Financial Report 06-30-2018 g -& ,
FISCAL YEAR
�5'S.1 y�.f•
CUPERTINO COMPREHENSIVE ANNUAL FINANCIAL REPORT
��l :��' 1l.�iik• III.. li- ' "k+t� ,y;, � _ - � '-'"� 'iqe' `� � - ., ��
�F jR 5
• � Wry '� „� " �r+^�l�'p 1
CITY OF CUPERTINO, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2018
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, 2018
CONTENTS
INTRODUCTORY SECTION
TABLE OF CONTENTS ..................................................................................................................... i
LETTER OF TRANSMITTAL.............................................................................................................. iii
ORGANIZATION CHART................................................................................................................... viii
CITY COUNCIL AND DIRECTORY OF CITY OFFICIALS ................................................................ ix
COMMISSIONS AND COMMITTEES................................................................................................ x
CERTIFICATE OF AWARD FOR EXCELLENCE IN FINANCIAL REPORTING............................... xi
FINANCIAL SECTION
INDEPENDENT AUDITOR'S REPORT.................................................................................................... 1
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED).......................................................... 4
BASIC FINANCIAL STATEMENTS:
GOVERNMENT-WIDE FINANCIAL STATEMENTS:
STATEMENT OF NET POSITION ..................................................................................................... 22
STATEMENT OF ACTIVITIES........................................................................................................... 23
FUND FINANCIAL STATEMENTS:
GOVERNMENTAL FUNDS:
BALANCESHEET.............................................................................................................................. 25
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET WITH THE
STATEMENT OF NET POSITION ................................................................................................... 26
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUNDBALANCES ........................................................................................................................... 27
RECONCILIATION OF THE NET CHANGE IN FUND BALANCES—
TOTAL GOVERNMENTAL FUNDS WITH THE STATEMENT OF ACTIVITIES............................. 28
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE—
BUDGET TO ACTUAL—GENERAL FUND ..................................................................................... 29
BUDGET TO ACTUAL—TRANSPORTATION SPECIAL REVENUE FUND................................... 30
BUDGET TO ACTUAL— HOUSING DEVELOPMENT SPECIAL REVENUE FUND....................... 31
PROPRIETARY FUNDS:
STATEMENT OF NET POSITION ..................................................................................................... 33
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION................ 34
STATEMENT OF CASH FLOWS....................................................................................................... 35
FIDUCIARY FUND:
STATEMENT OF FIDUCIARY NET POSITION................................................................................. 37
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION ......................................................... 38
NOTES TO THE BASIC FINANCIAL STATEMENTS .............................................................................. 39
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED):
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS .............. 75
SCHEDULE OF CONTRIBUTIONS—PENSION ............................................................................. 76
SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS..................... 77
SCHEDULE OF CONTRIBUTIONS—OPEB..................................................................................... 78
SCHEDULE OF INVESTMENT RETURNS—OPEB ........................................................................ 79
i.
CITY OF CUPERTINO, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
For the year ended June 30, 2018
CONTENTS (Continued)
OTHER SUPPLEMENTARY INFORMATION:
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE—
BUDGET AND ACTUAL - PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND.............. 81
NONMAJOR GOVERNMENTAL FUNDS:
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
NONMAJOR ENTERPRISE FUNDS:
COMBINING STATEMENT OF NET POSITION ............................................................................... 87
COMBINING STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN FUND NET POSITION.............................................................................................. 88
COMBINING STATEMENT OF CASH FLOWS................................................................................. 89
INTERNAL SERVICE FUNDS:
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
FINANCIAL TRENDS:
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
2018 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
ii.
i
CITY OF CUPERTINO
CITY HALL
lull 10300 TORRE AVENUE•CUPERTINO,CA 95014-3202
CUPERTINO (408)777-CITY-WWW.CUPERTINO.ORG
June 21,2019
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, 2018. 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,
iii.
Sunnyvale, Santa Clara and Los Altos. It has a residential population of 64,127 (based on 2018 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.
Cupertino is excited to have a number of mixed-use development projects in fmal construction phases and
almost fully leased,which will provide more retail and dining options,as well as provide additional housing
opportunities to meet the needs of the growing community.
The Main Street and Nineteen800 mixed-use developments have created a vibrant downtown area for
Cupertino, offering a large selection of restaurants and retailers, including Alexander's Steakhouse,
Eureka!, Rootstock Wine Bar, Oren's Hummus, Lazy Dog, Chef Hung, HaiDiLao Hot Pot Restaurant,
Pressed Juicery,Orangetheory,85 Degree Bakery,Target Express,Steins Beer Garden,Kula Sushi,Vitality
Bowls,Doppio Zero,Koja Kitchen,and Icool In2 Ice Cream.Housing,office,and a new Residence Inn by
Marriott are available to support the thriving area.Benihana,Dynasty Seafood Restaurant,Bowlmore, Ice
Center Cupertino,Galpao Gaucho and Silicon Valley Bay Club also serve as anchors.
The construction of new retail and commercial development strengthens existing popular venues in
Cupertino,including The Marketplace.The Marketplace has a variety of stores and restaurants popular with
students, families, and working professionals. They include Daiso, Marukai Groceries, Super Cue, La
Patisserie Bakery, Beard Papa's, Legend's Pizza, Aloha Fresh, Merlion Restaurant, Icicles, CBI Boiling
Fish,Garlic Mediterranean Grill,Rori Rice,and Erik's DeliCafe.
Cupertino Village is undergoing renovations to upgrade existing buildings, construct new buildings,
parking, and open-courtyard space. The shopping center is home to 99 Ranch Market, Starbucks, Gogigo
Korean BBQ, Creamistry, MOD Pizza, Ten Ren Tea, Fantasia Coffee & Tea, Happy Lemon, Joy Luck
Palace,Kee Wah Bakery,and many other restaurants,bakeries,and shops.
Cupertino features many other retail opportunities, including TJ Maxx and Home Goods, Whole Foods,
Target, and over 180 restaurants to serve residents and the local workforce. There are six hotels, which
provide almost 1,000 rooms,to serve the area: The Aloft Cupertino, Cupertino Hotel,Hilton Garden Inn,
Juniper Hotel operated by Curio,Marriott Courtyard,and the Residence Inn by Marriott. The Hyatt House
is currently under construction and will offer an additional 148 rooms.
The Homestead Square Shopping Center, located at Homestead Road and De Anza Boulevard, includes a
24-hour Safeway,Ulta Beauty,Ross Stores,Stein Mart,Michael's,Rite Aid,FedEx Kinko's and numerous
restaurants,such as Fish's Wild, 1000 Degrees Neapolitan Pizzeria,Yayoi Teishoku Japanese Restaurant,
Starbucks,and Chipotle.
Apple completed construction of its new corporate campus,Apple Park,which includes approximately 2.8
million square feet of office and R&D space north of Highway 280 between Wolfe Road and Tantau
iv.
Avenue. A state of the art Visitors Center,Observation Deck, flagship retail store and cafe are open to the
public seven days a week.
In the 2018-2019 Assessor's Annual Report for Santa Clara County,Cupertino's net assessment roll growth
increased from $23.14 to $25.18 billion from the previous year. That equated to an increase of 8.83%,
which exceeds the county-wide average of 7.34% growth. Additionally, the City's property tax share
increased from 6.44% in FY 17/18 to 6.72% in FY 18/19. The bulk of the increase was due to
increases in residential properties by $783 million, or 5.5%. This category makes up 60% of
property tax revenues. Unsecured property tax increased by$666 million or 60%. This category
makes up 7.1%of property tax revenues. Lastly increases in commercial property values increased
by $486 million or 7%. This category makes up 29% of property tax revenues. The remaining
increases are made up of changes in a variety of other property tax categories.
FY 17-18 FY 18-19 Increase/(Decrease %aQe(base) Weighted
Secured $22,024,906,420 $23,402123,229 $1,377,216,809 6.25% 5.95%
Unsecured 1 114 123 426 $ 1,780,065.668 S 665,942.242 59.77% 2.88%
Total $23,139,029,846 25,182,188,897 $2,043,159,051 66.03% 8.83%
Based on second quarter 2018 data, Cupertino experienced a 3.2% 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
67%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
$30,000
$25,000 -
$20,000 -
$15,000 -
$10,000
$5,000
$0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
FY 2009-10.showed a significant decline due to Hewlett Packard's move from Cupertino. Continued
economic growth driven primarily by the business to business sector continued through FY 2014-15 until
a slight$400,000 decline in FY 2015-16 reflecting the volatility in the City's sales tax base. FY 2016-17
increased significantly with a$3.5 million"triple-flip"close-out payment. Although there was a modest
decrease in FY 2017-18 in respect to the previous year, strong continued growth was experienced.
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
V.
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 was
completed and opened in April 2019 and includes a full-service restaurant and meeting rooms. Construction
of the Residence Inn by Marriott has been completed at the Main Street Cupertino mixed-use project and
uiicrs 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 30,2017 reported a pension unfunded liability of$40.5 million with annual payments to Ca1PERS of
28.6% 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 June 30, 2018
GASB 74/75 report,the City has a retiree medical unfunded liability of$415,000 with annual payments to
a retiree health plan trust at 7.41%of payroll.
In fiscal year 2017-18, the City Council approved the establishment of a Section 115 trust as part of a
pension rate stabilization program. Funding is appropriated in fiscal year 2018-19 adopted budget at an
initial investment of$8,000,000.
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
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 2017-2018 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.
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,
vi.
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.
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 LLP 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 30,2017. 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,Tina Mao,Thomas Leung,Zeng Wang,and Amber Chang
of the Finance staff for their continued support and dedication. Special recognition to Zach Korach,Beth
Viajar,Richard Wong, Giang Dinh,and Mariela Vargas for their efforts in the preparation and production
of this report.
Reviewed by, MOA19-
Kristina Alfaro
Director of Administrative Services
I
i
i
i
vii. {
Citizens of
Cupertino
CUPERTINO
City Council
Committees and
Commissions
City Attorney City Manager City Treasurer
City Clerk Public Affairs Sustainability
Programs
^-----------------------
i
Law Enforcement p Administrative Community Recreation and Innovation&
(Santa Clara County Public Works
Sherriff—Contract)
Services Development Community Services Technology
i
J
Finance Building Recreation& Capital Improvement Transportation GIS Infrastructure
Code Enforcement Education Program
Human Resources Planning Sports,Safety& Development Environmental Video Applications
Outdoor Recreation Services Programs
Economic Business& Service Center
Development Community Services
Code Enforcement
(Zoning&Building) Grounds Streets Trees&ROW Facilities&Fleet
Housing
VIII.
CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2017-18
CITY COUNCIL
S
Darcy Paul Rod Sinks
Mayor Vice Mayor
Steven Scharf Barry Chang Savita
Councilmember Councilmember Vaidhyanathan
Councilmember
DIRECTORY OF CITY OFFICIALS
David Brandt—City Manager
Rocio Fierro—Acting City Attorney
Timm Borden—Director of Public Works
Kristina Alfaro—Director of Administrative Services
Bill Mitchell—Chief Technology Officer
Jeff Milkes—Director of Recreation and Community Services
Aarti Shrivastava—Assistant City Manager/Director of Community Development
ix.
CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2017-18
COMMISSIONS AND COMMITTEES
AUDIT COMMITTEE LIBRARY COMMISSION
Barry Chang Rose Grymes
Eno Schmidt Liana Crabtree
Darcy Paul Gopal Kumarappan
Jim Luther Amando Wo
Mark Zavislak Christie Wang
HOUSING COMMISSION PLANNING COMMISSION
John Zhao Geoffrey Paulsen
Sue Bose David Fung
Nina Daruwalla Jerry Liu
Poonam Goyal Don Sun
Sanjiv Kapil Alan Takahashi
FINE ARTS COMMISSION BICYCLE PEDESTRIAN COMMISSION
Janki Chokshi Gerhard Eschelbeck
Wenjia Chen Peter Heller
Susan Levine Erik Lindskog
Rajeswari Mahaliagan Sean Lyn
Michael Sanchez Jennifer Shearin
PUBLIC SAFETY COMMISSION TEEN COMMISSION
Yvonne Chao Emily Chan Juliet Shearin
Andy Huang Madhavan Krishnan Varsha Subramanyam
Robert McCoy Christina Lau Vanitha Vemula
Hymanand Nellore Sidharth Rajaram
Neha Sahai Shivani Sahni
SUSTAINABILITY COMMISSION ECONOMIC DEVELOPMENT
Angela Chen Meera Ramanathan Don Sun Angela Tsui
Gary Latshaw Anna Weber Timm Borden Jeff Milkes
Vignesh Swaminathan Savita Vaidhyanathan David Brandt
Aarti Shrivastava Anjali Kausar
FISCAL STRATEGIC COMMITTEE Kevin McClelland Roslyn Donald
Kristina Alfaro Aarti Shrivastava Jason Lundgaard
Darcy Paul Steven Scharf Steven Scharf
Timm Borden Zach Korach Mike Rohde
PARKS AND RECREATION TECHNOLOGY,INFORMATION&
COMMISSION COMMUNICATIONS COMMISSION
Meenakshi Biyani Carol Stanek Mukesh Garg Vaishali Deshpande
Helene Davis Neesha Tambe Keita Broadwater Arnold de Leon
Judy Wilson Rajaram Soundararajam
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, 2017
oxu� P An�
Executive Director/CEO
A.
Crave
Crowe LLP
lndeperdenl Member Dmm GIDbol
INDEPENDENT AUDITOR'S REPORT
To the Honorable Mayor and City Council
City of Cupertino, California
Report on the Financial Statements
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, 2018, 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.
1.
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, 2018, 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 Matter
As discussed in Note 14 to the financial statements, during the year ended June 30, 2018,the City adopted
new accounting guidance, GASB Statement No.75, Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions, which resulted in a restatement of the July 1, 2017
governmental activities and business-type activities in the amount of ($11,525,595) and ($80,283),
respectively. Our opinion is 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 75-79 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 June 21, 2019
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. Q '
Y
Crowe LLP
Costa Mesa, California
June 21, 2019
3.
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
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.
2017-18 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 2018 by $259.8 million (net position). Of this amount,
$58.5 million represents unrestricted net position, which may be used to meet the City's ongoing
obligations to citizens and creditors.
• City revenues have decreased in 2017-18 with base governmental revenues showing a $0.1 million
decrease, or 0%, over 2016-17. The primary fluctuations include a decrease in total cost allocation
charges that were offset with increases in operating grants and contributions as well as general
revenues. The City experienced a net taxable value increase of 8.83% for the 2018/2019 tax roll,
which resulted in an increase of$1.6 million in property taxes received. Although sales tax received
in fiscal year 2016-17 included the $3.5 million of"triple-flip" close out, the City experienced a
continued upward trend in local business growth resulting in only a$767,000 decrease in fiscal year
2017-18.
• 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$12.1 million, after depreciation.
• The City's change in net position was $14.0 million for governmental activities and $9.1 million in
total, reflecting the stabilization of revenues and continued large investment in capital projects.
• The City's net pension liability for June 30, 2018, was $41.1 million, up $4.4 million from June 30,
2017, or 12.0%. The funding ratio for the City's pension plan with Ca1PERS went from 68.0% to
67.8%. During fiscal year 2017-18, the City Council approved a pension rate stabilization program
for Section 115 Trust funding. Contributions to this trust will commence in fiscal year 2018-19.
• Business-type activities contributed$7.9 million to citywide revenues totaling$100.2 million,while,
the same activities contributed over$9.1 million to citywide expenses of$91.2 million.
• The City implemented the provisions of GASB Statement No. 75, Accounting and Financial
Reporting for Postemployment Benefits Other Than Pensions, during the current year. This
statement requires governments to report a liability on the face of the financial statements for the
OPEB provided by the City. As of June 30,2018,the City reported a Net OPEB Liability of$415,000
and Deferred Inflows of Resources related to OPEB of$1.3 million. As of June 30,2018,the City's
OPEB plan had a funding ratio or funded status of 98.5%. As a result of the GASB 75
implementation,restatement of beginning net position was required in the amount of($11.5)million
and($80.3) thousand for governmental and business-type activities, respectively.
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.
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
4
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
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 of 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
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.
5
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
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.
6
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Governmental Activities
Table 1
Condensed Statement of Net Position at June 30
(in thousands)
Governmental Activities
2018 2017
Assets:
Cash and investments $ 133,439 $ 133,342
Other assets 8,490 14,937
Capital assets 194,832 182,688
Total assets 336,761 330,967
Deferred Outflows of Resources:
Related to Pension(Note 10) 10,006 8,480
Liabilities:
Long term debt 31,520 33,700
Other liabilities 63,641 57,434
Total liabilities 95,161 91,134
Deferred Inflows of Resources:
Related to Pension(Note 10) 280 696
Related to OPEB (Note 11) 1,189 -
Total deferred inflows of
resources 1,469 696
Net Position:
Net Investment in capital assets 167,606 153,253
Restricted 32,073 34,992
Unrestricted 50,458 59,372
Total net position $ 250,137 $ 247,617
The City's change in net position from governmental activities was $14,046,492. The following
significant changes within assets, liability, and net position categories occurred:
• Capital assets increased more than $12.1 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.
• Other liabilities increased more than$6.2 million,primarily due to a$4.4 million increase in
the City's Net Pension Liability.
• Deferred Inflows of Resources increased approximately $773 thousand due to
implementation of GASB 75 which required the Net OPEB Liability and related Deferred
Inflows of Resources ($1.2 million)to be reported on the City's financial statements.
7
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Sources of Revenue, Governmental Activities
2017-18
Investment Earnings 1.0%
Other Taxes 2.0% Miscellaneous 1.9%
Franrh€se Tax 3.7%
Utility User Tax 3.3%
Transient Occupancy
Tax 7.1% Charges for Services
24.5%
Operating Grants&
Contributions 5.1%
Capital Grants&
Sales Tax 27.5% Contrlbut€ons 0.3%
In 2017-18,the City experienced continued trends toward a return to normalcy.Revenues decreased$0.1
million or 0%from the prior year,primarily due to decreases in functional revenues offset with moderate
increases in general revenues. The decreases in functional revenues are attributable to a gross amount
reduction in the City's cost allocation plan as well as a decrease in fee revenue as a result of the winding
down of various construction and development projects. Increases in the City's general revenues are
attributable to a $2.2 million increase in property tax over the prior year. According to the 2018-2019
Assessor's Annual Report for Santa Clara County,Cupertino's net assessment roll growth increased$2.0
billion, or 8.83%, from the prior year. Sales tax experienced an anticipated slight decrease of $767
thousand primarily due to the $3.5 million payment related to the close out of the triple flip in FY 2016-
17. Nevertheless,the sales tax base had continued growth in the business sector as a result of an upward
trending economy.
8
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Functional Expenses Governmental Activities
2617-18
Administration 6.9%
Community
Development20.7%
Law Enforcement
15.fi46
Recreation Service
11.5%
Administrative
Services 5.43'0 Public Works 35.8%
Public and
Environmental
4.0%
The Statement of Activities presents program revenues, expenses, general revenues, and the resulting
change in net position as summarized in the next table.
9
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Table 2
Condensed Statement of Activities for the Year Ended June 30
(in thousands)
Governmental Activities
Expenses 2018 2017
Administration $ 5,613 $ 2,874
Law enforcement 12,674 12,528
Public and environmental affairs 3,245 1,884
Administrative services 4,416 5,898
Recreation services 9,353 10,652
Community development 16,789 13,776
Public works 28,995 32,491
Interest on long-term debt 993 1,036
Total expenses 82,078 81,139
Revenues
Program revenues:
Charges for services 23,340 27,954
Operating grants and contributions 4,820 2,314
Capital grants and contributions 272 245
Total program revenues 28,432 30,513
General revenues:
Taxes:
Property tax 14,882 13,252
Property tax in-lieu of motor vehicle fee 7,552 6,967
Sales tax 26,165 26,932
Transient occupancy tax 6,811 6,024
Utility user tax 3,146 3,082
Franchise tax 3,564 3,410
Other taxes 1,944 3,258
Intergovernmental,unrestricted:
Motor vehicle license fee 31 26
Investment earnings 916 695
Gain on sale of capital assets 741 -
Miscellaneous 1,834 2,005
Total general revenues 67,586 65,651
Total revenues 96,018 96,164
Excess of revenues over expenses,
before transfers 13,940 15,025
Transfers (Note 4) 107 (1,874)
Transfers in-fund closing - 272
Change in net position 14,047 13,423
Beginning net position, as restated(Note 14) 236,091 234,194
Ending net position $ 250,138 $ 247,617
10
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
City-wide Governmental Activities Revenues
Table 2 shows that revenues from governmental activities decreased $0.1 million or 0% from last year,
finishing at$96.1 million. Charges for services has decreased$4.6 million,or 16.5%,due to the winding
down of construction and development projects as well as a reduction in the gross amount of the FY
2017-18 cost allocation plan over the prior year. This significant decrease was offset by increases in
operating grants and contributions, property taxes and transient occupancy taxes as further discussed
below.
