Los Gatos City Council
December 17, 2024

ITEM NO. 11.

Name of Committee Purpose 2025 Appointee 2025 Alternate 2025 Meeting Schedule
*Tentative* based on
2024
Location Contact Person(s)
West Valley Clean
Water Program
Authority
(WVCWPA)
*NOTE PENDING
NAME CHANGE* to
"West Valley
Stormwater Authority"
upon execution of JPA
Amendment by
participating agencies.

The West Valley Clean Water
Program Authority was
formed in early 2018 to
coordinate stormwater
pollution abatement, control
and management efforts to
assist public and private
entities in complying with
stormwater National
Pollutant Discharge
Elimination System
(“NPDES”) permits and
improving surface water
quality and enhancing water
supplies in California.

Member Agencies:

City of Campbell, Town of
Los Gatos, City of Monte
Sereno, City of Saratoga
Mary Badame Maria Ristow Quarterly meetings
immediately
preceding (4:00
p.m.)
the Solid Waste
Management JPA
Board of Directors.
2025 Meeting
Schedule to be
determined
Monte Sereno
City Hall
18041 SaratogaLos Gatos Road
Monte Sereno
Scott Holt, Senior
Associate,
Hilton, Farnkopf &
Hobson (HF&H)
Consultants, LLC
201 North Civic
Drive, Suite 230
Walnut Creek, CA
94596
Phone (925) 977-6967
Fax (925) 977-6955
Email: sholt@hfhconsultants.com
Town Staff Contact:

Nicolle Burnham,
Director of Parks &
Public Works
(408) 399-5770
tmpB755.tmp 12/12/2024 15

ITEM NO. 11.

Name of Committee Purpose 2025 Appointee 2025 Alternate 2025 Meeting Schedule
*Tentative* based on
2024
Location Contact Person(s)
West Valley Sanitation
District Board of
Directors
The West Valley Sanitation
District Board of Directors
oversees the treatment of
sewage for the cities of
Campbell, Cupertino, Los
Gatos, Monte Sereno, and
Saratoga.
...............................................
........

Board of Directors receive
$210 stipend per meeting.

Rob Moore Maria Ristow Monthly
2nd Wednesday
(or 4th Wednesday
if needed)
5:00 p.m.

West Valley
Sanitation
District
100 E.

Sunnyoaks
Avenue
Campbell, CA
95008
Lesha Luu
West Valley
Sanitation District
100 E. Sunnyoaks
Avenue
Campbell, CA 95008
[email protected]
(408) 378-2407
Town Staff Contact:

Nicolle Burnham,
Director of Parks &
Public Works
(408) 399-5770
tmpB755.tmp 12/12/2024 16

ITEM NO. 11.
2023 OTHER COUNCIL APPOINTMENTS
(Non-Mayoral Appointments)
Name of Committee Purpose 2024 Appointee 2023 Alternate 2023 Meeting Schedule
Location Contact Person(s)
Santa Clara Valley
Transportation
Authority (VTA) Board
of Directors
The VTA Board is comprised
of elected officials from each
City and the County.

Rob Moore
Appointed as
Alternate Board
Member by
WVMM vote
December 4,
2024.

Two-year term
ends December
2026.

Not a Mayoral
Appointment.

Appointed as a
West Valley
Cities rep /
Cities
Association of
Santa Clara
County, City
Selection
Committee.)
(Not a Town or
Mayoral
Appointee)
Board Member
Appointees
cannot serve on
other VTA
committees/com
missions.

Monthly
1st Thursday
5:30 p.m.*
Friday Workshop
Meetings are
scheduled as
needed
Santa Clara
County Board of
Supervisors'
Chambers, 70 W.

Hedding St.,
San Jose
Michelle Garza
Board Assistant
Santa Clara Valley
Transportation
Authority (CMP)
3331 N. First Street
San Jose, CA 95134
[email protected]
(408) 546-7977
Town Staff Contact:

Laurel Prevetti, Town
Manager
(408) 354-6832
17

ITEM NO. 11.

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

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/17/2024
ITEM NO: 12
DATE: December 9, 2024
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Approve a Side Letter that Amends the Town Employees Association (TEA) Salary Schedule to Establish a New Classification Title and Salary Range for Project Analyst I/II.

RECOMMENDATION:

Approve a side letter that amends the Town Employees Association (TEA) salary Schedule to establish a new classification title and salary range for Project Analyst I/II (Attachment 1).

BACKGROUND:

The Town of Los Gatos Personnel Rules and Regulations (Section 4.4) and the Municipal Code (Section 2.30.925) require that amendments and revisions to the salary schedule/classification plan are approved by the Town Council. Changes must be presented to Council for approval as part of the formal budget adoption, through the labor negotiations process, or as needed.

DISCUSSION:

The Town seeks to establish the new flexibly-staff classification of Project Analyst I/II to help address recent Council approved positions for parking coordination and senior services. In lieu of creating a single use classification for either of these two functions, the Town determined that a more general Project Analyst classification would be appropriate so that the classification can be used for multiple purposes including future projects and programs.

The current Administrative Analyst classification is considered confidential, which under Town Resolution 1974-41 means an employee who is privy to decisions of Town management affecting employer-employee relations. Employees who would be hired to help manage specific programs would not qualify for the confidential employee group because they would not be

ITEM NO. 12.

PAGE 2 OF 2
SUBJECT: Approve a Side Letter that Amends the Town Employees Association (TEA) Salary Schedule to Establish a New Classification Title and Salary Range for Project Analyst I/II
DATE: December 9, 2024
privy to those decisions. As such, a separate classification was created that will be represented by TEA.

The proposed classification salaries are below:

Classification Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Project
Analyst I $44.42 $46.64 $48.97 $51.42 $53.99 $57.26
Project
Analyst II $49.35 $51.82 $54.41 $57.13 $59.99 $63.56
The Project Analyst II salary is 5% less than the Administrative Analyst salary in the Confidential group. It is important to note that Confidential employees received a 5% confidential salary differential. The Project Analyst I salary is 10% less than Project Analyst II based on best practice for promotional opportunity salary differences.

Staff has met the Town’s obligation to meet and confer with TEA to add this classification to the salary schedule. TEA reviewed and approved the attached Side Letter agreement.

CONCLUSION:

Staff recommends the approval of an amendment to the TEA salary schedule to establish a new classification title and salary ranges for Project Analyst I/II.

COORDINATION:

The Town Attorney and Director of Finance coordinated this memo.

FISCAL IMPACT:

This agenda item would modify the TEA salary schedule by adding a flexibly staffed Project Analyst I/II classification. If approved, should a Department wish to use this classification, the cost would need to be absorbed into the Department’s existing budget or a budget adjustment would need to be requested at that time.

ENVIRONMENTAL ASSESSMENT:

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

Attachments:

1. Side Letter with TEA on Project Analyst I/II with Exhibits A and B.

ITEM NO. 12.

SIDE LETTER OF AGREEMENT

BETWEEN THE
TOWN OF LOS GATOS AND THE TOWN EMPLOYEES’ ASSOCIATION
The Town of Los Gatos (Town) and the Town Employees’ Association (TEA), collectively referred to as "parties," having met and conferred in good faith, agree as follows:

1. Effective as soon as practicable, the Town shall create a flexibly staffed Project Analyst I/II classification (Exhibit A).

2. The salary schedule for the Project Analyst I and II positions will be as follows:

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6
Project
Analyst II
NonExempt $49.35 $51.82 $54.41 $57.13 $59.99 $63.56
Project
Analyst I
NonExempt $44.42 $46.64 $48.97 $51.42 $53.99 $57.26

3. The TEA salary schedules will be amended to include the new salaries.

4. The parties agree that this side letter is subject to Council approval.

FOR TEA: TOWN OF LOS GATOS:
______________________________ ________________________________ Christine Crossen, Chris Constantin, Town Manager
Communications Dispatcher Lead
______________________________ ______________________________ Cheryl Schiele Cheryl Parkman
Business Agent Human Resources Director
APPROVED AS TO FORM:
________________________________
Gabrielle Whelan, Town Attorney
Exhibit A – Project Analyst I/II Job Classification
Exhibit B – Updated Salary Schedule

ITEM NO. 12.

CLASSIFICATION SPECIFICATION FOR
Project Analyst I
Project Analyst II
Class specifications are intended to present a descriptive list of the range of typical duties performed by employees in the class. Specifications are not intended to reflect all duties performed within the job, and all duties described are not necessarily performed by all employees in the class.

FLEXIBLY STAFFED SERIES
This is a flexibly staffed series, meaning that incumbents may be promoted by successfully demonstrating the ability to perform competently at the required level and by meeting the qualifications for the next higher class. Promotion to a higher level is not automatic or guaranteed and is subject to management and budget authorization. For more information, refer to the Town’s Administrative Policy on Flexibly Staffed Classifications.

POSITION SUMMARY
Under close supervision (Project Analyst I) and general direction (Project Analyst II), performs a variety of non-confidential analytical, technical, and administrative duties related to the management support of municipal programs, operations, services, policies, and processes.

Assignment areas may be department-specific or may include functions encompassing multiple departments. May work with outside agencies, private organizations, and the public.

DISTINGUISHING CHARACTERISTICS
Project Analyst I: This is the entry-level classification in the Project Analyst classification series.

Incumbents perform various analytical and professional administrative assignments for an assigned department. Positions at this level are expected to function with a different amount of knowledge or skill level than positions allocated to the Project Analyst II level and usually exercise less independent discretion and judgment in matters related to work procedures and methods.

Initially, work methods and resources are identified, policies and procedures are explained, and assignments are supervised in progress and upon completion. With experience, assignments become more varied and are performed with greater independence.

Project Analyst II: This journey-level class in the Project Analyst classification series is responsible for performing the full range of professional support for an assigned operational and/or program area. Incumbents are expected to work independently and exercise judgment and initiative. Positions at this level receive only occasional instruction or assistance as new or unusual situations arise and are fully aware of the operating procedures and policies of the work unit. This classification is distinguished from Project Analyst I by the greater level of judgment, the difficulty of work assignments, and the extent to which quantitative and writing skills are required to present findings and recommendations.

EXHIBIT A

ITEM NO. 12.

SUPERVISION RECEIVED AND EXPECTED
Project Analyst I: Incumbents work under close supervision and gradually work more independently as knowledge, experience, and skills are acquired. They do not supervise staff.

Project Analyst II: Incumbents receive general administrative direction from a supervisor. They have no direct supervision over staff but may provide training and technical guidance to other staff.

DUTIES AND RESPONSIBILITIES (Illustrative Only)
Management reserves the right to add, modify, change, or rescind the work assignments of different positions and to make reasonable accommodations so that qualified employees can perform the essential functions of the job.

Positions exist throughout the organization and not all functions are essential in assigned departments.

Project Analyst I
• Participates in and/or leads program research, design and administration activities. • Researches grant programs and assists with the preparation of grant applications. • Monitors program budgets.
• Participates in designing, monitoring, and implementing research projects and surveys for administrative, operational, program budgeting and other functions. • Compiles materials and assist in the preparation of reports, manuals, presentations and other publications.
• Participates in conducting organizational, program and administrative related surveys and studies.
• Analyzes project outcomes for areas of improvement
Project Analyst II
• Researches, develops and implements new programs and initiatives. • Assists in organizational-wide analysis and makes recommendations. • Plans, organizes, directs and coordinates program activities including program risks and mitigation strategies.
• Evaluates programs and initiates studies and analyses. • Prepares and administers program budget
• Resolves problems and complaints regarding program activities; and interacts with departmental representatives, public officials, the business community and the public in the accomplishments of program objectives.
• Conducts organizational, program and administrative related surveys and studies.

ITEM NO. 12.
• Researches and prepares grant applications, monitors grant activities to ensure they remain in scope with terms and conditions for the grant; tracks grant spending to ensure that funds are expended within the grant terms and conditions; prepares and distributes reports on grant operations and activities.
• Tracks and analysis data to formulate recommendations. • Prepares, reviews, and edits reports.
• May provide training and technical guidance to other staff.

REQUIRED EDUCATION, EXPERIENCE AND TRAINING
Project Analyst I: A Bachelor's degree from an accredited four-year college or university with a major in Public Administration, Business Administration, or a related field. Project management and government sector experience are desirable.

Project Analyst II: Two years of increasingly responsible analytical or administrative experience.

A Bachelor's degree from an accredited four-year college or university with a major in Public Administration, Business Administration, or a related field. Project management, government sector experience, and a Master's degree in one of the related areas above are desirable.

Acceptable Substitution
• Additional years of analytical or administrative experience may be substituted for the education requirement on a year for year basis.
• A Master’s degree in one of the related areas above may be substituted for one year of work experience.

Licenses and Certificates
Possession and maintenance of a valid California driver’s license may be required for some assignments or responsibilities.

Special Requirements
Ability to pass a comprehensive background check, which may include all or some of the following requirements:
• Fingerprinting
• Education and employment verification
• Reference check
• DMV driving record check
• Consumer credit check
For assignments in the Police Department, the candidate must successfully pass a Police Department level background investigation.

ITEM NO. 12.

Disaster Service Worker
In accordance with California Government Code Section 3100, Town of Los Gatos employees, in the event of a disaster, are considered disaster service workers and may be asked to protect the health, safety, lives, and property of the people of the State.

KNOWLEDGE, SKILLS, AND ABILITIES
Knowledge of:
• Principles and practices of local government processes, services and programs in assigned area of responsibility.
• Professional level writing techniques, including proper grammar, spelling, vocabulary, and punctuation.
• Applicable Federal, State, and local laws, rules and regulations. • Office methods, procedures, software, and equipment applications. • Research methods and report writing techniques.
• Statistical methods and mathematical computations using software applications. • Administrative and clerical procedures and systems such as word processing, managing files and records, designing forms, and understanding other office procedures and terminology.

Skills in:
• Analyzing problems, evaluating options, and making sound recommendations. • Prioritizing assignments/workload and responding to deadlines. • Developing and implementing programs. (Analyst II)
• Analyzing and understanding complex issues in an assigned area of responsibility and developing effective recommendations. (Analyst II)
Ability to:
• Organize work, set priorities, meet deadlines, and complete assignments independently.

Evaluate the effectiveness of work programs, policies, and procedures, and make recommendations for improvement.
• Effectively represent the Department and the Town in meetings with governmental agencies, community groups, businesses; professional, educational, and regulatory organizations.
• Establish, maintain, and foster positive and effective working relationships with those contacted during work.
• Prepare and present clear, concise, and logically written and oral reports, correspondence, policies, procedures, and other written materials. (Analyst II) • Provide information to supervisors, co-workers, and others by telephone, in written form, email or in person.

ITEM NO. 12.
• Operate modern office equipment, including computer equipment and software programs relevant to the work performed.
• Communicate effectively in person, over the telephone, and in writing. • Consistently demonstrate professionalism, ethical integrity, and exceptional customer service.

PHYSICAL DEMANDS
Employees must be able to maintain physical condition necessary for sitting for prolonged periods of time; repetitively use fingers and/or wrists while twisting or applying pressure; reach with hands and arms above and below shoulder level; maintain concentration and the capability to make sound decisions; maintain effective audio/visual discrimination and perception to the degree necessary for the successful completion of assigned duties. Employees occasionally lift and carry records and documents that typically weigh less than 25 pounds. Sensory demands include the ability to see, talk, and hear.

WORK ENVIRONMENT
Employees work indoors in a computerized office environment, in direct contact with other Town personnel and the public.

FLSA Non-Exempt
Project Analyst I
Project Analyst II

ITEM NO. 12.

Town of Los Gatos TEA Classifications
Salary Schedule for Fiscal Year 2024/25
Effective July 7, 2024*
Class Code Classification Title Rate Type Range TE1 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 4310 Account Technician Hourly 08 $39.8895 $41.8840 $43.9782 $46.1771 $48.4860 $51.4873 3580 Administrative Assistant Hourly 04 $33.3900 $35.0595 $36.8125 $38.6531 $40.5858 $43.1921 4620 Assistant Engineer Hourly 25 $53.1296 $55.7861 $58.5754 $61.5042 $64.5794 $68.3854 4420 Assistant Planner Hourly 12 $47.0957 $49.4505 $51.9230 $54.5192 $57.2452 $60.6845 4600 Associate Civil Engineer Hourly 27 $60.4495 $63.4720 $66.6456 $69.9779 $73.4768 $77.7276 4661 Associate Engineering Technician Hourly 14 $46.5255 $48.8518 $51.2944 $53.8591 $56.5521 $59.9567 4400 Associate Planner Hourly 20 $54.8040 $57.5442 $60.4214 $63.4425 $66.6146 $70.5223 4410 Building Inspector Hourly 24 $51.7125 $54.2981 $57.0130 $59.8637 $62.8569 $66.5767 4430 Code Compliance Officer Hourly 10 $47.2197 $49.5807 $52.0597 $54.6627 $57.3958 $60.8426 4530 Communication Dispatcher Hourly 17 $49.0000 $51.4500 $54.0200 $56.7200 $59.5600 $63.1200 4535 Communication Dispatcher Lead Hourly 19 $61.9100 $65.0100 $68.2600 $71.6700 $75.2500 $79.5900 4540 Community Services Officer Hourly 11 $39.3200 $41.2900 $43.3500 $45.5200 $47.8000 $50.7700 4615 Construction Project Manager Hourly 26 $57.9920 $60.8916 $63.9362 $67.1330 $70.4897 $74.5912 4660 Engineering Technician Hourly 13 $42.2310 $44.3426 $46.5597 $48.8877 $51.3321 $54.4757 4705 Environmental Programs Specialist Hourly 08 $42.1689 $44.2773 $46.4912 $48.8158 $51.2566 $54.3964 4200 Events and Marketing Specialist Hourly 06 $35.1855 $36.9448 $38.7920 $40.7316 $42.7682 $45.4836 3501 Executive Assistant Hourly 08 $39.8895 $41.8840 $43.9782 $46.1771 $48.4860 $51.4873 4900 IT Systems Administrator Hourly 23 $60.8724 $63.9160 $67.1118 $70.4674 $73.9908 $78.2673 4915 IT Technician Hourly 07 $43.4533 $45.6260 $47.9073 $50.3027 $52.8178 $56.0357 4810 Librarian I Hourly 16 $44.7493 $46.9868 $49.3361 $51.8029 $54.3930 $57.6897 4808 Librarian II Hourly 18 $48.7633 $51.2015 $53.7616 $56.4497 $59.2722 $62.8128 4830 Library Assistant Hourly 03 $34.4433 $36.1655 $37.9738 $39.8725 $41.8661 $44.5364 4807 Library Customer Service Specialist Hourly 01 $31.6478 $33.2302 $34.8917 $36.6363 $38.4681 $40.9685 4805 Library Customer Service Supervisor Hourly 08 $41.3445 $43.4117 $45.5823 $47.8614 $50.2545 $53.3442 4825 Library Specialist Hourly 06 $37.1961 $39.0559 $41.0087 $43.0591 $45.2121 $48.0497 4819 Library Tech Specialist Hourly 15 $43.0622 $45.2153 $47.4761 $49.8499 $52.3424 $55.5365 3181 Office Assistant Hourly 01 $30.5340 $32.0607 $33.6637 $35.3469 $37.1142 $39.5469 4640 Park Services Officer Hourly 11 $39.3225 $41.2886 $43.3530 $45.5207 $47.7967 $50.7635 4560 Parking Control Officer Hourly 01 $30.5340 $32.0607 $33.6637 $35.3469 $37.1142 $39.5469 Reflects a general increase of 5% and equity adjustments Page 1 of 2 EXHIBIT B

ITEM NO. 12.

