CAFRPREPARED BY: STEPHEN CONWAY
Administrative Services and Finance Director
Reviewed by: Assistant Town Manager Town Attorney Finance
N:\FINANCE\CAFR\FY 2014-15\CAFR_Staff Report 14-15_final.doc
MEETING DATE: 3/1/2016
ITEM NO: 2
TOWN COUNCIL AGENDA REPORT
DATE: February 24, 2016
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: REVIEW AND APPROVE FISCAL YEAR (FY) 2014/15 COMPREHENSIVE
ANNUAL FINANCIAL REPORT (CAFR)
RECOMMENDATION:
Review and approve the FY 2014/15 Comprehensive Annual Financial Report.
BACKGROUND:
The attached FY 2014/15 CAFR presents the Town of Los Gatos’s financial, operational, and
current economic conditions for the fiscal year ending June 30, 2015. The CAFR received an
unqualified opinion from Chavan & Associates, LLP, the Town’s external auditors. An
unqualified opinion indicates the financial data of the Town is fairly presented according to
general accounting principles. Auditing standards require that any “significant deficiency” or
“material weaknesses” discovered in the audit be communicated in writing to management. A
material weakness is a significant deficiency which could lead to a material misstatement of the
financial statements. The auditor’s report found the Town’s internal control structure to have no
reportable material weaknesses.
DISCUSSION:
Chavan & Associates, LLP, the Town’s auditors, conducted an audit in accordance with
Generally Accepted Auditing Standards (GAAS) and the standards for financial audits contained
in the Government Audit Standards (1994 Revision), issued by the Comptroller General of the
United States. These standards require that they plan and perform the audits to obtain reasonable
assurance as to whether the financial statements are free of material misstatement.
Staff from both the Town and Chavan & Associates, LLP, met with the Council Finance
Committee on Thursday, February 18, 2016 for a review of the FY 2014/15 CAFR. The
Committee was advised by staff that the audited statements for the year ended June 30, 2015
received an unqualified or “clean” opinion for the year, meaning the financial statements are
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MAYOR AND TOWN COUNCIL
SUBJECT: REVIEW AND APPROVE FISCAL YEAR (FY) 2014/15 COMPREHENSIVE
ANNUAL FINANCIAL REPORT (CAFR)
February 24, 2016
DISCUSSION cont’d
fairly presented and contain no material misstatements.
The CAFR reported that the Town has positive net assets of $106.5 million at the fiscal year end
compared to $142.1 million the prior year. Of the $106.5 million, $93.7 million represent the
Town’s investment in its capital assets and infrastructure. The remaining $12.8 million reflects a
comprehensive accounting of working capital and restricted funds, which ensure responsible
fiscal management and funds designated for specific purposes.
The decrease in net position reflects of the first year of the Town’s implementation of the new
Governmental Accounting Standard Board (GASB) Statement 68, Accounting and Financial
Reporting for Pensions and the related GASB Statement 71, Pension Transition for Contributions
Made Subsequent to the Measurement Date. Under the new pension reporting standards, the
annual pension expense realized by the Town is no longer the actuarially required contribution
(ARC). Instead, pension expense for the first fiscal year is recognized in the change in net
pension liability from measurement year to measurement year. For the first time the Statement of
Net Position includes a liability termed Net Pension Liability of $39.2 million as of June 30,
2015. The total net position of the Town remains positive ($106,551,130).
CONCLUSION:
As noted in the auditor’s opinion, the CAFR fairly presents the fiscal year ending June 30, 2015
financial activity for the Town of Los Gatos.
ENVIRONMENTAL ASSESSMENT:
The recommended action is not a project defined under CEQA, and no further action is required.
Attachments:
1. Council Auditor Communications Letter titled “Independent Auditor’s Report”
2. Town of Los Gatos Independent Auditor’s Report on Internal Control titled “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”
3. Town of Los Gatos California Comprehensive Annual Financial Report for the Fiscal
Year Ended June 30, 2015
CALIFORNIA
T OWN OF LOS GATOS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
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TOWN OF LOS GATOS
CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2015
PREPARED BY THE
OFFICE OF THE TOWN MANAGER
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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 between 14 and 15 square miles and has a population of 30,505. 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 setting has attracted people with a preference for the Town's
distinctive, high quality natural and urban environment.
The slow growth of the Town over an extended number of years has left the Town with a
heritage of older, established residential areas and a downtown with many historic buildings
representing the various eras in the Town's history. Protection of these historic resources 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.
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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TABLE OF CONTENTS
TITLE PAGE
INTRODUCTORY SECTION:
Letter of Transmittal ........................................................................................................................... 2
Principal Officers ................................................................................................................................ 8
Organization Chart ............................................................................................................................. 9
GFOA Award ..................................................................................................................................... 10
FINANCIAL SECTION:
Independent Auditor’s Report ........................................................................................................... 12
Management’s Discussion and Analysis ........................................................................................... 15
Basic Financial Statements:
Government-Wide Financial Statements: .................................................................................... 28
Statement of Net Position ..................................................................................................... 29
Statement of Activities ......................................................................................................... 30
Fund Financial Statements:
Governmental Funds: ........................................................................................................... 31
Balance Sheet ................................................................................................................... 32
Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position .............................................................................................. 33
Statement of Revenues, Expenditures and Changes in Fund Balances ............................. 34
Reconciliation of Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities ...................................... 35
Statement of Revenue, Expenditures and Changes in Fund Balances –
Budget and Actual (GAAP) General Fund .................................................................... 36
Proprietary Funds – Internal Service Funds: ....................................................................... 37
Statement of Net Position ................................................................................................. 3 8
Statement of Revenue, Expenses and Changes in Net Position ........................................ 39
Statement of Cash Flows .................................................................................................. 40
Fiduciary Funds: .................................................................................................................. 41
Statement of Fiduciary Net Position ................................................................................. 42
Statement of Changes in Fiduciary Net Position .............................................................. 43
Notes to the Basic Financial Statements ...................................................................................... 45
REQUIRED SUPPLEMENTARY INFORMATION:
Major Governmental Fund Schedules (other than the General Fund):.......................................... 81
Schedule of Revenue, Expenditures and Changes in Fund Balance –
Budget and Actual (GAAP) Appropriated Reserves Fund ................................................... 82
Schedule of Pension Plan Contributions .......................................................................................... 83
Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety
Cost Sharing Plan ....................................................................................................................... 84
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TABLE OF CONTENTS
SUPPLEMENTARY INFORMATION:
Nonmajor Governmental Funds: ...................................................................................................... 87
Combining Balance Sheets .......................................................................................................... 88
Combining Schedule of Revenues, Expenditures and Changes in
Fund Balances ...................................................................................................................... 90
Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual (GAAP) ................................................... 92
Internal Service Funds: ..................................................................................................................... 97
Combining Statement of Fiduciary Net Position ......................................................................... 98
Combining Statement of Revenue, Expenses and Changes in Net Position ................................ 99
Combining Statement of Cash Flows .......................................................................................... 100
Private Purpose Trust Funds: .......................................................................................................... 101
Combining Statement of Fiduciary Net Position ......................................................................... 102
Combining Statement of Changes in Fiduciary Net Position ...................................................... 103
Agency Funds: ................................................................................................................................... 105
Statement of Changes in Assets and Liabilities - Parking Improvement District #88 ................. 106
STATISTICAL SECTION .............................................................................................................. 107
Net Position by Component ................................................................................................................ 110
Changes in Net Position ..................................................................................................................... 111
Fund Balances, Governmental Funds ................................................................................................. 112
Changes in Fund Balances, Governmental Funds .............................................................................. 113
Assessed Value and Estimated Actual Value of Taxable Property ..................................................... 114
Direct and Overlapping Property Tax Rates ....................................................................................... 115
Principal Property Tax Payers ............................................................................................................ 116
Property Tax Levies and Collections .................................................................................................. 117
Ratios of Outstanding Debt by Type .................................................................................................. 118
Direct and Overlapping Governmental Activities Debt ...................................................................... 119
Legal Debt Margin .............................................................................................................................. 120
Demographic and Economic Statistics ............................................................................................... 121
Principal Employers ........................................................................................................................... 122
Full-time Equivalent Town Government Employees by Function/Program ...................................... 123
Operating Indicators by Function/Program ........................................................................................ 124
Capital Assets Statistics by Function/Program ................................................................................... 125
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 ................................................................................................. 128
Introductory Section
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TOWN OF LOS GATOS
OFFICE OF THE TOWN MANAGER
(408) 354-6832
FAX: (408) 399-5786
February 15, 2016
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, 2015. This report was prepared by the Finance
Department in conjunction with t h e T o w n M a n a g e r ’ s o f f i c e , w h i c h 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, 2015, along with additional disclosures and
financial information designed to enable the reader to gain an understanding of the
Town’s financial activities.
This report was prepared as prescribed in Governmental Accounting Standards Board
(GASB) Statement No. 34, Basic Financial Statements and Management’s Discussion
and Analysis for State and Local Governments (GASB 34). This GASB Statement
requires management to provide a narrative introduction, overview, and analysis to
accompany the basic financial statements in the form of a Management’s Discussion and
Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and
should be read in conjunction with it. The MD&A can be found immediately following
the Independent Auditor’s Report.
This Comprehensive Annual Financial Report is organized into three sections:
I. The Introductory Section includes the table of contents, letter of transmittal,
listing of elected officials, Town administrative personnel, and an organization
chart delineating organizational structure.
II. The Financial Section includes the independent auditors’ opinion, the MD&A, the
basic financial statements, notes to the financial statements, combining statements
of non-major funds, and required supplemental information.
III. The Statistical Section includes both financial and non-financial data about the
Town.
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.
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Mayor and Town Council
February 15, 2016
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 30,505. This relatively slow growth over the last 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, a
Public Library, and Town Administration including Human Resources and Finance.
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 (RDA) for the Town
of Los Gatos was dissolved. Until its dissolution, the Town of Los Gatos Redevelopment
Agency was governed by a board that was the same as the Town’s governing body.
Therefore, the financial activities of the Redevelopment Agency through January 31,
2012 had been blended into the Town’s basic financial statements. As a result of the
dissolution, the RDA Successor Agency private-purpose trust fund was created while 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 economy continues to improve and
economically sensitive revenues, such as Property Tax, Transient Occupancy Tax,
Business License Tax and License and Permit revenues increased. However, the Town’s
Sales Tax revenue decreased slightly due to a change in business model from the Town’s
largest sales tax generator (Netflix). The business model change impacted the taxability
of internet commerce leading to substantial reduction in taxes collected from this
historically significant sales tax generator. Recognizing the continuing loss of this
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Mayor and Town Council
February 15, 2016
significant revenue source, diversification remains a top priority for the Town. The
Town continued its outreach and support of downtown and local businesses through
increased funding of the Economic Vitality Program.
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, job
sharing, and departmental cost saving efficiencies, among other strategies, that have
allowed the Town to remain fiscally balanced during challenging economic times.
Despite the ongoing strategic reductions made in staffing and operating expenditures
salary and benefits was the Town’s largest expenditure, reflecting the personal touch
required to deliver high quality services such as public safety, community development,
and parks and public works.
General Fund revenues (including operating transfer-ins) increased by 6% from the prior
year. Property tax revenues are a significant source of support for General Fund
operations, comprising approximately 32% of General Fund revenues in FY 2014/15.
The FY 2014/15 $12.9 million property tax receipts were $1.2 million higher than the
prior year’s collection, reflecting the continued desirability of the Town, its environment,
culture and educational opportunities. Los Gatos property value s a r e a n t i c i p a t e d t o
continue with moderate growth rates for the near term. Property taxes also increased
moderately due to a change in property tax distribution due to the dissolution of the
California redevelopment agencies, though this increase was a small portion of the loss of
redevelopment tax increment previously collected prior to the redevelopment dissolution
which occurred in February 2012.
The Town relies heavily on sales tax revenues to support General Fund operations,
comprising approximately 20% of General Fund revenues in FY 2014/15. The FY
2014/15 $8.2 million sales tax receipts were $0.2 million higher than the prior year’s
collection. Due to the sales tax declines in recent years related to the change in the
Netflix business model the small increase from the prior year is indicative of an
improving economy wherein the taxes collected from a diverse business community were
able to offset the losses sustained by the business model change. Overall the outlook for
sales tax remains promising as many businesses are reporting increased revenues
expected for the remainder of calendar year 2015.
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.
The Town is also preparing for an increase in pension employer rates effective in FY
2015/16. Estimates indicate the Town may be paying 32% more in pension cost in the
next 10 years than it is currently costing the Town. However, by Council authority in
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Mayor and Town Council
February 15, 2016
June 2014, the Town paid off its pension “side-fund” actuarial liability of $4.5 million
substantially decreasing the Town’s employer contribution rates for pensions in future
years. Town Council and staff are considering future opportunities to pro-actively
manage and control cost escalation in its pension and other postemployment benefits.
Despite the reductions to various state sources of local government revenue and
increasing costs due to unfunded federal and state mandates, the Town has maintained
high service levels due to the General Fund’s strong fiscal health through FY 2014/15.
The Town continues its outreach to the community, the League of California Cities, and
local legislators to prevent and limit any future revenue losses and mandated cost
increases.
MAJOR INITIATIVES
Major initiatives addressing the critical capital asset and infrastructure needs of the Town
were a priority for the fiscal year. Approximately $3.8 million in Town infrastructure
and other capital asset improvements were made in FY 2014/15, including $0.7 million in
building repairs and improvements, $0.4 million in vehicle and equipment and $0.3
million in annual curb, gutter, sidewalk and retaining walls improvements, $0.2 million
for street improvement projects including improvements to major arterials and
neighborhood collector streets to enhance pedestrian and traffic safety Town-wide.
Town park improvements totaling $0.1 million, and $2.0 million in construction in
progress in various streets, building improvements and park projects.
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, and
3) adherence to managerial policy.
The concept of reasonable assurance recognizes that the cost of internal control should
not outweigh the benefits, and that management must make estimates and judgments in
evaluating these costs and benefits.
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Mayor and Town Council
February 15, 2016
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
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
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,
2014 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
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Mayor and Town Council
February 15, 2016
for the Town of Los Gatos, and their report is included in the financial section of the
CAFR.
ACKNOWLEDGEMENTS
The preparation of this Comprehensive Annual Financial Report, as presented herein, is
the result of the combined efforts and dedicated services of the excellent staff of the
Department of Finance. Special thanks to Jen Callaway, Assistant Town Manager, Mark
Gaeta, Accountant; Linda Isherwood, Analyst; Nicole Tram, Payroll Specialist; Gitta
Ungvari, Administrative Analyst; and Melissa Ynegas, Account Technician for their
efforts in preparing this report.
Respectfully submitted,
____________________________ ___________________________________
Laurel Prevetti Stephen D. Conway
Town Manager Director of Finance & Administrative Services
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TOWN OF LOS GATOS
PRINCIPAL OFFICERS
JUNE 30, 2015
TOWN COUNCIL
M a y o r Marcia Jensen
V i c e M a y o r B a r b a r a S p e c t o r
Council Member Steven Leonardis
Council Member Rob Rennie
Council Member Marico Sayoc
COUNCIL APPOINTEES
I n t e r i m T o w n M a n a g e r L e s W h i t e
T o w n A t t o r n e y R o b e r t S c h u l t z
APPOINTED OFFICIALS
Assistant Town Manager/ Community Development
D i r e c t o r Laurel Prevetti
C h i e f o f P o l i c e Matt Frisby
Finance and Administrative Services Director Stephen Conway
H u m a n R e s o u r c e s D i r e c t o r Rumi Portillo
Parks and Public Works Director Matt Morley
Town Librarians Henry Bankhead & Heidi Murphy
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Town of Los Gatos
Organizational Structure
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Financial Section
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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,
General Fund budgetary statement, and the aggregate remaining fund information of the Town of Los Gatos
(the “Town"), as of and for the year ended June 30, 2015, 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, General Fund budgetary
statement, and the aggregate remaining fund information of the Town of Los Gatos, as of June 30, 2015,
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.
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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 t h e t a b l e o f c o n t e n t s , b e p r e s e n t e d t o
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.
New Accounting Principles
A s d i s c u s s e d i n N o t e s 1 a n d 9 t o t h e f i n a n c i a l s t a t e m e n t s , t h e City adopted the provisions of GASB
Statement No. 68, Accounting and Financial Reporting for Pensions, effective June 30, 2015 and GASB
Statement No 71, Pension Transition for Contributions Made Subsequent to the Measurement Date—an
amendment of GASB Statement No. 68.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated February 12,
2016 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.
February 12, 2016
San Jose, California
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Management’s Discussion and Analysis
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MANAGEMENT’S DISCUSSION AND ANALYSIS
Our discussion and analysis of the Town of Los Gatos financial performance provides an
overview of the Town’s financial activities for fiscal year ending June 30, 2015. 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 2014/15 by $106,531,130 (net
position). Of this amount, $7,180,919 (unrestricted net position) may be used to meet
the Town’s ongoing obligations to citizens and creditors.
