Los Gatos City Council
December 20, 2022

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2022

SCHEDULE OF CHANGES IN NET OPEB LIABILITY

Measurement Date 2017 2018 2019 2020 2021
Total OPEB liability
Service cost $ 1,134,000 $ 1,168,227 $ 1,203,274 $ 1,159,152 $ 1,115,309 Interest 1,607,000 1,706,270 1,814,072 1,887,105 1,956,034 Differences between expected & actual exp. - (149,297) - (2,521,500) - Changes of assumptions - (392,681) - (533,825) 1,054,638 Benefit payments (1,269,000) (1,326,313) (1,298,623) (1,399,933) (1,494,906) Net change in Total OPEB Liability 1,472,000 1,548,184 1,176,745 1,112,499 109,575 Total OPEB Liability - beginning 23,301,000 24,773,000 26,321,184 27,497,929 28,610,428 Total OPEB Liability - ending $ 24,773,000 $ 26,321,184 $ 27,497,929 $ 28,610,428 $ 28,720,003 Plan fiduciary net position
Employer contributions $ 3,878,000 $ 2,935,313 $ 2,406,636 $ 2,508,306 $ 2,096,847 Net investment income 1,049,000 1,082,977 1,009,315 652,656 5,529,824 Benefit payments (1,269,000) (1,326,313) (1,298,623) (1,399,933) (1,494,906) Administrative expense (14,000) (34,261) (11,502) (17,357) (18,556) Net change in plan fiduciary net position 3,644,000 2,657,716 2,105,826 1,743,672 6,113,209 Plan fiduciary net position - beginning 9,964,000 13,608,000 16,265,716 18,371,542 20,115,214 Plan fiduciary net position - ending $ 13,608,000 $ 16,265,716 $ 18,371,542 $ 20,115,214 $ 26,228,423 Net OPEB liability (asset) $ 11,165,000 10,055,468 9,126,387 8,495,214 2,491,580 Plan fiduciary net position as a percentage
of the total OPEB liability 54.93% 61.80% 66.81% 70.31% 91.32% Covered Employee Payroll $ 14,985,716 $ 16,192,060 $ 17,338,201 $ 17,406,541 $ 17,982,237 NOL as a % of cov. emp. payroll 74.50% 62.10% 52.64% 48.80% 13.86% Other Notes
GASB 75 requires a schedule of contributions for the last ten fiscal years, or for as many years as are available if less than ten years are available. GASB 75 was adopted as of June 30, 2018.

Supplementary Information

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TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2022

MAJOR GOVERNMENTAL FUND SCHEDULES
(OTHER THAN THE GENERAL FUND) AND

NONMAJOR GOVERNMENTAL FUNDS

Schedule of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP):

Appropriated Reserves Fund is used to account for resources provided for capital projects not fully funded from other sources.

Capital Projects Funds:

Storm Drain Basin Funds were established to account for fees paid in conjunction with the development in specified drainage areas.

Construction Tax Funds were established to account for tax levies on building additions or alterations including capital improvements, underground utilities and parks.

Gas Tax Fund was established to account for revenue and expenditures under the State of California Streets and Highways Code Sections 2106, 2107 and 2107.5. The revenues must be used for the maintenance and construction of streets.

Special Revenue Funds:

Community Development Block Grant Fund was established to account for grant funds received and expended under the Community Development Act of 1974.

Non-Point Source Maintenance Fund was established to comply with obligations under the National Pollutant Discharge Elimination system permit issued by the California Regional Water Quality Control Board.

Lighting and Landscape Fund was established to account for maintenance of trees, landscaping, irrigation systems and lighting within the boundaries of Tract No. 8439.

ARPA Fund was established to account for monies received under the American Rescue Plan Act of 2021 to respond to the COVID19 emergency.

LG Theatre Fund was established to account for monies received from rents on donated property and related expenditures.

Library Trust Fund was established to provide for the servicing of donations and bequests to the Town's Library Program.

Variance
Original Final Positive
Budget Budget Actual (Negative)

REVENUES
Licenses & permits 160,000 160,000 420,055 260,055
Intergovernmental 1,691,069 16,912,649 9,400,918 (7,511,731) Charges for services 755,676 2,693,556 1,464,746 (1,228,810) Developer fees 20,000 20,000 535,571 515,571
Interest - - 34,805 34,805
Use of Property - - 93,001 93,001
Total Revenues 2,626,745 19,786,205 11,949,096 (7,837,109)

EXPENDITURES
Current:

General government 7,000,000 - 6,900,000 100,000
Capital outlay 5,414,872 10,894,632 9,570,780 1,323,852 Total Expenditures 5,414,872 17,894,632 16,470,780 1,423,852

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (2,788,127) 1,891,573 (4,521,684) (6,413,257)

OTHER FINANCING SOURCES (USES)
Transfers in 2,841,047 3,584,047 4,074,141 490,094
Transfers (out) (427,616) (427,616) (427,616) -
Total Other Financing Sources (Uses) 2,413,431 3,156,431 3,646,525 490,094 CHANGE IN FUND BALANCE $ (374,696) $ 5,048,004 (875,159) $ (5,923,163) BEGINNING FUND BALANCE 15,115,912
ENDING FUND BALANCE $ 14,240,753

BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2022

TOWN OF LOS GATOS

APPROPRIATED RESERVES FUND

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2022

PROPRIETARY FUNDS

INTERNAL SERVICE FUNDS

Internal service funds are used to finance and account for special activities and service performed by a designed department for other departments in the Town on a cost reimbursement basis.

The concept of major funds does not extend to internal service funds because they are used for internal activities only. In the Government-Wide Statement of Activities, the net revenues and expenses of the internal service funds are allocated to the Town departments or programs that generated them, thus eliminating internal service funds.

However, internal service funds are still presented separately in the fund financial statements and include the following funds:

Equipment Fund was established to account for the replacement of major Town equipment and all vehicle replacement.

Workers’ Compensation Fund was established to account for future claims that may occur related to workers compensation injuries.

Self-Insurance Fund was established to account for future general liability claims against the Town.

Information Technology Fund was established to account for the replacement of management information computer systems and components.

Facilities Maintenance Fund was established to account for preventative maintenance and repair for all Town buildings.

Equipment Worker's Self Information Facilities
Replacement Comp Insurance Technology Maintenance Total ASSETS
Cash & Investments $ 2,237,647 $ 2,535,115 $ 863,995 $ 3,043,739 $ 332,928 $ 9,013,424 Restricted Cash & Investments - 129,929 - - - 129,929
Receivables:

Accounts 4,553 - - 16,396 24,853 45,802
Leases receivable - - - - 1,494,721 1,494,721
Total Assets $ 2,242,200 $ 2,665,044 $ 863,995 $ 3,060,135 $ 1,852,502 $ 10,683,876

LIABILITIES
Accounts Payable $ 19,805 $ 5,302 $ 41,146 $ 69,204 $ 94,660 $ 230,117 Due to Other Governments - - - - 50 50
Claims Payable - 1,364,558 19,557 - - 1,384,115
Total Liabilities $ 1,369,860 19,805 $ $ 60,703 $ 69,204 $ 94,710 $ 1,614,282 Deferred Inflows of Resources
Leases $ - $ - $ - $ 829,312 - $ $ 829,312

NET POSITION
Restricted for:

Wokers compensation claims -$ 129,929 $ -$ -$ -$ 129,929 $ Unrestricted 2,222,395 1,165,255 803,292 2,990,931 928,480 8,110,353 Total Net Position $ 2,222,395 $ 1,295,184 $ 803,292 $ 2,990,931 $ 928,480 $ 8,240,282

TOWN OF LOS GATOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF NET POSITION
JUNE 30, 2022

Equipment Worker's Self Information Facilities
Replacement Comp Insurance Technology Maintenance Total

OPERATING REVENUES
Charges for services $ 540,957 $ 896,732 $ 366,133 $ 998,158 $ 878,127 $ 3,680,107 Interest - 5 - - - 5
Use of money and property 3,274 - - - 111,817 115,091
Other local taxes - - - - 66,382 66,382
Other revenue & reimbursements 45,211 258,472 - - - 303,683 Total Operating Revenues 589,442 1,155,209 366,133 998,158 1,056,326 4,165,268

OPERATING EXPENSES
Insurance expenses - 1,533,045 583,924 - - 2,116,969
Services and supplies 161,767 - - 878,049 1,222,779 2,262,595 Total Operating Expenses 161,767 1,533,045 583,924 878,049 1,222,779 4,379,564 Operating Income (loss) 427,675 (377,836) (217,791) 120,109 (166,453) (214,296) Transfers (in) - - - - 251,194 251,194
Transfers (out) (94,816) - - - - (94,816)
Net Transfers (94,816) - - - 251,194 156,378
Change in Net Position 332,859 (377,836) (217,791) 120,109 84,741 (57,918) BEGINNING NET POSITION 1,889,536 1,673,020 1,021,083 2,870,822 156,340 7,610,801

PRIOR PERIOD ADJUSTMENT,
GASB 87 - LEASES - - - - 687,399 687,399

BEGINNING NET POSITION,
ADJUSTED 1,889,536 1,673,020 1,021,083 2,870,822 843,739 8,298,200 ENDING NET POSITION $ 2,222,395 $ 1,295,184 $ 803,292 $ 2,990,931 $ 928,480 $ 8,240,282

TOWN OF LOS GATOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2022

Equipment Worker's Self Information Facilities
Replacement Comp Insurance Technology Maintenance Total

CASH FLOWS FROM OPERATING

ACTIVITIES
Receipts from customers $ 586,745 $ 896,737 $ 366,133 $ 986,495 $ 390,917 $ 3,227,027 Payments to suppliers and providers (141,962) (1,550,272) (664,201) (848,854) (1,236,545) (4,441,834) Insurance reimbursements - 258,472 - - - 258,472
Claims paid - (130,924) (61,150) - - (192,074)
Net Cash Provided (Used) by
Operating Activities 444,783 (525,987) (359,218) 137,641 (845,628) (1,148,409)

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Transfers In - - - - 251,194 251,194
Transfers Out (94,816) - - - - (94,816)
Net Cash Provided (Used) by
Noncapital Financing Activities (94,816) - - - 251,194 156,378 Net Increase(Decrease) in Cash and Investments 349,967 (525,987) (359,218) 137,641 (594,434) (992,031) Cash and investments - beginning of year 1,887,680 3,191,031 1,223,213 2,906,098 239,963 9,447,985 Cash and investments - end of year $ 2,237,647 $ 2,665,044 $ 863,995 $ 3,043,739 $ (354,471) $ 8,455,954 Reconciliation of Operating Income to Cash
Flows from Operating Activities:

Operating Income $ 427,675 $ (377,836) $ (217,791) $ 120,109 $ (166,453) $ (214,296) Change in assets and liabilities:

Accounts receivable (2,697) - - (12,141) - (14,838)
Leases receivable - - - - (1,494,721) (1,494,721)
Due from other funds - - - 478 - 478
Deferred inflows of resources - - - - 829,312 829,312
Accounts payable 19,805 (17,227) 39,606 29,195 (13,733) 57,646 Due to other governments - - - - (33) (33)
Claims payable - (130,924) (181,033) - - (311,957)
Cash Flows From Operating Activities $ 444,783 $ (525,987) $ (359,218) $ 137,641 $ (845,628) $ (1,148,409)

TOWN OF LOS GATOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2022

Statistical Section

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STATISTICAL (UNAUDITED)
This part of the Town of Los Gatos Annual Comprehensive Financial Report (“ACFR”) presents the detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Town’s overall financial health.

Financial Trends
These schedules contain trend information to help the reader understand how Town’s financial performance and well-being have changed over time. (Schedule 1, Schedule 2, Schedule 3, and Schedule 4).

Revenue Capacity
These schedules contain information to help the reader assess one of the Town’s most significant local revenue source, the property tax (Schedule 5, Schedule 6, Schedule 7, and Schedule 8).

Debt Capacity
These schedules present information to help the reader assess the affordability of the Town’s current levels of outstanding debt and its ability to issue additional debt in the future (Schedule 9, Schedule 10, and Schedule 11)
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the environment within which the Town’s financial activities take place (Schedule 12, Schedule 13, and schedule 14).

Operating Information
These schedules contain service and infrastructure data to help the reader understand how the information in the Town’s ACFR relates to the services the Town provides and activities it performs (Schedule 15 and Schedule 16).

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Town of Los Gatos Schedule 1
Net Position by Component
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Fiscal Net Investment Total
Year in Capital Assets Restricted Unrestricted Net Position 2013 92,558,523 3,949,583 41,480,377 137,988,483
2014 93,251,117 4,485,246 44,393,265 142,129,628
2015 93,687,029 5,663,182 7,180,919 106,531,130 (1)
2016 93,383,855 6,386,014 12,744,637 112,514,506
2017 96,265,652 5,627,707 15,134,420 117,027,779
2018 102,098,729 8,199,598 170,590 110,468,917 (2)
2019 107,542,588 11,918,688 -4,642,167 114,819,109 (3)
2020 111,700,225 7,117,984 -3,967,178 114,851,031
2021 109,894,936 8,358,267 -4,735,103 113,518,100
2022 126,418,275 10,203,412 1,785,294 138,406,981
(1) The decrease in Restricted Net Position GASB 68 Implementation of Unfunded Pension Liability of Statement of Net Position.
(3) The decrease in unrestricted net position resulted largely from the use of approximately $8.0 million in unrestricted cash balances in the Town’s GFAR fund during the year to invest in the Town’s infrastructure and (2) Net position was restated for FY 2018 for amounts placed into fiduciary funds, reclassified to General Fund Restricted Asset.
-15,00 0,000
-10,00 0,000
-5,000 ,000
0 5,00 0,000
10,0 00,000
15,0 00,000
20,0 00,000
25,0 00,000
30,0 00,000
35,0 00,000
40,0 00,000
45,0 00,000
50,0 00,000
55,0 00,000
60,0 00,000
65,0 00,000
70,0 00,000
75,0 00,000
80,0 00,000
85,0 00,000
90,0 00,000
95,0 00,000
100 ,000,00 0
105 ,000,00 0
110 ,000,00 0
115 ,000,00 0
120 ,000,00 0
125 ,000,00 0
130 ,000,00 0
135 ,000,00 0
Net Investment in Capital Assets Restricted Unrestricted

Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2012/13 2013/14 2014/15 2015/16 2016/17
General Fund
Nonspendable $ - $ - $ - $ - $ -
Restricted - - - - -
Committed 20,019,187 15,129,925
Assigned 20,758,156 23,791,749 24,121,256 9,555,085 14,050,699 Unassigned 7,502,446 1,363,376 - - -
Total General Fund $ 28,260,602 $ 25,155,125 $ 24,121,256 $ 29,574,272 $ 29,180,624 All Other Governmental Funds
Nonspendable $ - $ - $ - $ - $ -
Restricted 3,949,583 4,485,246 5,663,182 6,386,014 5,627,707 Committed - - - 3,696,000 10,354,584
Assigned 6,097,182 8,191,823 15,346,558 11,099,076 7,928,994 Unassigned 157,208 183,045 206,875 - -
Total All Other Governmental Funds $ 10,203,973 $ 12,860,114 $ 21,216,615 $ 21,181,090 $ 23,911,285 Total Fund Balances $ 38,464,575 $ 38,015,239 $ 45,337,871 $ 50,755,362 $ 53,091,909 Continued
Fiscal Year

Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2017/18 2018/19 2019/20 2020/21 2021/22
General Fund
Nonspendable $ - $ - $ - $ 159,000 $ 159,000
Restricted 1,206,851 5,015,316 669,978 - 690,000
Committed 12,953,399 15,070,944 15,387,706 11,220,970 12,283,132 Assigned 17,475,285 18,256,895 13,277,813 12,534,648 13,764,657 Unassigned - - - - -
Total General Fund $ 31,635,535 $ 38,343,155 $ 29,335,497 $ 23,914,618 $ 26,896,789 All Other Governmental Funds
Nonspendable $ - $ - $ - $ - $ -
Restricted 6,992,747 6,903,372 6,448,006 8,562,653 9,383,483 Committed 5,571,087 2,579,997 - - 637,711
Assigned 6,361,403 6,180,930 14,181,679 15,360,481 13,944,155 Unassigned - - - - -
Total All Other Governmental Funds $ 18,925,237 $ 15,664,299 $ 20,629,685 $ 23,923,134 $ 23,965,349 Total Fund Balances $ 50,560,772 $ 54,007,454 $ 49,965,182 $ 47,837,752 $ 50,862,138 Concluded
Fiscal Year

Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2012/13 2013/14 2014/15 2015/16 2016/17
Revenues:

Taxes $ 24,596,799 $ 23,475,393 $ 23,208,820 $ 23,269,892 $ 25,945,129 Licenses & Permits 4,015,871 5,343,265 6,467,771 5,442,133 5,075,503 Intergovernmental 2,615,191 2,440,127 2,921,002 2,573,475 1,715,580 Charges for Services 6,529,234 5,837,581 5,794,386 4,773,001 4,210,174 Fines and Forfeitures 688,125 795,720 868,564 879,277 917,105 Franchise Fees - - 2,215,430 2,258,892 2,366,908
Developer Fees - - - - -
Investment Income (133,380) 772,164 428,735 698,308 192,978 Use of Property 38,910 37,741 32,209 31,723 32,096
Other 4,577,584 3,648,277 3,130,975 2,396,992 1,011,939 Total Revenues 42,928,334 42,350,268 45,067,892 42,323,693 41,467,412 Expenditures:

Current
General Government 8,331,444 8,499,854 8,647,451 9,144,797 8,390,959 Public Safety 13,370,032 13,742,189 13,747,198 13,763,316 13,251,288 Parks and Public Works 5,616,197 5,611,283 5,840,097 6,307,266 6,633,748 Community Development 4,235,832 4,335,599 4,218,500 3,695,504 3,793,930 Library Services 2,055,069 2,131,438 2,268,844 2,332,268 2,508,677 Sanitation & Other 359,725 322,817 411,863 452,726 466,762 Capital Outlay 6,568,653 4,097,662 3,800,478 3,241,657 6,867,034 Debt Service
Principal Repayment - - - - -
Total Expenditures 40,536,952 38,740,842 38,934,431 38,937,534 41,912,398 Excess (Deficiency) of Revenues
Over (Under) Expenditures 2,391,382 3,609,426 6,133,461 3,386,159 (444,986) Other Financing Sources(Uses):

Transfers In 2,841,881 3,418,872 8,977,220 3,315,846 7,907,692 Transfers Out (2,463,850) (2,921,409) (7,788,049) (1,284,514) (7,612,012) Gain from Sale of Property - - - - -
Issuance of Debt - - - - 4,435
Total Other Financing Sources(Uses) 378,031 497,463 1,189,171 2,031,332 300,115 Special Item:

Extraordinary Gain (Loss) RDA Dissolution 295,913 - - - - Prepayment of Pension Obligations - (4,534,538) - - -
Net Change in Fund Balances $ 2,769,413 $ 4,106,889 $ 7,322,632 $ 5,417,491 $ (144,871) Debt Service as a Percentage
of Non Capital Expenditures 0.00% 0.00% 0.00% 0.00% 0.00% Continued
Fiscal Year

Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2017/18 2018/19 2019/20 2020/21 2021/22
Revenues:

Taxes $ 26,253,026 $ 28,244,329 $ 27,811,665 $ 28,977,919 $ 31,627,593 Licenses & Permits 5,937,044 5,173,876 4,818,671 5,212,831 6,055,040 Intergovernmental 2,124,903 2,310,655 4,498,153 3,746,587 15,492,982 Charges for Services 5,395,057 5,584,504 5,309,470 6,035,659 6,925,359 Fines and Forfeitures 676,212 510,266 271,117 103,468 319,170 Franchise Fees 2,474,814 2,475,916 2,495,792 2,499,463 2,822,515 Developer Fees - - - - 1,735,571
Investment Income 332,938 1,809,164 2,428,453 227,940 (1,278,983) Use of Property 32,206 32,960 31,039 40,372 144,901
Other 640,844 579,755 376,922 423,115 349,145
Total Revenues 43,867,044 46,721,425 48,041,282 47,267,354 64,193,293 Expenditures:

Current
General Government 8,770,082 8,004,254 13,024,146 14,040,134 15,953,968 Public Safety 14,423,554 14,945,407 15,793,815 16,570,836 16,451,190 Parks and Public Works 7,125,686 7,962,135 8,168,599 8,229,944 8,639,128 Community Development 4,192,165 4,577,495 4,473,790 5,195,302 6,313,511 Library Services 2,529,017 2,493,617 2,700,802 2,847,988 2,827,210 Sanitation & Other 521,147 628,240 162,837 166,173 194,969 Capital Outlay 9,778,058 7,888,914 7,861,972 5,707,439 10,478,670 Debt Service
Principal Repayment - - - 39,008 156,034
Total Expenditures 47,339,709 46,500,062 52,185,961 52,796,824 61,014,680 Excess (Deficiency) of Revenues
Over (Under) Expenditures (3,472,665) 221,363 (4,144,679) (5,529,470) 3,178,613 Other Financing Sources(Uses):

Transfers In 3,176,760 4,264,131 8,935,260 4,053,535 8,154,307 Transfers Out (3,880,131) (3,323,756) (8,628,719) (3,940,015) (8,310,685) Gain from Sale of Property 378,219 1,912,316 1,566 1,201,369 2,151 Issuance of Debt - - - 1,560,336 -
Total Other Financing Sources(Uses) (325,152) 2,852,691 308,107 2,875,225 (154,227) Special Item:

Extraordinary Gain (Loss) RDA Dissolution - - - - -
Prepayment of Pension Obligations - - - - -
Net Change in Fund Balances $ (3,797,817) $ 3,074,054 $ (3,836,572) $ (2,654,245) $ 3,024,386 Debt Service as a Percentage
of Non Capital Expenditures 0.00% 0.00% 0.00% 0.08% 0.31% Concluded
Fiscal Year