Town of Los Gatos TEA Classifications
Salary Schedule for Fiscal Year 2024/25
Effective July 7, 2024*
Class Code Classification Title Rate Type Range TE1 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 4440 Permit Technician Hourly 09 $39.6415 $41.6236 $43.7048 $45.8900 $48.1845 $51.1707 4425 Planning Technician Hourly 11 $41.0078 $43.0582 $45.2111 $47.4717 $49.8453 $52.9146 4550 Police Records Specialist Hourly 05 $34.2328 $35.9444 $37.7416 $39.6287 $41.6101 $44.2676 4555 Police Records Specialist Lead Hourly 31 $42.2994 $44.4144 $46.6351 $48.9669 $51.4152 $54.5630 NEW Project Analyst I Hourly $44.4160 $46.6368 $48.9686 $51.4170 $53.9879 $57.2643 NEW Project Analyst II Hourly $49.3511 $51.8187 $54.4096 $57.1301 $59.9866 $63.5629 4630 Public Works Inspector Hourly 18 $48.0900 $50.4945 $53.0192 $55.6702 $58.4537 $61.9534 4450 Senior Building Inspector Hourly 27 $60.4380 $63.4599 $66.6329 $69.9645 $73.4627 $77.7128 4525 Senior Communication Dispatcher Hourly 29 $54.8940 $57.6387 $60.5206 $63.5466 $66.7239 $70.6371 4831 Senior Library Page Hourly 02 $22.6995 $23.8345 $25.0262 $26.2775 $27.5914 $29.5480 4565 Senior Parking Control Officer Hourly 11 $39.3225 $41.2886 $43.3530 $45.5207 $47.7967 $50.7635 4405 Senior Planner Hourly 28 $63.1226 $66.2787 $69.5926 $73.0722 $76.7258 $81.1391 4552 Senior Police Records Specialist Hourly 30 $38.4922 $40.4168 $42.4376 $44.5595 $46.7875 $49.7039 4610 Senior Public Works Inspector Hourly 26 $57.9810 $60.8801 $63.9241 $67.1203 $70.4763 $74.5771 4415 Senior Transportation Planner Hourly 32 $63.1226 $66.2787 $69.5926 $73.0722 $76.7258 $81.1391 4662 Sr. Engineering Technician Hourly 24 $51.7125 $54.2981 $57.0130 $59.8637 $62.8569 $66.5767 Reflects General Increase of 5% and negotiated equity adjustments. * *Except for Project Analyst I/11 which were added on December 17, 2024 Reflects a general increase of 5% and equity adjustments Page 2 of 2 Page 203 ITEM NO. 12.

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

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/17/2024
ITEM NO: 13
DATE: December 10, 2024
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Receive the Monthly Financial and Investment Report for October 2024 RECOMMENDATION:

Receive the monthly Financial and Investment Report for October 2024.

BACKGROUND:

California Government Code Section 41004 requires that the Town Treasurer submit to the Town Clerk and the legislative body a written report and accounting of all receipts, disbursements, and fund balances. The Finance Director assumes the Town Treasurer role.

Attachment 1 contains the October 2024 monthly Financial and Investment Report which fulfills this requirement.

The October 2024 Monthly Financial and Investment Report was received by the Finance Commission at its December 9, 2024, regular meeting.

DISCUSSION:

The October 2024 Monthly Financial and Investment Report includes a Fund Balance Schedule, representing estimated funding available for all funds at the beginning of the fiscal year and at the end of the respective month.

As operations fluctuate month to month, there are differences between balances in one month to balances in another. Such differences may be significant due to the type of activity in those months and the timing of any estimates used in the presentation based on the information available. This is demonstrated by the attached October 31, 2024, fund balance report.

ITEM NO. 13.

PAGE 2 OF 3
SUBJECT: Monthly Financial and Investment Report for October 2024 DATE: December 10, 2024
In the case that the differences are extraordinary and unanticipated, we will ensure we present more information to explain the differences.

The October 31, 2024, estimated fund balances differ from the September 30, 2024 estimated fund balances due to the normal day-to-day activity where revenue and expenditure activity in one month have a larger shift in one month from the other.

Please note that the amount in the Fund Schedule differs from the Portfolio Allocation and Treasurer’s Cash Fund Balances Summary schedule because assets and liabilities are components of the Fund Balance.

As illustrated in the summary below, Total Cash is adjusted by adding Total Assets less the amount of Total Liabilities to arrive at the Ending Fund Balance – which represents the actual amount of funds available.

As of October 31, 2024, the Town’s financial position (Assets $86.23M, Liabilities $29.16M, and Fund Equity $57.07M) remains strong and the Town has sufficient funds to meet the cash demands for the next six months.

As of October 31, 2024, the Town’s weighted portfolio yield for investments under management was 4.45% which was 7 basis points below the Local Agency Investment Fund (LAIF) yield of 4.52% for the same reporting period. As of October 31, 2024, the LAIF portfolio’s weighted average maturity (WAM) is 257 days versus the Town’s longer WAM of 701 days. The longer WAM for Town assets under management reflects the Town’s strategy to take advantage of higher yields associated with longer maturities balanced with shorter-term yields available on investments held with the State’s LAIF. The Town’s weighted average rate of return on investments under management of 4.45% at the close of October remained flat when compared to the September 30, 2024, investment report.

Since October 2023, LAIF yields have climbed from 367 basis points (3.67%) to 452 basis points (4.52%) through the end of October 2024. The State LAIF pool typically lags the market when current market yields are either increasing or decreasing.

After a rate change back in July of 2023, the Federal Open Market Committee (FOMC) did not change rates again until their September 18, 2024, meeting when they approved a 1/2

ITEM NO. 13.

PAGE 3 OF 3
SUBJECT: Monthly Financial and Investment Report for October 2024 DATE: December 10, 2024
percentage basis point decrease from 5.5% to 5.0%. Furthermore, on November 7, 2024, the Federal Reserve voted to approve an additional 1/4 basis point decrease from 5.0% to 4.75%.

These changes support the Federal Open Market Committee’s goal to support maximum employment and bring year-to-year inflation to its targeted level of 2%.

The September jobs report was unexpectedly strong, with the economy adding 254,000 jobs, a lot higher than market expectations for 150,000. There were also 72,000 of collective upward revisions to prior months. The unemployment rate edged down from 4.2% to 4.1%, even with the participation rate remaining steady over the period. Average hourly earnings edged up slightly to 4.0%.

The Town's investments are in compliance with the Town's Investment Policy dated February 21, 2023, and are also in compliance with the requirements of Section 53600 at seq. of the California State Code. Based on the information available, the Town has sufficient funds to meet the cash demands for the next six months.

CONCLUSION:

Receive the Monthly Financial and Investment Report for October 2024.

Attachments:

1. Financial and Investment Report (October 2024)

ITEM NO. 13.

Weighted Average YTM Portfolio Yield on Investments
under Management 4.45%
Weighted Average Maturity (days) 701
This Month Last Month One year ago
Portfolio Allocation & Treasurer's Cash Balances $68,118,481 $67,158,455 $64,959,590 Managed Investments $50,251,714
Local Agency Investment Fund $11,874,049
Reconciled Demand Deposit Balances $5,992,718
Portfolio Allocation & Treasurer's Cash Balances $68,118,481 Benchmarks/ References:

Town's Average Yield 4.45% 4.45% 4.12%
LAIF Yield for month 4.52% 4.58% 3.67%
3 mo. Treasury 4.54% 4.62% 5.48%
6 mo. Treasury 4.46% 4.40% 5.57%
2 yr. Treasury 4.17% 3.64% 5.09%
5 yr. Treasury (most recent) 4.16% 3.56% 4.86%
10 Yr. Treasury 4.28% 3.78% 4.93%
Town of Los Gatos
Summary Investment Information
October 31, 2024
0 - 1 year
32%
1 - 2 years
20%
2 - 3 years
22%
3 - 5 years
26%
Portfolio Maturity Profile
Compliance: The Town's investments are in compliance with the Town's investment policy dated February 21, 2023, and also in compliance with the requirements of Section 53600 at seq. of the California State Code. Based on the information available, the Town has sufficient funds to meet the cash demands for the next six months. 1 ATTACHMENT 1 Page 207
ITEM NO. 13.

Month YTD
Cash & Investment Balances - Beginning of Month/Period $ 67,158,455.08 $ 81,368,409.88 Receipts 6,061,263.57 21,313,432.99
Disbursements (5,101,237.37) (34,563,361.59)
Cash & Investment Balances - End of Month/Period $68,118,481.28 $68,118,481.28 Portfolio Allocation Amount % of Portfolio
Max. % or $ Allowed
per State Law or Policy
BNY MM $352,679.92 0.57% 20% of Town Portfolio
US Treasury Notes $20,054,713.77 32.28% No Max. on US Treasuries Government Agency Debenture Notes $15,904,019.60 25.60% No Max. on Non-Mortgage Backed Corporate Medium Term Bonds $13,940,300.50 22.44% 30% of Town Portfolio Local Agency Investment Fund $11,874,049.16 19.11% $75 M per State Law Subtotal - Investments 62,125,762.95 100.00%
Reconciled Demand Deposit Balances 5,992,718.33
Total Portfolio Allocation & Treasurer's Cash Balances $68,118,481.28

0.0401

0.0388
Town of Los Gatos
Portfolio Allocation & Treasurer's Cash Balances
October 31, 2024
BNY MM

0.57%
US Treasury Notes

32.28%
Government Agency Debenture
Notes

25.60%
Corporate Medium Term Bonds

22.44%
Local Agency Investment Fund

19.11%
Portfolio Investment Allocation
$65.0 M $68.1 M
$0.0 M
$10.0 M
$20.0 M
$30.0 M
$40.0 M
$50.0 M
$60.0 M
$70.0 M
$80.0 M
$90.0 M
Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Treasurer's Fund Balances
2

ITEM NO. 13.

October 2024 October 2024 October 2024
Beginning Deposits Interest/ Ending
Balance Realized Gain/Adj. Earnings Withdrawals Balance Non-Treasury Funds:

Cert. of Participation 2002 Ser A Reserve Fund $ 691,959.67 $ - $ 2,672.18 $ - $ 694,631.85 Note 1 Cert. of Participation 2010 Ser Lease Payment Fund 968.97 - 3.98 - 972.95 Note 2 Cert. of Participation 2002 Ser A Lease Payment Fund 17,450.99 - 4.60 - 17,455.59 Note 1 Cert. of Participation 2010 Ser Reserve Fund 1,407,041.81 - 5,795.32 - 1,412,837.13 Note 2 Total Restricted Funds: $ 2,117,421.44 $ - $ 8,476.08 $ - $ 2,125,897.52 CEPPT IRS Section 115 Trust 2,328,305.36 - (60,736.52) - $ 2,267,568.84 Note 3 Grand Total COP's and CEPPT Trust $ 4,445,726.80 $ - $ (52,260.44) $ - $ 4,393,466.36 These accounts are not part of the Treasurer's fund balances reported elsewhere in this report, as they are for separate and distinct entities.

Note 1: The three original funds for the Certificates of Participation 2002 Series A consist of construction funds which will be expended over the next few years, reserve funds which will guarantee the payment of lease payments, and a third fund for the disbursement of lease payments and initial delivery costs.

Note 2: The 2010 COP Funds are all for the Library construction, reserves to guarantee lease payments, and a lease payment fund for the life of the COP issue. The COI fund was closed in September 2010.

Note 3: The CEPPT IRS Section 115 Trust was established as an irrevocable trust dedicated to accumulate resources to fund the Town's unfunded liabilities related to pension and other post employment benefits.

Town of Los Gatos
Non-Treasury Restricted Fund Balances
October 31, 2024
3

ITEM NO. 13.

July 2024 $ 247,221.75
August 2024 $ 212,684.25
September 2024 $ 265,151.31
October 2024 $ 234,237.63
November 2024 $ -
December 2024 $ -
January 2025 $ -
February 2025 $ -
March 2025 $ -
April 2025 $ -
May 2025 $ -
June 2025 $ -
$ 959,294.94
Town of Los Gatos
Statement of Interest Earned
October 31, 2024
4

ITEM NO. 13.

Original Issue Market Value Maturity Yield to Interest Interest Interest Days Deposit Par Original (Discount) Market Above (Under) Purchased Date or Maturity Received Earned Earned to Institution CUSIP # Security Coupon Date Value Cost Premium Value Cost Interest Call Date or Call to Date Prior Yrs. Current FY Maturity Apple 037833DB3 Corporate Bond 2.90% 12/20/2022 1,300,000.00 1,228,591.00 (71,409.00) 1,251,302.00 22,711.00 6/21/2027 4.19% $ 65,137.22 $ 81,871.88 $ 18,047.03 963 Home Depot 437076BM3 Corporate Bond 3.00% 8/4/2022 1,000,000.00 991,960.00 (8,040.00) 980,120.00 (11,840.00) 1/1/2026 3.04% $ 64,750.00 $ 61,696.52 $ 10,903.26 427 US Treasury 912828ZW3 US Treasury Note 0.25% 8/9/2022 350,000.00 322,096.88 (27,903.12) 340,595.50 18,498.62 6/30/2025 3.16% $ 1,654.89 $ 19,915.08 $ 3,544.94 242 FFCB 3133EN5V8 Gov. Agency Debenture 4.13% 1/17/2023 236,000.00 239,174.20 3,174.20 235,910.32 (3,263.88) 1/11/2027 3.76% $ 14,440.25 $ 12,979.52 $ 3,012.23 802 US Treasury 91282CBT7 US Treasury Note 0.75% 9/30/2022 800,000.00 712,565.18 (87,434.82) 762,000.00 49,434.82 3/31/2026 4.14% $ 12,000.00 $ 54,221.52 $ 10,437.01 516 FFCB 3133ENP95 Gov. Agency Debenture 4.25% 9/30/2022 900,000.00 900,939.60 939.60 899,253.00 (1,686.60) 9/30/2025 4.14% $ 76,500.00 $ 66,415.88 $ 12,784.28 334 JP Morgan Chase 46625HRS1 Corporate Bond 3.20% 9/23/2022 500,000.00 474,660.00 (25,340.00) 489,860.00 15,200.00 3/15/2026 4.70% $ 27,644.44 $ 41,217.45 $ 7,847.90 500 FHLB 3135G05X7 Gov. Agency Debenture 0.38% 6/10/2022 1,200,000.00 1,102,952.40 (97,047.60) 1,161,816.00 58,863.60 8/25/2025 3.04% $ 9,937.50 $ 71,445.55 $ 11,701.47 298 US Treasury 912828ZL7 US Treasury Note 0.38% 4/12/2022 1,700,000.00 1,583,927.57 (116,072.43) 1,666,272.00 82,344.43 4/30/2025 2.72% $ 16,254.49 $ 98,544.63 $ 14,964.18 181 FHLB 3130AQF65 Gov. Agency Debenture 1.25% 11/30/2022 1,300,000.00 1,160,559.40 (139,440.60) 1,221,545.00 60,985.60 12/21/2026 4.15% $ 25,322.92 $ 80,116.59 $ 17,049.03 781 FHLB 3130APJH9 Gov. Agency Debenture 1.00% 1/17/2023 1,000,000.00 907,010.00 (92,990.00) 955,420.00 48,410.00 10/28/2026 4.17% $ 18,354.17 $ 50,234.10 $ 11,658.10 727 FFCB 3133EN5N6 Gov. Agency Debenture 4.00% 2/8/2023 1,700,000.00 1,706,732.00 6,732.00 1,690,310.00 (16,422.00) 1/6/2028 3.91% $ 95,955.56 $ 92,733.76 $ 22,453.25 1162 Freddie Mac 3137EAEX3 Gov. Agency Debenture 0.38% 5/1/2023 750,000.00 689,032.50 (60,967.50) 724,095.00 35,062.50 9/23/2025 3.97% $ 3,921.87 $ 32,931.11 $ 9,508.28 327 American Honda 02665WED9 Corporate Bond 4.70% 5/11/2023 600,000.00 608,856.00 8,856.00 601,866.00 (6,990.00) 1/12/2028 4.34% $ 32,978.33 $ 29,982.05 $ 8,864.88 1168 US Treasury 91282CEF4 US Treasury Note 2.50% 6/9/2023 1,500,000.00 1,416,626.12 (83,373.88) 1,444,515.00 27,888.88 3/31/2027 4.09% $ 49,077.87 $ 62,956.31 $ 20,009.37 881 US Treasury 91282CGA3 US Treasury Note 4.00% 6/20/2023 2,100,000.00 2,080,558.59 (19,441.41) 2,093,448.00 12,889.41 12/15/2025 4.40% $ 82,852.46 $ 94,573.28 $ 30,937.54 410 Colgate-Palmolive 194162AR4 Corporate Bond 4.60% 7/14/2023 500,000.00 504,655.00 4,655.00 507,255.00 2,600.00 2/1/2028 4.37% $ 26,002.79 $ 21,195.52 $ 7,406.39 1188 FannieMae 3135G06G3 Gov. Agency Debenture 0.50% 7/14/2023 500,000.00 455,157.00 (44,843.00) 481,300.00 26,143.00 11/7/2025 4.63% $ 2,034.72 $ 21,047.01 $ 7,354.50 372 FFCB 3133EPQC2 Gov. Agency Debenture 4.63% 7/17/2023 500,000.00 501,957.50 1,957.50 503,595.00 1,637.50 7/17/2026 4.48% $ 23,125.00 $ 21,487.97 $ 7,573.13 624 FFCB 3133EPBM6 Gov. Agency Debenture 4.13% 7/14/2023 600,000.00 596,220.00 (3,780.00) 599,076.00 2,856.00 8/23/2027 4.29% $ 27,431.25 $ 24,754.94 $ 8,650.16 1026 PNC Bank 69353RFJ2 Corporate Bond 3.25% 7/25/2023 1,000,000.00 921,490.00 (78,510.00) 955,920.00 34,430.00 12/23/2027 5.23% $ 32,229.17 $ 46,970.90 $ 16,942.58 1148 US Treasury 91282CFU0 US Treasury Note 4.13% 7/31/2023 1,300,000.00 1,290,660.60 (9,339.40) 1,299,545.00 8,884.40 10/31/2027 4.31% $ 67,031.25 $ 51,232.08 $ 18,810.59 1095 Toyota Motor Credit 89236TKL8 Corporate Bond 5.45% 8/25/2023 1,600,000.00 1,617,168.00 17,168.00 1,643,104.00 25,936.00 11/10/2027 5.16% $ 61,766.67 $ 70,599.88 $ 28,012.21 1105 US Treasury 912810FE3 US Treasury Note 5.50% 10/3/2023 1,200,000.00 1,238,207.14 38,207.14 1,260,192.00 21,984.86 8/15/2028 4.76% $ 57,211.96 $ 43,179.27 $ 19,597.97 1384 Pepsico Inc 713448DF2 Corporate Bond 2.85% 10/16/2023 1,000,000.00 947,570.00 (52,430.00) 980,170.00 32,600.00 11/24/2025 5.24% $ 24,383.33 $ 37,712.66 $ 17,979.29 389 FFCB 3133EPUW3 Gov. Agency Debenture 4.75% 10/13/2023 1,000,000.00 994,338.00 (5,662.00) 1,009,360.00 15,022.00 9/1/2026 4.96% $ 41,958.33 $ 35,367.82 $ 16,667.60 670 Freddie Mac 3137EAEP0 Gov. Agency Debenture 1.50% 10/13/2023 1,000,000.00 951,540.00 (48,460.00) 991,620.00 40,080.00 2/12/2025 5.32% $ 12,458.33 $ 36,644.18 $ 17,269.10 104 US Treasury 91282CEW7 US Treasury Note 3.25% 10/16/2023 1,000,000.00 950,039.06 (49,960.94) 977,930.00 27,890.94 6/30/2027 4.73% $ 22,961.96 $ 32,499.52 $ 15,493.96 972 US Treasury 91282CEN7 US Treasury Note 2.75% 10/31/2023 1,300,000.00 1,214,336.39 (85,663.61) 1,257,503.00 43,166.61 4/30/2027 4.82% $ 35,750.00 $ 40,101.59 $ 20,298.34 911 US Treasury 912828YV6 US Treasury Note 1.50% 11/15/2023 700,000.00 673,667.97 (26,332.03) 698,236.00 24,568.03 11/30/2024 5.26% $ 5,680.33 $ 22,316.65 $ 12,039.25 30 US Treasury 91282CAB7 US Treasury Note 0.25% 11/15/2023 675,000.00 623,900.39 (51,099.61) 654,702.75 30,802.36 7/31/2025 4.92% $ 1,196.84 $ 19,725.12 $ 10,641.18 273 US Treasury 91282CGU9 US Treasury Note 3.88% 11/30/2023 1,000,000.00 983,515.62 (16,484.38) 997,380.00 13,864.38 3/31/2025 5.17% $ 32,291.67 $ 29,822.81 $ 17,221.63 151 US Treasury 91282CCH2 US Treasury Note 1.25% 12/21/2023 900,000.00 798,647.55 (101,352.45) 811,584.00 12,936.45 6/30/2028 3.99% $ 5,930.71 $ 17,690.14 $ 11,332.75 1338 FNMA 3135G0Q22 Gov. Agency Debenture 1.88% 12/21/2023 900,000.00 845,676.00 (54,324.00) 862,713.00 17,037.00 9/24/2026 4.22% $ 12,796.88 $ 19,224.14 $ 12,315.47 693 US Treasury 91282CFB2 US Treasury Note 2.75% 1/2/2024 1,000,000.00 960,354.91 (39,645.09) 964,100.00 3,745.09 7/31/2027 3.95% $ 15,917.12 $ 19,025.75 $ 13,000.93 1003 US Treasury 91282CHE4 US Treasury Note 3.63% 1/17/2024 1,800,000.00 1,775,185.72 (24,814.28) 1,768,356.00 (6,829.72) 5/31/2028 3.97% $ 24,067.63 $ 32,061.96 $ 23,900.73 1308 JP Morgan Chase 46647PDG8 Corporate Bond 4.85% 2/1/2024 1,400,000.00 1,396,528.00 (3,472.00) 1,401,638.00 5,110.00 7/25/2027 4.93% $ 32,825.10 $ 28,319.94 $ 23,222.35 997 US Bancorp 91159HJF8 Corporate Bond 4.55% 2/5/2024 1,000,000.00 989,200.00 (10,800.00) 993,890.00 4,690.00 7/22/2027 4.89% $ 21,097.67 $ 19,440.46 $ 16,377.92 994 Treasury 91282CHB0 US Treasury Note 3.63% 2/23/2024 1,175,000.00 1,151,962.92 (23,037.08) 1,164,530.75 12,567.83 5/15/2026 4.56% $ 9,595.30 $ 18,568.45 $ 17,843.12 561 FHLB 3130AXB31 Gov. Agency Debenture 4.88% 2/27/2024 1,000,000.00 1,003,060.00 3,060.00 1,009,970.00 6,910.00 3/13/2026 4.72% $ 27,354.17 $ 16,052.33 $ 15,922.87 498 FFCB 3133EP5U5 Gov. Agency Debenture 4.13% 3/28/2024 1,700,000.00 1,687,981.00 (12,019.00) 1,693,727.00 5,746.00 3/20/2029 4.28% $ 33,504.17 $ 18,681.03 $ 24,444.33 1601 US Treasury 9128285M8 US Treasury Note 3.13% 4/30/2024 1,200,000.00 1,123,832.14 (76,167.86) 1,153,692.00 29,859.86 11/15/2028 4.69% $ 1,545.34 $ 9,066.06 $ 18,280.75 1476 Cisco Systems 17275RBR2 Corporate Bond 4.85% 5/15/2024 1,000,000.00 999,130.00 (870.00) 1,012,400.00 13,270.00 1/26/2029 4.87% $ 13,606.94 $ 6,135.64 $ 16,406.16 1548 Home Depot 437076CW0 Corporate Bond 4.90% 5/17/2024 1,000,000.00 1,001,790.00 1,790.00 1,013,760.00 11,970.00 4/15/2029 4.86% $ 20,144.44 $ 5,862.95 $ 16,389.60 1627 Treasury 91282CJR3 US Treasury Note 3.75% 5/31/2024 1,200,000.00 1,154,629.02 (45,370.98) 1,180,740.00 26,110.98 12/31/2028 4.68% $ 3,708.79 $ 4,511.24 $ 18,496.10 1522 American Honda 02665WEY3 Corporate Bond 4.95% 6/27/2024 1,000,000.00 995,640.00 (4,360.00) 1,003,960.00 8,320.00 1/9/2026 5.25% $ 1,787.50 $ 430.16 $ 17,636.76 435 FHLB 3130B1BT3 Gov. Agency Debenture 4.88% 7/2/2024 1,150,000.00 1,150,966.00 966.00 1,162,408.50 11,442.50 8,720.83 6/12/2026 4.82% $ (8,720.83) $ - $ 18,420.47 589 Citibank 17325FBK3 Corporate Bond 4.84% 8/15/2024 1,250,000.00 1,263,062.50 13,062.50 1,254,175.00 (8,887.50) 1,511.88 7/6/2029 4.60% $ (1,511.88) $ - $ 12,194.57 1709 FNMA 3135G05Y5 Gov. Agency Debenture 0.75% 9/10/2024 1,100,000.00 1,010,724.00 (89,276.00) 998,085.00 (12,639.00) 10/8/2027 3.56% $ 641.67 $ - $ 5,207.13 1072 Subtotal $ 51,586,000.00 $ 49,899,033.87 $ (1,686,966.13) $ 50,784,945.82 $ 885,911.95 $ 10,232.71 $ 1,284,586.29 $ 1,721,563.43 $ 737,072.63 BNY MM Money Market 352,679.92 352,679.92 0.00 0.00% 1
LAIF State Investment Pool 11,874,049.16 11,898,522.57 24,473.41 4.52% 216,309.18 1 62,125,762.95 $63,036,148.31 $910,385.36 $10,232.71 $ 1,284,586.29 $ 1,721,563.43 $ 953,381.81 Matured Assets
FNMA 3135G0V75 Gov. Agency Debenture 1.75% 10/17/2019 1,100,000.00 1,105,833.30 5,833.30 7/2/2024 1.63% $ 90,956.25 $ 84,780.33 $ 98.70 Honeywell Int'l. 438516BW5 Corporate Bond 2.30% 11/20/2019 1,000,000.00 1,014,660.00 14,660.00 8/15/2024 1.64% $ 108,483.33 $ 91,844.87 $ 2,508.83 FFCB 3133EKQA7 Gov. Agency Debenture 2.08% 10/21/2019 1,000,000.00 1,019,780.00 19,780.00 9/10/2024 1.66% $ 101,631.11 $ 78,691.92 $ 3,305.61 Total Investments "Matured" $ 5,913.13
Total Interest FY 24_25 Matured and Current $ 959,294.94 Maturity Profile Amount Percent
0-1 year $ 20,058,302.01 32%
1-2 years $12,306,071.19 20%
2-3 years $13,360,023.68 22%
3-5 years $ 16,401,366.07 26%
$62,125,762.95 100%
Town of Los Gatos
Investment Schedule
October 31, 2024
5

