Attachment 3 2012-13 TLG CAFR - C&ALLP FinalCALIFORNIA
TOWN OF LOS GATOS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
This Page Intentionally Left Blank
TOWN OF LOS GATOS
CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2013
PREPARED BY THE
OFFICE OF THE TOWN MANAGER
This Page Intentionally Left Blank
TOWN HISTORY
The name Los Gatos comes from "El Rancho de Los Gatos." A ranch established in 1839 by a
Mexican land grant and so named because of the large number of mountain lions in the area.
In 1854, James Alexander Forbes purchased some of this land and built a flour mill. In 1860,
the first hotel was opened to provide a stage stop on the toll road which had been built
between San Jose and Santa Cruz.
Wheat production gave way to orchards, and rapid growth ensued when the railroad
reached Los Gatos in 1878. The residential subdivisions of Broadway, Bayview,
Fairview, and Almond Grove were built in the 1880's. By 1887, the population had
grown to 1,500 and Los Gatans voted to incorporate.
Fruit industries faded slowly during the Depression and World War II, but the postwar
period brought an influx of people producing residential and commercial development.
Highway 17 was constructed through the center of Town. Growth levelled off in the early
1970's, leaving Los Gatos with its small-town atmosphere and pedestrian-oriented
downtown.
Because of its distance from other centers of population, Los Gatos developed as a
complete community including residential, business and industrial elements. Preserving Los
Gatos as a complete and well-balanced community has been and remains a
prominent goal of the community. From the first 100-acre town site in 1890
with a population of 1,652, Los Gatos grew slowly so that by 1963 the area was 6.3
square miles, with a population of 11,750. Today Los Gatos covers between14 and 15
square miles and has a population of 30,247. This relatively slow growth over the first 80
years resulted in a human scale community with narrow streets and small buildings.
As it exists now, 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 settinghas 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 is an important community goal. The Town's two museums, known as the Tait
Avenue and Forbes Mill museums, also help to preserve the Town's valued history.
This Page Intentionally Left Blank
Introductory Section
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2012
TABLE OF CONTENTS
i
TITLE PAGE
INTRODUCTORY SECTION:
Table of Contents................................................................................................................................ i
Letter of Transmittal ........................................................................................................................... iii
Principal Officers ................................................................................................................................ ix
Organization Chart ............................................................................................................................. x
GFOA Award ..................................................................................................................................... xi
FINANCIAL SECTION:
Independent Auditor’s Report ........................................................................................................... 1
Management’s Discussion and Analysis ........................................................................................... 3
Basic Financial Statements:
Government-Wide Financial Statements: .................................................................................... 13
Statement of Net Position ..................................................................................................... 14
Statement of Activities ......................................................................................................... 15
Fund Financial Statements:
Governmental Funds: ........................................................................................................... 16
Balance Sheet ................................................................................................................... 17
Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position .............................................................................................. 18
Statement of Revenues, Expenditures and Changes in Fund Balances ............................. 19
Reconciliation of Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities ...................................... 20
Statement of Revenues, Expenditures and Changes in Fund Balances –
Budget and Actual (GAAP) General Fund .................................................................... 21
Proprietary Funds – Internal Service Funds: ....................................................................... 22
Statement of Net Position ................................................................................................. 23
Statement of Revenue, Expenses and Changes in Net Position ........................................ 24
Statement of Cash Flows .................................................................................................. 25
Fiduciary Funds: .................................................................................................................. 26
Statement of Fiduciary Net Position ................................................................................. 27
Statement of Changes in Fiduciary Net Position .............................................................. 28
Notes to the Basic Financial Statements ...................................................................................... 29
SUPPLEMENTARY INFORMATION:
Major Governmental Fund Schedules (other than the General Fund):.......................................... 57
Schedule of Revenue, Expenditures and Changes in Fund Balance –
Budget and Actual (GAAP) Appropriated Reserves Fund ................................................... 58
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2012
TABLE OF CONTENTS
ii
Nonmajor Governmental Funds: ...................................................................................................... 59
Combining Balance Sheets .......................................................................................................... 60
Combining Schedule of Revenues, Expenditures and Changes in
Fund Balances ...................................................................................................................... 61
Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual (GAAP) ................................................... 63
Internal Service Funds: ..................................................................................................................... 66
Combining Statement of Net Position ......................................................................................... 67
Combining Statement of Revenue, Expenses and Changes in Net Position ................................ 68
Combining Statement of Cash Flows .......................................................................................... 69
Private Purpose Trust Funds: .......................................................................................................... 70
Combining Statement of Fiduciary Net Position ......................................................................... 71
Combining Statement of Changes in Fiduciary Net Position ...................................................... 72
Agency Funds: ................................................................................................................................... 73
Statement of Changes in Assets and Liabilities - Parking Improvement District #88 ................. 74
STATISTICAL SECTION .............................................................................................................. 75
Net Position by Component ................................................................................................................ 76
Changes in Net Position ..................................................................................................................... 77
Fund Balances, Governmental Funds ................................................................................................. 78
Changes in Fund Balances, Governmental Funds .............................................................................. 79
Assessed Value and Estimated Actual Value of Taxable Property ..................................................... 80
Direct and Overlapping Property Tax Rates ....................................................................................... 81
Principal Property Tax Payers ............................................................................................................ 82
Property Tax Levies and Collections .................................................................................................. 83
Ratios of Outstanding Debt by Type .................................................................................................. 84
Direct and Overlapping Governmental Activities Debt ...................................................................... 85
Legal Debt Margin .............................................................................................................................. 86
Demographic and Economic Statistics ............................................................................................... 87
Principal Employers ........................................................................................................................... 88
Full-time Equivalent Town Government Employees by Function/Program ...................................... 89
Operating Indicators by Function/Program ........................................................................................ 90
Capital Assets Statistics by Function/Program ................................................................................... 91
OTHER INDEPENDENT AUDITOR’S REPORTS:
Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards ................................................................................................. 92
Page iii
TOWN OF LOS GATOS
OFFICE OF THE TOWN MANAGER
(408) 354-6832
FAX: (408) 399-5786
December 24, 2013
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, 2013. This report was prepared by management and the
Finance staff in the Town Manager’s Department, which assumes responsibility for the
accuracy of the data and the completeness and fairness of the presentation and all
disclosures. The information in this report is intended to present the reader with a
comprehensive view of the Town’s financial position and the results of its operations for
the fiscal year ending June 30, 2013, along with additional disclosures and financial
information designed to enable the reader to gain an understanding of the Town’s
financial activities.
This report was prepared as prescribed in Governmental Accounting Standards Board
(GASB) Statement No. 34, Basic Financial Statements-and Management’s Discussion
and Analysis-for State and Local Governments (GASB 34). This new GASB Statement
requires management to provide a narrative introduction, overview, and analysis to
accompany the basic financial statements in the form of a Management’s Discussion and
Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and
should be read in conjunction with it. The MD&A can be found immediately following
the Independent Auditor’s Report.
This Comprehensive Annual Financial Report is organized into three sections:
I. The Introductory Section includes the table of contents, letter of transmittal,
listing of elected officials and Town administrative personnel, and organization
chart delineating organizational structure.
II. The Financial Section includes the independent auditors’ opinion, management’s
discussion and analysis, the basic financial statements, notes to the financial
statements, combining statements of non-major funds, and required supplemental
information.
III. The Statistical Section includes both financial and non-financial data about the
Town.
The 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 Chavan & Associates, LLP, the
Town’s independent certified public accountants.
Page iv
Mayor and Town Council
January 30, 2013
This Comprehensive Annual Financial Report will be submitted to the Government
Finance Officers Association for consideration to be awarded its Achievement of
Excellence in financial reporting certification. This award is granted only to entities
whose reports meet the highest standards of municipal financial reporting.
THE REPORTING ENTITY AND ITS SERVICES
Los Gatos is a general law Town, incorporated under the laws of California in 1887. The
Town is located in the foothills and level terrain of the Santa Clara Valley, in an area
referred to internationally as “Silicon Valley.” From the first 100-acre town site and an
1890 population of 1,652, Los Gatos grew slowly so that by 1963 the area was 6.3 square
miles, with a population of 11,750. Today Los Gatos covers approximately 15 square
miles with a population of 30,247. 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 complete and well-balanced community has been and remains a
prominent goal for the community.
Five council members are elected at large for staggered four-year terms to govern the
Town. The Mayor and Vice-Mayor are appointed by the Council from its own ranks and
serve for one-year terms. The Town Manager and Town Attorney are appointed and
supervised directly by the Council. The Town Manager oversees traditional municipal
services such as Public Safety, Parks & Public Works, Community Development,
Community Services and a Public Library.
This report includes all funds of the Town of Los Gatos. As of February 1, 2012, in
accordance with Assembly Bill 1X26, the Redevelopment Agency for the Town of Los
Gatos was dissolved. Until its dissolution, the Town of Los Gatos Redevelopment
Agency was governed by a board that as the same is the Town’s governing body. As a
result of the dissolution, the RDA Successor Agency private-purpose trust fund was
created and the Certificates of Participation (COP) RDA Debt Service Fund and
Redevelopment Agency Low & Moderate Housing Capital Projects Fund were closed out
as of June 30, 2012 and are now being held in the Successor Agency Trust fund.
ECONOMIC CONDITIONS AND OUTLOOK
Consistent with other Silicon Valley communities, the Town of Los Gatos has been
impacted by the effects of the national economic downturn. While the economy is
improving and economically sensitive revenues, such as Transient Occupancy Tax, and
License and Permit revenues, are increasing, the Town still experienced a decrease in
operating revenues. As a result of the recession and a change in the business model for
one of the Town’s largest businesses, the Town has experienced significant reductions in
sales tax revenues. In addition, while the property tax values in Los Gatos continue to
remain stable, The Town of Los Gatos experienced an overall decrease in property tax
revenues due to the dissolution of the Redevelopment Agency.
Page v
Mayor and Town Council
January 30, 2013
In recent years, the Town has implemented a number of strategies to keep operating
revenues in balance with ongoing operating expenditures. These steps included selected
hiring freezes, the elimination of vacant positions, organizational realignments, and
departmental cost saving efficiencies, among other strategies, that have allowed the Town
to remain fiscally balanced during these challenging economic times.
General Fund revenues (including operating transfer-ins) increased by 3% from the prior
year. The Town relies heavily on sales tax revenues to support General Fund operations,
comprising approximately 20% of General Fund revenues in FY 2012/13. The FY
2012/13 $8.8 million sales tax receipts were $1.1 million lower than the prior year’s
collection. This decrease in sales tax is due to a business model change in Netflix, an
internet streaming provider, which previously accounted for nearly 40% of all sales tax
received by the Town. However, overall the outlook for sales tax is promising as many
businesses are reporting increased revenues. Therefore, given the change in the Netflix
business model, diversification remains a top priority for the Town.
Los Gatos property values remain largely stable, with moderate growth forecasted given
increased home sales coupled with adjustments in property tax distribution due to the
dissolution of the California redevelopment agencies. Despite the slow economic
recovery, the Town continues to strategically use its Economic Vitality program to ensure
the fiscal health of the Town.
The Town continues to experience challenges due to the State of California’s budget
impacts. Effective February 1, 2012, redevelopment agencies were dissolved and
suspended all activities, with the exception of the implementation of existing contracts
and payment of enforceable obligations entered into prior to February 1, 2012. While
the Successor Agency will continue to receive tax increment revenue to pay enforceable
obligations, like debt service, funding for administrative services and various program
reimbursements has been significantly limited.
In addition, the Town is preparing for a sharp increase in CALPERS employer rates
effective in 2015/16. Estimates indicate the Town may be paying 34% more in 10 years
than it is currently costing the Town today. The Town has managed to limit the effects of
State revenue reductions and expanding future costs due to increase CALPERS rates with
pro-active strategic budgetary changes and expenditure reductions made on an
organizational basis.
Despite the reductions to various state sources of local government revenue and
mandated increased costs, the Town has maintained high service levels due to the
General Fund’s strong fiscal health through FY 2012/13. The Town continues to
diligently outreach to the community, the League of California Cities, and local
legislators to prevent and limit any future revenue losses and mandated cost increases.
Page vi
Mayor and Town Council
January 30, 2013
MAJOR INITIATIVES
Major initiatives addressing the critical capital asset and infrastructure needs of the Town
were a priority for the fiscal year. Approximately $6.6 million in Town infrastructure
and other capital asset improvements were made in FY 2012/13, including $1.4 million
for the development of a 2.5 acre sports park, $1.0 million for the phase 3 completion of
the Pageant Grounds, and $500,000 for curb, gutter, sidewalk improvements, and
retaining wall repairs. In addition, approximately $2.9 million was invested in the
Town’s streets and roads, including improvements to major arterials and neighborhood
collector streets to enhance pedestrian and traffic safety.
Additional infrastructure improvements were scheduled in accordance with the Town’s
approved Capital Improvement Plan, and will continue into future years. All of these
improvements are funded either through debt issuance, grants, or via revenues
accumulated from prior year budget savings and/or excess revenues per Town Council
policy.
ACCOUNTING SYSTEM AND BUDGETARY CONTROL
The effectiveness of internal 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 of assets 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, and that management must make estimates and judgments in
evaluating these costs and benefits.
All governmental fund types use the modified accrual basis of accounting. This means
that revenues are recorded when measurable and available rather then when received.
Measurable means the amount can be determined and available means the cash is
received within forty-five days after the end of the fiscal year. Expenditures are recorded
when the liability is incurred, rather than when paid. An exception to this rule is
principal and interest on general long-term debt, which is not recognized by debt service
funds until it is due.
Proprietary (internal service) funds are accounted for using the accrual basis of
accounting, similar to that used by corporations. Proprietary fund revenues are
Page vii
Mayor and Town Council
January 30, 2013
recognized when they are earned rather than when the cash is received, even if the cash is
not available and proprietary fund expenses are recognized when they are incurred.
With the implementation of GASB 34, the Town now prepares its Basic Financial
Statements on the accrual basis.
Internal accounting procedures have been developed to provide reasonable assurance
regarding the safeguarding of assets and the reliability of financial records for preparing
financial statements and maintaining asset accountability.
An annual operating budget 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.
AWARDS
The Town’s Comprehensive Annual Financial Report for the fiscal year ended June 30,
2012 was awarded a Certificate of Achievement for Excellence in Financial Reporting by
the national Government Finance Officers Association. This prestigious award recognizes
the report’s conformance with strict accounting and reporting standards established by
the Government Accounting Standards Board and government finance organizations.
This award is annual in nature and valid for one year only. This year’s report will be
submitted for award consideration by this organization, as we believe it continues to meet
these standards.
INDEPENDENT AUDIT
State law requires an annual audit of the Town’s accounts by independent certified public
accountants. The accounting firm of Chavan & Associates, LLP performs this function
for the Town of Los Gatos, and its report is included in the financial section of the
CAFR.
ACKNOWLEDGEMENTS
The preparation of this Comprehensive Annual Financial Report, as presented herein, is
the result of the combined efforts and dedicated services of the excellent staff of the
Department of Finance. Special thanks to Jen Callaway, Finance & Budget Manager,
Krysten Lee, Accountant; Linda Isherwood, Analyst, Nicole Tram, Accounts Payable
Technician, and Gitta Ungvari Administrative Technician, for their efforts in preparing
this report.
Page viii
Mayor and Town Council
January 30, 2013
Respectfully submitted,
_____________________________ ___________________________________
Greg Larson Stephen D. Conway
Town Manager Director of Finance & Administrative Services
ix
TOWN OF LOS GATOS
PRINCIPAL OFFICERS
JUNE 30, 2013
TOWN COUNCIL
Mayor Barbara Spector
Vice Mayor Steve Leonardis
Council Member Marcia Jensen
Council Member Diane McNutt
Council Member Joe Pirzynski
COUNCIL APPOINTEES
Town Manager Greg Larson
Town Attorney Judith Propp
APPOINTED OFFICIALS
Assistant Town Manager Pamela Jacobs
Chief of Police Scott Seaman
Community Development Director Wendie Rooney
Finance and Administrative Services Director Stephen Conway
Human Resources Director Rumi Portillo
Parks and Public Works Director Todd Capurso
Town Librarian
x
Town of Los Gatos
Organizational Structure
Page xi
Financial Section
Page | 1 1475 Saratoga Ave, Suite 180, San Jose, CA 95129
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the
Town Council of the Town of Los Gatos
Los Gatos, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund,
and the aggregate remaining fund information of the Town of Los Gatos (the “Town"), as of and for the
year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise
Town’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
The Town’s management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of America;
this includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to fraud
or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America, the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the Town’s preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by management,
as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, each major fund, and the aggregate remaining
fund information of the Town of Los Gatos, as of June 30, 2013, and the respective changes in financial
position and, where applicable, cash flows thereof for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
Page | 2 1475 Saratoga Ave, Suite 180, San Jose, CA 95129
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and required supplementary information, as listed in the table of contents, be presented to
supplement the basic financial statements. Such information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate operational,
economic, or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America,
which consisted of inquiries of management about the methods of preparing the information and comparing
the information for consistency with management’s responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the information because the limited procedures do not
provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the Town’s financial statements as a whole. The introductory section, combining individual non-
major fund statements and schedules, and statistical section, as listed in the table of contents, are presented
for purposes of additional analysis and are not a required part of the financial statements. The combining
individual non-major fund statements and schedules have been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole. The introductory and statistical sections have not
been subjected to the auditing procedures applied in the audit of the basic financial statements and,
accordingly, we do not express an opinion or provide any assurance on them.
Other Information
As discussed in Note 1 to the financial statements, the Town adopted the provisions of GASB Statement
No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net
Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, effective July
1, 2012.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 22,
2013 on our consideration of the Town’s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
The purpose of that report is to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing, and not to provide an opinion on internal control over
financial reporting or on compliance. That report is an integral part of an audit performed in accordance
with Government Auditing Standards in considering the Town’s internal control over financial reporting
and compliance.
December 22, 2013
San Jose, California
This Page Intentionally Left Blank
Management’s Discussion and Analysis
MANAGEMENT’S DISCUSSION AND ANALYSIS
3
Our discussion and analysis of the Town of Los Gatos financial performance provides an
overview of the Town’s financial activities for fiscal year ending June 30, 2013. 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 of FY 2013/14 by $137,988,483 (net
position). Of this amount, $41,480,377 (unrestricted net position) may be used to meet the
Town’s ongoing obligations to citizens and creditors.
The Town’s Net position increased by $5,295,586 million due primarily to the extraordinary
gain on the dissolution of the former Redevelopment agency, pursuant to the enactment of
California Assembly Bill (AB) 1X26 that dissolved all Redevelopment Agencies in the State
of California. Other contributing factors includes an increase of $1.5 million in the Town’s
general accounts receivables and a decrease of the Town’s overall liabilities by $1.1 million,
5% lower compared to the prior fiscal year.
Total fund balances for governmental funds at year end were $38,464,575, an increase of
$1,788,263 (5%) from the prior year. The increase is mainly the result of the dissolution of
the former Redevelopment Agency’s fund balances, in accordance with AB 1X26.
At the end of FY 2013/14, fund balance for the General Fund was $28,260,602,
approximately 83% of General Fund expenditures for the current fiscal year.
The Town’s total capital assets increased by $3,502,135 net of depreciation.
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 position – presents information on all of the Town’s assets and liabilities,
with the difference between the two reported as net position. Over time, increases or decreases
in net position may serve as a useful indicator of whether the financial position of the Town is
improving or deteriorating.
The statement of activities – presents information showing how the Town’s net position changed
during the most recent fiscal year. All changes in net position are reported as soon as the
underlying event giving rise to the change occurs, regardless of the timing of related cash flows.
Thus, revenues and expenses are reported in this statement for some items that will only result in
cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
Both of the government-wide financial statements distinguish functions of the Town that are
principally supported by taxes and intergovernmental revenues (governmental activities) from
other functions that are intended to recover all or a significant portion of their costs through user
MANAGEMENT’S DISCUSSION AND ANALYSIS
4
fees and charges (business–type activity). The governmental activities of the Town include
public safety, parks and public works, community development, library, community services,
debt service, redevelopment, and general government. The Town has no business-type activities.
In prior years, 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 was financially accountable. In accordance with
Assembly Bill 1X 26 (AB 1X26) which provides for the dissolution of all redevelopment
agencies in the State of California, the Town of Los Gatos agreed to serve as the successor
agency and thereby to hold the assets until they were distributed to other units of state and local
government. In accordance with AB 1X26, the Town of Los Gatos Redevelopment Agency
dissolved and ceased to operate as a legal entity on February 1, 2012.
Prior to February 1, 2012, the final seven months of activity of the redevelopment agency
continued to be reported in the governmental funds of the Town. After February 1, 2012, the
assets and activities of the dissolved redevelopment agency are reported in a fiduciary fund
(RDA Successor Agency private-purpose trust fund) in the financial statements of the Town.
Additional information on the dissolution of the RDA and this newly formed fiduciary fund can
be found in Note 12 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.
