Los Altos City Council
January 25, 2022

CITY COUNCIL MEETING
AGENDA
7:00 PM - Tuesday, January 25, 2022
via Teleconference
Please Note: Per California Executive Order N-29-20, the City Council will meet via Telephone/Video Conference Only.

Telephone: 1-650-242-4929 Meeting ID: 144 291 0272
https://webinar.ringcentral.com/j/1442910272
TO PARTICIPATE VIA VIDEO: Follow the link above. Members of the public will need to have a working microphone on their device and must have the latest version of Ringcentral installed (available at http://www.ringcentral.com/download.html). To request to speak, please use the “Raise hand” feature located at the bottom of the screen.

TO PARTICPATE VIA TELEPHONE: Members of the public may also participate via telephone by calling the number listed above. To request to speak, press *9 on your telephone.

TO SUBMIT WRITTEN COMMENTS: Prior to the meeting, comments on matters listed on the agenda may be emailed to [email protected]. Emails sent to this email address are sent to/received immediately by the City Council. Please include a subject line in the following format:

PUBLIC COMMENT AGENDA ITEM ## - MEETING DATE
Correspondence submitted in hard copy/paper must be received by 2:00 PM on the day of the meeting to ensure distribution prior to the meeting. Correspondence received prior to the meeting will be included in the public record. Please follow this link for more information on submitting written comments.

Public testimony will be taken at the direction of the Mayor, and members of the public may only comment during times allotted for public comments.

AGENDA

CALL MEETING TO ORDER

ESTABLISH QUORUM

PLEDGE ALLEGIANCE TO THE FLAG

REPORT ON CLOSED SESSION

SPECIAL ITEM
1 09/21/2021 CITY COUNCIL MEETING AGENDA Page 2 of 3

1. Recognition of Santa Clara Valley Science and Engineering Fair Association’s 2021 Synopsys Championship Participants and Award Winners from the City of Los Altos

CHANGES TO THE ORDER OF THE AGENDA

PUBLIC COMMENTS ON ITEMS NOT ON THE AGENDA
Members of the audience may bring to the Council's attention any item that is not on the agenda. Speakers are generally given two or three minutes, at the discretion of the Mayor. Please be advised that, by law, the City Council is unable to discuss or take action on issues presented during the Public Comment Period. According to State Law (also known as “The Brown Act”) items must first be noted on the agenda before any discussion or action.

CONSENT CALENDAR
These items will be considered by one motion unless any member of the Council or audience wishes to remove an item for discussion. Any item removed from the Consent Calendar for discussion will be handled at the discretion of the Mayor.

2. City Council Minutes: Approve Minutes of the January 11, 2022 Regular City Council Meeting and January 11, 2022 Joint Study Session with the Planning Commission (A.

Chelemengos)

3. 2022 City Council Assignments - Reassignment: Accept the Mayor’s re-assignment of Council Member Weinberg as the Council Liaison to the Los Altos Parks and Recreation Commission and Council Member Fligor as representative to CHAC to resolve meeting schedule conflicts. (A. Chelemengos)

4. Financial Statements and Compliance reports: Accept the Comprehensive Annual Financial Report and compliance reports for the fiscal year ended June 30, 2021. (J. Furtado)

PUBLIC HEARINGS

5. D20-0004 and TM20-0001: GreenTek Homes - 440 First Street: Requests for Design Review Approval and a Tentative Subdivision Map for a three-story building that includes 4 residential condominium units, one level of underground parking for 9 parking spaces and a useable rooftop area. The project is categorically exempt from environmental review pursuant to Section 15332 (Class 32), Infill Exemption of the California Environmental Quality Act (CEQA) Guidelines. The Planning Commission and Complete Streets Commission recommended approval of the project with the incorporation of specific design plan modifications. (S. Golden)

DISCUSSION ITEMS

6. Council Legislative Subcommittee: Discuss and consider changes to the format of the Standing Council Legislative Subcommittee (Council Member Fligor)

INFORMATIONAL ITEMS ONLY

7. Tentative Council Calendar

COUNCIL/STAFF REPORTS AND DIRECTIONS ON FUTURE AGENDA ITEMS 2 09/21/2021 CITY COUNCIL MEETING AGENDA Page 3 of 3

ADJOURNMENT
(Council Norms: It will be the custom to have a recess at approximately 9:00 p.m. Prior to the recess, the Mayor shall announce whether any items will be carried over to the next meeting. The established hour after which no new items will be started is 11:00 p.m. Remaining items, however, may be considered by consensus of the Council.)

SPECIAL NOTICES TO THE PUBLIC
In compliance with the Americans with Disabilities Act, the City of Los Altos will make reasonable arrangements to ensure accessibility to this meeting. If you need special assistance to participate in this meeting, please contact the City Clerk 72 hours prior to the meeting at (650) 947-2610.

Agendas Staff Reports and some associated documents for City Council items may be viewed on the Internet at http://www.losaltosca.gov/citycouncil/online/index.html.

All public records relating to an open session item on this agenda, which are not exempt from disclosure pursuant to the California Public Records Act, and that are distributed to a majority of the legislative body, will be available for public inspection at the Office of the City Clerk’s Office, City of Los Altos, located at One North San Antonio Road, Los Altos, California at the same time that the public records are distributed or made available to the legislative body.

If you wish to provide written materials, please provide the City Clerk with 10 copies of any document that you would like to submit to the City Council for the public record. 3 City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Elizabeth Barnett
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
4 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Vivek Bharati
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
5 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Saanvi Bhargava
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
6 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Andy Chung
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
7 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Olivia Colace
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
8 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Ori Gillai
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
9 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Kinjal Govil
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
10 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Prakrit Jain
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
11 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Thomas Lilygren
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
12 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Tara Pande
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
13 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Saloni Shah
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
14 Agenda Item # 1.

City of Los Altos
Certificate of Recognition
The City Council of the City of Los Altos hereby
presents this certificate to
Kallie Wang
In recognition of the 2021 STEM Winners and
Participants from the City of Los Altos in the
Santa Clara County 2021 Synopsys Championship
Dated: January 25, 2022
______________________________________
Anita Enander, MAYOR
15 Agenda Item # 1.

MINUTES OF THE REGULAR MEETING OF

THE CITY COUNCIL OF THE CITY OF LOS ALTOS
7:00 P.M., TUESDAY, JANUARY 11, 2022
Held Via Video/Teleconference Per California Executive Order N-29-20.

MEETING CALLED TO ORDER
At 7:17 p.m., Mayor Enander called the meeting to order.

ESTABLISH QUORUM

Present: Mayor Enander, Vice Mayor Meadows, Council Members Fligor, Lee Eng, and Weinberg

Absent: None

PLEDGE OF ALLEGIANCE TO THE FLAG
Jilly Jaros of Girl Scout Troop 60199 led the Council in the Pledge of Allegiance.

REPORT ON CLOSED SESSION

1. Conference with Legal Counsel – Existing Litigation
Pursuant to Government Code Section 54956.9(d)(1)
Name of Case: Satish Ramachandran v. City of Los Altos, et al.

United States District Court, Northern District of California Case No. 5:18-cv-01223-VKD

2. Conference with Legal Counsel – Existing Litigation
Pursuant to Government Code Section 54956.9(d)(1)
Name of Case: Satish Ramachandran v. City of Los Altos, et al.

Santa Clara County Superior Court
Case No. 21CV391414

3. Conference with Legal Counsel – Existing Litigation
Pursuant to Government Code Section 54956.9(d)(1)
Name of Case: Satish Ramachandran v. City of Los Altos, et al.

Santa Clara County Superior Court
Case No. 21CV386694
Mayor Enander reported that the Council held a Closed Session earlier in the evening and stated that no action was taken and there was nothing to report out.

CHANGES TO THE ORDER OF THE AGENDA
There were no changes made.
16 Agenda Item # 2.

Minutes
January 11, 2022
City Council Meeting
Regular Meeting

PUBLIC COMMENTS ON ITEMS NOT ON THE AGENDA
Frank Martin, Janet Corrigan, Roberta Phillips, Anne Paulson, and Joe Beninato provided comments.

CONSENT CALENDAR

1. City Council Minutes: Approve the (amended) Minutes of the December 14, 2021, Regular City Council Meeting. (A. Chelemengos)

2. Professional Services Agreement Amendment: Authorize the City Manager or designee to execute Amendment No. 2 to the Professional Services Agreement with Alta Planning + Design for Complete Streets Master Plan in a not-to-exceed amount of $14,000 for a total contract value of $179,426; and find that the amendment is exempt from review under the California Environmental Quality Act. (M. Lee)

3. Professional Services Agreement Amendment: Authorize the City Manager to execute Amendment No. 1 to the Professional Services Agreement with Bellecci and Associates, Inc. in the amount of $120,090 for consulting and support services for various engineering tasks for FY 2021-2022. (T. Nguyen)

4. Los Altos Summer Internship Program: Approve the program outlined in the Los Altos Summer Internship Program and authorize program implementation. (I. Silipin)

5. Extension of Local Emergency: Adopt Resolution extending the declaration of a local emergency due to the COVID-19 pandemic. (J. Maginot)
Council Member Fligor moved to approve the Consent Calendar. The motion was seconded by Vice Mayor Meadows and the motion passed 5-0 with the following roll call vote:

AYES: Council Members Fligor, Lee Eng, Weinberg, Vice Mayor Meadows, and Mayor Enander
NOES: None
ABSENT: None
ABSTAIN: None
PUBLIC HEARINGS - None

DISCUSSION ITEMS

6. Item removed from agenda per applicants request 01.05.2022 Mayor Enander announced that Agenda Item number 6 had been removed from the agenda at the applicant’s request.

7. Establishment of Permanent Dog Parks: Consider development of one fenced-in dog park in north Los Altos located adjacent to the Civic Center Soccer Field and one fencedin dog park in south Los Altos at McKenzie Park West; make findings that the (Project) is 17 Agenda Item # 2.

Minutes
January 11, 2022
City Council Meeting
Regular Meeting

exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Sections 15061(b)(3) , 15301, 15304, and 15305; that none of the exceptions set forth in CEQA Guidelines Section 15300.2 to the availability of the foregoing categorical exemptions applies to the Project; and direct the City Manager or designee to prepare and file a notice of exemption in connection with this project pursuant to CEQA Guidelines Section 15062 and increase the current fiscal year budget by $100,000 allocated from Park in Lieu funds. If approved by Council, staff will return with changes to the City’s Municipal Code, policies and procedures, and appropriate findings as required. (D.

Legge/M. Hernandez)
City Manager Engeland provided introduction of the item and introduced Facilities Director Hernandez and Recreation and Community Services Director Legge who provided a report and answered questions from the Council.

The following members of the public commented on the matter: Frank Martin, Teresa Morris, Bette Houtchens (with time cede from Steven Houtchens) Diane, Barbara Adey Alon Amit, Lisa Deegan, David Stiff, Millie Squire, Larry Baron, Linda White, call in speaker identified last digits 9493, Jeanine Valadez, Bill Sheppard, and Jim Sweeney.

City Attorney Houston clarified that the matter would be back before the Council in an ordinance form.

Council discussion commended. Neighborhood notification was discussed as well as possibly staggering the opening of multiple dog parks.

Following Council discussion, Council Member Weinberg moved that the Council find the project to be exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Sections 15061(b)(3) , 15301, 15304, and 15305; that none of the exceptions set forth in CEQA Guidelines Section 15300.2 to the availability of the foregoing categorical exemptions applies to the Project and direct staff to proceed with the necessary process, including City outreach to the residents of the area, to establish a fenced in dog park adjacent to the Civic Center Soccer Field including bringing back to Council for review and approval specific siting areas within the designated field to place a fenced in dog area. The motion was seconded by Council Member Lee Eng and the motion passed 5-0 with the following roll call vote:

AYES: Council Members Fligor, Lee Eng, Weinberg, Vice Mayor Meadows, and Mayor Enander
NOES: None
ABSENT: None
ABSTAIN: None
Council Member Weinberg moved that the Council find the project to be exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Sections 15061(b)(3) , 15301, 15304, and 15305; that none of the exceptions set forth in CEQA 18 Agenda Item # 2.

Minutes
January 11, 2022
City Council Meeting
Regular Meeting

Guidelines Section 15300.2 to the availability of the foregoing categorical exemptions applies to the Project and direct staff to proceed with the necessary process to establish a fenced in dog park in McKenzie Park West, per the staff recommendation. The motion was seconded by Mayor Enander and the motion passed 4-1 with the following roll call vote:

AYES: Council Members Lee Eng, Weinberg, Vice Mayor Meadows, and Mayor Enander
NOES: Council Member Fligor
ABSENT: None
ABSTAIN: None
Council Member Fligor stated she voted No because she preferred a delayed opening of the second dog park.

Council Member Lee Eng moved that the Council direct staff to proceed with the implementation of the parks as directed and return to the Council for adoption of the necessary ordinances and formal authorization to increase the current fiscal year budget by $100,000 allocated from Park in Lieu funds for use toward implementation of the dog parks. The motion was seconded by Council Member Weinberg and the motion passed 5-0 with the following roll call vote:

AYES: Council Members Fligor, Lee Eng, Weinberg, Vice Mayor Meadows, and Mayor Enander
NOES: None
ABSENT: None
ABSTAIN: None

INFORMATIONAL ITEMS ONLY
 Tentative Council Calendar

COUNCIL/STAFF REPORTS AND DIRECTIONS ON FUTURE AGENDA ITEMS Council Member Lee Eng reported that a collective effort to place an initiative on the ballot opposing SB 9 and 10 is underway and she would like the Council to place the matter on a future agenda of whether to join or somehow support the effort. Mayor Enander stated that she may be willing to support the request after she has had time to discuss the matter with the City Manager.

Council Member Fligor, supported by Council Member Weinberg, requested an agenda item to discuss the nature of the Council Legislative Subcommittee as a Standing committee.

In addition, Council Member Fligor reported the existence of a meeting conflict relative to her 2022 Council assignments. She requested a reassignment. Mayor Enander advised Council Member Fligor to work with another Council member on an agreeable trade of assignments and asked that staff place the matter on the next agenda.
19 Agenda Item # 2.

Minutes
January 11, 2022
City Council Meeting
Regular Meeting

ADJOURNMENT
At 11:14 p.m., Mayor Enander adjourned the meeting.
____________________________
Anita Enander MAYOR
ATTEST:
_____________________________________
Andrea M. Chelemengos MMC, CITY CLERK
20 Agenda Item # 2.

MINUTES OF THE STUDY SESSION OF

THE CITY COUNCIL AND PLANNING COMMISISON

OF THE CITY OF LOS ALTOS,
5:00 P.M., TUESDAY, JANUARY 11, 2022,

HELD VIA TELECONFERENCE

MEETING CASLLED TO ORDER
At 5:00 p.m., Mayor Enander called the meeting to order.

ESTABLISH QUORUM
PRESENT: Council Members Fligor, Lee Eng, Weinberg, Vice Mayor Meadows, and Mayor Enander
Planning Commissioners Ahi, Mensinger, Roche, Steinle, Vice Chairperson Doran ABSENT: Planning Commissioner Marek and Planning Chairperson Bodner

PUBLIC COMENTS ON AGENDA ITEM
Mayor Enander reordered the agenda to hear Public Comments following the project presentation

DISCUSSION ITEM

1. 330 Distel Circle Project Pre-Application Submittal: Review the submitted material and provide preliminary feedback to the applicant to address before submitting the formal development application. (R. Hayagreev)
Planning Consultant Hayagreev provided project information to the Council and introduced the development team of Welton Jordan of EAH Housing, Lily Ciammaichella of KTGY and Bruce Jett of Jett Landscaping. Each presented information on the proposed development and answered questions from the Council and Planning Commissioners.

PUBLIC COMENTS ON AGENDA ITEM
The following individuals provided public comment: County Supervisor Simitian, Salim, Anne Paulson, David Law, Jeanine Valadez, Roberta Phillips, Elaine Haight, Pierre Beddard, Jon Baer, Lois Bear Kelsey, Susan Russell representing the League of Women Voters, Ellen D., Scott Spielman and Donna Poulos
Councilmembers and Commissioners discussed various details of the design and offered several suggestions relative to the design, exterior color, bike storage access, potential green elements and garage and parking access for the applicants to consider. 21 Agenda Item # 2.

Minutes
January 11, 2022
City Council and Planning Commission
Joint Study Session

ADJOURNMENT
Mayor Enander adjourned the meeting at 6:29 p.m.
____________________________
Anita Enander, MAYOR
_______________________________
Andrea M. Chelemengos, MMC, CITY CLERK
22 Agenda Item # 2.

AGENDA REPORT SUMMARY
Meeting Date: January 25, 2022
Subject: Re-Assignment of (Certain) 2022 Council Assignments Prepared by: Andrea Chelemengos, City Clerk
Approved by: Gabriel Engeland, City Manager
Attachment(s):

None
Initiated by:

City Council
Previous Council Consideration:

None
Fiscal Impact:

None
Environmental Review:

Not applicable
Summary:

The Mayor annually appoints Council Members to serve on regional boards and Council Committees. At the December 14, 2022, meeting Council Assignments for 2022 were approved by the Council. It was later determined that Council Member Fligor was given assignments in which the meetings conflict. The proposed changes are to appoint Council Member Fligor as the City representative to CHAC (previously assigned to Council Member Weinberg) and appoint Council Member Weinberg as the Council Liaison to the Parks and Recreation Commission (previously assigned to Council Member Fligor) Council Member Weinberg.

Staff Recommendation:

Accept the Mayor’s appointment of Council Member Fligor as the City representative to CHAC (previously assigned to Council Member Weinberg) and appoint Council Member Weinberg as the Council Liaison to the Parks and Recreation Commission 23 Agenda Item # 3.

AGENDA REPORT SUMMARY

Reviewed By:

City Manager City Attorney
GE
Finance Director
JH JF
Meeting Date: January 25, 2022
Subject: Acceptance of Fiscal Year 2021 Audited Financial Statements and Compliance reports
Prepared by: John Furtado, Finance Director
Approved by: Gabriel Engeland, City Manager
Attachment(s):

1. Draft Annual Comprehensive Financial Report

2. Results of FY 21 GANN Limit

3. Memorandum on internal control (MOIC)

4. FY21 Year End General Fund Summary
Initiated by:

Staff and the Financial Commission
Previous Council Consideration:

N/A
Fiscal Impact:

None
Environmental Review:

Not applicable
Policy Question(s) for Council Consideration:
 Does the Council Accept the Fiscal Year 2021 Audited Financial Statements and Compliance reports?
Summary:
 The City’s Finance Department has prepared the FY2021 ACFR which was reviewed by the Finance Commission on December 20th, 2021. The Certified Public Accounting firm, Maze & Associates, has audited the financial statements in the report. The auditors have issued an opinion that the financial statements represent the position of the City fairly, in all material respects Staff Recommendation:
24 Agenda Item # 4.

Subject: Fiscal Year 2021 Annual Comprehensive Financial Report (ACFR) Date: January 25, 2021 Page 2
Accept the Comprehensive Annual Financial Report and compliance reports for the fiscal year ended June 30, 2021.

Purpose
A number of state and federal laws require that the City’s financial statements be audited annually by external auditors who are Certified Public Accountants. The result of the audit is a compilation of detailed financial statements, known as the Annual Comprehensive Financial Report (ACFR), prepared in accordance with generally accepted accounting principles (GAAP) as required by the Government Accounting Standards Board (GASB). The ACFR is a useful tool in understanding and evaluating the City’s financial condition.

Background
The audit typically begins a few months before the fiscal year-end with a review of the City’s financial processes and internal controls. However, the scope of the audit is to express an opinion on the City’s financial statements, not to express an opinion on the effectiveness of the City’s internal controls. Next, the auditor completes a site visit to conduct the interim audit procedures; however, due to the COVID-19 pandemic, this year the interim and final audits were performed mostly remotely, with the Auditors on site for a couple of days. Staff was available for questions using Zoom, Teams, in person, and other forms of remote communication. The interim audit occurred in May and June 2021. The auditors completed those year-end testing procedures and an evaluation of fund balances in November 2021.

This is the sixth year that Maze & Associates has performed the City’s annual audit, and the City has received an “unmodified” or “clean” opinion.

The ACFR is presented to the Finance Commission for its review prior to being submitted to the City Council for review and acceptance. 25 Agenda Item # 4.

Subject: Fiscal Year 2021 Annual Comprehensive Financial Report (ACFR) Date: January 25, 2021 Page 3
Discussion/Analysis

READING THE ACFR AND RELATED DOCUMENTS

1. ACFR: The ACFR highlights both the results of operations during FY2021 and changes to fund balances. The report is divided into three major sections, as follows:
 Introductory Section – provides a narrative summary of changesin fund balances andhighlights of the results of operations. It includes a letter of transmittal from management, an organizational profile, and a listing of key officers and personnel.
 Financial Section – presents the independent auditor’s report, management’s discussion and analysis of the financial reports, all of the financial statements, notes onthe financial statements, and supplemental information.  Statistical Section – includes several unaudited schedules that provide comparative information over a 10-year period.

Select highlights from the ACFR are presented below. The full draft ACFR can be seen in Attachment 1.

2. Single Audit: The Uniform Guidance addresses audit requirements for entities receiving federal grants. Audits performed under this provision are designed to reduce the risk of waste, fraud, and abuse. The annual dollar threshold requirement for a single audit is $750,000 or more in grant expenditures. During the fiscal year 2021, the City exceeded this threshold as its federal grant-related expenditures. Therefore, the City is required to issue a Single Audit report for the fiscal year 2021. The current deadline to submit Single Audit reports is September 30, 2022, which was extended by the Office of Management and Budget (OMB) due to impacts associated with the pandemic. The Single Audit fieldwork will be completed in February/ March 2022. We intend to bring the report to the Finance Commission and subsequently to the council upon completion.

3. Appropriations Limit: The auditor has reviewed the City’s calculation of the allowed spending caps defined in State legislation, known as Gann limits. The City’s numbers were found to be accurate, as documented in Attachment 2. 26 Agenda Item # 4.

Subject: Fiscal Year 2021 Annual Comprehensive Financial Report (ACFR) Date: January 25, 2021 Page 4
FY2021 RESULTS
During the year, the net position of Governmental Activities increased by $6.3 million, from $101.45 million to $107.7 million. Total assets and deferred outflows of resources increased by $15.1 million, offsetting the increase in total liabilities and deferred inflows of resources of $8.8 million during the year.

Total fund balances include cash and non-cash assets (such as capital assets). A notable change in governmental fund balances in FY2021 was a decrease in the General Fund from $32.5 million to $22.7 million. This $9.8 million decrease is primarily attributable to the Transfer of $10 million to fund the new community center project as well as another transfer from the FY 20 unassigned fund balance of $6.4 million to Fund other CIP projects.

The unassigned General Fund balance as of June 30, 2021, is approximately $1.2 million after required contributions to reserves and encumbrances. The primary contributor to this lower amount is when the City Council entered into the Purchase and Sale and Settlement agreement for 999 Fremont Ave. the staff report indicated the fiscal impact was $2.85M. When the land purchase was recorded, instead of placing it as an expenditure and realizing the fiscal impact in the budget, the City decided to record it as an investment. At the time, City staff represented to the auditors that the purpose of the property was for sale and redevelopment. We are unaware of any plans by the City to sell the property or make it available for development. Because of this, we cannot record the property as an investment and must comply with the terms of the agreement and record the $2.85M as an expenditure. Additionally, the unassigned General Fund balance was drawn down due to the adjustment of $1.1M of unrealized gains which were incorrectly recorded as unassigned in the previous fiscal year.

The City’s liability for unfunded CalPERS pension costs (UAL) increased from $39.1 million to $42.3 million, an increase of $3.2 million. This is primarily driven by lowerthan-expected investment returns and increases in pension expense, based on the valuations date of June 30, 2019, and a measurement date of June 30, 2020.

The City’s liability for Other Postemployment Benefits (OPEB) costs increased from $1.4 million to $1.6 million, an increase of $0.2 million. This is primarily driven by lower-than-expected investment returns and increases in health care costs and higher life expectancy.
27 Agenda Item # 4.

Subject: Fiscal Year 2021 Annual Comprehensive Financial Report (ACFR) Date: January 25, 2021 Page 5
General Fund Operating Results
The General Fund is the chief operating fund of the City. For the year ending June 30, 2021, the total fund balance was $23.7 million, $21.5 million of which is non-spendable, restricted, or has been committed or assigned to cover contingencies, claims, encumbrances, advances to other funds, and other City projects. The unassigned General Fund balance as of June 30, 2021, is approximately $1.2 million after required contributions to reserves and encumbrances. This amount represents an operating reserve of 18.9% of expenditures. This is due in large part to the approval of $1.1M in additional legal fee expenditures out of this reserve.

Revenues were $2.4 million higher in the fiscal year ended June 30, 2021, compared to last fiscal year, a change of 5.2%, however, this number includes stimulus monies received of $3.8 million. Without the stimulus, revenues would have been lower by $1.6 million
Expenditures increased $0.2 million in the fiscal year ended June 30, 2021, compared to last fiscal year, a change of -0.6%. Significant changes in revenues and expenditures that affected the GeneralFund balance are discussed below:

General Fund Revenues
Property Taxes overall increased by $2.7 million (10.4%) compared to the prior year primarily attributable to continued increases in property values (assessed value) and increased residential sales activity that increased the tax roll.

Sales and Use Taxes overall decreased by $0.4 million (-11.2%) compared to the prior year. This was due to the full-year impacts faced by the global pandemic that started in March of 2020.

Utility user Taxes overall increased by $0.1 million (2.8%) compared to the prior year.

This was due to normal inflationary increases rather than an increased tax base.

Charges for Services decreased by $0.7 million (-18.9%) from the prior year, mainly affected by the closing of all recreational activities during the construction of the new community center.

Grants and donations increased by $3.9 million (4,424%) from the prior year, mainly due to the receipt of the American Rescue Plan Act and CARES Act stimulus monies allocated to cities.
28 Agenda Item # 4.

Subject: Fiscal Year 2021 Annual Comprehensive Financial Report (ACFR) Date: January 25, 2021 Page 6
Other Taxes decreased significantly by $1.3 million (-35.9%) compared to the prior fiscal year, primarily due to lower levels of Transient Occupancy Taxes caused by lack of demand due to the pandemic.

Interest and Rentals decreased significantly by $2.1 million (-91.8%) compared to the prior fiscal year, primarily due to the federal reserve bank reducing the discount rates to near zero in their attempts to stimulate the economy.

General Fund Expenditures
Public Safety expenditures increased by $0.6 million (3.2%) from the prior year primarily due to increased personnel and benefit costs, offset by lower other expenses.

Public works expenditures increased by $0.15 million (2.7%) compared to the prior year primarily due to salary increases, and other increased expenses on protection such as plexiglass screens and cleaning supplies for COVID-19 in the city facilities.

Community development expenditures increased $0.8 million (15.1%) from the prior fiscal year primarily attributable to salary adjustments and an added position for sustainability, planned work on the housing element as well an increased cost that were related to higher revenues from planning activity.

Recreation expenditures were $0.5 million (-23.0%) less than the prior year primarily due to an overall decrease in operations from the pandemic and closure of the community center for construction activity.

Administration and Finance expenditures decreased by $0.8 million (-9.5%) compared to the prior year primarily due to an overall decrease in operations and a large number of vacant positions.

Budgetary Highlights
Over the course of the year, the City Council revised the City’s budget with adjustments for various revenue and expenditure changes. After considering these adjustments, General Fund actual revenues were higher than the final budget by $6.3 million (15.1%), which is primarily attributable to higher property taxes and grants revenue, offset by lower sales 29 Agenda Item # 4.

Subject: Fiscal Year 2021 Annual Comprehensive Financial Report (ACFR) Date: January 25, 2021 Page 7
tax, transient occupancy tax and recreation fees which were impacted by the pandemic and community center closure respectively.

General Fund actual expenditures were $0.6 million (-1.5%) under the final budget, with significant savings in Public safely ($0.95 million) partly offset by higher costs in Administration and finance ($0.16 million) due to higher legal fees and contract staffing to cover vacancies.

Net unassigned fund balance for the year was $4.9 ($1.2 after reserving ARPA proceeds) million after accounting for contributions to the Capital projects, Debt service, and other.

Further details are provided in the Transmittal letter.

NEXT STEPS
Upon acceptance by the City Council, the ACFR will be submitted to the Government Finance Officers Association for consideration of a Certificate of Achievement for Excellence in Financial Reporting.
30 Agenda Item # 4.

City of Los Altos
Annual Comprehensive
Financial Report
Fiscal Year Ended June 30, 2021
ATTACHMENT 1
31 Agenda Item # 4.
32 Agenda Item # 4.

CITY OF LOS ALTOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE YEAR ENDED June 30, 2021
Prepared by

FINANCE DEPARTMENT
33 Agenda Item # 4.

This Pag! L~Intmtional1y Blank
34 Agenda Item # 4.

INTRODUCTORY SECTION
35 Agenda Item # 4.

This Pag! L~Intmtional1y Blank
36 Agenda Item # 4.

CITY OF LOS ALTOS
Annual Comprehensive Financial Report
For the Year Ended June 30, 2021
INTRODUCTORY SECTION:

Letter of Transmittal .................................................................................................................................................. i List of Principal Officials ...................................................................................................................................... viii Organizational Chart ............................................................................................................................................... ix GFOA Certificate of Achievement .......................................................................................................................... x FINANCIAL SECTION:

Independent Auditor’s Report ............................................................................................................................ 1 Management’s Discussion and Analysis ........................................................................................................... 5 Basic Financial Statements:

Government-wide Financial Statements
Statement of Net Position ................................................................................................................. 33 Statement of Activities ..................................................................................................................... 34 Fund Financial Statements

Governmental Funds:

Balance Sheet ................................................................................................................................ 38 Reconciliation of the Governmental Funds - Balance Sheet with the Statement of Net Position .......................................................................................................................... 39 Statement of Revenues, Expenditures, and Changes in Fund Balances ........................................ 40 Reconciliation of the Net Change in Fund Balances - Total Governmental Funds with the Statement of Activities .................................................................................... 41

Proprietary Funds
Statement of Net Position .............................................................................................................. 44 Statement of Revenues, Expenses and Changes in Fund Net Position ......................................... 45 Statement of Cash Flows ............................................................................................................... 46 Fiduciary Funds
Statement of Net Position .............................................................................................................. 48

Statement of Activities ................................................................................................................... 49 37 Agenda Item # 4.

CITY OF LOS ALTOS
Annual Comprehensive Financial Report
For the Year Ended June 30, 2021
FINANCIAL SECTION (Continued):

Notes to Basic Financial Statements ....................................................................................................... 51 Required Supplementary Information:

Cost-Sharing Multiple-Employer Defined Pension Plan:

Schedule of Proportionate Share of the Net Pension Liability and Related Ratio as of the Measurement Date .............................................................................................. 94 Schedule of Contributions ............................................................................................................. 95 Agent Multiple Employer Retiree Healthcare OPEB Plan:

Schedule of Changes in the Net OPEB Liability and Related Ratios – Retiree Healthcare OPEB Plan ..................................................................................... 96 Schedule of Contributions ............................................................................................................. 97 Notes to Schedule of Employer Contribution ............................................................................... 97 Schedules of Revenue, Expenditures, and Changes in Fund Balance - Budget and Actual:

General Fund ................................................................................................................................. 98 In-Lieu Park Land Special Revenue Fund .................................................................................... 99 Notes to Required Supplementary Information ..................................................................................... 100 Other Supplementary Information
General Fund
Combining Balance Sheet ............................................................................................................... 104 Combining Schedule of Revenues Expenditures and Changes in Fund Balances .......................... 105 Non-major Governmental Funds
Combining Balance Sheet ........................................................................................................... 110 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ....................................................................................................................... 114 Schedules of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual:

Vehicle Impound Fund .............................................................................................................. 118 Supplemental Law Enforcement Fund ...................................................................................... 119 Gas Tax Fund ............................................................................................................................ 120

38 Agenda Item # 4.

CITY OF LOS ALTOS
Annual Comprehensive Financial Report
For the Year Ended June 30, 2021
FINANCIAL SECTION (Continued):

Proposition 1B Fund ................................................................................................................. 121 Community Development Block Grant Fund ........................................................................... 122 Downtown Parking Fund .......................................................................................................... 123 Traffic Impact Fee Fund ............................................................................................................ 124 Estate Donation Fund ................................................................................................................ 125 TDA Fund ................................................................................................................................. 126 PEG Fund .................................................................................................................................. 127 Vehicle Registration Fees Fund ................................................................................................ 128 SB1 Road Maintenance Rehabilitation Fund ............................................................................ 129 Traffic Congestion Relief Program Fund .................................................................................. 130 Equipment Replacement Capital Projects Fund ........................................................................ 131 Internal Service Fund:

Combining Statement of Net Position ................................................................................................ 134 Combining Statement of Revenues, Expenses and Changes in Fund Net Position ............................ 135 Combining Statement of Cash Flows ................................................................................................. 136 STATISTICAL SECTION:

Net Position by Component – Last Ten Fiscal Years ......................................................................... 141 Changes in Net Position – Last Ten Fiscal Years .............................................................................. 142 Fund Balances of Governmental Funds – Last Ten Fiscal Years ....................................................... 144 Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years .................................... 146 Tax Revenues by Source – Governmental Funds – Last Ten Fiscal Years ........................................ 148 Assessed Value of Taxable Property – Last Ten Fiscal Years ........................................................... 149 Property Tax Dollar Breakdown ........................................................................................................ 150 Property Tax Dollars By Recipient Group ......................................................................................... 151 Direct and Overlapping Tax Rates – Last Ten Fiscal Years .............................................................. 152 Principal Property Taxpayers – Current Year and Nine Years Ago ................................................... 153 Property Tax Levies and Collections – Last Ten Fiscal Years ........................................................... 154 Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ........................................................... 155 Schedule of Direct and Overlapping Bonded Debt ............................................................................ 156 Legal Debt Margin – Last Ten Fiscal Years....................................................................................... 157 39 Agenda Item # 4.

CITY OF LOS ALTOS
Annual Comprehensive Financial Report
For the Year Ended June 30, 2021
STATISTICAL SECTION (Continued):

Demographic Statistics – Last Ten Fiscal Years ................................................................................ 158 Principal Employers – Current Year and Ten Years Ago .................................................................. 159 Full-time Equivalent City Employees by Function/Program – Last Ten Fiscal Years ...................... 160 Full-time Equivalent City Employees ................................................................................................ 161 Operating Indicators by Function/Program – Last Ten Fiscal Years ................................................. 162 Capital Asset Statistics by Function/Program – Last Ten Fiscal Years ............................................. 163 Trust and Agency Debt Administration – Last Ten Fiscal Years ....................................................... 164 40 Agenda Item # 4.
i

ONE NORTH SAN ANTONIO ROAD
LOS ALTOS, CALIFORNIA 94022 - 3087
December 15, 2021
Honorable Mayor and Members of
the City Council City of Los Altos,
California
We are pleased to present the Annual Comprehensive Financial Report (ACFR) of the City of Los Altos, California (the City) for the fiscal year ended June 30, 2021. This document provides citizens, businesses, property owners, investors, and other interested parties with an overview of the City's finances. The information in this ACFR is prepared in accordance with Generally Accepted Accounting Principles (GAAP) and includes an unmodified opinion on the report by the City's independent certified public accountants. Although we rely on the standards and expertise of these external authorities, the responsibility for the accuracy and fairness of this report ultimately rests with the City. For readers interested in a more detailed review of the City's financial statements, the Management's Discussion and Analysis (MD&A) is also included in this document. The MD&A reports on the financial highlights of the City and provides additional analysis on the variances and trends reported as part of the financial statements. The MD&A also discloses significant items affecting the financial condition of the City and is designed to be read in conjunction with this Letter of Transmittal and can be found immediately following the report of the independent auditors.