ITEM NO. 13.

Date Cusip/Id Description Transaction Type Trade Date Settlement Date Par Coupon Maturity Date Price Principal Interest Transaction
Total
10/1/2024 437076BM3
HOME DEPOT INC 3% 01APR2026 (CALLABLE
01JAN26) BOND INTEREST 10/1/2024 10/1/2024 1,000,000.00 3.00% 4/1/2026 - - 15,000.00 15,000.00 10/2/2024 Cash-USD Cash-USD

SHORT TERM INVESTMENT
FUND INCOME 10/2/2024 10/2/2024 605.28 0.00% 100.00 - - 605.28 10/8/2024 3135G05Y5 FANNIE MAE 0.75% 08OCT2027 BOND INTEREST 10/8/2024 10/8/2024 1,100,000.00 0.75% 10/8/2027 - - 4,125.00 4,125.00 10/15/2024 437076CW0
HOME DEPOT INC 4.9% 15APR2029
(CALLABLE 15MAR29) BOND INTEREST 10/15/2024 10/15/2024 1,000,000.00 4.90% 4/15/2029 - - 24,500.00 24,500.00 10/28/2024 3130APJH9
FEDERAL HOME LOAN BANK 1.5% 28OCT2026
(CALLABLE 28JAN25) #0006 BOND INTEREST 10/28/2024 10/28/2024 1,000,000.00 0.00% 10/28/2026 - - 6,250.00 6,250.00 10/31/2024 91282CFU0 USA TREASURY 4.125% 31OCT2027 BOND INTEREST 10/31/2024 10/31/2024 1,300,000.00 4.13% 10/31/2027 - - 26,812.50 26,812.50 10/31/2024 912828ZL7 USA TREASURY 0.375% 30APR2025 BOND INTEREST 10/31/2024 10/31/2024 1,700,000.00 0.38% 4/30/2025 - - 3,187.50 3,187.50 10/31/2024 91282CEN7 USA TREASURY 2.75% 30APR2027 BOND INTEREST 10/31/2024 10/31/2024 1,300,000.00 2.75% 4/30/2027 - - 17,875.00 17,875.00 Town of Los Gatos
Investment Transaction Detail
October 31, 2024
6

ITEM NO. 13.

Security Description Maturity Date Par/Shares S&P Rating Moody Rating Insight ESG Rating Environment Social Governance AMERICAN HONDA FINANCE 4.95% 09JAN2026 1/9/2026 $ 1,000,000 A- A3 3 3 3 3 PEPSICO INC 2.85% 24FEB2026 (CALLABLE 24NOV25) 2/24/2026 $ 1,000,000 A+ A1 2 2 2 3 HOME DEPOT INC. 3% 01APR2026 (CALLABLE 01JAN2026) 46113 $ 1,000,000 A A2 3 3 2 3 JPMORGAN CHASE & CO 3.2 15JUN2026 (CALLABLE 15MAR26) 46188 $ 500,000 A A1 3 1 3 4 APPLE INC. 2.9% 12SEP2027 (CALLABLE 12JUN27) 9/12/2027 $ 1,300,000 AA- Aaa 5 1 4 5 TOYOTA MOTOR CREDIT CORP 5.45% 10NOV2027 11/10/2027 $ 1,600,000 A+ A1 3 2 3 4 AMERICAN HONDA FINANCE 4.7% 12JAN2028 1/12/2028 $ 600,000 A- A3 3 3 3 3 PNC BANK NA 3.25% 22JAN2028 (CALLABLE 01 FEB28) 1/22/2028 $ 1,000,000 A A2 3 2 3 3 COLGATE-PALMOLIVE CO 4.6% 01MAR2028 (CALLABLE 01FEB28) 3/1/2028 $ 500,000 A+ Aa3 3 2 3 3 US BANCORP 4.548% 22JUL2028 (CALLABLE 22JUL27) 7/222028 $ 1,000,000 A A3 4 3 4 4 JPMORGAN CHASE & CO 4.851% 25JUL2028 (CALLABLE 25JUL28) 7/25/2028 $ 1,400,000 A A1 3 1 3 4 CISCO INC. 4.85% 26FEB2029 (CALLABLE 26JAN2029) 2/26/2029 $ 1,000,000 AA- A1 2 1 4 3 HOME DEPOT INC. 4.9% 15APR2029 (CALLABLE 15MAR2029) 47223 $ 1,000,000 A A2 3 3 2 3 CITIBANK 4.838% 06AUG2029 (CALLABLE 06JUL2029) 8/6/2029 $ 1,250,000 A+ Aa3 3 1 3 4 Total/Average $ 14,150,000 3.1 2.0 3.0 3.5
*ESG ratings are from 1 to 5, with 1 as the highest rating and 5 as the lowest. All ratings are weighted by industry rankings, based on the importance of the category within the individual industry.

Town of Los Gatos
Insight ESG Ratings as of October 31, 2024
7

ITEM NO. 13.

Fund Schedule
Fund
Number Fund Description
Current
Revenue
Current
Expenditure
Transfer
In
Transfer
Out

GENERAL FUND
Non-Spendable:

Loans Receivable 159,000 - - - - - 159,000
Restricted Fund Balances:

Pension 2,188,659 - - - - - 2,188,659
Land Held for Resale 344,338 - - - - - 344,338
Committed Fund Balances:

Budget Stabilization 6,736,781 - - - - - 6,736,781
Catastrophic 6,736,781 - - - - - 6,736,781
Pension/OPEB 300,000 - - - - - 300,000
Measure G District Sales Tax 590,581 - - - - - 590,581
Assigned Fund Balances:

Open Space 410,000 - - - - - 410,000
Sustainability 140,553 - - - - - 140,553
Capital/Special Projects 8,651,059 - - - - - 8,651,059
Carryover Encumbrances 85,861 - - - - - 85,861
Compensated Absences 1,555,478 - - - - - 1,555,478
ERAF Risk Reserve 1,430,054 - - - - - 1,430,054
Market Fluctuations 1,712,246 - - - - - 1,712,246
Council Priorities - Economic Recovery 20,684 - - - - - 20,684 Unassigned Fund Balances:
111 Other Unassigned Fund Balance Reserve (Pre YE distribution) - (3,130,130) 3,301,794 (3,277,608) - - (3,105,944) General Fund Total 31,062,075 (3,130,130) 3,301,794 (3,277,608) - - 27,956,131 * Interfund transfers and Council Priorities/Economic Recovery funding allocation to be performed as part of the fiscal year end closing entries.

October 2024
Prior Year
Carryforward
7/1/2024*
Increase/
(Decrease)
July - Sept
Estimated Fund
Balance
10/31/2024*
8

ITEM NO. 13.

Fund Schedule
Fund
Number Fund Description
Current
Revenue
Current
Expenditure
Transfer
In
Transfer
Out

SPECIAL REVENUE
211/212 CDBG 166,653 - - - - - 166,653
222 Urban Runoff (NPDES) 754,134 (24,268) 13,641 (16,850) - - 726,657 231-236 Landscape & Lighting Districts 182,625 (1,839) - (3,337) - - 177,449 251 Los Gatos Theatre 171,035 116,144 9,922 (7,889) - - 289,212 711-716 Library Trusts 556,849 54,291 - (4,075) - - 607,065 Special Revenue Total 1,831,296 144,328 23,563 (32,151) - - 1,967,036

CAPITAL PROJECTS
411 GFAR - General Fund Appropriated Reserve 20,253,300 (35,109) 82,818 (65,329) - - 20,235,680 412 Community Center Development 866,281 - - - - - 866,281 421 Grant Funded Projects (2,563,503) (281,263) 1,180,024 (761,384) - - (2,426,126) 461-463 Storm Basin Projects 3,531,248 13,850 - - - - 3,545,098 471 Traffic Mitigation Projects 509,491 - - - - - 509,491 472 Utility Undergrounding Projects 3,584,251 3,579 - - - - 3,587,830 481 Gas Tax Projects 1,928,167 252,053 166,364 - - - 2,346,584 Capital Projects Total 28,109,235 (46,890) 1,429,206 (826,713) - - 28,664,838

INTERNAL SERVICE FUNDS
611 Town General Liability 177,876 (1,326,978) - - - - (1,149,102) 612 Workers Compensation 586,246 (559,992) - (10,844) - - 15,410 621 Information Technology 2,523,347 (372,010) 6,088 (20,997) - - 2,136,428 631 Vehicle & Equipment Replacement 3,286,552 (182,744) 975 (9,584) - - 3,095,199 633 Facility Maintenance 960,526 (128,645) 24,836 (130,760) - - 725,957 Internal Service Funds Total 7,534,547 (2,570,369) 31,899 (172,185) - - 4,823,892 Trust/Agency
942 RDA Successor Agency (4,632,040) (1,713,496) - (125) - - (6,345,661) Trust/Agency Fund Total (4,632,040) (1,713,496) - (125) - - (6,345,661) Total Town 63,905,113 (7,316,557) 4,786,462 (4,308,782) - - 57,066,236 * Interfund transfers and Council Priorities/Economic Recovery funding allocation to be performed as part of the fiscal year end closing entries.

Deposit Accounts of Interest:
111-23541 General Plan Update deposit account balance $426,308.54 111-23521 BMP Housing deposit account balance $3,923,342.78 Prior Year
Carryforward
7/1/2024*
Increase/
(Decrease)
July - Sept
October 2024
Estimated Fund
Balance
10/31/2024*
9

ITEM NO. 13.

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

TOWN OF LOS GATOS

COUNCIL AGENDA REPORT
MEETING DATE: 12/17/2024
ITEM NO: 14
DATE: December 11, 2024
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Receive Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2024, and Adopt a Resolution Confirming June 30, 2024 Fund Balances in Accordance With Fiscal Year 2023/24 Final Audit and Town Council General Fund Reserve Policy
RECOMMENDATION:

Town staff recommend the Town Council
a. Receive the Annual Comprehensive Financial Report (ACFR) for the Fiscal Year Ended June 30, 2024 as recommended by the Finance Commission (Attachment 1), and b. Adopt a Resolution Confirming June 30, 2022 Fund Balances in Accordance with Fiscal Year 2023/24 Final Audit and Town Council General Fund Reserve Policy. (Attachment 2)
BACKGROUND:

The Town contracts with an independent certified public accountant to examine the books, records, inventories, and reports of all officers and employees who receive, handle, or disburse public funds each fiscal year (FY). The FY 2023/24 audit was performed by Chavan and Associates, LLP an experienced firm specializing in audit services for California public agencies.

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

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

ITEM NO. 14.

PAGE 2 OF 5
SUBJECT: Receive FY 2023/24 Annual Comprehensive Financial Report DATE: December 10, 2024
With the passage of Measure A, the Finance Commission has been tasked with several mandated duties as described in the provisions of the adopted Ordinance. Section 2.50.225. – Duties states that:
(a) The Finance Commission shall:
(3) Review the Town Manager's draft Annual Comprehensive Financial Report (ACFR) for the preceding fiscal year and provide written comments and recommendations to the Town Manager.
(A) The Town Manager shall respond in writing to the Finance Commission providing his or her rationale for accepting or rejecting each of the Finance Commission's comments and recommendations prior to presenting the ACFR to the Town Council for formal consideration.
(B) The Town Manager may not present the ACFR to the Town Council for formal consideration unless or until he or she considers and responds in writing to all of the Finance Commission's comments and recommendations.

DISCUSSION:

On November 25, 2024, the Draft FY 2023/24 Annual Comprehensive Financial Report (ACFR) was posted to the Town’s website, and a link was provided to the Finance Commission. Finance Commissioners were given the opportunity to submit written questions to staff. Questions and comments received from Commissioners by 11:00 a.m. on December 2nd were compiled into Desk Items for the December 2nd Special Finance Commission meeting.

At the Finance Commission meetings on December 2, 2024 and December 9, 2024, the Town’s independent auditor and staff addressed the Commissioners’ questions and comments, which are included in Attachment 4.

The Finance Commission concluded its review of the draft ACFR and unanimously recommended that the Town Council receive the Annual Comprehensive Financial Report (ACFR) for the Fiscal Year Ended June 30, 2024 with recommended modifications (see Attachment 3 for redlined version).

Independent Auditor’s Report
The auditor has given the Town’s financial statements a “clean” audit opinion for the year ended June 30, 2024 giving reasonable assurance that the financial statements are “free of material misstatement” (Attachment 1).

Purpose of the Budget and Annual Comprehensive Financial Report Our Town’s budget is more than just numbers—it is a plan that ensures we use our resources efficiently and effectively, prioritizing our most important goals. Through this budget, the Town

ITEM NO. 14.

PAGE 3 OF 5
SUBJECT: Receive FY 2023/24 Annual Comprehensive Financial Report DATE: December 10, 2024
Council shapes our community's direction and priorities by allocating financial resources. The Annual Comprehensive Financial Report reflects the activities and financial condition of the previous year, serving as an essential document for residents, taxpayers, and other stakeholders to assess the Town’s financial standing. While both documents are critical, they do not provide the complete picture of the financial or operational reality of the Town.

Forecasting Our Finances
The FY 2024/25 budget projections are based on economic trends and forecasts specific to our area. These estimates, informed by local data from the County of Santa Clara and consultants such as Avenu Insights & Analytics, help predict revenue from sources like taxes and government grants. Expenditures are carefully reviewed by departments and the Finance Department and are incorporated into the budget with a vacancy savings factor of 4.6%, reflecting the Town’s historical trend of not fully expending predicted salaries and benefit costs.

Overall, the Town is financially stable and secure for the foreseeable future. During the FY 2023/24 fiscal year, the Town-wide Statement of Activities reported an increase in net position of $5,883,955—a measure of the change in the value of assets impacted by Town operations during the year. This net position includes $3,129,616 from investment earnings, driven by high interest rates and unrealized gains due to the requirement to value current investments at market value as of June 30. Additionally, revenue exceeding budget estimates and expenditures coming in below projections contributed to this positive change.

This increase in net position reflects a broader trend, with eight of the last nine years showing positive net position growth. In the General Fund—the primary operating fund for Town operations—the available resources for the next fiscal year have also increased.

While encouraging, the increase in net position can be significantly influenced by market interest rate fluctuations, liability payments (including pension costs), and operational and capital expenditures. Additionally, accounting standards do not account for future capital costs beyond depreciation, meaning deferred capital needs could substantially impact future financial performance. Rising costs in key Town operations and contracted services also pose challenges that could outpace revenue growth.

Despite our stable position and financial cushion, maintaining this stability will require fiscal prudence and foresight to address future challenges.

Emerging Financial Challenges
Although we have experienced financial gains, we are facing significant cost pressures. Rising costs for basic services—including salaries, benefits, and contracting—are compounded by volatile pension costs, which have fluctuated dramatically in recent years. The competitive Silicon Valley market and increasing regulatory requirements on local governments also drive up the cost of services and materials.

ITEM NO. 14.

PAGE 4 OF 5
SUBJECT: Receive FY 2023/24 Annual Comprehensive Financial Report DATE: December 10, 2024
A major concern is the lack of preparation to fully fund or quantify the liabilities and annualized costs for maintaining our infrastructure – such as roads, parks, and buildings. These deferred maintenance needs could add millions to future expenses. The cost per mile of infrastructure repair continues to rise, leading to tradeoffs between non-capital and capital priorities. While progress has been made in identifying some of our needs, the Town is quite a ways from achieving a sustainable investment to address its substantial capital liabilities.