The Town’s Net position decreased by $35,598,498 due primarily to implementation
of new pension reporting standards proscribed by Governmental Accounting
Standards Board (GASB) Statement Number 68, Accounting and Financial Reporting
for Pensions and the related GASB Statement 71, Pension Transition for
Contributions Made Subsequent to the Measurement Date.
Total fund balances for governmental funds at year end were $45,337,871, an
increase of $7,322,632 (19%) from the prior year. Fund balances increased primarily
due to higher than expected property tax, transient occupancy tax, and license and
permits revenues as well as operational salary savings due to vacancies.
At the end of FY 2014/15, fund balance for the General Fund was $24,121,256,
approximately 57% of General Fund expenditures for the current fiscal year.
The Town’s total capital assets increased by $435,914 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.
16
The statement of activities – presents information showing how the Town’s net position
changed during the most recent fiscal year. All changes in net position are reported as
soon as the underlying event giving rise to the change occurs, regardless of the timing of
related cash flows. Thus, revenues and expenses are reported in this statement for some
items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes
and earned but unused vacation leave).
Both of the government-wide financial statements distinguish functions of the Town that
are principally supported by taxes and intergovernmental revenues (governmental
activities) from other functions that are intended to recover all or a significant portion of
their costs through user fees and charges (business–type activity). The governmental
activities of the Town include public safety, parks and public works, community
development, library, community services, debt service, and general government. The
Town has no business-type activities.
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 (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
17
provides. Governmental fund information helps determine whether there are more or
fewer financial resources that can be spent in the near future to finance the Town’s
operations. Both the governmental fund balance sheet and the governmental fund
statement of revenues, expenditures, and changes in fund balances provide a
reconciliation to facilitate this comparison between governmental funds and
governmental activities.
Proprietary funds – The Town maintains one type of proprietary fund: internal service
funds. Proprietary funds are reported using the accrual basis of accounting. Internal
service funds are an accounting device used to accumulate and allocate costs internally
among the Town’s various functions. The Town uses internal service funds to account
for its fleet of vehicles and computer equipment, and for its risk management activities.
The Internal Service funds have been included within governmental activities in the
government-wide financial statements.
Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit
of parties outside the Town. Fiduciary funds are not reflected in the government-wide
financial statements because the resources 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 begin on page 45 of this report.
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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 $106 million at the end
of the current fiscal year.
2015 2014
Current and Other Assets 72,604,823$ 69,546,911$
Capital Assets 93,687,029 93,251,117
Total Assets 166,291,852 162,798,028
Current Liabilities 16,513,842 11,398,556
Long-term Liabilities Outstanding 43,341,162 9,269,844
Total Liabilities 59,855,004$ 20,668,400$
Net Position
Investment in Capital Assets,
Net of Related Debt 93,687,029$ 93,251,117$
Restricted 5,663,182 4,485,246
Unrestricted 7,180,919 44,393,265
Total Net Position 106,531,130$ 142,129,628$
Town of Los Gatos
Net Position
Governmental
Activities
Capital assets represent approximately 56% 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.
For the current year, Investment in Capital Assets, Net of Related Debt increased by
approximately $435,914 as a result of approximately $3.8 million, net of construction in
progress, in capital improvements made during the fiscal year, offset by $3.4 million in
capital assets depreciation and retirements.
An additional portion of the Town’s net position (5%) represents resources that are
subject to external restrictions on how they may be used. The balance of Unrestricted net
position may be used to meet the Town’s ongoing obligations to citizens, customers, and
creditors. The Town’s Unrestricted net position represents approximately 7% of the
Town’s net position at year end.
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Governmental activities
2015 2014
Revenues:
Program revenues:
Charges for Services 13,033,632$ 12,473,007$
Operating Grants and Contributions 936,645 1,051,419
Capital Grants and Contributions 2,514,859 2,294,239
General Revenues:
Property Taxes 12,931,603 11,712,312
Property Tax Increments
Less : Election Amount
Total Property Taxes 12,931,603 11,712,312
Sales Taxes 8,202,678 8,029,571
Franchise Taxes 2,215,430 2,063,756
Other Taxes 2,062,893 1,654,649
Motor Vehicle in Lieu - 13,068
Investment Earnings 428,772 772,200
Miscellaneous 813,324 350,468
Special Item -
Total Revenues 43,139,836$ 40,414,689$
Expenses:
Police Department 12,644,221$ 14,119,786$
Parks and Public Works 8,069,352 8,154,616
General Government 6,465,852 6,955,804
Community Development 4,047,738 4,424,040
Library Services 2,553,414 2,234,431
Redevelopment (Pmts to SA)21,687
Interest and fees
Sanitation 491,359 363,180
Total Expenses 34,271,936$ 36,273,544$
Change in net position 8,867,900 4,141,145
Net position, beginning 142,129,628 137,988,483
Prior Period Adjustment, GASB 68 (44,466,398)
Net Position - Beginning Adjusted 97,663,230
Net Position - Ending 106,531,130$ 142,129,628$
Governmental
Activities
Town of Los Gatos
Statement of Activities
For the Year Ended June 30, 2015
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As shown in the schedule above, governmental activities for the year increased the
Town’s net position by $8,867,900. Key elements of the increase in net position are as
follows:
Property tax revenues collected of $12.9 million accounted 32% of total Town
revenues. Property tax revenues for Town activities increased by $1.2 million or
10%, from FY 2013/14 due primarily to the economic recovery and the continued
strong demand for housing in Los Gatos.
Sales tax revenue of $8.2 million accounted for approximately 20% of Town total
revenues for the year. The 2% increase of approximately $173,107 from the prior
year collections is largely due to the growing economy.
Other taxes and miscellaneous revenues of $2.9 million accounted for 7% of total
revenues, increasing by 43% from the prior year’s amount of $2,018,185. This
increase was primarily the result of the economic recovery and the corresponding
increase in economically sensitive revenues like transient occupancy tax.
Investment earnings of $428,324, net of amortized premiums, decreased by
$343,876 from the prior year. This decrease is due to the historically low interest
rates during FY 2014/15.
Total expenditures decreased by $2.0 million or 6% from the prior year. This
decrease was primarily the result of salary and benefit cost savings due to high
staff vacancies and lowered pension rates as a result of the safety “side fund”
payoff.
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 2014/15, the
Town’s governmental funds reported combined ending fund balances of $45,337,871, an
increase of $7,322,632 in comparison with the prior year. Fund balances increased
primarily due to higher than expected property tax, transient occupancy tax, license and
permits revenues combined with operational salary savings due to staff vacancies.
Approximately 88% or $39,674,689 of the total amount of governmental fund balances of
$45,337,871 is assigned or unassigned fund balance, which is available for spending at
the Town’s discretion. The remainder of fund balance is restricted therefore not available
for new spending but limited as to use for (1) providing for appropriated capital projects
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($5,482,974); and (2) to provide for dedicated repair and maintenance in lighting and
landscape districts ($180,208).
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 decreased by 4%
from prior year balances to $24,121,256. This decrease was moderated by higher than
expected receipt of economically sensitive revenues, combined operational expenditure
savings. General Fund expenditures (excluding transfers-out) stayed at the level of the
prior fiscal year.
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 balance increased to
$15,346,558 primarily due to capital transfers made in advance during the fiscal year for
which expenditures were planned but unexpended.
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 $1,201,766.
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: Workers’
Compensation, Self Insurance; Stores, Vehicle Maintenance, Facilities 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.
The Equipment Replacement Fund charges replacement costs while 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 $493,843 and $86,111 respectively versus $497,619 and
$139,067 in the prior year. The increase in operating income in the Vehicle Maintenance
Fund from the prior year is attributable to reduced operating expenses incurred during the
fiscal year. The increase in Equipment Replacement Fund is attributable to the cyclical
nature of fleet purchases in accordance with the Town’s fleet replacement schedule.
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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 $95,288, ($38,663) and
$169,970 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 during FY 2014/15. Management
information systems also experienced savings on anticipated repairs and replacements.
The Workers’ Compensation and Self Insurance Funds charge premiums based on
exposure levels by department for liability, property, workers’ compensation and self
insurance costs. Net operating income before transfers at year end was ($59,494) and
($13,947) respectively, versus ($670,217) and ($295,475) in the prior year. The decrease
of operating income for the year for these funds reflects the adverse experience of loss
claims in the fiscal year as compared to the prior year, in both the Workers’
Compensation and general liability claim payments and settlements.
GOVERNMENT FUNDS BUDGETARY HIGHLIGHTS:
Budget Adjustments
Comparing the FY 2014/15 original budget (or adopted) General Fund Expenditures of
$36,451,723 (excluding budgeted transfers-out), the final budget amount of $36,666,194
shows a net increase of $214,471. Additions to the original budget included approved
encumbrance carry-forwards of $136,749, and additions of $77,722 in net miscellaneous
adjustments approved by Town Council throughout the fiscal year.
Original
Budget
+
Approved
Carry-
forwards
+
Prior Year
Encumbrances
+
Misc.
Adjustments &
Mid-Year
Adjustments
=
Final
Budget
$36,451,723 $136,749 $-0- $77,722 $36,666,194
The increase in General Fund appropriations occurred primarily from the following
selected budget adjustments made during the fiscal year:
$136,749 increase due to approved encumbrance carry-forwards.
$16,173 increase for Electric Vehicle Lease
$15,000 increase for medical exam cost due to a high number of anticipated
recruitments needed for FY 2014/15.
$25,000 increase for planning services due to increased planning activities.
Comparing the FY 2014/15 final amended budget to the actual result shows $1.8 million
in savings due to operational cost savings including staff vacancies.
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Capital Assets
As of June 30, 2015, the Town’s investment in capital assets for its governmental activity
is recorded at $93,687,029 (net of accumulated depreciation). The investment in capital
assets includes land, buildings and improvements, infrastructure, construction in progress
and machinery and equipment. During FY 2014/15 the Town’s $3.8 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:
$2.0 million added to Construction in Progress for streets, building improvements and
park projects;
$0.7 million for building improvements;
$0.3 million for annual curb, gutter, and sidewalk improvements and retaining walls;
$0.2 million for street improvements;
$0.1 million for various Town park improvement projects.
Governmental
Activities
Infrastructure 45,622,843$
Buildings 22,859,503
Land 20,333,685
Equipment 2,635,542
Construction in Progress 2,235,456
93,687,029$
June 30, 2015
Town of Los Gatos
Capital Assets (net of accumulated depreciation)
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 2015/16 budget, the Town
Council and management considered the following factors:
The Town anticipates a modest increase in sales tax growth for FY 2015/16. Sales tax
estimates of $8.3 million for FY 2015/16 were budgeted reflecting a slight 0.4%
increase from the prior year’s adopted sales tax. This reflects the recovering
economy and business being positive in many of the Town’s business activity
categories. However, gains in many of the Town’s business categories are offset by
the continuing impact of the 2011 business model change in Netflix, an internet
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streaming provider, previously accounting for nearly 40% of all sales tax received by
the Town. Currently, Netflix represents approximately 12% of total sales taxes
collected annually. With sales tax representing approximately 22% 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 32% (not including the
State’s property tax “backfill” shifts) of the Town’s General Fund revenues. Property
tax collections are expected to increase 11% from the prior year. This forecast is
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 during the recent recession and expects positive growth for FY
2015/16.
The Town’s investment portfolio experienced a slight increase in its overall weighted
average annual yield, rising from 0.68% at June 30, 2014 to 0.85% at June 30, 2015.
Anticipating continued low interest rates for FY 2015/16 coupled with reduced cash
balances due to capital expenditures, investment earnings are expected to remain at
the same level as the prior fiscal year. Budgeted estimates have been slightly
increased to $319,590 from the adjusted budget estimate of $310,340 from the prior
year.
Transient Occupancy Tax (TOT) revenues are expected to be higher in FY 2015/16 as
personal and business related travel is strong. Given the increase in travel activity, the
FY 2015/16 TOT revenues were budgeted at $1.5 million reflecting an 18% increase
from the FY 2014/15 adopted budget.
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.
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This Page Intentionally Left Blank
26
Basic Financial Statements
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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
GOVERNMENT-WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES
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.
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TOWN OF LOS GATOS, CALIFORNIA
STATEMENT OF NET POSITION
JUNE 30, 2015
Governmental
Activities
ASSETS
Cash and investments 67,822,471$
Restricted cash and investments 96,595
Receivables:
Accounts 1,233,915
Interest 127,379
Intergovernmental 1,878,863
Materials, supplies and deposits 26,110
Long term notes receivables 1,419,490
Capital Assets:
Nondepreciable 22,569,141
Depreciable, net of accumulated depreciation 71,117,888
Total Assets 166,291,852$
DEFERRED OUTFLOWS OF RESOURCES
Pension contributions 4,300,096$
Prepaid pension obligations 4,307,811
Total Deferred Outflows of Resources 8,607,907$
LIABILITIES
Accounts payable 1,369,677$
Accrued payroll and benefits 2,859,335
Due to other governments 12,872
Unearned Revenue 4,444,921
Deposits 5,305,148
Claims payable 1,002,072
Long-term liabilities:
Due within one year
Compensated absences 1,519,817
Due in more than one year
Postemployment benefits 3,212,390
Net pension liabilities 39,199,892
Compensated absences 928,880
Total Liabilities 59,855,004$
DEFERRED INFLOWS OF RESOURCES
Difference from actual and projected pension plan earnings 8,513,625$
NET POSITION
Net investment in capital assets 93,687,029$
Restricted for:
Capital projects 5,482,974
Lighting and landscape repairs and maintenance 180,208
Total Restricted Net Position 5,663,182
Unrestricted 7,180,919
Total Net Position 106,531,130$
The notes to the financial statements are an integral part of this statement.
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TOWN OF LOS GATOS, CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Net (Expense)
Revenues and
Changes in
Net Position
Operating Capital
Charges for Grants and Grants and Governmental
Functions/Programs Expenses Services Contributions Contributions Activities
Governmental Activities:
General government 6,465,852$ 1,888,213$ -$ 176,705$ (4,400,934)$
Public safety 12,644,221 3,529,166 24,838 - (9,090,217)
Parks and public works 8,069,352.14 2,206,765 907,745 2,338,154 (2,616,688)
Community development 4,047,737.59 5,027,497 - - 979,759
Library services 2,553,414.44 53,123 4,062 - (2,496,229)
Sanitation 491,359.05 328,868 - - (162,491)
Total Governmental Activities 34,271,936$ 13,033,632$ 936,645$ 2,514,859$ (17,786,800)
General revenues:
Taxes:
Property taxes 12,931,603
Sales taxes 8,202,678
Franchise taxes 2,215,430
Other taxes 2,062,893
Investment earnings 428,772
Miscellaneous 813,324
Total general revenues 26,654,700
Change in Net Position 8,867,900
Net Position - Beginning 142,129,628
Prior Period Adjustment, GASB 68 (44,466,398)
Net Position - Beginning, Adjusted 97,663,230
Net Position - Ending 106,531,130$
The notes to the financial statements are an integral part of this statement.
Program Revenues
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TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
FUND FINANCIAL STATEMENTS &
MAJOR GOVERNMENTAL FUNDS
Fund Financial Statements:
The Fund Financial Statements only present major funds individually while nonmajor funds are
combined in a single column. Major funds are generally defined as having significant activities
or balances in the current year. 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,
2015. 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.
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TOWN OF LOS GATOS, CALIFORNIA
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2015
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
ASSETS
Cash & Investments 31,338,836$ 18,877,396$ 5,802,972$ 56,019,204$
Restricted Cash & Investments - - 70,383 70,383
Receivables:
Accounts 1,200,733 9,036 1,649 1,211,418
Interest 127,379 - - 127,379
Intergovernmental 1,729,173 - 1 4 9 , 6 9 0 1,878,863
Total Assets 34,396,121$ 18,886,432$ 6,024,694$ 59,307,247$
LIABILITIES
Accounts Payable 698,260$ 405,756$ 676$ 1,104,692$
Accrued Payroll and Benefits 2,828,160 - 1,803 2,829,963
Due to other governments 12,845 - - 12,845
Unearned revenue 1,158,645 3,134,118 152,158 4,444,921
Deposits 5,305,148 - - 5,305,148
Compensated Absences 271,807 - - 271,807
Total Liabilities 10,274,865 3,539,874 154,637 13,969,376
FUND BALANCE
Restricted for:
Capital Outlay - - 5,482,974 5,482,974
Repairs and Maintenance - - 180,208 180,208
Assigned to:
Open Space 562,000 - - 562,000
Postemployment Medical 400,000 - - 400,000
Parking - 1,460,210 - 1,460,210
Sustainability 140,553 - - 140,553
Productivity Enhancements 100,000 - - 100,000
Economic Uncertainty 4,178,192 - - 4,178,192
Capital Projects 9,511,527 13,836,971 - 23,348,498
Carryover 99,284 - - 99,284
Comcast PEG - 49,377 - 49,377
Revenue Stabilization Fund 6,621,808 - - 6,621,808
Special Studies 490,000 - - 490,000
Special Revenue Funds - - 206,875 206,875
Unassigned 2,017,892 - - 2,017,892
Total Fund Balances 24,121,256 15,346,558 5,870,057 45,337,871
Total Liabilities and Fund Balances 34,396,121$ 18,886,432$ 6,024,694$ 59,307,247$
The notes to the financial statements are an integral part of this statement.
