15 Financial Report - Fiscal Year 06-30-2003
COMPREHENSIVE ANNUAL NA.N"CIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2003
TOWN OF LOS GATOS CALIFORNIA . COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2003 .
TOWN HISTORY The name Los Gatos comes from "El Rancho Rinconada 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 1880s. 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 producing residential and commercial development. Highway 17 was constructed through the center
of Town. Growth leveled off in the early '70s, leaving Los Gatos with its smaIl-town atmosphere and pedestrian-oriented downtown. Because of its distance from other centers of population,
Los Gatos developed as a complete community including residential, business and industrial elements. Preserving Los Gatos as a complete and wellbalanced community has been and remains
a prominent goal forthe community. 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 14 square miles and has a population of 28,928 persons. This relatively slow growth over the first 80 years resulted in a human scale
community with narrow streets and small buildings. Los Gatos' 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 the picturesque setting of the Town. In the midst of an increasingly uniform urban complex, this setting has attracted
people with a preference for the Town's distinctive, high quality natural and urban environment. The slow growth of the Town over an extended number of years has left the Town with a
heritage of older, established residential areas and a downtown with many historic buildings representing the various eras in the Town's history. Protection of these historic resources
which are a major part of the Town's character is an important community goal. Two museums, Tait Avenue and Forbes Mill, help preserve the Town's valued history.
TOWN OF LOS GATOS, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2003 PREPARED BY THE OFFICE OF THE TOWN MANAGER
TOWN OF LOS GATOS, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2003 Table of Contents IINTRODUCTORY SECTION I Table of Contents i Letter of Transmittal.
v Principal Officers x Organization Chart xi GFOA Award : xii CSMFO Award xiii 1FINANCIAL SECTION I IndependentA uditor's Report on Basic Financial Statements 1 Management's Discussion
andAnalysis 3 Basic Financial Statements: Government-wide Financial Statements: Statement ofNet Assets 14 Statement ofActivities 15 Fund Financial Statements: Governmental Funds: Balance
Sheet 18 Reconciliation ofthe Governmental Funds Balance Sheet with the Statement ofNet Assets 19 Statement ofRevenues, Expenditures, and Changes in Fund Balance : 20 Reconciliation
ofthe Net Change in Fund Balances Total Governmental Funds with the Statement ofActivities 21 General Fund Statement ofRevenues, Expenditures, and Changes in Fund Balances Budget and
ActuaL 22
TOWN OF LOS GATOS,CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2003 Table of Contents IFINANCIAL SECTION (Continued) Proprietary Funds: Statement ofNet
Assets 24 Statement of Revenue, Expenses and Changes in Fund Net Assets ..............................•.. ,... ,•••.... 25 Statement of Cash Flows 26 Fiduciary Funds: Combining Balance
Sheets 28 Statement of Changes in Fiduciary Net Assets 29 Notes to Financial Statements 31 Supplemental Information: Major Governmental Funds Other Than the General Fund: Schedule of
Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual: Appropriated Reserves Fund 54 Certificates of Participation Fund 55 Redevelopment Agency Capital Projects Fund
56 Non-major Governmental Funds: Combining Balance Sheets 58 Combining Statements of Revenues, Expenditures, and Changes in Fund Balances 60 Budgeted Non-Major Funds Combining Schedule
of Revenues, Expenditures, and Changes in Fund Balance-Budget and Actual. 62 Internal Service Funds: Combining Statement ofNet Assets 68 Combining Statements of Revenues, Expenses and
Changes in Fund Net Assets 70 ii
TOWN OF LOS GATOS, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2003 Table of Contents IFINANCIAL SECTION (Continued) I Combining Statements of Cash Flows
72 Fiduciary Funds: Statements of Changes in Assets and Liabilities -All Agency Funds 76 ISTATISTICAL SECTION General Revenues by Source -Last Ten Fiscal years 77 General Expenditures
by Function -Last Ten Fiscal Years 78 Ratio ofNet General Obligation Bonded Debt to Assessed Value and Net Bonded Debt Per Capita -Last Ten Fiscal years 79 Property Tax Levies and Collections
-Last Ten Fiscal Years 80 Property Tax Rates -All Direct and Overlapping Governments -Last Ten Fiscal Years 81 Assessed and Estimated Actual Value of Taxable Property-Last Ten Fiscal
Years 82 Special Assessment Billings and Collections -Last Ten Fiscal Years 83 Property Values, Construction and Bank Deposits -Last Ten Fiscal years 84 Demographic Statistics -Last
Ten Fiscal Years 85 Ratio ofAnnual Debt Service Expenditures for General Bonded Debt to Total General Fund Expenditures -Last Ten Fiscal years 86 Computation ofDirect and Overlapping
Debt 87 Computation ofLegal Debt Margin , 88 Principal Taxpayers 89 Major Employers 90 Miscellaneous Statistics 91 111
TOWN OF Los GATOS OFFICE OF THE TOWN MANAGER (408) 354-6832 FAX: (408) 399-5786 CMCCENIER 110 E. MAIN STREET P.O. Box 949 Los GATOS, CA 95031 January 15, 2004 Honorable Mayor and Town
Council, I am pleased to submit the Town's Comprehensive Annual Financial Report (CAFR) for the fiscal year ending June 30, 2003. This report was prepared by management and the Finance
staff in the Town Manager's Office, which assumes responsibility for the accuracy of the data and the completeness and fairness of the presentation and all disclosures.. The information
in this report is intended to present the reader With a comprehensive view ofthe Town's financial position and the results ofits operations for the fiscal year ending June 30, 2003,
along with additional disclosures and financial information designed to enable the reader to gain an understanding ofthe Town's financial activities. This is the first year the Town
has prepared the CAFR using the new financial reporting requirements as prescribed by The Governmental Accounting Standards Board (GASB) StatementNo. 34,Basic Financial Statements-and
Management's Discussion and Analysis-for State and Local Governments (GASB 34). This new GASB Statement requires that management 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 oftransmittal is designed to complement the MD&A and should be read
in conjunction with it. The MD&A can be found immediately following the Independent Auditor's Report. This Comprehensive Annual Financial Report is organized into three sections: 1.
The Introductory Section includes the table of contents, letter of transmittal, listing of elected officials and Town administrative personnel, and organization chart delineating organizational
structure. 2. The Financial Section includes the independent auditors' opinion, management's discussion and analysis, the basic financial statements, notes to the financial statements,
combining combining statements of non-major funds, and required supplemental information. 3. The Statistical Section indudes both financial and non-financial data about the Town. The
Comprehensive Annual Financial Report is prepared in accordance with Generally Accepted Accounting Principles (GAAP) promulgated by the Governmental Accounting Standards Board (GASB)
and includes the report of Maze & Associates, the Town's independent certified public accountants. This Comprehensive Annual Financial Report will be submitted to the Government Finance
Officers Association and the California Society of Municipal Finance Officers for consideration for their Awards for Excellence in financial reporting. These awards are granted only
to entities whose reports meet the highest standards ofmunicipal financial reporting. v INCORPORATED AUGUST 10, 1887
Page 2 Mayor and Town Council January 15,2004 THE REPORTING ENTITY AND ITS SERVICES Los Gatos is a general law Town, which was incorporated under the laws of California in 1887. Located
in the foothills and level terrain of the Santa Clara Valley, in an area referred to, "SiHcon Valley". From the fIrst 1OO-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 11,750. Today Los Gatos covers approximately 14 square miles and has a population of28,928
persons. This relatively slow growth over the fIrst 80 years resulted in a human scale community with narrow streets and small buildings. Preserving Los Gatos as a c()mplete and well-balanced
community has been and remains a prominent goal for the community. Five council members who are elected at large for staggered four-year terms govern the Town. The Town Clerk and Town
Treasurer are also elected for four-year terms. The Mayor and Vice-Mayor are elected by the Council from their own ranks and serve for one-year terms. The Town Manager and Town Attorney
are hired directly bythe Cou:o.cil. The Town Council oversees traditional municipal services such as Public Safety, Parks & Public Works, Community Development, Community Services and
a Public Library. This report includes all funds ofthe Town ofLos Gatos. It includes the fInancial activities ofthe Los Gatos Redevelopment Agency which is governed by the Los
Gatos Town Qoun,cil who sit. as the board members for the Agency. Financial information for the Los Gatos Redevelopment Agency is aggregated and merged with that of the Town in the fInancial
statements in accQrdance·with generally accepted accounting principles. ECONOMIC CONDITIONS AND OUTLOOK Consistent with other communities the "Silicon Valley", the Town Of Los. Gatos
has experienced a downward trend in locally generated revenues in recent years linked with the continuing aftermath ofthe national recession and its impact on the local economy. economy.
In recent years the Town also incurred the economic effects ofslowing business travel and tourism which was probably linked withreduced corporate travel budgets nationwide and prospective
travelers continued anxiety about potential terrorism. Over the past few years, the Federal Reserve has made continuous reductions in the federal funds interest rates, which continues
to have an impact on the Town's General Fund interest earnings. Since fIscal year 200112002 the Town has been implementing a number of strategies to keep operating revenues in balance
with ongoing operating expenditures. These steps included hiring freezes, strategic expenditure slowdowns, and departmental cost saving efficiencies, among other strategies
that have allowed the Townto remain fIscally balanced the recessionary downturn in local.:revenues and the State's budget crisis. . The Town relies heavily on salestax
revenues to support general fund operations. Sales taxes comprised approximately 30% 30% ofgeneral fund revenues inFY2002/2003. The fIscal year sales tax receipts collected were at the
same level as the prior year's adjusted budget amount of $6.9 million. In the prior year, estimates for sales taxes were reduced $300,000 from the adopted budget estimate of$7.2 million.
Other economically sensitive revenues such as Transient Occupancy Taxes, Business License Taxes, and Interest earnings have all trended lower from previous highs experienced in these
revenue sources in recent years. VI
Page 3 Mayor and Town Council January 15,2004 Despite the negative effects of the economy, the Town continues to actively engage its economic vitality program as an integral part ofthe
Town's overall strategic initiative to ensure fiscal health for the Town. Fortunately, property tax collections continued a moderate growth trend in spite ofthe events in the local economy,
evidence that the Town is still viewed by potential home buyers as a highly desirable community causing real estate values to continue to remain strong despite local economic downturns.
As soon as data became available confirming a downturn in locally generated revenues, the Town reacted pro-actively to this development in FY 2002/03 by recommending to Town Council
approximately $1.3 million of Town-wide reductions in the Town's General Fund funded operations. By making these reductions on a timely basis, despite the revenue losses sustained, the
General Fund revenues exceeded expenditures for the year by approximately $330,000. An additional challenge the Town is dealing with is the continuing State ofCalifornia budget crisis.
Since 1991 the State has diverted or "taken" portions ofTownrevenues such as property taxes to balance its fiscal equation. In the spring of2003 it was apparent to staffthat the State
was now facing additional projections of multi-billion dollar deficits for FY 2003/04. Knowing that the State has historically taken locally generated revenues to solve its fiscal woes,
the Town conservatively assumed a $500,000 State "take" of locally generated revenues in its FY 2003/04 budget development process. This action proved very prudent, because the adopted
State budget for 2003/04 negatively impacted the Town by approximately the amount estimated in the budget process. The majority ofthe "take" occurred in the loss ofa portion ofthe State
"back-fill" of Motor Vehicle License Fees (Car Tax) which the legislature had promised local governments when the car tax was reduced by two-thirds in 1998. This vital revenue source
of approximately $1.7 million dollars annually to the Town or approximately 7 per· cent of the operating budget, continues to be in jeopardy through actions at the State level. Town
staff is working diligently. through its outreach efforts to the community, working with the League of California Cities and local legislators to prevent any future losses ofthis revenue.
The Town c6ntinues to manage in an environment of great uncertainty due to potential State budget balancing actions that may lead to additional negative impacts or State "takes" from
the Town's current operating revenues. MAJOR INITIATIVES In July 2002, the Town and the Los Gatos Redevelopment issued $10,725,000 in Certificates of Participation to be used in a variety
ofdowntown project area infrastructure improvements. The funds were targeted for projects such as the Town Plaza Renovation, the Downtown Streetscape Improvement and Reconstruction Projects,
Downtown Parking Improvements, Alleyway Improvements, Community Pool Improvements, and other targeted improvements within the downtown redevelopment project area. The Town also continued
making large investments in the Town's streets and curbs and gutter infrastructure. In FY 2002/03 the Town invested approximately $5.3 million in its streets and roads, including improvements
to the downtown and its streetscape. Workonfurther infrastructure improvements is expected to continue into FY 2003/04 in accordance with the Town's approved FY 2003/08 Capital Improvement
Plan. All ofthese improvements were funded either through debt issuance in the case ofthe downtown improvements, or via revenues accumulated from prior years budget savings and excess
revenues that Town Council policy strategically aM?cated for this purpose.
Page 4 Mayor and Town Council January 15,2004 ACCOUNTING.8YSTEM AND BUDGETARY CONTROL The effectiveness of internal control is considered in the development and evaluation of the Town's
accounting system. Internal accounting controls are designed to provide reasonable but not absolute assurance regarding: 1) safeguarding ofassets against loss from unauthorized loss
or disposition, 2) accuracy and reliability of accounting data, 3) adherence to managerial policy. The concept of reasonable assurance recognizes that the cost of internal. control should
not outweigh its benefits, 8?d that management must make estimates and judgments in evaluating these costs and benefits. All governmental fund types use the modified accrual basis ofaccounting.
This means thatrevenues are recorded whenmeasurable and available rather thenwhen received. Measurablemeans the amountcan be determined, and available means the cash is received within
forty-five days after the end ofthe fiscal year. Expenditures are recorded when the liability is incurred, rather than when paid. An exception to this rule is principal and interest
on generallong"-term debt, which is not recognized by debt service funds until it . Proprietary (internal service) funds are accounted for using the accrual basis ofaccounting,
similar to that used by corporations. Proprietary fund revenues -are recognized when they are earned rather than when the cash is received, even ifthe cash is not available and proprietary
fund expenses are recognized when they are incurred. Withthe implementationofGASB 34, the Townnowprepares its Basic Financial Statements onthe accrual basis. Internal accounting procedures
have been developed to provide reasonable assurance regarding the safeguarding of assets and the reliability of financial records for preparing financial statements and maintaining asset
accountability. An annual operating budget and five-year capital improvement plan is adopted by the Town Council on a basis consistent with generally accepted accounting principles.
All budget adjustments and transfers between funds must be approved by the Town Council by resolution 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. viii
PageS Mayor and Town Council January 15, 2004 AWARDS The Town's Comprehensive Annual Financial Report for the fiscal year ended Jurie 30, 2002 was awarded a Certificate of Achievement
for Excellence in Financial Reporting by the national Government Finance Officers Association. The Report was also awarded a Certificate for Outstanding Financial Reporting by the California
Society of Municipal Finance Officers (CSMFO). These prestigious awards recognize the Report's conformance with the strict accounting and reporting standards established by the Government
Accounting Standards Board and by these organizations. These awards are annual in nature and are valid for one year only. This year's Report will be submitted for award consideration
by both these organizations, as we believe it continues to meet these standards. INDEPENDENT AUDIT State lawrequires an annual audit ofthe Town's accounts by independent certified public
accountants. The accounting firm ofMaze & Associates performs this function for the Town ofLos Gatos, and their report is included in the financial section of the CAFR. ACKNOWLEDGEMENTS
The preparation ofthis Comprehensive Annual Financial Report, as presented herein, is the result ofthe combined efforts and dedicated services ofthe excellent staffofthe Department ofFinance.
Special thanks to Mary Furey, Accounting Manager, Linda Debar, Accountant, and Glenda Cracknell, Senior Accounting Technician, for their efforts in preparing this report. Respectfully
submitted, Town Manager DJF:SDC:pd N:\MGR\AdminWorkFiles\Letters\CAFR.wpd ix
TOWN OF LOS GATOS PRINCIPAL OFFICERS JUNE 30, 2003 TOWN COUNCIL Mayor Vice Mayor Councilmember Councilmernber Councilmember COUNCIL APPOINTEES Town Manager Town Attorney ELECTED OFFICIALSTown
Clerk Town Treasurer APPOINTED OFFICIALS Sandy Decker Steye Glickman Diane McNutt Joe Pirzynski Mike Wasserman Debra Figone Orry Korb Marian V. Cosgrove Linda Lubeck Assistant Town Manager
Chief of Police Community Services Director Administrative Services & Finance Director Library Director Parks and Public Works Director Community Development Director Human Resources
Manager x Pamela Jacobs Larry J. Todd Regina A. Falkner Stephen D. Conway Peggy Conaway John Curtis Warren "Bud" Lortz Gary Rogers
Town of Los Gatos Organizational Chart Residents of Los Gatos i 'Ir I I Town Clerk TownAttorney I Town Council Town Manager Assistant Town Manager I Town Treasurer I Boards & Commissions
I Finance & Administrative Services Human Resources Community Services Library xi Community Development & Redevelopment Agency Police Parks & Public Works
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, 2002 A Certificate ofAchievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association ofthe United States and Canada to government units
and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and fmancial reporting. President
Executive Director xii The Government Finance Officers Association of the United States and Canada (GFOA) awarded a certificate of Achievement for Excellence in Financial Reporting to
the Town of Los Gatos for its comprehensive annual fmancial report for the fiscal year ended June 30, 2002. The Certificate of Achievement is a prestigious national award recognizing
conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish
an easily readable and efficiently organized comprehensive armual financial report, whose contents conform to program standards. Such CAFR must satisfy both generally accepted accounting
principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We· believe our current report continues to conform to the Certificate
of Achievement program requirements, and we are submitting . it to GFOA.