Increases in the City's general revenues are attributable to a $2.2 million increase in property tax over
the prior year. According to the 2017-2018 Assessor's Annual Report for Santa Clara County,
Cupertino's net assessment roll growth increased $2.0 billion, or 8.83%, from the prior year. Sales tax
experienced an anticipated slight decrease of$767 thousand primarily due to the $3.5 million payment
related to the close out of the triple flip in FY 2016-17. Nevertheless, the sales tax base had continued
growth in the business sector as a result of an upward trending economy. Transient occupancy tax
increased $787 thousand, or 13.1%, over the prior year, primarily due to the opening of the Residence
Inn by Marriott.
Program revenues showed a decrease of $5.8 million, or 19%, and is primarily attributable to the
completion and winding down of significant construction and development projects resulting in a
decrease in fee revenues.
Operating grants and contributions increased $2.5 million, or 108.3%, due primarily to a one-time
donation from Apple in the amount of$1.8 million for the 2016 Bicycle Transportation Plan.
City-wide Governmental Activities Expenses
City-wide governmental activities increased expenses by $939 thousand or 1%. The City's cost
allocation plan created fluctuations from one department to the next; however, base expenses remained
relatively consistent over the prior year.
Change in Net Position
The City-wide governmental net position increase of $14.0 million was slightly up compared to the
increase of$13.4 million in 2016-17 and can be best explained by continued relative stabilization in
general revenues paired with consistent and conservative spending.
11
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
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 $9.6 million at June 30, 2018, a decrease of
$1.4 million,or 12.7%, from the prior year with unrestricted net position decreasing$1.0 million and the
net investment in capital assets decreasing by $374,000. Business-type activities transferred out (net)
$107,000,a decrease of$1.9 million over the prior year,which contributed to the decrease in net position.
Few capital asset additions offset with $393,000 in depreciation expense resulted in a net decrease of
$374,000 over the prior year. An increase in the City's Net Pension Liability contributed to the$744,000
increase in enterprise fund liabilities. Additionally, the implementation of GASB 75 and inclusion of
the Net OPEB Liability moderately affected the enterprise funds' financial statements.
In Table 4,revenues for all business-type activities decreased$290,000 and operating expenses increased
by $1.0 million, primarily attributable to the increase in the City's Net Pension and OPEB Liabilities.
As a result, the net position for 2017-2018 decreased $1.4 million, or 12.7% from 2016-2017.
Table 3
Condensed Statement of Net Position at June 30
(in thousands)
Business Type Activities
2018 2017
Assets:
Cash and investments $ 11,271 $ 12,051
Other assets 526 75
Capital assets 1,598 1,972
Total assets 13,395 14,097
Deferred Outflows of Resources:
Related to pension 665 566
Other Liabilities: 4,310 3,566
Total liabilities 4,310 3,566
Deferred Inflows of Resources:
Related to pension 20 46
Related to OPEB 81 -
Total deferred inflows of resources 101 46
Net Position:
Net investment in capital assets 1,598 1,972
Unrestricted 8,051 9,079
Total net position $ 9,649 $ 11,051
12
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Table 4
Condensed Statement of Activities for the Year Ended June 30
(in thousands)
Business Tyne Activities
Expenses 2018 2017
Resource recovery $ 2,595 $ 2,991
Blackberry farm 656 597
Sports center 2,634 2,159
Recreation programs 3,232 2,352
Total expenses 9,117 8,099
Revenues
Program revenues:
Charges for services 7,826 8,133
General revenues:
Investment earnings 76 59
Total revenues 7,902 8,192
Excess of revenues over expenses,
before transfers (1,215) 93
Transfers (107) 1,874
Change in net position (1,322) 1,967
Beginning net position, as restated 10,971 9,084
Ending net position $ 9,649 $ 11,051
MAJOR GOVERNMENTAL FUNDS
General Fund
General Fund Revenues
General Fund actual revenues of$85.1 million ended $7.1 million, or 9.1%, above the original budget
and $8.0 million, or 8.6%, below the final budget. Actual revenues were down $7.7 million or 8.3%
when compared to 2016-17 actuals. Table 5 displays the variations in actual revenues, while Table 6
shows budgeted revenues compared to actuals.
Property taxes increased $2.2 million, or 11%, over the prior year due to continued roll-growth.
According to the 2018-2019 Assessor's Annual Report for Santa Clara County, Cupertino's net
assessment roll growth increased $2.0 billion, or 8.83%, from the prior year.
Sales tax decreased $767,000, or 3%, over the prior year; however, this decrease includes a one-time
triple flip close out payment of$3.5 million received in FY 2016-17. The City's two largest sales tax
payers in the business-to-business category represent a large part of that sector and therefore can
significant affect sales tax trends. The top tax payer's corporate and business technology spending has
driven growth in this sector. Overall, sales tax activity has increased across most sectors with a decrease
primarily in construction attributable to the winding down of construction projects in the City,
particularly, the Apple Park campus development.
Transient occupancy tax increased $787,000, or 13%, due to the opening of the Residence Inn by
Marriott.
13
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Charges for services showed the largest decline of$8.7 million, or 37%, over the prior year and due to
a reduction in cost allocation plan charges as well as decreased fee revenue from the completion and
winding down of various capital and development projects. Charges for services also came in under the
final budget by$9.7 million due to estimated developer deposit funds related to the Vallco Specific Plan
projected to span beyond fiscal year 2017-18.
Licenses and permits increased $221,000, or 9%, due to continued growth in the local economy as well
as the annual increase in business license tax rates.
Other revenue decreased $808,000, or 44%, over the prior year due to a reduction in administrative fees
for planning applications as well as a one-time insurance claim received in FY 2016-17 for$410,000.
Table 5
Revenue Changes
General Fund,Fiscal 2018 vs. 2017
(in thousands)
Increase/(Decrease)
Fiscal 2018 From Fiscal 2017
Revenue by Source Amount % of Total Amount Percent
Taxes:
Property $ 22,434 26% $ 2,215 11%
Sales 26,165 31% (767) -3%
Transient occupancy 6,811 8% 787 13%
Utility user 3,146 4% 64 2%
Franchise 3,564 4% 154 5%
Other 1,340 2% (1,642) -55%
Use of money&property 1,326 2% 153 13%
Intergovernmental 1,001 1% 671 203%
Licenses and permits 2,758 3% 221 9%
Charges for services 14,972 18% (8,736) -37%
Fines and forfeitures 575 1% (18) -3%
Other 1,015 1% (808) -44%
Total revenues $ 85,107 100% $ (7,706) -8%
Other financing sources:
Proceeds from sale of land $ 872 28% $ 872 100%
Transfers in 2,254 72% 2,249 44,980%
Transfers in—fund closing - 0% (260) -100%
Total other financing sources $ 3,126 100% $ 2,861 1,080%
14
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Table 6
Revenue, Budget and Actual Comparisons
General Fund 2017-18
(in thousands)
Variance with
Budgeted Amounts Final
Positive/
Original Final Actual (Negative)
Taxes:
Property $ 20,757 $ 22,357 $ 22,434 $ 77
Sales 22,910 23,910 26,165 2,255
Transient occupancy 6,708 6,708 6,811 103
Utility user 3,200 3,200 3,146 (54)
Franchise 3,040 3,040 3,564 524
Other 2,850 2,850 1,340 (1,510)
Use of money&property 1,648 1,648 1,326 (322)
Intergovernmental 364 364 1,001 637
Licenses and permits 2,145 2,145 2,758 613
Charges for services 13,548 24,675 14,972 (9,703)
Fines and forfeitures 600 600 575 (25)
Other 226 1,584 1,015 (569)
Total revenues $ 77,996 $ 93,081 $ 85,107 $ (7,974)
Transfers in $ 2,000 $ 2,000 $ 2,254 $ 254
Proceeds from sale of
land - - 872 872
Total other financing
sources $ 2,000 $ 2,000 $ 3,126 $ 1,126
General Fund Expenditures
Fiscal 2017-18 overall expenditures, at$65.2 million,were $0.1 million higher than last year. However,
this result came in 9% or $6.7 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.
Administration decreased$1.0 million,or 17%,from 2016-17. While employee compensation increased
consistent with previous years, cost allocation charges were down significantly due to a change in
methodology. Additionally, contract services contributed to the decrease due to elections being held in
FY 2016-17.
Law Enforcement was higher by approximately $424,000, or 4%, which was the automatic increase in
the existing contract with the Santa Clara County Sheriff's Office triggered by increases in the lease and
Ca1PERS costs.
Public and Environmental Affairs (IT) experienced an increase in expenditures from 2016-17 to 2017-
18 of approximately$971,000,or 52%. This primarily consisted of employee compensation and benefits
collectively increasing by approximately $337,000 as well as the acquisition of software for a new
permitting system for Public Works and Community Development Departments.
15
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Administrative Services' decrease of approximately $625,000 million, or 12%, was primarily
attributable to a $1.3 million decrease in cost allocation charges due to a change in methodology over
the prior year. This decrease was offset by increases in employee compensation and benefits of
approximately $224,000, or 12%, and contract services due to increased sales tax consultant fees.
Recreation and Community Services General Fund expenditures experienced a 7%decrease, or$676,000,
across its programs. While the department's program experiences increases in salaries, benefits and
contractual services categories, a significant decrease in cost allocation for building maintenance charges.
Community Development expenditures in the General Fund increased$1.9 million or 30%due to salary
and benefit increases as well as significant special project costs related to the Vallco Specific Plan.
Public Works expenditures decreased approximately $664,000 or 4%. This is primarily represented by
a change in cost allocation methodology that reduced the amount of allocated costs by the City. Public
Works' plan review charges also decreased due to the winding down of Apple Campus 2 development.
These decreases were offset by increases in compensation and benefits, consistent with other
departments.
Transfers out of the General Fund decreased from $26.6 million in 2016-17 to $24.1 million, with $6.8
million for capital projects in the Transportation Fund, $3.2 million for annual debt service, $10 million
for capital projects in the Capital Improvement Projects Fund, $284,124 to subsidize a state-mandated
enforcement program, $399,996 in operating subsidies to the City's Enterprise funds, and $3.4 million
to internal service funds.
Table 7
Expenditure Changes
General Fund,Fiscal 2018 vs. 2017
(in thousands)
Increase/(Decrease)
Fiscal 2018 From Fiscal 2017
Function/Program Amount % of Total Amount Percent
Administration $ 4,919 8% $ (1,017) -17%
Law enforcement 12,363 19% 424 4%
Public and environmental affairs(IT) 2,836 4% 971 52%
Administrative services 4,430 7% (625) -12%
Recreation and community services 8,686 13% (676) -7%
Community development 8,365 13% 1,932 30%
Public works 15,821 24% (664) -4%
Capital outlay 7,763 12% (237) -3%
Total expenditures $ 65,183 100% $ 108 0%
Transfers out $ 24,129 100% $ (2,480) -9%
16
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Table 8
Expenditure Changes
General Fund 2017-18
(in thousands)
Variance with
Budgeted Amounts Final
Original Final Actual Positive/(Negative)
Administration $ 6,228 $ 6,411 $ 4,919 $ 1,492
Law enforcement 12,344 12,460 12,363 97
Public and environmental affairs 77 3,409 2,836 573
Administrative services 4,004 4,562 4,430 132
Recreation services 9,610 9,775 8,686 1,089
Community development 7,344 9,587 8,365 1,222
Public works 17,368 17,179 15,821 1,358
Capital outlay 2,317 8,549 7,763 786
Total expenditures $ 59,292 $ 71,932 $ 65,183 $ 6,749
Transfers out $ 15,758 $ 24,129 $ 24,129 $ -
General Fund-Fund Balance
The General Fund carried a June 30, 2018, ending fund balance of $52,510,457, down 2.0% or $1.1
million from beginning of the fiscal year. Loan receivables and prepaid expenses totaled $464,893 of
non-spendable fund balance. The City committed $19.0 million for general economic uncertainty and
$122,754 for sustainability. The City assigned $9,963,310; $4.8 million for Ca1PERS liability and$5.1
million for encumbrances. The City also restricted$1,254,578 Public access television purposes.
Transportation
The Transportation Special Revenue Fund carried a June 30, 2018, ending fund balance of$8,803,725,
up 5.1%, or $424,000 from beginning of the fiscal year. Activities in this fund remained relatively
consistent from the prior fiscal year 2016-17.
Housing Development
The Housing Development Special Revenue Fund carried a June 30, 2018, ending fund balance of$8.5
million, down 31.8%, or$3.9 million from beginning of the fiscal year. The activities in this fund were
up significantly in comparison with 2016-17 due to increases Below Market Rate (BMR) Charities
Housing Program expenditures.
Public Facilities Corporation
A transfer of$3,167,544 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.
17
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Capital Improvement Projects
The Capital Improvement Projects Capital Projects Fund carried a June 30, 2018, ending fund balance
of$28,903,023, up 15.3%, or $3.8 million from beginning of the fiscal year. During fiscal year 2017-
2018, a $10 million transfer in from the General Fund was received for purposes of fund capital-related
projects.
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. Total operating revenue decreased from $2.79
million last year to$2.56 million this year,while expenses decreased by approximately$397,000. These
decreases in operating revenues and expenses are mostly attributable to a decrease in Recology collection
volume as a result of the winding down of construction and development in respect to recent years. Net
position increased by approximately $6,000. The fund ended the year with a $5,314,630 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. While the economy and enhanced
marketing helped cultural events, youth and teen programs, sports, dance and fitness classes in generate
increasing revenues in recent years, fiscal year 2017-18 saw a slight decline. These programs generated
approximately $2,517,000 in revenues that were 9.4% lower than last year. Ongoing program expenses
of approximately$3,234,000 included full-time administrative and programming staff,part-time activity
leaders, and class instructors on contract. This resulted in a net operating loss of$700,000 as compared
to operating income of$112,000 a year ago. This year a transfer in from the General Fund was made
for $400,000. After the transfer, the fund ended up with a decrease in net position of$337,163. The
fund ended the year with a net position of$2,707,690.
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 increased 6% in 2017-2018 from $325,000 to $346,000.
Operating expenses increased by $58,700, or 10%, to $656,000 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 $272,000 last year to $310,000 this year. After a transfer in from the General Fund of
$300,000, net position decreased$403,000. As of June 30, 2018,this fund's net position was $229,688.
18
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
Cupertino Sports Center
Tennis lesson,membership,fitness class and rent revenues of$2,404,000 increased by$166,000 or 7.4%
over last year, resulting from moderate increases across the Sport Center's major revenue sources. In
addition,expenses increased by$475,000 or 22%,resulting in a net operating loss of$230,000. In 2016-
17, net operating income was $79,000. This current year's operating loss was primarily attributable to
increases in contract services. After approximately $100,000 was transferred in from the General Fund
and $470,000 was transferred out for capital improvement projects, this fund's net position was
$1,396,707 as of June 30, 2018.
CAPITAL ASSETS
At June 30, 2018, the City had $196.4 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 $11.8 million, after
depreciation.
Table 9
Capital Assets,Net of Depreciation, at June 30
(in thousands)
2018 2017
Governmental Activities:
Land $ 62,046 $ 62,046
Easements 19,492 19,492
Construction in Progress 7,154 774
Buildings 19,049 18,442
Improvements other than buildings 20,862 15,657
Machinery and equipment 4,484 3,718
Roads, curbs, gutters, sidewalks,medians and bridges 54,696 56,040
Streetlights 1,409 1,503
Storm drain structures and mains 4,685 3,949
Traffic signals 955 1,067
Total Governmental Activities 194,832 182,688
Business-Type Activities
Construction in progress - 13
Buildings 695 755
Improvements other than buildings 838 1,109
Machinery and equipment 65 95
Total Business-Type Activities 1,598 1,972
Total City $ 196,430 $ 184,660
19
CITY OF CUPERTINO
Management's Discussion and Analysis(Unaudited)
For the Year Ended June 30,2018
DEBT ADMINISTRATION
The City's only long-term debt liability at June 30, 2018, 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 $3,170,379 that are covered by the General Fund. The
June 30, 2018, outstanding principal of $31,520,000 is due to be paid off by July 1, 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.
CURRENTLY KNOWN FACTS AND CONDITIONS
The City is unaware of any facts or conditions or decisions that are expected to have a significant effect
on net position or results of operations.
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.cUertino.org.
20
This Page Left Intentionally Blank
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 30,2018
Business-
Governmental Type
Activities Activities Total
ASSETS
Cash and cash investments(Note 2) $ 129,144,438 $ 11,270,882 $ 140,415,320
Restricted cash and investments(Note 2) 4,294,288 - 4,294,288
Receivables
Accounts 3,595,554 526,186 4,121,740
Interest 163,067 - 163,067
Loans(Note 3) 4,722,060 4,722,060
Prepaid expenses and other assets 9,884 9,884
Capital assets(Note 5):
Non-depreciable 88,691,789 - 88,691,789
Depreciable, net of
accumulated depreciation 106,140,289 1,597,700 107,737,989
Total assets 336,761,369 13,394,768 350,156,137
DEFERRED OUTFLOWS OF RESOURCES
Related to pension(Note 10) 10,005,834 664,685 10,670,519
Total deferred outflows of resources 10,005,834 664,685 10,670,519
LIABILITIES
Accounts payable and accruals 7,816,516 640,856 8,457,372
Accrued payroll and benefits 912,179 289 912,468
Deposits 10,479,925 - 10,479,925
Unearned revenue 99,215 718,338 817,553
Compensated absences(Note 1):
Due in one year 520,052 62,939 582,991
Due in more than one year 3,477,115 295,530 3,772,645
Claims payable(Note 9):
Due in one year 262,157 - 262,157
Due in more than one year 1,107,008 1,107,008
Long-term debt(Note 6):
Due in one year 2,220,000 2,220,000
Due in more than one year 29,300,000 - 29,300,000
Net pension liability(Note 10) 38,578,333 2,566,069 41,144,402
Net OPEB liability(Note 11) 388,579 26,421 415,000
Total liabilities 95,161,079 4,310,442 99,471,521
DEFERRED INFLOWS OF RESOURCES
Related to pension(Note 10) 280,485 19,505 299,990
Related to OPEB(Note 11) 1,188,207 80,791 1,268,998
Total deferred inflows of resources 1,468,692 100,296 1,568,988
NET POSITION(Note 7)
Net investment in capital assets 167,606,366 1,597,700 169,204,066
Restricted for:
Special revenue projects 21,966,438 - 21,966,438
Affordable housing 8,519,770 8,519,770
Debt service 1,586,987 1,586,987
Total restricted net position 32,073,195 - 32,073,195
Unrestricted 50,457,871 8,051,015 58,508,886
Total net position $ 250,137,432 $ 9,648,715 $ 259,786,147
See accompanying notes to financial statements 22•
CITY OF CUPERTINO,CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2018
Net(Expense)Revenue and
Program Revenues Changes in Net Position
Operating Capital Business-
Charges for Grants and Grants and Governmental Type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental activities:
Administration $ 5,612,733 $ 5,062,988 $ - $ $ (549,745) $ $ (549,745)
Law enforcement 12,674,042 732,544 139,416 (11,802,082) (11,802,082)
Public and environmental affairs 3,244,846 - - (3,244,846) (3,244,846)
Administrative services 4,415,647 2,635,885 (1,779,762) (1,779,762)
Recreation services 9,352,551 1,589,134 - (7,763,417) (7,763,417)
Community development 16,789,351 8,598,935 375,217 (7,815,199) (7,815,199)
Public works 28,995,382 4,720,646 4,305,063 271,587 (19,698,086) (19,698,086)
Interest on long-term debt 993,038 - - - (993,038) (993,038)
Total governmental activities 82,077,590 23,340,132 4,819,696 271,587 (53,646,175) (53,646,175)
Business-type activities:
Resource recovery 2,594,511 2,559,862 - - (34,649) (34,649)
Blackberry farm 656,112 345,667 (310,445) (310,445)
Cupertino sports center 2,633,748 2,403,665 (230,083) (230,083)
Recreation programs 3,232,593 2,516,678 (715,915) (715,915)
Total business-type activities 9,116,964 7,825,872 - (1,291,092) (1,291,092)
Total $ 91,194,554 $ 31,166,004 $ 4,819,696 $ 271,587 (53,646,175) (1,291,092) (54,937,267)
General revenues:
Taxes:
Property taxes 14,881,533 14,881,533
Property tax in lieu of
motor vehicle fee 7,552,272 7,552,272
Sales taxes 26,164,531 26,164,531
Transient occupancy tax 6,810,718 6,810,718
Utility user tax 3,146,398 3,146,398
Franchise tax 3,563,820 3,563,820
Other taxes 1,943,652 1,943,652
Intergovernmental,unrestricted:
Motor vehicle license fee 31,013 31,013
Investment earnings 916,638 75,663 992,301
Gain on sale of capital assets 740,570 - 740,570
Miscellaneous 1,834,492 - 1,834,492
Transfers(Note 4) 107,030 (107,030) -
Total general revenues and transfers 67,692,667 (31,367) 67,661,300
Change in Net Position 14,046,492 (1,322,459) 12,724,033
Net Position,beginning of year as restated(Note 14) 236,090,940 10,971,174 247,062,114
Net Position,end of year $ 250,137,432 $ 9,648,715 $ 259,786,147
See accompanying notes to financial statements. 23.
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 2017-18. 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 Projects Capital Projects Fund: This fund accounts for activities related to the
acquisition or construction of major capital facilities.
24.
