Financial Report 06-30-2006
CITY OF CUPERTINO, CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR FISCAL YEAR ENDED
JUNE 30, 2006
PREPARED BY:
CITY OF CUPERTINO
FINANCE DEPARTMENT
DAVID WOO
FINANCE DIRECTOR
INTRODUCTORY SECTION
CITY OF CUPERTINO, CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
Table of Contents
Page
INTRODUCTORY SECTION
Table of Contents. .
Letter of Transmittal .
Organization Chart
Commissions and Committees . . . .
City Council and Directory of City Officials. . . . .
Certificate of Award for Excellence in Financial Reporting.
I
V
xv
XVI
. XVll
. X Vlll
FINANCIAL SECTION
Independent Auditor's Report on Basic Financial Statements
3
Management's Discussion and Analysis
5
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets
22
23
Statement of Activities
Fund Financial Statements:
Major Governmental Funds:
Balance Sheet . 25
Reconciliation of the Governmental Funds - Balance Sheet with the
Statement of Net Assets . 26
Statement of Revenues, Expenditures, and Changes in Fund Balance 27
Reconciliation of the Net Change in Fund Balances Total Governmental
Funds with the Statement of Activities 28
Statement of Revenues, Expenditures, and Changes in Fund Balances-
Budget and Actual:
General Fund .
29
Major Proprietary Funds:
Statement of Net Assets 31
Statement of Revenue, Expenses, and Changes in Fund Net Assets. 32
Statement of Cash Flows . 33
CITY OF CUPERTINO, CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
Table of Contents
Page
FINANCIAL SECTION (Continued)
Fiduciary Funds:
Statement of Fiduciary Net Assets
35
37
Notes to Basic Financial Statements
Supplemental Information:
Major Governmental Funds Other Than the General Fund and Special Revenue Funds:
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget
and Actual:
Public Facilities Corporation Debt Service Fund.
64
Non-major Governmental Funds:
Combining Balance Sheets 66
Combining Statements of Revenues, Expenditures, and Changes in Fund Balance. 68
Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance -
Budget and Actual 70
Internal Service Funds:
Combining Statement of Net Assets 75
Combining Statements of Revenues, Expenses and Changes in Net Assets. 76
Combining Statements of Cash Flows 77
Fiduciary Funds:
Combining Statement of Changes in Assets and Liabilities - All Agency Funds 79
11
CITY OF CUPERTINO, CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
Table of Contents
Page
STATISTICAL SECTION
Financial Trends:
Net Assets by Component
Changes in Net Assets . . . .
Fund Balances of Governmental Funds. . .
Changes in Fund Balance of Governmental Funds
83
84
86
87
Revenue Capacity:
Assessed and Estimated Actual Value of Taxable Property
Property Tax Rates, All Overlapping Governments
Principal Property Taxpayers .
Property Tax Levies and Collections .
88
89
90
91
Debt Capacity:
Ratio of Outstanding Debt by Type
Computation of Direct and Overlapping Debt
Computation of Legal Bonded Debt Margin
Ratio of General Bonded Debt Outstanding
92
93
94
95
Demographic and Economic Information:
Demographic and Economic Statistics
Principal Employers .
96
97
Operating Information:
Full- Time Equivalent City Government Employees by Function
Operating Indicators by Function/Program .
Capital Asset Statistics by Function/Program.
98
99
100
COMMUNITY PROFILE
III
CITY OF
CUPEIQINO
December 13,2006
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, 2006. The Introductory Section includes
1) this transmittal letter, 2) an organizational chart, and 3) a list of principle officials. The
Financial Section includes 1) the independent audit firm's report, 2) a narrative section referred
to as Management's Discussion and Analysis (MD&A), 3) the basic financial statements and
related notes, 4) required supplemental information, and 5) the combining financial statements
for non-major funds. The Statistical Section includes several tables of unaudited data depicting
the financial history of the City as well as miscellaneous statistics.
The City's annual report is prepared in accordance with Accounting Principles Generally
Accepted in the United States of America (GAAP) as promulgated 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. The 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.
IV
Printed on Recycled Paper
REPORTING ENTITY
This Comprehensive Annual Financial Report includes all component units, funds and account
groups of the City. It reports all activities for which the City is considered to be financially
accountable. The general governmental funds provide a full range of services, including
planning, building, parks and recreation, public works, engineering, maintenance and general
administrative activities. This financial report incorporates data for the City of Cupertino, 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 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.
FACTORS AFFECTING 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 11 square miles and is bordered by the cities of San
Jose, Saratoga, Sunnyvale, Santa Clara and Los Altos.
. Hayward
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CUPERTINO .
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Situated at the west end of Silicon Valley, Cupertino
has earned the reputation of a balanced community
with a 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 close proximity to jobs in
the Santa Clara Valley. The City recognizes the
importance of quality school facilities and programs to
all Cupertino residents, and works in partnership with
the schools in many programs affecting education and
youth.
Cupertino is the corporate headquarters for major
companies such as Apple Computer, Symantec and
Borland Software. Key divisions of Hewlett-Packard
are also located in Cupertino.
The City has eight large shopping centers including its own regional mall, Val1co Fashion Park,
which is undergoing a massive expansion and renovation. A new 16-screen AMC movie
complex will open in 2007, with new stores, a food court, and a bowling alley in future plans. A
California Pizza Kitchen and Islands Restaurant will be built outside of the mall. Hotel and
mixed-use retail/condominium developments adjacent to the mall are in conceptual phases.
Alexander's Steakhouse and Dynasty Seafood Restaurant continue to pickup business, The City
projects that if development plans come to fruition, sales taxes from the mall could potentially
triple over current amounts.
v
The expansion of the Marketplace Center has led to new restaurants and services. Petsmart and
Chuck E Cheese have opened new retail and entertainment establishments that replaced shuttered
grocery and video retailers. Whole Foods Market is building a 63,000 square foot superstore on
the vacated Anderson Chevrolet dealer site. The Homestead Center at Homestead A venue and
Foothill Expressway is renovating and expanding. Shopping center occupancy rates increased
during the year from 94% to 99%, with average rents rising from $2.45 to $3.27 per square foot.
Significantly, Apple announced that in the next three to four years it plans to construct and open
a 50-acre second campus in the North Vallco area of the City, an action which could add up to
3,000 more jobs and improve sales tax receipts and property valuations.
Overall sales taxes rose more steeply than they did in the previous year, increasing 16% during
2005-06 as opposed to the 7% rise in 2004-05. The leading tax sector, business-to-business
(consisting mostly of office equipment), reached a new three-year high in tax receipts and
climbed to 57% of the tax base up from 54% last year. For the second straight year, the sector
rode Apple's robust sales of iPods. The market segment also began to capture the company's up-
and-coming sales of personal computers based on the Intel chip.
On the other hand, general retail, ranked second, suffered a three-year low during the fiscal year,
and dropped to 22% of the market compared to 25% last year. The re-development of Vallco
Fashion Park will hopefully reverse that trend in a couple of years. The third ranked segment,
food products, also reached a three-year high, driven by business at the new restaurants. Food
maintained a steady 12% of the base.
Looking at fiscal 2006-07 through October, sales taxes were down from the torrid pace of 2005-
06. They are projected to end up about 1 % over 2005-06 results.
The following chart shows actual sales tax receipts over the past nine years.
Sales Tax Trend
$14,000
$12,000
$2,000
$0
-
-
- .- -
- -
- - - -
- - I- - - - - - - -
-- I- - - - - - - -
- - - - - - - - - -
- I- - - - - - - -
,
10 ACTUAL/EST. I
--
en
g $10,000
o
.S
'-' $8,000
~ $6,000
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~
~ $4,000
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1998 1999 2000 2001 2002 2003 2004 2005 2006
YEAR
VI
The strong residential real estate market continues in Cupertino, contrary to other sectors of
California and the nation. While Cupertino has seen a slowdown compared to the hot pace of
recent years, the City's renowned school district has kept available properties in the city in high
demand. Even better news is that starting in 2006-07, the City will receive five cents of each
property tax dollar paid by landowners in the city as opposed to four cents. In 2006-07 alone, this
means $1.35 million more to the City in ongoing revenue.
Recognizing the long-term real estate strength, home building in the city carried on with the
Adobe Terrace, Metropolitan, Civic Park, and Oak Park Village condominium and townhouse
projects in various stages of construction.
Cell phone companies, citing a new Internal Revenue Service notice on federal excise taxes, have
challenged remittances of utility user taxes to cities such as Cupertino. The City plans to modify
its tax ordinance to address these arguments. Up to $400,000 per year in City revenue is at risk.
MAJOR INITIATIVES
1. Ensure Land Use is Compatible with Community Character
. Carry out master plan for the Stevens Creek Corridor Park.
. Acquire parcels at Sterling and Barnhart for a park in the Rancho Rinconada area.
Commence design.
. Conduct North Vallco land use study.
. Ensure that the walkable city concept IS present In all City development and
redevelopment projects.
. Pursue neighborhood park in the Homestead area.
2. Protect and Promote our Public Safety
. Add sheriff patrols for the late afternoons and evenings, improve responses for incidences
at schools, and add coverage for the larger crowds at Val1co.
. Study, implement or complete, traffic safety issues such as those involving the Safe
Routes to School program, the Streets Smarts Program, and the traffic signal at
McClellan and DeAnza.
. Continue emphasis on emergency response and preparedness, including expansion of
CERT training, improving community notification and coordination, and providing
emergency response training for businesses and schools.
3. Ensure the Financial Health of the Community
. Implement the City's fiscal strategic plan.
. Attract companies with local sales offices that can that can generate taxes from a regional
or national base.
. Encourage, retain and support healthy environment for retail growth.
. Consider retail in review of new development for potential revenue generating
possibilities.
. Consider a modification of the business license ordinance related to quarries
VB
4. Housing
. Review effectiveness of the housing assistance program for Cupertino teachers.
. Conduct a nexus study for housing mitigation fees.
. Pursue an affordable housing project on Cleo A venue.
5. Building Community
. Continue to offer opportunities and programs to promote cultural understanding and
address the needs of our diverse community.
6. Pursue Infrastructure Improvements
. Completed grading for the Mary A venue Bicycle Footbridge. Finish final plans and
designs, and award contract for bridge construction.
Department Focus - Efforts and Accomplishments
Cupertino Adopts a Fiscal Strategic Plan
The 2000 through 2005 recession coupled with significant increases in retirement, medical, and
energy costs, new infrastructure service needs, and State take-aways severely undermined the
ability of the City of Cupertino to continue delivering high quality municipal services. The City
weathered the economic storm by cutting service levels, freezing up to 17 staff positions,
refinancing debt service, turning to a full cost recovery fee structure for certain services, gaining
one-time revenues through the sale of surplus property, and reducing employee compensation
through salary cutbacks and work furloughs. Service levels clearly suffered and sacrifices were
necessary across the board.
The City learned that our fiscal structure left us vulnerable to the whims of economic fluctuations
and the ability of the State to raid our revenue sources. Two major revenue sources, sales tax and
property tax, were principal weak points in the above scenario. Cupertino is heavily dependent
on business-to-business sales taxes and its retail sales tax is significantly under performing due to
the condition of older strip shopping centers in the community and the recent loss of several
significant revenue producers. Also, Cupertino was one of four no-low property tax cities frozen
by pre-Proposition 13 to abnormally low tax rates.
To address this important issue, a fiscal strategic plan committee was formed. As described
below, the committee developed potential areas for short-term and/or long-term savings. The
committee also developed revenue strategies in an effort to stabilize and reposition the City's
revenue sources and recommended ways to decrease expenditures and risk exposure.
viii
Short and/or long-term savings:
A. Streamline and reposition our workforce as opportunities arise.
B. Implement E-Services with the goal of bringing city hall to the customer and reducing our
cost of service delivery.
C. Pursue artificial turf in our athletic fields to reduce maintenance and risks associated with
InJury.
D. Pursue alternate energy sources for the City's infrastructure and vehicle replacement
needs.
Areas for stabilizing and repositioning revenue sources:
A. Gained Property Tax Equity Allocation (TEA) relief with Santa Clara County.
B. Began assessing a sales tax in-lieu fee for discontinuance of retail land use.
C. Re-assess park dedication fees on an ongoing basis to capture rising real estate costs
associated with park acquisition.
D. Negotiate with Hansen Cement regarding future land use rights In exchange for
annexation.
E. Support Redevelopment/Economic Development for Vall co and other major projects.
F. Consider an Entertainment Tax and a modification to our existing Utility User Tax
Ordinance in conjunction with the next local election in 2007.
G. Phase out one-time revenue to the General Fund.
H. Re-visit the adoption of a county communication fee if our sales tax composition exceeds
50% from the business-to-business sector.
I. Consider a Refuse Vehicle Impact Fee.
Areas for decreasing expenditures and risk exposure:
A. Require developers to maintain new open space associated with their projects.
B. Require safety enhancements in new developments.
C. Contract school maintenance.
D. Add capital improvement projects only if on-going maintenance funding can be identified
(LLD, homeowners association, development maintained/owned).
ix
E. Increase the number of Block Leaders, Neighborhood Watch programs and CERT
graduates.
F. Change accounting for Enterprise Funds.
G. Continue to investigate cost-saving options for medical and retiree medical insurance.
H. Adopt a Sidewalk Liability Ordinance requiring the landowner to be responsible for
sidewalk maintenance and claims to third parties from failure to maintain.
I. Adopt a Tree Maintenance Ordinance requiring the landowner to be responsible for their
street trees.
The committee finalized the Fiscal Strategic Plan and City Council adopted the plan during the
2006-07 budget process. Some of the strategies have already been implemented. Congratulations
to the Fiscal Strategic Plan Committee for their efforts.
OTHER LONG TERM FINANCIAL ISSUES
Besides the topics discussed in the fiscal strategic plan, other long-term financial challenges for
the City are:
. Funding the City's retiree medical benefit liability
. Diversification ofthe City's sales tax base away from business-to-business office equipment.
. Keeping long-term revenues and expenditures in balance
. Maintaining aging facilities and infrastructure
. Constructing a park in the Rancho Rinconada area
. Realizing the Stevens Creek Corridor Park vision
. Seismically upgrading and increasing City Hall workspace
. Improving storm drainage at Bubb and McClellan
The additional $1.35 million in TEA funding has addressed the long-term imbalance of revenues
and expenditures however this balance could be threatened if the City's primary sales tax
producer hits a severe business downturn, if the Vallco Fashion Park redevelopment stalls and
the forecasted tax revenues turn out lower than expected, if retiree medical benefit and pension
costs skyrocket, and if imprudent capital spending choices are made.
The City's unfunded retiree medical liability will be required as a disclosure in the City's
financial statements starting in fiscal 2008-09. The annual installment to payoff this long-term
liability must be paid by the City, otherwise the unpaid amount is recorded as a liability against
reserves. An updated valuation of these costs will be obtained in 2006-07. The last valuation in
2004 disclosed a $15 million unfunded liability with an annual required installment of
approximately $1.1 million. For the past two years, the City has set-aside $3.5 million toward
this expense.
x
ACCOUNTING SYSTEM AND BUDGETARY CONTROL
The City's accounting records are maintained on a modified accrual basis of accounting for all
governmental fund types and agency funds. Under this basis, revenues are recognized when
susceptible to accrual, i.e., both measurable and available, and expenditures, other than interest
on long-term obligations which is recorded when paid, are recognized when the liability is
incurred. The accrual basis of accounting is used by the proprietary fund types where revenues
are recognized when earned and expenses are recorded when incurred. In compiling the
government-wide financial statements, the accrual basis of accounting is used to report all of the
City's financial activities. Since the fund financial statements are still compiled using the
modified accrual method for governmental funds, a reconciliation report is provided to show the
changes between the two reporting methods.
In developing and evaluating the City's accounting system, consideration is given to the
adequacy of internal accounting controls. Such 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 internal
accounting controls adequately safeguard assets and provide reasonable assurance of the proper
recording of financial transactions.
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. The
level of budgetary control (i.e., the level at which expenditures cannot legally exceed the
appropriated amount) is the departmental level within the General and Special Revenue funds,
and the project level within the Capital Project funds.
Changes in Financial Reporting
The enclosed Statistical Section reflects the implementation of GASB Statement 44 providing
new information on the City's financial trends, revenue generating ability, debt capacity,
demographics, and economy.
Cash Management
The City maintains a cash and investment pool for all City funds. The City's funds are invested
by the City Treasurer according to the investment policy adopted by the City Council. The
objectives of the policy are legality, safety, liquidity, diversity and yield. The policy addresses
soundness of financial institutions and the types of investments permitted by the California
government code.
XI
The City investments may include obligations of the U.S. Treasury and Federal agencies,
commercial paper, banker's acceptances, corporate bonds, repurchase agreements, certificates of
deposit and the State Treasurer's Local Agency Investment Fund. Total investment earnings for
all funds were $0.9 million.
Risk Management
Risk management issues factor substantially in the City's long term financial planning. Whether
through partnership or self-insurance programs, the City strives to maintain sufficient assets to
pay expected losses, maintain funding stability to avoid substantial fluctuation in annual expense,
and monitor risk management policies and claim administration to mitigate future losses.
The City maintains a program of commercial insurance combined with self-insurance for
substantially all of its governmental operations except for major construction projects and
contractor-supplied services. In such circumstances, insurance to protect the City is provided by
each contractor.
INDEPENDENT AUDIT
City Ordinance requires an annual audit of the financial records by an independent certified
public accounting firm selected by the City Council. The City's general purpose financial
statements were audited by Maze and Associates, 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 Comprehensive Annual Financial Report for the year ended June 30, 2005. In order to be
awarded a Certificate of Achievement, a government unit must publish an easily readable and
efficiently organized Comprehensive Annual Financial Report. This report must satisfy both
generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our 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.
~
David Woo
Finance Director
xii
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 past and present Finance staff - Dixie Farley, Tina
Mao, Yulia Rumalean, and Richard Wong - for their continued support and dedication. Special
recognition goes to Jennifer Chang, Dorothy Steenfott, and David Woo for their efforts in the
preparation and production of this report.
Reviewed by,
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Carol A. Atwood
Director of Administrative Services
xiii
><
=;t
Citizens
of Cupertino
City ttCJ
Counc il
Citizen Adivisoty CITY OF
Commissions and
Committees CUPEIQ"INO
City Attorney City Managet City Treasurer
Charles Kilian David Knapp Carol Atwood
Public Information Officer
Rick Kitson
I
Director of Director of Director of Director of
Administrative Services Community Development Parks and Recreation Public Works
Carol Atwood Steve Piasecki Therese Smith Ralph Qualls
IT Manager City Clerk Building Official Recreation Supervisor Recreation Supervisor CityArchitect Assistant Director
Mariyah Serratos Kimberly Smith Greg Casteel Sports Center Senior Center Terry Greene of Public Works - Eng.
