Financial Report 06-30-2010City of Cupertino, California
www.cupertino.org
.. For Fiscal Year Ended June 30, 2010
CITY OF CUPERTINO, CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR FISCAL YEAR ENDED
JUNE 30, 2010
PREPARED BY:
CITY OF CUPERTINO
ADMINISTRATIVE SERVICES DEPARTMENT
FINANCE DIVISION
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INTRODUCTORY SECTION
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CITY OF CUPERTINO
Comprehensive Annual Financial Report
For the Year Ended June 30, 2010
Table of Contents
INTRODUCTORY SECTION
Page
Tableof Contents ................................................................................................................... ............................... i
Letterof Tratlsmittal ................................................................................. ............................... ............................iii
OrganizationChart .................................................................................. ............................... ...........................viii
Citv Council and Director- of Cite- Officials ...................................................................... ............................... ix
Cointnissionsand Committees .............................................................................................. ............................... x
Certificate of Award for Excellence in Financial Reporting ............................................... ............................... xi
FINANCIAL SECTION
IndependentAuditor's Report ........................................................................................... ..............................1
Management's Discussion and Analysis (Unaudited) ..................................................... ...............................
3
Basic Financial Statements:
Government -wide Financial Statements:
Statementof Net Assets .................................................................................... ...............................
21
Statementof Activities ...................................................................................... ...............................
22
Fund Financial Statements:
BalanceSheet ..................................................................................................... ...............................
23
Reconciliation of the Balance Sheet of Governmental Funds to the
Statement of Net Assets - Governmental Activities ......................................... ...............................
24
Statement of Revenues, Expenditures and Changes in Fund Balances .............. ...............................
25
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities - Governmental Activities .......................................... ...............................
26
Statement of Revenues, Expenditures and Changes in Fund Balances —
Budget to Actual - General Fund ..................................................................... ...............................
27
Proprietary Funds:
Statementof Fund Net Assets ............................................................................ ...............................
28
Statement of Revenues, Expenses and Changes in Fund Net Assets ................. ...............................
29
Statementof Cash Flows .................................................................................... ...............................
30
Fiduciary- Funds:
Statement of Fiduciaiv Assets and Liabilities .................................................... ...............................
31
Notes to the Basic Financial Statements ................................................................. ...............................
32
Required Supplementary Information (Unaudited):
Schedulesof Funding Progress ............................................................................ ...............................
58
i
CITY OF CUPERTINO
Comprehensive Annual Financial Report
For the Year Ended June 30, 2010
Table of Contents
FINANCIAL SECTION (Continued)
Other Supplementary Information:
Schedule of Revenues, Expenditures, and Changes in Fund Balance —
Budget and Actual - Public Facilities Corporation Debt Service Fund
Nonmajor Governmental Funds:
Combining Balance Sheet ............ ...............................
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ......... ...............................
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances — Budget and Actual ......
Internal Service Funds:
Combining Statement of Net Assets ...........................
Combining Statement of Revenues, Expenses and
Changes in Fund Net Assets ...... ...............................
Combining Statement of Cash Flows ..........................
Agency Fund:
Statement of Changes in Assets and Liabilities — Special Assessment District
STATISTICAL SECTION
Financial Trends:
Net Assets by Component — Last Eight Fiscal Years .................... ...............................
Changes in Net Assets — Last Eight Fiscal Years ......................... ...............................
Fund Balances of Governmental Funds — Last Eight Fiscal Years .............................
Changes in Fund Balance of Governmental Funds — Last Eight Fiscal Years............
Revenue Capacity:
Assessed and Estimated Actual Value of Taxable Property — Last Ten Fiscal Years.
Property Tax Rates — All Overlapping Governments — Last Ten Fiscal Years...........
Principal Property Taxpayers — Current Year and Nine Years Ago ............................
Property Tax Levies and Collections — Last Ten Fiscal Years ..... ...............................
Debt Capacity:
Ratio of Outstanding Debt by Type — Last Ten Fiscal Years ..............
Direct and Overlapping Bonded Debt ................... ...............................
Legal Bonded Debt Margin Infonnation — Last Ten Fiscal Years ......
Ratio of General Bonded Debt Outstanding — Last Ten Fiscal Years.
Demographic and Economic Information:
Demographic and Economic Statistics — Last Ten Fiscal Years .........
Principal Employers — Current Year and Nine Years Ago ..................
Operating Information:
Full -Time Equivalent City Employees by Function/Program — Last Ten Fiscal Years
Operating Indicators by Function/Program — Last Six Fiscal Years .............................
Capital Asset Statistics by Function/Program — Last Ten Fiscal Years .........................
COMMUNITY PROFILE
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ii
CITY OF CUPERTINO
CUPERTINO
November 17, 2010
CITY HALL
10300 TORRE AVENUE • CUPERTINO, CA 95014 -3202
(408) 777 -CITY • WWW.CUPERTINO.ORG
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, 2010. 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. This financial report incorporates data for the City of
Cupertino and its component units: the Cupertino Public Facilities Corporation and the Cupertino
Redevelopment Agency.
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 the City affairs. The City Council also appoints the
City Attorney and the City Treasurer. All other employees are appointed by the City Manager.
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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,
Sunnyvale, Santa Clara and Los Altos. Its residential population of 55,838 expands to 71,194 when
including the daytime workforce.
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Situated at the west end of Silicon Valley, Cupertino has
earned the reputation of a balanced community with a
sta 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
Fri close proximity to jobs in the Santa Clara Valley. The
City recognizes the importance of quality school facilities
s� and programs to all Cupertino residents, and works in
partnership with the schools in many programs affecting
education and youth. National surveys tank the City high
in education levels, median household incomes, and
registered patent numbers.
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Cupertino is the corporate headquarters of almost twenty
I_os Gat companies including Apple Inc., Verigy, Durect
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derEri o t� Corporation, and ArcSight and houses sixty high-tech
_.. ._ firms including key Hewlett- Packard divisions. 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. Apple has purchased over sixty acres for a major expansion north of
Highway 280 along Pruneridge Avenue between Wolfe Road and Tantau Avenue. Seagate Technology is
moving its headquarters to Cupertino, but the Hewlett- Packard divisions are relocating to Palo Alto
within two years. In 2009, ten million square feet of office and research and development space existed
with vacancy rates of 13% for office and 4.9% for research and development. The City's unemployment
rate of 7.2% falls below the statewide rate of 12.2 %.
Retail space encompassed 3.6 million square feet in 2009, with over 150 eating establishments. The 1.2
million square feet Vallco Shopping Mall, formerly Cupertino Square, comprises most of the City's
redevelopment project area and features two levels of enclosed shopping, three anchor stores, a 16- screen
AMC theatre, a bowling center, ice rink, and international food court. In spite of the mall's additions and
remodel and aside from the theatre being one of the top attended AMC cinemas regionally, the shopping
center continues to underperform. Moreover, financing problems hit the former mall owners, resulting in
a bankruptcy, foreclosure, and sale of the property in 2009. Sears, Macy's, JC Penney, Target, TJ Maxx,
and Whole Foods Market are leading retailers in the City. A local restaurant association promotes the
City as a regional dining destination.
For Santa Clara County property taxes, what began in 2009 intensified in 2010 in three areas: 1) Homes
being purchased at prices lower than previously established assessment values because of foreclosures
and distressed sales; 2) Lack of new construction that increases property values; and 3) the number of
residential and commercial properties given temporary reductions in assessment values. Cities such as
Cupertino with more higher -end housing were more negatively affected by these factors in 2010.
Moreover for the first time ever, in 2010, homes that usually experience a maximum 2% assessed value
increase under Proposition 13, received instead a 0.237% reduction in assessed values because of a lower
California Consumer Price Index. While the residential market may have bottomed out in 2010, the
reduction in the number of businesses and tight credit has caused commercial, industrial and retail
iiii
property assessed values to fall significantly countywide. Cupertino's total assessment roll grew by
2.82% from 2008 to 2009, but declined 0.36% from 2009 to 2010, with Cupertino finishing sixth or
better in the percentages out of the sixteen cities and unincorporated area in the county. Apple and
Hewlett- Packard both with significant presence in Cupertino are ranked county -wide in the top 25 for
business personal property assessments. The Villa Serra Apartments in Cupertino was one of ten major
construction projects in the County.
Cupertino has a high 70% of its sales taxes coming from business -to- business commerce, compared to
California and San Francisco Bay Area averages of 17% and 20% respectively. One company comprises
much of that sector. Conversely, the City is not as diversified into retail, food products, and
transportation as the state and Bay Area. The City's fiscal strategic plan, part of the City's adopted
budget, supports the redevelopment of the Vallco Shopping Mall and recommends that quality retail
components be incorporated into future developments. The following chart shows sales taxes over the
past ten years reflecting the two recessions in the decade and the business -to- business concentration. The
City is seeing a sharp pickup in sales taxes for the first quarter of fiscal 2011. However, Hewlett-
Packard's move out of the City in two years will significantly affect sales taxes if their sales offices are
not retained here.
Sales Tax Trend
Continuing postponement of major commercial or residential projects approved in recent years, such as
Homestead Square, the mixed -use Main Street Cupertino complex, the 24,455 sq. ft. retail expansion of
Cupertino Village, the 10,582 sq. ft. retail building at Tantau Avenue and Stevens Creek Blvd., the
51,000 sq. ft. mixed -use building and 122 -room hotel at the Oaks Shopping Center, and the 19.8 acre One
Results Way office campus redevelopment has kept a lid on construction taxes and permit, park, and
housing fees, but plans have recently advanced on the 138 -room hotel on North DeAnza Boulevard.
Foundation and podium work on the Rose Bowl mixed -use project was done in 2009 but ultimate
construction of the structures themselves is delayed. On the positive side, along with the Villa Serra and
Grove expansion, the 4,871 square foot Learning Game retail commercial building, the Orange and
Granada mixed -use projects, the 20 -unit Las Palmas residential project, and 4 -unit Linnet Lane
townhome development are under construction along with tenant improvement work in various office
buildings.
The City's pension and retiree medical unfunded actuarial accrued liabilities are discussed in Notes 11
and 12 to the Basic Financial Statements. The City expenses the annual installments (required
contributions) to payoff this long -term liability. Cupertino's most recent pension actuarial valuation
report of June 30, 2008 reports a pension unfimded actuarial accrued liability of $10,766,000 and the
City's annual pension costs required an $1,841,000 contribution to CalPERS in 2009 -10 with the amount
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going up to $2,030,000 in 2010 -11 and continuing to rise after that because of CalPERS' investment
losses and changes to the assumptions used in their actuarial studies. Most Bay Area Peninsula cities
including Cupertino have agreed to work toward reducing pension benefits for new hires to address the
long -term rising costs. As of the most recent January 1, 2009 health cost actuarial valuation report, the
City has a retiree medical unfunded actuarial accrued liability of $18,069,000 which requires an annual
contribution of about $2 million. The City has been setting aside monies annually for this purpose since
2004, investing $7 million in an irrevocable trust and $2 million into reserves in order to fund the annual
normal cost and the amortization of past liabilities. The City's five -year budget plans to contribute about
$1.5 million additionally per year to the trust.
Because the City contracts out it 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's caps its contributions to employee health insurance premiums
at a set amount and works with its bargaining units to come up with labor agreements that benefit both
the City and employees. A build -up of operating reserves from the strong revenue years and traditional
under - spending of budgets enables the City to withstand weak revenue years, such as in 2009 -10.
However unless revenues pickup significantly, the City will eventually have to dip into its economic
uncertainty reserves within the next five years.
ECONOMIC INITIATIVES
The recession and future planned departure of a major company demonstrates the need for diversification
of the City's revenue base and a long -term balance of revenues and expenditures as described in the
City's Fiscal Strategic Plan. The City needs to find other revenues to mitigate the fluctuating nature of
sales taxes, hotel taxes, user fees, and state borrowings of local taxes in times of budget distress. It needs
to reduce the concentration of sales taxes among its top companies and top economic sector, the volatile
business -to- business area. Legislation raising the City's property tax share, the opening of a regional
sales office of a major technology solution provider, and update of the utility user tax are successes of the
strategic plan. While the City is undertaking further actions on property tax share, pursuing a storm drain
tax increase to eliminate the General Fund subsidy, and looking at the value of its water system
ownership, other tax or fee initiatives in the plan have incurred opposition to their implementation. The
City's Economic Development department strives to generate revenues by recruiting and retaining retail,
by finding office tenants, facilitating development, branding and outreaching to new business, revising
policies, coordinating with regional organizations, and promoting economic vitality.
The City has taken advantage of economic stimulus opportunities from the American Recovery and
Reinvestment Act and other programs. In 2009 -10 and 2010 -11 it has been awarded $2,600,000 in grants
for streets, energy efficiency, housing improvements, and emergency preparedness. The City is installing
new streetlights and irrigation systems to save on future utility costs. A state proposition passed that will
prevent further raids and borrowings of city taxes, however continuing state budget deficits will keep
pressure on city resources. As part of its service delivery automation and streamlining initiative,
Cupertino recently improved electronic services in Code Enforcement, Recreation, and City Clerk and
plans to expand that work to Community Development with the goal of bringing City Hall closer to the
customer at reduced costs. The fiscal strategic plan promotes the streamlining and repositioning of the
workforce as opportunities arise along with decreasing expenditures and risk exposure by requiring that
developers maintain new open space associated with their projects and that private and public capital
projects be added only if ongoing maintenance is funded.
Vi
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,
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 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. Macias Gini and O'Connell 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, 2009. 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 and we are submitting it to the
GFOA to determine its eligibility for another certificate.
Respectf lly submitted,
7-
David Woo
Finance Director
ACKNOWLEDGMENTS
I would like to express my appreciation to the City employees, City Manager, and the members of the
City Council for their interest in conducting the financial operations of the City in a responsible manner.
Special thanks go to the Finance staff - Tina Mao, Yulia Rumalean, and Richard Wong - for their
continued support and dedication. Special recognition goes to Jennifer Chang, Liz Nunez, and David
Woo for their efforts in the preparation and production of this report.
Reviewed by,
Carol A. Atwood
Director of Administrative Services
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CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2009/10
CITY COUNCIL
Kris Wang
Mayor
Gilbert Wong
Vice Mayor
Mark Santoro
Councilmember
Orrin Mahoney
Councilmember
Barry Chang
Councilmember
DIRECTORY OF CITY OFFICIALS
David W. Knapp - City Manager
Carol Korade — City Attorney
Carol Atwood — Director of Administrative Services
Mark Linder — Director of Parks and Recreation
Ralph Qualls — Director of Public Works
Aarti Shrivastava - Director of Community Development
ix
CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2009/10
COMMISSIONS AND COMMITTEES
AUDIT COMMITTEE PARKS & RECREATION COMMISSION
Myoung Kang
Mark Santoro
Stanley Stemkoski
Garrett Wade
Barry Chang
Jeanne Bradford
David Greenstein
David Lee
Darcy Paul
HOUSING COMMISSION
Harvey Barnett
Radha Kulkarni
Nicole Maroko
Liutyng Lin
Jimmy Chien
FINE ARTS COMMISSION
KC Chandratreya
John Fiegel
Srilakshmi Sitaraman
Robert Harrison
Jessi Kaur
PUBLIC SAFETY COMMISSION
Charles Caldwell
Nina Daruwalla
Craig Lee
Daniel Nguyen
Tamara Pow
TEEN COMMISSION
Utkarsh Bhagi
Kailash Sundaram
Jacqueline Do
Shailee Samar
Anand Hemmady
Anna Kathryn Sengupta
Esther Lim
Hadar Sachs
Laura Liu
TECHNOLOGY, INFORMATION &
COMMUNICATIONS COMMISSION
William Allen
Peter Friedland
Avinash Gadre
Wallace Iimura
Andrew Radle
LIBRARY COMMISSION
Adrian Kolb
Ronald Miller
Katherine Stakey
Ann Stevenson
Susanna Tsai
PLANNING COMMISSION
Paul Brophy
Lisa Giefer
David Kaneda
Winnie Lee
Marty Miller
BICYCLE PEDESTRIAN COMMISSION
Mark Fantozzi
Geoffrey Paulsen
Alan Takahashi
James Wiant
William Chan
ECONOMIC DEVELOPMENT
Lisa Giefer
Carol Atwood
Mike Foulkes
Kelly Kline
David Knapp
Orrin Mahoney
Lynn Ching
Ralph Qualls
Aarti Shrivastava
Maria Streeby
Gilbert Wong
FISCAL STRATEGIC COMMITTEE
Kris Wang
Orrin Mahoney
Carol Atwood
David Woo
Roger Lee
Kelly Kline
Aarti Shrivastava
x
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, 2009
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and financial reporting.
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Sacramento • Walnut Creek • Oakland • Los Angeles • Century City • Newport Beach • San Diego mgocpaxom
City Council
City of Cupertino, California
Independent Auditor's Report
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 (the City), as of and for the year ended June 30, 2010, which collectively comprise the City's
basic financial statements as listed in the table of contents. These financial statements are the
responsibility of the City's management. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's
internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our 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 of Cupertino, California as of June 30, 2010,
and the respective changes in financial position and, where applicable, cash flows thereof, and the
respective budgetary comparison for the General Fund for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
As discussed in Note 1(n) to the basic financial statements, effective July 1, 2009, the City adopted the
provisions of Governmental Accounting Standards Board (GASB) Statement No. 51, Accounting and
Financial Reporting for Intangible Assets.
The management's discussion and analysis and the schedules of funding progress listed in the table of
contents are not a required part of the basic financial statements but are supplementary information
required by accounting principles generally accepted in the United States of America. We have applied
certain limited procedures, which consisted principally of inquiries of management regarding the methods
of measurement and presentation of the required supplementary information. However, we did not audit
the information and do not express an opinion on it.
3000 S Street 2121 N. California Blvd. 505 14th Street 515 S. Figueroa Street 2029 Century Park East 1201 Dove Street 225 Broadway
Suite 300 Suite 750 5th Floor Suite 325 Suite 50€1 Suite 680 Suite 1750
Sacramento Walnut Cneek Oakland Los Angeles Los Angeles Newport Beach San Diego
CA 95816 CA 95496 CA 94612 CA 900711 CA 90067 CA 92660 CA 92141
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 section are presented for purposes of
additional analysis and are not a required part of the basic financial statements. The other supplementary
information section has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole. The introductory, statistical, and community profile sections have
not been subjected to the auditing procedures applied in the audit of the basic financial statements and,
accordingly, we express no opinion on them.