Town of Los Gatos Schedule 5
Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years
Utility
and Total
Fiscal Unsecured Percent Secured Percent Total Estimated Direct Year Property Change Property Change Assessed Full Market Tax Rate 2013 211,268,609 -2.77% 8,465,420,032 3.84% 8,676,688,641 33,861,680,128 1.0508 2014 224,079,502 6.06% 9,238,816,900 9.14% 9,462,896,402 36,955,267,600 1.0493 2015 227,331,042 1.45% 9,767,782,505 5.73% 9,995,113,547 39,071,130,020 1.0544 2016 217,035,545 -4.53% 10,417,804,357 6.65% 10,634,839,902 41,671,217,428 1.0533 2017 304,443,013 40.27% 11,240,554,198 7.90% 11,544,997,211 44,962,216,792 1.0560 2018 330,504,877 8.56% 11,969,049,272 6.48% 12,299,554,149 47,876,197,088 1.0659 2019 359,276,665 8.71% 12,795,393,103 6.90% 13,154,669,768 51,181,572,412 1.0607 2020 331,517,212 -7.73% 13,510,676,336 5.59% 13,842,193,548 54,042,705,344 1.0598 2021 308,749,655 -6.87% 14,599,669,332 8.06% 14,908,418,987 58,398,677,328 1.0494 2022 304,460,199 -1.39% 15,255,884,284 4.49% 15,560,344,483 61,023,537,136 1.0627 Source: Santa Clara County Assessed Value Report
0 2000
4000
6000
8000
10000
12000
14000
16000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Millions
Unsecured Property Secured Property

Town of Los Gatos Schedule 6
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
Santa Clara School
Fiscal Basic County County Bonds Valley Water District Bonds Year Wide Levy and Levies District and Loans Total
2013 1.0000 0.0439 0.0069 0.1523 1.2031
2014 1.0000 0.0423 0.0070 0.1417 1.1910
2015 1.0000 0.0479 0.0065 0.1442 1.1986
2016 1.0000 0.0476 0.0057 0.1381 1.1914
2017 1.0000 0.0474 0.0086 0.1223 1.1783
2018 1.0000 0.0597 0.0062 0.1177 1.1836
2019 1.0000 0.0565 0.0042 0.1006 1.1613
2020 1.0000 0.0557 0.0041 0.0935 1.1533
2021 1.0000 0.0457 0.0037 0.0959 1.1453
2022 1.0000 0.0576 0.0051 0.0902 1.1529
Source: Santa Clara County Book of Tax Rates

0.00 0.25

0.50 0.75

1.00 1.25
Per Hundred $
Santa Clara Valey Water District County
County Bonds and Levies
School District Bonds and Loans
Basic County Wide Levy

Town of Los Gatos Schedule 8
Property Tax Levies and Collections
Last Ten Fiscal Years
Value of
Redevelopment
Agency Value of
Town Redevelopment Total Property Value of Town Property Property Property Tax Property Tax Tax Levied Property subject Subject to Subject to Fiscal Levied and Levied and and to Local Tax Local Local Year Collected Collected Collected Rate Tax Rate Tax Rate 2013 8,253,442 - 8,253,442 8,676,688,641 1,167,752,021 9,844,440,662 2014 9,120,626 - 9,120,626 9,462,896,402 1,249,873,303 10,712,769,705 2015 9,787,519 - 9,787,519 9,995,113,547 1,318,214,863 11,313,328,410 2016 10,388,424 - 10,388,424 10,634,839,902 1,395,509,489 12,030,349,391 2017 11,345,588 - 11,345,588 11,544,997,211 1,537,577,241 13,082,574,452 2018 12,060,228 - 12,060,228 12,299,554,149 1,650,746,473 13,950,300,622 2019 12,924,592 - 12,924,592 13,154,669,768 1,717,358,555 14,872,028,323 2020 13,559,587 - 13,559,587 13,842,193,548 1,715,982,555 15,651,922,606 2021 13,864,271 - 13,864,271 14,908,418,987 1,809,729,058 16,718,148,045 2022 14,566,808 - 14,566,808 15,560,344,483 1,891,297,788 17,451,642,271 Sources: Santa Clara County Auditor-Controller Office and the Town of Los Gatos $7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
$18.0
Billions
Value of Property
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
$18.0
Millions
Tax Levied

Town of Los Gatos Schedule 9
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
Total Total Percentage of
Fiscal PG&E Governmental Primary Personal Per
Year Loan Activities Government Income Capita
2013 - - - 0.0% 0.00
2014 - - - 0.0% 0.00
2015 - - - 0.0% 0.00
2016 - - - 0.0% 0.00
2017 - - - 0.0% 0.00
2018 - - - 0.0% 0.00
2019 - - - 0.0% 0.00
2020 - - - 0.0% 0.00
2021 1,508,325 $ $ 1,508,325 $ 1,508,325 56.2% 48.91
2022 1,352,291 $ $ 1,352,291 $ 1,352,291 44.3% 40.90
Governmental Activities
Debt was transferred to the Successor Agency Trust Fund as a part of the RDA dissolution in FY 2011

Town of Los Gatos Schedule 10
Direct and Overlapping Governmental Activities Debt
As of June 30, 2022
2021/22 Assessed Valuation: $15,560,344,483 Estimated Share of Direct and
Total Debt at Overlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT: % Applicable (1) June 30, 2022 at June 30, 2022 Overlapping Tax & Assesment Debt
Santa Clara County 2.700% $ 1,130,850,000 $ 30,532,950
West Valley-Mission Community College District 9.435% $ 732,500,000 $ 69,111,375 Campbell Union High School District 7.738% $ 371,390,000 $ 28,738,158 Los Gatos-Saratoga Joint Union High School District 36.310% $ 84,030,000 $ 30,511,293 Cambrian School District 0.441% $ 60,969,944 $ 268,877
Campbell Union High School District 7.587% $ 223,499,324 $ 16,956,894 Los Gatos Union School District 74.114% $ 67,035,000 $ 49,682,320 Saratoga Union School District 0.033% $ 17,243,915 $ 5,690 Union School District 20.254% $ 105,359,439 $ 21,339,501 Midpeninsula Regional Open Space District 4.402% $ 84,575,000 $ 3,722,992 Santa Clara Valley Water District Benefit Assessment District 2.700% $ 48,150,000 $ 1,300,050 Total Overlapping Tax and Assesmet Debt $ 252,170,100
Overlapping General Fund Debt
Santa Clara County General Fund Obligations 2.700% $ 1,210,694,365 $ 32,688,748 Santa Clara County Pension Obligations 2.700% $ 335,638,470 $ 9,062,239 Santa Clara County Board of Education Certificates of Participation 2.700% $ 1,820,000 $ 49,140 West Valley-Mission Community College District General Fund Obligations 9.435% $ 12,000,000 $ 1,132,200 Campbell Union High School District General Fund Obligations 7.738% $ 15,500,000 $ 1,199,390 Los Gatos-Saratoga Joint Union High School District Certificates of Participation 36.310% $ 755,000 $ 274,141 Campbell Union School District General Fund Obligations 7.587% $ 1,890,000 $ 143,394 Saratoga Union School District Certificates of Participation 0.033% $ 2,335,000 $ 771 Santa Clara County Vector Control District Certificates of Participation 2.700% $ 1,505,000 $ 40,635 Midpeninsula Regional Open Space Park District General Fund Obligations 4.402% $ 99,705,600 $ 4,389,041 Total Gross Overlapping General Fund Debt $ 48,979,699
Less: Santa Clara County Supported Obligations $ 488,127 Total Overlapping General Fund Debt $ 48,491,572
Overlapping Tax Increment Debt ( Successor Agency)
Town of Los Gatos Certificated of Participations $ 12,785,000 Total of Overlapping Tax Increment Debt $ 12,785,000
Total Direct Debt $0
Total Gross Overlapping Dept $ 313,934,799
Total Net Overlapping Debt $ 313,446,672
Gross Combined Total Debt $ 313,934,799 (2)
Net Combined Total Debt $ 313,446,672
Ratios to 2021/22 Assessed Valuation:

Total Overlapping Tax and Assessment Debt: 1.62%
Total Direct Debt: 0.00%
Gross Combined Total Debt: 2.02%
Net Combined Total Debt: 2.01%
Ratios to Redevelpment Incremental Valuation ( $1,639,262,076):

Total Overlapping Tax Increment Debt: 0.78%
Source Data: California Municipal Statistics, Inc.
(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the distric's total taxable asessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non-bonded capital lease obligations.

Town of Los Gatos Schedule 12
Demographic and Economic Statistics
Last Ten Fiscal Years
Personal
Income Per Capita Public County
Fiscal (thousands Personal Median School Unemployment
Year Population of dollars) Income Age Enrollment Rate
Ended (1) (2) (3) (4) (5) (6)
2012 29,808 1,854,892$ 62,228 42.64 6,352 8.7%
2013 30,247 2,140,641$ 70,772 45.8 6,420 6.8%
2014 30,443 2,267,912$ 74,497 45.80 6,522 5.7%
2015 30,505 2,197,885$ 72,050 46.10 6,622 3.8%
2016 31,376 2,286,087$ 72,861 46.30 6,646 3.5%
2017 31,314 2,281,569$ 72,861 46.50 6,631 3.8%
2018 30,601 2,290,638$ 74,855 46.81 6,588 2.6%
2019 30,998 2,365,178$ 76,301 46.72 6,544 2.6%
2020 31,439 2,546,748$ 81,006 46.83 6,520 10.7%
2021 30,836 2,686,155$ 87,111 46.83 6,180 5.2%
2022 33,062 3,055,987$ 92,432 46.67 6,000 2.2%
Source:
(1) California State Dept. of Finance - Population Research Unit (January 2019) (2) California State Dept. of Finance - Estimate equals county per capita average times population (3) US Census Bureau - QuickFacts
(4) Claritas demographic snapshot report
(5) Los Gatos Saratoga Joint Union and Los Gatos Union Elementary School Districts (6) State of California, Employment Development Dept., Labor Market Info. Div.

Town of Los Gatos Schedule 14
Full-time-Equivalent Employees by Function/Program
Last Ten Fiscal Years
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 Function/Program
General Government 20.40 20.73 20.97 20.97 21.35 21.97 22.16 21.80 21.80 22.06 Police 58.00 57.50 60.00 59.00 59.00 59.00 59.00 60.00 60.00 60.00 Economic Development - 0.50 0.63 0.63 0.63 0.75 0.75 0.75 0.75 0.75 Library 8.60 10.30 10.80 11.00 12.25 12.25 12.50 12.50 12.50 12.50 Planning 17.50 17.50 19.50 19.00 19.26 19.63 20.08 20.08 20.20 20.20 Public Works 31.00 31.50 32.00 33.50 33.50 34.50 34.50 34.50 34.75 34.75 Total 135.50 138.03 143.90 144.10 145.98 148.10 148.99 149.63 150.00 150.26 Full-time equivalent employment is calculated as one or more employee positions totaling one full year of service or approximately 2,080 hours a year.

Page C-45 of Town Budget FY 2021/22
Full-time-Equivalent Employees as of June 30

Town of Los Gatos Schedule 16
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 Function/Program
Police
Number of Stations 2 2 2 2 2 2 2 2 2 2
Number of Patrol Units 14 14 14 14 14 14 14 14 14 14
Parking Enforcement Vehicles 2 2 2 2 2 2 2 2 2 2
Other Public Works
Streets (miles) 132 132 132 132 132 132 132 132 132 132 Streetlights 2,116 2,109 1,609 1,609 1,609 1,762 1,830 1,830 1,830 1,830 Traffic Signals 29 29 29 30 30 30 31 31 31 31
Parks and Recreation
Number of Parks 12 12 12 12 12 12 N/A N/A N/A N/A
Number of Community Centers 1 1 1 1 1 1 1 1 1 1
Number of Parks & Open Spaces N/A N/A N/A N/A N/A N/A 17 17 17 17 Parking
Number of Parking Garages 1 1 1 1 1 1 1 1 1 1
Number of Parking Lots 22 22 22 22 22 22 22 22 22 22
Number of Off Street Parking Garage Spaces 1,126 1,126 1,126 1,126 1,126 1,126 N/A N/A N/A N/A Number of Downtown Off-Street Parking Spaces N/A N/A N/A N/A N/A N/A 1,269 1,269 1,269 1,269 Source: Town of Los Gatos, Finance Department
Fiscal Year

Other Independent Auditor’s Reports

Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the
Town Council of the Town of Los Gatos
Los Gatos, California
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Town of Los Gatos (the “Town”) as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements, and have issued our report thereon dated December 6, 2022.

Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not

Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Morgan Hill, California
December 6, 2022

1 of 5
Resolution 2022-x Council Meeting Date
ATTACHMENT 2
DRAFT RESOLUTION 2022-

RESOLUTION OF THE TOWN COUNCIL
OF THE TOWN OF LOS GATOS APPROVING COMMITMENTS OF FUND BALANCE UNDER GASB 54

WHEREAS, the Governmental Accounting Standards Board (GASB) has issued its Statement No. 54, Fund Balance and Governmental Fund Type Definitions with the intent of improving financial reporting by providing fund balance categories that will be more easily understood and to improve the comparability of governmental fund financial statements; and WHEREAS, GASB 54 provides that the Town Council of the Town of Los Gatos classify governmental fund balances as restricted, assigned, or committed fund balances; and WHEREAS GASB 54 provides that restricted reserves are funds that are restricted for externally imposed constraints such as legal contracts or state law, assigned amounts are constrained by the Town’s intent to use them for specific purposes, and committed amounts are dedicated for specific purposes under constraints and formal action taken by the Town Council and these committed amounts cannot be used for any other purposes unless the Town Council of the Town of Los Gatos removes or changes the specific use through the same formal action to establish the commitment; and
WHEREAS, there exists a Nonspendable Reserve that is not readily available for expenditure as it represents the outstanding balance of long term notes receivable; and WHEREAS, there exists a balance of $159,000 as of June 30, 2022 in the Nonspendable Reserve; and
WHEREAS, there exists a balance of $690,000 as of June 30, 2022 in the Restricted Pension Trust Reserve; and
WHEREAS, the Town Council of the Town of Los Gatos has established a General Fund Reserve Policy providing for minimum fund balance dollar target amounts for Budget Stabilization and Catastrophic fund balances and outlines policies and procedures for use and restoration of these balances; and
WHEREAS, the Budget Stabilization and Catastrophic Reserve should be maintained at the required minimum 12.5% of Fiscal Year (FY) 2022/23 general fund budgeted operating expenditures of $5,991,566 as specified in the Town Council General Fund Reserve Policy. This

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Resolution 2022-x Council Meeting Date
ATTACHMENT 2
would increase both Budget Stabilization and Catastrophic Reserves from $5,460,566 by $531,081 from available Capital/Special Projects Reserve; and
WHEREAS, in June 2016, the Town Council established the committed Pension/ Other Post-Employment Benefits (OPEB) Reserve to provide additional funding toward pension and OPEB unfunded obligations by placing discretionary amounts to the reserve with formal Council action and transferring available year-end surpluses based on the General Fund Reserve Policy; and WHEREAS, per Town Council General Fund Reserve Policy, $300,000 will be placed to the CalPERS/OPEB Reserve from available year-end savings; and WHEREAS, there exists a balance of $300,000 as of June 30, 2022 in the committed CalPERS/OPEB Reserve; and
WHEREAS, the Town Council established the assigned Open Space reserve in the FY 1998/99 to be used for the preservation of open space, connection of open space trails, the definition of the southern boundary of the Town with passive open space, and protection of unique natural features; and
WHEREAS, there exists an excess balance of $410,000 as of June 30, 2022 in the assigned Open Space Reserve; and
WHEREAS, the Town Council established the assigned Sustainability Reserve in FY 2008/09 by closing the Solid Waste Management fund and placing the initial residual balance dedicated for conservation, recycling, and sustainability; and WHEREAS, there exists an excess balance of $140,553 as of June 30, 2022 in the assigned Sustainability Reserve; and
WHEREAS, there exists an assigned General Fund Compensated Absences Reserve allocated to fund 50% of all vested hours of sick leave, compensation, and vacation time with the actual reserve amount of $1,519,147; and
WHEREAS, there exists an assigned Market Fluctuation Reserve that represent fund balance amounts for unrealized investment gains that have been recorded as investment income in the financial statements in accordance with the requirements of GASB 31; and WHEREAS, there is a current balance of $0 as of June 30, 2022 in the assigned Market Fluctuation Reserve reflecting negative investment earnings as of June 30, 2022; and

3 of 5
Resolution 2022-x Council Meeting Date
ATTACHMENT 2
WHEREAS, there exists an assigned Measure G 2018 District Sales Tax Reserve to track receipt and use of the 1/8 cent district tax funds collected by the Town; and WHEREAS, the Town Council has determined the use of Measure G accumulated and future proceeds to be allocated 50% for operating expenditures and 50% for capital purposes; and WHEREAS, 50% of the current Measure G proceeds dedicated for Capital Purposes was receipted in the General Fund Appropriated Reserve for capital purposes; and WHEREAS, there is anticipated to be an excess balance of $590,581 as of June 30, 2022 in the assigned Measure G District Sales Tax Reserve -Operating Reserve that the Council previously dedicated to balance the FY 2022/23 Budget; and
WHEREAS, there exists an assigned Carryover Encumbrances Reserve for material and services on purchase orders and contract which are unperformed in the amount of $33,145; and WHEREAS, there exists an assigned Capital/Special Projects Reserve to fund Council priorities, and key infrastructure and capital/special projects as identified in the Town’s five-year Capital Improvement Plan; and
WHEREAS, the remainder of the available year-end savings will be placed to the Capital/Special Project Reserve according to the Town Council Reserve Policy; and WHEREAS, there exists an assigned Capital/Special Project Reserve in the amount of $11,071,231; and

NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES HEREBY RESOLVE that the following fund balances as of June 30, 2022 as restricted, assigned, or formally committed as follows:

4 of 5
Resolution 2022-x Council Meeting Date
ATTACHMENT 2
PASSED AND ADOPTED at a regular meeting of the Town Council held on the 20th day of December 2022 by the following vote:

COUNCIL MEMBERS:

AYES:

NAYS:

ABSENT:

ABSTAIN:

SIGNED:

MAYOR OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA

ATTEST:

Other
Nonmajor Total
Appropriated Governmental Governmental
General Fund Reserves Funds Funds
Fund Balance
Nonspendable $ 159,000 $ - $ - $ 159,000
Restricted for:

Library - - 555,253 555,253
Capital Projects - - 8,357,393 8,357,393
Repairs and Maintenance - - 174,239 174,239
Pension 690,000 690,000
VTA - 296,598 - 296,598
Committed to:

Budget Stabilization 5,991,566 - - 5,991,566
Catastrophic 5,991,566 - - 5,991,566
CalPERS/OPEB 300,000 - - 300,000
Special Revenue Fund 637,711 637,711
Assigned to:

Open Space 410,000 152,000 - 562,000
Parking - 100,000 - 100,000
Sustainability 140,553 - - 140,553
Capital/Special Projects 11,071,231 13,642,155 - 24,713,386 Comcast PEG - 50,000 - 50,000
Carryover Encumbrances 33,145 - - 33,145
Compensated Absences 1,519,147 - - 1,519,147
Measure G 2018 District Sales Tax 590,581 - - 590,581
Total Fund Balances $ 26,896,789 $ 14,240,753 $ 9,724,596 $ 50,862,138

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Resolution 2022-x Council Meeting Date
ATTACHMENT 2

CLERK ADMINISTRATOR OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA

Town of Los
Gatos
JUNE 30, 2022 AUDIT

RESULTS

Standards and
Responsibilities
A. GAAS
B. GAGAS
C. Objective
a) Express an Opinion on F.S.

D. Responsibilities
a) Reasonable Assurance
b) Risk Based
c) Materiality
d) Internal Controls

Annual Comprehensive Financial Report (ACFR)
Section 1 Introductory • Letter of Transmittal
• Elected Officials
•Organizational Chart
Section 2 Financial • Auditor’s Opinion
• MD&A
• Financial Statements and Notes
• Required Supplementary Information
• Supplementary Information
Section 3 Statistica • Fiscal
• Historical
• Demographic Information

Statement of Net Position
$(50,000,000)
$-
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
Statement of Net Position
2022 2021

Government Wide Revenues
$(5,000,000)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
Charges for
Services
Operating
Grants and
Contributions
Capital Grants
and
Contributions
Property
Taxes
Sales Taxes Franchise
Taxes
Other Taxes Motor Vehicle
in Lieu
Investment
Earnings
Miscellaneous
Government Wide Revenue
2022 2021

Pensions
Misc Safety Total
Deferred outflows of resources $ 3,663,900 $ 6,934,592 $ 10,598,492 Deferred inflows of resources $ 10,235,294 $ 11,897,661 $ 22,132,955 Net pension liabilities $ 10,723,589 $ 16,762,598 $ 27,486,187 Pension expense (credit) $ (2,782,619) $ (385,739) $ (3,168,358) Defined Benefit Plans

Leases Receivable GASB 87
Lease Deferred Inflows Prior Period
Description Receivable of Resources Adjustment
Initial Net Present Value $ 2,692,765 $ 2,692,765 $ -
Accumulated Amortization - (1,333,252) 1,333,252
Other adjustments - 1,717 (1,717)
Principal Payments (644,136) - (644,136)
Beginning Balances 7/1/2021 2,048,629 1,361,230 687,399 Current Amortization - (204,818) -
Valuation Expense (133,807) - -
Current Principal Payments (88,405) - -
Ending Balances 6/30/2022 $ 1,826,417 $ 1,156,412 $ 687,399 Governmental Funds $ 331,696 $ 327,100 $ -
Internal Service Funds 1,494,721 829,312 687,399
Total $ 1,826,417 $ 1,156,412 $ 687,399

Audit Results
No Exceptions in Audit Opinions
No Material Weaknesses
No Disagreements with Management
No Significant Passed on Adjustments

PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 7

ADDENDUM
DATE: December 19, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Annual Comprehensive Financial Report (ACFR):
a. Receive the Annual Comprehensive Financial Report (ACFR) for the Fiscal Year Ended June 30, 2022, and
b. Adopt a Resolution Confirming June 30, 2022 Fund Balances in Accordance Fiscal Year 2021/22 Final Audit and Town Council General Fund Reserve Policy
REMARKS:

Attachment 4 contains public comment received after the staff posted the staff report and before 11:00 a.m. on Monday December 19, 2022.