CITY OF CUPERTINO,CALIFORNIA
GOVERNMENTALFUNDS
BALANCE SHEET
June 30,2018
Public Capital
Facilities Improvement
Special Revenue Funds Corporation Projects Nonmajor Total
Housing Debt Capital Governmental Governmental
General Transportation Development Service Fund Projects Fund Funds Funds
ASSETS
Cash and investments(Note 2) $ 63,889,867 $ 9,208,242 $ 8,069,079 $ - $ 29,019,981 $ 12,064,210 $ 122,251,379
Restricted cash and investments(Note 2) - - - 4,294,288 - - 4,294,288
Receivables:
Accounts 2,837,425 572,974 106,752 - 78,403 3,595,554
Interest 163,067 - - - 163,067
Loans(Note 3) 458,893 - 4,263,167 - 4,722,060
Due from other funds(Note 4) 307,056 - - - 307,056
Prepaid items 6,000 - - - 6,000
Other assets 3,884 - - - - - 3,884
Total assets $ 67,666,192 $ 9,781,216 $ 12,438,998 $ 4,294,288 $ 29,019,981 $ 12,142,613 $ 135,343,288
LIABILITIES
Accounts payable and accruals $ 3,664,488 $ 977,491 $ 207,108 $ 2,676,519 $ 116,958 $ 7,885 $ 7,650,449
Accrued payroll and benefits 912,107 - - - - - 912,107
Due to other funds(Note 4) - - - 30,782 - 30,782
Deposits 10,479,925 - - - - 10,479,925
Unearned revenue 99,215 - - - - - 99,215
Total liabilities 15,155,735 977,491 207,108 2,707,301 116,958 7,885 19,172,478
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue-loans - - 3,712,120 - - 3,712,120
Total deferred inflows of resources - 3,712,120 3,712,120
FUND BALANCES(Note 7):
Nonspendable 464,893 - - - - 464,893
Restricted 1,254,578 8,803,725 8,519,770 1,586,987 11,908,135 32,073,195
Committed 19,122,754 - - - - - 19,122,754
Assigned 9,963,310 - 28,903,023 226,593 39,092,926
Unassigned 21,704,922 - - - - - 21,704,922
Total fund balances 52,510,457 8,803,725 8,519,770 1,586,987 28,903,023 12,134,728 112,458,690
Total liabilities,deferred inflows
of resources and fund balances $ 67,666,192 $ 9,781,216 $ 12,438,998 $ 4,294,288 $ 29,019,981 $ 12,142,613 $ 135,343,288
See accompanying notes to financial statements 25.
CITY OF CUPERTINO, CALIFORNIA
RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO
THE STATEMENT OF NET POSITION
June 30, 2018
Total fund balances reported on the governmental funds balance sheet $ 112,458,690
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. 191,292,376
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. 6,538,018
Certain receivables are not available to pay for current period
expenditures and therefore are deferred in the governmental funds. 3,712,120
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 (31,520,000)
Net pension liability (36,141,498)
Net OPEB liability (365,122)
Pension-related deferred outflows of resources 9,375,493
Pension-related deferred inflows of resources (261,109)
OPEB-related deferred inflows of resources (1,116,482)
Compensated absences (3,835,054)
Net position for governmental activities $ 250,137,432
See accompanying notes to financial statements 26.
CITY OF CUPERTINO,CALIFORNIA
GOVERNMENTALFUNDS
STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30,2018
Public Capital
Facilities Improvement
Special Revenue Funds Corporation Projects Nonmajor Total
Housing Debt Capital Governmental Governmental
General Transportation Development Service Fund Projects Fund Funds Funds
Revenues
Taxes $ 63,459,132 $ - $ 165,324 $ - $ $ 438,468 $ 64,062,924
Use of money and property 1,325,814 49,183 56,552 19,037 93,232 1,543,818
Intergovernmental 1,000,776 2,004,832 316,688 - 1,800,000 - 5,122,296
Licenses and permits 2,757,928 - - - - 2,757,928
Charges for services 14,972,627 24,941 34,135 144,689 461,855 15,638,247
Fines and forfeitures 575,032 - - - 27,902 602,934
Other revenue 1,015,227 775,021 4,754 39,490 1,834,492
Total revenues 85,106,536 2,853,977 577,453 19,037 1,944,689 1,060,947 91,562,639
Expenditures
Current:
Administration 4,919,262 - - 23,790 - - 4,943,052
Law enforcement 12,362,621 - - 12,362,621
Public and environmental affairs 2,835,768 - 2,835,768
Administrative services 4,430,300 4,430,300
Recreation services 8,686,076 - 8,686,076
Community development 8,365,234 - 4,541,852 12,907,086
Public works 15,820,836 1,719,112 - - 651,766 18,191,714
Capital outlay 7,762,733 10,871,723 - 3,231,277 1,529,379 23,395,112
Debt service:
Principal - - 2,180,000 - - 2,180,000
Interest and fiscal charges - - - 993,038 - - 993,038
Total expenditures 65,182,830 12,590,835 4,541,852 3,196,828 3,231,277 2,181,145 90,924,767
Excess(deficiency)of revenues
over expenditures 19,923,706 (9,736,858) (3,964,399) (3,177,791) (1,286,588) (1,120,198) 637,872
Other financing sources(uses)
Proceeds from sale of capital assets 872,250 - - - - 872,250
Transfers in(Note 4) 2,254,183 10,987,992 3,167,544 12,834,375 1,784,124 31,028,218
Transfers(out)(Note 4) (24,129,372) (827,349) - (7,713,924) (1,678,255) (34,348,900)
Total other financing sources(uses) (21,002,939) 10,160,643 3,167,544 5,120,451 105,869 (2,448,432)
Net change in fund balances (1,079,233) 423,785 (3,964,399) (10,247) 3,833,863 (1,014,329) (1,810,560)
Beginning fund balances 53,589,690 8,379,940 12,484,169 1,597,234 25,069,160 13,149,057 114,269,250
Ending fund balances $ 52,510,457 $ 8,803,725 $ 8,519,770 $ 1,586,987 $ 28,903,023 $ 12,134,728 $ 112,458,690
See accompanying notes to financial statements 27.
CITY OF CUPERTINO, CALIFORNIA
RECONCILIATION OF NET CHANGE IN FUND BALANCES-GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2018
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 $ (1,810,560)
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 18,114,296
Depreciation expense (6,658,923)
Net retirements (131,680)
Long term debt principal payments are reported as expenditures in the
governmental funds but are not reported as expenses in the statement
of activities. 2,180,000
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 3,672,000
Compensated absences (767,833)
Net pension liability (3,888,812)
Net OPEB liability 744,322
Pension-related deferred outflows of resources 1,434,343
Pension-related deferred inflows of resources 390,299
OPEB-related deferred inflows of resources (1,116,482)
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. 1,885,522
Change in net position of governmental activities $ 14,046,492
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 30,2018
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
Revenues
Taxes $ 59,465,000 $ 62,065,000 $ 63,459,132 $ 1,394,132
Use of money and property 1,647,790 1,647,790 1,325,814 (321,976)
Intergovernmental 364,000 364,000 1,000,776 636,776
Licenses and permits 2,145,000 2,145,000 2,757,928 612,928
Charges for services 13,547,897 24,675,155 14,972,627 (9,702,528)
Fines and forfeitures 600,000 600,000 575,032 (24,968)
Other revenue 225,960 1,583,889 1,015,227 (568,662)
Amounts available for appropriation 77,995,647 93,080,834 85,106,536 (7,974,298)
Charges for appropriation (outflows):
Current
Administration 6,227,870 6,411,308 4,919,262 1,492,046
Law enforcement 12,344,307 12,459,929 12,362,621 97,308
Public and environmental affairs 77,099 3,408,993 2,835,768 573,225
Administrative services 4,004,184 4,562,275 4,430,300 131,975
Recreation services 9,609,971 9,774,825 8,686,076 1,088,749
Community development 7,344,292 9,587,400 8,365,234 1,222,166
Public works 17,368,307 17,179,186 15,820,836 1,358,350
Capital outlay 2,317,469 8,548,992 7,762,733 786,259
Total charges for appropriations 59,293,499 71,932,908 65,182,830 6,750,078
Excess of revenues
over expenditures 18,702,148 21,147,926 19,923,706 (1,224,220)
Other financing sources(uses)
Proceeds from sale of land - - 872,250 872,250
Transfers in 2,000,000 2,000,000 2,254,183 254,183
Transfers(out) (15,757,734) (24,129,368) (24,129,372) (4)
Total other financing sources(uses) (13,757,734) (22,129,368) (21,002,939) 1,126,429
Net change in fund balance $ 4,944,414 $ (981,442) (1,079,233) $ (97,791)
Beginning fund balance 53,589,690
Ending fund balance $ 52,510,457
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, 2018
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
Revenues
Use of money and property $ 2,000 $ 2,000 $ 49,183 $ 47,183
Intergovernmental 1,666,000 1,666,000 2,004,832 338,832
Charges for services 4,100 4,100 24,941 20,841
Other revenue - - 775,021 775,021
Amounts available for appropriation 1,672,100 1,672,100 2,853,977 1,181,877
Charges for appropriation (outflows):
Current
Public works 1,789,899 1,720,251 1,719,112 1,139
Capital outlay 11,010,000 10,942,844 10,871,723 71,121
Total charges for appropriations 12,799,899 12,663,095 12,590,835 72,260
Excess of revenues
over expenditures (11,127,799) (10,990,995) (9,736,858) 1,254,137
Other financing sources (uses)
Transfers in 10,988,000 10,988,000 10,987,992 (8)
Transfers (out) (779,762) (779,762) (827,349) (47,587)
Total other financing sources (uses) 10,208,238 10,208,238 10,160,643 (47,595)
Net change in fund balance $ (919,561) $ (782,757) 423,785 $ 1,206,542
Beginning fund balance 8,379,940
Ending fund balance $ 8,803,725
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, 2018
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
Revenues
Taxes $ 1,000,000 $ 1,000,000 $ 165,324 $ (834,676)
Use of money and property - - 56,552 56,552
Intergovernmental 314,590 314,590 316,688 2,098
Charges for services - - 34,135 34,135
Other revenue - - 4,754 4,754
Amounts available for appropriation 1,314,590 1,314,590 577,453 (737,137)
Charges for appropriation (outflows):
Current
Community development 9,031,210 12,637,010 4,541,852 8,095,158
Total charges for appropriations 9,031,210 12,637,010 4,541,852 8,095,158
Net change in fund balance $ (7,716,620) $ (11,322,420) (3,964,399) $ 7,358,021
Beginning fund balance 12,484,169
Ending fund balance $ 8,519,770
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 2017- 18.
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 30,2018
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) $ 5,824,586 $ 3,170,388 $ 2,275,908 $ 11,270,882 $ 6,893,059
Accounts receivable 526,186 - 526,186 -
Total current assets 6,350,772 3,170,388 2,275,908 11,797,068 6,893,059
Noncurrent assets
Capital assets(Note 5):
Depreciable,net of
accumulated depreciation 13,768 1,094,480 489,452 1,597,700 3,539,702
Total noncurrent assets 13,768 1,094,480 489,452 1,597,700 3,539,702
Total assets 6,364,540 4,264,868 2,765,360 13,394,768 10,432,761
DEFERRED OUTFLOWS OF RESOURCES
Related to pension(Note 10) 253,174 206,791 204,720 664,685 630,341
Total deferred outflows of resources 253,174 206,791 204,720 664,685 630,341
LIABILITIES
Current liabilities
Accounts payable and accruals 143,507 226,941 270,408 640,856 166,067
Accrued payroll and benefits 289 - - 289 72
Due to other funds(Note 4) - - - - 276,274
Compensated absences(Note 1): 23,303 24,598 15,038 62,939 21,091
Claims payable(Note 9) - - - - 262,157
Unearned revenue - 568,004 150,334 718,338 -
Total current liabilities 167,099 819,543 435,780 1,422,422 725,661
Noncurrent liabilities
Compensated absences(Note 1) 109,418 115,501 70,611 295,530 141,022
Claims payable(Note 9) - - - - 1,107,008
Net pension liability(Note 10) 975,521 793,888 796,660 2,566,069 2,436,835
Net OPEB liability(Note 11) 10,871 7,426 8,124 26,421 23,457
Total noncurrent liabilities 10,871 7,426 8,124 26,421 23,457
Total liabilities 1,262,909 1,736,358 1,311,175 4,310,442 4,433,983
DEFERRED INFLOWS OF RESOURCES
Related to pension(Note 10) 6,937 4,903 7,665 19,505 19,376
Related to OPEB(Note 11) 33,238 22,708 24,845 80,791 71,725
Total deferred inflows of resources 40,175 27,611 32,510 100,296 91,101
NET POSITION(Note 7)
Net investment in capital assets 13,768 1,094,480 489,452 1,597,700 3,539,702
Unrestricted 5,300,862 1,613,210 1,136,943 8,051,015 2,998,316
Total Net Position $ 5,314,630 $ 2,707,690 $ 1,626,395 $ 9,648,715 $ 6,538,018
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 30,2018
Business-type Activities-Enterprise Funds Governmental
Nonmajor Activities-
Resources Recreation Enterprise Internal Service
Recovery Programs Funds Totals Funds
Operating revenues
Charges for services $ 2,475,967 $ 2,353,008 $ 2,717,249 $ 7,546,224 $ 4,644,798
Other 83,895 163,670 32,083 279,648 8,027
Total operating revenue 2,559,862 2,516,678 2,749,332 7,825,872 4,652,825
Operating expenses
Salaries and benefits 790,115 1,066,738 717,387 2,574,240 2,672,635
Materials and supplies 196,104 496,133 576,348 1,268,585 1,802,782
Contractual services 1,604,941 1,365,408 1,910,324 4,880,673 293,573
Insurance and claims and premium - - - - 727,808
Depreciation(Note 5) 3,351 304,314 85,801 393,466 799,775
Total operating expenses 2,594,511 3,232,593 3,289,860 9,116,964 6,296,573
Operating income(loss) (34,649) (715,915) (540,528) (1,291,092) (1,643,748)
Nonoperating revenues
Investment Income 40,662 15,778 19,223 75,663 41,843
Gain on sale of capital assets - - - - 59,715
Total nonoperating revenues 40,662 15,778 19,223 75,663 101,558
Income(loss)before transfers 6,013 (700,137) (521,305) (1,215,429) (1,542,190)
Transfers in(Note 4) - 400,000 399,996 799,996 3,427,712
Transfers(out)(Note 4) - (37,026) (870,000) (907,026) -
Changes in net position 6,013 (337,163) (991,309) (1,322,459) 1,885,522
Net position-beginning of year
as restated(Note 14) 5,308,617 3,044,853 2,617,704 10,971,174 4,652,496
Net position-end of year $ 5,314,630 $ 2,707,690 $ 1,626,395 $ 9,648,715 $ 6,538,018
See accompanying notes to financial statements 34.
CITY OF CUPERTINO,CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,2018
Business-type Activities-Enterprise Funds Governmental
Nonmajor Activities-
Resources Recreation Enterprise Internal Service
Recovery Programs Funds Totals Funds
Cash flows from operating activities
Cash received from customers $ 2,033,676 $ 2,720,902 $ 2,784,865 $ 7,539,443 $ 4,652,825
Cash payments to suppliers for
goods and services (1,856,435) (1,766,505) (2,413,471) (6,036,411) (2,038,733)
Cash payments to employees for salaries and benefits (687,144) (893,839) (651,394) (2,232,377) (2,494,058)
Cash payments for judgment and claims - - - - (1,041,294)
Net cash provided(used)by operating activities (509,903) 60,558 (280,000) (729,345) (921,260)
Cash flows from noncapital financing activities
Transfers in - 400,000 399,996 799,996 2,303,986
Transfers(out) (37,026) (870,000) (907,026)
Cash flows from noncapital financing activities 362,974 (470,004) (107,030) 2,303,986
Cash flows from capital and related financing activities
Acquisition of capital assets - (18,998) (18,998) (1,620,229)
Sale of capital assets - - 59,715
Cash flows from capital and related financing activities - (18,998) (18,998) (1,560,514)
Cash Flows from Investing Activities
Interest received 40,662 15,778 19,223 75,663 41,843
Cash flows from investing activities 40,662 15,778 19,223 75,663 41,843
Net cash flows (469,241) 439,310 (749,779) (779,710) (135,945)
Cash and investments at beginning of year 6,293,827 2,731,078 3,025,687 12,050,592 7,029,004
Cash and investments at end of year $ 5,824,586 $ 3,170,388 $ 2,275,908 $ 11,270,882 $ 6,893,059
Reconciliation of operating income(loss)to
to net cash provided by operating activities:
Operating income(loss) $ (34,649) $ (715,915) $ (540,528) $ (1,291,092) $ (1,643,748)
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation 3,351 304,314 85,801 393,466 $ 799,775
Change in assets,deferred outflows of resources,liabilities
and deferred inflows of resources
Accounts receivable (526,186) 74,930 - (451,256) -
Due to retirement system 56,204 49,008 37,101 142,313 131,384
Due to OPEB system 11,079 7,569 8,281 26,929 23,907
Accounts payable and accruals (55,390) 95,036 73,201 112,847 57,622
Unearned revenue - 129,294 35,533 164,827 -
Compensated absences 35,688 116,322 20,611 172,621 23,286
Claims payable - - - - (313,486)
Net cash provided(used)by operating activities $ (509,903) $ 60,558 $ (280,000) $ (729,345) $ (921,260)
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.
CITY OF CUPERTINO, CALIFORNIA
FIDUCIARY FUND
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2018
Other Post-Employment
Benefits Trust Fund
ASSETS
Cash and equivalents $ 530,959
Investments:
Mutual funds:
Fixed income 17,137,395
Equity 8,419,654
Real estate 1,688,710
Commodities 279,754
Total assets 28,056,472
LIABILITIES -
NET POSITION
Restricted for post-employment benefits other than pensions $ 28,056,472
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, 2018
Other Post-Employment
Benefits Trust Fund
ADDITIONS
Employer contributions $ 1,059,248
Investment income:
Net increase in fair value of investments 4,866,773
Interest and dividends 493,107
Less investment expense (2,937,027)
Total additions 3,482,101
DEDUCTIONS
Benefit payments 1,059,248
Administrative expense 111,456
Total deductions 1,170,704
Change in net position 2,311,397
Net position - beginning of year 25,745,075
Net position -end of year $ 28,056,472
See accompanying notes to financial statements.
38.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
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: 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 OPEB benefit payments of the Plan initiated by the City but reimbursed to
the PARS Trust 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.
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
revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by
fees charged to external parties.
(Continued)
39.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 10 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, 2018
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 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, 2018
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:
Excess of
Expenditures
Fund/Department Over Appropriations
Public Facilities Corporation Debt Service Fund $ 29,290
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, 2018
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, 2018
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The changes in compensated absences for the year ended June 30, 2018 were as follows:
Governmental Business-Type
Activities Activities Total
Beginning balance $ 3,206,048 $ 185,848 $ 3,391,896
Additions 1,192,006 187,823 1,379,829
Reductions (400,887) (15,202) (416,089)
Ending balance $ 3,997,167 $ 358,469 $ 4,355,636
Current portion $ 520,052 $ 22,939 $ 582,991
Non-current portion $ 3,477,115 $ 295,530 $ 3,772,645
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 and
OPEB assumptions, loss on pension and OPEB investments, and contributions made subsequent to the
measurement date as well. Differences between expected and actual experience and changes in pension
and OPEB 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 and OPEB plans. Loss on
pension and OPEB 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 and net OPEB 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 and
OPEB plans.
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, 2018
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, 2018.
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. See Note 14 for
the change in accounting principles.
