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Attachment 1 - FY 2021 Draft ACFR 20211216C A L I F O R N I A Town of Los Gatos Annual Comprehensive Financial Report Fiscal Year 2020/21 Draft 12/16/2021ATTACHMENT 1 Cover Photos: Constantino, Evie Julian Draft 12/16/2021 TOWN OF LOS GATOS CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 PREPARED BY THE OFFICE OF THE TOWN MANAGERDraft 12/16/2021 Draft 12/16/2021 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 small­town atmosphere and pedestrian­oriented 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 100­acre Town site in 1890 with a population of 1,652, Los Gatos grew slowly so that by 1963 the area was 6.3 square miles, with a population of 11,750. Today Los Gatos covers between 14 and 15 square miles and has a population of 30,836. 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 12/16/2021 Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 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: Government­Wide Financial Statements: Statement of Net Position ....................................................................................................... 40 Statement of Activities ............................................................................................................. 41 Fund Financial Statements: Governmental Funds: Balance Sheet ....................................................................................................................... 46 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ................................................................................................ 45 Statement of Revenues, Expenditures and Changes in Fund Balances ................................ 46 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities ......................................... 47 Statement of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) General Fund ......................................................................... 48 Proprietary Funds – Internal Service Funds: Statement of Net Position .................................................................................................... 50 Statement of Revenue, Expenses and Changes in Net Position ........................................... 51 Statement of Cash Flows ...................................................................................................... 52 Fiduciary Funds: Statement of Fiduciary Net Position .................................................................................... 54 Statement of Changes in Fiduciary Net Position .................................................................. 55 Notes to the Basic Financial Statements ......................................................................................... 58 Required Supplementary Information: Schedule of Proportionate Share of Net Pension Liability: CalPERS Misc. Agent­Multiple Employer Plan ............................................................................. 98 CalPERS Safety Cost­Sharing Plan ................................................................................................ 100 Schedule of Pension Plans Contributions Miscellaneous Agent Multiple­Employer Plan ............................................................................ 101 Safety Cost­Sharing Plan .............................................................................................................. 102 Actuarial Methods and Assumptions used for Pension Actuarially Determined Contributions ........................................................................................................... 103 Schedule of Changes in Net OPEB Liability and Related Ratios ...................................................... 104 Schedule of Employer Contributions .............................................................................................. 104 Actuarial Methods and Assumptions used for 2019/20 OPEB Actuarially Determined Contribution ............................................................................................................ 105 Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 TABLE OF CONTENTS SUPPLEMENTARY INFORMATION: Major Governmental Fund Schedules (other than the General Fund): Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) Appropriated Reserves Fund ............................................................ 109 Nonmajor Governmental Funds: Combining Balance Sheets .............................................................................................................. 110 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances .............................................................................................................................. 112 Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) .............................................................. 114 Internal Service Funds: Combining Statement of Net Position ............................................................................................ 119 Combining Statement of Revenue, Expenses and Changes in Net Position ................................... 120 Combining Statement of Cash Flows .............................................................................................. 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 ......................................................................................................................... 145 Full­time Equivalent Town Government Employees by Function/Program ................................... 147 Operating Indicators by Function/Program .................................................................................... 148 Capital Assets Statistics by Function/Program ................................................................................ 150 Draft 12/16/2021 INTRODUCTORY SECTION Draft 12/16/2021 This page intentionally left blank Draft 12/16/2021 TOWN OF LOS GATOS OFFICE OF THE TOWN MANAGER (408) 354-6832 FAX: (408) 399-5786         December xx, 2021    Honorable Mayor and Town Council,    I am pleased to submit the Town’s Annual Comprehensive Financial Report (ACFR) for the  fiscal year ending June 30, 2021.  In coordination with the Town Manager’s Office, this  report was prepared by the Finance Department , which assumes responsibility for the  accuracy of the data,  the completeness and fairness of the presentation, and all  disclosures.  The information in this report presents the reader with a comprehensive  view of the Town’s financial position and the results of its operations for the fiscal year  ending June 30, 2021, along with additional disclosures and financial information  designed to enable the reader to gain an understanding of the Town’s financial activities.         This report was prepared as prescribed in Governmental Accounting Standards Board  (GASB) Statement No. 34, Basic Financial Statements and Management’s Discussion and  Analysis for State and Local Governments (GASB 34).  This GASB Statement requires  management to provide a narrative introduction, overview and analysis to accompany  the basic financial statements in the form of a Management’s Discussion and Analysis  (MD&A).  This letter of transmittal is designed to complement the MD&A and should be  read in conjunction with it. The MD&A can be found immediately following the  Independent Auditor’s Report.    This Annual Comprehensive Financial Report is organized into three sections:    I. The Introductory Section includes the table of contents, letter of transmittal,  listing of elected officials, Town administrative personnel, and an organization  chart delineating organizational structure.     II. The Financial Section includes the Independent Auditor’s opinion, the MD&A, the  basic financial statements, notes to the financial statements, combining  statements of non‐major funds, and required supplemental information.    III. The Statistical Section includes both financial and non‐financial data about the  Town.    The Annual Comprehensive Financial Report is prepared in accordance with Generally  Accepted Accounting Principles (GAAP) promulgated by the Governmental Accounting  1Draft 12/16/2021 Mayor and Town Council  December xx, 2021  Standards Board (GASB) and includes the audit report of Badawi & Associates, the Town’s  independent certified public accountants.     This Annual Comprehensive Financial Report will be submitted to the Government  Finance Officers Association for consideration of its Achievement of Excellence Award in  financial reporting certification.  This award is granted only to entities whose reports meet  the highest standards of municipal financial reporting.       THE REPORTING ENTITY AND ITS SERVICES    Los Gatos is a general law Town, incorporated under the legal framework of California in  1887.  The Town is located in the foothills and level terrain of southwestern Santa Clara  Valley, referred to internationally as “Silicon Valley.”  From the first 100‐acre Town site  and an 1890 population of 1,652, Los Gatos grew slowly so that by 1963 the area was 6.3  square miles with a population of 11,750.  Today Los Gatos covers approximately 15  square miles with a population of 30,863. The growth over the last 80 years resulted in a  community with vibrant business districts, well maintained neighborhoods, and lovely  parks and open spaces.  Preserving the unique charm of Los Gatos as a complete and well‐ balanced community while meeting its economic and housing needs, has been, and  remains a key goal for the Town.    The Town maintains a 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    While the National Bureau of Economic Research (NBER) declared April 2020 as the  official end of the nation’s recession, the Town and communities across America continue  to grapple with the fiscal disruptions caused by the COVID‐19 pandemic. Even with the  recession officially being the shortest on record, the Town’s economically sensitive  Transient Occupancy Tax (TOT) revenue remains near historic lows while Sales Tax  receipts indicate modest improvement from the depths of the pandemic. Conversely, the  Town’s Property Tax revenues remained relatively strong as inventories of available  homes remained low and demand was high with millennials transitioning from renting to  homeownership, and remote work became more of a permanent fixture.       General Fund revenues (not including transfer‐ins) increased 0.1% from the prior year.   Property tax revenues remain the largest and most consistent source of support for  2Draft 12/16/2021 Mayor and Town Council  December xx, 2021  General Fund operations, comprising approximately 47% of General Fund revenues in FY  2020/21.  For FY 2020/21 property tax receipts of $19.9 million were $1.5 million higher  than the prior year’s collection, reflecting the continued desirability of the Town, its  environment, culture, and educational opportunities.       The Town also relies heavily on sales tax revenues to support General Fund operations,  comprising approximately 18.6% of General Fund revenues in FY 2020/21.  For FY 2020/21  sales tax receipts of $7.5 million were $0.4 million higher than the prior year’s collection.   Sales tax revenues increased as the worst of the unprecedented disruption to business  activity and public health restrictions waned. The Town’s 1/8 cent District Sales Tax  continued to perform well as the District Tax captured a larger share of the increase in  online sales.    Due to the unprecedented economic dislocations associated with the pandemic the  Federal government initiated two federal relief programs designed to provide direct  funding to states and cities.  The first program, the Coronavirus Aid, Relief, and Economic  Security (CARES) Act established a $150 billion Coronavirus Relief Fund.  Federal law  specifies that these funds may only be used for unbudgeted costs incurred between  March 1, 2020 and December 31, 20201. Control Section 11.90 of the 2021 Budget Act  extended the expenditures deadline for cities, counties and community colleges to  September 1, 2021.  The Budget Act authorized the California Department of Finance to  allocate $1,289,065,000 to address the public health and public safety impacts of COVID‐ 19, including homelessness. Cities will receive $500,000,000 for similar purposes.   Pursuant to the provisions of Control Section 11.90, cities with populations between  300,000 and 500,000 were allocated $225 million and cities with populations less than  300,000 were allocated $275 million.  Allocations Generally for cities were derived using  the proportional share of the State population. of the city was used to determine their  share of the allocation.  The Town of Los Gatos nonrecurring allocation of $388,181 was  received in July 2020.  On March 11, 2021, the second program, the American Rescue Plan  Act (ARPA) was signed into law by President Biden.  The $1.9 trillion package (the Act)  provides financial aid to families, governments, businesses, schools, non‐profits and  others impacted by the COVID‐19 public health crisis. The Act will allocate $7,229,744 to  the Town over a two year period.  The first tranche nonrecurring payment of $3,614,872  was received on July 13, 2021.  The replacement of lost revenue is an eligible ARPA use,  and initial budgetary estimates required approximately $1.4 million in ARPA funding to  close anticipated revenue shortfalls.  With actual revenues performing better in several  areas and expenditure savings being better than projected, ARPA funding was not  required under the revenue loss eligible use.   For more information regarding the two  federal programs please refer to Note 15.     The Town continues to adjust and prepare for pension employer costs to continue to be  a primary expense in conjunction with salaries.  The Town’s pension plans over the past  several decades, like all other CalPERS participants, have experienced unfavorable  investment returns, changes in actuarial assumptions, and demographic changes which  have outweighed any positive plan experiences. The outcome of these unfavorable  3Draft 12/16/2021 Mayor and Town Council  December xx, 2021  economic and demographic results is unfunded pension and Other Post‐Employment  Benefits (OPEB) obligations for the Town. According to the 2020 actuarial valuations, the  unfunded actuarial liability for pensions was $61.8 million and $8.7 million for OPEB as of  June 30, 2019.    To address the escalation in pension costs, current and previous Councils have allocated  additional discretionary pension funding totaling $10.4 million. These additional  discretionary payments will ultimately yield an approximate $12.7 million in pension  contribution savings. In addition to the management of the Town’s pension obligations,  prior Councils have worked to curb cost escalation in Other Post‐Employment Benefits  (OPEB). In 2009, the Town initiated prefunding of the retiree healthcare benefit and has  since established approximately $26.2 million in OPEB assets from zero in 2009.     Despite these efforts, in the past five years the Net Pension Obligation reported in the  Town’s ACFR’s has increased 73.8% from $33.4 million as of the June 30, 2016 ACFR to  the current Net Pension Obligation of $58.02 million as of June 30, 2021.      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 revenue constraints 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 2020/21.  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.      4Draft 12/16/2021 Mayor and Town Council  December xx, 2021  MAJOR CAPITAL PROJECT INITIATIVES    Major capital asset and infrastructure initiatives were once again a priority for the fiscal  year.  Approximately $4.3 million in Town infrastructure and other capital asset  improvements were invested in FY 2020/21, including $0.5 million in street projects  Town‐wide to improve the pavement condition.  Other investments included $0.8 million  in equipment purchases, $0.9 million in traffic signal improvements, $0.9 million in  building improvements, and $0.2 million in pathways and trails and $0.2 million in  guardrail replacement.     Additional infrastructure improvements are scheduled in accordance with the Town’s  approved Capital Improvement Plan, and will continue into future years.  All of these  improvements are funded either through grants, or via revenues accumulated from prior  year budget savings and/or excess revenues per Town Council Policy.     ACCOUNTING SYSTEM AND BUDGETARY CONTROL    The effectiveness of internal controls is a primary consideration in the development and  evaluation of the Town’s accounting system.  Internal accounting controls are designed  to provide reasonable but not absolute assurance regarding:     1)  safeguarding of assets against loss from unauthorized loss or disposition,   2)  accuracy and reliability of accounting data, and   3)  adherence to managerial policy.    The concept of reasonable assurance recognizes that the cost of internal controls should  not outweigh the benefits, and that management must make estimates and judgments in  evaluating these costs and benefits.       All governmental fund types use the modified accrual basis of accounting.  This means  that revenues are recorded when measurable and available rather than when received.   Measurable means the amount can be determined and available means the cash is  received within sixty days after the end of the fiscal year.  Expenditures are recorded  when the liability is incurred, rather than when paid.  An exception to this rule is principal  and interest on general long‐term debt, which is not recognized by debt service funds  until it is due.      Proprietary (internal service) funds are accounted for using the accrual basis of  accounting, similar to that used by corporations.  Proprietary fund revenues are  recognized when they are earned rather than when the cash is received, even if the cash  is not available and proprietary fund expenses are recognized when they are incurred.  With the implementation of GASB 34, the Town prepares its Basic Financial Statements  on the accrual basis.  5Draft 12/16/2021 Mayor and Town Council  December xx, 2021  Internal accounting procedures have been developed to provide reasonable assurance  regarding the safeguarding of assets and the reliability of financial records for preparing  financial statements and maintaining asset accountability.    An annual operating budget, five‐year budget forecast, and five‐year capital improvement  plan is adopted by the Town Council consistent with generally accepted accounting  principles.  All budget adjustments and transfers between funds must be approved by the  Town Council during the fiscal year.  The Town Manager is authorized to transfer  unencumbered appropriations within a budget category, within a fund.  Appropriations  are valid for each fiscal year and lapse at year‐end.      AWARDS    The Town’s Comprehensive Annual Financial Report for the fiscal year ended June 30,  2020 was awarded a Certificate of Achievement for Excellence in Financial Reporting by  the national Government Finance Officers Association.  This is the 26th 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 ACFR.    ACKNOWLEDGEMENTS    The preparation of this Annual Comprehensive Financial Report, as presented herein, is  the result of the combined efforts and dedicated services of the excellent staff of the  Department of Finance.  Special thanks to 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; and Arn Andrews  Assistant Town Manager for their efforts in preparing this report.  The Town’s Finance  Commission is also recognized for its contributions to strengthening the ACFR through its  review, discussion, and comments.    Respectfully submitted,      ____________________________           ___________________________________  Laurel Prevetti                        Stephen D. Conway  Town Manager                               Director of Finance    6Draft 12/16/2021 TOWN OF LOS GATOS ORGANIZATIONAL CHART FY 2020/21 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 TaxPurchasing Budget AdministrationFinancial ReportingTreasury & 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 7Draft 12/16/2021 TOWN OF LOS GATOS PRINCIPAL OFFICERS AS OF JUNE 30, 2021 TOWN COUNCIL Mayor Marico Sayoc Vice Mayor Rob Rennie Council Member Mary Badame Council Member Matthew Hudes Council Member Maria Ristow 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 8Draft 12/16/2021 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, 2020 Executive Director/CEO 9Draft 12/16/2021 This page intentionally left blank 10Draft 12/16/2021 FINANCIAL SECTION 11Draft 12/16/2021 This page intentionally left blank 12Draft 12/16/2021 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, the aggregate remaining fund information and the budgetary comparison for the General Fund of the Town of Los Gatos, California, as of and for the year ended June 30, 2021, 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. 13Draft 12/16/2021 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, 2021, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, pension­related schedules and OPEB­related schedules on pages 18­36, 48, and 98­105 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Los Gatos, California’s basic financial statements. The introductory section, major funds (other than General fund and Special revenue funds) budgetary schedules, combining and individual nonmajor fund financial statements, nonmajor fund budgetary schedules, 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, and nonmajor fund budgetary schedules, are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. 