One of the questions raised by the public and Council regarded the timing and the amount of the second American Rescue Plan Act (ARPA) payment. The second tranche of ARPA funds was received on July 21, 2022 in the amount $3,614,872.

Attachments previously received with the staff report:

1. Draft Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2022.

2. Fund Balance Resolution Establishing June 30, 2022 Fund Balances

3. Independent Auditor Presentation to the Council Finance Commission Attachment received with this Addendum:

4. Public Comment

1 Subject: FW: ARPA second tranche
‐‐‐‐‐Original Message‐‐‐‐‐
From: Phil Koen
Sent: Friday, December 16, 2022 5:43 PM
To: Arn Andrews <[email protected]>
Cc: Ron Dickel
Subject: ARPA second tranche

EXTERNAL SENDER
Hi Arn,
When did the Town receive the second $3.6m ARPA tranche ? Thanks,
Phil
ATTACHMENT 4

PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 7

DESK ITEM
DATE: December 20, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Annual Comprehensive Financial Report (ACFR):
a. Receive the Annual Comprehensive Financial Report (ACFR) for the Fiscal Year Ended June 30, 2022, and
b. Adopt a Resolution Confirming June 30, 2022 Fund Balances in Accordance Fiscal Year 2021/22 Final Audit and Town Council General Fund Reserve Policy
REMARKS:

Attachment 5 contains public comment received after 11:00 a.m. on Monday December 19, 2022.

In addition, a Councilmember inquired if the Finance Commission meeting held on December 12, 2022 provided Commissioners and the public amble opportunities to discuss the Annual Comprehensive Financial Report (ACFR). Following is the chronology of the Commission meeting:
3 mins 10 secs – Liaison Andrews introduces the item and states “similar to last year what we’ll do is we’ll listen to the proceedings, we’ll listen to the Q&A, and we will then document to the best of our ability the conversation as it transpired. We will then come back to you on Thursday showing kinda the recap of the meeting. And then if there are any additional comments on Thursday, we will capture those and both of these meetings will then be represented in the staff report that goes to Council on the 20th when they see the ACFR for the first time.”
3 mins 47 secs – The Town’s auditor Sheldon Chavan provides a presentation of the audit. The presentation concludes with the following audit results slide:
 No Exceptions in Audit Opinions
 No Material Weaknesses

PAGE 2 OF 3
SUBJECT: Receive 2022 Annual Comprehensive Financial Report DATE: December 20, 2022
 No Disagreements with Management
 No Significant Passed on Adjustments
14 mins 32 sec to 17 mins 17 secs – The Town’s auditor responds to questions from the Commission. No further questions are directed to the auditor. 17 mins 34 secs to 20 mins 23 secs – Town staff and the auditor respond to Commission questions. No further questions of staff or the auditor. 20 mins 26 secs - Chair Dickel opens public comment. No public comments received. 20 mins 58 secs to 30 mins 21 secs - Staff provides an assessment of important ACFR elements.

Additional Q&A between the Commission and staff.
30 mins 27 secs to 43 mins 39 secs – Chair Dickel asks staff to respond to written public comments. Staff provided verbal responses to written public comments and additional Commission questions.
43 mins 56 secs – Liaison Andrews provides a recap of Commission recommendations to ensure all Commission items are addressed.
46 mins 01 secs – Staff confirms they will continue to accept Commissioner questions up until the day of the meeting. (No additional Commissioner questions received to date.) 46 mins 25 secs – Chair Dickel states “I do want to say that it is an impressive document overall, with a tremendous amount of information.” The Chair further states “The form of the document is much improved over the form say five years ago, versus the MD&A, pension disclosures and others.”
47 mins 49 secs – Chair Dickel confirms there are no additional Commissioner questions and closes the item.
1 hour 06 mins 52 secs - At the conclusion of the Commission meeting, Chair Dickel confirms that staff has no disagreements with any of the Commission recommendations.

Attachments previously received with the staff report:

1. Draft Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2022.

2. Fund Balance Resolution Establishing June 30, 2022 Fund Balances

3. Independent Auditor Presentation to the Council Finance Commission

4. Public Comment

PAGE 3 OF 3
SUBJECT: Receive 2022 Annual Comprehensive Financial Report DATE: December 20, 2022
Attachment received with this Desk Item:

5. Public Comment

From: Rick Van Hoesen
Sent: Monday, December 19, 2022 5:28 PM
To: Gabrielle Whelan <[email protected]>
Cc: Maria Ristow <[email protected]>; Rob Moore <[email protected]>; Matthew Hudes <[email protected]>; Rob Rennie <[email protected]>; Mary Badame <[email protected]>; James Sutton
Subject: Town Council review of the ACFR must be pulled from the 12/20/2022 TC meeting agenda

EXTERNAL SENDER
Dear Ms. Whelan,
As outlined in the Staff report for the referenced item (attached), the Town Council cannot formally consider the draft Annual Comprehensive Financial Report (ACFR) until the Town Manager has responded in writing to the Finance Commission’s written comments. The Finance Commission has not yet provided the Town Manager written comments, because the Finance Commission has not completed its formal review. This is well known to the Staff since the Finance Commission has scheduled another special meeting to, “review the draft ACFR and provide final comments and recommendations,” for the same evening as the Town Council meeting, namely December 20, 2022. Including item #7 on the Town Council agenda is in contravention of Measure A (attached). Any action the Town Council takes on the ACFR at the December 20, 2022 meeting would be inappropriate and in violation of the relevant provisions of Measure A.

The fact that the Finance Commission has not yet submitted written comments to the Town Manager does not mean that such comments will not be submitted to the Town Manager once the Finance Commission completes its review. Subsequent to receiving such written comments, the Town Manager must then respond in writing to the Finance Commission, providing "...her rationale for accepting or rejecting each of the Finance Commission's comments and recommendations prior to presenting the CAFR to the Town Council for formal consideration."
As noted in the Staff report, the information in the ACFR is detailed and is used by the Los Gatos community as well as credit rating agencies and vendors to better understand the fiscal standing of the Town. It is in everyone’s best interest to have a complete, accurate and transparent ACFR. The draft ACFR in the Town Council packet has at least one apparent material error. In addition, there are substantive questions regarding the adequacy of the footnote disclosures, and completeness of the Management Discussion and Analysis section. These are all issues the Town Manager likely will have to consider once the Finance Commission completes its review and prepares and delivers its written comments.

Lastly, the current draft has been available to the public for less than one week. This is insufficient time for members of the public to review and comment on such a voluminous and important document. We do not understand the rush to complete such an important document. There are no statutory deadlines for adopting an ACFR. This rush to complete seems totally arbitrary, and creates the appearance of an intent to cut short a thoughtful review process by the Finance Commission and the public.

ATTACHMENT 5 Page 241
We respectfully request you to advise the Town Council that Agenda Item #7 must be pulled from the agenda for the December 20, 2022 meeting and reinstated only after all of the conditions outlined in Measure A have been met.

Thank you,
Rick Van Hoesen for the Los Gatos Community Alliance

PR-8101-1-ENG

TOWN OF LOS GATOS

MEASURE A
Shall the measure proposing an ordinance replacing the Town's current Finance Committee and Sales Tax Oversight Committee with a Finance Commission that would advise the Town Council on financial, budgetary and investment matters, including but not limited to, the Annual Budget, the Comprehensive Annual Financial Report, capital expenditures, sales tax revenue and expenditures, and other recommendations as the Town Council directs, be adopted? YES
NO

TOWN ATTORNEY'S IMPARTIAL ANALYSIS OF

MEASURE A
Voter approval of Measure "A" would amend the Los Gatos Town Code to disband both the Council Finance Committee and Sales Tax Oversight Committee and establish instead a Finance Commission consisting of seven (7) members—five (5) voting citizen members and two (2) nonvoting Council Members, (one of which would be either the Mayor or Vice Mayor), with each Council Member appointing one Citizen Appointee for a four (4) year term.

The Town of Los Gatos currently has a Council Finance Committee consisting of five (5) members—two (2) Town Council Members as voting members and three (3) citizen members as nonvoting members, appointed by the Town Council. The function of the current Council Finance Committee is to serve as an advisory committee to the Town Council regarding the Town's investment policy, the Comprehensive Annual Financial Report, the unfunded pension employment benefits and new and increased revenue sources. The purpose of the current Council Finance Committee is not to advise on regular or routine financial administration, the Town's budget or spending priorities, nor to become involved in other than the financial impact of the projects/programs they are asked to review.

Voter approval of Measure "A" would create a new Finance Commission that would serve in an advisory capacity to the Town Council and increase their duties and responsibilities in regard to the review of Town finances, including but not limited to: the Annual Budget, the Comprehensive Annual Financial Report, capital expenditures, the revenue and expenditure of Measure G Sales Tax, and making recommendations about the Town's financial budgetary and investment matters and operations related thereto to the Town Council and any other Town department, agency, committee, commission or other body as the Town Council directs.

A "yes" vote on Measure "A" will disband both the Council Finance Committee and Sales Tax Oversight Committee and establish a Finance Commission as set forth above.

A "no" vote on Measure "A" will not disband both the Council Finance Committee and Sales Tax Oversight Committee and will not establish a Finance Commission as set forth above.

Measure "A" will be approved if it receives a simple majority of "Yes" votes.

Robert Schultz
Town Attorney

COMPLETE TEXT OF MEASURE A

LOS GATOS TOWN FINANCE COMMISSION INITIATIVE
BE IT ORDAINED by the People of the Town of Los Gatos as follows:

Section 1. Title.

This measure shall be known and may be referred to as the "Town Finance Commission Initiative."
Section 2. Findings and Declarations.

WHEREAS, the Town's financial well-being is essential to ensuring that the Town can effectively provide services and fund all liabilities; and WHEREAS, many residents of the Town possess substantial financial management experience and are eager to serve their community; and
WHEREAS, a Finance Commission consisting of qualified Town residents can help ensure the financial well-being of the Town and promote greater public understanding of Town financial matters; and WHEREAS, a Finance Commission can increase citizen
participation in Town governance and encourage greater resident engagement in Town financial decisions; and
WHEREAS, the People of Los Gatos wish to establish a Finance Commission to assist the Town Council in ensuring the financial wellbeing of the Town; and WHEREAS, the People of Los Gatos do not wish to interfere with the budgetary authority or processes of the Town Council, but instead believe a Finance Commission can function as an advisory body and provide important guidance to the Town Council in carrying out its budgetary duties and establishing the Town's fiscal policies and priorities.

NOW, THEREFORE, the People of the Town of Los Gatos do
hereby amend the Los Gatos Town Code as follows:

Section 3. Amendment to the Los Gatos Town Code.
(New language is indicated by underlining, and
deleted language is indicated by strikethrough.)
1) A new Division is added to Article V of Chapter 2 of the Los Gatos Town Code to read in its entirety as follows:

Division 3.—Finance Commission.

Sec. 2.50.200.—Finance Commission established.
(a) The Finance Commission shall be established to serve in an advisory capacity to the Town Council by reviewing Town finances, including but not limited to the annual budget, Comprehensive Annual Financial Report, and capital
expenditures, and making recommendations about the Town's financial, budgetary and investment matters and operations related thereto to the Town Council and any other Town
department, agency, committee, commission or other body as the Town Council directs.

PR-8101-2-ENG
COMPLETE TEXT OF MEASURE A-Continued
(b) The Council Finance Committee is disbanded.
(c) The Sales Tax Oversight Committee established by section

25.60.140 of the Town Code is disbanded and all powers and duties of that Committee are transferred to the Finance Commission.

Sec. 2.50.205.—Composition, appointment, terms.
(a) The Finance Commission shall consist of five (5) voting citizen members ("Citizen Appointees") and two (2) non-voting Council Liaisons.
(b) Council Liaisons.
(1) The Town Council shall appoint two Town Council
members as non-voting Council Liaisons.
(2) The Council Liaisons shall serve on the Finance
Commission until replaced by the Town Council but shall not serve beyond their terms on the TownCouncil.
(3) One Council Liaison shall be the Mayor or Vice-Mayor of the Town.
(c) Citizen Appointees.
(1) Except with respect to initial appointments as provided for in section 2.50.205(c)(5), each member of the Town
Council shall appoint one Citizen Appointee, upon
expiration of terms described in section 2.50.205(c)(4). (2) Citizen Appointees must be residents and registered voters of the Town.
(3) No member of the Town Council may serve as a Citizen Appointee.
(4) Citizen Appointees shall serve four-year terms, which shall expire on a staggered basis such that every year one term shall expire, except that once every four years, two terms shall expire. The term of each Citizen Appointee shall
commence on the first day of January (or as soon as
practicable after the effective date of this Division for initial Citizen Appointees), and shall expire on the thirty-first day of the fourth successive December.
(5) As soon as practicable after the effective date of this Division, the initial appointment of the first Citizen
Appointees shall be carried out as follows: Town Council members shall draw lots to determine the order of
expiration for the terms of the first five Citizen Appointees such that one Citizen Appointee's term shall expire each year for four years after the effective date of this Division, and one additional Citizen Appointee's term shall expire in the fourth year after the effective date of this Division.

Following the expiration of each of the first five Citizen Appointees' terms, a Citizen Appointee shall be appointed to serve a four-year term.

COMPLETE TEXT OF MEASURE A-Continued
(6) Citizen Appointees must be certified public accountants, chartered financial analysts, or have a business, finance, economics or accounting degree, and must have at least
five years of experience in at least one of thefollowing:
(A) Financial experience in a corporate, business, or
government setting;
(B) Principal or officer at a financial auditing firm;
(C) Investment banking; or
(D) Finance or budget management.
(7) Should a Citizen Appointee resign or otherwise leave office prior to the end of his or her term, the appointing Town Council member for that Citizen Appointee shall, as soon as practicable, appoint a new Citizen Appointee to serve the remainder of the term.
(d) Section 2.40.030 of the Town Code shall not apply to the Finance Commission.
(e) Administrative support for the Finance Commission shall be provided by the Town Manager, the Director of Finance and by other Town staff as necessary.

Sec. 2.50.210.—Meetings andRecords.
(a) The Finance Commission shall hold at least one meeting per calendar quarter.
(b) Meetings shall be held as required by the business needs of the Finance Commission in the Town Council chamber in the Town Hall or such other locations as allowed by the Ralph M.

Brown Act, at a time that is convenient for the Finance Commission and the public to encourage publicparticipation. (c) Meetings shall be subject to the Ralph M. Brown Act. (d) Nothing in this Division shall be construed as excluding any documents from the California Public Records Act.

Sec. 2.50.215.—Chair.
(a) The Finance Commission shall appoint and prescribe the term of office for its Chair.
(b) The Chair must be a Citizen Appointee.
(c) All Finance Commission meetings shall be called by theChair. (d) The Chair shall set all Finance Commission meeting agendas.

Sec. 2.50.220.—Quorum.

A majority of the Citizen Appointees of the Finance Commission shall constitute a quorum. Except as otherwise prescribed by ordinance or State law, a vote by a majority of a quorum shall be sufficient to transact business.

Sec. 2.50.225.—Duties.

PR-8101-3-ENG
COMPLETE TEXT OF MEASURE A-Continued
(a) The Finance Commission shall:
(1) Serve as an on-going, substantive and expert advisory body to the Town and Town Council so that the Town and
Town Council can make informed decisions about the
Town's financial, budgetary and investment matters and
operations related thereto.
(2) Review the Town Manager's annual proposed budget
prepared in accordance with section 2.30.295(6) of the
Town Code, and provide written comments and
recommendations to the Town Council.
(A) The Finance Commission's comments and
recommendations shall include a recommendation
about whether the Town Council should approve or
disapprove the proposed budget. The Finance
Commission may make a recommendation of
approval of the budget conditional upon the Town
Council's acceptance of one or more of the Finance
Commission's recommendations.
(B) The Town Manager must provide a proposed budget
to the Finance Commission at least twenty (20)
business days before the first meeting at which the
proposed budget is considered by the Town Council.
(3) Review the Town Manager's draft Comprehensive Annual Financial Report (CAFR) for the preceding fiscal year, and provide written comments and recommendations to the
Town Manager.
(A) The Town Manager shall respond in writing to the
Finance Commission providing his or her rationale for
accepting or rejecting each of the Finance
Commission's comments and recommendations
prior to presenting the CAFR to the Town Council for
formal consideration.
(B) The Town Manager may not present the CAFR to the
Town Council for formal consideration unless or until
he or she considers and responds in writing to all of
the Finance Commission's comments and
recommendations.
(4) Review the Director of Finance's summary of the Town's financial report required by section 53891 of the California Government Code and prepared in accordance with
section 2.50.010(c) of the Town Code, and provide written comments and recommendations to the Director of
Finance prior to the publishing of the summary of the
report.
(5) Review the financial policies and procedures manual developed in accordance with section 2.50.010(f) of the Town Code, and provide written comments and
recommendations to the Director of Finance.
(6) Prior to the Town's expenditure of any revenues from the tax authorized by sections 25.60.010 et seq. of the Town Code, review the proposed expenditures and advise the
COMPLETE TEXT OF MEASURE A-Continued
Town Council on whether such expenditures meet the
Town Council's objectives for that tax:
(A) Maintaining and enhancing neighborhood police
patrols and local crime prevention programs;
(B) Improving traffic flow to reduce congestion;
(C) Repairing potholes and maintaining the Town's
streets, roads, and sidewalks; and
(D) Maintaining the Town's long-term financial stability. (7) Issue an annual public report of the expenditures and appropriations of sales tax revenues approved by the
Town Council during each fiscal year.
(8) Make recommendations to the Town Council about
policies and programs:
(A) To maximize the Town's revenues consistent with
existing taxation structures and inter-governmental
funding opportunities;
(B) To maximize fee generation consistent with market
rate charges for Town-provided services and market
rate fees for utilization of Town-owned assets;
(C) To minimize the City's cost to provide core services and required activities, consistent with the desired
service level for residents and other internal and
external customers;
(D) To set funding goals for reserves, and review ongoing progress related thereto; (E) To assess the risk associated with the structure and documentation of any proposed debt financing;
(F) To fund the Town's long-term compensation and
benefit program liabilities in the most responsible and cost-effective way; and
(G) To monitor investment performance, and make
recommendations related to the Town's investment
policy and performance.
(9) Provide written comments and recommendations
regarding the selection of auditors for the CAFR.
(10) Participate in pre-audit meetings with auditors, provided that the Finance Commission shall not participate in those portions of any meetings which pertain to confidential
employment or attorney-client privileged matters.
(11) Review and monitor any events or issues which may affect the financial status of the Town.
(b) The duties of the Finance Commission shall not be altered, abridged or abrogated in any way by any body except by a vote of the majority of the voters of the Town.

PR-8101-4-ENG
COMPLETE TEXT OF MEASURE A-Continued
(c) The Town Council shall make changes to the budgetary and all other Town processes and calendars as necessary to allow for consideration of the comments and recommendations of the Finance Commission outlined herein.

Sec. 2.50.230.—Conflicting Provisions.

Should any provision of this Division be found to conflict with the Los Gatos Town Code, this Division shall prevail, consistent with the purposes of the Finance Commission as set forth herein. 2) Section 25.60.140 of the Los Gatos Town Code is hereby amended as follows:

Sec. 25.60.140.-Citizens' oversight and annual audit.
(a) There shall be a committee appointed by the Town Council to The Finance Commission established by sections 2.50.200 et seq. of the Town Code shall review and report on the receipt of revenue and expenditure of funds from the tax authorized by this chapter ("revenues and expenditures"). The number, qualifications and duties of Committee members shall be established by ordinance or resolution of the TownCouncil. (b) Beginning with the fiscal year that ends June 30, 2019, the Town's independent auditors shall, as part of their annual audit of the Town's financial statements, review the collection and expenditure of revenue from the tax authorized by this chapter.

The auditors' review shall be a public document. The Finance Commission committee shall annually review the auditors' findings and report in writing to the Town Council regarding the auditors' findings regarding the revenues and expenditures.

The Finance Commission's committee's statement shall be transmitted to the Town Council for consideration at a public meeting.
(c) By January 31, 2019, the Town Council shall adopt a resolution establishing the composition of the committee and further defining its responsibilities consistently with this section.

Provisions defining the scope of committee responsibilities and reporting requirements shall address bond oversight, in the event that a decision is made at a later time to sell bonds that are in part backed by the revenues referenced in this section.

The Town Council shall appoint the initial members of the committee no later than March 1, 2019.

Section 4. Earliest Possible Election.

The People of Los Gatos hereby expressly request that, if not adopted by the Town Council, this measure be submitted to the voters of Los Gatos at a regular or special election at the earliest time allowable by law.

Section 5. Severability.

Should any provision of this measure, or its application to any person or circumstance, be determined by a court of competent jurisdiction to be unlawful, unenforceable, or otherwise void, voidable, or invalid, that determination shall have no effect on any other provision, or the application of this measure to any other person or circumstance and, to that end, the provisions hereof are severable. By approving this measure, the voters express their intent that each section and subsection would COMPLETE TEXT OF MEASURE A-Continued
have been adopted irrespective of whether any one or more sections or subsections are found to be invalid or unconstitutional, and that each section and subsection is therefore explicitly severable, part-by-part, phrase-by-phrase, and word-by-word, and that if any portion is determined by a court of competent jurisdiction to be unlawful, unenforceable, or otherwise void, voidable, or invalid, that the least amount of language be severed from the ordinance. When possible, if any duty granted to the Finance Commission by this measure is found to conflict with powers specifically granted to the Town Council by the Legislature, or found to be otherwise unlawful, the offending section or subsection shall be amended or interpreted to allow the Finance Commission the maximum allowable duties under the law.

