Los Gatos City Council
December 17, 2024

Measuement Date 2019 2020 2021 2022 2023
Total Pension liability
Service cost $ 1,771,368 $ 1,930,090 $ 2,062,486 $ 2,264,169 $ 2,092,786 Interest 7,381,846 7,729,269 7,943,404 8,142,881 8,437,589 Diff. between expected and actual exp. 1,082,289 1,465,653 (581,801) (108,166) 631,264 Changes of assumptions - - 3,399,004 - -
Changes of benefits - - - 164,628 -
Benefit payments (including refunds) (5,720,232) (5,958,101) (6,339,615) (6,623,114) (7,069,109) Net change in Total Pension Liability 4,515,271 5,166,911 3,084,474 7,074,774 4,257,158 Total Pension Liability - beginning 104,134,737 108,650,008 113,816,919 116,901,393 123,976,167 Total Pension Liability - ending $ 108,650,008 $ 113,816,919 $ 116,901,393 $ 123,976,167 $ 128,233,325 Plan fiduciary net position
Employer contributions $ 3,049,748 $ 8,146,791 $ 9,160,680 $ 3,472,727 $ 3,687,226 Employee contributions 846,125 834,145 889,649 871,063 916,606 Plan to plan resource movement - - - - -
Projected investment earnings - - - - -
Diff. between est. and actual earnings - - - - -
Net investment income 4,759,034 3,913,294 19,606,360 (7,988,150) 5,876,311 Benefit payments (including refunds) (5,720,232) (5,958,101) (6,339,615) (6,623,114) (7,069,109) Administrative expense (52,260) (107,303) (82,856) (66,142) (70,479) Adjsutments 170 - - - -
Net change in plan fiduciary net position 2,882,585 6,828,826 23,234,218 (10,333,616) 3,340,555 Plan fiduciary net position - beginning 73,232,175 76,114,760 82,943,586 106,177,804 95,844,188 Plan fiduciary net position - ending $ 76,114,760 $ 82,943,586 $ 106,177,804 $ 95,844,188 $ 99,184,743 Net Pension liability (asset) $ 32,535,248 $ 30,873,333 $ 10,723,589 $ 28,131,979 $ 29,048,582 Plan fiduciary net position as a percentage
of the total Pension liability 70.05% 72.87% 90.83% 77.31% 77.35% Covered Payroll $ 10,211,967 $ 11,188,927 $ 12,082,520 $ 12,305,265 $ 11,404,827 Net Pension liability % of covered payroll 318.60% 275.93% 88.75% 228.62% 254.70% Concluded

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

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

SCHEDULE OF OPEB CONTRIBUTIONS

Fiscal Year Ended 2018 2019 2020 2021 2022 2023 2024
Actuarially determined contribution (ADC) $ 2,129,000 $ 2,108,000 $ 2,172,000 $ 1,859,000 $ 1,860,000 $ 1,372,000 $ 1,427,000 Less: actual contribution in relation to ADC (2,935,000) (2,406,636) (2,508,306) (2,096,847) (1,754,922) (1,733,337) (1,818,298) Contribution deficiency (excess) $ (806,000) $ (298,636) $ (336,306) $ (237,847) $ 105,078 $ (361,337) $ (391,298) Covered payroll $ 16,192,060 $ 17,338,201 $ 17,406,541 $ 17,982,237 $ 16,987,042 $ 17,809,965 $ 18,255,214 Contrib. as a % of covered employee payroll 18.13% 13.88% 14.41% 11.66% 10.33% 9.73% 9.96% Notes to Schedule:

Assumptions and Methods
Valuation Date:

Measurement Date:

Actuarial Cost Method:

Amortization Period:

Asset Valuation Method: Investment gains and losses spread over 5-year rolling period Actuarial Assumptions:

Discount Rate
Inflation
Salary Increases
Investment Rate of Return
Healthcare Trend Rate
Mortality
Retirement
Other Notes
In FY 2022, the discount rate was updated based on newer capital market assumptions In FY 2022, decreased medical trend rate for Kaiser Senior Advantage In FY 2022, demographic assumptions were updated to CalPERS 2000-2019 Experience Study in FY 2022, the inflation rate decreased 25 basis points, decreasing discount rate, medical trend, and salary increases in FY 2022, retiree and family participation rates at retirement updated In FY 2022, the implicit subsidy was added for Tier 1 Medicare eligible In FY 2022, the mortality improvement scale was updated to Scale MP-2021 June 30, 2023
June 30, 2023
Entry-Age Normal Cost
15 year fixed period for 2023/24
GASB 75 requires a schedule of contributions for the last ten fiscal years, or for as many years as are available if less than ten years are available. GASB 75 was adopted as of June 30, 2018.

CalPERS 2000-2019 Experience Study
CalPERS 2000-2019 Experience Study

6.25%

2.50%

2.75%
Non-Medicare - 6.50% for 2023,
decreasing to an ultimate rate of 3.75% in

6.25%

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 OPEB LIABILITY

Measurement Date 2017 2018 2019 2020 2021 2022 2023
Total OPEB liability
Service cost $ 1,134,000 $ 1,168,227 $ 1,203,274 $ 1,159,152 $ 1,115,309 $ 955,115 $ 940,674 Interest 1,607,000 1,706,270 1,814,072 1,887,105 1,956,034 1,804,972 1,873,207 Differences between expected & actual exp. - (149,297) - (2,521,500) - 153,933 - Changes of assumptions - (392,681) - (533,825) 1,054,638 2,191,064 - Benefit payments (1,269,000) (1,326,313) (1,298,623) (1,399,933) (1,494,906) (1,591,150) (1,716,592) Net change in Total OPEB Liability 1,472,000 1,548,184 1,176,745 1,112,499 109,575 1,168,937 3,442,286 Total OPEB Liability - beginning 23,301,000 24,773,000 26,321,184 27,497,929 28,610,428 28,720,003 29,888,940 Total OPEB Liability - ending $ 24,773,000 $ 26,321,184 $ 27,497,929 $ 28,610,428 $ 28,720,003 $ 29,888,940 $ 33,331,226 Plan fiduciary net position
Employer contributions $ 3,878,000 $ 2,935,313 $ 2,406,636 $ 2,508,306 $ 2,096,847 $ 1,754,922 $ 1,733,337 Net investment income 1,049,000 1,082,977 1,009,315 652,656 5,529,824 (3,510,434) 1,468,115 Benefit payments (1,269,000) (1,326,313) (1,298,623) (1,399,933) (1,494,906) (1,591,150) (1,716,592) Administrative expense (14,000) (34,261) (11,502) (17,357) (18,556) (21,454) (23,387) Net change in plan fiduciary net position 3,644,000 2,657,716 2,105,826 1,743,672 6,113,209 (3,368,116) 1,461,473 Plan fiduciary net position - beginning 9,964,000 13,608,000 16,265,716 18,371,542 20,115,214 26,228,423 22,860,307 Plan fiduciary net position - ending $ 13,608,000 $ 16,265,716 $ 18,371,542 $ 20,115,214 $ 26,228,423 $ 22,860,307 $ 24,321,780 Net OPEB liability (asset) $ 11,165,000 $ 10,055,468 $ 9,126,387 $ 8,495,214 $ 2,491,580 $ 7,028,633 $ 9,009,446 Plan fiduciary net position as a percentage
of the total OPEB liability 54.93% 61.80% 66.81% 70.31% 91.32% 76.48% 72.97% Covered payroll $ 14,985,716 $ 16,192,060 $ 17,338,201 $ 17,406,541 $ 17,982,237 $ 16,987,042 $ 17,809,965 NOL as a % of cov. emp. payroll 74.50% 62.10% 52.64% 48.80% 13.86% 41.38% 50.59% Other Notes
GASB 75 requires a schedule of contributions for the last ten fiscal years, or for as many years as are available if less than ten years are available. GASB 75 was adopted as of June 30, 2018.

ITEM NO. 14.

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

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

NONMAJOR GOVERNMENTAL FUNDS

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

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

Capital Projects Funds:

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

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

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

Special Revenue Funds:

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

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

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

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

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

ITEM NO. 14.

Variance
Original Final Positive
Budget Budget Actual (Negative)

REVENUES
Licenses & permits $ 110,000 $ 110,000 $ 157,535 $ 47,535 Intergovernmental 3,188,473 2,994,500 3,362,026 367,526 Charges for services 951,800 904,869 1,137,659 232,790
Developer assessments 10,000 10,000 12,880 2,880
Interest - - 100,179 100,179
Use of Property 96,000 96,000 91,284 (4,716)
Other - - - -
Total Revenues 4,356,273 4,115,369 4,861,563 746,194

EXPENDITURES
Capital outlay 7,993,617 10,192,475 10,193,353 (878)
Total Expenditures 7,993,617 10,192,475 10,193,353 (878)

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (3,637,344) (6,077,106) (5,331,790) 745,316

OTHER FINANCING SOURCES (USES)
Transfers in 2,253,273 3,119,554 3,101,325 (18,229)
Transfers (out) (427,616) (451,491) (453,990) (2,499)
Total Other Financing Sources (Uses) 1,825,657 2,668,063 2,647,335 (20,728) CHANGE IN FUND BALANCE $ (1,811,687) $ (3,409,043) (2,684,455) $ 724,588 BEGINNING FUND BALANCE 21,750,025
ENDING FUND BALANCE $ 19,065,570

BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

TOWN OF LOS GATOS

APPROPRIATED RESERVES FUND

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

ITEM NO. 14.

Total
Capital
Storm Construction Gas Projects
Drains Tax Tax Funds
ASSETS
Cash & investments $ 3,531,248 $ 3,584,251 $ 1,698,293 $ 8,813,792 Restricted cash & investments - - - -
Receivables:

Accounts - - - -
Intergovernmental receivable - - 229,874 229,874
Leases receivable - - - -
Long term notes receivable - - - -
Total Assets $ 3,531,248 $ 3,584,251 $ 1,928,167 $ 9,043,666

LIABILITIES
Accounts payable $ - $ - $ - $ -
Accrued payroll and benefits - - - -
Unearned revenue - - - -
Total Liabilities - - - -

DEFERRED INFLOWS OF RESOURCES
Leases - - - -

FUND BALANCE
Restricted for:

Library - - - -
Repairs and maintenance - - - -
Capital projects 3,531,248 3,584,251 1,928,167 9,043,666 Committed to:

Special revenue funds - - - -
Total Fund Balances 3,531,248 3,584,251 1,928,167 9,043,666 Total Liabilities and Fund Balances $ 3,531,248 $ 3,584,251 $ 1,928,167 $ 9,043,666 (Continued)

CAPITAL PROJECTS FUNDS

TOWN OF LOS GATOS

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETS
JUNE 30, 2024

ITEM NO. 14.

Non-Point
Community Source Lighting and
Development Maintenance Landscaping
ASSETS
Cash & investments $ 94,412 $ 711,648 $ 187,092
Restricted cash & investments 58,344 - -
Receivables:

Accounts - 46,938 -
Intergovernmental receivable - - 220
Leases receivable - - -
Long term notes receivable 78,752 - -
Total Assets $ 231,508 $ 758,586 $ 187,312

LIABILITIES
Accounts payable $ 60 $ 1,228 $ 4,687
Accrued payroll and benefits - 3,224 -
Unearned revenue 64,795 - -
Total Liabilities 64,855 4,452 4,687

DEFERRED INFLOWS OF RESOURCES
Leases - - -

FUND BALANCE
Restricted for:

Library - - -
Repairs and maintenance - - 182,625
Capital projects - - -
Committed to:

Special revenue funds 166,653 754,134 -
Total Fund Balances 166,653 754,134 182,625
Total Liabilities and Fund Balances $ 231,508 $ 758,586 $ 187,312 (Continued)

SPECIAL REVENUE FUNDS

TOWN OF LOS GATOS

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETS
JUNE 30, 2024

ITEM NO. 14.

