The URL can be used to link to this page

Financial Report 06-30-2017BALANCE • CONNECTION • QUALITY OF LIFE F,q COMPREHENSIVE ANNUAL FINANCIAL REPORT For Fiscal Year Ended June 30, 2017 CUPERTINO City of Cupertino, California www.cupertino.org CITY OF CUPERTINO, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017 Prepared by the City of Cupertino Administrative Services Department Finance Division CITY OF CUPERTINO, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the year ended June 30, 2017 CONTENTS INTRODUCTORY SECTION TABLE OF CONTENTS...................................................................................... LETTER OF TRANSMITTAL............................................................................... ORGANIZATION CHART.................................................................................... CITY COUNCIL AND DIRECTORY OF CITY OFFICIALS ................................. COMMISSIONS AND COMMITTEES................................................................. CERTIFICATE OF AWARD FOR EXCELLENCE IN FINANCIAL REPORTING FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) ................. BASIC FINANCIAL STATEMENTS: GOVERNMENT -WIDE FINANCIAL STATEMENTS: STATEMENT OF NET POSITION............................................................ STATEMENT OF ACTIVITIES.................................................................. FUND FINANCIAL STATEMENTS: GOVERNMENTAL FUNDS: BALANCESHEET................................................................................................................... RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET WITH THE STATEMENT OF NET POSITION........................................................................................ STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUNDBALANCES................................................................................................................ RECONCILIATION OF THE NET CHANGE IN FUND BALANCES — TOTAL GOVERNMENTAL FUNDS WITH THE STATEMENT OF ACTIVITIES .................. STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE — BUDGET TO ACTUAL — GENERAL FUND.......................................................................... BUDGET TO ACTUAL — TRANSPORTATION SPECIAL REVENUE FUND ........................ BUDGET TO ACTUAL — HOUSING DEVELOPMENT SPECIAL REVENUE FUND ............ PROPRIETARY FUNDS: STATEMENT OF NET POSITION..................................................................................................... STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION ................ STATEMENT OF CASH FLOWS....................................................................................................... FIDUCIARY FUND: STATEMENT OF FIDUCIARY NET POSITION........................................................ STATEMENT OF CHANGES IN FIDUCIARY NET POSITION ................................ NOTES TO THE BASIC FINANCIAL STATEMENTS..................................................... REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED): SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS SCHEDULE OF CONTRIBUTIONS — MISCELLANEOUS PLAN ..................................... SCHEDULE OF FUNDING PROGRESS — DEFINED BENEFIT OTHER POST -EMPLOYMENT BENEFITS PLAN......................................................................... SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS...... SCHEDULE OF CONTRIBUTIONS — OPEB...................................................................... SCHEDULE OF INVESTMENT RETURNS — OPEB......................................................... 25 26 27 28 29 30 31 33 34 35 37 38 39 74 75 76 77 78 79 CITY OF CUPERTINO, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the year ended June 30, 2017 CONTENTS (Continued) OTHER SUPPLEMENTARY INFORMATION: SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE — BUDGET AND ACTUAL - PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND .............. 81 ►[�7►1�/_IILA]:ZK�1�1�:�►1JI�►��_1�1�1►1�I:? COMBINING BALANCE SHEET........................................................................................................ 83 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES.................................................................................................... 84 COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES — BUDGET AND ACTUAL ....................................................... 85 COMBINING STATEMENT OF NET POSITION............................................................................... 87 COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION.............................................................................................. 88 COMBINING STATEMENT OF CASH FLOWS................................................................................. 89 COMBINING STATEMENT OF NET POSITION............................................................................... 91 COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION.............................................................................................. 92 COMBINING STATEMENT OF CASH FLOWS................................................................................. 93 STATISTICAL SECTION a1►1_1104us] 1_1mIC721ON19 NET POSITION/ASSETS BY COMPONENT — LAST TEN FISCAL YEARS ................................... 95 CHANGES IN NET POSITION/ASSETS — LAST TEN FISCAL YEARS .......................................... 96 FUND BALANCES OF GOVERNMENTAL FUNDS — LAST TEN FISCAL YEARS ......................... 98 CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS — LAST TEN FISCAL YEARS.............................................................................................................. 99 REVENUE CAPACITY: ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY — LAST TEN FISCAL YEARS.................................................................................... 100 DIRECT AND OVERLAPPING PROPERTY TAX RATES — LAST TEN FISCAL YEARS ............... 101 PRINCIPAL PROPERTY TAXPAYERS — CURRENT YEAR AND FIVE YEARS AGO ................... 102 PROPERTY TAX LEVIES AND COLLECTIONS — LAST TEN FISCAL YEARS ............................. 103 DEBT CAPACITY RATIOS OF OUTSTANDING DEBT BY TYPE — LAST TEN FISCAL YEARS ................................ 104 DIRECT AND OVERLAPPING BONDED DEBT................................................................................ 105 LEGAL DEBT MARGIN INFORMATION — LAST TEN FISCAL YEARS .......................................... 106 RATIO OF GENERAL BONDED DEBT — LAST TEN FISCAL YEARS ........................................... 107 DEMOGRAPHIC AND ECONOMIC INFORMATION: DEMOGRAPHIC AND ECONOMIC STATISTICS — LAST TEN FISCAL YEARS ...........................108 2017 EMPLOYER RANKING.............................................................................................................109 OPERATING INFORMATION: FULL-TIME EQUIVALENT CITY EMPLOYEES BY FUNCTION/PROGRAM — LAST TEN FISCAL YEARS.................................................................. 110 OPERATING INDICATORS BY FUNCTION/PROGRAM — LAST TEN FISCAL YEARS ................ 111 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM — LAST TEN FISCAL YEARS........... 112 COMMUNITY PROFILE CUPERTINO March 1, 2018 CITY OF CUPERTINO CITY HALL 10300 TORRE AVENUE • CUPERTINO, CA 95014-3202 (408) 777-CITY • WWW.CUPERTINO.ORG To the Citizens of Cupertino, Honorable Mayor, Members of the City Council, and City Manager It is our pleasure to submit the Comprehensive Annual Financial Report (CAFR) for the City of Cupertino (the City) for the fiscal year ended June 30, 2017. The report is prepared in accordance with generally accepted accounting principles (GAAP) set by the Governmental Accounting Standards Board (GASB). The report presents City information on an entity -wide basis and on a more detailed fund level basis. The fund -level reports emphasize the City's major funds. A Management Discussion and Analysis (MD&A) presents a comparative analysis of current and prior year results, changes in financial position, a comparison of actual versus budget, financial highlights, trends, and disclosure of any known significant events or decisions that affect the financial condition of the City. This transmittal letter is designed to complement the MD&A, and should therefore be read in conjunction with it. The MD&A is required supplementary information and is found in the Financial Section of the CAFR. The accuracy of the data presented and the completeness and fairness of the presentations, including all disclosures, are the responsibility of the management of the City. To provide a reasonable basis for making these representations, management has established a comprehensive internal control framework that is designed to protect the City's assets and provide sufficient, reliable information for the proper preparation of these financial statements. We believe the data is accurate in all material respects and is presented in a manner that fairly sets forth the City's financial position. Furthermore, we believe that all disclosures necessary to enable the reader to gain an understanding of the City's financial activity have been included. REPORTING ENTITY This CAFR includes all component units and funds of the City. It reports all activities for which the City is considered to be financially accountable. The general governmental funds support a full range of services, including law enforcement, community development, recreation, public works, public and environmental affairs, and general administration. Enterprise funds account for recreation and solid waste operations supported by user fees. This financial report incorporates data for the City of Cupertino and its component unit, the Cupertino Public Facilities Corporation. The City operates under a Council -City Manager form of government. There are five council members, including the Mayor, who serve staggered four-year terms. The City Council appoints the City Manager who is responsible for the daily administration of City affairs. The City Council also appoints the City Attorney and the City Treasurer. All other employees are appointed by the City Manager. ECONOMIC CONDITIONS The City of Cupertino is located in Santa Clara County at the southern end of the San Francisco Bay Peninsula. The City is comprised of 13 square miles and is bordered by the cities of San Jose, Saratoga, Sunnyvale, Santa Clara and Los Altos. It has a residential population of 64,698 (based on 2017 Claritas estimated data). Situated at the west end of Silicon Valley, Cupertino has earned the reputation of a balanced community with a healthy climate for business and well maintained residential neighborhoods, community parks and public facilities. The excellent reputation of Cupertino's schools has been a major attraction for families wishing to settle in close proximity to jobs in Silicon Valley. The City recognizes the importance of quality school facilities and programs to all Cupertino residents, and works in partnership with the schools in many programs affecting education and youth. National surveys rank the City high in education levels, median household incomes, and registered patent numbers, as well as best cities in which to live. Cupertino is the corporate headquarters of several notable companies including Apple Inc., CRC Health, DURECT, Mirapath, Seagate Technology, Bromium, and SugarCRM Inc., and home to many other well- known firms, such as Altia Systems, Cinarra, Pepperdata, Panasonic Ventures, and Ducati North America. Other major employers include DeAnza College, one of the largest single -campus community colleges in the country, the Fremont Union High School District, and Cupertino Union School District. Based on Costar data as of the second quarter 2017, almost 7.7 million square feet of office, research, and development space existed in the City with one of the lowest vacancy rates in Silicon Valley at 1.6% for office and 0.2% for industrial. Leasing activity of office space has increased steadily from 2016-2017. As of July 2017, the City's unemployment rate was 3.1 %, having slightly increased from the previous year and below the statewide rate of 5.4%. The City features thirteen retail centers and over one hundred eighty eating establishments. The city's newest mixed -use projects, include Nineteen800 (formerly known as the Rosebowl), Main Street, and The Biltmore Adjacent Project, all have retail/restaurant tenants including Steins Beer Garden, Doppio Zero, The Kebab Shop, Kula Sushi, Icool In2 ice cream, Vitality Bowls, Alexander's Patisserie, Lazy Dog, Philz Coffee, Pressed Juicery, Eureka!, Oren's Hummus, Chef Hung, 85 Degrees Bakery, Meet Fresh, Target Express, Pieology, Capezio, Howards Shoes, The Counter, and Round Table Pizza. The Saich Way Project, located on Stevens Creek Boulevard next to Panera Bread and Peet's Coffee, is fully leased and includes The Vitamin Shoppe, The Melt, Coder School, H&R Block, T-Mobile, Site for Sore Eyes, UbreakIfix, and Blast & Brew. The successful redevelopment of Homestead Square features a 24-hour Safeway as its anchor and other tenants including Ulta, SteinMart, Ross, a variety of quick -casual dining options, and Pet Club opening soon in a 10,000SF space. The Cupertino Village Shopping Center, located on N. Wolfe Road near Pruneridge Avenue, has completed its two -level parking structure and construction of additional retail buildings (Phases I and II) as part of its overall redevelopment of the center. Phase III is currently underway to renovate the existing four -building shopping center with a contemporary architectural design, as well as the reconfiguration of the pedestrian courtyard landscape and hardscape. On August 1, 2017 City Council authorized the Cupertino Village Boutique Hotel to submit formal applications for project and environmental review as part of the City's General Plan Amendment Authorization Process. In the 2017-2018 Assessor's Annual Report for Santa Clara County, Cupertino's net assessment roll growth increased from $21.35 to $23.14 billion from the previous year. That equated to an increase of 8.39%, which exceeds the county -wide average of 7.37% growth. A large portion of the increase resulted from partial value from the new Apple campus of $822 million in new construction. The value of Apple's business personal property also contributed to the increase which includes investments in computers, iv. machinery, equipment, fixtures and furniture. The total construction value of the campus so far, totaling $5.2 billion, represents only a portion of the anticipated full market value when the campus is completed. Based on second quarter 2017 data, Cupertino experienced an 8.9% increase in business activity, quarter over quarter. The increase reflects continued growth in the local and regional economy and is also a product of continuing to experience the third longest economic expansion in US history. The City is not as diversified into retail, food products, and transportation compared to the state. It continues to receive over 80% of sales tax revenues from the business -to -business sector. The following chart shows City sales tax variations over the past ten years, reflecting moderate impact from the recession and trending growth from business -to -business activity despite high single -company concentration. Sales Tax Trend With the economic recovery and easing of credit, commercial development activity picked up considerably in 2012-13 and 2013-14 led by plan reviews of the new Apple Campus 2. Plans for the redevelopment of the Marina shopping center into a mixed -use project, Marina Plaza, was approved in 2016. This project will include 23,000 SF of retail and restaurant use, a 122-room boutique hotel, and 188 residential units including 16 below market rate units. Construction of a five story, 148-room Hyatt House hotel is underway and will include a full -service restaurant and meeting rooms. Construction of a Residence Inn by Marriott is nearly complete at the Main Street Cupertino mixed -use project. This hotel will offer 180 rooms. Through the City's new General Plan Amendment (GPA) Authorization Process applications for two development projects were authorized by City Council in August 2017: Cupertino Hotel and Cupertino Village Boutique Hotel. Proposed room counts are 156 and 185 respectively. The City's pension and retiree medical unfunded actuarial accrued liabilities are discussed in the Notes to the Basic Financial Statements. The City must pay CalPERS, the state's government pension system, annually to reduce its long-term liability for pensions. Cupertino's pension actuarial valuation report of June 30, 2016 reported a pension unfunded liability of $40.6 million with annual payments to Ca1PERS of 29.4% and 26.9% of payroll for 2019-20 and 2018-19, respectively, with ongoing increases after that because of actuarial assumption changes. To address long-term rising costs, Cupertino and state law has reduced pension benefits for new hires and increased employee contributions. As of the January 1, 2017 health cost actuarial valuation report, the City has a retiree medical unfunded liability of $2.5 million with annual payments to a retiree health plan trust at 7.11 % of payroll. Lip Because the City contracts out police services to the County Sheriff and because fire protection is handled by a special district, the City avoids the high pension, capital, and operating costs of a City -operated public safety function. The City caps its contributions to employee health insurance premiums that benefit both the City and employees. A build-up of operating reserves from strong revenue years, such as 2013-14, along with a traditional under -spending of budgets, enables the City to withstand weak revenue years that occur periodically, such as in 2009-10. ECONOMIC INITIATIVES Apple continues to grow and construction is nearing completion on its new ApplePark campus, bounded by Interstate 280, Homestead Road, Wolfe Road and Tantau Avenue. The new campus will include a flagship Apple store, caf6, and Visitors Center. With the expanded Apple presence, the City's revenue base will remain concentrated among its top companies and top economic sector, the volatile business -to - business area. Past recessions and the historic departure of a major tax provider, Hewlett-Packard, demonstrates the need for diversification of the City's revenue base and a long-term balance of revenues and expenditures. The City desires other revenues to mitigate the fluctuating nature of sales taxes, hotel taxes, user fees, and state grabs of local taxes in times of budget distress. Legislation raising the City's property tax share, the update of the utility user tax, the increase in the transient occupancy tax, and refinancing of the City's debt are past successes to help diversify and balance revenues and expenditures. The City Council work program underway in 2016-2017 describes economic development and administrative initiatives to further increase the City's property tax share; streamline City web content and permitting for new businesses; continue sponsoring seminars and workshops for new small businesses; increase coordination with the Chamber of Commerce and other regional business organizations; strengthen shop local habits of residents and daytime visitors; and enhance business access to City services. The City's Economic Development Division has begun work on implementing strategies included in the Economic Development Strategic Plan (EDSP) approved by City Council in October 2016. The EDSP is a three to five year plan with strategies and goals in which to strengthen Cupertino's business vitality and diversity. Key strategies include growing the incubator/accelerator and co -working entrepreneurial sectors by identifying suitable commercial space and the possible creation of an innovation district. ACCOUNTING AND BUDGETARY CONTROL In developing and evaluating the City's accounting system, consideration is given to the adequacy of internal accounting controls. The City's controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against losses from unauthorized use or disposition and the reliability of financial records for preparing financial statements and maintaining accountability of assets. The concept of reasonable assurance recognizes that the costs of a control should not exceed the benefits likely to be derived and that the evaluation of costs and benefits requires estimates and judgments by management. The City's budget is a detailed operating plan that identifies estimated costs and results in relation to estimated revenues. The budget includes 1) the programs, projects, services and activities to be provided during the fiscal year; 2) estimated revenue and fund balance available to finance the operating plan; and 3) the estimated spending requirements of the operating plan. The budget represents a process through which policy decisions are made, implemented and controlled. vu INDEPENDENT AUDIT City ordinance requires an annual audit of the financial records by an independent certified public accounting firm selected by the City Council and its audit committee. Crowe Horwath audited the City's Basic Financial Statements, and their opinion thereon is included in the Financial Section of this report. CERTIFICATE OF ACHIEVEMENT The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Cupertino for its CAFR for the year ended June 30, 2016. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized CAFR. This report must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that the current report continues to meet the Certificate of Achievement Program's requirements. Respectfully submitted, Zach Korach Finance Manager ACKNOWLEDGMENTS I would like to express my appreciation to City employees, department heads, the City Manager, and members of City Council for their interest in conducting the financial operations of the City in a responsible manner. Special thanks go to Yulia Rumalean, Giang Dinh, Tina Mao, Amber Chang, and Zeng Wang of the Finance staff for their continued support and dedication. Special recognition goes to Beth Viajar, Richard Wong, Thomas Leung, and Mary Redwine for their efforts in the preparation and production of this report. Reviewed by, 44�� W C�4� Kristina Alfaro Director of Administrative Services Vii. CITY OF CUPERTINO, CALIFORNIA Fiscal Year 2016-17 Savita Vaidhyanathan Rod Sinks Councilmember Mayor CITY COUNCIL Barry Chang Councilmember Darcy Paul Vice Mayor DIRECTORY OF CITY OFFICIALS David Brandt — City Manager Randolf Stevenson Hom — City Attorney Steven Scharf Councilmember Timm Borden — Director of Public Works Kristina Alfaro — Director of Administrative Services Jeff Milkes — Director of Recreation and Community Services Aarti Shrivastava — Assistant City Manager/Director of Community Development ix. CITY OF CUPERTINO, CALIFORNIA Fiscal Year 2016-17 COMMISSIONS AND COMMITTEES AUDIT COMMITTEE Peter Shin Eno Schmidt Darcy Paul Rod Sinks Mark Zavislak HOUSING COMMISSION Harvey Barnett Shirley Chu Nina Daruwalla Rajeev Raman Krista Wilson FINE ARTS COMMISSION Janki Chokshi Russell Leong Rajeswari Mahaliagan Diana Matley Michael Sanchez PUBLIC SAFETY COMMISSION Neha Sahai Bob Cascone Robert McCoy Gerald Tallinger Andy Huang SUSTAINABILITY COMMISSION Angela Chen Gary Latshaw Vignesh Swminathan Meera Ramanathan Anna Weber FISCAL STRATEGIC COMMITTEE Kristina Alfaro Aarti Shrivastava Rod Sinks Darcy Paul Timm Borden Lisa Taitano RECREATION AND COMMUNITY SERVICES COMMISSION David Fung Helene Davis Carol Stanek Neesha Tambe fudy Wilson LIBRARY COMMISSION Rose Grymes Annie Ho Gopal Kumarappan Jerry Liu Ann Stevenson PLANNING COMMISSION Geoffrey Paulsen Margaret Gong Winnie Lee Don Sun Alan Takahashi BICYCLE PEDESTRIAN COMMISSION Vidula Aiyer Gary Jones Peter Heller Sean Lyn Erik Lindskog TEEN COMMISSION Andrew Fung Varsha Swamy Harshitha Sriraman Annabelle Chan Meesha Reiisieh Steve Yang Anooj Vadodkar Rishit Gundu ECONOMIC DEVELOPMENT Geoffrey Paulsen Angela Tsui Timm Borden Rich Abdalah Savita Vaidhyanathan David Brandt Aarti Shrivastava Anjali Kausar Kevin McClelland Jason Lundegaard Barry Chang Mike Rohde TECHNOLOGY, INFORMATION & COMMUNICATIONS COMMISSION Shishir Chavan Rod Livingood Keita Broadwater Arnold de Leon Vaishali Deshpande X. Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Cupertino California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016 Executive Director/CEO A. Crowe Horwath, INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and City Council City of Cupertino, California Report on the Financial Statements Crowe Horwath LLP Independent Member Crowe Harvvath International We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Cupertino, California (City) as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund, the Transportation Special Revenue Fund, and the Housing Development Special Revenue Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matters As discussed in Note 15 to the basic financial statements, the July 1, 2016 net position of the City has been restated to correct misstatements. Our opinions are not modified with respect to this matter. As discussed in Note 1 to the basic financial statements, the City is presenting the City's Other -Post Employment Benefits (OPEB) Trust fund in the basic financial statements of the City due to a change in the reporting entity considerations. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, and the required supplementary information section on pages 4-20 and 67-69 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by 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. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, other supplementary information section, statistical section and community profile are presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplementary information section 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. Such 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 auditing standards generally accepted in the United States of America. In our opinion, the other supplementary section is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section, statistical section and community profile has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. 2. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 1, 2018 on our consideration of the City'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 City's internal control over financial reporting and compliance. �Mi [1'W4 W Crowe Horwath LLP Costa Mesa, California March 1, 2018 3. CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 This section describes the City of Cupertino's financial performance for the year. Readers are encouraged to consider the following information in conjunction with the accompanying Transmittal Letter and Basic Financial Statements. 2016-17 FINANCIAL HIGHLIGHTS • The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the fiscal year 2017 by $258.7 million (net position). Of this amount, $68 million represents unrestricted net position, which may be used to meet the City's ongoing obligations to citizens and creditors. • City revenues have increased in 2016-17 with base governmental revenues showing a $18.1 million increase, or 23.2%, over 2015-16. The primary contributing factors include the recognition of revenue related to payments made by Apple Inc. to satisfy outstanding amounts due from 2015-16 related to the development agreement between Apple Inc. and the City of Cupertino. In addition, the City experienced a net taxable value increase of 8.4% for the 2017/2018 tax roll, which resulted in an increase of $2.0 million in property taxes received. Furthermore, the City experienced a continued upward trend in local business growth as well as a close-out payment for the triple flip resulting in an increase of $5.6 million in sales taxes received. In March 2004, California voters approved Proposition 57, the California Economic Recovery Bond Act, which authorized the issuance of up to $15 billion in bonds to close the State's budget deficit. To guarantee bond repayment, the state promulgated Revenue and Taxation Code Section 6201.5 which established an excise tax equal to one -quarter percent of the sales price of property. The quarter -percent reduction in local sales tax was recovered through a series of revenue swapping procedures commonly referred to as the "triple flip." • The City continued to make substantial investment into capital projects dedicated to street and transportation improvements, storm drain improvements, and maintenance of and improvements to City facilities, resulting in an increase in net capital assets of $2.7 million, after depreciation. • The City's change in net position was $13.4 million for governmental activities and $15.4 million in total, reflecting the stabilization of revenues and continued large investment in capital projects. • The City's net pension liability for June 30, 2017, was $36.7 million, up $6.2 million from June 30, 2016, or 20.4%. The funding ratio for the City's pension plan with Ca1PERS went from 70.1 % to 65.8%. Additionally, the City identified and corrected an error pertaining to an incorrect allocation of pension -related liabilities, deferred outflows of resources and deferred inflows of resources between the opinion units. As a result, net position was restated in the Information Technology Internal Service Fund in the amount of $1,184,643. • Business -type activities contributed $8.2 million to citywide revenues totaling $104.4 million, while, the same activities contributed over $8.1 million to citywide expenses of $89 million. • A fund closing transfer was recorded in 2016-2017 for the consolidation of the City Channel/Web Internal Service Fund to the General Fund in the amount of $532,385. • The City implemented the provisions of GASB Statement No. 74, Financing Reporting for Postemployment Benefit Plans Other Than Pension Plans, during the current year. The impact of this pronouncement on the City's financial statements can be found in Note 11 to the Financing Statements and Required Supplementary Information (RSI). OVERVIEW OF THE FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the City's Basic Financial Statements. The Basic Financial Statements are comprised of the City-wide Financial Statements, the Fund Financial Statements, and the notes to the Basic Financial Statements. These two sets of financial statements provide two different views of the City's financial activities and positions. 