Financial Report 06-30-2007CITY OF CUPERTINO, CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR FISCAL YEAR ENDED
JUNE 30, 2007
PREPARED BY:
CITY OF CUPERTINO
ADMINISTRATIVE SERVICES DEPARTMENT
DAVID WOO
FINANCE DIRECTOR
INTROD UCTOR Y SECTION
CITY OF CUPERTINO, CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30, 2007
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 .
FINANCIAL SECTION
Independent Auditor's Report on Basic Financial Statements
Management's Discussion and Analysis .
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets
Statement of Activities
Fund Financial Statements:
Major Governmental Funds:
Balance Sheet .
Reconciliation of the Governmental Funds -Balance Sheet with the
Statement of Net Assets
Statement of Revenues, Expenditures, and Changes in Fund Balance
Reconciliation of the Net Change in Fund Balances Total Governmental
Funds with the Statement of Activities
Statement of Revenues, Expenditures, and Changes in Fund Balances -
Budget and Actual:
General Fund .
Major Proprietary Funds:
Statement of Net Assets
Statement of Revenue, Expenses, and Changes in Fund Net Assets .
Statement of Cash Flows .
i
iv
xiv
xv
xvi
. xvii
3
4
24
25
27
28
29
30
31
33
34
35
i
CITY OF CUPERTINO, CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30, 2007
Table of Contents
Page
FINANCIAL SECTION (Continued)
Fiduciary Funds:
Statement of Fiduciary Net Assets 37
Notes to Basic Financial Statements 39
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 . 67
Non-major Governmental Funds:
Combining Balance Sheets 70
Combining Statements of Revenues, Expenditures, and Changes in Fund Balance . 72
Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance -
Budget and Actual 74
Internal Service Funds:
Combining Statement of Net Assets 79
Combining Statements of Revenues, Expenses and Changes in Net Assets . 80
Combining Statements of Cash Flows 81
Fiduciary Funds:
Combining Statement of Changes in Assets and Liabilities -All Agency Funds 83
ii
CITY OF CUPERTINO, CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30, 2007
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
Revenue Capacity:
Assessed and Estimated Actual Value of Taxable Property ,
Property Tax Rates, All Overlapping Governments
Principal Property Taxpayers .
Property Tax Levies and Collections .
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
Demographic and Economic Information:
Demographic and Economic Statistics
Principal Employers
Operating Information:
Full-Time Equivalent City Government Employees by Function
Operating Indicators by Function/Program
Capital Asset Statistics by Function/Program.
COMMUNITY PROFILE
88
90
94
96
98
99
100
101
102
103
104
105
106
107
108
109
110
iii
CITY OF CUPERTINO
CUPERTINO
December 20, 2007
CITY HALL
10300 TORRE AVENUE • CUPERTINO, CA 95014-3255
(408) 777-CITY • WWW.CUPERTINO.ORG
To the Citizens of Cupertino, Honorable Mayor,
Members of the City Council, and City Manager
It is our pleasure to submit the Comprehensive Annual Financial Report (CAFR) for the City of
Cupertino (the City) for the fiscal year ended June 30, 2007. The report is prepared in accordance
with generally accepted accounting principles (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. A Management Discussion and Analysis (MD&A) presents a comparative analysis of
current and prior year results, changes in financial position, a comparison of actual versus
budget, financial highlights, trends, and disclosure of any known significant events or decisions
that affect the financial condition of the City. This transmittal letter is designed to complement
the MD&A, and should therefore be read in conjunction with it. The MD&A is required
supplementary information and is found in the Financial Section of the CAFR.
The accuracy of the data presented and the completeness and fairness of the presentations,
including all disclosures, are the responsibility of the management of the City. To provide a
reasonable basis for making these representations, management has established a comprehensive
internal control framework that is designed to protect the City's assets and provide sufficient,
reliable information for the proper preparation of these financial statements. We believe the data
is accurate in all material respects and is presented in a manner that fairly sets forth the City's
financial position. Furthermore, we believe that all disclosures necessary to enable the reader to
gain an understanding of the City's financial activity have been included.
REPORTING ENTITY
This CAFR includes all component units and funds of the City. It reports all activities for which
the City is considered to be financially accountable. The general governmental funds support a
full range of services, including law enforcement, community development, recreation, public
works, public information, 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 aCouncil-City Manager form of government. There are five council
members, including the Mayor, who serve staggered four-year terms. The City Council appoints
iv
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.
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.
Petaluma.
Vsllajo
San
Rafael
Mill •
Vai1~Y 'Richmond
• Oakland
San 'Alameda
Francisco .San Leandro
• Hayward
San
Matso . • Fremont
!'driJir
k'wu
Mountain. Milpitas
View •Sunnyvsle
CUPERTINO ~~~"` •j°ie
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, Symantec, Chordiant
software and Packeteer. Key divisions of Hewlett-
'ackard are also located in Cupertino.
The City has eight shopping centers including its own regional mall, Cupertino Square, which
completed a major expansion and renovation phase with the 2007 opening of a new 16-screen
AMC movie theatre and upscale bowling alley, Strike Cupertino. New retail tenants and a food
court are in future plans. Building permits for California Pizza Kitchen outside of the mall have
been approved. Amixed-use retail/condominium development in the Rose Bowl area south of
the mall is in planning review.
Whole Foods Market opened a 63,000 square foot superstore, its largest west of Texas. The
Marketplace Center leased the old Longs Drugstore to Daiso, Japan's No. 1 ranked household
supplier and Japanese supermarket Marukai and submitted plans for their third expansion phase.