Chair, Professional & Technical Standards Committee 1 California ociety of Uttunicipal :;finance Officers Certificate of Award Outstanding Financial Reporting 2001-2002 Presented
to the City ofLos Gatos This certificate is issued in recognition ofmeeting professional standards and criteria in reporting which reflect a high level ofquality in the annualfinancial
statements and in the underlying accounting system from which the reports were prepared. February 24, 2003 Dedicated to Excellence in Municipal Financial Management
AAAZE& • w ASSOCIATES INDEPENDENT AUDITOR'S REPORT The Honorable Mayor and Members ofthe Town Council Town of Los Gatos, California ACCOUNTANCY CORPORATION 1931 San Miguel Drive
-Suite 100 Walnut Creek, California 94596 (925) 930-0902· FAX (925) 930-0135 E-Mail: maze@mazeassociates.com Website: www.mazeassociates.com We have audited the basic financial statements
of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Los. Gatos as of and for the year ended June 30, 2003 as listed in the Table
of Contents. These financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these basic financial statements based on our
audit. We conducted our audit in accordance with generally accepted auditing standards in the United States of America and the standards for financial audits contained in Government
Audit Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the basic
financial statements are free of material misstatement. An audit includes examining on a test basis evidence supporting the amounts and disclosures in the basic financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion. In our opinion, the basic 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 infonnation of the Town of Los Gatos at June 30, 2003 and the respective changes
in the financial position and cash flows, where applicable, thereof and the respective budgetary comparisons listed as part of the basic financial statements for the year then ended
in conformity with generally accepted accounting principles in the United States of America. The basic financial statements referred to above follow the requirements of the Government
Accounting Standards Board's Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments, No. 36, Recipient Reporting for Certain
Non-exchange Revenues, an Amendment of GASB Statement No. 33, No. 37, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments; Omnibus, and
No. 38, Certain Financial Statement Note Disclosures, as discussed in Note 1 to the Basic Financial Statements. Management's Discussion and Analysis is required by the Government Accounting
Standards Board, but is not part of the basic financial statements. We have applied certain limited procedures to this information, principally inquiries of management regarding the
methods of measurement and presentation of this information, but we did not audit this information and we express no opinion on it. In accordance with Government Auditing Standards,
we have also issued reports dated November 7, 2003 on our consideration of the Town of Los Gatos' internal control structure and on its compliance with laws and regulations. 1 A Professional
Corporation
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information listed in the Table of Contents is presented
for purposes of additional analysis and is not a required part of the basic financial statements of the Town of Los Gatos. Such information has been subjected to the auditing procedures
applied in our audit of the basic financial statements, and in our opinion is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The
statistical section listed in the Table of Contents was not audited by us, and accordingly, we do not express an opinion on this information. , November 7, 2003 2
Town of Los Gatos Management's Discussion and Analysis Our discussion and analysis of the Town of Los Gatos financial performance provides an overview of the Town's financial activities
for the fiscal year ended June 30, 2003. This information is presented in conjunction with the audited financial statements that follow. this section. Financial Highlights • Town assets
exceeded its liabilities at the close ofthe fiscal year 2002/03 by $78,800,686 (net assets). Of this amount, $20,984,676 (unrestricted net assets) may be used to meet the Town's ongoing
obligations to citizens and creditors. • The Town's net assets increased by $1,368,391 during the fiscal year. This is mostly due to the remaining proceeds from the July 2002 $10,725,000
Certificates of Participation recorded as governmental fund revenues in the current year and an offsetting fund balance decrease in the Town's Appropriated Reserves fund reflecting the
significant investment made in the Town's streets and road infrastructure in the fiscal year. • At the end of the fiscal year 2002/03, unreserved fund balance for the General Fund was
$9,709,339 approximating
40 percent of General Fund expenditures for fiscal year 2002/03. • The Town and Redevelopment Agency issued $10,725,000 of Certificates of Participation (COP's) debt in July 2002, all
of which was outstanding as of June 30, 2003. At June 30, 2003 the total Town outstanding debt including the July 2002 COP's was $12,500,000. Overview of the Financial Statements The
financial statements presented herein include all of the activities of the Town and its component units using the integrated approach as prescribed by GASB Statement No. 34. Government-wide
financial statements. The government-wide financial statements present the financial picture of the Town from the economic resources measurement focus using the accrual basis of accounting.
The statement of net assets presents information on all of the Town's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases
in net assets 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 assets changed during the most recent fiscal year. All changes in net assets 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). 3
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 general government, police department, parks and public works, community development, community services; library services, sanitation, redevelopment, and interest and fees.
The Town has no business-type activities. The government-wide financial statements include not only the Town itself (known as. the primary government), but also a legally separate Town
of Los Gatos Redevelopment Agency (the Agency) for which the Town is financially accountable. Financial information for this blended component unit is reported as if it were part of
the primary government because its sole purpose is to provide redevelopment in the Town. Additional information on this legally separate entity can be found in Note leA) in the notes
to basic financial statements. 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. Govemmentalfunds. 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 device 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 and computer equipment, and for its risk management activities. The Internal
Service funds have been 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 ofthose funds are not available to support
the Town's own programs. Notes to basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide
and fund financial statements. 4
Government-wide Financial Analysis Net assets may serve over time as a useful indicator of a government's financial position. In the case of the Town, assets exceeded liabilities by
$78.8 million at the end of the current fiscal year. Activities 2003 2002 Current and other assets $ 60,675,192 N/A Capital assets 46,533,923 N/A Total assets 107,209,115 Current liabilities
15,908,479 NlA Long-term liabilities outstanding 12,500,000 N/A Total liabilities 28,408,479 Net assets: Investment in capital assets, net of related debt 33,799,130 N/A Restricted 24,016,830
N/A Unrestricted 20,984,676 N/A Total net assets $ 78,800,636 $ Note: This is the first year that the Town has presented its financial statements under the new reporting model required
by the Governmental Accounting Standards Board Statement No. 34 (GASB 34), Basic Financial Statements-and Management's Discussion and Analysis (MD&A) -jar State and Local Governments.
Because this reporting model significantly changes both the recording and presentation ojfinancial data, the Town has not restated priorfiscal years jar the purpose ofproviding comparative
information for the MD&A. In future years when prior-year information is available, a comparative analysis ofgovernment-wide data will be included in this report. By far the largest
portion of the Town's net assets (43 percent) reflects its investment in capital assets (e.g., land, buildings, infrastructure, machinery and equipment), less any related debt used to
acquire those assets still outstanding. The Town uses these capital assets to provide services to citizens and consumers; consequently, these assets are not available for future spending.
Although the Town's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources,
since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the Town's net assets (30.5 percent) represents resources that are subject
to external restrictions on how they may be used. The restricted net asset balance increase for the fiscal year was due primarily to the issuance of $10.7 million of Certificates of
Participation to be used for eligible redevelopment related capital improvements. The balance of unrestricted net assets may be used to meet the Town's ongoing obligations to citizens,
customers, and creditors. The Town's unrestricted net assets represent 26.6 percent, of the Town's net assets at year-end. 5
Town of Los Gatos Statement of Activities For the Year Ended June 30,2003 Governmental Activities 2003 2002 Revenues: Program revenues: Charges for services $ 6,811,907 N/A Operating
grants and contributions 1,662,376 Capital grants and contributions 881,758 General revenues: Property taxes 9,051,608 Sales taxes 6,928,817 Other taxes 1,835,328 Motor Vehicle In Lieu
1,722,801 Investment earnings 1,642,527 Proceeds from sale of property 262,568 Other 22,356 Total revenues 30,822,046 Expenses: General government 4,148,075 Police department 10,393,844
Parks and public works 6,345,756 Community development 2,277,109 Community Services 973,554 Library services 1,779,697 Sanitation 833,096 Redevelopment 1,563,166 Interest and fees 1,139,358
Total expenses 29,453,655 Increase in net assets 1,368,391 Net assets, beginning 77,432,245 Prior period adjustments Net assets, ending $ 78,800,636 N/A Governmental activities. Governmental
activities for the year increased the Town's net assets by $1.4 million. Key elements ofthe increase in net assets are as follows: • Property tax revenues collected for the Town and
the Redevelopment Agency accounted for 42.2 percent of Town General Revenues. Property taxes increased from the prior year due to the increase in ad valorem property tax resulting from
overall increase in assessed value, net of h()meowner exemption value, of Santa Clara County. • Sales tax revenue a.ccounted for 32.3 percent ofTown General Revenues at $6.9 million
for the year, decreasing approximately $300,000 from the adopted budget amount in the prior year reflecting the economic slowdown experienced locally and the loss of two significant
businesses in the Town. 6
• Other taxes and motor vehicle in lieu taxes accounted for 16.3 percent of General Revenues, decreasing slightly from the prior year due to some reductions in business license receipts
due to the economic slowdown. . • Investment Earnings accounted for 7.4 percent of Town General Revenues at $1.7 million for the year, decreasing significantly from the prior year, reflecting
the decreased investment portfolio size due to significant use of capital reserves for infrastructure projects and the historically low interest rates prevalent in the credit market.
For the most part, increases in expenses closely paralleled inflation and growth in the demand in services. Significant expenditures also occurred in the Parks and Public Works and Redevelopment
program carrying out the Town's aggressive capital program addressing streets and road infrastructure and park improvements. Financial Analysis of the Town's Funds The Town uses fund
accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Town's governmental funds is to provide information on near-term
inflows, outflows, and balances of spendable resources. As of the end of the fiscal year 2002/03, the Town's governmental funds reported combined ending fund balances of $36,139,204
an increase of $7,270,158 in comparison with the prior year. Approximately 51.6 percent of the total amount ($18,638,772) constitutes unreserved fund balance, which is available for
spending at the government's discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed to: 1)
to liquidate contracts and purchase orders of the prior period ($2,424,218); 2) to pay debt service ($975,173); 3) to provide for loans/advances due to the Town ($3,118,2118); 4) to
provide for appropriated capital projects ($8,238,622); 5) to provide for low and moderate housing ($2,651,933); and 6) to provide for dedicated repair and maintenance in lighting and
landscape districts ($92,268). The General Fund is the chief operating fund of the Town. It accounts for all financial resources except those required to be accounted for in another
fund. At the end of the current fiscal year, unreserved fund balance of the General Fund was $9,701,339, while total fund balance reached at $12,595,812. General fund expenditures including
transfers out decreased 8.66 percent ($2,304,310) over the prior year due to Town-wide expenditure reductions implemented in FY 2002/03 in response to the economic slowdown and its impact
to Town operating revenues and also to the decrease in capital expenditures in the current year. The prior year included approximately $1.9 million in capital expenditures related to
the purchase of strategic parcels located nearby the Civic Center (Fiesta Way). 7
The special revenue funds are used to account for specific revenue sources for which expenditures are restricted by law or regulation to finance particular functions or activities of
the Town. During the current year, special revenue fund revenues grew 15.2 percent ($158,146) from levels received in the prior year. The increase is attributable to the growth in intergovernmental
revenues which increased by 19.6 percent ($64,704) from the prior year due to increased block grant revenue reimbursements for eligible activities during the year. Interest income also
increased 51.2 percent ($16,161) from the prior year due mainly to increased loan interest earned on the CDBG loan portfolio. Operating expenditures also decreased 4.8 percent from the
prior year ($47,964). The decrease resulted from in public works expenditures of 81.3 percent ($28,693), increllsed capital maintenance in the lighting and landscape
improvement districts. Another significant increase of 26.5 percent ($171,840) was due due to increased maintenance activity in the Town's sewer network. At the end of the current fiscal
year, total fund balances for special revenue funds were $1,834,601 with unreserved fund balance of$I,067,615 and reserved balances of $766,986. The debt service fund has a total fund
balance of $33,550,573, all of which is reserved or designated for the payment of debt service for Town and redevelopment activities. The net fund balance increased in the debt service
fund by $1,625,573 primarily due to redevelopment tax increments exceeding agency debt service expenditures during the year. The capital projects fund is used to account for resources
used for the acquisition or construction of major capital projects within the governmental fund types. Total Town capital project fund balanyes at year-end were $18,158,218, an increase
of $3,787,066 from the prior year. The increase resulted from a combination of two primary factors, the first is that the Town's Redevelopment capital projects fund increased fund balances
by $5,854,458 which accounts for the residual unspent bond proceeds and debt service reserves for the $10,725,000 July 2002 Certifiqates of Participation. The second factor offsetting
this increase is a decrease in the Town's Appropriated Reserves (GFAR) capital projects fund of $2,319,973. The decrease in the Town's GFAR capital projects fund results primarily from
the Town's aggressive capital improvement plan where significant expenditures were made to improve the Town's street and roads. Total fund balances at year-end were either reserved or
designated for the payment of capital related expenditures in carrying out the Town's five-year capital improvement program. Proprietary The Town's proprietary funds provide
the same type of information found in the government-wjde financial statements, but in more detail. Internal Service Funds. The Town has seven internal service funds, the Worker's Compensation,
SelfInsurance, Stores; Vehicle Maintenance, Building Maintenance, Management Information, and Equipment Replacement funds. Revenues to the funds are generated from fees charged to the
Town's operating programs for services provided. The Equipment Replacement Fund charges replacement costs and the Vehicle Maintenance Fund charges vehicle maintenance costs to all user
departments based on equipment assignment and usage of equipment. Net operating income before transfers at year-end for both funds was $221,440 and $25,902 respectively versus $458,068
and $35,446 in the prior year. The decrease in operating income in the Equipment Replacement is attributable to the refinement in rates charged to user departments to more accurately
reflect current replacement costs. Operating transfers out increased from zero in the prior year to $500,000 in the current year to reflect management's decision to rebate excess fund
balances back to the General as proposed in the Town's adopted FY 2002/03 budget. 8
The Building Maintenance, Stores and Management Information funds charge premiums based on use and labor charges to provide Town-wide building maintenance, mail, office inventory and
duplication charges, and management information services. Net operating income before transfers at year-end for these funds was $108,784, $1,436 and $69,397 respectively versus ($84,649),
$2,820 and $120,371 in the prior year. The increase in operating income in the Building Maintenance fund is due to a more normal experience in unanticipated building repairs due to storm
damage experienced the prior year. Net income decreased in the Management Information services fund from the prior year due mainly to increases in Town-wide data services provided to
users and associated licensing costs. The Worker's Compensation and SelfInsurance Fund charge premiums based on exposure levels by department for liability, property, worker's compensation
and self-insurance costs. Net operating income before transfers at year end for these funds was ($3,965) and $422,630 respectively versus $257,573 and $226,231 in the prior year. Operating
income decreases for the Worker's Compensation fund reflect the increased experience of loss claims in the current year, the opposite claims experience occurred in the general liability
arena. Operating transfers out for both funds increased from zero in the prior year to $150,000 in the current year to reflect management's decision to rebate excess fund balances back
to the General as proposed in the Town's adopted FY 2002/03 budget. Government Funds Budgetary Highlights: Comparing the FY 2002/03 original budget (or adopted) General Fund amount of
$24,663,482 the final budget amount of $23,372,482 shows a net decrease of $1,291,000. Additions to the original budget included certain prior year (FY 2001102) approved carryforwards
of $194,758 into FY 2002/03 and $450,973 in committed purchase orders from the prior June 30 balance, also carried forward. + + -= Original Approved Prior Year Misc. Adjustments Final
Budget Carryforwards Encumbrances & Budget Mid-Year Reductions $24,663,482 $194,758 $450,973 $1,036,550 $23,372,482 The decrease in General Fund appropriations occurred mainly to the
following budget adjustments: • The Town pro-actively responded to the economic downturn in local revenues such as Sales Tax and Transient Occupancy Tax by making approximately $1.3
million dollar in General Fund appropriation reductions, approximating a six percent cut in approved budget at mid-year in FY 2002/03. • Miscellaneous adjustments approximating $330,000
of supplemental appropriations occurred, with the majority being budgeted increases for grant funded programs such as police technology grants, bike lockers and beverage container grants.
