Los Altos Hills City Council
May 22, 2025

150 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

HOUSING ELEMENT
Department: Planning
Program: Infrastructure
Project Number: 410220
Initial funding year: FY 2021-22
Planned start date: July 2021
Estimated completion date: May 2026
Project Description
Since 1969, California has required that all local governments (cities and counties) adequately plan to meet the housing needs of everyone in the community. To date, California is now in its sixth Housing Element cycle (2023-2031) for jurisdictions in the Bay Area).

Before each cycle, the State provides a target for how many homes to plan for in every jurisdiction, known as Regional Housing Needs Allocation (RHNA). On January 30, 2023, the City Council adopted the 6th cycle Housing Element in substantial compliance with the State law, which was timely submitted to California Housing and Community Development Department (HCD) for post-adoption certification. The adopted 6th cycle Housing Element is introducing multi-family zones to accommodate density at twenty (20) to thirty (30) dwellings per acre. The proposed change will require an amendment to the Land Use Element of the General Plan and Municipal Code to establish the multi-family zones with objective development and design standards. In addition, the proposed rezoning requires a Program Environmental Impact Report (EIR) pursuant to the California Environmental Quality Act (CEQA).

The state law requires Safety Element be to be updated with an Housing Element update. Safety Element identifies the need for local jurisdictions to understand their vulnerablities to hazards such as seismic hazards, wildfires, geologic issues, flooding climate change, and other natural hazards. The Safety Element shall also comply with Senate Bill (SB) 379 requirements.

Project Status
The statutory deadline for jurisdictions in the Bay Area to adopt a Housing Element is January 31, 2023, and Los Altos Hills successfully achieved this. Jurisdictions that have their Housing Element certified as compliant by HCD by May 31, 2023 are allowed three (3) years to complete the EIR and Rezoning. The Town awarded a $350,000 contract to Michael Baker International (MBI) for the Housing Element and Safety Element updates. After coordinating with HCD on several technical revisions to the Housing Element, the Town was advised by HCD on May 12, 2023 that the revised Housing Element had been certified as compliant by HCD. The Town also awarded another $601,620 contract to the same consultant for preparation of Zoning standards, objective design standards, and Program EIR to meet the three (3) year timeframe to complete the EIR and Rezoning. Now in 2025 The town has choosen to reduce the denisity to twenty (20) to twenty four (24) dwellings per acre as well as adjusting the zoning approach to target less acrage being rezoned on the twin oaks opertunity site. This Amendment to the certified housing element will rerequire a contract amendment with MBI which if approved through budgeting process will add another $300,000 to the existing contract.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Housing Element $ 1,456,000 $ 841,224 $ 614,776 $ 614,776 Total: $ 1,456,000 $ 841,224 $ 614,776 $ - $ 614,776

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 151 Capital Improve
ment Plan Summary and Funding Sources
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ 614,776 $ 53,000 $ 667,776
Total Funding: $ 614,776 $ 53,000 $ - $ - $ - $ - $ 667,776 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Housing Element $ 614,776 $ 53,000 $ 667,776
Total Spending: $ 614,776 $ 53,000 $ - $ - $ - $ - $ 667,776 Recurring annual maintenance and operating costs, if applicable N/A

152 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

PURISSIMA PARK IMPROVEMENT PROGRAM (FIELD & FACILITY IMPROVEMENTS) Department: Public Works
Program: Infrastructure
Project Number: 410225
Initial funding year: FY 2021-22
Planned start date: Ongoing
Estimated completion date: Ongoing
Project Description
List of improvements at Purissima Park to be completed in phases:

1. Continued repair of fencing to provide better safety to those outside of playing fields.

2. Upgrade water fountains (4), adding a fillable station in the back by the basketball court.

3. Parking lot maintenance (re-stripe and seal coat)

4. Playground repair/maintenance, including installing new engineered fibar mulch.

Project Status
Field 3 (P3) fence repair and parking lot pavement digout repairs completed in summer 2023. Field 2 (P2) fence repair completed in spring 2025. Fields 1 (P1) & 4 (P4) fences are planned to be repaired in 2026.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Purissima Park Improvement $ 140,000 $ 58,621 $ 81,379 $ 81,379 Total: $ 140,000 $ 58,621 $ 81,379 $ - $ 81,379
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ 81,379 $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ - $ 201,379 Total Funding: $ 81,379 $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ - $ 201,379 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Purissima Park Improvement $ 81,379 $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ - $ 201,379 Total Spending: $ 81,379 $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ - $ 201,379 Recurring annual maintenance and operating costs, if applicable No maintenance and operating cost applicable.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 153 Capital Improve
ment Plan Summary and Funding Sources

SECURITY CAMERA UPGRADE
Department: City Manager’s Office
Program: Infrastructure
Project Number: 410235
Initial funding year: FY 2024-25
Planned start date: July 2024
Estimated completion date: Ongoing program
Project Description
The security camera system at Town Hall, the Corporation Yard, and Westwind Community Barn need to be replaced. This replacement project was identified on the 2024-25 two-year City Council Work Plan, and reaffirmed in the update to the plan in January 2025. Staff is working with the Technology Committee to research options for each site. It is estimated that each location will cost roughly $100,000 to install. The new system will comply with all state and federal requirements of security camera recording on public land.Given the large cost to the project, staff is recommending to upgrade one location per year at a time (Town Hall 2025, Corp Yard 2026, Westwind Barn, 2027)
Project Status
Staff began working on this project in late 2024, and should have a recommendation to being to the City Council for contract in 2025 for the Town Hall location. No costs were incurred in FY 2024-25. Any budget augmentation can take place at that time.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Security Camera System $ 100,000 $ - $ 100,000 $ - $ 100,000 Total: $ 100,000 $ - $ 100,000 $ - $ 100,000
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ - $ - $ 400,000 Total Funding: $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ - $ - $ 400,000 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Security Camera System $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ - $ - $ 400,000 Total Spending: $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ - $ - $ 400,000 Recurring annual maintenance and operating costs, if applicable The camera system staff proposes include a service and licensing fee within the proposed budget.

154 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

STREET SIGN REPLACEMENT
Department: Public Works
Program: Infrastructure
Project Number: 410226
Initial funding year: FY 2021-22
Planned start date: March 2022
Estimated completion date: Ongoing
Project Description
Town street signs require upgrades to meet current sign standards such as for retro-reflectivity. This street sign project began in 2022 with an annual budget of $15,000, which was increased to $25,000 in FY2024/25. The majority of the costs is to purchase street signs, posts, hardware, concrete, and other materials for installation by the Town’s maintenance staff.

Project Status
Regulatory and warning signs such as STOP and YIELD are also being replaced in accordance with CA MUTCD’s new standards. Town maintenance staff have replaced approximately 1/3 of all street signs as of spring 2025.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Street Sign Replacement $ 54,000 $ 38,625 $ 15,375 $ 15,375 Total: $ 54,000 $ 38,625 $ 15,375 $ - $ 15,375
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ 15,375 $ 25,000 $ 25,000 $ 25,000 $ 90,375 Total Funding: $ 15,375 $ 25,000 $ 25,000 $ 25,000 $ - $ - $ 90,375 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Street Sign Replacement $ 15,375 $ 25,000 $ 25,000 $ 25,000 $ 90,375 Total Spending: $ 15,375 $ 25,000 $ 25,000 $ 25,000 $ - $ - $ 90,375 Recurring annual maintenance and operating costs, if applicable No maintenance and operating cost applicable.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 155 Capital Improve
ment Plan Summary and Funding Sources

MISCELLANEOUS TECHNOLOGY
Department: Administrative Services
Program: Infrastructure
Project Number: 410227-26
Initial funding year: FY 2022-23
Planned start date: July 2022
Estimated completion date: On Going
Project Description
The Miscellaneous Technology CIP for FY 25-26 is designed to improve the Town’s Technology for larger projects that are identified under the Town’s IT Master Plan and are not already included in the operating budget. Projects covered under this CIP will be managed by the City Manager’s Office. This CIP is designed to allow for projects to be completed on shorter timelines as our IT Services vendor can complete.

Project Status
The Town just completed it’s next 3-year IT strategic plan which covered the years of 2026-2028. The proposed IT projects scheduled for FY 25-26 include (but are not limited to): Develop Intranet using SharePoint, Upgrade website, Implementation of an A.I. chatbot for the website, Deploy IT disaster recovery + business continuity plan, and launching a password manager for employees.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Technology $ 100,000 $ 86,270 $ 13,730 $ 13,730
Total: $ 100,000 $ 86,270 $ 13,730 $ - $ 13,730
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ 13,730 $ 80,000 $ 50,000 $ 50,000 $ 193,730 Total Funding: $ 13,730 $ 80,000 $ 50,000 $ 50,000 $ - $ - $ 193,730 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Technology $ 13,730 $ 80,000 $ 50,000 $ 50,000 $ 193,730 Total Spending: $ 13,730 $ 80,000 $ 50,000 $ 50,000 $ - $ - $ 193,730 Recurring annual maintenance and operating costs, if applicable N/A

156 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

TOWN FACILITIES ENERGY EFFICIENCY (NEW)
Department: Public Works
Program: Infrastructure
Project Number: 410236
Initial funding year: FY 2024-25
Planned start date: Summer 2024
Estimated completion date: End of 2026
Project Description
Town is looking to work with an Energy Services Company (ESCO) to conduct energy audits of Town facilities including Town Hall, Heritage House, Parks & Recreation building, Westwind Community Barn, and Corporation Yard. ESCO will also provide recommendations and design for improvements for energy efficiency for implementation, if approved by the City Council. Government Code Section 4217 authorizes local governments to enter into Energy Saving Performance Contracts on terms that are found to be “in the best interests” of the agency, “notwithstanding any other provision of law.” In essence, this law allows a public entity to sole-source or directly engage into an energy contract as long as the anticipated cost(s) for the energy project or efficiency services is less than the anticipated energy cost savings to be derived from those services over the term of the contract.

Project Status
Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Energy Audit & Design $ 60,000 $ - $ 60,000 $ 60,000
Construction - -
Total: $ 60,000 $ - $ 60,000 $ - $ 60,000
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ 60,000 $ 150,000 $ 210,000
Total Funding: $ 60,000 $ 150,000 $ - $ - $ - $ - $ 210,000 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Energy Audit & Design $ 60,000 $ 60,000
Construction $ - $ 150,000 $ 150,000
Total Spending: $ 60,000 $ 150,000 $ - $ - $ - $ - $ 210,000 Recurring annual maintenance and operating costs, if applicable Maintenance and operational needs would be determined during design and construction phases

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 157 Capital Improve
ment Plan Summary and Funding Sources

TRAFFIC SIGNAL IMPROVEMENTS
Department: Public Works
Program: Infrastructure
Project Number: 410233
Initial funding year: FY 2023-24
Planned start date: Fall 2023
Estimated completion date: Q4 FY2025/26
Project Description
Aging traffic signal equipment at the three signalized intersections along El Monte Road at Voorhees Drive, Stonebrook Drive, and Foothill College require upgrades and modernization. Controller units at Voorhees Drive and Stonebrook Drive intersections require replacements. This project scope will include replacement of traffic signal controller units, installation of battery backup systems and detection cameras, and other updates needed to the Town’s three signalized intersections.

Project Status
Controllers replaced and backup battery system installed for all three intersections. Install detection cameras by end of FY2025/26.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Equipment Replacements $ 70,000 $ 39,179 $ 30,821 $ 30,821 Total: $ 70,000 $ 39,179 $ 30,821 $ - $ 30,821
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ 30,821 $ 20,000 $ 50,821
Total Funding: $ 30,821 $ 20,000 $ - $ - $ - $ - $ 50,821 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Equipment Replacements $ 30,821 $ 20,000 $ 50,821
Total Spending: $ 30,821 $ 20,000 $ - $ - $ - $ - $ 50,821 Recurring annual maintenance and operating costs, if applicable New equipment will be maintained by traffic signal maintenance contractor as part of the current scope.

158 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

WATER WELL AT PURISSIMA PARK
Department: Public Works
Program: Infrastructure
Project Number: 410228
Initial funding year: FY 2021-22
Planned start date: 2022
Estimated completion date: TBD
Project Description
Investigate the viability of a new well and, if viable, drill a new water well; install a water pump and electrical wiring; upgrade the electrical panel; and modify irrigation conduits irrigation at the Little League Fields. A geological desktop study was conducted in September 2022. The geologist recommended additional field investigation, including a site-specific hydrogeologic analysis and drilling a pilot boring to a maximum depth of 400 feet to determine the water table.

Project Status
A geological desktop study has been completed. Additional field investigations and hydrogeologic analyses are expected to begin in 2026.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Water Well at Purissima Park $ 40,000 $ 4,987 $ 35,013 $ 35,013 Total: $ 40,000 $ 4,987 $ 35,013 $ - $ 35,013
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ 35,013 $ 200,000 $ - $ - $ - $ - $ 235,013 Total Funding: $ 35,013 $ 200,000 $ - $ - $ - $ - $ 235,013 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Water Well at Purissima Park $ 35,013 $ 200,000 $ - $ - $ - $ - $ 235,013 Total Spending: $ 35,013 $ 200,000 $ - $ - $ - $ - $ 235,013 Recurring annual maintenance and operating costs, if applicable Maintenance and operational needs would be determined during design and construction phases.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 159 Capital Improve
ment Plan Summary and Funding Sources

ROAD SAFETY AND TRAFFIC CALMING (NEW)
Department: Public Works
Program: Infrastructure
Project Number: NEW
Initial funding year: FY 2025/26
Planned start date: Q1 FY2025/26
Estimated completion date: Ongoing
Project Description
Road safety and traffic calming measures shall implement strategies to improve road and pathway safety and reduce vehicle speeds, especially in pedestrian-heavy areas. The goal is to create safer environments for everyone, including drivers, pedestrians, and cyclists.

Road safety and traffic calming measures can consist of signages and markings, intersection modifications, crosswalk enhancements, roadway narrowing, speed humps/tables/cushils, and others to be based on best traffic engineering practices and judgements to produce desired effects.

Project Status
Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Design & Construction $ - $ - $ - $ - $ -
Total: $ - $ - $ - $ - $ -
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ - $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 300,000 Total Funding: $ - $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 300,000 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Design & Construction $ - $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 300,000 Total Spending: $ - $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 300,000 Recurring annual maintenance and operating costs, if applicable May depend on the roadway safety and traffic calming measures.

160 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

PARKS AND RECREATION CENTER RENOVATION (NEW)
Department: Public Works
Program: Infrastructure
Project Number: NEW
Initial funding year: FY 2025/26
Planned start date: Early 2026
Estimated completion date: TBD
Project Description
As one of the design options for the Civic Center Improvements, the City Council approved the concept design for the renovation of the Parks & Recreation building. The goal of the project is to improve the Parks & Recreation Center to create a more functional workspace for Town employees and to make necessary improvements at Town Hall to accommodate any relocation of staffing and programs.

The renovation scope for the Parks and Recreation Center will include making ADA upgrades, modifying the building configuration, creating additional workspaces, improvements to the HVAC system, optimize storage, and potentially expanding the building footprint.

Additional funds may be need if fire sprinklers are required for the Parks and Recreation building and for electrification of the building.