Certified Public Accountants
Walnut Creek, California
November 17, 2010
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
This describes the City of Cupertino's financial perfonnance for the year. Please read it in conjunction with the
accompanying Transmittal Letter and Basic Financial Statements.
2009 -10 FINANCIAL HIGHLIGHTS
• Governmental activity revenues were $46,152,000, down significantly from $51,757,000 in 2008 -09.
• Governmental activity expenses were $46,223,000 in 2009 -10, down slightly from $46,807,000 in the prior
year.
• Revenues from business -type activities were $6,575,000 in current year, down from $6,980,000 in the prior
year.
• Expenses of business -type activities were $5,808,000 in current year, down slightly from $5,828,000 in the
prior year.
• Governmental net assets were relatively unchanged while business -type net assets rose $767,000.
• General Fund revenues of $35,578,000 represented a large decrease of $5,715,000 from the prior year;
General Fund expenditures increased $680,000 to $32,956,000 in 2009 -10.
• The General Fund incurred expenditure budget savings of $2,338,000; however, revenues fell short of
budget by $2,310,000.
• Including net transfers out, the General Fund balance declined $6,266,000 to end the year at $15,931,000.
OVERVIEW OF THE FINANCIAL STATEMENTS
The Basic Financial Statements comprise the City -wide Financial Statements and the Fund Financial
Statements; these two sets of financial statements provide two different views of the City's financial activities
and position.
The City -Wide Financial Statements provide a long -term view of the City's activities as a whole, and
comprise the Statement of Net Assets 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
Assets 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 information about all the City's revenues and all
its expenses, with the emphasis on measuring net revenues or expenses for each of the City's programs. The
Statement of Activities explains in detail the change in Net Assets for the year. Over time, increases or
decreases in net assets 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 Assets and the Statement of Activities provide a summary of these two types of
activities for the Citv 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 Citv's governmental activities include the activities of a separate legal entity, the Cupertino
Redevelopment Agency, because the City is considered to be financially accountable for the Agency. The
Cupertino Public Facilities Corporation, from which the City leases its major facilities through the payment
of long -term debt, is also included as a component unit.
• Business -type activities —All the City's enterprises are reported here, including solid waste management
and some of the City's recreational operations. Unlike governmental services, these services are supported
by charges paid by users based on the amount of the service they use.
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
The Fund Financial Statements report the City's operations in more detail than the government -wide
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, and liabilities; they exclude
long -term assets and liabilities. Because these statements focus on the near -teen inflows and outflows of
spendable resources, such infonnation 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 government -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 activities
statements to allow a better understanding of the long -term impact of the government's near -term financial
decisions.
Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis and include all
their assets and liabilities, current and long -term. Enterprise funds are used to report the same functions
presented as business -type activities in the government -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 assets 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 government -wide financial statements.
Comparisons of budget and actual financial infonnation are included in the Basic Financial Statements for the
General Fund and other major Special Revenue Funds. Since none of the City's Special Revenue Funds are
considered major funds, budgetary comparison schedules for these funds are included in this document as
supplemental information only.
Fiduciary Fund statements provide financial information about the activity of an assessment district. The City
acts strictly as an agent for the district holding amounts collected from property owners, prior to transferring the
money to the districts' bond trustees. The City's fiduciary activities are reported in the separate Statement of
Fiduciary Net Assets and the Agency Funds Statement of Changes in Assets and Liabilities. These activities are
excluded from the City's other financial statements because the City cannot use these assets to finance its own
operations.
The Notes to Basic Financial Statements provide additional detail that is essential to a full understanding of
the information provided in the government -wide and fund financial statements.
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
CITY -WIDE FINANCIAL ACTIVITIES
This analysis focuses on the net assets and changes in net assets of the City's Governmental Activities (Tables 1
and 2) and Business -Type Activities (Tables 3 and 4) presented in the City -wide Statement of Net Assets and
Statement of Activities that follow. The Change in Net Asset Tables 2 and 4 show activity from a revenue and
expense perspective.
Governmental Activities
Table 1
Condensed Statement of Net Assets at June 30
(in thousands)
Assets:
Cash and investments
Other assets
Capital assets
Governmental Activities
2010
$ 41,700
10,391
165,915
218.006
2009
Total assets
Liabilities:
Long term debt
Other liabilities
Total liabilities
Net assets:
Invested in capital assets, net of debt
Restricted
Unrestricted
Total net assets
$ 48,363
6,446
167,275
222.084
45,510
46,970
12,311
14,858
57,821
61,828
120,405
120,305
8,692
6,661
31,088
33,290
$ 160,185 $ 160,256
The City's net assets from governmental activities were relatively unchanged from the prior year. The following
significant changes within asset, liability, and net asset categories occurred:
• A $7,000,000 investment into an irrevocable trust dedicated to future other post employment benefits
(OPEB) was the major cause of the cash and investments decrease. It also reduced the OPEB obligation
portion of other liabilities by $1,827,000 and increased the OPEB portion of other assets by $3,747,000.
• Principal payments on the 2002 certificates of participation lowered long -term debt by $1,460,000.
• Approximately $2 million in net assets changed from unrestricted to restricted reflecting lower
unrestricted general funds and higher balances restricted to transportation, redevelopment, and housing
purposes.
5
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
Sources of Revenues, Governmental Activities 2009 -10
Other Taxes
Yo
Franchise Tax 5% Investments
1 01 0
Utility user Tax Operating
7 ° "o Charges for Contributions & Grants
Services 4%
Transient Occupanc } 12%
Tax
5%
Capital Grants &
Contributions
12 °o
Sales Tax
22%
Property Tax
29%
As the Sources of Revenue chart above shows, property and sales taxes make up half of governmental revenue.
The Functional Expenses chart below includes only current year expenses with Public Works action on streets,
facilities, parks and storm drains comprising the largest activity. The chart does not include capital outlays or
principal payments on debt. Capital outlays are instead shown as additions to capital assets and principal
payments are reported as long -term liability reductions.
Functional Expenses, Governmental Activities 2009 -10
Interest Administration
4% 4%
Law Enforcement
18%
Public Public & Environmental
Works Affairs
42% 4%
Administrative Services
9%
Recreation Services
Community 10%
Development
9%
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
The Statement of Activities presents program revenues, expenses, and general revenues. These are all elements
of the Changes in Governmental Net Assets summarized in the next table.
Table 2
Condensed Changes in Net Assets For The Year Ended June 30
(in thousands)
7
Governmental Activities
2010
2009
Expenses:
Administration
S 1,912
S 1,770
Law enforcement
8,385
8,804
Public and environmental affairs
1,653
1,624
Administrative services
4,080
4,002
Recreation services
4,445
4,206
Community development
4,351
6,178
Public works
19,320
18,104
Interest on long term debt
2,077
2,119
Total expenses
46,223
46,807
Revenues
Program revenues:
Charges for services
5,631
5,417
Operating contributions and grants
2,043
4,014
Capital grants and contributions
5,511
4,760
Total program revenues
13,185
14,191
General revenues:
Taxes:
Property tax
7,489
7,492
Property tax in lieu of motor vehicle fee
4,421
4,300
Incremental property tax
1,323
1,211
Sales tax
9,931
14,139
Transient occupancy tax
2,142
2,140
Utility user tax
3,271
3,205
Franchise tax
2,598
2,618
Other taxes
1,212
1,318
Intergovernmental, unrestricted
Motor vehicle license fee
166
172
Investment earnings
295
890
Miscellaneous
119
81
Total general revenues
32,967
37,566
Total revenues
46,152
51,757
Change in net assets
(71)
4,950
Beginning net assets, as previously reported
143,293
138,343
Prior period adjustment for easements
16,963
16,963
Beginning net assets, as restated
160,256
155,306
Ending net assets
S 160,185
S 160,256
7
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
City -wide Governmental Revenues
Table 2 shows that total governmental revenues fell $5,605,000 or 11% off of last year, finishing at
$46,152,000.
Sales taxes fell $4,208,000 or 30% off of last year to finish up at $9,931,000. The state's mechanism of
collecting and allocating these taxes to the City lags actual sales trends by up to a year, so a part of last year's
recessionary downturn in business -to- business and retail sales showed up in this year's City results. Actual sales
tax collections in this current year, with prior year effects excluded, were down by only 4% from 2008 -09. This
year's result was also negatively impacted by the timing of a sales tax consulting agreement that is payable out
of a percentage of revenues. The positive revenue result that will show in first quarter of the new fiscal year is
offset by the corresponding higher amount payable for the consulting agreement in the current fiscal year.
Grants and contributions, both operating and capital related, decreased a combined $1,220,000 or 14% from
2008 -09 as this year's Stevens Creek Corridor Park and pavement resurfacing grants from federal and state
sources such as the American Recovery and Reinvestment Act, Surface Transportation Program, Proposition 113
bonds, and Park Bond Act were under the 2008 -09 Mary Avenue Bicycle Footbridge and community housing
program reimbursements received from the Santa Clara Valley Transportation Authority and Community
Development Block Grants (CDBG).
City -wide Governmental Expenses
City -wide governmental expenses in Table 2 decreased $584,000 or 1% under 2008 -09. Administration,
Recreation Services, and Public Works rose while Law Enforcement and Community Development declined.
Administrative Services, Public & Environmental Affairs, and debt interest were stable.
Administration increased $142,000 or 8% this year due to higher contract attorney use.
Recreation Services rose $239,000 or 6% because the Blackberry Farm recreation area and swimming pool
reopened in July 2009 after a two -year construction project.
Higher depreciation costs caused Public Works expenses to go up $1,216,000 or 7% over the prior year
reflecting the Mary Avenue Footbridge, Stevens Creek Corridor Park, and pavement capital projects completed
in the prior year.
The General Fund paid the County Sheriffs Office, under a Law Enforcement contract with the City, $251,000
or 3% more this year because of an annual cost of living adjustment, but on a consolidated financial basis, law
enforcement expenses dropped $419,000 from the previous year as internal service costs for information
technology, equipment, and insurance were no longer allocated to this function starting in 2009 -10.
Community Development expenses fell $1,827,000 or 30% primarily because of 2008 -09 CDBG monies and
City development impact fees expended on the Maitri domestic violence shelter and the Senior Housing
Solution senior living residence.
Change in Net Assets
City -wide governmental expenses in excess of revenues and accompanying net asset decrease of $71,000 was
under the $4,950,000 increase of last year, mostly due to the revenue falloff.
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 the costs of providing
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
services and facilities to the general public on a continuing basis can be financed or recovered primarily through
user fees.
Business -type net assets totaled $9,852,000 at June 30, 2010, an increase of $767,000 from the prior year with
$652,000 of the rise going into capital assets and the rest into unrestricted net assets.
Overall revenues of $6,575,000 this year were $405,000 or 6% lower than last year with declines in all of the
City's enterprises.
Expenses for all business -type activities were flat at $5,808,000. Revenues over expenses of $767,000 declined
from the $1,152,000 in 2008 -09, reflecting the lower operating incomes of the Sports Center, Recreation, and
Resources Recovery enterprises. The major proprietary funds section of this report provides more information
on business -type results.
Table 3
Condensed Statement of Net Assets at June 30
(in thousands)
9
Business Type Activities
2010
2009
Assets:
Cash and investments
$
9,762
$ 9,749
Other assets
348
353
Capital assets
788
136
Total assets
10,898
10,238
Current liabilities
1,046
1,153
Total liabilities
1,046
1,153
Net assets:
Invested in capital assets
788
136
Unrestricted
9,064
8,949
Total net assets
$
9,852
$ 9,085
Table 4
Condensed Changes in Net Assets For The Year Ended
June 30
(in thousands)
Business T Activities
2010
2009
Expenses:
Resources recovery
$
2,018
$ 1,998
Blackberry farm
457
496
Sports center
1,478
1,594
Recreation programs
1,855
1,740
Total expenses
5,808
5,828
Revenues
Program revenues:
Charges for services
6,501
6,794
Operating contributions and grants
7
14
Total program revenues
6,508
6,808
General revenues:
Investment income
67
172
Total revenues
6,575
6,980
Change in net assets
767
1,152
Beginning net assets
9,085
7,933
Ending assets
$
9,852
$ 9,085
9
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
MAJOR GOVERNMENTAL FUNDS
General Fund
General Fund Revenues
General Fund revenues of $35,578,000 ended up $2,310,000 or 6% below the final budget and $5,003,000 or
12% below the original budget for the year ended June 30, 2010. This was $5,715,000 or 14% under last year.
Severe declines in property and sales taxes caused the year -to -year falloff while underperfonnance in almost all
revenue categories except for transient occupancy taxes and intergovernmental grants produced the budget
shortfall. Table 5 displays year -to -year variations, while Table 6 shows budget versus actual differences.
Property taxes ended the year at $10,439,000, dropping 11% or $1,304,000 from last year while meeting the
final budget. The budget was adjusted downward at mid -year by $770,000 after the State adopted a late 2009 -10
budget in September 2009 that included the borrowing of $1,419,000 in property taxes to fund their budget
deficit. Proposition IA requires that the State repay this to the City by June 30, 2013 with 2% annual interest
and until that is done, it cannot seize any more property taxes under this statute; accordingly, this loan is carried
as a receivable and deferred revenue. The revenue decline was partially offset by actual tax receipts, aside from
the borrowing, coming in slightly better than predicted from the assessed valuation known at the original budget
adoption. However, the City was not immune to the weakness in the residential and commercial real estate
markets and tax roll growth was down from previous years. But because of the City's low foreclosure rates and
its popular local school districts, assessed values have been impacted less severely relative to many other cities
in the County. This category also includes property taxes that replace motor vehicle license fees lost due to the
statewide fee reduction in 2005.
Sales taxes fell $4,208,000 or 30% off of last year to finish up at $9,931,000. It was $1,718,000 or 15% below
the original budget and $1,318,000 or 12% below the final budget. The state's mechanism of collecting and
allocating these taxes to the City lags actual sales trends by up to a year, so a part of last year's recessionary
downturn in business -to- business and retail sales showed up in this year's City results. Actual sales tax
collections in this current year, with prior year effects excluded, were down by only 4% from 2008 -09. This
year's result was also negatively impacted by the timing of a sales tax consulting agreement that is payable out
of a percentage of revenues. The positive revenue result that will show in first quarter of the new fiscal year is
offset by the corresponding higher amount payable for the consulting agreement in the current fiscal year.
After the City saw declines in the first two quarters, it lowered its sales tax budget by $400,000.
The four hotels in the City remitted $2,142,000 in transient occupancy taxes this year, equaling last year's
performance. It was 7% or $148,000 better than the final budget. Receipts began to improve in November 2009
as the hotels, which all cater to business, saw a pickup in occupancy rates. Average room rates, however,
continued to lag the prior year. The City had forecasted a stronger business recovery in hotels than what was
unfolding, so the budget for this 10% tax was decreased at mid -year by $400,000.
The City's 2.4% utility user tax on telecommunication, gas, and electric services rose 2 % above last year. This
$3,271,000 in revenues was $95,000 or 3% under the original and final budget. On November 3, 2009, voters
passed an ordinance to ensure that this tax can continue to be collected on contemporary telecom systems.
Franchise taxes of $2,598,000 from electric, gas, water, solid waste, and cable utilities were mostly unchanged
from last year and in -line with this year's original and final budget.
Other taxes include business license, construction, and property transfer taxes. The county assesses the transfer
tax, at $1.10 per $1,000 in sales price, upon recording the ownership change, and gives the City one -half of the
tax. The increase in housing transactions offset the continuing decline in building activity and the associated
construction tax on its value, causing the other tax category to grow by a net 13% or $133,000 from 2008 -09
10
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
figures. However, the lack of a pickup in construction, due to difficulties in commercial financing, caused other
taxes to be 4% or $49,000 off of the final budget and 23% or $349,000 under the original budget.
Licenses and permits finished at $2,583,000, declining 6% or $157,000 from 2008 -09. It was 20% or $627,000
below the final and original budget. The slump in residential construction continued, while expected new
commercial projects did not come to fruition. Fees from a partially completed project at the Rosebowl were
delayed.
Zoning, planning, and engineering review fees comprise two - thirds of the charges for services category, with
non- enterprise recreational programs encompassing the rest. The category improved from $1,266,000 last year
to $1,334,000 this year, a 5% rise. It finished $100,000 or 7% below the final budget and $500,000 and 27%
under the original budget. Entitlement and street cut review fees were below forecasts as developments were
placed on hold, while Senior Center revenues turned out better than expected and grew over last year as the mild
economic recovery helped trip and class bookings. The Blackberry Farm recreation area reopened in July 2009,
resuming fees for picnic ground and swimming pool use, after being closed for a two year capital improvement
project.
Intergovernmental revenues of $626,000 rose 48% or $205,000 from last year, exceeded the final budget by
27% or $134,000, and topped the original budget by 51% or $211,000. $88,000 of an American Recovery and
Reinvestment Act grant for energy efficiency work appeared in 2009 -10 while $40,000 of a Citizens Option for
Public Safety grant, normally received in 2008 -09, arrived instead in October 2009. Cost reimbursements from
other governments and districts, including those for State mandates, grew by $42,000. $77,000 in new emergency
management grants were awarded to the City during 2009 -10 and subsequently added to the budget.
General Fund cash is part of the City's pooled investment portfolio. Investment returns of the pool are allocated
to the Fund based on the Fund's monthly cash balance. These returns plus the renting of City facilities comprise
use of money and property revenues, which extended their slump into a second year, falling 41% from 2008 -09,
to finish at $686,000 versus $1,163,000 a year ago. Results include $25,000 of unrealized losses from declines
in market value on the fixed rate securities in the portfolio. Current results were 23% and 51% under the final
and original budgets, respectively. Falling cash balances because of lower revenues and the portfolio's increased
concentration in safe short-term Treasuries kept yields down. As interest rates did not increase as expected and
investments into higher yielding Federal agencies and the Local Agency Investment Fund did not occur, the
investment revenue budget was decreased at mid -year by $500,000. A further explanation of the investment
picture for the year is in Note 2 of the Basic Financial Statements. Rent income was stable and on budget.
Fines and forfeitures year -to -year were relatively flat. Actual receipts came in $166,000 or 18% below final and
original budget as courts were assessing lower fine amounts in certain cases.
Transfers into the General Fund dropped 22% from $624,000 last year to $487,000 this year. There were fewer
surplus dollars returned to the General Fund from project savings in the Capital Project Improvement Fund. The
budget for transfers added $992,000 during the year to reflect the project savings and a $505,000 borrowing of
money from an internal service fund to replace the State property tax takeaway. However the borrowing was
actually recorded as an advance from another fund liability, rather than as a transfer -in, causing the budget
versus actual difference.