Section 6. Competing Initiatives/Measures.

This measure is intended to be comprehensive. It is the intent of the People of Los Gatos that, in the event this measure and one or more measures relating to the same subject shall appear on the same ballot, the provisions of the other measure or measures shall be deemed in conflict with this measure. In the event that this measure receives a greater number of affirmative votes, the provisions of this measure shall prevail in their entirety, and all provisions of the other measure or measures shall be null and void. If this measure is approved by a majority of the voters but does not receive a greater number of affirmative votes than any other measure or measures appearing on the same ballot regarding the same subject, then this measure shall take effect to the extent not in conflict with said other measure ormeasures.

Section 7. Effective Date.

This measure shall be considered adopted and become effective upon the date of the election which it was approved by the voters.

Section 8. Liberal Construction.

This measure is an exercise of the initiative power of the People of Los Gatos regarding the establishment of a Finance Commission and shall be liberally construed to effectuate its purposes.

Section 9. Legal Defense.

The People of Los Gatos desire that this measure, if approved by a simple majority of voters and thereafter challenged in court, be defended by the Town of Los Gatos. The People of Los Gatos, by approving this measure by a simple majority of voters, hereby declare that the proponent(s) of this measure have a direct and personal stake in defending this measure from constitutional or statutory challenges to the measure's validity or implementation. In the event the Town fails to defend this measure, or the Town fails to appeal an adverse judgment against the constitutionality, statutory permissibility or implementation of this measure, in whole or in part, in any court of law, the measure's proponent(s) or the voters the Town of Los Gatos shall be entitled to assert his, her or their direct personal stake by defending the measure's validity and implementation in any court of law and shall be empowered by the People through this measure to act as agents of the People of Los Gatos, and the Town of Los Gatos shall indemnify the proponent(s) for reasonable expenses and other losses incurred by the proponent(s), as agent(s), in defending the validity and/or implementation of the challenged measure. The rate of indemnification shall be no more than the amount it would cost the Town to perform the defenseitself.

PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 7
DATE: December 13, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Annual Comprehensive Financial Report (ACFR):
a. Receive the Annual Comprehensive Financial Report (ACFR) for the Fiscal Year Ended June 30, 2022, and
b. Adopt a Resolution Confirming June 30, 2022 Fund Balances in Accordance Fiscal Year 2021/22 Final Audit and Town Council General Fund Reserve Policy
RECOMMENDATION:

Annual Comprehensive Financial Report (ACFR):
a. Receive the Annual Comprehensive Financial Report (ACFR) for the Fiscal Year Ended June 30, 2022 (Attachment 1) as recommended by the Finance Commission, and b. Adopt a Resolution Confirming June 30, 2022 Fund Balances in Accordance with Fiscal Year 2021/22 Final Audit and Town Council General Fund Reserve Policy.(Attachment 2) BACKGROUND:

The Town contracts with an independent certified public accountant to examine the books, records, inventories, and reports of all officers and employees who receive, handle, or disburse public funds each fiscal year (FY). The FY 2021/22 audit was performed by Chavan and Associates, LLP an experienced firm specializing in audit services for California public agencies.

The firm also compiled the Draft ACFR for the Town of Los Gatos.

The information contained in the ACFR provides detailed financial information which the Los Gatos community and others can use to better understand the fiscal standing of the Town. In addition, the financial information contained in the document is one element that the credit rating agencies review annually to affix a credit rating for the Town’s outstanding debt obligations.

PAGE 2 OF 4
SUBJECT: Receive 2022 Annual Comprehensive Financial Report DATE: December 13, 2022
BACKGROUND (continued):

With the passage of Measure A, the Finance Commission has been tasked with several mandated duties as described in the provisions of the adopted Ordinance. Section 2.50.225. – Duties states that:
(a) The Finance Commission shall:
(3) Review the Town Manager's draft Annual Comprehensive Financial Report (ACFR) for the preceding fiscal year and provide written comments and recommendations to the Town Manager.
(A) The Town Manager shall respond in writing to the Finance Commission providing his or her rationale for accepting or rejecting each of the Finance Commission's comments and recommendations prior to presenting the ACFR to the Town Council for formal consideration.
(B) The Town Manager may not present the ACFR to the Town Council for formal consideration unless or until he or she considers and responds in writing to all of the Finance Commission's comments and recommendations.

DISCUSSION:

On December 12, 2022, the Commission received the Fiscal Year 2021/22 Draft Annual Comprehensive Financial Report (ACFR) for the Commission’s consideration per Measure A including a presentation from the Town’s auditor Chavan and Associates, LLP (Attachment 3).

During the meeting, the Commission provided feedback on the Fiscal Year 2021/22 Draft Annual Comprehensive Financial Report (Attachment 1). Of note the Commission requested that given recent inflationary trends, staff should provide language that illustrates the effect long-term inflation could have on the Town’s pension liabilities (pg. 4). In addition, the Commission requested that staff expand Note 15 to include the FY 2020/21 ARPA expenditures of $200,000 (pg. 97). Commissioners also requested that Note 16 make it clear that the potential waste hauler revenue loss is an annual number (pg. 98).

On December 15, 2022, the Finance Commission will conclude its review of the Fiscal Year 2021/22 Draft Annual Comprehensive Financial Report (ACFR). Any additional recommendations received from the Commission at the December 15th meeting will be communicated to the Town Council through the addendum process.

In addition to the review and input provided by the Finance Commission, staff also provided continuous review and updates to the Fiscal Year 2021/22 Draft Annual Comprehensive Financial Report (ACFR) accordingly (pages 4, 19, 31, 83, and 85).

PAGE 3 OF 4
SUBJECT: Receive 2022 Annual Comprehensive Financial Report DATE: December 13, 2022
DISCUSSION (continued):

The redline version of the attached ACFR represents the culmination of recommended enhancements and changes based on Finance Commission comments, continued staff analysis, and continued auditor review while maintaining appropriate ACFR presentation based on governmental accounting and municipal standards.

Highlights of the draft audited financial results include:

Independent Auditor’s Report
The auditor has given the Town’s financial statements a “clean” audit opinion for the year ended June 30, 2022 giving reasonable assurance that the financial statements are “free of material misstatement.” (Attachment 3)
Management’s Discussion and Analysis (MD&A)
The MD&A section of the report summaries for the Town on an entity-wide basis and fund type basis. Information is provided in this section with a year-to-year view, explaining how fund balances have changed between fiscal years ending June 30, 2020, June 30, 2021, and June 30, 2022. Information is also presented on the adopted General Fund budget to actuals and any significant budget adjustments made during FY 2021/22.

Statement of Net Position
The Statement of Net Position serves as a useful indicator of a government’s financial position.

The Town had net assets of $138.4 million at fiscal year-end as compared to $113.5 million the prior year, an overall increase of $24.9 million over the prior fiscal year. The increase was largely attributed to the combined net result of an approximate $37 million decrease in total long‐term liabilities outstanding, a $16 million dollar increase in capitalized assets including a $12.2 million historic Los Gatos Theatre contribution and a $3.7 million addition to non‐ capitalized capital outlay expenses from the prior year The largest portion of the net assets, $127.8 million, represents the Town’s investment in its capital assets and infrastructure. Restricted assets of $10.2 million are resources that are subject to external restrictions on how they may be used. As of June 30, 2022, unrestricted net position is $1.8 million compared to a negative ($4.7 million) the prior year.

Basic Financial Statements
This section contains basic financial statements, including the “entity-wide” Statement of Net Position and Statement of Activities, financial statements for the fund types including Governmental Funds (such as the General Fund), Proprietary Funds, and the Private Purpose Trust Funds (Redevelopment Successor Agency). The footnotes section provides details on significant items such as the Town’s cash and investments (Note 2), Note 4 which illustrates the new implementation of GASB 87 for leases, its long term obligations (Certificates of Participation) related to bonded debt (Note 7), the net pension liability for both the Town’s

PAGE 4 OF 4
SUBJECT: Receive 2022 Annual Comprehensive Financial Report DATE: December 13, 2022
DISCUSSION (continued):
miscellaneous and safety pension plans (Note 10), and a discussion of the Town’s other postemployment benefit plan (Note 11).

Required Supplementary Information
The Schedules of Pension Plan Contributions are provided in this section.

Supplementary Information
This section provides budget to actual information for “non-major” funds which represent less than 10% of the Town’s total assets/liabilities/revenues or expenditures.

Statistical Section
This section presents demographic statistics and ten-year historical financial data for the Town, including information on assessed valuations, fund balances, debt, property tax rates, personnel (full-time equivalent) history, principle employers, and other financial and demographic disclosures.

CONCLUSION:

As noted in the auditor’s opinion, the ACFR fairly presents the fiscal year ending June 30, 2022 financial activity for the Town of Los Gatos.

FISCAL IMPACT:

There is no fiscal impact associated with this item.

Attachments:

1. Draft Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2022.

2. Fund Balance Resolution Establishing June 30, 2022 Fund Balances

3. Independent Auditor Presentation to the Council Finance Commission

PREPARED BY: Heather St. John
Senior Administrative Analyst
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, and Finance Director 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 8
DATE: December 13, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Approve a First Amendment to the Agreement with Turbo Data Systems, Inc. in the Amount of $110,774 for a Total Amended Agreement Amount Not to Exceed $206,041.54 for a Three-Year Extension of Parking Citation and Permit Parking Processing Services.

RECOMMENDATION:

Approve a First Amendment to the Agreement with Turbo Data Systems, Inc. in the amount of $110,774 for a total Amended Agreement amount not to exceed $206,041.54 for a three-year extension of parking citation and permit parking processing services.

BACKGROUND:

On December 1, 2017, the Town entered into an agreement with Turbo Data Systems Inc. for the management of parking citation and parking permit payment and processing services.

Turbo Data Systems' annual fees are based on the number of citations and permits issued, the procedures associated to processing citations and permits, and the citation equipment leased monthly. The term of the original agreement was for five years, from December 2017 to December 2022, renewing annually thereafter upon mutual consent. It is anticipated that approximately $95,267.54 will be expensed during the original agreement term period.

Therefore, staff is seeking to extend the agreement of services for an additional three years through December 1, 2025, for an additional $110,774 expensed over this three-year amended term.

DISCUSSION:

Turbo Data Systems Inc. citation processing program utilizes a cloud-based approach allowing for multiple user accounts, an online web-portal for users to access real-time information (including photographs) related to their citations, online payment processing, an online appeal

PAGE 2 OF 2
SUBJECT: Approve a First Amendment to an Agreement for Services with Turbo Data Systems, Inc.

DATE: December 13, 2022
DISCUSSION (continued):
filing process, and enhanced data reporting capabilities. In addition, Turbo Data Systems Inc. provides customizable permit parking management for the Town's Permit Parking Programs to include vehicle license plate recognition, online permit issuance (including residence verification and placard issuance), and applicable permit fee collections for Business Employee Permits, Residential Permits, and Town staff permit tracking. The utilization of Turbo Data Systems has provided a more efficient and effective parking citation and permit issuance system, which is publicly accessible for permit and citation payment processing and has increased staff efficiencies within the parking program.

Staff is requesting a continuance to utilize this vendor to manage the citation and permit issuance and correlated payment processing. In conjunction with elements of the Downtown Parking Plan, this vendor has also proven to be a valuable partner for parking citation and parking permit coordination for implementation of the Downtown Employee Permit Program.

CONCLUSION:

Staff recommends the Town Council authorize the Town Manager to execute a first amendment to the Agreement for Processing of Parking Citations, Permits, and Citation Mobile Devices with Turbo Data Systems in the total increased amount of $110,774, for a three-year additional term. The total amount of the agreement with this three-year extension is not to exceed $206,041.54 (from December 2017 to December 2025) with Turbo Data Systems, Inc.

FISCAL IMPACT:

There are sufficient funds available in the Fiscal Year 2022/23 Operating Budget to cover this subscription expense incurred for Turbo Data System for FY 2022/23. Ongoing annual payments will be requested through future fiscal year budget processes, requesting the continuance of these services.

ENVIRONMENTAL ASSESSMENT:

This is not a project defined under CEQA, and no further action is required.

Attachments:

1. Original Agreement

2. Amendment to Turbo Data Systems Inc. Agreement

lrr_8..7\bAGREEMENT FOR PROCESSING

OF PARKING CITATIONS, PERMITS AND MOBILE DEVICES
This Agreement is entered into by and between Turbo Data Systems, lnc. (TDS), a California Corporation, and the Town of Los Gatos, (hereinafter "Customer").

Whereas, TDS and the Customer desire to enter into an agreement whereby TDS will provide services and equipment related to the processing of parking citations, provide a permit management system, and provide mobile devices for the Customer pursuant to the terms and conditions set forth herein. ln consideration of the mutual covenants, conditions, representations and warranties contained herein the parties hereby agree as follows:

1. PURPOSE. The purpose of this Agreement is for TDS to process parking citations, provide permit processing and provide mobile devices and support for the Customer in a timely manner.

2. SCOPE OF SERVICES. When and as directed by the Customer, TDS shall perform the following services:

See Attached Scope of Services

3. TERM. This agreement shall become effective for a period of five years, renewing annually thereafter upon mutual consent, starting December 1, 2017. /

4. CONSIDERATION. ln consideration for services performed by TDS as provided in this agreement, Customer shall pay TDS pursuant to the terms set forth in Exhibit "A" which is attached hereto and incorporated herein by this reference.

5. PAYMENT OF FEES. Charges determined on the basis set forth in Exhibit "A" shall be billed on a monthly basis in arrears and payment therefore shall be made within thirty (30) days after submission of each separate invoice.

6. ACCOUNTING RECORDS. Records of the citations processed by TDS shall be available for examination by the Customer or its authorized representative(s) at a time agreeable to the Customer and TDS within one week following a request by the Customer to examine such records. Failure by TDS to permit such examination within one (1) week of a request shall permit the Customer to withhold all further payments until such examination is completed unless the Customer in writing authorizes an extension of time for examination.

7. TIME OF PERFORMANCE. Time is of the essence, and TDS shall perform the services required by this a8reement in an expeditious and timely manner so as not to unreasonably delay the purpose of this agreement as set forth in Sections 1 and 2.

8. INDEPENDENT CONTRACTOR. At all times during the term of this agreement, TDS shall be an independent contractor and shall not be an employee ofthe Customer. The Customer shall have the rlght to control TDS only insofar as the results of TDS'S services rendered pursuant to this agreement; however, Customer shall not have the right to control the means by which TDS accomplishes the services rendered pursuant to this agreement.

9. FACILITIES AND EQUIPMENT. TDS shall, at its own cost and expense, provide all facilities and equipment 1 tHH.------
Attachment 1 Page 253

AGREEMENT FOR PROCESSING

OF PARKING CITATIONS, PERMITS AND MOBITE DEVICES
that may be required for performance of the servlces required by this agreement

11. INDEMNIFICATION BY CUSTOMER. TDS shall use due care in processing work of the Customer. Any errors shall be corrected by TDS at no additional charge to the Customer. TDS shall be entitled to reimbursement from the Customer for any expenses incurred by TDS for the correction of any erroneous information provided by the Customer and TDS shall not be responsible for Customers' losses and expenses resulting from erroneous source materials provided by the Customer. Neither party shall be liable to the other for any indirect or consequential losses or damages resulting from any errors within the scope of this Section 11.

12. FAIR EMPLOYMENT PRACTICES/EQUAL OPPORTUNIry ACTS. ln the performance of this agreement, TDS shall comply with all applicable provisions of the California Fair Employment Practices Act (California Labor Code Sections (410 et seq.) and the applicable equal employment provisions of the Civil Rights Act of 1964 (42 U.S.C. 200e 217), whichever is more restrictive.

13. AGENCY. Except as Customer may specify in writing TDS shall have no authority, expressed or implied, to act on behalf of the Customer in any capacity whatsoever as an agent. TDS shall have no authority, expressed or implied, pursuant to this agreement to bind Customer to any obligation whatsoever.

14. CHANGES lN LAW. Should there be any changes in the law applicable to the processing of parking citations which would require material changes in the method of the processing as contemplated in this agreement, or materially reduce or eliminate the amount of revenue received by the Customer from parking citations, this agreement shall terminate on the date such law becomes effective, provided either party gives sixty (60) days' notice of termination. Any changes in the processing of parking violations as a result of changes in the law or DMV regulations affecting such violations, which do not materially add to the cost of processing such citations by TDS shall be implemented by TDS at the request of the Customer, provided however, that the cost of such implementation does not exceed the fee paid to TDS for performing such services. lf any such change results in the cost of processing citations exceeding the amounts provided for in 2 10. TDS agrees to defend, indemnify, hold free and harmless the Customer, its elected offlcials, officers, agents and employees, at contractor's sole expense, from and against any and all claims, actions, suits or other legal proceedings brought against the Customer, its elected officials, officers, agents and employees arising out of the performance of the contractor, its employees, and/or authorized subcontractors, of the work undertaken pursuant to this Agreement. The defense obligation provided for hereunder shall apply without any advance showing of negligence or wrongdoing by the contractor, its employees, and/or authorized subcontractors, but shall be required whenever any claim, action, complaint, or suit asserts as its basis the negligence, errors, omissions or misconduct of the contractor, its employees, and/or authorized subcontractors, and/or whenever any claim, action, complaint or suit asserts liability against the Customer, its elected officials, officers, agents and employees based upon the work performed by the contractor, its employees, and/or authorized subcontractors under this Agreement, whether or not the contractor, its employees, and/or authorized subcontractors are specifically named or otherwise asserted to be liable. Notwithstanding the foregoing, the contractor shall not be liable for the defense or indemnification of the Customer for claims, actions, complaints or suits arising out of the sole active negligence or willful misconduct of the Customer. This provision shall supersede and replace all other indemnity provisions contained either in the Customer's speciflcations or contracto/s proposal, which shall be of no force and effectPage 254

AGREEMENT FOR PROCESSING
OF PARKING CITATIONS, PERM]TS AND MOBILE DEVICES
Section 4 and the Customer declines to amend this agreement to provide for the payment of such increased costs, the agreement shall terminate as of the effective date of the change in the law or regulations.

15. OWNERSHIP OF SOFTWARE. Customer acknowledges that the software and software programs used by the Customer or used for the Customer's benefit which were developed by TDS are the sole property of TDS and the Customer obtains no right or interest in the software by virtue of this agreement.

15. OWNERSHIP OF DOCUMENTS. All citations and other physical documents pertaining to the Customer (payment documents, appeal documents, etc.), shall be the property of the Customer. Copies of said documents shall not be made available by TDS to any individual or organization without the prior written approval of Customer, except as required by law. TDS agrees to provide Customer, in computer readable form, a copy of all data files to service its citations at the conclusion of this Agreement.

17. FORCE MAJEURE. Neither party shall be responsible for delays or failure in performance resulting from acts beyond the control of such parties. Such acts shall include, but are not limited to, Acts of God, strikes, riots, acts of war, epidemics, fire, communication line failure, earthquakes or other disasters.

18. TERMINATION. This aBreement may be terminated by either party upon ninety (90) days written notice after the original term of the agreement. At such time, TDS agrees to provide Customer, in computer readable form, a copy of all data files to service its citations.

1.9. NOTICE. Whenever it shall be necessary for either party to serve notice on the other respecting this agreement, such notice shall be served by certified mail addressed to:

TDS: Turbo Data Systems, lnc.
18302 lrvine Blvd, Suite 2(x)
Tustin, cA 92780
Roberta J. Rosen, President
CUSTOMER: Town of Los Gatos
110 E. Main Street
Los Gatos, CA 95030
unless and until different addresses may be furnished in writing by either party to the other, and such notice shall be deemed to have been served within seventy-two (72) hours after the same has been deposited in the United States Post Office by certified mail. This shall be valid and sufficient service of notice for all purposes.

20. EXTENT OF AGREEMENT. This agreement represents the entire and integrated agreement between Customer and TDS and supersedes any and all prior negotiations, representations or agreements, either written or oral. This agreement may be amended only by written instrument signed by both Customer and TDS. This agreement may only be assigned with the express written consent of each of the parties hereto. ln the event that any provision hereof is deemed to be illegal or unenforceable, such a determination shall not affect the validity or enforceability of the remaining provisions hereof, all of which remain in full force and effect.
3

AGREEMENT FOR PROCESSING
OF PARKING CITATIONS, PERMlTS AND MOBILE DEVICES

21. LITIGATION COSTS. lf any legal action or any other proceeding is brought to enforce the terms of this agreement, or because of an alleged dispute, breach, or misrepresentation in the connection with any of the provisions of this agreement, the successful or prevailing party or parties shall be entitled to recover their reasonable attorneys' fees and other costs incurred in that action or proceeding, including the costs of appeal in addition to any other relief to which it or they may be entitled.

22. EFFECTIVE DATE OF THIS AGREEMENT
after December 1, 2017.

This agreement, made in duplicate, shall be effective from and Executed on this _ day of
TOWN OF tOS GATOS
By: See Attached Si gnature Page
TURBO DATA SYSTEMS, INC.

