TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Inter-fund Receivables and Payables - Amounts due to or due from other funds reflect inter-fund balances for services rendered or short-term loans expected to be repaid in the next fiscal year. Advances to or from other funds are long-term loans between funds that are to be repaid in their entirety over several years.
NOTE 6 - CAPITAL ASSETS
Changes in the Town’s capital assets during the fiscal year are shown as follows:
Depreciation/amortization expense is charged to functions and programs based on their usage of the related assets. The amount allocated to each function or program is as follows:
Balance at June
30, 2022 Additions Retirements
Balance at June
30, 2023
Nondepreciable/Amortizable Capital Assets:
Land $ 26,066,103 $ - $ - $ 26,066,103
Construction in Progress 7,778,075 - (264,927) 7,513,148 Total Nondepreciable/Amortizable 33,844,178 - (264,927) 33,579,251 Depreciable/Amortizable Capital Assets:
Subscription Right of Use Assets - 915,860 - 915,860
Buildings and Improvements 39,613,623 313,377 (24,225) 39,902,775 Equipment & Vehicle 12,555,617 592,001 (195,324) 12,952,294 Infrastructure 108,726,852 7,958,361 (385,255) 116,299,958 Total Depreciable/Amortizable 160,896,092 9,779,599 (604,804) 170,070,887 Less Accumulated Depreciation/Amortization for:
Subscription Right of Use Assets - 202,422 - 202,422
Buildings and Improvements 10,131,701 924,468 - 11,056,169 Equipment & Vehicle 10,044,744 596,816 (151,960) 10,489,600 Infrastructure 46,793,259 2,428,915 - 49,222,174
Total Acccumulated Depreciation/Amortization 66,969,704 4,152,621 (151,960) 70,970,365 Net Depreciable/Amortizable Capital Assets 93,926,388 5,626,978 (452,844) 99,100,522 Capital Assets, Net $ 127,770,566 $ 5,626,978 $ (717,771) $ 132,679,773 Depreciation/
Amortization
Expense
General Government $ 473,698
Public Safety 498,187
Parks & Public Works 2,704,539
Community Development 76,379
Library 398,642
Sanitation 1,176
Total Governmental Activities $ 4,152,621
Governmental Activities
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Changes in the RDA Successor Agency trust fund capital assets during the fiscal year are shown as follows:
NOTE 7 - LONG-TERM OBLIGATIONS
The Town generally incurs long-term debt to finance projects or purchase assets, which will have useful lives equal to or greater than the related debt.
The following summarizes the changes in long-term debt in the Town during the fiscal year ended June 30, 2023:
Future debt service requirements of the PG&E loan were as follows:
Balance at June
30, 2022
Adjustments and
Additions Retirements
Balance at June
30, 2023
Depreciable/Amortizable Capital Assets:
Buildings and Improvements $ 4,067,708 $ - $ - $ 4,067,708 Less Accumulated Depreciation/Amortization for:
Buildings and Improvements 2,847,392 101,693 - 2,949,085 Net Depreciable/Amortizable Capital Assets 1,220,316 (101,693) - 1,118,623 Capital Assets, Net $ 1,220,316 $ (101,693) $ - $ 1,118,623 Interest Maturity Original Beginning Additions/ Ending
Long-Term Debt Rate Date Issue Balance Adjustments Deletions Balance Direct Borrowings:
PG& Loan 0% 2031 $ 1,560,336 $ 1,352,291 $ - $ 156,034 $ 1,196,257 Due Within One Year 156,034
Due in More Than One Year $ 1,040,223
For the Year
Ending June 30, Principal Interest Total
2024 $ 156,034 $ - $ 156,034
2025 156,034 - 156,034
2026 156,034 - 156,034
2027 156,034 - 156,034
2028 156,034 - 156,034
2029-2033 416,087 - 416,087
Total Debt Service $ 1,196,257 $ - $ 1,196,257
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
The following summarizes the changes in long-term debt in the Successor Agency trust fund during the fiscal year ended June 30, 2023:
2002 Certificates of Participation (2002 COPs) - On July 18, 2002, the Town and the Los Gatos Redevelopment Agency issued $10,725,000 in 2002 COPs, Series A, to finance the acquisition, construction, rehabilitation, equipping, and improvement of several capital improvement projects. The Town had pledged lease payments of real property and facilities comprised of the Parks and Public Works Service Center and Baseball Field, as well as Parking Lot No. 1, 2, and 3, as collateral for the repayment of the Certificates. Principal payments are due annually on August 1st, with interest payments due semi-annually on February 1st and August 1st.
2010 Certificates of Participation (2010 COPs) - On June 1, 2010, $15,675,000 of 2010 COPs were issued to finance the acquisition, construction, and improvement of a library on the Town’s Civic Center campus, to be owned and operated by the Town. Principal payments are due annually on August 1, with interest payments due semi-annually on February 1 and August 1.
To assist the Town in paying the cost of acquisition and construction of various projects, the Town and its Redevelopment Agency entered into lease and reimbursement agreements in 2002 and 2010. Under the agreements, the Agency will use available net tax increment revenues resulting from the projects’ effect on land values to repay the Town for all lease payments made by the Town to the Agency under the lease agreements for the projects. Net tax increment revenues are all taxes allocated to and paid into the Successor Agency private-purpose trust fund.
Future debt service requirements of the Certificates of Participation were as follows:
Interest Maturity Original Beginning Ending
Long-Term Debt Rate Date Issue Balance Deletions Balance 2002 COP 2.5-5% 2031 $ 10,725,000 $ 5,280,000 $ 420,000 $ 4,860,000 2010 COP 2.5-4.25% 2028 15,675,000 7,505,000 935,000 6,570,000 Subtotal COP's 26,400,000 12,785,000 1,355,000 11,430,000 Premiums 753,095 301,235 37,655 263,580
Total Long-Term Debt $ 27,153,095 $ 13,086,235 $ 1,392,655 $ 11,693,580 Due Within One Year 1,415,000
Due in More Than One Year $ 10,278,580
For the Year
Ending June 30, Principal Interest Total
2024 $ 1,415,000 $ 479,550 $ 1,894,550
2025 1,485,000 417,300 1,902,300
2026 1,550,000 351,850 1,901,850
2027 1,625,000 283,375 1,908,375
2028 1,705,000 210,819 1,915,819
2029-2033 3,650,000 275,656 3,925,656
Total Debt Service $ 11,430,000 $ 2,018,550 $ 13,448,550
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
The Successor Agency must maintain a required amount of cash and investments with the trustee under the terms of the COPs issues. These funds are pledged as reserves to be used if the Successor Agency fails to meet its obligations under the COPs issue and totaled $2,023,185 as of June 30, 2023. The California Government Code requires these funds to be invested in accordance with Town ordinance, bond indentures or State statues. All these funds have been invested as permitted under the Code.
NOTE 8 - SUBSCRIPTION-BASED INFORMATION TECHNOLOGY AGREEMENTS The following summarizes the terms of the Town’s subscription-based information technology agreements as of June 30, 2023:
The following summarizes the Town’s subscription right of use assets as of June 30, 2023:
The following summarizes the Town’s subscription liabilities as of June 30, 2023:
Terms Accela Microsoft
Start 7/1/2021 7/1/2022
End 6/30/2026 7/1/2025
Annual Rate 4.66% 4.92%
Prepayments $ 227,179 $ -
Implementation Cost $ 35,000 $ -
Principal Paid $ - $ 58,747
Interest Paid $ 15,957 $ 13,264
Lease Amortization $ 149,337 $ 53,085
Subscription Right of Use Assets Accela Microsoft Total Beginning $ - $ - $ -
Additions 597,350 318,510 915,860
Deletions - - -
Ending 597,350 318,510 915,860
Accumulated Amortization (149,337) (53,085) (202,422)
Subscription ROA, Net $ 448,013 $ 265,425 $ 713,438
Subscription Liabilities Accela Microsoft Total
Beginning $ - $ - $ -
Additions 335,172 318,509 653,681
Deletions - (58,747) (58,747)
Ending 335,172 259,762 594,934
Due Within One Year 102,174 46,980 149,154
Due in More Than One Year $ 232,998 $ 212,782 $ 445,780
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
NOTE 9 - SPECIAL ASSESSMENT DISTRICT DEBT WITHOUT COMMITMENT Special assessment districts are established in various parts of the Town to provide improvements to properties located in those districts. Properties are assessed for the cost of the improvements. These assessments are payable over the term of the debt issued to finance the improvements and are used to pay debt service on debt issued to fund the improvements. The Town is acting only as an agent and has no legal liability with respect to the payment of any indebtedness of the Downtown Parking Assessment District. There was no non-obligated debt outstanding as of June 30, 2023.
NOTE 10 - FUND BALANCES
Fund balance for governmental funds is reported in classifications (nonspendable, restricted, committed, assigned, and unassigned) that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. As of June 30, 2023, fund balances were classified as follows:
Beginning Ending
Balance Additions Deletions Balance
Nonspendable
Loans Receivable $ 159,000 $ - $ - $ 159,000
Leases - 146,167 (90,190) 55,977
Total Nonspendable 159,000 146,167 (90,190) 214,977
Restricted:
Library 555,253 86,459 (111,538) 530,174
Capital projects 8,357,393 1,971,621 (2,000,442) 8,328,572 Land held for resale - 344,338 - 344,338
Repairs and maintenance 174,239 41,219 (38,492) 176,966 Pensions 690,000 711,618 (1,455) 1,400,163
VTA 296,598 596,607 (398,379) 494,826
Total Restricted 10,073,483 3,751,862 (2,550,306) 11,275,039 Committed:
Budget stabilization and catastrophes 5,991,566 138,208 - 6,129,774 Catastrophic 5,991,566 138,209 - 6,129,775
Pension/OPEB Reserve 300,000 - - 300,000
Measure G 2018 District Sales Tax - Residual - 590,581 - 590,581 Measure G 2018 District Sales Tax - Capital - 1,769,057 - 1,769,057 Special revenue funds 637,711 382,382 (198,893) 821,200 Total Committed 12,920,843 3,018,437 (198,893) 15,740,387 Assigned:
Open Space 562,000 - - 562,000
Parking 100,000 - - 100,000
Sustainability 140,553 - - 140,553
Capital/Special projects 24,713,386 14,231,906 (9,707,263) 29,238,029 Carryover encumbrances 33,145 4,553 - 37,698
Comcast PEG 50,000 - - 50,000
ERAF Risk - 2,298,692 (1,609,084) 689,608
Economic recovery - 1,556,614 - 1,556,614
Compensated Absences 1,519,147 61,476 - 1,580,623
Measure G 2018 District Sales Tax - Residual 590,581 - (590,581) - Total Assigned 27,708,812 18,153,241 (11,906,928) 33,955,125 Total Fund Balance - Gov't Funds $ 50,862,138 $ 25,069,707 $ (14,746,317) $ 61,185,528
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Nonspendable
Loans receivable nonspendable fund balance reflects long-term loans that are offset by unearned and deferred amounts.
Leases nonspendable fund balance reflects leases receivable that are offset by unearned and deferred amounts.
Restricted
Library reflects fund balance from donations and bequests held in trust for the benefit of the Town’s library.
Capital Outlay funded from storm drain fees, construction taxes and debt proceeds are legally restricted for major capital projects.
Repairs and Maintenance reflects legally restricted balances for repairs and maintenance of lighting and landscape property and open space property that are financed with special tax assessments on the benefiting property.
Pension restricted are amounts paid into a separate legal trust for the Town's Miscellaneous and Safety pension plans administered by CALPERS.
VTA are funds provided by the Valley Transportation Authority’s Measure B restricted for the pavement/crack seal rehabilitation project.
Committed
Budget Stabilization and Catastrophic fund balance has been committed per Town Council resolution.
The Town Council has established by resolution the budget stabilization arrangement and the catastrophe arrangement. The total balances in these arrangements are to be maintained at 25% of annual General Fund ongoing, operating expenditures, excluding one-time expenditures, divided equally between both arrangements. When either arrangement is used, Town Council will develop a 1 to 5-year reserve replenishment plan to meet the minimum threshold of 25% of General Fund ongoing, operating expenditures, excluding onetime expenditures.
The arrangements can be used when:
• Unforeseen emergencies, such as a disaster or catastrophic event occur. • Significant decrease in property or sales tax, or other economically sensitive revenues. • Loss of businesses considered to be significant sales tax generators. • Reductions in revenue due to actions by the state /federal government. • Workflow/technical system improvements to reduce ongoing personnel costs and enhance customer service.
• One-time maintenance of service levels due to significant economic budget constraints • One-time transitional costs associated with organizational restructuring to secure long-term personnel cost savings.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Should any of the events listed above occur that require the expenditure of Town resources beyond those provided for in the annual budget, the Town Manager or designee shall have authority to approve catastrophic or budget stabilization arrangement appropriations. The Town Manager or designee shall then present to the Town Council a budget amendment confirming the nature of the event and authorizing the appropriation of reserve funds.
Pension/OPEB Reserve committed fund balance will be used to fund net pension liabilities for the Town's Miscellaneous and Safety pension plans administered by CALPERS. Town policy provides, to the extent possible, that additional annual deposits be calculated committed with the goal of moving the payment of the unfunded pension liability from a 29-year to a 20-year amortization period.
Special Revenue Fund committed fund balance will be used for the activities of the respective special revenue funds.
Assigned
Open Space assigned fund balance will be used to make selective open space acquisitions.
Parking assigned fund balance will be used to mitigate parking issues within the Town.
Sustainability assigned fund balance will be used to fund ongoing sustainability initiatives and programs.
Capital/Special Projects assigned fund balance will be used for the acquisition and construction of capital facilities as well as special projects or activities as directed by the Town Council.
Carryover Encumbrances assigned fund balance are unspent commitments carried through to future periods.
Comcast PEG assigned fund balance will be used to fund capital improvements linked to the televising of Council and Planning Commission meetings.
Education Realignment Augmentation Fund (ERAF) assigned fund balance has been established to setaside thirty percent of the anticipated ERAF proceeds from FY 2022/23 until a lawsuit between the State and the School Districts concludes.
Economic Recovery assigned fund balance has been established, after utilizing ARPA replacement revenues, to account for General Fund revenues set-aside for essential government services, economic recovery and business support, enhanced senior services, capital program augmentations, and other onetime uses.
Compensated Absences assigned fund balance will be used for vacation and sick-pay benefits owed to employees as of June 30, 2023 that were not an obligation of the General Fund because of their longterm nature.
Measure G 2018 District Sales Tax assigned fund balances for operational and capital will be used to track receipt and use of the 1/8 cents District tax funds collected by the Town for operational and capital expenditures.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
NOTE 11 - EMPLOYEES' RETIREMENT PLAN
The following summarizes the pension balances as of year-end:
Plan Descriptions
All qualified employees are eligible to participate in the Town’s pooled Safety Plan, a cost-sharing multiple-employer defined benefit pension plan and the Town’s Miscellaneous (all other) Plan, an agent Multiple-employer defined benefit pension plan administered by the California Public Employees' Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and Town resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Audited financial statements of CalPERS can be obtained from its website https://www.calpers.ca.gov/page/formspublications. The Town relies upon actuarial and investment data provided by CalPERS for inclusion and analysis in this report.
Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for nonduty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, Lump Sum, or the 1959 Survivor Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.
The Plans’ provisions and benefits in effect at June 30, 2023, are summarized as follows:
Misc Safety Total
Deferred outflows of resources $ 10,459,160 $ 14,761,072 $ 25,220,232 Deferred inflows of resources $ 160,064 $ 2,966,647 $ 3,126,711 Net pension liabilities $ 28,131,979 $ 31,734,686 $ 59,866,665 Pension expense (credit) $ 4,239,084 $ 1,630,960 $ 5,870,044 Defined Benefit Plans
Tier 1 Tier 2 PEPRA Tier 1 PEPRA
Benefit formula 2.5% @ 55 2% @ 60 2% @ 62 3.0% @ 50 2.7% @ 57 Benefit vesting schedule 5 Years 5 Years 5 Years 5 Years 5 Years Benefit payments Monthly for Life Monthly for Life Monthly for Life Monthly for Life Monthly for Life Retirement age 55 60 62 50 57
Monthly benefits as a
% of eligible compensation 2.0% to 2.5% 1% to 2.5% 1.5% to 2.5% 3.00% 2-2.70% Required employee contribution rates 8.00% 7% to 8% 7.25% 9.000% 13.75% Required employer contribution rates 10.20% 10.20% 14.43% 25.64% 13.66% Required payment of unfunded liability $2,515,583 $2,515,583 $2,515,583 $2,317,133 $19,258 Miscellaneous Safety (Police)
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Employees Covered
At June 30, 2023, the following employees were covered by the benefit terms for the Plans:
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rates are the estimated amount necessary to finance the costs of benefits earned by employees during the year.
The Town is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. In addition, the Town is solely responsible for any annual costs associated with payments toward any unfunded accrued liability.
For the year ended June 30, 2023, pension contributions for each Plan was as follows:
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions Pension Liability
As of June 30, 2023, the Town reported net pension liabilities for each plan as follows:
The Town’s net pension liability for the Safety Plan is measured as the proportionate share of the net pension liability while the Miscellaneous plan’s net pension liability is a direct calculation based on its actuarial study and is not proportionate. The net pension liability of all the Plans are measured as of June 30, 2022, and the total pension liability for the Plans used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2021. The Town’s proportion of the net pension liability for the Safety Plan was based on a projection of the Town’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially Miscellaneous Safety
Active 119 37
Transferred 101 13
Separated 91 3
Retired 255 88
Total 566 141
Miscellaneous Safety
Contributions - employer $ 3,687,213 $ 3,409,275
Miscellaneous
Safety
Total
Proportionate
Share of Net
Pension
Liability/(Asset)
$ 28,131,979
31,734,686
$ 59,866,665
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
determined. The Town’s proportionate share of the net pension liability for the Safety Plan as of June 30, 2022 and 2023 was as follows:
For the year ended June 30, 2023, the Town recognized a pension expense of $5,870,044.
The following is a summary of the changes in the total pension liability, fiduciary net position and net pension liability of the Town’s Miscellaneous Plan as of June 30, 2023:
At June 30, 2023, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
The Town reported $7,096,488 as deferred outflows of resources related to contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ended June 30, 2024.
Safety
Proportion - June 30, 2022 0.47764%
Proportion - June 30, 2023 0.46183%
Change - Increase/(Decrease) -0.01581%
Total Fiduciary Net
Pension Net Pension
Liability Position Liability
Beginning Balance $ 116,901,393 $ 106,177,804 $ 10,723,589 Service Costs 2,264,169 - 2,264,169
Interest on Total Pension Liability 8,142,881 - 8,142,881 Changes of Assumptions 3,399,004 - 3,399,004
Difference Between Actual and Expected Experience (108,166) - (108,166) Employer Contributions - 3,472,727 (3,472,727)
Employee Contributions - 871,063 (871,063)
Net Investment Income - (7,988,150) 7,988,150
Employee Contribution Refunds and Benefit Payments (6,623,114) (6,623,114) - Administrative Expenses - (66,142) 66,142
Net Changes 7,074,774 (10,333,616) 17,408,390
Ending Balance $ 123,976,167 $ 95,844,188 $ 28,131,979
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Changes of Assumptions $ 1,982,752 $ - $ 3,199,817 $ -
Differences between Expected and Actual Experience - 160,064 1,313,383 344,614 Differences between Projected and Actual Investment Earnings 4,789,195 - 5,011,351 - Differences between Employer's Contributions and
Proportionate Share of Contributions - - - 2,622,034
Change in Employer's Proportion - - 1,827,246 -
Pension Contributions Made Subsequent to Measurement Date 3,687,213 - 3,409,275 - Total $ 10,459,160 $ 160,064 $ 14,761,072 $ 2,966,647
Miscellaneous Safety
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Actuarial Assumptions
The total pension liabilities in the June 30, 2021 actuarial valuations were determined using the following actuarial assumptions:
The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2021 valuation are based on CalPERS experience studies which can found on the CalPERS website.
Miscellaneous Safety Total
$ 2,018,125 $ 2,351,878 $ 4,370,003
1,211,056 1,908,394 3,119,450
336,478 1,067,890 1,404,368
3,046,224 3,056,988 6,103,212
- - -
- - -
$ 6,611,883 $ 8,385,150 $ 14,997,033
Deferred Outflows/(Inflows) of
Fiscal Year Ending Resources
June 30:
Total
2025
2026
2027
Thereafter
2028
2024
Safety Miscellaneous
Valuation Date June 30, 2021 June 30, 2021
Measurement Date June 30, 2022 June 30, 2022
Actuarial Cost Method Entry-Age
Normal Cost
Method
Entry-Age
Normal Cost
Method
Actuarial Assumptions:
Discount Rate 6.90% 6.90%
Inflation 2.50% 2.50%
Payroll Growth 2.75% 2.75%
Projected Salary Increase (1) (1)
Investment Rate of Return 6.9% (2) 6.9% (2)
Mortality (3) (3)
(1) Varies by entry age and service
(2) Net of pension plan investment expenses, including inflation (3) Derived using CalPERS' membership data for all funds
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Discount Rate
The discount rate used to measure the total pension liability was 6.9 percent for the Plans. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the Plans, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets.
Therefore, the current 6.9 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long-term expected discount rate of 6.9 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website.
Long-Term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and longterm returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects the longterm expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.
Assumed Long-Term
Asset Expected Real
Asset Class (a) Allocation Return (1)(2)
Global Equity Cap Weighted 30.00% 4.45%
Global Equity NonCap Weighted 12.00% 3.84%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
Total 100.00%
(1) An expected inflation of 2.3% used for this period. (2) Figures are based on the 2021-22 Asset Liability Study.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the Town’s net pension liability for the Plans, calculated using the discount rate for the Plans, as well as what the Town’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.
Payable to the Pension Plans
As of June 30, 2023, the Town reported a payable of $21,030 and $24,723 for the outstanding amount of contributions to the Miscellaneous Agent Multiple Employer Plan and the Safety Cost Sharing Plan.
IRS Section 115 Trust
During the fiscal year ending June 30, 2020, the Town established an IRS Section 115 Trust with the CalPERS California Employer’ Pension Prefunding Trust (CEPPT) program. In fiscal year 2023, the Town reported $1,400,163 as restricted cash with fiscal agent within the General Fund. Per GASB, amounts placed in trusts for CalPERS plans are treated as side trusts that do not directly reduce the net pension liability.
NOTE 12 - OTHER POSTEMPLOYMENT BENEFITS
Plan Description
The Town makes contributions to California Employer’s Retiree Benefit Trust (CERBT), an agent multiple-employer defined benefit healthcare plan administered by CalPERS. The purpose of the CERBT Fund is to provide California government employers with a trust through which they may prefund retiree medical costs and Other Postemployment Benefits (OPEB). The Town uses CERBT 1 as its investment vehicle and requests disbursements on an as needed basis to reimburse the Town for the cost of retiree health insurance benefits. Benefit provisions and all other requirements are established by state statute and Town ordinance. Copies of PERS' annual financial report may be obtained from their Executive Office, 400 P Street, Sacramento, CA 95814.
In accordance with the Public Employees' Medical and Hospital Care Act (PEMHCA), employees qualify for retiree health benefits upon five (5) years of service if they meet the vesting requirements as Miscellaneous Safety
1% Decrease 5.90% 5.90%
Net Pension Liability $ 44,383,072 47,026,609
Current 6.90% 6.90%
Net Pension Liability $ 28,131,979 31,734,686
1% Increase 7.90% 7.90%
Net Pension Liability $ 14,764,600 19,236,994
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
set forth by CalPERS and take a service or disability retirement from Town employment. Additionally, the employee must actually draw a CalPERS pension within ninety (90) days of separation from the Town, provided the employee remains with the Town's health plan through COBRA. For employees who retire on or after February 1, 2016, at Medicare eligibility, the Town will align contributions to the full cost of the employee’s enrollment, including enrollment of family members, in a health benefits plan or plans up to a maximum of 100% Single Party and 90% Dependents for Kaiser Bay Area Basic/Medicare/Combo per month. During negotiations in fiscal year 2018/19, the Town’s discretionary retiree medical benefit contribution was eliminated for all future hires.
Upon retirement, employees have the option to roll over their sick leave accrual into a Town managed fund. Employees can request reimbursement of medical expenses from the fund up to the value of their sick leave at retirement.
Employees Covered by Benefit Terms
At June 30, 2023 (the measurement date), the benefit terms covered the following employees:
Contributions
The contribution requirements of Plan members and the Town are established and may be amended by the Town. The required contribution is based on projected pay-as-you-go financing requirements, with additional amounts to prefund benefits as determined annually by the Town Council. For the fiscal year ended June 30, 2023, the Town contributed $1,733,337 from the General Fund. During the measurement period ended June 30, 2022, the Town contributed $1,754,922 to the Plan and benefit payments were $1,591,150. Plan members receiving benefits contributed did not make any contributions.
Active employees 148
Inactive employees - receiving benefits 149
Inactive employees - not receiving benefits 43
Total employees 340
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Actuarial Assumptions
The following summarized the actuarial assumptions for the OPEB plan included in this fiscal year:
Discount Rate
The discount rate used to measure the total OPEB liability was 6.25 percent. The projection of cash flows used to determine the discount rate assumed that Town contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.