PROFILE OF THE CITY AND ITS SERVICES
Tree-lined streets and a small village atmosphere characterize Los Altos, which is in the heart of the world-famous Silicon Valley. Just 40 miles south of San Francisco, Los Altos is a residential community with a population of approximately 31,000 served by seven small retail areas. The seven-square-mile residential city is developed with small businesses, schools, libraries, and churches. Incorporated on December 1, 1952, Los Altos is a general law city operating under the Council-Manager form of government. There are five Council members elected at large, serving four-year overlapping terms. Municipal services provided include police, street maintenance, engineering, community development, parks, recreation, and sewer. Fire protection is contracted with the Santa Clara County Central Fire Protection District.

City Structure
The City operates under the Council-Manager form of government, with five at-large Council Members elected to staggered four-year terms. The Mayor and Mayor Pro Term are elected by the Council from their membership, and each serves a one-year term. The City Council serves as the legislative and policy-making body of City government and is responsible for enacting City ordinances, adopting resolutions, approving the annual budget, appointing commissions and committees, and hiring the City Manager and City Attorney. 41 Agenda Item # 4.

Letter of Transmittal (continued)
_____________________________________________________________________________________ The City Manager is responsible for implementing City Council policies, ordinances, and directives; overseeing day-to-day operations; and appointing the directors of the City's departments and all personnel. As of June 30, 2021, the City had a permanent staff of 136 and augmented this staff with temporary, limited duration, and seasonal employees to address needs such as summer recreation programs. The City provides an array of services that include public safety/police services, recreation, Executive, finance, technology, human resources, public works, and community and economic development. Responsibilities in each service area include:
• Executive - includes The City Manager's Office, Economic Development, Emergency Preparedness, City Clerk's Office, City Attorney’s Office, Risk Management, Human Resources, Information Technology, and Public relations; • Public Safety - includes all Police functions, comprised of Training, Communications, Patrol, Investigations, Community Policing, Animal Control, School Service Officers, Traffic Enforcement. Fire Services are contracted to the County. • Finance - includes Finance, Budget, Treasury, Business License, and Accounting. • Recreation and Community Services - includes Recreation Classes, Senior Services, Facility Rentals, Sports and Camps,
• Community Development- includes Building Code Enforcement, Planning, Housing, and Transportation Planning.
• Engineering Services- includes managing the Capital investment program, sewer, and storm drain operations as well Transportation Planning.  Maintenance services - includes Maintenance of Buildings, Parks, Streets, and Vehicles; Transportation Operations; Open Space Management.

The City also oversees the enterprise funds associated with Sewer and solid waste operations and several other special revenue funds such as the Park in Lieu fund, financial information for these operations is included in the ACFR. Library services are provided by The County. Fire services are contracted to the County, water utilities are provided by a separate special district, with their own governing body.

SERVICE EFFORTS AND MAJOR INITIATIVES
Service Efforts
In FY 2020-21, the City continued its commitment to provide a high level of service to its residents and citizens, adhered to its adopted financial plan as evidenced by the budget-toactual reporting presented within this document. The latter half of FY 2020-21 saw the City face operational uncertainty due to the departure of the City Manager and Administrative Services Director compounded with the effects of the COVID-19 pandemic. Prudent and quick decisionmaking by the city council helped speed the hire of an Interim City Manager and consultants were engaged to meet the workloads in the Finance department. All major funds have performed within acceptable limits through proper stewardship and management. ii
42 Agenda Item # 4.

Letter of Transmittal (continued)
_____________________________________________________________________________________ Major Initiatives
Capital Improvements: FY 2020-21 marked another year of capital investment into the community with further resources applied to City-wide improvements. Some of the key capital expenditures of note during FY 2020-21 include the following:
 $20,088,533 – Hillview Community Center Redevelopment  1,482,295 – Annual Sewer Structural Reach Replacement  1,151,484- Annual Sewer System Repair Program
 663,979 – Annual Street Resurfacing
 551,391 – Annual Collector Street Traffic Calming
 531,566 – El Monte Ave Sidewalk Gap closure (School route project)  303,508 – IT Initiatives
Pedestrian Safety, Roads, and Walkways: Los Altos invests a significant amount of resources on a variety of roadway, pedestrian, and bikeway initiatives and improvements. Over $1 million was applied to street resurfacing, sidewalk repairs, and street lighting systems which enhanced safety lighting and street striping. These efforts support the City’s highway condition index while increasing overall pedestrian, bicycle, and vehicle safety.

Civic Facilities: In FY 2020-21, the City undertook the demolition and first stages of construction of a $38 million state-of-the-art community center.

FINANCIAL CONTROLS AND PROCEDURES
Financial Policies: On an annual basis, the Council approves financial policies designed to promote sound financial management and ensure fiscal integrity over time. This ACFR reflects the implementation of these financial guidelines and presents all fund reserves and designations to define fund balance commitments and obligations as of the financial report date.

Internal Control Structure: City management is responsible for establishing and maintaining fiscal internal controls designed to safeguard the assets of the government from loss, theft, or misuse, and to ensure that accounting data is accurately compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of controls should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits require estimates and judgments by management.

Cash Management Policies: It is the City’s practice to “pool” available cash from all funds for investment purposes. In accordance with the annually adopted investment policy, available cash is invested with the goal of safety, meaning the protection of principal, as the priority, ensuring adequate liquidity as the second priority, and maximizing yield as the third priority. This past year interest rates hit historical lows with the Federal Discount rate dropping to near zero. The Local Agency Investment Fund (LAIF) earnings rate averaged 0.5% and is dropping. Staff continues to act on Council direction to engage investment advisory services and continues to diversify the City’s investment portfolio as a means of mitigating the impact of interest rate swings. As always, the emphasis remains on preserving the safety of principal. iii
43 Agenda Item # 4.

Letter of Transmittal (continued)
_____________________________________________________________________________________ Strengthening Key Fund Reserves: This financial report reflects the attainment of judicious fiscal reserves noting continued funding to both capital and economic safety fund balances. As projected in the budget process, the results herein place the City in a position to maintain at least two months of budget expenditures in General Fund reserve. The City continues to prepare for the increase in the annual CalPERS payments by maintaining the CalPERS Reserve at $5 million.

Risk Management: The City is insured for general liability through the Bay Cities Joint Powers Insurance Authority that covers claims in an amount up to $10 million with a deductible or uninsured liability of up to $100,000 per claim. The City is self-insured for Workers’ Compensation and has an excess insurance policy for such claims up to the statutory limits. The City continues to maintain adequate funding levels to cover the cost of its actuarial obligations, but these rising cost areas will require continued attention in the coming years.

GASB 75 Compliance: This report complies with the provisions of Government Accounting Standard Board Statement #75 (GASB 75). This standard pertains to Other Post Employee Benefits (OPEB) and requires the completion of an actuarial study to account for post-employee benefit liabilities that exist. This reporting requirement is described in financial note 12 of the ACFR and the related liabilities reflected in the statements. As of June 30, 2021, the City’s net OPEB obligation was valued at $1.6 million, an amount reflected in the government-wide statements. The City has set aside $1.5 million in reserves to address this liability funding. The City has also invested another $1.5 million in an irrevocable trust for OPEB with CalPERS.

EXECUTIVE FINANCIAL OVERVIEW
This executive financial overview is presented as a supplement to the more detailed and comprehensive analysis presented in the MD&A. This section highlights key financial performance indicators for our major funds.

General Fund
The General Fund, the primary operating fund of the City, favorably exceeded expectations with an operating surplus of $ 7.6 (includes onetime American rescue plan act, ARPA funds of $3.9) million before transfers, for Fiscal Year 2020-21. At year end, the total General Fund balance equaled $22.7 million with an unassigned fund balance of $1.2 million after commitments and assignments. At the beginning of the Fiscal Year, the unassigned fund balance was $7.8million. A primary factor reducing this balance was that the city decided to reclassify land it had purchased in the prior year from held for sale to held for park development, the land purchase was valued at $ 2.86 million.

As planned for in the budget process, this surplus must be allocated to maintain the City’s Operating Reserve at 20% and allocating major funding to capital improvements, such as street maintenance and annual facilities improvements. At year end, the City’s Operating Reserve fell short of 20%, at 18.9%, and the City’s CIP fund, after initial transfers, was $1.4 million less than what is required to meet planned projects. In order to ensure the City’s Operating Reserve is increased to 20%, the City will have to defer or cancel planned CIP projects. After the transfer and use of reserve activity listed below, the final General Fund balance decreased by $12.7 million.

These non-operating and transfer activities are as follows:
 $146,176 transfer in from public safety grant funds and others  $867,200 transfer out for general debt service payments  $16,781,172 transfer out for capital projects
 $7,754 transfer out for closing out Raymundo Curb and Gutter District iv
44 Agenda Item # 4.

Letter of Transmittal (continued)
_____________________________________________________________________________________ The General Fund’s key revenue streams continue to grow at a steady pace. Property tax, which accounts for nearly 59% of the City’s revenues, continues to be the strongest driver with an increase of 10.4% in FY 2020-21 over the prior year.

Table of Revenues compared to Last Year and Current Year Budget General Fund revenues increased by 6.4% overall in contrast to a 0.7% increase in the prior year.

Revenues came in above the annual budget estimates with Sales Tax, UUT, and property tax being the front runners. Interest income witnessed a large decrease due to the discount rate falling to near zero. Property Tax grew with an increase of 10.4% from the prior year. Sales tax decreased by

11.2% on actuals mainly due to slower recovery of the economy during the current COVID-19 pandemic, sales tax however did exceed budgeted numbers for the year by 13.4%. Interest income is expected to remain relatively flat in the upcoming year. The City’s other taxes, such as real estate transfer tax and documentary transfer tax, grew 32.9% primarily driven by higher real estate activity. License and permit fees increased based on development activity and timing of payments within the City. Recreation programs declined 67.9% due to the cancellations during the construction of the new Community Center and a reduction in community offerings in response to the COVID-19 pandemic.

General Fund expenditures were 1.5% lower than final budget. The General Fund expenditures came in significantly below General Fund revenues by $3.6 million after adjusting for one-time revenues related to grants American Rescue Plan Act (ARPA) & Coronavirus Aid, Relief, and Economic Security Act (CARES).

Other Funds
Capital Project Funds: Expenditures in the Capital Projects Fund were $22.8 million driven by the construction work on the new community center. The year end fund balance stood at $11.5 million.

Based on commitments in the Capital budget for the period FY 22-26 and the commitments made for the first and second year of that period these reserves will be insufficient to fulfill commitments unless additional funding sources are identified and/or Capital projects are deferred or cancelled.

Special Revenue, Internal and Enterprise Funds: All other Governmental and Business Type funds results were as expected. In Lieu Parkland, special revenue funds ended the year with a combined balance of $5.8 million while Enterprise funds ended the year with a combined net position of $30.25 million.

Revenue (in Millions) FY 2020 Actual FY 21 Budget FY 2021 Actual Actual Var % Budget Var% Property Tax                  25.79                      27.29 28.46 10.4% 4.3% Sales Tax                                  3.37 2.64 3.00   ‐11.2% 13.4% Transient Occupancy Tax                    2.36 0.58 0.66 ‐71.9% 13.7% Utility Users Tax                          2.84 2.46 2.92 2.8% 18.4% Other Taxes              1.12 1.02 1.49 32.9% 46.3%
Franchise Fees                             2.29 2.35 2.21 ‐3.1% ‐5.9% Interest Income                            1.79 0.41 0.14   ‐91.9% ‐64.2% Recreation Fees                            0.85 0.04 0.27   ‐67.9% 605.0% Community Development Fees                 3.48 3.42 3.94 13.3% 15.3% Other Revenue              1.69 1.95 1.42 ‐15.5% ‐26.9% Grants (ARPA + CARES)              ‐ ‐ 3.98 100.0% 100.0% Total Revenue 45.57                      42.16                       48.51 6.4% 15.1% v
45 Agenda Item # 4.

Letter of Transmittal (continued)
_____________________________________________________________________________________ Fiduciary Funds: The City acts as a custodian of funds held for the benefit of others including the administration of the North County Library Authority (NCLA). The long-standing Raymundo and the Blue Oak Lane Sewer special assessment district are classified in the custodial group in recognition of the limited nature of this debt which is fully collateralized by homeowner assessments without City obligation.

ECONOMIC TRENDS
The last quarter of the Fiscal Year 2020 and the entirety of Fiscal Year 2021 were marked by the impacts of the novel coronavirus, COVID‐19 pandemic. The declaration of local and state-wide emergencies and public health orders closed large parts of the economy to encourage physical distancing and protect public health. Since the initial public health orders, restrictions have been applied and lifted with regularity. This caused a severe impact on economic activity. The effects of this can be clearly seen in Los Altos financial statements, wherein Sales tax is still below prepandemic levels and Transient occupancy tax has taken a huge hit languishing at 21% of prepandemic levels.

Nationally, March 2021 saw non‐farm payroll employment grow by 916,000 jobs, reflecting the continued resumption of economic activity. Job growth in March 2021 was widespread, with leisure and hospitality, public and private education, and construction sectors experiencing job gains. Despite improvements in the unemployment rate, non‐farm payroll employment is still down by 8.4 million compared to pre‐pandemic employment1.

As of October 2021, the national unemployment rate2 was 6.0%, down from a peak of 14.8% in April 2020. In Santa Clara County, the unemployment rate was 3.7% in October 2021, compared to a pandemic peak of 12.2% in April 2020. Los Altos unemployment rate was at 3.6%.

As public health restrictions ease and City facilities and programs continue to reopen, the FY22 & FY23 budget includes increases in expenditures and additional staffing to support these changes. The economic recovery is expected to continue over the next two years. Accordingly, staff developed a budget for FY22 that served as a bridge year between the deepest moments of the pandemic and the return to normalcy. We expect it to be a year of continued recovery from the economic recession triggered by the pandemic. Likewise, the budget for FY23 will include the acknowledgment that some areas of operations are still likely to be in recovery, and not yet restored to pre‐pandemic levels of operation. Additionally, the passage of the American Rescue Plan Act (ARPA), which was signed into law on March 11, 2021, provides the City with $7.2 million in one‐time stimulus funds, which allows the City to support economic recovery, provide essential City services, and fund key projects and initiatives.

The City continues to perform fairly but was unable to maintain target reserve levels without delaying or canceling capital projects. As we move forward, we remain constantly aware of the financial challenges that face all local municipalities in particular the financial challenges caused by the COVID-19 pandemic, the effects of which will continue to impact the City for multiple years to come. In addition, we continue to monitor and plan to address the significant rises in pension, healthcare, and construction costs. Given the reliance on property tax revenues and the higher revenues in Community Development and other revenue streams, we must remain ever vigilant in monitoring economic trends and long-term financial issues. Only through fiscal stewardship, proper budgeting and prudent use of our reserves, the City of Los Altos will be set to continue its commitment to taking care of its capital needs and residents for the foreseeable future.

1.https://www.bls.gov/news.release/archives/empsit_04022021.pdf 2 https://fred.stlouisfed.org/series/CASANT5URN
vi
46 Agenda Item # 4.
vii
47 Agenda Item # 4.

City of Los Altos
List of Principal Officials
As of June 30, 2021

ELECTED OFFICIALS
Mayor ..................................................................................... Neysa Fligor Mayor Pro Tem .................................................................... Anita Enander City Council .......................................................................... Lynette Lee Eng City Council .......................................................................... Sally Meadows City Council .......................................................................... Johnathan Weinberg

APPOINTED OFFICIALS
City Manager ........................................................................ Gabriel Engeland City Attorney ........................................................................ Jolie Houston

EXECUTIVE TEAM
Community Development Director .................................. Jon Biggs Deputy City Manager .......................................................... Jon Maginot Assistant City Manager ....................................................... Vacant Chief of Police ....................................................................... Andy Galea Finance Director .................................................................. John Furtado Engineering Services Director ............................................ Jim Sandoval Human Resources Manager ............................................... Irene Silipin Recreation & Community Services ................................... Donna Legge Municipal Services Director ............................................... Manuel Hernandez

viii
48 Agenda Item # 4.

City of Los Altos
Dec 2021
Office of the
City Manager
Gabriel
Engeland
Administration
City Clerk
Public
Information
Risk
Management
Human
Resources
IT
City Council
Neysa Fligor, Mayor
Anita Enander, Vice Mayor
Lynette Lee Eng
Sally Meadows
Jonathan D. Weinberg
Commissions
Complete Streets – Design Review
Environmental – Public Arts – Senior – Youth
City Manager
Gabriel Engeland
Community
Development
Jon Biggs
Building
Planning
Economic Dev
Environmental
Citizens
Commissions
Financial – Historical – Library
Parks and Recreation – Planning
City Attorney
Jolie Houston
Engineering
Services
Jim Sandoval
Engineering
Special Projects
Finance
John Furtado
Finance
Public Safety
Andy Galea
Communications
Police Patrol
Investigations
Traffic
Operations
Emergency Prep
Fire Services
Maintenance
Services
Manny
Hernandez
Facilities
Parks
Sewers
Streets
Recreation &
Community Svcs
Donna Legge
Youth/Teens
Adults/Seniors
Community
Events
Performing &
Visual Arts
Health &
Wellness
Parks & Facilities
Mgmt
ix
49 Agenda Item # 4.

GFOA CERTIFICATE
x
50 Agenda Item # 4.

INDEPENDENT AUDITOR'S REPORT
To the Honorable Members of the City Council
City of Los Altos, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Los Altos (City), California, as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the Table of Contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’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 City’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, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2021, 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. 1 Accountancy Corporation
3478 Buskirk Avenue, Suite 215
Pleasant Hill, CA 94523
T 925.930.0902
F 925.930.0135
E [email protected]
w mazeassociates.com 51
Agenda Item # 4.

Change in Accounting Principles
Management adopted the provisions of Governmental Accounting Standards Board Statement No. 84 – Fiduciary Activities, which became effective during the year ended June 30, 2021 and established the new fund type, Custodial Funds, and eliminated the fund type of Agency Funds as discussed in Note 8J to the financial statements.

Management also early adopted the provisions of Governmental Accounting Standards Board Statement No. 98 – The Annual Comprehensive Financial Report which changes the name of the Annual Comprehensive Financial Report to Annual Comprehensive Financial Report.

Emphasis of a Matter
During the fiscal year 2021, the City made some prior period adjustments, as a result, the beginning fund balances for General Fund, the Capital Projects Fund, the Community Development Block Grant special revenue fund were reduced by $2,939,821, $161,894 and $4,617 respectively. The beginning fund balances for the Gas Tax, TDA and Vehicle Registration special revenue funds were increased by $19,392, $52,724 and $147,017 respectively. Beginning net positions at July 1, 2021 for the Governmental Activities were reduced by $2,887,199 correspondingly.

Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis, and other Required Supplementary Information listed in the Table of Contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements.

We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Introductory Section, Supplemental Information, and Statistical Section listed in the Table of Contents are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The Supplemental Information is responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplemental Information is fairly stated in all material respects in relation to the basic financial statements as a whole. 2 52
Agenda Item # 4.

The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 15, 2021, on our consideration of the City’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 the effectiveness of the City’s 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 City’s internal control over financial reporting and compliance.

Pleasant Hill, California
December 15, 2021
3 53
Agenda Item # 4.

This Pag! L~Intmtional1y Blank
54 Agenda Item # 4.

MANAGEMENT’S DISCUSSION

AND ANALYSIS
55 Agenda Item # 4.

This Pag! L~Intmtional1y Blank
56 Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis
For the year ended June 30, 2021
As management of the City of Los Altos (City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2021, in accordance with standards established by the Governmental Accounting Standards Board. We encourage readers to consider the information presented here, in conjunction with additional information furnished in the Letter of Transmittal, which can be found in the preceding introductory section of this report, and with the City’s basic financial statements and accompanying notes to those financial statements.

USING THIS ANNUAL REPORT
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the City’s basic financial statements, which are comprised of three components: 1) government-wide financial statements; 2) fund financial statements; and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Reporting on the City as a Whole
Government-wide Financial Statements: The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances in a manner similar to a private sector business.

The statement of net position presents information on all City 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 City is improving or deteriorating.

The statement of activities presents how the City’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 the government-wide financial statements distinguish functions of the City 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 activities). The governmental activities of the City include general government, public safety, maintenance, and public works services, planning, building, engineering, and recreation. The City’s business-type activities include sewer, solid waste, and storm drain.

The government-wide financial statements can be found on pages 21 to 23 of this report.

Reporting on the City’s Most Significant Funds
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 City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the City can be divided into three categories: governmental funds; proprietary funds; and fiduciary funds.
7 57
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Notes to the Basic Financial Statements. The notes provide additional information that is essential, or a full understanding of the data provided in the government-wide and fund financial statements.

In addition to the basic financial statements and accompanying notes, this report also presents certain required and other supplementary information, such as the budgetary comparison information on the City’s General Fund. Each major special revenue fund as well as the schedule of changes in the City's net pension liability for the miscellaneous plan, schedule of the City's proportionate share of the safety cost-sharing plan and the schedules of the City's pension contributions to each plan. This information is intended to furnish additional detail to support the basic financial statements.

Governmental Funds: Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the governmentwide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year.

Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains 22 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, In-Lieu Park Land Special Revenue Fund, and Capital Project Fund, each of which are major funds. Data from the other 19 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in the fund financial statements section of this report.

The City adopts a budget annually for the General Fund, Special Revenue Funds, (except for the Storm Dram Deposits Fund), and Equipment Replacement Capital Projects Fund that is effective July 1 for the ensuing fiscal year. A budgetary comparison statement has been provided for several key governmental funds to demonstrate compliance with this budget.

The basic governmental fund financial statements can be found on pages 26 to 29 of this report.

Proprietary Funds: The City maintains two types of proprietary funds. Services for which the City charges customers a fee are generally reported in the City’s enterprise funds. These proprietary funds, like the government-wide statements, provide both long-term and short-term financial information. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its City dental plan and unemployment insurance, as well as Workers’ Compensation and Liability Insurance costs. Because these services predominantly benefit the governmental function, they have been included in the government-wide financial statements and related intra-fund charges have been eliminated accordingly. 8 58
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Proprietary fund financial statements provide the same type of information as the government-wide financial statements, only in more detail. All four internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The City’s three enterprise funds (Sewer, Solid Waste and Storm Drain) are considered major funds and are presented as such in the fund financial statements. The City follows the practice of adopting annual budgets for these operations as well.

The combining statements referred to earlier in relation to non-major governmental funds, proprietary and internal service funds, are presented immediately following the notes to the financial statements. Combining and individual fund statements and schedules can be found on pages 93 to 103 of this report.

Notes to the Basic Financial Statements: The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. These can be found on pages 37 to 75 of this report.

Other Information: In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s budget-to-actual financial comparisons for the General Fund. The City has elected to present this information within the basic financial statement and financial statement sections of the report.

The City as Trustee
Fiduciary Funds: The City is the trustee, or fiduciary, for the North County Library Authority (NCLA) and two special assessment districts – Raymundo and Blue Oak Sewer Lane improvements. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

In summary, the various sections of this financial report are arranged as follows:

Financial
Section (I)
Management
Discussion
& Analysis
Government
Wide
Financial
Statements (II)
Statements of
Net Assets &
Activities
Fund
Financial
Statements (III)
Budgetary
Fund Statements
Notes to
Financial
Statements (IV)
Combining
Financial
Statements &
Schedules (V)
Non Major
Governmental &
Proprietary
Funds
Statistical
Section (VI)
(Un-audited)
Summary----------------------------------------------------------------Detail 9 59
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021

FINANCIAL HIGHLIGHTS
Financial highlights of the year ended June 30, 2021, include the following:

The City ended its fiscal year on a government-wide basis with total revenues of $61.5 million, which was an increase of $2.9 million or 5.0% compared to the prior year, and total expenses of $50.0 million, a decrease of $4.5 million or 8.3%. The results represent combined government and business operations, with an overall increase in net position of $8.7 million due to stronger than anticipated revenues combined with contained expenditures City-wide. These favorable fiscal results have continued to strengthen the City’s reserves. (See tables 2 and 5 for additional information).

Operational revenue gains were predominantly in property tax, utility tax and while hotel occupancy tax has not recovered to pre-pandemic levels it has exceeded the projected budget, interest income was well below last year’s level due to the drop in the discount rates. Recreation revenues were significantly lower due to the closure of the community center and the reduction or elimination of many events, programs, and activities that were fee based. The Operating Grants and Contributions increased by $4.2 million due to an inflow of stimulus money related to the Cares Act and the American Rescue Plan Act (ARPA). Sewer revenues decreased by $0.8 million due to lower planned billing to users and solid waste revenues were stable and positioned to facilitate future operational and capital needs.

The decrease in Government-wide expenses is the result of vacant full-time staff positions as well as lower expenses caused by restrictions related to COVID-19. Resource uses continue to reflect an emphasis on public safety, infrastructure maintenance, quality of life, and community development activity.

The City made significant progress on many capital improvement initiatives, which include maintenance and street resurfacing, streetscape and intersection improvements, and pedestrian and traffic safety enhancements throughout the City. Currently, the largest project is the Los Altos Community Center, which was completed in fall 2021. The City has also made significant capital investments in the maintenance and improvement of the City-wide sewer systems.

Government-Wide View
 Net position (excess of assets over liabilities) equaled $137.9 million, an increase of $8.7 million, or

6.75%. This is mainly attributed to the increase in tax revenue with the use of portions of those increased revenues for infrastructure maintenance and improvements. The City’s net position represents its total net holdings, which are not necessarily unrestricted depending upon the source of the original funding. (See tables 1 and 4 for additional information)  Governmental activities reported an ending net position of $107.7 million, an increase of $6.3 million.

The increase in government net position arises from positive operating results, fee collections, and cost containment.
 Business activities reported ending net position of $30.2 million, an increase of $2.37 million due to positive operating results in the Sewer and Solid Waste Funds and substantial capital investments.

Fund Level View
 The General Fund realized an operating surplus of $7.6 million which was $2.2 million higher than the prior year due to an increase in revenue from property tax ($2.7M), and Operating grants related to ARPA and CARES act ($3.9M). These gains were offset by reduced interest and rental income (2.07M), Transient occupancy tax ($1.7M), and recreation fees ($0.5M) which were substantially lower due to the impacts of the Covid-19 Pandemic.
10 60
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
 General Fund revenues, excluding transfers, increased over prior year actuals by $2.4 or 5.2% to $48.4 million. Current year results also exceeded budget estimates by 15.1%, primarily due to the receipt of ARPA and CARES act money and higher than anticipated property tax. Related expenditures increased by $0.23 million to $40.8 million, or 0.6%, the results also had expenditures lower than budget by 1.5% or $0.6 million, because of increased normal costs and contract commitments, which were offset by salary savings from vacant positions.
 Total governmental fund balances equaled $46.2 million at fiscal year-end, a $4.6 million decrease from the prior year. The decrease was primarily due to expenses incurred on the Community Center project.
 General government capital spending totaled approximately $23.3 million. The level of capital reinvestment in Los Altos reflects a sustained focus on the maintenance of streets, facilities, traffic calming efforts, and safety. The Capital Improvements Projects Fund balance increased by $7.8 million due to the transfer of a part of the unassigned general fund balance from the prior year to the end of the year of $6.4 million.
 The In Lieu Parkland Fund ended the year with a fund balance of $5.8 million with revenues of $1.6 million with expenditures and transfers out of 1.3 million spent on eligible projects.  The Gas Tax Fund balance increased by $0.4 million to $2.0 million after funds were used for capital projects including surplus revenue for the year.
 Sewer operations ended the year favorably with a net position of $24.6 million. Operating expenses decreased by $0.26 million or 4.7% because of the planned activity to system maintenance.  Solid waste operations ended the year favorably in net position of $5.6 million. Operating expenses decreased by $0.03 million or 7.5%.
 As in the prior year, the Storm Drain Fund has exhausted available resources and has a negative net position of $23,959. These operations are now fully General Fund-subsidized and will continue to be so until the implementation of a fee-based model.
 The Workers’ Compensation Fund ended the year with an unrestricted net position of $1.6 million, a decrease of $1.0 million due to claim activity and not providing additional funding. The General Liability Fund ended the year with an unrestricted net position of $0.3 million, a decrease of $0.79 million.
 Other Non-Major Governmental Funds ended the year with a total combined fund balance of $6.2 million, an increase of $263,417.

GOVERNMENT-WIDE FINANCIAL ANALYSIS
This analysis focuses on the net position and changes in net position at the City-wide level as presented in the statement of net position and statement of activities which are summarized in the tables below as of June 30, 2021.
11 61
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
As noted earlier, the net position represents the difference between assets, the deferred outflow of resources and liabilities, and the deferred inflow of resources of the City's governmental activities and may over time serve as a useful indicator of the City’s financial position. The City’s governmental activities, assets, and deferred outflows exceeded liabilities and deferred inflows by $107.7 million on June 30, 2021. Table 1 summarizes the City’s governmental activities net position.

TABLE 1
Governmental Activities Statement of Net Position (In Millions) 2021 2020
Cash and investments $ 50.8 $ 63.3
Other assets 9.8 6.4
Capital assets 105.8 81.9
Total assets 165.7 151.6
Deferred outflows of resources 9.5 9.3
Current liabilities 10.0 12.3
Non-current liabilities 56.7 44.1
Total liabilities 66.7 56.4
Deferred inflows of resources 1.5 3.0
Net Position
Net investment in capital assets 95.5 80.9
Restricted 24.0 15.4
Unrestricted (11.8) 5.2
Total net position $ 107.7 $ 101.5
12 62
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Governmental Activities
Of the governmental activities total net position, $95.5 million, or 88.6%, reflects its net investment in capital assets (e.g., land, infrastructure, buildings, and equipment). The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.

The governmental activities total Assets of $166.5 represent a $14.9 million or a 9.8% increase, driven by higher receipts, capital activity, and lower spending due to the pandemic.

Capital Assets (net) increased by $24.0 million or 29.3% primarily driven by additions from capital projects activity in the current year.

The governmental activities, total liabilities of $66.7 million represent outstanding obligations for operations, capital projects, deposits held for development projects, long-term debt, and net pension liability. A portion of the governmental activities net position represents resources that are subject to restriction on how they may be used. Total liabilities increased by $10.3 million or 18.2% due to higher accrued payroll and higher unearned revenues and grants receivables.

The following charts summarize governmental activities programs and general City revenues available for funding all City programs and major expense program categories.

For the fiscal year ended June 30, 2021, total revenues from all sources relating to governmental activities excluding transfers were $53.4 million, and total expenses for all City programs relating to governmental activities were $44.2 million.
13 63
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Charges for Services,

13.6%
Operating Grants, 9.0%
Capital Grants, 3.4%
Property Tax, 53.2%
Sales & Use Tax, 5.6%
Utility User Tax, 5.5%
Other Taxes, 4.3%
Intergovernmental,

4.1%
Investment Income,

0.4%
Other items, 0.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%
Governmental Activities
Sources of Revenue
FY 2021
Public Safety, 48.3%
Public works, 10.7%
Recreation, 5.8%
Community
Development, 15.8% Adminstration /
Finance, 18.7%
Interest on Long Term
Debt, 0.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%
Governmental Activities
Expenses by Function
FY 2021
14 64
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Revenues 2021 2020
Program revenues
Charges for service $ 7.3 $ 5.9
Operating contributions and grants 4.8 0.6
Capital grants 1.8 1.8
Total program revenues 13.9 8.3
General revenues
Taxes:

Property 28.4 25.8
Sales and use 3.0 3.4
Utility User 2.9 2.8
Other taxes 2.3 3.6
Intergovernmental 2.2 2.3
Investment income 0.2 2.6
Other 0.4 0.4
Total general revenues 39.5 40.9
Total revenues 53.4 49.2
Expenses
Public Safety 21.4 21.2
Public works 4.7 7.7
Recreation 2.6 3.2
Community Development 7.0 6.6
Adminstration / Finance 8.3 9.8
Interest on Long Term Debt 0.2 0.0
Total expenses 44.2 48.5
Excess (deficiency) before transfers 9.1 0.7
Transfers (Net) (2.8) 0.0
Change in net positon - Governmental Activities 6.3 0.7 Net Position - Beginning of year 101.4 100.7
Net Position - End of year $ 107.7 $ 101.4
TABLE 2
Change in Net Position - Governmental Activities
(In Millions)
15 65
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Table 2 shows that governmental activities expenses, which totaled $44.2 million, were lower than program revenues for governmental activities of $53.4 million. These program revenues included $7.3 million in charges for services, $4.8 million in operating grants and contributions, and $1.8 million in capital grants and contributions.

Governmental Fund Revenues
Charges for services include traffic safety fines, plan check fees, building inspection fees, other charges related to new construction, and fees charged for recreational activities and programs, these charges increased by $1.4 million or 23.0% primarily due to the community development activity being robust during the year.

Operating grants and contributions include amounts contributed by developers and stimulus monies received from the federal government, these are restricted to either grant requirements, or have been designated for one-time expenses, while capital grants and contributions are required to fund capital investments. General revenues, as shown in Table 2 on the previous page, are available to pay for expenses not fully covered by program generated revenues during the year the City was granted $4.2 million more in operating grants than the prior year due to the receipt of the ARPA and CARES act monies, while capital grants awarded were flat at $1.8 million.

Governmental Fund Expenditures
Public Safety expenditures increased by $0.2 million or 0.9% from the prior year primarily higher pension costs from the City’s share of the Safety pension pool and higher depreciation charges, partly offset by vacant positions that decreased other personnel and benefit costs.

Public works expenditures decreased by $3.0 million (-38.6%) compared to the prior year primarily due to lower depreciation charges than the past year, vacancy positions offset by salary increases, and lower operating and maintenance expenses.

Community Development expenditures increased $0.4 million 6.1% from the prior fiscal year primarily attributable to larger expenses in the housing element, increase community development activity witnessed by higher revenues derived.

Recreation expenditures were lower by $0.6 million (-19.6%) less than the prior year primarily due to an overall decrease in operations from the pandemic and closure of the community center.

