Fixed Income 28.00%1.00%2.62%
Inflation Sensitive 0.00%0.77%1.81%
Private Equity 8.00%6.30%7.23%
Real Estate 13.00%3.75%4.93%
Liquidity 1.00%0.00% -0.92%
Total 100.00%
(a) In the System's ACFR, Fixed Income is included in Global Debt Securities; Liquidity
Liquidity is included in Short-term Investments; Inflation Assets are included in both
Global Equity Securities and Global Debt Securities.
(b) An expected inflation of 2.0% used for this period.
(c) An expected inflation of 2.92% used for this period.
In addition to the expected returns by asset class, the table below reflects the short-term, Long-term, and blended expected rate of return for the total PERF asset allocation as of the 2017 ALM.
Expected Compound Return (1 to 10 years)6.1%
Long Term Expected Return (11 to 60 years)8.3%
Blended Return (1 to 60 years)7.0%DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the Town’s net pension liability for the Plans, calculated using the discount rate for the Plans, as well as what the Town’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
Miscellaneous Safety
1% Decrease 6.15%6.15%
Net Pension Liability 25,600,877$ 30,483,178
Current 7.15%7.15%
Net Pension Liability 10,723,589$ 16,762,598
1% Increase 8.15%8.15%
Net Pension Liability (1,563,756)$ 5,492,836
Pension Plan Fiduciary Net Position Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.
Payable to the Pension Plans
As of June 30, 2022, the Town reported a payable of $14,548 and $14,796 for the outstanding amount of contributions to the Miscellaneous Agent Multiple Employer Plan and the Safety Cost Sharing Plan.
IRS Section 115 Trust
During the fiscal year ending June 30, 2020, the Town established an IRS Section 115 Trust with the
CalPERS California Employers’ Pension Prefunding Trust (CEPPT) program. In fiscal year 2022, the Town transferred $690,000 which is reported as restricted cash with fiscal agent within the General Fund. Per GASB, amounts placed in trusts for CalPERS plans are treated as side trusts that do not directly reduce the net pension liability.
NOTE 11 - OTHER POST-EMPLOYMENT BENEFITS
Plan Description The Town makes contributions to California Employers' 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 1 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 CalPERS' annual financial report
may be obtained from their Executive Office, 400 P Street, Sacramento, CA 95814.
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TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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In accordance with the Public Employees' Medical and Hospital Care Act (PEMHCA), employees
qualify for retiree health benefits upon five (5) years of service if they meet the vesting requirements as set forth by CalPERS and take a service or disability retirement from Town employment. Additionally, the employee must actually draw a CalPERS pension within ninety (90) days of separation from the Town, provided the employee remains with the Town's health plan through COBRA. For employees who retire on or after February 1, 2016, at Medicare eligibility, the Town will align contributions to the
full cost of the employee’s enrollment, including enrollment of family members, in a health benefits plan or plans up to a maximum of 100% Single Party and 90% Dependents for Kaiser Bay Area Basic/Medicare/Combo per month. During negotiations in fiscal year 2018/19, the Town’s discretionary retiree medical benefit contribution was eliminated for all future hires.
Upon retirement, employees have the option to roll over their sick leave accrual into a Town managed fund. Employees can request reimbursement of medical expenses from the fund up to the value of their sick leave at retirement.
Employees Covered by Benefit Terms
At June 30, 2022 (the measurement date), the benefit terms covered the following employees:
Active employees 150
Inactive employees - receieving benefits 142
Inactive employees - not receiving benefits 42
Total employees 334
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 additional amounts to prefund benefits as determined annually by the Town Council. For the fiscal year ended June 30, 2022, the Town contributed $1,754,922 from the General Fund. During the measurement period ended June 30, 2021, the Town contributed $2,096,847 to the Plana and benefit
payments were $1,494,906. Plan members receiving benefits contributed did not make any
contributions. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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Actuarial Assumptions
The following summarized the actuarial assumptions for the OPEB plan included in this fiscal year:
Valuation Date:June 30, 2021
Measurement Date:June 30, 2021
Actuarial Cost Method:Entry-Age Normal
Amortization Period:20 years
Asset Valuation Method:
Actuarial Assumptions:
Discount Rate 6.25%
Inflation 2.50%
Salary Increases 3.00%
Investment Rate of Return
Healthcare Trend Rate
Mortality
Retirement
Tier 1 Actives in insurance program: 100%
Tier 1 Actives in cash allocation program: 80%
Tier 2 Actives in insurance program: 60%
Tier 2 Actives in cash allocation program:
Agency service < 3 months: 60%
Agency service >= 3 months: 40%
Waived retirees aged <65: 20%
Waived retirees aged ≥65: 0%
Assumption Changes:
Discount rate was updated based on newer capital market assumptions
Decreased medical trend rate for Kaiser Senior Advantage
Demographic assumptions updated to CalPERS 2000-2019 Experience Study
Inflation rate decreased 25 basis points, decreasing discount rate, medical trend, and salary increases
Retiree and family participation rates at retirement updated
Implicit subsidy added for Tier 1 Medicare eligible
Mortality improvement scale was updated to Scale MP-2021
Level percentage of payroll, closed
6.75%
CalPERS 2000-2019 Experience Study
CalPERS 2000-2019 Experience Study
Non-Medicare - 7.25% for 2021, decreasing to an ultimate rate of
4% in 2076
Mortality projected fully generational with Scale MP-2021
Medicare - 6.3% for 2021, decreasing to an ultimate rate of 4% in
2076
Discount Rate The discount rate used to measure the total OPEB liability was 6.25 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. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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Net OPEB Liability
The Town's net OPEB liability was measured as of June 30, 2021 (measurement date) and was determined by an actuarial valuation as of June 30, 2021 (valuation date) for the fiscal year ended June 30, 2022 (reporting date).
Changes in the Net OPEB Liability
The following summarizes the changes in the net OPEB liability during the year ended June 30, 2022:
Fiscal Year Ended June 30, 2022
(Measurement Date June 30, 2021)
Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability
(Asset)
Balance at June 30, 2021 28,610,428$ 20,115,214$ 8,495,214$
Service cost 1,115,309 - 1,115,309
Interest in Total OPEB Liability 1,956,034 - 1,956,034
Employer contributions - 2,096,847 (2,096,847)
Balance of diff between actual and exp experience (2,521,500) - (2,521,500)
Balance of diff between actual and exp earnings - - -
Balance of changes in assumptions 1,054,638 - 1,054,638
Net investment income - 5,529,824 (5,529,824)
Administrative expenses - (18,556) 18,556
Benefit payments (1,494,906) (1,494,906)-
Net changes 109,575 6,113,209 (6,003,634)
Balance at June 30, 2022 28,720,003$ 26,228,423$ 2,491,580$
Covered Employee Payroll 17,982,237$
Total OPEB Liability as a % of Covered Employee Payroll 159.71%
Plan Fid. Net Position as a % of Total OPEB Liability 91.32%
Service Cost as a % of Covered Employee Payroll 6.20%
Net OPEB Liability as a % of Covered Employee Payroll 13.86%
Contributions as a % of Cov. Emp. Payroll 11.66%
Deferred Inflows and Outflows of Resources At June 30, 2022, the Town reported deferred outflows of resources and deferred inflows of resources
related to OPEB from the following sources:
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Difference between actual and expected experience -$ 2,174,632$
Difference between actual and expected earnings - 2,982,166
Change in assumptions 878,865 545,880
OPEB contribution subsequent to measurement date 1,754,922 -
Totals 2,633,787$ 5,702,678$ DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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Of the total amount reported as deferred outflows of resources related to OPEB, $1,754,922 were the
result of Town contributions subsequent to the measurement date and before the end of the fiscal year. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:
Year Ended June 30,
2023 (1,158,834)$
2024 (1,125,775)
2025 (1,134,439)
2026 (1,160,288)
2027 (244,477)
Thereafter -
Total (4,823,813)$
Rate of Return
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 table below.