Construction of 60,000 square feet of new office space has started at the former Any Mountain
store site. Available office space is at a premium, with Cupertino ranked third lowest in office
vacancy rates in the Silicon Valley according to a Grubb & Ellis third quarter 2007 market report.
A North Vallco land use study that included Apple's future 58-acre campus and Hewlett-
Packard's current 30-acre complex, was completed.
Overall sales taxes continued their three-year rise although at a slower pace, increasing 5%
during 2006-07 as opposed to the 16% rise in 2005-06. The leading tax sector, business-to-
v
business (consisting mostly of office equipment), reached another three-year high in tax receipts
and climbed to 62% of the tax base up from 57% last year. For the third straight year, the sector
rode Apple's success with the iPod and began to benefit from strong iMac sales. A major new
office equipment provider, Insight, opened a sales office here in 2007 and will expect to bring in
significant revenues in 2007-08.
General retail, ranked second, was flat and dropped to 19% of the market compared to 22% last
year, as the new developments at Cupertino Square have not yet revived the retail market. The
third ranked segment, food products at 11 %, continued their three-year high, driven by new
restaurants.
The following chart shows actual sales tax receipts over the past ten years.
Sales Tax Trend
$14,000
$1.2,000
o $10,000
0
X $8,000
d
~ $6,000
w
$4,000
$2,000
$0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
YEAR
~ ACTU L
-- ----
Cupertino, so far, has been relatively spared from the subprime meltdown and leap in
foreclosures plaguing other regions of California. The City's renowned school district has kept
residential properties in high demand and the local economy and low office vacancy rates have
kept commercial values up. Cupertino is one of ten California cities with the highest median
home prices and greatest home price appreciation according to an October 2007 California
Association of Realtors report. Because of recent state legislation changing the historical low
allocation of property taxes to the City, the City now receives five cents of each property tax
dollar paid by landowners in the city as opposed to four cents. In 2006-07 alone, this meant $1.35
million more to the City in ongoing revenue.
Housing in general and affordable housing in particular is a continuing challenge for the City. In
November 2006, a voter referendum reversed the City's approval of two major multi-family
dwelling developments at Cupertino Square and at Tantau Avenue and Stevens Creek Boulevard.
vi
Below market rate housing development fees were raised but at lower levels than recommended
by an independent study, due to business opposition.
Diversification of the City's revenue base and along-term balance of revenues and expenditures
were major elements of the City's Fiscal Strategic Plan. The City needs to find other revenues to
mitigate the fluctuating nature of sales taxes, hotel taxes, user fees, and state borrowings of local
taxes in times of budget distress. It needs to reduce the concentration of sales taxes in its largest,
but volatile sector, business-to-business office equipment. Successes so far are the property tax
legislation and the new sales tax provider discussed above, but attempts to pass a new
entertainment tax, increase the transient occupancy tax, add a new business license tax category,
and modernize the utility user tax ordinance met stiff community opposition and did not make it
to the ballot. Fees related to 9-1-1 calls, refuse vehicle street impacts, and the re-zoning of retail
to non-sales tax generating uses were considered but not pursued by the Council. Due to the
State's Educational Revenue and Augmentation Fund (ERAF) shift, there are still inequities
remaining in the City's property tax share, something that will require new legislation to correct.
I-Iowever, the hiring of a new Economic Development manager, improved City and business
community relationships, and a focus on re-development of current under utilized office and
retail spaces provide hope in generating new revenues.
The City's unfunded retiree medical liability will be required as a disclosure in the City's
financial statements starting in fiscal 2008-09 or earlier if the City decides to use a trust to fund
the liability. The City must expense the annual installment to payoff this long-term liability. An
updated valuation of these costs was obtained in 2007-08 disclosing a $22 million unfunded
liability with an annual expense starting at $2.5 million if the City continues to fund the benefits
on apay-as-you-go basis. The City has been setting aside monies annually for this purpose since
2004 and will have accumulated $6 million of such assets in a separate City fund by the end of
2007-08. The City will consider placing assets in a trust and/or benefit alternatives in order to
address this issue.
MAJOR INITIATIVES
1. Ensure band Use is Compatible with Community Character
• Continue implementation of the 2005 General Plan update.
• Updated the R1 Ordinance relating to hillside development.
• Completed phase one of the North Vallco Master Plan study.
• Modified the tree protection ordinance.
• Develop Green Building standards.
• Prepare a historic preservation policy.
2. Protect and Promote our Public Safety
• Added one midnight beat unit and one school enforcement deputy during the day to
improve service call responses, student outreach, and to free up resources for other parts
of the City.
• Crimes against persons decreased 5% and comparable property crimes decreased 6%.
1lowever, traffic collisions were up 14%.
vii
• Implement the "walkable city" concept between Whole Foods, Peet's Coffee and Panera
Bread. Address traffic safety with the Safe Routes to School grant, street smarts
awareness program, the Tri-school and Regnart traffic improvements, and red light runner
program.
• Continue emphasis on emergency response and preparedness by expanding community
outreach, providing response training, updating notification databases, planning for
pandemic flu and mass immunizations, and managing volunteers.
• Continue Neighborhood Watch importance.
3. Ensure the Financial Health of the Community
• Implement the City's fiscal strategic plan.
• Bring equity to the City's property tax share.
• Facilitate enhancement of Cupertino Square.
• Facilitate development of new retail and enhance existing key retail centers.
• Increase retail sales tax and stores' role as a community amenity.
• Enhance underperforming and ourinoded retail centers.
• Facilitate relationships with corporations, the Chamber of Commerce, and business
support organizations.
4. Enhance Services
• Continued to rollout E-Service projects that bring City Hall to the customer and improve
efficiency of service delivery.
