CC 12-03-2024 Item No. 7. FY 2023-24 Annual Comprehensive Financial Report (ACFR)_Desk Item1
CITY COUNCIL STAFF REPORT
DESK ITEM
Meeting: December 3, 2024
Agenda Item #7
Subject
Receive the FY 2023-24 Annual Comprehensive Financial Report (ACFR)
Recommended Action
Receive the FY 2023-24 Annual Comprehensive Financial Report (ACFR)
Background:
Staff’s responses to questions received from councilmembers are shown in italics.
Q1: May I please have a link to the following loan agreements described in the ACFR:
“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. As of June 30, 2024,
the balance remaining on the loan was $1,934,740 including principal and interest in the
amounts of $821,000 and $1,113,740, respectively. The loan was issued using resources in
the amount of $417,000 and $404,000 in the General Fund and the Housing Development
Special Revenue Fund, respectively 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. As of June 30, 2024, the balance on the loan was $124,269. The
loan was issued using resources in the Housing Development Special Revenue 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
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calendar year, the Developer shall make repayments of the Joan 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. As of June 30,
2024, the balance remaining on the loan was $4,489,789 including principal and interest in
the amounts of $3,672,000 and $817,789, respectively in the Housing Development Special
Revenue Fund and is considered as governmental activities.” ACFR p. 71 (Council
member Moore)
Staff Response: The original loan document can be found at the following links:
1. Community Housing Developers (1995)
2. Cupertino Community Services (1996)
3. Stevens Creek, L.P. (2017)
Q2: Which part of the Housing Development Special Revenue Fund (HDSRF) receives the
interest payments for the above agreements, is it the BMR Fund? (Council member Moore)
Staff Response: The Housing Development Special Revenue Fund (HDSRF) comprises the
Community Development Block Grant Fund (CDBG), the Below Market Rate Housing Fund
(BMR), and the California Department of Housing and Community Development Loan Rehab Fund
(HCD). The 1995 loan to Community Housing Developers was funded by the General Fund
($417,000) and CDBG ($404,000); the 1996 loan to Cupertino Community Services was funded by
the General Fund ($103,625) and CDBG ($216,375); and the 2017 loan to Stevens Creek, L.P. was
funded entirely by BMR ($3,672,000). All loans accrue interest at a rate of three percent, with
payments made based on an amortization schedule, a proportion of surplus cash from operations, or
upon loan maturity, as dictated in the loan agreements.
Q3: The first loan, to Community Housing Developers, shows that General Fund and
HDSRF funds were lent, does this result in prorated loan payments back to these respective
funds? (Council member Moore)
Staff Response: The Community Housing Developers loan continues to accrue interest, which is
prorated between the General Fund and CDBG based on the original funding allocation. To date,
no surplus cash has been reported or remitted, so no loan payments have been made to either fund.
Q4: Resource Recovery has income higher than expenses, is this correct?
Resource recovery Expenses: $2,227,782 Income: $2,363,496
“The City has a solid waste franchise agreement with Recology that shares collection,
landfill disposal, and recycling revenues and costs. This fund receives revenues from
Recology 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 and expenses is at $2.4 million and $2.2 million,
respectively. Considering net non-operating revenues of $0.2 million, net position
increased by $0.3 to an ending fund balance of $5.1 million.” ACFR, p. 15 (Council member
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Moore)
Staff Response: Correct, the Resource Recovery Fund operating revenues exceeded operating
expenditures by approximately $0.2 million. However, this includes a one-time miscellaneous
revenue adjustment of approximately $0.8 million related to Recology’s rate period four cost-based
analysis. During rate year three of the initial three-year period of the Recology contract, Recology
received revenue for garbage processing that never occurred. These unrealized processing costs were
identified and corrected during the rate period four analysis. The excess funds are being held to offset
future expenses for customers.
Attachments Provided with Original Staff Report:
A – FY 2023-24 ACFR