Asset Class
Percentage of
Portfolio
Long-Term
Expected Rate of
Return
Global Equity 59.00% 4.560%
Fixed Income 25.00% 78.000%
TIPS 5.00%-8.0%
Commodities 3.00% 1.220%
REITs 8.00% 4.060%
Total 100.00%
OPEB Expense The following summarizes the OPEB expense by source during the year ended June 30, 2022:
Service cost 1,115,309$
Interest in TOL 1,956,034
Expected investment income (1,357,919)
Difference between actual and expected experience (445,555)
Difference between actual and expected earnings (808,017)
Change in assumptions 18,738
Administrative expenses 18,556
OPEB Expense 497,146$ DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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The following summarizes changes in the net OPEB liability as reconciled to OPEB expense during
the year ended June 30, 2022:
2,491,580$
(8,495,214)
(6,003,634)
Changes in deferred outflows (497,143)
Changes in deferred inflows 4,901,076
Employer contributions and implicit subsidy 2,096,847
OPEB Expense 497,146$
Net OPEB liability ending
Net OPEB liability beginning
Change in net OPEB liability
Sensitivity to Changes in the Discount Rate The net OPEB liability of the Town, as well as what the Town's net OPEB liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher, is as follows:
(1% Decrease )6.25%(1% Increase )
Net OPEB Liability (Asset)5,965,597$ 2,491,580$ (406,616)$
Discount Rate
Sensitivity to Changes in the Healthcare Cost Trend Rates
The net OPEB liability of the Town, as well as what the Town's net OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage point lower or one percentage point higher than current healthcare cost trend rates, is as follows:
(1% Decrease )Current (1% Increase )
Net OPEB Liability (Asset)170,134$ 2,491,580$ 5,107,398$
Trend Rate
NOTE 12 - 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 authority within the scope of the related agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Obligations and liabilities of the separate entities are not those of the Town, although the Town retains an ongoing financial interest or an ongoing financial responsibility.
Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA) The Town participates in PLAN, which covers general liability claims in the amount up to $5,000,000 plus $25,000,000 in excess liability for total coverage of $30,000,000 per occurrence. The Town has a deductible or uninsured liability of up to $50,000 per claim. PLAN also provides all risk property coverage of $1,000,000,000, excluding flood and earthquake coverage. The Town has a $5,000
deductible for property and vehicle damage. Once the Town’s deductible is met, PLAN becomes DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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responsible for payment of all claims up to the limit. Financial statements may be obtained from PLAN
at 1750 Creekside Drive, Suite 200, Sacramento, CA, 95833.
Local Agency Workers’ Compensation Joint Powers Authority (LAWCX) The Town is a member of LAWCX for workers compensation claims coverage. The Town has a $250,000 self-insured retention level or uninsured liability for all employees. Once the Town’s
deductible is met, LAWCX becomes responsible for claims up to $5,000,000. For claims greater than $5,000,000, LAWCX has a commercial policy providing coverage. Financial statements may be obtained from LAWCX at 1750 Creekside Oaks Dr., Suite 200, Sacramento, California, 95833. The Town has not significantly reduced its insurance coverage from the prior year and settlements have not exceeded insurance coverage for the past three years.
Liability for Uninsured Claims The Town is required to record its liability for uninsured claims and to reflect the current portion of this liability as an expenditure in its financial statements. As discussed above, the Town has coverage for such claims, but it has retained the risk for the deductibles, or uninsured portion of these claims.
The change in Workers’ Compensation and Self-Insurance Service Funds’ claims liabilities, is based on historical trend information provided by its third party administrator and was computed as follows as of June 30, 2022:
Workers' Self-
Compensation Insurance
Internal Internal
Service Fund Service Fund Total
Claims payable balance - June 30, 2020 1,191,386$ 57,025$ 1,248,411$
Claims incurred 511,800 143,565 655,365
Claims paid (207,704) - (207,704)
Claims payable balance - June 30, 2021 1,495,482 200,590 1,696,072
Claims incurred/adjustments - (119,883) (119,883)
Claims paid (130,924) (61,150) (192,074)
Claims payable balance - June 30, 2022 1,364,558$ 19,557$ 1,384,115$
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, 2022, the Successor Agency trust fund reported a net deficit of $7,607,526. DRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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Encumbrances - As of June 30, 2022, the town had the following encumbered balances that were
carried into the next fiscal year:
General Fund 996,124$
Appropriated Reserves Fund 6,604,021
Nonmajor Governmental Funds 1,676,361
Internal Service Funds 559,151
Total Encumbrances 9,835,657$
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 parkingb. Highway 9 improvements from Highway 17 to Monte Serenoc.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 improvementsf. New Los Gatos library building
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative
agreement were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of
its Redevelopment Agency.
Affordable Housing Cooperative Agreement
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 Lanec.Partnership with Senior Housing Solutions for the creation of senior housing in Los GatosDRAFT
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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d.Partnerships for the conversion of existing residential developments dedicated to affordable
housinge.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 - COVID-19 PANDEMIC PROGRAMS
On March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law by President Biden.
The $1.9 trillion package (the Act) provided financial aid to families, governments, businesses, schools, nonprofits and others impacted by the COVID19 public health crisis. Of the $1.9 trillion, $350 billion is being directed toward state and local governments. All 19,000 municipal governments are entitled to a direct, noncompetitive federal formula grant from the U.S. Treasury Department. The portion allocated to cities, towns, and villages totals $65.1 billion of which $19.5 billion is obligated
toward cities with less than 50,000 residents. The Act will allocate $7,229,744 to the Town over a two-year period. The first tranche payment of $3,614,862 was received on July 13, 2021, and the second payment no earlier than 12 months after the first payment.
Section 603. CORONAVIRUS LOCAL FISCAL RECOCERY FUND of the Act identified four
eligible uses for funding, as follows:
A.Respond to the public health emergency with respect to the Coronavirus Disease 2019(COVID–19) or its negative economic impacts, including assistance to households, small
businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;
B.Respond to workers performing essential work during the COVID–19 public healthemergency by providing premium pay to eligible workers of the metropolitan city,nonentitlement unit of local government, or county that are performing such essential work, orby providing grants to eligible employers that have eligible workers who perform essential
work;
C.Provide government services to the extent of the reduction in revenue of suchmetropolitan city, nonentitlement unit of local government, or county due to the COVID–19public health emergency relative to revenues collected in the most recent full fiscal year of themetropolitan city, nonentitlement unit of local government, or county prior to the emergency;
or
D.Make necessary investments in water, sewer, or broadband infrastructure.
During the fiscal year ended June 30, 2022 , the Town recognized $3,413,961 as operating grant revenue in the ARPA special revenue fund and transferred $3,413,961 to other funds, reimbursing the
Town for qualifying expenditures under the provisions of the Act. For FY 2020/21, the Town
recognized the initial $200K of ARPA proceeds as revenue to reimburse the Town for qualifying expenses.
TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2022
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NOTE 16 - FRANCHISE FEES
The California Supreme Court recently issued an opinion in a case challenging the franchise fees that the city of Oakland charges to certain waste hauling companies. In Zolly v. City of Oakland, the court concluded that it did not have enough evidence to rule as a matter of law that the fees are exempt from the voter approval requirements that apply to taxes under Proposition 26, Article XIII C of the
California Constitution.
However, there are several exceptions to the general rule that a tax must be approved by the voters. One exception (Article IIIC, section 1 (e)(1)) is for “a charge imposed for a specific benefit conferred or privileged granted directly to the payor that is not provided to those not charged, and which does not
exceed the reasonable costs to the local government of conferring the benefit or granting the privilege.” In the event the Town is unable to utilize one of the exceptions, the potential impact is a loss of approximately $2.4 million annually.