Capital Assets The Town's investment in capital assets for its governmental activity as of June 30, 2003, is recorded at $46,533,923 (net of accumulated depreciation). The investment
in capital assets includes land, buildings and improvements, infrastructure, construction in progress and machinery and equipment. 9
Major capital asset events during the current fiscal year include the following: • The Town re-stated capital assets to include Infrastructure totaling $28,026,762. • $5,346,054 of continuing
construction was accomplished on the Town's streets and street-related improvements, including substantial work performed downtown in the Downtown Street Improvement project. • The Town
made substantial improvements of $451,554 to its Civic Center, most notably the addition of audio/video capabilities for the Town COUncil chambers and safety improvements to the roof
and heating system. • The Town finished construction expenditure activity ($620,112) on its renovation of the Town Plaza Park, officially dedicated and opened to the public on September
22, 2002. 14,165,194 8,489 5,554,238 2,503,647 24,.302,355 Tow-nof Los Gatos Capital Assets (net of accumuiated depreciation) Governmental Activities Land $ Construction in Progress
Buildings Equipment Infrastructure $ 46,533,923 Additional information on the Town's capital assets can be found in note 5. Debt Administration At the end of the current fiscal year,
the Town had total bonded debt outstanding of $12,500,000. The entire amount owed is comprised of debt backed by the Town's obligation to pay lease payments to the Town's Redevelopment
Agency. The Town's long-term obligations outstanding as of June 30, 2003 consisted ofthe following: 12,500,000 12,500,000 Town of Los Gatos Outstanding Debt June 30, 2003 Governmental
Activities Certificates of Participation $ Total Outstanding Debt The Town's total obligations increased by $10,725,000 during the fiscal year. The increase in obligations resulted from
the issuance by the Town and the Los Gatos Redevelopment Agency on July 18, 2002 of $10,725,000 Certificates of Participation to finance a number of essential capital improvements located
in the downtown redevelopment project area, including the renovation of the Town Plaza, downtown streetscape improvements, downtown street reconstruction, and downtown parking improvements,
among others. 10
The rating of the Town's certificates of participation series from Moody's ranges from Aaa to Aa2 and from Standard & Poor's from AAA to AA-. Additional information on the Town's long-term
debt can be found in note 6. Economic Factors and Next Year's Budgets and Rates A product of an ongoing examination of how the Town provides cost-effective services, our budget emphasizes
outcomes or results for the community and allows for longer-term financial planning decisions. In considering the Town budget for the fiscal year 2003/04 the Town Council and management
considered the following in developing budget estimates: • Town retailers experienced declining sales in fiscal year 2002/03, reducing the sales tax revenue from $6,953,880 in the prior
year to $6,928,817 in the current fiscal year. With sales tax representing approximately 30% of the Town's General Fund revenue, continued slowing of the local economy will clearly impact
the Town. The slow recovery in sales tax growth was considered in preparing the Town's fiscal year 2003-04 sales tax revenue budget. • General property tax collections representing approximately
22% of the Town's General Fund revenues which had performed strongly reflecting the Town's continued desirability, despite the loss of approximately 200,000 Silicon Valley jobs over
the past two years, are expected to slow to approximately 4-5 percent, a growth rate of half that experienced in recent years. • Fiscal year 2003/04 budgeted Motor Vehicle License fees
(VLF) representing $1.7 million or approximately 7.2 percent of the Town's General Fund revenues, was reduced $500,000 in preparing budget estimates due to the State of California budget
crisis. The reduction in estimate was made to reflect a delay in the "trigger" being pulled to increase the License Fees. The newly elected governor now has rescinded the trigger being
pulled, thereby threatening up to 67 percent of the annual VLF fees collected every year if the State does not "backfill" this vital revenue source. • Declining interest rates were experienced
in FY 2002/03, with the Town's average annual interest rate declining from approximately 4 percent to 3 percent at June 30, 2003. The reduction in investment earnings was expected to
continue in FY 2003/04 and was factored into the adopted budget estimates. • Transient Occupancy taxes have also experienced declines in the Town due to the slow local economy and its
effect on business travel and the continuing aftermath of the war on terror that has impacted the travel industry nationwide. Estimates for FY 2003/04 were lowered from the prior year
by $200,000 to $900,000. Requests for Information This financial report is designed to provide CItizens, 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. If you have any questions about this report or need any additional information, contact the Finance
Department at 110 East Main Street, Los Gatos, California, 95030, or phone (408) 354-6828. 11
TOWN OF LOS GATOS STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES The Statement of Net Assets and the Statement of Activities are entirely new statements required by Government Accounting
Standards Board Statement 34. Their purpose is to summarize the entire Town's financial activities and financial position. They are prepared on the same basis as is used by most businesses,
which means they include all the Town's assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis-the effect of all the Town's
transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between Town funds have been eliminated. The Statement of
Net Assets reports the difference between the Town's total assets and the Town's total liabilities, including all the Town's capital assets and all its long-term debt. The Statement
ofNet Assets presents similar information to the old balance sheet format, but presents it in a way that focuses the reader on the composition of the Town's net assets, by subtracting
total liabilities from total assets. The Statement of Net Assets summarizes the financial position of all the Town's Governmental Activities in a single column. The Town's Governmental
Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Funds. Since the Town's Internal Service Funds service these
Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund transactions and balances. The Statement of Activities reports increases and decreases
in the Town's net assets. It is also prepared on the full accrual basis, which means it includes all the Town's revenues and all its expenses, regardless of when cash changes hands.
This differs from the "modified accrual" basis 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 differs considerably from those used in the past. It presents the Town's expenses first, listed by program. Program revenues-that is, revenues
that are generated directly by these programs-are then deducted from program expenses to arrive at the net expense of each governmental program. The Town's general revenues are then
listed in the Governmental Activities and the Change in Net Assets is computed and reconciled with the Statement ofNet Assets. Both of these Statements include the financial activities
of the Town and the Redevelopment Agency of the Town of Los Gatos, which is legally separate, but is a component unit of the Town because it is controlled by the Town, which is fmancially
accountable for the activities ofthis entity. These new financial statements along with the fund financial statements and footnotes are called Basic Financial Statements; the term General
Purpose Financial Statements is no longer used. 13
TOWN OF LOS GATOS STATEMENT OF NEt ASSETS JUNE 30, 2003 ASSETS (;o/ih and investments available for operations (Note 2) Restricted cash and investments (Note 2) Receivables Accounts
Interest Intergovernmental Materials, supplies, and deposits Long term notes receivable (Note 3) Capital assets, net of accumulated depreciation (Note 5) Total Assets LIABILITIES Accounts
payable Accrued payroll and benefits Deferred revenue Deposits Claims payable (Note IO.B.) Compensated absences (Note 1.J.) Passthrough obligations Long-term liabilities (Note 6): Due
within one year Due more than one year Total Liabilities NET ASSETS (Note 8) Invested in capital assets, net of related aebt Restricted for: Capital projects Housing Special revenue
projects Debt service Redevelopment activities Total Restricted Net Assets Unrestricted Total Net AssetsSee accompanying notes to financial statements 14 Governmental Activities $48,946,555
8,354,130 587,781 471,724 722,388 17,189 1,575,425 46,533,923 107,209,115 2,284,835 3,723,395 3,008,942 3,122,012 613,114 1,697,168 1,459,013 370,000 12,130,000 28,408,479 33,799,130
3,100,432 9,907,087 1,174,794 975,173 8,859,344 24,016,830 20,984,676 $78,800,636
TOWN OF LOS GATOS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2003 Program Revenues Operating Capital Charges for Grants
and Grants and FunctionslPrograms Expenses Services Contributions Contributions Governmental Activities: General government $4,140,359 $2,159,167 Police department 10,337,213 1,403,332
$590,489 Parks and public works 6,410,103 351,605 616,962 $881,758 Community development 2,277,109 1,815,495 Community services 973,554 152,697 285,812 Library services 1,779,697 57,913
26,070 Sanitation 833,096 871,698 Redevelopment 1,563,166 143,043 Interest and fees 1,139,358 Net (Expense) Revenue and Changes in Net Assets Governmental Activities ($1,981,192) (8,343,392)
(4,559,778) (461,614) (535,045) (1,695,714) 38,602 (1,420,123) (1,139,358) Total Governmental Activities 29,453,655 Total $29,453,655 General revenues: Property taxes Sales taxes Other
taxes Motor vehicle in lieu Interest Proceeds from sale of property Other Total General Revenues Change in Net Assets Net Assets-Beginning Net Assets-Ending 6,811,907 $6,811,907 1,662,376
$1,662,376 881,758 $881,758 (20,097,614) (20,097,614) 9,051,608 6,928,817 1,835,328 1,722,801 1,642,527 262,568 22,356 21,466,005 1,368,391 77,432,245 $78,800,636 See accompanying notes
to financial statements 15
FUND FINANCIAL STATEMENTS GASB 34 revises the format of the Fund Financial Statements so that only individual major funds are presented, while nOn-major funds are combined in a single
column. Major funds are defined generally as having significant activities or balances in the current year. No distinction is made between Fund types and the practice of combining like
funds and presenting their totals in separate columns (Combined Financial Statements) has been discontinued, along with the use of the General Fixed Assets and General Long-Term Debt
Account Groups. MAJOR GOVERNMENTAL FUNDS The funds described below were determined to be Major Funds by the Town in fiscal 2003. Individual non-major funds may be found in th'e Supplemental
section. GENERAL FUND The General Fund is used to account for all financial resources except those required to be accounted for in another fund. APPROPRIATED RESERVES Was established
to provide resources for capital projects not fully funded from other sources. CERTIFICATES OFPARTICIPATION Accounts for the 1992 Certificates of Participation issued on August 1, 1992
to assist in financing the Parking Lot #4 project, and the 2002 Certificates of Participation issued on July 18, 2002 to finance several capital improvement projects. REDEVELOPMENTAGENCYCAPITAL
PROJECTS Accounts for activities ofthe Redevelopment Agency ofthe Town and the related property tax revenue. 17
TOWN OF LOS GATOS GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2003 Redevelopment Certificates Agency Other Total Appropriated of Capital Governmental Governmental General Reserves Participation
Projects Furids Funds ASSETS Cash and investments available for operations (Note 2) $16,379,562 $9,179,827 $5,985,179 $49,172 $6,711,511 $38,305,251 Restricted cash and investments (Note
2) 975,173 6,728,237 625,324 8,328,734 Receivables Accounts 412,978 3,364 168,012 584,354 Interest 471,724 471,724 Intergovernmental 425,899 19,733 53,377 223,379 722,388 Due from other
funds (Note 4.A.) 37,000 37,000 Long term notes receivable (Note 3) 849,185 726,240 1,575,425 Advances to other funds (Note 4.B.) 2,118,500 2,118,500 Total Assets $20,694,848 $9,199,560
$7,013,729 $6,780,773 $8,454,466 $52,143,376 LIABILITIES Accounts payable $600,538 $422,703 $35,643 $565,092 $280,836 $1;904,812 Accrued payroll and benefits 3,686,094 8,270 13,594 3,707,958
Due to other funds (Note 4.A.) 37,000 37,000 Pass through obligations 1,459,013 1,459,013 Deferred revenue 620,164 2,578,415 386,070 3,584,649 Deposits 3,115,564 3,115,564 Advances from
other funds (Note 4.B.) 1,968,500 150,000 2,118,500 Compensated absences (Note I.J.) 76,676 76,676 Total Liabilities 8,099,036 3,001,118 3,463,156 573,362 867,500 16,004,172 FUND EQUITY
Fund Balances (Note 8) Reserved for: Encumbrances 450,973 904,024 1,069,221 2,424,218 Capital outlay 5,138,190 3,100,432 8,238,622 Advances 2,118,500 2,118,500 Long term notes receivable
325,000 674,718 999,718 Housing 2,651,933 2,651,933 Repairs and maintenance 92,268 92,268 Debt service 975,173 975,173 Unreserved, designated for: Civic center improvements 663,086 663,086
Solid waste management 352,646 352,646 Market fluctuations 551,278 551,278 Open space 562,000 562,000 Animal Control 300,000 300,000 Parking 567,484 1,972,000 2,539,484 Manager's contingency
100,000 100,000 Museum upgrades 13,500 13,500 Productivity enhancement 100,000 100,000 Economic uncertainty 3,678,001 3,678,001 Capital improvements 836,593 3,322,418 4,159,011 Authorized
carry forwards 115,000 115,000 Debt service 2,575,400 2,575,400 Unreserved, Reported in: General Fund 2,214,397 2,214,397 Special Revenue 714,969 714,969 Total Fund Balances 12,595,812
6,198,442 3,550,573 6,207,411 7,586,966 36,139,204 Total Liabilities and Fund Balances $20,694,848 $9,199,560 $7,013,729 $6,780,773 $8,454,466 $52,143,376 See accompanying notes to financial
statements 18
TOWN OF LOS GATOS Reconciliation of the GOVERNMENTAL FUNDS --BALANCE SHEET with the STATEMENT OF NET ASSETS JUNE 30, 2003 Total fund balances reported on the governmental funds balance
sheet Amounts reported for Governmental Activities in the Statement ofNet Assets are different from those reported in the Governmental Funds above because of the following: CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and therefore are not reported in the Governmental Funds. ALLOCATION OF INTERNAL SERVICE
FUND NET ASSETS Internal service funds are not governmental funds. However, they are used by management to charge the costs of certain activities, such as insurance and central services
and maintenance to individual governmental funds. The net current assets of the Internal Service Funds are therefore included in Governmental Activities in the following line items in
the Statement ofNet Assets. Cash and investments Restricted cash and cash equivalents Accounts receivable Capital assets Internal balances Accounts payable Accrued payroll and benefits
Claims payable Deposits ACCRUAL OF NON-CURRENT REVENUES AND EXPENSES Revenues which are deferred on the Fund Balance Sheets because they are not available currently are taken into revenue
in the Statement of Activities_ LONG TERM ASSETS AND LIABILITIES The assets and liabilities below are not due and payable in the current period and therefore are not reported in the
Funds: Long-term debt and interest payable Non-current portion of compensated absences NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements 19 $36,139,204
46,456,883 10,641,304 25,396 3,427 77,040 17,189 (145,230) (15,437) (613,114) (6,448) 575,707 (12,734,793) (1,620,492) $78,800,636
TOWN OF LOS GATOS GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2003 Redevelopment Other Total Appropriated Certificates
Agency Governmental. Governmental General Reserves ofParticipation Capital Projects Funds Funds REVENUES Property taxes $4,977,119 $37,046 $5,014,165 Property tax increment $4,142,040
4,142,040 Less: Educational Revenue Augmentation Fund Payment (104,597) (104,597) Sales & use taxes 6,928,817 6,928,817 Other taxes 1,619,383 $69,738 146,207 1,835,328 Licenses & permits
1,937,094 1,937,094 Intergovernmental 3,230,963 404,966 995,178 4,631,107 Charges for services 2,707,936 4,198 671,288 3,383,422 Fines and forfeitures 187,117 187,117 Interest 1,927,971
201,506 $143,082 275,017 2,547,576 Other 190,155 92,460 45 282,660 Total Revenues 23,516,400 669,057 4,238,949 235,542 2,124,781 30,784,729 EXPENDITURES General government 4,048,876
4,048,876 Police department 1O,211,315 10,211,315 Parks and public works 4,839,638 64,000 4,903,638 Community development 2,269,870 2,269,870 Community services 950,299 53,843 1,004,142
Library services 1,811,866 1,811,866 Sanitation and other 819,658 819,658 Capital outlay 85,689 3,203,693 4,390,639 1,397,099 9,077,120 Redevelopment 1,459,013 1,459,013 Debt Service:
Principal 150,000 150,000 Interest and fees 533,909 357,491 13,165 904,565 Total Expenditures 24,217,553 3,203,693 2,142,922 4,748,130 2,347,765 36,660,063 EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (701,153) (2,534,636) 2,096,027 (4,512,588) (222,984) (5,875,334) OTHER FINANCING SOURCES (USES) Proceeds from issuance of debt (Note 6) 10,725,000 10,725,000 Transfers
in (Note 4.C.) 1,105,853 263,793 707,987 350,033 828,671 3,256,337 Transfers (out) (Note 4.C.) (75,264) (49,130) (1,178,441) (707,987) (445,515) (2,456,337) Total Other Financing Sources
(Uses) 1,030,589 214,663 (470,454) 10,367,046 383,156 11,525,000 NET CHANGE IN FUND BALANCES 329,436 (2,319,973) 1,625,573 5,854,458 160,172 5,649,666 BEGINNING FUND BALANCES 10,645,884
8,518,415 1,925,000 352,953 7,426,794 28,869,046 ADJUSTMENT OF BEGINNING FUND BALANCEIMPLEMENTATION OF GASB 34 (NOTE 1.1.) 1,620,492 1,620,492 ENDING FUND BALANCES $12,595,812 $6,198,442
$3,550,573 $6,207,411 $7,586,966 $36,139,204 See accompanying notes to financial statements 20