Project Status
The final design phase is anticipated to begin early 2026.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Design $ - $ - $ - $ -
Construction - -
Total: $ - $ - $ - $ - $ -
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ - $ 200,000 $ 1,300,000 $ 1,500,000 Total Funding: $ - $ 200,000 $ 1,300,000 $ - $ - $ - $ 1,500,000 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Design $ - $ 200,000 $ - $ - $ - $ - $ 200,000
Construction $ - $ - $ 1,300,000 $ - $ - $ - $ 1,300,000 Total Spending: $ - $ 200,000 $ 1,300,000 $ - $ - $ - $ 1,500,000 Recurring annual maintenance and operating costs, if applicable Staff to continue maintenance of Parks & Recreation building.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 161 Capital Improve
ment Plan Summary and Funding Sources

MISCELLANEOUS PATHWAYS
Department: Public Works
Program: Pathways
Project Number: 427913-26
Initial funding year: FY 2021-22
Planned start date: Summer 2021
Estimated completion date: Ongoing
Project Description
The Miscellaneous Pathways Capital Improvement Project is designed to improve the Town’s pathways system by filling in gaps and repairing existing segments. The projects included in this CIP will be selected from a list that is maintained and regularly updated by the Pathways Committee. Once the list of eligible projects has been established, work would be initiated and completed by staff and/ or contractor. This CIP is intended to facilitate the completion of smaller pathway projects with shorter timelines as opportunities arise.

Any projects requiring extensive planning, design, and construction would be converted to an individual CIP projects.

Pathway CIPs are funded by the Pathway Fund from pathway development impact fees. Due to escalating costs of pathways design and construction, the Town is in the process of updating the pathway impact fee to be implemented in FY2025/26.

Project Status
In 2024, Town Staff focused on the feasibility and analysis of off-road pathways. The Saddle Mountain–Stirrup Way off-road path was installed in December 2024. For 2025, staff is focusing on the feasibility of roadside pathways and the design of the roadside pathway on Magdalena Avenue. A separate CIP for Magdalena Avenue roadside pathway is proposed for FY2025/26.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
Pathway Fund
Remaining
Budget
Design/Construction $ 1,020,136 $ 520,647 $ 499,489 $ 454,353 $ 45,136 Total: $ 1,020,136 $ 520,647 $ 499,489 $ 454,353 $ 45,136 Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Pathway Fund $ - $ 50,000 $ - $ 100,000 $ 100,000 $ 100,000 $ 350,000 TDA 45,136 45,136
Total Funding: $ 45,136 $ 50,000 $ - $ 100,000 $ 100,000 $ 100,000 $ 395,136 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Design/Construction $ 45,136 $ 50,000 $ - $ 100,000 $ 100,000 $ 100,000 $ 395,136 Total Spending: $ 45,136 $ 50,000 $ - $ 100,000 $ 100,000 $ 100,000 $ 395,136 Recurring annual maintenance and operating costs, if applicable The projects in the CIP would be funded by a reoccurring annual contribution from the Pathway Fund, as determined by the City Council.

The general maintenance of the Town’s pathway system would not be funded by this CIP.

162 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

SUMMERHILL PATHWAY
Department: Public Works
Program: Pathways
Project Number: 427902
Initial funding year: FY 2015-16
Planned start date: June 2016
Estimated completion date: Q2 FY2026/27
Project Description
The existing pedestrian route along Summerhill Avenue on the Town side (west side) iconsists of pathway segments and paved roadway shoulders within the County of Santa Clara public right-of-way. Easements are normally secured as part of property development process; therefore, some parcels along Summerhill Avenue lack necessary easements. Additionally, existing pathways along Summerhill Avenue alternate between sides of the roadway, forcing pedestrians to cross the busy County street.

Phase 1 of the project installed pathways on Summerhill Avenue between El Monte Road and Nicole Lane in 2019. Phase 2 will be from Nicole Lane to Magdalena Avenue, which falls under County jurisdiction.

Project Status
Staff is still working with the County of Santa Clara Roads & Airports Department to obtain an encroachment permit for the project, pending approval of a tree removal permit, a maintenance and indemnification agreement, and improvement plans. Construction is anticipated to begin in summer 2026.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Design/Construction $ 526,103 $ 147,085 $ 379,018 $ 379,018 Total: $ 526,103 $ 147,085 $ 379,018 $ - $ 379,018
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Pathway Fund $ 379,018 $ 100,000 $ 479,018
Total Funding: $ 379,018 $ 100,000 $ - $ - $ - $ - $ 479,018 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Design/Construction $ 379,018 $ 100,000 $ 479,018
Total Spending: $ 379,018 $ 100,000 $ - $ - $ - $ - $ 479,018 Recurring annual maintenance and operating costs, if applicable Pathways require annual maintenance. Maintenance costs for the new pathway shall be determined.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 163 Capital Improve
ment Plan Summary and Funding Sources

MAGDALENA AVENUE PATHWAY (NEW)
Department: Public Works
Program: Pathways
Project Number: NEW
Initial funding year: FY 2025-26
Planned start date: July 2025
Estimated completion date: Q2 FY2026/27
Project Description
Magdalena Avenue was identified as a priority location for new roadside pathway for FY2025-26 by the Pathways Committee.

Approximately 2,000 linear feet of new pathway segments are proposed along Magdalena Avenue, adjacent to Camino Hermoso Drive on the northern side of the street. Currently, there are segments of unimproved shoulder, which are proposed to be improved with a Type 2B Roadside Path in accordance with the Town’s standards.

Project Status
Topographic survey and staking started in April 2025 and is funded through the Miscellaneous Pathways CIP.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Design & Construction $ - $ - $ - $ - $ -
Total: $ - $ - $ - $ - $ -
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Pathway Fund $ - $ 315,000 $ - $ - $ - $ - $ 315,000
Total Funding: $ - $ 315,000 $ - $ - $ - $ - $ 315,000
Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Design/Construction $ - $ 315,000 $ - $ - $ - $ - $ 315,000 Total Spending: $ - $ 315,000 $ - $ - $ - $ - $ 315,000 Recurring annual maintenance and operating costs, if applicable Pathways require annual maintenance. Maintenance costs for the new pathway shall be determined.

164 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

MAPLE LEAF - MIDDLE FORK LANE PATHWAY (NEW)
Department: Public Works
Program: Pathways
Project Number: NEW
Initial funding year: FY 2025-26
Planned start date: July 2025
Estimated completion date: Q2 FY2027/28
Project Description
The City Council, following a recommendation from the Pathways Committee, directed staff to add the Maple Leaf Court to Middle Fork Lane pathway segment to the Town’s Master Path Plan (MPP). This off-road segment is approximately 1,230 feet long and would traverse through rolling hills, existing vegetation, and a seasonal stream. An Initial Study would be required for a CEQA determination before this segment can be considered for inclusion in the MPP. The Initial Study and CEQA determination may take up to a year to finalize. Changes to the MPP are considered General Plan amendments, as it is an integral component of the Pathway Element.

Project Status
Staff will issue an RFP in spring 2025 to hire a planning and environmental consultant for the Initial Study.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Initial Study $ - $ - $ - $ - $ -
Design/Construction - - - - -
Total: $ - $ - $ - $ - $ -
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Pathway Fund $ - $ 100,000 $ 150,000 $ - $ - $ - $ 250,000 Total Funding: $ - $ 100,000 $ 150,000 $ - $ - $ - $ 250,000 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Initial Study $ - $ 100,000 $ - $ - $ - $ - $ 100,000
Design/Construction $ - $ - $ 150,000 $ - $ - $ - $ 150,000 Total Spending: $ - $ 100,000 $ 150,000 $ - $ - $ - $ 250,000 Recurring annual maintenance and operating costs, if applicable Pathways require annual maintenance. Maintenance costs for the new pathway shall be determined.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 165 Capital Improve
ment Plan Summary and Funding Sources

ANNUAL ROAD REHABILITATION PROGRAM
Department: Public Works
Program: Road Rehabilitation
Project Number: 467226-26
Initial funding year: FY 2025-26
Planned start date: Fall 2025
Estimated completion date: Q4 FY2025/26
Project Description
The annual street resurfacing program is designed to maintain safe and functional Town streets. The project includes 6” AC deep lift patching, 2” asphalt concrete overlay, micro-surfacing, and all associated work. Street resurfacing includes corresponding drainage improvements. The street selections are based on recommendations from the Metropolitan Transportation Commission’s (MTC’s) Pavement Management Program (StreetSaver), utility coordination, and field inspections. Upon completion of the design phase, a list of streets and the type of work required are presented to the City Council for an authorization to advertise for bid. The roadway segments currently prioritized for the FY2025/26 resurfacing project are shown in the table below. The FY2025/26 project street list is from an updated five-year StreetSaver plan developed by the Town’s MTC consultant. After more indepth site evaluations, project coordination, design, and cost analysis, the FY2025/26 project street list may be further updated.

Project Status
Plans and specifications for the FY2025/26 street resurfacing project to be completed by early 2026 for construction start early summer 2026.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Annual Pavement Rehab $ 1,425,978 $ 1,314,766 $ 111,212 $ 111,212 Total: $ 1,425,978 $ 1,314,766 $ 111,212 $ - $ 111,212
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Gas Tax $ - $ 243,309 $ 255,500 $ 268,300 $ 281,700 $ 295,800 $ 1,344,609 SB1 Funds - 222,383 233,500 245,200 257,500 270,400 1,228,983 Vehicle Registration Fees SB 83 - 66,500 69,800 73,300 77,000 80,900 367,500 Drainage in-lieu - 40,000 40,000 40,000 40,000 40,000 200,000 Street Encroachment Fees - 107,100 112,500 118,100 124,000 130,200 591,900 Measure B - 254,596 214,158 224,900 236,100 247,900 1,177,654 CIP/ General Fund 111,212 441,112 449,542 405,200 358,700 334,800 2,100,566 Total Funding: $ 111,212 $ 1,375,000 $ 1,375,000 $ 1,375,000 $ 1,375,000 $ 1,400,000 $ 7,011,212 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Annual Pavement Rehab $ 111,212 $ 1,375,000 $ 1,375,000 $ 1,375,000 $ 1,375,000 $ 1,400,000 $ 7,011,212 Total Spending: $ 111,212 $ 1,375,000 $ 1,375,000 $ 1,375,000 $ 1,375,000 $ 1,400,000 $ 7,011,212 Recurring annual maintenance and operating costs, if applicable No additional maintenance and operating cost. This program focuses on addressing system deficiencies to maintain operating cost at the current level.

166 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

MEASURE B BIKE/PEDESTRIAN EDUCATION & ENCOURAGEMENT PROGRAM Department: Public Works
Program: Road Rehabilitation
Project Number: 467228
Initial funding year: FY 2024-25
Planned start date: Summer 2024
Estimated completion date: Ongoing
Project Description
Santa Clara County voters have approved 2016 Measure B, a 30-year, half-cent countywide sales tax to enhance transit, highways, expressways and active transportation (bicycles, pedestrians and complete streets). The measure passed by nearly 72%, the highest level of support for any Santa Clara County transportation tax. Collection of the tax began on April 1, 2017. As one of the approved Measure B programs, Bicycle and Pedestrian Education & Encouragement (E&E) Program provides annual funding to jurisdictions in the county for non-capital improvement projects to promote and educate communities to safely walk, bike, and resort to other multimodal and active transportation options. The E&E program funds are allocated by city population formula with a $10,000 annual minimum allocation per city, and the funds are distributed on a reimbursable basis. The Town is responsible for submitting an annual education & encouragement work program and annual progress report. The Town’s annual allocation of Measure B E&E funds since FY2017-18 has been between $10,000 to $20,000.

Project Status
As of FY2023-24, the total E&E allocation remaining for the Town is $73,286.70.Since FY2023-24, staff has been working on various E&E eligible projects including participating in Bike Month events with the City of Los Altos, working on and implementing Safe Routes to School related programs, and distributing merchandise promoting pathway usage.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
E&E Program $ 80,853 $ 7,647 $ 73,206 $ 73,206
Total: $ 80,853 $ 7,647 $ 73,206 $ - $ 73,206
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Measure B $ 73,206 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 123,206 Total Funding: $ 73,206 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 123,206 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
E&E Program $ 73,206 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 123,206 Total Spending: $ 73,206 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 123,206 Recurring annual maintenance and operating costs, if applicable Staff operating costs may be eligible for Measure B E&E fund reimbursement.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 167 Capital Improve
ment Plan Summary and Funding Sources

LOCAL ROAD SAFETY PLAN (NEW)
Department: Public Works
Program: Road Rehabilitation
Project Number: NEW
Initial funding year: FY 2025/26
Planned start date: Early 2026
Estimated completion date: Late 2026
Project Description
A Local Road Safety Plan (LRSP) is an initiative in the State’s Highway Safety Improvement Program (HSIP). Preparing a LRSP provides jurisdictions with an opportunity to address unique local roadway safety needs while contributing to the success of the Strategic Highway Safety Plan. The process of preparing an LRSP establishes a framework for systematically identifying and analyzing safety problems and recommending safety improvements. Additionally, preparing an LRSP facilitates the formation of local agency partnerships and collaboration, resulting in a prioritized list of improvements and actions that demonstrate a clear need and alignment with the Statewide plan. The LRSP offers a proactive approach to addressing safety concerns and showcases an agency’s commitment to improving roadway safety. An LRSP (or its equivalent) will be preferred or required for an agency to be eligible for future federal HSIP funds and other transporation projects.

Project Status
Staff to seek grant funds to implement LRSP, such as the Safe Street and Roads for All (SS4A) grant. SS4A grants have a 20% local match requirement.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
LSRP $ - $ - $ - $ -
Total: $ - $ - $ - $ - $ -
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ - $ 20,000 $ - $ - $ - $ - $ 20,000 Other -TBD - 60,000 - - - - 60,000
Total Funding: $ - $ 80,000 $ - $ - $ - $ - $ 80,000
Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
LRSP $ - $ 80,000 $ - $ - $ - $ - $ 80,000
Total Spending: $ - $ 80,000 $ - $ - $ - $ - $ 80,000
Recurring annual maintenance and operating costs, if applicable N/A

168 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

ANNUAL SANITARY SEWER REPLACEMENT AND REHAB
Department: Public Works
Program: Sewer
Project Number: 487918-26
Initial funding year: Ongoing
Planned start date: Ongoing
Estimated completion date: Ongoing
Project Description
The main objective of the annual sanitary sewer replacement and rehabilitation program is to repair and improve defective sewer pipes in the Town’s sanitary sewer system, ensuring the uninterrupted conveyance of wastewater to the Palo Alto Regional Water Quality Control Treatment Plant (RWQCTP) through the collection systems of the Cities of Palo Alto and Los Altos. The selection of the sewer segments is based on the review and analysis of the first cycle of CCTV inspections of the Town’s sewer pipes, along with follow-ups from the Town’s sewer maintenance and operation contractor, West Bay Sanitary District.

The Regional Water Quality Control Board has placed an increased emphasis on reviewing sewer system capital improvement programs and operation/maintenance activities, requiring a higher annual sewer replacement rate for agencies with aging sewer collection systems. In alignment with this approach, Town staff recommends an annual average of $900,000 in capital expenditures to address the most problematic areas and to reduce the need for high-frequency cleaning required to keep the system operational and prevent sanitary sewer overflows (SSOs). The annual allocation will be validated, reviewed, and updated as needed during each budget cycle.