Governmental funds – The Town’s basic services are reported in governmental funds, which
focus on how money flows into and out of those funds and the balances left at year-end that are
available for spending. These funds are reported using the modified accrual basis of accounting,
which measures cash and other financial assets that can readily be converted to cash. The
governmental fund statements provide a detailed short-term view of the Town’s general
government operations and the basic services it provides. Governmental fund information helps
determine whether there are more or fewer financial resources that can be spent in the near future
to finance the Town’s operations. Both the governmental fund balance sheet and the
governmental fund statement of revenues, expenditures, and changes in fund balances provide a
reconciliation to facilitate this comparison between governmental funds and governmental
activities.
Proprietary funds – The Town maintains one type of proprietary fund: internal service funds.
Proprietary funds are reported using the accrual basis of accounting. Internal service funds are
an accounting 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS
5
Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of parties
outside the Town. Fiduciary funds are not reflected in the government-wide financial statements
because the resources of those funds are not available to support the Town’s own programs.
Included in fiduciary funds is the RDA Successor Agency private-purpose trust fund created
upon the dissolution of the former Redevelopment Agency. The Trust Fund was created to hold
the assets of the former Redevelopment Agency until they are transferred for governmental
purposes to other entities, or distributed to the underlying taxing jurisdictions in Santa Clara
County after the payment of enforceable obligations.
Notes to basic financial statements
The notes provide additional information essential to a full understanding of the data provided in
the government-wide and fund financial statements. The notes to basic financial statements can
be found on pages 29-56 of this report.
Government-wide Financial Analysis
Net position may serve over time as a useful indicator of a government’s financial position. In
the case of the Town, assets exceeded liabilities by $138 million at the end of the current fiscal
year.
Capital assets represent approximately 59% of the Town’s total assets consisting of investments
made by the Town in permanent or long-lived 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 customers; 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS
6
For the current year, Net Investment in Capital Assets increased by approximately $2.2 million as
a result of approximately $3.5 million, net of construction in progress, in capital improvements
made and approximately $1.3 million in capital assets removed as a result of the RDA
dissolution.
An additional portion of the Town’s net position (3%) represents resources that are subject to
external restrictions on how they may be used. The balance of Unrestricted net position may be
used to meet the Town’s ongoing obligations to citizens, customers, and creditors. The Town’s
Unrestricted net position represent (30%) of the Town’s net position at year end.
Governmental activities
MANAGEMENT’S DISCUSSION AND ANALYSIS
7
As shown in the schedule above, governmental activities for the year increased the Town’s net
position by $5,295,586. Key elements of the increase in net position are as follows:
Property Tax revenues collected for the Town and the Redevelopment Agency accounted
for 26% of total Town revenues. Property tax revenues for Town activities fell by $3.4
million or 24%, from FY 11/12 due primarily to the dissolution of the redevelopment
agency. Under AB 1X26, the former Redevelopment Agency did not receive its usual
second-half-of-the-fiscal-year infusion of property tax increment revenue from the
County of Santa Clara. Instead, this revenue was diverted to a new Real Property Tax
Trust Fund administered by the County Auditor-Controller, out of which the Town, as
Successor Agency to the Town of Los Gatos Redevelopment Agency, paid enforceable
obligations with the excess distributed to underlying taxing entities.
Sales Tax revenue of $8.8 million accounted for 21% of Town total revenues for the year.
The 11% decrease of approximately $1.1 million from the prior year collections is due to
the a business model change in Netflix, an internet streaming provider, which previously
accounted for nearly 40% of all sales tax received by the Town.
Other taxes, other revenues, and motor vehicle in lieu taxes of $3,406,392 accounted for
8% of total revenues, decreasing by 8% from the prior year’s amount of $3,713,991. This
decrease was primarily the result of the dissolution of the former Redevelopment Agency
and its related other revenues.
Investment earnings of ($133,375), net of amortized premiums, decreased by $464,795
from the prior year. This decrease due to a declining interest rate environment and for
purposes of complying with the Governmental Accounting Standards Board - Statement
No. 31 (GASB 31), the Town calculated an unrealized loss of $549,990 on the Town’s
investment pool for the fiscal year.
Total expenditures increased by $346,847 or 1% from the prior year. This increase was
primarily the result of increased expenditures in general government.
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 FY 2013/14, the Town’s
governmental funds reported combined ending fund balances of $38,464,575, an increase of
$1,788,263 in comparison with the prior year. This increase is primarily due to the dissolution of
the Redevelopment Agency.
MANAGEMENT’S DISCUSSION AND ANALYSIS
8
Approximately 90% or $34,514,992 of the total amount of governmental fund balances of
$38,464,575 is assigned or unassigned fund balance, which is available for spending at the
Town’s discretion. The remainder of fund balance is restricted and is not available for new
spending because it has already been restricted to (1) provide for appropriated capital projects
($3,799,736); and (2) to provide for dedicated repair and maintenance in lighting and landscape
districts ($149,847).
General Fund - 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, the General Fund net fund balance increased by 9% from prior year balances
to $28,260,602 primarily as a result of an increase in revenues. The largest increase occurred in
licenses & permits due to a recalculation of West Valley Solid Waste Program Authority
(WVSWMA) fees. General Fund expenditures (excluding transfers-out) increased by 7% from
the prior fiscal year primarily due to a previously bargained increased for Public Safety Officers
and benefit cost payments related to the Town’s pension and post-retirement medical plans for
both safety and non-safety employees. Additionally, the General Fund absorbed administrative
and other costs effective February 1, 2012 from the former Redevelopment Agency.
Other Major Funds
General Fund Appropriated Reserve (GFAR) Capital Projects Fund. The GFAR fund is used as
the primary capital projects fund for the Town and is used for the acquisition and construction of
major capital projects in the Town. Fund balances decreased to $6,097,182 primarily due to
capital spending made on the new library building during the fiscal year.
Certificates of Participation (COP) RDA Debt Service Fund. As a result of the Redevelopment
Agency Dissolution, this fund has been closed as of June 30, 2012.
Redevelopment Agency Low & Moderate Housing Capital Projects Fund. As a result of the
Redevelopment Agency Dissolution, this fund has been closed as of June 30, 2012.
Other Non-Major Other Governmental Funds. These funds consist primarily of special revenue
funds 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 and other non-major capital
projects funds. Total fund balances for other non-major other governmental funds increased by
$109,511.
Proprietary funds
The Town’s proprietary funds provide the same type of information found in the government-
wide financial statements, but in more detail.
Internal Service Funds - The Town has seven internal service funds: Worker’s Compensation,
Self Insurance; Stores, Vehicle Maintenance, Building Maintenance, Management Information
Systems, and Equipment Replacement funds. Revenues to these funds are generated from fees
charged to the Town’s operating programs for services provided.
MANAGEMENT’S DISCUSSION AND ANALYSIS
9
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 $499,341
and $80,085 respectively versus $39,510 and $82,893 in the prior year. The decrease in operating income
in the Vehicle Maintenance Fund from the prior year is attributable to the contracting out maintenance
services to reduce General Fund operating expenses. The increase in Equipment Replacement Fund is
attributable to the cyclical nature of fleet purchases in accordance with the Town’s fleet replacement
schedule.
The Building Maintenance, Stores, and Management Information Systems funds charge premiums based
on use and labor charges to provide Town-wide building maintenance, mail and office inventory and
duplication charges, and management information services. Net operating income (loss) before transfers
at year end was $240,844, ($47,357) and $22,352 respectively. Revenues exceeded expenditures in the
Building Maintenance Fund due to decreased heating, ventilation and air conditioning maintenance and
repair costs experienced in the prior year. The office store expenditures increased because of the
additional copiers added to the maintenance lease for the New Library building during FY 2013/14.
Management information systems also experienced savings on anticipated repairs and replacements.
The Worker’s Compensation and Self Insurance 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 was ($53,723) and ($243,106) respectively, versus
($509,246) and ($470,928) in the prior year. The decrease of Operating income for the year in
the Worker’s Compensation and Self Insurance funds reflects the adverse experience of loss
claims in the current year from the prior year in Worker’s Compensation and general liability
claim payments and settlements.
GOVERNMENT FUNDS BUDGETARY HIGHLIGHTS:
Budget Adjustments
Comparing the FY 2013/14 original budget (or adopted) General Fund Expenditures of
$33,279,293 (excluding budgeted transfers-out), the final budget amount of $34,392,465 shows a
net increase of $1,113,172. Additions to the original budget included approved additions of
$1,113,172 in net miscellaneous adjustments approved by Town Council throughout the fiscal
year.
Original
Budget
+
Approved
Carryforwards
+
Prior Year
Encumbrances
+
Misc.
Adjustments &
Mid-Year
Adjustments
=
Final
Budget
$33,279,293 $-0- $-0- $1,113,172 $34,392,465
The increase in General Fund appropriations occurred from the following budget adjustments:
$348,800 increase is related to development “pass-thru” activities.
MANAGEMENT’S DISCUSSION AND ANALYSIS
10
$225,000 in Patrol for public safety to fund additional overtime incurred as a result of a local
homicide investigation.
$190,000 increase to the Below Market Price Housing Program.
$70,000 to increase to police staffing salaries to fund additional staff time as a result of the
parole realignment revenues received from the state.
$62,500 increase in Next Door Solutions to Domestic Violence for PD partnership to provide
assistance to domestic violence victims.
$55,000 increase to administer the Town’s Below Market Price Affordable Housing
Program.
$50,000 increase to fund the design phase of the Winchester/Lark intersection project which
will construct a new northbound lane, relocate signal poles, restripe the intersection and
reconfigure the traffic signal system.
$13,652 increase in grant money from the Santa Clara Public Health Department for Obesity
Prevention to aid the Town in expanding obesity prevention efforts.
Comparing the FY 2013/14 final amended budget to the actual result shows $4.9 million in
operational savings due to various cost saving methods. These steps included selected hiring
freezes, strategic expenditure slowdowns, and departmental cost saving efficiencies among other
strategies.
Capital Assets
As of June 30, 2013, the Town’s investment in capital assets for its governmental activity is
recorded at $92,558,523 (net of accumulated depreciation). The investment in capital assets
includes land, buildings and improvements, infrastructure, construction in progress and
machinery and equipment. During FY 2012/13 the Town’s $6.6 million investment in capital
assets for the current year represented approximately 4% of total assets for governmental
activities. Major capital asset events during the current fiscal year include the following:
$2.9 million for street improvements;
$1.4 million for the Los Gatos Creekside Sports Park;
$1.0 million for Phase 3 completion of the Pageant Grounds;
$.81 million traffic signal improvements;
$.50 million for curb, gutter and sidewalk improvements and retaining wall.
MANAGEMENT’S DISCUSSION AND ANALYSIS
11
Additional information on the Town’s capital assets is found in Note 5 of this financial report.
Economic Factors and Next Year’s Budgets and Rates
A product of an ongoing examination of how the Town provides cost-effective services, the
Town’s budget emphasizes outcomes or results for the community and allows for longer-term
financial planning decisions.
During the development and adoption of the Town’s FY 2013/14 budget, the Town Council and
management considered the following factors:
The Town anticipates a decline in sales tax growth for FY 2013/14. Sales tax estimates for
FY 2013/14 were budgeted reflecting a 1% decline from the prior year’s adopted sales tax of
approximately $7.9 million dollars. While the economy is turning around and primarily sales
tax revenue is up in most industries the Town is still being impacted by the business model
change in Netflix, an internet streaming provider, which previously accounted nearly 40% of
all sales tax received by the Town. With sales tax representing approximately 24% of the
Town’s General Fund revenues, any fluctuation in local sales tax collections will
significantly impact the Town.
General property tax collections represent approximately 24% (not including the State’s
property tax “backfill” shifts) of the Town’s General Fund revenues and anticipated to
experience a slight decrease of 3% based on data from the Santa Clara County Tax
Assessor’s Office. Los Gatos is one of the few cities in Santa Clara County that did not
encounter significant loss of assessed valuation due to the recent recession and expects
positive growth for FY 2013/14. The decrease in property tax is largely attributable to
overestimated growth predicted by the Santa Clara County Tax Assessor’s Office in 2012
and a lower than expected CPI increase for the County, below the 2% cap for valuation
increases.
The Town’s investment portfolio experienced a decline in its overall weighted average
annual yield, lowering from 1.46% at June 30, 2011 to 0.97% at June 30, 2013. As a result
of declining interest rates for FY 2013/14, and reduced cash balances due to significant
MANAGEMENT’S DISCUSSION AND ANALYSIS
12
capital expenditures, investment earnings are expected to be lower than the prior year.
Budgeted estimates have been reduced to $421,656 from the adjusted budget estimate to
$979,849 from the prior year.
Transient Occupancy Tax (TOT) revenues are expected to be higher in FY 2013/14 as
personal and business related travel is gaining strength. Given the increase in travel activity,
the FY 2013/14 TOT revenues were budgeted at $1,000,000 reflecting an 8% decrease from
the FY 2012/13 adopted budget but an overall 2% increase from actual revenues received in
FY 2012/13.
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 Stephen Conway, Director of Finance, at 110 East Main
Street, Los Gatos, California, 95030, or phone (408) 354-6828.
This Page Intentionally Left Blank
Basic Financial Statements
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
GOVERNMENT-WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES
13
The purpose of the Statement of Net Position and the Statement of Activities is to summarize the
entire financial activities and financial position of the Town. They are prepared on the same
basis of accounting (accrual) used by most businesses, which means they include all the Town’s
assets and liabilities, as well as its revenues and expenses. The effect of the entire Town’s
transactions is accounted for, regardless of when cash changes hands, and all material internal
transactions between funds have been eliminated.
The Statement of Net Position report the Town’s total assets, deferred outflows of resources,
liabilities, and deferred inflows of resources, including capital assets and long-term debt, and
presents similar information to the old balance sheet format while focusing the reader on the
composition of the Town’s net position (assets minus liabilities). The Statement of Net Position
summarizes the financial position of the Town’s governmental activities in a single column.
The Town’s governmental activities include the activities of the General Fund, Special Revenue
Funds, Capital Projects Funds and Debt Service Funds. These funds are serviced by the Town’s
Internal Service Funds; therefore internal service activities are consolidated with governmental
activities after eliminating inter-fund transactions and balances.
The Statement of Activities reports increases and decreases in the Town’s net position and is
prepared on the full accrual basis of accounting, which means it includes all the Town’s revenues
and expenses regardless of when cash changed hands. This differs from the “modified accrual”
basis of accounting used in the fund financial statements, which reflect only current assets,
current liabilities, available revenues and measurable expenditures.
The format of the Statement of Activities presents the Town’s expenses before revenues and by
program. Program revenues (revenues generated directly by specific programs) are deducted
from program expenses to arrive at the net expense of each governmental program, which is
offset by general revenues as listed before the change in net position. From these components,
the change in net position is computed and reconciled to the Statement of Net Position.
Both of these statements include the financial activities of the Town.
The Statement of Net Position, Statement of Activities, fund financial statements and the notes to
financial statements comprise the Basic Financial Statements of the Town. The term “Basic
Financial Statements” replaced the term “General Purpose Financial Statements” which is no
longer used.
TOWN OF LOS GATOS, CALIFORNIA
STATEMENT OF NET POSITION
JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
14
Governmental
Activities
ASSETS
Cash and investments (Note 2)59,028,889$
Restricted cash and investments (Note 2)18,653
Receivables:
Accounts2,852,366
Interest137,490
Intergovernmental1,512,092
Materials, supplies and deposits24,396
Long term notes receivables (Note 3)1,373,195
Capital Assets (Note 5):
Nondepreciable20,513,407
Depreciable, net of accumulated depreciation72,045,116
Total Assets157,505,604$
LIABILITIES
Accounts payable 1,078,892$
Accrued payroll and benefits3,926,139
Due to other governments8,394
Deposits3,275,826
Claims payable (Note 11)1,149,295
Long-term liabilities:
Due within one year
Compensated absences (Note 1)1,325,974
Due in more than one year
Post retirement benefits (Note 10)3,484,860
Compensated absences (Note 1)1,125,457
Total Liabilities15,374,837$
DEFERRED INFLOWS OF RESOURCES
Unearned Revenue4,142,284$
NET POSITION (Note 1)
Net investment in capital assets92,558,523$
Restricted for:
Capital projects3,799,736
Lighting and landscape repairs and maintenance149,847
Total Restricted Net Position3,949,583
Unrestricted41,480,377
Total Net Position137,988,483$
TOWN OF LOS GATOS, CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
15
Net (Expense)
Revenues and
Changes in
Net Position
OperatingCapital
Charges forGrants andGrants andGovernmental
Functions/ProgramsExpensesServicesContributionsContributionsActivities
Governmental Activities:
General government6,564,768$ 1,416,593$ 8,406$ 169,270$ (4,970,499)$
Public safety13,731,754 2,450,630 91,360 - (11,189,764)
Parks and public works7,829,315 3,032,435 835,724 2,757,660 (1,203,496)
Community development4,094,188 4,649,444 - - 555,256
Library services2,128,823 50,696 40 - (2,078,087)
Sanitation393,205 403,294 - - 10,089
Payments to Successor Agency1,277,063 - - - (1,277,063)
Total Governmental Activities36,019,116$ 12,003,092$ 935,530$ 2,926,930$ (20,153,564)
General revenues and special items:
Taxes:
Property taxes10,729,602
Sales taxes8,757,428
Franchise taxes2,028,903
Other taxes1,361,699
Motor vehicle in lieu15,790
Investment earnings(133,375)
Miscellaneous1,154,647
Special items:
Gain (loss) on the sale of property54,425
Extraordinary gain (loss) on dissolution of Redevelopment Agency1,480,031
Total general revenues and special items25,449,150
Change in Net Position5,295,586
Net Position - Beginning132,692,897
Net Position - Ending137,988,483$
Program Revenues
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
FUND FINANCIAL STATEMENTS &
MAJOR GOVERNMENTAL FUNDS
16
Fund Financial Statements:
The Fund Financial Statements only present major funds individually while nonmajor funds are
combined in a single column. Major funds are generally defined as having significant activities
or balances in the current year. No distinction is made between fund types and the practice of
combining like funds and presenting their totals in separate columns has been discontinued along
with the use of the General Fixed Assets and General Long-Term Debt Account Groups.
Major Governmental Funds:
The Town determined that the following funds were major funds for the year ended June 30,
2013. Individual non-major funds can be found in the supplemental section.
General Fund is the general operating fund of the Town and is used to account for all financial
resources except those required to be accounted for in another fund.
Appropriated Reserves Fund is used to account for resources provided for capital projects not
fully funded from other sources.
TOWN OF LOS GATOS, CALIFORNIA
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
17
Other
NonmajorTotal
AppropriatedGovernmentalGovernmental
GeneralReservesFundsFunds
ASSETS
Cash & Investments35,062,449$ 7,241,050$ 3,993,338$ 46,296,837$
Receivables:
Accounts1,353,390 1,353,000 143,768 2,850,158
Interest 137,490 - - 137,490
Intergovernmental1,276,652 85,500 149,940 1,512,092
Due from Other Funds21,708 - - 21,708
Total Assets37,851,689$ 8,679,550$ 4,287,046$ 50,818,285$
LIABILITIES
Accounts Payable749,780$ 76,875$ 4,636$ 831,291$
Accrued Payroll and Benefits3,904,585 - 1,753 3,906,338
Due to other governments7,976 404 - 8,380
Deposits3,275,826 - - 3,275,826
Due to Other Funds- - 21,708 21,708
Compensated Absences167,883 - - 167,883
Total Liabilities8,106,050 77,279 28,097 8,211,426
DEFERRED INFLOWS OF RESOURCES
Unearned Revenue1,485,037$ 2,505,089$ 152,158 4,142,284
FUND BALANCE (Note 8)
Restricted for:
Capital Outlay- - 3,799,736 3,799,736
Repairs and Maintenance- - 149,847 149,847
Assigned to:
Vasona Land Sale410,599 - - 410,599
Open Space562,000 - - 562,000
Post Retirement Medical400,000 - - 400,000
Parking - 1,460,210 - 1,460,210
Sustainability140,553 - - 140,553
Productivity Enhancements100,000 - - 100,000
Economic Uncertainty4,178,192 - - 4,178,192
Capital Projects 12,377,360 4,591,738 - 16,969,098
Carryover56,741 - - 56,741
Comcast PEG- 45,234 - 45,234
Revenue Stabilization Fund6,721,808 - - 6,721,808
Special Studies490,000 - - 490,000
Year End Budget Savings490,000 - - 490,000
Compensated Absences2,333,349 - - 2,333,349
Unassigned- - 157,208 157,208
Total Fund Balances28,260,602 6,097,182 4,106,791 38,464,575
Total Liabilities, Fund Balances
and Deferred Inflows of Resources37,851,689$ 8,679,550$ 4,287,046$ 50,818,285$
TOWN OF LOS GATOS, CALIFORNIA
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE GOVERNMENT-WIDE STATEMENT OF NET
POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
18
Fund Balance - Total Governmental Funds38,464,575$
Amounts reported for Governmental Activities in the Statement of Net Position are
different from those reported in the Governmental Funds because of the following:
CAPITAL ASSETS
Capital assets used in the Governmental Activities are not financial resources and,
therefore, are not reported in the Governmental Funds.92,558,523
ALLOCATION OF INTERNAL SERVICE FUND NET POSITION
Internal service funds are used by management to charge the cost of management of
certain activities such as insurance, central services and maintenance to individual
governmental funds. The net current assets of the internal service funds are therefore
included as Governmental Activities in the Statement of Net Position. 11,360,601
LONG-TERM LIABILITIES
Long-term liabilities, including bonds payable, are not due and payable in the current
period and, therefore, are not reported in the Governmental Funds.