TOWN OF LOS GATOS Reconciliation ofthe NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS with the STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2003 The schedule below reconciles
the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and
current liabilities on the modified accrual basis, with the Change in Net Assets of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual
basis. NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the Statement of Activities are different because of the following: CAPITAL
ASSETS 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. The capital outlay expenditures are therefore added back to fund balance Depreciation expense is deducted from the fund balance
(Depreciation expense is net of internal service fund depreciation of$14,274 which has already been allocated to serviced funds) Retirements of capital assets LONG TERM DEBT PROCEEDS
AND PAYMENTS Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement ofNet Assets. Repayment of bond
principal is an expenditure in the governmental funds, but in the Statement ofNet Assets the repayment reduces long-term liabilities. Proceeds from the issuance of debt are deducted
from fund balance Repayment of debt principal is added back to fund balance ACCRUAL OF NON-CURRENT ITEMS The amounts below included in the Statement of Activities do not provide or (require)
the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change): Deferred revenue Interest payable Compensated absences
ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY Internal Service Funds are used by management to charge the costs of certain activities, such as equipment acquisition, maintenance, and
insurance to individual funds. The portion of the net revenue (expense) ofthese Internal Service Funds arising out oftheir transactions with governmental funds is reported with governmental
activities, because they service those activities. Change in Net Assets -All Internal Service Funds CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial
statements 21 $5,649,666 8,457,771 (1,738,331) (5,184) (10,725,000) 150,000 37,317 (234,793) (268,528) 45,473 $1,368,391
TOWN OF LOS GATOS GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES I BUDGET AND ACTUAL FORTHE YEAR ENDED JUNE 30, 2003 Budgeted Amounts OrigiI1al FiI1al
Actual Amounts Variance with Final Budget Positive (Negative) REVENUES: Property taxes Sales & use taxes Other taxes Licenses & permits Intergovernmental Charges for services Fines and
forfeitures Interest Total Revenues EXPENDITURES: Current: General government: Town Council Town Treasurer Town Clerk Town Attorney Town Manager Non-Departmental Total general government
Police department Parks and public works Community development Community services Library services Capital outlay Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES
OTHER FINANCING SOURCES (USES) Transfers in Transfers (out) Total Other Financing Sources (uses) $5,106,000 $5,106,000 $4,977,119 ($128,881) 7,500,000 7,000,000 6,928,817 (71,183) 2,150,000
1,768,000 1,619,383 (148,617) 1,750,500 1,750,500 1,937,094 186,594 2,961,700 2,930,072 3;230,963 300,891 3,254,075 3,254,075 2,707,936 (546,139) 78,500 78,500 187,117 108,617 1,863,707
1,570,707 1,927,971 357,264 24,664,482 23,457,854 23,516,400 58,546 160,000 150,400 128,859 21,541 63,300 59,502 52,172 7,330 383,400 359,396 368,117 (8,721) 250,500 236,470 215,327
21,143 2,154,900 2,041,193 1,879,402 161,791 1,282,600 1,332,593 1,404,999 (72,406) 4,294,700 4,179,554 4,048,876 130,678 10,819,360 10,620,983 10,211,315 409,668 4,832,685 4,766,982
4,839,638 (72,656) 2,442,250 2,450,853 2,269.870 180,983 1,007,676 983,604 950,299 33,305 1,882,600 1,800,747 1,811,866 (11,119) 16,000 101,729 85,689 16,040 25,295,271 24,904,452 24,217,553
686,899 (630,789) (1,446,598) (701,153) 745,445 1,140,830 1,140,850 1,105,853 (34,997) (279,507) (279,507) (75,264) 204,243 861,323 861,343 1,030,589 1(;9,246 EXCESS (DEFICIENCY) OF
REVENUES AND OTHER SOURCE OVER EXPENDITURES AND OTHER USES BEGINNING FUND BALANCE ADJUSTMENT OF BEGINNING FUND BALANCE IMPLEMENTATION OF GASB 34 ENDING FUND BALANCE $230,534 ($585,255)
329,436 10,645,884 1,620,492 $12,595,812 $914,691 See accompanying notes to financial statements 22
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. 23
TOWN OF LOS GATOS PROPRIETARY FUNDS STATEMENT OF NET ASSETS FOR THE YEAR ENDED JUNE 30, 2003 ASSETS Current assets: Cash and investments available for operations (Note 2) Restricted
cash and cash equivalents (Note 2) Accounts receivable Materials, supplies, and deposits Total current assets Noncurrent assets: Capital assets, net of accumulated depreciation (Note
5) Total noncurrent assets Total Assets LIABILITIES Current liabilities: Accounts payable Accrued payroll and benefits Deposits Total current liabilities Noncurrent liabilities: Claims
payable (Note 10) Total noncurrent liabilities Total Liabilities NET ASSETS (Note 8) Invested in capital assets, net of related debt Unrestricted Total Net Assets See accompanying notes
to financial statements 24 Governmental ActivitiesInternal Service Funds $10,641,304 25,396 3,427 17,189 10,687,316 77,040 77,040 10,764,356 145,230 15,437 6,448 167,115 613,114 613,114
780,229 77,040 9,907,087 $9,984,127
TOWN OF LOS GATOS PROPRIETARY FUNDS STATEMENT OF REVENUE, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED JUNE 30, 2003 OPERATING REVENUES Charges for services Refunds Other
Total OperatingRevenues OPERATING EXPENSES Salaries and related expenses Insurance expenses Depreciation Services and supplies Total Operating Expenses Operating Income Transfers (out)
(Note 4.C.) Net transfers Change in net assets BEGINNING NET ASSETS ENDING NET ASSETS See accompanying notes to financial statements 25 Governmental ActivitiesInternal Service Funds
$4,216,938 17,057 47,520 4,281,515 843,885 551,989 14,274 2,025,894 3,436,042 845,473 (800,000) (800,000) 45,473 9,938,654 $9,984,127
TOWN OF LOS GATOS PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2003 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers Payments
to employees Claims paid Cash Flows from Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers (out) Cash Flows from Noncapital Financing Activities Net Cash
Flows Cash and investments at beginning of period Cash and investments at end of period Reconciliation of Operating Income to Cash Flows from Operating Activities: Operating income Adjustments
to reconcile operating income to cash flows from operating activities: Depreciation Change in assets and liabilities: Receivables, net Other assets Accounts payable and other accrued
expenses Other accrued expenses Cash Flows from Operating Activities See accompanying notes to financial statements 26 Governmental ActivitiesInternal Service Funds $4,280,926 (2,089,506)
(839,505) (774,740) 577,175 (800,000) (800,000) (222,825) 10,889,525 $10,666,700 $845,473 14,274 (589) (1,625) (64,497) (215,861) $577,175
FIDUCIARY FUNDS FIDUCIARYFUNDS 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 Entitywide financial statement, but are presented in separate Fiduciary Fund financial statements. Agency funds are used to account for
assets held by the Town as an agent for individuals, private organizations, and other governments. The financial activities of these funds are excluded from the Entity-wide financial
statements, but are presented in separate Fiduciary Fund financial statements. 27
TOWN OF LOS GATOS FIDUCIARY FUNDS COMBINING BALANCE SHEETS JUNE 30, 2003 PRIVATE PURPOSE TRUST Library ASSETS AGENCY FUND Parking Improvement District #88 Cash and investments available
for operations (Note 2) Restricted cash and investments (Note 2) Intergovernmental receivable Total Assets LIABILITIES Accounts payable Due to other governments Total Liabilities NET
ASSETS Reserved for library trust See accompanying notes to financial statements. 28 $204,961 204,961 5,233 5,233 $199,728 $78,180 212,975 949,425 $1,240,580 $1,240,580 $1,240,580
TOWN OF LOS GATOS PRIVATE PURPOSE LIBRARY TRUST FUND STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Trust Fund ADDITIONS Interest Other Total Additions
DEDUCTIONS Library services Total Deductions CHANGE IN NET ASSETS NET ASSETS, BEGINNING OF YEAR NET ASSETS, END OF YEAR See accompanying notes to financial statements 29 $5,890 39,458
45,348 38,752 38,752 6,596 193,132 $199,728
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Los Gatos (Town) operates under a Council-Manager form of
government and provides the following services; public safety, parks and public works, community development, community services, library, sanitation, public improvements, planning and
zoning, general administration services, and the Redevelopment Agency ofLos Gatos. The Town of Los Gatos is largely a residential community located in the foothills of the Santa Cruz
Mountains. The Town was incorporated as a municipal corporation in 1887, and its population at January 1, 2003 was 28,592. Police-Public Safety, emergency management and related services
are provided by 70 Town employees. Planning, Parks and Public Works -The Town provides development and planning services, code enforcement, inspection services, builds and maintains
its parks, streets, curbs, gutters and related public property with a force of 64 employees. Major projects are contracted out. Library and Community Services are provided by a total
of 15.75 employees. Fire services are provided by the Central Fire District, a separate governmental agency. The accounting policies of the Town conform with generally accepted accounting
principles applicable to governments. The following is a summary ofthese policies: A. Reporting Entity -Blended Component Units As required by generally accepted accounting principles,
these financial statements present the Town and the Redevelopment Agency, over which the Town can impose its will. Blended component units, although legally separate entities are, in
substance, part of the Town's operations and data from these units are combined with data of the Town. Town Council members serve as the Redevelopment Agency Board and have continuing
responsibility over this entity including budget adoption, taxing authority, funding and personnel management. Financial statements for the Redevelopment may be obtained from the Town
ofLos Gatos, 110 East Main Street, Los Gatos, California, 95031. In order to ensure the proper identification of individual revenue sources and the expenditures made from those revenues,
the accounts of the Town are organized on the basis of individual funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with
a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. The Town's resources are accounted
for in these individual funds based on the purposes for which they are to be spent and the means by which spending activities are controlled. B. Basis ofPresentation 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 is the acknowledged
standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A. 31
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES (Continued) The accompanying financial statements are presented on the
basis set forth in Government Accounting Standards Board Statements No. 34, Basic Financial Statements---'-andManagement 's Discussion and State and Local Governments,
No. 36, Recipient Reportingjor Certain Non-exchange Revenues, an Amendment oj GASB Statement No. 33, No. 37, Basic Financial Statements-and Management's Discussion and Analysis-jor State
and Local Governments; Omnibus, and No. 38, Certain Financial Statement Note Disclosures. These Statements require that the financial statements described below be presented. Government-wide
Statements: The Statement of Net Assets:and the Statement of Activities display information about the primary government (the Town) and its component units. These statements include
the financial activities of the overall Town government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements
present the governmental activities of the Town. Governmental activities generally ate 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 meeting 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
andfiduciary---'-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 and reported as nonmajor funds. C Major Funds GASB Statement 34 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 oftheir fund-type.
Major funds are defined as funds that have assets, liabilities, revenues or expenditures/expenses equal to ten. percent of their fund-type total and five percent of the grand total.
The General Fund is always a major fund. The Town may also select other funds it believes should be presented as major funds. 32
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 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. It is used to account for all financial resources except those required to be accounted
for in another fund. Appropriated Reserves -established to provide resources for capital projects not fully funded from other sources. Certificates ofParticipation -accounts for the
1992 Certificates of Participation issued on August 1, 1992 to assist in financing the Parking Lot #4 project, and the 2002 Certificates of Participation issued on July 18,2002 to finance
several capital improvement projects throughout the Town. Redevelopment Agency Capital Projects -accounts for activities of the Redevelopment Agency of the Town and the related property
tax revenue. THE TOWN ALSO REPORTS THE FOLLOWING FUND TYPES Internal Service Funds. These funds account for worker's compensation, self insurance, stores, vehicle maintenance, building
maintenance, management information, and equipment replacement, all of which are provided to other departments on a cost-reimbursement basis. Fiduciary Funds. Private-Purpose Trust Funds,
and Agency Funds are used to account for assets held by the Town as an agent for individuals, private organizations, and other governments. The financial activities of these funds are
excluded from the Government-wide financial statement,but are presented in separate Fiduciary Fund financial statements. D. Basis ofAccounting The government-wide and fiduciary fund
financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded
at the time liabilities are incurred,-regardless of when the related cash flows take place. Governmental funds are reported using the current financial resources measurement focus and
the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Town considers all revenues reported in the governmental funds
to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest
on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Governmental capital asset acquisitions
are reported as expenditures in governmental funds. Proceeds of governmental long-term debt and acquisitions under capital leases are reported as other financing sources. Those revenues
susceptible to accrual are property, sales and franchise taxes, certain other intergovernmental revenues and interest revenue. Fines, licenses and permits, and charges for services are
not susceptible to accrual because they are not measurable until received in cash. 33
TOWN OF LOS GATOS Notes to Basic Purpose FinancialS(atements INOTE 1-SUMMA.RY OF SIGNIFICANT ACCOUNTINGPOLICIES_(Continued) Non-exchange transactions, in which the Town gives or receives
value without directly receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the
fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which an eligibility requirements have been
satisfied. The Town may fund programs with a combination of cost-reimbursement grants, block grants, and general revenues. Thus, both restricted and unrestricted
net assets 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 if necessary. Certain indirect costs are included in program expenses reported for individual functions and activities. E. Budgets
and Budgetary Accounting The Town follows the procedures below in establishing the budgetary data reflected in the fmancial 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 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 ofTown 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,a.nd 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 General Fund, Special Revenue Funds,
Internal Service Funds, and Capital Project Funds. 6. Budgeted amounts are as originally adopted or as amended by the Town Council. Individual amendments were not material in relation
to the original appropriations. F. Encumbrances Under encumbrance accounting, purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to
reserve that portion of the applicable appropriation. Encumbrance accounting is employed as an extension of formal budgetary integration in all-funds. Encumbrances outstanding at year
end are reported as reservations 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. 34
i ---' (--:; I TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Materials, Supplies and Deposits Materials,
supplies and deposits are held for consumption and are valued at cost using the first-in-firstout (FIFO) basis. General fund supplies are recorded as an expenditure at the time individual
supply items are consumed. H. Cash Flows Each Proprietary fund's portion of Town pooled cash and investments are used in the preparation of the statement of cash flows since investments
are not allocated to specific funds. These balances are in substance demand deposits available for withdrawal at any time. 1. . Deferred Compensation Plan Town employees may defer a
portion of their compensation under a Town sponsored Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. Under this Plan, participants are not taxed
on the deferred portion of their compensation until it is distributed to them; distributions distributions may be made only at termination, retirement, death or in an emergency as defined
by the Plan. The Town has no liability for any losses incurred by the Plan and does not participate in any gains, but it does have the duty of due care that would be required of an ordinary
prudent investor. To satisfy this duty of due care, the Town has assigned its responsibility by signing a contract with Washington Mutual Bank and the International City Managers' Association
(lCMA) to manage and invest the assets of the Plan. These administrators pool the assets of the Plan with those of other participants and do not make separate investments for the Town.