In March 2024, V.W. Housen & Associate was hired to develop an asset management protocol to more effectively and holistically determine capital improvement needs and projects. The study was completed in fall 2024.

Project Status
Construction of 2025 Sewer Rehabilitation Project to be completed by fall 2025.

Due to rising capital costs from Palo Alto and Los Altos and in order to maintain an annual budget of $900,000 for sewer capital projects, a new sewer rate study may be required in FY2025/26.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Sewer Rehab CIP $ 900,000 $ 434,421 $ 465,579 $ 465,579 Total: $ 900,000 $ 434,421 $ 465,579 $ - $ 465,579
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Sewer User Charges $ 465,579 $ 900,000 $ 1,150,000 $ 1,050,000 $ 1,050,000 $ - $ 4,615,579 Total Funding: $ 465,579 $ 900,000 $ 1,150,000 $ 1,050,000 $ 1,050,000 $ - $ 4,615,579 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Sewer Rehab CIP $ 465,579 $ 900,000 $ 1,150,000 $ 1,050,000 $ 1,050,000 $ - $ 4,615,579 Total Spending: $ 465,579 $ 900,000 $ 1,150,000 $ 1,050,000 $ 1,050,000 $ - $ 4,615,579 Recurring annual maintenance and operating costs, if applicable The maintenance and operating costs for the Town’s sanitary sewer system is included in the annual operating budget for the sewer program.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 169 Capital Improvement Plan Summary and Funding Sources
FY2024-26 Anticipated Sewer Capital Projects:

FY2024-26 Sewer Rehabilitation Projects$ 1,350,000.00
Manhole Cover Replacement Project$ 300,000.00
O’Keefe Pump Station - Control Panel Upgrade$ 100,000.00 Root foaming for sewer mains$ 50,000.00
Total$ 1,800,000.00

170 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

WESTWIND COMMUNITY BARN IMPROVEMENTS
Department: Public Works
Program: Westwind Community Barn
Project Number: 437307-26
Initial funding year: Ongoing Program
Planned start date: Ongoing
Estimated completion date: Ongoing
Project Description
The annual Westwind Community Barn facility improvements program is designed to improve facility deficiencies and meet the the needs of Barn users. Each year, the Town and Concessionaire, Victoria Dye Equestrian (VDE), identify and prioritize potential improvements. The following projects were identified and prioritized:

1. Lower Arena: Replace and upgrade the existing perimeter fence and sprinkler system, improve site drainage, and regrade and improve the footing.

2. Upper Arena: Regrade and reconstruct the footing with a new textile and sand blend.

3. Installation of Footing Grid Systems in Remaining Five Paddocks: Rain causes water pooling and mud, making paddock grounds unusable. Installing footing grid systems or paddock slabs will help stabilize the grounds. Footing grids for 13 paddocks have been installed. Regrading and the installation of footing grid systems for the remaining five paddocks are estimated cost $60k for each paddock.

4. Paddock Retaining Wall/Fencing repairs: When installing or upgrading paddock footing grids, certain paddocks will also require repairs to their retaining wall/fencing.This involves reinforcing or replacing the posts and lagging boards.

5. Repair Footing Grids in Previously Upgraded Paddocks: Repair footing grids in paddocks that have previously been upgraded with grid systems.

6. Rehabilitation of Barn Exteriors: As funding allows, rehabilitate thelower half of 17 barn exterior doors, sliding doors, and the fence in the courtyard.

7. Addional Toilet: The Barn currently has one existing toilet and a room with a shower. As funding becomes available, adding an additional toilet to the shower room would be beneficial for camp participants, boarders, and event attendees.

8. Electrical Upgrade: Upgrades to the Barn’s electrical systems.

Project Status
The repair of the retaining wall/fencing, regrading, and installation of footing grid systems for one paddock were completed in FY2023-

24. For the Upper Arena, the current plan is to replace and upgrade the footing materials during the summer of 2025. Regarding the improvements needed at the Lower Arena, construction is also anticipated to begin in the summer of 2025, once authorized by the Council.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Paddock Footing $ 172,623 $ 40,280 $ 132,343 $ 132,343
Wall/Fencing 129,994 7,389 122,605 122,605
Lower Arena - -
Upper Arena - -
Drinking Fountain 15,000 - 15,000 15,000
Electrical Upgrade 40,000 - 40,000 40,000
Restroom Renovation $ 3,043 $ 3,043 $ - $ -

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 171 Capital Improve
ment Plan Summary and Funding Sources
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Cell Tower Rental $ 54,354 $ 50,000 $ 50,000 $ 50,000 $ - $ - $ 204,354 Westwind Barn Capital 240,000 240,000
CIP/ General Fund 50,000 50,000
Total Funding: $ 344,354 $ 50,000 $ 50,000 $ 50,000 $ - $ - $ 494,354 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Paddock Footing $ 132,343 $ 30,000 $ 30,000 $ 30,000 $ - $ - $ 222,343 Lower Arena $ - $ - $ -
Upper Arena - - -
Wall/Fencing 122,605 20,000 20,000 20,000 182,605
Electrical Upgrade 40,000 40,000
Drinking Fountain 15,000 15,000
Restroom Renovation - -
Feeding Pasture Fencing - -
Water line repairs - -
Site Drainage 34,406 34,406
Total Spending: $ 344,354 $ 50,000 $ 50,000 $ 50,000 $ - $ - $ 494,354 Recurring annual maintenance and operating costs, if applicable These projects are part of an ongoing maintenance program. Minor maintenance is the responsibility of VDE. Repairs above $500 are the Town’s responsibility.

172 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

MATADERO CREEK EROSION
Department: Public Works
Program: Storm Drain
Project Number: 467209
Initial funding year: FY 2011-12
Planned start date: Ongoing
Estimated completion date:

Q1 FY2025/26; Mitigation monitoring for
10 years
Project Description
The project aims to repair erosion along the edge of Page Mill Road between Baleri Ranch Road and Berry Hill Court at Matadero Creek.

This section of Page Mill Road is within Caltrans right-of-way. Due to the significant overall expense of the erosion repair project, the lengthy permitting process, and the risk of the travel lane being washed out, the project was divided into two phases.

Phase 1 stabilized the roadway and included a geotechnical investigation, topographic survey, design, construction, and inspection work.

Phase 2 will address the creek erosion repair, including environmental study, hydraulic study, permitting process with state and federal agencies, design, construction, inspections, and mitigation/monitoring work as required by the State Water Resources Control Board (Water Board).

Project Status
The cattails and sediments in Matadero Creek at Page Mill Road were removed in January 2023 due to flooding concerns from the atmospheric river storm events.

The Matadero Creek Bank Stabilization onsite project was first advertised in June 2024, and bids opened in July 2024. Four bids were received, and bid prices were at least 21% higher than the Engineer’s estimate. In July 2024, the City Council approved a resolution to reject all bids. Subsequently, the design was value engineered and improved without a new soldier pile retaining wall. In March 2025, the City Council approved the plans and specifications for the project to be advertised. The bids will be opened in May, and construction is anticipated to begin in July and be completed by November.

Water Board has certified the project and conditioned a mitigation and monitoring plan (MMP). The tributary area to Moody Creek at Byrne Preserve is the location for the offsite mitigation, which involves planting vegetation across 1.96 acres of the riparian corridor.

The offsite mitigation work at Byrne Preserve was completed in January 2025. Maintenance and monitoring of this offsite mitigation work will continue for ten (10) years as required by the Water Board.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Phase I $ 338,490 $ 338,490 $ - $ -
Phase 2 Design 429,800 404,169 25,631 25,631
Phase 2 Construction 716,000 716,000 716,000
Mitigation 300,000 69,008 230,992 230,992
Total: $ 1,784,290 $ 811,666 $ 972,624 $ - $ 972,624

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 173 Capital Improve
ment Plan Summary and Funding Sources
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Drainage in-lieu $ 458,124 $ 458,124
CIP/ General Fund 514,500 514,500
Total Funding: $ 972,624 $ - $ - $ - $ - $ - $ 972,624
Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Phase 2 Design $ 25,631 $ 25,631
Phase 2 Construction $ 716,000 $ 716,000
Mitigation 230,992 230,992
Total Spending: $ 972,624 $ - $ - $ - $ - $ - $ 972,624 Recurring annual maintenance and operating costs, if applicable Upon completion, maintenance of the creek will be included as part of the ongoing drainage maintenance budget. There is no additional cost.

174 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Capital Improve
ment Plan Summary and Funding Sources

STORM DRAIN IMPROVEMENTS
Department: Public Works
Program: Storm Drain
Project Number: 457202
Initial funding year: FY 2023-24
Planned start date: Summer 2023
Estimated completion date: Ongoing
Project Description
Address deficiencies and replace aging storm drain pipes to minimize future failures, flooding, ground erosion, and damage to roadways caused by storm events. Use video inspections to assess the condition of aging corrugated metal storm drain pipes that are prone to failure throughout the Town and schedule replacements as part of the project. As part of this effort,the, Town’s storm drain system will be entered into the Geographic Information System (GIS) application to support better asset management. Staff will continue to access and identify annual needs for storm drainage improvements.

Project Status
Staff compiled an inventory of the Town’s existing storm drain system based on the 2004 Storm Drainage Master Plan, record drawings, and field visits. The Town also hired a contractor to record CCTV videos at two culverts to assess the pipe conditions: one is a 12-inch corrugated metal pipe (CMP) at Paseo Del Roble Drive, and the other is a 15-inch reinforced concrete pipe (RCP) on Fremont Road near Arastradero Road. This inventory of storm drain assets will help identify critical locations and prioritize improvements.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
March 2025
Available
Budget
Return to
Storm Drain
Fund
Remaining
Budget
Design/Construction $ 450,000 $ 262,158 $ 187,842 $ 110,000 $ 77,842 Total: $ 450,000 $ 262,158 $ 187,842 $ 110,000 $ 77,842 Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Drainage in-lieu $ 77,842 $ - $ - $ - $ - $ 77,842
Total Funding: $ 77,842 $ - $ - $ - $ - $ - $ 77,842
Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Design/Construction $ 77,842 $ - $ - $ - $ - $ 77,842
Total Spending: $ 77,842 $ - $ - $ - $ - $ - $ 77,842
Recurring annual maintenance and operating costs, if applicable Staff continues to maintain Town storm drain facilities throughout the year.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 175 Capital Improve
ment Plan Summary and Funding Sources

VEHICLE AND EQUIPMENT REPLACEMENT (NEW)
Department: Public Works
Program: Vehicle and Equipment
Project Number: NEW
Initial funding year: FY2025/26
Planned start date: Summer 2025
Estimated completion date: Ongoing
Project Description
One of the recommended strategies in the Town’s Climate Action Plan (last updated in October 2021) is the Green Fleet Program to consider and prioritize EVs for the Town fleet when possible to reduce greenhouse gas (GHG) emissions. The other recommended strategy is to transition Town fleet to renewable diesel to further cut emissions. Many of the Town’s maintenance vehicles and equipment may soon require major services and should be considered for replacement, such as the 2003 Dodge Dakota, 2008 Ford Ranger, 2010 John Deere tractor, 2010 John Deere backhoe, and 2009 Cariton Chipper. The Vehicle and Equipment Replacement Policy recommends replacements at 13 to 15 years of service, and many of Town’s vehicles and equipment have been in operations longer.

The Town would also need to comply with the Advanced Clean Fleet Regulation of the California Air Resources Board (CARB), which requires all purchase of vehicles to be zero-emissions vehicles (ZEV’s) starting 2027 and all internal combustion engine vehicles to be retired after 13 year of service.

This projet would be funded by the Vehicle and Equipment Replacement Reserve.

Project Status
In FY2024/25, the City Council approved the replacement of the Town’s F250 truck not to exceed $120,000 and purchase of two small EVs not to exceed $80,000. For FY2025/26, staff recommends the replacement of the 2003 Dodge Dakota with a ZEV. Staff anticipates replacement of at least one truck or equipment each fiscal year for the next five years.

Prior Budget and Actual
Project Summary
Project
Budget
Spending Thru
February 2025
Available
Budget
Return to
General Fund
Remaining
Budget
Vehicle and Equipment $ - $ - $ - $ -
Total: $ - $ - $ - $ - $ -
Project Funding Estimate
Funding Source
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
CIP/ General Fund $ - $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 500,000 Total Funding: $ - $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 500,000 Project Spending Estimate
Project Spending
Remaining
Budget
2025-26
Planned
2026-27
Planned
2027-28
Planned
2028-29
Planned
2029-30
Planned
Project
Total
Vehicle and Equipment $ - $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 500,000 Total Spending: $ - $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 500,000 Recurring annual maintenance and operating costs, if applicable There will be routine vehicle and equipment maintenance anticpated. The maintenance costs will be lower with new vehicles/equipment and ZEV’s.

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Town Policies

178 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
Financial Policy
Proposed for City Council Adoption on June 26, 2025
Resolution XX-XX
This document establishes policies and practices for the Town of Los Altos Hills that provides financial information and manages its financial resources. As well as establishing and maintaining prudent fund balance levels, financial reporting, and investment policies that are in accordance with State Law. Formally adopted financial policies assist elected officials and staff in saving time and energy in making financial decisions, promoting public confidence, and the development of sound fiscal management practices.

In contrast to larger public agencies, the Town of Los Altos Hills is a small town as measured by geography, population, staff, the absence of commercial businesses, and employees who perform fire, policing, water, and sewer services (which are provided by independent third parties.) It has a volunteer, resident elected, five-member Council who are subject to term limits and operates under a Council – City Manager form of government. Town has many volunteer resident committees appointed by Town Council to limited terms, who advise the Council on financial matters, recreation and hospitality events, land development, technology and environmental issues.

Town staff perform planning and building functions, financial functions, maintenance of pathways, and contract for policing, trash removal, street maintenance, legal services, electronic recordkeeping, and recurring specialty services such as review of resident submitted building plans, town news media, treasury, insurance, and other occasional specialty needs.

While these policies will be updated intermittently, they provide the basic framework for many of the financial decisions that will be addressed by the Town. Support long-term planning and enhance the Town’s effectiveness.

This policy will be reviewed annually during the ACFR process to ensure conformance with the Town’s goals and objectives and compliance with any changes in regulations or standards. In conjunction with the annual policy review, the Administrative Services Director will include updated calculated thresholds, review of use and replenishment of the reserves, and any anticipated changes to be included in the annual ACFR preparations.

Financial Controls
Collection of revenues and disbursement of costs and expenses is performed by Town finance staff. An independent audit is performed annually along with the publication of an annual financial report. in accordance with GASB (Governmental Accounting Standard Board) , that includes a description of the Town’s accounting policies (in footnote 1.) An annual or biennial budget is prepared following a format recommended by the Government Financial Officers Association (GFOA) and prepared by Town Staff for presentation to Town Council after review by the Town’s Finance and Investment Committee. With exception of personnel records, Town records are public and are public information available upon request.

Investments
Most of the Town’s funds are maintained, invested, and managed by independent third parties who report monthly and quarterly to the Town Council who, in turn, delegate some of the review responsibility to Staff and the Town’s Finance and Investment Committee. Investments are made in compliance with the Town’s Investment policy which is reviewed annually by the Town’s Finance and Investment Committee.