Administration and Finance expenditures decreased by $1.5 million (-15.4%) compared to the prior year primarily due to an overall decrease in operations from the pandemic and a substantial number of vacancies. 16 66
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
2021 2020 2021 2020
Public Safety $ 4.3 $ 0.5 (17.0)$ $ (20.7)
Public works 2.2 2.3 (2.5) (5.3)
Recreation 0.3 0.8 (2.3) (2.4)
Community Development 6.1 3.5 (0.9) (3.1)
Administration / Finance 1.0 1.2 (7.4) (8.6)
Interest on Long Term Debt (0.2) (0.0)
Totals $ 13.9 $ 8.4 (30.3)$ $ (40.1)
Program Revenues Net (Expense) Revenue
Table 3
Governmental Activities
Program Revenues and Net (Expense) Revenue From Services (In Millions)
17 67
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Business-Type Activities
As shown in Table 4 below, the net position of the City’s business-type activities was $30.2 million on June 30, 2021. Assets totaling $32.1 million included a total of $17.0 million in cash and investments, $0.4 in receivables and other assets, and $14.7 million in capital assets. Liabilities totaled $2.2 million include $0.4 million in current liabilities and $1.8 million in non-current liabilities such as compensated absences and other liabilities.
2021 2020
Cash and investments $ 17.0 $ 16.8
Other assets 0.4 0.2
Capital assets 14.7 12.3
Total assets 32.1 29.3
Deferred outflows of resources 0.4 0.4
Current liabilities 0.4 0.1
Non-current liabilities 1.8 1.7
Total liabilities 2.2 1.8
Deferred inflows of resources 0.1 0.1
Net Position
Net investment in capital assets 14.7 12.3
Restricted 0.0 0.0
Unrestricted 15.5 15.5
Total net position $ 30.2 $ 27.8
Table 4
Business - Type Activities Statement of Net Position
(In Millions)
18 68
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Table 5 shows that Business type activities expenses, which totaled $5.7 million, were augmented by revenues of $8.1 million. These revenues included $8.0 million in charges for services and $0.1 million in interest, investment earnings, and others, thus adding $2.4 million to the net position at the end of the year.

The Joint Sewer System Authority (JSSA) formed in 1968 by a joint exercise of powers among the Cities of Palo Alto, Mountain View, and Los Altos, constructed, maintains, and operates sewage treatment facilities serving its member cities. The City of Palo Alto acts as administrator for JSSA and bills each member its share of the operating costs. Los Altos is obligated through the year 2018 under an operating agreement with the City of Palo Alto for the water treatment plant and sewer services. Payments under this agreement are based on expected usage and are adjusted annually based on actual use and site operating costs.

As projected in budgetary estimates and the prior year’s financial reports, the Storm Drain fund has exhausted its reserves. Currently, the Storm Drain and Urban Runoff Pollution Control Programs (URPP) are categorized as enterprise activities but are lacking a fee that pays for these services. 2021 2020
Revenues
Program revenues
Charges for services 8.0 $ 8.8 $
Total program revenues 8.0 8.8
General revenues
Investment income and other 0.1 0.6
Total revenues 8.1 9.4
Expenses
Outside Services 4.4 4.5
Employee services 0.9 1.1
Depreciation 0.4 0.4
Total expenses 5.7 6.0
Excess (deficiency) before transfers 2.4 3.4
Transfers 0.0 0.0

2.4 3.4
Change in net position - Business-type Activities
Net Position - Beginning of year 27.8 24.4
Net Position - End of year $ 30.2 $ 27.8
Table 5
Change in Net Position - Business-type Activities
(In Millions)
19 69
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021

FUND FINANCIAL STATEMENTS AND FINANCIAL ANALYSIS
These statements provide more detailed information about the City’s major funds. 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 City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental funds
Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a City’s or government agency’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City has several governmental funds, of which three are considered major funds for presentation purposes. Each major fund is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance. The City’s three major funds are - the General Fund, the In Lieu Parkland Fund, and the Capital Investment Program Fund.

Data from the other governmental funds are combined into a single, aggregated presentation.

The City Council adopts a biennial appropriated budget for its General Fund and other funds. Budgetary comparison statements have been provided in the Required Supplementary Information section for the general fund and major special revenue funds that demonstrate compliance with their budgets.

Proprietary funds
The City maintains two types of proprietary funds: Enterprise Funds and Internal Service Funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Sewer, Solid Waste, and Storm Drain operations, all of which are classified as major funds in the City’s Statement of Net Position. Internal service funds are used to accumulate and allocate costs internally among the City’s various functions and to build up reserves for future liabilities related to the workforce. The City uses internal service funds to account for such activities as dental reimbursements, Unemployment Insurance, Workers’ compensation, and liability insurance. Because these services solely benefit the governmental function, they have been included within governmental activities in the government-wide financial statements. 20 70
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Proprietary fund financial statements provide the same type of information as the government-wide financial statements, only in more detail. All nine internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements in the Supplemental Information section of this report.

Fiduciary Funds
The City is the agent for certain agencies and assessment districts, holding amounts collected that await payment as directed. The City’s fiduciary activities are reported in the separate Statement of Fiduciary Net Position. These activities are excluded from the City’s other financial statements because the City is acting as a trustee for these funds and cannot use these assets to finance its own operations. The City’s fiduciary funds include The North Country Library Authority, the Raymundo Curb and Gutter special district that has fulfilled its life and obligation and will cease to report from the next year, and the Blue oak Lane Sewer special district.

Summary Analysis of Governmental Funds
On June 30, 2021, the City’s governmental fund balances were $46.2 million, which is an overall decrease of $4.6 million, or -9.1%, as compared to the prior fiscal year. The following describes the specifics related to this variance:
 A decrease of $12.7 million in the General Fund, primarily due to transferring of $16.8 million held in the General Fund for the community center development ($10M) and transferring another $6.8M to the Capital projects fund, inclusive of the $6.4 million of prior year unassigned fund balance.

The remaining changes in fund balance were a combination of increased revenues in property tax, receipt of federal stimulus, and lower other revenues as explained earlier, departmental revenues increased, and when netted against operating expenditures came in below budget because of the COVID19 pandemic and higher than anticipated vacant positions.  The In-lieu Parkland fund had higher revenues from development activity of $1.6 million that were offset by transfers to Capital projects fund for eligible projects ($1.3M)  An increase of $7.62 million in the capital projects funds was due to increased transfers from the general fund and the facilities reserve to fund capital projects such as facilities maintenance and construction of the Community center
21 71
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Revenues 2021 2020
Taxes:

Property $ 28.5 $ 25.8
Sales and Use 3.0 3.4
Utility Users 2.9 2.8
Other taxes 2.3 3.6
Licenses, permits and fees 4.6 4.2
Intergovernmental 4.2 1.3
Grants and Donations 4.0 1.4
Charges for services 3.2 3.7
Fines, forfeitures and penalties 0.1 0.2
Interest and Rentals 0.2 2.7
Other 0.4 0.1
Total revenues 53.4 49.2
Expenditures
Current:

Public Safety 19.4 18.8
Public works 5.6 5.5
Recreation 1.8 2.3
Community Development 6.5 5.9
Adminstration / Finance 7.7 8.5
Capital Improvements 23.3 15.4
Debt Service
Principal 0.6 0.1
Interest and Fiscal Charges 0.2 0.0
Total expenditures 65.1 56.5
Excess (deficiency) before transfers (11.7) (7.3)
Other
Transfers (net) 10.0 (1.0)
Net change in fund balance (1.7) (8.3)
Beginning Fund Balance* Reinstated $ 47.9 59.1
Ending Fund Balance $ 46.2 $ 50.8
Table 6
Statement of Revenues, Expenditures and Other Financing Sources/Uses Governmental Funds
(In Millions)
22 72
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Detailed Analysis of Major Governmental Funds by Fund
General Fund
The General Fund is the chief operating fund of the City. For the year ending June 30, 2021, the total fund balance was $22.7 million, $17.8 million of which is non-spendable, restricted, or has been committed or assigned to cover contingencies, claims, encumbrances, advances to other funds, and other City projects.

Revenues were $2.4 million higher in the fiscal year ended June 30, 2021, compared to the last fiscal year, a change of 5.2%.

Expenditures decreased $0.2 million in the fiscal year ended June 30, 2021, compared to last fiscal year, a change of -0.6%. Significant changes in revenues and expenditures that affected the General Fund balances are discussed below:

General Fund Revenues
Property Taxes overall increased by $2.7 million (10.4%) compared to the prior year primarily attributable to continued increases in property values (assessed value) and increased residential sales activity that increased the tax roll.

Sales and Use Taxes overall decreased by $0.4 million (-11.2%) compared to the prior year. This was due to the full year impacts faced by the global pandemic that started in March of 2020.

Utility user Taxes overall increased by $0.1 million (2.8%) compared to the prior year. This was due to normal inflationary increases rather than an increased tax base.

Charges for Services decreased by $0.7 million (-18.9%) from the prior year, mainly affected by the closing of all recreational activities during the construction of the new community center.

Grants and donations increased by $3.9 million (4,424%) from the prior year, mainly due to the receipt of the American Rescue Plan Act and CARES Act stimulus monies allocated to cities.

Other Taxes decreased significantly by $1.3 million (-35.9%) compared to the prior fiscal year, primarily due to lower levels of Transient Occupancy Taxes caused by lack of demand due to the pandemic.

Interest and Rentals decreased significantly by $2.1 million (-91.8%) compared to the prior fiscal year, primarily due to the federal reserve bank reducing the discount rates to near zero in their attempts to stimulate the economy.
23 73
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
General Fund Expenditures
Public Safety expenditures increased by $0.6 million (3.2%) from the prior year primarily due to increased personnel and benefit costs, offset by lower other expenses.

Public works expenditures increased by $0.15 million (2.7%) compared to the prior year primarily due to salary increases, and other increased expenses on protection such as plexiglass screens and cleaning supplies for COVID-19 in the city facilities.

Community development expenditures increased $0.8 million (15.1%) from the prior fiscal year primarily attributable to salary adjustments and an added position for sustainability, planned work on the housing element as well as increased consultant costs that resulted in higher revenues from planning activity.

Recreation expenditures were $0.5 million (-23.0%) less than the prior year primarily due to an overall decrease in operations from the pandemic and closure of the community center for construction activity.

Administration and Finance expenditures decreased by $0.8 million (-9.5%) compared to the prior year primarily due to an overall decrease in operations and many vacant positions.

In-lieu Parkland
The In-lieu Parkland Fund had revenues of $1.6 million from in Lieu fees received during the year this was $1.3 million higher than the prior year. Expenses included a transfer out to the capital projects fund of $1.3 million.

Capital Investment Program Fund
The Capital Investment Program Fund accounts for funds used for capital improvements and significant maintenance projects. As of June 30, 2021, its fund balance was $11.5 million, primarily due to monies transferred from the General Fund.

The Capital budget also has planned appropriations of almost $60 million over the FY 22-26 CIP plan from various funding sources such as Gas tax, General fund, and enterprise funds. 24 74
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Summary Analysis of Proprietary Funds
As of June 30, 2021, the Enterprise Funds had a net position balance of $30.2 million, an increase of $2.4 million from the prior year or 8.5%. The net position balance of the Internal Service Funds is $2.3 million, down $1.9 million from the previous fiscal year, due to the underfunding of workers’ compensation and liability insurance due to the pandemic and using the available fund balances instead.

Sewer Fund
This fund accounts for the administration and operation of the City’s sewer system. The total net position is $24.6 million; an increase of $1.9 million.

Solid Waste Fund
This fund accounts for the administration and operation of the City’s solid waste system. The total net position is $5.6 million; an increase of $0.5 million. 2021 2020 2021 2020
Operating revenues $ 8.0 8.8$ 0.3$ $ 0.2
Operating expenses 5.7 6.0 2.1 1.8
Operating income (loss) 2.3 2.9 (1.9) (1.6)
Non-operating revenues (expenses) 0.1 0.6 0.0 0.0
Net income (loss) before contributions
and operating transfers 2.4 3.4 (1.9) (1.6)
Transfers in (out) and Capital Contributions 0.0 0.0 0.0 1.0 Change in net position $ 2.4 3.4$ $ (1.9) $ (0.6)
Total Enterprise Funds Total Internal Service Funds
Table 7
Change in Fund Net Position - Proprietary Funds
(In Millions)
25 75
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
BUDGETARY HIGHLIGHTS OF THE CITY’S GENERAL FUND
Over the course of the year, the City Council revised the City’s budget with adjustments for various revenue and expenditure changes. After taking into account these adjustments, General Fund actual revenues were higher than the final budget by $6.3 million (15.1%), which is primarily attributable to higher property taxes and grants revenue, offset by lower sales tax, transient occupancy tax and recreation fees which were impacted by the pandemic and community center closure respectively.

General Fund actual expenditures were $0.6 million (-1.6%) under the final budget, with significant savings in Public safely ($0.95 million) partly offset by higher Administration and finance ($0.35 million) due to higher legal fees and contract staffing to cover vacancies.

Net unassigned fund balance for the year was $4.9 million after accounting for contributions to the Capital projects, Debt service and others. Further details are provided in the Transmittal letter.

CAPITAL ASSETS AND LONG-TERM DEBT
Capital Assets
The City records all of its capital assets, including infrastructure in the Statement of Net Position.

Infrastructure includes roads, bridges, signals, and similar assets used by the entire population.

The City has recorded its capital assets at historical cost or estimated historical cost if the actual historical cost was not available. In addition, donated fixed assets have been valued at their estimated acquisition value on the date donated.

At June 30, 2021, the cost of infrastructure and other capital assets recorded on the City's financial statements is shown in Table 8 on the next page:
26 76
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
At June 30, 2021, the City had assets of $105.8 million, net of depreciation, invested in a broad range of capital assets used in governmental activities and $14.7 million, also net of depreciation, invested in Business-type activities assets, as shown in Table 8 above.

The City depreciates all its capital assets on a straight-line basis over their estimated useful lives.

The purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so that an allocable portion of the cost of the asset is borne by all users. Additional information on capital assets may be found in Notes 1 and 5 to the Basic Financial Statements. 2021 2020
Governmental activities
Land $ 14.5 $ 11.6
Construction in progress 45.6 24.1
Buildings 21.6 21.6
Improvements 6.5 6.5
Machinery and equipment 7.1 6.9
Infrastructure 46.6 45.0
Less accumulated depreciation (36.1) (33.9)
Totals $ 105.8 $ 81.8
Business-type activities
Construction in progress $ 1.4 $ 1.3
Buildings 17.9 18.0
Machinery and equipment 1.1 1.1
Infrastructure 8.1 5.3
Less accumulated depreciation (13.8) (13.4)
Totals $ 14.7 $ 12.3
Table 8
Capital Assets
(in Millions)
27 77
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
Long Term Debt
At June 30, 2021, the City's debt was comprised of the following:

The City made all required debt service payments on the issues listed above. As related to the community center that is expected to be completed in the fiscal year 2022.

ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The City has enjoyed several consecutive strong financial years. This has been driven by growth in property tax and sales tax and steady revenues from direct services. Economic development and the strength of the Bay Area and national economy have driven continued growth in revenues. Meanwhile, expenses have grown due to inflationary increases, negotiated wage increases, and pension cost increases.

Over the last several years Los Altos has experienced ongoing growth in major tax revenue categories and increases in revenues from fee-based services. This trend was buckled due to COVID-19 pandemic. Sales Tax, Transient Occupancy Tax, and fee-based service revenues declined during the year as a result.

The most significant financial challenges for the City are the ongoing stress on revenues due to the COIVID-19 pandemic, the projected increases in pension costs, and identifying resources to replace aging capital infrastructure. Funds to replace buildings and other facilities are inadequate.
2021 2020
Governmental activities
2004 Certificate of Participation $ 0.9 $ 1.0
Community Center Lease 9.5 0.0
Compensated Absenses 1.9 2.0
Total governmental activities debt $ 12.3 $ 3.0
Business-type activities
Compensated Absenses $ 0.1 $ 0.1
Total business-type activities debt $ 0.1 $ 0.1
Total debt $ 12.4 $ 3.1
Table 9
Outstanding Debt
(In Millions)
28 78
Agenda Item # 4.

City of Los Altos
Management’s Discussion and Analysis, Continued
For the year ended June 30, 2021
In December 2016, CalPERS reduced its expected return on investments from 7.5% to 7.0% which were effective starting fiscal year 2019. This action coupled with other assumption changes made by CalPERS is resulting in a substantial increase in pension contributions for employers.

The City Council renewed its commitment to address this challenge by creating a Pension reserve of $5 million. The reserve is an essential tool to help the City address pension cost increases in future years.

The City Council has also identified funding capital infrastructure as a high-priority area and is working to identify current and future facility needs and potential funding options to address those needs.

Major Capital Projects in construction for fiscal years 2021-21 and beyond include:
 $20,088,533 – Hillview Community Center Redevelopment  1,482,295 – Annual Sewer Structural Reach Replacement  1,151,484- Annual Sewer System Repair Program
 663,979 – Annual Street Resurfacing
 551,391 – Annual Collector Street Traffic Calming
 531,566 – El Monte Ave Sidewalk Gap closure (School route project)  303,508 – IT Initiatives

CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This Annual Comprehensive Financial Report is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City's finances. Questions about this report should be directed to the following address: City of Los Altos, Finance Department, 1 North San Antonio Road, Los Altos, California 94022.

A copy of this financial report can be found on the City’s website at http://www.losaltosca.gov, by selecting “Audited Financials” in the “Quick Links” section and then selecting “Other Financial Reports.”
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Agenda Item # 4.

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80 Agenda Item # 4.

CITY OF LOS ALTOS

GOVERNMENT-WIDE FINANCIAL STATEMENTS

STATEMENT OF NET POSITION

AND STATEMENT OF ACTIVITIES
81 Agenda Item # 4.

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82 Agenda Item # 4.

CITY OF LOS ALTOS

STATEMENT OF NET POSITION
JUNE 30, 2021
Governmental Business-Type
Activities Activities Total
ASSETS
Current assets:

Cash and investments (Note 2) $50,832,035 $17,008,151 $67,840,186 Accounts receivable 7,645,179 399,613 8,044,792
Interest receivable 104,135 36,613 140,748
Prepaid items and inventory (Note 1H) 145,196 145,196
Note receivable (Note 4) 1,704,880 1,704,880
Internal balances 7,969 (7,969)
Total current assets 60,439,394 17,436,408 77,875,802
Noncurrent assets:

Restricted cash and investments (Note 2) 172,021 172,021 Capital assets (Note 5):

Non-depreciable 60,160,965 1,361,354 61,522,319
Depreciable, net of accumulated depreciation 45,678,518 13,288,249 58,966,767 Total noncurrent assets 106,011,504 14,649,603 120,661,107 Total Assets 166,450,898 32,086,011 198,536,909

DEFERRED OUTFLOWS OF RESOURCES
Related to pension (Note 11) 9,208,836 346,658 9,555,494 Related to OPEB (Note 12) 245,121 18,450 263,571
Total deferred outflows of resources 9,453,957 365,108 9,819,065

LIABILITIES
Current liabilities:

Accounts payable 6,655,640 345,022 7,000,662
Interest payable 6,233 6,233
Accrued liabilities 1,104,842 38,515 1,143,357
Other payable 112,768 112,768
Compensated absences, due in one year (Note 7) 481,010 26,845 507,855 Claims and judgements, due in one year (Note 9) 1,072,302 1,072,302 Long-term debt, due in one year (Note 6) 534,612 534,612 Total current liabilities 9,967,407 410,382 10,377,789
Noncurrent liabilities:

Compensated absences, due in more than one year (Note 7) 1,443,028 80,536 1,523,564 Claims and judgments, due in more than one year (Note 9) 3,148,698 3,148,698 Net pension liability (Note 11) 40,741,084 1,628,033 42,369,117 Net OPEB liability (Note 12) 1,522,251 103,208 1,625,459 Long-term debt, due in more than one year (Note 6) 9,842,251 9,842,251 Total noncurrent liabilities 56,697,312 1,811,777 58,509,089 Total Liabilities 66,664,719 2,222,159 68,886,878

DEFERRED INFLOWS OF RESOURCES
Related to pension (Note 11) 1,146,611 42,158 1,188,769 Related to OPEB (Note 12) 359,169 27,034 386,203
Related to revenue 677 677
Total deferred inflows of resources 1,506,457 69,192 1,575,649 NET POSITION (Note 8)
Net investments in capital assets 95,462,620 14,649,603 110,112,223 Restricted for:

Debt service 373,551 373,551
Special revenue programs:

Public safety 146,007 146,007
Recreation 5,780,278 5,780,278
Streets and roads 3,979,673 3,979,673
Public education 906,165 906,165
Parking 889,174 889,174
Other 74,224 74,224
Capital projects 11,872,141 11,872,141
Total Restricted Net Position 24,021,213 24,021,213
Unrestricted (11,750,154) 15,510,165 3,760,011
Total Net Position $107,733,679 $30,159,768 $137,893,447 See accompanying notes to financial statements
33 83
Agenda Item # 4.

Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions Total Primary government:

Governmental Activities:

Public safety $21,383,819 $201,547 $4,140,121 $4,341,668 Public works 4,741,500 59,512 378,773 $1,778,354 2,216,639 Recreation 2,584,001 271,410 271,410
Community development 7,004,132 5,792,569 305,535 31,462 6,129,566 Admin / community services 8,282,306 953,780 953,780
Interest on long-term debt 244,697
Total Governmental Activities 44,240,455 7,278,818 4,824,429 1,809,816 13,913,063 Business-type Activities:

Sewer 5,268,426 7,126,024 7,126,024
Solid waste 394,443 860,900 860,900
Storm drain 21
Total Business-type Activities 5,662,890 7,986,924 7,986,924 Total primary government $49,903,345 $15,265,742 $4,824,429 $1,809,816 $21,899,987 General revenues:

Taxes:

Property taxes
Sales and use taxes
Utility users' tax
Other taxes
Franchise fees
Total taxes
Interest income
Miscellaneous
Total general revenues
Change in Net Position
Net Position-Beginning, as restated (Note 8)
Net Position-Ending
See accompanying notes to financial statements
Program Revenues

CITY OF LOS ALTOS

STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2021
34 84
Agenda Item # 4.

Net (Expense) Revenue and
Changes in Net Position
Governmental Business-type
Activities Activities Total
($17,042,151) ($17,042,151)
(2,524,861) (2,524,861)
(2,312,591) (2,312,591)
(874,566) (874,566)
(7,328,526) (7,328,526)
(244,697) (244,697)
(30,327,392) (30,327,392)
$1,857,598 1,857,598
466,457 466,457
(21) (21)
2,324,034 2,324,034
(30,327,392) 2,324,034 (28,003,358)
28,464,193 28,464,193
2,996,325 2,996,325
2,917,252 2,917,252
2,303,893 2,303,893
2,214,947 2,214,947
38,896,610 38,896,610
173,406 47,270 220,676
428,002 428,002
39,498,018 47,270 39,545,288
9,170,626 2,371,304 11,541,930
98,563,053 27,788,464 126,351,517
$107,733,679 $30,159,768 $137,893,447
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Agenda Item # 4.

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86 Agenda Item # 4.

FUND FINANCIAL STATEMENTS
The funds described below were determined to be Major Funds by the City in fiscal 2021. Individual non-major funds may be found in the Supplemental section.

GENERAL FUND
Accounts for all financial resources necessary to carry out basic governmental activities of the City that are not accounted for in other funds. The General Fund supports essential City services such as police, fire, street and parks maintenance, maintenance services, community development and recreation activities. The General Fund also includes the Real Property Proceeds Funds, which accounts for the proceeds from the sale of real property and the Community Facilities Renewal Fund, which accounts for the revenues and expenditures related to the community facilities renewal efforts.

IN-LIEU PARK LAND FUND
Accounts for revenues received in lieu of park land dedications. The revenues are dedicated for purchasing or improving park or recreational facilities.

CAPITAL PROJECTS FUND
Accounts for the acquisition and construction of major capital projects and plans that are financed by resources other than proprietary funds.
37 87
Agenda Item # 4.

In-Lieu Capital Other Total
Park Land Projects Governmental Governmental
General Fund Fund Funds Funds
ASSETS
Cash and investments (Note 2) $18,693,565 $5,770,870 $14,280,786 $5,456,537 $44,201,758 Restricted cash and investments (Note 2) 172,021 172,021 Receivables, net of allowance for uncollectibles:

Accounts 6,224,645 57,085 1,346,451 7,628,181
Interest 88,052 16,083 104,135
Prepaids (Note 1H) 66,176 66,176
Note receivable (Note 4) 1,704,880 1,704,880
Inventory (Note 1H) 79,020 79,020
Due from other funds (Note 3) 850,985 850,985
Total Assets $27,707,323 $5,786,953 $14,337,871 $6,975,009 $54,807,156

LIABILITIES
Accounts payable $3,765,318 $6,675 $2,855,189 $53 $6,627,235 Accrued liabilities 1,104,842 1,104,842
Other payable 112,768 112,768
Due to other funds (Note 3) 748,269 748,269
Total Liabilities 4,982,928 6,675 2,855,189 748,322 8,593,114

DEFERRAL INFLOWS OF RESOURCES
Deferred inflows of revenues 677 677
Total Deferred Inflows 677 677

FUND BALANCES
Fund balance (Note 8):

Nonspendable 1,858,691 1,858,691
Restricted $5,780,278 6,368,794 12,149,072
Assigned 15,936,861 11,482,682 389,459 27,809,002
Unassigned 4,928,166 (531,566) 4,396,600
Total Fund Balances 22,723,718 5,780,278 11,482,682 6,226,687 46,213,365 Total Liabilities, Deferred inflow of resources
and Fund Balances $27,707,323 $5,786,953 $14,337,871 $6,975,009 $54,807,156 See accompanying notes to financial statements

CITY OF LOS ALTOS

GOVERNMENTAL FUNDS

BALANCE SHEET
JUNE 30, 2021
38 88
Agenda Item # 4.

CITY OF LOS ALTOS
Reconciliation of the

GOVERNMENTAL FUNDS -- BALANCE SHEET
with the

STATEMENT OF NET POSITION
JUNE 30, 2021
Fund balances of governmental funds $46,213,365
Amounts reported for Governmental Activities in the Statement of Net Position are different because:

Capital assets used in Governmental Activities are not current financial resources. Therefore, were not reported in the governmental funds balance sheet:

Land, buildings, property, equipment and infrastructure, net 105,839,483 Interest payable on long-term debt does not require current financial resources. Therefore, interest payable was not reported as a liability in the governmental funds balance sheet. (6,233) Deferred outflows below are not current assets of financial resources; and the deferred inflows are not due and payable in the current period and therefore are not reported in the Governmental Funds.

Deferred outflows 9,453,957
Deferred inflows (1,505,780)
Long-term liabilities are not due and payable in the current period.

Therefore, they were not reported in the governmental funds balance sheet.

Long-term debt - current portion (534,612)
Long-term debt - noncurrent portion (9,842,251)
Net pension liability (40,741,084)
Net OPEB liability (1,522,251)
Compensated absences - current portion (481,010)
Compensated absences - noncurrent portion (1,443,028)
Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the governmental-wide statement of net position. 2,303,123 NET POSITION OF GOVERNMENTAL ACTIVITIES $107,733,679
See accompanying notes to financial statements
39 89
Agenda Item # 4.

In-Lieu Capital Other Total
Park Land Projects Governmental Governmental
General Fund Fund Funds Funds

REVENUES
Property tax $28,464,193 $28,464,193
Sales tax 2,996,325 2,996,325
Utility users 2,917,252 2,917,252
Other tax 2,306,393 2,306,393
Licenses, permits and fees 4,392,246 $152,842 4,545,088 Intergovernmental $1,541,500 $57,085 2,556,327 4,154,912 Grants and donations 3,986,394 30,312 4,016,706
Charges for services 2,958,245 262,404 3,220,649
Fines and forfeitures 131,467 6,636 138,103
Interest and rentals 184,032 19,049 30,610 233,691
Other 106,487 311,282 417,769
Total Revenues 48,443,034 1,560,549 87,397 3,320,101 53,411,081

EXPENDITURES
General government
Public safety 19,389,523 460 19,389,983
Public works 5,616,637 5,616,637
Recreation 1,782,214 1,782,214
Community development 6,357,369 87,612 6,444,981
Admin / community development 7,702,229 7,702,229
Capital improvements 17,564 22,845,200 480,310 23,343,074 Debt service:

Principal 628,137 628,137
Interest and fiscal charges 239,264 239,264
Total Expenditures 40,847,972 17,564 22,845,200 1,435,783 65,146,519

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 7,595,062 1,542,985 (22,757,803) 1,884,318 (11,735,438)

OTHER FINANCING SOURCES (USES)
Proceeds from Lease 100,000 9,900,000 10,000,000
Transfers in (Note 3) 146,176 30,537,813 867,400 31,551,389 Transfers (out) (Note 3) (17,648,572) (1,300,000) (12,602,817) (31,551,389) Total Other Financing Sources (Uses) (17,402,396) (1,300,000) 30,537,813 (1,835,417) 10,000,000 NET CHANGE IN FUND BALANCES (9,807,334) 242,985 7,780,010 48,901 (1,735,438)

BEGINNING FUND BALANCES,
AS RESTATED (NOTE 8) 32,531,052 5,537,293 3,702,672 6,177,786 47,948,803 ENDING FUND BALANCES $22,723,718 $5,780,278 $11,482,682 $6,226,687 $46,213,365 See accompanying notes to financial statements

CITY OF LOS ALTOS

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2021
40 90
Agenda Item # 4.

CITY OF LOS ALTOS
Reconciliation of the

NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
with the

STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2021
Net change in fund balances of governmental funds ($1,735,438) Amounts reported for governmental activities in the Statement of Activities are different because:

CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures. However, in the government-wide statement of activities and changes in net position, the cost of those assets is capitalized and allocated over their estimated useful lives as depreciation expense. This is the amount of capital assets recorded in the current period. 26,347,402
Depreciation expense on capital assets is reported in the government wide statement of activities and changes in net position, but they do not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in governmental funds. (2,381,714)
Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position.

Principal payment (9,371,863)
The amounts below included in the Statement of Activities do not provide or require the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change):

Compensated absences 66,642
Interest payable (5,433)
Net OPEB liability, and related deferred outflows and inflows of resources (100,217) Net pension liability, and related deferred outflows and inflows of resources (1,789,176) Internal Service Funds are used by management to charge the costs of certain activities such as insurance, to individual funds. The net revenue of the internal service funds is reported with governmental activities. (1,859,577) Changes in net position of governmental activities $9,170,626 See accompanying notes to financial statements
41 91
Agenda Item # 4.

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92 Agenda Item # 4.

MAJOR PROPRIETARY FUNDS
Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges.

The City reported all of its Enterprise Funds as major funds in fiscal 2021.

SEWER
To account for the operation (including waste water treatment) of the City's sewer treatment activities, a selfsupporting activity which provides services on a user charge basis.

SOLID WASTE
To account for the collection and disposal of solid waste, a self-supporting activity that provides service on a user charge basis.

STORM DRAIN
To account for the operation of the City's urban runoff and storm drain activities. 43 93
Agenda Item # 4.

CITY OF LOS ALTOS

PROPRIETARY FUNDS

STATEMENT OF NET POSITION
JUNE 30, 2021
Business-type Activities-Enterprise Funds Governmental
ActivitiesStorm Internal Service
Sewer Solid Waste Drain Totals Funds
ASSETS
Current Assets:

Cash and investments (Note 2) $11,459,886 $5,548,265 $17,008,151 $6,630,277 Accounts receivable 321,898 77,715 399,613 16,998
Interest receivable 24,285 12,328 36,613
Total Current Assets 11,806,069 5,638,308 17,444,377 6,647,275 Non-Current Assets:

Capital assets (Note 5):

Nondepreciable 1,361,354 1,361,354
Depreciable 25,148,928 $1,969,221 27,118,149
Less accumulated depreciation (11,860,679) (1,969,221) (13,829,900) Total capital assets, net 14,649,603 14,649,603
Total non-current Assets 14,649,603 14,649,603
Total Assets 26,455,672 5,638,308 32,093,980 6,647,275
Related to pension (Note 11) 346,658 346,658
Related to OPEB (Note 12) 14,497 1,318 2,635 18,450
Total Deferred Outflows 361,155 1,318 2,635 365,108

LIABILITIES
Current Liabilities:

Accounts payable 320,781 24,220 21 345,022 28,405
Accrued liabilities 38,515 38,515
Due to other funds (Note 3) 7,969 7,969 94,747
Compensated absences (Note 7) 26,845 26,845
Claims and judgements (Note 9) 1,072,302
Total Current Liabilities 386,141 24,220 7,990 418,351 1,195,454 Long-Term Liabilities
Compensated absences (Note 7) 80,536 80,536
Claims and judgements (Note 9) 3,148,698
Net pension liabilities (Note 11) 1,628,033 1,628,033
Net OPEB liabilities (Note 12) 81,093 7,373 14,742 103,208 Total Noncurrent Liabilities 1,789,662 7,373 14,742 1,811,777 3,148,698 Total Liabilities 2,175,803 31,593 22,732 2,230,128 4,344,152 Related to pension (Note 11) 42,158 42,158
Related to OPEB (Note 12) 21,241 1,931 3,862 27,034
Total Deferred Inflows 63,399 1,931 3,862 69,192
Net investment in capital assets 14,649,603 14,649,603
Unrestricted (deficit) 9,928,022 5,606,102 (23,959) 15,510,165 2,303,123 Total Net Position (Deficit) $24,577,625 $5,606,102 ($23,959) $30,159,768 $2,303,123 See accompanying notes to financial statements
NET POSITION (Note 8)

DEFERRAL OUTFLOWS OF RESOURCES

DEFERRAL INFLOWS OF RESOURCES
44 94
Agenda Item # 4.

CITY OF LOS ALTOS

PROPRIETARY FUNDS

STATEMENT OF REVENUES, EXPENSES

AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2021
Business-type Activities-Enterprise Funds Governmental
ActivitiesStorm Internal Service
Sewer Solid Waste Drain Totals Funds

OPERATING REVENUES
Charges for services $7,126,024 $860,900 $7,986,924 $273,028 Total Operating Revenues 7,126,024 860,900 7,986,924 273,028

OPERATING EXPENSES
Outside services 3,936,433 377,651 $21 4,314,105 52,830 Employee services 905,989 16,792 922,781
Repairs and maintenance
Claims and insurance 1,918,649
Administration 161,126
Depreciation 426,004 426,004
Total Operating Expenses 5,268,426 394,443 21 5,662,890 2,132,605 Operating Income (Loss) 1,857,598 466,457 (21) 2,324,034 (1,859,577)

NONOPERATING REVENUES
Interest 32,649 14,621 47,270
Total Nonoperating Revenues 32,649 14,621 47,270
Change in Net Position 1,890,247 481,078 (21) 2,371,304 (1,859,577) BEGINNING NET POSITION 22,687,378 5,125,024 ($23,938) 27,788,464 4,162,700 ENDING NET POSITION (DEFICIT) $24,577,625 $5,606,102 ($23,959) $30,159,768 $2,303,123 See accompanying notes to financial statements
45 95
Agenda Item # 4.