5. Foster a Sense of Community
• Continue to offer opportunities and programs to promote cultural understanding and
address the needs of our diverse community.
• Support the Historical Society in its effort to create a Center for Living History.
• Pursue partnerships with the three school districts involving the pool, gymnasiums,
traff c, parking, teacher housing, school resource officers, and juvenile programs.
• Work with community organizations in restoring the Tank House.
6. Pursue Infrastructure Improvements
• Completed plans and specifications for the Mary Avenue Bicycle Footbridge and awarded
construction contract in November 2007.
• Currently designing the Iirst phase of the Stevens Creek Corridor Park project.
• Pursue acquisition of the Sterling and Barnhart parcels for a Rancho Rinconada park.
• Pursue a park in the Homestead area.
• Develop a new use for the pool house at the Sports Center.
• Replace the Quinlan fountain.
viii
Department Focus -Efforts and Accomplishments
Each year, we feature a department in the City that has made notable contributions to the
organization or community. This year, the spotlight falls on the Public Information Department.
Cupertino was awarded first place by the National Association of Telecommunications Officers
and Advisors (NATOA) in the Public/Community Meetings category for its submittal of the
"Cupertino City Council Meeting". This is a substantial accomplishment since there were only
11 submittals from much larger municipalities such as Denver, CO and Washington, DC.
The City Channel was the first government channel to begin operations in Santa Clara County
and was established in 1982. The City's Video Department began televising City Council and
Planning Commission meetings in January 1983. Since then, the channel has grown into a vital
information resource for the community, providing Cupertino residents with a wide variety of
locally produced and acquired programming.
The City Channel offers a unique program format that
combines local and state government coverage, as well as
top-quality educational programming for teachers and
students. Local city meeting coverage includes regular
telecasts of City Council and Planning Commission
meetings. These meetings are televised live and repeated
several times during the course of the week.
Local Cupertino programming includes a regular
schedule of press conferences, town hall forums, special
meetings, awards programs, groundbreaking ceremonies,
and other community related events. Special televised events include the Mayor's State of the
City Address, the Lunar New Year Unity Parade, the Cupertino Recognizes Extra Steps Taken
(CREST), and comprehensive City Council election programming.
Cupertino's AM radio station began broadcasting on the frequency of 1670 AM in March 2007.
Radio Cupertino provides residents with up-to-date information on city news, community events,
construction projects, road conditions, weather forecasts and emergency preparedness. In the
event of an emergency, local residents can tune into Radio Cupertino for the latest information
on the nature of the emergency, the impact of the emergency on the community, and instructions
for local residents.
We congratulate the Public Information Department for their achievements in all of their projects
and wish them continued success in the implementation of their programs.
1X
ACCOUNTING AND BUDGETARY CONTROL
In developing and evaluating the City's accounting system, consideration is given to the
adequacy of internal accounting controls. 'The City's controls are designed to provide reasonable,
but not absolute, assurance regarding the safeguarding of assets against losses from unauthorized
use or disposition and the reliability of financial records for preparing financial statements and
maintaining accountability of assets. "the concept of reasonable assurance recognizes that the
costs of a control should not exceed the benefits likely to be derived and that the evaluation of
costs and benefits requires estimates and judgments by management.
The City's budget is a detailed operating plan that identifies estimated costs and results in
relation to estimated revenues. The budget includes 1) the programs, projects, services and
activities to be provided during the fiscal year; 2) estimated revenue available to finance the
operating plan; and 3) the estimated spending requirements of the operating plan. The budget
represents a process through which policy decisions are made, implemented and controlled.
Changes in Financial Reporting
A new GASB pronouncement related to temporary impairment of capital assets is reflected in
Note 5 to the Basic Financial Statements.
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, in order of priority, are safety, liquidity, and yield. The policy addresses
soundness of financial institutions and the types of investments permitted by the California
government code.
The City's investments consists of U.S. Treasury and Federal agency obligations, FDIC insured
certificates of deposit, money market funds consisting of Treasuries, Federal agency notes, and
repurchase agreements, and the State Treasurer's Local Agency Investment Fund. The portfolio's
average yield, excluding unrealized gains, rose from 4.15% in July 2006 to 4.85% during June
2007. The year-end portfolio had a market value of $59.5 million and a book value of $59.7
million. See Note 2 to the Basic Financial Statements for more information.
Risk Management
Risk management issues factor substantially in the City's long term financial planning. Whether
through risk pools 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.
X
INllEPENDENT AUDIT
City ordinance requires an annual audit of the financial records by an independent certified
public accounting firm selected by the City Council and its audit committee. Maze and
Associates audited the City's Basic Financial Statements, and their opinion thereon is included in
the Financial Section of this report.
CERTIFICATE OF ACHIEVEMENT
The Government Finance Officers Association of the United States and Canada (GFOA) awarded
a Certificate of Achievement for Excellence in Financial Reporting to the City of Cupertino for
its CAFR for the year ended June 30, 2006. In order to be awarded a Certificate of Achievement,
a government unit must publish an easily readable and efficiently organized CAFR. This report
must satisfy both GAAP and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that 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.
Respectfully submitted,
David Woo
Finance Director
X1
ACKNOWLEDGMENTS
I would like to express my appreciation to the City employees, City Manager, and the members
of the City Council for their interest in conducting the financial operations of the City in a
responsible manner. Special thanks go to the Finance staff -Tina Mao, Yulia Rumalean, and
Richard Wong -for their continued support and dedication. Special recognition goes to Jennifer
Chang, Dorothy Steenfott, and David Woo for their efforts in the preparation and production of
this report.