By: See Attached Signature Page
Roberta J. Rosen
President
4

AGREEMENT FOR PROCESSING

OF PARKING CITATIONS, PERMITS AND MOBITE DEVICES
EXHIBIT .,A"
PARKING €ITATION PROCESSING
Basic Processing Services - Automated Citations
Manual Citations
Monthly Minimum
Notice Processing Services
Notices, initial review letters, other correspondence
Out of state Processing
Administrative Adiudication Processing
Paperless Appeals (eAppeals and Scanning)
Web Payments - Credit Card Processing
Franchise Tax Board Offset Program
includes postage
Bank Management
Process all parking deposits
Send monthly surcharge check
Write TDS check for services
Monthly reconciliation
Monthly check to Agency for balance of funds
55 fee per NSF and refund check
So.40
So.40
waived
S0.80/letter mailed
25% of amt collected
$1.25 per appeal
included with Adjudication

53.95 Fee Paid by Violator /
No Charge to Agency
25% of amt collected
S2.fi/letter mailed
plus 15% of amount collected
S75 per month plus bank fees y'
Fee lncreases:

Postal Rate lncrease Offset - Fees will increase immediately to offset the amount of any postal increase.

Annual CPI lncrease - For each additional year that this agreement continues per paragraph 3, the cost per item shall be increased according to the CPI for the previous 12 month period. 5 eXorbrt A
ICS Delinquent Collections

AGRECMENT FOR PROCESSING
OF PARKING CITATIONg PERMITS AND MOBITE DEVICES
MOBItE DEVICES with ticketPRO software
57 Active ticketPRo Magic Lease (5 yea., 3 units at S12o/month/unit = Early Termination Fee: $55/month/unit for the remainder ofthe lease term v
One Time Setup/Configuration included
Monthly Communications and Support included
Parking Citation ticket stock 5,q)0 citations = 5400
5,0fi) envelopes = S4fl)
sr"{,*.
6

AGREEMENT FOR PROCESSING

OF PARKING CITATIONS, PERMITS AND MOBITE DEVICES

PERMIT PROCESSING
,/
PfrOCFSST$G FEES * PERTV,TT MANAAEMENT
Arutaal k*wnce
2"OAO - 5,M
DNE ff$E STAfrTAP TCIST $r,tuta
Includm: Database Creation. Sy$em Setup cf Tables, mject Managernrrt Okrt Approryd, W*-Based trainirq, Web Sih Custornizatitrr
{$frat rHL Y sEfr vrcEfcLfrafi-Hag TING Ff E $2sa
This fe*r wil[ cor$er *p basic nraintenanre and anailabilfy of t]E qfstern fs the puilic ard tre Cty.

Al*o Inrlutles:

Portal Account Registration
Hirp Permit @licatbfrs by tuHic A U$oading of Docurnents lnrrentory Stock Managenrent
Albws Maile#in or OIC Permit Applkatisrs
Web-Based Payment
P0 Bo,',( estabiidled by TDS for Mailed-in Ap$irations
All other ctrr#porderre $rill be rnailed or sranrxd Hr,tdeen TDS ard $te City "Self-Srvire" InBrnet access 2417 fu tlx prHic to view their perrnit informatfrrt fuire SurFport via enrail 8am-5prn l.'torday-Friday (excltdirry l+didaF) $x*tl# pw pnnit Feruat F*
' Fhysical tffi; fi&Dn-Diqatalrermits
$0"75 px Pennit Online {Digital} tur'rlr,it - Na freview - ltla Fulfrllnrerz,t r Mrh:als FDf Fennits
+$ZOO per Pwl*tit Pen*it {vlatx;al €xtry/Inrprt by TDS
r Incltdes docLrnpnt valldation
$1.5o lrerSrconit +
frrct clas* p*stage FUT- F IL LI*,EN T SER W C E5
TDS will assign app'oved Fermib ard deliver via mail with bter' Pen n it Stac k y' Su ytp li*s Suppliee{ by Agetry
1

AGREEMENT FOR PROCESSING

OF PARKING CITATIONS, PERMITS AND MOBILE DEVICES
v
OTHEfr L ETTE R C0.frRESPtCI$lD€NCE $f perleifer * Uuf, dass Stostage
This fee will rcryer the maili'ng of a sirqle pa6" of infornnation, such as a sim$e rersral letter or a reffion letter, etr. Otler mailirqs outside af the fulfilmert proress ran be rxryotiated. trennit Pracessing Sank Managenrcnt "$58perruorffi
F/rrs furlr feeqlrtrmrgrr'
. Proress all permit deposits into a separate account sefup for Aqency " Wnite a cherk to TDS for services rendered
. Reronrile the account rnonthly
' Provide rnonthly reconciliation of all activlties in the account " \{Irite a rheck to Agency monthly for the balance of the funds . $5 fee per NSF and Refurd check
" trlote: Reduced to $25 per month if TDS Bank Managernent is already established Credit Card Paynrcnts {Intemet} Ho Charge tCI Agenry
A conrrenierre fue cf 4o/a af lfie anrount paid is rharged b *te rufurs for this servire. This fee {overs the rwt of ofigoing mainknance, support ard enharrernents of t}te ncb payrnut system, ard indr.des daily and murthly reronciliation of all paynents. Optionalty, dre Agency may cff,lose b pay ftis fee. {Rle wbjec{ to rhange).
cus r0 *rra rrfrN c HA R $ E5 { a PTroN A L ) $12o PEfr Hfrafr B

Turbo Data Amendment
ATTACHMENT 2

AMENDMENT TO AGREEMENT
This FIRST AMENDMENT TO AGREEMENT is dated for identification this 17th day of November 2022 and amends that certain agreement for processing of parking citations and parking permit management dated December 1, 2017, made by and between the Town of Los Gatos, ("Town,") and Turbo Data Systems, Inc.(“Consultant.”)

RECITALS
A. Town and Consultant entered into an agreement for processing of parking citations and parking permit management on December 1, 2017, (“Agreement”), a copy of which is attached hereto and incorporated by reference as Attachment 1 to this Amendment.

AMENDMENT

1. Item 3. TERM is now amended by mutual consent to extend the term for an additional threeyears until December 1, 2025.

2. All other terms and conditions of the Agreement remain in full force and effect.

IN WITNESS WHEREOF, the Town and Consultant have executed this Amendment.

Town of Los Gatos Approved as to Consent:

By: _______________________________ By: ______________________________ Laurel Prevetti, Town Manager Roberta Rosen, President
Department Approval:
_______________________________________
Jamie Field
Chief of Police
Approved as to Form: Attest:
______________________________ ______________________________ Gabrielle Whelan, Town Attorney Wendy Wood, CMC
Town Clerk

PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney 110 E. Main Street Los Gatos, CA 95030 ● 406-354-6832
www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 9
DATE: December 13, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Authorize the Continuation of the Business License Late Fee Penalty Suspension into the 2023 Calendar Year
RECOMMENDATION:

Authorize the continuation of the Business License Late Fee Penalty Suspension into the 2023 calendar year.

BACKGROUND:

The Town requires all businesses located within Los Gatos and/or those that operate within Los Gatos to obtain a business license. Annual renewal payments are due on January 2 of each year.

According to the Town Code a 25% late fee penalty is assessed up to 100% on unpaid balances every 30 days.

Since March 2020, to alleviate the impacts of the pandemic, the Town Council has been working to remain supportive and adaptive to the community’s businesses.

One of the steps taken to support businesses included a business license late fee penalty suspension during the emergency proclamation.

DISCUSSION:

The Town is currently partnering with HdL Companies (HdL) to provide dedicated business license support to Los Gatos businesses. Through the partnership, the Town’s business license application and renewal process has been streamlined by offering online business license applications and renewals. HdL is assisting with a variety of business license related tasks including new applications, annual renewals, payments, compliance inquiries, and any other general support. In addition, in November, Los Gatos voters approved Measure J, which

PAGE 2 OF 2
SUBJECT: Authorize the Continuation of the Business License Late Fee Penalty Suspension in 2023 Calendar Year
DATE: December 13, 2022
DISCUSSION (continued):
modernizes the Town’s business license tax program. This is the first update to the program since 1991 and includes adjustments to flat rate fees, retailing gross receipts, and e-commerce, manufacturing, wholesaling, and jobbing grossreceipts.

During this transition period, staff is recommending waiving the business license late fee penalty during the first year (2023) to provide adequate time for businesses to adjust to the new process and fee structure.

FISCAL IMPACT:

Continuing the late fee penalty waiver will reduce the potential collection of late fee penalties; however, providing sufficient time for the transition to the online platform and other HdL efficiencies will enable businesses to pay on-time in the future and have a better user experience.

ENVIRONMENTAL ASSESSMENT:

This is not a project defined under CEQA, and no further action is required.

PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney 110 E. Main Street Los Gatos, CA 95030 ● 406-354-6832
www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 10
DATE: December 9, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Authorize the Town Manager to Execute an Assignment of Agreement with Bartel Associates, LLC to Assign the Agreement to Foster and Foster Consulting Actuaries, Inc.

RECOMMENDATION:

Authorize the Town Manager to execute an Assignment of Agreement with Bartel Associates, LLC to assign the agreement to Foster and Foster Consulting Actuaries, Inc.

BACKGROUND:

In October 2021, the Town of Los Gatos sent a Request for Proposals (RFP) for actuarial consulting services to sixteen qualified firms known to provide actuarial services. The opportunity was also promoted on the Town’s website, What’s New, and other social media platforms. Three firms responded with proposals: Actuarial Retirement Consulting, Precision Actuarial Inc., and Bartel Associates, LLC.

A selection panel consisting of the Finance Commission Chair, the Finance Director, Assistant Town Manager, Finance and Budget Manager, and Finance Administrative Analyst reviewed and scored the three proposals. The firms were evaluated based on their technical expertise, qualified personnel, and responsiveness to the RFP. Based upon the firm’s technical expertise, proposal, interview, and references, the panel selected Bartel Associates, LLC. This selection was approved by Town Council at its January 18, 2022 meeting.

DISCUSSION:

Staff has been informed that Bartel Associates, LLC has been acquired by Foster and Foster Consulting Actuaries, Inc. Per the Town Attorney, the Town must now assign the agreement to Foster and Foster through the recommended Assignment of Agreement and subsequent Town Council approval.

PAGE 2 OF 3
SUBJECT: Authorize a Assignment of Agreement with Bartel Associates, LLC to Assign the Agreement to Foster and Foster Consulting Actuaries, Inc.

DATE: December 9, 2022
CONCLUSION:

Authorize the Town Manager to execute an Assignment of Agreement with Bartel Associates, LLC to assign the agreement to Foster and Foster Consulting Actuaries, Inc.

FISCAL IMPACT:

There is no fiscal impact to the Town.

ENVIRONMENTAL ASSESSMENT:

This is not a project defined under CEQA, and no further action is required.

Attachment:

1. First Amendment to Bartel Associates, LLC Agreement

ASSIGNMENT OF AGREEMENT
This ASSIGNMENT OF AGREEMENT is dated for identification this 20th day of December 2022 and assigns that certain agreement for professional actuarial services dated January 31, 2022, made by and between the Town of Los Gatos, ("Town,") , Bartel Associates, LLC.(“Consultant.”) to Foster and Foster Consulting Actuaries, Inc. (“Foster”).

RECITALS
A. Town and Consultant entered into an actuarialservices Agreement on January 31, 2022, (“Agreement”), a copy of which is attached hereto and incorporated by reference as Exhibit A.

B. Because Bartel Associates, LLC, was acquired by Foster and Foster Consulting Actuaries, Inc., the parties now wish to assign the Agreement to Foster.

ASSIGNMENT

1. The parties agree that the Agreement is assigned to Foster.

2. All other terms and conditions of the Agreement remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Assignment Agreement.

Town of Los Gatos: Foster:

By: By:____________________________
Laurel Prevetti, Town Manager CEO or VP
By:____________________________
One additional corporate officer
Bartel:

By:____________________________
Member for Manager-Managed LLC
ATTACHMENT 1

Department Approval:

Gitta Ungvari
Finance Director
Approved as to Form: Attest:

Gabrielle Whelan, Town Attorney Wendy Wood, CMC, Town Clerk 1 of

PREPARED BY: Savannah Van Akin
Assistant Planner
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, and Community Development Director
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 11
DATE: December 16, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Consider a Request for a Continuance for an Appeal of a Planning Commission Decision to Deny a Fence Height Exception Request for Construction of a Six-Foot Fence Located Within the Required Front Yard Setback and a Vehicular Gate Set Back Less than 18 Feet from the Edge of the Adjacent Street on Property Zoned R-1:10. APN 523-04-043. PROPERTY OWNER/APPELLANT: David and Ilana Kohanchi. APPLICANT: Nina Guralnic.

REMARKS:

On November 9, 2022, the Planning Commission considered an appeal of a Community Development Director denial of an exception request for construction of six-foot tall fencing located within the required front yard setback and construction of a vehicular gate with reduced setbacks. The Planning Commission denied the appeal and upheld the Community Development Director denial of the fence height exception request.

On November 14, 2022, the decision of the Planning Commission was appealed to the Town Council by the property owners, David and IIana Kohanchi. Pursuant to Town Code Section

29.20.280, the appeal must be heard within 56 days of the Planning Commission hearing and in this case by January 4, 2023. The Council must at least open the public hearing for the item, and it may continue the matter to a date certain.

Attachment 1 includes a request for a continuance of the item to a date certain of January 17, 2023. Because this item was publicly noticed and because the Town Code requires that the Town hold a public hearing within 56 days of an appeal, staff recommends that the Town Council open the public hearing to take public comments from any members of the public who will not be able to attend the January 17, 2023, meeting and continue the appeal hearing to January 17, 2023.

PAGE 2 OF 2
SUBJECT: 755 Blossom Hill Road/FHE-21-003
DATE: December 16, 2022
Attachment:

1. Request for Continuance, dated December 13, 2022

To Whom it May Concern,
We would like for this item at 755 Blossom Hill Road (FHE-21-003) to be continued to the January 17 meeting. We acknowledge that we understand that the January 17 meeKng date is aLer the 56 day window period from the date of the Planning Commission Decision as outlined in Ordinance No 1967.

Sincerely,
David and Ilana Kohanchi
ATTACHMENT 1

This Page
Intentionally
Left Blank

PREPARED BY: Bridgette Falconio, Administrative Technician Gabrielle Whelan, Town Attorney
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, and Finance Director 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 12
DATE: December 20, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Review and Approve the Town’s Response to the 2022 Civil Grand Jury of Santa Clara County Report Entitled, “If You Only Read the Ballot, You’re Being Duped.”
RECOMMENDATION:

Review and approve the Town’s response to the 2022 Civil Grand Jury of Santa Clara County Report entitled, “If You Only Read the Ballot, You’re Being Duped.” BACKGROUND:

On October 7, 2022, the 2021-2022 Civil Grand Jury of Santa Clara County released a report on the clarity of ballot measure questions. The Grand Jury Report proposes that an oversight person or body be empowered to review and reject the wording of ballot questions if deemed to be false, misleading, or partial to one side. The Grand Jury’s final report is included as Attachment

1. Pursuant to Penal Code sections 933 and 933.05, the Grand Jury requested a response from the Town of Los Gatos and other jurisdictions that may place measures on the ballot. Specifically, the Town of Los Gatos and 22 other governing bodies were asked to respond to Finding #1 of the report and report Recommendations 1b, 1c, and 1e. Penal Code section 933(c) requires the Town Council to provide a response within 90 days, by no later than January 5, 2023. A draft response letter is included as Attachment 2.

PAGE 2 OF 3
SUBJECT: Santa Clara County Civil Grand Jury Report
DATE: December 20, 2022
DISCUSSION:

The Grand Jury investigated the clarity of ballot measure questions countywide. The Grand Jury identified two ballot measure questions, prepared by other local agencies in the County, that were potentially misleading. The Grand Jury’s final report includes the following finding and six recommendations:

Finding #1:

The Civil Grand Jury finds that in the current environment, which is unregulated at the local level, it is easy for the author of a ballot measure question to write the question in a way that is confusing or misleading to voters.

Recommendation 1a:

The Board of Supervisors should ask the County Counsel to review all ballot questions submitted to it pursuant to Recommendation 1b.

Recommendation 1b:

Governing entities within Santa Clara County should voluntarily submit their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendation 1d is implemented.

Recommendation 1c:

Governing entities within Santa Clara County should, by March 31, 2023, adopt their own resolution or ordinance to require submission of their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendations 1d and 1e are implemented.

Recommendation 1d:

The County should create an independent, citizen-led oversight commission like the recommended Good Governance in Ballots Commission as described in the “Solutions” section of this report. The Commission should be implemented by August 1, 2024.

Recommendation 1e:

Governing entities within Santa Clara County should submit their ballot questions for review by the Good Governance in Ballots Commission pursuant to Recommendation 1d.

Recommendation 1f:

The County should, by March 31, 2023, take appropriate action to request that the state legislature consider amending current law to require the County Counsel to review and approve local ballot measure questions before they are voted on.

PAGE 3 OF 3
SUBJECT: Santa Clara County Civil Grand Jury Report
DATE: December 20, 2022
DISCUSSION (continued):

The Grand Jury Report requests that the Town of Los Gatosrespond to Recommendations 1b, 1c, and 1e only. The proposed response partially agrees with Finding #1. The proposed response disagrees with Recommendations 1b, 1c, and 1e, for the reasons set forth in the letter, which include the following:
1) The Elections Code already contains a remedy in the event that an individual considers ballot measures materials to be misleading. If the current Elections Code remedy is not satisfactory, those seeking a change to the process could propose an amendment to the Elections Code.
2) Ballot measures, including ballot questions, are reviewed by the Town Council at public meetings, which already provides an opportunity for the public to request clarification. 3) There is often a tight timeframe for getting ballot measures on the ballot, which does not afford the Town the time to consult with separate government agencies.

If approved by the Town Council, the response letter will be submitted to the Presiding Judge of the Santa Clara County Superior Court before the response deadline.

CONCLUSION:

Staff recommends approval of the letter with the detailed response as contained in Attachment

2. Once approved by the Town Council, the letter will be transmitted to the Santa Clara County Civil Grand Jury, the Presiding Judge, and the Clerk of the Santa Clara County Superior Court.

COORDINATION:

The Town’s proposed response was coordinated with the Town Manager’s Office, Clerk’s Department, and Town Attorney’s Office.

FISCAL IMPACT:

There is no fiscal impact for approving the response to the Civil Grand Jury on this matter.

ENVIRONMENTAL ASSESSMENT:

This is not a project defined under CEQA, and no further action is required.

Attachments:

1. Santa Clara County Civil Grand Jury Report dated October 7, 2022

2. Proposed response to the Santa Clara County Civil Grand Jury

SUPERIOR COURT BUILDING • 191 NORTH FIRST STREET, SAN JOSE, CALIFORNIA 95113 • (408) 882-2721 • FAX (408) 882-2795

G R A N D J U R Y S A N T A C L A R A C O U N T Y
October 7, 2022
Town of Los Gatos
c/o Ms. Wendy Wood, Town Clerk
110 East Main Street
Los Gatos, CA 95031
Sent via email: [email protected]
Dear Ms. Wood:

The 2022 Santa Clara County Civil Grand Jury is transmitting to you its Final Report, If You Only Read the Ballot, You’re Being Duped.

California Penal Code § 933(c) requires that a governing body of the particular public agency or department that has been the subject of a Grand Jury final report shall respond within 90 days to the Presiding Judge of the Superior Court on the findings and recommendations pertaining to matters under the control of the governing body. California Penal Code § 933.05 contains guidelines for responses to Grand Jury findings and recommendations and is attached to this transmission.

Please note:

1. As stated in Penal Code § 933.05(a), attached, you are required to "Agree" or "Disagree" with each applicable Finding: 1. If you disagree, in whole or part, you must include an explanation of the reasons you disagree.

2. As stated in Penal Code § 933.05(b), attached, you are required to respond with one of four possible actions to each applicable Recommendation: 1b, 1c, 1e.

Your comments are due to the office of the Honorable Beth McGowen, 2023 Presiding Judge, Superior Court of California, County of Santa Clara, 191 North First Street, San José, CA 95113, no later than January 5, 2023.

Copies of all responses shall be placed on file with the Clerk of the Court.

If you have any questions, please contact Britney Huelbig, Deputy Manager for the Civil Grand Jury, at (408) 882-2721 or [email protected].

Sincerely,
James Renalds
Foreperson, 2022 Civil Grand Jury
Enclosures
ATTACHMENT 1

Release date here Page 0 of 23

IF YOU ONLY READ THE BALLOT,
YOU’RE BEING DUPED
2022 Santa Clara County
Civil Grand Jury
October 7, 2022

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED

TABLE OF CONTENTS
GLOSSARY AND ABBREVIATIONS..........................................................................................2 SUMMARY.....................................................................................................................................4 BACKGROUND .............................................................................................................................5 METHODOLOGY ..........................................................................................................................6 INVESTIGATION...........................................................................................................................6 CONCLUSION..............................................................................................................................16 FINDINGS AND RECOMMENDATIONS..................................................................................17 REQUIRED RESPONSES............................................................................................................19 REFERENCES ..............................................................................................................................21

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED

GLOSSARY AND ABBREVIATIONS
Attorney General The chief law officer who represents a state in legal proceedings.

Ballot Card The printed ballot, usually on high-grade paper, consisting of the ballot questions and names of individuals running for elected office.

Ballot Measure Ballot measures are proposals, usually at a county or local level, to enact new laws or repeal existing laws, which are placed on the ballot for approval or rejection by the
electorate.

Ballot Proposition Ballot propositions are proposals, usually at the state level, to enact new laws or constitutional amendments or repeal existing laws or constitutional amendments, which are
placed on the ballot for approval or rejection by the
electorate.

Ballot Question or Ballot
Label
Boards and Commissions
For purposes of this report, Ballot Question or Ballot
Label means the 75-word or less statement of a measure
that precedes “Yes” or “No” on the ballot card.

Boards and Commissions are made up of residents who
volunteer their time and expertise to assist and advise governing bodies in the chosen capacity.

Caselaw Law or legal precedent established by the outcome of court cases.

County Counsel or Office of
the County Counsel
The County Counsel is the chief legal advisor and
representative for the county, including the county board of supervisors and all county agencies and departments.

Elections Code A collection of California laws related to public elections.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED Governing Entity A jurisdiction such as a city, county, school district, special district, or political subdivision.

