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Letter of Transmittal iii Los Altos Hills Financial Outlook As shown in the Basic Financial Statements, starting on page 22, the Town is financially healthy. As of June 30, 2020, the Town has no outstanding debt, the unfunded pension liability per CalPERS Actuary is estimated at $2.2 million, and the total unrestricted fund balance is $18.3 million, of which $7.2 million is unassigned and available to meet current and future liabilities. With the recent hit of COVID‐19 pandemic in March 2020, the Town was able to maintain a combination of strong local economy increase in assessed property value, healthy building improvement activity, and reduced spending are the reasons for the current year overall increase in total town‐wide net position. In contrast to published reports about municipal finances nationwide, the Town’s finances are in good condition. However, pension cost spending and pension liabilities continue to substantially increase based on updated actuarial studies by CalPERS. These updated actuarial studies by CalPERS anticipate lower long‐ term investment earnings, increasing employee compensation, a longer life span, and earlier retirement. The Town has addressed these changes by complying with PEPRA new pension benefits for new employees, increasing employee participation in pension costs, and making voluntary payments to partially retire long‐ term pension liabilities. The Town’s expectation for past service pension cost increases have not yet been included in the CalPERS published employer liabilities. The Town’s OPEB liability is fully funded and management submitted reimbursements from our third‐party administered OPEB in this fiscal year. The Notes to Financial Statements provide detailed information regarding the Town’s pension and OPEB obligations. The Economy and Its Impact Los Altos Hills has twelve non‐residential properties and approximately 3,000 single‐family residential properties. The twelve non‐residential properties are Fremont Country Club, Purissima Hills Water District, El Monte Fire Station, Town Hall, Foothill College, four religious institutions, and three schools. With no commercial base, Los Altos Hills’ primary revenue sources are property tax and development permit revenues from private development. Based on the most recent Property Tax Analysis performed by HdL, the local real estate market continues to improve. While home sales volume stays flat, home price continues to rise year over year. During the first 2 months of 2020, the Town’s median sale price of single‐family residential homes decreased 3.25 percent to $4,006,000 (from $4,140,500 for calendar year 2019). This is a 62 percent increase over the median price reported in the peak of the real estate bubble in 2008 ($2,500,000). Resolution 60-20 Page 12