ICMA and Washington Mutual Bank amended their Plans to incorporate changes in the laws governing deferred compensation plan assets to be held by a Trust for the exclusive benefit of
plan participants and their beneficiaries. Since the assets under both Plans are not the Town's property i and are not subject to claims by general creditors of the Town, they have been
excluded from these financial statements. J. Accumulated Unpaid Vacation, Sick Pay and Other Employee Benefit Accounts Compensated absences comprise unused vacation leave, vested sick
pay and certain compensated time off, which are accrued as earned. The liability for compensated absences is determined annually. For all governmental funds, amounts expected to be paid
out of current financial resources are recorded as fund liabilities; the long-term portion is recorded in the Statement ofNet Assets. As part of its implementation of GASB Statement
34, the Town determined that $1,620,492 of General Fund liabilities as of July 1,2002 for compensated absences was not a current liability. This amount has been classified as a long
term liability and is reflected only in the City-wide financial statements. Accordingly, fund balance has been increased and General Fund liabilities decreased by the above amount. 35
TOWN OF LOS GATOS Notes to Basic Purpose Statements INOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTiNG POLICIES (Continued) The changes of the compensated absences were as
follows: Governmental Activities Beginning Balance Additions Payments Ending Balance Current Portion $1,428,640 1,745,080 (1,476,552) $1,697,168 $76,676 Compensated absences are liquidated
by the fund that has recorded the liability. The long-term portion of governmental activities compensated absences is liquidated by the General Fund. K. Property Taxes
andSpecial Assessment Revenue Revenue is recognized in the fiscal year for which. the taxes and assessments are levied, provided the taxes and assessments are collected in the current
period Of within 60 days after June 30. The County of Santa Clara levies, biils and collects property taxes and special assessments for the Town. Secured property tax is due in two installments,
on November 1 and February 1. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax is due on March 1 and becomes delinquent on August 31. Secured and
unsecured property taxes are levied on January 1. L. Postemployment Heath Care Benefits Substantially all Town employees and their surviving spouses are eligible for post-retirement
health care benefits, which are funded on a pay-as-you-go basis. During the fiscal year ended June 30, 2003, 57 employees received benefits at a cost to the Town of $103,162, net of
employee reimbursements. The benefits were provided based qn Council resolution. M. Social Security The Omnibus Budget Reconciliation Act of 1990 (OBRA) mandates that public sector employees
who are not members of their employer's existing retirement system as of January 1, 1992 be covered by either Social Security or an alternative plan. The Town's part-time, seasonal and
temporary employees are covered under Social Security, which requires these employees and the Town to each contribute 6.2% of the employees pay. Total contributions to Social Security
Security during the year ended June 30,2003 amounted to $47,729, ofwhich the Town paid one-half. INOTE 2 -CASH AND INVESTMENTS The Town pools cash from all sources and all funds except
Restricted Cash and Investments so that it can be invested at the maximum yield, consistent with safety and liquidity, while individual funds can make expenditures at any time. 36
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 2 -CASH AND INVESTMENTS (Continued) A. Categorization ofSecurities Instruments The Town and its fiscal agents 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. The Town categorizes its individual securities instruments in ascending order to reflect the relative risk of
loss of these instruments. This risk is called Credit Risk, the lower the number, the lower the risk. The three levels of risk prescribed by generally accepted accounting principles
are described below: Category 1 -Securities instruments in this category are in the Town's name and are in the possession of the Trust Department of the bank employed by the Town solely
for this purpose. The Town is the registered owner of securities held in book entry form by the bank's Trust Department. Category 2 -Securities instruments and book entry form securities
in this category are in the pledging financial institution's name but are held by its Trust Department in a separate account in the Town's name. Category 3 -None of the Town's investments
are in this category, which would include onlyTownowned securities instruments or book entry form securities which were not in the Town's name or which were not held by the bank's Trust
Department. Pooled Investments -Pooled investments are not categorized because of their pooled, rather than individual, nature. Investments are carried at fair value, which is the same
as fair market value, and are categorized as follows at June 30: Available for Operations Restricted Total Category 1: U.S. Government Agency Securities $35,996,137 $35,996,137 Category
2: U.S. Treasury Securities $706,266 706,266 Non-categorized investments: Government Securities Money Market Mutual Funds 399,481 523,823 923,304 Local Agency Investment Fund 9,412,000
6,021,788 15,433,788 Total Investments 45,807,618 7,251,877 53,059,495 Cash Deposits with Banks 1,727,668 650,720 2,378,388 Certificates ofDeposit 2,143,443 212,975 2,356,418 Cash on
hand at Town 2,500 2,500 Total Cash and Investments $49,681,229 $8,115,572 $57,796,801 37
TOWNOF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 2 -CASH AND INVESTMENTS (Continued) Cash and investments are classified in the financial statements as shown below,
based on whether or not their used is restricted under the term of City debt instruments or Agency agreements: Cash and investments available for operations Restricted cash and investments,
with fiscal agents Total City and Agency cash and investments Cash and investments in Fiduciary Funds (separate statement) Total cash and investments B. Authorized Investmenrs $48,946,555
8,354,130 57,300,685 496,116 $57,796,801 The Town's Investment Policy and the California Government Code allow the Town to invest in the following, provided the credit ratings of the
issuers are acpeptable to the Town: i Securities ofthe U.S. Government or its agencies Collateralized, non-negotiable certificates of deposit Bankers acceptances Commercial paper Medium
term corporate notes Money market mutual funds California Local Agency Investment Fund The Town does not enter into repurchase or reverse ri::lpurchase agreemi::lnts. C. Cash and Investments
Defined The Town includes only cash deposits in banks as cash. Investments in LAIF and government securities mutual funds are net in the order of liquidity, since they may be withdrawn
without penalty. U.S. Treasuries, U.S. Agencies and Certificates of Deposit are the Town's least liquid investments, since they must be held to maturity. D. Cash Deposits with Banks
and Certificates ofDeposit California Law requires banks and savings and loan institutions to pledge government securities with a market valui::lof 110% of the Town's cash on deposit
or first trust deed mortgage notes with a value of 150% of the deposit as collateral for these deposits. 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 has waived collateral requirements for the portion of deposits covereg by federal deposit insurance. Cash deposits with banks
and and certificates of deposit are entirely insured (Category 1) or collateralized by securities held by agent of the pledging financial institution in the Town's name (Category 2).
The carrying amount ofthe Town's cash deposits is $4,734,806 at June 30, 2003. Bank balances before reconciling items were $4,921,678 of which $100,000 was insured (Category 1) and $4,821,678
was collateralized (Category 2), as discussed above. 38
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 2 -CASH .AND INVESTMENTS (Continued) E. Marking Investments to Fair Value (GASB 31) The Town adopted Government Accounting
Standards Board Statement 31, which requires that the Town's investments be carried at fair value instead of cost. Under GASB 31, the Town adjusts the carrying value of its investments
to reflect their fair value at each fiscal year end, and it includes the effects ofthese adjustments in income for that fiscal year. The Town is a voluntary participant in the Local
Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The Town reports its investment
in LAIF at the fair value amount provided by LAIF. The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost
basis. Included in LAIF's investment portfolio are collateralized mortgage obligation, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating
rate securities issued by federal agencies, government-sponsored enterprises, and corporations. INOTE 3 -LONG-TERM NOTES RECEIVABLE A. Summary Long-term notes receivable comprised the
following at June 30,2003: Description General Fund: Open Doors Associates, Ltd. Police Chief General Fund Total Community Development Block Grant Special Revenue Fund: Housing conservation
loans CDBG Fund Total Interest Rate 7.00% Varies 0%-5% Maturity 2024 See below Various $390,903 458,282 849,185 726,240 726,240 $1,575,425 B. Open Doors Associates Ltd. and Mid-Peninsula
Housing Coalition The Town has cooperation agreements with two developers (Mid-Peninsula Housing Coalition and Open Doors Associates, Ltd.) and several other governmental agencies. Under
these agreements, the Developers constructed a 64-unit low and moderate-income housing project. To assist in financing this Project, the Town advanced funds to these developers under
notes, which are secured by deeds of trust subordinated to construction loans, permanent financing and other loans on the Project up to a maximum of $6.5 million. Under a note dated
Apri121, 1992, the Town agreed to loan a maximum amount of $339,250 to Open Doors Associates, Ltd. to cover the cost of traffic impact fees, planning fees and building permit taxes.
At June 30, 2003, $390,903 of such costs, including accrued interest, had been· incurred by Open Doors Associates, Ltd. in connection with the Project and advanced by the Town under
this note. 39
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 3 -LONG-TERM NOTES RECEIVABLE (Continued) c: Related Parties The proceeds of the former Police Chiefs note receivable
were used to assist in the purchase of a primary residence in the Town, as required by his· employment contract. The Note is secured by a second trust deed and accrues interest at a
rate equal to the interest paid by the State ofCalifornia Local Agency Investment Fund (LAIF). The rate is adjusted annually. At June 30, 200J, the balance of the note was $458,282,
which was fully repaid on July 2, 2003. D. Housing Conservation The Town administers a housing conservation and rehabilitation loan program using Housing and Community Development Act
funds. Under this Program, individuals with incomes below a certain level are eligible to receive low interest loans, secured by deeds of trust, for construction work on their homes.
Federal grants are used to fund these loans. Upon approval of loans, the Town disburses the funds, and arranges for and collects repayments. As of June 30, 2003, restricted cash and
investments included cash balances of $625,324 available for this program which were recorded in the Community Development Block Grant Special Revenue Fund. INOTE 4 -INTERFUND TRANSACTIONS
A. Current Interfund Balances Current interfund balances arise in the normal course of business and are expected to be repaid shortly after the end of the fiscal year. As of June 30,
2003, the Sewer Maintenance Special Revenue Fund owed $37,000 to the General Fund. This balance is expected to be repaid during fiscal 2003-04. B. Inteifund Advances Advances are long-term
loans from one fund to another. The General Fund has an advance of $1,968,500 to the Certificates of Participation Debt Service Fund to finance Agency operations. The advance bears interest
at 10% per year and is payable on demand. During fiscal year ended June 30, 2003 the 1992 Certificates of Participation Debt Service Fund paid $196,850 in interest to the General
. The General Fund has a $150,000, non-interest bearing advance to the Non-Point Source Maintenance Special Revenue Fund. This fund receives revenue on a reimbursement basis; expenditures
are paid and are subsequently reimbursed. The advance is used to cover cash shortages until reimbursement is received. The advance is due when the program is eliminated and is repayable
from Non-Point Source Maintenance Revenues. 40
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements NOTE 4 -INTERFUND TRANSACTIONS (Continued) C. Transfers Among Funds With Council approval, resources may be transferred
from one Town fund to another. The purpose of the majority of transfers is to reimburse a fund, which has made an expenditure on behalf of another fund. Transfers between individual
funds during the fiscal year ended June 30, 2003 are shown below. Fund Receiving Transfers Fund Making Transfers Amount Special RevelUle Funtls General Fund Solid Waste Management $27,682
(A) General Fund Non-Point Source Maintenance 24,441 (A) General Fund Sewer Maintenance 92,200 (A) General Fund Land and Lighting 6,400 (A) Capital Projects FuntIs General Fund Appropriated
Reserves 49,130 (A) General Fund Gas Tax 106,000 (B) Internal Service Funtls General Fund Equipment Replacement 500,000 (C) General Fund Workers Compensation 150,000 (C) General Fund
SelfInsurance 150,000 (C) Capital Projects Funtls Debt Service Fund Housing Set-Aside Certificates ofParticipation 828,408 (D) Redevelopment Agency Certificates ofParticipation 350,033
(E) Appropriated Reserves General Fund 75,001 (B) Special RevelUle Funds <-' Appropriated Reserves Community Development Block Grant 188,792 (F) Debt Service Fund Capital Projects Funtls
Certificates ofParticipation Redevelopment Agency 707,987 (G) Special RevelUle FuntIs Community Development Block Grant General Fund 263 (A) $3,256,337 The reasons for these transfers
are set forth below: (A) To reimburse fund administrative expenditures. (B) Recurring transfers. (C) To reimburse prior year overcharges. (D) State-required set-aside ofLowlModerate
Income Housing portion ofproperty tax increment (E) To allocate balance ofadvance to fund capital projects. (F) To fund capital project expenditures using grant funds. (G) To fund debt
service payments. 41
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 5 -CAPITA.L ASSETS (Continued) C. Depreciation Allocation Depreciation expense is charged to functions and programs
based on their usage ofthe related assets. The amounts allocated to each function or program are as follows: Governmental Activities General government Public safety Parks and public
works Community development Community services Library Sanitation Redevelopment Total Governmental Activities INOTE 6 -GENERAL LONG-TERM DEBT A. Composition and Changes $126,977 337,782
1,057,622 39,249 31,074 53,047 5,161 101,692 $1,752,604 The Town generally incurs long-termdebt to finance projects or purchase assets, which will have useful lives equal to or greater
than the related debt. The Town's bonded debt issues and transactions are summarized'below and discussed in.detaH thereafter. Original Issue Halance Balance Current AmOllnt June 30,
2002 Additions Retirements June 30, 2003 Portion 1992 Certificates ofParticipation, 5%-9%, due 8/1/2012 $2,96Q,000 $1,925,000 $150,000 $1,775,000 $160,000 2002 Certificates ofParticipation,
, Series A, 2.5%-5%, due 8/1/2031 10,725,000 $10,725,000 10,725,000 210,000 Total Long-Tenn Debt $13,685,000 $1,925,000 $10,725,000 $150,000 $12,500,000 $370,000 1992 Certificates ofParticipation
(COPs) The Town issued Certificates of Participation (COPs) in the original principal amount of $2,960,000 dated August 1, 1992 to finance certain construction costs of the Town1s Parking
Lot 4 Project, which was constructed on land located in the Redevelopment Agency. The COPs are similar to debt; they allow investors to participate in a share of guaranteed payments,
which are made by the Town. Because they are similar to debt, the present value of the total of the payments to be made is recorded as longterm debt. Principal payments are due annually
on August 1, with interest payments payable semiannually on February 1 and August 1. The Town has pledged motor vehicle license fee revenues as collateral for the repayment ofthe Certificates.44
..J i TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 6 -GENERAL LONG-TERM DEBT (Continued) To assist the Town in paying the cost of the acquisition and construction
of the Parking Lot 4 Project, the Town and its Redevelopment Agency entered into a Reimbursement Agreement. Under this agreement, the Agency will use available net tax increment revenues
resulting from the Project's effect on land values to repay the Town for all lease payments made by the Town to the Agency under the lease agreement for the Project. Net tax increment
revenues are all taxes allocated to and paid into the Redevelopment Agency Capital Projects Fund for the Project Area. Reimbursements under this agreement commenced in fiscal 1995-96.
2002 Certificates of Participation, Series A On July 18, 2002, the Town and the Los Gatos Redevelopment Agency issued $10,725,000 in 2002 Certificates of Participation, Series A, to
finance the acquisition, construction, rehabilitation, equipping and improvement of several capital improvement projects. The Town has pledged lease payments of real property and facilities
comprised of the Parks and Public Works Service Center and Baseball Field, as well as Parking Lots No.1, 2, and 3, as collateral for the repayment of the Certificates. Interest is payable
semiannually on each February 1 and August 1, commencing February 1, 2003. Principal payments are due and payable annually, commencing August 1,2003. Repayment requirements for general
long-term debt were as follows at June 30, 2003: Governmental Activities For The Year Ending June 30 Principal Interest 2004 $370,000 $560,878 2005 385,000 546,765 2006 400,000 531,745
2007 415,000 516,083 2008 430,000 500,785 2009-2013 2,175,000 2,228,109 2014-2018 1,545,000 1,839,747 2019-2023 1,920,000 1,451,430 2024-2028 2,435,000 922,100 2029-2032 2,425,000 249,622
Total payments due $12,500,000 $9,347,264 The Town must maintain required amounts of cash and investments with the trustees under the terms of the COPs and Special Assessments issues.
These funds are pledged as reserves to be used if the Town fails to meet its obligations under the COPs issue. These reserves totaled $975,175 at June 30,2003. The California Government
Code requires these funds to be invested in accordance with Town ordinance, bond indentures or State statutes. All these funds have been invested as permitted under the Code. 45
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 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 improvements; these assessments are payable over the term of the
debt issued to finance the improvements, and the assessments are used to pay debt service on debt issued to fund the improvements. The Town has rio' legal or moral liability with respect
to the payment of any indebtedness of the Downtown Parking Assessment District. The principal amoUllt of outstanding debt of the District was $1,060,000 on June 30, 2003, which has been
excluded from the Town's financial statements. INOTE 8 -NET ASSETS AND FUND BALANCES GASB Statement 34 acids the concept ofNet Assets, which is measured on the full accrual basis, to
the concept ofFund Balance, which is measured on the modified accrual basis. A. Net Assets Net Assets is the excess of all the Town's assets over all its liabilities, regardless of fund.
Net Assets are divided into three captions under GASB Statement 34. These captions apply only to Net Assets, which is determined only at the Government-wide level, and are described
below: Invested in Capital Assets, net ofrelated debt describes the portion of Net Assets which is represented by the current net book value of the Town's capital assets, less the outstanding
balance .of any debt issued to finance these assets. Restricted describes the portion of Net Assets which is restricted as to use by the terms and conditions of agreements with outside
parties, governmental regulations, laws, or other restrictions which the Town cannot unilaterally alter. These principally include debt service requirements, and redevelopment funds
restricted to low and moderate income purposes. Unrestricted describes the portion ofNet Assets which is not restricted to use. B. Reserves ofFund Equity Fund equity consists of reserved
and unreserved amounts. Reserved fund equity represents that portion of fund balance or retained earnings, which has been appropriated for expenditure or is legally segregated for a
specific future use. At June 30, 2003, portions offund equity had been reserved for the following: Encumbrances This reserve encumbers fund balance for purchase order commitments made
prior to the fiscal year end. 46
, /TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 8 -FUND EQUITY AND EXPENDITURES IN EXCESS OF BUDGET (Continued) Capital Outlay This reserve is funded by storm
drain fees, construction taxes, and debt proceeds, which are legally restricted for major capital projects. Advances This reserve reflects long-term loans to other funds that are not
available for expenditure. Long Term Notes Receivable This reserve reflects the balance of long-term loans not offset by deferred revenue, which are not available for expenditure. Housing
This reserve reflects amounts to be expended for low and moderate-income housing or rental rehabilitation. Repairs and Maintenance Repairs and maintenance of lighting and landscape property
and open space property are financed with special tax assessments on benefiting property, which is legally restricted. Debt Service This reserve reflects cash balances in the debt service
funds that are restricted for debt service. Library Trust This reserve will be used for library operations accounted for in the Library Expendable Trust Fund. C. Designations ofFund
Equity A portion of unreserved fund balance may be designated to jndicate plans for financial resource use in a future period, such as for general contingencies or capital projects.