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 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. See Note 14 for the change in accounting principles
that this Statement addresses regarding postemployment benefits. The other requirements of the standard
will have no effect on 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:
(Continued)
45.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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 $ 140,415,320
Restricted cash and investments:
Held by fiscal agent for bond repayments 4,294,288
Total cash and investments $ 144,709,608
(Continued)
46.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 2—CASH AND INVESTMENTS (Continued)
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
* 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 percent 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:
(Continued)
47.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 2—CASH AND INVESTMENTS (Continued)
Minimum Maximum
Maximum Credit Percentage of
Authorized Investment Type Maturity Quality Portfolio
Cash or obligations of the U.S. including U.S. Treasury obligations N/A N/A None
Federal agencies obligations which represent
full faith and credit of the U.S. N/A N/A None
Direct federal agencies obligations which are not
fully guaranteed by the full faith and credit of the U.S. N/A N/A None
U.S. dollar denominated deposit accounts,federal funds and
bankers'acceptances with domestic commercial banks 360 days P-1,A-1+,A-1 None
Commercial Paper 270 days P-1,A-1 None
Money market funds N/A Aaam or AAAm-G None
Pre-refunded municipal obligations that are not callable prior
to maturity or as to which irrevocable instructions have been Highest
given to call on the date specified in the notice N/A rating category None
Municipal obligations or General obligations of states N/A Aaa, AAA,A2,A None
California Local Agency Investment Fund (LAIF) N/A N/A Up to$65 million
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. 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, 2018
NOTE 2—CASH AND INVESTMENTS (Continued)
12 Months 13 to More than
Investment Type or less 24 Months 24 Months Total
U.S. Treasury Securities $ 5,976,220 $ 8,839,150 $ - $ 14,815,370
U.S. Agency Notes
Federal Home Loan Mortgage Corporation 5,947,080 9,801,850 - 15,748,930
Federal National Mortgage Association 995,870 1,956,220 2,923,620 5,875,710
Federal Home Loan Banks 4,990,000 5,938,200 2,989,230 13,917,430
Federal Farm Credit Banks 5,978,520 1,962,340 - 7,940,860
Local Agency Investment Fund 55,792,465 - - 55,792,465
Money Market Mutual Funds 11,773,452 - - 11,773,452
Total Investments $91,453,607 $28,497,760 $ 5,912,850 125,864,217
Cash in banks and on hand 18,845,391
Total Cash and Investments $144,709,608
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, 2018, money market
mutual funds, used for pooled investment and held by fiscal agent purposes, had a weighted average
maturity of 31 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, 2018:
(Continued)
49.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 2—CASH AND INVESTMENTS (Continued)
Investments by Fair Value Level: Level 1 Level 2 Total
U.S. Treasury Securities $14,815,370 $ - $ 14,815,370
U.S. Agency Notes
Federal Home Loan Mortgage Corporation - 15,748,930 15,748,930
Federal National Mortgage Association - 5,875,710 5,875,710
Federal Home Loan Banks - 13,917,430 13,917,430
Federal Farm Credit Banks - 7,940,860 7,940,860
Total Investments $14,815,370 $ 43,482,930 58,298,300
Investments Measured at Amortized Cost:
Money Market Mutual Funds 11,773,452
Investments Exempt from Fair Value Hierarchy:
Local Agency Investment Fund 55,792,465
Cash in banks and on hand 18,845,391
Total Cash and Investments $144,709,608
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, 2018 for each investment type, including
those with fiscal agents, as provided by Moody's ratings:
Investment Type Ratings Total
Money Market Mutual Funds AAA $ 11,773,452
U.S. Agency Notes
Federal Home Loan Mortgage Corporation AAA 15,748,930
Federal National Mortgage Association AAA 5,875,710
Federal Home Loan Banks AAA 13,917,430
Federal Farm Credit Banks AAA 7,940,860
U.S. Treasury Securities AAA 14,815,370
Not Rated:
Local Agency Investment Fund Not Rated 55,792,465
Total Investments $ 125,864,217
(Continued)
50.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
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 five percent or more of total City-wide investments:
Issuer Investment Type Amount
Federal Home Loan Mortgage Corporation (FHLMC) U.S. Agency Notes $15,748,930
Federal Home Loan Banks (FHLB) U.S. Agency Notes 13,917,430
Federal Farm Credit Banks (FFCB) U.S. Agency Notes 7,940,860
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.
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 two percent 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
percent of the total market value of the Portfolio.
(Continued)
51.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 2—CASH AND INVESTMENTS (Continued)
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 two percent of the total market value of the Portfolio. The
international equity investments (including emerging markets) shall constitute no more than 20
percent 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 percent 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
percent 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
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, 2018, money market
mutual funds, used for investment and held by fiscal agent purposes, had a weighted average maturity of
20 days or less.
(Continued)
52.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 2—CASH AND INVESTMENTS (Continued)
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 five percent or more of total Plan investments.
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. The City had received full payment on this loan during the fiscal year, as thus reported a balance of
$0 as of the year ended June 30, 2018.
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, 2018, the balance remaining on the loan was $821,000. The loan was issued
using resources in the Housing Development Fund and is considered governmental activities.
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 30,2018,the balance on the loan was$188,940. The loan was issued using resources in the Housing
Development Fund and is considered governmental activities.
On September 11, 2017 the City loaned$3,672,000 to Stevens Creek, L.P., a California limited partnership.
The note bears interest at three percent per annum for 55 years. After the completion of construction of the
development, no later than April 30th of each calendar year, the Developer shall make repayments of the
loan in an amount equal to the City loan percentage of the lenders'share of residual receipts.The payments
shall be credited first against accrued interest and then against outstanding principal of the loan, and shall
be accompanied by the developer's report of residual receipts. At June 30, 2018,the balance remaining on
the loan was $3,672,000. The loan was issued using resources in the Housing Development Fund and is
considered governmental activities.
In addition to these loans, the City has $40,120 in housing and other loans receivable at June 30, 2018.
These loans bear interest at three to six percent and are due by June 30, 2025. The loan was issued using
resources in the Housing Development Fund and is considered governmental activities.
(Continued)
53.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 4—INTERFUND TRANSACTIONS
Transfers between funds during the fiscal year ended June 30, 2018 were as follows:
Fund Making Transfers Fund Receiving Transfers Amount Transferred
General Fund Transportation Special Revenue Fund $ 6,849,996 (A)
Public Financing Corporation Debt Service Fund 3,167,544 (B,D)
Capital Improvement Projects Capital Projects Fund 10,000,000 (A)
Non-major Governmental Funds 284,124 (C)
Non-major Enterprise Funds 399,996 (D)
Internal Service Funds 3,427,712 (E)
Transportation Special Revenue Fund Capital Improvement Projects Capital Projects Fund 827,349 (A)
Capital Improvements Projects
Capital Projects Fund General Fund 2,075,928 (F)
Transportation Special Revenue Fund 4,137,996 (A)
Non-major Governmental Funds 1,500,000 (C)
Non-major Governmental Funds General Fund 178,255 (F)
Capital Improvement Projects Capital Projects Fund 1,500,000 (A)
Recreation Program Enterprise Funds Capital Improvement Projects Capital Projects Fund 37,026 (A)
Non-major Enterprise Funds Capital Improvement Projects Capital Projects Fund 470,000 (A)
Recreation Program Enterprise Funds 400,000 (D)
Total Interfund Transfers $ 35 255 926
The reasons for these transfers are set forth below:
(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 project completion
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, 2018, the Retiree Medical and
Equipment Revolving Internal Service Funds owed the General Fund $276,274 and the Public Financing
Corporation Debt Service Fund owed the General Fund $30,782, for a total owed to the General Fund
across all funds of$307,056.
(Continued)
54.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 5—CAPITAL ASSETS
A summary of changes in governmental activities capital assets is as follows:
Balance at Balance at
July 1,2017 Additions Deletions Transfers June 30,2018
Governmental Activities:
Capital Assets Not Being Depreciated:
Land $ 62,045,969 $ $ $ $ 62,045,969
Easements 19,491,959 19,491,959
Construction in Progress 773,565 17,241,984 (28,189) (10,833,499) 7,153,861
Total Capital Assets Not Being Depreciated 82,311,493 17,241,984 (28,189) (10,833,499) 88,691,789
Capital Assets Being Depreciated:
Buildings 43,762,096 2,450,000 (485,746) 45,726,350
Improvements Other Than Buildings 49,665,047 - 7,404,831 57,069,878
Machinery and Equipment 3,069,243 142,265 3,211,508
Road,Curbs,Gutters,Sidewalks,Medians and Bridges 159,811,072 586,670 160,397,742
Streetlights 8,633,770 13,224 8,646,994
Storm Drain Structure and Mains 35,796,755 1,137,010 36,933,765
Traffic Signals 6,418,246 - 6,418,246
Total Capital Assets Being Depreciated 307,156,229 2,450,000 (485,746) 9,284,000 318,404,483
Less Accumulated Depreciation For:
Buildings (25,319,970) (1,710,765) 354,066 - (26,676,669)
Improvements Other Than Buildings (34,007,361) (2,200,319) - (36,207,680)
Machinery and Equipment (2,070,939) (197,089) (2,268,028)
Road,Curbs,Gutters,Sidewalks,Medians and Bridges (103,771,438) (1,928,997) (105,700,435)
Streetlights (7,131,060) (107,184) (7,238,244)
Storm Drain Structure and Mains (31,847,658) (401,795) (32,249,453)
Traffic Signals (5,350,613) (112,774) - (5,463,387)
Total Accumulated Depreciation (209,499,039) (6,658,923) 354,066 - (215,803,896)
Total General Government Capital Assets Being Depreciated,Net 97,657,190 (4,208,923) (131,680) 9,284,000 102,600,587
Internal Service Fund Capital Assets
Machinery and Equipment 8,608,618 70,730 (271,733) 1,549,499 9,957,114
Less Accumulated Depreciation (5,889,370) (799,775) 271,733 (6,417,412)
Net Internal Service Fund Capital Assets Being Depreciated 2,719,248 (729,045) 1,549,499 3,539,702
Governmental Activity Capital Assets,Net $182,687,931 $ 12,304,016 $ (159,869) $ - $194,832,078
(Continued)
55.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 5—CAPITAL ASSETS (Continued)
Balance at Balance at
July 1,2017 Additions Deletions Transfers June 30,2018
Business-Type Activities:
Capital Assets Not Being Depreciated:
Construction in Progress $ 13,296 $ 18,998 $ $ (32,294) $ -
Total Capital Assets Not Being Depreciated 13,296 18,998 (32,294)
Capital Assets Being Depreciated:
Buildings 1,006,002 - - 1,006,002
Improvements Other Than Buildings 2,057,450 32,294 2,089,744
Machinery and Equipment 623,332 - 623,332
Total Capital Assets Being Depreciated 3,686,784 32,294 3,719,078
Less Accumulated Depreciation For:
Buildings (251,257) (59,857) - (311,114)
Improvements Other Than Buildings (948,045) (304,282) (1,252,327)
Machinery and Equipment (528,610) (29,327) (557,937)
Total Accumulated Depreciation (1,727,912) (393,466) (2,121,378)
Total Capital Assets Being Depreciated,Net 1,958,872 (393,466) 32,294 1,597,700
Business-Type Activity Capital Assets,Net $ 1,972,168 $ (374,468) $ $ - $ 1,597,700
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 $ 163,458
Public and Environment Affairs 14,290
Administrative Services 25,333
Parks and Recreation 144,849
Public Works 6,310,993
Internal Service Funds 799,775
Total $ 7 328 333
Depreciation expense was charged to the business-type activities as follows:
Business-Type Activities
Resources Recovery $ 3,351
Blackberry Farm 28,553
Cupertino Sports Center 57,248
Recreation Program 304,314
Total $ 393 446
(Continued)
56.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 6—LONG-TERM DEBT
Cupertino Public Facilities Corporation Certificates of Participation:
Original Balance Balance
Issue June 30, June 30, Current
Amount 2017 Retirements 2018 Portion
2012 Refinancing Certificates
of Participation:
0.350-3.125%, due 07/01/2030 $ 43,940,000 $ 33,700,000 $ 2,180,000 $31,520,000 $ 2,220,000
Total long-term debt $ 33,700,000 $ 2,180,000 $31,520,000 $ 2-220-000
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 which represent
the pledged revenues are scheduled to be sufficient in both time and amount, when the principal and
interest of the certificates are due, which was the case for the year ended June 30, 2018.
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 $38,044,547 payable through July 1, 2030. For the year ended June 30,
2018, the bonds had $2,180,000 of principal and $993,038 interest due.
Annual debt service requirements for the 2012 COPS are shown below:
Governmental Activities
For the Year
Ending June 30 Principal Interest
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 2,500,000 670,738
2024-2028 13,675,000 2,182,490
2029-2030 6,055,000 281,419
Total $ 31,520,000 $ 6,524,547
(Continued)
57.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
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, 2018
NOTE 7 - NET POSITION AND FUND BALANCES (Continued)
Fund balances for all major and nonmajor governmental funds as of June 30, 2018, were distributed as
follows:
Public Capital Other
Housing Facilities Improvements Governmental
General Transportation Development Corporation Projects Funds Total
Nonspendable:
Loans receivable $ 458,893 $ $ $ $ $ $ 458,893
Prepaid items 6,000 6,000
Subtotal 464,893 464,893
Restricted for:
Public access television 1,237,403 1,237,403
Debt service 17,175 1,586,987 1,604,162
Storm drain system - - 1,808,822 1,808,822
Parks and open space 9,859,784 9,859,784
Environmental management 239,529 239,529
Streets and road projects 8,803,725 - 8,803,725
Housing programs - 8,519,770 - - 8,519,770
Subtotal 1,254,578 8,803,725 8,519,770 1,586,987 11,908,135 32,073,195
Committed for:
Economic uncertainty 1 19,000,000 - - - - 19,000,000
Sustainability Reserve 122,754 122,754
Subtotal 19,122,754 19,122,754
Assigned to:
PERS liability 4,793,000 4,793,000
Encumbrances 5,170,310 5,170,310
Capital projects 28,903,023 226,593 29,129,616
Subtotal 9,963,310 28,903,023 226,593 39,092,926
Unassigned 21,704,922 - - 21,704,922
Total $ 52,510,457 $ 8,803,725 $ 8,519,770 $ 1,586,987 $ 28,903,023 $ 12,134,728 $ 112,458,690
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, 2018, 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, 2018
NOTE 8—COMMITMENTS AND CONTINGENCIES (Continued)
As of June 30, 2018, the City had the following encumbrances outstanding:
Governmental Funds:
General Fund $ 5,170,310
Transportation Special Revenue Fund 4,373,575
Housing Development Special Revenue Fund 38,220
Capital Improvements Projects Capital Projects Fund 973,583
Other Governmental Funds 95,009
Total Encumbrances $ 10,650,697
Lease Agreement with County of Santa Clara: The City has an agreement(commitment), 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, 2018, the cost and carrying value of the building which opened in October 2004, is $21,952,133
and $9,816,355 respectively, with $12,135,778 in accumulated depreciation.
Consulting Agreement for Sales Taxes: The City entered into agreements (commitments) 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. For the year ended June 30, 2018, the City incurred $7,014,450 in related expenditures.
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, 2018:
VRF Balance as of July 1, 2017 $ -
VRF Revenue 361,846
VRF Interest -
VRF Expended (361,846)
VRF Balance as of June 30, 2018 $ -
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, 2018, the City paid ABAG PLAN premiums of$668,440.
(Continued)
60.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
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, 2018,
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 two 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:
2018 2017
Claims liability, beginning of year $ 1,682,651 $ 1,481,098
Incurred claims and changes in estimate (12,991) 388,701
Claim payments and credits (300,495) (187,148)
Total claims liability, end of year 1,369,165 1,682,651
Less current portion (262,157) (521,998)
Non-current portion $ 1,107,008 $ 1,160,653
NOTE 10— DEFINED BENEFIT PENSION PLAN
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, 2018
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 Deferred
Outflows Net Pension Inflows
of Resources Liability of Resources
Miscellaneous $10,670,519 $ 41,144,402 $ 299,990
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, 2018, 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, 2018
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,
2017, using an annual actuarial valuation as of June 30, 2016 rolled forward to June 30, 2017 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, 2016 actuarial valuations were
determined using the following actuarial assumptions:
Valuation Date June 30, 2016
Measurement Date June 30, 2017
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 7.15%
Inflation 2.75%
Payroll Growth 3.00%
Projected Salary Increase Varies by Entry Age and Service (1)
Investment Rate of Return 7.5% (2)
Derived using CalPERS' Membership
Mortality Data for all Funds (3)
(1) Depending on age, service and type of employment
(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, 2016 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: In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent.
In 2016, there were no changes.
Discount Rate: The discount rate used to measure the total pension liability was 7.15 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 7.15 percent discount rate is adequate and the use of the municipal bond rate
calculation is not necessary. The long term expected discount rate of 7.15 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, 2018
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 47.00% 4.90% 5.38%
Global Fixed Income 19.00% 80.00% 2.27%
Inflation Sensitive 6.00% 60.00% 1.39%
Private Equity 12.00% 6.60% 6.63%
Real Estate 11.00% 2.80% 5.21%
Infrastructure and Forestland 3.00% 3.90% 5.36%
Liquidity 2.00% -0.40% -0.09%
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, 2018
NOTE 10— DEFINED BENEFIT PENSION PLAN (Continued)
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
Balance at June 30, 2016 $ 114,836,186 $ 78,096,224 $ 36,739,962
Changes in the year:
Service cost 2,895,549 2,895,549
Interest on the total pension liability 8,619,588 8,619,588
Change of Assumptions 7,125,558 7,125,558
Differences between actual and expected experience (182,397) (182,397)
Contribution -employer 4,183,822 (4,183,822)
Contribution -employee 1,236,052 (1,236,052)
Net investment income 8,749,288 (8,749,288)
Administrative expenses (115,304) 115,304
Benefit payments, including refunds of employee
contributions (5,346,890) (5,346,890) -
Net changes 13,111,408 8,706,968 4,404,440
Balance at June 30, 2017 $ 127,947,594 $ 86,803,192 $ 41,144,402
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 6.15%
Net Pension Liability $58,470,218
Current Discount Rate 7.15%
Net Pension Liability $41,144,402
1% Increase 8.15%
Net Pension Liability $26,841,197
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, 2018
NOTE 10— DEFINED BENEFIT PENSION PLAN (Continued)
Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions: For the year ended
June 30, 2018, the City recognized pension expense of $6,600,888. At June 30, 2018, 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 $ 4,263,020 $ -
Differences between actual and expected experience 308,221 (128,751)
Changes in assumptions 5,029,806 (171,239)
Net differences between projected and actual earnings
on plan investments 1,069,472 -
Total $ 10,670,519 $ (299,990)
The $4,263,020 of contributions for the fiscal year ended June 30, 2018 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, 2019. 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
2019 $ 2,091,093
2020 3,380,854
2021 1,272,593
2022 (637,031)
$ 6,107,509
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)
66.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
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 (the latest information available), 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
Contributions: 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. Based on the actuarial
valuation date of January 1, 2018, the annual required contribution rate is 7.41 percent of annual covered
payroll. For the year ended June 30, 2018, the City paid$1,059,248 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, 2018
NOTE 11 —OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
Net OPEB Liability of the City: The components of the net OPEB liability of the City at June 30, 2018
(expressed in thousands)were as follows:
Total OPEB liability $ 28,471
Plan fiduciary net position 28,056
City's net OPEB liability $ 415
Plan fiduciary net position as a percentage of the total OPEB liability 98.5%
Investment rate of return: 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, 2018 (see the discussion of the Plan's investment policy) are summarized in the following
table:
Long-Term Expected
Asset Class Real Rate of Return
Fixed income—core 14.00%
Fixed income—high yield 6.00%
Fixed income—inflation protected 4.00%
Fixed income—hedged 4.00%
Equities—domestic 43.75%
Equities—developed foreign 14.75%
Equities—emerging foreign 4.50%
Real estate 6.00%
Commodities 1.00%
Cash 2.00%
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, 2018:
Asset Class Target Allocation
Fixed income 29%
Equities 62%
Real estate 6%
Commodities 2%
Cash 1%
Total 100%
(Continued)
68.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 11 —OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
Concentrations: The Plan did not have investments outside of mutual funds that comprise five percent or
more of the Plan's total fiduciary net position.
Rate of return:For the year ended June 30, 2018,the annual money-weighted rate of return on investments,
net of investment expense, was 8.31 percent. The money-weighted rate of return expresses investment
performance, net of investment expense, adjusted for the changing amounts actually invested.
Actuarial assumptions: The total OPEB liability was determined by an actuarial valuation as of January 1,
2018, 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.
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, 2018 actuarial valuation
include the following:
Valuation date: January 1, 2018
Measurement date: June 30, 2018
Actuarial Cost Method: Entry Age Normal
Amortization Method: Level percent of pay closed
Amortization Period: 12 year
Asset Valuation Method: Market value
Actuarial Assumptions:
Discount Rate 7.00%
Payroll Growth 3.00%
Ultimate Rate of Medical Inflation 4.50%
Mortality (1) CalPERS mortality assumptions
Health Care Trend The annual cost of healthcare is
expected to decrease from
7.5% in 2019 to 4%from 2076
and later.
(1) 2014 CalPERS Experience Study, Recipients with attained age of 50
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.
(Continued)
69.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 11 —OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
Changes in the Net OPEB Liability: The changes in the City's net OPEB liability are:
Increase (Decrease)
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability
(a) (b) (a)- (b)
Balances at July 1, 2017 $ 27,006,000 $ 25,745,000 $ 1,261,000
Changes in the year:
Service cost 1,008,000 - 1,008,000
Interest 1,876,000 - 1,876,000
Actuarial experience - - -
Assumptions changes - - -
Contributions - employer - 1,419,000 (1,419,000)
Contributions - employee - -Net investment income - 2,365,000 (2,365,000)
Benefit payments, including refunds (1,419,000) (1,419,000) -
Administrative expense - (54,000) 54,000
Net changes 1,465,000 2,311,000 (846,000)
Balances at June 30, 2018 $ 28,471,000 $ 28,056,000 $ 415,000
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 one-percentage-point lower(6.0 percent)or one-percentage-point higher(8.0 percent)than the
current discount rate (expressed in thousands):
1% Current 1%
Decrease Discount Rate Increase
6.00% 7.00% 8.00%
City of Cupertino's net OPEB liability for the
plan $ 4,086,000 $ 415,000 $ (2,626,000)
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 one-percentage-point lower (decreasing to 3.5 percent) or one-
percentage-point higher(increasing to 5.5 percent)than the current healthcare cost trend rates (expressed
in thousands):
Current
1% Healthcare Cost 1%
Decrease Trend Rate Increase
City of Cupertino's net OPEB liability for the
plan $ (2,987,000) $ 415,000 $ 4,585,000
(Continued)
70.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 11 —OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
OPEB Expense and Deferred Inflows of Resources Related to OPEB: For the year ended June 30, 2018,
the City recognized OPEB expense of $752,000. At June 30, 2018, the City reported deferred inflows of
resources related to OPEB from the following sources:
Deferred Inflows
of Resources
Net difference between projected and actual earnings on investments $ 1,269,000
Amounts reported as deferred inflows of resources related to OPEB will be recognized as OPEB expense
as follows:
Year Ended Deferred Inflows
June 30 of Resources
2019 $ 385,000
2020 385,000
2021 385,000
2022 114,000
2023 -
Thereafter -
Total $ 1,269,000
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, 2018, 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.