Don McCarthy Julia Lamy Glenn Goepfert
Finance Director Human Resources City Planner Recreation Supervisor Recreation Supervisor Public Works Environmental
David Woo Director Ciddy Wordell Blackberry Farm Youth Programs Project Manager Programs Manager
Sandy Abe Mike O'Dowd Christine Hanel Carmen Lynaugh Lavenia Millar
Code Outreach Economic Development! Recreation Supervisor Assistant Director Senior Civil Engineer
Enforcement Programs RDA Manager Quinlan Center of Public Works - Maint David Stillman
Vacant Tom Walters Bob Rizzo
I
Parks Facilities Streets Public Works
Supervisor Supervisor Supervisor Supervisor
John Bisely Jim Davis Diane Mahan Ron Silva
CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2005/06
COMMISSIONS AND COMMITTEES
AUDIT COMMITTEE
PARKS & RECREATION COMMISSION
Myoung Kang
Dolly Sandoval
Garrett Wade
Kris Wang
Jim Weber
Jeanne Bradford
Derek Chen
Margaret Goodrich
David Greenstein
Roger Peng
HOUSING COMMISSION
SENIOR COMMISSION
Richard Abdalah
Sarah Hathaway-Feit
Kim Mosleh
Frances Seward
Chihua Wei
Estelle Incociati
Christine Kennedy Pierce
Mavis Smith
Linda Walker
Frank Yap
FINE ARTS COMMISSION
LIBRARY COMMISSION
Nancy Canter
Michael Harkin
Robert Harrison
Janet Mohr
Ann Woo
Ronald Miller
Sheila Mohan
Janet Riddell
Katherine Stakey
Susanna Tsai
PUBLIC SAFETY COMMISSION
PLANNING COMMISSION
Fari Aberg
Charles Caldwell
Jay Cena
Nina Daruwalla
Hugh Riddell
TEEN COMMISSION
Cary Chien
Lisa Giefer
Marty Miller
Taghi Saadati
Gilbert Wong
ECONOMIC DEVELOPMENT
Yukti Gangwani
V rinda Gupta
Cordelia Jiang
Diane Keng
Hannah Lee
Benjamin Lin
Abishek Menon
Tiffany Ou
Varun Pande
Alex Pommier
Rukmani Sahay
Shivani Sharma
Ana Yglesias
Carol Atwood
Cary Chien
Mike Foulkes
Christine Giusiana
David Knapp
Orrin Mahoney
Mark McKenna
Steve Piasecki
Ralph Qualls
Scott Stauffer
Kris Wang
BICYCLE PEDESTRIAN COMMISSION
TECHNOLOGY. INFORMATION &
COMMUNICATIONS COMMISSION
Scott Fable
May Koski
Geoffrey Paulsen
Joseph Walton
James Wiant
Charlie Ahern
William Allen
Eric Klein
Andrew Radle
Steven Ting
xv
CITY OF CUPERTINO, CALIFORNIA
Richard Lowenthal
Mayor
r
::r
o
Orrin Mahoney
Councilmember
CITY COUNCIL
Fiscal Year 2005/06
Kris Wang
Vice Mayor
...
Patrick K wok
Councilmember
,..
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If]
Dolly Sandoval
Councilmember
DIRECTORY OF CITY OFFICIALS
David W. Knapp - City Manager
Charles T. Kilian - City Attorney
Carol Atwood - Director of Administrative Services
Steve Piasecki - Director of Community Development
Ralph Qualls - Director of Public Works
Therese Smith - Director of Parks and Recreation
XVI
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, 2005
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 [mancial
reports (CAFRs) achieve the highest
standards in government accounting
and [mancial reporting.
~tff
President
~/~
Executive Director
xvu
FINANCIAL SECTION
1
MAZE &
ASSOCIATES
INDEPENDENT AUDITOR'S REPORT ON
BASIC FINANCIAL STATEMENTS
ACCOUNTANCY CORPORATION
3478 Buskirk Ave. - Suite 215
Pleasant Hill, California 94523
(925) 930-0902 . FAX (925) 930-0135
maze@mazeassociates.com
www.mazeassociates.com
To the City Council
City of Cupertino, California
We have audited the basic financial statements of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of the City of Cupertino as of and for the year ended June 30,
2006, which collectively comprise the City's basic financial statements as listed in the Table of Contents. These basic
financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on
these basic financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards in the United States of America and
generally accepted government audit standards issued by the Comptroller General of the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial
statements are free of material misstatement. An audit includes examining on a test basis evidence supporting the
amounts and disclosures in the financial statements. An audit also includes 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 opinion.
In our opinion, the basic 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 at June 30, 2006 and the results of its operations and the cash
flows of its proprietary fund types thereof and the respective budgetary comparisons listed as part of the basic
financial statements for the year then ended, in confonnity with generally accepted accounting principles in the United
States of America.
In accordance with generally accepted government auditing standards, we have also issued reports dated September
29, 2006 on our consideration of the City of Cupertino internal control structure and on its compliance with laws and
regulations.
Management's Discussion and Analysis is required by the Government Accounting Standards Board, but is not part
of the basic component unit financial statements. We have applied certain limited procedures to this information,
principally inquiries of management regarding the methods of measurement and presentation of this information,
but we did not audit this information and we express no opinion on it.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The
supplemental section listed in the Table of Contents are presented for purposes of additional analysis and are not a
required part of the basic financial statements of the City of Cupertino. Such information has been subjected to the
auditing procedures applied in our audit of the basic financial statements, and in our opinion are fairly stated in all
material respects in relation to the basic financial statements taken as a whole.
The introductory section and statistical section listed in the Table of Contents were not audited by us, and we do not
express an opinion on these information.
~~ ~ ~~
September 29, 2006
3
A Professional Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS
This is intended to provide an objective and easily readable analysis of the City of Cupertino's financial
performance for the year. Please read it in conjunction with the accompanying Transmittal Letter and
Basic Financial Statements.
FISCAL 2005-06 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
. The City's total net assets increased $3,5 million during fiscal 2005-06, At June 30,2006, net assets
totaled $125.1 million.
. Total City revenues, including program and general revenues, were $49.3 million, while total
expenses were $45.8 million in fiscal 2005-06.
. Net assets in Governmental funds were $118.3 million, while net assets in business activities were
$6.8 million.
. Governmental program revenues were $10.4 million compared with $8.1 million in 2004-05.
. Governmental expenses were $38,6 million in 2005-06, compared with $34.4 million in the prior
year.
. Revenues from Business-type activities were $8.2 million in current year, compared with $7,8 million
in the prior year.
. Expenses of Business-type activities were $7.2 million in current year, compared with $7.8 million in
the prior year.
. General Fund revenues of $35,3 million represented an increase of $3.4 million from the prior year;
General Fund expenditures increased from $24.8 to $27.6 million in 2005-06.
. Actual expenditures in the General Fund were $3 million less than the final 2005-06 budget primarily
because of budget savings in Law Enforcement, Administrative Services and Public Works.
. Unreserved General Fund balance of $23.9 million at June 30,2006 surpassed the last budgeted fund
balance of $19.4 million.
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 financial position.
The City-Wide Financial Statements provide a longer-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, also on the full accrual basis, 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 presented are grouped into Governmental activities and Business-type
activities, as explained below. All the amounts in the Statement of Net Assets and the Statement of
Activities are separated in order to provide a summary of these two types of activities for the City as a
whole.
. Governmental activities-Most of the City's basic services are considered to be governmental
activities, including general government, community development, public safety, public works,
culture-recreation, public improvements, planning and zoning, and general administration services.
5
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 City'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 enterprise activities are reported here, including solid waste
collection. and disposal and the recreational operations of each of the City's various community
facilities. Unlike governmental services, these services are supported by charges paid by users based
on the amount of the service they use.
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 and expenditures and fund
balances; they exclude capital assets, long-term debt and other long-term amounts, Because these
statements focus on the near-term inflows and outflows of spendable resources, such information 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. The concept of major funds, and the determination of which
are major funds, was established by GASB Statement 34 and replaces the concept of combining like
funds and presenting them in total. Instead, 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 the Financial Statements, present the detail of these Non-major funds,) Major Funds present
the major 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, as in
the past, 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 the
City of Cupertino, the 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 information are required in the Major Governmental Fund
Financial Statements only for the General Fund and other Major funds that are Special Revenue Funds.
6
Since none of the City's Special Revenue funds are considered Major funds for financial statement
purposes, budgetary comparison statements for these funds are included in this document as supplemental
statements only,
Fiduciary Fund statements provide financial information about the activities of certain assessment
districts. The City acts strictly as an agent for these districts holding amounts collected from property
owners which await transfer 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,
FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE
This analysis focuses on the net assets and changes in net assets of the City's Governmental Activities
(Tables 1, 2 and 3) and Business-Type Activities (Tables 4, 5 and 6) presented in the City-wide Statement
of Net Assets and Statement of Activities that follow.
Governmental Activities
Table 1
Governmental Net Assets at June 30
(in Millions)
Governmental Activities
2006 2005
Cash and investments $ 41.3 $ 34.2
Other assets 6.0 5.6
Capital assets 131.7 136.4
Total assets 179.0 176.2
Long-term debt outstanding 51.0 52.3
Other liabilities ~ 8.9
Total liabilities 60.7 61.2
Net assets:
Invested in capital assets, net of debt 83.1 86,5
Restricted 8,3 7.3
Unrestricted 26.9 ~
Total net assets $l1B.J $llS.Jl
The City's net assets from governmental activities increased $3.3 million or 3% from the prior year, This
increase is the Change in Net Assets reflected in the Statement of Activities, as shown in Table 2, and is
explained below:
. Cash and investments increased $7.1 million, mostly reflecting the $6,7 million Increase In
restricted and unrestricted net assets,
7
. Capital assets decreased $4.7 million. $1.4 million of various capital assets were acquired or
completed and $1.7 million in mostly infrastructure was added to work in process. Two Oak
Valley land parcels costing $1.2 million were sold and annual depreciation was $6.6 million.
. Payments on the 2002 certificates of participation decreased long-term debt by $1.3 million.
. Other liabilities increased $0.8 million due to a rise in accounts payable and development
application deposits.
. Capital assets net of related debt decreased $3.4 million representing the disposition and
depreciation of capital assets that were paid for by government revenues and reserves.
. Restricted net assets increased $1 million representing capital funds set aside for street and bridge
projects.
. Unrestricted net assets is the part of net assets that can be used to finance day-to-day operations
or reserved for certain purposes by the City Council, without constraints established by debt
covenants or other legal requirements. $26.9 million of unrestricted net assets existed at June 30,
2006, $5.7 million higher than a year ago.
Fiscal Year 2005-06 Governmental Activities
Sources of Revenues
Intergovernmental
7%
Other
1%
Charges for
Services
16%
Operating
Contributions &
Grants
8%
Other Taxes
24%
Capital Grants &
Contributions
1%
Property Tax
12%
Sales Tax
26%
8
As the Sources of Revenue chart above shows, sales tax is the largest category of governmental revenue,
representing just over one-fourth of receipts. It was the largest growing sector, rising $1.5 million or 16%
over 2004-05 to $1 0.6 million this year due to phenomenal growth in the business-to-business and office
equipment sectors. $9.8 million, or 24% of the City's governmental 2005-06 revenues, came from other
taxes, the City's second largest source of revenue. This category, which was down $0.1 million from last
year, represents transient occupancy (hotel), utility user, park in-lieu, construction, franchise, and business
license taxes. Charges for services, at $6.5 million, was the third leading revenue source at 16% rising
$1.2 million or 22% over last year, continuing the upswing in development approvals and building permit
fees that started in 2004-05.
Functional Expense
Interest
6%
Administration
4%
Public
Works
42%
Law
Enforcement
17%
Public
Infonnation
2%
Administrative
Services
11%
Community
Development
12%
The Functional Expense chart above includes only current year expenses, which are discussed in detail
below. It does not include capital outlays, which are added directly to the City's capital assets, as
opposed to being expensed.
The Statement of Activities presents program revenues, expenses, and general revenues in detail. These
are all elements of the Changes in Governmental Net Assets summarized below.
9
Table 2
Change in Governmental Net Assets
(in Millions)
Governmental Activities
2005-06 2004-05
4.9 4.3
10.7 9.2
9,8 9.9
.3 1.6
2,9 2.3
.7 ,7
.2 .0
--L1 --2
30.7 28.5
41.1 36,6
2.5 2.2
~ --L.1
$3..3 $1...6
Expenses
Administration
Law Enforcement
Public Information
Administrative Services
Recreation Services
Community Development
Public Warks
Interest on long-term debt
Total expenses
$1.3
6.6
.9
4.2
2.4
4.5
16.4
2.3
38.6
Revenues
Program revenues:
Charges for services
Operating contributions and grants
Capital grants and contributions
Total program revenues
6.5
3.4
--:2
10.4
General revenues:
Taxes:
Property taxes
Sales taxes
Other taxes
Motor vehicle in-lieu
Intergovernmental, unrestricted
Investment earnings
Miscellaneous
Gain on the sale of land
Total general revenues
Total revenues
Excess of revenues over expenses, before transfers
Transfers
Change in net assets
$1.3
6.2
.8
3,7
2,2
3.3
14,6
2.3
34.4
5.3
.6
2.2
tl
Table 2 shows that total governmental revenues increased $4.5 million during fiscal 2005-06, driven by
the increases in sales tax ($1.5 million) and charges for services ($1.2 million) discussed previously,
augmented by a net $1.1 million increase in Community Development Block Grants, below market
housing contributions and gasoline taxes, and $0,7 million more in the gain on the sale of Oak Valley
land.
Total governmental spending increased by $4.2 million from fiscal 2004-05. With the improved revenue
picture, the City addressed deferred maintenance of City facilities and streets by increasing public works
expenditures by $1.8 million. Community Development expenses rose $1.2 million to handle the larger
volume of development and building permit applications.
10
The November 2005 election, and higher insurance, technology, and depreciation costs caused
Administrative Service expenses to rise $0.5 million. City's governmental revenues in excess of
expenditures climbed to $2,5 million at June 30, 2006, an improvement from the $2.2 million positive
showing a year ago, After $0.8 million in transfers from business-type activities, for reimbursement of
waste cleanup costs and debt payments on the 2002 debt issue, overall net assets of governmental
activities increased $3,3 million during 2005-06, compared to $3.6 million during 2004-05.
Table 3 presents the net cost of each of the City's programs-Administration, Law Enforcement, Public
Information, Administrative Services, Recreation Services, Community Development, Public Works, and
interest on long-term debt. Net cost is defined as total program cost less the revenues generated by those
specific activities; it reflects the financial burden placed on the City's taxpayers by each function. Net
revenue represents activities that generate revenues in excess of direct costs. General taxpayers are not
supporting that function; instead the net revenue generated covers administrative support provided by
other City functions,
. Table 3
Net Cost (Revenue) of Governmental Activities
(in Millions)
Net Cost (Revenue)
Of Activities
2005-06
Administration
Law Enforcement
Public Information
Administrative Services
Recreation Services
Community Development
Public Works
Interest on Long-term Debt
Totals
$1.3
5.7
.9
4.2
2.1
(2.0)
13.7
2,3
$28.2
2004-05
$1.3
5.5
.8
3.7
2,0
(2.7)
13.4
2.3
$26.3
. Administration comprises four percent of governmental expenses, and includes activities of the
City Council, City Manager and City Attorney. Administrative Services, which includes Finance,
Human Resources, Information Technology, City Clerk, Code Enforcemept and Emergency
Preparedness services, accounts for 11 percent of all governmental service costs, Net cost of
Administration was unchanged from prior year, while comparable costs in Administrative
Services rose from $3.7 million to $4.2 million, due to the Novem~er 2005 election and higher
insurance expenses,
. The City's costs for Law Enforcement, procured by contract with the Santa Clara County
Sheriffs Office, were partially offset by $0,9 million in citations, fines and grants, Contract cost
increases caused the net cost of this activity to rise from $5,5 million to $5,7 million in 2005-06.
. Public Works expenses include Transportation, Engineering, Environmental Programs, and the
maintenance and improvement of the City's streets, grounds and facilities. Offsetting revenues
include state grants, gasoline taxes, environmental fees, facility rental, damage restitutions, and
storm drain fees totaling $2.6 million, leaving $13.7 million as the 2005-06 net cost of public
works,
. Community Development programs include Planning, Building and Housing Services. Net
revenues of community development activities dropped from $2.7 million last year to $2.0
million this year because park in-lieu taxes were considered as general, rather than specific
11
program revenue this year. Net revenues went toward covering development support services
provided by Administration, Administrative Services, and facilities maintenance,
. Much of the City's Park and Recreation programs are reported as business-type activities for
which fees are charged to recover the costs of the programs, However, many community events,
programs and services are available to the public free of charge. The costs of administering these
general (governmental) activities are partially offset by facility rental fees, which amounted to
$0.2 million in fiscal year 2005-06, the same as last year.
. Interest on the long-term debt that was re-financed in 2002 was flat at $2,3 million.
Business Type Activities
Business-type activities in the City-wide Financial Statements include the City's enterprise funds.
Enterprise funds are used to account for operations that are financed and operated in a manner similar to
private business enterprise where the intent is that the costs of providing goods or services to the general
public on a continuing basis be financed or recovered primarily through user charges.
Business-type net assets totaled $6.8 million at June 30, 2006, an increase of $0.2 million from the prior
year. Cash & investments rose $0.4 million, while repayment of the Library furniture and fixtures
advance to the General Fund caused other current assets to decline $0,2 million. Program revenues were
$8 million this year, a 4% increase of $0.4 million over last year, while general revenues were flat at $0.2
million this year. Expenses were $7.2 million in 2005-06, down $0.6 million or 9% from the prior year.
Revenues over expenses, before transfers, were $1 million in 2005-06 as opposed to being zero in the
previous year. Transfers to governmental activities declined to $0,8 million from $1.4 million because
2004-05 included a transfer to the Stevens Creek Corridor Park capital project fund. Individual enterprise
funds comprising this performance are discussed in the Enterprise Funds portion of this analysis.
Table 4
Business-Type Net Assets at June 30
(in Millions)
Business-TyPe Activities
2006 2005
Current liabilities
Total liabilities
$7.2 $6.8
0.6 0,8
0,5 0.6
8.3 8.2
12 LQ
1.5 1.6
0.5 0,6
6.3 6,0
$.6..ft $.6.Ji
Cash and investments
Other current assets
Capital assets
Total assets
Net assets:
Invested in capital assets
Unrestricted
Total net assets
12
Table 5
Change in Business-Type Net Assets
(in Millions)
Business-Type Activities
2005-06 2004-05
7.8 7,6
~ ~
8.0 7.6
~ ~
8.2 7.8
1.0 J!
LID W:l
.L.2 $ Ll4}
Expenses
Resource Recovery
Blackberry Farm
Sports Center
Recreation Programs
Senior Center
Total expenses
$2,1
1.3
1.5
1.7
~
7.2
Revenues
Program revenues:
Charges for services
Operating contributions and grants
Total program revenues
General revenues:
Investment income
Total revenues
Excess of revenues over expenses, before transfers
Transfers out
Change in net assets
$2,9
1.3
1.5
1.7
.4
7,8
Resource Recovery improved dramatically from a net cost of $503 thousand to a net revenue of $237
thousand because 2004-05 included the implementation of a weekly recycling program, which involved a
$1.2 million purchase of new recycling containers. Senior Center net revenue improved almost three-fold
because $51 thousand of prior year travel program deposits were recognized as revenue this year.
Table 6
Net Cost (Revenue) of Business-Type Activities
(in thousands)
Net Cost (Revenue)
Of Activities
2005-06 2004-05
Resource Recovery
Blackberry Farm
Cupertino Sports Center
Recreation Programs
Senior Center
$(237)
147
28
(602)
---LllQ}
$(780)
Total Business-type Activities
13
$503
122
67
(478)
.Jm
$179
THE CITY'S FUND FINANCIAL STATEMENTS
Governmental Funds
At June 30, 2006, the City's governmental funds reported combined fund balances of $36.8 million,
which is an increase of $6,6 million or 22% compared with the prior year. Robust permit, charges for
services, and tax revenues, plus a one-time sale of land, combined with measured operating expenditure
growth caused the General Fund balance to increase by $4,6 million. Non-major fund balances increased
$2.7 million led by a $1.1 million increase in capital set-asides for street and traffic improvements and a
$1.4 million increase because of the movement of below market rate housing monies from the General
Fund to special revenue funds.
