Los Gatos City Council
December 16, 2025

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

G. Accounting and Reporting Changes
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 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 implementation of this standard did not have a material impact on the Town’s financial statements and management determined there were no were concentrations or constraints that make the Town vulnerable to the risk of substantial impact.

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. 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.

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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.

The bank balance of the Town’s cash deposits was $8,687,744 and the carrying amount was $9,807,078 as of June 30, 2025. 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.

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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, 2025, 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 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, 2025.

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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%
The following is a summary of the Town’s Cash and Investments (stated at fair value) as of June 30, 2025:

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.

Available Concentration Time to Weighted
for of Credit Input Mature Average
Operations Restricted Total Risk Rating Level (Years) Maturity Government Bonds $ 19,937,294 - $ 19,937,294 27.28% AA+ 2 .08-4.92 2.39 Government Agencies 17,930,643 - 17,930,643 24.53% AA+ 2 .15-4.47 1.72 Corporate Bonds 15,039,365 - 15,039,365 20.58% A- to AA+ 2 .53-4.10 2.27 Mutual Funds 15,229 - 15,229 0.02% Not Rated 2 n/a n/a
LAIF 20,168,601 - 20,168,601 27.59% Not Rated n/a n/a n/a Total Investments 73,091,132 - 73,091,132 100.00%
Cash Deposits with Banks 9,789,372 2,332,431 12,121,803 Money Market Accounts 17,706 - 17,706
Pension Trust - 3,090,731 3,090,731
Cash on Hand at Town 2,400 - 2,400
Total Cash and Investments $ 82,900,610 $ 5,423,162 $ 88,323,772 Description
Fiduciary
Description Total Town Funds Totals
Cash and Investments Available for Operations $ 80,767,941 $ 2,132,669 $ 82,900,610 Restricted Cash and Investments 3,255,657 2,167,505 5,423,162 Total Cash and Investments $ 84,023,598 $ 4,300,174 $ 88,323,772

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

NOTE 3 - LONG-TERM NOTES RECEIVABLE
The Town had the following long-term notes receivable as of June 30, 2025:

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

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

Project Match - The Successor Agency has a loan agreement with Project Match, a nonprofit benefit corporation, to acquire and rehabilitate four- or five-bedroom single family homes. The property is to provide affordable housing rental to very low-income senior households. The loan receivable is evidenced by a promissory note and secured by a deed of trust. From inception of the loan through June 30, 2025, 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%.

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 645,410
Total Long-Term Notes Receivable $ 1,783,162
Community Development Block Grant Fund (CDBG):

Description
Successor Agency Affordable Housing:

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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%.

The following summarizes the lease balances as of June 30, 2025:

Lease Receivable Beginning Additions Deletions Ending
Tesla $ 149,496 $ - $ (93,867) $ 55,629
LGS 123 E. Main St 131,006 - (19,623) 111,383
LGS 208 E. Main St 1,055,502 - (158,086) 897,416
NUMU 221,175 - (12,368) 208,807
Los Gatos Threatre 304,129 - (78,477) 225,652
$ 1,861,308 $ - $ (362,420) $ 1,498,888
Deferred Inflows of Resources Beginning Additions Deletions Ending Tesla $ 144,532 $ - $ (91,284) $ 53,248
LGS 123 E. Main St 70,402 - (12,997) 57,405
LGS 208 E. Main St 535,276 - (98,820) 436,456
NUMU 215,594 - (17,247) 198,347
Los Gatos Threatre 202,252 - (67,418) 134,834
$ 1,168,056 $ - $ (287,766) $ 880,290

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

The following summarizes the future lease collections as of June 30, 2025:

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.

Transfers between funds during the fiscal year ended June 30, 2025 were as follows:

For the Year
Ending June 30, Principal Interest Total
2026 $ 363,791 $ 82,970 $ 446,761
2027 352,973 64,266 417,239
2028 248,138 45,815 293,953
2029 270,392 30,536 300,928
2030 128,730 16,319 145,049
2031-2035 99,049 25,952 125,001
2036-2037 35,815 1,685 37,500
Total Future Collections $ 1,498,888 $ 267,543 $ 1,766,431 Opinion Unit Program Title Amount Opinion Unit Program Title Description General Fund Non-Departmental $ 1,110,000 Appropriated Reserves GFAR Adopted Budget Support General Fund Non-Departmental 60,000 Internal Service Liability Program Internal Service Fund General Fund Non-Departmental 20,684 Appropriated Reserves ARC Interim Community Center Capital Project General Fund Measure G Program 652,396 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 Non-Departmental 102,000 General Fund Non-Departmental Vehicle Impact Fees Appropriated Reserves Non-Departmental 250,000 General Fund Non-Departmental Community Grants Appropriated Reserves GFAR 217,808 General Fund PPW Admin Engineering Support Appropriated Reserves GFAR 121,683 General Fund Town Engineering Engineering Support Appropriated Reserves Traffic Mitigation 10,000 General Fund Non-Departmental Admin Support Nonmajor Gas Tax 106,000 General Fund Non-Departmental Admin Support Total Transfers $ 2,655,491
Transfers Out Transfers In

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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

Depreciation/amortization expense is charged to functions and programs based on their usage of the related assets. The amount allocated to each function or program is as follows:

Beginning Additions Deletions Ending
Nondepreciable/Amortizable Capital Assets:

Land $ 26,064,735 $ 40,657 $ - $ 26,105,392
Construction in Progress 15,491,043 8,464,443 (3,097,303) 20,858,183 Total Nondepreciable/Amortizable 33,579,251 8,505,100 (3,097,303) 46,963,575 Depreciable/Amortizable Capital Assets:

Subscription Right of Use Assets 1,622,573 - - 1,622,573 Buildings and Improvements 42,862,716 158,685 - 43,021,401 Equipment & Vehicle 12,893,445 1,153,864 (531,434) 13,515,875 Infrastructure - All Other 28,491,627 3,127,389 - 31,619,016 Infrastructure - Streets 86,301,911 3,556,897 (113,684) 89,745,124 Total Depreciable/Amortizable 172,172,272 7,996,835 (645,118) 179,523,989 Less Accumulated Depreciation/Amortization for:

Subscription Right of Use Assets 422,512 273,093 - 695,605 Buildings and Improvements 11,995,280 1,263,825 - 13,259,105 Equipment & Vehicle 10,870,937 738,557 (530,542) 11,078,952 Infrastructure - All Other 10,552,383 879,263 - 11,431,646 Infrastructure - Streets 40,509,975 2,791,126 (113,684) 43,187,417 Total Acccumulated Depreciation/Amortization 74,351,087 5,945,864 (644,226) 79,652,725 Net Depreciable/Amortizable Capital Assets 97,821,185 2,050,971 (892) 99,871,264 Capital Assets, Net $ 139,376,963 $ 10,556,071 $ (3,098,195) $ 146,834,839 Depreciation/
Amortization
Expense
General Government $ 485,905
Public Safety 503,948
Parks & Public Works 4,864,643
Community Development 53,448
Library 37,665
Sanitation 255
Total Governmental Activities $ 5,945,864
Governmental Activities

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

Changes in the RDA Successor Agency trust fund capital assets during the fiscal year are shown as follows:

NOTE 7 - 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 following summarizes the changes in long-term debt in the Town during the fiscal year ended June 30, 2025:

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

Beginning Additions Deletions Ending
Depreciable/Amortizable Capital Assets:

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

Buildings and Improvements 3,050,778 120,823 - 3,171,601 Net Depreciable/Amortizable Capital Assets 1,016,930 (120,823) - 896,107 Capital Assets, Net $ 1,016,930 $ (120,823) $ - $ 896,107 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 $ 1,040,223 $ - $ 156,034 $ 884,189 Due Within One Year 156,034
Due in More Than One Year $ 728,155
For the Year
Ending June 30, Principal Interest Total
2026 $ 156,034 $ - $ 156,034
2027 156,034 - 156,034
2028 156,034 - 156,034
2029 156,034 - 156,034
2030 156,034 - 156,034
2031-2035 104,019 - 104,019
Total Debt Service $ 884,189 $ - $ 884,189

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

The following summarizes the changes in long-term debt in the Successor Agency trust fund during the fiscal year ended June 30, 2025:
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.

Interest Maturity Original Beginning Ending
Long-Term Debt Rate Date Issue Balance Deletions Balance 2002 COP 2.5-5% 2031 $ 10,725,000 $ 4,420,000 $ 465,000 $ 3,955,000 2010 COP 2.5-4.25% 2028 15,675,000 5,595,000 1,020,000 4,575,000 Subtotal COP's 26,400,000 10,015,000 1,485,000 8,530,000 Premiums 753,095 225,926 37,655 188,271
Total Long-Term Debt $ 27,153,095 $ 10,240,926 $ 1,522,655 $ 8,718,271 Due Within One Year 1,550,000
Due in More Than One Year $ 7,168,271

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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 $2,167,505 as of June 30, 2025. 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, 2025:

The following summarizes the Town’s subscription right of use assets as of June 30, 2025:

For the Year
Ending June 30, Principal Interest Total
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 590,000 78,250 668,250
2031-2035 1,270,000 64,250 1,334,250
Total Debt Service $ 8,530,000 $ 1,121,700 $ 9,651,700
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 $ 111,986 $ 49,344 $ 50,347
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 $ 706,713 $ 1,622,573
Additions - - - -
Deletions - - - -
Ending 597,350 318,510 706,713 1,622,573
Accumulated Amortization (448,011) (159,255) (88,339) (695,605) Subscription ROA, Net $ 149,339 $ 159,255 $ 618,374 $ 926,968

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

The following summarizes the Town’s subscription liabilities as of June 30, 2025:

The following summarizes the Town’s future payments for subscription liabilities as of June 30, 2025:

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, 2025.

Subscription Liabilities Accela Microsoft Axon Total
Beginning $ 232,997 $ 212,784 $ 637,377 $ 1,083,158
Additions - - - -
Deletions (111,986) (49,344) (50,349) (211,679)
Ending 121,011 163,440 587,028 871,479
Due Within One Year 121,011 51,828 53,618 226,457
Due in More Than One Year $ - $ 111,612 $ 533,410 $ 645,022 For the Year
Ending June 30, Principal Interest Total
2026 $ 226,456 $ 52,120 $ 278,576
2027 111,536 40,265 151,801
2028 117,985 33,817 151,802
2029 67,512 26,990 94,502
2030 74,733 22,604 97,337
2030-2034 273,257 36,628 309,885
Total Debt Service $ 871,479 $ 212,424 $ 1,083,903

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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, 2025, fund balances were classified as follows:

Nonspendable
Loans receivable nonspendable fund balance reflects long-term loans that are offset by unearned and deferred amounts.

Beginning Ending
Balance Additions Deletions Balance
Nonspendable
Loans Receivable $ 159,000 $ - $ - $ 159,000
Total Nonspendable 159,000 - - 159,000
Restricted:

Library 556,848 85,760 (82,864) 559,744
Capital projects 9,043,666 2,352,685 (2,676,656) 8,719,695 Land held for resale 344,338 - (344,338) -
Repairs and maintenance 182,625 46,575 (35,594) 193,606 Pensions 2,188,659 905,776 (3,704) 3,090,731
VTA 577,887 1,973,860 (2,288,686) 263,061
Total Restricted 12,894,023 5,364,656 (5,431,842) 12,826,837 Committed:

Budget stabilization and catastrophes 6,736,781 1,133,858 - 7,870,639 Catastrophic 6,736,781 1,133,858 - 7,870,639
Pension/OPEB Reserve 300,000 1,300,000 (300,000) 1,300,000 Measure G 2018 District Sales Tax - Residual 590,581 - (590,581) - Measure G 2018 District Sales Tax - Capital 1,572,619 - (196,438) 1,376,181 Special revenue funds 1,091,822 2,960,396 (2,840,275) 1,211,943 Total Committed 17,028,584 6,528,112 (3,927,294) 19,629,402 Assigned:

Open Space 562,000 - - 562,000
Parking 292,000 - - 292,000
Sustainability 140,553 - - 140,553
Capital/Special projects 25,072,120 10,738,047 (19,066,538) 16,743,629 Carryover encumbrances 85,861 - (79,494) 6,367
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 - (36,235) 1,519,243
Market fluctuations 1,712,246 - (510,422) 1,201,824
Total Assigned 30,920,996 10,738,047 (21,143,427) 20,515,616 Unassigned - 10,211,049 - 10,211,049
Total Fund Balance - Gov't Funds $ 61,002,603 $ 32,841,864 $ (30,502,563) $ 63,341,904

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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.

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

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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.

Measure G 2018 District Sales Tax committed 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.

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.

Compensated Absences assigned fund balance will be used for vacation and sick-pay benefits owed to employees as of June 30, 2025 that were not a liability of the General Fund because of their long-term nature.

Market Fluctuations assigned fund balance will be used for fair value adjustments that are not immediately realizable but included in investment earnings.

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 Misc Safety Total
Deferred outflows of resources $ 7,066,321 $ 9,822,629 $ 16,888,950 Deferred inflows of resources $ - $ 809,446 $ 809,446
Net pension liabilities $ 27,934,019 $ 33,469,333 $ 61,403,352 Pension expense (credit) $ 5,488,565 $ 6,534,580 $ 12,023,145 Defined Benefit Plans

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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, 2025, are summarized as follows:

Employees Covered
At June 30, 2025, 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 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% 7.75% 9% 14.5% Required employer contribution rates 11.15% 11.15% 11.15% 29.30% 14.72% Miscellaneous Safety (Police)
Miscellaneous Safety
Active 123 48
Transferred 107 19
Separated 106 9
Retired 264 91
Total 600 167

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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, 2025, 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, 2025, 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, 2024, 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, 2023. The Town’s proportion of the net pension liability for the Safety Plan was based on a projection of the Town’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The Town’s proportionate share of the net pension liability for the Safety Plan as of June 30, 2024 and 2025 was as follows:

For the year ended June 30, 2025, the Town recognized a pension expense of $12,023,145.

Employer
Contributions
Miscellaneous $ 4,348,001
Safety 3,929,739
Total Employer Contributions $ 8,277,740
Miscellaneous
Safety
Total
Proportionate Share of
Net Pension
Liability/(Asset)
$ 27,934,019
33,469,333
$ 61,403,352
Safety
Proportion - June 30, 2024 0.45458%
Proportion - June 30, 2025 0.45906%
Change - Increase/(Decrease) 0.00448%

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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, 2025:

At June 30, 2025, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

The Town reported $8,277,740 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, 2026.

Total Fiduciary Net
Pension Net Pension
Liability Position Liability
Beginning Balance $ 128,233,325 $ 99,184,743 $ 29,048,582 Service Costs 2,365,384 - 2,365,384
Interest on Total Pension Liability 8,809,282 - 8,809,282 Changes of Assumptions - - -
Difference Actual and Expected Experience 1,923,906 - 1,923,906 Employer Contributions - 3,876,932 (3,876,932)
Employee Contributions - 996,934 (996,934)
Net Investment Income - 9,419,976 (9,419,976)
Benefit Payments (7,338,359) (7,338,359) -
Administrative Expenses - (80,707) 80,707
Net Changes 5,760,213 6,874,776 (1,114,563)
Ending Balance $ 133,993,538 $ 106,059,519 $ 27,934,019 Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Changes of Assumptions $ - $ - $ 824,616 $ -
Differences between Expected and Actual Experience 1,079,463 - 2,731,395 88,809 Differences between Projected and Actual Investment Earnings 1,638,857 - 1,617,755 - Differences between Employer's Contributions and
Proportionate Share of Contributions - - 401,233 415,900 Change in Employer's Proportion - - 341,199 304,702
Pension Contributions Made Subsequent to Measurement Date 4,348,001 - 3,929,739 - Total $ 7,066,321 $ - $ 9,845,937 $ 809,411
Miscellaneous Safety

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
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, 2023 actuarial valuations were determined using the following actuarial assumptions:

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2023 valuation are based on CalPERS experience studies which can found on the CalPERS website.

Miscellaneous Safety Total
$ 837,457 $ 1,924,705 $ 2,762,162
2,817,540 3,747,701 6,565,241
(403,583) (12,128) (415,711)
(533,094) (553,491) (1,086,585)
- - -
- - -
$ 2,718,320 $ 5,106,787 $ 7,825,107
2026
2030
Total
2027
2028
2029
Thereafter
Deferred Outflows/(Inflows) of
Fiscal Year Ending Resources
June 30:

Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age
Normal Cost
Method
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Payroll Growth 2.80%
Projected Salary Increase (1)
Investment Rate of Return 6.8% (2)
Mortality (3)
(1) Varies by entry age and service
(2) Net of pension plan investment expenses, including inflation (3) Derived using CalPERS' membership data for all funds

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

Discount Rate
The discount rate used to measure the total pension liability was 6.9 percent for the Plans. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the Plans, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets.

Therefore, the current 6.9 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long-term expected discount rate of 6.9 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website.

Long-Term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and longterm returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects the longterm expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.

Assumed Long-Term
Asset Expected Real
Asset Class (a) Allocation Return (1)(2)
Global Equity Cap Weighted 30.00% 4.54%
Global Equity NonCap Weighted 12.00% 3.84%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
Total 100.00%
(1) An expected inflation of 2.3% used for this period. (2) Figures are based on the 2021-22 Asset Liability Study.

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the Town’s net pension liability for the Plans, calculated using the discount rate for the Plans, as well as what the Town’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

Payable to the Pension Plans
As of June 30, 2025, the Town reported a payable of $33,474 and $30,506 for the outstanding amount of contributions to the Miscellaneous Agent Multiple Employer Plan and the Safety Cost Sharing Plan.

IRS Section 115 Trust
During the fiscal year ending June 30, 2020, the Town established an IRS Section 115 Trust with the CalPERS California Employer’ Pension Prefunding Trust (CEPPT) program. In fiscal year 2025, the Town reported $3,090,731 as restricted cash with fiscal agent within the General Fund. Per GASB, amounts placed in trusts for CalPERS plans are treated as side trusts that do not directly reduce the net pension liability.

NOTE 12 - OTHER POSTEMPLOYMENT BENEFITS
Plan Description
The Town makes contributions to California Employer’s Retiree Benefit Trust (CERBT), an agent multiple-employer defined benefit healthcare plan administered by CalPERS. The purpose of the CERBT Fund is to provide California government employers with a trust through which they may prefund retiree medical costs and Other Postemployment Benefits (OPEB). The Town uses CERBT 1 as its investment vehicle and requests disbursements on an as needed basis to reimburse the Town for the cost of retiree health insurance benefits. Benefit provisions and all other requirements are established by state statute and Town ordinance. Copies of PERS' annual financial report may be obtained from their Executive Office, 400 P Street, Sacramento, CA 95814.

Miscellaneous Safety
1% Decrease 5.90% 5.90%
Net Pension Liability $ 45,258,401 49,708,639
Current 6.90% 6.90%
Net Pension Liability $ 27,934,019 33,469,333
1% Increase 7.90% 7.90%
Net Pension Liability $ 13,675,961 20,187,864

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

In accordance with the Public Employees' Medical and Hospital Care Act (PEMHCA), employees qualify for retiree health benefits upon five (5) years of service if they meet the vesting requirements as set forth by CalPERS and take a service or disability retirement from Town employment. Additionally, the employee must actually draw a CalPERS pension within ninety (90) days of separation from the Town, provided the employee remains with the Town's health plan through COBRA. For employees who retire on or after February 1, 2016, at Medicare eligibility, the Town will align contributions to the full cost of the employee’s enrollment, including enrollment of family members, in a health benefits plan or plans up to a maximum of 100% Single Party and 90% Dependents for Kaiser Bay Area Basic/Medicare/Combo per month. During negotiations in fiscal year 2018/19, the Town’s discretionary retiree medical benefit contribution was eliminated for all future hires.