Reviewed by,
~~
Carol A. Atwood
Director of Administrative Services
xii
NOTES
xiii
Citizens
of Cupertino
City
Council
Citizen Adivtsory
Commissions and
Committees
City Attorney City Manager
Charles kilian David Knapp
Public Information Officer
Rick Kitson
X
C
Direc
Administrat
Carol tor of
ive Services
Atwood
C Director of
ommunity Development
Steve Piasecki
IT Manager
Mariyah Serratos City Clerk
Kimberly Smith Building Official
Greg Casteel
Finance Director
David R'oo Human Resources
Drector
Sandv Abe City Planner
Ciddv Wordell
Code
Enforcement Outreach
Programs Economic Development/
RDA Manager
Kelly Kline
City Treasurer
Carol Atwood
CITY OF
CUPERTINO
Director of Director of
Parks and Recreation Public Works
Therese Smith Ralph Qualls
Recreation Supervisor Recreation Supervisor CityArchitect
Sports Center Senior Center Tem' Greene
Don McCarthy Julia Lamy
Recreation Supervisor Recreation Supervisor Public Works
Youth Programs Facilities/Communih' Events Protect Manager
Christine Hanel Tom Walters Carmen Lvnaugh
Assistant Director
of Public U'orks - Maini
Bob Rizzo
Assistant Director
of Public Works - Eng
Glenn Goepfert
Environmental
Programs Manager
Lavenia 6lillar
Senior Civil Engineer
David Stillman
Parks Facilities Streets Public Works
Supervisor Supervisor Supervisor Supervisor
John Bisely Jim Davis Diane Mahan Ron Silva
CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2006/07
COMMISSIONS AND COMMITTEES
AUDIT COMMITTEE PARKS & RECREATION COMMISSION
Myoung Kang
Orrin Mahoney
Dolly Sandoval
Stanley Stemkoski
Garrett Wade
MOUSING COMMISSION
Sarah 1 [athaway-Peit
Winnie Lcc
Kim Mosleh
Frances Seward
FINE ARTS COMMISSION
Nancy Canter
KC Chandratreya
Michael Ilarkin
Robert Ilarrison
Jcssi Kaur
PUBLIC SAFETY COMMISSION
Mari Aberg
Charles Caldwell
.lay Cena
Nina Daruwalla
Hugh Riddell
TEEN COMMISSION
Anshul Bhagi
Vrinda Gupta
Diane Keng
1 iannah Lee
Benjamin Lin
Abishek Menon
Tiffany Ou
Varun Pande
Alex Pommier
Rukmani Sahay
Shivani Sharma
Ana Yglesias
BICYCL[, P1+aF,STRIAN COMMISSION
Donald Armstrong
May Koski
Geoffrey Paulsen
.toseph Walton
James Wiant
Jeanne Bradford
Derek Chen
David Greenstein
David Lee
Roger Peng
SENIOR COMMISSION
Estelle Incociati
Christine Kennedy Pierce
Mavis Smiih
Linda Walker
Frank Yap
LIBRARY COMMISSION
Ram Gopal
Ronald Miller
Janet Riddell
Katherine Staney
Susanna Tsai
PLANNING COMMISSION
Cary Chien
Lisa Giefer
David Kaneda
Marty Miller
Gilbert Wong
ECONOMIC DEVEL,OPMF,NT
Carol Atwood
Cary Chien
Mike Foulkes
Christine Giusiana
David Knapp
Richard I,owcnthal
Orrin Mahoney
Mark McKenna
Steve Piasecki
Ralph Qualls
Scott Stauffer
"I'1+,CHNOLOGY, INFORMATION &
COMMUNICATIONS COMMISSION
Charlie Ahern
William Allen
Peter Friedland
Wallace Iimura
Eric Klein
Luke Lam
Andrew Radle
xv
CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2006/07
CITY COUNCIL
Kris Wang Patrick Kwok Richard Lowenthal
Mayor Vice Mayor Councilmember
,,
.n.
+_ rz~~~i~E Mahunc}~ Dolly Sandoval
Councilmember 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
XVl
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, 2006
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and financial reporting.
~i'~Yii'
=E DFp
~ aFTx ~~e~w
'~ UW1LD STATES
~ ~. nvD ~
_~~ ~~ ~, s President
~'MI[4G~ S iv~~J_'
~'~%~~ ~~~~i~~ HIV ~
Executive Director
xvii
FINANCIAL SECTION
NOTES
MazE &
ASSOCIATES
ACCOUNTANCY CORPORATION
3478 Buskirk Ave. -Suite 215
Pleasant Hill, California 94523
INDEPENDENT AUDITOR'S REPORT ON (925) 930-0902 • FAX (925) 930-0135
BASIC FINANCIAL STATEMENTS maze@mazeassociates.com
www. mazeassocia tes. 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,
2007, 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 fmancial 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 fmancial
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 fmancial statements referred to above present fairly in all material respects, the respective
fmancial 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, 2007 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 conformity 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
21, 2007 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 fmancial 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 21, 2007
3
A Professional Corporation
MANAGEMENT'S llISC[JSSION AND ANALYSIS
This is the Finance Department's report on the City of Cupertino's financial performance for the year.
Please read it in conjunction with the accompanying Transmittal Letter and Basic Financial Statements.
2006-07 FINANCIAL HIGHLIGI-ITS
Highlights of the year include the following:
• The City's total net assets increased $11.2 million during fiscal 2006-07, ending the year at $136.3
million.
• Total City revenues, including program and general revenues, were $57.5 million, while total
expenses were $46.2 million in fiscal 2006-07.
• Net assets in Governmental activities were $1.28.9 million, while net assets in business activities were
$7.4 million.