The table below presents governmental fund revenues by source and the related changes for the prior
year. Governmental fund revenues rose $3.8 million or 10.7% this year to a new total of $39.8 million.
$2,0 million of the increase came from taxes, consisting of a $2,6 million increase in all General Fund tax
categories, a $0.3 million increase in housing mitigation taxes and a $1 million decrease in park in-lieu
taxes. Booming residential and commercial development caused license, permit, and charges for services
receipts to climb $1,3 million over last year. Rising interest rates on top of the higher cash balances
resulting from the better revenue picture, caused use of money earnings to increase by $0,5 million,
Community Development Block Grant receipts of $0.4 million for the LeBeaulieu affordable housing
project offset lower motor vehicle license fee revenues and caused intergovernmental revenues to increase
overall by $0.3 million. Other revenues declined $0.3 million due to state grant dollars for street projects
being reported as intergovernmental revenue this year and because of lower donations received for the
library's furniture, fixtures, and equipment fund raising campaign,
Table 7
Revenues Classified by Source
Governmental Fund Types, 2005-06
(in thousands)
Increase/(Decrease)
From previous year
Revenues by Source Amount % of Total Amount Percent
Taxes $25,616 64.5% $2,001 8,5%
Use of Money & Property 1,608 4.0 489 43.7
Intergovernmental 5,896 14,8 329 5,9
Licenses and Permits 3,615 9.1 719 24.8
Charges for Services 2,144 5.4 575 36.6
Fines and Forfeitures 630 1.6 70 12.5
Other Revenue 245 ~ (348) (58.7)
Total Revenues $39.754 100.0% $3.835 10,7%
Other Financing Sources-
Proceeds from Land Sale $2,423 100.0% $1,223 101.9%
Governmental fund expenditures in Table 8 decreased $4,1 million this year to $36.2 million, primarily
from $7,3 million in fewer capital outlays due to the completion of the library and civic center projects
last year. Community Development costs rose $1,3 million or 41,5% because of the boom in building
permits and plan checks and because of expenditures on the LeBeaulieu housing project. Public Works
spending increased $0.7 million to address the deferred maintenance backlog, Administrative Services
rose $0.4 million or 11.8% due to higher election and insurance costs while Public Information payments
grew by 12.5% because of increased media coverage of government meetings and events. Law
Enforcement increased $0.4 million in accordance with the County Sheriffs cost of living and
compensation contract provisions,
14
Table 8
Expenditures Classified by Major Service Area
Governmental Fund Types, 2005-06
(in thousands)
Increase/ (Decrease)
from previous year
Expenditures by Service Area Amount % of Total Amount Percent
Administration $ 1,236 3.4% $ 74 6.4%
Law Enforcement 6,500 18.0 355 5,8
Public Information 853 2.4 95 12.5
Administrative Services 4,103 11.3 432 11.8
Recreation Services 2,303 6.4 182 8,6
Community Development 4,468 12.4 1,311 41.5
Public Works 10,386 28.6 749 7.8
Capital Outlay 2,772 7,7 (7,254) (72.4)
Debt Service:
Principal 1,270 3.5 25 2,0
Interest 2,263 ~ ill2 (11)
Total $36.154 100.0% $( 4.058) UQJ1%
Proprietary Funds
Proprietary funds include the City's enterprise and internal service funds. Every enterprise fund is
considered a major proprietary fund in the Fund Financial Statements. Enterprise activities comprise the
City's business-type activities and, as a whole, are discussed in the business-type activities section of this
analysis,
Internal Service Funds are used to account for the financing of services provided by one department or
agency to other departments or agencies of the City on a cost-reimbursement basis. Because the services
are provided primarily to the general government, these operations are reported as part of government
activities in the City-wide Financial Statements. In essence, any income or losses that are related to an
internal service fund activity represent an adjustment of the expenses recorded by the various
governmental functions, The following table shows actual revenues, expenses (including depreciation)
and results of operations for the fiscal year ended June 30, 2006.
Table 9
Revenues, Expenses, and Changes in Net Assets
Internal Service Funds, 2005-06
(in thousands)
Operating Operating Operating Incr/(Decr)
Fund Revenues Expenses Income/fLoss ) Net Assets
Management Information Systems $717 $882 $(165) $86
Workers' Compensation 339 461 (122) (86)
Equipment Revolving 856 859 (3) 11
Long-Term Disability ~ -4l 1 ~
Totals $1 954 $2.243 $(289) $12
15
The Management Information Systems fund is financing the City's e-Services initiative, A $220 thousand
transfer from the General Fund offsets the MIS fund's $165 thousand operating loss and maintains
unrestricted net assets at $1.1 million. Workers' Compensation fund liability for future and current claims
was increased to $1.3 million, which left unrestricted net assets at $70 thousand, The Equipment
Revolving fund carried $1.6 million in unrestricted net assets for future replacement of existing
equipment.
Major Governmental Funds
General Fund
Revenues
General Fund revenues increased $3.4 million or 11 % to $35.3 million this fiscal year. Growth in taxes,
charges for services, and licenses and permits overcame a decline in intergovernmental revenues, Actual
revenues exceeded the final amended budget by $2,1 million or 6%, The final budget was $2.7 million or
9% over the original adopted budget.
The revenue growth was spearheaded by taxes, which came in 7% or $1.6 million over the final budget
and 12% or $2.6 million over last year,
Property taxes ended the year at $4.7 million, rising 12% or $0.5 million over last year's result, 14% or
$0.6 million over the original budget, and 3% or $0.1 million higher over the final budget. All increases
reflect rising property assessments from the last stages of the strong local real estate market.
Sales taxes of $10.7 million jumped $1.5 million or 16% higher than last year, $1.5 million or 17% over
the original budget, and $1 million or 11 % over the final budget as the business-to-business office and
electronic equipment sectors accelerated its recent robust growth led by sales increases by the City's
largest tax provider.
Transient occupancy or hotel taxes of $2.1 million met final budget expectations by rising $0.3 million
and 15% over last year, as the Silicon Valley business expansion led to increased commercial travel into
the region, The original budget had expected these taxes to be relatively flat, compared to last year.
Franchise, utility user, construction, business license, property transfer, and other taxes of $7 million rose
$0.6 million over final budget and $0.5 million over last year. The increase was spread over all
categories, but in particular, new structures at Valleo Shopping Center, the commencement of the Adobe
Terrace mixed-use project, and other housing and commercial building activity caused construction tax
receipts to double over last year,
Licenses and permits rose from $2.9 million in 2004-05 to $3.6 million in 2005-06. It exceeded final and
original budget expectations by $0,2 million and $0,8 million, respectively. Charges for services
increased from $1.2 million last year to $1.8 million this year and surpassed original budget projections
by $0,5 million. The boom in commercial and residential building activity caused permit, inspection,
zoning, planning, and engineering review revenues reflected in these categories to jump.
Intergovernmental revenues decreased from $4,3 million to $3.6 million this year because last year's
result included a repayment of Motor Vehicle In-Lieu Fees (VLF) that the State had borrowed in 2003-04,
Final budget and actual receipts were $0,6 million over the original projections because of the increased
amount of property taxes received in exchange for the new, lower VLF fee rate.
Use of money and property was relatively unchanged from last year.
16
In the one-time revenue category, proceeds from the sale of two Oak Valley parcels for $2.4 million in the
current year was double the $1.2 million received for one parcel in the Valley last year.
Transfers into the General Fund decreased $1 million from the prior year to a current year amount of $1.4
million, due to lower park in-lieu fee receipts.
Expenditures
Fiscal 2005-06 overall expenditures, at $27.6 million were $2.8 million or 11 % higher than last year's
total of $24.8 million. However this result came in 10% or $3 million under the final budget and 5% or
$1.4 million under the original budget.
Current year law enforcement costs of $6.5 million was under the final budget by $0.7 million or 9% due
to the lower usage of general law enforcement, service and emergency calls, patrol, and investigations,
However, it exceeded past year expenditures by 6% or $0.4 million, due to consumer price index and
compensation escalators built into the sheriff contract.
Administrative services outlays grew from $3,7 million in 2004-05 to $4.1 million in 2005-06 due to the
bi-annual council election and special initiative vote and due to increases in insurance, accounting and
general administration. However the result was still $0,9 million under final budget because spending in
disaster preparedness, postage, insurance claims and litigation came out lower than anticipated. The
original budget had been augmented with budget carryovers from 2004-05 to address higher claims and
litigation costs.
Public works expenditures of $8.9 million were $0.9 million under final budget due to traffic control and
study contingencies that were not needed and because of a vacancy in traffic engineering. It was $0.9
million over the prior year, due to the addressing of street, facility and park maintenance that had been
deferred in the past years. The final budget of $9.8 million was $0.3 million over the adopted budget,
mostly due to contract carryovers.
High development, planning and building activity in the City caused community development costs to
climb significantly from $2,8 million last year to $3.6 million this year. The 2005-06 budget for this
function rose from $3.3 million to $3.9 million in order to service the growing caseload of planning and
building applications. The increase in the issuance of development approvals and building permits caused
revenues in these areas to go up accordingly,
Transfers out of the General Fund increased from $5,2 million in 2004-05 to $7 million in 2005-06 to
fund the Mary Ave Bicycle Footbridge capital project and to move the City's below-market rate program
money to a separate special revenue fund.
Table 10
General Fund Budget and Actual Comparison, 2005-06
(in millions)
Budgeted Amounts
Original Final
Actual
Variance
Revenues (amount available for appropriation)
Expenditures of appropriations
Proceeds from sale of land
$30.5
(29.0)
1.5
$33.2
(30,6)
2.4
$35.3
(27.6)
2.4
$2,1
3.0
Increase (decrease) in fund balance
lDJ
~
Q2}
~
Q2}
$4.6
$5.1
Net transfers out to other funds
17
Fund Balance
At June 30, 2006, the General Fund reported a combined ending fund balance of $26.8 million, up $4.6
million from the prior year. The City Council designated $23.8 million of this amount for (l) long-term
actuarial liabilities of the City's retiree medical program, (2) fluctuations in the City's CalPERS
retirement funding rates, (3) a buffer in times of future economic uncertainty, (4) operating contingencies
and emergencies, and (5) specific budget carryovers for expenditures in 2006-07, $2,9 million was
reserved for loans, purchase order commitments, advances to other funds, affordable housing, and public
access television programming. $0.1 million represented the unreserved, undesignated balance.
Public Facilities Corporation
This fund accounts for the payments of principal and interest on the 2002 certificates of participation
(COPs), the refinanced the long-term debt that funded many of the City's major parks and facilities. As in
the previous year, General Fund transfers into the fund cover the debt service payments of $3.5 million.
Mary Avenue Bicycle Footbridge
This fund accounts for the design and construction of a pedestrian and bicycle bridge over Interstate 280
at the end of Mary Avenue. The $10 million project was formerly within Other Governmental Funds, but
because of significant grading and design work this year, the higher capital outlays of $1.4 million caused
the project to become a major fund in 2005-06,
Other Governmental Funds
Non-major funds are not presented separately in the Basic Financial statements, but are individually
presented as Supplemental Information. They include all the City's Special Revenue and Capital Project
funds, which account for revenue sources that are legally restricted to expenditure for specific purposes
such as streets and roads, parks, housing, storm drainage, and the Redevelopment Agency, As for
significant activity, street and road expenditures of the Transportation fund this year was $1.5 million,
leaving an ending fund balance of $3.7 million that was earmarked for pavement management, traffic
projects, and repairs of curbs, gutters and sidewalks,
Enterprise Funds
Resources Recovery
Contractual service costs declined $1 million from last year because of prior year expenses to implement
a weekly recycling pickup service, Other revenues increased $0,1 million because of a Bay Area Air
Quality Management District grant. Operating income improved to $0,2 million compared to a $0.5
million loss the previous year. With interest earnings and the second of four half million dollar annual
reimbursements to the General Fund for past waste cleanup costs fronted by the Fund, the overall
unrestricted net assets of the Recovery fund remained relatively unchanged at $5,6 million,
Blackberry Farm
Blackberry Farm's operating revenues of $1,2 million, operating expenses of $1.3 million, and operating
loss of $0.1 million were similar to 2004-05 results. Net assets of this fund decreased $0.1 million to end
the current year at $0.4 million, with $0,5 million of this invested in capital assets, leaving a $0,1 million
unrestricted net asset deficit.
18
The Farm's picnic and food operations closed in September 2006, to pave the way for the Stevens Creek
Corridor Park capital project that will vastly improve the Farm's picnic and recreational facilities.
Unrestricted net assets in the previous year were used to provide funding for the capital project.
Cupertino Sports Center
Operating revenues and expenses of $1.4 million for 2005-06 were flat compared to last year. A $0.1
million transfer in 2005-06 to the General Fund impacted this break-even operating margin and caused a
$0.1 million decrease in net assets during the year. The transfer was a contribution to help the General
Fund pay the debt service on the certificates of participation (COP) issued to help acquire and improve
recreational facilities and parkland. Net assets were $0.1 million at June 30, 2006, with most of it
unrestricted,
Recreation Programs
Charges for services increased 8% or $0.2 million over the prior year while operating expenses were
steady. A robust offering and enrollment of cultural youth classes and sports programs contributed to the
revenue improvement. Operating income before transfers improved $0,1 million or 26% over last year
ending up at $0.6 million for 2005-06. Despite the transfer out of $0.2 million for COP debt service, the
fund ended up with an increase in net assets of $0.4 million, leaving an ending unrestricted net asset
balance of $0,5 million.
Senior Center
Revenues ballooned to $0.7 million, a $0,2 million or 49% increase from 2004-05. The aggressive
expansion of the travel program has resulted in increased trip bookings in the last few years, and a review
of the program resulted in a large one-time revenue recognition of reservation deposits received in prior
years. Expenses jumped 24% or $0,2 million to $0.6 million in 2005-06 to pay for the additional trips.
The one-time revenue recognition caused an operating income of $0,1 million, compared to a break-even
result last year. Net assets increased by this same amount, leaving a $0.1 million unrestricted balance in
the fund at year-end.
CAPITAL ASSETS
At June 30, 2006 the City had $132,2 million, net of depreciation, invested in a broad range of capital
assets used in governmental and business-type activities, as shown in the table on the following page
(further detail may be found in Note 5 to the Basic Financial Statements):
19
Table 11
Capital Assets, Net of Depreciation, at June 30
(in Millions)
Total Business-type Activities
2006 2005
$ 59,0 $ 60.2
2.0 .3
30.5 31.8
7.8 9.0
1.1 1.5
20,8 22,5
8,8 9.4
-Ll -L1
$131.7 $136.4
$ .4 $ .4
.1 .2
~ ~
$ {l5 $ 0.6
$132,2 $137,0
Governmental Activities:
Land
Construction in progress
Buildings
Improvements other than buildings
Machinery and equipment
Roads, curbs, gutters, sidewalks, medians and bridges
Storm drain structures and mains
Traffic signals
Total Governmental Activities
Business-type Activities:
Land
Improvements other than buildings
Machinery & equipment
Total City
The two Oak Valley land parcels, sold for $2.4 million this year, had a cost of $1.2 million removed from
the capital asset list. $1.4 million of various other capital assets were acquired or completed and $1.7
million in mostly infrastructure was in the process of being built. Depreciation was $6,6 million for the
year.
DEBT ADMINISTRATION
The City's debt issues are discussed in detail in Note 6 to the Basic Financial Statements. Unchanged
from last year, except for scheduled debt service payments, the City's debt comprise Certificates of
Participation (COPs) issued by the Cupertino Public Facilities Corporation, and is serviced by the City
through lease payments to the corporation. The outstanding principal at June 30, 2006 is $51 million,
At June 30, 2006, a total of $0.1 million in special assessment district debt was outstanding, issued by one
special assessment district. This debt is secured by a traffic impact fee, charged as a special assessment
on the real property in the district issuing the debt, and is not the City's responsibility. The City acts
solely as the District's agent in the collection and remittance of the assessment.
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The impact of the economic environment and a description of the City's major initiatives for the coming
year are discussed in detail in the accompanying Transmittal Letter,
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This Comprehensive Annual Financial Report is intended to provide citizens, taxpayers, investors, and
creditors with a general overview of the City's finances. Questions about this Report can be directed to
the Finance Department at City Hall, 10300 Torre Avenue, Cupertino CA 95014, (408) 777-3220,
20
CITY OF CUPERTINO
STATEMENT OF NET ASSETS AND
STATEMENT OF ACTIVITIES
The Statement of Net Assets and the Statement of Activities summarize the entire City's financial activities
and financial position. They are prepared on the same basis as is used by most businesses, which means
they include all the City's assets and all its liabilities, as well as all its revenues and expenses. This is
known as the full accrual basis-the effect of all the City's transactions is taken into account, regardless of
whether or when cash changes hands, but all material internal transactions between City funds have been
eliminated.
The Statement of Net Assets reports the difference between the City's total assets and the City's total
liabilities, including all the City's capital assets and all its long-term debt. The Statement of Net Assets
presents similar information to the old balance sheet format, but presents it in a way that focuses the reader
on the composition of the City's net assets, by subtracting total liabilities from total assets.
The Statement of Net Assets summarizes the financial position of all the City's Governmental Activities in a
single column, and the financial position of all the City's Business-Type Activities in a single column; these
columns are followed by a Total column which presents the financial position of the entire City.
The City's Governmental Activities include the activities of its General Fund, along with all its Special
Revenue, Capital Projects and Debt Service Funds. Since the City's Internal Service Funds service these
Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund
transactions and balances. The City's Business Type Activities include all its Enterprise Fund activities.
The Statement of Activities reports increases and decreases in the City's net assets. It is also prepared on the
full accrual basis, which means it includes all the City's revenues and all its expenses, regardless of when
cash changes hands. This differs from the "modified accrual" basis used in the Fund financial statements,
which reflect only current assets, current liabilities, available revenues and measurable expenditures.
The format ofthe Statement of Activities presents the City's expenses first, listed by program, and follows
these with the expenses of its business-type activities. Program revenues, that is revenues which are
generated directly by these programs, are then deducted from program expenses to arrive at the net expense
of each governmental and business-type program. The City's general revenues are then listed in the
Governmental Activities or Business-type Activities column, as appropriate, and the Change in Net Assets
is computed and reconciled with the Statement of Net Assets.
Both these Statements include the financial activities of the City, the Cupertino Redevelopment Agency, and
the Cupertino Public Facilities Corporation, which are legally separate but are component units of the City
because they are controlled by the City, which is financially accountable for their activities.