Upon retirement, employees have the option to roll over their sick leave accrual into a Town managed fund. Employees can request reimbursement of medical expenses from the fund up to the value of their sick leave at retirement.

Employees Covered by Benefit Terms
At June 30, 2025 (the measurement date), the benefit terms covered the following employees:

Contributions
The contribution requirements of Plan members and the Town are established and may be amended by the Town. The required contribution is based on projected pay-as-you-go financing requirements, with additional amounts to prefund benefits as determined annually by the Town Council. For the fiscal year ended June 30, 2025, the Town contributed $2,081,717 from the General Fund. During the measurement period ended June 30, 2024, the Town contributed $1,818,298 to the Plan and benefit payments were $1,801,144. Plan members receiving benefits contributed did not make any contributions.

Active employees 158
Inactive employees - receiving benefits 145
Inactive employees - not receiving benefits 36
Total employees 339

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

Actuarial Assumptions
The following summarized the actuarial assumptions for the OPEB plan included in this fiscal year:

Discount Rate
The discount rate used to measure the total OPEB liability was 6.25 percent. The projection of cash flows used to determine the discount rate assumed that Town contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Valuation Date: June 30, 2023
Measurement Date: June 30, 2024
Actuarial Cost Method: Entry-Age Normal
Amortization Period:

Asset Valuation Method:

Actuarial Assumptions:

Discount Rate 6.25%
Inflation 2.50%
Salary Increases 2.75%
Investment Rate of Return 6.25%
Healthcare Trend Rate
Mortality
Retirement
Tier 1 Actives in insurance program: 100%
Tier 1 Actives in cash allocation program: 80%
Tier 2 Actives in insurance program: 60%
Tier 2 Actives in cash allocation program:

Agency service < 3 months: 60%
Agency service >= 3 months: 40%
Waived retirees aged <65: 20%
Waived retirees aged ≥65: 0%
Assumption Changes:

None
15 year fixed
Medicare (Kaiser) - 4.60% for 2023,
decreasing to an ultimate rate of 3.75% in 2076
Investment gains and losses spread over 5-year rolling period CalPERS 2000-2019 Experience Study
CalPERS 2000-2019 Experience Study
Non-Medicare - 6.50% for 2023,
decreasing to an ultimate rate of 3.75% in 2076
Mortality projected fully generational with Scale MP-2021 Medicare (Non-Kaiser) - 5.65% for 2023,
decreasing to an ultimate rate of 3.75% in 2076

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

Net OPEB Liability
The Town's net OPEB liability was measured as of June 30, 2024 (measurement date) and was determined by an actuarial valuation as of June 30, 2024 (valuation date) for the fiscal year ended June 30, 2025 (reporting date).

Changes in the Net OPEB Liability
The following summarizes the changes in the net OPEB liability during the year ended June 30, 2025:

Deferred Inflows and Outflows of Resources
At June 30, 2025, the Town reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Fiscal Year Ended June 30, 2025
(Measurement Date June 30, 2024)
Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability
(Asset)
Balance at June 30, 2024 $ 33,331,226 $ 24,321,780 $ 9,009,446 Service cost 865,285 - 865,285
Interest in Total OPEB Liability 2,080,996 - 2,080,996
Employer contributions - 1,818,298 (1,818,298)
Net investment income - 2,672,858 (2,672,858)
Administrative expenses - (25,082) 25,082
Benefit payments (1,801,144) (1,801,144) -
Net changes 1,145,137 2,664,930 (1,519,793)
Balance at June 30, 2025 $ 34,476,363 $ 26,986,710 $ 7,489,653 Covered Employee Payroll $ 20,375,284
Total OPEB Liability as a % of Covered Employee Payroll 169.21% Plan Fid. Net Position as a % of Total OPEB Liability 78.28% Service Cost as a % of Covered Employee Payroll 4.25%
Net OPEB Liability as a % of Covered Employee Payroll 36.76% Contributions as a % of Cov. Emp. Payroll 8.92%
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Difference between actual and expected experience $ 102,621 $ 840,500 Difference between actual and expected earnings 279,365 - Change in assumptions 1,812,256 81,430
OPEB contribution subsequent to measurement date 2,081,717 - Totals $ 4,275,959 $ 921,930

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

Of the total amount reported as deferred outflows of resources related to OPEB, $2,081,717 were the result of Town contributions subsequent to the measurement date and before the end of the fiscal year.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Rate of Return
The long-term expected rate of return on OPEB plan investments was determined using a building- block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the table below.

Year Ended June 30,
2026 $ 21,973
2027 937,782
2028 152,324
2029 160,233
2030 -
Thereafter -
Total $ 1,272,312
Asset Class
Percentage of
Portfolio
Long-Term
Expected Rate of
Return
Global Equity 49.00% 4.56%
Fixed Income 23.00% 1.56%
TIPS 5.00% -0.08%
Commodities 3.00% 1.22%
REITs 20.00% 4.06%
Total 100.00%

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

OPEB Expense
The following summarizes the OPEB expense by source during the year ended June 30, 2025:

The following summarizes changes in the net OPEB liability as reconciled to OPEB expense during the year ended June 30, 2025:

Sensitivity to Changes in the Discount Rate
The net OPEB liability of the Town, as well as what the Town's net OPEB liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher, is as follows:

Sensitivity to Changes in the Healthcare Cost Trend Rates The net OPEB liability of the Town, as well as what the Town's net OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage point lower or one percentage point higher than current healthcare cost trend rates, is as follows:

Service cost $ 865,285
Interest in TOL 2,080,996
Expected investment income (1,519,863)
Difference between actual and expected experience (417,366) Difference between actual and expected earnings 74,618
Change in assumptions 390,570
Administrative expenses 25,082
OPEB Expense $ 1,499,322
$ 7,489,653
(9,009,446)
(1,519,793)
Changes in deferred outflows 1,794,219
Changes in deferred inflows (593,402)
Employer contributions and implicit subsidy 1,818,298
OPEB Expense $ 1,499,322
Net OPEB liability ending
Net OPEB liability beginning
Change in net OPEB liability
(1% Decrease ) 6.25% (1% Increase )
Net OPEB Liability (Asset) $ 11,538,514 $ 7,489,653 $ 4,106,816 Discount Rate
(1% Decrease ) Current (1% Increase )
Net OPEB Liability (Asset) $ 3,561,702 $ 7,489,653 $ 12,266,003 Trend Rate

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

NOTE 13 - RISK MANAGEMENT
The Town participates in the following public entity risk pools through formally organized and separate legal entities. The Town does not have an equity interest in the joint ventures. These entities exercise full powers and authority within the scope of the related agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Obligations and liabilities of the separate entities are not those of the Town, although the Town retains an ongoing financial interest or an ongoing financial responsibility.

Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA) The Town participates in PLAN, which covers general liability claims in the amount up to $1,000,000 plus $34,000,000 in excess liability for total coverage of $35,000,000 per occurrence. The Town has a deductible or uninsured liability of up to $50,000 per claim. PLAN also provides all risk property coverage of $1,000,000,000, excluding flood and earthquake coverage. The Town has a $5,000 deductible for property and vehicle damage. Once the Town’s deductible is met, PLAN becomes responsible for payment of all claims up to the limit. Financial statements may be obtained from PLAN at 1750 Creekside Drive, Suite 200, Sacramento, CA, 95833.

Local Agency Workers’ Compensation Joint Powers Authority (LAWCX) The Town is a member of LAWCX for workers compensation claims coverage. The Town has a $250,000 self-insured retention level or uninsured liability for all employees. Once the Town’s deductible is met, LAWCX becomes responsible for claims up to $5,000,000. For claims greater than $5,000,000, LAWCX has a commercial policy providing coverage. Financial statements may be obtained from LAWCX at 1750 Creekside Oaks Dr., Suite 200, Sacramento, California, 95833. The Town has not significantly reduced its insurance coverage from the prior year and settlements have not exceeded insurance coverage for the past three years.

Liability for Uninsured Claims
The Town is required to record its liability for uninsured claims and to reflect the current portion of this liability as an expenditure in its financial statements. As discussed above, the Town has coverage for such claims, but it has retained the risk for the deductibles, or uninsured portion of these claims. The change in Workers’ Compensation and Self-Insurance Service Funds’ claims liabilities, is based on historical trend information provided by its third party administrator and was computed as follows as of June 30, 2025:

Workers' SelfCompensation Insurance
Internal Internal
Service Fund Service Fund Total
Claims payable balance - June 30, 2023 $ 1,968,979 $ 157,729 $ 2,126,708 Claims incurred - 124,525 124,525
Claims paid (253,382) (107,859) (361,241)
Claims payable balance - June 30, 2024 1,715,597 174,395 1,889,992 Claims incurred - - -
Claims paid (429,543) (92,520) (522,063)
Claims payable balance - June 30, 2025 $ 1,286,054 $ 81,875 $ 1,367,929

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

NOTE 14 - COMMITMENTS AND CONTINGENCIES
Federal and State Grants - The Town participates in several federal and state grant programs. These are subject to examination by grantors and the amount, if any, of disallowed expenditures cannot be determined at this time. The Town expects such amounts, if any, to be immaterial.

Litigation - The Town is subject to litigation arising from the normal course of business. The Town Attorney believes there is no pending litigation which is likely to have a material adverse effect on the financial position of the Town.

Successor Agency - As of June 30, 2025, the Successor Agency trust fund reported a net deficit of $3,037,145.

Encumbrances- As of June 30, 2025, the town had the following encumbered balances that were carried into the next fiscal year:

NOTE 15 - TOWN/SUCCESSOR AGENCY GRANTS, COOPERATIVE AGREEMENTS Public Improvement Grants and Cooperative Agreements
In January of 2011, the Redevelopment Agency entered into a public improvement grant and cooperative agreement with the Town for the purpose of funding the acquisition of public land and designing and constructing various public improvements to be owned by the Town provided that the projects were in accordance with the Redevelopment Agency’s five year implementation plan and redevelopment plan.

The improvement plan, as identified in the agreement, called for approximately $24 million to be granted to the Town for the following projects:
a. Expansion and improvement of current and new downtown parking b. Highway 9 improvements from Highway 17 to Monte Sereno c. Almond Grove Area street, sidewalk and other improvements d. Downtown Los Gatos gateways, signage, banners and art e. Storm drain, retaining wall, street and other improvements f. New Los Gatos library building
During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its Redevelopment Agency.

General Fund $ 1,600,572
Appropriated Reserves Fund 4,149,910
Internal Service Fund 178,927
Total Encumbrances $ 5,929,410

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

Affordable Housing Cooperative Agreement
In March of 2011, the Redevelopment Agency entered into an affordable housing cooperative agreement with the Town for the purpose of funding affordable housing projects and programs to be developed and/or administered by the Town in accordance with the Redevelopment Agency’s five year implementation plan and redevelopment plan. The improvement plan, as identified in the agreement, called for approximately $16 million to be granted to the Town for the following projects:
a. Development of affordable housing at 224 Main St.
b. Development of affordable housing at Dittos Lane
c. Partnership with Senior Housing Solutions for the creation of senior housing in Los Gatos d. Partnerships for the conversion of existing residential developments dedicated to affordable housing e. Grants to the Santa Clara County Housing Trust for the development of affordable housing.

During the fiscal year ended June 30, 2012, the rights and obligations resulting from this cooperative agreement were transferred to the Successor Agency Trust Fund as a part of the Town’s dissolution of its Redevelopment Agency.

NOTE 16 – JOINT POWERS AGREEMENT
The Town participates in one joint power agreements (JPA), with The Silicon Valley animal Control Authority. The relationship between the Town and the JPA is such that the JPA is not a component unit of the Town for financial reporting purposes. The JPA arranges for and/ or provides animal control services for its members. The JPA is governed by a board consisting of a representative from each member town/city. The board controls the operations of its JPA, including selection of management and approval of operating budgets independent of any influence by the member town/city beyond their representation on the Board. Each member town/city pays the JPA Authority its allocated proportional share of the total estimated annual costs and expenses.

NOTE 17 – DEFINED CONTRIBUTION PLAN
The Town offers its Town Manager a deferred compensation plan in accordance with Internal Revenue Code Section 401a. The deferred compensation plan is available only to the Town Manager of the Town.

Under the plan, the employee may elect to defer a portion of their salaries and avoid paying taxes on the deferred portion until the withdrawal date. The deferred compensation amount is not available for withdrawal by employees until termination, death, or unforeseeable emergency. The Town contributes to the plan an amount equal to the participants’ 457(b) plan deferrals. In fiscal year 2024-25, the Town paid $11,750 to the plan.

ITEM NO. 7.

Required Supplementary Information

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

BENEFIT PLAN SCHEDULES

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

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

SCHEDULE OF PENSION PLAN CONTRIBUTIONS

Miscellaneous Plan
Plan Measurement Date 2015 2016 2017 2018 2019
Fiscal Year Ended 2016 2017 2018 2019 2020
Contractually Required Contributions $ 2,223,782 $ 2,407,496 $ 2,669,133 $ 3,049,748 $ 3,366,304 Contributions in Relation to
Contractually Required Contributions 2,223,782 2,407,496 2,669,133 3,049,748 8,146,791 Contribution Deficiency (Excess) $ - $ - $ - $ - $ (4,780,487) Covered Payroll $ 9,198,318 $ 9,024,370 $ 9,576,157 $ 10,211,967 $ 11,188,927 Contributions as a % of Covered Payroll 24.18% 26.68% 27.87% 29.86% 72.81% Miscellaneous Plan
Plan Measurement Date 2020 2021 2022 2023 2024
Fiscal Year Ended 2021 2022 2023 2024 2025
Contractually Required Contributions $ 3,529,373 $ 3,472,727 $ 2,687,213 $ 3,878,991 $ 4,348,001 Contributions in Relation to
Contractually Required Contributions 9,160,680 3,472,727 2,687,213 3,878,991 4,348,001 Contribution Deficiency (Excess) $ (5,631,307) $ - $ - $ - $ - Covered Payroll $ 12,082,520 $ 12,305,265 $ 11,094,190 $ 13,817,826 $ 15,008,562 Contributions as a % of Covered Payroll 75.82% 28.22% 24.22% 28.07% 28.97%

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

SCHEDULE OF PENSION PLAN CONTRIBUTIONS

Safety Plan
Plan Measurement Date 2015 2016 2017 2018 2019
Fiscal Year Ended 2016 2017 2018 2019 2020
Contractually Required Contributions $ 1,586,129 $ 1,738,150 $ 1,951,711 $ 2,325,357 $ 2,565,205 Contributions in Relation to
Contractually Required Contributions 1,586,129 1,738,150 1,951,711 2,325,357 2,565,205 Contribution Deficiency (Excess) $ - $ - $ - $ - $ -
Covered Payroll $ 5,022,498 $ 4,941,138 $ 5,079,440 $ 4,445,061 $ 4,928,821 Contributions as a % of Covered Payroll 31.58% 35.18% 38.42% 52.31% 52.05% Safety Plan
Plan Measurement Date 2020 2021 2022 2023 2024
Fiscal Year Ended 2021 2022 2023 2024 2025
Contractually Required Contributions $ 2,853,764 $ 3,072,032 $ 3,409,275 $ 3,554,897 $ 3,929,739 Contributions in Relation to
Contractually Required Contributions 2,853,764 3,072,032 3,409,275 3,554,897 3,929,739 Contribution Deficiency (Excess) $ - $ - $ - $ - $ -
Covered Payroll $ 5,178,418 $ 5,603,211 $ 5,863,101 $ 6,557,458 $ 6,180,009 Contributions as a % of Covered Payroll 55.11% 54.83% 58.15% 54.21% 63.59% Notes to Schedule:

Valuation Date: June 30, 2023
Assumptions Used: Entry Age Method used for Actuarial Cost Method Level Percentage of Payroll and Direct Rate Smoothing
Remaining Amortization Period no more than 26 years
Inflation Assumed at 2.30%
Investment Rate of Returns set at 6.8%
The CalPERS mortality assumptions was adjusted in fiscal year 2021.

The mortality table was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing morality improvement using 80% of Scale MP 2020 published by the Society of Actuaries. For more details, please refer to the 2021 experience study report that can be found on the CalPERS website.

The CalPERS discount rate was increased from 7.50% to 7.65% in FY2016, to 7.15% in FY2018, and then decreased to 6.90% in FY2022.

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

SCHEDULE OF PROPORTIONARE SHARE OF NET PENSION LIABILITY

CALPERS SAFETY COST SHARING PLAN

Safety Plan
Plan Measurement Date 2015 2016 2017 2018 2019
Fiscal Year Ended 2016 2017 2018 2019 2020
Proportion of Net Pension
Liability (Safety) 0.14860% 0.22394% 0.22603% 0.23583% 0.24100% Proportionate Share of
Net Pension Liability $ 10,199,904 $ 19,377,843 $ 22,415,954 $ 22,725,267 $ 24,695,687 Covered Payroll $ 4,897,104 $ 5,022,498 $ 4,941,138 $ 5,079,440 $ 4,445,061 Proportionate Share of NPL
as a % of Covered Payroll 208.28% 385.82% 453.66% 447.40% 555.58% Plan's Fiduciary Net Position
as a % of the TPL 74.89% 74.89% 73.87% 74.52% 73.61%
Safety Plan
Plan Measurement Date 2020 2021 2022 2023 2024
Fiscal Year Ended 2021 2022 2023 2024 2025
Proportion of Net Pension
Liability (Safety) 0.24953% 0.30994% 0.27474% 0.27237% 0.27598% Proportionate Share of
Net Pension Liability $ 27,149,916 $ 16,762,598 $ 31,734,686 $ 33,979,087 $ 33,469,333 Covered Payroll $ 4,928,821 $ 5,178,418 $ 5,603,211 $ 5,863,101 $ 6,557,458 Proportionate Share of NPL
as a % of Covered Payroll 550.84% 323.70% 566.37% 579.54% 510.40% Plan's Fiduciary Net Position
as a % of the TPL 72.46% 83.55% 71.34% 70.17% 71.85%
The CalPERS discount rate was increased from 7.50% to 7.65% in FY2016, to 7.15% in FY2018, and then decreased to 6.90% in FY2022.

The CalPERS mortality assumptions was adjusted in fiscal year 2021.

