CC 10-15-2024 Item No. 8 Unassign funds from the Committed Sales Tax Repayment Reserve_Written Communications_2CC 10-15-2024
Item No. 8
Unassign funds from the
Committed Sales Tax
Repayment Reserve
Written Communications
From:Rhoda Fry
To:City Clerk; Cupertino City Manager"s Office; City Council
Cc:"Rhoda Fry"
Subject:10/15/2024 Agenda Item #8 CDTFA
Date:Tuesday, October 15, 2024 12:13:47 AM
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Dear City Council,
Please do not put our City’s windfall into an unassigned fund that could be frittered away.
Please put the money into the economic uncertainty fund – or even better yet, create a new fund
and call it an endowment.
It is my understanding that a long-term objective of this lucrative tax-sharing agreement was
that the City would build up a fund and would earn interest on it.
That was a good idea and we should go with that.
Please, stop the wasteful studies and do not buy an office building on Stevens Creek Blvd.
I have to say that when I took a look at the agenda, that I was taken aback that in November,
staff would make proposals on how to spend the money.
No – it must be invested. At 5%, we would generate about $7.5M every year off of that $150M
balance and that would make a significant difference in making up for lost sales-tax revenue.
In recent normal years, we had about $27M in sales-tax revenues and we’ll be going down to
about $10M.
You can see that during the COVID years that we got a huge boost – several years worth!!!
Here’s a graphic extracted from opengov showing net sales tax revenue with a line at the $10M
mark:
You can see that the likelihood of the City getting back to $27M is extremely unlikely. We
must not consider spending down the fund to cover a 10-year budget deficit because eventually
the money will run out.
Even doubling sales-tax revenue is a long shot. The Vallco project has continued to shrink its
retail footprint. And even if it changed course and added retail, you can see that it would be
nearly impossible to get back to where we were. Most people were unaware that Cupertino had
this huge income stream. For every $100 of Apple goods purchased online, Cupertino earned
$0.65. The City’s Annual Report, the ACFR, referred to this income as business-to-business
income (and the tax-sharing agreement with Apple as a consulting agreement) – and so what
really was going on was probably forgotten over time. There will be a new law in the State that
requires that Cities disclose these agreements.
THE CITY KNEW THAT IT WOULD COME TO AN END – EVEN IN 2006!!!
And this was when we were doing a 50-50 split.
Here is an excerpt of the 2006/2007 Budget:
See image of the 25th page of the City’s budget Budget 2006-2007 (cupertino.org)
----
PLEASE DO NOT PUT OUR PRECIOUS ONE-TIME WINDFALL INTO AN
UNASSIGNED FUND – MAKE IT AN ENDOWMENT.
I know that there is some excitement about future construction and the receipt of impact fees
that go along with it.
But this is a false economy because impact fees go toward funding impacts of developments.
And these fees are set at a lower actual cost - - - so it will be the residents who will be funding
development.
Here is an informative video:
https://www.bloomberg.com/news/videos/2024-08-28/best-buy-and-apple-make-millions-on-
tax-deals-video
Thanks for reading,
Rhoda Fry
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