21
CITY OF CUPERTINO
STATEMENT OF NET ASSETS
JUNE 30, 2006
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and investments (Note 2) $38,909,564 $7,164,648 $46,074,212
Cash and investments with fiscal agents (Note 2) 2,40 I ,369 2,401,369
Receivables:
Accounts 2,520,097 464,388 2,984,485
Loans (Note 3) 2,431,334 2,43 I ,334
Prepaid expenses and other assets 447,793 188,476 636,269
Land held for housing development (Note 1 t) 615,000 615,000
Internal balances (Note 4) (22,092) 22,092
Capital assets
Non-depreciable 61,035,969 389,929 61,425,898
Depreciable, net accumulated depreciation 70,662,541 107,752 70,770,293
Total Assets 179,001,575 8,337,285 187,338,860
LIABILITIES
Accounts payable and accruals 4,380,609 265,692 4,646,30 I
Accrued payroll and benefits 248,978 39,469 288,447
Deposits 1,402,058 168,689 1,570,747
Unearned revenue 77,941 924,186 1,002,127
Compensated absences (Note I h)
Due in one year 161,555 78,172 239,727
Due in more than one year 2, I 09,205 71,957 2,181,162
Claims payable (Note 9)
Due in one year 170,000 170,000
Due in more than one year I, I 05,000 I, 105,000
Long-term debt (Note 6)
Due in one year 1,295,000 1,295,000
Due in more than one year 49,740,000 49,740,000
Total Liabilities 60,690,346 1,548,165 62,238,511
NET ASSETS (Note 7)
Invested in capital assets, net of related debt 83,064,879 497,681 83,562,560
Restricted for:
Special revenue projects 7,437,799 7,437,799
Affordable housing 85,844 85,844
Public access television 753,715 753,715
Debt service 52,313 52,313
Total Restricted Net Assets 8,329,671 8,329,671
Unrestricted 26,916,679 6,291,439 33,208,118
Total Net Assets 118,3 II ,229 $6,789,120 $125,1 00,349
See accompanying notes to financial statements
22
CITY OF CUPERTINO
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006
Net (Expense) Revenue and
Program Revenues Changes in Net Assets
Operating Capital
Charges for Grants and Grants and Governmental Business-type
FunctionsfPrograms Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
Administration $1,354,543 $23,201 $54,309 ($1,277,033) ($1,277.033)
Law enforcement 6,577,199 722,164 150,413 (5,704,622) (5,704,622)
Public information 914,024 (914,024) (914,024)
Administrative services 4,208,389 ( 4,208,389) (4,208,389)
Recreation services 2,359,966 240,074 (2,119,892) (2,119.892)
Community development 4,541,965 5,286,336 1,299,982 2,044,353 2,044,353
Public works 16,384,026 201.250 1,899,058 $522.950 (13.760,768) ( 13,760,768)
Interest on long tenn debt 2.262,913 (2.262,913) (2,262,913)
Total Governmental Activities 38,603,025 6,473,025 3,403.762 522,950 (28,203,288) (28,203,288)
Business-type Activities:
Resource recovery 2,10 1,198 2,203,127 135,539 $237,468 237,468
Blackberry fann 1,302,855 1,155,986 ( 146,869) ( 146,869)
Cupertino sports center 1.448,048 1,419,672 (28,376) (28,376)
Recreation programs 1.729,194 2,331,409 602,215 602,215
Senior center 588,818 704,390 115,572 115,572
Total Business-type Activities 7.170,113 7,814,584 135,539 780,010 780,0 I 0
Total $45,773,138 $14,287,609 $3,539,30 I $522,950 (28,203,288) 780,0 I 0 (27,423,278)
General revenues:
Taxes:
Property taxes
Incremental property tax
Sales taxes
Other taxes
Motor vehicle in lieu
Intergovernmental, unrestricted
Investment earnings
Miscellaneous
Gain on the sale of land
Transfers (Note 4)
Total general revenues and transfers
4,728,811 4,728,811
185,676 185,676
10,671,642 10,671,642
9,752,459 9,752,459
318,557 318,557
2,950,704 2,950,704
669,820 201,159 870,979
189,262 189,262
1,222,849 1,222,849
800,000 (800,000)
31,489,780 (598,841 ) 30,890,939
3,286,492 181,169 3,467,661
115,024,737 6,607,951 121,632,688
$118,3 II ,229 $6,789,120 $125,100,349
Change in Net Assets
Net Assets-Beginning
Net Assets-Ending
See accompanying nutes to financial statements
23
FUND FINANCIAL STATEMENTS
In the Fund Financial Statements only individual major funds are presented, while non-major funds are
combined in a single column. Major funds are defined generally as having significant activities or balances
ih the current year.
The funds described below were determined to be Major Funds by the City for fiscal 2006. Individual
non-major funds may be found in the Supplemental section.
GENERAL FUND
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.
PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND
This fund accounts for the payments of principal and interest on certificates of participation issued to
provide for the financing of the Civic Center/Library, Wilson Park and Memorial Park and other City
facilities, through the issuance of certificates of participation.
MARY AVENUE BICYCLE FOOTBRIDGE CAPITAL PROJECT FUND
This fund accounts for design and construction of a bicycle footbridge extension of Mary Avenue over
Interstate 280. It includes gateways, paths, residential buffering elements and landscaping,
24
CITY OF CUPERTINO
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2006
Public Mary Avenue Other Total
Facilities Bicycle Governmental Governmental
General Corporation Footbridge Funds Funds
ASSETS
Cash and investments (Note 2) $25,355,171 $50,704 $9,303,331 $34,709,206
Cash and investments with fiscal agents (Note 2) 11,504 2,389,865 2,40 I ,369
Recei vab I es:
Accounts 1,879.819 640,278 2,520,097
Loans (Note 3) 1,497,85 I 933,483 2,431,334
Prepaid items 124,382 124,382
Land held for housing development (Note It) 615,000 615,000
Due from other funds (Note 4) 781,145 781,145
Advance to other funds (Note 4) 258,712 258,712
Other assets 3,884 300,000 303,884
Total Assets $29,912,468 $2,440,569 $11,792,092 $44,145,129
LIABILITIES
Accounts payable and accruals $1,396,665 $2,388,256 $568,906 $4,353,827
Accrued payroll and benefits 223,600 \3,047 236,647
Deposits 1,402,058 1,402,058
Due to other funds (Note 4) $781,145 781,145
Advance from other funds (Note 4) 22,092 258,712 280,804
Deferred revenue 70,439 256,032 326,471
Total Liabilities 3,114,854 2,388,256 781,145 1,096,697 7,380,952
Fund balance (Note 7)
Reserved for:
Encumbrances 296,386 617,414 843,511 1,757,3 11
Debt service 52,3 13 52,313
Advances to other funds 258,712 258,712
Prepaid items and other assets 124,382 400,000 524,382
Loans receivable 1,497,851 684,953 2,182,804
Land held for housing development 615,000 6 I 5,000
Low and moderate income housing 85,844 85,844
Capital projects 1,626,865 1,626,865
Public access television 753,715 753,715
Unreserved, reported in:
General Fund 23,866,568 23,866,568
Special Revenue Funds 6,249,004 6,249.004
Capital Project Funds ( 1,398,559) 190,2 I 8 (1,208,341 )
TOT AL FUND BALANCES 26,797,614 52,3 13 (781,145) 10,695,395 36,764,177
Total Liabilities and Fund Balances $29,912,468 $2,440,569 $11,792,092 $44,145,129
See accompanying notes to financial statements
25
CITY OF CUPERTINO
Reconciliation of the
GOVERNMENT AL FUNDS -- BALANCE SHEET
with the
ST ATEMENT OF NET ASSETS
JUNE 30, 2006
Total fund l;Jalances reported on the governmental funds balance sheet
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.
ALLOCATION OF INTERNAL SERVICE FUND NET ASSETS
Internal service funds are not governmental funds. However, they are used by management to
charge the costs of certain activities, such as insurance and central services and maintenance
to individual governmental funds. The net current assets of the Internal Service Funds are therefore
included in Governmental Activities in the following line items in the Statement of Net Assets.
Cash and investments
Prepaids
Capital assets, net of accumulated depreciation
Accounts payable and accruals
Accrued payroll and benefits
Compensated absences
Claims payable
ACCRUAL OF NON-CURRENT REVENUES AND EXPENSES
Revenues which are deferred on the Fund Balance Sheets because they are not available currently
are taken into revenue in the Statement of Activities.
LONG TERM ASSETS AND LIABILITIES
The assets and liabilities below are not due and payable in the current period and therefore are not
reported in the Funds:
Long-term debt
Non-current portion of compensated absences
NET ASSETS OF GOVERNMENTAL ACTIVITIES
See accompanying notes to financial statements
26
$36,764,177
131,028,671
4,200,358
19,527
669,839
(26,782)
(12,331)
(78,748)
(J ,275,000)
248,530
(51,035,000)
(2,192,012)
$ J 18,3 II ,229
CITY OF CUPERTINO
GOVERNMENTAL FUNDS
ST A TEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2006
Public Mary Avenue Other Total
Facilities Bicycle Governmental Governmental
General Corporation Footbridge Funds Funds
REVENUES
Taxes $24,420,110 $1,196,443 $25,616,553
Use of money and property 1,025,295 $14,115 568,427 1,607,837
Intergovernmental 3,635,553 2,260,614 5,896,167
Licenses and permits 3,614,953 3,614,953
Charges for services 1,781,277 362,452 2,143,729
Fines and forfeitures 629,586 629,586
Other revenue 232,088 13,088 245,176
Total Revenues 35,338,862 14,115 4,40 1,024 39,754,001
EXPENDITURES
Current:
Administration 1,236,390 1,236,390
Law enforcement 6,499,911 6,499,911
Public information 853,484 853,484
Administrative services 4, I 03,497 4, I 03,497
Recreation services 2,302,995 2,302,995
Community development 3,639,488 828,167 4,467,655
Public works 8,940,825 1,445.230 10,386,055
Capital outlay $1,438,331 1,333,171 2,771,502
Debt service
Principal 1,270,000 1,270,000
Interest and fiscal charges 2,262,913 2,262,913
Total Expenditures 27,576,590 3,532,913 1,438,331 3,606,568 36,154,402
EXCESS (DEFICIENCY) OF REVENUES,
OVER EXPENDITURES 7,762,272 (3,518,798) (1,438,331) 794,456 3,599,599
OTHER FINANCING SOURCES (USES)
Proceeds from sale of land 2,422,849 2,422,849
Transfers in (Note 4) 1,459,974 3,548,000 755,000 2,601,110 8,364,084
Transfers (out) (Note 4) (7,026,296) (97,814) (659,974) (7,784,084 )
Total Other Financing Sources (Uses) (3,143,473) 3,548,000 657,186 1,941,136 3,002,849
NET CHANGE IN FUND BALANCES 4,618,799 29,202 (78 I , 145) 2,735,592 6,602,448
BEGINNING FUND BALANCES 22,178,815 23, III 7,959,803 30,161,729
ENDING FUND BALANCES $26,797,614 $52,3 13 ($781,145) $10,695,395 $36,764,177
See accompanying notes to financial statements
27
CITY OF CUPERTINO
Reconciliation of the
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
with the
ST A TEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of
Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and current
liabilities on the modified accrual basis, with the Change in Net Assets of Governmental Activities reported in the
Statement of Activities, which is prepared on the full accrual basis.
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
$6,602,448
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 capitali;;:ed and allocated over
their estimated useful lives and reported as ?epreciation expense.
The capital outlay expenditures are therefore added back to fund balance
(Net of internal service fund additions of $129,266)
2,765,529
Public works expenditures are added back to fund balance
169,382
Depreciation expense is deducted from the fund balance
(Depreciation expense is net of Internal service fund depreciation
of$365,015 which has already been allocated to serviced funds)
(6,204,585)
RetIrement of Land
(1,200,000)
LONG TERM DEBT PROCEEDS AND PAYMENTS
Repayment of bond principal is an expenditure in the governmental funds, but
in the Statement of Net Assets the repayment reduces long-tenn liabilities.
Repayment of debt principal is added back to fund balance
1,270,000
ACCRUAL OF NON-CURRENT 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 revenue or expenditures in
governmental funds (net change):
Non-current portion of compensated absences
Deferred revenue
(110,902)
(17,868)
ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY
Internal Service Funds are used by management to charge the costs of certain activities,
such as equipment acquisition, maintenance, and insurance 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,
because they service those activities.
Change in Net Assets - All Internal Service Funds
12,488
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES
$3,286,492
See accompanying notes to financial statements
28
CITY OF CUPERTINO
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2006
Budgeted Amounts
Variance with
Final Budget
Positive
Actual Amounts (Negative)
Original Final
Revenues:
Taxes $21,562,000 $22,795,000 $24,420, II 0 $1,625, ] 10
Use of money and property 1,075,000 875,000 1,025,295 150,295
Intergovernmental 3,052,000 3,755,337 3,635,553 (119,784)
Licenses and pennits 2,800,000 3,370,000 3,614,953 244,953
Charges for services 1,285,000 1,785,500 1,781,277 (4,223)
Fines and forfeitures 625,000 550,000 629,586 79,586
Other revenue 100,000 116,200 232,088 115,888
Amounts available for appropriation 30,499,000 33,247,037 35,338,862 2,091,825
Charges for appropriation (outflows)
Administration 1,345,000 1,362,195 1,236,390 125,805
Law enforcement 6,969,000 7,177,378 6,499,911 677,467
Public information 834,000 917,644 853,484 64,160
Administrative services 4,563,000 4,978,400 4,]03,497 874,903
Recreation services 2,407,000 2,428,298 2,302,995 125,303
Community development 3,347,000 3,885,441 3,639,488 245,953
Public works 9,559,000 9,845.280 8,940,825 904,455
Total charges for appropriations 29,024,000 30,594,636 27,576,590 3,018,046
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 1,475,000 2,652,40 I 7,762,272 5,109,871
OTHER FINANCING SOURCES (USES)
Proceeds from sale of land 1,500,000 2,423,000 2,422,849 (15 I)
Transfers in 1,600,000 1,459,974 1,459,974
Transfers (out) (5,118,000) (7,026,296) (7,026,296)
Total other financing sources (uses) (2,018,000) (3,143,322) ,(3,143,473) (IS I)
NET CHANGE IN FUND BALANCE ($543,000) ($490,921 ) 4,618,799 $5,109,720
BEGINNING FUND BALANCE 22,178,815
ENDlNG FUND BALANCE $26,797,614
See accompanying notes to financial statements
29
MAJOR PROPRIETARY FUNDS
Proprietary funds account for City operations financed and operated in a manner similar to a private
business enterprise. The intent of the City is that the cost of providing goods and services be financed
primarily through user charges.
The City has identified the funds below as major proprietary funds for fiscal 2006.
RESOURCES RECOVERY FUND
This 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.
BLACKBERRY FARM FUND
This fund accounts for activities related to operating the picnic area and golf course.
CUPERTINO SPORTS CENTER FUND
This fund accounts for the operation and maintenance of the Cupertino Sports Facility.
RECREATION PROGRAMS FUND
This fund accounts for activities of the City's community center.
SENIOR CENTER FUND
This fund accounts for the activities of the City's senior center.
30
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
JUNE 30, 2006
Business-type Activities-Enterprise Funds Governmental
Cupertino Activities-
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fann Center Programs Cen ter Totals Funds
ASSETS
Current assets:
Cash and investments (Note 2) $5,480,231 $196,285 $271,747 $1,066,60 I $149,784 $7,164,648 $4,200,358
Accounts receivable 318,637 8,989 60,013 76,749 464,388
Prepaid expense 896 187,580 188,476 19,527
Advance to other funds (Note 4) 22,092 22,092
Total current assets 5,820,960 205,274 272,643 1,126,614 414,113 7,839.604 4,219,885
Capital assets (Note 5):
Non-depreciable 389,929 389,929
Depreciable, net of
accumulated depreciation 2,317 91,095 11,912 1,647 781 107,752 669,839
Total Assets 5,823,277 686,298 284,555 1,128,261 414,894 8,337,285 4,889,724
LIABILITIES
Current Liabilities:
Accounts payable and accruals 151,729 63,920 27,004 21,191 1,848 265,692 26,782
Accrued payroll and benefits 2,364 14,583 4,655 15,714 2,153 39,469 12,331
Compensated absences 78,172 78,172
Claims payable (Note 9) 170,000
Deposits 95,860 72,829 168,689
Deferred revenue 154,192 561,653 208,341 924,186
Total current liabilities 154,093 252,535 185,851 598,558 285,171 1,476,208 209,113
Non-current Liabilities:
Compensated absences (Note I h) 55,867 11,950 4,140 71,957 78,748
Claims payable (Note 9) I, I 05,000
Total Liabilities 209,960 264,485 185,851 598,558 289,311 1,548,165 1,392,861
NET ASSETS (Note 7)
Invested in capital assets 2,317 481,024 11,912 1,647 781 497,681 669,839
Unrestricted 5,611,000 (59,211) 86,792 528,056 124,802 6,291,439 2,827,024
Total Net Assets $5,613,317 $421,813 $98,704 $529,703 $125,583 $6,789,120 $3,496,863
See accompanying notes to financial statements
31
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2006
Business-type Activities-Enterprise Funds Governmental
Cupertino Activities-
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fann Center Programs Center Totals Funds
OPERATING REVENUES
Charges for services $2,200,213 $1,061,310 $1,368,007 $2,331,409 $704,390 $7.665,329 $1,952,673
Other 138,453 94,677 51,670 284,800 $1,338
Total Operating Revenues 2,338,666 1,155,987 1,419,677 2,331,409 704,390 7,950,129 1,954,0 II
OPERATING EXPENSES
Salaries and benetits 164,216 576,029 229,541 490,584 131,694 1,592,064 721,503
Materials and supplies 53.451 234,687 202,513 152,496 444,606 1,087,753 413,009
Contractual services 1,883,320 419,622 1,010,041 1,082,549 10,955 4,406,487 301,378
Insurance and claims 442,053
Depreciation 211 72,517 5,953 3,565 1,563 83,809 365,015
Total Operating Expenses 2,101.198 1,302,855 1,448,048 1,729,194 588,818 7,170,113 2,242,958
Operating Income (Loss) 237,468 (146,868) (28,371) 602,215 115,572 780,016 (288.947)
NONOPERATING REVENUES (EXPENSES)
Interest income 159,601 4,389 6,421 26,882 3,860 201,153 112,667
Loss on capital asset disposal (31,232)
Total Nonoperating Revenues (Expenses) 159,601 4,389 6,421 26,882 3,860 201.153 81,435
Income (Loss) Before Contributions and Transfers 397,069 ( 142,479) (21,950) 629,097 119,432 981,169 (207,512)
Transfers in (Note 4) 220,000
Transfers (out) (Note 4) (500,000) ( 100,000) (200,000 ) (800,000)
Net transfers (500,000) (100,000) (200,000) (800,000) 220,000
Change in net assets (102,931) ( 142,479) (121,950) 429,097 119,432 18 I, 169 12,488
Net Assets-Beginning 5,716,248 564,292 220,654 100,606 6,151 6,607,951 3,484,375
Net Assets-Ending $5,613,317 $421,813 $98,704 $529,703 $125,583 $6,789,120 $3.496,863
See accompanying notes to financial statements
32
CITY OF CUPERTfNO
PROPRIETARY FUNDS
ST A TEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2006
Business-type Activities-Enterprise Funds
Governmental
Cupertino Activities-
Resources Blackberry Sports Recreat ion Senior Internal Service
Recovery Fann Center Programs Center Totals Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $2,345,623 $1, I 53,457 $1,415,945 $2,367,285 $476,278 $7,758.588 $1,954,01 I
Cash payments to suppliers
for goods and services (1,947,871) (648,25] ) (1,207,222) (1,233,769) (388,459) (5,425,572) (733,986)
Cash payments to employees (I 10,037) (607,090) (235,957) (521,049) (13 I ,376) (1,605.509) (933,904)
Net cash provided by operating activities 287,715 (101,884) (27,234) 612,467 (43,557) 727,507 286,121
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Advance to other funds 238,065 238,065
Transfers in 220,000
Transfers (out) (500,000) (100,000) (200,000) (800,000)
Cash Flows from Noncapital
Financing Activities (261,935) (100.000) (200,000) (561,935) 220,000
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchase of capital assets (2,528) _ (2,528) (129,266)
Cash Flows from Capital and
Related Financing Activities (2,528) (2,528) (129,266)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 159,601 4,389 6,421 26,882 3,860 201,153 112,667
Cash Flows from Investing Activities 159,601 4,389 6,421 26,882 3,860 201, I 53 112,667
Net Cash Flows 182,853 (97,495) (120,813) 439,349 (39,697) 364,197 489,522
Cash and investments at beginning of year 5,297,378 293,780 392,560 627,252 189,481 6,800,45 I 3,710,836
Cash and investments at end of year $5,480,23 I $ I 96,285 $271 ,747 $1,066.60 I $149,784 $7,164,648 $4,200,353
Reconciliation of operating income (loss) to
net cash provided by operating activities:
Operating income (loss) $237,468 ($146,868) ($28.371 ) $602,2 I 5 $115,572 $780,016 ($288,947)
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation 211 72,S 17 5,953 3.565 1,563 83,809 365,015
Change in assets and liabilities:
Accounts receivable 6,957 (2,530) 21 21,340 3,015 28.803
Prepaid expense 76 ( 122,326) (122,250) (8,893)
Accounts payable and accruals (11,100) 26,706 5,256 1,276 1,848 23,986 6,615
Accrued payroll and benefits (1,688) (32,247) (6,416) (30,465) (3,822) (74,638) (291,149)
Deposits (20,648) (7,407) (28,055) 78,748
DefelTed revenue (3,753) 14,536 (36,140) (25,357) 424,732
Compensated absences 55,867 1,186 4,140 61,193
Net cash provided by operating activities $287,715 ($10 I ,884) ($27,234) $612,467 ($43,557) $727,507 $286,121
See accompanying notes to financial statements
33
FIDUCIARY FUNDS
Fiduciary Funds include all agency funds that account for assets held by the City as an agent for
individuals, private organizations, other governmental units and/or other funds.