Valuation Date: June 30, 2021
Measurement Date: June 30, 2022
Actuarial Cost Method: Entry-Age Normal
Amortization Period:
Asset Valuation Method:
Actuarial Assumptions:
Discount Rate 6.25%
Inflation 2.50%
Salary Increases 2.75%
Investment Rate of Return 6.25%
Healthcare Trend Rate
Mortality
Retirement
Tier 1 Actives in insurance program: 100%
Tier 1 Actives in cash allocation program: 80%
Tier 2 Actives in insurance program: 60%
Tier 2 Actives in cash allocation program:
Agency service < 3 months: 60%
Agency service >= 3 months: 40%
Waived retirees aged <65: 20%
Waived retirees aged ≥65: 0%
Assumption Changes:
None
16 year fixed period for 2022/23
Medicare (Kaiser) - 4.60% for 2023,
decreasing to an ultimate rate of 3.75% in 2076
Level percentage of payroll, closed
CalPERS 2000-2019 Experience Study
CalPERS 2000-2019 Experience Study
Non-Medicare - 6.50% for 2023,
decreasing to an ultimate rate of 3.75% in 2076
Mortality projected fully generational with Scale MP-2021 Medicare (Non-Kaiser) - 5.65% for 2023,
decreasing to an ultimate rate of 3.75% in 2076
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Net OPEB Liability
The Town's net OPEB liability was measured as of June 30, 2022 (measurement date) and was determined by an actuarial valuation as of June 30, 20221 (valuation date) for the fiscal year ended June 30, 2023 (reporting date).
Changes in the Net OPEB Liability
The following summarizes the changes in the net OPEB liability during the year ended June 30, 2023:
Deferred Inflows and Outflows of Resources
At June 30, 2023, the Town reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:
Fiscal Year Ended June 30, 2023
(Measurement Date June 30, 2022)
Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability
(Asset)
Balance at June 30, 2022 $ 28,720,003 $ 26,228,423 $ 2,491,580 Service cost 955,115 - 955,115
Interest in Total OPEB Liability 1,804,972 - 1,804,972
Employer contributions - 1,754,922 (1,754,922)
Net investment income - (3,510,434) 3,510,434
Administrative expenses - (21,454) 21,454
Benefit payments (1,591,150) (1,591,150) -
Net changes 1,168,937 (3,368,116) 4,537,053
Balance at June 30, 2023 $ 29,888,940 $ 22,860,307 $ 7,028,633 Covered Employee Payroll $ 16,987,042
Total OPEB Liability as a % of Covered Employee Payroll 175.95% Plan Fid. Net Position as a % of Total OPEB Liability 76.48% Service Cost as a % of Covered Employee Payroll 5.62%
Net OPEB Liability as a % of Covered Employee Payroll 41.38% Contributions as a % of Cov. Emp. Payroll 10.33%
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Difference between actual and expected experience $ - $ 1,729,077 Difference between actual and expected earnings 1,869,601 - Change in assumptions 703,092 388,845
OPEB contribution subsequent to measurement date 1,733,337 - Totals $ 4,306,030 $ 2,117,922
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Of the total amount reported as deferred outflows of resources related to OPEB, $1,733,337 were the result of Town contributions subsequent to the measurement date and before the end of the fiscal year.
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:
Rate of Return
The long-term expected rate of return on OPEB plan investments was determined using a building- block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the table below.
Year Ended June 30,
2024 $ (95,837)
2025 (104,501)
2026 (130,350)
2027 785,459
2028 -
Thereafter -
Total $ 454,771
Asset Class
Percentage of
Portfolio
Long-Term
Expected Rate of
Return
Global Equity 49.00% 4.56%
Fixed Income 23.00% 1.56%
TIPS 5.00% -0.08%
Commodities 3.00% 1.22%
REITs 20.00% 4.06%
Total 100.00%
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
OPEB Expense
The following summarizes the OPEB expense by source during the year ended June 30, 2023:
The following summarizes changes in the net OPEB liability as reconciled to OPEB expense during the year ended June 30, 2023:
Sensitivity to Changes in the Discount Rate
The net OPEB liability of the Town, as well as what the Town's net OPEB liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher, is as follows:
Sensitivity to Changes in the Healthcare Cost Trend Rates The net OPEB liability of the Town, as well as what the Town's net OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage point lower or one percentage point higher than current healthcare cost trend rates, is as follows:
Service cost $ 955,115
Interest in TOL 1,804,972
Expected investment income (1,639,254)
Difference between actual and expected experience (445,555) Difference between actual and expected earnings 297,921 Change in assumptions 18,738
Administrative expenses 21,454
OPEB Expense $ 1,013,391
$ 7,028,633
(2,491,580)
4,537,053
Changes in deferred outflows (1,693,828)
Changes in deferred inflows (3,584,756)
Employer contributions and implicit subsidy 1,754,922
OPEB Expense $ 1,013,391
Net OPEB liability ending
Net OPEB liability beginning
Change in net OPEB liability
(1% Decrease ) 6.25% (1% Increase )
Net OPEB Liability (Asset) $ 10,608,076 $ 7,028,633 $ 4,038,280 Discount Rate
(1% Decrease ) Current (1% Increase )
Net OPEB Liability (Asset) $ 4,445,533 $ 7,028,633 $ 9,938,167 Trend Rate
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
NOTE 13 - RISK MANAGEMENT
The Town participates in the following public entity risk pools through formally organized and separate legal entities. The Town does not have an equity interest in the joint ventures. These entities exercise full powers and authority within the scope of the related agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Obligations and liabilities of the separate entities are not those of the Town, although the Town retains an ongoing financial interest or an ongoing financial responsibility.
Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA) The Town participates in PLAN, which covers general liability claims in the amount up to $5,000,000 plus $25,000,000 in excess liability for total coverage of $30,000,000 per occurrence. The Town has a deductible or uninsured liability of up to $50,000 per claim. PLAN also provides all risk property coverage of $1,000,000,000, excluding flood and earthquake coverage. The Town has a $5,000 deductible for property and vehicle damage. Once the Town’s deductible is met, PLAN becomes responsible for payment of all claims up to the limit. Financial statements may be obtained from PLAN at 1750 Creekside Drive, Suite 200, Sacramento, CA, 95833.
Local Agency Workers’ Compensation Joint Powers Authority (LAWCX) The Town is a member of LAWCX for workers compensation claims coverage. The Town has a $250,000 self-insured retention level or uninsured liability for all employees. Once the Town’s deductible is met, LAWCX becomes responsible for claims up to $5,000,000. For claims greater than $5,000,000, LAWCX has a commercial policy providing coverage. Financial statements may be obtained from LAWCX at 1750 Creekside Oaks Dr., Suite 200, Sacramento, California, 95833. The Town has not significantly reduced its insurance coverage from the prior year and settlements have not exceeded insurance coverage for the past three years.
Liability for Uninsured Claims
The Town is required to record its liability for uninsured claims and to reflect the current portion of this liability as an expenditure in its financial statements. As discussed above, the Town has coverage for such claims, but it has retained the risk for the deductibles, or uninsured portion of these claims. The change in Workers’ Compensation and Self-Insurance Service Funds’ claims liabilities, is based on historical trend information provided by its third party administrator and was computed as follows as of June 30, 2023:
Workers' SelfCompensation Insurance
Internal Internal
Service Fund Service Fund Total
Claims payable balance - June 30, 2021 $ 1,495,482 $ 200,590 $ 1,696,072 Claims incurred - (119,883) (119,883)
Claims paid (130,924) (61,150) (192,074)
Claims payable balance - June 30, 2022 1,364,558 19,557 1,384,115 Claims incurred/adjustments 1,731,577 224,382 1,955,959 Claims paid (1,127,156) (86,210) (1,213,366)
Claims payable balance - June 30, 2023 $ 1,968,979 $ 157,729 $ 2,126,708
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
NOTE 14 - COMMITMENTS AND CONTINGENCIES
Federal and State Grants - The Town participates in several federal and state grant programs. These are subject to examination by grantors and the amount, if any, of disallowed expenditures cannot be determined at this time. The Town expects such amounts, if any, to be immaterial.
Litigation - The Town is subject to litigation arising from the normal course of business. The Town Attorney believes there is no pending litigation which is likely to have a material adverse effect on the financial position of the Town.
Successor Agency - As of June 30, 2023, the Successor Agency trust fund reported a net deficit of $6,187,788.
Encumbrances- As of June 30, 2023, the town had the following encumbered balances that were carried into the next fiscal year:
NOTE 15 - TOWN/SUCCESSOR AGENCY GRANTS, COOPERATIVE AGREEMENTS Public Improvement Grants and Cooperative Agreements
In January of 2011, the Redevelopment Agency entered into a public improvement grant and cooperative agreement with the Town for the purpose of funding the acquisition of public land and designing and constructing various public improvements to be owned by the Town provided that the projects were in accordance with the Redevelopment Agency’s five year implementation plan and redevelopment plan.
The improvement plan, as identified in the agreement, called for approximately $24 million to be granted to the Town for the following projects:
a. Expansion and improvement of current and new downtown parking b. Highway 9 improvements from Highway 17 to Monte Sereno c. Almond Grove Area street, sidewalk and other improvements d. Downtown Los Gatos gateways, signage, banners and art e. Storm drain, retaining wall, street and other improvements f. New Los Gatos library building
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its Redevelopment Agency.
General Fund $ 797,302
Appropriated Reserves Fund 5,526,443
Nonmajor Governmental Funds 1,476,257
Internal Service Funds 125,253
Total Encumbrances $ 7,925,255
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
Affordable Housing Cooperative Agreement
In March of 2011, the Redevelopment Agency entered into an affordable housing cooperative agreement with the Town for the purpose of funding affordable housing projects and programs to be developed and/or administered by the Town in accordance with the Redevelopment Agency’s five year implementation plan and redevelopment plan. The improvement plan, as identified in the agreement, called for approximately $16 million to be granted to the Town for the following projects:
a. Development of affordable housing at 224 Main St.
b. Development of affordable housing at Dittos Lane
c. Partnership with Senior Housing Solutions for the creation of senior housing in Los Gatos d. Partnerships for the conversion of existing residential developments dedicated to affordable housing e. Grants to the Santa Clara County Housing Trust for the development of affordable housing.
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its Redevelopment Agency.
NOTE 16 - COVID19 PANDEMIC PROGRAMS
On March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law by President Biden.
The $1.9 trillion package (the Act) provided financial aid to families, governments, businesses, schools, nonprofits and others impacted by the COVID19 public health crisis. Of the $1.9 trillion, $350 billion was directed toward state and local governments. All 19,000 municipal governments are entitled to a direct, noncompetitive federal formula grant from the U.S. Treasury Department. The portion allocated to cities, towns, and villages totals $65.1 billion of which $19.5 billion is obligated toward cities with less than 50,000 residents. The Act has allocated $7,229,744 to the Town over a two-year period. The first tranche payment of $3,614,862 was received on July 13, 2021, and the second payment was received on July 21, 2022. Section 603. Coronavirus Local Fiscal Recovery Fund of the Act identified four eligible uses for funding, as follows:
A. to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality; B. to respond to workers performing essential work during the COVID19 public health emergency by providing premium pay to eligible workers of the metropolitan city, nonentitlement unit of local government, or county that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work; C. for the provision of government services to the extent of the reduction in revenue of such metropolitan city, nonentitlement unit of local government, or county due to the COVID19 public health emergency relative to revenues collected in the most recent full fiscal year of the metropolitan city, nonentitlement unit of local government, or county prior to the emergency; or D. to make necessary investments in water, sewer, or broadband infrastructure.
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
During the fiscal year ended June 30, 2023, the Town recognized $3,614,872 as operating grant revenue in the ARPA special revenue fund and transferred $3,614,872 to other funds, reimbursing the Town for qualifying public safety expenditures under the provisions of the Act.
Required Supplementary Information
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
BENEFIT PLAN SCHEDULES
Schedule of Pension Plan Contributions
Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost Sharing Plan Schedule of Proportionate Share of Net Pension Liability – CalPERS Misc. Agent-Multiple Employer Plan
Schedule of OPEB Contribution
Schedule of Changes in Net OPEB Liability
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
SCHEDULE OF PENSION PLAN CONTRIBUTIONS
Miscellaneous Agent Multiple-Employer Plan
Plan Measurement Date 2014 2015 2016 2017 2018 2019 2020 2021 2022 Fiscal Year Ended 2015 2016 2017 2018 2019 2020 2021 2022 2023 Contractually Required Contributions $ 1,941,765 $ 2,223,782 $ 2,407,496 $ 2,669,133 $ 3,049,748 $ 3,366,304 $ 3,529,373 $ 3,472,727 $ 3,687,213 Contributions in Relation to Contractually
Required Contributions 1,941,765 2,223,782 2,407,496 2,669,133 3,049,748 8,146,791 9,160,680 3,472,727 3,687,213 Contribution Deficiency (Excess) $ - $ - $ - $ - $ - $ (4,780,487) $ (5,631,307) $ - $ - Covered Payroll $ 8,487,940 $ 9,198,318 $ 9,024,370 $ 9,576,157 $ 10,211,967 $ 11,188,927 $ 12,082,520 $ 12,305,265 $ 11,094,190 Contributions as a % of Covered Payroll 22.88% 24.18% 26.68% 27.87% 29.86% 72.81% 75.82% 28.22% 33.24% Safety Cost Sharing Plan
Plan Measurement Date 2014 2015 2016 2017 2018 2019 2020 2021 2022 Fiscal Year Ended 2015 2016 2017 2018 2019 2020 2021 2022 2023 Contractually Required Contributions $ 1,999,757 $ 1,586,129 $ 1,738,150 $ 1,951,711 $ 2,325,357 $ 2,565,205 $ 2,853,764 $ 3,072,032 $ 3,409,275 Contributions in Relation to Contractually
Required Contributions 1,999,757 1,586,129 1,738,150 1,951,711 2,325,357 2,565,205 2,853,764 3,072,032 3,409,275 Contribution Deficiency (Excess) $ - $ - $ - $ - $ - $ - $ - $ - $ - Covered Payroll $ 4,897,104 $ 5,022,498 $ 4,941,138 $ 5,079,440 $ 4,445,061 $ 4,928,821 $ 5,178,418 $ 5,603,211 $ 5,863,101 Contributions as a % of Covered Payroll 40.84% 31.58% 35.18% 38.42% 52.31% 52.05% 55.11% 54.83% 58.15% Notes to Schedule:
Valuation Date: June 30, 2021
Assumptions Used: Entry Age Method used for Actuarial Cost Method Level Percentage of Payroll and Direct Rate Smoothing
Remaining Amortization Period no more than 29 years
Inflation Assumed at 2.30%
Investment Rate of Returns set at 6.9%
Fiscal year 2015 was the first year of implementation, therefore only nine years are shown.
The CalPERS discount rate was increased from 7.50% to 7.65% in FY2016, to 7.15% in FY2018 and then decreased to 6.9% in FY2023.
The CalPERS mortality assumptions were adjusted in fiscal year 2023.
The mortality table was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing morality improvement using 80% of Scale MP 2020 published by the Society of Actuaries. For more
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
SCHEDULE OF PROPORTIONARE SHARE OF NET PENSION LIABILITY
CALPERS SAFETY COST SHARING PLAN
Safety Cost Sharing Plan
Plan Measurement Date 2014 2015 2016 2017 2018 2019 2020 2021 2022 Fiscal Year Ended 2015 2016 2017 2018 2019 2020 2021 2022 2023 Proportion of Net Pension
Liability 0.28588% 0.14860% 0.22394% 0.22603% 0.23583% 0.24100% 0.24953% 0.30994% 0.27474% Proportionate Share of
Net Pension Liability $ 17,788,690 $ 10,199,904 $ 19,377,843 $ 22,415,954 $ 22,725,267 $ 24,695,687 $ 27,149,916 $ 16,762,598 $ 31,734,686 Covered Payroll $ 4,916,535 $ 4,897,104 $ 5,022,498 $ 4,941,138 $ 5,079,440 $ 4,445,061 $ 4,928,821 $ 5,178,418 $ 5,603,211 Proportionate Share of NPL
as a % of Covered Payroll 361.81% 208.28% 385.82% 453.66% 447.40% 555.58% 550.84% 323.70% 566.37% Plan's Fiduciary Net Position
as a % of the TPL 78.83% 74.89% 74.89% 73.87% 74.52% 73.61% 72.46% 83.55% 71.34% Fiscal year 2015 was the first year of implementation, therefore only nine years are shown.
The CalPERS discount rate was increased from 7.50% to 7.65% in FY2016, to 7.15% in FY2018 and then decreased to 6.9% in FY2023.
The CalPERS mortality assumptions were adjusted in fiscal year 2023.
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
SCHEDULE OF PROPORTIONARE SHARE OF NET PENSION LIABILITY
CALPERS MISCELLANEOUS AGENT-MULTPLE EMPLOYER PLAN
Measuement Date 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total Pension liability
Service cost $ 1,579,547 $ 1,491,925 $ 1,560,679 $ 1,651,550 $ 1,700,438 $ 1,771,368 $ 1,930,090 $ 2,062,486 $ 2,264,169 Interest 6,268,015 6,483,032 6,697,247 6,820,536 7,073,843 7,381,846 7,729,269 7,943,404 8,142,881 Diff. between expected and actual exp. - (623,495) (357,870) (892,479) 994,994 1,082,289 1,465,653 (581,801) (108,166) Changes of assumptions - (1,513,132) - 5,481,432 (655,541) - - - 3,399,004 Benefit payments (including refunds) (4,241,487) (4,748,786) (4,953,756) (5,138,083) (5,448,374) (5,720,232) (5,958,101) (6,339,615) (6,623,114) Net change in Total Pension Liability 3,606,075 1,089,544 2,946,300 7,922,956 3,665,360 4,515,271 5,166,911 3,084,474 7,074,774 Total Pension Liability - beginning 84,904,502 88,510,577 89,600,121 92,546,421 100,469,377 104,134,737 108,650,008 113,816,919 116,901,393 Total Pension Liability - ending $ 88,510,577 $ 89,600,121 $ 92,546,421 $ 100,469,377 $ 104,134,737 $ 108,650,008 $ 113,816,919 $ 116,901,393 $ 123,976,167 Plan fiduciary net position
Employer contributions $ 1,796,079 $ 1,941,765 $ 2,223,782 $ 2,407,496 $ 2,669,104 $ 3,049,748 $ 8,146,791 $ 9,160,680 $ 3,472,727 Employee contributions 668,167 679,796 691,770 682,891 761,705 846,125 834,145 889,649 871,063 Plan to plan resource movement - 22,561 (28,866) - (170) - - - - Projected investment earnings 4,328,173 - - - - - - - - Diff. between est. and actual earnings 5,831,718 - - - - - - - - Net investment income - 1,470,873 369,185 7,171,443 5,883,868 4,759,034 3,913,294 19,606,360 (7,988,150) Benefit payments (including refunds) (4,241,487) (4,748,786) (4,953,756) (5,138,083) (5,448,374) (5,720,232) (5,958,101) (6,339,615) (6,623,114) Administrative expense - (74,706) (40,462) (95,455) (108,582) (52,260) (107,303) (82,856) (66,142) Adjsutments - - - - (206,199) 170 - - -
Net change in plan fiduciary net position 8,382,650 (708,497) (1,738,347) 5,028,292 3,551,352 2,882,585 6,828,826 23,234,218 (10,333,616) Plan fiduciary net position - beginning 58,716,725 67,099,375 66,390,878 64,652,531 69,680,823 73,232,175 76,114,760 82,943,586 106,177,804 Plan fiduciary net position - ending $ 67,099,375 $ 66,390,878 $ 64,652,531 $ 69,680,823 $ 73,232,175 $ 76,114,760 $ 82,943,586 $ 106,177,804 $ 95,844,188 Net Pension liability (asset) $ 21,411,202 23,209,243 27,893,890 30,788,554 30,902,562 32,535,248 30,873,333 10,723,589 28,131,979 Plan fiduciary net position as a percentage
of the total Pension liability 75.81% 74.10% 69.86% 69.36% 70.32% 70.05% 72.87% 90.83% 77.31% Covered Payroll $ 8,406,315 $ 8,487,940 $ 9,198,318 $ 9,024,370 $ 9,576,157 $ 10,211,967 $ 11,188,927 $ 12,082,520 $ 12,305,265 Net Pension liability % of covered payroll 254.70% 273.44% 303.25% 341.17% 322.70% 318.60% 275.93% 88.75% 228.62% Other Notes
Fiscal year 2015 was the first year of implementation, therefore only nine years are shown.
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
SCHEDULE OF OPEB CONTRIBUTIONS
Fiscal Year Ended 2018 2019 2020 2021 2022 2023
Actuarially determined contribution (ADC) $ 2,129,000 $ 2,108,000 $ 2,172,000 $ 1,859,000 $ 1,860,000 $ 1,372,000 Less: actual contribution in relation to ADC (2,935,000) (2,406,636) (2,508,306) (2,096,847) (1,754,922) (1,733,337) Contribution deficiency (excess) $ (806,000) $ (298,636) $ (336,306) $ (237,847) $ 105,078 $ (361,337) Covered employee payroll $ 16,192,060 $ 17,338,201 $ 17,406,541 $ 17,982,237 $ 16,987,042 $ 17,809,965 Contrib. as a % of covered employee payroll 18.13% 13.88% 14.41% 11.66% 10.33% 9.73% Notes to Schedule:
Assumptions and Methods
Valuation Date:
Measurement Date:
Actuarial Cost Method:
Amortization Period:
Asset Valuation Method:
Actuarial Assumptions:
Discount Rate
Inflation
Salary Increases
Investment Rate of Return
Healthcare Trend Rate
Mortality
Retirement
Other Notes
In FY 2022, the discount rate was updated based on newer capital market assumptions In FY 2022, decreased medical trend rate for Kaiser Senior Advantage In FY 2022, demographic assumptions were updated to CalPERS 2000-2019 Experience Study in FY 2022, the inflation rate decreased 25 basis points, decreasing discount rate, medical trend, and salary increases in FY 2022, retiree and family participation rates at retirement updated In FY 2022, the Implicit subsidy was added for Tier 1 Medicare eligible In FY 2022, the mortality improvement scale was updated to Scale MP-2021 No changes in FY 2023
June 30, 2021
June 30, 2022
Entry-Age Normal Cost
16 year fixed period for 2022/23
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.
Level percentage of payroll, closed
CalPERS 2000-2019 Experience Study
CalPERS 2000-2019 Experience Study
6.25%
2.50%
2.75%
Non-Medicare - 6.50% for 2023,
decreasing to an ultimate rate of 3.75% in
6.25%
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
SCHEDULE OF CHANGES IN NET OPEB LIABILITY
Measurement Date 2017 2018 2019 2020 2021 2022
Total OPEB liability
Service cost $ 1,134,000 $ 1,168,227 $ 1,203,274 $ 1,159,152 $ 1,115,309 $ 955,115 Interest 1,607,000 1,706,270 1,814,072 1,887,105 1,956,034 1,804,972 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) (1,591,150) Net change in Total OPEB Liability 1,472,000 1,548,184 1,176,745 1,112,499 109,575 1,168,937 Total OPEB Liability - beginning 23,301,000 24,773,000 26,321,184 27,497,929 28,610,428 28,720,003 Total OPEB Liability - ending $ 24,773,000 $ 26,321,184 $ 27,497,929 $ 28,610,428 $ 28,720,003 $ 29,888,940 Plan fiduciary net position
Employer contributions $ 3,878,000 $ 2,935,313 $ 2,406,636 $ 2,508,306 $ 2,096,847 $ 1,754,922 Net investment income 1,049,000 1,082,977 1,009,315 652,656 5,529,824 (3,510,434) Benefit payments (1,269,000) (1,326,313) (1,298,623) (1,399,933) (1,494,906) (1,591,150) Administrative expense (14,000) (34,261) (11,502) (17,357) (18,556) (21,454) Net change in plan fiduciary net position 3,644,000 2,657,716 2,105,826 1,743,672 6,113,209 (3,368,116) Plan fiduciary net position - beginning 9,964,000 13,608,000 16,265,716 18,371,542 20,115,214 26,228,423 Plan fiduciary net position - ending $ 13,608,000 $ 16,265,716 $ 18,371,542 $ 20,115,214 $ 26,228,423 $ 22,860,307 Net OPEB liability (asset) $ 11,165,000 10,055,468 9,126,387 8,495,214 2,491,580 7,028,633 Plan fiduciary net position as a percentage
of the total OPEB liability 54.93% 61.80% 66.81% 70.31% 91.32% 76.48% Covered Employee Payroll $ 14,985,716 $ 16,192,060 $ 17,338,201 $ 17,406,541 $ 17,982,237 $ 16,987,042 NOL as a % of cov. emp. payroll 74.50% 62.10% 52.64% 48.80% 13.86% 41.38% 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
This Page Left Intentionally Blank
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
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.