At June 30, 2003, portions of unreserved fund equity had been designated for the purposes below. The remaining portion is unreserved. Civic Center Improvements This designation will
be used for general improvements to the Civic Center, including major upgrades in the electrical system. Solid Waste Management This designation will be used to implement a yard waste
collection program. Market Fluctuations This designation will be used to reserve funds representing an increase or reduction in market value of the Town's treasury investments at year-end.
47
TOWN OF LOS GATOS Notes tdBasic Purpose FiuancialStatements INOTE 8-FUND EQUITY AND EXPENDITURES IN EXCESS OF BUDGET (Continued) Open Space ThiEl designation will be used to make selective
open space acquisitions. Animal Control This designation will be used to extend the period that animals are held. Parking This designation will be used to mitigate parking issues within
theTown. Manager's Contingency This designation will be used at the discretion of the Town Manager to provide budgets for unforeseen situations that may arise during the fiscal year.
Museum Upgrades This designation will be
used to fund requests submitted by the Los Gatos Museum Association for capital improvements at the two museum sites. Productivity Enhancement This designation will be used to fund one-time
requests that result in streamlining or improving existing service levels. Economic Uncertainty This designation will be used to fund future fluctuations in the economy, which are not
currently foreseen. Calculated at twenty five per per cent ofthe 2002-03 General Fund operating budget. Capital Improvements This designation will be used for the acquisition and construction
ofcapital facilities. Debt Service This designation will be used to fund the future payments ofprincipal and interest on the general longterm debt. D. Excess ofExpenditures overAppropriations
The following funds had expenditures in excess of budget due to unanticipated expenditures: General Fund Non-Point Source Maintenance Special Revenue Fund Sewer Maintenance Special Revenue
Fund Land and Lighting Special Revenue Fund Redevelopment Agency Capital Projects Fund Gas Tax Capital Projects Fund 48 $885,401 12,819 38,072 24,100 378,371 9,862
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 9 -PENSIQN PLAN CALPERS Safety and Miscellaneous Employees Plans Substantially all Town employees are eligible to
participate in pension plans offered by California Public Employees Retirement System (CALPERS), an agent multiple employer defined benefit pension plan which acts as a common investment
and administrative agent for its participating member employers. CALPERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members,
who must be public employees and beneficiaries. The Town's employees participate in the separate Safety (police) and Miscellaneous (all other) Employee Plans. Benefit provisions under
both Plans are established by State statute and Town resolution. Benefits are based on years of credited service, equal to one year of full time employment Funding contributions for
both Plans are determined annually on an actuarial basis as of June 30 by CALPERS; the Town must contribute these amounts. The Plans' provisions and benefits in effect at June 30, 2003,
are summarized as follows: Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of annual salary Required employee contribution rates Required employer contribution
rates Safety 5 year service monthly for life 50 3.000% 9.000% 16.010% Miscellaneous 5 year service monthly for life 50 1.426% -2.418% 7.000% 0.000% The Town's labor contracts require
it to pay employee contributions as well as its own. CALPERS determines contribution requirements using a modification of the Entry Age Normal Method. Under this method, the Town's total
normal benefit cost for each employee from date of hire to date of retirement is expressed as a level percentage of the related total payroll cost. Normal benefit cost under this method
is the level amount the Town must pay annually to fund an employee's projected retirement benefit This level percentage of payroll method is used to amortize any unfunded actuarial liabilities.
The Town does not have a net pension obligation since it pays these actuarially required contributions monthly. CALPERS uses the market related value method of valuing the Plan's assets.
An investment rate of return of 8.25% is assumed, including inflation at 3.5%. Annual salary increases are assumed to vary by duration of service. Changes in liability due to plan amendments,
changes in actuarial assumptions, or changes in actuarial methods are amortized as a level percentage of payroll on a closed basis. Investment gains and losses are accumulated as they
are realized and ten percent of the net balance is amortized annually. The remaining amortization period ends June 30, 2022 for the Safety Plan and June 30, 2024 for the Miscellaneous
Plan. 49
TOWN OF LOS GATOS .Notes to Basic Purpose Financial Statements INOTE 9 -PENSION PLAN (Continued) The Plans' actuarial value (which differs from market value) and funding progress over
the past three years are set forth below at their actuarial valuation date of June 30: Safety Plan: Actuarial Eritry Unfunded Age Unfunded Annual (Overfunded) Valuation Accrued Value
of (Overfunded) Funded Covered Liability as% of . Date Liability Assets Liability Ratio PayrolJ Payroll 2000 $25,692;203 $26,977,795 ($1,285,592) 105.0% $3,i09;170 (41.3%) 2001 26,845,081
27,471,189 (626,108) 102.3% 3,339,766 (18.7%) 2002 29,477,337 25,858,988 3,618,349 87.7% 3,631,141 99.6% Miscellaneous Plan: Actuarial Entry Unfunded Age Unfunded Annual (Overfunded)
Valuation Accrued Value of (Overfunded) Funded Covered Liability as % of Date Liability Assets Liability Ratio Payroll Payroll 2000 $27,321,378 $37,157,178 ($9,835,800) 136.0% $6,053,885
(162.5%) 2001 30,841,467 38,562,466 (7,720,999) 125.0% 6,601;729 (117.0%) 2002 34,162,824 36,683,535 (2,520,711) 107.4% 8,314,689 (30.3%) Audited annual financial statements and ten-year
trend information are available from CALPERS at P.O. Box 942709, Sacramento, CA 94229-2709. PERS has reported that the value of the net as.sets in Plan held for pension benefits
changed as follows during the year ended June 30,2002: Beginning Balance 6/30101 Contributions received Benefits and Refunds Paid Investment Earnings Credited Expected Actuarial Value
of Assets 6/30102 Market Value of Assets 6/30102 Actuarial Value of Assets 6/30/02 50 Safety $27,471,189 750,108 (1,057,229) 2,253,955 $29,418;023 $23,508,171 $25,858,988 Miscellaneous
$38,562,466 544,383 (1,242,968) 3,153,158 $41,017,039 $33,348,668 $36,683,535
TOWN OF LOS GATOS Notes to Basic Purpose Financial Statements INOTE 9 -PENSION PLAN (Continued) Actuarially required contributions for the Safety Plan for fiscal years 2003, 2002, and
2001 were $1,024,649, $747,367 and $335,995, respectively. Actuarially required contributions for the Miscellaneous Plan for fiscal years 2003, 2002, and 2001 were $611,989, $530,197,
and $445,645, respectively. The Town made these contributions as required, together with certain immaterial amounts required as the result of the payment of overtime and other additional
employee compensation. INOTE 10 -RISK MANAGEMENT The Town participates in the following public entity risk pools. A. Risk Pools ABAG PLAN Corporation (ABAG PLAN) covers general liability
claims in an amount up to $5,000,000. The Town has a deductible or uninsured liability of up to $50,000 per claim. ABAG PLAN also provides all risk property coverage of $100,000,000,
excluding flood and earthquake coverage. The Town has a $5,000 deductible for property damage and and a $10,000 deductible for vehicle damage. Once the Town's deductible is met ABAG
PLAN becomes responsible for payment of all claims up to the limit. During the fiscal year ended June 30,2003 the Town contributed $415,150 for current year coverage. ABAG PLAN is governed
by a board consisting of representatives from member municipalities. The board controls the operations of each ABAG PLAN, including selection of management and approval of operating
budgets, independent of any influence by member municipalities beyond their representation on the Board. The Town's contributions to each ABAG PLAN equal the ratio of the Town's payroll
to the total payrolls of all entities participating in the same layer of each program, in each program year. Actual surpluses or losses are shared according to a formula developed from
overall loss costs and spread to member entities on a percentage basis after a retrospective rating. Financial statements may be obtained from ABAG PLAN Corporation, P.O. Box 2050, Oakland,
California, 94604-2050. The Town is a member of Local Agency Workers' Compensation Excess Joint Powers Authority (LAWCX) for Worker's Compensation claims. The Town has a $250,000 self-insured
retention level or uninsured liability for all employees. Once the Town's deductible is met, LAWCX becomes responsible up to $1,000,000. After this, LAWCX has a commercial policy that
covers claims. Financial statements may be obtained from LAWCX, 6371 Auburn Boulevard, Suite B, Citrus Heights, California 95621. The Town has not significantly reduced its insurance
coverage from the prior year. Furthermore, settlements have not exceeded insurance coverage for the past three fiscal years. 51
TOWN OF LOS GATOS Notes to Financial Statements INOTE 10 -RISK MANAGEMENT (Continued) B. Liabilityfor 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 fmancial statements. As discussed above, the Town has coverage for such claims, but
it has retained the risk for the deductible, or uninsured portion ofthese claims. The change in the Workers' Compensation and Self Insurance Internal Service Funds' claims liability,
including claims incurred but not reported as estimated by the Town, is based on historical trend information provided by its third party administrators and was computed as follows at
June 30,2003: Beginning claims payable balance Liability for current fiscal year claims Increase (decrease) in estimated liability for prior fiscal year claims Claims paid Ending claims
payable balance Self Worker's Insurance Compensation Internal Internal Service Service Fund Fund Total $469,163 $366,702 $835,865 82,489 122,408 204,897 224,447 (171,054) 53,393 (275,237)
(205,804) (481,041) $50G,862 $112,252 $613,114 INOTE 11-JOINT POWERS AUTHORITY' I The Town is a member of the Silicon Valley Animal Control Authority (SVACA), established in 2000 to
deliver animal control services. SVACA provides its own field services and has an agreement with the Humane Society of Santa Clara Valley to provide facilities, personnel, shelter and
animal services. SVACA is governed by a Board of Directors consisting of representatives from member agencies. During the fiscal year ended June 30, 2003 the Town contributed $179,154
to SVACA. The Town's equity interest in SVACA is not available. Audited financial statements are available from SVACA at 2340-A Walsh Avenue, Santa Clara, CA 95051. INOTE 12 -CONTINGENT
LIABILITIES The Town participates in several federal and State grant programs. These programs have been audited by the Town's independent accountants in accordance with the provisions
of the Federal Single Audit Act of 1996 and applicable State requirements. No cost disallowances were proposed as a result of these audits; however, these programs are still subject
to further examination by the grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time. The Town expects such
aInounts, if any, to be immaterial. The Town is subject to litigation arising in the normal course of business. In the opinion of the Town Attorney there is no pending litigation which
is likely to have a material adverse effect on the financial position ofthe Town. 52
MAJOR GOVERNMENTAL FUNDS, OTHER THAN GENERAL FUND AND SPECIAL REVENUE FUNDS Appropriated Reserves Fund was established to provide resources for capital projects not fully funded from
other sources. Certificates of Participation accounts for the 1992 Certificates of Participation issued on August 1, 1992 to assist in financing the Parking Lot #4 project, and the 2002
Certificates of Participation issued on July 18, 2002 to finance several capital improvement projects throughout the Town. Redevelopment Agency Capital Projects Fund accounts for activities
of the Redevelopment Agency of the Town and the related property tax revenue. 53
TOWN OF LOS GATOS APPROPRIATED RESERVES FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Variance Positive
Budget Actual (Negative) REVENUES Other taxes $80,000 $69,738 ($10,262) Intergovernmental 1,275,570 404,966 (870,604) Charges for services 4,198 $4,198 Interest 70,000 (70,000) Other
190,155 190,155 Total Revenues 1,425,570 669,057 (756,513) EXPENDITURES Capital outlay 3,779,246 3,203,693 575,553 Total Expenditures 3,779,246 3,203,693 575,553 EXCESS (DEFICIENCY)
OF REVENUES OVER EXPENDITURES (2,353,676) (2,534,636) (180,960) OTHER FINANCING SOURCES (USES) Transfers in 604,832 263,793 (341,039) Transfers (out) (40,000) (49,130) (9,130) Total
Other Financing Sources (Uses) 564,832 214,663 (350,169) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES ($1,788,844) (2,319,973) ($531,129) BEGINNING
FUND BALANCES 8,518,415 ENDING FUND BALANCES $6,198,442 54
TOWN OF LOS GATOS CERTIFICATES OF PARTICIPATION FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2003 ./REVENUES
Property tax increment Less: Educational Revenue Augmentation Fund Payment Interest Total Revenues EXPENDITURES Budget $4,284,538 465,795 4,750,333 Actual $4,142,040 (104,597) 201,506
4,238,949 Variance Positive (Negative) ($142,498) (104,597) (264,289) (511,384) Redevelopment Debt Service: Principal Interest and fees Total Expenditures EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in 1,394,750 1,459,013 150,000 150,000 783,909 533,909 2,328,659 2,142,922 2,421,674 2,096,027 707,987 (64,263) 250,000 185,737
(325,647) 707,987 Transfers (0 ut) Total Other Financing Sources (Uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES BEGINNING FUND BALANCES ENDING
FUND BALANCES 55 (731,246) (731,246) $1,690,428 (1,178,441) (470,454) 1,625,573 1,925,000 $3,550,573 (447,195) 260,792 ($64,855)
TOwN OF LOS GATOS REDEVELOPMENT AGENCY CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Variance Positive Budget Actual (Negative) REVENUES Interest $37,100 $143,082 $105,982 Other 92,460 92,460 Total Revenues 37,100 235,542 198,442 EXPENDITURES Capital outlay 4,369,759
4,390,639 (20,880) Debt Service: Interest and fees 357,491 (357,491) Total Expenditures 4,369,759 4,748,130 (378,371) EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (4,332,659) (4,512,588)
(179,929) OTHER FINANCING SOURCES (USES) Proceeds from issuance of debt 9,000,000 10,725,000 1,725,000 Transfers in 350,033 350,033 Transfers (out) (707,987) (707,987) Total Other Financing
Sources (Uses) 9,000,000 10,367,046 1,367,046 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $4,667,341 5,854,458 $1,187,117 BEGINNING FUND BALANCES
352,953 ENDING FUND BALANCES $6,207,411 56
NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS: Solid Waste Management Fund was established to account for the Town's Solid Waste Program activities. 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. Sewer Maintenance Fund is usedto account for
the collection and disbursement of sanitary sewer fees. Land and Lighting Fund was established to provide maintenance of trees, landscaping, irrigation systems and lighting within the
boundaries of Tract No. 8439. CAPITAL PROJECTS FUNDS: Housing Set-Aside Fund accounts for the 20% mandatory property tax allocation for low income housing and the related capital projects.
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 levy a tax
based upon building additions or alterations. The types of taxes imposed include Capital Improvement, Utility Underground and Parks. Gas Tax Fund is used to account for revenue received
and expended under the State of California Streets and Highways Code Sections 2106, 2107, and 2107.5. These revenues must be expended for the maintenance or construction of streets.