Total
Total Nonmajor
LG Library Special Revenue Governmental
Theatre Trust Funds Funds
ASSETS
Cash & investments $ 48,338 $ 559,788 $ 1,601,278 $ 10,415,070 Restricted cash & investments - - 58,344 58,344
Receivables:

Accounts 35,905 - 82,843 82,843
Intergovernmental receivable - - 220 230,094
Leases receivable 304,129 - 304,129 304,129
Long term notes receivable - - 78,752 78,752
Total Assets $ 388,372 $ 559,788 $ 2,125,566 $ 11,169,232

LIABILITIES
Accounts payable $ 15,085 $ 2,940 $ 24,000 $ 24,000
Accrued payroll and benefits - - 3,224 3,224
Unearned revenue - - 64,795 64,795
Total Liabilities 15,085 2,940 92,019 92,019

DEFERRED INFLOWS OF RESOURCES
Leases 202,252 - 202,252 202,252

FUND BALANCE
Restricted for:

Library - 556,848 556,848 556,848
Repairs and maintenance - - 182,625 182,625
Capital projects - - 9,043,666 -
Committed to:

Special revenue funds 171,035 1,091,822 - 1,091,822
Total Fund Balances 171,035 556,848 1,831,295 10,874,961 Total Liabilities and Fund Balances $ 388,372 $ 559,788 $ 2,125,566 $ 11,169,232 (Concluded)

TOWN OF LOS GATOS

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETS
JUNE 30, 2024

SPECIAL REVENUE FUNDS

ITEM NO. 14.

Total
Storm Construction Gas Capital Projects
Drain Tax Tax Funds

REVENUES
Property Taxes $ - $ - $ - $ -
Other Taxes - 24,838 - 24,838
License and permits 196,604 - - 196,604
Intergovernmental - - 1,781,448 1,781,448
Interest 116,313 120,417 46,074 282,804
Use of property - - - -
Other - - - -
Total Revenues 312,917 145,255 1,827,522 2,285,694

EXPENDITURES
Current:

Parks and public works - - - -
Library services - - - -
Sanitation and other - - - -
Capital Outlay - - 1,464,600 1,464,600
Total Expenditures - - 1,464,600 1,464,600

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 312,917 145,255 362,922 821,094

OTHER FINANCING SOURCES (USES)
Transfers in - - - -
Transfers (out) - - (106,000) (106,000)
Total Other Financing Sources (Uses) - - (106,000) (106,000) Changes in Fund Balances 312,917 145,255 256,922 715,094 Fund Balances - Beginning of year 3,218,331 3,438,996 1,671,245 8,328,572 Fund Balances - End of year $ 3,531,248 $ 3,584,251 $ 1,928,167 $ 9,043,666 (Continued)

TOWN OF LOS GATOS

NONMAJOR GOVERNMENTAL FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

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

CAPITAL PROJECTS FUNDS

ITEM NO. 14.

Non-Point
Community Source Lighting and
Development Maintenance Landscaping

REVENUES
Property Taxes $ - $ - $ 38,437
Other Taxes - - -
License and permits - 359,950 -
Intergovernmental - 16,946 -
Interest - - 6,118
Use of property - - -
Other - - -
Total Revenues - 376,896 44,555

EXPENDITURES
Current:

Parks and public works - - 33,976
Library services - - -
Sanitation and other - 252,605 -
Capital Outlay - - -
Total Expenditures - 252,605 33,976

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES - 124,291 10,579

OTHER FINANCING SOURCES (USES)
Transfers in - - -
Transfers (out) - - (4,920)
Total Other Financing Sources (Uses) - - (4,920)
Changes in Fund Balances - 124,291 5,659
Fund Balances - Beginning of year 166,653 629,843 176,966 Fund Balances - End of year $ 166,653 $ 754,134 $ 182,625 (Continued)

NONMAJOR GOVERNMENTAL FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

TOWN OF LOS GATOS

AND CHANGES IN FUND BALANCES

SPECIAL REVENUE FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

ITEM NO. 14.

Total
LG Library Special Revenue
Theatre Trust Funds Total

REVENUES
Property Taxes $ - $ - $ 38,437 $ 38,437
Other Taxes - - - 24,838
License and permits - - 359,950 556,554
Intergovernmental - - 16,946 1,798,394
Interest - 20,263 26,381 309,185
Use of property 171,495 - 171,495 171,495
Other - 88,411 88,411 88,411
Total Revenues 171,495 108,674 701,620 2,987,314

EXPENDITURES
Current:

Parks and public works 75,451 - 109,427 109,427
Library services - 82,000 82,000 82,000
Sanitation and other - - 252,605 252,605
Capital Outlay - - - 1,464,600
Total Expenditures 75,451 82,000 444,032 1,908,632

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 96,044 26,674 257,588 1,078,682

OTHER FINANCING SOURCES (USES)
Transfers in - - - -
Transfers (out) - - (4,920) (110,920)
Total Other Financing Sources (Uses) - - (4,920) (110,920) Changes in Fund Balances 96,044 26,674 252,668 967,762
Fund Balances - Beginning of year 74,991 530,174 1,578,627 9,907,199 Fund Balances - End of year $ 171,035 $ 556,848 $ 1,831,295 $ 10,874,961 (Concluded)

AND CHANGES IN FUND BALANCES

TOWN OF LOS GATOS

NONMAJOR GOVERNMENTAL FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

SPECIAL REVENUE FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

ITEM NO. 14.

TOWN OF LOS GATOS

BUDGETED NONMAJOR FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)

REVENUES
Property taxes $ - $ - $ - $ - $ - $ -
Other taxes - - - 30,000 24,838 (5,162)
License and permits 92,500 196,604 104,104 - - -
Intergovernmental - - - - - -
Interest 13,170 116,313 103,143 15,190 120,417 105,227
Use of property - - - - - -
Other - - - - - -
Total Revenues 105,670 312,917 207,247 45,190 145,255 100,065

EXPENDITURES
Current:

Parks and public works - - - - - -
Library services - - - - - -
Sanitation and other - - - - - -
Capital outlay - - - - - -
Total Expenditures - - - - - -

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 105,670 312,917 207,247 45,190 145,255 100,065

OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) - - - - - -
Total Other Financing Sources (Uses) - - - - - -
CHANGE IN FUND BALANCE $ 105,670 312,917 $ 207,247 $ 45,190 145,255 $ 100,065 BEGINNING FUND BALANCE 3,218,331 3,438,996
ENDING FUND BALANCE $ 3,531,248 $ 3,584,251
(Continued)

STORM DRAIN CONSTRUCTION TAX

ITEM NO. 14.

Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)

REVENUES
Property taxes $ - $ - $ - $ - $ - $ -
Other taxes - - - - - -
License and permits - - - - - -
Intergovernmental 1,712,974 1,781,448 68,474 - - -
Interest 1,402 46,074 44,672 - - -
Use of property - - - - - -
Other - - - - - -
Total Revenues 1,714,376 1,827,522 113,146 - - -

EXPENDITURES
Current:

Parks and public works - - - - - -
Library services - - - - - -
Sanitation and other - - - - - -
Capital outlay 1,464,599 1,464,600 (1) - - -
Total Expenditures 1,464,599 1,464,600 (1) - - -

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 249,777 362,922 113,145 - - -

OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) (106,000) (106,000) - - - -
Total Other Financing Sources (Uses) (106,000) (106,000) - - - - CHANGE IN FUND BALANCE $ 143,777 256,922 $ 113,145 $ - - $ - BEGINNING FUND BALANCE 1,671,245 166,653
ENDING FUND BALANCE $ 1,928,167 $ 166,653
(Continued)

GAS TAX
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

COMMUNITY DEVELOPMENT

TOWN OF LOS GATOS

BUDGETED NONMAJOR FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL (GAAP)

ITEM NO. 14.

Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)

REVENUES
Property taxes $ - $ - $ - $ 38,220 $ 38,437 $ 217
Other taxes - - - - - -
License and permits 359,950 359,950 - - - -
Intergovernmental - 16,946 16,946 - - -
Interest - - - 1,010 6,118 5,108
Use of property - - - - - -
Other - - - - - -
Total Revenues 359,950 376,896 16,946 39,230 44,555 5,325

EXPENDITURES
Current:

Parks and public works - - - 42,764 33,976 8,788
Library services - - - - - -
Sanitation and other 274,587 252,605 21,982 - - -
Capital outlay - - - - - -
Total Expenditures 274,587 252,605 21,982 42,764 33,976 8,788

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 85,363 124,291 38,928 (3,534) 10,579 14,113

OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) - - - (4,920) (4,920) -
Total Other Financing Sources (Uses) - - - (4,920) (4,920) - CHANGE IN FUND BALANCE $ 85,363 124,291 $ 38,928 $ (8,454) 5,659 $ 14,113 BEGINNING FUND BALANCE 629,843 176,966
ENDING FUND BALANCE $ 754,134 $ 182,625
(Continued)

TOWN OF LOS GATOS

BUDGETED NONMAJOR FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

NON-POINT

SOURCE MAINTENANCE LIGHTING AND LANDSCAPING

ITEM NO. 14.

Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)

REVENUES
Property taxes $ - $ - $ - $ - $ - $ -
Other taxes - - - - - -
License and permits - - - - - -
Intergovernmental - - - - - -
Interest - - - 4,800 20,263 15,463
Use of property 119,845 171,495 51,650 - - -
Other 54,155 - (54,155) 88,300 88,411 111
Total Revenues 174,000 171,495 (2,505) 93,100 108,674 15,574

EXPENDITURES
Current:

Parks and public works 117,364 75,451 41,913 - - -
Library services - - - 79,800 82,000 (2,200)
Sanitation and other - - - - - -
Capital outlay - - - 21,000 - 21,000
Total Expenditures 117,364 75,451 41,913 100,800 82,000 18,800

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 56,636 96,044 39,408 (7,700) 26,674 34,374

OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) - - - - - -
Total Other Financing Sources (Uses) - - - - - -
CHANGE IN FUND BALANCE $ 56,636 96,044 $ 39,408 $ (7,700) 26,674 $ 34,374 BEGINNING FUND BALANCE 74,991 530,174
ENDING FUND BALANCE $ 171,035 $ 556,848
(Continued)

TOWN OF LOS GATOS

BUDGETED NONMAJOR FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL (GAAP)
LG Theatre Library Trust
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

ITEM NO. 14.

Variance
Positive
Budget Actual (Negative)

REVENUES
Property taxes $ 38,220 $ 38,437 $ 217
Other taxes 30,000 24,838 (5,162)
License and permits 452,450 556,554 104,104
Intergovernmental 1,712,974 1,798,394 85,420
Interest 35,572 309,185 273,613
Use of property 119,845 171,495 51,650
Other 142,455 88,411 (54,044)
Total Revenues 2,531,516 2,987,314 455,798

EXPENDITURES
Current:

Parks and public works 160,128 109,427 50,701
Library services 79,800 82,000 -
Sanitation and other 274,587 252,605 21,982
Capital outlay 1,485,599 1,464,600 20,999
Total Expenditures 2,000,114 1,908,632 93,682

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 531,402 1,078,682 547,280

OTHER FINANCING SOURCES (USES)
Operating transfers in - - -
Operating transfers (out) (110,920) (110,920) -
Total Other Financing Sources (Uses) (110,920) (110,920) - CHANGE IN FUND BALANCE $ 420,482 967,762 $ 547,280
BEGINNING FUND BALANCE 9,907,199
ENDING FUND BALANCE $ 10,874,961
(Concluded)

TOWN OF LOS GATOS

BUDGETED NONMAJOR FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL (GAAP)
TOTALS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

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

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

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

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

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

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

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

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

ITEM NO. 14.

