09 Attachment 1 - CAFR for the Fiscal Year Ended June 30 2020CALIFORNIA
T ĔĜē Ĕċ L ĔĘ G ĆęĔĘ
Comprehensive Annual Financial Report
For the Fiscal Year Ended June 30, 2020 Draft 12/10/2020ATTACHMENT 1
Cover Photos: Ken Benjamin and Liv Ames Draft 12/10/2020
TOWN OF LOS GATOS
CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2020
PREPARED BY THE
OFFICE OF THE TOWN MANAGER Draft 12/10/2020
Draft 12/10/2020
TOWN HISTORY
The name Los Gatos comes from “El Rancho de Los Gatos.” A ranch established in 1839 by a
Mexican land grant and so named because of the large number of mountain lions in the area. In
1854, James Alexander Forbes purchased some of this land and built a flour mill. In 1860, the
first hotel was opened to provide a stage stop on the toll road which had been built between San
Jose and Santa Cruz.
Wheat production gave way to orchards, and rapid growth ensued when the railroad reached
Los Gatos in 1878. The residential subdivisions of Broadway, Bayview, Fairview, and Almond
Grove were built in the 1880’s. By 1887, the population had grown to 1,500 and Los Gatans voted
to incorporate.
Fruit industries faded slowly during the Depression and World War II, but the postwar period
brought an influx of people and associated residential and commercial development. Highway
17 was constructed through the center of Town. Growth levelled off in the early 1970’s, leaving
Los Gatos with its small‐town atmosphere and pedestrian‐oriented downtown.
Because of its distance from other centers of population, Los Gatos developed as a complete
community including residential, business and industrial elements. Preserving Los Gatos as a
complete and well balanced community has been and remains a prominent goal of the
community. From the first 100‐acre Town site in 1890 with a population of 1,652, Los Gatos grew
slowly so that by 1963 the area was 6.3 square miles, with a population of 11,750. Today Los
Gatos covers between 14 and 15 square miles and has a population of 31,493. This growth over
the last 80 years resulted in a community with vibrant business districts, well maintained
neighborhoods, and lovely parks and open spaces.
As it exists now, the Town’s boundaries encompass a wide variety of terrain, ranging from level
land to steep and densely wooded hillsides. The sharp visual contrasts among these features and
charming architecture create a picturesque setting of the Town. In the midst of the growth of
Silicon Valley, Los Gatos attracts people with a preference for the Town’s distinctive, high quality
natural and urban environment.
Draft 12/10/2020
Draft 12/10/2020
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
TABLE OF CONTENTS
INTRODUCTORY SECTION:
Letter of Transmittal ........................................................................................................................... 1
Organizational Chart ........................................................................................................................... 7
Principal Officers ................................................................................................................................. 8
GFOA Award ....................................................................................................................................... 9
FINANCIAL SECTION:
Independent Auditor’s Report .......................................................................................................... 13
Management’s Discussion and Analysis ............................................................................................ 18
Basic Financial Statements:
Government‐Wide Financial Statements:
Statement of Net Position ....................................................................................................... 42
Statement of Activities ............................................................................................................. 43
Fund Financial Statements:
Governmental Funds:
Balance Sheet ....................................................................................................................... 46
Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position ................................................................................................ 47
Statement of Revenues, Expenditures and Changes in Fund Balances ................................ 48
Reconciliation of Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities ......................................... 49
Statement of Revenue, Expenditures and Changes in Fund Balances –
Budget and Actual (GAAP) General Fund ......................................................................... 50
Proprietary Funds – Internal Service Funds:
Statement of Net Position .................................................................................................... 52
Statement of Revenue, Expenses and Changes in Net Position ........................................... 53
Statement of Cash Flows ...................................................................................................... 54
Fiduciary Funds:
Statement of Fiduciary Net Position .................................................................................... 56
Statement of Changes in Fiduciary Net Position .................................................................. 57
Notes to the Basic Financial Statements ......................................................................................... 60
Required Supplementary Information:
Schedule of Proportionate Share of Net Pension Liability:
CalPERS Misc. Agent‐Multiple Employer Plan ............................................................................. 100
CalPERS Safety Cost‐Sharing Plan ................................................................................................ 101
Schedule of Pension Plans Contributions
Miscellaneous Agent Multiple‐Employer Plan ............................................................................ 101
Safety Cost‐Sharing Plan .............................................................................................................. 101
Actuarial Methods and Assumptions used for Pension Actuarially
Determined Contributions ........................................................................................................... 102
Schedule of Changes in Net OPEB Liability and Related Ratios ...................................................... 103
Schedule of Employer Contributions .............................................................................................. 103
Actuarial Methods and Assumptions used for 2019/20 OPEB Actuarially
Determined Contribution ............................................................................................................ 104 Draft 12/10/2020
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
TABLE OF CONTENTS
SUPPLEMENTARY INFORMATION:
Major Governmental Fund Schedules (other than the General Fund):
Schedule of Revenue, Expenditures and Changes in Fund Balance –
Budget and Actual (GAAP) Appropriated Reserves Fund ............................................................ 107
Nonmajor Governmental Funds:
Combining Balance Sheets .............................................................................................................. 108
Combining Schedule of Revenues, Expenditures and Changes in
Fund Balances .............................................................................................................................. 110
Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual (GAAP) .............................................................. 112
Internal Service Funds:
Combining Statement of Net Position ............................................................................................ 116
Combining Statement of Revenue, Expenses and Changes in Net Position ................................... 117
Combining Statement of Cash Flows .............................................................................................. 118
Private Purpose Trust Funds:
Combining Statement of Fiduciary Net Position ............................................................................. 120
Combining Statement of Changes in Fiduciary Net Position........................................................... 121
STATISTICAL SECTION:
Net Position by Component ............................................................................................................ 127
Changes in Net Position .................................................................................................................. 128
Fund Balances, Governmental Funds .............................................................................................. 130
Changes in Fund Balances, Governmental Funds ........................................................................... 132
Assessed Value and Estimated Actual Value of Taxable Property .................................................. 134
Direct and Overlapping Property Tax Rates .................................................................................... 135
Principal Property Tax Payers ......................................................................................................... 136
Property Tax Levies and Collections ................................................................................................ 138
Ratios of Outstanding Debt by Type ............................................................................................... 139
Direct and Overlapping Governmental Activities Debt ................................................................... 140
Legal Debt Margin ........................................................................................................................... 142
Demographic and Economic Statistics ............................................................................................ 144
Principal Employers ......................................................................................................................... 146
Full‐time Equivalent Town Government Employees by Function/Program ................................... 150
Operating Indicators by Function/Program .................................................................................... 152
Capital Assets Statistics by Function/Program ................................................................................ 154
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 ................................................................................................. 159 Draft 12/10/2020
INTRODUCTORY SECTION Draft 12/10/2020
This page intentionally left blank Draft 12/10/2020
TOWN OF LOS GATOS
OFFICE OF THE TOWN MANAGER
(408) 354-6832
FAX: (408) 399-5786
December XX, 2020
Honorable Mayor and Town Council,
I am pleased to submit the Town’s Comprehensive Annual Financial Report (CAFR) for
the fiscal year ending June 30, 2020. This report was prepared by the Finance
Department in conjunction with the Town Manager’s Office, which assumes
responsibility for the accuracy of the data and the completeness and fairness of the
presentation and all disclosures. The information in this report is intended to present
the reader with a comprehensive view of the Town’s financial position and the results of
its operations for the fiscal year ending June 30, 2020, along with additional disclosures
and financial information designed to enable the reader to gain an understanding of the
Town’s financial activities.
This report was prepared as prescribed in Governmental Accounting Standards Board
(GASB) Statement No. 34, Basic Financial Statements and Management’s Discussion and
Analysis for State and Local Governments (GASB 34). This GASB Statement requires
management to provide a narrative introduction, overview, and analysis to accompany
the basic financial statements in the form of a Management’s Discussion and Analysis
(MD&A). This letter of transmittal is designed to complement the MD&A and should be
read in conjunction with it. The MD&A can be found immediately following the
Independent Auditor’s Report.
This Comprehensive Annual Financial Report is organized into three sections:
I. The Introductory Section includes the table of contents, letter of transmittal,
listing of elected officials, Town administrative personnel, and an organization
chart delineating organizational structure.
II. The Financial Section includes the independent auditors’ opinion, the MD&A, the
basic financial statements, notes to the financial statements, combining
statements of non‐major funds, and required supplemental information.
III. The Statistical Section includes both financial and non‐financial data about the
Town. Draft 12/10/20201
Mayor and Town Council
December xx, 2020
The Comprehensive Annual Financial Report is prepared in accordance with Generally
Accepted Accounting Principles (GAAP) promulgated by the Governmental Accounting
Standards Board (GASB) and includes the audit report of Badawi & Associates, the
Town’s independent certified public accountants.
This Comprehensive Annual Financial Report will be submitted to the Government
Finance Officers Association for consideration of its Achievement of Excellence Award in
financial reporting certification. This award is granted only to entities whose reports
meet the highest standards of municipal financial reporting.
THE REPORTING ENTITY AND ITS SERVICES
Los Gatos is a general law Town, incorporated under the laws of California in 1887. The
Town is located in the foothills and level terrain of the Santa Clara Valley, in an area
referred to internationally as “Silicon Valley.” From the first 100‐acre Town site and an
1890 population of 1,652, Los Gatos grew slowly so that by 1963 the area was 6.3
square miles, with a population of 11,750. Today Los Gatos covers approximately 15
square miles with a population of 31,439. This growth over the last 80 years resulted in
a community with vibrant business districts, well maintained neighborhoods, and lovely
parks and open spaces. Preserving the unique charm of Los Gatos as a complete and
well‐balanced community while meeting its economic and housing needs has been, and
remains a key goal for the Town.
The Town maintains a Council‐Manager form of government which combines the strong
political leadership of elected officials with the strong managerial experience of an
appointed Town Manager. Five Council members are elected at large for staggered
four‐year terms to govern the Town. The Mayor and Vice‐Mayor are appointed by the
Council from its own ranks and serve for one‐year terms. The Town Manager and Town
Attorney are appointed and supervised directly by the Council. The Town Manager
oversees all municipal services such as Public Safety, Parks and Public Works,
Community Development, Library, and Town Administration including Human
Resources, Information Technology, and Finance.
ECONOMIC CONDITIONS AND OUTLOOK
Like other communities across the nation and Silicon Valley, the Town was confronted
with the societal and economic realities associated with the global COVID‐19 pandemic.
The Town entered the new Fiscal Year (FY) in a relatively strong economic environment;
however, from the initial COVID‐19 cases reported in January 2020, to the ultimate
sequestering of the local economy in March, FY 2019/20 concluded against recessionary
winds. Economically sensitive revenues, such as Sales Tax and Transient Occupancy Tax
(TOT), experienced immediate contractions as the public was only allowed limited
access to businesses, and leisure and business travel temporarily ceased. The Town’s
Property Tax revenues remained relatively strong into the close of the FY as inventories Draft 12/10/20202
Mayor and Town Council
December xx, 2020
of available homes remained low and suburban communities benefited from a flight
from more urban markets.
General Fund revenues (not including transfer‐ins) decreased 2.1% from the prior year.
Property tax revenues remain a significant source of support for General Fund
operations, comprising approximately 43% of General Fund revenues in FY 2019/20. For
FY 2019/20 property tax receipts of $18.3 million were $1.0 million higher than the prior
year’s collection, reflecting the continued desirability of the Town, its environment,
culture, and educational opportunities. While the impacts of remote work and work
from home on property values are yet to be fully understood, it should be noted that
valuation projections by the Santa Clara County Assessor’s Office in the 2020‐2021
Annual Report caution that 2021 could be a significant transition year for real estate
values.
The Town relies heavily on sales tax revenues to support General Fund operations,
comprising approximately 18% of General Fund revenues in FY 2019/20. For FY 2019/20
sales tax receipts of $7.5 million were $0.6 million lower than the prior year’s collection.
Sales tax revenues decreased because of the unprecedented disruption to business
activity due to COVID‐19 mitigation restrictions. One bright spot in sales tax receipts
were steady increases in the Town’s 1/8 cent District Sales Tax as the local tax captured
a larger share of the increase in online sales during shelter‐in‐place.
The Town is preparing for continued increases in pension employer rates. The Town’s
pension plans over the past several decades, like all other CalPERS participants, have
experienced unfavorable investment returns relative to the assumed rate of return,
changes in actuarial assumptions, and demographic shifts which have outweighed any
positive plan experiences. Recognizing these challenges, the Council has adopted or
programmed additional discretionary pension funding strategies in excess of $20.0
million including the first additional discretionary payment (ADP) directly to CalPERS of
$4,753,965 in October 2019. In addition, the Council initiated the prefunding of other
post‐employment benefit (OPEB) obligations beginning from zero funding status in 2009
leading to the current 67.9% funding status from zero in 2019.
While the Town Council has been proactively working to manage the anticipated cost
escalation in its pension and OPEB expense, pension and OPEB related obligations
continue to be one of the Town’s greatest long‐term cost drivers. In the past five years
the Net Pension Obligation has increased 45.9% from $39.2 million as of the June 30,
2014 actuarial valuation to the current Net Pension Obligation of $57.2 million as of
June 30, 2019. Data from the June 30, 2019 actuarial valuations show total Net Pension
($57.2) and In addition, for the same time period the Town’s Net OPEB Obligation has
decreased 34.5% from $13.9 million to $9.1 million. OPEB ($9.1) As of June 30, 2019 the
Town had total pension and OPEB net liabilities of $66.3 million.
Draft 12/10/20203
Mayor and Town Council
December xx, 2020
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 9 and changes to Healthcare Trend and Discount rates as illustrated in
Note 10.
For detailed information about the Town employees’ retirement plan please refer to
Note 9 of the Notes to Basic Financial Statements Section. For detailed information
about the Town OPEB obligations please refer to Note 10 of the Notes to Basic Financial
Statements Section. In addition, the Town provides extensive information on pension
and OPEB information on the Town’s website.
Despite the reductions to various sources of local government revenue such as the
elimination of redevelopment tax increment in 2012 and increasing costs associated
with unfunded federal and state mandates, the Town has managed to maintain high
service levels through increased efficiency and prudent fiscal management as evidenced
by General Fund’s resilience through the unprecedented events of FY 2019/20. The
Town continues its outreach to the community, the League of California Cities, and local
legislators to prevent and limit any future revenue losses and mandated cost increases.
MAJOR CAPITAL PROJECT INITIATIVES
Major capital asset and infrastructure initiatives were once again a priority for the fiscal
year. Approximately $7.8 million in Town infrastructure and other capital asset
improvements were expended in FY 2019/20, including $5.8 million in street
improvement projects Town‐wide to major arterials and neighborhood collector streets
to improve the pavement condition of the Town’s streets. Other investments included
$0.7 million in equipment purchases, $0.4 million in traffic signal improvements, $0.4
million in building improvements, ad $0.3 million in bicycle and pedestrian projects to
enhance user safety.
Additional infrastructure improvements are scheduled in accordance with the Town’s
approved Capital Improvement Plan, and will continue into future years. All of these
improvements are funded either through grants, or via revenues accumulated from
prior year budget savings and/or excess revenues per Town Council policy. Draft 12/10/20204
Mayor and Town Council
December xx, 2020
ACCOUNTING SYSTEM AND BUDGETARY CONTROL
The effectiveness of internal control is a primary consideration in the development and
evaluation of the Town’s accounting system. Internal accounting controls are designed
to provide reasonable but not absolute assurance regarding:
1) safeguarding of assets against loss from unauthorized loss or disposition,
2) accuracy and reliability of accounting data, and
3) adherence to managerial policy.
The concept of reasonable assurance recognizes that the cost of internal control should
not outweigh the benefits, and that management must make estimates and judgments
in evaluating these costs and benefits.
All governmental fund types use the modified accrual basis of accounting. This means
that revenues are recorded when measurable and available rather then when received.
Measurable means the amount can be determined and available means the cash is
received within sixty days after the end of the fiscal year. Expenditures are recorded
when the liability is incurred, rather than when paid. An exception to this rule is
principal and interest on general long‐term debt, which is not recognized by debt service
funds until it is due.
Proprietary (internal service) funds are accounted for using the accrual basis of
accounting, similar to that used by corporations. Proprietary fund revenues are
recognized when they are earned rather than when the cash is received, even if the cash
is not available and proprietary fund expenses are recognized when they are incurred.
With the implementation of GASB 34, the Town prepares its Basic Financial Statements
on the accrual basis.
Internal accounting procedures have been developed to provide reasonable assurance
regarding the safeguarding of assets and the reliability of financial records for preparing
financial statements and maintaining asset accountability.
An annual operating budget, five‐year budget forecast, and five‐year capital
improvement plan is adopted by the Town Council consistent with generally accepted
accounting principles. All budget adjustments and transfers between funds must be
approved by the Town Council during the fiscal year. The Town Manager is authorized
to transfer unencumbered appropriations within a budget category, within a fund.
Appropriations are valid for each fiscal year and lapse at year‐end.
Draft 12/10/20205
Mayor and Town Council
December xx, 2020
AWARDS
The Town’s Comprehensive Annual Financial Report for the fiscal year ended June 30,
2019 was awarded a Certificate of Achievement for Excellence in Financial Reporting by
the national Government Finance Officers Association. This is the 25th consecutive year
that the Town has received the award. This prestigious award recognizes the report’s
conformance with strict accounting and reporting standards established by the
Government Accounting Standards Board and government finance organizations. This
award is annual in nature and valid for one year only. This year’s report will be
submitted for award consideration by this organization, as we believe it continues to
meet these standards.
INDEPENDENT AUDIT
State law requires an annual audit of the Town’s accounts by independent certified
public accountants. The accounting firm of Badawi & Associates performs this function
for the Town of Los Gatos, and their report is included in the financial section of the
CAFR.
ACKNOWLEDGEMENTS
The preparation of this Comprehensive Annual Financial Report, as presented herein, is
the result of the combined efforts and dedicated services of the excellent staff of the
Department of Finance. Special thanks to Gitta Ungvari, Finance and Budget Manager,
Mark Gaeta, Accountant; Melissa Ynegas, Finance Analyst; Diane Howard, Finance
Analyst; and Maurice De Castro, Accountant and Finance Analyst for their efforts in
preparing this report.
Respectfully submitted,
____________________________ ___________________________________
Laurel Prevetti Stephen D. Conway
Town Manager Director of Finance
Draft 12/10/20206
TOWN OF LOS GATOS ORGANIZATIONAL CHART FY 2019/20
COMMUNITY DEVELOPMENT
CDD Administration
Development ReviewCode Compliance
Inspection ServicesAdvanced PlanningBMP Housing Program
POLICE
Police AdministrationRecords/CommunicationsPatrol
InvestigationsTraffic
Support ServicesParking Management
PARKS &PUBLIC WORKS
PPW Administration
Park ServicesEngineering Development
Engineering ProgramStreets & SignalsBuilding Maintenance
Landscape & LightingEnvironmental Services
LIBRARY
Library AdministrationReference ServicesChildren's Program
Reading/Literacy ProgramCollection Maintenance
Circulation & System AdministrationLos Gatos History Program
HUMAN
RESOURCES
Recruitment
Benefits ManagementTrainingEmployee Relations
Organizational Development
FINANCE
General Ledger
Accounts PayableAccounts Receivable
PayrollBusiness License Tax
PurchasingBudget AdministrationFinancial Reporting
Treasury & Investments
CLERK &
ADMINISTRATIVE
PROGRAMS
Records ManagementBoards & CommissionsElection CoordinationClaims & InsuranceCustomer Service CenterLegislative CoordinationPublic InformationCable/Broadcasting ManagementArts & CultureCommunity Grants
INFORMATION
TECHNOLOGY
Technology Support
IT Systems ManagementTechnology Planning & Implementation
Website Management
TOWN MANAGER
ASSISTANT TOWN MANAGER
ELECTED
TOWN COUNCIL
BOARDS &COMMISSIONSTOWN ATTORNEY
RESIDENTS of LOS GATOS
Draft 12/10/20207
TOWN OF LOS GATOS
PRINCIPAL OFFICERS
JUNE 30, 2020
TOWN COUNCIL
Mayor Marcia Jensen
Vice Mayor Barbara Spector
Council Member Rob Rennie
Council Member Marico Sayoc
COUNCIL APPOINTEES
Town Manager Laurel Prevetti
Town Attorney Robert Schultz
APPOINTED OFFICIALS
Assistant Town Manager Arn Andrews
Chief of Police Peter Decena
Community Development Director Joel Paulson
Parks and Public Works Director Matt Morley
Library Director Ryan Baker
Finance Director Stephen Conway
Human Resources Director Lisa Velasco
Draft 12/10/20208
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
Town of Los Gatos
California
For its Comprehensive Annual
Financial Report
For the Fiscal Year Ended
June 30, 2019
Executive Director/CEODraft 12/10/20209
This page intentionally left blank Draft 12/10/202010
FINANCIAL SECTION Draft 12/10/202011
This page intentionally left blank Draft 12/10/202012
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the Town Council of the
Town of Los Gatos
Los Gatos, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the Town of Los Gatos, California, as of and for the year ended June 30,
2020, and the related notes to the financial statements, which collectively comprise the Town’s basic financial
statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit
in accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no
such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions. Draft 12/10/202013
To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
Page 2
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, each major fund, and the aggregate remaining fund information
of the Town as of June 30, 2020, and the respective changes in financial position and, where applicable, cash flows
thereof for the year then ended in accordance with accounting principles generally accepted in the United States of
America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, budgetary comparison information, pension‐related schedules and OPEB‐related
schedules on pages 18‐37, 50, and 100‐104 be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental Accounting
Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied certain limited
procedures to the required supplementary information in accordance with auditing standards generally accepted in
the United States of America, which consisted of inquiries of management about the methods of preparing the
information and comparing the information for consistency with management’s responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do
not express an opinion or provide any assurance on the information because the limited procedures do not provide
us with sufficient evidence to express an opinion or provide any assurance.
COVID‐19 Pandemic
As discussed in Note 15 to the basic financial statements, the Town was impacted by the COVID‐19 pandemic
during the year. Our opinion is not modified with respect to this matter.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise
the Town of Los Gatos, California’s basic financial statements. The introductory section, major funds (other than
General fund and Special revenue funds) budgetary schedules, combining and individual nonmajor fund financial
statements, and statistical section are presented for purposes of additional analysis and are not a required part of
the basic financial statements.
The major funds (other than General fund and Special revenue funds) budgetary schedules, combining and
individual nonmajor fund financial statements are the responsibility of management and were derived from and
relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial statements
and certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the
United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly Draft 12/10/202014
To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
Page 3
stated, in all material respects, in relation to the basic financial statements as a whole.
The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of
the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated DATE, 2020 on our
consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s
internal control over financial reporting and compliance.
Badawi and Associates
Certified Public Accountants
Berkeley, California
DATE, 2020 Draft 12/10/202015
This page intentionally left blank Draft 12/10/202016
Management’s Discussion and Analysis Draft 12/10/202017
MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of the Town of Los Gatos’s Comprehensive Annual Financial Report (CAFR) presents
management’s discussion and analysis of the Town’s financial performance during the fiscal year
that ended on June 30, 2020. This analysis should be read in conjunction with the Transmittal
Letter at the front of this report and the accompanying Basic Financial Statements.
FINANCIAL HIGHLIGHTS
Town assets exceeded liabilities at the close of FY 2019/20 by $114,851,031 (total net
position).
The Town’s total net position increased by $32,000 during the fiscal year largely as a result of
a small excess of total governmental activities revenues above governmental expenses and
uses of financial resources.
Reported unrestricted net position is negative ($3,967,178) compared to ($4,642,167) the
prior year. The improvement in unrestricted net position resulted largely from the use of
approximately $8.0 million in unrestricted cash balances in the Town’s General Fund
Appropriated Reserve (GFAR) fund during the year to invest in the Town’s infrastructure and
equipment. Unrestricted net position represents all resources not included as net investment
in capital or restricted assets.
The Town’s economically sensitive major revenues of sales tax and transient occupancy taxes
(TOT) were negatively impacted by the COVID‐19 pandemic and its related disruptions to
normal local economic activity. Sales taxes declined $0.6 million from the prior year while
TOT declined $0.8million from the prior period. The impacts to revenues began in March
2020, as shelter‐in‐place orders were instituted and continued through the end of the fiscal
year. Revenue impacts have continued into FY 2020/21 primarily evidenced by TOT revenue
declines relative to prior years. For more information on COVID‐19 impacts, please refer to
Note 15.
The decline in sales taxes and TOT was partially offset by continued growth in property tax
revenues ($1.0 million).
Total expenses as reported in the Statement of Activities increased $3.8 million from the prior
year. The increase was driven by a combination of different factors detailed under the
Government Activities Expenditures Discussion. A primary contributing factor was the
increasing cost of negotiated salary and related benefit increases offered to all Town
bargaining units during the fiscal year and lower amounts of vacant positions primarily in the
public safety function.
Draft 12/10/202018
The cost of all governmental activities this year was $48.0 million. However, as shown in the
Statement of Activities, the amount that the taxpayers ultimately supported for these
activities was $33 million This is because those who directly benefited from the programs
paid $10.3 million, and other governments and organizations subsidized certain programs
with operating grants and contributions of $3.8 million and capital grants and contributions
of $0.9 million. Overall, the Town ’s governmental program revenues were $15.0 million. The
Town paid for the remaining “public benefit” portion of governmental activities with $33
million in taxes and general revenues including interest and miscellaneous revenues. This
$33 million in net cost of governmental activities is an approximate 9% increase from the
prior fiscal year, resulting largely from the increasing cost of negotiated salary and related
benefit increases offered to all Town bargaining units during the fiscal year and lower
amounts of vacant positions primarily in the public safety function.
At the end of FY 2019/20, General Fund balance was $29,335,497 compared to $38,343,155
in the prior year. The ending fund balance of $29,335,497 represents approximately 66.3%
of General Fund expenditures for the current fiscal year excluding transfers‐out to the Town’s
capital projects funds and internal service funds. The reduction in General Fund ending fund
balances was primarily from:
o $4.8 million of General Fund restricted cash balances for an additional
discretionary payment (ADP) made to CalPERS in October 2019. The ADP to
CalPERS was to pay down a portion of the Town’s actuarially determined
unfunded pension liability beyond the mandated annual payments.
o Additionally, the General fund transferred approximately $7.0 to the Town’s
capital projects fund to provide funding for Town infrastructure improvements.
o $1.0 million transfer to the Town’s workers compensation internal service fund
from General Fund reserves to provide additional funding available to meet
ongoing claims activity.
o This reduction of General fund balance was partially offset by an approximate $3.1
million excess operating revenues above operating expenditures (excluding the
ADP payment and transfers out to other funds) for the year.
Total fund balances for all governmental funds at year end were $50,170,882, a decrease of
approximately $3.4 million or (6.4%) from the prior year. Governmental fund balances
decreased primarily due to:
o $7.8 million of capital outlay expenditures made from the Town’s capital projects
funds.
o $4.8 million ADP payment made to CalPERS in October 2019 from the General
fund.
o These uses were partially offset by the Town’s capital projects funds recording
approximately $2.2 million in increases from the prior year’s level of receipts of
intergovernmental (grants) revenues during the fiscal year.
At fiscal year end, the Town’s General Fund restricted cash assets included $669,978 placed
in its recently established Town’s IRS Section 115 Pension Trust. Draft 12/10/202019
The Town’s total capital assets increased by $4,157,637 to $111,700,225 net of depreciation.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of the CAFR contains the following information: Independent Auditor’s
Report, Management’s Discussion and Analysis (this section), the Basic Financial Statements, and
the Required Supplementary Information. The CAFR also includes a Supplementary Information
section, which presents combining and budgetary schedules for individual non‐major funds. The
Basic Financial Statements are comprised of three components: 1) Government‐Wide Financial
Statements, 2) Fund Financial Statements, and 3) Notes to the Financial Statements. The
Management’s Discussion and Analysis is intended to be an introduction to the Basic Financial
Statements.
Government‐Wide Financial Statements
The Government‐Wide Financial Statements present the financial picture of the Town from an
economic resources measurement focus using the accrual basis of accounting. An economic
resources measurement focus is when a body of financial statements report all inflows, outflows,
and balances affecting or reflecting an entity’s net position.
The Statement of Net Position presents information on all of the Town’s assets and liabilities,
with the difference between the two reported as net position. Over time, increases or decreases
in net position may serve as a useful indicator of whether the financial position of the Town is
improving or deteriorating.