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Required Supplementary Information
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022
BENEFIT PLAN SCHEDULES
Page 100
Schedule of Pension Plan Contributions
Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost Sharing
Plan
Schedule of Proportionate Share of Net Pension Liability – CalPERS Misc. Agent-Multiple Employer Plan
Schedule of OPEB Contribution
Schedule of Changes in Net OPEB Liability
TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022 SCHEDULE OF PENSION PLAN CONTRIBUTIONS
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Miscellaneous Agent Multiple-Employer Plan
Plan Measurement Date 2014 2015 2016 2017 2018 2019 2020 2021
Fiscal Year Ended 2015 2016 2017 2018 2019 2020 2021 2022
Contractually Required Contributions 1,941,765$ 2,223,782$ 2,407,496$ 2,669,133$ 3,049,748$ 3,366,304$ 3,529,373$ 3,472,727$
Contributions in Relation to Contractually
Required Contributions 1,941,765 2,223,782 2,407,496 2,669,133 3,049,748 8,146,791 9,160,680 3,472,727
Contribution Deficiency (Excess)-$ -$ -$ -$ -$ (4,780,487)$ (5,631,307)$ -$
Covered Payroll 8,487,940$ 9,198,318$ 9,024,370$ 9,576,157$ 10,211,967$ 11,188,927$ 12,082,520$ 11,970,102$
Contributions as a % of Covered Payroll 22.88% 24.18% 26.68% 27.87% 29.86% 72.81% 75.82% 29.01%
Safety Cost Sharing PlanPlan Measurement Date 2014 2015 2016 2017 2018 2019 2020 2021Fiscal Year Ended 2015 2016 2017 2018 2019 2020 2021 2022
Contractually Required Contributions 1,999,757$ 1,586,129$ 1,738,150$ 1,951,711$ 2,325,357$ 2,565,205$ 2,853,764$ 3,072,032$
Contributions in Relation to ContractuallyRequired Contributions 1,999,757 1,586,129 1,738,150 1,951,711 2,325,357 2,565,205 2,853,764 3,072,032
Contribution Deficiency (Excess)-$ -$ -$ -$ -$ -$ -$ -$
Covered Payroll 4,897,104$ 5,022,498$ 4,941,138$ 5,079,440$ 4,445,061$ 4,928,821$ 5,178,418$ 5,831,703$
Contributions as a % of Covered Payroll 40.84% 31.58% 35.18% 38.42% 52.31% 52.05% 55.11% 52.68%
Notes to Schedule:
Valuation Date:June 30, 2020
Assumptions Used: Entry Age Method used for Actuarial Cost Method
Level Percentage of Payroll and Direct Rate Smoothing
3.8 Years Remaining Amortization Period
Inflation Assumed at 2.50%Investment Rate of Returns set at 7.00%
Fiscal year 2015 was the first year of implementation, therefore only eight years are shown.
The CalPERS discount rate was increased from 7.50% to 7.65% in fiscal year 2016, then to 7.15% in 2018.
The CalPERS mortality assumptions was adjusted in fiscal year 2019.
CalPERS mortality table based on CalPERS' experience and include 15 years of projected ongoing mortality
improvement using 90 percent of Scale MP 2016 published by the Society of Actuaries.
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022
SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY CALPERS SAFETY COST SHARING PLAN
Page 102
Safety Cost Sharing PlanPlan Measurement Date 2014 2015 2016 2017 2018 2019 2020 2021Fiscal Year Ended 2015 2016 2017 2018 2019 2020 2021 2022
Proportion of Net Pension
Liability (Safety and Misc)0.28588% 0.14860% 0.22394% 0.22603% 0.23583% 0.24100% 0.24953% 0.30994%
Proportionate Share ofNet Pension Liability 17,788,690$ 10,199,904$ 19,377,843$ 22,415,954$ 22,725,267$ 24,695,687$ 27,149,916$ 16,762,598$
Covered Payroll 4,916,535$ 4,897,104$ 5,022,498$ 4,941,138$ 5,079,440$ 4,445,061$ 4,928,821$ 5,178,418$
Proportionate Share of NPLas a % of Covered Payroll 361.81% 208.28% 385.82% 453.66% 447.40%555.58% 550.84% 323.70%
Plan's Fiduciary Net Positionas a % of the TPL 75.66% 74.89% 74.89% 73.87% 74.52% 73.61% 72.46% 83.55%
Fiscal year 2015 was the first year of implementation, therefore only eight years are shown.
The CalPERS discount rate was increased from 7.50% to 7.65% in fiscal year 2016, then to 7.15% in 2018.
The CalPERS mortality assumptions was adjusted in fiscal year 2019.
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022
SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY CALPERS MISCELLANEOUS AGENT-MULTPLE EMPLOYER PLAN
Page 103
Measuement Date 2014 2015 2016 2017 2018 2019 2020 2021
Total Pension liabilityService cost 1,579,547$ 1,491,925$ 1,560,679$ 1,651,550$ 1,700,438$ 1,771,368$ 1,930,090$ 2,062,486$
Interest 6,268,015 6,483,032 6,697,247 6,820,536 7,073,843 7,381,846 7,729,269 7,943,404
Diff. between expected and actual exp.- (623,495) (357,870) (892,479) 994,994 1,082,289 1,465,653 (581,801)
Changes of assumptions - (1,513,132) - 5,481,432 (655,541) - - -
Benefit payments (including refunds)(4,241,487) (4,748,786) (4,953,756) (5,138,083) (5,448,374) (5,720,232) (5,958,101) (6,339,615)
Net change in Total Pension Liability 3,606,075 1,089,544 2,946,300 7,922,956 3,665,360 4,515,271 5,166,911 3,084,474 Total Pension Liability - beginning 84,904,502 88,510,577 89,600,121 92,546,421 100,469,377 104,134,737 108,650,008 113,816,919 Total Pension Liability - ending 88,510,577$ 89,600,121$ 92,546,421$ 100,469,377$ 104,134,737$ 108,650,008$ 113,816,919$ 116,901,393$
Plan fiduciary net position
Employer contributions 1,796,079$ 1,941,765$ 2,223,782$ 2,407,496$ 2,669,104$ 3,049,748$ 8,146,791$ 9,160,680$
Employee contributions 668,167 679,796 691,770 682,891 761,705 846,125 834,145 889,649 Plan to plan resource movement - 22,561 (28,866) - (170) - - - Projected investment earnings 4,328,173 - - - -- - - Diff. between est. and actual earnings 5,831,718 - - - -- - -
Net investment income - 1,470,873 369,185 7,171,443 5,883,868 4,759,034 3,913,294 19,606,360
Benefit payments (including refunds)(4,241,487) (4,748,786) (4,953,756) (5,138,083) (5,448,374) (5,720,232) (5,958,101) (6,339,615)
Administrative expense - (74,706) (40,462) (95,455) (108,582) (52,260) (107,303) (82,856)
Adjsutments - -- - (206,199) 170 - -
Net change in plan fiduciary net position 8,382,650 (708,497) (1,738,347) 5,028,292 3,551,352 2,882,585 6,828,826 23,234,218
Plan fiduciary net position - beginning 58,716,725 67,099,375 66,390,878 64,652,531 69,680,823 73,232,175 76,114,760 82,943,586
Plan fiduciary net position - ending 67,099,375$ 66,390,878$ 64,652,531$ 69,680,823$ 73,232,175$ 76,114,760$ 82,943,586$ 106,177,804$
Net Pension liability (asset)21,411,202$ 23,209,243 27,893,890 30,788,554 30,902,562 32,535,248 30,873,333 10,723,589
Plan fiduciary net position as a percentageof the total Pension liability 75.81% 74.10% 69.86% 69.36% 70.32% 70.05% 72.87% 90.83%
Covered Payroll 8,406,315$ 8,487,940$ 9,198,318$ 9,024,370$ 9,576,157$ 10,211,967$ 11,188,927$ 12,082,520$
Net Pension liability % of covered payroll 254.70% 273.44% 303.25% 341.17% 322.70% 318.60% 275.93% 88.75%
Other Notes
Fiscal year 2015 was the first year of implementation, therefore only eight years are shown.
TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022 SCHEDULE OF OPEB CONTRIBUTIONS
Page 104
Fiscal Year Ended 2018 2019 2020 2021 2022
Actuarially determined contribution (ADC)2,129,000$ 2,108,000$ 2,172,000$ 1,859,000$ 1,860,000$
Less: actual contribution in relation to ADC (2,935,000) (2,406,636) (2,508,306) (2,096,847) (1,754,922)
Contribution deficiency (excess)(806,000)$ (298,636)$ (336,306)$ (237,847)$ 105,078$
Covered employee payroll 16,192,060$ 17,338,201$ 17,406,541$ 17,982,237$ 16,987,042$
Contrib. as a % of covered employee payroll 18.13% 13.88% 14.41% 11.66% 10.33%
Notes to Schedule:
Assumptions and Methods
Valuation Date:
Measurement Date:
Actuarial Cost Method:
Amortization Period:
Asset Valuation Method:
Actuarial Assumptions:
Discount Rate
Inflation
Salary Increases
Investment Rate of Return
Healthcare Trend Rate
Mortality
Retirement
Other Notes
Discount rate was updated based on newer capital market assumptions
Decreased medical trend rate for Kaiser Senior Advantage
Demographic assumptions updated to CalPERS 2000-2019 Experience Study
Inflation rate decreased 25 basis points, decreasing discount rate, medical trend, and salary increases
Retiree and family participation rates at retirement updated
Implicit subsidy added for Tier 1 Medicare eligible
Mortality improvement scale was updated to Scale MP-2021
Non-Medicare - 7.25% for 2021, decreasing to
an ultimate rate of 4% in 2076
June 30, 2021
June 30, 2021
Entry-Age Normal Cost
20 years
6.75%
Level percentage of payroll, closed
CalPERS 2000-2019 Experience Study
CalPERS 2000-2019 Experience Study
6.25%
2.50%
3.00%
GASB 75 requires a schedule of contributions for the last ten fiscal years, or for as many years as are available if less than ten
years are available. GASB 75 was adopted as of June 30, 2018.
TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022 SCHEDULE OF CHANGES IN NET OPEB LIABILITY
Page 105
Measurement Date 2017 2018 2019 2020 2021
Total OPEB liability
Service cost 1,134,000$ 1,168,227$ 1,203,274$ 1,159,152$ 1,115,309$
Interest 1,607,000 1,706,270 1,814,072 1,887,105 1,956,034
Differences between expected & actual exp.- - (149,297) - (2,521,500)
Changes of assumptions - - (392,681) (533,825) 1,054,638
Benefit payments (1,269,000) (1,326,313) (1,298,623) (1,399,933) (1,494,906)
Net change in Total OPEB Liability 1,472,000 1,548,184 1,176,745 1,112,499 109,575
Total OPEB Liability - beginning 23,301,000 24,773,000 26,321,184 27,497,929 28,610,428
Total OPEB Liability - ending 24,773,000$ 26,321,184$ 27,497,929$ 28,610,428$ 28,720,003$
Plan fiduciary net position
Employer contributions 3,878,000$ 2,935,313$ 2,406,636$ 2,508,306$ 2,096,847$
Net investment income 1,049,000 1,082,977 1,009,315 652,656 5,529,824
Benefit payments (1,269,000) (1,326,313) (1,298,623) (1,399,933) (1,494,906)
Administrative expense (14,000) (34,261) (11,502) (17,357) (18,556)
Net change in plan fiduciary net position 3,644,000 2,657,716 2,105,826 1,743,672 6,113,209
Plan fiduciary net position - beginning 9,964,000 13,608,000 16,265,716 18,371,542 20,115,214
Plan fiduciary net position - ending 13,608,000$ 16,265,716$ 18,371,542$ 20,115,214$ 26,228,423$
Net OPEB liability (asset)11,165,000$ 10,055,468 9,126,387 8,495,214 2,491,580
Plan fiduciary net position as a percentage
of the total OPEB liability 54.93% 61.80% 66.81% 70.31% 91.32%
Covered Employee Payroll 14,985,716$ 16,192,060$ 17,338,201$ 17,406,541$ 17,982,237$
NOL as a % of cov. emp. payroll 74.50% 62.10% 52.64% 48.80% 13.86%
Other Notes
GASB 75 requires a schedule of contributions for the last ten fiscal years, or for as many years as are available if less than ten
years are available. GASB 75 was adopted as of June 30, 2018.
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Supplementary Information
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TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022 MAJOR GOVERNMENTAL FUND SCHEDULES (OTHER THAN THE GENERAL FUND) AND NONMAJOR GOVERNMENTAL FUNDS
Page 108
Schedule of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual
(GAAP):
Appropriated Reserves Fund is used to account for resources provided for capital projects not
fully funded from other sources.
Capital Projects Funds: Storm Drain Basin Funds were established to account for fees paid in conjunction with the
development in specified drainage areas.
Construction Tax Funds were established to account for tax levies on building additions or alterations including capital improvements, underground utilities and parks.
Gas Tax Fund was established to account for revenue and expenditures under the State of
California Streets and Highways Code Sections 2106, 2107 and 2107.5. The revenues must be used for the maintenance and construction of streets. Special Revenue Funds:
Community Development Block Grant Fund was established to account for grant funds received and expended under the Community Development Act of 1974. Non-Point Source Maintenance Fund was established to comply with obligations under the
National Pollutant Discharge Elimination system permit issued by the California Regional Water
Quality Control Board. Lighting and Landscape Fund was established to account for maintenance of trees, landscaping, irrigation systems and lighting within the boundaries of Tract No. 8439.
ARPA Fund was established to account for monies received under the American Rescue Plan Act of 2021 to respond to the COVID19 emergency. LG Theatre Fund was established to account for monies received from rents on donated
property and related expenditures. Library Trust Fund was established to provide for the servicing of donations and bequests to the Town's Library Program.
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Variance
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Licenses & permits 160,000 160,000 420,055 260,055
Intergovernmental 1,691,069 16,912,649 9,400,918 (7,511,731)
Charges for services 755,676 2,693,556 1,464,746 (1,228,810)
Developer fees 20,000 20,000 535,571 515,571
Interest - - 34,805 34,805
Use of Property - - 93,001 93,001
Total Revenues 2,626,745 19,786,205 11,949,096 (7,837,109)
EXPENDITURES
Current:
General government - 7,000,000 6,900,000 100,000
Capital outlay 5,414,872 10,894,632 9,570,780 1,323,852
Total Expenditures 5,414,872 17,894,632 16,470,780 1,423,852
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (2,788,127) 1,891,573 (4,521,684) (6,413,257)
OTHER FINANCING SOURCES (USES)
Transfers in 2,841,047 3,584,047 4,074,141 490,094
Transfers (out)(427,616) (427,616) (427,616) -
Total Other Financing Sources (Uses)2,413,431 3,156,431 3,646,525 490,094
CHANGE IN FUND BALANCE (374,696)$ 5,048,004$ (875,159) (5,923,163)$
BEGINNING FUND BALANCE 15,115,912
ENDING FUND BALANCE 14,240,753$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
TOWN OF LOS GATOS
APPROPRIATED RESERVES FUND
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
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TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022 PROPRIETARY FUNDS INTERNAL SERVICE FUNDS
Page 121
Internal service funds are used to finance and account for special activities and service performed by a designed department for other departments in the Town on a cost reimbursement
basis.
The concept of major funds does not extend to internal service funds because they are used for internal activities only. In the Government-Wide Statement of Activities, the net revenues and expenses of the internal service funds are allocated to the Town departments or programs that
generated them, thus eliminating internal service funds.
However, internal service funds are still presented separately in the fund financial statements and include the following funds:
Equipment 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. Information Technology Fund was established to account for the replacement of management
information computer systems and components. Facilities Maintenance Fund was established to account for preventative maintenance and repair for all Town buildings.