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

SCHEDULE OF PROPORTIONARE SHARE OF NET PENSION LIABILITY

CALPERS MISCELLANEOUS AGENT-MULTPLE EMPLOYER PLAN

Measurement Date 2015 2016 2017 2018 2019
Total Pension liability
Service cost $ 1,491,925 $ 1,560,679 $ 1,651,550 $ 1,700,438 $ 1,771,368 Interest 6,483,032 6,697,247 6,820,536 7,073,843 7,381,846 Diff. between expected and actual exp. (623,495) (357,870) (892,479) 994,994 1,082,289 Changes of assumptions (1,513,132) - 5,481,432 (655,541) - Changes of benefits - - - - -
Benefit payments (including refunds) (4,748,786) (4,953,756) (5,138,083) (5,448,374) (5,720,232) Net change in Total Pension Liability 1,089,544 2,946,300 7,922,956 3,665,360 4,515,271 Total Pension Liability - beginning 88,510,577 89,600,121 92,546,421 100,469,377 104,134,737 Total Pension Liability - ending $ 89,600,121 $ 92,546,421 $ 100,469,377 $ 104,134,737 $ 108,650,008 Plan fiduciary net position
Employer contributions $ 1,941,765 $ 2,223,782 $ 2,407,496 $ 2,669,104 $ 3,049,748 Employee contributions 679,796 691,770 682,891 761,705 846,125 Plan to plan resource movement 22,561 (28,866) - (170) - Net investment income 1,470,873 369,185 7,171,443 5,883,868 4,759,034 Benefit payments (including refunds) (4,748,786) (4,953,756) (5,138,083) (5,448,374) (5,720,232) Administrative expense (74,706) (40,462) (95,455) (108,582) (52,260) Adjsutments - - - (206,199) 170
Net change in plan fiduciary net position (708,497) (1,738,347) 5,028,292 3,551,352 2,882,585 Plan fiduciary net position - beginning 67,099,375 66,390,878 64,652,531 69,680,823 73,232,175 Plan fiduciary net position - ending $ 66,390,878 $ 64,652,531 $ 69,680,823 $ 73,232,175 $ 76,114,760 Net Pension liability (asset) $ 23,209,243 $ 27,893,890 $ 30,788,554 $ 30,902,562 $ 32,535,248 Plan fiduciary net position as a percentage
of the total Pension liability 74.10% 69.86% 69.36% 70.32% 70.05% Covered Payroll $ 8,487,940 $ 9,198,318 $ 9,024,370 $ 9,576,157 $ 10,211,967 Net Pension liability % of covered payroll 273.44% 303.25% 341.17% 322.70% 318.60% Continued

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

SCHEDULE OF PROPORTIONARE SHARE OF NET PENSION LIABILITY

CALPERS MISCELLANEOUS AGENT-MULTPLE EMPLOYER PLAN

Measurement Date 2020 2021 2022 2023 2024
Total Pension liability
Service cost $ 1,930,090 $ 2,062,486 $ 2,264,169 $ 2,092,786 $ 2,365,384 Interest 7,729,269 7,943,404 8,142,881 8,437,589 8,809,282 Diff. between expected and actual exp. 1,465,653 (581,801) (108,166) 631,264 1,923,906 Changes of assumptions - - 3,399,004 - -
Changes of benefits - - - 164,628 -
Benefit payments (including refunds) (5,958,101) (6,339,615) (6,623,114) (7,069,109) (7,338,359) Net change in Total Pension Liability 5,166,911 3,084,474 7,074,774 4,257,158 5,760,213 Total Pension Liability - beginning 108,650,008 113,816,919 116,901,393 123,976,167 128,233,325 Total Pension Liability - ending $ 113,816,919 $ 116,901,393 $ 123,976,167 $ 128,233,325 $ 133,993,538 Plan fiduciary net position
Employer contributions $ 8,146,791 $ 9,160,680 $ 3,472,727 $ 3,687,226 $ 3,876,932 Employee contributions 834,145 889,649 871,063 916,606 996,934 Plan to plan resource movement - - - - -
Net investment income 3,913,294 19,606,360 (7,988,150) 5,876,311 9,419,976 Benefit payments (including refunds) (5,958,101) (6,339,615) (6,623,114) (7,069,109) (7,338,359) Administrative expense (107,303) (82,856) (66,142) (70,479) (80,707) Adjsutments - - - - -
Net change in plan fiduciary net position 6,828,826 23,234,218 (10,333,616) 3,340,555 6,874,776 Plan fiduciary net position - beginning 76,114,760 82,943,586 106,177,804 95,844,188 99,184,743 Plan fiduciary net position - ending $ 82,943,586 $ 106,177,804 $ 95,844,188 $ 99,184,743 $ 106,059,519 Net Pension liability (asset) $ 30,873,333 $ 10,723,589 $ 28,131,979 $ 29,048,582 $ 27,934,019 Plan fiduciary net position as a percentage
of the total Pension liability 72.87% 90.83% 77.31% 77.35% 79.15% Covered Payroll $ 11,188,927 $ 12,082,520 $ 12,305,265 $ 11,404,827 $ 13,817,826 Net Pension liability % of covered payroll 275.93% 88.75% 228.62% 254.70% 202.16% Concluded

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

SCHEDULE OF OPEB CONTRIBUTIONS

Fiscal Year Ended 2018 2019 2020 2021 2022 2023 2024 2025 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 $ 1,579,000 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) (2,081,717) (2,081,717) Contribution deficiency (excess) $ (806,000) $ (298,636) $ (336,306) $ (237,847) $ 105,078 $ (361,337) $ (654,717) $ (502,717) Covered payroll $ 16,192,060 $ 17,338,201 $ 17,406,541 $ 17,982,237 $ 16,987,042 $ 17,809,965 $ 18,225,114 $ 20,512,356 Contrib. as a % of covered employee payroll 18.13% 13.88% 14.41% 11.66% 10.33% 9.73% 11.42% 10.15% 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, 2024
June 30, 2024
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 2076

6.25%

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

SCHEDULE OF CHANGES IN NET OPEB LIABILITY

Measurement Date 2017 2018 2019 2020 2021 2022 2023 2024 Total OPEB liability
Service cost $ 1,134,000 $ 1,168,227 $ 1,203,274 $ 1,159,152 $ 1,115,309 $ 955,115 $ 940,674 $ 865,285 Interest 1,607,000 1,706,270 1,814,072 1,887,105 1,956,034 1,804,972 1,873,207 2,080,996 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) (1,801,144) 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 1,145,137 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 33,331,226 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 $ 34,476,363 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 $ 1,818,298 Net investment income 1,049,000 1,082,977 1,009,315 652,656 5,529,824 (3,510,434) 1,468,115 2,672,858 Benefit payments (1,269,000) (1,326,313) (1,298,623) (1,399,933) (1,494,906) (1,591,150) (1,716,592) (1,801,144) Administrative expense (14,000) (34,261) (11,502) (17,357) (18,556) (21,454) (23,387) (25,082) 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 2,664,930 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 24,321,780 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 $ 26,986,710 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 $ 7,489,653 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% 78.28% Covered payroll $ 14,985,716 $ 16,192,060 $ 17,338,201 $ 17,406,541 $ 17,982,237 $ 16,987,042 $ 17,809,965 $ 18,225,114 NOL as a % of cov. emp. payroll 74.50% 62.10% 52.64% 48.80% 13.86% 41.38% 50.59% 41.10% 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. 7.

Supplementary Information

ITEM NO. 7.

This Page Left Intentionally Blank

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

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. 7.

Variance
Original Final Positive
Budget Budget Actual (Negative)

REVENUES
Licenses & permits $ 120,000 $ 120,000 $ 158,732 $ 38,732 Intergovernmental 1,701,196 8,003,839 7,830,241 (173,598) Charges for services 958,381 898,553 898,553 -
Interest - - 200,349 200,349
Use of Property 96,000 96,000 91,284 (4,716)
Other 50,000 722,581 477,300 (245,281)
Total Revenues 2,925,577 9,840,973 9,656,459 (184,514)

EXPENDITURES
Capital outlay 4,883,046 19,161,577 12,910,018 6,251,559 Total Expenditures 4,883,046 19,161,577 12,910,018 6,251,559

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (1,957,469) (9,320,604) (3,253,559) 6,067,045

OTHER FINANCING SOURCES (USES)
Transfers in 1,765,416 1,765,416 1,783,080 17,664
Transfers (out) (451,491) (673,356) (701,491) (28,135)
Total Other Financing Sources (Uses) 1,313,925 1,092,060 1,081,589 (10,471) CHANGE IN FUND BALANCE $ (643,544) $ (8,228,544) (2,171,970) $ 6,056,574 BEGINNING FUND BALANCE 19,065,570
ENDING FUND BALANCE $ 16,893,600

BUDGET AND ACTUAL (GAAP)
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

TOWN OF LOS GATOS

APPROPRIATED RESERVES FUND

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

ITEM NO. 7.

Total
Capital
Storm Construction Gas Projects
Drains Tax Tax Funds
ASSETS
Cash & investments $ 3,105,895 $ 3,763,913 $ 2,046,207 $ 8,916,015 Restricted cash & investments - - - -
Receivables:

Accounts - - - -
Intergovernmental receivable - - 84,341 84,341
Leases receivable - - - -
Long term notes receivable - - - -
Total Assets $ 3,105,895 $ 3,763,913 $ 2,130,548 $ 9,000,356

LIABILITIES
Accounts payable $ 280,661 $ - $ - $ 280,661
Accrued payroll and benefits - - - -
Unearned revenue - - - -
Total Liabilities 280,661 - - 280,661

DEFERRED INFLOWS OF RESOURCES
Leases - - - -

FUND BALANCE
Restricted for:

Library - - - -
Repairs and maintenance - - - -
Capital projects 2,825,234 3,763,913 2,130,548 8,719,695 Committed to:

Special revenue funds - - - -
Total Fund Balances 2,825,234 3,763,913 2,130,548 8,719,695 Total Liabilities and Fund Balances $ 3,105,895 $ 3,763,913 $ 2,130,548 $ 9,000,356 (Continued)

CAPITAL PROJECTS FUNDS

TOWN OF LOS GATOS

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETS
JUNE 30, 2025

ITEM NO. 7.

Non-Point
Community Source Lighting and
Development Maintenance Landscaping
ASSETS
Cash & investments $ 94,352 $ 634,028 $ 196,901
Restricted cash & investments 58,344 - -
Receivables:

Accounts - 34,173 -
Intergovernmental receivable - - -
Leases receivable - - -
Long term notes receivable 78,752 - -
Total Assets $ 231,448 $ 668,201 $ 196,901

LIABILITIES
Accounts payable $ - $ 1,540 $ 3,295
Accrued payroll and benefits - 2,493 -
Unearned revenue 64,795 - -
Total Liabilities 64,795 4,033 3,295

DEFERRED INFLOWS OF RESOURCES
Leases - - -

FUND BALANCE
Restricted for:

Library - - -
Repairs and maintenance - - 193,606
Capital projects - - -
Committed to:

Special revenue funds 166,653 664,168 -
Total Fund Balances 166,653 664,168 193,606
Total Liabilities and Fund Balances $ 231,448 $ 668,201 $ 196,901 (Continued)

SPECIAL REVENUE FUNDS

TOWN OF LOS GATOS

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETS
JUNE 30, 2025

ITEM NO. 7.

Total
Total Nonmajor
LG Library Special Revenue Governmental
Theatre Trust Funds Funds
ASSETS
Cash & investments $ 119,336 $ 561,166 $ 1,605,783 $ 10,521,798 Restricted cash & investments - - 58,344 58,344
Receivables:

Accounts 176,991 - 211,164 211,164
Intergovernmental receivable - - - 84,341
Leases receivable 225,652 - 225,652 225,652
Long term notes receivable - - 78,752 78,752
Total Assets $ 521,979 $ 561,166 $ 2,179,695 $ 11,180,051

LIABILITIES
Accounts payable $ 6,022 $ 1,422 $ 12,279 $ 292,940
Accrued payroll and benefits - - 2,493 2,493
Unearned revenue - - 64,795 64,795
Total Liabilities 6,022 1,422 79,567 360,228

DEFERRED INFLOWS OF RESOURCES
Leases 134,835 - 134,835 134,835

FUND BALANCE
Restricted for:

Library - 559,744 559,744 559,744
Repairs and maintenance - - 193,606 193,606
Capital projects - - - 8,719,695
Committed to:

Special revenue funds 381,122 - 1,211,943 1,211,943
Total Fund Balances 381,122 559,744 1,965,293 10,684,988 Total Liabilities and Fund Balances $ 521,979 $ 561,166 $ 2,179,695 $ 11,180,051 (Concluded)

TOWN OF LOS GATOS

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETS
JUNE 30, 2025

SPECIAL REVENUE FUNDS

ITEM NO. 7.

Total
Storm Construction Gas Capital Projects
Drain Tax Tax Funds

REVENUES
Property Taxes $ - $ - $ - $ -
Other Taxes - 22,516 - 22,516
License and permits 97,939 - - 97,939
Intergovernmental - - 1,850,488 1,850,488
Interest 146,669 157,146 77,927 381,742
Use of property - - - -
Other - - - -
Total Revenues 244,608 179,662 1,928,415 2,352,685

EXPENDITURES
Current:

Parks and public works - - - -
Library services - - - -
Sanitation and other - - - -
Capital Outlay 950,622 - 1,620,034 2,570,656
Total Expenditures 950,622 - 1,620,034 2,570,656

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (706,014) 179,662 308,381 (217,971)

OTHER FINANCING SOURCES (USES)
Transfers (out) - - (106,000) (106,000)
Total Other Financing Sources (Uses) - - (106,000) (106,000) Changes in Fund Balances (706,014) 179,662 202,381 (323,971) Fund Balances - Beginning of year 3,531,248 3,584,251 1,928,167 9,043,666 Fund Balances - End of year $ 2,825,234 $ 3,763,913 $ 2,130,548 $ 8,719,695 (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, 2025

CAPITAL PROJECTS FUNDS

ITEM NO. 7.

Non-Point
Community Source Lighting and
Development Maintenance Landscaping

REVENUES
Property Taxes $ - $ - $ 38,650
Other Taxes - - -
License and permits - 163,690 -
Intergovernmental - - -
Interest - - 7,926
Use of property - - -
Other - 20,532 -
Total Revenues - 184,222 46,576

EXPENDITURES
Current:

Parks and public works - - 30,675
Library services - - -
Sanitation and other - 274,188 -
Capital Outlay - - -
Total Expenditures - 274,188 30,675

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES - (89,966) 15,901

OTHER FINANCING SOURCES (USES)
Transfers (out) - - (4,920)
Total Other Financing Sources (Uses) - - (4,920)
Changes in Fund Balances - (89,966) 10,981
Fund Balances - Beginning of year 166,653 754,134 182,625 Fund Balances - End of year $ 166,653 $ 664,168 $ 193,606 (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, 2025

ITEM NO. 7.

Total
LG Library Special Revenue
Theatre Trust Funds Total

REVENUES
Property Taxes $ - $ - $ 38,650 $ 38,650
Other Taxes - - - 22,516
License and permits - - 163,690 261,629
Intergovernmental - - - 1,850,488
Interest 16,522 25,436 49,884 431,626
Use of property 274,633 - 274,633 274,633
Other - 60,322 80,854 80,854
Total Revenues 291,155 85,758 607,711 2,960,396

EXPENDITURES
Current:

Parks and public works 81,068 - 111,743 111,743
Library services - 82,862 82,862 82,862
Sanitation and other - - 274,188 274,188
Capital Outlay - - - 2,570,656
Total Expenditures 81,068 82,862 468,793 3,039,449

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 210,087 2,896 138,918 (79,053)

OTHER FINANCING SOURCES (USES)
Transfers (out) - - (4,920) (110,920)
Total Other Financing Sources (Uses) - - (4,920) (110,920) Changes in Fund Balances 210,087 2,896 133,998 (189,973) Fund Balances - Beginning of year 171,035 556,848 1,831,295 10,874,961 Fund Balances - End of year $ 381,122 $ 559,744 $ 1,965,293 $ 10,684,988 (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, 2025

ITEM NO. 7.

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, 2025
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)

REVENUES
Property taxes $ - $ - $ - $ - $ - $ -
Other taxes - - - 30,000 22,516 (7,484)
License and permits 94,350 97,939 3,589 - - -
Intergovernmental - - - - - -
Interest 12,480 146,669 134,189 15,590 157,146 141,556
Use of property - - - - - -
Other - - - - - -
Total Revenues 106,830 244,608 137,778 45,590 179,662 134,072

EXPENDITURES
Current:

Parks and public works - - - - - -
Library services - - - - - -
Sanitation and other - - - - - -
Capital outlay 1,100,623 950,622 150,001 299,573 - 299,573 Total Expenditures 1,100,623 950,622 150,001 299,573 - 299,573

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (993,793) (706,014) 287,779 (253,983) 179,662 433,645

OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) - - - - - -
Total Other Financing Sources (Uses) - - - - - -
CHANGE IN FUND BALANCE $ (993,793) (706,014) $ 287,779 $ (253,983) 179,662 $ 433,645 BEGINNING FUND BALANCE 3,531,248 3,584,251
ENDING FUND BALANCE $ 2,825,234 $ 3,763,913
(Continued)

STORM DRAIN CONSTRUCTION TAX

ITEM NO. 7.

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

REVENUES
Property taxes $ - $ - $ - $ - $ - $ -
Other taxes - - - - - -
License and permits - - - - - -
Intergovernmental 1,783,113 1,850,488 67,375 - - -
Interest 1,472 77,927 76,455 - - -
Use of property - - - - - -
Other - - - - - -
Total Revenues 1,784,585 1,928,415 143,830 - - -

EXPENDITURES
Current:

Parks and public works - - - - - -
Library services - - - - - -
Sanitation and other - - - - - -
Capital outlay 1,620,034 1,620,034 - - - -
Total Expenditures 1,620,034 1,620,034 - - - -

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 164,551 308,381 143,830 - - -

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 $ 58,551 202,381 $ 143,830 $ - - $ - BEGINNING FUND BALANCE 1,928,167 166,653
ENDING FUND BALANCE $ 2,130,548 $ 166,653
(Continued)

GAS TAX
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

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. 7.

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

REVENUES
Property taxes $ - $ - $ - $ 38,220 $ 38,650 $ 430
Other taxes - - - - - -
License and permits 163,690 163,690 - - - -
Intergovernmental - - - - - -
Interest - - - 1,010 7,926 6,916
Use of property - - - - - -
Other - 20,532 20,532 - - -
Total Revenues 163,690 184,222 20,532 39,230 46,576 7,346

EXPENDITURES
Current:

Parks and public works - - - 35,480 30,675 4,805
Library services - - - - - -
Sanitation and other 294,706 274,188 20,518 - - -
Capital outlay - - - - - -
Total Expenditures 294,706 274,188 20,518 35,480 30,675 4,805

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (131,016) (89,966) 41,050 3,750 15,901 12,151

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 $ (131,016) (89,966) $ 41,050 $ (1,170) 10,981 $ 12,151 BEGINNING FUND BALANCE 754,134 182,625
ENDING FUND BALANCE $ 664,168 $ 193,606
(Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

NON-POINT

SOURCE MAINTENANCE LIGHTING AND LANDSCAPING

TOWN OF LOS GATOS

BUDGETED NONMAJOR FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL (GAAP)

ITEM NO. 7.

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

REVENUES
Property taxes $ - $ - $ - $ - $ - $ -
Other taxes - - - - - -
License and permits - - - - - -
Intergovernmental - - - - - -
Interest - 16,522 16,522 5,900 25,436 19,536
Use of property 117,960 274,633 156,673 - - -
Other - - - 60,500 60,322 (178)
Total Revenues 117,960 291,155 173,195 66,400 85,758 19,358

EXPENDITURES
Current:

Parks and public works 119,685 81,068 38,617 - - -
Library services - - - 118,002 82,862 35,140
Sanitation and other - - - - - -
Capital outlay - - - - - -
Total Expenditures 119,685 81,068 38,617 118,002 82,862 35,140

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (1,725) 210,087 211,812 (51,602) 2,896 54,498

OTHER FINANCING SOURCES (USES)
Operating transfers in - - - - - -
Operating transfers (out) - - - - - -
Total Other Financing Sources (Uses) - - - - - -
CHANGE IN FUND BALANCE $ (1,725) 210,087 $ 211,812 $ (51,602) 2,896 $ 54,498 BEGINNING FUND BALANCE 171,035 556,848
ENDING FUND BALANCE $ 381,122 $ 559,744
(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, 2025

ITEM NO. 7.