The Statement of Activities presents information showing how the Town’s net position changed
during the most recent fiscal year. All changes in net position are reported as soon as the
underlying event giving rise to the change occurs, regardless of the timing of related cash flows.
Thus, revenues and expenses are reported in this Statement for some items that will only result
in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).
Both of the Government‐Wide Financial Statements distinguish functions of the Town that are
principally supported by taxes and intergovernmental revenues (governmental activities) from
other functions that are intended to recover all or a significant portion of their costs through user
fees and charges (business–type activity). The governmental activities of the Town include public
safety, parks and public works, community development, library, community services, debt
service, and general government. The Town has no business‐type activities for accounting
purposes.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have
been segregated for specific activities or objectives. The Town, like other local governments, Draft 12/10/202020
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
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. The notes to the Basic Financial
Statements can be found on pages 60‐98 of this report.
Draft 12/10/202021
ANALYSIS OF GOVERNMENT‐WIDE FINANCIAL STATEMENTS
The Government‐Wide Financial Statements provide long‐term and short‐term information
about the Town’s overall financial condition. This analysis addresses the financial statements of
the Town as a whole, utilizing data from throughout the CAFR to describe the changes between
2019 and 2020.
Net Position Discussion
As shown below, the Town’s combined net position for the year ended June 30, 2020 was
$114.85 million, reflecting a small increase of approximately $30K to the prior years’ net
position of $114.82 million. In general, net position can serve as an important indicator of
whether the Town’s overall financial condition is improving or deteriorating over time.
Current and other assets decreased $3.5 million from the prior year, primarily due to an
approximate $4.8 million decrease in restricted cash deposits. The decrease is primarily related
to the budgeted October 2019 additional discretionary payment (ADP) made by the Town to
CalPERS to reduce the Town’s actuarial unfunded pension liability beyond the mandated annual
payments. Capital assets increased $4.2 million net of depreciation expense totaling
approximately $3.9 million for the year, much of which is related to the infrastructure
investments made throughout the Town including:
2020 2019
Current and other Assets 75,995,161$ 79,464,869$
Capital Assets 111,700,225 107,542,588
Total Assets 187,695,386$ 187,007,457$
Deferred Outflows ‐ Pension/OPEB 17,441,310 13,521,349
Current Liabilities 18,093,199 17,002,972
Long‐Term Liabilities Outstanding 69,465,025 66,521,231
Total Liabilities 87,558,224$ 83,524,203$
Deferred Inflows ‐ Pension/OPEB 2,727,441 2,185,494
Net Position
Net Investment in Capital Assets 111,700,225 107,542,588
Restricted 7,117,984 11,918,688
Unrestricted (3,967,178) (4,642,167)
Total Net Position 114,851,031$ 114,819,109$
Town of Los Gatos
Net Position
Governmental Activites
For the Year Ended June 30, 2020
Draft 12/10/202022
Approximately $5.8 million in street repair and resurfacing and curb and gutter work
Town‐wide,
Approximately $0.7 million to complete the Almond Grove Street Rehabilitation
project,
$0.3 million in bicycle and pedestrian improvements, and
$0.2 million in energy efficiency upgrades made to the Town’s facilities among other
current year capital projects.
Deferred Outflows increase of $3.9 million was primary due to the additional discretionary
payment made in October 2019 to reduce the Town’s unfunded pension liability.
Current liabilities increased $1.1 million from the prior year primarily due to increases in accounts
payable ($400K) and accrued payroll ($285K), claims payable ($141K), and unearned revenue
($403K), offset by an decrease in deposits payable and amount due to other governments
($161K).
Long‐term liabilities increased $3.0 million. The increase is primarily due to the $3.6 million
increases in pension liabilities measured as of June 30, 2019. Due to the actuarial measurement
date the ADP payment of approximately $4.8 made by the Town in October 2019 will be reflected
in the subsequent actuarial valuation. There was an additional increase of $343K for
compensated absences from the prior year. These increases were offset by a $900K reduction in
net other post employment benefits (OPEB) liabilities due to the continued additional
discretionary funding of the unfunded OPEB liability. See Note (9) and Note (10) of Notes to the
Financial Statements for more information on Town’s pension and other post retirement benefit
plans.
Deferred Inflows increased by $0.5 million resulting primarily from the difference between
projected and actual earnings on investments.
The largest segment of the Town’s net position, representing $111.7 million of net position,
reflects the net investment in capital assets (e.g., land, buildings, infrastructure, and equipment)
less accumulated depreciation and related outstanding debt used to acquire those assets. The
Town uses these capital assets to provide infrastructure and services to our residents. Therefore,
they do not represent a liquid financial resource to the Town and consequently are not readily
available for funding current obligations.
Restricted net position totaled approximately $7.1 million representing approximately $6.4
million for capital projects and $670K placed in trust for unfunded pension/OPEB obligations.
As of June 30, 2020, unrestricted net position reports an approximate $675K increase from a
deficit of approximately (‐$4.64 million) the prior year to an ending deficit balance of
approximately (‐$3.97 million). The deficit in governmental unrestricted net position is primarily
due to the Town’s outstanding long term pension and OPEB liabilities. It is not uncommon for
governments with these types of long term liabilities to report a deficit in unrestricted net Draft 12/10/202023
position. A deficit in unrestricted net position is not the only measure to assess the Town’s fiscal
health, other factors can also be important to consider such as an expanding and growing
property tax base and the condition of the Town’s infrastructure including streets, parklands,
civic center and library, police operations building , neighborhood center, corporation yard and
other improvements.
Governmental Activities
Governmental activities are generally financed through taxes, intergovernmental revenues, and
other non‐exchange revenues. The Statement of Activities is intended to illustrate how the cost
of governmental activities is financed and determine the annual change in net position. Draft 12/10/202024
(1) In staff’s review of the prior year’s Statement of Activities it was discovered an error had been made
in the reversal of current year OPEB contributions which was allocated across all departments in error.
The credit should have only been charged to general governmental expenses in the prior year. This
correction has no effect on net position but changes the expense totals by function but no effect on
total expenses on the Statement of Activities for the prior fiscal year ending June 30. 2019.
2020 2019
Revenues:
Program revenues:
Charges for Services 10,288,351$ 11,350,345$
Operating Grants and Contributions 3,854,188 2,175,277
Capital Grants and Contributions 850,113 146,792
General Revenues:
Property Taxes 18,330,426 17,321,347
Sales Taxes 7,531,425 8,158,152
Franchise Taxes 2,495,792 2,475,916
Other Taxes 1,911,774 2,726,743
Motor Vehicle in Lieu 24,526 14,689
Investment Earnings 2,428,470 1,809,128
Miscellaneous 323,940 2,407,840
Total Revenues 48,039,005 48,586,229
Expenses:
Police Department 20,446,188 16,635,726 (1)
Parks and Public Works 11,803,005 10,627,716
General Government 7,405,368 8,163,991 (1)
Community Development 5,001,958 5,064,637
Library Services 3,347,523 3,059,294
Sanitation 3,041 684,673
Total Expenses 48,007,083 44,236,037
Change in Net Position 31,922 4,350,192
Net Position, beginning 114,819,109 110,468,917
Net Position, Ending 114,851,031$ 114,819,109$
Town of Los Gatos
Statement of Activities
For the Year Ended June 30, 2020
Draft 12/10/202025
Governmental Activities Revenue Discussion
The Statement of Activities shown above details how the $48.0 million in Governmental Activities
revenue was derived. As categorized in the Statement of Activities as program revenues,
approximately $10.3 million or 21.4% of the revenues were recorded from those who directly
benefited from the program as a charge for service. Another $4.7 million or 9.8% of the revenues
were sourced from operating/capital grants and contributions. The remaining $33.0 million or
68.8% represents general revenues of the Town, including taxes, intergovernmental revenues,
and other miscellaneous revenues.
Program revenues increased by approximately $1.3 million from the prior year. This is largely
due to the Town’s effort to qualify for a number of new operational and capital grants from the
federal and state government.
The Town’s revenues related to Governmental Activities decreased by approximately $1.9 million
from the prior year, a combination of approximately $1.0 million increase in property taxes and
$620K increase in investment earnings offset by approximately $630K declines in sales taxes,
$815K in other taxes the majority of the decline coming from loss of transient occupancy taxes,
and a $2.0 million reduction in miscellaneous revenues explained largely by the $1.8 million one‐
time gain on the sale recorded to miscellaneous revenues in the prior fiscal year associated with
the Winchester land sale.
Property tax is the largest individual revenue source for the Town and collections finished the
year $1.0 million higher than the previous year. This increase was mostly due to an increase in
secured taxes as strong demand for residential Town property continued, the approval of the
annexations of County pockets with tax revenues accruing to the Town effective FY 2019/20, and
new developments driving property values higher. It’s important to note that assessed valuations
for FY 2019/20 were established on the tax roll in January 2019 and collected in FY 2019/20 and
accordingly do not reflect COVID‐19 impacts to secured or unsecured property.
At $7.5 million, sales taxes represent the second largest individual revenue source for the Town.
Sales taxes decreased $0.6 million from the previous year largely due to the economic impacts
related to COVID‐19 which began in March 2020. The decline was slowed by the receipt for the
full fiscal year of FY 2019/20 of a new additional 1/8 cent District Sales Tax approved by the Los
Gatos voters in the fall of 2018.
Franchise taxes, the Town’s third largest revenue source, finished the year at $2.5 million,
reflecting only a very small increase $20K from the previous fiscal year.
Investment earnings increased $619K from the prior year. The primary factor responsible for this
growth was the increase in the value of portfolio investments due to the dramatic reduction in
prevailing interest rates as a result of the market’s reaction to COVID‐19. As interest rates decline
interest bearing investments increase in value which led to year end ($1.2M of which
approximately $600K had been recognized in the previous fiscal year) additional investment Draft 12/10/202026
gains. These non‐cash or paper gains are recognized as investment income as a result of the
“mark to market value” procedure required by GASB 31.
Miscellaneous revenues decreased by approximately $2.1 million from the prior year. The
substantial decrease is due to a gain on sale of property recognized the prior fiscal year, the
largest segment of which was the approximate $1.9 million gain on sale of the Winchester land
sale finalized in May 2019.
Governmental Activities Expenses Discussion
The Town provides residents and visitors with the following functional services: General
Government is comprised of six departments (Town Council, Town Clerk, Town Manager, Town
Attorney, Human Resources, Information Technology, and Finance) providing services in general
governance, information technology, executive management, economic vitality, legal, records
management, risk management, human resources, finance, and accounting. The Town’s Police
Department (public safety) provides general law enforcement, crime prevention, dispatch and
responses to emergency and non‐emergency calls for services. Parks and Public Works provides
engineering, construction and maintenance of public streets, street lighting, Town owned
buildings, parks, and related infrastructure; as well as traffic engineering and engineering
evaluation of private development proposals. Community Development provides planning and
zoning services; and building plan check and inspection; and code enforcement services. The
Library Department provides library, local history and cultural services to the community.
Total expenses increased $3.8 million from the prior year. The increase was driven largely by the
combination of the following factors:
Negotiated salary increases and subsequent benefit increases. All non‐sworn and
management employees received a 3% across the board salary increase and sworn
employees received a 4% across the board salary increase.
General Government expenses increased $1.2 million from the prior year. The largest
share of this increase is a result of a $416K allocation of this cost center’s share of Internal
Service Fund expenses over revenues in FY 2019/20 for which the prior year allocation
was a decrease to this cost center of $346K for its share of Internal Service Fund revenue
above expenses. The net difference between fiscal years for this allocation is
approximately $762K between fiscal years.
Public safety expenses grew by approximately $2.7 million from the prior year. There are
three chief drivers of this increase. First, $1.9 million of the increase is the pension
expense calculated for the Town’s safety risk pool pension plan for the current fiscal year
of $5,646,706 compared to $3,706,313 expensed in the prior fiscal year. Second, lower
position vacancies throughout the fiscal year compared to the prior year added to the
increase. Third, the cost of negotiated salary increases and related benefits including the Draft 12/10/202027
increased pension contributions for miscellaneous or “non‐safety” pension plan positions
contributed.
Parks and Public Works expenses grew by approximately $0.7 million from the prior year
driven primarily by negotiated salary increases and related benefits, increased required
employer pension contributions, and increases to depreciation expenses for Town
infrastructure.
Community Development expenses decreased by $360K for the year due to
approximately $221K lower volume in “pass‐through” expenditures for private
development activity offsetting cost increases from negotiated salary increases and
related benefits and increased required employer pension contributions.
Library Services expense increased approximately $288K from the prior year primarily
from negotiated salary increases and related benefits and increased required employer
pension contributions.
Sanitation expenses for urban runoff decreased approximately $682K from the prior year.
In the prior fiscal year, the Town received program management fees from the West
Valley Sanitation District and expensed those fees for program management. Effective
fiscal year 2019/20, the West Valley Clean Water Authority receives its funding through
property tax bill assessments and related expenses are paid through the Authority.
FINANCIAL ANALYSIS OF THE TOWN’S FUNDS
Governmental Funds
Recognizing the financial resources measurement focus, the Town’s Governmental Funds
provide information on near‐term inflows and outflows, and balances of spendable resources.
This information is useful in assessing the Town’s financing requirements and may serve as a
useful measure of a government’s net resources available for spending at the end of the fiscal
year. Unlike the Statement of Activities which does not include transfers, the Governmental
Funds Balance Sheet does include transfers in and out.
Fund Balance – As discussed below, the Town’s Governmental Funds Balance Sheet reports the
following fund balances.
Restricted Fund Balance – The Town has $7.2 million in fund balance classified as restricted to
indicate that it has an externally imposed restriction on how the money may be spent. Of the
$7.2 million restricted fund balance, $0.7 million is in the General Fund representing amounts
placed in an IRS Section 115 trust dedicated as to use for pension expenses. $6.3 million is
restricted for capital projects, and $0.2 million for maintenance and repairs.
Draft 12/10/202028
Committed Fund Balance – The Town has $15.4 million in fund balance classified as committed
to indicate that the Town Council previously committed how the money will be spent. Of the
$15.4 million committed fund balance, $15.1 million is committed to the General Fund, of which
$10.9 million is for budget stabilization and catastrophe response and $4.5 million is for
additional discretionary payments toward pension and OPEB unfunded liabilities.
Assigned Fund Balance – The Town has $27.5 million in fund balance which is not restricted or
committed and is classified as assigned to indicate the Town Council’s intent to be used for
specific purposes. The largest assigned fund balance is the Reserve for Capital and Special
projects with a balance of approximately $10 million which is the primary funding source for the
Town’s five‐year capital improvement plan and special projects as budgeted by the Town.
Additional information on the Town’s Fund Balance can be found in Note (8) of the Notes to the
Financial Statements.
Major Governmental Funds results for the year included the following: Draft 12/10/202029
REVENUES 2020 2019
Property Taxes 18,368,466 17,359,435
Sales Taxes 7,531,425 8,158,152
Other Taxes 1,911,774 2,726,742
Licenses & Permits 4,818,671 5,173,876
Intergovernmental 4,292,453 2,310,655
Charges for Services 5,309,470 5,584,504
Fines and Forfeitures 271,117 510,266
Franchise Fees 2,495,792 2,475,916
Interest 2,428,453 1,809,164
Use of Property 31,039 32,960
Other 376,922 579,755
Total Revenues 47,835,582 46,721,425
EXPENDITURES
Current:
Public Safety 15,793,815 14,945,407
General Government 13,024,146 8,004,254
Parks and Public Works 8,168,599 7,962,135
Community Development 4,473,790 4,577,495
Library Services 2,700,802 2,493,617
Sanitation and Other 162,837 628,240
Capital Outlay 7,861,972 7,888,914
Total Expenditures 52,185,961 46,500,062
Excess Revenues over Expenditures (4,350,379) 221,363
Proceeds from sales of assets 1,566 1,912,316
Transfers in 8,935,260 4,264,131
Tranfers out (8,628,719) (3,323,756)
Total Other Financing Sources (Uses) 308,107 2,852,691
Net Changes in Fund Balances (4,042,272) 3,074,054
Beginning/Ending Fund Balances As Restated 54,007,454 50,560,772
Ending Fund Balances 49,965,182 53,634,826
TOTAL GOVERNMENTAL FUNDS REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2020
TOWN OF LOS GATOS
Draft 12/10/202030
Overall, Total Governmental Funds revenues finished $1.3 million or 2.8% higher than the prior
year, while total expenditures finished $5.7 million or 12.2% higher than the prior year. The net
result is that Governmental Funds income before transfers and other financing sources and uses
decreased by $3.8 million. Of Total Governmental Funds revenues, General Fund revenues
totaled $42. million or nearly 89% of the total $48.0 million. Total General Fund operating
revenues decreased by $900K, resulting from the net effect of:
$1.0 million increase in property tax collections,
$600K increase in investment income,
$150K increase in intergovernmental revenues for the year,
$800K decreases in other taxes,
$600K decrease in sales tax, and
$500K decrease in licenses and permits.
The declines in revenues from the prior year were impacted by the COVID‐19 pandemic and its
related restrictions which began in March 2020 and continued through the end of the fiscal year.
COVID‐19 and its associated economic impacts are expected to continue across the entire
spectrum of economic activity both locally and nationally.
General Fund expenditures represent approximately $44.3 million of the Total Governmental
Fund expenditures of $52.2 million compared to $38.0 million of total Governmental Funds
expenditures of $46.5 million in the prior year. The increase in governmental funds expenditures
was led by an approximate $5.0M increase in general governmental and an $850K increase in
public safety expenditures from the prior year. The increase in general governmental
expenditures was largely attributable to a $4.8 million ADP paid in October 2019 to pay down an
additional portion of the Town’s actuarial unfunded pension liability beyond mandated annual
payments. Increases in public safety expenditures from the prior year were influenced by lower
levels of staff vacancy savings and associated increases in salary and benefits from the prior year.
Additionally, salary and benefit cost increases resulting from labor negotiations and mandated
increases in employer pension contribution rates were also a contributing factor to increases to
all Town departments and services.
Proprietary Funds
The Town’s Proprietary Funds (Internal Service Funds) presented in the Fund Financial
Statements section basically provide the same type of information in the Government‐Wide
Financial Statements and include individual segment information.
Total net position in the Internal Service Funds decreased $0.7 million in the current year. This
decrease reflects the use of approximately $788K transferred from the Town’s Facilities
Maintenance Fund to provide a funding source for the Town’s Capital projects for the Civic center
and Recreation building restroom renovations, waterproofing, deck railing repairs, and fire
suppression for the Town’s IT server room. Equipment Replacement net position was reduced
by scheduled fleet and equipment replacements totaling approximately $540K and transfers out Draft 12/10/202031
of approximately $580K to be used as a funding source for the computer aided dispatch system
for the Police department ($525K) and the purchase of a new patrol vehicle ($55K). These uses
of net position were offset by an approximate $1.1 million transfer from the Town’s General Fund
to the Town’s Workers Compensation Internal Service fund.
GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to the Original Budget
Comparing the FY 2019/20 original budget (or adopted) General Fund expenditures of
$43,256,352 (excluding budgeted transfers‐out and debt payments that are reimbursed) to the
final adjusted budget of $47,997,219 indicates a net increase of approximately $4.7 million.
Additions to the original expenditure budget included adjustments approved by Town Council
throughout the fiscal year.
The increase in General Fund appropriations occurred primarily from the following selected
budget adjustments made during the fiscal year.
Use of $4,232,500 of Pension/OPEB Reserve to make additional discretionary payments
(ADPs)
$122,820 expenditure budget adjustment for Transportation Analysis Guideline
development consultation services from available General Plan Deposit Account
$102,000 expenditure budget adjustment for police safety equipment utilizing grant
received by the Town
$54,797 budget expenditure for tasers and cameras from available Equipment
Replacement Fund balance
$50,000 expenditure budget increase due to increased water utility costs for Town Parks.
$47,000 for tree service expenses from available Tree Replacement account
$24,219 increase expenditures for Youth Collection to utilize Library Grant received by
the Town
$22,677expenditure budget adjustment traffic signal controller’s equipment and service
$22,669 increase to salary and benefits for the Town Manager and the Town Attorney
$16,165 expenditure budget increase to move temporary FTE hours inadvertently
budgeted in the Facilities Maintenance Internal Service Fund.
$15,000 to fund additional services by the Town of Los Gatos Chamber of Commerce
$10,800 expenditure budget increase for Emergency Operation Center equipment
utilizing grant received by the Town
Original Budget
GF Expenditures
+
Misc. Adjustments &
Mid‐Year Adjustments
=
Final
Budget
$43,256,352 $4,740,867 $47,997,219 Draft 12/10/202032
$20,220 miscellaneous budget increase in various programs
Variance with the Final General Fund Budget
The General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance‐Budget
and Actual (GAAP) for Fiscal Year Ended June 30, 2020 reports an approximate overall favorable
variance with the final budget of approximately $2.1 million. This favorable variance was created
largely by the net effect of the following factors:
Approximately $661K of expenditures below budget for FY 19/20 work paid from
General Plan Update fees (a dedicated revenue source which funds this expenditure).
All savings in this budget are carried over to the next fiscal year to be continue the
General Plan Update project.
Actual revenues ended the fiscal year at $1.6 million below final budgeted revenues.
Unfavorable variances from budget were experienced beginning in March 2020 related
to the COVID‐19 pandemic and its related restrictions. The following economically
sensitive revenues experienced declines:
An unfavorable variance of ($1.2 million) sales tax collections
An unfavorable variance of ($1.0 million) Transient Occupancy Tax collections
An unfavorable variance of ($619K) in licenses and permits
An unfavorable variance of (213K) in fines and forfeitures
An unfavorable variance of (202K) in charges for services
A favorable variance of $1.6 million in investment earnings for year. The Town received
additional investment earnings for the year in its pension/OPEB trust which was not
anticipated during FY 19/20 budget development and a positive trend of interest rates
leading to additional interest accrued in year end mark to market valuations.
Significant factors affecting actual expenditures include:
Community Development expenditures reflected a $1.3 million favorable variance
explained largely by staff vacancies with salary and benefit savings of approximately
$332K, and the General Plan Update expenditures being approximately $661K lower than
budgeted because the budget reflected the entire contract amount which has not been
fully executed through the end of the fiscal year. An additional $208K favorable variance
reflects the fiscal year actual activity in the Department pass through program that
depends on the timing and the volume of the development projects.
Public safety expenditures had a favorable variance of approximately $1.2 million. An
$839K saving is reflecting limited term vacancies in Police Officer, Police Record Specialist, Draft 12/10/202033
and Dispatcher positions, and savings of $363K due to decreased service cost of crossing
guards and parking violation services, and travel activity due to the Shelter in Place order.
Administrative Services reflected a favorable balance of approximately $501K in large
measure due to savings in salary and benefits due to partial year vacancies in the Finance
and Clerk Departments positions and savings in special events cost due to cancellation of
events.
Parks and Public Works reflects a favorable variance of approximately $190K reflecting
partial vacancies during the year.
Library services reflected a favorable variance of $260K due mainly to salary and benefit
savings from staff vacancies in the Library Technology Specialist position and other
temporary vacancies.
CAPITAL ASSETS
As of June 30, 2020, the Town’s investment in capital assets for its governmental activity is
recorded at $111,700,225 (net of accumulated depreciation). The investment in capital assets
includes land, buildings and improvements, infrastructure, construction in progress, and
machinery and equipment. Capital assets increased $4.2 million net of depreciation expense
totaling approximately $3.9 million for the year.
During FY 2019/20, the Town’s approximate $7.8 million investment in capital assets for the
current year represented approximately 4.1% of total assets for governmental activities. Major
capital asset events during the current fiscal year include the following:
$5.8 million in street repair and resurfacing and curb and gutter work Town‐wide,
approximately $0.7 million to complete the Almond Grove Street Rehabilitation project;
$0.7 million in equipment purchases, including $0.5 million in vehicle fleet replacements,
and $0.2 million in mobile cash barriers, license plate recognition system, and other
building improvements;
$0.4 million in traffic signal improvements;
$0.4 million expended on building improvements, retaining walls, park improvements,
and parking lot improvement projects;
$0.3 million in bicycle and pedestrian improvements; and
$0.2 million in energy efficiency upgrades made to the Town’s facilities among other
current year capital projects.
Draft 12/10/202034
Additional information on the Town’s capital assets is found in Note 5 of this financial report.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
A product of an ongoing examination of how the Town provides cost‐effective services, the
Town’s budget emphasizes outcomes or results for the community and allows for longer‐term
financial planning decisions.
During the development and adoption of the Town’s FY 2020/21 budget, the Town Council and
management considered the following factors:
In response to the economic impact of COVID‐19 pandemic, the Town modified its revenue
forecast downward in the FY 2020/21 Budget. For additional details, see Note 15. The FY
2020/21 operating budget is a balanced budget, with the use of General Fund reserves
dedicated for one‐time uses. The FY 2020/21 Budget reflect maintaining high service levels
with little to no increases in the employee headcount. The budget identified contingencies
should revenues come in below projected amounts. The Town is carefully monitoring its
revenues sources and will identify any modification at the mid‐year budget discussion.
The Town continues to focus on priority issues that involve maintaining public safety and
Town infrastructure including streets and parks; and providing library, community
development, and other services. These priorities are coordinated with other Core Goals that
protect the Town’s fiscal health and ensure cost efficient and effective delivery of Town‐wide
administrative services. The Town’s proactive approach to reducing operating expenditures,
identifying revenue enhancements, and implementing operating efficiencies has been an
effective fiscal approach.
Specific trends affecting the fund balance forecast include:
o General property tax collections represent approximately 32.1% (not including the State’s
property tax “backfill” shifts) of the Town’s General Fund revenues. Property tax
collections are expected to increase 3.9% in FY 2020/21 from the prior year’s tax
Governmental
Activities
Infrastructure 63,337,364$
Buildings 23,341,210
Land 20,294,810
Equipment 2,682,698
Construction in Progress 2,044,143
111,700,225$
Net Investment in Capital Assets
Town of Los Gatos
For the Year Ended June 30, 2020
Draft 12/10/202035
collections. This increase is primary due to the additional tax collection from the recently
annexed parcels. This forecast is based on data from the Santa Clara County Tax
Assessor’s Office. The Town closely monitor its actual collection and other legislative
changes regarding property tax. See Note 16 for more detail.
o The Town anticipates a decrease in general sales tax for FY 2020/21. Sales tax estimates
of $7.9 million for FY 2020/21 were budgeted reflecting a 0.2% decrease from the prior
year’s adopted sales tax budget.
o The Town’s investment portfolio experienced a slight decrease in its overall weighted
average annual yield, reducing from 2.05% at June 30, 2019 to 1.86% at June 30, 2020.
Prevailing interest rates at the end of fiscal year were at historic lows due to economic
impacts of the COVID‐19 pandemic and were anticipated to remain at these low levels for
the foreseeable future which will likely lower yields on the investment portfolio in the
future.
o Transient Occupancy Tax (TOT) revenues are expected to be significantly lower in FY
2020/21 as personal and business‐related travel are susceptible to the economic impact
of Covid‐19 pandemic.
o The Town’s pension plans over the past several decades, like all other CalPERS
participants, have experienced unfavorable investment returns, changes in actuarial
assumptions, and demographic shifts which have outweighed any positive plan
experiences. To address this unfunded status, the Town took proactive steps including
initiating the prefunding of OPEB obligations, budgeting and programming additional
discretionary pension payments to accelerate reduction of unfunded liabilities, and
recently partnering with the Town’s employee groups to eliminate the existing retiree
healthcare benefit for new employees. Even with these proactive steps, the Town
continues to be impacted by the continuing rising cost of pension related benefits. Over
the next five fiscal years, the Town’s five‐year forecast includes increasing pension costs
due to further changes in actuarial assumptions or lowering the discount rate. The Town’s
net pension liability is $24.7 million for the safety cost sharing plan and $32.5 million for
the miscellaneous plan based upon data from CalPERS. To illustrate the sensitivity of the
net pension liability to changes in the discount rate, CalPERS estimates that a 1 %
reduction in the discount rate from 7.15% to 6.15% would increase the total net pension
liability for both Miscellaneous and Safety by $26.7 million. Conversely, an increase in the
discount rate from 7.15% to 8.15% would decrease the total net pension liability for both
Miscellaneous and Safety by $22.0 million.
o In addition, CalPERS provides a hypothetical termination liability estimate of the plans
should the contract with CalPERS be terminated. The plan liability on a termination basis
is calculated differently from the plans’ ongoing funding liability. Since no future
employer contributions would be made in the hypothetical termination, benefit
payments are secured by risk‐free assets. For the Miscellaneous plan, a 3.25% Draft 12/10/202036
termination return rate results in a $103.1 million termination liability. For the Safety
plan, a 3.25% termination return rate results in a $91.9 million termination liability.
o For detailed information about the Town employees’ retirement plan please refer to
Note 9 of the Notes to Basic Financial Statements Section.