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Equipment Worker's Self Information Facilities
Replacement Comp Insurance Technology Maintenance Total
ASSETS
Cash & Investments 2,237,647$ 2,535,115$ 863,995$ 3,043,739$ 332,928$ 9,013,424$
Restricted Cash & Investments - 129,929 - - - 129,929
Receivables:
Accounts 4,553 - - 16,396 24,853 45,802
Leases receivable - - - - 1,494,721 1,494,721
Total Assets 2,242,200$ 2,665,044$ 863,995$ 3,060,135$ 1,852,502$ 10,683,876$
LIABILITIES
Accounts Payable 19,805$ 5,302$ 41,146$ 69,204$ 94,660$ 230,117$
Due to Other Governments - - - - 50 50
Claims Payable - 1,364,558 19,557 - - 1,384,115
Total Liabilities 19,805$ 1,369,860$ 60,703$ 69,204$ 94,710$ 1,614,282$
Deferred Inflows of Resources
Leases -$ -$ -$ -$ 829,312$ 829,312$
NET POSITION
Restricted for:
Wokers compensation claims -$ 129,929$ -$ -$ -$ 129,929$
Unrestricted 2,222,395 1,165,255 803,292 2,990,931 928,480 8,110,353
Total Net Position 2,222,395$ 1,295,184$ 803,292$ 2,990,931$ 928,480$ 8,240,282$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30, 2022
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Equipment Worker's Self Information Facilities
Replacement Comp Insurance Technology Maintenance Total
OPERATING REVENUES
Charges for services 540,957$ 896,732$ 366,133$ 998,158$ 878,127$ 3,680,107$
Interest - 5 - - - 5
Use of money and property 3,274 - - - 111,817 115,091
Other local taxes - - - - 66,382 66,382
Other revenue & reimbursements 45,211 258,472 - - - 303,683
Total Operating Revenues 589,442 1,155,209 366,133 998,158 1,056,326 4,165,268
OPERATING EXPENSES
Insurance expenses - 1,533,045 583,924 - - 2,116,969
Services and supplies 161,767 - - 878,049 1,222,779 2,262,595
Total Operating Expenses 161,767 1,533,045 583,924 878,049 1,222,779 4,379,564
Operating Income (loss)427,675 (377,836) (217,791) 120,109 (166,453) (214,296)
Transfers (in)- - - - 251,194 251,194
Transfers (out)(94,816) - - - - (94,816)
Net Transfers (94,816) - - - 251,194 156,378
Change in Net Position 332,859 (377,836) (217,791) 120,109 84,741 (57,918)
BEGINNING NET POSITION 1,889,536 1,673,020 1,021,083 2,870,822 156,340 7,610,801
PRIOR PERIOD ADJUSTMENT,
GASB 87 - LEASES - - - - 687,399 687,399
BEGINNING NET POSITION,
ADJUSTED 1,889,536 1,673,020 1,021,083 2,870,822 843,739 8,298,200
ENDING NET POSITION 2,222,395$ 1,295,184$ 803,292$ 2,990,931$ 928,480$ 8,240,282$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
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Equipment Worker's Self Information Facilities
Replacement Comp Insurance Technology Maintenance Total
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers 586,745$ 896,737$ 366,133$ 986,495$ 390,917$ 3,227,027$
Payments to suppliers and providers (141,962) (1,550,272) (664,201) (848,854) (1,236,545) (4,441,834)
Insurance reimbursements - 258,472 - - - 258,472
Claims paid - (130,924) (61,150) - - (192,074)
Net Cash Provided (Used) by
Operating Activities 444,783 (525,987) (359,218) 137,641 (845,628) (1,148,409)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers In - - - - 251,194 251,194
Transfers Out (94,816) - - - - (94,816)
Net Cash Provided (Used) by
Noncapital Financing Activities (94,816) - - - 251,194 156,378
Net Increase(Decrease) in Cash and Investments 349,967 (525,987) (359,218) 137,641 (594,434) (992,031)
Cash and investments - beginning of year 1,887,680 3,191,031 1,223,213 2,906,098 239,963 9,447,985
Cash and investments - end of year 2,237,647$ 2,665,044$ 863,995$ 3,043,739$ (354,471)$ 8,455,954$
Reconciliation of Operating Income to Cash
Flows from Operating Activities:
Operating Income 427,675$ (377,836)$ (217,791)$ 120,109$ (166,453)$ (214,296)$
Change in assets and liabilities:
Accounts receivable (2,697) - - (12,141) - (14,838)
Leases receivable - - - - (1,494,721) (1,494,721)
Due from other funds - - - 478 - 478
Deferred inflows of resources - - - - 829,312 829,312
Accounts payable 19,805 (17,227) 39,606 29,195 (13,733) 57,646
Due to other governments - - - - (33) (33)
Claims payable - (130,924) (181,033) - - (311,957)
Cash Flows From Operating Activities 444,783$ (525,987)$ (359,218)$ 137,641$ (845,628)$ (1,148,409)$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
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Statistical Section
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STATISTICAL (UNAUDITED)
This part of the Town of Los Gatos Annual Comprehensive Financial Report (“ACFR”) 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 ACFR relates to the services the Town provides and activities it performs (Schedule 15 and Schedule 16).
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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
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 (1)
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 (2)
2019 107,542,588 11,918,688 -4,642,167 114,819,109 (3)
2020 111,700,225 7,117,984 -3,967,178 114,851,031
2021 109,894,936 8,358,267 -4,735,103 113,518,100
2022 126,418,275 10,203,412 1,785,294 138,406,981
(1) 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 $8.0 million in
unrestricted cash balances in the Town’s GFAR fund during the year to invest in the Town’s infrastructure and
(2) Net position was restated for FY 2018 for amounts placed into fiduciary funds, reclassified to General Fund
Restricted Asset.
-15,000,000-10,000,000
-5,000,0000
5,000,000
10,000,00015,000,000
20,000,000
25,000,00030,000,000
35,000,00040,000,000
45,000,000
50,000,00055,000,000
60,000,000
65,000,000
70,000,000
75,000,00080,000,000
85,000,000
90,000,00095,000,000
100,000,000
105,000,000
110,000,000
115,000,000120,000,000
125,000,000
130,000,000135,000,000
Net Investment in Capital Assets Restricted Unrestricted
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Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2012/13 2013/14 2014/15 2015/16 2016/17
General Fund
Nonspendable -$ -$ -$ -$ -$
Restricted - - - - -
Committed 20,019,187 15,129,925
Assigned 20,758,156 23,791,749 24,121,256 9,555,085 14,050,699
Unassigned 7,502,446 1,363,376 - - -
Total General Fund 28,260,602$ 25,155,125$ 24,121,256$ 29,574,272$ 29,180,624$
All Other Governmental Funds
Nonspendable -$ -$ -$ -$ -$
Restricted 3,949,583 4,485,246 5,663,182 6,386,014 5,627,707
Committed - - - 3,696,000 10,354,584
Assigned 6,097,182 8,191,823 15,346,558 11,099,076 7,928,994
Unassigned 157,208 183,045 206,875 - -
Total All Other Governmental Funds 10,203,973$ 12,860,114$ 21,216,615$ 21,181,090$ 23,911,285$
Total Fund Balances 38,464,575$ 38,015,239$ 45,337,871$ 50,755,362$ 53,091,909$
Continued
Fiscal Year
Page 133
Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2017/18 2018/19 2019/20 2020/21 2021/22
General Fund
Nonspendable -$ -$ -$ 159,000$ 159,000$
Restricted 1,206,851 5,015,316 669,978 - 690,000
Committed 12,953,399 15,070,944 15,387,706 11,220,970 12,283,132
Assigned 17,475,285 18,256,895 13,277,813 12,534,648 13,764,657
Unassigned - - - - -