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Financial records
The collection of receipts is recorded and reviewed by Town staff before being deposited in the Town’s bank accounts. Disbursements are prepared by the responsible Town staff, reviewed by Town finance staff, and signed by two independent check signers who are either senior employees or Council members. Bank reconciliations are prepared monthly. Other records are maintained and independently backed up offsite.

Specialty third party financial service providers
Payroll is independently prepared and processed by a third-party specialty service. Employee benefits are managed by responsible third-party health care providers, pension benefit managers, and related periodic reports are reviewed by Staff, the Town’s Finance and Investment Committee and Town Council. Liability insurance services are provided by a Joint Powers Authority who report annually, and town staff attend periodic meetings in an oversight role. Electronic records are maintained offsite by an independent service. Physical asset inventories are conducted annually by Town staff and reviewed as part of the Town’s annual financial audit. The Town maintains employee fidelity insurance purchased from its Joint Powers Authority provider.

Overall controls
The foregoing briefly describes a web of interrelated services performed periodically on annual, quarterly, and monthly cycles. In addition, reserves are provided for several financial risks subject to review by the Town’s Finance and Investment Committee and Town Council. The Town’s employees develop and maintain job descriptions and procedures the objective of which is to enable smooth transition when employee turnover occurs. Compensation surveys are used to assist management and Council in maintaining competitive compensation. Despite its small size, the Town maintains records, produces financial reports, and utilizes financial controls that are comparable to those performed and maintained by larger governmental agencies.

This policy is reviewed and assessed by the Town’s staff, the Finance & Investment Committee, and elected officials and will also be updated annually, if necessary, to reflect any changes within the requirements.

This document discusses the important elements of financial management at the Town of Los Altos Hills, in an all-in-one format and organized into the following areas of discussion:

General Financial Principles Cash Management
Operating Budget Debt Management
Revenues Capitalization Assets
Expenditures Financial Reporting
Capital Improvement Program
General Financial Principles
It is the overall policy of the Town of Los Altos Hills to:
> Provide financial information in a relevant, thorough, timely fashion, and in a format that effectively communicates financial status to City Council, citizens, and Town employees. > Manage its financial resources in a responsible and planned manner. > Establish and maintain prudent fund balance levels.

180 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
> Maintain financial reporting in compliance with current governmental accounting standards. > Promote and implement a relevant and strong system of internal financial controls to manage significant risks and monitor the reliability and integrity of financial and operating reporting. > Promote constructive and proactive financial decision making. > Integrate long-term operating and capital resources planning. > Allow for uncertainties and maintain a posture of financial flexibility. > Develop programs in a manner that supports the City’s long-term ability to cover costs and provide the level and quality of service required by its citizens.
> Managing debt responsibility.
> Establish and maintain investment policies in accordance with State law.

Operating Budget
Budget Adoption
The City Council shall adopt the Town’s annual or biennial budget no later than June 30 of each year. The City Manager is responsible for developing and presenting either an annual or biennial budget, as appropriate.

A balanced provisional operating budget will be submitted to the City Council for review and adoption. Total projected expenditures must not exceed estimated revenues, excluding internal overhead allocations. If necessary, the City Council may approve the planned use of accumulated fund balances from prior years to support specific appropriations within the budget.

No funds may be expended for a new fiscal year until the City Council has formally adopted the budget for that year.

One-time revenue sources shall not be relied upon to fund ongoing operations, ensuring structural financial sustainability.

Budgetary Control and Adjustments
Budgetary control is maintained at the fund level. The City Manager has the authority to approve budget transfers between departments or programs within the same fund, provided that such changes do not increase the fund’s total appropriation. However, the following actions require City Council approval:
> Transfers between funds
> Overall increases in fund appropriations
> Increases in capital project budgets
Transfers between departments should be reported to the City Council as part of periodic budget updates, such as during the mid-year review or at the start of a new budget term.

Department heads are accountable for developing and managing their departmental budgets. Budgetary authority is maintained at the department level. For departments operating across multiple funds, expenditures must remain within the appropriate allocation for each fund.

Encumbrances, Lapsed Appropriations, and Carryforwards
Operating expenditure appropriations that are not spent within the fiscal year shall lapse at year-end, with the following exceptions:

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> Encumbrances or legally binding commitments (e.g., purchase orders) issued during the fiscal year but not completed by year-end
> Capital improvement projects or multi-year grant programs with approved life cycles extending beyond one fiscal year
For contracts that remain incomplete at fiscal year-end, the remaining balance must be reappropriated in the subsequent budget cycle.

Basis of Budgeting and Financial Reporting
Governmental funds are budgeted on a modified accrual basis, while proprietary and fiduciary funds follow the full accrual basis of accounting. The Town’s Annual Comprehensive Financial Report (ACFR) is prepared in accordance with Generally Accepted Accounting Principles (GAAP), and the budget is developed in conformity with these standards.

Appropriations Limit Compliance
The Town’s budget must comply with the annually calculated Appropriations Limit as required under Article XIIIB of the California Constitution. A resolution establishing the Town’s appropriations limit shall be adopted annually by the City Council in accordance with State law.

Revenues
The Town will seek out, apply for, and effectively administer federal, state, and other grants that address the Town’s current operating and capital priorities.

Operating departments are to review existing fees periodically and recommend adjustments to fees, as necessary, to reflect changing direct and indirect costs of providing such services. Independent user-fee studies should be performed and updated periodically (three to five years) to ensure the proper balance of costs and service charges.

The Town should strive to cover the full cost of providing non-tax and discretionary fee-based service operations except to the extent that the City Council approves defined subsidy levels by program area.

Operating departments are to periodically review public services to identify and determine those appropriate for fee collection.

Enterprise operations will be self-supporting and shall reimburse the General Fund for any and all material and services provided on their behalf.

Expenditures
Expenditures are to be budgeted and controlled to not exceed estimated revenues plus the approved and planned use of fund balances accumulated in prior years.

The Town will conduct a mid-year financial status review to determine if projected revenues and expenditures meet budgeted levels. If an operating deficit is projected at year-end, the Town should evaluate the need for immediate corrective and/or mitigating actions, including operating or capital expenditures reduction and /or activate the use of established contingency balances. The deferral of essential and scheduled operational expenditures into the following fiscal year or the use of short-term loans and transfers to balance the budget should be avoided.

182 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
Capital Improvement Plan
The Town will develop and maintain a five-year Capital Improvement Plan (CIP) to be updated annually in conjunction with the operating budget. The CIP should reflect the current and changing needs of the community as well as enhance the community’s quality of life.

Cash Management
The Financial and Investment Committee will review the Town’s Investment Policy annually and make recommendations to the City Council when appropriate.

The City Manager may delegate to the Administrative Services Director/Finance Director the responsibility of investing Town funds in accordance with the Town’s Investment Policy. Additionally, the City Manager may authorize the Administrative Services Director/Finance Director to present quarterly investment reports to the City Council, providing a summary of the portfolio’s status and its compliance with the Investment Policy’s requirements.

Debt Management
The Town should plan the use of debt in a manner that sustains financing payments at manageable levels. The Town will seek to maintain a high credit rating through sound financial practices as a basis for minimizing borrowing costs.

The Town will make every effort to use pay-as-you-go financing for capital improvement projects. Debt financing for a project can be used if the overall project’s cost exceeds anticipated available resources and/or if financing terms are favorable. The Town will monitor all forms of debt annually in conjunction with the budget preparation process and report concerns and remedies, if necessary, to the City Council. The Town will diligently monitor its compliance with bond covenants.

The Town will not issue long-term debt to finance current operations. Debt financing should only be used for longterm capital improvement projects with a useful life exceeding the term of the financing and for which the project revenues or specific identified revenue sources are sufficient to service the long-term debt.

The Town may use a lease-purchase method of financing for equipment if the lease rates are more favorable than the Town’s expected overall investment rate of return.

The Town will not incur general obligation indebtedness for public improvements which exceed in aggregate 15% of the assessed value of all real and personal property of the Town as specified in the California Government Code Section 43605.

Capitalization Assets and Leases
The Town’s operations require the purchase and construction of certain assets that are used over a long-term period to provide services to the community. To facilitate the proper recording of these assets, the department has established the following procedure.

Acquisition
The acquisition of capital assets is planned in the Town’s budget on an annual basis. Public projects are budgeted in lump sums based on recommendation from the City Manager. The City Manager oversees the various components of the public project to ensure overall budget compliance. Under direction from the City Manager, the Public Works Director has the authority to make necessary changes from the authorized plans, provided the project will not

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exceed the approved budget. With the exception of public works projects, the acquisition of all other capital assets may be managed by the Administrative Services Director under the direction of the City Manager.

Accounting & Tracking
It is the Finance and Administrative Services Department’s policy to record staff time, supplies, services, and applicable overhead to public projects. Public projects are budgeted in distinct capital project funds and tracked by unique account numbers. All costs required to acquire a public project are recorded to the respective account number.

The Administrative Services Director/Finance Director maintains a register of capital assets that is in conformance with generally accepted accounting principles. The register records the asset’s identification (e.g., name, vehicle identification, etc.), year of acquisition, acquisition cost, useful life.

Depreciation Schedule
Capital assets are categorized into one of several categories, each with estimated useful lives. The Administrative Services Director/Finance Director determines the useful life of each item based on historical practice and input from the appropriate department head where necessary. Assets are classified as “capital assets” on the Town’s financial statements and include any tangible goods with an acquisition cost of $25,000 or more and a useful life greater than three years. Depreciation/amortization will be recorded on a straight-line basis (effective rate of interest method for leases) over the following estimated useful lives:

Infrastructure 20 to 50 years
Structures and improvements 10 to 30 years
Vehicles 5 to 10 years
Equipment 3 to 10 years
Leases term of the leases
Disposal of Capital Assets
At the discretion of the City Manager, obsolete or unused capital assets may be recommended for disposal at any time. The Administrative Services Director/Finance Director is responsible for ensuring that all asset disposals comply with the provisions of the Municipal Code.

Leases
The Town is to record the depreciation of equipment, buildings and facilities, infrastructure, and leases as follows and in line with internally established capitalization guidelines:
> Capitalization Thresholds
• Land purchases at any value
• Equipment - $25,000
• Buildings and facility improvements - $100,000
• Leases - $100,000
The interest rate used for GASB 87 leases is the commercial real estate secured loan rate as of July 1st of the commencement year of the lease if there is not an explicit interest rate in the lease agreement.

184 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
Fund Balance
This policy is intended to ensure that the Town has sufficient cash flow to meet current and future needs and provide transparency to its residents by establishing fund reserve targets for each of the Town’s governmental funds. Reserve funds are needed to provide funding for planned and unplanned events. Planned events include, but are not limited to, (1) accumulating balances to fund operating and capital needs; (2) debt service obligations; and (3) funding for employee-related pension and other post-employment benefits. Unplanned events include, but are not limited to, (1) accounting for revenue shortfalls; (2) unanticipated expenses; and (3) paying for unforeseen emergency events.

Adequate fund reserves are of value to: (1) provide working capital to fund operating needs; (2) provide a financial cushion for dealing with unanticipated financial needs and emergencies; and (3) are a component of achieving favorable credit ratings which can help reduce the costs of issuing debt. This policy designates specific reserve accounts. For each reserve, this policy specifies the reserve purpose, the threshold amount, allowable uses of reserves, and replenishment of the reserve. This policy establishes committed and assigned reserves. Committed or Assigned reserves may be established, changed, applied, and deleted by Council resolution. Committed reserves may be used for one or more limited activities noted in the purpose or usage of the reserve. Assigned reserves are not limited to one single activity and may be used for any Town specific activity described in the purpose or usage of the reserve.

Fund Balance Classifications
To set forth the Town’s policy for establishing and maintaining fund reserve targets for each of the Town’s governmental funds. Fiscal reserves provide working capital for operations and maintenance activities, funding for IT, vehicle, and equipment needs, fulfillment of legal, regulatory, and contractual obligations and mitigation of risk and liability exposures.

The Town is required to reclassify fund balances into the following five categories to comply with the Governmental Accounting Standards Board Statement (GASB) No. 54, Fund Balance, and Governmental Fund Types.

Non-Spendable: This is a portion of fund balance not available for appropriations by its nature or external restriction.

Examples are inventories, prepaid expenses and loans to other agencies.

Restricted: The restricted portion of the fund balance is subject to externally enforceable legal restrictions. Examples are Gas Tax revenues and grant proceeds.

Committed: The committed portion of the fund balance is constrained by the limitations imposed through formal City Council action. Only formal City Council action can remove or modify a previously committed amount.

Unassigned: The Unassigned portion of fund balance is that remaining after the non-spendable, the restricted, the committed, and the assigned fund balances are identified and recorded. The general fund is the only fund that reports a positive unassigned fund balance.

Assigned: The assigned portion of the fund balance is established for intended use by either the City Council or its designee, such as the City Manager. No formal City Council action is needed to remove the intended use. GAAP required reserves, such as the Other Post-Employment Benefits (OPEB) reserve, belong to this category.

Order of Utilization
The Town will use GASB’s definitions of fund balance for the annual financial reports (audits) and for all other financial reporting. For all financial planning purposes, the term Budgetary Fund Balance will be used and will include

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 185 Town Policies
any portion of the fund balance that is available for appropriation. Portions of the fund balance not available for appropriations will be identified as follows.

The Town shall strive to use the most restricted fund balances prior to utilizing those that are less restricted. This policy establishes the order of use of unrestricted resources as follows:
> Nonspendable (if funds become spendable)
> Restricted
> Committed
> Assigned
> Unassigned
Finance Reporting
A system of effective internal controls will be maintained that ensures only properly authorized expenditures, recordings of financial transactions, and accounting entries are executed. Along with providing management information and meeting reporting requirements.

Accounting and Finance Responsibilities
Management’s discussion and analysis (MD&A). MD&A should introduce the basic financial statements and provide an analytical overview of the government’s financial activities. Each basic financial statement should include:

1. Government-wide financial statements, consisting of a statement of net assets and a statement of activities.

2. A series of statements that focus on information about the government’s major governmental and enterprise funds, including its blended component units.

Annual Audit
The Town aims to maintain its accounting records, processes, and procedures in a manner that supports the issuance of an unmodified (clean) audit opinion. Responsibility for the accuracy of financial information and the completeness and fairness of its presentation—including all required disclosures—rests with Town management.

Each year, an independent public accounting firm with expertise in municipal finance conducts the Town’s financial audit. The resulting audit opinion is included in the Town’s Annual Comprehensive Financial Report (ACFR), which is organized into three primary sections: introductory, financial, and statistical. The independent auditor’s report appears first within the financial section.

Following the auditor’s report, the Management’s Discussion and Analysis (MD&A) provides a narrative overview of the Town’s financial performance. It includes a comparative analysis of current and prior year results, highlights significant financial trends, and discloses key events or decisions affecting the Town’s fiscal position. The MD&A serves to enhance readers’ understanding of the Town’s financial statements by offering context and analysis.

Accounting During a Disaster
The Finance and Administrative Services Department is responsible for the Town’s participation in disaster assistance funding. Breaking down responsibilities into four main sections, (1) Compensation and Claims Unit, (2) Cost and Purchasing Unit, (3) Time Keeping Unit, and the (4) Recovery Unit. Ensuring that the Finance and Administrative Services Department continues to assist staff, elected officials, and the Town in saving time and energy when making financial decisions, promoting public confidence, and the development emergency management.