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TOWN OF LOS GATOS, CALIFORNIA
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE GOVERNMENT-WIDE STATEMENT OF NET
POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2015
Fund Balance - Total Governmental Funds 45,337,871$
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. 93,687,029
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. 8,429,146
DEFERED OUTFLOWS OF RESOURCES
Contributions made to pension plans will not be included in the calculation of the City's net
pension liability of the plan year included in this report and have been deferred and
reported as deferred outflows of resources. 8,432,194
DEFERRED INFLOWS OF RESOURCES
The difference between projected and actual earnings from pension plan assets is not included in the
plan's actuarial study until the next fiscal year and are reported as deferred inflows of
resources in the Statement of Net Position. (8,097,086)
LONG-TERM LIABILITIES
Long-term liabilities are not due and payable in the current
period and, therefore, are not reported in the Governmental Funds.
Net Pension Liabilities (37,288,234)$
Postemployment Benefits (3,212,390)
Compensated absences (2,176,890) (42,677,514)
LONG-TERM NOTES RECEIVABLES
In governmental funds, notes receivables are not available to pay for current
period expenditures and, therefore, are offset by deferred revenue. 1,419,490
Net Position - Governmental Activities 106,531,130$
The notes to the financial statements are an integral part of this statement.
33
TOWN OF LOS GATOS, CALIFORNIA
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
REVENUES
Property Taxes 12,905,526$ -$ 37,723$ 12,943,249$
Sales Taxes 8,202,678 - - 8,202,678
Other Taxes 1,926,934 - 135,959 2,062,893
Licenses & Permits 5,346,131 853,946 267,694 6,467,771
Intergovernmental 1,004,661 859,119 1,057,222 2,921,002
Charges for Services 5,171,326 294,192 328,868 5,794,386
Fines and Forfeitures 868,547 - 17 868,564
Franchise Fees 2,215,430 - - 2,215,430
Interest 430,476 6,806 (8,547) 428,735
Use of Property 32,209 - - 32,209
Other 2,606,223 521,402 3,350 3,130,975
Total Revenues 40,710,141 2,535,465 1,822,286 45,067,892
EXPENDITURES
Current:
General Government 8,647,451 - - 8,647,451
Public Safety 13,747,198 - - 13,747,198
Parks and Public Works 5,631,105 187,960 21,032 5,840,097
Community Development 4,218,500 - - 4,218,500
Library Services 2,268,844 - - 2,268,844
Sanitation and Other - - 411,863 411,863
Capital Outlay 348,797 3,451,681 - 3,800,478
Total Expenditures 34,861,895 3,639,641 432,895 38,934,431
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 5,848,246 (1,104,176) 1,389,391 6,133,461
OTHER FINANCING SOURCES (USES)
Transfers in 504,376 8,372,844 100,000 8,977,220
Transfers (out)(7,386,491) (113,933) (287,625) (7,788,049)
Total Other Financing Sources (Uses)(6,882,115) 8,258,911 (187,625) 1,189,171
NET CHANGES IN FUND BALANCES (1,033,869) 7,154,735 1,201,766 7,322,632
BEGINNING FUND BALANCES 25,155,125 8,191,823 4,668,291 38,015,239
ENDING FUND BALANCES 24,121,256$ 15,346,558$ 5,870,057$ 45,337,871$
The notes to the financial statements are an integral part of this statement.
34
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, 2015
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS 7,322,632$
Amounts reported for Governmental Activities in the Statement of Activities are
different because of the following:
LONG-TERM PREPAID PENSION OBLIGATIONS
Prepaid pension obligations reported as expenditures in the governmental funds are converted
to long-term prepaid assets and amortized over service periods identified plan valuation reports.(226,727)
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)3,800,478$
Current Year Depreciation (3,322,653) 477,825
Gains and losses from the disposal of capital assets are not considered current financial resources and
are not recorded in the governmental fund statement of revenues and expenditures but are
recorded in the government-wide statement of activities because they are economic resources.(41,911)
ACCRUAL OF NON-CURRENT ITEMS
The amount below included in the Statement of Activities does not require the use
of current financial resources and therefore is not reported in the governmental funds:
Compensated absences (200,883)
Postemployment benefits 835,614
PENSION PLAN CONTRIBUTIONS AND EXPENSE
In governmental funds, actual contributions to pension plans are reported as expenditures in the year
incurred. However, in the Government-Wide Statement of Activities, only the current year pension
expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred
inflows and outflows of resources.1,027,695
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. (322,887)
LONG TERM NOTES RECEIVABLES AND ASSOCIATED DEFERRED REVENUE
Interest income and proceeds from long term notes receivables is recorded on the Statement of Activities
but is considered a resource not available for governmental funds (3,458)
CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES 8,867,900$
The notes to the financial statements are an integral part of this statement.
35
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, 2015
Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Property Taxes 10,896,590$ 10,896,590$ 12,905,526$ 2,008,936$
Sales Taxes 8,303,962 8,079,277 8,202,678 123,401
Other Taxes 1,281,200 1,507,000 1,926,934 419,934
Franchise Fees 2,076,030 2,076,030 2,215,430 139,400
Licenses & Permits 4,321,176 4,859,666 5,346,131 486,465
Intergovernmental 734,300 797,788 1,004,661 206,873
Charges for Services 4,244,556 4,310,821 5,171,326 860,505
Fines and Forfeitures 722,800 722,800 868,547 145,747
Interest 268,171 279,019 430,476 151,457
Use of Property 42,169 31,321 32,209 888
Other 2,609,351 2,761,554 2,606,223 (155,331)
Total Revenues 35,500,305 36,321,866 40,710,141 4,388,275
EXPENDITURES
Current:
General Government:
Town Council 211,561 211,561 208,491 3,070
Town Attorney 258,984 264,684 260,740 3,944
Administrative Services 2,971,714 3,010,850 2,955,822 55,028
Non-Departmental 5,652,044 6,368,796 5,222,398 1,146,398
Total General Government 9,094,303 9,855,891 8,647,451 1,208,440
Public Safety 14,895,320 14,229,916 13,747,198 482,718
Community Development 4,076,729 4,099,200 4,218,500 (119,300)
Parks & Public Works 6,035,432 6,075,113 5,631,105 444,008
Library Services 2,349,939 2,349,939 2,268,844 81,095
Capital Outlay - 56,135 348,797 (292,662)
Total Expenditures 36,451,723 36,666,194 34,861,895 1,804,299
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES (951,418) (344,328) 5,848,246 6,192,574
OTHER FINANCING SOURCES (USES)
Operating Transfers In 629,420 679,420 504,376 (175,044)
Operating Transfers Out (7,141,691) (7,436,691) (7,386,491) 50,200
Total Other Financing Sources (Uses) (6,512,271) (6,757,271) (6,882,115) (124,844)
NET CHANGES IN FUND BALANCES (7,463,689)$ (7,101,599)$ (1,033,869) 6,067,730$
BEGINNING FUND BALANCE 25,155,125
ENDING FUND BALANCE 24,121,256$
The notes to the financial statements are an integral part of this statement.
36
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
PROPRIETARY FUNDS -
INTERNAL SERVICE FUNDS
Internal service funds account for Town operations financed and operated in a manner similar to
a private business enterprise. The intent of the Town is that the cost of providing goods and
services to other Town funds be financed through user charges to those funds.
37
TOWN OF LOS GATOS, CALIFORNIA
PROPRIETARY FUNDS -
STATEMENT OF NET POSITION
JUNE 30, 2015
Governmental
Activities
Internal Service
Funds
ASSETS
Current Assets:
Cash & investments 11,803,267$
Restricted cash & investments 26,212
Accounts Receivable 22,497
Materials, supplies, and deposits 26,110
Total current assets 11,878,086
Noncurrent Assets:
Capital assets, net of accumulated depreciation 3,427
Total Assets 11,881,513$
DEFERRED OUTFLOWS OF RESOURCES
Pension contributions 175,713$
LIABILITIES
Current Liabilities:
Accounts payable 264,985$
Accrued payroll and benefits 29,372
Due to other governments 27
Total current liabilities 294,384
Noncurrent liabilities:
Claims payable 1,002,072
Net pension liabilities 1,911,658
Total noncurrent liabilities 2,913,730
Total Liabilities 3,208,114$
DEFERRED INFLOWS OF RESOURCES
Difference from actual and projected pension plan earnings 416,539$
NET POSITION
Invested in capital assets, net of related debt 3,427$
Restricted for workers compensation claims 26,212
Unrestricted 8,402,934
Total Net Position 8,432,573$
The notes to the financial statements are an integral part of this statement.
38
TOWN OF LOS GATOS, CALIFORNIA
PROPRIETARY FUNDS -
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Governmental
Activities
Internal Service
Funds
OPERATING REVENUES
Charges for services 4,269,954$
Interest 5
Use of money and property 220,490
Other local taxes 135,959
Other 513,388
Total Operating Revenues 5,139,796
OPERATING EXPENSES
Salaries and related expenses 1,166,933
Insurance expenses 277,842
Depreciation 956
Services and Supplies 2,828,737
Total Operating Expenses 4,274,468
Operating Income 865,328
Transfers in (Note 4) 531,066
Transfers out (Note 4) (1,720,237)
Net transfers (1,189,171)
Change in Net Position (323,843)
BEGINNING NET POSITION 10,934,182
PRIOR PERIOD ADJUSTMENT GASB 68 (2,177,766)
BEGINNING NET POSITION, ADJUSTED 8,756,416
ENDING NET POSITION 8,432,573$
The notes to the financial statements are an integral part of this statement.
39
TOWN OF LOS GATOS, CALIFORNIA
PROPRIETARY FUNDS -
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Governmental
Activities
Internal Service
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 5,118,776$
Payments to suppliers (1,804,936)
Payments to employees (1,185,715)
Claims paid (1,595,212)
Net cash provided (used) by operating activities 532,913
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers In 531,066
Transfers Out (1,720,237)
Net cash provided (used) by noncapital financing activities (1,189,171)
Net Increase(Decrease) in Cash and Investments (656,258)
Cash and investments - beginning of year 12,485,737
Cash and investments - end of year 11,829,479$
Reconciliation of Operating Income to Cash Flows
from Operating Activities:
Operating Income 865,328$
Adjustments to reconcile operating income to cash flows
from operating activities:
Depreciation 956
Pension expense adjustment (GASB 68) (25,283)
Change in assets and liabilities:
Receivables, net (21,022)
Other assets 1,633
Accounts payable and other accrued expenses (31,510)
Other accrued expenses (257,189)
Cash Flows From Operating Activities 532,913$
The notes to the financial statements are an integral part of this statement.
40
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
FIDUCIARY FUNDS
Trust funds are used to account for assets held by the Town as a trustee agent for individuals,
private organizations and other governments. The financial activities of these funds are excluded
from the government-wide financial statements, but are presented in separate Fiduciary Fund
financial statements.
Library Private Purpose Trust Fund was established to provide for the servicing of donations
and bequests to the Town's Library Program.
RDA Successor Agency Private Purpose Trust Fund was established to account for the assets
and liabilities transferred from the dissolution of the Town’s former Redevelopment Agency and
the continuing operations related to existing Redevelopment Agency obligations.
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.
41
Agency
Total Fund
Private Parking
Purpose Trust Improvement
Funds District #88
ASSETS
Cash and investments (Note 2)2,313,141$ 179,204$
Restricted cash and investments (Note 2)1,963,357 -
Loans receivable (Note 3)540,433 -
Capital assets (Note 5):
Nondepreciable 5,257,422 -
Depreciable, net of accumulated depreciation 1,932,161 -
Total Assets 12,006,514$ 179,204$
LIABILITIES
Accounts payable 20,402$ -$
Due to other governments (Note 13)123 179,204
Interest payable 381,097 -
Long-term debt (Note 6):
Due within one year 1,025,000 -
Due in more than one year 20,414,820 -
Total Liabilities 21,841,442$ 179,204$
NET POSITION
Held in trust (9,834,928)$
Total Net Position (9,834,928)$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2015
42
Total
ADDITIONS
Investment earnings 13,015$
Gifts, bequests and endowments 37,303
Other 2,067,483
Total Additions 2,117,801
DEDUCTIONS
Program expenses of former RDA 106,570
Payments to other governments 38,213
Interest and fiscal agency expenses of RDA 880,881
Library services 87,741
Depreciation expense 101,693
Total Deductions 1,215,098
CHANGE IN NET POSITION 902,703
NET POSITION - BEGINNING OF YEAR (10,737,631)
NET POSITION - END OF YEAR (9,834,928)$
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
43
This Page Intentionally Left Blank
44
Notes to Basic Financial Statements
45
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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,
2015 was 30,505.
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
Financial Statements—and Management’s Discussion and Analysis—for State and Local
Governments; Omnibus, and No. 38, Certain Financial Statement Note Disclosures.
46
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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.
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.
47
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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.
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.
48
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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
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.
49
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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.
C e r t a i n i n d i r e c t c o s t s a r e i n c luded 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.
Pension Expense - For purposes of measuring the net pension liability and deferred
outflows/inflows of resources related to pensions, and pension expense, information about the
fiduciary net position of the City’s California Public Employees’ Retirement System (CalPERS)
plans (the Plans) and additions to/deductions from the Plans’ fiduciary net position have been
determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments
(including refunds of employee contributions) are recognized when due and payable in accordance
with the benefit terms. Investments are reported at fair value.
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.
50
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
Materials, Supplies and Deposits - These assets are held for consumption and are stated at cost
using the first-in, first-out method. The costs are recorded as expenditures at the time the item is
consumed.
Interfund Receivables and Payables - Transactions between funds that are representative of
lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as
“advances to/advances from other funds”. All other outstanding balances between funds are
reported as “due to/from other funds”.
Advances - Advances between funds 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
51
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
part of the Town’s assets or liabilities, as the deferred compensation plan trustees hold those funds
in trust on behalf of employees until the employees are eligible to receive the benefits.
Compensated Absences - Accumulated Vacation, Sick Pay and Other Employee Benefits are
accrued as earned. Upon termination, employees are paid for all unused vacation at their current
hourly rates. Sick leave earned is cashed out based on the following schedule for employees with at
least 150 hours accrued and up to a maximum amount as specified under labor contract provisions:
For employees under contract 1-59 months 25.0%
For employees under contract 60-119 months 37.5%
For employees under contract 120 months or more 50.0%
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 Balance 2,281,656$
Additions 1,070,315
Payments (903,274)
Ending Balance 2,448,697$
Current Portion 1,519,817$
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 - 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
52
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
reported as other financing sources. Premiums received on debt issuances are reported as other
financing sources while discounts on debt issuances are reported as other financing uses. Issuance
costs, whether or not withheld from the actual debt proceeds received, are reported as debt service
expenditures.
Deferred Outflows/Deferred Inflows of Resources - Deferred outflows of resources is a
consumption of net position by the Town that is applicable to a future reporting period, for
example, prepaid items and deferred charges.
Deferred inflows of resources is an acquisition of net position 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.
53
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
Assigned includes fund balance amounts that are intended to be used for specific purposes that
are neither considered restricted or committed. Fund balance may be assigned by the Town
Manager or the Finance Director.
Unassigned includes fund balances within the funds which have not been classified within the
above mentioned categories.
The 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 February 12, 2016,
the date which the financial statements were available to be issued. T he f inancial sta tem ents
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
54
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
revenue and receivables when they are collected during the fiscal year of levy or within 60 days of
year-end.
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 - There were no significant expenditures in excess
of budget during for the year ended June 30, 2015.
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.
55
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
G. Accounting and Reporting Changes
GASB Statement No. 68 – Accounting and Financial Reporting for Pensions - an
amendment of GASB Statement No. 27 (Issued 06/12). 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 governmental
employers about financial support for pensions that is provided by other entities. This
Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State
and Local Governmental Employers, as well as the requirements of Statement No. 50,
Pension Disclosures, as they relate to pensions that are provided through pension plans
administered as trusts or equivalent arrangements (hereafter jointly referred to as trusts) that
meet certain criteria. This Statement establishes a definition of a pension plan that reflects the
primary activities associated with the pension arrangement-determining pensions,
accumulating and managing assets dedicated for pensions, and paying benefits to plan
members as they come due. This Statement has been implemented as of June 30, 2015
resulting in a prior period adjustment of $44,466,398. See Note 9 for information related to
the financial statement impact of this statement.