11
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
Table 5
Revenue Changes
General Fund, Fiscal 2010 vs. 2009
(in thousands)
12
Increase /(Decrease)
Fiscal 2010
From Fiscal 2009
Revenue by Source
Amount % of Total
Amount
Percent
Taxes:
Property
S
10,439
30%
S (1,304)
-11%
Sales
9,931
28%
(4,208)
-30%
Transient occupancy
2,142
6%
2
0%
Utility user
3,271
9%
66
2%
Franchise
2,598
7%
(20)
-1%
Other
1,151
3%
133
13 %
Use of money & property
686
2%
(477)
-41%
Intergovernmental
626
2%
205
49%
Licenses and permits
2,583
7 %
(157)
-6 %
Charges for services
1,334
4%
68
5%
Fines and forfeitures
736
2%
(25)
-3%
Other
81
--
2
3 %
Total revenues
S
35,578
100%
$ (5,715)
-14 %
Transfers in
S
487
100%
S (137)
-22%
Table 6
Revenue
Budget and Actual Comparisons
General Fund, 2009 -10
(in thousands)
Budgeted Amounts
Over /(Under)
Original
Final
Actual
Final
Taxes:
Property
S
11,190 S
10,420
S 10,439
S 19
Sales
11,649
11,249
9,931
(1,318)
Transient occupancy
2,394
1,994
2,142
148
Utility user
3,366
3,366
3,271
(95)
Franchise
2,630
2,630
2,598
(32)
Other
1,500
1,200
1,151
(49)
Use of money & property
1,391
891
686
(205)
Intergovernmental
415
492
626
134
Licenses and permits
3,210
3,210
2,583
(627)
Charges for services
1,834
1,434
1,334
(100)
Fines and forfeitures
902
902
736
(166)
Other
100
100
81
(19)
Total revenues
S
40,581 S
37,888
S 35,578
S (2,310)
Transfers in
S
- S
992
S 487
S (505)
12
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
General Fund Expenditures
Fiscal 2009 -10 overall expenditures, at $32,956,000, were $680,000 or 2% higher than last year's total of
$32,276,000. However, this result came in 7% or $2,338,000 under the final budget and $2,533,000 below the
original budget. Year -to -year and budget versus actual results by General Fund department are described below
and in Tables 7 and 8.
Administration expenditures of $1,469,000 rose 10% or $132,000 over last year while finishing $48,000 or 3%
under final budget. Higher usage of contract attorney services accounted for the yearly rise while a staff attorney
vacancy led to a minor budget reduction at mid -year.
Law Enforcement sheriff contract costs of $8,384,000 were under the final budget by $182,000 or 2 %. The
budget contains dollars for unexpected events or incidences, so by the end of the year, the normal rate of general
law enforcement, service requests, emergency calls, patrol, and investigations usually brings budget savings.
Funds for school traffic safety was carried over from the previous year and added to the amended budget. The
results exceeded past year expenditures by 3% or $251,000, because of the contract's cost of living adjustment.
Having contract law enforcement helps the City contain costs.
Public and Environmental Affairs expenditures of $1,487,000 were flat on a budget and year -to -year basis.
Administrative Services increased 3% from last year and finished 8% or $329,000 under final budget. The
City's biennial City Council election affected the yearly fluctuation. Budget savings were realized in finance,
city clerk, disaster preparedness, insurance, code enforcement and neighborhood watch. The final budget was
$192,000 under the original budget due mid -year budget cuts from a human resource staff vacancy and a lower
insurance reserve.
Non - enterprise Recreation expenditures ended up $285,000 or 7% below final budget, but exceeded last year's
spending by $215,000 or 6 %. The Blackberry Farm recreation area and swimming pool reopened in July 2009
after a two -year closure for construction. Most operational areas realized budget savings but the senior travel
program comprised 45% of the savings as their cost of trips sold budget was set for a higher revenue level than
what was actually realized, even after a mid -year budget decrease.
Community Development costs of $3,069,000 was $492,000 or 14% below the final budget due to a lower
amount of building activity and associated reduction in plan checking and inspection work. Additionally, the
department employed fewer consultant hours than anticipated for its long -tern planning work. Costs dipped 4%
or $140,000 from last year as the less contract plan checking was needed.
Public Works maintenance, repair, and engineering expenditures of $10,809,000 rose a slight 1% or $121,000
over the prior year. It was $995,000 or 8% under final budget due to a school traffic safety project that will
continue into next year, two engineering staff vacancies, and surplus engineering, traffic, and maintenance
contingencies. Purchase orders from last year comprised the $253,000 increase from original to final budget.
Transfers out of the General Fund climbed from $7,110,000 in 2008 -09 to $9,375,000 in 2009 -10, as finally
budgeted, with $3,538,000 for ongoing debt service, $2,625,000 for one -time capital projects, $1,848,000 for
ongoing retiree health obligations, $750,000 for ongoing road maintenance, $300,000 for ongoing accrued leave
payouts, $199,000 for new information technology and equipment, $100,000 for ongoing infrastructure reserve
additions, and a $15,000 new subsidy for storm drain management. The increase over 2008 -09 resulted from
new capital funding offset by a reduction in the retiree health contribution, accrued leave payout, and
information technology support. $1,696,000 of the capital funding came out of General Fund reserves for a
citywide streetlight and irrigation retrofit project which is slated to generate future energy savings. The
$929,000 remaining capital commitment was for various tasks described in the Capital Improvement Projects
section of this discussion, $487,000 of it reflects a redeployment of budget savings from older projects. The
budget varied during the fiscal year as new projects were authorized.
13
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
Service Area
Administration
Law enforcement
Public and environmental affairs
Administrative services
Recreation services
Community development
Public works
Total expenditures
Transfers out
Table 7
Expenditure Changes from Prior Year
General Fund, 2009 -10
(in thousands)
Fiscal 2010
Increase /(Decrease)
From Fiscal 2009
Under
Amount
% of Total
Amount Percent
$ 1,469
4%
$ 132
10%
8,384
25%
251
3%
1,487
5 %
1
0%
3,734
11%
100
3%
4,004
12%
215
6 %
3,069
10 %
(140)
-4%
10,809
33%
121
1 %
$ 32,956
100 %
$ 680
2%
$ 9,375
100%
$ 2,265
32%
Table 8
Expenditure Budget and Actual Comparison
General Fund, 2009 -10
(in thousands)
Service Area
Administration
Law enforcement
Public and environmental affairs
Administrative services
Recreation services
Community development
Public works
Total expenditures
Transfers out
General Fund Balance
Budgeted Amounts
Under
Original
Final
Actual
Final
$ 1,547
$ 1,517
$ 1,469
$ 48
8,537
8,566
8,384
182
1,500
1,494
1,487
7
4,255
4,063
3,734
329
4,366
4,289
4,004
285
3,733
3,561
3,069
492
11,551
11,804
10,809
995
$ 35,489
$ 35,294
$ 32,956
$ 2,338
$ 7,573
$ 9,375
$ 9,375
$ -
At June 30, 2010, the General Fund reported a total ending fund balance of $15,931,000, down 28% or
$6,266,000 from the prior year. The City designates $12,500,000 of this for economic uncertainty and $916,000
for utility user taxes specified for capital projects. $1,104,000 is reserved for open purchase orders, future
public access programming, and prepaid expenses. $1,204,000 is earmarked as rehabilitation and employee
housing loans due back to the City. Finally, $207,000 in unreserved, undesignated funds is available to balance
future budgets.
14
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
The fund balance falloff resulted from revenues exceeding expenditures by $2,622,000 offset by a net transfer
out of $8,888,000. The unreserved, undesignated fund balance took the bulk of the hit dropping from $4,857,000
a year ago to $207,000 at June 30, 2010. The $915,000 set -aside for state budget raids was depleted when the
state took property taxes at mid -year for their budget deficit. The designated utility user tax balance was drawn
down by $684,000 during the year for capital project use. Loan payoffs reduced loan reserves by $17,000.
Public Facilities Corporation
This fund accounts for the payments of principal and interest on the 2002 certificates of participation (COPs),
which refinanced the long -term debt that funded many of the City's major parks and facilities. As in previous
years, General Fund transfers into the fund cover the debt service payments of $3,538,000.
Capital Improvement Projects
All of the City's non - enterprise capital projects are in this fund, except for the Stevens Creek Corridor Park,
which is a separate major fund, and the Mary Avenue Bicycle Footbridge, which is a part of Other
Governmental Funds. Funding for these projects come from grants, General Fund, and Other Governmental
Funds. Outlays for park, facility, and traffic projects declined from $2,048,000 in 2008 -09 to $1,359,000 in
2009 -10, as Sterling /Barnhart Park construction, Service Center equipment wash rack, Quinlan Community
Center courtyard trellis, and Sports Center tennis court lighting were new projects worked on this year. The
General Fund and Other Governmental Funds provided $2,322,000 and $60,000 respectively in new project
funding this year, compared to none the previous year, as earlier revenue forecasts allowed a cautious
resumption of capital spending and an investment in a strectlight and irrigation retrofit project was deemed to be
worthwhile because of future utility bill savings. $487,000 in completed project cost savings were returned to
the General Fund. The General Fund maintained its commitment of contributing $100,000 annually to the
Capital Improvement Fund and designating these contributions towards future projects. As of June 30, 2010,
the Capital Improvement Fund has $1,775,000 designated for capital projects of which $1,000,000 is designated
for infrastructure projects, $699,000 is designated for capital improvement, and $76,000 for construction in
progress.
Stevens Creek Corridor Park
This fund contains three capital projects. The $13,577,000 Phase One segment to completely re- design the
picnic grounds at Blackberry Farm, re -align and restore the natural habitat of the creek, renovate the swimming
pool facilities, and build the creek trail, completed major construction and re- opened to the public on July 4,
2009. Outlays for this segment fell to $994,000 during 2009 -10 compared to $9,472,000 the previous year as
this year's work consisted of providing minor improvements to the area facilities. Phase Two, initially budgeted
at $200,000 for designing a trail extension to Stevens Creek Boulevard, began with $37,000 in expenditures for
2009 -10. A new third project, the $800,000 Blackberry Farm infrastructure upgrade, kicked off with $33,000
spent in 2009 -10 for design. The General Fund financed two- thirds of Phase One, with the City's recreation
enterprise fund, State grants, and the Santa Clara Valley Water District backing the rest of the undertaking. The
City billed for and received many of the cost - reimbursement grants during this fiscal year, with $2,294,000
received and accrued this year compared to $804,000 the prior year. Moreover, the infrastructure upgrade
project received a $303,000 transfer from the General Fund this year. With the reimbursements and transfers,
the $838,000 fund balance deficit of the past year turned into a current $965,000 positive fund balance
designated for Phase Two and the infrastructure upgrade.
15
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
MAJOR PROPRIETARY FUNDS
Resources Recovery
The City's solid waste disposal enterprise, operated by a franchise agreement with Recology, experienced little
change in solid waste pickup and debris box revenues compared to the previous year. Operating expenses for
pickup, landfill disposal, recycling, and City administration rose a modest 1 %. Operating income declined from
$117,000 to $93,000 this year. With interest earnings of $41,000, net assets increased by $134,000 ending the
year at $5,827,000 in unrestricted net assets. The net asset increase underperformed the $222,000 growth of last
year, because of lower interest earnings from the City's pooled investment portfolio and the lower operating
income. The City renewed its franchise agreement for five years commencing in November 2010 with a minor
revenue rate increase and a restructuring of how the City and franchisee share revenues and costs.
Blackberry Farm
City employees, with a teaching professional on contract, staff the City -owned Blackberry Farm golf course and
pro shop. Golfing green fees declined at a lower degree that the previous year, as the older demographics of golf
course users continued to negatively impact customer counts. Operating revenues of $569,000 represented a 5%
or $28,000 drop in 2009 -10, compared to a 7% and $44,000 decline in 2008 -09. Expenses decreased by
$39,000 or 8% finishing at $457,000 this year as water irrigation cost increases of the previous year were
avoided and managed with lower water usage. Increase in net assets was $115,000, an improvement over the
$109,000 of last year. At June 30, 2010, unrestricted net assets were $534,000.
Cupertino Sports Center
Tennis lesson, membership, fitness class and rent revenues of $1,578,000 declined by $154,000 or 9% off of last
year, resulting from a falloff in tennis lesson revenues generated by a private sports operator. Corresponding
contract instructor and in -house staff costs fell by $122,000, but with unchanged facility maintenance costs,
operating income fell to $100,000 in 2009 -10, off of the $138,000 produced in 2008 -09. After adding -in interest
earnings, the increase in net assets of $104,000 brought ending unrestricted net assets to $346,000 by year -end.
The Sports Center completed $83,000 of tennis court resurfacing and equipment purchases during the year,
enhancing capital assets by that amount.
Recreation Programs
Cultural events, youth and teen programs, sports, dance and fitness classes generated earnings of $2,249,000,
which was $115,000 or 5% less than last year, for this enterprise operated out of the Quinlan Community
Center, Morita Vista Recreation Center, McClellan Ranch, Creekside Park building, eight school sites, and
various parks. Ongoing program expenses, including full -time administrative and programming staff, part-time
activity leaders, and class instructors on contract decreased only $22,000 or 1% from 2008 -09. Along with one-
time furniture purchases of $137,000, operating income dropped to $395,000 compared to $624,000 of a year
ago. After adding interest earnings, the fund ended up with an increase in net assets of $413,000 and an
unrestricted net asset balance of $2,355,000. This balance is committed toward future capital improvement and
insurance needs. Memorial Park softball and Library multi - purpose field renovations, park tennis court
resurfacings, and the new Monta Vista Recreation Center roof added $594,000 to capital assets this year.
16
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
CAPITAL ASSETS
At June 30, 2010 the City had $166,703,000, net of depreciation, invested in a broad range of capital assets used
in governmental and business -type activities, as shown in the following table and in Note 6 to the Basic
Financial Statements:
Table 9
Capital Assets, Net of Depreciation, at June 30
(in thousands)
Government Activities:
Land
Easements
Buildings
Improvements other than buildings
Machinery and equipment
Roads, curbs, gutters, sidewalks, medians and bridges
Streetlights
Strom drain structures and mains
Traffic signals
Total Governmental Activities
Business -Type Activities
Buildings
Improvements other than buildings
Machinery and equipment
Total Business Type Activities
Total City
165,915 167,275
285
2009,
2010
as restated
116
136
$ 60,806
$ 60,806
17,939
16,963
25,589
26,787
18,016
17,606
1,377
1,566
34,676
35,273
85
46
5,981
6,701
1,446
1,527
165,915 167,275
285
-
387
-
116
136
788 136
$ 166,703 $ 167,411
City capital assets decreased by $708,000 due to normal depreciation. 2008 -09 includes $16,963,000 of
easements adopted since 2003 added as a prior year adjustment, with $976,000 of new easements added in
2009 -10. Business -type asset gains came from recreational facility improvements.
DEBT ADMINISTRATION
The City's only long -term debt liability comes from $56,640,000 in Certificates of Participation (COPs) issued
in 2002 by the Cupertino Public Facilities Corporation. The certificates refunded previously issued COPs that
financed the Wilson Park, Blackberry Farm, and Creekside Park purchases, the Memorial Park expansion, the
Quinlan Community Center construction, and the City Hall remodel. It provided capital for the new library
opened in 2004. The serial, fixed interest rate debt ranging from 2% to 5% requires annual debt payments of
$3,534,000 that are covered by the General Fund. The June 30, 2010 outstanding principal of $45,510,000 is
due to be paid off by 2030.
17
CITY OF CUPERTINO
Management's Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2010
At June 30, 2010, a total of $35,000 in special assessment district debt was outstanding. This debt is secured by
a traffic impact fee, charged as a special assessment on the three commercial parcels in the district. The City,
which is not liable for the debt, acts solely as the district's agent for the collection and remittance of the
assessment. The bond will be paid off in September 2010.
More information can be found in Note 7 to the Basic Financial Statements.
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 -3220, or by the City website at www.cupertino.org.
18
FINANCIAL SECTION
19
I�� �_ r � �i '`*
CITY OF CUPERTINO
Statement of Net Assets
June 30, 2010
Assets:
Cash and investments
Restricted cash and investments
Receivables:
Accounts
Loans
Prepaid items and other assets
Land held for housing development
Net OPEB assets
Capital assets:
Nondepreciable
Depreciable, net of accumulated depreciation
Total assets
Liabilities:
Accounts payable and accruals
Accrued payroll and benefits
Deposits
Unearned revenue
Compensated absences:
Due in one year
Due in more than one year
Claims payable:
Due in one year
Due in more than one year
Long -term debt:
Due in one year
Due in more than one year
Total liabilities
Net Assets:
Invested in capital assets, net of related debt
Restricted for:
Special revenue projects
Affordable housing
Public access television
Debt service
Total restricted net assets
Unrestricted
Total net assets
Governmental Business -Type
Activities Activities Total
$ 39,152,990
$ 9,762,252
$ 48,915,242
2,547,475
-
2,547,475
3,934,978
347,728
4,282,706
1,997,824
-
1,997,824
96,455
-
96,455
615,000
-
615,000
3,746,683
-
3,746,683
78,744,826
-
78,744,826
87,170,464
788,213
87,958,677
218,006,695
10,898,193
228,904,888
6,035,988
415,482
6,451,470
493,166
42,676
535,842
1,608,232
-
1,608,232
32,328
548,068
580,396
16,684
40,138
56,822
2,491,028
-
2,491,028
376,037 - 376,037
1,257,906 - 1,257,906
1,500,000 - 1,500,000
44,010,000 - 44,010,000
57,821,369 1,046,364 58,867,733
120,405,290 788,213 121,193,503
6,582,681 -
6,582,681
1,457,707 -
1,457,707
594,110 -
594,110
57,677 -
57,677
8,692,175 -
8,692,175
31,087,861 9,063,616
40,151,477
$160,185,326 $ 9,851,829
$170,037,155
See accompanying notes to basic financial statements.