CITY OF LOS ALTOS

PROPRIETARY FUNDS

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2021
Business-type Activities-Enterprise Funds
Governmental
ActivitiesInternal Service
Sewer Solid Waste Storm Drain Totals Funds

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $6,923,171 $855,678 $7,778,849 $315,820 Cash payments to suppliers for goods and services (3,656,621) (402,818) (4,059,439) Cash payment employees for services (794,205) (16,792) (810,997) Cash payments to claimants (59,336)
Insurance premiums, settlements and rebates (1,710,179) Cash Flows from (used for) Operating Activities 2,472,345 436,068 2,908,413 (1,453,695)

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition of capital assets (2,787,409) (2,787,409)
Proceeds from disposal of capital assets
Cash Flows (used for) Capital and
Related Financing Activities (2,787,409) (2,787,409)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 32,649 14,621 47,270
Cash Flows from Investing Activities 32,649 14,621 47,270 Net Cash Flows (282,415) 450,689 168,274 (1,453,695)
Cash and investments at beginning of period 11,742,301 5,097,576 16,839,877 8,083,972 Cash and investments at end of period $11,459,886 $5,548,265 $17,008,151 $6,630,277 Reconciliation of Operating Income (Loss) to
Cash Flows from Operating Activities:

Operating income (loss) $1,857,598 $466,457 ($21) $2,324,034 ($1,859,577) Adjustments to reconcile operating income to
cash flows from operating activities:

Depreciation 426,004 426,004
Change in assets and liabilities:

Receivables, net (202,853) (5,222) (208,075) (1,873)
Accounts payable and other accrued expenses 279,812 (25,167) 21 254,666 (107,910) Due to other funds (2,111) (2,111) 44,665
Net pension liabilities and deferred
inflows and outflows 64,877 64,877
Net OPEB liabilities 11,610 2,111 13,721
Compensated absences 35,297 35,297
Claims and judgments 471,000
Cash Flows from (used for) Operating Activities $2,472,345 $436,068 $2,908,413 ($1,453,695) See accompanying notes to financial statements
46 96
Agenda Item # 4.

FIDUCIARY FUNDS

CUSTODIAL FUNDS
Custodial Funds are custodial in nature and does not involve measurement of the results of operations. It is used to account for assets held in a custodial capacity for others and therefore cannot be used to support the City's programs. The City has the following custodial funds:

NORTH COUNTY LIBRARY AUTHORITY
This fund accounts for the operating activities and the special assessment collection pertaining to the North County Library Authority.

RAYMUNDO CURB AND GUTTER
This fund accounts for the accumulation of resources for payment of the debt service related to the construction and installation of curbs and gutters. The revenue is derived from the special assessment levied to property owners within that improvement district.

BLUE OAK LANE SEWER
This fund accounts for the accumulation of resources for payment of the debt service and installation of sanitary sewer systems on Blue Oak Lane funded via November 2009 limited obligation assessment district bonds. The revenue is derived from the special assessment levied to property owners within that improvement district. 47 97
Agenda Item # 4.

CITY OF LOS ALTOS

FIDUCIARY FUNDS

STATEMENT OF NET POSITION
JUNE 30, 2021
Custodial Funds
North County Raymundo Curb Blue Oak
Library Authority and Gutter Lane Sewer
ASSETS
Cash and investments (Note 2) $25 $34,957
Restricted cash and investments (Note 2) 45,814
Accounts receivable $818,816
Interest receivable 230 15 34
Total Assets 819,046 40 80,805

LIABILITIES
Accounts payable 8,828
Due to others
Total Liabilities 8,828

NET POSITION
Restricted for:

Other governments 810,218 40 80,805
Total Net Position $810,218 $40 $80,805
See accompanying notes to financial statements
48 98
Agenda Item # 4.

CITY OF LOS ALTOS

FIDUCIARY FUNDS

STATEMENT OF ACTIVITIES
JUNE 30, 2021
Custodial Funds
North County Raymundo Curb Blue Oak
Library Authority and Gutter Lane Sewer

ADDITIONS
Fee collections $59,178 $7,853 $49,410
Total Additions 59,178 7,853 49,410

DEDUCTIONS
Distributions 4,309,565 25,643 45,178
Total Deductions 4,309,565 25,643 45,178
Net increase(decrease) in net position (4,250,387) (17,790) 4,232 Net Position-Beginning, as restated (Note 8) 5,060,605 17,830 76,573 Net Position-Ending $810,218 $40 $80,805
See accompanying notes to financial statements
49 99
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100
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Background
The basic financial statements of the City of Los Altos, California (the City), have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies.

The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below:

Reporting Entity
The City incorporated in 1952. The City operates under an elected Council and appointed City Manager form of government and provides the following services: public safety, recreation, community development, public works, capital improvements, and general supporting administrative services. The City has no component units.

B. Basis of Presentation
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for within a separate set of self-balancing accounts which includes its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained consistent with such provisions and managerial requirements.

Government-wide Statements: The City’s Government-wide Financial Statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of governmental activities and business-type activities for the City, the primary government, accompanied by a total column. Fiduciary activities of the City are not included in these statements.

These basic financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities and Changes in Net Position presents changes in the net position of the City. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability for goods or services is incurred.

Certain types of transactions are reported as program revenues for the city in three categories:
 Charges for services
 Operating grants and contributions
 Capital grants and contributions
51 101
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Certain eliminations have been made as prescribed by GASB Statement No. 34 in regard to interfund activities, payables, and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column.

In the Statement of Activities and Changes in Net Position internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The following inter-fund activities have been eliminated:
 Due to, due from other funds
 Transfers in, transfers out
 Internal service fund transactions
Fund Financial Statements: Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds in the aggregate. An accompanying schedule is included to reconcile and explain the differences in fund balances as presented in these statements to the net position presented in the Government-Wide financial statements.

Governmental funds are accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.

Revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The City’s primary revenue sources, which have been treated as susceptible to accrual by the City, are: property tax, sales tax, hotel tax, special assessments, intergovernmental revenues, other taxes, interest revenue, rental revenue and certain charges for services.

Expenditures are recorded in the accounting period in which the related fund liability is incurred and are accrued accordingly.

Deferred inflow of resources arise when potential revenues do not meet both the “measurable” and “available” criteria for recognition in the current period. Unearned revenues arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when the government has a legal claim to the resources, the revenue is recognized.

The reconciliation of the Fund Financial Statements to the Government-wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34. 52 102
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Proprietary Fund Financial Statements: Proprietary Fund financial statements include a Statement of Net Position, a Statement of Revenues, Expenses and Change in Net Position, and a Statement of Cash Flows for all proprietary funds.

A column representing the City’s internal service funds, those funds that support agency wide shared service costs, is also presented in these statements. These internal service balances and activities are combined with the governmental activities in the Government-wide Financial Statements.

Proprietary Funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Change in Fund Net Position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which liability for goods or services is incurred.

Proprietary Funds distinguish operating revenues and expenses and non-operating items. Operating revenues and expenses generally result from providing services in connection with the fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise and internal service funds are charges for customer services, including sewer charges, solid waste fees, and support charges. Operating expenses for enterprise funds and internal service funds include the cost of services, administrative expenses, and depreciation on capital assets. All other revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

Fiduciary Fund Financial Statements: The City’s Fiduciary Funds are comprised of custodial funds used to account for the operating activities and for the special assessment collections pertaining to the North County Library Authority (NCLA), Raymundo and Avalon Drive Curb and Gutter Districts, and Blue Oak Lane Sewer Improvements. Custodial Funds are custodial in nature (assets equal liabilities), do not involve the measurement of results of operations, and are accounted for on the full accrual basis of accounting.

Internal Service Funds: Internal Service Funds account for services provided to other departments pertaining to the employee self-insurance dental program, unemployment insurance, workers’ compensation insurance and liability insurance, all of which are funded on a cost reimbursement basis as budget projections and valuations develop.

C. Major Funds
Major funds are defined as funds that have either assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The City may also select other funds it believes should be presented as major funds.

The City reported the following major governmental funds in the accompanying financial statements:

General Fund – Accounts for all financial resources necessary to carry out basic governmental activities of the City that are not accounted for in another funds. The General Fund supports essential City services such as police, fire, street and parks maintenance, public works, and community development and recreation activities. The General Fund also includes the Real Property Proceeds Funds, which accounts for the proceeds from sale of real property and the Community Facilities Renewal Fund, which accounts for the revenues and expenditures related to the community facilities renewal efforts. 53 103
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In-Lieu Park Land Fund – Accounts for revenues received in lieu of parkland dedications. The revenues are dedicated for purchasing or improving park or recreational facilities.

Capital Project Fund – Accounts for the acquisition and construction of major general government capital projects and plans that are financed by resources other than proprietary funds.

The City reported all of its enterprise funds as major funds in the accompanying financial statements:

Sewer Fund – Accounts for the operation (including waste water treatment) of the City’s sewer treatment activities, a self-supporting activity which provides services on a user charge basis.

Solid Waste Fund – Accounts for the administration and support of contracted solid waste services, a selfsupporting user charge for services activity.

Storm Drain Fund – Accounts for operation of the City’s urban runoff and storm drain activities.

D. Recognition of Interest Payable
In the Governmental Fund Financial Statements, interest expenditures on long-term debt are recognized when payment is made. In the Government-wide Financial Statements and Proprietary Fund Financial Statements interest expense is recognized as the liability is incurred.

E. Use of Restricted and Unrestricted Net Position
When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the City’s policy is to apply restricted net position first.

F. Cash, Cash Equivalents and Investments
The City pools its available cash for investment purposes. The City considers pooled cash and investment amounts, with original maturities of three months or less, to be cash equivalents.

In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available.

The City participates in an investment pool managed by the State of California known as the Local Agency Investment Fund (LAIF) which has invested a portion of the pool funds in Structured Notes and Assetbacked Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset-backed Securities are subject to market risk as to change in interest rates.

The City places liquid assets in a pooled investment account with the goal of enhancing the diversity of its investment holdings. This portfolio complies with state code investment requirements and is subject to a more restrictive City adopted investment policy. Such funds are held independently in City established investment custodial accounts.

54 104
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) For purposes of reporting cash flows, the City considers each fund’s share in the cash and investments pool to be cash and cash equivalents including cash with fiscal agents.

G. Fair Value Hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for an asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for an asset or liability.

If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement.

H. Inventories
Inventory, mainly consisting of vehicle fuel and paper supplies, is stated at cost on an average cost basis and is controlled by a perpetual inventory system which is adjusted to reflect periodic physical counts. Inventories are recorded as expenditures in the General Fund and charged to departments as consumed.

I. Restricted Cash
Fiscal agents acting on behalf of the City hold investment funds arising from the proceeds of long-term debt issuances. The funds may be used for specific capital outlays or for the payment of certain bonds, certificate of participation and have been invested only as permitted by specific State statutes or applicable City ordinance, resolution or bond indenture.

J. Compensated Absences
Government-wide Financial Statements: For governmental and business-type activities, compensated absences are recorded as expenses and liabilities as the time is earned by employees.

Fund Financial Statements: For Governmental Funds, compensated absences are recorded as expenditures in the years paid. The General Fund is typically used to pay out compensated absences that arise in the course of any one year. Unpaid and accumulated liabilities for some compensated absences accrue to future resources. In Proprietary Funds, compensated absences are expensed to the various funds in the period they are earned, and such fund’s share of the unpaid liability is recorded as a long-term liability of the fund. 55 105
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) K. Property Taxes
Santa Clara County (County) assesses all properties in the City, and it bills, collects and distributes property taxes to the City. Both secured and unsecured property taxes are levied on January 1. The County assesses properties and it bills, collects and distributes property taxes to the City. The County remits the entire amount levied and handles all delinquencies, retaining interest and penalties. Secured and unsecured property taxes are levied on July 1 for the fiscal year.

Secured property tax is due in two installments, on November 1 and February 1, and it becomes delinquent after December 10 and April 10, respectively. The City and the County adopted the “alternative method of property tax distribution” known as the Teeter Plan that authorizes the County to allocate 100% of the secured property tax based on levy instead of collection and to retain all delinquent penalties and interest. Unsecured property tax is due on July 1 and becomes delinquent after August 31. Distribution of the unsecured property taxes is based on collections. Collection of delinquent accounts is the responsibility of the County, which retains all penalties. The County also distributes both penalties and interest collected for delinquent unsecured property taxes.

L. Capital Assets
Capital assets are valued at historical cost or estimated historical cost if actual historical cost was not available. Donated capital assets are valued at their estimated acquisition value on the date contributed. City policy has set the capitalization threshold for reporting capital assets at $5,000 for equipment, $25,000 for building and facility improvements and $100,000 for infrastructure.

Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as follows:

Buildings 50 years
Improvements 30-50 years
Machinery and Equipment 3-10 years
Infrastructure 30-100 years
In accordance with GASB Statement No. 34, the City has included all infrastructures in its Statement of Net Position.

The City defines infrastructure as basic physical assets that allow the City to function. The assets include the street system. Each major infrastructure system can be divided into subsystems. For example, the street system can be subdivided into pavement, streetlights and traffic control devices (signs, signals and pavement markings). These subsystems were not delineated in the Government-wide Financial Statements. The appropriate operating department maintains information regarding the subsystems.

For all infrastructure systems, the City has elected to use the Basic Approach, as defined by GASB Statement No. 34, for infrastructure reporting. The valuation of the City’s infrastructure assets are determined based on the original cost using one of the following methods:

1. Use of historical records where available

2. Standard unit costs appropriate for the construction/acquisition date of the asset

3. Present replacement cost indexed by a reciprocal factor of the price increase from the construction/acquisition date to the current date
56 106
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accumulated depreciation, defined as the total depreciation from the date of construction/acquisition to the current date, was computed on a straight-line method. The book value was then computed by deducting the accumulated depreciation from the original cost.

M. Long-Term Debt
Government-wide Financial Statements: Long-term debt and other financial obligations are reported as liabilities in the appropriate activities.

Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable premium or discount.

Fund Financial Statements: The Governmental Fund Financial Statements do not present long-term debt, which are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position.

Governmental Funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuance are reported as other financing sources while discounts on debt issuance are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Proprietary Fund Financial Statements use the same principles as those used in the Government-wide Financial Statements.

N. Unearned Revenue
Government-wide Financial Statements: In the Government-wide Financial Statements, unearned revenue is recognized for transactions for which revenue has not yet been earned.

O. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position or balance sheet reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of financial position or balance sheet reports a separate section for deferred inflows of resources.

This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

P. Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition, estimates affect the reported amount of expenses. Actual results could differ from these estimates and assumptions.

57 107
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Q. OPEB Liabilities, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s OPEB Plan and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis as they are reported by California Employers’ Retiree Benefit Trust (CERBT). For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

R. Implementation of Governmental Accounting Standards Board (GASB) Pronouncements Management adopted the provisions of the following Governmental Accounting Standards Board (GASB) Statement, which became effective during the year ended June 30, 2021.

Effect of New Governmental Accounting Standards Board (GASB) Pronouncements GASB Statement No. 84 – In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. This Statement describes four fiduciary funds that should be reported, if applicable: (1) pension (and other employee benefit) trust funds, (2) investment trust funds, (3) private-purpose trust funds, and (4) custodial funds.

Custodial funds generally should report fiduciary activities that are not held in a trust or equivalent arrangement that meets specific criteria. The provisions of this Statement were implemented during fiscal year 2021. As part of the implementation of this Statement, the City’s former Agency Funds are not presented as Custodial Funds.

GASB Statement No. 90 – In August 2018, GASB issued Statement No. 90, Majority Equity Interests – an amendment of GASB Statements No. 14 and No. 61. The primary objectives of this Statement are to improve the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. It defines a majority equity interest and specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government’s holding of the equity interest meets the definition of an investment. This statement is effective for reporting periods beginning after December 15, 2019. The is no impact on the City financial statements.

Future Governmental Accounting Standards (GASB) Pronouncements GASB Statement No. 87 – In June 2017, the GASB issued Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. The requirements of this Statement are effective for reporting periods beginning after December 15, 2020. The City has not determined its effect on the financial statements.

58 108
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) GASB Statement No. 91 – In May 2019, GASB Issued Statement No. 91, Conduit Debt Obligation. The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement clarifies the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures. This Statement also addresses arrangements— often characterized as leases—that are associated with conduit debt obligations. This Statement is effective for reporting periods beginning after December 15, 2021. Earlier application is encouraged. The City has not yet determined its effect on the financial statements.

GASB Statement No. 92 – In January 2020, GASB Issued Statement No. 92, Omnibus 2020. The primary objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics. This Statement is effective for reporting periods beginning after June 15, 2020. Earlier application is encouraged. The City has not yet determined its effect on the financial statements.

GASB Statement No. 93 – In March 2020, GASB Issued Statement No. 93, Replacement of Interbank Offered Rates. The primary objective of this Statement to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. This Statement is effective for reporting periods beginning after December 31, 2021. Earlier application is encouraged. The City has not yet determined its effect on the financial statements.

NOTE 2 - CASH, CASH EQUIVALENTS AND INVESTMENTS
A. Cash Deposits
The City’s cash and investments at June 30, 2021 are presented as follows:

Cash and investments $67,840,186
Restricted cash and investments 172,021
Custodial funds:

Cash and investments 34,982
Restricted cash and investments 45,814
Total cash and investments $68,093,003
Cash and investments consist of the following as of June 30, 2021:

Cash on hand $2,170
Deposits with financial institutions* 9,717,246
Investments:

Liquid investments $3,590,222
Managed investments 54,783,365 58,373,587
Total cash and investments $68,093,003
*Workers' compensation imprest balances held by Tristar in trust for City. 59 109
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 2 - CASH, CASH EQUIVALENTS AND INVESTMENTS (Continued) B. Authorized Investments
Under the provisions of the City’s investment policy and in accordance with Section 53601 of the California Government Code, the City is authorized to invest or deposit in the following, with the limitations as they relate to interest rate risk, credit risk, and concentration of credit risk:

Maximum Maximum
Maximum Percentage Investment Minimum Legal
Authorized Investment Type Maturity of Portfolio In One Issuer Rating Local Agency Investment Fund N/A 100% $75 million N/A
Money Market Mutual Funds N/A 20% 10% N/A
Certificates of Deposit 3 years 50% 10% A
Bankers' Acceptances 180 days 20% 10% N/A
Commercial Paper 270 days 25% 5% A-1
Repurchase Agreements 180 days 20% 10% N/A
U.S. Treasury Bills, Notes and Bonds 5 years 100% N/A N/A Supra-National Agency Notes and Bonds 5 years 20% N/A AA U.S. Government-Sponsored Enterprise 5 years 100% 20% N/A Agencies
Medium-Term Corporate Notes 5 years 30% 3% A
Asset-backed Securities 5 years 20% 3% AAA
C. Interest Risk
Interest rate risk is the market rate changes that adversely affect the fair value of an investment. Generally, the sensitivity of an investment fair value to changes in market rates is greater when the maturity of the investment is longer.

Investments held in City Treasury grouped by maturity date at June 30, 2021, are shown below:

One Year 13 months to 25 months 37 months
Investment Type or Less 24 months to 36 months to 60 months Total Money Market Mutual Fund $217,835 $217,835
Government Sponsored Enterprise Agencies:

Federal National Mortgage Association Notes (FNMA) 7,320 $3,049,732 $1,784,720 4,841,772 Federal Home Loan Mortgage Corporation (FHLMC) 304,608 2,174,440 3,796,799 6,275,847 FHMS 21,808 $96,123 117,931
U.S. Treasury Notes 13,042,422 8,256,417 3,302,000 24,600,839 Supra-National Agency Notes and Bonds 825,969 423,779 1,249,748 Certificate of Deposit 1,031,008 2,639,884 3,670,892
Corporate Notes 939,109 2,630,999 3,290,481 1,707,110 8,567,699 Asset-Backed Securities 5,416 692,360 1,964,727 2,578,299 5,240,802 Local Agency Investment Funds (LAIF) 3,590,222 3,590,222 Total investments $6,095,518 $25,055,806 $19,538,731 $7,683,532 58,373,587 Demand Deposits and Cash on Hand 9,719,416
Total cash and investments $68,093,003

60 110
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 2 - CASH, CASH EQUIVALENTS AND INVESTMENTS (Continued) D. Fair Value Hierarchy
The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.

The following is a summary of the fair value hierarchy of the fair value of investments of the City as of June 30, 2021:

Investments by Fair Value Level: Level 1 Level 2 Total
Government Sponsored Enterprise Agencies:

Federal National Mortgage Association Notes (FNMA) $4,841,772 $4,841,772 Federal Home Loan Mortgage Corporation (FHLMC) 6,275,847 6,275,847 FHMS 117,931 117,931
U.S. Treasury Notes $24,600,839 24,600,839
Supra-National Agency Notes and Bonds 1,249,748 1,249,748 Corporate Notes 8,567,699 8,567,699
Asset-backed Securities 5,240,802 5,240,802
Total Investments $24,600,839 $26,293,799 50,894,638
Investments Measured at Amortized Cost:

Certificates of Deposit 3,670,892
Money Market Mutual Fund 217,835
California Local Agency Investment Fund (LAIF) 3,590,222 Cash in banks and on hand 9,719,416
Total Cash and investments $68,093,003
Investments above classified in Level 1 of the fair value hierarchy are valued using a quoted price in an active market for an identical asset. Investments above classified in Level 2 of the fair value hierarchy are valued using a quoted price in a non-active market for an identical asset. These prices are obtained from various pricing sources by the custodian bank. Certificates of Deposit, Money Market Mutual Fund and LAIF are valued at amortized cost and therefore, exempt from being classified under GASB 72. 61 111
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 2 - CASH, CASH EQUIVALENTS AND INVESTMENTS (Continued) E. Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is usually measured by the assignment of a rating by a nationally recognized statistical rating organization.

At June 30, 2021, the City’s deposit and investments were rated as follows:

Investment Type Moody's S&P Market Value
Securities of Government Sponsored Enterprise Agencies:

Federal National Mortgage Association Notes (FNMA) Aaa AA+ $4,841,772 Federal Home Loan Mortgage Corporate Notes (FHLMC) Aaa AA+ 6,275,847 FHMS Aaa AA+ 117,931
U.S. Treasury Notes Aaa AA+ 24,600,839
Corporate Notes:

Northern Trust Company A2 A+ 281,189
Honeywell International A2 A 122,268
Toyota Motor Credit Corp A1 A+ 382,955
Apple Inc. Aa1 AA+ 354,388
Clorox Company Baa1 A- 230,892
Bank of NY Mellon A1 A 76,728
Adobe Inc. Corp Note A2 A 204,356
JP Morgan Chase & Co. Bonds A2 A- 641,029
Exxon Mobil Corporation Aa2 AA- 291,236
Pepsico Inc. Corporate Notes A1 A+ 151,172
Chevron Corp Aa2 AA- 86,275
General Dynamics A2 A- 237,387
Amazon.com Inc. A1 AA 784,615
Paccar Financial Corp A1 A+ 50,424
Chevron Corp Aa2 AA- 288,386
John Deere Capital Corp A2 A 225,472
Caterpillar Financial Service A2 A 424,581
Bristol-Myers Squibb Co (Callable) A2 A+ 338,667
Goldman Sachs Group Inc. A2 BBB+ 477,619
IBM Corp Notes A2 A- 134,543
Charles Schwab Corp (Callable) A2 A 175,922
Morgan Stanley Corp (Callable) A1 BBB+ 105,126
Credit Quality Ratings
(Continued)
62 112
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 2 - CASH, CASH EQUIVALENTS AND INVESTMENTS (Continued) Comcast Corp (Callable) A3 A- 216,571
Morgan Stanley Corp A1 BBB+ 211,411
Citigroup Inc. A3 BBB+ 404,300
United Health Group Inc. A3 A+ 189,472
Astrazeneca Finance LLC (Callable) A2 A 289,636
Bank of America A2 A- 213,046
Bank of America Corp (Callable) A2 A- 275,829
Merck & Co. Inc. A1 A+ 138,471
Burlington North Santa Fe A3 AA- 134,365
Bank of NY Mellon (Callable) A1 A 138,425
PNC Bank NA A2 A 290,943
Certificates of Deposit
Credit Suisse New York P-1 A-1 450,821
Societe Generale NY P-1 A-1 580,187
Sumitomo Mitsui Bank NY A1 A 452,114
Nordea Bank ABP New York Aa3 AA- 586,009
Skandinav Enskilda Bank Aa2 A+ 586,075
DNB Bank ASA/NY LT Aa2 AA- 590,008
Credit Suisse New York Cert Aa3 A+ 425,678
Asset-backed Securities NR AAA 2,575,769
Asset-backed Securities Aaa AAA 1,370,270
Asset-backed Securities Aaa NR 1,294,763
Supra-National Agency Notes and Bonds Aaa AAA 1,249,748 Money Market Aaa AAAm 217,835
Subtotal 54,783,365
Not Rated:

Cash on hand Not Rated Not Rated 2,170
US Bank General Checking Not Rated Not Rated 9,468,158
Money Market (Sweep Account) Not Rated Not Rated 249,088 Local Agency Investment Funds (LAIF) Not Rated Not Rated 3,590,222 Total Investments $68,093,003

63 113
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 2 - CASH, CASH EQUIVALENTS AND INVESTMENTS (Continued) F. Custodial Credit Risk – Deposits
This is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The City does not have a policy for custodial credit risk for deposits. However, the California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105% of the secured deposits.

As of June 30, 2021, the City's bank balance was $9,510,964 and the corresponding carrying book balance was $9,414,473. Of the bank balance, $250,000 was covered by federal depository insurance and $9,164,473 was collateralized.

Investments: The custodial credit risk for investments 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 California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments.

G. Investment in State Investment Pool
The City is a voluntary participant in LAIF that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool as reported in the accompanying financial statements is based upon the Entity’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio).

As of June 30, 2021, the City held $3,590,222 in LAIF. The LAIF fair value factor of 1.00008297 was used to calculate the fair value of the investments in LAIF and average maturity of 291 days. 64 114
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 3 – INTERFUND TRANSACTIONS
A. Transfers
Transfers between funds during the fiscal year ended June 30, 2021 were as follows:

City of Los Altos
June 30, 2021
Fund Making Transfers Fund Receiving Transfers Amount
General Fund Capital Projects Fund $16,781,172 (A)
Non-Major Governmental Funds 867,400 (B)
In-Liew Park Land Special Revenue Fund Capital Projects Fund 1,300,000 (A) Non-Major Governmental Funds General Fund 146,176 (C)
Capital Projects Fund 12,456,641 (A)
$31,551,389
Interfund transfers were principally used for the following purposes, (A) To fund capital projects
(B) To maintain minimum fund balance in Debt Service
(C) Public safety related funds paid to the General Fund B. Due to/from other funds
Current interfund balances arise in the normal course of business, to fund projects until the borrowing fund receives revenues to repay the lending fund and to assist funds with negative cash balance at the fiscal year end. The following is a summary of interfund balances as of June 30, 2021:

Due From Other Funds Due To Other Funds Amount
General Fund Storm Drain Enterprise Fund $7,969
Internal Service Fund 94,747
Non-Major Governmental Funds 748,269
Total $850,985
NOTE 4 – NOTE RECEIVABLE
The City entered into a loan agreement with the City Manager on November 1, 2016, to provide the City Manager a long-term loan of up to $2,000,000 to finance the acquisition of his personal residence located within the City. The loan is secured by a deed of trust on the property. The loan is due upon sale of the property, within six to twelve months after the termination of the City Manager’s employment with the City depending on the cause of termination, or 30 years from the date of the loan agreement execution, whichever occurs first. The loan bears an interest rate at the 5 Year Treasury Rate as of September 1, 2016 amortized over a thirty-year period and recalculated to the 5 year Treasury Rate every five years of the original date of the loan. At June 30, 2021, the outstanding balance of this loan was $1,704,880. 65 115
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 5 – CAPITAL ASSETS
A. Government-wide Financial Statements
At June 30, 2021, the City’s capital assets consisted of the following:

Governmental Business-Type
Activities Activities Total
Nondepreciable assets:

Construction in progress $45,660,831 $1,361,354 $47,022,185 Land 14,500,134 14,500,134
Total nondepreciable assets 60,160,965 1,361,354 61,522,319 Depreciable assets:

Buildings 21,637,868 17,959,980 39,597,848
Improvements 6,537,672 6,537,672
Machinery and equipment 7,094,884 1,066,804 8,161,688
Infrastructure 46,562,694 8,091,365 54,654,059
Total depreciable assets 81,833,118 27,118,149 108,951,267 Less accumulated depreciation (36,154,600) (13,829,900) (49,984,500) Total depreciable assets, net 45,678,518 13,288,249 58,966,767 Total capital assets $105,839,483 $14,649,603 $120,489,086 The following is a summary of capital assets for governmental activities for the year ended June 30, 2021:

Balance Balance
June 30, 2020 Additions Retirements Transfers June 30, 2021 Governmental Activities:

Capital assets, not depreciated:

Land $11,642,285 $2,857,849 $14,500,134
Construction in progress 24,125,740 23,135,712 ($1,600,621) 45,660,831 Total capital assets, not depreciated 35,768,025 25,993,561 (1,600,621) 60,160,965 Buildings 21,637,868 21,637,868
Improvements 6,537,672 6,537,672
Machinery and equipment 6,879,232 353,841 ($138,189) 7,094,884 Infrastructure 44,962,073 1,600,621 46,562,694
Total cost of depreciable assets 80,016,845 353,841 (138,189) 1,600,621 81,833,118 Less accumulated depreciation:

Buildings (11,029,830) (398,477) (11,428,307)
Improvements (2,592,193) (177,675) (2,769,868)
Machinery and equipment (5,084,950) (329,062) 138,189 (5,275,823) Infrastructure (15,204,102) (1,476,500) (16,680,602)
Total accumulated depreciation (33,911,075) (2,381,714) 138,189 (36,154,600) Net depreciable assets 46,105,770 (2,027,873) 1,600,621 45,678,518 Governmental Activity Capital Assets, Net $81,873,795 $23,965,688 $105,839,483 66 116
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 5 – CAPITAL ASSETS (Continued)
The governmental activities depreciation expenses for capital assets for the year ended June 30, 2021 are as follows:

Functions/Programs Total
Public safety $157,432
Public works 1,546,803
Recreation 473,809
Community development 815
Admin / community services 202,855
Total depreciation expense $2,381,714
The following is a summary of capital assets for business-type activities:

Balance Balance
June 30, 2020 Additions Retirements Transfers June 30, 2021 Business-Type Activities:

Capital assets, not depreciated:

Construction in progress $1,341,596 $2,787,409 $ ($2,767,651) $1,361,354 - Total capital assets, not depreciated: 1,341,596 2,787,409 (2,767,651) 1,361,354 Capital assets, being depreciated:

Buildings 17,959,980 17,959,980
Machinery and equipment 1,066,804 1,066,804
Infrastructure 5,323,714 2,767,651 8,091,365
Total cost of depreciable assets 24,350,498 2,767,651 27,118,149 Less accumulated depreciation:

Buildings (10,457,145) (217,810) (10,674,955)
Machinery and equipment (820,519) (55,571) (876,090)
Infrastructure (2,126,232) (152,623) (2,278,855)
Total accumulated depreciation (13,403,896) (426,004) (13,829,900) Net depreciable assets 10,946,602 (426,004) 2,767,651 13,288,249 Business-type Activity Capital Assets, Net $12,288,198 $2,361,405 -$ $ - $14,649,603 Depreciation expense for business-type activities related to the Sewer Fund amounted to $426,004 for the year ended June 30, 2021.

B. Fund Financial Statements
The Governmental Fund Financial Statements do not present capital assets, which are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position.

The capital assets of the Enterprise Funds in the Proprietary Fund Financial Statements are the same as those shown in the business-type activities of the Government-wide Financial Statements. 67 117
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 6 – LONG-TERM OBLIGATIONS
A. Governmental Activities Long-Term Debt
Summary of changes in governmental activities long-term debt for the year ended June 30, 2021 is as follows:

Balance at Balance at Due Within Due in More
June 30, 2020 Additions Retirements June 30, 2021 One Year Than One Year 2004 Certificate of Participation $1,005,000 ($125,000) $880,000 $130,000 $750,000 Direct Borrowing-Community Center Lease $10,000,000 (503,137) 9,496,863 404,612 9,092,251 Total $1,005,000 $10,000,000 ($628,137) $10,376,863 $534,612 $9,842,251 2004 Refunding Certificate of Participation: On November 1, 1996, the City issued $2,630,000 principal amount of Certificates of Participation (ABAG 38 COPs). The purpose of the ABAG 38 COPs was to finance the partial purchase of the 5.5 acre Saint William School site for public purposes and uses. During 2004 the City issued $2,500,000 of 2004 Refunding Certificates of Participation to advance refund $2,390,000 of outstanding principal on the ABAG 38 Certificates of Participation, set up reserve funds, and to pay related issuance costs. The entire ABAG 38 Certificates of Participation had been paid off by June 30, 2004. This advance refunding was undertaken to reduce total future debt service payments.

The Certificates of Participation are limited obligations of the City, payable from appropriations budged for in the City’s annual adopted budget. The Certificate covenants contain events of default that may result in the termination of the lease, collection of rent due and other monetary charges and terminate the City's right to possession of the leased property as applied by the Trustee and specified in the terms of the agreement if any of the following conditions occur: default on debt service payments; the failure of the City to observe or perform the conditions, covenants, or agreement terms of the debt; bankruptcy filing by the City; or if any court or competent jurisdiction shall assume custody or control of the City. There were no such events occurred during the fiscal year ending June 30, 2021.

Direct Borrowing - Community Center Lease Agreement: On December 1, 2020, the City entered into Lease Agreements with the Public Property Financing Corporation of California, which subsequently assign the Agreement to Sterling National Bank (Assignee), under which the City leased certain facilities and the land on which the City’s Community Center is located, for which the Assignee made a one‐time up‐front lease payment to the City in the amount of $10,000,000. Simultaneously, the City will lease back from the Assignee with annual lease payments over a lease term of 19 years, at a fixed interest rate of 2.290% per year. The Sublease is secured by the leased property. The Sublease is repayable in semi‐annual payments beginning June 2021 through June 30, 2040. The pledge of repayment is from the General Fund.

68 118
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 6 – LONG-TERM OBLIGATIONS (Continued)
At June 30, 2021, future debt service requirements were as follows:

Direct Borrowing
Years ending 2004 COP Community Center Lease
June 30 Principal Interest Principal Interest Total
2022 $130,000 $37,400 $404,612 $217,478 $789,490
2023 140,000 31,875 413,877 208,213 793,965
2024 140,000 25,925 423,355 198,735 788,015
2025 150,000 19,975 433,050 189,040 792,065
2026 155,000 13,600 442,967 179,123 790,690
2027-2031 165,000 7,012 2,371,719 738,730 3,282,461
2032-2036 - - 2,656,005 454,443 3,110,448
2037-2040 - - 2,351,278 136,101 2,487,379
Total $880,000 $135,787 $9,496,863 $2,321,863 $12,834,513 B. Non-City Obligations
The following bonds are not reported in the City’s financial statements as they are special obligations payable solely from and secured by specific revenue sources as described in the resolutions and official statements of the respective issues. Neither the faith and credit nor the taxing power of the City is pledged for payment of these obligations.

Balance Balance Due Within Due in More
June 30, 2020 Retirements June 30, 2021 One Year Than One Year Raymundo Curb and Gutter $25,000 ($25,000)
Blue Oak Lane 500,000 (15,000) $485,000 $15,000 $470,000 Total $525,000 ($40,000) $485,000 $15,000 $470,000
Raymundo Special Assessment Districts: The Raymundo Curb and Gutter Assessment District Improvement Bonds were issued on August 3, 2005 to provide financing for the street improvements in that District. The bonds are payable from a special property tax levied to those residents living within the respective District. The Bonds have been repaid and this District will cease to be reported from next year.