GASB 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. There
was no financial statement effect related to this Statement.
GASB 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 financial
guarantees. Therefore, this Statement had no financial statement effect.
GASB Statement No. 71 – In November, 2013, GASB issued Statement No. 71, Pension
Transition for Contributions Made Subsequent to the Measurement Date—an amendment of
GASB Statement No. 68. The objective of this Statement is to address an issue regarding
application of the transition provisions of Statement No. 68, Accounting and Financial
Reporting for Pensions. The issue relates to amounts associated with contributions, if any,
made by a state or local government employer or non-employer contributing entity to a
defined benefit pension plan after the measurement date of the government’s beginning net
pension liability. The provisions of this Statement were required to be applied simultaneously
with the provisions of Statement 68 and have been implemented as of June 30, 2015. See
Note 9 for information related to the financial statement impact of this statement.
56
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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 $19,812,497 as of June 30, 2015. 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, 2015, the Town’s cash balances
exceeded FDIC by $19,312,497 but were collateralized as discussed above.
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, 2015, LAIF had approximately $69.6 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,
2015 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.
57
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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, 2015, the Town had $4,171,610 invested in LAIF, which had invested .79% 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 1.0004 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 t he f air valu es of the T ow n'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 as to custodial credit risk. Its U.S. Government Agency Securities
investment is held by a third party financial institution under the third party’s trust department’s name
and thus not exposed to custodial credit risk.
Concentration of Credit Risk is the risk that the Town’s investments are exposed because the types of
investments have been too limited. The Town’s Policy states that, with the exception of US Treasury
securities and LAIF, no more than 50% of the Town’s total investment portfolio will be invested in one
single security type or with a single financial institution. The Town was in compliance with this policy
as of June 30, 2015.
58
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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,
2015:
Available Concentration Time to Weighted
for Investment of Credit Mature Average
Operations Restricted Total Rating Risk (Years) Maturity
U.S. Government Agency securities 47,622,746$ 70,383$ 47,693,129$ Aaa/AAA 92% 1.55 1.43
Government Securities Money
Market Mutual Funds 17,368 - 17,368 Not Rated 0%
LAIF 4,171,610 - 4,171,610 Not Rated 8% 0.65 0.05
Total Investments 51,811,724 70,383 51,882,107 100%
Cash Deposits with Banks 18,498,992 26,212 18,525,204
Money Market Accounts - 1,963,357 1,963,357
Cash on hand at Town 4,100 - 4,100
Total Cash and Investments 70,314,816$ 2,059,952 $ 72,374,768$
(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
59
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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 Town Funds Totals
Cash and investments available for operations 67,822,471$ 2,492,345$ 70,314,816$
Restricted cash and investments 96,595 1,963,357 2,059,952
Total cash and investments 67,919,066$ 4,455,702$ 72,374,768$
NOTE 3 - LONG-TERM NOTES RECEIVABLE
The Town had the following long-term notes receivable as of June 30, 2015:
Interest Rate Maturity Balance
General Fund:
Open Doors Associates, Ltd. 7% 2024 880,388$
BMP Loans 3% Various 8,011
Total General Fund 888,399
Active Home Loans Various Various 116,038
Open Doors Associates, Ltd. 7% 2024 98,660
Housing Conservation Loans 0-5% Various 157,393
Rehab Loan to Charities 159,000
Total CDBG 531,091
Total Long-Term Notes Receivable - Government-wide Statement of Net Assets 1,419,490
Project Match Various Various 540,433
Total Long-Term Notes Receivable 1,959,923$
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 a loan with Open Doors Associates, Ltd. to
cover the cost of traffic impact fees, planning fees and building permit taxes. As of June 30, 2015,
60
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
$883,416 of such costs, including accrued interest, had been incurred by Open Doors Associates, Ltd.
in connection with the project and advances by the Town under this note.
Active Home Loans and Housing Conservation Loans - The Town uses CDBG Fund (funded
through federal grants) to assist low and moderate income homeowners to improve their homes and to
fund low income housing rental properties acquisition and rehabilitation. These loans are secured by
deeds of trust.
Project Match - The Successor Agency has a loan agreement with Project Match, a nonprofit benefit
corporation, to acquire and rehabilitate four or five bedroom single family homes. The property is to
provide affordable housing rental to very low income senior households. The loan receivable is
evidenced by a promissory note and secured by a deed of trust. From inception of the loan through
June 30, 2015, no interest or principal payments have been made.
NOTE 4 - INTERFUND TRANSACTIONS
Inter-fund Receivables and Payables - Amounts due to or due from other funds reflect inter-fund
balances for services rendered or short-term loans expected to be repaid in the next fiscal year.
Advances to or from other funds are long-term loans between funds that are to be repaid in their
entirety over several years. As of June 30, 2015, there were no inter-fund receivables and payables.
Transfers - With Council approval resources may be transferred from one fund to another. Transfers
routinely reimburse funds that have made an expenditure on behalf of another fund. Transfers may also
be made to pay for capital projects or capital outlays, lease or debt service payments, operating
expenses and low and moderate-income housing projects. Transfers between funds during the fiscal
year ended June 30, 2015 were as follows:
Transfers In Transfers Out
General Fund 504,376$ 7,386,491$
Appropriated Reserves Fund 8,372,844 113,933
Nonmajor Gov't Funds 100,000 287,625
Internal Service Funds 531,066 1,720,237
Total Transfers 9,508,286$ 9,508,286$
61
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
NOTE 5 - CAPITAL ASSETS
Changes in the Town’s capital assets during the fiscal year are shown as follows:
Balance at
June 30, 2014
Adjustments
and Additions Retirements
Balance at
June 30, 2015
Capital Assets not being depreciated:
Land 20,333,684$ -$ - $ 20,333,684$
Construction in Progress 997,145 1,238,312 - 2,235,457
Total capital assets not being depreciated 21,330,829 1,238,312 - 22,569,141
Capital Assets being depreciated:
Buildings and Improvements 28,316,263 141,166 - 28,457,429
Equipment & Vehicle 9,161,837 998,274 348,168 9,811,943
Infrastructure - All Other 20,615,531 1,422,724 - 22,038,255
Infrastructure - Streets 53,984,080 - - 53,984,080
Total capital assets being depreciated 112,077,711 2,562,164 348,168 114,291,707
Less accumulated depreciation for:
Buildings and Improvements 5,018,488 579,438 - 5,597,926
Equipment & Vehicle 7,046,321 436,336 306,257 7,176,400
Infrastructure - All Other 2,840,159 2,306,879 - 5,147,038
Infrastructure - Streets 25,252,455 - - 25,252,455
Total acccumulated depreciation 40,157,423 3,322,653 306,257 43,173,819
Net capital assets being depreciated 71,920,288 (760,489) 41,911 71,117,888
Governmental activity capital assets, net 93,251,117$ 477,823$ 41,911$ 93,687,029$
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 Government 136,138$
Public Safety 301,475
Parks & Public Works 2,402,339
Community Development 1,508
Library 391,339
Sanitation 89,854
Total Governmental Activities 3,322,653$
Governmental Activities
62
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
Changes in the RDA Successor Agency trust fund capital assets during the fiscal year are shown as
follows:
Balance at
June 30, 2014
Adjustments
and Additions Retirements
Balance at
June 30, 2015
Capital Assets not being depreciated:
Land 5,257,422$ -$ - $ 5,257,422$
Total capital assets not being depreciated 5,257,422 - - 5,257,422
Capital Assets being depreciated:
Buildings and Improvements 4,067,708 - - 4,067,708
Total capital assets being depreciated 4,067,708 - - 4,067,708
Less accumulated depreciation for:
Buildings and Improvements 2,033,854 101,693 - 2,135,547
Total acccumulated depreciation 2,033,854 101,693 - 2,135,547
Net capital assets being depreciated 2,033,854 (101,693) - 1,932,161
Successor Agency capital assets, net 7,291,276$ (101,693)$ - $ 7,189,583$
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, 2015:
Due Due in
Interest Maturity Original Beginning Ending Within One More Than
Long-Term Debt Rate Date Issue Balance Deletions Balance Year One Year
2002 COP 2.5-5% 2031 10,725,000$ 8,040,000$ 295,000$ 7,745,000$ 310,000 $ 7,435,000$
2010 COP 2.5-4.25% 2028 15,675,000 13,825,000 695,000 13,130,000 715,000 12,415,000
Subtotal COP's 26,400,000 21,865,000 990,000 20,875,000 1,025,000 19,850,000
Premiums 753,095 602,475 37,655 564,820 - 564,820
Total Long-Term Debt 27,153,095$ 22,467,475$ 1,027,655 $ 21,439,820$ 1,025,000 $ 20,414,820$
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.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
2010 Certificates of Participation (2010 COPs) - On June 1, 2010, $15,675,000 of 2010 COPs were
issued to finance the acquisition, construction, and improvement of a library on the Town’s Civic
Center campus, to be owned and operated by the Town. Principal payments are due annually on
August 1, with interest payments due semi-annually on February 1 and August 1.
To assist the Town in paying the cost of acquisition and construction of various projects, the Town and
its Redevelopment Agency entered into lease and reimbursement agreements in 1992, 2002, and 2010.
Under the agreements, the Agency will use available net tax increment revenues resulting from the
projects’ effect on land values to repay the Town for all lease payments made by the Town to the
Agency under the lease agreements for the projects. Net tax increment revenues are all taxes allocated
to and paid into the Successor Agency private-purpose trust fund.
Future debt service requirements of the 1992, 2002, and 2010 Certificates of Participation (collectively
the “COPs”) as of June 30, 2015, were as follows:
For the Year
Ending June 30, Principal Interest Total
2016 1,025,000$ 897,398$ 1,922,398$
2017 1,065,000 858,303 1,923,303
2018 1,105,000 809,739 1,914,739
2019 1,150,000 759,073 1,909,073
2020 1,195,000 710,024 1,905,024
2021-2025 6,805,000 2,693,906 9,498,906
2026-2030 7,260,000 1,057,450 8,317,450
2031-2032 1,270,000 64,250 1,334,250
Total COP Debt Service 20,875,000$ 7,850,143$ 28,725,143$
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 $1,963,315 as of June 30, 2015.
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 $0 as of June 30, 2015 and was excluded from the Town’s financial
statements.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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.
As of June 30, 2015, fund balances were classified as follows:
Restricted
Capital Outlay funded from storm drain fees, construction taxes and debt proce e d s a r e l e g a l l y
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.
Postemployment 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 i n
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.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
Comcast PEG assigned fund balance will be used to fund capital improvements linked to the televising
of council and planning commission meetings.
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 Descriptions
All qualified employees are eligible to participate in the Town’s Miscellaneous agent multiple
employer defined benefit pension plan or the Safety cost-sharing multiple employer defined benefit
pension plans (the Plans) administered by the California Public Employees’ Retirement System
(CalPERS). Benefit provisions under the Plans are established by State statute and Town resolution.
CalPERS issues publicly available reports that include a full description of the pension plans
regarding benefit provisions, assumptions and membership information that can be found on the
CalPERS website.
Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and
death benefits to plan members. Benefits are based on age at retirement, highest salary for either a one
or three year period and years of credited service. The cost of living adjustments for the Plans are
applied as specified by the Public Employees’ Retirement Law. The Plans’ provisions and benefits in
effect at June 30, 2015, are summarized as follows:
Tier 1 PEPRA Safety
Hire date N/A On or after
January 1, 2013
N/A
Benefit formula 2% @ 55 2% @ 62 3% @ 50
Benefit vesting schedule 5 Years 5 Years 5 Years
Benefit payments Monthly for Life Monthly for Life Monthly for Life
Retirement age 50 52 50
Monthly benefits as a % of eligible compensation 1% to 2.5% 1% to 2.5% 3.00%
Required employee contribution rates 7.00%6.25%9.00%
Required employer contribution rates 21.90%17.06%40.85%
Miscellaneous
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
Employees Covered
At June 30, 2015, the following employees were covered by the benefit terms for the Plans:
Miscellaneous Safety
Active 116 38
Transferred 82 15
Separated 73 3
Retired 185 59
Total 456 115
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer
contribution rates for all public employers be determined on an annual basis by the actuary and
shall be effective on the July 1 following notice of a change in the rate. Funding contributions
for the Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The
actuarially determined rates are the estimated amount necessary to finance the costs of benefits
earned by employees during the year, with an additional amount to finance any unfunded accrued
liability. The Town is required to contribute the difference between the actuarially determined
rate and the contribution rate of employees. For the year ended June 30, 2015, the contributions
recognized as part of pension expense for the Plans were as follows:
Employer Employee
Contributions Contributions
Miscellaneous $ 1,796,079 $ 668,167
Safety $ 1,565,402 $ 551,732
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to
Pensions Pension Liability
As of June 30, 2015, the Town reported net pension liabilities for each plan as follows:
Net Pension
Liability
Miscellaneous $ 21,411,202
Safety 17,788,690
Total Net Pension Liability $ 39,199,892
The Town’s net pension liability for the Safety Plan is measured as the proportionate share of the
net pension liability while the Miscellaneous plan’s net pension liability is a direct calculation
based on its actuarial study and is not proportionate. The net pension liability of all the Plans are
measured as of June 30, 2014, and the total pension liability for the Plans used to calculate the
net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward
to June 30, 2014 using standard update procedures. The Town’s proportion of the net pension
67
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
liability for the Safety Plan was based on a projection of the Town’s long-term share of
contributions to the pension plans relative to the projected contributions of all participating
employers, actuarially determined. The Town’s proportionate share of the net pension liability
for the Safety Plan as of June 30, 2013 and 2014 was as follows:
Safety
Proportion - June 30, 2013 0.4440%
Proportion - June 30, 2014 0.4742%
Change 0.0303%
The following is a summary of the changes in the total pension liability, fiduciary net position
and net pension liability of the Town’s Miscellaneous Plan as of June 30, 2015:
Total Fiduciary Net
Pension Net Pension
Liability Position Liability
Beginning Balance 84,904,502$ 58,716,725$ 26,187,777$
Service Costs 1,579,547 - 1,579,547
Interest on Total Pension Liability 6,268,015 - 6,268,015
Employer Contributions Subsequent to
Measurement Date - Actual - 1,796,079 (1,796,079)
Employee Contributions - 668,167 (668,167)
Projected Earnings on Plan Investments - 4,328,173 (4,328,173)
Recognized Difference between Projected and
Actual Earnings - 1,166,344 (1,166,344)
Net Difference Between Projected and Actual Earnings - 4,665,374 (4,665,374)
Employee Contribution Refunds and Benefit Payments (4,241,487) (4,241,487) -
Net Changes 3,606,075 8,382,650 (4,776,575)
Ending Balance 88,510,577$ 67,099,375$ 21,411,202$
For the year ended June 30, 2015, the Town recognized pension expense of $3,247,119.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
At June 30, 2015, the Town reported deferred outflows of resources and deferred inflows of
resources related to pensions from the following sources:
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
1,968,043$ - $ 1,412,210$ -$
Adjustment due to differences
- - - 38,185
- 4,665,374 - 3,810,066
1,968,043$ 4,665,374$ 1,412,210$ 3,848,251$
in proportions
to measurement date
Miscellaneous Safety
Pension contributions subsequent
Net differences between projected
and actual earnings on plan investments
Totals
The Town reported $3,380,253 as deferred outflows of resources related to contributions
subsequent to the measurement date that will be recognized as a reduction of the net pension
liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of
resources and deferred inflows of resources related to pensions will be recognized as pension
expense as follows:
Miscellaneous Safety
2016 (1,166,344)$ (966,154)$
2017 (1,166,344) (966,154)
2018 (1,166,344) (963,425)
2019 (1,166,342) (952,518)
Totals (4,665,374)$ (3,848,251)$
Fiscal Year Ended June 30
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
Actuarial Assumptions
The total pension liabilities in the June 30, 2013 actuarial valuations were determined using the
following actuarial assumptions:
Valuation Date June 30, 2013
Measurement Date June 30, 2014
Actuarial Cost Method Entry-Age Normal
Cost Method
Actuarial Assumptions:
Discount Rate 7.50%
Inflation 2.75%
Payroll Growth 3.00%
Projected Salary Increase 3.3% - 14.2% (1)
Investment Rate of Return 7.5% (2)
Mortality (3)
(3) Derived using CalPERS' membership data for all funds
(1) Depending on age, service and type of employment
(2) Net of pension plan investment expenses, including inflation
The underlying mortality assumptions and all other actuarial assumptions used in the June 30,
2013 valuation were based on the results of a January 2014 actuarial experience study for the
period 1997 to 2011. Further details of the Experience Study can found on the CalPERS website.