21
CITY OF CUPERTINO
Statement of Activities
For the Year Ended June 30, 2010
Functions/Programs
Expenses
Program Revenues
Operating
Charges for Grants and
Services Contributions
Capital
Grants and
Contributions
Net (Expense) Revenue and
Changes in Net Assets
Governmental Business -type
Activities Activities
Total
Governmental Activities:
568,770 - - -
111,601
111,601
Cupertino sports center
1,478,143
1,578,330 - - -
Administration
$ 1,911,665
$ 21,873
$ 28,271
$ -
$ (1,861,521) $ -
$ (1,861,521)
Law enforcement
8,385,476
811,676
166,482
-
(7,407,318) -
(7,407,318)
Public and environmental affairs
1,653,034
-
-
-
(1,653,034) -
(1,653,034)
Administrative services
4,080,134
-
-
-
(4,080,134) -
(4,080,134)
Recreation services
4,444,536
930,773
-
-
(3,513,763) -
(3,513,763)
Community development
4,351,975
3,310,355
884,714
-
(156,906) -
(156,906)
Public works
19,320,151
556,636
963,090
5,511,359
(12,289,066) -
(12,289,066)
Interest on long - term debt
2,076,264
-
-
-
(2,076,264) -
(2,076,264)
Total governmental activities
46,223,235
5,631,313
2,042,557
5,511,359
(33,038,006) -
(33,038,006)
Business -type activities
Resource recovery
2,018,147
2,104,299 6,895 - -
93,047
93,047
Blackberry farin
457,169
568,770 - - -
111,601
111,601
Cupertino sports center
1,478,143
1,578,330 - - -
100,187
100,187
Recreation programs
1,854,648
2,249,191 - - -
394,543
394,543
Total business-type activities
5,808,107
6,500,590 6,895 - -
699,378
699,378
Total
$ 52,031,342
$ 12,131,903 $ 2,049,452 $ 5,511,359 (33,038,006)
699,378
(32,338,628)
General revenues:
Taxes:
Property taxes
Property tax in lieu of motor vehicle fee
Incremental property tax
Sales taxes
Transient occupancy tax
Utility user tax
Franchise tax
Other taxes
Intergovernmental, unrestricted:
Motor vehicle license fee
Investment earnings
Miscellaneous
Total general revenues
Change in net assets
Net assets, beginning of year, as previously reported
Prior period adjustment
Net assets, beginning of year, as restated
Net assets, end of year
7,488,701
- 7,488,701
4,420,912
- 4,420,912
1,322,925
- 1,322,925
9,930,530
- 9,930,530
2,142,137
- 2,142,137
3,271,452
- 3,271,452
2,597,930
- 2,597,930
1,211,899
- 1,211,899
166,440
-
166,440
295,059
67,182
362,241
119,393
-
119,393
32,967,378
67,182
33,034,560
(70,628)
766,560
695,932
143,293,029
9,085,269
152,378,298
16,962,925
-
16,962,925
160,255,954
9,085,269
169,341,223
$160,185,326
$ 9,851,829
$170,037,155
See accompanying notes to basic financial statements
22
CITY OF CUPERTINO
Governmental Funds
Balance Sheet
June 30, 2010
Assets:
Cash and investments
Restricted cash and investments
Receivables:
Accounts
Loans
Prepaid items
Due from other funds
Land held for housing development
Other assets
Total assets
Liabilities and Find Balances:
Liabilities:
Accounts payable and accruals
Accrued payroll and benefits
Deposits
Due to other funds
Advance from other funds
Unearned revenue
Deferred revenue
Total liabilities
3,197,767 - -
349,165 388,046
Stevens
1,204,540 - -
Public
Capital
Creek
Other
Facilities
Improvement
Corridor
Governmental
General Corporation
Projects
Park
Funds Total
$18,294,292 $ 57,677
$5,562,446
$1,009,508
$6,704,480 $ 31,628,403
- 2,496,972
-
50,503
- 2,547,475
3,197,767 - -
349,165 388,046
3,934,978
1,204,540 - -
- 793,284
1,997,824
73,474 - -
- -
73,474
39,788 - -
- -
39,788
- - -
- 615,000
615,000
3,884 - -
- -
3,884
$22,813,745 $2,554,649 $5,562,446
$1,409,176 $8,500,810
$ 40,840,826
$ 2,878,151 $2,496,972 $ 238,336 $ 95,139 $ 271,688 $ 5,980,286
440,206 - -
- 28,818
469,024
1,608,232 - -
- -
1,608,232
- - -
- 39,788
39,788
504,497 - -
- -
504,497
32,044 - -
- 284
32,328
1,419,497 - -
349,165 139,638
1,908,300
6,882,627 2,496,972 238,336
444,304 480,216
10,542,455
Fund balances:
Reserved for:
Encumbrances
436,166
- 2,325,674
265,282
705,437
3,732,559
Debt service
-
57,677 -
-
-
57,677
Prepaid items
73,474
- -
-
-
73,474
Loans receivable
1,204,540
- -
-
653,646
1,858,186
Land held for housing development
-
- -
-
615,000
615,000
Low and moderate income housing
-
- -
-
842,707
842,707
Public access television
594,110
- -
-
-
594,110
Unreserved, reported in:
General Fund
13,622,828
- -
-
-
13,622,828
Special Revenue Funds
-
- -
-
5,113,020
5,113,020
Capital Project Funds
-
- 2,998,436
699,590
90,784
3,788,810
Total fund balances
15,931,118
57,677 5,324,110
964,872
8,020,594
30,298,371
Total liabilities and fund balances
$ 22,813,745
$ 2,554,649 $ 5,562,446
$1,409,176
$ 8,500,810
$ 40,840,826
See accompanying notes to basic financial statements.
23
CITY OF CUPERTINO
Reconciliation of the Balance Sheet of Governmental Funds to
the Statement of Net Assets - Governmental Activities
June 30, 2010
Total fiord balances reported on the governmental funds balance sheet $ 30,298,371
Amounts reported for governmental activities in the statement of net assets
are different from those reported in the governmental funds above because
of the following:
Capital assets:
Capital assets used in governmental activities are not current assets or financial
resources and therefore are not reported in the governmental funds. 164,910,359
Allocation of internal service funds net assets:
Internal service funds are used by management to charge the costs of activities
such as insurance, equipment acquisition and maintenance, and certain
employees' benefits to governmental funds. The assets and liabilities of the
internal service funds are therefore included in governmental activities in
the statement of net assets. 11,026,435
Receivables not available:
Certain receivables are not available to pay for current period expenditures
and therefore are deferred in the governmental funds. 1,908,300
Long -term liabilities:
The liabilities below are not due and payable in the current period and therefore
are not reported in the governmental funds:
Certifications of participation (45,510,000)
Compensated absences (2,448,139)
Net assets of governmental activities $160,185,326
See accompanying notes to basic financial statements.
24
CITY OF CUPERTINO
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2010
Expenditure:
Stevens
Current:
Public Capital
Creek
Other
Facilities Improvement
Corridor
Governmental
-
-
General
Corporation Projects
Park
Funds
Total
Revenues:
-
-
8,384,310
Public and environmental affairs
1,487,265
Taxes
$ 29,532,759
$ - $ -
$ -
$1,461,824
$ 30,994,583
Use of money and property
685,490
- -
-
88,729
774,219
Intergovernmental
625,523
- 115,928
2,293,500
4,504,884
7,539,835
Licenses and permits
2,583,131
- -
-
-
2,583,131
Charges for services
1,333,729
- -
-
367,428
1,701,157
Fines and forfeitures
736,239
- -
-
-
736,239
Other
81,352
- -
-
608,589
689,941
Total revenues
35,578,223
- 115,928
2,293,500
7,031,454
45,019,105
Expenditure:
Current:
Administration
1,469,004
-
-
-
-
1,469,004
Law enforcement
8,384,310
-
-
-
-
8,384,310
Public and environmental affairs
1,487,265
-
-
-
-
1,487,265
Administrative services
3,733,414
-
-
-
-
3,733,414
Recreation services
4,003,764
-
-
-
-
4,003,764
Community development
3,069,287
-
-
-
1,056,452
4,125,739
Public works
10,802,938
-
631
-
1,157,649
11,961,218
Capital outlay
6,110
-
1,358,010
993,543
2,352,697
4,710,360
Debt service:
Principal
-
1,460,000
-
-
-
1,460,000
Interest and fiscal charges
-
2,076,264
-
-
-
2,076,264
Total expenditures
32,956,092
3,536,264
1,358,641
993,543
4,566,798
43,411,338
Excess (deficiency) of revenues
over (under) expenditures
2,622,131
(3,536,264)
(1,242,713)
1,299,957
2,464,656
1,607,767
Other financing sources (uses)
Transfers in
487,015
3,538,000
2,481,845
503,040
778,517
7,788,417
Transfers out
(9,374,885)
-
(487,015)
-
(273,517)
(10,135,417)
Total other financing sources (uses) (8,887,870)
3,538,000
1,994,830
503,040
505,000
(2,347,000)
Change in fund balances
(6,265,739)
1,736
752,117
1,802,997
2,969,656
(739,233)
Fund balance, beginning of year
22,196,857
55,941
4,571,993
(838,125)
5,050,938
31,037,604
Fund balance, end of year
$ 15,931,118
$ 57,677
$ 5,324,110
$ 964,872
$ 8,020,594
$ 30,298,371
See accompanying notes to basic financial statements.
25
CITY OF CUPERTINO
Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances
of Governmental Funds to the Statement of Activities - Governmental Activities
For the Year Ended June 30, 2010
Net change in fund balances - total governmental funds $ (739,233)
Amounts reported for governmental activities in the statement of activities
are different because of the following:
Capital assets transactions:
Governmental Funds report capital outlays as expenditures. However, in the statement of
activities, the cost of those assets is capitalized and allocated over their estimated useful
lives and reported as depreciation expense.
Expenditures for capital assets reported as
Capital outlay 4,710,360
Public works 235,282
Easement received during the year 975,820
Less current year depreciation (7,148,481)
Net effect of sales /disposal of capital assets (2,335)
Long term debt transactions:
Repayment of bond principal is an expenditure in the governmental funds, but in the
statement of net assets the repayment reduces long -term liabilities. 1,460,000
Accrual of noncurrent items:
The amounts below included in the statement of activities do not provide or (require)
the use of current financial resources and therefore are not reported as revenues or
expenditures in governmental funds (net change):
Change in compensated absences (79,209)
Change in deferred revenue 61,923
Allocation of internal service funds' activities:
Internal service funds are used by management to charge the costs of activities, such
as insurance, equipment acquisition and maintenance, and employees' benefits to
individual funds. The portion of the net revenue (expense) of these Internal Service
Funds arising out of their transactions with governmental funds is reported with
governmental activities.
Change in net assets - internal service funds 455,245
Change in net assets of governmental activities $ (70,628)
See accompanying notes to basic financial statements.
26
CITY OF CUPERTINO
General Fund
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
For the Year Ended June 30, 2010
See accompanying notes to basic financial statements.
27
Variance with
Budgeted
Amounts
Final Budget
Actual
Positive
Original
Final
Amounts
(Negative)
Revenues:
Taxes
$ 32,729,000
$ 30,858,503
$ 29,532,759
$ (1,325,744)
Use of money and property
1
891,000
685,490
(205,510)
Intergovernmental
415,000
492,296
625,523
133,227
Licenses and permits
3,210,000
3,210,000
2,583,131
(626,869)
Charges for services
1,834,000
1,434,000
1,333,729
(100,271)
Fines and forfeitures
902,000
902,000
736,239
(165,761)
Other
100,000
100,000
81,352
(18,648)
Amounts available for appropriation
40,581,000
37,887,799
35,578,223
(2,309,576)
Charges for appropriation (outflows):
Current:
Administration
1,546,992
1,517,004
1,469,004
48,000
Law enforcement
8,536,636
8,565,636
8,384,310
181,326
Public and environmental affairs
1,499,563
1,494,522
1,487,265
7,257
Administrative services
4,254,619
4,062,641
3,733,414
329,227
Recreation services
4,366,560
4,289,549
4,003,764
285,785
Community development
3,733,423
3,560,750
3,069,287
491,463
Public works
11,550,993
11,803,700
10,809,048
994,652
Total charges for appropriations
35,488,786
35,293,802
32,956,092
2,337,710
Excess of revenues over expenditures
5,092,214
2,593,997
2,622,131
28,134
Other financing sources (uses)
Transfers in
-
991,512
487,015
(504,497)
Transfers out
(7,573,000)
(9,374,885)
(9,374,885)
-
Total other financing sources (uses)
(7,573,000)
(8,383,373)
(8,887,870)
(504,497)
Change in fund balance
$ (2,480,786)
$ (5,789,376)
(6,265,739)
$ (476,363)
Fund balance, beginning of year
22,196,857
Fund balance, end of year
$ 15,931,118
See accompanying notes to basic financial statements.
27
CITY OF CUPERTINO
Proprietary Funds
Statement of Fund Net Assets
June 30, 2010
Noncurrent assets:
Business -type
Activities - Enterprise Funds
Net OPEB assets
Governmental
Capital assets:
Current liabilities:
Depreciable, net of
Cupertino
accumulated depreciation
40,537 4,298 126,151 617,227 788,213 1,004,931
Activities -
40,537 4,298 126,151 617,227 788,213 5,256,111
Resources
Blackberry
Sports
Recreation
86,094
Internal Service
55,702
Recovery
Farm
Center
Programs
Totals
Funds
Assets:
Compensated absences
3,739
20,123
16,276
-
40,138
Current assets:
Claims payable
-
-
-
-
-
Cash and investments
$5,659,856
$ 574,627
$ 612,293
$2,915
$9,762,252
$ 7,524,587
Accounts receivable
334,701
-
719
12,308
347,728
-
Prepaid items
-
-
-
-
-
19,097
Total current assets
5,994,557
574,627
613,012
2,927,784
10,109,980
7,543,684
Noncurrent assets:
Advances to other funds
- - - - - 504,497
Net OPEB assets
- - - - - 3,746,683
Capital assets:
Current liabilities:
Depreciable, net of
accumulated depreciation
40,537 4,298 126,151 617,227 788,213 1,004,931
Total noncurrent assets
40,537 4,298 126,151 617,227 788,213 5,256,111
Total assets
6,035,094 578,925 739,163 3,545,011 10,898,193 12,799,795
Liabilities:
Current liabilities:
Accounts payable and accruals
158,178
16,419
154,791
86,094
415,482
55,702
Accrued payroll and benefits
5,154
3,658
7,812
26,052
42,676
24,142
Compensated absences
3,739
20,123
16,276
-
40,138
16,684
Claims payable
-
-
-
-
-
376,037
Unearned revenue
-
-
87,661
460,407
548,068
-
Total current liabilities
167,071
40,200
266,540
572,553
1,046,364
472,565
Noncurrent liabilities:
Compensated absences, net
of current portion
-
-
-
-
-
42,889
Claims payable, net of current portion
-
-
-
-
-
1,257,906
Total liabilities
167,071
40,200
266,540
572,553
1,046,364
1,773,360
Net assets:
Invested in capital assets
40,537
4,298
126,151
617,227
788,213
1,004,931
Unrestricted
5,827,486
534,427
346,472
2,355,231
9,063,616
10,021,504
Total net assets
$5,868,023
$ 538,725
$ 472,623
$2,972,458
$9,851,829
$11,026,435
See accompanying notes to basic financial statements.
28
CITY OF CUPERTINO
Proprietary Funds
Statement of Revenues, Expenses and Changes in Fund Net Assets
For the Year Ended June 30, 2010
Operating revenues:
Charges for services
Other
Total operating revenues
Operating expenses:
Salaries and benefits
Materials and supplies
Contractual services
Insurance claims and premium
Depreciation
Total operating expenses
Operating income (loss)
Nonoperating revenues:
Investment income
Income (loss) before transfers
Transfers in
Change in net assets
Net assets, beginning of year
Net assets, end of year
Business -type Activities - Enterprise Funds
Governmental
Cupertino
Activities -
Resources Blackberry Sports Recreation
Internal Service
Recovery Farm Center Programs
Totals Funds
$ 2,104,299
$ 554,502
$1,575,672
$ 2,249,049
$ 6,483,522
$ 2,686,010
6,895
14,268
2,658
142
23,963
22,633
2,111,194
568,770
1,578,330
2,249,191
6,507,485
2,708,643
171,921
129,821
289420
484,313
1,075,475
3,205,703
21,653
70,880
153,427
157,026
402,986
415,155
1,821,221
255,531
1,020,882
1,206,957
4,304,591
359,194
-
-
-
-
-
340,023
3,352
937
14,414
6,352
25,055
376,082
2,018,147
457,169
1,478,143
1,854,648
5,808,107
4,696,157
93,047
111,601
100,187
394,543
699,378
(1,987,514)
41,141
3,764
3,731
18,546
67,182
95,759
134,188
115,365
103,918
413,089
766,560
(1,891,755)
-
-
-
-
-
2,347,000
134,188
115,365
103,918
413,089
766,560
455,245
5,733,835
423,360
368,705
2,559,369
9,085,269
10,571,190
$ 5,868,023
$ 538,725
$ 472,623
$ 2,972,458
$ 9,851,829
$ 11,026,435
See accompanying notes to basic financial statements.
29
CITY OF CUPERTINO
Proprietary Funds
Statement of Cash Flows
For the Year Ended June 30, 2010
Cash flows from operating activites:
Cash received from customers
Cash payments to suppliers for goods and services
Cash payments to employees
Cash payments for judgment and claims
Net cash provided by (used in)
operating activities
Cash flows from noncapital financing activities:
Contributions to an irrevocable trust
Transfers in
Advances to other funds
Cash flows used in noncapital financing activities
Cash flows from capital and related financing activities:
Acquisition of capital assets
Cash flows from investing activities:
Interest received
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Reconciliation of operating income (loss) to
net cash provided by (used in) operating activities:
Operating income (loss)
Adjustments to reconcile operating income (loss) to
net cash provided by (used in) operating activities:
Depreciation
Contributions to an irrevocable trust for
current year's annual OPEB cost
Change in assets and liabilities:
Accounts receivable
Prepaid items
Accounts payable and accruals
Accrued payroll and benefits
Unearned revenue
Compensated absences
Claims payable
Net cash provided by (used in)
operating activities
99,632 102,005 58,309 363,081 623,027 (240,202)
(7,000,000)
- - - - 2,347,000
- - - - - (504,497)
- - - - - (5,157,497)
- - (82,675) (594,466) (677,141) (245,896)
41,141
Business -type
Activities - Enterprise
Funds
67,182
Governmental
140,773
105,769
Cupertino
(212,839)
13,068
Activities -
Resources
Blackberry
Sports
Recreation
9,749,184
Internal Service
Recovery
Farm
Center
Programs
Totals
Funds
5,086
-
- (17,347)
(62,167)
(79,514)
-
$2,114,592
$ 568,770
$1,560,264
$2,189,382
$6,433,008
$ 2,708,643
(1,845,500)
(340,604)
(1,213,501)
(1,345,099)
(4,744,704)
(942,337)
(169,460)
(126,161)
(288,454)
(481,202)
(1,065,277)
(1,734,443)
-
-
-
-
-
(272,065)
99,632 102,005 58,309 363,081 623,027 (240,202)
(7,000,000)
- - - - 2,347,000
- - - - - (504,497)
- - - - - (5,157,497)
- - (82,675) (594,466) (677,141) (245,896)
41,141
3,764
3,731
18,546
67,182
95,759
140,773
105,769
(20,635)
(212,839)
13,068
(5,547,836)
5,519,083
468,858
632,928
3,128,315
9,749,184
13,072,423
$ 5,659,856
$ 574,627
$ 611293
$ 2,915,476
$ 9,762,252
$ 7,524,587
$ 93,047 $ 111,601 $ 100,187 $ 394,543 $ 699,378 $ (1,987,514)
3,352 937 14,414 6,352 25,055 376,082
-
- -
-
-
1,426,240
3,398
- (719)
2,358
5,037
-
-
- -
-
-
(19,097)
(2,626)
(14,193) (39,192)
18,884
(37,127)
(135,957)
1,017
574 771
3,111
5,473
5,086
-
- (17,347)
(62,167)
(79,514)
-
1,444
3,086 195
-
4,725
29,015
-
- -
-
-
65,943
$ 99,632 $ 102,005 $ 58,309 $ 363,081 $ 623,027 $ (240,202)
See accompanying notes to basic financial statements.