Blue Oak Lane Special Assessment District: On November 5, 2009, Limited Obligation Improvement Bonds were issued for a newly formed Blue Oak Lane Sewer Assessment District (series 2009) to finance the acquisition and construction, by the City, of sanitary sewer improvements serving properties within the subject assessment District. These bonds are issued upon and secured by individual parcel levied assessments to be included in the annual property tax billings annually. The Bonds mature in 2039, were issued in a principal amount of $662,880 and are subject to semi-annual debt service payments administered by the City.
69 119
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 7 – COMPENSATED ABSENCES PAYABLE
The City’s compensated absences at June 30, 2021, were as follows:

Governmental Business-type
Activities Activities Total
Balance at July 1, 2020 $1,990,680 $72,084 $2,062,764
Additions 517,576 81,492 599,068
Payments (584,218) (46,195) (630,413)
Balance at June 30, 2021 $1,924,038 $107,381 $2,031,419 Current Portion $481,010 $26,845 $507,855
Long-Term Portion $1,443,028 $80,536 $1,523,564
NOTE 8 – NET POSITION AND FUND BALANCES
A. Fund Balances
In the fund financial statements, governmental funds report the following classifications: non-spendable, restricted, committed, assigned, and unassigned. The City Council, as the highest level of decision making authority for the City, can commit fund balances through the adoption of a formal action in accordance with the adoption of its annual Financial Policy. This formal action includes committing funds through budget adoption or by resolution. This policy authorizes the City Manager to assign fund balances and has set the budgetary level of control at the Fund and Capital Project level for the governing body and the department level for the City Manager and assignees.

B. General Fund Reserve
The City Council has established a General Fund Reserve goal level of 20% of annual operating expenditures has set funds aside accordingly through its annual budgetary actions. These funds would be available for use in such conditions to mitigate negative economic fiscal impacts or State takeaways and can be activated within any one budget cycle through Council action. An economic downturn would entail a projected and/or sudden drop in core revenues (major tax and service revenue loss) of equal to or greater than 5% (including the impact of inflation) and/or a change in economic parameters (such as interest rates, debt service rates, commodity prices, pension rates) that cause a material change in expenditures of 5% or more, or the occurrence of a local natural disaster or unexpected financial claim requiring the immediate use of cash balances of 5% or more, or the occurrence of a local natural disaster or unexpected financial claim requiring the immediate use of cash balances. In fiscal year 2020/2021, in line with budget approval, the City reallocated the pre-established State Budget Stabilization reserve into the aforementioned General Fund reserve. This results in the establishment of one Reserve balance to assist in periods of economic downturn or extraordinary need. The City’s reserve goal is at 17.5% during fiscal year 2020/21 based on total expenses for the year.
70 120
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 8 – NET POSITION AND FUND BALANCES (Continued)
C. Classifications
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.

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 do not meet the definition of “net investment in capital assets” or “restricted net position.” As prescribed by GASB Statement No. 54, governmental funds report fund balance in classifications based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. As of June 30, 2021, fund balances for government funds are made up of the following:
 Non-spendable Fund Balance – includes amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash, for example: inventories, prepaid amounts, long-term notes receivable and land.
 Restricted Fund Balance – includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers.  Committed Fund Balance – Committed fund balances include amounts that can be used only for the specific purposes determined by a formal action of the City Council's highest level of decision-making authority. The City Council can, by adoption of a resolution prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the resolution remains in place until a similar action is taken (the adoption of another resolution) to remove or revise the limitation.  Assigned Fund Balance – comprised of amounts intended to be used by the City for specific purposes that are neither restricted nor committed. Intent is expressed by (a) the City Council or (b) a body (for example: a budget or finance committee) or official to which the City Council has delegated the authority to assign amounts to be used for specific purposes.  Unassigned Fund Balance – conveys the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose. General fund is the only fund that reports a positive unassigned fund balance amount. In governmental funds other than the general fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed, or assigned to those purposes, a negative unassigned fund balance is reported in that fund.
71 121
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 8 – NET POSITION AND FUND BALANCES (Continued)
D. Policies
Order of Use
The standard also requires governments to disclose the accounting policies that indicate the order in which restricted, committed, assigned and unassigned amounts are spent. The City considers restricted amounts to have been spent first when expenditures are incurred and both restricted and unrestricted fund balances are available. Additionally, the City considers committed amounts to have been spent first, assigned amounts to have been spent second, and unassigned amounts to have been spent last when an expenditure is incurred for purposes of which committed, assigned, and unassigned fund balance is available. In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned.

Assignment and Commitment Authority
The City Council has approved by resolution a financial policy authorizing the City Manager to assign fund balances to facilitate year-end reporting requirements. The City Council, as the highest level of decision making authority for the City, has the ability to commit fund balances through the adoption by resolution.

The same action must be taken to modify or rescind the commitment.

E. Fund Balances
Fund balances for all the major and non-major governmental funds as of June 30, 2021 were distributed as follows:

Other
In Lieu Capital Governmental
Fund Balance Classifications General Park Land Projects Funds Total Nonspendables:

Inventory and prepaids $145,196 $145,196
Notes receivable 1,704,880 1,704,880
Veteran Memorial 8,615 8,615
Total Nonspendable Fund Balances 1,858,691 1,858,691
Restricted for:

Debt service $373,551 373,551
Special revenue programs and projects $5,780,278 5,995,243 11,775,521 Total Restricted Fund Balances 5,780,278 6,368,794 12,149,072 Assigned to:

Emergency and operating 7,649,169 7,649,169
OPEB 1,500,000 1,500,000
PERS reserve 5,000,000 5,000,000
Technology reserve 1,108,582 1,108,582
Capital and equipment (Note 8I):

Capital and equipment reserve 389,459 389,459
Construction in progress reserve $11,482,682 11,482,682 Community center reserve 679,110 679,110
Total Assigned Fund Balances 15,936,861 11,482,682 389,459 27,809,002 Unassigned 4,928,166 (531,566) 4,396,600
Total Unassigned Fund Balances 4,928,166 (531,566) 4,396,600 Total Fund Balances $22,723,718 $5,780,278 $11,482,682 $6,226,687 $46,213,365 72 122
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 8 – NET POSITION AND FUND BALANCES (Continued)
F. Net Deficit
The funds listed in the table below had fund balance deficits at June 30, 2021. These deficits are expected to be eliminated by future revenues.

Fund
Fund Deficit
Storm Drain Enterprise Fund ($23,959)
Community Development Block Grant Special Revenue Fund (531,566) Dental reimbursement Internal Services Fund (94,747)
G. OPEB Reserves
As of June 30, 2021, $1,500,000 in General Fund reserves have been assigned in recognition of existing PostRetirement Health actuarial liability.

H. Capital Projects Reserves
As of June 30, 2021 the City had set-aside $679,110 for the construction of a new community center that is financed by resources other than proprietary funds. This amount was from the City’s Real Property Proceeds Fund, which are presented with the General Fund in the financial statements. While these funds are not restricted by outside funding sources, the fund balance is assigned for the new community center.

Real Property
Proceeds Fund
Beginning Fund Balance as of July 1, 2020 $10,654,976
Revenues
Interest Income 24,133
Total Revenues 24,133
Other Financing Sources (Uses)
Transfers out (10,000,000)
Total Other Financing Sources (Uses) (10,000,000)
Ending Fund Balance as of June 30, 2021 $679,109
I. Encumbrances
The City utilized an encumbrance system during fiscal year 2021 to assist in controlling expenditures.

Under this system, governmental funds are encumbered when purchase orders, contracts, or other commitments are signed or approved. The General fund had an encumbrance balance at June 30, 2021 of $1,254,492, which is reflected in the fiscal year 2021 budget. 73 123
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 8 – NET POSITION AND FUND BALANCES (Continued)
J. Closure of the Agency Funds and Restatement of Fiduciary Beginning Net Position The City implemented the provisions of Governmental Accounting Standards Board Statement No. 84 – Fiduciary Activities during the year ended June 30, 2021. As a result, the activities of the former agency funds are now reported as custodial funds in the fiduciary funds statements. Custodial funds beginning net position at July 1, 2020, was restated and increased by $5,155,088.

K. Prior Period Adjustment
During the fiscal year 2021, the City made some prior period adjustments, as a result, the beginning fund balances for General Fund, the Capital Projects Fund, the Community Development Block Grant special revenue fund were reduced by $2,939,821, $161,894 and $4,617 respectively. The beginning fund balances for the Gas Tax, TDA and Vehicle Registration special revenue funds were increased by $19,392, $52,724 and $147,017 respectively. Beginning net positions at July 1, 2021 for the Governmental Activities were reduced by $2,887,199 correspondingly.

NOTE 9 – RISK MANAGEMENT
A. Bay Cities Joint Powers Insurance Authority
The City is exposed to various risks of loss related to torts; theft of damage to and destruction of assets; errors and omissions; and floods for which the City is insured through Bay Cities Joint Powers Insurance Authority (Bay Cities).

The City has joined Bay Cities for general liability, property, errors and omissions, crimes and automobile physical damage coverage in the current year. Bay Cities is a public agency created in 1986 by and among various municipalities in Northern California to provide a pooled approach to liability insurance pursuant to the California Government Code. It is governed by a Board of Directors comprised of appointed officials from the member entities. The purpose of the pool is to provide various levels of liability coverage, claims administration, and loss control support to member agencies. Annually, each member pays an actuarially determined premium based on a formula which takes into account the prior three years’ loss experience, annual payroll, and population.

Bay Cities provides coverage for its Members in excess of the member's retained limit, or self-insured retention (SIR), up to $1,000,000 per occurrence. Each Member retains the portion of every loss that falls within their SIR, ranging from $2,500 to $1,000,000. Bay Cities is also a member of the California Affiliated Risk Management Authorities (CARMA), a risk sharing joint powers authority. When losses exceed the $1,000,000 per occurrence limit, CARMA provides coverage up to $28,000,000.

The City self-insures the first $100,000 of each liability loss. Once the City’s deductible is met, Bay Cities becomes responsible for payment of all claims up to the upper limit. During the year ended June 30, 2021, the City contributed $110,211 or current year coverage.

The City continues to carry excess insurance policy for Workers’ Compensation claims through the CSAC Excess Insurance Authority JPA up to the statutory limits and does so using the services of a contracted third-party administrator. The City has a $250,000 deductible as of June 30, 2021. During the year, the City contributed $660,550 for current year coverage.

74 124
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 9 – RISK MANAGEMENT (Continued)
As of June 30, 2021, $51,763 of revolving funds was held in trust on behalf of the City by the workers’ compensation third-party claims administrator. $20,000 is also being held by Bay Cities in the procurement of liability and claims coverage. The City will receive these funds upon termination of services subject to final withdrawal adjustments.

The Bay Cities financial statements may be obtained from Bay Cities Joint Powers Insurance Authority, Bickmore, 1750 Creekside Oaks Drive Suite 200, Sacramento, CA 95833. CSAC Excess Insurance Authority financial statements may be obtained from CSAC Excess Insurance Authority, 75 Iron Point Circle Suite 200, Folsom, CA 95630.

B. Liability for Uninsured Claims
The GASB requires municipalities to record their liability for uninsured claims and to reflect the current portion of this liability as an expenditure in their financial statements. As discussed in the section above, the City has coverage for such claims, but it has retained the risk for the deductible or uninsured portion, of these claims. The current accounting standards require that this amount be separately identified and recorded as a liability. Changes in the balances of claims liabilities during the past three years were as follows:
2021 2020 2019
Unpaid claims, beginning of year $3,750,000 $3,492,000 $3,580,000 Incurred claims and changes in estimates 68,724 816,675 247,742 Claim payments 402,276 (558,675) (335,742)
Unpaid claims, end of year $4,221,000 $3,750,000 $3,492,000 Current Portion $1,072,302 $930,123 $827,371
Long-Term Portion $3,148,698 $2,819,877 $2,664,629
June 30,
In conformance with current accounting standards the City obtained an independent actuarial valuation of all outstanding Workers Compensation and Liability claims. The Workers Compensation report presented a valuation as of December 31, 2020 and projected values through fiscal years 2021 and 2022. The fiscal year 2020-2021 values presented above reflect the estimated present value of open claims as developed in this actuarial report. The General Liability report presented a valuation as of December 31, 2020 and projected values through fiscal years 2021 and 2022. The estimated amount of claims and judgments due within one year is $1,072,302.
75 125
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 10 – SELF-FUNDED REIMBURSEMENT DENTAL AND VISION PLAN The City provides a self-funded reimbursement based dental and vision plans. The City’s contribution for these plans are accounted for in the Dental Reimbursement Fund. The City contributed $75 per month for each fulltime budgeted position. The funds accumulated are used to reimburse full-time salaried employees and their dependents, as well as council members for covered dental and vision claims. There are no administrative charges for this plan. The Dental Reimbursement Fund has a negative fund balance of $94,747 in fiscal year 2021 due to the plans operating on a calendar year basis. Contributions and reimbursements for the past five fiscal years as follows:

Contribution Reimbursement
Fiscal year ended June 30, Amount Amount
2017 $121,350 $125,208
2018 127,800 177,094
2019 125,324 238,064
2020 258,874 253,377
2021 264,121 308,786
Total $897,469 $1,102,529
The dental and vision plan year commences January 1st of each calendar year. An annual maximum dental and vision reimbursements of $1,939 are provided for each employee and $1,291 for each of their dependents. Any remaining balance in the fund for each plan year is carried forward to the following year. In subsequent years, the maximum coverage for both employees and dependents is increased annually based on the Consumer Price Index but not to exceed 3%.

NOTE 11 – PENSION PLAN
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) plan (Plan) and additions to/deductions from the Plan’s 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.

A. General Information about the Pension Plan
Plan Descriptions – All qualified permanent and probationary employees are eligible to participate in the City’s Miscellaneous and Safety Tier I, Tier II and PEPRA Employee Pension Rate Plan. The City’s Miscellaneous Rate Plan is part of the public agency cost-sharing multiple-employer defined benefit pension plan (PERF C), which is administered by the California Public Employees’ Retirement System (CalPERS). PERF C consists of a miscellaneous pool and a safety pool (also referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively. Individual employers may sponsor more than one miscellaneous and safety rate plan. The employer participates in one cost-sharing multiple-employer defined benefit pension plan regardless of the number of rate plans the employer sponsors. The City sponsors three miscellaneous and three safety rate plans. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. 76 126
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 11 – PENSION PLAN (Continued)
Benefits Provided – CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries.

Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Plan’s provisions and benefits in effect at June 30, 2021, are summarized as follows:

Miscellaneous - Tier 1
Hire date Prior to January 1, 2012
Benefit formula 2.7% @ 55
Benefit vesting schedule 5 years service
Benefit payments monthly for life
Retirement age 50 - 67
Monthly benefits, as a % of eligible compensation 2.000% - 2.700% Required employee contribution rates 8.000%
Required employer contribution rates 14.194%
Miscellaneous - Tier 2
Hire date
January 1, 2012 -
December 31, 2012
Benefit formula 2% @ 60
Benefit vesting schedule 5 years service
Benefit payments monthly for life
Retirement age 50 - 67
Monthly benefits, as a % of eligible compensation 1.092% - 2.418% Required employee contribution rates 7.000%
Required employer contribution rates 8.794%
Miscellaneous - PEPRA
Hire date On or after January 1, 2013
Benefit formula 2% @ 62
Benefit vesting schedule 5 years service
Benefit payments monthly for life
Retirement age 52 - 67
Monthly benefits, as a % of eligible compensation 1.000% - 2.500% Required employee contribution rates 6.750%
Required employer contribution rates 7.732%

77 127
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 11 – PENSION PLAN (Continued)
Safety - Tiers 1 and 2
Hire date Prior to January 1, 2012
Benefit formula 3% @ 50
Benefit vesting schedule 5 years service
Benefit payments monthly for life
Retirement age 50 - 55
Monthly benefits, as a % of eligible compensation 3.000% Required employee contribution rates 9.000%
Required employer contribution rates 23.674%
Safety - Tier 3
Hire date
January 1, 2012 -
December 31, 2012
Benefit formula 3% @ 55
Benefit vesting schedule 5 years service
Benefit payments monthly for life
Retirement age 50 - 55
Monthly benefits, as a % of eligible compensation 2.400% - 3.000% Required employee contribution rates 9.000%
Required employer contribution rates 20.585%
Safety - PEPRA
Hire date On or after January 1, 2013
Benefit formula 2.7% @ 57
Benefit vesting schedule 5 years service
Benefit payments monthly for life
Retirement age 50 - 57
Monthly benefits, as a % of eligible compensation 2.000% - 2.700% Required employee contribution rates 13.000%
Required employer contribution rates 13.044%
Beginning in fiscal year 2018, CalPERS collects employer contributions for the Plan as a percentage of payroll for the normal cost portion as noted in the rates above and as dollar amount for contributions toward the unfunded liability and side fund. The dollar amounts are billed on a monthly basis. The City’s required contribution for the unfunded liability and side fund was $2,783,677 in fiscal year 2021.

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 Plan are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. 78 128
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 11 – PENSION PLAN (Continued)
For the year ended June 30, 2021, the contributions recognized as part of pension expense for the Plan were as follows:

Miscellaneous Safety Total
Contributions - employer $2,588,732 $2,201,042 $4,789,774 B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2021, the City reported a net pension liability for its proportionate share of the net pension liability of the Plan as follows:

Proportionate Share
of Net Pension Liability
Miscellaneous $23,257,604
Safety 19,111,513
Total Net Pension Liability $42,369,117
The City’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2020, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The City’s proportionate share of the net pension liability for the Plan as of June 30, 2019 and 2020 was as follows:

Miscellaneous Safety
Proportion - June 30, 2019 0.54% 0.28%
Proportion - June 30, 2020 0.55% 0.29%
Change - Increase (Decrease) 0.01% 0.01%

79 129
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 11 – PENSION PLAN (Continued)
For the year ended June 30, 2021, the City recognized pension expense of $1,789,174. At June 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Miscellaneous Plan
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $2,588,732 Differences between actual and expected experience 1,198,533 Changes in assumptions ($165,883)
Change in employer's proportion and differences between the employer’s contributions and the employer’s
proportionate share of contributions (369,920)
Net differences between projected and actual earnings
on plan investments 690,904
Adjustments due to differences in proportion 474,104 (66,475) Miscellaneous Total $4,952,273 ($602,278)
Safety Plan
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $2,201,042 Differences between actual and expected experience 1,482,001 Changes in assumptions ($63,661)
Change in employer's proportion and differences between the employer’s contributions and the employer’s
proportionate share of contributions (522,830)
Net differences between projected and actual earnings
on plan investments 415,374
Adjustments due to differences in proportion 504,804
Safety Total $4,603,221 ($586,491)
Grand total $9,555,494 ($1,188,769)
80 130
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 11 – PENSION PLAN (Continued)
$4,789,774 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Miscellaneous Safety Total
Year Ended Annual Annual Annual
June 30 Amortization Amortization Amortization
2022 $188,257 $443,303 $631,560
2023 687,186 682,144 1,369,330
2024 554,442 482,117 1,036,559
2025 331,377 208,125 539,502
$1,761,262 $1,815,689 $3,576,951
Actuarial Assumptions – For the measurement period ended June 30, 2020, the total pension liability was determined by rolling forward the June 30, 2019 total pension liability. The June 30, 2019 total pension liability is based on the following actuarial methods and assumptions:

Miscellaneous & Safety
Valuation Date 6/30/2019
Measurement Date 6/30/2020
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 7.15%
Inflation 2.50%
Salary Increase (1)
Investment Rate of Return 7.15% (2)
Mortality Derived using CalPERS' Membership Data for all funds (3) Post Retirement Benefit Increase Contract COLA up to 2.50% until Purchasing Power Protection Allowance Floor on Purchasing Power applies
(1) Depending on age, service and type of employment
(2) Net of pension plan investment expenses, including inflation (3) The mortality table used was developed based on CalPERS’ specific data. The table includes 15 years of mortality improvements using the Society of Actuaries Scale 90% of scale MP 2016. For more details on this table, please refer to the CalPERS December 2017 experience study report (based on CalPERS demographic data from 1997 to 2015) that can be found on the CalPERS website.

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2019 valuation were based on the results of a December 2018 actuarial experience study for the period 1997 to 2015. Further details of the Experience Study can be found on the CalPERS website. 81 131
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 11 – PENSION PLAN (Continued)
Discount Rate – The discount rate used to measure the total pension liability for the Plan was 7.15%.

The projection of cash flows used to determine the discount rate for the Plan assumed that contributions from all plan members in the Public Employees Retirement Fund (PERF) will be made at the current member contribution rates and the contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the longterm expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

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 and forecasted information for all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded 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 equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

The table below reflects the expected real rates of return by asset class.

Asset Class (a)
New Strategic
Allocation
Real Return
Years 1 - 10(b)
Real Return
Years 11+(c)
Global Equity 50.0% 4.80% 5.98%
Fixed Income 28.0% 1.00% 2.62%
Inflation Assets 0.0% 0.77% 1.81%
Private Equity 8.0% 6.30% 7.23%
Real Assets 13.0% 3.75% 4.93%
Liquidity 1.0% -0.92%
Total 100%
(a) In the CalPERS Comprehensive Annual Financial Repoert, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities. (b) An expected inflation of 2.00% used for this period. (c) An expected inflation of 2.92% used for this period.

82 132
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 11 – PENSION PLAN (Continued)
Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate – The following presents the City’s proportionate share of the net pension liability for the Plan, calculated using the discount rate for the Plan, as well as what the City’s proportionate share of the 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 6.15% 6.15%
Net Pension Liability $33,854,725 $27,889,889
Current Discount Rate 7.15% 7.15%
Net Pension Liability $23,257,604 $19,111,513
1% Increase 8.15% 8.15%
Net Pension Liability $14,501,536 $11,908,025
Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

Reduction of CalPERS Discount Rate - In July 2021, CalPERS reported a preliminary 21.3% net return on investments for the 12‐month period that ended June 30, 2021. Under the Funding Risk Mitigation Policy approved by the CalPERS Board of Administration in 2015, the 21.3% net return was under the original expected return of 21.7%, which will trigger a reduction in the discount rate used to calculate employer and Public Employees' Pension Reform Act (PEPRA) member contributions. The Funding Risk Mitigation Policy seeks to reduce CalPERS funding risk over time, in which CalPERS investment performance that significantly outperforms the discount rate will trigger adjustments to the discount rate, expected investment return, and strategic asset allocation targets. This is the first time it has been triggered. The discount rate, or assumed rate of return, will drop to 6.8%, from its current level of 7%.

Based on these preliminary fiscal year returns, the CalPERS has announced the funded status of the overall PERF is an estimated 82%. This estimate is based on a 7% discount rate. Under the new 6.8% discount rate, however, CalPERS indicated the funded status of the overall PERF drops to 80%. This is because existing assets are assumed to grow at a slightly slower rate annually into the future. As intended under the Funding Risk Mitigation Policy, the lower discount rate increases the likelihood that CalPERS can reach its target over the longer term. The CalPERS Board of Administration will continue to review the discount rate through its Asset Liability Management process during the rest of the calendar year. CalPERS' final fiscal year 2021 investment performance will be calculated based on audited figures and will be reflected in contribution levels for contracting cities, counties, and special districts in fiscal year 2024. 83 133
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 12 – OTHER POST EMPLOYMENT BENEFITS (OPEB)
A. General Information about the City’s Other Post Employment Benefit (OPEB) Plan Plan Description – The City’s Post Employment Benefit Plan is an agent-multiple-employer defined benefit healthcare plan administered by the California Employers’ Retiree Benefit Trust (CERBT).

Benefits Provided – The provisions and benefits of the City’s Other Post Employment Benefit Plan in effect at June 30, 2021, are summarized as follow:

All Bargaining Units
Eligibility
Benefit
Surviving Spouse Benefit
Other
1 Age 52 for Miscellaneous PEPRA members
Surviving spouse coverage continues based on CalPERS
retirement plan election
Retire directly from the City under CalPERS
(age 501
and 5 years of service or disability)
- 5% of active contribution times years in PEMHCA
(increase each year not greater than $100 per month)
- Joined PEMHCA in 2001
- 100% of PEMHCA minimum in 2021
- Monthly amounts:

Year Actives Retirees
2021 $ 132 $ 124
- No dental, vision & life or Medicare reimbursement
- Implicit rate subsidy included
For the year ended June 30, 2021, the City’s contributions to the Plan were $118,972.

Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of June 30, 2020:

Active employees 146
Inactive employees or beneficiaries currently
receiving benefit payments 50
Inactive employees entitled to but not yet
receiving benefit payments 90
Total 286
84 134
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 12 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) B. Net OPEB Liability
Actuarial Methods and Assumptions – The City net OPEB liability was measured as of June 30, 2020 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated January 1, 2019 that was rolled forward using standard update procedures to determine the total OPEB liability as of June 30, 2020, based on the following actuarial methods and assumptions:

Actuarial Assumptions June 30, 2020 Measurement Date
Valuation Date January 01, 2019
Actuarial Cost Method • Entry Age Normal, Level Percentage of Payroll Contribution Policy • City contributes full Actuarial Determined Contribution through CERBT #1 • 6.75% at June 30, 2020
• 6.75% at June 30, 2019
• Expected City contributions projected to keep sufficient plan assets to pay all benefits from trust General Inflation • 2.75% annually
Mortality, Retirement, Disability, Termination • CalPERS 1997-2015 Experience Study Mortality Improvement • Mortality Improvement Scale MP-18 Salary Increases • Aggregate - 3% annually
• Merit - CalPERS 1997-2015 Experience Study
Medical Trend • Non-Medicare - 7.5% for 2020, decreasing to an ultimate rate of 4.0% in 2076 and later years • Medicare - 6.5% for 2020, decreasing to an ultimate rate of 4.0% in 2076 and later years PEMHCA Minimum Increases • 4.25% annually
Healthcare participation • 60%
Discount Rate and Long Term Expected Rate of
Return on Assets
The long-term expected rate of return on OPEB plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
Global equity 59.0% 4.82%
Fixed income 25.0% 1.47%
TIPS 5.0% 1.29%
Commodities 3.0% 0.84%
REITs 8.0% 3.76%
Total 100.0%
Discount Rate – The discount rate used to measure the total OPEB liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability. 85 135
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CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 12 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) C. Changes in Net OPEB Liability
The changes in the net OPEB liability follows:

Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability/(Asset)
(a) (b) (a) - (b)
Balance at June 30, 2019 Measurement Date $3,297,885 $1,915,574 $1,382,311 Changes Recognized for the Measurement Period:

Service Cost 195,973 195,973
Interest on the total OPEB liability 231,856 231,856
Changes in benefit terms 0
Differences between expected and actual experience 0
Changes of assumptions 0
Contributions from the employer 118,972 (118,972)
Net investment income 67,723 (67,723)
Benefit payments (117,894) (117,894) 0
Administrative expenses (2,014) 2,014
Net changes 309,935 66,787 243,148
Balance at June 30, 2020 Measurement Date $3,607,820 $1,982,361 $1,625,459 The City paid $117,894 for retiree healthcare plan benefits, including $75,894 in premium payments for retirees, $42,000 for implied subsidies, and $1,078 for administrative costs. The plan does not issue separate financial statements.

D. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and Healthcare Cost Trend Rates The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75%) or 1-percentage-point higher (7.75%) than the current discount rate:

Net OPEB Liability/(Asset)
Discount Rate -1% Current Discount Rate Discount Rate +1% (5.75%) (6.75%) (7.75%)
$2,118,198 $1,625,459 $1,218,011
86 136
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 12 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) The following table presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point or 1-percentagepoint higher than the current healthcare cost trend rates.

The healthcare cost trend are as follows:
 Non-Medicare: 7.5% for 2021, decreasing to an ultimate rate of 4.0% in 2076 and later years.  Medicare: 6.5% for 2021, decreasing to an ultimate rate of 4.0% in 2076 and later years.

Net OPEB Liability/(Asset)
1% Decrease Current Healthcare Cost 1% Increase
Trend Rates
$1,115,107 $1,625,459 $2,262,568
E. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2021, the City recognized OPEB expense of $100,217. At June 30, 2021, the City reported deferred outflows and inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Employer contributions made subsequent to the measurement date $132,024 Net differences between projected and actual earnings on plan investments 36,755
Differences between expected and actual experience ($386,203) Changes in assumptions 94,792
Total $263,571 ($386,203)
$132,024 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ended June 30, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as part of OPEB expense as follows:

Year Annual
Ended June 30 Amortization
2022 ($51,556)
2023 (42,556)
2024 (37,557)
2025 (39,728)
2026 (52,038)
Thereafter (31,221)
Total ($254,656)
87 137
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CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 13 – CONTINGENCIES
The City is presently involved in certain matters of litigation that have arisen in the normal course of conducing City business. City management believes, based upon consultation with the City Attorney, that these cases in the aggregate, although they could potentially result in a material adverse financial impact on the City, a reasonable estimate of the outcome and impacts could not be made at the financial statement issuance date.

The City participates in several Federal and State grant programs. These programs are subject to the audits by the City’s independent accountants in accordance with the provisions of the Federal Single Audit Act as amended and applicable State requirements. In addition, these programs are subject to further examination by the grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time. The City expects such amounts, if any, to be immaterial.

NOTE 14 – OTHER INFORMATION
A. Joint Powers Agreements
The City participates in joint ventures through Joint Powers Authorities (JPAs) established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these JPAs exercise full powers and authorities within the scope of the related Joint Powers Agreement, 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 JPAs are not those of the City.

Each JPA is governed by a board consisting of representatives from each member agency. Each board controls the operations of its respective JPA, including selection of management and approval of operating budgets, independent of any influence of member agencies beyond their representation of the board.

City of Palo Alto Regional Water Quality Control Plant: The City has an agreement with the City of Palo Alto to purchase treatment capacity at the Palo Alto Regional Water Quality Control Plant. It was formed in 1968 by a joint exercise of powers among the cities of Palo Alto, Mountain View, and Los Altos, constructed, maintains and operates sewage treatment facilities serving its member cities. The agreement provides that the City will purchase capacity for 50 years. The City of Palo Alto acts as administrator and bills each member its share of the operating costs. The audited financial statements can be obtained by contacting the City of Palo Alto at P.O. Box 10250, Palo Alto, CA 94303.

North County Library Authority (NCLA): The NCLA, formed in 1985 by a joint exercise of powers agreement between the City and the Town of Los Altos Hills, provides library services for member residents. The NCLA was created to provide financing for capital improvements and additional services by the public libraries serving the area. Although the City owns the libraries and their sites, the County of Santa Clara (County) is responsible for all library operations. However, since 1985, the NCLA has levied a voter approved special parcel tax to compensate for service reductions due to cutbacks by the County. The special tax has been collected by the County, transferred to the City, on behalf of NCLA, and then transferred back to the County for the specifically requested services provided by the libraries within the NCLA’s service area. The City performs administrative and accounting services for NCLA.

In 1991, the NCLA issued Special Tax Bonds in the amount of $3,645,000. The Special Tax Bonds were repaid off as of June 30, 2012. In 2010, NCLA successfully passed an updated twenty year parcel tax extending the assessment term to 2030. No new debt was issued in association with this election.

The audited financial statements can be obtained by contacting the NCLA at One North San Antonio Road, Los Altos, CA 94022.

88 138
Agenda Item # 4.

CITY OF LOS ALTOS

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2021
NOTE 14 – OTHER INFORMATION (Continued)
Community Health Awareness Council (CHAC): CHAC was organized as a joint powers agency between the City of Los Altos, City of Mountain View, Town of Los Altos Hills, Los Altos School District, Mountain View Whisman School District, and Mountain View-Los Altos High School District.

CHAC provides prevention and intervention services concentrating on positive alternatives to health abuse and self-destructive behaviors within the communities served. The audited financial statements can be obtained by contacting CHAC at P.O. Box 335, Mountain View, California, 94042.

Silicon Valley Clean Energy Authority: The Silicon Valley Clean Energy Authority (SVCEA) was established in 2016 by 12 agencies in Santa Clara County including the City of Los Altos. The purpose of SVCEA is to enable the member agencies to pool the electricity demand within their jurisdictions to directly procure or generate electrical power supplies on behalf of the residents and businesses in their communities, thus allowing those agencies to provide a clean energy option for residents at a competitive price with traditional energy sources. As part of the implementation of SVCEA, the City of Los Altos paid $100,000 for its portion of the start-up costs. These funds are to be reimbursed to the City once the Authority has achieved financial sustainability.

NOTE 15 – OTHER COMMITMENTS
A summary of remaining authorized CIP project balances at June 30, 2021 for all City funds by service area are as follows:

Construction in progress:

Streets and Roadways $12,375,929
Pedestrian Safety 786,506
Infrastructure and Facilities 2,112,509
Parks 1,180,352
Sewer 6,729,484
Technology 936,709
Community Development 817,139
Storm Drain 962,492
Public Art 60,000
Total $25,961,120
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REQUIRED SUPPLEMENTARY INFORMATION
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CITY OF LOS ALTOS
Notes to Required Supplementary Information
For the Year Ended June 30, 2021
COST-SHARING EMPLOYER DEFINED PENSION PLAN:

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY AND

RELATED RATIO
This schedule reports the proportion (percentage) of the collective net pension liability, the proportionate share (amount) of the collective net pension liability, the employer’s covered employee payroll, the proportionate share (amount of the collective net pension liability as a percentage of the employer’s covered employee payroll and the pension plan’s fiduciary net position as a percentage of the total pension liability.

SCHEDULE OF CONTRIBUTIONS
This schedule reports the cost sharing employer’s contributions to the plan which are actuarially determined, the employer’s actual contributions, the difference between the actual and actuarially determined contributions, and a ratio of the actual contributions divided by covered employee payroll. 93 143
Agenda Item # 4.

CITY OF LOS ALTOS
Notes to Required Supplementary Information
For the Year Ended June 30, 2021
Schedule of Proportionate Share of the
Net Pension Liability and Related Ratio as of the Measurement Date Cost-Sharing Multiple-Employer Defined Pension Plan
Last 10 Years*
Miscellaneous Pool
Measurement Date 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 Plan's proportion of the Net Pension Liability
(Asset) 0.42907% 0.50595% 0.20298% 0.51409% 0.52958% 0.54011% 0.55138% Plan's proportion share of the Net Pension
Liability (Asset) $10,604,408 $13,880,661 $17,564,072 $20,265,838 $19,958,437 $21,628,592 $23,257,604 Plan's Covered Payroll 7,736,180 7,806,721 8,434,058 8,337,461 9,734,936 9,569,932 10,185,806 Plan's Proportionate Share of the Net Pension
Liability/(Asset) as a Percentage of its
Covered Payroll 137.08% 177.80% 208.25% 243.07% 205.02% 226.01% 228.33% Plan’s Fiduciary Net Position as a Percentage
of the Total Pension Liability 83.03% 78.28% 73.20% 75.39% 77.69% 77.73% 77.71% Safety Pool
Measurement Date 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 Plan's proportion of the Net Pension Liability
(Asset) 0.24026% 0.25820% 0.16023% 0.26642% 0.27582% 0.28041% 0.28686% Plan's proportion share of the Net Pension
Liability (Asset) $9,011,972 $10,639,010 $13,864,825 $15,919,233 $16,183,695 $17,504,397 $19,111,513 Plan's Covered Payroll 3,607,754 3,645,893 3,885,679 3,686,478 4,233,297 4,320,366 4,135,400 Plan's Proportionate Share of the Net Pension
Liability/(Asset) as a Percentage of its
Covered Payroll 249.79% 291.81% 356.82% 431.83% 382.30% 405.16% 462.14% Plan's Proportionate Share of the Fiduciary Net
Position as a Percentage of the Plan's Total
Pension Liability 81.46% 78.52% 73.96% 71.74% 73.39% 73.37% 73.12% * Fiscal year 2015 was the 1st year of implementation.
94 144
Agenda Item # 4.