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In the case of an emergency all reimbursements that are based on disaster related expenses should be recorded by each department. Each department is responsible for keeping thorough, accurate and complete records regarding all expenses that are incurred as a latter result of a declared disaster. Without proper documentation, requests for reimbursement will be denied.

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Investment Policy
Adopted by the City Council on February 20, 2025

1.0 Philosophy
It is the policy of the Town of Los Altos Hills to invest public funds in a manner that will provide a reasonable rate of investment return while minimizing exposure to loss of capital and thereby maintaining a consistent source of revenues for the Town. This policy establishes the parameters for the Town’s investment strategies.

2.0 Delegation of Authority
Authority to manage the Town of Los Altos Hills’ investment program is derived from the California Government Code Section 53600 et seq. The City Council shall approve all modifications to the investment strategy and the selection or dismissal of an investment advisor. Administration of the Council-approved investment strategy is hereby delegated to the City Manager, who shall be responsible for supervising all treasury activities of the Town’s Finance Director and who shall establish written procedures for the operation of the investment program consistent with this investment policy. Procedures should include reference to: safekeeping, delivery vs. payment, investment accounting, wire transfer agreements, banking service contracts and collateral/ depository agreements. Such procedures shall include explicit delegations of authority to persons responsible for investment transactions. No person may engage in any investment transactions except as provided under the terms of this policy and the procedures established by the City Manager or her/his designee. The City Manager or her/his designee shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials.

3.0 Scope
This investment policy applies to all financial assets of the Town of Los Altos Hills. These funds are accounted for in the Town of Los Altos Hills’ Annual Comprehensive Financial Report (ACFR) and include:

3.1 Funds
General Fund Enterprise Funds
Special Revenue Funds Capital Projects Funds
Trust and Agency Funds
Any new fund, unless specifically exempted

3.2 The following financial assets are excluded:

Deferred Compensation Plans – Investments are directed by the individual plan participants.

Debt Service Funds Held by Trustees – Investments are placed in accordance with bond indenture provisions.

Notes and Loans – Investments are authorized by separate agreements approved by City Council.

Retiree and Retiree Medical Plans
Except as noted, the Town of Los Altos Hills will consolidate cash balances from all funds to maximize investment earnings. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles.

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4.0 Prudence
Investments shall be made with judgment and care – under circumstances then prevailing – which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investments, considering the probable safety of their capital as well as the probable income to be derived.

4.1 Standard of prudence:

The standard of prudence to be used by investment officials shall be the “prudent investor” standard and shall be applied in the context of managing an overall portfolio. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency.

5.0 Objective
The primary objectives, in priority order, of the Town of Los Altos Hills’ investment activities shall be:

5.1 Safety:

Safety of principal is the foremost objective of the investment program. Investments of the Town of Los Altos Hills shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective is to minimize (1) credit risk, through diversifying the portfolio among the authorized investment types with pre-qualifying financial institutions and broker dealers, and (2) interest rate risk, by structuring portfolio maturities to match cash requirements and investing operating funds in shorter-term securities.

5.2 Liquidity:

The Town of Los Altos Hills’ investment portfolio will remain sufficiently liquid to enable the Town of Los Altos Hills to meet all operating requirements which might be reasonably anticipated. In addition to structuring the portfolio so that securities mature concurrent with cash needs, suitable investments (Section 6.0) consist largely of securities with active secondary or resale markets.

5.3 Return on Investments:

The Town of Los Altos Hills’ investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, commensurate with the Town of Los Altos Hills’ investment risk constraints and the cash flow characteristics of the portfolio.

6.0 Authorized and Suitable Investments
Where this section specifies a percentage limitation for a particular security type, that percentage is applicable only on the date of purchase. Credit criteria listed in this section refers to the credit rating at the time the security is purchased. Where credit requirements in this section refer to a minimum credit rating, this minimum is regardless of any category modifiers such as “+” or “-”. If an investment’s credit rating falls below the minimum rating required at the time of purchase, the City Manager will perform a timely review and decide whether to sell or hold the investment.

The Town of Los Altos Hills is empowered by Government Code Section 53601, 53601.6, 53601.8, 53635, 53635.2, 53638, and 53684 which includes a number of requirements on how and where public money may be invested. Within the context of limitations, the following investments are authorized, as further

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limited herein. A security purchased in accordance with this section shall not have a forward settlement date exceeding 45 days from the time of investment. The Town is empowered by statute to invest in the following type of securities:

1. United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest.

2. Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises.

3. Obligations of the State of California or any local agency within the state, including bonds payable solely out of revenues from a revenue-producing property owned, controlled or operated by the state or any local agency or by a department, Commission, agency or authority of the state or any local agency; provided that the obligations are rated in one of the three highest categories by a nationally recognized statistical rating organization (NRSRO). Purchases of municipal obligations in sections 3 and 4 combined may not exceed 30 percent of the Town’s investment portfolio.

4. Registered treasury notes or bonds of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state, or by a department, board, agency, or authority of any of these states; provided that the obligations are rated in one of the three highest categories by a NRSRO. Purchases of municipal obligations in sections 3 and 4 combined may not exceed 30 percent of the Town’s investment portfolio.

5. Bankers’ Acceptances with a rating of the highest ranking or highest letter and number rating as provided for by a NRSRO. Purchases of bankers’ acceptances may not exceed 180 days. No more than 40% of the Town’s investment portfolio may be invested in bankers’ acceptances and no more than 30% of the Town’s investment portfolio may be invested in the bankers’ acceptances of any one commercial bank.

6. Commercial paper of “prime” quality of the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (1) or (2):
(1) The entity meets the following criteria:
(A) Is organized and operating in the United States as a general corporation. (B) Has total assets in excess of five hundred million dollars ($500,000,000). (C) Has debt other than commercial paper, if any, that is rated in a rating category of “A” or its equivalent or higher by a NRSRO.
(2) The entity meets the following criteria:
(A) Is organized within the United States as a special purpose corporation, trust, or limited liability company.
(B) Has program-wide credit enhancements including, but not limited to, overcollateralization, letters of credit, or a surety bond.
(C) Has commercial paper that is rated “A-1” or higher, or the equivalent, by an NRSRO. Eligible commercial paper shall have a maximum maturity of 270 days or less. Local agencies, other than counties or a city and county, may invest no more than 25% of their moneys in eligible commercial paper.

Eligible commercial paper associated with less than $100,000,000 of investments shall have a maximum maturity of 270 days or less. Local agencies, other than counties or a city and

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county, may invest no more than 25% of their moneys and no more than 5% per issuer in eligible commercial paper. Eligible commercial paper associated with more than or equal to $100,000,000 of investments and Pooled Funds shall have a maximum maturity of 270 days or less. Local Agencies other than counties or a city and county, may invest no more than 40% of their moneys and no more than 5% per issuer in eligible commercial paper.

7. FDIC insured or fully collateralized time certificates of deposit in financial institutions located in California, including U.S. branches of foreign banks licensed to do business in California. All time deposits must be collateralized in accordance with California Government Code section 53651. Purchase of FDIC insured or fully collateralized time certificates of deposit may not exceed 50% of the Town’s investment portfolio.

8. Negotiable Certificates of Deposit (CD) issued by a nationally or state-chartered bank, a savings association or a federal association (as defined by Section 5102 of the Financial Code), a state or federal credit union, or by a federally- or statelicensed branch of a foreign bank. No more than 30% of the Town’s portfolio may be invested in negotiable CDs and eligible CDs must be rated in one of the three highest categories by a NRSRO.

9. Local Agency Investment Fund (LAIF). Investments in LAIF shall not exceed $75 million.

10. Insured savings account or bank money market account. In accordance with California Government Code Section 53635.2 to be eligible to receive local agency deposits a financial institution must have received a minimum overall “satisfactory” rating for meeting the credit needs of California communities in its most recent evaluation.

11. Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a1, et seq.). To be eligible for investment pursuant to this subdivision these companies shall either: (1) attain the highest ranking letter or numerical rating provided by not less than two of the three largest nationally recognized rating services or (2) have an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ experience managing money market mutual funds and with assets under management in excess of $500,000,000. The purchase price of shares shall not exceed 20% of the investment portfolio and 10% per money market fund.

12. California Asset Management Program. (CAMP), as long as the portfolio is rated among the top two rating categories by a NRSRO. There is no limit on the percentage of CAMP that may be held in the Town’s portfolio.

13. Medium-term notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Notes eligible for investment under this subdivision shall be rated in a rating category of “A” or its equivalent or better by a NRSRO. Purchases of medium-term notes shall not include other instruments authorized by this section and may not exceed 30% of the agency’s money and 5% per issuer that may be invested pursuant to this section.

14. United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter American Development Bank, with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States. Investments under this subdivision shall be rated in a rating category of “AA” or its equivalent or better by a NRSRO and shall not exceed 30% of the agency’s moneys that may be invested pursuant to this section. (Supranationals).

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 191 Town Policies

15. Mortgage Pass-Through and Asset-Backed Securities including equipment lease-backed certificates, consumer receivable passthrough certificates, or consumer receivable-backed bonds of a maximum remaining maturity of five year. Securities eligible for investment under this subdivision shall be rated in a rating category of “AA,” its equivalent or better by at least one NRSRO. Purchase of securities authorized by this subdivision may not exceed 20 percent of the Town’s total portfolio.

192 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
Summary Table of Permitted Investments
Investment Instruments
Calif. Code Limitation (Maturity, % of
Portfolio, Rating)
Town Policy Limitation (Maturity, % of
Portfolio, Rating)
U.S. Treasury 5 years
100% of portfolio
5 years
100% of portfolio
Federal Agency
(including mortgagebacked securities and
callable securities)
5 years
100% of portfolio
5 years
100% of portfolio
Municipal Obligations
(including notes issued by the State of
California, California local agencies, and the
other 49 states)
5 years
100% of portfolio
5 years
30% of portfolio Credit rating category of
“A” or its equivalent or higher by a NRSRO
Bankers’ Acceptances 180 days 40% of portfolio 40% per issuer 180 days 40% of portfolio 30% per issuer Commercial Paper (under $100,000,000 of
investments)
270 days
25% of portfolio
10% per issuer
Long term credit rating category of “A” and
short term rating of “A-1” or its equivalent
or higher by a NRSRO
270 days
25% of portfolio
5% per issuer
Long term credit rating category of “A” and
short term rating of “A-1” or its equivalent
or higher by a NRSRO
Commercial Paper (min. $100,000,000 of
investments) and Pooled Funds
270 days
40% of portfolio
10% per issuer
Long term credit rating category of “A” and
short term rating of “A-1” or its equivalent
or higher by a NRSRO
270 days
40% of portfolio
5% per issuer
Long term credit rating category of “A” and
short term rating of “A-1” or its equivalent
or higher by a NRSRO
Deposits
(Collateralized/FDIC) 100%1
of portfolio 5 years
50% of portfolio
Negotiable CDs 5 years
30% of portfolio
5 years
30% of portfolio
5% per issuer
Credit rating category of “A” or its
equivalent or higher by a NRSRO
LAIF $75 million $75 million
Money Market Funds 20% of portfolio
10% per fund
20% of portfolio
10% per fund
JPA
(CAMP) 100% of portfolio 100% of portfolio
Medium-Term Notes
5 years
30% of portfolio
10% per issuer
Credit rating category of “A” or its
equivalent or higher by a NRSRO
5 years
30% of portfolio
5% per issuer
Credit rating category of “A” or its
equivalent or higher by a NRSRO
Supranationals
5 years
30% of portfolio
Credit rating category of “AA” or its
equivalent or higher by a NRSRO
5 years
30% of portfolio
Credit rating category of “AA” or its
equivalent or higher by a NRSRO
Mortgage Pass-through and Asset-Backed
Securities
5 years or less
20% of portfolio
Credit rating category of “AA” or its
equivalent or higher by a NRSRO
5 years or less
20% of portfolio
Credit rating category of “AA” or its
equivalent or higher by a NRSRO
1For deposit placement services.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 193 Town Policies

7.0 Authorized Financial Dealers and Institutions
To provide for the optimum yield in the Town’s portfolio, the Town’s procedures shall be designed to encourage competitive bidding on transactions from an approved list of broker/dealers. The Town may engage the services of an external investment advisor to assist in the management of the Town’s investment portfolio in a manner consistent with this investment policy. If the Town hires an investment adviser to provide investment management services, the adviser is authorized to transact with its direct dealer relationships on behalf of the Town. Approved investment adviser firms must provide their services to the Town on a fiduciary capacity and be registered with the Securities and Exchange Commission (SEC) under the Investment Advisor’s Act of 1940. The advisor shall have more than five years’ experience in managing public funds and shall have at minimum $1 billion under management. The City Manager, or the Town’s investment advisor, shall maintain a list of authorized broker/dealers and financial institutions that are approved for investment purposes. This list will be developed after a comprehensive credit and capitalization analysis indicates the firm is adequately financed to conduct business with public entities. It shall be the policy of the Town to purchase securities only from those authorized institutions or firms.

8.0 Safekeeping and Custody
To protect against potential fraud and embezzlement, or losses caused by a collapse of an individual securities dealer all security transactions entered into by the Town of Los Altos Hills shall be conducted on a deliveryversus-payment (DVP) basis. Securities will be held by a third-party custodian, in the Town of Los Altos Hills’ name and control, designated by the City Manager or her/his designee and evidenced by safekeeping receipts.

9.0 Collateralization
Collateralization will be required on certificates of deposit as specified under Government Code Section 63630 et seq in order to anticipate market changes and provide a level of security for all funds. All time deposits must be collateralized in accordance with California Government Code section 53651.

The Town of Los Altos Hills chooses to limit collateral to the following:

Collateral will always be held by an independent third party. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the Town of Los Altos Hills and retained.

The right of collateral substitution is granted.

10.0 Internal Control
The Town of Los Altos Hills is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the Town are protected from loss, theft or misuses. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by the City Manager and staff.

The City Manager or designee shall arrange for an annual audit by an external CPA firm in compliance with the requirements of state law and generally accepted accounting principles as pronounced by the Government Accounting Standards Board (GASB). As a part of the audit, investment transactions will be tested. The annual audit will be an integral part, but not the sole part of management’s program of monitoring internal controls.

194 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
The internal controls shall address the following points:
• Control of collusion
• Separation of transaction authority from accounting and recordkeeping • Custodial safekeeping
• Avoidance of physical delivery securities
• Clear delegation of authority to subordinate staff members • Written confirmation of transactions for investments and wire transfers • Development of a wire transfer agreement with the lead bank and third-party custodian

11.0 Ethics and Conflicts of Interest
Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. These officers and employees involved in the investment process shall disclose to the City Manager any material financial interest in financial institutions that conduct business with this jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the Town of Los Altos Hills, particularly with regard to the time of purchases and sales. Employees and investment officials shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the Town of Los Altos Hills.

12.0 Diversification
The Town of Los Altos Hills will diversify its investments by security type and institution. Limits are provided for in Section 6.0. With the exception of U.S. Treasury and Federal Agency securities, municipal bonds, supranational bonds, and authorized pools such as CAMP or LAIF, no more than 5% of the Town of Los Altos Hills’ total investment portfolio will be invested in a single issuer.