Sales tax, our second-largest revenue source, is expected to stagnate or decline due to reduced consumer spending capacity, higher costs, and the loss of high-tax businesses like car dealerships. In FY2023/24, sales tax revenue dropped 8.3% from the previous year to approximately $8 million, aligning with the Town’s historical average over the past decade. This flat revenue trajectory, combined with increasing operational and capital costs, poses a significant budgetary challenge.

Additionally, the region's economy is heavily influenced by industries affected by geopolitical dynamics. These dynamics could impact employment, property and transfer tax revenue, fees, occupancy taxes, and sales taxes, further adding uncertainty to the financial outlook.

Proactive Financial Strategies and Sustainable Financial Planning It is essential for us to continuously monitor and evaluate our long-term financial sustainability, balancing major capital needs with the provision of essential services. Los Gatos is currently in a relatively strong financial position, supported by significant reserves. However, we must remain vigilant and prepared to address rising operational and capital costs that could outpace revenue growth. Our goal is to preserve the exceptional quality of life in our community through prudent and strategic financial management.

To achieve this, the Town must work to fully identify the true costs of basic operations as well as additional programs and services, comparing these costs to our capacity to sustain such activities over the long term. While our overall financial position is balanced, our focus must shift to achieving a sustainably balanced budget that ensures efficient and effective delivery of services at a level supported by available resources.

Key efforts in this direction should include:
· Establishing a shared understanding of our current and projected financial condition. · Defining the basic and enhanced services provided to residents and businesses. · Taking deliberate steps toward long-term financial sustainability. · Identifying system and process improvements that reflect careful planning in how Town activities are delivered, ensuring accountability to those who fund these services.

ITEM NO. 14.

PAGE 5 OF 5
SUBJECT: Receive FY 2023/24 Annual Comprehensive Financial Report DATE: December 10, 2024
These initiatives require a multi-year approach, and I am confident we can make meaningful progress in the years ahead.

Fund Balance Resolution
The Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance and Governmental Fund Type Definitions requires that the Town Council of the Town of Los Gatos classify governmental fund balances as restricted, assigned, or committed fund balances with formal actions. Staff is requesting the Town Council adopt a resolution confirming June 30, 2024 Fund Balances in accordance with FY 2023/24 Final Audit as listed Attachment 2.

CONCLUSION:

As noted in the auditor’s opinion, the ACFR fairly presents the fiscal year ending June 30, 2024 financial activity for the Town of Los Gatos.

FISCAL IMPACT:

There is no fiscal impact associated with this item.

Attachments:

1. Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2024

2. Fund Balance Resolution Establishing June 30, 2024 Fund Balances

3. Redlined Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2024

4. Town Manager’s Responses to Commissioners’ Questions and Comments

ITEM NO. 14.

ATTACHMENT 1

ITEM NO. 14.

ITEM NO. 14.

TOWN OF LOS GATOS

CALIFORNIA

ANNUAL COMPREHENSIVE

FINANCIAL REPORT

FOR THE FISCAL YEAR ENDED
JUNE 30, 2024

PREPARED BY THE

OFFICE OF THE TOWN MANAGER

ITEM NO. 14.

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 33,230. 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.

ITEM NO. 14.

TOWN VISION 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.

ITEM NO. 14.

This Page Left Intentionally Blank

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

TABLE OF CONTENTS

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 Proprietary Funds – Internal Service Funds: ....................................................................................... 49 Statement of Net Position ................................................................................................................. 50 Statement of Revenue, Expenses and Changes in Net Position........................................................ 51 Statement of Cash Flows .................................................................................................................. 52 Fiduciary Funds: .................................................................................................................................. 53 Statement of Fiduciary Net Position ................................................................................................. 54 Statement of Changes in Fiduciary Net Position .............................................................................. 55 Notes to the Basic Financial Statements...................................................................................................... 56 REQUIRED SUPPLEMENTARY INFORMATION:

Schedule of Pension Plan Contributions...................................................................................................... 101 Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost Sharing Plan ................................................................................................................................. 103 Schedule of Changes in Net Pension Liability – CalPERS Misc.

Agent-Multiple Employer Plan ............................................................................................................ 104 Schedule of OPEB Contributions................................................................................................................ 106 Schedule of Changes in Net OPEB Liability............................................................................................... 107

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

TABLE OF CONTENTS
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................................................................... 111 Nonmajor Governmental Funds:

Combining Balance Sheets.......................................................................................................................... 112 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances...................................................................................................................................... 115 Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) ................................................................... 118 Internal Service Funds:

Combining Statement of Fiduciary Net Position......................................................................................... 124 Combining Statement of Revenue, Expenses and Changes in Net Position................................................ 125 Combining Statement of Cash Flows.......................................................................................................... 126 STATISTICAL SECTION .............................................................................................................................. 129 Net Position by Component......................................................................................................................... 130 Changes in Net Position .............................................................................................................................. 131 Fund Balances, Governmental Funds.......................................................................................................... 133 Changes in Fund Balances, Governmental Funds....................................................................................... 135 Assessed Value and Estimated Actual Value of Taxable Property ............................................................. 137 Direct and Overlapping Property Tax Rates................................................................................................ 138 Principal Property Tax Payers..................................................................................................................... 139 Property Tax Levies and Collections........................................................................................................... 141 Ratios of Outstanding Debt by Type ........................................................................................................... 142 Direct and Overlapping Governmental Activities Debt............................................................................... 143 Legal Debt Margin ...................................................................................................................................... 144 Demographic and Economic Statistics........................................................................................................ 145 Principal Employers.................................................................................................................................... 146 Full-time Equivalent Town Government Employees by Function/Program ............................................... 148 Operating Indicators by Function/Program ................................................................................................. 149 Capital Assets Statistics by Function/Program............................................................................................ 151 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................................................................................................................. 153

ITEM NO. 14.

INTRODUCTORY SECTION

ITEM NO. 14.
his Page Left Intentionally Blank

ITEM NO. 14.

November 23, 2024
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, 2024. 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, 2024, 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

ITEM NO. 14.

Mayor and Town Council
November 23, 2024

Standards Board (GASB) and includesthe auditreport of Chavan & Associates,the Town’s independent certified public accountants.

This Annual Comprehensive Financial Report was developed in accordance with best practices of the Government Finance Officers Association and will be submitted 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.

AWARDS
The Town’s Annual Comprehensive Financial Report for the fiscal year ended June 30, 2023, was awarded a Certificate of Achievement for Excellence in Financial Reporting by the national Government Finance Officers Association. This is the 29th consecutive year that the Town has received the award. This prestigious award recognizes the report’s conformance with strict accounting and reporting standards established by the Government Accounting Standards Board and government finance organizations. This award is annual in nature and valid for one year only. This year’sreport will be submitted for award consideration by this organization, as we believe it continues to meet these standards.

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 33,230 (California Department of Finance, January 2024). 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 charmof 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.

ITEM NO. 14.

Mayor and Town Council
November 23, 2024

ECONOMIC CONDITIONS AND OUTLOOK
This past year, the Town continued to see increases to economically sensitive revenues, however sales tax collections are decreasing. The Town General Fund closed FY 2023/24 with $4 million revenue over expenditure. The excess revenue includes $1.7 million unrealized gain in the Town investment portfolio. The General Fund Balance increased $1.5 million.

General Fund revenues (not including transfers in other financing sources) increased 5.8% from the prior year. Property tax revenues remain the largest and most consistent source of support for General Fund operations, comprising approximately 45.3% of General Fund revenues in FY 2023/24.

For FY 2023/24, property tax receipts of $24.2 million were $1.5 million higher than the prior year’s collection, reflecting the continued desirability of the Town, its environment, culture, and educational opportunities
The Town also relies heavily on sales tax revenues to support General Fund operations, comprising approximately 15.1% of General Fund revenues in FY 2023/24. For FY 2023/24, sales tax receipts of $8.1 million were $0.7 million lower than the prior year’s collection. Increased interest rates impacted business to business activities, while increased mortgage rates leaved customers with less disposable income. In addition, gas service stations have decreased activity due to the popularity of electric vehicles.

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 the Summer 2024, the Town successfully completed negotiations with all bargaining units. While important for the consistent delivery of high quality services for the Town, these actions impact the balance 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 2023 CalPERS actuarial valuations, the unfunded actuarial liability for pensions was $63.0 million and $9.0 million for OPEB as determined by an actuarial valuation 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. 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.

ITEM NO. 14.

Mayor and Town Council
November 23, 2024

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 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 2023/24) has increased 5.3% from $59.9 million to the current NPO of $63.0 million. Due to CalPERS preliminary returns of 9.3%, staff expects the NPO to decrease 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 $12 million in Town infrastructure and other capital asset improvements and contributions were invested in FY 2023/24, including $3.8 million in Town-wide street projects to improve the pavement condition, $0.8 million adding subscription right of use of assets, and $0.1 million for curb and gutter improvements. In addition, $7.1 million was invested in construction in progress including, roads, bridges, storm drains, park, pathways, and building improvements.

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

ITEM NO. 14.

Mayor and Town Council
November 23, 2024

funded either through grants, or via revenues accumulated from prior year budget savings and/or excess revenues per Town Council Policy.

ACCOUNTING SYSTEM AND BUDGETARY CONTROL
The effectiveness of internal 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. Proprietary fund expenses are recognized when they are incurred, even if the cash is not available. 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. 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.

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.

ITEM NO. 14.

Mayor and Town Council
November 23, 2024

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; Eagled’Or Am, Accountant, Ed Karas, Accountant; 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,

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Town of Los Gatos
Organizational Structure

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TOWN OF LOS GATOS

PRINCIPAL OFFICERS
JUNE 30, 2024

TOWN COUNCIL
Mayor Mary Badame
Vice Mayor Matthew Hudes
Council Member Maria Ristow
Council Member Rob Moore
Council Member Rob Rennie

COUNCIL APPOINTEES
Town Manager1 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 Cheryl Parkman
1 Effective November 4, 2024 Chris Constantin

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ITEM NO. 14.

FINANCIAL SECTION

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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, 2024, 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, 2024, 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.

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.

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

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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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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 11, 2024 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 11, 2024
Morgan Hill, California

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ITEM NO. 14.

Management’s Discussion and Analysis

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ITEM NO. 14.

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, 2024. 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) 2023/24 by $159.4 million (net position). The unrestricted net position, which represents the amounts available to meet the Town ongoing obligations to citizens and creditors, is $9.1 million. • The Town’s total net position increased by $5.9 million in FY 2023/24. The overall increase of $5.9 million is primarily due to the combined effect of infrastructure capitalization, grant revenue recognition, and changes to pension expenses.
• At the close of the current fiscal year, the Town’s governmental funds reported combined fund balances of $61.0 million, a decrease of $0.2 million in comparison with the prior year. • During FY 2023/24, the General Fund had an excess of revenues over expenditures of $4.0 million, excluding transfers. Transfers out exceeded transfers in by $3.2 million. The principal purpose of the Town’s interfund transfers was contributions toward capital projects ($3.1 million) and general liability ($.43 million). The detail of the interfund transfers is illustrated in Note #5.
• At the end of the current fiscal year, unrestricted fund balance (the total of the committed, and assigned components of the fund balance) for the general fund was $28.4 million, or approximately 57% of the total general fund expenditures.

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.

ITEM NO. 14.

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, 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.

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

ITEM NO. 14.

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.

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 2023 and 2024.

ITEM NO. 14.

Net Position Discussion
In general, net position can serve as an important indicator of whether the Town’s overall financial condition is improving or deteriorating over time. As shown below, the Town’s assets and deferred outflows of resources (consumption of net position that applies to a future period) exceeded liabilities and deferred inflows of resources (acquisition of net position that applies to a future period) by $159.4 million, reflecting an increase of approximately $5.9 million to the prior year’s net position of $153.5 million.

Current and other assets increased $8.5 million from the prior year, primarily due to a $ 5.4 million increase in cash/restricted cash and investments, and a $3.1 million increase in accounts, interest, and intergovernmental receivable.

Capital assets increased $6.7 million to $139.4 million for the year reflecting current year’s capital asset additions/retirements less the annual depreciation/amortization expense.

Deferred Outflows for Pension and Other Post-Employment Benefits (OPEB) decreased by $0.6 million primarily due to the difference between the 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 $5.4 million. The increase is primarily due to a pension liability increase of $3.2 million and an increase of OPEB liabilities of $2.0 million. See Note 11 and Note 12 in the Notes to the Financial Statements for more information on the Town’s pension and OPEB plans.
2024 2023
Current and other Assets $ 93,959,415 $ 85,489,167
Capital Assets 139,376,963 132,679,773
Total Assets $ 233,336,378 $ 218,168,940
Deferred Outflows - Pension/OPEB 28,973,675 29,526,262
Current Liabilities 21,254,648 15,857,589
Long-Term Liabilities Outstanding 77,271,453 71,847,737 Total Liabilities $ 98,526,101 $ 87,705,326
Deferred Inflows - Pension/OPEB 4,377,735 6,467,614
Net Position
Net Investment in Capital Assets 137,253,582 130,623,654 Restricted 13,015,461 11,091,020
Unrestricted 9,137,174 11,807,588
Total Net Position $ 159,406,217 $ 153,522,262
Town of Los Gatos
Net Position
Governmental Activites
For the Year Ended June 30, 2024

ITEM NO. 14.

Deferred Inflows decreased by $2.1 million, resulting primarily from the difference between the projected assumed investment returns and actual investment earnings on pension and OPEB investments. The pension inflows decreased by $1.4 million and the OPEB plan decreased by $0.6 million.

The largest segment of the Town’s net position, representing $137.3 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. They do not represent a liquid financial resource to the Town and consequently are not readily available for funding current obligations.

The chart below shows the Town’s net position for the fiscal year ended June 30, 2023 and 2024.

Restricted net position totaled approximately $13.0 million representing approximately $9.0 million for capital projects and maintenance, $2.2 million for restricted pension trust, $0.6 million placed in a special revenue trust accounts for Library services, $0.3 million for land held for resale, $0.2 million for Lighting and Landscaping Assessment Districts.

As of June 30, 2024, unrestricted net position, the amounts available to meet the Town’s ongoing obligations to citizens and creditors, reports an approximate $2.7 million decrease from the prior year to an ending balance of $9.1 million. The decrease was a result of an increase in pension adjustments of $3.8 million and a reduction in governmental reserve balances of approximately $1.9 million. The decreases were offset by a positive change in the internal service fund net position of $1.0 million and the unavailable revenue reclassification (to revenue) of $2.3 million.

The Town’s overall net position increased $5.9 million from the prior fiscal year. The reasons for this overall increase are discussed in the following sections for governmental activities $0 $50 $100 $150
Net Investment in Capital Assets
Restricted
Unrestricted
Millions
Statement of Net Position
2023 2024

ITEM NO. 14.

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.

The Statement of Activities shown above details how the $64.5 million in Governmental Activities revenues and contributions were derived. Approximately $13.5 million or 20.9% of the revenues were recorded from fees paid by residents/businesses who directly benefited from the respective 2024 2023
Revenues:

Program revenues:

Charges for Services1 $ 13,495,756 $ 12,390,750
Operating Grants and Contributions 3,667,909 7,149,581
Capital Grants and Contributions 5,668,252 3,915,175
General Revenues:

Property Taxes 24,224,142 22,746,842
Sales Taxes 8,071,735 8,806,477
Franchise Taxes1 2,547,011 3,074,624
Transient Occupancy Taxes 2,367,653 2,228,190
Other Taxes 55,196 63,818
Motor Vehicle in Lieu 41,461 34,406
Developer Assessment 12,880 614,820
Investment Earnings 1,417,370 794,390
Unrealized gains (losses) 1,712,246 3,197
Miscellaneous 1,199,422 1,045,214
Total Revenues 64,481,033 62,867,484
Expenses:

Police Department 23,783,313 17,428,923
Parks and Public Works 14,075,171 12,258,626
General Government 11,113,238 10,522,568
Community Development 5,481,765 5,215,961
Library Services 3,853,748 3,653,642
Sanitation 263,706 208,262
Interest and Fees 26,137 29,221
Total Expenses 58,597,078 49,317,203
Increase (Decrease) in Net Position
before Special Items 5,883,955 13,550,281
Special Items
Litigation Settlement Proceeds - 1,565,000
Change in Net Position 5,883,955 15,115,281
Net Position - Beginning 153,522,262 138,406,981
Net Position, Ending $ 159,406,217 $ 153,522,262
Town of Los Gatos
Statement of Activities
For the Year Ended June 30, 2024
(1) Starting in March 2024, due to a change in the JPA agreement, Garbage Franchise Fees were categorized as encroachment fees under Charges for Services. The total amount classified in Charges for Services in FY 2023/24 was $765,900.The garbage Franchise Fees were $2,051,335 in FY 2022/23 and $1,493,184 in FY 2023/24.

ITEM NO. 14.

program or service. Another $9.3 million or 14.5% of the revenues were sourced from operating/capital grants and contributions. The remaining $41.6 million or 64.6% represents general revenues of the Town, including taxes, intergovernmental revenues, and other miscellaneous revenues.

The chart below summarizes the financial activities of the major programs.

Governmental Activities Revenue Discussion
The chart below summarized the Town’s government wide revenues for the FY 2022/23 and FY 2023/24.
$0 $5 $10 $15 $20 $25
General Government
Public Safety
Parks and Public Works
Community
Development
Library Services
Sanitation
Interest and Fees
Millions
Expenses and Revenues - Governmental Activities
Expenses
Program Revenues
$0 $5 $10 $15 $20 $25 $30
Charges for Services
Operating Grants and Contributions
Capital Grants and Contributions
Property Taxes
Sales Taxes
Franchise Taxes
Other Taxes
Motor Vehicle in Lieu
Developer Fee
Investment Earnings
Unrealized gains (losses)
Miscellaneous
Litigation Settlement Proceeds
Millions
Government Wide Revenues
2023 2024

ITEM NO. 14.

Program revenues decreased by approximately $0.6 million from the prior year. This decrease is due to the combined effect of a $1.7 million net increase in capital grant activity including grants received toward the Los Gatos Creek Trail to Highway 9 Trailhead Connector project, $1.1 million increase in charges for services due to increased development activity and garbage franchise fee reclassification, and a decrease of $3.5 million from the prior year on operating grants and contribution. The decrease was due to the prior fiscal year including the American Rescue Plan Act (ARPA) second tranche of revenue.

The Town’s General Revenues related to Governmental Activities increased by approximately $0.7 million from the prior year. The increase is attributable to a combination of an approximately $2.3 million increase in investment earnings including the mark-to-market value adjustments on the Town portfolio investment and a $1.5 million increase in property taxes. The increases were offset by a $0.7 million decrease in sales tax, $0.5 million decrease in franchise fee collection, and $0.6 million decrease in pass-through developer contributions.

Property tax is the largest individual revenue source for the Town and collections finished the year $1.5 million higher than the previous year. This increase was mostly due to an increase of $1.1 million in general property tax collection and $0.4 million increase in Vehicle License Fee (VLF) Property Tax In-Lieu fee. It is important to note that assessed valuations for FY 2023/24 were established on the tax roll in January 2023 and collected in FY 2023/24.

At $8.1 million, sales taxes represent the second largest individual revenue source for the Town.

Sales taxes decreased $0.7 million from the previous year largely due to a reduction in businessto-business activities and less taxable sales activity. In addition, gas service stations have decreased activity due to the popularity of electric vehicles.

Franchise taxes, the Town’s third largest individual revenue source, finished the year at $2.5 million, reflecting a decrease of $0.5 million from the previous fiscal year. Franchise fee collected from the garbage hauler company was reclassified as license and permit fees during FY 2023/24.

In the statement of activity, the license and permit fees are categorized as charges for services.

While collections remained at the same level, the revenue shifted from franchise fee to charges for services.

Investment earnings increased $2.3 million from the prior year. The primary factor responsible for this increase was $1.7 million total mark-to-market value above historical investment cost than the prior year for the Town’s investment portfolio. These unrealized gains are recognized as investment income as a result of the mark to market value procedure required by GASB 31.

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. The balance sheet reflects the $1.7 million Market Fluctuation Reserve. The additional $0.6 million increase in interest was due to a higher interest rate environment.

ITEM NO. 14.

Governmental Activities Expenses Discussion
The chart below summarized the Town’s government wide expenses for the FY 2022/23 and FY 2023/24.

The Town provides residents, businesses, and visitors with an array of high-quality municipal services. General government strategic support is comprised of seven Departments (Town Council, Town Clerk, Town Manager, Town Attorney, Human Resources, Information Technology, and Finance) which provide 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; 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 $58.6 million as reported in the Statement of Activities increased by $9.3 million from $49.3 million the prior year. The change was primarily driven by increases of $3.7 million in public safety pension expense, $1.4 million in Miscellaneous Pension expense, $1.1 million in depreciation, and 1.5 million in salaries and benefits. $0 $10 $20 $30
General government
Public safety
Parks and public works
Community development
Library services
Sanitation
Interest and fees
Millions
Government Wide Expenses
2023 2024

ITEM NO. 14.