4 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 The City -Wide Financial Statements provide a long-term view of the City's activities as a whole, and comprise the Statement of Net Position and the Statement of Activities. These statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole. The accrual basis of accounting is similar to the accounting used by most private sector companies. The Statement of Net Position provides information about the financial position of the City as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about all the City's revenues and expenses, with the emphasis on measuring net revenues and expenses for each of the City's programs. The Statement of Activities explains in detail the change in net position for the year. Over time, increases or decreases in net position can be indicators of whether the financial condition of the City is improving or deteriorating. All of the City's activities are grouped into Governmental activities and Business -type activities, as explained below. The Statement of Net Position and the Statement of Activities provide a summary of these two types of activities for the City as a whole. • Governmental activities —Most of the City's basic services are considered to be governmental activities, including public works, law enforcement, community development, recreation, public & environmental affairs, and general administration. These services are supported by general City revenues such as property, sales and other taxes, and by specific program revenues such as developer fees and grants. The City's governmental activities include the activities of a separate legal entity, the Cupertino Public Facilities Corporation (the "Corporation"), because the City is considered to be financially accountable for the Corporation. The City leases its major facilities from the Corporation, which then uses the lease payments to pay principal and interest on the Corporation's long-term debt. Business -type activities —All the City's enterprises are reported here, including solid waste management and most of the City's recreational operations. Unlike governmental services, these services are supported by charges paid by users based on the amount of services used. The Fund Financial Statements report the City's operations in more detail than the City-wide Financial Statements and focus primarily on the short-term activities of the City's General Fund and other major funds. The Fund Financial Statements measure only current revenues, expenditures, assets, liabilities, and deferred inflows and outflows of resources; they exclude long-term assets and liabilities. Because these statements focus on the near -term inflows and outflows of spendable resources, such information may be useful in evaluating near -term financing requirements. The Fund Financial Statements provide detailed information about each of the City's most significant funds, called major funds. Cupertino's Fund Financial Statements include governmental, enterprise and internal service funds as discussed below. Each major fund is presented individually, with all non -major funds summarized and presented only in a single column. Subordinate schedules, which follow the Notes to Basic Financial Statements, present the detail of these non -major funds. Major funds present the significant activities of the City for the year, and may change from year to year as a result of changes in the pattern of City's activities and public interest. For example, the Capital Improvement Projects Fund may or may not appear as a major fund depending on the volume of construction activity in a certain year. Governmental Fund financial statements are prepared on the modified accrual basis, which means they measure only current financial resources and uses. They present essentially the same functions reported as governmental activities in the city-wide financial statements. However, capital assets and other long- lived assets, along with long-term liabilities, are not presented in the Governmental Fund financial statements. Reconciliations are provided to facilitate a comparison between governmental funds and CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 governmental activity statements to allow a better understanding of the long-term impact of the government's near -term financial decisions. Comparisons of budget and actual financial information are included in the Basic Financial Statements for the General Fund and other major Special Revenue Funds. For other nonmajor funds, budgetary comparison schedules for these funds are included in this document as supplemental information only. Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis and include current and long-term assets and liabilities and deferred outflows and inflows of resources. Enterprise funds are used to report the same functions presented as business -type activities in the City- wide Financial Statements, and in more detail in the Fund Financial Statements. Since the City's Internal Service funds provide goods and services only to the City's governmental and business -type activities, their activities are reported only in total at the fund level. Internal Service funds may not be major funds because their revenues are derived from other City funds. These revenues are eliminated in the City-wide financial statements and any related profits or losses are returned to the activities which created them, along with any residual net position of the Internal Service funds. For this City, internal service activities predominantly benefit governmental rather than business -type functions, and are therefore included within governmental activities in the City-wide Financial Statements. Fiduciary Fund financial statements are prepared on the full accrual basis and include current and long- term assets and liabilities and deferred outflows and inflows of resources. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds activities are excluded from the City's government -wide financial statements because the City cannot use these assets to finance its own operations. The City maintains an OPEB Pension Trust Fund that is used to account for the assets and liabilities held in trust for the retirees' post -employment health benefits. The Notes to Basic Financial Statements provide important additional detail that is essential to a full understanding of the data reported in the City-wide and Fund Financial Statements. CITY-WIDE FINANCIAL ACTIVITIES This analysis focuses on the net position and changes in net position of the City's Governmental Activities (Tables 1 and 2) and Business -Type Activities (Tables 3 and 4) as presented in the City-wide Statement of Net Position and the Statement of Activities. 0 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Governmental Activities Table 1 Condensed Statement of Net Position at June 30 (in thousands) Governmental Activities 2017 2016 Assets: Cash and investments $ 133,342 $ 115,916 Other assets 14,937 23,374 Capital assets 182,688 179,783 Total assets 330,967 319,073 Deferred Outflows of Resources: Related to Pension (Note 10) 8,480 3,664 Liabilities: Long term debt 33,700 35,835 Other liabilities 57,434 50,882 Total liabilities 91,134 86,717 Deferred Inflows of Resources: Related to Pension (Note 10) 696 1,826 Net Position: Net Investment in capital assets 153,253 148,168 Restricted 34,992 34,862 Unrestricted 59,372 51,164 Total net position $ 247,617 $ 234,194 The City's change in net position from governmental activities was $13,422,591. The following significant changes within assets, liability, and net position categories occurred: • Capital assets increased more than $2.9 million, as a result of substantial investment into capital projects dedicated to street and transportation improvements, storm drain improvements, and maintenance of and improvements to City facilities. • Cash and investments increased approximately $17.4 million reflecting an increase in property and sales taxes of $2 million and $5.6 million, respectively. Additionally, the City received significant payments from Apple Inc. pertaining to the agreements and requirements of the development agreement between Apple Inc. and the City. • Other assets decreased $8.4 million as a result of the collection of a prior year accounts receivable in the General Fund. The receivable was primarily derived from an invoice to Apple Inc. for funds needed on -hand prior to the City executing consultant agreements with for inspection services. The agreements are requirements of the development agreement between Apple Inc. and the City. 7 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Sources of Revenue, Governmental Activities 2016-17 Investment Earnings 0.7% Other Taxes 3.4% Miscellaneous 2.1% Fra Utility Us Transient Occupa Tax 6.3% Sales Tax 28.1 harges for Services 29.1% Operating Grants & Contributions 2.4% Capital Grants & :ontributions 0.3% :y Tax 21.0% In 2016-17, the City experienced continued trends toward a return to normalcy. Revenues increased $18.1 million or 23.2% from the prior year, primarily due to an increase in property tax, sales tax, and recorded revenues related to developer agreements between Apple Inc. and the City. According to the 2017-2018 Assessor's Annual Report for Santa Clara County, Cupertino's net assessment roll growth increased $1.79 million, or 8.39%, from the prior year. Sales tax experienced an increase due to continued growth in the business sector as a result of an upward trending economy as well as the final payment of the triple flip sales tax. CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Functional Expenses, Governmental Activities 2016-17 Community Administration Development 3.6% Recreation Services 13.3% Administrate Services 7.4 Pu Envio 2.4% rcement 5% Public Works 40.6% The Statement of Activities presents program revenues, expenses, general revenues, and the resulting change in net position as summarized in the next table. 0 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Table 2 Condensed Statement of Activities for the Year Ended June 30 (in thousands) Expenses Administration Law enforcement Public and environmental affairs Administrative services Recreation services Community development Public works Interest on long-term debt Total expenses Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions Total program revenues General revenues: Taxes: Property tax Property tax in -lieu of motor vehicle fee Sales tax Transient occupancy tax Utility user tax Franchise tax Other taxes Intergovernmental, unrestricted: Motor vehicle license fee Investment earnings Gain on sale of capital assets Miscellaneous Total general revenues Total revenues Excess of revenues over expenses before transfers Transfers Transfers in - fund closing Change in net position Beginning net position, as restated Ending net position Governmental Activities 2017 2016 $ 2,874 $ 3,710 12,528 11,316 1,884 575 5,898 2,995 10,652 5,758 13,776 6,260 32,491 31,313 1,036 1,078 81,139 63,005 27,954 19,749 2,314 1,851 245 362 30,513 21,962 13,252 11,864 6,967 6,330 26,932 21,350 6,024 5,852 3,082 3,371 3,410 3,478 3,258 2,818 26 24 695 807 - 1 2,005 219 65,651 56,115 96,164 78,077 15,025 15,072 (1,874) (1,635) 272 - 13,423 13,437 F4c ANRE,►dOIl& $ 247,617 $ 234,194 10 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 City-wide Governmental Activities Revenues Table 2 shows that revenues from governmental activities increased $18.1 million or 23% from last year, finishing at $96.2 million. Primary contributing factors include property tax, sales tax, and additional payments received related to developer agreement between Apple Inc. and the City as further discussed below. For general revenues, the City experienced a net taxable value increase of 8.4% for the 2017/2018 tax roll. The assessed value increase between 2016/2017 and 2017/2018 was $1.8 billion. The change attributed to the 2% Proposition 13 inflation adjustment was $330 million, which accounted for 18% of all growth experienced in the City. In addition, sales tax increased $5.6 million over 2015/2016 resulting from continued local business and economy growth as well as a close-out triple flip payment received. Program revenues showed an increase of $8.6 million or 39%. There was a mix of changes in that charges for services revenues and operating grants and contributions increased by $8.2 million and $0.5 million, respectively, while capital grants and contributions declined by $0.12 million. The increase of $8.2 million in charges for services primarily resulted from payments made by Apple Inc. to satisfy outstanding amounts due from 2015-16 related to the development agreement between Apple Inc. and the City of Cupertino. The operating and capital grants and contributions remained relatively flat with a total increase of $346,000. City-wide Governmental Activities Expenses City-wide governmental activities increased expenses by $18.1 million or 30%. The primary cause for this increase is related to a significant increase in employee compensation and benefits. The City created eight new position in 2016/2017 represented by an increase of $3.2 million. Increases in employee benefits and inter -position step increases also contributing to this increase in governmental activity expense. Additionally, contract services with the Santa Clara County Sheriff's Office increased $1 million and consistent with historical increases. Change in Net Position The City-wide governmental net position increase of $13.4 million was very similar to the increase of $13.4 million in 2015-16. 11 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Business Type Activities Business -type activities in the City-wide Financial Statements include the City's four enterprise funds. Enterprise funds are used to account for recreational and solid waste management operations that are financed and operated in a manner similar to private business enterprises where the intent is that costs of providing services and facilities to the general public on a continuing basis be financed or recovered primarily through user fees. The major proprietary funds section of this report provides more information on business -type results. As shown in Table 3, the business -type net position totaled $11.1 million at June 30, 2017, an increase of $2 million from the prior year with unrestricted net position increasing $1,718,000 and the net investment in capital assets increasing by $264,000. Business -type activities received transfer ins of $1.87 million from the General Fund which contributed to the increase in cash and cash investments of $1.3 million over 2015-2016. There are no additional substantial changes in assets, liabilities, and net position of business -type activities. In Table 4, revenues for all business -type activities increased $420,000 and operating expenses decreased by $582,000. In addition, the City identified and corrected one error related to capital assets which resulted in a prior period restatement of $327,730 (See Note 15 in the footnotes to the financial statements for additional information). As a result, the net position for 2016-2017 increased $2 million or 21.7% from 2015-2016. Table 3 Condensed Statement of Net Position at June 30 (in thousands) Assets: Cash and investments Other assets Capital assets Total assets Deferred Outflows of Resources: Related to pension Other Liabilities: Total liabilities Deferred Inflows of Resources: Related to pension Net Position: Net investment in capital assets Unrestricted Total net position Business Type Activities 2017 2016 $ 12,051 $ 10,712 74 309 1,972 1,708 14,097 12,729 366 255 3,566 3,792 3,566 3,792 46 109 1,972 1,708 9,079 7,375 $ 11,051 $ 9,084 12 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Table 4 Condensed Statement of Activities for the Year Ended June 30 (in thousands) Expenses Resource recovery Blackberry farm Sports center Recreation programs Total expenses Revenues Program revenues: Charges for services General revenues: Investment earnings Total revenues Excess of revenues over expenses before transfers Transfers Change in net position Beginning net position Ending net position MAJOR GOVERNMENTAL FUNDS General Fund General Fund Revenues Business TVDe Activities 2017 2016 2,991 $ 2,997 597 576 2,159 2,299 2.352 3.136 8,099 9,009 8,133 7,690 59 83 8,192 7,773 93 (1,236) 1,874 1,365 1,967 399 9,084 8,684 $ 11,051 $ 9,084 General Fund actual revenues of $92.8 million ended $13.8 million, or 17.5%, above the original budget and $12.8 million, or 12.1 %, below the final budget. Actual revenues were up $15 million or 19.2% when compared to 2015-16 actuals. Table 5 displays the variations in actual revenues, while Table 6 shows budgeted revenues compared to actuals. Charges for services contributed the most to the increase in actual general fund revenues with an increase of $6.8 million or 41% above last year. The largest contributors were payments made by Apple Inc. to satisfy outstanding amounts due from 2015-2016. These payments were deposit requirements outlined in the development agreement between Apple Inc. and the City of Cupertino. Property tax revenues went from $18.2 million in 2015-16 to $20.2 million in 2016-17, representing a $2.0 million dollar increase. The increase is mostly due to higher property taxes resulting from incremental assessed value of $822.3 million from the new construction at the Apple Campus 2 development. The value of Apple's business personal property also contributed to the increase which includes investments in computers, machinery, equipment, fixtures and furniture. 13 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Sales tax revenues increased from $21.3 million in 2015-2016 to $26.9 million in 2016-2017, representing a $5.8 million increase. The increase was primarily due to an upward trend in the local business sector and economy as well as the close-out triple flip payment. The remaining tax revenues for the General Fund (Transient Occupancy, Utility User, Franchise, and Other) collectively contributed $256,000 to the year -over -year increase. Revenues from use of money and property decreased by $189,000 due to a decrease in investment earnings. Intergovernmental revenues decreased just over $99,000 mostly due to a continued decline in state grants received year over year. Licenses and permits included fees for reviewing building plans, building inspections, construction, tenant improvements, and commercial/residential installations. License and permit fees were decreased from 2015-16 with a 17% decline, or $536,000. Fines and forfeitures experienced an upward trend from 2015-16 with a 6% increase, or $34,000. Other revenues went from $800,000 in 2015-16 to $1.8 million in 2016-17. The incremental revenues were the administrative charges applied to inspection service contractual expenses related to the Apple Campus 2 project as outlined in the development agreement between Apple Inc. and the City of Cupertino. Table 5 Revenue Changes General Fund, Fiscal 2017 vs. 2016 (in thousands) Increase/(Decrease) Fiscal 2017 From Fiscal 2016 Revenue by Source Amount % of Total Amount Percent Taxes: Property $ 20,219 22% $ 2,025 11% Sales 26,932 29% 5,582 26% Transient occupancy 6,024 6% 172 3% Utility user 3,082 3% (289) -9% Franchise 3,410 4% (68) -2% Other 2,982 3% 441 17% Use of money & property 1,173 1 % (189) -14% Intergovernmental 330 0% (99) -23% Licenses and permits 2,537 3% (536) -17% Charges for services 23,708 26% 6,860 41% Fines and forfeitures 593 1 % 34 6% Other 1,823 2% 1,023 128% Total revenues $ 92,813 100% $ 14,956 19% Other financing sources: Proceeds from sale of land $ - 0% $ (1) -100% Transfers in 5 0% (31) -86% Transfers in — fund closing 260 0% 260 100% Total other financing sources $ 265 0% $ 228 616% 14 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Table 6 Revenue, Budget and Actual Comparisons General Fund 2016-17 (in thousands) Variance with Budgeted Amounts Final Positive/ Original Final Actual (Negative) Taxes: Property $ 18,741 $ 20,741 $ 20,219 $ (522) Sales 22,440 25,940 26,932 992 Transient occupancy 6,708 6,708 6,024 (684) Utility user 3,122 3,122 3,082 (40) Franchise 2,900 2,900 3,410 510 Other 1,600 2,200 2,982 782 Use of money & property 777 897 1,173 276 Intergovernmental 231 231 330 99 Licenses and permits 2,499 2,499 2,537 38 Charges for services 19,250 36,801 23,708 (13,093) Fines and forfeitures 600 600 593 (7) Other 136 3,000 1,823 (1,177) Total revenues $ 79,004 $ 105,639 $ 92,813 $ (12,826) Transfers in $ - $ - $ 5 $ 5 Transfers in — fund closeout - - 260 260 Total other financing sources $ - $ - $ 265 $ 265 General Fund Expenditures Fiscal 2016-17 overall expenditures, at $65.1 million, were $13.2 million or 25% higher than last year. However, this result came in 10% or $7.1 million under the final budget. Year -over -year and budget - versus -actual results for General Fund programs are described below and in Tables 7 and 8. One of the primary contributors to this increase was related to Council -approved revised cost allocation plan (CAP). The CAP accounts for the full cost of providing specific services to the community by determining indirect (overhead) costs associated with operations. These overhead costs are used to calculate fees and also charged internally to user departments in the budget and credited as revenue to programs that provide these indirect service. This new methodology increases the CAP from $3.1 million to $12.2 million in revenues and corresponding expenditures, a 294% increase. In addition to the CAP revision, the following factors contributed to the increase in General Fund expenditures: Administration increased $1.9 million from 2015-16. In addition to employee compensation increases, law enforcement was higher by $1 million, which was the automatic increase in the existing contract with the Santa Clara County Sheriff's Office triggered by increases in the lease and PERS costs. Public and environmental affairs (IT) experienced an increase in expenditures from 2015-16 to 2016-17 of $1.3 million or 242%. This primarily consisted of employee compensation and benefits collectively increasing by $274,000, the CAP revision resulting in an increase of $293,000, and special projects increasing $362,000. 15 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Administrative services' increase of $2.2 million or 80% was primarily attributable to the hiring of several positions that had been vacant in the prior year. Recreation services General Fund expenditures experienced a 23% increase or $3.9 million across its programs. The majority of the expenditures increased in the salaries, benefits and contractual services categories. Community development expenditures in the General Fund increased $1.2 million or 23% due to salary and benefit increases as well as from higher contractual expenditures in the Building division for inspection services related to Apple Campus 2 inspections. Public Works expenditures increased $3.4 million or 26%. This is primarily represented by a $300,000 increase in benefits and a $2 million increase in the CAP. Transfers out of the General Fund increased from $13.2 million in 2015-16 to $26.6 million, with $3.3 million for capital projects in the Transportation Fund, $3.2 million for annual debt service, $15 million for capital projects in the Capital Improvements Projects Fund, $2.1 million to subsidize a state - mandated enforcement program, $1.9 million in operating subsidies to the City's Enterprise funds, and $1.1 million to internal service funds. Table 7 Expenditure Changes General Fund, Fiscal 2017 vs. 2016 (in thousands) Increase/(Decrease) Fiscal 2017 From Fiscal 2016 Function/Program Amount % of Total Amount Percent Administration $ 5,936 9% $ 1,884 46% Law enforcement 11,939 18% 950 9% Public and environmental affairs (IT) 1,865 3% 1,320 242% Administrative services 5,055 8% 2,244 80% Recreation services 9,362 14% 3,921 72% Community development 6,433 10% 1,184 23% Public works 16,485 25% 3,370 26% Capital outlay 8,000 12% (1,657) -17% Total expenditures $ 65,075 100% $ 13,216 25% Transfers out $ 26,609 191% $ 13,445 102% 16 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Table 8 Expenditure Changes General Fund 2016-17 (in thousands) Variance with Budgeted Amounts Final Original Final Actual Positive/ (Negative) Administration $ 6,445 $ 6,896 $ 5,936 $ 960 Law enforcement 11,884 11,938 11,939 (1) Public and environmental affairs 924 73 1,865 (1,792) Administrative services 4,682 5,109 5,055 54 Recreation services 10,478 10,676 9,362 1,314 Community development 6,917 8,398 6,433 1,965 Public works 17,606 18,282 16,485 1,797 Capital outlay 5,325 10,873 8,000 2,873 Total expenditures $ 64,261 $ 72,245 $ 65,075 $ 7,170 Transfers out $ 12,961 $ 28,694 $ 26,609 $ (2,085) General Fund - Fund Balance The General Fund carried a June 30, 2017, ending fund balance of $53,589,690, up 2.7% or $1.4 million from beginning of the fiscal year. Loan receivables and prepaid expenses totaled $876,939 of non - spendable fund balance. The City committed $19.0 million for general economic uncertainty and assigned $100,000 for PERS liability and $4.5 million for encumbrances. The City also restricted $1,016,771 Public access television purposes. Transportation The Transportation Special Revenue Fund carried a June 30, 2017, ending fund balance of $8,379,940, down 16.9% or $1.7 million from beginning of the fiscal year. The City committed $1.4 million for streets and roads projects and the remaining $7 million restricted for street and road purposes including related engineering and administrative expenditures. Housing Development The Housing Development Special Revenue Fund carried a June 30, 2017, ending fund balance of $12.5 million, down 2.8%, or $356,000 from beginning of the fiscal year. The activities in this fund remained relatively flat in comparison with 2015-16. Capital Improvement Projects The Capital Improvement Projects Capital Projects Fund carried a June 30, 2017, ending fund balance of $25,069,160, up 66.3 %, or $10 million from beginning of the fiscal year. During fiscal year 2016- 2017, this Fund received a $15 million transfer in from the General Fund for purposes of fund capital - related projects. 17 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Public Facilities Corporation A transfer of $3,177,286 was made from the General Fund to the Public Facilities Corporation Debt Service Fund to cover principal and interest on the 2012 Certificates of Participation lease payments. See Notes 4 and 6 to the Basic Financial Statements and the Debt Administration section of this analysis for more information. MAJOR PROPRIETARY FUNDS Resource Recovery The City has a solid waste franchise agreement with Recology that shares collection, landfill disposal, and recycling revenues and costs. This fund receives 17% of Recology revenues with the funds going toward landfill costs, regulatory fees, and staffing costs that the City incurs to manage its solid waste, recycling, and household hazardous waste programs. Due to a Council approved commercial customer rate increase of 5.28%, effective July 1, 2016 and an annual customer rate increase of 2.68% to reflect consumer price index increased both residential and commercial revenues. Total operating revenue rose from $2.66 million last year to $2.79 million this year, while expenses decreased by $6,000. Net position decreased by $112,363. The fund ended the year with a $5,341,647 net position. Recreation Programs This enterprise operates the Quinlan Community Center, Monta Vista Recreation Center, McClellan Ranch, Creekside Park building, eight school sites, and various parks. The improved economy and enhanced marketing helped cultural events, youth and teen programs, sports, dance and fitness classes generate $2,779,000 in revenues that were 4.1 % higher than last year. Ongoing program expenses of $2,679,000 included full-time administrative and programming staff, part-time activity leaders, and class instructors on contract. This resulted in a net operating income of $99,000 as compared to operating income of $670,000 a year ago. This year a transfer in from the General Fund was made for $457,000. After the transfer, the fund ended up with an increase in net position of $569,499. The City also identified and corrected an error in reporting of capital assets in prior years and adjusted the beginning net position by $328,000. The fund ended the year with a net position of $3,067,418. NONMAJOR PROPRIETARY FUNDS Blackberry Farm City employees, with a teaching professional contractor, staff the City -owned Blackberry Farm golf course and pro shop. Operating revenues decreased 3% in 2016-2017 from $335,000 to $325,000. Operating expenses increased by $21,000 to $597,000 this year due to increased contract services costs and capital investment in the golf course turf. Altogether, the golf course's operating loss increased from $242,000 last year to $272,000 this year. After a transfer in from the General Fund of $333,000 (increase of $71,000), net position increased $65,000. As of June 30, 2017, this f ind's net position was $637,556. CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 Cupertino Sports Center Tennis lesson, membership, fitness class and rent revenues of $2,238,000 increased by $14,000 or 0.6% over last year, resulting from moderate increases across the Sport Center's major revenue sources. In addition, expenses decreased by $140,000 or 6%, resulting in a net operating income of $79,000. In 2015-16, net operating loss was $67,000. This operating loss improved by $146,000 from 2015-16. Additionally, $1,031,000 was transferred in from the General Fund. As of June 30, 2017, this fund's net position was $2,004,836. CAPITAL ASSETS At June 30, 2017, the City had $184.7 million, net of depreciation, invested in a broad range of capital assets used in governmental and business -type activities, as shown in Table 9 and in Note 5 to the Basic Financial Statements. This reflects the City's continued investment into capital projects dedicated to street and transportation improvements, storm drain improvements, and maintenance of and improvements to City facilities, resulting in an increase in net capital assets of $2.8 million, after depreciation. Table 9 Capital Assets, Net of Depreciation, at June 30 (in thousands) 2017 Governmental Activities: Land Easements Construction in Progress Buildings Improvements other than buildings Machinery and equipment Roads, curbs, gutters, sidewalks, medians and bridges Streetlights Storm drain structures and mains Traffic signals Total Governmental Activities Business -Type Activities Construction in progress Buildings Improvements other than buildings Machinery and equipment Total Business -Type Activities Total City $ 62,046 19,492 774 18,442 15,657 3,718 56,040 1,503 3,949 1,067 2016 62,046 19,492 760 19,770 16,974 2,761 50,245 1,613 5,174 948 182,688 179,783 13 608 755 501 1,109 906 95 21 1,972 2,036 $ 184,660 $ 181,819 19 CITY OF CUPERTINO Management's Discussion and Analysis (Unaudited) For the Year Ended June 30, 2017 DEBT ADMINISTRATION The City's only long-term debt liability at June 30, 2017, comes from $43,940,000 in Certificates of Participation (COPS) issued in May 2012 by the Cupertino Public Facilities Corporation. The certificates refunded previously issued COPS that financed Wilson Park, Blackberry Farm, and Creekside Park purchases, the Memorial Park expansion, the Quinlan Community Center construction, the City Hall remodel, and the new library opened in 2004. The serial fixed rate debt ranging from 0.35% to 3.125% requires annual debt payments of approximately $3,168,000 that are covered by the General Fund. The June 30, 2017, outstanding principal of $33,700,000 is due to be paid off by 2030. More information can be found in Note 6 to the Basic Financial Statements and in the Public Facilities Corporation discussion earlier in this analysis. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This Comprehensive Annual Financial Report is intended to provide a general overview of the City's finances. Further information can be provided by the City of Cupertino Finance Department, 10300 Torre Avenue, Cupertino CA 95014, phone (408) 777-3280, or by the City website at www.cupertino.org. 20 STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES The Statement of Net Position and the Statement of Activities summarize the entire City's financial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all the City's assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis - the effect of all the City's transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between City funds have been eliminated. The Statement of Net Position reports the difference between the City's total assets and deferred outflows and the City's total liabilities and deferred inflows, including all the City's capital assets and all its long term debt. The Statement of Net Position summarizes the financial position of all the City's Governmental Activities in a single column, and the financial position of all the City's Business -Type Activities in a single column; these columns are followed by a Total column which presents the financial position of the entire City. The City's Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Funds. Since the City's Internal Service Funds service these Funds, their activities are consolidated with Governmental Activities, after eliminating inter -fund transactions and balances. The City's Business Type Activities include all of its Enterprise Fund activities. The Statement of Activities reports increases and decreases in the City's net position. It is also prepared on the full accrual basis, which means it includes all the City's revenues and all its expenses, regardless of when cash changes hands. This differs from the "modified accrual" basis 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 City's expenses first, listed by program, and follows these with the expenses of its business -type activities. Program revenues, that are revenues which are generated directly by these programs, are then deducted from program expenses to arrive at the net expense of each governmental and business -type program. The City's general revenues are then listed in the Governmental Activities or Business -type Activities column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position. Both these Statements include the financial activities of the City and the Cupertino Public Facilities Corporation, which is a legally separate component unit of the City because it is controlled by and financially accountable to the City. 21. CITY OF CUPERTINO, CALIFORNIA STATEMENT OF NET POSITION JUNE 30, 2017 Business - Governmental Type Activities Activities Total ASSETS Cash and cash investments (Note 2) $ 129,090,145 $ 12,050,592 $ 141,140,737 Restricted cash and investments (Note 2) 4,251,603 - 4,251,603 Receivables Accounts 3,018,830 74,930 3,093,760 Interest 94,152 - 94,152 Loans (Note 3) 1,449,008 - 1,449,008 Prepaid expenses and other assets 29,109 - 29,109 Net OPEB asset (Note 11) 10,344,876 - 10,344,876 Capital assets (Note 5): Non -depreciable 82,311,493 13,296 82,324,789 Depreciable, net of accumulated depreciation 100,376,438 1,958,873 102,335,311 Total assets 330,965,654 14,097,691 345,063,345 Deferred outflows of resources Related to pension (Note 10) 8,480,196 565,797 9,045,993 LIABILITIES Accounts payable and accruals 7,105,735 528,010 7,633,745 Accrued payroll and benefits 224,418 289 224,707 Deposits 10,663,048 - 10,663,048 Unearned revenue 109,789 553,511 663,300 Compensated absences (Note 1): - Due in one year 502,760 78,882 581,642 Due in more than one year 2,703,288 106,966 2,810,254 Claims payable (Note 9): Due in one year 521,998 - 521,998 Due in more than one year 1,160,653 - 1,160,653 Long-term debt (Note 6): Due in one year 2,180,000 - 2,180,000 Due in more than one year 31,520,000 - 31,520,000 Net pension liability (Note 10) 34,442,001 2,297,961 36,739,962 Total Liabilities 91,133,690 3,565,619 94,699,309 Deferred inflows of resources Related to pension (Note 10) 695,625 46,412 742,037 Net position (Note 7) Net investment in capital assets 153,239,534 1,972,169 155,211,703 Restricted for: Special revenue projects 20,910,289 - 20,910,289 Affordable housing 12,484,169 - 12,484,169 Debt service 1,597,234 - 1,597,234 Total restricted net position 34,991,692 - 34,991,692 Unrestricted 59,385,309 9,079,288 68,464,597 Total Net Position $ 247,616,535 $ 11,051,457 $ 258,667,992 See accompanying notes to financial statements 22• Q o Z N O W M LL F W z UFO Q 0 Z LL w a F W Z)2w U H } LL W O U) H F U O LL N O LO N W tT W LT W W M f- r d) W LO 7 N A W N to LO @ 7 01W M M LO O M N y0 � h W M W M� O W F �C6 CqN C5 EA O N @ c N N L > Fts C O m Q >a (D z va C N N N @ 0)W W Lo M 0) r 6N1 X- 0) LL a) 0)W Ln V N Lo W N LO 0 O W M M LO O M N L C 'j � W m co M� O W ZU O ; V�V�vC0 Q v Ln (0 b4 ' ' ' ' ' ' CO co Ln co W N Cl! C _ O @ @ ._ LO LO p_ 4 N N @ C 'C U � � U U va rn N IT O co N C "O C M M C O) W > O O cM O Cl) E Q N L N m w 06 U o � IL W Vh O N I- LO O n h� CNO 7cq'" O N@ O W O Cl) tN0 LSO N V RN-1W L17 O O) W 0 01 Z M M N O co I- _ � N U r- co co V N coWLO d) V y "'M--7 LO LO Cl! P-L W NM W V W 0N W Ih N co W LO I- W M M C W LO W W W I� V O O N N LO O M N X co W W b4 I- N O h co M W W W co O N 0, � C W N co N co I- V O I- h N m O N 7 It1 LO h N O h CO co W W W W O O) CO N W n V V O) v h NV m m LO cc co LO N va N m M Cel N O V cM W LO O O N N W N M N O L O O O N LO W W 7 W m N m Ih v W r M N r O N N N CO W M n co V O N f� V N lfi Ci LO M O Cl! N N N CO m W i N ) @ > j @ C @O U U C E @ `y @ 0E" w 1 E@ C N n E 5 C C 2 U N > �' E O N N @ N > lT E > O y m @ O E ID N> y 'O rn 0 N N d Q a C 12 N @ N o N N O C O O O y. U a� C O 3 o c o c) c E c� m ya o -0-E co m -0 m m v aLi o � �i a�i LL U'o QJLLQ Q'ULL m Of coU LL' F O I, N h N W W N CO ' N 7 (M W O"- 7 0 V N I� O) W N O (O '"LO I� O O W 7 to O f� N M N O CO W M M N O n I- LO f0 co N co 0 LO N LO O r W O h W N O O C C 7 N h 0 N O M N LO � W N W M M co N 0) LO V co N N 613 N' O N O r- � O r � W fN0 7 N W I I co O 0); rfl O I- N I- N W W O W O : N_ V V M W O f� PM O { d) V co W N O (O V LO r O1 O L17 L17 O LO h N CO N O) W WIT It 7 N CO N M W LO CO co N co O LO N O O I- h� N _O N m 0)0 O ItN W O co N O V 10 M W W W cM P 1 M N- V M r N N ER rn N C V @ N 4? C U O @ 6 N Z N > VD w N 7 C 7 C N O y OCL C > r/i N C d 7 X R mgC U N .O C O X X t N .@+ y0 @ U@ 3 LU C d N C �0 �>6. N N O C L O 0 > 'C > �@.. N 7 t N> C C Z C O Z C C O C S 2) @ o o Fa m m r rn o y w °1 o Q mad U) Z) L0 2g > y r- w a a (D 0 Z Z Lh N FUND FINANCIAL STATEMENTS In the Fund Financial Statements only individual major funds are presented, while non -major funds are combined in a single column. Major funds are defined generally as having significant activities or balances in the current year. The funds described below were determined to be Major Funds by the City for fiscal 2016-17. Individual non -major funds may be found in the Supplementary section. General Fund: The general fund is the general operating fund of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund. Transportation Special Revenue Fund: Accounts for the City's gas tax, vehicle registration fees and grant revenues and expenditures related to the maintenance and construction of City streets. All revenue in this fund is restricted exclusively for street and road purposes including related engineering and administrative expenditures. Housing Development Special Revenue Fund: Accounts for the Federal Housing and Community Development Grant Program activities administered through the County. Monies collected from developers that mitigate the impact of housing needs are also included. Monies in this fund are governed by the program's rules. Public Facilities Corporation Debt Service Fund: This fund accounts for the payments of principal and interest on certificates of participation issued to provide for the financing of the Civic Center, Library, Wilson Park, Memorial Park, and other City facilities. Capital Improvement Protects Capital Protects Fund: This fund accounts for activities related to the acquisition or construction of major capital facilities. 24. Cl) O N N O LO V M O (O 00 O M O O O N LO V) O O Cl) m O Cl) LO O O N O O It V O f— N N M O O LO O LO O O O O N O O N M O C (C O P- N O m u, OId- 0 0 LO Cl) M I— It M (n V O O (O � 00 V L- 0') Cl) �p E -O O LO O't O N O 0')N O C) 0) r O O Lf) (O O Q C C O N O V V M O N Cc M 00 O co 0) O N Cl) LL N co M CO CO N N N- co O ELT 6q I (A (Al .'t M ' ' ' ' h O ' ' O m N N It (n O V LO 'IT LO O M N N N O O M O N U M M Ih 00 OD N_ C0 0')f— m -0 � M i � E C C O N �cyi M M M 0 Z 0 U V4 6cy, � M ' M 1— h o 0 CO (O M C N ti C ti LO LO I� 0 E U .m.LL .Q > 01 00 00 O O) 0) 6) O O O m O O m U LO U a U .O N N N N N EA Efl EA EA 1 M i i i i i co M i i I O i i i M C C M M N N u, O p (09 U N :tfm Q LL LO 41 _ Ln N _ LLi N LO LO Cfl O O (� LO LO _- Ln N N N d .V V N N V LL U Q cn of O CQ LL 0 �_ v rn o" O O O w" rn m N O O CDU Q H N M V V LL W O � E r— 6) LO LO C) CD 0)O = C:)-O .UJ U ca O N O LO V Cl) O Qco N C O N N N ZZWo LL > Z a z Q � Ef3 EA EA EA Uw m M N i i ' ' ' C LO LO C)LL > O O t V � V N (O 0 V O co m O ON N _ � O r- d O� O (D (O N N O Cl) Cl) (O U U) a w ai m 06 of m ' (O N V O LO V N O co 00 O N O O— M (D N h O LO — O N O Lf) I� It It O (O co I-- O 00 O O In C--r- O N O O M O r, M Cr- O -- r- (O O m O M-q O LO Co 00 zr M m 00 (O (O O co L-- O Co LO O Lf) O N (O N (0 O U) f� CDM U') co C C co- CON CO 00 00 O O C4 O LO Nt N N N I� N O M O O M r- ('� O O N LO (D ER EA EA EA N N u) (1) U Z U O O C m C � U)i c cu m 7 w a) u) C co U Z O U m i O 2 Z m 7 o (n w u, C N - N 7 O N U a m C '0 m C -O C m 'O C N 0 C s 0)� C O m V, m c) E m ,� () O m 7 — C u) U> N Z N m = E u) w N wU fn NO 'O"aCU N O a) E O U m 0 CC a) a)-0 CZ) 2 -O -O co C — V) (6 -0 w Q 'O m N N '0) O O H 0 U> p 0 coO +m. J C :m C U N L>6 .m. fD m U) .0 E 0) u) ~ W CO n U U m m m U p m O_ N o H = i m 0 fl N p 2 m o C H c� E -7 m o O N O O C H CO m o a) Q--j O N L Q U U N C H N 7 - C Z of U Q 7) QUww �d O .J000 Z) 0 LL LO N V) C 0 E a) m U C m C O V) O C O C T C m Q E O U m N m CITY OF CUPERTINO, CALIFORNIA RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2017 Total fund balances reported on the governmental funds balance sheet $ 114,269,250 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 used in governmental activities are not current assets or financial resources and therefore are not reported in the governmental funds. 179,968,683 Internal service funds are used by management to charge the costs of activities such as information technology, insurance, equipment acquisition and maintenance, and certain employee benefits to governmental funds. The assets and liabilities of the internal service funds are therefore included in the governmental activities of the statement of net position. 15,068,647 Certain receivables are not available to pay for current period expenditures and therefore are deferred in the governmental funds. 40,120 The liabilities, deferred inflows of resources and deferred outflows of resources are not related to the current period and therefore are not reported in the governmental funds: Long-term debt (33,700,000) Net pension liability (32,252,686) Pension -related deferred outflows of resources 7,941,150 Pension -related deferred inflows of resources (651,408) Compensated absences (3,067,221) Net position for governmental activities $ 247,616,535 See accompanying notes to financial statements 26. U) W U Z Q m 0 Z M LL Z U) W Q � O Z Z N OU=oM LL 0 U w Z Z ULL Q O Q w W Z Z w 0 W D Z W -E L W C) W Z Wa W LL w O � U D LU p W LL w W w LL O H Z W 2 W H Q U) a pci y — 3 (6 E U @ LL > N N CO O O @ U 0- la- C) a` C a IN O U N LL L d L (D 7 .0 e c)U LL LL U U I- 0 0 L0 I-- V V V 000 CNO ON — ON � V LO LC) 0 C+') M V M N N 0 M 0 0 0 0 O V LO LO 0 O N r N N N N N ff3 NN L000 I- M 0 r1 ^ O) N co 0 ER C'M LO 0 m V N LO LO O 0 r- M W V Cl) Cl) O) 0 0 O N 0 O t` LO O N LO r O c r N O V V r r M LO v d) ,I- M0LO0MNC; �m' r O) CA 0 O M V 0 O r V) LO O) r 0 0 N r04 00 0 LO M O c) C) OC) CD 0 0 OD 0 O O N N N N N O Cl) Cl) N O � O 0 Ln LO r r O r N r CO i i i i i i C W r- W d a E 0 0 0 w cfl r- r- N. w C 7 0 M V Ln V c'M 0 O O O) O) O O (D LL = > 63 C ' m V ' 0) ' 0 � . . . . . O) i O 0 M O N � 1 0 W @ U n V O)CL 7 0) N Cl) 0 N O r 0 LO Cl 0 U) cl N r N r CO 0) @ c+')LO007M0I7 M O O N O N 0 to 0 O M M 1� m 0 M 0 0 0 M N N C MMO O)Oc r r M 0� 0 0 0 N r N M r N 0 N O to a) O) O_ O O) n N V) a U u) c :° E w m co T@ a N C 7 N O C ca N N a 7 N O 0 m C y N C N C, O) @ O) @ L a) DSID EO O Cli M LO O LO LO LO O C 0 0 O N N co O r- M 0 M 0 O 0 M Co rn C+') LO 0 r; � M O LO O) V 00 LO V V 0 O V 7 M V O 'T 0 0 —0 M (0 0 I�- LO r-- r r 0 N O) rn � O) @ _ V) c C Q) > NN N UE _ L c c O) O O O U N V) > U U c E C O N K C a O) N '� N Y T a N .0 c N N U a (i C w @ O) C Q N 7 V) 00 c O 'O — U @ X� O_ @ u) c ?i 7 @ 0) '6 N N O a Lap 7 a O) 0 7 C N O) >O a Q � LL Q U LL@ d 5 X W U U W O O 0 O CM CM 0 0ON Ln 0 r O N N N W ' Lo O LfD O O ' 0 N o coo m O r-- N O O O O � N LO N N 000 000 N N 0 cD co M N ' ' N � � cp co I- � LO O_ M M Cl 0 LO G O c M It N COO Cl 0 0 N N to O) V O) 7 O O N_ N LO N 0 0) LO 0 M O) N r N EA Lo O r O O N_ V N r M N O (00 00 M 0 r It 'T O) N C C O 0 N cs) LL( ONO M N O) N 0 r— LQ LQ EA N O) V LO LOO V 0000 M 0 V N N �3 LO V r` m � O M o 00 U) 0 0 W W � 'IT It m M L00 r N M LO LO ER O) U C y L6 N Co U N -0 C 07 a 2 U wco N c c � (D C O O C C _ C O U C C O) 0) c Z m w CITY OF CUPERTINO, CALIFORNIA RECONCILIATION OF NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 The schedule below reconciles the net changes in fund balances reported on the governmental funds statement of revenues, expenditures and changes in fund balances, which measures only changes in current assets and current liabilities on the modified accrual basis, with the change in net position of governmental activities reported in the statement of activities, which is prepared on the full accrual basis. Total net changes in fund balances reported on the governmental funds balance sheet $ 11,358,121 Amounts reported for governmental activities in the statement of activities are different from those reported in the governmental funds because of the following: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets are capitalized and depreciated over their estimated useful lives, which is reported as depreciation expense. Expenditures for capital assets reported as: Capital outlay 9,873,146 Depreciation expense (7,354,802) Net retirements (635,609) Long term debt principal payments are reported as expenditures in the governmental funds but are not reported as expenses in the statement of activities. 2,135,000 The changes in the amounts below do not provide or require the use of current financial resources and therefore are not reported as revenues or expenditures in the governmental funds: Accounts receivable (52,454) Compensated absences (370,530) Net pension liability (3,631,533) Pension -related deferred outflows of resources 4,277,057 Pension -related deferred inflows of resources 1,174,282 The item reported in the governmental funds as a transfer in - fund closing is not reported as such in the statement of activities, as the internal service fund that was closed into the General Fund was reported as part of governmental activities in prior years. (260,374) The City's Information Technology Internal Service Fund had a restatement of beginning net position due to an error in the allocation of pension related items in prior years which was determined not to be material at the government -wide level. (1,184,643) Internal service funds are used by management to charge the costs of activities such as information technology, insurance, equipment acquisition and maintenance, and certain employee benefits to governmental funds. The portion of the net expense of these internal service funds arising out of their transactions with governmental funds is reported with governmental activities because they service those activities. (1,905,070) Change in net position of governmental activities $ 13,422,591 See accompanying notes to financial statements 28. CITY OF CUPERTINO, CALIFORNIA GENERALFUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues Taxes $ 55,511,000 $ 61,611,000 $ 62,648,633 $ 1,037,633 Use of money and property 776,980 896,980 1,173,095 276,115 Intergovernmental 230,500 230,500 330,108 99,608 Licenses and permits 2,499,000 2,499,000 2,536,925 37,925 Charges for services 19,250,524 36,801,152 23,708,304 (13,092,848) Fines and forfeitures 600,000 600,000 593,123 (6,877) Other revenue 136,000 3,000,366 1,822,766 (1,177,600) Amounts available for appropriation 79,004,004 105,638,998 92,812,954 (12,826,044) Charges for appropriation (outflows): Current Administration Law enforcement Public and environmental affairs Administrative services Recreation services Community development Public works Capital outlay Total charges for appropriations Excess of revenues over expenditures Other financing sources (uses) Transfers in Transfer in - fund closing (Note 14) Transfers (out) Total other financing sources (uses) Net change in fund balance Beginning fund balance Ending fund balance 6,444,972 6,895,796 5,936,337 959,459 11,884,384 11,938,210 11,939,095 (885) 924,006 73,364 1,864,746 (1,791,382) 4,681,655 5,108,952 5,054,539 54,413 10,478,073 10,676,077 9,361,934 1,314,143 6,917,023 8,398,392 6,433,422 1,964,970 17,605,553 18,282,113 16,484,844 1,797,269 5,325,414 10,872,659 7,999,577 2,873,082 64,261,080 72,245,563 65,074,494 7,171,069 14,742,924 33,393,435 27,738,460 (5,654,975) - - 5,374 5,374 - 260,374 260,374 (12,961,373) (28,693,806) (26,609,358) 2,084,448 (12,961,373) (28,693,806) (26,343,610) 2,350,196 $ 1,781,551 $ 4,699,629 1,394,850 $ (3,304,779) 52,194,840 $ 53,589,690 See accompanying notes to financial statements 29. CITY OF CUPERTINO, CALIFORNIA TRANSPORTATION SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Revenues Use of money and property Intergovernmental Charges for services Other revenue Amounts available for appropriation Charges for appropriation (outflows): Current Public works Capital outlay Total charges for appropriations Excess of revenues over expenditures Other financing sources (uses) Transfers in Total other financing sources (uses) Net change in fund balance Beginning fund balance Ending fund balance Budgeted Amounts Original Final Variance with Final Budget Actual Positive Amounts (Negative) $ 10,000 $ 10,000 $ 47,373 $ 37,373 2,780,151 3,025,439 1,798,004 (1,227,435) - - 22,279 22,279 - 25,859 174,498 148,639 2,790,151 3,061,298 2,042,154 (1,019,144) 1,589,458 1,626,880 1,530,761 96,119 8,188,000 8,377,590 8,365,189 12,401 9,777,458 10,004,470 9,895,950 108,520 (6,987,307) (6,943,172) (7,853,796) (910,624) 6,103,000 6,152,982 6,152,982 - 6,103,000 6,152,982 6,152,982 - $ (884,307) $ (790,190) (1,700,814) $ (910,624) 10,080,754 $ 8,379,940 See accompanying notes to financial statements 30. CITY OF CUPERTINO, CALIFORNIA HOUSING DEVELOPMENT SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Revenues Taxes Use of money and property Intergovernmental Licenses and permits Amounts available for appropriation Charges for appropriation (outflows): Current Community development Capital outlay Total charges for appropriations Excess of revenues over expenditures Other financing sources (uses) Transfers in Total other financing sources (uses) Net change in fund balance Beginning fund balance Ending fund balance Budgeted Amounts Original Final $ 15,113,279 $ 15,113,279 251,672 251,672 62,918 62,918 15,427,869 15,427,869 1,007,023 1,254,921 3,500,000 - 4,507,023 1,254,921 10,920,846 14,172,948 - 3,614 - 3,614 $ 10,920,846 $ 14,176,562 Variance with Final Budget Actual Positive Amounts (Negative) $ 39,000 $ (15,074,279) 141,908 141,908 456,926 205,254 - (62,918) 637,834 (14,790,035) 997,870 257,051 997,870 257,051 (360,036) 3,614 3,614 (356,422) 12,840,591 $ 12,484,169 (14,532,984) $ (14,532,984) See accompanying notes to financial statements 31. MAJOR PROPRIETARY FUNDS Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges. The City has identified the funds below as major proprietary funds for fiscal 2016 - 17. Resources Recovery Fund: This fund accounts for activity related to the collection, disposal, and recycling of solid waste. A private company has been issued an exclusive franchise to perform these services. Recreation Programs Fund: This fund accounts for activities of the City's community centers and park facilities. 32. CITY OF CUPERTINO, CALIFORNIA PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2017 Business -type Activities - Enterprise Funds Governmental Nonmajor Activities - Resources Recreation Enterprise Internal Service Recovery Programs Funds Totals Funds ASSETS Current assets Cash and cash investments (Note 2) $ 6,293,827 $ 2,731,078 $ 3,025,687 $ 12,050,592 $ 7,029,004 Accounts receivable - 74,930 74,930 Total current assets 6,293,827 2,806,008 3,025,687 12,125,522 7,029,004 Noncurrent assets Net OPEB asset (Note 11) - - - 10,344,876 Capital assets (Note 5): Nondepreciable - 13,296 - 13,296 - Depreciable, net of accumulated depreciation 17,120 1,385,498 556,255 1,958,873 2,719,248 Total non current assets 17,120 1,398,794 556,255 1,972,169 13,064,124 Total assets 6,310,947 4,204,802 3,581,942 14,097,691 20,093,128 Deferred outflows of resources Related to pension (Note 10) 214,119 172,736 178,942 565,797 539,046 LIABILITIES Current liabilities Accounts payable and accruals 198,898 131,905 197,207 528,010 108,445 Accrued payroll and benefits 289 - - 289 72 Due to other funds (Note 4) - - - - 1,400,000 Compensated absences (Note 1): 41,185 10,092 27,605 78,882 23,325 Claims payable (Note 9) - - - - 521,998 Unearned revenue - 438,710 114,801 553,511 - Total current liabilities 240,372 580,707 339,613 1,160,692 2,053,840 Noncurrent liabilities Compensated absences (Note 1) 55,848 13,685 37,433 106,966 115,502 Claims payable (Note 9) - - - - 1,160,653 Net pension liability (Note 10) 869,635 701,559 726,767 2,297,961 2,189,315 Total liabilities 1,165,855 1,295,951 1,103,813 3,565,619 5,519,310 Deferred inflows of resources Related to pension (Note 10) 17,564 14,169 14,679 46,412 44,217 Net position (Note 7) Net investment in capital assets 17,120 1,398,794 556,255 1,972,169 2,719,248 Unrestricted 5,324,527 1,668,624 2,086,137 9,079,288 12,349,399 Total Net Position $ 5,341,647 $ 3,067,418 $ 2,642,392 $ 11,051,457 $ 15,068,647 See accompanying notes to financial statements 33. CITY OF CUPERTINO, CALIFORNIA PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2017 Operating revenues Charges for services Other Total operating revenue Operating expenses Salaries and benefits Materials and supplies Contractual services Insurance and claims and premium Depreciation (Note 5) Total operating expenses Operating income (loss) Nonoperating revenues Investment Income Gain on sale of capital assets Total nonoperating revenues Income (loss) before transfers Transfers in (Note 4) Transfers (out) - fund closing (Note 14) Changes in net position Net position - beginning of year as restated (Note 15) Net position - end of year Business -type Activities - Enterprise Funds Governmental Nonmajor Activities - Resources Recreation Enterprise Internal Service Recovery Programs Funds Totals Funds $ 2,717,524 $ 2,223,960 $ 2,543,458 $ 7,484,942 $ 3,742,404 74,666 554,628 19,789 649,083 1,529 2,792,190 2,778,588 2,563,247 8,134,025 3,743,933 724,582 635,600 683,833 2,044,015 3,248,202 175,422 419,066 338,386 932,874 2,124,450 2,087,822 1,358,087 1,672,422 5,118,331 481,120 - - - - 788,824 3,351 266,478 62,008 331,837 212,908 2,991,177 2,679,231 2,756,649 8,427,057 6,855,504 (198,987) 99,357 (193,402) (293,032) (3,111,571) 33,409 12,830 12,773 59,012 32,276 - - - - 82,095 33,409 12,830 12,773 59,012 114,371 (165,578) 112,187 (180,629) (234,020) (2,997,200) 53,215 457,312 1,363,593 1,874,120 1,092,130 (532,385) (112,363) 569,499 1,182,964 1,640,100 (2,437,455) 5,454,010 2,497,919 1,459,428 9,411,357 17,506,102 $ 5,341,647 $ 3,067,418 $ 2,642,392 $ 11,051,457 $ 15,068,647 Reconciliation of proprietary fund statement of revenues, expenses and changes in net position to the statement of activities: Beginning net position above The City's Recreation Programs Fund had a restatement of beginning net position due to an error in the reporting of capital assets in prior years which was determined not to be material at the government -wide level. Beginning net position reported in the statement of activities: Change in net position above The City's Recreation Programs Fund had a restatement of beginning net position due to an error in the reporting of capital assets in prior years which was determined not to be material at the government -wide level. Change in net position reported in the statement of activities: $ 9,411,357 (327,730) $ 9,083,627 $ 1,640,100 327,730 $ 1,967,830 See accompanying notes to financial statements 34. CITY OF CUPERTINO, CALIFORNIA PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017 Cash flows from operating activities Cash received from customers Cash payments to suppliers for goods and services Cash payments to employees for salaries and benefits Cash payments for judgment and claims Net cash provided (used) by operating activities Cash flows from noncapital financing activities Transfers in Transfers (out) - fund closing Cash flows from noncapital financing activities Cash flows from capital and related financing activities Acquisition of capital assets Cash flows from capital and related financing activities Cash Flows from Investing Activities Interest received Cash flows from investing activities Net cash flows Cash and investments at beginning of year Cash and investments at end of year Reconciliation of operating income (loss) to to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Change in assets and liabilities Accounts receivable Prepaid expense Net OPEB asset Due to retirement system Accounts payable and accruals Unearned revenue Compensated absences Claims payable Net cash provided (used) by operating activities Noncash capital and related financing Transfer of capital assets Transfer of debt Business -type Activities - Enterprise Funds Governmental Nonmajor Activities - Resources Recreation Enterprise Internal Service Recovery Programs Funds Totals Funds $ 3,094,334 $ 2,682,977 $ 2,575,147 $ 8,352,458 $ 3,756,878 (2,722,323) (1,860,659) (2,051,060) (6,634,042) (2,570,021) (596,237) (775,766) (672,936) (2,044,939) (2,561,366) - - - (587,271) (224,226) 46,552 (148,849) (326,523) (1,961,780) 53,215 457,312 1,363,593 1,874,120 2,041,910 - - - - (337,571) 53,215 457,312 1,363,593 1,874,120 1,704,339 (2,484) (13,298) (252,310) (268,092) (1,105,218) (2,484) (13,298) (252,310) (268,092) (1,105,218) 33,409 12,830 12,773 33,409 12,830 12,773 (140,086) 503,396 975,207 6,433,913 2,227,682 2,050,480 $ 6,293,827 $ 2,731,078 $ 3,025,687 59,012 59,012 1,338,517 10,712,075 $ 12,050,592 32,276 32,276 (1,330,383) 8,359,387 $ 7,029,004 $ (198,987) $ 99,357 $ (193,402) $ (293,032) $ (3,111,571) 3,351 266,478 62,008 331,837 $ 212,908 302,144 (74,930) 7,243 234,457 12,945 - - - 25,210 - - - 147,661 106,371 (76,754) 3,749 33,366 509,843 (459,079) (83,506) (40,252) (582,837) 10,339 - (20,681) 4,657 (16,024) - 21,974 (63,412) 7,148 (34,290) 29,332 - - 201,553 $ (224,226) $ 46,552 $ (148,849) $ (326,523) $ (1,961,780) $ $ $ $ $ 512,648 (240,637) See accompanying notes to financial statements 35. FIDUCIARY FUND Fiduciary funds account for activities where the City holds related resources in trust for specific purposes but cannot claim the resources with those that belong to the City. Other Post -Employment Benefits Trust Fund: This fund accounts for activity related the City's OPEB plan administered through a qualified trust. 36. ASSETS Cash and equivalents Investments: Mutual funds: Fixed income Equity Real estate Commodities Total assets LIABILITIES CITY OF CUPERTINO, CALIFORNIA FIDUCIARY FUND STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2017 Other Post -Employment Benefits Trust Fund $ 283,196 7,028,405 16,811,534 1,390,234 231,706 25,745,075 NET POSITION Restricted for post -employment benefits other than pensions $ 25,745,075 See accompanying notes to financial statements. 37. CITY OF CUPERTINO, CALIFORNIA FIDUCIARY FUND STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED JUNE 30, 2017 ADDITIONS Employer contributions Investment income: Net increase in fair value of investments Interest and dividends Less investment expense Total additions DEDUCTIONS Benefit payments Administrative expense Total deductions Change in net position Net position - beginning of year Net position - end of year Other Post -Employment Benefits Trust Fund $ 1,332,975 2,563,281 451,950 (55,617) 4,292,589 1,332,975 48,629 1,381,604 2,910,985 22,834,090 $ 25,745,075 See accompanying notes to financial statements. 38. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity: The City of Cupertino, California (the City) was incorporated on October 3, 1955, under the laws of the State of California. The City operates under a Council - City Manager form of government and provides services through the following departments: Administrative Services, Community Development, City Manager, Parks and Recreation, Public and Environmental Affairs, and Public Works. Fire services are provided by the Santa Clara County Fire District, and the City contracts with the Santa Clara County Sheriff's Department for police services, and with Recology for garbage and recycling services. The accompanying basic financial statements include all funds and boards and commissions that are controlled by the City Council. The basic financial statements include the City's blended component unit entity for which the City is considered to be financially accountable. A blended component unit, although a legally separate entity, is in substance, part of the City's operations and so data from this unit is combined with the City. Blended Component Unit: The Cupertino Public Facilities Corporation (the Corporation) was incorporated in May 1986, under the Nonprofit Public Benefit Corporation Law of the State of California. The Corporation was organized as a nonprofit corporation solely for the purpose of assisting the City in the acquisition, construction, and financing of public improvements which are of public benefit to the City. The Corporation, after acquiring certain properties from the City, leases these back to the City. The lease money provides the funds for the debt service for the Certificates of Participation issued by the Corporation to acquire the properties. The Corporation does not issue separate financial statements, since it is reported separately in the City's basic financial statements. Fiduciary Component Unit/Change in Reporting Entity: The City participates in the Public Agency Retirement System (PARS) Public Agencies Post Retirement Health Care Plan Trust Program (PARS Trust), an agent -multiple employer irrevocable trust established to fund other postemployment benefits. The PARS Trust functions for the benefit of the employees. The City funds all PARS Trust costs based on actuarial valuations for its specific portion of the PARS Trust as opposed to the PARS Trust as a whole. Effective July 1, 2016, the City reported in its fiduciary fund financial statements the PARS Trust that pertains to the City as well as any non -Trust elements of the Plan that are required to be recognized under applicable standards due to a change in the reporting entity. With the implementation of GASB Statement 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, the City reviewed the PARS Trust separately issued financial statements and determined that inclusion of the City OPEB Plan component unit financial statements and related disclosures as a City trust fund were necessary as omission would have been misleading. As a result, a cumulative effect adjustment of $22,834,090 has been reported to present the beginning net position of the fund. Measurement Focus, Basis of Accounting and Basis of Presentation: The City's basic financial statements are prepared in conformity with accounting principles generally accepted in the United States. 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 United States. Government -wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government (the City) and its component units. These statements include the financial activities of the overall City government and distinguish between the governmental and business - type activities of the City. Governmental activities generally are financed through taxes, intergovernmental (Continued) 39. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) revenues, and other nonexchange transactions. Business -type activities are financed in whole or in part by fees charged to external parties. The Statement of Activities presents a comparison between expenses and program revenues for each segment of the business -type activities of the City and for each function of the City's governmental activities. Expenses include direct and indirect types. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses such as depreciation, information technology, insurance and equipment replacement are included in expenses for individual activities and functions. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital needs of a particular program. Revenues that are not classified as program revenues, including taxes, are presented as general revenues. Program revenues and direct expenses related to interfund services are included and indirect expenses funded by interfund transfers are excluded from the Statement of Activities. The Statement of Net Position eliminates interfund balances between governmental funds and interfund balances between proprietary funds. Fund Financial Statements: The fund financial statements provide information about the City'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 and enterprise funds, each of which is displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. 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. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. Major Funds: The City's major governmental and enterprise funds are 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, which have either assets (plus deferred outflows), liabilities (plus deferred inflows), revenues or expenditures in excess of ten percent of their fund -type total and five percent of the aggregate total for both governmental funds and enterprise funds. The General Fund is always a major fund. The City may select other funds it believes should be presented as major funds. The City reported the following major governmental funds in the accompanying financial statements: • The General Fund is the general operating fund of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund. • The Transportation Special Revenue Fund accounts for the City's gas tax, vehicle registration fees and grant revenues and expenditures related to the maintenance and construction of City streets. All revenue in this fund is restricted exclusively for street and road purposes including related engineering and administrative expenses. • The Housing Development Special Revenue Fund accounts for the Federal Housing and Community Development Grant Program activities administered through the County. Monies collected from developers that mitigate the impact of housing needs are also included. Monies in this fund are governed by the program's rules. (Continued) 40. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) • The Public Facilities Corporation Debt Service Fund accounts for the payments of principal and interest on certificates of participation issued to provide for the financing of City Hall, Library, Wilson Park, Memorial Park, and other City facilities. • Capital Improvement Projects Capital Projects Fund Accounts for activities related to the acquisition or construction of major capital facilities. The City reports the following enterprise funds as major funds in the accompanying financial statements: The Resources Recovery Fund accounts for activity related to the collection, disposal, and recycling of solid waste. A private company has been issued an exclusive franchise to perform these services. • The Recreation Programs Fund accounts for activities of the City's community centers and park facilities. The City also reports the following fund types: Internal Service Funds. These funds account for workers' compensation, management information systems maintenance and replacement, equipment maintenance and replacement, retiree health costs, accrued leave payouts, and long-term disability coverage; allot" which are provided to other departments on a cost -reimbursement basis. Fiduciary Fund. The City's Other Post -Employment Benefits (OPEB) Trust fund is established in accordance with GASB Statement No. 74 for the defined benefit OPEB plan administered though trusts that meet the specified criteria. Basis of Accounting: The government -wide, proprietary and fiduciary 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 City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt which are recognized as expenditures to the extent the City has provided financial resources to a debt service fund for payment of these liabilities that mature early in the following year. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from long-term debt and acquisitions under capital leases are reported as other financing sources. Unearned revenues are considered on a full accrual basis, while unavailable revenues are based on the modified accrual measure. Property taxes, transient occupancy taxes, utility taxes, franchise taxes, interest and special assessments are susceptible to accrual. Other receipts and taxes are recognized as revenue when the cash is received. Sales taxes collected and held by the state at year end on behalf of the City are also recognized as revenue. Sales tax consultant payments which are contingent on revenues collected are netted against the related revenues. (Continued) 41. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Under the terms of grant agreements, the City may fund certain programs with a combination of cost reimbursement grants, categorical block grants, and general revenue. The City's policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary. Grant revenues are recognized after eligibility and billing occurs, but may be a deferred inflow if not received within sixty days of year-end. Because of the cost -reimbursement and recognition nature of some grants, certain capital project funds may carry deficit fund balances until billing and receipt of grants. The City may also front the capital outlays with cash advances from other funds. Non -exchange transactions, in which the City gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants, entitlements, and donations. On the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants is recognized as described above. Entitlement and donation revenues are recognized when cash is received. Budgetary Practices: The budget of the City is a detailed operating plan which identifies estimated costs and results in relation to estimated revenues. The budget includes (1) the programs, projects, services and activities to be provided during the fiscal year; (2) estimated revenue available to finance the operating plan; and (3) the estimated spending requirements of the operating plan. The budget represents a process through which policy decisions are made, implemented and controlled. The City prohibits expending funds for which there is no legal appropriation. Operating appropriations lapse at fiscal year end. In May of each year, the City Manager submits to the City Council a proposed budget for the fiscal year beginning July 1. Public hearings on the proposed budget are held during the month of June and the budgets for all fund types are legally adopted by Resolution prior to June 30. Original budget amounts are presented on the accompanying budgetary statements include these legally adopted amounts. The City's legal level of budgetary control is at the functional level for the general fund and at the fund level for other funds. The City Manager is responsible for controlling the City's expenditures in accordance with the adopted budget. The City Manager is authorized to administer and transfer appropriations between budget accounts within the operating budget when in his opinion such transfers become necessary for administrative purposes. Any revision which increases total appropriations must be approved by the City Council. Requests for additional personnel or capital outlay also require the approval of the City Council. Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting principles. Budget information is presented for the general, special revenue and debt service funds only. Capital projects funds are budgeted on a long-term project -by -project basis and, hence, budgets for these funds are not presented in the basic financial statements. During the fiscal year, expenditures exceeded appropriations as follows: Fund/Department Public Facilities Corporation Debt Service Fund Excess of Expenditures Over $ 9,496 Cash and Investments: The City pools its cash resources, consisting of cash and investments, of all funds for investment except for restricted funds generally held by an outside fiscal agent. Cash amounts are reported net of outstanding warrants. Investments are stated at fair value, except for money market mutual funds which are reported at amortized cost. (Continued) 42. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital Assets: Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at their estimated acquisition value on the date donated. Public domain (infrastructure) capital assets consisting of roads, bridges, curbs, gutters, medians, sidewalks, drainage and lighting systems have been capitalized and depreciated. Capital assets are defined as assets with an initial individual cost of more than $5,000 for general capital assets and $100,000 for intangible assets. Depreciation is recorded using the straight-line method over the following useful lives: Buildings 15 — 25 years Improvements 10 — 15 years Vehicles 4 — 10 years Street equipment 3 — 20 years Water equipment 3 — 50 years Office equipment 3 — 5 years Road, curbs, gutters, sidewalks, medians and bridges 30 — 40 years Streetlights 20 years Storm drain structure and mains 40 years Traffic signals 20 years Major outlays for capital assets and improvements are capitalized as projects are constructed. For enterprise funds, interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. Some capital assets may be acquired using federal and state grant funds, or they may be contributed by developers or other governments. These contributions are accounted for as revenues at the time the capital assets are contributed. Claims and Judgment Payable: Claims and judgments payable are accrued when the liability is incurred and the amount can be reasonably estimated. Claims and judgments payable are recorded in an internal service fund for workers' compensation and long-term disability, and other claims and judgments are recorded in the General Fund or enterprise funds, as appropriate. Compensated Absences: Compensated absences comprise vested accumulated vacation and sick leave. The City's liability for compensated absences is recorded in governmental or business -type activities as appropriate. The liability for compensated absences is determined annually. For all governmental funds, amounts expected to be "permanently liquidated," such as what is due to be paid because of a realized employment action, are recorded as fund liabilities; the long-term portion is recorded in the Statement of Net Position. Compensated absences are liquidated by the fund that has recorded the liability. The long-term portion of governmental activities compensated absences are liquidated primarily by the General Fund, using the Compensated Absences and Long -Term Disability internal service fund to account for termination payouts. (Continued) 43. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The changes in compensated absences for the year ended June 30, 2017 were as follows: Governmental Business -Type Activities Activities Total Beginning balance $ 2,806,186 $ 220,138 $ 3,026,324 Additions 905,273 - 905,273 Reductions (505,411) (34,290) (539,701) Ending balance $ 3,206,048 $ 185,848 $ 3,391,896 Current portion $ 502,760 $ 88,882 $ 581,642 Non -current portion $ 2,703,288 $ 106 966 $ 2,810,254 Deferred Outflows/Inflows of Resources: In addition to assets, the statement of financial position or balance sheet reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City reports differences between expected and actual experience, changes in pension assumptions, loss on pension investments, and contributions made subsequent to the measurement date as well. Differences between expected and actual experience and changes in pension plan assumptions are deferred and amortized over the average of the expected remaining service lives of employees who are provided with benefits through the pension plan. Loss on pension investments are deferred and amortized over five years. Employer contributions made subsequent to the measurement date and change in proportionate share are deferred and recognized as a reduction of the net pension liability in the subsequent reporting year. In addition to liabilities, the statement of financial position or balance sheet reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Under the accrual basis of accounting differences between expected and actual experience are deferred and amortized over the average of the expected remaining service lives of all employees who are provided with benefits through the pension plan. Property Tax Calendar: All property taxes are levied and collected by the County of Santa Clara. Secured taxes are levied on July 1, are due in two installments on November 1 and February 1 and become delinquent after December 10 and April 10. Unsecured taxes are levied on July 1 and become delinquent on August 31. The lien date for secured and unsecured property taxes is January 1. The City, in fiscal year 1993-94, adopted an alternative method of property tax distribution (the "Teeter Plan"). Under this method, the City receives 100 percent of its secured property tax levied in exchange for foregoing any interest and penalties collected on delinquent taxes. The City receives remittances as a series of advances made by the County during the year. Interfund Transactions: Transactions constituting reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. (Continued) 44. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Statement of Cash Flows: For purposes of reporting cash flows for the City's proprietary funds, pooled cash and investments are considered cash equivalents as the proprietary funds can access pooled cash and investments in a manner similar to a demand deposit account Prepaid Items: Prepaid items are reported under the consumption method, which recognizes the expenditures/expense in the period associated with the service rendered or goods consumed. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain amounts and disclosures. Accordingly, actual results could differ from those estimates. Implementation of Governmental Accounting Standards Board (GASB) Pronouncements: Management adopted the provisions of the following Governmental Accounting Standards Board (GASB) Statements, which became effective during the year ended June 30, 2017. In June 2015, the GASB issued Statement 74, Financial Reporting forPostemployment Benefit Plans Other Than Pension Plans. Statement 74 addresses the financial reports of defined benefit OPEB plans that are administered through trusts that meet specified criteria. The Statement follows the framework for financial reporting of defined benefit OPEB plans in Statement 45 by requiring a statement of fiduciary net position and a statement of changes in fiduciary net position. The Statement requires more extensive note disclosures and RSI related to the measurement of the OPEB liabilities for which assets have been accumulated, including information about the annual money -weighted rates of return on plan investments. Statement 74 also sets forth note disclosure requirements for defined contribution OPEB plans. The implementation of this statement is reflected in the Fiduciary Fund financial statements, Note 11 of the City's Notes to Basic Financial Statements, and in the Required Supplementary Information. In August 2015, the GASB issued Statement 77, Tax Abatement Disclosures. This Statement is intended to improve financial reporting by requiring disclosure of tax abatement information about a reporting government's own tax abatement agreements and those that are entered into by other governments and that reduce the reporting government's tax revenues. This statement did not have an effect on the financial statements of the City. In December 2015, the GASB issued Statement 78, Pensions Provided through Certain Multiple -Employer Defined Benefit Pension Plans. The objective of this Statement is to address a practice issue regarding the scope and applicability of Statement No. 68. This issue is associated with pensions provided through certain multiple -employer defined benefit pension plans and to state or local government employers whose employees are provided with such pensions. This Statement amends the scope and applicability of Statement 68 to exclude pensions provided to employees of state or local governmental employees through a cost —sharing multiple -employer defined benefit pension plan that is not a state or local governmental pension plan, is used to provide defined benefit pensions both to employees of state or local governmental employers and to employees of employers that are not state or local governmental employers, and has no predominant state or local governmental employer(either individually or collectively with other state or local governmental employers that provide pension through the pension plan). This Statement establishes requirements for recognition and measurement of pension expense, expenditures, and liabilities; note disclosures; and required supplementary information for pensions that have the characteristics described above. This statement did not have a material effect on the financial statements of the City. (Continued) 45. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In January 2016, the GASB issued Statement 80, Blending Requirements for Certain Component Units — An Amendment of GASB Statement 14. This Statement amends the blending requirements for the financial statement presentation of component units of all state and local governments. The additional criterion requires blending of a component unit incorporated as a not -for -profit corporation in which the primary government is the sole corporate member. This statement did not have a material effect on the financial statements of the City. In March 2016, the GASB issued Statement 82, Pension Issues — An Amendment of GASB Statements 67, 68 and 73. This Statement addresses issues regarding (1) the presentation of payroll -related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. This statement did not have a material effect on the financial statements of the City. Fair Value Measurements: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs — other than quoted prices included within level 1 — that are observable for an asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for an asset or liability. If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement. NOTE 2 — CASH AND INVESTMENTS Primary Government The City's pooled idle funds are invested pursuant to investment policy guidelines adopted by the City Council. The objectives of the policy are to invest funds to the fullest extent possible and to invest in accordance with the provisions of the California Government Code with the priority of safety, liquidity and yield. The policy addresses the safekeeping of securities, types of investment instruments, diversification, maturities, reporting requirements, and internal control. The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the Statement of Net Position and the balance sheet as "cash and investments." Policies: California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110 percent of the City's cash on deposit, or first trust deed mortgage notes with a market value of 150 percent of the deposit, as collateral for these deposits. Under California Law, this collateral is held in a separate investment pool by another institution in the City's name and places the City ahead of general creditors of the institution. (Continued) 46. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 2 — CASH AND INVESTMENTS (Continued) The City and its fiscal agents invest in individual investments and in investment pools. Individual investments are evidenced by specific identifiable securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. Security instruments owned by the City are held in safekeeping by a third party custodian acting as agent for the City under the terms of a custody agreement. The City's investments are carried at fair value with the exception of money market mutual funds, which are carried at amortized cost. The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in investment income for that fiscal year. Classification: The City's total cash and investments, at fair value, are presented on the financial statements in the following allocation: Primary Government Cash and investments $ 141,140,737 Restricted cash and investments: Held by fiscal agent for bond repayments 4,251,603 Total cash and investments $ 145,392,340 Authorized Investments by the City: The City's Investment Policy and the California Government Code allow the City to invest its pooled idle funds in the following, under limits and provisions that address interest rate risk, credit risk, and concentration of credit risk. This does not include the City's investments of debt proceeds held by fiscal agents that are governed by the provisions of debt agreements of the City. Minimum Maximum Maximum Maximum Credit Percentage of Investment in Authorized Investment Type Maturity Quality Portfolio One Issuer U.S. Treasury Obligations 5 years N/A None None U.S. Agency Securities * 5 years N/A None None California Local Agency Investment Fund (LAIF) N/A N/A Up to $65 million None Non-negotiable Certificates of Deposits (time deposits) 5 years N/A 30%*** 10% of portfolio; 5% of issuer's net worth State of California registered state warrants, treasury notes, or bonds 5 years N/A None None California local agency bonds, notes, warrants, or other obligations 5 years N/A None None Bond issued by the local agency 5 years N/A None None Bankers' Acceptances 180 days N/A 40% None Commercial Paper 270 days A-1+P-1 25% 10% of portfolio; 5% of issuer's net worth; 10% of outstanding paper of Issuer. ** Negotiable Certificates of Deposit 5 years N/A 30% 10% of portfolio; 5% of issuer's net worth. ** Repurchase Agreements 1 year N/A None 10% of portfolio; 5% of issuer's net worth. ** Medium Term Corporate Notes 5 years A or better 30% 10% of portfolio; 5% of issuer's net worth. ** Money market mutual funds investing in U.S. Treasury, Government Agency securities or repurchase agreements collateralized by U.S. Treasury or Government Agency securities 5 years Aaa/AAA 20% None (Continued) 47. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 2 — CASH AND INVESTMENTS (Continued) Securities issued by agencies of the federal government such as the Government National Mortgage Association (GNMA), the Federal Farm Credit System (FFCB), the Federal Home Loan Bank (FHLB), the Federal National Mortgage Association (FNMA), the Student Loan Marketing Association (SLMA), and the Federal Home Loan Mortgage Association (FHLMC). "* Represents restriction in which the City's investment policy is more restrictive than the California Government Code. *** 30% maximum % of portfolio if using a private sector entity to assist in the placement of the time deposits. No maximum for others. Authorized Investments by Debt Agreements: The City must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged reserves to be used if the City fails to meet its obligations under these debt issues. The California Government Code requires these funds to be invested in accordance with City ordinances, bond indentures or State statutes. The City's Investment Policy allows investments of bond proceeds to be governed by provisions of the related bond indentures. The following identifies the investment types that are authorized for investments held by fiscal agents under the terms of the bond indentures of the related debt issue: Authorized Investment Type Cash or obligations of the U.S. including U.S. Treasury obligations Federal agencies obligations which represent full faith and credit of the U.S. Direct federal agencies obligations which are not fully guaranteed by the full faith and credit of the U.S. U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances with domestic commercial banks Commercial Paper Money market funds Pre -refunded municipal obligations that are not callable prior to maturity or as to which irrevocable instructions have been given to call on the date specified in the notice Municipal obligations or General obligations of states California Local Agency Investment Fund (LAIF) Shares in a California common law trust established pursuant to Title 1, Division 7, Chapter 5 of the California Government Code which invests exclusively in investments permitted by Section 53635 of Title 5, Division 2, Chapter of the California Government Code, as it may be amended. Minimum Maximum Maximum Credit Percentage of Maturity Quality Portfolio N/A N/A None N/A N/A None N/A N/A None 360 days P-1, A-1+, A-1 None 270 days P-1, A-1 None N/A Aaam or AAAm-G None Highest N/A rating category None N/A Aaa, AAA, A2, A None N/A N/A Up to $65 million N/A N/A None Interest Rate Risk: 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 changes in market interest rates. Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity or earliest call date: (Continued) 48. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 2 — CASH AND INVESTMENTS (Continued) Investment Type U.S. Treasury Securities U.S. Agency Notes Federal Home Loan Mortgage Corporation Federal National Mortgage Association Federal Home Loan Banks Federal Farm Credit Banks Local Agency Investment Fund Money Market Mutual Funds Total Investments Cash in banks and on hand Total Cash and Investments 12 Months 13 to More than or less 24 Months 24 Months Total $ 7,984,570 $ 5,961,540 $ 8,913,380 $ 22,859,490 4,995,120 5,972,070 9,899,310 20, 866, 500 1,995,870 1,002,810 4,917,570 7,916,250 4,993,170 4,990,470 9,126, 070 19,109, 710 10, 988, 670 5,980,800 1,979,480 18, 948, 950 40, 885,119 - - 40, 885,119 10,633,719 - - 10,633,719 $82,476,238 $23,907,690 $34,835,810 141,219,738 4,172,602 $ 145,392,340 The City is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The Local Investment Advisory Board (Board) has oversight responsibility for LAW. The Board consists of five members as designated by State Statute. The City reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are U.S. Treasuries, Federal Agency obligations, time deposits, negotiable certificates of deposits, commercial paper, corporate bonds, and security loans. These investments had weighted average maturity of 167 days. Money market mutual funds are available for withdrawal on demand. At June 30, 2017, money market mutual funds, used for pooled investment and held by fiscal agent purposes, had a weighted average maturity of 40 days or less. Fair Value Hierarchy: The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The following is a summary of the fair value hierarchy of the fair value of investments of the City as of June 30, 2017: (Continued) 49. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 2 — CASH AND INVESTMENTS (Continued) Investments by Fair Value Level: U.S. Treasury Securities U.S. Agency Notes Federal Home Loan Mortgage Corporation Federal National Mortgage Association Federal Home Loan Banks Federal Farm Credit Banks Total Investments Investments Measured at Amortized Cost: Level Level Total $22,859,490 $ - $ 22,859,490 20, 866, 500 20, 866, 500 7,916,250 7,916,250 19,109, 710 19,109, 710 18.948.950 18.948.950 $22,859,490 $ 66,841,410 89,700,900 Money Market Mutual Funds 10,633,719 Investments Exempt from Fair Value Hierarchy: Local Agency Investment Fund 40,885,119 Cash in banks and on hand 4,172,602 Total Cash and Investments $ 145,392,340 Investments classified in Level 1 of the fair value hierarchy include U.S. Treasury Notes valued using quoted prices in active markets. Federal Agency Securities, classified in Level 2 of the fair value hierarchy are valued using matrix pricing techniques maintained by various pricing vendors. Matrix pricing is used to value securities based on the securities' relationship to benchmark quoted prices. Fair value is defined as the quoted market value on the last trading day of the period. These prices are obtained from various pricing sources by the custodian bank. The California Local Agency Investment Fund (LAIF) is valued using factors provided in the Pooled Money Investment Account (PMIA) Performance Report by the State Treasurer's Office. Money market funds are exempt from fair value measurement and are reported at amortized cost. Credit Risk: Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of June 30, 2017 for each investment type, including those with fiscal agents, as provided by Moody's ratings: Investment Type Ratings Total Money Market Mutual Funds AAA $ 10,633,719 U.S. Agency Notes Federal Home Loan Mortgage Corporation AAA 20,866,500 Federal National Mortgage Association AAA 7,916,250 Federal Home Loan Banks AAA 19,109,710 Federal Farm Credit Banks AAA 18,948,950 U.S. Treasury Securities AAA 22,859,490 Not Rated: Local Agency Investment Fund Not Rated 40,885,119 Total Investments $141,219,738 (Continued) 50. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 2 — CASH AND INVESTMENTS (Continued) Concentration of Credit Risk: The City's investment policy contains certain limitations on the amount that can be invested in any one issuer. In certain categories, these limitations are more restrictive than those required by California Government Code Sections 53600 et seq. Excluding those issued or explicitly guaranteed by the U.S. government and investments in the local agency investment fund and mutual funds, the City had the following investments that represent 5% or more of total City-wide investments: Issuer Federal Home Loan Mortgage Corporation (FHLMC) Federal National Mortgage Association (FNMA) Federal Home Loan Banks (FHLB) Federal Farm Credit Banks (FFCB) Investment Type Amount U.S. Agency Notes $20,866,500 U.S. Agency Notes 7,916,250 U.S. Agency Notes 19,109, 710 U.S. Agency Notes 18,948,950 OPEB Trust: The OPEB Trust's pooled idle funds are invested pursuant to investment policy guidelines adopted by the Plan. The objectives of the policy are to invest funds to the fullest extent possible and to invest in accordance with the provisions of the California Government Code with the priority of safety, liquidity and yield. The policy addresses the safekeeping of securities, types of investment instruments, diversification, maturities, reporting requirements, and internal control. The Plan maintains a cash and investment pool that is available for use only by the plan and not any other City funds. Policies: California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110 percent of the Plan's cash on deposit, or first trust deed mortgage notes with a market value of 150 percent of the deposit, as collateral for these deposits. Under California Law, this collateral is held in a separate investment pool by another institution in the Plans name and places the Plan ahead of general creditors of the institution. The Plan and its fiscal agent invest in individual investments and in investment pools. Individual investments are evidenced by specific identifiable securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. Security instruments owned by the Plan are held in safekeeping by a third party custodian acting as agent for the City under the terms of a custody agreement. The Plan's investments are carried at fair value with the exception of money market mutual funds which are carried at amortized cost. The Plan adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in investment income for that fiscal year. Classification: The Plan's total cash and investments, at fair value, are presented on the fiduciary fund financial statements. (Continued) 51. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 2 — CASH AND INVESTMENTS (Continued) Authorized Investments: The Plan's Investment Policy and the California Government Code allow the Plan to invest its pooled idle funds in the following, under limits and provisions that address interest rate risk, credit risk, and concentration of credit risk. Specifics of the policy are: Fixed Income Assets: The fixed income investments are to maintain intermediate -term average weighted duration, between three -seven years. At the time of purchase, no single fixed income issuer shall exceed 2% of the total market value of the Portfolio, with the exception of U.S. Treasury or Agency obligations. The direct high -yield portion shall constitute no more than 10% of the total market value of the Portfolio. Equity & Growth Assets: The domestic equity investments are expected to be diversified at all times by size, industry, sector, and style (Large Cap, Mid Cap, and Small Cap). At the time of purchase, no individual equity security shall exceed 2% of the total market value of the Portfolio. The international equity investments (including emerging markets) shall constitute no more than 20% of the total market value of the Portfolio. The real estate investments shall be captured through the use of diversified mutual funds or ETFs investing in REITs; and shall constitute no more than 15% of the total market value of the Portfolio. The commodities investments shall be captured through the use of diversified mutual funds or ETFs; and shall constitute no more than 10% of the total market value of the Portfolio. Permitted Asset Classes and Security Types • Fixed Income & Cash Equivalent Investments: • Domestic Certificates of Deposit (rated A-1/P-1 or better) • Domestic Commercial Paper (rated A-1/P-1 or better) • Floating Rate Notes • Money Market Mutual Funds • U.S. Treasury Bonds, Bills and Notes • U.S. Agency (and Instrumentality) Discount Notes, Notes, and Bonds • Treasury Inflation -Protected Securities (TIPS) • Municipal Bonds and Notes • Corporate Bonds • Mortgage -Backed Bonds (MBS) • Asset -Backed Bonds (ABS) • High -Yield Bonds (rated B-/B3 or better) • Dollar denominated Foreign Bonds and Notes • Bond Mutual Funds • Equity Investments: • Common & Preferred Stocks • American Depository Receipts (ADRs) • Domestic and International Equity Mutual Funds (Open and Closed) • Emerging Market Equity Funds or Exchange Traded Funds (ETFs) • Alternative Investments: • Commodities Mutual Funds or Exchange Traded Notes (ETNs) • REIT Investment or Pooled Strategy or Fund of REITs • Registered Hedge Funds or Hedge Fund of Funds (Continued) 52. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 2 — CASH AND INVESTMENTS (Continued) Interest Rate Risk: 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 changes in market interest rates. All of the Plan's investments are held in mutual fund securities with a maturity of less than 12 months. Money market mutual funds are available for withdrawal on demand. At June 30, 2017, money market mutual funds, used for pooled investment and held by fiscal agent purposes, had a weighted average maturity of 34 days or less. Fair Value Hierarchy: The Plan categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The Plan's investments in mutual funds are valued at fair value and are considered Level 1 investments. Credit Risk: Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. As the Plan is invested in mutual funds, there are no available credit risk ratings. Concentration of Credit Risk: The Plan's investment policy contains certain limitations on the amount that can be invested in any one issuer. In certain categories, these limitations are more restrictive than those required by California Government Code Sections 53600 et seq. Excluding those issued or explicitly guaranteed by the U.S. government and investments in the local agency investment fund and mutual funds, the Plan did not have investments that represent 5% or more of total Plan investments. (Continued) 53. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 3 — LOANS RECEIVABLE Related Party Loans: In conjunction with the City's executive housing assistance program, a loan totaling $584,360 has been provided to an executive manager. The 40-year loan bears an interest rate equal to the 11th District Cost of Funds at the time of the loan, and requires bi-weekly principal and interest payments. In addition, there is a two percent deferral on the interest rate for the first five years of the loan, at which time the interest rate may be adjusted to the current 11th District Cost of Funds for the remainder of the loan. At June 30, 2017, the balance remaining on the loan was $388,256. Housing Program Loans: On June 30, 1995, the City loaned $821,000 to Community Housing Developers, a California nonprofit public benefit corporation. The note bears interest at three percent per annum, compounded annually, payable to the extent of surplus cash, and all unpaid principal and interest due June 30, 2035. At June 30, 2017, the balance remaining on the loan was $821,000. On June 6, 1996, the City loaned $320,000 to Cupertino Community Services, a California nonprofit public benefit corporation. The note bears interest at three percent per annum and due on July 14, 2026. At June 30, 2017, the balance on the loan was $198,632. In addition to these loans, the City has $41,120 in housing and other loans receivable at June 30, 2017. These loans bear interest at 3 to 6 percent and are due by June 30, 2025. NOTE 4 — INTERFUND TRANSACTIONS Transfers between funds during the fiscal year ended June 30, 2017 were as follows: Fund Making Transfers General Fund Capital Improvements Projects Capital Projects Fund Non -major Governmental Funds Total Interfund Transfers The reasons for these transfers are set forth below: Fund Receiving Transfers Amount Transferred Transportation Special Revenue Fund Housing Development Public Financing Corporation Debt Service Fund Capital Improvement Projects Capital Projects Fund Non -major Governmental Funds Resource Recovery Enterprise Fund Recreation Program Enterprise Fund Non -major Enterprise Funds Internal Service Funds Transportation Special Revenue Fund General Fund 3,355,374 (A) 3,614 (D) 3,177,286 (B,D) 15,000,000 (A) 2,106,834 (C) 53,215 (D) 457,312 (D) 1,363,593 (D) 1,092,130 (E) 2,797,608 (A) 5,374 (F) $ 29 412 340 (A) To fund capital projects. (B) For annual lease payment for 2012 Certificates of Participation debt service. (C) To support state -mandated activities including complaint response and enforcement programs. (D) Operating subsidy from General Fund. (E) To fund IT operations, personnel costs associated with staffing special project, and compensated absences and retiree health. (F) To transfer residual resources due to fund closing. Current Interfund Balances: Current interfund balances arise in the normal course of business and are expected to be repaid shortly after the end of the fiscal year. At June 30, 2017, the Retiree Medical Internal Service Fund owed the General Fund $1,400,000. (Continued) 54. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 5 — CAPITAL ASSETS A summary of changes in governmental activities capital assets is as follows: Balance at Balance at July 1, 2016 Additions Deletions Transfers June 30, 2017 Governmental Activities: Capital Assets Not Being Depreciated: Land $ 62,045,969 $ $ $ $ 62,045,969 Easements 19,491,959 19,491,959 Construction in Progress 759,718 9,873,146 (635,609) (9,223,69 0) 773,565 Total Capital Assets Not Being Depreciated 82,297,646 9,873,146 635,609) 9,223,690) 82,311,493 Capital Assets Being Depreciated Buildings 44,335,568 - (573,472) 43,762,096 Improvements Other Than Buildings 48,917,333 (22,631) 770,345 49,665,047 Machinery and Equipment 2,581,617 (599,000) 1,086,626 3,069,243 Road, Curbs, Gutters, Sidewalks, Medians and Bridges 151,585,111 8,225,961 159,811,072 Streetlights 8,633,769 1 8,633,770 Storm Drain Structure and Mains 35,789,952 6,803 35,796,755 Traffic Signals 6,191,808 226,438 6,418,246 Total Capital Assets Being Depreciated 298,035,158 (621,631) 9,742,702 307,156,229 Less Accumulated Depreciation For: Buildings (24,565,434) (1,602,902) - 848,366 (25,319,970) Improvements Other Than Buildings (31,943,199) (2,052,955) 22,631 (33,838) (34,007,361) Machinery and Equipment (2,030,390) (267,803) 599,000 (371,746) (2,070,939) Road, Curbs, Gutters, Sidewalks, Medians and Bridges (101,339,851) (2,064,464) - (367,123) (103,771,438) Streetlights (7,020,638) (106,688) (3,734) (7,131,060) Storm Drain Structure and Mains (30,615,795) (1,156,082) (75,781) (31,847,658) Traffic Signals (5,244,200) (103,908) (2,505) (5,350,613) Total Accumulated Depreciation 202,759,507) 7,354,802) 621,631 (6,361) 209( 499,039) Total General Government Capital Assets Being Depreciated, Net 95,275,651 7,354,802) 9,736,341 97,657,190 Internal Service Fund Capital Assets Machinery and Equipment 9,038,313 1,235,410 (998,669) (666,436) 8,608,618 Less Accumulated Depreciation (6,828,916) (212,908) 998,669 153,785 5,889,370) Net Internal Service Fund Capital Assets Being Depreciated 2,209,397 1,022,502 512,651) 2,719,248 Governmental Activity Capital Assets, Net $179,782,694 $ 3,540,846 $ (635,609) $ - $182,687,931 (Continued) 55. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 5 — CAPITAL ASSETS (Continued) Business -Type Activities: Capital Assets Not Being Depreciated: Construction in Progress Total Capital Assets Not Being Depreciated Capital Assets Being Depreciated: Buildings Improvements other Than Buildings Machinery and Equipment Total Capital Assets Being Depreciated Less Accumulated Depreciation For: Buildings Improvements other Than Buildings Machinery and Equipment Total Accumulated Depreciation Total Capital Assets Being Depreciated, Net Business -Type Activity Capital Assets, Net Restated Balance at Balance at July 1, 2016 Additions Deletions Transfers June 30, 2017 $ 607,494 $ 81,870 $ $ (676,068) $ 13,296 607,494 81,870 (676,068) 13,296 681,914 - 324,088 1,006,002 1,594,177 186,223 (2,089) 279,140 2,057,451 300,369 (28,203) 351,166 623,332 2,576,460 186,223 (30,292) 954,394 3,686,785 (180,636) (28,337) - (42,284) (251,257) (688,185) (288,178) 2,089 26,229 (948,045) (279,220) (15,322) 28,203 (262,271) (528,610) (1,148,041) (331,837) 30,292 (278,326) (1,727,912) 1,428,419 (145,614) - 676,068 1,958,873 $ 2,035,913 $ (63,744) $ $ $ 1,972,169 Depreciation expense was charged to functions and programs based on their usage of the related assets. Depreciation expense was charged to governmental activities as follows: Governmental Activities Administration $ 180,540 Public and Environment Affairs 15,783 Administrative Services 27,980 Parks and Recreation 159,986 Public Works 6,970,513 Internal Service Funds 212,908 Total $ 7,567,710 Depreciation expense was charged to the business -type activities as follows: Business -Type Activities Resources Recovery $ 3,351 Blackberry Farm 21,470 Cupertino Sports Center 40,538 Recreation Program 266,478 Total $ 331,837 (Continued) 56. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 6 — LONG-TERM DEBT Cupertino Public Facilities Corporation Certificates of Participation: Original Balance Balance Issue June 30, June 30, Current Amount 2016 Retirements 2017 Portion 2012 Refinancing Certificates of Participation: 0.350-3.125%, due 07/01/2030 $ 43,940,000 $ 35,835,000 $ 2,135,000 $ 33,700,000 $ 2,180,000 The Cupertino Public Facilities Corporation issued Certificates of Participation to provide financing for the construction of the Community Center, improvements of the City Hall and the Library in July 1986; purchase of Wilson Park in 1989; finance the Memorial Park Expansion in 1990; and purchase the Blackberry Farm and Fremont Older site in 1991. The Cupertino Public Facilities Corporation, as lessor, leased real property to the City (under the Lease Agreement with the lessee) and assigned the base rental payments to the trustee for the benefit of the owners of the certificates of participation. The rental payments are scheduled to be sufficient in both time and amount, when the principal and interest of the certificates are due. On May 9, 2012, $43,940,000 principal amount of 2012 Refinancing Certificates of Participation (2012 COPs) were issued to refund the 2002 COPs, to fund a reserve fund for the 2012 COPs, and pay costs incurred in connection with issuance. The 2012 COPS are payable by a pledge of revenues from the lease payments payable by the City pursuant to the Lease Agreement between the Cupertino Public Facilities Corporation and the City for the use and possession of the Site and Facility as described in the Lease Agreement. The City also covenanted in the Lease Agreement to include all lease payments in its annual budget. Total debt service payments remaining on the 2012 COPs is $41,217,585 payable through July 1, 2030. For the year ended June 30, 2017, the bonds had $2,135,000 of principal and $1,035,738 interest due. Annual debt service requirements for the 2012 COPS are shown below: Governmental Activities For the Year Ending June 30 Principal Interest 2018 $ 2,180, 000 $ 993,038 2019 2,220,000 949,438 2020 2,290,000 882,838 2021 2,355,000 814,138 2022 2,425,000 743,486 2023-2027 13,275,000 2,580,740 2028-2030 8,955,000 553,907 Total $ 33,700,000 $ 7,517,585 (Continued) 57. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 7 — NET POSITION AND FUND BALANCES Net Position is measured on the full accrual basis while Fund Balance is measured on the modified accrual basis. Net Position: The government -wide and proprietary fund financial statements utilize a net position presentation. Net position is categorized as follows: Net investment in capital assets - This category groups all capital assets including, infrastructure, into one component of net position. Accumulated depreciation and outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category. Restricted - This category represents net position that has external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Unrestricted - This category represents net position of the City that do not meet the definition of "net investment in capital assets" or "restricted." Fund Balances: As prescribed by GASB Statement No. 54, governmental funds report fund balance in classifications based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. Fund balances for governmental funds are made up of the followings: Nonspendable Fund Balance - includes amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The "not in spendable form" criterion includes items that are not expected to be converted to cash, for example: prepaid items, property held for resale and long term notes receivable. Restricted Fund Balance - includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers. Committed Fund Balance - includes amounts that can only be used for the specific purposes determined by a formal action of the City's highest level of decision -making authority, the City Council. Commitments may be changed or lifted only by the City taking the same formal action (resolution) that imposed the constraint originally. Assigned Fund Balance - comprises amounts intended to be used by the City for specific purposes that are neither restricted nor committed. Intent is expressed by the City Council or official to which the City Council has delegated the authority to assign amounts to be used for specific purposes. Through the adopted budget, the City Council establishes assigned fund balance policy levels and also sets the means and priority for the City Manager to fund these levels. Unassigned Fund Balance - is the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose. In circumstances when an expenditure may be made for which amounts are available in multiple fund balance classifications, the fund balance in General Fund will generally be used in the order of restricted, unassigned, and then assigned reserves. In other governmental funds, the order will generally be restricted and then assigned. (Continued) 58. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 7 - NET POSITION AND FUND BALANCES (Continued) Fund balances for all major and nonmajor governmental funds as of June 30, 2017, were distributed as follows: Public Capital Other Housing Facilities Improvements Governmental General Transportation Development Corporation Projects Funds Total Nonspendable: Loans receivable $ 851,714 $ $ $ $ $ $ 851,714 Prepaid items 25,225 25,225 Subtotal 876,939 876,939 Restricted for: Public access television Debt service Storm drain system Parks and open space Environmental management Streets and road projects Housing programs Subtotal Committed for: Economic uncertainty I Streets and road projects Subtotal Assigned to: PERS liability Encumbrances Capital projects Subtotal Unassigned Total 1,016,771 - - 1,597,234 6,981,275 - - 12,484,169 - 1,016,771 6,981, 275 12,484,169 1,597,234 1,016,771 1,597,234 3,102,459 3,102,459 9,412,548 9,412,548 397,236 397,236 - 6,981,275 - 12,484,169 12,912,243 34,991,692 19,000,000 - 19,000,000 - 1,398,665 1,398,665 19,000,000 1,398,665 20,398,665 100,000 - 100,000 4,538,181 4,538,181 - 25,069,160 236,814 25,305,974 4,638,181 25, 069,160 236,814 29, 944,155 28,057,799 - - - - 28,057,799 $ 53,589,690 $ 8,379,940 $ 12,484,169 $ 1,597,234 $ 25,069,160 $ 13,149,057 $ 114,269,250 NOTE 8 — COMMITMENTS AND CONTINGENCIES Federal and State Grant: The City participates in a number of federal and state grant programs subject to financial and compliance audits by the grantors or their representatives. Audits of certain grant programs, including those for the year ended June 30, 2017, have yet to be conducted. The amount, if any, of expenditures that may be disallowed by the granting agencies cannot be determined at this time. Management believes that such disallowances, if any, would not have a material effect on the financial statements. Encumbrances: The City uses encumbrances to control expenditure commitments for the year. Encumbrances represent commitments related to executor contracts not yet performed and purchase orders not yet filled. Commitments for such expenditure of monies are encumbered to reserve a portion of applicable appropriations. Encumbrances still open at year end are not accounted for as expenditures and liabilities, but as restricted, or assigned fund balance. (Continued) 59. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 8 — COMMITMENTS AND CONTINGENCIES (Continued) As of June 30, 2017, the City had the following encumbrances outstanding: Governmental Funds: General Fund $ 4,538,181 Transportation Special Revenue Fund 4,019,740 Capital Improvements Projects Capital Projects Fund 708,867 Other Governmental Funds 1,199,125 Total Encumbrances $ 10,465,913 Lease Agreement with County of Santa Clara: The City has an agreement, expiring in 2019, to lease a building to the County of Santa Clara for the purpose of providing library service to the City's residents. The lease requires a minimum annual payment of $120,000 adjusted for Cupertino's portion of book circulation and increase of assessed valuation. This is an operating lease with a renewable option. At June 30, 2017, the cost and carrying value of the building which opened in October 2004, is $21,952,133 and $10,694,441 respectively, with $11,257,692 in accumulated depreciation. Consulting Agreement for Sales Taxes: The City entered into agreements with two companies to provide services consisting of the assessment and creation of new sales and use tax revenue sources for the City. The City agreed to pay the companies based on a sliding scale payment schedule dependent on the level of new sales tax revenue realized by the City as defined in the consulting agreements. Santa Clara County Vehicle Registration Fee (VRF): The City is required to report VRF revenues, expenditures and fund balances as of the year ended June 30, 2017: VRF Balance as of July 1, 2016 VRF Revenue 352,246 VRF Interest - VRF Expended 352,246 VRF Balance as of June 30, 2017 $ - NOTE 9 — LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT General and Property Liability: The City is self -insured for the first $250,000 of general and property liability for each occurrence, and the excess (up to $10,000,000 for each occurrence and annual aggregate) is covered through the City's participation in the Association of Bay Area Governments Pooled Liability Assurance Network (ABAG PLAN). The risk pool consists of 30 agencies within the San Francisco Bay Area. The stated purpose of the ABAG PLAN is to provide certain levels of liability insurance coverage, claims management, risk management services, and legal defense to its participating members. ABAG PLAN is governed by a Board of Directors, which comprises officials appointed by each participating member. Premiums paid to ABAG are subject to possible refund based on the results of actuarial studies and approval by the Board of Directors. Complete financial statements for ABAG PLAN may be obtained from their offices at the following address: ABAG PLAN, Finance Department, P.O. Box 2050, Oakland, CA 94604. Premiums are revised each year based on the City's claims experience and risk exposure. For the year ended June 30, 2017, the City paid ABAG PLAN premiums of $419,644. (Continued) 0 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 9 — LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT (Continued) Workers' Compensation Liability: The City belongs to the CSAC Excess Insurance Authority (EIA), a joint power authority which provides excess workers' compensation liability claims coverage above the City's self -insured retention of $500,000 per occurrence. Losses above the self -insured retention are pooled with excess reinsurance purchased to a $50,000,000 statutory limit. EIA was established in 1979 for the purpose of creating a risk management pool for all California public entities. EIA is governed by a Board of Directors consisting of representatives of its member public entities. Complete financial statements for ETA may be obtained from their offices at the following address: CSAC Excess Insurance Authority, Finance Department, EIA 75 Iron Point Circle, Suite 200, Folsom, CA 95630. For the year ended June 30, 2017, the City paid premiums of $115,327. It is the City's practice to obtain biennial actuarial studies for the self -insured workers' compensation liability. The claims liabilities included in the workers' compensation internal service fund is based on the results of actuarial studies and include amounts for claims incurred but not reported and loss adjustment expenses. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends, including frequency and amount of payouts, and other economic and social factors. Inflation of 2.5 percent, annual rate of return of 2 percent, claim severity increase at 2.5 percent were assumed. In the current year, management used actuarial estimates based on a 90 percent confidence level. Settlements have not exceeded insurance coverage in the past three years. Changes in the balances of workers' compensation and general claims liabilities during the years ended June 30 are as follows: 2017 Claims liability, beginning of year $ 1,481,098 Incurred claims and changes in estimate 590,254 Claim payments and credits (388,701) Total claims liability, end of year 1,682,651 Less current portion (521,998) Non -current portion $ 1,160,653 NOTE 10 — DEFINED BENEFIT PENSION PLAN 2016 $ 2,190, 079 (379,665) (329,316) 1,481, 098 (489,499) $ 991,599 Plan Descriptions and Summary of Balances by Plan: The City has one defined benefit pension plan. The Miscellaneous Plan (Plan) is an Agent -Multiple Employer Plan. Benefit provisions under the Plan is established by State statute and City Ordinance. All qualified permanent and probationary employees are eligible to participate in the Plan for which they are an eligible member based on their employment position with the City. The Plan is administered by the California Public Employees' Retirement System (CaIPERS) which acts as a common investment and administrative agent for its participating member employers. CaIPERS 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 CaIPERS website. (Continued) 61. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 10 — DEFINED BENEFIT PENSION PLAN (Continued) For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Miscellaneous Plan and additions to/deductions from the Plan's fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. Below is a summary of the deferred outflows of resources, net pension liabilities and deferred inflows of resources by Plan: Deferred Outflows Net Pension of Resources Liability Miscellaneous $ 9,045,993 $ 36,739,962 Deferred I nflows of Resources $ 742,037 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 non -duty disability benefits after 10 years of service. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. The Pension Reform Act of 2013 (PEPRA), Assembly Bill 340, is applicable to employees new to CalPERS and hired after December 31, 2012. The Plans' provisions and benefits in effect at June 30, 2017, are summarized as follows: Hire date Prior to On or after January 1, 2013 January 1, 2013 Benefit formula 2.7% @ 55 2.0% @ 62 Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life Minimum retirement age 50 52 Monthly benefits, as a % of eligible compensation 2% to 2.7% 1 % to 2% Required employee contribution rates 8.00% 6.25% Required employer contribution rates 23.54% 25.653% Employees Covered: As of the June 30, 2016 actuarial valuation date (most current), the following employees were covered by the benefit terms of the Plan: Inactive employees or beneficiaries currently receiving benefits 201 Inactive employees entitled to but not yet receiving benefits 124 Active employees 182 Total 507 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 both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. (Continued) 62. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 10 — DEFINED BENEFIT PENSION PLAN (Continued) Net Pension Liability: The City's net pension liability for the Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2016, using an annual actuarial valuation as of June 30, 2015 rolled forward to June 30, 2016 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Actuarial Assumptions: The total pension liabilities in the June 30, 2015 actuarial valuations were determined using the following actuarial assumptions: Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions: Discount Rate Inflation Payroll Growth Projected Salary Increase Investment Rate of Return Derived using CalPERS' Membership Mortality June 30, 2015 June 30, 2016 Entry -Age Normal Cost Method 7.65% 2.75% 3.00% Varies by Entry Age and Service (1) 7.5% (2) (1) Depending on age, service and type of employment Data for all Funds (3) (2) Net of pension plan investment expenses and administrative expenses, including inflation (3) The mortality table used was developed based on CalPERS' specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the CalPERS 2014 experience study report available on CalPERS website. All other actuarial assumptions used in the June 30, 2015 valuation were based on the results of a January 2014 actuarial experience study for the period 1997 to 2011, including updates to salary increase, mortality and retirement rates. Further details of the Experience Study can be found on the CalPERS website under Forms and Publications. Change of Assumptions: There were no changes in the assumptions used for the June 30, 2016 measurement. Discount Rate: The discount rate used to measure the total pension liability was 7.65 percent for the Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, 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 7.65 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.65 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. 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. (Continued) 63. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 10 - DEFINED BENEFIT PENSION PLAN (Continued) 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 long-term 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 long-term 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 (presented as geometric means) are net of administrative expenses. New Strategic Real Return Real Return Asset Class Allocation Years 1 - 10(a) Years 11+(b) Global Equity 51.00% 5.25% 5.71 % Global Fixed Income 20.00% 0.99% 2.43% Inflation Sensitive 6.00% 0.45% 3.36% Private Equity 10.00% 6.83% 6.95% Real Estate 10.00% 4.50% 5.13% Infrastructure and Forestland 2.00% 4.50% 5.09% Liquidity 1.00% -0.55% -1.05% Total 100.00% (a) An expected inflation of 2.5% used for this period. (b) An expected inflation of 3.0% used for this period. Changes in Net Pension Liability: The changes in the Net Pension Liability for the City's Miscellaneous Plan are as follows: (Continued) 64. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 10 — DEFINED BENEFIT PENSION PLAN (Continued) Balance at June 30, 2015 Changes in the year: Service cost Interest on the total pension liability Differences between actual and expected experience Contribution - employer Contribution - employee Net investment income Administrative expenses Benefit payments, including refunds of employee contributions Net changes Balance at June 30, 2016 Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability $ 108,511,840 $ 77,999,263 $ 30,512,577 2,525,314 2,525,314 8,253,983 8,253,983 696,347 696,347 3,659,170 (3,659,170) 1,169,921 (1,169,921) 466,704 (466,704) (47,536) 47,536 (5,151,298) (5,151,298) - 6,324,346 96,961 6,227,385 $114,836,186 $ 78,096,224 $ 36,739,962 Sensitivity of the Net Pension Liability to Changes in the Discount Rate: The following presents the net pension liability of the City, calculated using the discount rate for the Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate: Miscellaneous 1 % Decrease 6.65% Net Pension Liability $51,807,352 Current Discount Rate 7.65% Net Pension Liability $36,739,962 1% Increase 8.65% Net Pension Liability $24,242,330 Pension Plan Fiduciary Net Position: Detailed information about the Plan's fiduciary net position is available in the separately issued CalPERS financial reports. (Continued) 65. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 10 — DEFINED BENEFIT PENSION PLAN (Continued) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions: For the year ended June 30, 2017, the City recognized pension expense of $4,091,868. At June 30, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Pension contributions subsequent to measurement date $ 4,183,821 $ - Differences between actual and expected experience 632,240 - Changes in assumptions - (742,037) Net differences between projected and actual earnings on plan investments Total 4,229,932 - $ 9,045,993 $ (742,037) The $4,183,821 of contributions for the fiscal year ended June 30, 2017 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Other amounts reported as deferred inflows of resources related to pensions will be recognized as pension expense as follows: Year Ended Annual June 30 Amortization 2018 $ 365,560 2019 686,017 2020 1,975,781 2021 1,092,777 $ 4,120,135 NOTE 11 — OTHER POST EMPLOYMENT BENEFITS (OPEB) Plan Description: Permanent employees who retire under the City's CalPERS retirement plan are, pursuant to their respective collective bargaining agreements, eligible to have their medical insurance premiums paid by the City. Retirees receive the amount necessary to pay the cost of his/her enrollment, including the enrollment of his/her family members, in a health benefit plan provided by CalPERS up to the maximum received by active employees in their respective bargaining unit. The City contracts with CalPERS for this insured -benefit plan established under the state Public Employees' Medical and Hospital Care Act (PEMHCA). The plan offers employees and retirees three CalPERS' self - funded options, setup as insurance risk pools, or offers various third -party insured health plans. The plan's medical benefits and premium rates are established by CalPERS and the insurance providers. The City contribution is established by City resolution. Retirees and active employees pay the difference between the premium rate and the City's contribution. Premiums and City contributions are based on the plan and coverage selected by actives and retirees, with the City's potential contribution ranging from zero to $1,605 per month per employee or retiree. The responsibility for benefit payments has transferred to the insurers and the City does not guarantee the benefits in the event of default by the insurers. A comprehensive annual financial report of CalPERS, inclusive of their benefit plans, is available at www.calpers.ca.gov. (Continued) 24 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 11 — OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) The City participates in the Public Agency Retirement System (PARS) Public Agencies Post Retirement Health Care Plan Trust Program (PARS Trust), an agent -multiple employer irrevocable trust established to fund other postemployment benefits. The City Council adopted the PARS Public Agencies Post -Retirement Health Care Plan Trust, including the PARS Public Agencies Post -Retirement Health Care Plan, to fund medical insurance costs for its retired employees, effective February 17, 2010. The City Council appointed the City Treasurer, or his/her successor or his/her designee as the City's plan administrator. The plan administrator is authorized to execute the PARS legal documents on behalf of the City and to take whatever additional actions necessary to maintain the City's participation in the Program and to maintain compliance of any relevant regulation issued or as may be issued; therefore, authorizing him/her to take whatever additional actions are required to administer the City's PARS Plan. The PARS Trust is approved by the Internal Revenue Code Section 115 and invests funds in equity, bond, and money market mutual funds. Copies of PARS Trust annual financial report is available at the City's Finance Department. However, as the City is the plan administrator and has ultimate responsibility for the plan, the City considered the plan to be a single employer plan with PARS as the trust administrator only (with no special funding situation or nonemployer contributing entity). As such, in accordance with the requirements of GASB Statement 74, Financial Reporting for Post Employment Benefit Plans Other Than Pension Pans, the City has elected to present the PARS Trust as a fiduciary fund and include the required disclosures and required supplementary information in its annual financial statements. An employee is eligible for lifetime medical benefits under the OPEB Plan, along with his/her spouse or declared domestic partner at the time of retirement, if all criteria listed below are met: The employee was hired or the City Council member was elected prior to August 1, 2004, and the employee has five or more full-time years of service and the City Council member has five or more years of elected service with the City of Cupertino; or The employee was hired or the City Council member was elected on or after August 1, 2004, and the employee has ten or more full-time and/or elected years of CalPERS service, five years of which must be from the City of Cupertino; and The employee is eligible for retirement as defined under the CalPERS retirement system; and the employee retires from the City of Cupertino. In addition, the eligible employee's dependent children at the time of retirement who are under 23 years old are eligible for medical benefits. In addition to extending the eligibility of dependents from age 23 to age 26 in accordance with the recent healthcare reform act, effective July 1, 2010, employees that retire or resign from service with the City of Cupertino and who are not eligible for retiree medical benefits can continue on the City's medical and dental plans provided that they pay the premiums in full. Plan membership: At January 1, 2017, Plan membership consisted of the following: Inactive plan members or beneficiaries currently receiving benefit payments 130 Inactive plan members entitled to but not yet receiving benefit payments 1 Active plan members 174 305 Funding Policy: OPEB Plan contributions are set by the adopted budget. The cost of the benefits provided by the OPEB Plan is currently being paid by the City on a fully pre -funded basis. The City has expressed intent to fully fund the annual required contribution (ARC) each year. Based on the actuarial valuation date of January 1, 2017, the annual required contribution rate is 7.11 percent of annual covered payroll. For the year ended June 30, 2017, the City paid $956,571 in healthcare premium payments. Plan members are not required to contribute to the plan. (Continued) 67. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 11 — OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) Annual OPEB Cost and Funded Status: Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of certain events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with long-term perspective of the calculations. The other significant actuarial assumptions used to prepare the City's January 1, 2017 actuarial valuation include the following: Valuation date: Measurement date: Actuarial Cost Method: Amortization Method: Amortization Period: Asset Valuation Method: Actuarial Assumptions: Discount Rate Payroll Growth Ultimate Rate of Medical Inflation Mortality (1) January 1, 2017 June 30, 2017 Entry Age Normal Level percent of pay closed 12 year Market value 7.00% 3.00% 4.50% CalPERS mortality assumptions (1) 2014 CalPERS Experience Study, Recipients with attained age of 50 The City's annual OPEB cost and actual contributions to the OPEB Plan for the past three years are as follows: OPEB Annual Actual Fiscal Year Cost (AOC) Contribution 6/30/2015 $ 1,584,785 $ 9,088,056 6/30/2016 1,227,219 1,225,353 6/30/2017 1,451,232 1,303,571 (Continued) Percentage of Net OPEB AOC Obligation Contributed (Asset) 573% $ (10,494,403) 100% (10,492,537) 90% (10, 344, 876) CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 11 — OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) The City's Net OPEB asset is recorded in the Retiree Medical Internal Service Fund and is calculated as of June 30, 2017 as follows: Annual required contribution $ 1,116,764 Interest on prior year net OPEB asset (734,478) Adjustment to annual required contribution 1,068,946 Annual OPEB cost 1,451,232 Insurance premiums paid on behalf of retirees (956,571) Implicit subsidy (347,000) Decrease in net OPEB asset 147,661 Net OPEB (asset) June 30, 2016 (10,492,537) Net OPEB (asset) June 30, 2017 $ (10,344,876) The latest available actuarial data and funding progress are set forth below at their actuarial valuation date of January 1, 2017. Actuarial accrued liability (AAL) $ 26,294,101 Actuarial value of planned assets (23,808,423) Unfunded actuarial accrued liability (UAAL) $ 2,485,678 Funded Ratio (actuarial value of plan assets/AAL) 90.55% Covered payroll (active plan members) $ 15,705,000 UAAL as a percentage of covered payroll 15.83% Investment policy: The Plan's policy in regard to the allocation of invested assets is established and may be amended by the Plan's Board by a majority vote of its members. It is the policy of the Plan Board to pursue an investment strategy that reduces risk through the prudent diversification of the portfolio across a broad selection of distinct asset classes. The Plan's investment policy discourages the use of cash equivalents, except for liquidity purposes, and aims to refrain from dramatically shifting asset class allocations over short time spans. The following was the Board's adopted asset allocation policy as of June 30, 2017: Asset Class Target Allocation Fixed income 29% Equities 62% Real estate 6% Commodities 2% Cash 1 % Total 100% (Continued) • • CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 11 — OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) Concentrations: The Plan did not have investments outside of mutual funds that comprise 5% or more of the Plan's total fiduciary net position. Rate of return: For the year ended June 30, 2017, the annual money -weighted rate of return on investments, net of investment expense, was 10.74 percent. The money -weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Net OPEB Liability of the City: The components of the net OPEB liability of the City at June 30, 2017 (expressed in thousands) were as follows: Total OPEB liability $ 27,006 Plan fiduciary net position (25,745) City's net OPEB liability $ 1,261 Plan fiduciary net position as a percentage of the total OPEB liability 95.3% The City is not required to report this liability on its financial statements for the year ended June 30, 2017, in accordance with the adoption requirements of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Actuarial assumptions: The total OPEB liability was determined by an actuarial valuation as of January 1, 2017, using the previously listed actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified. Mortality rates were based on the CalPERS mortality assumptions. The long-term expected rate of return on OPEB 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 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. Best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation as of June 30, 2017 (see the discussion of the Plan's investment policy) are summarized in the following table: Asset Class Long -Term Expected Real Rate of Return Fixed income — core 4.00% Fixed income — high yield 6.50% Fixed income — inflation protected 4.25% Fixed income — hedged 7.00% Equities — domestic 8.50% Equities — developed foreign 9.00% Equities — emerging foreign 10.75% Real estate 8.00% Commodities 8.00% Cash 1.00% (Continued) 70. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 11 — OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) Discount rate: The discount rate used to measure the total OPEB liability was 7.0 percent. The projection of cash flows used to determine the discount rate assumed that City 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 future benefit payments of current plan members. 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. Sensitivity of the net OPEB liability to changes in the discount rate: The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.0 percent) or 1-percentage-point higher (8.0 percent) than the current discount rate (expressed in thousands): 1% Decrease Discount Rate 1% Increase 6.00% 7.00% 8.00% Net OPEB liability (asset) $ 4,746 $ 1,261 $ (1,625) Sensitivity of the net OPEB liability to changes in the healthcare cost trend rates: The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower (decreasing to 3.5 percent) or 1- percentage-point higher (increasing to 5.5 percent) than the current healthcare cost trend rates (expressed in thousands): Healthcare Cost 1% Decrease Trend Rates 1% Increase 3.50% 4.50% 5.50% Net OPEB liability (asset) $ (1,754) $ 1,261 $ 4,944 NOTE 12 — CONCENTRATION RISK The City has an economic dependency on revenues generated directly or indirectly from one company. For the year ended June 30, 2017, more than 10 percent of the City General Fund's total revenues are derived from the company. The City's operations would be adversely impacted if there are any significant declines in taxes received from the company. (Continued) 71 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 13 — UPCOMING GASB PRONOUCEMENTS In June 2015, the GASB issued Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This Statement replaces the requirements of Statement 45 and requires governments to report a liability on the face of the financial statements for the OPEB that they provide. Statement 75 requires governments in all types of OPEB plans to present more extensive note disclosures and required supplementary information (RSI) about their OPEB liabilities. Among the new note disclosures is a description of the effect on the reported OPEB liability of using a discount rate and a healthcare cost trend rate that are one percentage point higher and one percentage point lower than assumed by the government. The new RSI includes a schedule showing the causes of increases and decreases in the OPEB liability and a schedule comparing a government's actual OPEB contributions to its contribution requirements. This Statement is effective for the City's fiscal year ended June 30, 2018. This statement will have an effect on the City and the OPEB liability will be added to the Statement of Net Position. In March 2016, the GASB issued Statement 81, Irrevocable Split -Interest Agreements. This Statement provides accounting and financial reporting guidance for irrevocable split -interest agreements in which a government is a beneficiary. This Statement is effective for the City's fiscal year ended June 30, 2018. This statement will have no effect on the City. In November 2016, the GASB issued Statement 83, Certain Asset Retirement Obligations. This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs) and establishes criteria for determining the timing and pattern of recognition of a liability and a corresponding deferred outflow of resources for AROs. This Statement is effective for the City's fiscal year ended June 30, 2019. Management has not determined what impact, if any, this statement will have on its financial statements. In January 2017, the GASB issued Statement 84, Fiduciary Activities. The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. This Statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. This Statement is effective for the City's fiscal year ended June 30, 2020. Management has not determined what impact, if any, this statement will have on its financial statements. In March 2017, the GASB issued Statement 85, Omnibus 2017. The objective of this Statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits. This Statement is effective for the City's fiscal year ended June 30, 2018. Management has not determined what impact, if any, this statement will have on its financial statements. In March 2017, the GASB issued Statement 86, Certain Debt Extinguishment Issues. The primary objective of this Statement is to improve consistency in accounting and financial reporting for in -substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources (resources other than the proceeds of refunding debt) are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. This Statement is effective for the City's fiscal year ended June 30, 2018. Management has not determined what impact, if any, this statement will have on its financial statements. (Continued) 72. CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2017 NOTE 13 — UPCOMING GASB PRONOUCEMENTS (Continued) In June 2017, the GASB issued Statement 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. This Statement is effective for the City's fiscal year ended June 30, 2021. Management has not determined what impact, if any, this statement will have on its financial statements. NOTE 14 — FUND CLOSING TRANSFER During FY17, the City elected to close the City Channel/Web Internal Service Fund and move the related current financial resources into the General Fund, with related capital assets and long-term debt being moved into the Governmental Activities. This was effective as of July 1, 2016. The transfer of current resources as of July 1, 2016 was reflected as a separate transfer in the General Fund of $260,374, with the residual capital assets and long-term debt of $272,011 being reported as a part of the Governmental Activities for a total transfer of $532,385. NOTE 15 — PRIOR PERIOD RESTATEMENTS In FY17 the City identified and corrected two errors in the financial statements. The first error pertained to capital assets that were not reported in the correct fund as well as construction in progress that was not calculated correctly in prior years. The second error pertained to the incorrect allocations of pension -related liabilities, deferred outflows of resources and deferred inflows of resources between the funds they are directly related to and expected to be paid from. A summary of the restatements is as follows: Capital Net Position Assets July 1, 2016 Adjustment Information Technology Internal Service Fund $ 2,821,765 $ Recreation Programs Enterprise Fund 2,170,189 Net Position Pension July 1, 2016 Adjustment (as restated) - $ (1,184,643) $ 1,637,122 327,730 - 2,497,919 The impact on the change in net position for the preceding period for the Information Technology Internal Service Fund was ($1,141,065) and the impact on the Recreation Programs Enterprise Fund was $743,272. 73. REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) CITY OF CUPERTINO SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS For the year ended June 30, 2017 Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan Last 10 years* Measurement Date Total Pension Liability Service Cost Interest Changes of benefit terms Differences between expected and actual experience Changes in assumptions Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan fiduciary net position Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a)-(b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll Net pension liability as percentage of covered payroll 6/30/2014 6/30/2015 6/30/2016 $ 2,504,228 $ 2,444,939 $ 2,525,314 7,349,943 7,789,134 8,253,983 372,917 696,347 (1,883,633) - (4,351,614) (4,637,005) (5,151,298) 5,502,557 4,086,352 6,324,346 98, 922, 931 104,425,488 108, 511, 840 $ 104,425,488 $ 108,511,840 $ 114,836,186 $ 2,891,986 $ 3,301,642 $ 3,659,170 1,061,884 1,149, 894 1,169, 921 11,379,985 1,724,204 466,704 (4,351,614) (4,637,005) (5,151,298) - (87,780) (47,536) 10,982,241 1,450,955 96,961 65, 566, 067 76, 548, 308 77, 999, 263 $ 76, 548, 308 $ 77, 999, 263 $ 78, 096, 224 $ 27, 877,180 $ 30, 512, 577 $ 36, 739, 962 73.30% 71.88% 68.01% $ 13, 080, 327 $ 13, 504, 966 $ 14, 336, 969 213.12% 225.94% 256.26% Notes to Schedule: Benefit chances. The figures above do not include any liability impact that may have resulted from plan changes which occurred after the actuarial valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes). Chances in assumptions. GASB 68, paragraph 68 states that the long long-term expected rate of return should be determined net of pension plan investment expense, but without reduction for pension plan administrative expense. The discount rate of 7.65% used for the June 30, 2015 measurement date is without reduction of pension plan administrative expense. All other assumptions for the June 30, 2015 measurement date were the same as those used for the June 30, 2016 measurement date. - Fiscal year 2015 was the 1st year of implementation, therefore only three years are shown. Source: CaIPERS Accounting Valuation 74. CITY OF CUPERTINO SCHEDULE OF CONTRIBUTIONS For the year ended June 30, 2017 Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan Last 10 Years* Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Notes to Schedule Valuation date: Methods and assumptions used to determine contribution rates: Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality 2015 2016 2017 $ 3,608,853 $ 3,659,170 (3,608,853) (3,659,170) $ 13,504,966 $ 14,336,969 26.72% 25.52% 6/30/2013 6/30/2014 Entry age Level percentage of payroll, closed 19 Years as of the Valuation Date 15 Year Smoothed Market 2.75% 3% 7.50% Net of Pension Plan Investment and Administrative Expenses; includes Inflation. The probabilities of Retirement are based on the 2010 CalPERS Experience Study for the period from 1997 to 2007. The probabilities of mortality are based on the 2014 CalPERS Experience Study for the period from 1997 to 2007. Pre -retirement and Post -retirement mortality rates include 20 years of projected mortality improvement using Scale BB published by the Society of Actuaries. * - Fiscal year 2015 was the 1 st year of implementation, therefore only three years are shown. Source: City of Cupertino's general ledger and CalPERS Actuarial Valuation $ 4,183, 821 (4,183, 821) $ 16, 505, 207 25.35% 6/30/2015 75. CITY OF CUPERTINO SCHEDULE OF FUNDING PROGRESS For the year ended June 30, 2017 Required Supplementary Information (Unaudited) Defined Benefit Other Post -Employment Benefits Plan: Unfunded Actuarial Unfunded Actuarial Actuarial Accrued Actuarial Actuarial Liability as Valuation Liability Value of Accrued Funded Covered Percentage of Date Entry Age Assets Liability Ratio Payroll Covered Payrol 1/1/2015 $23,370,871 $14,770,023 $ 8,600,848 63.20% $13,800,000 62.32% 1/1/2016 24,483,554 22,294,035 2,189,519 91.06% 14,214,000 15.40% 1/1/2017 26,294,101 23,808,423 2,485,678 90.55% 15,705,000 15.83% 76. CITY OF CUPERTINO, CA SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS For the year ended June 30, 2017 Single Employer Defined Benefit OPEB Plan Last 10 years* Expressed in thousands 6/30/2017 Total OPEB liability Service cost $ 908 Interest 1,781 Changes of benefit terms - Differences between expected and actual experience - Changes of assumptions - Benefit payments (1,333) Net change in total OPEB liability 1,356 Total OPEB liability - beginning 25,650 Total OPEB liability - ending (a) $ 27,006 Plan fiduciary net position Contributions - employer 1,333 Net investment income 2,960 Benefit payments (1,333) Administrative expense (49) Net change in fiduciary net position 2,911 Plan fiduciary net position - beginning 22,834 Plan fiduciary net position - ending (b) $ 25,745 Net OPEB liability - ending (a-b) $ 1,261 Plan fiduciary net position as a percentage of the total OPEB liability 95.33% Covered -employee payroll $ 17,255 Net OPEB liability as a percentage of covered -employee payroll 7.31 % Notes to schedule: * - Fiscal year 2017 was the 1 st year of implementation, therefore only one year is shown. 77. CITY OF CUPERTINO, CA SCHEDULE OF CONTRIBUTIONS - OPEB For the year ended June 30, 2017 Single Employer Defined Benefit OPEB Plan Last 10 years* Expressed in thousands 6/30/2017 Actuarially determined contribution $ 1,117 Contributions in relation to the actuarially determined contributions 1,333 Contribution deficiency (excess) $ (216) Covered -employee payroll $ 17,255 Contributions as a percentage of covered -employee payroll 7.73% Notes to schedule: * - Fiscal year 2017 was the 1st year of implementation, therefore only one year is shown. Valuation Date Methods and assumptions used to determine contribution rates: Actuarial cost method Amortization method Remaining amortization period Asset valuation method Discount rate Amortization growth rate Ultimate rate of medical inflation Salary increases Mortality 1 /1 /2017 Entry age Level percentage of pay, closed 12 years as of the valuation date Fair value of assets 7.00% 3.00% 4.50% 3.00% plus merit component based on years of service CalPERS mortality assumptions 78. CITY OF CUPERTINO, CA SCHEDULE OF INVESTMENT RETURNS - OPEB For the year ended June 30, 2017 Single Employer Defined Benefit OPEB Plan Last 10 years* 6/30/2017 Annual money -weighted rate of return, net of investment expense 10.74% Notes to schedule: * - Fiscal year 2017 was the 1st year of implementation, therefore only one year is shown. 79. MAJOR GOVERNMENTAL FUNDS OTHER THAN THE GENERAL FUND AND SPECIAL REVENUE FUNDS This section is provided for the presentation of budget -to -actual statements for the Public Facilities Corporation Debt Service Fund. Although the fund is considered to be a major government fund, budget - to -actual information in the basic financial statements is limited to the General Fund and major Special Revenue Funds. All other major governmental fund schedules with such information are therefore included as Supplemental Information. The Capital Projects Funds are budgeted on a major project length basis and therefore not comparable on an annual basis. Public Facilities Corporation Debt Service Fund: This fund accounts for the payments of principal and interest on certificates of participation issued to provide for the financing of the Civic Center, Library, Wilson Park, Memorial Park, and other City facilities. :1 CITY OF CUPERTINO, CALIFORNIA PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 Expenditures Administration Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers in Total other financing sources (uses) Net change in fund balance Beginning fund balance Ending fund balance Final Budget Actual $ 6,296 3,167,538 2,135,000 - 1,035,738 3,167,538 3,177,034 Variance Positive (Negative) $ (6,296) 1,032,538 (1,035,738) (9,496) (3,167,538) (3,177,034) (9,496) 3,167,538 3,177,286 9,748 3,167,538 3,177,286 9,748 $ - 252 $ 252 1,596,982 $ 1,597,234 81. NON -MAJOR GOVERNMENTAL FUNDS All funds not considered as major funds on the Fund Financial Statements are consolidated in one column entitled "Other Governmental Funds." These non -major funds are identified and included in this supplementary section and includes the City's Special Revenue Funds and Capital Project Funds. The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Storm Drain Improvement —Accounts for the construction and maintenance of storm drain facilities including drainage and sanitary sewer facilities. Revenues were collected from developers as a result of connections to the storm drainage sewer system. Park Dedication — Accounts for the activity granted by the business and professions code of the State of California in accordance with the open space and conservation element of the City's General Plan. Revenues of this fund are restricted for the acquisition, improvement, expansion and implementation of the City's parks and recreation facilities. Environmental Management / Clean Creeks — Accounts for all activities related to operating the non -point source pollution program. A parcel tax provides revenues. Capital Projects Funds account for the financial resources committed to the construction or improvement of major facilities. Stevens Creek Corridor Park Capital Projects Fund — Accounts for the design and construction of the Stevens Creek Corridor Park projects. Don Burnett Bicycle -Pedestrian Bridge — Accounts for the design and construction of a bicycle footbridge extension of Mary Avenue over Interstate 280. It includes gateways, paths, residential buffering elements, and landscaping. 