Post Retirement Benefits(3,484,860)
Compensated absences(2,283,551) (5,768,411)
LONG-TERM NOTES RECEIVABLES
In governmental funds, notes receivables are not available to pay for current
period expenditures and, therefore, are offset by unearned revenue. 1,373,195
Net Position - Governmental Activities137,988,483$
TOWN OF LOS GATOS, CALIFORNIA
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
19
Other
NonmajorTotal
AppropriatedGovernmentalGovernmental
GeneralReservesFundsFunds
REVENUES
Property Taxes11,875,862$ -$ 41,238$ 11,917,100$
Sales Taxes 8,757,428 - - 8,757,428
Other Taxes3,336,756 302,028 283,487 3,922,271
Licenses & Permits4,015,871 - - 4,015,871
Intergovernmental924,657 788,095 902,439 2,615,191
Charges for Services4,711,280 1,414,660 403,294 6,529,234
Fines and Forfeitures688,110 - 15 688,125
Interest(163,070) - 29,690 (133,380)
Use of Property38,910 - - 38,910
Other 3,168,200 1,397,871 11,513 4,577,584
Total Revenues37,354,004 3,902,654 1,671,676 42,928,334
EXPENDITURES
Current:
General Government8,318,214 - - 8,318,214
Public Safety13,370,032 - - 13,370,032
Parks and Public Works5,599,022 - 17,175 5,616,197
Community Development4,235,832 - 13,230 4,249,062
Library Services2,055,069 - - 2,055,069
Sanitation and Other- - 359,725 359,725
Capital Outlay402,842 5,273,966 891,845 6,568,653
Payments to Successor Agency- 1,277,063 - 1,277,063
Total Expenditures33,981,011 6,551,029 1,281,975 41,814,015
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES3,372,993 (2,648,375) 389,701 1,114,319
OTHER FINANCING SOURCES (USES)
Transfers in (Note 4)623,096 2,218,785 - 2,841,881
Transfers (out) (Note 4)(2,043,695) (139,965) (280,190) (2,463,850)
Total Other Financing Sources (Uses)(1,420,599) 2,078,820 (280,190) 378,031
Extraordinary Gain (Loss) - RDA Dissolution295,913 - - 295,913
NET CHANGES IN FUND BALANCES2,248,307 (569,555) 109,511 1,788,263
BEGINNING FUND BALANCES26,012,295 6,666,737 3,997,280 36,676,312
ENDING FUND BALANCES28,260,602$ 6,097,182$ 4,106,791$ 38,464,575$
TOWN OF LOS GATOS, CALIFORNIA
RECONCILIATION OF THE GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES TO THE GOVERNMENT-WIDE
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
20
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS1,788,263$
Amounts reported for Governmental Activities in the Statement of Activities are
different because of the following:
CAPITAL ASSET TRANSACTIONS
Governmental funds report capital outlays as expenditures. However, in the Statement of
Activities the cost of those assets is capitalized and allocated over their estimated useful
lives and reported as depreciation expense.
Expenditures for capital assets (additions)6,555,861$
Current year depreciation(3,098,760) 3,457,101
Gains and losses from the disposal of capital assets are not considered current financial resources and
are not recorded in the governmental funds Statement of Revenues and Expenditures but are
recorded in the government-wide Statement of Activities because they are economic resources.54,425
ACCRUAL OF NON-CURRENT ITEMS
The amounts below included in the Statement of Activities do not require the use
of current financial resources and therefore are not reported in the governmental funds:
Compensated absences240,935
Post retirement benefits(602,953)
ALLOCATION ON INTERNAL SERVICE FUND ACTIVITY
Internal service funds are used by management to charge the costs of certain activities to
individual funds. The net revenue of the internal service fund is reported with governmental activities.120,406
LONG TERM NOTES RECEIVABLES AND ASSOCIATED UNEARNED REVENUE
Interest income and proceeds from long term notes receivables are recorded on the Statement of Activities
but are considered a resource not available for governmental funds.237,409
CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES5,295,586$
TOWN OF LOS GATOS, CALIFORNIA
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
21
Variance With
Final Budget
OriginalFinal Positive
BudgetBudgetActual(Negative)
REVENUES
Property Taxes10,293,937$ 10,248,064$ 11,875,862$ 1,627,798$
Sales Taxes 7,859,000 7,442,856 8,757,428 1,314,572
Other Taxes3,043,720 3,019,699 3,336,756 317,057
Licenses & Permits3,217,920 3,716,158 4,015,871 299,713
Intergovernmental801,173 768,294 924,657 156,363
Charges for Services3,174,074 4,238,540 4,711,280 472,740
Fines and Forfeitures698,440 638,809 688,110 49,301
Interest608,566 421,656 (163,070) (584,726)
Use of Property37,223 37,223 38,910 1,687
Other 2,519,025 2,586,085 3,168,200 582,115
Total Revenues32,253,078 33,117,384 37,354,004 4,236,620
EXPENDITURES
Current:
General Government:
Town Council213,057 211,516 185,084 26,432
Town Attorney228,809 225,451 207,746 17,705
Administrative Services2,899,736 2,874,922 2,659,062 215,860
Non-Departmental5,122,190 5,323,456 5,266,322 57,134
Total General Government8,463,792 8,635,345 8,318,214 317,131
Public Safety13,388,960 13,772,877 13,370,032 402,845
Community Development3,518,947 3,995,966 4,235,832 (239,866)
Parks & Public Works5,714,904 5,813,969 5,599,022 214,947
Library Services2,192,690 2,174,308 2,055,069 119,239
Capital Outlay- - 402,842 (402,842)
Total Expenditures33,279,293 34,392,465 33,981,011 411,454
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES(1,026,215) (1,275,081) 3,372,993 4,648,074
OTHER FINANCING SOURCES (USES)
Operating Transfers In536,920 536,920 623,096 86,176
Operating Transfers Out(1,900,000) (1,900,000) (2,043,695) (143,695)
Total Other Financing Sources (Uses)(1,363,080) (1,363,080) (1,420,599) (57,519)
Extraordinary Gain (Loss) - RDA Dissolution- - 295,913 295,913
NET CHANGES IN FUND BALANCES(2,389,295)$ (2,638,161)$ 2,248,307 4,886,468$
BEGINNING FUND BALANCE26,012,295
ENDING FUND BALANCE28,260,602$
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
PROPRIETARY FUNDS -
INTERNAL SERVICE FUNDS
22
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.
TOWN OF LOS GATOS, CALIFORNIA
PROPRIETARY FUNDS -
STATEMENT OF NET POSITION
JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
23
Governmental
Activities
Internal Service
Funds
ASSETS
Current Assets:
Cash & investments (Note 2)12,732,052$
Restricted cash & investments (Note 2)18,653
Accounts Receivable2,208
Materials, supplies, and deposits24,396
Total current assets12,777,309
Noncurrent Assets:
Capital assets, net of accumulated depreciation (Note 5)11,292
Total noncurrent assets11,292
Total Assets12,788,601$
LIABILITIES
Current Liabilities:
Accounts payable247,598$
Accrued payroll and benefits19,801
Due to other governments14
Claims payable (Note 11)1,149,295
Total Liabilities1,416,708$
NET POSITION (Note 1)
Invested in capital assets, net of related debt11,292$
Restricted for workers compensation claims18,653
Unrestricted11,341,948
Total Net Position11,371,893$
TOWN OF LOS GATOS, CALIFORNIA
PROPRIETARY FUNDS -
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
24
Governmental
Activities
Internal Service
Funds
OPERATING REVENUES
Charges for services4,221,909$
Interest10
Use of money and property177,785
Other213,718
Total Operating Revenues4,613,422
OPERATING EXPENSES
Salaries and related expenses1,047,268
Insurance expenses506,922
Depreciation9,391
Services and Supplies2,551,405
Total Operating Expenses4,114,986
Operating Income498,436
Transfers in (Note 4)-
Transfers out (Note 4)(378,030)
Net transfers(378,030)
Change in Net Position120,406
BEGINNING NET POSITION11,251,487
ENDING NET POSITION11,371,893$
TOWN OF LOS GATOS, CALIFORNIA
PROPRIETARY FUNDS -
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
25
Governmental
Activities
Internal Service
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers4,623,639$
Payments to suppliers(1,690,046)
Payments to employees(1,046,526)
Claims paid(1,222,145)
Net cash provided (used) by operating activities664,922
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers In-
Transfers Out(378,030)
Net cash provided (used) by noncapital financing activities(378,030)
Net Increase(Decrease) in Cash and Investments286,892
Cash and investments - beginning of year12,463,813
Cash and investments - end of year12,750,705$
Reconciliation of Operating Income to Cash Flows
from Operating Activities:
Operating Income498,436$
Adjustments to reconcile operating income to cash flows
from operating activities:
Depreciation9,391
Change in assets and liabilities:
Receivables, net10,217
Other assets16,235
Accounts payable and other accrued expenses97,659
Other accrued expenses32,984
Cash Flows From Operating Activities664,922$
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
FIDUCIARY FUNDS
26
Trust funds are used to account for assets held by the Town as a trustee agent for individuals,
private organizations and other governments. The financial activities of these funds are excluded
from the government-wide financial statements, but are presented in separate Fiduciary Fund
financial statements.
Library Private Purpose Trust Fund was established to provide for the servicing of donations
and bequests to the Town's Library Program.
RDA Successor Agency Private Purpose Trust Fund was established to account for the assets
and liabilities transferred from the dissolution of the Town’s former Redevelopment Agency and
the continuing operations related to existing Redevelopment Agency obligations.
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 statements, but are presented in separate Fiduciary Fund financial
statements. Agency funds have no measurement focus.
Parking Improvement District Agency Fund was established to account for non-obligation
bond debt service payments and assessments.
The notes to the financial statements are an integral part of this statement
27
Agency
TotalFund
PrivateParking
Purpose TrustImprovement
FundsDistrict #88
ASSETS
Cash and investments (Note 2)2,640,562$ 23,897$
Restricted cash and investments (Note 2)2,005,931 286,447
Accounts receivable416 -
Intergovernmental receivable- 6,158
Loans receivable (Note 3)505,441 -
Capital assets (Note 5):
Nondepreciable5,257,422 -
Depreciable, net of accumulated depreciation2,135,545 -
Total Assets12,545,317 316,502$
LIABILITIES
Accounts payable37,100 -$
Due to other governments (Note 13)217 316,502
Interest payable416,532 -
Long-term debt (Note 6):
Due within one year955,000 -
Due in more than one year22,505,130 -
Total Liabilities23,913,979 316,502$
NET POSITION
Held in trust(11,368,662)
Total Net Position(11,368,662)$
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2013
The notes to the financial statements are an integral part of this statement
28
Total
ADDITIONS
Property taxes-$
Investment earnings55,916
Gifts, bequests and endowments28,150
Repayment of Town obligations1,277,063
Other4,171,849
Total Additions5,532,978
DEDUCTIONS
Program expenses of former RDA340,095
Payments to other governments295,913
Interest and fiscal agency expenses of RDA3,123,866
Library services135,631
Depreciation expense101,693
Total Deductions3,997,198
Extraordinary Gain (Loss) - RDA Dissolution(358,986)
CHANGE IN NET POSITION1,176,794
NET POSITION - BEGINNING OF YEAR(12,545,456)
NET POSITION - END OF YEAR(11,368,662)$
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
This Page Intentionally Left Blank
Notes to Basic Financial Statements
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
29
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Description of the Financial Reporting Entity
The Town of Los Gatos (the “Town”) operates under a Council-Manager form of government and
provides the following services; public safety (including police, emergency management and fire
services), parks and public works, community development, community services, library, sanitation,
public improvements, planning and zoning, general administration services, and redevelopment.
Redevelopment services were provided primary through the Redevelopment Agency of the Town
which was dissolved on February 1, 2012.
The Town is largely a residential community located in the foothills of the Santa Cruz Mountains and
was incorporated as a municipal corporation in 1887. The Town’s population as of January 1, 2013
was 30,247.
As required by generally accepted accounting principles, these financial statements present the Town
as the Primary Government and any component units for which the Town is considered financially
accountable.
B. Description of Blended Component Units
The Town did not report any component units as a part of the primary government because the Town
Council was not the governing body of any entities and no separate entity provided services entirely to
the Town.
C. Description of Joint Ventures and Public Entity Risk Pool
As described in Note 11, the Town participates in two joint ventures and public entity risk pool
activities through formally organized separate legal entities. The financial activities of the ABAG
PLAN Corporation (“ABAG”) and the Local Agency Workers’ Compensation Excess Joint Powers
Authority (“LAWCX”) are not included in the accompanying basic financial statements as boards
separate from and independent of the Town administer them.
D. Basis of Presentation
The Town’s Basic Financial Statements are prepared in conformity with accounting principles
generally accepted in the United States of America. The Government Accounting Standards Board
(“GASB”) is the acknowledged standard setting body for establishing accounting and financial
reporting standards followed by governmental entities in the U.S.A.
The accompanying financial statements are presented on the basis set forth in Government
Accounting Standards Board Statements No. 34, Basic Financial Statements—and Management’s
Discussion and Analysis—for State and Local Governments, No. 36, Recipient Reporting for
Certain Non-exchange Revenues, an Amendment of GASB Statement No. 33, No. 37, Basic
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
30
Financial Statements—and Management’s Discussion and Analysis—for State and Local
Governments; Omnibus, and No. 38, Certain Financial Statement Note Disclosures.
These Statements require that the financial statements described below be presented.
Government-wide Statements: The Statement of Net Position and the Statement of Activities
display information about the primary government (the Town). These statements include the
financial activities of the overall Town government, except for fiduciary activities. Eliminations
have been made to minimize the double counting of internal activities. These statements present
governmental activities of the Town. Governmental activities generally are financed through taxes,
intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues
for each function of the Town’s governmental activities. Direct expenses are those that are
specifically associated with a program or function and, therefore, are clearly identifiable to a
particular function. Program revenues include (a) charges paid by the recipients of goods or
services offered by the programs, (b) grants and contributions that are restricted to meet the
operational needs of a particular program and (c) fees, grants and contributions that are restricted to
financing the acquisition or construction of capital assets. Revenues that are not classified as
program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the Town's
funds, including fiduciary funds and blended component units. Separate statements for each fund
category—governmental, proprietary and fiduciary—are presented. The emphasis of fund
financial statements is on major individual governmental funds, each of which is displayed in a
separate column. All remaining governmental are aggregated and reported as nonmajor funds.
Internal service funds of the Town (which provide services primarily to other funds of the Town)
are presented, in summary form, as part of the proprietary fund financial statements. Since the
principal users of the internal services are the Town’s governmental activities, financial activities
of the internal service funds are presented in the governmental activities column when presented at
the government-wide level. The costs of these services are allocated to the appropriate
function/program in the Statement of Activities.
Proprietary fund operating revenues, such as charges for services, result from exchange
transactions associated with the principal activity of the fund. Exchange transactions are those in
which each party receives and gives up essentially equal values. Non-operating revenues, such as
subsidies and investment earnings, result from non-exchange transactions or ancillary activities.
E. Major Funds
GASB defines major funds and requires that the Town’s major governmental funds be identified
and presented separately in the fund financial statements. All other funds, called nonmajor funds,
are combined and reported in a single column, regardless of their fund-type.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
31
Major funds are defined as funds that have assets, deferred outflows of resources, liabilities,
deferred outflows of resources, revenues or expenditures/expenses equal to ten percent of their
fund-type total and five percent of the grand total. The General Fund is always a major fund. The
Town may also select other funds it believes should be presented as major funds.
The Town reported the following major governmental funds in the accompanying financial
statements:
General Fund is the general operating fund of the Town and is used to account for all financial
resources except those required to be accounted for in another fund.
Appropriated Reserves Fund is used to account for resources provided for capital projects not
fully funded from other sources.
The Town also reports the following fund types:
Internal Service Funds are used to account for services, which are provided to other departments
on a cost-reimbursement basis. Those services include workers compensation, self-insurance,
stores, vehicle maintenance, building maintenance, management information, and equipment
replacement.
Fiduciary Funds include Private-Purpose Trust Funds and agency funds used to account for assets
held by the Town as an agent for individuals, private organizations, and other governments. The
financial activities of this fund are excluded from the government-wide financial statement but are
presented in a separate Fiduciary Fund financial statement.
The Town reported the following Fiduciary Funds in the accompanying financial statements:
Library Private Purpose Trust Fund provides for the servicing of donations and bequests to
the Town's Library Program and includes the following:
History Project Private Purpose Trust Fund was established to provide for the
servicing of donations, bequests, grant monies and expenditures to the history project
partnership of Los Gatos Public Library and the Museum of Los Gatos.
Clelles Ness Private Purpose Trust Fund was established by Ansten R. Ness, M.D.
and the Board of Library Trustees for the Town of Los Gatos, as a memorial to his wife,
Clelles Ness. to use the income and principal of the trust estate to provide materials and
services not ordinarily available from public funds.
Susan E. (Betty) McClendon Private Purpose Trust Fund is a bequest to the Los
Gatos Public Library from the estate of Susan McClendon was established to be used
solely for children's services.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
32
Barberra J. Cassin Private Purpose Trust Fund is a bequest to the Town from the
estate of Barberra J. Cassin was established to be distributed to the Los Gatos Public
Library for the purpose of establishing an endowment fund, which is to be used for the
support of science, the arts and humanities projects.
RDA Successor Agency Private Purpose Trust Fund accounts for the assets, liabilities and
operations transferred from the dissolution of the Town’s Redevelopment Agency, which
includes the following:
Certificates of Participation issued to finance several capital improvement projects
throughout the Town.
Redevelopment projects and related property tax revenue.
Affordable Housing Set-Aside Program obligations.
Repayment of obligations incurred by the Town’s Redevelopment Agency prior to its
dissolution.
Parking Improvement District Agency Fund was established to account for non-obligation
bond debt service payments and assessments.
F. Basis of Accounting
The government-wide and fiduciary fund (except for agency funds) 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. Agency funds have no measurement focus.
Governmental funds are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Under this method, revenues are recognized when
measurable and available. The Town considers property tax revenues reported in the governmental
funds to be available if the revenues are collected or are reasonably expected to be collected within
sixty days after year-end. For revenues other than property taxes, the Town generally applies the
sixty-day period rule but would make exceptions considering the measurable and available criteria.
Expenditures are recorded when the related fund liability is incurred, except for principal and
interest on general long-term debt, which is recognized upon becoming due and payable; and
except for claims, judgments and compensated absences, which are recognized when estimable and
probable. Governmental capital asset acquisitions are reported as expenditures in governmental
funds. Proceeds of governmental long-term debt and acquisitions under capital leases are reported
as other financing sources.
Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental
revenues, and interest revenue. Fines, forfeitures, licenses and permits, and charges for services are
not susceptible to accrual because they are not measurable until received in cash.
Non-exchange transactions, in which the Town gives or receives value without directly, receiving
or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
33
accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or
assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in
which all eligibility requirements have been satisfied.
The Town may fund programs with a combination of cost-reimbursement grants, categorical block
grants and general revenues. Thus, both restricted and unrestricted net position may be available to
finance program expenditures. The Town’s policy is to first apply restricted grant resources to
such programs followed by general revenues as necessary.
Certain indirect costs are included in program expenses reported for individual functions and
activities.
The Town applies all applicable GASB pronouncements for certain accounting and financial
reporting guidance including those applicable to accounting and reporting for proprietary
operations. In December of 2010, GASB issued GASB No. 62, Codification of Accounting and
Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA
Pronouncements. This statement incorporates pronouncements issued on or before November 30,
1989 into GASB authoritative literature. This includes pronouncements by the Financial
Accounting Standards Board (FASB), Accounting Principles Board Opinions (APB), and the
Accounting Research Bulletins of the American Institute of Certified Public Accountants' (AICPA)
Committee on Accounting Procedure, unless those pronouncements conflict with or contradict with
GASB pronouncements.
Cash Equivalents - The Town’s cash and cash equivalents are considered to be cash on hand,
demand deposits, and short-term investments with original maturities of three months or less from
the date of acquisition.
State of California statutes and the Town’s investment policy authorize the Town to invest in
obligations of the U.S. Treasury, its agencies and instrumentalities, collateralized, non-negotiable
certificates of deposits, commercial paper rated A-1/P-1, medium-term corporate notes rated A or
its equivalent or better by Moody’s or Standard & Poor’s, asset backed corporate notes, bankers’
acceptances, mutual funds, and the State Treasurer’s investment pool (Local Agency Investment
Fund).
The Town does not enter into repurchase or reverse repurchase agreements.
Investments - Town investments are reported at fair value. The value is determined based upon
market closing prices. The fair value of mutual funds is stated at share value.
Materials, Supplies and Deposits - These assets are held for consumption and are stated at cost
using the first-in, first-out method. The costs are recorded as expenditures at the time the item is
consumed.
Interfund Receivables and Payables - Transactions between funds that are representative of
lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
34
“advances to/advances from other funds”. All other outstanding balances between funds are
reported as “due to/from other funds”.
Advances - Advances between funds and due from/to other funds are offset by a nonspendable
fund balance in applicable Town funds to indicate the extent to which they are not available for
appropriation and are not expendable available financial resources.