Variance
Positive
Budget Actual (Negative)

REVENUES
Property taxes $ 38,220 $ 38,650 $ 430
Other taxes 30,000 22,516 (7,484)
License and permits 258,040 261,629 3,589
Intergovernmental 1,783,113 1,850,488 67,375
Interest 36,452 431,626 395,174
Use of property 117,960 274,633 156,673
Other 60,500 80,854 20,354
Total Revenues 2,324,285 2,960,396 636,111

EXPENDITURES
Current:

Parks and public works 155,165 111,743 43,422
Library services 118,002 82,862 -
Sanitation and other 294,706 274,188 20,518
Capital outlay 3,020,230 2,570,656 449,574
Total Expenditures 3,588,103 3,039,449 513,514

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (1,263,818) (79,053) 1,184,765

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 $ (1,374,738) (189,973) $ 1,184,765 BEGINNING FUND BALANCE 10,874,961
ENDING FUND BALANCE $ 10,684,988
(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, 2025

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

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. 7.

Workers' Self Information Facilities
Equipment Comp Insurance Technology Maintenance Total
ASSETS
Cash & Investments $ 3,893,502 $ 2,443,408 $ 313,777 $ 2,620,971 $ 400,250 $ 9,671,908 Restricted Cash & Investments - 106,582 - - - 106,582
Accounts receivable 4,553 - - 3,365 86,570 94,488
Leases receivable - - - - 1,217,607 1,217,607
Subscription assets, net - - - 308,593 - 308,593
Total Assets $ 3,898,055 $ 2,549,990 $ 313,777 $ 2,932,929 $ 1,704,427 $ 11,399,178

LIABILITIES
Accounts Payable $ 7,626 $ 3,964 $ 23,155 $ 50,581 $ 192,035 $ 277,361 Due to Other Governments - - - - 86 86
Interest payable - - - 12,795 - 12,795
Claims Payable - 1,286,054 81,875 - - 1,367,929
Subscription liabilities - - - 284,449 - 284,449
Total Liabilities $ 7,626 $ 1,290,018 $ 105,030 $ 347,825 $ 192,121 $ 1,942,620 Deferred Inflows of Resources
Leases $ - $ - $ - $ - $ 692,207 $ 692,207

NET POSITION
Net investment in capital assets $ - $ - $ - $ 24,144 $ - $ 24,144 Restricted for:

Wokers compensation claims - 106,582 - - - 106,582
Unrestricted 3,890,429 1,153,390 208,747 2,560,960 820,099 8,633,625 Total Net Position $ 3,890,429 $ 1,259,972 $ 208,747 $ 2,585,104 $ 820,099 $ 8,764,351

TOWN OF LOS GATOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF NET POSITION
JUNE 30, 2025

ITEM NO. 7.

Workers' Self Information Facilities
Equipment Comp Insurance Technology Maintenance Total

OPERATING REVENUES
Charges for services $ 1,123,659 $ 1,474,500 $ 1,291,328 $ 948,821 $ 1,052,961 $ 5,891,269 Use of money and property - - - - 137,633 137,633
Other local taxes - - - - 22,516 22,516
Other revenue & reimbursements 43,409 330,789 - - - 374,198 Total Operating Revenues 1,167,068 1,805,289 1,291,328 948,821 1,213,110 6,425,616

OPERATING EXPENSES
Insurance expenses - 526,517 1,320,458 - - 1,846,975
Services and supplies 563,191 231,103 - 684,644 1,439,205 2,918,143 Insurance claims - 373,944 - - - 373,944
Depreciation/amortization expense - - - 202,422 - 202,422 Total Operating Expenses 563,191 1,131,564 1,320,458 887,066 1,439,205 5,341,484 Operating Income (loss) 603,877 673,725 (29,130) 61,755 (226,095) 1,084,132

NONOPERATING REVENUE (EXPENSES)
Investment earnings - - - - 85,669 85,669
Income (loss) before transfers 603,877 673,725 (29,130) 61,755 (140,426) 1,169,801

TRANSFERS
Transfers in - - 60,000 - - 60,000
Change in Net Position 603,877 673,725 30,870 61,755 (140,426) 1,229,801 BEGINNING NET POSITION 3,286,552 586,247 177,877 2,523,349 960,525 7,534,550 ENDING NET POSITION $ 3,890,429 $ 1,259,972 $ 208,747 $ 2,585,104 $ 820,099 $ 8,764,351

TOWN OF LOS GATOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2025

ITEM NO. 7.

Workers' Self Information Facilities
Equipment Comp Insurance Technology Maintenance Total

CASH FLOWS FROM OPERATING

ACTIVITIES
Receipts from customers $ 1,167,068 $ 1,474,500 $ 1,291,328 $ 949,860 $ 1,218,005 $ 6,100,761 Payments to suppliers and providers (556,540) (1,144,331) (1,329,462) (656,659) (1,402,097) (5,089,089) Insurance reimbursements - 330,789 - - - 330,789
Claims paid - (429,543) (82,622) - - (512,165)
Net Cash Provided (Used) by
Operating Activities 610,528 231,415 (120,756) 293,201 (184,092) 830,296

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Transfers in - - 60,000 - - 60,000
Net Cash Provided (Used) by
Noncapital Financing Activities - - 60,000 - - 60,000

CASH FLOWS FROM CAPITAL AND

RELATED FINANCING ACTIVITIES
Interest paid - - - (7,148) - (7,148)
Principal paid - - - (161,332) - (161,332)
Net Cash Used by Capital and
Related Financing Activities - - - (168,480) - (168,480)

CASH FLOWS FROM INVESTING ACTIVITIES
Collections from investment earnings - - - - 85,669 85,669 Net Cash Provided by Investing Activities - - - - 85,669 85,669 Net Increase(Decrease) in Cash and Investments 610,528 231,415 (60,756) 124,721 (98,423) 807,485 Cash and investments - beginning of year 3,282,974 2,318,575 374,533 2,496,250 498,673 8,971,005 Cash and investments - end of year $ 3,893,502 $ 2,549,990 $ 313,777 $ 2,620,971 $ 400,250 $ 9,778,490 Reconciliation of Operating Income to Cash
Flows from Operating Activities:

Operating Income $ 603,877 $ 673,725 $ (29,130) $ 61,755 $ (226,095) $ 1,084,132 Adjustments to reconcile operating income to
cash flows from operating activities:

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

Accounts receivable - - - 1,039 (56,116) (55,077)
Leases receivable - - - - 190,076 190,076
Deferred inflows of resources - - - - (129,065) (129,065) Accounts payable 6,651 (12,767) 894 27,985 37,081 59,844 Claims payable - (429,543) (92,520) - - (522,063)
Cash Flows From Operating Activities $ 610,528 $ 231,415 $ (120,756) $ 293,201 $ (184,092) $ 830,296

TOWN OF LOS GATOS

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

ITEM NO. 7.

Statistical Section

ITEM NO. 7.

This Page Left Intentionally Blank

ITEM NO. 7.

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. 7.

This Page Left Intentionally Blank

ITEM NO. 7.

Net Position by Component
Last Ten Fiscal Years
(Accrual Basis of Accounting)
Fiscal Net Investment Total
Year in Capital Assets Restricted Unrestricted Net Position 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
2025 145,079,170 12,933,419 8,676,121 166,688,710
(1) Net position was restated for FY 2018 for amounts placed into fiduciary funds, reclassified to General Fund Restricted Asset. (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. (15,000,000)
(10,000,000)
(5,000,000)
-
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
150,000,000
155,000,000
Net Investment in Capital Assets Restricted Unrestricted

ITEM NO. 7.

Town of Los Gatos Schedule 2
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
2015-16 2016-17 2017-18 2018-19 2019-20
Expenses
Governmental Activities:

General Government $ 6,993,661 $ 6,771,628 $ 7,948,918 $ 8,163,991 $ 7,405,368 Public Safety 12,825,688 14,587,597 15,545,521 16,635,726 20,446,188 Parks and Public Works 8,320,623 9,502,707 10,047,003 10,627,716 11,803,005 Community Development 3,227,224 5,093,459 4,667,609 5,064,637 5,001,958 Library Services 2,522,142 2,868,748 3,087,684 3,059,294 3,347,523 Sanitation 528,580 466,762 536,296 684,673 3,041
Interest - - - - -
Total Governmental Activities 34,417,918 39,290,901 41,833,031 44,236,037 48,007,083 Program Revenues
Charges for Services:

General Government 1,517,012 1,669,020 1,701,146 1,562,683 1,470,324 Public Safety 3,278,585 2,076,688 1,888,359 1,745,889 1,549,207 Parks and Public Works 1,516,108 2,155,841 4,150,068 2,910,936 3,674,222 Community Development 4,359,146 3,803,626 3,456,390 4,155,231 3,351,753 Library Services 46,192 46,746 14,702 9,476 11,522
Sanitation 368,813 410,626 771,442 966,130 231,323
Operating Grants and Contributions:

General Government 15,291 - - - 12,290
Public Safety 98,138 837,329 895,730 826,643 952,045
Parks and Public Works 749,300 665,779 953,294 1,301,152 2,824,638 Community Development - - - - 15,864
Library Services 12,228 - 57,200 47,482 49,351
Capital Grants and Contributions:

General Government - - - - 8,258
Public Safety - - - - 9,100
Parks and Public Works 1,610,657 770,600 348,437 146,792 832,755 Community Development - 9,280 - - -
Total Program Revenues 13,571,470 12,445,535 14,236,768 13,672,414 14,992,652 General Revenues and Special Items:

Property Taxes 13,763,458 14,756,214 15,958,406 17,321,347 18,330,426 Sales Taxes 7,501,175 8,925,276 7,466,253 8,158,152 7,531,425 Franchise Taxes 2,258,892 2,366,908 2,474,814 2,475,916 2,495,792 Other Taxes 1,997,497 2,351,223 2,667,840 2,726,743 1,911,774 Motor Vehicle in Lieu 12,308 14,056 16,483 14,689 24,526 Developer Assessments - - - - -
Investment Earnings 698,324 192,260 333,120 1,809,128 2,428,470 Miscellaneous 598,170 528,946 622,105 2,407,840 323,940 Insurance recoveries - - - - -
Total General Revenues and Special Items 26,829,824 29,134,883 29,539,021 34,913,815 33,046,353 Change in Net Position $ 5,983,376 $ 2,289,517 $ 1,942,758 $ 4,350,192 $ 31,922 Continued
Fiscal Year

ITEM NO. 7.

Town of Los Gatos Schedule 2
Changes in Net Position
Last Ten Fiscal Years
(Accrual Basis of Accounting)
2020-21 2021-22 2022-23 2023-24 2024-25
Expenses
Governmental Activities:

General Government $ 7,086,377 $ 15,681,345 $ 10,522,568 $ 11,113,238 $ 11,122,319 Public Safety 19,808,230 15,093,308 17,428,923 23,783,313 24,095,151 Parks and Public Works 13,141,034 12,969,615 12,258,626 14,075,171 17,745,141 Community Development 6,846,834 5,827,001 5,215,961 5,481,765 5,734,087 Library Services 3,496,153 2,969,954 3,653,642 3,853,748 3,716,806 Sanitation 185,981 178,575 208,262 263,706 276,528
Interest - - 29,221 26,137 41,403
Total Governmental Activities 50,564,609 52,719,798 49,317,203 58,597,078 62,731,435 Program Revenues
Charges for Services:

General Government 1,894,080 1,725,857 2,635,527 2,694,162 5,809,508 Public Safety 1,288,358 1,596,313 1,846,312 1,980,431 1,793,058 Parks and Public Works 4,209,048 5,090,014 3,590,936 4,211,420 4,095,474 Community Development 4,063,776 4,129,718 3,971,336 4,247,279 6,055,131 Library Services - 521 2,039 2,514 2,515
Sanitation 299,478 231,323 359,950 359,950 163,690
Operating Grants and Contributions:

General Government - 2,766,833 - 63,088 112,216
Public Safety 1,061,344 1,144,226 4,622,373 917,317 869,926 Parks and Public Works 1,547,102 1,482,896 1,735,608 1,828,050 1,902,414 Community Development 223,129 670,929 616,937 692,151 95,126 Library Services 55,181 114,958 174,663 167,303 118,472 Capital Grants and Contributions:

General Government 2,365 12,205,050 - - -
Public Safety - - - - -
Parks and Public Works 843,980 10,021,156 3,915,175 5,668,252 6,710,310 Community Development - - - - -
Total Program Revenues 15,487,841 41,179,794 23,470,856 22,831,917 27,727,840 General Revenues and Special Items:

Property Taxes 19,878,835 21,132,098 22,746,842 24,224,142 25,252,782 Sales Taxes 7,933,604 8,483,673 8,806,477 8,071,735 8,330,978 Franchise Taxes 2,499,463 2,822,515 3,074,624 2,547,011 1,057,483 Other Taxes 1,126,887 2,042,580 2,292,008 2,422,849 2,417,630 Motor Vehicle in Lieu 23,058 35,624 34,406 41,461 50,036 Developer Assessments - 1,735,571 614,820 12,880 52,733 Investment Earnings 227,136 (1,278,978) 797,587 3,129,616 3,783,217 Miscellaneous 1,528,039 755,400 1,029,864 1,199,422 1,341,229 Insurance recoveries - - 1,565,000 - -
Total General Revenues and Special Items 33,217,022 35,728,483 40,961,628 41,649,116 42,286,088 Change in Net Position $ (1,859,746) $ 24,188,479 $ 15,115,281 $ 5,883,955 $ 7,282,493 Concluded
Fiscal Year

ITEM NO. 7.

Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2015-16 2016-17 2017-18 2018-19 2019-20
General Fund
Nonspendable $ - $ - $ - $ - $ -
Restricted - - 1,206,851 5,015,316 669,978
Committed 20,019,187 15,129,925 12,953,399 15,070,944 15,387,706 Assigned 9,555,085 14,050,699 17,475,285 18,256,895 13,277,813 Unassigned - - - - -
Total General Fund 29,574,272 29,180,624 31,635,535 38,343,155 29,335,497 All Other Governmental Funds
Restricted 6,386,014 5,627,707 6,992,747 6,903,372 6,448,006 Committed 3,696,000 10,354,584 5,571,087 2,579,997 -
Assigned 11,099,076 7,928,994 6,361,403 6,180,930 14,181,679 Unassigned - - - - -
Total All Other Governmental Funds 21,181,090 23,911,285 18,925,237 15,664,299 20,629,685 Total Fund Balances $ 50,755,362 $ 53,091,909 $ 50,560,772 $ 54,007,454 $ 49,965,182 Continued
Fiscal Year

ITEM NO. 7.

Town of Los Gatos Schedule 3
Fund Balance, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2020-21 2021-22 2022-23 2023-24 2024-25
General Fund
Nonspendable $ 159,000 $ 159,000 $ 159,000 $ 159,000 $ 159,000 Restricted - 690,000 1,444,501 2,532,997 3,090,731
Committed 11,220,970 12,283,132 13,150,130 14,364,143 17,041,278 Assigned 12,534,648 13,764,657 14,774,673 14,005,932 5,261,258 Unassigned - - - - 10,211,049
Total General Fund 23,914,618 26,896,789 29,528,304 31,062,072 35,763,316 All Other Governmental Funds
Restricted 8,562,653 9,383,483 9,530,538 10,361,026 9,736,106 Committed - 637,711 2,590,257 2,664,441 2,588,124
Assigned 15,360,481 13,944,155 19,536,429 16,915,064 15,254,358 Unassigned - - - - -
Total All Other Governmental Funds 23,923,134 23,965,349 31,657,224 29,940,531 27,578,588 Total Fund Balances $ 47,837,752 $ 50,862,138 $ 61,185,528 $ 61,002,603 $ 63,341,904 Concluded
Fiscal Year

ITEM NO. 7.

Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2015-16 2016-17 2017-18 2018-19 2019-20
Revenues:

Taxes $ 23,269,892 $ 25,945,129 $ 26,253,026 $ 28,244,329 $ 27,811,665 Licenses & Permits 5,442,133 5,075,503 5,937,044 5,173,876 4,818,671 Intergovernmental 2,573,475 1,715,580 2,124,903 2,310,655 4,498,153 Charges for Services 4,773,001 4,210,174 5,395,057 5,584,504 5,309,470 Fines and Forfeitures 879,277 917,105 676,212 510,266 271,117 Franchise Fees 2,258,892 2,366,908 2,474,814 2,475,916 2,495,792 Developer Fees - - - - -
Investment Income 698,308 192,978 332,938 1,809,164 2,428,453 Use of Property 31,723 32,096 32,206 32,960 31,039
Other 2,396,992 1,011,939 640,844 579,755 376,922
Total Revenues 42,323,693 41,467,412 43,867,044 46,721,425 48,041,282 Expenditures:

Current
General Government 9,144,797 8,390,959 8,770,082 8,004,254 13,024,146 Public Safety 13,763,316 13,251,288 14,423,554 14,945,407 15,793,815 Parks and Public Works 6,307,266 6,633,748 7,125,686 7,962,135 8,168,599 Community Development 3,695,504 3,793,930 4,192,165 4,577,495 4,473,790 Library Services 2,332,268 2,508,677 2,529,017 2,493,617 2,700,802 Sanitation & Other 452,726 466,762 521,147 628,240 162,837 Capital Outlay 3,241,657 6,867,034 9,778,058 7,888,914 7,861,972 Debt Service
Principal Repayment - - - - -
Interest - - - - -
Total Expenditures 38,937,534 41,912,398 47,339,709 46,500,062 52,185,961 Excess (Deficiency) of Revenues
Over (Under) Expenditures 3,386,159 (444,986) (3,472,665) 221,363 (4,144,679) Other Financing Sources(Uses):

Transfers In 3,315,846 7,907,692 3,176,760 4,264,131 8,935,260 Transfers Out (1,284,514) (7,612,012) (3,880,131) (3,323,756) (8,628,719) Gain from Sale of Property - - 378,219 1,912,316 1,566
Insurance Recoveries - - - - -
Issuance of Debt - 4,435 - - -
Total Other Financing Sources(Uses) 2,031,332 300,115 (325,152) 2,852,691 308,107 Net Change in Fund Balances $ 5,417,491 $ (144,871) $ (3,797,817) $ 3,074,054 $ (3,836,572) Capitalized Capital Outlay $ 3,241,657 $ 6,867,034 $ 9,778,058 $ 7,861,972 $ 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. 7.

Town of Los Gatos Schedule 4
Changes in Fund Balances, Governmental Funds
Last Ten Fiscal Years
(Modified Accrual Basis of Accounting)
2020-21 2021-22 2022-23 2023-24 2024-25
Revenues:

Taxes $ 28,977,919 $ 31,627,593 $ 33,851,411 $ 34,735,349 $ 36,081,643 Licenses & Permits 5,212,831 6,055,040 6,333,675 6,227,298 10,077,688 Intergovernmental 3,746,587 15,492,982 10,145,820 6,317,644 11,038,323 Charges for Services 6,035,659 6,925,359 5,718,714 7,051,179 6,648,503 Fines and Forfeitures 103,468 319,170 416,950 480,634 420,127 Franchise Fees 2,499,463 2,822,515 3,074,624 2,547,011 1,057,483 Developer Fees - 1,735,571 614,820 12,880 -
Investment Income 227,940 (1,278,983) 797,582 3,108,100 3,783,218 Use of Property 40,372 144,901 237,647 297,501 442,078
Other 423,115 349,145 985,188 604,493 748,259
Total Revenues 47,267,354 64,193,293 62,176,431 61,382,089 70,297,322 Expenditures:

Current
General Government 14,040,134 15,953,968 8,828,779 9,573,022 10,884,414 Public Safety 16,570,836 16,451,190 18,446,048 20,718,781 20,827,888 Parks and Public Works 8,229,944 8,639,128 9,084,406 9,899,083 10,828,974 Community Development 5,195,302 6,313,511 5,065,412 5,246,729 5,637,742 Library Services 2,847,988 2,827,210 3,208,027 3,335,389 3,651,358 Sanitation & Other 166,173 194,969 204,097 252,605 274,188 Capital Outlay 5,707,439 10,478,670 8,917,075 12,366,255 15,545,674 Debt Service
Principal Repayment 39,008 156,034 156,034 225,370 206,380 Interest - - - 3,716 41,403
Total Expenditures 52,796,824 61,014,680 53,909,878 61,620,950 67,898,021 Excess (Deficiency) of Revenues
Over (Under) Expenditures (5,529,470) 3,178,613 8,266,553 (238,861) 2,399,301 Other Financing Sources(Uses):

Transfers In 4,053,535 8,154,307 11,886,022 3,666,235 2,595,491 Transfers Out (3,940,015) (8,310,685) (11,396,347) (4,317,235) (2,655,491) Gain from Sale of Property 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) 2,875,225 (154,227) 2,056,837 55,936 (60,000) Net Change in Fund Balances $ (2,654,245) $ 3,024,386 $ 10,323,390 $ (182,925) $ 2,339,301 Capitalized Capital Outlay $ 5,707,439 $ 9,180,716 $ 8,598,811 $ 12,016,644 $ 13,404,632 Debt Service as a Percentage
of Non Capital Expenditures 0.08% 0.30% 0.35% 0.46% 0.38% Concluded
Fiscal Year

ITEM NO. 7.