Total General Fund 31,635,535$ 38,343,155$ 29,335,497$ 23,914,618$ 26,896,789$
All Other Governmental Funds
Nonspendable -$ -$ -$ -$ -$
Restricted 6,992,747 6,903,372 6,448,006 8,562,653 9,383,483
Committed 5,571,087 2,579,997 - - 637,711
Assigned 6,361,403 6,180,930 14,181,679 15,360,481 13,944,155
Unassigned - - - - -
Total All Other Governmental Funds 18,925,237$ 15,664,299$ 20,629,685$ 23,923,134$ 23,965,349$
Total Fund Balances 50,560,772$ 54,007,454$ 49,965,182$ 47,837,752$ 50,862,138$
Concluded
Fiscal Year
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Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2012/13 2013/14 2014/15 2015/16 2016/17
Revenues:
Taxes 24,596,799$ 23,475,393$ 23,208,820$ 23,269,892$ 25,945,129$
Licenses & Permits 4,015,871 5,343,265 6,467,771 5,442,133 5,075,503
Intergovernmental 2,615,191 2,440,127 2,921,002 2,573,475 1,715,580
Charges for Services 6,529,234 5,837,581 5,794,386 4,773,001 4,210,174
Fines and Forfeitures 688,125 795,720 868,564 879,277 917,105
Franchise Fees - - 2,215,430 2,258,892 2,366,908
Developer Fees - - - - -
Investment Income (133,380) 772,164 428,735 698,308 192,978
Use of Property 38,910 37,741 32,209 31,723 32,096
Other 4,577,584 3,648,277 3,130,975 2,396,992 1,011,939
Total Revenues 42,928,334 42,350,268 45,067,892 42,323,693 41,467,412
Expenditures:
Current
General Government 8,331,444 8,499,854 8,647,451 9,144,797 8,390,959
Public Safety 13,370,032 13,742,189 13,747,198 13,763,316 13,251,288
Parks and Public Works 5,616,197 5,611,283 5,840,097 6,307,266 6,633,748
Community Development 4,235,832 4,335,599 4,218,500 3,695,504 3,793,930
Library Services 2,055,069 2,131,438 2,268,844 2,332,268 2,508,677
Sanitation & Other 359,725 322,817 411,863 452,726 466,762
Capital Outlay 6,568,653 4,097,662 3,800,478 3,241,657 6,867,034
Debt Service
Principal Repayment - - - - -
Total Expenditures 40,536,952 38,740,842 38,934,431 38,937,534 41,912,398
Excess (Deficiency) of Revenues
Over (Under) Expenditures 2,391,382 3,609,426 6,133,461 3,386,159 (444,986)
Other Financing Sources(Uses):
Transfers In 2,841,881 3,418,872 8,977,220 3,315,846 7,907,692
Transfers Out (2,463,850) (2,921,409) (7,788,049) (1,284,514) (7,612,012)
Gain from Sale of Property - - - - -
Issuance of Debt - - - - 4,435
Total Other Financing Sources(Uses)378,031 497,463 1,189,171 2,031,332 300,115
Special Item:
Extraordinary Gain (Loss) RDA Dissolution 295,913 - - - -
Prepayment of Pension Obligations - (4,534,538) - - -
Net Change in Fund Balances 2,769,413$ 4,106,889$ 7,322,632$ 5,417,491$ (144,871)$
Debt Service as a Percentage
of Non Capital Expenditures 0.00%0.00%0.00%0.00%0.00%
Continued
Fiscal Year
Page 135
Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2017/18 2018/19 2019/20 2020/21 2021/22
Revenues:
Taxes 26,253,026$ 28,244,329$ 27,811,665$ 28,977,919$ 31,627,593$
Licenses & Permits 5,937,044 5,173,876 4,818,671 5,212,831 6,055,040
Intergovernmental 2,124,903 2,310,655 4,498,153 3,746,587 15,492,982
Charges for Services 5,395,057 5,584,504 5,309,470 6,035,659 6,925,359
Fines and Forfeitures 676,212 510,266 271,117 103,468 319,170
Franchise Fees 2,474,814 2,475,916 2,495,792 2,499,463 2,822,515
Developer Fees - - - - 1,735,571
Investment Income 332,938 1,809,164 2,428,453 227,940 (1,278,983)
Use of Property 32,206 32,960 31,039 40,372 144,901
Other 640,844 579,755 376,922 423,115 349,145
Total Revenues 43,867,044 46,721,425 48,041,282 47,267,354 64,193,293
Expenditures:
Current
General Government 8,770,082 8,004,254 13,024,146 14,040,134 15,953,968
Public Safety 14,423,554 14,945,407 15,793,815 16,570,836 16,451,190
Parks and Public Works 7,125,686 7,962,135 8,168,599 8,229,944 8,639,128
Community Development 4,192,165 4,577,495 4,473,790 5,195,302 6,313,511
Library Services 2,529,017 2,493,617 2,700,802 2,847,988 2,827,210
Sanitation & Other 521,147 628,240 162,837 166,173 194,969
Capital Outlay 9,778,058 7,888,914 7,861,972 5,707,439 10,478,670
Debt Service
Principal Repayment - - - 39,008 156,034
Total Expenditures 47,339,709 46,500,062 52,185,961 52,796,824 61,014,680
Excess (Deficiency) of Revenues
Over (Under) Expenditures (3,472,665) 221,363 (4,144,679) (5,529,470) 3,178,613
Other Financing Sources(Uses):
Transfers In 3,176,760 4,264,131 8,935,260 4,053,535 8,154,307
Transfers Out (3,880,131) (3,323,756) (8,628,719) (3,940,015) (8,310,685)
Gain from Sale of Property 378,219 1,912,316 1,566 1,201,369 2,151
Issuance of Debt - - - 1,560,336 -
Total Other Financing Sources(Uses)(325,152) 2,852,691 308,107 2,875,225 (154,227)
Special Item:
Extraordinary Gain (Loss) RDA Dissolution - - - - -
Prepayment of Pension Obligations - - - - -
Net Change in Fund Balances (3,797,817)$ 3,074,054$ (3,836,572)$ (2,654,245)$ 3,024,386$
Debt Service as a Percentage
of Non Capital Expenditures 0.00%0.00%0.00%0.08%0.31%
Concluded
Fiscal Year
Page 136
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
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
2020 331,517,212 -7.73%13,510,676,336 5.59% 13,842,193,548 54,042,705,344 1.0598
2021 308,749,655 -6.87%14,599,669,332 8.06% 14,908,418,987 58,398,677,328 1.0494
2022 304,460,199 -1.39%15,255,884,284 4.49% 15,560,344,483 61,023,537,136 1.0627
Source: Santa Clara County Assessed Value Report
0
2000
4000
6000
8000
10000
12000
14000
16000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Millions
Unsecured Property Secured Property
Page 137
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
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
2020 1.0000 0.0557 0.0041 0.0935 1.1533
2021 1.0000 0.0457 0.0037 0.0959 1.1453
2022 1.0000 0.0576 0.0051 0.0902 1.1529
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 LoansBasic County Wide Levy
Page 138
Page 139
Page 140
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
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
2020 13,559,587 - 13,559,587 13,842,193,548 1,715,982,555 15,651,922,606
2021 13,864,271 - 13,864,271 14,908,418,987 1,809,729,058 16,718,148,045
2022 14,566,808 - 14,566,808 15,560,344,483 1,891,297,788 17,451,642,271
Sources: Santa Clara County Auditor-Controller Office and the Town of Los Gatos
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
$18.0
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
$18.0
MillionsTax Levied
Page 141
Town of Los Gatos Schedule 9
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
Total Total Percentage of
Fiscal PG&E Governmental Primary Personal Per
Year Loan Activities Government Income Capita
2013 - - - 0.0%0.00
2014 - - - 0.0%0.00
2015 - - - 0.0%0.00
2016 - - - 0.0%0.00
2017 - - - 0.0%0.00
2018 - - - 0.0%0.00
2019 - - - 0.0%0.00
2020 - - - 0.0%0.00
2021 1,508,325$ 1,508,325$ 1,508,325$ 56.2% 48.91
2022 1,352,291$ 1,352,291$ 1,352,291$ 44.3% 40.90
Governmental Activities
Debt was transferred to the Successor Agency Trust Fund as a part of the RDA dissolution in FY
2011
Page 142
Town of Los Gatos Schedule 10
Direct and Overlapping Governmental Activities Debt