14Draft 12/16/2021 To the Honorable Mayor and Members of the Town Council of the Town of Los Gatos Los Gatos, California Page 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December xx, 2021 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 & Associates, CPAs Berkeley, California December xx, 2021 15Draft 12/16/2021 This page intentionally left blank 16Draft 12/16/2021 Management’s Discussion and Analysis 17Draft 12/16/2021 MANAGEMENT’S DISCUSSION AND ANALYSIS This section of the Town of Los Gatos’s Annual Comprehensive Financial Report (ACFR) presents  management’s discussion and analysis of the Town’s financial performance during the fiscal year  that ended on June 30, 2021. 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 2020/21 by $113,518,100 (total net  position).       The Town’s total net position decreased by $1,332,931 during the fiscal year largely as a result  of an approximate $1.2 million dollar increase in non‐capitalized capital outlay expenses from  the prior year.  Non‐capitalized project expense reduces net position as they are not added  back to total assets as new infrastructure capital investments.  Major non‐capitalized expense  projects included approximately $650K in direct economic assistance provided through the  Town’s Economic Recovery project.  Other significant non‐capitalized projects included  approximately $500K in expenses for wildfire protection through the Roadside Fuel Reduction  project and approximately $200K for the Vegetation Management project.  One other  significant expense was approximately $105K to prepare a Town Storm Water Master Plan.   Depreciation expense allocated to all Town Departments increased by approximately $700K  from the prior year reflecting the significant additional investments made in the Town’s  infrastructure through FY 2019/20.      Total pension expense calculated for the Town’s miscellaneous and safety plans decreased  approximately $1.0 million or 10.7% from the prior fiscal year primarily reflecting the impact  of the Town’s approximate $4.8 million nonrecurring additional discretionary payment (ADP)  made to pay down the Town’s unfunded liability in FY 2019/20.  Fiscal year 2020/21 was the  first year to see the benefits of this ADP as the ADP did not appear as Town assets until they  were included as part of the June 30, 2020 “measurement date” pension expense calculation.   Pension expense growth related to the Town’s pension plans has averaged approximately  20.0% annually since FY 2014/15.  More discussion on the Town’s unfunded pension liabilities  can be found in Note 9.      Reported unrestricted net position is negative ($4,735,103) compared to negative  ($3,967,178) the prior year.  The $767K additional decrease in unrestricted net position  resulted largely from the use of approximately $2.4 million in unrestricted cash balances for  non‐capitalized project costs offset by revenue gains from amounts received the prior fiscal  year in large revenue sources such as property tax and sales tax offset by declines in  investment earnings from amounts earned the prior year.  Unrestricted net position  represents all resources not included as net investment in capital or restricted assets.       Despite the ongoing economic impacts resulting from the nationwide pandemic, the Town’s  economically sensitive major revenues of property tax and sales tax were able to record gains  from amounts reported the prior fiscal year.  Property taxes collected increased $1.5 million  18Draft 12/16/2021 from the prior year while sales taxes increased a modest $0.4 million from amounts collected  the prior year.     The economic impacts related to pandemic travel restrictions began in March 2020 and  continued into FY 2020/21. These impacts are primarily evidenced by Transient Occupancy  Tax (TOT) revenue declines of approximately $820K relative to the amounts collected in prior  years.       Total expenses as reported in the Statement of Activities increased $2.6 million from the prior  year.  The increase was driven by a combination of factors detailed under the Government  Activities Expenditures Discussion.  Contributing factors to the total fiscal year increase  included the cost of the aforementioned non‐capitalized project expenses which exceeded  the prior year’s expenses by approximately $1.2 million, $700K increased depreciation  expense on the Town’s infrastructure investment and the FY 2020/21 approximate $602K  cost of a 1% negotiated cost of living adjustment (COLA) and 2% one‐time bonus and related  benefit increases offered to all Town employees during the fiscal year.     The cost of all governmental activities this year was $50.6 million.  However, as shown in the  Statement of Activities, the amount of taxpayer supported governmental activities was $35.1  million.  Taxpayers who directly benefited from the programs paid Charges for services were  $11.48 million, and other governments and organizations subsidized certain programs with  operating grants and contributions of $3.32.9 million and capital grants and contributions of  $0.8 million.  Overall, the Town’s governmental program revenues were $15.5 million.  The  Town paid for the remaining “public benefit” portion of governmental activities with $33.2  million in taxes and general revenues including interest and miscellaneous revenues.  This  $35.1 million in net cost of governmental activities is an approximate 5.7% increase from the  prior fiscal year, resulting largely from one‐time “non‐capitalized” expense growth for  economic recovery efforts and wildfire protection and the 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 parks and public works function.       At the end of FY 2020/21, General Fund balance was $23,914,618 compared to $29,335,497  in the prior year.  The ending fund balance of $23,914,618 represents approximately 51.3%  of General Fund expenditures for the current fiscal year excluding transfers‐out to the Town’s  capital projects funds and internal service funds.  The $5.4 million reduction in General Fund  ending fund balances was primarily from:    o  Non‐recurring payments of $5.6 million of General Fund restricted cash balances  for an $3.6 million additional discretionary payment (ADP) made to CalPERS in July  2020 and another $2.0 million ADP made in April 2021.  The ADPs to CalPERS were  used to pay down a portion of the Town’s actuarially determined unfunded  pension liability beyond the mandated annual payments.      19Draft 12/16/2021 o Additionally, the General Fund transferred approximately $3.4 million to the  Town’s capital projects fund to provide resources for Town infrastructure  improvements.    o This reduction of General Fund balance was partially offset by an approximate  $1.1 million excess operating revenues above operating expenditures (excluding  the nonrecurring $5.6 million ADP payment and the $3.4 million transfers out to  other funds expenditures for Town capital projects.       Fund balances for all governmental funds at year end were $47,837,752 a decrease of  approximately $2.7 million or (5.3%) from the prior year.  Governmental fund balances  decreased primarily due to:      o $5.6 million nonrecurring ADP payment made to CalPERS in FY 2020/21 from the  General fund.    o $5.7 million of capital outlay expenditures made from the Town’s capital projects  funds.    o These uses were partially offset by an approximate $1.1 million excess operating  revenues above operating expenditures (excluding the nonrecurring $5.6 million  ADP payment and the $3.4 million transfers out to other funds expenditures for  Town capital projects).       At fiscal year end, the Town’s General Fund restricted cash assets reported a zero balance as  the entire amount that remained in its recently established Town’s IRS Section 115 Pension  Trust was used for payment of the ADP to CalPERS made in April 2021.     The Town received $388,181 from the Coronavirus Aid, Relief, and Economic Security (CARES)  Act which was utilized for fully expended on assistanceing to small businesses to boost  economic recovery, supporting non‐profit organizations with direct grants and rent  forgiveness, and obtaining equipment to provide municipal services consistent with Public  Health Orders.  The entire amount of the $388,181 was recognized as revenue in FY 2020/21  and categorized as Operating Grants and Contributions in the Statement of Activities  Schedule, and Intergovernmental Revenues in the Governmental Funds Statement of  Revenues, Expenditures, and Changes in Fund Balance Schedule.     The Town received the first tranche payment of $3,614,872 from the American Rescue Plan  Act (ARPA) grant on July 13, 2021.  The replacement of lost revenue is an eligible ARPA use,  and initial budgetary estimates estimated programmed approximately $1.4 million in ARPA  fundsing to close anticipated revenue shortfalls.  ARPA funding for budget shortfalls was not  required under the revenue loss eligible use requirements since actual revenues performed  better in several areas and expenditure savings were higher than projected.       However, For FY 2020/21 $200K of ARPA proceeds was recognized as FY 2020/21 revenue to  reimburse the Town for qualifying expenditures under the provisions of the Act including  boosting economic recovery and providing rent forgiveness and direct grants to non‐profit  organizations.  The $200K was categorized as Operating Grants and Contributions in the  Statement of Activities Schedule, and  Intergovernmental Revenues in the Governmental  20Draft 12/16/2021 Funds Statement of Revenues, Expenditures, and Changes in Fund Balance Schedule.  The  remainder of ARPA proceeds will be recognized as revenues in the current and future fiscal  years with eligible expenses.  The proceeds not spent remain in the Town deposit account.     The Town’s total capital assets decreased by $1,805,289 to $109,894,936 net of depreciation  due to smaller infrastructure expenditures and further reduced by the annual total  equipment, buildings and infrastructure depreciation expense.      OVERVIEW OF THE FINANCIAL STATEMENTS    The financial section of the ACFR contains the following information:  Independent Auditor’s  Report, Management’s Discussion and Analysis (this section), the Basic Financial Statements, and  the Required Supplementary Information.  The ACFR also includes a Supplementary Information  section, which presents combining and budgetary schedules for individual non‐major funds.  The  Basic Financial Statements are comprised of three components:  1) Government‐Wide Financial  Statements, 2) Fund Financial Statements, and 3) Notes to the Financial Statements.  The  Management’s Discussion and Analysis is intended to be an introduction to the Basic Financial  Statements.    Government‐Wide Financial Statements    The Government‐Wide Financial Statements present the financial picture of the Town from an  economic resources measurement focus using the accrual basis of accounting.  An economic  resources measurement focus is when a body of financial statements report all inflows, outflows,  and balances affecting or reflecting an entity’s net position.    The Statement of Net Position presents information on all of the Town’s assets and liabilities,  with the difference between the two reported as net position.  Over time, increases or decreases  in net position may serve as a useful indicator of whether the financial position of the Town is  improving or deteriorating.    The Statement of Activities presents information showing how the Town’s net position changed  during the most recent fiscal year.  All changes in net position are reported as soon as the  underlying event giving rise to the change occurs, regardless of the timing of related cash flows.   Thus, revenues and expenses are reported in this Statement for some items that will only result  in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation  leave).    Both of the Government‐Wide Financial Statements distinguish functions of the Town that are  principally supported by taxes and intergovernmental revenues (governmental activities) from  other functions that are intended to recover all or a significant portion of their costs through  user fees and charges (business–type activity).  The governmental activities of the Town include  public safety, parks and public works, community development, library, community services,  debt service, and general government.  Governmental activities typically include financial data  for all governmental funds.  Internal service funds are typically incorporated into governmental  activities as well.  Business‐type activities typically include financial data for all enterprise funds.  21Draft 12/16/2021 The Town has no enterprise funds and therefore reports no business type activities.  The Town  has no business‐type activities for accounting purposes.    Fund Financial Statements     A fund is a grouping of related accounts that is used to maintain control over resources that have  been segregated for specific activities or objectives.  The Town, like other local governments,  uses fund accounting to ensure and demonstrate compliance with finance‐related legal  requirements.  The funds of the Town are segregated into three categories:  governmental funds,  proprietary funds, and fiduciary funds.    Governmental funds – The Town’s basic services are reported in governmental funds, which focus  on how money flows into and out of those funds and the balances left at year‐end that are  available for spending.  These funds are reported using the modified accrual basis of accounting,  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.      22Draft 12/16/2021 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 58‐120 of this report.    ANALYSIS OF GOVERNMENT‐WIDE FINANCIAL STATEMENTS     The Government‐Wide Financial Statements provide long‐term and short‐term information  about the Town’s overall financial condition.  This analysis addresses the financial statements of  the Town as a whole, utilizing data from throughout the ACFR to describe the changes between  2020 and 2021.  Given the unique nature of COVID pandemic economic impacts during the  reporting period, 2019 data has also been provided to provide additional context.     Net Position Discussion    As shown below, the Town’s combined net position for the year ended June 30, 2021 was  $113.52 million, reflecting a decrease of approximately $1.33 million to the prior years’ net  position of $114.85 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 $3.9 million from the prior year, primarily due to an  approximate $4.9 million decrease in cash/restricted cash and investments.  The $4.9 million  2021 2020 2019 Current and other Assets 72,065,091$     75,995,161$   79,464,869$    Capital Assets 111,416,264     111,700,225   107,542,588    Total Assets 183,481,355$   187,695,386$ 187,007,457$  Deferred Outflows ‐ Pension/OPEB 19,746,595       17,441,310     13,521,349      Current Liabilities 16,334,887       18,093,199     17,002,972      Long‐Term Liabilities Outstanding 71,339,626       69,465,025     66,521,231      Total Liabilities 87,674,513$     87,558,224$   83,524,203$    Deferred Inflows ‐ Pension/OPEB 2,335,387         2,727,441       2,185,494        Net Position Net Investment in Capital Assets 109,894,936     111,700,225   107,542,588    Restricted 8,358,267         7,117,984       11,918,688      Unrestricted (4,735,103)        (3,967,178)      (4,642,167)      Total Net Position 113,518,100$   114,851,031$ 114,819,109$  Town of Los Gatos Net Position Governmental Activites For the Year Ended June 30, 2021 23Draft 12/16/2021 decrease is primarily related to the nonrecurring $3.6 million additional discretionary payment  (ADP) made in July 2020 and the $2.0 million ADP made in April 2021 paid by the Town to CalPERS  to reduce the Town’s actuarial unfunded pension liability beyond the mandated annual  payments.     Capital assets remained relatively stable at $111.4 million for the year reflecting current year’s  capital asset additions less the annual depreciation expense.  Capital infrastructure activity  slowed from the prior year but some infrastructure work was accomplished including:      Approximately $537K in street repair and resurfacing and curb and gutter work Town‐ wide,    Approximately $894K of work completed on the Town’s corporation yard building  replacement project,    $389K in communications and emergency dispatch equipment,   $863K investment in Town traffic signals and intersection improvements.     Deferred Outflows increase of $2.3 million was primarily due to the nonrecurring additional  discretionary payment made in July 2020 and April 2021 made to reduce the Town’s unfunded  pension liability. Current liabilities increased $1.8 million from the prior year primarily due to  decreases in accounts payable ($1.2M), deposits payable ($510K), and unearned revenue  ($403K), offset by an increase in claims payable ($448K).    Long‐term liabilities increased $1.9 million.  The increase is primarily due to the $1.56 million low  interest PG&E on‐bill financing loan used for Town facility energy efficiency project upgrades.   There was an additional increase of $792K for net pension liabilities and $157K for compensated  absences increase from the prior year.  These increases were offset by a $631K 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 decreased by $500K resulting primarily from the difference between projected  and actual earnings on investments, pension inflows decreased $664K which were offset by  $173K increase in OPEB plan inflows.    The largest segment of the Town’s net position, representing $109.9 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 $8.4 million representing approximately $7.8  million for capital projects and maintenance and $553K placed in a special revenue trust fund for  library services.    As of June 30, 2021, unrestricted net position reports an approximate $767K decrease from a  deficit of approximately ($3.97 million) the prior year to an ending deficit balance of  24Draft 12/16/2021 approximately ($4.74 million).  The deficit in governmental unrestricted net position is primarily  due to the Town’s outstanding long term pension and OPEB liabilities.  It is not uncommon for  governments with these types of long term liabilities to report a deficit in unrestricted net  position.  A deficit in unrestricted net position is not the only measure to assess the Town’s fiscal  health, other factors can also be important to consider such as an expanding and growing  property tax base and the condition of the Town’s infrastructure including streets, parklands,  civic center and library, police operations building, neighborhood center, corporation yard and  other improvements.            Governmental Activities    Governmental activities are generally financed through taxes, intergovernmental revenues, and  other non‐exchange revenues. The Statement of Activities is intended to illustrate how the cost  of governmental activities is financed and determine the annual change in net position.        2021 2020 2019 Revenues: Program revenues: Charges for Services 11,353,932$   10,288,351$   11,350,345$    Operating Grants and Contributions 3,287,564       3,854,188       2,175,277        Capital Grants and Contributions 846,345          850,113          146,792           General Revenues: Property Taxes 19,878,835     18,330,426     17,321,347      Sales Taxes 7,933,604       7,531,425       8,158,152        Franchise Taxes 2,499,463       2,495,792       2,475,916        Other Taxes 1,126,887       1,911,774       2,726,743        Motor Vehicle in Lieu 23,058            24,526            14,689             Investment Earnings 227,136          2,428,470       1,809,128        Miscellaneous 1,528,039       323,940          2,407,840        Total Revenues 48,704,863     48,039,005     48,586,229      Expenses: Police Department 19,808,230     20,446,188     16,635,726      Parks and Public Works 13,141,034     11,803,005     10,627,716      General Government 7,452,136       7,405,368       8,163,991        Community Development 6,481,075       5,001,958       5,064,637        Library Services 3,496,153       3,347,523       3,059,294        Sanitation 185,981          3,041              684,673           Total Expenses 50,564,609     48,007,083     44,236,037      Change in Net Position (1,859,746)      31,922            4,350,192        Net Position, beginning 115,377,846   114,819,109   110,468,917    Net Position, Ending 113,518,100$ 114,851,031$ 114,819,109$  Town of Los Gatos Statement of Activities For the Year Ended June 30, 2021 25Draft 12/16/2021 Governmental Activities Revenue Discussion    The Statement of Activities shown above details how the $48.7 million in Governmental Activities  revenue was derived.  As categorized in the Statement of Activities as program revenues,  approximately $11.3 million or 23.3% of the revenues were recorded from fees paid by residents  who directly benefited from the program or serviceas a charge for service.  Another $4.1 million  or 8.5% of the revenues were sourced from operating/capital grants and contributions.   Operating Grants and Contributions include approximately $600k in nonrecurring Federal CARES  Act ($388k) and ARPA ($200k) funds. The remaining $33.2 million or 68.2% represents general  revenues of the Town, including taxes, intergovernmental revenues, and other miscellaneous  revenues.       Program revenues increased by approximately $495K from the prior year.  This is largely due to  an increase in revenues from charges for services of $1.06 million offset by decreases of  approximately $567K in operating grant revenues and contributions.     The Town’s General Revenues related to Governmental Activities increased by approximately  $171K from the prior year. The increase is attributable to a combination of approximately $1.5  million increase in property taxes, a $402K increase in sales tax, and a $1.2 million gain on sale of  property. The increases were offset by nearly $2.2 million reduction in investment earnings from  the prior year as result of lower market values above purchase cost on the Town’s investment  portfolio and declines of approximately $820K in transient occupancy tax receipts due to the  pandemic and its related effects on business travel and tourism.      