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 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 1.0614 2021 308,749,655 -6.87% 14,599,669,332 8.06% 14,908,418,987 58,398,677,328 1.0509 2022 304,460,199 -1.39% 15,255,884,284 4.49% 15,560,344,483 61,023,537,136 1.0642 2023 357,370,065 17.38% 16,404,930,826 7.53% 16,762,300,891 65,619,723,304 1.0616 2024 432,381,651 20.99% 17,623,641,576 7.43% 18,056,023,227 70,494,566,304 1.0591 2025 326,140,681 -24.57% 18,478,666,192 4.85% 18,804,806,873 73,914,664,768 1.0540 Source: Santa Clara County Assessed Value Report
0 2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Millions
Unsecured Property Series2

ITEM NO. 7.

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
2016 1.0000 0.0476 0.0065 0.1373 1.1914
2017 1.0000 0.0474 0.0092 0.1217 1.1783
2018 1.0000 0.0597 0.0071 0.1168 1.1836
2019 1.0000 0.0565 0.0060 0.0988 1.1613
2020 1.0000 0.0557 0.0057 0.0919 1.1533
2021 1.0000 0.0457 0.0052 0.0944 1.1453
2022 1.0000 0.0576 0.0066 0.0887 1.1529
2023 1.0000 0.0559 0.0057 0.0841 1.1457
2024 1.0000 0.0538 0.0053 0.0720 1.1311
2025 1.0000 0.0486 0.0054 0.0716 1.1256
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. 7.

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 $ 19,379,620 0.19% $ 19,675,159 0.18% $ 25,241,863 0.21% $ 25,746,699 0.20% $ 26,261,632 0.19% 980 JR LLC $ 19,277,879 0.15%
140 Toll House Hotel LLC
17443 Farley Rd LLC
Alberto Way Holdings LLC 24,188,966 0.23% 24,557,845 0.22% 25,048,998 0.21% 25,549,975 0.20% 24,158,350 0.18% Ann R. Desantis
A W Los Gatos LLC
Boccardo Corporation 21,617,318 0.21% 21,918,921 0.20% 22,211,650 0.19% 22,651,732 0.18% 23,099,314 0.17% CH Realty IV Downing LP
CHL Ventures LP
D&K Los Gatos LLC 16,293,163 0.16%
David A. and Shari Flick Trustee
Donahue Schriber Realty Group LP 53,872,083 0.45% 56,370,186 0.44% 57,497,587 0.43% DS Downing Los Gatos LLC 21,980,568 0.21% 22,315,770 0.20% DS Village Square 22,799,599 0.20%
El Camino Hospital 26,477,160 0.25% 26,880,933 0.24% 23,353,576 0.20% 28,596,104 0.22% 30,789,155 0.23% EL Gato 15 LLC
Equestrian 3 Investments LLC 29,584,251 0.25% 28,563,864 0.22% 25,525,880 0.19% Fox Creek Fund LLC 21,558,664 0.17%
Good Samaritan Hospital LP 19,880,366 0.19% 22,402,756 0.20% 22,516,823 0.19% 22,934,274 0.18% 23,391,289 0.17% Grade Way Associations VI
Green Eyes LLC
Grosvenor USA Ltd. 23,449,975 0.23%
Health Care REIT Inc, 20,089,903 0.19% 20,396,274 0.18% Hercules Holding II LLC
International Hotel 30,144,617 0.25% 30,747,509 0.24% 31,362,458 0.23% 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% 28,864,942 0.21% Knowles Los Gatos LLC 49,167,836 0.47% 49,917,644 0.44% 50,915,995 0.43% 51,934,313 0.41% 52,972,998 0.39% KSL Capital Partners 30,134,614 0.29% 30,105,945 0.27% 25,893,946 0.22% 26,411,820 0.21% 33,069,058 0.24% 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 17,507,261 0.17% 31,070,572 0.28%
LG Hotel LLC 15,497,395 0.15%
Los Gatos Hotel Corp. 15,676,113 0.15%
Lyon Baytree Apartments LLC
Paul H. Roskoph
Preylock Los Gatos LLC 89,141,472 0.66%
Safeway Inc. 24,394,468 0.20% 25,752,231 0.19%
San Jose Water Works 37,081,049 0.36% 38,710,728 0.34% 41,202,805 0.34% 46,150,577 0.36% 47,777,432 0.35% Serramonte Corporate Center LLC 200,844,610 1.57% 204,861,501 1.52% SF Los Gatos LLC
SHP Newark LLC
SI 32 LLC 141,348,894 1.36% 143,442,269 1.28% 146,317,944 1.22% 149,208,182 1.17% 152,166,578 1.13% Sobrato Interests IV LLC 44,930,482 0.43% 42,240,994 0.38% 43,071,837 0.36% 43,919,879 0.34% 44,781,377 0.33% SRI Old Town LLC 31,744,252 0.30% 32,228,351 0.29% 32,872,917 0.27% 33,530,374 0.26% 34,200,980 0.25% Summerhill N40 LLC 56,244,782 0.42%
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% 115,777,792 0.86% Wealthcap Los Gatos 31 84,000,000 0.75% 85,680,000 0.72% 87,393,600 0.68% Oaks at Los Gatos LP
Total - Principal taxpayers $ 1,296,723,012 6.37% $ 814,164,568.00 7.24% $ 916,633,381 7.66% $ 1,061,033,843 8.29% $ 1,127,696,808 8.35% Total - All real properties assessed by the Town (1) $10,416,786,877 $11,239,536,718 $11,968,031,792 $12,793,751,423 $13,509,034,656 (1) Assessed value includes only net secured real properties. (2) Excludes the value of tax-exempt properties
Source Data: California Municipal Statistics, Inc. Continued 2015-16 2016-17 2017-18 2018-19 2019-20

ITEM NO. 7.

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 $ 26,786,863 0.18% $ 27,064,374 0.19% $ 27,605,660 0.17% 28,157,772 0.16% 28,720,926 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% 28,677,162 0.16% 17443 Farley Rd LLC 29,000,000 0.16% 29,580,000 0.16%
Alberto Way Holdings LLC 24,641,514 0.17% 24,896,799 0.17% Ann R. Desantis
A W Los Gatos LLC 26,749,500 0.16%
Boccardo Corporation 24,268,078 0.15%
CH Realty IV Downing LP
CHL Ventures LP
D&K Los Gatos LLC
David A. and Shari Flick Trustee
Donahue Schriber Realty Group LP 58,647,535 0.40% 59,255,121 0.41% 60,440,222 0.37% 61,649,025 0.35% 62,882,002 0.34% DS Downing Los Gatos LLC
DS Village Square
El Camino Hospital 42,611,768 0.29% 50,456,560 0.35% 43,379,731 0.26% 42,156,737 0.24% 75,699,788 0.41% EL Gato 15 LLC 36,719,999 0.21% 37,454,398 0.20%
Equestrian 3 Investments LLC 26,036,395 0.18% 26,306,130 0.18% 26,832,251 0.16% 27,368,894 0.16% 27,916,270 0.15% Fox Creek Fund LLC 27,231,335 0.19% 27,078,255 0.17% 28,331,465 0.16% Good Samaritan Hospital LP 23,846,402 0.16% 24,111,608 0.17% 24,569,780 0.15% Grade Way Associations VI
Green Eyes LLC
Grosvenor USA Ltd.

Health Care REIT Inc,
Hercules Holding II LLC
International Hotel 31,989,706 0.22%
Kay K. & Go Sasaki Sr., Trustee 27,190,951 0.19% 27,471,495 0.19% 28,020,326 0.17% 28,585,258 0.16% 29,151,822 0.16% Knowles Los Gatos LLC 54,032,455 0.37% 54,592,229 0.37% 55,684,072 0.34% 56,797,751 0.32% 57,933,704 0.31% KSL Capital Partners 33,118,759 0.23% 33,037,818 0.23% 32,098,542 0.20% 31,484,883 0.18% 34,126,554 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.

Lyon Baytree Apartments LLC
Paul H. Roskoph
Preylock Los Gatos LLC 95,880,000 0.66% 96,873,316 0.66% 98,810,782 0.60% 96,498,189 0.55% 98,428,152 0.53% Safeway Inc. 25,577,034 0.18%
San Jose Water Works 49,649,154 0.34% 53,320,614 0.37% 51,657,625 0.31% 52,511,158 0.30% 66,462,434 0.36% Serramonte Corporate Center LLC 208,958,729 1.43% 211,123,540 1.45% 215,346,008 1.31% 219,652,926 1.25% 224,045,983 1.21% SF Los Gatos LLC 33,214,527 0.23%
SHP Newark LLC 32,435,541 31,799,550 0.18% 32,435,541 0.18% SI 32 LLC 155,181,793 1.06% 158,132,236 1.08% 159,929,209 0.97% 163,243,322 0.93% 166,484,193 0.90% Sobrato Interests IV LLC 45,682,006 0.31% 46,155,127 0.32% 47,067,863 0.29% 48,004,098 0.27% 48,969,831 0.27% SRI Old Town LLC 34,884,999 0.24% 35,246,406 0.24% 35,951,333 0.22% 36,670,359 0.21% 37,403,765 0.20% Summerhill N40 LLC 57,369,661 0.39% 59,462,462 0.41% 71,006,795 0.43% 42,705,086 0.24% 28,816,212 0.16% Summerhill Prospect Avenue LLC
Wealthcap Los Gatos 121 118,093,347 0.81% 119,316,793 0.82% 121,703,128 0.74% 124,137,190 0.70% 126,619,932 0.69% Wealthcap Los Gatos 31
Oaks at Los Gatos LP 33,020,269 0.18%
Total - Principal taxpayers $ 1,175,222,251 8.05% $ 1,202,767,594 8.24% $ 1,245,442,767 7.39% $ 1,220,964,252 6.93% $ 1,274,828,938 6.90% Total - All real properties assessed by the Town (1) $14,598,027,652 $15,254,242,604 $16,403,289,146 $17,621,748,976 $18,476,773,592 (1) Assessed value includes only net secured real properties. (2) Excludes the value of tax-exempt properties
Source Data: California Municipal Statistics, Inc. Concluded 2020-21 2021-22 2022-23 2023-24 2024-25

ITEM NO. 7.

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 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 2025 18,178,096 - 18,178,096 18,804,806,873 2,238,952,783 21,043,759,656 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
$22.0
Billions
Value of Property
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
$15.0
$16.0
$17.0
$18.0
$19.0
Millions
Tax Levied

ITEM NO. 7.

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
2016 $ - $ - $ - $ - 0.0% 0.00
2017 $ - $ - $ - $ - 0.0% 0.00
2018 $ - $ - $ - $ - 0.0% 0.00
2019 $ - $ - $ - $ - 0.0% 0.00
2020 $ - $ - $ - $ - 0.0% 0.00
2021 $ 1,508,325 $ - $ 1,508,325 $ 1,508,325 56.2% 48.91 2022 $ 1,352,291 $ - $ 1,352,291 $ 1,352,291 44.3% 40.90 2023 $ 1,196,257 $ 594,934 $ 1,791,191 $ 1,791,191 52.0% 54.11 2024 $ 1,040,223 $ 1,083,158 $ 2,123,381 $ 2,123,381 53.0% 63.90 2025 $ 884,190 $ 871,479 $ 1,755,669 $ 1,755,669 43.7% 52.64 Governmental Activities

ITEM NO. 7.

Town of Los Gatos Schedule 10
Direct and Overlapping Governmental Activities Debt
As of June 30, 2025
2024-25 Assessed Valuation: $18,804,806,873 Estimated Share of Direct and
Total Debt at Overlapping Debt
DIRECT AND OVERLAPPING BONDED DEBT: % Applicable (1) June 30, 2025 at June 30, 2025 Overlapping Tax & Assesment Debt
Santa Clara County 2.704% $ 1,217,905,000 $ 32,932,151
West Valley-Mission Community College District 9.385% $ 631,255,000 $ 59,243,282 Campbell Union High School District 7.614% $ 318,105,000 $ 24,220,515 Los Gatos-Saratoga Joint Union High School District 36.825% $ 72,445,000 $ 26,677,871 Cambrian School District 0.464% $ 113,749,944 $ 527,800 Campbell Union School District 7.363% $ 240,714,324 $ 17,723,796 Los Gatos Union School District 74.199% $ 116,965,000 $ 86,786,860 Saratoga Union School District 0.048% $ 10,336,159 $ 4,961 Union School District 20.077% $ 134,454,631 $ 26,994,456 Midpeninsula Regional Open Space District 4.399% $ 114,920,000 $ 5,055,331 Santa Clara Valley Water District Benefit Assessment District 2.704% $ 24,940,000 $ 674,378 Total Overlapping Tax and Assesmet Debt $ 280,841,401
Overlapping General Fund Debt
Santa Clara County General Fund Obligations 2.704% $ 1,002,458,930 $ 27,106,489 Santa Clara County Pension Obligation Bonds 2.704% $ 317,654,990 $ 8,589,391 Santa Clara County Board of Education Certificates of Participation 2.704% $ 12,072,417 $ 326,438 West Valley-Mission Community College District General Fund Obligations 9.385% $ 2,520,000 $ 236,502 Campbell Union High School District General Fund Obligations 7.614% $ 12,500,000 $ 951,750 Campbell Union School District General Fund Obligations 7.363% $ 855,000 $ 62,954 Saratoga Union School District Certificates of Participation 0.048% $ 990,000 $ 475 Town of Los Gatos 100% $ 1,755,669 $ 1,755,669
Santa Clara County Central Fire Protection District Certificates of Participation 26.116% $ 26,475,000 $ 6,914,211 Midpeninsula Regional Open Space Park District General Fund Obligations 4.399% $ 74,065,600 $ 3,258,146 Total Gross Overlapping General Fund Debt $ 49,202,025
Less: Santa Clara County Supported Obligations $ 65,437 Total Overlapping General Fund Debt $ 49,136,588
Overlapping Tax Increment Debt ( Successor Agency)
Town of Los Gatos Certificated of Participations $ 8,530,000 Total of Overlapping Tax Increment Debt $ 8,530,000
Total Direct Debt $ 1,755,669
Total Gross Overlapping Dept $ 338,573,426
Total Net Overlapping Debt $ 338,507,989
Gross Combined Total Debt $ 338,573,426 (2)
Net Combined Total Debt $ 338,507,989
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non-bonded capital lease obligations.

Ratios to 2024-25 Assessed Valuation:

Total Overlapping Tax and Assessment Debt: 1.49%
Total Direct Debt: 0.01%
Gross Combined Total Debt: 1.79%
Net Combined Total Debt: 1.79%
Ratios to Redevelpment Incremental Valuation ( $1,992,831,755):

Total Overlapping Tax Increment Debt: 0.43%
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 district's total taxable asessed value.

ITEM NO. 7.

Town of Los Gatos Schedule 11
Legal Debt Margin Information,
Last Ten Fiscal Years
(In Thousands of Dollars)
Legal Debt Margin Calculation
for Fiscal Year 2024-25
Assessed Value
Debt Limit
Debt Applicable to Limit:

Legal Debt Margin
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Debt Limit $ 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 $ 2,820,721 Debt Applicable to Limit - - - - - - 1,352 1,196 1,040 884 Legal Debt Margin $ 1,444,943 $ 1,556,252 $ 1,679,736 $ 1,789,097 $ 2,076,329 $ 2,236,263 $ 2,332,699 $ 2,513,149 $ 2,707,363 $ 2,819,837 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% 0.06% 0.05% 0.04% 0.03% 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.

Fiscal Year
$ 18,804,806,873
2,820,721,031
-
$ 2,820,721,031

ITEM NO. 7.

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)
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 47.55 5,895 3.7%
2024 33,230 $ 4,006,242 120,561 47.03 5,856 4.1%
2025 33,355 $ 4,021,312 120,561 (7) 47.55 5,860 4.6%
Source and Footnotes:
(1) California State Dept. of Finance - Population Research Unit (January 2025) (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. (7) US Census data was unavailable. Prior fiscal year's per capita personal income used.

ITEM NO. 7.

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 3.53% 560 3.49% 560 3.43% 560 3.49% 560 3.49% Los Gatos Union School District 280 1.76% 274 1.71% 267 1.64% 281 1.75% 281 1.75% Los Gatos-Saratoga High School District 157 0.99% 370 2.30% 367 2.25% 367 2.28% 367 2.28% Netflix 1,976 12.45% 1,864 11.61% 2,117 12.98% 2,314 14.41% 2,314 14.41% Safeway 314 1.98% 314 1.95% 314 1.92% 314 1.95% 314 1.95% Alain Pinel Realtors 146 0.92% 148 0.92% 131 0.80% 131 0.82% 131 0.82% Courtside Tennis Club 440 2.77% 468 2.91% 542 3.32% 542 3.37% 542 3.37% Town of Los Gatos 158 1.00% 160 1.00% 159 0.97% 160 1.00% 160 1.00% Whole Foods 179 1.13% 179 1.11% 179 1.10% 125 0.78% 125 0.78% Vasona Creek Health Care Center 233 1.47% 233 1.45% 233 1.43% 233 1.45% 233 1.45% Good Samaritan Regional Cancer Center 200 1.26% 200 1.25% 200 1.23% 200 1.25% 200 1.25% Roku 487 3.07% 554 3.45% 664 4.07% 516 3.21% 516 3.21%
Terraces of Los Gatos 228 1.44% 228 1.42% 228 1.40% 228 1.42% 228 1.42% Source: Town of Los Gatos, Finance
Department and Muniservices Continued
2015-16 2016-17 2017-18 2018-19 2019-20

ITEM NO. 7.

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 3.35% 517 3.20% 509 3.04% 548 3.45% 556 3.48% Los Gatos Union School District 281 1.68% 281 1.74% 281 1.68% 287 1.81% 325 2.03% Los Gatos-Saratoga High School District 320 1.92% 320 1.98% 320 1.91% 320 2.01% 320 2.00% Netflix 2,524 15.11% 2,278 14.10% 2,263 13.53% 2444 15.39% 2503 15.65% Safeway 314 1.88% 314 1.94% 314 1.88% 314 1.98% 314 1.96% Alain Pinel Realtors 0.00% 0.00% 0.00% 0.00% 0.00%
Courtside Tennis Club 542 3.24% 542 3.36% 542 3.24% 342 2.15% 354 2.21% Town of Los Gatos 161 0.96% 165 1.02% 163 0.97% 165 1.04% 208 1.30% Whole Foods 125 0.75% 180 1.11% 132 0.79% 133 0.84% 140 0.88% Vasona Creek Health Care Center 250 1.50% 250 1.55% 250 1.49% 250 1.57% 250 1.56% Good Samaritan Regional Cancer Center 200 1.20% 200 1.24% 200 1.20% 111 0.70% 111 0.69% Roku 0.00% 0.00% 0.00% 0.00% 0.00%
Terraces of Los Gatos 228 1.36% 200 1.24% 200 1.20% 230 1.45% 230 1.44% Source: Town of Los Gatos, Finance
Department and Muniservices Concluded
2020-21 2021-22 2022-23 2023-24 2024-25

ITEM NO. 7.