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 $ 110,000 $ 110,001 $ 181,533 $ 71,532 Intergovernmental 6,187,538 3,340,719 3,358,063 17,344
Charges for services 871,800 956,262 1,072,009 115,747
Developer fees 20,000 620,000 614,820 (5,180)
Interest - - 44,198 44,198
Use of Property 96,000 96,000 91,284 (4,716)
Other 2,900,000 - - -
Total Revenues 10,185,338 5,122,982 5,361,907 238,925
EXPENDITURES
Capital outlay 13,949,982 6,710,867 6,722,633 (11,766)
Total Expenditures 13,949,982 6,710,867 6,722,633 (11,766)
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (3,764,644) (1,587,885) (1,360,726) 227,159
OTHER FINANCING SOURCES (USES)
Settlements - 1,565,000 1,565,000 -
Transfers in 3,706,978 7,103,550 7,732,614 629,064
Transfers (out) (427,616) (427,616) (427,616) -
Total Other Financing Sources (Uses) 3,279,362 8,240,934 8,869,998 629,064 CHANGE IN FUND BALANCE $ (485,282) $ 6,653,049 7,509,272 $ 856,223 BEGINNING FUND BALANCE 14,240,753
ENDING FUND BALANCE $ 21,750,025
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
TOWN OF LOS GATOS
APPROPRIATED RESERVES FUND
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
Total
Capital
Storm Construction Gas Projects
Drains Tax Tax Funds
ASSETS
Cash & investments $ 3,218,331 $ 3,438,996 $ 1,465,877 $ 8,123,204 Restricted cash & investments - - - -
Receivables:
Accounts - - - -
Intergovernmental receivable - - 205,368 205,368
Leases receivable - - - -
Long term notes receivable - - - -
Total Assets $ 3,218,331 $ 3,438,996 $ 1,671,245 $ 8,328,572
LIABILITIES
Accounts payable $ - $ - $ - $ -
Accrued payroll and benefits - - - -
Due to other funds - - - -
Unearned revenue - - - -
Total Liabilities - - - -
DEFERRED INFLOWS OF RESOURCES
Leases - - - -
FUND BALANCE
Nonspendable - leases - - - -
Restricted for:
Library - - - -
Repairs and maintenance - - - -
Capital projects 3,218,331 3,438,996 1,671,245 8,328,572 Committed to:
Special revenue funds - - - -
Total Fund Balances 3,218,331 3,438,996 1,671,245 8,328,572 Total Liabilities and Fund Balances $ 3,218,331 $ 3,438,996 $ 1,671,245 $ 8,328,572 (Continued)
CAPITAL PROJECTS FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2023
Non-Point
Community Source Lighting and
Development Maintenance Landscaping
ASSETS
Cash & investments $ 94,412 $ 580,929 $ 183,129
Restricted cash & investments 58,344 - -
Receivables:
Accounts - 52,426 -
Intergovernmental receivable - - 171
Leases receivable - - -
Long term notes receivable 78,752 - -
Total Assets $ 231,508 $ 633,355 $ 183,300
LIABILITIES
Accounts payable $ 60 $ 1,178 $ 6,334
Accrued payroll and benefits - 2,334 -
Due to other funds - - -
Unearned revenue 64,795 - -
Total Liabilities 64,855 3,512 6,334
DEFERRED INFLOWS OF RESOURCES
Leases - - -
FUND BALANCE
Nonspendable - leases - - -
Restricted for:
Library - - -
Repairs and maintenance - - 176,966
Capital projects - - -
Committed to:
Special revenue funds 166,653 629,843 -
Total Fund Balances 166,653 629,843 176,966
Total Liabilities and Fund Balances $ 231,508 $ 633,355 $ 183,300 (Continued)
SPECIAL REVENUE FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2023
Total
Total Nonmajor
LG Library Special Revenue Governmental
Theatre Trust Funds Funds
ASSETS
Cash & investments $ - $ 533,131 $ 1,391,601 $ 9,514,805 Restricted cash & investments - - 58,344 58,344
Receivables:
Accounts 32,725 - 85,151 85,151
Intergovernmental receivable - - 171 205,539
Leases receivable 319,957 - 319,957 319,957
Long term notes receivable - - 78,752 78,752
Total Assets $ 352,682 $ 533,131 $ 1,933,976 $ 10,262,548
LIABILITIES
Accounts payable $ 6,189 $ 2,957 $ 16,718 $ 16,718
Accrued payroll and benefits - - 2,334 2,334
Due to other funds 1,832 - 1,832 1,832
Unearned revenue - - 64,795 64,795
Total Liabilities 8,021 2,957 85,679 85,679
DEFERRED INFLOWS OF RESOURCES
Leases 269,670 - 269,670 269,670
FUND BALANCE
Nonspendable - leases 50,287 - 50,287 50,287
Restricted for:
Library - 530,174 530,174 530,174
Repairs and maintenance - - 176,966 176,966
Capital projects - - - 8,328,572
Committed to:
Special revenue funds 24,704 - 821,200 821,200
Total Fund Balances 74,991 530,174 1,578,627 9,907,199
Total Liabilities and Fund Balances $ 352,682 $ 533,131 $ 1,933,976 $ 10,262,548 (Concluded)
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2023
SPECIAL REVENUE FUNDS
Total
Storm Construction Gas Capital Projects
Drain Tax Tax Funds
REVENUES
Property Taxes $ - $ - $ - $ -
Other Taxes - 29,042 - 29,042
License and permits 161,830 - - 161,830
Intergovernmental - - 1,597,057 1,597,057
Interest 55,771 58,440 20,481 134,692
Use of property - - - -
Other - 49,000 - 49,000
Total Revenues 217,601 136,482 1,617,538 1,971,621
EXPENDITURES
Current:
Parks and public works - - - -
Library services - - - -
Sanitation and other - - - -
Capital Outlay 218,081 - 1,676,361 1,894,442
Total Expenditures 218,081 - 1,676,361 1,894,442
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (480) 136,482 (58,823) 77,179
OTHER FINANCING SOURCES (USES)
Transfers in - - - -
Transfers (out) - - (106,000) (106,000)
Total Other Financing Sources (Uses) - - (106,000) (106,000) Changes in Fund Balances (480) 136,482 (164,823) (28,821) Fund Balances - Beginning of year 3,218,811 3,302,514 1,836,068 8,357,393 Fund Balances - End of year $ 3,218,331 $ 3,438,996 $ 1,671,245 $ 8,328,572 (Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
CAPITAL PROJECTS FUNDS
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
Non-Point
Community Source Lighting and
Development Maintenance Landscaping
REVENUES
Property Taxes $ - $ - $ 38,161
Other Taxes - - -
License and permits - 359,950 -
Intergovernmental - 22,432 -
Interest - - 3,058
Use of property - - -
Other - - -
Total Revenues - 382,382 41,219
EXPENDITURES
Current:
Parks and public works - - 33,572
Library services - - -
Sanitation and other - 204,097 -
Capital Outlay - - -
Total Expenditures - 204,097 33,572
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES - 178,285 7,647
OTHER FINANCING SOURCES (USES)
Transfers in - - -
Transfers (out) - - (4,920)
Total Other Financing Sources (Uses) - - (4,920)
Changes in Fund Balances - 178,285 2,727
Fund Balances - Beginning of year 166,653 451,558 174,239 Fund Balances - End of year $ 166,653 $ 629,843 $ 176,966 (Continued)
SPECIAL REVENUE FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
TOWN OF LOS GATOS
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
Total
LG Library Special Revenue
Theatre Trust Funds Total
REVENUES
Property Taxes $ - $ - $ 38,161 $ 38,161
Other Taxes - - - 29,042
License and permits - - 359,950 521,780
Intergovernmental - - 22,432 1,619,489
Interest - 9,845 12,903 147,595
Use of property 108,237 - 108,237 108,237
Other - 76,617 76,617 125,617
Total Revenues 108,237 86,462 618,300 2,589,921
EXPENDITURES
Current:
Parks and public works 52,746 - 86,318 86,318
Library services - 111,541 111,541 111,541
Sanitation and other - - 204,097 204,097
Capital Outlay - - - 1,894,442
Total Expenditures 52,746 111,541 401,956 2,296,398
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 55,491 (25,079) 216,344 293,523
OTHER FINANCING SOURCES (USES)
Transfers in - - - -
Transfers (out) - - (4,920) (110,920)
Total Other Financing Sources (Uses) - - (4,920) (110,920) Changes in Fund Balances 55,491 (25,079) 211,424 182,603 Fund Balances - Beginning of year 19,500 555,253 1,367,203 9,724,596 Fund Balances - End of year $ 74,991 $ 530,174 $ 1,578,627 $ 9,907,199 (Concluded)
SPECIAL REVENUE FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
AND CHANGES IN FUND BALANCES
TOWN OF LOS GATOS
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes $ - $ - $ - $ - $ - $ -
Other taxes - - - 30,000 29,042 (958)
License and permits 92,500 161,830 69,330 - - -
Intergovernmental - - - - - -
Interest 12,580 55,771 43,191 22,490 58,440 35,950
Use of property - - - - - -
Other - - - - 49,000 49,000
Total Revenues 105,080 217,601 112,521 52,490 136,482 83,992
EXPENDITURES
Current:
Parks and public works - - - - - -
Library services - - - - - -
Sanitation and other - - - - - -
Capital outlay 218,081 218,081 - - - -
Total Expenditures 218,081 218,081 - - - -
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (113,001) (480) 112,521 52,490 136,482 83,992
OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) - - - - - -
Total Other Financing Sources (Uses) - - - - - -
CHANGE IN FUND BALANCE $ (113,001) (480) $ 112,521 $ 52,490 136,482 $ 83,992 BEGINNING FUND BALANCE 3,218,811 3,302,514
ENDING FUND BALANCE $ 3,218,331 $ 3,438,996
(Continued)
STORM DRAIN CONSTRUCTION TAX
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes $ - $ - $ - $ - $ - $ -
Other taxes - - - - - -
License and permits - - - - - -
Intergovernmental 1,535,078 1,597,057 61,979 - - -
Interest 1,335 20,481 19,146 - - -
Use of property - - - - - -
Other - - - - - -
Total Revenues 1,536,413 1,617,538 81,125 - - -
EXPENDITURES
Current:
Parks and public works - - - - - -
Library services - - - - - -
Sanitation and other - - - - - -
Capital outlay 1,676,361 1,676,361 - - - -
Total Expenditures 1,676,361 1,676,361 - - - -
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (139,948) (58,823) 81,125 - - -
OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) (106,000) (106,000) - - - -
Total Other Financing Sources (Uses) (106,000) (106,000) - - - - CHANGE IN FUND BALANCE $ (245,948) (164,823) $ 81,125 $ - - $ - BEGINNING FUND BALANCE 1,836,068 166,653
ENDING FUND BALANCE $ 1,671,245 $ 166,653
(Continued)
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
GAS TAX COMMUNITY DEVELOPMENT
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes $ - $ - $ - $ 38,220 $ 38,161 $ (59)
Other taxes - - - - - -
License and permits 359,950 359,950 - - - -
Intergovernmental - 22,432 22,432 - - -
Interest - - - 1,425 3,058 1,633
Use of property - - - - - -
Other - - - - - -
Total Revenues 359,950 382,382 22,432 39,645 41,219 1,574
EXPENDITURES
Current:
Parks and public works - - - 42,764 33,572 9,192
Library services - - - - - -
Sanitation and other 198,372 204,097 (5,725) - - -
Capital outlay - - - 62,500 - 62,500
Total Expenditures 198,372 204,097 (5,725) 105,264 33,572 71,692
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 161,578 178,285 16,707 (65,619) 7,647 73,266
OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) - - - (4,920) (4,920) -
Total Other Financing Sources (Uses) - - - (4,920) (4,920) - CHANGE IN FUND BALANCE $ 161,578 178,285 $ 16,707 $ (70,539) 2,727 $ 73,266 BEGINNING FUND BALANCE 451,558 174,239
ENDING FUND BALANCE $ 629,843 $ 176,966
(Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
NON-POINT
SOURCE MAINTENANCE LIGHTING AND LANDSCAPING
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Property taxes $ - $ - $ - $ - $ - $ -
Other taxes - - - - - -
License and permits - - - - - -
Intergovernmental - - - - - -
Interest - - - 6,250 9,845 3,595
Use of property 68,400 108,237 39,837 - - -
Other - - - 75,000 76,617 1,617
Total Revenues 68,400 108,237 39,837 81,250 86,462 5,212
EXPENDITURES
Current:
Parks and public works 55,814 52,746 3,068 - - -
Library services - - - 105,500 111,541 (6,041)
Sanitation and other - - - - - -
Capital outlay - - - 20,755 - 20,755
Total Expenditures 55,814 52,746 3,068 126,255 111,541 14,714
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 12,586 55,491 42,905 (45,005) (25,079) 19,926
OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) - - - - - -
Total Other Financing Sources (Uses) - - - - - -
CHANGE IN FUND BALANCE $ 12,586 55,491 $ 42,905 $ (45,005) (25,079) $ 19,926 BEGINNING FUND BALANCE 19,500 555,253
ENDING FUND BALANCE $ 74,991 $ 530,174
(Continued)
LG Theatre Library Trust
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
Variance
Positive
Budget Actual (Negative)
REVENUES
Property taxes $ 38,220 $ 38,161 $ (59)
Other taxes 30,000 29,042 (958)
License and permits 452,450 521,780 69,330
Intergovernmental 1,535,078 1,619,489 84,411
Interest 44,080 147,595 103,515
Use of property 68,400 108,237 39,837
Other 75,000 125,617 50,617
Total Revenues 2,243,228 2,589,921 346,693
EXPENDITURES
Current:
Parks and public works 98,578 86,318 12,260
Library services 105,500 111,541 -
Sanitation and other 198,372 204,097 (5,725)
Capital outlay 1,977,697 1,894,442 83,255
Total Expenditures 2,380,147 2,296,398 89,790
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (136,919) 293,523 430,442
OTHER FINANCING SOURCES (USES)
Operating transfers in - - -
Operating transfers (out) (110,920) (110,920) -
Total Other Financing Sources (Uses) (110,920) (110,920) - CHANGE IN FUND BALANCE $ (247,839) 182,603 $ 430,442
BEGINNING FUND BALANCE 9,724,596
ENDING FUND BALANCE $ 9,907,199
(Concluded)
TOTALS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
TOWN OF LOS GATOS
BUDGETED NONMAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
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.
Workers' Self Information Facilities
Equipment Comp Insurance Technology Maintenance Total
ASSETS
Cash & Investments $ 2,401,161 $ 2,371,205 $ 386,654 $ 2,462,357 $ 379,020 $ 8,000,397 Restricted Cash & Investments - 115,981 - - - 115,981
Receivables:
Accounts 30,531 2,000 - 18,054 24,853 75,438
Leases receivable - - - - 1,348,155 1,348,155
Subscription assets, net - - - 713,438 - 713,438
Total Assets $ 2,431,692 $ 2,489,186 $ 386,654 $ 3,193,849 $ 1,752,028 $ 10,253,409
LIABILITIES
Accounts Payable $ 17,972 $ 5,394 $ 16,903 $ 96,381 $ 106,775 $ 243,425 Due to Other Governments - - - - 59 59
Interest payable - - - 27,915 - 27,915
Claims Payable - 1,968,979 157,729 - - 2,126,708
Subscription liabilities - - - 594,935 - 594,935
Total Liabilities $ 17,972 $ 1,974,373 $ 174,632 $ 719,231 $ 106,834 $ 2,993,042 Deferred Inflows of Resources
Leases $ - $ - $ - $ - $ 717,495 $ 717,495
NET POSITION
Net investment in capital assets $ - $ - $ - $ 118,503 $ - $ 118,503 Restricted for:
Wokers compensation claims - 115,981 - - - 115,981
Unrestricted 2,413,720 398,832 212,022 2,356,115 927,699 6,308,388 Total Net Position $ 2,413,720 $ 514,813 $ 212,022 $ 2,474,618 $ 927,699 $ 6,542,872
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30, 2023
Workers' Self Information Facilities
Equipment Comp Insurance Technology Maintenance Total
OPERATING REVENUES
Charges for services $ 639,367 $ 967,013 $ 397,216 $ 753,356 $ 938,492 $ 3,695,444 Interest - 5 - - - 5
Use of money and property - - - - 122,317 122,317
Other local taxes - - - - 28,322 28,322
Other revenue & reimbursements 78,919 165,757 - 1,745 988 247,409 Total Operating Revenues 718,286 1,132,775 397,216 755,101 1,090,119 4,093,497
OPERATING EXPENSES
Insurance expenses - 1,913,146 988,486 - - 2,901,632
Services and supplies 526,961 - - 306,771 1,334,225 2,167,957 Depreciation/amortization expense - - - 202,422 - 202,422 Total Operating Expenses 526,961 1,913,146 988,486 509,193 1,334,225 5,272,011 Operating Income (loss) 191,325 (780,371) (591,270) 245,908 (244,106) (1,178,514)
NONOPERATING EXPENSES
Interest expense - - - (29,221) - (29,221)
Income (loss) before transfers 191,325 (780,371) (591,270) 216,687 (244,106) (1,207,735) Transfers (in) - - - - 243,325 243,325
Transfers (out) - - - (733,000) - (733,000)
Net Transfers - - - (733,000) 243,325 (489,675)
Change in Net Position 191,325 (780,371) (591,270) (516,313) (781) (1,697,410) BEGINNING NET POSITION 2,222,395 1,295,184 803,292 2,990,931 928,480 8,240,282 ENDING NET POSITION $ 2,413,720 $ 514,813 $ 212,022 $ 2,474,618 $ 927,699 $ 6,542,872
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Workers' Self Information Facilities
Equipment Comp Insurance Technology Maintenance Total
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers $ 692,308 $ 965,018 $ 397,216 $ 753,443 $ 1,124,868 $ 3,932,853 Payments to suppliers and providers (528,794) (1,913,054) (800,055) (279,594) (1,322,101) (4,843,598) Insurance reimbursements - 165,757 - - - 165,757
Claims paid - 604,421 (74,502) - - 529,919
Net Cash Provided (Used) by
Operating Activities 163,514 (177,858) (477,341) 473,849 (197,233) (215,069)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers in - - - - 243,325 243,325
Transfers out - - - (733,000) - (733,000)
Net Cash Provided (Used) by
Noncapital Financing Activities - - - (733,000) 243,325 (489,675)
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES
Interest paid - - - (1,306) - (1,306)
Acquisition of subscription assets - - - (320,925) - (320,925) Net Cash Used by Capital and
Related Financing Activities - - - (322,231) - (322,231) Net Increase(Decrease) in Cash and Investments 163,514 (177,858) (477,341) (581,382) 46,092 (1,026,975) Cash and investments - beginning of year 2,237,647 2,665,044 863,995 3,043,739 332,928 9,143,353 Cash and investments - end of year $ 2,401,161 $ 2,487,186 $ 386,654 $ 2,462,357 $ 379,020 $ 8,116,378 Reconciliation of Operating Income to Cash
Flows from Operating Activities:
Operating Income $ 191,325 $ (780,371) $ (591,270) $ 245,908 $ (244,106) $ (1,178,514) Adjustments to reconcile operating income to
cash flows from operating activities:
Depreciation/amortization - - - 202,422 - 202,422
Change in assets and liabilities:
Accounts receivable (25,978) (2,000) - (1,658) - (29,636) Leases receivable - - - - 146,566 146,566
Deferred inflows of resources - - - - (111,817) (111,817) Accounts payable (1,833) 92 (24,243) 27,177 12,115 13,308 Due to other governments - - - - 9 9
Claims payable - 604,421 138,172 - - 742,593
Cash Flows From Operating Activities $ 163,514 $ (177,858) $ (477,341) $ 473,849 $ (197,233) $ (215,069)
TOWN OF LOS GATOS
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
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).
This Page Left Intentionally Blank
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 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
2023 130,888,581 11,091,020 11,542,661 153,522,262
(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 equipment.
(2) Net position was restated for FY 2018 for amounts placed into fiduciary funds, reclassified to General Fund Restricted Asset.
-15,000,000
-10,000,000
-5,000,000
0 5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
55,000,000
60,000,000
65,000,000
70,000,000
75,000,000
80,000,000
85,000,000
90,000,000
95,000,000
100,000,000
105,000,000
110,000,000
115,000,000
120,000,000
125,000,000
130,000,000
135,000,000
140,000,000
Net Investment in Capital Assets Restricted Unrestricted
Town of Los Gatos Schedule 2
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
2013/14 2014/15 2015/16 2016/17 2017/18
Expenses
Governmental Activities:
General Government $ 6,955,804 $ 6,465,852 $ 6,993,661 $ 6,771,628 $ 7,948,918 Public Safety 14,119,786 12,644,221 12,825,688 14,587,597 15,545,521 Parks and Public Works 8,154,616 8,069,352 8,320,623 9,502,707 10,047,003 Community Development 4,424,040 4,047,738 3,227,224 5,093,459 4,667,609 Library Services 2,234,431 2,553,414 2,522,142 2,868,748 3,087,684 Sanitation 363,180 491,359 528,580 466,762 536,296
Redevelopment 21,687 - - - -
Interest and Fees - - - - -
Total Governmental Activities 36,273,544 34,271,936 34,417,918 39,290,901 41,833,031 Program Revenues
Charges for Services:
General Government 2,179,077 1,888,213 1,517,012 1,669,020 1,701,146 Public Safety 3,206,579 3,529,166 3,278,585 2,076,688 1,888,359 Parks and Public Works 1,550,867 2,206,765 1,516,108 2,155,841 4,150,068 Community Development 5,156,061 5,027,497 4,359,146 3,803,626 3,456,390 Library Services 51,775 53,123 46,192 46,746 14,702
Sanitation 328,648 328,868 368,813 410,626 771,442
Operating Grants and Contributions:
General Government - - 15,291 - -
Public Safety 42,661 24,838 98,138 837,329 895,730
Parks and Public Works 994,096 907,745 749,300 665,779 953,294 Community Development - - - - -
Library Services 14,662 4,062 12,228 - 57,200
Capital Grants and Contributions:
General Government - 176,705 - - -
Public Safety - - - - -
Parks and Public Works 2,274,879 2,338,154 1,610,657 770,600 348,437 Community Development 19,360 - - 9,280 -
Total Program Revenues 15,818,665 16,485,136 13,571,470 12,445,535 14,236,768 General Revenues and Special Items:
Property Taxes 11,712,312 12,931,603 13,763,458 14,756,214 15,958,406 Sales Taxes 8,029,571 8,202,678 7,501,175 8,925,276 7,466,253 Franchise Taxes - 2,215,430 2,258,892 2,366,908 2,474,814 Other Taxes 3,718,405 2,062,893 1,997,497 2,351,223 2,667,840 Motor Vehicle in Lieu 13,068 - 12,308 14,056 16,483
Developer Fees - - - - -
Investment Earnings 772,200 428,772 698,324 192,260 333,120 Sale of Property - - - - -
Miscellaneous 350,468 813,324 598,170 528,946 622,105
Insurance recoveries - - - - -
Total General Revenues and Special Items 24,596,024 26,654,700 26,829,824 29,134,883 29,539,021 Change in Net Position $ 4,141,145 $ 8,867,900 $ 5,983,376 $ 2,289,517 $ 1,942,758 Continued
Fiscal Year
Town of Los Gatos Schedule 2
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
2018/19 2019/20 2020/21 2021/22 2022/23
Expenses
Governmental Activities:
General Government $ 8,163,991 $ 7,405,368 $ 7,086,377 $ 15,681,345 $ 10,522,568 Public Safety 16,635,726 20,446,188 19,808,230 15,093,308 17,428,923 Parks and Public Works 10,627,716 11,803,005 13,141,034 12,969,615 12,258,626 Community Development 5,064,637 5,001,958 6,846,834 5,827,001 5,215,961 Library Services 3,059,294 3,347,523 3,496,153 2,969,954 3,653,642 Sanitation 684,673 3,041 185,981 178,575 208,262
Redevelopment - - - - -
Interest and Fees - - - - 29,221
Total Governmental Activities 44,236,037 48,007,083 50,564,609 52,719,798 49,317,203 Program Revenues
Charges for Services:
General Government 1,562,683 1,470,324 1,894,080 1,725,857 2,635,527 Public Safety 1,745,889 1,549,207 1,288,358 1,596,313 1,846,312 Parks and Public Works 2,910,936 3,674,222 4,209,048 5,090,014 3,590,936 Community Development 4,155,231 3,351,753 4,063,776 4,129,718 3,971,336 Library Services 9,476 11,522 - 521 2,039
Sanitation 966,130 231,323 299,478 231,323 359,950
Operating Grants and Contributions:
General Government - 12,290 - 2,766,833 -
Public Safety 826,643 952,045 1,061,344 1,144,226 4,622,373 Parks and Public Works 1,301,152 2,824,638 1,547,102 1,482,896 1,735,608 Community Development - 15,864 223,129 670,929 616,937
Library Services 47,482 49,351 55,181 114,958 174,663
Capital Grants and Contributions:
General Government - 8,258 2,365 12,205,050 -
Public Safety - 9,100 - - -
Parks and Public Works 146,792 832,755 843,980 10,021,156 3,915,175 Community Development - - - - -
Total Program Revenues 13,672,414 14,992,652 15,487,841 41,179,794 23,470,856 General Revenues and Special Items:
Property Taxes 17,321,347 18,330,426 19,878,835 21,132,098 22,746,842 Sales Taxes 8,158,152 7,531,425 7,933,604 8,483,673 8,806,477 Franchise Taxes 2,475,916 2,495,792 2,499,463 2,822,515 3,074,624 Other Taxes 2,726,743 1,911,774 1,126,887 2,042,580 2,292,008 Motor Vehicle in Lieu 14,689 24,526 23,058 35,624 34,406 Developer Fees - - - 1,735,571 614,820
Investment Earnings 1,809,128 2,428,470 227,136 (1,278,978) 797,587 Sale of Property - - - - -
Miscellaneous 2,407,840 323,940 1,528,039 755,400 1,029,864 Insurance recoveries - - - - 1,565,000
Total General Revenues and Special Items 34,913,815 33,046,353 33,217,022 35,728,483 40,961,628 Change in Net Position $ 4,350,192 $ 31,922 $ (1,859,746) $ 24,188,479 $ 15,115,281 Concluded
Fiscal Year
Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2013/14 2014/15 2015/16 2016/17 2017/18
General Fund
Nonspendable $ - $ - $ - $ - $ -
Restricted - - - - 1,206,851
Committed 20,019,187 15,129,925 12,953,399
Assigned 23,791,749 24,121,256 9,555,085 14,050,699 17,475,285 Unassigned 1,363,376 - - - -
Total General Fund $ 25,155,125 $ 24,121,256 $ 29,574,272 $ 29,180,624 $ 31,635,535 All Other Governmental Funds
Nonspendable $ - $ - $ - $ - $ -
Restricted 4,485,246 5,663,182 6,386,014 5,627,707 6,992,747 Committed - - 3,696,000 10,354,584 5,571,087
Assigned 8,191,823 15,346,558 11,099,076 7,928,994 6,361,403 Unassigned 183,045 206,875 - - -
Total All Other Governmental Funds $ 12,860,114 $ 21,216,615 $ 21,181,090 $ 23,911,285 $ 18,925,237 Total Fund Balances $ 38,015,239 $ 45,337,871 $ 50,755,362 $ 53,091,909 $ 50,560,772 Continued
Fiscal Year
Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2018/19 2019/20 2020/21 2021/22 2022/23
General Fund
Nonspendable $ - $ - $ 159,000 $ 159,000 $ 159,000
Restricted 5,015,316 669,978 - 690,000 1,444,501