NOTE 13— UPCOMING GASB PRONOUCEMENTS
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.
(Continued)
71.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 13— UPCOMING GASB PRONOUCEMENTS (Continued)
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 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.
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.
In April 2018, the GASB issued Statement No. 88, Certain Disclosures Related to Debt, including Direct
Borrowings and Direct Placements. The primary objective of this Statement is to improve the information
that is disclosed in notes to government financial statements related to debt, including direct borrowings
and direct placements. It clarifies which liabilities governments should include when disclosing information
related to debt. It also defines debt for purposes of disclosure in notes to financial statements as a liability
that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of cash) in
one or more payments to settle an amount that is fixed at the date the contractual obligation is established.
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 June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of
a Construction Period. The objectives of this Statement are (1)to enhance the relevance and comparability
of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify
accounting for interest cost incurred before the end of a construction period. This Statement establishes
accounting requirements for interest cost incurred before the end of a construction period. 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.
(Continued)
72.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 13—UPCOMING GASB PRONOUCEMENTS (Continued)
In August 2018, the GASB issued Statement No. 90, Majority Equity Interests—an amendment of GASB
Statements No. 14 and No. 61. The primary objectives of this Statement are to improve the consistency
and comparability of reporting a government's majority equity interest in a legally separate organization and
to improve the relevance of financial statement information for certain component units. It defines a majority
equity interest and specifies that a majority equity interest in a legally separate organization should be
reported as an investment if a government's holding of the equity interest meets the definition of an
investment. This Statement also requires that a component unit in which a government has a 100 percent
equity interest account for its assets, deferred outflows of resources, liabilities, and deferred inflows of
resources at acquisition value at the date the government acquired a 100 percent equity interest in the
component unit. 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 May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations. The primary objectives of this
Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate
diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated
with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives
by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is
not a liability of the issuer; establishing standards for accounting and financial reporting of additional
commitments and voluntary commitments extended by issuers and arrangements associated with conduit
debt obligations; and improving required note disclosures. This Statement is effective for the City's fiscal
year ended June 30, 2022. Management has not determined what impact, if any, this statement will have
on its financial statements.
NOTE 14—CHANGE IN ACCOUNTING PRINCIPLE
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. A specific change
to the City's financial statements relates to the recognition of the City's OPEB liabilities and related Deferred
Inflows of Resources and Deferred Outflows of Resources with a net value of $1,261,002 that was not
previously reported on the financial statements, while the previously reported Net OPEB Asset of
$10,344,876 has been removed from the financial statements. Due to the requirements of GASB 75, the
new amounts are now required to be included on the City's financial statement and thus were added to the
financial statements as an adjustment to net position.A reconciliation for net position from the 2017 financial
statements to beginning net position as reported on the 2018 financial statements is as follows.
(Continued)
73.
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2018
NOTE 14—CHANGE IN ACCOUNTING PRINCIPLE (Continued)
Governmental
Activities- Total
Governmental Internal Service Governmental
Activities Funds Activities
Previously reported net position as of June 30,2017 $ 232,547,888 $ 15,068,647 $ 247,616,535
Net position restatements from OPEB Plan:
Removal of net OPEB Asset previously reported - (10,344,876) (10,344,876)
Addition of net OPEB liability beginning of year (1,109,444) (71,275) (1,180,719)
Total net position restatements (1,109,444) (10,416,151) (11,525,595)
Net position as of July 1,2017 as restated $ 231,438,444 $ 4,652,496 $ 236,090,940
Total
Nonmajor Business
Resources Recreation Enterprise Type
Recovery Programs Funds Activities
Previously reported net position as of June 30,2017 $ 5,341,647 $ 3,067,418 $ 2,642,392 $ 11,051,457
Net position restatements from OPEB Plan:
Addition of net OPEB liability beginning of year (33,030) (22,565) (24,688) (80,283)
Net position as of July 1,2017 as restated $ 5,308,617 $ 3,044,853 $ 2,617,704 $ 10,971,174
74.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
CITY OF CUPERTINO,CA
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS
For the year ended June 30,2018
Agent Multiple Employer Defined Benefit Retirement Plan-Miscellaneous Plan
Last 10 years"
Measurement Date 6/30/2014 6/30/2015 6/30/2016 6/30/2017
Total Pension Liability
Service Cost $ 2,504,228 $ 2,444,939 $ 2,525,314 $ 2,895,549
Interest 7,349,943 7,789,134 8,253,983 8,619,588
Changes of benefit terms - - - -
Differences between expected and actual experience 372,917 696,347 (182,397)
Changes in assumptions (1,883,633) - 7,125,558
Benefit payments,including refunds of employee contributions (4,351,614) (4,637,005) (5,151,298) (5,346,890)
Net change in total pension liability 5,502,557 4,086,352 6,324,346 13,111,408
Total pension liability-beginning 98,922,931 104,425,488 108,511,840 114,836,186
Total pension liability-ending(a) $104,425,488 $108,511,840 $114,836,186 $127,947,594
Plan fiduciary net position
Contributions-employer $ 2,891,986 $ 3,301,642 $ 3,659,170 $ 4,183,822
Contributions-employee 1,061,884 1,149,894 1,169,921 1,236,052
Net investment income 11,379,985 1,724,204 466,704 8,749,288
Benefit payments,including refunds of employee contributions (4,351,614) (4,637,005) (5,151,298) (5,346,890)
Administrative expense - (87,780) (47,536) (115,304)
Net change in plan fiduciary net position 10,982,241 1,450,955 96,961 8,706,968
Plan fiduciary net position-beginning 65,566,067 76,548,308 77,999,263 78,096,224
Plan fiduciary net position-ending(b) $ 76,548,308 $ 77,999,263 $ 78,096,224 $ 86,803,192
Net pension liability-ending(a)-(b) $ 27,877,180 $ 30,512,577 $ 36,739,962 $ 41,144,402
Plan fiduciary net position as a percentage of the total pension liability 73.30% 71.88% 68.01% 67.84%
Covered payroll $ 13,080,327 $ 13,504,966 $ 14,336,969 $ 15,595,136
Net pension liability as percentage of covered payroll 213.12% 225.94% 256.26% 263.83%
Notes to Schedule:
Benefit changes.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).
Changes in assumptions.In 2017,the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016,there were no
changes.In 2015,amounts reported reflect an adjustment of the discount rate from 7.5 percent(net of administrative expense)to 7.65
percent(without a reduction for pension plan administrative expense.) In 2014,amounts reported were based on the 7.5 percent discount
rate.
-Fiscal year 2015 was the 1 st year of implementation,therefore only four years are shown.
Source:CalPERS Accounting Valuation
75.
CITY OF CUPERTINO,CA
SCHEDULE OF CONTRIBUTIONS-PENSION
For the year ended June 30,2018
Agent Multiple Employer Defined Benefit Retirement Plan-Miscellaneous Plan
Last 10 years*
2015 2016 2017 2018
Actuarially determined contribution $ 3,608,853 $ 3,659,170 $ 4,183,821 $ 4,807,182
Contributions in relation to the actuarially determined contributions (3,608,853) (3,659,170) (4,183,821) (4,807,182)
Contribution deficiency(excess) $ - $ - $ - $ -
Covered payroll $ 13,504,966 $ 14,336,969 $ 15,595,136 $ 15,140,909
Contributions as a percentage of covered payroll 26.72% 25.52% 26.83% 31.75%
Notes to Schedule
Valuation date: 6/30/2013 6/30/2014 6/30/2015 6/30/2016
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry age
Amortization method Level percentage of payroll,closed
Remaining amortization period 19 Years as of the Valuation Date
Asset valuation method 15 Year Smoothed Market
Inflation 2.75%
Salary increases 3%
Investment rate of return 7.50%Net of Pension Plan
Retirement age The probabilities of Retirement are based on the 2014 CaIPERS
Experience Study for the period from 1997 to 2011.
Mortality The probabilities of mortality are based on the 2014 CaIPERS
Experience Study for the period from 1997 to 2011. 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 four years are shown.
Source:City of Cupertino's general ledger and CaIPERS Actuarial Valuation
Notes to Schedule:
Benefit changes.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).
Changes in assumptions.In 2017,the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016,there were no
changes.In 2015,amounts reported reflect an adjustment of the discount rate from 7.5 percent(net of administrative expense)to 7.65
percent(without a reduction for pension plan administrative expense.) In 2014,amounts reported were based on the 7.5 percent discount
rate.
*-Fiscal year 2015 was the 1 st year of implementation,therefore only three years are shown.
Source:CaIPERS Accounting Valuation
76.
CITY OF CUPERTINO, CA
SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS
For the year ended June 30, 2018
Single Employer Defined Benefit OPEB Plan
Last 10 years*
Expressed in thousands
6/30/2017 6/30/2018
Total OPEB liability
Service cost $ 908 $ 1,008
Interest 1,781 1,876
Changes of benefit terms - -
Differences between expected and actual experience - -
Changes of assumptions - -
Benefit payments (1,333) (1,419)
Net change in total OPEB liability 1,356 1,465
Total OPEB liability - beginning 25,650 27,006
Total OPEB liability -ending (a) $ 27,006 $ 28,471
Plan fiduciary net position
Contributions-employer 1,333 1,419
Net investment income 2,960 2,365
Benefit payments (1,333) (1,419)
Administrative expense (49) (54)
Net change in fiduciary net position 2,911 2,311
Plan fiduciary net position - beginning 22,834 25,745
Plan fiduciary net position -ending (b) $ 25,745 $ 28,056
Net OPEB liability-ending (a-b) $ 1,261 $ 415
Plan fiduciary net position as a percentage of the total OPEB liability 95.33% 98.54%
Covered payroll $ 17,255 $ 19,153
Net OPEB liability as a percentage of covered payroll 7.31% 2.17%
Notes to schedule:
*- Fiscal year 2017 was the 1 st year of implementation, therefore only two years are shown.
77.
CITY OF CUPERTINO, CA
SCHEDULE OF CONTRIBUTIONS - OPEB
For the year ended June 30, 2018
Single Employer Defined Benefit OPEB Plan
Last 10 years*
Expressed in thousands
6/30/2017 6/30/2018
Actuarially determined contribution $ 1,117 $ 1,362
Contributions in relation to the actuarially determined contributions 1,333 1,419
Contribution deficiency (excess) $ (216) $ (57)
Covered payroll $ 17,255 $ 19,153
Contributions as a percentage of covered payroll 7.73% 7.41%
Notes to schedule:
*- Fiscal year 2017 was the 1 st year of implementation, therefore only two years are shown.
Valuation Date 1/1/2017
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry age
Amortization method Level percentage of pay, closed
Remaining amortization period 12 years as of the valuation date
Asset valuation method Fair value of assets
Discount rate 7.00%
Amortization growth rate 3.00%
Ultimate rate of medical inflation 4.50%
Salary increases 3.00% plus merit component
based on years of service
Mortality CaIPERS mortality assumptions
78.
CITY OF CUPERTINO, CA
SCHEDULE OF INVESTMENT RETURNS - OPEB
For the year ended June 30, 2018
Single Employer Defined Benefit OPEB Plan
Last 10 years*
6/30/2017 6/30/2018
Annual money-weighted rate of return, net of investment expense 10.74% 8.31%
Notes to schedule:
*- Fiscal year 2017 was the 1 st year of implementation, therefore only two years are 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.
80.
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, 2018
Variance
Final Positive
Budget Actual (Negative)
Revenues
Use of money and property $ - $ 19,037 $ 19,037
Total revenues - 19,037 19,037
Expenditures
Administration $ - $ 23,790 $ (23,790)
Debt service:
Principal 3,167,538 2,180,000 987,538
Interest and fiscal charges - 993,038 (993,038)
Total expenditures 3,167,538 3,196,828 (29,290)
Excess (deficiency) of revenues
over expenditures (3,167,538) (3,177,791) (10,253)
Other financing sources (uses)
Transfers in 3,167,538 3,167,544 6
Total other financing sources (uses) 3,167,538 3,167,544 6
Net change in fund balance $ - (10,247) $ (10,247)
Beginning fund balance 1,597,234
Ending fund balance $ 1,586,987
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 forthe 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.
82.
CITY OF CUPERTINO, CALIFORNIA
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEET
JUNE 30, 2018
Capital Projects
Special Revenue Funds Fund
Total
Storm Environmental Nonmajor
Drain Park Management/ Stevens Creek Governmental
Improvement Dedication Clean Creeks Corridor Park Funds
Assets
Cash and investments $ 1,808,822 $ 9,859,784 $ 240,992 $ 154,612 $ 12,064,210
Accounts receivable - - 6,422 71,981 78,403
Total assets $ 1,808,822 $ 9,859,784 $ 247,414 $ 226,593 $ 12,142,613
Liabilities
Accounts payable and accruals $ - $ - $ 7,885 $ - $ 7,885
Total liabilities - - 7,885 - 7,885
Fund balances
Restricted 1,808,822 9,859,784 239,529 - 11,908,135
Assigned - - - 226,593 226,593
Total fund balances 1,808,822 9,859,784 239,529 226,593 12,134,728
Total liabilities and
fund balances $ 1,808,822 $ 9,859,784 $ 247,414 $ 226,593 $ 12,142,613
83.
CITY OF CUPERTINO, CALIFORNIA
NONMAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2018
Capital Projects
Special Revenue Funds Fund
Total
Storm Environmental Nonmajor
Drain Park Management/ Stevens Creek Governmental
Improvement Dedication Clean Creeks Corridor Park Funds
Revenues
Taxes $ 74,718 $ 363,750 $ - $ - $ 438,468
Use of money and property 29,002 63,242 988 - 93,232
Charges for services - 20,431 369,443 71,981 461,855
Fines and forfeitures - - 27,902 - 27,902
Other revenue 39,490 - - - 39,490
Total revenues 143,210 447,423 398,333 71,981 1,060,947
Expenditures
Current:
Public works 10,798 - 640,160 808 651,766
Capital outlay 1,447,798 187 - 81,394 1,529,379
Total expenditures 1,458,596 187 640,160 82,202 2,181,145
Excess of revenues over
(under)expenditures (1,315,386) 447,236 (241,827) (10,221) (1,120,198)
Other finances sources(uses)
Transfers in 1,700,004 - 84,120 - 1,784,124
Transfers out (1,678,255) - - - (1,678,255)
Total other financing
sources (uses) 21,749 - 84,120 - 105,869
Net change in fund balances (1,293,637) 447,236 (157,707) (10,221) (1,014,329)
Beginning fund balances 3,102,459 9,412,548 397,236 236,814 13,149,057
Ending fund balances $ 1,808,822 $ 9,859,784 $ 239,529 $ 226,593 $ 12,134,728
84.
CITY OF CUPERTINO,CALIFORNIA
NONMAJOR GOVERNMENTAL FUNDS
COMBINING SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30,2018
Special Revenue Funds
Storm Drain Improvement Park Dedication Environmental Management/Clean Creeks
Variance Variance Variance
Original Final Positive Original Final Positive Original Final Positive
Budget Budget Actual (Negative) Budget Budget Actual (Negative Budget Budget Actual (Negative
Revenues
Taxes $ 100,000 $ 100,000 $ 74,718 $ (25,282) $ 250,000 $ 250,000 $ 363,750 $ 113,750 $ $ $ - $
Use of money and property - - 29,002 29,002 - - 63,242 63,242 988 988
Charges for services - - 20,431 20,431 380,000 380,000 369,443 (10,557)
Fines for forfeitures - - - - 6,000 6,000 27,902 21,902
Other revenue 39,490 39,490
Total revenues 100,000 100,000 143,210 43,210 250,000 250,000 447,423 197,423 386,000 386,000 398,333 12,333
Expenditures
Current:
Public works - - 10,798 (10,798) - - - - 761,720 711,793 640,160 71,633
Capital outlay 1,500,000 3,459,680 1,447,798 2,011,882 189 187 2
Total expenditures 1,500,000 3,459,680 1,458,596 2,001,084 189 187 2 761,720 711,793 640,160 71,633
Excess(deficiency)of revenues
over expenditures (1,400,000) (3,359,680) (1,315,386) 2,044,294 250,000 249,811 447,236 197,425 (375,720) (325,793) (241,827) 83,966
Other financing sources(uses)
Transfers in 1,700,000 1,700,000 1,700,004 (4) - - - - 84,122 84,122 84,120 (2)
Transfers(out) (1,678,255) 1,678,255
Total other financing sources(uses) 1,700,000 1,700,000 21,749 1,678,251 84,122 84,122 84,120 (2)
Net change in fund balance $ 300,000 $(1,659,680) (1,293,637) $ 3,722,545 $ 250,000 $ 249,811 447,236 $ 197,425 $ (291,598) $ (241,671) (157,707) $ 83,964
Beginning fund balance 3,102,459 9,412,548 397,236
Ending fund balance $ 1,808,822 $ 9,859,784 $ 239,529
85.
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 2017-18.
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.
86.
CITY OF CUPERTINO, CALIFORNIA
NONMAJOR ENTERPRISE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30,2018
Cupertino
Blackberry Sports
Farm Center Totals
ASSETS
Current assets
Cash and cash investments(Note 2) $ 478,411 $ 1,797,497 $ 2,275,908
Total current assets 478,411 1,797,497 2,275,908
Noncurrent assets
Capital assets(Note 5):
Depreciable, net of
accumulated depreciation 50,445 439,007 489,452
Total non current assets 50,445 439,007 489,452
Total assets 528,856 2,236,504 2,765,360
DEFERRED OUTFLOWS OF RESOURCES
Related to pension (Note 10) 64,251 140,469 204,720
Total deferred outflows of resources 64,251 140,469 204,720
LIABILITIES
Current liabilities
Accounts payable and accruals 51,841 218,567 270,408
Compensated absences(Note 1) 9,056 5,982 15,038
Unearned revenue - 150,334 150,334
Total current liabilities 60,897 374,883 435,780
Noncurrent liabilities
Compensated absences(Note 1) 42,520 28,091 70,611
Net pension liability(Note 10) 251,083 545,577 796,660
Net OPEB liability(Note 11) 1,536 6,588 8,124
Total noncurrent liabilities 295,139 580,256 875,395
Total liabilities 356,036 955,139 1,311,175
DEFERRED INFLOWS OF RESOURCES
Related to pension (Note 10) 2,682 4,983 7,665
Related to OPEB(Note 11) 4,701 20,144 24,845
Total deferred inflows of resources 7,383 25,127 32,510
NET POSITION (Note 7)
Net investment in capital assets 50,445 439,007 489,452
Unrestricted 179,243 957,700 1,136,943
Total Net Position $ 229,688 $ 1,396,707 $ 1,626,395
87.
CITY OF CUPERTINO, CALIFORNIA
NONMAJOR ENTERPRISE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE YEAR ENDED JUNE 30, 2018
Cupertino
Blackberry Sports
Farm Center Totals
Operating revenues
Charges for services $ 314,757 $ 2,402,492 $ 2,717,249
Other 30,910 1,173 32,083
Total operating revenue 345,667 2,403,665 2,749,332
Operating expenses
Salaries and benefits 186,917 530,470 717,387
Materials and supplies 181,866 394,482 576,348
Contractual services 258,776 1,651,548 1,910,324
Depreciation (Note 5) 28,553 57,248 85,801
Total operating expenses 656,112 2,633,748 3,289,860
Operating income (loss) (310,445) (230,083) (540,528)
Nonoperating revenues
Investment income 7,248 11,975 19,223
Total nonoperating revenues 7,248 11,975 19,223
Income (loss) before transfers (303,197) (218,108) (521,305)
Transfers in (Note 4) 300,000 99,996 399,996
Transfers out (Note 4) (400,000) (470,000) (870,000)
Changes in net position (403,197) (588,112) (991,309)
Net position - beginning of year
as restated (Note 14) 632,885 1,984,819 2,617,704
Net position -end of year $ 229,688 $ 1,396,707 $ 1,626,395
88.