13.0 Maximum Maturities
To the extent possible, the Town of Los Altos Hills will attempt to match its investments with anticipated cash flow requirements. The Town of Los Altos Hills will not directly invest in securities maturing more than five (5) years from the settlement date unless City Council has provided approval for a specific purpose at least three (3) months before the investment is made. The calculation of an investment’s remaining maturity/term is to be measured from the settlement date to final maturity.

Debt reserve funds may be invested in securities exceeding five (5) years if the maturities of such investments are made to coincide as nearly as practicable with the expected use of the funds.

The Town of Los Altos Hills will retain operating reserves as adopted by the City Council. The amount of active deposits and inactive investments with a maturity of one year or less shall always be equal to greater than any draw on these reserves required by the annual operating budget.

Securities may be sold prior to maturity to accommodate the Town’s cash flow requirements, to reposition the portfolio to perform well in the current market, or to take advantage of market opportunities to increase the Town’s rate of return.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 195 Town Policies

14.0 Performance Standards
The investment portfolio shall be designed with the objective of obtaining a market rate of return throughout budgetary and economic cycles, commensurate with the Town’s investment risk constraints and cash flow needs.

14.1 Market Yield (Benchmark):

Suitability should be the standard for evaluating the success of the Town’s investment portfolio. Given this strategy and the active investment management utilized by the Town, the basis used to determine whether market yields are adequate shall be the ICE BofAML 1-5 year U.S. Treasury Index. 15.0 Reporting The City Manager is charged with the responsibility of including a market report on investment activity and returns in the Town of Los Altos Hills’ Cash and Investment Report. The Report will be in compliance with California Government Code Section 53646. 16.0 Investment Policy Adoption The Town of Los Altos Hills’ investment policy shall be adopted by the City Council. The policy shall be reviewed annually by the Finance and Investment Committee and any modifications made thereto must be approved by the City Council.

15.0 Reporting
The City Manager is charged with the responsibility of including a market report on investment activity and returns in the Town of Los Altos Hills’ Cash and Investment Report. The Report will be in compliance with California Government Code Section 53607 and will include:
• The monthly report shall include an accounting of all receipts, disbursements, and fund balances. • The quarterly reports shall include the book and market value of the cash investment, the classification of the investment, the name of the institution or entity, the rate of interest, and the maturity dates for all securities.
• The quarterly report will include a statement of compliance of the portfolio with the investment policy or an explanation as to why the portfolio is not in compliance per Government Code 53646(b) (2).
• The quarterly report will include a statement on availability of funds to meet its obligations within the next six months per Government Code 53646(b)(3).

As a good reporting practice, the Report will be submitted on a quarterly basis and provided to the Council within 45 days following the end of the month.

16.0 Investment Policy Adoption
The Town of Los Altos Hill’s’ investment policy shall be adopted by the City Council. The policy shall be reviewed annually by the Finance and Investment Committee and any modifications made thereto must be approved by the City Council.

196 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
Glossary of Terms - Financial Policy
Bankers’ Acceptances
Short-term credit arrangements that enable businesses to obtain funds to finance commercial transactions. They are time drafts drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. By its acceptance, the bank becomes primarily liable for the payment of the draft at maturity. An acceptance is a highgrade negotiable instrument.

Benchmark
A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk the average duration of the portfolio’s investments.

Broker
Someone who brings buyers and sellers together and is compensated for her/his service.

California Asset Management Program (CAMP)
CAMP is a joint powers authority which provides investment services to local governments through its investment pool. The pool is AAAm-rated by Standard and Poor’s, and provides same-day availability to funds up to 11:00AM Pacific. The pool strives to maintain stable asset value.

Certificates of Deposit

1. Negotiable Certificates of Deposit are large-denomination CDs. They are issued at face value and typically pay interest at maturity, if maturing in less than 12 months. CDs that mature beyond this range pay interest semi-annually. Negotiable CDs are issued by U.S. banks (domestic CDs), U.S. branches of foreign banks (Yankee CDs), and thrifts. There is an active secondary market for negotiable domestic and Yankee CDs. However, the negotiable thrift CD secondary market is limited. Yields on CDs exceed those on U.S. treasuries and agencies of similar maturities. This higher yield compensates the investor for accepting the risk of reduced liquidity and the risk that the issuing bank might fail. State law does not require the collateralization of negotiable CDs.

2. Non-negotiable Certificates of Deposit are time deposits with financial institutions that earn interest at a specified rate for a specified term. Liquidation of the CD prior to maturity incurs a penalty. There is no secondary market for these instruments; therefore, they are not liquid. They are classified as public deposits, and financial institutions are required to collateralize them. Collateral may be waived for the portion of the deposits that are covered by FDIC insurance.

Collateral
Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.

Collateralization
Process by which a borrower pledges securities, property or other deposits for the purpose of securing the repayment of a loan and/or security. Also refers to securities pledged by a bank to secure deposits of public moneys.

Dealer
Someone who acts as a principal in all transactions, including buying and selling from her/his own account.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 197 Town Policies
Delivery v. payment
The preferred method of delivering securities, with an exchange of money for the securities.

Demand deposits
A deposit of monies which are payable by the bank upon demand of the depositor.

Derivative
Securities that are based on, or derived from, some underlying asset, reference date, or index.

Diversification
Dividing investment funds among a variety of securities offering independent returns.

Federal Depository Insurance Corporation (FDIC)
A federal agency that insures bank deposits, currently up to $250,000 per deposit.

Federal Home Loan Bank (FHLB)
A federal agency that provides credit and liquidity in the housing market. FHLB issues discount notes and semiannual pay coupon securities.

Federal Home Loan Mortgage Corporation (FHLMC)
A federal agency that provides credit and liquidity in the housing market. FHLMC, also called “Freddie Mac,” issues discount notes, semi-annual pay coupon securities and mortgage-backed securities.

Federal National Mortgage Association (FNMA)
A federal agency that provides credit and liquidity in the housing market. FHLMC, also called “Fannie Mae,” issues discount notes, semi-annual pay coupon securities and mortgage-backed securities Liquidity
An asset that can easily and rapidly be converted into cash without significant loss of value.

Local Agency Investment Fund (LAIF)
The LAIF was established by the State of California to enable treasurers to place funds in a pool for investments.

There is a limitation of $50 million per agency subject to a maximum of fifteen total transactions per month. The Town uses this fund when market interest rates are declining as well as for short-term investments and liquidity.

Town funds in LAIF are limited to $40 million.

Maturity
The date upon which the principal or stated value of an investment becomes due and payable.

Mortgage-Backed Security
Debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property.

198 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
Portfolio
Combined holding of more than one stock, bond, commodity, cash equivalent or other asset. The purpose of a portfolio is to reduce risk through diversification.

Repurchase Agreement
A form of collateralized loan involving the sale of a security with a simultaneous agreement by the seller to buy the same security back from the purchaser at an agreed-on price and future date. The party who sells the security at the inception of the repurchase agreement and buys it back at maturity is borrowing money from the other party, and the security sold and subsequently repurchased represents the collateral.

Safekeeping
Offers storage and protection of assets provided by an institution serving as an agent.

Supranational Bonds
A bond issued by a supranational agency such as the World Bank.

U.S. Treasury Bills
Commonly referred to as T-Bills, these are short-term marketable securities sold as obligations of the U.S.

Government. They are offered in three-month, six-month and one year maturities. T-Bills do not accrue interest but are sold at a discount to pay face value at maturity.

U.S. Treasury Notes
These are marketable, medium-term interest-bearing securities sold as obligations of the U.S. Government with original maturities of one to ten years. Interest is paid semiannually.

U.S. Government Agency
Issues Issues which are unconditionally backed by the full faith and credit of the United States.

Yield
The rate of annual income return on an investment, expressed as a percentage. Income yield is obtained by dividing the current dollar income by the current market price for the security. Net yield or yield to maturity is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 199 Town Policies
Reserve Policy
Proposed for City Council Adoption on June 26, 2025
Resolution XX-XX
Purpose
This policy establishes reserve targets for the Town’s governmental funds to ensure financial stability, operational continuity, and long-term planning. Reserves provide:
> Working capital for operations and maintenance
> Funding for equipment, technology, and capital needs
> Resources to meet legal, regulatory, and contractual obligations > A buffer against revenue shortfalls and unforeseen emergencies Maintaining adequate reserves enhances transparency, supports credit ratings, and helps manage risk through economic or operational disruptions.

Policy
This policy ensures that the Town maintains sufficient cash flow to meet current and future obligations while providing transparency to the public. By establishing targeted reserve levels for each of the Town’s governmental funds, the policy supports financial stability, risk mitigation, and long-term planning.

Reserves are essential to address both planned and unplanned needs:
> Planned needs may include:
• Funding operating requirements
• Meeting debt service obligations (if any)
• Addressing pension and other post-employment benefit (OPEB) liabilities > Unplanned needs may include:
• Offsetting revenue shortfalls
• Covering unanticipated expenses
• Responding to emergencies or disasters
Establishing formal reserve targets helps the Town:
> Maintain adequate working capital
> Prepare for financial contingencies and emergencies
> Support strong credit ratings and reduce borrowing costs This policy defines specific reserve accounts by outlining their purpose, target thresholds, allowable uses, and replenishment procedures. It distinguishes between committed reserves, which are formally designated by City Council for specific purposes, and assigned reserves, which offer greater flexibility and may be used for a range of Town-identified needs. Both committed and assigned reserves may be established, modified, applied, or eliminated by City Council resolution. Committed reserves are restricted to the purposes explicitly stated at the time of designation. In contrast, assigned reserves may support multiple related activities, provided they align with the stated intent of the reserve.

200 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
Policy Review and Monitoring
This policy will be reviewed annually during the budget process to ensure alignment with the Town’s financial goals and compliance with applicable regulations. As part of the annual review, the Administrative Services Director/ Finance Director will:
> Recalculate reserve thresholds based on the most recent financial data > Evaluate reserve usage and replenishment
> Recommend any policy or funding adjustments for inclusion in the budget In addition to the annual review, reserve balances will be monitored mid-year and presented to the City Council as part of the mid-year financial update to promote transparency and timely decision-making.

Committed Reserves

1. Pension Contribution Reserve
Purpose of the Reserve:

The Pension Contribution Reserve is to set aside funds for the Town’s estimated unfunded liability. CalPERS prepares an annual Actuarial Report for each of the Town’s three pension plans. This reserve is for amounts not included in the Accrued Liability and represents the difference between the currently applied Discount Rate and the lowest Discount Rate measured by CalPERS in its most recent actuarial report. This difference is updated to the most recent past fiscal year end as reported in the related ACFR Pension Footnote.

Threshold of the Reserve:

The Pension Contribution Reserve shall maintain a maximum threshold based on the CalPERS annual actuarial report for each of the Town’s three pension plans. The reserve threshold amount is calculated by the following:
the difference between the accrued liability at the current discount rate and the accrued liability calculated using the discount rate that is one percentage point lower than the current rate, as shown in the most recent ACFR pension footnote.

The balance of the Town’s Section 115 Pension Trust shall be included in the calculation of the Pension Contribution Reserve. The sum of the Pension Contribution Reserve and the Pension Trust balance shall be used to evaluate compliance with the policy threshold.

Usage of the Reserve:

Adjustments to the reserve will result from the discount rate changes in succeeding years per the CalPERS annual report per the Analysis of Discount Rate Sensitivity as updated in the most recent ACFR Pension footnote.

Replenishment of the Reserve:

During the annual budget cycle, the Pension Contribution Reserve will be adjusted to reflect the new threshold amount as described in the preceding Threshold of the Reserve section. These adjustments will be approved by the City Council as part of the annual budget cycle.

2. Technology Reserve

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 201 Town Policies
Purpose of the Reserve:

The Technology Reserve is to set aside funds for the Town’s future Audio and Visual equipment and software replacement needs.

Threshold of the Reserve:

The threshold will be calculated based on $460K, the budgeted amount of the AV system, and will be $46K for the following 10 years for upgrades and replacement of the equipment.

Usage of the Reserve:

Eligible expenditures will be for AV System and software to be upgraded or replaced throughout the fiscal year. These expenditures will be determined on an annual basis.

Replenishment of the Reserve:

The Technology Reserve will be adjusted up or down, as necessary, to equal the threshold. These expenditures will be determined on an annual basis.

3. Vehicle and Equipment Replacement Reserves
Purpose of the Reserve:

The Vehicle and Equipment Replacement Reserve is to set aside funds for the Town’s current and future vehicle and equipment replacement needs. The Town maintains a vehicle and equipment replacement schedule for all Town vehicles and equipment. This schedule is updated as equipment is added or removed from service.

Threshold of the Reserve:

The threshold of the Vehicle and Equipment Replacement Reserve will be calculated each year during the annual budget cycle. This threshold will be the sum of the amount determined for each piece of equipment on the Vehicle and Equipment replacement schedule based on future replacement costs of the item divided by its useful life and multiplied by the number of years in service, but in no event greater than the future replacement cost.

Usage of the Reserve:

Eligible expenditures include vehicles and/or equipment replacements purchased throughout the fiscal year.

These expenditures will be determined on an annual basis.

Replenishment of the Reserve:

During the annual budget cycle, the Vehicle and Equipment Replacement Reserve will be adjusted up or down, as necessary, to equal the threshold. Any adjustments will be approved by the City Council as part of the annual budget cycle.

4. Facilities Replacement Reserves
Purpose of the Reserve:

The Facilities Replacement Reserve is to set aside funds for the Town’s current and future facility improvement and replacement needs. The Town maintains a facility schedule for all Town facilities. Additions to the facilities schedule occur when Town facilities are either improved or new Town facilities are added. Deletions occur as Town facilities are demolished and removed from service.

202 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Town Policies
Threshold of the Reserve:

The threshold of the Facilities Replacement Reserve will be calculated each year during the annual budget cycle.

This threshold will be comprised of two parts. For existing buildings, it will be the cumulative depreciation of the buildings listed in the fixed asset schedule as reported in the most recent ACFR Capital Asset Footnote.

Added to this amount is any remaining unspent funds appropriated to construct additions or improvements to facilities.

Usage of the Reserve:

Eligible expenditures include facilities improvements, renovations, or demolitions that occur throughout the fiscal year. These expenditures will be determined on an annual basis.

Replenishment of the Reserve:

During the annual budget cycle, the Facilities Replacement Reserve will be adjusted up or down, as necessary, to equal the threshold. Any adjustments will be approved by the City Council as part of the annual budget cycle.

5. Disaster Contingency Reserve:

The Disaster Contingency Reserve is to set aside funds for emergencies that may arise within the Town that have not been federally and or state declared disasters. To constitute a Town emergency, the disaster or emergency would be natural disasters (i.e. earthquakes, landslides, flooding) or temporary service outages of Town facilities and infrastructure (i.e. extensive debris cleanup from wind events that prohibits travel on Town roads). To be declared a Town Emergency, the Emergency Operations Center and team would be activated for any length of time. Town emergencies are smaller in nature than presidentially declared federal disasters and governor declared state disasters and are typically contained within the Town boundaries.

Threshold of the Reserve:

The Disaster Contingency Reserve shall maintain a balance not less than $1,250,000. This amount shall be adjusted up or down, as necessary, each year. Adjustments will be based on the risk assessment performed by the Town’s emergency services personnel.