Committed 15,070,944 15,387,706 11,220,970 12,283,132 13,150,130 Assigned 18,256,895 13,277,813 12,534,648 13,764,657 14,774,673 Unassigned - - - - -
Total General Fund $ 38,343,155 $ 29,335,497 $ 23,914,618 $ 26,896,789 $ 29,528,304 All Other Governmental Funds
Nonspendable $ - $ - $ - $ - $ 55,977
Restricted 6,903,372 6,448,006 8,562,653 9,383,483 9,530,538 Committed 2,579,997 - - 637,711 2,590,257
Assigned 6,180,930 14,181,679 15,360,481 13,944,155 19,480,452 Unassigned - - - - -
Total All Other Governmental Funds $ 15,664,299 $ 20,629,685 $ 23,923,134 $ 23,965,349 $ 31,657,224 Total Fund Balances $ 54,007,454 $ 49,965,182 $ 47,837,752 $ 50,862,138 $ 61,185,528 Concluded
Fiscal Year
Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2013/14 2014/15 2015/16 2016/17 2017/18
Revenues:
Taxes $ 23,475,393 $ 23,208,820 $ 23,269,892 $ 25,945,129 $ 26,253,026 Licenses & Permits 5,343,265 6,467,771 5,442,133 5,075,503 5,937,044 Intergovernmental 2,440,127 2,921,002 2,573,475 1,715,580 2,124,903 Charges for Services 5,837,581 5,794,386 4,773,001 4,210,174 5,395,057 Fines and Forfeitures 795,720 868,564 879,277 917,105 676,212 Franchise Fees - 2,215,430 2,258,892 2,366,908 2,474,814 Developer Fees - - - - -
Investment Income 772,164 428,735 698,308 192,978 332,938 Use of Property 37,741 32,209 31,723 32,096 32,206
Other 3,648,277 3,130,975 2,396,992 1,011,939 640,844
Total Revenues 42,350,268 45,067,892 42,323,693 41,467,412 43,867,044 Expenditures:
Current
General Government 8,499,854 8,647,451 9,144,797 8,390,959 8,770,082 Public Safety 13,742,189 13,747,198 13,763,316 13,251,288 14,423,554 Parks and Public Works 5,611,283 5,840,097 6,307,266 6,633,748 7,125,686 Community Development 4,335,599 4,218,500 3,695,504 3,793,930 4,192,165 Library Services 2,131,438 2,268,844 2,332,268 2,508,677 2,529,017 Sanitation & Other 322,817 411,863 452,726 466,762 521,147 Capital Outlay 4,097,662 3,800,478 3,241,657 6,867,034 9,778,058 Debt Service
Principal Repayment - - - - -
Total Expenditures 38,740,842 38,934,431 38,937,534 41,912,398 47,339,709 Excess (Deficiency) of Revenues
Over (Under) Expenditures 3,609,426 6,133,461 3,386,159 (444,986) (3,472,665) Other Financing Sources(Uses):
Transfers In 3,418,872 8,977,220 3,315,846 7,907,692 3,176,760 Transfers Out (2,921,409) (7,788,049) (1,284,514) (7,612,012) (3,880,131) Gain from Sale of Property - - - - 378,219
Insurance Recoveries - - - - -
Issuance of Debt - - - 4,435 -
Total Other Financing Sources(Uses) 497,463 1,189,171 2,031,332 300,115 (325,152) Special Item:
Extraordinary Gain (Loss) RDA Dissolution - - - - -
Prepayment of Pension Obligations (4,534,538) - - - -
Net Change in Fund Balances $ 4,106,889 $ 7,322,632 $ 5,417,491 $ (144,871) $ (3,797,817) Capitalized Capital Outlay $ 4,097,662 $ 3,800,478 $ 3,241,657 $ 6,867,034 $ 9,778,058 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)
2018/19 2019/20 2020/21 2021/22 2022/23
Revenues:
Taxes $ 28,244,329 $ 27,811,665 $ 28,977,919 $ 31,627,593 $ 33,851,411 Licenses & Permits 5,173,876 4,818,671 5,212,831 6,055,040 6,333,675 Intergovernmental 2,310,655 4,498,153 3,746,587 15,492,982 10,145,820 Charges for Services 5,584,504 5,309,470 6,035,659 6,925,359 5,718,714 Fines and Forfeitures 510,266 271,117 103,468 319,170 416,950 Franchise Fees 2,475,916 2,495,792 2,499,463 2,822,515 3,074,624 Developer Fees - - - 1,735,571 614,820
Investment Income 1,809,164 2,428,453 227,940 (1,278,983) 797,582 Use of Property 32,960 31,039 40,372 144,901 237,647
Other 579,755 376,922 423,115 349,145 985,188
Total Revenues 46,721,425 48,041,282 47,267,354 64,193,293 62,176,431 Expenditures:
Current
General Government 8,004,254 13,024,146 14,040,134 15,953,968 8,828,779 Public Safety 14,945,407 15,793,815 16,570,836 16,451,190 18,446,048 Parks and Public Works 7,962,135 8,168,599 8,229,944 8,639,128 9,084,406 Community Development 4,577,495 4,473,790 5,195,302 6,313,511 5,065,412 Library Services 2,493,617 2,700,802 2,847,988 2,827,210 3,208,027 Sanitation & Other 628,240 162,837 166,173 194,969 204,097 Capital Outlay 7,888,914 7,861,972 5,707,439 10,478,670 8,917,075 Debt Service
Principal Repayment - - 39,008 156,034 156,034
Total Expenditures 46,500,062 52,185,961 52,796,824 61,014,680 53,909,878 Excess (Deficiency) of Revenues
Over (Under) Expenditures 221,363 (4,144,679) (5,529,470) 3,178,613 8,266,553 Other Financing Sources(Uses):
Transfers In 4,264,131 8,935,260 4,053,535 8,154,307 11,886,022 Transfers Out (3,323,756) (8,628,719) (3,940,015) (8,310,685) (11,396,347) Gain from Sale of Property 1,912,316 1,566 1,201,369 2,151 2,162 Insurance Recoveries - - - - 1,565,000
Issuance of Debt - - 1,560,336 - -
Total Other Financing Sources(Uses) 2,852,691 308,107 2,875,225 (154,227) 2,056,837 Special Item:
Extraordinary Gain (Loss) RDA Dissolution - - - - -
Prepayment of Pension Obligations - - - - -
Net Change in Fund Balances $ 3,074,054 $ (3,836,572) $ (2,654,245) $ 3,024,386 $ 10,323,390 $ 7,888,914 $ 7,861,972 $ 5,707,439 $ 9,180,716 $ 8,598,811 Debt Service as a Percentage
of Non Capital Expenditures 0.00% 0.00% 0.08% 0.30% 0.35% 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 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 2023 357,370,065 17.38% 16,404,930,826 7.53% 16,762,300,891 65,619,723,304 1.0616 Source: Santa Clara County Assessed Value Report
0 2000
4000
6000
8000
10000
12000
14000
16000
18000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
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 Special District Bonds Year Wide Levy and Levies Districts and Loans Total
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
2023 1.0000 0.0559 0.0057 0.0854 1.1470
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 7
Principle Property Tax Payers
Last Ten Fiscal Years *
2013/14 2014/15 2015/16 2016/17 2017/18
Percentage Percentage Percentage Percentage Percentage
of Total City of Total City of Total City of Total City of Total City Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed ASSESSEE NAME Value Value Value Value Value Value Value Value Value Value 750 University LLC $ 18,600,000 0.19% $ 19,000,000 0.18% $ 19,379,620 0.19% $ 19,675,159 0.18% $ 25,241,863 0.21% 980 JR LLC
140 Toll House Hotel LLC
Alberto Way Holdings LLC 23,607,964 0.24% 23,715,141 0.23% 24,188,966 0.23% 24,557,845 0.22% 25,048,998 0.21% Ann R. Desantis 13,823,779 0.14%
A W Los Gatos LLC
Boccardo Corporation 38,617,912 0.40% 38,772,905 0.37% 21,617,318 0.21% 21,918,921 0.20% 22,211,650 0.19% CH Realty IV Downing LP 19,916,443 0.20%
CHL Ventures LP - 0.00%
D&K Los Gatos LLC 15,901,809 0.16% 15,974,003 0.15% 16,293,163 0.16% David A. and Shari Flick Trustee 15,388,884 0.15%
Donahue Schriber Realty Group LP 53,872,083 0.45%
DS Downing Los Gatos LLC 20,006,861 0.19% 21,980,568 0.21% 22,315,770 0.20% DS Village Square 22,799,599 0.20%
El Camino Hospital 20,803,609 0.20% 26,477,160 0.25% 26,880,933 0.24% 23,353,576 0.20% Equestrian 3 Investments LLC 29,584,251 0.25%
Fox Creek Fund LLC
Good Samaritan Hospital LP 19,710,897 0.20% 19,602,594 0.19% 19,880,366 0.19% 22,402,756 0.20% 22,516,823 0.19% Grade Way Associations VI 15,094,623 0.15% 15,163,152 0.15% Green Eyes LLC 12,793,404 0.13%
Grosvenor USA Ltd. 22,886,720 0.23% 22,990,624 0.22% 23,449,975 0.23% Health Care REIT Inc, 20,671,960 0.21% 20,765,810 0.20% 20,089,903 0.19% 20,396,274 0.18% Hercules Holding II LLC
International Hotel 30,144,617 0.25%
Kay K. & Go Sasaki Sr., Trustee 22,752,809 0.23% 24,744,983 0.24% 25,122,131 0.22% 25,624,027 0.21% Knowles Los Gatos LLC 47,986,850 0.49% 48,204,708 0.46% 49,167,836 0.47% 49,917,644 0.44% 50,915,995 0.43% KSL Capital Partners 43,383,370 0.44% 43,580,326 0.42% 30,134,614 0.29% 30,105,945 0.27% 25,893,946 0.22% Leland E Lester, Trustee 29,004,169 0.26%
LG Business Park Bldg 3 LLC 61,947,284 0.59% 53,465,724 0.45% LG Business Park Bldg 4 LLC 43,937,857 0.37%
LG Business Park LLC 47,276,977 0.48% 39,347,485 0.38% 17,507,261 0.17% 31,070,572 0.28% LG Hotel LLC 15,448,057 0.15% 15,497,395 0.15%
Los Gatos Hotel Corp. 18,134,182 0.19% 15,573,314 0.15% 15,676,113 0.15% Lyon Baytree Apartments LLC 14,674,716 0.15%
Paul H. Roskoph
Preylock Los Gatos LLC
Safeway Inc. 24,394,468 0.20%
San Jose Water Works 33,626,381 0.34% 36,693,453 0.35% 37,081,049 0.36% 38,710,728 0.34% 41,202,805 0.34% Serramonte Corporate Center LLC
SI 32 LLC 150,563,119 1.45% 141,348,894 1.36% 143,442,269 1.28% 146,317,944 1.22% SF Los Gatos LLC
Sobrato Interests IV LLC 169,809,676 1.74% 20,869,338 0.20% 44,930,482 0.43% 42,240,994 0.38% 43,071,837 0.36% SRI Old Town LLC 30,981,771 0.32% 31,122,427 0.30% 31,744,252 0.30% 32,228,351 0.29% 32,872,917 0.27% Summerhill N40 LLC
Summerhill Prospect Avenue LLC 18,274,508 0.16%
Wealthcap Los Gatos 121 109,100,000 0.97% 111,282,000 0.93% Wealthcap Los Gatos 31 84,000,000 0.75% 85,680,000 0.72% Total - Principal taxpayers $ 650,252,243 7.68% $ 394,337,473 6.49% $ 1,296,723,012 6.37% $ 814,164,568.00 7.24% $ 916,633,381 7.66% Total - All real properties assessed by the Town (1) $9,237,887,980 $9,766,765,025 $10,416,786,877 $11,239,536,718 $11,968,031,792 (1) Assessed value includes only net secured real properties. (2) Excludes the value of tax-exempt properties
Source Data: California Municipal Statistics, Inc. Continued
Town of Los Gatos Schedule 7
Principle Property Tax Payers
Last Ten Fiscal Years *
2018/19 2019/20 2020/21
Percentage Percentage Percentage Percentage Percentage
of Total City of Total City of Total City of Total City of Total City Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed ASSESSEE NAME Value Value Value Value Value Value Value Value Value Value 750 University LLC $ 25,746,699 0.20% $ 26,261,632 0.19% $ 26,786,863 0.18% $ 27,064,374 0.19% $ 27,605,660 0.17% 980 JR LLC $ 19,277,879 0.15%
140 Toll House Hotel LLC 35,043,180 0.24% 35,499,104 0.24% 34,808,066 0.21% Alberto Way Holdings LLC 25,549,975 0.20% 24,158,350 0.18% 24,641,514 0.17% 24,896,799 0.17% Ann R. Desantis
A W Los Gatos LLC 26,749,500 0.16%
Boccardo Corporation 22,651,732 0.18% 23,099,314 0.17% 24,268,078 0.15% CH Realty IV Downing LP
CHL Ventures LP
D&K Los Gatos LLC
David A. and Shari Flick Trustee
Donahue Schriber Realty Group LP 56,370,186 0.44% 57,497,587 0.43% 58,647,535 0.40% 59,255,121 0.41% 60,440,222 0.37% DS Downing Los Gatos LLC
DS Village Square
El Camino Hospital 28,596,104 0.22% 30,789,155 0.23% 42,611,768 0.29% 50,456,560 0.35% 43,379,731 0.26% Equestrian 3 Investments LLC 28,563,864 0.22% 25,525,880 0.19% 26,036,395 0.18% 26,306,130 0.18% 26,832,251 0.16% Fox Creek Fund LLC 21,558,664 0.17% 27,231,335 0.19% 27,078,255 0.17% Good Samaritan Hospital LP 22,934,274 0.18% 23,391,289 0.17% 23,846,402 0.16% 24,111,608 0.17% 24,569,780 0.15% Grade Way Associations VI
Green Eyes LLC
Grosvenor USA Ltd.
Health Care REIT Inc,
Hercules Holding II LLC
International Hotel 30,747,509 0.24% 31,362,458 0.23% 31,989,706 0.22% Kay K. & Go Sasaki Sr., Trustee 26,135,962 0.20% 28,864,942 0.21% 27,190,951 0.19% 27,471,495 0.19% 28,020,326 0.17% Knowles Los Gatos LLC 51,934,313 0.41% 52,972,998 0.39% 54,032,455 0.37% 54,592,229 0.37% 55,684,072 0.34% KSL Capital Partners 26,411,820 0.21% 33,069,058 0.24% 33,118,759 0.23% 33,037,818 0.23% 32,098,542 0.20% Leland E Lester, Trustee
LG Business Park Bldg 3 LLC
LG Business Park Bldg 4 LLC
LG Business Park LLC
LG Hotel LLC
Los Gatos Hotel Corp.
Lyon Baytree Apartments LLC
Paul H. Roskoph
Preylock Los Gatos LLC 89,141,472 0.66% 95,880,000 0.66% 96,873,316 0.66% 98,810,782 0.60% Safeway Inc. 25,752,231 0.19% 25,577,034 0.18%
San Jose Water Works 46,150,577 0.36% 47,777,432 0.35% 49,649,154 0.34% 53,320,614 0.37% 51,657,625 0.31% Serramonte Corporate Center LLC 200,844,610 1.57% 204,861,501 1.52% 208,958,729 1.43% 211,123,540 1.45% 215,346,008 1.31% SI 32 LLC 149,208,182 1.17% 152,166,578 1.13% 155,181,793 1.06% 158,132,236 1.08% 159,929,209 0.97% SF Los Gatos LLC 33,214,527 0.23%
Sobrato Interests IV LLC 43,919,879 0.34% 44,781,377 0.33% 45,682,006 0.31% 46,155,127 0.32% 47,067,863 0.29% SRI Old Town LLC 33,530,374 0.26% 34,200,980 0.25% 34,884,999 0.24% 35,246,406 0.24% 35,951,333 0.22% Summerhill N40 LLC 56,244,782 0.42% 57,369,661 0.39% 59,462,462 0.41% 71,006,795 0.43% Summerhill Prospect Avenue LLC
Wealthcap Los Gatos 121 113,507,640 0.89% 115,777,792 0.86% 118,093,347 0.81% 119,316,793 0.82% 121,703,128 0.74% Wealthcap Los Gatos 31 87,393,600 0.68%
Total - Principal taxpayers $ 1,061,033,843 8.29% $ 1,127,696,808 8.35% $ 1,175,222,251 8.05% $ 1,202,767,594 8.24% $ 1,213,007,226 7.39% Total - All real properties assessed by the Town (1) $12,793,751,423 $13,509,034,656 $14,598,027,652 $15,254,242,604 $16,403,289,146 (1) Assessed value includes only net secured real properties. (2) Excludes the value of tax-exempt properties
Source Data: California Municipal Statistics, Inc. Concluded 2021/22 2022/23
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 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 2023 16,300,797 - 16,300,797 16,762,300,891 2,047,530,717 18,809,831,608 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
$19.0
$20.0
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
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
2023 $ 1,196,257 $ 1,196,257 $ 1,196,257 34.7% 36.14
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, 2023
2022/23 Assessed Valuation: $16,762,300,891 Estimated Share of Direct and
Total Debt at Overlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT: % Applicable (1) June 30, 2023 at June 30, 2023 Overlapping Tax & Assesment Debt
Santa Clara County 2.708% $ 1,041,125,000 $ 28,193,665
West Valley-Mission Community College District 9.426% $ 694,320,000 $ 65,446,603 Campbell Union High School District 7.776% $ 354,085,000 $ 27,533,650 Los Gatos-Saratoga Joint Union High School District 36.333% $ 81,235,000 $ 29,515,113 Cambrian School District 0.648% $ 96,314,944 $ 624,121
Campbell Union School District 7.620% $ 205,899,324 $ 15,689,528 Los Gatos Union School District 74.055% $ 62,020,000 $ 45,928,911 Saratoga Union School District 0.032% $ 15,206,197 $ 4,866 Union School District 20.230% $ 144,497,533 $ 29,231,851 Midpeninsula Regional Open Space District 4.400% $ 82,680,000 $ 3,637,920 Santa Clara Valley Water District Benefit Assessment District 2.708% $ 38,900,000 $ 1,053,412 Total Overlapping Tax and Assesmet Debt $ 246,859,640
Overlapping General Fund Debt
Santa Clara County General Fund Obligations 2.708% $ 1,120,404,570 $ 30,340,556 Santa Clara County Pension Obligation Bonds 2.708% $ 329,741,844 $ 8,929,409 Santa Clara County Board of Education Certificates of Participation 2.708% $ 935,000 $ 25,320 West Valley-Mission Community College District General Fund Obligations 9.426% $ 8,160,000 $ 769,162 Campbell Union High School District General Fund Obligations 7.776% $ 14,500,000 $ 1,127,520 Los Gatos-Saratoga Joint Union High School District Certificates of Participation 36.333% $ 149,000 $ 54,136 Campbell Union School District General Fund Obligations 7.620% $ 1,575,000 $ 120,015 Saratoga Union School District Certificates of Participation 0.032% $ 1,905,000 $ 610 Town of Los Gatos 100.000% $ - $ -
Santa Clara County Vector Control District Certificates of Participation 2.708% $ 1,230,000 $ 33,308 Santa Clara County Central Fire Protection District Certificates of Participation 25.763% $ 27,755,000 $ 7,150,521 Midpeninsula Regional Open Space Park District General Fund Obligations 4.400% $ 91,570,600 $ 4,029,106 Total Gross Overlapping General Fund Debt $ 52,579,663
Less: Santa Clara County Supported Obligations $ 284,888 Total Overlapping General Fund Debt $ 52,294,775
Overlapping Tax Increment Debt ( Successor Agency)
Town of Los Gatos Certificated of Participations $ 11,430,000 Total of Overlapping Tax Increment Debt $ 11,430,000
Total Direct Debt $0
Total Gross Overlapping Dept $ 310,869,303
Total Net Overlapping Debt $ 310,584,415
Gross Combined Total Debt $ 310,869,303 (2)
Net Combined Total Debt $ 310,584,415
Ratios to 2022/23 Assessed Valuation:
Total Overlapping Tax and Assessment Debt: 1.47%
Total Direct Debt: 0.00%
Gross Combined Total Debt: 1.85%
Net Combined Total Debt: 1.85%
Ratios to Redevelpment Incremental Valuation ( $1,792,881,346):
Total Overlapping Tax Increment Debt: 0.64%
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 11
Legal Debt Margin Information,
Last Ten Fiscal Years
(In Thousands of Dollars)
Assessed Value
Debt Limit
Debt Applicable to Limit:
Legal Debt Margin
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Debt Limit $1,263,138 $1,379,254 $1,444,943 $1,556,252 $1,679,736 $1,789,097 $2,076,329 $2,236,263 $2,334,052 $2,514,345 Debt Applicable to Limit - - - - - - - - 1,352 1,196
Legal Debt Margin $1,263,138 $1,379,254 $1,444,943 $1,556,252 $1,679,736 $1,789,097 $2,076,329 $2,236,263 $2,332,699 $2,513,149 Total Net Debt
Applicable to the Limit
as a Percentage
of Debt Limit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.06% 0.05% Notes:
(1) The Town of Los Gatos is a general law city and has a debt limit of 15%. (2) Excludes RDA asessed valuation and debt transferred to the Successor Agency trust as a part of the RDA dissolution.
Legal Debt Margin Calculation
Fiscal Year
$ 16,762,300,891
2,514,345,134
$ 2,514,345,134
for Fiscal Year 2022/23
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)
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%
2023 33,102 $ 3,443,767 104,035 46.76 5,895 3.7%
Source:
(1) California State Dept. of Finance - Population Research Unit (January 2023) (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 13
Principal Employers
Last Ten Fiscal Years
Percentage Percentage Percentage Percentage Percentage
of Total Town of Total Town of Total Town of Total Town of Total Town Principal Employers Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Columbia Health Care Assoc/Mission Oaks Hospital 2,000 13.52% - 0.00% - 0.00% - 0.00% 0.00% El Camino Hospital, Los Gatos 700 4.73% 560 3.73% 560 3.53% 560 3.49% 560 3.43% Los Gatos Union School District 237 1.60% 273 1.82% 280 1.76% 274 1.71% 267 1.64% Los Gatos-Saratoga High School District 256 1.73% 157 1.05% 157 0.99% 370 2.30% 367 2.25% Netflix 825 5.58% 1,530 10.19% 1,976 12.45% 1,864 11.61% 2,117 12.98% Safeway 250 1.69% 314 2.09% 314 1.98% 314 1.95% 314 1.92% Alain Pinel Realtors 156 1.05% 156 1.04% 146 0.92% 148 0.92% 131 0.80% Courtside Tennis Club 295 1.99% 440 2.93% 440 2.77% 468 2.91% 542 3.32% Town of Los Gatos 144 0.97% 157 1.05% 158 1.00% 160 1.00% 159 0.97% Whole Foods - 0.00% 179 1.19% 179 1.13% 179 1.11% 179 1.10% Vasona Creek Health Care Center - 0.00% 233 1.55% 233 1.47% 233 1.45% 233 1.43% Good Samaritan Regional Cancer Center - 0.00% 200 1.33% 200 1.26% 200 1.25% 200 1.23% Roku - 0.00% - 0.00% 487 3.07% 554 3.45% 664 4.07%
Terraces of Los Gatos - 0.00% - 0.00% 228 1.44% 228 1.42% 228 1.40% Source: Town of Los Gatos, Finance
Department and Muniservices Continued
2013/14 2014/15 2015/16 2016/17 2017/18
Town of Los Gatos Schedule 13
Principal Employers
Last Ten Fiscal Years
Percentage Percentage Percentage Percentage Percentage
of Total Town of Total Town of Total Town of Total Town of Total Town Principal Employers Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Columbia Health Care Assoc/Mission Oaks Hospital 0.00% 0.00% 0.00% 0.00% 0.00% El Camino Hospital, Los Gatos 560 3.49% 560 3.49% 560 3.35% 517 3.09% 509 3.04% Los Gatos Union School District 281 1.75% 281 1.75% 281 1.68% 281 1.68% 281 1.68% Los Gatos-Saratoga High School District 367 2.28% 367 2.28% 320 1.92% 320 1.91% 320 1.91% Netflix 2,314 14.41% 2,314 14.41% 2,524 15.11% 2,278 13.62% 2,263 13.53% Safeway 314 1.95% 314 1.95% 314 1.88% 314 1.88% 314 1.88% Alain Pinel Realtors 131 0.82% 131 0.82% 0.00% 0.00% 0.00% Courtside Tennis Club 542 3.37% 542 3.37% 542 3.24% 542 3.24% 542 3.24% Town of Los Gatos 160 1.00% 160 1.00% 161 0.96% 165 0.99% 163 0.97% Whole Foods 125 0.78% 125 0.78% 125 0.75% 180 1.08% 132 0.79% Vasona Creek Health Care Center 233 1.45% 233 1.45% 250 1.50% 250 1.49% 250 1.49% Good Samaritan Regional Cancer Center 200 1.25% 200 1.25% 200 1.20% 200 1.20% 200 1.20% Roku 516 3.21% 516 3.21% 0.00% 0.00% 0.00%
Terraces of Los Gatos 228 1.42% 228 1.42% 228 1.36% 200 1.20% 200 1.20% Source: Town of Los Gatos, Finance
Department and Muniservices Concluded
2018/19 2019/20 2020/21 2021/22 2022/23
Town of Los Gatos Schedule 14
Full-time-Equivalent Employees by Function/Program
Last Ten Fiscal Years
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Function/Program
General Government 20.73 20.97 20.97 21.35 21.97 22.16 21.80 21.80 22.06 22.05 Police 57.50 60.00 59.00 59.00 59.00 59.00 60.00 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 0.75 Library 10.30 10.80 11.00 12.25 12.25 12.50 12.50 12.50 12.50 13.50 Planning 17.50 19.50 19.00 19.26 19.63 20.08 20.08 20.20 20.20 20.20 Public Works 31.50 32.00 33.50 33.50 34.50 34.50 34.50 34.75 34.75 36.75 Total 138.03 143.90 144.10 145.98 148.10 148.99 149.63 150.00 150.26 153.25 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 2022/23
Fiscal Year
Town of Los Gatos Schedule 15
Operating Indicators
Last Ten Fiscal Years
FUNCTION/PROGRAM
General government 2013/14 2014/15 2015/16 2016/17 2017/18 Building Permits Issued
Residential Permits Issued 813 805 899 744 849
Residential Permits Value 87,307,822 76,896,111 85,000,754 53,625,891 63,083,249 Commercial Permits Issued 139 133 147 135 105
Commercial Permits Value 138,676,507 178,195,997 20,185,884 50,024,177 16,626,196 Publically Owned Permits Issued - - - - -
Publically Owned Permits Value - - - - -
Residential Parking Permits
Number of Special Event Permits Issued 133 127 107 118 113 Number of Annual Permits Issued 1,376 1,570 1,363 1,251 1,342 City Clerk
Number of Council Resolutions Passed 86 72 61 69 69
Number of Ordinances Passed 16 9 11 5 17
Number of Contracts Passed 196 222 283 240 262
General Services
Number of Purchase Orders Issued 301 277 334 331 322
Police
Physical Arrests 641 695 987 1,030 1,164
Parking Violations 14,421 13,321 13,975 12,863 11,784
Traffic Violations 4,747 4,633 5,400 4,634 4,757
DUI Arrests 62 48 58 60 51
Library
Number of Library Visits - - - - -
Annual Circulation - - - - -
Number of Library Card holders - - - - -
Circulated e-audiobooks 2,414 ( 5,867 ( 7,761 10,006 8,844 Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles) 10.0 1.8 8.0 10.0 2.6 ADA Compliance: Curb Ramps 19 23 11 30 68
Traffic Circles - 1 1 1 1
Street Poles 1,611 1,609 1,609 1,609 1,762
Planning and Development Department
Building & Safety Inspections Performed 12,764 11,652 8,655 14,722 13,918 Redevelopment: Number of active projects - - - - -
Source: Town of Los Gatos, Finance Department Continued Fiscal Year
Town of Los Gatos Schedule 15
Operating Indicators
Last Ten Fiscal Years
FUNCTION/PROGRAM
General government 2018/19 2019/20 2020/21 2021/22 2022/23 Building Permits Issued
Residential Permits Issued 814 898 1,128 1,144 1,118
Residential Permits Value 80,030,846 47,961,529 111,242,724 132,784,439 73,432,645 Commercial Permits Issued 122 92 68 117 84
Commercial Permits Value 13,295,999 12,389,688 37,285,259 23,442,964 19,422,918 Publically Owned Permits Issued - - - - -
Publically Owned Permits Value - - - - -
Residential Parking Permits
Number of Special Event Permits Issued 78 - - - - (1)
Number of Annual Permits Issued 1,395 1,400 1,568 1,958 1,827 City Clerk
Number of Council Resolutions Passed 59 57 50 64 71
Number of Ordinances Passed 11 24 9 14 10
Number of Contracts Passed 245 242 205 296 275
General Services
Number of Purchase Orders Issued 343 359 376 306 296
Police
Physical Arrests 1,138 616 360 504 522
Parking Violations 6,817 4,023 1,584 4,678 8,569
Traffic Violations 2,877 1,225 764 1,245 1,427
DUI Arrests 70 64 23 49 42
Library
Number of Library Visits - - - 150,198 206,874 (3)
Annual Circulation - - - 432,707 397,517 (3)
Number of Library Card holders - - - 29,322 29,815 (3)
Circulated e-audiobooks 12,130 57,839 54,614 - - (2)
Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles) 5.8 16.2 10.0 9.9 10.9 ADA Compliance: Curb Ramps 49 68 91 59 50
Traffic Circles 1 1 1 1 1
Street Poles 1,830 1,830 2,113 2,113 2,113
Planning and Development Department
Building & Safety Inspections Performed 13,966 13,633 13,806 16,906 16,641 Redevelopment: Number of active projects - - - - -
(3) New metrics being presented in FY 2021/22.
