Attachment 7A - 9
Trust Funds
Trust funds are used to account for assets held by the Town as a trustee agent for individuals,
private organizations, and other governments. The Town’s Trust Funds are comprised of four
trusts established to provide for the servicing of donations and bequests to the Town’s Library
program. The FY 2019/20 budgeted expenditures in this trust fund total $133,255.
Successor Agency to the Los Gatos RDA Funds
The Successor Agency to the Los Gatos Redevelopment Agency (RDA) is a private purpose trust
fund that accounts for the assets, liabilities, and operations transferred from the dissolution of
the Town’s RDA. These funds include Certificates of Participation issued to finance several capital
improvement projects throughout the Town and repayment of obligations incurred by the
Town’s RDA prior to its dissolution. The FY 2019/20 budgeted expenditures in this trust fund
total $3.8 million.
GENERAL FUND RESERVES
The total General Fund Reserves are forecasted at a balance of approximately $22.9 million as of
June 30, 2020. Additional information on the estimated FY 2018/19 and FY 2019/20 year-end
General Fund balances can be found in the Financial Summaries section. As indicated in the next
chart, the General Fund reserves are decreasing from the prior year due primarily to programmed
payments to the Town’s California Public Employees Retirement System (CalPERS) side-fund
payoff in June 2014 of $4.5 million dollars, transfers to the CIP program in FY 2016/17 ($7.0
million), FY 2017/18 ($2.4 million), FY 2018/19 ($2.4 million), FY 2019/20 ($5.7 million), and the
total of $4.4 million scheduled payments to the IRS 115 Pension Trust Fund in FY 2017/18 and FY
2018/19.
A - 10
Catastrophic and Budget Stabilization Reserves
As per the Town’s Reserve Policy and reaffirmed by Council, the Catastrophic and Budget
Stabilization Reserves are to be maintained at combined minimum funding level of 25% of
General Fund ongoing operating expenditures. The funding requirement is equally divided
between the Catastrophic Reserve (12.5%) and the Budget Stabilization Reserve (12.5%). Fund
balance in these reserves is used to fund future fluctuations in the economy, mitigating the
cyclical changes in locally generated revenues from temporary downturns in the local economy.
Staff recommends transferring $755,788 from available prior year-end saving to meet the
required 25% funding level, or $10.8 million total for FY 2019/20.
Pension/OPEB Reserve
Committed fund balance in this reserve will be used to aid in funding pension and Other Post-
Employment Benefits (OPEB) unfunded obligations. This reserve is primarily used to house
additional discretionary payments budgeted for future allocation. Additional discretionary
payments will either be allocated directly to CalPERS, the Town’s Pension IRS 115 Trust Fund, or
the OPEB IRS 115 Trust Fund. With Council direction, upon the close of the fiscal year, the
CalPERS/OPEB Reserve receives $300,000 of the available year-end savings. In FY 2018/19 the
Council approved development of an additional reserve policy to reduce the amortization period
for prior amortization bases from 30 years to 20 years. Initial annual programming of $390,000
was established subject to final adjustment based upon updated CalPERS actuarial valuations.
The Council Finance Committee makes recommendations for the use of these funds for future
Town Council/Oversight Committee consideration.
Capital / Special Projects
With Council direction, upon the close of the fiscal year, the Capital/Special Projects Reserve
receives the Town's annual revenues above operating expenditures after funding all legally
restricted reserves at their required levels. Fund balance is assigned for the acquisition and
construction of capital facilities. It is anticipated the reserve will have approximately $2.5 million
as of June 30, 2020.
Compensated Absences Reserve
A reserve is maintained annually to fund 50% of all vested hours of vacation earnings. It is
anticipated the reserve will have approximately $1.1 million as of June 30, 2020.