Home Rule The right of self-government that is granted by state constitution or statute to give autonomy to a local
government. Home Rule implies that each level of
government has a separate realm of authority.

Public Opinion Pollsters
Registrar of Voters
Opinion polls are designed to represent the opinions of a population by conducting a series of questions and then extrapolating generalities in ratio or within confidence intervals. A person who conducts polls is referred to as a pollster.

The department responsible for the operation,
administration, and direction of the elections department, with primary responsibility for the registration of voters, the holding of elections, and all matters pertaining to elections.

Single Subject Rule

Per Article II, Section 8(d) of the California Constitution, “An initiative measure embracing more than one subject
may not be submitted to the electors or have any effect.” Essentially, the rule stands for the notion that where an initiative embraces more than one subject, it can neither be submitted to, nor enacted by, the voters.

Term Limits A specified number of terms (in years) that a person in office is allowed to serve.

Writ of Mandate In California, writs of mandate are used by superior courts, courts of appeal, and the Supreme Court to command
lower bodies, including both courts and government
agencies, to do or not to do certain things.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED

SUMMARY
It is not uncommon for the public to be confronted daily with news and information through multiple sources—traditional television programming, 24/7 cable news, satellite radio, social media, and phone alerts. In the context of elections, voters’ busy lives can be overwhelmed with many different voices. County and state voter information guides are required by law to be mailed to every registered voter, but voters today do not have a lot of time to read these resources. As a result, the ballot measure question printed on the ballot itself becomes a key factor in the outcome of an election.

There is an expectation in California law that ballot questions be drafted in a manner that is not false, misleading, or partial to one side.1 But there are ways to work around it. Among the fifty or so jurisdictions in Santa Clara County that are eligible to put forth a ballot measure, the 2022 Santa Clara County Civil Grand Jury (Civil Grand Jury) has seen ballot question language that is confusing, advocacy-oriented, or simply dishonest. Yes, sometimes voters are being deceived.

Many voters cannot comprehend the complicated language or the implications of that "yes” or "no” vote. In a perfect world, voters would have the luxury of time to research these issues. In reality, however, voters almost always rely on the language of the ballot measure question itself.

What can be done about this? The Civil Grand Jury proposes an oversight person or body, one who has taken an oath to act with integrity, is well versed in the requirements of the law, and is empowered to review and to reject ballot question wording that is false, misleading, or partial to one side. Santa Clara County should have a climate whereby governing entities in Santa Clara County are discouraged from using dishonest or deceitful wording in a ballot question, especially when they know it will be reviewed and could be rejected. In so doing, due process will be strengthened. With clearer writing, ballot measure questions will be more transparent and straightforward, which will lead to a better perception of government by the voters. It is time to remove impediments to good governance.
1 California Elections Code section 10403 requires a ballot question to “conform to this code governing the wording of propositions submitted to the voters at a statewide election.” The California Elections Code contains Section 9051, which provides that in a statewide election the ballot title and summary of an initiative or referendum must be a “true and impartial statement of the purpose of the measure in such language that the ballot title and summary shall neither be an argument, nor be likely to create prejudice, for or against the proposed measure.” (Elec. C. §9051(c); see also, McDonough v. Superior Ct. (2012) 204 Cal. App. 4th 1169, 1172.)

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED

BACKGROUND
Ballot measures or ballot propositions are proposals to enact new laws or constitutional amendments or to repeal existing laws or constitutional amendments. They are placed on the ballot for approval or rejection by the voting public. The words “ballot measures” are often used by county, city, and local governing entities, whereas at the state level, the California State Legislature uses the term “ballot propositions” to refer to the same concept. The ballot measure question, which is the subject of this report, refers to the maximum 75-word text that precedes the “Yes” or “No” selection on the ballot card itself. Because most voters never read beyond what is printed on the ballot card, it is of critical importance that ballot measure questions be concise, accurate, and impartial.

Recently, two local newspaper articles highlighted the tactics that governing entities have used to manipulate voters:
• Borenstein, Daniel, Tricks California Local Officials Use To Trick Voters, Bay Area News Group, January 21, 2022.
• Mercury News and East Bay Times Editorial Boards, Stop Deceiving Bay Area Voters on Local Tax Measure Costs, June 26, 2020, updated September 5, 2020.

As part of its charge, the Civil Grand Jury is responsible for identifying areas within local government that lack good governance or practices. This Civil Grand Jury identified as a problem the choice of wording used in local ballot measure questions. Specifically, the Civil Grand Jury discovered that some local governing entities presenting measures for a public vote create ballot questions that are purposefully misleading so they may obtain their desired result. In particular, it was noted that the wording of a ballot question from the June 2022 election, although representing a relatively simple issue, created confusion among the public. When voters found out what the text of the measure actually meant, they felt deceived by the wording of the ballot question. Deception in ballot questions is worth the attention of the Civil Grand Jury. This problem must be remediated to reinstate good governance in the election process.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED

METHODOLOGY
The Civil Grand Jury used the following investigative methods:
• Interviews with ten individuals who are well versed in the intricacies of the election process and experts in political science and local governments
• Three published Civil Grand Jury reports: 2021-22 Alameda County, 2021-22 Santa Cruz County, 2021 Santa Clara County
• Editorials from local and regional newspapers: Mercury News, Los Angeles Times, San Francisco Chronicle
• Close reviews of ballot measures, past and upcoming, from the counties of San Mateo, Santa Clara, Santa Cruz, and the City and County of San Francisco • Legal research of court challenges involving ballot questions

INVESTIGATION
Throughout this report, the Civil Grand Jury was interested only in the process of ballot measure question drafting, not the substance of the underlying ballot measure itself. In its research and analysis, the Civil Grand Jury does not examine the merits of the measure, but rather whether the question as drafted is truthful, impartial, and fair. Ballot questions must conform to statutory requirements and should provide voters with sufficient information and transparency to make informed decisions.

A straightforward ballot question can be summarized this way: A vote for “Yes” means yes and a vote for “No” means no. Unfortunately, it is common for ballot questions to be presented whereby a vote for “Yes” actually means no, and vice versa. This wording is arguably confusing. Inching farther away from confusing questions, the research performed by the Civil Grand Jury found ballot questions that are even worse—they are misleading.

Santa Clara Valley Water District’s Measure A
During the last election in June 2022, the question for Measure A put forth by the Santa Clara Valley Water District (Water District) employed such a tactic:

Shall the measure amending the Santa Clara Valley Water District Ordinance 11-01 to limit Board members to four successive four-year terms be adopted? The Water District had term limits already in place for board members to serve three four-year terms, or 12 years at most. Measure A sought to increase term limits to four four-year terms, or 16 years at most. However, the ballot question hid the fact that a term limit was already in place; it

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED asked voters whether a term limit of four terms should be adopted, thereby couching the question as a measure to adopt term limits generally, which one political science expert described to the Civil Grand Jury as a concept widely favorable to the voting public. The ballot question did not reflect what the Water District wanted to do. The Water District wanted to extend term limits, but it wrote the ballot question without using the words “extend,” “change,” or “increase.” Instead, the Water District characterized the ballot measure as setting term limits, which is a mischaracterization of what Measure A was actually about.

Further, it is notable that in November 1998, the County of Santa Clara placed a substantially similar measure on the ballot using the same tactic. Measure E asked:

Shall the County of Santa Clara amend section 202 to limit the number of terms a member of the Board of Supervisors may serve to three terms, consisting of four years each? Again, the ballot question failed to inform the reader that each member of the County of Santa Clara Board of Supervisors was already limited to two terms and that the ballot measure proposed to extend years served, not “limit” them. By not being transparent, this tactic of ballot question drafting is tantamount to a lie by omission; it borders on deceiving the public. From Measure E in 1998 to Measure A this year, 24 years later, the climate has not changed.

Regulations that Govern Ballot Questions
Sections 9100-9190 of the California Elections Code specifically address county-level elections.

Other sections of the Elections Code, while they do not specifically address county-level elections, have import and therefore apply as well. The County of Santa Clara has not enacted local ordinance code provisions regarding ballot question language.

Under the Elections Code, the wording of a ballot measure must state the ballot question, or what the Elections Code calls the “label,” in 75 words or less (Elec. C. §9051(b), §10403, §13247). The ballot question must state “the nature” of the measure (Elec. C. §13120). The official who drafts the ballot question “shall give a true and impartial statement of the purpose of the measure in such language that the ballot title and summary shall neither be an argument, nor be likely to create prejudice, for or against the proposed measure” (Elec. C. §9051(c)). In other words, ballot measure questions shall not be false, misleading, or partial to one side.

Who is Responsible for Writing Ballot Questions?
Today, ballot questions are rarely written “from scratch.” Residing in the public domain are hundreds, if not thousands, of boilerplate questions spanning the universe of issues typically faced by government and public agencies. Putting a measure on the ballot usually starts with selecting

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED an existing template, preferably one that had been used successfully within a reasonable timeframe and geographic proximity to the one at hand. Tweaks are then made to the chosen template to fit the measure being proposed.

Governing entities are ultimately responsible for approving the final text of the ballot question, but the actual selection of words is often the calculated and carefully calibrated work product of hired election experts, consultants, and attorneys. These outside consultants often rely on public opinion pollsters to determine the type of proposal and wording to put before voters that would achieve the desired outcome. Often, this includes using “feel good” wording that is shown to resonate with voters: “reduce crime;” “funds spent locally;” “all money locally controlled;” and “with citizen oversight.” Results from public opinion polls often dictate the structure and selection of words used within the ballot question, which is then voted on and, if successful, adopted by the governing body such as a city council, a county board of supervisors, the board members of a school district, or any governing body of a government entity operating within the county. During the course of this investigation, the Civil Grand Jury learned that local measures on the ballot that governing entities choose wording likely to be most successful at the ballot box over clarity of language to the voter.

For purposes of this investigation, the Civil Grand Jury focused on ballot questions relating to local ballot measures, not state propositions, because according to the California Elections Code, the state attorney general is responsible for providing ballot questions for state propositions. In contrast, there is no similar requirement that a certain officer provide the ballot question for local elections, so it is instead drafted by the proponent of the measure at the local level.

Advocacy and Tactical Wordplay Result in Poorly Drafted Ballot Questions It has been widely observed today that the 75-word ballot questions are being used as advocacy pieces, at the expense of fairness and impartiality. In an aptly titled report published in June of last year, the Alameda County Civil Grand Jury advocated for “The Need for Accuracy and Impartiality of Ballot Measure Questions.” The jury explained how and why the desire to achieve a certain outcome has tainted the process to produce ballot measure questions that are not accurate and impartial:

In general, we found ballot questions suffer from a “proponent’s bias” that is a natural outgrowth of the typical process through which questions are selected, drafted, and proposed. … In general, we found that ballot questions too often fall short of what voters have a right to expect in terms of transparency and impartiality, even when satisfying minimum legal standards.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED The jury in Alameda reviewed and provided an in-depth analysis of six ballot questions to reach their conclusion. In so doing, they exposed the “tricks of the trade”—wording chosen for the sole purpose of increasing the odds of success at the polls. Adopting the same methodology as the Alameda report, the Civil Grand Jury reviewed past and upcoming ballot measure questions from local jurisdictions within Santa Clara County. The Santa Clara County Civil Grand Jury observed the same tricks and tactics used by governing bodies to deceive voters:
(1) Using “feel-good" words to garner voter approval. Measure F, November 2020, said “all funds spent locally,” which is meaningless when one pauses to think about it. (2) Adding favorable language even where it plainly does not apply. Measure F, November 2020, said “independent audits, citizens’ oversight” where the underlying ordinance implementing the measure makes no mention whatsoever of audit and oversight requirements.
(3) Adding misleading words to lead voters astray. Measure S, November 2020, said “until ended by voters,” falsely implying that the measure itself provided for repeal or that voters would have an opportunity to repeal the tax when they did not; Measure L, November 2020, conveyed the same with “can be ended by voters.” Measure A, March 2017, said “[funds] cannot be taken away by the State,” falsely implying that the state may access local funds when it may not.
(4) Manipulating words to divert voters from what is actually at issue. Upcoming Measure N, November 2022, which seeks authorization of $572 million in school bonds costing approximately 3 cents per $100 of assessed valuation, states “no increase in tax rates.” (5) Omitting relevant information necessary for voters to make informed decisions. Measure AA, November 2016, and Measure H, November 2014, made no mention of the tax increase that would be required to fund the school bonds that were at issue. (6) Putting multiple issues on a single measure, ostensibly violating the single subject rule.

Measure H, November 2020, sought to increase card room tax and the number of card tables allowed in gambling facilities.

At the writing of this report, the following measures slated for the upcoming November 2022 election also rely on at least one of the tactics described:

E “all funds spent locally with no money taken by the State and spent elsewhere” - see (1) and (3) above.

G, H, J, L “until ended by voters” - see (3) above.

I “Shall the City Charter be amended to add the City's ethics and elections commission (Board of Fair Campaign and Political Practices) to the Charter; remove requirements that members of the Planning, Civil Service, and Salary Setting Commissions be electors and/or citizens; remove gender-specific language; and require the City Council to adopt equity values, standards, and assessments in making certain decisions?” - see (6) above.

O “all money staying local” - see (1) above.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED Along the same lines, it is worth noting that in June 2022, the Santa Cruz County Civil Grand Jury released its report, “Words Matter: Did Measure G Deceive Voters?” The question confronting the jury was whether the County of Santa Cruz was honoring the provisions in the ballot measure following its passage. The jury concluded that the ballot question behind the November 2018 Measure G was misleading after its investigation and research revealed no basis whatsoever for including the words “annual audits and independent citizens oversight” within the ballot question.

Arguably, these words were used for no purpose other than to elicit good feelings in the voter.

The Elephant in the Room: Big Money
Elections cost money—lots of money. In an article published June 30, 2002, updated June 22, 2022, CalMatters put it succinctly: “Ballot measures are big business.” The Civil Grand Jury learned that cost is a major factor in the decision to get to the ballot. San Jose’s Mercury News reported that the Water District’s Measure A from the June 2022 election cost taxpayers $3.2 million.

Once the decision is made by the government entity to spend the money to go to ballot, a lot of pressure is put on the entity to do whatever it takes to secure a win. For this reason, proponents of ballot measures stay focused on the result, hiring high-priced election consultants, attorneys, and opinion pollsters to carefully frame the ballot question to achieve the desired outcome. Successful elections will reward those that are behind them. It does not take much imagination to understand how this practice has evolved to become “high stakes.” For example, a school district superintendent who has successfully secured funding through school bond measures may parlay these wins to rally support for a more prestigious role or a position at a larger public institution.

On the other hand, if a measure fails, individuals’ livelihoods are at stake because someone will likely have to take the blame for it—usually either someone on staff or the board proponents of the governing body. This is why proponents advocate so strongly, often—as exemplified above— sacrificing context, clarity, truthfulness, and transparency in ballot question wording in favor of pure advocacy. The Civil Grand Jury learned from those in the ballot question business that it is understood that the drafter will make sure the statement is “lawful,” but it is also understood that it will not necessarily provide full disclosure.

Eroding the Public’s Trust
Many voters in Santa Clara County felt that they were tricked by the Water District based on how Measure A was worded. The Civil Grand Jury compiled the following descriptors of Measure A from local news sources and through its interviews: “deceitful,” “deceptive ballot language,” “designed to confuse voters,” “dishonest,” “false,” “hiding the ball,” “lacks integrity,” “lie by omission,” “misleading,” “not ethical,” “not transparent,” “not clear,” “violates the norm,”

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED “violates standards of good governance,” “board must be held accountable,” “board should resign,” “board violated its fiduciary duty,” “board violated the trust of the people,” “board wasting money,” “failure of character,” “failure to represent its constituents,” “fraudulent misappropriation of public funds,” “misled the public for political gain,” “self-serving hoodwinking of the electorate,” “self-serving dishonesty,” “unacceptable in a democracy.” Public opinion made it clear that where a ballot question fails to provide voters with sufficient information to make an informed decision, it does so at the expense of public trust. Forming distrust between government and its citizenry hurts. What the Water District did through Measure A has severe ramifications because it creates distrust between the government agency and the people the agency is supposed to serve and protect. Going forward, Santa Clara County residents will likely question the integrity and ethical behavior of the Water District. Once the bonds of trust have been weakened, citizens are less inclined to trust the actions and decisions of this agency and more inclined to ask, “If the Water District cannot be trusted to be truthful on the ballot, how can we know them to be truthful in other matters?”
With the passage of Measure A, many residents lost confidence in the Water District. It may take a long time to regain trust from the community. While the Civil Grand Jury appreciates the desire of a government entity to advocate for itself when putting ballot measures up for a public vote, ballot questions cannot be false, misleading, or partial to one side. Based on Civil Grand Jury research and reports, too many local measures fail to meet this standard in favor of advocacy and “proponent’s bias.”
Lack of Oversight Results in Poorly Drafted Ballot Questions Despite the number of hands that touch a proposal from inception to ballot card, the Civil Grand Jury was surprised to discover that there is no filter or oversight by an appropriate official prior to the adoption of ballot question wording. At the state level, the “Attorney General gives a true and impartial statement of the purpose of the measure in such language that the ballot title [e.g., the ballot question] and summary shall neither be an argument, nor likely to create prejudice, for or against the proposed measure” (Elec. C. §9051(c)). But the Attorney General does not have jurisdiction over local measures and thus does not provide the ballot question. When it comes to local measures, the Civil Grand Jury learned that there is not a similar role performed by an official, like the Attorney General, that can provide the wording for ballot questions. Rather, when the ballot question is submitted to the Santa Clara County Registrar of Voters, their review is narrowly limited to enforcement of the 75-word limit. Staff at the County Registrar of Voters manually count the number of words to ensure that the word cap has not been stretched. They do not monitor the content of the ballot question.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED At the local level, the County of Santa Clara Office of the County Counsel performs legal services that are most analogous to the Attorney General’s role at the state level with respect to elections.

Further, County Counsel has expertise in election law and advises the County of Santa Clara Registrar of Voters. The County Counsel does not, however, have authority over cities and political subdivisions within the boundaries of the county. Therefore, when a city, school district, or special district places a local measure on the ballot, they are permitted under current law to draft the language themselves. They have every incentive to adopt wording proposed by their polling consultants, who will give weight to “feel good” words over simplicity, transparency, and impartiality. Fundamentally, the government entity’s self-interest dictates the ballot question wording.

The Current Sole Remedy—Initiating a Court Challenge—Falls Short Under current legislation, there is no realistically expedient method to challenge problematic ballot questions. When a measure is to be placed on the ballot for an upcoming election, it is subject to a 10-day public examination period during which any voter in the jurisdiction may file a lawsuit to amend the language of the measure. California Elections Code section 9295 sets forth the procedure:

During the 10-calendar-day public examination period provided by this section, any voter of the jurisdiction in which the election is being held, or the elections official, himself or herself, may seek a writ of mandate or an injunction requiring any or all of the materials to be amended or deleted. The writ of mandate or injunction request shall be filed no later than the end of the 10-calendar-day public examination period.

A peremptory writ of mandate or an injunction shall be issued only upon clear and convincing proof that the material in question is false, misleading, or inconsistent with the requirements of this chapter, and that issuance of the writ or injunction will not substantially interfere with the printing or distribution of official election materials as provided by law.

There are several reasons why the 10-calendar-day public examination period to object in a formal court setting does not work well:
(1) The public tends not to hear about ballot measures until it is too late. This is due in part to a dearth of media coverage of local news, a result of the consolidation of local news outlets by media conglomerates. It is no secret that in today’s news environment, local news coverage has been reduced significantly. Furthermore, ten days is a very short window to react, let alone mount a court challenge to remediate.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED (2) Ten days is much too short a time to locate an attorney well versed in the laws and processes of elections to file a lawsuit in this specialized field. (3) Even if an attorney can be available within the 10-day window, it is not within the means of the average person to afford the attorney fees necessary to pursue a remedy. (4) Voters challenging the wording in a ballot question face an uphill battle because the courts give deference and considerable latitude to the original author. Further, courts uphold the ballot measure question if it substantially complies with the requirement not to be “false, misleading, or partial to one side.” (See Bibliography, Amador and McDonough decisions.) (5) There is practically no recourse to fix non-conforming ballot questions after the 10- calendar day public examination period has passed. (See Bibliography, Denny decision.) (6) Even the single subject rule—a state constitutional doctrine—has been watered down by case law; hence it is no longer vigorously enforced. (See Bibliography, Amador and Harbor decisions.)
When confronted with challenges to ballot measures, the courts have stated:
• Relief under a writ of mandate may be granted "only upon clear and convincing evidence" that the challenged election material is "false or misleading or otherwise inconsistent with the provisions." (See Bibliography, McDonough decision.) • The test is not whether the ballot question could be more complete. (See Bibliography, Martinez decision.)
• The ballot title need not be the “most accurate,” “most comprehensive,” or “fairest” that a skilled wordsmith might imagine. (See Bibliography, Yes on 25, Citizens for an On-Time Budget decision.)
• The courts are not free to change an accurate statement to reflect their interpretation of the common sense understanding of the language. (See Bibliography, Yes on 25, Citizens for an On-Time Budget decision.)
• The courts are not free to wordsmith the ballot question and change it just because they believe it could be better. (See Bibliography, Martinez decision.) • The courts must give deference to the official who drafts the ballot question; “all legitimate presumptions should be indulged in favor of the propriety” of the drafter’s actions. (See Bibliography, Becerra decision.)
Solutions

The Civil Grand Jury has learned that the sole legal remedy currently available to right a wrong when it comes to ballot measure questions is insurmountable for the average citizen. Nonetheless, the Civil Grand Jury notes that there could be two potential mechanisms to improve the current process.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED

1. Task an appropriate official to review ballot measure questions Current law requires that the individual who drafts the ballot question do so in a way that is not false, misleading, or partial to one side. In order to meet this requirement, an objective, neutral third party is needed to speak on behalf of the voting public, ideally someone who is well versed in the law, has a fiduciary duty to uphold the law, and has taken an oath to act with integrity. The Civil Grand Jury recommends that County Counsel perform this task. Further, the Civil Grand Jury recommends that the County of Santa Clara Board of Supervisors should endorse the County Counsel to act in a role, like that of the Attorney General, to provide for ballot question wording for all local measures.