Usage of the Reserve:

The City Manager is the Director of Emergency Services. In the event of a Town emergency, the City Manager would determine eligible expenditures allowable for use of the reserve on a case-by-case basis. If expenditures are incurred, use of the reserve will be considered on an annual basis.

Replenishment of the Reserve:

During the annual budget cycle, the Disaster Contingency Reserve will be adjusted as necessary to equal the threshold. Any adjustments will be approved by the City Council as part of the annual budget cycle.

6. Capital Projects Reserve
Purpose of the Reserve:

The Capital Projects Reserve is to set aside funds to start or complete projects for which the Council has previously appropriated funds, but the projects have not been started or completed.

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 203 Town Policies
Threshold of the Reserve:

The Capital Projects Reserve shall maintain a balance equal to the unused prior appropriated funds as shown in the list of capital projects prepared as part of the annual budget process. This amount shall be adjusted up or down, as necessary, each year.

Usage of the Reserve:

The Capital Projects Reserve will be used to fund the completion of the prior appropriated projects as shown in the list of capital projects in the budget.

Replenishment of the Reserve:

During the annual budget cycle, the Capital Projects Reserve will be adjusted as necessary to equal the threshold. Any adjustments will be approved by the City Council as part of the annual budget cycle.

Assigned Reserves

1. General Fund Stabilization Reserve
Purpose of the Reserve:

The General Fund Stabilization Reserve is to establish a minimum unassigned fund balance and to set aside funds for the Town’s current and future operational needs in the event of economic downtowns or unexpected expenditures.

Threshold of the Reserve:

The General Fund Stabilization Reserve shall maintain a maximum threshold that is equivalent to three months of average operating expenditures in the general fund. Operating expenditures are defined as those expenditures before transfers to other funds and exclude capital expenditures (less that portion of Community Development costs that are recovered through charges for services). The figures from the most recent ACFR shall be used for calculating the threshold amount.

Usage of the Reserve:

Allowable expenditures for use in this reserve shall be determined on a case-by-case basis. Examples of allowable expenditures include, but are not limited to, significant economic downturn that result in diminished property taxes revenues, thus resulting in a need for use of the reserve to balance the annual general fund budget. These expenditures will be recommended by the City Manager and approved by the City Council.

If expenditures are recommended and approved, use of this reserve will be considered on an annual basis.

Replenishment of the Reserve:

During the annual budget cycle, the General Fund Stabilization Reserve will be reviewed and updated based on the most recent audited and issued Annual Comprehensive Financial Report. Any adjustments will be approved by the City Council as part of the annual budget cycle.

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Appendix

206 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Appendix
Glossary of Terms in Budget
Accounting System: The methods and records
established to identify, assemble, analyze, classify,
record and report a government’s transactions and
to maintain accountability for the related assets and
liabilities.

ACFR: abbreviation. Annual Comprehensive Financial
Report. This is the Town’s financial statement,
which includes auditor’s opinion and other financial
information pertinent in evaluating the Town’s financial health.

Adopted Budget: The official budget as approved by
the City Council at the start of each fiscal year.

Agency Fund: A fund normally used to account for
assets held by a government as an agent for individuals, private organizations or other governments and/or
other funds.

Amended Budget: The official budget as adopted and
as amended by the City Council through the course of
a fiscal year.

Annual Budget: A budget applicable to a single fiscal
year.

Annual Financial Report: A financial report applicable
to a single fiscal year.

Appropriated Budget: The expenditure authority
created by the appropriation bills or ordinances, which are signed into law, and the related estimated revenues.

The appropriated budget would include all reserves,
transfers, allocations, supplemental appropriations
and other legally authorized legislative and executive
changes.

Appropriation: A legal authorization granted by a
legislative body for a given period to make expenditures and to incur obligations for specific purposes. An
appropriation usually is limited in amount and time it
may be expended.

ASD: abbreviation. Administrative Services Department
Assessed Valuation: The estimated value placed upon
real and personal property by the County Assessor as
the basis for levying property taxes.

Audit: Prepared by an independent Certified Public
Accountant , the primary objective of an audit is to
determine if the City’s financial statements present
fairly the City’s financial position and results of
operations in conformity with generally accepted
accounting principles.

Authority: A government or public agency created to
perform a single function or restricted group of related activities.

Balanced Budget: A balanced budget exists when total
revenues are equal to, or greater than, total expenses.

Bond Covenant: A legally enforceable promise made
by an issuer of bonds to the bondholders, normally
contained in the bond resolution or indenture.

Budget: A plan of financial operation embodying an
estimate of the proposed expenditures for a given
period and the proposed means of financing them.

Capital Budget: A plan or proposed capital outlays and
the means of financing them.

Capital Improvement Program: A plan for capital
improvements to be implemented each year over a
fixed period of years to meet capital needs arising from the assessment of long‐term needs. It sets forth each
project in which the government is to have a part and
specifies the full resources estimated to be available
to finance the projected expenditures.

Capitalized Expenditures: Expenditures resulting in the acquisition and/or construction of fixed assets.

Contracted Services: Services rendered in support of
City operations and activities by external parties. These may be based upon either formal contracts or ad hoc
charges.

Contingency: A budgetary reserve set‐aside for
emergencies or unforeseen expenditures not otherwise
budgeted.

Cost Accounting: The method of accounting that
provides for assembling and recording of all the
elements of cost incurred to accomplish a purpose, to

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 207 Appendix
carry on an activity or operation, or to complete a unit of work or a specific job.

Cost Allocation Plan: A comprehensive analysis of
the appropriate distribution of overhead costs from
the Town’s General Government Departments to
the various service departments – Public Works,
Community Development and Parks & Recreation.

Cost of Services: Payments made by customers
for publicly provided services that benefit specific
individuals and exhibit “public good” characteristics.

They include such fees as recreational fees, building
permit fees, etc.

Debt Service Fund: A fund established for the payment
of interest and principal on all debt other than payable exclusively from special assessments.

Department: A major organizational group of the City
with overall management responsibility for an operation or a group of related operations within a functional area.

Depreciation: (1) Expiration in the service life of capital assets attributable to wear and tear, deterioration,
action of the physical elements, inadequacy or
obsolescence. (2) That portion of the cost of a capital asset which is charged as an expense during a particular period.

Division: An organizational subgroup of a department.

Employee Services: Salaries plus fringe benefits earned by employees of the organization for work performed.

Encumbrance: The commitment of appropriated funds
to purchase goods that have not yet been received, or
services that have yet to be rendered.

Enterprise Fund: A fund established to account for
operations financed and operated in a manner similar to private business enterprises. In this case, the governing body intends that costs of providing goods or services
to the general public on a continuing basis be financed or recovered primarily through user charges.

Entitlement: The amount of payment to which a state
or local government is entitled pursuant to an allocation formula contained in applicable statutes.

EOC: abbreviation. Emergency Operation Center. This
is only activated during an emergency situation by
authorized Town personnel.

ERAF: abbreviation. Educational Revenue
Augmentation Fund. A shift of property tax revenues
from cities, counties and other local agencies to the
State in support of schools.

Expenditure: Decreases in net financial resources.

Expenditures include current operating expenses, which
require the current or future use of net current assets, debt service, and capital outlays.

FIC: abbreviation. Finance and Investment Committee.

Fiscal Year: A 12‐month period (usually July 1st through June 30th) to which the annual operating budget applies and at the end of which a government determines its
financial position and the results of its operations.

Fixed Assets: Equipment costing $5,000 or more,
including tax, and not qualifying as a capital
improvement project.

Full‐Time Equivalent (FTE): The conversion of full‐time and part‐time employee hours to an equivalent of a
full-time position. For example: one person working
half‐time would count as 0.5 FTE.

Fund: A fiscal and accounting entity with a self‐
balancing set of accounts in which cash and other
financial resources, all related liabilities and residual equities, or balances, and changes therein, are
recorded and segregated to carry on specific activities or attain certain objectives in accordance with special regulations, restrictions, or limitations.

Fund Balance: The difference between fund assets and
fund liabilities of governmental and similar trust funds.

General Fund: The fund used to account for all financial resources, except those required to be accounted for
in another fund.

Generally Accepted Accounting Principles (GAAP):

Uniform minimum standards of/ and guidelines for
financial accounting and reporting. They govern the
form and content of the basic financial statements of
an entity. GAAP encompasses the conventions, rules
and procedures necessary to define accepted

208 Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan Appendix
accounting practices at a particular time. They include not only broad guidelines of general application, but
also detailed practices and procedures. GAAP provides a standard by which to measure financial presentations.

Governmental Funds: Funds general used to account
for tax‐supported activities. There are five different
types of governmental funds: the general fund, special
revenue funds, debt service funds, capital projects
funds, and permanent funds.

Grants: Contributions of cash or other assets from
another governmental agency (usually) to be expended
or used for a specified purpose, activity or facility.

Infrastructure: All City owned facilities supporting
the operation of the governmental unit. It includes:
streets, roads, bridges, curbs and gutters, parks, water and sewer lines, storm drains, water pump stations
and reservoirs, water wells, sewer lift stations, all
government buildings and related facilities.

Internal Service Fund: A fund used to account
for the financing of goods or services provided by
one department to other departments on a costreimbursement basis.

Investment: Securities and real estate purchased and
held for the production of income in the form of interest, dividends, rentals or base payments.

Long Term Debt: Debt with a maturity of more than
one year after the date of the issues.

Materials & Services: Expenses which are charged
directly as a part of the cost of a service.

Modified Accrual Basis: The accrual basis of accounting where revenues are recognized when they become both
“measurable” and “available” to finance expenditures of the current period. All governmental funds and agency
funds are accounted for using the modified accrual basis of accounting.

Net Income (Loss): Proprietary fund excess (deficit) of operating revenues and operating transfers-in over
operating expenses, non-operating expenses and
operating transfers-out.

Non‐Operating Expenses: Proprietary fund expenses
not directly related to the fund’s primary activities (e.g. interest).

Non‐Operating Revenues: Proprietary fund revenues
incidental to, or by‐products of, the fund’s primary
activities.

Operating Expenses: Proprietary fund expenses related
directly to the fund’s primary activities.

Operating Income: The excess of proprietary fund
operating revenues over operating expenses.

Operating Revenues: Proprietary funds revenues
directly related to the fund’s primary activities. They consist primarily of user charges for goods and services.

Operating Transfers: Legally authorized transfers from
a fund receiving revenue to the fund through which
the resources are to be expended, such as transfers
from the General Fund to a Special Revenue or Capital
Projects Fund.

Ordinance: A formal legislative enactment by the City
Council. If it is not in conflict with any higher form of law, it has the full force and effect of law within the boundaries of the City.

PCI: abbreviation. Pavement Condition Index.

Preliminary Budget: A budget in its preliminary
preparation stage prior to review and formulation by
the City Council. In the preliminary stage, a budget
forecasts current costs into the future and new or
modified spending proposals for the future.

Program: Group activities, operations, or organization
units directed to attaining specific purposes or
objectives.

Program Purpose: A general statement explaining the
reason a particular program or division exists.

Proprietary Fund: The classification used to account
for a government’s ongoing organizations and activities that are similar to those often found in the private
sector (i.e., enterprise and internal service funds). All assets, liabilities, equities, revenues, expenses and
transfers relating to the government’s business and

Town of Los Altos Hills | FY 2024-26 Operating Budget and FY 2025-2029 Five Year Capital Improvement Plan 209 Appendix
quasi-business activities are accounted for through
proprietary funds.

Reserved Fund Balance: Those portions of fund balance
that have not been appropriated for expenditure or that are legally segregated for a specific future use.

Resolution: A special or temporary order of the City
Council requiring less formality than an ordinance.

Retained Earnings: An equity account reflecting the
accumulated earning of an enterprise or internal service fund.

Revenues: (1) Increases in net current assets of a
governmental fund type from other than expenditure
refunds and residual equity transfer. (2) Increases in
the net total assets of a proprietary fund type from
other than expense refunds, capital contributions and
residual equity transfers.

Risk Management: All the ways and means used to
avoid accidental loss or to reduce its consequences if
it does occur.

Self‐Insurance: A term often used to describe the
retention by an entity of a risk of loss arising out of the ownership of property or from some other cause,
instead of transferring that risk to an independent third party through the purchase of an insurance policy. It is sometimes accompanied by the setting aside of assets
to fund any related losses. Because no insurance is
involved, the term self‐insurance is a misnomer.

Service Reimbursements: Transactions that constitute
reimbursements to a department/division for
expenditures or expenses initially made from it but
that properly apply to another department/division.

Service Level Measure: A statement describing an
activity conducted or performed by the program/
division. A program will usually have many Service Level Measures. Service Level Measures provide quantifiable
and qualifiable information as to the level of service to be provided in relation to the level of fund indicated in the budget.

Special Revenue Fund: A fund used to account for the
proceeds of specific revenue sources that are legally
restricted to expenditures for specified purposes.

Specific Program Objectives: An “action” statement
indicating the new or special activities proposed for a program.

Taxes: Compulsory charges levied by a government for
the purpose of financing services performed for the
common benefit. This term does not include specific
charges made against particular persons or property
for current or permanent benefits such as special
assessments. Neither does the term include charges
for services rendered only to those paying such charges as, for example, user charges.

Transfers: Payments from one fund to another ideally
for work or services provided, or to cover operating
expense shortfalls.

Triple Flip: Backfill of the confiscated local sales tax reimbursed through a series of revenue swapping
procedures to guarantee repayment for the California
Economic Recovery Bond.

Trust Fund: Funds used to account for assets held by a
government in a trustee capacity for individuals, private organizations, other governments and/or funds.