Property tax is the largest individual revenue source for the Town and collections finished the  year $1.5 million higher than the previous year.  This increase was mostly due to an increase of  $600K in secured taxes received as a rebate of excess property taxes collected and available from  the State of California’s Educational Revenue Augmentation Fund (ERAF), $430K increase in  property transfer tax as well as continued strong demand for residential Town property.  In  addition, the approval of the annexations of County pockets with tax revenues accruing to the  Town effective FY 2019/20 and new developments helped to drive property values higher.  It’s  important to note that assessed valuations for FY 2020/21 were established on the tax roll in  January 2020 and collected in FY 2020/21.    At $7.9 million, sales taxes represent the second largest individual revenue source for the Town.  Sales taxes increased $402K from the previous year largely due to the gradual recovery from the  economic impacts related to COVID‐19 which began with the March 2020 shelter‐in‐place public  health orders.  The increase was aided by the receipt of online purchase revenues which accrue  to a new additional 1/8 cent District Sales Tax approved by the Los Gatos voters in the fall of 2018  which became effective fully in FY 2019/20.    Franchise taxes, the Town’s third largest revenue source, finished the year at $2.5 million,  reflecting only a very small increase of $4K from the previous fiscal year.    Investment earnings decreased $2.2 million from the prior year.  The primary factor responsible  for this decline was the lower total market value above historical investment cost than the prior  26Draft 12/16/2021 year.  These non‐cash or paper gains/losses are recognized as investment income/loss as a result  of the “mark to market value” procedure required by GASB 31.  Miscellaneous other revenues increased by approximately $1.2 million from the prior year.  The  increase is due to a gain on sale of property on gain of the 14850 Winchester Boulevard land  sale finalized in July 2020.      Governmental Activities Expenses Discussion    The Town provides residents and visitors with an array of high quality services.  General  government strategic support is comprised of six departments (Town Council, Town Clerk, Town  Manager, Town Attorney, Human Resources, Information Technology, and Finance) which  provide services in 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 $2.6 million from the prior year.  The $2.4 million of the total increase  was driven largely by the combination of the following factors:     Community Development expenses increased by $1.8 $1.5 million for the year chiefly due  to increased development and building inspection activity.  Other costs incurred this fiscal  year included Departmental support toward economic recovery in the form of absorbing  and mitigating certain development fees, and $0.6 million in non‐capitalized parklet  expenses.  There were also cost increases from negotiated salary increases and related  benefits and increased required employer pension contributions and lower position  vacancies than in prior years.   Parks and Public Works expenses grew by approximately $1.3 million from the prior year  resulting largely from the “one‐time non‐capitalized” expense of $1.2 $0.6 million for the  economic recovery and wildfire protection efforts.  There were also increased costs for  infrastructure depreciation related to new significant additions to the Town’s  infrastructure in prior years and increases related to negotiated salary and related  benefits offered to all Town employees during the fiscal year.  In addition, Parks and Public  Works experienced lower amounts of vacant positions relative to the rest of the  organization.   $700K in increased depreciation expense on the Town’s infrastructure investments.   602K in negotiated salary increases and subsequent benefit increases.  All sworn, non‐ sworn and management employees received a 1% across the board salary increase and a  “one‐time” non‐pensionable bonus of 2% that did not raise the employee’s base salary.   Library expenses increased approximately $149K from the prior year primarily from  negotiated salary increases and related benefits and increased required employer  pension contributions.    27Draft 12/16/2021  General Government expenses decreased increased $319K $47K from the prior year.     Pension expense calculated under accounting standards and allocated for the current  fiscal year of $9.8 million was approximately $1.0 million lower than the $10.8 million  allocated pension expense in the prior fiscal year.   Public safety expenses decreased approximately $637K from the prior fiscal year.  The  decrease resulted mostly from higher position vacancies throughout the fiscal year  compared to the prior year.  These savings were partially offset by the cost of negotiated  salary increases and related benefits including increased pension contribution rates for  both safety and miscellaneous safety employee classifications.      Non‐capitalized project expenses which exceeded the prior years expenses by  approximately $1.2 million.   Expenses for urban runoff decreased approximately $182K 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 $8.4 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  $8.4 million restricted fund balance, $7.6 million is restricted for capital projects, $0.6 million for  library trusts and $0.2 million for maintenance and repairs.      Committed Fund Balance – The Town has $11.2 million in fund balance classified as committed  to indicate that the Town Council previously committed how the money will be spent.  Of the  $11.2 million $10.9 million is for budget stabilization and catastrophe response.    Assigned Fund Balance – The Town has $27.9 million in fund balance which is not restricted or  committed and is classified as assigned to indicate the Town Council’s intent to be used for  specific purposes.  The largest assignments of fund balance are the Reserve for Capital/Special  projects with a balance of approximately $7 million and the Appropriated Reserves of $13.3  million which are the primary funding sources for the Town’s five year capital improvement plan  and special projects as budgeted by the Town.    28Draft 12/16/2021 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:        Overall, Total Governmental Funds revenues finished $0.6 million or 1.2% lower than the prior  year, while total expenditures finished $0.6 million or 1.2% higher than the prior year.  The  approximate $1.2 million decline in total governmental fund balance is the net result of the $1.2  million decrease in Governmental Funds income before transfers and other financing sources and  REVENUES 202120202019   Property Taxes 19,917,428$             18,368,466$             17,359,435$                Sales Taxes 7,933,604                  7,531,425                  8,158,152                     Other Taxes 1,126,887                  1,911,774                  2,726,742                     Licenses & Permits 5,212,831                  4,818,671                  5,173,876                     Intergovernmental 3,746,587                  4,292,453                  2,310,655                     Charges for Services 6,035,659                  5,309,470                  5,584,504                     Fines and Forfeitures 103,468                      271,117                      510,266                         Franchise Fees 2,499,463                  2,495,792                  2,475,916                     Interest 227,940                      2,428,453                  1,809,164                     Use of Property 40,372                        31,039                        32,960                           Other 423,115                      376,922                      579,755                         Total Revenues 47,267,354$             47,835,582$             46,721,425$              EXPENDITURES   Current:     Public Safety 16,570,836$             15,793,815$             14,945,407$                  General Government 14,040,134                13,024,146                8,004,254                       Parks and Public Works 8,229,944                  8,168,599                  7,962,135                       Community Development 5,195,302                  4,473,790                  4,577,495                       Library Services 2,847,988                  2,700,802                  2,493,617                       Sanitation and Other 166,173                      162,837                      628,240                         Capital Outlay 5,746,447                  7,861,972                  7,888,914                     Total Expenditures 52,796,824$             52,185,961$             46,500,062$              Excess  Revenues over Expenditures (5,529,470)$              (4,350,379)$              221,363$                    Proceeds from sales of assets 1,201,369                  1,566                          1,912,316                   Proceeds from issuance of debt 1,560,336                   Transfers in 4,053,535                  8,935,260                  4,264,131                   Tranfers out (3,940,015)                (8,628,719)                (3,323,756)                   Total Other Financing Sources (Uses)2,875,225$                308,107$                   2,852,691$                 Net Changes in Fund Balances (2,654,245)                (4,042,272)                3,074,054                   Beginning/Ending Fund Balances As Restate 50491997 54,007,454                50,560,772                 Ending Fund Balances 47,837,752$             49,965,182$             53,634,826$              TOTAL GOVERNMENTAL FUNDS REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2021 TOWN OF LOS GATOS 29Draft 12/16/2021 uses  and the approximately $2.8 million increase from proceeds of sale of land ($1.2 million) and  proceeds from the issuance of debt ($1.6 million PG&E Energy Efficiency Loan) and lower  amounts of General Fund capital and special projects reserve dollars transferred to the Town’s  General Fund Allocated Reserve (GFAR) Capital Projects fund than the prior fiscal year.      General Fund revenues totaled $42.8 million or nearly 90% of the total $47.3 million in Total  Governmental Fund revenues.  Total General Fund operating revenues decreased by $568K,  resulting from the net effect of:    $1.5 million increase in property tax collections     $402K increase in sales tax   $394K increase in licenses and permits   $726K increase in charges for services   $2.2 million decrease in investment income   $167K decrease in fines and forfeitures    $564K decrease in intergovernmental revenues for the year     $784K decreases in other taxes (e.g., TOT)    The declines in revenues from the prior year were impacted by the COVID‐19 pandemic and its  Public Health restrictions which began in March 2020 and continued to impact the Town in FY  2020/21.  It should be noted that Intergovernmental revenue includes approximately $600k in  nonrecurring Federal CARES Act ($388k) and ARPA ($200k) funds.    General Fund expenditures represent approximately $46.2 million of the Total Governmental  Fund expenditures of $52.8 million compared to $44.3 million of total Governmental Funds  expenditures of $52.2 million in the prior year.  The increase in governmental funds expenditures  was led by an approximate $1.0 million increase in general governmental and an $777K increase  in public safety expenditures from the prior year.      The increase in general governmental expenditures was largely attributable to the total of $5.6  million in nonrecurring ADP payments made in the FY that were approximately $800K higher than  the amounts paid in the prior fiscal.  These payments were used 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 of approximately $777K were due  primarily to mandated pension contribution rate increases by CalPERS and by increases in  negotiated salary 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.      GFAR capital projects fund balances increased $1.2 million from the prior year reflecting $3.2  million of capital outlay expenditures above operating revenues, offset by $1.5 million proceeds  from the PG&E on‐bill financing loan and net transfers into the GFAR fund of approximately  $3.0 million.  Gas Tax fund balances increased approximately $1.1 million reflecting gas tax  revenues of $1.2 million exceeding capital outlay expenditures and transfers out of $100K for  the fiscal year.    30Draft 12/16/2021 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 $100K in the current year due primarily  to expense over revenues for workers compensation and general liability costs including  administration, insurance premiums, and claims expense.      GENERAL FUND BUDGETARY HIGHLIGHTS    Changes to the Original Budget    Comparing the FY 2020/21 original budget (i.e., the adopted budget) General Fund expenditures  of $46,908,324 (excluding budgeted transfers‐out and debt payments that are reimbursed) to  the final adjusted budget of $47,741,860 indicates a net increase of approximately $0.8 million.   Additions to the original expenditure budget included adjustments approved by Town Council  throughout the fiscal year.      The increase in General Fund appropriations occurred primarily from the following selected  budget adjustments made during the fiscal year.     Use of $708,807 of Pension/OPEB Reserve and Restricted Pension Trust to make  nonrecurring additional discretionary payments (ADPs) to CalPERS    $88,185 expenditure budget increase utilizing SB 2 Planning Grant received by the Town  for the review of housing development applications, and to identify amendments to the  Town Code necessary to add the objective standards and findings to Chapter 29 of the  Town Code (Zoning Regulations).    $9,729 increase expenditures for electronic collections to utilize Library Grant received by  the Town.   $100,000 expenditure budget adjustment to Traffic Program Safety Supplies to provide  funding toward technology that will assist Patrol Officers in property crime prevention.   $55,000 expenditure budget adjustment to provide funding to the Chamber of Commerce  for Destination Marketing from American Rescue Plan Act (ARPA) proceeds.   $48,325 expenditure budget adjustment to provide funding for Engineering  General  Plan update work that carried forward from FY 2019/20 into FY 2020/21 from available  General Plan Update deposits.   Original Budget  GF Expenditures  +  Misc. Adjustments &  Mid‐Year Adjustments  =  Final  Budget  $46,908,324 $833,536 $47,741,860  31Draft 12/16/2021  $35,222 budget expenditure increase for the purchase and maintenance of Police Vehicle  Mobile Audio and Video with License Plate Reader from available Equipment  Replacement Fund balance.   $31,959 increase to salary and benefits for the Town Manager and the Town Attorney.   $9,729 increase expenditures for additional downtown street lighting repairs.   $129,000 expenditure budget decrease for the Parking Management Program since the  COVID‐19 pandemic has significantly impacted the visitation and parking patterns to  parking enforcement areas.     $129,000 expenditure budget decrease for the Holiday Valet Parking Program since the  Town did not implement the annual Holiday Valet Parking Program to reduce potential  health impacts.    $87,786 expenditure budget decrease for Crossing Guard Services reflecting Santa Clara  County Health Orders requiring remote learning instruction at all schools, thus reducing  Crossing Guard service delivery needs.     $19,708 budget decrease for recognizing ARPA proceeds for 50% subsidizing permit  expenses for parklets.  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, 2021 reports an approximate overall favorable  variance with the final budget of approximately $1.0 million.  This favorable variance was created  largely by the net effect of the following factors:        Actual revenues ended the fiscal year at $100K below final budgeted revenues.  The  negative $0.1 million variances represent a combined effect of $3.2 million favorable  variances of the economic sensitive revenues from budget, an unfavorable variance of  $0.5 million in investment earnings for year, an unfavorable $32K variance in Franchise  fees collected,  and to the fact that staff budgeted the $2.8 million anticipated American  Recovery Plan (ARPA) proceeds in the General Fund, however after further Treasury  guidance the ARPA proceeds are accounted in a Special Revenue Fund.      The Town economically sensitive revenues started to show increases after the negative  impact related to the COVID‐19 pandemic and its related restrictions. The following  economically sensitive revenues experienced increases:    A favorable variance of $1.1 million in property tax collections    A favorable variance of $0.8 million in charges for services   A favorable variance of $600K in sales tax collections   A favorable variance of $337K in Transient Occupancy Tax collections    A favorable variance of $86K in Business License Tax collections    A favorable variance of $174K in licenses and permits    A favorable variance of $8K in fines and forfeitures         32Draft 12/16/2021 Significant factors affecting actual expenditures include:      Public safety expenditures had a favorable variance of approximately $900K .  $614K in  savings is reflective of limited term vacancies in Police Officer and Dispatcher positions,  savings of $300K due to savings on vehicle maintenance expenses, decreased service cost  of crossing guards and parking violation services, decreased travel activity due to the  Shelter in Place order, and other miscellaneous operational savings.       Community Development expenditures reflected a $600K  favorable variance explained  largely by staff vacancies with salary and benefit savings of approximately $220K due to  the partial year vacancies of the Planning Manager and temporary Assistant Planner  positions, decreased temporary Code compliance service delivery, and the General Plan  Update expenditures being approximately $306K lower than budgeted because the  budget reflected the entire contract amount which has not been fully executed through  the end of the fiscal year.      Administrative Services reflected a favorable balance of approximately $327K in large  measure due to savings in salary and benefits due to partial year vacancies in the  Emergency Manager position, decreased workload for the Special Event Coordinator  position, savings in special events cost due to cancellation of events, and decreased travel  activity due to the Shelter in Place order, and other miscellaneous operational savings.         Library services reflected a favorable variance of $128K due mainly to salary and benefit  savings from partial staff vacancies in the Librarian, and Library Specialist position and  other temporary vacancies.        Town Attorney reflected a favorable balance of approximately $121K in large measure  due to savings in salary and benefits due to partial year vacancies of the Legal  Administrative position and saving on legal services.      Town Council reflected a favorable balance of approximately $50K due to temporary  salary savings, and decreased travel activity due to the Shelter in Place order, and other  miscellaneous operational savings.          Parks and Public Works reflects a favorable variance of approximately $30K reflecting  miscellaneous savings.      CAPITAL ASSETS    As of June 30, 2021, the Town’s investment in capital assets for its governmental activity is  recorded at $111,416,265 (net of accumulated depreciation).  The investment in capital assets  includes land, buildings and improvements, infrastructure, construction in progress, machinery  and equipment.  Capital assets decreased $300Knet of depreciation expense totaling  approximately $4.7 million for the year.    33Draft 12/16/2021 During FY 2020/21, the Town’s approximate $4.3 million investment in capitalized assets for the  current year represented approximately 2.4% of total assets for governmental activities.  Major  capital asset events during the current fiscal year include the following:   $500K in street repair and resurfacing and curb and gutter work Town‐wide;    $800K in equipment purchases, including $400K in construction in progress for public  safety communications/dispatch equipment, vehicle fleet replacements, and $100K in IT  server fire suppression and disaster recovery equipment;   $900K in traffic signal and intersection improvements;   $900K expended on the Town’s corporation yard building replacement;   $200K in construction in progress for pathways and trails; and    $200K in guardrail replacement efforts.         Additional information on the Town’s capital assets is found in Note 5 of this financial report.  ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES    A product of an ongoing examination of how the Town provides cost‐effective services, the  Town’s budget emphasizes outcomes or results for the community and allows for longer‐term  financial planning decisions.    During the development and adoption of the Town’s FY 2021/22 budget, the Town Council and  management considered the following factors:     The FY 2021/22 Budget reflect maintaining high service levels with little to no increases in the  employee headcount.  The budget identified contingencies should revenues come in below  projected amounts.  The Town is carefully monitoring its revenues sources and will identify  any modification at the mid‐year budget discussion.      Several Strategic Priorities are not one‐time projects, but rather are ongoing commitments  due to their critical significance to ensure the Town’s fiscal and infrastructure stability and  the safety and quality of life for Los Gatos residents, businesses, and visitors.  