57
TOWN OF LOS GATOS NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS JUNE 30, 2003 SPECIAL REVENUE FUNDS Community Non-Point Solid Waste Development Source Sewer Land and Management
Block Grant Maintenance Maintenance Lighting ASSETS Cash and investments available for operations $331,430 $292,891 $80 $92,1l7 Restricted cash and investments $625,324 Receivables Accounts
23,681 22,305 75,330 46,696 Intergovernmental 209,307 728 Long term notes receivable 726,240 Total Assets $355,111 $1,583,176 $368,221 $46,776 $92,845 LIABILITIES Accounts payable $1,637
$21,719 $1,535 $577 Accrued payroll and benefits 828 593 $3,328 8,241 Due to other funds 37,000 Deferred revenue 386,070 Advances from other funds 150,000 Total Liabilities . 2,465 408,382
15,3,328 46,776 577 FUND BALANCES Reserved for: Capital outlay Long term notes receivable 674,718 Low and moderate income housing Repairs and maintenance 92,268 Unreserved, designated
for: Solid waste management 352,646 Unreserved, Undesignated 500,076 214,893 Total Fund Fund Balances 352,646 1,174,794 214,893 92,268 Total Liabilities and Fund Balances $355,lll $1,583,176
$368,221 $46,776 $92,845 58
Housing Set-Aside CAPITAL PROJECTS FUND STORM DRAIN Basin #1 Basin #2 Basin #3 Construction Tax Gas Tax Total Nonmajor Governmental Funds $2,649,691 $381,300 $240,844 $141,539 $1,770,201
$811,418 $6,711,511 625,324 168,012 13,344 223,379 726,240 $2,663,035 $381,300 $240,844 $141,539 $1,770,201 $811,418 $8,454,466 $10,498 $929 $517 $243,424 $280,836 604 13,594 37,000
386,070 150,000 11,102 929 517 243,424 867,500 380,371 $240,844 $141,539 1,769,684 567,994 3,100,432 674,718 2,651,933 2,651,933 92,268 352,646 714,969 2,651,933 380,371 240,844 141,539
1,769,684 567,994 7,586,966 .. $2,663,035 $381,300 $240,844 $141,539 $1,770,201 $811,418 $8,454,466 ,-----,' . " 59
TOWN OF LOS GATOS NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2003 SPECIAL REVENuE FUNDS Community
Non-Point Solid Waste Development Source Sewer Land and Management Block Grant Maintenance Maintenance Lighting REVENUES Property taxes $37,046 Other taxes Intergovernmental $47,090
$241,010 $153,326 Charges for service 46,016 $625,272 Interest 44,702 3,002 Other 45 Total Revenues 93,106 285,757 153,326 625,272 40,048 EXPENDITURES Parks and public works 64,000 Community
services 53,843 Sanitation and other 145,307 141,279 533,072 Capital outlay Debt Service: Interest and fees 13,165 Total Expenditures 145,307 67,008 141,279 533,072 64,000 EXCESS (DEFICIENCY)
OF REVENUES OVER EXPENDITURES (52,201) 218,749 12,047 92,200 (23,952) OTHER FINANCING SOURCES (USES) Transfers in 263 Transfers (out) (27,682) (188,792) (24,441) (92,200) (6,400) Total
Other Financing Sources (Uses) (27,682) (188,529) (24,441) (92,200) (6,400) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES (79,883) 30,220 (12,394)
(30,352) BEGINNING FUND BALANCE 432,529 1,144,574 227,287 122,620 ENDING FUND BALANCE $352,646 $1,174,794 $214,893 $92,268 60
CAPITAL PROJECTS FUND STORM DRAIN Housing Set-Aside Basin #1 Basin #2 Basin #3 Construction Tax Gas Tax Total Nonmajor Governmental $37,046 $61,832 $36,959 $4,793 $42,623 146,207 $553,752
995,178 671,288 ---", $130,703 10,330 6,620 3,990 49,950 25,720 275,017 45 130,703 72,162 43,579 8,783 92,573 579,472 2,124,781 64,000 53,843 819,658 383,104 1,013,995 1,397,099
13,165 383,104 1,013,995 2,347,765 (252,401) 72,162 43,579 8,783 92,573 (434,523) (222,984) --- 828,408 828,671 (106,000) (445,515) 828,408 (106,000) 383,156 r-"'" , 576,007 2,075,926
$2,651,933 72,162 308,209 $380,371 43,579 197,265 $240,844 8,783 132,756 $141,539 92,573 1,677,111 $1,769,684 61 (540,523) 1,108,517 $567,994 160,172 7,426,794 $7,586,966
TOWN OF LOS GATOS BUDGETED NON-MAJOR FUNDS CONIBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2003 COMMUNITY
DEVELOPMENT SOLID WASTE MANAGEMENT BLOCK GRANT Variance Variance Positive Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Property taxes Other taxes Intergovernmental
$47,400 $47,090 ($310) $415,368 $241,010 ($174,358) Charges for services 130,000 46,016 (83,984) Interest 20,000 44,702 24,702 Other 45 45 Total Revenues 177,400 93,106 (84,294) 435,368
285,757 (149,611) EXPENDITURES Parks and public works Community services 264,893 53,843 211,050 Sanitation and other 172,600 145,307 27,293 Capital outlay Debt Service: Interest and
fees 20,000 13,165 6,835 Total Expenditures 172,600 145,307 27,293 284,893 67,008 217,885 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 4,800 (52,201) (57,001) 150,475 218,749 68,274
OTHER FINANCING SOURCES (USES) Transfers in 19,500 263 (19,237) Transfers (out) (28,500) (27,682) 818 (221,975) (188,792) 33,183 Total Other Financing Sources (Uses) (28,500) (27,682)
818 (202,475) (188,529) 13,946 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES ($23,700) (79,883) ($56,183) ($52,000) 30,220 $82,220 BEGINNING FUND
BALANCE 432,529 1,144,574 ENDING FUND BALANCE $352,646 $1,174,794 62
NON-POINT SOURCE MAINTENANCE SEWER MAINTENANCE LAND AND LIGHTING Budget $153,360 153,360 128,460 128,460 24,900 (22,200) (22,200) $2,700 Actual $153,326 153,326 141,279 141,279 12,047
(24,441) (24,441) (12,394) 227,287 $214,893 Variance Positive (Negative) ($34) (34) (12,819) (12,819) (12,853) (2,241) (2,241) ($15,094) Budget $580,600 580,600 495,000 495,000 85,600
(85,600) (85,600) Actual $625,272 625,272 533,072 533,072 92,200 (92,200) (92,200) Variance Positive (Negative) $44,672 44,672 (38,072) (38,072) 6,600 (6,600) (6,600) 63 Budget $36,962
4,520 41,482 39,900 39,900 1,582 (6,400) (6,400) ($4,818) Actual $37,046 3,002 40,048 64,000 64,000 (23,952) (6,400) (6,400) (30,352) 122,620 $92,268 Variance Positive (Negative) $84
(1,518) (1,434) (24,100) (24,100) (25,534) ($25,534) (Continued)
TOWN OF LOS GATOS BUDGETED NON-MAJOR FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2003 HOUSING
SET-ASIDE BASIN #1 Variance Variance Positive Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Property taxes Other taxes $52,700 $61,832 $9,132 Intergovernmental
Charges for services Interest $71,300 $130,703 $59,403 9,070 10,330 1,260 Other Total Revenues 71,300 130,703 59,403 61,770 72,162 10,392 EXPENDlTURES Parks and public works Community
services Sanitation and other Capital outlay 448,320 383,104 65,216 Debt Service: Interest and fees Total Expenditures 448,320 383,104 65,216 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDlTURES
(377,020) (252,401) 124,619 61,770 72,162 10,392 OTHER FINANCING SOURCES (USES) Transfers in 731,246 828,408 97,162 Transfers (out) Total Other Financing Sources (Uses) 731,246 828,408
97,162 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $354,226 576,007 $221,781 $61,770 72,162 $10,392 BEGINNING FUND BALANCE 2,075,926 308,209 ENDING
FUND BALANCE $2,651,933 $380,371 64
Budget BASIN #2 Variance Positive Actual (Negative) Budget--STORM DRAIN BASIN #3 Variance Positive Actual (Negative) Budget CONSTRUCTION TAX Variance Positive Actual (Negative) $29,700
6,161 $36,959 $7,259 6,620 459 $5,000 3,500 $4,793 ($207) 3,990 490 $71,100 58,700 $42,623 ($28,477) 49,950 (8,750) "----" 35,861 43,579 7,718 __--'8,_50_0 --'8,:-7_83_ 283 129,800 92,573
(37,227) 35,861 $35,861 43,579 43,579 197,265 $240,844 7,718 $7,718 8,500 $8,500 8,783 8,783 132,756 $141,539 65 283 $283 129,800 $129,800 92,573 92,573 1,677,111 $1,769,684 (37,227)
($37,227) (Continued)
TOWN OF LOS GATOS BUDGETED NON-MAJOR FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2003 GAS TAX
TOTALS Varian.ce Variance Positive Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Property taxes $36,962 $37,046 $84 Other taxes 158,500 146,207 (12,293) Intergovernmental
$584,000 $553,752 ($30,248) 1,200,128 995,178 (204,950) Charges for services 710,600 671,288 (39,312) Interest 32,700 25,720 (6,980) 205,951 275,017 69,066 Other 45 45 Total Revenues
616,700 579,472 (37,228) 2,312,141 2,124,781 (187,444) EXPENDITURES Parks and public works 39,900 64,000 (24,100) Community services 264,893 53,843 211,050 Sanitation and other 796,060
819,658 (23,598) Capital outlay 1,004,133 1,013,995 (9,862) 1,452,453 1,397,099 55,354 Debt Service: Interest and fees 20,000 13,165 6,835 Total Expenditures 1,004,133 1,013,995 (9,862)
2,573,306 2,347,765 225,541 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (387,433) (434,523) (47,090) (261,165) (222,984) 38,181 OTHER FINANCING SOURCES (USES) Transfers in 750,746
828,671 77,925 Transfers (out) (106,000) (106,000) (470,675) (445,515) 25,160 Total Other Financing Sources (Uses) (106,000) (106,000) 280,071 383,156 103,085 EXCESS (DEFICIENCY) OF
REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES ($493,433) (540,523) ($47,090) $18,906 160,172 $141,266 BEGINNING FUND BALANCE 1,108,517 7,426,794 ENDING FUND BALANCE $567,994
$7,586,966 66
INTERNAL SERVICE FUNDS Internal Service Funds are used to finance and account for special activities and services performed by a designated department for other departments in the Town
on a cost reimbursement basis. The concept of major funds introduced by GASB Statement 34 does not extend to internal service funds because they do not do business with outside parties.
GASB Statement 34 requires thatfor the Statement of Activities, the net revenues or expenses of each internal service fund be eliminated by netting them against the operations of the
other Town departments, which generated them. The remaining balance sheet items are consolidated with these same funds in the Statement ofNet Assets. However, internal service funds
are still presented separately in the Fund fmancial statements, including the funds below. Workers' Compensation Fund was established to cover future claims that may occur related to
workers' compensation injuries. Self Insurance Fund was established to cover future general liability claims against the Town. Stores Fund was established to purchase photocopy equipment,
postage and bulk meter expenses. Vehicle Maintenance Fund was established to provide preventative maintenance and repair for all Town owned vehicles and equipment. Building Maintenance
Fund was established to provide preventative maintenance and repair for all Town owned buildings. Management Information Fund was established to pay for the replacement of management
information computer systems and components. Equipment Replacement Fund is used to pay for the replacement of major Town equipment needs and all vehicles. 67
TOWN OF LOS GATOS INTERNAL SERVICE FUNDS COMBINING STATEMENT OFNET ASSETS JUNE 30, 2003 Workers' Self VehiC'le Compensation Insurance Stores Maintenance ASSETS Cash and investments available
for operations $2,473,840 $2,242,608 $168,778 $89,945 Restricted cash and cash equivalents 25,396 Accounts receivable 3,427 Materials, supplies, and deposits 8,985 8,204 Capital assets,
net of accumulated depreciation 22,401 Total Assets 2,499,236 2,246,035 200,164 98,149 LIABILITIES Accounts payable 925 5,411 25,833 Claims payable 500,862 112,252 Accrued payroll 831
2,153 4,723 Total Liabilities 501,693 115,330 5,411 30,556 NET ASSETS Invested in capital assets, net of related debt 22,401 Unrestricted 1,997,543 2,130,705 172,352
67,593 Total Net Assets $1,997,543 $2,130,705 $194,753 $67,593 68
Building Maintenance Management Information Equipment Replacement Total $520,856 $1,919,889 $3,225,388 $10,641,304 25,396 3,427 17,189 54,639 77,040 575,495 1,919,889 3,225,388 10,764,356
74,784 17,659 20,618 145,230 613,114 1,300 6,430 15,437 6,448 6,448 82,532 24,089 20,618 780,229 54,639 438,324 $492,963 1,895,800 $1,895,800 3,204,770 $3,204,770 77,040 9,907,087 $9,984,127
69
TOWN OF LOS GATOS INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS JUNE 30, 2003 Workers' Self Vehicle Compensation Insurance Stores Maintenance
OPERATING REVENUES Charges for services $509,390 $763,086 $91,422 $539,000 Refunds 17,057 Other 43 27 Total Operating Revenues 509,433 780,170 91,422 539,000 OPERATING EXPENSES Salaries
and benefits 157,845 97,447 259,966 Insurance expenses 353,474 198,515 Depreciation 9,224 Services and supplies 2,079 61,578
80,762 253,130 Total Operating Expenses 513,398 357,540 89,986 513,096 Operating Income (Loss) (3,965) 422,630 1,436 25,904 Transfers (out) (150,000) (150,000) Net Transfers (150,000)
(150,000) Change in Net Assets (153,965) 272,630 1,436 25,904 BEGINNING NET ASSETS 2,151,508 1,858,075 193,317 41,689 ENDING NET ASSETS $1,997,543 $2,130,705 $194,753 $67,593 70
Building Maintenance $1,048,706 1,048,706 Management Information $772,209 150 772,359 Equipment Replacement $493,125 47,300 540,425 Total $4,216,938 17,057 47,520 4,281,515 86,053 242,574
843,885 551,989 5,050 14,274 848,972 460,388 318,985 2,025,894 940,075 702,962 318,985 3,436,042 108,63 I 69,397 221,440 845,473 (500,000) (800,000) (500,000) (800,000) 108,631 69,397
(278,560) 45,473 384,332 1,826,403 3,483,330 9,938,654 $492,963 $1,895,800 $3,204,770 $9,984,12771
TOWN OF LOS GATOS INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2003 Workers' Compensation Self Insurance Insurance Stores CASH FLOWS FROM OPERATING
ACTIVITIES Receipts from customers $509,433 $778,879 $91,422 Payments to suppliers (2,079) (62,629) (84,951) Payments to employees (157,014) (95,294) Claims paid (321,775) (452,965)
Cash Flows from Operating Activities 28,565 167,991 6,471 CASH FLOWS FROM NO CAPITAL FINANCING ACTIVITIES Transfers out (150,000) (150,000) Cash Flows from NoncapitaI Financing Activities
(150,000) (150,000) Net Cash Flows (121,435) 17,991 6,471 Cash and investments at beginning of period 2,620,671 2,224,617 162,307 Cash and investments at end of period $2,499,236 $2,:242,608
$168,718 Reconciliation of operating income (loss) to net cash flows from operating activities: Operating income (loss) ($3,965) $422,630 $1,436 Adjustments to reconcile operating income
to net cash flows 'from operating activities: Depreciation 9,224 Change in assets and and liabilities: Receivables, net (1,291) Other assets (3,760) Accounts and other payables (1,051)
(429) Other accrued expenses 32,530 (252,297) Cash Flows from Operating Activities $28,565 $167,991 $6,471 72
Vehicle Building Management Equipment Maintenance Maintenance Information Replacement Total $539,000 $1,049,408 $772,359 $540,425 $4,280,926 (247,785) (868,166) (474,851) (349,045) (2,089,506)
(259,800) (86,137) (241,260) (839,505) (774,740) 31,415 95,105 56,24& 191,380 577,175 31,415 58,530 $89,945 95,105 425,751 $520,856 56,248 1,863,641 $1,919,889 (500,000) (500,000) (308,620)
3,534,008 $3,225,388 (800,000) (800,000) (222,825) 10,889,525 $10,666,700 $25,904 $108,631 $69,397 $221,440 $845,473 5,050 14,274 702 (589) 2,135 (1,625) 3,210 (21,704) (14,463) (30,060)
(64,497) 166 2,426 1,314 (215,861) $31,415 $95,105 $56,248 $191,380 $577,175 73
AGENCY FUNDS GASB Statement 34 requires that Agency Funds be presented separately from the Government-wide and Fund financial statements. Agency Funds account for assets held by a government