Town of Los Gatos Schedule 14
Full-time-Equivalent Employees by Function/Program
Last Ten Fiscal Years
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Function/Program
General Government 20.97 21.35 21.97 22.16 21.80 21.80 22.06 22.05 22.06 23.06 Police 59.00 59.00 59.00 59.00 60.00 60.00 60.00 60.00 60.00 60.00 Economic Development 0.63 0.63 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 Library 11.00 12.25 12.25 12.50 12.50 12.50 12.50 13.50 13.50 13.50 Planning 19.00 19.26 19.63 20.08 20.08 20.20 20.20 20.20 20.45 20.45 Public Works 33.50 33.50 34.50 34.50 34.50 34.75 34.75 36.75 35.75 34.75 Total 144.10 145.98 148.10 148.99 149.63 150.00 150.26 153.25 152.51 152.51 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-46 of Town Budget FY 2024-25
Full-time-Equivalent Employees as of June 30

ITEM NO. 7.

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

FUNCTION/PROGRAM
General government 2015-16 2016-17 2017-18 2018-19 2019-20 Building Permits Issued
Residential Permits Issued 899 744 849 814 898
Residential Permits Value 85,000,754 53,625,891 63,083,249 80,030,846 47,961,529 Commercial Permits Issued 147 135 105 122 92
Commercial Permits Value 20,185,884 50,024,177 16,626,196 13,295,999 12,389,688 Publically Owned Permits Issued - - - - -
Publically Owned Permits Value - - - - -
Residential Parking Permits
Number of Special Event Permits Issued 107 118 113 78 - Number of Annual Permits Issued 1,363 1,251 1,342 1,395 1,400 City Clerk
Number of Council Resolutions Passed 61 69 69 59 57
Number of Ordinances Passed 11 5 17 11 24
Number of Contracts Passed 283 240 262 245 242
General Services
Number of Purchase Orders Issued 334 331 322 343 359
Police
Physical Arrests 987 1,030 1,164 1,138 616
Parking Violations 13,975 12,863 11,784 6,817 4,023
Traffic Violations 5,400 4,634 4,757 2,877 1,225
DUI Arrests 58 60 51 70 64
Library
Number of Library Visits - - - - -
Annual Circulation - - - - -
Number of Library Card holders - - - - -
Circulated e-audiobooks ( 7,761 10,006 8,844 12,130 57,839 Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles) 8.0 10.0 2.6 5.8 16.2 ADA Compliance: Curb Ramps 11 30 68 49 68
Traffic Circles 1 1 1 1 1
Street Poles 1,609 1,609 1,762 1,830 1,830
Planning and Development Department
Building & Safety Inspections Performed 8,655 14,722 13,918 13,966 13,633 Redevelopment: Number of active projects - - - - -
Source: Town of Los Gatos, Finance Department Continued Fiscal Year

ITEM NO. 7.

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

FUNCTION/PROGRAM
General government 2020-21 2021-22 2022-23 2023-24 2024-25 Building Permits Issued
Residential Permits Issued 1,128 1,144 1,118 957 912
Residential Permits Value 111,242,724 132,784,439 73,432,645 63,352,925 74,306,221 Commercial Permits Issued 68 117 84 62 68
Commercial Permits Value 37,285,259 23,442,964 19,422,918 31,245,689 28,715,444 Publically Owned Permits Issued - - - - -
Publically Owned Permits Value - - - - -
Residential Parking Permits
Number of Special Event Permits Issued - - - - - (1)
Number of Annual Permits Issued 1,568 1,958 1,827 1,847 2,204 City Clerk
Number of Council Resolutions Passed 50 64 71 69 53
Number of Ordinances Passed 9 14 10 14 15
Number of Contracts Passed 205 296 275 322 297
General Services
Number of Purchase Orders Issued 376 306 296 302 281
Police
Physical Arrests 360 504 522 642 635
Parking Violations 1,584 4,678 8,569 8,644 9,859
Traffic Violations 764 1,245 1,427 1,787 1,640
DUI Arrests 23 49 42 51 156
Library
Number of Library Visits - 150,198 206,874 249,120 250,527 (3) Annual Circulation - 432,707 397,517 422,733 484,462 (3) Number of Library Card holders - 29,322 29,815 33,551 34,048 (3) Circulated e-audiobooks ( 54,614 - - - - (2)
Other Public Works
Street Resurfacing/Overlay/Reconstruction (miles) 10.0 9.9 10.9 10.1 2.7 ADA Compliance: Curb Ramps 91 59 50 69 47
Traffic Circles 1 1 1 1 1
Street Poles 2,113 2,113 2,113 2,113 2,113
Planning and Development Department
Building & Safety Inspections Performed 13,806 16,906 16,641 14,696 14,560 Redevelopment: Number of active projects - - - - -
(3) New metrics being presented in FY 2021/22.

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

ITEM NO. 7.

Town of Los Gatos Schedule 16
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 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) 132 132 132 132 132 132 132 112 112 112 (1) Streetlights 1,609 1,609 1,762 1,830 1,830 2,113 2,113 2,113 2,113 2,113 Traffic Signals 30 30 30 31 31 31 31 31 31 31
Parks and Recreation
Number of Parks 12 12 12 N/A 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 17 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 N/A 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 1,269 1,269 1,269 1,269 1,269 1,269 1,269 Source: Town of Los Gatos, Finance Department
Fiscal Year

Commission (MTC) funded Pavement Technical
Assistance Program
(P-TAP) inventory for year 2022.

ITEM NO. 7.

Other Independent Auditor’s Reports

ITEM NO. 7.

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, 2025, 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 19, 2025.

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. 7.

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 19, 2025

ITEM NO. 7.

ITEM NO. 7.
1 of 4
Draft Resolution Date
ATTACHMENT 2
DRAFT RESOLUTION 2025-

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, committed, or unassigned 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, 2025, in the Nonspendable Reserve; and
WHEREAS, there exists a balance of $3,090,731 as of June 30, 2025, in the Restricted Pension Trust Reserve; and
WHEREAS, the Town Council of the Town of Los Gatos has established a General Fund Reserve Policy providing for minimum fund balance dollar target amounts for Budget Stabilization and Catastrophic fund balances and outlines policies and procedures for use and restoration of these balances; and
WHEREAS, the Budget Stabilization and Catastrophic Reserve should be maintained at the required minimum 12.5% of Fiscal Year (FY) 2025-26 general fund budgeted operating expenditures of $7,870,639 as specified in the Town Council General Fund Reserve Policy. This would increase both Budget Stabilization and Catastrophic Reserves from $6,736,781 by $1,133,858 from the available Capital/Special Projects Reserve; and
WHEREAS, in June 2016, the Town Council established the committed Pension/ Other PostEmployment Benefits (OPEB) Reserve to provide additional funding toward pension and OPEB

ITEM NO. 7.
2 of 4
Draft Resolution Date
ATTACHMENT 2
unfunded obligations by placing discretionary amounts into 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 in the CalPERS/OPEB Reserve from available year-end savings; and WHEREAS, there exists a balance of $1,300,000 as of June 30, 2025, 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 received in the General Fund Appropriated Reserve for capital purposes; 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, 2025, in the assigned Open Space Reserve; and
WHEREAS, the Town Council established the assigned Sustainability Reserve in FY 2008/09 by closing the Solid Waste Management fund and placing the initial residual balance dedicated for conservation, recycling, and sustainability; and
WHEREAS, there exists an excess balance of $140,553 as of June 30, 2025, 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 exists a current balance of $1,201,824 as of June 30, 2025, in the assigned Market Fluctuation Reserve; and
WHEREAS, there exists an assigned Carryover Encumbrances Reserve for material and services on purchase orders and contracts which are unperformed in the amount of $6,367; and WHEREAS, there exists an assigned General Fund Compensated Absences Reserve allocated to fund 50% of all vested hours of sick leave, compensation, and vacation time, with the actual reserve amount of $1,519,243; and

ITEM NO. 7.
3 of 4
Draft Resolution Date
ATTACHMENT 2
WHEREAS, there exists an assigned Capital/Special Projects Reserve to fund Council priorities, and key infrastructure and capital/special projects as identified in the Town’s five-year Capital Improvement Plan; and
WHEREAS, there exists an assigned Capital/Special Project Reserve in the amount of $1,983,271; and
WHEREAS, the remainder of the available year-end savings will be placed in the Unassigned Fund Balance according to the Town Council General Fund Reserve Policy; and WHEREAS, there exists an unassigned fund balance in the amount of $10,211,049; and

NOW, THEREFORE, THE TOWN COUNCIL OF THE TOWN OF LOS GATOS DOES HEREBY RESOLVE that the following fund balances as of June 30, 2025, are restricted, assigned, unassigned, or formally committed as follows:

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

Library - - 559,744 559,744
Capital Projects - - 8,719,695 8,719,695
Repairs and Maintenance - - 193,606 193,606
Pension 3,090,731 3,090,731
VTA - 263,061 - 263,061
Committed to:

Budget Stabilization 7,870,639 - - 7,870,639
Catastrophic 7,870,639 - - 7,870,639
CalPERS/OPEB 1,300,000 - - 1,300,000
Special Revenue Fund - 1,211,943 1,211,943
Measure G District Sales Tax - 1,376,181 - 1,376,181
Assigned to:

Open Space 410,000 152,000 - 562,000
Parking - 292,000 - 292,000
Sustainability 140,553 - - 140,553
Capital/Special Projects 1,983,271 14,760,358 - 16,743,629 Comcast PEG - 50,000 - 50,000
Carryover Encumbrances 6,367 - - 6,367
Compensated Absences 1,519,243 - - 1,519,243
Market Fluctuation 1,201,824 - - 1,201,824
Unassigned 10,211,049 - - 10,211,049
Total Fund Balances $ 35,763,316 $ 16,893,600 $ 10,684,988 $ 63,341,904

ITEM NO. 7.
4 of 4
Draft Resolution Date
ATTACHMENT 2
PASSED AND ADOPTED at a regular meeting of the Town Council held on the ____ day of __________, 2025, 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. 7.

Draft
ATTACHMENT 3

ITEM NO. 7.

Draft

ITEM NO. 7.

TOWN OF LOS GATOS

CALIFORNIA

ANNUAL COMPREHENSIVE

FINANCIAL REPORT

FOR THE FISCAL YEAR ENDED
JUNE 30, 2025

PREPARED BY THE

OFFICE OF THE TOWN MANAGER
Draft

ITEM NO. 7.

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 33,355. 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. 7.

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. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

TABLE OF CONTENTS

INTRODUCTORY SECTION:

Letter of Transmittal........................................................................................................................................... 1 Organization Chart ............................................................................................................................................. 6 Principal Officers................................................................................................................................................ 7 GFOA Award ..................................................................................................................................................... 8 FINANCIAL SECTION:

Independent Auditor’s Report........................................................................................................................... 12 Management’s Discussion and Analysis........................................................................................................... 17 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. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

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. 7.

INTRODUCTORY SECTION
Draft

ITEM NO. 7.

This Page Left Intentionally Blank
Draft

ITEM NO. 7.

Mayor and Town Council
November 24, 2025

November 24, 2025
Honorable Mayor and Town Council and Residents of Los Gatos, I ampleased to submitthe Town’s Annual Comprehensive Financial Report(ACFR)forthe fiscal year ending June 30, 2025. 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, 2025, along with additional disclosures and financial information designed to enable the reader to gain an understanding of the Town’s financial activities. Operating revenues remained stable, while development activity and investment performance provided additional funding capacity.

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

Draft

ITEM NO. 7.

Mayor and Town Council
November 24, 2025

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, 2024, was awarded a Certificate of Achievement for Excellence in Financial Reporting by the national Government Finance Officers Association. This is the 30th 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’s report 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 33,355 (California Department of Finance, January 2025). The growth over the last 80 years resulted in a community with vibrant business districts, well-maintained neighborhoods, and lovely parks and open spaces. Preserving the unique charm of Los Gatos as a complete and well-balanced community while meeting its economic and housing needs, has been, and remains a key goal for the Town.

The Town maintains a Council­Manager form of government which combines the strong political leadership of elected officials with the strong managerial experience of an appointed Town Manager. Five Council members are elected atlarge forstaggered four­yeartermsto govern the Town. The Mayor and Vice Mayor are appointed by the Council from its own ranks and serve one-year terms. 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 including Human Resources, Information Technology, and Finance.

ECONOMIC CONDITIONS AND OUTLOOK
This past year, the Town continued to see increases in economically sensitive revenues. The Town General Fund closed FY 2024-25 with $5.7 million in revenue over expenditure before transfers. The excess revenue includes $1.2 million unrealized gain in the Town investment portfolio. The General Fund Balance increased $4.7 million.

General Fund revenues (not including transfers in other financing sources) increased 7.7% from the prior year. Property tax revenues remain the largest and most consistent source of support for General Fund operations, comprising approximately 43.8% of General Fund revenues in FY 2024-25 For FY 2024-25, property tax receipts of $25.3 million were $1.0 million higher than the prior year’s Draft

ITEM NO. 7.

Mayor and Town Council
November 24, 2025

collection, reflecting the continued desirability of the Town, its environment, culture, and educational opportunities
The Town also depends on sales tax revenues to fund General Fund operations, which made up about 14.4% of total General Fund revenues in FY 2024–25. Sales tax receipts for the year reached $8.3 million, a $0.3 million increase from the previous year, indicating modest growth. This trend reflects broader changes in the local economy and shopping habits, such as increased use of electric vehicles, which has led to decreased fuel purchases.

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 for three fiscal years. Salaries increased $0.8 million from the prior year. While important for the consistent delivery of high quality services for the Town, these actions impact the balance between ongoing revenues and expenditures. Due to conservative fiscal practice and significant salary savings, General Fund expenditures were lower due to salary savings; however, not every department was able to achieve the targeted 4.6% vacancy savings. As the Town continues successful hiring, tradeoffs to achieve projected savings will be necessary should a 4.6% vacancy factor not be achievable. In addition, non-pension benefits increased by $0.7 million, primarily due to rising costs associated with health insurance, and related employee benefit programs. These increases are reflected in the overall personnel expenditures and contribute to the year-over-year variance.

The Town also continues to adjust and prepare for pension employer coststo continue to be a primary expense in conjunction with salaries. Pension-related benefits increased by $0.8 million compared to the previous year.

For the year ended June 30, 2025, the Town recognized a pension expense of $12 million compared to $11.2 million in the prior fiscal year. 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) obligations for the Town. According to the 2024 CalPERS actuarial valuations, the unfunded actuarial liability for pensions was $ 62.2 million and $7.5 million for OPEB, as determined by an actuarial valuation as of June 30, 2023.

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 should 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 $30.3 million in OPEB assets from zero in 2009.

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 FY 2020-21 and decreasing to $27.48 million in FY 2021-22. The NPO reported in this year’s financial statements (ACFR 2024-25) has decreased 2.5% from $63.0 million to the current NPO of $61.4 million. Due to Draft

ITEM NO. 7.

Mayor and Town Council
November 24, 2025

CalPERS preliminary returns of 11.6% for FY 2024-25, 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 actuarialmethods 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. This sensitivity to changes in actuarial assumptions is especially evident in changes to the Discount Rate asillustrated 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 Notes to 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
During FY 2024-25, the Town continued its focus on long-term infrastructure renewal. Approximately $16.5 million was invested in capital projects, including $8.5 million in construction in progress, $4.2 million in street improvements, $2.5 million in other infrastructure, and $1.3 million in facility and equipment upgrades. These investments reflect the Town’s strategy of translating accumulated reserves and grant funding into tangible 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 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.

Draft

ITEM NO. 7.

Mayor and Town Council
November 24, 2025

The concept of reasonable assurance recognizes that the cost of internal controls should 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 is incurred, 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 of the Town’s accounts by independent certified public accountants. The accounting firm of Chavan & Associates LLP performs this function for the Town of Los Gatos, and their report is included in the financial section of the ACFR.

ACKNOWLEDGEMENTS
The preparation of this Annual Comprehensive Financial Report, as presented herein, is the result of the combined efforts and dedicated services of the excellent staff of the Department of Finance. Special thanks to Eric Lemon, Finance and Accounting Manager; Eagled’Or Am, Accountant; Ed Karas, Accountant; Diane Howard, Division Manager; Melissa Ynegas, Senior Administrative 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,
____________________________________ ____________________________________ Chris Constantin Gitta Ungvari
Town Manager Director of Finance
Chris Constantin Gitta Ungvari
Draft

ITEM NO. 7.

Town of Los Gatos
Organizational Structure
Draft

ITEM NO. 7.

TOWN OF LOS GATOS

PRINCIPAL OFFICERS
JUNE 30, 2025

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

COUNCIL APPOINTEES
Town Manager Chris Constantin
Town Attorney Gabrielle Whelan

APPOINTED OFFICIALS
Assistant Town Manager Katy Nomura
Chief of Police Jamie Field
Community Development Director Joel Paulson
Parks and Public Works Director Nicolle Burnham
Library Director Ryan Baker
Finance Director Gitta Ungvari
Human Resources Director Cheryl Parkman
Draft

ITEM NO. 7.

Draft

ITEM NO. 7.

This Page Left Intentionally Blank
Draft

ITEM NO. 7.

FINANCIAL SECTION
Draft

ITEM NO. 7.

This Page Left Intentionally Blank
Draft

ITEM NO. 7.

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, 2025, 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, 2025, 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. 7.

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.

Draft

ITEM NO. 7.

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 19, 2025 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 19, 2025
Morgan Hill, California
Draft

ITEM NO. 7.

This Page Left Intentionally Blank
Draft

ITEM NO. 7.

Management’s Discussion and Analysis
Draft

ITEM NO. 7.

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, 2025. 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) 2024-25 by $166.7 million (net position). The unrestricted net position, which represents the amounts available to meet the Town ongoing obligations to citizens and creditors, is $8.7 million.
• The Town’s total net position increased by $7.3 million in FY 2024-25. The overall increase of $7.3 million is primarily due to the combined effects of the $7.5 million increase in Capital Assets infrastructure capitalization and changes in pension expense, $7.8 million decrease in Deferred Outflows, and $1.8 million decrease in Deferred Inflows related to Pension and OPEB expenses; and $5.3 million decrease in liabilities. These combined changes reflect the Town’s continued investment in infrastructure and the impact of variability in net pension and OPEB obligations. This variability is influenced by the difference between the plans’ actual investment earnings and the assumed rate of return during the measurement period.
• At the close of the current fiscal year, the Town’s governmental funds reported combined fund balances of $63.3 million, an increase of $2.3 million in comparison with the prior year. Of this amount, $10.4 million, is available for spending at the Government’s discretion (unassigned fund balance).
• During FY 2024-25, the General Fund had an excess of revenues over expenditures of $5.7 million, excluding transfers. Transfers out exceeded transfers in by $1.0 million. The principal purpose of the Town’s interfund transfers was contributions toward capital projects ($1.8 million) and general liability ($0.1 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, assigned, and unassigned components of the fund balance) for the general fund was $32.5 million, or approximately 63% 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.

Draft

ITEM NO. 7.