Capital Assets - Capital assets are valued at historical cost or estimated historical cost if actual
historical cost is not available. Contributed capital assets are valued at their estimated fair market
value on the date contributed. Capital assets, including infrastructure, are recorded if acquisition or
construction costs exceeds $10,000.
As required by GASB, the Town depreciates capital assets with limited useful lives over their
estimated useful lives. The purpose of depreciation is to spread the cost of capital assets equitably
among all users over the life of these assets. The amount charged to depreciation expense each year
represents that year’s pro rata share of the cost of capital assets. The Town depreciates using the
straight line method which means the cost of the asset is divided by its expected useful life in years
and the result is charged to expense each year until the asset is fully depreciated.
The Town has assigned the useful lives listed below to capital assets:
Buildings 25-40 years
Improvements 25-40 years
Machinery and equipment 2-20 years
Furniture and fixtures 5-12 years
Software 5-7 years
Infrastructure 20-40 years
Major capital outlay for capital assets and improvements are capitalized as projects are constructed.
Capital assets may be acquired using federal and state grants, contributions from developers, and
contributions or grants from other governments. GASB 34 requires that these contributed assets be
accounted for as revenue at the time they are contributed.
Deferred Compensation Plan - The Town established a deferred compensation plan created in
accordance with California Government Code Section 53212 and Internal Revenue Code Section
457. The plan, available to all Town employees, permits them to defer a portion of their salary
until future years. The deferred compensation is not available to employees until termination,
retirement, death, or unforeseeable emergency. Deferred compensation plans are not reported as
part of the Town’s assets or liabilities, as the deferred compensation plan trustees hold those funds
in trust on behalf of employees until the employees are eligible to receive the benefits.
Compensated Absences - Accumulated Vacation, Sick Pay and Other Employee Benefits are
accrued as earned. Upon termination, employees are paid for all unused vacation at their current
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
35
hourly rates. Sick leave earned is cashed out based on the following schedule for employees with at
least 150 hours accrued and up to a maximum amount as specified under labor contract provisions:
For employees under contract 1-59 months 25.0%
For employees under contract 60-119 months 37.5%
For employees under contract 120 months or more 50.0%
The Town’s liability for compensated absences is determined annually. For all governmental
funds, amounts expected to be paid out of current financial resources are recorded as liabilities of
each fund; the long-term portion is recorded in the Statement of Net Position.
The changes of the compensated absences were as follows:
Beginning Balance2,666,855$
Additions1,429,994
Payments(1,645,418)
Ending Balance2,451,431$
Current Portion1,325,974$
Compensated absences are liquidated by the fund that has recorded the liability. The long-term
portion of governmental activities compensated absences is liquidated primarily by the General
fund. Only compensated absences related to terminated employees are reported in the fund
financial statements.
Unearned Revenue and Deferred Revenue - Unearned revenue arises when assets are received
before revenue recognition criteria have been satisfied. Grants and entitlements received before
eligibility requirements are met are recorded as deferred inflows from unearned revenue. In the
governmental fund financial statements, receivables associated with non-exchange transactions that
will not be collected within the availability period have been recorded as deferred inflows from
unearned revenue.
Long-Term Liabilities - In the government-wide financial statements and private-purpose trust
funds long-term debt and other long-term obligations are reported as liabilities in the applicable
statement of net position. Bond premiums and discounts, as well as issuance costs, are deferred and
amortized over the life of the bonds using the effective interest method. Bonds payable are reported
net of the applicable bond premium or discount.
In the fund financial statements, governmental fund types recognize bond premiums and discounts,
as well as bond issuance costs, during the current period. The face amount of debt issued is
reported as other financing sources. Premiums received on debt issuances are reported as other
financing sources while discounts on debt issuances are reported as other financing uses. Issuance
costs, whether or not withheld from the actual debt proceeds received, are reported as debt service
expenditures.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
36
Deferred Outflows/Deferred Inflows of Resources - Deferred outflows of resources is a
consumption of net assets by the Town that is applicable to a future reporting period, for example,
prepaid items and deferred charges.
Deferred inflows of resources is an acquisition of net assets by the Town that is applicable to a
future reporting period, for example, unearned revenue and advance collections.
Net Position - In the government-wide financial statements, net position is classified in the
following categories:
Net Investment in Capital Assets - This amount consists of capital assets net of accumulated
depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or
improvement of the assets. In addition, deferred outflows of resources and deferred inflows of
resources that are attributable to the acquisition, construction, or improvement of those assets or
related debt also are included in the net investment in capital assets component of net position
Restricted Net Position - This amount is restricted by external creditors, grantors, contributors, or
laws or regulations of other governments.
Unrestricted Net Position - This amount is all net position that does not meet the definition of "net
investment in capital assets" or "restricted net position."
Fund Balances - The Town does not have a policy identifying a minimum unassigned fund
balance. Because amounts in the nonspendable, restricted, committed, and assigned categories are
subject to varying constraints on their use, the remaining fund balances are otherwise unassigned.
In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and
Governmental Fund Type Definitions, the Town classifies governmental fund balances as follows:
Non-spendable includes fund balance amounts that cannot be spent either because it is not in
spendable form or because of legal or contractual constraints.
Restricted includes fund balance amounts that are constrained for specific purposes which are
externally imposed by providers, such as creditors or amounts constrained due to constitutional
provisions or enabling legislation.
Committed includes fund balance amounts that are constrained for specific purposes that are
internally imposed by the government through formal action of the highest level of decision
making authority and does not lapse at year-end. Committed fund balances are imposed by the
Town Council.
Assigned includes fund balance amounts that are intended to be used for specific purposes that
are neither considered restricted or committed. Fund balance may be assigned by the Town
Manager or the Finance Director.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
37
Unassigned includes fund balances within the funds which have not been classified within the
above mentioned categories.
The Town uses restricted/committed amounts to be spent first when both restricted and unrestricted
fund balance is available unless there are legal documents/contracts that prohibit doing this, such as
a grant agreement requiring dollar for dollar spending. Additionally, the Town would first use
committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when
expenditures are made.
Use of Estimates - The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the
dates of the financial statements and the reported amounts of revenues and expenditures/expenses
during the reporting periods. Actual results could differ from those estimates.
Subsequent Events - Management has considered subsequent events through December 22, 2013,
the date which the financial statements were available to be issued. Management has reviewed
subsequent events and transactions that occurred after the date of the financial statements through
the date through December 22, 2013. The financial statements include all events or transactions,
including estimates, required to be recognized in accordance with generally accepted accounting
principles. Management has determined that there are no non-recognized subsequent events that
require additional disclosure.
Property Tax Levy, Collection and Maximum Rates - State of California Constitution Article XIII
A provides that the combined maximum property tax rate on any given property may not exceed 1%
of its assessed value unless an additional amount for general obligation debt has been approved by
voters. Assessed value is calculated at 100% of market value as defined by Article XIII A and may be
adjusted by no more than 2% per year unless the property is sold, transferred, or substantially
improved. The State Legislature has determined the method of distribution of receipts from a 1% tax
levy among the counties, cities, school districts and other districts.
The County of Santa Clara assesses properties, bills for and collects property taxes on the following
schedule:
Secured Unsecured
Valuation/lien dates January 1 January 1
Levy dates January 1 January 1
Due dates (delinquent as of) 50% on November 1 (December 10) March 1 (August 31)
50% on February 1 (April 10)
The term "unsecured" refers to taxes on personal property other than land and buildings. These taxes
are secured by liens on the property being taxed. Property taxes levied are recorded as revenue and
receivables when they are collected during the fiscal year of levy or within 60 days of year-end.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
38
Budgets and Budgetary Accounting - The Town follows the procedures below when establishing
the budgetary data reflected in the financial statements:
1. The Town Manager submits to the Town Council a proposed operating and capital improvement
budget for the fiscal year commencing the following July 1. The budgets include the proposed
expenditures and the means of financing them.
2. Public hearings are conducted to obtain taxpayer comments.
3. The budget is legally enacted through adoption of Town resolution by Council.
4. The Town Manager is authorized to implement the programs as approved in the adopted budget.
Within a specific fund, the Town Manager may transfer appropriations between categories,
departments, projects and programs as needed to implement the adopted budget, whereas the
Town Council must authorize budget increases and decreases, and transfers between funds.
5. Budgets are adopted on a basis consistent with generally accepted accounting principles except for
proprietary funds which budget for capital outlays but not depreciation. Budgets were adopted for
the General Fund, Special Revenue Funds, Internal Service Funds and Capital Projects Funds.
6. Budgeted amounts are as originally adopted or as amended by Town Council. Individual
amendments were not material in relation to original appropriations.
Excess of Expenditures over Appropriations - Expenditures exceeded budget by $239,866 in the
General Fund and $1,277,063 in the Appropriated Reserves fund due to unanticipated community
development costs and payments to the RDA Successor Agency. No other general fund or special
revenue funds have expenditures in excess of budget for the year ended June 30, 2013.
Encumbrances - Under encumbrance accounting, purchase orders, contract and other commitments
for expenditures are recorded in order to reserve that portion of the applicable appropriation.
Encumbrance accounting is employed as an extension of formal budgetary integration in all funds.
Encumbrances outstanding at year-end are reported as 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.
Reclassifications - Certain accounts in the prior-year financial statements have been reclassified for
the presentation in the current-year financial statements.
G. Newly Implemented Accounting Pronouncements
Statement No. 63 - In June, 2012, GASB issued Statement No. 63, Financial Reporting of
Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. This Statement
provides financial reporting guidance for deferred outflows of resources and deferred inflows of
resources. Concepts Statement No. 4, Elements of Financial Statements, introduced and defined
those elements as a consumption of Net Position by the government that is applicable to a future
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
39
reporting period, and an acquisition of Net Position by the government that is applicable to a future
reporting period, respectively. Previous financial reporting standards do not include guidance for
reporting those financial statement elements, which are distinct from assets and liabilities.
Concepts Statement 4 also identifies net position as the residual of all other elements presented in a
statement of financial position. This Statement amends the net asset reporting requirements in
Statement No. 34, Basic Financial Statements-and Management’s Discussion and Analysis-for
State and Local Governments, and other pronouncements by incorporating deferred outflows of
resources and deferred inflows of resources into the definitions of the required components of the
residual measure and by renaming that measure as net position, rather than net assets. The
provisions of this Statement were effective as of July 1, 2012 and did not have a significant impact
on the Town’s financial statements.
Statement No. 64 - In June, 2012, GASB issued Statement No. 64, Derivative Instruments:
Application of Hedge Accounting Termination Provisions—an amendment of GASB Statement No.
53. The objective of this Statement is to enhance comparability and improve financial reporting by
clarifying the circumstances in which hedge accounting should continue when swap counterparty
or a swap counterparty’s credit support provider is replaced. This pronouncement is effective for
financial statements for periods beginning after June 15, 2012. The Town has determined this
Statement change will not have an effect on the financial statements.
Statement No. 65 - In March, 2013, GASB issued Statement No. 65, Items Previously Reported as
Assets and Liabilities. This Statement establishes accounting and financial reporting standards that
reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that
were previously reported as assets and liabilities and recognizes, as outflows of resources or
inflows of resources, certain items that were previously reported as assets and liabilities. This
Statement amends the financial statement element classification of certain items previously
reported as assets and liabilities to be consistent with the definitions in Concepts Statement 4. The
provisions of this Statement are effective for financial statements for periods beginning after
December 15, 2012. However, the Town has chosen to implement these reporting requirements as
of July 1, 2012. This statement did not have a significant impact on the Town’s financial
statements.
H. Upcoming Accounting and Reporting Changes
Statement No. 66 - In March, 2013, GASB issued Statement No. 66, Technical Correction – 2013
– an amendment of GASB Statement No. 10 and No. 62. The objective of this Statement is to
improve accounting and financial reporting for a governmental financial reporting entity by
resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements
No. 54, Fund Balance Reporting and Government Fund Type Definitions, and No. 62, Codification
of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and
AICPA Pronouncements. The City does not believe there will be a significant financial statement
effect related to this Statement.
Statement No. 67 - In June, 2013, GASB issued Statement No. 67, Financial Reporting for
Pension Plans – amendment of GASB Statement No. 25. The objective of this Statement is to
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
40
improve financial reporting by state and local government pension plans. This Statement results
from a comprehensive review of the effectiveness of existing standards of accounting and financial
reporting for pensions with regards to providing decision-useful information, supporting assessments of
accountability and inter-period equity, and creating additional transparency. The Town is in the
process of determining the impact this statement will have on the financial statements.
Statement No. 68 - In June, 2013, GASB issued Statement No. 68, Accounting and Financial
Reporting for Pensions – an amendment of GASB Statement No. 27. The primary objective of this
Statement is to improve accounting and financial reporting by state and local governments for pensions.
It also improves information provided by state and local government employers about financial support
for pensions that is provided by other entities. The Town is in the process of determining the impact
this statement will have on the financial statements.
Statement No. 69 – In January, 2013, GASB issued Statement No. 69, Government Combinations and
Disposal of Government Operations. This Statement establishes accounting and financial reporting
standards related to government combinations and disposal of government operations. As used in this
Statement, combinations includes a variety of transactions referred to as mergers, acquisitions, and
transfers of operations. The Town believes there will be no financial statement effect related to this
Statement.
Statement No. 70 – In April, 2013, GASB issued Statement No 70, Accounting and Financial
Reporting for Nonexchange Financial Guarantees. Some governments extend financial guarantees for
the obligations of another government, a not-for-profit entity, or private entity without directly
receiving equal or approximately equal value in exchange (a nonexchange transaction). The Town does
not participate in nonexchange transactions and this Statement will have no financial statement effect.
NOTE 2 - CASH AND INVESTMENTS
The Town pools cash from all sources and all funds except Restricted Cash and Investments so that it can be
invested at the maximum yield, consistent with safety and liquidity, while existing funds have cash available
for expenditures.
Cash and Investments Defined - The Town includes only cash deposits in banks as cash. Investments in
LAIF and government securities mutual funds are net in the order of liquidity, since they may be withdrawn
without penalty. U.S. Treasuries, U.S. Agencies and Certificates of Deposit are the Town’s least liquid
investments, since they must be held to maturity.
Cash Deposits with Banks and Custodial Credit Risk - California Law requires banks and savings and loan
institutions to pledge government securities with a market value of 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 covered by Federal
Depository Insurance Corporation (FDIC).
The bank balance of the Town’s cash deposits was $13,967,391 as of June 30, 2013. The bank balance and the
carrying amount differed due to deposits in transit and outstanding checks. The FDIC insured the bank
balances up to $250,000 for each bank. As of June 30, 2013, the Town’s cash balances exceeded FDIC by
$13,467,391 but were collateralized as discussed above.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
41
Investments - The Town and its fiscal agent invest in individual investments and in investment pools.
Individual investments are evidenced by specific identifiable pieces of paper called “securities instruments,” or
by an electronic entry registering the owner in the records of the institution issuing the security, called the book
entry system. In order to maximize security, the Town employs the Trust department of a bank as the
custodian of all its investments, regardless of their form.
The Town invests in the California State Treasurer’s Local Agency Investment Fund (LAIF). LAIF,
established in 1977, is regulated by California Government Code Section 16429 and under the day to day
administration of the State Treasurer. As of June 30, 2013, LAIF had approximately $59 billion in
investments.
LAIF determines fair value on its investment portfolio based on market quotations for those securities where
market quotations are readily available, and on amortized cost of best estimate for those securities where
market value is not readily available. The Town’s investments with LAIF at June 30, 2013 included a portion
of the pooled funds invested in structured notes and asset-backed securities. These investments are described
as follows:
1. Structured Notes are debt securities (other than asset-backed securities) whose cash flow characteristics
(coupon rate, redemption amount, or stated maturity) depend upon one or more indices and / or that have
embedded forwards or options.
2. Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to
receive a share of the cash flows from a pool of assets such as principal and interest repayments from a
pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.
As of June 30, 2013, the Town had $4,149,985 invested in LAIF, which had invested .82% of the pool
investments funds in Structured Notes and Asset-Backed Securities. The Town valued its investments with
LAIF by multiplying its account balance with a fair value factor determined by LAIF. This factor was 1.00027
and was the result of dividing all LAIF participants’ total aggregate fair value by total aggregate amortized
cost.
Risk Disclosures
- Interest Rate Risk is the risk that changes in market interest rates will adversely affect
the fair value of an investment. Generally, the longer the maturity of an investment, the greater the
sensitivity of its fair value to the changes in market interest rates. One of the ways that the Town manages
its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments
and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to
maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the Town's investments to market interest rate
fluctuations is provided in the summary of cash and investments table on page 42 that shows the
distribution of the Town's investments by maturity.
Credit Risk
is the risk of loss due to the failure of the security issuer. This is measured by the assignment of
a rating by a nationally recognized statistical rating organization. The summary of cash and investments
table on page 42 shows the minimum rating under the actual rating of the Town’s investments at year end.
Custodial Credit Risk
is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a
transaction, a government will not be able to recover the value of its investment or collateral securities that are
in the possession of another party. The Town’s investment in money market fund and LAIF is not categorized
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
42
as to custodial credit risk. Its U.S. Government Agency Securities investment is held by a third party financial
institution under the third party’s trust department’s name and thus not exposed to custodial credit risk.
Concentration of Credit Risk is the risk that the Town’s investments are exposed because the types of
investments have been too limited. The Town’s Policy states that, with the exception of US Treasury securities
and LAIF, no more then 50% of the Town’s total investment portfolio will be invested in one single security
type or with a single financial institution. The Town was in compliance with this policy as of June 30, 2013.
The following table summarizes the Towns policy related to maturities and concentration of investments:
Maximum
Maximum Portfolio
Investment Type Maturity Percentage
US Treasury Obligations 5 years None
US Agency Obligations 5 years None
Bankers Acceptances 180 days 15%
Commercial Paper 180 days 15%
Medium Term Notes 3/5 years 15%
Collateralized CD's 5 years 15%
CA LAIF NA 65%
Money Market Funds NA 15%
Marking Investments to Fair Value - The Town adopted Governmental Accounting Standards Board
(GASB) Statement 31, which requires that the Town's investments be carried at fair value instead of cost.
Under GASB 31, the Town must adjust the carrying value of its investments to reflect their fair value at
each fiscal year end, and it must include the effects of these adjustments in income for that fiscal year.
The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30, 2013:
AvailableConcentrationTime toWeighted
forInvestmentof CreditMatureAverage
OperationsRestrictedTotalRatingRisk(Years)Maturity
U.S. Government Agency securities46,464,173$ -$ 46,464,173$ Aaa/AAA92%2.94 2.70
Government Securities Money
Market Mutual Funds17,341 - 17,341 Not Rated0%
LAIF4,149,985 39,358 4,189,343 Not Rated8%0.76 0.06
Total Investments50,631,499 39,358 50,670,857 100%
Cash Deposits with Banks11,057,749 18,653 11,076,402
Money Market Accounts- 2,253,020 2,253,020
Cash on hand at Town4,100 - 4,100
Total Cash and Investments61,693,348$ 2,311,031$ 64,004,379$
(1)Limited to US Agency Obligations with liquid markets and readily determinable fair market values, including FHLB,
FNMA, Freddie Mac, FFCB, the Federal Land Bank, and the TVA.
Investment Type/Cash Deposit
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
43
Cash and investments are classified in the financial statements as shown below, based on whether or
not their use is restricted by Town debt or Agency agreements.
Fiduciary
Total TownFundsTotals
Cash and investments available for operations59,028,889$ 2,664,45961,693,348$
Restricted cash and investments18,653 2,292,378 2,311,031
Total cash and investments59,047,542$ 4,956,837$ 64,004,379$
NOTE 3 - LONG-TERM NOTES RECEIVABLE
The Town had the following long-term notes receivable as of June 30, 2013:
Interest RateMaturity Balance
General Fund:
Open Doors Associates, Ltd.7%2024768,965$
BMP Loans3%Various231,117
Total General Fund1,000,082
Active Home LoansVariousVarious173,101
Open Doors Associates, Ltd.7%2024101,352
Housing Conservation Loans0-5%Various98,660
Total CDBG373,113
Total Long-Term Notes Receivable - Government-wide Statement of Net Position1,373,195
Project MatchVariousVarious505,441
Total Long-Term Notes Receivable1,878,636$
Community Development Block Grant Fund (CDBG):
Description
Successor Agency Affordable Housing:
Open Doors Associates Ltd. And Mid-Peninsula Housing Coalition - The Town has cooperation
agreements with these two developers and several other governmental agencies (the “Developers”).
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 by construction loans, permanent financing and other
loans on the project up to a maximum of $6.5 million.
Under a note dated April 21, 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.
As of June 30, 2013, $768,965 of such costs, including accrued interest, had been incurred by Open
Doors Associates, Ltd. in connection with the project and advances by the Town under this note.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
44
Active Home Loans and Housing Conservation Loans - The Town uses CDBG Fund (funded
through federal grants) to assist low and moderate income homeowners to improve their homes and to
fund low income housing rental properties acquisition and rehabilitation. These loans are secured by
deeds of trust.