These  commitments include continuing to address the Town’s unfunded pension and other post‐ employment benefits (OPEB) obligations; developing Measure B transportation projects so  Governmental  Activities Infrastructure 60,505,727$     Buildings 22,891,327        Land 20,254,949        Equipment 2,312,214          Construction in Progress 5,452,048          111,416,265$   Capital Assets Town of Los Gatos For the Year Ended June 30, 2021 34Draft 12/16/2021 the Town is positioned to receive its fair share of the funds; and fostering emergency  preparedness and community wildfire resilience.      In terms of capital projects, the Town Council affirmed its interest in investing in bicycle and  pedestrian improvements and implementing elements of the Comprehensive Parking Study.   In addition to capital projects, the Council identified new policy priorities which include  engaging our senior community and implementing diversity, equity, and inclusion efforts.     Other Strategic Priorities should position the Town well for its future.  The Council is  interested in exploring new revenue opportunities.  The Council continues the General Plan  Update to engage the community in land use planning and policies to guide development for  the next couple of decades and address environmental sustainability and climate resiliency.   Other Priorities included continuing to enhance economic and community vitality.  As the  Town continues to emerge from the economic upheaval of pandemic, the significance of  enhancing economic and community vitality are paramount.       Specific trends affecting the fund balance forecast include:    o General property tax collections represent approximately 33.6% (not including the State’s  property tax “backfill” shifts) of the Town’s General Fund revenues.  Property tax  collections are expected to increase 13.9% in FY 2021/22 from the prior year’s tax  collections. This increase is primarily due to the additional tax collection from the first  phase of North 40 residential sales and continued strong property assessment values  through the Town. This forecast is based on data from the Santa Clara County Tax  Assessor’s Office. The Town closely monitor its actual collection and other legislative  changes regarding property tax.     o The Town anticipates an increase in general sales tax for FY 2021/22.  Sales tax estimates  of $8.1 million for FY 2021/22 were budgeted reflecting a 6.7% increase from the prior  year’s adjusted sales tax budget.     o The Town’s investment portfolio experienced a decrease in its overall weighted average  annual yield, reducing from 1.86% as of June 30, 2020 to 1.37% as of June 30, 2021.   Prevailing interest rates at the end of fiscal year were at historic lows due to economic  impacts of the COVID‐19 pandemic and Federal Reserve actions.     o Transient Occupancy Tax (TOT) is expected to increase by 30% from FY 2020/21 adjusted  budget.  During FY 2020/21 TOT has experienced the most significant percentage decline  relative to the adopted budget and Town Council approved a 69% decrease to the budget.   In addition to the initial Shelter‐in‐Place (SIP) restrictions instituted on March 17, 2020,  on November 28, 2020, Santa Clara County issued new mandatory directives which  included that hotels and other lodging facilities would be open only for essential travel  and for use to facilitate isolation or quarantine.  Unlike sales tax forecasts which predict  an acceleration of revenues tied to pent up consumer demand, the Town’s TOT revenue  has historically been primarily driven by business travel. Given the uncertainty around  physical business travel resuming at prior levels, as opposed to a continuation of remote  35Draft 12/16/2021 work and online meeting forums, staff is recommending modest growth for base case  development of the FY 2021/22 budget.      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 $29.3 million for the safety cost sharing plan and $32.5 million for  the miscellaneous plan based upon data from CalPERS as of 6/30/2020.      o To illustrate the sensitivity of the net pension liability to changes in the discount rate,  CalPERS estimates that a 1 % reduction in the discount rate from 7.0% to 6.0% would  increase the total net pension liability for both Miscellaneous and Safety by $28.1 million.   Conversely, an increase in the discount rate from 7.0% to 8.0% would decrease the total  net pension liability for both Miscellaneous and Safety by $23.1 million.      o In addition, CalPERS provides a hypothetical termination liability estimate of the plans  should the contract with CalPERS be terminated.  The plan liability on a termination basis  is calculated differently from the plans’ ongoing funding liability.  Since no future  employer contributions would be made in the hypothetical termination, benefit  payments are secured by risk‐free assets.  For the Miscellaneous plan, a 2.5% termination  return rate results in a $117.4 million termination liability.  For the Safety plan, a 2.5%  termination return rate results in a $112.2 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.  36Draft 12/16/2021 Basic Financial Statements 37Draft 12/16/2021 This page intentionally left blank 38Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 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 long­term 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 inter­fund 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. 39Draft 12/16/2021 Governmental Activities ASSETS Cash and investments 66,528,737$ Restricted cash and investments 85,724 Receivables: Accounts 1,939,600 Interest 244,671 Intergovernmental 3,104,661 Materials, supplies and deposits 123,946 Long term notes receivables 237,752 Long­term prepaid pension obligations Capital Assets: Nondepreciable 25,706,997 Depreciable, net of accumulated depreciation 85,709,267 Total Assets 183,681,355 DEFERRED OUTFLOWS OF RESOURCES Pension contributions subsequent to measurement date 12,014,444 Pension related amounts 5,253,582 OPEB contributions subsequent to measurement date 2,096,847 OPEB related amounts 381,722 Total Deferred Outflows of Resources 19,746,595 LIABILITIES Accounts payable 2,476,829 Accrued payroll and benefits 1,662,094 Due to other governments 41,291 Unearned Revenue 4,231,781 Deposits 6,226,770 Claims payable 1,696,072 Long­term liabilities: Due within one year: Loans payable 156,034 Compensated absences 370,921 Due in more than one year: Loans payable 1,365,294 Net OPEB liability 8,495,214 Net pension liabilities 58,023,249 Compensated absences 2,928,914 Total Liabilities 87,674,463 DEFERRED INFLOWS OF RESOURCES Pension related amounts 1,433,785 OPEB related amounts 801,602 Total Deferred Inflows of Resources 2,235,387 NET POSITION Net investment in capital assets 109,894,936 Restricted for: Capital projects 7,544,097 Library 552,877 Lighting and landscape repairs and maintenance 172,356 Total Restricted Net Position 8,269,330 Unrestricted (4,646,166) Total Net Position 113,518,100$ TOWN OF LOS GATOS STATEMENT OF NET POSITION JUNE 30, 2021 The notes to the financial statements are an integral part of this statement. 40Draft 12/16/2021 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 ,452,136$ 7 1,505,899$ 388,181$ 2,365$ (5,555,691)$ Public safety 19,808,230 1,275,731 1,073,971 ­ (17,458,528) Parks and public works 13,141,034 4,209,048 1,547,102 843,980 (6,540,904) Community development 6,481,075 4,063,776 223,129 ­ (2,194,170) Library services 3,496,153 ­ 55,181 ­ (3,440,972) Sanitation 185,981 299,478 ­ ­ 113,497 Total Governmental Activities 50,564,609$ 11,353,932$ 3,287,564$ 846,345$ (35,076,768) General revenues: Taxes: Property taxes 19,878,835 Sales taxes 7,933,604 Franchise taxes 2,499,463 Other taxes 1,126,887 Motor vehicle in lieu 23,058 Investment earnings 227,136 Miscellaneous 1,528,039 Total general revenues 33,217,022 Change in Net Position (1,859,746) Net Position ­ Beginning, as restated 115,377,846 Net Position ­ Ending 113,518,100$ TOWN OF LOS GATOS STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2021 Program Revenues The notes to the financial statements are an integral part of this statement. 41Draft 12/16/2021 This page intentionally left blank 42Draft 12/16/2021 TOWN OF LOS GATOS ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 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, 2021. Individual non­major 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. 43Draft 12/16/2021 Other Nonmajor Total Appropriated Governmental Governmental General Reserves Funds Funds ASSETS Cash & Investments 30,102,793$ 18,477,294$ 8,586,389$ 57,166,476$ Receivables: Accounts 1,159,677 691,115 57,904 1,908,696 Interest 244,672 ­­244,672 Intergovernmental 2,739,088 ­365,573 3,104,661 Other assets 123,946 ­­123,946 Due from other funds 79,177 121,256 ­200,433 Long term notes 159,000 ­78,752 237,752 Total Assets 34,608,353$ 19,289,665$ 9,088,618$ 62,986,636$ LIABILITIES Accounts payable 1,053,910$ 1,239,614$ 10,833$ 2,304,357$ Accrued payroll and benefits 1,657,348 ­4,747 1,662,095 Due to other governments 41,159 ­50 41,209 Unearned revenue 1,714,548 2,452,438 64,855 4,231,841 Deposits 6,226,770 ­­6,226,770 Due to Other Funds ­­200,911 200,911 Total Liabilities 10,693,735 3,692,052 281,396 14,667,183 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue ­481,701 ­481,701 Total deferred inflows of resources ­481,701 ­481,701 FUND BALANCE Nonspendable 159,000 ­­159,000 Restricted for: Capital Outlay ­­7,544,097 7,544,097 Library ­­552,877 552,877 Repairs and Maintenance ­­172,356 172,356 VTA ­293,323 ­293,323 Committed to: Budget Stabilization and Catastrophic 10,920,970 ­­10,920,970 Pension/OPEB 300,000 ­­300,000 Assigned to: Open Space 410,000 152,000 ­562,000 Parking ­1,460,210 ­1,460,210 Sustainability 140,553 ­­140,553 Capital/Special Projects 6,965,355 13,160,379 ­20,125,734 Comcast PEG ­50,000 ­50,000 Sale of Property 1,200,000 ­­1,200,000 Market Fluctuations 438,333 ­­438,333 Compensated Absences 1,649,917 ­­1,649,917 Measure G 2018 District Sales Tax 1,730,490 ­­1,730,490 Special Revenue Funds ­­537,892 537,892 Total Fund Balances 23,914,618 15,115,912 8,807,222 47,837,752 Total Liabilities and Fund Balances 34,608,353$ 19,289,665$ 9,088,618$ 62,986,636$ TOWN OF LOS GATOS GOVERNMENTAL FUNDS JUNE 30, 2021 BALANCE SHEET The notes to the financial statements are an integral part of this statement. 44Draft 12/16/2021 47,837,752$ 111,416,264 7,610,801 481,701 17,268,026 (1,433,785) 2,478,569 (801,602) Loans payable (1,521,328)$ Net Pension Liability (58,023,249) Net OPEB Liability (8,495,214) Compensated absences (3,299,835) (71,339,626) 113,518,100$ Net Position ­ Governmental Activities LONG­TERM LIABILITIES Long­term liabilities are not due and payable in the current period and, therefore, are not reported in the Governmental Funds. over a period of time, however, in the governmental funds no transactions are recorded. included in the calculation of the Town's net OPEB liability or expenses for the plan year included in this report and have been deferred and reported as deferred outflows of resources. DEFERRED INFLOWS OF RESOURCES In the Government­Wide financial statements certain OPEB amounts are deferred and amortized In the Government­Wide 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 and certain other expenses will not be Contributions subsequent to the measurement date and certain other expenses will not be included in the calculation of the Town's net pension liability and expenses for the plan year included in this report and have been deferred and reported as deferred outflows of resources. DEFERRED INFLOWS OF RESOURCES 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. 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 CAPITAL ASSETS TOWN OF LOS GATOS RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENT­WIDE STATEMENT OF NET POSITION­GOVERNMENTAL ACTIVITIES JUNE 30, 2021 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: The notes to the financial statements are an integral part of this statement. 45Draft 12/16/2021 Other Nonmajor Total Appropriated Governmental Governmental General Reserves Funds Funds REVENUES Property Taxes 19,878,835$ ­$ 38,593$ 19,917,428$ Sales Taxes 7,933,604 ­­7,933,604 Other Taxes 1,059,741 ­67,146 1,126,887 Licenses & Permits 4,386,654 473,427 352,750 5,212,831 Intergovernmental 1,573,697 630,035 1,542,855 3,746,587 Charges for Services 4,835,962 1,199,697 ­6,035,659 Fines and Forfeitures 103,467 ­1 103,468 Franchise Fees 2,499,463 ­­2,499,463 Interest 96,061 35,312 96,567 227,940 Use of Property 36,372 4,000 ­40,372 Other 335,905 48,818 38,392 423,115 Total Revenues 42,739,761 2,391,289 2,136,304 47,267,354 EXPENDITURES Current: General Government 14,040,134 ­­14,040,134 Public Safety 16,570,836 ­­16,570,836 Parks and Public Works 8,175,987 ­53,957 8,229,944 Community Development 4,994,391 ­200,911 5,195,302 Library Services 2,828,873 ­19,115 2,847,988 Sanitation and Other ­­166,173 166,173 Capital Outlay 2,365 5,675,604 68,478 5,746,447 Total Expenditures 46,612,586 5,675,604 508,634 52,796,824 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (3,872,825) (3,284,315) 1,627,670 (5,529,470) OTHER FINANCING SOURCES (USES) Proceeds from sales of assets 1,201,369 ­­1,201,369 Proceeds from issuance of debt ­1,560,336 ­1,560,336 Transfers in 652,056 3,401,479 ­4,053,535 Transfers (out)(3,401,479) (427,616) (110,920) (3,940,015) Total Other Financing Sources (Uses)(1,548,054) 4,534,199 (110,920) 2,875,225 NET CHANGES IN FUND BALANCES (5,420,879) 1,249,884 1,516,750 (2,654,245) BEGINNING FUND BALANCES, AS RESTATED 29,335,497 13,866,028 7,290,472 50,491,997 ENDING FUND BALANCES 23,914,618$ 15,115,912$ 8,807,222$ 47,837,752$ TOWN OF LOS GATOS GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2021 The notes to the financial statements are an integral part of this statement. 46Draft 12/16/2021 NET CHANGE IN FUND BALANCES ­ TOTAL GOVERNMENTAL FUNDS (2,654,245)$ 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) 4,347,099$ Proceeds from sale of assets (1,201,369) Gain on sale of assets 1,161,508 Current Year Depreciation (4,591,199) (283,961) LONG­TERM DEBT PROCEEDS AND PAYMENTS Debt proceeds provide current financial resources to governmental funds, but issuing debt increases long­term liabilities in the Statement of Net Position. (1,560,336) Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long­term liabilities in the Statement of Net Position. Loan payable 39,008 UNAVAILABLE REVENUES 276,001 OPEB PLAN CONTRIBUTIONS AND EXPENSE In governmental funds, actual contributions to OPEB plans are reported as expenditures in the year incurred. However, in the Government­Wide 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.428,728 PENSION PLAN CONTRIBUTIONS AND EXPENSE In governmental funds, actual contributions to pension plans are reported as expenditures in the year incurred. However, in the Government­Wide 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.2,207,470 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. (120,279) COMPENSATED ABSENCES EXPENSE In governmental funds, compensated absences such as vacations and sick leave are expenditures when taken. However, in the Government­Wide Statement of Activities, the current year change in the compensated absences liability is reported. (192,132) CHANGE IN NET POSITION ­ GOVERNMENTAL ACTIVITIES (1,859,746)$ FOR THE FISCAL YEAR ENDED JUNE 30, 2021 TOWN OF LOS GATOS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE GOVERNMENT­WIDE 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. 47Draft 12/16/2021 Variance With Final Budget Original Final Positive Budget Budget Actual (Negative) REVENUES Property Taxes 18,652,039$ 18,705,325$ 19,878,835$ 1,173,510$ Sales Taxes 7,987,247 7,301,869 7,933,604 631,735 Other Taxes 2,294,671 714,723 1,059,741 345,018 Franchise Fees 2,532,289 2,532,289 2,499,463 (32,826) Licenses & Permits 4,296,898 4,211,898 4,386,654 174,756 Intergovernmental 970,885 4,342,588 1,573,697 (2,768,891) Charges for Services 4,178,212 4,014,619 4,835,962 821,343 Fines and Forfeitures 434,950 94,950 103,467 8,517 Interest 626,409 626,409 96,061 (530,348) Use of Property 35,793 35,793 36,372 579 Other 253,351 253,351 335,905 82,554 Total Revenues 42,262,744 42,833,814 42,739,761 (94,053) EXPENDITURES Current: General Government: Town Council 243,486 243,486 192,280 51,206 Town Attorney 645,303 658,831 537,296 121,535 Administrative Services 4,974,616 4,995,847 4,667,995 327,852 Non­Departmental 6,841,510 7,602,517 8,642,563 (1,040,046) Total General Government 12,704,915 13,500,681 14,040,134 (539,453) Public Safety 17,587,825 17,487,761 16,570,836 916,925 Community Development 5,517,030 5,589,807 4,994,391 595,416 Parks & Public Works 8,152,045 8,206,080 8,175,987 30,093 Library Services 2,946,509 2,957,531 2,828,873 128,658 Capital Outlay ­­2,365 (2,365) Total Expenditures 46,908,324 47,741,860 46,612,586 1,129,274 EXCESS (DEFICIT) OF REVENUES OVER EXPENDITURES (4,645,580) (4,908,046)(3,872,825)1,035,221 OTHER FINANCING SOURCES (USES) Proceeds from sale of assets 1,000 1,201,000 1,201,369 369 Transfers In 616,834 652,056 652,056 ­ Transfers Out (3,401,479) (3,401,479) (3,401,479)­ Total Other Financing Sources (Uses)(2,784,645) (2,749,423) (1,548,054)369 NET CHANGES IN FUND BALANCES (7,430,225)$ (7,657,469)$ (5,420,879)1,035,590$ BEGINNING FUND BALANCE 29,335,497 ENDING FUND BALANCE $ 23,914,618 BUDGET AND ACTUAL (GAAP) FOR THE FISCAL YEAR ENDED JUNE 30, 2021 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. 48Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 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 Government­Wide 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. 49Draft 12/16/2021 Governmental Activities Internal Service Funds ASSETS Cash & investments 9,362,261$ Restricted cash & investments 85,724 Accounts receivable 30,964 Due from other funds 478 Total Assets 9,479,427 LIABILITIES Current Liabilities: Accounts payable 172,471 Due to other governments 83 Total current liabilities 172,554 Noncurrent liabilities: Claims payable 1,696,072 Total noncurrent liabilities 1,696,072 Total Liabilities 1,868,626 Restricted for workers compensation claims 85,724 Unrestricted 7,525,077 Total Net Position 7,610,801$ TOWN OF LOS GATOS PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2021 The notes to the financial statements are an integral part of this statement. 50Draft 12/16/2021 Governmental Activities Internal Service Funds OPERATING REVENUES Charges for services 3,382,212$ Interest 5 Use of money and property 232,474 Other local taxes 67,146 Intergovernmental 0 Other 421,650 Total Operating Revenues 4,103,487 OPERATING EXPENSES Insurance expenses 1,169,839 Services and Supplies 2,940,407 Total Operating Expenses 4,110,246 Operating Expense (6,759) Transfers in (Note 4)33,000 Transfers out (Note 4)(146,520) Net transfers (113,520) Change in Net Position (120,279) BEGINNING NET POSITION 7,731,080 ENDING NET POSITION 7,610,801$ TOWN OF LOS GATOS PROPRIETARY FUNDS STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2021 The notes to the financial statements are an integral part of this statement. 51Draft 12/16/2021 Governmental Activities Internal Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 4,101,076$ Payments to suppliers (3,016,880) Claims paid (722,178) Net cash provided (used) by operating activities 362,018 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers In/(Out)(113,520) Net cash provided (used) by noncapital financing activities (113,520) Net Increase(Decrease) in Cash and Investments 248,498 Cash and investments ­ beginning of year 9,199,965 Cash and investments ­ end of year 9,448,463$ FINANCIAL STATEMENT PRESENTATION Cash & investments 9,362,261$ Restricted cash & investments 85,724 Total 9,447,985$ Reconciliation of Operating Income to Cash Flows from Operating Activities: Operating Income (6,759)$ Change in assets and liabilities: Receivables, net (2,411) Accounts payable (76,556) Claims payable 447,661 Due to other government 83 Cash Flows From Operating Activities 362,018$ TOWN OF LOS GATOS PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2021 The notes to the financial statements are an integral part of this statement. 52Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 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. 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. 53Draft 12/16/2021 RDA Successor Agency ASSETS Cash and investments (Note 2) 1,863,433$ Restricted cash and investments (Note 2)1,984,487 Loans receivable (Note 3)598,754 Capital assets (Note 5): Nondepreciable 5,257,422 Depreciable, net of accumulated depreciation 1,322,008 Total Assets 11,026,104 LIABILITIES Accounts payable 63 Interest payable 263,355 Long­term debt (Note 6): Due within one year 1,300,000 Due in more than one year 13,123,890 Total Liabilities 14,687,308 NET POSITION Held in trust (3,661,204) Total Net Position (3,661,204)$ TOWN OF LOS GATOS FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2021 The notes to the financial statements are an integral part of this statement. 54Draft 12/16/2021 RDA Successor Agency ADDITIONS Property taxes 1,946,787$ Investment earnings 28,297 Total Additions 1,975,084 DEDUCTIONS Program expenses of former RDA 5,399 Interest and fiscal agency expenses of RDA 598,804 Depreciation expense 101,693 Total Deductions 705,896 CHANGE IN NET POSITION 1,269,188 NET POSITION ­ BEGINNING OF YEAR, AS RESTATED (4,930,392) NET POSITION ­ END OF YEAR (3,661,204)$ ­$ TOWN OF LOS GATOS FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2021 The notes to the financial statements are an integral part of this statement. 55Draft 12/16/2021 This page intentionally left blank 56Draft 12/16/2021 Notes to Basic Financial Statements 57Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Description of the Financial Reporting Entity The Town of Los Gatos (the “Town”) operates under a Council­Manager 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, 2021 was 30,836. 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 Non­exchange 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. 58Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government (the Town). These statements include the financial activities of the overall Town government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. However, interfund services provided and used are not eliminated in the process of consolidation. These statements present governmental activities of the Town. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non­exchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Town’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meet the operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the Town's funds, including fiduciary funds and blended component units. Separate statements for each fund category— governmental, proprietary and fiduciary—are presented. The emphasis of fund financial statements is on major individual governmental funds, each of which is displayed in a separate column. All remaining governmental funds are aggregated funds and reported as non­major funds. Internal service funds of the Town (which provide services primarily to other funds of the Town) are presented, in summary form, as part of the proprietary fund financial statements. Since the principal users of the internal services are the Town’s governmental activities, financial activities of the internal service funds are presented in the governmental activities column when presented at the government­wide 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. Non­operating revenues, such as subsidies and investment earnings, result from non­exchange transactions or ancillary activities. E. Major Funds GASB defines major funds and requires that the Town’s major governmental funds be identified and presented separately in the fund financial statements. All other funds, called non­major funds, are combined and reported in a single column, regardless of their fund­type. 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 fund­type 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. 59Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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, self­insurance, facilities maintenance, information technology, and equipment replacement. Fiduciary Funds includePrivate­Purpose 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 government­wide financial statement but are presented in a separate Fiduciary Fund financial statement. The Town reported the following Fiduciary Fund in the accompanying financial statements: RDA Successor Agency Private Purpose Trust Fund accounts for the assets, liabilities and operations transferred from the dissolution of the Town’s Redevelopment Agency in 2012, which includes the following: x Certificates of Participation issued to finance several capital improvement projects throughout the Town. x Redevelopment projects and related property tax revenue. x Affordable Housing Set­Aside Program obligations. x Repayment of obligations incurred by the Town’s Redevelopment Agency prior to its dissolution. F. Basis of Accounting The government­wide, 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. 60Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED 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 year­end. For revenues other than property taxes, the Town generally applies the sixty­day 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 long­term 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 long­term 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. Non­exchange transactions, in which the Town gives or receives value without directly, receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The Town may fund programs with a combination of cost­reimbursement 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 Pre­November 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. 61Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED 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, 2019 Measurement Date June 30, 2020 Measurement Period July 1, 2019 to June 30, 2020 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, 2020 Measurement Period July 1, 2019 to June 30, 2020 Cash and Cash Equivalents ­ The Town’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short­term 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, non­negotiable certificates of deposits, commercial paper rated A­1/P­1, medium­term 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. 62Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED 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: x 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. x 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. x 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 first­in, first­out method. The costs are recorded as expenditures at the time the item is consumed. Interfund Receivables and Payables ­ Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “advances to/advances from other funds”. All other outstanding balances between funds are reported as “due to/from other funds”. Advances ­ Advances between funds are offset by a nonspendable fund balance in applicable Town funds to indicate the extent to which they are not available for appropriation and are not expendable available financial resources. Capital Assets ­ Capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their 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. 63Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED The Town has assigned the useful lives listed below to capital assets: Buildings 25­40 years Improvements 25­40 years Machinery and equipment 2­20 years Furniture and fixtures 5­12 years Software 5­7 years Infrastructure 20­40 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 1­59 months 25.0% For employees under contract 60­119 months 37.5% For employees under contract 120 months or more 50.0% The Town’s liability for compensated absences is determined annually. For all governmental funds, amounts expected to be paid out of current financial resources are recorded as liabilities of each fund; the long­term 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 long­term 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. 64Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Unearned Revenue ­ Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as unearned revenue. In the governmental fund financial statements, receivables associated with non­ exchange transactions that will not be collected within the availability period have been recorded as deferred inflows from unavailable revenue. Long­Term Liabilities ­ In the government­wide financial statements and private­purpose trust funds long­ term debt and other long­term 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 straight­line method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Deferred Outflows/Deferred Inflows of Resources ­ Deferred outflows of resources is a consumption of net position by the Town that is applicable to a future reporting period, for example, contributions to pension and OPEB plans that are after the actuarial measurement date. Deferred inflows of resources is an acquisition of net position by the Town that is applicable to a future reporting period, for example, unavailable revenue. Net Position ­ In the government­wide 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. 65Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and Governmental Fund Type Definitions, the Town classifies governmental fund balances as follows: Non­spendable 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 year­end. Committed fund balances are imposed by the Town Council. Assigned includes fund balance amounts that are intended to be used for specific purposes that are neither considered restricted or committed. Fund balance may be assigned by the Town Manager or the Finance Director. Unassigned includes fund balances within the funds which have not been classified within the above mentioned categories. The general fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than the general fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed, or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that fund. The Town uses restricted/committed amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal documents/contracts that prohibit doing this, such as a grant agreement requiring dollar for dollar spending. Additionally, the Town would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. Use of Estimates ­ The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the dates of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual results could differ from those estimates. Subsequent Events ­ Management has considered subsequent events through December xx, 2021, 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 non­recognized subsequent events that require additional disclosure. 66Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Property Tax Levy, Collection and Maximum Rates ­ State of California Constitution Article XIII A provides that the combined maximum property tax rate on any given property may not exceed 1% of its assessed value unless an additional amount for general obligation debt has been approved by voters. Assessed value is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2% per year unless the property is sold, transferred, or substantially improved. The State Legislature has determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school districts and other districts. The County of Santa Clara assesses properties, bills and collects property taxes on the following schedule: Secured Unsecured Valuation/lien dates January 1 January 1 Levy dates January 1 January 1 Due dates (delinquent as of) 50% on November 1 (December 10) March 1 (August 31) 50% on February 1 (April 10) The term "unsecured" refers to taxes on personal property other than land and buildings. These taxes are secured by liens on the property being taxed. Property taxes levied are recorded as revenue and receivables when they are collected during the fiscal year of levy or within 60 days of year­end. 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 non­departmental expenditures related to a discretionary lump­sum 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, 2021. 67Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 1 ­ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED 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 year­end 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 prior­year financial statements have been reclassified for the presentation in the current­year financial statements. G. Accounting and Reporting Changes The Town adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statements: ¾GASB Statement No. 90, Majority Equity Interests – The primary objectives of this Statement are to improve the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. The requirements of this statement did not apply to the Town for the current fiscal year. ¾GASB Statement No. 93, Interbank offered rates (except LIBOR removal and lease modifications) – The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an interbank offered rate. The requirements of this statement did not apply to the Town for the current fiscal year. ¾GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans – The primary objectives of this Statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. The requirements of this statement did not apply to the Town for the current fiscal year. ¾GASB Statement No. 98, The Annual Comprehensive Financial Report – The objective of this Statement is to address references in authoritative literature to the term comprehensive annual financial report. The Town implemented this statement by referring to the report as an Annual Comprehensive Financial Report and using the ACFR acronym. 68Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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. 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 $12,455,161 and the carrying amount was $12,308,688 as of June 30, 2021. 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: x Level 1 inputs are quoted prices in active markets for identical assets or liabilities. x 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 x Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal. 69Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 2 ­ CASH AND INVESTMENTS, CONTINUED 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 day­to­day administration of the State Treasurer. As of June 30, 2021, the Town had approximately $11.9 million in LAIF and used a fair value factor of 1.00008297 to calculate the fair value of the investments in LAIF. Of that amount, 97.69% is invested in non­derivative financial products and 2.31% in structured notes and asset­backed securities. These investments are described as follows: 1. Structured Notes are debt securities (other than asset­backed 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. Asset­Backed Securities, the bulk of which are mortgage­backed 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 longer­term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the Town's investments to market interest rate fluctuations is provided in the summary of cash and investments table on the following page that shows the distribution of the Town's investments by maturity. Credit Risk is the risk of loss due to the failure of the security issuer. This 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., broker­dealer) 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 third­party 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, 2021. 70Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 2 ­ CASH AND INVESTMENTS, CONTINUED Risk Disclosures, Continued The following table summarizes the Town’s policy related to maturities and concentration of investments: The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30, 2021: 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. 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 7,892,169$ ­$ 7,892,169$ 13.58% n/a 2 1­4 1.87 years US Instrumentality Security 22,313,521 ­ 22,313,521 38.38% n/a 2 0­4 1.80 years Corporate Securities 15,742,984 ­ 15,742,984 27.08% A3 2 0­4 1.95 years Market Mutual funds 305,797 ­ 305,797 0.53% Not Rated 2 n/a n/a LAIF 11,879,232 ­ 11,879,232 20.43% Not Rated n/a n/a n/a Total investments 58,133,703 ­ 58,133,703 100.00% Cash Deposit with Banks 10,238,478 2,070,211$ 12,308,689 Money Market Accounts 17,389 ­ 17,389 Cash on hand at Town 2,600 ­ 2,600 Town Cash and Investments 68,392,170$ 2,070,211$ 70,462,381$ 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% 71Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 3 ­ LONG­TERM NOTES RECEIVABLE The Town had the following long­term notes receivable as of June 30, 2021: 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 five­bedroom single­family 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, 2021, 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 short­term loans expected to be repaid in the next fiscal year. Advances to or from other funds are long­term 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, 2021 were as follows: 72Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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: 73Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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 ­ LONG­TERM OBLIGATIONS The Town generally incurs long­term debt to finance projects or purchase assets, which will have useful lives equal to or greater than the related debt. Below is a summary of Town indebtedness: 74Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 6 ­ LONG­TERM OBLIGATIONS, CONTINUED On August 7, 2020, the Town entered into an agreement with PG&E for a loan in the amount of $1,560,336 for costs related to various energy upgrades the Town performed during the fiscal years ended June 30, 2019 and June 30, 2020. The loan is to be repaid over the course of 12 years with an interest rate of 0% and a monthly amount of $13,003 billed through the Town's energy bill. Future debt service requirements for the PG&E loan are as follows: As of February 1, 2012, the Town transferred long­term debt issued by the Redevelopment Agency to the Successor Agency trust as a part of the RDA dissolution. The following summarizes the changes in long­term debt in the Successor Agency trust fund during the fiscal year ended June 30, 2021: 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 semi­annually 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 semi­annually on February 1 and August 1. To assist the Town in paying the cost of acquisition and construction of various projects, the Town and its Redevelopment Agency entered into lease and reimbursement agreements in 2002 and 2010. Under the agreements, the Agency will use available net tax increment revenues resulting from the projects’ effect on land values to repay the Town for all lease payments made by the Town to the Agency under the lease agreements for the projects. Net tax increment revenues are all taxes allocated to and paid into the Successor Agency private­ purpose trust fund. 75Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 6 ­ LONG­TERM OBLIGATIONS, CONTINUED 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 $1,984,487 as of June 30, 2021. 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 non­obligated debt outstanding as of June 30, 2021. 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. 76Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 8 ­ FUND BALANCES, CONTINUED As of June 30, 2021, 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. Library reflects fund balance from donations and bequests held in trust for the benefit of the Town’s library. Repairs and Maintenance reflects legally restricted balances for repairs and maintenance of lighting and landscape property and open space property that are financed with special tax assessments on the benefiting property. VTA are funds provided by the Valley Transportation Authority’s Measure B restricted for the pavement/crack seal rehabilitation project Beginning Balance Adjustments Adjusted Beginning Balance Additions Deletions Ending Balance Nonspendable ­ 159,000 159,000 ­ ­ 159,000 Restricted for: Capital Outlay 6,257,756$ ­$ 6,257,756$ 1,286,341$ ­$ 7,544,097$ Pension 669,978 ­ 669,978 ­ (669,978) ­ Library ­ 526,815 526,815 45,177 (19,115) 552,877 Repairs and Maintenance 190,250 ­ 190,250 ­ (17,894) 172,356 VTA ­ ­ ­ 293,323 ­ 293,323 Total Restricted 8,562,653 Committed to: Budget Stabilization 5,427,603 ­ 5,427,603 32,882 5,460,485 Catastrophic 5,427,603 ­ 5,427,603 32,882 ­ 5,460,485 Pension/OPEB Reserve 4,532,500 ­ 4,532,500 300,000 (4,532,500) 300,000 Total Committed 11,220,970 Assigned to: Open Space 410,000 ­ 410,000 152,000 ­ 562,000 Parking 1,460,210 ­ 1,460,210 ­ ­ 1,460,210 Sustainability 140,553 ­ 140,553 ­ ­ 140,553 Capital/Special Projects 8,787,958 (159,000) 8,628,958 ­ (1,663,603) 6,965,355 Comcast PEG 50,000 ­ 50,000 ­ ­ 50,000 Market Fluctuations 1,218,732 ­ 1,218,732 438,333 (1,218,732) 438,333 Sale of Property ­­­1,200,000 ­1,200,000 Compensated Absences 1,539,408 ­ 1,539,408 110,509 ­ 1,649,917 Capital Projects 12,266,881 ­ 12,266,881 893,498 ­ 13,160,379 Measure G 2018 District Sales Tax Operational 1,181,162 ­ 1,181,162 ­ (590,581) 590,581 Capital ­ ­ ­ 1,139,909 ­ 1,139,909 Special Revenue Funds 404,588 ­ 404,588 299,477 (166,173) 537,892 Total Assigned 27,895,129 Total Fund Balance ­ All Governmental Funds 49,965,182$ 526,815$ 50,491,997$ 6,224,331$ (8,878,576)$ 47,837,752$ 77Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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 one­time 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: x Unforeseen emergencies, such as a disaster or catastrophic event occur x Significant decrease in property or sales tax, or other economically sensitive revenues x Loss of businesses considered to be significant sales tax generators x Reductions in revenue due to actions by the state /federal government x Workflow /technical system improvements to reduce ongoing, personnel costs and enhance customer service x One ­time maintenance of service levels due to significant economic /budget constraints x One ­time transitional costs associated with organizational restructuring to secure long­term 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 29­year to a 20­year amortization period. 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. Comcast PEG assigned fund balance will be used to fund capital improvements linked to the televising of council and planning commission meetings. 78Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 8 ­ FUND BALANCES, CONTINUED 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. Sale of Property is intended to be spent on capital projects Compensated Absences assigned fund balance will be used for vacation and sick­pay benefits owed to employees as of June 30, 2021 that were not an obligation of the General Fund because of their long­term nature. Measure G 2018 District Sales Tax assigned fund balances for operational and capital will be used to track receipt and use of the 1/8 cents District tax funds collected by the Town for operational and capital expenditures. 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 multiple­employer defined benefit pension plan and the Town’s Miscellaneous (all other) Plan, an agent multiple­employer defined benefit pension plan administered by the California Public Employees' Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and Town resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Audited financial statements of CalPERS can be obtained from its website https://www.calpers.ca.gov/page/forms­publications. The Town relies upon actuarial and investment data provided by CalPERS for inclusion and analysis in this report. 79Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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 non­duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, Lump Sum, or the 1959 Survivor Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law. The Plan’s provisions and benefits in effect at June 30, 2021, are summarized as follows: Employees Covered At June 30, 2021, 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. 80Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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, 2020, using an annual actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. The Town’s proportion of the net pension liability (Safety Plan) was based on a projection of the Town’s long­term 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, 2020 was as follows: A summary of principal assumptions and methods used to determine the net pension liability is shown below. 81Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 9 ­ EMPLOYEES' RETIREMENT PLAN, CONTINUED (b) Net Pension Liability, continued Actuarial Assumptions ­ The June 30, 2019 valuation was rolled forward to determine the June 30, 2020 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 long­term 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. Long­term 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 actuarial­based 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 long­term expected rate of return on pension plan investments was determined using a building­block 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, 2019 June 30, 2019 Measurement Date June 30, 2020 June 30, 2020 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 Entry­Age 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 CalPERS­specific 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. 82Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 9 ­ EMPLOYEES' RETIREMENT PLAN, CONTINUED (b) Net Pension Liability, continued In determining the long­term expected rate of return, CalPERS took into account both short­term and long­term 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 short­term (first 10 years) and the long­term (11+ years) using a building­block approach. Using the expected nominal returns for both short­term and long­term, 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 short­term and long­term 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 long­term 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 short­term, long­term, and blended expected rate of return for the total PERF asset allocation as of the 2017 ALM. Expected Compound Return (1­10 years) 6.10% Long Term Expected Return (11­60 years) 8.30% Blended Return (1­60 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. 83Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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, 2020 (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 21.3% net return on investments for the 12­month period ended June 30, 2021. The preliminary fiscal year 2020­21 return brings total fund performance to 10.3% for the five­year time period, 8.5% for the 10­year time period, and 6.9% for the 20­year time period. Over the past 30 years, the PERF has returned an average of 8.4% annually. Under the CalPERS Funding Risk Mitigation Policy, the 21.3% return will trigger a reduction in the discount rate to 6.8% from the current 7.0%. (c) Changes in the Net Pension Liability The change in the Net Pension Liability for the Miscellaneous Plan is as follows: 84Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 9 ­ EMPLOYEES' RETIREMENT PLAN, CONTINUED (c) Changes in the Net Pension Liability, Continued For the measurement period ended June 30, 2020, the Town contributed $2,565,205 for the safety Cost­Sharing Plan. As of June 30, 2021, the Town reported net pension liabilities for its proportionate share of the net pension liability of the safety Cost­Sharing Plan of $27,149,916. 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 1­percentage 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, 2021, the Town recognized pension expense of $5,170,412 for the Miscellaneous Agent Multiple Employer Plan and $4,636,562 for the Safety Cost Sharing Plan. The Town recognized total pension expense for all plans of $9,806,974. 85Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 9 ­ EMPLOYEES' RETIREMENT PLAN, CONTINUED (d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued At June 30, 2021, 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: $9,160,680 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, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: 86Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 9 ­ EMPLOYEES' RETIREMENT PLAN, CONTINUED (d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions, Continued At June 30, 2021, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources for the Safety Cost­Sharing Plan: $2,853,764 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, 2022. 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, 2021, the Town reported a payable of $106,634 and $91,870 for the outstanding amount of contributions to the Miscellaneous Agent Multiple­Employer Plan and the Safety Cost­Sharing Plan. Deferred Outflows of Resureces Deferred Inflows of Resources Pension contributions subsequent to measurement date 2,853,764$ ­$ Changes in assumptions ­ 90,437 Difference between expected and actual experiences 2,105,338 ­ Changes in employer's proportion 923,111 ­ Differences between the employer's contributions and the employer's proportionate share of contributions ­ 1,343,348 Net differences between projected and actual earnings on plan investments 590,082 ­ Totals 6,472,295$ 1,433,785$ Safety 87Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 9 ­ EMPLOYEES' RETIREMENT PLAN, CONTINUED (f) IRS Section 115 Trust During the fiscal year ending June 30, 2020, the Town established an IRS Section 115 Trust with the CalPERS California Employer’ Pension Prefunding Trust (CEPPT) program. In fiscal year 2021, the Town used the balance of $706,988 to contribute an additional amount to CalPERS for the Miscellaneous Plan. This payment is included in the deferred outflows amount of $6,872,036 for contributions made after the measurement date for the Miscellaneous Plan. NOTE 10 ­ OTHER POSTEMPLOYMENT BENEFITS Plan Description ­ The Town makes contributions to California Employer’s Retiree Benefit Trust (CERBT), an agent multiple­employer 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 Post­Employment Benefits (OPEB). The Town uses CERBT 1 as its investment vehicle and requests disbursements on an as needed basis to reimburse the Town for the cost of retiree health insurance benefits. Benefit provisions and all other requirements are established by state statute and Town ordinance. Copies of 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 Town­managed 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 pay­as­you­go financing requirements, with an additional amount to prefund benefits as determined by the Town. For the measurement period July 1, 2019­June 30, 2020, the Town contributed $2,508,306 to the plan which included $1,198,608 of cash benefit payments, administrative fees of $8,373, and $201,325 of implied subsidy benefit payments. All related obligations are paid from the Town’s General Fund. 88Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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 long­term perspective of the calculations. For the June 30, 2019 actuarial valuation, the actuarial assumptions used are as follows: Valuation Date June 30, 2019 Measurement Date June 30, 2020 Actuarial Cost Method Entry­Age Normal Cost Method Actuarial Assumptions: Discount Rate 6.75% Inflation 2.75% Contribution Policy Pre­funded through CERBT with the Strategy 1 asset allocation Town contributes at least the ADC Salary Increases Aggregate ­ 3% annually Merit ­ CalPERS 1997­2015 Experience Study Projected Salary Increase 3.00% Investment Rate of Return 6.75% Mortality, Retirement, Disability, Termination CalPERS 1997­2015 Experience Study Mortality Improvement Post­retirement mortality projected fully generational with Scale MP­2019 Healthcare Trend Non­Medicare ­ 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% 89Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 10 ­ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED The long­term expected rate of return on OPEB plan investments in CERBT 1 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 long­term 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 Long­Term Rate of Inflation 2.75% Expected Long­Term Net Rate of Return, Rounded 6.75% * Policy target effective October 1, 2018. The long­term expected real rates of return are presented as geometric means 90Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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, 2019 through June 30, 2020. Due to these changes, the Town achieved an OPEB Plan funding status of 70.3% for the June 30, 2020 measurement date. Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability/(Asset) Balance at June 30, 2020 (6/30/19 measurement date) $ 27,497,929 $ 18,371,542 $ 9,126,387 Changes in the year: Service cost 1,159,152 ­ 1,159,152 Interest 1,887,105 ­ 1,887,105 Differences between actual and expected experience ­ ­ ­ Changes in assumptions (533,825) ­ (533,825) Changes in benefit terms ­ ­ ­ Contributions ­ employer ­ 2,508,306 (2,508,306) Contributions ­ employee ­ ­ ­ Net investment income ­ 652,656 (652,656) Administrative expenses ­ (17,357) 17,357 Benefit payments , including refunds of employee contributions (1,399,933) (1,399,933) ­ Net changes 1,112,499 1,743,672 (631,173) Balance at June 30, 2021 (6/30/20 measurement date) $ 28,610,428 $ 20,115,214 $ 8,495,214 Increase (Decrease) 91Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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. Investment gains and losses are spread evenly over a 5­year period. All other deferred outflows and inflows created during the measurement period are recognized over a 5.9­year period. The total OPEB expense recognized in the fiscal year ending June 30, 2021 was $1,668,119 and the Town reported deferrals from the following sources: 92Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 10 ­ OTHER POSTEMPLOYMENT BENEFITS, CONTINUED The $2,096,847 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2020 measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ending June 30, 2022. 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 1750 Creekside Drive, Suite 200, Sacramento, CA, 95833. 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 self­insured 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. 93Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 11 ­ RISK MANAGEMENT, CONTINUED The change in Workers’ Compensation and Self­Insurance 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, 2021: 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, 2021, the Successor Agency Trust fund reported a net deficit of $3,661,204. Encumbrances ­ As of June 30, 2021, the Town had the following encumbered balances that were carried into the next fiscal year: NOTE 13 ­ TOWN/SUCCESSOR AGENCY GRANTS, COOPERATIVE AGREEMENTS Public Improvement Grants and Cooperative Agreements In January of 2011, the Redevelopment Agency entered into a public improvement grant and cooperative agreement with the Town for the purpose of funding the acquisition of public land and designing and constructing various public improvements to be owned by the Town provided that the projects were in accordance with the Redevelopment Agency’s five year implementation plan and redevelopment plan. Workers'Self­ Compensation Insurance Internal Internal Service Fund Service Fund Total Claims payable balance ­ June 30, 2019 1,052,195$ 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 Claims incurred (207,704) 143,565 (64,139) Claims paid 511,800 ­ 511,800 Claims payable balance ­ June 30, 2021 1,495,482$ 200,590$ 1,696,072$ 94Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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. 95Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 14 – PRIOR PERIOD ADJUSTMENTS Beginning fund balances of $526,817 of Library Trust funds formerly reported as private purpose trust funds were reclassified to be reported as part of the special revenue governmental funds. This reclassification is in recognition of the criteria established by GASB Statement 84 and further authoritative guidance regarding the restrictions on the use of private purpose trust fund classifications, resulting in a restatement of net position: NOTE 15 – COVID­19 PANDEMIC PROGRAMS A balance of $200,901 is reported as Due to Other Funds in the Governmental Funds Balance Sheet. The entire balance of$200,901 represents amounts due to the General Fund from the American Rescue Plan Act (ARPA) Special Revenue fund. Due to the unprecedented economic dislocations associated with the pandemic the Federal government initiated two federal relief programs designed to provide direct funding to states and cities. The first program, the Coronavirus Aid, Relief, and Economic Security (CARES) Act established a $150 billion Coronavirus Relief Fund. Federal law specifies that these funds may only be used for unbudgeted costs incurred between March 1, 2020 and December 31, 2020. Control Section 11.90 of the 2021 Budget Act extended the expenditures deadline for cities, counties and community colleges to September 1, 2021. The Budget Act authorized the California Department of Finance to allocate $1,289,065,000 to address the public health and public safety impacts of COVID­19, including homelessness. Pursuant to the provisions of Control Section 11.90, cities with populations between 300,000 and 500,000 were allocated $225 million and cities with populations less than 300,000 were allocated $275 million. Allocations Generally for cities were derived using the proportional share of the State population. The Town of Los Gatos nonrecurring allocation of $388,181 was received in July 2020. The CARES Act established six eligible expense categories, as follows: (A) Medical Expenses; (B) Public Health Expenses; (C) Substantially Dedicated Payroll Expenses; (D) Comply with Public Health Measures and Mitigate the Effects of COVID­19; (E) Economic Support; or (F) Other 96Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2021 The entire CARES Act amount of the $388,181 was recognized as revenue in FY 2020/21 and categorized as Operating Grants and Contributions in the Statement of Activities Schedule, and Intergovernmental Revenues in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance Schedule. On March 11, 2021, the second program, the American Rescue Plan Act (ARPA) was signed into law by President Biden. The $1.9 trillion package (the Act) provides financial aid to families, governments, businesses, schools, non­profits and others impacted by the COVID­19 public health crisis. Of the $1.9 trillion, $350 billion is being directed toward state and local governments. All 19,000 municipal governments are entitled to a direct, non­ competitive federal formula grant from the U.S. Treasury Department. The portion allocated to cities, towns, and villages totals $65.1 billion of which $19.5 billion is obligated toward cities with less than 50,000 residents. The Act will allocate $7,229,744 to the Town over a two year period. The first tranche payment of $3,614,872 was received on July 13, 2021, and the second payment no earlier than 12 months after the first payment. Section 603. CORONAVIRUS LOCAL FISCAL RECOCERY FUND of the Act identified four eligible uses for funding, as follows: (A) to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID– 19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality; (B) to respond to workers performing essential work during the COVID–19 public health emergency by providing premium pay to eligible workers of the metropolitan city, nonentitlement unit of local government, or county that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work; (C) for the provision of government services to the extent of the reduction in revenue of such metropolitan city, nonentitlement unit of local government, or county due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year of the metropolitan city, nonentitlement unit of local government, or county prior to the emergency; or (D) to make necessary investments in water, sewer, or broadband infrastructure. Initial budgetary estimates programmed approximately $1.4 million in ARPA funding to close anticipated revenue shortfalls in FY 2020/21. With actual revenues performing better in several areas and expenditure savings being better than projected, ARPA funding was not required for revenue loss. For FY 2020/21 $200,901 of ARPA proceeds was recognized as revenue to reimburse the Town for qualifying expenditures under the provisions of the Act including boosting economic recovery and providing rent forgiveness and direct grants to non­profit organizations. The $200,901 was categorized as Operating Grants and Contributions in the Statement of Activities Schedule, and Intergovernmental Revenues in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance Schedule. The remainder of ARPA proceeds will be recognized as revenues in the current and future fiscal years with eligible expenses. The proceeds not spent remain in the Town deposit account. 97Draft 12/16/2021 Required Supplementary Information 98Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 Schedule of Proportionate Share of Net Pension Liability – CalPERS Misc. Agent­Multiple Employer Plan* Measurement Date 6/30/2020 6/30/2019 6/30/2018 Total Pension Liablity Service Cost 1,930,090$ 1,771,368$ 1,700,438$ Interest on total pension liability 7,729,269 7,381,846 7,073,843 Difference between expected and actual experience 1,465,653 1,082,289 994,994 Changes in assumptions ­ ­ (655,541) Changes in benefits ­ ­ ­ Benefit payments, including refunds of employee contributions (5,958,101) (5,720,232) (5,448,374) Net change in total pension liability 5,166,911 4,515,271 3,665,360 Total pension liability - beginning 108,650,008 104,134,737 100,469,377 Total pension liability - ending (a)113,816,919$ 108,650,008$ 104,134,737$ Plan fiduciary net position Contributions ­ employer 8,146,791 3,049,748 2,669,104 Contributions ­ employee 834,145 846,125 761,705 Plan to plan resource movement ­ ­ (170) Projected Earnings on Plan Investments ­ ­ ­ Recognized Difference between Projected and Actual Earnings ­ ­ ­ Net Investment Income 3,913,294 4,759,034 5,883,868 Net Difference between Projected and Actual Earnings ­ ­ ­ Benefit payments, including refunds of employee contribution (5,958,101) (5,720,232) (5,448,374) Administrative Expenses (107,303) (52,260) (108,582) Other Miscellaneous Income/(Expense)1 ­ 170 (206,199) Net change in plan fiduciary net position 6,828,826 2,882,585 3,551,352 Plan fiduciary net position - beginning 76,114,760 73,232,175 69,680,823 Plan fiduciary net position - ending (b)82,943,586$ 76,114,760$ 73,232,175$ Net pension liability ­ ending (a) ­ (b)30,873,333$ 32,535,248$ 30,902,562$ Plan fiduciary net position as a percentage of the total pension liability 72.87% 70.05% 70.32% Covered payroll 11,743,677 10,211,967 9,576,157 Net pension liability as a percentage of covered payroll 262.89% 318.60% 322.70% * Fiscal Year 2015 was the first year of implementation, therefore only seven years are shown 1. During Fiscal Year 2017­18, 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 one­time expense as a result of the adoption of GASB75. Additionally, CalPERS employees participate in various State of California agent pension plans and during FY2017­18, CalPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to 99Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 6/30/2017 6/30/2016 6/30/2015 6/30/2014 1,651,550$ 1,560,679$ 1,491,925$ 1,579,547$ 6,820,536 6,697,247 6,483,032 6,268,015 (892,479) (357,870) (623,495)­ 5,481,432 ­ (1,513,132)­ ­ ­ ­ ­ (5,138,083) (4,953,756) (4,748,786) (4,241,487) 7,922,956 2,946,300 1,089,544 3,606,075 92,546,421 89,600,121 88,510,577 84,904,502 100,469,377$ 92,546,421$ 89,600,121$ 88,510,577$ 2,407,496 2,223,782 1,941,765 1,796,079 682,891 691,770 679,796 668,167 ­ (28,866) 22,561 ­ ­ ­ ­ 4,328,173 ­ ­­1,166,344 7,171,443 369,185 1,470,873 ­ ­ ­ 4,665,374 (5,138,083) (4,953,756) (4,748,786) (4,241,487) (95,455) (40,462) (74,706)­ ­ ­­­ 5,028,292 (1,738,347) (708,497) 8,382,650 64,652,531 66,390,878 67,099,375 58,716,725 69,680,823$ 64,652,531$ 66,390,878$ 67,099,375$ 30,788,554$ 27,893,890$ 23,209,243$ 21,411,202$ 69.36% 69.86% 74.10% 75.81% 9,024,370 9,198,318 8,487,940 8,406,315 341.17% 303.25% 273.44% 254.70% 100Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost­Sharing Plan 101Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 Schedule of Pension Plan Contributions – Miscellaneous Agent Multiple­Employer Plan* 102Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 Schedule of Pension Plan Contributions – Safety Cost­Sharing Plan* 103Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 Actuarial Methods and Assumptions used for Pension Contractually Required Contributions for FY2021 104Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 Schedule of Changes in Net OPEB Liability and Related Ratios* Schedule of Employer Contributions* 105Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 Actuarial Methods and Assumptions used for 2020/21 OPEB Actuarially Determined Contribution 106Draft 12/16/2021 Supplementary Information 107Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 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. ARPA Fund was established to account for monies received under the American Rescue Plan Act of 2021 to respond to the COVID­19 emergency. Library Trust Fund was established to provide for the servicing of donations and bequests to the Town's Library Program. 