Discount Rate
The discount rate used to measure the total pension liability was 7.50 percent for the Plans. To
determine whether the municipal bond rate should be used in the calculation of a discount rate
for the Plans, CalPERS stress tested plans that would most likely result in a discount rate that
would be different from the actuarially assumed discount rate. Based on the testing, none of the
tested plans run out of assets. Therefore, the current 7.50 percent discount rate is adequate and
the use of the municipal bond rate calculation is not necessary. The long term expected discount
rate of 7.50 percent will be applied to all plans in the Public Employees Retirement Fund
(PERF). The stress test results are presented in a detailed report that can be obtained from the
CalPERS website. According to Paragraph 30 of Statement 68, the long-term discount rate
should be determined without reduction for pension plan administrative expense. The 7.50
percent investment return assumption used in this accounting valuation is net of administrative
expenses. Administrative expenses are assumed to be 15 basis points. An investment return
excluding administrative expenses would have been 7.65 percent. Using this lower discount rate
has resulted in a slightly higher Total Pension Liability and Net Pension Liability. CalPERS
checked the materiality threshold for the difference in calculation and did not find it to be a
material difference.
CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability
Management (ALM) review cycle that is scheduled to be completed in February 2018. Any
changes to the discount rate will require Board action and proper stakeholder outreach. For these
70
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
reasons, CalPERS expects to continue using a discount rate net of administrative expenses for
GASB 67 and 68 calculations through at least the 2017-18 fiscal year.
CalPERS will continue to check the materiality of the difference in calculation until such time as
they changes their methodology. The long-term expected rate of return on pension plan
investments was determined using a building-block method in which best-estimate ranges of
expected future real rates of return (expected returns, net of pension plan investment expense and
inflation) are developed for each major asset class. In determining the long-term expected rate of
return, CalPERS took into account both short-term and long-term market return expectations as
well as the expected pension fund cash flows. Using historical returns of all the funds’ asset
classes, expected compound returns were calculated over the short-term (first 10 years) and the
long-term (11-60 years) using a building-block approach.
Using the expected nominal returns for both short-term and long- t e r m , t h e p r e s e n t v a l u e o f
benefits was calculated for each fund. The expected rate of return was set by calculating the
single equivalent expected return that arrived at the same present value of benefits for cash flows
as the one calculated using both short-term and long-term returns. The expected rate of return
was then set equivalent to the single equivalent rate calculated above and rounded down to the
nearest one quarter of one percent. The table below reflects the long-term expected real rate of
return by asset class. The rate of return was calculated using the capital market assumptions
applied to determine the discount rate and asset allocation. These rates of return are net of
administrative expenses.
New
Strategic Real Return Real Return
Asset Class Allocation Years 1 - 10 (a) Years 11+ (b)
Global Equity 47.00% 5.25% 5.71%
Global Fixed Income 19.00% 0.99% 2.43%
Inflation Sensitive 6.00% 0.45% 3.36%
Private Equity 12.00% 6.83% 6.95%
Real Estate 11.00% 4.50% 5.13%
Infrastructure and Forestland 3.00% 4.50% 5.09%
Liquidity 2.00% -0.55% -1.05%
Total 100.00%
(b) An expected inflation of 3.0% used for this period.
(a) An expected inflation of 2.5% used for this period.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the Town’s net pension liability for the Plans, calculated using the discount rate
for the Plans, as well as what the Town’s net pension liability would be if it were calculated using a
discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
Miscellaneous Safety
1% Decrease 6.50%6.50%
Net Pension Liability $ 32,506,410 $ 27,577,769
Current Discount Rate 7.50%7.50%
Net Pension Liability $ 21,411,202 $ 17,788,690
1% Increase 8.50%8.50%
Net Pension Liability $ 12,178,563 $ 8,733,911
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately
issued CalPERS financial reports.
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 makes contributions 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, 2015, the Town contributed $2,159,470 to the plan, including $859,470 for
72
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
current premiums and an additional $1,300,000 to prefund benefits. All related obligations are paid
from the Town’s General Fund.
Annual OPEB Cost and Net OPEB Obligation - As of June 30, 2015 and for the year then ended,
the Town’s Net OPEB Obligation (NOO) and Annual OPEB Cost were as follows:
NOO as of June 30, 2014 4,048,004$
Annual OPEB Cost
Annual Required Contribution 1,864,000
Interest on NOO 294,000
NOO adjustment (834,144)
Net annual OPEB cost 1,323,856
Contributions made (includes benefit payments) (2,159,470)
NOO as of June 30, 2015 3,212,390$
Trend Information
Actual
Annual OPEB Employer Percentage Net OPEB
Year Cost Contribution Contributed Obligation
2013 2,490,000$ 1,887,047$ 76% 3,484,860$
2014 2,617,000 2,053,856 78% 4,048,004
2015 1,323,856 2,159,470 163% 3,212,390
Plan Actuarial Value and Funding Progress
As of June 30, 2015, the plan was 38% funded. The actuarial accrued liability (AAL) for benefits was
$22,257,000 and the actuarial value of plan assets was approximately $8,345,705, resulting in an
unfunded actuarial accrued liability (UAAL) of $13,911,295. The covered payroll (annual payroll of
active employees covered by the plan) was $14,440,000 and the ratio of UAAL to the covered payroll
was 96%.
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.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
In the June 30, 2013 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 7.5%-7.8% 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) (24 years
remaining as of June, 30, 2015)
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.
Funded Status per Valuation Date (Required Supplementary Information)
Unfunded
Entry Age Actuairal Unfunded Annual (Overfunded)
Valuation Accrued Value of (Overfunded) Funded Covered Liability as %
Date Liability Assets Liability Ratio Payroll of Payroll
1/1/2010 17,712,000$ 425,000$ 17,287,000$ 2.4% 13,477,000$ 128.3%
6/30/2011 22,121,000 1,947,000 20,174,000 8.8% 14,123,000 142.8%
6/30/2013 22,257,000 8,345,705 13,911,295 37.5% 14,440,000 96.3%
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 $10,000 deductible for vehicle damage. Once the Town’s deductible is met,
ABAG becomes responsible for payment of all claims up to the limit.
74
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
Condensed full accrual basis audited financial information of ABAG as of and for the year ended June
30, 2014, as provided by ABAG, P.O. Box 2050, Oakland, CA 94604, is as follows:
Total Assets 44,444,445$
Total Liabilities 36,354,585
Net Position 8,089,860$
Total Operating Revenue 8,935,914$
Total Operating Expense 20,413,794
Net Operating Income (11,477,880)
General Revenue (896,792)
Change in Net Position (12,374,672)
Beginning Net Position 20,464,532
Ending Net Position 8,089,860$
Local Agency Workers’ Compensation Joint Powers Authority (LAWCX) - T h e T o w n i s 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 $1,000,000,
LAWCX has a commercial policy providing coverage. Financial statements may be obtained from
LAWCX at 6371 Auburn Blvd., Suite B, Citrus Heights, California, 94604-2050.
Condensed full accrual basis audited financial information of LAWCX as of and for the year ended
June 30, 2014, is as follows:
Total Assets 71,812,040$
Total Liabilities 45,119,273
Net Position 26,692,767$
Total Operating Revenue 10,441,407$
Total Operating Expense 9,999,089
Net Operating Income 442,318
General Revenue 100,417
Change in Net Position 542,735
Beginning Net Position 26,150,032
Ending Net Position 26,692,767$
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.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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, 2015:
Workers' Self
Compensation Insurance
Internal Internal
Service Fund Service Fund Total
Claims payable balance - June 30, 2012 807,383$ 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, 2013 795,487 353,808 1,149,295
Claims incurred 965,800 (66,621) 899,179
Claims paid (892,063) (154,339) (1,046,402)
Claims payable balance - June 30, 2014 869,224$ 132,848$ 1,002,072$
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
impacted the reporting entity of the Town that previously had reported a redevelopment agency as a
blended component unit.
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.
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, 2015, the Successor Agency trust fund reported a net deficit of $10,477,175.
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TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2015
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 identified in the agreement, called for approximately $24 million to be
granted to the Town for the following projects:
a. Expansion and improvement of current and new downtown parking
b. Highway 9 improvements from Highway 17 to Monte Sereno
c. Almond Grove Area street, sidewalk and other improvements
d. Downtown Los Gatos gateways, signage, banners and art
e. Storm drain, retaining wall, street and other improvements
f. New Los Gatos library building
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative
agreement were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of
its Redevelopment Agency.
Affordable Housing Cooperative Agreement
In March of 2011, the Redevelopment Agency entered into an affordable housing cooperative
agreement with the Town for the purpose of funding affordable housing projects and programs to be
developed and/or administered by the Town in accordance with the Redevelopment Agency’s five year
implementation plan and redevelopment plan. The improvement plan, as identified in the agreement,
called for approximately $16 million to be granted to the Town for the following projects:
a. Development of affordable housing at 224 Main St.
b. Development of affordable housing at Dittos Lane
c. Acquisition of property and development of affordable housing on Knowles Ave
d. Partnership with Senior Housing Solutions for the creation of senior housing in Los Gatos
e. Partnerships for the conversion of existing residential developments dedicated to affordable
housing
f. Grants to the Santa Clara County Housing Trust for the development of affordable housing.
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative
agreement were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of
its Redevelopment Agency.
77
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78
Required Supplementary Information
79
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80
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
MAJOR GOVERNMENTAL FUND SCHEDULES
(OTHER THAN THE GENERAL FUND) AND
PENSION SCHEDULES REQUIRED BY GASB 68
Schedule of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual
(GAAP):
Appropriated Reserves Fund is used to account for resources provided for capital projects not
fully funded from other sources.
Schedule of Pension Plan Contributions
Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost Sharing
Plan
81
Variance
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Other taxes -$ -$ -$ -$
Licenses & permits 182,000 182,000 853,946 671,946
Intergovernmental 160,000 675,857 859,119 183,262
Charges for services 899,299 1,978,443 294,192 (1,684,251)
Interest - - 6,806 6,806
Other - 18,000 521,402 503,402
Total Revenues 1,241,299 2,854,300 2,535,465 (318,835)
EXPENDITURES
Parks and public works - - 187,960 (187,960)
Capital outlay 7,203,749 15,218,609 3,451,681 11,766,928
Total Expenditures 7,203,749 15,218,609 3,639,641 11,578,968
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (5,962,450) (12,364,309) (1,104,176) 11,260,133
OTHER FINANCING SOURCES (USES)
Operating transfers in 7,081,491 8,372,844 8,372,844 -
Operating transfers (out)(112,000) (112,000) (113,933) (1,933)
Total Other Financing Sources (Uses)6,969,491 8,260,844 8,258,911 (1,933)
CHANGE IN FUND BALANCE 1,007,041$ (4,103,465)$ 7,154,735 11,258,200$
BEGINNING FUND BALANCE 8,191,823
ENDING FUND BALANCE 15,346,558$
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TOWN OF LOS GATOS
APPROPRIATED RESERVES FUND
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
82
2015
Safety Plan
Contractually Required Contributions (Actuarially Determined)1,999,757$
Contributions in Relation to Actuarially Determined Contributions 1,999,757
Contribution Deficiency (Excess)-
Covered Employee Payroll 4,916,535$
Contributions as a Percentage of Covered Payroll 40.67%
Miscellaneous Plan
Contractually Required Contributions (Actuarially Determined)1,796,079$
Contributions in Relation to Actuarially Determined Contributions 1,796,079
Contribution Deficiency (Excess)-
Covered Employee Payroll 8,406,315$
Net Pension Liability as a Percentage of Covered Payroll 254.70%
Contributions as a Percentage of Covered Payroll 21.37%
Notes to Schedule:
Valuation Date:June 30, 2013
Assumptions Used:Entry Age Method used fro Actuarial Cost Method
Level Percentage of Payroll (Closed) Used Amortization Method
3.8 Years Remaining Amortization Period
Inflation Assumed at 2.75%
Investment Rate of Returns set at 7.5%
CalPERS mortality table using 20 years of membership data for all funds
** Fiscal year 2015 was the first year of implementation, therefore only one year is shown.
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TOWN OF LOS GATOS
SCHEDULE OF PENSION PLAN CONTRIBUTIONS
83
2015
Safety Plan
District's Proportion of Net Pension Liability 0.28588%
District's Proportionate Share of Net Pension Liability 17,788,690$
District's Covered Employee Payroll 4,916,535$
District's Proportionate Share of NPL as a % of Covered Employee Payroll 361.81%
Plan Fiduciary's Net Position as a % of the Total Pension Liability 75.66%
** Fiscal year 2015 was the first year of implementation, therefore only one year is shown.
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TOWN OF LOS GATOS
SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY
CALPERS SAFETY COST SHARING PLAN
84
Supplementary Information
85
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86
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
NONMAJOR GOVERNMENTAL FUNDS
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.
