August 8, 2024 - Cupertino Public Facilities Corporation Questions (provided to Council on December 6, 2023)
CITY COUNCIL INFORMATIONAL MEMORANDUM
December 6, 2023
To: Cupertino City Council
From: Kristina Alfaro, Director of Administrative Services
Re: Cupertino Public Facilities Corporation Questions
Background
The Cupertino Public Facilities Corporation (CPFC) was established on June 2, 1986 as
tax-exempt corporation under Internal Revenue Code section 501(c)(4) to issue debt on
behalf of the City.
The City of Cupertino, City Council acts as the CPFC’s board of directors. Following
Resolution 12-01, the Mayor, Vice Mayor, and City Clerk are automatically seated as the
President, Vice President, and Secretary of the Board, respectively. CPFC’s bylaws
assigns the City’s Director of Administrative Services as the Treasurer.
The board has met on 11 occasions since its establishment, with one meeting cancellation
for lack of business, on the following dates:
1. June 2, 1986 – Passed Articles of Incorporation (Attachment A), Bylaws
(Attachment B), Elected Officers, set date and meeting time of regular meetings
and authorized filing of exemptions to the State Franchise Tax Board and various
Federal Forms and issued Certificates of Participation (COP). COP is a
municipal financing tool used to generate funds to acquire real property or to
construct or improve public facilities. COP use a tax-exempt lease-financing
agreement, where the investors are paid via lease revenues generated from the
property. Per California State law, properly structured COP are not debt and
therefore do not require voter approval.
2. July 20, 1987 – Elected officers, set date and meeting time of regular meetings to
the second Tuesday in November at seven o’clock p.m.
3. November 16, 1987 – Elected Officers and set new date and meeting time of
regular meetings to the third Monday in November at seven o’clock p.m.
(Attachment C)
4. February 16, 1988 – Authorized execution of grant of easement to Pacific Gas and
Electric Company
5. March 1, 1993 – Refinancing of Certificates of Participation
6. September 16, 2002 – Issuing Certificates of Participation
7. April 17, 2012 – Adopted resolution 12-01 appointing Cupertino City Council
members as Board of Directors of the Public Facilities Corporation and approved
refinancing of certificates of participation.
8. October 6, 2015 – Cancelled due to lack of business.
9. January 19, 2016 -- Approved the City entering into Antenna Ground Lease
Agreement with GTE Mobilnet of California
10. July 5, 2017 – Approved the City to entering into Antenna Ground Lease
Agreement with New Cingular Wireless
11. September 15, 2020 – Refinancing of Certificates of Participation
12. October 6, 2020 – Approved the minutes of the September 15, 2020 meeting.
Public Facilities Corporation bylaws and Articles of Incorporation
At the corporation’s first meeting in 1986, its Bylaws were adopted, these Bylaws set
forth the provisions which the corporation operates under, including but not limited to
the election of directions, regular meetings, objects and purpose of the corporation, and
general provisions.
In addition, the corporation adopted its Articles of Incorporation, which state the
purpose for which the corporation was formed.
Lasty, the corporation authorized filings with both the State and Federal governments
for recognition as a 501(c)(4) tax-exempt corporation.
Debt Issued and Reporting Requirements
The corporation has authorized debt issuance on the following occasions, with the most
recent issuance in 2020, a refinancing of the 2012 Certificates of Participation. The
refinancing resulted in annual savings of approximately half a million dollars for the
remaining 10 years of the debt. Additional details can be found in the Fiscal Year 2020-21
Mid-Year Report (Attachment J) and Debt Schedules (Attachment K).