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 Government-Wide Financial Statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business– type activity). The governmental activities of the Town include public safety, parks and public works, community development, library, community services, debt service, and general government.

Governmental activities typically include financial data for all governmental funds. Internal service funds are typically incorporated into governmental activities as well. Business-type activities typically include financial data for all enterprise funds. The Town has no enterprise funds and therefore reports no business-type activities.

Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town, like other local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The funds of the Town are segregated into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental funds – The Town’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending.

These funds are reported using the modified accrual basis of accounting, which measures cash and other financial assets that can readily be converted to cash. The Governmental Fund Statements provide a detailed short-term view of the Town’s general government operations and the basic services it provides.

Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near 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 Draft

ITEM NO. 7.

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 Town's financial statements as a whole, using data from throughout the ACFR to describe changes between 2024 and 2025.

Draft

ITEM NO. 7.

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 $166.7 million, reflecting an increase of approximately $7.3 million to the prior year’s net position of $159.4 million.

Capital assets increased $7.5 million to $146.8 million for the year, reflecting the 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 $7.8 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 decreased by $3.7 million. The overall change is mainly due to a net pension liability decrease of $1.6 million and a reduction in net OPEB liabilities of $1.5 million, driven by higher current investment earnings for CalPERS than the 6.9% discount rate. See Note 11 and Note 12 in the Notes to the Financial Statements for more details on the Town’s pension and OPEB plans.

Deferred Inflows decreased by $1.8 million, mainly due to the difference between projected investment returns and actual investment earnings on pension and OPEB investments. The decreases consisted of pension inflows of $0.9 million, the OPEB plan of $0.6 million, and leases of $0.3 million. 2025 2024
Current and other Assets $ 94,529,842 $ 93,959,415
Capital Assets 146,834,839 139,376,963
Total Assets $ 241,364,681 $ 233,336,378
Deferred Outflows - Pension/OPEB 21,188,217 28,973,675
Current Liabilities 19,655,539 21,254,648
Long-Term Liabilities Outstanding 73,597,018 77,271,453 Total Liabilities $ 93,252,557 $ 98,526,101
Deferred Inflows - Pension/OPEB 2,611,631 4,377,735
Net Position
Net Investment in Capital Assets 145,079,170 137,253,582 Restricted 12,933,419 13,015,461
Unrestricted 8,676,121 9,137,174
Total Net Position $ 166,688,710 $ 159,406,217
Town of Los Gatos
Net Position
Governmental Activites
For the Year Ended June 30, 2025
Draft

ITEM NO. 7.

The largest segment of the Town’s net position, representing $145.1 million, reflects the net investment in capital assets (e.g., land, buildings, infrastructure, subscriptions, 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 to fund current obligations.

The chart below shows the Town’s net position for the fiscal year ended June 30, 2024 and 2025.

Restricted net position totaled approximately $12.9 million, representing approximately $9.0 million for capital projects and maintenance, $3.1 million for restricted pension trust, $0.6 million placed in a special revenue trust account for Library services, and $0.2 million for Lighting and Landscaping Assessment Districts.

As of June 30, 2025, the unrestricted net position, the amounts available to meet the Town’s ongoing obligations to citizens and creditors, reports an approximate $0.5 million decrease from the prior year to an ending balance of $8.7 million.

The Town’s overall net position increased $7.3 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
2025 2024
Draft

ITEM NO. 7.

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 $70 million in Governmental Activities revenues and contributions were derived. Approximately $17.9 million or 25.6% of the revenues were recorded from fees paid by residents/businesses who directly benefited from the respective program or service.

Another $9.8 million or 14.0% of the revenues were sourced from operating/capital grants and contributions. The remaining $42.3 million or 60.4% represents general revenues of the Town, including taxes, intergovernmental revenues, and other miscellaneous revenues. 2025 2024
Revenues:

Program revenues:

Charges for Services $ 17,919,376 $ 13,495,756
Operating Grants and Contributions 3,098,154 3,667,909
Capital Grants and Contributions 6,710,310 5,668,252
General Revenues:

Property Taxes 25,252,782 24,224,142
Sales Taxes 8,330,978 8,071,735
Franchise Taxes 1,057,483 2,547,011
Transient Occupancy Taxes 2,417,630 2,367,653
Other Taxes 50,036 55,196
Motor Vehicle in Lieu 52,733 41,461
Developer Assessment 12,880
Investment Earnings 2,581,393 1,417,370
Unrealized gains (losses) 1,201,824 1,712,246
Miscellaneous 1,341,229 1,199,422
Total Revenues 70,013,928 64,481,033
Expenses:

Police Department 24,095,151 23,783,313
Parks and Public Works 17,745,141 14,075,171
General Government 11,122,319 11,113,238
Community Development 5,734,087 5,481,765
Library Services 3,716,806 3,853,748
Sanitation 276,528 263,706
Interest and Fees 41,403 26,137
Total Expenses 62,731,435 58,597,078
Change in Net Position 7,282,493 5,883,955
Net Position - Beginning 159,406,217 153,522,262
Net Position, Ending $ 166,688,710 $ 159,406,217
Town of Los Gatos
Statement of Activities
For the Year Ended June 30, 2025
Draft

ITEM NO. 7.

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 2023-24 and FY 2024-25.

Total Government-Wide Revenues increased by $5.5 million. $0 $5 $10 $15 $20 $25 $30
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
Millions
Government Wide Revenues
2025 2024
Draft

ITEM NO. 7.

Program revenues increased by approximately $4.9 million compared to the prior fiscal year. A key component of this increase—$1.5 million—is due to a reclassification of fees collected from the garbage hauler company. In FY 2023–24, these fees were reclassified from franchise fees to license and permit fees as a result of changes in the JPA agreement, and are now reported under the Charges for Services category in the Statement of Activities. This reclassification resulted in a $1.5 million decrease in franchise fees and a corresponding $1.5 million increase in Charges for Services, with no net change in total collections from the garbage hauler company; however, it does affect year-over-year comparability. The remaining $2.9 million increase in program revenues is primarily attributable to a $1.5 million increase in business license tax collections, due to timing differences in license payments crossing fiscal years, and a $1.7 million increase from increased development activity, partially offset by a $0.3 million decrease in revenues from street sweeping and crossing guard services, which were contracted out in FY 2024–25.

The majority of this increase, $4.4 million, was due to higher charges for services driven by a rise in development activity and increased encroachment fee collections from the Town’s garbage hauler.

Additionally, the Town received an additional $1.0 million in capital grants, including funding for the Los Gatos Creek Trail to Highway 9 Trailhead Connector project. These gains were partially offset by a $0.6 million decrease in operating grants and contributions, reflecting reduced availability of operating grant funding in the current year.

The Town’s general revenues related to governmental activities increased by approximately $0.6 million compared to the prior year. This increase was primarily driven by a $1.0 million rise in property tax revenues, a $0.7 million increase in investment earnings, including mark-to-market adjustments on the Town’s investment portfolio—and a $0.3 million increase in sales tax collections. These gains were partially offset by a $1.5 million decrease in franchise fee collections. Starting in March 2024, due to a change in the JPA agreement, Garbage Franchise Fees were categorized as Licenses and Permits under Charges for Services. The total amount of the Encroachment Fee was $2.3 million in FY 2024-25 and $0.8 million in FY 2023-24.

Property tax is the Town's largest individual revenue source, and collections for the year were $1.0 million more than the previous year. This increase was primarily due to a $0.8 million rise in general property tax collection and a $0.2 million increase in the Vehicle License Fee (VLF) Property Tax In-Lieu fee. It is important to note that assessed valuations for FY 2024-25 were established on the tax roll in January 2024 and collected during FY 2024-25.

Sales taxes totaled $8.3 million for the fiscal year, making them the second-largest individual General Fund revenue source for the Town. This represents an increase of $0.3 million from the prior year. The modest growth reflects stable sales tax collections from business-to-business transactions. Additionally, reduced activity at gas service stations, attributed to the growing adoption of electric vehicles—also contributed to the slower pace of sales tax growth.

Franchise taxes finished the year at $1.1 million, reflecting a decrease of $1.5 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.

Investment earnings for the fiscal year ended June 30, 2025, totaled $2.6 million, representing an increase of $1.2 million from the prior year. This growth reflects improved interest income from the Town’s Draft

ITEM NO. 7.

investment portfolio, due to a higher interest rate environment. Additionally, the Town recorded $1.2 million in unrealized gains from mark-to-market adjustments, which, while positive, were $0.5 million lower than the prior year’s unrealized gains of $1.7 million. Overall, the combined increase in realized earnings and moderate unrealized gains contributed positively to the Town’s general revenues and financial position. The $1.2 million unrealized gain is an increase in the value of the asset that has not been sold and is not available for spending.

Miscellaneous Revenue increased by $0.1 million from the prior year. This category includes many different items, primarily $0.5 million in revenue recognized for Capital Projects, received through developer contributions and cost-sharing agreements with local governments and utility companies.

Additionally, the Town received $0.4 million in insurance reimbursements related to property damage and workers’ compensation claims. Another $0.2 million was contributed by nonprofit organizations, including the Friends of the Library and the Police Foundation.

Governmental Activities Expenses Discussion
The chart below summarizes the Town’s government-wide expenses for the FY 2023-24 and FY 2024-25.

The Town provides residents, businesses, and visitors with an array of high-quality municipal services.

General government strategic support comprises seven Departments (Town Council, Town Clerk, Town Manager, Town Attorney, Human Resources, Information Technology, and Finance) that provide information technology, executive management, economic vitality, legal services, 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. The Parks and Public Works Department provides $0 $10 $20 $30
General government
Public safety
Parks and public works
Community development
Library services
Sanitation
Interest and fees
Millions
Government Wide Expenses
2025 2024
Draft

ITEM NO. 7.

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 for the year, as reported in the Statement of Activities, were $62.7 million, an increase of $4.1 million from the prior year’s total of $58.6 million. The primary driver of this increase was in $3.5 million in capital expenses in the capital program that did not meet the criteria for capitalization is not capitalizable and reported under Parks and Public Works expenses in the Statement of Activities. These expenditures included costs related to vegetation management, implementation of the parking program, and the creation of storm drain system maps.

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 $12.8 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 $12.8 million restricted fund balance, $9.0 million is restricted for capital projects, $3.1 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 $19.3 $19.6 million in fund balance classified as committed to indicate that the Town Council previously committed how the money will be spent. Of the $19.3 million, $15.8 million is for budget stabilization ($7.9 million) and catastrophe response ($7.9 million).

Assigned Fund Balance – The Town has $20.7 $20.5 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 $2.0 million and the Capital Projects Reserve of $16.7 million which are the primary funding sources for the Town’s five-year capital improvement plan and special projects as budgeted by the Town.

Unassigned Fund Balance – The Town has $10.4 $10.2 million in fund balance is available for spending at the Government’s discretion.

Draft

ITEM NO. 7.

The chart below shows the Town’s governmental fund balances for the fiscal year ended June 30, 2024 and 2025.

Additional information on the Town’s Fund Balance can be found in Note 10 of the Notes to the Financial Statements.
$0 $10 $20 $30
Nonspendable
Restricted
Committed
Assigned
Unassigned
Millions
Governmental Funds
Components of Fund Balances
2025 2024
Draft

ITEM NO. 7.

Total Governmental Funds results for the year included the following:

REVENUES 2025 2024
Property Taxes $ 25,305,515 $ 24,265,603
Sales Taxes 8,330,978 8,071,735
Transient Occupancy Taxes 2,417,630 2,367,653
Other Taxes 27,520 30,358
Licenses & Permits (1) 10,077,688 6,227,298
Intergovernmental 11,038,323 6,317,644
Charges for Services 6,648,503 7,051,179
Fines and Forfeitures 420,127 480,634
Franchise Fees (1) 1,057,483 2,547,011
Developer Assessment - 12,880
Interest 3,783,218 3,108,100
Use of Property 442,078 297,501
Other 748,259 604,493
Total Revenues $ 70,297,322 $ 61,382,089

EXPENDITURES
Current:

Public Safety $ 20,827,888 $ 20,718,781
General Government 10,884,414 9,573,022
Parks and Public Works 10,828,974 9,899,083
Community Development 5,637,742 5,246,729
Library Services 3,651,358 3,335,389
Sanitation and Other 274,188 252,605
Capital Outlay 15,545,674 12,366,255
Debt Service
Principal 206,380 225,370
Interest and Fees 41,403 3,716
Total Expenditures $ 67,898,021 $ 61,620,950
Excess Revenues over Expenditures $ 2,399,301 $ (238,861) Subscriptions - 706,713
Proceeds from sales of assets - 223
Transfers in 2,595,491 3,666,235
Tranfers out (2,655,491) (4,317,235)
Total Other Financing Sources (Uses) $ (60,000) $ 55,936 Net Changes in Fund Balances 2,339,301 (182,925)
Beginning/Ending Fund Balances $ 61,002,603 $ 61,185,528 Ending Fund Balances $ 63,341,904 $ 61,002,603

TOWN OF LOS GATOS

TOTAL GOVERNMENTAL FUNDS REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2025
(1) Starting in March 2024, due to a change in the JPA agreement, Garbage Franchise Fees were categorized as Licenses and Permits. The total amount of the Encroachment Fee was $2.3 million in FY 2024-25 and $0.8 million in FY 2023-24
Draft

ITEM NO. 7.

Total Governmental Funds revenues increased by $8.9 million, or 14.5%, compared to the prior year, primarily due to higher capital grant activity and increased collections from property taxes, interest income, sales taxes, and business license taxes. On the expenditure side, total spending rose by $6.3 million, or 10.2%, mainly driven by a $3.2 million increase in capital outlay, a $2.3 million rise in salaryies ($0.8 million) and benefits ($1.5 million) costs, and $0.9 million in additional internal service charges combined with operational changes.

General Fund revenues totaled $57.7 million, or nearly 82.1% of the total $70.3 million in Total Governmental Fund revenues, compared to $53.5 million of General Fund revenues and total Governmental Funds revenues of $61.3 million in the prior year.

General Fund expenditures represent approximately $51.9 million or 76.5% of the Total Governmental Fund expenditures of $67.9 million compared to $49.5 million of General Fund expenditures and total Governmental Funds expenditures of $61.6 million in the prior year.

Public Safety expenditures increased by approximately $0.1 million compared to the prior year. The net increase is the result of a $0.6 million decrease in salaries, offset by a $0.4 million increase in pension costs and a $0.3 million increase in non-pension benefits, such as health insurance. This modest change reflects increases in negotiated salary and benefits offset by an increased number of vacancies and additional operational savings the Department achieved in the current fiscal year, which were not at the same level in the previous year.

General Government, Public Works, Community Development, and Library services expenditures increased by $2.9 million compared to the prior year, primarily due to higher personnel and operational costs. This included $2.3 $0.8 million in salaryies and $1.5 million in benefitsincreases, $0.3 million in legal service expenses, and $0.3 million in post-retirement benefit obligations. These increases were partially offset by some operational savings.

Appropriated Reserves Fund capital projects fund balances decreased $2.2 million from the prior year to $16.9 million, reflecting increased capital activity during the fiscal year. The $3.3 million general government and capital outlay expenditures above operating revenues was offset by $1.1 million from other financing sources.

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

Total net position in the Internal Service Funds increased by $1.2 million due to increases in general fund support and program charges for services to cover workers’ compensation, information technology, and general liability costs including administration, insurance premiums, and claims expense.

Draft

ITEM NO. 7.

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

Changes to the Original Budget
As noted in the above chart, comparing the FY 2024-25 original budget (i.e., the Adopted Budget) General Fund revenues of $53.1 million to the final adjusted budget of $53.9 million indicates a net increase of approximately $0.8 million or 1.4%. Additions to the original revenue budget included adjustments approved by Town Council throughout the fiscal year.
$0
$5
$10
$15
$20
$25
$30
Millions
Variances between the Original Budget, Final Budget, and Actuals - General Fund Revenues Original Budget
Final Budget
Actual
$0
$5
$10
$15
$20
$25
Millions
Variances between the Original Budget, Final Budget, and Actuals - General Fund Expenditures Original Budget
Final Budget
Actual
Draft

ITEM NO. 7.

The increase in General Fund revenue appropriations occurred primarily from the following sample of revenue budget adjustments made during the fiscal year:
• $0.4 million revenue increases for charges for services including $0.3 million for plan check fees; • $0.8 million revenue budget for licenses & permits including $0.4 million for business license taxes and $0.3 million for planning permit fees;
• $0.3 million revenue budget for grant receipts with matching expenditures.

As shown in the chart on the previous page, comparing the FY 2024-25 original budget (i.e. the Adopted Budget) General Fund expenditures of $52.5 million (excluding budgeted transfers-out and debt payments that are reimbursed) to the final adjusted budget of $55.6 million indicates a net increase of approximately $3.1 million or 6.0%. Additions to the original expenditure budget included adjustments approved by Town Council throughout the fiscal year.

The increase in General Fund expense appropriations occurred primarily from the following sample of budget adjustments made during the fiscal year.
• $1.0 million increase in expenditure budget 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; • $1.9 million expenditure increase for salaries and benefits related charges including budget restoration of $0.3 million for individual departments that were fully staffed and did not experience the full preplanned 4.6% salary savings factor and $1.6 million for negotiated salaries and benefits and temporary staff augmentation, since agreements were finalized after the budget adoption; and
• $0.3 million 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, 2025, reports an approximate favorable variance overall with the final budget of approximately $7.4 million. During FY 2024-25, the General Fund had an excess of revenues over expenditures of $5.7 million, excluding transfers. This favorable variance was created largely by the net effect of the following factors:
• Actual revenues for the fiscal year ended June 30, 2025, exceeded final budgeted projections by $3.8 million. This favorable variance was primarily driven by high interest rates and unrealized gains resulting from the requirement to value current investments at market value as of June 30, as well as stronger-than-anticipated sales tax and business license collections reflecting increased consumer spending. Additionally, the Town experienced higher revenues from licenses, permits, and related service charges, largely due to a surge in development-related activity and an increase in engineering, building, and planning permit submittals.
• On the expenditure side, actual spending was $3.6 million below the final budgeted amounts, mainly due to $1.8 million in Town-wide savings on salaries and benefits resulting from short-term vacancies, especially in the Police ($1.5 million) and Parks and Public Works ($0.2 million), and Administrative Services ($0.1 million) Departments. Additional savings of $1.8 million were achieved across various expenditure categories town-wide, reflecting ongoing fiscal discipline and effective budget management.

Draft

ITEM NO. 7.

CAPITAL ASSETS
As of June 30, 2025, the Town’s investment in capital assets for its governmental activity is recorded at $146.8 million(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. Net capital assets increased by $7.5 million, reflecting $16.5 million in capital additions which were offset by $5.3 million in net depreciation and $3.7 million in deletions for the year.

Notable additions include:
• $8.5 million addition to construction in progress
• $4.2 million in street repair and resurfacing, and curb and gutter work; and • $2.5 million in other infrastructure, including $2.3 million in traffic signal work; and • $1.3 million in land, building improvements, and equipment acquisitions.

The $8.5 million addition to construction in progress is comprised of $4.7 million for pathways projects, $2.2 million for streets and curbs improvements, $0.6 million for land and building improvements, $0.6 million for bridges, $0.4 million for equipment, retaining walls, traffic signals, parking lots, and park improvements.

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

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 $0.9 million at 6/30/2025. The longterm debt in the Successor Agency Trust Fund is related to the 2002 COP and 2010 COP, totaling $8.5 million. Additional information on the Town’s Long-Term Debt is found in Note 7 of this Financial Report.