108Draft 12/16/2021 Variance Original Final Positive Budget Budget Actual (Negative) REVENUES Licenses & permits 110,000$ 110,000$ 473,427$ 363,427$ Intergovernmental 2,239,863 7,547,085 630,035 (6,917,050) Charges for services 1,429,080 2,837,369 1,199,697 (1,637,672) Interest ­­35,312 35,312 Use of Property ­48,000 4,000 (44,000) Other ­20,755 48,818 28,063 Total Revenues 3,778,943 10,563,209 2,391,289 (8,171,920) EXPENDITURES Capital outlay 7,371,447 25,386,926 5,675,604 19,711,322 Total Expenditures 7,371,447 25,386,926 5,675,604 19,711,322 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (3,592,504) (14,823,717) (3,284,315) 11,539,402 OTHER FINANCING SOURCES (USES) Proceeds from issuance of debt ­1,439,995 1,560,336 120,341 Transfers in 3,401,479 3,436,479 3,401,479 (35,000) Transfers (out) (427,616) (427,616) (427,616)­ Total Other Financing Sources (Uses) 2,973,863 4,448,858 4,534,199 85,341 CHANGE IN FUND BALANCE (618,641)$ (10,374,859)$ 1,249,884 11,624,743$ BEGINNING FUND BALANCE 13,866,028 ENDING FUND BALANCE 15,115,912$ BUDGET AND ACTUAL (GAAP) FOR THE FISCAL YEAR ENDED JUNE 30, 2021 TOWN OF LOS GATOS APPROPRIATED RESERVES FUND COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE 109Draft 12/16/2021 Total Storm Construction Gas Capital Drains Tax Tax Projects Funds Fund Fund Funds ASSETS Cash & Investments 2,917,690$ 3,203,736$ 1,318,887$ 7,440,313$ Receivables: Accounts ­­­­ Intergovernmental Receivable ­­106,209 106,209 Long Term Notes Receivable ­­­­ Total Assets 2,917,690$ 3,203,736$ 1,425,096$ 7,546,522$ LIABILITIES Accounts Payable ­$ 2,425$ ­$ 2,425$ Accrued Payroll and Benefits ­­­­ Due to other governments ­­­­ Unearned revenue ­­­­ Due to other funds ­­­­ Total Liabilities ­2,425 ­2,425 FUND BALANCE Restricted for: Repairs and Maintenance ­­­­ Library ­­­­ Capital Projects 2,917,690 3,201,311 1,425,096 7,544,097 Committed to: Repairs and Maintenance ­ Assigned for: Special Revenue Funds ­­­­ Unassigned ­ ­ ­ ­ Total Fund Balances 2,917,690 3,201,311 1,425,096 7,544,097 Total Liabilities and Fund Balances 2,917,690$ 3,203,736$ 1,425,096$ 7,546,522$ ­$ ­$ (Continued) CAPITAL PROJECTS FUNDS TOWN OF LOS GATOS NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS JUNE 30, 2021 110Draft 12/16/2021 Total Community Non­Point Total Nonmajor Development Source Lighting and ARPA Library Special Revenue Governmental Fund Maintenance Landscaping Fund Trust Funds Funds 94,412$ 321,481$ 175,457$ ­$ 554,726$ 1,146,076$ 8,586,389$ ­57,904 ­­­57,904 57,904 58,344 ­109 200,911 ­259,364 365,573 78,752 ­­­­78,752 78,752 231,508$ 379,385$ 175,566$ 200,911$ 554,726$ 1,542,096$ 9,088,618$ ­$ 3,399$ 3,210$ ­$ 1,799$ 8,408$ 10,833$ ­4,747 ­­­4,747 4,747 ­­­­50 50 50 64,855 ­­­­64,855 64,855 ­­ ­200,911 ­200,911 200,911 64,855 8,146 3,210 200,911 1,849 278,971 281,396 ­­172,356 ­­172,356 172,356 ­­­­552,877 552,877 552,877 ­­­­­­7,544,097 ­­ 166,653 371,239 ­­­537,892 537,892 ­ ­ ­ ­ ­ ­ ­ 166,653 371,239 172,356 ­ 552,877 1,263,125 8,807,222 231,508$ 379,385$ 175,566$ 200,911$ 554,726$ 1,542,096$ 9,088,618$ (Concluded) SPECIAL REVENUE FUNDS 111Draft 12/16/2021 Total Storm Construction Gas Capital Drain Tax Tax Projects Funds Fund Fund Funds REVENUES Property Taxes ­$ ­$ ­$ ­$ Other Taxes ­67,146 ­67,146 License and permits 121,428 ­­121,428 Intergovernmental ­­1,273,789 1,273,789 Fines and Forfeitures ­­­­ Interest 36,597 40,618 10,178 87,393 Other ­­­­ Total Revenues 158,025 107,764 1,283,967 1,549,756 EXPENDITURES Current: Parks and Public Works ­­­­ Community Development ­­­­ Sanitation and Other ­­­­ Library ­­­­ Capital Outlay 611 24,626 43,241 68,478 Total Expenditures 611 24,626 43,241 68,478 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 157,414 83,138 1,240,726 1,481,278 OTHER FINANCING SOURCES (USES) Transfers (out)­­(106,000) (106,000) Total Other Financing Sources (Uses)­­(106,000) (106,000) Changes in Fund Balances 157,414 83,138 1,134,726 1,375,278 Fund Balances ­ Beginning of year, as restated 2,760,276 3,118,173 290,370 6,168,819 Fund Balances ­ End of year 2,917,690$ 3,201,311$ 1,425,096$ 7,544,097$ (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, 2021 112Draft 12/16/2021 Total Community Non­Point Total Nonmajor Development Source Lighting and ARPA Library Special Revenue Governmental Fund Maintenance Landscaping Fund Trust Funds Funds ­$ ­$ 38,593$ ­$ ­$ 38,593$ 38,593$ ­­­­­­67,146 ­231,322 ­­­231,322 352,750 ­68,155 ­200,911 ­269,066 1,542,855 ­­1 ­­11 ­­2,389 ­6,785 9,174 96,567 ­­­­38,392 38,392 38,392 ­299,477 40,983 200,911 45,177 586,548 2,136,304 ­­53,957 ­­53,957 53,957 ­­­200,911 ­200,911 200,911 ­166,173 ­­­166,173 166,173 ­­­­19,115 19,115 19,115 ­­­­­­68,478 ­166,173 53,957 200,911 19,115 440,156 508,634 ­133,304 (12,974)­26,062 146,392 1,627,670 ­­(4,920)­­(4,920) (110,920) ­­(4,920)­­(4,920) (110,920) ­133,304 (17,894)­26,062 141,472 1,516,750 166,653 237,935 190,250 ­526,815 1,121,653 7,290,472 166,653$ 371,239$ 172,356$ ­$ 552,877$ 1,263,125$ 8,807,222$ (Concluded) SPECIAL REVENUE FUNDS 113Draft 12/16/2021 Variance Variance Positive Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Property taxes ­$ ­$ ­$ ­$ ­$ ­$ Other taxes ­ ­ ­ 30,000 67,146 37,146 License and permits 92,500 121,428 28,928 ­ ­ ­ Intergovernmental ­ ­ ­ ­ ­ ­ Charges for services ­ ­ ­ 3,810,558 ­ (3,810,558) Fines and Forfeitures ­ ­ ­ ­ ­ ­ Interest 11,840 36,597 24,757 22,490 40,618 18,128 Other ­ ­ ­ ­ ­ ­ Total Revenues 104,340 158,025 53,685 3,863,048 107,764 (3,755,284) EXPENDITURES Parks and public works ­ ­ ­ ­ ­ ­ Community development ­­­­­ Sanitation and other ­ ­ ­ ­ ­ ­ Library ­­­­­­ Capital outlay 485,058 611 484,447 6,836,204 24,626 6,811,578 Total Expenditures 485,058 611 484,447 6,836,204 24,626 6,811,578 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (380,718) 157,414 538,132 (2,973,156) 83,138 3,056,294 OTHER FINANCING SOURCES (USES) Operating transfers (out)­ ­ ­ ­ ­ ­ Total Other Financing Sources (Uses)­ ­ ­ ­ ­ ­ CHANGE IN FUND BALANCE (380,718)$ 157,414 538,132$ (2,973,156)$ 83,138 3,056,294$ BEGINNING FUND BALANCE 2,760,276 3,118,173 ENDING FUND BALANCE 2,917,690$ 3,201,311$ (Continued) STORM DRAIN FUNDS CONSTRUCTION TAX TOWN OF LOS GATOS BUDGETED NONMAJOR FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (GAAP) FOR THE FISCAL YEAR ENDED JUNE 30, 2021 114Draft 12/16/2021 Variance Variance Variance Positive Positive Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) ­$ ­$ ­$ ­$ ­$ ­$ ­$ ­$ ­$ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ 231,323 231,322 (1) 1,232,107 1,273,789 41,682 ­ ­ ­ ­ 68,155 68,155 ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ 1,210 10,178 8,968 ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ 1,233,317 1,283,967 50,650 ­ ­ ­ 231,323 299,477 68,154 ­ ­ ­ ­ ­ ­ ­ ­ ­ ­­­ ­­­­ ­­ ­ ­ ­ ­ ­ ­ 205,850 166,173 39,677 ­­­ ­­­­ ­­ 1,291,952 43,241 1,248,711 ­ ­ ­ ­ ­ ­ 1,291,952 43,241 1,248,711 ­ ­ ­ 205,850 166,173 39,677 (58,635) 1,240,726 1,299,361 ­ ­ ­ 25,473 133,304 107,831 (106,000) (106,000) ­ ­ ­ ­ ­ ­ ­ (106,000) (106,000) ­ ­ ­ ­ ­ ­ ­ (164,635)$ 1,134,726 1,299,361$ ­$ ­ ­$ 25,473$ 133,304 107,831$ 290,370 166,653 237,935 1,425,096$ 166,653$ 371,239$ (Continued) BLOCK GRANT NON­POINT SOURCE MAINTANENCEGAS TAX COMMUNITY DEVELOPMENT 115Draft 12/16/2021 Variance Variance Positive Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Property taxes 38,220$ 38,593$ 373$ ­$ ­$ ­$ Other taxes ­ ­ ­ ­ ­ ­ License and permits ­ ­ ­ ­ ­ ­ Intergovernmental ­ ­ ­ 200,911 200,911 ­ Charges for services ­ ­ ­ ­ ­ ­ Fines and Forfeitures ­ 1 1 ­ ­ ­ Interest 1,460 2,389 929 ­ ­ ­ Other ­ ­ ­ ­ ­ ­ Total Revenues 39,680 40,983 1,303 200,911 200,911 ­ EXPENDITURES Parks and public works 48,906 53,957 (5,051) ­ ­ ­ Community services ­­­200,911 200,911 ­ Sanitation and other ­ ­ ­ ­ ­ ­ Library ­­­­­­ Capital outlay ­ ­ ­ ­ ­ ­ Total Expenditures 48,906 53,957 (5,051) 200,911 200,911 ­ EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (9,226) (12,974) (3,748) ­ ­ ­ OTHER FINANCING SOURCES (USES) Operating transfers (out)(4,920) (4,920) ­ ­ ­ ­ Total Other Financing Sources (Uses)(4,920) (4,920) ­ ­ ­ ­ CHANGE IN FUND BALANCE (14,146)$ (17,894) (3,748)$ ­$ ­ ­$ BEGINNING FUND BALANCE 190,250 ­ ENDING FUND BALANCE 172,356$ ­$ (Continued) LIGHTING AND LANDSCAPING ARPA Fund TOWN OF LOS GATOS BUDGETED NONMAJOR FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (GAAP) FOR THE FISCAL YEAR ENDED JUNE 30, 2021 116Draft 12/16/2021 Variance Variance Positive Positive Budget Actual (Negative) Budget Actual (Negative) ­$ ­$ ­$ 38,220$ 38,593$ 373$ ­ ­ ­ 30,000 67,146 37,146 ­ ­ ­ 323,823 352,750 28,927 ­ ­ ­ 1,433,018 1,542,855 109,837 ­ ­ ­ 3,810,558 ­ (3,810,558) ­ ­ ­ ­ 1 1 4,100 6,785 2,685 41,100 96,567 55,467 ­ 38,392 38,392 ­ 38,392 38,392 4,100 45,177 41,077 5,676,719 2,136,304 (3,540,415) ­ ­ ­ 48,906 53,957 (5,051) ­­­200,911 200,911 ­ ­ ­ ­ 205,850 166,173 39,677 28,200 19,115 9,085 28,200 19,115 9,085 20,755 ­ 20,755 8,633,969 68,478 8,565,491 48,955 19,115 29,840 9,117,836 508,634 8,609,202 (44,855) 26,062 70,917 (3,441,117) 1,627,670 5,068,787 ­ ­ ­ (110,920) (110,920) ­ ­ ­ ­ (110,920) (110,920) ­ (44,855)$ 26,062 70,917$ (3,552,037)$ 1,516,750 5,068,787$ 526,815 7,290,472 552,877$ 8,807,222$ TOTALSLIBRARY TRUST (Concluded) 117Draft 12/16/2021 TOWN OF LOS GATOS, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2021 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 Government­Wide 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. 118Draft 12/16/2021 Equipment Workers' Self Information Facilities Replacement Comp Insurance Technology Maintenance Total ASSETS Cash & Investments 1,887,680$ 3,105,307$ 1,223,213$ 2,906,098$ 239,963$ 9,362,261$ Restricted Cash & Investments ­ 85,724 ­ ­ ­ 85,724 Receivables: Accounts 1,856 ­ ­ 4,255 24,853 30,964 Due from Other Funds ­ ­ ­ 478 ­ 478 Total Assets 1,889,536 3,191,031 1,223,213 2,910,831 264,816 9,479,427 LIABILITIES Accounts Payable ­ 22,529 1,540 40,009 108,393 172,471 Due to Other Governments ­ ­ ­ ­ 83 83 Claims Payable ­ 1,495,482 200,590 ­ ­ 1,696,072 Total Liabilities ­ 1,518,011 202,130 40,009 108,476 1,868,626 NET POSITION Restricted for: Workers comp­ ensation claims ­ 85,724 ­ ­ ­ 85,724 Unrestricted 1,889,536 1,587,296 1,021,083 2,870,822 156,340 7,525,077 Total Net Position 1,889,536$ 1,673,020$ 1,021,083$ 2,870,822$ 156,340$ 7,610,801$ TOWN OF LOS GATOS INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET POSITION JUNE 30, 2021 119Draft 12/16/2021 Equipment Workers'Self Information Facilities Replacement Comp Insurance Technology Maintenance Total OPERATING REVENUES Charges for services 267,545$ 917,555$ 376,964$ 972,775$ 847,373$ 3,382,212$ Interest ­5 ­­­5 Use of money and property ­ ­ ­ ­ 232,474 232,474 Other local taxes ­­­­67,146 67,146 Intergovernmental ­­­­­­ Other 59,852 327,768 ­­34,030 421,650 Total Operating Revenues 327,397 1,245,328 376,964 972,775 1,181,023 4,103,487 OPERATING EXPENSES Insurance expenses ­596,665 573,174 ­­1,169,839 Services and supplies 254,194 784,384 73,321 668,356 1,160,152 2,940,407 Total Operating Expenses 254,194 1,381,049 646,495 668,356 1,160,152 4,110,246 Operating Income (loss)73,203 (135,721) (269,531) 304,419 20,871 (6,759) Transfers in ­­­­33,000 33,000 Transfers out (108,720)­­(37,800)­(146,520) Net Transfers (108,720)­­(37,800) 33,000 (113,520) Change in Net Position (35,517) (135,721) (269,531) 266,619 53,871 (120,279) BEGINNING NET POSITION 1,925,053 1,808,741 1,290,614 2,604,203 102,469 7,731,080 ENDING NET POSITION 1,889,536$ 1,673,020$ 1,021,083$ 2,870,822$ 156,340$ 7,610,801$ TOWN OF LOS GATOS INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2021 120Draft 12/16/2021 Equipment Worker's Self Information Facilities Replacement Comp Insurance Technology Maintenance Total CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 325,541$ 1,245,328$ 376,964$ 970,485$ 1,182,280$ 4,100,598$ Payments to suppliers (254,194) (764,499) (71,781) (758,972) (1,167,434) (3,016,880) Claims paid ­(292,569) (429,609)­­(722,178) Net Cash Provided (Used) by Operating Activities 71,347 188,260 (124,426) 211,513 14,846 361,540 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers In/(Out) (108,720)­­(37,800) 33,000 (113,520) Net Cash Provided (Used) by Noncapital Financing Activities (108,720)­­(37,800) 33,000 (113,520) Net Increase(Decrease) in Cash and Investments (37,373) 188,260 (124,426) 173,713 47,846 248,020 Cash and investments ­ beginning of year 1,925,053 3,002,771 1,347,639 2,732,385 192,117 9,199,965 Cash and investments ­ end of year 1,887,680$ 3,191,031$ 1,223,213$ 2,906,098$ 239,963$ 9,447,985$ ­$­ ­ ­ ­ Reconciliation of Operating Income to Cash Flows from Operating Activities: Operating Income 73,203$ (135,721)$ (269,531)$ 304,419$ 20,871$ (6,759)$ Change in assets and liabilities: Receivables, net (1,856)­­(2,290) 1,257 (2,889) Accounts payable ­19,885 1,540 (90,616) (7,365) (76,556) Claims payable 304,096 143,565 ­­447,661 Due to other government ­ ­ ­ ­ 83 83 Cash Flows From Operating Activities 71,347$ 188,260$ (124,426)$ 211,513$ 14,846$ 361,540$ TOWN OF LOS GATOS INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2021 121Draft 12/16/2021 This page intentionally left blank 122Draft 12/16/2021 STATISTICAL SECTION 123Draft 12/16/2021 This page intentionally left blank 124Draft 12/16/2021 STATISTICAL (UNAUDITED) This part of the Town of Los Gatos Annual Comprehensive Financial Report (“ACFR”) presents the detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Town’s overall financial health. Financial Trends These schedules contain trend information to help the reader understand how Town’s financial performance and well­being have changed over time. (Schedule 1, Schedule 2, Schedule 3, and Schedule 4). Revenue Capacity These schedules contain information to help the reader assess one of the Town’s most significant local revenue source, the property tax (Schedule 5, Schedule 6, Schedule 7, and Schedule 8). Debt Capacity These schedules present information to help the reader assess the affordability of the Town’s current levels of outstanding debt and its ability to issue additional debt in the future (Schedule 9, Schedule 10, and Schedule 11) Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the Town’s financial activities take place (Schedule 12, Schedule 13, and schedule 14). Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the Town’s ACFR relates to the services the Town provides and activities it performs (Schedule 15 and Schedule 16). 125Draft 12/16/2021 This page intentionally left blank 126Draft 12/16/2021 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 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 2021 109,894,936 8,358,267 ­4,735,103 113,518,100 (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 $8.0 million in unrestricted cash balances in the Town’s GFAR fund during the year to invest in the Town’s infrastructure and equipment. (4) Net position was restated for FY 2018 for amounts placed into fiduciary funds, reclassified to General Fund Restricted Asset. -15,000,000 -10,000,000 -5,000,000 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 45,000,000 50,000,000 55,000,000 60,000,000 65,000,000 70,000,000 75,000,000 80,000,000 85,000,000 90,000,000 95,000,000 100,000,000 105,000,000 110,000,000 115,000,000 120,000,000 Net Investment in Capital Assets Restricted Unrestricted 127Draft 12/16/2021 Town of Los Gatos Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) Expenses 2011/12 2012/13 2013/14 2014/15 Governmental Activities: General Government 6,145,143$ 6,564,768$ 6,955,804$ 6,465,852$ Police Department 14,124,798 13,731,754 14,119,786 12,644,221 Parks and Public Works 7,827,332 7,829,315 8,154,616 8,069,352 Community Development 3,434,551 4,094,188 4,424,040 4,047,738 Community Services ­­­­ Library Services 1,938,577 2,128,823 2,234,431 2,553,414 Sanitation 158,205 393,205 363,180 491,359 Redevelopment 919,821 1,277,063 21,687 ­ Interest and Fees 1,123,842 ­­­ Total Governmental Activities 35,672,269$ 36,019,116$ 36,273,544$ 34,271,936$ Program Revenues Charges for Services: General Government 1,131,424$ 1,416,593$ 2,179,077$ 1,888,213$ Police Department 2,324,397 2,450,630 3,206,579 3,529,166 Parks and Public Works 1,215,382 3,044,401 1,550,867 2,206,765 Community Development 3,448,433 4,649,444 5,156,061 5,027,497 Community Services ­­­­ Library Services 37,662 50,696 51,775 53,123 Sanitation 135,000 403,294 328,648 328,868 Operating Grants and Contributions: General Government 6,453 8,406 ­­ Police Department 29,980 91,360 42,661 24,838 Parks and Public Works 993,827 835,724 994,096 907,745 Community Development ­­­­ Library Services 109 40 14,662 4,062 Sanitation ­­­­ Capital Grants and Contributions: General Government ­169,270 ­176,705 Police Department ­­­­ Parks and Public Works 641,811 2,757,660 2,274,879 2,338,154 Community Development ­­19,360 ­ Total Program Revenues 9,964,478$ 15,877,518$ 15,818,665$ 16,485,136$ General Revenues 2011/12 2012/13 2013/14 2014/15 Property Taxes 14,088,866$ 11,968,377$ 11,712,312$ 12,931,603$ Sales Taxes 9,889,100 8,757,428 8,029,571 8,202,678 Franchise Taxes ­­­2,215,430 Other Taxes 3,698,753 3,324,791 3,718,405 2,062,893 Motor Vehicle in Lieu 15,238 15,790 13,068 ­ Investment Earnings 331,420 b (133,375)b 772,200 b 428,772 Loss on Disposal of Capital Assets ­­­­ Sale of Property ­54,425 ­­ Miscellaneous 2,275,160 1,154,647 350,468 813,324 Extraordinary Gain (Loss) Dissolution of RDA 11,864,453 295,101 ­­ Total General Revenues 42,162,990$ 25,437,184$ 24,596,024$ 26,654,700$ Change in Net Position 16,455,199$ 5,295,586$ 4,141,145$ 8,867,900$ 128Draft 12/16/2021 Schedule 2 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 6,993,661$ 6,771,628$ 7,948,918$ 8,163,991$ 7,405,368$ 7,452,136$ 12,825,688 14,587,597 15,545,521 16,635,726 20,446,188 19,808,230 8,320,623 9,502,707 10,047,003 10,627,716 11,803,005 13,141,034 3,227,224 5,093,459 4,667,609 5,064,637 5,001,958 6,481,075 ­ 2,522,142 2,868,748 3,087,684 3,059,294 3,347,523 3,496,153 528,580 466,762 536,296 684,673 3,041 185,981 ­­­­­ ­­­­­ 34,417,918$ 39,290,901$ 41,833,031$ 44,236,037$ 48,007,083$ 50,564,609$ 1,517,012$ 1,669,020$ 1,701,146$ 1,562,683$ 1,470,324$ 1,505,899$ 3,278,585 2,076,688 1,888,359 1,745,889 1,549,207 1,275,731 1,516,108 2,155,841 4,150,068 2,910,936 3,674,222 4,209,048 4,359,146 3,803,626 3,456,390 4,155,231 3,351,753 4,063,776 ­­­­­­ 46,192 46,746 14,702 9,476 11,522 ­ 368,813 410,626 771,442 966,130 231,323 299,478 15,291 ­­­12,290 388,181 98,138 837,329 895,730 826,643 952,045 1,073,971 749,300 665,779 953,294 1,301,152 2,824,638 1,547,102 ­­­­15,864 223,129 12,228 ­57,200 47,482 49,351 55,181 ­­­­­­ ­­­­8,258 2,365 ­­­­9,100 ­ 1,610,657 770,600 348,437 146,792 832,755 843,980 ­9,280 ­­­­ 13,571,470$ 12,445,535$ 14,236,768$ 13,672,414$ 14,992,652$ 15,487,841$ 2015/16 2016/17 0 2017/18 2018/19 2019/20 2020/21 13,763,458$ 14,756,214$ 15,958,406$ 17,321,347$ 18,330,426$ 19,878,835$ 7,501,175 8,925,276 7,466,253 8,158,152 7,531,425 7,933,604 2,258,892 2,366,908 2,474,814 2,475,916 2,495,792 2,499,463 1,997,497 2,351,223 2,667,840 2,726,743 1,911,774 1,126,887 12,308 14,056 16,483 14,689 24,526 23,058 698,324 192,260 333,120 1,809,128 2,428,470 227,136 ­­­­­ ­­­­­ 598,170 528,946 622,105 2,407,840 323,940 1,528,039 ­­­­­ 26,829,824$ 29,134,883$ 29,539,021$ 34,913,815$ 33,046,353$ 33,217,022$ 5,983,376$ 2,289,517$ 1,942,758$ 4,350,192$ 31,922$ (1,859,746)$ 129Draft 12/16/2021 Town of Los Gatos Fund Balance, Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 2011/12 2012/13 2013/14 2014/15 General Fund Reserved ­$ ­$ ­$ ­$ Unreserved ­­­­ Nonspendable ­­­­ Restricted ­­­­ Committed Assigned 21,992,886 20,758,156 23,791,749 24,121,256 Unassigned 4,019,409 7,502,446 1,363,376 ­ Total General Fund 26,012,295$ 28,260,602$ 25,155,125$ 24,121,256$ All Other Governmental Funds Reserved ­$ ­$ ­$ ­$ Unreserved, reported in: Special Revenue Funds ­­­­ Capital Project Funds ­­­ Debt Service Funds ­­­­ Nonspendable ­ Restricted 5,167,236 3,949,583 4,485,246 5,663,182 Committed ­­­­ Assigned 5,389,674 6,097,182 8,191,823 15,346,558 Unassigned 107,107 157,208 183,045 206,875 Total All Other Governmental Funds 10,664,017$ 10,203,973$ 12,860,114$ 21,216,615$ Total Fund Balances 36,676,312$ 38,464,575$ 38,015,239$ 45,337,871$ Fiscal Year 130Draft 12/16/2021 Schedule 3 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 ­$ ­$ ­$ ­$ ­$ ­$ ­­­­­­ ­­­­­159,000 ­­1,206,851 5,015,316 669,978 ­ 20,019,187 15,129,925 12,953,399 15,070,944 15,387,706 11,220,970 9,555,085 14,050,699 17,475,285 18,256,895 13,277,813 12,534,648 ­­­­­ 29,574,272$ 29,180,624$ 31,635,535$ 38,343,155$ 29,335,497$ 23,914,618$ ­$ ­$ ­$ ­$ ­$ ­$ ­­­­­­ ­­­­­­ ­­­­­­ 6,386,014 5,627,707 6,992,747 6,903,372 6,448,006 8,562,653 3,696,000 10,354,584 5,571,087 2,579,997 ­­ 11,099,076 7,928,994 6,361,403 6,180,930 14,181,679 15,360,481 ­­­­­ 21,181,090$ 23,911,285$ 18,925,237$ 15,664,299$ 20,629,685$ 23,923,134$ 50,755,362$ 53,091,909$ 50,560,772$ 54,007,454$ 49,965,182$ 47,837,752$ 131Draft 12/16/2021 Town of Los Gatos Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 2011/12 2012/13 2013/14 2014/15 Revenues: Taxes 27,676,719$ 24,596,799$ 23,475,393$ 23,208,820$ Intergovernmental 1,669,729 2,615,191 2,440,127 2,921,002 Charges for Services 5,550,671 6,529,234 5,837,581 5,794,386 Licenses & Permits 3,242,348 4,015,871 5,343,265 6,467,771 Investment Income 291,484 (133,380) 772,164 428,735 Fines and Forfeitures 809,790 688,125 795,720 868,564 Franchise Fees ­­­2,215,430 Use of Property 38,974 38,910 37,741 32,209 Other 5,412,328 4,577,584 3,648,277 3,130,975 Total Revenues 44,692,043 42,928,334 42,350,268 45,067,892 Expenditures: Current Public Safety 13,392,953 13,370,032 13,742,189 13,747,198 Public Works 5,440,960 5,616,197 5,611,283 5,840,097 Community Development 3,226,195 4,235,832 4,335,599 4,218,500 Library Services 1,805,479 2,055,069 2,131,438 2,268,844 Sanitation & Other 116,607 359,725 322,817 411,863 General Government 8,046,794 8,331,444 8,499,854 8,647,451 Redevelopment 3,282,155 1,277,063 21,687 ­ Capital Outlay 10,929,491 6,568,653 4,097,662 3,800,478 Debt Service Principal Repayment 934,167 ­­­ Interest and Fiscal