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Notes to Required Supplementary Information
For the Year Ended June 30, 2021
Cost-Sharing Multiple-Employer Defined Pension Plan
As of fiscal year ending June 30, 2021
Last 10 Years*

SCHEDULE OF CONTRIBUTIONS
Miscellaneous Pool
Fiscal Year 2015 Fiscal Year 2016 Fiscal Year 2017 Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Actuarially determined contribution $1,081,811 $1,456,475 $1,544,680 $1,769,644 $1,974,752 $2,356,569 $2,588,732 Contributions in relation to the actuarially
determined contributions (1,081,811) (1,456,475) (1,544,680) (1,769,644) (1,974,752) (2,356,569) (2,588,732) Contribution deficiency (excess) $0 $0 $0 $0 $0 $0 $0
Covered payroll $7,806,721 $8,434,058 $8,337,461 $9,734,936 $9,569,932 $10,185,806 $10,715,749 Contributions as a percentage of
covered payroll 13.86% 17.27% 18.53% 18.18% 20.63% 23.14% 24.16% Notes to Schedule
Valuation date: 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 Safety Pool
Fiscal Year 2015 Fiscal Year 2016 Fiscal Year 2017 Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Actuarially determined contribution $924,466 $1,134,277 $1,205,365 $1,390,429 $1,605,370 $1,962,129 $2,201,042 Contributions in relation to the actuarially
determined contributions (1,076,741) (1,134,277) (1,205,365) (1,390,429) (1,605,370) (1,962,129) (2,201,042) Contribution deficiency (excess) ($152,275) $0 $0 $0 $0 $0 $0 Covered payroll $3,645,893 $3,885,679 $3,686,478 $4,233,297 $4,320,366 $4,135,400 $4,760,661 Contributions as a percentage of
covered payroll 29.53% 29.19% 32.70% 32.85% 37.16% 47.45% 46.23% Notes to Schedule
Valuation date: 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry age
Amortization method Level percentage of payroll
Remaining amortization period 15 years
Asset valuation method 5-year smoothed market
Inflation 2.50%
Salary increases (1)
Investment rate of return
Mortality Derived using CalPERS Membership Data
Post Retirement Benefit Increase
(1) Depending on age, service and type of employment
(2) Net of pension plan investment expenses, including inflation * Fiscal year 2015 was the 1st year of implementation.

Contract COLA up to 2.75% until
Purchasing Power Protection Allowance
Floor on Purchasing Power applies, 2.75%
thereafter

7.15% (2)
95 145
Agenda Item # 4.

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Notes to Required Supplementary Information
For the Year Ended June 30, 2021
Measurement Date 6/30/17 6/30/18 6/30/19 6/30/20
Total OPEB Liability
Service Cost $154,000 $158,000 $162,743 $195,973
Interest 207,000 223,000 238,629 231,856
Actual vs. expected experience (524,133)
Assumption changes 128,646
Benefit payments (134,000) (142,000) (161,000) (117,894) Net change in total OPEB liability 227,000 239,000 (155,115) 309,935 Total OPEB liability - beginning 2,987,000 3,214,000 3,453,000 3,297,885 Total OPEB liability - ending (a) $3,214,000 $3,453,000 $3,297,885 $3,607,820 Plan fiduciary net position
Contributions - employer $135,000 $143,000 $162,000 $118,972 Net investment income 160,000 134,000 110,961 67,723
Administrative expense (2,000) (4,000) (1,387) (2,014)
Benefit payments (134,000) (142,000) (161,000) (117,894) Net change in plan fiduciary net position 159,000 131,000 110,574 66,787 Plan fiduciary net position - beginning 1,515,000 1,674,000 1,805,000 1,915,574 Plan fiduciary net position - ending (b) $1,674,000 $1,805,000 $1,915,574 $1,982,361 Net OPEB liability - ending (a)-(b) $1,540,000 $1,648,000 $1,382,311 $1,625,459 Plan fiduciary net position as a percentage of the total OPEB liability 52.1% 52.3% 58.1% 54.9% Covered-employee payroll $12,546,000 $14,000,000 $15,000,000 $15,000,000 Net OPEB liability as a percentage of covered-employee payroll 12.27% 11.77% 9.22% 10.84% * Fiscal year 2018 was the first year of implementation.

SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS Retiree Healthcare OPEB Plan - Agent Multiple Employer
Last 10 fiscal years*
96 146
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Notes to Required Supplementary Information
For the Year Ended June 30, 2021
Fiscal Year Ended June 30, 2018 2019 2020 2021
Actuarially determined contribution $304,000 $313,000 $333,000 $343,000 Contributions in relation to the
actuarially determined contribution 143,000 314,000 118,972 132,024 Contribution deficiency (excess) $161,000 ($1,000) $214,028 $210,976 Covered-employee payroll $14,000,000 $15,000,000 $15,000,000 $15,366,121 Contributions as a percentage of
covered-employee payroll 1.02% 2.10% 0.80% 0.90%
* Fiscal year 2018 was the first year of implementation.

SCHEDULE OF CONTRIBUTIONS
Retiree Healthcare OPEB Plan - Agent Multiple Employer
Last 10 fiscal years*
Valuation Date • 1/1/2019
Actuarial Cost Method • Entry Age Normal, Level Percentage of Payroll Amortization Method • Level percent of pay
Amortization Period • 12.9-year average fixed period for 2020/21 Asset Valuation Method • Investment gains and losses spread over 5-year rolling period Discount Rate • 6.75%
General Inflation • 2.75%
Medical Trend • Non-Medicare - 7.5% for 2020, decreasing to an ultimate rate of 4.0% in 2076 • Medicare - 6.5% for 2020, decreasing to an ultimate rate of 4.0% in 2076 Mortality, Retirement, Disability,
Termination • CalPERS 1997-2015 Experience Study
Mortality Improvement • Mortality Improvement Scale MP-18 PEMHCA Minimum Increases • 4.25% annually
Healthcare participation • 60%
Retiree Healthcare OPEB Plan - Agent Multiple Employer

NOTES TO SCHEDULE OF EMPLOYER CONTRIBUTION
Methods and Assumptions for Actuarially Determined Contribution 97 147
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GENERAL FUND

SCHEDULE OF REVENUES AND EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Budgeted Amounts Final Budget
Positive
Original Final Actual Amounts (Negative)
Revenues:

Property tax $25,639,810 $27,287,029 $28,464,193 $1,177,164 Sales tax 3,301,400 2,641,120 2,996,325 355,205
Utility users 2,781,000 2,464,430 2,917,252 452,822
Other tax 4,600,950 1,792,137 2,306,393 514,256
Licenses, permits and fees 8,633,080 4,136,377 4,392,246 255,869 Grants and donations 499,876 3,986,394 3,486,518
Charges for services 2,629,700 2,958,245 328,545
Fines and forfeitures 178,050 131,467 (46,583)
Interest and rentals 386,900 405,045 184,032 (221,013)
Other 123,506 106,487 (17,019)
Total revenues 45,343,140 42,157,270 48,443,034 6,285,764 Expenditures:

General government:

Public Safety 19,615,686 20,343,895 19,389,523 954,372
Public Works 2,964,442 5,775,779 5,616,637 159,142
Recreation 2,666,978 1,800,249 1,782,214 18,035
Community development 3,840,000 6,226,997 6,357,369 (130,372) Admin/community services 6,547,399 7,350,916 7,702,229 (351,313) Total expenditures 35,634,505 41,497,836 40,847,972 649,864 9,708,635 659,434 7,595,062 6,935,628
Other financing sources (uses):

Proceeds from Lease 100,000 100,000
Transfers in 146,176 146,176
Transfers out (17,648,572) (17,648,572)
Total other financing sources (uses) (17,402,396) (17,402,396) Net change in fund balance $9,708,635 $659,434 (9,807,334) ($10,466,768) Fund balance at beginning of year, as restated 32,531,052 Fund balance at end of year $22,723,718
Excess of revenues over
expenditures
98 148
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IN-LIEU PARK LAND SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Positive
Original Final Actual Amounts (Negative)
REVENUES:

Interest and rentals $19,049 $19,049
Intergovernmental $500,000 $500,000 1,541,500 1,041,500 Total Revenues 500,000 500,000 1,560,549 1,060,549
Expenditures:

Capital improvement 17,400 17,564 (17,564)

EXCESS OF REVENUES
OVER EXPENDITURES 482,600 500,000 1,542,985 1,078,113
NET CHANGE IN FUND BALANCE $482,600 $500,000 242,985 ($221,887) Beginning fund balance 5,537,293
Ending fund balance $5,780,278
Budgeted Amounts
99 149
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Notes to Required Supplementary Information
For the Year Ended June 30, 2021

1. Budget and Budgetary Accounting
The City adopts a budget annually for General Fund, Special Revenue Funds, (except for the Storm Drain Deposits Fund), and Equipment Replacement Capital Projects Fund that is effective July 1 for the ensuing fiscal year. From the effective date of the budget, which is adopted and controlled at the fund level, the amounts stated therein as proposed expenditures become appropriations to the various City departments.

The City Council may amend the budget during the fiscal year. The City Manager is authorized to transfer budgeted amount between departments and line items within any fund to achieve a balanced budget; however, any revisions which alter the total expenditures of any fund must be approved by the City Council. Transfers between funds must be approved by the City Council. All appropriations lapse at yearend unless otherwise authorized by the City Council and the City Manager, except for capital improvement projects and open purchase order commitments for which appropriations endure until the project or obligation is completed.

Budgets are adopted on a basis consistent with generally accepted accounting principles except for capital projects funds, which are adopted on a project length basis, which means budgets are used until the project’s completion for the entire project amount.
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OTHER SUPPLEMENTARY INFORMATION
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GENERAL FUND
General Fund – Accounts for all financial resources necessary to carry out basic governmental activities of the City that are not accounted for in other funds. The General Fund supports essential City services such as police, fire, street and parks maintenance, maintenance services, community development and recreation activities. The General Fund also includes the Real Property Proceeds Funds, which accounts for the proceeds from the sale of real property and the Community Facilities Renewal Fund, which accounts for the revenues and expenditures related to the community facilities renewal efforts.
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Community Total
Facilities Renewal Real Property General
General Fund Proceeds Fund
ASSETS
Cash and investments $18,038,690 $654,875 $18,693,565
Receivables, net of allowance for uncollectibles:

Accounts 6,224,645 6,224,645
Interest 63,817 24,235 88,052
Prepaids 66,176 66,176
Notes receivable 1,704,880 1,704,880
Inventory 79,020 79,020
Due to other funds 850,985 850,985
Total Assets $27,028,213 $679,110 $27,707,323

LIABILITIES
Accounts payable $3,765,318 $3,765,318
Accrued liabilities 1,104,842 1,104,842
Other payable 112,768 112,768
Total Liabilities 4,982,928 4,982,928

DEFERRAL INFLOWS OF RESOURCES
Deferred inflows or revenues 677 677
Total Deferred Inflows 677 677

FUND BALANCES
Fund balance:

Nonspendable 1,858,691 1,858,691
Assigned 15,118,297 $679,110 15,797,407
Unassigned 5,067,620 5,067,620
Total Fund Balances 22,044,608 679,110 22,723,718
Total Liabilities and Fund Balances $27,028,213 $679,110 $27,707,323

CITY OF LOS ALTOS

GENERAL FUND

COMBINING BALANCE SHEET
JUNE 30, 2021
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Community Intra-Fund Total
Facilities Real Property Transaction General
General Renewal Proceeds Elimination Fund

REVENUES
Property tax $28,464,193 $28,464,193
Sales tax 2,996,325 2,996,325
Utility users 2,917,252 2,917,252
Other tax 2,306,393 2,306,393
Licenses, permits and fees 4,392,246 4,392,246
Grants and donations 3,986,394 3,986,394
Charges for services 2,958,245 2,958,245
Fines and forfeitures 131,467 131,467
Interest and rentals 159,899 $24,133 184,032
Other 106,487 106,487
Total Revenues 48,418,901 24,133 48,443,034

EXPENDITURES
General government
Public safety 19,389,523 19,389,523
Public works 5,616,637 5,616,637
Recreation 1,782,214 1,782,214
Community development 6,357,369 6,357,369
Admin / community development 7,702,229 7,702,229
Total Expenditures 40,847,972 40,847,972

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 7,570,929 24,133 7,595,062

OTHER FINANCING SOURCES (USES)
Proceeds from Lease 100,000 100,000
Transfers in 146,176 146,176
Transfers (out) (7,648,572) (10,000,000) (17,648,572)
Total Other Financing Sources (Uses) (7,402,396) (10,000,000) (17,402,396) NET CHANGE IN FUND BALANCES 168,533 (9,975,867) (9,807,334) BEGINNING FUND BALANCES, as Restated 21,876,075 10,654,977 32,531,052 ENDING FUND BALANCES $22,044,608 $679,110 $22,723,718

CITY OF LOS ALTOS

GENERAL FUND

COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2021
105
155
Agenda Item # 4.

This Pag! L~Intmtional1y Blank
156
Agenda Item # 4.

NON-MAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS

VEHICLE IMPOUND FUND
To account for revenues collected from arrest and towing fees that are dedicated for public safety purposes.

SUPPLEMENTAL LAW ENFORCEMENT FUND
To account for revenues from the Citizen's Option for Public Safety Program in support of additional frontline law enforcement services.

GAS TAX FUNDS
To account for the revenues received from the State gas taxes under the provision of the Streets and Highways Codes. These revenues are restricted to uses related to construction and improvements, an maintenance and repair of local streets.

PROPOSITION 1B FUND
To account for the allocated bond fund amount from the State under the Proposition 1B provisions.

STORM DRAIN DEPOSITS FUND
To account for fees collected from new subdivision development. All funds are restricted to construction and improvement of the storm drain system.

COMMUNITY DEVELOPMENT BLOCK GRANT FUND
To account for grant funds received from the federal government specifically for the housing rehabilitation loan programs, the human services programs through local nonprofit agencies, and the accessibility improvements in compliance with the American with Disabilities Act.

DOWNTOWN PARKING FUND
To account for revenues received from the lease of the public parking plazas and in-lieu program fees. The revenues are dedicated for the construction and improvement of downtown parking facilities.

TRAFFIC IMPACT FEE FUND
To account for revenues received from development. The revenues are dedicated for transportation improvements within the City.

ESTATE DONATION FUND
To account for donations received that are dedicated for purposes specified by the donors.

TDA FUND
To account for State Transportation Development Act, Article 3 funds for bike route and pedestrian facilities improvements.
107
157
Agenda Item # 4.

NON-MAJOR GOVERNMENTAL FUNDS (Continued)
SPECIAL REVENUE FUNDS (Continued)

PEG FUND
To account for fees collected by local Cable Television franchise. All funds are restricted for public education and government access programming.

VEHICLE REGISTRATION FEES FUND
To account for fees collected by the Department of Motor Vehicles from registrations in Santa Clara County.

All funds are restricted to street projects.

SB 1 ROAD MAINTENANCE REHABILITATION FUND
To account for revenues received from the State Streets and Highways Codes. These revenues are restricted to address deferred maintenance on the State Highway System and the local street and road system.

TRAFFIC CONGESTION RELIEF PROGRAM FUND
To account for revenues received from the State. These revenues must be used only for maintenance or reconstruction costs on public streets or roads.

CAPITAL PROJECTS FUND

EQUIPMENT REPLACEMENT FUND
To account for the revenues and expenditures related to the replacement of certain City equipment and vehicles.

DEBT SERVICE FUND

GENERAL DEBT SERVICE
To account for the accumulation of revenues for periodic payment of principal and interest on Certificates of Participation and related authorized costs.
108
158
Agenda Item # 4.

This Pag! L~Intmtional1y Blank
159
Agenda Item # 4.

CITY OF LOS ALTOS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET
JUNE 30, 2021

SPECIAL REVENUE FUNDS
Supplemental
Vehicle Law Proposition
Impound Enforcement Gas Tax 1B
ASSETS
Cash and investments $146,007 $2,016,248 $44,441
Restricted cash and investments
Receivables, net of allowance
for uncollectibles:

Accounts 4,220 101
Total Assets $146,007 $2,020,468 $44,542

LIABILITIES
Accounts payable
Due to other funds
Total Liabilities

FUND BALANCES
Restricted:

Debt service
Special revenue programs and projects $146,007 $2,020,468 $44,542 Assigned
Unassigned
Total Fund Balances 146,007 2,020,468 44,542
Total Liabilities and Fund Balances $146,007 $2,020,468 $44,542 110
160
Agenda Item # 4.

SPECIAL REVENUE FUNDS
Storm Community
Drain Development Downtown Traffic Estate
Deposits Block Grant Parking Impact Fee Donation TDA
$56,086 $884,191 $20,114 $18,097
5,036 1,528 41 $52,724
$56,086 $889,227 $21,642 $18,138 $52,724
$53
$531,566 $52,724
531,566 53 52,724
$56,086 889,174 $21,642 $18,138
(531,566)
56,086 (531,566) 889,174 21,642 18,138
$56,086 $889,227 $21,642 $18,138 $52,724
(Continued)
111
161
Agenda Item # 4.

SPECIAL REVENUE FUNDS
SB1 Traffic
Vehicle Road Congestion
Registration Maintenance Relief
PEG Fees Rehabilitation Program
ASSETS
Cash and investments $709,973 $529,401 $168,733 $106,129 Restricted cash and investments
Receivables, net of allowance
for uncollectibles:

Accounts 30,064 104,307
Total Assets $740,037 $529,401 $273,040 $106,129

LIABILITIES
Accounts payable
Due to other funds
Total Liabilities

FUND BALANCES
Restricted:

Debt service
Special revenue programs and projects $740,037 $529,401 $273,040 $106,129 Assigned
Unassigned
Total Fund Balances 740,037 529,401 273,040 106,129
Total Liabilities and Fund Balances $740,037 $529,401 $273,040 $106,129

CITY OF LOS ALTOS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET
JUNE 30, 2021
112
162
Agenda Item # 4.

CAPITAL

PROJECTS

SPECIAL REVENUE FUNDS FUND DEBT SERVICE FUNDS
Los Alto Total
Community Non-major
Public Equipment Center Governmental
Measure B Art Replacement General Lease Funds
$166,128 $389,459 $201,530 $5,456,537
172,021 172,021
$1,148,430 1,346,451
$1,148,430 $166,128 $389,459 $373,551 $6,975,009
$53
$163,979 748,269
163,979 748,322
$373,551 373,551
984,451 $166,128 5,995,243
$389,459 389,459
(531,566)
984,451 166,128 389,459 373,551 6,226,687
$1,148,430 $166,128 $389,459 $373,551 $6,975,009
113
163
Agenda Item # 4.

CITY OF LOS ALTOS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2021

SPECIAL REVENUE FUNDS
Supplemental
Vehicle Law Proposition
Impound Enforcement Gas Tax 1B

REVENUES
Charges for services
Licenses, permits and fees
Intergovernmental $156,726 $678,775
Fines and forfeitures $6,636
Interest and rentals 2,621 $114
Other
Total Revenues 6,636 156,726 681,396 114

EXPENDITURES
Current:

Public safety 460
Community development
Capital improvements 280,592
Debt service:

Principal
Interest and fiscal charges
Total Expenditures 460 280,592

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 6,176 156,726 400,804 114

OTHER FINANCING SOURCES (USES)
Proceeds from Lease
Transfers in
Transfers (out) (6,176) (100,000)
Total Other Financing Sources (Uses) (6,176) (100,000)
NET CHANGE IN FUND BALANCES 56,726 400,804 114
BEGINNING FUND BALANCES, AS RESTATED 89,281 1,619,664 44,428 ENDING FUND BALANCES $146,007 $2,020,468 $44,542
114
164
Agenda Item # 4.

SPECIAL REVENUE FUNDS
Storm Community
Drain Development Downtown Traffic Estate
Deposits Block Grant Parking Impact Fee Donation TDA
$13,506 $139,336
13,390 2,193 $47
303,933 6,199 1,150
303,933 33,095 141,529 1,197
13,587
13,587
303,933 19,508 141,529 1,197
(835,499) (40,000) (651,391)
(835,499) (40,000) (651,391)
(531,566) (20,492) (509,862) 1,197
$56,086 - 909,666 531,504 16,941
$56,086 ($531,566) $889,174 $21,642 $18,138
(Continued)
115
165
Agenda Item # 4.

SPECIAL REVENUE FUNDS
SBI Traffic
Vehicle Road Congestion
Registration Maintenance Relief
PEG Fees Rehabilitation Program

REVENUES
Charges for services $96,276
Licenses, permits and fees
Intergovernmental $572,396
Fines and forfeitures
Interest and rentals 2,872
Other
Total Revenues 99,148 572,396

EXPENDITURES
Current:

Public safety
Community development
Capital improvements
Debt service:

Principal
Interest and fiscal charges
Total Expenditures

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 99,148 572,396

OTHER FINANCING SOURCES (USES)
Proceeds from Lease
Transfers in
Transfers (out) (405,772) (500,000)
Total Other Financing Sources (Uses) (405,772) (500,000) NET CHANGE IN FUND BALANCES (306,624) 72,396
BEGINNING FUND BALANCES, AS RESTATED 1,046,661 529,401 200,644 106,129 ENDING FUND BALANCES $740,037 $529,401 $273,040 $106,129

CITY OF LOS ALTOS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2021
116
166
Agenda Item # 4.

CAPITAL

PROJECTS

SPECIAL REVENUE FUNDS FUND DEBT SERVICE FUNDS
Los Alto Total
Community Non-major
Public Equipment Center Governmental
Measure B Art Replacement General Lease Funds
$166,128 $262,404
152,842
$1,148,430 2,556,327
6,636
$9,373 30,610
311,282
1,148,430 166,128 9,373 3,320,101
460
$74,025 87,612
199,718 480,310
125,000 $503,137 628,137
42,401 196,863 239,264
273,743 167,401 700,000 1,435,783
1,148,430 166,128 (273,743) (158,028) (700,000) 1,884,318 9,900,000 9,900,000
167,400 700,000 867,400
(163,979) (9,900,000) (12,602,817)
(163,979) 167,400 700,000 (1,835,417)
984,451 166,128 (273,743) 9,372 48,901
663,202 364,179 6,177,786
$984,451 $166,128 $389,459 $373,551 $6,226,687
117
167
Agenda Item # 4.

CITY OF LOS ALTOS

VEHICLE IMPOUND FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Fines and forfeitures $20,000 $6,636 ($13,364)
Total Revenues 20,000 6,636 (13,364)

EXPENDITURES
Current:

Public safety 460 (460)
Total Expenses 460 (460)

EXCESS OF REVENUES
OVER EXPENDITURES 20,000 6,176 (12,904)

OTHER FINANCING SOURCES (USES)
Transfers (out) (6,176) (6,176)
Total other financing sources (uses) (6,176) (6,176)
NET CHANGE IN FUND BALANCE $20,000 ($19,080)
Beginning fund balance
Ending fund balance
118
168
Agenda Item # 4.

CITY OF LOS ALTOS

SUPPLEMENTAL LAW ENFORCEMENT FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Intergovernmental $100,000 $156,726 $56,726
Total Revenues 100,000 156,726 56,726

EXCESS OF REVENUES
OVER EXPENDITURES 100,000 156,726 56,726

OTHER FINANCING SOURCES (USES)
Transfers (out) (100,000) ($100,000)
Total other financing sources (uses) (100,000) (100,000) NET CHANGE IN FUND BALANCE $100,000 56,726 ($43,274)
Beginning fund balance 89,281
Ending fund balance $146,007
119
169
Agenda Item # 4.

CITY OF LOS ALTOS

GAS TAX FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Intergovernmental $680,000 $678,775 ($1,225)
Interest and rentals 2,621 2,621
Total Revenues 680,000 681,396 1,396

EXPENDITURES
Capital improvements 280,592 (280,592)
Total Expenses 280,592 (280,592)

EXCESS OF REVENUES
OVER EXPENDITURES 680,000 400,804 (279,196)
NET CHANGE IN FUND BALANCE $680,000 400,804 ($279,196)
Beginning fund balance, as restated 1,619,664
Ending fund balance $2,020,468
120
170
Agenda Item # 4.

CITY OF LOS ALTOS
PROPOSITION 1B FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Interest and rentals $114 $114
Total Revenues 114 114

EXCESS OF REVENUES
OVER EXPENDITURES 114 114
NET CHANGE IN FUND BALANCE 114 $114
Beginning fund balance 44,428
Ending fund balance $44,542
121
171
Agenda Item # 4.

CITY OF LOS ALTOS

COMMUNITY DEVELOPMENT BLOCK GRANT FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Grants and donations $303,933 $303,933
Total Revenues 303,933 303,933

EXCESS OF REVENUES
OVER EXPENDITURES 303,933 303,933

OTHER FINANCING SOURCES (USES)
Transfers (out) (835,499) (835,499)
Total other financing sources (uses) (835,499) (835,499) NET CHANGE IN FUND BALANCE (531,566) ($531,566)
Beginning fund balance, as restated
Ending fund balance ($531,566)
122
172
Agenda Item # 4.

CITY OF LOS ALTOS

DOWNTOWN PARKING FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Licenses, permits and fees $40,000 $13,506 ($26,494)
Interest and rentals 13,390 13,390
Other 6,199 6,199
Total Revenues 40,000 33,095 (6,905)

EXPENDITURES
Current:

Community development 13,587 (13,587)
Total Expenses 13,587 (13,587)

EXCESS OF REVENUES
OVER EXPENDITURES 40,000 19,508 (20,492)

OTHER FINANCING SOURCES (USES)
Transfers (out) (40,000) (40,000)
Total other financing sources (uses) (40,000) (40,000)
NET CHANGE IN FUND BALANCE $40,000 (20,492) ($60,492)
Beginning fund balance 909,666
Ending fund balance $889,174
123
173
Agenda Item # 4.

CITY OF LOS ALTOS

TRAFFIC IMPACT FEE FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Licenses, permits and fees $260,000 $139,336 ($120,664) Interest and rentals 1,360 1,360
Total Revenues 260,000 140,696 (119,304)

EXPENDITURES
Capital improvements (833) 833
Total Expenses (833) 833

EXCESS OF REVENUES
OVER EXPENDITURES 260,000 141,529 (118,471)

OTHER FINANCING SOURCES (USES)
Transfers (out) (651,391) (651,391)
Total other financing sources (uses) (651,391) (651,391) NET CHANGE IN FUND BALANCE $260,000 (509,862) ($769,862) Beginning fund balance 531,504
Ending fund balance $21,642
124
174
Agenda Item # 4.

CITY OF LOS ALTOS

ESTATE DONATION FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Interest $47 $47
Total Revenues 1,197 1,197

EXCESS OF REVENUES
OVER EXPENDITURES 1,197 1,197
NET CHANGE IN FUND BALANCE 1,197 $1,197
Beginning fund balance 16,941
Ending fund balance $18,138
125
175
Agenda Item # 4.

CITY OF LOS ALTOS

TDA FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Grants and donations
Total expenditures

EXCESS (DEFICIENCY) OF REVENUES

OVER EXPENDITURES

OTHER FINANCING SOURCES (USES)
Transfers (out)
Total other financing sources (uses)

NET CHANGE IN FUND BALANCE
Beginning fund balance, as restated
Ending fund balance
126
176
Agenda Item # 4.

CITY OF LOS ALTOS

PEG FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Interest income $2,872 $2,872
Charges for services $100,000 96,276 (3,724)
Total revenues 100,000 99,148 (852)

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (100,000) 99,148 (852)

OTHER FINANCING SOURCES (USES)
Transfers (out) (405,772) (405,772)
Total other financing sources (uses) (405,772) (405,772) NET CHANGE IN FUND BALANCE ($100,000) (306,624) ($852)
Beginning fund balance 1,046,661
Ending fund balance $740,037
127
177
Agenda Item # 4.

CITY OF LOS ALTOS

VEHICLE REGISTRATION FEES FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Grants and donations $408,553 ($408,553)
Total revenues 408,553 (408,553)

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 408,553 (408,553)
NET CHANGE IN FUND BALANCE $408,553 ($408,553)
Beginning fund balance, as restated $529,401
Ending fund balance $529,401
128
178
Agenda Item # 4.

CITY OF LOS ALTOS
SB1 ROAD MAINTENANCE REHABILITATION FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Intergovernmental $572,396 $572,396
Total revenues 572,396 572,396

OTHER FINANCING SOURCES (USES)
Transfers (out) (500,000) (500,000)
Total other financing sources (uses) (500,000) (500,000)

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 72,396 72,396
NET CHANGE IN FUND BALANCE 72,396 $72,396
Beginning fund balance 200,644
Ending fund balance $273,040
129
179
Agenda Item # 4.

CITY OF LOS ALTOS

TRAFFIC CONGESTION RELIEF PROGRAM FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)
REVENUES:

Intergovernmental
Total revenues

EXCESS (DEFICIENCY) OF REVENUES

OVER EXPENDITURES

NET CHANGE IN FUND BALANCE
Beginning fund balance $106,129
Ending fund balance $106,129
130
180
Agenda Item # 4.

CITY OF LOS ALTOS

EQUIPMENT REPLACEMENT CAPITAL PROJECTS FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2021
Variance with
Final Budget
Final Positive
Budget Actual Amounts (Negative)

EXPENDITURES
Community development $210,000 $74,025 $135,975
Capital improvements 207,000 199,718 7,282
Total expenditures 417,000 273,743 143,257

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (417,000) (273,743) 143,257
NET CHANGE IN FUND BALANCE ($417,000) (273,743) $143,257 Beginning fund balance 663,202
Ending fund balance $389,459
131
181
Agenda Item # 4.

This Pag! L~Intmtional1y Blank
182
Agenda Item # 4.

INTERNAL SERVICE FUNDS
Internal Service Funds are used to account for the financing of goods and services provided by one City department or agency to other departments or agencies of the City, or to other government units on a costreimbursement basis (including depreciation).

DENTAL REIMBURSEMENT
To account for costs of the City's self-insurance dental program. Funds are provided primarily from charges to departments.

UNEMPLOYMENT INSURANCE
To account for the unemployment insurance premiums and claims made against the City. Funds are provided primarily from charges to departments.

WORKERS’ COMPENSATION INSURANCE
To account for the premium costs and self-insured claim losses made against the City for workers compensation. Funds are provided primarily from charges to departments.

LIABILITY INSURANCE
To account for the premium costs and self-insured claim losses made against the City for property-related and general liability. Funds are provided primarily from charges to departments. 133
183
Agenda Item # 4.

CITY OF LOS ALTOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF NET POSITION
JUNE 30, 2021
Workers'
Dental Unemployment Compensation Liability
Reimbursement Insurance Insurance Insurance Total
ASSETS
Current Assets:

Cash and investments $546,698 $5,332,328 $751,251 $6,630,277 Accounts receivable 1,265 15,733 16,998
Total Assets 546,698 5,333,593 766,984 6,647,275

LIABILITIES
Current Liabilities:

Accounts payable 4,285 24,120 28,405
Claims and judgements 771,281 301,021 1,072,302
Due to other funds $94,747 94,747
Noncurrent Liabilities:

Claims and judgements 2,989,719 158,979 3,148,698
Total Liabilities 94,747 3,765,285 484,120 4,344,152

NET POSITION
Unrestricted (94,747) 546,698 1,568,308 282,864 2,303,123 Total Net Position ($94,747) $546,698 $1,568,308 $282,864 $2,303,123 134
184
Agenda Item # 4.

CITY OF LOS ALTOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF REVENUES, EXPENSES

AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2021
Workers'
Dental Unemployment Compensation Liability
Reimbursement Insurance Insurance Insurance Total

OPERATING REVENUES
Charges for services $264,121 $8,907 $273,028
Total Operating Revenues 264,121 8,907 273,028

OPERATING EXPENSES
Outside services 52,830 52,830
Claims and insurance 308,786 $7,594 $857,037 745,232 1,918,649 Administration 161,126 161,126
Total Operating Expenses 308,786 7,594 1,018,163 798,062 2,132,605 Operating Income (Loss) (44,665) (7,594) (1,018,163) (789,155) (1,859,577)

OTHER FINANCING SOURCES (USES)
Transfers in
Total Other Financing Sources (Uses)
Change in Net Position (44,665) (7,594) (1,018,163) (789,155) (1,859,577) BEGINNING NET POSITION (50,082) 554,292 2,586,471 1,072,019 4,162,700 ENDING NET POSITION ($94,747) $546,698 $1,568,308 $282,864 $2,303,123 135
185
Agenda Item # 4.

CITY OF LOS ALTOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2021
Workers'
Dental Unemployment Compensation Liability
Reimbursement Insurance Insurance Insurance Total

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from other funds $308,786 $4,703 $2,331 $315,820 Cash payments to vendors (308,786) ($7,594) 243,874 13,170 (59,336) Insurance premiums, settlements, and rebates (951,977) (758,202) (1,710,179) Cash Flows from Operating Activities (7,594) (703,400) (742,701) (1,453,695) Cash and investments at beginning of period 554,292 6,035,728 1,493,952 8,083,972 Cash and investments at end of period $546,698 $5,332,328 $751,251 $6,630,277 Reconciliation of operating income (loss) to
net cash flows from operating activities:

Operating income (loss) ($44,665) ($7,594) ($1,018,163) ($789,155) ($1,859,577) net cash flows from operating activities:

Change in assets and liabilities:

Accounts receivable 4,703 (6,576) (1,873)
Accounts payable (94,940) (12,970) (107,910)
Due to other funds 44,665 44,665
Claims and judgments payable 405,000 66,000 471,000
Cash Flows from Operating Activities ($7,594) ($703,400) ($742,701) ($1,453,695) Adjustments to reconcile operating income to
136
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STATISTICAL SECTION
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STATISTICAL SECTION
This part of the City’s Annual Comprehensive Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit.