• Governmental program revenues were $12.7 million compared with $10.4 million in 2005-06.
• Governmental expenses were $389 million in 2006-07, compared with $38.6 million in the prior
year.
• Revenues from Business-type activities were $8.4 million in current year, compared with $8.2 million
in the prior year.
• Expenses of Business-type activities were $7.3 million in current year, compared with $7.2 million in
the prior year.
• General Fund revenues of $40.4 million represented an increase of $5.1 million from the prior year;
General Fund expenditures increased from $27.6 to $28.5 million in 2006-07.
• Actual expenditures in the General Fund were $2.3 million less than the tinal 2006-07 budget.
• After transfers and surplus land sales, the total General Fund balance decreased by $0.5 million to end
the year at $26.3 million.
OVERVIEW OF THE FINANCIAL STATEMF,NTS
'1"he 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 f nancial
activities and position.
The City-Wide Financial Statements provide along-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.
"fhe accrual basis of accounting is similar to the accounting used by most private sector companies. "I'he
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 are grouped into Governmental activities and Business-type activities, as
explained below. "fhe Statement of Net Assets and the Statement of Activities provide a summary of
these two types of activities for the City as a whole.
Governments/ activities-Most of the City's basic services are considered to be governmental
activities, including public works, law enforcement, community development, recreation, public
inlonnation, and general administration. These services are supported by general City revenues such
as property, sales and other taxes, and by specific program revenues such as developer fees and
grants.
4
fhe 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.
'T'he 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.
Busi~zess-type activities-All the City's enterprises are reported here, including solid waste
management and some of the City's recreational operations. Unlike governmental services, these
services are supported by charges paid by users based on the amount of the service they use.
The Fund Financial Statements report the City's operations in more detail than the government-wide
statements and focus primarily on the short-term activities of the City's General Fund and other Major
Funds. The Fund Financial Statements measure only current revenues, expenditures, assets, and
liabilities; they exclude long-term assets and liabilities. Because these statements focus on the near-term
inflows and outtiows 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. Each major fund is presented individually, with all non-major
fiords 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 cu--rent tinancial resources and uses. They present essentially the same functions reported
as governmental activities in the government-wide financial statements. f-iowever, 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 govermment's near-term financial decisions.
Enterprise and Internal Service Fcrnd financial statements are prepared on the full accrual basis, as in
the past, and include all their assets and liabilities, current and long-tern. 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 tinancial 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 ar°e derived from other City funds. These revenues are
eliminated in the City-wide financial statements and any related profits or losses are returned to the
activities which created them, along with any residual net assets of the Internal Service Funds. For this
City, internal service activities predominantly benefit governmental rather than business-type functions,
and are therefore included within governmental activities in the government-wide financial statements.
Comparisons of budget and actual financial information are required in the Basic Financial Statements
only for the General Fund and other major funds that are Special Revenue Funds. Since none of the
City's Special Revenue Funds are considered major funds, budgetary comparison statements for these
funds are included in this document as supplemental statements only.
I'iduciar~ Fund statements provide financial information about the activities of certain assessment
disU•icts. The City acts strictly as an agent for these districts holding amounts collected fi-om property
owners, prior to transferring the money to the districts' bond trustees. The City's fiduciary activities are
reported in the separate Statement of Fiduciary Net Assets and the Agency Funds Statement of Changes
5
in Assets and Liabilities. These activities are excluded from the City's other financial statements because
the City cam~ot use these assets to finance its own operations.
The Motes to Basic Financial Statements provide additional detail that is essential to a full
understanding of the information provided in the government-wide and fund f nancial 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.
Goverrtntental Activities
Table 1
Governmental Net Assets at June 30
(in Millions)
Governmental Activities
2007 2006
Cash and investments $ 51.7 $ 41.3
Other assets 6.9 6.0
Capital assets 130.1 131.7
Total assets 188.7 179.0
Long-term debt outstanding 49.7 51.0
Other liabilities ] 0.1 9.7
Total liabilities 59.8 60.7
Net assets:
Invested in capital assets, net of debt 80.4 83.1
Rcst--icted 9.3 8.3
Unrestricted 39.2 26.9
Total net assets $128.9 X118.3
The City's net assets from governmental activities increased $10.6 million or 9% from the prior year. This
increase is detailed in the Change in Net Assets, Table 2, and is also explained below:
• Cash and investments increased $10.4 million, reflecting most of the increase in net assets and the
strong revenue growth described later.
• Other assets increased $0.9 million because of grant receivables for the Mary Avenue Bicycle
Footbridge project.
• Capital assets decreased by a net $1.6 million. $2.5 million in street, storm, and traffic work were
done and added to infi-astructure. $1.4 million in Mary Avenue Bicycle Footbridge and Stevens
Creek Corridor Park design work were added to construction in progress. $0.7 million of
machinery and equipment was acquired. Two surplus land parcels, costing $0.2 million, were
sold. Depreciation of buildings, infrastructure, equipment, and improvements was $6 million.
• Principal payments on the 2002 certificates of participation totaled $1.3 million.
6
• Capital assets net of related debt decreased $2.7 million primarily due to a $2.4 million
overstatement in the previous year. Every year, the amount represents cash held in trust by a
fiscal agent for the annual June l5 debt service payment. Since the cash is offset by a current
liability, it should not be in net assets.
• Restricted net assets increased $1 million representing current assets set aside for street and
affordable housing 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. $39.2 million of unrestricted net assets existed at June 30,
2007, $12.3 million higher than a year ago. The rise comes from the $10.6 million increase in net
assets shown in Table 2 and by the capital assets net of related debt and restricted net asset
changes described above.