Project Match - The Successor Agency has a loan agreement with Project Match, a nonprofit benefit
corporation, to acquire and rehabilitate four or five bedroom single family homes. The property is to
provide affordable housing rental to very low income senior households. The loan receivable is
evidenced by a promissory note and secured by a deed of trust. From inception of the loan through
June 30, 2013, no interest or principal payments have been made.
NOTE 4 - INTERFUND TRANSACTIONS
Inter-fund Receivables and Payables - Amounts due to or due from other funds reflect inter-fund
balances for services rendered or short-term loans expected to be repaid in the next fiscal year. Advances
to or from other funds are long-term loans between funds that are to be repaid in their entirety over
several years. As of June 30, 2013, inter-fund receivables and payables consisted of the following:
Due toDue From
OtherOther
FundsFunds
General Fund-$ 21,708$
Non-Point Source Maintenance Fund21,708 -
Totals21,708$ 21,708$
Transfers - With Council approval resources may be transferred from one fund to another. Transfers
routinely reimburse funds that have made an expenditure on behalf of another fund. Transfers may also
be made to pay for capital projects or capital outlays, lease or debt service payments, operating
expenses and low and moderate-income housing projects. Transfers between funds during the fiscal
year ended June 30, 2013 were as follows:
General Appropriated Total
Funds Making TransfersFundReserveTransfers Out
General Fund-$ 2,043,695$ 2,043,695$
Appropriated Reserve139,965 - 139,965
Internal Service Funds372,211 5,820 378,031
Nonmajor Governmental110,920 169,270 280,190
Total Transfers In623,096$ 2,218,785$ 2,841,881$
Fund Receiving Transfers
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
45
NOTE 5 - CAPITAL ASSETS
Changes in the Town’s capital assets during the fiscal year are shown as follows:
Balance at
June 30, 2012
Adjustments
and Additions Retirements
Balance at
June 30, 2013
Capital Assets not being depreciated:
Land20,329,684$ 4,000$ -$ 20,333,684$
Construction in Progress3,360,517 130,840 3,311,634 179,723
Total capital assets not being depreciated23,690,201 134,840 3,311,634 20,513,407
Capital Assets being depreciated:
Buildings and Improvements27,522,449 658,479 - 28,180,928
Equipment & Vehicle9,688,964 188,496 884,883 8,992,577
Infrastructure - All Other14,508,908 5,353,499 - 19,862,407
Infrastructure - Streets48,484,153 3,596,066 - 52,080,219
Total capital assets being depreciated100,204,474 9,796,540 884,883 109,116,131
Less accumulated depreciation for:
Buildings and Improvements3,809,420 630,584 - 4,440,004
Equipment & Vehicle7,199,581 453,997 875,423 6,778,155
Infrastructure - All Other1,618,997 559,082 - 2,178,079
Infrastructure - Streets22,210,289 1,464,488 - 23,674,777
Total acccumulated depreciation34,838,287 3,108,151 875,423 37,071,015
Net capital assets being depreciated65,366,187 6,688,389 9,460 72,045,116
Governmental activity capital assets, net89,056,388$ 6,823,229$ 3,321,094$ 92,558,523$
Depreciation expense is charged to functions and programs based on their usage of the related assets.
The amount allocated to each function or program is as follows:
Depreciation
Expense
General Government251,386$
Public Safety331,440
Parks & Public Works2,180,565
Community Development111,242
Library78,408
Sanitation37,383
Redevelopment117,727
Total Governmental Activities3,108,151$
Governmental Activities
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
46
Changes in the RDA Successor Agency trust fund capital assets during the fiscal year are shown as
follows:
Balance at
June 30, 2012
Adjustments
and Additions Retirements
Balance at
June 30, 2013
Capital Assets not being depreciated:
Land5,321,307$ -$ 63,885$ 5,257,422$
Total capital assets not being depreciated5,321,307 - 63,885 5,257,422
Capital Assets being depreciated:
Buildings and Improvements4,067,708 - - 4,067,708
Total capital assets being depreciated4,067,708 - - 4,067,708
Less accumulated depreciation for:
Buildings and Improvements1,830,470 101,693 - 1,932,163
Total acccumulated depreciation1,830,470 101,693 - 1,932,163
Net capital assets being depreciated2,237,238 (101,693) - 2,135,545
Successor Agency capital assets, net7,558,545$ (101,693)$ 63,885$ 7,392,967$
NOTE 6 - LONG-TERM OBLIGATIONS
The Town generally incurs long-term debt to finance projects or purchase assets, which will have
useful lives equal to or greater than the related debt. As of February 1, 2012, the Town transferred
long-term debt issued by the Redevelopment Agency to the Successor Agency trust as a part of the
RDA dissolution. The following summarizes the changes in long-term debt in the Successor Agency
trust fund during the fiscal year ended June 30, 2013:
DueDue in
InterestMaturityOriginalBeginningEndingWithin OneMore Than
Long-Term DebtRateDateIssueBalanceDeletionsBalanceYearOne Year
2002 COP2.5-5%203110,725,000$ 8,600,000$ 275,000$ 8,325,000$ 285,000$ 8,040,000$
2010 COP2.5-4.25%202815,675,000 15,145,000 650,000 14,495,000 670,000 13,825,000
Subtotal COP's26,400,000 23,745,000 925,000 22,820,000 955,000 21,865,000
Premiums 753,095 677,785 37,655 640,130 - 640,130
Total Long-Term Debt27,153,095$ 24,422,785$ 962,655$ 23,460,130$ 955,000$ 22,505,130$
2002 Certificates of Participation (2002 COPs) - On July 18, 2002, the Town and the Los Gatos
Redevelopment Agency issued $10,725,000 in 2002 COPs, Series A, to finance the acquisition,
construction, rehabilitation, equipping and improvement of several capital improvement projects. The
Town had pledged lease payments of real property and facilities comprised of the Parks and Public
Works Service Center and Baseball Field, as well as Parking Lot No. 1, 2, and 3, as collateral for the
repayment of the Certificates. Principal payments are due annually on August 1st, with interest
payments due semi-annually on February 1st and August 1st.
2010 Certificates of Participation (2010 COPs) - On June 1, 2010, $15,675,000 of 2010 COPs were
issued to finance the acquisition, construction, and improvement of a library on the Town’s Civic
Center campus, to be owned and operated by the Town. Principal payments are due annually on
August 1, with interest payments due semi-annually on February 1 and August 1.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
47
To assist the Town in paying the cost of acquisition and construction of various projects, the Town and
its Redevelopment Agency entered into lease and reimbursement agreements in 2002 and 2010. Under
the agreements, the Agency will use available net tax increment revenues resulting from the projects’
effect on land values to repay the Town for all lease payments made by the Town to the Agency under
the lease agreements for the projects. Net tax increment revenues are all taxes allocated to and paid into
the Successor Agency private-purpose trust fund.
Future debt service requirements of the 2002 and 2010 Certificates of Participation (collectively the
“COPs”) as of June 30, 2013, were as follows:
For the Year
Ending June 30,PrincipalInterestTotal
2014955,000$ 980,578$ 1,935,578$
2015990,000 938,055 1,928,055
20161,025,000 897,398 1,922,398
20171,065,000 858,303 1,923,303
20181,105,000 809,739 1,914,739
2019-20236,250,000 3,266,153 9,516,153
2024-20287,780,000 1,742,894 9,522,894
2029-20333,650,000 275,656 3,925,656
Total COP Debt Service22,820,000$ 9,768,774$ 32,588,774$
The Successor Agency must maintain a required amount of cash and investments with the trustee
under the terms of the COPs issues. These funds are pledged as reserves to be used if the Successor
Agency fails to meet its obligations under the COPs issue and totaled $2,005,931 as of June 30, 2013.
The California Government Code requires these funds to be invested in accordance with Town
ordinance, bond indentures or State statues. All these funds have been invested as permitted under the
Code.
NOTE 7 - SPECIAL ASSESSMENT DISTRICT DEBT WITHOUT COMMITMENT
Special assessment districts are established in various parts of the Town to provide improvements to
properties located in those districts. Properties are assessed for the cost of the improvements. These
assessments are payable over the term of the debt issued to finance the improvements and are used to
pay debt service on debt issued to fund the improvements.
The Town is acting only as an agent and has no legal liability with respect to the payment of any
indebtedness of the Downtown Parking Assessment District. The principal amount of the non-
obligated debt outstanding was $135,000 as of June 30, 2013 and was excluded from the Town’s
financial statements.
NOTE 8 - FUND BALANCES
Fund balance for governmental funds is reported in classifications (nonspendable, restricted,
committed, assigned, and unassigned) that comprise a hierarchy based primarily on the extent to which
the government is bound to honor constraints on the specific purposes for which amounts in those
funds can be spent.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
48
As of June 30, 2013, fund balances were classified as follows:
Restricted
Capital Outlay funded from storm drain fees, construction taxes and debt proceeds are legally
restricted for major capital projects.
Repairs and Maintenance reflects legally restricted balances for repairs and maintenance of lighting
and landscape property and open space property that are financed with special tax assessments on the
benefiting property.
Assigned
Vasona Land Sale assigned fund balance will be used for acquisition and development of a new Town
sports park.
Open Space assigned fund balance will be used to make selective open space acquisitions.
Post Retirement Medical assigned fund balance will be used to aid in funding actuarially determined
requirements for retiree medical costs.
Parking assigned fund balance will be used to mitigate parking issues within the Town.
Market Fluctuations assigned fund balance will be used to manage changes in fair values of
investments.
Sustainability assigned fund balance will be used to fund ongoing sustainability initiatives and
programs.
Productivity Enhancements assigned fund balance will be used to fund requests that result in
streamlining or improving existing service levels.
Economic Uncertainty assigned fund balance will be used to fund future fluctuations in the economy
that are not currently foreseen. This designation is calculated at 25% of the operating budget.
Capital Projects assigned fund balance will be used for the acquisition and construction of capital
facilities.
Carryover assigned fund balance will be used for encumbered items re-appropriated in the following
year.
Comcast PEG assigned fund balance will be used to fund capital improvements linked to the televising
of council and planning commission meetings.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
49
Revenue Stabilization assigned fund balance will be used to mitigate the cyclical changes in locally
generated revenues from temporary downturns in the local economy, or "one-time" revenue losses
where recovery of the revenue base is deemed likely in the near future.
Special Revenue Fund assigned fund balance will be used for the activities of the respective revenue
fund.
NOTE 9 - EMPLOYEES' RETIREMENT PLAN
Plan Description - The Town of Los Gatos contributes to the California Public Employees Retirement
System (PERS), a cost-sharing multiple-employer public employee defined benefit pension plan.
PERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits
to plan members and beneficiaries. PERS acts as a common investment and administrative agent for
participating public entities within the State of California. Benefit provisions and all other
requirements are established by state statute and Town ordinance. Copies of PERS' annual financial
report may be obtained from their Executive Office, 400 P Street, Sacramento, CA 95814.
Funding Policy - Participants are required to contribute 7% (9% for safety employees) of their annual
covered salary. The Town is required to contribute at an actuarially determined rate. The rates for the
fiscal year ended June 30, 2013 was 19.623% of annual covered payroll for non-safety (miscellaneous)
and 39.313% for safety employees. The contribution requirements of plan members and the Town are
established and may be amended by PERS. All related obligations are paid from the Town’s General
Fund.
Annual Pension Cost - For fiscal year ended June 30, 2013, the Town's $4,107,452 annual pension
cost for PERS was equal to the Town's required and actual contributions. The required contribution
was determined as part of the June 30, 2011, actuarial valuation using the entry age normal actuarial
cost method. The actuarial assumptions included: (a) 7.5% investment rate of return (net of
administrative expenses); (b) projected annual salary increases from 3.2% and 14.20% that vary by
age, duration of service, and type of employment; (c) 2.75% inflation; (d) 3% payroll growth; and (e)
individual salary growth based on a merit scale varying by duration of employment coupled with an
assumed annual inflation of 3% and an annual production growth of 0.25%. The actuarial value of
PERS assets was determined using techniques that smooth the effects of short-term volatility in the
market value of investments over a three-year period (smoothed market value) depending on the size
of investment gains and/or losses. Initial unfunded liabilities are amortized over a closed period that
depends on the plan’s date of entry into PERS. Subsequent plan amendments are amortized as a level
percentage of payroll over a closed 20-year period. Gains and losses that occur in the operation of the
plan are amortized over a rolling period, which results in an amortization of 6% of unamortized gains
and losses each year. If the plan’s accrued liability exceeds the actuarial value of plan assets, then the
amortization payment on the total unfunded liability may not be lower than the payment calculated
over a 30 year amortization period.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
50
Three Year Trend Information PERS
Safety Plan:
Fiscal Year Annual Pension Percentage ofNet Pension
EndedCost (APC)APC ContributedObligation
6/30/20111,730,796100% -
6/30/20122,094,561100% -
6/30/20132,187,866100% -
Miscellaneous Plan:
Fiscal Year Annual Pension Percentage ofNet Pension
Ended Cost (APC) APC Contributed Obligation
6/30/20111,203,491100% -
6/30/20121,852,519100% -
6/30/20131,919,586100% -
Plan Actuarial Value and Funding Progress (Required Supplementary Information)
The information presented below relates to the cost-sharing plans as a whole, of which the Town of
Los Gatos is one participating employer.
Safety Plan:
Unfunded
Entry AgeActuarialUnfundedAnnual(Overfunded)
ValuationAccruedValue of(Overfunded)FundedCoveredLiability as %
DateLiabilityAssetsLiabilityRatioPayrollof Payroll
20099,721,675,347 8,027,158,724 1,694,516,623 82.6%973,814,168 174.0%
201010,165,475,166 8,470,235,152 1,695,240,014 83.3%955,980,815 177.3%
201110,951,745,049 9,135,654,246 1,816,090,803 83.4%949,833,090 191.2%
Miscellaneous Plan:
Unfunded
Entry AgeActuarialUnfundedAnnual(Overfunded)
ValuationAccruedValue of(Overfunded)FundedCoveredLiability as %
DateLiabilityAssetsLiabilityRatioPayrollof Payroll
200966,123,224 56,676,749 9,446,475 85.7%9,101,528 103.8%
201070,468,550 59,225,131 11,243,419 84.0%8,888,743 126.5%
201175,549,721 61,760,502 13,789,219 81.7%8,616,783 160.0%
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
51
NOTE 10 - OTHER POSTEMPLOYMENT BENEFITS
The Town recognizes the cost of postemployment healthcare in the year when employee services are
received, reports the accumulated liability from prior years, and provides information useful in
assessing potential demands on the Town’s future cash flows based on GASB Statement No. 45,
Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions
(GASB 45). Because the Town adopted the requirements of GASB 45 prospectively, recognition of
the liability accumulated from prior years will be phased in over ten years, commencing with the 2009
liability.
Plan Description - The Town provides the contribution to California Employer’s Retiree Benefit Trust
(CERBT), an agent multiple-employer defined benefit healthcare plan administered by the PERS. The
purpose of the CERBT Fund is to provide California government employers with a trust through which
they may prefund retiree medical costs and Other Post Employment Benefits (OPEB). The Town uses
CERBT as its investment vehicle and requests disbursements on an as needed basis to reimburse the
Town for the cost of retiree health insurance benefits. Benefit provisions and all other requirements
are established by state statute and Town ordinance. Copies of PERS' annual financial report may be
obtained from their Executive Office, 400 P Street, Sacramento, CA 95814.
Funding Policy - The contribution requirements of plan members and the Town are established and
may be amended by the Town. The required contribution is based on projected pay-as-you-go
financing requirements, with an additional amount to prefund benefits as determined by the Town. For
the year ended June 30, 2013, the Town contributed $1,887,047 to the plan, including $687,047 for
current premiums and an additional $1,200,000 to prefund benefits. All related obligations are paid
from the Town’s General Fund.
Annual OPEB Cost and Net OPEB Obligation - As of June 30, 2013 and for the year then ended,
the Town’s Net OPEB Obligation (NOO) and Annual OPEB Cost were as follows:
NOO as of June 30, 20122,881,907$
Annual OPEB Cost
Annual Required Contribution2,492,000
Interest on NOO191,000
NOO adjustment(193,000)
Net annual OPEB cost2,490,000
Contributions made (includes benefit payments)(1,887,047)
NOO as of June 30, 20133,484,860$
Trend Information
Actual
Annual OPEBEmployerPercentageNet OPEB
YearCostContributionContributedObligation
20111,928,000$ 1,401,000$ 73%2,551,863$
20122,056,000 1,725,956 84%2,881,907
20132,490,000 1,887,047 76%3,484,860
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
52
Funded Status and Funding Progress
Unfunded
Entry AgeActuairalUnfundedAnnual(Overfunded)
ValuationAccruedValue of(Overfunded)FundedCoveredLiability as %
DateLiabilityAssetsLiabilityRatioPayrollof Payroll
201122,121,000$ 3,272,382$ 18,848,618$ 14.8%13,477,000$ 139.9%
201223,897,000 2,885,000 21,012,000 12.1%13,915,000 151.0%
201325,787,000 4,157,000 21,630,000 16.1%14,123,000 153.2%
Actuarial Methods and Assumptions - Projections of benefits for financial reporting purposes are
based on the substantive plan (the plan as understood by the employer and the plan members) and
include the types of benefits provided at the time of each valuation and the historical pattern of sharing
of benefit costs between the employer and plan members to that point. Actuarially determined amounts
are subject to continual revision as actual results are compared with past expectations and new
estimates are made about the future. The actuarial methods and assumptions used include techniques
that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the
actuarial value of assets, consistent with the long-term perspective of the calculations.
In the June 30, 2011 actuarial valuation, the entry age normal actuarial cost method was used. The
actuarial assumptions used in the valuation are as follows:
1. Ultimate investment return of 7.25% (upward trend 0.25%-0.30% per year to 7.25% in FY 17/18)
2. Projected salary increases of 3.25%.
3. The annual healthcare cost trend ultimate rate is 5%. The select rates were 9%-9.4% depending on
plans but were reduced to the ultimate rate in 2021.
4. Total inflation is assumed to increase 3% annually.
5. Amortization method: Level percentage of payroll.
6. Amortization period:
a. 30-year closed period for initial unfunded actuarial accrued liability (UAAL) (25 years
remaining as of June, 30, 2013)
b. 20-year closed period for method, assumption, and plan changes
c. 15-year closed period for gains and losses; and
d. Maximum 30 year combined period
7. Actuarial method for valuing assets: Investment gains and losses spread over a 5-year rolling
period, not less than 80% or more than 120% of market value.
Plan Actuarial Value and Funding Progress (Required Supplementary Information)
As of June 30, 2011, the valuation date, the plan was 8.8% funded. The actuarial accrued liability
(AAL) for benefits was $22,121,000 and the actuarial value of plan assets was approximately
$3,272,382, resulting in an unfunded actuarial accrued liability (UAAL) of $18,848,618. The covered
payroll (annual payroll of active employees covered by the plan) was $13,477,000 and the ratio of
UAAL to the covered payroll was 136%.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
53
NOTE 11 - RISK MANAGEMENT
The Town participates in the following public entity risk pools through formally organized and
separate legal entities. The Town does not have an equity interest in the joint ventures. These entities
exercise full powers and authorities within the scope of the related agreements including the
preparation of annual budgets, accountability for all funds, the power to make and execute contracts
and the right to sue and be sued. Obligations and liabilities of the separate entities are not those of the
Town, although the Town retains an ongoing financial interest or an ongoing financial responsibility.
Association of Bay Area Governments PLAN Corporation (ABAG) - The Town participates in
ABAG, which covers general liability claims in the amount up to $5,000,000 plus $15,000,000 in
excess liability for total coverage of $20,000,000 per occurrence. The Town has a deductible or
uninsured liability of up to $50,000 per claim. ABAG 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 a $10,000 deductible for vehicle damage. Once the Town’s deductible is met,
ABAG becomes responsible for payment of all claims up to the limit.
Condensed full accrual basis audited financial information of ABAG as of and for the year ended June
30, 2012, as provided by ABAG, P.O. Box 2050, Oakland, CA 94604, is as follows:
Total Assets45,141,862$
Total Liabilities24,677,330
Net Assets20,464,532$
Total Operating Revenue8,660,668$
Total Operating Expense15,179,160
Net Operating Income(6,518,492)
General Revenue449,814
Change in Net Assets(6,068,678)
Beginning Net Assets26,533,210
Ending Net Assets20,464,532$
Local Agency Workers’ Compensation Joint Powers Authority (LAWCX) - The Town is a
member of LAWCX for workers compensation claims coverage. The Town has a $250,000 self-
insured retention level or uninsured liability for all employees. Once the Town’s deductible is met,
LAWCX becomes responsible for claims up to $1,000,000. For claims greater than $1,000,000,
LAWCX has a commercial policy providing coverage. Financial statements may be obtained from
LAWCX at 6371 Auburn Blvd., Suite B, Citrus Heights, California, 94604-2050.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
54
Condensed full accrual basis audited financial information of LAWCX as of and for the year ended
June 30, 2012, is as follows:
Total Assets65,962,653$
Total Liabilities39,812,621
Net Assets26,150,032$
Total Operating Revenue7,781,855$
Total Operating Expense10,963,129
Net Operating Income(3,181,274)
General Revenue1,389,150
Change in Net Assets(1,792,124)
Beginning Net Assets27,942,156
Ending Net Assets26,150,032$
The Town has not significantly reduced its insurance coverage from the prior year and settlements
have not exceeded insurance coverage for the past three years.