Financial Trends
These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time:

1. Net Position by Component

2. Changes in Net Position

3. Fund Balances of Governmental Funds

4. Changes in Fund Balances of Governmental Funds
Revenue Capacity
These schedules contain information to help the reader assess the City’s most significant local revenue source, the property tax:

1. Tax Revenues by Source, Governmental Funds

2. Assessed Value of Taxable Property

3. Property Tax Dollar by Break Down

4. Property Tax Dollars by Recipient Group

5. Direct and Overlapping Tax Rates

6. Principal Property Taxpayers

7. Property Tax Levies and Collections
Debt Capacity
These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future:

1. Ratios of Outstanding Debt by Type

2. Schedule of Direct and Overlapping Bonded Debt

3. Legal Debt Margin
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place:

1. Demographic Statistics

2. Principal Employers
Operating Information
These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs:

1. Full-Time Equivalent City Employees by Function/Program

2. Operating Indicators by Function/Program

3. Capital Asset Statistics by Function/Program

4. Trust and Agency Debt Administration
Sources
Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Reports for the relevant year.
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City of Los Altos
Net Position by ComponentLast Ten Fiscal Years(accrual basis of accounting; amounts expressed in thousands) 2011-12 2012-13 (a) 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Governmental activities
Net investment in capital assets 48,511 $ 50,102$ 50,164$ 49,079$ 53,409$ 54,725$ 61,525$ 67,611$ 80,869$ 95,463 $ Restricted 3,926 7,406 17,629 17,815 14,447 11,498 10,620 11,381 15,365 24,021 Unrestricted 34,634 29,883 27,624 10,746 15,583 24,047 20,429 21,733 5,216 (11,750) Total governmental activities net position 87,071 $ 87,391 $ 95,417 $ 77,640 $ 83,439 $ 90,270 $ 92,574 $ 100,725 $ 101,450 $ 107,734 $ Business-type activities
Net investment in capital assets 5,952 $ 6,773$ 8,718$ 8,662$ 8,726$ 8,403$ 9,450$ 11,239$ 12,288$ 14,650 $ Unrestricted 7,539 7,843 8,087 8,472 11,259 11,907 12,644 13,135 15,500 15,510 Total business-type activities net position 13,491 $ 14,616 $ 16,805 $ 17,134 $ 19,985 $ 20,310 $ 22,094 $ 24,374 $ 27,788 $ 30,160 $ Primary government
Net investment in capital assets 54,463 $ 56,875$ 58,882$ 57,741$ 62,135$ 63,128$ 70,975$ 78,850$ 93,157$ 110,113$ Restricted 3,926 7,406 17,629 17,815 14,447 11,498 10,620 11,381 15,365 24,021 Unrestricted 42,173 37,726 35,711 19,218 26,842 35,954 33,073 34,868 20,716 3,760 Total primary government net position 100,562 $ 102,007 $ 112,222 $ 94,774 $ 103,424 $ 110,580 $ 114,668 $ 125,099 $ 129,238 $ 137,894 $ Source:

City of Los Altos Finance Department
Note:(a) The City implemented the provisions of GASB Statement 63 in fiscal year 2013, which replaced the term "Net Assets" with the term "Net Position"

FISCAL YEAR
$‐
$80$60$40$20
$160$140$120$100
11‐12 12‐13 13‐14 14‐15 15‐16 16‐17 17‐18 18‐19 19‐20 20‐21 Capital AssetsUnrestrictedNet Assets
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Agenda Item # 4.

City of Los Altos
Changes in Net PositionLast Ten Fiscal Years(accrual basis of accounting; amounts expressed in thousands) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 ExpensesGovernmental activities:

Public safety 14,101$ 14,797$ 15,144$ 14,884$ 15,636$ 15,791$ 15,224$ 19,928$ 18,945$ 21,217$ 21,384$ Public works 5,451 5,157 5,557 6,453 7,058 5,816 7,832 6,217 6,534 7,659 4,741Recreation 2,503 2,193 2,108 2,656 2,976 2,744 2,613 3,402 3,061 3,235 2,584Community development 4,052 3,583 4,514 4,038 4,590 5,758 4,243 6,440 5,547 6,596 7,004 Admin/Community services 3,837 4,034 5,675 3,804 4,002 4,882 4,411 5,687 5,905 9,806 8,282 Interest on long-term activities 86 69 95 71 68 63 51 64 51 40 245 Total governmental activities expenses 30,030 29,833 33,093 31,906 34,330 35,054 34,374 41,738 40,043 48,553 44,240 Business-type activities:

Sewer 4,520 4,386 4,529 4,574 4,789 4,607 6,754 4,970 5,273 5,527 5,268Solid waste 717 341 355 366 347 376 438 461 465 426 394Storm drain 200 213 232 165 215 - 1 1 - - - Total Business-type activities expenses 5,437 4,940 5,116 5,105 5,351 4,983 7,193 5,432 5,738 5,953 5,662 Total primary government expenses 35,467$ 34,773 $ 38,209 $ 37,011 $ 39,681 $ 40,037 $ 41,567 $ 47,170 $ 45,781 $ 54,506 $ 49,902 $ Program RevenuesGovernmental activities:

Charges for services:

Public safety 348$ 394$ 344$ 417$ 898$ 462$ 363$ 330$ 488$ 324$ 202$ Public works 191 32 34 60 33 55 42 51 51 48 59Recreation 1,763 1,808 1,865 1,952 2,167 2,123 2,070 2,021 1,963 847 271Community development 2,650 3,260 7,431 5,196 3,625 3,412 3,112 4,589 4,027 3,498 5,793 Admin/Community services 1,061 875 947 942 954 1,033 1,082 950 753 1,200 954 Operating grants and contributions:

Public safety 100 112 109 116 109 437 392 409 401 188 4,140 Public works 682 829 699 909 504 336 262 298 286 420 379Recreation - - - - - 2 5 5 5 - - Community development 168 21 59 36 343 8 148 170 - - 306 Admin/Community services 64 36 58 6 - - - - - - -
Capital grants and contributions:

Public safety - - - - - - - - - -
Public works 711 897 492 747 498 1,522 807 641 806 1,856 1,778Recreation - - - - - - - - - - Community development - 3,400 80 3 30 7 - 62 - - 31 Admin/Community services 78 76 - 83 - - - - - - -
Total governmental activities program revenues 7,816 11,740 12,118 10,467 9,161 9,397 8,283 9,526 8,780 8,381 13,913

FISCAL YEAR
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Agenda Item # 4.

City of Los Altos
Changes in Net PositionLast Ten Fiscal Years(accrual basis of accounting; amounts expressed in thousands) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

FISCAL YEAR
Business-type activities:

Charges for services:

Sewer 4,813$ 4,503$ 5,121$ 6,347$ 6,328$ 6,986$ 6,703$ 6,369$ 6,467$ 7,942$ 7,126$ Solid waste 992 821 879 754 786 752 774 812 841 847 861 Storm drain - - - 12 2 - - - - - -
Total business-type activities program revenues 5,805 5,324 6,000 7,113 7,116 7,738 7,477 7,181 7,308 8,789 7,987 Total primary government program revenues 13,621$ 17,064 $ 18,118 $ 17,580 $ 16,277 $ 17,135 $ 15,760 $ 16,707 $ 16,088 $ 17,170 $ 21,900 $ Net (expense)/revenue:

Governmental activities (22,214) $ (18,093) $ (20,975) $ (21,439) $ (25,170) $ (25,657) $ (26,091) $ (32,212) $ (31,263) $ (40,172) $ (30,327) $ Business-type activities 368 384 884 2,008 1,766 2,755 284 1,749 1,570 2,836 2,325 Total primary government net (expense)/revenue (21,846) $ (17,709) $ (20,091) $ (19,431) $ (23,404) $ (22,902) $ (25,807) $ (30,463) $ (29,693) $ (37,336) $ (28,002) $ General Revenues and Other Changes in Net PositionGovernmental activities:

Taxes:

Property taxes 12,794$ 13,302$ 14,130$ 15,586$ 17,480$ 18,776$ 19,863$ 21,429$ 23,792$ 25,787$ 28,464$ Sales taxes 2,588 2,746 2,926 2,809 2,943 3,196 3,278 3,244 3,461 3,373 2,996 Utility users taxes 2,543 2,548 2,600 2,600 2,523 2,672 2,680 2,732 2,744 2,839 2,917 Other taxes 2,910 2,868 3,301 3,542 3,732 3,909 4,330 4,535 4,514 3,598 2,304 Franchise fees 1,814 1,731 1,770 1,905 1,808 2,029 2,083 2,207 2,222 2,287 2,215 Sale of Capital Assets-net - (545) (8) 2,846 - - - - - - - Interest income 275 115 174 99 200 438 233 320 2,226 2,595 173 Miscellaneous 388 131 382 212 1,124 435 454 452 456 418 428 Transfers (65) (247) (232) (152) (196) - - - - - -
Total governmental activities 23,247 22,649 25,043 29,447 29,614 31,455 32,921 34,919 39,415 40,897 39,497 Business-type activities:

Interest income 71 37 10 - - - - - - 579 47
Miscellaneous - - - 28 40 96 40 70 477 - -
Transfers 65 247 232 152 196 - - - - - -
Total business-type activities 136 284 242 180 236 96 40 70 477 579 47 Total primary government 23,383$ 22,933 $ 25,285 $ 29,627 $ 29,850 $ 31,551 $ 32,961 $ 34,989 $ 39,892 $ 41,476 $ 39,544 $ Change in Net Position
Governmental activities 1,033$ 4,556$ 4,068$ 8,008$ 4,444$ 5,798$ 6,830$ 2,707$ 8,152$ 725$ 9,170$ Business-type activities 504 668 1,126 2,188 2,002 2,851 324 1,819 2,047 3,415 2,372 Total primary government 5,224 1,537$ $ 5,194 $ 10,196 $ 6,446 $ 8,649 $ 7,154 $ 4,526 $ 10,199 $ 4,140 $ 11,542 $ Source:

City of Los Altos Finance Department
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Agenda Item # 4.

City of Los Altos
Fund Balances - Governmental FundsLast Ten Fiscal Years(modified accrual basis of accounting; amounts expressed in thousands)(Pre GASB 54 Presentation - For Years Before 2011-12) 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 General fund
Non-Spendable 46$ 49$ 35$ 445$ 524$ 38$ 1,932$ 1,882$ 1,836$ 1,859 $ Restricted - - - - - - - - - -
Committed 1,025 - - - - - - - - -
Assigned 4,700 6,025 27,161 29,565 29,064 37,630 38,040 39,020 25,773 15,937 Unassigned/Unrestricted 1,714 2,428 1,433 4,789 8,535 6,148 5,422 6,841 7,861 4,928 Total general fund 7,485$ 8,502 $ 28,629 $ 34,799 $ 38,123 $ 43,816 $ 45,394 $ 47,743 $ 35,470 $ 22,724 $ All other governmental funds
Non-Spendable -$ -$ -$ -$ -$ -$ -$ -$ -$ - $
Restricted 7,406 7,406 10,008 10,614 9,969 9,645 10,107 9,939 10,890 12,149 Committed 4,611 3,630 - - - - - -Assigned 19,514 19,460 7,621 7,201 4,477 1,993 1,335 1,495 4,529 11,872 Unreserved/Unrestricted - - - - - (140) (823) (53) (53) (532) Total all other governmental funds 31,531 30,496 17,629 17,815 14,446 11,498 10,619 11,381 15,366 23,489 Total all governmental funds 38,998 39,016$ $ 46,258 $ 52,614 $ 52,569 $ 55,314 $ 56,013 $ 59,124 $ 50,836 $ 46,213 $ Source:

City of Los Altos Finance Department

FISCAL YEAR
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Agenda Item # 4.

City of Los Altos
Fund Balances - Governmental FundsLast Ten Fiscal Years(modified accrual basis of accounting; amounts expressed in thousands)(GASB 54 Presentation - 2020-21) General Fund
In Lieu Park
Land
Capital
Projects
Other Govt
Funds Total
Inventory & Prepaids (145,196) $ - $ - $ - $ (145,196) $ Notes Receivable (1,704,880) - - - (1,704,880)
Veteran Memorial (8,615) - - - (8,615)
Non-Spendable (1,858,691) - - - (1,858,691)
Debt Service (373,551) (373,551)Special Revenue Programs and Projects - (5,780,278) - (5,995,243) (11,775,521) Restricted - (5,780,278) - (6,368,794) (12,149,072)Continuing CIPS - - - - - Committed - - - - -General Fund Reserve (7,649,169) - - - (7,649,169) OPEB (1,500,000) - - - (1,500,000)
PERS Reserve (5,000,000) - - - (5,000,000)
Technology (1,108,582) - - - (1,108,582)
Capital and Equipment - - - (389,459) (389,459)
CIP Reserve - - (11,482,682) - (11,482,682)
Capital Project Reserve - Community Center (679,110) - - - (679,110) Assigned (15,936,861) - (11,482,682) (389,459) (27,809,002) APRA Reserve (3,598,964)
Unrealized Gain/(Loss) (118,905)Unassigned (1,210,297) - - - - Total Unassigned Fund Balance (4,928,166) - - 531,566 (4,396,600) Total Fund Equity (22,723,718) $ (5,780,278) $ (11,482,682) $ (6,226,687) $ (46,213,365) $ Source:

City of Los Altos Finance Department
-
50,000,000 40,000,000 30,000,000 20,000,000 10,000,000
UnassignedAssignedRestrictedNon-Spendable
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Agenda Item # 4.

City of Los Altos
Changes in Fund Balances - Governmental FundsLast Ten Fiscal Years(modified accrual basis of accounting; amounts expressed in thousands) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Revenues
Taxes 17,714 $ 18,250$ 19,444 $ 21,950 $ 26,690$ 28,565 $ 30,151$ 31,939 $ 34,511$ 35,597$ 36,684 $ License, permits and park-in-lieu 3,187 3,204 3,312 4,531 3,925 3,784 3,786 4,195 4,207 4,209 4,545 Intergovernmental 3,988 4,333 4,513 4,861 1,027 973 742 2,087 1,557 1,358 4,155 Grants and donations 929 4,242 650 788 873 1,863 1,214 928 396 1,368 4,017 Charges for services 4,020 3,780 4,480 4,572 4,698 4,659 4,577 4,620 4,850 3,751 3,221 Fines and forfeitures 148 231 171 214 161 264 213 178 191 195 138 Interest and rentals 333 169 135 159 291 558 230 360 2,269 2,681 233Other 521 973 4,616 2,989 1,306 187 291 137 214 119 418 Total revenues 35,182 30,840 37,320 40,064 38,971 40,853 41,204 44,444 48,195 49,278 53,411 Expenditures
General government
Public Safety
Police 8,616 9,588 9,178 8,891 9,167 9,976 9,968 10,744 11,107 11,465 11,673 Fire Services 5,259 5,375 5,513 5,714 5,961 6,219 6,473 6,722 7,011 7,331 7,717 Public works 4,793 4,826 4,831 4,353 4,307 4,859 5,299 5,784 5,535 5,469 5,617Recreation 2,062 2,429 2,102 2,186 2,389 2,423 2,343 2,509 2,469 2,313 1,782 Community development 3,973 3,726 4,553 3,885 4,221 6,087 4,653 5,747 5,361 5,896 6,445 Administration/Community services 3,845 3,624 3,655 3,552 3,770 4,852 4,567 4,773 5,673 8,515 7,702 Capital improvements 4,475 3,212 2,916 3,492 2,435 6,313 4,992 7,299 7,756 15,428 23,343 Debt service
Principal 85 90 95 95 100 105 105 110 120 120 628
Interest and fiscal charges 80 77 75 72 69 64 60 56 52 47 239 Total expenditures 32,947 33,188 32,918 32,240 32,419 40,898 38,460 43,744 45,084 56,584 65,146 Excess (deficiency) of revenues over (under) expenditures 2,235 (2,348) 4,402 7,824 6,552 (45) 2,744 700 3,111 (7,306) (11,735) Other financing sources (uses)
Debt issuance - - - - - - - - - - 10,000Payment to refunded bonded escrow agent - - - - - - - - - - - Transfers in 3,509 1,887 2,443 2,119 3,632 1,752 760 5,714 8,243 17,747 31,551Transfers out (3,574) (2,134) (2,925) (2,685) (3,828) (1,752) (760) (5,714) (8,243) (18,729) (31,551) Total Other financing sources (uses) (65) (247) (482) (566) (196) - - - - (982) 10,000 Fiscal Year
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City of Los Altos
Changes in Fund Balances - Governmental FundsLast Ten Fiscal Years(modified accrual basis of accounting; amounts expressed in thousands) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Fiscal Year
Special items
CalPERS Side Fund Pay Down - (850) (950) - - - - - - - - Sale of capital assets-net 300 100 492 - - - - - - - -
Total special items (750) 300 (458) - - - - - - - -
Net change in fund balances (2,113) $ 1,238 $ 3,463 $ 7,258 $ 6,356 $ (45) $ 2,744 $ 700 $ 3,111 $ (8,288) $ (1,735) $ Debt service as a percentage of
non-capital expenditures 0.6% 0.6% 0.6% 0.6% 0.6% 0.5% 0.5% 0.5% 0.5% 0.4% 2.1% Source:

City of Los Altos Finance Department
-
70,000 60,000 50,000 40,000 30,000 20,000 10,000
12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21
RevenuesTotal ExpOperational ExpCapital ExpDebt ServiceDebt Insurance 147
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Agenda Item # 4.

City of Los Altos
Tax Revenues by Source - Governmental FundsLast Ten Fiscal Years Fiscal Sales Business Utility Transient Real Estate Motor Vehicle Building Special Year Property Tax Licenses Users Occupancy Transfer Tax License Tax Development Assessments Total 2011-12 13,301,950 2,746,374 442,824 2,547,777 1,782,018 468,006 - 175,499 - 21,464,448 2012-13 14,130,040 2,926,441 519,828 2,600,054 1,946,484 587,422 15,102 247,992 - 22,973,363 2013-14 15,586,329 2,809,489 475,298 2,600,034 2,168,556 583,581 12,639 314,271 - 24,550,197 2014-15 17,479,882 2,942,764 453,201 2,522,536 2,450,488 616,500 12,281 212,187 - 26,689,839 2015-16 18,775,472 3,195,628 520,687 2,672,236 2,608,368 617,355 12,119 162,981 - 28,564,846 2016-17 19,863,197 3,278,430 539,989 2,679,961 2,985,201 668,242 14,046 122,071 - 30,151,137 2017-18 21,428,501 3,243,554 547,065 2,732,325 3,072,982 732,409 16,530 165,900 - 31,939,265 2018-19 23,791,531 3,461,298 540,262 2,743,570 3,166,067 679,424 15,054 113,589 - 34,510,795 2019-20 25,786,599 3,373,391 517,818 2,838,664 2,359,762 579,948 24,686 115,994 - 35,596,861 2020-21 28,464,193 2,996,325 537,089 2,917,252 662,132 931,856 22,646 150,170 36,681,663 Source: City of Los Altos Finance Department
$‐
$5,000,000
$40,000,000$35,000,000$30,000,000$25,000,000$20,000,000$15,000,000$10,000,000 11‐12 12‐13 13‐14 14‐15 15‐16 16‐17 17‐18 18‐19 19‐20 20‐21 TTL Tax RevenueProp TaxSales TaxUUTOther
148
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Agenda Item # 4.

City of Los Altos
Assessed Value of Taxable PropertyLast Ten Fiscal Years City of Los Altos Total
Total Taxable Direct
Fiscal Residential Commercial Net Assessed Tax %
Year Property Property Other Unsecured Value (1) Rate (2) Change 2011-12 8,952,576,593 622,766,264 33,390,275 89,645,375 9,698,378,507 1% 3.59% 2012-13 9,431,853,173 642,590,939 45,608,509 82,124,561 10,202,177,182 1% 5.19% 2013-14 10,318,249,580 676,252,209 67,682,916 97,506,301 11,159,691,006 1% 9.39% 2014-15 11,017,386,476 685,084,415 83,121,563 109,149,891 11,894,742,345 1% 6.59% 2015-16 11,848,840,720 750,708,212 106,506,870 125,355,972 12,831,411,774 1% 7.87% 2016-17 12,754,487,484 771,705,270 106,158,405 80,739,845 13,713,091,004 1% 6.87% 2017-18 13,600,334,963 880,225,920 90,338,436 83,250,683 14,654,150,002 1% 6.86% 2018-19 14,551,466,831 936,831,320 119,120,564 112,813,483 15,720,232,198 1% 7.27% 2019-20 15,563,770,279 1,003,212,732 110,061,604 131,971,942 16,809,016,557 1% 6.93% 2020-21 16,685,985,691 1,045,789,993 116,124,083 127,343,780 17,975,243,547 1% 6.94% Source: HdL Coren & Cone
(1)(2)
The California State Constitution requires property to be assessed at one hundred percent of the most recent purchase price, plus an increment of no more than two percent annually, plus any property improvements of substantial value to the property. These values are considered to be full market values for the City of Los Altos.California cities do not set their own direct tax rate. The California State Constitution establishes the rate at 1% and the County of Santa Clara is responsible for allocating a portion of that amount to all the taxing entities within each of the City's tax rate areas. The City has 15 tax rate areas and receives of approximately 12% of that 1% rate. $0
$8,000,000,000$6,000,000,000$4,000,000,000$2,000,000,000 $16,000,000,000$14,000,000,000$12,000,000,000$10,000,000,000 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Assessed Value
Fiscal Year
Total Taxable Assessed Value Residential Property Commercial Property 149
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Agenda Item # 4.

City of Los Altos
Property Tax Dollar BreakdownJune 30, 2021
Source: HdL Coren & Cone

1.00000.90000.80000.70000.60000.50000.40000.30000.20000.10000.0000

0.02930.04090.07210.11660.15940.16110.16680.1923
Scvwd-zone W-4Scvwd-districtBay Area Air QualityManagement DistrictScvwd State Water ProjectScvwd-n WestMidpeninsula Regional OpenSpace DistrictEl Camino HospitalCounty Library Retirement LevyCounty School ServiceFoothill-DeAnza CommunityCollegeLos Altos General FundSanta Clara County GeneralMountain View-Los Altos UnionHighEducation RevenueAugmentation Fund (ERAF)Los Altos Elementary 150
200
Agenda Item # 4.

City of Los Altos
Property Tax Dollars By Recipient GroupJune 30, 2021
Source: HdL Coren & Cone
Los Altos, 0.1166
County, 0.1594
Schools, 0.6332
Library, 0.0293
Open Space, 0.0176
Hospital, 0.0200 Water & Utilities, 0.0239
151
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Agenda Item # 4.

City of Los Altos
Direct and Overlapping Tax RatesLast Ten Fiscal Years(rate per $100 of taxable value) Basic Santa County Los Altos Mountain View Cupertino Whisman Foothill- Mountain View Fremont Santa Clara Mid County County Fiscal County- Clara Library Elementary Elementary Elementary School De Anza Los Altos Union High Valley Water Peninsula Housing Hospital El Camino Year Wide Retirement Retirement School School School Bond College High School School District Open Space Bond Bonds Hospital Total 2011-12 1.0000 0.0388 0.0024 0.0595 0.0303 0.0290 - 0.0297 0.0147 0.0415 0.0064 - - 0.0047 0.0129 1.2699 2012-13 1.0000 0.0388 0.0024 0.0579 0.0302 0.0598 0.0300 0.0287 0.0139 0.0390 0.0069 - - 0.0051 0.0129 1.3256 2013-14 1.0000 0.0388 0.0024 0.0534 0.0276 0.0525 0.0254 0.0290 0.0121 0.0405 0.0070 - - 0.0035 0.0129 1.3051 2014-15 1.0000 0.0388 0.0024 0.0524 - 0.0540 - 0.0276 0.0133 0.0396 0.0065 - - 0.0091 0.0129 1.2566 2015-16 1.0000 0.0388 0.0024 0.0485 - 0.0519 - 0.0240 0.0119 0.0525 0.0057 0.0008 - 0.0088 0.0129 1.2582 2016-17 1.0000 0.0388 0.0024 0.0479 - 0.0509 - 0.0234 0.0112 0.0403 0.0086 0.0006 - 0.0086 0.0129 1.2456 2017-18 1.0000 0.0388 0.0024 0.0463 - 0.0496 - 0.0220 0.0107 0.0464 0.0062 0.0009 0.0127 0.0082 0.0100 1.2542 2018-19 1.0000 0.0388 0.0024 0.0449 - 0.0397 - 0.0217 0.0409 0.0430 0.0042 0.0018 0.0105 0.0072 0.0100 1.2651 2019-20 1.0000 0.0388 0.0024 0.0418 - 0.0415 - 0.0208 0.0365 0.0479 0.0041 0.0016 0.0100 0.0069 0.0100 1.2623 2020-21 1.0000 0.0388 0.0024 0.0713 - 0.0403 - 0.0364 0.0400 0.0478 0.0037 0.0015 - 0.0069 0.0100 1.2991 Source: HdL Coren & Cone(1) Overlapping rates are those of local and county governments that apply to property owners within the City of Los Altos; however, not all of these overlapping rates apply to all Los Altos property owners.

Overlapping Rates (1)

1.400001.200001.000000.800000.600000.400000.200000.00000 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Regional Property Tax Rate City of Los Altos Allocation 152
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Agenda Item # 4.

City of Los Altos
Principal Property TaxpayersCurrent Year and Nine Years Ago % of City's % of City's
Total Est. Total Total Est. Total
Assessed Property Tax Assessed Property Tax
Taxpayer Value Rank Revenue Value Rank Revenue
RLJ R Los Altos LP 69,225,673 $ 1 0.39%
Los Altos Gardens II LP 57,719,605 2 0.32% 26,444,234 $ 3 Imperial Hornet Developers LLC 56,100,000 3 0.31%
St Paul Fire and Marine Insurance Co 54,047,269 4 0.30% 5150 ECR Group LLC 49,939,200 5 0.28%
Sutter Bay Medical Foundation 41,690,103 6 0.23%
Richard T Spieker Trustee 39,390,525 7 0.22%
Springwood Apartments 33,170,540 8 0.18% 27,002,877 $ 2 0.28% Safeway Inc 29,278,088 9 0.16%
I99 First Street Owner LLC 24,000,000 10 0.13%KRC Los Altos LP 0.00% 20,720,000 6 0.21% Behringer Harvard El Camino Real LP - - 40,522,807 1 0.42% Compass Grand Los Altos - - 21,411,487 5 0.22%
David & Lucile Packard Foundation - - 0.00%
4 Seasons Associations LLC - - 19,061,754 7 0.20%
Palo Alto Medical Foundation - - 21,751,597 4 0.22%
Los Altos Hotel Associates LLC - - 16,990,461 8 0.18%Village Court Partners - - 16,256,756 9 0.17% Whole Foods Market California Inc - - 13,770,278 10 0.14% Top Ten Total 454,561,003 $ 2.53% 223,932,251 $ 2.04%City Total 17,975,243,547 $ 9,698,378,507 $ Source: HdL Coren & Cone
2020-21 2011-12
153
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Agenda Item # 4.

City of Los Altos
Property Tax Levies and CollectionsLast Ten Fiscal Years Current Current Delinquent
Fiscal Total Tax Levy Levy Collected Collections Tax
Year Tax Levy Collections Collected of the Total Levy of the Levy Collections 2010-11 3,654,128,401 $ 288,311,420 $ 268,113,225 $ 7.34% 92.99% 7.01% 2011-12 3,703,148,623 293,002,052 273,640,116 7.39% 93.39% 6.61% 2012-13 3,877,675,089 301,164,764 292,131,302 7.53% 97.00% 3.00% 2013-14 4,165,019,181 349,740,765 316,325,898 7.59% 90.45% 2.59% 2014-15 4,463,179,149 344,291,093 339,731,930 7.61% 98.68% 0.98% 2015-16 4,944,651,360 330,545,207 326,823,894 6.61% 98.87% 1.13% 2016-17 5,278,067,434 359,152,852 346,454,876 6.56% 96.46% 1.89% 2017-18 5,719,021,680 355,579,401 345,863,202 6.05% 97.27% 1.86% 2018-19 6,070,435,575 402,557,998 394,623,618 6.50% 98.03% 1.46% 2019-20 6,512,388,164 385,721,931 378,492,815 5.81% 98.13% 1.74% 2020-21 6,920,087,868 422,454,897 413,409,481 5.97% 97.86% 1.80% Source: County of Santa ClaraNote:

The actual tax levy data for the City of Los Altos is not available because the Santa Clara County uses a factor known as the AB8 factors to apportion the 1% portion of the tax levies/collections to each of the jurisdictions within the county. The City's AB8 factors range from 0.0029 to 0.0033 for the past 10 years. Additionally, the City and the County adopted the "alternative method of property tax distributions" that authorizes the County to allocate 100% of the secured property tax based on levy instead of collection, and to retain all delinquent penalties and interest.

Santa Clara County
154
204
Agenda Item # 4.

City of Los Altos
Ratios of Outstanding Debt by Type
General Certificates Per Capita
Fiscal Obligation of Capital Per Personal
Year Bond Participation (1) Lease Total Population (2) Capita Income (2) 2010-11 - $ 1,945,000 $ - $ 1,945,000 $ 28,863 67$ 73,414 $ 2011-12 - $ 1,855,000 $ - $ 1,855,000 $ 29,460 63$ 72,608 $ 2012-13 - $ 1,760,000 $ - $ 1,760,000 $ 29,792 59$ 74,570 $ 2013-14 - $ 1,665,000 $ - $ 1,665,000 $ 29,969 56$ 79,102 $ 2014-15 - $ 1,565,000 $ - $ 1,565,000 $ 29,884 52$ 83,041 $ 2015-16 - $ 1,460,000 $ - $ 1,460,000 $ 31,353 47$ 80,407 $ 2016-17 - $ 1,355,000 $ - $ 1,355,000 $ 31,402 43$ 86,558 $ 2017-18 - $ 1,245,000 $ - $ 1,245,000 $ 31,361 40$ 93,010 $ 2018-19 - $ 1,125,000 $ - $ 1,125,000 $ 31,190 36$ 96,333 $ 2019-20 - $ 1,005,000 $ - $ 1,005,000 $ 30,876 33$ 104,649 $ 2020-21 - $ 880,000 $ 9,496,863.00 $ 10,376,863 $ 30,510 340$ 115,433 $ Sources:
(1) City of Los Altos Finance Department(2) HdL Coren & Cone Last Ten Fiscal Years
Note: Special Assessment Debt is no longer presented as they involve limited obligation bonds that are secured by ad valorem assessments and carry no city obligation.

Governmental Activities
155
205
Agenda Item # 4.

City of Los Altos
Schedule of Direct and Overlapping Bonded Debt
2020-21 Assessed Valuation: $17,975,243,547
Total Debt % City’s Share of
OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/2020 Applicable (1) Debt 6/30/20 Santa Clara County $ 812,685,000 3.263% $26,517,912
Foothill-De Anza Community College District 707,932,142 9.305% 65,873,086 Fremont Union High School District 617,160,088 3.934% 24,279,078 Mountain View-Los Altos Union High School District 207,011,101 24.138% 49,968,340 Cupertino Union School District 284,223,303 7.180% 20,407,233 Los Altos School District 164,070,000 52.711% 86,482,938 El Camino Hospital District 116,290,000 16.687% 19,405,312 Midpeninsula Regional Park District 86,400,000 5.341% 4,614,624 Santa Clara Valley Water District Benefit Assessment District 57,010,000 3.263% 1,860,236 City of Los Altos 1915 Act Bonds 485,000 100.000% 485,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $299,893,759
DIRECT AND OVERLAPPING GENERAL FUND DEBT:

Santa Clara County General Fund Obligations $ 914,957,860 3.263% 29,855,075 Santa Clara County Pension Obligation Bonds 341,399,194 3.263% 11,139,856 Santa Clara County Board of Education Certificates of Participation 2,670,000 3.263% 87,122 Foothill-De Anza Community College District Certificates of Participation 22,085,000 9.305% 2,055,009 Mountain View-Los Altos Union High School District General Fund Obligatio 24.138% 601,029 2,489,970 Los Altos School District General Fund Obligations 1,954,070 52.711% 1,030,010 City of Los Altos General Fund Obligations 10,377,499 100.000% 10,377,499 Midpeninsula Regional Park District General Fund Obligations 106,000,600 5.341% 5,661,492 Santa Clara County Vector Control District Certificates of Participation 1,765,000 3.263% 57,592 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $ 60,864,684 Less: Santa Clara County supported obligations 824,798
TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $ 60,039,886 TOTAL DIRECT DEBT $ 10,377,499
TOTAL GROSS OVERLAPPING DEBT $ 350,380,944
TOTAL NET OVERLAPPING DEBT $ 349,556,146
GROSS COMBINED TOTAL DEBT $ 360,758,443 (2)
NET COMBINED TOTAL DEBT $ 359,933,645
Source:

California Municipal Statistics, Inc.
(1)
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

June 30, 2021
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 district's total taxable assessed value.
156
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Agenda Item # 4.

City of Los Altos
Legal Debt Margin
Debt Limit Debt Legal
Fiscal Assessed 15% of Assessed Applicable to Debt
Year Valuation (1) Valuation Limit Margin
2011-12 10,202,177,182 1,530,326,577 - 1,530,326,577
2012-13 10,202,177,182 1,530,326,577 - 1,530,326,577
2013-14 11,159,691,006 1,673,953,651 - 1,673,953,651
2014-15 11,894,742,345 1,784,211,352 - 1,784,211,352
2015-16 12,831,411,774 1,924,711,766 - 1,924,711,766
2016-17 13,713,091,004 2,056,963,651 - 2,056,963,651
2017-18 14,654,150,002 2,198,122,500 - 2,198,122,500
2018-19 15,720,232,198 2,358,034,830 - 2,358,034,830
2019-20 16,809,016,557 2,521,352,484 - 2,358,034,830
2020-21 17,975,243,547 2,696,286,532 - 2,696,286,532
Source:
(1) HdL Coren & Cone
Last Ten Fiscal Years
157
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Agenda Item # 4.

City of Los Altos
Demographic StatisticsLast Ten Fiscal Years
Per Capita % with % with
City Percentage School Percentage Unemployment Personal Median High School Bachelor's Fiscal Year Population (1) Change Enrollment (2) Change Rate (1) Income (1) Age (1) Degree (1) Degree (1) 2011-12 29,460 2.07% 8,138 1.28% 4.9% 72,608 $ 45.4 98.50% 78.20%2012-13 29,792 1.13% 8,198 0.74% 3.2% 74,570 $ 45.8 98.70% 76.70%2013-14 29,969 0.59% 8,303 1.28% 2.6% 79,102 $ 46.1 98.70% 77.40%2014-15 29,884 -0.28% 8,284 -0.23% 3.4% 83,041 $ 46.2 98.80% 78.70%2015-16 31,353 4.92% 8,666 4.61% 2.7% 80,407 $ 46.2 98.70% 79.00%2016-17 31,402 0.16% 8,606 -0.69% 2.4% 86,558 $ 45.7 98.70% 80.00%2017-18 31,361 -0.13% 8,685 0.92% 1.6% 93,010 $ 45.7 98.60% 80.90%2018-19 31,190 -0.55% 8,610 -0.86% 2.4% 96,333 $ 45.9 98.60% 82.30%2019-20 30,876 -1.01% 8,513 -1.13% 2.3% 104,649 $ 45.8 98.40% 82.60%2020-21 30,510 -1.19% 7,693 -9.63% 4.2% 115,433 $ 46.1 98.40% 84.20% Sources:
(1) HdL Coren & Cone(2) State of California Department of Education 158
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Agenda Item # 4.