• The increase to unrestricted net assets is used in the 2007-08 five-year adopted budget for the
City's pension plan enhancement (see Note 14 to the Basic Financial Statements), parkland
acquisition, two major capital projects -the Mary Avenue Bicycle Footbridge and Stevens Creek
Corridor Park, new recreational capital projects, a green initiative, and an infrastructure reserve
buildup.
Fiscal Year 2006-07 Governmental Activities
Sources of Revenues
Intergove
8°
Other "faxes
22%
Sales Tax
23%
Operating
~ntributions &
Grants
6%
Capital Grants &
Contributions
7%
Property Tax .
14%
7
Land Other
Interest Sale ~ 1% Charges for
As the Sources of Revenue chart above shows, sales tax is the largest category of governmental revenue,
representing 23% of receipts. Other taxes are the City's second largest source of revenue. This category
represents transient occupancy (hotel), utility user, park in-lieu, construction, franchise, and business
license taxes. Property taxes became the third leading revenue source this year, leaping over charges for
services in rank, as successful tax reallocation legislation caused a huge 38% increase in the ongoing
General Fund revenue portion. The property tax qualifies as the City's leading own-source revenue, since
California sales taxes are collected and allocated to local jurisdictions by the state. Capital grants jumped
significantly from 1% to 7% of revenues this year due to large grants for the Mary Avenue Bicycle
Footbridge and pavement management projects.
Functional Expense
Interest Administration
6% 4%
~aw
rcement
18%
Public
Works
42%
Public
Information
3%
administrative
Services
10%
6%
The Functional Expense chart above includes only current year expenses, which are discussed in detail
below. Percentages are consistent with last year. The chart does not include capital outlays or principal
payments on debt. Capital outlays are added directly to the City's capital assets and principal payments
reduce long-term liabilities.
The Statement of Activities presents program revenues, expenses, and general revenues. These are all
elements of the Changes in Governmental Net Assets summarized below.
8
Community
Development
11%
Table 2
Change in Governmental Net Assets
(in Millions)
Governmental Activities
2006-07 2005-06
Expenses
Administration $1.7 $1.3
Law Enforcement 7.1 6.6
Public Information 1.2 .9
Administrative Services 3.9 4.2
Recreation Services 2.5 2.4
Community Development 4.1 4.5
Public Works 16.2 16.4
Interest on long-term debt 2.2 2.3
Total expenses 38.9 38.6
Revenues
Program revenues:
Charges for services 6.2 6.5
Operating contributions and grants 3.0 3.4
Capital grants and contributions 3.5 _5
Total program revenues 12.7 10.4
General revenues:
Taxes:
Property taxes 6.7 4.9
Sales taxes 11.3 10.7
Other taxes 10.7 9.8
Intergovernmental, unrestricted 4.0 3.2
Investment earnings 1.8 .7
Miscellaneous .3 .2
Gain on the sale of capital asset 1.5 1.2
Total general revenues 36.3 30.7
Total revenues 49.0 41.1
Excess of revenues over expenses, before transfers 10.1 2_5
Transfers _5 _8
Change in net assets $1Q.Sz $~
Revenues
Table 2 shows that total governmental revenues jumped $7.9 million or 19% over the previous year,
driven by increases in grants earned for the Mary Avenue Bicycle Footbridge and street projects ($3
million rise), property taxes ($1.8 million), sales taxes ($0.6 million), construction and other taxes ($0.9
million), unrestricted intergovernmental revenues ($0.8 million), investment earnings ($l.l million), and
profit on capital asset sales ($0.3 million). These gains made up for $0.3 million and $0.4 million declines
in charges for services and operating grants, respectively.
Property taxes went up due to successful state legislation increasing the allocation of taxes to the City.
Sales taxes reflected strong growth from the leading tax providers. Construction taxes benefited from the
building of a new theatre and supermarket. Intergovernmental revenues benefited from the ending of the
9
two-year state shift of local taxes. Investment earnings reflected better yields, improved market value, and
higher cash balance. While proceeds from the sale of surplus land were lower this year compared to last,
the gain on the sales were more, reflecting the different locations of the parcels sold this year.
A weaker residential building market, resulting from two citizen referenda directed at housing
restrictions, lowered charges for services and fees for planning, zoning, and building reviews and permits.
Operating grants declined due to the large Community Development Block Grant used last year for the
LeBeaulieu housing project.
Expenses
City-wide governmental expenses, representing non-capitalized spending, was relatively flat compared to
last year, increasing only by $0.3 million or 1% over 2005-06. Increases in Administration, Law
Enforcement, and Public Information offset decreases in Administrative Services, Community
Development, Public Works and debt interest. Recreation was relatively unchanged.
The addition of two sheriff deputies during the year and enhanced media coverage of city meetings and
activities caused the cost increases in Law Enforcement and Public Information. A shift of the
Community Hall depreciation from Public Works to Administration caused the fluctuation in those areas.
An allocation of pay-as-you-go retiree health care costs over all departments rather than charging it only
to the human resource division plus a decline in residential development reviews caused the expense
declines in Administrative Services and Community Development.
City-wide governmental revenues in excess of expenditures nearly quadrupled to $10.1 million compared
to the $2.5 million of last year. After transfers from business-type activities, for reimbursement of past
waste cleanup costs, overall net assets of governmental activities increased $10.6 million, compared to
$3.3 million during 2005-06. The surge in general revenues and capital grant reimbursements compared
to a flat expense number proved heavily beneficial to net assets.
Net Cost and Revenues
Table 3 presents the net cost of each of the City's programs. 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
general 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
overhead provided by other City functions.