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.

As discussed below, the Town’s Governmental Funds Balance Sheet reports the following fund balances:

Restricted Fund Balance – The Town has $12.9 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 $12.9 million restricted fund balance, $9.0 million is restricted for capital projects, $2.2 million for pension, $0.6 million for Library special revenue trust accounts, and $0.2 million for maintenance and repairs.

Committed Fund Balance – The Town has $17.0 million in fund balance classified as committed to indicate that the Town Council previously committed how the money will be spent. Of the $17.0 million, $12.5 million is for budget stabilization ($6.7 million) and catastrophe response ($6.7 million).

Assigned Fund Balance – The Town has $30.9 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 $8.7 million and the Capital Projects Reserve of $16.4 million which are the primary funding sources for the Town’s five-year capital improvement plan and special projects as budgeted by the Town.

The chart below shows the Town’s governmental fund balances for the fiscal year ended June 30, 2023 and 2024.

ITEM NO. 14.

Additional information on the Town’s Fund Balance can be found in Note 10 of the Notes to the Financial Statements.

ITEM NO. 14.

Total Governmental Funds results for the year included the following:

TOTAL GOVERNMENTAL FUNDS REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES REVENUES 2024 2023
Property Taxes $ 24,265,603 $ 22,781,248
Sales Taxes 8,071,735 8,806,477
Transient Occupancy Taxes 2,367,653 2,228,190
Other Taxes 30,358 35,496
Licenses & Permits1 6,227,298 6,333,675
Intergovernmental 6,317,644 10,145,820
Charges for Services 7,051,179 5,718,714
Fines and Forfeitures 480,634 416,950
Franchise Fees1 2,547,011 3,074,624
Developer Assessment 12,880 614,820
Interest 3,108,100 797,582
Use of Property 297,501 237,647
Other 604,493 985,188
Total Revenues $ 61,382,089 $ 62,176,431

EXPENDITURES
Current:

Public Safety $ 20,718,781 $ 18,446,048
General Government 9,573,022 8,828,779
Parks and Public Works 9,899,083 9,084,406
Community Development 5,246,729 5,065,412
Library Services 3,335,389 3,208,027
Sanitation and Other 252,605 204,097
Capital Outlay 12,366,255 8,917,075
Debt Service
Principal 225,370 156,034
Interest and Fees 3,716 -
Total Expenditures $ 61,620,950 $ 53,909,878
Excess Revenues over Expenditures $ (238,861) $ 8,266,553 Subscriptions 706,713 -
Settlement -Shannon Road - 1,565,000
Proceeds from sales of assets 223 2,162
Transfers in 3,666,235 11,886,022
Tranfers out (4,317,235) (11,396,347)
Total Other Financing Sources (Uses) $ 55,936 $ 2,056,837 Net Changes in Fund Balances (182,925) 10,323,390
Beginning/Ending Fund Balances $ 61,185,528 $ 50,862,138 Ending Fund Balances $ 61,002,603 $ 61,185,528

TOWN OF LOS GATOS
FOR THE YEAR ENDED JUNE 30, 2024
(1) Starting in March 2024, due to a change in the JPA agreement, Garbage Franchise Fees were categorized as Licenses & Permits under Charges for Services. The total amount classified in Licenses & Permits in FY 2023/24 was $765,900. The garbage Franchise Fees were $2,051,335 in FY 2022/23 and $1,493,184 in FY 2023/24.

ITEM NO. 14.

Overall, total Governmental Funds revenues finished $0.8 million or 1.3% lower than the prior year, while total expenditures finished $7.7 million or 14.3% higher than the prior year. One of the main reasons for the decrease in revenue was a reduction in grant activity due to receiving the final tranche of the $3.6 million ARPA payment in fiscal year 2023 as well as a $0.7 million dollar reduction in sales tax. The reduction was offset by increases in general property tax collections of $1.5 million and $2.3 million increase in interest revenue. The increase in interest was due to $1.7 million unrealized gain adjustment. The change in expenditures was mainly due to capital outlay increases of $3.4 million, salary and benefit cost increases of $1.9 million, and general operating increases of $1.5 million.

General Fund revenues totaled $53.5 million or nearly 87.2% of the total $61.0 million in Total Governmental Fund revenues.

Governmental Funds expenditures increased by $7.7 million. General Fund expenditures represent approximately $49.5 million or 80.4% of the Total Governmental Fund expenditures of $61.6 million compared to $44.9 million of General Fund expenditures and total Governmental Funds expenditures of $53.9 million in the prior year.

Increases in Public Safety expenditures from the prior year of approximately $2.3 million were primarily due to $1.4 million salary and benefit cost increases resulting from labor negotiations and mandated increases in employer pension contribution rates, and $0.5 million internal service costs for equipment replacement and general liability.

Increases in Parks and Public Works, Community Development, and Library services expenditures from prior year of approximately $1.1 million were primarily due to $0.7 million operating expenditure increases, $0.3 million equipment replacement costs, and $0.1 million salary and benefit cost increases.

The $0.7 million increase in general governmental expenditures was mainly attributable to $0.3 million salary and benefit increases and $0.2 million labor relation services and post-retirement benefits.

Appropriated Reserves Fund capital projects fund balances decreased $2.7 million from the prior year, reflecting increased capital activity during the fiscal year. The $5.3 million of general government and capital outlay expenditures above operating revenues was offset by $2.6 million from other financing sources.

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.

ITEM NO. 14.

Total net position in the Internal Service Funds increased by $1.0 million due to increases in general fund support and program charges for services to cover for workers’ compensation, information technology, and general liability costs including administration, insurance premiums, and claims expense.

GENERAL FUND BUDGETARY HIGHLIGHTS
The below graphs represent the revenue and expenditure variances between the original budget, final budget, and actuals.

Changes to the Original Budget
As noted in the above chart, comparing the FY 2023/24 original budget (i.e., the Adopted Budget) General Fund revenues of $49.2 to the final adjusted budget of $51.7 indicates a net increase of

ITEM NO. 14.

approximately $2.5 million or 5.1%. Additions to the original revenue budget included adjustments approved by Town Council throughout the fiscal year.

The increase in General Fund revenue appropriations occurred primarily from the following sample of revenue budget adjustments made during the fiscal year:
• $1.2 million revenue increases for charges for services including $1.1 million for garbage franchise fees and $0.1 million for PG&E franchise fees; • $0.7 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; • $0.5 million Interest revenue budget increase based on the estimated collection from LAIF per projected interest rates;
• $0.3 million grant receipt with matching expenditure.

As shown in the chart on the previous page, comparing the FY 2023/24 original budget (i.e. the Adopted Budget) General Fund expenditures of $48.6 million (excluding budgeted transfers-out and debt payments that are reimbursed) to the final adjusted budget of $51.4 million indicates a net increase of approximately $2.8 million or 5.8%. Additions to the original expenditure budget included adjustments approved by Town Council throughout the fiscal year.

The increase in General Fund expense appropriations occurred primarily from the following sample of budget adjustments made during the fiscal year. • $1.3 million increase in expenditure related cost increases to legal, labor and employee relation services, post-employment benefit, recruitment services, special studies, property damage repair, utilities and other operating expenditures; • $1.1 million expenditure increase for salaries and benefits related charges including budget restoration of $0.7 million for individual departments that were fully staffed and did not experience the full preplanned 4.6% salary savings factor and $0.4 million for negotiated salaries and benefits and temporary staff augmentation; and • $0.3 grant activity with matching revenues.

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, 2024, reports an approximate favorable variance overall with the final budget of approximately $3.6 million. During FY 2023/24, the General Fund had an excess of revenues over expenditures of $4.0 million, excluding transfers. This favorable variance was created largely by the net effect of the following factors:
• Actual revenues ended the fiscal year at $1.8 million above final budgeted revenues. The chart on the next page illustrates the original revenue budget, final revenue budget and actual revenues.

ITEM NO. 14.

• Actual expenditures ended the fiscal year at $1.8 million below final budgeted expenditures.

Significant factors affecting actual expenditures include: $1.0 million savings in salaries and benefits in limited term vacancies throughout the organization combined with ($0.8 million less actual expenditures than budgeted in multiple categories Town-wide). The chart below illustrates the original expenditure budget, final expenditure budget and actual expenditures.

CAPITAL ASSETS
As of June 30, 2024, the Town’s investment in capital assets for its governmental activity is recorded at $139,376,963 (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 $6.7 million net of depreciation expense totaling approximately $5.3 million for the year.

Notable additions include:
• $7.1 million addition to construction in progress
• $3.8 million in street repair and resurfacing and curb and gutter work; and • $0.5 million in subscription right of use of assets.

The $7.1 million addition to construction in progress is comprised of $3.8 million for pathways projects, $1.2 million for streets and curbs improvements, $0.9 million for land and building improvements, $0.6 million for bridges, $0.4 million for equipment, and $0.2 million for retaining walls, traffic signals, parking lots, and park improvements.

Additional information on the Town’s capital assets is found in Note 6 of this Financial Report.

Capital Assets
Accumulated
Depreciation
Capital Assets,
Net
Infrastructure - Streets $ 86,301,911 $ (40,509,975) $ 45,791,936 Infrastructure -Other 28,491,627 (10,552,383) 17,939,244 Subscription Right of Use Assets 1,622,573.00 (422,512.00) 1,200,061 Buildings 42,862,716 (11,995,280) 30,867,436
Land 26,064,735 - 26,064,735
Equipment 12,893,445 (10,870,937) 2,022,508
Construction in Progress 15,491,043 - 15,491,043
$ 213,728,050 $ (74,351,087) $ 139,376,963
Capital Assets
Town of Los Gatos
For the Year Ended June 30, 2024

ITEM NO. 14.

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 $1.0 million at 6/30/2024. The long-term debt in the Successor Agency Trust Fund is related to the 2002 COP and 2010 COP, totaling $10.2 million. Additional information on the Town’s Long-Term Debt is found in Note 7 of this Financial Report.

ECONOMIC FACTORS, NEXT YEAR’S BUDGET, AND RATES
General Fund Monies Made Available because of the ARPA Grant The Town recognized the American Rescue Plan Act (ARPA) operating revenue over three fiscal years including FY 2020/21 ($200,911), FY 2021/22 ($3,413,961), and FY 2022/23 ($3,614,872) for allowable expenditures under the standard allowance provision of the ARPA federal rules.

The funds were received in the ARPA special revenue fund and were transferred out to other funds and used Town for qualifying public safety expenditures under the provisions of the Act.

The utilization of the ARPA grant enabled the Town to support the following activities using unrestricted resources:

Unrestricted Funds Available $ 7,229,744
Less Council Approved Uses
Parklets (Downtown Economic Recovery Efforts) $ 930,000 Rent Waivers 746,463
CUP/ADA Fee Waivers 54,346
Destination Marketing 55,000
K-Rails (Downtown Economic Recovery Efforts) 88,654
Promenades 188,667
Direct Grants 110,000
Enhanced Senior Services 500,000
Capital Improvement Program Support Transfers 2,900,000 One-Time Community Grant (Council Action 2-21-2023) 150,000 One-Time to LGS REC 55+ Program (Council Action 2-21-2023) 225,000 One-Time to KCAT Producers (Council Action 2-21-2023) 100,000 One-Time Unhoused Residents Efforts (Council Action 2-21-2023) 25,000 One-Time Rent Forgiveness LGS REC (Council Action 3-21-2023) 200,000 One-Time Rent Forgiveness NUMU (Council Action 3-21-2023) 21,000 One-Time Unhoused Residents Efforts (Council Action 4-4-2023) 25,000 One-Time - Additional Chambers of Commerce (Council Action 5-2-2023) 33,000 One-time - Adult Recreation Center Interim Community Center (Council Action 8-15-2023 & FY 2024/25 Proposed Budget) 877,614
Total $ 7,229,744

ITEM NO. 14.

Purpose of the Budget and Annual Comprehensive Financial Report Our Town’s budget is more than just numbers—it is a plan that ensures we use our resources efficiently and effectively, prioritizing our most important goals. Through this budget, the Town Council shapes our community's direction and priorities by allocating financial resources. The Annual Comprehensive Financial Report reflects the activities and financial condition of the previous year, serving as an essential document for residents, taxpayers, and other stakeholders to assess the Town’s financial standing. While both documents are critical, they do not provide the complete picture of the financial or operational reality of the Town.

Forecasting Our Finances
The FY 2024/25 budget projections are based on economic trends and forecasts specific to our area. These estimates, informed by local data from the County of Santa Clara and consultants such as Avenu Insights & Analytics, help predict revenue from sources like taxes and government grants. Expenditures are carefully reviewed by departments and the Finance Department and are incorporated into the budget with a vacancy savings factor of 4.6%, reflecting the Town’s historical trend of not fully expending predicted salaries and benefit costs.

Overall, the Town is financially stable and secure for the foreseeable future. During the FY 2023/24 fiscal year, the Town-wide Statement of Activities reported an increase in net position of $5,883,955—a measure of the change in the value of assets impacted by Town operations during the year. This net position includes $3,129,616 from investment earnings, driven by high interest rates and unrealized gains due to the requirement to value current investments at market value as of June 30. Additionally, revenue exceeding budget estimates and expenditures coming in below projections contributed to this positive change.

This increase in net position reflects a broader trend, with eight of the last nine years showing positive net position growth. In the General Fund—the primary operating fund for Town operations—the available resources for the next fiscal year have also increased.

While encouraging, the increase in net position can be significantly influenced by market interest rate fluctuations, liability payments (including pension costs), and operational and capital expenditures. Additionally, accounting standards do not account for future capital costs beyond depreciation, meaning deferred capital needs could substantially impact future financial performance. Rising costs in key Town operations and contracted services also pose challenges that could outpace revenue growth.

Despite our stable position and financial cushion, maintaining this stability will require fiscal prudence and foresight to address future challenges.

Emerging Financial Challenges
Although we have experienced financial gains, we are facing significant cost pressures. Rising costs for basic services—including salaries, benefits, and contracting—are compounded by volatile pension costs, which have fluctuated dramatically in recent years. The competitive Silicon Valley market and increasing regulatory requirements on local governments also drive up the cost of services and materials.

ITEM NO. 14.

A major concern is the lack of preparation to fully fund or quantify the liabilities and annualized costs for maintaining our infrastructure – such as roads, parks, and buildings. These deferred maintenance needs could add millions to future expenses. The cost per mile of infrastructure repair continues to rise, leading to tradeoffs between non-capital and capital priorities. While progress has been made in identifying some of our needs, the Town is quite a ways from achieving a sustainable investment to address its substantial capital liabilities.

Sales tax, our second-largest revenue source, is expected to stagnate or decline due to reduced consumer spending capacity, higher costs, and the loss of high-tax businesses like car dealerships.

In FY2023/24, sales tax revenue dropped 8.3% from the previous year to approximately $8 million, aligning with the Town’s historical average over the past decade. This flat revenue trajectory, combined with increasing operational and capital costs, poses a significant budgetary challenge.

Additionally, the region's economy is heavily influenced by industries affected by geopolitical dynamics. These dynamics could impact employment, property and transfer tax revenue, fees, occupancy taxes, and sales taxes, further adding uncertainty to the financial outlook.

Proactive Financial Strategies and Sustainable Financial Planning It is essential for us to continuously monitor and evaluate our long-term financial sustainability, balancing major capital needs with the provision of essential services. Los Gatos is currently in a relatively strong financial position, supported by significant reserves. However, we must remain vigilant and prepared to address rising operational and capital costs that could outpace revenue growth. Our goal is to preserve the exceptional quality of life in our community through prudent and strategic financial management.

To achieve this, the Town must work to fully identify the true costs of basic operations as well as additional programs and services, comparing these costs to our capacity to sustain such activities over the long term. While our overall financial position is balanced, our focus must shift to achieving a sustainably balanced budget that ensures efficient and effective delivery of services at a level supported by available resources.

Key efforts in this direction should include:
• Establishing a shared understanding of our current and projected financial condition. • Defining the basic and enhanced services provided to residents and businesses. • Taking deliberate steps toward long-term financial sustainability. • Identifying system and process improvements that reflect careful planning in how Town activities are delivered, ensuring accountability to those who fund these services.

These initiatives require a multi-year approach, and I am confident we can make meaningful progress in the years ahead.

ITEM NO. 14.

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.

ITEM NO. 14.

Basic Financial Statements

ITEM NO. 14.

This Page Left Intentionally Blank

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

STATEMENT OF NET POSITION
JUNE 30, 2024

Governmental
ASSETS Activities
Cash and investments $ 79,482,564
Restricted cash and investments 2,368,441
Receivables:

Accounts 3,052,460
Interest 800,882
Intergovernmental 4,759,056
Other assets 152,614
Land held for resale 344,338
Long-term leases receivable 1,861,308
Long-term notes receivables 1,137,752
Capital Assets:

Nondepreciable 26,064,735
Depreciable, net of accumulated depreciation 113,312,228 Total Assets $ 233,336,378

DEFERRED OUTFLOWS OF RESOURCES
Pension adjustments $ 23,166,916
OPEB adjustments 5,806,759
Total Deferred Outflows of Resources $ 28,973,675

LIABILITIES
Accounts payable $ 4,799,652
Accrued payroll and benefits 603,981
Interest payable 19,943
Due to other governments 82,372
Unearned Revenue 7,599,945
Deposits 6,258,763
Claims payable 1,889,992
Long-term liabilities:

Due within one year
Compensated absences 596,874
Subscription liabilities 211,678
Loans payable 156,034
Due in more than one year
Net OPEB liability 9,009,446
Net pension liabilities 63,027,669
Compensated absences 2,514,083
Subscription liabilities 871,480
Loans payable 884,189
Total Liabilities $ 98,526,101

DEFERRED INFLOWS OF RESOURCES
Leases 1,168,056
Pension adjustments 1,694,347
OPEB adjustments 1,515,332
Total Deferred Inflows of Resources $ 4,377,735

NET POSITION
Net investment in capital assets $ 137,253,582
Restricted for:

Library 556,848
Capital projects 9,043,666
Land held for resale 344,338
Lighting and landscape repairs and maintenance 182,625
Pensions 2,188,659
VTA 577,887
Worker's compensation claims 121,438
Total Restricted Net Position 13,015,461
Unrestricted 9,137,174
Total Net Position $ 159,406,217
The notes to the financial statements are an integral part of this statement.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

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 $ 11,113,238 $ 2,694,162 $ 63,088 $ 2,757,250 - $ $ (8,355,988) Public safety 23,783,313 1,980,431 917,317 2,897,748 - (20,885,565) Parks and public works 14,075,171 4,211,420 1,828,050 5,668,252 11,707,722 (2,367,449) Community development 5,481,765 4,247,279 692,151 4,939,430 - (542,335) Library services 3,853,748 2,514 167,303 - 169,817 (3,683,931) Sanitation 263,706 359,950 - - 359,950 96,244
Interest and fees 26,137 - - - - (26,137)
Total Governmental Activities $ 58,597,078 $ 13,495,756 $ 3,667,909 $ 5,668,252 $ 22,831,917 (35,765,161) General revenues:

Taxes:

Property taxes 24,224,142
Sales taxes 8,071,735
Franchise taxes 2,547,011
Transient occupancy taxes 2,367,653
Other taxes 55,196
Motor vehicle in lieu 41,461
Developer assessments 12,880
Investment earnings:

Investment earnings 1,417,370
Unrealized gains (losses) 1,712,246
Miscellaneous 1,199,422
Total general revenues 41,649,116
Change in Net Position 5,883,955
Net Position - Beginning 153,522,262
Net Position - Ending $ 159,406,217
The notes to the financial statements are an integral part of this statement.

Program Revenues

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

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, 2024.