30
CITY OF CUPERTINO
Statement of Fiduciary Assets and Liabilities
June 30, 2010
Agency
Fund
Assets:
Cash and investments $ 118,241
Total assets $ 118,241
Liabilities:
Deposits $ 118,241
Total liabilities $ 118,241
See accompanying notes to basic financial statements.
31
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) 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/Engineering. 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
units, entities 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 units - 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 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 Cupertino Redevelopment Agency was formed in 2000 under the California Health & Safety Code
to assist in the elimination of areas considered to be in a blighted condition. The City Council acts as the
Board of Directors of the Corporation and the Agency. The Mayor and Vice Mayor of the City have
been elected President and Vice President, respectively, of the Corporation. The City Clerk has been
elected Secretary, and the City's Director of Administrative Services has been appointed Treasurer of
both entities.
The Corporation does not issue separate financial statements, since it is reported separately in the City's
basic financial statements. The Redevelopment Agency's separate report is available from the City of
Cupertino's website at www.cupertino.org.
(b) 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.
32
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (continued)
Government -wide Statements - The Statement of Net Assets 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, except for fiduciary activities. These statements
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.
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 Assets eliminates
interfund balances between govermmental 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 fiends.
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.
33
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (Continued)
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, liabilities, revenues or expenditures in
excess of ten 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 Citv 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 Public Facilities Corporation Debt Service Fund accounts for the payments of principal and
interest on certificates of participation issued to provide for the advance refunding of the City
Hall/Library, Wilson Park and Memorial Park certificates of participation.
• The Capital Improvement Projects Fund accounts for activities related to the acquisition or
construction of major capital facilities.
• The Stevens Creek Corridor Park Capital Projects Fund accounts for the design and construction of
the Stevens Creek Corridor Park projects.
The City reports all its enterprise funds as major funds in the accompanying financial statements:
• The Resources Recovery Fund accounts for activity related to the collection and disposal of solid
waste. A private company has been issued an exclusive franchise to perform these services.
• The Blackberry Farm Fund accounts for activities related to the municipal golf course.
• The Cupertino Sports Center Fund accounts for the operation and maintenance of the Cupertino Sports
Center.
■ 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; all of which are provided to other departments
on a cost - reimbursement basis.
Fiduciary Fund. The City acts as an agent for repayment of certain special assessment debt described
in Note 7. This fund accounts for the tax assessments used for bond payments.
34
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (Continued)
Basis of Accounting - The government -wide and proprietary 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 deferred revenues are based on the
modified accrual measure.
Fiduciary financial statements consisting of agency funds, report only assets and liabilities, and
therefore have no measurement focus. They recognize receivables and pavables on a full accrual basis.
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 taxes rebates which are contingent on revenues collected are netted against the related
revenues.
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 deferred 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.
Private - sector standards of accounting and financial reporting issued prior to December 1, 1989,
generally are followed in both the government -wide statements for the business -type activities and
proprietary fund financial statements to the extent that those standards do not conflict with or contradict
guidance of GASB. Governments also have the option of following subsequent private- sector guidance
for business -type activities and enterprise funds, subject to the same limitation. The City has elected not
to follow subsequent private- sector guidance.
35
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) 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_ The City Manager is responsible
for controlling the City's expenditures in accordance with the adopted budget. The City Manager is
authorized to transfer appropriations within functional expenditure classifications. Any revision which
requires transfers between functional expenditure classifications or 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.
(d) 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.
36
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(e) Capital Assets
Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Donated
capital assets are recorded at their estimated fair 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:
Years
Buildings
15-25
Improvements
10-15
Vehicles
4-10
Street equipment
3-20
Water equipment
3 -50
Office equipment
3 -5
Road, curbs, gutters, sidewalks, medians and bridges
30-40
Streetlights
20
Storm drain structure and mains
40
Traffic signals
20
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.
(f) Land Held for Redevelopment
Land held for redevelopment of $615,000 at June 30, 2010 is stated at the lowest of historical cost, net
realizable value determined upon the execution of disposition and development agreement, or agreed -
upon sales price. The land was purchased using Federal grant funds for housing activities.
(g) 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 -teen disability, and other claims and judgments are recorded in the
General Fund or enterprise funds, as appropriate.
37
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) 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 Assets.
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 -Tenn Disability internal service funds to account for termination
payouts.
The changes in compensated absences for the year ended June 30, 2010 were as follows:
Reservations of fund balances represent those portions of fund balances which are not available for
appropriation or expenditure or are legally restricted for a specific future use. Designated fund balances
represent management's tentative plans for future use of financial resources.
(j) 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% 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.
38
Govennertal
Business Type
Activities
Activities
Total
Balance, beginning of year
$ 2,399,488
$ 35,413
$ 2,434,901
Additions
1,238,874
27,908
1266,782
Payments
(1,130,650)
(23,183)
(1,153,833)
Balance, end of-,,
2,507,712
40,138
2,547,850
Less current portion
(16,684)
(40,138)
(56,822)
Non - current portion
$ 2,491,028
$ -
$ 2,491,028
(i) Fund Equity
Reservations of fund balances represent those portions of fund balances which are not available for
appropriation or expenditure or are legally restricted for a specific future use. Designated fund balances
represent management's tentative plans for future use of financial resources.
(j) 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% 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.
38
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k) 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.
(1) 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.
(m) 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.
(n) Effects of New Pronouncements
During the year ended June 30, 2010, the City implemented the following GASB Statement:
In June 2007, GASB issued Statement No. 51, Accounting and Financial Reporting for Intangible
Assets. This Statement requires that all intangible assets not specifically excluded by its scope
provisions be classified as capital assets. Accordingly, existing authoritative guidance related to the
accounting and financial reporting for capital assets should be applied to these intangible assets, as
applicable. This Statement also provides authoritative guidance that specifically addresses the nature of
these intangible assets. Such guidance should be applied in addition to the existing authoritative
guidance for capital assets. The requirements of this Statement are effective for financial statements for
periods beginning after June 15, 2009.
With the implementation of GASB Statement No. 51, the City reevaluated its capital assets inventory
and determined that easements totaling $16,962,925 should have been capitalized as of June 30, 2009.
As a result, beginning net assets and capital assets for governmental activities have been restated to
correct this error and these balances were increased by $16,962,925.
The City is currently analyzing its accounting practices to determine the potential impact on the
financial statements for the following GASB Statements:
In March 2009, GASB issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type
Definitions. The objective to this Statement is to enhance the usefulness of fund balance information by
providing clearer fund balance classifications that can be more consistently applied and by clarifying the
existing governmental fund type definitions. This Statement establishes fund balance classifications
that comprise a hierarchy based primarily on the extent to which a government is bound to observe
constraints imposed upon the use of the resources reported in governmental funds. Application of this
Statement is effective for the City's fiscal year ending June 30, 2011.
39
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In June 2010, GASB issued Statement No. 59, Financial Instruments Omnibus. This statement updates
and improves existing standards regarding financial reporting of certain financial instruments and
external investment pools. Application of this Statement is effective for the City's fiscal year ending
June 30, 2011.
(o) 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.
NOTE 2 — CASH AND INVESTMENTS
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 Assets and the balance sheet as "cash and
investments."
(a) Policies
California Law requires banks and savings and loan institutions to pledge government securities with a
market value of 110% of the City's cash on deposit, or first trust deed mortgage notes with a market value
of 150% 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 parry custodian acting as agent
for the City under the terms of a custody agreement.
The City's investments are carried at fair value. 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.
40
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 2 — CASH AND INVESTMENTS (Continued)
(b) Classification
The City's total cash and investments, at fair value, are presented on the accompanying financial
statements in the following allocation:
Cash and mvestments
Primary Agency
Government Funds Total
$ 48,915,242 $ 118,241 $ 49,033,483
Restricted cash and investments:
Held by Fiscal Agent for bond repayments
Held in escrow accounts for contractor retentions
Total restricted cash and investments
Total cash and investments
(c) Authorized Investments by the City
2,496,972 - 2,496,972
50,503 - 50,503
2,547,475 - 2547,475
$ 51,462,717 $ 118,241 $ 51,580,958
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.
pa
Medimr Tenn Corporate Notes 5 years Aor better 30% u u **
5 /o cf issuer's net worth.
Maley market mutual funds investing
in U.S. Treasury, Govemmert
Agency securities orrepurchase 5 years Aaa/AAA 20% None
agreements collaterizedby
U.S. Treasury or Government
Agency securities
* Securities issued by agcruies of the federal goyemnent such as the Government National Mortgage Association (GNMA� the Feral Farm
Credit System (FFCB� the Federal Home Loan Bark (Fl II B), the Federal National Mortgage Association (F� the Student Loan Marketing
Association (SLMA), and the Federal HaneLoan Mortgage Association (HILN".
** Represents restriction in which the City's investment policy is more restrictive than the California Covemment Code.
* ** 30 %maximrnn ° o of portfolio if using a private sector entity to assist in theplacement ofthe time &posits. No maxiarum for ethers.
41
Minimum M
Maxirnmm M
Maximum
Nlaxinnml C
Credt P
Percentage of i
investment rn
Arthonizedhivestment Type M
Maturity Q
Quality P
Portfolio O
One Issuer
U.S. Treasury Obligations 5
5 years N
NA N
None N
Nene
U.S. Agency Securities * 5
5 years N
NA N
None N
Nene
CalifomiaLoeal Agency Investment N
Upto $50 N
Find (LAIF) m
N/A N
NA U
millicn
None
Non - negotiable Certificates of 5
5 y ears N
NA 3
30 % * ** 1
10 %ofpafolio;
Deposits (time deposits) 5
5 %ofissuces net worth.
**
State of Califomiaregisteredstate 5
5years N
NA N
None N
None
warrants, treasury notes, or bonds
California local agency bonds, notes, 5
5 years N
NA N
None N
None
warrants, orotherobligatims
Bend issued by the local agency 5
5 years N
NA N
None N
Nate
Bankers' Acceptances I
I9D days N
NA 4
40% N
Nate
10 %of perffolio;
Cenrmercial Paper 2
270 days A
A 1 +/P-1 2
25% 5
5 %of issuer's net worth;
10% ofoutstanding paper ofissuer. **
Negotiable CertificatesofDeposit S
Syears N
NA 3
30% 1
10 %of ffolio;
5 %of issuers net worth.
**
10 %of pafolio;
ReprnclnaseAgreernents l
lyear N
NA N
None 5
5 %of issuers net worth.
**
10°/ of p
Medimr Tenn Corporate Notes 5 years Aor better 30% u u **
5 /o cf issuer's net worth.
Maley market mutual funds investing
in U.S. Treasury, Govemmert
Agency securities orrepurchase 5 years Aaa/AAA 20% None
agreements collaterizedby
U.S. Treasury or Government
Agency securities
* Securities issued by agcruies of the federal goyemnent such as the Government National Mortgage Association (GNMA� the Feral Farm
Credit System (FFCB� the Federal Home Loan Bark (Fl II B), the Federal National Mortgage Association (F� the Student Loan Marketing
Association (SLMA), and the Federal HaneLoan Mortgage Association (HILN".
** Represents restriction in which the City's investment policy is more restrictive than the California Covemment Code.
* ** 30 %maximrnn ° o of portfolio if using a private sector entity to assist in theplacement ofthe time &posits. No maxiarum for ethers.
41
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 2 — CASH AND INVESTMENTS (Continued)
(d) 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:
42
Makirrmm
Mininnurn
Credit
Mahirrnnn
Percertage of
AuthorizedInvestnent Type
Maturity
Quality
Portfolio
U.S. Treasury obligations
N/A
N/A
None
Federal agencies obligatio swhichrelreseatfull faith
N/A
N/A
None
and credit of the U. S.
Direct federal agencies obligations whch are not fully
N/A
N/A
None
guaranteed by the full faith and credit oftheU. S.
U.S. dollar denominated deposit accounts, fecbral funds and
360 days
P- 1,A -1 +, A 1
None
bankers' acceptances with domestic conc banks
ConrruorcialPaper
2704s
Rl, A -1
None
Money market funds
N/A
Aaam or AAAnrG
None
Pre- refirrided municipal obligations that are not callable
Idighest rating
prior to maturity or as to wheh irveNocable instructions
N/A
category
None
have been given to call on the date specified in the notice
General obligations of states
N/A
A2, A
None
hivestruent agreerrents or oth°r fomrs of investnerts,
including repurchase agreements, approved by the
N/A
N/A
None
financial guararty ins uarue carrier.
CalifomiaLocal Agency Investnuent Fund (LAiF)
N/A
N/A
Up to $50 million
Shares in a California corarm law trust established pursuant
to Tide 1, Division 7, Chatter 5 ofthe California Goverrnnent
Code which invests exclusively in investments permitted by
N/A
N/A
None
Section 53635 of Title 5, Division 2, Chapter of the California
Govemmert Code, as it may be amended
42
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 2 — CASH AND INVESTMENTS (Continued)
(e) 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.
Infonnation 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:
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 LAIF. 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. As of June 30, 2010, the total amount recorded by all participating public
agencies in LAIF was approximately $233 billion. Of that amount, 94.58% was invested in non -
derivative financial products and 5.42% in structured notes and asset backed securities. These
investments had weighted average maturity of 203 days.
Money market mutual funds are available for withdrawal on demand. At June 30, 2010, money market
mutual funds in the pooled investment and held by fiscal agent had weighted average maturity of 51
days and 7 days, respectively.
43
Maturities in
Less Than
3 to 12
Investment Type
3 Months
Months
Total
Pooled investments
U.S. Treasury Securities
$ 8,026,120
$ 30,508,620
$ 38,534,740
Federal Agency Obligations
1,010,000
-
1,010,000
Local Agency Investment Fund
-
593,219
593,219
Money Market Mutual Funds
8,396,571
-
8,396,571
Non - Negotiable Certificates of Deposit
-
98,988
98,988
Total pooled investments
17,432,691
31,200,827
48,633,518
Investment held by fiscal agent
Money Market Mutual Funds
2,496,972
-
2,496,972
Total investments
$ 19,929,663
$ 31,200,827
51,130,490
Cash in banks and on hand
399,965
Cash held in escrow accounts for contractor retentions
50,503
Total cash and investments
$ 51,580,958
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 LAIF. 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. As of June 30, 2010, the total amount recorded by all participating public
agencies in LAIF was approximately $233 billion. Of that amount, 94.58% was invested in non -
derivative financial products and 5.42% in structured notes and asset backed securities. These
investments had weighted average maturity of 203 days.
Money market mutual funds are available for withdrawal on demand. At June 30, 2010, money market
mutual funds in the pooled investment and held by fiscal agent had weighted average maturity of 51
days and 7 days, respectively.
43
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 2 — CASH AND INVESTMENTS (Continued)
0
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, 2010 for each investment type,
including those with fiscal agents, as provided by Moody's ratings:
Investment Type Ratings Total
Federal Agency Obligations
Money Market Mutual Funds
Total rated
Exempt from credit rating disclosure:
U.S. Treasury Securities
Not rated:
Local Agency Investment Fund
Non - Negotiable Certificates of Deposit
Total investments
(9)
Concentration of Credit Risk
Aaa S 1,010,000
Aaam 10,893,543
11,903,543
38,534,740
593,219
98,988
S 51,130,490
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 did not
have investments that represent 5% or more of total City -wide investments.
NOTE 3 — PROPOSITION IA BORROWING BY THE STATE OF CALIFORNIA
Under the provisions of Proposition IA and as part of the 2009 -10 budget package passed by the
California state legislature on July 28, 2009, the State of California borrowed 8% of the amount of
property tax revenue, including those property taxes associated with the in -lieu motor vehicle license
fee, the triple flip in lieu sales tax, and supplemental property tax, apportioned to cities, counties and
special districts (excluding redevelopment agencies). The State of California is required to repay this
borrowing plus interest by June 30, 2013. After repayment of this initial borrowing, the California
legislature may consider only one additional borrowing within a ten -year period. The amount of this
borrowing pertaining to the City was $1,419,497.
This borrowing by the State of California was recognized as a receivable in the accompanying basic
financial statements. Under the modified accrual basis of accounting, the borrowed tax revenues are not
permitted to be recognized as revenue in the governmental fund financial statements until the tax
revenues are received from the State of California (expected to be fiscal year 2012 -13). In the
government -wide financial statements, the tax revenues were recognized in the fiscal year for which
they were levied (fiscal year 2009 -10).
44
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 4 — LOANS RECEIVABLE
(a) Related Party Loans
In conjunction with the City's executive housing assistance program, loans totaling $849,360 have been
provided to two executive managers. These 40 -year loans bear an interest rate equal to the 11th District
Cost of Funds at the time of the loan, and require monthly 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 balance remaining on these loans was $712,682 at June 30, 2010.
(b) 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, 2010, the balance remaining on the loan was $821,000.
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, 2010, the balance on the loan was $258,930.
In addition to these loans, the City has $205,212 in housing and other loans at June 30, 2010. These
loans bear interest at 3 to 6 percent and are due by June 30, 2035.