82. <b 2 0 LLI w ±-I 2 < m O < CD $ 7 < o I LLI IL D — gwz E O I O< O \z O O z / ƒ CL / / LL j j ± / CL m /0 / � � /00\ / \\ E _ \ L � / 't / R 0 § LL cyi cei C cei cyi / m 60-1 m m ƒ o •/ o �ƒ\2 0 2 I a 691 m m $3 LO '#� r e e (D (o k OD00 00 (D U o o r r m o 0 \ \ \ / $ CN CN \£ f� m 60-1 6ql m �kco // k k ) q q E 2 - \ # # \ \ 7 _ cmco It r co # /(/ L U m m m m c , = c , c c 7 7 7 7 / § « 7 N C14 C\j cli N ° k It It I 7 c c c c c 2 � 601 m o, o c, c o k $ $ $ $ $ �_ �_ \ F k �_ E _/ _/ me ca cli cli (yi cli (yi 2 § / U _ U \ 2 % E e U) E i ° § § S % g \ m k ) k k / .C: 2$ § a -02 7\ / 7 U) — ( ■ / j ® / j \ /: 2 / 2 G / JU< ƒ�< m< CO w O z < k c c z 2 LL z_ \ 2 0 z <\L\ 2==04 0 CY) LLkmw LLJ L) 6/BE 2±z= Ewƒ� \��ry < b/ \\�/ e2iry O/ry\ LL O @ z 2 75; w \ @ m 0 z 2 3 > 0 O 2 _ 2 j } � / 77E9/ EE%/ E G c R N n o o w o n n n § \ 0 © \ 0 Cr-: - w @ 0 a) / a #\n C: /\% LU 7 In e 3 _ ��c= 0woo \=o�g CD 00 n Cl) _ \%/ \ LOGS \ � t a k� 7 / $ _ 7\7 /0 \ \ \ \ \ \ (N4 It = � 0 & & Q / a \ Cl \ cy m � o % ? Q 04 04 a /7- / % � e E w N \ \ 't _ \ \ / & & & � G a k k � � 't \ \ / \ / S \ 0 \ $ $ \ m c 7/} r ) 2 m $ ) 3 c rb >,§$°° j\ \ /\ _ ( / \ _ y\ \ = c U 5 \ > } ) 0 2 \ § \ \ $ $ $ % e _ Q R / f % 2 ± k \ / G G f / t£ 2 f $» 2 2 f S x = _ « «_ U_ £ e = e D E e = 7 + E E e ƒ e D O E o x\ I O / e e n m It W :.i z m O 7 LL U) z Z U = r Z z U N O J Q J M W a Z w H 7 U W U O2�¢o W Z 0 - 0 W w a ¢ w jc07wo< U w C6 O W O Q LU Z m 2 W U O W Z W LL O M 0 w T U c� Z m 2 O U a rn o a 0, rn 0 y N� �c0 N7 O 7 c0 O) (0 O n r r r N N '0 @ O O M O O V >az y fA fA N N U a 0 CO C m M n a O 7 0 (0 O N N cM M cq M M M c0 a0 t- CM r N m � m of a a N N N 00 ao N r w M M N N N O C Q E fA fA @ O c0 O O co 00 M N N M C C 0 LL N N 100 w £ m O w ... O O M' M M r n M N O O t0 c0 (O t0 <O W J Om N N tn0 cr0 (00 N N a 69 ER N@ O N O O O 0 n r N , Z v J LL J C N ! fD r 10 O O In N T N C 10 N N N N N LL' 7 � � N V3 U1 Q @ O O O C O LL ID LL j W W N N r r m p m� U N j O N a0 (NO fN0 N OD Y In O 7 M M V 7 >0 v E» ds C aD O OD 7 N N 7 (O n <O Iq O O O M 7 N N O V @ E m J a 0 N M V r N O O n IC) N Q OD W O N CO N W O N Q) r O > O M N Hi C_ o � o o r r n C o N N O LL 0? O? W �3 �3 O" ' O ' O O O O O O _ C@ O O O O O O O O O O N O m O O O N N O O CO 0 T OM1 N N N T @ J N @ N J N ^y U O N d y O J @ U y w C d @ o Zo N E N Q d J U 0@ 0@ ~ .. LOccm 0NL H A U LL 0 0 LL X-U U x o 'd@ s H U d y c w w O z m w L6 w NON -MAJOR ENTERPRISE FUNDS Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges. The City has identified the funds below as nonmajor proprietary funds for fiscal 2016 - 17. Blackberry Farm Fund: This fund accounts for activities related to operating the City -owned golf course. Cupertino Sports Center Fund: This fund accounts for the operation and maintenance of the Cupertino Sports Center. 24 CITY OF CUPERTINO, CALIFORNIA NONMAJOR ENTERPRISE FUNDS STATEMENT OF NET POSITION JUNE 30, 2017 Cupertino Blackberry Sports Farm Center Totals ASSETS Current assets Cash and cash investments (Note 2) $ 819,319 $ 2,206,368 $ 3,025,687 Total current assets 819,319 2,206,368 3,025,687 Noncurrent assets Depreciable, net of accumulated depreciation 60,000 496,255 556,255 Total non current assets 60,000 496,255 556,255 Total assets 879,319 2,702,623 3,581,942 Deferred outflows of resources Related to pension (Note 10) 56,940 122,002 178,942 LIABILITIES Current liabilities Accounts payable and accruals 12,868 184,339 197,207 Compensated absences (Note 1): 21,182 6,423 27,605 Unearned revenue - 114,801 114,801 Total current liabilities 34,050 305,563 339,613 Noncurrent liabilities Compensated absences (Note 1) Net pension liability (Note 10) Total liabilities Deferred inflows of resources Related to pension (Note 10) Net position (Note 7) Net investment in capital assets Unrestricted Total Net Position 28,723 8,710 37,433 231,259 495,508 726,767 294,032 809,781 1,103,813 4,671 10,008 14,679 60,000 496,255 556,255 577,556 1,508,581 2,086,137 $ 637,556 $ 2,004,836 $ 2,642,392 87. CITY OF CUPERTINO, CALIFORNIA NONMAJOR ENTERPRISE FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2017 Cupertino Blackberry Sports Farm Center Totals Operating revenues Charges for services $ 305,435 $ 2,238,023 $ 2,543,458 Other 19,789 - 19,789 Total operating revenue 325,224 2,238,023 2,563,247 Operating expenses Salaries and benefits 195,164 488,669 683,833 Materials and supplies 113,736 224,650 338,386 Contractual services 267,036 1,405,386 1,672,422 Depreciation (Note 5) 21,470 40,538 62,008 Total operating expenses 597,406 2,159,243 2,756,649 Operating income (loss) (272,182) 78,780 (193,402) Nonoperating revenues Investment Income 4,221 8,552 12,773 Total nonoperating revenues 4,221 8,552 12,773 Income (loss) before transfers (267,961) 87,332 (180,629) Transfers in (Note 4) 332,931 1,030,662 1,363,593 Changes in net position 64,970 1,117,994 1,182,964 Net position - beginning of year 572,586 886,842 1,459,428 Net position - end of year $ 637,556 $ 2,004,836 $ 2,642,392 CITY OF CUPERTINO, CALIFORNIA NONMAJOR ENTERPRISE FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017 Cash flows from operating activities Cash received from customers Cash payments to suppliers for goods and services Cash payments to employees for salaries and benefits Net cash provided (used) by operating activities Cash flows from noncapital financing activities Transfers in Cash flows from noncapital financing activities Cash flows from capital and related financing activities Acquisition of capital assets Cash flows from capital and related financing activities Cash Flows from Investing Activities Interest received Cash flows from investing activities Net cash flows Cash and investments at beginning of year Cash and investments at end of year Reconciliation of operating income (loss) to to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Change in assets and liabilities Accounts receivable Due to retirement system Accounts payable and accruals Unearned revenue Compensated absences Net cash provided (used) by operating activities Cupertino Blackberry Sports Farm Center Totals $ 325,224 $ 2,249,923 $ 2,575,147 (403,324) (1,647,736) (2,051,060) (188,231) (484,705) (672,936) (266,331) 117,482 (148,849) 332,931 1,030,662 1,363,593 332,931 1,030,662 1,363,593 (52,208) (200,102) (252,310) (52,208) (200,102) (252,310) 4,221 8,552 12,773 4,221 8,552 12,773 18,613 956,594 975,207 800,706 1,249,774 2,050,480 $ 819,319 $ 2,206,368 $ 3,025,687 $ (272,182) $ 78,780 $ (193,402) 21,470 40,538 62,008 - 7,243 7,243 1,320 2,429 3,749 (22,552) (17,700) (40,252) - 4,657 4,657 5,613 1,535 7,148 $ (266,331) $ 117,482 $ (148,849) INTERNAL SERVICE FUNDS Internal Service Funds are used to finance and account for special activities and services provided by one department or program to other departments of the City on a cost reimbursement basis. The concept of major funds does not extend to internal service funds because they do not do business with outside parties. For the Statement of Activities, the net revenues or expenses of each internal service fund are eliminated by netting them against the operations of the City departments that generated them. The remaining balance sheet items are consolidated with these same funds in the Statement of Net Position. However, internal service funds are still presented separately in the Fund financial statements. Information Technology - Accounts for the activities related to the maintenance and replacement of the City's technology infrastructure. Workers' Compensation - Accounts for the activities in support of the self -insured workers' compensation program. Equipment Revolving - Accounts for the activities related to the maintenance and replacement of the City's vehicle fleet and other equipment. Compensated Absences and Long -Term Disability - Accounts for accrued leave payouts and the City's long term disability insurance program. Retiree Medical - Accounts for funds set -aside for other post -employment retirement benefits 0 Q w CO LL Z Q LL : U U Z > F W W C L CL < Dz LL w 0 z : O N (M W Z V V (D OD V OD (D LO N O LO OD O N Cl) lO O co O n O O O O h M V N N N_ V O 'It P�O NO) <t V O M O O OLO fl- LO (Q V (M N 'ITW N M V (C T T V T V co O OD O co B (M LO O T LO O V W O W @ N N V (O O (`') O O N N LO (D W CO V V (D 0 F O O h h (M O I� O 04�2 O LO V O O N V N Cl) LO LO f� cl N O Co EH Ef3 O) y U � m L U LO LO co co O o O r- r- � � � m � O� cD O O o O o O Lip (o n (p 0 0 'l- V LO 0 0 0 LO LO U m O M O V O O 41 O d7 EA EA O O i O i i i i i i 0 O "O "O a) C E 00 00 O O M O 0000 O O N N N CD CDO O CD C m � Ln Ln Ln Lp L2 a C 0 0 U Q co co ' V V N (0 O N ' LO O N ' M O V V 00 f-- � O (C OD 00 O W (D LO N I� N f- O O r N O h O M M N M - N CO- co It M V N M m C T T N N N O to M 0) to (D N O N 00 E? (D (D 'IT 'IT(`") M m (`") O Oct (M m 00 O -ITLO -ITm LO (Ma M (M r cl N N N N N W> v> (s co co 00 L` W' ' N W M (D (`') O O (D ' O O C O O O O O co1- O o0 O LO O LO N V (7(D m V) O O N (D M V W LO O_ V O V O ul 6 M M co N N 'ITN O N LO 0)LO LO N LO LO Ln N N CD LO Cl) N N ` r- O O O LO LO N r- (h M > E O U 6131 V9� V V ' V V OD (M r ' ' OD LO V ' (M f- N O V LO O C > O O LO LO (D (D M M LO O V V O (D f- LO (D O to V M f� N cei V M (D f- cl M (M f� p M Cl) (D (O T (O O O O I- O 00 00 Cl) (D W V N 0 W 00 00 00 c0 O r 0)T LO It CO 00 O N N (M (M (O V (O f� W (M W N L co M co N C F EH 619. C C N O _N m N O V O N m N f0 O O N m U N U 7 m U O m(D N u) O U Z N m m m C N Q m O O N Z D N y '0 C T) m C m 7 0 Z .. O m .N +u) E N N N O y O O N (O U m y y N m N a (� m 0 C a (D m In .Q) O u N U N y u 3 C d u) m O m N y N N m p 1] m (/) C C C w N C @ m N 7 O m D. y Q N N >. m N m N O - m D. m u) 7 ul U m (n E C C W m 7 p p 7 O O 0 O. L N m u) .y -p O C D_ U - C O' C C C m (� N O _O O C C O (D F m m N W� U O .Q m F F _a) _m .m'+ 7 N p O V) y0 c cL E 11 O 0 m N F ~ p m (0 W C n ay+ y p N m F U C N m p m a) m N U U 0) E .E O U U 7 F 7 C U U Z O y 7 U p Z U N d' m j 0 0 0 co) U p N Of Z D 40 Z 0 J 0 Z 0 Z E O M N O O't 00 (D lf) O O LO LO N fl- O N Cl) O LO N N Co O 1- O 1— O Cl) 00 LO O �t Nt V D) N 7 00 O lf) LO N O (M N M _(D N co 00 * CO N LC) N N fl- N N Ll- (D 00 f0 V 7 V N 00 00 LO co 00 O O co co O (D 16 � � M M N 7 V I- N OO M N (.D O O LO V LO O LO (R (R i i i i i LO 4 00 00 00 00)) M M M > M M M _T O LO U � m U ' N r ' ' co M N N Ln ' LO (D Cl) r- � 00 00 LO LO O LO N O0 O O O O 00 (O Z (D V LO O O V V V O LO O U O N a) a) O O O C 0 a w z Z C O ' CD' (fl (fl ID' CO ' CO 00 N O M V O ' 0')V N O ' V O N co (A 00 lO LO N V W O0 00 O C O O O W N N a) - V Cl) O M O O OD L1- co O I- Cl) co O LO Z c a) .6 V V N N N N N Q) p C N Q U J❑ N U) O❑ZoM Q LL Z LLJ Z) U) z 0 0 0) 00 O r' N (D iz N LO r-- is00 N O 00 Q LL W � O N N O LO LO N 0) 07 O N — CO V (D O LO LO 0) CO O It I- LO CO (D 00 Cl)M N (n U U Z -� O W❑ C C> M V N 00 r-:(iJ 00 Cl) OD M OD (D N 00 O V C L(i CD () (M 7 It M M 1- M M N HW W❑Z tea) W � W J Cl) a- w �Zzw U 0-1Z } W C 00 00 O r— O a) M Cl) N N (D O OH>w � V co CD C) M l- V 00 0)Il- (D 'IT} Z itO f0 co (fl 00 co (D — I- LO 00 00 O � 00 Ln LO (D N 00 M O N O LO LL U) a) c) r--OD OD V (D (.0(D 04 U O O Y C (fl (fl I*V M LL mce) �' o w wU (» V) H (fl (fl O CD ' (fl (M � � � M O I— N 0)(n UL C O O M O LO O O N M LO M M O — V M 7 (M LO OD f� V O N M rl Z O p O (.0 00 CC)(M M M � m (•O M f� t �p O (A O V (M r- � (D Cl) (o Cl) O Z C O D) — - M M M M m LO (D N O N N r M N O �H U � � �i v o z E N E N o a) a) En a) EN c 0.a (n � > c m w p a) a) a) m CO � N o w (° U a) a) w a a N 0 .Q p@ o V C, O .Q C a) C Y a) 0 p O V5 O '� a1 (0 j Z (n O a) w N a p w a •y m C Q% N N > a) p a) X N ' 0 O C O C C O O O_ _ a) a) ' 7 0 .P a N C y O 7 U) C O C co O p) U ,� O C Q U _ C N C a) p N N N O @ R) (4 N a) 7 O O (a O_ C p N C a1 co L C D_ @ f0 p N a) OID a) (0 E En En C C L C CL 0 Q in 2 U S❑ p U N N U 0 0 z w N O W O M N rl OI r N N N W d fA U c cu U vs ' vn OD N N V N N a a @ @vrV E aD N 7 m o eo U FTO @ O_ C aD V N C O a 0 0 U ¢ sus O O 0 o a mm m N V s s amD O > w W sus c O 7 t0 O°i Obi w 7 `o � E 0 U sus 0 o w n m 0 W N co 0 N @ O OOi w w O O U c F o � w ro ro o o M r v w uni tmo N N N N M m O n V N N N M N M O N M mi i O N N N N N M m v nmi ao w n r w o w o n w n v r N O O O O W W N O W O w 7 V N N ro N of w M M m co ui v w W W O N V .N.. N w w V N N V N O N m o o M M v v M v n n v v w o w o v m v m N co a w rn N tq a T d N @ o c m o @ a w y n OE w @ C E d O, O O `p p C Y w c> E c m c c 0 E> 5 0@ E> w 0 m Eas @ w w E E c E OE E t o. c o L m o c L m a t > > 0 O 55 °@ p y N N O� @ U U U U @ c r r @¢ m s U U STATISTICAL SECTION This part of the City's Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit. Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and wellbeing have changed over time: 1. Net Position/Assets by Component 2. Changes in Net Position/Assets 3. Fund Balances of Governmental Funds 4. Changes in Fund Balance of Governmental Funds Revenue Capacity These schedules contain information to help the reader assess the City's most significant own -source revenue, property tax. 1. Assessed and Estimated Actual Value of Taxable Property 2. Direct and Overlapping Property Tax Rates 3. Principal Property Taxpayers 4. Property Tax Levies and Collections Debt Capacity These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future: 1. Ratios of Outstanding Debt by Type 2. Direct and Overlapping Bonded Debt 3. Legal Debt Margin Information 4. Ratio of General Bonded Debt Outstanding Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place: 1. Demographic and Economic Statistics 2. 2017 Employer Ranking Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs: 1. Full -Time Equivalent Employees by Function/Program 2. Operating Indicators by Function/Program 3. Capital Assets Statistics by Function/Program Sources Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. 94. 7 N rn vi a1 7 m M N m x M a,o m �c oo vi oa,� x r. �r Mo ao p N On M �D �rn On O OIn x w Vl M V) 7 Vl M �c V'1 69 69 69 In vl h M h 01 7 7 vl h x N I N N O h h 0 W O N O N 10 w t+i m h C, M M V) N M M V1 N 69 69 .wl O N O 7 O N ' N 7 x 69 69 In m Iq N oho b m 7 x h V1 .-. m h .-. 00 7 V1 N - N 00 M 7 �c M S Oc 01 xlc� O V'1 O N h 0 7 h N 7 N 7 N NI 7 h .-. � N Vl W �c h � .-• V1Nm o r- 00 �cNo x o co NO,rn r- C N00 nO o lc N ca, r-�,O,o , rlI N N 00 M h v1 O N cO V1 h 6s I I I I I In O vl 10 M_ �c O1 m V1 h - O O1 00 W x b h 01 O1 6s I I I I I In C l O O O N O O N p l 7 10 ON ON M V 00 h m l� p ll lc N N N M �O N N O m 7 O 7 v1 6s I I I I 165 x O 01 m h llc ' I'-N h x x 01 h �D N h h� � OD I cry �O .--� p N 7 7 x 7 m cl p 01 N M W O� i 01 O N x V M 00 V1 � 6s I I I I I�q N N ti O O .y O GL O CL Cam. q cN6 ^O > cN6 1 > cN6 lud ti C U�. L d .q O G .q aJ 0 7 0o V1 D1 h 7 00 1D h 10 m h M 10 7 ' h D1 N h N o0 V) 0 7 M m V) 7 N 10 h Vl D1 7 M 7 h 0 7 0 N h D1 N Vl N oo M o0 N D1 N N l� W ^. 7 N h 10 ^2 o0 7 10 N O1 ^. N O 1n O 01 M 00 00 ^. Vl V) 7 00 h O\ .--i 7 01 00 N M Vl 10 N M M V) N Vl 00 00 1p N m D1 h D1 M p o0 m m 10 r 7 O M n. D1 D1 Vl D1 Vl ^. M 01 O M N 01 O 10 O h ^. 7 01 10 1n O D1 0o M N .N.^ V) 01 N M h h M N h M 7 n. 1D V1 O M M .--� N N N w� M m N O 1p N O N N N 00 W 69 10 W "I O h O n. 00 O D1 m N 00 V1 h O N n. r-1 00 01 10 10 O, 1D 00 h 10 -. D1 M 01 M M N N 01 O N 01 Iq 01 17 10 00 Vl 7 00'n h 00 01 0 7 M -� -� 7 0o N 7 M M 00 N 7 m 01 M N O 1p Vl 7 00 D1 M h S h 10 D1 1D o0 D1 10 01 m -. N N 10 'Irm 7 10 01 N p l� m Vl D1 h N M 0 O O 01 h 01 M 01 I N O O _M O 1p 10 7 Vl N M Vl Vl 1p m M 10 m 7 Vl t+'1 0o M 10 01 10 M N 10 10 MM N' o0 V) 1p 1p Vl 10 m N N M 01 N O 10 ^: N N N h 01 69 D1 00 N 1p N h r~ W '. N 7 o0 D1 10 M M O '. V1 O h 1p 00 N V) M N 1p N 7 00 N 1p 7 V1 h h O M h Vl ^. m 7 Vl ^. 01 M N 10 ^. 00 O l� 01 D1 O V) 00 1p o0 D1 M 7 MM N h M .--i 1D 7 �--� 7 7 V) �--� V1 M m 1p ^. h m 1p n. 01 N 0 7 00 .. 1D V) 1p Vl 01 O 1n 10 K1 N tiI o0 0 10 0 10 h 01 h 01 o0 h 01 N 7 7 7 h 0 C) _� N O ^. 00 ^. 01 N N N Cl 7 00 01 ^. O N m _� DD N N 01 DD Vl M 7 7 10 O 10 M M D1 00 N CI Vl Vl N M h C 0 O0 M Vl 7 h Vl 00 O O lc 1D Vl 1p M t Vl Vl h .--i 01 N N N N -� N h 10 N m 69 D1 N V1 h O m V) V) r. m rw ' ' rw N h 01 M M D1 01 O h 7 mM N Vl �. 00 O D1 D1 M 7 M 7 0 0 1p O O l� h .--i V) M oc Cl M o0 D1 D1 m V) M 1p O N m ^. .-. 00 V) V1 h N 0 V) 7 D1 N N 1p o0 M O tiN 1p 1p 1p O M 1D D1 ^. O V1 l� N M N o0 of 01 h Vl D1 10 O 01 00 N 1n 7 O 1p M O 7 N 00 O h 0 00 00 V) 00 7 7 I D1 10 D1 69 1n 10 N M M N N Mc m 10 00 0 1p V1 ' ' N 7 m <=I —1 m 01 0 01 0 1n M o0 7 1p h 1p N N 1n o1 7 00 N 0 01 M M Cl m 00 n. D, M 7 7 N N 10 h h D1 01 10 O D1 00 10 1n cV 1n 1n 7 WWI O O ^. Vl m 7) r 2 t MI h 7 Vi m 10 01 10 Vi 7 m ^: Vi Vi O Vi h O 'n M N Oil 14 N 10 O 01 0; 7 r � Vl 7 1p N 10 01 10 10 N h 7 O O 10 N m N m h 10 Cl 1n 1p Cl r 1n r h 7 7 DD 00 Vl O DD M ^. 7 N h oc N 10 N N N N 10 01 N 7 h 69 cV Cl oo rw o0 1p o0 7 00 ' ' m 1p vi vi w N h m Vl 0 7 M 0 Vl o10-.v�NN1n1a O o N o1 N1c1c�c -. 1n 1n Cl N -� N -� 1p vv mNNo1� rn M 00 Vl 00 O �010� N N N 1c NI h 1p m D1 r N h h _ 1p O h V) 10 10 10 D1 m oo O �. W) W) . . O .-I M h 7 0 h N o0 M p o0 h h M V1 01 t+'1 00 01 M 1p 1p D1 00 V1 7 o0 01 _O O D1 10 O O o0 V1 V1 h 00 V) rq 1p N N 7 D1 m M 7 O N O �. �: N 10 h N 7 h 69 ^. Vl 1p 7 00 7 N 7 7 D1 Vl 1p V) h ' ' D1 O Vl h .-. O 1p h O 10 01 01 Vl 00 h Vl 10 r 10 b 00 00 10 D1 r 10 7 M l� D1 10 7 V) Vl 1p 01 O Vl Vl N 1p o0 V) 7 h D1 O D1 1D O ti O 7 Vi M 00 7 C41 r.� 1p M N D1 N 1p N m N 1D ll- 10 m o Vl V) o0 N Orn Vi ll- O 01 01 ': Cr -� 01 N 7 1n h 10 V) ^. h N O K1 7 N 10 0_0 10 p 00 7 1p D1 V1 D1 N O b DD 7 l� h h M l� O V1 M 01 00 01 7 h N M N M 7 Vi O N 00 '. -� n. 1!i 7 -� 7 N n-" O -� -� N 10 h N 7 h 69 Vl 1p 7 7 1p Vl '. 7 Vl r D1 m o0 h N m 10 ' ' m Vl 10 r 01 (2,1 01 O O V) V) 1p h m m M h V1 b Vl D1 '. N M N 10 7 --� 1p 0 n. 7 M h h h V1 M V1 V) o0 1p h M 1p Vl M N N 01 h m D1 01 N h M --i o0 00 h ^: Vl M O 7 In00 OBI 00 Vl 00 7 Vl N h N Vl h V) O M N r~ M --i Vl 7 00 00 D; 10 O 1p h 7 h N O 01 p D1 m 10 0 7 m M O N 0 7 7 00 00 O o0 D1 m V1 O V) n. ^. V1 V1 N V) 1p N 1p" 0i 69 O V1 O 00 m D1 D1 7 00 7 V1 V1 N 1p 7 O V1 '' O m— 10 Vl <=I N h n. 00 00 o Z -� M 7 h 7 v -.Nl cnoolor N N o0 7 N 01 r Oocnol 7 ca h v 7 a, W o, -� M oo CCNo,Mov 0 0 7 0o m h t�O,N o v m h v O p1l 01 7 7 10 h 7 02 h oo Vi 7 Oi o0 1n N 0, 10 r O, O O 10 N 7 7 00 of p 1p O N O O h 0 p h 00 10 ^� ^� 0 o0 01 01 01 M 01 7 V1 h N o0 M 10 10 O 00 Vl V) 00 00 V1 ^. O h 01 -� O D1 m 10 ^. V1 h m O Ol oc O1 N -�10 0o N1p" O 69 N N h 7 1p O r~ V1 01 01 1n N 7 N o0 M l� m 7 7 D1 D1 O h h V1 N M 1p 10 00I 10 D; 1_0 cr5 Vi D; D; M M 10 O h M 10 O O 01 h ': Vi N l0 7 7 O Vi t+i 7 0o N p M h N 7 Vl 1p o0 p 10 10 N 01 o0 O Vl n. �_ Vl Vl 7 V) O 7 Vl o0 O 01 N O Vl M 01 01 h W Vl '. M l0 M 7 Vl 7 0 D1 N 1p 10 7 0 7 O 7 N Vi h M N Vi M N N h 0 69 Q N N N 0 N pq �n N N •� � � O A. y w O LL cd y y y � > > O. � O O •�-' O p, N > N •.r>iV> N 'b U •.r>i V N y �., O ' CI N> qq O jR R a° i 9 d O N I^ > p " 1 u4.m N N y >u �CCGOU� P.dP�.UP. �.,• p Uri LOU �O U od.aC y en 0 Q a�F y W F W F 16 01 �I N RI N MI N OI N �I N OOI N 69 69 69 69 69 69 69 O n N 00 O\ M m O\ M O 10 M In N M M 69 69 69 r 00 M 01 m 7 N N C, to � N 'I-O 01 01 7 O 00 Vi : Vi m r �000 o�o�o�ro�N��n N r V1 O r r 01 V1 01 7 M N � --i Vl 01 O N Cl �. NCl o0 01 vi vi a, N rO o � rr rro�oov� 00 7 00 M N N 7 Cl � 7 r M 01 00 01 h N h N_ 7 m r 01 N NoOo M N 00 O Vl r m C, C, r0 r7O77 00 N a, r r a, M M N N 7 0101 O V1 c17,r1 c10r1 N 7 01 to to 7 N 7 N V1 V1 N o0 7 N N ^� oN_ to O r N 0 01 O C, m ' NMm to M 17,7 to O, r 0 Cl VL Cl 00 7 0 M 00 O N O N r= to 01 7 7 M O, to N M 0 - M to r M N ' g Cl Cl N O r �O o0 m MW 00 00 r v - N M N O N r 01 0 7 01 N 01 M 01 ' O �O 7 01 N M w 0o r N o�v�Nr�nrvcoro�kn 7 17, N t~r- 7 0'o V1 O 01 M In r N v �oM mNMN-� W N U N Y3 69 69 N 7 r cry 'n 00 r w 69 N � r 7 M 00 M 7 65 N 65 w N ' N O oo O N r M n Cl IC M D 'n 17� r r r 7 O 10 'n O, O `-� r- Ic M M b9 O 7 7 7 N N oOo of O Obi �D M M 65 Clcq 7i Ocrri h 7 7 cl M M 17, g iUG k U " U w 69 7 P4 000 0, N _- 00 N O N M N M V1 00 141) N tn 00 IlO N M 000 0 — �--� N 01 N 69 or) t-- �o 69 kn M 00 l� 00 tn tn M O m 0000 00 l� O O N000 DD O Ic 00 m M 69 I�c 00 M `O It M b9 w w i�. Qr S"•i U ,..' L'r a� H � 0,- C0-0, O M l� O 00 C1 01 'o o0-0 aM0; tVl 0v" 00 0oO: Nr ,--� N tn 69 1 00 r- O 00 IT M M O O OO l� 00 O O, M 00 O �O O, 0, 00 Vl 00 ^� N O a1 N N N Wn M vl N M 6s O 00 M �Irl N M N "t 6R N O O l) O 00 01 O V1 M O a1 N IT 0, O 69 00 t� O, 00 N M kr I --� N 6R W) V'1 �--i O� N cn N Oo M M 0 O 110 MCD Oo 69 w —v,� ' O O N D 0� a1 � a1 vl N ,It Oo to a, o l� 0, O O M M ,O N 69 01 M M l� 01 4�o} ' N W') M �lO 00 M �O 00 tr O \O 0, 0� 00 69 M �!1 01 01 M N O O O M--i 00 In M fn N �O N vl vl r CqN N C 6R � N lz v t 00 1p Vl \O 6R O O N N O O 00 0, Oo w h D1 m Vl h 7 7 7 m Vl 10 01 7 N Vl Vl O m h h ' ' = 7 0 1D o 1D N M N 1D a1 o N DD � O On -- -- 0� l� lc D, 7 kr cn D, o0 1D 10 O l� 1I� On o cn l� N 17 h 01 ...I N N o0 M 0 0 00 rl 71n nmc'iM7 00 N0177 --cq 7 M 10 1n 1D M N m v v m M M -� 1D 010 1n 7 1D -- O o0 1n 10 O -- C On On 0o O m 7 1D 7 h M N N --� N N 7 N 10 1n --� -- In O1 h 00 0o N --� N 7 10 N 10 N 69 69 1D N V1 O m m MI N 1n O N --� N O -- M -- V1 00 h 0 0 7 h 7 m -- -- O N h N O DD O M O N 1D = cV -- O 1n Vl 01 N O -- -- 01 O oo h h h -- N 00 -- -- O Vl _h 1D 1n h N 0, N 7 N m 01 '4 01 1n tiI Vl m h 7 10 m N M 00 7 --� N 00 O h N Oi 10 h Vl N 1n O N •--' O 1n p 7 1D 1n O N Vl N 01 O D1 1n 00 N r- fV h -� 69 69 DD M N V1 N 01 N V1 7 DD 01 00 D1 M M 107 h O N o0 N 01 1I� 7 m 0 0l 7 O I'-D1 7 V1 M D1 h h N -- 1D O 00 O M O V1 D1 Go N 00 CD CD 0 ry M h 0 1n 7 M , 00 N N 7 00 N 1D C7, 010 N O -- 1D l� 0 N W O cV o oc O1 o h 7 1n NW) h m 1!1 N M O M 1!1 1!1 N h 7 M D; C1 7 DO Vl r- 10 N M M N N 69 69 7 D1 O M M D1 C-41 O 01 h 7 O 00 7 1p ' 01 7 N D1 0 7 -- 00 1n N l� N 7C1, -- M N V1 h -- V1 N h 00 10 Vl N 1D 1:1 O N O oo M 10 O 1n Go h l0 --� 7 D; 171 7 1D 1!i --� 10 10 l 7 h 10 h 7 1D 7 D; O O O oo _M h O 01 •-- 01 'n 1p p N h 0 1p h 10 1n 1D l 01 1D 7 7 1n 7 7 1D 7 Go h h -- 01 -- 1n M -- N •-- N 69 69 O 10 h h 10 h o0 -- 10 V1 0 7 N -- 1D 1D O N N 01 " r ' O M 10 o 01 N O -- h 00 1p 1n 1D O N O D1 N h N oc O -- O h N h M 10 r-- CD r- 7 V M1DN Mtn 107 O10 10 DD Go 0 00 -y 00 7 7 -- 1D 1n O O p M h 00 V1 V1 1n 1D O m m r m 01 01 m O h 7 h O M D1 10 N Vl D1 N _h oo M N M O 1D 7 M Go 7 M N 7 10 -- 7 -- 69 69 7 N DD 1D 1D D1 N I r-I 10 N M D1 7 ll ' 1n =I M 1p D1 -- 10 ' 1D O h h o 7 0 m m 7 D1 O -- On 10 DD D1 D1 DD M 1n h -- V1 m m N D1 7 O D1 00 D1 D1 N -- O 1p 0 1p oo 7 N h N m N N N 10 00 7 7 7 N 01 M l� N 10 � ryl V DD O M 7 r- m In 171 M D N OO M h h- 7 M 7 N 0 O- Vl -y 10 1p h O h 1D 10 O p N 1p 1D 01 N 10N m 7 1n O -- 1p N N 1D -- M h 1n 1n m 01 00 oc O 1p O, N 00 01 00 7 1p 1p M o0 N 07 N N M 10 N ~ 7 69 69 D1 1n -- 7 1p 1D N O 1D m o0 mh N O 1p D1 N 1p o0 1D m DD 10 h ' 7 N N O DD N 0 1n h D1 O 10 0 7 N 7 N 7 7 l� Go 7 00 V1 M O 01 r- O 00 7 h In h M 7 -- N m 01 01 -- 01 M DD O N O m _h 00 'n 7 M M 1n 00 Go 7 p 1n h 1n D1 M 10 01 1n 7 7 1D -- 1D N N 1n O O oc O 1p Go h � 69 69 M a,�--tea, 'n voln�oo10 o1 rn 1D " ' o v o oo--MMv1Mv o 0--10 0 1D 1M-- o10 M 1D .-. o M Owl D1 h M 00 O M 00 MIn o_ 1p 00 00 M O Ni 1p 0 0 1p h r- O oo v 00 M 7 a M p D1 r 1n 1n r r b O -- 69 6A O DD v M m o 1n M -- 00 M M O 00 - 01 0 7 O h ' ' 1n ' 1n O l- o Vl O 01 10 M N M O 01 1n 117 1n M oo O N lD 7 7 1D N m lD D1 -- 7 O N 7 1n M O O h 01 C D1 0, O 0, all 1n O 10 O h O m 10 m 10 7 01 7 N Vl 00 -� Go ;; 1n GD M p D1 O 01 7 0 1p o0 m p M M DD r r r o0 m M 00 M DD 7 1p M -- 7 1D h -- 10 --� 10 N -- 01 --� m � M M --vi 69 69 01 7 0 h 01 h 00 t M -- h 1p 7 V1 1n m O m h h '' V1 ' O 1n N o M 7 00 -- D1 DD o0 v1 h 1p 7 V1 7 V1 r DD1 1 O O O 0 7 1D o0 O 1p 1n GD O 00 DD � op D; O vi 10 DD N vi 10 vi 1n m 1n 10 V'i 01 1n p m 01 m 1n N N 01 1D l 1n 1n 1p D1 7 M M M Vl 00 1p O O M 1D M O --� h --� M 69 69 � j d cC O ^ Q aq Ua u"w"o WU UA coaF-F-H A W� rn o 0 0 0 0 0 0 0 0 l "O "t O N C� 00 ooN�nv�NNIDInO� k kn V) 00 l— C1 r- �,o — C1 N l-- 0 00 �c O) 00 It O C� N �O --� N l— M IC M l— M — M 'C cd � kr M N tzF O M 00 l O O ��+ N — M l— 00 \O l— O l— � /, p O 'O N l-,-� l- �n v� W) � 00 ., \O 00 kn O 01 01 It 01 00 � 00 0\ 00 00 N O M O O l- .-� 00 I:T \C M r- C1 v') �t O o0 %O tT r- N v') "o C� C1 t-- 0't r-'t N N IlO cr 01 � � 00 M 01 tzt 00 C, C, O, o, C, 0 iG W 0 0 0 0 0 0 O O O O O O 4-I O O O O O O I I I O O O O O O O C,3 O� tip•' •--� --� •--� --� •--� --� cr Y ~ Ty W 110 00 v') C� O C� 00 N NO —CA— W)—It Olt N N �O O M O O --� 01 NOMr--� �n N M cn N — r- M 00 M kr 11 O M 110 00 to 't kr) W) 't W) r 00 01 0 69 N O� 00 N r- 0 It �c 00 l� �10 O C1 It N Q1 O M M N lO N N `O l- 0 00 M N kn r-� N Q N l� C� N M 00 �O 00 M O O� O 69 UO O O O O O O O O O N N N N N N N N N N w LTOZ 9TOZ SIN t 17TOZ a O a` a £TOZ U U1 M ZTOZ TTOZ v .� v OTOZ 60OZ SON � � � � � SU01ll18 N C O U 06 O U J 2 0 O L 7E C N E N O O LL U X M (6 -O H O C_ C C O U U >- O a� c U _ C O fB N =3 1 M O jj O N O 70 O 0 0 0 r 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O N \O ti O \O I- 00 01 01 � M M \O 00 \10 \O \10 1 �O l� O o0 N 00 O N cn O N 0 - 00 v) O� O C1 C1 O O O M In .--i NIt It 0 00 0 It - 00 In In p O o 0 0 0 0 0 0 0 0 0 0 0 o M O O N --� O O O O O O O O O O O O O l4 O o N �O 000000000000000 .--a 00 O O O Q �--� O 00 It 00 C1 C1 0 In M 00 00 N C1 N It � 00 `*'' a G E 000N00•--iN"TNNoo�"tMN In In U U OO O O K1 v) �--i N v) B O O O� E N O In In ��., p 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 O O U y U U N-0000000000000cz o00000000000000 o `� cn $w 00 N l- O� -� O 0 "o v) N O �O �O U O O O M In N M In o t- oIt r k4r) ¢ U U OOOOOOOOOOOOOO M O O «3 p.W -C w N �--�OOOOOOOOOOOOO.-i O O ,Y, = O IV 00000000000000M - I O In 't 00 kr) C1 0 In .--i o l- O 0 In ON N N y O y Y O U M O M N 00 N N 01 0 In O O l- In In N \O \O 9." 00 O U ,•' �--i O O O en v) �--i N I'll cn O l- CD I'll N 110 In In y U r Y 01 • N 0 0 0 0 0 0 0 0 0 0 0 0 0 0 M O 0 ¢¢ 0 0 0 0 0 0 0 0 0 0 0 O O �--i O O U ^4 M En O CD O O O O O O O O O O O O O N ° U ' �' N •y p O - T OD OD O� l- O OD O O� O� N O� I kn N O v) N 00 O� N 00 O� "O 0 - "O kn 00 �o �c OOOMW). --i N M MO oo O -tN 00 In `O o "p y y O CD CD CD CD CD CD CD CD CD O O O O O M O O Q y� (1) U pp.M N--�O O O O O O O O O O CD CD CD i O O ^' +C�3 n b ° w bq O y s U 7 ct O N O QN O O O O O O O O O O O O O O O O o 00 H cC tto ? +� -I ., O l� 00 CD l� kf) .--i CD � � � N In U > O '~ OOOmN-N-tfnOoM0o 1,0 -t,--�en 't � U U Q a '~ O O O O O O O O O O O O O O M Q N OOOOOOOOOOOOO.�-i o � O H 7 Cd 5lnv000c5"otnr-255Nr-50� 4 'to W Q' CDO� N 0O O N N \O l O — l M M l— `O 00 In O O O O M M M M M 0 v) O - r o In V a �.,� 000000000�0000 M O 00 O U � 9 U p U O O O O O O O - ¢ Q"C y y W C cd y0, O CD CD CD CDO -� O O j"•„ cC ¢, M M O, O —I O N 00 N O) N \O N O — � OD O 00 U V .!d>! bd13 O\ O N N 00 -N N 0 v) O 0 l� 00 � In "D 00 In a)�O 0 -O MM O l- O In It cr. Fw O CD OO ¢ N - OOOOOOOOOOOO.-O y cc � �y W cy O� HC." O O O O O O O O O O O O O O O ,-� O M ¢ �" Q U `�' ,"' rn �" O O O � 00 \O O) M O) O O M �--� M N 00 110 M �O U ¢ O �+ u ° cd O" i Q( u O 0 0 0 M M M 0 r O M 0 00 In It O o Y ii .� �. U y O 0 0 0 0 0 0 0 0 0 0 0 0 0 o N O O O fl 0 Cd U U U •� --�OOOOOOOOOOOC)(614 o O y 0 � ❑ � ,y y � � � `� l� � gz C." >I 00 O O O O O O O O O O O O O O O � O O O O 0 It 00 r C1 M .--i In o �--i �--� M 00 O O M lr- C� O O N 00 M N �--� t 1* o l l \O = O l 00 00 c� O O O m m �--� �--� N M O N O M �--� I cn In U '� O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N O 0 0 O Ln> LV O d U U O O O bA U �yN--�OOOOOOOOOOOOO rl O -� O Y., q o cl Q�' l�.M tz O ,M-i45 (� Y (AO +� Y " bA O 'C N a40��--� O y cd O O 9 U 4y rU.+ O •� p U U p bA cn N bUA O y •i+ Y cd N ZL ., A V Y dQ U OrUn c a h w U 00 O o CAbro d y> C �bA p O p rnCA ¢ O¢ y Q ¢l 7 d y p .(� w U W N �I a Q cd Y Y. r. • a Syy rr°``CI. 17 ��// �1.I� O art/ y V tc U U y O W Y i✓� 1 N\ Y W V O dJ ,�.I -• O lit Cc C,3 U° '¢ = o U O .. S+" �, .. ,S.' 2 o U En oc > A_ �' > A y p `` > ai a) bA cl O O O U 00iaU..• O cad cad cad U Oi. -0O O DC U U O DC 'v aUUUUwwwav�v�v�3H vc7xh 0 0 0 I l� O M O O M N_ Wn N M 00 01 69 0 000000000 \10 O l� N O O 00 �O M 00 '-r "o ,c Z l- in -T — O O O O O O O r- O O 01 O O 69 0 'IT 0 0It � O M O O l- N M V) N 00 N 00 N O S O O O N 00 O O 0- 0 -� O 00 O ^� O M 'T 00 00 't l O\ O 00 O 01� 1.0 — C1 — N "O N N N N N 00 M O M M 00 — O0 N 00 O O M M a M 00 l� � V1 CA 69 d U W a � a ¢ � O a � A � .� 'U y O O O O� E y E� QU>� U aiu L. N C M O F- O O O O O O O O O O U y� cd OOOOOOOOOO N O [� 0000000000 C1 V) N M �t \O � kn 00 M N 00 O O 00 r- - r- O 00 N M O C1 01 00 - 00 l- 00 o0 00 l� o0 C\ O .--i M U 6• � .o U N N Q O U 64 O O O O O O O O a V O O O O O O O O O O �,�, �, o00000000c - O O O O O O O O O U iC v �a1oo�N�nooMNoo 00 — O 00 � � l O 00 N M O — C1 01 a0 d' DD 00 o0 00 o0 r- o0 C O M UU l— M •--� C1 W) N M � � l- C1 00 -� N tr) 00 M N 00 --� O oo C r- --� r- O o0 Q N M O -� a1 a,,00 00 a O �O C1 00 a1 �O CI- �O O p -� Itll:�--� — --� 00 M l— 00 00 00 l— 00 O\ O 69 00 O1 O M � W) I�c � O O O O O O O O O O N N N N N N N N N N 4 0 0000000000 ,:1- 1,0 I�O O I�O 00 00 .� N M M l� kn M N N O \O M V) V1 lzl- kn M 00 C1 00 Vn .