CITY OF CUPERTINO, CALIFORNIA
NONMAJOR ENTERPRISE FUNDS
COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2018
Cupertino
Blackberry Sports
Farm Center Totals
Cash flows from operating activities
Cash received from customers $ 345,667 $ 2,439,198 $ 2,784,865
Cash payments to suppliers for
goods and services (401,669) (2,011,802) (2,413,471)
Cash payments to employees for salaries and benefits (173,156) (478,238) (651,394)
Net cash provided (used) by operating activities (229,158) (50,842) (280,000)
Cash flows from noncapital financing activities
Transfers in 300,000 99,996 399,996
Transfers (out) (400,000) (470,000) (870,000)
Cash flows from noncapital financing activities (100,000) (370,004) (470,004)
Cash flows from capital and related financing activities
Acquisition of capital assets (18,998) - (18,998)
Cash flows from capital and related financing activities (18,998) - (18,998)
Cash Flows from Investing Activities
Interest received 7,248 11,975 19,223
Cash flows from investing activities 7,248 11,975 19,223
Net cash flows (340,908) (408,871) (749,779)
Cash and investments at beginning of year 819,319 2,206,368 3,025,687
Cash and investments at end of year $ 478,411 $ 1,797,497 $ 2,275,908
Reconciliation of operating income (loss)to
to net cash provided by operating activities:
Operating income (loss) $ (310,445) $ (230,083) $ (540,528)
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation 28,553 57,248 85,801
Change in assets, deferred outflows of resources, liabilities,
and deferred inflows of resources
Due to retirement system 10,524 26,577 37,101
Due to OPEB system 1,566 6,715 8,281
Accounts payable and accruals 38,973 34,228 73,201
Unearned revenue - 35,533 35,533
Compensated absences 1,671 18,940 20,611
Net cash provided (used) by operating activities $ (229,158) $ (50,842) $ (280,000)
89.
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.
90.
CITY OF CUPERTINO,CALIFORNIA
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30,2018
Compensated
Absences and
Information Workers' Equipment Long-Term Retiree
Technoloav Compensation Revolving Disabili Medical Total
ASSETS
Current assets:
Cash and investments $ 3,175,682 $ 3,331,026 $ $ 386,351 $ $ 6,893,059
Total current assets 3,175,682 3,331,026 386,351 6,893,059
Noncurrent assets:
Capital assets,depreciable net
of accumulated depreciation 693,446 2,846,256 3,539,702
Total noncurrent assets 693,446 2,846,256 3,539,702
Total assets 3,869,128 3,331,026 2,846,256 386,351 10,432,761
DEFERRED OUTFLOWS OF RESOURCES
Related to pension(Note 10) 474,142 15,028 141,171 630,341
Total deferred outflows of resources 474,142 15,028 141,171 630,341
LIABILITIES
Current liabilities
Accounts payable and accruals 141,850 13 24,204 166,067
Accrued payroll and benefits - - 72 72
Due to other funds - - 250,995 25,279 276,274
Compensated absences 17,582 814 2,695 - 21,091
Claims payable 262,157 262,157
Total current liabilities 159,432 262,984 277,966 25,279 725,661
Noncurrent liabilities
Compensated absences 117,557 5,443 18,022 - 141,022
Claims payable - 1,107,008 - 1,107,008
Net pension liability(Note 10) 1,834,299 58,134 544,402 2,436,835
Net OPEB liability(Note 11) 16,287 382 6,788 23,457
Total noncurrent liabilities 1,968,143 1,170,967 569,212 3,708,322
Total liabilities 2,127,575 1,433,951 847,178 25,279 4,433,983
DEFERRED INFLOWS OF RESOURCES
Related to pension(Note 10) 14,919 471 3,986 - 19,376
Related to OPEB(Note 11) 49,803 1,165 20,757 71,725
Total deferred inflows of resources 64,722 1,636 24,743 91,101
NET POSITION
Net investment in capital assets 693,446 - 2,846,256 - - 3,539,702
Unrestricted 1,457,527 1,910,467 (730,750) 386,351 (25,279) 2,998,316
Total net position $ 2,150,973 $ 1,910,467 $ 2,115,506 $ 386,351 $ (25,279) $ 6,538,018
91.
CITY OF CUPERTINO, CALIFORNIA
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE YEAR ENDED JUNE 30, 2018
Compensated
Absences and
Information Workers' Equipment Long-Term Retiree
Technologv Compensation Revolving Disability Medical Total
Operating revenues
Charges for services $ 2,356,724 $ 921,238 $ 1,211,860 $ 154,976 $ - $ 4,644,798
Other 903 - 7,124 - - 8,027
Total operating revenues 2,357,627 921,238 1,218,984 154,976 - 4,652,825
Operating expenses
Salaries and related expenses 1,154,505 41,849 417,033 - 1,059,248 2,672,635
Materials and supplies 1,400,908 13,442 379,278 3,629 5,525 1,802,782
Contractual services 211,041 43 82,489 - - 293,573
Insurance claims and premiums - 300,495 - 427,313 - 727,808
Depreciation 164,681 - 635,094 - - 799,775
Total operating expenses 2,931,135 355,829 1,513,894 430,942 1,064,773 6,296,573
Operating income(loss) (573,508) 565,409 (294,910) (275,966) (1,064,773) (1,643,748)
Nonoperating revenue(expenses)
Interest income 19,524 20,277 - 1,808 234 41,843
Gain on sale of capital assets - - 59,715 - - 59,715
Total nonoperating
revenue (expenses) 19,524 20,277 59,715 1,808 234 101,558
Income (loss)before transfers (553,984) 585,686 (235,195) (274,158) (1,064,539) (1,542,190)
Transfers in 549,707 - - 509,520 2,368,485 3,427,712
Change in net position (4,277) 585,686 (235,195) 235,362 1,303,946 1,885,522
Beginning net position as restated (Note 14) 2,155,250 1,324,781 2,350,701 150,989 (1,329,225) 4,652,496
Ending net position $ 2,150,973 $ 1,910,467 $ 2,115,506 $ 386,351 $ (25,279) $ 6,538,018
92.
CITY OF CUPERTINO,CALIFORNIA
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,2018
Compensated
Absences and
Information Workers' Equipment Long-Term Retiree
Technology Compensation Revolving Disabili Medical Total
Cash flows from operating activities
Cash received from customers $ 2,357,627 $ 921,238 $ 1,218,984 $ 154,976 $ - $ 4,652,825
Cash payments to suppliers for
goods and services (1,540,606) (15,681) (473,292) (3,629) (5,525) (2,038,733)
Cash payments to employees (1,022,401) (34,795) (377,614) - (1,059,248) (2,494,058)
Cash payment for judgment
and claims (613,981) (427,313) (1,041,294)
Net cash from operating activities (205,380) 256,781 368,078 (275,966) (1,064,773) (921,260)
Cash flows from noncapital
financing activities
Transfers in 549,707 250,995 509,520 993,764 2,303,986
Net cash from noncapital
financing activities 549,707 250,995 509,520 993,764 2,303,986
Cash flows from capital and related
financing activities
Acquisition of capital assets (471,763) (1,148,466) - - (1,620,229)
Sale of capital assets 59,715 59,715
Net cash from capital and related
financing activities (471,763) (1,088,751) (1,560,514)
Cash flows from investing activities
Interest received 19,524 20,277 1,808 234 41,843
Net cash flows from
investing activities 19,524 20,277 1,808 234 41,843
Net cash flows (107,912) 277,058 (469,678) 235,362 (70,775) (135,945)
Cash and investments beginning of year 3,283,594 3,053,968 469,678 150,989 70,775 7,029,004
Cash and investments end of year $ 3,175,682 $ 3,331,026 $ $ 386,351 $ $ 6,893,059
Reconciliation of operating income(loss)
to net cash flows from operating activities
Operating income(loss) $ (573,508) $ 565,409 $ (294,910) $ (275,966) $ (1,064,773) $ (1,643,748)
Adjustments to reconcile operating
income(loss)to net cash flows
from operating activities
Depreciation 164,681 - 635,094 799,775
Change in assets,deferred outflows of resources,
liabilities and deferred inflows of resources
Due to retirement system 97,426 3,097 30,861 131,384
Due to OPEB system 16,601 388 6,918 23,907
Accounts payable and accruals 71,343 (2,196) (11,525) 57,622
Compensated absences 18,077 3,569 1,640 23,286
Claims payable (313,486) (313,486)
Cash flows from operating activities $ (205,380) $ 256,781 $ 368,078 $ (275,966) $ (1,064,773) $ (921,260)
93.
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. 2018 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.
CITY OF CUPERTINO
Net Positions/Assets by Component
Last Ten Fiscal Years
(Accrual basis of accounting)
(Unaudited)
Fiscal Year Ended June 30
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Governmental Activities
Net investment in capital assets $ 103,341,905 $ 120,405,290 $ 120,724,205 $ 117,440,257 $ 116,343,918 $ 122,081,223 $ 131,425,677 $ 148,168,074 $ 153,239,534 $ 167,606,366
Restricted 6,661,074 8,692,175 7,721,962 7,572,865 8,351,118 24,232,367 38,327,705 34,861,807 34,991,692 32,073,195
Unrestricted 33,290,050 31,087,861 33,185,903 38,117,361 47,558,701 63,150,548 51,003,950 51,164,063 59,385,309 50,457,871
Total governmental activities net position/assets 143,293,029 160,185,326 161,632,070 163,130,483 172,253,737 209,464,138 220,757,332 234,193,944 247,616,535 250,137,432
Business-Type Activities
Net investment in capital assets 136,127 788,213 777,521 824,687 762,013 1,110,414 2,079,561 1,708,183 1,972,169 1,597,700
Unrestricted 8,949,142 9,063,616 9,779,087 10,057,331 10,865,479 10,292,210 6,604,578 7,375,444 9,092,584 8,051,015
Total business-type activities net position/assets 9,085,269 9,851,829 10,556,608 10,882,018 11,627,492 11,402,624 8,684,139 9,083,627 11,064,753 9,648,715
Primary Government
Net investment in capital assets 103,478,032 121,193,503 121,501,726 118,264,944 117,105,931 123,191,637 133,505,238 149,876,257 155,211,703 169,204,066
Restricted 6,661,074 8,692,175 7,721,962 7,572,865 8,351,118 24,232,367 38,327,705 34,861,807 34,991,692 32,073,195
Unrestricted 42,239,192 40,151,477 42,964,990 48,174,692 58,424,180 73,442,758 57,608,528 58,539,507 68,477,893 58,508,886
(1),(2) $ 152,378,298 $ 170,037,155 $ 172,188,678 $ 174,012,501 $ 183,881,229 $ 220,866,762 $ 229,441,471 $ 243,277,571 $ 258,681,288 $ 259,786,147
(1)Represents net assets thru June 30,2012 and net position after that.
(2)Noted that restatements due to prior period adjustments and changes in accounting principles are not reflected in the prior year balances.
95.
CITY OF CUPERTINO
Change in Net Positions/Assets
Last Ten Fiscal Years
(Accrual basis of accounting)
(Unaudited)
Fiscal Year Ended June 30
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Expenses
Governmental Activities:
Administration $ 1,769,500 $ 1,911,665 $ 1,860,451 $ 1,837,072 $ 2,367,255 $ 4,529,539 $ 3,286,919 $ 3,710,388 $ 2,873,744 $ 5,612,733
Law enforcement 8,804,195 8,385,476 8,434,885 8,776,633 9,274,536 10,062,192 10,705,328 11,316,271 12,528,328 12,674,042
Public and environmental affairs 1,624,210 1,653,034 1,625,876 1,743,151 1,595,982 512,895 649,442 575,260 1,884,165 3,244,846
Administrative services 4,001,738 4,080,134 3,993,654 4,309,503 4,171,440 2,662,008 4,300,336 2,994,611 5,898,479 4,415,647
Recreation services 4,206,343 4,444,536 4,528,968 4,577,243 4,473,861 4,866,974 5,365,282 5,758,194 10,651,557 9,352,551
Community development 6,177,879 4,351,975 5,961,774 4,922,237 4,676,273 9,108,949 5,976,797 6,259,734 13,775,591 16,789,351
Public works 18,104,649 19,320,151 20,224,662 20,387,508 22,149,063 21,143,331 27,893,361 31,313,396 32,491,244 28,995,382
Interest on long-term debt 2,118,714 2,076,264 2,032,464 1,837,655 1,256,922 1,130,428 1,120,138 1,077,538 1,035,738 993,038
Total governmental activities expense 46,807,228 46,223,235 48,662,734 48,391,002 49,965,332 54,016,316 59,297,603 63,005,392 81,138,846 82,077,590
Business-Type Activities:
Resources recovery 1,998,184 2,018,147 1,801,599 1,566,229 1,764,993 2,159,047 2,548,461 2,997,200 2,991,177 2,594,511
Blackberry farm 495,845 457,169 457,065 460,698 463,336 571,000 547,185 576,177 597,406 656,112
Cupertino sports center 1,594,325 1,478,143 1,716,741 1,897,611 2,011,483 2,221,703 2,269,420 2,299,210 2,159,243 2,633,748
Recreation programs 1,739,892 1,854,648 1,753,156 1,985,618 2,025,416 2,730,765 2,342,457 3,136,011 2,351,501 3,232,593
Total business-type activities expense 5,828,246 5,808,107 5,728,561 5,910,156 6,265,228 7,682,515 7,707,523 9,008,598 8,099,327 9,116,964
Total primary government expense 52,635,474 52,031,342 54,391,295 54,301,158 56,230,560 61,698,831 67,005,126 72,013,990 89,238,173 91,194,554
Program Revenues
Governmental Activities:
Charges for services:
Administration 2,240 21,873 15,801 6,454 5,676 1,087,393 322,534 369,069 3,992,716 5,062,988
Law enforcement 869,295 811,676 797,757 696,498 637,595 725,631 590,378 664,483 603,194 732,544
Public and environmental affairs - - - - - - 41,352 41,352 - -
Administrative services - - - - - - 481,616 359,148 3,565,627 2,635,885
Recreation services 801,280 930,773 1,020,159 1,166,323 970,292 955,081 1,798,134 1,421,185 2,016,159 1,589,134
Community development 3,586,993 3,310,355 4,149,620 4,919,216 6,765,564 6,649,292 8,511,745 10,534,457 10,902,822 8,598,935
Public works 157,311 556,636 549,065 503,225 593,501 7,916,897 2,869,357 6,358,870 6,873,487 4,720,646
Operating grants and contributions 4,014,036 2,042,557 2,351,287 2,508,917 2,752,493 10,000,131 6,002,617 1,851,282 2,313,632 4,819,696
Capital grants and contributions 4,759,485 5,511,359 1,972,951 780,761 719,880 569,159 4,022,190 362,491 245,288 271,587
Total governmental activities program revenue 14,190,640 13,185,229 10,856,640 10,581,394 12,445,001 27,903,584 24,639,923 21,962,337 30,512,925 28,431,415
Business-Type Activities:
Charges for services:
Resources recovery 2,100,704 2,104,299 1,931,076 1,727,783 1,882,517 2,074,251 2,591,276 2,664,888 2,792,190 2,559,862
Blackberry farm 596,944 568,770 447,797 411,056 386,753 302,472 388,091 334,529 325,224 345,667
Cupertino sports center 1,732,282 1,578,330 1,722,700 1,965,684 2,150,139 2,188,127 2,152,498 2,224,146 2,238,023 2,403,665
Recreation programs 2,364,037 2,249,191 2,260,296 2,325,705 2,409,720 2,480,209 2,532,800 2,466,336 2,778,588 2,516,678
Operating grants and contributions 14,471 6,895 -
Total business-type activities program revenue 6,808,438 6,507,485 6,361,869 6,430,228 6,829,129 7,045,059 7,664,665 7,689,899 8,134,025 7,825,872
Total primary government program revenue 20,999,078 19,692,714 17,218,509 17,011,622 19,274,130 34,948,643 32,304,588 29,652,236 38,646,950 36,257,287
(continued)
96.
CITY OF CUPERTINO
Change in Net Positions/Assets
Last Ten Fiscal Years
(Accrual basis of accounting)
(Unaudited)
Fiscal Year Ended June 30
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Net(Expense)Revenue:
Governmental activities $ (32,616,588) $ (33,038,006) $ (37,806,094) $ (37,809,608) $ (37,520,331) $ (26,112,732) $ (34,657,680) $ (41,043,055) $ (50,625,921) $ (53,646,175)
Business-Type activities 980,192 699,378 633,308 520,072 563,901 (637,456) (42,858) (1,318,699) 34,698 (1,291,092)
Total primary government net expense (31,636,396) (32,338,628) (37,172,786) (37,289,536) (36,956,430) (26,750,188) (34,700,538) (42,361,754) (50,591,223) (54,937,267)
General Revenues and Transfers
Governmental Activities:
Taxes:
Property taxes 7,491,965 7,488,701 7,296,970 7,479,132 8,793,110 9,169,183 11,864,027 13,251,840 14,881,533
Property taxes in lieu of motor vehicle fee 4,299,902 4,420,912 4,404,795 4,487,412 4,772,355 5,289,476 6,330,436 6,967,237 7,552,272
Incremental property tax 1,211,128 1,322,925 1,251,777 202,793 - - - - -
Sales tax 14,139,190 9,930,530 14,539,243 17,326 18,721,193 19,794,036 21,350,056 26,932,012 26,164,531
Transient occupancy tax 2,140,274 2,142,137 2,536,501 3,112,934 3,768,504 4,590,156 5,852,244 6,023,681 6,810,718
Utility user tax 3,205,073 3,271,452 3,227,942 3,264,896 2,994,526 3,098,639 3,370,830 3,082,407 3,146,398
Franchise tax 2,618,125 2,597,930 2,841,344 2,808,136 2,848,950 2,775,892 3,478,024 3,409,572 3,563,820
Othertaxes 1,317,767 1,211,899 1,491,316 1,377,211 4,561,219 18,791,559 2,818,019 3,258,118 1,943,652
Intergovernmental(1) 171,621 166,440 259,289 29,064 30,256 25,294 24,111 26,118 31,013
Investment earnings 889,823 295,059 259,217 61,096 176,782 133,243 40,751 807,287 694,730 916,638
Miscellaneous 81,342 119,393 1,144,429 82,684 126,690 57,005 (2) 219,053 2,004,906 1,834,492
Gain on sale of capital assets - - - - - - 23,715,897 580 - 740,570
Extraordinary items(2) (1,130,797) - - - -
Transfers-fund closings(3) - - - - - 272,011 -
Transfers 15 207,000 (150,000) (401,350) 872,340 (1,635,000) (1,874,120) 107,030
Total governmental activities 37,566,210 32,967,378 39,252,838 21,998,887 46,643,585 63,323,133 24,628,986 54,479,667 64,048,512 67,692,667
Business-Type Activities:
Investment earnings 171,804 67,182 71,486 12,338 31,573 11,238 42,531 82,187 59,012 75,663
Transfers (15) (207,000) 150,000 401,350 (872,340) 1,635,000 1,874,120 (107,030)
Total business-type activities 171,804 67,182 71,471 (194,662) 181,573 412,588 (829,809) 1,717,187 1,933,132 (31,367)
Total primary government 37,738,014 33,034,560 39,324,309 21,804,225 46,825,158 63,735,721 23,799,177 56,196,854 65,981,644 67,661,300
Change in Net Position/Assets(4)
Governmental activities 4,949,622 (70,628) 1,446,744 (15,810,721) 9,123,254 37,210,401 (10,028,694) 13,436,612 13,422,591 14,046,492
Business-Type activities 1,151,996 766,560 704,779 325,410 745,474 (224,868) (872,667) 398,488 1,967,830 (1,322,459)
Total primary government $ 6,101,618 $ 695,932 $ 2,151,523 $ (15,485,311) $ 9,868,728 $ 36,985,533 $ (10,901,36l $ 13,835,100 $ 15,390,421 $ 12,724,033
(1)The 2006 state take-away of sales taxes,property taxes and vehicle license fees is reported in this category.
(2)Asset transfer to Successor to Redevelopment Agency fiduciary trust in 2012.
(3)Asset and liability transfer from the closed City Channel/Web Internal Service Fund in 2017.
(4)Representes changes in net assets thru fiscal year ended June 30,2012 and changes in net position after that.
97.
CITY OF CUPERTINO
Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified accrual basis of accounting
(Unaudited)
Fiscal Year Ended June 30
2009 2010
General Fund
Reserved $ 2,325,283 $ 2,308,290
Unreserved 19,871,574 13,622,828
Total General Fund 22,196,857 15,931,118
All Other Governmental Funds
Reserved 4,180,483 5,465,423
Unreserved, reported in:
Special Revenue Funds 3,692,187 5,113,020
Capital Project Funds 968,077 3,788,810
Total All Other Governmental Funds 8,840,747 14,367,253
Total Governmental Funds $ 31,037,604 $ 30,298,371
2011 (1) 2012 2013 2014 2015 2016 2017 2018
General Fund
Nonspendable $ 1,023,950 $ 1,003,438 $ 956,827 $ 3,363,065 $ 938,245 $ 937,381 $ 876,939 $ 464,893
Restricted 663,254 695,564 725,903 - 761,653 888,374 1,016,771 1,254,578
Committed - - - - - - 19,000,000 19,122,754
Assigned 14,739,394 17,729,297 16,400,000 16,400,000 28,849,679 20,500,000 4,638,181 9,963,310
Unassigned 3,380,279 6,669,379 17,961,579 23,197,378 8,774,966 29,869,085 28,057,799 21,704,922
Total General Fund 19,806,877 26,097,678 36,044,309 42,960,443 39,324,543 52,194,840 53,589,690 52,510,457
All Other Governmental Funds
Nonspendable 615,000 - - - - - - -
Restricted 6,314,106 6,877,301 7,625,215 24,232,367 37,566,052 33,973,433 33,974,921 30,818,617
Committed - - - - 1,398,665 1,398,665 1,398,665 -
Assigned 4,303,822 3,646,073 5,299,904 7,619,534 20,671,116 15,344,191 25,305,974 29,129,616
Unassigned - - - (2,280,961) - - - -
Total All Other Governmental Funds 11,232,928 10,523,374 12,925,119 29,570,940 59,635,833 50,716,289 60,679,560 59,948,233
Total Governmental Funds $ 31,039,805 $ 36,621,052 $ 48,969,428 $ 72,531,383 $ 98,960,376 $ 102,911,129 $ 114,269,250 $ 112,458,690
(1)The City implemented GASB Statement No.54 under which governmental fund balances are reported as nonspendable, restricted,committed,
assigned and unassigned compared to reserved and unreserved
98.