Liability for Uninsured Claims - The Town is required to record its liability for uninsured claims and
to reflect the current portion of this liability as an expenditure in its financial statements. As discussed
above, the Town has coverage for such claims, but it has retained the risk for the deductibles, or
uninsured portion of these claims.
The change in Workers’ Compensation and Self Insurance Service Funds’ claims liabilities, is based
on historical trend information provided by its third party administrator and was computed as follows
as of June 30, 2013:
Workers' Self
CompensationInsurance
InternalInternal
Service FundService FundTotal
Claims payable balance - June 30, 2011514,123$ 28,993$ 543,116$
Claims incurred 1,023,598 320,219 1,343,817
Claims paid(730,338) (39,554) (769,892)
Claims payable balance - June 30, 2012807,383 309,658 1,117,041
Claims incurred 366,125 460,807 826,932
Claims paid(378,021) (416,657) (794,678)
Claims payable balance - June 30, 2013795,487$ 353,808$ 1,149,295$
NOTE 12 - REDEVELOPMENT AGENCY DISSOLUTION
On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the Bill”) that
provides for the dissolution of all redevelopment agencies in the State of California. This action
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
55
In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on
December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to
operate as a legal entity as of February 1, 2012.
In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary
to pay the estimated annual installment payments on enforceable obligations of the former
redevelopment agency until all enforceable obligations of the prior redevelopment agency have been
paid in full and all assets have been liquidated.
During the fiscal year ended June 30, 2013, transfers of the assets and liabilities from governmental
funds of the Town to fiduciary funds were reported in the government funds and government wide
financial statements as an extraordinary gain of $295,101. This was also reported in the private-
purpose trust fund as an extraordinary loss.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Town participates in several federal and state grant programs. These are subject to examination
by grantors and the amount, if any, of disallowed expenditures cannot be determined at this time. The
Town expects such amounts, if any, to be immaterial.
The Town is subject to litigation arising from the normal course of business. The Town Attorney
believes there is no pending litigation which is likely to have a material adverse effect on the financial
position of the Town.
As of June 30, 2013, the Successor Agency trust fund reported a net deficit of $11,368,662.
NOTE 14 - TOWN/SUCCESSOR AGENCY GRANTS, COOPERATIVE AGREEMENTS
Public Improvement Grants and Cooperative Agreements
In January of 2011, the Redevelopment Agency entered into a public improvement grant and cooperative
agreement with the Town for the purpose of funding the acquisition of public land and designing and
constructing various public improvements to be owned by the Town provided that the projects were in
accordance with the Redevelopment Agency’s five year implementation plan and redevelopment plan.
The improvement plan, as indentified in the agreement, called for approximately $24 million to be
granted to the Town for the following projects:
a. Expansion and improvement of current and new downtown parking
b. Highway 9 improvements from Highway 17 to Monte Sereno
c. Almond Grove Area street, sidewalk and other improvements
d. Downtown Los Gatos gateways, signage, banners and art
e. Storm drain, retaining wall, street and other improvements
f. New Los Gatos library building
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2013
56
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative
agreement were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its
Redevelopment Agency.
Affordable Housing Cooperative Agreement
In March of 2011, the Redevelopment Agency entered into an affordable housing cooperative agreement
with the Town for the purpose of funding affordable housing projects and programs to be developed
and/or administered by the Town in accordance with the Redevelopment Agency’s five year
implementation plan and redevelopment plan. The improvement plan, as indentified in the agreement,
called for approximately $16 million to be granted to the Town for the following projects:
a. Development of affordable housing at 224 Main St.
b. Development of affordable housing at Dittos Lane
c. Acquisition of property and development of affordable housing on Knowles Ave
d. Partnership with Senior Housing Solutions for the creation of senior housing in Los Gatos
e. Partnerships for the conversion of existing residential developments dedicated to affordable housing
f. Grants to the Santa Clara County Housing Trust for the development of affordable housing.
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative
agreement were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its
Redevelopment Agency.
This Page Intentionally Left Blank
Supplementary Information
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
MAJOR GOVERNMENTAL FUND SCHEDULES
(OTHER THAN THE GENERAL FUND)
57
Schedule of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual
(GAAP):
Appropriated Reserves Fund is used to account for resources provided for capital projects not
fully funded from other sources.
Variance
OriginalFinal Positive
BudgetBudgetActual(Negative)
REVENUES
Other taxes80,000$ 80,000$ 302,028$ 222,028$
Intergovernmental9,999 773,575 788,095 14,520
Charges for services730,000 1,510,208 1,414,660 (95,548)
Other- - 1,397,871 1,397,871
Total Revenues819,999 2,363,783 3,902,654 1,538,871
EXPENDITURES
Payments to Successor Agency- - 1,277,063 (1,277,063)
Capital outlay5,203,274 12,282,901 5,273,966 7,008,935
Total Expenditures5,203,274 12,282,901 6,551,029 5,731,872
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES(4,383,275) (9,919,118) (2,648,375) 7,270,743
OTHER FINANCING SOURCES (USES)
Operating transfers in2,604,615 2,246,270 2,218,785 (27,485)
Operating transfers (out)(112,000) (112,000) (139,965) (27,965)
Total Other Financing Sources (Uses)2,492,615 2,134,270 2,078,820 (55,450)
CHANGE IN FUND BALANCE(1,890,660)$ (7,784,848)$ (569,555) 7,215,293$
BEGINNING FUND BALANCE6,666,737
ENDING FUND BALANCE6,097,182$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
TOWN OF LOS GATOS
APPROPRIATED RESERVES FUND
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
58
This Page Intentionally Left Blank
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
NONMAJOR GOVERNMENTAL FUNDS
59
Capital Projects Funds:
Storm Drain Basin Funds were established to account for fees paid in conjunction with the
development in specified drainage areas.
Construction Tax Funds were established to account for tax levies on building additions or
alterations including capital improvements, underground utilities and parks.
Gas Tax Fund was established to account for revenue and expenditures under the State of
California Streets and Highways Code Sections 2106, 2107 and 2107.5. The revenues must be
used for the maintenance and construction of streets.
Special Revenue Funds:
Community Development Block Grant Fund was established to account for grant funds
received and expended under the Community Development Act of 1974.
Non-Point Source Maintenance Fund was established to comply with obligations under the
National Pollutant Discharge Elimination system permit issued by the California Regional Water
Quality Control Board.
Lighting and Landscape Fund was established to account for maintenance of trees,
landscaping, irrigation systems and lighting within the boundaries of Tract No. 8439.
Total Total
Storm Construction GasCapitalCommunity Non-PointTotalNonmajor
DrainsTax TaxProjectsDevelopmentSourceLighting andSpecial RevenueGovernmental
FundsFundFund FundsFundMaintenanceLandscapingFunds Funds
ASSETS
Cash & Investments1,110,841$ 2,519,548$ 169,347$ 3,799,736$ 46,963$ -$ 146,639$ 193,602$ 3,993,338$
Receivables:
Accounts- - - - - 143,768 - 143,768 143,768
Intergovernmental Receivable- - - - 145,707 - 4,233 149,940 149,940
Total Assets1,110,841$ 2,519,548$ 169,347$ 3,799,736$ 192,670$ 143,768$ 150,872$ 487,310$ 4,287,046$
LIABILITIES
Accounts Payable-$ -$ -$ -$ 3,409$ 202$ 1,025$ 4,636$ 4,636$
Accrued payroll and benefits- - - - - 1,753 - 1,753 1,753
Due to other funds- - - - - 21,708 - 21,708 21,708
Total Liabilities- - - - 3,409 23,663 1,025 28,097 28,097
DEFERRED INFLOWS OF RESOURCES
Unearned Revenue- - - - 152,158 - - 152,158 152,158
FUND BALANCE
Restricted for:
Capital Projects 1,110,841 2,519,548 169,347 3,799,736 - - - - 3,799,736
Committed to:
Repairs and Maintenance- - - - - - 149,847 149,847 149,847
Unassigned- - - - 37,103 120,105 - 157,208 157,208
Total Fund Balances1,110,841 2,519,548 169,347 3,799,736 37,103 120,105 149,847 307,055 4,106,791
Total Liabilities, Fund Balances
and Deferred Inflows of Resources1,110,841$ 2,519,548$ 169,347$ 3,799,736$ 192,670$ 143,768$ 150,872$ 487,310$ 4,287,046$
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2013
SPECIAL REVENUE FUNDS CAPITAL PROJECTS FUNDS
60
Storm Construction GasTotal
DrainTax TaxCapital Projects
FundsFundFund Funds
REVENUES
Property Taxes-$ -$ -$ -$
Other Taxes229,642 53,845 - 283,487
Intergovernmental- - 733,169 733,169
Charges for Services- - - -
Fines and Forfeitures- - - -
Interest6,410 15,381 (1,122) 20,669
Other - - - -
Total Revenues236,052 69,226 732,047 1,037,325
EXPENDITURES
Current:
Parks and Public Works- - - -
Community Development- - - -
Sanitation and Other- - - -
Redevelopment- - - -
Capital Outlay241,845 - 650,000 891,845
Total Expenditures241,845 - 650,000 891,845
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES(5,793) 69,226 82,047 145,480
OTHER FINANCING SOURCES (USES)
Transfers in- - - -
Transfers (out)- - (106,000) (106,000)
Total Other Financing Sources (Uses)- - (106,000) (106,000)
Changes in Fund Balances(5,793) 69,226 (23,953) 39,480
Fund Balances - Beginning of year1,116,634 2,450,322 193,300 3,760,256
Fund Balances - End of year1,110,841$ 2,519,548$ 169,347$ 3,799,736$
(Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2011
CAPITAL PROJECTS FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
61
REVENUES
Property Taxes
Other Taxes
Intergovernmental
Charges for Services
Fines and Forfeitures
Interest
Other
Total Revenues
EXPENDITURES
Current:
Parks and Public Works
Community Development
Sanitation and Other
Redevelopment
Capital Outlay
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out)
Total Other Financing Sources (Uses)
Changes in Fund Balances
Fund Balances - Beginning of year
Fund Balances - End of year
Community Non-PointTotal
DevelopmentSourceLighting andSpecial Revenue
FundMaintenanceLandscapingFundsTotal
-$ -$ 41,238$ 41,238$ 41,238$
- - - - 283,487
169,270 - - 169,270 902,439
- 403,294 - 403,294 403,294
- - 15 15 15
8,249 - 772 9,021 29,690
11,513 - - 11,513 11,513
189,032 403,294 42,025 634,351 1,671,676
- - 17,175 17,175 17,175
13,230 - - 13,230 13,230
- 359,725 - 359,725 359,725
- - - - -
- - - - 891,845
13,230 359,725 17,175 390,130 1,281,975
175,802 43,569 24,850 244,221 389,701
- - - - -
(169,270) - (4,920) (174,190) (280,190)
(169,270) - (4,920) (174,190) (280,190)
6,532 43,569 19,930 70,031 109,511
30,571 76,536 129,917 237,024 3,997,280
37,103$ 120,105$ 149,847$ 307,055$ 4,106,791$
(Concluded)
SPECIAL REVENUE FUNDS
AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
TOWN OF LOS GATOS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
NONMAJOR GOVERNMENTAL FUNDS
62
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
VarianceVariance
PositivePositive
BudgetActual(Negative)BudgetActual(Negative)
REVENUES
Property taxes
-$ -$ -$ -$ -$ -$
Other taxes- - - - - -
Intergovernmental274,079 169,270 (104,809) - - -
Charges for services- - - 502,000 403,294 (98,706)
Fines and forfeitures- - - - - -
Interest5,029 8,249 3,220 - - -
Other - 11,513 11,513 - - -
Total Revenues279,108 189,032 (90,076) 502,000 403,294 (98,706)
EXPENDITURES
Parks and public works
- - - - - -
Community services46,370 13,230 33,140 - - -
Sanitation and other- - - 338,798 359,725 (20,927)
Capital outlay- - - - - -
Total Expenditures46,370 13,230 33,140 338,798 359,725 (20,927)
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
232,738 175,802 (56,936) 163,202 43,569 (119,633)
OTHER FINANCING SOURCES (USES)
Operating transfers in
- - - - - -
Operating transfers (out)(169,270) (169,270) - - - -
Total Other Financing Sources (Uses)(169,270) (169,270) - - - -
CHANGE IN FUND BALANCE63,468$ 6,532 (56,936)$ 163,202$ 43,569 (119,633)$
BEGINNING FUND BALANCE30,571 76,536
ENDING FUND BALANCE37,103$ 120,105$
(Continued)
COMMUNITY DEVELOPMENT
BLOCK GRANT
NON-POINT
SOURCE MAINTENANCE
63
REVENUES
Property taxes
Other taxes
Intergovernmental
Charges for services
Fines and forfeitures
Interest
Other
Total Revenues
EXPENDITURES
Parks and public works
Community services
Sanitation and other
Capital outlay
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Operating transfers in
Operating transfers (out)
Total Other Financing Sources (Uses)
CHANGE IN FUND BALANCE
BEGINNING FUND BALANCE
ENDING FUND BALANCE
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
VarianceVariance
PositivePositive
BudgetActual(Negative)BudgetActual(Negative)
37,760$ 41,238$ 3,478$ -$ -$ -$
- - - 92,000 229,642 137,642
- - - - - -
- - - - - -
- 15 15 - - -
1,588 772 (816) 10,540 6,410 (4,130)
- - - - - -
39,348 42,025 2,677 102,540 236,052 133,512
29,023 17,175 11,848 - - -
- - - - - -
- - - - - -
- - - 284,560 241,845 42,715
29,023 17,175 11,848 284,560 241,845 42,715
10,325 24,850 14,525 (182,020) (5,793) 176,227
- - - - - -
(4,920) (4,920) - - - -
(4,920) (4,920) - - - -
5,405$ 19,930 14,525$ (182,020)$ (5,793) 176,227$
129,917 1,116,634
149,847$ 1,110,841$
(Continued)
STORM DRAIN FUNDSLIGHTING AND LANDSCAPING
64
REVENUES
Property taxes
Other taxes
Intergovernmental
Charges for services
Fines and forfeitures
Interest
Other
Total Revenues
EXPENDITURES
Parks and public works
Community services
Sanitation and other
Capital outlay
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Operating transfers in
Operating transfers (out)
Total Other Financing Sources (Uses)
CHANGE IN FUND BALANCE
BEGINNING FUND BALANCE
ENDING FUND BALANCE
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
VarianceVarianceVariance
PositivePositivePositive
BudgetActual(Negative)BudgetActual(Negative)BudgetActual(Negative)
-$ -$ -$ -$ -$ -$ 37,760$ 41,238$ 3,478$
15,000 53,845 38,845 - - - 107,000 283,487 176,487
- - - 832,290 733,169 (99,121) 1,106,369 902,439 (203,930)
- - - - - - 502,000 403,294 (98,706)
- - - - - - - 15 15
36,250 15,381 (20,869) 2,270 (1,122) (3,392) 55,677 29,690 (25,987)
- - - - - - - 11,513 11,513
51,250 69,226 17,976 834,560 732,047 (102,513) 1,808,806 1,671,676 (137,130)
- - - - - - 29,023 17,175 11,848
- - - - - - 46,370 13,230 33,140
- - - - - - 338,798 359,725 (20,927)
- - - 650,000 650,000 - 934,560 891,845 42,715
- - - 650,000 650,000 - 1,348,751 1,281,975 66,776
51,250 69,226 17,976 184,560 82,047 (102,513) 460,055 389,701 (70,354)
- - - - - - - - -
- - - (106,000) (106,000) - (280,190) (280,190) -
- - - (106,000) (106,000) - (280,190) (280,190) -
51,250$ 69,226 17,976$ 78,560$ (23,953) (102,513)$ 179,865$ 109,511 (70,354)$
2,450,322 193,300 3,997,280
2,519,548$ 169,347$ 4,106,791$
(Concluded)
TOTALSCONSTRUCTION TAXGAS TAX
65
This Page Intentionally Left Blank
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
PROPRIETARY FUNDS
INTERNAL SERVICE FUNDS
66
Internal service funds are used to finance and account for special activities and service performed
by a designed department for other departments in the Town on a cost reimbursement basis.
The concept of major funds does not extend to internal service funds because they are used for
internal activities only. In the Government-Wide Statement of Activities, the net revenues and
expenses of the internal service funds are allocated to the Town departments or programs that
generated them, thus eliminating internal service funds.
However, internal service funds are still presented separately in the fund financial statements and
include the following funds:
Equipment Replacement Fund was established to account for the replacement of major Town
equipment and all vehicle replacement.
Workers’ Compensation Fund was established to account for future claims that may occur
related to workers compensation injuries.
Self Insurance Fund was established to account for future general liability claims against the
Town.
Stores Fund was established to account for the purchase of photocopy equipment, postage and
bulk meter expenses.
Management Information Fund was established to account for the replacement of management
information computer systems and components.
Vehicle Maintenance Fund was established to account for preventative maintenance and repair
provided for all Town vehicles and equipment.
Building Maintenance Fund was established to account for preventative maintenance and
repair for all Town buildings.
EquipmentWorker'sSelfManagementVehicleBuilding
ReplacementCompInsuranceStoresInformationMaintenanceMaintenanceTotal
ASSETS
Cash & Investments3,260,721$ 3,031,683$ 1,708,456$ 157,044$ 2,636,737$ 598,034$ 1,339,377$ 12,732,052$
Restricted Cash & Investments- 18,653 - - - - - 18,653
Receivables:
Accounts- 87 - - 1,027 - 1,094 2,208
Materials, Supplies and Deposits- - - 4,573 - 19,823 - 24,396
Equipment (Net)- - - - - 5,952 5,340 11,292
Total Assets3,260,721$ 3,050,423$ 1,708,456$ 161,617$ 2,637,764$ 623,809$ 1,345,811$ 12,788,601$
LIABILITIES
Accounts Payable- 5,964 - 2,404 134,166 18,282 86,782 247,598
Accrued Payroll and Benefits190 2,057 2,614 - 7,901 3,719 3,320 19,801
Due to Other Governments- - - - - 14 - 14
Claims Payable- 795,487 353,808 - - - - 1,149,295
Total Liabilities190$ 803,508$ 356,422$ 2,404$ 142,067$ 22,015$ 90,102$ 1,416,708$
NET POSITION
Net investment in capital assets-$ -$ -$ -$ -$ 5,952$ 5,340$ 11,292$
Restricted for:
workers compensation claims- 18,653 - - - - - 18,653
Unrestricted3,260,531 2,228,262 1,352,034 159,213 2,495,697 595,842 1,250,369 11,341,948
Total Net Position3,260,531$ 2,246,915$ 1,352,034$ 159,213$ 2,495,697$ 601,794$ 1,255,709$ 11,371,893$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30, 2013
67
EquipmentWorker'sSelfManagementVehicleBuilding
ReplacementCompInsuranceStoresInformationMaintenanceMaintenanceTotal
OPERATING REVENUES
Charges for services439,532$ 638,594$ 486,986$ 88,323$ 1,039,344$ 537,448$ 991,682$ 4,221,909$
Interest- 10 - - - - - 10
Use of money and property- - - - - - 177,785 177,785
Other89,243 53,114 - 294 196 - 70,871 213,718
Total Operating Revenues528,775 691,718 486,986 88,617 1,039,540 537,448 1,240,338 4,613,422
OPERATING EXPENSES
Salaries and benefits9,411 96,223 122,152 - 423,825 189,157 206,500 1,047,268
Insurance expenses- 135,000 371,922 - - - - 506,922
Depreciation expenses- - - - - 6,772 2,619 9,391
Services and supplies20,023 514,218 236,018 135,974 593,363 261,434 790,375 2,551,405
Total Operating Expenses29,434 745,441 730,092 135,974 1,017,188 457,363 999,494 4,114,986
Operating Income (loss)499,341 (53,723) (243,106) (47,357) 22,352 80,085 240,844 498,436
Transfers (in)- - - - - - - -
Transfers (out)(372,210) - - - - - (5,820) (378,030)
Net Transfers(372,210) - - - - - (5,820) (378,030)
Change in Net Position127,131 (53,723) (243,106) (47,357) 22,352 80,085 235,024 120,406
BEGINNING NET POSITION3,133,400 2,300,638 1,595,140 206,570 2,473,345 521,709 1,020,685 11,251,487
ENDING NET POSITION3,260,531$ 2,246,915$ 1,352,034$ 159,213$ 2,495,697$ 601,794$ 1,255,709$ 11,371,893$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
68
EquipmentWorker'sSelfManagementVehicleBuilding
ReplacementCompInsuranceStoresInformationMaintenanceMaintenanceTotal
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers528,775$ 691,631$ 486,986$ 88,617$ 1,039,191$ 538,079$ 1,250,360$ 4,623,639$
Payments to suppliers(26,874) - - (132,410) (509,902) (237,891) (782,969) (1,690,046)
Payments to employees(9,387) (95,885) (121,690) - (423,039) (188,568) (207,957) (1,046,526)
Claims paid- (655,150) (566,995) - - - - (1,222,145)
Net Cash Provided (Used) by
Operating Activities492,514 (59,404) (201,699) (43,793) 106,250 111,620 259,434 664,922
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers In- - - - - - - -
Transfers Out(372,210) - - - - - (5,820) (378,030)
Net Cash Provided (Used) by
Noncapital Financing Activities(372,210) - - - - - (5,820) (378,030)
Net Increase(Decrease) in Cash and Investments120,304 (59,404) (201,699) (43,793) 106,250 111,620 253,614 286,892
Cash and investments - beginning of year3,140,417 3,109,740 1,910,155 200,837 2,530,487 486,414 1,085,763 12,463,813
Cash and investments - end of year3,260,721$ 3,050,336$ 1,708,456$ 157,044$ 2,636,737$ 598,034$ 1,339,377$ 12,750,705$
Reconciliation of Operating Income to Cash
Flows from Operating Activities:
Operating Income499,341$ (53,723)$ (243,106)$ (47,357)$ 22,352$ 80,085$ 240,844$ 498,436$
Adjustments to reconcile operating income to
cash flows from operating activities:
Depreciation- - - - - 6,772 2,619 9,391
Change in assets and liabilities:
Receivables, net- (87) - - (349) 631 10,022 10,217
Other assets- - - 2,288 - 13,947 - 16,235
Accounts payable(6,851) 5,964 (3,205) 1,276 83,468 9,601 7,406 97,659
Accrued payroll and benefits24 (11,558) 44,612 - 779 584 (1,457) 32,984
Cash Flows From Operating Activities492,514$ (59,404)$ (201,699)$ (43,793)$ 106,250$ 111,620$ 259,434$ 664,922$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
69
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
PRIVATE PURPOSE TRUST FUNDS
70
Library Private Purpose Trust Fund was established to provide for the servicing of donations
and bequests to the Town's Library Program.