45
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 5 - INTERFUND TRANSACTIONS
Transfers between funds during the fiscal year ended June 30, 2010 were as follows:
Amount
Fund Making Transfers Fund Receiving Transfers Transferred
General Fund
Public Facilities Corporation Debt Service Fund
Capital Improvement Projects Fund
Stevens Creek Corridor Park Capital Project Fund
Nonmajor governmental funds
Internal Service Funds
S 3,538,000 A)
2,421,845
303,040 �)
765,000
2,347,000
Capital Improvement Projects Fund
Nonmajor governmental funds
Total interfund transfers
General Fund
Capital Improvement Projects Fund
Stevens Creek Corridor Park Capital Project Fund
Nonmajor governmental funds
The reasons for these transfers are set forth below:
487,015 (F)
60,000 (G)
200,000
13,517
S 10,135,417
(A> For annual lease payment related to the 2002 Certificates of Participation debt issue.
(B) To fund various capital improvements projects and the City's infrastructure reserve.
(c) To fund the Blackberry Farm infrastructures upgrade.
(D) To fund operating expenditures of the Environmental Management Special Revenue Fund ($15,000)
and street maintenance expenditures ($750,000).
(E) To fund management information systems, equipment revolving, compensated absences, and retiree
medical expenses.
(F) To return capital projects savings back to General Fund.
(G) To fund the Bollinger Bike Lane and Calabazas Creek project.
(H) To fund the cost for Stevens Creek Corridor Park Project Phase II design.
(0 To return excess funds to the Mary Avenue Bicycle Footbridge Capital Project Fund.
Internal Balances — The City -wide financial statements had no net interfund receivables and payable
remaining after the elimination of all such balances within governmental and business -type activities.
Due from and due to other funds
The General Fund loaned the Mary Avenue Bicycle Footbridge Capital Projects Fund $39,788 to fund a
temporary cash shortfall.
Advance to and advance from other funds
The Equipment Revolving Internal Service Fund loaned the General Fund $504,497 for payment of
Prop IA borrowing by the State of California during fiscal year ended June 30, 2010. The General
Fund is expected to repay the funds upon receipt of the repayment from the State of California during
fiscal year ended June 30, 2013.
46
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 6 - CAPITAL ASSETS
A summary of changes in capital assets is as follows:
Governmental activities
Capital assets, not being depreciated:
Land
Easements
Total capital assets, not being depreciated
Capital assets, being depreciated:
Buildings
improvements other than buildings
Machinery and equipment
Roads, curbs, gutters, sidewalks, medians and bridges
Streetlights
Storm drain s tructure and main s
Traffic signals
Total capital assets, being depreciated
Less accitrmelated depreciation for•:
Buildings
hmprovernents other than buildings
Machinery and equipment
Roads, curbs, gutters, sidewalks, medians and bridges
Streetlights
Storm drain s tructure and mains
Traffic signals
Total accumulated depreciation
Total capital assets, being depreciated, net
Governmental activities, capital assets, net
Business -type activities
Capital assets, being depreciated:
Buildings
improvements other than buildings
Machinery and equipment
Total capital assets, being depreciated
Less accurmulated depreciation for:
Buildings
improvements other than buildings
Machinery and equipment
Total accumulated depreciation
Total capital assets, being depreciated, net
Business -type activities, capital assets, net
Balance,
July 1, 2009,
Balance,
as restated
Additions
Retirements
Transfers
June 30, 2010
$ 60,806,081
$ -
$
$
$ 60,806,081
16,962,925
975,820
17,938,745
77,769,006
975,820
78,744,826
40,635,227
365
(2,071)
40,998,928
37,681,060
2,016,182
(12,444)
39,684,798
7,576,940
306,533
(306,941)
7,576,532
119,258,220
2,353,789
121,612,009
6,555,104
41,352
6,596,456
31,726,132
73,101
31,799,233
5,999,399
34,809
6,034,208
249,432,082
5,191,538
(321,456)
254,302,164
(13,848,160)
(1,563,034)
834
(15,410,360)
(20,074,099)
(1,606,210)
11,564
(21,668,745)
(6,010,706)
(495,074)
306,723
(6,199,057)
(83,987,301)
(2,948,706)
-
(86,936,007)
(6,509,077)
(2,755)
(6,511,832)
(25,024,687)
(793,153)
(25,817,840)
(4,472,228)
(115,631)
(4,587,859)
(159,926,258)
(7,524,563)
319,121
(167,131,700)
89,505,824
(2,333,025)
(2,335)
87170,464
$ 167,274,830
_L (L357,205)
$ (2,335)
$
$ 165,915,290
$ -
$ 244,022
$
$ 49,350
$ 293,372
5,053
387,422
(2,964)
389,511
310,755
45,697
(37,978)
(46,386)
272,088
315,808
677,141
(37,978)
954,971
-
(3,352)
(5,461)
(8,813)
(5,053)
-
2,964
(2,089)
(174,628)
(21,703)
37,978
2,497
(155,856)
(179,681)
(25,055)
37,978
-
(166,758)
136,127
652,086
788,213
$ L6,127
$ 6i 2 ,086
$
$
$ 788,213
47
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 6 - CAPITAL ASSETS (Continued)
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:
Administration
$ 311,747
Law enforcement
1,166
Public and environmental affairs
13,478
Administration services
26,551
Recreation service
80,773
Community development
429
Public wo&s
6,714,337
Amount reported in the internal service funds
376,082
Total depreciation expense - governmental activities $ 7,524,563
Depreciation expense was charged to the business -type activities as follows:
Resources Recovery
$ 3,352
Blackberry Farm
937
Cupertino Sports Center
14,414
Recreation Programs
6,352
Total depreciation expense - business -type activities
$ 25,055
48
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 7 - LONG -TERM DEBT
(a) Cupertino Public Facilities Corporation Certificates of Participation
Amount
Original Balance Balance Due
Issue July 1, June 30, Within
Amount 2009 Retirements 2010 One Year
Goveimnental activities debt:
2002 Refinancing mid Capital Improvement
Project, 2.00 - 5.00014 due 07 /01/2030 $ 56,640,000 $ 46,970,000 _L L,460,0001 $ 45.510,000 $ 1,500,000
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 are scheduled to be sufficient in both time and amount, when the principal and interest
of the certificates are due.
On October 1, 2002, $56,640,000 principal amount of 2002 Refinancing and Capital Improvement Project
Certificates of Participation (2002 COPS), were issued to finance the costs of acquiring and constructing a
new public library and to refund the 1992A COPS, the 1992B COPS and the 1993A COPS ( "Prior COPS ").
Payment of the principal and interest are insured by a financial guaranty insurance policy issued by Ambac
Assurance Corporation ( Ambac). The reserve fund required for the 2002 COPs is funded with a
reserve fund surety bond issued by Ambac.
The 2002 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. In the event that
insufficient funds are available to make the lease payments, payments will be made from an
apportionment of moneys to which the City is entitled from the Motor Vehicle Licenses Fee Account in
the Transportation Fund of the State of California.
Annual debt service requirements for the 2002 COPS are shown below:
For the Year
Govermnental Activities
Fnding June 30,
Principal
Interest
2011
$ 1,500,000 $
2,030,144
2012
1,545,000
1,985,144
2013
1,600,000
1,934,931
2014
1,660,000
1,870,931
2015
1,730,000
1,804,531
2016 -2020
9,795,000
7,868,556
2021 -2025
12,280,000
5,385,175
2026 -2030
15,400,000
2,262,188
$ 45,510,000 $
25,141.600
49
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 7 - LONG -TERM DEBT (Continued)
(b) 1915 Act Bonds Without City Commitment
The City acts as agent for the property owners of parcels upon which assessments were made for local
improvements. The City collects the assessments and forwards the collections to bond holders. The
City is not directly liable for the repayment of special assessment district bonds as such bonds and
interest payable are secured by fixed lien assessments on real property; however, the City has
detennined that it is not probable that the government would assume responsibility for all or part of the
debt in the event of default. The amount of outstanding bond principal at June 30, 2010 was $35,000.
(c) Conduit Debt
On October 1, 2001, the City authorized the issuance of the Multi - Family Housing Revenue Bonds in an
amount up to $1.6 million to assist a developer in financing the cost of site acquisition and construction
of a 24 unit multi - family rental housing project. The bonds are payable solely out of loan repayments
received from the developer. The principal balance outstanding of the bonds and any accrued and
unpaid interest is due and payable on October 1 2031. The City has no legal or moral liability with
respect to the payment of this debt. The amount of outstanding conduit debt principal at June 30, 2010
was $928,000.
NOTE 8 - NET ASSETS AND FUND BALANCES
Net Assets are measured on the full accrual basis while Fund Balance is measured on the modified accrual
basis.
Net Assets — The government -wide and proprietary fund financial statements utilize a net assets
presentation. Net assets are categorized as follows:
Invested in Capital Assets, net of related debt — This category groups all capital assets including
infrastructure, into one component of net assets. 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 assets that have 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. At June 30, 2010, the government -wide
statement of net assets reported restricted assets of $8,692,175 in governmental activities, of which
$153,585 are restricted by enabling legislation.
Unrestricted — This category represents net assets of the City that do not meet the definition of ``invested
in capital assets, net of related debt" or "restricted."
Fund Balances, Reserves and Designations - In the governmental fund financial statements, reserves
and designations segregate portions of fund balance that are either not available or have been earmarked
for specific purposes. The various reserves and designations are established by actions of the City
Council and City's management and can be increased, reduced or eliminated by similar actions.
50
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 8 - NET ASSETS AND FUND BALANCES (Continued)
The unreserved fund balances include amounts which have been internally designated to be set aside and
are not considered to be available for immediate appropriation. The components of the designated fund
balance for the Governmental Funds at June 30, 2010 are as follows:
General Fund
Economic Uncertainty $ 12,500,000
Utilities Users Tax Revenue 916,000
Capital Improvement Projects Fund:
Capital hupmvement 699,000
Construction in Progress - Future Projects 75,924
Infrastructure 1,000,000
Nomnajor Special Revernre Funds, Transportation 1,667,559
Total designated fund balances $ 16,858,483
NOTE 9 - COMMITMENTS AND CONTINGENCIES
(a) 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, 2010, 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.
(b) Lease Agreement with County of Santa Clara
The City has an agreement, 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, 2010, the cost and carrying
value of the building which opened in October 2004, is $21,935,325 and $17,545,856 respectively, with
$4,389,469 in accumulated depreciation.
(c) Consulting Agreement for Sales Taxes Rebate
The City entered into agreements 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 two
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. The agreements with the two companies
will expire by June 30 2011 and June 30 2012.
51
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 10 - LIABILITIES UNDER SELF - INSURANCE AND RISK MANAGEMENT
(a) 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 31 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, 2010, the City paid ABAG PLAN premiums of $247,112.
(b) 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 EIA may be obtained
from their offices at the following address: CSAC Excess Insurance Authority, Finance Department, 75
Iron Point Circle, Suite 200, Folsom, CA 95630. For the year ended June 30, 2010, the City paid
premiums of $43,278 to EIA.
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 %, annual rate of return of 3 %, claim severity increase at 2.5% were assumed. In the
current year, management used actuarial estimates based on an 80% confidence level.
Settlements have not exceeded insurance coverage in the past three years.
Changes in the balances of workers' compensation claims liabilities during the years ended June 30,
2010 and 2009 are as follows:
Unpaid claims, beginning of year
Incurred claims and changes in estimate
Claim payments and credits
2010 2009
$ 1,568,000 $ 1,497,000
232,696 313,642
(166,753) (242,642)
Unpaid claims, end of year
Less current portion
Non -current portion
1,633,943 1,568,000
(3 76,037) (411,000)
S 1,257,906 1.157.000
52
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 11 - DEFINED BENEFIT PENSION PLAN
(a) Plan Description
Substantially all City employees are eligible to participate in pension plans offered by California Public
Employees Retirement System (CALPERS), an agent multiple employer defined benefit pension plan
which acts as a common investment and administrative agent for its participating member employers.
CALPERS provides retirement and disability benefits, annual cost of living adjustments and death
benefits to plan members, who must be public employees and beneficiaries. The City's employees
participate in the Miscellaneous Employee Plan (Plan). Benefit provisions under the Plan are
established by State statute and City resolution. Benefits are based on years of credited service and
compensation. Audited annual financial statements are available from CALPERS at
www.calpers.ca.gov.
(b) Funding Policy
The contribution requirements of plan members and the City are established and may be amended by
CALPERS. The City is required to contribute at an actuarially determined rate. Based on the June 30,
2007 actuarial report, the Plan's provisions and benefits in effect at June 30, 2010, are summarized as
follows:
Benefit vesting schedule 5 years service
Benefit payments Monthly for life
Eligible retirement age 50
Benefits, as a % of annual salary multiplied by
years of service and annual salary 2%-2.7%
Required employee contribution rates 8%
Required employer contribution rates 15.560%
The City covered 75% of the employees' required payroll contributions for fiscal year 2010.
(c) Annual Pension Cost
CALPERS determines contribution requirements using a modification of the Entry Age Normal Method.
Under this method, the City's total nonnal benefit cost for each employee from date of hire to date of
retirement is expressed as a level percentage of the related total payroll cost. Normal benefit cost under
this method is the level amount the employer must pay annually to fund an employee's projected
retirement benefit. This level percentage of payroll method is used to amortize any unfunded actuarial
liabilities. The actuarial assumptions used to compute contribution requirements are also used to
compute the actuarially accrued liability. The City uses the actuarially determined percentages of
payroll to calculate and pay 100% of the required contributions to CALPERS. This results in no net
pension obligations or unpaid contributions.
Recent Annual Pension Costs, which equal the Annual Required Contribution to CALPERS, were as
follows:
Annual Percent of
Pension Cost APC
Fiscal Year
(APC)
06/30/2008
$ 1,454,415
06/30/2009
1,835,521
06/30/2010
1,841,350
53
Contributed
100 %
100 %
100 %
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 11 - DEFINED BENEFIT PENSION PLAN (Continued)
The required contributions were determined as part of the June 30, 2007 actuarial valuations using a
modification of the Entry Age Normal Actuarial Cost Method. The actuarial assumptions include: (a) a
rate of return on investments of 7.75 %; (b) inflation of 3.00 %; (c) payroll growth of 3.25 %; and (d)
projected salary increases of 3.25% to 14.45% depending on age, service, and type of employment.
Changes in liability due to plan amendments, changes in actuarial assumptions, or changes in actuarial
methods are amortized separately on a close basis over twenty years. Market value fluctuations in the
actuarial value of plan assets are smoothed over 15 years. All gains and losses are tracked and
amortized over a rolling thirty year period.
(d) Funded Status and Funding Progress
CALPERS' latest available actuarial data and funding progress are set forth below at their actuarial
valuation date as of June 30, 2008.
Actuarial accrued liability (AAL) $ 65,337,134
Actuarial value of plan assets 54,571,233
Unfunded actuarial accrued liability (UAAL) $10,765,901
Funded ratio (actuarial value of plan assests /AAL) 83.5%
Covered payroll (active plan members) $11,009,984
UAAL as a percentage of covered payroll 97.8%
The Schedule of Funding Progress, presented as Required Supplementary Information following the
Notes to Basic Financial Statements, presents multi -year trend information about whether the actuarial
value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for
benefits.
NOTE 12 - OTHER POST EMPLOYMENT BENEFITS (OPEB)
(a) Play 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
ma'imum 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 plans, 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 $1,202 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
54
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 12 - 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 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 may be obtained from PARS at 4350 Von Karman Avenue, Suite 100, Newport
Beach, CA 92660. A separate report for the City's portion of the PARS Trust is available at the City's
Finance Department.
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 Ca1PERS service, five years of which
must be from the City of Cupertino; and
• The employee is eligible for retirement as defined under the Ca1PERS 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.
(b) Funding Policy
The contribution requirements to the OPEB Plan are established and may be amended by the City
Council. Based on the actuarial valuation date of January 1, 2009, the annual required contribution rate
is 16.93% of annual covered payroll. As of June 30, 2010, the City contributed $7,000,000 to the PARS
Trust and paid $616,760 through healthcare premium payments during the year to fully pre -fund OPEB
Plan. The City is planning to fully fund the Annual OPEB Cost in the future years.
(c) Annual OPEB Cost
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of certain events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined
regarding the funded status of the plan and the annual required contributions of the employer are subject
to continual revision as actual results are compared with past expectations and new estimates are made
about the future. The schedule of funding progress, presented as required supplementary information
following the notes to the financial statements, presents multi -year trend information about whether the
actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued
liabilities for benefits.
55
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 12 - OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
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-tenn volatility in actuarial accrued liabilities and the actuarial value
of assets, consistent with long -term perspective of the calculations.
The City's actuary determined the City's OPEB liability and contribution requirements using the Entry
Age Normal Actuarial Cost Method. The annual rate of return on future assets for benefit payments was
assumed to be 6% on a fully prefunded basis. Inflation of 3 %, annual salary increases of 3.25 %, City
contribution increases of 3.5 %, and healthcare cost growth ranging from 10% initially down to 5% long-
term were also assumed. The Unfunded Actuarial Accrued Liability is amortized as a level percentage
of pay (assuming 3.25% per year growth in total payroll) over a rolling twenty year period. The
payment for a given year is expressed as a percentage of projected active member payroll for that year.
PEMHCA is a community -rated plan, where the same premiums apply for all plan participants
regardless of the presence or number of active employees. There is no implicit rate subsidy in the
premiums for pre- Medicare retirees.
The City's annual OPEB cost and actual contributions to the Plan for the years ended 2010 and 2009 are
as follows:
The City's Net OPEB Obligation or Asset is recorded in the Retiree Medical Internal Service Fund, and
is calculated as follows:
Annual required contribution
Interest on prior year net OPEB obligation
Adjustment to annual required contribution
Annual OPEB Cost
Contribution made
Increase (Decrease) in net OPEB obligation
Net OPEB obligation - beginning of year
Net OPEB obligation (asset) - end of year
June 30, 2010
$ 2,049,000
102,000
(108,000)
2,043,000
(7,616,760)
(5,573,760)
1,827,077
$ (3,746,683)
56
Annual
Percentage
Net OPEB
Fiscal Year
OPEB
Actual
of AOC
Obligation
Year Ended
Cost (AOC)
Contribution
Contributed
(Asset)
6/30/2009
$ 2,475,000
$ 647,923
26%
$ 1,827,077
6/30/2010
2,043,000
7,616,760
373%
(3,746,683)
The City's Net OPEB Obligation or Asset is recorded in the Retiree Medical Internal Service Fund, and
is calculated as follows:
Annual required contribution
Interest on prior year net OPEB obligation
Adjustment to annual required contribution
Annual OPEB Cost
Contribution made
Increase (Decrease) in net OPEB obligation
Net OPEB obligation - beginning of year
Net OPEB obligation (asset) - end of year
June 30, 2010
$ 2,049,000
102,000
(108,000)
2,043,000
(7,616,760)
(5,573,760)
1,827,077
$ (3,746,683)
56
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2010
NOTE 12 - OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
(d) Funded Status and Funding Progress
The latest available actuarial data and funding progress are set forth below at their actuarial valuation
date of January 1, 2009.