Source: Town of Los Gatos, Finance Department Concluded Fiscal Year
(2) Changed operating indicators to fully reflect Department's efficiency metrics starting FY 2021/22.
(1) The Town streamlined the special event application where multiple events require only one permit.
Town of Los Gatos Schedule 16
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 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) 132 132 132 132 132 132 132 132 132 112 (1) Streetlights 1,611 1,609 1,609 1,609 1,762 1,830 1,830 2,113 2,113 2,113 Traffic Signals 29 29 30 30 30 31 31 31 31 31
Parks and Recreation
Number of Parks 12 12 12 12 12 N/A 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 17 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 N/A 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 1,269 1,269 1,269 1,269 1,269 Fiscal Year
(1) Based on Metropolitan Transportation Commission (MTC) funded Pavement Technical Assistance Program
(P-TAP) inventory for year 2022.
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, 2023, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements, and have issued our report thereon dated November 27, 2023.
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
November 27, 2023
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ATTACHMENT 2
DRAFT RESOLUTION 2023-
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, 2023 in the Nonspendable Reserve; and
WHEREAS, there exists a balance of $44,338 as of June 30, 2023 Land held for resale for Below Market Housing Program property in the Restricted Reserve; and WHEREAS, there exists a balance of $1,400,163 as of June 30, 2023 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
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ATTACHMENT 2
WHEREAS, the Budget Stabilization and Catastrophic Reserve should be maintained at the required minimum 12.5% of Fiscal Year (FY) 2023/24 general fund budgeted operating expenditures of $6,129,774 as specified in the Town Council General Fund Reserve Policy. This would increase both Budget Stabilization and Catastrophic Reserves from $6,129,775 by $138,208 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, 2023 in the committed CalPERS/OPEB Reserve; and
WHEREAS, there exists a committed 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, 2023 and should be used for operating expenses in FY 2023/24; 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, 2023 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
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ATTACHMENT 2
WHEREAS, there exists an excess balance of $140,553 as of June 30, 2023 in the assigned Sustainability Reserve; and
WHEREAS, there exists an assigned Market Fluctuation Reserve that represents 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 no current balance as of June 30, 2023 in the assigned Market Fluctuation Reserve reflecting less than $10,000 investment earnings as of June 30, 2023; 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 $37,698; and WHEREAS, with the adoption of the Fiscal Year 2023/24 Budget, the Council established an assigned Council Priorities – Economic Recovery Reserve to track General Fund revenues freed up from recognizing all American Rescue Plan Act (ARPA) “replacement” revenues to the General Fund for essential government services, for economic recovery and business support, enhanced senior services, capital program augmentations, and other one-time uses; and WHEREAS, there exists an excess balance of $1,556,614 as of June 30, 2023 in the assigned Council Priorities – Economic Recovery Reserve; and WHEREAS, the Council has established an assigned Educational Revenue Augmentation Fund (ERAF) Risk Reserve, reserving the 30% of the anticipated ERAF proceeds from FY 2022/23 until a lawsuit between the State and the School Districts concludes; and WHEREAS, there exists an excess balance of $689,608 as of June 30, 2023 in the assigned ERAF Risk 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 $1,580,623; 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
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ATTACHMENT 2
WHEREAS, the remainder of the available year-end savings will be placed in 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 $10,359,577; and
NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES HEREBY RESOLVE that the following fund balances as of June 30, 2023 as restricted, assigned, or formally committed as follows:
Other
Nonmajor Total
Appropriated Governmental Governmental
General Fund Reserves Funds Funds
Fund Balance
Nonspendable $ 159,000 $ - $ - $ 159,000
Loans Receivable - 5,690 - 5,690
Leases Receivable - - 50,287 50,287
Restricted for:
Library - - 530,174 530,174
Capital Projects - - 8,328,572 8,328,572
Land Held for Resale 44,338 - - 44,338
Repairs and Maintenance - - 176,966 176,966
Pension 1,400,163 - - 1,400,163
VTA - 494,826 - 494,826
Committed to:
Budget Stabilization 6,129,774 - - 6,129,774
Catastrophic 6,129,775 - - 6,129,775
Pension/OPEB 300,000 - - 300,000
Measure G 2018 District Sales Tax 590,581 1,769,057 - 2,359,638 Special Revenue Fund - - 821,200 821,200
Assigned to:
Open Space 410,000 152,000 - 562,000
Parking - 100,000 - 100,000
Sustainability 140,553 - - 140,553
Capital/Special Projects 10,359,577 19,178,452 - 29,538,029 Carryover Encumbrances 37,698 - - 37,698
Comcast PEG - 50,000 - 50,000
ERAF Risk 689,608 - - 689,608
Economic Recovery 1,556,614 - - 1,556,614
Compensated Absences 1,580,623 - - 1,580,623
Total Fund Balances $ 29,528,304 $ 21,750,025 $ 9,907,199 $ 61,185,528
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ATTACHMENT 2
PASSED AND ADOPTED at a regular meeting of the Town Council held on the ____ day of __________, 2023, by the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
_______________________________
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
___________________________________
TOWN CLERK OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
DRAFT
DRAFT
TOWN OF LOS GATOS
CALIFORNIA
ANNUAL COMPREHENSIVE
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2023
PREPARED BY THE
OFFICE OF THE TOWN MANAGER
DRAFT
TOWN HISTORY
Los Gatos is located at the base of the Santa Cruz Mountains at the southwest edge of Santa Clara County and approximately 50 miles south of San Francisco. The natural landscape includes picturesque hillsides, creeks, and valley flatlands. Los Gatos is in an area once occupied by Indigenous People, who lived sustainably in the area rich with fertile soils, abundant wildlife, and other natural resources.
The name Los Gatos comes from “El Rancho de Los Gatos,” a ranch established in 1839 by a Mexican land grant and so named because of the large number of mountain lions in the area. In 1854, James Alexander Forbes purchased some of this land and built a flour mill. In 1860, the first hotel was opened to provide a stage stop on the toll road which had been built between San Jose and Santa Cruz.
Wheat production gave way to orchards, and rapid growth ensued when the railroad reached Los Gatos in 1878. The residential subdivisions of Broadway, Bayview, Fairview, and Almond Grove were built in the 1880’s. By 1887, the population had grown to 1,500 and the Los Gatos community voted to incorporate.
Fruit industries faded slowly during the Depression and World War II, but the postwar period brought an influx of people, producing residential and commercial development. Highway 17 was constructed through the center of town, opening in 1940. Growth levelled off in the early 1970’s, leaving Los Gatos with its small-town atmosphere and pedestrian-oriented downtown.
Because of its distance from other centers of population, Los Gatos developed as a complete community including residential, business, and industrial elements. Preserving Los Gatos as a complete and wellbalanced community has been and remains a prominent goal of residents. From the first 100-acre town site in 1890 with a population of 1,652, Los Gatos grew slowly so that by 1963 the area was 6.3 square miles, with a population of 11,750. Today Los Gatos covers nearly 15 square miles and has a population of about 33,102. This growth over the first 80 years resulted in a human scale community with narrow streets and small buildings.
As it exists now, Los Gatos’ boundaries encompass a wide variety of terrain, ranging from level land to steep and densely wooded hillsides. The sharp visual contrasts among these features and charming architecture create the picturesque setting of the Town. In the midst of the growth of Silicon Valley, Los Gatos attracts people with a preference for the Town’s distinctive, high quality natural and urban environment.
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TOWN VISON STATEMENT
The Town of Los Gatos’s Vision Statement articulates the future Los Gatos and reflects the high ideals identified by the community:
Residents are united in their desire to maintain a high quality of life and preserve the character of the Town. The overall community consensus is that Los Gatos be a full-service community that is also environmentally sensitive; that Los Gatos maintains a balanced, well-designed mix of residential, commercial, service and open space uses, fostering a pedestrian-oriented community with a small town, village-like character; that Los Gatos supports an active business community that provides a wide variety of goods and services and a broad range of employment opportunities, eliminating the need to travel to other communities; and that Los Gatos provides a well-run, efficient municipal government that is fiscally healthy, with high levels of public safety, recreational, art and cultural amenities and is connected to high quality education.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
TABLE OF CONTENTS
To Be Updated After Finance Commission Review of Proposed Changes
INTRODUCTORY SECTION:
Letter of Transmittal........................................................................................................................................... 1 Organization Chart ............................................................................................................................................. 7 Principal Officers................................................................................................................................................ 8 GFOA Award ..................................................................................................................................................... 9 FINANCIAL SECTION:
Independent Auditor’s Report........................................................................................................................... 13 Management’s Discussion and Analysis........................................................................................................... 18 Basic Financial Statements:
Government-Wide Financial Statements:.................................................................................................... 40 Statement of Net Position..................................................................................................................... 41 Statement of Activities......................................................................................................................... 42
Fund Financial Statements:
Governmental Funds: ........................................................................................................................... 43 Balance Sheet.................................................................................................................................... 44 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position.............................................................................................................. 45 Statement of Revenues, Expenditures and Changes in Fund Balances............................................. 46 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities...................................................... 47 Statement of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) General Fund.................................................................................... 48 Statement of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) ARPA Fund...................................................................................... 49 Proprietary Funds – Internal Service Funds: ....................................................................................... 50 Statement of Net Position ................................................................................................................. 51 Statement of Revenue, Expenses and Changes in Net Position........................................................ 52 Statement of Cash Flows .................................................................................................................. 53 Fiduciary Funds: .................................................................................................................................. 54 Statement of Fiduciary Net Position ................................................................................................. 55 Statement of Changes in Fiduciary Net Position .............................................................................. 56 Notes to the Basic Financial Statements...................................................................................................... 58 REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of Pension Plan Contributions...................................................................................................... 101 Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost Sharing Plan ................................................................................................................................. 102 Schedule of Proportionate Share of Net Pension Liability – CalPERS Misc.
Agent-Multiple Employer Plan ............................................................................................................ 103 DRAFT
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
TABLE OF CONTENTS
To Be Updated After Finance Commission Review of Proposed Changes Schedule of OPEB Contributions................................................................................................................ 104 Schedule of Changes in Net OPEB Liability............................................................................................... 105 SUPPLEMENTARY INFORMATION:
Major Governmental Fund Schedules (other than the General Fund):
Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) Appropriated Reserves Fund................................................................... 109 Nonmajor Governmental Funds:
Combining Balance Sheets.......................................................................................................................... 110 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances...................................................................................................................................... 113 Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) ................................................................... 116 Internal Service Funds:
Combining Statement of Fiduciary Net Position......................................................................................... 122 Combining Statement of Revenue, Expenses and Changes in Net Position................................................ 123 Combining Statement of Cash Flows.......................................................................................................... 124 STATISTICAL SECTION .............................................................................................................................. 127 Net Position by Component......................................................................................................................... 129 Changes in Net Position .............................................................................................................................. 130 Fund Balances, Governmental Funds.......................................................................................................... 132 Changes in Fund Balances, Governmental Funds....................................................................................... 134 Assessed Value and Estimated Actual Value of Taxable Property ............................................................. 136 Direct and Overlapping Property Tax Rates................................................................................................ 137 Principal Property Tax Payers..................................................................................................................... 138 Property Tax Levies and Collections........................................................................................................... 140 Ratios of Outstanding Debt by Type ........................................................................................................... 141 Direct and Overlapping Governmental Activities Debt............................................................................... 142 Legal Debt Margin ...................................................................................................................................... 143 Demographic and Economic Statistics........................................................................................................ 144 Principal Employers.................................................................................................................................... 145 Full-time Equivalent Town Government Employees by Function/Program ............................................... 147 Operating Indicators by Function/Program ................................................................................................. 148 Capital Assets Statistics by Function/Program............................................................................................ 150 OTHER INDEPENDENT AUDITOR’S REPORTS:
Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards................................................................................................................. 152 DRAFT
INTRODUCTORY SECTION
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This Page Left Intentionally Blank
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November 27, 2023
Honorable Mayor and Town Council and Residents of Los Gatos, I am pleased to submit the Town’s Annual Comprehensive Financial Report (ACFR) for the fiscal year ending June 30, 2023. In coordination with the Town Manager’s Office, this report was prepared by the Finance Department, which assumes responsibility for the accuracy of the data, the completeness and fairness of the presentation, and all disclosures. The information in this report presents the reader with a comprehensive view of the Town’s financial position and the results of its operations for the fiscal year ending June 30, 2023, along with additional disclosures and financial information designed to enable the reader to gain an understanding of the Town’s financial activities.
This report was prepared as prescribed in Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments (GASB 34). This GASB Statement requires management to provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of a Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A can be found immediately following the Independent Auditor’s Report.
This Annual Comprehensive Financial Report is organized into three sections:
I. The Introductory Section includes the table of contents, letter of transmittal, listing of elected officials, Town administrative personnel, and an organization chart delineating organizational structure.
II. The Financial Section includes the Independent Auditor’s opinion, the MD&A, the basic financial statements, notes to the financial statements, combining statements of nonmajor funds, and required supplemental information.
III. The Statistical Section includes both financial and nonfinancial data about the Town.
The Annual Comprehensive Financial Report is prepared in accordance with Generally Accepted Accounting Principles (GAAP) promulgated by the Governmental Accounting DRAFT
Mayor and Town Council
November 27, 2023
Standards Board (GASB) and includesthe auditreport of Chavan & Associates,the Town’s independent certified public accountants.
This Annual Comprehensive Financial Report will be submitted to the Government Finance Officers Association for consideration of its Achievement of Excellence Award in financial reporting certification. This award is granted only to entities whose reports meet the highest standards of municipal financial reporting.
THE REPORTING ENTITY AND ITS SERVICES
Los Gatos is a general law Town, incorporated under the legal framework of California in 1887. The Town is located in the foothills and level terrain of southwestern Santa Clara Valley, referred to internationally as “Silicon Valley.” From the first 100acre Town site and an 1890 population of 1,652, Los Gatos grew slowly so that by 1963 the area was 6.3 square miles with a population of 11,750.
Today Los Gatos covers approximately 15 square miles with a population of 33,102 (California Department of Finance, January 2023). The growth over the last 80 years resulted in a community with vibrant business districts, well-maintained neighborhoods, and lovely parks and open spaces.
Preserving the unique charm of Los Gatos as a complete and well-balanced community while meeting its economic and housing needs, has been, and remains a key goal for the Town.
The Town maintains a CouncilManager form of government which combines the strong political leadership of elected officials with the strong managerial experience of an appointed Town Manager.
Five Council members are elected at large for staggered fouryear terms to govern the Town. The Mayor and Vice Mayor are appointed by the Council from its own ranks and serve one-yearterms. The Town Manager and Town Attorney are appointed and supervised directly by the Council. The Town Manager oversees all municipal services such as Public Safety, Parks and Public Works, Community Development, Library, and Town Administration includingHuman Resources, Information Technology, and Finance.
ECONOMIC CONDITIONS AND OUTLOOK
This past year, the Town continued to see a modest return to economic normalcy after the initial economic impacts associated with the pandemic. The Town closed FY 2022/23 with a net $5.7 million General Fund surplus due to a variety of factors discussed in the MD&A. However, the Town’s economically sensitive Transient Occupancy Tax (TOT) revenues remain below near historic lows and Sales Tax receipts are flattening. Property Tax revenues remained steady and remote work remained viable for certain occupations.
General Fund revenues (not including transfers in) increased 8.5% from the prior year. Property tax revenues remain the largest and most consistent source of support for General Fund operations, comprising approximately 44.9% of General Fund revenues in FY 2022/23. For FY 2022/23, property tax receipts of $22.7 million were $1.6 million higher than the prior year’s collection, reflecting the continued desirability of the Town, its environment, culture, and educational opportunities.
DRAFT
Mayor and Town Council
November 27, 2023
The Town also relies heavily on sales tax revenues to support General Fund operations, comprising approximately 17.4%ofGeneral Fund revenuesin FY 2022/23. For FY2022/23 salestax receipts of $8.8 million were $0.3 million higher than the prior year’s collection. Sales tax revenues were supported by the continued resurgence of the restaurant sector. The Town’s 1/8 cent District Sales Tax continued to perform well as the District Tax captures a larger share of the increase in online sales versus the County pool collections.
In addition to the Town’s revenue sources, the Town benefited from the federal American Rescue Plan Act (ARPA). The Act allocated $7,229,744 to the Town over a two-year period. The Town has received both payments. During the fiscal year ended June 30, 2023 , the Town recognized $3,614,872 as operating grant revenue in the ARPA special revenue fund and transferred $3,614,872 to other funds, reimbursing the Town for qualifying expenditures under the provisions of the Act. For more information regarding the two federal programs please refer to Note 16.
As with most municipalities, services are provided directly by employees to the Town’s residents, businesses, and visitors. As a service delivery enterprise, the cost of salaries and benefits are a significant portion of the Town’s expenditures. Salaries are largely dictated by regional market forces as evidenced by fierce competition for talent in the San Francisco Bay Area, and inflationary pressures nationwide. During FY 2021/22, the Town successfully completed negotiations with all bargaining units. While important for the consistent delivery of high quality services for the Town, these actions exacerbated an already existing imbalance between revenues and expenditures.
The Town also continues to adjust and prepare for pension employer coststo continue to be a primary expense in conjunction with salaries. The Town’s pension plans over the past several decades, like all other CalPERS participants, have experienced changes in actuarial assumptions, demographic changes, and volatile investment returns which have outweighed any positive plan experiences. The outcome of these unfavorable economic and demographic conditions is the creation of unfunded pension and Other PostEmployment Benefits(OPEB) obligationsfor the Town. According to the 2022 CalPERS actuarial valuations, the unfunded actuarial liability for pensions was $59.9 million and $7.0 million for OPEB as of June 30, 2022.
To address the escalation in pension costs, current and previous Councils have allocated additional discretionary pension funding totaling $10.4 million in prior fiscal years. These additional discretionary payments will ultimately yield an approximate $12.7 million in pension contribution savings. In addition to the management of the Town’s pension obligations, prior Councils have worked to curb cost escalation in Other Post-Employment Benefits (OPEB). In 2009, the Town initiated prefunding of retiree healthcare benefits and has since established approximately $24.3 million in OPEB assets from zero in 2009.
In addition, it should be noted that the net pension obligation varies annually depending upon the plan’s actual investment earnings compared to the assumed rate of return during the plan’s measurement periods. The Net Pension Obligation (NPO) reported in the Town’s ACFRs has experienced a high degree of variability in recent years, with Net Pension Obligation reported in the DRAFT
Mayor and Town Council
November 27, 2023
June 30, 2017 ACFR in the amount of $33.4 million rising to $58.02 million in fiscal year 2020/21, and decreasing to $27.48 million in FY 2021/22. The NPO reported in this year’s financial statements (ACFR 2022/23) has increased 52.6% to the current NPO of $59.86 million. Due to CalPERS preliminary returns of 5.8%, staff expects the NPO to rise in the next fiscal year reporting period.
Readers are cautioned that in considering the amount of the pension and OPEB liabilities and other actuarial data as reported by CalPERS and the Town’s actuary, this is “forward looking” information.
Such “forward looking” information reflects the judgment of the Board of Administration of CalPERS, its actuaries, and the Town’s actuary as to the amount of assets which the pension and OPEB plans will be required to accumulate to fund future benefits. These judgments are based upon a variety of assumptions, one or more of which may prove to be inaccurate or that may change with the future experience of the pension and OPEB plans. The actuarial methods and assumptions could be changed by CalPERS and the Town’s actuary at any time based on their professional judgement. Such changes could cause the Town’s obligations to the pension and OPEB plans to be higher or lower in any particular year. Thissensitivity to changesin actuarial assumptions is especially evident in changes to the Discount Rate as illustrated in Note 11 and changes to Healthcare Trend and Discount rates as illustrated in Note 12.
For detailed information about the Town employees’ retirement plan please refer to Note 11 of the Notes to Basic Financial Statements Section. For detailed information about the Town OPEB obligations please referto Note 12 of the Notesto Basic Financial Statements Section. In addition, the Town provides extensive information on pension and OPEB information on the Town’s website.
Despite revenue constraints and increasing costs associated with unfunded federal and state mandates, the Town has managed to maintain high service levels and balanced budget through prudent fiscal management. The Town continues its outreach to the community, the League of California Cities, and local legislators to prevent and limit any future revenue losses and mandated cost increases.
MAJOR CAPITAL PROJECT INITIATIVES
Major capital asset and infrastructure initiatives were once again the priority for the fiscal year.
Approximately $9.5 million in Town infrastructure and other capital asset improvements and contributions were invested in FY 2022/23, including $3.4 million in Town-wide street projects to improve the pavement condition, $0.7 million adding subscription right of use of assets by GASB 96 implementation, $0.6 million equipment adds, and $0.3 million for storm drain and park improvements. In addition, $4.5 million was invested in construction in progress including, roads, bridges, storm drains, park, pathways, building improvements, and downtown revitalization efforts.
Additional infrastructure improvements are scheduled in accordance with the Town’s approved Capital Improvement Plan, and will continue into future years. All of these improvements are funded either through grants, or via revenues accumulated from prior year budget savings and/or excess revenues per Town Council Policy.
DRAFT
Mayor and Town Council
November 27, 2023
ACCOUNTING SYSTEM AND BUDGETARY CONTROL
The effectiveness of internal controls is a primary consideration in the development and evaluation of the Town’s accounting system. Internal accounting controls are designed to provide reasonable but not absolute assurance regarding:
1) safeguarding of assets against loss from unauthorized loss or disposition, 2) accuracy and reliability of accounting data, and
3) adherence to managerial policy.
The concept of reasonable assurance recognizesthat the cost of internal controlsshould not outweigh the benefits, and that management must make estimates and judgmentsin evaluating these costs and benefits.
All governmental fund types use the modified accrual basis of accounting. This means that revenues are recorded when measurable and available rather than when received. Measurable means the amount can be determined and available means the cash is received within sixty days after the end of the fiscal year. Expenditures are recorded when the liability isincurred, rather than when paid. An exception to this rule is principal and interest on general long-term debt, which is not recognized by debt service funds until it is due.