Agency Funds 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.
Special district assessments held by the City, acting as an agent for bond debt service payments, comprise
Agency funds. The City is not liable for re-payment of the bonds.
34
ASSETS
CITY OF CUPERTINO
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30, 2006
Cash and investments (Note 2)
LIABILITIES
Deposits
Total Assets
Total Liabilities
See accompanying notes to financial statements
35
Agency
Funds
$236,049
$236,049
$236,049
$236,049
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Reporting Entitv
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 Information, 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 the Los Altos Garbage Company for
garbage and recycling services.
The accompanying basic financial statements include all funds, account groups, 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.
No separate financial statements are issued for the Corporation, since it is reported
separately in the basic financial statements.
(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 of America. The Government
Accounting Standards Board is the acknowledged standard setting body for establishing
accounting and financial reporting standards followed by governmental entities in the
U.S.A.
37
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(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. Eliminations have been made to minimize the
double counting of internal 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, (b) grants
and contributions that are restricted to meeting the operational or capital needs of a
particular program and (c) development fees which are considered capital grants under
California law. Revenues that are not classified as program revenues, including taxes, are
presented as general revenues.
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 and enterprise funds are aggregated and reported as nonmajor
funds.
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.
38
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (continued)
Major Funds - GASB Statement 34 defines major funds and requires that the City's
major governmental and business-type funds be identified and presented separately in the
fund financial statements. All other funds, called non-major 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 equal to ten percent of their fund-type total and five percent of the grand
total. The General Fund is always a major fund. The City may select other funds it
believes should be presented as major funds.
The City reported the following major governmental funds m the accompanymg
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 HalVLibrmy, Wilson Park and Memorial Park certificates of
participation.
The Mary Avenue Bicycle Footbridge Capital Project Fund accounts for design and
construction of a bicycle footbridge extension of Mary Avenue over Interstate 280. It
includes gateways, paths, residential buffering elements and landscaping.
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 operating the picnic area and
golf course.
The Cupertino Sports Center Fund accounts for the operation and maintenance of the
Cupertino Sports Facility.
The Recreation Programs Fund accounts for activities of the City's community center.
The Senior Center Fund accounts for the activities of the City's senior center.
39
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Measurement Focus. Basis of Accounting and Basis of Presentation (continued)
The City also reports the following fund types:
Internal Service Funds. These funds account for workers' compensation, management
information system maintenance and replacement, equipment maintenance and
replacement, and long-term disability coverage; all of which are provided to other
departments on a cost-reimbursement basis.
Fiduciary Fund. This fund accounts for deposits held by the City as an agent.
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 they have become due and payable. 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.
Fiduciary financial statements consisting of agency funds, report only assets and
liabilities, and therefore have no measurement focus. They recognize receivables and
payables on a full accrual basis.
Property taxes, utility taxes, franchise taxes, interest and special assessments are
susceptible to accrual. Sales taxes collected and held by the state at year end on behalf
of the City are also recognized as revenue. Other receipts and taxes are recognized as
revenue when the cash is received.
Grant revenues are recognized in the fiscal year in which all eligibility requirements are
met. 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.
Thus, both restricted and unrestricted net assets may available to finance program
expenditures. The City's policy is to first apply restricted grant resources to such
programs, followed by general revenues if necessary.
40
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (continued)
The City follows statements and interpretations of the Financial Accounting Standards
Board and its predecessors that were issued on or before November 30, 1989, in
accounting for its business-type activities, unless they conflict with Government
Accounting Standards Board pronouncements.
GASB 33 Non-Exchange Transaction - 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, entitlements, and donations is recognized in the fiscal
year in which all eligibility requirements have been satisfied.
(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 (I) 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. All 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 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. The legal level of budgetary control is at the
departmental or project level.
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 project 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.
41
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(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.
(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.
Depreciation is recorded using the straight-line method over the following useful lives:
Buildings
Improvements
Vehic1es
Street equipment
Water equipment
Office equipment
Road, curbs, gutters, sidewalks, medians and bridges
Streetlights
Storm drain structure and mains
Traffic signals
The City capitalizes capital assets exceeding $1,000.
Years
25
31
4-10
3-20
3-50
3-5
30-40
20
40
20
Major outlays for capital assets and improvements are capitalized as projects are
constructed. 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.
42
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t) Land Held for Housing Development
Land held for redevelopment of $615,000 at June 30, 2006 is stated at the lowest of
historical cost, net realizable value or agreed-upon sales price. The land was purchased
using Federal grant funds for housing activities.
(g) Claims and Judgments Pavable
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-term disability. General liability claims
and judgments are not material and are not accrued.
(h) Compensated Absences
Compensated absences comprise vested accumulated vacation and sick leave. The City's
liability for compensated absences is recorded in Governmental Activities or various
Proprietary funds 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, In prior
years, the governmental fund associated with the ongoing salary and benefit cost of the
employee has liquidated the long-term liability.
The changes in compensated absences were as follows:
Business-
Governmental Type
Activities Activities Total
Beginning Balance $2,081,111 $153,359 $2,234,470
Additions 353,371 82,080 435,451
Payments (163,722) (85,310) (249,032)
Ending Balance $2,270,760 $150,129 $2,420,889
Current Portion $161,555 $78,172 $239,727
43
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Fund Equitv
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.
U) 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 March 1 and become
delinquent on December 10 and April 10. Unsecured taxes are due on July 1 and become
delinquent on August 31. The lien date for secured and unsecured property taxes is
March 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.
(k) Interfund Transactions
Transactions constituting reimbursements to a fund for expenditures/expenses initially
made from it that are properly applicable to another fund,
expenditures/expenses in the reimbursing fund and as
expenditures/expenses in the fund that is reimbursed.
are recorded as
reductions of
(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) Bond Discounts and Issue Costs
Debt discounts and issuance costs are recognized in the current period. Debt discounts
and issuance costs incurred by proprietary fund types are amortized over the term of the
debt using the bonds-outstanding method, which approximates the effective interest
method.
44
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) Inventories and Prep aids
Inventories are accounted for under the purchases method, which considers inventories to
be recognized as an expenditure upon purchase, with inventories insignificant at year-
end. Prepaid expenses are reported under the consumption method, which recognizes the
expense in the period associated with the service rendered or goods consumed.
(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 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 combined 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 party custodian acting as agent for the City under the terms of a
custody agreement. Individual investments are generally made by the City and its fiscal
agents.
The City's investments are carried at fair value, as required by generally accepted
accounting principles. 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 income
for that fiscal year.
45
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(2) CASH AND INVESTMENTS (continued)
(b) Classification
The City's total 'cash and investments, at fair value, are presented on the accompanying
statement of net assets in the following allocation:
Statement of Net Assets
Cash and investments
Cash and investments with fiscal agent
Subtotal
Fiduciary Funds
Cash and investments
$46,074,212
2,401,369
48,475,581
236,049
$48,711,630
Total Cash and investments
46
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(2) CASH AND INVESTMENTS (continued)
(c) Authorized Investments by the Citv
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.
Maximum Minimum
Authorized Investment Type Maturity Credit Quality
u.s. Treasury obligations 5 years N/A
Federa] Agency securities (A) 5 years (B) N/A
California Loca] Agency Investment
Fund N/A N/A
Non-negotiab]e Certificates of Deposit 5 years N/A
(time deposits)
State of California registered state 5 years N/A
warrants, treasury notes, or bonds
California local agency bonds, notes, 5 years N/A
warrants or other obligations
Bonds issued by the loca] agency 5 years N/A
Bankers Acceptances 180 days N/A
Commercia] Paper ] 80 days A-I+/P-]
Maximum
Percentage of
Portfolio
Maximum Investment
In One Issuer
None
None
Up to $40
million, per State
law
None
None
None
None
10% of portfolio; 5% of
issuer's net worth
None
10%
None
]0%
None
]0%
40%
None
25%
] 0% of portfolio; 5% of
issuer's net worth; 10%
of outstanding paper of
Issuer.
Negotiab]e Certificates of Deposit 5 years N/A 30%
Repurchase Agreements ] year N/A None
Medium Term Corporate Notes 5 years A or better 30%
Money market mutual funds investing
in U.S. Treasury or Government N/A N/A 20%
Agency securities
10% ofportfo]io; 5% of
issuer's net worth
10% of portfolio; 5% of
issuer's net worth
10% of portfolio; 5% of
issuer's net worth
10%
(A) Securities issued by agencies of the federal government such as the Government Nationa] Mortgage Association, (GNMA), the
Federal Home Loan Bank (FHLB), the Federa] National Mortgage Association (FNMA), the Federa] Home Loan Mortgage
Corporation (FHLMC), and the Federa] Farm Credit Bank (FFCB).
(B) As allowed by City investment policy, the City Council approved an exception to the 5-year maturity limit with an investment in
] 993 of one FHLMC security with maturity in 2007. The investment has a maturity value of$1 00,000.
47
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30,2006
(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:
Authorized Investment Type
Money market mutual funds
California Local Agency Investment
Fund
U.S. Treasury obligations
u.s. Federal agency obligations (A)
Pre-refunded local agency municipal
obligations that are non-callable or
irrevocably callable on a specified date
General obligations of states
U.S. dollar denominated deposit
accounts, federal funds and bankers
acceptances
Commercial paper
Time or demand accounts or certificates
of deposits, collateralized
Investment agreements or other forms of
investments, including repurchase
agreements, approved by the financial
guaranty insurance carrier.
Maximum
Maximum Minimum Credit Percentage of
Maturity Quality Portfolio
Aaam or
N/A AAAm-G None
Up to $40
million, per
N/A N/A State law
N/A N/A None
N/A N/A None
Highest rating
N/A category None
N/A A2/A None
360 days P-I, A-I+, A-I None
270 days P-I, A-I None
N/A N/A None
N/A
N/A
None
(A) Securities issued by agencies of the federal government such as the Government National Mortgage
Association, (GNMA), the Federal Home Loan Bank (FHLB), the Federal National Mortgage Association
(FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and the Federal Farm Credit Bank
(FFCB).
48
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(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,
Information 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:
12 Months 13 to 25 to
or less 24 Months 60 Months Total
U.S. Treasury Securities $995,740 $995,740
Federal Agency Obligations 7,598,774 $7,764,278 $8,053,581 23,416,633
Local Agency Investment Fund 12,309,064 12,309,064
Government Securities Money Market Funds 10,682,126 10,682,126
Non-negotiable Certificates of Deposit 388,214 1,247,236 469,438 2,104,888
Total Investments $31,973,918 $9,011,514 $8,523,019 49,508,451
Cash in banks (overdraft) and on hand (796,821 )
Total Cash and Investments $48,711,630
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 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 collateralized mortgage obligations, mortgage-backed securities, other asset-
backed securities, loans to certain state funds, and floating rate securities issued by
federal agencies, government-sponsored enterprises, United States Treasury Notes and
Bills, and corporations. At June 30, 2006, these investments matured in an average of
152 days.
Money market funds are available for withdrawal on demand and at June 30, 2006,
matured in an average of 26 days.
49
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(2) CASH AND INVESTMENTS (continued)
(f) 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, 2006 for each investment type, including those with fiscal agents, as provided by
Moody's ratings:
Investment Type
Federal Agency Obligations
Government Securities Money Market Funds
Aaa
$23,389,794
10,682,126
Total
$23,389,794
10,682,126
Totals
Exempt from Credit Rating Disclosure:
U.S. Treasury Securities
Not Rated:
Federal Agency Obligations
Local Agency Investment Fund
Certificates of deposit
$34,071,920
34,071,920
995,740
26,839
12,309,064
2,104,888
$49,508,451
Total Investments
(g) Concentration of Credit Risk
The City's investment policy contains certain limitations on the amount that can be
invested in anyone issuer. In certain categories, these limitations are more restrictive
than those required by California Government Code Sections 53600 et seq. Investments
in anyone issuer, other than U.S. Treasury securities, mutual funds, and external
investment pools, that represent 5% or more of total Entity-wide investments are as
follows at June 30, 2006:
Issuer
Federal Home Loan Bank
Federal National Mortgage Association
Federal Home Loan Mortgage Corporation
Federal Farm Credit Bank
Investment Type
Federal Agencies Obligation
Federal Agencies Obligation
Federal Agencies Obligation
Federai Agencies Obligation
Amount
$10,090,862
4,225,079
6,164,812
2,935,880
50
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(3) RELATED PARTY LOAN
In conjunction with the City's executive housing assistance program, loans totaling $1,535,860
have been provided to three executive managers, These 40-year loans bear an interest rate equal
to the 11 th 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 11 th District Cost
of Funds for the remainder of the loan, At June 30, 2006, the balance remaining on the three
loans was $978,646.
(4) INTERFUND TRANSACTIONS
Transfers between funds during the fiscal year ended June 30, 2006 were as follows:
Fund Making Transfers
Fund Receiving Transfers
Amount
Transferred
$3,548,000 (A)
755,000 (B)
2,503,296 (C)
220,000 (D)
657,450 (E)
2,524 (F)
97,8]4 (G)
500,000 (H)
100,000 (1)
200,000 (I)
$8,584,084
General Fund
Public Facilities Corporation Debt Service Fund
Mary Avenue Bicycle Footbridge Capital Project Fund
Non-major governmental funds
Internal Service Funds
Special Revenue Funds:
Park Dedication
Cali Mill Plaza
General Fund
General Fund
Capital Projects Funds:
Mary Avenue Bicycle Footbridge
Transportation Special Revenue Fund
Enterprise Funds
Resource Recovery
Cupertino Sports Center
Recreation Program
General Fund
General Fund
General Fund
Total Interfund Transfers
The reasons for these transfers are set forth below:
(A) For debt service.
(B) For capital projects (budget and mid year adjustments)
(C) To fund gas tax projects (budget and midyear adjustment) and street maintenance.
(D) To provide budgeted new technology equipment
(E) All park dedication fees collected are transferred to the General Fund.
(F) To close out Cali Mill Plaza Construction Fund.
(G) To cover beginning fiscal year cash deficit.
(H) To reimburse General Fund costs for waste cleanup.
(I) Budgeted (enterprise funds) transfer of excess earnings over expenditures for cost reimbursement to
the General Fund.
51
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(4) INTERFUND TRANSACTIONS (continued)
As development of the Vallco project area is still in progress tax increment revenues are not yet
sufficient to finance Agency operations. To assist the Agency until project redevelopment generates
additional tax increment revenues, the City has advanced funds to the Agency, a part of non-major
governmental funds, to finance operations. As of June 30, 2006 the balance of the advance was
$258,712.
In fiscal year 2001/02, City Council approved a budget of approximately $20,800,000 for the
construction of a new library. At that time, the library community pledged to raise an additional
$1.2 million to pay for the furniture and fixtures in the new building which effectively increased the
size of the building. However, the campaign committee fell short of its fundraising effort. In order
to keep the project on its construction schedule, the City Council approved a loan from the Resource
Recovery Enterprise Fund for this shortfall. In the past two years the loan has been paid back with
General Fund monies and additional donations. As of June 30, 2006 the remaining loan balance
was $22,092 and it is anticipated to be completely paid off in fiscal 2006-07.
At June 30, 2006, the Mary Avenue Bicycle Footbridge Capital Project Fund owed the General
Fund $781,145. The General Fund will be paid back after grant reimbursements for the project are
received.
Internal Balances - Internal balances are presented only in the City-wide financial statements.
They represent the net interfund receivables and payables remaining after the elimination of all
such balances within governmental and business-type activities.
52
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(5) CAPITAL ASSETS
A summary of changes in capital assets follows:
Goyernmental actiyities
Capital assets not being depreciated:
Land
Construction in progress:
Infrastructure
Other capital proj eets
Total capital assets not being depreciated
Capital assets being depreciated:
Buildings
Improvements other than buildings
Machinery and Equipment - governmental funds
Machinery and Equipment - internal service funds
Road, curbs, gutters, sidewalks, medians
and bridges
Streetlights
Storm drain structure and mains
Traffic signals
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
Improvements other than buildings
Machinery and Equipment - governmental funds
Machinery and Equipment - internal service funds
Road, curbs, gutters, sidewalks, medians
and bridges
Streetlights
Storm drain structure and mains
Traffic signals
Total accumulated depreciation
Net capital assets being depreciated
Governmental activity capital assets, net
($1,200,000) $59,035,080
$1,438,330 1,725,875
275,014 275,014
1,713,344 (1,200,000) 61,035,969
Balance at
June 30, 2005
Additions
$60,235,080
287.545
60,522,625
39,511 ,411 226,303
24,817.863 36,410
1,700,654 67,660
4,478,762 129,266
96,931,950 613,167
6,500,000 47,255
31,288,516 134,119
5,741,610 102,626
210,970,766 1,356,806
7,723,147 1,530,161
15,861,092 1,202,244
1,176,865 183,029
3,541,942 365,015
74,384,692 2,389,729
6,500,000 1,728
21,872,912 782,213
3,997,576 115,481
135,058,226 6,569,600
75.912,540 (5,212,794)
$136,435,165
($3,499,450)
53
Retirements
(70,627)
(285,211)
(355,838)
(64,654)
(253,979)
(318.633)
(37,205)
($1,237,205)
Balance at
June 30, 2006
39,737,714
24,854,273
1,697,687
4,322.817
97,545,117
6,547,255
31,422,635
5,844.236
211,971,734
9,253,308
17,063,336
1,295,240
3,652,978
76,774,421
6,501,728
22,655,125
4,113,057
141.309,193
70,662,541
$131,698.510
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(5) CAPITAL ASSETS (continued)
Balance at
June 30, 2005
Additions
Retirements
Balance at
June 30, 2006
Business-type activities:
Capital assets not being depreciated:
Land and improvements
$389,929
$389,929
Total capital assets not being depreciated
389,929
389,929
Capital assets being depreciated:
Improvements other than buildings
Machinery and Equipment
Total capital assets being depreciated
638,464
333.310
971,774
$2,528.