Actuarial accrued liability (AAL) $ 18,069,366
Actuarial value of plan assets -
Unfunded actuarial accrued liability (UAAL) $ 18,069,366
Funded ratio (actuarial value of plan assests /AAL) 0.0%
Covered payroll (active plan members) $ 11,892,000
UAAL as a percentage of covered payroll 151.9%
The Schedule of Funding Progress, presented as Required Supplemental Information following the
Notes to Basic Financial Statements, presents multi -year trend inforination about whether the actuarial
value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for
benefits.
NOTE 13 — SUBSEQUENT EVENTS
(a) Land Held for Redevelopment
On July 1, 2010, the City entered into a Disposition and Development Agreement (DDA) with a
developer. In accordance with the DDA, the City will transfer the land held for redevelopment of
$615,000 to the developer at no cost for the purpose of developing four single - family detached homes at
an affordable price to very low income homebuyers.
57
CITY OF CUPERTINO
Required Supplementary Information (Unaudited)
Schedules of Funding Progress
For the Year Ended June 30, 2010
Schedule of Funding Progress — Ca1PERS Defined Benefit Retirement Miscellaneous Plan:
Actuarial
Actuarial
Accrued
Accrued
Actuarial
Percentage
Percentage
Valuation
Asset
Liability-
Liability —
Funded
Covered
of Covered
Date
Value
Entry Age
UAAL
Ratio
Payroll
Payroll
6/30/2006
$ 44,876,584
$ 54,287,591
$ 9,411,007
82.7%
$ 10,133,914
92.9%
6/30/2007
50,157,077
59,241,300
9,084,2223
84.7%
10,751,350
84.5%
6/30/2008
54,571,233
65,337,134
10,765,901
83.5%
11,009,984
97.8 %0
Schedule of Funding Progress — Defined Benefit Other Post Employment Benefits Plan:
Actuarial Actuarial
Valuation Asset
Date Value
1/1/2007 $ -
l/l/2009 -
58
Unfunded
Actuarial
Actuarial
Percentage
Accrued
Accrued
Payroll
Liability-
Liability —
Funded
Fntry Age
UAAL
Ratio
$ 21,981,544
$ 21,981,544
0.0 0 /0
18,069,366
18,069,366
0.0 0 /0
58
UAAL
as
Percentage
Covered
of Covered
Payroll
Payroll
$ 11,118,000
197.7%
11,892,000
151.9%
58
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, GASB
Statement 34 states that budget -to- actual information in the basic financial statements should be limited to
the General Fund and major Special Revenue Funds. All other major governmental fund schedules with
such information should be included as Supplementary Information.
Public Facilities Corporation Debt Service Fund - Accounts for the accumulation of resources for and the
payments of principal and interest on certificates of participation issued in 2002 to advance refund debt
that was previously issued to finance the City Hall, Library, Wilson Park and Memorial Park projects.
59
CITY OF CUPERTINO
Public Facilities Corporation Debt Service Fund
Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
For the Year Ended June 30, 2010
Revenues:
Use of money and property
Total revenues
Expenditures:
Debt service:
Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
Other financing sources:
Transfers in
Total other financing sources
Change in fund balance
Fund balance, beginning of year
Fund balance, end of year
(3,537,543) (3,536,264) 1,279
3,538,000 3,538,000 -
3,538,000 3,538,000 -
$ 457 1,736 $ 1,279
55,941
$ 57,677
60
Variance
Positive
Budget
Actual
(Negative)
$ 2,000
$ -
$ (2,000)
2,000
-
(2,000)
1,460,000
1,460,000
-
2,079,543
2,076,264
3,279
3,539,543
3,536,264
3,279
(3,537,543) (3,536,264) 1,279
3,538,000 3,538,000 -
3,538,000 3,538,000 -
$ 457 1,736 $ 1,279
55,941
$ 57,677
60
NONMAJOR GOVERNMENTAL FUNDS
All funds not considered as major funds on the Fund Financial Statements are consolidated in one column
entitled "Other Governmental Funds." These nonmajor funds are identified and included in this
supplementary section and includes all of the City's Special Revenue Funds and one Capital Project Fund.
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 - Accounts for the 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 - Accounts for all activities related to operating the non -point source
pollution program.
Transportation - Accounts for the City's gas tax, sales tax 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 - 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.
Redevelopment Agency — Accounts for the Vallco project area and low and moderate income
housing funds.
Capital Projects Funds account for the financial resources committed to the acquisition or construction of
major capital facilities.
Mary Avenue Bicycle Footbridge — Accounts for the design and construction of a bicycle
footbridge extension of Mary Avenue over Interstate 280. It includes gateways, paths, residential
buffering elements, and landscaping.
61
CITY OF CUPERTINO
Nonmajor Governmental Funds
Combining Balance Sheet
June 30, 2010
62
Special Revenue Funds
Storm
Park
Environmental
Housing
Drain
Dedication
Management
Transportation
Development
Assets:
Cash and investments
$
964,379
$
454
$ 163,655
$ 1,933,372
$ 1,704,123
Accounts receivable
-
-
-
141,321
89,828
Loans receivable
-
-
-
-
793,284
Land held for housing development
-
-
-
-
615,000
Total assets
$
964,379
$
454,561
$ 163,655
$ 2,074,693
$ 3,202,235
Liabilities and fund balances:
Liabilities:
Accounts payable and accruals
$
2,087
$
9,812
$ 4,783
$ 103,111
$ 141,113
Accrued payroll and benefits
2,067
-
5,287
11,878
4,400
Due to other funds
-
-
-
-
-
Unearned revenue
-
-
-
284
-
Deferred revenue
-
-
-
-
139,638
Total liabilities
4,154
9,812
10,070
115,273
285,151
Fund balances:
Reserved for:
Encumbrances
60,763
-
-
291,861
323,753
Loans receivable
-
-
-
-
653,646
Land held for housing development
-
-
-
-
615,000
Low and moderate income housing
-
-
-
-
-
Unreserved, reported in:
Special Revenue Funds
899,462
444,749
153,585
1,667,559
1,324,685
Capital Project Fund
-
-
-
-
-
Total fund balances
960,225
444,749
153,585
1,959,420
2,917,084
Total liabilities and fund balances
$
964,379
$
454,561
$ 163,655
$ 2,074,693
$ 3,202,235
62
Special
Capital
Revenue Funds
Projects Funds
Redevelopment
Mary Avenue
Agency
Bicycle Footbridg
Total
$ 1,470,873
$ 13,517 $
6,704,480
-
156,897
388,046
-
-
793,284
-
-
615,000
$ 1,470,873
$ 170,414 $
8,500,810
$ -
$ 10,782 $
271,688
5,186
-
28,818
-
39,788
39,788
-
-
284
-
-
139,638
5,186
50,570
480,216
- 29,060 705,437
- - 653,646
- - 615,000
842,707 - 842,707
622,980 - 5,113,020
- 90,784 90,784
1,465,687 119,844 8,020,594
$ 1,470,873 $ 170,414 $ 8,500,810
63
CITY OF CUPERTINO
Nonmajor Govermnental Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2010
Other financing sources (uses)
Transfers in
-
-
Special Revenue Funds
750,000 -
Transfers out
Storm
Park
Environmental
(13,517) -
Housing
(60,000)
Drain
Dedication
Management
Transportation
Development
Revenues:
(11,548)
940,888 484,193
Fund balances, beginning of year
1
577,475
Taxes
$ 26,230
$ 60,561
$ -
$ -
$ 52,108
Use of money and property
7,207
3,408
(34)
3,146
68,569
Intergovernmental
-
-
-
3,012,517
194,373
Charges for services
-
3,305
364,123
-
-
Other
-
-
-
-
608,589
Total revenues
33,437
67,274
364,089
3,015,663
923,639
Expenditures:
Current:
Community development
-
-
-
-
439,446
Public works
28,326
-
390,637
738,686
-
Capital outlay
44,775
-
-
2,072,572
-
Total expenditures
73,101
-
390,637
2,811,258
439,446
Excess (deficiency) of revenue
over (under) expenditures
(39,664)
67,274
(26,548)
204,405
484,193
Other financing sources (uses)
Transfers in
-
-
15,000
750,000 -
Transfers out
(60,000)
(200,000)
-
(13,517) -
Total other financing sources (uses)
(60,000)
(200,000)
15,000
736,483 -
Change in fund balances
(99,664)
(132,726)
(11,548)
940,888 484,193
Fund balances, beginning of year
1
577,475
165,133
1,018,532 2,432,891
Find balances, end of year
$ 960,225
$ 444,749
$ 153,585
$ 1,959,420 $ 2,917,084
64
Special
Capital
Revenue Funds
Projects Fund
Redevelopment
Mary Avenue
Agency
Bicycle Footbridg
Total
$ 1,322,925
$ -
$ 1,461,824
6,433
-
88,729
-
1,297,994
4,504,884
-
-
367,428
-
-
608,589
1,329,358
1,297,994
7,031,454
617,006 - 1,056,452
- - 1,157,649
- 235,350 2,352,697
617,006 235,350 4,566,798
712,352 1,062,644 2,464,656
13,517 778,517
- (273,517)
- 13,517 505,000
712,352 1,076,161 2,969,656
753,335 (956,317) 5,050,938
$ 1,465,687 $ 119,844 $ 8,020,594
65
CITY OF CUPERTINO
Nonmajor Goverrunental Funds - Special Revenue Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual
For the Year Ended June 30, 2010
Storm Drain Park Dedication
66
Variance
Variance
Positive
Positive
Budget
Actual
(Negative)
Budget
Actual
(Negative)
Revenues:
Taxes
$ 50,000
$ 26,230
$ (23,770)
$ 1,400,000
$ 60,561
$ (1,339,439)
Use of money and property
33,000
7,207
(25,793)
29,000
3,408
(25,592)
Intergovernmental
-
-
-
-
-
-
Charges for services
-
-
-
-
3,305
3,305
Other
-
-
-
-
-
-
Total revenues
83,000
33,437
(49,563)
1,429,000
67,274
(1,361,726)
Expenditures:
Current:
Community development
-
-
-
-
-
-
Public works
28,326
28,326
-
-
-
-
Capital outlay
631,475
44,775
586,700
24,118
-
24,118
Total expenditures
659,801
73,101
586,700
24,118
-
24,118
Excess (deficiency) of revenues
over (under) expenditures
(576,801)
(39,664)
537,137
1,404,882
67,274
(1,337,608)
Other financing sources (uses):
Transfers in
-
-
-
-
-
-
Transfers out
(60,000)
(60,000)
-
(200,000)
(200,000)
-
Total other financing sources (uses)
(60,000)
(60,000)
-
(200,000)
(200,000)
-
C.hangeinfundbalances
_L _L
(99,664)
$ 537,137
$ 1,204,882
(132,726)
$ (1,332608)
Fund balances, beginning of year
1,059,889
577,475
Fund balances, end of year
$ 960,225
$ 444,749
66
Environmental Management
Transportation
Housing Development
Variance
Variance
Variance
Positive
Positive
Positive
Budget
Actual
(Negative)
Budget
Actual
(Negative)
Budget
Actual
(Negative)
$ -
$ -
$ -
$ -
$ -
$ -
$ 50,000
$ 52,108
$ 2,108
2,000
(34)
(2,034)
66,000
3,146
(62,854)
122,000
68,569
(53,431)
-
-
-
2,275,000
3,012,517
737,517
496,013
194,373
(301,640)
365,000
364,123
(877)
-
-
-
-
-
-
365,000
-
(365,000)
-
-
-
-
608,589
608,589
732,000
364,089
(367,911)
2,341,000
3,015,663
674,663
668,013
923,639
255,626
- - - - - - 1,352,946 439,446 913,500
519,953 390,637 129,316 897,759 738,686 159,073 - - -
- - - 3,622,344 2,072,572 1,549,772 - - -
219,953 390,637 129,316 4,520,103 2,811,258 1,708,845 1,352,946 439,446 913,500
212,047 (26,548) (238,595) (2,179,103) 204,405 2,383,508 (684,933) 484,193 1,169,126
15,000 15,000 - 750,000 750,000 - - - -
- - - (13,517) (13,517) - - - -
15,000 15,000 - 736,483 736,483 - - - -
$ 227,047 (11,548) $ (238,595) _L (1,442,620L 940,888 $ 2,383,508 $ (684,933) 484,193 $ 1,169,126
165,133 1,018,532 2,432,891
$ 153.585 $ 1,959,420 $ 2,917,084
(Continued)
67
CITY OF CUPERTINO
Nonmajor Governmental Funds - Special Revenue Funds
Combining Schedule of Revenues, Expenditrues and Changes in Fund Balances -
Budget and Actual
For the Year Ended June 30, 2010
Revenues:
Taxes
Use of money and property
Intergovernmental
Charges for services
Other
Total revenues
Expenditures:
Current:
Community development
Public works
Capital outlay
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
Other financing sources (uses):
Transfers in
Transfers out
Total other financing sources (uses)
Change in fund balances
Fund balances, beginning of year
Fund balances, end of year
Redevelopment Agency
Variance
Positive
Budget Actual (Negative)
$ 1,256,000 $ 1,322,925 $ 66,925
20,000 6,433 (13,567)
1,276,000 1,329,358 53,358
682,040 617,006 65,034
682,040 617,006 65,034
593,960 712,352 118,392
$ 593,960 712,352 $ 118,392
753,335
$ 1,465,687
68
INTERNAL SERVICE FUNDS
The Internal Service Funds are used to account for the financing of goods or services provided by one
department 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 and 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
Assets. However, internal service funds are still presented separately in the Fund Financial Statements.
Management Information Systems - 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 Nvorkers'
compensation program.
Equipment Revolving - Accounts for the activities related to the maintenance and replacement of
the City's vehicle fleet.
Compensated Absences and Long -Term Disability - Accounts for the activities related to the
City's program for compensated absences payouts and long -teen disability.
Retiree Medical - Contains funds set aside for other post employment retirement benefits.
69
CITY OF CUPERTINO
Internal Service Funds
Combining Statement of Net Assets
June 30, 2010
70
Compensated
Management
Absences and
Information
Workers'
Equipment
Long -Term
Retiree
Systems
Compensation
Revolving
Disabilitv
Medical
Total
Assets:
Current assets:
Cash and investments
$2,005,997
$1,832,129
$1,575,936
$ 81,702
$2,028,823
$ 7,524,587
Prepaid items
19,097
-
-
-
-
19,097
Total current assets
2,025,094
1,832,129
1,575,936
81,702
2,028,823
7,543,684
Noncurrent assets:
Advances to other funds
-
-
504,497
-
-
504,497
Net OPEB assets
-
-
-
-
3,746,683
3,746,683
Capital assets:
Depreciable, net of
accumulated depreciation
370,655
-
634,276
-
-
1,004,931
Total noncurrent assets
370,655
-
1,138,773
-
3,746,683
5,256,111
Total assets
2,395,749
1,832,129
2,714,709
81,702
5,775,506
12,799,795
Liabilities:
Current liabilities:
Accounts payable and accruals
25,014
2,015
28,673
-
-
55,702
Accrued payroll and benefits
14,244
651
9,247
-
-
24,142
Compensated absences
-
-
-
16,684
-
16,684
Claims payable
-
376,037
-
-
-
376,037
Total current liabilities
39,258
378,703
37,920
16,684
-
472,565
Noncurrent liabilities:
Compensated absences,
net of current portion
32,037
-
10,852
-
-
42,889
Claims payable, net of
currrent portion
-
1,257,906
-
-
-
1,257,906
Total liabilities
71,295
1,636,609
48,772
16,684
-
1,773,360
Net assets:
Invested in capital assets
370,655
-
634,276
-
-
1,004,931
Unrestricted
1,953,799
195,520
2,031,661
65,018
5,775,506
10,021,504
Total net assets
$2,324,454
$ 195,520
$2,665,937
$ 65,018
$ 5,775,506
$11,026,435
70
CITY OF CUPERTINO
Internal Service Funds
Combining Statement of Revenues, Expenses and Changes in Fund Net Assets
For the Year Ended Tune 30, 2010
Operating expenses
Salaries and related expenses
523,981
23,087
Compensated
254,574 2,053,919
3,205,703
Management
127,401
Absences and
287,754
- -
Information
Workers' Equipment
Long -Term Retiree
-
107,416
Systems
Compensation Revolving
Disability Medical
Total
Operating reveneus:
-
64,049 -
340,023
Depreciation
Charges for services
$1,231,000
$ 405,696 $ 985,030
$ 64,284 $ -
$ 2,686,010
Other
22,633
- -
- -
22,633
Total operating revenues
1,253,633
405,696 985,030
64,284 -
2,708,643
Operating expenses
Salaries and related expenses
523,981
23,087
350,142
254,574 2,053,919
3,205,703
Materials and supplies
127,401
-
287,754
- -
415,155
Contractual services
251,778
-
107,416
- -
359,194
Insurance claims and premium
-
275,974
-
64,049 -
340,023
Depreciation
185,535
-
190,547
- -
376,082
Total operating expenses
1,088,695
299,061
935,859
318,623 2,053,919
4,696,157
Operating income (loss)
164,938
106,635
49,171
(254,339) (2,053,919)
(1,987,514)
Nonoperating revenues
Investment income
13,355
12,081
11,640
555
58,128
95,759
Income (loss) before transfers
178,293
118,716
60,811
(253,784)
(1,995,791)
(1,891,755)
Transfers in
169,000
-
30,000
300,000
1,848,000
2,347,000
Change in net assets
347,293
118,716
90,811
46,216
(147,791)
455,245
Net assets, beginning of year
1,977,161
76,804
2,575,126
18,802
5,923,297
10,571,190
Net assets, end of year
$2,324,454
$ 195,520
$2,665,937
$ 65,018
$5,775,506
$11,026,435
71
CITY OF CUPERTINO
Internal Service Funds
Combining Statement of Cash Flows
For the Year Ended Tune 30, 2010
Cash flows from operating activities:
Cash received from customers
Cash payments to suppliers for goods and services
Cash payments to employees
Cash payments for judgment and claims
Cash flows provided by (used in)
operating activities
Cash flows from noncapital financing activities:
Contribution to an irrevocable trust
Transfers in
Advances to other funds
Cash flows provided by (used in)
noncapital financing activities
324,336 174,680 126,116 (237,655) (627,679) (240,202)
- - - - (7,000,000) (7,000,000)
169,000 - 30,000 300,000 1,848,000 2,347,000
- - (504,497) - - (504,497)
169,000 - (474,497) 300,000 (5,152,000) (5,157,497)
Cash flows from capital and related financing activities
Acquisition of capital assets
(216,521)
-
Compensated
-
-
Management
Cash flows from investing activities:
to net cash provided by (used in) operating activities:
Absences and
Depreciation
185,535
Information
Workers'
Equipment
Long -Term
Retiree
11,640
Systems
Compensation Revolving
Disability
Medical
Total
$1253,633
$ 405,696
$ 985,030
$ 64,284
$ -
$ 2,708,643
(417,900)
-
(513,518)
-
(10,919)
(942,337)
(511,397)
(23,000)
(345,396)
(237,890)
(616,760)
(1,734,443)
-
(208,016)
-
(64,049)
-
(272,065)
324,336 174,680 126,116 (237,655) (627,679) (240,202)
- - - - (7,000,000) (7,000,000)
169,000 - 30,000 300,000 1,848,000 2,347,000
- - (504,497) - - (504,497)
169,000 - (474,497) 300,000 (5,152,000) (5,157,497)
Cash flows from capital and related financing activities
Acquisition of capital assets
(216,521)
-
(29,375)
-
-
(245,896)
Cash flows from investing activities:
to net cash provided by (used in) operating activities:
Depreciation
185,535
Contributions to an irrevocable trust for
Interest received
13,355
12,081
11,640
555
58,128
95,759
Net change in cash and cash equivalents
290,170
186,761
(366,116)
62,900
(5,721,551)
(5,547,836)
Cash and cash equivalents, beginning of year
1,715,827
1,645,368
1,942,052
18,802
7,750,374
13,072,423
Cash and cash equivalents, end of year
$ 2,005,997
$ 1,832,129
$ 1,575,936 $
81,702
$ 1028,823
$ 7,524,587
Reconciliation of operating income (loss) to net cash
flows provided by (used in) operating activities:
Operating income (loss) $
164,938
Adjustments to reconcile operating income (loss)
to net cash provided by (used in) operating activities:
Depreciation
185,535
Contributions to an irrevocable trust for
current years annual OPEB cost
-
Change in assets and liabilities:
Prepaid items
(19,097
Accounts payable and accruals
(19,624
Accrued payroll and benefits
1,951
Compensated absences
10,633
Claims payable
-
Cash flows provided by (used in)
$ 106,635 $ 49,171 $ (254,339) $ (2,053,919) $ (1,987,514)
- 190,547 - - 376,082
- - - 1,426,240 1,426,240
- - - - (19,097)
2,015 (118,348) - - (135,957)
87 3,048 - - 5,086
- 1,698 16,684 - 29,015
65,943 - - - 65,943
operating activities $ 324,336 $ 174,680 $ 126,116 _L L2 _L_(6 _L_(2
72
AGENCY FUNDS
All Agency Funds, representing all fiduciary funds of the City, are custodial in nature and do not involve
measurement of results of operations. Such funds have no equity since any assets are due to individuals
or other entities at some future time.