Workers' Self Information Facilities
Equipment Comp Insurance Technology Maintenance Total
ASSETS
Cash & Investments $ 3,282,974 $ 2,197,137 $ 374,533 $ 2,496,250 $ 498,673 $ 8,849,567 Restricted Cash & Investments - 121,438 - - - 121,438
Receivables:

Accounts 4,553 - - 4,403 30,454 39,410
Leases receivable - - - - 1,407,683 1,407,683
Subscription assets, net - - - 511,016 - 511,016
Total Assets $ 3,287,527 $ 2,318,575 $ 374,533 $ 3,011,669 $ 1,936,810 $ 10,929,114

LIABILITIES
Accounts Payable $ 975 $ 16,731 $ 22,261 $ 22,596 $ 154,954 $ 217,517 Due to Other Governments - - - - 59 59
Interest payable - - - 19,943 - 19,943
Claims Payable - 1,715,597 174,395 - - 1,889,992
Subscription liabilities - - - 445,781 - 445,781
Total Liabilities $ 1,732,328 975 $ $ 196,656 $ 488,320 $ 155,013 $ 2,573,292 Deferred Inflows of Resources
Leases $ - $ - $ - $ 821,272 - $ $ 821,272

NET POSITION
Net investment in capital assets -$ -$ -$ 65,235 $ -$ $ 65,235 Restricted for:

Wokers compensation claims - 121,438 - - - 121,438
Unrestricted 3,286,552 464,809 177,877 2,458,114 960,525 7,347,877 Total Net Position $ 3,286,552 $ 586,247 $ 177,877 $ 2,523,349 $ 960,525 $ 7,534,550

TOWN OF LOS GATOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF NET POSITION
JUNE 30, 2024

ITEM NO. 14.

Workers' Self Information Facilities
Equipment Comp Insurance Technology Maintenance Total

OPERATING REVENUES
Charges for services $ 1,026,738 $ 1,011,814 $ 662,039 $ 781,902 $ 916,324 $ 4,398,817 Use of money and property 1,100 - - - 165,273 166,373
Other local taxes - - - - 24,838 24,838
Other revenue & reimbursements 32,317 392,312 5,000 (1,253) 57,889 486,265 Total Operating Revenues 1,060,155 1,404,126 667,039 780,649 1,164,324 5,076,293

OPERATING EXPENSES
Insurance expenses - 1,332,697 1,131,184 - - 2,463,881
Services and supplies 187,323 - - 507,075 1,374,009 2,068,407 Depreciation/amortization expense - - - 202,422 - 202,422 Total Operating Expenses 187,323 1,332,697 1,131,184 709,497 1,374,009 4,734,710 Operating Income (loss) 872,832 71,429 (464,145) 71,152 (209,685) 341,583

NONOPERATING REVENUE (EXPENSES)
Investment earnings - 5 - - 21,511 21,516
Interest expense - - - (22,421) - (22,421)
Income (loss) before transfers 872,832 71,434 (464,145) 48,731 (188,174) 340,678 Transfers in - - 430,000 - 221,000 651,000
Transfers out - - - - - -
Net Transfers - - 430,000 - 221,000 651,000
Change in Net Position 872,832 71,434 (34,145) 48,731 32,826 991,678 BEGINNING NET POSITION 2,413,720 514,813 212,022 2,474,618 927,699 6,542,872 ENDING NET POSITION $ 3,286,552 $ 586,247 $ 177,877 $ 2,523,349 $ 960,525 $ 7,534,550

TOWN OF LOS GATOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2024

ITEM NO. 14.

Workers' Self Information Facilities
Equipment Comp Insurance Technology Maintenance Total

CASH FLOWS FROM OPERATING

ACTIVITIES
Receipts from customers $ 1,086,133 $ 1,013,814 $ 662,039 $ 794,300 $ 1,202,972 $ 4,759,258 Payments to suppliers and providers (204,320) (1,321,360) (1,001,301) (580,860) (1,325,830) (4,433,671) Insurance reimbursements - 392,312 5,000 - - 397,312
Claims paid - (253,382) (107,859) - - (361,241)
Net Cash Provided (Used) by
Operating Activities 881,813 (168,616) (442,121) 213,440 (122,858) 361,658

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Transfers in - - 430,000 - 221,000 651,000
Transfers out - - - - - -
Net Cash Provided (Used) by
Noncapital Financing Activities - - 430,000 - 221,000 651,000

CASH FLOWS FROM CAPITAL AND

RELATED FINANCING ACTIVITIES
Interest paid - - - (30,393) - (30,393)
Principal paid - - - (149,154) - (149,154)
Acquisition of subscription assets - - - - - -
Net Cash Used by Capital and
Related Financing Activities - - - (179,547) - (179,547)

CASH FLOWS FROM INVESTING ACTIVITIES
Collections from investment earnings - 5 - - 21,511 21,516 Net Cash Provided by Investing Activities - 5 - - 21,511 21,516 Net Increase(Decrease) in Cash and Investments 881,813 (168,611) (12,121) 33,893 119,653 854,627 Cash and investments - beginning of year 2,401,161 2,487,186 386,654 2,462,357 379,020 8,116,378 Cash and investments - end of year $ 3,282,974 $ 2,318,575 $ 374,533 $ 2,496,250 $ 498,673 $ 8,971,005 Reconciliation of Operating Income to Cash
Flows from Operating Activities:

Operating Income $ 872,832 $ 71,429 $ (464,145) $ 71,152 $ (209,685) $ 341,583 Adjustments to reconcile operating income to
cash flows from operating activities:

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

Accounts receivable 25,978 2,000 - 13,651 (5,601) 36,028 Leases receivable - - - - (59,528) (59,528)
Deferred inflows of resources - - - - 103,777 103,777
Accounts payable (16,997) 11,337 5,358 (73,785) 48,179 (25,908) Claims payable - (253,382) 16,666 - - (236,716)
Cash Flows From Operating Activities $ 881,813 $ (168,616) $ (442,121) $ 213,440 $ (122,858) $ 361,658

TOWN OF LOS GATOS

INTERNAL SERVICE FUNDS

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

ITEM NO. 14.

This Page Left Intentionally Blank

ITEM NO. 14.

Statistical Section

ITEM NO. 14.

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

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

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

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

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

ITEM NO. 14.

Town of Los Gatos Schedule 1
Net Position by Component
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Fiscal Net Investment Total
Year in Capital Assets Restricted Unrestricted Net Position 2015 93,687,029 5,663,182 7,180,919 106,531,130
2016 93,383,855 6,386,014 12,744,637 112,514,506
2017 96,265,652 5,627,707 15,134,420 117,027,779
2018 102,098,729 8,199,598 170,590 110,468,917 (1)
2019 107,542,588 11,918,688 -4,642,167 114,819,109 (2)
2020 111,700,225 7,117,984 -3,967,178 114,851,031
2021 109,894,936 8,358,267 -4,735,103 113,518,100
2022 126,418,275 10,203,412 1,785,294 138,406,981
2023 130,888,581 11,091,020 11,542,661 153,522,262
2024 137,253,582 13,015,461 9,137,174 159,406,217
(2) The decrease in unrestricted net position resulted largely from the use of approximately $8.0 million in unrestricted cash balances in the Town’s GFAR fund during the year to invest in the Town’s infrastructure and equipment. (1) Net position was restated for FY 2018 for amounts placed into fiduciary funds, reclassified to General Fund Restricted Asset. -15,000,000
-10,000,000
-5,000,000
0 5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
55,000,000
60,000,000
65,000,000
70,000,000
75,000,000
80,000,000
85,000,000
90,000,000
95,000,000
100,000,000
105,000,000
110,000,000
115,000,000
120,000,000
125,000,000
130,000,000
135,000,000
140,000,000
145,000,000
Net Investment in Capital Assets Restricted Unrestricted

ITEM NO. 14.

Town of Los Gatos Schedule 2
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
2014/15 2015/16 2016/17 2017/18 2018/19
Expenses
Governmental Activities:

General Government $ 6,465,852 $ 6,993,661 $ 6,771,628 $ 7,948,918 $ 8,163,991 Public Safety 12,644,221 12,825,688 14,587,597 15,545,521 16,635,726 Parks and Public Works 8,069,352 8,320,623 9,502,707 10,047,003 10,627,716 Community Development 4,047,738 3,227,224 5,093,459 4,667,609 5,064,637 Library Services 2,553,414 2,522,142 2,868,748 3,087,684 3,059,294 Sanitation 491,359 528,580 466,762 536,296 684,673
Interest and Fees - - - - -
Total Governmental Activities 34,271,936 34,417,918 39,290,901 41,833,031 44,236,037 Program Revenues
Charges for Services:

General Government 1,888,213 1,517,012 1,669,020 1,701,146 1,562,683 Public Safety 3,529,166 3,278,585 2,076,688 1,888,359 1,745,889 Parks and Public Works 2,206,765 1,516,108 2,155,841 4,150,068 2,910,936 Community Development 5,027,497 4,359,146 3,803,626 3,456,390 4,155,231 Library Services 53,123 46,192 46,746 14,702 9,476
Sanitation 328,868 368,813 410,626 771,442 966,130
Operating Grants and Contributions:

General Government - 15,291 - - -
Public Safety 24,838 98,138 837,329 895,730 826,643
Parks and Public Works 907,745 749,300 665,779 953,294 1,301,152 Community Development - - - - -
Library Services 4,062 12,228 - 57,200 47,482
Capital Grants and Contributions:

General Government 176,705 - - - -
Public Safety - - - - -
Parks and Public Works 2,338,154 1,610,657 770,600 348,437 146,792 Community Development - - 9,280 - -
Total Program Revenues 16,485,136 13,571,470 12,445,535 14,236,768 13,672,414 General Revenues and Special Items:

Property Taxes 12,931,603 13,763,458 14,756,214 15,958,406 17,321,347 Sales Taxes 8,202,678 7,501,175 8,925,276 7,466,253 8,158,152 Franchise Taxes 2,215,430 2,258,892 2,366,908 2,474,814 2,475,916 Other Taxes 2,062,893 1,997,497 2,351,223 2,667,840 2,726,743 Motor Vehicle in Lieu - 12,308 14,056 16,483 14,689
Developer Assessments - - - - -
Investment Earnings 428,772 698,324 192,260 333,120 1,809,128 Sale of Property - - - - -
Miscellaneous 813,324 598,170 528,946 622,105 2,407,840 Insurance recoveries - - - - -
Total General Revenues and Special Items 26,654,700 26,829,824 29,134,883 29,539,021 34,913,815 Change in Net Position $ 8,867,900 $ 5,983,376 $ 2,289,517 $ 1,942,758 $ 4,350,192 Continued
Fiscal Year

ITEM NO. 14.

Town of Los Gatos Schedule 2
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
2019/20 2020/21 2021/22 2022/23 2023/241
Expenses
Governmental Activities:

General Government $ 7,405,368 $ 7,086,377 $ 15,681,345 $ 10,522,568 $ 11,113,238 Public Safety 20,446,188 19,808,230 15,093,308 17,428,923 23,783,313 Parks and Public Works 11,803,005 13,141,034 12,969,615 12,258,626 14,075,171 Community Development 5,001,958 6,846,834 5,827,001 5,215,961 5,481,765 Library Services 3,347,523 3,496,153 2,969,954 3,653,642 3,853,748 Sanitation 3,041 185,981 178,575 208,262 263,706
Interest and Fees - - - 29,221 26,137
Total Governmental Activities 48,007,083 50,564,609 52,719,798 49,317,203 58,597,078 Program Revenues
Charges for Services:

General Government1 1,470,324 1,894,080 1,725,857 2,635,527 2,694,162 Public Safety 1,549,207 1,288,358 1,596,313 1,846,312 1,980,431 Parks and Public Works 3,674,222 4,209,048 5,090,014 3,590,936 4,211,420 Community Development 3,351,753 4,063,776 4,129,718 3,971,336 4,247,279 Library Services 11,522 - 521 2,039 2,514
Sanitation 231,323 299,478 231,323 359,950 359,950
Operating Grants and Contributions:

General Government 12,290 - 2,766,833 - 63,088
Public Safety 952,045 1,061,344 1,144,226 4,622,373 917,317 Parks and Public Works 2,824,638 1,547,102 1,482,896 1,735,608 1,828,050 Community Development 15,864 223,129 670,929 616,937 692,151 Library Services 49,351 55,181 114,958 174,663 167,303
Capital Grants and Contributions:

General Government 8,258 2,365 12,205,050 - -
Public Safety 9,100 - - - -
Parks and Public Works 832,755 843,980 10,021,156 3,915,175 5,668,252 Community Development - - - - -
Total Program Revenues 14,992,652 15,487,841 41,179,794 23,470,856 22,831,917 General Revenues and Special Items:

Property Taxes 18,330,426 19,878,835 21,132,098 22,746,842 24,224,142 Sales Taxes 7,531,425 7,933,604 8,483,673 8,806,477 8,071,735 Franchise Taxes1 2,495,792 2,499,463 2,822,515 3,074,624 2,547,011 Other Taxes 1,911,774 1,126,887 2,042,580 2,292,008 2,422,849 Motor Vehicle in Lieu 24,526 23,058 35,624 34,406 41,461 Developer Fees - - 1,735,571 614,820 12,880
Investment Earnings 2,428,470 227,136 (1,278,978) 797,587 3,129,616 Sale of Property - - - - -
Miscellaneous 323,940 1,528,039 755,400 1,029,864 1,199,422 Insurance recoveries - - - 1,565,000 -
Total General Revenues and Special Items 33,046,353 33,217,022 35,728,483 40,961,628 41,649,116 Change in Net Position $ 31,922 $ (1,859,746) $ 24,188,479 $ 15,115,281 $ 5,883,955 Concluded
(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 Fiscal Year
Licenses & Permits in FY 2023/24 was $765,900. The garbage Franchise Fees were $2,051,33 in FY 2022/23 and $1,493,184 in FY 2023/24.