Table 3
Net Cost (Revenue) of Governmental Activities
(in Millions)
Net Cost (Revenue)
Of Activities
2006-07 2005-06
Administration $1.6 $1.3
Law Enforcement 6.0 5.7
Public Information 1.2 .9
Administrative Services 3.9 4.2
Recreation Services 2.3 2.1
Community Development (1.2) (2.0)
Public Works 10.2 13.7
Interest on Long-term Debt 2_2 2.3
Totals 26.2 2 .2
10
Administration includes activities of the City Council, Commissions, City Manager and City
Attorney. Administrative Services includes Finance, Human Resources, Information Technology,
City Clerk, Code Enforcement and Emergency Preparedness. Net cost of Administration rose
from $1.3 million to $1.6 million due to the Community Hall depreciation reclass from Public
Works. Net costs in Administrative Services sunk from $4.2 million to $3.9 million, due to retiree
health insurance costs moved to other programs.
• The City's $0.6 million cost increase for Law Enforcement provided by the Santa Clara County
Sheriff were partially offset by a $0.3 million increase in citations and fines. Two sheriff deputies
were added for more school and overnight coverage.
Public Works expenses include Transportation, Engineering, Environmental Programs, and the
maintenance and improvement of the City's streets, parks, and facilities. Offsetting revenues
include federal, state, and local grants, gasoline taxes, environmental fees, facility rental, damage
restitutions, and storm drain fees totaling $6 million, leaving $10.2 million as the 2006-07 net
cost of public works. Higher grant earnings and gasoline taxes for the Mary Avenue Bicycle
Footbridge and pavement improvement projects and the reclass of Community Hall depreciation
to Administration caused the net cost of Public Works to decline by $3.5 million.
• Community Development programs include the Planning, Building, Economic Development, and
Housing divisions, and the Redevelopment Agency. Net revenues dropped from $2 million last
year to $1.2 million this year due to a decline in residential development applications. Net
revenues went toward covering development support services provided by Administration,
Administrative Services, and facilities maintenance.
• Much of the City's 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 2006-07, the same as last year.
• Interest on the long-term debt that was re-financed in 2002 declined slightly to $2.2 million, as
the principal continues to be paid-off.
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 recreational and solid waste management operations that are
financed and operated in a manner similar to private business enterprises where the intent is that the costs
of providing services and facilities to the general public on a continuing basis can be financed or
recovered primarily through user fees.
Business-type net assets totaled $7.4 million at June 30, 2007, an increase of $0.6 million from the prior
year. Cash & investments rose $0.7 million, while the drop in Senior Center travel program advance
deposits and prepaid trip expenses caused other current working capital to decline by $0.1 million.
Overall enterprise revenues of $8.4 million this year were $0.2 million higher than last year. Sports
Center tennis and membership, Recreation classes and programs, and interest income showed revenue
gains while the Blackberry Farm picnic grounds, Senior Center travel, and Resource Recovery grant areas
displayed weaker earnings. Expenses were $0.1 million higher at $7.3 million during 2006-07. Revenues
over expenses, before transfers, were $1.1 million in 2006-07 as opposed to $1 million in the previous
year. Cost savings from the temporary closure of the picnic grounds due to the Stevens Creek Corridor
Park project were offset by higher travel program outlays and higher contract instructor costs in tennis
and other recreational programs.
11
Transfers to governmental activities declined to $0.5 million from $0.8 million last year due to the
elimination of the recreation enterprises' contribution toward debt service on their facilities.
Table 4
Business-Type Net Assets at June 30
(in Millions)
Cash and investments
Other current assets
Capital assets
Total assets
Current liabilities
Total liabilities
Net assets:
Invested in capital assets
Unrestricted
Total net assets
Business-Tune Activities
2007 2006
$7.9 $7.2
0.4 0.6
0_5 0_5
8_8 8_3
1_4 1.5
1_4 1_5
0.5
6.9
~Z~4
Table 5
Change in Business-Type Net Assets
(in Millions)
Expenses
Resource Recovery
Blackberry Farm
Sports Center
Recreation Programs
Senior Center
Total expenses
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
0.5
6.3
$St,$
Business-Type Activities
2006-07 2005-06
$2.1 $2.1
1.0 1.3
1.6 1.5
1.8 1.7
.8 .6
7.3 7.2
8.1 7.8
--- _2
8.1 8.0
.3 .2
8_4 8_2
1_l 1_0
$~ $ ~.2.
12
As shown in Table 6, the enterprises' overall net revenue contribution remained consistent with last year,
Blackberry Farm changed to a positive net revenue position due to the strong net results from the golf
course operations that remain open. Lower margins on the Senior Center travel program reversed the net
revenue and cost results for the Senior Center. The Center's other non-enterprise programs such as
counseling, social activities, and entertainment, have grown such that they will comprise more than half
of the Center's activities. Because of this, the City will reclass the Center as a governmental activity
beginning in 2007-08.
Table 6
Net Cost (Revenue) of Business-Type Activities
(in thousands)
Net Cost (Revenue)
Of Activities
2006-07 2005-06
Resource Recovery $(146) $(237)
Blackberry Farm (127) 147
Cupertino Sports Center (31) 28
Recreation Programs (566) (602)
Senior Center 81 116
Total Business-type Activities $~_78~_~ $
THE CITY'S FUND FINANCIAL STATEMENTS
Governmental Funds
At June 30, 2007, the City's governmental funds reported combined fund balances of $41.3 million,
which is an increase of $4.5 million or ] 2% compared with the prior year. Non-major fund balances
increased $3.7 million led by an increase in capital project funding and infrastructure reserves. The
General Fund balance decreased $0.5 million. The Mary Avenue Bicycle Footbridge, a major fund
balance, rose $1.3 million due to local grants and General Fund monies received this year. See the major
governmental fund section of this report for further discussion of the fund balance changes.