The Town of Los Altos Hills
26379 Fremont Road
Los Altos Hills, CA 94022

FY 2025-26
Proposed Budget

CITY COUNCIL & FIC
MAY 22, 2025

FY 2024-26 BIENNIAL BUDGET
• In 2024, staff developed the FY 2024-26 biennial budget • CIP adjustments:
• Reprioritizing projects
• Updating cost estimates and schedules
• Adjusting projects to reflect current needs and priorities • Operating Budget adjustments:
• Staffing changes and revised revenues
• City Council Work Plan implementation
• New cost allocation and fee schedule
• Departmental requests to improve service delivery and efficiency

CITY COUNCIL WORK PLAN
• Maintaining Quality of Life and
Community Character
• Promoting Public Safety
• Increasing Effective Service Delivery
and Governance
• Protecting and Maintaining
Infrastructure

OPERATING BUDGET

FY 2025-26 BUDGET SUMMARY
Total General Fund
Revenues: $18.5
million
Total General Fund
Expenditures:
$18.1 million
Surplus (before
transfers): $0.4
million
Includes key
investments in
public safety and
staffing
Strong reserves
maintained in
alignment with
policy
Ongoing revenues
exceed ongoing
expenditures

TOWN ONLY RECEIVES ~6% OF 1% PROPERTY TAX

0.00%

0.18%

1.54%

1.58%

1.75%

1.84%

2.54%

3.31%

5.69%

6.29%

10.14%

11.73%

13.54%

39.86%
Guadalupe Coyote Resource Conservation…
Bay Area Air Quality Management District
Mid Peninsula Regional Open Space District
Purissima Hills County Water District
El Camino Hospital
SCVWD
County Library Retirement Levy
County School Service
Los Altos Hills General Fund
Foothill-DeAnza Community College
Los Altos Hills County Fire District
ERAF
Santa Clara County General
Palo Alto Unified
Palo Alto Unified Tax Area (TRA 14-007)
Share of 1% Property Tax Allocation
Majority goes to
schools, County,
Educational Revenue
Augmentation Fund
(ERAF), Fire District 0.21%

1.73%

1.97%

2.17%

2.87%

4.03%

6.41%

7.09%

11.44%

12.05%

15.85%

18.92%
Bay Area Air Quality Mgmt. District
Mid Pen. Regional Open Space District
El Camino Hospital
SCVWD
County Library Retirement Levy
County School Service
Los Altos Hills General Fund
Foothill-DeAnza Community College
Los Altos Hills County Fire District
ERAF
Mountain View-Los Altos Union High
Los Altos Elementary
Mountain View-Los Altos Tax Area (TRA 14-001)
Share of 1% Property Tax Allocation

GENERAL FUND REVENUES VS EXPENDITURES

EXCLUDES TRANSFERS AND ALLOCATIONS
$12.1 M $12.0 M
$14.0 M $14.0 M $13.7 M
$15.1 M
$9.5 M
$10.1 M
$11.7 M
$13.8 M
$12.1 M
$13.7 M
$2.7 M
$1.9 M $2.3 M
$0.2 M
$1.6 M $1.4 M
2021-22
Actual
2022-23
Actual
2023-24
Actual
2024-25
Budget
2024-25
Est. Actual
2025-26
Proposed Budget
Total Revenues Total Expenditures Operating Surplus/(Deficit)

GENERAL FUND REVENUES

EXCLUDES TRANSFERS & ALLOCATIONS
$15.1 M
Property tax
is 63% of
Property Taxes revenue
$9,483,540
63%
Taxes Other Than
Property
$610,750
4%
Franchise Fees
$691,500
5%
Licenses and Permits
$2,012,774
13%
Use of Money and
Property
$1,030,000
7%
Charges for Services
$1,241,925
8%

GENERAL FUND REVENUES (IN MILLIONS)

EXCLUDES TRANSFERS AND ALLOCATIONS
Category FY 2021
Actual
FY 2022
Actual
FY 2023
Actual
FY 2024
Actual
FY 2025
Adopted
Budget
FY 2025
Est. Actual
FY 2026
Proposed
Budget
Property Taxes $7.3M $7.6M $8.2M $8.5M $8.9M $9.0M $9.5M Other Taxes $1.0M $0.8M $0.6M $0.6M $0.6M $0.7M $0.6M
Franchise Fees $0.4M $0.4M $0.4M $0.7M $0.6M $0.7M $0.7M Licenses & Permits $1.8M $2.5M $1.4M $1.8M $1.6M $1.0M $2.0M Charges for
Services $1.2M $1.2M $1.0M $1.1M $1.0M $0.7M $1.2M
Use of Money &
Property $0.2M –$0.6M $0.3M $1.1M $1.1M $1.6M $1.0M
Intergovernmental
& Miscellaneous $1.0M $0.2M $0.1M $0.1M $0.1M $0.1M $0.1M Total $12.8M $12.1M $12.0M $14.0M $14.0M $13.7M $15.1M

FY 2025–26 REVENUE HIGHLIGHTS
• Property Tax
• Projected Revenue: $9.5 million
• 5.5% increase from FY 2024–25 final estimates
• Drivers: 2.0% CPI adjustment, property reassessments after sales • Includes projected growth in ERAF (Excess Educational Revenue Augmentation Fund) • Use of Money and Property
• Projected Revenue: $1.0 million
• 9.0% decrease from FY 2024–25 adopted budget
• Includes investment income and rental income
• Interest earnings impacted by potential Federal Reserve rate cuts • Budget assumes 3.0% return for portfolio, 2.0% for liquid accounts • Town uses sweep accounts to optimize idle cash returns

FY 2025–26 REVENUE HIGHLIGHTS
• Licenses and Permits
• Projected Revenue: $2.0 million
• 22.0% increase from FY 2024–25 adopted budget
• Growth reflects updated fees and sustained service demand • Includes revenues from Planning, Building, and other permit activities • Charges for Services
• Projected Revenue: $1.2 million
• Includes service fees from various Town functions
• Volatile category influenced by development activity
• User Fee and Cost Allocation Studies underway to improve cost recovery • Planning cost recovery remains low (~30%) due to state-mandated activities • Other Revenues (Other Taxes, Franchise Fees, Intergovernmental, Miscellaneous) • Stable with no significant changes

GENERAL FUND EXPENDITURES BY DEPARTMENT

EXCLUDES TRANSFERS AND ALLOCATIONS
$13.7 M
General
Administration
$2,510,087
18%
Finance &
Administrative
Services
$1,622,560
12%
Public Safety
$3,578,090
26%
Community
Development
$3,072,700
22%
Community Services
$936,101
7%
Public Works
$2,027,250
15%

Personnel
$5,411,988
39%
Contractual Services
$6,053,859
44%
Professional Services
$347,204
3%
Operations
$1,691,737
12%
Miscellaneous
Expenditures
$242,000
2%

GENERAL FUND EXPENDITURES BY CATEGORY

EXCLUDES TRANSFERS AND ALLOCATIONS
$13.7 M

GENERAL FUND EXPENDITURES (IN MILLIONS)

EXCLUDES TRANSFERS AND ALLOCATIONS
Category FY 2021
Actual
FY 2022
Actual
FY 2023
Actual
FY 2024
Actual
FY 2025
Adopted
Budget
FY 2025
Est. Actual
FY 2026
Proposed
Budget
Personnel $4.7M $3.8M $3.9M $4.3M $4.9M $4.5M $5.4M
Contractual
Services $3.1M $4.2M $4.7M $5.9M $6.5M $5.6M $6.1M
Professional
Services $0.4M $0.4M $0.3M $0.4M $0.4M $0.4M $0.3M
Operations $0.8M $1.1M $1.1M $1.2M $1.7M $1.5M $1.7M
Miscellaneous $0.2M $0.2M $0.2M
Total $9.1M $9.5M $10.1M $11.7M $13.8M $12.1M $13.7M

FY 2025-26 EXPENDITURE HIGHLIGHTS
• General Fund Expenditures
• Total Budget*: $13.7 million, similar to FY 2024-25 Adopted Budget • Personnel
• Increase in costs due to two new positions (including the conversion of a contract Building Technician to full-time), as well as higher health and pension costs • No COLAs budgeted, salary adjustments funded from merit-based contingency
• Contractual Services
• Decrease in costs due to the conversion of a contract Building Technician to a full-time position
* Excludes allocations

PUBLIC SAFETY
• Total Budget*: $3.6 million, 3% increase from FY 2024-25 adopted budget • Sheriff’s contract grew 8% to $2.7 million due to CPI and pension costs • $1M+ increase in public safety costs since FY 2021–22 • Cost-saving measures:
• Overtime cut from $200K to $100K
• Private security shifts reduced from 4 to 3 (saves $50K) • ALPRs reduced from 40 to 31 units (saves $27K)
• FY 2025-26 key investments:
• $550K for private security
• $93K for ALPRs
• $100K for overtime deputies
* Excludes allocations

COMMUNITY DEVELOPMENT
• Total Budget*: $3.1 million, 11% decrease from FY 2024-25 adopted budget • Includes Planning, Building, and Code Enforcement
• Continued pressure from state mandates and long-range planning • Planning cost recovery remains low (~30%) due to non-billable housing work • New staff positions include:
• Addition of 0.5 FTE Management Analyst
• Conversion of contract Building Technician to 1.0 FTE Building Technician • Conversion of 1.0 FTE Assistant Community Development Director to 2.0 FTE Planners * Excludes allocations

PUBLIC WORKS
• Total Budget*:
• All Funds: $6.2 million, 6% increase from FY 2024-25 adopted budget • General Fund: $2.0 million, 2% decrease from FY 2024-25 adopted budget • Engineering expenses reduced from shifting to in-house support • Sewer Fund increase reflects higher Palo Alto and Los Altos charges * Excludes allocations

GENERAL ADMINISTRATION
• Total Budget*: $2.5 million, 9% increase from FY 2024-25 adopted budget • Includes City Council, City Manager, City Attorney, City Clerk, and Committees • Deputy City Manager allocation to General Administration increased • Contract Emergency Services Manager ($120K) supports planning and training • General legal costs reduced to reflect actual trends
* Excludes allocations

FINANCE & ADMINISTRATIVE SERVICES
• Total Budget*:
• All Funds: $2.6 million, 10% increase from FY 2024-25 adopted budget • General Fund: $1.6 million, 12% increase from FY 2024-25 adopted budget • Includes Finance, Human Resources, Insurance, Community Services Grants, and Town Center
• Budget reflects full staffing in Finance for the first time in several years • Increase due to:
• Continued investment in financial and HR systems (Gravity budget: $23K, ADP payroll:
$27K, Holly HR: $8K)
• Higher costs of insurance
• Addition of 0.5 FTE Management Analyst (sharing with Community Development) * Excludes allocations

COMMUNITY SERVICES
• Total Budget*: $0.9 million, 8% decrease from FY 2024-25 adopted budget • Covers recreation programs, events, parks, and Westwind Barn • Decrease due to reduction in staffing from two positions to one Community Services Supervisor
• Increased attendance at events and increased variety of events * Excludes allocations

ORGANIZATION CHART
Department Position Change FTE
Change
Public Works Reclassify Associate Engineer → Project
Manager 0
Finance /
Community
Development
Add 1.0 FTE Management Analyst (0.5
FTE Finance / 0.5 FTE Community
Development)
+1.0
Community
Development
Convert contract Building Technician →

1.0 FTE Building Technician +1.0
Community
Development
Convert 1.0 FTE Assistant Community
Development Director → 2.0 FTE
Planners
+1.0
Total Change +3.0

SALARY SCHEDULE
Market Misalignment:
• Average gap: 6% below market
• Proposed increases range from 2% to
16%
• Roles ≥2% below market → adjust
salary ranges to market median
• Roles <2% below market → adjust
salary ranges by 2% CPI adjustment
Largest Gaps:
• Not Budgeted or Filled
• Building Official (-16%)
• Building Inspector (-14%)
• Senior Building Inspector (-11%)
• Finance Manager (-10%)
• Budgeted and Filled
• City Clerk* (-15%)
• Maintenance Superintendent* (-13%)
• Maintenance Worker I (-11%)
• Deputy City Manager (-10%)
23 * Sr City Clerk and Sr Maintenance Superintendent classifications will be eliminated Page 235 of 245

RESERVES
Reserve Name Type Purpose Threshold Calculation Usage Replenishment General Fund
Stabilization Reserve Assigned
Provide operational
stability during
downturns or revenue
shocks
3 months of average General
Fund operating expenditures
(excl. capital & recovered costs)
from latest ACFR
Council-approved uses
during economic
shortfalls
Reviewed
annually with
budget
Capital Projects Reserve Committed
Complete capital
projects with prior
appropriations
Equals unused appropriations
from capital project list
Fund incomplete
previously approved
projects
Reviewed
annually with
budget
Disaster Contingency
Reserve Committed Fund Town-specific emergency response Minimum $1,250,000, adjusted
per annual risk assessment
Determined by City
Manager in Town
emergencies
Reviewed
annually with
budget
Facilities Replacement
Reserve Committed
Maintain/improve
Town
buildings/facilities
Depreciation from ACFR +
unspent funds for improvements
Facility improvements,
renovations,
demolitions
Reviewed
annually with
budget
Pension Contribution
Reserve Committed
Address CalPERS
discount rate risk in
unfunded liability
Difference between liabilities at
current vs. -1% discount rate per
latest ACFR
Adjustments based on
annual actuarial report
Reviewed
annually with
budget
Technology Reserve Committed
Audio/Visual system
and software
replacement
$46K per year for 10 years
(based on $460K total)
AV and software
upgrades/replacement
s
Reviewed
annually with
budget
Vehicle & Equipment
Replacement Committed
Fund future
replacement of Town
vehicles/equipment
Based on replacement cost,
useful life, and years in service
Replacement purchases
per annual schedule
Reviewed
annually with
budget

PROJECTED RESERVE BALANCES
Reserves
Audited Fund
Balance
7/1/2024
Estimated
Fund Balance
6/30/2025
Surplus/
(Deficit) Adjustment
Projected
Fund Balance
6/30/2026
Pension Trust (Restricted) 1,209,137 1,209,137 - 1,209,137 General Fund Stabilization Reserve 2,328,858 2,328,858 784,765 3,113,623 Capital Projects Reserve 2,504,440 3,407,739 - 3,407,739 Disaster Contingency Reserve 1,050,000 1,050,000 200,000 1,250,000 Facilities Replacement Reserve 4,619,613 4,619,613 (1,602,532) 3,017,081 Pension Contribution Reserve 2,099,951 2,099,951 (564,512) 1,535,439 Technology Reserve - - - -
Vehicle & Equipment Replacement 594,000 409,000 100,000 509,000 Unassigned Fund Balance * 2,539,886 1,382,681 431,177 (616,739) 1,197,119 Total $ 16,945,885 $ 16,506,979 $ 431,177 $(1,699,018) $ 15,239,138 *Adjustment includes estimated revenues and expenditures. Page 237 of 245

TOWN-WIDE FUND SUMMARY

INCLUDES ALLOCATIONS AND TRANSFERS
Fund Type
Beginning Fund
Balance
7/1/2025 Revenue Expenditure
Transfers
In/(Out)
Ending Fund
Balance
6/30/2026
General Fund 16,506,979 18,542,021 (18,110,844) (1,699,018) 15,239,138 Internal Service Funds 822,055 1,426,106 (1,426,106) - 822,055 Special Revenue Funds 482,591 115,000 (115,000) - 597,591 Capital Funds 3,883,986 1,155,292 (3,279,310) 1,699,018 3,458,986 Sewer Funds 4,572,863 4,068,264 (5,133,062) - 3,508,065 Total $ 26,268,474 $ 25,306,683 $ (28,064,322) $ - $ 23,625,835

FISCAL OUTLOOK
Public safety and
housing mandates
(e.g., Housing
Element, Builder’s
Remedy) continue
to drive cost
pressures
Town receives
only ~6% of
property tax, and
future growth is
marketdependent and
constrained by
Proposition 13
Planning &
Building revenues
remain variable
and sensitive to
development
activity
Investment
income is cyclical
and exposed to
interest rate risk
Strong reserves
and fee updates
will help mitigate
future fiscal
pressure

CAPITAL IMPROVEMENT

PROGRAM (CIP)
FY 2025-26 THROUGH FY 2029-30

NEW PROJECTS
• Parks and Recreation Center Renovation ($0.2M in FY 2025-26, $1.3M in FY 2026- 27)
• Road Safety and Traffic Calming ($60K annually)
• Local Road Safety Plan ($60K)
• Vehicle and Equipment Replacement ($100K annually)
• Magdalena Avenue Pathway ($315K)
• Maple Leaf – Middle Fork Pathway ($100K in FY 2025-26, $150K in FY 2026-27)

NEXT STEPS
• May 15, 2025 – FY 2025-26 Proposed Budget published online and in print • May 22, 2025 – 4:00 PM: Joint City Council and FIC meeting to review the Proposed Budget
• June 26, 2025 – 6:00 PM: City Council adoption of the budget • February 2026: Mid-year Budget Review

Thank you!
Questions and Comments