ITEM NO. 14.

Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2014/15 2015/16 2016/17 2017/18 2018/19
General Fund
Nonspendable $ - $ - $ - $ - $ -
Restricted - - - 1,206,851 5,015,316
Committed - 20,019,187 15,129,925 12,953,399 15,070,944 Assigned 24,121,256 9,555,085 14,050,699 17,475,285 18,256,895 Unassigned - - - - -
Total General Fund 24,121,256 29,574,272 29,180,624 31,635,535 38,343,155 All Other Governmental Funds
Restricted 5,663,182 6,386,014 5,627,707 6,992,747 6,903,372 Committed - 3,696,000 10,354,584 5,571,087 2,579,997
Assigned 15,346,558 11,099,076 7,928,994 6,361,403 6,180,930 Unassigned 206,875 - - - -
Total All Other Governmental Funds 21,216,615 21,181,090 23,911,285 18,925,237 15,664,299 Total Fund Balances $ 45,337,871 $ 50,755,362 $ 53,091,909 $ 50,560,772 $ 54,007,454 Continued
Fiscal Year

ITEM NO. 14.

Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2019/20 2020/21 2021/22 2022/23 2023/24
General Fund
Nonspendable $ - $ 159,000 $ 159,000 $ 159,000 $ 159,000 Restricted 669,978 - 690,000 1,444,501 2,532,997
Committed 15,387,706 11,220,970 12,283,132 13,150,130 14,364,143 Assigned 13,277,813 12,534,648 13,764,657 14,774,673 14,005,932 Unassigned - - - - -
Total General Fund 29,335,497 23,914,618 26,896,789 29,528,304 31,062,072 All Other Governmental Funds
Restricted 6,448,006 8,562,653 9,383,483 9,530,538 10,361,026 Committed - - 637,711 2,590,257 2,664,441
Assigned 14,181,679 15,360,481 13,944,155 19,536,429 16,915,064 Unassigned - - - - -
Total All Other Governmental Funds 20,629,685 23,923,134 23,965,349 31,657,224 29,940,531 Total Fund Balances $ 49,965,182 $ 47,837,752 $ 50,862,138 $ 61,185,528 $ 61,002,603 Concluded
Fiscal Year

ITEM NO. 14.

Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2014/15 2015/16 2016/17 2017/18 2018/19
Revenues:

Taxes $ 23,208,820 $ 23,269,892 $ 25,945,129 $ 26,253,026 $ 28,244,329 Licenses & Permits 6,467,771 5,442,133 5,075,503 5,937,044 5,173,876 Intergovernmental 2,921,002 2,573,475 1,715,580 2,124,903 2,310,655 Charges for Services 5,794,386 4,773,001 4,210,174 5,395,057 5,584,504 Fines and Forfeitures 868,564 879,277 917,105 676,212 510,266 Franchise Fees 2,215,430 2,258,892 2,366,908 2,474,814 2,475,916 Developer Fees - - - - -
Investment Income 428,735 698,308 192,978 332,938 1,809,164 Use of Property 32,209 31,723 32,096 32,206 32,960
Other 3,130,975 2,396,992 1,011,939 640,844 579,755
Total Revenues 45,067,892 42,323,693 41,467,412 43,867,044 46,721,425 Expenditures:

Current
General Government 8,647,451 9,144,797 8,390,959 8,770,082 8,004,254 Public Safety 13,747,198 13,763,316 13,251,288 14,423,554 14,945,407 Parks and Public Works 5,840,097 6,307,266 6,633,748 7,125,686 7,962,135 Community Development 4,218,500 3,695,504 3,793,930 4,192,165 4,577,495 Library Services 2,268,844 2,332,268 2,508,677 2,529,017 2,493,617 Sanitation & Other 411,863 452,726 466,762 521,147 628,240 Capital Outlay 3,800,478 3,241,657 6,867,034 9,778,058 7,888,914 Debt Service
Principal Repayment - - - - -
Interest and Fiscal Charges - - - - -
Total Expenditures 38,934,431 38,937,534 41,912,398 47,339,709 46,500,062 Excess (Deficiency) of Revenues
Over (Under) Expenditures 6,133,461 3,386,159 (444,986) (3,472,665) 221,363 Other Financing Sources(Uses):

Transfers In 8,977,220 3,315,846 7,907,692 3,176,760 4,264,131 Transfers Out (7,788,049) (1,284,514) (7,612,012) (3,880,131) (3,323,756) Gain from Sale of Property - - - 378,219 1,912,316
Insurance Recoveries - - - - -
Issuance of Debt - - 4,435 - -
Total Other Financing Sources(Uses) 1,189,171 2,031,332 300,115 (325,152) 2,852,691 Special Item:

Extraordinary Gain (Loss) RDA Dissolution - - - - -
Prepayment of Pension Obligations - - - - -
Net Change in Fund Balances $ 7,322,632 $ 5,417,491 $ (144,871) $ (3,797,817) $ 3,074,054 Capitalized Capital Outlay $ 3,800,478 $ 3,241,657 $ 6,867,034 $ 9,778,058 $ 7,861,972 Debt Service as a Percentage
of Non Capital Expenditures 0.00% 0.00% 0.00% 0.00% 0.00% Continued
Fiscal Year

ITEM NO. 14.

Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2019/20 2020/21 2021/22 2022/23 2023/241
Revenues:

Taxes $ 27,811,665 $ 28,977,919 $ 31,627,593 $ 33,851,411 $ 34,735,349 Licenses & Permits1 4,818,671 5,212,831 6,055,040 6,333,675 6,227,298 Intergovernmental 4,498,153 3,746,587 15,492,982 10,145,820 6,317,644 Charges for Services 5,309,470 6,035,659 6,925,359 5,718,714 7,051,179 Fines and Forfeitures 271,117 103,468 319,170 416,950 480,634 Franchise Fees1 2,495,792 2,499,463 2,822,515 3,074,624 2,547,011 Developer Fees - - 1,735,571 614,820 12,880
Investment Income 2,428,453 227,940 (1,278,983) 797,582 3,108,100 Use of Property 31,039 40,372 144,901 237,647 297,501
Other 376,922 423,115 349,145 985,188 604,493
Total Revenues 48,041,282 47,267,354 64,193,293 62,176,431 61,382,089 Expenditures:

Current
General Government 13,024,146 14,040,134 15,953,968 8,828,779 9,573,022 Public Safety 15,793,815 16,570,836 16,451,190 18,446,048 20,718,781 Parks and Public Works 8,168,599 8,229,944 8,639,128 9,084,406 9,899,083 Community Development 4,473,790 5,195,302 6,313,511 5,065,412 5,246,729 Library Services 2,700,802 2,847,988 2,827,210 3,208,027 3,335,389 Sanitation & Other 162,837 166,173 194,969 204,097 252,605 Capital Outlay 7,861,972 5,707,439 10,478,670 8,917,075 12,366,255 Debt Service
Principal Repayment - 39,008 156,034 156,034 225,370
Interest and Fiscal Charges - - - - 3,716
Total Expenditures 52,185,961 52,796,824 61,014,680 53,909,878 61,620,950 Excess (Deficiency) of Revenues
Over (Under) Expenditures (4,144,679) (5,529,470) 3,178,613 8,266,553 (238,861) Other Financing Sources(Uses):

Transfers In 8,935,260 4,053,535 8,154,307 11,886,022 3,666,235 Transfers Out (8,628,719) (3,940,015) (8,310,685) (11,396,347) (4,317,235) Gain from Sale of Property 1,566 1,201,369 2,151 2,162 223 Insurance Recoveries - - - 1,565,000 -
Issuance of Debt - 1,560,336 - - 706,713
Total Other Financing Sources(Uses) 308,107 2,875,225 (154,227) 2,056,837 55,936 Special Item:

Extraordinary Gain (Loss) RDA Dissolution - - - - -
Prepayment of Pension Obligations - - - - -
Net Change in Fund Balances $ (3,836,572) $ (2,654,245) $ 3,024,386 $ 10,323,390 $ (182,925) Capitalized Capital Outlay $ 7,861,972 $ 5,707,439 $ 9,180,716 $ 8,598,811 $ 12,016,644 Debt Service as a Percentage
of Non Capital Expenditures 0.00% 0.08% 0.30% 0.35% 0.46% Concluded
(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 Fiscal Year
Licenses & Permits in FY 2023/24 was $765,900. The garbage Franchise Fees were $2,051,33 in FY 2022/23 and $1,493,184 in FY 2023/24.

ITEM NO. 14.

Town of Los Gatos Schedule 5
Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years
Utility
and Total
Fiscal Unsecured Percent Secured Percent Total Estimated Direct Year Property Change Property Change Assessed Full Market Tax Rate 2015 $ 227,331,042 1.45% $ 9,767,782,505 5.73% $ 9,995,113,547 $ 39,071,130,020 1.0544 2016 217,035,545 -4.53% 10,417,804,357 6.65% 10,634,839,902 41,671,217,428 1.0533 2017 304,443,013 40.27% 11,240,554,198 7.90% 11,544,997,211 44,962,216,792 1.0560 2018 330,504,877 8.56% 11,969,049,272 6.48% 12,299,554,149 47,876,197,088 1.0659 2019 359,276,665 8.71% 12,795,393,103 6.90% 13,154,669,768 51,181,572,412 1.0607 2020 331,517,212 -7.73% 13,510,676,336 5.59% 13,842,193,548 54,042,705,344 1.0494 2021 308,749,655 -6.87% 14,599,669,332 8.06% 14,908,418,987 58,398,677,328 1.0627 2022 304,460,199 -1.39% 15,255,884,284 4.49% 15,560,344,483 61,023,537,136 1.0616 2023 357,370,065 17.38% 16,404,930,826 7.53% 16,762,300,891 65,619,723,304 1.0591 2024 432,381,651 20.99% 17,623,641,576 7.43% 18,056,023,227 70,494,566,304 1.0591 Source: Santa Clara County Assessed Value Report
0 2000
4000
6000
8000
10000
12000
14000
16000
18000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Millions
Unsecured Property Secured Property

ITEM NO. 14.

Town of Los Gatos Schedule 6
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
Santa Clara School
Fiscal Basic County County Bonds Special District Bonds Year Wide Levy and Levies Districts and Loans Total
2015 1.0000 0.0479 0.0065 0.1442 1.1986
2016 1.0000 0.0476 0.0057 0.1381 1.1914
2017 1.0000 0.0474 0.0086 0.1223 1.1783
2018 1.0000 0.0597 0.0062 0.1177 1.1836
2019 1.0000 0.0565 0.0042 0.1006 1.1613
2020 1.0000 0.0557 0.0041 0.0935 1.1533
2021 1.0000 0.0457 0.0037 0.0959 1.1453
2022 1.0000 0.0576 0.0051 0.0902 1.1529
2023 1.0000 0.0559 0.0057 0.0854 1.1470
2024 1.0000 0.0538 0.0053 0.0720 1.1311
Source: Santa Clara County Book of Tax Rates

0.00 0.25

0.50 0.75

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

ITEM NO. 14.