87
Total
Storm Construction Gas Capital
Drains Tax Tax Projects
Funds Fund Fund Funds
ASSETS
Cash & Investments 1,592,794$ 2,814,352$ 1,075,828$ 5,482,974$
Restricted cash & investments - - - -
Receivables:
Accounts - - - -
Intergovernmental Receivable - - - -
Total Assets 1,592,794$ 2,814,352$ 1,075,828$ 5,482,974$
LIABILITIES
Accounts Payable -$ -$ -$ -$
Accrued payroll and benefits - - - -
Unearned revenue - - - -
Total Liabilities - - - -
FUND BALANCE
Restricted for:
Capital Projects 1,592,794 2,814,352 1,075,828 5,482,974
Committed to:
Repairs and Maintenance - - - -
Assigned for:
Special Revenue Funds - - - -
Unassigned - - - -
Total Fund Balances 1,592,794 2,814,352 1,075,828 5,482,974
Total Liabilities and Fund Balances 1,592,794$ 2,814,352$ 1,075,828$ 5,482,974$
(Continued)
CAPITAL PROJECTS FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2015
88
ASSETS
Cash & Investments
Restricted cash & investments
Receivables:
Accounts
Intergovernmental Receivable
Total Assets
LIABILITIES
Accounts Payable
Accrued payroll and benefits
Unearned revenue
Total Liabilities
FUND BALANCE
Restricted for:
Capital Projects
Committed to:
Repairs and Maintenance
Assigned for:
Special Revenue Funds
Unassigned
Total Fund Balances
Total Liabilities and Fund Balances
Total
Community Non-Point Total Nonmajor
Development Source Lighting and Special Revenue Governmental
Fund Maintenance Landscaping Funds Funds
-$ 143,097$ 176,901$ 319,998$ 5,802,972$
70,383 - - 70,383 70,383
- 1,649 - 1,649 1,649
145,707 - 3,983 149,690 149,690
216,090$ 144,746$ 180,884$ 541,720$ 6,024,694$
-$ -$ 676$ 676$ 676$
- 1,803 - 1,803 1,803
152,158 - - 152,158 152,158
152,158 1,803 676 154,637 154,637
- - - - 5,482,974
- - 180,208 180,208 180,208
63,932 142,943 - 206,875 206,875
- - - - -
63,932 142,943 180,208 387,083 5,870,057
216,090$ 144,746$ 180,884$ 541,720$ 6,024,694$
(Concluded)
COMBINING BALANCE SHEETS
JUNE 30, 2015
SPECIAL REVENUE FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
89
Storm Construction Gas Total
Drain Tax Tax Capital Projects
Funds Fund Fund Funds
REVENUES
Property Taxes -$ -$ -$ -$
Other Taxes - 135,959 - 135,959
License and permits 267,694 - - 267,694
Intergovernmental - - 880,517 880,517
Charges for Services - - - -
Fines and Forfeitures - - - -
Interest (5,793) (9,397) 4,008 (11,182)
Other - - - -
Total Revenues 261,901 126,562 884,525 1,272,988
EXPENDITURES
Current:
Parks and Public Works - - - -
Sanitation and Other 2 - - 2
Capital Outlay - - - -
Total Expenditures 2 - - 2
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 261,899 126,562 884,525 1,272,986
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 261,899 126,562 778,525 1,166,986
Fund Balances - Beginning of year 1,330,895 2,687,790 297,303 4,315,988
Fund Balances - End of year 1,592,794$ 2,814,352$ 1,075,828$ 5,482,974$
(Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
CAPITAL PROJECTS FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
90
REVENUES
Property Taxes
Other Taxes
License and permits
Intergovernmental
Charges for Services
Fines and Forfeitures
Interest
Other
Total Revenues
EXPENDITURES
Current:
Parks and Public Works
Sanitation and Other
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-Point Total
Development Source Lighting and Special Revenue
Fund Maintenance Landscaping Funds Total
-$ -$ 37,723$ 37,723$ 37,723$
- - - - 135,959
- - - - 267,694
176,705 - - 176,705 1,057,222
- 328,868 - 328,868 328,868
- - 17 17 17
3,473 - (838) 2,635 (8,547)
3,350 - - 3,350 3,350
183,528 328,868 36,902 549,298 1,822,286
- - 21,032 21,032 21,032
- 411,861 - 411,861 411,863
- - - - -
- 411,861 21,032 432,893 432,895
183,528 (82,993) 15,870 116,405 1,389,391
- 100,000 - 100,000 100,000
(176,705) - (4,920) (181,625) (287,625)
(176,705) 100,000 (4,920) (81,625) (187,625)
6,823 17,007 10,950 34,780 1,201,766
57,109 125,936 169,258 352,303 4,668,291
63,932$ 142,943$ 180,208$ 387,083$ 5,870,057$
(Concluded)
SPECIAL REVENUE FUNDS
AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TOWN OF LOS GATOS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
NONMAJOR GOVERNMENTAL FUNDS
91
TOWN OF LOS GATOS TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2015 FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Variance Variance
Positive Positive
Budget Actual (Negative)Budget Actual (Negative)
REVENUES
Property taxes -$ -$ -$ -$ -$ -$
Other taxes - - - - - -
License and permits - - - - - -
Intergovernmental 176,705 176,705 - - - -
Charges for services - - - 336,684 328,868 (7,816)
Fines and forfeitures - - - - - -
Interest - 3,473 3,473 - - -
Other 18,000 3,350 (14,650) - - -
Total Revenues 194,705 183,528 (11,177) 336,684 328,868 (7,816)
EXPENDITURES
Parks and public works - - - - - -
Sanitation and other - - - 404,616 411,861 (7,245)
Capital outlay - - - - - -
Total Expenditures - - - 404,616 411,861 (7,245)
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 194,705 183,528 (11,177) (67,932) (82,993) (15,061)
OTHER FINANCING SOURCES (USES)
Operating transfers in - - - 100,000 100,000 -
Operating transfers (out)(70,000) (176,705) (106,705) - - -
Total Other Financing Sources (Uses)(70,000) (176,705) (106,705) 100,000 100,000 -
CHANGE IN FUND BALANCE 124,705$ 6,823 (117,882)$ 32,068$ 17,007 (15,061)$
BEGINNING FUND BALANCE 57,109 125,936
ENDING FUND BALANCE 63,932$ 142,943$
(Continued)
COMMUNITY DEVELOPMENT
BLOCK GRANT
NON-POINT
SOURCE MAINTENANCE
92
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, 2015
REVENUES
Property taxes
Other taxes
License and permits
Intergovernmental
Charges for services
Fines and forfeitures
Interest
Other
Total Revenues
EXPENDITURES
Parks and public works
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, 2015
Variance Variance
Positive Positive
Budget Actual (Negative)Budget Actual (Negative)
37,760$ 37,723$ (37)$ -$ -$ -$
- - - - - -
- - - 95,000 267,694 172,694
- - - - - -
- - - - - -
- 17 17 - - -
1,178 (838) (2,016) - (5,793) (5,793)
- - - - - -
38,938 36,902 (2,036) 95,000 261,901 166,901
17,891 21,032 (3,141) - - -
- - - - 2 (2)
- - - - - -
17,891 21,032 (3,141) - 2 (2)
21,047 15,870 (5,177) 95,000 261,899 166,899
- - - - - -
(4,920) (4,920) - - - -
(4,920) (4,920) - - - -
16,127$ 10,950 (5,177)$ 95,000$ 261,899 166,899$
169,258 1,330,895
180,208$ 1,592,794$
(Continued)
STORM DRAIN FUNDSLIGHTING AND LANDSCAPING
93
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, 2015
REVENUES
Property taxes
Other taxes
License and permits
Intergovernmental
Charges for services
Fines and forfeitures
Interest
Other
Total Revenues
EXPENDITURES
Parks and public works
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
Variance Variance
Positive Positive
Budget Actual (Negative)Budget Actual (Negative)
-$ -$ -$ -$ -$ -$
30,000 135,959 105,959 - - -
- - - - - -
- - - 880,214 880,517 303
- - - - - -
- - - - - -
30,000 (9,397) (39,397) 1,000 4,008 3,008
- - - - - -
60,000 126,562 66,562 881,214 884,525 3,311
- - - - - -
- - - - - -
- - - - - -
- - - - - -
60,000 126,562 66,562 881,214 884,525 3,311
- - - - - -
- - - (106,000) (106,000) -
- - - (106,000) (106,000) -
60,000$ 126,562 66,562$ 775,214$ 778,525 3,311$
2,687,790 297,303
2,814,352$ 1,075,828$
(Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
CONSTRUCTION TAX GAS TAX
94
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, 2015
REVENUES
Property taxes
Other taxes
License and permits
Intergovernmental
Charges for services
Fines and forfeitures
Interest
Other
Total Revenues
EXPENDITURES
Parks and public works
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
Variance
Positive
Budget Actual (Negative)
37,760$ 37,723$ (37)$
30,000 135,959 105,959
95,000 267,694 172,694
1,056,919 1,057,222 303
336,684 328,868 (7,816)
- 17 17
32,178 (8,547) (40,725)
18,000 3,350 (14,650)
1,606,541 1,822,286 215,745
17,891 21,032 (3,141)
404,616 411,863 (7,247)
- - -
422,507 432,895 (10,388)
1,184,034 1,389,391 205,357
100,000 100,000 -
(180,920) (287,625) (106,705)
(80,920) (187,625) (106,705)
1,103,114$ 1,201,766 98,652$
4,668,291
5,870,057$
(Concluded)
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
TOTALS
95
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96
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
PROPRIETARY FUNDS
INTERNAL SERVICE FUNDS
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.
97
Equipment Worker's Self Management Vehicle Building
Replacement Comp Insurance Stores Information Maintenance Maintenance Total
ASSETS
Cash & Investments 3,749,041$ 2,366,218$ 1,703,216$ 189,366$ 2,885,510$ 331,477$ 578,439$ 11,803,267$
Restricted Cash & Investments - 26,212 - - - - - 26,212
Receivables:
Accounts - - 2,328 - 1,645 - 18,524 22,497
Materials, Supplies and Deposits - - - 4,573 - 21,537 - 26,110
Equipment (Net)- - - - - - 3,427 3,427
Total Assets 3,749,041$ 2,392,430$ 1,705,544$ 193,939$ 2,887,155$ 353,014$ 600,390$ 11,881,513$
Deferred Outflows of Resources
Pension Plan Contributions -$ 16,307$ 23,247$ -$ 62,615$ 28,546$ 44,998$ 175,713$
LIABILITIES
Accounts Payable 73,813 5,761 1,922 5,983 44,241 25,334 107,931 264,985
Accrued Payroll and Benefits 199 2,588 3,613 - 9,755 4,788 8,429 29,372
Due to Other Governments - - - - - 27 - 27
Claims Payable - 869,224 132,848 - - - - 1,002,072
Net Pension Liabilities - 177,406 252,913 - 681,213 310,569 489,557 1,911,658
Total Liabilities 74,012$ 1,054,979$ 391,296$ 5,983$ 735,209$ 340,718$ 605,917$ 3,208,114$
Deferred Inflows of Resources
Differences Between Projected
and Actual Pension Earnings -$ 38,656$ 55,108$ -$ 148,432$ 67,671$ 106,672$ 416,539$
NET POSITION
Net investment in capital assets -$ -$ -$ -$ -$ -$ 3,427$ 3,427$
Restricted for:
workers compensation claims - 26,212 - - - - - 26,212
Unrestricted 3,675,029 1,288,890 1,282,387 187,956 2,066,129 (26,829) (70,628) 8,402,934
Total Net Position 3,675,029$ 1,315,102$ 1,282,387$ 187,956$ 2,066,129$ (26,829)$ (67,201)$ 8,432,573$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30, 2015
98
Equipment Worker's Self Management Vehicle Building
Replacement Comp Insurance Stores Information Maintenance Maintenance Total
OPERATING REVENUES
Charges for services 369,953$ 634,144$ 485,397$ 147,502$ 1,089,254$ 569,300$ 974,404$ 4,269,954$
Interest - 5 - - - - - 5
Use of money and property - - - - - - 220,490 220,490
Other local taxes - - - - - - 135,959 135,959
Other 134,999 370,425 - 481 - 703 6,780 513,388
Total Operating Revenues 504,952 1,004,574 485,397 147,983 1,089,254 570,003 1,337,633 5,139,796
OPERATING EXPENSES
Salaries and benefits 6,932 105,149 143,536 - 400,171 184,473 326,672 1,166,933
Insurance expenses - 146,721 131,121 - - - - 277,842
Depreciation expenses - - - - - - 956 956
Services and supplies 4,177 812,198 196,793 109,320 492,113 299,419 914,717 2,828,737
Total Operating Expenses 11,109 1,064,068 471,450 109,320 892,284 483,892 1,242,345 4,274,468
Operating Income (loss)493,843 (59,494) 13,947 38,663 196,970 86,111 95,288 865,328
Transfers (in)31,066 - 500,000 - - - - 531,066
Transfers (out)(279,523) - - - (16,066) (500,000) (924,648) (1,720,237)
Net Transfers (248,457) - 500,000 - (16,066) (500,000) (924,648) (1,189,171)
Change in Net Position 245,386 (59,494) 513,947 38,663 180,904 (413,889) (829,360) (323,843)
BEGINNING NET POSITION 3,429,643 1,576,698 1,056,559 149,293 2,661,264 740,861 1,319,864 10,934,182
PRIOR PERIOD ADJUSTMENT
GASB 68 - (202,102) (288,119) - (776,039) (353,801) (557,705) (2,177,766)
BEGINNING NET POSITION,
AS ADJUSTED 3,429,643 1,374,596 768,440 149,293 1,885,225 387,060 762,159 8,756,416
ENDING NET POSITION 3,675,029$ 1,315,102$ 1,282,387$ 187,956$ 2,066,129$ (26,829)$ (67,201)$ 8,432,573$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
99
Equipment Worker's Self Management Vehicle Building
Replacement Comp Insurance Stores Information Maintenance Maintenance Total
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers 504,952$ 1,004,575$ 483,069$ 147,983$ 1,088,650$ 570,003$ 1,319,544$ 5,118,776$
Payments to suppliers 23,495 - - (105,841) (562,948) (282,547) (877,095) (1,804,936)
Payments to employees (6,922) (107,717) (146,378) - (408,871) (185,152) (330,675) (1,185,715)
Claims paid - (1,002,880) (592,332) - - - - (1,595,212)
Net Cash Provided (Used) by
Operating Activities 521,525 (106,022) (255,641) 42,142 116,831 102,304 111,774 532,913
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers In 31,066 - 500,000 - - - - 531,066
Transfers Out (279,523) - - - (16,066) (500,000) (924,648) (1,720,237)
Net Cash Provided (Used) by
Noncapital Financing Activities (248,457) - 500,000 - (16,066) (500,000) (924,648) (1,189,171)
Net Increase(Decrease) in Cash and Investments 273,068 (106,022) 244,359 42,142 100,765 (397,696) (812,874) (656,258)
Cash and investments - beginning of year 3,475,973 2,498,452 1,458,857 147,224 2,784,745 729,173 1,391,313 12,485,737
Cash and investments - end of year 3,749,041$ 2,392,430$ 1,703,216$ 189,366$ 2,885,510$ 331,477$ 578,439$ 11,829,479$
Reconciliation of Operating Income to Cash
Flows from Operating Activities:
Operating Income 493,843$ (59,494)$ 13,947$ 38,663$ 196,970$ 86,111$ 95,288$ 865,328$
Adjustments to reconcile operating income to
cash flows from operating activities:
Depreciation - - - - - - 956 956
Pension expense adjustments (GASB 68)- (2,348) (3,345) - (9,009) (4,107) (6,474) (25,283)
Change in assets and liabilities:
Receivables, net - - (2,328) - (604) - (18,090) (21,022)
Other assets - - - - - 1,633 - 1,633
Accounts payable 27,672 (2,517) (49,011) 3,479 (69,867) 18,640 40,094 (31,510)
Accrued payroll and benefits 10 (41,663) (214,904) - (659) 27 - (257,189)
Cash Flows From Operating Activities 521,525$ (106,022)$ (255,641)$ 42,142$ 116,831$ 102,304$ 111,774$ 532,913$
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
100
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
PRIVATE PURPOSE TRUST FUNDS
Library Private Purpose Trust Fund was established to provide for the servicing of donations
and bequests to the Town's Library Program.
RDA Successor Agency Private Purpose Trust Fund was established to account for the assets
and liabilities transferred from the dissolution of the Town’s former Redevelopment Agency and
the continuing operations related to existing Redevelopment Agency obligations.
101
RDA
Successor
Library Agency Total
ASSETS
Cash and investments (Note 2)662,445$ 1,650,696$ 2,313,141$
Restricted cash and investments (Note 2)- 1,963,357 1,963,357
Loans receivable (Note 3)- 540,433 540,433
Capital assets (Note 5):
Nondepreciable - 5,257,422 5,257,422
Depreciable, net of accumulated depreciation - 1,932,161 1,932,161
Total Assets 662,445$ 11,344,069$ 12,006,514$
LIABILITIES
Accounts payable 20,075$ 327$ 20,402$
Due to other governments 123 - 123
Interest payable - 381,097 381,097
Long-term debt (Note 6):
Due within one year - 1,025,000 1,025,000
Due in more than one year - 20,414,820 20,414,820
Total Liabilities 20,198$ 21,821,244$ 21,841,442$
NET POSITION
Held in trust 642,247$ (10,477,175)$ (9,834,928)$
Total Net Position 642,247$ (10,477,175)$ (9,834,928)$
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2015
102
RDA
Successor
Library Agency Total
ADDITIONS
Investment earnings (2,234)$ 15,249$ 13,015$
Gifts, bequests and endowments 37,303 - 37,303
Other - 2,067,483 2,067,483
Total Additions 35,069 2,082,732 2,117,801
DEDUCTIONS
Program expenses - 106,570 106,570
Payments to other governments - 38,213 38,213
Interest and fiscal agency expenses of RDA - 880,881 880,881
Library services 87,741 - 87,741
Depreciation expense - 101,693 101,693
Total Deductions 87,741 1,127,357 1,215,098
CHANGE IN NET POSITION (52,672) 955,375 902,703
NET POSITION - BEGINNING OF YEAR 694,919 (11,432,550) (10,737,631)
NET POSITION - END OF YEAR 642,247$ (10,477,175)$ (9,834,928)$
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
103
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104
TOWN OF LOS GATOS, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
AGENCY FUND
PARKNG IMPROVEMENT DISTRICT #88
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.
105
Balance Balance
June 30, 2014 Additions Deletions June 30, 2015
-$ 179,204$ -$ 179,204$
ASSETS
Cash and investments
Restricted cash and investments 178,839 365 179,204 -
Total Assets 178,839$ 179,569$ 179,204$ 179,204$
LIABILITIES
Due to other governments 178,839$ 179,569$ 179,204$ 179,204$
Total Liabilities 178,839$ 179,569$ 179,204$ 179,204$
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TOWN OF LOS GATOS
AGENCY FUND
PARKING IMPROVEMENT DISTRICT #88
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
106
Statistical Section
107
This Page Intentionally Left Blank
108
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).
109
Town of Los Gatos Schedule 1
Net Position by Component
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Investment
Fiscal in Capital Assets Total
Year Net of Related Debt Restricted Unrestricted Net Position
2006 41,019,121 12,665,493 38,609,085 92,293,699
2007 43,281,315 20,423,828 37,893,056 101,598,199
2008 48,581,378 18,459,776 42,884,826 109,925,980
2009 52,665,506 15,663,436 51,619,635 119,948,577
2010 50,129,550 26,723,994 47,191,225 124,044,769
2011 72,567,355 14,652,823 29,017,520 116,237,698
2012 90,333,451 5,167,236 37,192,210 132,692,897
2013 92,558,523 3,949,583 41,480,377 137,988,483
2014 93,251,117 4,485,246 44,393,265 142,129,628
2015 93,687,029 5,663,182 7,180,919 106,531,130
(2) The decrease in Restricted Net Position from FY2010 to FY2011 was primarily due to the issuance of the $15.7 million
Certificates of Participation in FY2010.