Proprietary (internal service) funds are accounted for using the accrual basis of accounting, similar to that used by corporations. Proprietary fund revenues are recognized when they are earned rather than when the cash is received, even if the cash is not available and proprietary fund expenses are recognized when they are incurred. With the implementation of GASB 34, the Town prepares its Basic Financial Statements on the accrual basis. Internal accounting procedures have been developed to provide reasonable assurance regarding the safeguarding of assets and the reliability of financial records for preparing financial statements and maintaining asset accountability.
An annual operating budget, five-year budget forecast, and five-year capital improvement plan is adopted by the Town Council consistent with generally accepted accounting principles. All budget adjustments and transfers between funds must be approved by the Town Council during the fiscal year. The Town Manager is authorized to transfer unencumbered appropriations within a budget category, within a fund. Appropriations are valid for each fiscal year and lapse at yearend.
AWARDS
The Town’s Annual Comprehensive Financial Report for the fiscal year ended June 30, 2022 was awarded a Certificate of Achievement for Excellence in Financial Reporting by the national Government Finance Officers Association. This is the 28th consecutive year that the Town has received the award. This prestigious award recognizes the report’s conformance with strict DRAFT
Mayor and Town Council
November 27, 2023
accounting and reporting standards established by the Government Accounting Standards Board and government finance organizations. This award is annual in nature and valid for one year only. This year’sreport will be submitted for award consideration by this organization, as we believe it continues to meet these standards.
INDEPENDENT AUDIT
State law requires an annual audit ofthe Town’s accounts by independent certified public accountants.
The accounting firm of Chavan & Associates LLP performs this function for the Town of Los Gatos, and their report is included in the financial section of the ACFR.
ACKNOWLEDGEMENTS
The preparation of this Annual Comprehensive Financial Report, as presented herein, is the result of the combined efforts and dedicated services of the excellent staff of the Department of Finance.
Special thanks to Eric Lemon, Finance and Accounting Manager; Mark Gaeta, Accountant; Eagled’Or Am Accountant, Melissa Ynegas, Finance Analyst; Diane Howard, Finance Analyst; and Wayne Chen, Administrative Technician for their efforts in preparing this report. The Town’s Finance Commission is also recognized for its contributions to strengthening the ACFR through its review, discussion, and comments.
Respectfully submitted,
Laurel Prevetti Gitta Ungvari
Town Manager
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Director of Finance
Town of Los Gatos
Organizational Structure
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TOWN OF LOS GATOS
PRINCIPAL OFFICERS
JUNE 30, 2023
TOWN COUNCIL
Mayor Maria Ristow
Vice Mayor Mary Badame
Council Member Matthew Hudes
Council Member Rob Moore
Council Member Rob Rennie
COUNCIL APPOINTEES
Town Manager Laurel Prevetti
Town Attorney Gabrielle Whelan
APPOINTED OFFICIALS
Assistant Town Manager Katy Nomura
Chief of Police Jamie Field
Community Development Director Joel Paulson
Parks and Public Works Director Nicolle Burnham
Library Director Ryan Baker
Finance Director Gitta Ungvari
Human Resources Director Salina Flores
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FINANCIAL SECTION
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Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the
Town Council of the Town of Los Gatos
Los Gatos, California
Report on the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, each major fund, General Fund budgetary statement, and the aggregate remaining fund information of the Town of Los Gatos (the “Town"), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise Town’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, General Fund budgetary statement, and the aggregate remaining fund information of the Town of Los Gatos, as of June 30, 2023, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Town and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of a Matter
As discussed in Note 1 to the financial statements, for the year ended June 30, 2023, the Town adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 96, Subscription-Based Information Technology Arrangements. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements Town management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
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Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS and GAGAS, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
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Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The combining and individual fund financial statements, schedules, and other information listed in the supplementary information section of the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements.
Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Information
The Town’s management is responsible for the other information included in the annual comprehensive financial report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 27, 2023 on our consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control over financial reporting and compliance.
Chavan & Associates, LLP
Certified Public Accountants
November 27, 2023
Morgan Hill, California
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Management’s Discussion and Analysis
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MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of the Town of Los Gatos’s Annual Comprehensive Financial Report (ACFR) presents Management’s Discussion and Analysis (MD&A) of the Town’s financial performance during the fiscal year that ended on June 30, 2023. This analysis should be read in conjunction with the Transmittal Letter at the front of this report and the accompanying Basic Financial Statements.
FINANCIAL HIGHLIGHTS
• Town assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources at the close of Fiscal Year (FY) 2022/23 by $153,522,262 (total net position). • The Town’s total net position increased by $15,115,281 in FY 2022/23 during the fiscal year largely as a result of general revenue collection of $39.4 million and a $1.6 million litigation settlement combined with net expenses over revenues in governmental activities expenses of $25.8 million. combined with general revenue collection of $39.4 million, and $1.6 million litigation settlement.
• The increase in long-term liabilities was mostly attributed to the increase in net pension liabilities of $32.4 million. The increase was due to each plan’s actual investment earnings of negative 7.5%, which were significantly lower than the actuarial return assumptions during the plans’ measurement period (July 1, 2021 through June 30, 2022). • Total pension expense calculated for the Town’s miscellaneous and safety plans is $5,870,044. A more detailed discussion of the Town’s unfunded pension liabilities can be found in Note 11.
• Reported unrestricted net position is increased to $11,542,661 compared to $1,785,294 in the prior year. Unrestricted net position represents all resources not included as net investment in capital or restricted assets.
• A General Fund surplus of revenues over expenditures was $5.7 million in FY 2022/23. • During FY 2022/23, the Town implemented GASB Statement No. 96 Subscription-Based Information Technology Agreements. As a result, the Town recorded subscription right of use assets totaling $915,860 and subscription liabilities totaling $653,681. See Note 8 for additional information.
• The Town received $7,229,744 from the American Rescue Plan Act (ARPA) grant. For FY 2020/21, $200K of ARPA proceeds were recognized as revenue to reimburse the Town for qualifying expenditures under the provisions of the Act including boosting economic recovery, providing rent forgiveness, and directing grants to non-profit and social welfare DRAFT
organizations. For FY 2021/22 and FY 2022/23, the Town recognized $3.4 million and $3.6 million respectively in ARPA revenues related to recovery of revenue loss. • The Town’s economically sensitive major revenues of property tax, sales tax, and franchise fees were able to record gains from amounts reported the prior fiscal year. Property taxes collected increased $1.6 million, sales taxes and franchise fees increased $0.3 million.
Business License Tax increased by $0.9 million based on the new voter-approved business license tax ordinance.
• FY 2022/23 Transient Occupancy Tax (TOT) revenue collection increased by $0.3 million compared to the level collected in FY 2021/22. However, FY 2022/23 inflows of $2.2 million are is still $0.5 million lower than FY 2018/19 (pre-pandemic) level of TOT collection. • Total expenses as reported in the Statement of Activities decreased $3.4 million from the prior year. The decrease was primarily driven by the fact that prior year General Government expenses included a one-time pass-through fire safety grant payment. In addition, other factors included Pension and OPEB expense credits of $2.0 million calculated under accounting standards and allocated for FY 2022/23 compared to a $4.4 million credit for the prior fiscal year.
• The cost of all governmental activities as presented in the Statement of Activities this year was $49.3 million. The Town’s governmental program revenues were $23.5 million including charges for services of $12.4 million, operating grants and contributions of $7.2 million, and capital grants and contributions of $3.9 million. After taking governmental program revenues into consideration, the net amount of taxpayer supported governmental activities was $25.8 million. The Town paid for the remaining “public benefit” portion of governmental activities from total taxes and general revenues of $39.4 million. • At the end of FY 2022/23, the General Fund balance was $29,528,304 compared to $26,896,789 in the prior year. The ending fund balance of $29,528,304 represents approximately 65.8% of General Fund expenditures for the current fiscal year excluding transfers-out to the Town’s capital projects funds and internal service funds. The $2.6 million increase in General Fund ending fund balances was primarily due to the combined effect of favorable year end increases in economically sensitive revenues coupled with operational savings, and approximately $3.1 million net transfer to the Town’s capital projects fund to provide resources for Town infrastructure improvements. • Fund balances for all governmental funds at year end were $61,185,528, an increase of approximately $10.3 million or (20.3%) from the prior year. Governmental fund balances increased primarily due to General Fund increases of $2.6 million and $7.5 million for the General Fund Appropriated Reserve, including the General Fund Support, Capital Grants received, litigation settlement, and 50% of the Measure G proceeds.
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• At fiscal year end, the Town’s General Fund restricted cash assets reported a $1.4 million balance in the Town’s IRS Section 115 Pension Trust.
• As of June 30, 2023, the Town’s investment in capital assets for its governmental activities was $132,679,773 net of accumulated depreciation/amortization ($106,613,671 depreciable/amortizable and $26,066,102 nondepreciable). During FY 2022/23, the Town’s investment and contribution in capitalized assets were $9.1 million with depreciation totaling $4.2 million. The Capital asset increased by $4.9 million for the current year.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of the ACFR contains the following information: Independent Auditor’s Report, Management’s Discussion and Analysis (this section), the Basic Financial Statements, and the Required Supplementary Information. The ACFR also includes a Supplementary Information section, which presents combining and budgetary schedules for individual nonmajor funds. The Basic Financial Statements are comprised of three components: 1) Government-Wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Financial Statements. The Management’s Discussion and Analysis is intended to be an introduction to the Basic Financial Statements.
Government-Wide Financial Statements
The Government-Wide Financial Statements present the financial picture of the Town from an economic resources measurement focus using the accrual basis of accounting. An economic resources measurement focus is when a body of financial statements report all inflows, outflows, and balances affecting or reflecting an entity’s net position.
The Statement of Net Position presents information on all of the Town’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating.
The Statement of Activities presents information showing how the Town’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows.
Thus, revenues and expenses are reported in this Statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
Both of the Government-Wide Financial Statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business–type activity). The governmental activities of the Town include public safety, parks and public works, community development, library, community services, DRAFT
debt service, and general government. Governmental activities typically include financial data for all governmental funds. Internal service funds are typically incorporated into governmental activities as well. Business-type activities typically include financial data for all enterprise funds.
The Town has no enterprise funds and therefore reports no business-type activities.
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Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town, like other local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The funds of the Town are segregated into three categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental funds – The Town’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using the modified accrual basis of accounting, which measures cash and other financial assets that can readily be converted to cash. The Governmental Fund Statements provide a detailed short-term view of the Town’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the Town’s operations. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
Proprietary funds – The Town maintains one type of proprietary fund: Internal Service Funds.
Proprietary funds are reported using the accrual basis of accounting. Internal Service Funds are an accounting tool used to accumulate and allocate costs internally among the Town’s various functions. The Town uses Internal Service Funds to account for its fleet of vehicles, computer equipment, risk management activities, and other items. Internal Service Funds help smooth the variability of certain expenses and insulate the Town from large unanticipated costs. The Internal Service Funds are included within governmental activities in the Government-Wide Financial Statements.
Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of parties outside the Town. Fiduciary funds are not reflected in the Government-Wide Financial Statements because the resources of those funds are not available to support the Town’s own programs.
Included in fiduciary funds is the Redevelopment Successor Agency private-purpose Trust Fund created upon the dissolution of the former Redevelopment Agency (RDA) in 2012. The Trust Fund was created to hold the assets of the former Redevelopment Agency until they are transferred for governmental purposes to other entities or distributed to the underlying taxing jurisdictions in Santa Clara County after the payment of enforceable obligations. Additional information on the dissolution of the RDA and this fiduciary fund can be found in Note 15 in the notes to basic financial statements.
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Notes to Basic Financial Statements
The notes provide additional information to facilitate a full understanding of the data provided in the Government-Wide and Fund Financial Statements.
Required Supplementary Information
In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town’s progress in funding its obligation to provide Pension and Other Post Employment benefits to its employees.
ANALYSIS OF GOVERNMENT-WIDE FINANCIAL STATEMENTS
The Government-Wide Financial Statements provide long-term and short-term information about the Town’s overall financial condition. This analysis addresses the financial statements of the Town as a whole, utilizing data from throughout the ACFR to describe the changes between 2022 and 2023. Given the unique nature of the economic impacts of the COVID-19 pandemic during the reporting period, 2021 data have also been provided for additional context.
Net Position Discussion
As shown below, the Town’s combined net position for the year ended June 30, 2023 was $153.5 million, reflecting an increase of approximately $15.1 million to the prior year’s net position of $138.4 million. In general, net position can serve as an important indicator of whether the Town’s overall financial condition is improving or deteriorating over time.
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2023 2022 2021
Current and other Assets $ 85,489,167 $ 78,302,210 $ 72,065,091 Capital Assets 132,679,773 127,770,566 111,416,264
Total Assets $ 218,168,940 $ 206,072,776 $ 183,481,355
Deferred Outflows - Pension/OPEB 29,526,262 13,232,279 19,746,595 Current Liabilities 15,857,589 17,537,678 16,334,887
Long-Term Liabilities Outstanding 71,847,737 34,368,351 71,339,626 Total Liabilities $ 87,705,326 $ 51,906,029 $ 87,674,513 Deferred Inflows - Pension/OPEB 6,467,614 28,992,045 2,335,387 Net Position
Net Investment in Capital Assets 130,623,654 126,418,275 109,894,936 Restricted 11,091,020 10,203,412 8,269,330
Unrestricted 11,807,588 1,785,294 (4,646,166)
Total Net Position $ 153,522,262 $ 138,406,981 $ 113,518,100 Town of Los Gatos
Net Position
Governmental Activites
For the Year Ended June 30, 2023
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Current and other assets increased $7.2 million from the prior year, primarily due to an $6.2 million increase in cash/restricted cash and investments, a $0.4 million increase in accounts receivable, and a $0.3 million increase in land held for resale.
Capital assets increased $4.9 million to $132.7 million for the year reflecting current year’s capital asset additions/retirements less the annual depreciation/amortization expense. Capital infrastructure activity includes the following:
• $3.4 million in street repair and resurfacing and curb and gutter work Town-wide; • $4.5 million construction in progress as detailed under “Capital Assets” section of this MD&A;
• $0.8 million added for equipment, storm drain and park improvements; and • $0.9 million added in subscription right of use of assets by implementing GASB 96 subscription-based information technology agreements.
Deferred Outflows for Pension and Other Post-Employment Benefits (OPEB) increased $16.3 million primarily due to the difference between projected assumed investment returns and actual investment earnings on pension and OPEB investments, changes in assumptions, and the change in the Town’s proportionate share for the pooled safety pension plan.
Long-term liabilities increased by $37.5 million. The increase is primarily due to a pension liability increase of $32.4 million and an increase of OPEB liabilities of $4.5 million. See Note 11 and Note 12 in the Notes to the Financial Statements for more information on Town’s pension and OPEB plans.
In addition, the implementation of GASB 96 subscription right of use of asset added $0.4 million to the total liabilities.
Deferred Inflows decreased by $22.5 million, resulting primarily from the difference between projected assumed investment returns and actual investment earnings on pension and OPEB investments. The pension inflows decreased $19.0 million and the OPEB plan decreased $3.5 million.
The largest segment of the Town’s net position, representing $130.9 million of net position, reflects the net investment in capital assets (e.g., land, buildings, infrastructure, subscription, and equipment) less accumulated depreciation/amortization and related outstanding debt used to acquire those assets. The Town uses these capital assets to provide infrastructure and services to the residents. Therefore, They do not represent a liquid financial resource to the Town and consequently are not readily available for funding current obligations.
Restricted net position totaled approximately $11.1 million representing approximately $8.8 million for capital projects and maintenance, $1.4 million for restricted pension trust, $0.5 million placed in a special revenue trust accounts for Library services, $0.2 million for Lighting and Landscaping aAssessment dDistricts, and $0.1 million for workers’ compensation.
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As of June 30, 2023, unrestricted net position reports an approximate $9.8 million increase from the prior year to an ending balance of $11.5 million.
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Governmental Activities
Governmental activities are generally financed through taxes, intergovernmental revenues, and other non-exchange revenues. The Statement of Activities is intended to illustrate how the cost of governmental activities is financed and determine the annual change in net position. 2023 2022 2021
Revenues:
Program revenues:
Charges for Services $ 12,390,750 $ 12,773,746 $ 11,353,932 Operating Grants and Contributions 7,149,581 6,179,842 3,287,564 Capital Grants and Contributions 3,915,175 22,226,206 846,345 General Revenues:
Property Taxes 22,746,842 21,132,098 19,878,835
Sales Taxes 8,806,477 8,483,673 7,933,604
Franchise Taxes 3,074,624 2,822,515 2,499,463
Other Taxes 2,292,008 2,042,580 1,126,887
Motor Vehicle in Lieu 34,406 35,624 23,058
Developer Fee 614,820 1,735,571 -
Investment Earnings 794,390 736,523 1,007,535
Unrealized gains (losses) 3,197 (2,015,501) (780,399)
Miscellaneous 1,045,214 755,400 1,528,039
Special Items
Litigation Settlement Proceeds 1,565,000 - -
Total Revenues 64,432,484 76,908,277 48,704,863
Expenses:
Police Department 17,428,923 15,093,308 19,808,230
Parks and Public Works 12,258,626 12,969,615 13,141,034 General Government 10,522,568 15,681,345 7,452,136
Community Development 5,215,961 5,827,001 6,481,075
Library Services 3,653,642 2,969,954 3,496,153
Sanitation 208,262 178,575 185,981
Interest and Fees 29,221 - -
Total Expenses 49,317,203 52,719,798 50,564,609
Change in Net Position 15,115,281 24,188,479 (1,859,746) Net Position - Beginning 138,406,981 113,518,100 115,377,846 Prior Period Adjustment - Principal Payments - 13,003 - Prior Period Adjustment - GASB 87 Leases - 687,399 -
Net Position - Beginning, Adjusted - 114,218,502 -
Net Position, Ending $ 153,522,262 $ 138,406,981 $113,518,100 Town of Los Gatos
Statement of Activities
For the Year Ended June 30, 2023
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Governmental Activities Revenue Discussion
The Statement of Activities shown above details how the $64.4 million in Governmental Activities revenues and contributions were derived. As categorized in the Statement of Activities as program revenues, Approximately $12.4 million or 19.2% of the revenues were recorded from fees paid by residents/businesses who directly benefited from the respective program or service.
Another $11.1 million or 17.2% of the revenues were sourced from operating/capital grants and contributions. Significant grants and contributions include $3.6 million in recognized ARPA, $0.8 million gas tax, $0.7 million in Road Maintenance and Repair Account from the State proceeds, and $0.5 million Prop 172 Public Safety allocations. The Town has received a $1.6 million settlement from Santa Clara County and responsible contractors related to the Shannon Road litigation. The remaining $39.4 million or 61.2% represents general revenues of the Town, including taxes, intergovernmental revenues, and other miscellaneous revenues.
Program revenues decreased by approximately $17.7 million from the prior year. This is largely due to a $18.3 million decrease in capital grants and contributions, $0.4 million decreases from charges for services, and $1.0 million revenue increases in operating grants and contributions.
FY 2021/22 capital grants and contributions include the donated $12.2 million historic Los Gatos Theatre, and one-time $6.9 million State pass-through wildfire grant contributions.
The Town’s General Revenues related to Governmental Activities increased by approximately $3.7 million from the prior year. The increase is attributable to a combination of approximately DRAFT
$2.1 million increase in investment earnings including the mark-to-market value adjustments on the Town portfolio investment, $1.6 million increase in property taxes, a $0.3 million increase in sales tax, $0.3 million increase in franchise fees, $0.2 million increases in Transient Occupancy Tax (TOT). The increases were offset by $1.1 million decrease in pass-through developer contributions.
Property tax is the largest individual revenue source for the Town and collections finished the year $1.6 million higher than the previous year. This increase was mostly due to an increase of $1.8 million in general property tax collection, $0.3 million increase in Vehicle License Fee (VLF) Property Tax In-Lieu fee, a $73K decrease in secured taxes received as a rebate of excess property taxes collected and available from the State of California’s Educational Revenue Augmentation Fund (ERAF), and $0.4 million decrease in property transfer tax reflecting the current mortgage rate environment. It is important to note that assessed valuations for FY 2022/23 were established on the tax roll in January 2022 and collected in FY 2022/23.
At $8.8 million, sales taxes represent the second largest individual revenue source for the Town.
Sales taxes increased $0.3 million from the previous year largely due to the continued resurgence of the restaurant sector. The increase was aided by the Town’s 1/8 cent District Tax which captures a larger share of the increase in online sales versus those receipts provided by the County pool collections.
Franchise taxes, the Town’s third largest revenue source, finished the year at $3.1 million, reflecting an increase of $0.3 million from the previous fiscal year.
Investment earnings increased $2.1 million from the prior year. The primary factor responsible for this increase was the higher total mark-to-market value above historical investment cost than the prior year for the Town’s investment portfolio. These unrealized gains/losses are recognized as investment income/loss as a result of the mark to market value procedure required by GASB
31. The FY 2021/22 actual GASB 31 adjustment reduced interest earnings by $1,577,168, while the FY 2022/23 GASB 31 adjustment was $1,573,971. After the reversal of the FY 2021/22 adjustments there was a gain of $3,197. Per the Town Council General Fund Reserve Policy, $10,000 or more of unrealized investment gains that have been recorded in the financial statement are required to be reserved.
Governmental Activities Expenses Discussion
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The Town provides residents, businesses, and visitors with an array of high quality municipal services. General government strategic support is comprised of six Departments (Town Council, Town Clerk, Town Manager, Town Attorney, Human Resources, Information Technology, and Finance) which provide in information technology, executive management, economic vitality, legal, records management, risk management, human resources, finance, and accounting services. The Town’s Police Department (public safety) provides general law enforcement, crime prevention, dispatch, and responses to emergency and non-emergency calls for service. Parks and Public Works provides engineering, construction, and maintenance of public streets, street lighting, Town-owned buildings, parks, and related infrastructure; as well as traffic engineering and engineering evaluation of private development proposals. Community Development provides planning and zoning services; and building plan checks and inspections; and code compliance services. The Library Department provides library, local history, and cultural services to the community.
Total expenses of $49.3 million as reported in the Statement of Activities decreased by $3.4 million from $52.7 million the prior year. The decrease was primarily driven by the fact that prior year General Government expenses included a $6.9 million one-time pass-through fire safety grant payment. In addition, other factors included Pension and OPEB expense credits of $2.0 million calculated under accounting standards and allocated to FY 2022/23 compared to a $4.4 million credit for the prior fiscal year. The calculated pension and OPEB expense credits of $2.0 million was applied across all operating Departments. Eliminating the prior year $6.9 million onetime pass-through grant payment, total expenses increased from $45.8 million to $49.3 million. as follows:
DRAFT
o Public Safety - $1.9 million
o Parks and Public Works - $36K
o General Government - $35K
o Community Development - $20K
o Library - $13K
o Non-Point Source/Sanitation - $1K
FINANCIAL ANALYSIS OF THE TOWN’S FUNDS
Governmental Funds
Recognizing the financial resources measurement focus, the Town’s Governmental Funds provide information on near-term inflows and outflows, and balances of spendable resources.
This information is useful in assessing the Town’s financing requirements and may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Unlike the Statement of Activities which does not include transfers, the Governmental Funds Balance Sheet does include transfers in and out.
Fund Balance – As discussed below, the Town’s Governmental Funds Balance Sheet reports the following fund balances.
Restricted Fund Balance – The Town has $11 million in fund balance classified as restricted to indicate that it has an externally imposed restrictions on how the money may be spent. Of the $11 million restricted fund balance, $8.6 million is restricted for capital projects, $1.4 million for pension, $0.5 million for Library special revenue trust accounts, and $0.2 million for maintenance and repairs.
Committed Fund Balance – The Town has $15.7 million in fund balance classified as committed to indicate that the Town Council previously committed how the money will be spent. Of the $15.7 million, $12.3 million is for budget stabilization ($6.13 million) and catastrophe response ($6.13 million).
Assigned Fund Balance – The Town has $34.3 million in fund balance which is not restricted or committed and is classified as assigned to indicate the Town Council’s intent to be used for specific purposes. The largest assignments of fund balance are the Reserve for Capital/Special Projects with a balance of approximately $10.4 million and the Capital Projects Reserve of $19.1 million which are the primary funding sources for the Town’s five-year capital improvement plan and special projects as budgeted by the Town.
Additional information on the Town’s Fund Balance can be found in Note 10 of the Notes to the Financial Statements.
DRAFT
Major Governmental Funds results for the year included the following:
Overall, total Governmental Funds revenues finished $2.0 million or 3.1% lower than the prior year, while total expenditures finished $7.1 million or 11.6% lower than the prior year. One of the main reasons for the decreases are because prior year revenues and expenses included REVENUES 2023 2022 2021
Property Taxes $ 22,781,248 $ 21,167,722 $ 19,917,428
Sales Taxes 8,806,477 8,483,673 7,933,604
Other Taxes 2,263,686 1,976,198 1,126,887
Licenses & Permits 6,333,675 6,055,040 5,212,831
Intergovernmental 10,145,820 15,492,982 3,746,587
Charges for Services 5,718,714 6,925,359 6,035,659
Fines and Forfeitures 416,950 319,170 103,468
Franchise Fees 3,074,624 2,822,515 2,499,463
Developer Fees 614,820 1,735,571 -
Interest 797,582 (1,278,983) 227,940
Use of Property 237,647 144,901 40,372
Other 985,188 349,145 423,115
Total Revenues $ 62,176,431 $ 64,193,293 $ 47,267,354
EXPENDITURES
Current:
Public Safety $ 18,446,048 $ 16,451,190 $ 16,570,836
General Government 8,828,779 15,953,968 14,040,134
Parks and Public Works 9,084,406 8,639,128 8,229,944
Community Development 5,065,412 6,313,511 5,195,302
Library Services 3,208,027 2,827,210 2,847,988
Sanitation and Other 204,097 194,969 166,173
Capital Outlay 8,917,075 10,478,670 5,746,447
Debt Service
Principal 156,034 156,034 -
Total Expenditures $ 53,909,878 $ 61,014,680 $ 52,796,824 Excess Revenues over Expenditures $ 8,266,553 $ 3,178,613 $ (5,529,470) Settlement -Shannon Road 1,565,000 - -
Proceeds from sales of assets 2,162 2,151 1,201,369
Proceeds from issuance of debt - - 1,560,336
Transfers in 11,886,022 8,154,307 4,053,535
Tranfers out (11,396,347) (8,310,685) (3,940,015)
Total Other Financing Sources (Uses) $ 2,056,837 $ (154,227) $ 2,875,225 Net Changes in Fund Balances 10,323,390 3,024,386 (2,654,245) Beginning/Ending Fund Balances As Restat $ 50,862,138 $ 47,837,752 50491997 Ending Fund Balances $ 61,185,528 $ 50,862,138 $ 47,837,752
TOWN OF LOS GATOS
TOTAL GOVERNMENTAL FUNDS REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2023
DRAFT
the one-time State pass-through wildfire grant in the amount of $6.9 million. The approximate $10.3 million increase in Total Governmental Fund balance is the net result.