Town of Los Gatos Schedule 7
Principle Property Tax Payers
Last Ten Fiscal Years *
Percentage Percentage Percentage Percentage Percentage
of Total City of Total City of Total City of Total City of Total City Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed ASSESSEE NAME Value Value Value Value Value Value Value Value Value Value 750 University LLC $ 19,000,000 0.17% $ 19,379,620 0.19% $ 19,675,159 0.18% $ 25,241,863 0.21% $ 25,746,699 0.20% 980 JR LLC 19,277,879 0.15%
140 Toll House Hotel LLC
17443 Farley Rd LLC
Alberto Way Holdings LLC 23,715,141 0.21% 24,188,966 0.23% 24,557,845 0.22% 25,048,998 0.21% 25,549,975 0.20% A W Los Gatos LLC
Boccardo Corporation 38,772,905 0.34% 21,617,318 0.21% 21,918,921 0.20% 22,211,650 0.19% 22,651,732 0.18% D&K Los Gatos LLC 15,974,003 0.14% 16,293,163 0.16%
David A. and Shari Flick Trustee 15,388,884 0.14%
Donahue Schriber Realty Group LP 53,872,083 0.45% 56,370,186 0.44% DS Downing Los Gatos LLC 20,006,861 0.18% 21,980,568 0.21% 22,315,770 0.20% DS Village Square 22,799,599 0.20%
El Camino Hospital 20,803,609 0.19% 26,477,160 0.25% 26,880,933 0.24% 23,353,576 0.20% 28,596,104 0.22% EL Gato 15 LLC
Equestrian 3 Investments LLC 29,584,251 0.25% 28,563,864 0.22% Fox Creek Fund LLC 21,558,664 0.17%
Good Samaritan Hospital LP 19,602,594 0.17% 19,880,366 0.19% 22,402,756 0.20% 22,516,823 0.19% 22,934,274 0.18% Grade Way Associations VI 15,163,152 0.13%
Grosvenor USA Ltd. 22,990,624 0.20% 23,449,975 0.23%
Health Care REIT Inc, 20,765,810 0.18% 20,089,903 0.19% 20,396,274 0.18% International Hotel 30,144,617 0.25% 30,747,509 0.24%
Kay K. & Go Sasaki Sr., Trustee 24,744,983 0.24% 25,122,131 0.22% 25,624,027 0.21% 26,135,962 0.20% Knowles Los Gatos LLC 48,204,708 0.43% 49,167,836 0.47% 49,917,644 0.44% 50,915,995 0.43% 51,934,313 0.41% KSL Capital Partners 43,580,326 0.39% 30,134,614 0.29% 30,105,945 0.27% 25,893,946 0.22% 26,411,820 0.21% Leland E Lester, Trustee 29,004,169 0.26%
LG Business Park Bldg 3 LLC 61,947,284 0.59% 53,465,724 0.45% LG Business Park Bldg 4 LLC 43,937,857 0.37%
LG Business Park LLC 39,347,485 0.35% 17,507,261 0.17% 31,070,572 0.28% LG Hotel LLC 15,448,057 0.14% 15,497,395 0.15%
Los Gatos Hotel Corp. 15,573,314 0.14% 15,676,113 0.15% Preylock Los Gatos LLC
Safeway Inc. 24,394,468 0.20%
San Jose Water Works 36,693,453 0.33% 37,081,049 0.36% 38,710,728 0.34% 41,202,805 0.34% 46,150,577 0.36% Serramonte Corporate Center LLC 200,844,610 1.57%
SF Los Gatos LLC
SHP Newark LLC
SI 32 LLC 150,563,119 1.34% 141,348,894 1.36% 143,442,269 1.28% 146,317,944 1.22% 149,208,182 1.17% Sobrato Interests IV LLC 20,869,338 0.19% 44,930,482 0.43% 42,240,994 0.38% 43,071,837 0.36% 43,919,879 0.34% SRI Old Town LLC 31,122,427 0.28% 31,744,252 0.30% 32,228,351 0.29% 32,872,917 0.27% 33,530,374 0.26% Summerhill N40 LLC
Summerhill Prospect Avenue LLC 18,274,508 0.16%
Wealthcap Los Gatos 121 109,100,000 0.97% 111,282,000 0.93% 113,507,640 0.89% Wealthcap Los Gatos 31 84,000,000 0.75% 85,680,000 0.72% 87,393,600 0.68% Total - Principal taxpayers $ 633,585,810 6.49% $ 663,137,202 6.37% 814,164,568 $ 7.24% $ 916,633,381 7.66% 1,061,033,843 $ 8.29% Total - All real properties assessed by the Town (1) $ 9,766,765,025 $ 10,416,786,877 $ 11,239,536,718 $ 11,968,031,792 $ 12,793,751,423 (1) Assessed value includes only net secured real properties. (2) Excludes the value of tax-exempt properties
Source Data: California Municipal Statistics, Inc. Continued 2014/15 2015/16 2016/17 2017/18 2018/19

ITEM NO. 14.

Town of Los Gatos Schedule 7
Principle Property Tax Payers
Last Ten Fiscal Years *
Percentage Percentage Percentage Percentage Percentage
of Total City of Total City of Total City of Total City of Total City Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed Assessed ASSESSEE NAME Value Value Value Value Value Value Value Value Value Value 750 University LLC $ 26,261,632 0.19% $ 26,786,863 0.18% $ 27,064,374 0.19% $ 27,605,660 0.17% $ 28,157,772 0.16% 980 JR LLC
140 Toll House Hotel LLC 35,043,180 0.24% 35,499,104 0.24% 34,808,066 0.21% 35,490,590 0.20% 17443 Farley Rd LLC 29,000,000 0.16%
Alberto Way Holdings LLC 24,158,350 0.18% 24,641,514 0.17% 24,896,799 0.17% A W Los Gatos LLC 26,749,500 0.16%
Boccardo Corporation 23,099,314 0.17% 24,268,078 0.15%
D&K Los Gatos LLC
David A. and Shari Flick Trustee
Donahue Schriber Realty Group LP 57,497,587 0.43% 58,647,535 0.40% 59,255,121 0.41% 60,440,222 0.37% 61,649,025 0.35% DS Downing Los Gatos LLC
DS Village Square
El Camino Hospital 30,789,155 0.23% 42,611,768 0.29% 50,456,560 0.35% 43,379,731 0.26% 42,156,737 0.24% 36,719,999 0.21%
Equestrian 3 Investments LLC 25,525,880 0.19% 26,036,395 0.18% 26,306,130 0.18% 26,832,251 0.16% 27,368,894 0.16% Fox Creek Fund LLC 27,231,335 0.19% 27,078,255 0.17% 28,331,465 0.16% Good Samaritan Hospital LP 23,391,289 0.17% 23,846,402 0.16% 24,111,608 0.17% 24,569,780 0.15% Grade Way Associations VI
Grosvenor USA Ltd.

Health Care REIT Inc,
International Hotel 31,362,458 0.23% 31,989,706 0.22%
Kay K. & Go Sasaki Sr., Trustee 28,864,942 0.21% 27,190,951 0.19% 27,471,495 0.19% 28,020,326 0.17% 28,585,258 0.16% Knowles Los Gatos LLC 52,972,998 0.39% 54,032,455 0.37% 54,592,229 0.37% 55,684,072 0.34% 56,797,751 0.32% KSL Capital Partners 33,069,058 0.24% 33,118,759 0.23% 33,037,818 0.23% 32,098,542 0.20% 31,484,883 0.18% Leland E Lester, Trustee
LG Business Park Bldg 3 LLC
LG Business Park Bldg 4 LLC
LG Business Park LLC
LG Hotel LLC
Los Gatos Hotel Corp.

Preylock Los Gatos LLC 89,141,472 0.66% 95,880,000 0.66% 96,873,316 0.66% 98,810,782 0.60% 96,498,189 0.55% Safeway Inc. 25,752,231 0.19% 25,577,034 0.18%
San Jose Water Works 47,777,432 0.35% 49,649,154 0.34% 53,320,614 0.37% 51,657,625 0.31% 52,511,158 0.30% Serramonte Corporate Center LLC 204,861,501 1.52% 208,958,729 1.43% 211,123,540 1.45% 215,346,008 1.31% 219,652,926 1.25% SF Los Gatos LLC 33,214,527 0.23%
31,799,550 31,799,550 0.18%
SI 32 LLC 152,166,578 1.13% 155,181,793 1.06% 158,132,236 1.08% 159,929,209 0.97% 163,243,322 0.93% Sobrato Interests IV LLC 44,781,377 0.33% 45,682,006 0.31% 46,155,127 0.32% 47,067,863 0.29% 48,004,098 0.27% SRI Old Town LLC 34,200,980 0.25% 34,884,999 0.24% 35,246,406 0.24% 35,951,333 0.22% 36,670,359 0.21% Summerhill N40 LLC 56,244,782 0.42% 57,369,661 0.39% 59,462,462 0.41% 71,006,795 0.43% 42,705,086 0.24% Summerhill Prospect Avenue LLC
Wealthcap Los Gatos 121 115,777,792 0.86% 118,093,347 0.81% 119,316,793 0.82% 121,703,128 0.74% 124,137,190 0.70% Wealthcap Los Gatos 31
Total - Principal taxpayers $ 1,127,696,808 8.35% 1,175,222,251 $ 8.05% 1,202,767,594 $ 8.24% 1,244,806,776 $ 7.39% 1,220,964,252 $ 6.93% Total - All real properties assessed by the Town (1) $ 13,509,034,656 $ 14,598,027,652 $ 15,254,242,604 $ 16,403,289,146 $ 17,621,748,976 (1) Assessed value includes only net secured real properties. (2) Excludes the value of tax-exempt properties
Source Data: California Municipal Statistics, Inc. Concluded 2019/20 2020/21 2021/22 2022/23 2023/24

ITEM NO. 14.

Town of Los Gatos Schedule 8
Property Tax Levies and Collections
Last Ten Fiscal Years
Value of
Redevelopment
Agency Value of
Town Redevelopment Total Property Value of Town Property Property Property Tax Property Tax Tax Levied Property subject Subject to Subject to Fiscal Levied and Levied and and to Local Tax Local Local Year Collected Collected Collected Rate Tax Rate Tax Rate 2015 $ 9,787,519 $ - $ 9,787,519 $ 9,995,113,547 $ 1,318,214,863 $ 11,313,328,410 2016 10,388,424 - 10,388,424 10,634,839,902 1,395,509,489 12,030,349,391 2017 11,345,588 - 11,345,588 11,544,997,211 1,537,577,241 13,082,574,452 2018 12,060,228 - 12,060,228 12,299,554,149 1,650,746,473 13,950,300,622 2019 12,924,592 - 12,924,592 13,154,669,768 1,717,358,555 14,872,028,323 2020 13,559,587 - 13,559,587 13,842,193,548 1,715,982,555 15,651,922,606 2021 13,864,271 - 13,864,271 14,908,418,987 1,809,729,058 16,718,148,045 2022 14,566,808 - 14,566,808 15,560,344,483 1,891,297,788 17,451,642,271 2023 16,300,797 - 16,300,797 16,762,300,891 2,047,530,717 18,809,831,608 2024 17,431,668 - 17,431,668 18,056,023,227 2,162,668,731 20,218,691,958 Sources: Santa Clara County Auditor-Controller Office and the Town of Los Gatos $7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
$18.0
$19.0
$20.0
$21.0
Billions
Value of Property
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
$18.0
Millions
Tax Levied

ITEM NO. 14.

Town of Los Gatos Schedule 9
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
Total Total Percentage of
Fiscal PG&E Governmental Primary Personal Per
Year Loan SBITA's Activities Government Income Capita
2015 $ - $ - $ - $ - 0.0% 0.00
2016 $ - $ - $ - $ - 0.0% 0.00
2017 $ - $ - $ - $ - 0.0% 0.00
2018 $ - $ - $ - $ - 0.0% 0.00
2019 $ - $ - $ - $ - 0.0% 0.00
2020 $ - $ - $ - $ - 0.0% 0.00
2021 1,508,325 $ $ - $ 1,508,325 $ 1,508,325 96.4% 48.91 2022 1,352,291 $ $ - $ 1,352,291 $ 1,352,291 95.5% 40.90 2023 1,196,257 $ $ 594,934 $ 1,791,191 $ 1,791,191 118.7% 36.14 2024 1,040,224 $ $ 1,083,858 $ 2,124,082 $ 2,124,082 108.9% 31.30 Debt was transferred to the Successor Agency Trust Fund as a part of the RDA dissolution in FY 2011 Governmental Activities

ITEM NO. 14.