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
55,000,000
60,000,000
65,000,000
70,000,000
75,000,000
80,000,000
85,000,000
90,000,000
95,000,000
Series1 Series2 Series3
110
Town of Los Gatos Schedule 2
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Expenses 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Governmental Activities:
General government 4,383,584$ 4,570,391$ 5,233,730$ 5,323,467$ 4,647,801$ 5,180,153$ 6,145,143$ 6,564,768$ 6,955,804$ 6,465,852$
Police department 11,133,362 11,556,350 12,313,637 13,467,503 13,266,849 13,495,885 14,124,798 13,731,754 14,119,786 12,644,221
Parks and public works 6,523,888 7,222,052 6,958,449 8,671,678 7,458,085 7,155,905 7,827,332 7,829,315 8,154,616 8,069,352
Community development 2,887,818 2,735,223 3,064,865 3,389,151 3,522,477 3,099,269 3,434,551 4,094,188 4,424,040 4,047,738
Community services 948,650 2,388,250 1,060,922 1,162,284 1,270,240 666,015 - - - -
Library services 1,880,465 1,892,448 1,956,767 2,067,476 2,038,009 1,892,805 1,938,577 2,128,823 2,234,431 2,553,414
Sanitation 574,344 414,610 502,196 407,048 655,713 342,893 158,205 393,205 363,180 491,359
Redevelopment 2,093,546 2,434,935 3,360,585 2,939,550 6,992,935 16,794,022 919,821 1,277,063 21,687 -
Interest and fees 708,585 704,794 670,415 631,159 612,700 1,278,381 1,123,842 - - -
Total Governmental Activities 31,134,241$ 33,919,053$ 35,121,566$ 38,059,316$ 40,464,809$ 49,905,328$ 35,672,269$ 36,019,116$ 36,273,544$ 34,271,936$
Program Revenues
Charges for Services:
General government 1,981,557$ 2,127,670$ 1,149,911$ 1,155,409$ 1,337,772$ 1,156,931$ 1,131,424$ 1,416,593$ 2,179,077$ 1,888,213$
Police department 1,343,028 1,250,636 895,569 1,358,361 2,110,357 2,153,843 2,324,397 2,450,630 3,206,579 3,529,166
Parks and public works 591,079 676,095 576,107 637,933 779,300 810,022 1,215,382 3,044,401 1,550,867 2,206,765
Community development 3,070,115 2,997,419 2,954,123 2,700,614 3,404,087 3,097,192 3,448,433 4,649,444 5,156,061 5,027,497
Community services - - - 147,895 134,366 98,803 - - - -
Library services 62,444 61,091 60,123 56,932 57,633 39,491 37,662 50,696 51,775 53,123
Sanitation 690,314 437,794 166,660 135,000 135,000 135,000 135,000 403,294 328,648 328,868
Operating Grants and Contributions:
General government - - 54,242 8,834 10,237 15,638 6,453 8,406 - -
Police department 745,797 645,034 744,347 538,629 81,997 27,748 29,980 91,360 42,661 24,838
Parks and public works 549,873 545,432 565,857 633,923 594,775 809,272 993,827 835,724 994,096 907,745
Community services 180,897 68,912 146,236 190,447 124,287 182,683 - - - -
Library services 11,379 16,735 11,409 10,462 13,996 10,662 109 40 14,662 4,062
Sanitation 7,857 41,044 39,891 25,103 9,002 - - - -
Capital Grants and Contributions:
General government - - - - - - - 169,270 - 176,705
Parks and public works 931,616 1,381,631 2,020,121 1,330,638 3,074,453 2,375,759 641,811 2,757,660 2,274,879 2,338,154
Community development - - - - - - - - 19,360 -
Total Program Revenues 10,165,957$ 10,208,449$ 9,385,749$ 8,944,968$ 11,883,363$ 10,922,046$ 9,964,478$ 15,877,518$ 15,818,665$ 16,485,136$
General Revenues 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Property taxes 13,810,457$ 16,082,348$ 17,311,052$ 18,343,063$ 18,856,081$ 18,226,001$ 14,088,866$ 11,968,377$ 11,712,312$ 12,931,603$
Sales taxes 8,655,566 9,253,891 9,345,432 8,487,000 8,317,217 9,971,409 9,889,100 8,757,428 8,029,571 8,202,678
Franchise taxes - - - - - - - - - 2,215,430
Other taxes 2,247,997 2,327,516 2,904,908 2,664,698 2,623,622 2,906,264 3,698,753 3,324,791 3,718,405 2,062,893
Motor vehicle in lieu 666,494 194,104 137,330 101,265 92,595 139,814 15,238 15,790 13,068 -
Investment earnings 1,922,819 3,607,966 4,190,951 2,949,119 1,155,929 760,905 a 331,420 b (133,375) b 772,200 b 428,772
Loss on disposal of capital assets (3,592) - - - - - - - - -
Sale of property - - - 6,525,000 - (870,127) - 54,425 - -
Miscellaneous 2,850,836 334,818 9,842 66,802 52,459 41,943 2,275,160 1,154,647 350,468 813,324
Extraordinary gain (loss) dissolution of RDA - - - - - - 11,864,453 295,101 - -
Total General Revenues 30,150,578$ 31,800,643$ 33,899,515$ 39,136,947$ 31,097,903$ 31,176,209$ 42,162,990$ 25,437,184$ 24,596,024$ 26,654,700$
Change in Net Position 9,182,294$ 8,090,039$ 8,163,698$ 10,022,599$ 2,516,457$ (7,807,073)$ 16,455,199$ 5,295,586$ 4,141,145$ 8,867,900$
* These line items have only been available since implementation of GASB34 in 2002/03.
a. Investment Earnings revenue was down due to the economy downturn.
b. Investment Earnings revenue was down due to declining interest rates and reduced cash balances.
111
Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
General Fund
Reserved 2,128,873$ 4,732,394$ 2,048,261$ 8,165,607$ 4,491,589$ -$ -$ -$ -$ -$
Unreserved 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 23,791,749 22,103,364
Unassigned - - - - - 2,433,556 4,019,409 7,502,446 1,363,376 2,017,892
Total general fund 20,129,082$ 21,138,605$ 19,284,830$ 25,027,359$ 23,086,573$ 25,740,337$ 26,012,295$ 28,260,602$ 25,155,125$ 24,121,256$
All Other Governmental Funds
Reserved 12,088,367$ 15,820,345$ 14,917,629$ 15,265,127$ 10,525,384$ -$ -$ -$ -$ -$
Unreserved, reported in:
Special revenue funds 1,123,335 836,191 1,030,161 522,105 225,509 - - - - -
Capital project funds 3,842,580 8,169,857 11,719,905 11,203,521 24,454,347 - - - -
Debt service funds 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 4,485,246 5,663,182
Assigned - - - - - 26,593,328 27,382,560 26,855,338 8,191,823 15,553,433
Unassigned - - - - - 2,409,667 4,126,516 7,659,654 183,045 -
Total all other governmental funds 22,014,312$ 28,675,775$ 33,414,880$ 34,517,310$ 42,158,972$ 45,267,329$ 36,676,312$ 38,464,575$ 12,860,114$ 21,216,615$
Fiscal Year
112
Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Revenues:
Taxes 25,112,221$ 27,888,072$ 29,773,634$ 29,643,262$ 29,967,385$ 31,549,352$ 27,676,719$ 24,596,799$ 23,475,393$ 23,208,820$
Intergovernmental 3,993,032 4,085,983 3,128,239 2,134,352 4,082,725 3,248,303 1,669,729 2,615,191 2,440,127 2,921,002
Charges for Service 3,529,178 4,269,571 2,996,660 3,421,131 4,418,074 4,107,386 5,550,671 6,529,234 5,837,581 5,794,386
Licenses & Permits 2,637,977 2,705,028 3,337,822 2,692,187 2,977,199 2,967,819 3,242,348 4,015,871 5,343,265 6,467,771
Investment income 4,975,513 4,179,736 4,190,955 2,949,120 1,174,203 691,022 291,484 (133,380) 772,164 428,735
Fines and Forfeitures 1,005,773 561,665 369,292 618,771 662,699 737,903 809,790 688,125 795,720 868,564
Franchise Fees - - - - - - - - - 2,215,430
Use of Property 60,749 51,948 38,502 38,974 38,910 37,741 32,209
Other 232,694 110,486 1,180,063 1,581,078 2,105,333 2,904,862 5,412,328 4,577,584 3,648,277 3,130,975
Total revenues 41,486,388 43,800,541 44,976,665 43,100,650 45,439,566 46,245,149 44,692,043 42,928,334 42,350,268 45,067,892
Expenditures:
Current
Public safety 11,706,091 11,576,850 12,214,891 12,971,105 12,821,499 13,004,041 13,392,953 13,370,032 13,742,189 13,747,198
Public Works 4,742,401 4,956,451 5,261,706 5,785,584 5,152,745 5,222,504 5,440,960 5,616,197 5,611,283 5,840,097
Community Development 2,936,730 2,776,231 3,035,240 3,280,856 3,452,914 2,973,587 3,226,195 4,235,832 4,335,599 4,218,500
Community Services 950,333 2,395,429 1,056,835 1,149,290 1,261,981 663,645 - - - -
Library Services 1,876,022 1,904,900 1,946,595 2,007,518 1,999,430 1,806,611 1,805,479 2,055,069 2,131,438 2,268,844
Sanitation & Other 551,164 387,674 470,660 375,483 642,512 314,899 116,607 359,725 322,817 411,863
General Government 4,358,853 4,586,513 5,120,970 5,145,355 5,483,753 6,318,706 8,046,794 8,331,444 8,499,854 8,647,451
Redevelopment 2,573,514 2,966,132 3,284,847 3,861,525 8,692,216 18,958,126 3,282,155 1,277,063 21,687 -
Capital outlay 4,682,848 4,689,187 8,697,478 7,759,577 16,141,561 15,839,303 10,929,491 6,568,653 4,097,662 3,800,478
Debt service
Principal repayment 400,000 414,167 429,167 445,000 465,000 485,000 934,167 - - -
Interest and fiscal charges 714,079 711,346 676,913 638,221 620,356 1,019,881 1,143,185 - - -
Total expenditures 35,492,035 37,364,880 42,195,302 43,419,514 56,733,967 66,606,303 48,317,986 41,814,015 38,762,529 38,934,431
Excess (deficiency) of revenues
over (under) expenditures 5,994,353 6,435,661 2,781,363 (318,864) (11,294,401) (20,361,154) (3,625,943) 1,114,319 3,587,739 6,133,461
Other financing sources(uses):
Debt Issuance - - - - 16,428,095 - - - - -
Transfers in 2,854,245 10,611,169 8,810,379 5,370,708 4,028,905 3,928,107 3,735,440 2,841,881 3,418,872 8,977,220
Transfers out (2,640,785) (9,375,847) (8,706,409) (4,731,885) (3,461,724) (3,545,168) (3,661,894) (2,463,850) (2,921,409) (7,788,049)
Proceeds from issuance of debt - - - - - - - - - -
Total other financing sources(uses)213,460 1,235,322 103,970 638,823 16,995,276 382,939 73,546 378,031 497,463 1,189,171
Special item:
Sale of property - - - 6,525,000 - - - - - -
Extraordinary Gain (Loss) RDA Dissolution - - - - - - (5,038,620) 295,913 - -
Prepayment of pension obligations - - - - - - - - (4,534,538) -
Net change in fund balances 6,207,813$ 7,670,983$ 2,885,333$ 319,959$ 5,700,875$ (19,978,215)$ (3,552,397)$ 1,492,350$ 4,085,202$ 7,322,632$
Debt service as a percentage
of non capital expenditures 3.62%3.44%3.30%3.04%2.67%2.96%5.56%0.00%0.00%0.00%
1 Increase due to SERAF payment to State in the amount of $2.2M and increased Pass Through Payments.
2 The 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
Town of Los Gatos Schedule 5
Assessed Value and Estimated Actual Value of Taxable Property
Last Ten Fiscal Years
Utility
and Total
Fiscal Unsecured Percent Secured Percent Total Estimated Direct
Year Property Change Property Change Assessed Full Market Tax Rate
2004 175,689,995 -12.83%5,258,601,739 7.02%5,434,291,734 21,034,406,956 1.0475
2005 179,611,684 2.23%5,654,906,203 7.54%5,834,517,887 22,619,624,812 1.0480
2006 186,694,066 3.94%6,259,830,939 10.70%6,446,525,005 25,039,323,756 1.0466
2007 194,195,209 4.02%6,840,335,733 9.27%7,034,530,942 27,361,342,932 1.0460
2008 201,629,315 3.83%7,392,958,751 8.08%7,594,588,066 29,571,835,004 1.0459
2009 216,402,089 7.33%7,949,991,620 7.53%8,166,393,709 31,799,966,480 1.0449
2010 241,286,055 11.50%8,076,101,607 1.59%8,317,387,662 32,304,406,428 1.0584
2011 217,353,236 -9.92%8,044,692,600 -0.39%8,262,045,836 32,178,770,400 1.0555
2012 217,297,593 -0.03%8,152,459,157 1.34%8,369,756,750 32,609,836,628 1.0499
2013 211,268,609 -2.77%8,465,420,032 3.84%8,676,688,641 33,861,680,128 1.0508
2014 224,079,502 6.06%9,238,816,900 9.14%9,462,896,402 36,955,267,600 1.0493
2015 227,331,042 1.45%9,767,782,505 5.73%9,995,113,547 39,071,130,020 1.0544
Source: Santa Clara County Assessed Value Report
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Mi
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i
o
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Utility and Unsecured Property
Secured Property
114
Town of Los Gatos Schedule 6
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
County
Retirement Levy Santa Clara School
Fiscal Basic County and County Valley Water District Bonds
Year Wide Levy Hospital Bond District and Loans Total
2006 1.0000 0.0388 0.0078 0.0996 1.1462
2007 1.0000 0.0388 0.0072 0.0941 1.1401
2008 1.0000 0.0388 0.0071 0.1032 1.1491
2009 1.0000 0.0388 0.0061 0.0970 1.1419
2010 1.0000 0.0510 0.0074 0.1021 1.1605
2011 1.0000 0.0483 0.0072 0.1449 1.2004
2012 1.0000 0.0435 0.0064 0.1393 1.1892
2013 1.0000 0.0439 0.0069 0.1523 1.2031
2014 1.0000 0.0423 0.0070 0.1417 1.1910
2015 1.0000 0.0479 0.0065 0.1442 1.1986
Source: Santa Clara County Book of Tax Rates
0.00
0.25
0.50
0.75
1.00
1.25
Pe
r
H
u
n
d
r
e
d
$
Santa Clara Valey Water District County
Retirement Levy /Hospital Bond
School District Bonds and Loans
Basic County Wide Levy
115
Town of Los Gatos Schedule 7
Principle Property Tax Payers
Last Five Fiscal Years *
Percentage Percentage Percentage Percentage Percentage
of Total City of Total City of Total City of Total City of Total City
Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed
ASSESSEE NAME Value Value Value Value Value Value Value Value Value Value
Sobrato Interests IV/Sobrato Land Holdings $150,781,092 1.87%$157,554,525 1.93%$157,559,245 1.86%$169,809,676 2.01%$20,869,338 0.21%
Boccardo Corporation $36,839,021 0.46%$37,173,877 0.46%$37,550,368 0.44%$38,617,912 0.46%$38,772,905 0.40%
Knowles Los Gatos LLC $45,778,757 0.57%$46,123,468 0.57%$47,045,934 0.56%$47,986,850 0.57%$48,204,708 0.49%
SRI Old Town LLC $29,556,155 0.37%$29,778,712 0.37%$30,374,286 0.36%$30,981,771 0.37%$31,122,427 0.32%
CH Realty IV Downing LP $19,000,000 0.24%$19,143,068 0.23%$19,525,927 0.23%$19,916,443 0.24%- 0.00%
Hercules Holding II LLC $25,865,452 0.32%- 0.00%- 0.00%- 0.00%- 0.00%
Health Care REIT Inc,$19,720,749 0.25%$19,869,245 0.24%$19,223,348 0.23%$20,671,960 0.24%$20,765,810 0.21%
750 University LLC $20,950,229 0.26%- 0.00%$12,137,999 0.14%$18,600,000 0.22%$19,000,000 0.19%
Grosvenor USA Ltd.$20,909,185 0.26%$21,066,630 0.26%$22,437,962 0.27%$22,886,720 0.27%$22,990,624 0.24%
Alberto Way Holdings LLC $20,877,418 0.26%$21,034,623 0.26%$23,145,064 0.27%$23,607,964 0.28%$23,715,141 0.24%
D&K Los Gatos LLC $20,351,651 0.25%$15,284,324 0.19%$15,590,010 0.18%$15,901,809 0.19%$15,974,003 0.16%
CHL Ventures LP $20,115,163 0.25%$20,266,630 0.25%$20,671,962 0.24%- 0.00%-
San Jose Water Works $23,313,978 0.29%$29,369,137 0.36%$30,882,009 0.36%$33,626,381 0.40%$36,693,453 0.38%
Toll House Hotel LLC $15,848,626 0.20%$15,696,089 0.19%- 0.00%- 0.00%-
Grade Way Associations VI $14,400,050 0.18%$14,508,482 0.18%$14,798,651 0.17%$15,094,623 0.18%$15,163,152 0.16%
Lyon Baytree Apartments LLC $14,111,407 0.18%$14,177,039 0.17%$14,430,123 0.17%$14,674,716 0.17%-
KSL Capital Partners $39,960,114 0.50%$41,698,751 0.51%$42,532,721 0.50%$43,383,370 0.51%$43,580,326 0.45%
Los Gatos Hotel Corp.$15,978,009 0.20%$15,683,979 0.19%$15,617,134 0.18%$18,134,182 0.21%$15,573,314 0.16%
David A. and Shari Flick Trustee $14,614,447 0.18%$14,724,487 0.18%$15,018,971 0.18%- 0.00%$15,388,884 0.16%
Pter R. Hofman $13,247,124 0.16%- 0.00%- 0.00%- 0.00%-
Paul H. Roskoph - 0.00%$12,926,457 0.16%$13,416,452 0.16%- 0.00%-
Good Samaritan Hospital LP - 0.00%$19,372,795 0.24%$19,530,183 0.23%$19,710,897 0.23%$19,602,594 0.20%
Windrose Los Gatos Properties LLC - 0.00%- 0.00%- 0.00%- 0.00%-
Park Row East Apartments Ltd.- 0.00%- 0.00%- 0.00%- 0.00%-
LG Business Park LLC - 0.00%18,342,931.00 0.23%- 0.00%$47,276,977 0.56%$39,347,485 0.40%
Green Eyes LLC - 0.00%- 0.00%$12,542,555 0.15%$12,793,404 0.15%-
Go and Kay Karou Sasaki - 0.00%- 0.00%- 0.00%$22,752,809 0.27%-
Ann R. Desantis - 0.00%- 0.00%- 0.00%$13,823,779 0.16%-
DS Downing Los Gatos LLC - 0.00%- 0.00%- 0.00%- 0.00%$20,006,861 0.20%
El Camino Hospital - 0.00%- 0.00%- 0.00%- 0.00%$20,803,609 0.21%2
LG Hotel LLC - 0.00%- 0.00%- 0.00%- 0.00%$15,448,057 0.16%
SI 32 LLC - 0.00%- 0.00%- 0.00%$150,563,119 1.54%
Total - Principal taxpayers 582,218,627$ 7.24%583,795,249$ 7.16%584,030,904$ 6.90%650,252,243$ 7.68%633,585,810$ 6.49%
Total - All real properties assessed by the Town (1)$8,043,793,200 $8,151,530,237 $8,464,491,112 $9,237,887,980 $9,766,765,025
(1) Assessed value includes only net secured real properties.