Requests for Information
This financial report is designed to provide residents, taxpayers, customers, investors, and
creditors with a general overview of the Town’s finances and to demonstrate the Town’s
accountability for the money it receives. Questions about this report or requests for any
additional information, should be directed to Stephen Conway, Director of Finance, at 110 East
Main Street, Los Gatos, California, 95030; email at sconway@losgatosca.gov; or phone at (408)
354‐6828. Draft 12/10/202037
This page intentionally left blank Draft 12/10/202038
Basic Financial Statements
Draft 12/10/202039
This page intentionally left blank Draft 12/10/202040
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
GOVERNMENT WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES
The Statement of Net Position, Statement of Activities, fund financial statements and the notes to financial
statements comprise the Basic Financial Statements of the Town.
The purpose of the Statement of Net Position and the Statement of Activities is to summarize the entire financial
activities and financial position of the Town. They are prepared on the same basis of accounting (accrual) used
by most businesses, which means they include all the Town’s assets and liabilities, as well as its revenues and
expenses. The effect is the entire Town’s transactions are accounted for, regardless of when cash changes
hands, and all material internal transactions between funds have been eliminated.
The Statement of Net Position reports the Town’s total assets, deferred outflows of resources, liabilities, and
deferred inflows of resources, including capital assets and long‐term debt, and presents similar information to
the old balance sheet format while focusing on the composition of the Town’s net position (assets minus
liabilities). The Statement of Net Position summarizes the financial position of the Town’s governmental
activities in a single column.
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.
Draft 12/10/202041
Governmental
Activities
ASSETS
Cash and investments 71,609,969$
Restricted cash and investments 784,191
Receivables:
Accounts 1,459,473
Interest 317,209
Intergovernmental 1,555,607
Materials, supplies and deposits 30,960
Long term notes receivables 237,752
Long‐term prepaid pension obligations
Capital Assets:
Nondepreciable 22,338,953
Depreciable, net of accumulated depreciation 89,361,272
Total Assets 187,695,386
DEFERRED OUTFLOWS OF RESOURCES
Pension contributions subsequent to measurement date 10,753,665
Pension related amounts 4,179,339
OPEB contributions subsequent to measurement date 2,508,306
Total Deferred Outflows of Resources 17,441,310
LIABILITIES
Accounts payable 3,772,685
Accrued payroll and benefits 1,700,778
Due to other governments 37,969
Unearned Revenue 4,596,403
Deposits 6,736,953
Claims payable 1,248,411
Long‐term liabilities:
Due within one year:
Compensated absences 335,642
Due in more than one year:
Net OPEB liability 9,126,387
Net pension liabilities 57,230,935
Compensated absences 2,772,061
Total Liabilities 87,558,224
DEFERRED INFLOWS OF RESOURCES
Pension related amounts 2,098,547
OPEB related amounts 628,894
Total Deferred Inflows of Resources 2,727,441
NET POSITION
Net investment in capital assets 111,700,225
Restricted for:
Capital projects 6,257,756
Pension 669,978
Lighting and landscape repairs and maintenance 190,250
Total Restricted Net Position 7,117,984
Unrestricted (3,967,178)
Total Net Position 114,851,031$
TOWN OF LOS GATOS
STATEMENT OF NET POSITION
JUNE 30, 2020
The notes to the financial statements are an integral part of this statement.Draft 12/10/202042
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 7,405,368$ 1,470,324$ 12,290$ 8,258$ (5,914,496)$
Public safety 20,446,188 1,549,207 952,045 9,100 (17,935,836)
Parks and public works 11,803,005 3,674,222 2,824,638 832,755 (4,471,390)
Community development 5,001,958 3,351,753 15,864 ‐ (1,634,341)
Library services 3,347,523 11,522 49,351 ‐ (3,286,650)
Sanitation 3,041 231,323 ‐ ‐ 228,282
Total Governmental Activities 48,007,083$ 10,288,351$ 3,854,188$ 850,113$ (33,014,431)
General revenues:
Taxes:
Property taxes 18,330,426
Sales taxes 7,531,425
Franchise taxes 2,495,792
Other taxes 1,911,774
Motor vehicle in lieu 24,526
Investment earnings 2,428,470
Miscellaneous 323,940
Total general revenues 33,046,353
Change in Net Position 31,922
Net Position ‐ Beginning 114,819,109
Net Position ‐ Ending 114,851,031$
TOWN OF LOS GATOS
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Program Revenues
The notes to the financial statements are an integral part of this statement.Draft 12/10/202043
This page intentionally left blank Draft 12/10/202044
TOWN OF LOS GATOS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
FUND FINANCIAL STATEMENTS &
MAJOR GOVERNMENTAL FUNDS
______________________________________________________________________________
Fund Financial Statements
The Fund Financial Statements only present major funds individually while nonmajor funds are combined in a
single column. Major funds are generally defined as having significant activities or balances in the current year.
Major Governmental Funds:
The Town determined that the following funds were major funds for the year ended June 30, 2020. Individual
non‐major funds can be found in the supplemental section.
General Fund is the general operating fund of the Town and is used to account for all financial resources except
those required to be accounted for in another fund.
Appropriated Reserves Fund is used to account for resources provided for capital projects not fully funded from
other sources.
Draft 12/10/202045
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
ASSETS
Cash & Investments 36,974,140$ 18,951,321$ 6,598,756$ 62,524,217$
Restricted Cash & Investments 669,978 ‐ ‐ 669,978
Receivables:
Accounts 930,815 ‐ 19,277 950,092
Interest 317,209 ‐ ‐ 317,209
Intergovernmental 1,414,965 480,888 140,642 2,036,495
Other assets 30,960 ‐ ‐ 30,960
Long term notes 159,000 ‐ 78,752 237,752
Total Assets 40,497,067$ 19,432,209$ 6,837,427$ 66,766,703$
LIABILITIES
Accounts payable 957,782$ 2,561,695$ 4,181$ 3,523,658$
Accrued payroll and benefits 1,696,044 ‐ 4,734 1,700,778
Due to other governments 37,969 ‐ ‐ 37,969
Unearned revenue 1,732,822 2,798,786 64,855 4,596,463
Deposits 6,736,953 ‐ ‐ 6,736,953
Total Liabilities 11,161,570 5,360,481 73,770 16,595,821
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue ‐ 205,700 ‐ 205,700
Total deferred inflows of resources ‐ 205,700 ‐ 205,700
FUND BALANCE
Restricted for:
Capital Outlay ‐ 88,937 6,168,819 6,257,756
Pension 669,978 ‐ ‐ 669,978
Repairs and Maintenance ‐ ‐ 190,250 190,250
Committed to:
Budget Stabilization 5,427,603 ‐ ‐ 5,427,603
Catastrophic 5,427,603 ‐ ‐ 5,427,603
Pension/OPEB 4,532,500 ‐ ‐ 4,532,500
Assigned to:
Open Space 410,000 ‐ ‐ 410,000
Parking ‐ 1,460,210 ‐ 1,460,210
Sustainability 140,553 ‐ ‐ 140,553
Capital/Special Projects 8,787,958 ‐ ‐ 8,787,958
Comcast PEG ‐ 50,000 ‐ 50,000
Market Fluctuations 1,218,732 ‐ ‐ 1,218,732
Compensated Absences 1,539,408 ‐ ‐ 1,539,408
Capital Projects ‐ 12,266,881 ‐ 12,266,881
Measure G 2018 District Sales Tax 1,181,162 ‐ ‐ 1,181,162
Special Revenue Funds ‐ ‐ 404,588 404,588
Total Fund Balances 29,335,497 13,866,028 6,763,657 49,965,182
Total Liabilities and Fund Balances 40,497,067$ 19,432,209$ 6,837,427$ 66,766,703$
TOWN OF LOS GATOS
GOVERNMENTAL FUNDS
JUNE 30, 2020
BALANCE SHEET
The notes to the financial statements are an integral part of this statement.Draft 12/10/202046
49,965,182$
111,700,225
7,731,080
205,700
14,933,004
(2,098,547)
2,508,306
(628,894)
Net Pension Liability (57,230,935)$
Net OPEB Liability (9,126,387)
Compensated absences (3,107,703) (69,465,025)
114,851,031$
TOWN OF LOS GATOS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO
THE GOVERNMENT‐WIDE STATEMENT OF NET POSITION‐GOVERNMENTAL ACTIVITIES
JUNE 30, 2020
Fund Balance ‐ Total Governmental Funds
Amounts reported for Governmental Activities in the Statement of Net Position are
different from those reported in the Governmental Funds because of the following:
CAPITAL ASSETS
Capital assets used in the Governmental Activities are not financial resources and,
therefore, are not reported in the Governmental Funds.
ALLOCATION OF INTERNAL SERVICE FUND NET POSITION
Internal service funds are used by management to charge the cost of management of
certain activities such as insurance, central services and maintenance to individual
governmental funds. The net current assets of the internal service funds are therefore
included as Governmental Activities in the Statement of Net Position.
DEFERRED OUTFLOWS OF RESOURCES
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.
Contributions subsequent to the measurement date will not be included in the calculation of the
Town's net pension liability of the plan year included in this report and have been deferred and
reported as deferred outflows of resources.
DEFERRED INFLOWS OF RESOURCES
In the Government‐Wide financial statements certain pension amounts are deferred and amortized
over a period of time, however, in the governmental funds no transactions are recorded.
DEFERRED OUTFLOWS OF RESOURCES
Contributions subsequent to the measurement date will not be included in the calculation of the
Town's net OPEB liability of the plan year included in this report and have been deferred and
reported as deferred outflows of resources.
DEFERRED INFLOWS OF RESOURCES
In the Government‐Wide financial statements certain OPEB amounts are deferred and amortized
over a period of time, however, in the governmental funds no transactions are recorded.
LONG‐TERM LIABILITIES
Long‐term liabilities are not due and payable in the current
period and, therefore, are not reported in the Governmental Funds.
Net Position ‐ Governmental Activities
The notes to the financial statements are an integral part of this statement.Draft 12/10/202047
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
REVENUES
Property Taxes 18,330,425$ ‐$ 38,041$ 18,368,466$
Sales Taxes 7,531,425 ‐ ‐ 7,531,425
Other Taxes 1,877,338 ‐ 34,436 1,911,774
Licenses & Permits 4,053,537 407,340 357,794 4,818,671
Intergovernmental 1,104,075 1,938,684 1,249,694 4,292,453
Charges for Services 4,447,213 862,257 ‐ 5,309,470
Fines and Forfeitures 271,117 ‐ ‐ 271,117
Franchise Fees 2,495,792 ‐ ‐ 2,495,792
Interest 2,266,134 47,219 115,100 2,428,453
Use of Property 31,039 ‐ ‐ 31,039
Other 307,812 69,110 ‐ 376,922
Total Revenues 42,715,907 3,324,610 1,795,065 47,835,582
EXPENDITURES
Current:
General Government 13,024,146 ‐ ‐ 13,024,146
Public Safety 15,793,815 ‐ ‐ 15,793,815
Parks and Public Works 8,139,106 ‐ 29,493 8,168,599
Community Development 4,473,790 ‐ ‐ 4,473,790
Library Services 2,700,802 ‐ ‐ 2,700,802
Sanitation and Other ‐ ‐ 162,837 162,837
Capital Outlay 138,384 5,919,125 1,804,463 7,861,972
Total Expenditures 44,270,043 5,919,125 1,996,793 52,185,961
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (1,554,136) (2,594,515) (201,728) (4,350,379)
OTHER FINANCING SOURCES (USES)
Proceeds from sales of assets 656 910 ‐ 1,566
Transfers in 599,669 8,325,591 10,000 8,935,260
Transfers (out) (8,053,847) (433,952) (140,920) (8,628,719)
Total Other Financing Sources (Uses) (7,453,522) 7,892,549 (130,920) 308,107
NET CHANGES IN FUND BALANCES (9,007,658) 5,298,034 (332,648) (4,042,272)
BEGINNING FUND BALANCES, as restated 38,343,155 8,567,994 7,096,305 54,007,454
ENDING FUND BALANCES 29,335,497$ 13,866,028$ 6,763,657$ 49,965,182$
TOWN OF LOS GATOS
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
The notes to the financial statements are an integral part of this statement.Draft 12/10/202048
NET CHANGE IN FUND BALANCES ‐ TOTAL GOVERNMENTAL FUNDS (4,042,272)$
Amounts reported for Governmental Activities in the Statement of Activities are
different because of the following:
CAPITAL ASSET TRANSACTIONS
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)7,995,690$
Proceeds from sale of assets (1,566)
Loss on sale of assets (904)
Current Year Depreciation (3,835,585) 4,157,635
UNAVAILABLE REVENUES
205,700
OPEB PLAN CONTRIBUTIONS AND EXPENSE
In governmental funds, actual contributions to OPEB plans are reported as expenditures in the year
incurred. However, in the Government‐Wide Statement of Activities, only the current year OPEB
expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred
inflows and outflows of resources.760,089
PENSION PLAN CONTRIBUTIONS AND EXPENSE
In governmental funds, actual contributions to pension plans are reported as expenditures in the year
incurred. However, in the Government‐Wide Statement of Activities, only the current year pension
expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred
inflows and outflows of resources.(56,098)
ALLOCATION ON INTERNAL SERVICE FUND ACTIVITY
Internal service funds are used by management to charge the costs of certain activities to
individual funds. The net expense of the internal service fund is reported with governmental activities.(723,363)
COMPENSATED ABSENCES EXPENSE
In governmental funds, compensated absences such as vacations and sick leave are expenditures
when taken. However, in the Government‐Wide Statement of Activities, the current year change in
the compensated absences liability is reported.(269,769)
CHANGE IN NET POSITION ‐ GOVERNMENTAL ACTIVITIES 31,922$
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
TOWN OF LOS GATOS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES TO
THE GOVERNMENT‐WIDE STATEMENT OF ACTIVITIES ‐ GOVERNMENTAL ACTIVITIES
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.
The notes to the financial statements are an integral part of this statement.Draft 12/10/202049
Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Property Taxes 17,970,500$ 18,352,880$ 18,330,425$ (22,455)$
Sales Taxes 8,001,917 8,723,000 7,531,425 (1,191,575)
Other Taxes 2,855,730 2,857,285 1,877,338 (979,947)
Franchise Fees 2,458,520 2,458,520 2,495,792 37,272
Licenses & Permits 4,672,534 4,672,534 4,053,537 (618,997)
Intergovernmental 988,441 1,165,460 1,104,075 (61,385)
Charges for Services 4,454,336 4,649,235 4,447,213 (202,022)
Fines and Forfeitures 483,950 483,950 271,117 (212,833)
Interest 629,774 629,774 2,266,134 1,636,360
Use of Property 35,793 35,793 31,039 (4,754)
Other 286,077 286,077 307,812 21,735
Total Revenues 42,837,572 44,314,508 42,715,907 (1,598,601)
EXPENDITURES
Current:
General Government:
Town Council 240,605 240,605 206,164 34,441
Town Attorney 621,391 628,793 559,010 69,783
Administrative Services 4,815,138 4,881,105 4,380,504 500,601
Non‐Departmental 3,873,255 8,201,520 7,878,468 323,052
Total General Government 9,550,389 13,952,023 13,024,146 927,877
Public Safety 16,940,786 16,995,583 15,793,815 1,201,768
Community Development 5,760,099 5,760,099 4,473,790 1,286,309
Parks & Public Works 8,070,068 8,328,730 8,139,106 189,624
Library Services 2,935,010 2,960,784 2,700,802 259,982
Capital Outlay ‐ ‐ 138,384 (138,384)
Total Expenditures 43,256,352 47,997,219 44,270,043 3,727,176
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES (418,780) (3,682,711) (1,554,136) 2,128,575
OTHER FINANCING SOURCES (USES)
Proceeds from sale of assets 1,000 1,201,000 656 (1,200,344)
Transfers In 538,536 593,333 599,669 6,336
Transfers Out (7,753,140) (8,053,847) (8,053,847) ‐
Total Other Financing Sources (Uses) (7,214,604) (7,460,514) (7,453,522) (1,194,008)
NET CHANGES IN FUND BALANCES (7,633,384)$ (11,143,225)$ (9,007,658) 934,567$
BEGINNING FUND BALANCE, as restated 38,343,155
ENDING FUND BALANCE 29,335,497$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
TOWN OF LOS GATOS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
The notes to the financial statements are an integral part of this statement.Draft 12/10/202050
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
PROPRIETARY FUNDS – INTERNAL SERVICE FUNDS
Internal service funds account for Town operations financed and operated in a manner similar to a private
business enterprise. The intent of the Town is that the cost of providing goods and services to other Town funds
be financed through user charges to those funds.
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.
Draft 12/10/202051
Governmental
Activities
Internal Service
Funds
ASSETS
Cash & investments 9,085,752$
Restricted cash & investments 114,213
Accounts Receivable 28,553
Total Assets 9,228,518
LIABILITIES
Current Liabilities:
Accounts payable 249,027
Total current liabilities 249,027
Noncurrent liabilities:
Claims payable 1,248,411
Total noncurrent liabilities 1,248,411
Total Liabilities 1,497,438
Restricted for workers compensation claims 114,213
Unrestricted 7,616,867
Total Net Position 7,731,080$
TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2020
The notes to the financial statements are an integral part of this statement.Draft 12/10/202052
Governmental
Activities
Internal Service
Funds
OPERATING REVENUES
Charges for services 3,209,982$
Interest 7
Use of money and property 165,652
Other local taxes 34,437
Other 596,752
Total Operating Revenues 4,006,830
OPERATING EXPENSES
Services and Supplies 3,549,649
Total Operating Expenses 4,423,652
Operating Income (416,822)
Transfers in (Note 4)1,061,256
Transfers out (Note 4)(1,367,797)
Net transfers (306,541)
Change in Net Position (723,363)
BEGINNING NET POSITION 8,454,443
ENDING NET POSITION 7,731,080$
TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
The notes to the financial statements are an integral part of this statement.Draft 12/10/202053
Governmental
Activities
Internal Service
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 4,089,772$
Payments to suppliers (3,620,655)
Claims paid (733,825)
Net cash provided (used) by operating activities (264,708)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers In/(Out)(306,541)
Net cash provided (used) by noncapital financing activities (306,541)
Net Increase(Decrease) in Cash and Investments (571,249)
Cash and investments ‐ beginning of year 9,771,214
Cash and investments ‐ end of year 9,199,965$
FINANCIAL STATEMENT PRESENTATION
Cash & investments 9,085,752$
Restricted cash & investments 114,213
Total 9,199,965$
Reconciliation of Operating Income to Cash Flows
from Operating Activities:
Operating Income (416,822)$
Change in assets and liabilities:
Receivables, net 82,942
Accounts payable (70,864)
Claims payable 140,178
Due to other government (142)
Cash Flows From Operating Activities (264,708)$
TOWN OF LOS GATOS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
The notes to the financial statements are an integral part of this statement.Draft 12/10/202054
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
FIDUCIARY FUNDS
Trust funds are used to account for assets held by the Town as a trustee agent for individuals, private
organizations and other governments. The financial activities of these funds are excluded from the government‐
wide financial statements, but are presented in separate Fiduciary Fund financial statements.
Library Private Purpose Trust Fund was established to provide for the servicing of donations and bequests to
the Town's Library Program.
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.
Draft 12/10/202055
Total
Private
Purpose Trust
Funds
ASSETS
Cash and investments (Note 2)2,343,505$
Restricted cash and investments (Note 2)1,987,621
Accounts receivable 8,750
Loans receivable (Note 3)575,425
Capital assets (Note 5):
Nondepreciable 5,257,422
Depreciable, net of accumulated depreciation 1,423,701
Total Assets 11,596,424
LIABILITIES
Accounts payable 3,064
Due to other governments (Note 13)2
Interest payable 285,390
Long‐term debt (Note 6):
Due within one year 1,250,000
Due in more than one year 14,461,545
Total Liabilities 16,000,001
NET POSITION
Held in trust (4,403,577)
Total Net Position (4,403,577)$
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2020
The notes to the financial statements are an integral part of this statement.Draft 12/10/202056
Total
Private
Purpose Trust
Funds
ADDITIONS
Property taxes 1,949,284$
Investment earnings 53,652
Gifts, bequests and endowments 61,809
Other 1,905,024
Total Additions 3,969,769
DEDUCTIONS
Program expenses of former RDA 1,916,701
Interest and fiscal agency expenses of RDA 651,462
Library services 82,626
Depreciation expense 101,692
Total Deductions 2,752,481
CHANGE IN NET POSITION 1,217,288
NET POSITION ‐ BEGINNING OF YEAR (5,620,865)
NET POSITION ‐ END OF YEAR (4,403,577)$
‐$
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
The notes to the financial statements are an integral part of this statement.Draft 12/10/202057
This page intentionally left blank Draft 12/10/202058
Notes to Basic Financial Statements Draft 12/10/202059
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Description of the Financial Reporting Entity
The Town of Los Gatos (the “Town”) operates under a Council‐Manager form of government and provides
the following services: public safety (including police and emergency management), parks and public works,
community development, library, public improvements, planning and zoning, and general administration
services. Redevelopment services were provided primarily through the Redevelopment Agency of the Town
which was dissolved on February 1, 2012.
The Town is largely a residential community located in the foothills of the Santa Cruz Mountains and was
incorporated as a municipal corporation in 1887. The Town’s population as of January 1, 2020 was 31,439.
As required by generally accepted accounting principles, these financial statements present the Town as the
Primary Government and any component units for which the Town is considered financially accountable.
B. Description of Blended Component Units
The Town did not report any component units as a part of the primary government because the Town
Council was not the governing body of any entities and no separate entity provided services solely to the
Town.
C. Description of Joint Ventures and Public Entity Risk Pool
As described in Note 11, the Town participates in two joint ventures and public entity risk pool activities
through formally organized separate legal entities. The financial activities of the Pooled Liability Assurance
Network Joint Powers Authority (PLAN JPA) and the Local Agency Workers’ Compensation Excess Joint
Powers Authority (LAWCX) are not included in the accompanying basic financial statements as these boards
are separate from and independent of the Town administration.
D. Basis of Presentation
The Town’s Basic Financial Statements are prepared in conformity with accounting principles generally
accepted in the United States of America. The Government Accounting Standards Board (“GASB”) is the
acknowledged standard setting body for establishing accounting and financial reporting standards followed
by governmental entities in the U.S.A.
The accompanying financial statements are presented on the basis set forth in Government Accounting
Standards Board Statements No. 34, Basic Financial Statements—and Management’s Discussion and
Analysis—for State and Local Governments, No. 36, Recipient Reporting for Certain Non‐exchange Revenues,
an Amendment of GASB Statement No. 33, No. 37, Basic Financial Statements—and Management’s
Discussion and Analysis—for State and Local Governments; Omnibus, and No. 38, Certain Financial
Statement Note Disclosures.
These Statements require that the financial statements described below be presented.
Draft 12/10/202060
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Government‐wide Statements: The Statement of Net Position and the Statement of Activities display
information about the primary government (the Town). These statements include the financial activities of
the overall Town government, except for fiduciary activities. Eliminations have been made to minimize the
double counting of internal activities. However, interfund services provided and used are not eliminated in
the process of consolidation. These statements present governmental activities of the Town. Governmental
activities generally are financed through taxes, intergovernmental revenues, and other non‐exchange
transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each
function of the Town’s governmental activities. Direct expenses are those that are specifically associated
with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues
include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and
contributions that are restricted to meet the operational needs of a particular program and (c) fees, grants
and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues
that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the Town's funds,
including fiduciary funds and blended component units. Separate statements for each fund category—
governmental, proprietary and fiduciary—are presented. The emphasis of fund financial statements is on
major individual governmental funds, each of which is displayed in a separate column. All remaining
governmental funds are aggregated funds and reported as non‐major funds.
Internal service funds of the Town (which provide services primarily to other funds of the Town) are
presented, in summary form, as part of the proprietary fund financial statements. Since the principal users
of the internal services are the Town’s governmental activities, financial activities of the internal service
funds are presented in the governmental activities column when presented at the government‐wide level.
The costs of these services are allocated to the appropriate function/program in the Statement of Activities.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions
associated with the principal activity of the fund. Exchange transactions are those in which each party
receives and gives up essentially equal values. Non‐operating revenues, such as subsidies and investment
earnings, result from non‐exchange transactions or ancillary activities.
E. Major Funds
GASB defines major funds and requires that the Town’s major governmental funds be identified and
presented separately in the fund financial statements. All other funds, called non‐major funds, are
combined and reported in a single column, regardless of their fund‐type.
Major funds are defined as funds that have assets, deferred outflows of resources, liabilities, deferred
inflows of resources, revenues or expenditures/expenses equal to ten percent of their fund‐type total and
five percent of the grand total. The General Fund is always a major fund. The Town may also select other
funds it believes should be presented as major funds.
Draft 12/10/202061
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Town reported the following major governmental funds in the accompanying financial statements:
General Fund is the general operating fund of the Town and is used to account for all financial resources
except those required to be accounted for in another fund.
Appropriated Reserves Fund is used to account for resources provided for capital projects not fully
funded from other sources.
The Town also reports the following fund types:
Internal Service Funds are used to account for services, which are provided to other departments on a cost‐
reimbursement basis. Those services include workers compensation, self‐insurance, facilities maintenance,
information technology, and equipment replacement.
Fiduciary Funds include Private‐Purpose Trust Funds used to account for assets held by the Town as an agent
for individuals, private organizations, and other governments. The financial activities of this fund are
excluded from the government‐wide financial statement but are presented in a separate Fiduciary Fund
financial statement.
The Town reported the following Fiduciary Funds in the accompanying financial statements:
Library Private Purpose Trust Fund provides for the servicing of donations and bequests to the Town's
Library Program and includes the following:
History Project Private Purpose Trust Fund was established to provide for the servicing of
donations, bequests, grant monies and expenditures to the history project partnership of Los
Gatos Public Library and the Museum of Los Gatos.
Clelles Ness Private Purpose Trust Fund was established by Ansten R. Ness, M.D. and the Board
of Library Trustees for the Town of Los Gatos, as a memorial to his wife, Clelles Ness to use the
income and principal of the trust estate to provide materials and services not ordinarily available
from public funds.
Susan E. (Betty) McClendon Private Purpose Trust Fund is a bequest to the Los Gatos Public
Library from the estate of Susan McClendon established to be used solely for children's services.
Barberra J. Cassin Private Purpose Trust Fund is a bequest to the Town from the estate of
Barberra J. Cassin established to be distributed to the Los Gatos Public Library for the purpose
of establishing an endowment fund, which is to be used for the support of science, the arts and
humanities projects.
Draft 12/10/202062
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RDA Successor Agency Private Purpose Trust Fund accounts for the assets, liabilities and operations
transferred from the dissolution of the Town’s Redevelopment Agency in 2012, which includes the
following:
Certificates of Participation issued to finance several capital improvement projects throughout
the Town.
Redevelopment projects and related property tax revenue.
Affordable Housing Set‐Aside Program obligations.
Repayment of obligations incurred by the Town’s Redevelopment Agency prior to its dissolution.
F. Basis of Accounting
The government‐wide, proprietary and fiduciary fund financial statements are reported using the economic
resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned
and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take
place.
Governmental funds are reported using the current financial resources measurement focus and the modified
accrual basis of accounting. Under this method, revenues are recognized when measurable and available.
The Town considers property tax revenues reported in the governmental funds to be available if the
revenues are collected or are reasonably expected to be collected within sixty days after year‐end. For
revenues other than property taxes, the Town generally applies the sixty‐day period rule but would make
exceptions considering the measurable and available criteria. Expenditures are recorded when the related
fund liability is incurred, except for principal and interest on general long‐term debt, which is recognized
upon becoming due and payable; and except for claims, judgments and compensated absences, which are
recognized when estimable and probable. Governmental capital asset acquisitions are reported as
expenditures in governmental funds. Proceeds of governmental long‐term debt and acquisitions under
capital leases are reported as other financing sources.
Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental revenues,
and interest revenue. Fines, forfeitures, licenses and permits, and charges for services are not susceptible to
accrual because they are not measurable until received in cash.
Non‐exchange transactions, in which the Town gives or receives value without directly, receiving or giving
equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue
from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants,
entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been
satisfied.
Draft 12/10/202063
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Town may fund programs with a combination of cost‐reimbursement grants, categorical block grants
and/or general revenues. Thus, both restricted and unrestricted net position may be available to finance
program expenditures. The Town’s policy is to first apply restricted grant resources to such programs
followed by general revenues as necessary.
Certain indirect costs are included in program expenses reported for individual functions and activities.
The Town applies all applicable GASB pronouncements for certain accounting and financial reporting
guidance including those applicable to accounting and reporting for proprietary operations. In December of
2010, GASB issued GASBS No. 62, Codification of Accounting and Financial Reporting Guidance Contained in
Pre‐November 30, 1989 FASB and AICPA Pronouncements. This statement incorporates pronouncements
issued on or before November 30, 1989 into GASB authoritative literature. This includes pronouncements
by the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinions (APB), and the
Accounting Research Bulletins of the American Institute of Certified Public Accountants' (AICPA) Committee
on Accounting Procedure, unless those pronouncements conflict with or contradict with GASB
pronouncements.
Pension ‐ For purposes of measuring the net pension liability and deferred outflows/inflows of resources
related to pensions, and pension expense, information about the fiduciary net position of the Town’s
California Public Employees’ Retirement System (CalPERS) plans (the Plans) and additions to/deductions
from the Plans’ fiduciary net position have been determined on the same basis as they are reported by
CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized
when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Generally accepted accounting principles require that the reported results must pertain to liability and asset
information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date June 30, 2018
Measurement Date June 30, 2019
Measurement Period July 1, 2018 to June 30, 2019
Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of
resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Town’s
plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been
determined on the same basis. For this purpose, benefit payments are recognized when currently due and
payable in accordance with the benefit terms. Investments are reported at fair value. Generally accepted
accounting principles require that the reported results must pertain to liability and asset information within
certain defined timeframes. For this report, the following timeframes are used:
Valuation Date June 30, 2019
Measurement Date June 30, 2019
Measurement Period July 1, 2018 to June 30, 2019
Draft 12/10/202064
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Cash and Cash Equivalents ‐ The Town’s cash and cash equivalents are considered to be cash on hand,
demand deposits, and short‐term investments with original maturities of three months or less from the date
of acquisition.
State of California statutes and the Town’s investment policy authorize the Town to invest in obligations of
the U.S. Treasury, its agencies and instrumentalities, collateralized, non‐negotiable certificates of deposits,
commercial paper rated A‐1/P‐1, medium‐term corporate notes rated A or its equivalent or better by
Moody’s or Standard & Poor’s, asset backed corporate notes, bankers’ acceptances, mutual funds, and the
State Treasurer’s investment pool (Local Agency Investment Fund).
The Town does not enter into repurchase or reverse repurchase agreements.
Investments ‐ Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value
Measurement and Application. Accordingly, the change in fair value of investments is recognized as an
increase or decrease to investment assets and investment income.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction. In determining this amount, three valuation techniques are available:
Market approach ‐ This approach uses prices generated for identical or similar assets or liabilities. The
most common example is an investment in a public security traded in an active exchange such as the
NYSE.
Cost approach ‐ This technique determines the amount required to replace the current asset. This
approach may be ideal for valuing donations of capital assets or historical treasures.
Income approach ‐ This approach converts future amounts (such as cash flows) into a current discounted
amount.
Each of these valuation techniques requires inputs to calculate a fair value. Observable inputs have been
maximized in fair value measures, and unobservable inputs have been minimized.
Materials, Supplies and Deposits ‐ These assets are held for consumption and are stated at cost using the
first‐in, first‐out method. The costs are recorded as expenditures at the time the item is consumed.
Interfund Receivables and Payables ‐ Transactions between funds that are representative of
lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “advances
to/advances from other funds”. All other outstanding balances between funds are reported as “due to/from
other funds”.
Advances ‐ Advances between funds are offset by a nonspendable fund balance in applicable Town funds to
indicate the extent to which they are not available for appropriation and are not expendable available
financial resources.
Draft 12/10/202065
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Capital Assets ‐ Capital assets are valued at historical cost or estimated historical cost if actual historical cost
is not available. Contributed capital assets are valued at their acquisition value on the date contributed.
Donated capital assets, donated works of art and similar items, and capital assets received in a service
concession arrangement are reported at acquisition value. Capital assets, including infrastructure, are
recorded if acquisition or construction costs exceed $10,000.
As required by GASB, the Town depreciates capital assets with limited useful lives over their estimated useful
lives. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the
life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata
share of the cost of capital assets. The Town depreciates using the straight line method which means the
cost of the asset is divided by its expected useful life in years and the result is charged to expense each year
until the asset is fully depreciated.
The Town has assigned the useful lives listed below to capital assets:
Buildings 25‐40 years
Improvements 25‐40 years
Machinery and equipment 2‐20 years
Furniture and fixtures 5‐12 years
Software 5‐7 years
Infrastructure 20‐40 years
Major capital outlay for capital assets and improvements are capitalized as projects are constructed.
Capital assets may be acquired using federal and state grants, contributions from developers, and
contributions or grants from other governments. GASB 34 requires that these contributed assets be
accounted for as revenue at the time they are contributed.
Deferred Compensation Plan ‐ The Town established a deferred compensation plan created in accordance
with California Government Code Section 53212 and Internal Revenue Code Section 457. The plan, available
to all Town employees, permits them to defer a portion of their salary until future years. The deferred
compensation is not available to employees until termination, retirement, death, or unforeseeable
emergency. Deferred compensation plans are not reported as part of the Town’s assets or liabilities, as the
deferred compensation plan trustees hold those funds in trust on behalf of employees until the employees
are eligible to receive the benefits.
Compensated Absences ‐ Accumulated Vacation, Sick Pay and Other Employee Benefits are accrued as
earned. Upon termination, employees are paid for all unused vacation at their current hourly rates. Sick
leave earned is cashed out based on the following schedule for employees with at least 150 hours accrued
and up to a maximum amount as specified under labor contract provisions:
For employees under contract 1‐59 months 25.0%
For employees under contract 60‐119 months 37.5%
For employees under contract 120 months or more 50.0%
Draft 12/10/202066
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Town’s liability for compensated absences is determined annually. For all governmental funds, amounts
expected to be paid out of current financial resources are recorded as liabilities of each fund; the long‐term
portion is recorded in the Statement of Net Position. The changes of the compensated absences were as
follows:
Compensated absences are liquidated by the fund that has recorded the liability. The long‐term portion of
governmental activities compensated absences is liquidated primarily by the General fund. Only
compensated absences liabilities related to retirements as of the end of the fiscal year are reported in the
fund financial statements.
Unearned Revenue ‐ Unearned revenue arises when assets are received before revenue recognition criteria
have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded
as unearned revenue. In the governmental fund financial statements, receivables associated with non‐
exchange transactions that will not be collected within the availability period have been recorded as
deferred inflows from unavailable revenue.
Long‐Term Liabilities ‐ In the government‐wide financial statements and private‐purpose trust funds long‐
term debt and other long‐term obligations are reported as liabilities in the applicable statement of net
position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life
of the bonds using the straight‐line method. Bonds payable are reported net of the applicable bond premium
or discount.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well
as bond issuance costs, during the current period. The face amount of debt issued is reported as other
financing sources. Premiums received on debt issuances are reported as other financing sources while
discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld
from the actual debt proceeds received, are reported as debt service expenditures.
Deferred Outflows/Deferred Inflows of Resources ‐ Deferred outflows of resources is a consumption of net
position by the Town that is applicable to a future reporting period, for example, contributions to pension
and OPEB plans that are after the actuarial measurement date.
Deferred inflows of resources is an acquisition of net position by the Town that is applicable to a future
reporting period, for example, unavailable revenue.
Beginning Balance $ 2,837,934
Addition 1,705,099
Payments (1,435,330)
Ending Balance $ 3,107,703
Compensated Absences Current Portion $ 335,642 Draft 12/10/202067
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Net Position ‐ In the government‐wide financial statements, net position is classified in the following
categories:
Net Investment in Capital Assets ‐ This amount consists of capital assets net of accumulated depreciation
and reduced by outstanding debt that is attributed to the acquisition, construction, or improvement of the
assets. In addition, deferred outflows of resources and deferred inflows of resources that are attributable to
the acquisition, construction, or improvement of those assets or related debt also are included in the net
investment in capital assets component of net position.
Restricted Net Position ‐ This amount is restricted by external creditors, grantors, contributors, or laws or
regulations of other governments.
Unrestricted Net Position ‐ This amount is all net position that does not meet the definition of "net
investment in capital assets" or "restricted net position."
Fund Balances ‐ The Town does not have a policy identifying a minimum unassigned fund balance. Because
amounts in the nonspendable, restricted, committed, and assigned categories are subject to varying
constraints on their use, the remaining fund balances are otherwise unassigned.
In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and Governmental
Fund Type Definitions, the Town classifies governmental fund balances as follows:
Non‐spendable includes fund balance amounts that cannot be spent either because it is not in spendable
form or because of legal or contractual constraints.
Restricted includes fund balance amounts that are constrained for specific purposes which are externally
imposed by providers, such as creditors or amounts constrained due to constitutional provisions or
enabling legislation.
Committed includes fund balance amounts that are constrained for specific purposes that are internally
imposed by the government through Council Resolution which is a formal action of the highest level of
decision making authority and does not lapse at year‐end. Committed fund balances are imposed by the
Town Council.
Assigned includes fund balance amounts that are intended to be used for specific purposes that are
neither considered restricted or committed. Fund balance may be assigned by the Town Manager or the
Finance Director.
Unassigned includes fund balances within the funds which have not been classified within the above
mentioned categories. The general fund is the only fund that reports a positive unassigned fund balance
amount. In other governmental funds it is not appropriate to report a positive unassigned fund balance
amount. However, in governmental funds other than the general fund, if expenditures incurred for specific
purposes exceed the amounts that are restricted, committed, or assigned to those purposes, it may be
necessary to report a negative unassigned fund balance in that fund.
Draft 12/10/202068
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Town uses restricted/committed amounts to be spent first when both restricted and unrestricted fund
balance is available unless there are legal documents/contracts that prohibit doing this, such as a grant
agreement requiring dollar for dollar spending. Additionally, the Town would first use committed, then
assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made.
Use of Estimates ‐ The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent asset and liabilities at the dates of the financial statements
and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual
results could differ from those estimates.
Subsequent Events ‐ Management has considered subsequent events through December 11, 2020, the date
which the financial statements were available to be issued. The financial statements include all events or
transactions, including estimates, required to be recognized in accordance with generally accepted
accounting principles. Management has determined that there are no non‐recognized subsequent events
that require additional disclosure.
Property Tax Levy, Collection and Maximum Rates ‐ State of California Constitution Article XIII A provides
that the combined maximum property tax rate on any given property may not exceed 1% of its assessed
value unless an additional amount for general obligation debt has been approved by voters. Assessed value
is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2%
per year unless the property is sold, transferred, or substantially improved. The State Legislature has
determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school
districts and other districts.
The County of Santa Clara assesses properties, bills for and collects property taxes on the following schedule:
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.
Draft 12/10/202069
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Budgets and Budgetary Accounting ‐ The Town follows the procedures below when establishing the
budgetary data reflected in the financial statements:
1. The Town Manager submits to the Town Council a proposed operating and capital improvement budget
for the fiscal year commencing the following July 1. The budgets include the proposed expenditures and
the means of financing them.
2. Public hearings are conducted to obtain taxpayer comments.
3. The budget is legally enacted through adoption of Town resolution by Council.
4. The Town Manager is authorized to implement the programs as approved in the adopted budget. Within
a specific fund, the Town Manager may transfer appropriations between categories, departments,
projects and programs as needed to implement the adopted budget, whereas the Town Council must
authorize budget increases and decreases, and transfers between funds.
5. Budgets are adopted on a basis consistent with generally accepted accounting principles except for
proprietary funds which budget for capital outlays but not depreciation. Budgets were adopted for the
General Fund, Special Revenue Funds, Internal Service Funds and Capital Projects Funds.
6. Budgeted amounts are as originally adopted or as amended by Town Council. Individual budget
adjustments or amendments were not material in relation to original appropriations, except for an
increase in non‐departmental expenditures related to a discretionary lump‐sum payment to CalPERS for
the pension liability.
Excess of Expenditures over Appropriations ‐ There were no significant expenditures in excess of budget
during the year ended June 30, 2020.
Encumbrances ‐ Under encumbrance accounting, purchase orders, contract and other commitments for
expenditures are recorded in order to reserve that portion of the applicable appropriation. Encumbrance
accounting is employed as an extension of formal budgetary integration in all funds. Encumbrances
outstanding at year‐end are reported as restrictions, commitments or assignments of fund balances since
they do not constitute expenditures or liabilities; unexpended and unencumbered appropriations lapse at
year end in all funds. Encumbered appropriations are carried forward to the following year.
Reclassifications ‐ Certain accounts in the prior‐year financial statements have been reclassified for the
presentation in the current‐year financial statements.
G. Accounting and Reporting Changes
In fiscal year 2020, the City did not adopt any new GASB statements.
NOTE 2 ‐ CASH AND INVESTMENTS
The Town pools cash from all sources and all funds except Restricted Cash and Restricted Investments so that it
can be invested at the maximum yield, consistent with the primary objectives of safety and liquidity, while
ensuring existing funds have cash available for expenditures.
Cash and Investments Defined ‐ The Town includes only cash deposits in banks as cash. Investments in LAIF and
government securities mutual funds are next in the order of liquidity, since they may be withdrawn without
penalty. U.S. Treasuries, U.S. Agencies and Certificates of Deposit are the Town’s least liquid investments, since
they must be held to maturity. Draft 12/10/202070
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 2 ‐ CASH AND INVESTMENTS, CONTINUED
Cash Deposits with Banks and Custodial Credit Risk ‐ California Law requires banks and savings and loan
institutions to pledge government securities with a fair value of 110% of the Town’s cash on deposit, first trust
deed mortgage notes with a value of 150% of the deposit, or letters of credit issued by the Federal Home Loan
Bank of San Francisco with a value of 100% of the deposit as collateral. Under California Law this collateral is
held in the Town’s name and places the Town ahead of general creditors of the institution. The Town’s cash
deposits are collateralized under this law.
The bank balance of the Town’s cash deposits was $15,285,669 and the book balance was $13,801,981 as of
June 30, 2020. The bank balance and the carrying amount differed due to deposits in transit and outstanding
checks.
Investments ‐ The Town and its fiscal agent invest in individual investments and in investment pools. Individual
investments are evidenced by specific identifiable pieces of paper called “securities instruments,” or by an
electronic entry registering the owner in the records of the institution issuing the security, called the book entry
system. In order to maximize security, the Town employs the Trust department of a bank as the custodian of all
its investments, regardless of their form.
Fair Value Measurements ‐ GASB 72 established a hierarchy of inputs to the valuation techniques above. This
hierarchy has three levels:
Level 1 inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are quoted market prices for similar assets or liabilities, quoted prices for identical or
similar assets or liabilities in markets that are not active, or other than quoted prices that are not
observable
Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal.
Local Agency Investment Fund (LAIF) ‐ The Town invests in the California State Treasurer’s Local Agency
Investment Fund. LAIF, established in 1977, is regulated by California Government Code Section 16429 and is
under the day to day administration of the State Treasurer. As of June 30, 2020, the Town had approximately
$12.2 million in LAIF and used a fair value factor of 1.004912795 to calculate the fair value of the investments in
LAIF. Of that amount, 96.63% is invested in non‐derivative financial products and 3.37% in structured notes and
asset‐backed securities. These investments are described as follows:
1. Structured Notes are debt securities (other than asset‐backed securities) whose cash flow characteristics
(coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have
embedded forwards or options.
2. Asset‐Backed Securities, the bulk of which are mortgage‐backed securities, entitle their purchasers to
receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool
of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.
Risk Disclosures
Interest Rate Risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to
the changes in market interest rates. One of the ways that the Town manages its exposure to interest rate risk
is by purchasing a combination of shorter term and longer term investments and by timing cash flows from
maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary Draft 12/10/202071
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 2 ‐ CASH AND INVESTMENTS, CONTINUED
to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values
of the Town's investments to market interest rate fluctuations is provided in the summary of cash and
investments table on the following page that shows the distribution of the Town's investments by maturity.
Credit Risk is the risk of loss due to the failure of the security issuer. This risk is measured by the assignment of
a rating by a nationally recognized statistical rating organization. The summary of cash and investments table on
the following page shows the minimum rating under the actual rating of the Town’s investments at year end.
Custodial Credit Risk is the risk that in the event of the failure of the counterparty (e.g., broker‐dealer) to a
transaction, a government will not be able to recover the value of its investment or collateral securities that are
in the possession of another party. The Town’s money market fund and investment in LAIF are not categorized
as to custodial credit risk. Its U.S. Government Agency Securities investment is held by a third‐party financial
institution under the third party’s trust department’s name and thus not exposed to custodial credit risk.
Concentration of Credit Risk is the risk that the Town’s investments are exposed because the types of
investments have been too limited. The Town’s Policy states that, with the exception of US Treasury securities
and LAIF, no more than 50% of the Town’s total investment portfolio will be invested in one single security type
or with a single financial institution. The Town was in compliance with this policy as of June 30, 2020.
Risk Disclosures, Continued
The following table summarizes the Town’s policy related to maturities and concentration of investments:
Investment Type
Maximum
Maturity
Maximum
Portfolio
Percentage
US Treasury Obligations 5 years None
US Agency Obligations 5 years None
Bankers Acceptances 180 days 30%
Commercial Paper 270 days 25%
Medium Term Notes 5 years 30%
Collateralized CD's 5 years 30%
CA LAIF N/A $65 million
Money Market Funds N/A 20% Draft 12/10/202072
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 2 ‐ CASH AND INVESTMENTS, CONTINUED
The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30, 2020:
Cash and investments are classified in the financial statements as shown below, based on whether or not their
use is restricted by Town debt or Agency agreements.
NOTE 3 ‐ LONG‐TERM NOTES RECEIVABLE
The Town had the following long‐term notes receivable as of June 30, 2020:
Investment Type/Cash Deposit
Available for
Operations Restricted Total
Concentration
of Credit Risk
Minimum
Rating
Input
level
Time to
Mature
(Years)
Weighted
Average
Maturity
US Treasury Securities 8,054,756$ ‐$ 8,054,756$ 13.40% Aaa 2 1‐4 2.58 years
US Instrumentality Security 23,940,487 ‐ 23,940,487 39.82% Aaa 2 0‐4 2.02 years
Corporate Securities 15,802,160 ‐ 15,802,160 26.28% A3 2 0‐4 2.38 years
Government Securities Money
Market Mutual funds 145,920 ‐ 145,920 0.24% Not Rated 2 n/a n/a
LAIF 12,185,932 ‐ 12,185,932 20.27% Not Rated n/a n/a n/a
Total investments 60,129,255 ‐ 60,129,255 100.00%
Cash Deposit with Banks 13,801,981 2,101,834 15,903,815
Money Market Accounts 17,388 ‐ 17,388
Investment held in pension trust ‐ 669,978 669,978
Cash on hand at Town 4,850 ‐ 4,850
Town Cash and Investments 73,953,474$ 2,771,812$ 76,725,286$
Total Town Fiduciary Funds Total
Cash and Investments available for operations 71,609,969$ 2,343,505$ 73,953,474$
Restricted cash and investments 784,191 1,987,621 2,771,812
Total cash and investments 72,394,160$ 4,331,126$ 76,725,286$
Description Interest Rate Maturity Balance
General Fund:
Rehab Loan to Charities Various Various 159,000$
Total General Fund 159,000
Community Development Block Grant Fund (CDBG):
Housing Conservation Loans 0‐5%Various 78,752
Total CDBG 78,752
Total Long Term Notes Receivable ‐ Government‐Wide Statement of Net Position 237,752
Successor Agency Affordable Housing
Project Match Various Various 575,425
Total Long Term Notes Receivable 813,177$ Draft 12/10/202073
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 3 ‐ LONG‐TERM NOTES RECEIVABLE, CONTINUED
Active Home Loans and Housing Conservation Loans ‐ The Town used CDBG Funds (funded through federal
grants) to assist low and moderate income homeowners to improve their homes and to fund low income housing
rental properties acquisition and rehabilitation. These loans are secured by deeds of trust.
Project Match ‐ The Successor Agency has a loan agreement with Project Match, a nonprofit benefit corporation,
to acquire and rehabilitate four‐ or five‐bedroom single‐family homes. The property is to provide affordable
housing rental to very low income senior households. The loan receivable is evidenced by a promissory note and
secured by a deed of trust. From inception of the loan through June 30, 2020, no interest or principal payments
have been made.
NOTE 4 ‐ INTERFUND TRANSACTIONS
Interfund Receivables and Payables ‐ Amounts due to or due from other funds reflect interfund balances for
services rendered or short‐term loans expected to be repaid in the next fiscal year. Advances to or from other
funds are long‐term loans between funds that are to be repaid in their entirety over several years.
Transfers ‐ With Council approval resources may be transferred from one fund to another. Transfers pay for
capital projects or capital outlays, lease or debt service payments, operating expenses and low and moderate‐
income housing projects. Transfers between funds during the fiscal year ended June 30, 2019 were as follows:
Transfer In Transfer Out
General Fund 599,669$ 8,053,847$
Appropriated Reserve Fund 8,325,591 433,952
Non‐major Gov't Funds 10,000 140,920
Internal Service Funds 1,061,256 1,367,797
Total Transfers 9,996,516$ 9,996,516$ Draft 12/10/202074
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 5 ‐ CAPITAL ASSETS
Changes in the Town’s capital assets during the fiscal year are shown as follows:
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:
Balance at Adjustments Transfers and Balance at
June 30, 2019 and Additions Retirements June 30, 2020
Capital Assets not being Depreciated
Land 20,294,810$ ‐$ ‐$ 20,294,810$
Construction in Progress 13,718,006 2,294,775 (13,968,638) 2,044,143
Total Capital Assets not being Depreciated 34,012,816 2,294,775 (13,968,638) 22,338,953
Capital Assets being Depreciated
Buildings and Improvements 30,178,972 51,645 1,664,497 31,895,114
Equipment & Vehicle 11,484,761 654,980 (403,346) 11,736,395
Infrastructure ‐ All Other 25,275,447 922,122 ‐ 26,197,569
Infrastructure ‐ Streets 63,014,800 4,072,168 10,631,392 77,718,360
Total Capital Assets being Depreciated 129,953,980 5,700,915 11,892,543 147,547,438
Less Accumulated Depreciation for:
Buildings and Improvements 7,923,246 630,658 ‐ 8,553,904
Equipment & Vehicle 8,827,268 627,306 (400,877) 9,053,697
Infrastructure ‐ All Other 6,431,634 775,417 ‐ 7,207,051
Infrastructure ‐ Streets 33,242,060 1,802,203 (1,672,749) 33,371,514
Total accumulated depreciation 56,424,208 3,835,584 (2,073,626) 58,186,166
Net Capital Assets being Depreciated 73,529,772 1,865,331 13,966,169 89,361,272
Governmental Activity Capital Assets, Net 107,542,588$ 4,160,106$ (2,469)$ 111,700,225$
Depreciation
Governmental Activities Expense
General Government 181,357$
Community Services 52,599
Public Safety 476,528
Parks & Public Works 2,747,628
Library 377,217
Sanitation 255
Total Governmental Activities 3,835,584$ Draft 12/10/202075
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 5 ‐ CAPITAL ASSETS, CONTINUED
Changes in the RDA Successor Agency trust fund capital assets during the fiscal year are shown as follows:
NOTE 6 ‐ LONG‐TERM OBLIGATIONS
The Town generally incurs long‐term debt to finance projects or purchase assets, which will have useful lives
equal to or greater than the related debt. As of February 1, 2012, the Town transferred long‐term debt issued
by the Redevelopment Agency to the Successor Agency trust as a part of the RDA dissolution. The following
summarizes the changes in long‐term debt in the Successor Agency trust fund during the fiscal year ended June
30, 2020:
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, $15,675,000 of 2010 COPs were issued to
finance the acquisition, construction, and improvement of a library on the Town’s Civic Center campus, to be
owned and operated by the Town. Principal payments are due annually on August 1, with interest payments due
semi‐annually on February 1 and August 1.
Balance at Adjustments Transfers and Balance at
June 30, 2019 and Additions Retirements June 30, 2020
Capital Assets not being Depreciated
Land 5,257,422$ ‐$ ‐$ 5,257,422$
Total Capital Assets not being Depreciated 5,257,422 ‐ ‐ 5,257,422
Capital Assets being Depreciated
Buildings and Improvements 4,067,708 ‐ ‐ 4,067,708
Total Capital Assets being Depreciated 4,067,708 ‐ ‐ 4,067,708
Less Accumulated Depreciation for:
Buildings and Improvements 2,542,315 101,692 ‐ 2,644,007
Total accumulated depreciation 2,542,315 101,692 ‐ 2,644,007
Net Capital Assets being Depreciated 1,525,393 (101,692) ‐ 1,423,701
Successor Agency Capital Assets, Net 6,782,815$ (101,692)$ ‐$ 6,681,123$
Long Term Debt
Interest
Rate
Maturity
Date
Original
Issue
Beginning
Balance Deletion
Ending
Balance
Due Within
One Year
Due in More
Than One
Year
2002 COP 2.5 ‐5% 8/1/2031 10,725,000$ 6,430,000$ 365,000$ 6,065,000$ 385,000$ 5,680,000$
2010 COP 2.5 ‐ 4.25% 8/1/2028 15,675,000 10,100,000 830,000 9,270,000 865,000 8,405,000
Subtotal COP 26,400,000 16,530,000 1,195,000 15,335,000 1,250,000 14,085,000
Premiums 735,095 414,200 37,655 376,545 376,545
Total Long‐Term Debt 27,135,095$ 16,944,200$ 1,232,655$ 15,711,545$ 1,250,000$ 14,461,545$ Draft 12/10/202076
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 6 ‐ LONG‐TERM OBLIGATIONS, CONTINUED
To assist the Town in paying the cost of acquisition and construction of various projects, the Town and its
Redevelopment Agency entered into lease and reimbursement agreements in 2002 and 2010. Under the
agreements, the Agency will use available net tax increment revenues resulting from the projects’ effect on land
values to repay the Town for all lease payments made by the Town to the Agency under the lease agreements
for the projects. Net tax increment revenues are all taxes allocated to and paid into the Successor Agency private‐
purpose trust fund.
Future debt service requirements of the 2002 and 2010 Certificates of Participation are as follows:
The Successor Agency must maintain a required amount of cash and investments with the trustee under the
terms of the COPs’ debt agreements. These funds are pledged as reserves to be used if the Successor Agency
fails to meet its obligations under the debt agreements and totaled $1,987,621 as of June 30, 2020. The California
Government Code requires these funds to be invested in accordance with Town ordinances, bond indentures or
State statues. All these funds have been invested as permitted under the Code.
NOTE 7 ‐ SPECIAL ASSESSMENT DISTRICT DEBT WITHOUT COMMITMENT
Special assessment districts are established in various parts of the Town to provide improvements to properties
located in those districts. Properties are assessed for the cost of the improvements. These assessments are
payable over the term of the debt issued to finance the improvements and are used to pay debt service on debt
issued to fund the improvements.
The Town is acting only as an agent and has no legal liability with respect to the payment of any indebtedness
of the Downtown Parking Assessment District. There was no non‐obligated debt outstanding as of June 30,
2020.
NOTE 8 ‐ FUND BALANCES
Fund balance for governmental funds is reported in classifications (nonspendable, restricted, committed,
assigned, and unassigned) that comprise a hierarchy based primarily on the extent to which the government is
bound to honor constraints on the specific purposes for which amounts in those funds can be spent.
Fiscal Year
Ended June 30,Principal Interest Total
2021 1,250,000 658,494 1,908,494
2022 1,300,000 599,850 1,899,850
2023 1,355,000 538,713 1,893,713
2024 1,415,000 479,550 1,894,550
2025 1,485,000 417,300 1,902,300
2026‐2030 6,670,000 979,200 7,649,200
2031‐2032 1,860,000 142,500 2,002,500
Total COP Debt Service 15,335,000$ 3,815,607$ 19,150,607$ Draft 12/10/202077
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 8 ‐ FUND BALANCES, CONTINUED
As of June 30, 2020, fund balances were classified as follows:
Restricted
Capital Outlay funded from storm drain fees, construction taxes and debt proceeds are legally restricted for
major capital projects.