CITY OF CUPERTINO
Change in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Unaudited)
Fiscal Year Ended June 30
2009 2010 2011 2012 2013 2014 2015 2016 2017 2017
Revenues
Taxes $ 36,395,950 $ 30,994,583 $ 37,582,299 $ 40,265,944 $ 48,382,570 $ 72,211,724 $ 55,134,238 $ 55,462,956 $ 62,924,867 $ 64,062,924
Use of money and property 1,300,508 774,219 792,035 661,602 744,196 764,299 915,933 1,654,702 1,425,629 1,543,818
Intergovernmental 6,896,394 7,539,835 3,543,641 2,678,888 2,841,407 3,069,400 7,210,562 2,532,025 2,585,038 5,122,296
Licenses and permits 2,740,463 2,583,131 2,901,944 2,900,936 3,502,617 3,679,943 3,170,445 3,073,110 2,536,925 2,757,928
Charges for services 1,707,533 1,701,157 2,311,216 3,273,946 4,515,066 10,744,113 5,203,371 17,249,123 24,103,167 15,638,247
Fines and forfeitures 761,320 736,239 695,666 661,899 560,417 616,889 554,002 564,903 603,194 602,934
Other 80,835 689,941 73,881 264,302 57,828 545,052 542,429 1,289,013 2,004,904 1,834,492
Total revenues 49,883,003 45,019,105 47,900,682 50,707,517 60,604,101 91,631,420 72,730,980 81,825,832 96,183,724 91,562,639
Expenditures:
Current:
Administration 1,336,921 1,469,004 1,528,070 1,533,070 2,005,176 3,957,739 3,897,701 4,053,741 5,942,633 4,943,052
Law enforcement 8,133,168 8,384,310 8,434,885 8,445,917 8,783,885 9,626,121 10,283,772 10,988,735 11,939,095 12,362,621
Public and environmental affairs 1,486,443 1,487,265 1,497,263 1,659,856 1,486,910 477,852 624,295 544,718 1,864,746 2,835,768
Administrative services 3,634,043 3,733,414 3,695,076 4,103,982 3,772,714 2,444,670 3,226,164 2,811,117 5,054,539 4,430,300
Recreation services 3,789,260 4,003,764 4,117,477 4,319,983 4,083,822 4,536,519 5,047,548 5,441,200 9,361,934 8,686,076
Community development 5,841,428 4,125,739 5,693,541 4,762,229 4,395,601 8,424,254 5,180,659 6,102,820 7,431,292 12,907,086
Public works 11,914,584 11,961,218 12,234,726 12,528,194 13,996,516 17,469,627 14,625,038 15,078,174 18,623,585 18,191,714
Capital Outlay 22,262,369 4,710,360 5,281,927 3,523,047 4,684,676 7,110,974 21,760,899 26,171,127 18,731,165 23,395,112
Debt service:
Principal repayment 1,415,000 1,460,000 1,500,000 - 1,920,000 2,040,000 2,055,000 2,090,000 2,135,000 2,180,000
Interest and fiscal charges 2,118,714 2,076,265 2,032,464 1,837,665 1,256,922 1,130,428 1,120,138 1,077,538 1,035,738 993,038
Payment to refunded debt escrow agent - - - 44,897,800 - - - - - -
Total expenditures 61,931,930 43,411,339 46,015,429 87,611,743 46,386,222 57,218,184 67,821,214 74,359,170 82,119,727 90,924,767
Excess(deficiency)of revenues over
(under)expenditures (12,048,927) 1,607,766 1,885,253 (36,904,226) 14,217,879 34,413,236 4,909,766 7,466,662 14,063,997 637,872
Other Financing Sources(Uses)
Bond proceeds - - 44,823,839 - - - - - -
Proceeds from sale of capital assets - - 1,055,449 421 - 37,569 23,814,257 580 - 872,250
Transfers in 5,035,925 7,788,417 5,684,483 6,484,426 8,438,707 13,610,304 39,408,990 11,905,724 26,446,090 31,028,218
Transfers in-fund closing - - - - - - - - 260,374 -
Transfers out (7,758,925) (10,135,417) (7,883,751) (7,692,426) (10,308,210) (24,499,154) (39,177,284) (15,422,213) (29,412,340) (34,348,900)
Total other financing sources(uses) (2,723,000) (2,347,000) (1,143,819) 43,616,260 (1,869,503) (10,851,281) 24,045,963 (3,515,909) (2,705,876) (2,448,432)
Extraordinary Item
Asset transferred to Successor Agencies - - (1,130,797) - - - - - -
Change infund balances $ (14,771,927) $ (739,234) $ 741,434 $ 5,581,237 $ 12,348,376 $ 23,561,955 $ 28,955,729 $ 3,950,753 $ 11,358,121 $ (1,810,560)
Debt service as a percentage of
noncapital expenditures(1) 8.9% 9.1% 8.7% 55.6% 7.6% 6.3% 6.9% 6.6% 5.0% 4.7%
(1)Noncapital expenditures is total expenditures less capital assets added each year to the statement of net position/assets.
99.
CITY OF CUPERTINO
Assessed and Estimated Actual Value of Taxable Property
Last Ten Fiscal Years
(Unaudited)
State Board of Total Assessed& Direct
Total Equalization Secured Est.Full Market Tax
Fiscal Year Secured(a) Unsecured(a) Non-Unitary Exemptions Valuation(a) Rate
2009 $ 12,637,622,059 $ 533,413,208 $ 1,390,000 $ 99,950,894 $ 13,172,425,287 6.26%
2010 12,979,346,158 564,277,611 1,390,000 99,947,559 13,545,013,769 6.51%
2011 13,017,910,372 476,332,025 1,390,000 96,704,811 13,495,632,397 6.51%
2012 13,219,574,367 527,310,319 1,390,000 96,081,912 13,748,274,686 6.24%
2013 13,882,147,291 738,243,050 1,390,000 108,468,872 14,621,780,341 6.20%
2014 15,391,656,690 813,117,019 1,390,000 113,744,809 16,206,163,709 5.62%
2015 16,133,637,244 965,141,148 - 119,476,276 17,098,778,392 5.61%
2016 18,308,720,226 1,086,786,901 - 114,223,063 19,395,507,127 5.59%
2017 20,196,258,418 1,150,311,942 - 118,257,368 21,346,570,360 5.98%
2018 22,024,906,420 1,114,123,426 - 122,805,695 23,139,029,846 6.19%
H $18
c
$16
'm _
$14
$12
$10
$8
$6
$4
$2
$0
rn o N m V Ln n 00
0 0 0 0 0 0 0 0 0 0
N N N rV N N N N N N
o Seriesl a Unsecured Property
(a)Net of exemptions
Source:HdL,Coren&Cone
Data Source: Santa Clara County Assessor 0/-2017/18 Combined Tax Rolls
This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL,Coren&Cone
Prepared On 7/27/2018 by KB
100.
THE CITY OF CUPERTINO
Direct and Overlapping Property Tax Rates
Rate per$100 of taxable value
Last 10 Fiscal Years
Agency 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Basic Levy' 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
Co.Housing Bond 2016 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.01266
County Bond 2008 Hospital Facility 0.00000 0.01220 0.00950 0.00470 0.00510 0.00350 0.00910 0.00880 0.00860 0.00820
County Library Retirement Levy 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240
County Retirement Levy 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880
Cupertino Elementary 0.03060 0.03120 0.03080 0.02900 0.05980 0.05250 0.05400 0.05190 0.05090 0.04960
El Camino Hospital 2003 0.01290 0.01290 0.01290 0.01290 0.01290 0.01290 0.01290 0.01290 0.01290 0.01000
Foothill De Anza College 0.01230 0.03220 0.03260 0.02970 0.02870 0.02900 0.02760 0.02400 0.02340 0.02200
Fremont High 0.03390 0.03060 0.03650 0.04150 0.03900 0.04050 0.03960 0.05250 0.04030 0.04640
Los Gatos-Saratoga High 1998 0.03300 0.03520 0.03770 0.03810 0.03680 0.03510 0.05160 0.04230 0.04690 0.04570
MidPeninsula Open Space 2014 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00080 0.00060 0.00090
Santa Clara Unified 0.07430 0.07010 0.05190 0.08360 0.08190 0.07070 0.07040 0.09420 0.08180 0.08280
Santa Clara Valley Water Districl 0.00610 0.00740 0.00720 0.00640 0.00690 0.00700 0.00650 0.00570 0.00860 0.00620
Saratoga Elementary 0.03630 0.03880 0.04370 0.04440 0.04520 0.04500 0.04580 0.04490 0.04560 0.04580
West Valley College 0.00320 0.01400 0.01390 0.01370 0.02890 0.02550 0.01200 0.02320 0.01960 0.02000
Total Direct&Overlapping'Tax Rates 1.28380 1.32580 1.31790 1.34520 1.38640 1.36290 1.37070 1.40240 1.38040 1.39146
City's Share of 1%Levy Per Prop 13' 0.05661 0.05641 0.05644 0.05650 0.05652 0.05626 0.05617 0.05571 0.05962 0.06148
General Obiligation Debt Rate
Redevelopment Rate' 1.04730 1.04860 1.04840 1.04760
Total Direct Rates 0.06263 0.06510 0.06507 0.06238 0.06204 0.05623 0.05610 0.05588 0.05976 0.06187
Notes:
'In 1978,California voters passed Proposition 13 which set the property tax rate at a 1.00%fixed amount.This 1.00%is shared by all taxing agencies for
which the subject property resides within.In addition to the 1.00%fixed amount,property owners are charged taxes as a percentage of assessed property
values for the payment of any voter approved bonds.
'Overlapping rates are those of local and county governments that apply to property owners within the City.Not all overlapping rates apply to all city property owner
'City's Share of 1%Levy is based on the City's share of the general fund tax rate area with the largest net taxable value within the city.ERAF general
fund tax shifts may not be included in tax ratio figues
°Redevelopment Rate is based on the largest RDA tax rate area and only includes rate(s)from indebtedness adopted prior to 1989 per California State
statute.RDA direct and overlapping rates are applied only to the incremental property values.The approval of ABXI 26 eliminated Redevelopment from
the State of California for the fiscal year 2012/13 and years thereafter.
'Total Direct Rate is the weighted average of all individual direct rates applied to by the government preparing the statistical section information and
excludes revenues derived from aircraft.Beginning in 2013/14 the Total Direct Rate no longer includes revenue generated from the former redevelopmei
tax rate areas.Challenges to recognized enforceable obligations are assumed to have been resolved during 2012/13.For the purposes of this report,
residual revenue is assumed to be distributed to the City in the same proportions as general fund revenue.
Data Source: Santa Clara County Assessor 2008109-2 01 711 8 Tax Rate Table
This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren&Cone
Prepared on 7/27/2018 by KB
101.
CITY OF CUPERTINO
Principal Property Taxpayers
Current Year and Five Years Ago
(Unaudited)
2018 Percentage of 2013 Percentage of
Assessed Total Assessed Assessed Total Assessed
Taxpaycr Valuation Valuation Valuation Valuation
Apple Inc. $ 5,151,722,757 22.26% $ 933,312,667 6.38%
Main Street Cupertino 331,405,037 1.43% 699,845,700 4.79%
Vallco Property Owner LLC 326,717,496 1.41% 72,927,533 0.50%
BVK Perimeter Square Retail LLC ET AL 174,280,482 0.75% - -
Cupertino Property Development 152,928,711 0.66% - -
Cupertino City Center 146,109,891 0.63% - -
Mission West Properties LP II ETAL 134,964,379 0.58% - -
SVF Cupertino City Center Corporation 129,871,378 0.56% - -
PR Cupertino Gateway LLC 125,591,580 0.54% - -
Cupertino Hotel Owner LLC 114,600,014 0.50% - -
Total $ 6,788,191,725 29.32% $ 1,706,085,900 11.67%
Source: HdL,Coren&Cone
102.
CITY OF CUPERTINO
Property Tax Levies and Collections
Last Ten Fiscal Years
(Unaudited)
Percent of
Percent Delinquent Total Total Tax
Fiscal Total Current Tax of Levy Tax Tax Collections
Year Tax Levy Collections Collected(1) Collections(1) Collections to Tax Levy
2009 $ 8,703,093 $ 8,703,093 100.00% $ - $ 8,703,093 100.00%
2010 8,760,881 8,760,881 100.00% - 8,760,881 100.00%
2011 8,497,119 8,497,119 100.00% - 8,497,119 100.00%
2012 7,681,925 7,681,925 100.00% - 7,681,925 100.00%
2013 8,199,752 8,199,752 100.00% - 8,199,752 100.00%
2014 9,169,183 9,169,183 100.00% - 9,169,183 100.00%
2015 10,178,734 10,178,734 100.00% - 10,178,734 100.00%
2016 11,864,026 11,864,026 100.00% - 11,864,026 100.00%
2017 13,308,884 13,308,884 100.00% - 13,308,884 100.00%
2018 13,172,425 13,172,425 100.00% - 13,172,425 100.00%
(1)Per the Teeter Plan,the City receives 100%of the tax levy,while the County receives delinquencies and penalties.
Source: City of Cupertino
103.
CITY OF CUPERTINO
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
(Unaudited)
Percentage
of Estimated %of
Fiscal Certificates Actual Market Value Personal
Year of Participation of Taxable Property Per Capita Income
2009 $ 46,970,000 0.36% $ 853 1.36%
2010 45,510,000 0.34% 815 1.36%
2011 44,010,000 0.30% 755 1.70%
2012 43,940,000 0.27% 744 1.56%
2013 42,020,000 0.26% 705 1.41%
2014 39,980,000 0.23% 671 1.38%
2015 37,925,000 0.20% 633 1.28%
2016 35,835,000 0.18% 598 1.21%
2017 33,700,000 0.15% 579 1.02%
2018 31,520,000 0.14% 535 0.90%
Source: City of Cupertino
104.
CITY OF CUPERTINO
Direct and Overlapping Bonded Debt
June 30,2018
(Unaudited)
2017-18 Assessed Valuation $ 23,139,029,846
Total Debt % City's Share of
Overlanpin¢Tax and Assessment Debt: 6/30/2018 Applicable(1) Debt 6/30/18
Santa Clara County $ 784,845,000 5.096% $ 39,995,701
Foothill-DeAnza Community College Distric 649,079,095 13.454% 87,327,101
West Valley Community College Distric 407,295,973 1.634% 6,655,216
Santa Clara Unified School District 501,080,000 3.813% 19,106,180
Fremont Union High School District 364,345,088 29.883% 108,877,243
Cupertino Union School Districl 281,213,688 50.963% 143,314,932
El Camino Hospital District 227,050,000 1.056% 2,397,648
Midpeninsula Regional Open Space Districi 44,225,000 8.134% 3,597,262
Santa Clara Valley Water District Benefit Assessmen 90,945,000 5.096% 4,634,557
Total Overlapping Tax and Assessment Debt 3,350,078,844 415,905,840
Direct and Overlapping General Fund Debt
Overlapping Debt:
Santa Clara County General Fund Obligation! $ 634,190,521 5.096% $ 32,318,349
Santa Clara County Pension Obligation< 362,470,957 5.096% S 18,471,520
Santa Clara County Board of Education Certificates of Participation 5,690,000 5.096% $ 289,962
Foothill-De Anza Community College District Certificates of Participatioi 30,830,528 13.454% $ 4,147,939
West Valley-Mission Community College District General Fund Obligation 63,715,000 1.634% $ 1,041,103
Santa Clara Unified School District Certificates of Participatior 13,795,000 3.813% $ 526,003
Santa Clara County Vector Control District Certificates of Participation 2,685,000 5.096% $ 136,828
Midpeninsula Regional Open Space Park District Certificates of Participation 112,143,611 8.134% $ 9,121,761
Subtotal Overlapping General Fund Deb 1,225,520,617 66,053,466
Direct Debt:City of Cupertino Certificates of Participation 31,520,000 100.000% 31,520,000 (2)
Total Direct and Overlapping General Fund Deb 1,257,040,617 97,573,466
Totals by Category:
Total Direct Debt 31,520,000 31,520,000
Total Overlapping Debt 4,575,599,461 481,959,306
Combined Total Debi $ 4,607,119,461 $ 513,479,306 (3)
Ratios to 2017-18 Assessed Valuation:
Total Overlapping Tax and Assessment Debi 1.80%
0.14%
Combined Total Debi 2.22%
(1)The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value.Applicabl
percentages were estimated by determining the portion of the overlapping district's assessed value that is within the
boundaries of the city divided by the district's total taxable assessed value
(2) Principal amount as of 6/30/18.
(3) Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and non-bonded capital lease obligation
Sources: HdL,Coren&Cone
105.
CITY OF CUPERTINO
Legal Debt Margin Information
Last Ten Fiscal Years
(Unaudited)
Total net debt
Total Net Legal applicable to the
Fiscal Debt Debt Applicable Debt limit as a%of
Year Limit to Limit Margin debt limit
2009 $ 473,910,827 $ - $ 473,910,827 $ -
2010 486,725,480 - 486,725,480 -
2011 488,171,639 - 488,171,639 -
2012 495,734,039 - 495,734,039 -
2013 520,580,523 - 520,580,523 -
2014 577,187,126 - 577,187,126 -
2015 605,011,397 - 605,011,397 -
2016 686,577,008 - 686,577,008 -
2017 757,359,691 - 757,359,691 -
2018 825,933,991 - 825,933,991 -
Debt Limit:
Secured property assessed value,net of exempt real property $ 22,024,906,420
Adjusted valuation-25%of assessed valuation 5,506,226,605
Debt limit- 15%of adjusted valuation 825,933,991
Amount of Debt Subject to Limit:
Total Bonded Debt 31,520,000
Less:Certificates of Participation not subject to debt limit (31,520,000)
Amount of debt subject to limit -
Legal Debt Margin $ 825,933,991
Note: The Government Code of the State of California provides for a legal debt limit of 15%of gross assessed valuation.However,this
provision was enacted when assessed valuation was based upon 25%of market value. Effective with the 1981-82 fiscal year,each parcel is
now assessed at 100%of market value(as of the most recent change in ownership for that parcel).The computations shown above reflect a
conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25%level that was in effect at the
time that the legal debt margin was enacted by the State of California for local governments located within the state.
Source: City of Cupertino
106.
CITY OF CUPERTINO
Ratio of General Bonded Debt
Last Ten Fiscal Years
(Unaudited)
Ratio of General
Fiscal Assessed General Bonded Debt Bonded Debt to
Year Population Value Bonded Debt Per Capita Assessed Value
2009 55,045 $ 13,172,425,287 $ - $ - $ -
2010 55,838 13,545,013,769 - - -
2011 56,431 13,495,632,397 - - -
2012 59,022 13,748,274,686 - - -
2013 59,620 14,621,780,341 - - -
2014 59,946 17,098,778,392 - - -
2015 59,777 19,395,507,127 - - -
2016 58,185 19,395,507,127 - - -
2017 58,917 21,346,570,360 - - -
2018 60,091 23,139,029,846 - - -
Sources: HdL,Coren&Cone
City of Cupertino
107.
City of Cupertino
Demographic and Economic Statistics
Last Ten Fiscal Years
' i 1 ' I
city ' County Population Population
CountyFiscal
"Public
City ' 1 1 1 11 1 1
Population Population Population School
IncomePersonal I I ' ' I I ' ' I High I
a i l I Enrollment -
Incomei i3) School Bachelor's
Degree Degree
2008-09 55,045 1,857,621 2.96% 3,442,884,000 62,547 10,300 3.8% - - - -
2009-10 55,838 1,800,876 3.10% 3,350,250,000 59,999 10,350 7.2% - 40.5 96.5% 69.3%
2010-11 56,431 1,781,642 3.17% 2,586,120,000 45,828 10,365 7.3% - 39.1 96.3% 72.6%
2011-12 59,022 1,809,378 3.26% 2,818,655,000 47,756 10,625 6.3% - 39.2 97.0% 74.7%
2012-13 59,620 1,842,254 3.24% 2,985,829,000 50,081 29,699 4.1% 8.4% 39.5 96.7% 75.5%
2013-14 59,946 1,868,558 3.21% 3,090,636,000 51,557 29,904 3.4% 6.8% 40.0 96.2% 74.2%
2014-15 59,777 1,889,638 3.16% 3,186,772,000 53,311 29,871 4.2% 3.8% 40.0 96.5% 74.6%
2015-16 58,185 1,927,888 3.02% 3,340,132,000 57,405 29,684 3.4% 4.2% 40.2 96.5% 75.6%
2016-17 58,917 1,938,180 3.04% 3,486,805,000 59,181 29,467 3.0% 3.8% 40.6 96.7% 76.0%
2017-18 60,091 1,938,153 3.10% 3,620,255,000 60,246 29,255 3.3% 3.8% 40.7 97.1% 76.6%
Notes and Data Sources:
Population: California State Department of Finance. Unemployment Data: California Employment Development Department
2000-2009 Income,Age,and Education Data:ESRI-Demographic Estimates are based on the last available Census. Projections are developed by incorporating
all of the prior census data released to date. Demographic Data is totaled from Census Block Groups that overlap the City's boundaries
201-and later-Income,Age and education Data-US Census Bureau,most recent American Community Survey
"Reported Public School Enrollment reflects the total number of students in the Fremont Union High School District and Cupertino Union School District.