As of June 30, 2022
2021/22 Assessed Valuation:$15,560,344,483 Estimated Share
of Direct and
Total Debt at Overlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT:% Applicable (1)June 30, 2022 at June 30, 2022
Overlapping Tax & Assesment Debt
Santa Clara County 2.700%1,130,850,000$ 30,532,950$
West Valley-Mission Community College District 9.435%732,500,000$ 69,111,375$
Campbell Union High School District 7.738%371,390,000$ 28,738,158$
Los Gatos-Saratoga Joint Union High School District 36.310%84,030,000$ 30,511,293$
Cambrian School District 0.441%60,969,944$ 268,877$
Campbell Union High School District 7.587%223,499,324$ 16,956,894$
Los Gatos Union School District 74.114%67,035,000$ 49,682,320$
Saratoga Union School District 0.033%17,243,915$ 5,690$
Union School District 20.254%105,359,439$ 21,339,501$
Midpeninsula Regional Open Space District 4.402%84,575,000$ 3,722,992$
Santa Clara Valley Water District Benefit Assessment District 2.700%48,150,000$ 1,300,050$
Total Overlapping Tax and Assesmet Debt 252,170,100$
Overlapping General Fund Debt
Santa Clara County General Fund Obligations 2.700%1,210,694,365$ 32,688,748$
Santa Clara County Pension Obligations 2.700%335,638,470$ 9,062,239$
Santa Clara County Board of Education Certificates of Participation 2.700%1,820,000$ 49,140$
West Valley-Mission Community College District General Fund Obligations 9.435%12,000,000$ 1,132,200$
Campbell Union High School District General Fund Obligations 7.738%15,500,000$ 1,199,390$
Los Gatos-Saratoga Joint Union High School District Certificates of Participation 36.310%755,000$ 274,141$
Campbell Union School District General Fund Obligations 7.587%1,890,000$ 143,394$
Saratoga Union School District Certificates of Participation 0.033%2,335,000$ 771$
Santa Clara County Vector Control District Certificates of Participation 2.700%1,505,000$ 40,635$
Midpeninsula Regional Open Space Park District General Fund Obligations 4.402%99,705,600$ 4,389,041$
Total Gross Overlapping General Fund Debt 48,979,699$
Less: Santa Clara County Supported Obligations 488,127$
Total Overlapping General Fund Debt 48,491,572$
Overlapping Tax Increment Debt ( Successor Agency)
Town of Los Gatos Certificated of Participations 12,785,000$
Total of Overlapping Tax Increment Debt 12,785,000$
Total Direct Debt $0
Total Gross Overlapping Dept 313,934,799$
Total Net Overlapping Debt 313,446,672$
Gross Combined Total Debt 313,934,799$ (2)
Net Combined Total Debt 313,446,672$
Ratios to 2021/22 Assessed Valuation:
Total Overlapping Tax and Assessment Debt: 1.62%
Total Direct Debt: 0.00%
Gross Combined Total Debt: 2.02%
Net Combined Total Debt: 2.01%
Ratios to Redevelpment Incremental Valuation ( $1,639,262,076):
Total Overlapping Tax Increment Debt: 0.78%
Source Data: California Municipal Statistics, Inc.
(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable
percentages were estimated by determining the portion of the overlapping district's assessed value that is within the
boundaries of the city divided by the distric's total taxable asessed value.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non-bonded capital lease
obligations.
Page 143
Page 144
Page 145
Town of Los Gatos Schedule 12
Demographic and Economic Statistics
Last Ten Fiscal Years
Personal
Income Per Capita Public County
Fiscal (thousands Personal Median School Unemployment
Year Population of dollars)Income Age Enrollment Rate
Ended (1)(2)(3)(4)(5)(6)
2012 29,808 1,854,892$ 62,228 42.64 6,352 8.7%
2013 30,247 2,140,641$ 70,772 45.8 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%
2020 31,439 2,546,748$ 81,006 46.83 6,520 10.7%
2021 30,836 2,686,155$ 87,111 46.83 6,180 5.2%
2022 33,062 3,055,987$ 92,432 46.67 6,000 2.2%
Source:
(1) California State Dept. of Finance - Population Research Unit (January 2019)
(2) California State Dept. of Finance - Estimate equals county per capita average times population
(3) US Census Bureau - QuickFacts
(4) Claritas demographic snapshot report
(5) Los Gatos Saratoga Joint Union and Los Gatos Union Elementary School Districts
(6) State of California, Employment Development Dept., Labor Market Info. Div.
Page 146
Page 147
Page 148
Town of Los Gatos Schedule 14
Full-time-Equivalent Employees by Function/Program
Last Ten Fiscal Years
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Function/Program
General Government 20.40 20.73 20.97 20.97 21.35 21.97 22.16 21.80 21.80 22.06
Police 58.00 57.50 60.00 59.00 59.00 59.00 59.00 60.00 60.00 60.00
Economic Development - 0.50 0.63 0.63 0.63 0.75 0.75 0.75 0.75 0.75
Library 8.60 10.30 10.80 11.00 12.25 12.25 12.50 12.50 12.50 12.50
Planning 17.50 17.50 19.50 19.00 19.26 19.63 20.08 20.08 20.20 20.20
Public Works 31.00 31.50 32.00 33.50 33.50 34.50 34.50 34.50 34.75 34.75
Total 135.50 138.03 143.90 144.10 145.98 148.10 148.99 149.63 150.00 150.26
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-45 of Town Budget FY 2021/22
Full-time-Equivalent Employees as of June 30
Page 149
Page 150
Page 151
Town of Los Gatos Schedule 16
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Function/Program
Police
Number of Stations 2 2 2 2 2 2 2 2 2 2
Number of Patrol Units 14 14 14 14 14 14 14 14 14 14
Parking Enforcement Vehicles 2 2 2 2 2 2 2 2 2 2
Other Public Works
Streets (miles)132 132 132 132 132 132 132 132 132 132
Streetlights 2,116 2,109 1,609 1,609 1,609 1,762 1,830 1,830 1,830 1,830
Traffic Signals 29 29 29 30 30 30 31 31 31 31
Parks and Recreation
Number of Parks 12 12 12 12 12 12 N/A N/A N/A N/A
Number of Community Centers 1 1 1 1 1 1 1 1 1 1
Number of Parks & Open Spaces N/A N/A N/A N/A N/A N/A 17 17 17 17
Parking
Number of Parking Garages 1 1 1 1 1 1 1 1 1 1
Number of Parking Lots 22 22 22 22 22 22 22 22 22 22
Number of Off Street Parking Garage Spaces 1,126 1,126 1,126 1,126 1,126 1,126 N/A N/A N/A N/A
Number of Downtown Off-Street Parking Spaces N/A N/A N/A N/A N/A N/A 1,269 1,269 1,269 1,269
Source: Town of Los Gatos, Finance Department
Fiscal Year
Page 152
Other Independent Auditor’s Reports
Page 153 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
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 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 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 Town of Los
Gatos (the “Town”) as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements, and have issued our
report thereon dated December 6, 2022. Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town’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’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’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 over financial reporting was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial
reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town’s financial statements are free of
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
Page 154 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
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.