These funds are presented separately from the Governmental and Fund Financial Statements.
73
CITY OF CUPERTINO
Special Assessment District Agency Fund
Statement of Changes in Assets and Liabilities
For the Year Ended June 30, 2010
74
Balance
Balance
July 1, 2009
Additions Deletions
June 30, 2010
Assets:
Cash and investments
$ 115,322
$ 37,719 $ (34,800)
$ 118,241
Liabilities:
Deposits
$ 115,322
$ 37,719 $ (34,800)
$ 118,241
74
STA TISTICAL SECTION
75
I�� �_ r � �i '`*
..; ,
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 well being have changed over time:
1. Net Assets by Component
2. Changes in Net 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
revenues, property tax:
Assessed and Estimated Actual Value of Taxable Property
Property Tax Rates — All Overlapping Governments
Principal Property Taxpayers
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. Ratio of Outstanding Debt by Type
2. Direct and Overlapping Bonded Debt
3. Legal Bonded 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. Principal Employers
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 City Employees by Function/Progmms
2. Operating Indicators by Function/Program
3. Capital Asset 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. The City implemented GASB Statement 34 in 2002 -03;
schedules presenting government -wide information include information beginning in that year.
77
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CITY OF CUPERTINO
Direct and Overlapping Bonded Debt
June 30, 2010
(Unaudited)
2008 -09 Assessed Valuation:
$
13,545,013,769
Redevelopment Incremental Valuation:
119,794,449
Adjusted Assessed Valuation
$
13,664,808,218
Total Debt
City's Share of
Overlapping Tax and Assessment Debt:
6/30/2010
% Applicable (1)
Debt 6/30/10
Santa Clara County
$ 350,000,000
4.972%
$
17,402,000
Santa Clara Valley Water District, Zone W -1
910,000
5.084
46,264
Foothill- DeAnza Community College District
479,279,288
13.807
66,174,091
West Valley Community College District
215,069,692
0.669
1,438,816
Santa Clara Unified School District
267,085,000
2.108
5,630,152
Fremont Union High School District
202,415,000
29.573
59,860,188
Cupertino Union School District
127,264,911
49.571
63,086,489
El Camino Hospital District
144
1.361
1
Santa Clara Valley Water District Benefit Assessment
152,440,000
4.972
7,579,317
City of Cupertino 1915 Act Bonds
35,000
100.000
35,000
Total Overlapping Tax and Assessment Debt
1,939,473,891
223,225,427
Direct and Overlapping General Fund Debt
Santa Clara County General Fund Obligations
825,070,000
4.972%
41,022,480
Santa Clara County Pension Obligations
388
4.972
19,293,589
Santa Clara County Board of Education COP
13,580,000
4.972
675,198
Foothill -De Anza Community College District COP
23,450,000
13.807
3,237,742
West Valley- Mission Community College District General Fund Obligations
56,120,000
0.669
375,443
Santa Clara Unified School District COP
12,980,000
2.108
273,618
City of Cupertino Certificates of Participation
45,510,000
100.000
45,510,000
Santa Clara County Vector Control District COP
3,965,000
4.972
197,140
Midpeninsula Regional Open Space Park District COP
113,788,031
7.752
8,820,848
Total Direct and Overlapping General Fund Debt
1,482,507,853
119,406,058
Combined Total Debt
$ 3,421,981,744
$
342,631,485 (2)
Ratios to 2009 -10 Assessed Valuation:
Total Overlapping Tax and Assessment Debt
1.65%
Ratios to Adjusted Assessed Valuation:
Combined Direct Debt ($45,510,000)
0.33%
Combined Total Debt
2.51%
State School Building Aid Repayable as of 6/30/10: $
(1) Percentage of overlapping agency's assessed valuation located within boundaries of the city.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and
non - bonded capital lease obligations.
Source: California Municipal Services
89
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96
COMMUNITY
PROFILE
97
I�� �_ r � �i '`*
;,
Jrlstory
Cupertino owes its name and earliest mention in recorded history to the 1776 expedition led by the Spaniard, Don Juan
Bautista de Anza, from Sonora, Mexico to the Port of San Francisco to found the presidio of St. Francis.
Leaving the majority of the parry of men, women, and children
in Monterey to rest from their travels, deAnza, his diarist and
cartographer, Petrus Font, and 18 other men pressed on through
the Santa Clara Valley in late March to their San Francisco
destination.
With the expedition encamped in what is now Cupertino, Font
christened the creek next to the encampment the Arroyo San
Joseph Cupertino in honor of his patron, San Guiseppe (San
Joseph) of Cupertino, Italy. The arroyo is now known as
Stevens Creek.
The village of Cupertino sprang up at the crossroads of
Saratoga- Sunnyvale Road (now DeAnza Boulevard) and
Stevens Creek Boulevard. It was first known as West Side; but by 1898 the post office at the Crossroads needed a new
name to distinguish it from other similarly named towns. John T. Doyle, a San Francisco lawyer and historian, had given
the name Cupertino to his winery in recognition of the name bestowed on the nearby creek by Petrus Font. In 1904 the
name was applied to the Crossroads and to the post office when the Home Union Store incorporated under the name, The
Cupertino Stores, Inc.
clyRANC' y
Many of Cupertino's pioneer European settlers planted their
land in grapes. Vineyards and wineries proliferated on
Montebello Ridge, on the lower foothills, and on the flat
lands below.
After 1906 a lot more than grape growing was going on in
Cupertino. Orchards were thriving and new businesses were
being started. In the late 1940's Cupertino was swept up in
Santa Clara Valley's postwar population explosion.
Concerned by unplanned development, higher taxes, and
piecemeal annexation to adjacent cities, Cupertino's
community leaders began a drive in 1954 for incorporation.
Cupertino rancher Norman Nathanson, the Cupertino —
Monta Vista Improvement Association, and the Fact Finding
Committee played important roles in this movement.
Incorporation was approved in the September 27, 1955 election. Cupertino officially became Santa Clara County's 13
City on October 10, 1955.
A major milestone in Cupertino's development was the creation by some of the city's largest landowners of Vallco
Business and Industrial Park in the early 1960's. Of the 25 property owners, 17 decided to pool their land to form Vallco
Park, six sold to Varian Associates, a thriving young electronics firm, founded by Russell Varian, and two opted for
transplanting to farms elsewhere. The name Vallco was derived from the names of the principal developers: Varian
Associates and the Leonard, Lester, Craft, and Orlando families.
99
2010 Commwiiry
Cupertino, with a population of 55,162 and city limits stretching across 13 square miles, is considered to be one of the San
Francisco Bay Area's most prestigious cities in which to live and work.
Economic health is an essential component to maintaining a balanced environment, 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 in that our success as a partnership is a direct reflection of our success as a community. The
cornerstone of this partnership is that of a cooperative and responsive government that provides an environment for
business and residential prosperity and fosters strong working relationships with all sectors of the community.
Our economic development strategies are tailored to address the specific needs of the community. As the City of
Cupertino is a mature city with over 90% build -out, our focus concentrates more on business retention and revitalization.
Business recruitment is site specific and targeted to industries that enhance, rather than draw from, our existing business
base.
As home to many well -known high -tech companies, Cupertino offers a dynamic and exciting business climate. Apple
Inc., Verigy, Durect Corporation, and ArcSight, are headquartered in the city. Hewlett- Packard and DeAnza College, one
of the largest single - campus community colleges in the country, are other major employers. Seagate Technology will
consolidate offices and relocate their headquarters into the city.
The City's proactive economic development efforts have resulted in a number of innovative, mutually beneficial
partnerships with local companies. The City strives to retain and attract local companies through policies of balanced
growth and streamlined permitting.
The Vallco shopping center includes Macy's, JCPenney, and Sears as anchors and features many exciting entertainment
and eating venues. Shoppers can enjoy the latest shows at the AMC 16- screen theater, skating at the mall's full -size ice
rink, and bowling at the chic and upscale Strike Cupertino. They can begin or top off the evening with fine - dining at the
critically- acclaimed Alexander's Steakhouse or enjoy more casual cuisine at TGI Friday's, Benihana's, Dynasty Seafood
Restaurant, Fresh Choice, and food court. The city features many other restaurants and stores to serve the local workforce
and residents.
Four hotels occupy the city, with three of them operated by Hilton, Marriott, and Kimpton Group.
The City of Cupertino has a history of providing high -level municipal services to complement the sense of community
and quality of life enjoyed by our constituents. The City will continue to enhance and promote a strong local economy to
provide municipal services that make Cupertino a place that people are proud to call home.
100
Zolo cry Profa&
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 the Community Hall.
The City has 163 authorized full -time benefited employee positions. City departments include Administration (City
Council, commissions, city manager, city attorney); Administrative Services (finance, human resources, information
technology, city clerk, neighborhood watch, emergency preparedness, code enforcement); Community Development
(planning, building, and economic development); Parks and Recreation; Public Works (engineering, maintenance,
transportation, solid waste, and storm drain management); and Public and Environmental Affairs. Police service is
provided by the Santa Clara County Sheriff's Department, and fire service is provided through the Santa Clara County
Fire District.
Assisting the City Council are several citizen advisory commissions /committees which include housing,
telecommunications, fine arts, library, planning, audit, parks and recreation, bicycle and pedestrian, teen, economic
development, strategic planning, and public safety. Members of the volunteer boards are appointed by the City Council
and vacancies are announced so that interested residents may apply for the positions. Residents are kept informed about
city services and programs through the Cupertino Scene, a monthly newsletter; Cupertino's government access cable TV
channel, The City Channel; and the city's website.
Housing
The estimated median home value in Cupertino is $907,731
as of May 2009, a decline of 1.56% from a year ago,
according to RealtyTrac.
Community Health Care Facilities
Cupertino is served by the Cupertino Medical Clinic,
NovaCare Occupational Health Services. Nearby hospitals
include El Camino Hospital in Mountain View, O'Connor
Hospital in San Jose, Community Hospital of Los Gatos,
Kaiser Permanente Medical Center in Santa Clara, 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;
business service, 800 - 750 -2355.
Cable — Comcast, 800- 945 -2288.
Garbage — Recology,408- 725 -0420.
Water — San Jose Water Company, 408 -279 -7900 and
California Water, 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 will bear 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, or other taxing
agencies. Assessed valuations and tax rates are published
annually after July 1.
Retail Sales Tax: Santa Clara County: 1.25 %; City: 1 %;
State General Fund: 6 %; State Local Public Safety Fund:
0.50 %, State Local Revenue Fund: 0.25 %; County
Transportation Fund: 0.25 %. Total: 9.25 %.
Assessed Valuation: (Secured and Unsecured)
Cupertino: $13,495,632,397 (7/1/10)
County: $296,474,111,554 (7/1/10)
Transportation
Rail — CalTrain service to Gilroy and San Francisco, with
local station four miles north of city, Amtrak station is 10
miles south.
Air — Mineta San Jose International Airport 11 miles south;
San Francisco International Airport 30 miles north.
Bus — Santa Clara Valley Transportation Authority.
Highways — Interstate Route 280, State Route 85.
101
Nm���
Facts and Figures
Population in City Limits
Median Household Income
Median Age
Sales Tax Rate
Registered Voters
Democrats
Republicans
American Independent
Other
Decline to State
55,162
$131,517
39
9.25%
26,658
10,023
5,829
366
320
10,120
Top 40 Sales Tax Producers
Fourth Quarter 2009
(In Alphabetical Order)
Alexander's Steakhouse
Apple Inc.
Argonaut Window & Door
Benihana of Tokyo
BJ's Bar & Grill
California Dental Arts
Chevron Service Stations
CVS Pharmacy
Cypress Hotel /Park Place
DeAnza College Campus Center
Dynasty Restaurant
Elephant Bar
Granite Rock
Hewlett- Packard
Insight Direct
JC Penney
Joy Luck Place
Macy's
Marina Foods
Mervvn's
Michael's Arts & Crafts
Mirapath
Outback Steakhouse
Proofpoint
Ranch 99 Market
Ricoh
Rite Aid Drug Store
Rotten Robbie Service Station
Scandinavian Designs
Sears
Shane Diamond Jewelers
Shell Service Station
Symantec
Target
TJ Maxx
Union 76 Service Station
Valero Service Station
Verigy
Verizon Wireless
Whole Foods
Demogrgj)hie Inforination
Asian
White, non - Hispanic
Hispanic or Latino
Black or African American
American Indian /Alaska Native
Native Hawaiian /Other Pacific
Islander
Other
56.9 %
33.8 %
4.2 %
1.4%
0.1%
0.1%
3.5%
102
Comm"niry �r��,d��Zec�eatuo�vSe�vuG�
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 Civic Center and Library
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 complex has a 6,000 square foot Community Hall,
plaza with fountain, trees and seating areas. City Council
meetings are held in the Community Hall as well as
Planning Commission and Parks and Recreation
Commission sessions.
The 54,000 square foot library continues to be one of the
busiest in the Santa Clara County Library system. For
more information call 408 -446 -1677.
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 is also included as well as a child watch center.
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, a computer lab
and classes, language instruction including English as a
second language, 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.
McClellan Ranch Park
A horse ranch during the 1930'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 and a Junior
Nature Museum, which features small live animal exhibits
and dispenses information about bird, animal, and plant
species of the area. McClellan Ranch is located at 22221
McClellan Road. Telephone: 408 - 777 -3120.
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Winner of numerous state and national awards for excellence, our
city's schools are widely acknowledged to be models of quality
instruction.
Cupertino Union School District serves 16,500 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 a 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 over 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 achievement. Four of five high schools in the district exceeded their state established achievement targets
for the 2009 Academic Performance Index. District students are encouraged to volunteer and /or 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 during their
graduation ceremonies.
Cupertino is served by four local
institutions of higher education:
DeAnza College, the University of
San Francisco, National University
and the UCSC Extension. In
addition to these schools,
Cupertino's location offers easy
access to Stanford University, Santa
Clara University and San Jose State
University.
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 through 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.
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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, traditionally 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. — 4 p.m. Monday through Thursday. Telephone: 408 -864-
8836.
Fujitsu Planetarium
Stargazers will have a Cupertino facility catering to their interests, the Fujitsu Planetarium on the DeAnza College
campus. It will host a variety of planetarium shows and events, including educational programs for school groups and
family astronomy evenings when it reopens for Saturday evening shows on September 25, 2010. For more information,
visit the website at www.deanza.edu/planctarium 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 at 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 one and one half hours prior to any performance. Box office: 408 -864-
8816; administrative office: 408 - 864 -8820.
Cupertino Historical Society
On May 2, 1966, the Cupertino Historical Society was founded as a non - profit organization by a group of 177 longtime
residents concerned about the rapid growth in the area and its impact on the quickly vanishing Cupertino heritage. On
March 30, 1990, the Society opened the Cupertino Historical Museum dedicated to the preservation and exhibition of the
city's history. Through its exhibits the museum attempts to develop and expand the learning opportunities that it offers to
the ethnically diverse community of the City of Cupertino. The Society continues to build partnerships with the local
school districts to ensure that the history of Cupertino is offered as part of the educational curriculum. The Society is
located at the Quinlan Community Center, 10185 N. Stelling Road. Telephone: 408 -973 -1495.
Farmers' Market
Residents and visitors can visit the farmers' market every
Friday from 9:00 a.m. to 1:00 p.m. at the Vallco Shopping
Center parking lot near Sears.
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 boasts a
large collection of books, a pamphlet file, 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 or natural history are
offered by the center each quarter. For more information, call 408- 864 -8987. The center is open September through June
9:30 a.m. to noon and 1:00 p.m. to 4:00 p.m. Tuesday through Thursday.
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