What this might look like: After the governing entity ratifies the concept behind the proposed measure, as is the practice today, the entity’s lawyer, whether a city attorney, school district attorney, or special district attorney, would draft a ballot question that is impartial, unbiased, and non-argumentative. The proposed ballot question would then be submitted to the County Counsel, who would be charged with overseeing the narrow task of ensuring that the wording of the question is not false, misleading, or biased in favor of one view. Most importantly, County Counsel would also be authorized to reject non-conforming or deficient wording and to compel revisions. Only when the ballot question at issue conforms to statutory requirements would County Counsel approve it for use.

2. Create an independent oversight commission to review ballot questions It is not unusual for jurisdictions to convene independent advisory commissions to assist in county governance. The County of Santa Clara alone boasts over 75 boards and commissions, ranging from an Advisory Commission on Consumer Affairs to a Youth Task Force.

For purposes of overseeing conformity of ballot measure questions, the Civil Grand Jury recommends that the County form a Good Governance in Ballots Commission (Good Governance Commission). This advisory commission should act quickly to review and comment on ballot questions or provide recommendations to remediate questions that that are false, misleading, or partial to one side. The composition of the Good Governance Commission should, at a minimum, include an attorney member of the California State Bar, either to participate as a full member or act as an ex officio member without voting privileges. Because County Counsel is the attorney to most Santa Clara County advisory boards and commissions, it could therefore be tasked to help members of this commission navigate the intricacies of California’s statutory requirements.

Apart from the obvious benefits—non-partisanship and public representation—another advantage of having a single commission perform the task of reviewing ballot questions would be to maintain consistency across all governing entities. Regardless of whether a city, county, school district, or

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED other jurisdiction puts forth the measure, the output from a neutral, uninterested third party would probably help eliminate the rhetoric and advocacy inherent in the current practice.

To be successful, the Good Governance Commission should ideally have the ability to review and to reject language that is biased and partial. The power of rejection is crucial because it would also likely have the effect of encouraging the governing entity to self-police. It must not be merely optional for governing entities to submit their ballot questions for review. If the commission were granted mere advisory powers, then it would have very limited impact; it is reasonable to surmise that most, if not all, governing entities would choose to decline to submit their ballot questions for consideration in the interest of the time required to add a layer of review.

Unfortunately, adoption of a Good Governance Commission that has the power to reject language would require passage of a state law that would enable the County of Santa Clara to have an express grant of power to impose a requirement on other entities. This is because “[t]he board of supervisors has no inherent powers; the counties are legal subdivisions of the state, and the county board of supervisors can exercise only those powers expressly granted it by Constitution or statutes and those necessarily implied therefrom” (Hicks v. Board of Supervisors (1977) 69 Cal. App. 3d 228, 242). In general, absent other express authorization, one governmental entity cannot regulate another.

Put another way, charter cities operate under home rule, which means that they do not answer to the county the city is located in. For example, the County of Santa Clara Board of Supervisors does not have jurisdiction to compel the City of Gilroy, a charter city, to abide by a county ordinance. Absent some legislative authorization, the County of Santa Clara cannot impose a mandatory review process for ballot questions on other entities. For this reason, the Civil Grand Jury urges the County to pursue legislative solutions to facilitate a process by which the County Counsel would be required to review and approve local measure ballot questions before they are voted on.

Formation of a Good Governance in Ballots Commission
The Civil Grand Jury believes that having an independent oversight commission with advisory powers will improve the local electoral process. It puts pressure on governing bodies, sending the message that their ballot questions are being monitored for clarity, truthfulness, fairness, and impartiality.

The Alameda Civil Grand Jury report provides detailed instructions around the formation, structure, and operation of an oversight committee. This can be found in Appendix B of their June 2021 report. Last, but not least, another possibility is to lean on an existing Santa Clara County advisory body, the Citizens’ Advisory Commission on Elections, to create a subcommittee focused

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED on ballot question integrity and good governance. Because time is of the essence when it comes to the elections process, the subcommittee must act within the short turnaround timeframe established by state statutes and county ordinances.

There do not appear to be any advocates for transparent and neutral language. Action must be taken. Having the Office of the County Counsel review and approve ballot questions to ensure conformity to statutory requirements would be a good start. Convening a citizen-led, independent oversight Good Governance Commission is another solution.

CONCLUSION
Civil Grand Juries are charged to help government develop practical solutions to improve government operations. Poorly worded ballot questions may not be illegal, but if they withhold information to shield what is really at issue, they are unethical. There are insufficient workable checks and balances to prevent this ongoing issue from being curtailed. Not doing anything about this only adds to the distrust of government. The Civil Grand Jury recommends that elected officials be held accountable—ballot questions must be transparent and clear in order to enable today’s voters to make informed decisions. The Civil Grand Jury wants governing entities to know that the public is paying attention and will not tolerate questions that are anything less than truthful, impartial, and fair. Further, ballot measure questions need to be straightforward, understandable, transparent, and honest.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED

FINDINGS AND RECOMMENDATIONS
Finding 1
The Civil Grand Jury finds that in the current environment, which is unregulated at the local level, it is easy for the author of a ballot measure question to write the question in a way that is confusing or misleading to voters.

Recommendation 1a
The Board of Supervisors should ask the County Counsel to review all ballot questions submitted to it pursuant to Recommendation 1b.

Recommendation 1b

Governing entities2 within Santa Clara County should voluntarily submit their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendation 1d is implemented.

Recommendation 1c
Governing entities 3 within Santa Clara County should, by March 31, 2023, adopt their own resolution or ordinance to require submission of their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendations 1d and 1e are implemented.

Recommendation 1d
The County should create an independent, citizen-led oversight commission like the recommended Good Governance in Ballots Commission as described in the “Solutions” section of this report.

The Commission should be implemented by August 1, 2024. 2 There are approximately 50 governing entities within Santa Clara County. The Civil Grand Jury has elected to address these recommendations to the County, cities, and a select number of special districts and school districts that have historically the most measures on the ballot for response. The Civil Grand Jury encourages all governing entities to adopt these recommendations. 3 Id.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED Recommendation 1e
Governing entities4 within Santa Clara County should submit their ballot questions for review by the Good Governance in Ballots Commission pursuant to Recommendation 1d.

Recommendation 1f

The County should, by March 31, 2023, take appropriate action to request that the state legislature consider amending current law to require the County Counsel to review and approve local ballot measure questions before they are voted on.
4 Id.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED

REQUIRED RESPONSES
Pursuant to California Penal Code § 933(b) et seq. and California Penal Code § 933.05, the County of Santa Clara 2022 Civil Grand Jury requests responses from the following governing bodies:

Responding Agency Findings Recommendations
County of Santa Clara Board of Supervisors 1 1a, 1b, 1d, 1f City of Campbell 1 1b, 1c, 1e
City of Cupertino 1 1b, 1c, 1e
City of Gilroy 1 1b, 1c, 1e
City of Los Altos 1 1b, 1c, 1e
Town of Los Altos Hills 1 1b, 1c, 1e
Town of Los Gatos 1 1b, 1c, 1e
City of Milpitas 1 1b, 1c, 1e
City of Monte Sereno 1 1b, 1c, 1e
City of Morgan Hill 1 1b, 1c, 1e
City of Mountain View 1 1b, 1c, 1e
City of Palo Alto 1 1b, 1c, 1e

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED Responding Agency Findings Recommendations
City of San Jose 1 1b, 1c, 1e
City of Santa Clara 1 1b, 1c, 1e
City of Saratoga 1 1b, 1c, 1e
City Sunnyvale 1 1b, 1c, 1e
Santa Clara Valley Water District 1 1b, 1c, 1e
Valley Transportation Authority 1 1b, 1c, 1e
El Camino Healthcare 1 1b, 1c, 1e
Foothill-DeAnza Community College District 1 1b, 1c, 1e San Jose Unified School District 1 1b, 1c, 1e
East Side Union High School District 1 1b, 1c, 1e
Cupertino Union School District 1 1b, 1c, 1e

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED

REFERENCES
Bibliography:

Alameda County 2020-2021 Grand Jury, Final Report, “The Need for Accuracy and Impartiality of Ballot Measure Questions,” June 2022.

Ballotpedia.org, https://ballotpedia.org/Santa_Clara_County,_California, Measure A (June 2022); Measures F, G, H, L, and S (November 2020); Measure AA (November 2016); Measure H (November 2014); Measure E (November 1998) (accessed September 22, 2022).

Borenstein, Daniel, “Tricks California Local Officials Use To Trick Voters,” The Bay Area News Group, https://www.mercurynews.com/2022/01/21/borenstein-tricks-california-local-officialsuse-to-deceive-voters/ January 21, 2022 (accessed August 23, 2022).

California Elections Code sections 303, 9051, 9100-9190, 9295, 13120, and 133247.

Christopher, Ben; Kamal, Sameea, “California Ballot Measures: What You Need to Know,” https://calmatters.org/explainers/california-ballot-measures-2022/ June 30, 2022, updated July 1, 2022 (accessed August 23, 2022).

City and County of San Francisco Department of Elections, https://sfelections.sfgov.org/measures (accessed August 2, 2022).

County of Santa Clara 2020-21 Grand Jury, Final Report, “Gavilan College Measure X Bond Program: Oversight Shortchanged.” June 2022.

County of Santa Clara, Office of the Clerk of the Board of Supervisors, List of Boards and Commissions, https://stenttssaim2publicportal.blob.core.windows.net/bcentcabodocs/MaddyReport.pdf (accessed August 24, 2022).

County of Santa Clara Registrar of Voters, Ballot Measures proposed for the upcoming November 2022 election, https://sccvote.sccgov.org/candidates-measures/november-8-2022- general-election-list-local-measures (accessed Aug 20, 2022).

Editorial, Mercury News and East Bay Times, “Stop Deceiving Bay Area Voters On Local Tax Measure Costs,” MercuryNews.com, https://www.mercurynews.com/2020/06/26/editorial-stopdeceiving-voters-on-local-tax-measure-costs/ June 26, 2020 (accessed August 23, 2022).

Kumar, Rishi, “Opinion: Why 4 Valley Water board members should resign,” MercuryNews.com, https://www.mercurynews.com/2022/05/11/opinion-why-4-valley-waterboard-members-should-resign/ May 11, 2022 (accessed August 23, 2022).

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED Rogers, Paul, “Self-Serving Dishonesty: Liccardo Blasts Santa Clara Valley Water District Measure To Extend Term Limits, Even After Polling Shows Voters Oppose,” Mercury News, March 30, 2022 (accessed August 23, 2022).

Santa Cruz County 2020-2021 Grand Jury, Final Report, “Words Matter: Did Measure G Deceive Voters?” June 2022.

Caselaw:

Amador Valley Joint Union High School District v. State Board of Equalization, 22 Cal.3d. 208 (1978).

Becerra v. Superior Court, 19 Cal.App.5th 967 (2017).

Denny v. Arntz, 55 Cal.App.5th 914 (2020).

Harbor v. Deukmejian, 43 Cal.3d 1078 (1987).

Hicks v. Bd. of Supervisors, 69 Cal. App. 3d 228 (1977).

Home Gardens Sanitary Dist. v. City of Corona, 96 Cal. App. 4th 87 (2002).

Martinez v. Superior Court, 142 Cal.App.4th 1245 (2006).

McDonough v. Superior Court of Santa Clara, 204 Cal.App.4th 1169 (2012).

People v. Langdon, 54 Cal. App.3d 384 (1976).

Rodeo Sanitary Dist. v. Bd. of Supervisors, 71 Cal. App.4th 1443 (1999).

Yes on 25, Citizens for an On-Time Budget v. Superior Court, 189 Cal.App.4th 1445 (2010).

Interviews:

The Civil Grand Jury conducted interviews with ten individuals between June 28, 2022, and August 22, 2022.

IF YOU ONLY READ THE IF YOU ONLY READ THE BALLOT, YOU’RE BEING DUPED BALLOT, YOU’RE BEING DUPED This report was ADOPTED by the Santa Clara County 2022 Civil Grand Jury on this 7th day of October, 2022.
______________________________
Mr. James Renalds
Foreperson

TOWN OF LOS GATOS

OFFICE OF THE TOWN COUNCIL
(408) 354-6801
[email protected]
December 21, 2022
The Honorable Beth McGowen, Presiding Judge
Santa Clara County Civil Grand Jury
Superior Court Building
191 North First Street
San Jose, CA 95113
RE: Response to the Santa Clara Civil Grand Jury Report on “If You Only Read the Ballot, You’re Being Duped” Dated October 7, 2022
Dear Presiding Judge McGowen,
The Town would like to thank the Grand Jury for its work on this important topic. Enclosed please find the Town’s response to the Santa Clara Civil Grand Jury Report on “If You Only Read the Ballot, You’re Being Duped.”
The response was reviewed and approved by the Los Gatos Town Council on December 20, 2022. The Town is required to respond to one Finding and three Recommendations. The attached document contains the Town’s responses to the Finding and Recommendations. In summary, the Town partially agrees with Finding 1 but does not anticipate implementing the Recommendations due to concerns that the Recommendations are not reasonable.

If you have any questions, please contact me at [email protected] or (408) 354-6801.

Sincerely,
Rob Rennie
Town of Los Gatos Mayor
Enclosure
cc:

James Renalds, Foreperson, 2022 Civil Grand Jury
Clerk of the Santa Clara County Superior Court
ATTACHMENT 2

Town of Los Gatos Response to Grand Jury Report on Ballot Questions Finding 1:

The Civil Grand Jury finds that in the current environment, which is unregulated at the local level, it is easy for the author of a ballot measure question to write the question in a way that is confusing or misleading to voters.

Response: The Town partially agrees with this Finding. The Town agrees with the portion of the Finding stating that ballot measure questions can be confusing or misleading. The Grand Jury Report itself provides two examples of this Finding. However, with regard to local ballot measures, the Town disagrees with the finding that ballot measures are unregulated. The California Elections Code clearly sets the expectation that ballot materials should be true and impartial in a manner that does not create prejudice or serve as an argument for or against the proposed measure. In city government, ballot questions are prepared by the city attorney and the city attorney is responsible for drafting ballot questions that are clear to voters. Ballot measures and ballot questions are reviewed at Town Council meetings before submission to the County Registrar of Voters, which provides the community with a direct opportunity to comment on the proposed wording.

Recommendation 1b:

Governing entities within Santa Clara County should voluntarily submit their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendation 1d is implemented.

Response: As noted in the Grand Jury report, the California Elections Code does provide an option for recourse if a ballot question falls short of the requirements set forth in State law. If the existing recourses in State law are not working, the solution is to propose amendments to State law.

In addition, the Elections Code contains tight timelines and it is not feasible to build in review time by a separate agency. The Town will occasionally need to add measures on the ballot quickly in order to respond to time-sensitive issues. Also, the Town will occasionally receive proposed ballot measures as a result of an initiative or referendum. If sufficient signatures are gathered on an initiative or referendum petition, State law requires the Town to place the measure on the ballot at the next regular municipal election. There may be instances in which the Town does not have time to seek County review of a proposed ballot question.

In addition, the Town believes that local agencies are the most familiar with the content of Townsponsored ballot measures and therefore the best-equipped to draft those ballot questions.

The recommendation will not be implemented, because it is not warranted or reasonable.

Recommendation 1c:

Governing entities within Santa Clara County should, by March 31, 2023, adopt their own resolution or ordinance to require submission of their ballot questions to the County Counsel for review prior to submission to the Register of Voters, unless and until Recommendations 1d and 1e are implemented.

Response: Please see the Town’s response above. The recommendation will not be implemented, because it is not reasonable.

Town of Los Gatos Response to Grand Jury Report on Ballot Questions Recommendation 1e:

Governing entities within Santa Clara County should submit their ballot questions for review by the Good Governance in Ballots Commission pursuant to Recommendation 1d.

Response: Please see the Town’s response above. The recommendation will not be implemented, because it is not reasonable.

PREPARED BY: Jocelyn Shoopman and Erin Walters
Associate Planner and Associate Planner
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, Community Development Director, and Finance Director
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 13
DATE: December 15, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Discuss the Housing Element Update and Provide Direction on Next Steps.

RECOMMENDATION:

Discuss the Housing Element Update and provide direction on next steps.

BACKGROUND:

The Town of Los Gatos is required to adopt an updated Housing Element for the period covering 2023-2031 by January 31, 2023. The Housing Element is one of nine State-mandated elements that must be included in every General Plan. The Housing Element assesses housing needs for all income groups within the community and identifies implementation programs to meet those housing needs. Unlike other General Plan elements, the Housing Element must be updated every eight years, rather than every 10 to 20 years, must address statutory requirements regarding its content, and is subject to mandatory review and certification by the California Housing and Community Development Department (HCD).

Starting in early 2021, the Town has worked diligently through the required steps to comply with State law with the goal of adopting a Housing Element prior to the January 31, 2023, deadline. Attachment 1 presents a timeline outlining the ongoing efforts that have been completed toward achieving this goal. In the event the Town does not have an adopted Housing Element by January 31st, this report discusses the “Builders Remedy” and scheduling options.

The primary purposes of this agenda item are:
(1) Provide direction on the Town’s potential modifications to the Housing Element in response to the preliminary, unofficial comments to the Town from HCD;

PAGE 2 OF 8
SUBJECT: Housing Element Update and Next Steps
DATE: December 20, 2022
BACKGROUND (continued):
(2) Provide direction on the Town’s potential modifications to the Housing Element in response to the official HCD comments received by some other cities in the Bay Area; and (3) Provide direction on the timing for Housing Element adoption.

DISCUSSION:

Preliminary Comments to the Town from HCD
Staff met with the Town’s HCD reviewer on December 13, 2022, to receive preliminary, verbal feedback on the Draft Housing Element. The following topics were identified by the HCD reviewer as requiring additional information and/or analysis. Many of these topics, listed below, were discussed at the December 1, 2022, Housing Element Advisory Board (HEAB) meeting as potential comments that the Town may receive.

1. The referendum status of the Land Use and Community Design Elements of the 2040 General Plan;

2. The housing needs assessment;

3. The site inventory;

4. The governmental and non-governmental constraints;

5. Affirmatively Furthering Fair Housing;

6. The implementation programs;

7. Documented compliance with State law, including, but not limited to transparency laws, Senate Bill 330, and Assembly Bill 139; and

8. Additional information for the Pipeline Projects and the projections used for calculating Accessory Dwelling Unit (ADU) and Senate Bill 9 (SB 9) projects.

Comments to Other Cities from HCD
In anticipation of the Town’s first review comment letter from HCD, staff reviewed comment letters received by other jurisdictions, including, the cities of Campbell, Dublin, Menlo Park, Mountain View, Redwood City, Saratoga, and Sunnyvale. Staff identified the following recurring topics in the comment letters from other jurisdictions which the Town may also receive and presented this information to the HEAB at their December 1, 2022, meeting. The HEAB discussed each of the topics described below, agreed with staff’s recommended approach to each issue, and provided a general consensus to the Town Council that the Draft Housing Element as submitted to HCD be adopted by the statutory deadline of January 31, 2023.

PAGE 3 OF 8
SUBJECT: Housing Element Update and Next Steps
DATE: December 20, 2022
DISCUSSION (continued):

Implementation Programs

1. Provide more definitive implementation timelines and objectives, quantified where appropriate, for each Implementation Program.

2. An Implementation Program to modify the Town’s Density Bonus Ordinance for compliance with Assembly Bill 1763, which became effective in January 2020. The Town’s Density Bonus Ordinance was last modified in June of 2012.

3. An Implementation Program to modify the Town’s ADU Ordinance for compliance with State law. For example, the Town’s current ADU ordinance requires that a new ADU in the Hillside Residential (HR) zone comply with the primary structure setbacks for the rear and side setbacks; whereas, HCD has previously provided correspondence to staff that the Town may only utilize minimum rear and side setbacks of four feet.

Site Inventory List

1. HCD provided a comment in the City of Menlo Park comment letter that the Housing Element could utilize a minimum density and this methodology may be accepted without further analysis or methodology. The Town’s current methodology for calculating the realistic residential capacity for the Site Inventory utilizes the typical density identified in the 2040 General Plan Residential Buildout table. The following table demonstrates the existing 2020 General Plan Land Use designations, the 2040 General Plan minimum density, and the 2040 General Plan typical density. Should the Town choose to utilize a minimum density for calculating the residential capacity of the Site Inventory, additional sites would be required to be selected from either the Tier 2 or Tier 3 Site Inventory list.