2,528
($10,000)
(30,741)
(40,741)
628,464
305,097
933,561
Less accumulated depreciation for:
Improvements other than buildings
Machinery and Equipment
Total accumulated depreciation
471,316 48,543 (10,000) 509,859
311 ,425 35,266 (30,741) 315,950
782,741 83,809 (40,741) 825,809
189,033 (81,281 ) 107,752
$578,962 ($81,281) $497,681
Net capital assets being depreciated
Business-type activity capital assets, net
Depreciation expense was charged to functions and programs based on their usage of the related
assets. The amounts allocated to each function or program is as follows:
Governmental Activities
Administration
Law Enforcement
Public Information
Administrative Services
Recreation Service
Community Development
Public Works
Internal Service funds
Amount
$90,643
2,172
46,101
36,008
17,132
574
6,011,955
365,015
Total
$6,569,600
54
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(5) CAPITAL ASSETS (continued)
Business-Type Activities
Resources Recovery
Senior
Center
Blackberry Farms
Cupertino Sports Center
Recreation Program
Amount
$211
1,563
72,517
5,953
3,565
Total
$83,809
(6) LONG-TERM DEBT
(a) Cupertino Public Facilities Corporation Certificates of Participation
Original
Issue
Amount
Balance
June 30,
2005
Retirements
Balance
June 30,
2006
Current
Portion
Governmental Activity Debt:
2002 Refinancing and Capital
Improvement Project,
2.00-5.00%, due 07/01/2031
$56,640,000
$52,305,000
$1,270,000
$51,035,000
$1,295,000
The Cupertino Public Facilities Corporation issued Certificates of Participation to
provide financing for the construction of the Community Center, remodeling of City Hall
and the Library in July of 1986, to purchase Wilson Park in 1989, to finance Memorial
Park Expansion in 1990, and to purchase Blackberry Farm and Fremont Older site in
1991. 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 ("Refunded COPS").
55
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(6) LONG-TERM DEBT (continued)
(a) Cupertino Public Facilities Corporation Certificates of Participation (continued)
Annual debt service requirements for the Certificates of Participation are shown below:
For the Year
Ending June 30
2007
2008
2009
2010
2011
2012-2016
2017-2021
2022-2026
2027-2030
Total
Governmental Activities
Principal
$1,295,000
1,355,000
1,415,000
1,460,000
1,500,000
8,330,000
10,250,000
12,830,000
12,600,000
$51,035,000
(b) 1915 Act Bonds Without Citv Commitment
Interest
$2,237,338
2,179,063
2,116,394
2,073,944
2,030,144
9,330,868
7,415,455
4,834,443
1,530,687
$33,748,336
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 determined 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 unmatured bond principal at June 30, 2006 was $125,000.
(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 City
has no legal or moral liability with respect to the payment of this debt.
56
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(7) 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 - Net Assets is the excess of all the City's assets over all its liabilities, regardless of
fund. Net Assets are divided into three captions under GASB Statement 34, These captions
apply only to Net Assets, which is determined only at the Government-wide level, and are
described below:
Invested in Capital Assets, net of related debt describes the portion of Net Assets which is
represented by the current net book value of the City's capital assets, less the outstanding balance of
any debt issued to finance these assets.
Restricted describes the portion of Net Assets which is restricted as to use by the terms and
conditions of agreements with outside parties, governmental regulations, laws, or other restrictions
which the City cannot unilaterally alter. These principally include developer fees received for use
on capital projects, debt service requirements, and redevelopment funds restricted to low and
moderate income purposes,
Governmental fund balances represent the net current assets of each fund. Net current assets
generally represent a fund's cash and receivables, less its liabilities. Portions of a fund's balance
may be reserved or designated for future expenditure.
Fund Balances, Reserves and Designations - In the Fund financial statements, fund balances
represent the net current assets of each fund. Net current assets generally represent a fund's cash
and receivables, less its liabilities. Portions of a fund's balance may be reserved or designated
for future expenditure.
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
unreserved fund balance for the Governmental Funds at June 30, 2006 are as follows:
General Fund:
Economic Uncertainty
Disaster Preparedness
Retiree Medical
PERS Future Liability
Infrastructure Sinking Fund
Capital Improvement
Special Revenue Funds, Gas Tax Projects
$6,300,000
7,500,000
3,489,000
1,000,000
500,000
5,000,000
3,545,053
Total designated fund balances
$27 ,334,053
57
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(7) NET ASSETS AND FUND BALANCES (continued)
(a) New and closed funds
During fiscal year 2005-06 the City established the Mary Avenue Bicycle Footbridge
Capital Project Fund and closed the Cali Mill Plaza Capital Project Fund.
(8) COMMITMENTS AND CONTINGENCIES
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, 2006, 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.
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. The cost and carrying
value of the building, opened in October 2004, is $21,935,325 and $21,057,912, respectively,
with $877 ,413 in accumulated depreciation.
(9) LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT
The City is self-insured for the first $100,000 of general and automobile liability for each
occurrence, and the excess (up to $10,000,000) is covered through the City's participation in the
Association of Bay Area Governments (ABAG) Plan general liability risk pool. The pool consists
of 32 agencies within the San Francisco Bay area. The stated purpose of the ABAG pool is to
provide certain levels of liability insurance coverage, claims management, risk management
services, and legal defense to each participating city within the pool. Each city was required to
make an initial deposit premium based on an actuarial study of each City's risk exposure. The
premium consists of a risk portion and administrative portion. The premium is revised each year
based on claims experience and risk exposure. Complete financial statements for ABAG plan
may be obtained from their offices at the following address: ABAG Plan Corporation, Finance
Department, P.O. Box 2050, Oakland, CA 94604.
In January 2004, the City joined the California Public Entity Insurance Authority (CPEIA), 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 $150,000,000 limit. CPEIA was
established in 2001 for the purpose of creating a risk management pool for all California public
entities. CPEIA is governed by a Board of Directors consisting of representatives of its member
public entities.
58
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(9) LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT (continued)
During the fiscal year 2005/06, an outside independent actuary performed an analysis of the
City's workers' compensation program. The resulting unpaid claims liability recorded by the
City includes those based on existing open claims plus those estimated on an incurred but not
reported basis. Allocated loss adjustment expenses, such as fees paid to outside attorneys, were
also considered.
Changes in the balances of claim liabilities during the past two fiscal years are as follows:
Workers'
Compensation
Claims liability, June 30, 2004
Incurred claims
Claim payments/credits
$1,064,000
213,731
(213,731)
Claims liability, June 30, 2005
1,064,000
Incurred claims
Claim payments/credits
363,859
(152,859)
Claims liability, June 30, 2006
$1,275,000
Current portion
$170,000
(10) OTHER POST EMPLOYMENT RETIREMENT BENEFITS
Permanent employees who retire under the City's retirement plan (PERS) 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 up to the maximum
received by active employees in their respective bargaining unit. The cost of retiree medical
insurance premiums are recognized as an expenditure when benefits are paid. There were 86
retirees participating in the plan as of June 30, 2006. The City has established a designation of
General Fund Balance to fund the liabilities associated with this retiree medical benefit.
Retiree medical insurance premium expenses for the past five fiscal years ended June 30 are as
follows:
2002
2003
2004
2005
2006
$346,202
427,312
501,568
536,190
558,366
59
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(11) DEFERRED COMPENSATION PLAN
Due to the passage of the Small Business Job Protection Act (Act) of 1996, and the issuance of
Governmental Accounting Standards Board Statement No. 32 "Accounting and Financial
Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans," governmental
entities who have established deferred compensation plans under Internal Revenue Code Section
457 are required to establish trusts to hold plan assets for the exclusive benefit of plan
participants and their beneficiaries. This Act supercedes previous regulations, which required
that plan assets remain the property of the City until paid or made available to the participants,
subject only to the City's general creditors. In compliance with the new regulations, the City
established separate trusts to hold plan assets. The value of assets held in trust under Section 457
deferred compensation plans is approximately $11,994,022 as of June 30, 2006. These assets
have been excluded from the financial statements.
(12) 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. Benefit
provisions under both Plans 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 P.O. Box 942709, Sacramento, CA 94229-2709.
(b) Funding Policv
Funding contributions for the Plan are determined annually on an actuarial basis as of June 30 by
CALPERS; the City must contribute these amounts. The Plans' provisions and benefits in
effect at June 30, 2006, are summarized as follows:
Benefit vesting schedule
Benefit payments
Eligible retirement age
Benefits, as a % of annual salary
multiplied by years of service and
annual salary
Required employee contribution rates
Required employer contribution rates
Miscellaneous
5 years service
Monthly for life
50
1.426% - 2.418%
7%
12.393%
60
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(12) DEFINED BENEFIT PENSION PLAN (continued)
( c) Annual Pension Cost
CALPERS determines contribution requirements using a modification of the Entry Age Normal
Method. Under this method, the City's total normal 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 contributions to
CALPERS. This results in no net pension obligations or unpaid contributions. Annual Pension
Costs, representing the payment of all contributions required by CALPERS, for the years ended
June 30, 2006, 2005 and 2004 amounted to $1,312,167, $870,110 and $877,928 respectively
CALPERS uses the market related value method of valuing the Plan's assets. An investment rate
of return of 7.75% is assumed, including inflation rate at 3.0%. Annual salary increases are
assumed to vary by duration of service. Changes in liability due to plan amendments, changes in
actuarial assumptions, or changes in actuarial methods are amortized as a level percentage of
payroll on a closed basis over twenty years. All gains and losses are realized and amortized over
a rolling thirty year period. Market value fluctuations in the actuarial value of plan assets are
smoothed over 15 years.
CALPERS' latest available actuarial value (which differs from market value) and funding
progress are set forth below at their actuarial valuation date of June 30, 2004.
Af~cellaneousPlan:
Actuarial
Unfunded
Entry Age Unfunded Annual (Overfunded)
Valuation Accrued Value of (Overfunded) Funded Covered Liability as %
Date Liability Assets Liability Ratio Payroll of Payroll
6/30/02 $35,125,628 $36,012,654 ($887,026) 102.5% $9,370,084 (9.5%)
6/30/03 40,199,604 36,349,0 II $3,850,593 90.4% 9,619,149 40.0%
6/30/04 44,001,844 38,356,851 $5,644,993 87.2% 9,749,961 57.9%
61
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2006
(13) DEFICIT FUND BALANCE
As of June 30, 2006, the General Fund had advanced funds to the Redevelopment Agency (RDA)
for staffing costs, legal and consulting fees as the Vallco project area's tax increment revenues
are not yet sufficient to finance Agency operations. Such expenditures have resulted in a deficit
fund balance of $124,809. Once development leads to improved tax increment, the RDA will
repay the advance.
As of June 30, 2006, the Mary Avenue Bicycle Footbridge Capital Project fund had a deficit
balance of $781,145. The deficit will be eliminated once the City receives reimbursement from
available grant funds,
(14) SUBSEQUENT EVENT
AB 117 was signed into law in September 2006. The bill provides for the majority of the full
Tax Equity Allocation (TEA) formula for the cities of Cupertino, Los Altos Hills, Monte Sereno
and Saratoga. Four cities, called "low/no tax cities," were eligible under legislation passed in the
late 1980's to receive TEA funding that provided a minimum 7% of the 1 % property tax. An
amendment to the TEA legislation was sponsored, which limited the four cities to 55% of what
other low/no tax cities in the state received to help reimburse Santa Clara County for trial court
funding, This bill corrects the inequity in the funding allocation and provides Cupertino an
estimated $1,350,260 in additional property tax per year, These increased dollars will result in a
balanced budget for the General Fund in regards to operating revenues versus operating
expenditures.
62
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 dictates 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 must be included as Supplemental 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 City Hall, Library, Wilson Park and Memorial Park projects.
63
CITY OF CUPERTINO
PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Variance
Positive
Budget Actual (Negative)
REVENUES
Use of money and property $14,115 $14,115
Total Revenues 14,115 14,115
EXPENDITURES
Debt service:
Principal $1,245,000 1,270,000 (25,000)
Interest 2,302,650 2,262,913 39,737
Total Expenditures 3,547,650 3,532,913 14,737
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (3,547,650) (3.518,798) 28,852
OTHER FINANCING SOURCES (USES)
Transfers in 3,548,000 3,548,000
Total Other Financing Sources (Uses) 3,548,000 3,548,000
NET CHANGE IN FUND BALANCE $350 29,202 $28,852
BEGINNING FUND BALANCE 23,111
ENDING FUND BALANCE $52,313
64
NON-MAJOR GOVERNMENTAL FUNDS
All funds not defined as major funds for the Fund Financial Statements are consolidated in one column
entitled "Other Governmental Funds". These non-major funds are identified and included in this
supplemental section and includes all the City's Special Revenue Funds and several distinct Capital Project
Funds.
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.
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
expenses.
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 rules.
Redevelopment Valleo - Accounts for revenu~ and expenditures related to the Redevelopment
Agency project area at ValIeo Fashion Park.
The Capital Project Funds are used to account for financial resources to be used for the acquisition or
construction of major capital facilities (other than those financed by Proprietary Funds).
Capital Improvement Projects - Accounts for activities related to the acquisition or construction
of major capital facilities.
Library Construction Fund - This fund accounts for costs associated with demolition of an old
library building, and the design and construction of a new library on that site.
Stevens Creek Corridor Park - Accounts for the development of the master plan and the design
and construction of the Stevens Creek Corridor Park.
65
CITY OF CUPERTINO
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2006
SPECIAL REVENUE FUNDS
Storm Park Environmental Housing
Drain Dedication Management Transportation Development
Assets
Cash and investments $1,069,288 $40,658 $159,263 $3,763,287 $1,872,473
Accounts receivable 52,753 67,414 434,718
Loans receivable 933,483
Land held for housing development 6 15,000
Other assets
Total assets $1,122,041 $40,658 $159,263 $3,830,701 $3,855,674
Liabilities
Accounts payable and accruals $29,894 $11,554 $69,069 $452,559
Accrued payroll and benefits 813 2,275 8,408 125
Advance from other funds
Deferred revenue 7,502 248,530
Total Liabilities 30,707 13,829 84,979 701,214
Fund balances
Reserved for:
Encumbrances 184,141 6,485 200,669 26,703
Loans receivable 684,953
Land held for housing development 615,000
Low and moderate income housing
Prepaids and other assets
Capital projects
Unreserved, reported in:
Special Revenue Funds 907,193 $40,658 138,949 3,545,053 1,827,804
Capital Project Funds
Total fund balances 1,091,334 40,658 145,434 3,745,722 3,154,460
Total liabilities and fund balances $1,122,041 $40,658 $159,263 $3,830,701 $3,855,674
66
SPECIAL
REVENUE
FUND CAPITAL PROJECT FUNDS
Total
Capital Cali Stevens Creek Nonmajor
Redevelopment Improvement Library Mill Corridor Governmental
Vallco Projects Construction Plaza Park Funds
$104,713 $1,750,328 $2,050 $541,271 9,303,33 I
36,446 48,947 640,278
933,483
615,000
300,000 300,000
$141,159 $2,050,328 $2,050 $590,218 $11,792,092
$5,830 $568,906
1,426 13,047
258,712 258,712
256,032
265,968 1,096,697
$23,463 $2,050 $400,000 843,511
684,953
615,000
85,844 85,844
400,000 400,000
1,626,865 1,626,865
(210,653) 6,249,004
190,218 190,218
( 124,809) 2,050,328 2,050 590,21 8 10,695,395
$141,159 $2,050,328 $2,050 $590,218 $ I 1,792,092
67
CITY OF CUPERTINO
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2006
SPECIAL REVENUE FUNDS
Storm Park Environmental Housing
Drain Dedication Management Transportation Development
REVENUES
Taxes $36,966 $657,450 $316,351
Use of money and property 32,601 10,222 $3,180 $83,851 99,140
Intergovernmental 1,221,326 901,461
Charges for services 358,452 4,000
Other revenue
Total Revenues 69,567 667,672 361,632 1,309,177 1,3] 6,952
EXPENDITURES
Current
Community development 740,004
Public works 15] ,465 379,048 914,717
Capital outlay 134,119 609,324
Total Expenditures 134,119 151,465 379,048 ] ,524,041 740,004
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (64,552) 516,207 (17,416) (214,864) 576,948
OTHER F[NANCfNG SOURCES (USES)
Transfers in 1,352,814 818,296
Transfers (out) (657,450)
Total Other Financing Sources (Uses) (657,450) 1,352,814 818,296
NET CHANGE fN FUND BALANCES (64,552) (141,243) (17,416) 1.137,950 1,395,244
BEGINNING FUND BALANCES (DEFICIT) 1,155,886 18[,901 162,850 2,607,772 1,759,216
ENDfNG FUND BALANCES (DEFICIT) $1,091,334 $40,658 $145,434 $3,745,722 $3,154,460
68
SPECIAL
REVENUE
FUND CAPlT AL PROJECTS FUNDS
Total
Capital Cali Stevens Creek Nonmajor
Redevelopment Improvement Library Mill Corridor Governmental
Valko Projects Construction Plaza Park Funds
$185,676 $1,196,443
$339,433 568,427
$137,827 2,260,614
362,452
$13,088 13,088
185,676 339,433 13,088 137,827 4,40 1,024
88,163 828,167
1,445,230
261,877 52,837 275,014 1,333,171
88,163 261,877 52,837 275,014 3,606,568
97,513 77,556 (39,749) (137,187) 794,456
390,000 40,000 2,601,110
($2,524) (659,974)
390,000 40,000 (2,524 ) 1,941,136
97,513 467,556 251 (2,524) (137,187) 2,735,592
(222,322) 1,582,772 1,799 2,524 727,405 7,959,803
($124,809) $2,050,328 $2,050 $590,218 $10,695,395
69
CITY OF CUPERTINO
BUDGETED NON-MAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30,2006
SPECIAL REVENUE FUNDS
STORM DRAIN
PARK DEDICATION
Variance
Positive
Budget Actual (Negative) Budget Actual
$50,000 $36,966 ($13,034) $657,450 $657,450
25,000 32,601 7,601 10,222
REVENUES
Taxes
Use of money and property
Intergovernmental
Charges for services
Total Revenues
75,000
69,567
(5,433 )
657,450
EXPENDITURES
Current:
Community development
Public works
Capital outlay
174,139
972,262
134,119
1,106,381
Total Expenditures
1,106,381
134,119
972,262
174,139
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
483,3 J 1
966,829
(64,552)
(1,031,381)
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out)
(657,450)
Total Other Financing Sources (Uses)
(657,450)
NET CHANGE IN FUND BALANCES
($1,031,381)
(64,552)
$966,829
($174,139)
BEGINNING FUND BALANCES (DEFICIT)
1,155,886
ENDING FUND BALANCES (DEFICIT)
$1,091,334
70
667,672
151,465
151,465
516,207
(657,450)
(657,450)
( 141,243)
181,901
$40,658
Variance
Positive
(Negative)
$10,222
10,222
(151,465)
174,139
22,674
32,896
$32,896
SPECIAL REVENUE FUNDS
ENVIRONMENT AL
MANAGEMENT TRANSPORT A TION HOUSING DEVELOPMENT
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (N egati ve)
$300,000 $316,351 $16,351
$1,000 $3,180 $2,180 $50,000 $83,851 $33,851 50,000 99,140 49,140
1,553,000 1,221,326 (331,674 ) 435,000 901,461 466,461
365,000 358,452 (6,548) 4,000 4,000
366,000 361,632 (4,368) 1,603,000 1,309,177 (293,823) 785,000 1,316,952 531,952
2,125,816 740,004 1,385,812
413,742 379.048 34.694 1,160,865 914,717 246,148
3,746,787 609,3 24 3,137,463
413,742 379,048 34,694 . 4,907,652 1,524,041 3,383,611 2,125,816 740,004 1,385,812
(47,742) (17,416) 30,326 (3,304,652) (214,864) 3,089,788 (1,340,816) 576,948 1,917,764
1,255,000 1,352,814 97,8]4 818,296 818,296
1,255,000 1,352,814 97,814 818,296 818,296
($47,742) (17,416) $30,326 ($2,049,652) 1,137,950 $3,187,602 ($522,520) 1,395,244 $1,917,764
162,850 2,607,772 1,759,216
$145,434 $3,745,722 $3,154,460
(Continued)
71
CITY OF CUPERTINO
BUDGETED NON-MAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
SPECIAL REVENUE FUND
REDEVELOPMENT V ALLCO
Variance
Positive
(Negative)
Actual
Budget
REVENUES
Taxes
Use of money and property
Intergovernmental
Charges for services
$88,000
$185,676
$97.676
Total Revenues
88,000
185,676
97,676
EXPENDITURES
Current:
Community development
Public works
Capital outlay
202,098
88,163
113,935
Total Expenditures
202,098
88,163
113,935
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
(114,098)
97,513
211,611
OTHER FINANCING SOURCES (USES)
Trans fers in
Transfers (out)
Total Other Financing Sources (Uses)
NET CHANGE IN FUND BALANCES
($114,098)
97,513
$211,611
BEGINNING FUND BALANCES (DEFICIT)
(222,322)
ENDING FUND BALANCES (DEFICIT)
($124,809)
72
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 ofthe City's technology infrastructure.