--i kn lzl- O M 01 l� 00 00 00 l� l— l� \O 1�0 V) Vn O O O O O O O O O O �,O lzl- N O C� kr) N - \�C 0 0 0 0 0 0 0 0 0 0 O O O O O O O O O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 kn0000ooviknc 00 l� It N 00 N M O M C1 kn O 01 O 01 a1 00 l- 00 110 W M N O1 � W) M GS 00 C� O M �I- W) I�c � 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N O Cl) N 00 N ll- O M kh l: 17 V] M 00 � C1 O Mm N M 4 wl N U A 69 69 V 'r o G G G o o G G o �D t .Mr M M �D �D y O V1 M 00 I'D V1 M 01 00 V1 01 O N C1 M M 00 �D M O O N an On O o0 l� CO N 00 69 69 69 69 69 69 69 69 0 0 0 0 0 0 0 0 �o �c �c It It m �c It p1 01 01 In 01 M O O O 't IIR DD O --i kn In h M — M h 00 10 OI� M _ra 00 O O O, O O �O C O O oo N O O O h OA O Vl O O O 'O O �D O G O V p [� W 0 W O kn m 0 vi vi o0 0 0 0 0 kn kn kn m O 0 0 O 01 O`. v) <71 rl- <71 M <71 00 N O N O O\ Ol A O 00 O N O In N O N tzt — l� -t O O O •--+ 7 �D CO l� l� �D N Vi O m m N N �n l� Vi en N of l� �n M vi N O,. id O 00 O O �D 00 N M Wn M l— O os I III 6os 1 1 II 16os C O N N A W) 0 00 kn o o 'O 0 N C 15 � O 59 59 M l� O 41 41 M �O l— 00 N N 00 M M N 01 o d, �0 oo �O O t M N M 00 00 h �n 00 l— 00 00 01 N l� O 00 kn Wn W) 69 � as o d o HQ 59 ot o � �O o0 ' llO O N M o s, O O O M o0 00 h r- V') CDV') m ,e 00 r O l� V'1 O l� Y b 0 Q U ti 69 Cd CC > ♦+ � > o kf) d' U O �• Y O � Q Y muCIS o00 NM��n o� o CIS kr) d °' o000000000 � > � Q � •� o Q d 0 0 .0 U w 0 U coo o o � C7Q� o � � d IEn 00 r- o, r'- I'o — a, N r'- 0 l� 00 a, 00 It O O1 N �O l0 M r- M M vi M N It O M 00 l� O M r- 00 \�o r O l-- V� O I�O N l— ,--i r-- V) O N tr kr 00 --� �16 00 kr IlO M l� "t 01 "t N O 01 a1 01 tn� l— 69 ohtn o It N N N Vl O In W) 00 01 C1 C1 O, 00 O W) tn W) W) kr) W) kn v') v) 1�0 O 00 a, O -- N M �t kr) ',O l� 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N O O O O O O O O 01 N It kn V) 'IT kn \O 0 0 0 0 0 0 0 0 01 01 01 01 01 01 01 01 0 0 0 0 0 It o0 0o N o0 00 110 en It en 0 0 0 0 0 0 0 0 0 0 M M� t-- 1p V•1 M M M r-i � oo \O M M M M llO \O cl 00 \ ' O O O O O01) C1 �� N N N N N M � all W) W) W) N \C (OIN N r^' lq� O lO "T r- oo a1 V'i ,O 0� 69 O O O O O WO O CN 00 r- O O O O O r- � 00 0 0 0 0 0 0�1- DD O� 00 4 O O ke- 00 kr r" c3l� V) \p 00 N 17 01 N O �O DD a0 � O a0 O M � M W) M M M N N N N M M M 69 0 0 0 0 o 0 0 0 0 0 N �O O l � -,I-,-� � N � M N M M M M M M M M 1p 1p N 00 'IT 00 00 00 O l� N �o00 �oM "o N to M 00 00 a,N"000.� 0ot--0—C�No0C�t--o0 It W) O= O It�10 00 N M r-�, OO 0o t o 0o OO 0o OO Cln a n It W) 0000m O N ON � W) 0000 v7 O 00 M O lO cl r- •--� �O Vl DD C1 C7) C1 c DD O Vi V'1 Vi V'1 Vi V'1 Vi V'1 V'1 � 00 01 O N .M-� �t W) \C r--� l� o0 c1 O N M 4 A ,6 O O O O O O O O O O N N N N N N N N N N 0 U Y U Q O O U O O f. U U 'd ��y U y i-I U Q N � O Y O GU U � O 0 y 'C O .��• U �i � • � Q N � ��'' � Q to cn Y • a .0 Q.I v] }+ O ram+ U i+ O cd U N N � _ CIS V] V] E-� --� N M � •x• R� 0 0 kn l� kn O M M N V') r In 01 M M 01 — l— O --� M N 00 00 N O kn O O 00 O N kn to 00 'T M — M m N O000 N v) v) V') O OO O N kn v, r- N O N 00 r N l— kn O O 00 M N kn Wn l— O O IT 00 l— O en N M N kn M In O 01 N In 01 kn r- kn M M N O N N N l— �O N l— kn kf) 00 00 M C1 kn N O 01't r'T kn l— `� N C1 M M N N ,--i �O kn kn IT 00 00 O\ V') ..y 00 O1 M � � kn l— "'� IT �O N O M N N O N M N l— O kr) M 00 M C1 Vl p 01 C1 M l� l— kn l— N`O N O N rA 00 M l— r- — l— N•--� N O N rrA O O O 00 �O OO rn kr) 00 M kn 00 l— l— l— O ' N N Gn Vr O cu y fi O N O U Q N U N i.4 � •y � •y CV y i-' O F� Udad04u06 A •L •L> W •la. OF.' a O d va O av� 'O �Q 0 N O N O N v N _M O N O N O O N a` 0 00 0 N O o00 N O o00 7 N O N 0 �� U NN A ❑ A f]Cl a N 338 .d d dtE y y N y 33S iiiU aoNN OAA qeq MVN 1m 33S d d d ry ^ v . . . . . . . . . . 33$ . . . . . . . . . . iii �� _N 000 oci 333 d d d . . . . . . . . . coo . . . . . . . . . . . %�.%U a�N G A ❑ ACl ° 333s` ,e zrA o8 S °3 Ny p `FZ �� iv �MN 000 AA �x �e r a " O i i i U o N O o o qe q mmrn U v, 5 F c r,m 333 � a8 d d d . . . . . . . . . . v au am �¢dd nww'' t 9 �n ga°• � d'E v d °.� a b0� o � ea d � o oae'�� °e �a y SOFF ��'.. cc G��.a` aa� cgK'o dmddc�Vx aiii ;vbvbk2 vaw O N N N O oo O M ,--� ,--� ,--� •--� •--� ,--� � ,--� •--� N^ N It O N N N O 00 „" O M — — — — — t — — N N O N N O N N N O 00 O1 p — — — — ,--- l-, — — O N ~ N rl ,� N N i.i CA O it a1 O ,--� •--� ,--� ,--� ,--� •--� ,--� l ,--� •--� r-I �Z•I � CC QM N N fJ, y tn � N a C� U M Otn 00 O N O O O iUr �ii r/U U Q O s.. 1 y Uf. O 0 ?�, ?-, o w � �� o'� a'�'� o � �UU•�Uw� � Uv�Haaa0C7UUv��nznH�U w a U History Cupertino owes its name and earliest mention in recorded history to the 1776 expedition led by the Spanish explorer Captain Juan Bautista de Anza. Starting in Sonora, Mexico, Anza led a group up the coast of California, aiming to establish a presidio (fort) on San Francisco Bay. In late March, Anza left the majority of his party of men, women, and children in Monterey to rest and pressed on through the Santa Clara Valley to his San Francisco destination with 18 men and Pedro Font, a Qiy diarist, cartographer, and Franciscan priest. With the expedition encamped in what is now Cupertino, Font christened the creek next to the encampment the Arroyo San Joseph Cupertino in honor of his patron, San Guiseppe (San Joseph) of Copertino, Italy. The arroyo is now known as Stevens Creek. The village of Cupertino sprang up at the crossroads of Saratoga -Sunnyvale Road (now DeAnza Boulevard) and Stevens Creek Boulevard. It was first known as West Side, but by 1898, the post office at the Crossroads needed a more unique name. John T. Doyle, a San Francisco lawyer and historian, had given the name Cupertino to his winery in recognition of the name bestowed on the nearby creek - likewise, in 1904, the same name was applied to the Crossroads and to the post office as the Home Union Store in the northeast corner of the Crossroads changed its name to The Cupertino Store. Although Cupertino's pioneer settlers planted grapes in the late 1800s, many switched to keeping orchards when phylloxera, a root louse, struck the thriving wine industry in 1895. As the orchards flourished, the valley became known for the spring profusion of blossoms. In the late 1940's Cupertino was swept up in Santa Clara Valley's postwar population explosion. Concerned by unplanned development, higher taxes, and piecemeal annexation to adjacent cities, Cupertino's community leaders began a drive for incorporation in 1954. The incorporation was approved in the September 27, 1955 election, and Cupertino officially became Santa Clara County's 1311, City on October 10, 1955. A major milestone in Cupertino's development was the creation of Vallco Business and Industrial Park by some of the city's largest landowners in the early 1960's. Of the 25 property owners, 17 decided to pool their land to form Vallco Park and six sold their land to Varian Associates, a thriving young electronics firm founded by Russell Varian. The name Vallco was derived from the names of the principal developers: Varian Associates and the Leonard, Lester, Craft, and Orlando families. 2017 Community Economic Profile Cupertino, with a population of 60,668 and the city limits stretching across 13 square miles, is considered one of the most prestigious cities to live and work in the San Francisco Bay Area. Economic health is an essential component to maintaining a balanced city, which provides high- level opportunities and services that create and help sustain a sense of community and quality of life. Public and private interests must be mutual so that our success as a partnership is a direct reflection of our success as a community. The cornerstone of this partnership is a cooperative and responsive government that fosters business and residential prosperity and strengthens working relationships among all sectors of the community. Our economic development strategies are tailored to address the specific needs of Cupertino. Because Cupertino is a mature, 90% built -out city, we focus on business retention and revitalization. For example, business recruitment is site -specific and targeted to industries that enhance, rather than draw from, our existing business base. Cupertino is home to many well-known high-tech companies, offering a dynamic and exciting business climate. Apple Inc., Verigy, Durect Corporation, and Trend Micro are headquartered in the city. DeAnza College, one of the largest single -campus community colleges in the country, is another major employer. The City's proactive economic development efforts have resulted in a number of innovative, mutually beneficial partnerships with local companies. The City strives to retain and attract local companies through active outreach and a responsive and customer -oriented entitlement process. Another popular shopping venue is the Cupertino Marketplace, located just across Vallco Mall. A popular destination by high school students in the area, the Marketplace has a variety of hangout locations such as Yogurtland, Super Cue, La Patisserie Bakery, and Beard Papa's. In addition to shopping for Japanese groceries and goods at Marukai and Daiso, customers can eat at one of the many culturally diverse restaurants, including Merlion Restaurant, Harumi Sushi, Gyu-Kaku Japanese BBQ, One Pot Shabu Shabu, Kong's Korean Tofu & BBQ, PotSticker King, Wingstop, Erik's Deli Cafe, J.T. McHart's Pizza, and Elephant Bar. On the other side of Vallco Mall is the Cupertino Village, home to 99 Ranch Market, Ten Ren Tea, Fantasia Coffee & Tea, Joy Luck Palace, and other Asian restaurants, bakeries, and shops. The city features many other stores, including TJ Maxx and Home Goods, Whole Foods, Target, and over 160 restaurants to serve the local workforce and residents. Cupertino features five hotels: Cupertino Inn, Hilton Garden Inn, Marriott Courtyard, the Cypress Hotel, operated by the Kimpton Group and The Aloft Cupertino Hotel, operated by Starwood Hotels & Resorts. In addition, Cupertino is excited to have new retail commercial development projects underway, including Main Street Cupertino on Stevens Creek Boulevard, the Biltmore on DeAnza Boulevard, and Saich Way Station on Stevens Creek Boulevard and Saich Way. Each project features mixed use to accommodate the growing retail and residential needs of the community. The City of Cupertino has a history of providing high-level municipal services to complement the sense of community and quality of life enjoyed by our constituents. The City will continue to enhance and promote a strong local economy to provide municipal services that make Cupertino a place that people are proud to call home. 2017 City Profile The City of Cupertino operates as a general law city with a City Council -City Manager form of government. Five council members serve four year, overlapping terms, with elections held every two years. The council meets twice a month on the first and third Tuesday at 6:45 p.m. in the Community Hall. The meetings can be viewed on the City website. The City has 185.75 authorized full-time benefited employee positions. City departments include Administration (City Council, Commissions, City Clerk, City Manager, City Attorney, Environmental Affairs); Administrative Services (Finance, Human Resources); Community Development (Planning, Building, Housing Services, Economic Development, Code Enforcement); Recreation and Community Services (Parks and Recreation, Community Events, Sports and Fitness, Senior Programs, Youth and Teen Programs, Neighborhood Services, Emergency Preparedness); Public Works (Engineering, Maintenance, Transportation, Solid Waste, and Storm Drain Management); and Information Services (IT, GIS, Public Affairs). Police service is provided by the Santa Clara County Sheriff's Department, and fire service is provided through the Santa Clara County Fire District. Assisting the City Council are several citizen advisory commissions/committees including housing, telecommunications, fine arts, library, planning, audit, parks and recreation, bicycle and pedestrian, teens, economic development, strategic planning, sustainability, and public safety. Members of the volunteer boards are appointed by the City Council and vacancies are announced so that interested residents can apply for the positions. Residents are kept informed about city services and programs through the Cupertino Scene, a monthly newsletter; the City Channel, Cupertino's government access cable TV channel; and the city's website. Housing The average listing of an existing single-family home is $1,890,000 for the time between July and October 2017. For housing programs in Cupertino, please see "Programs & Applications." Community Health Care Facilities Cupertino is served by the Cupertino Medical Clinic, NovaCare Occupational Health Services. Nearby hospitals include Kaiser Permanente Medical Center in Santa Clara, El Camino Hospital in Mountain View, O'Connor Hospital in San Jose, Community Hospital of Los Gatos, Stanford Hospital in Palo Alto, and the Saratoga Walk-in Clinic in Saratoga. Utilities Gas & Electric Phone Cable Solid Waste & Recycling Water Sewer Service Tax Rates and Government Services Pacific Gas and Electric, 800-743-5000 AT&T residential service, 800-894-2355 AT&T business service, 800-750-2355 Comcast, 800- 945-2288 Recology, 408-725-0420 San Jose Water Company, 408-279-7900 California Water, 650-917-0152 Cupertino Sanitary District, 408-253-7071 Residential, commercial, and industrial property is appraised at full market value as it existed on March 1, 1975, with increases limited to a maximum of 2% annually. Property created or sold since March 1, 1975 bears full cash value as of the time created or sold, plus the 2% annual increase. The basic tax rate is $1.00 per $100 (full cash value) plus any tax levied to cover bonded indebtedness for county, city, school, and other taxing agencies. Assessed valuations and tax rates are published annually after July 1. Assessed Valuation (Secured and Unsecured) Cupertino: $21,346,570,360 (7/1/16) County: $418,872,247,147 (7/1/16) Retail Sales Tax Grand Total = 9.00%. Breakdown = Cupertino 1%, State General Fund 3.9375%, County Public Safety (Prop 172) .50%, County Realignment (Mental Health/Welfare/Public Safety) 1.5625%, Countywide Transportation Fund .25%, Santa Clara County Transit District (SCCT) .50%, Santa Clara County Valley Transportation Authority (SCVT) .50%, Santa Clara County VTA BART Operating & Maintenance Transaction and Use Tax (SVTV) .125%, Santa Clara County Retail Transactions and Use Tax (SCCR) .125%, Silicon Valley Transportation Solutions Tax (SVTS) .50%. Transportation Rail: The CalTrain station is four miles north of city. The Amtrak station is 10 miles south. Air: The San Francisco International Airport is located roughly 30 miles north, and the Mineta San Jose International Airport is located approximately 11 miles south. Bus: Cupertino is served by the Santa Clara Valley Transportation Authority. The routes listed below pass through the City. For Cupertino -specific schedules and maps visit their online website: Route 23 San Jose - Mountain View/Palo Alto Route 25 San Jose - De Anza College Route 26 Eastridge - Lockheed Route 36 East San Jose - Vallco Route 51 Vallco - Moffett/Ames Route 53 Westgate - Sunnyvale Route 54 West Valley - Fair Oaks/ Tasman Route 55 De Anza - Great America Route 81 East San Jose - Vallco Express 101 Camden/Branham - Palo Alto Express 501 Palo Alto - I.B.M Bailey Car: The City of Cupertino is in the heart of the world renowned Silicon Valley. The major highway transportation facilities are Interstate Route 280 and State Route 85 freeways. The City is linked internally by several principal arterials and Santa Clara County expressways. Principal arterials are De Anza Boulevard, Stevens Creek Boulevard, and Wolfe Road. Nearby expressways are Lawrence Expressway and Foothill Expressway. Sister Cities Cupertino has four sister cities: Copertino, Italy; Hsinchu, Taiwan; Toyokawa, Japan, and Bhubaneswar, India. Education Winner of numerous state and national awards for excellence, our city's schools are widely acknowledged as models of quality instruction. Cupertino Union School District serves 18,000 students in a 26 square mile area that includes Cupertino and portions of five other cities. The district has 20 elementary schools and five middle schools, including several choice programs. Eighteen schools have received state and/or national awards for educational excellence. Student achievement is exceptionally high. Historically, district test scores place Cupertino among the premier public school districts in California. The district is a leader in the development of standards -based system of education and is nationally recognized for leadership in the use of technology as an effective tool for learning. Quality teaching and parent involvement are the keys to the district's success. The Fremont Union High School District serves 10,000 students in a 42 square mile area covering all of Cupertino, most of Sunnyvale, and portions of San Jose, Los Altos, Saratoga, and Santa Clara. The five high schools of the district have garnered many awards and recognition based on both the achievement of students and the programs designed to support student achievements. Many high schools in the district exceed their established achievement targets for the State Academic Performance Index. District students are encouraged to volunteer and provide service to organizations within the community. During their senior year, if students complete 80 hours of service to a non-profit community organization, they are recognized with a "Community Service Award" medal that may be worn at their graduation ceremonies. Cupertino is served by two local institutions of higher education: DeAnza College and the University of San Francisco. In addition to these schools, Cupertino's location offers easy access to Stanford University, Santa Clara University and San Jose State University. Building on its tradition of excellence and innovation, DeAnza College challenges students of every background to develop their intellect, character, and abilities; to achieve their educational goals; and to serve their community in a diverse and changing world. DeAnza College offers a wide range of quality programs and services to meet the work force development needs of our region. The college prepares current and future employees of Silicon Valley in traditional classroom settings and customized training arranged by employers. Several DeAnza programs encourage economic development through college credit courses, short-term programs, services for manufacturers, technical assistance, and/or recruitment and retention services. Programs & Applications Community Outreach Programs Leadership 95014 Leadership 95014 is a program designed by the City of Cupertino, Wilfred Jarvis Institute, and other local sponsors to offer an exciting adult program that is guaranteed to enhance the participants' leadership skills. The ten full -day sessions feature LEADERSHIP inside looks at local governments, the social sector, local non- profit organizations, and educational institutions. This 9-month 11mus program is offered annually, September to May, and applications can be found online. Neighborhood Block Leader Program Good neighborhoods are those where neighbors work together on common issues and look out for each other. Block leaders take extra steps to connect neighbors and build community, making our neighborhoods safer and more harmonious. The Block Leader Program teaches residents how to get to know their neighbors and how to organize activities so neighbors can more easily communicate with each other. Block leaders are vital links between City Hall and the neighborhoods, and leaders gain the inside track on neighborhood development activities. Neighborhood Watch Neighborhood Watch is a crime prevention program that enlists the active participation of citizens in cooperation with law enforcement to reduce crime in our communities. It involves: neighbors getting to know each other and working together in a program of mutual assistance; citizens being trained to recognize and report suspicious activities in their neighborhoods; and implementation of crime prevention techniques such as home security and operation identification. To organize a Neighborhood Watch program in your neighborhood, please contact the Neighborhood Watch Coordinator at 408.777.3177. eCAP Email Community Alert Program (eCAP) was created by the Santa Clara County Sheriff's Office to prevent and reduce crime by raising community awareness, minimizing opportunities for crime, and increasing the possibility of solving crimes with the public's help. Cupertino residents may voluntarily register their email addresses with the Sheriff's Office for community alert messages. Citizens can sign-up at a Neighborhood Watch meeting or log -on to the City of Cupertino's eCAP online registration. Affordable Housing: BMR (Below Market Rate) Program The City of Cupertino requires 15% of all new construction be affordable to households below 120% of the County median income. Rental units are affordable to very low and low-income households while ownership units are affordable to median and moderate -income households. The City of Cupertino contracts with West Valley Community Services (WVCS) to screen and place qualified households in most of the city's BMR units. WVCS maintains a waiting list of interested persons for these BMR units. If interested, please call 408.255.8033. More information can be found online. Smart Phone Applications Mobile 95014 City of Cupertino's Mobile 95014 app offers latest listing of Cupertino news and events as well as local parks, schools, and recreation offerings in the city. This app showcases environmental services and community services such as Block Leaders and Neighborhood Watch programs. Users can learn about public safety and contact City Council members and City officials. The app also offers links to Cupertino's social media sites. Trees 95014 Trees 95014 is an iPhone/iPad and Android app which provides details about the city -planted trees in Cupertino. Users can search for trees by Search Cupertino Trees street name or by current location. The search results show the picture of Shah for woes or location. the tree and details such as location, height, diameter, and species. Cupertino residents can also sign up their tree, name their tree, and request tree service through this app. Flntl [rose by the currorn location: Eats 95014 by. Eats 95014 is the local restaurant app that showcases Cupertino's dining options such as restaurants, grocery stores, farmers' markets, ands. vineyards. The app information on the services offered at such provides eating places including store hours, parking information, noise level, directions, and website link. Ready 95014 Ready 95014 is an app that puts safety information into the hands of Cupertino residents. Steps to prepare and respond to emergencies including earthquakes, floods, fires, and pandemics are outlined in an easy -to -understand format. The app also streams Cupertino's own AM radio station (1670 AM) and has a map of the City's Area Resource Centers, satellite locations opened after disasters to provide public assistance. For local governments, a GIS is a computer technology that combines geographic data (the locations of manmade and natural features on the earth's surface) and other types of information (names, classifications, addresses, and much more) to generate visual maps and reports. A GIS uses geographic location to relate otherwise disparate data and provides a systematic way to collect and manage location -based information crucial to local government. The City of Cupertino has been using GIS within individual departments to enhance both operational and analytical functions since 1977. The City has organized their GIS efforts by placing GIS into the Information Technology Division. Cupertino at a Glance The Cupertino at a Glance application can be accessed online at: gis.cupertino.org/CupertinoAtAGIance. Cupertino's Green Program Cupertino is committed to maintaining the City as a sustainable place to live, learn, work, and play for all the community members. To achieve this goal of safeguarding the community's well-being and environmental health, Cupertino is actively working to implement its first Climate Action Plan (CAP) and provide residents, businesses, and schools with clear and easy - to -access programs and services to jumpstart green leadership. More information can be found online. Social Media Sites Facebook Sites City of Cupertino Facebook Cupertino Parks and Recreation Facebook Cupertino Teen Center Facebook McClellan Ranch Preserve Facebook Cupertino Senior Center Facebook Cupertino Sports Center Facebook Cupertino Block Leader Facebook Twitter Sites City of Cupertino Twitter Cupertino Fields Twitter Cupertino Parks and Recreation Twitter YouTube Site City of Cupertino, City Channel Community Statistics Facts and Figures' Population in City Limits 60,668 Median Household Income $136,940 Median Age 40 Registered Voters 25,516 Democrats 9,558 Republicans 4,887 American Independent 373 Other 206 i No Political Party designated 10,445 Top 40 Sales Tax Producers First Quarter 2017 in Alphabetical Order 7 Eleven Dynasty Seafood Rest. Scandinavian Designs 99 Ranch Market Estel Group Seagate - Alexander's Steak House Haworth Seele Alliance Huawei Enterprise Shane Apple Insight Direct Shell Argonaut Window & Door Insight Public Sector Superior Air Handling Benihana Kula Revolving Sushi Bar Target BJ's Restaurant & Brewhouse Lazy Dog Cafe Teknion Brightview Tree Company Mirapath TJ Maxx Chevron Mitsubishi Electric Inc. Ulta Beaty Columbia Stone Permasteelisa No. America Valero Cupertino Electric Powersecure Whole Foods Market De Anza College Campus Ctr. Rotten Robbie Dental Arts of California Safeway 1 U.S. Census Bureau Demographic Information American T.,a;--/Al,,v, Native Hispanic i 3.6 White, non-11i51 31.3% Community and Recreation Services Blackberry Farm Blackberry Farm has been upgraded and restored to improve the natural habitat for native trees, animals, and fish. Improvements to the park include construction of a new ticket kiosk, re -plastered pools, a new water slide, bocce ball, horseshoe courts, and numerous upgrades to the west bank picnic area. The park is located at 21979 San Fernando Avenue. Telephone: 408-777-3140. The Blackberry Farm Golf Course is located at 22100 Stevens Creek Boulevard. Telephone: 408-253-9200. The Quinlan Community Center The City of Cupertino's Quinlan Community Center is a 27,000 square foot facility that provides a variety of recreational opportunities. Most prominent is the Cupertino Room - a multi -purpose room that can accommodate 300 people in a banquet format. Telephone: 408-777-3120. Asian 63.3% Cupertino Sports Center The Sports Center is a great place to meet friends. The facility features 17 tennis courts, complete locker room facilities, and a fully -equipped fitness center featuring free weights, Cybex, and cardio equipment. A teen center and a child -watch center are also included. The center is located at the corner of Stevens Creek Boulevard and Stelling Road. Telephone: 408-777-3160. Cupertino Senior Center The Senior Center provides a welcome and friendly environment for adults over age 50 There is a full calendar of opportunities for learning, volunteering, and enjoying life. There are exercise classes, computer lab classes, and English as a second language classes, and cultural and special interest classes. The center also coordinates trips and socials. The Senior Center is located at 21251 Stevens Creek Boulevard and is open Monday through Friday, 8 a.m. to 5 p.m Telephone: 408-777-3150. Civic Center and Library The complex has a 6,000 square foot Community Hall, plaza with fountain, trees, and seating areas. City Council meetings, Planning Commission sessions, and Parks and Recreation Commission sessions are held in the Community Hall. The 54,000 square foot library continues to be one of the busiest libraries in the Santa Clara County Library system. For more information, call 408-446-1677. McClellan Ranch Park A horse ranch during the 1930's and 40's, this 18-acre park has the appearance of a working ranch. Preserved on the property are the original ranch house, milk barn, and livestock barn. Two historic buildings have been recently renovated: Baer's Blacksmith Shop, originally located at DeAnza and Stevens Creek, and the Environmental Education Center which houses the Nature Museum. Cupertino is famous for its continued dedication to education and environmental sustainability. The original ranch house houses Santa Clara Valley Audubon and Friends of Stevens Creek Trail. Rolling Hills 4-H Club members raise rabbits, chickens, sheep, swine, and cattle. McClellan Ranch is located at 22221 Things to do and See Euphrat Museum of Art The highly regarded Euphrat Museum of Art, at its new location next to the new Visual Arts and Performance Center at DeAnza College, presents one -of -a -kind exhibitions, publications, and events reflecting the rich diverse heritage of our area. The Museum prides itself on its changing exhibitions of national and international stature emphasizing Bay Area artists. Museum hours are 10 a.m. - 3 p.m. Monday through Thursday. Telephone: 408-864-5464. Fujitsu Planetarium The Fujitsu Planetarium on the DeAnza College campus is a must -visit Cupertino facility for stargazers. It hosts a variety of planetarium shows and events, including educational programs for school groups and family astronomy evenings. For more information, visit the website at http://planetarium.deanza.edu or call 408-864-8814. Flint Center The cultural life of the Peninsula and South Bay is enhanced by programs presented at the Flint Center for Performing Arts located at 21250 Stevens Creek Boulevard in the DeAnza College campus. The center opened in 1971 and was named in honor of Calvin C. Flint, the first chancellor of the Foothill-DeAnza Community College District. The box office is open 10 a.m. - 4 p.m. Tuesday through Friday and 1.5 hours prior to any performance. Box office: 408-864- 8816; administrative office: 408-864-8820. Cupertino Historical Society The Cupertino Historical Society was founded in 1966 by a group of 177 longtime residents and is dedicated to the preservation and exhibition of the city's history. Their museum, located at the Quinlan Community Center, develops and expands the learning opportunities that it offers to the ethnically diverse community of the City of Cupertino. Telephone: 408-973-1495. Farmers' Market 1$�aCical �a1411 m � MTV ti Pdry p�h ,mod �551On {DL;� There are two farmers' markets located in the City of Cupertino. One is held on Fridays from 9:00 a.m. to 1:00 p.m. at Creekside Park, and the other is held every Sunday from 9:00 a.m. to 1:00 p.m. at the Cupertino Oaks Shopping Center, 21275 Stevens Creek Blvd. California History Center The California History Center and Foundation is located on the DeAnza College campus. The center has published 37 volumes on California history and has a changing exhibit program. The center's Stocklmeir Library Archives boast a large collection of books, pamphlet files, oral history tapes, videotapes, and a couple thousand student research papers. The library's collection is for reference only. Heritage events focusing on California's cultural and/or natural history are offered by the center each quarter. For more information, call 408-864-8987. The center is open September through June, Tuesday through Thursday, from 9:30 a.m. to noon and 1:00 p.m. to 4:00 p.m.