2. HCD has deemed sites smaller than a half-acre as inadequate to accommodate housing for lower-income housing unless it is demonstrated that sites of equivalent size and affordability were successfully developed during the prior planning period or unless the Housing Element provides other evidence to HCD that the site is adequate to accommodate lower-income housing. The Town’s Site Inventory includes eight sites that are less than half an acre (Site A-1, Site A-7, Site B-1, Site C-6, Site D-3, Site D-4, Site D-7, and Site G-1). 2020 General Plan
Designation
2040 General
Plan Minimum
Density (du/ac)
2040 General
Plan Typical
Density (du/ac)
Low Density Residential 0 4
Medium Density Residential 14 18
High Density Residential 30 36
Neighborhood Commercial 10 18
Central Business District 20 26
Mixed-Use 30 36

PAGE 4 OF 8
SUBJECT: Housing Element Update and Next Steps
DATE: December 20, 2022
DISCUSSION (continued):
a. Site A-1 (50 Park Avenue) is identified in the Site Inventory; however, it has not been identified as a site to accommodate lower-income housing. b. Site A-7 (165 Los Gatos-Saratoga Road) is identified in the Site Inventory; however, it has not been identified as a site to accommodate lower-income housing. c. Site B-1 (APN 529-24-003) has been identified as a site to accommodate lower-income housing units as it is consolidated with the Los Gatos Lodge property. The Town has received a Property Owner Interest form for this property. Programs BF and BG of the Draft Housing Element propose to amend the Zoning Code and General Plan to include a Housing Element Overlay Zone to apply to the sites included in the Site Inventory to increase the development standards. For this particular consolidated site, the minimum density would be 30 du/ac. The HCD Housing Element Site Inventory Guidebook allows jurisdictions to use a higher density (default density of 30 du/ac) as a proxy for lower income affordability.
d. Site C-6 (16492 Los Gatos Boulevard and APN 532-07-085) is identified in the Site Inventory; however, it has not been identified as a site to accommodate lower-income housing.
e. Site D-3 (16240 Burton Road), Site D-4 (16270 Burton Road), and Site D-7 (14823 Los Gatos Boulevard) have been identified as sites to accommodate lower-income housing as they are located within the North Forty Specific Plan Area. Program D of the Draft Housing Element proposes to amend the North Forty Specific Plan to increase the density to more than 30 du/ac and to increase the total number of dwelling units allowed in the Specific Plan. The HCD Housing Element Site Inventory Guidebook allows jurisdictions to use a higher density (default density of 30 du/ac) as a proxy for lower income affordability.
f. Site G-1 (445 Leigh Avenue) is identified in the Site Inventory; however, it has not been identified as a site to accommodate lower-income housing.

3. HCD has stated that the Housing Element must demonstrate that existing uses are not an impediment to additional residential development and will likely discontinue in the planning period. The Site Inventory currently relies upon nonvacant sites to accommodate more than 50 percent of the Regional Housing Needs Allocation (RHNA) for lower-income households. Sites that are nonvacant have been included in the Site Inventory due to either a Property Owner Interest Form being submitted to the Town, staff contact regarding potential residential development, or submittal of a Conceptual Development Advisory Committee application.

4. HCD has stated that in order for SB 9 housing units to be included as a strategy to accommodate the Town’s need of above-moderate housing, additional analysis will be required to be provided. The analysis may include, but is not limited to: experience; trends; and market conditions that allow lot splits; and the likelihood of redevelopment, including whether existing uses constitute an impediment for additional residential use to support

PAGE 5 OF 8
SUBJECT: Housing Element Update and Next Steps
DATE: December 20, 2022
DISCUSSION (continued):
the proposed projection within the eight-year planning period. The Town has provided a SB 9 projection of 96 housing units within the eight-year planning period.

5. It is likely that HCD is aware of the 2040 General Plan referendum for the Land Use and Community Design Elements, as demonstrated in their comment letter to the City of Menlo Park regarding a voter initiative for a proposed ballot measure for single-family rezoning. In response to the referendum to repeal the Land Use and Community Design Elements of the 2040 General Plan, the Draft Housing Element included Implementation Programs BF and BG to amend the Zoning Code and General Plan for the sites that are included in the Site Inventory. The amendments would consider modification of the development standards, including, but not limited to the: density; lot coverage; floor area ratio; and height for the parcels in the Site Inventory.

Public Participation

1. HCD has commented that Housing Elements need to describe the efforts made to circulate the document to low-and moderate-income households, and organizations that represent them, and to involve such groups and persons in the update of the Housing Element throughout the process. Staff has also seen feedback requesting information on how the Housing Element has targeted outreach efforts to renters. In response, staff and the Housing Element consultant created an anonymous, online survey that is available on the Town’s Housing Element Update website. Hard copies of the survey are available at the Community Development Department counter, and the Town Library. Staff has also reached out to West Valley Community Services and SV@Home regarding other community outreach opportunities.

Direction on Scheduling Options
To provide context to the scheduling options and potential consequences, this section first describes the Builder’s Remedy.

Builder’s Remedy
Under the Housing Accountability Act, jurisdictions who do not have an adopted Housing Element that is in substantial compliance with State law by the statutory deadline (January 31, 2023, for the Bay Area) could be required to approve a residential development even if it does not meet local General Plan and zoning regulations. The “builder’s remedy” has been in the Housing Accountability Act since 1990 and pertains to residential developments that have at least 20 percent low-income units or 100 percent moderate income units. In past Housing Element cycles, HCD has applied a 120-day grace period past the statutory deadline for local agencies to adopt a Housing Element. In early October 2022, HCD confirmed that no such 120-

PAGE 6 OF 8
SUBJECT: Housing Element Update and Next Steps
DATE: December 20, 2022
DISCUSSION (continued):
day grace period will apply this cycle and any jurisdiction that adopts a Housing Element later than January 31, 2023, will be subject to the Builder’s Remedy. This provision in the Housing Accountability Act has been available for quite some time and in Los Gatos, no applications have come forward during previous Housing Element cycles when the Town missed the statutory deadlines for adoption of a Housing Element.

The statutory deadline for adoption of a Housing Element for the fourth cycle (2007-2014) was June 30, 2009. The Town Council adopted the fourth cycle Housing Element on November 1, 2010. On April 8, 2011, the Housing Element was certified by HCD pending a resubmittal once the element was adopted by the Town Council. On September 19, 2011, the Town Council considered amendments to the Housing Element and continued the matter to a date uncertain with direction to Town staff. On March 5, 2012, the Town Council adopted Resolution 2012- 008 amending the Housing Element based on modifications to meet State Housing Law requirements. On September 20, 2012, the adopted Housing Element was found to be in full compliance with the State Housing Element law by HCD. The statutory deadline for adoption of a Housing Element for the fifth cycle (2015-2023) was January 31, 2015. The Town Council adopted the fifth cycle Housing Element on May 5, 2015. On May 20, 2015, the Housing Element was certified by HCD.

Staff fully recognizes that the current Housing Element cycle is unlike any past cycle. It is possible that a developer could invoke the Builder’s Remedy in connection with a planning application submitted in February if the Town Council does not adopt a Housing Element that is in substantial compliance with Housing Element Law by January 31, 2023.

The Council’s options in response to the statutory deadline for adoption of a Housing Element by January 31, 2023, are:

A. Adopt a Housing Element Prior to January 31, 2023
Adopt the current version of the Draft Housing Element as submitted to HCD on October 14, 2022, making the findings that the Housing Element is in substantial compliance with State law. The Town expects to receive its comment letter from HCD on the Draft Housing Element by January 12, 2023. Should the HCD comment letter be provided to the Town prior to Council’s adoption, a memorandum in response to the HCD comment letter, illustrating how each comment has been responded to and how it is in substantial compliance with State law would be prepared; however, the extent of the work that may be required to address those comments is not yet know. It is highly unlikely that staff and the consultants have the time or resources to produce a redline version incorporating all of the required changes.

PAGE 7 OF 8
SUBJECT: Housing Element Update and Next Steps
DATE: December 20, 2022
DISCUSSION (continued):

If the Council decides to move forward with Option A, the Draft Housing Element would be reviewed by the Planning Commission in early January for a recommendation to the Town Council. Town Council would then consider adoption of the Draft Housing Element prior to or on January 31, 2023.

A revised draft or adopted Housing Element must be submitted to HCD in response to the initial comment letter. Subsequent reviews by HCD will take up to 60 days. Prior to submitting a revised draft or adopted Housing Element to HCD, the Town must post the revision on its website and email a link to all individuals and organizations that have previously requested notices relating to the local government’s Housing Element at least seven days before submitting the revised Housing Element to HCD.

Based on HCD’s second review, it is possible that additional changes may be needed before HCD would certify the Housing Element. This means that the Planning Commission and Town Council hearings would need to be conducted again, using up two of the four allowed General Plan amendments for this Element.

B. Adopt a Housing Element After January 31, 2023
The Town expects to receive its comment letter from HCD on the Draft Housing Element on January 12, 2023. Modifications to the Draft Housing Element in response to the comment letter would be made and brought forward to the HEAB for consideration and discussion. A revised Draft Housing Element would be submitted to HCD for a subsequent review which will take up to 60 days. Once HCD has notified the Town that the Draft Housing Element is in substantial compliance with State law, the Draft Housing Element would be brought through the formal adoption process with a recommendation from the HEAB and Planning Commission, with the final decision by the Town Council. This option will be required, even if the Town Council decides to provide direction to adopt the current version of the Draft Housing Element prior to January 31, 2023.

PUBLIC COMMENT:

At the time of this report’s preparation, the Town has not received any public comment.

CONCLUSION AND NEXT STEPS:

Staff looks forward to the Town Council’s discussion and direction.

PAGE 8 OF 8
SUBJECT: Housing Element Update and Next Steps
DATE: December 20, 2022
COORDINATION:

The Community Development Department coordinated with the Offices of the Town Attorney and Town Manager in the preparation of this report.

ENVIRONMENTAL ASSESSMENT:

The Town Council’s direction regarding the next steps of the Housing Element Update is not a project subject to the California Environmental Quality Act (CEQA). Environmental analysis for the Housing Element will be completed in accordance with CEQA requirements.

Attachments:

1. Housing Element Update Process Timeline

HOUSING ELEMENT PROCESS TIMELINE
On April 21, 2021, the Town issued a Request for Proposals (RFP) for consultant services for preparation of the 2023-2031 Housing Element. The Town received a proposal from one firm, EMC Planning Group, Inc.

On June 15, 2021, the Town Council authorized the Town Manager to execute an agreement for Consultant Services with EMC Planning Group, Inc. to prepare the 2023-2031 Housing Element and associated public engagement and environmental review documents.

On August 3, 2021, the Town Council adopted Resolution 2021-032 to establish the Housing Element Advisory Board (HEAB) to serve as an advisory board that provides input on specific tasks associated with the Housing Element Update and established the role of the HEAB as follows:
 Provide guidance on the development of the Housing Element Update;  Provide an additional forum for public involvement;
 Forward milestone products to the Planning Commission and Town Council;  Review the Draft Housing Element; and
 Make recommendations to the Planning Commission and Town Council.

On August 9, 2021, the Town participated in a Let’s Talk Housing Community Meeting for Santa Clara County jurisdictions hosted by the Santa Clara County Planning Collaborative.

On September 21, 2021, the Town Council appointed four at-large members to the HEAB, in addition to the existing nine members of the General Plan Committee (GPC).

On October 15, 2021, the HEAB held their first meeting to elect the Chair and Vice Chair and adopt a meeting schedule.

On December 16, 2021, the HEAB discussed the Housing Element process, milestones, and reviewed the Draft Housing Needs Assessment and Review of Previous Housing Element appendices as contextual background information for future work by the HEAB.

On February 17, 2022, the HEAB reviewed and discussed the Housing Element Site Inventory analysis process.

On March 31, 2022, a Community Meeting was held for the public to review and provide input on potential sites for inclusion in the Site Inventory. At the meeting, the Balancing Act tool and Housing Element Update website site surveys were introduced to the public.

On April 6, 2022, a Joint Study Session of the Town Council, Planning Commission, and HEAB was held to discuss the production of affordable housing.

ATTACHMENT 1

On April 21, 2022, the HEAB provided feedback on additional sites to include in the Site Inventory, in addition to the sites already identified by staff and the Housing Element Consultant. Results from the Balancing Act tool and Housing Element Update website site surveys were also shared with the HEAB.

On April 21, 2022, Property Owner Interest forms were mailed out to the property owners of the sites selected in the Draft Site Inventory to garner their interest in providing housing on their property. An electronic copy of the Property Owner Interest form was also made available on the Housing Element Update website.

On April 24, 2022, Town staff hosted a booth at the Spring Into Green event at the Town Plaza to provide the public an opportunity to discuss the Housing Element Update.

On May 5, 2022, the HEAB continued the discussion of the Site Inventory and provided feedback on additional sites that should be included.

On May 19, 2022, HEAB recommended the acceptance of the Site Inventory as proposed within Tier 1, with modifications to reduce the number of housing units within the North Forty, to add the site located at 206 Knowles Drive, and to add the site located within the California Department of Transportation right-of-way off of Oka Road. The sites identified by the HEAB at their meetings of April 21, 2022, and May 5, 2022, were divided by staff into three tiers based on the HCD checklist, property size, Zoning, General Plan land use designation, recently developed, environmental constraints, public feedback, and Property Owner Interest forms that were submitted to the Town.

On June 7, 2022, the Town Council considered the Site Inventory as recommended by the HEAB and recommended approval of the Tier 1 sites as presented in the staff report with an amendment to provide a unit projection for Senate Bill 9 projects. Since the recommendation of the HEAB at their May 19, 2022, meeting, an additional Property Owner Interest form was received for 15795 Los Gatos Boulevard and was added to the Tier 1 list. In addition, a letter from the property owner for 15827 Los Gatos Boulevard was received requesting to be removed from the Draft Site Inventory. In response, the Tier 2 site list was modified to remove the site.

On June 16, 2022, the HEAB reviewed and provided initial direction and modifications to the Draft Housing Element Goals, Policies, and Implementation Programs.

On July 7, 2022, the HEAB continued to review and provide additional direction and modifications to the Draft Housing Element Goals, Policies, and Implementation Programs.

On August 4, 2022, the HEAB completed review of the Draft Housing Element Goals, Policies, and Implementation Programs and provided feedback for additional modifications.

On August 16, 2022, signatures were submitted to the Town in support of a referendum on the Land Use and Community Design Elements of the approved 2040 General Plan.

On August 18, 2022, the HEAB reviewed and provided feedback for modifications to the Initial Public Review Draft Housing Element prior to the release of the document for the required 30- day public comment period.

On August 29, 2022, the Town released the Initial Public Review Draft Housing Element for a 30- day public comment period which ran from August 29, 2022, to September 27, 2022.

On September 4, 2022, Town staff hosted a booth at the Los Gatos Farmers’ Market to provide the public an opportunity to discuss the Initial Public Review Draft Housing Element during the 30-day public comment period.

On September 15, 2022, the HEAB received public comments on the Initial Public Review Draft Housing Element during the 30-day public review period.

On September 27, 2022, the referendum signatures on the Land Use and Community Design Elements of the approved 2040 General Plan were verified by the Santa Clara County Registrar.

On October 9, 2022, Town staff hosted a booth at the Los Gatos Farmers’ Market to provide opportunity for the public to discuss the Draft Housing Element.

On October 14, 2022, the Town submitted the Draft Housing Element and a response to public comments received during the 30-day public comment period to HCD for preliminary review. By law, HCD has up to 90 days to complete its first review. The full document can be viewed at EngageLosGatosHousing.com.

On October 20, 2022, the HEAB reviewed the Draft Housing Element that was submitted to HCD for preliminary review, including a summary of all modifications that were made to the Draft Housing Element. Modifications to the Site Inventory as reviewed by the Town Council on June 7, 2022, include:
 The addition of 401-409 Alberto Way as the property owner submitted a Property Owner Interest form to the Town;
 The removal of 404 North Santa Cruz Avenue, 420 North Santa Cruz Avenue, and 430 North Santa Cruz Avenue (Los Gatos Shopping Center) from the Site Inventory per the property owner’s request and therefore deleted the North Santa Cruz Avenue Area;  The removal of 16535 Camellia Terrace and parcel number 523-02-005 (El Gato Village) as no Property Owner Interest form was submitted;
 Increased the housing density within the North Forty Specific Plan from 20 dwelling units per acre to a minimum of 30 dwelling units per acre to align with Implementation Program D and a public comment received from a member representing the interests of the property owner during the 30-day public comment period;
 Revised the housing density used for the calculation of projected housing units in the Site Inventory from the maximum density to the typical density, to be consistent with the 2040 General Plan Residential Buildout;

 Increased the maximum housing density within the Affordable Housing Overlay Zone (AHOZ) from 20 dwelling units per acre to 40 dwelling units per acre to area to align with Implementation Program BF;
 Modified the distribution for each income category to be consistent with the HCD Housing Element Site Inventory Guidebook, which allows jurisdictions to use a higher density (default density of 30 dwelling units per acre) as a proxy for lower income affordability;  Created a Senate Bill 9 (SB 9) unit projection;
 Modified the number of housing units generated in the Pipeline Projects based on the creation of a new SB 9 projection, Planning applications that have been withdrawn, and projects that have received their Certificate of Use and Occupancy;  Decreased the overall total number of housing units in the Site Inventory from 2,448 units to 2,371 units, as a result of the changes listed above; and  Created a separate Appendix H, Site Inventory Form per HCD formatting requirements.

On November 9, 2022, Town staff hosted a booth at the Los Gatos Farmers’ Market to provide the public an opportunity to discuss the Draft Housing Element that was submitted to HCD for preliminary review.

On November 15, 2022, a Renter’s Survey was published on the Housing Element Update website and made available in hard copies at the Community Development Department and Town Library. The survey is available in English, Spanish, and Russian in both the electronic and hard copy versions.

On November 17, 2022, the HEAB meeting was rescheduled by staff to December 1, 2022, due to the meeting being cancelled as a result of the Town’s website being down and the agenda being unavailable to members of the public.

On November 18, 2022, Town staff hosted an informational table at the Town Library to provide the public an opportunity to discuss the Draft Housing Element and publicize the availability of the Renter’s Survey.

On December 1, 2022, the HEAB discussed anticipated comments on the Draft Housing Element based on comments other jurisdictions have received from HCD on their Draft Housing Element.

On December 11, 2022, Town staff hosted a booth at the Los Gatos Farmers’ Market to provide the public an opportunity to discuss the Draft Housing Element.

On December 13, 2022, Town staff met with our HCD reviewer and received verbal, preliminary input on the Draft Housing Element.

PREPARED BY: Jocelyn Shoopman and Erin Walters
Associate Planner and Associate Planner
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, Community Development Director, and Finance Director
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/20/2022
ITEM NO: 13

DESK ITEM
DATE: December 20, 2022
TO: Mayor and Town Council
FROM: Laurel Prevetti, Town Manager
SUBJECT: Discuss the Housing Element Update and Provide Direction on Next Steps.

REMARKS:

The following questions and responses provide additional information. Reponses to each question are provided below in italics:
 Bay Area jurisdictions may use a minimum density of 30 units/acre (“default density”) in order to count a site as providing affordable housing units. What happens if a project goes forward at 30 units/acre and it is not 100 percent affordable? The Town’s Site Inventory does not assume 100 percent affordability for any of the sites.

If the Town approves a development of a parcel identified in the sites inventory with fewer units than shown in the Housing Element, it must either make findings that the Housing Element’s remaining sites have sufficient capacity to accommodate the remaining unmet Regional Housing Needs Allocation (RHNA) by each income level, or identify and make available sufficient sites to accommodate the remaining unmet RHNA for each income category. The RHNA buffer has been included to address the potential for No Net Loss. In addition, the Town has an inclusionary zoning ordinance which requires that a portion of the new residential construction in Los Gatos be dedicated to affordable housing.  Moving forward with Housing Element adoption could potentially use two of our four General Plan amendments for the year for this Element. What other amendments might we anticipate? Can other amendments be bundled if necessary? State Law limits General Plan amendments to four per year for each of the required General Plan Elements. The Housing Element may be amended up to four times per year without reducing the number of amendments allowed for other General Plan Elements. Currently,

PAGE 2 OF 3
SUBJECT: Housing Element Update and Next Steps
DATE: December 20, 2022
REMARKS (continued):
staff does not anticipate additional amendments to the Housing Element with the exception of required amendments addressing HCD’s comments for this 6th cycle Housing Element update. If additional amendments to the Housing Element are necessary staff would look to bundle modifications as a single amendment if possible.  How many Builder’s Remedy projects have occurred outside of the City of Santa Monica? 16 new housing projects were submitted in the City of Santa Monica under the Builder’s Remedy primarily by a single development firm. According to YIMBY Law, additional applications have been received by Manhattan Beach, Cerritos, Redondo Beach, Del Mar, Pasadena, and Beverly Hills.
 How did the initial conversation with the HCD reviewer go and was the referendum discussed?
The initial conversation with the Town’s California Department of Housing and Community Development (HCD) reviewer covered topics staff had anticipated and that are presented in the staff report. The HCD reviewer asked for clarification on the referendum to repeal the Land Use and Community Design Elements of the 2040 General Plan. Staff provided clarification and called attention to the Housing Element’s Implementation Programs BF and BG. These Implementation Programs would include amendments of the Zoning Code and General Plan for the sites that are included in the Site Inventory so that the referendum would not be considered a constraint on the housing production described in the Housing Element. Staff provided clarifying information to the HCD reviewer on where information is already provided in the Draft Housing Element which will assist at reducing the number of comments from HCD.
 How will the process work for adjusting the Housing Element regarding issues called out in the staff report, like HCD preference for minimum density instead of typical density? If the Council provides direction to staff to utilize the minimum density for the site inventory housing calculations, then a few additional sites would be required to be added to the site inventory in order to comply with the Town’s RHNA and 15 percent buffer.  If the Town Council adopts the Housing Element by January 31, 2023, and the Town continues an iterative process of revising the Hosing Element in response to subsequent HCD comments, will the Town Council need to readopt the Housing Element with all of the changes once HCD determines that it is ready to be certified?

PAGE 3 OF 3
SUBJECT: Housing Element Update and Next Steps
DATE: December 20, 2022
REMARKS (continued):

Yes, the Town Council will need to adopt the Housing Element with any additional changes once HCD determines that the revised Housing Element meets the requirements to be certified.
 What is the real risk of Builder’s Remedy in Los Gatos based on preliminary discussions with developers, anticipated CDAC applications, and other conversations? Staff has not heard of any intent from developers or property owners planning to utilize the Builder’s Remedy at this time. As mentioned in the staff report, no Builder’s Remedy applications came forward during previous Housing Element cycles when the Town missed the statutory deadlines for adoption of a Housing Element.

ATTACHMENT:

Previously received with December 20, 2022 Staff Report:

1. Housing Element Update Process Timeline