General Fund revenues totaled $50.6 million or nearly 81.4% of the total $62.2 million in Total Governmental Fund revenues.
Total Governmental Funds revenues decreased by $2.0 million., resulting from the net effect of:
• $2.0 million increase in investment earning including the mark-to-market value adjustments on the Town portfolio investment;
• $1.6 million increase in property tax collections;
• $0.7 million increase in use of property and other receipts; • $0.3 million increase in sales tax collection;
• $0.3 million increase in TOT collection;
• $0.3 million increase in licenses and permits;
• $0.3 million increase in franchise fees;
• $98K increase in fines and forfeitures;
• $1.1 million decrease in development fees since prior year included the affordable housing loan;
• $1.2 million decrease in charge of services reflecting current development activities; and • $5.3 million decrease in intergovernmental revenue, including the $3.6 million ARPA proceeds compared to prior year which had a $6.9 million pass-through grant and $3.4 million ARPA proceeds.
Governmental Funds expenditures decreased by $7.1 million. General Fund expenditures represent approximately $44.9 million or 83.3% of the Total Governmental Fund expenditures of $53.9 million compared to $43.3 million of General Fund expenditures and total Governmental Funds expenditures of $61.0 million in the prior year.
Increases in Public Safety expenditures from the prior year of approximately $2.0 million were primarily due to salary and benefit cost increases resulting from labor negotiations and mandated increases in employer pension contribution rates.
Increases in Parks and Public Works and Library services expenditures from prior year of approximately $0.8 million were primarily due to salary and benefit cost increases resulting from labor negotiations and mandated increases in employer pension contribution rates.
Decreases in Community Development were primarily due to fact that prior year expensed the $1.2 million affordable housing loan through the Below Market Housing program.
The $7.1 million decrease in general governmental expenditures was mainly attributable to the fact that prior year included the one-time $6.9 million State pass-through wildfire safety grant.
DRAFT
Appropriated Reserves Fund capital projects fund balances increased $7.5 million from the prior year, reflecting increased capital activity during the fiscal year. The $1.4 million of general government and capital outlay expenditures above operating revenues was offset by $8.9 million from other financing sources, including $1.6 million in settlement, and $7.3 million net transfers.
Proprietary Funds
The Town’s Proprietary Funds (Internal Service Funds) presented in the Fund Financial Statements section provide similar information to the Government-Wide Financial Statements and include individual segment information.
Total net position in the Internal Service Funds decreased by $1.7 million, a combined effect of GASB 96 expense increase adjustment of $0.2 million, a $0.2 million increase in equipment replacement net position, a $1.7 million decrease in FY 2022/23 due to excess expenses over revenues for workers’ compensation, information technology, and general liability costs including administration, insurance premiums, and claims expense.
GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to the Original Budget
Comparing the FY 2022/23 original budget (i.e., the Adopted Budget) General Fund revenues of $45,537,337 to the final adjusted budget of $50,272,274 indicates a net increase of approximately $4.7 million. Additions to the original revenue budget included adjustments approved by Town Council throughout the fiscal year.
Original Budget
General Fund (GF) Revenues
Misc. Adjustments &
Mid-Year Adjustments
Final Budget
GF Revenues
$45,537,337 $4,734,937 $50,272,274
DRAFT
The increase in General Fund revenue appropriations occurred primarily from the following sample of revenue budget adjustments made during the fiscal year:
$1.6 million property tax revenue budget increase in line with the estimates and forecasts provided to the Town quarterly from Santa Clara County Assessor’s Office; • $1.3 million revenue increases for charges for services including $0.8 million development related pass-through revenues, $0.4 million revenue budget increase regarding the purchasing and the preparation of reselling the Bersano Lane Below Market Unit, $47K revenue budget increase from two local school districts for the School Resource Officer contract;
• $0.9 million Business License Tax revenue budget increase based on the estimated collection per the new business license tax;
• $0.7 million Transient Occupancy Tax (TOT) revenue budget increase based on actual receipts.;
• $0.2 million interest revenue budget increase;
• $0.2 million Franchise Fee revenue budget increase to recognize actual collection trend for electric, gas, and garbage franchise fees;
• $0.2 million intergovernmental revenue budget increase for recognizing operating grants for Community Development and Library Department and increased Prop 172 Public Safety Sales Tax proceeds;
• $65K revenue budget increase to recognize Solid Waste Fees; • $50K additional encroachment revenue budget increase based on current development activity;
• $25K fines and forfeitures revenue budget increase to recognize current parking citation revenue collection;
• $0.2 million sales tax revenues budget decrease based on MuniServices, the Town sales tax consultant, quarterly sales tax update based on actual receipts and most likely scenario projection;
• $0.3 million net decrease in other revenue based on $0.3 million revenue increase to recognize affordable housing loan repayment proceeds; $0.2 million General Fund salary reimbursement revenue increase for capital project staff work; $0.1 million revenue increase to recognize additional proceeds from the Police Foundation, opioid settlement, and Town benches; and offset with $0.9 million Other Post-Employment Benefit (OPEB) Trust withdrawal revenue decrease as FY 2022/23 budget balancing was not needed; and • $20K budget revenue decrease for not collecting parking revenue in Oak Meadow Park.
Comparing the FY 2022/23 original budget (i.e., the Adopted Budget) General Fund expenditures of $47,354,218 (excluding budgeted transfers-out and debt payments that are reimbursed) to the final adjusted budget of $50,204,894 indicates a net increase of approximately $2.9 million.
Additions to the original expenditure budget included adjustments approved by Town Council throughout the fiscal year.
DRAFT
The increase in General Fund expense appropriations occurred primarily from the following sample of budget adjustments made during the fiscal year. • $0.9 million increase expenditure related to legal expenses, recruitment services, traffic signalization, special studies, retire medical and other miscellaneous services town wide; • $0.7 million expenditure increase for development related pass through activities; • $0.4 million for the Bersano Lane affordable unit repurchase and preparation of resell; • $0.3 million expenditure increase for Community Grants to recognize Council authorized General Fund Council Priorities – Economic Recovery reserve spending in the FY 2022/23; • $0.3 million expenditure increase for redepositing the first affordable loan payment to the Below Market Housing Deposit account.;
• $0.2 million expenditure increase to cover the cost for special studies related to Diversity, Equity, and Inclusion (DEI) prior year carry forward services; General Plan update Environment Impact Report; and the Housing Element related consultant work; • $0.1 million expenditure increase to recognize increased cost related the retiree medical services due to additional recent retirements;
• $0.2 million temporary salary reimbursement from capital projects; • $0.2 million for PG&E loan principal payment;
• $0.21 million to recognize the proceeds and authorize expenditures spend for Library operating grants.;
• $0.1 million increase for additional legal expenses;
• $64K expenditure increase for executive recruitment services; • $53K expenditure increase for additional traffic signalization expenditures; • $50K to recognize and spend the additional support from the Police Foundation; • $32K expenditure increase for third party business license processing services; • $37K for landscape maintenance; and
• $10K expenditure budget expense for park benches.
Original Budget
GF Expenditures
Misc. Adjustments &
Mid-Year Adjustments
Final
GF Expenditure Budget
$47,354,218 $2,850,676 $50,204,894
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Variance with the Final General Fund Budget
The General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance-Budget and Actual (GAAP) for Fiscal Year Ended June 30, 2023 reports an approximate overall favorable variance with the final budget of approximately $5.7 million. This favorable variance was created largely by the net effect of the following factors:
• Actual revenues ended the fiscal year at $0.3 million above final budgeted revenues. • The $0.3 million total variance represents a combined effect:
o $0.5 million favorable variance in license and permit revenues; o $0.4 million favorable variance in franchise fees;
o $0.3 million favorable variance in intergovernmental revenues; o $0.3 million favorable variance in property tax;
o $0.2 million favorable variance in fines and forfeitures; o $7.5K unfavorable difference in use of property and other revenues; o $64K unfavorable variance in interest;
o $0.1 million unfavorable variance in TOT;
o $0.2 million unfavorable variance in sales tax;
o $0.9 million unfavorable variance in charges for services. • Actual expenditures ended the fiscal year at $5.3 million below final budgeted expenditures. Significant factors affecting actual expenditures include: $2.7 million savings in salaries and benefits in limited term vacancies throughout the organization ($1.4 million in salaries, $0.6 million in pension benefits, and $0.7 million in other benefits), $1.4 million variance due to the timing of development and below market housing related pass-through activities, and $1.2 million operational savings Town-wide.
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o Public safety expenditures had a favorable variance of approximately $0.8 million. $0.7 million in savings is reflective of limited term vacancies in Police Captain, Police Officers, Dispatchers, Police Record Specialist, Senior Parking Control Officer, and Police Records and Communication Manager positions, savings of $79K in miscellaneous operating savings, and $74K salary-related internal service charges savings.
o Community Development expenditures reflected a $1.5 million favorable variance. $1.1 million of the variance is related pass-through activities supported with developer deposits in the Below Market Program, development review; building inspection, and special studies activities. Corresponding pass-though revenues were lower as demonstrated above. Not counting the pass-through activities related savings, Community Development operating expenditures include $0.5 million combined savings on vacancies and miscellaneous operating expenditures. Associate Planner and Permit Counter Technician positions were partially unfilled during the fiscal year.
o Administrative Services reflected a favorable balance of approximately $0.5 million in savings in salary and benefits due to partial year vacancies in the Deputy Clerk, Emergency Manager, Special Event Coordinator, IT Technician, Assistant Town Manager, Accountant, HR Analyst, and Finance and Accounting Manager positions.
o Parks and Public Works reflects a total favorable variance of approximately $1.4 million largely due to vacancies savings due to partial year vacancies in the Parks and Public Works Director, Senior Civil Engineer, Town Engineer, Assistant Engineer, Lead Maintenance Worker positions totaling $0.9 million. The FY 2022/23 budget included a one-time 1 FTE hire ahead Lead Maintenance Position that was not filled due to delayed retirement. The position is defunded in FY 2023/24. The Department realized additional positive variance reflecting actual DRAFT
pass-through activities ($0.3 million), and other miscellaneous operational savings ($55K).
o Library services reflected a favorable variance of $0.2 million due mainly to salary and benefit savings from partial staff vacancies in the Librarian, Senior Library Page positions, and other temporary vacancies, and other miscellaneous operational savings.
o Town Attorney reflected a favorable balance of approximately $0.1 million in large measure due to savings in salary and benefits due to partial year vacancies of the Legal Administrative position, membership savings, and decreased travel and training activity.
o Town Council reflected a favorable balance of approximately $31K due to benefit savings, decreased travel and training activity, and other miscellaneous operational savings.
CAPITAL ASSETS
As of June 30, 2023, the Town’s investment in capital assets for its governmental activity is recorded at $132,679,773 (net of accumulated depreciation/amortization). The investment in capital assets includes land, buildings and improvements, infrastructure, construction in progress, subscription right of use asset, machinery and equipment. Capital assets increased $4.9 million net of depreciation expense totaling approximately $4.2 million for the year. • $3.4 million in street repair and resurfacing and curb and gutter work Town-wide; • $0.9 million in subscription right of use of asset by implementing GASB 96 subscriptionbased information technology agreements; • $0.6 million equipment adds Town-wide;
• $0.3 million storm drain improvements;
• $36K for park improvements; and
• $4.5 million of construction in progress. including:
o $0.8 million for building replacement at Corporation Yard; o $0.7 million for downtown revitalization;
o $0.6 million for Highway 17 capacity improvements;
o $0.5 million for Town-wide traffic signal improvements; o $0.4 million for Library battery power supply;
o $0.4 million for bridges;
o $0.3 million for Adult Recreation Center HVAC and floor replacement; o $0.2 million for Enterprise Recourse Program implementation; o $0.1 million for Highway 9 Los Gatos connection trail projects; o $74K for curb and gutter work Town-wide;
o $73K in street repair in resurfacing;
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o $57K equipment for fire suppression and IT disaster recovery; o $52K in building improvements Town-wide;
o $44K in parking lots improvements;
o $17K Recreation Building ADA Restroom Improvements; and o $14K for park improvements.
Additional information on the Town’s capital assets is found in Note 6 of this Financial Report.
LONG-TERM DEBT
The Town generally incurs long-term debt to finance projects or purchase assets, which will have useful lives equal to or greater than the related debt. The Town long-term debt is related to the PG&E on-bill financing loan used for facility efficiency project updates, totaling $1.2 million at 6/30/2023. The long-term debt in the Successor Agency Trust Fund is related to the 2002 COP and 2010 COP, totaling $11.7 million. Additional information on the Town’s Long-Term Debt is found in Note 7 of this Financial Report.
ECONOMIC FACTORS, AND NEXT YEAR’S BUDGETS, AND RATES
A product of an ongoing examination of how the Town provides cost-effective services, the Town’s budget emphasizes outcomes or results for the community and allows for longer-term financial planning decisions.
During the development and adoption of the Town’s FY 2023/24 budget, the Town Council and management considered the following factors:
• The FY 2023/24 Proposed Adopted Budget endeavored to maintain essential public services while controlling operational costs in light of the Five-Year Financial Forecast. which predicts operating shortfalls in subsequent fiscal years. Providing current service levels to the community in future fiscal years will require a strong return to pre-pandemic performance of Governmental
Activities
Infrastructure $ 67,077,784
Subscription Right of Use Assets 713,438
Buildings 28,846,606
Land 26,066,103
Equipment 2,462,694
Construction in Progress 7,513,148
$ 132,679,773
For the Year Ended June 30, 2023
Capital Assets
Town of Los Gatos
DRAFT
the Town’s economically sensitive revenues and/or revenue enhancements as identified as one of the Town Council’s Strategic Priorities.
• For FY 2023/24, the Proposed Adopted Operating Budget was balanced utilizing two primary budget balancing strategies. The first was direction to all Departments to develop a status quo budget. To that end, the Departments programmed existing resources by either maintaining current structures or realigning operations to remain effective. This proved exceptionally difficult as vendor, supply, and other costs rose beyond FY 2022/23 levels. In addition, Departments were provided guidance to enhance capacity where necessary through limit-dated non-benefited personnel options when possible. The second strategy includes a 4.6% vacancy factor, while Council directed that staff continue to hire for all vacant positions. The 4.6% salary savings represents approximately $1.7 million projected saving. • Several Strategic Priorities are not one-time projects, but rather are ongoing commitments due to their critical significance to ensure the Town’s fiscal sustainability, infrastructure stability, and the safety and quality of life for Los Gatos residents, businesses, and visitors.
These commitments include continuing to address the Town’s fiscal challenges; implementing the Comprehensive Parking Study; and fostering emergency preparedness and community wildfire resilience.
• In terms of capital projects, the Town Council stated its capital budget priorities to continue implementation of the Downtown Parking Roadmap, continue mobility improvements for all transportation modes, manage the vegetation on Town lands to protect against wildfire, and advance other needed improvements. All of these efforts support improving and enhancing transportation options, public safety, and quality of life within the context of prudent fiscal management.
• Other Strategic Priorities will position the Town well for its future while celebrating the special aspects of Los Gatos. Such Priorities include continuing to enhance economic and community vitality; focusing on traffic safety for all users; and investing in key wildfire mitigation.
• Specific trends affecting the fund balance forecast include:
o General property tax collections represent approximately 34.9% (not including the State’s property tax “backfill” shifts) of the Town’s General Fund revenues. Property tax collections are expected to increase 3.6% in FY 2023/24 from the prior year’s estimated tax collections. This increase reflects the continued strong property assessment values through the Town. This forecast is based on data from the Santa Clara County Tax Assessor’s Office. The Town closely monitors its actual collection and other legislative changes regarding property tax.
o The Town anticipates an increase in sales tax for FY 2023/24. General sales tax estimates of $7.9 million and $1.3 million in dedicated district sales tax revenue for FY 2023/24 were DRAFT
budgeted reflecting a 2.2% combined increase from the prior year’s expected sales tax budget.
o The Town’s investment portfolio yield was 3.19% as of June 30, 2023 which trended significantly higher than the average yield of 1.37% of June 30, 2022. Prevailing interest rates are rising based on Federal Reserve actions.
o Transient Occupancy Tax (TOT) is expected to increase by 3% from FY 2022/23 estimated revenues. The Town’s TOT revenue, like other municipalities, was impacted heavily by the pandemic. Since FY 2021/22, people started to travel again, increasing the revenues year by year. The Town’s TOT revenue has historically been primarily driven by business travel. During the pandemic, TOT experienced the most significant percentage decline.
Due to a rebound in leisure “staycation” travel and modest improvements in business travel, current TOT collections are trending higher than anticipated and average occupancy rates are increasing as well.
o The Town’s pension plans over the past several decades, like all other CalPERS participants, have experienced volatile investment returns, changes in actuarial assumptions, and demographic shifts which have outweighed any positive plan experiences. To address this unfunded status, the Town took proactive steps including initiating the prefunding of OPEB obligations, budgeting and programming additional discretionary pension payments to accelerate reduction of unfunded liabilities, and partnering with the Town’s employee groups to eliminate the existing retiree healthcare benefit for new employees. Even with these proactive steps, the Town continues to be impacted by the continuing rising cost of pension related benefits. Over the next five fiscal years, the Town’s five-year forecast includes increasing pension costs due to actual realized investment returns, further changes in actuarial assumptions or lowering the discount rate. The Town’s net pension liability is $28.1 million for the safety cost sharing plan and $31.7 million for the miscellaneous plan based upon data from CalPERS as of 6/30/2022.
o To illustrate the sensitivity of the net pension liability to changes in the discount rate, CalPERS estimates that a 1% reduction in the discount rate from 6.8% to 5.8% would increase the total net pension liability for both Miscellaneous and Safety by $31.5 million.
Conversely, an increase in the discount rate from 6.8% to 7.8% would decrease the total net pension liability for both Miscellaneous and Safety by $25.9 million. o In addition, CalPERS provides a hypothetical termination liability estimate of the plans should the contract with CalPERS be terminated. The plan liability on a termination basis is calculated differently from the plans’ ongoing funding liability. Since no future employer contributions would be made in the hypothetical termination, benefit payments are secured by risk-free assets. For the Miscellaneous plan, a 2.5% termination return rate results in a $156.6 million termination liability. For the Safety Classic and DRAFT
PEPRA plans, a 2.25% termination return rate results in a $161.5 million termination liability.
o For detailed information about the Town employees’ retirement plan please refer to Note 11 of the Notes to Basic Financial Statements Section.
REQUESTS FOR INFORMATION
This financial report is designed to provide residents, taxpayers, customers, investors, and creditors with a general overview of the Town’s finances and to demonstrate the Town’s accountability for the money it receives. Questions about this report or requests for any additional information, should be directed to Gitta Ungvari, Finance Director, at 110 East Main Street, Los Gatos, California, 95030; email at [email protected]; or phone at (408) 354- 6805.
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Basic Financial Statements
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TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
GOVERNMENT-WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES
The Statement of Net Position, Statement of Activities, fund financial statements, and the notes to financial statements comprise the Basic Financial Statements of the Town.
The purpose of the Statement of Net Position and the Statement of Activities is to summarize the entire financial activities and financial position of the Town. They are prepared on the same basis of accounting (accrual) used by most businesses, which means they include all the Town’s assets and liabilities, as well as its revenues and expenses. The effect of the entire Town’s transactions is accounted for, regardless of when cash changes hands, and all material internal transactions between funds have been eliminated.
The Statement of Net Position report the Town’s total assets, deferred outflows of resources, liabilities, and deferred inflows of resources, including capital assets and long-term debt, and presents similar information to the old balance sheet format while focusing the reader on the composition of the Town’s net position (assets minus liabilities). The Statement of Net Position summarizes the financial position of the Town’s governmental activities in a single column.
The Town’s governmental activities include the activities of the General Fund, Special Revenue Funds, Capital Projects Funds, and Debt Service Funds. These funds are serviced by the Town’s Internal Service Funds; therefore internal service activities are consolidated with governmental activities after eliminating inter-fund transactions and balances.
The Statement of Activities reports increases and decreases in the Town’s net position and is prepared on the full accrual basis of accounting, which means it includes all the Town’s revenues and expenses regardless of when cash changed hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the Town’s expenses before revenues and by program. Program revenues (revenues generated directly by specific programs) are deducted from program expenses to arrive at the net expense of each governmental program, which is offset by general revenues as listed before the change in net position. From these components, the change in net position is computed and reconciled to the Statement of Net Position.
Both of these statements include the financial activities of the Town.
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TOWN OF LOS GATOS, CALIFORNIA
STATEMENT OF NET POSITION
JUNE 30, 2023
Governmental
ASSETS Activities
Cash and investments $ 74,859,048
Restricted cash and investments 1,574,488
Receivables:
Accounts 2,721,849
Interest 349,806
Intergovernmental 2,438,400
Other assets 153,868
Land held for resale 344,338
Long-term leases receivable 1,909,618
Long-term notes receivables 1,137,752
Capital Assets:
Nondepreciable 26,066,102
Depreciable, net of accumulated depreciation 106,613,671 Total Assets $ 218,168,940
DEFERRED OUTFLOWS OF RESOURCES
Pension adjustments $ 25,220,232
OPEB adjustments 4,306,030
Total Deferred Outflows of Resources $ 29,526,262
LIABILITIES
Accounts payable $ 2,134,177
Accrued payroll and benefits 447,965
Interest payable 27,915
Due to other governments 69,895
Unearned Revenue 4,201,551
Deposits 6,849,378
Claims payable 2,126,708
Long-term liabilities:
Due within one year
Compensated absences 292,795
Subscription liabilities 149,154
Loans payable 156,034
Due in more than one year
Net OPEB liability 7,028,633
Net pension liabilities 59,866,665
Compensated absences 2,868,452
Subscription liabilities 445,781
Loans payable 1,040,223
Total Liabilities $ 87,705,326
DEFERRED INFLOWS OF RESOURCES
Leases 1,222,981
Pension adjustments 3,126,711
OPEB adjustments 2,117,922
Total Deferred Inflows of Resources $ 6,467,614
NET POSITION
Net investment in capital assets $ 130,888,581
Restricted for:
Library 530,174
Capital projects 8,328,572
Land held for resale 44,338
Lighting and landscape repairs and maintenance 176,966
Pensions 1,400,163
VTA 494,826
Worker's compensation claims 115,981
Total Restricted Net Position 11,091,020
Unrestricted 11,542,661
Total Net Position $ 153,522,262
The notes to the financial statements are an integral part of this statement.
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TOWN OF LOS GATOS, CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Net (Expense)
Revenues and
Changes in
Net Position
Operating Capital
Charges for Grants and Grants and Governmental
Functions/Programs Expenses Services Contributions Contributions Total Activities Governmental Activities:
General government $ 10,522,568 $ 2,635,527 -$ -$ $ 2,635,527 $ (7,887,041) Public safety 17,428,923 1,846,312 4,622,373 - 6,468,685 (10,960,238) Parks and public works 12,258,626 3,590,936 1,735,608 3,915,175 9,241,719 (3,016,907) Community development 5,215,961 3,971,336 616,937 - 4,588,273 (627,688) Library services 3,653,642 2,039 174,663 - 176,702 (3,476,940) Sanitation 208,262 359,950 - - 359,950 151,688
Interest and fees 29,221 - - - - (29,221)
Total Governmental Activities $ 49,317,203 $ 12,406,100 $ 7,149,581 $ 3,915,175 $ 23,470,856 (25,846,347) General revenues:
Taxes:
Property taxes 22,746,842
Sales taxes 8,806,477
Franchise taxes 3,074,624
Transient occupancy taxes 2,228,190
Other taxes 63,818
Motor vehicle in lieu 34,406
Developer fees 614,820
Investment earnings:
Investment earnings 794,390
Unrealized gains (losses) 3,197
Miscellaneous 1,029,864
Total general revenues 39,396,628
Special items:
Settlements 1,565,000
Total general revenues and special items 40,961,628
Change in Net Position 15,115,281
Net Position - Beginning 138,406,981
Net Position - Ending $ 153,522,262
The notes to the financial statements are an integral part of this statement.
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
TOWN OF LOS GATOS
Program Revenues
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
FUND FINANCIAL STATEMENTS &
MAJOR GOVERNMENTAL FUNDS
Fund Financial Statements:
The Fund Financial Statements only present major funds individually while nonmajor funds are combined in a single column. Major funds are generally defined as having significant activities or balances in the current year.
Major Governmental Funds:
The Town determined that the following funds were major funds for the year ended June 30, 2023.
Individual non-major funds can be found in the supplemental section.
General Fund is the general operating fund of the Town and is used to account for all financial resources except those required to be accounted for in another fund.
Appropriated Reserves Fund is used to account for resources provided for capital projects not fully funded from other sources.