Town of Los Gatos Schedule 10
Direct and Overlapping Governmental Activities Debt
June 30, 2024
2023/24 Assessed Valuation: $18,056,023,227 Estimated Share of Direct and
Total Debt at Overlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT: % Applicable (1) June 30, 2024 at June 30, 2024 Overlapping Tax & Assesment Debt
Santa Clara County 2.735% $ 1,041,125,000 $ 26,167,660
West Valley-Mission Community College District 9.553% $ 694,320,000 $ 63,340,211 Campbell Union High School District 7.894% $ 354,085,000 $ 26,538,444 Los Gatos-Saratoga Joint Union High School District 36.786% $ 81,235,000 $ 28,759,295 Cambrian School District 0.757% $ 96,314,944 $ 678,423
Campbell Union School District 7.886% $ 205,899,324 $ 19,739,393 Los Gatos Union School District 74.219% $ 62,020,000 $ 42,364,205 Saratoga Union School District 0.049% $ 15,206,197 $ 5,778 Union School District 20.070% $ 144,497,533 $ 28,183,190 Midpeninsula Regional Open Space District 4.444% $ 82,680,000 $ 3,586,308 Santa Clara Valley Water District Benefit Assessment District 2.735% $ 38,900,000 $ 799,577 Total Overlapping Tax and Assesmet Debt $ 240,162,484
Overlapping General Fund Debt
Santa Clara County General Fund Obligations 2.735% $ 1,057,709,440 $ 28,928,353 Santa Clara County Pension Obligation Bonds 2.735% $ 323,733,582 $ 8,854,113 Santa Clara County Board of Education Certificates of Participation 2.735% $ 12,073,098 $ 330,199 West Valley-Mission Community College District General Fund Obligations 9.553% $ 2,520,000 $ 240,736 Campbell Union High School District General Fund Obligations 7.894% $ 13,500,000 $ 1,065,690 Campbell Union School District General Fund Obligations 7.886% $ 1,230,000 $ 96,998 Saratoga Union School District Certificates of Participation 0.049% $ 1,455,000 $ 713 Town of Los Gatos 100.000% $ - $ 2,123,381
Santa Clara County Vector Control District Certificates of Participation 2.735% $ 945,000 $ 25,846 Santa Clara County Central Fire Protection District Certificates of Participation 26.139% $ 27,130,000 $ 7,091,511 Midpeninsula Regional Open Space Park District General Fund Obligations 4.444% $ 79,795,600 $ 3,546,116 Total Gross Overlapping General Fund Debt $ 52,303,656
Less: Santa Clara County Supported Obligations $ 72,751 Total Overlapping General Fund Debt $ 52,230,905
Overlapping Tax Increment Debt ( Successor Agency)
Town of Los Gatos Certificated of Participations $ 10,015,000 Total of Overlapping Tax Increment Debt $ 10,015,000
Total Direct Debt $ 2,123,381
Total Gross Overlapping Dept $ 302,481,140
Total Net Overlapping Debt $ 302,408,389
Gross Combined Total Debt $ 302,481,140 (2)
Net Combined Total Debt $ 302,408,389
Ratios to 2023/24 Assessed Valuation:

Total Overlapping Tax and Assessment Debt: 1.33%
Total Direct Debt: 0.00%
Gross Combined Total Debt: 1.66%
Net Combined Total Debt: 1.66%
Ratios to Redevelpment Incremental Valuation ( $1,916,471,918):

Total Overlapping Tax Increment Debt: 0.52%
Source Data: California Municipal Statistics, Inc.
(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the distric's total taxable asessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non-bonded capital lease obligations.

ITEM NO. 14.

Town of Los Gatos Schedule 11
Legal Debt Margin Information,
Last Ten Fiscal Years
(In Thousands of Dollars)
Assessed Value
Debt Limit
Debt Applicable to Limit:

Legal Debt Margin
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 Debt Limit $ 1,379,254 $ 1,444,943 $ 1,556,252 $ 1,679,736 $ 1,789,097 $ 2,076,329 $ 2,236,263 $ 2,334,052 $ 2,514,345 $ 2,708,403 Debt Applicable to Limit - - - - - - - 1,352 1,196 1,040 Legal Debt Margin $ 1,379,254 $ 1,444,943 $ 1,556,252 $ 1,679,736 $ 1,789,097 $ 2,076,329 $ 2,236,263 $ 2,332,700 $ 2,332,699 $ 2,707,363 Total Net Debt
Applicable to the Limit
as a Percentage
of Debt Limit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.06% 0.05% 0.04% Notes:
(1) The Town of Los Gatos is a general law city and has a debt limit of 15%. (2) Excludes RDA asessed valuation and debt transferred to the Successor Agency trust as a part of the RDA dissolution.

Legal Debt Margin Calculation
Fiscal Year
$ 18,056,023,227
2,708,403,484
$ 2,708,403,484
for Fiscal Year 2023/24

ITEM NO. 14.

Town of Los Gatos Schedule 12
Demographic and Economic Statistics
Last Ten Fiscal Years
Personal
Income Per Capita Public County
Fiscal (thousands Personal Median School Unemployment
Year Population of dollars) Income Age Enrollment Rate
Ended (1) (2) (3) (4) (5) (6)
2015 30,505 $ 2,197,885 72,050 46.10 6,622 3.8%
2016 31,376 $ 2,286,087 72,861 46.30 6,646 3.5%
2017 31,314 $ 2,281,569 72,861 46.50 6,631 3.8%
2018 30,601 $ 2,290,638 74,855 46.81 6,588 2.6%
2019 30,998 $ 2,365,178 76,301 46.72 6,544 2.6%
2020 31,439 $ 2,546,748 81,006 46.83 6,520 10.7%
2021 30,836 $ 2,686,155 87,111 46.83 6,180 5.2%
2022 33,062 $ 3,055,987 92,432 46.67 6,000 2.2%
2023 33,102 $ 3,443,767 104,035 46.76 5,895 3.7%
2024 33,230 $ 4,006,242 120,561 47.03 5,856 4.1%
Source:
(1) California State Dept. of Finance - Population Research Unit (January 2023) (2) California State Dept. of Finance - Estimate equals county per capita average times population (3) US Census Bureau - QuickFacts
(4) Claritas demographic snapshot report
(5) Los Gatos Saratoga Joint Union and Los Gatos Union Elementary School Districts (6) State of California, Employment Development Dept., Labor Market Info. Div.

ITEM NO. 14.

Town of Los Gatos Schedule 13
Principal Employers
Last Ten Fiscal Years
Percentage Percentage Percentage Percentage Percentage
of Total Town of Total Town of Total Town of Total Town of Total Town Principal Employers Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Columbia Health Care Assoc/Mission Oaks Hospital - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% El Camino Hospital, Los Gatos 560 3.73% 560 3.53% 560 3.49% 560 3.43% 560 3.49% Los Gatos Union School District 273 1.82% 280 1.76% 274 1.71% 267 1.64% 281 1.75% Los Gatos-Saratoga High School District 157 1.05% 157 0.99% 370 2.30% 367 2.25% 367 2.28% Netflix 1,530 10.19% 1,976 12.45% 1,864 11.61% 2,117 12.98% 2,314 14.41% Safeway 314 2.09% 314 1.98% 314 1.95% 314 1.92% 314 1.95% Alain Pinel Realtors 156 1.04% 146 0.92% 148 0.92% 131 0.80% 131 0.82% Courtside Tennis Club 440 2.93% 440 2.77% 468 2.91% 542 3.32% 542 3.37% Town of Los Gatos 157 1.05% 158 1.00% 160 1.00% 159 0.97% 160 1.00% Whole Foods 179 1.19% 179 1.13% 179 1.11% 179 1.10% 125 0.78% Vasona Creek Health Care Center 233 1.55% 233 1.47% 233 1.45% 233 1.43% 233 1.45% Good Samaritan Regional Cancer Center 200 1.33% 200 1.26% 200 1.25% 200 1.23% 200 1.25% Roku - 0.00% 487 3.07% 554 3.45% 664 4.07% 516 3.21%
Terraces of Los Gatos - 0.00% 228 1.44% 228 1.42% 228 1.40% 228 1.42% Source: Town of Los Gatos, Finance
Department and Muniservices Continued
2014/15 2015/16 2016/17 2017/18 2018/19

ITEM NO. 14.

Town of Los Gatos Schedule 13
Principal Employers
Last Ten Fiscal Years
Percentage Percentage Percentage Percentage Percentage
of Total Town of Total Town of Total Town of Total Town of Total Town Principal Employers Emp. Employment Emp. Employment Emp. Employment Emp. Employment Emp. Employment Columbia Health Care Assoc/Mission Oaks Hospital - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% El Camino Hospital, Los Gatos 560 3.49% 560 3.35% 517 3.09% 509 3.04% 548 3.45% Los Gatos Union School District 281 1.75% 281 1.68% 281 1.68% 281 1.68% 287 1.81% Los Gatos-Saratoga High School District 367 2.28% 320 1.92% 320 1.91% 320 1.91% 320 2.01% Netflix 2,314 14.41% 2,524 15.11% 2,278 13.62% 2,263 13.53% 2,444 15.39% Safeway 314 1.95% 314 1.88% 314 1.88% 314 1.88% 314 1.98% Alain Pinel Realtors 131 0.82% - 0.00% - 0.00% - 0.00% - 0.00% Courtside Tennis Club 542 3.37% 542 3.24% 542 3.24% 542 3.24% 342 2.15% Town of Los Gatos 160 1.00% 161 0.96% 165 0.99% 163 0.97% 165 1.04% Whole Foods 125 0.78% 125 0.75% 180 1.08% 132 0.79% 133 0.84% Vasona Creek Health Care Center 233 1.45% 250 1.50% 250 1.49% 250 1.49% 250 1.57% Good Samaritan Regional Cancer Center 200 1.25% 200 1.20% 200 1.20% 200 1.20% 111 0.70% Roku 516 3.21% - 0.00% - 0.00% - 0.00% - 0.00%
Terraces of Los Gatos 228 1.42% 228 1.36% 200 1.20% 200 1.20% 230 1.45% Source: Town of Los Gatos, Finance
Department and Muniservices Concluded
2019/20 2020/21 2021/22 2022/23 2023/24

ITEM NO. 14.

Town of Los Gatos Schedule 14
Full-time-Equivalent Employees by Function/Program
Last Ten Fiscal Years
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 Function/Program
General Government 20.97 20.97 21.35 21.97 22.16 21.80 21.80 22.06 22.05 22.06 Police 60.00 59.00 59.00 59.00 59.00 60.00 60.00 60.00 60.00 60.00 Economic Development 0.63 0.63 0.63 0.75 0.75 0.75 0.75 0.75 0.75 0.75 Library 10.80 11.00 12.25 12.25 12.50 12.50 12.50 12.50 13.50 13.50 Planning 19.50 19.00 19.26 19.63 20.08 20.08 20.20 20.20 20.20 20.45 Public Works 32.00 33.50 33.50 34.50 34.50 34.50 34.75 34.75 36.75 35.75 Total 143.90 144.10 145.98 148.10 148.99 149.63 150.00 150.26 153.25 152.51 Full-time equivalent employment is calculated as one or more employee positions totaling one full year of service or approximately 2,080 hours a year.

Page C-45 of Town Budget FY 2023/24
Fiscal Year

ITEM NO. 14.