RDA Successor Agency Private Purpose Trust Fund was established to account for the assets
and liabilities transferred from the dissolution of the Town’s former Redevelopment Agency and
the continuing operations related to existing Redevelopment Agency obligations.
RDA
Successor
LibraryAgencyTotal
ASSETS
Cash and investments (Note 2)787,849$ 1,852,713$ 2,640,562$
Restricted cash and investments (Note 2)- 2,005,931 2,005,931
Accounts receivable- 416 416
Loans receivable (Note 3)- 505,441 505,441
Capital assets (Note 5):
Nondepreciable- 5,257,422 5,257,422
Depreciable, net of accumulated depreciation- 2,135,545 2,135,545
Total Assets787,849 11,757,468 12,545,317
LIABILITIES
Accounts payable30,370 6,730 37,100
Due to other governments217 - 217
Interest payable- 416,532 416,532
Long-term debt (Note 6):
Due within one year- 955,000 955,000
Due in more than one year- 22,505,130 22,505,130
Total Liabilities30,587 23,883,392 23,913,979
NET POSITION
Held in trust757,262 (12,125,924) (11,368,662)
Total Net Position757,262$ (12,125,924)$ (11,368,662)$
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2013
71
RDA
Successor
LibraryAgencyTotal
ADDITIONS
Investment earnings5,514$ 50,402$ 55,916$
Gifts, bequests and endowments28,150 - 28,150
Repayment of Town obligations- 1,277,063 1,277,063
Other- 4,171,849 4,171,849
Total Additions33,664 5,499,314 5,532,978
DEDUCTIONS
Program expenses- 340,095 340,095
Payments to other governments- 295,913 295,913
Interest and fiscal agency expenses of RDA- 3,123,866 3,123,866
Library services135,631 - 135,631
Depreciation expense- 101,693 101,693
Total Deductions135,631 3,861,567 3,997,198
Extraordinary Gain (Loss) - RDA Dissolution- (358,986) (358,986)
CHANGE IN NET POSITION(101,967) 1,278,761 1,176,794
NET POSITION - BEGINNING OF YEAR859,229 (13,404,685) (12,545,456)
NET POSITION - END OF YEAR757,262$ (12,125,924)$ (11,368,662)$
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
72
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
AGENCY FUND
PARKNG IMPROVEMENT DISTRICT #88
73
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 statements, but are presented in separate Fiduciary Fund financial
statements.
Balance Balance
June 30, 2012AdditionsDeletionsJune 30, 2013
ASSETS
Cash and investments (Note 3)26,730$ 140,822$ 143,655$ 23,897$
Restricted cash and investments (Note 3)284,992 1,455 - 286,447
Intergovernmental receivable92,346 6,158 92,346 6,158
Total Assets404,068$ 148,435$ 236,001$ 316,502$
LIABILITIES
Due to other governments404,068$ 148,435$ 236,001$ 316,502$
Total Liabilities404,068$ 148,435$ 236,001$ 316,502$
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
TOWN OF LOS GATOS
AGENCY FUND
PARKING IMPROVEMENT DISTRICT #88
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
74
This Page Intentionally Left Blank
Statistical Section
75
STATISTICAL (UNAUDITED)
This part of the Town of Los Gatos Comprehensive Annual Financial Report (“CAFR”) presents
the detailed information as a context for understanding what the information in the financial
statements, note disclosures, and required supplementary information says about the Town’s
overall financial health.
Financial Trends
These schedules contain trend information to help the reader understand how Town’s
financial performance and well-being have changed over time. (Schedule 1, Schedule 2,
Schedule 3, and Schedule 4).
Revenue Capacity
These schedules contain information to help the reader assess one of the Town’s most
significant local revenue source, the property tax (Schedule 5, Schedule 6, Schedule 7,
and Schedule 8).
Debt Capacity
These schedules present information to help the reader assess the affordability of the
Town’s current levels of outstanding debt and its ability to issue additional debt in the
future (Schedule 9, Schedule 10, and Schedule 11)
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the Town’s financial activities take place
(Schedule 12, Schedule 13, and schedule 14).
Operating Information
These schedules contain service and infrastructure data to help the reader understand how
the information in the Town’s CAFR relates to the services the Town provides and
activities it performs (Schedule 15 and Schedule 16).
Town of Los Gatos Schedule 1
Net Position by Component
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Net Investment
FiscalinTotal
YearCapital Assets Restricted UnrestrictedNet Position
200438,417,211$ 11,463,187$ 29,308,135$ 79,188,533$
200538,234,229 13,295,871 31,410,468 82,940,568
200641,019,121 12,665,493 38,609,085 92,293,699
200743,281,315 20,423,828 37,893,056 101,598,199
200848,581,378 18,459,776 42,884,826 109,925,980
200952,665,506 15,663,436 51,619,635 119,948,577
201050,129,550 26,723,994 47,191,225 124,044,769
201172,567,355 14,652,823 29,017,520 116,237,698
201290,333,451 5,167,236 37,192,210 132,692,897
201392,558,523 3,949,583 41,480,377 137,988,483
(2) The decrease in Restricted Net Position from FY2010 to FY2011 was primarily due to the issuance of the $15.7
million Certificates of Participation in FY2010.
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
$50,000,000
$55,000,000
$60,000,000
$65,000,000
$70,000,000
$75,000,000
$80,000,000
$85,000,000
$90,000,000
$95,000,000
Invesment in Capital Assets Net of Related DebtRestrictedUnrestricted
76
Town of Los Gatos
Schedule 2
Changes in Net PositionLast Ten Fiscal Years(Accrual Basis of Accounting)Ex
p
enses
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
Governmental Activities:General government
4,246,133$
4,341,526$
4,383,584$
4,570,391$
5,233,730$
5,323,467$
4,647,801$
5,180,153$
6,145,143$
6,564,768$
Police department
9,980,927
10,524,840
11,133,362
11,556,350
12,313,637
13,467,503
13,266,849
13,495,885
14,124,798
13,731,754
Parks and public works
6,179,328
5,953,319
6,523,888
7,222,052
6,958,449
8,671,678
7,458,085
7,155,905
7,827,332
7,829,315
Community development
2,229,686
2,494,689
2,887,818
2,735,223
3,064,865
3,389,151
3,522,477
3,099,269
3,434,551
4,094,188
Community services
1,046,351
920,562
948,650
2,388,250
1,060,922
1,162,284
1,270,240
666,015
-
-
Library services
1,807,662
1,786,696
1,880,465
1,892,448
1,956,767
2,067,476
2,038,009
1,892,805
1,938,577
2,128,823
Sanitation
832,538
834,525
574,344
414,610
502,196
407,048
655,713
342,893
158,205
393,205
Redevelopment
1,828,924
2,133,008
2,093,546
2,434,935
3,360,585
2,939,550
6,992,935
16,794,022
919,821
1,277,063
Interest and fees
662,867
696,266
708,585
704,794
670,415
631,159
612,700
1,278,381
1,123,842
-
Total Governmental Activities
28,814,415
$
29,685,430
$
31,134,241
$
33,919,053
$
35,121,567
$
38,059,316
$
40,464,809
$
49,905,328
$
35,672,269
$
36,019,116
$
Program RevenuesCharges for Services:General government
1,959,401$
1,640,632$
1,981,557$
2,127,670$
1,149,911$
1,155,409$
1,337,772$
1,156,931$
1,131,424$
1,416,593$
Police department
1,446,067
1,386,479
1,343,028
1,250,636
895,569
1,358,361
2,110,357
2,153,843
2,324,397
2,450,630
Parks and public works
472,366
757,790
591,079
676,095
576,107
637,933
779,300
810,022
1,215,382
3,032,435
Community development
2,025,305
2,569,923
3,070,115
2,997,419
2,954,123
2,700,614
3,404,087
3,097,192
3,448,433
4,649,444
Community services
347,970
182,075
-
-
-
147,895
134,366
98,803
-
-
Library services
72,013
61,671
62,444
61,091
60,123
56,932
57,633
39,491
37,662
50,696
Sanitation
903,097
889,948
690,314
437,794
166,660
135,000
135,000
135,000
135,000
403,294
Operating Grants and Contributions:General government
-
-
-
-
54,242
8,834
10,237
15,638
6,453
8,406
Police department
546,508
566,180
745,797
645,034
744,347
538,629
81,997
27,748
29,980
91,360
Parks and public works
706,621
556,121
549,873
545,432
565,857
633,923
594,775
809,272
993,827
835,724
Community services
124,920
262,554
180,897
68,912
146,236
190,447
124,287
182,683
-
-
Library services
12,981
14,987
11,379
16,735
11,409
10,462
13,996
10,662
109
40
Sanitation
8,155
8,023
7,857
41,044
39,891
25,103
9,002
-
-
Capital Grants and Contributions:General government
-
-
-
-
-
-
-
-
-
169,270
Parks and public works
1,166,929
867,951
931,616
1,381,631
2,020,121
1,330,638
3,074,453
2,375,759
641,811
2,757,660
Total Program Revenues
9,792,333$
9,764,334
$
10,165,957
$
10,208,449
$
9,385,751
$
8,944,968
$
11,883,363
$
10,922,046
$
9,964,478
$
15,865,552
$
General Revenues
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
Property taxes
9,645,339$
11,931,215$
13,810,457$
16,082,348$
17,311,052$
18,343,063$
18,856,081$
18,226,001$
14,088,866$
10,729,602$
Sales taxes
6,914,526
7,904,130
8,655,566
9,253,891
9,345,432
8,487,000
8,317,217
9,971,409
9,889,100
8,757,428
Other taxes
1,823,019
1,864,997
2,247,997
2,327,516
2,904,908
2,664,698
2,623,622
2,906,264
3,698,753
3,390,602
Motor vehicle in lieu
1,298,455
314,041
666,494
194,104
137,330
101,265
92,595
139,814
15,238
15,790
Investment earnings
(92,621)
1,286,433
1,922,819
3,607,966
4,190,951
2,949,119
1,155,929
760,905
331,420
(133,375)
Sale of property
-
(6,378)
-
-
-
6,525,000
-
(870,127)
-
54,425
Miscellaneous
25,415
378,693
2,850,836
334,818
9,842
66,802
52,459
41,943
2,275,160
1,154,647
Extraordinary gain (loss) dissolution of RDA
-
-
-
-
-
-
-
-
11,864,453
1,480,031
Total General Revenues
19,614,133$
23,673,131
$
30,150,578
$
31,800,643
$
33,899,515
$
39,136,947
$
31,097,903
$
31,176,209
$
42,162,990
$
25,449,150
$
Change in Net Positio
n
592,051
$ 3,752,035$ 9,182,294$ 8,090,039$ 8,163,698$ 10,022,597$ 2,516,457$ (7,807,073)$ 16,455,199$ 5,295,586$
77
Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2003/042004/052005/062006/072007/082008/092009/102010/112011/122012/13
General Fund
Reserved1,852,516$ 2,097,545$ 2,128,873$ 4,732,394$ 2,048,261$ 8,165,607$ 4,491,589$ -$ -$ -$
Unreserved10,544,144 12,144,819 18,000,209 16,406,211 17,236,569 16,861,752 18,594,984 - - -
Nonspendable- - - - - - - 1,500,000 - -
Restricted- - - - - - - - - -
Assigned- - - - - - - 21,806,781 21,992,886 20,758,156
Unassigned- - - - - - - 2,433,556 4,019,409 7,502,446
Total General Fund12,396,660$ 14,242,364$ 20,129,082$ 21,138,605$ 19,284,830$ 25,027,359$ 23,086,573$ 25,740,337$ 26,012,295$ 28,260,602$
All Governmental Funds
Reserved11,189,030$ 12,844,667$ 12,088,367$ 15,820,345$ 14,917,629$ 15,265,127$ 10,525,384$ -$ -$ -$
Unreserved, reported in:
Special revenue funds845,014 962,032 1,123,335 836,191 1,030,161 522,105 225,509 - - -
Capital project funds4,078,709 3,853,747 3,842,580 8,169,857 11,719,905 11,203,521 24,454,347 - -
Debt service funds3,704,844 4,032,770 4,960,030 3,849,382 5,747,185 7,526,557 6,953,732 - - -
Nonspendable- - - - - - - 1,500,000 -
Restricted- - - - - - - 14,764,334 5,167,236 3,949,583
Assigned- - - - - - - 26,593,328 27,382,560 26,855,338
Unassigned- - - - - - - 2,409,667 4,126,516 7,659,654
Total all Governmental Funds19,817,597$ 21,693,216$ 22,014,312$ 28,675,775$ 33,414,880$ 34,517,310$ 42,158,972$ 45,267,329$ 36,676,312$ 38,464,575$
Fiscal Year
78
Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2003/042004/052005/062006/072007/082008/092009/102010/112011/122012/13
Revenues:
Taxes18,541,280$ 22,099,118$ 25,112,221$ 27,888,072$ 29,773,634$ 29,643,262$ 29,967,385$ 31,549,352$ 27,676,719$ 24,596,799$
Intergovernmental4,719,901 4,242,451 3,993,032 4,085,983 3,128,239 2,134,352 4,082,725 3,248,303 1,669,729 2,615,191
Charges for Service3,236,450 3,062,960 3,529,178 4,269,571 2,996,660 3,421,131 4,418,074 4,107,386 5,550,671 6,529,234
Licenses & Permits2,031,387 2,417,204 2,637,977 2,705,028 3,337,822 2,692,187 2,977,199 2,967,819 3,242,348 4,015,871
Investment income465,432 1,828,216 4,975,513 4,179,736 4,190,955 2,949,120 1,174,203 691,022 291,484 (133,380)
Fines and Forfeitures751,532 580,937 1,005,773 561,665 369,292 618,771 662,699 737,903 809,790 688,125
Use of Property60,749 51,948 38,502 38,974 38,910
Other267,052 1,597 232,694 110,486 1,180,063 1,581,078 2,105,333 2,904,862 5,412,328 4,577,584
Total revenues30,013,034 34,232,483 41,486,388 43,800,541 44,976,665 43,100,649 45,439,565 46,245,148 44,692,043 42,928,334
Expenditures:
Current
Public safety9,986,069 10,506,167 11,706,091 11,576,850 12,214,891 12,971,105 12,821,499 13,004,041 13,392,953 13,370,032
Public Works4,625,525 4,399,171 4,742,401 4,956,451 5,261,706 5,785,584 5,152,745 5,222,504 5,440,960 5,616,197
Community Development2,249,641 2,527,730 2,936,730 2,776,231 3,035,240 3,280,856 3,452,914 2,973,587 3,226,195 4,235,832
Community Services1,265,296 933,759 950,333 2,395,429 1,056,835 1,149,290 1,261,981 663,645 - -
Library Services1,798,331 1,770,991 1,876,022 1,904,900 1,946,595 2,007,518 1,999,430 1,806,611 1,805,479 2,055,069
Sanitation & Other846,809 848,547 551,164 387,674 470,660 375,483 642,512 314,899 116,607 359,725
General Government4,234,148 4,372,991 4,358,853 4,586,513 5,120,970 5,145,355 5,483,753 6,318,706 8,046,794 8,331,444
Redevelopment1,773,889 2,084,767 2,573,514 2,966,132 3,284,847 3,861,525 8,692,216 18,958,126 3,282,155 1,277,063
Capital outlay6,911,405 2,142,212 4,682,848 4,689,187 8,697,478 7,759,577 16,141,561 15,839,303 10,929,491 6,568,653
Debt service
Principal repayment 370,000 385,000 400,000 414,167 429,167 445,000 465,000 485,000 934,167 -
Interest and fiscal charges668,721 698,906 714,079 711,346 676,913 638,221 620,356 1,019,881 1,143,185 -
Total expenditures34,729,834 30,670,241 35,492,035 37,364,880 42,195,302 43,419,514 56,733,966 66,606,303 48,317,986 41,814,015
Excess (deficiency) of revenues
over (under) expenditures(4,716,800) 3,562,242 5,994,353 6,435,661 2,781,363 (318,865) (11,294,401) (20,361,155) (3,625,943) 1,114,319
Other financing sources(uses):
Debt Issuance- - - - - - 16,428,095 - - -
Transfers in2,352,051 2,130,315 2,854,245 10,611,169 8,810,379 5,370,708 4,028,905 3,928,107 3,735,440 2,841,881
Transfers out(1,702,052) (2,130,315) (2,640,785) (9,375,847) (8,706,409) (4,731,885) (3,461,724) (3,545,168) (3,661,894) (2,463,850)
Proceeds from issuance of debt- - - - - - - - - -
Total other financing sources(uses)649,999 - 213,460 1,235,322 103,970 638,823 16,995,276 382,939 73,546 378,031
Special item:
Sale of property- - - - - 6,525,000 - - - -
Extraordinary Gain (Loss) RDA Dissolution(5,038,620) 295,913
Net change in fund balances(4,066,801)$ 3,562,242$ 6,207,813$ 7,670,983$ 2,885,333$ 6,844,958$ 5,700,875$ (19,978,216)$ (8,591,017)$ 1,788,263$
Debt service as a percentage
of non capital expenditures3.73%3.80%3.62%3.44%3.30%3.04%2.67%2.96%5.56%0.00%
1Increase due to SERAF payment to State in the amount of $2.2M and increased Pass Through Payments.
2The increase in capital outlay is due to purchases of land for low-moderate housing projects in the amount of $4.3M and purchase of land for a sports park in the amount of $3.1M.