Debt Issuance Date Certificates of Participation for: Debt Principal
Amount
July 16, 1986 1986 Series A for City Hall and Library $9,800,000
July 11, 1989 Wilson Park Project $5,000
April 2, 1990 Memorial Park Expansion Project (for the Sports
Center Acquisition)
$9,070,000
Debt Issuance Date Certificates of Participation for: Debt Principal
Amount
March 14, 1991 Blackberry Farm and Fremont Older Elementary
School Site (now Creekside Park)
$32,970,000
November 24, 1992 Refunding of Series A City Hall and Library
Projects
$10,785,000
November 24, 1992 Refunds the 1989 Wilson Park and 1990
Memorial Park
$14,585,000
March 22, 1993 Refunding Series A Blackberry Farm and
Fremont Older projects
$36,600,000
October 1, 2002 Refunds the Series A and Series B and issues and
provides funding for the new library
$56,640,000
April 19, 2012 Refinance the Oct 1 2002 debt at a lower interest
rate
$43,940,000
September 29, 2020 Refinance the 2012 at a lower interest rate $22,040,000
There are regulatory reports and actions to maintain the 501(c)(4) status along with debt
reporting and compliance requirements. Those requirements and the City’s current
status is shown in the table below:
Requirement Activity Status
Internal Revenue Service-
Annual Federal
Reporting (Form 990)
Regulatory
Reporting
Outside counsel unsuccessfully attempted
to exempt CPFC from filing in 2016
(Attachment I). The Corporation is
currently working with subject matter
experts to reestablish 501(c)(4) and will
begin Form 990 filing shortly afterward.
Franchise Tax Board-
Annual State Filing
(Form 199)
Regulatory
Reporting
The corporation stopped filing after 2001
when it was determined that the
corporation was exempt from filing.
State Controller’s Office –
Annual Transaction
Report (Attachment D)
Regulatory
Reporting
Independent external auditors have
continued to prepare and submit reports
with City staff review.
Secretary of State –
Statement of Information
(Attachment G)
Regulatory
Reporting
The City maintains its state tax-exempt
status and will file the Statement
biannually in June on even years.
Annual Meeting of the
Board of Directors
Corporate
Compliance
Staff is tentatively proposing future
meetings occur in November.
Insurance Coverage
(Attachment H)
Debt Issuance
Compliance
The City has continued to maintain the
minimum general liability and rental
interruption coverage.
Bank New York Mellon
(BNYM) -Statement of
the City
Debt Issuance
Reporting
The City has provided BNYM current
Statement and supplement documents.
Conclusion
The City is in compliance with all State filings and debt issuance requirements.
The lapse of annual federal reporting (Form 990) has resulted in the revocation of
CPFC’s 501(c)(4) status. There is no material impact on the City’s debt issuance due to a
lapse in reporting as the City has not received a disbursement from the debt since 2002
when additional debt was issued for the Library and Community Hall. In addition, the
Corporation has not met regularly as prescribed by the Bylaws. Based on the most
recent Resolution on meeting dates, City staff will schedule an annual meeting on the
third Monday in November, or November 18, 2024.
Next Steps
City staff is working with subject matter experts to regain CPFC’s 501(c)(4) status and
bring into federal reporting compliance. Expected completion for filing is early next
calendar year. Staff will update City Council once CPFC has regained 501(c)(4) status.
Following reacquiring 501(c)(4) status and Form 990 fillings, staff will work with subject
matter experts to reattempt exempting CPFC from filing Form 990 in future years.
Staff is drafting internal reporting procedures to ensure that reporting and annual
meetings are not missed in the future. For debt issuance, the City will continue to work
with UFI Inc. to ensure the required annual reporting is met.
Sustainability Impact
No sustainability impact.
Fiscal Impact
Any additional expenditures needed to come into compliance will be assumed within
existing budget appropriations.
_____________________________________
Prepared by: Jonathan Orozco, Finance Manager
Reviewed by: Kristina Alfaro, Director of Administrative Services
Matt Morely, Assistant City Manager
Approved for Submission by: Pamela Wu, City Manager
Attachments:
A – Cupertino Public Facilities Corporation Articles of Incorporation
B—Cupertino Public Facilities Corporation Bylaws
C – Cupertino Public Facilities Corporation Resolution 87-4 Appointing Time and
Meeting Place of Regular Meetings
D – Financial Transactions Report FY2021-22
E – Cupertino Public Facilities Corporation all other resolutions
F – Cupertino Public Facilities Corporation Minutes
G – Cupertino Public Facilities Corporation Entity Status Letter
H – Cupertino Public Facilities Corporation Insurance and Appropriations Compliance
I –Form 990 Exemption Request Submittal
J – Fiscal Year 2020-21 Mid-Year Financial Report
K – Debt Schedules