Town of Los Gatos Schedule 15
Operating Indicators
Last Ten Fiscal Years

FUNCTION/PROGRAM
General government 2014/15 2015/16 2016/17 2017/18 2017/18 Building Permits Issued
Residential Permits Issued 805 899 744 849 814
Residential Permits Value 76,896,111 85,000,754 53,625,891 63,083,249 80,030,846 Commercial Permits Issued 133 147 135 105 122
Commercial Permits Value 178,195,997 20,185,884 50,024,177 16,626,196 13,295,999 Publically Owned Permits Issued - - - - -
Publically Owned Permits Value - - - - -
Residential Parking Permits
Number of Special Event Permits Issued 127 107 118 113 78 Number of Annual Permits Issued 1,570 1,363 1,251 1,342 1,395 City Clerk
Number of Council Resolutions Passed 72 61 69 69 59
Number of Ordinances Passed 9 11 5 17 11
Number of Contracts Passed 222 283 240 262 245
General Services
Number of Purchase Orders Issued 277 334 331 322 343
Police
Physical Arrests 695 987 1,030 1,164 1,138
Parking Violations 13,321 13,975 12,863 11,784 6,817
Traffic Violations 4,633 5,400 4,634 4,757 2,877
DUI Arrests 48 58 60 51 70
Library
Number of Library Visits - - - - -
Annual Circulation - - - - -
Number of Library Card holders - - - - -
Circulated e-audiobooks 5,867 ( 7,761 10,006 8,844 12,130 Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles) 1.8 8.0 10.0 2.6 5.8 ADA Compliance: Curb Ramps 23 11 30 68 49
Traffic Circles 1 1 1 1 1
Street Poles 1,609 1,609 1,609 1,762 1,830
Planning and Development Department
Building & Safety Inspections Performed 11,652 8,655 14,722 13,918 13,966 Redevelopment: Number of active projects - - - - -
Source: Town of Los Gatos, Finance Department Continued Fiscal Year

ITEM NO. 14.

Town of Los Gatos Schedule 15
Operating Indicators
Last Ten Fiscal Years

FUNCTION/PROGRAM
General government 2019/20 2020/21 2021/22 2022/23 2023/24 Building Permits Issued
Residential Permits Issued 898 1,128 1,144 1,118 957
Residential Permits Value 47,961,529 111,242,724 132,784,439 73,432,645 63,352,925 Commercial Permits Issued 92 68 117 84 62
Commercial Permits Value 12,389,688 37,285,259 23,442,964 19,422,918 31,245,689 Publically Owned Permits Issued - - - - -
Publically Owned Permits Value - - - - -
Residential Parking Permits
Number of Special Event Permits Issued - - - - - (1)
Number of Annual Permits Issued 1,400 1,568 1,958 1,827 1,847 City Clerk
Number of Council Resolutions Passed 57 50 64 71 69
Number of Ordinances Passed 24 9 14 10 14
Number of Contracts Passed 242 205 296 275 322
General Services
Number of Purchase Orders Issued 359 376 306 296 302
Police
Physical Arrests 616 360 504 522 642
Parking Violations 4,023 1,584 4,678 8,569 8,644
Traffic Violations 1,225 764 1,245 1,427 1,787
DUI Arrests 64 23 49 42 51
Library
Number of Library Visits - - 150,198 206,874 249,120 (3) Annual Circulation - - 432,707 397,517 422,733 (3)
Number of Library Card holders - - 29,322 29,815 33,551 (3) Circulated e-audiobooks 57,839 54,614 - - - (2)
Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles) 16.2 10.0 9.9 10.9 10.1 ADA Compliance: Curb Ramps 68 91 59 50 69
Traffic Circles 1 1 1 1 1
Street Poles 1,830 2,113 2,113 2,113 2,113
Planning and Development Department
Building & Safety Inspections Performed 13,633 13,806 16,906 16,641 14,696 Redevelopment: Number of active projects - -
(3) New metrics being presented in FY 2021/22.

Source: Town of Los Gatos, Finance Department Concluded Fiscal Year
(2) Changed operating indicators to fully reflect Department's efficiency metrics starting FY 2021/22.
(1) The Town streamlined the special event application where multiple events require only one permit.

ITEM NO. 14.

Town of Los Gatos Schedule 16
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 Function/Program
Police
Number of Stations 2 2 2 2 2 2 2 2 2 2
Number of Patrol Units 14 14 14 14 14 14 14 14 14 14
Parking Enforcement Vehicles 2 2 2 2 2 2 2 2 2 2
Other Public Works
Streets (miles) 132 132 132 132 132 132 132 132 112 112 (1) Streetlights 1,609 1,609 1,609 1,762 1,830 1,830 2,113 2,113 2,113 2,113 Traffic Signals 29 30 30 30 31 31 31 31 31 31
Parks and Recreation
Number of Parks 12 12 12 12 N/A N/A N/A N/A N/A N/A
Number of Community Centers 1 1 1 1 1 1 1 1 1 1
Number of Parks & Open Spaces N/A N/A N/A N/A 17 17 17 17 17 17 Parking
Number of Parking Garages 1 1 1 1 1 1 1 1 1 1
Number of Parking Lots 22 22 22 22 22 22 22 22 22 22
Number of Off Street Parking Garage Spaces 1,126 1,126 1,126 1,126 N/A N/A N/A N/A N/A N/A Number of Downtown Off-Street Parking Spaces N/A N/A N/A N/A 1,269 1,269 1,269 1,269 1,269 1,269 Source: Town of Los Gatos, Finance Department
Fiscal Year
(1) Based on Metropolitan Transportation Commission (MTC) funded Pavement Technical Assistance Program (P-TAP) inventory for year 2022.

ITEM NO. 14.

Other Independent Auditor’s Reports

ITEM NO. 14.

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

FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the
Town Council of the Town of Los Gatos
Los Gatos, California
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Town of Los Gatos (the “Town”) as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements, and have issued our report thereon dated November 11, 2024.

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

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

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

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

ITEM NO. 14.

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

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

Morgan Hill, California
November 11, 202

ITEM NO. 14.

ITEM NO. 14.
1 of 5
Draft Resolution Date
ATTACHMENT 2
DRAFT RESOLUTION 2024-

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

WHEREAS, the Governmental Accounting Standards Board (GASB) has issued its Statement No. 54, Fund Balance and Governmental Fund Type Definitions with the intent of improving financial reporting by providing fund balance categories that will be more easily understood and to improve the comparability of governmental fund financial statements; and WHEREAS, GASB 54 provides that the Town Council of the Town of Los Gatos classify governmental fund balances as restricted, assigned, or committed fund balances; and WHEREAS, GASB 54 provides that restricted reserves are funds that are restricted for externally imposed constraints such as legal contracts or state law, assigned amounts are constrained by the Town’s intent to use them for specific purposes, and committed amounts are dedicated for specific purposes under constraints and formal action taken by the Town Council and these committed amounts cannot be used for any other purposes unless the Town Council of the Town of Los Gatos removes or changes the specific use through the same formal action to establish the commitment; and
WHEREAS, there exists a Nonspendable Reserve that is not readily available for expenditure as it represents the outstanding balance of long term notes receivable; and WHEREAS, there exists a balance of $159,000 as of June 30, 2024 in the Nonspendable Reserve; and
WHEREAS, there exists a balance of $344,338 as of June 30, 2024 Land held for resale for Below Market Housing Program property in the Restricted Reserve; and WHEREAS, there exists a balance of $2,188,659 as of June 30, 2024 in the Restricted Pension Trust Reserve; and
WHEREAS, the Town Council of the Town of Los Gatos has established a General Fund Reserve Policy providing for minimum fund balance dollar target amounts for Budget Stabilization and Catastrophic fund balances and outlines policies and procedures for use and restoration of these balances; and

ITEM NO. 14.
2 of 5
Draft Resolution Date
ATTACHMENT 2
WHEREAS, the Budget Stabilization and Catastrophic Reserve should be maintained at the required minimum 12.5% of Fiscal Year (FY) 2024/25 general fund budgeted operating expenditures of $6,736,781 as specified in the Town Council General Fund Reserve Policy. This would increase both Budget Stabilization and Catastrophic Reserves from $6,736,781 by $607,007 from available Capital/Special Projects Reserve; and
WHEREAS, in June 2016, the Town Council established the committed Pension/ Other Post-Employment Benefits (OPEB) Reserve to provide additional funding toward pension and OPEB unfunded obligations by placing discretionary amounts to the reserve with formal Council action and transferring available year-end surpluses based on the General Fund Reserve Policy; and WHEREAS, per Town Council General Fund Reserve Policy, $300,000 will be placed to the CalPERS/OPEB Reserve from available year-end savings; and WHEREAS, there exists a balance of $300,000 as of June 30, 2024 in the committed CalPERS/OPEB Reserve; and
WHEREAS, there exists a committed Measure G 2018 District Sales Tax Reserve to track receipt and use of the 1/8 cent district tax funds collected by the Town; and WHEREAS, the Town Council has determined the use of Measure G accumulated and future proceeds to be allocated 50% for operating expenditures and 50% for capital purposes; and WHEREAS, 50% of the current Measure G proceeds dedicated for Capital Purposes was receipted in the General Fund Appropriated Reserve for capital purposes; and WHEREAS, there is anticipated to be an excess balance of $590,581 as of June 30, 2024 and should be used for operating expenses in FY 2024/25; and WHEREAS, the Town Council established the assigned Open Space reserve in the FY 1998/99 to be used for the preservation of open space, connection of open space trails, the definition of the southern boundary of the Town with passive open space, and protection of unique natural features; and
WHEREAS, there exists an excess balance of $410,000 as of June 30, 2024 in the assigned Open Space Reserve; and
WHEREAS, the Town Council established the assigned Sustainability Reserve in FY 2008/09 by closing the Solid Waste Management fund and placing the initial residual balance dedicated for conservation, recycling, and sustainability; and

ITEM NO. 14.
3 of 5
Draft Resolution Date
ATTACHMENT 2
WHEREAS, there exists an excess balance of $140,553 as of June 30, 2024 in the assigned Sustainability Reserve; and
WHEREAS, there exists an assigned Market Fluctuation Reserve that represents fund balance amounts for unrealized investment gains that have been recorded as investment income in the financial statements in accordance with the requirements of GASB 31; and WHEREAS, there exist a current balance of $1,712,246 as of June 30, 2024 in the assigned Market Fluctuation Reserve; and
WHEREAS, there exists an assigned Carryover Encumbrances Reserve for material and services on purchase orders and contract which are unperformed in the amount of $85,861; and WHEREAS, with the adoption of the Fiscal Year 2023/24 Budget, the Council established an assigned Council Priorities – Economic Recovery Reserve to track General Fund revenues freed up from recognizing all American Rescue Plan Act (ARPA) “replacement” revenues to the General Fund for essential government services, for economic recovery and business support, enhanced senior services, capital program augmentations, and other one-time uses; and WHEREAS, there exists an excess balance of $20,864 as of June 30, 2024 in the assigned Council Priorities – Economic Recovery Reserve; and WHEREAS, the Council has established an assigned Educational Revenue Augmentation Fund (ERAF) Risk Reserve, reserving the 30% of the anticipated ERAF proceeds from FY 2022/23 until a lawsuit between the State and the School Districts concludes; and WHEREAS, there exists an excess balance of $1,430,054 as of June 30, 2024 in the assigned ERAF Risk Reserve; and
WHEREAS, there exists an assigned General Fund Compensated Absences Reserve allocated to fund 50% of all vested hours of sick leave, compensation, and vacation time with the actual reserve amount of $1,555,478; and
WHEREAS, there exists an assigned Capital/Special Projects Reserve to fund Council priorities, and key infrastructure and capital/special projects as identified in the Town’s five-year Capital Improvement Plan; and

ITEM NO. 14.
4 of 5
Draft Resolution Date
ATTACHMENT 2
WHEREAS, the remainder of the available year-end savings will be placed in the Capital/Special Project Reserve according to the Town Council Reserve Policy; and WHEREAS, there exists an assigned Capital/Special Project Reserve in the amount of $8,651,065; and

NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES HEREBY RESOLVE that the following fund balances as of June 30, 2024 as restricted, assigned, or formally committed as follows:

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

Library - - 556,848 556,848
Capital Projects - - 9,043,666 9,043,666
Lands Held for Resale 344,338 - - 344,338
Repairs and Maintenance - - 182,625 182,625
Pension 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
CalPERS/OPEB 300,000 - - 300,000
Measure G 2018 District Sales Tax 590,581 1,572,619 - 2,163,200 Special Revenue Fund 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 Comcast PEG - 50,000 - 50,000
ERAF Risk 1,430,054 - - 1,430,054
Economic Recovery 20,684 - - 20,684
Carryover Encumbrances 85,861 - - 85,861
Compensated Absences 1,555,478 - - 1,555,478
Market Fluctuation 1,712,246 - - 1,712,246
Total Fund Balances $ 31,062,072 $ 19,065,570 $ 10,874,961 $ 61,002,603

ITEM NO. 14.
5 of 5
Draft Resolution Date
ATTACHMENT 2
PASSED AND ADOPTED at a regular meeting of the Town Council held on the ____ day of __________, 2024, by the following vote:

COUNCIL MEMBERS:

AYES:

NAYS:

ABSENT:

ABSTAIN:

SIGNED:
_______________________________

MAYOR OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA

ATTEST:
___________________________________

TOWN CLERK OF THE TOWN OF LOS GATOS

LOS GATOS, CALIFORNIA

ITEM NO. 14.