Repairs and Maintenance reflects legally restricted balances for repairs and maintenance of lighting and
landscape property and open space property that are financed with special tax assessments on the benefiting
property.
Pension amounts are cash and investments held for the purpose of paying for the pension liabilities. Monies are
held in an IRS Section 115 Trust over which the Town has control.
Beginning
Balance Adjustments
Adjusted
Beginning
Balance Additions Deletions
Ending
Balance
Restricted for
Capital Outlay 6,695,233$ ‐$ 6,695,233$ 1,522,139$ (1,959,616)$ 6,257,756$
Pension 5,015,316 5,015,316 420,459 (4,765,797) 669,978
Repairs and Maintenance 208,139 ‐ 208,139 41,603 (59,492) 190,250
Committed to:
Budget Stabilization 5,419,222 ‐ 5,419,222 8,381 ‐ 5,427,603
Catastrophic 5,419,222 ‐ 5,419,222 8,381 ‐ 5,427,603
Pension/OPEB Reserve 4,232,500 ‐ 4,232,500 300,000 ‐ 4,532,500
Almond Grove Street Project 2,579,997 ‐ 2,579,997 ‐ (2,579,997) ‐
Assigned to:
Open Space 562,000 ‐ 562,000 ‐ (152,000) 410,000
Parking 1,460,210 ‐ 1,460,210 ‐ ‐ 1,460,210
Sustainability 140,553 ‐ 140,553 ‐ ‐ 140,553
Capital/Special Projects 13,262,303 ‐ 13,262,303 1,434,141 (5,908,486) 8,787,958
Carryover Encumbrances 413,729 ‐ 413,729 ‐ (413,729) ‐
Comcast PEG 50,000 ‐ 50,000 ‐ ‐ 50,000
Market Fluctuations ‐ ‐ ‐ 1,218,732 ‐ 1,218,732
Vehicle Maintenance & Stores
Reserve 1,040,375 ‐ 1,040,375 ‐ (1,040,375) ‐
Workers' Compensation 1,232,654 ‐ 1,232,654 ‐ (1,232,654) ‐
Compensated Absences 1,232,653 372,628 1,605,281 ‐ (65,873) 1,539,408
Capital Projects 4,344,618 ‐ 4,344,618 11,650,201 (3,727,938) 12,266,881
Measure G 2018 District Sales Tax ‐ ‐ ‐ 1,181,162 ‐ 1,181,162
Special Revenue Funds 326,102 ‐ 326,102 78,486 ‐ 404,588
Total Fund Balance ‐ All
Governmental Funds 53,634,826$ 372,628$ 54,007,454$ 15,879,484$ (15,121,052)$ 49,965,182$ Draft 12/10/202078
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 8 ‐ FUND BALANCES, CONTINUED
Committed
Stabilization Arrangements
The Town Council has established by resolution the budget stabilization arrangement and the catastrophe
arrangement. The total balances in these arrangements are to be maintained at 25% of annual General Fund
ongoing, operating expenditures, excluding one‐time expenditures, divided equally between both
arrangements. When either arrangement is used, Town Council will develop a 1 to 5 year reserve replenishment
plan to meet the minimum threshold of 25% of General Fund ongoing, operating expenditures, excluding one‐
time expenditures. The arrangements can be used when:
Unforeseen emergencies, such as a disaster or catastrophic event occur
Significant decrease in property or sales tax, or other economically sensitive revenues
Loss of businesses considered to be significant sales tax generators
Reductions in revenue due to actions by the state /federal government
Workflow /technical system improvements to reduce ongoing, personnel costs and enhance customer
service
One ‐time maintenance of service levels due to significant economic /budget constraints
One ‐time transitional costs associated with organizational restructuring to secure long‐term personnel
cost savings.
Should any of the events listed above occur that require the expenditure of Town resources beyond those
provided for in the annual budget, the Town Manager or designee shall have authority to approve catastrophic
or budget stabilization arrangement appropriations. The Town Manager or designee shall then present to the
Town Council a budget amendment confirming the nature of the event and authorizing the appropriation of
reserve funds.
Pension/OPEB Reserve committed fund balance will be used to fund net pension liabilities for the Town's
Miscellaneous and Safety pension plans administered by CALPERS. In the fiscal year ending June 30, 2018 the
Town approved an update to its General Fund reserve policy providing to the extent possible that additional
annual deposits be calculated and placed into this reserve with the goal of moving the payment of the unfunded
pension liability from a 29‐year to a 20‐year amortization period.
Almond Grove Street Project committed fund balance was used for the infrastructure repairs, improvements and
construction along Almond Grove Street.
Assigned
Open Space assigned fund balance will be used to make selective open space acquisitions.
Parking assigned fund balance will be used to mitigate parking issues within the Town.
Sustainability assigned fund balance will be used to fund ongoing sustainability initiatives and programs.
Capital/Special Projects assigned fund balance will be used for the acquisition and construction of capital
facilities as well as special projects or activities as directed by the Town Council.
Carryover Encumbrances assigned fund balance is used for encumbered items re‐appropriated in the following
year. Draft 12/10/202079
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 8 ‐ FUND BALANCES, CONTINUED
Comcast PEG assigned fund balance will be used to fund capital improvements linked to the televising of council
and planning commission meetings.
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.
Vehicle Maintenance & Stores Reserve assigned fund balance is to be used for maintaining the Town’s fleet and
providing mail and printing services.
To Workers’ Comp assigned fund balance is to be used for future payments to employees due to illness or injury
as a result of being employed by the Town.
Compensated Absences assigned fund balance will be used for vacation and sick‐pay benefits owed to employees
as of June 30, 2020 that were not an obligation of the General Fund because of their long‐term nature.
Measure G 2018 District Sales Tax assigned fund balance will be used to track receipt and use of the 1/8 cents
District tax funds collected by the Town.
Special Revenue Fund assigned fund balance will be used for the activities of the respective revenue funds.
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN
(a) General Information about the Pension Plans
Plan Description ‐ All qualified employees are eligible to participate in the Town’s pooled Safety Plan, a cost‐
sharing multiple‐employer defined benefit pension plan and the Town’s Miscellaneous (all other) Plan, an agent
multiple‐employer defined benefit pension plan administered by the California Public Employees' Retirement
System (CalPERS), which acts as a common investment and administrative agent for its participating member
employers. Benefit provisions under the Plans are established by State statute and Town resolution. CalPERS
issues publicly available reports that include a full description of the pension plans regarding benefit provisions,
assumptions and membership information that can be found on the CalPERS website. Audited financial
statements of CalPERS can be obtained from its website https://www.calpers.ca.gov/page/forms‐publications.
The Town relies upon actuarial and investment data provided by CalPERS for inclusion and analysis in this report.
Summary of Pension Amounts
Miscellaneous Plan Safety Plan Total Plans
Deferred Employer Pension Contributions 8,188,460$ 2,565,205$ 10,753,665$
Deferred Outflows ‐ Pension Related Amounts 761,117$ 3,418,222$ 4,179,339$
Net Pension Liability 32,535,248$ 24,695,687$ 57,230,935$
Deferred Inflows ‐ Pension Related Amounts 482,199$ 1,616,348$ 2,098,547$
Pension Expense 5,163,057$ 5,646,706$ 10,809,763$ Draft 12/10/202080
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(a) General Information about the Pension Plan, Continued
Benefits Provided ‐ CalPERS provides service retirement and disability benefits, annual cost of living adjustments
and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on
years of credited service, equal to one year of full time employment. Members with five years of total service
are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non‐duty disability
benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, Lump Sum,
or the 1959 Survivor Benefit. The cost of living adjustments for each plan are applied as specified by the Public
Employees’ Retirement Law.
The Plan’s provisions and benefits in effect at June 30, 2020, are summarized as follows:
Employees Covered
At June 30, 2020, the following employees were covered by the benefit terms for the Miscellaneous and Safety
Plans:
Contributions – Section 20814 (c) of the California Public Employees’ Retirement Law requires that the employer
contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective
on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined
annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount
necessary to finance the cost of benefits earned by employees during the year. 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.
Tier 1 Tier 2 PEPRA Tier 1 PEPRA
Hire Date
Prior to
September 15,
2012
Prior to
September 15,
2012 and
before January
1, 2013 with
reciprocity or
member of
CalPERS
On or after
January 1, 2013
Before January
1, 2013 with
reciprocity or
member of
CalPERS
On or after
January 1, 2013
Benefit Formula 2.5% @ 55 2% @ 60 2% @ 62 3% @ 50 2.7% @ 57
Benefit vesting schedule 5 years 5 years 5 years 5 years 5 years
Benefit payments Monthly for Life Monthly for Life Monthly for Life Monthly for Life Monthly for Life
Retirement age 55 60 62 50 57
Monthly benefits as a % of eligible compensation 2% to 2.5% 1% to 2.5% 1.5% to 2.5% 3% 2% to 2.7%
Required employee contribution rates 8.00%7.00%6.75%9.00%12.75%
Required employer contribution rates 23.654% 13.900%
Required payment of unfunded liability 2,328,669$ $1,485,723 $6,600
Miscellaneous Safety
10.226%
Miscellaneous Safety
Active 120 35
Transferred 95 9
Separated 79 33
Retired 249 83
Total 543 160Draft 12/10/202081
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability
Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for
Pensions, an amendment of GASB Statement No. 27 (GASB 68), requires public employers to comply with
accounting and financial reporting standards related to the recognition and calculation of pension obligations.
Under GASB 68, employers that participate in a defined benefit pension plan administered as a trust or
equivalent arrangement are required to record their portion of the net pension liability, pension expense, and
deferred outflows/deferred inflows of resources related to pensions in their financial statements as part of their
financial position.
The Town’s net pension liability for the Miscellaneous Plan is measured as the total pension liability, less the
pension plan's fiduciary net position.
GASB 68 requires that the reported results must pertain to liability and asset information within certain defined
timeframes. For this report, the following timeframes are used. For the Safety Plan, net pension liability is
measured as the proportionate share of the net pension liability. The net pension liability of each of the Plans is
measured as of June 30, 2019, using an annual actuarial valuation as of June 30, 2018 rolled forward to June 30,
2018 using standard update procedures. The Town’s proportion of the net pension liability (Safety Plan) was
based on a projection of the Town’s long‐term share of contributions to the pension plans relative to the
projected contributions of all participating employers, actuarially determined. The Town’s proportionate share
of the net pension liability for the Safety Plan as of the measurement date June 30, 2019 was as follows:
A summary of principal assumptions and methods used to determine the net pension liability is shown below.
Proportionate Share of
Net Pension Liability
Proportion ‐ June 30, 2018 0.235831%
Proportion ‐ June 30, 2019 0.241003%
Change ‐ Increase (Decrease) 0.005172%Draft 12/10/202082
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, continued
Actuarial Assumptions ‐ The June 30, 2018 valuation was rolled forward to determine the June 30, 2019 total
pension liability, based on the following actuarial methods and assumptions:
Discount Rate ‐ The discount rate used to measure the total pension liability was 7.15% for the Plan and reflects
the long‐term expected rate for the Plan net of investment expenses and without reduction for administrative
expenses. To determine whether the municipal bond rate should be used in the calculation of a discount rate
for each plan, CalPERS conducted cash flow projections for plans with a higher likelihood of running out of
assets with too high of a discount rate. Based on the testing, none of the tested plans ran out of assets.
Therefore, the current 7.15 percent discount rate is adequate and the use of the municipal bond rate
calculation is not necessary. The long term expected discount rate of 7.15 percent will be applied to all plans
in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report
that can be obtained from the CalPERS website.
Long‐term Expected Rate of Return – Every four years, CalPERS performs an Asset Liability Management (ALM)
review of possible asset allocation alternatives for the Public Employees’ Retirement Fund (PERF) investment
portfolio. The review examines potential new investment policy portfolios and their impact on the CalPERS
Fund. The ALM review also incorporates actuarial‐based information to reflect the implications of the various
asset allocation alternatives on parameters such as the employer contribution rate. This periodic review is the
primary process by which the PERF investment portfolio and actuarial assumptions evolve to reflect the market
opportunity set, demographic assumptions and experience, and plan status.
The last ALM was performed in 2017 and the long‐term expected rate of return on pension plan investments
was determined using a building‐block method in which expected future real rates of return (expected returns,
net of pension plan investment expense and inflation) are developed for each major asset class.
Miscellaneous Agent
Multiple Employer Plan Safety Cost Sharing Plan
Valuation Date June 30, 2018 June 30, 2018
Measurement Date June 30, 2019 June 30, 2019
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate 7.15% 7.15%
Inflation 2.50% 2.50%
Salary Increases
Mortality Rate Table1
Post Retirement Benefit Increase
Entry‐Age Normal Cost Method
Varies by Entry Age and Service
Derived using CalPERS' Membership Data for all Funds
Contract COLA up to 2.50% until Purchasing Power
Protection Allowance Floor on Purchasing Power
applies
1. The mortality table used was developed based on CalPERS‐specific data. The table includes 15 years of
mortality improvements using the Society of Actuaries Scale 90% of scale MP 2016. For more details on this
table, please refer to the December 2017 experience study report that can be found on the CalPERS
website.Draft 12/10/202083
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, continued
In determining the long‐term expected rate of return, CalPERS took into account both short‐term and long‐term
market return expectations as well as the expected pension fund cash flows. Using historical returns of all the
funds’ asset classes, expected compound (geometric) returns were calculated over the short‐term (first 10 years)
and the long‐term (11+ years) using a building‐block approach. Using the expected nominal returns for both
short‐term and long‐term, the present value of benefits was calculated for each fund. The expected rate of
return was set by calculating the single equivalent expected return that arrived at the same present value of
benefits for cash flows as the one calculated using both short‐term and long‐term returns. The expected rate
of return was then set equivalent to the single equivalent rate calculated above and adjusted to account for
administrative expenses.
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.
In addition to the expected returns by asset class, the table below reflects the short‐term, long‐term, and
blended expected rate of return for the total PERF asset allocation as of the 2017 ALM.
Expected Compound Return (1‐10 years) 6.10%
Long Term Expected Return (11‐60 years) 8.30%
Blended Return (1‐60 years) 7.00%
New
Strategic Real Return Real Return
Asset Class Allocation Years 1 ‐ 10(a) Years 11+(b)
Global Equity 50.00% 4.80% 5.98%
Global Fixed Income 28.00% 1.00% 2.62%
Inflation Sensitive ‐ 0.77% 1.81%
Private Equity 8.00% 6.30% 7.23%
Real Estate 13.00% 3.75% 4.93%
Liquidity 1.00% ‐ ‐0.92%
Total 100%
(a) An expected inflation of 2.00% used for this period.
(b) An expected inflation of 2.92% used for this period.Draft 12/10/202084
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(b) Net Pension Liability, continued
The table below shows historical compound annual returns of the Public Employees Retirement Fund for various
time periods ending on June 30, 2019 (figures are reported as gross of fees). The compound annual return is the
average rate per year compounded over the indicated number of years. It should be recognized that in any given
year the rate of return is volatile. The portfolio has an expected volatility of 11.4 percent per year based on the
most recent Asset Liability Modelling study. The volatility is a measure of the risk of the portfolio expressed in
the standard deviation of the fund’s total return distribution, expressed as a percentage. Consequently, when
looking at investment returns, it is more instructive to look at returns over longer time horizons.
CalPERS reported a preliminary 4.7% net return on investments for the 12‐month period ended June 30, 2020.
The preliminary Fiscal Year 2019‐20 return brings total fund performance to 6.3% for the five‐year time period,
8.5% for the 10‐year time period, and 5.5% for the 20‐year time period. Over the past 30 years, the PERF has
returned an average of 8.0% annually.
(c) Changes in the Net Pension Liability
The change in the Net Pension Liability for the Miscellaneous Plan is as follows:
Miscellaneous Plan Total Fiduciary Net
Pension Net Pension
Liability Pension Liability
Beginning Balance 104,134,737$ 73,232,175$ 30,902,562$
Service Costs 1,771,368 1,771,368
Interest on Total Pension Liability 7,381,846 7,381,846
Changes of Assumptions ‐ ‐
Difference Between Actual and Expected Experience 1,082,289 1,082,289
Net Plan to Plan Resource Movement ‐ ‐
Employer Contributions 3,049,748 (3,049,748)
Employee Contributions 846,125 (846,125)
Net Investment Income 4,759,034 (4,759,034)
Employee Contribution Refunds and Benefit Payments (5,720,232) (5,720,232) ‐
Administrative Expenses (52,260) 52,260
Other Miscellaneous Income 170 (170)
Net Changes 4,515,271 2,882,585 1,632,686
Ending Balance 108,650,008$ 76,114,760$ 32,535,248$ Draft 12/10/202085
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(c) Changes in the Net Pension Liability, Continued
For the measurement period ended June 30, 2019, the Town contributed $2,325,357 for the safety Cost‐Sharing
Plan.
As of June 30, 2020, the Town reported net pension liabilities for its proportionate share of the net pension
liability of the safety Cost‐Sharing Plan of $24,695,687.
Sensitivity of the Net Pension Liability to Changes in the Discount Rate ‐ The following presents the net
pension liability of the Town for each plan, calculated using the discount rate for the Plan, as well as what
the Local Government’s net pension liability would be if it were calculated using a discount rate that is 1‐
percentage point lower or 1‐percentage point higher than the current rate:
Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is
available in a separately issued CalPERS financial report.
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2020, the Town recognized pension expense of $5,163,057 for the Miscellaneous
Agent Multiple Employer Plan and $5,646,706 for the Safety Cost Sharing Plan. The Town recognized total
pension expense for all plans of $10,809,763.
Sensitivity to Changes
in the Discount Rate
Miscellaneous
Agent Multiple
Employer Plan
Safety Cost
Sharing Plan Total
1% Decrease (6.15%)
Net Pension Liability $ 46,452,350 $ 37,518,167 $ 83,970,517
Current Discount Rate (7.15%)
Net Pension Liability $ 32,535,248 $ 24,695,687 $ 57,230,935
1% Increase (8.15%)
Net Pension Liability $ 21,037,757 $ 14,183,262 35,221,019$ Draft 12/10/202086
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
At June 30, 2020, the Town reported deferred outflows of resources and deferred inflows of resources related
to pension from the following sources for the Miscellaneous Agent Multiple Employer Plan:
$8,118,460 reported as deferred outflows of resources related to contributions subsequent to the measurement
date will be recognized as a reduction of the net pension liability in the year ended June 30, 2021. Other amounts
reported as deferred outflows of resources and deferred inflows of resources related to pensions will be
recognized as pension expense as follows:
Deferred
Outflows of
Resources
Deferred Inflows
of Resources
Pension contributions subsequent to
measurement date 8,188,460$ ‐$
Changes in assumptions ‐ (85,505)
Difference between expected and actual experiences 761,117 ‐
Net differences between projected and actual
earnings on plan investments ‐ (396,694)
Totals 8,949,577$ (482,199)$
Miscellaneous
Fiscal Year Ended June
30,
Deferred
Outflows/(Inflows) of
Resources
2020 776,699$
2021 (462,531)
2022 (116,574)
2023 81,324
2024 ‐
Thereafter ‐ Draft 12/10/202087
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued
At June 30, 2020, the Town reported deferred outflows of resources and deferred inflows of resources related
to pensions from the following sources for the Safety Cost‐Sharing Plan:
$2,565,205 reported as deferred outflows of resources related to contributions subsequent to the measurement
date will be recognized as a reduction of the net pension liability in the fiscal year ending June 30, 2021. Other
amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will
be recognized as pension expense as follows:
(e) Payable to the Pension Plan
At June 30, 2020, the Town reported a payable of $99,593 and $82,168 for the outstanding amount of
contributions to the Miscellaneous Agent Multiple‐Employer Plan and the Safety Cost‐Sharing Plan.
Deferred
Outflows of
Resureces
Deferred Inflows
of Resources
Pension contributions subsequent to
measurement date 2,565,205$ ‐$
Changes in assumptions 1,012,233 (197,536)
Difference between expected and actual experiences 1,612,405 ‐
Changes in employer's proportion 793,584 (68,685)
Differences between the employer's contributions and
the employer's proportionate share of contributions ‐ (1,010,396)
Net differences between projected and actual
earnings on plan investments ‐ (339,731)
Totals 5,983,427$ (1,616,348)$
Safety
Fiscal Year Ended
June 30,
Deferred
Outflows/(Inflows) of
Resources
2021 1,609,739$
2022 (101,848)
2023 227,882
2024 66,101
2025 ‐
Thereafter ‐ Draft 12/10/202088
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 9 ‐ EMPLOYEES' RETIREMENT PLAN, CONTINUED
(f) IRS Section 115 Trust
In March 2018, the Town established an IRS Section 115 Trust (Trust) with Public Agencies Retirement Services
(PARS), an entity independent of CalPERS, in order to prefund the pension liabilities for both the Miscellaneous
and Safety defined‐benefit pension plans. The Town closed the Trust for the fiscal year ending June 2020 and
used it to pay $4,753,965 more than the unfunded liability payment required by CalPERS for the Miscellaneous
Plan. This payment is included in the deferral amount of $8,188,460 for contributions made after the
measurement date for the Miscellaneous Plan.
During the fiscal year ending June 30, 2020, the Town established an alternate IRS Section 115 Trust with the
CalPERS California Employer’ Pension Prefunding Trust (CEPPT) program.
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS
Plan Description ‐ The Town makes contributions to California Employer’s Retiree Benefit Trust (CERBT), an
agent multiple‐employer defined benefit healthcare plan administered by CalPERS. The purpose of the CERBT
Fund is to provide California government employers with a trust through which they may prefund retiree medical
costs and Other Post‐Employment Benefits (OPEB). The Town uses CERBT as its investment vehicle and requests
disbursements on an as needed basis to reimburse the Town for the cost of retiree health insurance benefits.
Benefit provisions and all other requirements are established by state statute and Town ordinance. Copies of
PERS' annual financial report may be obtained from their Executive Office, 400 P Street, Sacramento, CA 95814.
In accordance with the Public Employees' Medical and Hospital Care Act (PEMHCA), employees qualify for retiree
health benefits upon five (5) years of service if they meet the vesting requirements as set forth by CalPERS and
take a service or disability retirement from Town employment. Additionally, the employee must actually draw a
CalPERS pension within ninety (90) days of separation from the Town, provided the employee remains with the
Town's health plan through COBRA. For employees who retire on or after February 1, 2016, at Medicare
eligibility, the Town will align contributions to the full cost of the employee’s enrollment, including enrollment
of family members, in a health benefits plan or plans up to a maximum of 100% Single Party and 90% Dependents
for Kaiser Bay Area Basic/Medicare/Combo per month. During negotiations in fiscal year 2018/19, the Town’s
discretionary retiree medical benefit contribution was eliminated for all future hires.
Upon retirement, employees have the option to roll over their sick leave accrual into a Town‐managed fund.
Employees can request reimbursement of medical expenses from the fund up to the value of their sick leave at
retirement.
Contributions ‐ The contribution requirements of plan members and the Town are established and may be
amended by the Town. The required contribution is based on projected pay‐as‐you‐go financing requirements,
with an additional amount to prefund benefits as determined by the Town. For the measurement period July 1,
2018‐June 30, 2019, the Town contributed $2,406,636 to the plan which included $1,104,025 of cash benefit
payments, administrative fees of $8,013, and $194,598 of implied subsidy benefit payments. All related
obligations are paid from the Town’s General Fund.
Draft 12/10/202089
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
Covered Participants
Actuarial Methods and Assumptions ‐ Projections of benefits for financial reporting purposes are based on the
substantive plan (the plan as understood by the employer and the plan members) and include the types of
benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between
the employer and plan members to that point. Actuarially determined amounts are subject to continual revision
as actual results are compared with past expectations and new estimates are made about the future. The
actuarial methods and assumptions used include techniques that are designed to reduce the effects of short‐
term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long‐term
perspective of the calculations.
For the June 30, 2019 actuarial valuation, the actuarial assumptions used are as follows:
Inactive employees or beneficiaries
currently receiving benefits 130
Inactive employees entitled to but
not yet receiving benefits 45
Active employees 149
Total 324
Valuation Date June 30, 2019
Measurement Date June 30, 2019
Actuarial Cost Method Entry‐Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 6.75%
Inflation 2.75%
Contribution Policy Pre‐funded through CERBT with the Strategy 1 asset allocation
Town contributes at least the ADC
Salary Increases Aggregate ‐ 3% annually
Merit ‐ CalPERS 1997‐2015 Experience Study
Projected Salary Increase 3.00%
Investment Rate of Return 6.75%
Mortality, Retirement,
Disability, Termination
CalPERS 1997‐2015 Experience Study
Mortality Improvement Post‐retirement mortality projected fully generational with
Scale MP‐2019
Healthcare Trend Non‐Medicare ‐ 7.25% for 2021, decreasing to an ultimate rate
of 4.0% in 2076
Medicare ‐ 6.3% for 2021, decreasing to an ultimate rate of 4.0%
in 2076
Participation at 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%Draft 12/10/202090
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
The long‐term expected rate of return on OPEB plan investments was determined using a building‐ block method
in which expected future real rates of return (expected returns, net of OPEB plan investment expense and
inflation) are developed for each major asset class. These ranges are combined to produce the long‐term
expected rate of return by weighting the expected future real rates of return by the target asset allocation
percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of
return for each major asset class are summarized in the following table:
Discount Rate ‐ The discount rate used to measure the total OPEB liability was 6.75 percent. The projection of
cash flows used to determine the discount rate assumed that Town contributions will be made equal to the
actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position
was projected to be available to make all projected OPEB payments for current active and inactive employees
and beneficiaries. Therefore, the long‐term expected rate of return on OPEB plan investments was applied to
all periods of projected benefit payments to determine the total OPEB liability.
Target Expected Real
Asset Class Allocation* Rate of Return
Public Equity 59% 4.82%
Fixed Income 25%1.47%
TIPS 5%1.29%
Commodities 3%0.84%
REITs 8%3.76%
Assumed Long‐Term Rate of Inflation 2.75%
Expected Long‐Term Net Rate of Return, Rounded 6.75%
* Policy target effective October 1, 2018.
The long‐term expected real rates of return are presented as geometric means
Draft 12/10/202091
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
Net OPEB Liability – The net OPEB liability is calculated by subtracting the fiduciary net position (FNP) of the
Plan from the total OPEB liability as determined by the actuary. The table that follows displays the changes that
applied to the total OPEB liability, FNP, and Net OPEB liability during the measurement period of July 1, 2018
through June 30, 2019.
Due to these changes, the Town achieved an OPEB Plan funding status of 66.8% for the June 30, 2019
measurement date.
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability/(Asset)
Balance at June 30, 2019
(6/30/18 measurement date) $ 26,321,184 $ 16,265,716 $ 10,055,468
Changes in the year:
Service cost 1,203,274 ‐ 1,203,274
Interest on the total pension liability 1,814,072 ‐ 1,814,072
Differences between actual and
expected experience (149,297) ‐ (149,297)
Changes in assumptions (392,681) ‐ (392,681)
Changes in benefit terms ‐ ‐ ‐
Contributions ‐ employer ‐ 2,406,636 (2,406,636)
Contributions ‐ employee ‐ ‐ ‐
Net investment income ‐ 1,009,315 (1,009,315)
Administrative expenses ‐ (11,502) 11,502
Benefit payments , including refunds
of employee contributions (1,298,623) (1,298,623) ‐
Net changes 1,176,745 2,105,826 (929,081)
Balance at June 30, 2020
(6/30/19 measurement date) $ 27,497,929 $ 18,371,542 $ 9,126,387
Increase (Decrease)
6/30/2020 6/30/2019
Measurement Date 6/30/2019 6/30/2018
Total OPEB Liability (TOL) 27,497,929 26,321,184
Fiduciary Net Position (FNP) 18,371,542 16,265,716
Net OPEB Liability (NOL) 9,126,387 10,055,468
Funded Status (FNP/TOL) 66.8% 61.8%
Fiscal Year EndingDraft 12/10/202092
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
Sensitivity of Actuarial Assumptions – The following tables indicate how much the net OPEB liability varies if
the discount rate and healthcare trend rate used to calculate the liability are increased or decreased by one
percentage point.