6/30/2013
Actual
6/30/2014
Actual
6/30/2015
Actual
6/30/2016
Actual
6/30/2017
Actual
6/30/2018
Actual
6/30/2019
Estimated
6/30/2020
Proposed
Commited to:
Budget Stabilization Reserve 5,450,000$ 5,450,000$ 5,450,000$ 6,621,808$ 4,969,847$ 5,037,243$ 5,037,243$ 5,415,137$
Catastrophic Reserves 5,450,000 5,450,000 5,450,000 4,637,406 4,969,847 5,037,243 5,037,243 5,415,137$
Pension/OPEB Reserve - - - 300,000 3,388,913 2,878,913 690,000 2,027,500
Almond Grove Reserve - - - 8,459,973 1,801,318 - - -
Assigned to:
Open Space Reserve 562,000 562,000 562,000 562,000 562,000 562,000 562,000 410,000
Sustainability 140,553 140,553 140,553 140,553 140,553 140,553 140,553 140,553
Strategy Reserve 2,600,000 2,600,000 129,090 129,090 -
Capital / Special Projects 12,427,161 10,218,579 9,511,527 4,222,405 8,332,953 14,421,203 10,035,983 2,514,285
Authorized Carryforward 56,741 56,741 56,741 99,284 34,852 99,927 99,927 99,927
Compensated Absences 350,329 193,647 2,122,512 1,061,256
Veh. Maint. & Stores Residual 1,005,069 1,005,069
Surplus Property 1,905,000 1,905,000
Other 2,004,101 1,001,265 1,032,563 2,807,085 2,950,527
Total General Fund Reserve 26,090,556$ 22,879,138$ 22,203,384$ 27,643,429$ 27,150,612$ 28,499,819$ 29,571,705$ 22,944,391$
General Fund Reserve
PAGE 9 OF 11 SUBJECT: OPERATING AND CAPITAL BUDGETS DATE: MAY 16, 2019
S:\COUNCIL REPORTS\2019\05-21-19\Budget\Staff Report Budget Final 5-21-2019.docx 5/21/2019 11:40 AM SLL
DISCUSSION (continued):
and staff recommends high priority projects that are consistent with the Strategic Priorities and
Core Goals.
General Fund Reserve Policy
On Page A-31 of Attachment 1, staff is recommending changes to the General Fund Reserve
Policy to more accurately reflect allocation options for additional discretionary payments
(ADPs) of unfunded pension/OPEB obligations. The proposed modifications are:
The ADP is currently projected at $390,000 for FY 2018/19 (subject to annual updates
provided by CalPERS actuaries). Per Council direction instead of paying future ADPs will
either be allocated directly to CalPERS, the Town’s Pension IRS 115 Trust Fund, or the
OPEB will deposit ADPs into the IRS 115 Trust Fund.
COMMENTS AND QUESTIONS FROM COUNCIL MEMBERS:
Some of the questions raised by Council members are addressed in the body of this report.
Below are responses to additional Council inquiries.
Please explain the General Fund Reserve Status.
The total General Fund Reserves are forecasted at a balance of approximately $22.9 million as
of June 30, 2020. Additional information on the estimated FY 2018/19 and FY 2019/20 year-
end General Fund balances can be found in the Financial Summaries section of Attachment 1.
As indicated in the Operating Budget Transmittal Letter in page A-9, the General Fund reserves
are decreasing from the prior year due primarily to programmed payments to the Town’s
California Public Employees Retirement System (CalPERS) side-fund payoff in June 2014 of $4.5
million dollars, transfers to the CIP program in FY 2016/17 ($7.0 million), FY 2017/18 ($2.4
million), FY 2018/19 ($2.4 million), FY 2019/20 ($5.7 million), and the total of $4.4 million
scheduled payments to the IRS 115 Pension Trust Fund in FY 2017/18 and FY 2018/19.
Specifically, regarding the CIP activity, General Fund reserves decrease by the annual amount of
Council approved appropriated transfers-out to the Town’s General Fund Appropriated Reserve
(GFAR) Capital Projects fund. The GFAR Capital Projects fund is a separate fund that accounts
for the funds until project work is completed, and the funds are expended. This means that
General Fund reserve will decrease for the annual transfers for the capital program regardless
of when funds are eventually expended in the Town’s separate GFAR Capital Projects fund. The
level of actual project expenditures or carry over balances in the Town’s GFAR fund will not
affect the Town’s General Fund reserves. Because of the high level of capital activity and
related transfers in recent years from the General Fund Capital/Special Projects Reserve, the