Workers' Compensation - Accounts for the activities in support of the self-insured workers'
compensation program.
Equipment Revolving - Accounts for the activities related to the maintenance and replacement of
the City's vehicle fleet.
Long-Term Disability - Accounts for the activities related to the City's program for long term
disability.
74
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET ASSETS
JUNE 30, 2006
Management
Information Workers' Equipment Long-Term
Systems Compensation Revolving Disability Total
ASSETS
Cash and investments $1,159,652 $1,347,534 $1,677,924 $15,248 $4,200,358
Prepaid expense 19,527 19,527
Total current assets 1,179,179 1,347,534 1,677,924 15,248 4,219,885
Capital assets, net of accumulated depreciation 190,694 479,145 669,839
Total Assets 1,369,873 1,347,534 2,157,069 15,248 4,889,724
LIABILITIES
Current Liabilities:
Accounts payable and accruals 19,216 2,050 5,516 26,782
Accrued payroll and benefits 6,359 332 5,640 12,331
Claims payable 170,000 170,000
Total current liabilities 25,575 172,382 11,156 209,113
Non-current Liabi Iities:
Compensated absences 25,849 52,899 78,748
Claims payable 1,105,000 1,105,000
Total Liabilities 51,424 1,277,382 64,055 1,392,861
NET ASSETS
Invested in capital assets 190,694 479, I 45 669,839
Unrestricted 1,127,755 70,152 1,613,869 15,248 2,827,024
Total Net Assets $1,318,449 $70,152 $2,093,014 $15,248 $3,496,863
75
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENSES AND
CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2006
Management
Information Workers' Equipment Long-Term
Systems Compensation Revolving Disability Total
OPERA TING REVENUES
Charges for services $716,820 $339,026 $855,000 $4 1,827 $ 1,952,673
Other revenue 152 1,186 $1,338
Total Operating Revenues 716,972 339,026 856,186 41,827 1,954,011
OPERATING EXPENSES
Salaries and related expenses 373,827 18,579 329,097 721,503
Materials and supplies 159,548 212,188 41,273 413,009
Contractual services 217,052 84,326 301,378
Insurance claims 442,053 442,053
Depreciation 131,725 233,290 365,015
Total Operating Expenses 882,152 460,632 858,901 41,273 2,242,958
Operating Income (Loss) (165,180) (121,606) (2,715) 554 (288,947)
NONOPERATING REVENUES (EXPENSES)
Interest income 31,495 35,642 45,101 429 112,667
Loss on capital asset disposal (31,232) (31,232)
Total Nonoperating Revenues (Expenses) 31,495 35,642 13,869 429 8 I ,435
Income (Loss) Before Transfers ( 133,685) (85,964 ) 11,154 983 (207,512)
Transfers in 220,000 220,000
Change in Net Assets 86,315 (85,964) 11,154 983 12,488
BEGINNING NET ASSETS 1,232,134 156,116 2,081,860 14,265 3,484,375
ENDING NET ASSETS $1,318,449 $70,152 $2,093,014 $15,248 $3,496,863
76
77
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.
78
CITY OF CUPERTINO
Combining Statement of Changes in Assets and Liabilities
All Agency Funds
For the Fiscal Year Ended June 30, 2006
Balance Balance
June 30, 2005 Additions Deletions June 30, 2006
All Agency Funds
Assets
Cash and investments $237,932 $1,883 $236,049
Liabilities
Deposits $237,932 $1,883 $236,049
79
STATISTICAL SECTION
81
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 local revenue
source, the property tax:
1. Assessed and Estimated Actual Value of Taxable Property
2, Property Tax Rates, All Overlapping Governments
3. Principal Property Taxpayers
4, 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. Computation of Direct and Overlapping Debt
3, Computation of Legal Bonded Debt Margin
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 Government Employees by Function
2. Operating Indicators by Function/Program
3. Capital Assets 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 2003; schedules
presenting government-wide information include information beginning in that year.
82
CITY OF CUPERTINO
NET ASSETS BY COMPONENT
LAST FOUR FISCAL YEARS
(Accrual basis of accounting)
2003
Governmental Activities
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total governmental activities net assets
$79,705,041
9,081,791
24,472,451
$113,259,283
Business-Type Activities
Invested in capital assets, net of related debt
Unrestricted
Total business-type activites net assets
688,331
6,573,514
$7,261,845
Primary Government
Invested in capital assets, net of related debt
Retricted
Unrestricted
Total primary government net assets
80,393,372
9,081,791
31,045,965
$120,521,128
83
Fiscal Year Ended June 30
2004 2005
$85,425,753
7,416,930
18,541,954
$111,384,637
645,290
7,314,068
$7,959,358
86,071,043
7,416,930
25,856,022
$119,343,995
$86,530,017
7,291,925
21,202,795
$115,024,737
578,962
6,028,989
$6,607,951
87,108,979
7,291,925
27,231,784
$121,632,688
2006
$83,064,879
8,329,671
26,916,679
$118,311,229
497,681
6,291,439
$6,789,120
83,562,560
8,329,671
33,208,118
$125,100,349
CITY OF CUPERTINO
CHANGES IN NET ASSETS
LAST FOUR FISCAL YEARS
(Accrual Basis of Accounting)
Fiscal Year Ended June 30
2003 2004 2005 2006
Expenses
Governmental Activities:
Administration $1,635,846 $1,430,523 $1,280,339 $1,354,543
Law Enforcement 6,041,831 6,090,038 6,179,326 6,577,199
Public Information 763,254 710,754 824,317 914,024
Administrative Services 3,556,129 3,923,377 3,750,174 4,208,389
Recreation Services 2,156,972 2,234,509 2,173,936 2,359,966
Community Development 3,234,456 2,678,109 3,269,475 4,541,965
Public Works 17,534,128 15,546,461 14,585,232 16,384,026
Interest on Long Term Debt 3,796,472 2,317,837 2,289,526 2,262,913
Total Governmental Activities Expenses 38,719,088 34,931,608 34,352,325 38,603,025
Business-Type Activities:
Resource Recovery 1,897,425 1,793,083 2,927,060 2,101,198
Blackberry Farm 1,497,420 1,353,362 1,341,712 1,302,855
Cupertino Sports Center 1,130,077 1,352,509 1,452,957 1,448,048
Recreation Programs 1,554,834 1,590,302 1,689,436 1,729,194
Senior Center 570,412 493,244 438,440 588,818
Total Business-Type Activities Expense 6,650,168 6,582,500 7,849,605 7,170,113
Total Primary Government Expenses $45,369,256 41,514,108 42,201,930 45,773,138
Program Revenues
Governmental Activities:
Charges for Services:
Administration $23,201
Law Enforcement $468,110 $838,457 $694,952 722,164
Administrative Services 294,577 16,650
Recreation Services 161,969 148,337 163,462 240,074
Community Development 1,624,181 1,903,277 4,164,792 5,286,336
Public Works 348,905 325,959 286,280 201,250
Operating Grants and Contributions 2,388,199 2,496,689 593,657 3,403,762
Capital Grants and Contributions 965,211 3,612,102 2,164,907 522,950
Total Government Activities Program Revenues 6,251,152 9,341,471 8,068,050 10,399,737
Business-Type Activities:
Charges for Services:
Resource Recovery 2,397,439 2,398,819 2,395,282 2,203,127
Blackberry Farm 1,479,312 1,301,092 1,218,958 1,155,986
Cupertino Sports Center 1,109,799 1,184,860 1,385,837 1,419,672
Recreation Programs 1,872,004 1,910,599 2,167,705 2,331,409
Senior Center 484,530 456,211 473,787 704,390
84
CITY OF CUPERTINO
CHANGES IN NET ASSETS
LAST FOUR FISCAL YEARS
(Accrual Basis of Accounting)
2003
Fiscal Year Ended June 30
2004 2005
2006
Operating Grants and Contributions
Total Business-Type Activities Program Revenue
Total Primary Government Program Revenues
61 ,441
7,404,525
13,594,236
84,660
7,336,241
16,677,712
28,860
7,670,429
15,738,479
135,539
7,950,123
18,349,860
Net (Expense) Revenue
Governmental Acitivities
Business-Type Activities
Total Primary Government Net Expense
-32,467,936 -25,590,137 -26,284,275 -28,203,288
754,357 753,741 -179,176 780,010
-$31,713,579 -$24,836,396 -$26,463,451 -$27,423,278
General Revenues and Other Changes
in Net Assets
Governmental Activities:
Taxes:
Property Taxes
Incremental Property Tax
Sales Taxes
Other Taxes
Transfers
Motor Vehicle In Lieu
Intergovernmental, unrestricted
Investment Earnings
Miscellaneous
Total Government Activities
Business-Type Activities:
Interest Earnings
Transfers
Total Business-Type Acitivities
Total Primary Government
$4,100,856 $3,944,459 $4,296,940 $4,728,811
25,831 76,570 15,974 185,676
8,843,792 8,654,185 9,224,661 10,671,642
7,531,948 7,711,866 9,860,634 9,752,459
225,000 175,000 1,388,000 800,000
3,215,866 2,460,137 1,596,574 318,557
2,311,485 2,950,704
1,207,017 526,560 684,952 669,820
79,280 166,714 545,155 189,262
25,229,590 23,715,491 29,924,375 31,489,780
211,093 95,127 215,769 201,159
-225,000 -175,000 -1,388,000 -800,000
106,496 -56,228 -1,172,231 -598,841
$25,336,086 $23,659,263 $28,752,144 $30,890,939
Change in Net Assets
Government Acitivities
Business-Type Activities
Total Primary Government
-$7,238,346
860,853
-$6,377,493
-1,874,646
697,513
-$1,177,133
3,640,100
-1,351,407
$2,288,693
3,286,492
181,169
$3,467,661
85
CITY OF CUPERTINO
FUND BALANCES OF GOVERNMENTAL FUNDS
LAST FOUR FISCAL YEARS
(Modified Accrual Basis of Accounting)
Fiscal Year Ended June 30
2003
2004
2005
2006
General Fund
Reserved
Unreserved
Total General Fund
$3,782,689
13,099,033
$16,881,722
$3,897,270 $3,864,969 $2,931,046
12,632,286 18,313,846 23,866,568
$16,529,556 $22,178,815 $26,797,614
All Other Governrnental Funds
Reserved
Unreserved, reported in:
Special Revenue Funds
Capital Project Funds
Total All Other Governmental Funds
$20,891,656
$9,784,645 $2,701,067 $4,925,900
3,976,517
6,576,208
$31,444,381
3,736,446 3,618,814 6,249,004
2,236,730 1,663,033 -1,208,341
$15,757,821 $7,982,914 $9,966,563
The City implemented GASB Statement 34 in fiscal year 2003 and has elected to show the
above information from that date.
86
CITY OF CUPERTINO
CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
LAST FOUR FISCAL YEARS
(Modified Accrual Basis of Accounting)
Fiscal Year Ended June 30
2003 2004 2005 2006
Revenues
Taxes
Use of Money and Property
Intergovernmental
Licenses and Permits
Charges for Services
Fines and Forfeitures
Other Revenue
$20,200,250
1,910,503
6,318,523
1,410,572
855,844
550,377
59,219
$21,004,405 $23,614,623 $25,616,553
940,963 1,119,399 1,607,837
7,236,955 5,567,266 5,896,167
1,540,760 2,896,000 3,614,953
930,050 1,568,935 2,143,729
723,748 559,791 629,586
1,009,260 1,792,795 245,176
Total Revenues
31,305,288
33,386,141 37,118,809 39,754,001
Expenditures
Current:
Administration
Law Enforcement
Public Information
Administrative Services
Recreation Services
Community Development
Public Works
Capital Outlay
Debt Service
Principal Repayment
Interest and Fiscal Charges
Total Expenditures
1,474,924 1,222,581 1,162,096 1,236,390
6,015,036 5,950,849 6,144,695 6,499,911
703,431 686,798 758,314 853,484
3,475,991 3,758,806 3,671,303 4,103,497
2,104,167 2,141,431 2,121,366 2,302,995
3,177,406 2,563,242 3,156,908 4,467,655
10,440,335 9,322,086 9,637,314 10,386,055
6,812,856 20,246,237 10,025,935 2,771,502
6,925,948 1,220,000 1,245,000 1,270,000
2,939,757 2,317,837 2,289,526 2,262,913
44,069,851 49,429,867 40,212,457 36,154,402
Excess (deficiency) of Revenues Over
(under) expenditures
Other Financing Sources (Uses)
Bond Proceeds
Proceeds from Sale of Land
Payment to Refunded Debt Escrow Agent
Transfers In
Transfers Out
Total Other Financing Sources
Net Change in Fund Balances
Debt service as a percentage of
noncapital expenditures
36.02%
13.79%
13.26%
11.84%
The City implemented GASB Statement 34 in fiscal year 2003. This calculation is included only for
fiscal years from that date.
87
CITY OF CUPERTINO
ASSESSED AND ESTIMATED ACTUAL
VALUE OF TAXABLE PROPERTY
LAST TEN FISCAL YEARS
Total Estimated Direct
Fiscal Total Assessed Full Market Tax
Year Secured Unsecured Exemptions Valuation Valuation Rate
1997 $4,730,865,467 $440,005,909 $66,172,400 $5,170,871,376 $5,298,764,322 0.05%
1998 $5,078,070,121 $452,549,925 $57,445,281 $5,538,936,459 $5,538,936,459 0.06%
1999 $5,591,299,195 $443,973,509 $67,859,400 $6,043,669,471 $6,043,669,471 0.05%
2000 $6,045,504,382 $500,020,465 $73,148,676 $6,553,278,115 $6,553,278,115 0.05%
2001 $6,986,833,015 $416,844,493 $67,242,848 $7,407,208,836 $7,407,208,836 0.04%
2002 $7,836,349,904 $634,624,124 $82,089,594 $8,562,981,335 $8,562,981,335 0.04%
2003 $8,119,969,820 $565,212,987 $75,795,294 $8,685,515,766 $8,685,515,766 0.05%
2004 $8,689,558,802 $530,097,614 $80,704,482 $9,219,879,996 $9,219,879,996 0.04%
2005 $9,159,184,070 $367,378,773 $80,678,889 $9,526,841,379 $9,526,841,379 0.05%
2006 $9,942,314,157 $350,391,447 $88,612,732 $10,292,965,413 $10,292,965,413 0.05%
Property Tax Comparison
$2,000,000,000
- -
-
- - - -
- -
1 , n , , 1 , , , ,
$12,000,000,000
$10,000,000,000
$8,000,000,000
$6,000,000,000
$4,000,000,000
$0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: HdL Companies
88
CITY OF CUPERTINO
PROPERTY TAX RATES
ALL OVERLAPPING GOVERNMENTS
LAST TEN FISCAL YEARS
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
County 1.000 1.000 1.000 1.000 1. 000 1.000 1.000 1. 000 1.000 1.000
County School Service 0.031 0.031
County Bond 0.239 0.239
County Retirement .0388 .0388 .0388 .0388 .0388 .0388 .0388 .0388 0.031 0.031
Library Retirement .0024 .0024 .0043 .0043 .0043 .0043 .0043 .0043 .0043 .0043
Central Fire District 0.151 0.151 0.151 0.151 0.151 0.151 0.151 0.151 0.151 0.151
Cupertino Elementary .0303 .0292 .0247 .0247 .0247 .0247 .0247 .0247 .0247 .0247
Foothill College Maintenance 0.064 0.064 0.064 0.064 0.064 0.064 0.064 0.064 0.064 0.064
Fremont High Maintenance 0.167 0.167 0.167 0.167 0.167 0.167 0.167 0.167 0.167 0.167
Mid Peninsula Open Space .0156 .0156 .0156 .0156 .0156 .0156 .0156 .0156 .0156 .0156
Bay Area Air Quality Mgmt .0018 .0018 .0018 .0018 .0018 .0018 .0018 .0018 .0018 .0018
SCV Water D-N Central .0097 .0097 .0097 .0097 .0097 .0097 .0097 .0097 .0097 .0097
SCVWD State Water Project .0076 .0076 .0053 .0053 .0053 .0053 .0053 .0053 .0053 .0053
SCV Water District D-Zone W-4 .0023 0.002 0.002 0.002 0.002 0.002 0.002 0.002 .0014 .0014
SCV Water D-District .0018 .0018 .0018 .0018 .0018 .0018 .0018 .0018 .0018 .0018
Cupertino .0002 .0002 .0002 .0002 .0002 .0002 .0002 .0002 .0002 .0002
TOTALS 1ill 1.512 1.508 1.508 1.508 1.508 1.508 1.508 1.769 1lli
Source: The HdL Companies
89
CITY OF CUPERTINO
PRINCIPAL PROPERTY TAX PAYERS
CURRENT YEAR AND NINE YEARS AGO
2006 Percentage of 1997 Percentage of
Assessed Total Assessed Assessed Total Assessed
Taxpayer Valuation Valuation Valuation Valuation
Hewlett Packard $346,964,914 3.34% $282,040,283 5.33%
Apple Computer 331,760,541 3.19% 0.00%
Cupertino Gateway Partners 0.00% 182,806,666 3.46%
Symantec 121,602,748 1.17% 0.00%
Tandem Computers 121,106,280 1.17% 270,907,046 5.33%
Westland Projects 0.00% 120,558,984 2.28%
Roman Catholic Bishop of San Jose 0.00% 91,771,085 1.73%
Cupertino City Center Apartments 103,243,591 0.99% 86,020,706 1.63%
Hines SV Application Fund 82,300,425 0.79% 0.00%
Vall co International Shopping 78,883,321 0.76% 0.00%
Irvine Apartment Commons 66,131,887 0.64% 0.00%
RWC LLC 65,024,697 0.63% 0.00%
Villa Serra Apartments 54,999,155 0.53% 0.00%
Measurex 0.00% 33,833,594 0.64%
Sumitomo Bank 0.00% 29,537,645 0.56%
Torre Avenue Projects 0.00% 27,345,046 0.02%
Travelers Insurance 0.00% 25 .494.413 0.46%
$1.372,017,559 13.21 % $1.150.315.468 21.44%
Source: The HdL Companies
90
CITY OF CUPERTINO
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
Percent of
Percent Delinquent Total Total Tax
Fiscal Total Current Tax of Levy Tax Tax Collections
Year Tax Levy Collections Collected Collections Collections to Tax Levy
1997 $2,636,065 $2,636,065 100.00% $0 $2,636,065 100.00%
1998 $2,593,855 $2,593,855 100.00% $0 $2,593,855 100.00%
1999 $2,804,662 $2,804,662 100.00% $0 $2,804,662 100.00%
2000 $3,075,546 $3,075,546 100.00% $0 $3,075,546 100.00%
2001 $3,209,623 $3,209,623 100.00% $0 $3,209,623 100.00%
2002 $4,024,705 $4,024,705 100.00% $0 $4,024,705 100.00%
2003 $4,126,687 $4,126,687 100.00% $0 $4,126,687 100.00%
2004 $4,021,029 $4,021,029 100.00% $0 $4,021,029 100.00%
2005 $4,312,914 $4,312,914 100.00% $0 $4,312,914 100.00%
2006 $4,914,487 $4,914,487 100.00% $0 4,914,487 100.00%
Source: County of Santa Clara, Department of Finance
91
CITY OF CUPERTINO
RATIO OF OUTSTANDING DEBT BY TYPE
LAST TEN FISCAL YEARS
Governrnental Activities and Primary Governrnent
Percentage of Estimated
Fiscal Certificates Actual Market Value
Year of Participation 1915 Act Bonds Total of Taxable Property Per Capita
1997 $53,160,000 $1,055,000 $54,215,000 1.02% 0.08%
1998 51,205,000 900,000 52,105,000 0.94% 0.09%
1999 49,160,000 730,000 49,890,000 0.83% 0.10%
2000 47,005,000 47,005,000 0.72% 0.11%
2001 44,745,000 44,745,000 0.60% 0.11 %
2002 42,370,000 42,370,000 0.49% 0.12%
2003 54,770,000 54,770,000 0.63% 0.09%
2004 53,550,000 53,550,000 0.58% 0.10%
2005 52,305,000 52,305,000 0.55% 0.1 0%
2006 51,035,000 51,035,000 0.50% 0.11 %
92
CITY OF CUPERTINO
COMPUT A TION OF DIRECT AND OVERLAPPING BONDED DEBT
JUNE 30, 2006
2005-06 Assessed Valuation:
Redevelopment Incremental Valuation:
Adjusted Assessed Valuation:
$10,292,965,413
7.438,014
$10,285,527,399
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Santa Clara County General Fund Obligations $920,595,000
Santa Clara County Board of Education Certificates of
Participation 17,170,000
Foothill-De Anza Community College District Certificates
of Participation 20,440,000
West Valley-Mission Community College District
Certificates of Participation
Santa Clara Unified School District Certificates
of Participation
Cupertino Union School District Certificates of
Participation
City of Cupertino Certificates of Participation
Midpeninsula Regional Open Space Park District
Certificates of Participation
TOTAL DIRECT AND OVERLAPPING GENERAL
FUND DEBT
OVERLAPPING TAX AND ASSESSMENT DEBT:
Foothill-DeAnza Community College District
West Valley Community College District
Santa Clara Unified School District
Fremont Union High School District
Cupertino Union School District
Santa Clara Valley Water District Benefit Assessment
District
City of Cupertino 1915 Act Bonds
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT
COMBINED TOTAL DEBT
Total Debt
6/30/06
$240,259,999
100,000,000
196,170,000
138,590,000
124,045,023
183,850,000
150,000
35,910,000
7,575,000
4,520,000
52,305,000
111,690,193
City's Share of
% Applicable (1 ) Debt 6/30/06
13.983% $ 33,595,556
0.686 686,000
2.183 4,282,391
29.660 41,105,794
49.270 61,116,983
4.757 8,745,745
100. 150,000
$149,682,469
4.757% $ 43,792,704
4.757 816,777
13.983 2,858,125
0.686 246,343
2.183 165,362
49.270 2,227,004
100. 52,305,000
7.735 8,639,236
$111,050,551
$260,733,020 (2)
(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.