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB – Gains and losses related to
changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over
time. Partial amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining
amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be
recognized in future OPEB expense. The recognition period differs depending on the source of the gain or loss.
The measurement period July 1, 2018 through June 30, 2019 investment gains and losses are spread evenly over
a 5‐year period. All other deferred outflows and inflows created during the measurement period are recognized
over a 5.9‐year period. The total OPEB expense recognized in the fiscal year ending June 30, 2020 was $1,748,217
and the Town reported deferrals from the following sources:
Discount Rate 1% Decrease Current Rate 1% Increase
(5.75%)(6.75%)(7.75%)
Net OPEB Liability $ 12,620,092 9,126,387$ 6,231,928$
Healthcare Trend
1% Decrease Current Trend 1% Increase
Net OPEB Liability $ 6,581,769 9,126,387$ 11,778,962$
Deferred
Outflows of
Resources
Deferred Inflows
of Resources
● Employer contribuƟons made subsequent to the
measurement date 2,508,306$ ‐$
● Changes in assumpƟons ‐ (326,125)
● Difference between expected and actual experiences ‐ (123,992)
● Net difference between projected and actual
earnings on plan investments ‐ (178,777)
Totals 2,508,306$ (628,894)$
OPEB
Draft 12/10/202093
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 10 ‐ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED
The $2,508,306 reported as deferred outflows of resources related to contributions subsequent to the June 30,
2019 measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ending
June 30, 2021. Other amounts reported as deferred outflows of resources related to OPEB will be recognized as
expense as follows:
NOTE 11 ‐ RISK MANAGEMENT
The Town participates in the following public entity risk pools through formally organized and separate legal
entities. The Town does not have an equity interest in the joint ventures. These entities exercise full powers and
authorities within the scope of the related agreements including the preparation of annual budgets,
accountability for all funds, the power to make and execute contracts and the right to sue and be sued.
Obligations and liabilities of the separate entities are not those of the Town, although the Town retains an
ongoing financial interest or an ongoing financial responsibility.
Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA) ‐ The Town participates in PLAN, which
covers general liability claims in the amount up to $5,000,000 plus $25,000,000 in excess liability for total
coverage of $30,000,000 per occurrence. The Town has a deductible or uninsured liability of up to $50,000 per
claim. PLAN also provides all risk property coverage of $1,000,000,000, excluding flood and earthquake
coverage. The Town has a $5,000 deductible for property and vehicle damage. Once the Town’s deductible is
met, PLAN becomes responsible for payment of all claims up to the limit. Financial statements may be obtained
from PLAN at 375 Beale Street, San Francisco, CA 94105.
Local Agency Workers’ Compensation Joint Powers Authority (LAWCX) ‐ The Town is a member of LAWCX for
coverage of workers’ compensation claims. The Town has a $250,000 self‐insured retention level or uninsured
liability for all employees. Once the Town’s deductible is met, LAWCX becomes responsible for claims up to
$5,000,000. For claims greater than $5,000,000, LAWCX has a commercial policy providing coverage. Financial
statements may be obtained from LAWCX at 1750 Creekside Oaks Dr., Suite 200, Sacramento, California, 95833.
The Town has not significantly reduced its insurance coverage from the prior year and settlements have not
exceeded insurance coverage for the past three years.
Liability for Uninsured Claims ‐ The Town is required to record its liability for uninsured claims and to reflect the
current portion of this liability as an expenditure in its financial statements. As discussed above, the Town has
coverage for such claims, but it has retained the risk for the deductibles, or uninsured portion of these claims.
Fiscal Year Ended June
30,
Deferred
Outflows/(Inflows) of
Resources
2021 (182,070)$
2022 (183,070)
2023 (107,070)
2024 (74,011)
2025 (82,673)
Thereafter ‐ Draft 12/10/202094
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 11 ‐ RISK MANAGEMENT, CONTINUED
The change in Workers’ Compensation and Self‐Insurance Service Funds’ claims liabilities, is based on historical
trend information provided by its third party administrator and was computed as follows as of June 30, 2020:
NOTE 12 ‐ COMMITMENTS AND CONTINGENCIES
Federal and State Grants ‐ The Town participates in several federal and state grant programs. These are subject
to examination by grantors and the amount, if any, of disallowed expenditures cannot be determined at this
time. The Town expects such amounts, if any, to be immaterial.
Litigation ‐ The Town is subject to litigation arising from the normal course of business. The Town Attorney
believes there is no pending litigation which is likely to have a material adverse effect on the financial position
of the Town.
Successor Agency ‐ As of June 30, 2020, the Successor Agency Trust fund reported a net deficit of $4,930,392.
Encumbrances ‐ As of June 30, 2020, the Town had the following encumbered balances that were carried into
the next fiscal year:
NOTE 13 ‐ TOWN/SUCCESSOR AGENCY GRANTS, COOPERATIVE AGREEMENTS
Public Improvement Grants and Cooperative Agreements
In January of 2011, the Redevelopment Agency entered into a public improvement grant and cooperative
agreement with the Town for the purpose of funding the acquisition of public land and designing and
constructing various public improvements to be owned by the Town provided that the projects were in
accordance with the Redevelopment Agency’s five year implementation plan and redevelopment plan.
Workers'Self‐
Compensation Insurance
Internal Internal
Service Fund Service Fund Total
Claims payable balance ‐ June 30, 2018 1,472,324$ 131,743$ 1,604,067$
Claims incurred 1,161,312 29,999 1,191,311
Claims paid (1,581,441) (105,704) (1,687,145)
Claims payable balance ‐ June 30, 2019 1,052,195 56,038 1,108,233
Claims incurred 1,007,872 2,786 1,010,658
Claims paid (868,681) (1,799) (870,480)
Claims payable balance ‐ June 30, 2020 1,191,386$ 57,025$ 1,248,411$
Appropriated Reserves Fund 3,029,398
Non‐major Governmental Funds 4,500
Proprietary Funds 139,391
Total Encumbrances 3,173,289$ Draft 12/10/202095
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 13 ‐ TOWN/SUCCESSOR AGENCY GRANTS, COOPERATIVE AGREEMENTS, CONTINUED
The improvement plan, as identified in the agreement, called for approximately $24 million to be granted to the
Town for the following projects:
a. Expansion and improvement of current and new downtown parking
b. Highway 9 improvements from Highway 17 to Monte Sereno
c. Almond Grove Area street, sidewalk and other improvements
d. Downtown Los Gatos gateways, signage, banners and art
e. Storm drain, retaining wall, street and other improvements
f. New Los Gatos library building
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement
were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its Redevelopment
Agency.
Affordable Housing Cooperative Agreement
In March of 2011, the Redevelopment Agency entered into an affordable housing cooperative agreement with
the Town for the purpose of funding affordable housing projects and programs to be developed and/or
administered by the Town in accordance with the Redevelopment Agency’s five year implementation plan and
redevelopment plan. The improvement plan, as identified in the agreement, called for approximately $16
million to be granted to the Town for the following projects:
a. Development of affordable housing at 224 Main St.
b. Development of affordable housing at Dittos Lane
c. Partnership with Senior Housing Solutions for the creation of senior housing in Los Gatos
d. Partnerships for the conversion of existing residential developments dedicated to affordable housing
e. Grants to the Santa Clara County Housing Trust for the development of affordable housing.
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement
were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its Redevelopment
Agency.
NOTE 14 – PRIOR PERIOD ADJUSTMENTS
The Town recorded a prior period adjustment due to a change in how short‐term compensated absences are
recorded. The Town conformed the accounting to GASB 16, resulting in a restatement of net position:
Prior Period
Adjustment
Net Position, as
Previously
Reported
Removal of short‐
term compensated
absences
Net Position, as
Restated
Fund Financial Statements:
General Fund 37,970,527$ 372,628$ 38,343,155$ Draft 12/10/202096
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 15 – COVID‐19 PANDEMIC
During December 2019, a novel coronavirus disease (COVID‐19) was discovered. COVID‐19 was subsequently
declared a world‐wide pandemic by the World Health Organization on March 11, 2020. On March 4, 2020,
California State Governor Gavin Newsom proclaimed a State of Emergency as a result of the threat of the COVID‐
19 in the State of California, leading the Santa Clara County Health Officer to issue a stay‐at‐home directive
effective on March 17, 2020. This directive halted all business within Santa Clara County outside of essential
activities.
The COVID‐19 Public Health Order had an immediate impact on the Town of Los Gatos’ economically sensitive
tax revenues. While 2019‐20 property tax revenues were insulated from COVID‐19 due to the lien date (and
change in California Consumer Price Index) of January 1, 2019, preceding the onset of COVID‐19 in March 2020,
a As clearly evident in the Town’s basic financial statements, sales tax and transient occupancy tax (TOT) were
immediately susceptible to the economic impact of COVID‐19. The reduction in sales tax revenue reflects the
closure, and later reduced activity of non‐essential businesses in response to the restrictions from the shelter‐
in‐place restrictions order, while the drop in TOT revenues was directly attributable to the restrictions on the
travel industry. As illustrated in the table below, TOT has had the largest revenue declines to date.
Non‐tax revenues were also impacted by COVID‐19, largely in permits and fees, caused by some delays in private
construction projects and fewer renewals of business licenses. Property tax revenues were largely insulated from
COVID‐19 due to the lien date of January 1, 2019 and change in California Consumer Price Index preceding the
proliferation of COVID‐19 in March.
In response to the economic impact the Town modified its revenue forecasts downward for the Fiscal Year
2020/21 Budget. The Budget identified contingencies in the event should revenues come in below projected
amounts. Of note, Council did no program $1.2 million of property sale proceeds as an additional safeguard
against potential COVID‐19 related budget shortfalls. Expenditures reflect maintaining high service levels with
little to no increase in employee headcount. To date, the contingencies have not needed to be used, and the
Town is carefully monitoring actual revenues and expenditures.
NOTE 16 – SUBSEQUENT EVENTS
Court Decision Regarding Redevelopment Agency (RDA) Distributions
The Town was recently informed that the County of Santa Clara intends on withholding approximately $1.6
million over the next two fiscal years to recapture excess RDA residual property tax revenues distributed to the
Town. County Counsel has advised the Auditor/Controllers office to "look back" three fiscal years to determine
the total amount to be recaptured from the Town and paid back over two fiscal years. The immediate impact to
the Town Budget will be an unanticipated withholding of approximately $789K in FY 2020/21.
FY 2018/19 FY 2019/20 FY 2020/21
1Q 735,349$ 739,494$ 316,515$
2Q 632,240 599,113
3Q 608,902 434,493
4Q 715,552 96,585
TOT Total 2,692,043$ 1,869,685$ 316,515$ Draft 12/10/202097
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 16 – SUBSEQUENT EVENTS, CONTINUED
The County has informed the Town that this action is necessary to comply with a recent appellate court decision
[City of Chula Vista v. Sandoval, 49 Cal. App. 5th 539 (2020)] that held that any funds remaining each RDA
property tax trust fund (RPPTF) must be distributed in accordance with the taxing entities pro‐rata shares
without any caps or reductions to the distributions of RPTTF residuals to taxing entities that received pass‐
through payments.
The County explained that the court concluded that pass‐through payments are to be treated as enforceable
obligation payments and not considered as part of the property tax increment remaining in the RPTTF. Since the
RPTTF's were established, many auditor‐controllers, including the County of Santa Clara, had been reducing the
RPPTF residual property tax distributions to taxing entities that received pass‐through payments. Of note is that
when the Town Redevelopment Agency was created, it negotiated property tax pass‐through agreements with
nearly all of the taxing jurisdictions in the RDA project area with the biggest share allocated was in pass‐through
agreements with the school districts.
The County has informed the Town that these reductions will no longer occur and the RPTTF residuals will be
distributed to all taxing entities in accordance with their property tax shares. After the two‐year recapture of
residual property tax, the Town will continue to receive RPTTF residual property taxes but at lower levels than
previously allocated under the County's old allocation method.
Educational Revenue Augmentation Fund (ERAF)
The Town is continuing to monitor developments regarding the distribution of excess ERAF funds. A portion of
property tax revenue goes to the ERAF to support local school districts. When the amount contributed to ERAF
is more than the minimum cost of funding local schools, excess funds are returned to the County, Cities, and
Special Districts. Five counties, including Santa Clara have been using a redistribution' allocation formula that is
being contested by the State. The Town's Adopted FY 20/21 Budget has ERAF revenue estimated at $433,000.
The State's Legislative Analyst Office (LAO) requested Governor Newsom's administration to examine five
counties (including Santa Clara County) whose allocation methods for ERAF were questioned by the LAO in three
areas: (I) excluding charter school students from the calculations, (2) accounting for the school district's share
of property tax formerly allocated to redevelopment agencies, and (3) applying State law for the provision of
minimum State aid to schools. The LAO asserts that the counties' interpretation of applicable State law is shifting
monies away from schools in favor of local agencies.
The County believes that the Chula Vista ruling (see item above) will help the County with its excess ERAF
calculation. Santa Clara and other excess ERAF counties have sent a letter to the State Controller's Office (SCO)
to ask the SCO to take the court's decision into consideration when they develop further guidelines for the excess
ERAF allocation by counties.
If the LAO were to prevail, the possibility of a revenue claw back could reduce the current year's budgeted ERAF
amount to zero. Should the County prevail, the amounts budgeted could actually increase for the current fiscal
year. The State is expected to decide this issue in December 2020. Draft 12/10/202098
Required Supplementary Information
Draft 12/10/202099
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Schedule of Proportionate Share of Net Pension Liability – CalPERS Misc. Agent‐Multiple Employer Plan
Measurement Date 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014
Total Pension Liablity
Service Cost 1,771,368$ 1,700,438$ 1,651,550$ 1,560,679$ 1,491,925$ 1,579,547$
Interest on total pension liability 7,381,846 7,073,843 6,820,536 6,697,247 6,483,032 6,268,015
Difference between expected and actual
experience 1,082,289 994,994 (892,479) (357,870) (623,495)‐
Changes in assumptions ‐ (655,541) 5,481,432 ‐ (1,513,132)‐
Changes in benefits ‐ ‐ ‐ ‐ ‐ ‐
Benefit payments, including refunds of employee
contributions (5,720,232) (5,448,374) (5,138,083) (4,953,756) (4,748,786) (4,241,487)
Net change in total pension liability 4,515,271 3,665,360 7,922,956 2,946,300 1,089,544 3,606,075
Total pension liability ‐ beginning 104,134,737 100,469,377 92,546,421 89,600,121 88,510,577 84,904,502
Total pension liability ‐ ending (a)108,650,008$ 104,134,737$ 100,469,377$ 92,546,421$ 89,600,121$ 88,510,577$
Plan fiduciary net position
Contributions ‐ employer 3,049,748 2,669,104 2,407,496 2,223,782 1,941,765 1,796,079
Contributions ‐ employee 846,125 761,705 682,891 691,770 679,796 668,167
Plan to plan resource movement ‐ (170) ‐ (28,866) 22,561 ‐
Projected Earnings on Plan Investments ‐ ‐ ‐ ‐ ‐ 4,328,173
Recognized Difference between Projected and Actual
Earnings ‐ ‐ ‐ ‐ ‐ 1,166,344
Net Investment Income 4,759,034 5,883,868 7,171,443 369,185 1,470,873
Net Difference between Projected and Actual Earnings ‐ ‐ ‐ ‐ ‐ 4,665,374
Benefit payments, including refunds of employee
contribution (5,720,232) (5,448,374) (5,138,083) (4,953,756) (4,748,786) (4,241,487)
Administrative Expenses (52,260) (108,582) (95,455) (40,462) (74,706) ‐
Other Miscellaneous Income/(Expense)1 170 (206,199) ‐ ‐ ‐ ‐
Net change in plan fiduciary net position 2,882,585 3,551,352 5,028,292 (1,738,347) (708,497) 8,382,650
Plan fiduciary net position ‐ beginning 73,232,175 69,680,823 64,652,531 66,390,878 67,099,375 58,716,725
Plan fiduciary net position ‐ ending (b)76,114,760$ 73,232,175$ 69,680,823$ 64,652,531$ 66,390,878$ 67,099,375$
Net pension liability ‐ ending (a) ‐ (b)32,535,248$ 30,902,562$ 30,788,554$ 27,893,890$ 23,209,243$ 21,411,202$
Plan fiduciary net position as a percentage of the
total pension liability 70.05% 70.32% 69.36% 69.86% 74.10% 75.81%
Covered payroll 10,211,967 9,576,157 9,024,370 9,198,318 8,487,940 8,406,315
Net pension liability as a percentage of covered payroll 318.60%322.70% 341.17% 303.25% 273.44% 254.70%
1. During Fiscal Year 2017‐18, as a result of GASB No.75, CalPERS reported its proportionate share of activity related to postemployment benefit for participation in the State of California's
agent OPEB plan. Accordingly, CalPERS recorded a one‐time expense as a result of the adoption of GASB75. Additionally, CalPERS employees participate in various State of California agent
pension plans and during FY2017‐18, CalPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to pensions in
accordance with GASB Statement No.68.Draft 12/10/2020100
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost‐Sharing Plan
Schedule of Pension Plan Contributions – Miscellaneous Agent Multiple‐Employer Plan
*Fiscal year 2015 was the 1st year of implementation, therefore only six years are shown.
Schedule of Pension Plan Contributions – Safety Cost‐Sharing Plan
*Fiscal year 2015 was the 1st year of implementation, therefore only six years are shown.
Measurement Date 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014
Proportion of the net pension liability 0.24100% 0.23583% 0.22603%0.22394% 0.14860% 0.28588%
Proportionate share of the net pension liability 24,695,687$ 22,725,267$ 22,415,954$ 19,377,843$ 10,199,904$ 17,788,690$
Covered payroll* 4,445,061$ 5,079,440$ 4,941,138$ 5,022,498$ 4,897,104$ 4,916,535$
Proportionate share of the net pension liability
as percentage of covered payroll 555.58% 447.40% 453.66% 385.82% 208.28% 361.81%
Plan fiduciary net position as a percentage of
of the total pension liability 75.26% 75.26% 73.31% 74.06% 78.40% 75.66%
* For the year ending on the measurement date.
Fiscal Year 2020 2019 2018 2017 2016 2015
Actuarially Determined Contribution 3,366,304$ 3,049,748$ 2,669,133$ 2,407,496$ 2,223,782$ 1,941,765$
Contributions in Relation to the Actuarially
Determined Contribution (8,188,460) (3,049,748) (2,669,133) (2,407,496) (2,223,782) (1,941,765)
Contribution Deficiency (Excess)(4,822,156)$ ‐$ ‐$ ‐$ ‐$ ‐$
Covered Payroll 11,743,677 10,211,967 9,576,157 9,024,370 9,198,318 8,487,940
Contributions as a Percentage of Covered
Payroll 28.66% 29.86% 27.87% 26.68% 24.18% 22.88%
Fiscal Year 2020 2019 2018 2017 2016 2015
Actuarially Determined Contribution 2,565,205$ 2,325,357$ 1,951,711$ 302,911$ 297,000$ 295,000$
Contributions in Relation to the Actuarially
Determined Contribution (2,565,205) (2,325,357) (1,951,711) (302,911) (297,000) (295,000)
Contribution Deficiency (Excess)‐$ ‐$ ‐$ ‐$ ‐$ ‐$
Covered Payroll 4,928,821 4,445,061 5,079,440 4,941,138 5,022,498 4,897,104
Contributions as a Percentage of Covered
Payroll 52.05% 52.31% 38.42% 6.13% 5.91% 6.02%Draft 12/10/2020101
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Actuarial Methods and Assumptions used for Pension Actuarially Determined Contributions
Actuarial Cost Method Entry Age Normal
Amortization Method For details, see June 30, 2016 CalPERS Funding Valuation Report
Amortization Period For details, see June 30, 2016 CalPERS Funding Valuation Report
Asset Valuation Method Fair Value of Assets. For details, see June 30, 2016 CalPERS
Funding Valuation Report
Inflation 2.75%
Salary Increases Varies by Entry Age and Service
Payroll Growth 3.00%
Investment Rate of Return 7.375% Net of Pension Plan Investment and Administrative
Expenses; includes Inflation.
Retirement Age CalPERS 1997‐2011 experience study
Mortality CalPERS 1997‐2011 experience study
Pre‐retirement and post‐retirement mortality rates include 20
years of projected mortality improvement using Scale BB
published by the Society of Actuaries.Draft 12/10/2020102
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Schedule of Changes in Net OPEB Liability and Related Ratios
Schedule of Employer Contributions
Measurement Date 6/30/2019 6/30/2018 6/30/2017
Changes in Total OPEB Liablity
Service Cost 1,203,274$ 1,168,227$ 1,134,000$
Interest on total OPEB liability 1,814,072 1,706,270 1,607,000
Difference between expected and actual
experience (149,297) ‐ ‐
Changes in assumptions (392,681) ‐ ‐
Benefit payments (1,298,623) (1,326,313) (1,269,000)
Net change in total OPEB liability 1,176,745 1,548,184 1,472,000
Total OPEB liability ‐ beginning 26,321,184 24,773,000 23,301,000
Total OPEB liability ‐ ending (a)27,497,929$ 26,321,184$ 24,773,000$
Changes in plan fiduciary net position
Contributions ‐ employer 2,406,636 2,935,313 3,878,000
Contributions ‐ employee ‐ ‐ ‐
Net Investment Income 1,009,315 1,082,977 1,049,000
Benefit payments (1,298,623) (1,326,313) (1,269,000)
Administrative Expenses (11,502) (34,261) (14,000)
Net change in plan fiduciary net position 2,105,826 2,657,716 3,644,000
Plan fiduciary net position ‐ beginning 16,265,716 13,608,000 9,964,000
Plan fiduciary net position ‐ ending (b)18,371,542$ 16,265,716$ 13,608,000$
Net OPEB liability ‐ ending (a) ‐ (b)9,126,387$ 10,055,468$ 11,165,000$
Plan fiduciary net position as a percentage of the 66.8% 61.8% 54.9%
total OPEB liability
Covered payroll 17,338,201 16,192,060 14,985,716
Net pension liability as a percentage of covered 52.64% 62.10% 74.50%
payroll
Fiscal Year 2020 2019 2018
Actuarially Determined Contribution (ADC)2,172,000$ 2,108,000$ 2,129,000$
Actual Contributions 2,508,306 2,406,636 2,935,000
Contribution deficiency/(excess)(336,306) (298,636) (806,000)
Covered employee payroll 17,406,541 17,338,201 14,985,716
Contributions as a percentage of covered payroll 14.4%13.9%19.6%Draft 12/10/2020103
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Actuarial Methods and Assumptions used for 2019/20 OPEB Actuarially Determined Contribution
Valuation Date June 30, 2017
Actuarial Cost Method Entry Age Normal, Level percentage of pay
Amortization Method Level percentage of pay
Amortization Period 19‐year fixed period for 2019/20
Asset Valuation Method Investment gains and losses spread over 5‐year
rolling period
Discount Rate 6.75%
General Inflation 2.75%
Medical Trend Non‐medicare ‐ 7.5% for 2019, decreasing to an
ultimate rate of 4.0% in 2076
Medicare ‐ 6.5% for 2019, decreasing to an
ultimate rate of 4.0% in 2076
Mortality CalPERS 1997‐2015 experience study
Mortality Improvement Post‐retirement mortality projected fully
generational with Scale MP‐2017
Draft 12/10/2020104
Supplementary Information
Draft 12/10/2020105
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
MAJOR GOVERNMENTAL FUND BUDGET SCHEDULES
(OTHER THAN THE GENERAL FUND) AND
NONMAJOR GOVERNMENTAL FUNDS
Schedule of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP):
Appropriated Reserves Fund is used to account for resources provided for capital projects not fully funded from
other sources.
Capital Projects Funds:
Storm Drain Basin Funds were established to account for fees paid in conjunction with the development in
specified drainage areas.
Construction Tax Funds were established to account for tax levies on building additions or alterations including
capital improvements, underground utilities and parks.
Gas Tax Fund was established to account for revenue and expenditures under the State of California Streets and
Highways Code Sections 2106, 2107 and 2107.5, as well as for the Roads Maintenance Rehabilitation Act. The
revenues must be used for the maintenance and construction of streets.
Special Revenue Funds:
Community Development Block Grant Fund was established to account for grant funds received and expended
under the Community Development Act of 1974.
Non‐Point Source Maintenance Fund was established to comply with obligations under the National Pollutant
Discharge Elimination system permit issued by the California Regional Water Quality Control Board.
Lighting and Landscape Fund was established to account for maintenance of trees, landscaping, irrigation
systems and lighting within the boundaries of Tract No. 8439.