unit in the capacity of agent for individuals, governmental entities, and non-public organizations.75
TOWN OF LOS GATOS AGENCY FUNDS STATEMENTS OF CHANGES IN ASSETS AND LIABILITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Balance Balance June 30, 2002 Additions Deductions June 30, 2003
Parking Improvement District #88 Assets Cash and investments available for operations $85,871 $140,872 $148,563 $78,180 Restricted cash and investments 198,525 14,450 212,975 Intergovernmental
receivable 949,425 949,425 $284,396 $1,104,747 $148,563 $1,240,580 Liabilities Due to other governments $284,396 $1,104,747 $148,563 $1,240,580 $284,396 $1,104,747 $148,563 $1,240,580
76
$20,000,000 $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 TOWN OF LOS GATOS GENERAL REVENUES BY SOURCE ALL GOVERNMENTAL FUND
TYPES AND SIMILAR TRUST FUNDS LAST TEN FISCAL YEARS 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Licenses, Interest and Fiscal Special Permits and Service Fines and Miscellaneous
Year Taxes Assessments Intergovernmental Charges Forfeitures Revenue Total 1994 $8,711,095 $113,334 $3,559,566 $L785,569 $247,380 $1,178,466 $15,595,410 1995 8,910,322 117,564 3,830,831
2,0 J5,686 391,668 2,170,410 17,436,481 1996 10,101,045 99,658 3,784,756 1,212,374 411,306 2,274,938 17,884,077 1997 11,478,624 1,740 4,694,549 2,335,782 406,677 2,888,064 21,805,436
1998 11,236,320 1,605 4,438,286 2,029,760 470,765 3,100,499 21,277,235 1999 13,315,412 4,727,216 2,846, II 0 556,561 2,]96,270 23,641,569 2000 16,56],481 6,541,328 3,417,012 592,750
2,499,637 29,612,208 , 2001 19,525,766 6,324,350 2,803,893 608,183 4,235,137 33,497,329 2002 ]7,804,238 6,207,429 2,684,386 532,680 3,457,705 30,686,438 2003 17,815,753 6,568,201 3,383,422
187,117 2,830,236 30,784,729 Source: Town of Los Gatos Annual Financial Report 77
18000000 16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000o TOWN OF LOS GATOS GENERAL EXPENDITURES BY FUNCTION ALL GOVERNMENTAL FUND TYPES AND SIMILAR TRUST FUNDS LAST
TEN FISCAL YEARS 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Public Works Fiscal General Public and Capital Debt Culture and Sanitation & Year Government Safety Improvements Service
Recreation Other Total 1994 $2,323,210 $5,146,612 $4,176,033 $521,432 $3,327,180 $609,176 $16,103,643 1995 2,307,398 5,235,959 5,025,886 514,492 3,557,762 580,545 17,222,042 1996 2,324,257
5,329,760 3,205,935 464,773 4,084,258 536,521 15,945,504 1997 3,212,982 5,625,711 3,238,853 340,292 4,237,315 704,127 17,359,280 1998 2,139,598 6,114,286 5,210,127 2,230 4,643,048 745,264
18,854,553 1999 2,559,026 7,490,703 6,986,754 360.273 3,518,302 712,609 21,627,667 2000 2,643,530 8,324,537 9,119,233 532,726 3,820,022 742,614 25,182,662 2001 3,438,753 9,175,280 7,365,560
729.500 4,509,231 616,042 25,834,366 2002 3,884,791 9.782.116 17,712,651 701,570 2,914,534 647,818 35,643,480 2003 4,048,876 10,211,315 15,439,771 1,054,565 5,085,878 819,658 36,660,063
Source: Town of Los Gatos Annual Financial Report78
0.0003 TO\VN OF LOS GATOS RATIO OF NET GENERAL OBLIGATION BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA LAST TEN FISCAL YEARS $2 ,---------------_ 0.00025 0.0002 0.00015
0.0001 0.00005 O'---------'------'---=='-§---------' $1 $1 $1 $1 $1 $0 $0 $0 1994 1995 1994 1995 -1iI-Debt per Assessed Value • Debt/Capita Net Bonded Gross Net Bonded Fiscal
Assessed Debt Per Bonded Debt Per Year Population Value Assessed Value Debt (1) Capita 1994 29,683 2,962,096,331 0.0015% 45,000 2 1995 29,683 2,962,096,331 0.0000% 0 (1) Includes General
Obligation Bonds which were repaid during fiscal year 1994-95. Source: State of California -Department of Finance -Population Research Unit County Auditor Certificate ofAssessed Valuation
and Town of Los Gatos Annual Financial Report 79
TOWN OF LOS GATOS PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS $10.0 $9.0 .....----1iI iii $8.0 /$7.0 iii '" /a'" $6.0 2 I $5.0 $4.0 /$3.0 1iI______....---111 $2.0 *
w I -1iI-Tax Levied I $6.0 $5.5 $5.0 $4.5 '" .'9" $4.0 co $3.5 $3.0 $2.5 $2.0 * w
--+-Value ofproperty I Value of Redevelopment Agency Value of Town Redevelopment Total Property Value ofTown 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 1994 $2,772,081 $405,410 $3,177,491 $2,606,384,108
$308,526,189 $2,914,910,297 1995 2,581,700 404,611 2,986,311 2,725,728,976 314,696,713 3,040,425,689 1996 2,574,880 595,380 3,170,260 2,782,943,960 320,990,647 3,103,934,607 1997 2,652,072
790,015 3,442,087 2,962,096,331 327,410,460 3,289,506,791 1998 2,916,305 1,132,806 4,049,111 3,503,932,314 334,394,557 3,838,326,871 1999 3,260,615 1,314,556 4,575,171 3,507,562,766
341,082,448 3,848,645,214 2000 3,578,175 2,123,041 5,701,216 3,882,006,452 347,904,097 4,229,910,549 2001 3,917,932 3,232,042 7,149,974 4,310,115,280 585,708,196 4,895,823,476 2002 4,425,047
4,079,598 8,504,645 4,918,304,676 667,237,082 5,585,541,758 2003 4,736,560 4,037,443 8,774,003 5,162,418,263 693,559,274 5,855,977,537 Sources: Santa Clara County Auditor-Controller
Office and JiQTown of Los Gatos
I TOWN OF LOS GATOS PROPERTY TAX RATES ALL DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS 1.25 1.00 0.75 0.50 0.25 0.00 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 •
Santa Clara Valley Water District • County Retirement Levy • School District Bonds and Loans III Basic County Wide Levy School County Santa Clara Fiscal Basic County District Bonds Retirement
Valley Water Year Wide Levy and Loans Levy District Total 1994 $1.0000 $0.0755 $0.0305 $0.0117 $1.1177 1995 1.0000 0.0000 0.0332 0.0115 1.0447 1996 1.0000 0.0000 0.0338 0.0098 1.0436
1997 1.0000 0.1292 0.034] 0.0026 1.1659 1998 1.0000 0.0045 0.0388 0.0098 1.0531 1999 1.0000 0.0356 0.0388 0.0082 1.0826 2000 1.0000 0.0239 0.0343 0.0085 1.0667 2001 1.0000 0.0320 0.0356
0.0075 1.0751 2002 1.0000 0.0734 0.0364 0.0062 1.1160 2003 1.0000 0.0635 0.0388 0.0072 1.1095 Source: Santa Clara County Book of Tax Rates 81
TOWN OF LOS GATOS ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS 5000 4500 4000 3500 se:n: 3000 S 2500 2000 1500 1000 500 iii Unsecured I!!II Secured
2003 Fiscal Secured Percent Unsecured Percent Total Estimated Year Property Change Property Change Assessed Full Market 1994 $2,483,999,488 9.01% $122,384,620 12.10% $2,606,384,108 $9,935,997,952
1995 2,556,199,688 2.91% 123,019,888 0.52% 2,679,219,576 10,224,798,752 1996 2,655,271,851 3.88% 121,725,609 -1.05% 2,776,997,460 10,621,087,404 1997 2,823,741,415 6.34% 138,354,916
13.66% 2,962,096,331 11,294,965,660 1998 3,046,505,031 7.89% 136,521,793 -1.32% 3,183,026,824 12,186,020,124 1999 3,368,833,898 10.58% 138,728,868 1.62% 3,507,562,766 13,475,335,592
2000 3,690,413,743 9.55% 143,327,909 3.32% 3,833,741,652 14,761,654,972 2001 4,084,688,126 10.68% 177,486,954 23.83% 4,262,175,080 16,338,752,504 2002 4,685,070,118 14.70% 185,521,158
4.53% 4,870,591,276 18,740,280,472 2003 4,913,724,163 4.88% 201,539,300 8.63% 5,115,263,463 19,654,896,652 Source: Santa Clara County Assessed Value Report 82
TOWN OF LOS GATOS SPECIAL ASSESSMENT BILLINGS AND COLLECTIONS LAST TEN FISCAL YEARS 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 • Special Assessment Fiscal Year 1994 1995 1996
1997 1998 1999 2000 2001 2002 2003 Special Assessment Billings and Collections $113,334 117,564 99,658 1,740 1,605 Debt repaid in fiscal1997 -98 83 Source: Town of Los Gatos Annual Financial
Report
TOWN OF LOS GATOS PROPERTY VALUES, CONSTRUCTION AND BANK DEPOSITS LAST TEN FISCAL YEARS 65 '" 4 i=: 'i=": a P5 • Property Values • Residential Construction 25 1,200 20 15 10a*
I III Commercial Construction I 1,000aAI>< A":> Arc A'" A'b &:l\) &:l" &:l'").. &:l'? "Cj "Cj '")..'5 '")..'5
'")..'5 '")..'5 I Ii!!I Bank Deposits I Commercial Construction Residential Construction Fiscal Property Number Number Year Values of Permits Value of Permits Value 1994 $2,606,384,108
19 $5,097,972 51 $4,059,348 1995 2,679,219,576 11 413,952 18 5,188,051 1996 2,776,997,460 21 2,828,979 52 14,908,854 1997 2,962,096,331 139 5,552,775 850 31,549,778 1998 3,503,932,314
160 21,127,602 1,170 36,731,115 1999 3,507,562,766 193 10,408,140 1,049 29,520,379 2000 3,882,006,452 176 15,010,441 1,000 36,583,926 2001 4,310,115,280 115 8,999,817 661 20,403,617
2002 4,918,304,676 121 10,460,662 606 22,370,494 2003 5,162,418,263 107 5,209,550 533 22,362,743 Bank Deposits $684,172,000 664,412,000 729,680,000 746,950,000 773,087,000 861,750,000
977,953,000 1,044,328,000 998,029,000 N/A Source: Town of Los Gatos Building Department Bank Deposits from Findley Reports Santa Clara County Assessed Value Reports 84 Note: 2003 data
for Bank Deposits was not available
TOWN OF LOS GATOS DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS 2000 1500 en "dgen 1000 0 5000 2001 2002 2003 [ • Santa Clara County .Town J Santa Clara Town Fiscal Town County
population ..-Year population population % ofCounty 1994 28,175 1,563,800 1.80% 1995 28,731 1,587,768 1.81% 1996 28,951 1,608,944 1.80% 1997 29,683 1,652,330 1.80% 1998 30,122
1,689,200 1.78% 1999 30,274 1,715,374 1.76% 2000 30,457 1,736,722 1.75% ,-__J 2001 29,083 1,723,680 1.69% 2002 28,950 1,719,600 1.68% 2003 28,900 1,729,900 1.67% 85 Source: State of
California Department of Finance -population Research Unit e..-J
TOWN OFLOS GATOS RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL BONDED DEBT TO TOTAL GENERAL FUND EXPENDITURES LAST TEN FISCAL YEARS 0.6% ,-------------------------------------,
0.4% 0.2% 0.0% '------'--L-----' 1993 1994 -Debt Service % 1995 Percent of Total Debt Service Fiscal Total General Fund to General Fund Year Principal Interest Debt Service Expenditures
Expenditures 1993 $40,000 $4,300 $44,300 $12,635,877 0.35% 1994 70,000 2,388 72,388 12,751,462 0.57% 1995 45,000 787 45,787 12,075,473 0.38% Note: General Obligation bonds consist of
1962 Municipal Street Improvement Bonds, Issues I and 2. General Obligation bonds were repaid during fiscal year 1994-95. Source: Town of Los Gatos Annual Financial Reports 86
TOWN OF LOS GATOS COMPUTATION OF DIRECT AND OVERLAPPING DEBT JUNE 30, 2003 2002-03 Assessed valuation: $4,771,335,645 DIRECT AND OVERLAPPING BONDED DEBT: % Applicable Santa Clara County
General Fund Obligations 2.620% Santa Clara County Board ofEducation Certificates ofParticipation 2.620% Santa Clara County Flood Control and Water Conservation District, Zone NC-I \.883%
Santa Clara County Flood Control and Water Conservation District, Zone W-l 2.893% Santa Clara Valley Water District Benefit Assessment District 2.620% Santa Clara County Central Fire
District Certificates ofParticipation 20.878% West Valley Community College District Certificates ofParticipation 9.573% Los Gatos Joint Union High School District 29.260% Campbell Union
School District 9.047% Saratoga Union School District Certificates of Participation 0.020% Saratoga Union School District 0.020% Town ofLos Gatos Certificates ofParticipation 100.000%
Town of Los Gatos 1915 Act Bonds 100.000% Midpeninsula Regional Open Space Park District 4.596% Campbell Union High School District 8.475% Union School District 20.875% Los Gatos Union
School District 66.328% Los Gatos-Saratoga Joiut Union High School District Certificates ofParticipation 29.260% TOTALGROSS DIRECT AND OVERLAPPING BONDED DEBT Less: Santa Clara County
FC and WCD, Zone NC-l TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT (1) Excludes tax and revenue anticipationllotes, revenue, IIlOrtgage revenue and tax allocation bonds and non-bonded
capital lease obligations. Ratio to Assessed Valuation: Direct Debt{$2,070,000 )..._ 0.27% Total Gross Debt. 1.44% Total Net Debt.........•...•..••. \.44% STATE SCHOOL BUILDING AID REPAYABLE
AS OF JUNE 30, 2003 SOURCE: CALIFORNIA MUNICIPAL STATISTICS, INC.87 Debt at June 30, 2003 $15,890,300 498,324 4,048 203,667 5,336,154 28,120 2,370,275 21,507,563 5,767,309 1,600 10,440
12,660,000 1,060,000 4,968,974 4,635,401 13,367,206 22,485,192 1,369,368 $112,163,941 (I) 4,048 $112,159,893
TOWN OF LOS GATOS COMPUTATION OF LEGAL DEBT MARGIN JUNE 30, 2003 ASSESSED VALUATION Secured property assessed value Total Assessed Valuation BONDED DEBT LIMIT (15% OF ASSESSED VALUE)
AMOUNT OF DEBT SUBJECT TO LIMIT Total Debt Less: Certificates ofparticipation Amount of Debt subject to limit LEGAL DEBT MARGIN SOURCE: TOWN OF LOS GATOS FINANCE DEPARTMENT 88 $4,771,335,645
$4,771,335,645 12,500,000 $715,700,347 (12,500,000) $728,200,347
, ..JI TOWN OF LOS GATOS PRINCIPAL TAXPAYERS JUNE 30, 2003 Percent of Assessed Total Secured Assessed Name Value Assessed Value Sports Resorts Inc. $16,236,036 0.33% BR3 Partners $23,486,112
0.47% NME Hospitals, Inc. $17,062,560 0.34% Union Bank Trustee $10,245,195 0.21% Good Samaritan Hospitals $13,218,958 0.27% GS Baytree LP $10,239,734 0.21% Los Gatos Business Park $10,104,105
0.20% Park Row East Apartments $12,484,800 0.25% William & Loretta A. Errico, Trust $9,233,902 0.19% Ohana University Ave $11,128,200 0.22% Elizabeth K. Dodson $10,680,309 0.22% Boccardo
Corporation $21,200,425 0.43% SRI Old Town LLC $25,825,219 0.52% Health Care Property Partners $24,757,164 0.50% Sobrato Land Holdings & LSPI Exchange Corp. $41,719,724 0.84% 750 University
LLC $19,830,208 0.40% Knowles Los Gatos LLC $56,100,000 1.13% Safeway Inc. $10,224,797 0.21% San Jose Water Works $17,915,254 0.36% Green Eyes LLC $11,444,400 0.23% Totals $373,137,102
7.53% SOURCE: CALIFORNIA MUNICIPAL STATISTICS, INC. 89
TOWN OF LOS GATOS MAJOR EMPLOYERS JUNE 30, 2003 Company Product/Service Employees Good Samaritan Hospital! Columbia HCA Health IndustIy 2,000 Community Hospital of Los Gatos Health IndustIy
800 Los Gatos Union School District (Elementary) Education 300 Los Gatos-Saratoga High School District Education 300 Safeway Food IndustIy 200 Verizon Communication 200 Courtside Tennis
Club Leisure/Recreation 200 Town ofLos Gatos (A) Town Government 189 Los Gatos Meadows RetirementlHealthcare 150 Lunardi's Food IndustIy 100 Los Gatos Acura Auto Dealership 100 Swanson
Ford Auto Dealership 90 (A) Number of Employees taken from Town of Los Gatos Operating Budget. Source: Town ofLos Gatos Chamber ofCommer9b
TOWN OF LOS GATOS MISCELLANEOUS STATISTICS JUNE 30, 2003 DATE OF INCORPORATION FORM OF GOVERNMENT POPULATION 1/1/02 EMPLOYEES AREA MILES OF STREETS NUMBER OF TRAFFIC LIGHTS POLICE PROTECTION:
AUGUST 8,1887 COUNCIL-MANAGER 28,900 189 14-15 square miles 111 27 PARKS AND RECREATION PARKS ACRES IN PARKS NUMBER OF REGISTERED VOTERS COMMUNITY FACILITIES: NEIGHBORHOOD CENTER COMMUNITY
SERVICES CENTER HOSPITALS: 12 82 acres 18,522 NUMBER OF STATIONS NUMBER OF POLICE OFFICERS NUMBER OF SUPPORT PERSONNEL EDUCATION: ELEMENTARY SCHOOLS JUNIOR HIGH SCHOOLS HIGH SCHOOLS
CONTINUATION PROGRAM INDEPENDENT STUDY TEACHERS 46 194 240 COMMUNITY HOSPITAL OF LOS GATOS GOOD SAMARITAN HOSPITAL /MISSION OAKS HOSPITAL LOS GATOS-SARATOGA RECREATION DEPT LIBRARY MUSEUMS
SOURCES: VARIOUS TOWN OF LOS GATOS RECORDS 2 91