Ratios to 2005-06 Assessed Valuation:
Total Overlapping Tax and Assessment Debt
1.45%
Ratios to Adiusted Assessed Valuation:
Combined Direct Debt ($52,305,000)
Combined Total Debt
0.51%
2.53%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/06: $0
Source: Municipal Resource Consultants
93
CITY OF CUPERTINO
COMPUTATION OF LEGAL BONDED DEBT MARGIN
JUNE 30, 2006
Assessed Valuation:
$10,030,926,889
Secured property assessed value, net of exempt real property
Adjusted valuation - 25% of assessed valuation
Debt limit - 15% of adjusted valuation
Amount of Debt Subject to Limit:
Total Bonded Debt
Less: Certificates of Participation not subject to
debt limit
Amount of debt subject to limit
Legal Bonded Debt Margin
Total Net
Fiscal Debt Debt Applicable
Year Limit to Limit
1997 198,703,662 0
1998 207,710,118 0
1999 226,637,606 0
2000 245,747,930 0
2001 277,770,332 0
2002 321,111,800 0
2003 325,706,841 0
2004 345,745,500 0
2005 357,745,500 0
2006 376,159,758 0
$2,507,731,722
$376,159,758
$51,035,000
51,035,000
o
$376,159,758
Legal
Debt
Margin
Total net debt
applicable to the
limit as a % of
debt limit
198,703,662
207,710,118
226,637,606
245,747,930
277,770,332
321,111,800
325,706,841
345,745,500
357,256,552
376,159,752
o
o
o
o
o
o
o
o
o
o
The Governrnent Code of the State of California provides for a legal debt limit of 15% of gross assessed
valuation. However, this provision was enacted when assessed valuation was based upon 25% of
market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of
market value (as of the most recent change in ownership for that parcel). The computations shown
above reflect a conversion of assessed valuation data for each fiscal year from the current full
valuation perspective to the 25% level that was in effect at the time that the legal debt margin was
enacted by the State of California for local governrnents located within the state.
Source: City Finance Department
94
CITY OF CUPERTINO
RATIO OF GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
Ratio of General
Fiscal Assessed General Bonded Debt Bonded Debt to
Year Population Value Bonded Debt Per Capita Assessed Value
1997 44,775 $5,298,764,322
1998 46,682 $5,538,936,459
1999 50,000 $6,043,669,471
2000 52,000 $6,553,278,115
2001 50,546 $7,407,208,836
2002 50,546 $8,562,981,335
2003 52,000 $8,685,515,766
2004 52,628 $9,219,879,996
2005 52,600 $9,526,841,379
2006 52,600 $10,292,965,413
Source: (1) State of California, Department of Finance, Demographics Research Unit
(2) County of Santa Clara and City Administrative Services
95
CITY OF CUPERTINO
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN FISCAL YEARS
School City
Fiscal County Enrollment Unemployment Population
Year Population Population Grades 9-12 Rate % of County
1997 44,775 1,671,400 8,380 1.8% 2.68%
1998 46,682 1,689,908 8,380 1.7% 2.76%
1999 50,000 1,647,419 8,762 1.9% 3.04%
2000 52,000 1,682,585 8,822 1.3% 3.09%
2001 50,546 1,674,634 8,822 2.4% 3.02%
2002 50,546 1,668,309 9,063 4.6% 3.03%
2003 52,000 1,675,915 9,108 5.1% 3.10%
2004 52,600 1,656,128 9,147 3.7% 3.18%
2005 52,600 1,759,585 9,138 3.2% 2.99%
2006 53,840 1,773,258 9,875 2.9% 3.04%
Source: (1) State of California, Department of Finance, Demographics Research Unit
(2) Cupertino Chamber of Commerce
(3) Fremont Union High School District
(4) Department of Employment Statistics
96
CITY OF CUPERTINO
PRINCIPAL EMPLOYERS
NINE YEARS AGO (1)
1999-00
Percentage
Number of of Total City
Employer Employees Employment
Hewlett-Packard 3,500 13.36%
Apple Computer 3,000 11.45%
Tandem Computers 3,000 11.45%
Foothill/DeAnza College 3,000 11.45%
Cupertino Union School District 1,400 5.34%
Symantec Corporation 1,300 4.96%
Fremont Union High School District 722 2.76%
Sears 294 1.12%
JC Penney 280 1.07%
Pacific Gas & Electric 278 1.06%
(1) The City was not able to obtain data for current year and was only able to obtain historical data
back to fiscal year 1999-00.
97
CITY OF CUPERTINO
FULL-TIME EQUIVALENT
CITY GOVERNMENT EMPLOYEES BY FUNCTION
LAST TEN FISCAL YEARS
80.00
70.00
10.00 --
mil CounciUCommissions
o Administration
o Public Information
o Administrative Services
o Parks & Recreation
o Community Development
o Public Works
_ I!I Redevelopment Agency
60.00-------
50.00
40.00.
30.00.
20.00
0.00 .
Function 1997 1998 !222 2000 2001 2002 2003 2004 2005 2006
Co unci lICommissions 0.49 0.49 0.49 0.50 0.50 0.50 0.80 0.80 0.80 1.40
Administration 3.35 4.10 4.85 4.85 4.85 4.60 4.70 4.65 4.70 4.30
Public Information 4.15 4.15 4.15 4.15 4.15 4.15 4.40 4.40 4.40 5.55
Administrative Services 15.90 16.90 16.90 18.90 17.90 19.90 20.30 20.30 20.35 21.63
Parks & Recreation 22.15 23.15 24.65 24.65 28.65 35.15 32.63 33.13 32.13 31.96
Community Development 16.61 17.86 17.96 18.95 18.95 19.95 20.75 20.75 19.34 20.47
Public Works 59.85 66.85 63.00 66.00 69.00 70.00 70.22 70.22 71.22 71.13
Redevelopment Agency 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.32 0.92
Source: City of Cupertino Budget
98
CITY OF CUPERTINO
OPERATING INDICATORS BY FUNCTION/PROGRAM
LAST TWO FISCAL YEARS (1)
Function/Pr02ram
2005
2006
Public Information:
Access Cupertino
3 Days
3 Days
Public Safety Sheriff Response:
Priority One
Priority Two
Priority Three
5.37 Minutes
8.61 Minutes
18.92 Minutes
4.94 Minutes
8.09 Minutes
16.74 Minutes
Public Works:
Street Sweeping
Street Maintainence
696 Curb Miles
24 Hours of Call
696 Curb Miles
24 Hours of Call
Culture & Recreation:
Recreation Classes
Teen Center Memberships
Teen Dances
Sports Center Memberships
Senior Center Memberships
600
441
10
916
2,000
600
550
10
1,021
3,100
Community Development:
Planning Applications
Building Permit Applications
Building Inspections
165
2,252
19,243
216
2,190
21,022
Administrative Services:
Investment Return
Accounts Payable Processing
Duplication Requests
Recruitments
Greater than LAIF
5 Days
1 Day
60 Days
Less than LAIF
5 Days
1 Day
45 Days
(1) Statistical information was not tracked prior to 2005.
99
CITY OF CUPERTINO
CAPITAL ASSET STATISTICS BY
FUNCTION/PROGRAM
LAST TEN FISCAL YEARS
Fiscal Year
Function/Pro2ram 1997 1998 1999 2000 2001 2002 2003
Public Works (1):
Miles of Streets 450 450 450 450 450
Streetlights 3,250 3,250 3,250 3,250 3,250
Traffic Signals 39 39 39 39 39
Culture & Recreation:
City Parks 14 14 15 15 15 15 15
City Park Acreage (1) 150.8 150.8 150.8 150.8 150.8
City Trails 1 1 1 1 1 1 1
Golf Courses 1 1 1 1 1 1 1
Boathouse 1 1 1 1 1 1 1
Community Center 1 1 1 1 1 1 1
Community Hall 0 0 0 0 0 0 0
Senior Center 1 1 1 1 1 1 1
Sports Center 1 1 1 1 1 1 1
Swimming Pools 1 1 1 1 1 1 1
Tennis Courts 17 17 17 17 17 17 17
Sports Fields 1 I 1 1 1 1 1
City Library 1 1 1 1 1 1 1
(1) Historical data prior to 1999 is not available.
100
2004
450
3,250
39
15
150.8
1
1
1
1
1
1
1
1
17
1
1
2005
450
3,250
39
15
150.8
1
1
1
1
1
1
1
I
17
I
1
2006
450
3,250
39
15
150.8
1
1
1
1
1
1
1
1
17
1
1
CITY OF CUPERTINO
CAPITAL ASSET STATISTICS BY
FUNCTION/PROGRAM
LAST TEN FISCAL YEARS
101
COMMUNITY
PROFILE
103
.7Iistory
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 party 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.
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 13th
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. Ofthe 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.
105
2006C~E~Pr~
Cupertino, with a population just over 52,000 and city limits stretching across 11 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% buildout, 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.
;:
]
'. _Ji _i'!-i
I
~
---~
As home to many well-known high-tech companies, Cupertino offers a dynamic and exciting business climate. Apple
Computer is headquartered in the city along with Symantec and Portal Software. In addition, key divisions of Hewlett
Packard, Sun Microsystems and Borland are also located in Cupertino.
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 pennitting.
Vallco Fashion Park, includes Macy's, Penney's and Sears as anchors and features popular chain stores such as Victoria's
Secret, Express and Natural Wonders. Shoppers can also enjoy iceskating at the mall's ice skating rink or a nice meal at
Todai Restaurant. The mall is undergoing major changes in the next two years with the addition of a 16-screen movie
theater, which is expected to open in the Fall of 2006, and many new shops and restaurants. Vallco Mall is becoming a
vibrant, exciting place for residents and visitors to enjoy.
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.
106
c~ SLca:~~
Facts and Figures
Population in City Limits
Median Household Income
Median Age
Sales Tax Rate
Registered Voters
Democrats
Republicans
Independent
Other
Did Not State
52,600
$100,411
38
8.25%
26,128
9,685
8,188
357
533
7,365
Alexander's Steakhouse
Apple Computer
Argonaut Window & Door
Benihana's
BJ's Bar & Grill
Chevron Service Stations
Cupertino Clean Scene
Cupertino Smog Pros
Cupertino Supply
Cypress HotellHelio's Restaurant
DeAnza College Campus Center
Dental Arts of California
Dynasty Restaurant
Elephant Bar
Top 40 Sales Tax Producers
Second Quarter 2006
(In Alphabetical Order)
Hewlett-Packard
IBM Rationale Software
Jade Galore
JC Penney
Joy Luck Place
Longs Drug Stores
Macy's
Marina Foods
Mervyn's
Michael's Arts & Crafts
Outback Steakhouse
Ranch 99 Market
Rotten Robbie Service Stations
Sears
Shane Diamond Jewelers
Shell Service Stations
Sodexho Marriott Management
Suburban House
Symantec Corporation
Target
TGI Friday's
TJ Maxx
Union 76 Service Station
Valero Service Station
Verizon Wireless
Whole Foods
Demographic Information
White
Asian
Hispanic
Black
American Indian
Native Hawaiian
50.1%
44.4%
4.0%
0.7%
0.2%
0.1%
107
2006 C(A;y py~
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 158 authorized full-time benefited employees. City departments include administrative services (finance,
human resources, IT, city clerk, emergency preparedness, outreach programs, code enforcement); community
development (planning, building, and economic development); parks and recreation; public works (engineering,
maintenance, transportation, and environmental); and public information. 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, senior, 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 governrnent access cable TV channel; The City Channel; and the
city's website.
Housing
Rentals for one and two bedroom apartments and duplexes
range from $1,100 to $2,100 per month. Rent for a two
bedroom house ranges from $2,200 to $3,250 per month.
The average price of existing single family homes is
$950,000 as of June 2004. The average condo-
minimum/townhouse sale price is $597,742.
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
Natural gas and electric - Pacific Gas and Electric
Company, (800) 743-5000.
Telephone - SBC. For residential service call (800) 894-
2355; for business service call (800) 750-2355.
Cable - Comcast, (800) 945-2288.
Garbage - Los Altos Garbage, (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: 5%; State Local Public Safety Fund:
0.50%; State Local Revenue Fund: 0.25%; County
Transportation Fund: 0.25%. Total: 8.25%.
Assessed Valuation: (Secured and Unsecured)
Cupertino: $9,526,841,379 (6/30/05)
County: $222,166,528,031 (6/30/05)
Transportation
Rail- Southern Pacific, San Jose to San Francisco, with
spur line in Cupertino.
Air - Seven miles north of San Jose International Airport;
32 miles south of San Francisco airport.
Bus - Santa Clara County Transit Systems, Greyhound bus
lines
Highways - Interstate Route 280, State Route 85.
108
c011UnUnity and- Recreat-'W11/SerJ/~
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.
Civic Center and Library
The complex has a 6,000 square foot Community Hall,
plaza with fountain, trees and seating areas. City
Council meetings are now held in the Community Hall
as well as Planning Commission and Parks and
Recreation Commission.
The new 54,000 square foot library, despite reduced
hours due to budget cuts, continues to be one of the
busiest in the Santa Clara County Library system. For
more information call (408) 446-1677.
The Quinlan Community Center
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. For
more information, call (408) 777-3120.
Cupertino Sports Center
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.
Blackberry Farm
This 33-acre recreational facility offers two large swimming
pools, softball field, basketball courts, volleyball courts,
horseshoe pits, and a nine-hole golf course. The picnic
grounds are located at 21975 San Fernando A venue and the
golf course is located at 22100 Stevens Creek Boulevard.
Telephone: (408) 777-3140.
Blackberry Farm Retreat Center is a 2,000 square foot house
that overlooks the picnic grounds and golf course. The
center has one large conference room that will accommodate
up to 25 people. The retreat center is located at 21979 San
Fernando Avenue. Telephone: (408) 777-3140.
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: 777-3120.
109
Ec:lucaruJ11/
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 15,700 students in a 26 square
mile area that includes Cupertino and portions of five other cities. The
district has 20 elementary schools and four 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 9,000 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. Student achievement is at an all time high based on the statewide Academic Performance
Index (API). All five high schools in the district exceeded their state established achievement targets for the 2000 API.
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.
110
~Lo-do-~Se€l
Euphrat Museum of Art
The highly regarded Euphmt Museum of Art adjacent to the Flint Center on the DeAnza College campus 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 11 a.m. - 4 p.m. Tuesday, Wednesday, Thursday; 6-8 p.m. Tuesday and 11 a.m. - 2 p.m. Saturday. Telephone:
408-864-8836.
Minolta DeAnza Planetarium
Stargazers have a Cupertino facility catering to their interests, the Minolta Planetarium on the DeAnza College campus. It
hosts a variety of planetarium shows and events, including educational programs for school groups and family astronomy
evenings on Saturdays at 7:00 p.m. For more information and current schedule of events, visit the website at
www.planetarium.deanza.fhda 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. Monday 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 mpid 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: 408-973-8049.
The California History Center is located on the DeAnza College campus. The
center has published 39 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-
864-8712. The center is open September through June 8:30 a.m. to noon and 1 :00 p.m. to 4:30 p.m. Monday through
Thursday.
Farmers' Market
Residents and visitors can visit the farmers' market every Friday from 9:00 a.m. to
1 :00 p.m. The market is located at the ValIco Fashion Park behind Macy's.
California History Center
III