Morgan Hill, California December 6, 2022
1 of 5
Resolution 2022-x Council Meeting Date
ATTACHMENT 2
DRAFT RESOLUTION 2022-
RESOLUTION OF THE TOWN COUNCIL
OF THE TOWN OF LOS GATOS APPROVING COMMITMENTS OF FUND BALANCE UNDER GASB 54
WHEREAS, the Governmental Accounting Standards Board (GASB) has issued its
Statement No. 54, Fund Balance and Governmental Fund Type Definitions with the intent of
improving financial reporting by providing fund balance categories that will be more easily
understood and to improve the comparability of governmental fund financial statements; and
WHEREAS, GASB 54 provides that the Town Council of the Town of Los Gatos classify
governmental fund balances as restricted, assigned, or committed fund balances; and
WHEREAS GASB 54 provides that restricted reserves are funds that are restricted for
externally imposed constraints such as legal contracts or state law, assigned amounts are
constrained by the Town’s intent to use them for specific purposes, and committed amounts are
dedicated for specific purposes under constraints and formal action taken by the Town Council and
these committed amounts cannot be used for any other purposes unless the Town Council of the
Town of Los Gatos removes or changes the specific use through the same formal action to establish
the commitment; and
WHEREAS, there exists a Nonspendable Reserve that is not readily available for
expenditure as it represents the outstanding balance of long term notes receivable; and
WHEREAS, there exists a balance of $159,000 as of June 30, 2022 in the Nonspendable
Reserve; and
WHEREAS, there exists a balance of $690,000 as of June 30, 2022 in the Restricted
Pension Trust Reserve; and
WHEREAS, the Town Council of the Town of Los Gatos has established a General Fund
Reserve Policy providing for minimum fund balance dollar target amounts for Budget Stabilization
and Catastrophic fund balances and outlines policies and procedures for use and restoration of
these balances; and
WHEREAS, the Budget Stabilization and Catastrophic Reserve should be maintained at
the required minimum 12.5% of Fiscal Year (FY) 2022/23 general fund budgeted operating
expenditures of $5,991,566 as specified in the Town Council General Fund Reserve Policy. This
2 of 5
Resolution 2022-x Council Meeting Date
ATTACHMENT 2
would increase both Budget Stabilization and Catastrophic Reserves from $5,460,566 by $531,081
from available Capital/Special Projects Reserve; and
WHEREAS, in June 2016, the Town Council established the committed Pension/ Other
Post-Employment Benefits (OPEB) Reserve to provide additional funding toward pension and OPEB
unfunded obligations by placing discretionary amounts to the reserve with formal Council action
and transferring available year-end surpluses based on the General Fund Reserve Policy; and
WHEREAS, per Town Council General Fund Reserve Policy, $300,000 will be placed to
the CalPERS/OPEB Reserve from available year-end savings; and
WHEREAS, there exists a balance of $300,000 as of June 30, 2022 in the committed
CalPERS/OPEB Reserve; and
WHEREAS, the Town Council established the assigned Open Space reserve in the FY
1998/99 to be used for the preservation of open space, connection of open space trails, the
definition of the southern boundary of the Town with passive open space, and protection of unique
natural features; and
WHEREAS, there exists an excess balance of $410,000 as of June 30, 2022 in the
assigned Open Space Reserve; and
WHEREAS, the Town Council established the assigned Sustainability Reserve in FY
2008/09 by closing the Solid Waste Management fund and placing the initial residual balance
dedicated for conservation, recycling, and sustainability; and
WHEREAS, there exists an excess balance of $140,553 as of June 30, 2022 in the
assigned Sustainability Reserve; and
WHEREAS, there exists an assigned General Fund Compensated Absences Reserve
allocated to fund 50% of all vested hours of sick leave, compensation, and vacation time with the
actual reserve amount of $1,519,147; and
WHEREAS, there exists an assigned Market Fluctuation Reserve that represent fund
balance amounts for unrealized investment gains that have been recorded as investment income
in the financial statements in accordance with the requirements of GASB 31; and
WHEREAS, there is a current balance of $0 as of June 30, 2022 in the assigned Market
Fluctuation Reserve reflecting negative investment earnings as of June 30, 2022; and
3 of 5
Resolution 2022-x Council Meeting Date
ATTACHMENT 2
WHEREAS, there exists an assigned Measure G 2018 District Sales Tax Reserve to track
receipt and use of the 1/8 cent district tax funds collected by the Town; and
WHEREAS, the Town Council has determined the use of Measure G accumulated and
future proceeds to be allocated 50% for operating expenditures and 50% for capital purposes; and
WHEREAS, 50% of the current Measure G proceeds dedicated for Capital Purposes was
receipted in the General Fund Appropriated Reserve for capital purposes; and
WHEREAS, there is anticipated to be an excess balance of $590,581 as of June 30, 2022
in the assigned Measure G District Sales Tax Reserve -Operating Reserve that the Council previously
dedicated to balance the FY 2022/23 Budget; and
WHEREAS, there exists an assigned Carryover Encumbrances Reserve for material and
services on purchase orders and contract which are unperformed in the amount of $33,145; and
WHEREAS, there exists an assigned Capital/Special Projects Reserve to fund Council
priorities, and key infrastructure and capital/special projects as identified in the Town’s five-year
Capital Improvement Plan; and
WHEREAS, the remainder of the available year-end savings will be placed to the
Capital/Special Project Reserve according to the Town Council Reserve Policy; and
WHEREAS, there exists an assigned Capital/Special Project Reserve in the amount of
$11,071,231; and
NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES
HEREBY RESOLVE that the following fund balances as of June 30, 2022 as restricted, assigned, or
formally committed as follows:
4 of 5
Resolution 2022-x Council Meeting Date
ATTACHMENT 2
PASSED AND ADOPTED at a regular meeting of the Town Council held on the 20th day
of December 2022 by the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
Other
Nonmajor Total
Appropriated Governmental Governmental
General Fund Reserves Funds Funds
Fund Balance
Nonspendable 159,000$ -$ -$ 159,000$
Restricted for:
Library - - 555,253 555,253
Capital Projects - - 8,357,393 8,357,393
Repairs and Maintenance - - 174,239 174,239
Pension 690,000 690,000
VTA - 296,598 - 296,598
Committed to:
Budget Stabilization 5,991,566 - - 5,991,566
Catastrophic 5,991,566 - - 5,991,566
CalPERS/OPEB 300,000 - - 300,000
Special Revenue Fund 637,711 637,711
Assigned to:
Open Space 410,000 152,000 - 562,000
Parking - 100,000 - 100,000
Sustainability 140,553 - - 140,553
Capital/Special Projects 11,071,231 13,642,155 - 24,713,386
Comcast PEG - 50,000 - 50,000
Carryover Encumbrances 33,145 - - 33,145
Compensated Absences 1,519,147 - - 1,519,147
Measure G 2018 District Sales Tax 590,581 - - 590,581
Total Fund Balances 26,896,789$ 14,240,753$ 9,724,596$ 50,862,138$
5 of 5
Resolution 2022-x Council Meeting Date
ATTACHMENT 2
CLERK ADMINISTRATOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
This Page Intentionally Left Blank
Town of Los
Gatos
JUNE 30, 2022 AUDIT
RESULTS
ATTACHMENT 3
Standards and
Responsibilities
A.GAAS
B.GAGAS
C.Objective
a)Express an Opinion on F.S.
D.Responsibilities
a)Reasonable Assurance
b)Risk Based
c)Materiality
d)Internal Controls
Annual Comprehensive Financial Report (ACFR)
IntroductorySection 1
•Letter of Transmittal
•Elected Officials
•Organizational Chart
FinancialSection 2
•Auditor’s Opinion
•MD&A
•Financial Statements and Notes
•Required Supplementary Information
•Supplementary Information
StatisticaSection 3
•Fiscal
•Historical
•Demographic Information
Statement of Net Position
$(50,000,000)
$-
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
Statement of Net Position
2022 2021
Government Wide Revenues
$(5,000,000)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
Charges for
Services
Operating
Grants and
Contributions
Capital Grants
and
Contributions
Property
Taxes
Sales Taxes Franchise
Taxes
Other Taxes Motor Vehicle
in Lieu
Investment
Earnings
Miscellaneous
Government Wide Revenue
2022 2021
Pensions
Misc Safety Total
Deferred outflows of resources 3,663,900$ 6,934,592$ 10,598,492$
Deferred inflows of resources 10,235,294$ 11,897,661$ 22,132,955$
Net pension liabilities 10,723,589$ 16,762,598$ 27,486,187$
Pension expense (credit)(2,782,619)$ (385,739)$ (3,168,358)$
Defined Benefit Plans
Leases Receivable GASB 87
Lease Deferred Inflows Prior Period
Description Receivable of Resources Adjustment
Initial Net Present Value 2,692,765$ 2,692,765$ -$
Accumulated Amortization - (1,333,252) 1,333,252
Other adjustments - 1,717 (1,717)
Principal Payments (644,136) - (644,136)
Beginning Balances 7/1/2021 2,048,629 1,361,230 687,399
Current Amortization - (204,818) -
Valuation Expense (133,807) - -
Current Principal Payments (88,405) - -
Ending Balances 6/30/2022 1,826,417$ 1,156,412$ 687,399$
Governmental Funds 331,696$ 327,100$ -$
Internal Service Funds 1,494,721 829,312 687,399
Total 1,826,417$ 1,156,412$ 687,399$
Audit Results
No Exceptions in Audit Opinions
No Material Weaknesses
No Disagreements with Management
No Significant Passed on Adjustments