DRAFT
ATTACHMENT 3

ITEM NO. 14.

DRAFT

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
DRAFT

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.

DRAFT

ITEM NO. 14.

TOWN VISON STATEMENT
The Town of Los Gatos’s Vision Statement articulates the future Los Gatos and reflects the high ideals identified by the community:

Residents are united in their desire to maintain a high quality of life and preserve the character of the Town. The overall community consensus is that Los Gatos be a full-service community that is also environmentally sensitive; that Los Gatos maintains a balanced, well-designed mix of residential, commercial, service and open space uses, fostering a pedestrian-oriented community with a small town, village-like character; that Los Gatos supports an active business community that provides a wide variety of goods and services and a broad range of employment opportunities, eliminating the need to travel to other communities; and that Los Gatos provides a well-run, efficient municipal government that is fiscally healthy, with high levels of public safety, recreational, art and cultural amenities and is connected to high quality education.

DRAFT

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:.................................................................................................... 37 Statement of Net Position..................................................................................................................... 38 Statement of Activities......................................................................................................................... 39

Fund Financial Statements:

Governmental Funds: ........................................................................................................................... 40 Balance Sheet.................................................................................................................................... 41 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position.............................................................................................................. 42 Statement of Revenues, Expenditures and Changes in Fund Balances............................................. 43 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities...................................................... 44 Statement of Revenue, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) General Fund.................................................................................... 45 Proprietary Funds – Internal Service Funds: ....................................................................................... 46 Statement of Net Position ................................................................................................................. 47 Statement of Revenue, Expenses and Changes in Net Position........................................................ 48 Statement of Cash Flows .................................................................................................................. 49 Fiduciary Funds: .................................................................................................................................. 50 Statement of Fiduciary Net Position ................................................................................................. 51 Statement of Changes in Fiduciary Net Position .............................................................................. 52 Notes to the Basic Financial Statements...................................................................................................... 54 REQUIRED SUPPLEMENTARY INFORMATION:

Schedule of Pension Plan Contributions...................................................................................................... 97 Schedule of Proportionate Share of Net Pension Liability – CalPERS Safety Cost Sharing Plan ................................................................................................................................. 99 Schedule of Proportionate Share of Net Pension Liability – CalPERS Misc.

Agent-Multiple Employer Plan ............................................................................................................ 100 Schedule of OPEB Contributions................................................................................................................ 102 Schedule of Changes in Net OPEB Liability............................................................................................... 103 DRAFT

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................................................................... 107 Nonmajor Governmental Funds:

Combining Balance Sheets.......................................................................................................................... 108 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances...................................................................................................................................... 111 Budgeted Nonmajor Funds Combining Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP) ................................................................... 114 Internal Service Funds:

Combining Statement of Fiduciary Net Position......................................................................................... 120 Combining Statement of Revenue, Expenses and Changes in Net Position................................................ 121 Combining Statement of Cash Flows.......................................................................................................... 122 STATISTICAL SECTION .............................................................................................................................. 125 Net Position by Component......................................................................................................................... 127 Changes in Net Position .............................................................................................................................. 128 Fund Balances, Governmental Funds.......................................................................................................... 130 Changes in Fund Balances, Governmental Funds....................................................................................... 132 Assessed Value and Estimated Actual Value of Taxable Property ............................................................. 134 Direct and Overlapping Property Tax Rates................................................................................................ 135 Principal Property Tax Payers..................................................................................................................... 136 Property Tax Levies and Collections........................................................................................................... 138 Ratios of Outstanding Debt by Type ........................................................................................................... 139 Direct and Overlapping Governmental Activities Debt............................................................................... 140 Legal Debt Margin ...................................................................................................................................... 141 Demographic and Economic Statistics........................................................................................................ 142 Principal Employers.................................................................................................................................... 143 Full-time Equivalent Town Government Employees by Function/Program ............................................... 145 Operating Indicators by Function/Program ................................................................................................. 146 Capital Assets Statistics by Function/Program............................................................................................ 148 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................................................................................................................. 150 DRAFT

ITEM NO. 14.

INTRODUCTORY SECTION
DRAFT

ITEM NO. 14.

This Page Left Intentionally Blank
DRAFT

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 DRAFT

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.

DRAFT

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.

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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 DRAFT

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.

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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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ITEM NO. 14.

Town of Los Gatos
Organizational Structure
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ITEM NO. 14.

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 Salina Flores Cheryl Parkman
1 Effective November 4, 2024 Chris Constantin
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FINANCIAL SECTION
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Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the
Town Council of the Town of Los Gatos
Los Gatos, California
Report on the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, each major fund, General Fund budgetary statement, and the aggregate remaining fund information of the Town of Los Gatos (the “Town"), as of and for the year ended June 30, 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 DRAFT

ITEM NO. 14.

Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
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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ITEM NO. 14.

Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The combining and individual fund financial statements, schedules, and other information listed in the supplementary information section of the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements.

Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
The Town’s management is responsible for the other information included in the annual comprehensive financial report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 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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Management’s Discussion and Analysis
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MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of the Town of Los Gatos’s Annual Comprehensive Financial Report (ACFR) presents Management’s Discussion and Analysis (MD&A) of the Town’s financial performance during the fiscal year that ended on June 30, 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. Even though the change in net position is positive, it was a 61.1% reduction from the prior year change in net position of $15.1 million. The change is a result of flatter revenues and an increase in total expenses of $9.3 million. 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.

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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 DRAFT

ITEM NO. 14.

government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the Town’s operations. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

Proprietary funds – The Town maintains one type of proprietary fund: Internal Service Funds.

Proprietary funds are reported using the accrual basis of accounting. Internal Service Funds are an accounting tool used to accumulate and allocate costs internally among the Town’s various functions. The Town uses Internal Service Funds to account for its fleet of vehicles, computer equipment, risk management activities, and other items. Internal Service Funds help smooth the variability of certain expenses and insulate the Town from large unanticipated costs. The Internal Service Funds are included within governmental activities in the Government-Wide Financial Statements.

Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of parties outside the Town. Fiduciary funds are not reflected in the Government-Wide Financial Statements because the resources of those funds are not available to support the Town’s own programs.

Included in fiduciary funds is the Redevelopment Successor Agency private-purpose Trust Fund created upon the dissolution of the former Redevelopment Agency (RDA) in 2012. The Trust Fund was created to hold the assets of the former Redevelopment Agency until they are transferred for governmental purposes to other entities or distributed to the underlying taxing jurisdictions in Santa Clara County after the payment of enforceable obligations. Additional information on the dissolution of the RDA and this fiduciary fund can be found in Note 15 in the notes to basic financial statements.

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 DRAFT

ITEM NO. 14.

the Town as a whole, utilizing data from throughout the ACFR to describe the changes between 2023 and 2024.

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
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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
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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 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.

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ITEM NO. 14.

were recorded from fees paid by residents/businesses who directly benefited from the respective 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
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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.

DRAFT

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
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Parks and public works
Community development
Library services
Sanitation
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Government Wide Expenses
2023 2024
DRAFT

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.

DRAFT

ITEM NO. 14.

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

DRAFT

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.

DRAFT

ITEM NO. 14.

Proprietary Funds
The Town’s Proprietary Funds (Internal Service Funds) presented in the Fund Financial Statements section provide similar information to the Government-Wide Financial Statements and include individual segment information.

Total net position in the Internal Service Funds 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.
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Variances with between the Original Budget, Final General Fund Budget, and Actuals - General Fund Expenditures
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ITEM NO. 14.

Changes to the Original Budget
As noted in the below 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 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 next 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. $0
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ITEM NO. 14.

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.
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DRAFT

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 operational savings in multiple categories Townwide). 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 less current year depreciation of $5.3 million 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.

Governmental
Activities
Infrastructure - Streets $ 45,791,936
Infrastructure -Other 17,939,244
Subscription Right of Use Assets 1,200,061
Buildings 30,867,436
Land 26,064,735
Equipment 2,022,508
Construction in Progress 15,491,043
$ 139,376,963
Capital Assets
Town of Los Gatos
DRAFT
For the Year Ended June 30, 2024

ITEM NO. 14.

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

LONG-TERM DEBT
The Town generally incurs long-term debt to finance projects or purchase assets, which will have useful lives equal to or greater than the related debt. The Town long-term debt is related to the PG&E on-bill financing loan used for facility efficiency project updates, totaling $1.0 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:

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
DRAFT

ITEM NO. 14.

The Town’s budget emphasizes reasonable consideration for revenue and expenditures. Moving forward, the Town will grapple with understanding capital improvement needs as well as understanding the true cost to run basic operations. Interest rates are expected to fall resulting in potential to show deficits. The Town will continue assessing its operations, analyzing information useful to future planning, and will adjust to changes in the economy as necessary.

During the development and adoption of the Town’s FY 2024/25 budget, the Town Council and management considered the following factors:
• The FY 2023/24 Adopted Budget endeavored to maintain essential public services while controlling operational costs in light of the Five-Year Financial Forecast. • For FY 2024/25, the Adopted Operating Budget was balanced utilizing two primary budget balancing strategies. The first was direction to all Departments to develop a status quo budget. To that end, the Departments programmed existing resources by either maintaining current structures or realigning operations to remain effective. This proved exceptionally difficult as vendor, supply, and other costs rose beyond FY 2023/24 levels. In addition, Departments were provided guidance to enhance capacity where necessary through limitdated non-benefited personnel options when possible. The second strategy includes a 4.6% vacancy factor, while Council directed that staff continue to hire for all vacant positions. The

4.6% salary savings represents approximately $1.7 million projected saving. • In terms of capital projects, the Town Council stated its capital budget priorities to continue implementation of wildfire protection, emergency preparedness, traffic calming/traffic safety for all users, parking study implementation, and advance other needed improvements. All of 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
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ITEM NO. 14.

these efforts support improving and enhancing transportation options, public safety, and quality of life within the context of prudent fiscal management.

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 DRAFT

ITEM NO. 14.

Valley market and increasing regulatory requirements on local governments also drive up the cost of services and materials.

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.

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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.

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ITEM NO. 14.

Basic Financial Statements
DRAFT

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.

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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.

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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
DRAFT

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.

DRAFT

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.

DRAFT

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.

DRAFT

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.

DRAFT

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.

DRAFT

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.

DRAFT

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.

DRAFT

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.

DRAFT

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.

DRAFT

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.

DRAFT

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.

DRAFT

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
DRAFT

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
DRAFT

ITEM NO. 14.

This Page Left Intentionally Blank
DRAFT

ITEM NO. 14.

Notes to Basic Financial Statements
DRAFT

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.

DRAFT

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.

DRAFT

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 DRAFT

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.

DRAFT

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.

DRAFT

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 DRAFT

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; DRAFT

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
DRAFT

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 DRAFT

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.

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

DRAFT

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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.

DRAFT

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 DRAFT

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.

DRAFT

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 DRAFT

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%
DRAFT

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:

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 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:

DRAFT

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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

DRAFT

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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
DRAFT
$ 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) $ DRAFT

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 - $ DRAFT

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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
DRAFT

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.

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.

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
DRAFT

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2024

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:

The following summarizes the Town’s subscription right of use assets 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
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 DRAFT

ITEM NO. 14.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
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 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
DRAFT

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 DRAFT

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.

DRAFT

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.

DRAFT

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% DRAFT
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
DRAFT

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
DRAFT
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 DRAFT