Draft 12/10/2020106
Variance
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Licenses & permits 110,000$ 110,000$ 407,340$ 297,340$
Intergovernmental 1,627,763 1,903,527 1,938,684 35,157
Charges for services 1,446,577 840,289 862,257 21,968
Interest ‐ ‐ 47,219 47,219
Other 20,755 326,446 69,110 (257,336)
Total Revenues 3,205,095 3,180,262 3,324,610 144,348
EXPENDITURES
Capital outlay 11,014,724 9,305,582 5,919,125 3,386,457
Total Expenditures 11,014,724 9,305,582 5,919,125 3,386,457
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (7,809,629) (6,125,320) (2,594,515) 3,530,805
OTHER FINANCING SOURCES (USES)
Proceeds from sale of assets ‐ ‐ 910 910
Transfers in 7,994,884 8,325,591 8,325,591 ‐
Transfers (out)(427,616) (427,616) (433,952) (6,336)
Total Other Financing Sources (Uses)7,567,268 7,897,975 7,892,549 (5,426)
CHANGE IN FUND BALANCE (242,361)$ 1,772,655$ 5,298,034 3,525,379$
BEGINNING FUND BALANCE 8,567,994
ENDING FUND BALANCE 13,866,028$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
TOWN OF LOS GATOS
APPROPRIATED RESERVES FUND
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
Draft 12/10/2020107
Total
Storm Construction Gas Capital Community
Drains Tax Tax Projects Development
Funds Fund Fund Funds Fund
ASSETS
Cash & Investments 2,760,276$ 3,118,173$ 208,412$ 6,086,861$ 94,412$
Receivables:
Accounts ‐ ‐ ‐ ‐ ‐
Intergovernmental Receivable ‐ ‐ 81,958 81,958 58,344
Long Term Notes Receivable ‐ ‐ ‐ ‐ 78,752
Total Assets 2,760,276$ 3,118,173$ 290,370$ 6,168,819$ 231,508$
LIABILITIES
Accounts Payable ‐$ ‐$ ‐$ ‐$ ‐$
Accrued Payroll and Benefits ‐ ‐ ‐ ‐ ‐
Unearned revenue ‐ ‐ ‐ ‐ 64,855
Total Liabilities ‐ ‐ ‐ ‐ 64,855
FUND BALANCE
Restricted for:
Repairs and Maintenance ‐ ‐ ‐ ‐ ‐
Capital Projects 2,760,276 3,118,173 290,370 6,168,819 ‐
Assigned for:
Special Revenue Funds ‐ ‐ ‐ ‐ 166,653
Unassigned ‐ ‐ ‐ ‐ ‐
Total Fund Balances 2,760,276 3,118,173 290,370 6,168,819 166,653
Total Liabilities and Fund Balances 2,760,276$ 3,118,173$ 290,370$ 6,168,819$ 231,508$
‐$ ‐$ (Continued)
CAPITAL PROJECTS FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2020
Draft 12/10/2020108
Total
Non‐Point Total Nonmajor
Source Lighting and Special Revenue Governmental
Maintenance Landscaping Funds Funds
225,099$ 192,384$ 511,895$ 6,598,756$
19,277 ‐ 19,277 19,277
‐ 340 58,684 140,642
‐ ‐ 78,752 78,752
244,376$ 192,724$ 668,608$ 6,837,427$
1,707$ 2,474$ 4,181$ 4,181$
4,734 ‐ 4,734 4,734
‐ ‐ 64,855 64,855
6,441 2,474 73,770 73,770
‐ 190,250 190,250 190,250
‐ ‐ ‐ 6,168,819
237,935 ‐ 404,588 404,588
‐ ‐ ‐ ‐
237,935 190,250 594,838 6,763,657
244,376$ 192,724$ 668,608$ 6,837,427$
(Concluded)
SPECIAL REVENUE FUNDS Draft 12/10/2020109
Storm Construction Gas Total
Drain Tax Tax Capital Projects
Funds Fund Fund Funds
REVENUES
Property Taxes ‐$ ‐$ ‐$ ‐$
Other Taxes ‐ 34,436 ‐ 34,436
License and permits 126,471 ‐ ‐ 126,471
Intergovernmental ‐ ‐ 1,249,694 1,249,694
Interest 46,248 53,052 12,238 111,538
Total Revenues 172,719 87,488 1,261,932 1,522,139
EXPENDITURES
Current:
Parks and Public Works ‐ ‐ ‐ ‐
Sanitation and Other ‐ ‐ ‐ ‐
Capital Outlay 11,000 49,000 1,719,384 1,779,384
Total Expenditures 11,000 49,000 1,719,384 1,779,384
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 161,719 38,488 (457,452) (257,245)
OTHER FINANCING SOURCES (USES)
Transfers in ‐ ‐ ‐ ‐
Transfers (out) (30,000) ‐ (106,000) (136,000)
Total Other Financing Sources (Uses) (30,000) ‐ (106,000) (136,000)
Changes in Fund Balances 131,719 38,488 (563,452) (393,245)
Fund Balances ‐ Beginning of year 2,628,557 3,079,685 853,822 6,562,064
Fund Balances ‐ End of year 2,760,276$ 3,118,173$ 290,370$ 6,168,819$
(Continued)
CAPITAL PROJECTS FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Draft 12/10/2020110
Community Non‐Point Total
Development Source Lighting and Special Revenue
Fund Maintenance Landscaping Funds Total
‐$ ‐$ 38,041$ 38,041$ 38,041$
‐ ‐ ‐ ‐ 34,436
‐ 231,323 ‐ 231,323 357,794
‐ ‐ ‐ ‐ 1,249,694
‐ ‐ 3,562 3,562 115,100
‐ 231,323 41,603 272,926 1,795,065
‐ ‐ 29,493 29,493 29,493
‐ 162,837 ‐ 162,837 162,837
‐ ‐ 25,079 25,079 1,804,463
‐ 162,837 54,572 217,409 1,996,793
‐ 68,486 (12,969) 55,517 (201,728)
‐ 10,000 ‐ 10,000 10,000
‐ ‐ (4,920) (4,920) (140,920)
‐ 10,000 (4,920) 5,080 (130,920)
‐ 78,486 (17,889) 60,597 (332,648)
166,653 159,449 208,139 534,241 7,096,305
166,653$ 237,935$ 190,250$ 594,838$ 6,763,657$
(Concluded)
SPECIAL REVENUE FUNDS Draft 12/10/2020111
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
Other taxes ‐ ‐ ‐ 30,000 34,436 4,436
License and permits 92,500 126,471 33,971 ‐ ‐ ‐
Intergovernmental ‐ ‐ ‐ ‐ ‐ ‐
Charges for services ‐ ‐ ‐ ‐ ‐ ‐
Interest 12,040 46,248 34,208 22,490 53,052 30,562
Total Revenues 104,540 172,719 68,179 52,490 87,488 34,998
EXPENDITURES
Parks and public works ‐ ‐ ‐ ‐ ‐ ‐
Sanitation and other ‐ ‐ ‐ ‐ ‐ ‐
Capital outlay 11,000 11,000 ‐ 49,000 49,000 ‐
Total Expenditures 11,000 11,000 ‐ 49,000 49,000 ‐
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 93,540 161,719 68,179 3,490 38,488 34,998
OTHER FINANCING SOURCES (USES)
Operating transfers in ‐ ‐ ‐ ‐ ‐ ‐
Operating transfers (out)(30,000) (30,000) ‐ ‐ ‐ ‐
Total Other Financing Sources (Uses)(30,000) (30,000) ‐ ‐ ‐ ‐
CHANGE IN FUND BALANCE 63,540$ 131,719 68,179$ 3,490$ 38,488 34,998$
BEGINNING FUND BALANCE 2,628,557 3,079,685
ENDING FUND BALANCE 2,760,276$ 3,118,173$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
STORM DRAIN FUNDS CONSTRUCTION TAX
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
(Continued)Draft 12/10/2020112
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative)
‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ 231,323 231,323 ‐
1,363,738 1,249,694 (114,044) ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ 353,071 ‐ (353,071)
1,210 12,238 11,028 ‐ ‐ ‐ ‐ ‐ ‐
1,364,948 1,261,932 (103,016) ‐ ‐ ‐ 584,394 231,323 (353,071)
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ 579,173 162,837 416,336
1,719,384 1,719,384 ‐ ‐ ‐ ‐ ‐ ‐ ‐
1,719,384 1,719,384 ‐ ‐ ‐ ‐ 579,173 162,837 416,336
(354,436) (457,452) (103,016) ‐ ‐ ‐ 5,221 68,486 63,265
‐ ‐ ‐ ‐ 10,000 10,000 ‐
(106,000) (106,000) ‐ ‐ ‐ ‐ ‐ ‐ ‐
(106,000) (106,000) ‐ ‐ ‐ ‐ 10,000 10,000 ‐
(460,436)$ (563,452) (103,016)$ ‐$ ‐ ‐$ 15,221$ 78,486 63,265$
853,822 166,653 159,449
290,370$ 166,653$ 237,935$
(Continued)
COMMUNITY DEVELOPMENT
GAS TAX BLOCK GRANT
NON‐POINT
SOURCE MAINTANENCE
Draft 12/10/2020113
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes 38,220$ 38,041$ (179)$ 38,220$ 38,041$ (179)$
Other taxes ‐ ‐ ‐ 30,000 34,436 4,436
License and permits ‐ ‐ ‐ 323,823 357,794 33,971
Intergovernmental ‐ ‐ ‐ 1,363,738 1,249,694 (114,044)
Charges for services ‐ ‐ ‐ 353,071 ‐ (353,071)
Interest 1,460 3,562 2,102 37,200 115,100 77,900
Total Revenues 39,680 41,603 1,923 2,146,052 1,795,065 (350,987)
EXPENDITURES
Parks and public works 44,057 29,493 14,564 44,057 29,493 14,564
Sanitation and other ‐ ‐ ‐ 579,173 162,837 416,336
Capital outlay 67,579 25,079 42,500 1,846,963 1,804,463 42,500
Total Expenditures 111,636 54,572 57,064 2,470,193 1,996,793 473,400
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (71,956) (12,969) 58,987 (324,141) (201,728) 122,413
OTHER FINANCING SOURCES (USES)
Operating transfers in ‐ ‐ ‐ 10,000 10,000 ‐
Operating transfers (out)(4,920) (4,920) ‐ (140,920) (140,920) ‐
Total Other Financing Sources (Uses)(4,920) (4,920) ‐ (130,920) (130,920) ‐
CHANGE IN FUND BALANCE (76,876)$ (17,889) 58,987$ (455,061)$ (332,648) 122,413$
BEGINNING FUND BALANCE 208,139 7,096,305
ENDING FUND BALANCE 190,250$ 6,763,657$
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
TOTALS
(Concluded)
LIGHTING AND LANDSCAPING
Draft 12/10/2020114
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
PROPRIETARY FUNDS
INTERNAL SERVICE FUNDS
Internal Service Funds are used to finance and account for special activities and service performed by a
designated department for other departments in the Town on a cost reimbursement basis.
The concept of major funds does not extend to internal service funds because they are used for internal activities
only. In the Government‐Wide Statement of Activities, the net revenues and expenses of the internal service
funds are allocated to the Town departments or programs that generated them, thus eliminating internal service
funds
However, internal service funds are still presented separately in the fund financial statements and include the
following funds:
Equipment Replacement Fund was established to account for the replacement of major Town equipment and
all vehicle replacement.
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.
Draft 12/10/2020115
Equipment Workers' Self Information Facilities
Replacement Comp Insurance Technology Maintenance Total
ASSETS
Cash & Investments 1,925,053$ 2,888,558$ 1,347,639$ 2,732,385$ 192,117$ 9,085,752$
Restricted Cash &
Investments ‐ 114,213 ‐ ‐ ‐ 114,213
Receivables:
Accounts ‐ ‐ ‐ 2,443 26,110 28,553
Total Assets 1,925,053 3,002,771 1,347,639 2,734,828 218,227 9,228,518
LIABILITIES
Accounts Payable ‐ 2,644 ‐ 130,625 115,758 249,027
Claims Payable ‐ 1,191,386 57,025 ‐ ‐ 1,248,411
Total Liabilities ‐ 1,194,030 57,025 130,625 115,758 1,497,438
NET POSITION
Restricted for:
Workers comp‐
ensation claims ‐ 114,213 ‐ ‐ ‐ 114,213
Unrestricted 1,925,053 1,694,528 1,290,614 2,604,203 102,469 7,616,867
Total Net Position 1,925,053$ 1,808,741$ 1,290,614$ 2,604,203$ 102,469$ 7,731,080$
FY 2019 Values
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30, 2020
Draft 12/10/2020116
Equipment Workers' Self Information Facilities
Replacement Comp Insurance Technology Maintenance Total
OPERATING
REVENUES
Charges for
services 199,095$ 903,434$ 378,133$ 881,936$ 847,384$ 3,209,982$
Interest ‐ 7 ‐ ‐ ‐ 7
Use of money and
property ‐ ‐ ‐ ‐ 165,652 165,652
Other local taxes ‐ ‐ ‐ ‐ 34,437 34,437
Other 36,987 526,552 ‐ ‐ 33,213 596,752
Total Operating
Revenues 236,082 1,429,993 378,133 881,936 1,080,686 4,006,830
OPERATING
EXPENSES
Insurance
expenses ‐ 529,241 344,762 ‐ ‐ 874,003
Services and
supplies 540,036 996,348 56,061 796,201 1,161,003 3,549,649
Total Operating
Expenses 540,036 1,525,589 400,823 796,201 1,161,003 4,423,652
Operating Income
(loss)(303,954) (95,596) (22,690) 85,735 (80,317) (416,822)
Transfers in ‐ 1,061,256 ‐ ‐ ‐ 1,061,256
Transfers out (579,797) ‐ ‐ ‐ (788,000) (1,367,797)
Net Transfers (579,797) 1,061,256 ‐ ‐ (788,000) (306,541)
Change in Net
Position (883,751) 965,660 (22,690) 85,735 (868,317) (723,363)
BEGINNING NET
POSITION 2,808,804 843,081 1,313,304 2,518,468 970,786 8,454,443
ENDING NET
POSITION 1,925,053$ 1,808,741$ 1,290,614$ 2,604,203$ 102,469$ 7,731,080$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Draft 12/10/2020117
Equipment Worker's Self Information Facilities
Replacement Comp Insurance Technology Maintenance Total
CASH FLOWS FROM
OPERATING ACTIVITIES
Receipts from customers 236,082$ 1,497,589$ 378,133$ 881,405$ 1,096,563$ 4,089,772$
Payments to suppliers (625,467) (1,009,831) (71,599) (741,233) (1,172,525) (3,620,655)
Claims paid ‐ (390,050) (343,775) ‐ ‐ (733,825)
Net Cash Provided (Used)
by Operating Activities (389,385) 97,708 (37,241) 140,172 (75,962) (264,708)
CASH FLOWS FROM
NONCAPITAL FINANCING
ACTIVITIES
Transfers In/(Out) (579,797) 1,061,256 ‐ ‐ (788,000) (306,541)
Net Cash Provided (Used)
by Noncapital Financing
Activities (579,797) 1,061,256 ‐ ‐ (788,000) (306,541)
Net Increase(Decrease) in Cash and
Investments (969,182) 1,158,964 (37,241) 140,172 (863,962) (571,249)
Cash and investments ‐ beginning of
year 2,894,235 1,843,807 1,384,880 2,592,213 1,056,079 9,771,214
Cash and investments ‐ end of year 1,925,053$ 3,002,771$ 1,347,639$ 2,732,385$ 192,117$ 9,199,965$
‐$ ‐ ‐ ‐ ‐
Reconciliation of Operating
Income to Cash Flows
from Operating Activities:
Operating Income (303,954)$ (95,596)$ (22,690)$ 85,735$ (80,317)$ (416,822)$
Change in assets and liabilities:
Receivables, net ‐ 67,596 ‐ (531) 15,877 82,942
Accounts payable (85,378) (13,483) (15,538) 54,968 (11,433) (70,864)
Claims payable 139,191 987 ‐ ‐ 140,178
Due to other government (53) ‐ ‐ ‐ (89) (142)
Cash Flows From Operating Activities (389,385)$ 97,708$ (37,241)$ 140,172$ (75,962)$ (264,708)$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Draft 12/10/2020118
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
FIDUCIARY FUNDS
PRIVATE PURPOSE TRUST FUNDS
Library Private Purpose Trust Fund was established to provide for the servicing of donations and bequests
to the Town's Library Program.
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.
Draft 12/10/2020119
RDA
Successor
Library Agency Total
ASSETS
Cash and investments (Note 2)521,067$ 1,822,438$ 2,343,505$
Restricted cash and investments (Note 2)‐ 1,987,621 1,987,621
Accounts receivable 8,750 ‐ 8,750
Loans receivable (Note 3)‐ 575,425 575,425
Capital assets (Note 5):
Nondepreciable ‐ 5,257,422 5,257,422
Depreciable, net of accumulated depreciation ‐ 1,423,701 1,423,701
Total Assets 529,817 11,066,607 11,596,424
LIABILITIES
Accounts payable 3,000 64 3,064
Due to other governments 2 ‐ 2
Interest payable ‐ 285,390 285,390
Long‐term debt (Note 6):
Due within one year ‐ 1,250,000 1,250,000
Due in more than one year ‐ 14,461,545 14,461,545
Total Liabilities 3,002 15,996,999 16,000,001
NET POSITION
Held in trust 526,815 (4,930,392) (4,403,577)
Total Net Position 526,815$ (4,930,392)$ (4,403,577)$
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2020
Draft 12/10/2020120
RDA
Successor
Library Agency Total
ADDITIONS
Property taxes ‐$ 1,949,284$ 1,949,284$
Investment earnings 9,617 44,035 53,652
Gifts, bequests and endowments 61,809 ‐ 61,809
Other ‐ 1,905,024 1,905,024
Total Additions 71,426 3,898,343 3,969,769
DEDUCTIONS
Program expenses ‐ 1,916,701 1,916,701
Interest and fiscal agency expenses of RDA ‐ 651,462 651,462
Library services 82,626 ‐ 82,626
Capital Outlay ‐ ‐ ‐
Depreciation expense ‐ 101,692 101,692
Total Deductions 82,626 2,669,855 2,752,481
CHANGE IN NET POSITION (11,200) 1,228,488 1,217,288
NET POSITION ‐ BEGINNING OF YEAR 538,015 (6,158,880) (5,620,865)
NET POSITION ‐ END OF YEAR 526,815$ (4,930,392)$ (4,403,577)$
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
Draft 12/10/2020121
This page intentionally left blank Draft 12/10/2020122
STATISTICAL SECTION
Draft 12/10/2020123
This page intentionally left blank Draft 12/10/2020124
STATISTICAL (UNAUDITED)
This part of the Town of Los Gatos Comprehensive Annual Financial Report (“CAFR”) presents the detailed
information as a context for understanding what the information in the financial statements, note disclosures,
and required supplementary information says about the Town’s overall financial health.
Financial Trends
These schedules contain trend information to help the reader understand how Town’s financial
performance and well‐being have changed over time. (Schedule 1, Schedule 2, Schedule 3, and Schedule
4).
Revenue Capacity
These schedules contain information to help the reader assess one of the Town’s most significant local
revenue source, the property tax (Schedule 5, Schedule 6, Schedule 7, and Schedule 8).
Debt Capacity
These schedules present information to help the reader assess the affordability of the Town’s current
levels of outstanding debt and its ability to issue additional debt in the future (Schedule 9, Schedule 10,
and Schedule 11)
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the
environment within which the Town’s financial activities take place (Schedule 12, Schedule 13, and
schedule 14).
Operating Information
These schedules contain service and infrastructure data to help the reader understand how the
information in the Town’s CAFR relates to the services the Town provides and activities it performs
(Schedule 15 and Schedule 16). Draft 12/10/2020125
This page intentionally left blank Draft 12/10/2020126
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
2011 72,567,355 14,652,823 29,017,520 116,237,698 (1)
2012 90,333,451 5,167,236 37,192,210 132,692,897
2013 92,558,523 3,949,583 41,480,377 137,988,483
2014 93,251,117 4,485,246 44,393,265 142,129,628
2015 93,687,029 5,663,182 7,180,919 106,531,130 (2)
2016 93,383,855 6,386,014 12,744,637 112,514,506
2017 96,265,652 5,627,707 15,134,420 117,027,779
2018 102,098,729 8,199,598 170,590 110,468,917 (4)
2019 107,542,588 11,918,688 ‐4,642,167 114,819,109 (3)
2020 111,700,225 7,117,984 ‐3,967,178 114,851,031
(1) The decrease in Restricted Net Position from FY 2010 to FY 2011 was primarily due to the issuance of the $15.7 million
Certificates of Participation in FY 2010.
(2) The decrease in Restricted Net Position GASB 68 Implementation of Unfunded Pension Liability of Statement of Net
Position.
(3) The decrease in unrestricted net position resulted largely from the use of approximately $8.0 million in unrestricted
cash balances in the Town’s GFAR fund during the year to invest in the Town’s infrastructure and equipment.
(4) Net position was restated for Fy 2018 for amounts placed intofiduciary funds, reclassified to General Fund Restricted
Asset.
-15,000,000
-10,000,000
-5,000,000
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
55,000,000
60,000,000
65,000,000
70,000,000
75,000,000
80,000,000
85,000,000
90,000,000
95,000,000
100,000,000
105,000,000
110,000,000
115,000,000
120,000,000
Net Investment in Capital Assets Restricted Unrestricted
Draft 12/10/2020127
Town of Los Gatos
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Expenses 2010/11 2011/12 2012/13 2013/14
Governmental Activities:
General Government 5,180,153$ 6,145,143$ 6,564,768$ 6,955,804$
Police Department 13,495,885 14,124,798 13,731,754 14,119,786
Parks and Public Works 7,155,905 7,827,332 7,829,315 8,154,616
Community Development 3,099,269 3,434,551 4,094,188 4,424,040
Community Services 666,015 ‐ ‐ ‐
Library Services 1,892,805 1,938,577 2,128,823 2,234,431
Sanitation 342,893 158,205 393,205 363,180
Redevelopment 16,794,022 919,821 1,277,063 21,687
Interest and Fees 1,278,381 1,123,842 ‐ ‐
Total Governmental Activities 49,905,328$ 35,672,269$ 36,019,116$ 36,273,544$
Program Revenues
Charges for Services:
General Government 1,156,931$ 1,131,424$ 1,416,593$ 2,179,077$
Police Department 2,153,843 2,324,397 2,450,630 3,206,579
Parks and Public Works 810,022 1,215,382 3,044,401 1,550,867
Community Development 3,097,192 3,448,433 4,649,444 5,156,061
Community Services 98,803 ‐ ‐ ‐
Library Services 39,491 37,662 50,696 51,775
Sanitation 135,000 135,000 403,294 328,648
Operating Grants and Contributions:
General Government 15,638 6,453 8,406 ‐
Police Department 27,748 29,980 91,360 42,661
Parks and Public Works 809,272 993,827 835,724 994,096
Community Services 182,683 ‐ ‐ ‐
Library Services 10,662 109 40 14,662
Sanitation 9,002 ‐ ‐ ‐
Capital Grants and Contributions:
General Government ‐ ‐ 169,270 ‐
Police Department ‐ ‐ ‐ ‐
Parks and Public Works 2,375,759 641,811 2,757,660 2,274,879
Community Development ‐ ‐ ‐ 19,360
Total Program Revenues 10,922,046$ 9,964,478$ 15,877,518$ 15,818,665$
General Revenues 2010/11 2011/12 2012/13 2013/14
Property Taxes 18,226,001$ 14,088,866$ 11,968,377$ 11,712,312$
Sales Taxes 9,971,409 9,889,100 8,757,428 8,029,571
Franchise Taxes ‐ ‐ ‐ ‐
Other Taxes 2,906,264 3,698,753 3,324,791 3,718,405
Motor Vehicle in Lieu 139,814 15,238 15,790 13,068
Investment Earnings 760,905 331,420 (133,375) 772,200
Loss on Disposal of Capital Assets ‐ ‐ ‐ ‐
Sale of Property (870,127) ‐ 54,425 ‐
Miscellaneous 41,943 2,275,160 1,154,647 350,468
Extraordinary Gain (Loss) Dissolution of RDA ‐ 11,864,453 295,101 ‐
Total General Revenues 31,176,209$ 42,162,990$ 25,437,184$ 24,596,024$
Change in Net Position (7,807,073)$ 16,455,199$ 5,295,586$ 4,141,145$ Draft 12/10/2020128
Schedule 2
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
6,465,852$ 6,993,661$ 6,771,628$ 7,948,918$ 8,163,991$ 7,405,368$
12,644,221 12,825,688 14,587,597 15,545,521 16,635,726 20,446,188
8,069,352 8,320,623 9,502,707 10,047,003 10,627,716 11,803,005
4,047,738 3,227,224 5,093,459 4,667,609 5,064,637 5,001,958
‐ ‐
2,553,414 2,522,142 2,868,748 3,087,684 3,059,294 3,347,523
491,359 528,580 466,762 536,296 684,673 3,041
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐
34,271,936$ 34,417,918$ 39,290,901$ 41,833,031$ 44,236,037$ 48,007,083$
1,888,213$ 1,517,012$ 1,669,020$ 1,701,146$ 1,562,683$ 1,470,324$
3,529,166 3,278,585 2,076,688 1,888,359 1,745,889 1,549,207
2,206,765 1,516,108 2,155,841 4,150,068 2,910,936 3,674,222
5,027,497 4,359,146 3,803,626 3,456,390 4,155,231 3,351,753
‐ ‐ ‐ ‐ ‐ ‐
53,123 46,192 46,746 14,702 9,476 11,522
328,868 368,813 410,626 771,442 966,130 231,323
‐ 15,291 ‐ ‐ ‐ 12,290
24,838 98,138 837,329 895,730 826,643 952,045
907,745 749,300 665,779 953,294 1,301,152 2,824,638
‐ ‐ ‐ ‐ ‐ 15,864
4,062 12,228 ‐ 57,200 47,482 49,351
‐ ‐ ‐ ‐ ‐ ‐
176,705 ‐ ‐ ‐ ‐ 8,258
‐ ‐ ‐ ‐ ‐ 9,100
2,338,154 1,610,657 770,600 348,437 146,792 832,755
‐ ‐ 9,280 ‐ ‐ ‐
16,485,136$ 13,571,470$ 12,445,535$ 14,236,768$ 28,665,066$ 14,992,652$
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
12,931,603$ 13,763,458$ 14,756,214$ 15,958,406$ 17,321,347$ 18,330,426$
8,202,678 7,501,175 8,925,276 7,466,253 8,158,152 7,531,425
2,215,430 2,258,892 2,366,908 2,474,814 2,475,916 2,495,792
2,062,893 1,997,497 2,351,223 2,667,840 2,726,743 1,911,774
‐ 12,308 14,056 16,483 14,689 24,526
428,772 698,324 192,260 333,120 1,809,128 2,428,470
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐
813,324 598,170 528,946 622,105 2,407,840 323,940
‐ ‐ ‐ ‐ ‐ ‐
26,654,700$ 26,829,824$ 29,134,883$ 29,539,021$ 34,913,815$ 33,046,353$
8,867,900$ 5,983,376$ 2,289,517$ 1,942,758$ 19,342,844$ 31,922$ Draft 12/10/2020129
Town of Los Gatos
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2010/11 2011/12 2012/13 2013/14
General Fund
Reserved ‐$ ‐$ ‐$ ‐$
Unreserved ‐ ‐ ‐ ‐
Nonspendable 1,500,000 ‐ ‐ ‐
Restricted ‐ ‐ ‐ ‐
Committed
Assigned 21,806,781 21,992,886 20,758,156 23,791,749
Unassigned 2,433,556 4,019,409 7,502,446 1,363,376
Total General Fund 25,740,337$ 26,012,295$ 28,260,602$ 25,155,125$
All Other Governmental Funds
Reserved ‐$ ‐$ ‐$ ‐$
Unreserved, reported in:
Special Revenue Funds ‐ ‐ ‐ ‐
Capital Project Funds ‐ ‐ ‐
Debt Service Funds ‐ ‐ ‐ ‐
Nonspendable ‐ ‐
Restricted 14,764,334 5,167,236 3,949,583 4,485,246
Committed ‐ ‐ ‐ ‐
Assigned 4,786,547 5,389,674 6,097,182 8,191,823
Unassigned (23,889) 107,107 157,208 183,045
Total All Other Governmental Funds 19,526,992$ 10,664,017$ 10,203,973$ 12,860,114$
Total Fund Balances 45,267,329$ 36,676,312$ 38,464,575$ 38,015,239$
Fiscal
Draft 12/10/2020130
Schedule 3
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
‐$ ‐$ ‐$ ‐$ ‐$ ‐$
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ 1,206,851 5,015,316 669,978
20,019,187 15,129,925 12,953,399 15,070,944 15,387,706
24,121,256 9,555,085 14,050,699 17,475,285 18,256,895 13,277,813
‐ ‐ ‐ ‐ ‐ ‐
24,121,256$ 29,574,272$ 29,180,624$ 31,635,535$ 38,343,155$ 29,335,497$
‐$ ‐$ ‐$ ‐$ ‐$ ‐$
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐
5,663,182 6,386,014 5,627,707 6,992,747 6,903,372 6,448,006
‐ 3,696,000 10,354,584 5,571,087 2,579,997 ‐
15,346,558 11,099,076 7,928,994 6,361,403 6,180,930 14,181,679
206,875 ‐ ‐ ‐ ‐ ‐
21,216,615$ 21,181,090$ 23,911,285$ 18,925,237$ 15,664,299$ 20,629,685$
45,337,871$ 50,755,362$ 53,091,909$ 50,560,772$ 54,007,454$ 49,965,182$
Year
Draft 12/10/2020131
Town of Los Gatos
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2010/11 2011/12 2012/13 2013/14 2014/15
Revenues:
Taxes 31,549,352$ 27,676,719$ 24,596,799$ 23,475,393$ 23,208,820$
Intergovernmental 3,248,303 1,669,729 2,615,191 2,440,127 2,921,002
Charges for Service 4,107,386 5,550,671 6,529,234 5,837,581 5,794,386
Licenses & Permits 2,967,819 3,242,348 4,015,871 5,343,265 6,467,771
Investment Income 691,022 291,484 (133,380) 772,164 428,735
Fines and Forfeitures 737,903 809,790 688,125 795,720 868,564
Franchise Fees ‐ ‐ ‐ ‐ 2,215,430
Use of Property 38,502 38,974 38,910 37,741 32,209
Other 2,904,862 5,412,328 4,577,584 3,648,277 3,130,975
Total Revenues 46,245,149 44,692,043 42,928,334 42,350,268 45,067,892
Expenditures:
Current
Public Safety 13,004,041 13,392,953 13,370,032 13,742,189 13,747,198
Public Works 5,222,504 5,440,960 5,616,197 5,611,283 5,840,097
Community Development 2,973,587 3,226,195 4,235,832 4,335,599 4,218,500
Community Services 663,645 ‐ ‐ ‐ ‐
Library Services 1,806,611 1,805,479 2,055,069 2,131,438 2,268,844
Sanitation & Other 314,899 116,607 359,725 322,817 411,863
General Government 6,318,706 8,046,794 8,331,444 8,499,854 8,647,451
Redevelopment 18,958,126 3,282,155 1,277,063 21,687 ‐
Capital Outlay 15,839,303 10,929,491 6,568,653 4,097,662 3,800,478
Debt Service
Principal Repayment 485,000 934,167 ‐ ‐ ‐
Interest and Fiscal Charges 1,019,881 1,143,185 ‐ ‐ ‐
Total Expenditures 66,606,303 48,317,986 41,814,015 38,762,529 38,934,431
Excess (Deficiency) of Revenues
Over (Under) Expenditures (20,361,154) (3,625,943) 1,114,319 3,587,739 6,133,461
Other Financing Sources(Uses):
Debt Issuance ‐ ‐ ‐ ‐ ‐
Transfers In 3,928,107 3,735,440 2,841,881 3,418,872 8,977,220
Transfers Out (3,545,168) (3,661,894) (2,463,850) (2,921,409) (7,788,049)
Proceeds from Sale of Property
Proceeds from Issuance of Debt ‐ ‐ ‐ ‐ ‐
Total Other Financing Sources(Uses)382,939 73,546 378,031 497,463 1,189,171
Special Item:
Sale of Property ‐ ‐ ‐ ‐ ‐
Extraordinary Gain (Loss) RDA Dissolution ‐ (5,038,620) 295,913 ‐ ‐
Prepayment of Pension Obligations ‐ ‐ ‐ (4,534,538) ‐
Net Change in Fund Balances (19,978,215)$ (3,552,397)$ 1,492,350$ 4,085,202$ 7,322,632$
Debt Service as a Percentage
of Non Capital Expenditures 2.96%5.56%0.00%0.00%0.00%
Fiscal Year
Draft 12/10/2020132
Schedule 4
2015/16 2016/17 2017/18 2018/19 2019/20
23,269,892$ 25,945,129$ 26,253,026$ 28,244,329$ 27,811,665$
2,573,475 1,715,580 2,124,903 2,310,655 4,498,153
4,773,001 4,210,174 5,395,057 5,584,504 5,309,470
5,442,133 5,075,503 5,937,044 5,173,876 4,818,671
698,308 192,978 332,938 1,809,164 2,428,453
879,277 917,105 676,212 510,266 271,117
2,258,892 2,366,908 2,474,814 2,475,916 2,495,792
31,723 32,096 32,206 32,960 31,039
2,396,992 1,011,939 640,844 579,755 376,922
42,323,693 41,467,412 43,867,044 46,721,425 48,041,282
13,763,316 13,251,288 14,423,554 14,945,407 15,793,815
6,307,266 6,633,748 7,125,686 7,962,135 8,168,599
3,695,504 3,793,930 4,192,165 4,577,495 4,473,790
‐ ‐ ‐ ‐ ‐
2,332,268 2,508,677 2,529,017 2,493,617 2,700,802
452,726 466,762 521,147 628,240 162,837
9,144,797 8,390,959 8,770,082 8,004,254 13,024,146
‐ ‐ ‐ ‐ ‐
3,241,657 6,867,034 9,778,058 7,888,914 7,861,972
‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
38,937,534 41,912,398 47,339,709 46,500,062 52,185,961
3,386,159 (444,986) (3,472,665) 221,363 (4,144,679)
‐ ‐ ‐ ‐ ‐
3,315,846 7,907,692 3,176,760 4,264,131 8,935,260
(1,284,514) (7,612,012) (3,880,131) (3,323,756) (8,628,719)
378,219 1,912,316 1,566
‐ 4,435 ‐ ‐ ‐
2,031,332 300,115 (325,152) 2,852,691 308,107
‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
5,417,491$ (144,871)$ (3,797,817)$ 3,074,054$ (3,836,572)$
0.00%0.00%0.00%0.00%0.00%Draft 12/10/2020133
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
2011 217,353,236 ‐9.92%8,044,692,600 ‐0.39% 8,262,045,836 32,178,770,400 1.0555
2012 217,297,593 ‐0.03%8,152,459,157 1.34% 8,369,756,750 32,609,836,628 1.0499
2013 211,268,609 ‐2.77%8,465,420,032 3.84% 8,676,688,641 33,861,680,128 1.0508
2014 224,079,502 6.06%9,238,816,900 9.14% 9,462,896,402 36,955,267,600 1.0493
2015 227,331,042 1.45%9,767,782,505 5.73% 9,995,113,547 39,071,130,020 1.0544
2016 217,035,545 ‐4.53%10,417,804,357 6.65% 10,634,839,902 41,671,217,428 1.0533
2017 304,443,013 40.27%11,240,554,198 7.90% 11,544,997,211 44,962,216,792 1.0560
2018 330,504,877 8.56%11,969,049,272 6.48% 12,299,554,149 47,876,197,088 1.0659
2019 359,276,665 8.71%12,795,393,103 6.90% 13,154,669,768 51,181,572,412 1.0607
2020 331,517,212 ‐7.73%13,510,676,336 5.59% 13,842,193,548 54,042,705,344 1.0598
Source: Santa Clara County Assessed Value Report
0
2000
4000
6000
8000
10000
12000
14000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Millions
Unsecured Property Secured Property
Draft 12/10/2020134
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
2011 1.0000 0.0483 0.0072 0.1449 1.2004
2012 1.0000 0.0435 0.0064 0.1393 1.1892
2013 1.0000 0.0439 0.0069 0.1523 1.2031
2014 1.0000 0.0423 0.0070 0.1417 1.1910
2015 1.0000 0.0479 0.0065 0.1442 1.1986
2016 1.0000 0.0476 0.0057 0.1381 1.1914
2017 1.0000 0.0474 0.0086 0.1223 1.1783
2018 1.0000 0.0597 0.0062 0.1177 1.1836
2019 1.0000 0.0565 0.0042 0.1006 1.1613
2020 1.0000 0.0557 0.0041 0.0935 1.1533
Source: Santa Clara County Book of Tax Rates
0.00
0.25
0.50
0.75
1.00
1.25
Per Hundred $Santa Clara Valey Water District County
County Bonds and Levies
School District Bonds and Loans
Basic County Wide Levy
Draft 12/10/2020135
Town of Los Gatos
Principle Property Tax Payers
Last Five Fiscal Years *
Percentage Percentage
of Total City of Total City
Taxable Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed Assessed
ASSESSEE NAME Value Value Value Value Value
750 University LLC 19,379,620$ 0.19%19,675,159$ 0.18%25,241,863$
980 JR LLC
Alberto Way Holdings LLC 24,188,966 0.23%24,557,845 0.22%25,048,998
Ann R. Desantis
Boccardo Corporation 21,617,318 0.21%21,918,921 0.20%22,211,650
CH Realty IV Downing LP
D&K Los Gatos LLC 16,293,163 0.16%
David A. and Shari Flick Trustee
Donahue Schriber Realty Group LP 53,872,083
DS Downing Los Gatos LLC 21,980,568 0.21%22,315,770 0.20%
DS Village Square 22,799,599 0.20%
El Camino Hospital 26,477,160 0.25%26,880,933 0.24%23,353,576
Equestrian 3 Investments LLC 29,584,251
Fox Creek Fund LLC
Good Samaritan Hospital LP 19,880,366 0.19%22,402,756 0.20%22,516,823
Grade Way Associations VI
Green Eyes LLC
Grosvenor USA Ltd.23,449,975 0.23%
Health Care REIT Inc,20,089,903 0.19%20,396,274 0.18%
International Hotel 30,144,617
Kay Kaoru and Go Sasaki Sr., Trustees 24,744,983 0.24%25,122,131 0.22%25,624,027
Knowles Los Gatos LLC 49,167,836 0.47%49,917,644 0.44%50,915,995
KSL Capital Partners 30,134,614 0.29%30,105,945 0.27%25,893,946
Leland E Lester, Trustee 29,004,169 0.26%
LG Business Park Bldg 3 LLC 61,947,284 0.59%53,465,724
LG Business Park Bldg 4 LLC 43,937,857
LG Business Park LLC 17,507,261 0.17%31,070,572 0.28%
LG Hotel LLC 15,497,395 0.15%
Los Gatos Hotel Corp.15,676,113 0.15%
Lyon Baytree Apartments LLC
Preylock Los Gatos LLC
Safeway Inc.24,394,468
San Jose Water Works 37,081,049 0.36%38,710,728 0.34%41,202,805
Serramonte Corporate Center LLC
SI 32 LLC 141,348,894 1.36%143,442,269 1.28%146,317,944
Sobrato Interests IV LLC 44,930,482 0.43%42,240,994 0.38%43,071,837
SRI Old Town LLC 31,744,252 0.30%32,228,351 0.29%32,872,917
Summerhill N40 LLC
Summerhill Prospect Avenue LLC 18,274,508 0.16%
Wealthcap Los Gatos 121 109,100,000 0.97%111,282,000
Wealthcap Los Gatos 31 84,000,000 0.75%85,680,000
Windrose Los Gatos Properties LLC ‐ 0.00%0.00%
Total ‐ Principal taxpayers 663,137,202$ 6.37%814,164,568.00$ 7.24%916,633,381.00$
Total ‐ All real properties assessed by the Town (1) $10,416,786,877 $11,239,536,718 $11,968,031,792
(1) Assessed value includes only net secured real properties.