Capital Assets
Accumulated
Depreciation
Capital
Asstes, Net
Infrastructure - Streets $ 89,745,124 $ 43,187,417 $ 46,557,707 Infrastructure - All Other 31,619,016 11,431,646 20,187,370 Subscription Right of Use Assets 1,622,573 695,605 926,968 Buildings 43,021,401 13,259,105 29,762,296
Land 26,105,392 - 26,105,392
Equipment 13,515,875 11,078,952 2,436,923
Construction in Progress 20,858,183 - 20,858,183
$ 226,487,564 $ 79,652,725 $ 146,834,839
Capital Assets
Town of Los Gatos
For the Year Ended June 30, 2025
Draft

ITEM NO. 7.

ECONOMIC FACTORS, NEXT YEAR’S BUDGET, AND RATES
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 2025-26 budget projections are based on economic trends and forecasts specific to the Town Geographic area. These estimates, informed by local data from the County of Santa Clara and consultants such as Avenu Insights & Analytics and HdL Coren & Cone 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 2024-25 fiscal year, the Town-wide Statement of Activities reported an increase in net position of $7.3 million, a measure of the change in the value of assets impacted by Town operations during the year. This net position includes $3.8 million from investment earnings, driven by higher than usual interest rates and including $1.2 million unrealized gains, which are not available to spend, due to the requirement to value current investments at market value as of June 30. Additionally, conservative budgeting and operations resulted in revenue exceeding budget estimates and expenditures coming in below projections contributing to this positive change.

This increase in net position reflects a broader trend, with seven 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 as well as needs to address wildfire risk will substantially impact future financial performance. Further, the potential consolidation of the police department is also not considered in standards or the Town’s Capital Improvement Program. Rising costs in key Town operations and contracted services also pose challenges that could outpace revenue growth. Despite our stable current 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 this year, 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 in recent years. The competitive Silicon Valley market and increasing regulatory requirements on local governments also drive up the cost of services and materials.

Draft

ITEM NO. 7.

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. Further, the Town does not have identified resources to address a recommended police station consolidation, Town Hall replacement/rehabilitation, or to fully implement its various plans, such as the Bicycle and Pedestrian Master Plan or Senior Roadmap.

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. While the Town is benefiting today, an economic reversal can have the same negative impact.

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 good 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 as well as address future capital, wildfire, and other capital needs not currently scheduled in a five-year Capital Improvement Program. Our goal is to preserve the exceptional quality of life in our community through prudent and strategic financial management. To strengthen the Town’s long-term financial sustainability and provide strategic insights to the Council, the Town is collaborating with an independent consultant to perform a Fiscal Condition Analysis, Fiscal Impact Analysis, and Asset-Liability Management Studies." 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.

In considering the capital intensive needs of buildings, infrastructure, and disaster mitigation, a longer view of financial condition and outlook is necessary.

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.

Draft

ITEM NO. 7.

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.

Draft

ITEM NO. 7.

Basic Financial Statements
Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

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.

Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

STATEMENT OF NET POSITION
JUNE 30, 2025

Governmental
ASSETS Activities
Cash and investments $ 80,767,941
Restricted cash and investments 3,255,657
Receivables:

Accounts 2,572,019
Interest 608,320
Intergovernmental 4,528,496
Other assets 160,769
Long-term leases receivable 1,498,888
Long-term notes receivables 1,137,752
Capital Assets:

Nondepreciable 46,963,575
Depreciable, net of accumulated depreciation 99,871,264 Total Assets $ 241,364,681

DEFERRED OUTFLOWS OF RESOURCES
Pension adjustments $ 16,912,258
OPEB adjustments 4,275,959
Total Deferred Outflows of Resources $ 21,188,217

LIABILITIES
Accounts payable $ 3,931,301
Accrued payroll and benefits 915,225
Interest payable 12,795
Due to other governments 94,423
Unearned Revenue 7,764,914
Deposits 5,568,952
Claims payable 1,367,929
Long-term liabilities:

Due within one year
Compensated absences 484,551
Subscription liabilities 226,457
Loans payable 156,034
Due in more than one year
Net OPEB liability 7,489,653
Net pension liabilities 61,403,352
Compensated absences 2,463,793
Subscription liabilities 645,022
Loans payable 728,156
Total Liabilities $ 93,252,557

DEFERRED INFLOWS OF RESOURCES
Leases 880,290
Pension adjustments 809,411
OPEB adjustments 921,930
Total Deferred Inflows of Resources $ 2,611,631

NET POSITION
Net investment in capital assets $ 145,079,170
Restricted for:

Library 559,744
Capital projects 8,719,695
Lighting and landscape repairs and maintenance 193,606
Pensions 3,090,731
VTA 263,061
Worker's compensation claims 106,582
Total Restricted Net Position 12,933,419
Unrestricted 8,676,121
Total Net Position $ 166,688,710
The notes to the financial statements are an integral part of this statement.

Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

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 $ 11,122,319 $ 5,809,508 $ 112,216 $ 5,921,724 - $ $ (5,200,595) Public safety 24,095,151 1,793,058 869,926 2,662,984 - (21,432,167) Parks and public works 17,745,141 4,095,474 1,902,414 6,710,310 12,708,198 (5,036,943) Community development 5,734,087 6,055,131 95,126 6,150,257 - 416,170 Library services 3,716,806 2,515 118,472 - 120,987 (3,595,819) Sanitation 276,528 163,690 - - 163,690 (112,838)
Interest 41,403 - - - - (41,403)
Total Governmental Activities $ 62,731,435 $ 17,919,376 $ 3,098,154 $ 6,710,310 $ 27,727,840 (35,003,595) General revenues:

Taxes:

Property taxes 25,252,782
Sales taxes 8,330,978
Franchise taxes 1,057,483
Transient occupancy taxes 2,417,630
Other taxes 50,036
Motor vehicle in lieu 52,733
Investment earnings:

Investment earnings 2,581,393
Unrealized gains (losses) 1,201,824
Miscellaneous 1,341,229
Total general revenues 42,286,088
Change in Net Position 7,282,493
Net Position - Beginning 159,406,217
Net Position - Ending $ 166,688,710
The notes to the financial statements are an integral part of this statement.

Program Revenues
Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

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, 2025.

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. 7.

TOWN OF LOS GATOS, CALIFORNIA

GOVERNMENTAL FUNDS

BALANCE SHEET
JUNE 30, 2025

Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds
ASSETS
Cash & investments $ 38,724,248 $ 21,849,987 $ 10,521,798 $ 71,096,033 Restricted cash & investments 3,090,731 - 58,344 3,149,075 Receivables:

Accounts 1,842,977 423,390 211,164 2,477,531
Interest 608,320 - - 608,320
Intergovernmental 2,162,657 2,281,498 84,341 4,528,496
Other assets 160,769 - - 160,769
Leases receivable - 55,629 225,652 281,281
Long term note receivable 1,059,000 - 78,752 1,137,752
Total Assets $ 47,648,702 $ 24,610,504 $ 11,180,051 $ 83,439,257

LIABILITIES
Accounts payable $ 1,280,057 $ 2,080,943 $ 292,940 $ 3,653,940 Accrued payroll and benefits 912,732 - 2,493 915,225
Due to other governments 94,337 - - 94,337
Unearned revenue 4,029,308 3,670,811 64,795 7,764,914
Deposits 5,568,952 - - 5,568,952
Total Liabilities 11,885,386 5,751,754 360,228 17,997,368

DEFERRED INFLOWS OF RESOURCES
Leases - 53,248 134,835 188,083
Total Deferred Inflows of Resources - 1,965,150 134,835 2,099,985

FUND BALANCE
Nonspendable:

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

Library - - 559,744 559,744
Capital projects - - 8,719,695 8,719,695
Repairs and maintenance - - 193,606 193,606
Pensions 3,090,731 - - 3,090,731
VTA - 263,061 - 263,061
Committed to:

Budget stabilization 7,870,639 - - 7,870,639
Catastrophic 7,870,639 - - 7,870,639
Pensions/OPEB 1,300,000 - - 1,300,000
Measure G 2018 district sales tax - 1,376,181 - 1,376,181 Special revenue funds - - 1,211,943 1,211,943
Assigned to:

Open Space 410,000 152,000 - 562,000
Parking - 292,000 - 292,000
Sustainability 140,553 - - 140,553
Capital improvements 1,983,271 14,760,358 16,743,629 -
Carryover encumbrances 6,367 - - 6,367
Comcast PEG - 50,000 - 50,000
Compensated absences 1,519,243 - - 1,519,243
Market fluctuations 1,201,824 - - 1,201,824
Unassigned 10,211,049 - 10,211,049 -
Total Fund Balances 35,763,316 16,893,600 10,684,988 63,341,904 Total Liabilities, Deferred Inflows
of Resources and Fund Balances $ 47,648,702 $ 24,610,504 $ 11,180,051 $ 83,439,257 The notes to the financial statements are an integral part of this statement.

Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE GOVERNMENT-WIDE STATEMENT OF NET
POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2025

Fund Balance - Total Governmental Funds $ 63,341,904
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. 146,526,246

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. 8,764,351

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 $ 7,066,321
PERS Safety Plan adjustments 9,845,937
OPEB plan adjustments 4,275,959 21,188,217
Deferred Inflows of resources:

PERS Safety Plan adjustments $ (809,411)
OPEB plan adjustments (921,930) (1,731,341)

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. 1,911,902

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 $ (587,030)
Loans payable (884,190)
Net Pension Liabilities (61,403,352)
Net OPEB Liability (7,489,653)
Compensated absences (2,948,344) (73,312,569)
Net Position - Governmental Activities $ 166,688,710
The notes to the financial statements are an integral part of this statement.

Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

Other
Nonmajor Total
Appropriated Governmental Governmental
General Reserves Funds Funds

REVENUES
Property Taxes $ 25,266,865 $ - $ 38,650 $ 25,305,515
Sales Taxes 8,330,978 - 8,330,978 -
Transient Occupancy Taxes 2,417,630 - 2,417,630 -
Other Taxes 5,004 - 22,516 27,520
Licenses & Permits 9,657,327 158,732 261,629 10,077,688 Intergovernmental 1,357,594 7,830,241 1,850,488 11,038,323 Charges for Services 5,749,950 898,553 6,648,503 -
Fines and Forfeitures 420,127 - - 420,127
Franchise Fees 1,057,483 - 1,057,483 -
Interest 3,151,243 200,349 431,626 3,783,218
Use of Property 76,161 91,284 274,633 442,078
Other 190,105 477,300 80,854 748,259
Total Revenues 57,680,467 9,656,459 2,960,396 70,297,322

EXPENDITURES
Current:

General Government 10,884,414 - 10,884,414 -
Public Safety 20,827,888 - 20,827,888 -
Parks and Public Works 10,717,231 - 111,743 10,828,974
Community Development 5,637,742 - 5,637,742 -
Library Services 3,568,496 - 82,862 3,651,358
Sanitation and Other - - 274,188 274,188
Capital Outlay 65,000 12,910,018 2,570,656 15,545,674
Debt service:

Principal 206,380 - - 206,380
Interest 41,403 - - 41,403
Total Expenditures 51,948,554 12,910,018 3,039,449 67,898,021

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 5,731,913 (3,253,559) (79,053) 2,399,301

OTHER FINANCING SOURCES (USES)
Transfers in 812,411 1,783,080 2,595,491 -
Transfers (out) (1,843,080) (701,491) (110,920) (2,655,491) Total Other Financing Sources (Uses) (1,030,669) 1,081,589 (110,920) (60,000) NET CHANGES IN FUND BALANCES 4,701,244 (2,171,970) (189,973) 2,339,301 BEGINNING FUND BALANCES 31,062,072 19,065,570 10,874,961 61,002,603 ENDING FUND BALANCES $ 35,763,316 $ 16,893,600 $ 10,684,988 $ 63,341,904 The notes to the financial statements are an integral part of this statement.

Draft

ITEM NO. 7.

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, 2025

NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 2,339,301 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) $ 13,404,632 Current year depreciation (5,743,441) 7,661,191
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. (892)

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 Principal Payments 50,347
PG&E Loan 156,033

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. (1,152,891)

COMPENSATED ABSENCES
In governmental funds, compensated absences such as vacations and sick leave are expenditures 162,613

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. 582,395

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. (3,745,405)

ALLOCATION ON INTERNAL SERVICE FUND ACTIVITY
Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of the internal service fund is reported with governmental activities. 1,229,801 CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES $ 7,282,493 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. 7.

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, 2025

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

REVENUES
Property Taxes $ 25,204,691 $ 25,102,070 $ 25,266,865 $ 164,795 Sales Taxes 7,885,517 7,841,645 8,330,978 489,333
Transient Occupancy Taxes 2,332,419 2,332,419 2,417,630 85,211 Other Taxes 7,000 7,000 5,004 (1,996)
Licenses & Permits 8,253,715 9,087,746 9,657,327 569,581 Intergovernmental 1,015,439 1,265,444 1,357,594 92,150
Charges for Services 4,786,513 5,168,358 5,749,950 581,592 Fines and Forfeitures 315,200 325,200 420,127 94,927
Franchise Fees 1,041,330 1,013,330 1,057,483 44,153
Interest 1,764,425 1,427,333 3,151,243 1,723,910
Use of Property 55,143 55,143 76,161 21,018
Other 485,273 248,413 190,105 (58,308)
Total Revenues 53,146,665 53,874,101 57,680,467 3,806,366

EXPENDITURES
Current:

General Government:

Town Council 206,235 219,813 222,953 (3,140)
Town Attorney 943,589 1,085,157 1,076,252 8,905
Administrative Services 6,397,313 6,942,452 6,428,015 514,437 Non-Departmental 3,440,213 3,773,154 3,157,194 615,960
Total General Government 10,987,350 12,020,576 10,884,414 1,136,162 Public Safety 21,956,480 22,832,439 20,827,888 2,004,551 Parks & Public Works 10,394,397 11,210,625 10,717,231 493,394 Community Development 5,577,310 5,706,062 5,637,742 68,320 Library Services 3,398,711 3,591,990 3,568,496 23,494
Capital Outlay - 65,000 65,000 -
Debt Service:

Principal 156,034 156,034 206,380 (50,346)
Interest - - 41,403 (41,403)
Total Expenditures 52,470,282 55,582,726 51,948,554 3,634,172

EXCESS (DEFICIT) OF REVENUES
OVER EXPENDITURES 676,383 (1,708,625) 5,731,913 7,440,538

OTHER FINANCING SOURCES (USES)
Transfers In 595,411 812,411 812,411 -
Transfers Out (1,754,083) (1,782,575) (1,843,080) (60,505) Total Other Financing Sources (Uses) (1,158,672) (970,164) (1,030,669) (60,505) NET CHANGES IN FUND BALANCE $ (482,289) $ (2,678,789) 4,701,244 $ 7,380,033 BEGINNING FUND BALANCE 31,062,072
ENDING FUND BALANCE $ 35,763,316
The notes to the financial statements are an integral part of this statement.

Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

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. 7.

TOWN OF LOS GATOS, CALIFORNIA

PROPRIETARY FUNDS -

STATEMENT OF NET POSITION
JUNE 30, 2025

Governmental
Activities
Internal Service
Funds
ASSETS
Current Assets:

Cash & investments $ 9,671,908
Restricted cash & investments 106,582
Accounts Receivable 94,488
Total current assets 9,872,978
Noncurrent Assets:

Leases receivable 1,217,607
Subscription assets, net 308,593
Total noncurrent assets 1,526,200
Total Assets $ 11,399,178

LIABILITIES
Current Liabilities:

Accounts payable $ 277,361
Due to other governments 86
Interest payable 12,795
Subscription liabilities - Current 172,839
Total current liabilities 463,081
Noncurrent liabilities:

Claims payable 1,367,929
Subscription liabilities 111,610
Total noncurrent liabilities 1,479,539
Total Liabilities $ 1,942,620

DEFERRED INFLOWS OF RESOURCES
Leases $ 692,207

NET POSITION
Net Investment in capital assets $ 24,144
Restricted for workers compensation claims 106,582
Unrestricted 8,633,625
Total Net Position $ 8,764,351
The notes to the financial statements are an integral part of this statement.

Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

PROPRIETARY FUNDS -

STATEMENT OF REVENUES, EXPENSES

AND CHANGES IN NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

Governmental
Activities
Internal Service
Funds

OPERATING REVENUES
Charges for services $ 5,891,269
Use of money and property 137,633
Other local taxes 22,516
Other revenue and reimbursements 374,198
Total Operating Revenues 6,425,616

OPERATING EXPENSES
Insurance expenses 2,435,013
Services and Supplies 2,704,049
Depreciation/amortization 202,422
Total Operating Expenses 5,341,484
Operating Income (Loss) 1,084,132

NONOPERATING REVENUE (EXPENSES)
Investment earnings 85,669
Income (loss) before transfers 1,169,801
Transfers in 60,000
Change in Net Position 1,229,801
BEGINNING NET POSITION 7,534,550
ENDING NET POSITION $ 8,764,351
The notes to the financial statements are an integral part of this statement.

Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

PROPRIETARY FUNDS -

STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

Governmental
Activities
Internal Service
Funds

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 6,100,761
Payments to suppliers (5,089,089)
Insurance reimbursements 330,789
Claims paid (512,165)
Net cash provided (used) by operating activities 830,296

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers In 60,000
Net cash provided (used) by noncapital financing activities 60,000

CASH FLOWS FROM CAPITAL RELATED FINANCING ACTIVITIES
Interest paid (7,148)
Principal paid (161,332)
Net cash provided (used) by capital related financing activities (168,480)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash collected from investment eanings 85,669
Net cash provided (used) Investing Activities 85,669
Net Increase(Decrease) in Cash and Investments 807,485
Cash and investments - beginning of year 8,971,005
Cash and investments - end of year $ 9,778,490
Reconciliation of Operating Income to Cash Flows
from Operating Activities:

Operating Income $ 1,084,132
Adjustments to reconcile operating income to cash flows from operating activities:

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

Accounts receivables (55,077)
Leases receivable 190,076
Deferred inflows of resources (129,065)
Accounts payable 59,844
Claims payable (522,063)
Cash Flows From Operating Activities $ 830,296
Cash and cash equivalents:

Cash and investments $ 9,671,908
Restricted cash and investments 106,582
Total cash and cash equivalents $ 9,778,490
The notes to the financial statements are an integral part of this statement.

Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

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. 7.

RDA
Successor
Agency
ASSETS
Cash and investments $ 2,132,669
Restricted cash and investments 2,167,505
Loans receivable 645,410
Capital assets:

Depreciable, net of accumulated depreciation 896,107
Total Assets $ 5,841,691

LIABILITIES
Accounts payable $ 36
Interest payable 160,530
Long-term debt:

Due within one year 1,550,000
Due in more than one year 7,168,270
Total Liabilities $ 8,878,836

NET POSITION
Restricted for RDA $ (3,037,145)
Total Net Position $ (3,037,145)
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, 2025
Draft

ITEM NO. 7.

RDA
Successor
Agency

ADDITIONS
Property taxes $ 1,951,721
Investment earnings 130,367
Total Additions 2,082,088

DEDUCTIONS
Program expenses of former RDA 1,718
Payments to other governments 5,394
Interest and fiscal agency expenses of RDA 359,258
Depreciation expense 120,823
Total Deductions 487,193
CHANGE IN NET POSITION 1,594,895
NET POSITION - BEGINNING OF YEAR (4,632,040)
NET POSITION - END OF YEAR $ (3,037,145)
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, 2025
Draft

ITEM NO. 7.

This Page Left Intentionally Blank
Draft

ITEM NO. 7.

Notes to Basic Financial Statements
Draft

ITEM NO. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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, 2025, was 33,355.

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. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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. 7.

TOWN OF LOS GATOS, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2025

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” using the accrual basis of accounting.

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 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