Fiscal Year
79
Town of Los GatosSchedule 5
Assessed Value and Estimated Actual Value of Taxable Property
Last Ten Fiscal Years
Utility
and Total
FiscalUnsecured PercentSecuredPercentTotal EstimatedDirect
YearPropertyChangePropertyChangeAssessedFull MarketTax Rate
2004175,689,995$ -12.83%5,258,601,739$ 7.02%5,434,291,734$ 21,034,406,956$ 1.0460
2005179,611,684 2.23%5,654,906,203 7.54%5,834,517,887 22,619,624,812 1.0475
2006186,694,066 3.94%6,259,830,939 10.70%6,446,525,005 25,039,323,756 1.0480
2007194,195,209 4.02%6,840,335,733 9.27%7,034,530,942 27,361,342,932 1.0466
2008201,629,315 3.83%7,392,958,751 8.08%7,594,588,066 29,571,835,004 1.0460
2009216,402,089 7.33%7,949,991,620 7.53%8,166,393,709 31,799,966,480 1.0459
2010241,286,055 11.50%8,076,101,607 1.59%8,317,387,662 32,304,406,428 1.0449
2011217,353,236 -9.92%8,044,692,600 -0.39%8,262,045,836 32,178,770,400 1.0462
2012217,297,593 -0.03%8,152,459,157 1.34%8,369,756,750 32,609,836,628 1.0460
2013211,268,609 -2.77%8,465,420,032 3.84%8,676,688,641 33,861,680,128 1.0457
Source: Santa Clara County Assessed Value Report
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Millions
UnsecuredSecured
80
Town of Los GatosSchedule 6
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
CountySanta ClaraCounty School
FiscalBasic CountyRetirementValley WaterDirect Rate District Bonds
YearWide LevyLevyDistrictSubtotal and LoansTotal
20041.00000.03880.00871.04750.07491.1224
20051.00000.03880.00921.04800.07261.1206
20061.00000.03880.00781.04660.09961.1462
20071.00000.03880.00721.04600.09411.1401
20081.00000.03880.00711.04590.10321.1491
20091.00000.03880.00611.04490.09701.1419
20101.00000.03880.00741.04620.11471.1609
20111.00000.03880.00721.04600.12521.1712
20121.00000.03880.00641.04520.12691.1721
20131.00000.03880.00691.04570.14401.1897
Source: Santa Clara County Book of Tax Rates
0.00
0.25
0.50
0.75
1.00
1.25
Per Hundred $
Santa Clara Valley Water District
County Retirement Levy
School District Bonds and Loans
Basic County Wide Levy
81
Town of Los GatosSchedule 7
Principle Property Tax Payers
Last Five Fiscal Years *
Percentage Percentage Percentage Percentage Percentage
of Total Cityof Total Cityof Total Cityof Total Cityof Total City
Taxable TaxableTaxable TaxableTaxable TaxableTaxable TaxableTaxable Taxable
AssessedAssessedAssessedAssessedAssessedAssessedAssessedAssessedAssessedAssessed
ASSESSEE NAMEValueValueValueValueValueValueValueValueValueValue
Sobrato Interests IV/Sobrato Land Holdings$147,774,9331.86%$156,934,5611.94%$150,781,0921.87%$157,554,5251.93%$157,559,2451.86%
Boccardo Corporation$20,519,2740.26%$37,747,0200.47%$36,839,0210.46%$37,173,8770.46%$37,550,3680.44%
Knowles Los Gatos LLC$35,000,0000.44%$32,000,0000.40%$45,778,7570.57%$46,123,4680.57%$47,045,9340.56%
SRI Old Town LLC$29,045,4630.37%$29,626,3710.37%$29,556,1550.37%$29,778,7120.37%$30,374,2860.36%
CH Realty IV Downing LP$28,815,0000.36%$29,391,3000.37%$19,000,0000.24%$19,143,0680.23%$19,525,9270.23%
Hercules Holding II LLC$18,417,1110.23%$25,886,8050.33%$25,865,4520.32%- 0.00%- 0.00%
Health Care REIT Inc,$24,480,0000.31%$24,969,6000.31%$19,720,7490.25%$19,869,2450.24%$19,223,3480.23%
750 University LLC$22,000,0000.28%$21,000,0000.26%$20,950,2290.26%- 0.00%$12,137,9990.14%
Grosvenor USA Ltd.$20,547,9000.26%$20,958,8580.26%$20,909,1850.26%$21,066,6300.26%$22,437,9620.27%
Alberto Way Holdings LLC$20,516,6870.26%$20,927,0180.26%$20,877,4180.26%$21,034,6230.26%$23,145,0640.27%
D&K Los Gatos LLC$14,041,5730.18%$20,400,0000.26%$20,351,6510.25%$15,284,3240.19%$15,590,0100.18%
CHL Ventures LP$19,767,5990.25%$20,162,9500.25%$20,115,1630.25%$20,266,6300.25%$20,671,9620.24%
San Jose Water Works$19,934,4910.25%$20,162,8480.25%$23,313,9780.29%$29,369,1370.36%$30,882,0090.36%
Toll House Hotel LLC$16,127,9370.20%$18,986,1450.24%$15,848,6260.20%$15,696,0890.19%- 0.00%
Grade Way Associations VI$14,151,2370.18%$14,434,2610.18%- 0.00%- 0.00%$14,798,6510.17%
Lyon Baytree Apartments LLC$16,722,7480.21%$14,161,5250.18%$14,111,4070.18%$14,177,0390.17%$14,430,1230.17%
KSL Capital Partners$27,838,9030.35%$14,030,0960.18%$39,960,1140.50%$41,698,7510.51%$42,532,7210.50%
Los Gatos Hotel Corp.- 0.00%$13,906,2730.17%$15,978,0090.20%$15,683,9790.19%$15,617,1340.18%
David A. and Shari Flick- 0.00%- 0.00%$14,614,4470.18%$14,724,4870.18%$15,018,9710.18%
Pter R. Hofman- 0.00%- 0.00%$13,247,1240.16%- 0.00%- 0.00%
Paul H. Roskoph- 0.00%$12,696,9240.16%- 0.00%$12,926,4570.16%$13,416,4520.16%
Elizabeth K. Dodson- 0.00%$12,617,1400.16%- 0.00%- 0.00%- 0.00%
Health Care Property Partners$27,844,2160.35%- 0.00%- 0.00%- 0.00%- 0.00%
BR3 Partners$21,182,5950.27%- 0.00%- 0.00%- 0.00%- 0.00%
Community Hospital of Los Gatos Inc.$17,081,9710.21%- 0.00%- 0.00%- 0.00%- 0.00%
Ohana University Ave. LLC- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
Robert M. Granum II- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
GS Baytree LP- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
Robson Homes LLC- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
GHC Shannon Valley Ranch LLC- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
Sports Resorts Inc.- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
Good Samaritan Hospital LP- 0.00%- 0.00%- 0.00%$19,372,7950.24%$19,530,1830.23%
Windrose Los Gatos Properties LLC- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
Grade Way Associates VI- 0.00%- 0.00%$14,400,0500.18%$14,508,4820.18%- 0.00%
Park Row East Apartments Ltd.- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
LG Business Park LLC- 0.00%- 0.00%- 0.00%18,342,931.00 0.23%- 0.00%
Green Eyes LLC- 0.00%- 0.00%- 0.00%- 0.00%$12,542,5550.15%
Total - Principal taxpayers561,809,638$ 7.07%560,999,695$ 6.95%582,218,627$ 7.24%583,795,249$ 7.16%584,030,904$ 6.90%
Total - All real properties assessed by the Town (1)$7,949,991,620 $8,075,202,207 $8,043,793,200 $8,151,530,237 $8,464,491,112
(1) Assessed value includes only net secured real properties.
Source Data: California Municipal Statistics, Inc.
2011/122012/132008/092009/102010/11
82
Town of Los Gatos Schedule 8
Property Tax Levies and Collections
Last Ten Fiscal Years
Value of
Redevelopment
AgencyValue of
TownRedevelopmentTotal PropertyValue of TownPropertyProperty
Property TaxProperty TaxTax LeviedProperty subjectSubject to Subject to
FiscalLevied andLevied andandto Local TaxLocal Local
YearCollectedCollectedCollectedRateTax RateTax Rate
20044,834,464$ 4,376,896$ 9,211,361$ 5,480,295,734$ 753,210,332$ 6,233,506,066$
20055,348,483 5,013,350 10,361,833 5,834,517,887 804,306,862 6,638,824,749
20065,739,846 5,976,062 11,715,909 6,446,525,005 897,448,660 7,343,973,665
20076,386,562 7,425,925 13,812,488 7,034,530,942 996,479,040 8,031,009,982
20086,901,935 8,072,176 14,974,111 7,594,588,066 1,081,483,541 8,676,071,607
20097,465,403 8,574,251 16,039,654 8,166,393,709 1,096,883,582 9,263,277,291
20107,608,137 9,022,863 16,630,999 8,317,387,662 1,134,135,499 9,451,523,161
20117,567,880 6,861,650 14,429,530 8,262,045,836 1,117,973,351 9,380,019,187
20127,520,265 3,349,254 10,869,519 8,369,756,750 1,109,305,673 9,479,062,423
20138,253,442 - 8,253,442 8,676,688,641 1,167,752,021 9,844,440,662
Sources: Santa Clara County Auditor-Controller Office and the Town of Los Gatos
$4.0
$4.5
$5.0
$5.5
$6.0
$6.5
$7.0
$7.5
$8.0
$8.5
$9.0
$9.5
Billions
Value of Property
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
Millions
Tax Levied
83
Town of Los Gatos Schedule 9
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
199220022010
CertificateCertificateCertificateTotalTotal Percentage of
FiscalofofofGovernmentalPrimaryPersonal Per
YearParticipationParticipationParticipationActivitiesGovernmentIncomeCapita
20041,615,000$ 10,515,000$ -$ 12,130,000$ 12,130,000$ 8.6%419.56
20051,445,000 10,300,000 - 11,745,000 11,745,000 7.8%405.49
20061,270,000 10,075,000 - 11,345,000 11,345,000 6.9%389.65
20071,085,000 9,845,000 - 10,930,000 10,930,000 6.2%372.25
2008890,000 9,610,000 - 10,500,000 10,500,000 5.9%348.03
2009685,000 9,370,000 - 10,055,000 10,055,000 5.9%329.70
2010470,000 9,120,000 15,675,000 25,265,000 25,265,000 14.1%820.24
2011240,000 8,865,000 15,675,000 24,780,000 24,780,000 13.5%835.72
2012- - - - - 0.0%1)0.00
2013- - - - - 0.0%0.00
1)Debt was transferred to the Successor Agency trust fund as a part of the RDA dissolution
Governmental Activities
84
Town of Los GatosSchedule 10
Direct and Overlapping Governmental Activities Debt
As of June 30, 2013
2012/13 Assessed Valuation:$8,767,688,641
Redevelopment Incremental Valuation$0(2)
Adjusted Assessed Valuation:$8,767,688,641
Estimated Share
of Direct and
Debt atOverlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT:% ApplicableJune 30, 2013at June 30, 2013
Overlapping Tax & Assesment Debt
Santa Clara County2.812%805,800,000$ 22,659,096$
West Valley-Mission Community College District9.993%308,533,073$ 30,831,710$
Campbell Union High School District8.204%156,055,000$ 12,802,752$
Los Gatos-Saratoga Joint Union High School District33.176%46,905,000$ 15,561,203$
Cambrian School District0.432%17,804,944$ 76,917$
Campbell Union High School District8.579%146,472,432$ 12,565,870$
Los Gatos Union School District70.014%107,180,000$ 75,041,005$
Saratoga Union School District0.043%42,987,102$ 18,484$
Union School District20.596%68,079,958$ 14,021,748$
Town of Los Gatos 1915 Act Bonds100.000%135,000$ 135,000$
Santa Clara Valley Water District Benefit Assessment District2.812%123,100,000$ 3,461,572$
Total Overlapping Tax and Assesmet Debt187,175,357$
Overlapping General Fund Debt
Santa Clara County General Fund Obligations2.812%819,956,840$ 23,057,186$
Santa Clara County Pension Obligations2.812%378,994,822$ 10,657,334$
Santa Clara County Board of Education Certificates of Participation2.812%10,400,000$ 292,448$
West Valley-Mission Community College District General Fund Obligations9.993%65,435,000$ 6,538,920$
Campbell Union High School District General Fund Obligations8.204%11,325,579$ 929,151$
Los Gatos-Saratoga Joint Union High School District Certificates of Participation33.176%8,420,000$ 2,793,419$
Saratoga Union School District Certificates of Participation0.043%5,540,000$ 2,382$
Santa Clara County Vector Control District Certificates of Participation2.812%3,455,000$ 97,155$
Midpeninsula Regional Open Space Park District General Fund Obligations4.848%135,649,717$ 6,576,298$
Total Overlapping General Fund Debt50,944,293$
Total of Overlapping Debt238,119,650$
Direct Debt
Town of Los Gatos Certificates of Participation(2)-$
Total Direct Debt-$
Total Direct and Overlapping Bonded Debt238,119,650$
Ratios to 2012/13 Assessed Valuation:
Total Overlapping Tax and Assessment Debt: 2.16%
Ratios to Adjusted Assessed Valuation:
Total Direct Debt: 0.00%
Combined Total Debt: 3.01%
Ratios to redevelpment Incremental Valuation ( $933,300,666):
Total Overlapping Tax Increment Debt: 2.45%
Source Data: California Municipal Statistics, Inc.
(1) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital
lease obligations.
(2) Excludes RDA asessed valuation and debt transferred to the Successor Agency trust as a part of the RDA dissolution.
85
Town of Los Gatos Schedule 11
Legal Debt Margin Information,
Last Ten Fiscal Years
(In Thousands of Dollars)
Legal Debt Margin Calculation
for Fiscal Year 2013/14
Assessed Value8,420,918,232
Debt limit1,263,137,735
Debt applicable to limit:-
Legal Debt Margin1,263,137,735
2004/052005/062006/072007/082008/092009/102010/112011/122012/132013/14
Debt limit788,790$ 842,159$ 932,872$ 1,019,970$ 1,102,766$ 1,185,727$ 1,204,551$ 1,195,035$ 1,216,131$ 1,263,138$
Debt applicable to limit- - - - - - - - - -
Legal debt margin788,790$ 842,159$ 932,872$ 1,019,970$ 1,102,766$ 1,185,727$ 1,204,551$ 1,195,035$ 1,216,131$ 1,263,138$
Total net debt
applicable to the limit0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%
as a percentage
of debt limit
Notes:
Fiscal Year
(1) The Town of Los Gatos is a general law city and has a debt limit of 15%.
(2) Excludes RDA asessed valuation and debt transferred to the Successor Agency trust as a part of the RDA dissolution.
86
Town of Los GatosSchedule 12
Demographic and Economic Statistics
Last Ten Fiscal Years
Personal
IncomePer CapitaPublic County
Fiscal(thousandsPersonalMedian School Unemployment
YearPopulationof dollars)IncomeAgeEnrollmentRate
Ended(1)(2)(3)(4)(5)(6)
200428,911 1,415,425$ 48,958$ 42.525,529 6.7%
200528,965 1,508,526 52,081 44.045,610 5.5%
200629,116 1,644,239 56,472 44.195,718 4.7%
200729,362 1,764,862 60,107 44.645,742 4.8%
200830,170 1,781,780 59,058 44.865,870 6.0%
200930,497 1,701,153 55,781 45.356,006 11.8%
201030,802 1,787,070 58,018 45.096,100 11.3%
201129,651 1,833,410 61,833 44.226,184 10.3%
201229,808 1,854,892 62,228 42.646,352 8.7%
201330,247 1,938,621 64,093 45.806,420 6.8%
Source:
(1) California State Dept. of Finance - Population Research Unit (January 2010)
(2) California State Dept. of Finance - Estimate equals county per capita average times population
(3) California State Dept of Finance - county per capita at: labormarketinfo.edd.ca.gov
(4) Claritas demographic snapshot report
(5) Los Gatos Saratoga Joint Union and Los Gatos Union Elementary School Districts
(6) State of California, Employment Development Dept., Labor Market Info. Div.
87
Town of Los Gatos Schedule 13
Principal Employers
Last Seven Fiscal Years
PercentagePercentagePercentagePercentagePercentagePercentagePercentage
of Total Townof Total Townof Total Townof Total Townof Total Townof Total Townof Total Town
Major EmployersEmployeesEmploymentEmployeesEmploymentEmployeesEmploymentEmployeesEmploymentEmployeesEmploymentEmployeesEmploymentEmployeesEmployment
Columbia Health Care Assoc/Mission Oaks Hospital2,000 13.09%2,000 12.89%2,000 12.31%2,000 12.17%2,000 12.60%2,000 13.89%2,000 13.29%
- 0.00%- 0.00%800 4.92%700 4.26%700 4.41%700 4.86%700 4.65%
Community Hospital of Los Gatos730 4.78%730 4.70%- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
Los Gatos Union School District300 1.96%300 1.93%300 1.85%300 1.83%300 1.89%275 1.91%275 1.83%
Los Gatos-Saratoga High School District300 1.96%300 1.93%300 1.85%300 1.83%300 1.89%270 1.88%270 1.79%
Netflix280 1.83%280 1.80%- 0.00%280 1.70%800 5.04%800 5.56%900 5.98%
Safeway250 1.64%250 1.61%200 1.23%250 1.52%250 1.57%250 1.74%250 1.66%
Alain Pinel Realtors220 1.44%220 1.42%- 0.00%220 1.34%220 1.39%150 1.04%150 1.00%
Verizon200 1.31%200 1.29%200 1.23%- 0.00%- 0.00%- 0.00%- 0.00%
Courtside Tennis Club200 1.31%200 1.29%200 1.23%200 1.22%200 1.26%200 1.39%200 1.33%
Town of Los Gatos152 0.99%135 0.87%189 1.16%148 0.90%138 0.87%136 0.94%138 0.92%
Source: Town of Los Gatos, Finance Department and Claritas Demographic Report
2012/132011/12
El Camino Hospital, Los Gatos
2006/072007/082008/092009/102010/11
88
Town of Los Gatos Schedule 14
Full-time-Equivalent Employees by Function/Program
Last Ten Fiscal Years
2003/042004/052005/062006/072007/082008/092009/102010/112011/122012/13
Function/Program
General Government23.10 21.35 19.95 20.75 20.50 19.95 18.35 18.90 20.15 20.40
Police69.00 65.30 62.00 62.00 61.00 61.00 60.00 59.50 60.50 58.00
Culture and Recreation4.25 4.25 4.25 4.25 5.25 5.25 5.25 3.25 --
Economic Development1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 -
Library10.75 11.10 10.35 10.35 10.35 10.35 10.35 8.60 8.60 8.60
Planning18.60 19.60 18.80 18.80 18.80 18.80 17.80 15.00 16.00 17.50
Public Works41.00 37.00 37.00 34.00 34.00 37.00 35.00 32.50 32.00 31.00
Total167.70 159.60 153.35 151.15 150.90 153.35 147.75 138.75 138.25 135.50
Full-time equivalent employment is calculated as one or more employee positions totaling one full year
Full-time-Equivalent Employees as of June 30
of service or approximately 2,080 hours a year.
89
Town of Los Gatos Schedule 15
Operating Indicators
Last Seven Fiscal Years
FUNCTION/PROGRAM
General government2007/082008/092009/102010/112011/122012/13
Building Permits Issued
Residential Permits Issued762 676 733 711 747 747
Residential Permits Value69,104,606 48,162,274 51,090,808 42,974,043 66,072,341 66,072,341
Commercial Permits Issued127 24 117 128 107 107
Commercial Permits Value27,232,018 4,356,307 7,908,146 31,289,431 17,663,124 17,663,124
Publically Owned Permits Issued2 11 11 - -
Publically Owned Permits Value2,308,160 5,732,014 40,000 - -
Residential Parking Permits
Number of Special Event Permits Issued72 76 87 96 89 125
Number of Annual Permits Issued621 752 686 713 1,223 1,320
City Clerk
Number of Council Resolutions Passed130 143 167 76 59 74
Number of Ordinances Passed6 13 16 6 13 20
Number of Contracts Passed221 197 206 218 227 220
General Services
Number of Purchase Orders Issued557 396 365 336 358 318
Police
Physical Arrests1,165 925 831 872 690 648
Parking Violations4,041 11,148 11,512 14,377 12,938 11,991
Traffic Violations1,714 2,588 3,008 2,718 2,908 3,333
DUI Arrests100 88 110 98 89 86
Library
Circulated e-audiobooks965 1,516 1,852 1,994 3,388 4,774
Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles)2.1 3.5 4.7 4.7 8.0 8.0
ADA Compliance: Curb Ramps9 9 13 17 19 19
Traffic Circles1 1 1 1 1 1
Street Poles1,575 1,575 1,605 1,708 1,611 1,611
Planning and Development Department
Building & Safety Inspections Performed11,110 10,367 9,055 10,977 11,738 11,903
Redevelopment: Number of active projects4 3 3 1 - -
Note : Data prior to 2005/06 is not available.
*
Source: Town of Los Gatos, Finance Department
Fiscal Year
90
Town of Los Gatos Schedule 16
Capital Asset Statistics by Function/Program
Last Six Fiscal Years
2007/082008/092009/102010/112011/122012/13
Function/Program
Police
Number of Stations1 1 2 2 2 2
Number of Patrol Units15 15 14 14 14 14
Parking Enforcement Vehicles3 3 2 2 2 2
Other Public Works
Streets (miles)112 112 112 112 112 112
Streetlights2,190 2,190 2,112 2,115 2,116 2,116
Traffic Signals28 28 28 28 29 29
Parks and Recreation
Number of Parks12 12 12 12 12 12
Number of Community Centers1 1 1 1 1 1
Parking
Number of Parking Garages 1 1 1 1 1 1
Number of Parking Lots22 22 22 22 22 22
Number of Off Street Parking Garage Spaces1,126 1,126 1,126 1,126 1,126 1,126
Source: Town of Los Gatos, Finance Department
Fiscal Year
Note: Certain data required by GASB 44 was not
available prior to 2005/06.
91
Other Independent Auditor’s Reports
Page | 92 1475 Saratoga Ave, Suite 180, San Jose, CA 95129
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the
Town Council of the Town of Los Gatos
Los Gatos, California
We have audited, in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the financial statements of the Town of Los
Gatos (the “Town”) as of and for the year ended June 30, 2013, and the related notes to the financial
statements, which collectively comprise the Town’s basic financial statements, and have issued our
report thereon dated December 22, 2013.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining effective internal control over financial
reporting. In planning and performing our audit of the financial statements, we considered the Town’s
internal control over financial reporting (internal control) to determine the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s
internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s
internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees in the normal course of performing their assigned functions, to prevent, or
detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a
material misstatement of the entity’s financial statements will not be prevented, or detected and
corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies,
in internal control that is less severe than a material weakness, yet important enough to merit attention
by those charged with governance.
Our consideration of internal control over financial reporting was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal control
over financial reporting that might be material weaknesses or significant deficiencies. Given these
limitations, during our audit we did not identify any deficiencies in internal control over financial
reporting that we consider to be material weaknesses. However, material weaknesses may exist that
have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town’s financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion
Page | 93 1475 Saratoga Ave, Suite 180, San Jose, CA 95129
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
on compliance with those provisions was not an objective of our audit, and accordingly, we do not
express such an opinion. The results of our tests disclosed no instances of noncompliance or other
matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
entity’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the entity’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
San Jose, California
December 22, 2013