City of Los Altos
Principal EmployersCurrent Year and Ten Years Ago
% of % of
Total City Total City
Employer Employees (1) Rank Employment Employees (4) Rank Employment Los Altos School District 442 * (2) 1 3.31% 568 * (2) 1 4.54% Toyota Research Institute 400 2 3.00%
Whole Food Market 242 3 1.81% 198 2 1.58%
Los Altos High School 210 (3) 4 1.57% 217 (3) 6 1.74%
Los Altos Sub-Acute & Rehab 196 5 1.47% - - - City of Los Altos 131 6 0.98% 130 7 1.04% The David and Lucile Packard Foundation 131 7 0.98% 100 10 0.80% Alain Pinel Realtors 129 8 0.97% 150 5 1.20%
Adobe Animal Hospital 118 9 0.88% 125 8 1.00%
Palo Alto Medical Foundation 110 10 0.82% - - -
Coldwell Banker - - 190 3 1.52%Covenant Care Sub Acute Rehab - - 163 4 1.30% Pilgrim Haven Skilled Nursing - - 120 9 0.96%
Top Ten Total 2,109 15.81% 1,961 15.69%Total Employees in City 13,341 12,500 (1) Sources:
(1) City Finance Department (2) Los Altos School District FY21-22 Annual Budget(3) California State Department of Education * - For fiscal years 2009-10, this number includes 119 substitute teachers. 2020-21 2009-10 (Latest Available)
159
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Agenda Item # 4.

City of Los Altos
Full-time Equivalent City Employees by Function/ProgramLast Ten Fiscal Years Function/Program 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21Public Safety Police Operations 32.00 32.00 32.00 32.00 31.00 31.00 31.00 31.00 30.00 30.00 Police Traffic Safety 5.00 5.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 Communications 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 13.00 13.00 Maintenance Services 29.50 29.50 29.50 29.50 29.50 29.50 29.50 28.00 27.00 27.00 Recreation 7.00 7.00 7.00 7.00 8.00 8.00 8.00 8.00 8.00 8.00 Community Development
Planning & Building 13.00 13.00 14.00 14.00 14.00 15.00 15.00 14.00 15.00 15.00 Engineering 9.00 9.00 9.00 9.00 9.00 10.00 10.00 12.25 13.25 13.25 Economic Development 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Administration
City Management 4.75 4.75 5.00 5.00 5.00 5.00 5.00 6.00 6.00 6.00 Administration & Finance 10.00 10.00 10.00 10.00 12.00 12.00 12.00 11.00 11.00 11.00 Sewer 6.25 6.25 6.25 6.25 6.25 6.25 6.25 7.50 7.50 7.50 Solid Waste 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 Storm Drain 1.00 1.00 1.00 1.00 - - - - - -
Total 129.75 129.75 130.00 130.00 131.00 133.00 133.00 134.00 136.00 136.00 Source:

City of Los Altos Finance DepartmentNote: In FY09-10 Staffing assignments were recategorized in the revision of the budget process to align with functional areas.

FISCAL YEAR
160
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Agenda Item # 4.

City of Los Altos
Full-time Equivalent City Employees Last Ten Fiscal Years Source:

City of Los Altos
-
90 80 70 60 50 40 30 20 10
140 130 120 110 100
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Number of Full-time Equivalent Employees
Fiscal Year
161
211
Agenda Item # 4.

City of Los Altos
Operating Indicators by Function/ProgramLast Ten Fiscal Years 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Police:

Arrests 301 308 283 312 222 210 211 717 893 347
Moving citations issued 1,385 1,285 1,069 1,555 1,757 982 1,203 2,517 1474 1053Parking citations issued 1,938 1,947 2,559 2,266 3,138 2,431 1,879 1,338 1573 543Municipal code violations issued 25 56 161 109 103 25 115 116 54 54 Public Works:

Crack sealing in lineal feet 66,290 98,136 2,112 113,784 101,040 110,000 174,040 - 120,000 45,536Street sign installed and replaced 1,361 511 949 596 457 100 320 1,025 1200 411 Recreation:

Classes/programs 1,821 2,675 2,738 2,713 2,107 2,349 2,724 1,803 1559 1298 Facility rentals 3,106 2,702 3,501 5,648 5,378 5,927 4,141 4,044 2246 1269Field/gymnasium permits 3,658 3,388 2,945 4,509 2,795 3,433 3,556 3,109 2383 1935 Planning:

Plan applications submitted 404 510 716 757 800 675 686 988 493 935 Building:

Permits issued 1,690 1,817 1,757 1,751 1,927 1,769 1,795 1,939 1,695 2,036 Plan checks submitted 560 636 649 582 599 619 569 619 883 991 Inspections 7,108 6,631 7,682 7,227 7,517 6,445 6,479 7,967 7,920 8,862 Sewer:

Cleaning and flushing in lineal feet 852,453 777,285 667,415 683,552 759,456 585,273 713,795 585,095 601,543 768,557 Storm Drain:

Catch basin/storm drain cleaned 1,583 1,202 1,898 1,350 1,350 1,350 1,350 1,350 2,000 1,350 (measured in storm inlets cleaned)
Sources:

City of Los Altos Quarterly Reports.Data for all fiscal years was provided by the corresponding departments.

Function/Program

FISCAL YEAR
162
212
Agenda Item # 4.

City of Los Altos
Capital Asset Statistics by Function/ProgramLast Ten Fiscal Years 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Public Safety:

Police Station 1111111111Fire Stations 2222222222
Recreation:

Number of Parks 10 10 10 10 10 10 10 10 10 10Park Acreage 38 38 38 38 38 38 38 38 38 38Number of Libraries 2222222222Number of History Museums 1 1 1 1 1 1 1 1 1 1 Maintenance Services:

Miles of Streets 127 127 127 127 127 127 127 127 127 127Number of Traffic Signals 13 13 13 13 13 13 16 16 16 16 Sewer:

Miles of Sewer Mains 141 141 141 141 141 141 141 141 141 141 Storm Drain:

Miles of Storm Drain Mains 58 58 58 58 58 58 58 58 58 58 Source:

City of Los Altos
Function/Program

FISCAL YEAR
163
213
Agenda Item # 4.

City of Los Altos
Trust and Agency Debt AdministrationLast Ten Fiscal Years Fiscal Year
Special Principal Interest Special Principal Interest Special Principal Interest Special Principal Interest Coverage 2011-12 27,091 8,000 2,204 27,216 16,000 9,068 48,104 12,880 34,490 102,411 36,880 45,762 1.24 2012-13 27,091 8,000 1,740 27,405 17,000 8,300 42,960 10,000 31,900 97,456 35,000 41,940 1.27 2013-14 10,044 8,000 1,276 27,341 18,000 7,487 46,491 10,000 31,629 83,876 36,000 40,392 1.10 2014-15 - 18,620 783 27,216 19,000 6,626 50,280 15,000 31,241 77,496 52,620 38,650 0.85 2015-16 - - - 29,592 20,000 5,719 48,024 15,000 30,741 77,616 35,000 36,460 1.09 2016-17 - - - 26,192 21,000 4,766 51,709 15,000 30,197 77,901 36,000 34,963 1.10 2017-18 - - - 26,217 21,000 3,790 49,802 15,000 29,610 76,019 36,000 33,400 1.10 2018-19 - - - 28,537 22,000 2,790 48,378 15,000 28,971 76,915 37,000 31,761 1.12 2019-20 - - - 27,741 23,999 1,721 47,868 15,000 28,341 75,609 38,999 30,062 1.09 2020-21 - - - 25,581 25,000 581 48,691 15,000 27,648 74,272 40,000 28,229 1.09 Source: City of Los Altos Finance DepartmentNote : This chart presents Limited Obligation Debt that the City Administers on a trust and Agency Basis. This debt does not represent City Obligations.

Non-City Obligation Debt
Special Assessment Debt Service
Avalon Dr. Curb & Gutter Raymundo Curb & Gutter Blue Oak Lane Sewer Total Special Assessment Debt Service 164
214
Agenda Item # 4.

INDEPENDENT ACCOUNTANT’S REPORT ON

APPLYING AGREED UPON PROCEDURES FOR
COMPLIANCE WITH THE PROPOSITION 111
2020-2021 APPROPRIATIONS LIMIT INCREMENT
Honorable Mayor and Members of the City Council
City of Los Altos, California
We have performed the procedures enumerated below on the Appropriations Limit Worksheet (Worksheet) of the City of Los Altos, California, for the year ended June 30, 2021. The City’s management is responsible for the Worksheet.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of these procedures, which were suggested by the League of California Cities and presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, were performed solely to assist you in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and associated findings were as follows:

A. We obtained the Worksheet and determined that the 2020-2021 Appropriations Limit of $38,063,553 and annual adjustment factors were adopted by Resolution of the City Council. We also determined that the population and inflation options were selected by a recorded vote of the City Council.

B. We recomputed the 2020-2021 Appropriations Limit by multiplying the 2019-2020 Prior Year Appropriations Limit by the Total Growth Factor. We recomputed the Total Growth Factor by multiplying the population option by the inflation option.

C. For the Worksheet, we agreed the Per Capita Income Factor, City Population Factor and County Population Factor to California State Department of Finance Worksheets.

We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the Worksheet.

Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

ATTACHMENT 2
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Agenda Item # 4.
his report is intended solely for the information and use of management and the City Council and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record.

Pleasant Hill, California
December 15, 2021
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Agenda Item # 4.

CITY OF LOS ALTOS

MEMORANDUM ON INTERNAL CONTROL
AND

REQUIRED COMMUNICATIONS
FOR THE YEAR ENDED JUNE 30, 2021
ATTACHMENT 3
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CITY OF LOS ALTOS

MEMORANDUM ON INTERNAL CONTROL
For The Year Ended June 30, 2021
Table of Contents
Page
Memorandum on Internal Control...................................................................................................... 1 Schedule of Other Matters.............................................................................................................. 5 Status of Prior Year Other Matters............................................................................................... 15 219
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MEMORANDUM ON INTERNAL CONTROL
To the City Council of
the City of Los Altos, California
In planning and performing our audit of the basic financial statements of the City of Los Altos (City) as of and for the year ended June 30, 2021, in accordance with auditing standards generally accepted in the United States of America, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore material weaknesses or significant deficiencies may exist that were not identified. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error or fraud may occur and not be detected by such controls. However, as discussed below, we identified certain deficiencies in internal control that we consider to be significant deficiencies.

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 City’s financial statements will not be prevented or detected and corrected on a timely basis. We did not identify any deficiencies in internal control that we consider to be material weaknesses.

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.

We consider the deficiencies in internal control included on the Schedule of Significant Deficiencies to be significant deficiencies.

Included in the Schedule of Other Matters are recommendations not meeting the above definitions that we believe are opportunities for strengthening internal controls and operating efficiency.

Management’s written responses included in this report have not been subjected to the audit procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them.

This communication is intended solely for the information and use of management, City Council, others within the organization, and agencies and pass-through entities requiring compliance with Government Auditing Standards and is not intended to be and should not be used by anyone other than these specified parties.

Pleasant Hill, California
December 15, 2021
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MEMORANDUM ON INTERNAL CONTROLS

SCHEDULE OF OTHER MATTERS
2021-01: Timely Invoice payments
The city should pay vendor invoices in a timely manner, within 30-45 days of receiving the invoices.

During our interim audit sampling testing, we noted that the city did not pay three invoices sampled in a timely manner. According to the Finance staff, the delay was due to the delayed approval by the Department.

Accounting records may not be properly reflected in the correct reporting periods if the invoices were not processed in a timely manner. Expenditures may be understated and cash available may be overstated due to the delay.

We recommend the City should communicate with the other departments in the City and establish corresponding standard procedures to ensure the submission of invoices to Finance in a timely manner.

Management Response:

The issue originated from new procedures that were implemented during COVID-19, Departments were asked to send emails to approved invoices to Accounts payable, not all departments were following these procedures and were saving the invoices using old instructions. When this was found out there was a large backlog of invoices as well as the Finance department was short-staffed due to turnover.

The New Director and Manager have set revised procedures for invoice payments and have communicated the same to departments, we are also in the process of training departments to enter their invoices directly into the financial system. This will avoid invoices being missed and Finance will have a better way of monitoring invoices and following up with departments if they are entered too late. 2021-02: Outdated Signature Cards
Signature cards for the bank and investment accounts should be updated immediately whenever there is a change in authorized signers.

As of November 4, 2021, we found that the formal Administrative Services Director and City Manager were listed as authorized signers for the City’s Union Bank account. According to the Finance staff, the delay was due to the staff shortage and turnover.

Keeping inactive employees as authorized signers exposes the city to the risk of misappropriation of assets.

We recommend that the city immediately remove the ex-employees from the authorized signer lists of all bank accounts. In the future, a step should be added to the employee departure checklist to ensure that outside parties (such as banks, investment advisors, and bond trustees) are informed that the departed employee no longer represents the City.

Management Response:

Union Bank was the original custodian for the city’s investment portfolio, In January of 2021 US bank bought the custody business from Union bank. US bank informed clients that the transition would be automatic and that the union bank accounts would be closed. This happened in August of 2021 as a result we do not have an account with Union bank anymore. The signature cards to US bank were updated in time. 223
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SCHEDULE OF OTHER MATTERS
2021-03: Information System Risk Management Policy
Risk management policy is to provide guidance regarding the management of risk to support the achievement of corporate objectives, protect staff and business assets and ensure financial sustainability.

During the information system review with the City, we noted that the IT department has no written risk management policy.

Without a specific Risk Management Policy, the City is leaving the determination of how to deal with cyberattacks to individual employees, which could impede financial statement reporting.

We recommend that the City to set up a former Information System Risk Management Policy to ensure the security of the financial system and be well prepared for unexpected cyberattacks.

Management Response: The City currently does not have a written risk management policy for financial systems. However, the City does have an IT support platform for employees to report suspicious activity and potential cyberattacks. Daily backup of data is performed to protect important financial data.

Besides, City’s Financial systems are not accessible from public sources only authorized VPN users can have access to the systems from a remote location. The Division will consider adopting a formal policy in the future.

NEW GASB PRONOUNCEMENTS OR PRONOUNCEMENTS NOT YET EFFECTIVE The following comment represents new pronouncements taking effect in the next few years. We have cited them here to keep you abreast of developments:

EFFECTIVE FISCAL YEAR 2021/22:

GASB 87 – Leases
The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities.

A lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. Any contract that meets this definition should be accounted for under the guidance of the lease, unless specifically excluded in this Statement.
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SCHEDULE OF OTHER MATTERS
Management Response: The City will review the applicability of this GASB and implement accordingly, if applicable.

GASB 89 – Accounting for Interest Cost Incurred before the End of a Construction Period The objectives of this Statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period.

This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. Such interest cost includes all interest that previously was accounted for in accordance with the requirements of paragraphs 5–22 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which are superseded by this Statement. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business-type activity or enterprise fund.

This Statement also reiterates that in financial statements prepared using the current financial resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expenditure on a basis consistent with governmental fund accounting principles. 225
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SCHEDULE OF OTHER MATTERS
Management Response: The City will review the applicability of this GASB and implement accordingly, if applicable.

EFFECTIVE FISCAL YEAR 2022/23:

GASB 91 – Conduit Debt Obligations
The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures.

A conduit debt obligation is defined as a debt instrument having all of the following characteristics:
• There are at least three parties involved:
(1) an issuer
(2) a third-party obligor, and
(3) a debt holder or a debt trustee.
• The issuer and the third-party obligor are not within the same financial reporting entity. • The debt obligation is not a parity bond of the issuer, nor is it cross-collateralized with other debt of the issuer.
• The third-party obligor or its agent, not the issuer, ultimately receives the proceeds from the debt issuance.
• The third-party obligor, not the issuer, is primarily obligated for the payment of all amounts associated with the debt obligation (debt service payments).

All conduit debt obligations involve the issuer making a limited commitment. Some issuers extend additional commitments or voluntary commitments to support debt service in the event the third party is, or will be, unable to do so.

An issuer should not recognize a conduit debt obligation as a liability. However, an issuer should recognize a liability associated with an additional commitment or a voluntary commitment to support debt service if certain recognition criteria are met. As long as a conduit debt obligation is outstanding, an issuer that has made an additional commitment should evaluate at least annually whether those criteria are met. An issuer that has made only a limited commitment should evaluate whether those criteria are met when an event occurs that causes the issuer to reevaluate its willingness or ability to support the obligor’s debt service through a voluntary commitment.
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SCHEDULE OF OTHER MATTERS
GASB 91 – Conduit Debt Obligations (Continued)
This Statement also addresses arrangements—often characterized as leases—that are associated with conduit debt obligations. In those arrangements, capital assets are constructed or acquired with the proceeds of a conduit debt obligation and used by third-party obligors in the course of their activities. Payments from third-party obligors are intended to cover and coincide with debt service payments. During those arrangements, issuers retain the titles to the capital assets. Those titles may or may not pass to the obligors at the end of the arrangements.

Issuers should not report those arrangements as leases, nor should they recognize a liability for the related conduit debt obligations or a receivable for the payments related to those arrangements. In addition, the following provisions apply:
• If the title passes to the third-party obligor at the end of the arrangement, an issuer should not recognize a capital asset.
• If the title does not pass to the third-party obligor and the third party has exclusive use of the entire capital asset during the arrangement, the issuer should not recognize a capital asset until the arrangement ends.
• If the title does not pass to the third-party obligor and the third party has exclusive use of only portions of the capital asset during the arrangement, the issuer, at the inception of the arrangement, should recognize the entire capital asset and a deferred inflow of resources. The deferred inflow of resources should be reduced, and an inflow recognized, in a systematic and rational manner over the term of the arrangement.

This Statement requires issuers to disclose general information about their conduit debt obligations, organized by type of commitment, including the aggregate outstanding principal amount of the issuers’ conduit debt obligations and a description of each type of commitment. Issuers that recognize liabilities related to supporting the debt service of conduit debt obligations also should disclose information about the amount recognized and how the liabilities changed during the reporting period.

How the Changes in this Statement will Improve Financial Reporting The requirements of this Statement will improve financial reporting by eliminating the existing option for issuers to report conduit debt obligations as their own liabilities, thereby ending significant diversity in practice. The clarified definition will resolve stakeholders’ uncertainty as to whether a given financing is, in fact, a conduit debt obligation. Requiring issuers to recognize liabilities associated with additional commitments extended by issuers and to recognize assets and deferred inflows of resources related to certain arrangements associated with conduit debt obligations also will eliminate diversity, thereby improving comparability in reporting by issuers. Revised disclosure requirements will provide financial statement users with better information regarding the commitments issuers extend and the likelihood that they will fulfill those commitments. That information will inform users of the potential impact of such commitments on the financial resources of issuers and help users assess issuers’ roles in conduit debt obligations.

Management Response: The City will review the applicability of this GASB and implement it accordingly, if applicable.
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SCHEDULE OF OTHER MATTERS
GASB 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). As used in this Statement, a PPP is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital assets (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction. Some PPPs meet the definition of a service concession arrangement (SCA), which the Board defines in this Statement as a PPP in which (1) the operator collects and is compensated by fees from third parties; (2) the transferor determines or has the ability to modify or approve which services the operator is required to provide, to whom the operator is required to provide the services, and the prices or rates that can be charged for the services; and (3) the transferor is entitled to a significant residual interest in the service utility of the underlying PPP asset at the end of the arrangement.

This Statement also provides guidance for accounting and financial reporting for availability payment arrangements (APAs). As defined in this Statement, an APA is an arrangement in which a government compensates an operator for services that may include designing, constructing, financing, maintaining, or operating an underlying nonfinancial asset for a period of time in an exchange or exchange-like transaction.

PPPs – This Statement requires that PPPs that meet the definition of a lease apply the guidance in Statement No. 87, Leases, as amended, if existing assets of the transferor that are not required to be improved by the operator as part of the PPP arrangement are the only underlying PPP assets and the PPP does not meet the definition of an SCA. This Statement provides accounting and financial reporting requirements for all other PPPs: those that either (1) meet the definition of an SCA or (2) are not within the scope of Statement 87, as amended (as clarified by this Statement). The PPP term is defined as the period during which an operator has a noncancelable right to use an underlying PPP asset, plus, if applicable, certain periods if it is reasonably certain, based on all relevant factors, that the transferor or the operator either will exercise an option to extend the PPP or will not exercise an option to terminate the PPP.

A transferor generally should recognize an underlying PPP asset as an asset in financial statements prepared using the economic resources measurement focus. However, in the case of an underlying PPP asset that is not owned by the transferor or is not the underlying asset of an SCA, a transferor should recognize a receivable measured based on the operator’s estimated carrying value of the underlying PPP asset as of the expected date of the transfer in ownership. In addition, a transferor should recognize a receivable for installment payments, if any, to be received from the operator in relation to the PPP. Measurement of a receivable for installment payments should be at the present value of the payments expected to be received during the PPP term. A transferor also should recognize a deferred inflow of resources for the consideration received or to be received by the transferor as part of the PPP. Revenue should be recognized by a transferor in a systematic and rational manner over the PPP term.

This Statement requires a transferor to recognize a receivable for installment payments and a deferred inflow of resources to account for a PPP in financial statements prepared using the current financial resources measurement focus. Governmental fund revenue would be recognized in a systematic and rational manner over the PPP term.
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SCHEDULE OF OTHER MATTERS
GASB 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements, (Continued)
This Statement also provides specific guidance in financial statements prepared using the economic resources measurement focus for a government that is an operator in a PPP that either (1) meets the definition of an SCA or (2) is not within the scope of Statement 87, as amended (as clarified in this Statement). An operator should report an intangible right-to-use asset related to an underlying PPP asset that either is owned by the transferor or is the underlying asset of an SCA. Measurement of the right-to-use asset should be the amount of consideration to be provided to the transferor, plus any payments made to the transferor at or before the commencement of the PPP term, and certain direct costs. For an underlying PPP asset that is not owned by the transferor and is not the underlying asset of an SCA, an operator should recognize a liability measured based on the estimated carrying value of the underlying PPP asset as of the expected date of the transfer in ownership. In addition, an operator should recognize a liability for installment payments, if any, to be made to the transferor in relation to the PPP. Measurement of a liability for installment payments should be at the present value of the payments expected to be made during the PPP term. An operator also should recognize a deferred outflow of resources for the consideration provided or to be provided to the transferor as part of the PPP. Expense should be recognized by an operator in a systematic and rational manner over the PPP term.

This Statement also requires a government to account for PPP and non-PPP components of a PPP as separate contracts. If a PPP involves multiple underlying assets, a transferor and an operator in certain cases should account for each underlying PPP asset as a separate PPP. To allocate the contract price to different components, a transferor and an operator should use contract prices for individual components as long as they do not appear to be unreasonable based on professional judgment or use professional judgment to determine their best estimate if there are no stated prices or if stated prices appear to be unreasonable. If determining the best estimate is not practicable, multiple components in a PPP should be accounted for as a single PPP.

This Statement also requires an amendment to a PPP to be considered a PPP modification, unless the operator’s right to use the underlying PPP asset decreases, in which case it should be considered a partial or full PPP termination. A PPP termination should be accounted for by a transferor by reducing, as applicable, any receivable for installment payments or any receivable related to the transfer of ownership of the underlying PPP asset and by reducing the related deferred inflow of resources. An operator should account for a termination by reducing the carrying value of the right-to-use asset and, as applicable, any liability for installment payments or liability to transfer ownership of the underlying PPP asset. A PPP modification that does not qualify as a separate PPP should be accounted for by remeasuring PPP assets and liabilities.

APAs – An APA that is related to designing, constructing, and financing a nonfinancial asset in which ownership of the asset transfers by the end of the contract should be accounted for by a government as a financed purchase of the underlying nonfinancial asset. This Statement requires a government that engaged in an APA that contains multiple components to recognize each component as a separate arrangement. An APA that is related to operating or maintaining a nonfinancial asset should be reported by a government as an outflow of resources in the period to which payments relate.

Management Response: The City will review the applicability of this GASB and implement it accordingly, if applicable.
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SCHEDULE OF OTHER MATTERS
GASB 96 – Subscription-Based Information Technology Arrangements This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended.

A SBITA is defined as a contract that conveys control of the right to use another party’s (a SBITA vendor’s) information technology (IT) software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.

The subscription term includes the period during which a government has a noncancelable right to use the underlying IT assets. The subscription term also includes periods covered by an option to extend (if it is reasonably certain that the government or SBITA vendor will exercise that option) or to terminate (if it is reasonably certain that the government or SBITA vendor will not exercise that option).

Under this Statement, a government generally should recognize a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability. A government should recognize the subscription liability at the commencement of the subscription term, —which is when the subscription asset is placed into service. The subscription liability should be initially measured at the present value of subscription payments expected to be made during the subscription term. Future subscription payments should be discounted using the interest rate the SBITA vendor charges the government, which may be implicit, or the government’s incremental borrowing rate if the interest rate is not readily determinable. A government should recognize amortization of the discount on the subscription liability as an outflow of resources (for example, interest expense) in subsequent financial reporting periods.

The subscription asset should be initially measured as the sum of (1) the initial subscription liability amount, (2) payments made to the SBITA vendor before commencement of the subscription term, and (3) capitalizable implementation costs, less any incentives received from the SBITA vendor at or before the commencement of the subscription term. A government should recognize amortization of the subscription asset as an outflow of resources over the subscription term.

Activities associated with a SBITA, other than making subscription payments, should be grouped into the following three stages, and their costs should be accounted for accordingly:
• Preliminary Project Stage, including activities such as evaluating alternatives, determining needed technology, and selecting a SBITA vendor. Outlays in this stage should be expensed as incurred. • Initial Implementation Stage, including all ancillary charges necessary to place the subscription asset into service. Outlays in this stage generally should be capitalized as an addition to the subscription asset.
• Operation and Additional Implementation Stage, including activities such as subsequent implementation activities, maintenance, and other activities for a government’s ongoing operations related to a SBITA. Outlays in this stage should be expensed as incurred unless they meet specific capitalization criteria.
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SCHEDULE OF OTHER MATTERS
GASB 96 – Subscription-Based Information Technology Arrangements, (Continued) In classifying certain outlays into the appropriate stage, the nature of the activity should be the determining factor. Training costs should be expensed as incurred, regardless of the stage in which they are incurred.

If a SBITA contract contains multiple components, a government should account for each component as a separate SBITA or nonsubscription component and allocate the contract price to the different components.

If it is not practicable to determine a best estimate for price allocation for some or all components in the contract, a government should account for those components as a single SBITA.

This Statement provides an exception for short-term SBITAs. Short-term SBITAs have a maximum possible term under the SBITA contract of 12 months (or less), including any options to extend, regardless of their probability of being exercised. Subscription payments for short-term SBITAs should be recognized as outflows of resources.

This Statement requires a government to disclose descriptive information about its SBITAs other than shortterm SBITAs, such as the amount of the subscription asset, accumulated amortization, other payments not included in the measurement of a subscription liability, principal and interest requirements for the subscription liability, and other essential information.

How the Changes in this Statement will Improve Financial Reporting The requirements of this Statement will improve financial reporting by establishing a definition for SBITAs and providing uniform guidance for accounting and financial reporting for transactions that meet that definition. That definition and uniform guidance will result in greater consistency in practice. Establishing the capitalization criteria for implementation costs also will reduce diversity and improve comparability in financial reporting by governments. This Statement also will enhance the relevance and reliability of a government’s financial statements by requiring a government to report a subscription asset and subscription liability for a SBITA and to disclose essential information about the arrangement. The disclosures will allow users to understand the scale and important aspects of a government’s SBITA activities and evaluate a government’s obligations and assets resulting from SBITAs.

Management Response: The City will review the applicability of this GASB and implement it accordingly, if applicable.
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STATUS OF PRIOR YEARS SCHEDULE OF OTHER MATTERS
2020-01: Timely Preparation of Bank Reconciliations and Investment Reconciliations Bank and investment reconciliations are an important element of the City’s internal control and bank reconciliations and related adjustments should be completed after month end, generally within 30-45 days.

During our testing of internal controls over bank and investment reconciliations, we selected bank and investments reconciliations for the months of January and February 2021 to test, however, these reconciliations were not ready as of August 2021. The June 2021 bank reconciliations were not completed until late December 2021, six months later.

According to the Finance staff, the delay was due to the staff shortage and turnover.

Without the timely completion of bank and investment reconciliations, errors or unauthorized transactions in these accounts might not be detected and remedied in a timely manner.

We recommend that the City ensure that the bank and investment reconciliations are prepared and reviewed timely within 30 to 45 days of the end of the reporting period.

Current Status: During the fiscal year 2021 audit, we noted that the Bank reconciliation for December 2020 was not reviewed until 5/11/21. The March 2021 bank reconciliation was not yet performed as 5/31/21. The June 2021 bank reconciliation was not prepared until 10/18/21.

Management Response on Current Status: The Department has been without leadership for over nine months, at the same time there has been a lot of turnovers, which has caused delays in reconciliation. Even currently after getting in a new Finance Director and a new Finance Manager, the department has lost 2 of its longer-tenured staff, a senior accountant and an accounting Technician, as the department manages to hire the new staff it will return to having these items prepared in time. 2020-02: Accrual for legal liabilities
According to the Governmental Accounting Standard Board (GASB) Statement 56 Paragraph 11, litigation payment made before the issuance of the financial report should be accrued in the applicable fiscal year when the event that gave rise to the litigation had taken place prior to the settlement date.

The City made two payments in September 2021 and January 2022 accordingly for a legal case settled in April 2021. The legal expenditures were not accrued in the fiscal year 2021, instead, were recorded in 2022.

It appeared that the Finance staff overlooked the accrual.

Without the review for proper accrual, the expenditures could have been understated for the fiscal year 2021 and overstated for 2022.

We recommend that the City ensure that the finance staff in charge of year end closing and accrual process reviews the applicable legal liabilities carefully to ensure proper accrual and recording of financial transactions.

Current Status: We noted no unrecorded legal liabilities applicable to the fiscal year 2021.

Management Response on Current Status: Finance has a process in place to work with the City manager and city attorney to review any paternal settlements prior to the close of books. 233
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STATUS OF PRIOR YEARS SCHEDULE OF OTHER MATTERS
2020-03: Journal Entries Preparation and Posting
Segregation of duties is an integral part in maintaining adequate effectiveness in an entity’s internal control environment. Journal entries are an important transaction cycle that affects all aspects of accounting and financial reporting. Prudent internal control concepts dictate that no single employee should have the ability to process a transaction without the involvement of another employee.

During our testing of journal entries, we noted that both the Financial Services Manager and Administrative Services Director can prepare and post the journal entries to the finance system directly.

It appeared that the Finance System was set up to allow both staff to prepare and post the journal entries.

Allowing the preparer to post their own journal entries, even after review by a 2nd staff, could subject the City to the potential risk of the journal entries being manipulated or altered with further verification.

We recommend that the City establish proper procedures to ensure the segregation of duties to mitigate the potential risk of journal entries being altered without verification.

Current Status: During the fiscal year 2021 audit, we noted that out of the forty journal entry samples we tested, fifteen of them were posted more than 45 days after the transaction date.

Management Response on Current Status: As mentioned above the department is short-staffed, we have procedures in place to have all processes to be in a maker checker format, Journals entered are currently posted within a reasonable period unless there is documentation missing. 2020-04: Treasurer’s Report Timeliness
California Government Code 53646 states that the treasurer or chief fiscal officer may render a quarterly report to the chief executive officer, the internal auditor, and the legislative body of the local agency. The quarterly report shall be so submitted within 30 days following the end of the quarter covered by the report.

Per review of the treasury report dated 12/31/2020, we noted that the report was not presented to council until 4/28/2021, surpassing the 30 days requirement.

According to the Finance staff, the delay was due to the staff shortage and turnover.

We recommend that the City implement procedures to ensure the timely preparation and submission of the treasury report.

Current Status: During the fiscal year 2021 audit, we noted that the treasury report dated 12/31/2020 was not presented to the City Council until 3/9/21. During final, 6/30/21 treasury report was also not presented to the City Council until 9/14/21.

Management Response on Current Status: The Cities Investment portfolio is managed by PFM and as such we are dependent on them to provide us with the valuations, these valuations are usually only received 30-40 days after the month closes which then causes a further delay in the reporting to the commission and council. We anticipate that going forward we will be able to provide the report to the commission in the second month following the close of the Quarter and to the city council in the following council meeting. 234
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MEMORANDUM ON INTERNAL CONTROLS

STATUS OF PRIOR YEARS SCHEDULE OF OTHER MATTERS
2020-05: Cross training for Payroll Duties
In the event the payroll clerk is out on an extended vacation, another appropriate employee should be trained to assume the duties of payroll processing. Furthermore, for effective internal control, the cross-trained employee should process the payroll for at least one payroll cycle during the fiscal year.

We noted that the City does not have anyone cross-trained for payroll processing during the fiscal year 2021.

According to the Finance staff, due to the staff shortage and turnover, the two new Accounting technicians have not yet been cross trained.

The City is subjected to the potential risk of delay, error and unauthorized transaction in payroll process if it entirely relies on one staff to process the payroll without appropriate backup or rotation.

We recommend the City cross train an employee for the payroll duties. In addition, the City should consider formally documenting the payroll process procedures for backup purposes.

Current Status: During the fiscal year 2021 audit, we noted that no staff has been crossed trained to take over the payroll duties yet due to limited staff availabilities.

Management Response on Current Status: The City has trained a new accounting Technician on the payroll function that was previously handled by the Senior accountant. 235
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Revenues FY 20
Actuals
FY 21
Budget
FY 21
Actual
Property Tax 25.79 27.29 28.46
Grants Revenue - - 3.98
Community Development Fees 3.38 3.31 3.85
Sales Tax 3.37 2.64 3.00
Utility Users Tax 2.84 2.46 2.92
Franchise Fees 2.29 2.35 2.21
Documentary Transfer Tax 0.58 0.55 0.93
Admin Fees 1.15 0.92 0.92
Transient Occupancy Tax 2.36 0.58 0.66
Business License Tax 0.52 0.47 0.54
All Other Revenue 0.54 1.03 0.51
Recreation Fees 0.85 0.04 0.27
Interest Income 1.77 0.38 0.14
Police Fees 0.10 0.11 0.09
Motor Vehicle Tax 0.02 - 0.02
Rental Income 0.02 0.02 0.01
Totals 45.57 42.16 48.51
Expenses
FY 2020
Actual
FY 21
Budget
FY 2021
Actual
Public Safety 18.80 20.34 19.39
Public Works 5.47 5.77 5.62
Recreation 2.31 1.80 1.78
Community Development 5.52 6.20 6.36
Administration & Finance 8.52 7.35 7.70
Total Expenditures 40.61 41.47 40.85
Surplus / (Deficit) before Transfers 4.96 0.69 7.66
Transfers In 0.11 0.16 0.15
Transfers Out (5.02) (10.87) (17.66)
Net Change to Fund Balance 0.05 (10.02) (9.85)
Fiscal Year 2021
General Fund Year‐End Results Summary (in millions)
ATTACHMENT 4
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AGENDA REPORT SUMMARY

Reviewed By:

City Manager City Attorney
CJ
Finance Director
JH SE
Meeting Date: January 25, 2022
Subject: Council Legislative Subcommittee: Discuss and consider changes to the format of the Standing Council Legislative Subcommittee (Council Member Fligor) No report – Oral introduction and discussion to take place at the meeting 237
Agenda Item # 6.