Previously published reports included Fremont Union High School District only.
108.
CITY OF CUPERTINO
2018 Employer Ranking
(Unaudited)
Employer Ranking Employer Ranking
Apple 1 Insight Solutions Inc 1 1
De Anza College 2 Intero Real Estate Scv Inv 12
Seagate Technology Inc 3 Keller Williams Realty 13
Health Care Center at the Forum 4 Sugar CRM Inc 14
Magnet Systems Inc 5 Sunny View Retirement Community 15
All Fab Precision Sheet 6 Target 16
BJ's Restaurant&Brewhouse 7 Whole Foods Market 17
Coldwell Banker Residential 8 99 Ranch Market 18
Cupertino Healthcare-Wellness 9 Argonaut Window &Door 19
Forum at Rancho San Antonio 10 Astra Real Estate 20
Source: InfoUSA
109.
CITY OF CUPERTINO
Full-Time Equivalent City Employees by Function/Program
Last Ten Fiscal Years
(Unaudited)
Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Council and Commissions 1.40 1.47 1.46 1.47 1.52 1.57 1.55 1.60 1.55 2.35
Administration 4.85 4.90 4.85 5.05 5.05 10.75 10.75 10.85 10.57 14.12
Public&Environmental Affairs 7.45 6.95 6.95 6.95 6.90 11.00 10.25 11.40 13.95 14.55
Administrative Services 22.33 22.33 22.34 22.48 22.26 11.00 12.00 12.30 12.30 12.00
Recreation&Community Services 30.77 30.78 30.78 29.78 29.53 29.48 31.28 32.18 33.08 35.13
Community Development 23.78 23.73 23.78 23.43 23.90 24.83 24.80 27.30 28.18 28.08
Public Works 72.17 72.59 72.59 73.59 73.59 74.12 77.12 82.12 84.12 84.52
Law Enforcement 0.00 0.00 0.00 0.00 0.00 2.00 2.00 2.00 2.00 2.00
Total 162.75 162.75 162.75 162.75 162.75 164.75 169.75 179.75 185.75 192.75
250
■Public Works
200 -
■Community
Development
■Recreation&
150 Community
Services
Administrative
Services
100 ■Public&
I Environmental
Affairs
�0 Administration
50 ■
■Council and
■ ■ ■ Commissions
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: City of Cupertino Budget
110.
CITY OF CUPERTINO
Operating Indicators by Function/Program
Last Ten Fiscal Years
(Unaudited)
Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Law Enforcement Sheriff Response
Priority One-Respond within 5 minutes 3.88 Min. 3.95 Min. 4.49 Min. 4.84 Min. 3.76 Min. 4.30 Min. 4.90 Min. 4.90 Min. 5.07 Min 4.23 Min.
Priority Two-Respond within 9 minutes 5.94 Min. 5.90 Min. 5.76 Min. 6.44 Min. 5.98 Min. 6.39 Min. 6.56 Min. 6.56 Min. 8.00 Min. 7.49 Min.
Priority Three-Respond within 20 minutes 9.40 Min. 9.77 Min. 9.79 Min. 10.62 Min. 10.29 Min. 10.76 Min. 10.52 Min. 10.52 Min. 15.79 Min 14.79 Min.
Public Works
Street Sweeping 696 Curb Miles 696 Curb Miles 696 Curb Miles 575 Curb Miles 575 Curb Miles 575 Curb Miles 575 Curb Miles 575 Curb Miles 534 Curb Miles 534 Curb Miles
Street Maintenance 24 H.of Call 24 Bra of Call 24 H.of Call 24 Hrs of Call 24 Hrs of Call 24 Bra of Call 24 H.of Call 24 Hra of Call 24 H.of Call 24 Hrs of Call
Recreation and Community Services
Teen Center Memberships 400 447 492 576 564 684 424 491 388 57•
Sports Center Memberships 1,700 1,385 1,598 1,776 1,852 1,950 2,000 1,989 2,015 1,850
Senior Center Memberships 2,243 2,287 2,387 2,470 2,456 2,623 2,549 2,493 2,094 2,260
Local Resident Rentals at Blackberry Farm(a) 28 91 120 135 141 149 120 107
Quinlan Community Center Rental Revenue(a) $80,000 $71,000 $91,000 $133,000 $120,000 $109,342 $110,033 $104,150 $128,778 $72,948
Community Development
Approved Building Plan Sets 91%Within S Days 96%Within S Days 97%Within S Days 93%Within S Days 92%Within S Days 95%Within 7 Work Days 95%Within 7 Work Days 95%Within 7 Work Days 95%Within 7 Work Days 95%Within 7 Work Days
Discretionary Land Use Applications 95%Within 21 Days 100%Within 21 Days l00%Within 21 Days 99%Within 21 Days 99%Within 21 Days 99%Within 21 Work Days 99%Within 21 Work Days 99%Within 21 Work Days 99%Within 21 Work Days 99%Within 21 Work Days
Public Notice of Upcoming Project: 100%Within 10 Days 100%Within 10 Days 100%Within 10 Days 100%Within 10 Days l00%Within 10 Days 100%Within 10 Days 100%Within 10 Days 100%Within 10 Days l00%Within 10 Days 100%Within 10 Days
Administrative Services
Accounts Payable Processing 5 Days 5 Days 5 Days 7 Days 7 Days 7 Days 7 Days 7 Days 7 Days 7 Days
Business License Renewal Certificates 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days
Library
Volumes in Collection - - - - - - 361,817 364,557 369,924 367,979
Annual Gate Count - - - - - - 869,762 880,894 835,073 873,862
Annual Circulation Children's Items - - - - - - 1,474,996 1,544,095 1,448,265 1,453,173
Annual Circulation Adult and Teen Items - - - - - - 999,766 1,032,326 950,453 980,609
Adult Classes and Events - - - - - - 209 215 242 206
Adult Classes and Events Attendence - - - - - - 11,860 8,855 9,242 7,622
Teen Classes and Events - - - - - - 52 78 66 79
Teen Classes and Events Attendenoe - - - - - - 3,393 3,135 2,571 2,495
Children's Classes and Events - - - - - - 458 493 440 426
Children's Classes and Events Attendence - - - - - - 25,529 28,532 25,857 24,675
Volunteer Hours - - - - - - 11,786 10,000 9,645 10,302
Recreation and Community Services is currently rebuilding the membership base through a new registration application.The current year figure does not include non-resident teens.
Sources:City of Cupertino and Santa Clara County Library District
111.
CITY OF CUPERTINO
Capital Assets Statistics by Function/Program
Last Ten Fiscal Years
(Unaudited)
Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Public Works
Centerlane Miles of Streets 142 142 142 142 142 142 142 142 142 142
Streetlights 2,950 2,950 2,950 2,950 2,950 2,950 2,950 2,950 2,950 2,950
Traffic Signals 39 39 39 39 48 48 48 48 48 52
Culture&Recreation
Parks and Open Spaces 17 18 19 19 19 21 21 21 21 21
Park and Landscape Acreage 169 169 169 169 169 169 169 169 169 169
City Trails 1 1 1 1 1 3 3 3 3 3
Golf Courses 1 1 1 1 1 1 1 1 1 1
Community Center 1 1 1 1 1 1 1 1 1 1
Community Hall 1 1 1 1 1 1 1 1 1 1
Senior Center 1 1 1 1 1 1 1 1 1 1
Sports Center 1 1 1 1 1 1 1 1 1 1
Swimming Pools 1 1 1 1 1 1 1 1 1 1
Tennis Courts 17 17 17 17 17 17 28 28 28 28
Sports Fields 41 41 41 41 41 41 41 41 41 41
City Library 1 1 1 1 1 1 1 1 1 1
Source: City of Cupertino
112.
History
"This place of San Joseph Cupertino has good water and much firewood, but nothing suitable for a
settlement because it is among the hills very near to the range of cedars which I mentioned yesterday, and
lacks level lands."
When Spanish explorer San Juan Bautista De Anza traveled through California in 1776,he and
his party documented these words about the land surrounding Stevens Creek,named back then
as Arroyo San Joseph Cupertino. However,first impressions can often be misleading.
Underneath the spiny, overgrown bush was a completely different land waiting to be
uncovered.During this time, the area was populated by Native Americans who hunted and
gathered, prospering from the abundant resources the land had to offer.
It wasn't until 1848 when the first American settler, Elijah Stephens, a blacksmith from South
Carolina, moved to the area—at this time,named simply'West Side' and primarily owned by
the government. After crossing over the Sierra Nevada in wagons,he discovered the true value
of the land underneath the bush, and proceeded to purchase over 300 acres of farmland to grow
grapes and blackberries. Stephens pioneered the way for farmers, which established West Side
as an agricultural hot spot. The land Stephens owned eventually became Blackberry Farm, and
the road, creek, and reservoir were all named after him, although misspelled.
In early West Side, many of the newest advances in agriculture were being developed. Settlers
were drawn to the land because of its rich earth,where they were able to grow products that
competed on the world market. Once the bush had been cleared, they grew grapes,which
covered the West Valley area with vineyards by the late 1800s. By the 1900s, a plant louse called
Phylloxera spread throughout the vineyards, attacking the roots of the grape vines,killing the
grapes and putting a halt to wine production. As a solution,nearly everything was replanted
with fruit orchards. When the fruit trees blossomed,visitors would come to the orchards for
"The Valley of Heart's Delight" festivals,which celebrated the prosperous agriculture of the
West Valley area.
Apart from the farmland, West Side was primarily known as a cross-roads, an intersection
between Saratoga-Sunnyvale Road and Stevens Creek. This served as a way station for travelers
to pass through while going from town to town. As more people came to West Side to take
advantage of the rich farm land,more family holdings gathered around the cross-roads.
Starting off as just a post office and home union store,West Side's humble cross-roads brought
many diverse communities, all attracted by the preferable climate and profitable market for
crops.
As more people were drawn to the area around the cross-roads, the orchards were gradually
replaced with modern houses for workers. The population steadily grew, and the face of West
Side changed, progressing to a more modern town. The community wanted to rename the city,
as to not confuse it with other cities, as well as establish a unique identity.John T.Doyle, a
lawyer from San Francisco, and writer of historical anthologies on the area, chose the name
"Cupertino" after the original name of the creek.
After the post-World War II population boom, the growing community petitioned for
Cupertino to become an incorporated town. Members of the community were worried that the
alternative to incorporation was to have parts of Cupertino annexed by surrounding cities,
splitting up the community and erasing the local culture. To preserve the rural atmosphere,
lower taxes for farmers, start a local government, and prepare for growth, Cupertino voted for
incorporation. In 1955, Cupertino officially became the 13th city in Santa Clara County.
By the 1970s, Cupertino once again began to undergo dramatic changes. The growing
community attracted several large technology corporations. Lockheed Martin, HP,Intel, and
many other big names established themselves in the Silicon Valley. Apple Inc. was founded in
Cupertino in 1976 and quickly grew into the tech giant it's known for today.
In the late 20th century, Cupertino and the surrounding areas experienced another surge in
population growth,this time due to the immigration of people from Asian countries.
Immigration laws at the time were in the favor of families looking to move to the Silicon Valley.
People immigrated here for a variety of reasons—whether they were aspiring for career
prospects with major tech companies, or striving for a quality education for their children,
everyone who immigrated here had a common goal: to find opportunities to work hard for a
better life for themselves and their families.
2018 Community Economic Profile
Cupertino, with a population of 64,127 and City limits stretching across 13 square miles, is
considered one of the most prestigious cities to live and work in the 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 success as a partnership is a direct
reflection of success as a community. The cornerstone of this partnership is a cooperative and
responsive government that fosters residential and business prosperity and strengthens
working relationships among all sectors of the community.
Because Cupertino is a mature, 93%built-out city, the City of Cupertino focuses on business
retention and revitalization. Cupertino is world renowned as the home of high-tech giants, such
as Apple, Inc. and Seagate Technologies, and as a community with stellar public schools.
DeAnza College, one of the largest single-campus community colleges in the country, is another
major employer and a magnet for attracting local and international students. The City's
proactive economic development efforts have resulted in an innovative environment for start-
ups and growing companies to thrive. The City strives to retain and attract local companies
through active outreach and a responsive and customer-oriented entitlement process.
Cupertino is excited to have a number of new mixed-use development projects in final
construction phases and almost fully leased,which will provide more retail and dining options,
as well as provide additional housing opportunities to meet the needs of the growing
community.
The Main Street and Nineteen800
mixed-use developments have created
a vibrant downtown area for
Cupertino, offering a large selection of
restaurants and retailers, including
Alexander's Steakhouse, Eureka!,
am
Rootstock Wine Bar, Oreri s Hummus,
Lazy Dog, Chef Hung, HaiDiLao Hot
Pot Restaurant, Pressed Juicery,
Orangetheory, 85 Degree Bakery,
Target Express, Steins Beer Garden,
Kula Sushi,Vitality Bowls,Doppio
Zero, Koja Kitchen, and Icool In2 Ice Cream. Housing, office, and a new Residence Inn by
Marriott are available to support the thriving area. Benihana,Dynasty Seafood Restaurant,
Bowlmore, Ice Center Cupertino, and Silicon Valley Bay Club also serve as anchors.
The construction of new retail and commercial development strengthens existing popular
venues in Cupertino,including The Marketplace. The Marketplace has a variety of stores and
restaurants popular with students, families, and working professionals. They include Daiso,
Marukai Groceries, Super Cue,La Patisserie Bakery, Beard Papa's, Legend's Pizza, Aloha Fresh,
Merlion Restaurant, Icicles, CBI Boiling Fish, Garlic Mediterranean Grill, Rori Rice, and Erik's
DeliCafe.
Cupertino Village is undergoing renovations to upgrade existing buildings, construct new
buildings, parking, and open-courtyard space. The shopping center is home to 99 Ranch
Market, Starbucks, Gogigo Korean BBQ Creamistry,MOD Pizza, Ten Ren Tea, Fantasia Coffee
&Tea,Happy Lemon,Joy Luck Palace, Kee Wah Bakery, and many other Asian restaurants,
bakeries, and shops.
Cupertino features many other retail opportunities, including TJ Maxx and Home Goods,
Whole Foods,Target, and over 180 restaurants to serve residents and the local workforce. There
are six hotels, which provide almost 1,000 rooms,to serve the area: The Aloft Cupertino,
Cupertino Hotel, Hilton Garden Inn,Juniper Hotel operated by Curio, Marriott Courtyard, and
the Residence Inn by Marriott. The Hyatt House is currently under construction and will offer
an additional 148 rooms.
The redevelopment of the Homestead Square Shopping Center,located at Homestead Road and
De Anza Boulevard,includes a 24-hour Safeway, Ulta Beauty, Ross Stores, Stein Mart,
Michael's,Rite Aid,FedEx Kinko's and numerous restaurants, such as Fish's Wild, 1000
Degrees Neapolitan Pizzeria,Yayoi
Teishoku Japanese Restaurant,
Starbucks, and Chipotle.
Apple completed construction of its
new corporate campus, Apple Park,
which includes approximately 2.8
million square feet of office and R&D r}
space north of Highway 280 between Ap
Wolfe Road and Tantau Avenue. A
state of the art Visitors Center,
Observation Deck, flagship retail store ` y
and cafe are open to the public seven
days a week.
2018 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
Cupertino Community Hall. The meetings can be viewed on the City website.
The City has 197.75 authorized full-time benefited employee positions. City departments
include Administration(City Council, Commissions, City Manager, City Attorney, City Clerk,
Sustainability, Public Affairs);Administrative Services (Finance, Human Resources);
Community Development(Planning, Building, Housing Services, Economic Development,
Code Enforcement);Recreation and Community Services (Neighborhood Watch, Emergency
Preparedness);Public Works (Engineering,Maintenance,Transportation, Solid Waste,
Environmental Programs, Storm Drain Management); and Innovation&Technology (IT, GIS,
Website and Applications,Video). Public safety services are provided by the Santa Clara
County Sheriff's Department and the Santa Clara County Fire District.
Assisting the City Council are several citizen advisory commissions/committees including:
• Audit Committee • Public Safety Commission
• Fine Arts Commission • Sustainability Commission
• Housing Commission • Teen Commission
• Library Commission • Technology, Information and
• Parks and Recreation Commission Communication Commission
• Planning Commission
Members of the volunteer boards are appointed by the City Council and vacancies are
announced so that interested residents can apply for the positions. For more information,visit
cupertino.org/commissions.
Housing
The median sales price for an existing single-family home was$2,178,000 in January 2018. 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 Pacific Gas and Electric, 800-743-5000
Phone AT&T residential service, 800-894-2355
AT&T business service, 800-750-2355
Cable Comcast, 800-945-2288
Solid Waste&Recycling Recology,408-725-0420
Water San Jose Water Company,408-279-7900
California Water Service, 650-917-0152
Sewer Service Cupertino Sanitary District,408-253-7071
Tax Rates and Government Services
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 (7/17)
County: $449,772,839,608 (7/17)
Retail Sales Tax
Grand Total=9.00%.
Breakdown=Cupertino 1.00%, State 6%, County Transportation 0.25%, County General .125%,
Local District (Valley Transportation Authority) 1.625%.
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 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
City of Cupertino recognizes the value of
developing people-to-people contacts by
strengthening the partnerships between the
city and its four sister cities of Copertino,
Italy;Hsinchu,Taiwan;Toyokawa,Japan,
0
and Bhubaneswar, India. Cupertino's Sister �(
. O
City partnerships have proven successful in
fostering educational, technical, economic,
and cultural exchanges. Over the years, there
have been many delegations visiting both
the cities as well as many local students 8,065 MILES
participated in annual student exchange
programs.
Education
Winner of numerous state and national awards for excellence, Cupertino's schools are widely
acknowledged as models of quality instruction.
Cupertino Union School District serves over 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.
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 inside looks at local
governments, the social sector,local non-profit organizations, and educational institutions. This
9-month 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 r
our neighborhoods safer and more
harmonious.The Block Leader Program y
i�
teaches residents how to get to know # r
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
MOBILE and events as well as local parks, schools, and recreation offerings in the city.
95014 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 street name or by current location. The search
results show the picture of 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.
Eats 95014
Eats 95014 is the local restaurant app that showcases Cupertino's dining options such as
restaurants, grocery stores,farmers'markets, and vineyards.The app provides information on
the services offered at such eating places including store hours, parking information,noise
level, directions, and website link.
Ready 95014
READY Ready 95014 is an app that puts safety information into the hands of Cupertino
residents. Steps to prepare and respond to emergencies including earthquakes,
95014 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.
Community Statistics
Facts and Figures'
Population in City Limits 64,127
Average Household Income $222,322
Average Age 40
Registered Voters 28,778
Democrats 11,296
Republicans 4,923
American Independent 406
Other 208
No Political Party designated 11,873
Top 40 Sales Tax Producers
Third Quarter 2017, in Alphabetical Order
Apple Brightview Kula Revolving Sushi Shell Station
Landscape Bar
Develo ment
7 Eleven Brightview Tree Lazy Dog Cafe Staples
Company
99 Ranch Market Chevron Lindgren RF Enclosures Superior Air
Handling
Agie Charmilles De Anza College Mirapath Target
Campus Center
Alexander's Steak Dental Arts of Ross Teknion
House California
Alliance Dynasty Seafood Rotten Robbie TJ Maxx
Restaurant
A ui Cal Mex Estel Group Safeway Ulta Beauty
Argonaut Window& Huawei Enterprise Scandinavian Designs Valero
Door
Benihana Insight Direct Seele Whole Foods
Market
BJs Restaurant& Insight Public Sector Shane Company Wiremold
Brewhouse
1 Claritas 2018 Estimates and California Secretary of State Report of Registration February 10,2017
Demographic Information
American
Indian/Alaska Native
Black or African Hawaiian/Other
American Native
0 2% Pacific Islander
0.6% 0.1%
Hispanic or Latino
3.6% Other
0.9%
White,non-Hispanic
3 Asian
1.3%
63.3%
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.
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, livestock barn, and
two historic buildings: Baer's Blacksmith Shop, originally located at DeAnza and Stevens Creek,
and the old water tower from the Parish Ranch,now the site of Memorial Park. Rolling Hills 4-
H Club members raise rabbits, chickens, sheep, swine, and cattle.The Junior Nature Museum,
which features small live animal exhibits and dispenses information about bird, animal, and
plant species of the area,is also located at the ranch. The newly opened Environmental
Education Center has Open House hours on Friday, Saturday, and Sunday. McClellan Ranch is
located at 22221 McClellan Road.Telephone:408-777-3120.
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 T---
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
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.