(2) Excludes the value of tax-exempt properties
Source Data: California Municipal Statistics, Inc.
2014/152011/12 2012/13 2013/142010/11
116
Town of Los Gatos Schedule 8
Property Tax Levies and Collections
Last Ten Fiscal Years
Value of
Redevelopment
Agency Value of
Town Redevelopment Total Property Value of Town Property Property
Property Tax Property Tax Tax Levied Property subject Subject to Subject to
Fiscal Levied and Levied and and to Local Tax Local Local
Year Collected Collected Collected Rate Tax Rate Tax Rate
2004 4,834,464 4,376,896 9,211,361 5,480,295,734 753,210,332 6,233,506,066
2005 5,348,483 5,013,350 10,361,833 5,834,517,887 804,306,862 6,638,824,749
2006 5,739,846 5,976,062 11,715,909 6,446,525,005 897,448,660 7,343,973,665
2007 6,386,562 7,425,925 13,812,488 7,034,530,942 996,479,040 8,031,009,982
2008 6,901,935 8,072,176 14,974,111 7,594,588,066 1,081,483,541 8,676,071,607
2009 7,465,403 8,574,251 16,039,654 8,166,393,709 1,096,883,582 9,263,277,291
2010 7,608,137 9,022,863 16,630,999 8,317,387,662 1,134,135,499 9,451,523,161
2011 7,567,880 6,861,650 14,429,530 8,262,045,836 1,117,973,351 9,380,019,187
2012 7,520,265 3,349,254 10,869,519 8,369,756,750 1,109,305,673 9,479,062,423
2013 8,253,442 - 8,253,442 8,676,688,641 1,167,752,021 9,844,440,662
2014 9,120,626 - 9,120,626 9,462,896,402 1,249,873,303 10,712,769,705
2015 9,787,519 - 9,787,519 9,995,113,547 1,318,214,863 11,313,328,410
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
$10.0
$10.5
$11.0
$11.5
Bi
l
l
i
o
n
s
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
Mi
l
l
i
o
n
s
Tax Levied
117
Town of Los Gatos Schedule 9
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
1992 2002 2010
Certificate Certificate Certificate Total Total Percentage of
Fiscal of of of Governmental Primary Personal Per
Year Participation Participation Participation Activities Government Income Capita
2006 1,270,000 10,075,000 11,345,000 11,345,000 7.9%389.65
2007 1,085,000 9,845,000 10,930,000 10,930,000 7.3%372.25
2008 890,000 9,610,000 10,500,000 10,500,000 6.2%348.03
2009 685,000 9,370,000 10,055,000 10,055,000 5.5%329.70
2010 470,000 9,120,000 15,675,000 25,265,000 25,265,000 19.4%820.24
2011 240,000 8,865,000 15,675,000 24,780,000 24,780,000 19.7%835.72
2012 - - - - - 0.0%1)0.00
2013 - - - - - 0.0%0.00
2014 - - - - - 0.0%0.00
2015 - - - - - 0.0%0.00
1)Debt was transferred to the Successor Agency Trust Fund as a part of the RDA dissolution
Governmental Activities
118
Town of Los Gatos Schedule 10
Direct and Overlapping Governmental Activities Debt
As of June 30, 2015
2014/15 Assessed Valuation:$9,995,113,547
Estimated Share
of Direct and
Debt at Overlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT:% Applicable (1)June 30, 2015 at June 30, 2015
Overlapping Tax & Assesment Debt
Santa Clara County 2.799%799,180,000$ 22,369,048$
West Valley-Mission Community College District 9.909%424,754,350$ 42,088,909$
Campbell Union High School District 8.227%146,910,000$ 12,086,286$
Los Gatos-Saratoga Joint Union High School District 33.499%79,245,000$ 26,546,283$
Cambrian School District 0.383%54,989,944$ 210,611$
Campbell Union High School District 8.574%170,131,249$ 14,587,053$
Los Gatos Union School District 70.280%98,870,000$ 69,485,836$
Saratoga Union School District 0.038%37,170,075$ 14,125$
Union School District 20.673%91,809,422$ 18,979,762$
Santa Clara Valley Water District Benefit Assessment District 2.799%106,690,000$ 2,986,253$
Total Overlapping Tax and Assesmet Debt 209,354,166$
Overlapping General Fund Debt
Santa Clara County General Fund Obligations 2.799%707,613,810$ 19,806,111$
Santa Clara County Pension Obligations 2.799%371,443,651$ 10,396,708$
Santa Clara County Board of Education Certificates of Participation 2.799%9,030,000$ 252,750$
West Valley-Mission Community College District General Fund Obligations 9.909%64,660,000$ 6,407,159$
Campbell Union High School District General Fund Obligations 8.227%8,953,047$ 736,567$
Los Gatos-Saratoga Joint Union High School District Certificates of Participation 33.499%6,995,000$ 2,343,255$
Campbell Union School District General Fund Obligations 8.574%3,425,000$ 293,660$
Saratoga Union School District Certificates of Participation 0.038%4,925,000$ 1,872$
Santa Clara County Vector Control District Certificates of Participation 2.799%3,085,000$ 86,349$
Midpeninsula Regional Open Space Park District General Fund Obligations 4.868%127,086,851$ 6,186,588$
Total Gross Overlapping General Fund Debt 46,511,019$
Less: Santa Clara County Supported Obligations 14,132,112$
Total Overlapping General Fund Debt 32,378,907$
Overlapping Tax Increment Debt ( Successor Agency)
Town of Los Gatos Certificated of Participations 20,875,000$
Total of Overlapping Tax Increment Debt 21,865,000$
Total Direct Debt $0
Total Gross Overlapping Dept 276,740,185$
Total Net Overlapping Debt 262,608,073$
Gross Combined Total Debt 276,740,185$ (2)
Net Combined Total Debt 262,608,073$
Ratios to 2014/15 Assessed Valuation:
Total Overlapping Tax and Assessment Debt: 2.09%
Total Direct Debt: 0.00%
Gross Combined Total Debt: 2.77%
Net Combined Total Debt: 2.63%
Ratios to redevelpment Incremental Valuation ( $1,083,873,943):
Total Overlapping Tax Increment Debt: 1.93%
Source Data: California Municipal Statistics, Inc.
(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable
percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the
city divided by the distric's total taxable asessed value.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non-bonded capital lease obligations.
119
Town of Los Gatos Schedule 11
Legal Debt Margin Information,
Last Ten Fiscal Years
(In Thousands of Dollars)
9,195,026,300
1,379,253,945
-
1,379,253,945
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Debt limit 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 1,379,253.95
Debt applicable to limit - - - - - - - - - -
Legal debt margin 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 1,379,253.95
Total net debt
applicable to the limit 0.00%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:
Legal Debt Margin
(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.
Legal Debt Margin Calculation
for Fiscal Year 2014/15
Assessed Value
Debt limit
Debt applicable to limit:
Fiscal Year
120
Town of Los Gatos Schedule 12
Demographic and Economic Statistics
Last Ten Fiscal Years
Personal
Income Per Capita Public County
Fiscal (thousands Personal Median School Unemployment
Year Population of dollars)Income Age Enrollment Rate
Ended (1)(2)(3)(4)(5)(6)
2006 29,116 1,644,239 56,472 44.19 5,718 4.7%
2007 29,362 1,764,862 60,107 44.64 5,742 4.8%
2008 30,170 1,781,780 59,058 44.86 5,870 6.0%
2009 30,497 1,701,153 55,781 45.35 6,006 11.8%
2010 30,802 1,787,070 58,018 45.09 6,100 11.3%
2011 29,651 1,833,410 61,833 44.22 6,184 10.3%
2012 29,808 1,854,892 62,228 42.64 6,352 8.7%
2013 30,247 2,140,641 70,772 45.80 6,420 6.8%
2014 30,443 2,267,912 74,497 45.80 6,522 5.7%
2015 30,505 2,197,885 72,050 46.10 6,622 3.8%
Source:
(1) California State Dept. of Finance - Population Research Unit (January 2015)
(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.
121
Town of Los Gatos Schedule 13
Principal Employers
Last Seven Fiscal Years
Percentage Percentage Percentage Percentage Percentage Percentage Percentage
of Total Town of Total Town of Total Town of Total Town of Total Town of Total Town of Total Town
Major Employers Employees Employment Employees Employment Employees Employment Employees Employment Employees Employment Employees Employment Employees Employment
Columbia Health Care Assoc/Mission Oaks Hospital 2,000 12.31%2,000 12.17%2,000 12.60%2,000 13.89%2,000 13.29%2,000 13.52%- 0.00%
800 4.92%700 4.26%700 4.41%700 4.86%700 4.65%700 4.73%560 3.73%
Los Gatos Union School District 300 1.85%300 1.83%300 1.89%275 1.91%275 1.83%237 1.60%273 1.82%
Los Gatos-Saratoga High School District 300 1.85%300 1.83%300 1.89%270 1.88%270 1.79%256 1.73%157 1.05%
- 0.00%280 1.70%800 5.04%800 5.56%900 5.98%825 5.58%1,530 10.19%
200 1.23%250 1.52%250 1.57%250 1.74%250 1.66%250 1.69%314 2.09%
Alain Pinel Realtors - 0.00%220 1.34%220 1.39%150 1.04%150 1.00%156 1.05%- 0.00%
200 1.23%- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%
Courtside Tennis Club 200 1.23%200 1.22%200 1.26%200 1.39%200 1.33%295 1.99%440 2.93%
Town of Los Gatos 189 1.16%148 0.90%138 0.87%136 0.94%138 0.92%144 0.97%157 1.05%
- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%179 1.19%
Vasona Creek Health Care Center - 0.00%- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%233 1.55%
Good Samaritan Regional Cancer Center - 0.00%- 0.00%- 0.00%- 0.00%- 0.00%- 0.00%200 1.33%
Source: Town of Los Gatos, Finance Department and Muniservices
Netflix
Safeway
Verizon
Whole Foods
2014/152011/12 2012/13 2013/14
El Camino Hospital, Los Gatos
2008/09 2009/10 2010/11
122
Town of Los Gatos Schedule 14
Full-time-Equivalent Employees by Function/Program
Last Ten Fiscal Years
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Function/Program
General Government 19.95 20.75 20.50 19.95 18.35 18.90 20.15 20.40 20.73 20.97
Police 62.00 62.00 61.00 61.00 60.00 59.50 60.50 58.00 57.50 60.00
Culture and Recreation 4.25 4.25 5.25 5.25 5.25 3.25 ----
Economic Development 1.00 1.00 1.00 1.00 1.00 1.00 1.00 - 0.50 0.63
Library 10.35 10.35 10.35 10.35 10.35 8.60 8.60 8.60 10.30 10.80
Planning 18.80 18.80 18.80 18.80 17.80 15.00 16.00 17.50 17.50 19.50
Public Works 37.00 34.00 34.00 37.00 35.00 32.50 32.00 31.00 31.50 32.00
Total 153.35 151.15 150.90 153.35 147.75 138.75 138.25 135.50 137.53 143.90
Full-time equivalent employment is calculated as one or more employee positions totaling one full year
of service or approximately 2,080 hours a year.
Full-time-Equivalent Employees as of June 30
123
Town of Los Gatos
Operating Indicators
Last Seven Fiscal Years
Schedule 15
FUNCTION/PROGRAM
General government 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Building Permits Issued
Residential Permits Issued 676 733 711 747 738 813 805
Residential Permits Value 48,162,274 51,090,808 42,974,043 66,072,341 75,227,889 87,307,822 76,896,111
Commercial Permits Issued 24 117 128 107 137 139 133
Commercial Permits Value 4,356,307 7,908,146 31,289,431 17,663,124 46,855,615 138,676,507 178,195,997
Publically Owned Permits Issued 2 11 11 - - - -
Publically Owned Permits Value 2,308,160 5,732,014 40,000 - - - -
Residential Parking Permits
Number of Special Event Permits Issued 76 87 96 89 125 133 127
Number of Annual Permits Issued 752 686 713 1,223 1,320 1,376 1,570
City Clerk
Number of Council Resolutions Passed 143 167 76 59 74 86 72
Number of Ordinances Passed 13 16 6 13 20 16 9
Number of Contracts Passed 197 206 218 227 220 196 222
General Services
Number of Purchase Orders Issued 396 365 336 358 318 301 277
Police
Physical Arrests 925 831 872 690 648 641 695
Parking Violations 11,148 11,512 14,377 12,938 11,991 14,421 13,321
Traffic Violations 2,588 3,008 2,718 2,908 3,333 4,747 4,633
DUI Arrests 88 110 98 89 86 62 48
Library
Circulated e-audiobooks 1,516 1,852 1,994 3,388 4,774 2,414 *5,867
Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles)3.5 4.7 4.7 8.0 8.0 10.0 1.8
ADA Compliance: Curb Ramps 9 13 17 19 19 19 23
Traffic Circles 1 1 1 1 1 - 1
Street Poles 1,575 1,605 1,708 1,611 1,611 1,611 1,609
Planning and Development Department
Building & Safety Inspections Performed 10,367 9,055 10,977 11,738 11,902 12,764 11,652
Redevelopment: Number of active projects 3 3 1 - - - -
Source: Town of Los Gatos, Finance Department
* July 2013 the Library separated from Northern CA Digital Library, Patrons had no longer access to collections of multiple libraries. By 2014 the Library has expanded its contents
giving patrons access to more materials.
Fiscal Year
124
Town of Los Gatos Schedule 16
Capital Asset Statistics by Function/Program
Last Six Fiscal Years
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Function/Program
Police
Number of Stations 2 2 2 2 2 2
Number of Patrol Units 14 14 14 14 14 14
Parking Enforcement Vehicles 2 2 2 2 2 2
Other Public Works
Streets (miles)112 112 112 112 112 112
Streetlights 2,112 2,115 2,116 2,116 2,109 1,609
Traffic Signals 28 28 29 29 29 29
Parks and Recreation
Number of Parks 12 12 12 12 12 12
Number of Community Centers 1 1 1 1 1 1
Parking
Number of Parking Garages 1 1 1 1 1 1
Number of Parking Lots 22 22 22 22 22 22
Number of Off Street Parking Garage Spaces 1,126 1,126 1,126 1,126 1,126 1,126
Source: Town of Los Gatos, Finance Department
Fiscal Year
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Other Independent Auditor’s Reports
127
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, 2015, and the related notes to the financial
statements, which collectively comprise the Town’s basic financial statements, and have issued our
report thereon dated February 12, 2016.
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
on compliance with those provisions was not an objective of our audit, and accordingly, we do not
128
1475 Saratoga Ave, Suite 180, San Jose, CA 95129
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
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
February 12, 2016
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