(2) Excludes the value of tax‐exempt properties
Source Data: California Municipal Statistics, Inc.
2017/182016/172015/16
Draft 12/10/2020136
Schedule 7
Percentage Percentage Percentage
of Total City of Total City of Total City
Taxable Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed Assessed
Value Value Value Value Value
0.21% 25,746,699$ 0.20% 26,261,632$ 0.19%
19,277,879 0.15%
0.21% 25,549,975 0.20% 24,158,350 0.18%
0.19% 22,651,732 0.18% 23,099,314 0.17%
0.45% 56,370,186 0.44% 57,497,587 0.43%
0.20% 28,596,104 0.22% 30,789,155 0.23%
0.25% 28,563,864 0.22% 25,525,880 0.19%
21,558,664 0.17%
0.19% 22,934,274 0.18% 23,391,289 0.17%
0.25% 30,747,509 0.24% 31,362,458 0.23%
0.21% 26,135,962 0.20% 28,864,942 0.21%
0.43% 51,934,313 0.41% 52,972,998 0.39%
0.22% 26,411,820 0.21% 33,069,058 0.24%
0.45%
0.37%
89,141,472 0.66%
0.20% 25,752,231 0.19%
0.34% 46,150,577 0.36% 47,777,432 0.35%
200,844,610 1.57%204,861,501 1.52%
1.22% 149,208,182 1.17%152,166,578 1.13%
0.36% 43,919,879 0.34% 44,781,377 0.33%
0.27% 33,530,374 0.26% 34,200,980 0.25%
56,244,782 0.42%
0.93% 113,507,640 0.89%115,777,792 0.86%
0.72% 87,393,600 0.68%
7.66% 1,061,033,843.00$ 8.29% 1,127,696,808.00$ 8.35%
$12,793,751,423 $13,509,034,656
2019/202018/19
Draft 12/10/2020137
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
2011 7,567,880 6,861,650 14,429,530 8,262,045,836 1,117,973,351 9,380,019,187
2012 7,520,265 3,349,254 10,869,519 8,369,756,750 1,109,305,673 9,479,062,423
2013 8,253,442 ‐ 8,253,442 8,676,688,641 1,167,752,021 9,844,440,662
2014 9,120,626 ‐ 9,120,626 9,462,896,402 1,249,873,303 10,712,769,705
2015 9,787,519 ‐ 9,787,519 9,995,113,547 1,318,214,863 11,313,328,410
2016 10,388,424 ‐ 10,388,424 10,634,839,902 1,395,509,489 12,030,349,391
2017 11,345,588 ‐ 11,345,588 11,544,997,211 1,537,577,241 13,082,574,452
2018 12,060,228 ‐ 12,060,228 12,299,554,149 1,650,746,473 13,950,300,622
2019 12,924,592 ‐ 12,924,592 13,154,669,768 1,717,358,555 14,872,028,323
2020 13,559,587 ‐ 13,559,587 13,842,193,548 1,809,729,058 15,651,922,606
Sources: Santa Clara County Auditor‐Controller Office and the Town of Los Gatos
$7.0
$7.5
$8.0
$8.5
$9.0
$9.5
$10.0
$10.5
$11.0
$11.5
$12.0
$12.5
$13.0
$13.5$14.0
$14.5
$15.0
$15.5
$16.0$16.5
BillionsValue of Property
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
$18.0
MillionsTax Levied
Draft 12/10/2020138
Town of Los Gatos Schedule 9
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
1992 2002 2010
Certificate Certificate Certificate Total Total Percentage of
Fiscal of of of Governmental Primary Personal Per
Year Participation Participation Participation Activities Government Income Capita
2011 240,000 8,865,000 15,675,000 24,780,000 24,780,000 19.7%835.72
2012 ‐ ‐ ‐ ‐ ‐ 0.0%
1)0.00
2013 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2014 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2015 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2016 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2017 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2018 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2019 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
2020 ‐ ‐ ‐ ‐ ‐ 0.0%0.00
1)Debt was transferred to the Successor Agency Trust Fund as a part of the RDA dissolution
Governmental Activities
Draft 12/10/2020139
Town of Los Gatos Schedule 10
Direct and Overlapping Governmental Activities Debt
As of June 30, 2020
2019/20 Assessed Valuation:$13,842,193,548
Estimated Share
of Direct and
Total Debt at Overlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT:% Applicable (1)June 30, 2020 at June 30, 2020
Overlapping Tax & Assesment Debt
Santa Clara County 2.685%881,455,000$ 23,667,067$
West Valley‐Mission Community College District 9.282%617,330,000$ 57,300,571$
Campbell Union High School District 7.875% 369,655,000$ 29,110,331$
Los Gatos‐Saratoga Joint Union High School District 34.723%88,930,000$ 30,879,164$
Cambrian School District 0.454%48,499,944$ 220,190$
Campbell Union High School District 7.818%218,860,233$ 17,110,493$
Los Gatos Union School District 71.118%76,655,000$ 54,515,503$
Saratoga Union School District 0.032%21,227,353$ 6,793$
Union School District 20.485%112,109,206$ 22,965,571$
Midpeninsula Regional Open Space District 4.423%88,810,000$ 3,928,066$
Santa Clara Valley Water District Benefit Assessment District 2.685%65,495,000$ 1,758,541$
Total Overlapping Tax and Assesmet Debt 241,462,290$
Overlapping General Fund Debt
Santa Clara County General Fund Obligations 2.685%966,725,100$ 25,956,569$
Santa Clara County Pension Obligations 2.685%346,996,639$ 9,316,860$
Santa Clara County Board of Education Certificates of Participation 2.685%3,480,000$ 93,438$
West Valley‐Mission Community College District General Fund Obligations 9.282%50,780,000$ 4,713,400$
Campbell Union High School District General Fund Obligations 7.875%20,000,000$ 1,575,000$
Los Gatos‐Saratoga Joint Union High School District Certificates of Participation 34.723%2,634,000$ 914,604$
Campbell Union School District General Fund Obligations 7.818%2,440,000$ 190,759$
Saratoga Union School District Certificates of Participation 0.032%3,150,000$ 1,008$
Santa Clara County Vector Control District Certificates of Participation 2.685%2,010,000$ 53,969$
Midpeninsula Regional Open Space Park District General Fund Obligations 4.423%111,985,600$ 4,953,123$
Total Gross Overlapping General Fund Debt 47,768,730$
Less: Santa Clara County Supported Obligations 1,969,609$
Total Overlapping General Fund Debt 45,799,121$
Overlapping Tax Increment Debt ( Successor Agency)
Town of Los Gatos Certificated of Participations 15,335,000$
Total of Overlapping Tax Increment Debt 15,335,000$
Total Direct Debt $0
Total Gross Overlapping Dept 304,566,020$
Total Net Overlapping Debt 302,596,411$
Gross Combined Total Debt 304,566,020$ (2)
Net Combined Total Debt 302,596,411$
Ratios to 2019/20 Assessed Valuation:
Total Overlapping Tax and Assessment Debt: 1.74%
Total Direct Debt: 0.00%
Gross Combined Total Debt: 2.20%
Net Combined Total Debt: 2.19%
Ratios to Redevelpment Incremental Valuation ( $1,471,897,930):
Total Overlapping Tax Increment Debt: 1.040%
Source Data: California Municipal Statistics, Inc.
(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages
were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by
the distric's total taxable asessed value.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non‐bonded capital lease obligations.Draft 12/10/2020140
This page intentionally left blank Draft 12/10/2020141
Town of Los Gatos
Legal Debt Margin Information,
Last Ten Fiscal Years
(In Thousands of Dollars)
2010/11 2011/12 2012/13 2013/14 2014/15
Debt Limit 1,204,551$ 1,195,035$ 1,216,131$ 1,263,138$ 1,379,254$
Debt Applicable to Limit ‐ ‐ ‐ ‐ ‐
Legal Debt Margin 1,204,551$ 1,195,035$ 1,216,131$ 1,263,138$ 1,379,254$
Total Net Debt
Applicable to the Limit
as a Percentage
of Debt Limit 0.00% 0.00% 0.00% 0.00% 0.00%
Notes:
(2) Excludes RDA asessed valuation and debt transferred to the Successor Agency trust as a part of the RDA dissolution.
(1) The Town of Los Gatos is a general law city and has a debt limit of 15%.
Fisca
Draft 12/10/2020142
Schedule 11
Assessed Value 13,842,193,548$
Debt Limit 2,076,329,032
Debt Applicable to Limit:
Legal Debt Margin 2,076,329,032$
2015/16 2016/17 2017/18 2018/19 2019/20
1,444,943$ 1,556,252$ 1,679,736$ 1,789,097$ 2,076,329$
‐ ‐ ‐ ‐ ‐
1,444,943$ 1,556,252$ 1,679,736$ 1,789,097$ 2,076,329$
0.00%0.00%0.00%0.00%0.00%
Legal Debt Margin Calculation
for Fiscal Year 2019/20
al Year
Draft 12/10/2020143
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)
2011 29,651 1,833,410 61,833 44.22 6,184 10.3%
2012 29,808 1,854,892 62,228 42.64 6,352 8.7%
2013 30,247 2,140,641 70,772 45.8 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%
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. Draft 12/10/2020144
This page intentionally left blank Draft 12/10/2020145
Town of Los Gatos
Principal Employers
Last Ten Fiscal Years
Percentage Percentage
of Total Town of Total Town
Principal Employers Emp. Employment Emp. Employment
Columbia Health Care Assoc/Mission Oaks Hospital 2,000 12.60% 2,000 13.89%
El Camino Hospital, Los Gatos 700 4.41% 700 4.86%
Los Gatos Union School District 300 1.89% 275 1.91%
Los Gatos‐Saratoga High School District 300 1.89% 270 1.88%
Netflix 800 5.04% 800 5.56%
Safeway 250 1.57% 250 1.74%
Alain Pinel Realtors 220 1.39% 150 1.04%
Verizon ‐ 0.00% ‐ 0.00%
Courtside Tennis Club 200 1.26% 200 1.39%
Town of Los Gatos 138 0.87% 136 0.94%
Whole Foods ‐ 0.00% ‐ 0.00%
Vasona Creek Health Care Center ‐ 0.00% ‐ 0.00%
Good Samaritan Regional Cancer Center ‐ 0.00% ‐ 0.00%
Roku ‐ 0.00% ‐ 0.00%
Terraces of Los Gatos ‐ 0.00% ‐ 0.00%
Source: Town of Los Gatos, Finance Department and Muniservices
2011/122010/11
Draft 12/10/2020146
Schedule 13
Percentage Percentage Percentage
of Total Town of Total Town of Total Town
Emp. Employment Emp. Employment Emp. Employment
2,000 13.29% 2,000 13.52% ‐ 0.00%
700 4.65% 700 4.73% 560 3.73%
275 1.83% 237 1.60% 273 1.82%
270 1.79% 256 1.73% 157 1.05%
900 5.98% 825 5.58% 1,530 10.19%
250 1.66% 250 1.69% 314 2.09%
150 1.00% 156 1.05% 156 1.04%
‐ 0.00% ‐ 0.00% ‐ 0.00%
200 1.33% 295 1.99% 440 2.93%
138 0.92% 144 0.97% 157 1.05%
‐ 0.00% ‐ 0.00% 179 1.19%
‐ 0.00% ‐ 0.00% 233 1.55%
‐ 0.00% ‐ 0.00% 200 1.33%
‐ 0.00% ‐ 0.00% ‐ 0.00%
‐ 0.00% ‐ 0.00% ‐ 0.00%
2012/13 2013/14 2014/15
Draft 12/10/2020147
Percentage Percentage
of Total Town of Total Town
Principal Employers Emp. Employment Emp. Employment
Columbia Health Care Assoc/Mission Oaks Hospital ‐ 0.00% ‐ 0.00%
El Camino Hospital, Los Gatos 560 3.53% 560 3.49%
Los Gatos Union School District 280 1.76% 274 1.71%
Los Gatos‐Saratoga High School District 157 0.99% 370 2.30%
Netflix 1,976 12.45% 1,864 11.61%
Safeway 314 1.98% 314 1.95%
Alain Pinel Realtors 146 0.92% 148 0.92%
Verizon ‐ 0.00% ‐ 0.00%
Courtside Tennis Club 440 2.77% 468 2.91%
Town of Los Gatos 158 1.00% 160 1.00%
Whole Foods 179 1.13% 179 1.11%
Vasona Creek Health Care Center 233 1.47% 233 1.45%
Good Samaritan Regional Cancer Center 200 1.26% 200 1.25%
Roku 487 3.07% 554 3.45%
Terraces of Los Gatos 228 1.44% 228 1.42%
2015/16 2016/17
Draft 12/10/2020148
Schedule 13
Percentage Percentage Percentage
of Total Town of Total Town of Total Town
Emp. Employment Emp. Employment Emp. Employment
0.00% 0.00% 0.00%
560 3.43% 560 3.49% 560 3.49%
267 1.64% 281 1.75% 281 1.75%
367 2.25% 367 2.28% 367 2.28%
2,117 12.98% 2,314 14.41% 2,314 14.41%
314 1.92% 314 1.95% 314 1.95%
131 0.80% 131 0.82% 131 0.82%
0.00%0.00%0.00%
542 3.32% 542 3.37% 542 3.37%
159 0.97% 160 1.00% 160 1.00%
179 1.10% 125 0.78% 125 0.78%
233 1.43% 233 1.45% 233 1.45%
200 1.23% 200 1.25% 200 1.25%
664 4.07% 516 3.21% 516 3.21%
228 1.40% 228 1.42% 228 1.42%
2019/202018/192017/18
Draft 12/10/2020149
Town of Los Gatos Schedule 14
Full‐time‐Equivalent Employees by Function/Program
Last Ten Fiscal Years
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Function/Program
General Government 18.90 20.15 20.40 20.73 20.97 20.97 21.35 21.97 22.16 21.80
Police 59.50 60.50 58.00 57.50 60.00 59.00 59.00 59.00 59.00 60.00
Culture and Recreation 3.25 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
Economic Development 1.00 1.00 ‐ 0.50 0.63 0.63 0.63 0.75 0.75 0.75
Library 8.60 8.60 8.60 10.30 10.80 11.00 12.25 12.25 12.50 12.50
Planning 15.00 16.00 17.50 17.50 19.50 19.00 19.26 19.63 20.08 20.08
Public Works 32.50 32.00 31.00 31.50 32.00 33.50 33.50 34.50 34.50 34.50
Total 147.75 138.75 138.25 135.50 137.53 144.10 145.98 148.10 148.99 149.63
Full‐time equivalent employment is calculated as one or more employee positions totaling one full year
of service or approximately 2,080 hours a year.
Page C‐42 of Town Budget 19‐20
Full‐time‐Equivalent Employees as of June 30
Draft 12/10/2020150
This page intentionally left blank Draft 12/10/2020151
Town of Los Gatos
Operating Indicators
Last Ten Fiscal Years
FUNCTION/PROGRAM
General government 2010/11 2011/12 2012/13 2013/14
Building Permits Issued
Residential Permits Issued 711 747 738 813
Residential Permits Value 42,974,043 66,072,341 75,227,889 87,307,822
Commercial Permits Issued 128 107 137 139
Commercial Permits Value 31,289,431 17,663,124 46,855,615 138,676,507
Publically Owned Permits Issued 11 ‐ ‐ ‐
Publically Owned Permits Value 40,000 ‐ ‐ ‐
Residential Parking Permits
Number of Special Event Permits Issued 96 89 125 133
Number of Annual Permits Issued 713 1,223 1,320 1,376
City Clerk
Number of Council Resolutions Passed 76 59 74 86
Number of Ordinances Passed 6 13 20 16
Number of Contracts Passed 218 227 220 196
General Services
Number of Purchase Orders Issued 336 358 318 301
Police
Physical Arrests 872 690 648 641
Parking Violations 14,377 12,938 11,991 14,421
Traffic Violations 2,718 2,908 3,333 4,747
DUI Arrests 98 89 86 62
Library
Circulated e‐audiobooks 1,994 3,388 4,774 2,414 *
Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles)4.7 8.0 8.0 10.0
ADA Compliance: Curb Ramps 17 19 19 19
Traffic Circles 1 1 1 ‐
Street Poles 1,708 1,611 1,611 1,611
Planning and Development Department
Building & Safety Inspections Performed 10,977 11,738 11,902 12,764
Redevelopment: Number of active projects 1 1 ‐ ‐
* July 2013 the Library separated from Northern CA Digital Library, Patrons had no longer access to collections of multiple libraries. By 20
patrons access to more materials.
** The Town streamlined the special event application where multiple events require only one permit.Draft 12/10/2020152
Schedule 15
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
805 899 744 849 814 898
76,896,111 85,000,754 53,625,891 63,083,249 80,030,846 47,961,529
133 147 135 105 122 92
178,195,997 20,185,884 50,024,177 16,626,196 13,295,999 12,389,688
‐ ‐ ‐
‐ ‐ ‐
127 107 118 113 78 **
1,570 1,363 1,251 1,342 1,395 1,400
72 61 69 69 59 57
9 11 5 17 11 24
222 283 240 262 245 242
277 334 331 322 343 359
695 987 1,030 1,164 1,138 616
13,321 13,975 12,863 11,784 6,817 4,023
4,633 5,400 4,634 4,757 2,877 1,225
48 58 60 51 70 64
5,867 *7,761 10,006 8,844 12,130 57,839
1.8 8.0 10.0 2.6 5.8 16.2
23 11 30 68 49 68
1 1 1 1 1 1
1,609 1,609 1,609 1,762 1,830 1,830
11,652 8,655 14,722 13,918 13,966 13,633
‐ ‐ ‐ ‐ ‐ ‐
014 the Library has expanded its contents giving
Fiscal Year
Draft 12/10/2020153
Town of Los Gatos
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Function/Program
Police
Number of Stations 2 2 2 2 2 2
Number of Patrol Units 14 14 14 14 14 14
Parking Enforcement Vehicles 2 2 2 2 2 2
Other Public Works
Streets (miles)132 132 132 132 132 132
Streetlights 2,115 2,116 2,116 2,109 1,609 1,609
Traffic Signals 28 29 29 29 29 30
Parks and Recreation
Number of Parks 12 12 12 12 12 12
Number of Community Centers 1 1 1 1 1 1
Number of Parks & Open Spaces N/A N/A N/A N/A N/A N/A
Parking
Number of Parking Garages 1 1 1 1 1 1
Number of Parking Lots 22 22 22 22 22 22
Number of Off Street Parking Garage Spaces 1,126 1,126 1,126 1,126 1,126 1,126
Number of Downtown Off‐Street Parking Spaces N/A N/A N/A N/A N/A N/A
Source: Town of Los Gatos, Finance Department
Fiscal Year
Draft 12/10/2020154
Schedule 16
2016/17 2017/18 2018/19 2019/20
2 2 2 2
14 14 14 14
2 2 2 2
132 132 132 132
1,609 1,762 1,830 1,830
30 30 31 31
12 12 N/A N/A
1 1 1 1
N/A N/A 17 17
1 1 1 1
22 22 22 22
1,126 1,126 N/A N/A
N/A N/A 1,269 1,269 Draft 12/10/2020155
This page intentionally left blank Draft 12/10/2020156
OTHER INDEPENDENT AUDITOR’S REPORT
Draft 12/10/2020157
This page intentionally left blank Draft 12/10/2020158
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States, the financial statements of the governmental activities, each major
fund, and the aggregate remaining fund information of the Town of Los Gatos, California, as of and for the year
ended June 30, 2020, and the related notes to the financial statements, which collectively comprise the Town of
Los Gatos, California’s basic financial statements, and have issued our report thereon dated December xx, 2020.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town of Los Gatos,
California’s internal control over financial reporting (internal control) as a basis for designing audit procedures
that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements,
but not for the purpose of expressing an opinion on the effectiveness of the Town of Los Gatos, California’s internal
control. Accordingly, we do not express an opinion on the effectiveness of the Town of Los Gatos, California’s
internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements
will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough
to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or,
significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal
control that we consider to be material weaknesses. However, material weaknesses may exist that have not been
identified. Draft 12/10/2020159
To the Honorable Mayor and Members of the Town Council
of the Town of Los Gatos
Los Gatos, California
Page 2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town of Los Gatos, California’s financial
statements are free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a
direct and material effect on the financial statements. However, providing an opinion on compliance with
those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be reported
under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.
Badawi and Associates
Certified Public Accountants
Berkeley, California
December xx, 2020
Draft 12/10/2020160
Draft 12/10/2020
Draft 12/10/2020