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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

GOVERNMENTAL FUNDS

BALANCE SHEET
JUNE 30, 2024

Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
ASSETS
Cash & investments $ 34,471,425 $ 25,746,502 $ 10,415,070 $ 70,632,997 Restricted cash & investments 2,188,659 - 58,344 2,247,003 Receivables:

Accounts 1,784,830 1,145,377 82,843 3,013,050
Interest 800,882 - - 800,882
Intergovernmental 1,815,445 2,713,517 230,094 4,759,056 Other assets 152,614 - - 152,614
Land held for resale 344,338 344,338
Leases receivable - 149,496 304,129 453,625
Long term note receivable 1,059,000 - 78,752 1,137,752
Total Assets $ 42,617,193 $ 29,754,892 $ 11,169,232 $ 83,541,317

LIABILITIES
Accounts payable $ 971,349 $ 3,586,786 $ 24,000 $ 4,582,135 Accrued payroll and benefits 600,757 - 3,224 603,981
Due to other governments 82,313 - - 82,313
Unearned revenue 3,641,939 3,893,211 64,795 7,599,945
Deposits 6,258,763 - - 6,258,763
Total Liabilities 11,555,121 7,479,997 92,019 19,127,137

DEFERRED INFLOWS OF RESOURCES
Leases - 144,532 202,252 346,784
Unavailable revenue - 3,064,793 - 3,064,793
Total Deferred Inflows of Resources - 3,209,325 202,252 3,411,577

FUND BALANCE
Nonspendable:

Loans receivable 159,000 - - 159,000
Restricted for:

Library - - 556,848 556,848
Capital projects - - 9,043,666 9,043,666
Land held for resale 344,338 - - 344,338
Repairs and maintenance - - 182,625 182,625
Pensions 2,188,659 - - 2,188,659
VTA - 577,887 - 577,887
Committed to:

Budget stabilization 6,736,781 - - 6,736,781
Catastrophic 6,736,781 - - 6,736,781
Pensions/OPEB 300,000 - - 300,000
Measure G 2018 district sales tax 590,581 1,572,619 - 2,163,200 Special revenue funds - - 1,091,822 1,091,822
Assigned to:

Open Space 410,000 152,000 - 562,000
Parking - 292,000 - 292,000
Sustainability 140,553 - - 140,553
Capital/Special projects 8,651,056 16,421,064 - 25,072,120 Carryover encumbrances 85,861 - - 85,861
Comcast PEG - 50,000 - 50,000
ERAF Risk 1,430,054 - - 1,430,054
Economic recovery 20,684 - - 20,684
Compensated absences 1,555,478 - - 1,555,478
Market fluctuations 1,712,246 - - 1,712,246
Total Fund Balances 31,062,072 19,065,570 10,874,961 61,002,603 Total Liabilities, Deferred Inflows
of Resources and Fund Balances $ 42,617,193 $ 29,754,892 $ 11,169,232 $ 83,541,317 The notes to the financial statements are an integral part of this statement.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE GOVERNMENT-WIDE STATEMENT OF NET
POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2024

Fund Balance - Total Governmental Funds $ 61,002,603
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. 138,865,947

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. 7,534,550

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 $ 9,339,476
PERS Safety Plan adjustments 13,827,440
OPEB plan adjustments 5,806,759 28,973,675
Deferred Inflows of resources:

PERS Miscellaneous Plan adjustments $ (18,028)
PERS Safety Plan adjustments (1,676,319)
OPEB plan adjustments (1,515,332) (3,209,679)

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. 3,064,793

LONG-TERM LIABILITIES
Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the Governmental Funds.

Subscription liabilities $ (637,377)
Loans payable (1,040,223)
Net Pension Liabilities (63,027,669)
Net OPEB Liability (9,009,446)
Compensated absences (3,110,957) (76,825,672)
Net Position - Governmental Activities $ 159,406,217
The notes to the financial statements are an integral part of this statement.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds

REVENUES
Property Taxes $ 24,227,166 $ - $ 38,437 $ 24,265,603
Sales Taxes 8,071,735 - - 8,071,735
Transient Occupancy Taxes 2,367,653 - - 2,367,653
Other Taxes 5,520 - 24,838 30,358
Licenses & Permits 5,513,209 157,535 556,554 6,227,298
Intergovernmental 1,157,224 3,362,026 1,798,394 6,317,644 Charges for Services 5,913,520 1,137,659 - 7,051,179
Fines and Forfeitures 480,634 - - 480,634
Franchise Fees 2,547,011 - - 2,547,011
Developer Assessments - 12,880 - 12,880
Interest 2,698,736 100,179 309,185 3,108,100
Use of Property 34,722 91,284 171,495 297,501
Other 516,082 - 88,411 604,493
Total Revenues 53,533,212 4,861,563 2,987,314 61,382,089

EXPENDITURES
Current:

General Government 9,573,022 - - 9,573,022
Public Safety 20,718,781 - 20,718,781 -
Parks and Public Works 9,789,656 - 109,427 9,899,083
Community Development 5,246,729 - - 5,246,729
Library Services 3,253,389 - 82,000 3,335,389
Sanitation and Other - - 252,605 252,605
Capital Outlay 708,302 10,193,353 1,464,600 12,366,255
Debt service:

Principal 225,370 - - 225,370
Interest & Fees 3,716 - - 3,716
Total Expenditures 49,518,965 10,193,353 1,908,632 61,620,950

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 4,014,247 (5,331,790) 1,078,682 (238,861)

OTHER FINANCING SOURCES (USES)
Subscriptions 706,713 - - 706,713
Sale of capital assets 223 - - 223
Transfers in 564,910 3,101,325 - 3,666,235
Transfers (out) (3,752,325) (453,990) (110,920) (4,317,235) Total Other Financing Sources (Uses) (2,480,479) 2,647,335 (110,920) 55,936 NET CHANGES IN FUND BALANCES 1,533,768 (2,684,455) 967,762 (182,925) BEGINNING FUND BALANCES 29,528,304 21,750,025 9,907,199 61,185,528 ENDING FUND BALANCES $ 31,062,072 $ 19,065,570 $ 10,874,961 $ 61,002,603 The notes to the financial statements are an integral part of this statement.

ITEM NO. 14.

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, 2024

NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ (182,925) 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) $ 12,016,644 Current year depreciation (5,092,938) 6,923,706
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. (24,094)

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.

Subscription Liabilities Debt Issuances (706,713)
Subscription Liabilities Principal Payments 69,336
PG&E Loan 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. 2,266,093

COMPENSATED ABSENCES
In governmental funds, compensated absences such as vacations and sick leave are expenditures 50,290

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. 122,506

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. (3,781,956)

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. 991,678 CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES $ 5,883,955 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.

ITEM NO. 14.

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, 2024

Variance With
Final Budget
Original Final Positive
Budget Budget Actual (Negative)

REVENUES
Property Taxes $ 23,249,311 $ 23,938,717 $ 24,227,166 $ 288,449 Sales Taxes 9,152,778 7,881,069 8,071,735 190,666
Transient Occupancy Taxes 2,419,000 2,262,528 2,367,653 105,125 Other Taxes 7,000 7,000 5,520 (1,480)
Licenses & Permits 5,365,996 5,684,574 5,513,209 (171,365) Intergovernmental 913,094 1,362,032 1,157,224 (204,808) Charges for Services 4,416,250 4,715,797 5,913,520 1,197,723 Fines and Forfeitures 203,450 365,950 480,634 114,684
Franchise Fees 2,116,470 3,308,703 2,547,011 (761,692)
Interest 1,035,097 1,566,384 2,698,736 1,132,352
Use of Property 35,811 31,839 34,722 2,883
Other 281,954 622,555 516,082 (106,473)
Total Revenues 49,196,211 51,747,148 53,533,212 1,786,064

EXPENDITURES
Current:

General Government:

Town Council 184,386 197,260 196,368 892
Town Attorney 771,611 947,963 751,614 196,349
Administrative Services 6,061,730 6,506,131 5,877,879 628,252 Non-Departmental 3,157,423 3,246,886 2,747,161 499,725
Total General Government 10,175,150 10,898,240 9,573,022 1,325,218 Public Safety 19,685,259 21,067,571 20,718,781 348,790
Parks & Public Works 10,028,859 10,401,802 9,789,656 612,146 Community Development 5,390,623 5,509,852 5,246,729 263,123 Library Services 3,175,170 3,285,841 3,253,389 32,452
Capital Outlay - 40,000 708,302 (668,302)
Debt Service:

Principal 156,034 156,034 225,370 (69,336)
Interest & Fees - - 3,716 (3,716)
Total Expenditures 48,611,095 51,359,340 49,518,965 1,840,375

EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES 585,116 387,808 4,014,247 3,626,439

OTHER FINANCING SOURCES (USES)
Subscriptions - - 706,713 706,713
Gain from sale of assets 1,000 1,000 223 (777)
Transfers In 571,536 595,411 564,910 (30,501)
Transfers Out (2,456,327) (3,752,608) (3,752,325) 283
Total Other Financing Sources (Uses) (1,883,791) (3,156,197) (2,480,479) 675,718 NET CHANGES IN FUND BALANCE $ (1,298,675) $ (2,768,389) 1,533,768 $ 4,302,157 BEGINNING FUND BALANCE 29,528,304
ENDING FUND BALANCE $ 31,062,072
The notes to the financial statements are an integral part of this statement.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

PROPRIETARY FUNDS -

STATEMENT OF NET POSITION
JUNE 30, 2024

Governmental
Activities
Internal Service
Funds
ASSETS
Current Assets:

Cash & investments $ 8,849,567
Restricted cash & investments 121,438
Accounts Receivable 39,410
Total current assets 9,010,415
Noncurrent Assets:

Leases receivable 1,407,683
Subscription assets, net 511,016
Total noncurrent assets 1,918,699
Total Assets $ 10,929,114

LIABILITIES
Current Liabilities:

Accounts payable $ 217,517
Due to other governments 59
Interest payable 19,943
Subscription liabilities - Current 161,331
Total current liabilities 398,850
Noncurrent liabilities:

Claims payable 1,889,992
Subscription liabilities 284,450
Total noncurrent liabilities 2,174,442
Total Liabilities $ 2,573,292

DEFERRED INFLOWS OF RESOURCES
Leases $ 821,272

NET POSITION
Net Investment in capital assets $ 65,235
Restricted for workers compensation claims 121,438
Unrestricted 7,347,877
Total Net Position $ 7,534,550
The notes to the financial statements are an integral part of this statement.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

PROPRIETARY FUNDS -

STATEMENT OF REVENUES, EXPENSES

AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

Governmental
Activities
Internal Service
Funds

OPERATING REVENUES
Charges for services $ 4,398,817
Use of money and property 166,373
Other local taxes 24,838
Other revenue and reimbursements 486,265
Total Operating Revenues 5,076,293

OPERATING EXPENSES
Insurance expenses 2,463,881
Services and Supplies 2,068,407
Depreciation/amortization 202,422
Total Operating Expenses 4,734,710
Operating Income (Loss) 341,583

NONOPERATING REVENUE (EXPENSES)
Investment earnings 21,516
Interest expense (22,421)
Income (loss) before transfers 340,678
Transfers in 651,000
Transfers out -
Net transfers 651,000
Change in Net Position 991,678
BEGINNING NET POSITION 6,542,872
ENDING NET POSITION $ 7,534,550
The notes to the financial statements are an integral part of this statement.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

PROPRIETARY FUNDS -

STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

Governmental
Activities
Internal Service
Funds

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 4,759,258
Payments to suppliers (4,433,671)
Insurance reimbursements 397,312
Claims paid (361,241)
Net cash provided (used) by operating activities 361,658

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers In 651,000
Transfers Out -
Net cash provided (used) by noncapital financing activities 651,000

CASH FLOWS FROM CAPITAL RELATED FINANCING ACTIVITIES
Interest paid (30,393)
Principal paid (149,154)
Acquisition of subscription assets -
Net cash provided (used) by capital related financing activities (179,547)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash collected from investment eanings 21,516
Net cash provided (used) Investing Activities 21,516
Net Increase(Decrease) in Cash and Investments 854,627
Cash and investments - beginning of year 8,116,378
Cash and investments - end of year $ 8,971,005
Reconciliation of Operating Income to Cash Flows
from Operating Activities:

Operating Income $ 341,583
Adjustments to reconcile operating income to cash flows from operating activities:

Depreciation/amortization 202,422
Change in assets and liabilities:

Accounts receivables 36,028
Leases receivable (59,528)
Deferred inflows of resources 103,777
Accounts payable (25,908)
Claims payable (236,716)
Cash Flows From Operating Activities $ 361,658
Cash and cash equivalents:

Cash and investments $ 8,849,567
Restricted cash and investments 121,438
Total cash and cash equivalents $ 8,971,005
The notes to the financial statements are an integral part of this statement.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

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.

ITEM NO. 14.

RDA
Successor
Agency
ASSETS
Cash and investments $ 2,026,518
Restricted cash and investments 2,118,936
Loans receivable 633,746
Capital assets:

Depreciable, net of accumulated depreciation 1,016,930
Total Assets $ 5,796,130

LIABILITIES
Accounts payable $ 27
Interest payable 187,218
Long-term debt:

Due within one year 1,485,000
Due in more than one year 8,755,925
Total Liabilities $ 10,428,170

NET POSITION
Restricted for RDA $ (4,632,040)
Total Net Position $ (4,632,040)
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, 2024

ITEM NO. 14.

RDA
Successor
Agency

ADDITIONS
Property taxes $ 1,952,104
Investment earnings 133,738
Total Additions 2,085,842

DEDUCTIONS
Program expenses of former RDA 5,394
Interest and fiscal agency expenses of RDA 423,007
Depreciation expense 101,693
Total Deductions 530,094
CHANGE IN NET POSITION 1,555,748
NET POSITION - BEGINNING OF YEAR (6,187,788)
NET POSITION - END OF YEAR $ (4,632,040)
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, 2024

ITEM NO. 14.

Notes to Basic Financial Statements

ITEM NO. 14.

This Page Left Intentionally Blank

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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, 2024, was 33,320.

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 13, 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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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

General Fund is the general operating fund of the Town and is used to account for all financial resources except those required to be accounted for in another fund.

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

The Town also reports the following fund types:

Internal Service Funds are used to account for services 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 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 separate Fiduciary Fund financial statements. Fiduciary Fund Financial Statements include a statement of net position and a statement of changes in net position. Fiduciary funds are presented using the “economic resources measurement focus.”
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 and available. The Town considers property tax revenues reported in the governmental funds to be

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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 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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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, 2022
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
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, 2022
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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 Town has determined is reasonably certain of being exercised, then the lease asset is amortized over the useful life of the

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

underlying asset. Intangible right-to-use subscription assets are amortized over the shorter of the subscription term or the useful life of the underlying IT asset.

The Town has assigned the useful lives listed below to capital assets:

Buildings 25-40 years
Improvements 25-40 years
Machinery and equipment 2-20 years
Furniture and fixtures 5-12 years
Software 5-7 years
Infrastructure 20-40 years
Major capital outlay for capital assets and improvements are capitalized as projects are constructed.

Capital assets may be acquired using federal and state grants, contributions from developers, and contributions or grants from other governments. GASB 34 requires that these contributed assets be accounted for as revenue at the time they are contributed.

Leases Receivable - The Town’s leases receivable are measured at the present value of lease payments expected to be received during the lease terms. The present value, net of accumulated amortization, is reported as deferred inflows of resources is recorded for leases. Deferred inflows of resources are recorded at the initiation of the leases in an amount equal to the initial recording of the leases receivable, plus incentive payments received. Amounts recorded as deferred inflows of resources from the leases are amortized on a straight-line basis over the term of the lease.

Deferred Compensation Plan - The Town established a deferred compensation plan created in accordance with California Government Code Section 53212 and Internal Revenue Code Section 457. The plan, available to all Town employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. Deferred compensation plans are not reported as part of the Town’s assets or liabilities, as the deferred compensation plan trustees hold those funds in trust on behalf of employees until the employees are eligible to receive the benefits.

Compensated Absences - Accumulated Vacation, Sick Pay, and Other Employee Benefits are accrued as earned. Upon termination, employees are paid for all unused vacation at their current hourly rates. Sick leave earned is cashed out based on the following schedule for employees with at least 150 hours accrued and up to a maximum amount as specified under labor contract provisions:

For employees under contract 1-59 months 25.0%
For employees under contract 60-119 months 37.5%
For employees under contract 120 months or more 50.0%
The Town’s liability for compensated absences is determined annually. For all governmental funds, amounts expected to be paid out of current financial resources are recorded as liabilities of each fund;

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

the long-term portion is recorded in the Statement of Net Position. The changes of the compensated absences were as follows:

Compensated absences are liquidated by the fund that has recorded the liability. The long-term portion of governmental activities compensated absences is liquidated primarily by the General Fund. Only compensated absences related to terminated employees are reported in the fund financial statements.

Unearned Revenue - Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as deferred inflows from unearned revenue. In the governmental fund financial statements, receivables associated with non-exchange transactions that will not be collected within the availability period have been recorded as deferred inflows from unavailable revenue.

Long-Term Liabilities - In the government-wide financial statements and private-purpose trust funds long-term debt and other long-term obligations are reported as liabilities in the applicable statement of net position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount.

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

Subscription Based Information Technology Arrangements - The Town recognizes subscription liabilities with an initial, individual value of $100,000 or more. The Town uses its estimated incremental borrowing rate to measure subscription liabilities unless it can readily determine the interest rate in the arrangement. The Town's estimated incremental borrowing rate is calculated as described above. The Town’s estimated incremental borrowing rate is based on its most recent public debt issuance.

Deferred Outflows/Deferred Inflows of Resources - Deferred outflows of resources is a consumption of net assets by the Town that is applicable to a future reporting period, for example, contributions to pension and OPEB plans that are after the actuarial measurement date.

Deferred inflows of resources is an acquisition of net assets by the Town that is applicable to a future reporting period, for example, unavailable revenue.

Beginning Balance $ 3,161,247
Net Change (50,290)
Ending Balance 3,110,957
Compensated Absences Current 596,874
Compensated Absences Noncurrent $ 2,514,083

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

Net Position - In the government-wide financial statements, net position is classified in the following categories:

Net Investment in Capital Assets - This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or improvement of the assets. In addition, deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt also are included in the net investment in capital assets component of net position.

Restricted Net Position - This amount is restricted by external creditors, grantors, contributors, or laws or regulations of other governments.

Unrestricted Net Position - This amount is all net position that does not meet the definition of "net investment in capital assets" or "restricted net position." Fund Balances - The Town does not have a policy identifying a minimum unassigned fund balance.

Because amounts in the nonspendable, restricted, committed, and assigned categories are subject to varying constraints on their use, the remaining fund balances are otherwise unassigned.

In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and Governmental Fund Type Definitions, the Town classifies governmental fund balances as follows:

Nonspendable includes fund balance amounts that cannot be spent either because it is not in spendable form or because of legal or contractual constraints.

Restricted includes fund balance amounts that are constrained for specific purposes which are externally imposed by providers, such as creditors or amounts constrained due to constitutional provisions or enabling legislation.

Committed includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision making authority and does not lapse at year-end. Committed fund balances are imposed by the Town Council.

Assigned includes fund balance amounts that are intended to be used for specific purposes that are neither considered restricted or committed. Fund balance may be assigned by the Town Manager or the Finance Director.

Unassigned includes fund balances within the funds which have not been classified within the above-mentioned categories. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than the General Fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed, or

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that fund.

The Town uses restricted/committed amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal documents/contracts that prohibit doing this, such as a grant agreement requiring dollar for dollar spending. Additionally, the Town would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made.

Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the dates of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual results could differ from those estimates.

Subsequent Events - Management has considered subsequent events through November 11, 2024, the date which the financial statements were available to be issued. The financial statements include all events or transactions, including estimates, required to be recognized in accordance with generally accepted accounting principles. Management has determined that there are no non-recognized subsequent events that require disclosure.

Property Tax Levy, Collection and Maximum Rates - State of California Constitution Article XIII A provides that the combined maximum property tax rate on any given property may not exceed 1% of its assessed value unless an additional amount for general obligation debt has been approved by voters. Assessed value is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2% per year unless the property is sold, transferred, or substantially improved. The State Legislature has determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school districts and other districts.

The County of Santa Clara assesses properties, bills for and collects property taxes on the following schedule:

Secured Unsecured
Valuation/lien dates January 1 January 1
Levy dates January 1 January 1
Due dates (delinquent as of) 50% on November 1 (December 10) March 1 (August 31) 50% on February 1 (April 10)
The term "unsecured" refers to taxes on personal property other than land and buildings. These taxes are secured by liens on the property being taxed. Property taxes levied are recorded as revenue and receivables when they are collected during the fiscal year of levy or within 60 days of year-end.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

Budgets and Budgetary Accounting - The Town follows the procedures below when establishing the budgetary data reflected in the financial statements:

1. The Town Manager submits to the Town Council a proposed operating and capital improvement budget for the fiscal year commencing the following July 1. The budgets include the proposed expenditures and the means of financing them.

2. Public hearings are conducted to obtain taxpayer comments.

3. The budget is legally enacted through adoption of Town resolution by Council.

4. The Town Manager is authorized to implement the programs as approved in the adopted budget.

Within a specific fund, the Town Manager may transfer appropriations between categories, departments, projects and programs as needed to implement the adopted budget, whereas the Town Council must authorize budget increases and decreases, and transfers between funds.