ARPA Fund was established to account for monies received under the American Rescue Plan Act of 2021 to respond to the COVID19 emergency.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2023
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves ARPA Funds Funds
ASSETS
Cash & investments $ 33,591,832 $ 23,752,014 $ 9,514,805 - $ $ 66,858,651 Restricted cash & investments 1,400,163 - - 58,344 1,458,507 Receivables:
Accounts 1,482,426 1,078,834 - 85,151 2,646,411
Interest 349,806 - - - 349,806
Intergovernmental 1,885,545 347,316 - 205,539 2,438,400 Other assets 153,868 - - - 153,868
Due from other funds 1,832 - - - 1,832
Land held for resale 344,338 344,338
Leases receivable - 241,506 - 319,957 561,463
Long term note receivable 1,059,000 - - 78,752 1,137,752 Total Assets $ 40,268,810 $ 25,419,670 $ 10,262,548 - $ $ 75,951,028
LIABILITIES
Accounts payable $ 616,131 $ 1,257,903 $ - $ 16,718 $ 1,890,752 Accrued payroll and benefits 445,631 - - 2,334 447,965
Due to other governments 69,836 - - - 69,836
Unearned revenue 2,759,530 1,377,226 - 64,795 4,201,551 Deposits 6,849,378 - - 6,849,378 -
Due to other funds - - - 1,832 1,832
Total Liabilities 10,740,506 2,635,129 - 85,679 13,461,314
DEFERRED INFLOWS OF RESOURCES
Leases - 235,816 - 269,670 505,486
Unavailable revenue - 798,700 - - 798,700
Total Deferred Inflows of Resources 1,034,516 - - 269,670 1,304,186
FUND BALANCE
Nonspendable:
Loans receivable 159,000 - - - 159,000
Leases receivable - 5,690 - 50,287 55,977
Restricted for:
Library - - - 530,174 530,174
Capital projects - - 8,328,572 - 8,328,572
Land held for resale 44,338 - - - 44,338
Repairs and maintenance - - - 176,966 176,966
Pensions 1,400,163 - - 1,400,163 -
VTA - 494,826 - - 494,826
Committed to:
Budget stabilization 6,129,774 - - 6,129,774 -
Catastrophic 6,129,775 - - 6,129,775 -
Pensions/OPEB 300,000 - - - 300,000
Measure G 2018 district sales tax 590,581 1,769,057 - 2,359,638 - Special revenue funds - - - 821,200 821,200
Assigned to:
Open Space 410,000 152,000 - - 562,000
Parking - 100,000 - - 100,000
Sustainability 140,553 - - - 140,553
Capital/Special projects 10,359,577 19,178,452 - 29,538,029 - Carryover encumbrances 37,698 - - - 37,698
Comcast PEG - 50,000 - - 50,000
ERAF Risk 689,608 - - - 689,608
Economic recovery 1,556,614 - - 1,556,614 -
Compensated Absences 1,580,623 - - 1,580,623 -
Total Fund Balances 29,528,304 21,750,025 9,907,199 - 61,185,528 Total Liabilities, Deferred Inflows
of Resources and Fund Balances $ 40,268,810 $ 25,419,670 $ 10,262,548 - $ $ 75,951,028 The notes to the financial statements are an integral part of this statement.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE GOVERNMENT-WIDE STATEMENT OF NET
POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2023
Fund Balance - Total Governmental Funds $ 61,185,528
Amounts reported for Governmental Activities in the Statement of Net Position are different from those reported in the Governmental Funds because of the following:
CAPITAL ASSETS
Capital assets used in the Governmental Activities are not financial resources and, therefore, are not reported in the Governmental Funds. 131,966,335
ALLOCATION OF INTERNAL SERVICE FUND NET POSITION
Internal service funds are used by management to charge the cost of management of certain activities such as insurance, central services and maintenance to individual governmental funds. The net current assets of the internal service funds are therefore included as Governmental Activities in the Statement of Net Position. 6,542,872
DEFERED OUTFLOWS AND INFLOWS OF RESOURCES
The differences from benefit plan assumptions and estimates versus actuals are not included in the plan's actuarial study until the next fiscal year and are reported as deferred inflows or deferred outflows of resources in the statement of net position.
Deferred outflows of resources:
PERS Miscellaneous Plan adjustments $ 10,459,160
PERS Safety Plan adjustments 14,761,072
OPEB plan adjustments 4,306,030 29,526,262
Deferred Inflows of resources:
PERS Miscellaneous Plan adjustments $ (160,064)
PERS Safety Plan adjustments (2,966,647)
OPEB plan adjustments (2,117,922) (5,244,633)
DEFERRED INFLOWS OF RESOURCES
Revenues from grants that are funded in this fiscal year that will not be collected for several months after the Town's fiscal year end are not considered available and are classified as deferreed inflows of resources in the governmental funds. 798,700
LONG-TERM LIABILITIES
Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the Governmental Funds.
Loans payable $ (1,196,257)
Net Pension Liabilities (59,866,665)
Net OPEB Liability (7,028,633)
Compensated absences (3,161,247) (71,252,802)
Net Position - Governmental Activities $ 153,522,262
The notes to the financial statements are an integral part of this statement.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves ARPA Funds Funds
REVENUES
Property Taxes $ 22,743,087 -$ -$ $ 22,781,248 38,161 $ Sales Taxes 8,806,477 - - - 8,806,477
Transient Occupancy Taxes 2,228,190 - - - 2,228,190
Other Taxes 6,454 - - 29,042 35,496
Licenses & Permits 5,630,362 181,533 - 521,780 6,333,675 Intergovernmental 1,553,396 3,358,063 3,614,872 1,619,489 10,145,820 Charges for Services 4,646,705 1,072,009 - - 5,718,714
Fines and Forfeitures 416,950 - - - 416,950
Franchise Fees 3,074,624 - - - 3,074,624
Developer Fees - 614,820 - - 614,820
Interest 605,789 44,198 - 147,595 797,582
Use of Property 38,126 91,284 - 108,237 237,647
Other 859,571 - - 125,617 985,188
Total Revenues 50,609,731 5,361,907 3,614,872 2,589,921 62,176,431
EXPENDITURES
Current:
General Government 8,828,779 - - - 8,828,779
Public Safety 18,446,048 - - - 18,446,048
Parks and Public Works 8,998,088 - - 86,318 9,084,406
Community Development 5,065,412 - - - 5,065,412
Library Services 3,096,486 - - 111,541 3,208,027
Sanitation and Other - - - 204,097 204,097
Capital Outlay 300,000 6,722,633 - 1,894,442 8,917,075
Debt service:
Principal 156,034 - - - 156,034
Total Expenditures 44,890,847 6,722,633 - 2,296,398 53,909,878
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 5,718,884 (1,360,726) 3,614,872 293,523 8,266,553
OTHER FINANCING SOURCES (USES)
Settlements - 1,565,000 - 1,565,000 -
Gain from sale of assets 2,162 - - - 2,162
Transfers in 4,153,408 7,732,614 - - 11,886,022
Transfers (out) (7,242,939) (427,616) (3,614,872) (110,920) (11,396,347) Total Other Financing Sources (Uses) (3,087,369) 8,869,998 (3,614,872) (110,920) 2,056,837 NET CHANGES IN FUND BALANCES 2,631,515 7,509,272 - 182,603 10,323,390 BEGINNING FUND BALANCES 26,896,789 14,240,753 - 9,724,596 50,862,138 ENDING FUND BALANCES $ 29,528,304 $ 21,750,025 -$ 9,907,199 $ $ 61,185,528 The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2023
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
RECONCILIATION OF THE GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES TO THE GOVERNMENT-WIDE
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 10,323,390 Amounts reported for Governmental Activities in the Statement of Activities are different because of the following:
CAPITAL ASSET TRANSACTIONS
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense.
Expenditures for capital assets (additions) $ 8,598,811 Current year depreciation (3,950,198) 4,648,613
Gains and losses from the disposal of capital assets are not considered current financial resources and are not recorded in the governmental fund statement of revenues and expenditures but are recorded in the government-wide statement of activities because they are economic resources. (452,844)
LONG-TERM DEBT PROCEEDS AND PAYMENTS
Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position.
Certificates of participation 156,034
UNAVAILABLE REVENUE
Revenues from grants that are funded in this fiscal year that will not be collected for several months after the Town's fiscal year end are not considered available and are classified as deferred inflows of resources in the governmental funds. 293,000
COMPENSATED ABSENCES
In governmental funds, compensated absences such as vacations and sick leave are expenditures (122,954)
OPEB PLAN CONTRIBUTIONS AND EXPENSE
In governmental funds, actual contributions to OPEB plans are reported as expenditures in the year incurred. However, in the Government-Wide Statement of Activities, only the current year OPEB expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred inflows and outflows of resources. 719,946
PENSION PLAN CONTRIBUTIONS AND EXPENSE
In governmental funds, actual contributions to pension plans are reported as expenditures in the year incurred. However, in the Government-Wide Statement of Activities, only the current year pension expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred inflows and outflows of resources. 1,247,506
ALLOCATION ON INTERNAL SERVICE FUND ACTIVITY
Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of the internal service fund is reported with governmental activities. (1,697,410) CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES $ 15,115,281 The notes to the financial statements are an integral part of this statement. when taken. However, in the Government Wide Statement of Activities, the current year change in the compensated absences liability is reported.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Property Taxes $ 20,907,894 $ 22,484,118 $ 22,743,087 $ 258,969 Sales Taxes 9,174,944 8,959,134 8,806,477 (152,657)
Transient Occupancy Taxes 1,642,460 2,348,547 2,228,190 (120,357) Other Taxes 7,000 7,000 6,454 (546)
Licenses & Permits 4,122,529 5,140,684 5,630,362 489,678 Intergovernmental 1,051,814 1,273,910 1,553,396 279,486 Charges for Services 4,257,261 5,540,465 4,646,705 (893,760) Fines and Forfeitures 201,750 226,750 416,950 190,200
Franchise Fees 2,493,870 2,716,470 3,074,624 358,154
Interest 432,947 670,021 605,789 (64,232)
Use of Property 41,211 41,211 38,126 (3,085)
Other 1,203,657 863,964 859,571 (4,393)
Total Revenues 45,537,337 50,272,274 50,609,731 337,457
EXPENDITURES
Current:
General Government:
Town Council 217,238 217,240 186,337 30,903
Town Attorney 707,555 811,427 699,143 112,284
Administrative Services 5,298,494 5,759,393 5,302,281 457,112 Non-Departmental 3,194,526 3,334,931 2,641,018 693,913
Total General Government 9,417,813 10,122,991 8,828,779 1,294,212 Public Safety 19,225,985 19,331,330 18,446,048 885,282
Parks & Public Works 9,798,967 10,368,194 8,998,088 1,370,106 Community Development 5,772,004 6,543,199 5,065,412 1,477,787 Library Services 3,139,449 3,247,730 3,096,486 151,244
Capital Outlay - 435,416 300,000 135,416
Debt Service:
Principal - 156,034 156,034 -
Total Expenditures 47,354,218 50,204,894 44,890,847 5,314,047
EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES (1,816,881) 67,380 5,718,884 5,651,504
OTHER FINANCING SOURCES (USES)
Gain from sale of assets 600 600 2,162 1,562
Transfers In 2,183,817 3,381,544 4,153,408 771,864
Transfers Out (3,006,978) (5,842,011) (7,242,939) (1,400,928) Total Other Financing Sources (Uses) (822,561) (2,459,867) (3,087,369) (627,502) NET CHANGES IN FUND BALANCE $ (2,639,442) $ (2,392,487) 2,631,515 $ 5,024,002 BEGINNING FUND BALANCE 26,896,789
ENDING FUND BALANCE $ 29,528,304
The notes to the financial statements are an integral part of this statement.
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
TOWN OF LOS GATOS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
ARPA FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Intergovernmental $ 1,304,696 $ 3,614,872 $ 3,614,872 $ - Total Revenues 1,304,696 3,614,872 3,614,872 -
EXPENDITURES
Current: - - - -
Total Expenditures - - - -
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 1,304,696 3,614,872 3,614,872 -
OTHER FINANCING SOURCES (USES)
Operating transfers in - - - -
Operating transfers (out) (1,304,696) (3,614,872) (3,614,872) - Total Other Financing Sources (Uses) (1,304,696) (3,614,872) (3,614,872) - CHANGE IN FUND BALANCE $ - $ - - $ -
BEGINNING FUND BALANCE -
ENDING FUND BALANCE $ -
The notes to the financial statements are an integral part of this statement.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
PROPRIETARY FUNDS -
INTERNAL SERVICE FUNDS
Internal service funds account for Town operations financed and operated in a manner similar to a private business enterprise. The intent of the Town is that the cost of providing goods and services to other Town funds be financed through user charges to those funds.
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.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
PROPRIETARY FUNDS -
STATEMENT OF NET POSITION
JUNE 30, 2023
Governmental
Activities
Internal Service
Funds
ASSETS
Current Assets:
Cash & investments $ 8,000,397
Restricted cash & investments 115,981
Accounts Receivable 75,438
Total current assets 8,191,816
Noncurrent Assets:
Leases receivable 1,348,155
Subscription assets, net 713,438
Total noncurrent assets 2,061,593
Total Assets $ 10,253,409
LIABILITIES
Current Liabilities:
Accounts payable $ 243,425
Due to other governments 59
Interest payable 27,915
Subscription liabilities - Current 149,154
Total current liabilities 420,553
Noncurrent liabilities:
Claims payable 2,126,708
Subscription liabilities 445,781
Total noncurrent liabilities 2,572,489
Total Liabilities $ 2,993,042
DEFERRED INFLOWS OF RESOURCES
Leases $ 717,495
NET POSITION
Net Investment in capital assets $ 118,503
Restricted for workers compensation claims 115,981
Unrestricted 6,308,388
Total Net Position $ 6,542,872
The notes to the financial statements are an integral part of this statement.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
PROPRIETARY FUNDS -
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Governmental
Activities
Internal Service
Funds
OPERATING REVENUES
Charges for services $ 3,695,444
Interest 5
Use of money and property 122,317
Other local taxes 28,322
Other revenue and reimbursements 247,409
Total Operating Revenues 4,093,497
OPERATING EXPENSES
Insurance expenses 2,901,632
Services and Supplies 2,167,957
Depreciation/amortization 202,422
Total Operating Expenses 5,272,011
Operating Income (Loss) (1,178,514)
NONOPERATING EXPENSES
Interest expense (29,221)
Income (loss) before transfers (1,207,735)
Transfers in 243,325
Transfers out (733,000)
Net transfers (489,675)
Change in Net Position (1,697,410)
BEGINNING NET POSITION 8,240,282
ENDING NET POSITION $ 6,542,872
The notes to the financial statements are an integral part of this statement.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
PROPRIETARY FUNDS -
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
Governmental
Activities
Internal Service
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 3,932,853
Payments to suppliers (4,843,598)
Insurance reimbursements 165,757
Claims paid 529,919
Net cash provided (used) by operating activities (215,069)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers In 243,325
Transfers Out (733,000)
Net cash provided (used) by noncapital financing activities (489,675)
CASH FLOWS FROM CAPITAL RELATED FINANCING ACTIVITIES
Interest paid (1,306)
Acquisition of subscription assets (320,925)
Net cash provided (used) by capital related financing activities (322,231) Net Increase(Decrease) in Cash and Investments (1,026,975) Cash and investments - beginning of year 9,143,353
Cash and investments - end of year $ 8,116,378
Reconciliation of Operating Income to Cash Flows
from Operating Activities:
Operating Income $ (1,178,514)
Adjustments to reconcile operating income to cash flows from operating activities:
Depreciation/amortization 202,422
Change in assets and liabilities:
Accounts receivables (29,636)
Leases receivable 146,566
Deferred inflows of resources (111,817)
Accounts payable 13,308
Due to other governments 9
Claims payable 742,593
Cash Flows From Operating Activities $ (215,069)
Cash and cash equivalents:
Cash and investments $ 8,000,397
Restricted cash and investments 115,981
Total cash and cash equivalents $ 8,116,378
The notes to the financial statements are an integral part of this statement.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
FIDUCIARY FUNDS
Trust funds are used to account for assets held by the Town as a trustee agent for individuals, private organizations and other governments. The financial activities of these funds are excluded from the government-wide financial statements but are presented in separate Fiduciary Fund financial statements.
RDA Successor Agency Private Purpose Trust Fund was established to account for the assets and liabilities transferred from the dissolution of the Town’s former Redevelopment Agency and the continuing operations related to existing Redevelopment Agency obligations.
DRAFT
RDA
Successor
Agency
ASSETS
Cash and investments $ 1,954,332
Restricted cash and investments 2,023,185
Loans receivable 622,082
Capital assets:
Depreciable, net of accumulated depreciation 1,118,623
Total Assets $ 5,718,222
LIABILITIES
Accounts payable $ 24
Interest payable 212,406
Long-term debt:
Due within one year 1,415,000
Due in more than one year 10,278,580
Total Liabilities $ 11,906,010
NET POSITION
Restricted for RDA $ (6,187,788)
Total Net Position $ (6,187,788)
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2023
DRAFT
RDA
Successor
Agency
ADDITIONS
Property taxes $ 1,942,119
Investment earnings 80,795
Total Additions 2,022,914
DEDUCTIONS
Program expenses of former RDA 5,640
Interest and fiscal agency expenses of RDA 495,843
Depreciation expense 101,693
Total Deductions 603,176
CHANGE IN NET POSITION 1,419,738
NET POSITION - BEGINNING OF YEAR (7,607,526)
NET POSITION - END OF YEAR $ (6,187,788)
The notes to the financial statements are an integral part of this statement.
TOWN OF LOS GATOS
PRIVATE PURPOSE TRUST FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
DRAFT
This Page Left Intentionally Blank
DRAFT
Notes to Basic Financial Statements
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Description of the Financial Reporting Entity
The Town of Los Gatos (the “Town”) operates under a Council-Manager form of government and provides the following services; public safety (including police and emergency management), parks and public works, community development, library, public improvements, planning and zoning, and general administration services. Redevelopment services were provided primary through the Redevelopment Agency of the Town which was dissolved on February 1, 2012.
The Town is largely a residential community located in the foothills of the Santa Cruz Mountains and was incorporated as a municipal corporation in 1887. The Town’s population as of January 1, 2023, was 33,102.
As required by generally accepted accounting principles, these financial statements present the Town as the Primary Government and any component units for which the Town is considered financially accountable.
B. Description of Blended Component Units
The Town did not report any component units as a part of the primary government because the Town Council was not the governing body of any entities and no separate entity provided services entirely to the Town.
C. Description of Joint Ventures and Public Entity Risk Pool
As described in Note 11, the Town participates in two joint ventures and public entity risk pool activities through formally organized separate legal entities. The financial activities of the Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA) and the Local Agency Workers’ Compensation Excess Joint Powers Authority (“LAWCX”) are not included in the accompanying basic financial statements as boards separate from and independent of the Town administer them.
D. Basis of Presentation
The Town’s Basic Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Government Accounting Standards Board (“GASB”) is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A.
The accompanying financial statements are presented on the basis set forth in Government Accounting Standards Board Statements No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, No. 36, Recipient Reporting for Certain Non-exchange Revenues, an Amendment of GASB Statement No. 33, No. 37, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments; Omnibus, and No. 38, Certain Financial Statement Note Disclosures.
DRAFT
TOWN OF LOS GATOS, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2023
These Statements require that the financial statements described below be presented.
Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government (the Town). These statements include the financial activities of the overall Town government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements present governmental activities of the Town. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Town’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meet the operational needs of a particular program, and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the Town's funds, including fiduciary funds and blended component units. Separate statements for each fund category—governmental, proprietary and fiduciary—are presented. The emphasis of fund financial statements is on major individual governmental funds, each of which is displayed in a separate column. All remaining governmental are aggregated and reported as nonmajor funds.
Internal service funds of the Town (which provide services primarily to other funds of the Town) are presented, in summary form, as part of the proprietary fund financial statements. Since the principal users of the internal services are the Town’s governmental activities, financial activities of the internal service funds are presented in the governmental activities column when presented at the government-wide level. The costs of these services are allocated to the appropriate function/program in the Statement of Activities.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from non-exchange transactions or ancillary activities.
E. Major Funds
GASB defines major funds and requires that the Town’s major governmental funds be identified and presented separately in the fund financial statements. All other funds, called nonmajor funds, are combined and reported in a single column, regardless of their fund-type.
Major funds are defined as funds that have assets, deferred outflows of resources, liabilities, deferred outflows of resources, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The Town may also select other funds it believes should be presented as major funds.
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NOTES TO BASIC FINANCIAL STATEMENTS
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The Town reported the following major governmental funds in the accompanying financial statements:
General Fund is the general operating fund of the Town and is used to account for all financial resources except those required to be accounted for in another fund.
Appropriated Reserves Fund is used to account for resources provided for capital projects not fully funded from other sources.
ARPA Fund was established to account for monies received under the American Rescue Plan Act of 2021 to respond to the COVID19 emergency.
The Town also reports the following fund types:
Internal Service Funds are used to account for services that are provided to other departments on a cost-reimbursement basis. Those services include workers compensation, self-insurance, facilities maintenance, information technology, and equipment.
Fiduciary Funds include Private-Purpose Trust Funds and agency funds used to account for assets held by the Town as an agent for individuals, private organizations, and other governments. The financial activities of this fund are excluded from the government-wide financial statement but are presented in a separate Fiduciary Fund financial statement.
The Town reported the following Fiduciary Funds in the accompanying financial statements:
RDA Successor Agency Private Purpose Trust Fund accounts for the assets, liabilities, and operations transferred from the dissolution of the Town’s Redevelopment Agency, which includes the following:
• Certificates of Participation issued to finance several capital improvement projects throughout the Town.
• Redevelopment projects and related property tax revenue. • Affordable Housing Set-Aside Program obligations.
• Repayment of obligations incurred by the Town’s Redevelopment Agency prior to its dissolution.
F. Basis of Accounting
The government-wide and fiduciary fund (except for agency funds) financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable DRAFT
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and available. The Town considers property tax revenues reported in the governmental funds to be available if the revenues are collected or are reasonably expected to be collected within sixty days after year-end. For revenues other than property taxes, the Town generally applies the sixty-day period rule when considering the measurable and available criteria. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which is recognized upon becoming due and payable; and except for claims, judgments, and compensated absences, which are recognized when estimable and probable. Governmental capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of governmental long-term debt and acquisitions under capital leases are reported as other financing sources.
Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental revenues, and interest revenue. Fines, forfeitures, licenses and permits, and charges for services are not susceptible to accrual because they are not measurable until received in cash.
Non-exchange transactions, in which the Town gives or receives value without directly, receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed.
Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The Town may fund programs with a combination of cost-reimbursement grants, categorical block grants and/or general revenues. Thus, both restricted and unrestricted net position may be available to finance program expenditures. The Town’s policy is to first apply restricted grant resources to such programs followed by general revenues as necessary.
Certain indirect costs are included in program expenses reported for individual functions and activities.
The Town applies all applicable GASB pronouncements for certain accounting and financial reporting guidance including those applicable to accounting and reporting for proprietary operations.
In December of 2010, GASB issued GASB No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This statement incorporates pronouncements issued on or before November 30, 1989 into GASB authoritative literature. This includes pronouncements by the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinions (APB), and the Accounting Research Bulletins of the American Institute of Certified Public Accountants' (AICPA) Committee on Accounting Procedure, unless those pronouncements conflict with or contradict with GASB pronouncements.
Pensions - For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Town’s California Public Employees’ Retirement System (CalPERS) plans (the Plans) and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms.
Investments are reported at fair value.
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NOTES TO BASIC FINANCIAL STATEMENTS
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Generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
Other Postemployment Benefit (OPEB) Expense
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense information about the fiduciary net position of the Town’s Retiree Benefits Plan (the OPEB Plan) and additions to/deductions from the OPEB Plan's fiduciary net position have been determined on the same basis as they are reported by the OPEB Plan. For this purpose, the OPEB Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value. Generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
Cash and Cash Equivalents - The Town’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.
State of California statutes and the Town’s investment policy authorize the Town to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, collateralized, non-negotiable certificates of deposits, commercial paper rated A-1/P-1, medium-term corporate notes rated A or its equivalent or better by Moody’s or Standard & Poor’s, asset backed corporate notes, bankers’ acceptances, mutual funds, and the State Treasurer’s investment pool (Local Agency Investment Fund).
The Town does not enter into repurchase or reverse repurchase agreements.
Restricted Cash and Investments - Certain restricted cash and investments are held by fiscal agents for pension stabilization, worker’s compensation insurance, and Successor Agency debt service obligations.
Investments - Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value Measurement and Application. Accordingly, the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income.
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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction. In determining this amount, three valuation techniques are available:
• Market approach - This approach uses prices generated for identical or similar assets or liabilities.
The most common example is an investment in a public security traded in an active exchange such as the NYSE.
• Cost approach - This technique determines the amount required to replace the current asset. This approach may be ideal for valuing donations of capital assets or historical treasures. • Income approach - This approach converts future amounts (such as cash flows) into a current discounted amount.
Each of these valuation techniques requires inputs to calculate a fair value. Observable inputs have been maximized in fair value measures, and unobservable inputs have been minimized.
Materials, Supplies and Deposits (Other Assets) - These assets are held for consumption and are stated at cost using the first-in, first-out method. The costs are recorded as expenditures at the time the item is consumed.
Interfund Receivables and Payables - Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “advances to/advances from other funds.” All other outstanding balances between funds are reported as “due to/from other funds.”
Advances - Advances between funds and due from/to other funds are offset by a nonspendable fund balance in applicable Town funds to indicate the extent to which they are not available for appropriation and are not expendable available financial resources.
Capital Assets - Capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets or donated works of art and similar items should be reported at acquisition value rather than fair value. Also, note that capital assets received in a service concession arrangement should be reported at acquisition value rather than fair value.
Capital assets, including infrastructure, are recorded if acquisition or construction costs exceeds $10,000.
As required by GASB, the Town depreciates and amortizes capital assets with limited useful lives over their estimated useful lives. The purpose of depreciation/amortization is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets. The Town depreciates/amortizes using the straight-line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated.
Intangible right-to-use lease assets are amortized over the shorter of the lease term or the useful life of the underlying asset, unless the lease contains a purchase option that the university has determined is reasonably certain of being exercised, then the lease asset is amortized over the useful life of the DRAFT