Charges 1,143,185 ­­­ Total Expenditures 48,317,986 41,814,015 38,762,529 38,934,431 Excess (Deficiency) of Revenues Over (Under) Expenditures (3,625,943) 1,114,319 3,587,739 6,133,461 Other Financing Sources(Uses): Debt Issuance ­­­­ Transfers In 3,735,440 2,841,881 3,418,872 8,977,220 Transfers Out (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)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 (3,552,397)$ 1,492,350$ 4,085,202$ 7,322,632$ Debt Service as a Percentage of Non Capital Expenditures 5.56%0.00%0.00%0.00% Fiscal Year 132Draft 12/16/2021 Schedule 4 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 23,269,892$ 25,945,129$ 26,253,026$ 28,244,329$ 27,811,665$ 28,977,919$ 2,573,475 1,715,580 2,124,903 2,310,655 4,498,153 3,746,587 4,773,001 4,210,174 5,395,057 5,584,504 5,309,470 6,035,659 5,442,133 5,075,503 5,937,044 5,173,876 4,818,671 5,212,831 698,308 192,978 332,938 1,809,164 2,428,453 227,940 879,277 917,105 676,212 510,266 271,117 103,468 2,258,892 2,366,908 2,474,814 2,475,916 2,495,792 2,499,463 31,723 32,096 32,206 32,960 31,039 40,372 2,396,992 1,011,939 640,844 579,755 376,922 423,115 42,323,693 41,467,412 43,867,044 46,721,425 48,041,282 47,267,354 13,763,316 13,251,288 14,423,554 14,945,407 15,793,815 16,570,836 6,307,266 6,633,748 7,125,686 7,962,135 8,168,599 8,229,944 3,695,504 3,793,930 4,192,165 4,577,495 4,473,790 5,195,302 2,332,268 2,508,677 2,529,017 2,493,617 2,700,802 2,847,988 452,726 466,762 521,147 628,240 162,837 166,173 9,144,797 8,390,959 8,770,082 8,004,254 13,024,146 14,040,134 ­­­­­ 3,241,657 6,867,034 9,778,058 7,888,914 7,861,972 5,746,447 ­­­­­ ­­­­­ 38,937,534 41,912,398 47,339,709 46,500,062 52,185,961 52,796,824 3,386,159 (444,986) (3,472,665) 221,363 (4,144,679) (5,529,470) ­­­­­ 3,315,846 7,907,692 3,176,760 4,264,131 8,935,260 4,053,535 (1,284,514) (7,612,012) (3,880,131) (3,323,756) (8,628,719) (3,940,015) 378,219 1,912,316 1,566 1,201,369 ­4,435 ­­­1,560,336 2,031,332 300,115 (325,152) 2,852,691 308,107 2,875,225 ­­­­­ ­­­­­ ­­­­­ 5,417,491$ (144,871)$ (3,797,817)$ 3,074,054$ (3,836,572)$ (2,654,245)$ 0.00%0.00%0.00%0.00%0.00%0.00% 133Draft 12/16/2021 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 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 2021 308,749,655 ­6.87%14,599,669,332 8.06% 14,908,418,987 58,398,677,328 0.0000 Source: Santa Clara County Assessed Value Report 0 2000 4000 6000 8000 10000 12000 14000 16000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Unsecured Property Secured Property 134Draft 12/16/2021 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 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 2021 1.0000 0.0457 0.0037 0.0959 1.1453 Source: Santa Clara County Book of Tax Rates 0.00 0.25 0.50 0.75 1.00 1.25 Santa Clara Valey Water District County County Bonds and Levies School District Bonds and Loans Basic County Wide Levy 135Draft 12/16/2021 Town of Los GatosSchedule 7Principle Property Tax PayersLast Five Fiscal Years *Percentage Percentage Percentage Percentage Percentage of Total Cityof Total Cityof Total Cityof Total Cityof Total CityTaxable TaxableTaxable TaxableTaxable TaxableTaxable TaxableTaxable TaxableAssessedAssessedAssessedAssessedAssessedAssessedAssessedAssessedAssessedAssessedASSESSEE NAMEValueValueValueValueValueValueValueValueValueValue750 University LLC­$ 0.00%12,137,999$ 0.14%18,600,000$ 0.20%19,000,000$ 0.19%19,379,620$ 0.19%980 JR LLCAlberto Way Holdings LLC21,034,6230.26%23,145,0640.27%23,607,9640.26%23,715,1410.24%24,188,966 0.23%Ann R. Desantis13,823,7790.15%Boccardo Corporation37,173,8770.46%37,550,368 0.44%38,617,9120.42%38,772,905 0.40%21,617,318 0.21%CH Realty IV Downing LP19,143,068 0.23%19,525,9270.23%19,916,4430.22%CHL Ventures LP20,266,6300.25%20,671,9620.24%­0.00%­0.00%­0.00%D&K Los Gatos LLC15,284,3240.19%15,590,0100.18%15,901,8090.17%15,974,0030.16%16,293,1630.16%David A. and Shari Flick Trustee14,724,4870.18%15,018,9710.18%15,388,8840.16%Donahue Schriber Realty Group LPDS Downing Los Gatos LLC20,006,8610.20%21,980,568 0.21%DS Village SquareEl Camino Hospital20,803,6090.21%26,477,1600.25%Equestrian 3 Investments LLCFox Creek Fund LLCGood Samaritan Hospital LP19,372,795 0.24%19,530,1830.23%19,710,8970.21%19,602,5940.20%19,880,366 0.19%Grade Way Associations VI14,508,4820.18%14,798,6510.17%15,094,6230.16%15,163,1520.16%Green Eyes LLC12,542,555 0.15%12,793,4040.14%Grosvenor USA Ltd.21,066,6300.26%22,437,9620.27%22,886,7200.25%22,990,6240.24%23,449,975 0.23%Health Care REIT Inc,19,869,245 0.24%19,223,348 0.23%20,671,9600.22%20,765,8100.21%20,089,9030.19%Hercules Holding II LLC­0.00%­0.00%­0.00%­0.00%­0.00%International HotelKay Kaoru and Go Sasaki Sr., Trustees22,752,8090.25%24,744,9830.24%Knowles Los Gatos LLC46,123,468 0.57%47,045,9340.56%47,986,8500.52%48,204,708 0.49%49,167,836 0.47%KSL Capital Partners41,698,7510.51%42,532,7210.50%43,383,3700.47%43,580,326 0.45%30,134,6140.29%Leland E Lester, TrusteeLG Business Park Bldg 3 LLC61,947,2840.59%LG Business Park Bldg 4 LLCLG Business Park LLC18,342,9310.23%47,276,9770.51%39,347,485 0.40%17,507,2610.17%LG Hotel LLC15,448,0570.16%15,497,395 0.15%Los Gatos Hotel Corp.15,683,9790.19%15,617,1340.18%18,134,1820.20%15,573,3140.16%15,676,1130.15%Lyon Baytree Apartments LLC14,177,0390.17%14,430,1230.17%14,674,716 0.16%Paul H. Roskoph12,926,4570.16%13,416,4520.16%­0.00%­0.00%Preylock Los Gatos LLCSafeway Inc.San Jose Water Works29,369,1370.36%30,882,0090.36%33,626,3810.36%36,693,4530.38%37,081,0490.36%Serramonte Corporate Center LLCSI 32 LLC150,563,1191.54%141,348,8941.36%Sobrato Interests IV LLC157,554,525 1.93%157,559,245 1.86%169,809,676 1.84%20,869,338 0.21%44,930,4820.43%SRI Old Town LLC29,778,7120.37%30,374,286 0.36%30,981,7710.34%31,122,4270.32%31,744,2520.30%Summerhill N40 LLCSummerhill Prospect Avenue LLCToll House Hotel LLC15,696,0890.19%­0.00%Wealthcap Los Gatos 121Wealthcap Los Gatos 31Windrose Los Gatos Properties LLCTotal ­ Principal taxpayers583,795,249$ 7.16%584,030,904$ 6.90%650,252,243$ 7.68%394,337,473$ 6.49%1,296,723,012$ 6.37%Total ­ All real properties assessed by the Town (1) $8,151,530,237 $8,464,491,112 $9,237,887,980 $9,766,765,025 $10,416,786,877 (1) Assessed value includes only net secured real properties.(2) Excludes the value of tax­exempt propertiesSource Data: California Municipal Statistics, Inc.2014/152011/12 2012/13 2013/14 2015/16136Draft 12/16/2021 Schedule 72016/172017/182018/19Percentage Percentage Percentage Percentage Percentage of Total Cityof Total Cityof Total Cityof Total Cityof Total CityTaxable TaxableTaxable TaxableTaxable TaxableTaxable TaxableTaxable TaxableAssessedAssessedAssessedAssessedAssessedAssessedAssessedAssessedAssessedAssessedASSESSEE NAMEValueValueValueValueValueValueValueValueValueValue750 University LLC19,675,159$ 0.18%25,241,863$ 0.21%25,746,699$ 0.20%26,261,632$ 0.19%26,786,863$ 0.18%980 JR LLC19,277,8790.15%Alberto Way Holdings LLC24,557,845 0.22%25,048,998 0.21%25,549,975 0.20%24,158,3500.18%24,641,5140.17%Ann R. DesantisBoccardo Corporation21,918,9210.20%22,211,6500.19%22,651,7320.18%23,099,3140.17%CH Realty IV Downing LPCHL Ventures LPD&K Los Gatos LLCDavid A. and Shari Flick TrusteeDonahue Schriber Realty Group LP53,872,0830.45%56,370,186 0.44%57,497,5870.43%58,647,535 0.40%DS Downing Los Gatos LLC22,315,7700.20%DS Village Square22,799,5990.20%El Camino Hospital26,880,9330.24%23,353,576 0.20%28,596,1040.22%30,789,155 0.23%42,611,768 0.29%Equestrian 3 Investments LLC29,584,2510.25%28,563,8640.22%25,525,8800.19%26,036,395 0.18%Fox Creek Fund LLC21,558,6640.17%Good Samaritan Hospital LP22,402,756 0.20%22,516,8230.19%22,934,2740.18%23,391,2890.17%23,846,4020.16%Grade Way Associations VIGreen Eyes LLCGrosvenor USA Ltd.Health Care REIT Inc, 20,396,2740.18%Hercules Holding II LLC­0.00%­0.00%International Hotel30,144,6170.25%30,747,5090.24%31,362,458 0.23%31,989,706 0.22%Kay Kaoru and Go Sasaki Sr., Trustees25,122,1310.22%25,624,0270.21%26,135,9620.20%28,864,9420.21%27,190,9510.19%Knowles Los Gatos LLC49,917,6440.44%50,915,995 0.43%51,934,3130.41%52,972,998 0.39%54,032,455 0.37%KSL Capital Partners30,105,945 0.27%25,893,946 0.22%26,411,8200.21%33,069,058 0.24%33,118,7590.23%Leland E Lester, Trustee29,004,1690.26%LG Business Park Bldg 3 LLC53,465,7240.45%LG Business Park Bldg 4 LLC43,937,8570.37%LG Business Park LLC31,070,5720.28%LG Hotel LLCLos Gatos Hotel Corp.Lyon Baytree Apartments LLCPaul H. Roskoph­0.00%­0.00%Preylock Los Gatos LLC89,141,4720.66%95,880,0000.66%Safeway Inc.24,394,468 0.20%25,752,2310.19%25,577,0340.18%San Jose Water Works38,710,728 0.34%41,202,805 0.34%46,150,5770.36%47,777,4320.35%49,649,1540.34%Serramonte Corporate Center LLC200,844,6101.57%204,861,5011.52%208,958,7291.43%SI 32 LLC143,442,2691.28%146,317,9441.22%149,208,1821.17%152,166,578 1.13%155,181,7931.06%Sobrato Interests IV LLC42,240,9940.38%43,071,8370.36%43,919,8790.34%44,781,3770.33%45,682,006 0.31%SRI Old Town LLC32,228,3510.29%32,872,9170.27%33,530,3740.26%34,200,9800.25%34,884,9990.24%Summerhill N40 LLC56,244,7820.42%57,369,6610.39%Summerhill Prospect Avenue LLC18,274,508 0.16%Toll House Hotel LLC­0.00%­0.00%35,043,1800.24%Wealthcap Los Gatos 121109,100,0000.97%111,282,0000.93%113,507,6400.89%115,777,7920.86%118,093,3470.81%Wealthcap Los Gatos 3184,000,0000.75%85,680,0000.72%87,393,6000.68%Windrose Los Gatos Properties LLCTotal ­ Principal taxpayers814,164,568.00$ 7.24%916,633,381.00$ 7.66%1,061,033,843.00$ 8.29%1,127,696,808.00$ 8.35%1,175,222,251.00$ 8.05%Total ­ All real properties assessed by the Town (1) $11,239,536,718 $11,968,031,792 $12,793,751,423 $13,509,034,656 $14,598,027,652 (1) Assessed value includes only net secured real properties.(2) Excludes the value of tax­exempt propertiesSource Data: California Municipal Statistics, Inc.2020/212019/20137Draft 12/16/2021 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 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 1,715,982,555 15,651,922,606 2021 13,864,271 13,864,271 14,908,418,987 1,809,729,058 16,718,148,045 Sources: Santa Clara County Auditor­Controller 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$17.0$17.5 Value 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 Tax Levied 138Draft 12/16/2021 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 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 2021 ­ ­ ­ ­ ­ 0.0% 0.00 1)Debt was transferred to the Successor Agency Trust Fund as a part of the RDA dissolution in FY 2011 Governmental Activities 139Draft 12/16/2021 Town of Los Gatos Schedule 10 Direct and Overlapping Governmental Activities Debt As of June 30, 2021 2020/21 Assessed Valuation:$14,908,418,987 Estimated Share of Direct and Total Debt at Overlapping Debt DIRECT AND OVERLAPPING BONDED DEBT:% Applicable (1)June 30, 2021 at June 30, 2021 Overlapping Tax & Assesment Debt Santa Clara County 2.706% 812,685,000$ 21,991,256$ West Valley­Mission Community College District 9.383%589,080,000$ 55,273,376$ Campbell Union High School District 7.774%357,945,000$ 27,826,644$ Los Gatos­Saratoga Joint Union High School District 36.253%86,585,000$ 31,389,660$ Cambrian School District 0.437%62,324,944$ 272,360$ Campbell Union High School District 7.665%211,274,895$ 16,194,221$ Los Gatos Union School District 74.127%72,185,000$ 53,508,575$ Saratoga Union School District 0.034%19,249,458$ 6,545$ Union School District 20.369%109,815,349$ 22,368,288$ Midpeninsula Regional Open Space District 4.430%86,400,000$ 3,827,520$ Santa Clara Valley Water District Benefit Assessment District 2.706%57,010,000$ 1,542,691$ Total Overlapping Tax and Assesmet Debt 234,201,136$ Overlapping General Fund Debt Santa Clara County General Fund Obligations 2.706%914,957,860$ 24,758,760$ Santa Clara County Pension Obligations 2.706%341,399,194$ 9,238,262$ Santa Clara County Board of Education Certificates of Participation 2.706%2,670,000$ 72,250$ West Valley­Mission Community College District General Fund Obligations 9.383%49,850,000$ 4,677,426$ Campbell Union High School District General Fund Obligations 7.774%20,000,000$ 1,554,800$ Los Gatos­Saratoga Joint Union High School District Certificates of Participation 36.253%1,709,000$ 619,564$ Campbell Union School District General Fund Obligations 7.665% 2,180,000$ 167,097$ Saratoga Union School District Certificates of Participation 0.034%2,750,000$ 935$ Santa Clara County Vector Control District Certificates of Participation 2.706%1,765,000$ 47,761$ Midpeninsula Regional Open Space Park District General Fund Obligations 4.430%106,000,600$ 4,695,827$ Total Gross Overlapping General Fund Debt 45,832,682$ Less: Santa Clara County Supported Obligations 684,004$ Total Overlapping General Fund Debt 45,148,678$ Overlapping Tax Increment Debt ( Successor Agency) Town of Los Gatos Certificated of Participations 14,085,000$ Total of Overlapping Tax Increment Debt 14,085,000$ Total Direct Debt $0 Total Gross Overlapping Dept 294,118,818$ Total Net Overlapping Debt 293,434,814$ Gross Combined Total Debt 294,118,818$ (2) Net Combined Total Debt 293,434,814$ Ratios to 2020/21 Assessed Valuation: Total Overlapping Tax and Assessment Debt: 1.57% Total Direct Debt: 0.00% Gross Combined Total Debt: 1.97% Net Combined Total Debt: 1.97% Ratios to Redevelpment Incremental Valuation ( $1,560,073,787): Total Overlapping Tax Increment Debt: 0.90% Source Data: California Municipal Statistics, Inc. (1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the distric's total taxable asessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non­bonded capital lease obligations. 140Draft 12/16/2021 This page intentionally left blank 141Draft 12/16/2021 Town of Los Gatos Legal Debt Margin Information, Last Ten Fiscal Years (In Thousands of Dollars) 2011/12 2012/13 2013/14 2014/15 2015/16 Debt Limit 1,195,035$ 1,216,131$ 1,263,138$ 1,379,254$ 1,444,943$ Debt Applicable to Limit ­­­­­ Legal Debt Margin 1,195,035$ 1,216,131$ 1,263,138$ 1,379,254$ 1,444,943$ 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 (1) The Town of Los Gatos is a general law city and has a debt limit of 15%. Fiscal Year 142Draft 12/16/2021 Schedule 11 Assessed Value 14,908,418,987$ Debt Limit 2,236,262,848 Debt Applicable to Limit: Legal Debt Margin 2,236,262,848$ 2016/17 2017/18 2018/19 2019/20 2020/21 1,556,252$ 1,679,736$ 1,789,097$ 2,076,329$ 2,236,263$ ­­­­ ­ 1,556,252$ 1,679,736$ 1,789,097$ 2,076,329$ 2,236,263$ 0.00% 0.00% 0.00% 0.00% 0.00% Legal Debt Margin Calculation for Fiscal Year 2020/21 Fiscal Year 143Draft 12/16/2021 Town of Los Gatos Schedule 12 Demographic and Economic Statistics Last Ten Fiscal Years Personal Income Per Capita Public County Fiscal (thousands Personal Median School Unemployment Year Population of dollars)Income Age Enrollment Rate Ended (1) (2) (3) (4) (5) (6) 2012 29,808 1,854,892 62,228 42.64 6,352 8.7% 2013 30,247 2,140,641 70,772 45.8 6,420 6.8% 2014 30,443 2,267,912 74,497 45.80 6,522 5.7% 2015 30,505 2,197,885 72,050 46.10 6,622 3.8% 2016 31,376 2,286,087 72,861 46.30 6,646 3.5% 2017 31,314 2,281,569 72,861 46.50 6,631 3.8% 2018 30,601 2,290,638 74,855 46.81 6,588 2.6% 2019 30,998 2,365,178 76,301 46.72 6,544 2.6% 2020 31,439 2,546,748 81,006 46.83 6,520 10.7% 2021 30,836 2,686,155 87,111 46.83 6,180 5.2% 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. 144Draft 12/16/2021 Town of Los Gatos Schedule 13 Principal Employers Last Ten Fiscal Years Percentage Percentage Percentage Percentage Percentage of Total Town of Total Town of Total Town of Total Town of Total Town Principal Employers Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Columbia Health Care Assoc/Mission Oaks Hospital 2,000 13.89%2,000 13.29%2,000 13.52%­0.00%­0.00% El Camino Hospital, Los Gatos 700 4.86%700 4.65%700 4.73%560 3.73%560 3.53% Los Gatos Union School District 275 1.91%275 1.83%237 1.60%273 1.82%280 1.76% Los Gatos­Saratoga High School District 270 1.88%270 1.79%256 1.73%157 1.05%157 0.99% Netflix 800 5.56%900 5.98%825 5.58%1,530 10.19%1,976 12.45% Safeway 250 1.74%250 1.66%250 1.69%314 2.09%314 1.98% Alain Pinel Realtors 150 1.04%150 1.00%156 1.05%156 1.04%146 0.92% Courtside Tennis Club 200 1.39%200 1.33%295 1.99%440 2.93%440 2.77% Town of Los Gatos 136 0.94%138 0.92%144 0.97%157 1.05%158 1.00% Whole Foods ­0.00%­0.00%­0.00%179 1.19%179 1.13% Vasona Creek Health Care Center ­0.00%­0.00%­0.00%233 1.55%233 1.47% Good Samaritan Regional Cancer Center ­0.00%­0.00%­0.00%200 1.33%200 1.26% Roku ­0.00%­0.00%­0.00%­0.00%487 3.07% Terraces of Los Gatos ­0.00%­0.00%­0.00%­0.00%228 1.44% Source: Town of Los Gatos, Finance Department and Muniservices 2011/12 2012/13 2013/14 2014/15 2015/16 145Draft 12/16/2021 Schedule 13 Percentage Percentage Percentage Percentage Percentage of Total Town of Total Town of Total Town of Total Town of Total Town Principal Employers Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Columbia Health Care Assoc/Mission Oaks Hospital ­0.00%0.00%0.00%0.00%0.00% El Camino Hospital, Los Gatos 560 3.49%560 3.43%560 3.49%560 3.49%560 3.35% Los Gatos Union School District 274 1.71%267 1.64%281 1.75%281 1.75%281 1.68% Los Gatos­Saratoga High School District 370 2.30%367 2.25%367 2.28%367 2.28%320 1.92% Netflix 1,864 11.61%2,117 12.98%2,314 14.41%2,314 14.41%2,524 15.11% Safeway 314 1.95%314 1.92%314 1.95%314 1.95%314 1.88% Alain Pinel Realtors 148 0.92%131 0.80%131 0.82%131 0.82%0.00% Courtside Tennis Club 468 2.91%542 3.32%542 3.37%542 3.37%542 3.24% Town of Los Gatos 160 1.00%159 0.97%160 1.00%160 1.00%161 0.96% Whole Foods 179 1.11%179 1.10%125 0.78%125 0.78%125 0.75% Vasona Creek Health Care Center 233 1.45%233 1.43%233 1.45%233 1.45%250 1.50% Good Samaritan Regional Cancer Center 200 1.25%200 1.23%200 1.25%200 1.25%200 1.20% Roku 554 3.45%664 4.07%516 3.21%516 3.21%0.00% Terraces of Los Gatos 228 1.42%228 1.40%228 1.42%228 1.42%228 1.36% 2020/212018/192017/182016/17 2019/20 146Draft 12/16/2021 Town of Los Gatos Schedule 14 Full­time­Equivalent Employees by Function/Program Last Ten Fiscal Years 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 20/21 Function/Program General Government 20.15 20.40 20.73 20.97 20.97 21.35 21.97 22.16 21.80 21.80 Police 60.50 58.00 57.50 60.00 59.00 59.00 59.00 59.00 60.00 60.00 Culture and Recreation ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ Economic Development 1.00 ­ 0.50 0.63 0.63 0.63 0.75 0.75 0.75 0.75 Library 8.60 8.60 10.30 10.80 11.00 12.25 12.25 12.50 12.50 12.50 Planning 16.00 17.50 17.50 19.50 19.00 19.26 19.63 20.08 20.08 20.20 Public Works 32.00 31.00 31.50 32.00 33.50 33.50 34.50 34.50 34.50 34.75 Total 138.75 138.25 135.50 137.53 144.10 145.98 148.10 148.99 149.63 150.00 Full­time equivalent employment is calculated as one or more employee positions totaling one full year of service or approximately 2,080 hours a year. Page C­45 of Town Budget 21­22 Full­time­Equivalent Employees as of June 30 147Draft 12/16/2021 Town of Los Gatos Operating Indicators Last Ten Fiscal Years FUNCTION/PROGRAM General government 2011/12 2012/13 2013/14 2014/15 Building Permits Issued Residential Permits Issued 747 738 813 805 Residential Permits Value 66,072,341 75,227,889 87,307,822 76,896,111 Commercial Permits Issued 107 137 139 133 Commercial Permits Value 17,663,124 46,855,615 138,676,507 178,195,997 Publically Owned Permits Issued ­­­­ Publically Owned Permits Value ­­­­ Residential Parking Permits Number of Special Event Permits Issued 89 125 133 127 Number of Annual Permits Issued 1,223 1,320 1,376 1,570 City Clerk Number of Council Resolutions Passed 59 74 86 72 Number of Ordinances Passed 13 20 16 9 Number of Contracts Passed 227 220 196 222 General Services Number of Purchase Orders Issued 358 318 301 277 Police Physical Arrests 690 648 641 695 Parking Violations 12,938 11,991 14,421 13,321 Traffic Violations 2,908 3,333 4,747 4,633 DUI Arrests 89 86 62 48 Library Circulated e­audiobooks 3,388 4,774 2,414 *5,867* Other Public Works Street Resurfacing/Overlay/Reconstruction (miles) 8.0 8.0 10.0 1.8 ADA Compliance: Curb Ramps 19 19 19 23 Traffic Circles 11 ­1 Street Poles 1,611 1,611 1,611 1,609 Planning and Development Department Building & Safety Inspections Performed 11,738 11,902 12,764 11,652 Redevelopment: Number of active projects 1 ­­­ Source: Town of Los Gatos, Finance Department * 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. 148Draft 12/16/2021 Schedule 15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 899 744 849 814 898 1,128 85,000,754 53,625,891 63,083,249 80,030,846 47,961,529 111,242,724 147 135 105 1229268 20,185,884 50,024,177 16,626,196 13,295,999 12,389,688 37,285,259 ­­ ­ ­­ ­ 107 118 113 78 ­** 1,363 1,251 1,342 1,395 1,400 1,568 61 69 69 59 57 50 11 5 17 11 24 9 283 240 262 245 242 205 334 331 322 343 359 376 987 1,030 1,164 1,138 616 360 13,975 12,863 11,784 6,817 4,023 1,584 5,400 4,634 4,757 2,877 1,225 764 58 60 51 70 64 23 7,761 10,006 8,844 12,130 57,839 54,614 8.0 10.0 2.6 5.8 16.2 10.0 11 30 68 49 68 91 1 11111 1,609 1,609 1,762 1,830 1,830 1,830 8,655 14,722 13,918 13,966 13,633 13,806 ­ ­­­ ­ Fiscal Year 014 the Library has expanded its contents giving 149Draft 12/16/2021 Town of Los Gatos Schedule 16 Capital Asset Statistics by Function/Program Last Ten Fiscal Years 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 Function/Program Police Number of Stations 2 2 2 2 2 2 2 2 2 2 Number of Patrol Units 14 14 14 14 14 14 14 14 14 14 Parking Enforcement Vehicles 2 2 2 2 2 2 2 2 2 2 Other Public Works Streets (miles)132 132 132 132 132 132 132 132 132 132 Streetlights 2,116 2,116 2,109 1,609 1,609 1,609 1,762 1,830 1,830 1,830 Traffic Signals 29 29 29 29 30 30 30 31 31 31 Parks and Recreation Number of Parks 12 12 12 12 12 12 12 N/A N/A N/A Number of Community Centers 1 1 1 1 1 1 1 1 1 1 Number of Parks & Open Spaces N/A N/A N/A N/A N/A N/A N/A 17 17 17 Parking Number of Parking Garages 1 1 1 1 1 1 1 1 1 1 Number of Parking Lots 22 22 22 22 22 22 22 22 22 22 Number of Off Street Parking Garage Spaces 1,126 1,126 1,126 1,126 1,126 1,126 1,126 N/A N/A N/A Number of Downtown Off­Street Parking Spaces N/A N/A N/A N/A N/A N/A N/A 1,269 1,269 1,269 Source: Town of Los Gatos, Finance Department Fiscal Year 150Draft 12/16/2021 Draft 12/16/2021