5. Budgets are adopted on a basis consistent with generally accepted accounting principles except for proprietary funds which budget for capital outlays but not depreciation. Budgets were adopted for the General Fund, Special Revenue Funds, Internal Service Funds, and Capital Projects Funds.

6. Budgeted amounts are as originally adopted or as amended by Town Council. Individual amendments were not material in relation to original appropriations.

Excess of Expenditures over Appropriations - There were no significant expenditures in excess of budget during for the year ended June 30, 2024.

Encumbrances - Under encumbrance accounting, purchase orders, contract and other commitments for expenditures are recorded in order to reserve that portion of the applicable appropriation.

Encumbrance accounting is employed as an extension of formal budgetary integration in all funds.

Encumbrances outstanding at year-end are reported as commitments or assignments of fund balances since they do not constitute expenditures or liabilities; unexpended and unencumbered appropriations lapse at year end in all funds. Encumbered appropriations are carried forward to the following year.

Reclassifications - Certain accounts in the prior-year financial statements have been reclassified for the presentation in the current-year financial statements.

G. Accounting and Reporting Changes
GASB Statement No. 100, Accounting Changes and Error Corrections—an amendment of GASB Statement No. 62
This Statement defines accounting changes as changes in accounting principles, changes in accounting estimates, and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. This Statement also prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections in previously issued financial statements. This statement did not have a material impact on the financial statements.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

GASB Statement No. 101, Compensated Absences
This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave.

Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences.

This Statement requires that a liability for certain types of compensated absences - including parental leave, military leave, and jury duty leave—not be recognized until the leave commences. This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used. A liability for leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. Certain salary-related payments that are directly and incrementally associated with payments for leave also should be included in the measurement of the liabilities.

The requirements of this Statement are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. However, the Town implemented GASB 101 as of June 30, 2024. This statement did not have a material impact on the financial statements.

H. Upcoming Accounting and Reporting Changes
The Town is currently analyzing its accounting practices to determine the potential impact on the financial statements of the following recent GASB Statements:

GASB Statement No. 102, Certain Risk Disclosures
This Statement requires a government to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. Additionally, this Statement requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued.

If a government determines that those criteria for disclosure have been met for a concentration or constraint, it should disclose information in notes to financial statements in sufficient detail to enable users of financial statements to understand the nature of the circumstances disclosed and the

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

government’s vulnerability to the risk of a substantial impact. The disclosure should include descriptions for (1) the concentration or constraint (2) each event associated with the concentration or constraint that could cause a substantial impact if the event had occurred or had begun to occur prior to the issuance of the financial statements (3) actions taken by the government prior to the issuance of the financial statements to mitigate the risk. The requirements of this Statement are effective for fiscal years beginning after June 15, 2024, and all reporting periods thereafter.

GASB Statement No. 103, Financial Reporting Model Improvements This Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability.

This Statement establishes new accounting and financial reporting requirements or modifies existing requirements related to (a) Management’s discussion and analysis (MD&A) (b) Unusual or infrequent items (c) Presentation of the proprietary fund statement of revenues, expenses, and changes in fund net position (d) Information about major component units in basic financial statements (5) Budgetary comparison information (6) Financial trend information in the statistical section
The requirements of this Statement are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter.

NOTE 2 - CASH AND INVESTMENTS
The Town pools cash from all sources and all funds except Restricted Cash and Investments so that it can be invested at the maximum yield, consistent with safety and liquidity, while existing funds have cash available for expenditures.

Cash and Investments Defined
The Town includes only cash deposits in banks as cash. Investments in LAIF and government securities mutual funds are net in the order of liquidity, since they may be withdrawn without penalty. U.S.

Treasuries, U.S. Agencies and Certificates of Deposit are the Town’s least liquid investments, since they must be held to maturity.

Cash Deposits with Banks and Custodial Credit Risk
California Law requires banks and savings and loan institutions to pledge government securities with a fair value of 110% of the Town’s cash on deposit, first trust deed mortgage notes with a value of 150% of the deposit, or letters of credit issued by the Federal Home Loan Bank of San Francisco with a value of 100% of the deposit as collateral. Under California Law this collateral is held in the Town’s name and places the Town ahead of general creditors of the institution. The Town’s cash deposits are collateralized under this law.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

The bank balance of the Town’s cash deposits was $15,664,336 and the carrying amount was $15,176,656 as of June 30, 2024. The bank balance and the carrying amount differed due to deposits in transit and outstanding checks.

Investments
The Town and its fiscal agent invest in individual investments and in investment pools. Individual investments are evidenced by specific identifiable pieces of paper called “securities instruments,” or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. In order to maximize security, the Town employs the Trust department of a bank as the custodian of all its investments, regardless of their form.

Fair Value Measurements
GASB 72 established a hierarchy of inputs to the valuation techniques above. This hierarchy has three levels:
• Level 1 inputs are quoted prices in active markets for identical assets or liabilities. • Level 2 inputs are quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other than quoted prices that are not observable
• Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal.

Local Agency Investment Fund (LAIF)
The Town invests in the California State Treasurer’s Local Agency Investment Fund. LAIF, established in 1977, is regulated by California Government Code Section 16429 and under the day to day administration of the State Treasurer. As of June 30, 2024, LAIF had approximately $178 billion in investments that were fully invested in non-derivative financial products. These investments are described as follows:

1. Structured Notes are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and / or that have embedded forwards or options.

2. Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.

Risk Disclosures
Interest Rate Risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to the changes in market interest rates. One of the ways that the Town manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

Information about the sensitivity of the fair values of the Town's investments to market interest rate

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

fluctuations is provided in the summary of cash and investments table on the following page that shows the distribution of the Town's investments by maturity.

Credit Risk is the risk of loss due to the failure of the security issuer. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The summary of cash and investments table on the following page shows the minimum rating under the actual rating of the Town’s investments at year end.

Custodial Credit Risk is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Town’s investment in money market fund and LAIF is not categorized as to custodial credit risk. Its U.S. Government Agency Securities investment is held by a third-party financial institution under the third party’s trust department’s name and thus not exposed to custodial credit risk.

Concentration of Credit Risk is the risk that the Town’s investments are exposed because the types of investments have been too limited. The Town’s Policy states that, with the exception of US Treasury securities and LAIF, no more than 50% of the Town’s total investment portfolio will be invested in one single security type or with a single financial institution. The Town was in compliance with this policy as of June 30, 2024.

The following table summarizes the Towns policy related to maturities and concentration of investments:

Maximum
Maximum Portfolio
Investment Type Maturity Percentage
US Treasury Obligations 5 years None
US Agency Obligations 5 years None
Bankers Acceptances 180 days 30%
Commercial Paper 270 days 25%
Medium Term Notes 5 years 30%
Collateralized CD's 5 years 30%
CA LAIF NA $75 million
Money Market Funds NA 20%

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30, 2024:

Cash and investments are classified in the financial statements as shown below, based on whether or not their use is restricted by Town debt or Agency agreements.

NOTE 3 - LONG-TERM NOTES RECEIVABLE
The Town had the following long-term notes receivable as of June 30, 2024:

Available Concentration Time to Weighted
for of Credit Input Mature Average
Operations Restricted Total Risk Rating Level (Years) Maturity Government Bonds $ 20,229,135 - 20,229,135 $ 30.50% AA+ 2 .42-4.51 2.51 Government Agencies 15,255,972 - 15,255,972 23.00% AA+ 2 .01-4.72 1.92 Corporate Bonds 14,328,567 - 14,328,567 21.60% A- to AA+ 2 .13-4.79 3.00 Mutual Funds 61,190 - 61,190 0.09% Not Rated 2 n/a n/a
LAIF 16,455,165 - 16,455,165 24.81% Not Rated n/a n/a n/a Total Investments 66,330,029 - 66,330,029 100.00%
Cash Deposits with Banks 15,159,123 2,298,718 17,457,841 Money Market Accounts 17,530 - 17,530
Pension Trust - 2,188,659 2,188,659
Cash on Hand at Town 2,400 - 2,400
Total Cash and Investments $ 81,509,082 $ 4,487,377 $ 85,996,459 Description
Fiduciary
Description Total Town Funds Totals
Cash and Investments Available for Operations $ 79,482,564 $ 2,026,518 $ 81,509,082 Restricted Cash and Investments 2,368,441 2,118,936 4,487,377 Total Cash and Investments $ 81,851,005 $ 4,145,454 $ 85,996,459 Interest
Rate Maturity Balance
General Fund:

Rehab Loan to Charities Various Various 159,000 $
BMP Loans Various Various 900,000
Total General Fund 1,059,000
Housing Conservation 0-5% Various 78,752
Total CDBG 78,752
Total Long-Term Notes Receivable - Government-Wide Statement of Net Position 1,137,752 Project Match Various Various 633,746
Total Long-Term Notes Receivable $ 1,771,498
Community Development Block Grant Fund (CDBG):

Description
Successor Agency Affordable Housing:

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

BMP Loans - The purpose of the Below Market Price (BMP) Housing Program is to provide adequate housing for Los Gatos residents, regardless of age, income, race, or ethnic background. As required by the State, the Town plans and facilitates the construction of housing adequate for future populations consistent with environmental limitations and in a proper relationship to community facilities, open space, transportation, and small-town character.

Active Home Loans and Housing Conservation Loans - The Town used CDBG Funds (funded through federal grants) to assist low- and moderate-income homeowners to improve their homes and to fund low-income housing rental properties acquisition and rehabilitation. These loans are secured by deeds of trust.

Project Match - The Successor Agency has a loan agreement with Project Match, a nonprofit benefit corporation, to acquire and rehabilitate four- or five-bedroom single family homes. The property is to provide affordable housing rental to very low-income senior households. The loan receivable is evidenced by a promissory note and secured by a deed of trust. From inception of the loan through June 30, 2024, no interest or principal payments have been made.

NOTE 4 - LEASES RECEIVABLE
In March of 2021, the Town entered into a five-year lease with Tesla Motor Cars (Tesla) allowing Tesla to use Town property at the North Lot for charging stations. Under the lease, Tesla pays the Town $96,000 per year during the term of the lease. The lease receivable is measured as the present value of the future minimum rent payments expected to be received during the lease term at a discount rate of 2%.

In January of 2010, the Town entered into a twenty-year lease with the Los Gatos Saratoga Recreation (LGS) allowing LGS to use the property at 123 East Main Street. Under the lease, LGS paid the Town $19,950 per year at the beginning of the lease. After cumulative CPI adjustments, the payment in the final year of the lease will be $30,216. The lease receivable is measured as the present value of the future minimum rent payments expected to be received during the lease term at a discount rate of 6.6%.

In January of 2010, the Town entered into a twenty-year lease with the Los Gatos Saratoga Recreation (LGS) allowing LGS to use the property at 208 East Main Street. Under the lease, LGS paid the Town $90,000 per year at the beginning of the lease. After cumulative CPI adjustments, the payment in the final year of the lease will be $243,435. The lease receivable is measured as the present value of the future minimum rent payments expected to be received during the lease term at a discount rate of 6.6%.

In January of 2016, the Town entered into a twenty-year lease with New Museum Los Gatos (NUMU) to use the property at 106 East Main Street. Under the lease, NUMU pays the Town $25,000 per year.

The lease receivable is measured as the present value of the future minimum rent payments expected to be received during the lease term at a discount rate of 5.86%.

In December of 2022, the Town entered into a fifty-five-month lease with CineLux Theaters allowing CineLux Theaters to use the Los Gatos Threatre building. Under the lease, CineLux Theaters pays the Town up to $120,000 per year during the term of the lease. The lease receivable is measured as the

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

present value of the future minimum rent payments expected to be received during the lease term at a discount rate of 5.99%.

The following summarizes the lease balances as of June 30, 2024:

The following summarizes the future lease collections as of June 30, 2024:

NOTE 5 - INTERFUND TRANSACTIONS
Inter-fund Receivables and Payables - Amounts due to or due from other funds reflect inter-fund balances for services rendered or short-term loans expected to be repaid in the next fiscal year. Advances to or from other funds are long-term loans between funds that are to be repaid in their entirety over several years.

Transfers - With Council approval resources may be transferred from one fund to another. Transfers routinely reimburse funds that have made an expenditure on behalf of another fund. Transfers may also be made to pay for capital projects or capital outlays, lease or debt service payments, operating expenses and low and moderate-income housing projects.

Lease Receivable Beginning Additions Deletions Ending
Tesla $ 241,506 $ - $ (92,010) $ 149,496
LGS 123 E. Main St 148,858 - (17,852) 131,006
LGS 208 E. Main St 1,199,297 - (143,795) 1,055,502
NUMU - 232,841 (11,666) 221,175
Los Gatos Threatre 319,957 - (15,828) 304,129
$ 1,909,618 $ 232,841 $ (281,151) $ 1,861,308
Deferred Inflows of Resources Beginning Additions Deletions Ending Tesla $ 235,816 $ - $ (91,284) $ 144,532
LGS 123 E. Main St 83,399 - (12,997) 70,402
LGS 208 E. Main St 634,096 - (98,820) 535,276
NUMU - 232,841 (17,247) 215,594
Los Gatos Threatre 269,670 - (67,418) 202,252
$ 1,222,981 $ 232,841 $ (287,766) $ 1,168,056
For the Year
Ending June 30, Principal Interest Total
2025 $ 362,421 $ 104,325 $ 466,746
2026 363,791 82,970 446,761
2027 352,973 62,902 415,875
2028 248,139 42,949 291,088
2029 270,392 26,020 296,412
2030-2034 205,587 33,434 239,021
2035-2037 58,005 4,494 62,499
Total Future Collections $ 1,861,308 $ 357,094 $ 2,218,402

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

Transfers between funds during the fiscal year ended June 30, 2024 were as follows:

NOTE 6 - CAPITAL ASSETS
Changes in the Town’s capital assets during the fiscal year are shown as follows:

Opinion Unit Program Title Amount Opinion Unit Program Title Description General Fund Non-Departmental $ 1,615,000 Appropriated Reserves GFAR Adopted Budget Support General Fund Non-Departmental 430,000 Internal Service Liability Program Internal Service Fund General Fund Non-Departmental 866,281 Appropriated Reserves ARC Interim Community Center Capital Project General Fund Non-Departmental 221,000 Internal Service Facilities Rent Waivers General Fund Measure G Program 620,044 Appropriated Reserves GFAR Capital projects Nonmajor Blackwell District 460 General Fund Non-Departmental Admin Support Nonmajor Kennedy Meadows 1,510 General Fund Non-Departmental Admin Support Nonmajor Gemini Court 610 General Fund Non-Departmental Admin Support Nonmajor Santa Rosa Heights 660 General Fund Non-Departmental Admin Support Nonmajor Vasona Heights 1,430 General Fund Non-Departmental Admin Support Nonmajor Hillbrook Drive 250 General Fund Non-Departmental Admin Support Appropriated Reserves GFAR 102,000 General Fund Non-Departmental Vehicle Impact Fees Appropriated Reserves Street Repairs & Resurfacing 23,875 General Fund PPW Admin Engineering Support Appropriated Reserves GFAR 193,933 General Fund PPW Admin Engineering Support Appropriated Reserves GFAR 121,683 General Fund Town Engineering Engineering Support Appropriated Reserves Traffic Mitigation 12,499 General Fund Non-Departmental Admin Support Nonmajor Gas Tax 106,000 General Fund Non-Departmental Admin Support Total Transfers $ 4,317,235
Transfers Out Transfers In
Beginning Additions Retirements Transfers Ending
Nondepreciable/Amortizable Capital Assets:

Land $ 26,066,103 -$ -$ $ 26,064,735 (1,368) $
Construction in Progress 7,513,148 7,131,654 - 846,241 15,491,043 Total Nondepreciable/Amortizable 33,579,251 7,131,654 - 844,873 41,555,778 Depreciable/Amortizable Capital Assets:

Subscription Right of Use Assets 915,860 706,713 - - 1,622,573 Buildings and Improvements 39,902,775 51,564 - 2,908,377 42,862,716 Equipment & Vehicle 12,952,294 187,323 (243,421) 12,893,445 (2,751) Infrastructure - All Other 28,358,260 133,367 - - 28,491,627 Infrastructure - Streets 87,941,698 3,806,023 (1,695,310) (3,750,500) 86,301,911 Total Depreciable/Amortizable 170,070,887 4,884,990 (1,938,731) (844,874) 172,172,272 Less Accumulated Depreciation/Amortization for:

Subscription Right of Use Assets 202,422 220,090 - - 422,512 Buildings and Improvements 11,056,169 935,250 - 11,995,280 3,861 Equipment & Vehicle 10,489,600 604,526 (219,330) 10,870,937 (3,859) Infrastructure - All Other 9,677,566 874,817 - - 10,552,383 Infrastructure - Streets 39,544,608 2,660,677 (1,695,310) - 40,509,975 Total Acccumulated Depreciation/Amortization 70,970,365 5,295,360 (1,914,640) 74,351,087 2 Net Depreciable/Amortizable Capital Assets 99,100,522 (410,370) (24,091) (844,876) 97,821,185 Capital Assets, Net $ 132,679,773 $ 6,721,284 $ (24,091) $ 139,376,963 (3) $

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

During the year, the Town transferred $2,907,014 from construction in progress (CIP) to buildings and improvements and $141,324 to infrastructure streets for capital projects that were completed and placed in service. The transfers out were offset by $3,894,579 of transfers in. The Town transferred $3,891,824 from infrastructure - streets back into CIP since these assets were not available for service. The net transfers out of infrastructure - streets of $3,750,500 include the $3,891,824 transfer out to CIP net of the $141,324 transfer in from CIP as reported in the above schedule. There was also a reclassification of equipment back into CIP of $2,751. Total transfers into buildings and improvements included a land reclassification of $1,368 for a total transfer in of $2,908,377. The assets reclassified to CIP had not been depreciated.

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:

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, 2024:

Depreciation/
Amortization
Expense
General Government $ 550,355
Public Safety 439,232
Parks & Public Works 3,855,796
Community Development 48,251
Library 399,618
Sanitation 2,108
Total Governmental Activities $ 5,295,360
Governmental Activities
Beginning
Adjustments and
Additions Retirements Ending
Depreciable/Amortizable Capital Assets:

Buildings and Improvements $ 4,067,708 $ - $ 4,067,708 - $ Less Accumulated Depreciation/Amortization for:

Buildings and Improvements 2,949,085 101,693 3,050,778 - Net Depreciable/Amortizable Capital Assets 1,118,623 (101,693) 1,016,930 - Capital Assets, Net $ 1,118,623 $ (101,693) $ 1,016,930 - $

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

Future debt service requirements of the PG&E loan were as follows:

The following summarizes the changes in long-term debt in the Successor Agency trust fund during the fiscal year ended June 30, 2024:
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.

For the Year
Ending June 30, Principal Interest Total
2025 $ 156,034 -$ $ 156,034
2026 156,034 - 156,034
2027 156,034 - 156,034
2028 156,034 - 156,034
2029 156,034 - 156,034
2030-2034 260,053 - 260,053
Total Debt Service $ 1,040,223 -$ 1,040,223 $
Interest Maturity Original Beginning Ending
Long-Term Debt Rate Date Issue Balance Deletions Balance 2002 COP 2.5-5% 2031 10,725,000 $ $ 4,860,000 $ 440,000 $ 4,420,000 2010 COP 2.5-4.25% 2028 15,675,000 6,570,000 975,000 5,595,000 Subtotal COP's 26,400,000 11,430,000 1,415,000 10,015,000 Premiums 753,095 263,580 37,655 225,925
Total Long-Term Debt $ 27,153,095 $ 11,693,580 $ 1,452,655 $ 10,240,925 Due Within One Year 1,485,000
Due in More Than One Year $ 8,755,925
Interest Maturity Original Beginning Additions/ Ending
Long-Term Debt Rate Date Issue Balance Adjustments Deletions Balance Direct Borrowings:

PG&E Loan 0% 2031 1,560,336 $ $ 1,196,257 -$ 156,034 $ $ 1,040,223 Due Within One Year 156,034
Due in More Than One Year $ 884,189

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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:

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 $2,118,936 as of June 30, 2024. 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, 2024:

For the Year
Ending June 30, Principal Interest Total
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 1,790,000 133,156 1,923,156
2030-2034 1,860,000 142,500 2,002,500
Total Debt Service $ 10,015,000 $ 1,539,000 $ 11,554,000 Terms Accela Microsoft Axon
Start 7/1/2021 7/1/2022 4/1/2024
End 6/30/2026 7/1/2025 4/1/2034
Annual Rate 4.66% 4.92% 6.31%
Prepayments $ 227,179 $ - $ -
Implementation Cost $ 35,000 $ - $ -
Principal Paid $ 102,174 $ 46,980 $ 69,336
Interest Paid $ 17,320 $ 13,073 $ 3,716
Amortization $ 149,337 $ 53,085 $ 17,668

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

The following summarizes the Town’s subscription right of use assets as of June 30, 2024:

The following summarizes the Town’s subscription liabilities as of June 30, 2024:

The following summarizes the Town’s future payments for subscription liabilities as of June 30, 2024:

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, 2024.

