HomeMy WebLinkAboutCC 11-18-2025 Item No. 18 City Manager's First Quarter Financial Report for FY 2025-26_Supplemental ReportCC 11-18-2025
Item No. 18
First Quarter Finance
Report for Fiscal
Year 2025-26
Supplemental Report
1
ADMINISTRATIVE SERVICES DEPARTMENT
CITY HALL
10300 TORRE AVENUE • CUPERTINO, CA 95014-3255
TELEPHONE: (408) 777-3220
CUPERTINO.GOV
CITY COUNCIL STAFF REPORT
SUPPLEMENTAL 1
Meeting: November 18, 2025
Agenda Item #18
Subject
City Manager’s First Quarter Financial Report for Fiscal Year (FY) 2025-26; Budget
Modification decreasing appropriations by $674,221 and increasing revenues by $503,628
resulting in a $1,177,849 increase to unassigned fund balance
Recommended Action
1.Accept the City Manager’s First Quarter Financial Report for Fiscal Year 2025-26; and
2.Adopt Resolution No. 25-XXX approving Budget Modification No. 2526-419,
decreasing appropriations by $674,221 and increasing revenues by $503,628 resulting
in a $1,177,849 increase to unassigned fund balance
Background:
Staff’s responses to questions received from councilmembers are shown in italics.
Q1: Can you explain how we are beginning the first quarter with $182M and ending it
quarter with $155M?
That does not look like things are going in the right direction. Can you explain?
I went to opengov and it seems to me that the anticipated sales-tax-revenue is too high.
I would like to understand how the City determined the anticipated sales-tax revenues for
2025/26.
Previously, revenue from tax-sharing agreements with Apple and Insight, see third
attachment, were rolled into sales-tax-revenue, so there was no transparency as to how
much income we were deriving from these agreements. We all know that the Apple
agreement has been terminated. But what about Insight? Please explain how we have
anticipated the revenue drop from the loss of that agreement? I haven’t attended all council
meetings, but I have not seen mention of the loss of that income.
2
In looking at CDTFA data, there have been zero sales-tax income distributions from the
state since May 2025. The first attachment is a report that I generated from the CDTFA (I
removed the pennies and added commas for the thousands). By comparison, see the second
attachment shows the City of Campbell. So you can see that there are six months of zero
income for Cupertino where Campbell has these fields populated. There is some
explanation on page 11, but can you please provide some more color here? We don’t have
transparency on a full six months of data! In detail, why is this happening? And, what do
we anticipate that the numbers should be?
According to open gov, it is expected that sales-tax-revenue will rise – I am not that
optimistic. Please explain more.
I am glad that we’ll probably have a good year for TOT (hotel tax revenue) with the football
Superbowl and the big soccer matches coming, but that will be a one-time revenue
opportunity.
Finally, please go through the CIP project status line-by-line, I think that there are some
opportunities for savings there.
Staff Response: See excerpt from page 25 of the First Quarter Financial Report staff report:
3
The excerpt from the financial report above shows $181.8 million in estimated ending fund balance
for FY25. The FY Adopted Budget fund balance number was estimated by taking FY24 beginning
fund balance and assuming revenue materializing and all budget being expended for FY 25 and
FY 26. As discussed in the report, revenue has exceeded budget across almost all revenue
categories and expenditures materialized under budget, this has resulted in an increase in
estimated ending fund balance in FY25 that carries over into FY26 beginning balance resulting in
an updated year-end estimate of $183 million.
The sales tax sharing agreement with Apple has not been terminated. Unrelated to the agreement ,
the City has forecasted approximately a 90% drop in sale tax revenue including the direct allocation
and pool share due to the impact of the California Department of Tax and Fee Administration
(CDTFA) audit and subsequent settlement agreement. The Insight sales tax sharing agreement is
due to expire on June 30, 2026, and staff are working with the City Attorney’s Office to determine
what action if any the City needs to take in regard to that agreement.
Per the settlement agreement with CDTFA the City has a payback amount due. These payments
are processed by reducing the amount an agency would have received in sales tax dollars. The
CDTFA is expected to release sales tax revenues generated in calendar quarter three (July–
September) during the week of November 17, 2025. Staff will continue to closely monitor these
distributions and will update the City Council as new information becomes available.
For FY 2025-26 sales tax revenue is budgeted at $12.0 million, a decrease from prior year’s amended
budget. The estimates are made together with our sales tax consultant HDL, considering the
CDTFA settlement agreement, any tax sharing agreements, historical trend analysis, and economic
analysis based on sales tax sector.
Attachments Provided with Original Staff Report:
A – Fiscal Year 2025-26 First Quarter Financial Report
B – Draft Resolution
C – Description of Carryovers and Adjustments as of September 30, 2025
D – Description of Budget Transfers as of September 30, 2025
E – First Quarter Recommended Budget Adjustments
F – FY 2025-26 First Quarter Special Projects Update as of September 30, 2025
G – Competitive and Non-Competitive Citywide Grants Tracking
H – FY 2025-26 First Quarter CIP Project Status