Subscription Right of Use Assets Accela Microsoft Axon Total Beginning $ 597,350 $ 318,510 $ - $ 915,860
Additions - - 706,713 706,713
Deletions - - - -
Ending 597,350 318,510 706,713 1,622,573
Accumulated Amortization (298,674) (106,170) (17,668) (422,512) Subscription ROA, Net $ 298,676 $ 212,340 $ 689,045 $ 1,200,061 Subscription Liabilities Accela Microsoft Axon Total
Beginning $ 335,171 $ 259,764 $ - $ 594,935
Additions - - 706,713 706,713
Deletions (102,174) (46,980) (69,336) (218,490)
Ending 232,997 212,784 637,377 1,083,158
Due Within One Year 111,987 49,344 50,347 211,678
Due in More Than One Year $ 121,010 $ 163,440 $ 587,030 $ 871,480 For the Year
Ending June 30, Principal Interest Total
2025 $ 211,678 $ 63,203 $ 274,881
2026 226,457 52,118 278,575
2027 111,537 40,266 151,803
2028 117,985 33,817 151,802
2029 67,512 26,990 94,502
2030-2034 347,989 59,232 407,221
Total Debt Service $ 1,083,158 $ 275,626 $ 1,358,784

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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, 2024, fund balances were classified as follows:

Town of Los Gatos
Copy of Changes in Fund Balance Disclosure
June 30. 2024
Beginning Ending
Balance Additions Deletions Balance
Nonspendable
Loans Receivable $ 159,000 $ - $ 159,000 - $
Leases 55,977 - (55,977) -
Total Nonspendable 214,977 - (55,977) 159,000
Restricted:

Library 530,174 108,676 (82,002) 556,848
Capital projects 8,328,572 2,285,694 (1,570,600) 9,043,666 Land held for resale 344,338 - - 344,338
Repairs and maintenance 176,966 44,555 (38,896) 182,625 Pensions 1,400,163 791,012 2,188,659 (2,516)
VTA 494,826 538,736 (455,675) 577,887
Total Restricted 11,275,039 3,768,673 (2,149,689) 12,894,023 Committed:

Budget stabilization and catastrophes 6,129,774 607,007 - 6,736,781 Catastrophic 6,129,775 607,006 - 6,736,781
Pension/OPEB Reserve 300,000 300,000 (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 (196,438) - 1,572,619 Special revenue funds 821,200 701,620 (430,998) 1,091,822 Total Committed 15,740,387 2,215,633 (927,436) 17,028,584 Assigned:

Open Space 562,000 - - 562,000
Parking 100,000 192,000 - 292,000
Sustainability 140,553 - - 140,553
Capital/Special projects 29,238,029 7,508,897 (11,674,806) 25,072,120 Carryover encumbrances 37,698 48,163 - 85,861
Comcast PEG 50,000 - - 50,000
ERAF Risk 689,608 740,446 - 1,430,054
Economic recovery 1,556,614 (1,535,930) - 20,684
Compensated Absences 1,580,623 - (25,145) 1,555,478
Market fluctuations 1,712,246 - - 1,712,246
Total Assigned 33,955,125 10,201,752 (13,235,881) 30,920,996 Total Fund Balance - Gov't Funds $ 61,185,528 $ 16,186,058 $ (16,368,983) $ 61,002,603

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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, 2024 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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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, 2024, are summarized as follows:

Misc Safety Total
Deferred outflows of resources $ 9,339,476 $ 13,827,440 $ 23,166,916 Deferred inflows of resources $ 18,028 $ 1,676,319 $ 1,694,347 Net pension liabilities $ 29,048,582 $ 33,979,087 $ 63,027,669 Pension expense (credit) $ 5,773,242 $ 5,442,602 $ 11,215,844 Defined Benefit Plans
Tier 1 Tier 1 PEPRA Police 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% 7% 7.25% 9% 14.5% Required employer contribution rates 11.42% 11.42% 14.43% 29.09% 14.5% Miscellaneous Safety (Police)

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

Employees Covered
At June 30, 2024, 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, 2024, 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, 2024, 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, 2023, 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, 2022. The Town’s proportion of the net pension Miscellaneous Safety
Active 107 37
Transferred 105 12
Separated 104 7
Retired 263 91
Total 579 147
Employer
Contributions
Miscellaneous $ 3,878,991
Safety 3,554,897
Total Employer Contributions $ 7,433,888
Miscellaneous
Safety
Total
Proportionate Share of
Net Pension
Liability/(Asset)
$ 29,048,582
33,979,087
$ 63,027,669

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

liability for the Safety Plan was based on a projection of the Town’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The Town’s proportionate share of the net pension liability for the Safety Plan as of June 30, 2023 and 2024 was as follows:

For the year ended June 30, 2024, the Town recognized a pension expense of $11,215,844.

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, 2024:

At June 30, 2024, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Safety
Proportion - June 30, 2023 0.46183%
Proportion - June 30, 2024 0.41366%
Change - Increase/(Decrease) -0.04816%
Total Fiduciary Net
Pension Net Pension
Liability Position Liability
Beginning Balance $ 123,976,167 $ 95,844,188 $ 28,131,979 Service Costs 2,092,786 - 2,092,786
Interest on Total Pension Liability 8,437,589 - 8,437,589 Changes of Assumptions 164,628 - 164,628
Difference Actual and Expected Experience 631,264 - 631,264 Employer Contributions - 3,687,226 (3,687,226)
Employee Contributions - 916,606 (916,606)
Net Investment Income - 5,876,311 (5,876,311)
Benefit Payments (7,069,109) (7,069,109) -
Administrative Expenses - (70,479) 70,479
Net Changes 4,257,158 3,340,555 916,603
Ending Balance $ 128,233,325 $ 99,184,743 $ 29,048,582
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Changes of Assumptions $ 566,500 -$ 1,983,065 $ -$
Differences between Expected and Actual Experience 330,662 18,028 2,494,691 213,572 Differences between Projected and Actual Investment Earnings 4,563,323 - 4,650,029 - Differences between Employer's Contributions and
Proportionate Share of Contributions - - 165,323 1,330,966 Change in Employer's Proportion - - 979,435 131,781
Pension Contributions Made Subsequent to Measurement Date 3,878,991 - 3,554,897 - Total $ 9,339,476 $ 18,028 $ 13,827,440 $ 1,676,319
Miscellaneous Safety

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

The Town reported $7,433,888 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, 2025.

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, 2022 actuarial valuations were determined using the following actuarial assumptions:

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2022 valuation are based on CalPERS experience studies which can found on the CalPERS website.

Miscellaneous Safety Total
$ 1,641,167 $ 2,769,602 $ 4,410,769
496,047 1,945,470 2,441,517
3,175,733 3,751,361 6,927,094
129,510 129,791 259,301
- - -
- - -
$ 5,442,457 $ 8,596,224 $ 14,038,681
Deferred Outflows/(Inflows) of
Fiscal Year Ending Resources
June 30:

Total
2026
2027
2028
Thereafter
2029
2025
Valuation Date June 30, 2022
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age
Normal Cost
Method
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Payroll Growth 2.80%
Projected Salary Increase (1)
Investment Rate of Return 6.8% (2)
Mortality (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

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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% 4.54%
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.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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, 2024, the Town reported a payable of $33,474 and $30,506 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 2024, the Town reported $2,188,659 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.

Miscellaneous Safety
1% Decrease 5.90% 5.90%
Net Pension Liability $ 45,575,753 49,604,375
Current 6.90% 6.90%
Net Pension Liability $ 29,048,582 33,979,087
1% Increase 7.90% 7.90%
Net Pension Liability $ 15,432,672 21,204,301

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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 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, 2024 (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, 2024, the Town contributed $1,818,298 from the General Fund. During the measurement period ended June 30, 2023, the Town contributed $1,733,337 to the Plan and benefit payments were $1,716,592. Plan members receiving benefits contributed did not make any contributions.

Active employees 149
Inactive employees - receiving benefits 150
Inactive employees - not receiving benefits 42
Total employees 341

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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, 2023
Measurement Date: June 30, 2023
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%
15 year fixed
Medicare (Kaiser) - 4.60% for 2023,
decreasing to an ultimate rate of 3.75% in 2076
Investment gains and losses spread over 5-year rolling period 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

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

Net OPEB Liability
The Town's net OPEB liability was measured as of June 30, 2023 (measurement date) and was determined by an actuarial valuation as of June 30, 2023 (valuation date) for the fiscal year ended June 30, 2024 (reporting date).

Changes in the Net OPEB Liability
The following summarizes the changes in the net OPEB liability during the year ended June 30, 2024:

Deferred Inflows and Outflows of Resources
At June 30, 2024, the Town reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Fiscal Year Ended June 30, 2024
(Measurement Date June 30, 2023)
Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability
(Asset)
Balance at June 30, 2023 $ 29,888,940 $ 22,860,307 $ 7,028,633 Service cost 940,674 - 940,674
Interest in Total OPEB Liability 1,873,207 - 1,873,207
Actual vs. expected experience 153,933 - 153,933
Assumption changes 2,191,064 - 2,191,064
Employer contributions - 1,733,337 (1,733,337)
Net investment income - 1,468,115 (1,468,115)
Administrative expenses - (23,387) 23,387
Benefit payments (1,716,592) (1,716,592) -
Net changes 3,442,286 1,461,473 1,980,813
Balance at June 30, 2024 $ 33,331,226 $ 24,321,780 $ 9,009,446 Covered Employee Payroll $ 17,809,965
Total OPEB Liability as a % of Covered Employee Payroll 187.15% Plan Fid. Net Position as a % of Total OPEB Liability 72.97% Service Cost as a % of Covered Employee Payroll 5.28%
Net OPEB Liability as a % of Covered Employee Payroll 50.59% Contributions as a % of Cov. Emp. Payroll 9.73%
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Difference between actual and expected experience $ 128,277 $ 1,283,522 Difference between actual and expected earnings 1,506,978 - Change in assumptions 2,353,206 231,810
OPEB contribution subsequent to measurement date 1,818,298 - Totals $ 5,806,759 $ 1,515,332

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

Of the total amount reported as deferred outflows of resources related to OPEB, $1,818,298 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,
2025 $ 278,421
2026 252,572
2027 1,168,381
2028 382,923
2029 390,832
Thereafter -
Total $ 2,473,129
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%

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

OPEB Expense
The following summarizes the OPEB expense by source during the year ended June 30, 2024:

The following summarizes changes in the net OPEB liability as reconciled to OPEB expense during the year ended June 30, 2024:

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 $ 940,674
Interest in TOL 1,873,207
Expected investment income (1,428,561)
Difference between actual and expected experience (419,899) Difference between actual and expected earnings 323,069 Change in assumptions 383,915
Administrative expenses 23,387
OPEB Expense $ 1,695,792
$ 9,009,446
(7,028,633)
1,980,813
Changes in deferred outflows (1,415,768)
Changes in deferred inflows (602,590)
Employer contributions and implicit subsidy 1,733,337
OPEB Expense $ 1,695,792
Net OPEB liability ending
Net OPEB liability beginning
Change in net OPEB liability
(1% Decrease ) 6.25% (1% Increase )
Net OPEB Liability (Asset) $ 12,986,126 $ 9,009,446 $ 5,691,792 Discount Rate
(1% Decrease ) Current (1% Increase )
Net OPEB Liability (Asset) $ 5,438,579 $ 9,009,446 $ 13,343,702 Trend Rate

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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 $1,000,000 plus $34,000,000 in excess liability for total coverage of $35,000,000 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, 2024:

Workers' SelfCompensation Insurance
Internal Internal
Service Fund Service Fund Total
Claims payable balance - June 30, 2022 $ 1,364,558 $ 19,557 $ 1,384,115 Claims incurred 790,928 224,382 1,015,310
Inc./(Dec.) in estimated liability for prior claims - - - Claims paid (186,507) (86,210) (272,717)
Claims payable balance - June 30, 2023 1,968,979 157,729 2,126,708 Claims incurred - 124,525 124,525
Claims paid (253,382) (107,859) (361,241)
Claims payable balance - June 30, 2024 $ 1,715,597 $ 174,395 $ 1,889,992

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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, 2024, the Successor Agency trust fund reported a net deficit of $4,643,704.

Encumbrances - As of June 30, 2024, 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 $ 1,296,796
Appropriated Reserves Fund 9,182,140
Internal Service Funds 428,490
Total Encumbrances $ 10,907,426

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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.

ITEM NO. 14.

Required Supplementary Information

ITEM NO. 14.

This Page Left Intentionally Blank

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

BENEFIT PLAN SCHEDULES

Schedule of Pension Plan Contributions

Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost Sharing Plan Schedule of Changes in Net Pension Liability – CalPERS Misc. Agent-Multiple Employer Plan Schedule of OPEB Contribution
Schedule of Changes in Net OPEB Liability

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

SCHEDULE OF PENSION PLAN CONTRIBUTIONS

Miscellaneous Plan
Plan Measurement Date 2014 2015 2016 2017 2018
Fiscal Year Ended 2015 2016 2017 2018 2019
Contractually Required Contributions $ 1,941,765 $ 2,223,782 $ 2,407,496 $ 2,669,133 $ 3,049,748 Contributions in Relation to
Contractually Required Contributions 1,941,765 2,223,782 2,407,496 2,669,133 3,049,748 Contribution Deficiency (Excess) $ - $ - $ - $ - $ -
Covered Payroll $ 8,487,940 $ 9,198,318 $ 9,024,370 $ 9,576,157 $ 10,211,967 Contributions as a % of Covered Payroll 22.88% 24.18% 26.68% 27.87% 29.86% Miscellaneous Plan
Plan Measurement Date 2019 2020 2021 2022 2023
Fiscal Year Ended 2020 2021 2022 2023 2024
Contractually Required Contributions $ 3,366,304 $ 3,529,373 $ 3,472,727 $ 3,687,213 $ 3,878,991 Contributions in Relation to
Contractually Required Contributions 8,146,791 9,160,680 3,472,727 3,687,213 3,878,991 Contribution Deficiency (Excess) $ (4,780,487) $ (5,631,307) $ - $ - $ - Covered Payroll $ 11,188,927 $ 12,082,520 $ 12,305,265 $ 11,094,190 $ 13,817,826 Contributions as a % of Covered Payroll 72.81% 75.82% 28.22% 33.24% 28.07% Continued

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

SCHEDULE OF PENSION PLAN CONTRIBUTIONS

Safety Plan
Plan Measurement Date 2014 2015 2016 2017 2018
Fiscal Year Ended 2015 2016 2017 2018 2019
Contractually Required Contributions $ 1,999,757 $ 1,586,129 $ 1,738,150 $ 1,951,711 $ 2,325,357 Contributions in Relation to
Contractually Required Contributions 1,999,757 1,586,129 1,738,150 1,951,711 2,325,357 Contribution Deficiency (Excess) $ - $ - $ - $ - $ -
Covered Payroll $ 4,897,104 $ 5,022,498 $ 4,941,138 $ 5,079,440 $ 4,445,061 Contributions as a % of Covered Payroll 40.84% 31.58% 35.18% 38.42% 52.31% Safety Plan
Plan Measurement Date 2019 2020 2021 2022 2023
Fiscal Year Ended 2020 2021 2022 2023 2024
Contractually Required Contributions $ 2,565,205 $ 2,853,764 $ 3,072,032 $ 3,409,275 $ 3,554,897 Contributions in Relation to
Contractually Required Contributions 2,565,205 2,853,764 3,072,032 3,409,275 3,554,897 Contribution Deficiency (Excess) $ - $ - $ - $ - $ -
Covered Payroll $ 4,928,821 $ 5,178,418 $ 5,603,211 $ 5,863,101 $ 6,557,458 Contributions as a % of Covered Payroll 52.05% 55.11% 54.83% 58.15% 54.21% Concluded
Notes to Schedule:

Valuation Date: June 30, 2022
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 6.8%
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 was 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 details, please refer to the 2021 experience study report that can be found on the CalPERS website.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

SCHEDULE OF PROPORTIONARE SHARE OF NET PENSION LIABILITY

CALPERS SAFETY COST SHARING PLAN

Safety Plan
Plan Measurement Date 2014 2015 2016 2017 2018
Fiscal Year Ended 2015 2016 2017 2018 2019
Proportion of Net Pension
Liability 0.28588% 0.14860% 0.22394% 0.22603% 0.23583%
Proportionate Share of
Net Pension Liability $ 17,788,690 $ 10,199,904 $ 19,377,843 $ 22,415,954 $ 22,725,267 Covered Payroll $ 4,916,535 $ 4,897,104 $ 5,022,498 $ 4,941,138 $ 5,079,440 Proportionate Share of NPL
as a % of Covered Payroll 361.81% 208.28% 385.82% 453.66% 447.40% Plan's Fiduciary Net Position
as a % of the TPL 78.83% 74.89% 74.89% 73.87% 74.52%
Safety Plan
Plan Measurement Date 2019 2020 2021 2022 2023
Fiscal Year Ended 2020 2021 2022 2023 2024
Proportion of Net Pension
Liability 0.24100% 0.24953% 0.30994% 0.27474% 0.50522%
Proportionate Share of
Net Pension Liability $ 24,695,687 $ 27,149,916 $ 16,762,598 $ 31,734,686 $ 63,027,669 Covered Payroll $ 4,445,061 $ 4,928,821 $ 5,178,418 $ 5,603,211 $ 5,863,101 Proportionate Share of NPL
as a % of Covered Payroll 555.58% 550.84% 323.70% 566.37% 1074.99% Plan's Fiduciary Net Position
as a % of the TPL 73.61% 72.46% 83.55% 71.34% 72.85%
The CalPERS discount rate was increased from 7.50% to 7.65% in FY2016, to 7.15% in FY2018, and then decreased to 6.80% in FY2023.

The CalPERS mortality assumptions was adjusted in fiscal year 2023.

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

SCHEDULE OF CHANGES IN NET PENSION LIABILITY

CALPERS MISCELLANEOUS AGENT-MULTPLE EMPLOYER PLAN

Measuement Date 2014 2015 2016 2017 2018
Total Pension liability
Service cost $ 1,579,547 $ 1,491,925 $ 1,560,679 $ 1,651,550 $ 1,700,438 Interest 6,268,015 6,483,032 6,697,247 6,820,536 7,073,843 Diff. between expected and actual exp. (623,495) - (357,870) (892,479) 994,994 Changes of assumptions (1,513,132) - 5,481,432 - (655,541) Changes of benefits - - - - -
Benefit payments (including refunds) (4,241,487) (4,748,786) (4,953,756) (5,138,083) (5,448,374) Net change in Total Pension Liability 3,606,075 1,089,544 2,946,300 7,922,956 3,665,360 Total Pension Liability - beginning 84,904,502 88,510,577 89,600,121 92,546,421 100,469,377 Total Pension Liability - ending $ 88,510,577 $ 89,600,121 $ 92,546,421 $ 100,469,377 $ 104,134,737 Plan fiduciary net position
Employer contributions $ 1,796,079 $ 1,941,765 $ 2,223,782 $ 2,407,496 $ 2,669,104 Employee contributions 668,167 679,796 691,770 682,891 761,705 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 Benefit payments (including refunds) (4,241,487) (4,748,786) (4,953,756) (5,138,083) (5,448,374) Administrative expense (74,706) - (40,462) (95,455) (108,582) Adjsutments - - - (206,199) -
Net change in plan fiduciary net position 8,382,650 (708,497) (1,738,347) 5,028,292 3,551,352 Plan fiduciary net position - beginning 58,716,725 67,099,375 66,390,878 64,652,531 69,680,823 Plan fiduciary net position - ending $ 67,099,375 $ 66,390,878 $ 64,652,531 $ 69,680,823 $ 73,232,175 Net Pension liability (asset) $ 21,411,202 $ 23,209,243 $ 27,893,890 $ 30,788,554 $ 30,902,562 Plan fiduciary net position as a percentage
of the total Pension liability 75.81% 74.10% 69.86% 69.36% 70.32% Covered Payroll $ 8,406,315 $ 8,487,940 $ 9,198,318 $ 9,024,370 $ 9,576,157 Net Pension liability % of covered payroll 254.70% 273.44% 303.25% 341.17% 322.70% Continued

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

SCHEDULE OF CHANGES IN NET PENSION LIABILITY

CALPERS MISCELLANEOUS AGENT-MULTPLE EMPLOYER PLAN