Table 7 presents governmental fund revenues by source and the related changes for the prior year.
Governmental fund revenues rose $6 million or 15% this year to a new total of $45.7 million. $3.3
million of the increase came from taxes, consisting of a $3.7 million increase in General Fund taxes, led
by those related to sales, properties, construction, and hotels, offset by a $0.4 million decrease in park in-
lieu taxes. Rising portfolio yields on top of the higher cash balances resulting from the improved revenue
picture, caused use of money earnings to increase by $0.6 million. Valley Transportation Authority grant
revenues for the Mary Avenue Bicycle Footbridge, the end of the two-year state takeaway of local tax
revenues, higher state mandated cost reimbursements, and more motor vehicle license fees caused
intergovernmental revenues to increase by $2.3 million. Declining residential development caused permit
and charges for services receipts to drop $0.4 million below last year. One-time revenues from a County
audit caused fines and forfeitures to rise $0.3 million.
Proceeds from the sale of property decreased $0.7 million from last year. In 2006-07, two surplus parcels
related to the former City-operated water system were sold for $1.7 million, with the proceeds earmarked
for parkland acquisition. In the prior year, two Oak Valley parcels were sold for $2.4 million.
I3
Table 7
Revenues Classified by Source
Governmental Fund Types, 2006-07
(in thousands)
Increase/(Decrease)
From p revious year
Revenues by Source Amount % of Total Amount Percent
Taxes $28,904 63% $3,288 13%
Use of Money & Property 2,170 5 562 35
Intergovernmental 8,201 18 2,305 39
Licenses and Permits 3,326 7 (289) (8)
Charges for Services 2,062 5 (82) (4)
Fines and Forfeitures 926 2 296 47
Other Revenue 154_ ~ (.~
Total Revenues $45 743 100% $5.989 15%
Other Financing Sources-
Proceeds from Land Sale $1,664 100.0% $(759) (31)%
Governmental fund expenditures in Table 8 increased $1.6 million this year to $37.8 million, primarily
from $1.5 million in more capital outlays due to the Mary Ave Bicycle Footbridge, Stevens Creek
Corridor Park, and street improvement projects.
Law Enforcement costs increased $0.5 million due to the addition of two sheriff deputies and due to
annual increases built into the contract.
Public Information expenditures hiked 31% to $1.1 million this year, caused by expansion of community
affairs programming, increased media and Internet coverage of City meetings, the biennial City survey,
and extensive community hearings on various private development and City projects.
Administrative Services outlays dropped $0.4 million ending up at $3.7 million in 2006-07. Retiree health
insurance costs of $0.5 million were shifted to an internal service fund beginning in 2006-07. Excluding
this one-time shift from the comparison, Administrative Service expenditures would have, instead, shown
a slight increase of $0.1 million.
Last year's purchase of the Cleo Avenue affordable housing parcel, plus this year's reduced need for
contract plan checking caused Community Development costs to fall 11% to $4 million this year.
14
Table 8
Expenditures Classified by Major Service Area
Governmental Fund Types, 2006-07
(in thousands)
Increase/(Decrease)
from previous year
Expenditures by Service Area Amount % of Total Amount Percent
Administration $ 1,287 3% $ 51 4%
Law Enforcement 6,976 19 475 7
Public Information 1,121 3 268 31
Administrative Services 3,716 10 (387) (9)
Recreation Services 2,403 6 100 4
Community Development 3,970 11 (498) (11)
Public Works 10,478 28 92 1
Capital Outlay 4,292 11 1,521 55
Debt Service:
Principal 1,295 3 25 2
Interest 2,240 6 23 (1)
Total $37.778 100% $1,624 4%
Proprietary Funds
Proprietary funds include the City's enterprise and internal service funds. Every enterprise fund is
considered a major fund and is individually talked about in the Enterprise Funds section of this report.
Together, they comprise the City's business-type activities that, 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 acost-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 net assets for the fiscal year ended June 30, 2007.
Table 9
Revenues, Expenses, and Ending Net Assets
Internal Service Funds, June 30, 2007
(in thousands)
Operating Operating Operating Ending
Fund Revenues Expenses Income/(Loss) Net Assets L)
Management Information Systems $883 $927 $(44) $1,483
Workers' Compensation 280 307 (27) 114
Equipment Revolving 841 814 27 1,631
Retiree Medical --- 615 (615) 4,785
Long-Term Disability 47 45 2 17
Totals
$2,051 $2,708
$(657) $
(A) Unrestricted and available for future needs.
15
The City created the Retiree Medical fund this year to accumulate assets for other post employment
benefit liabilities that will begin to accrue in either 2007-08 or 2008-09. The General Fund provided $5.3
million in cash that it had set-aside in this and previous years, based on an actuarial study. The
Management Information Systems fund finances the City's information technology network and online
government services. The General Fund infused $0.3 million into the MIS fund for new technology
purchases this year. Workers' compensation claim liability was increased $0.1 million to end the year at
$1.4 million, leaving the fund with $0.1 million in net assets. The Equipment Revolving fund maintained
its $1.6 million in unrestricted net assets for future equipment replacement.
Maior Governmental Funds
General Fund
Revenues
General Fund revenues of $40.4 million ended up $1.6 million or 4% over the final budget for the year
ended June 30, 2007. Permits, investment income, fines, and transient occupancy (hotel) taxes were the
categories that ended up stronger than expected, due to one-time fine revenues from a Santa Clara County
audit, ongoing strength in office and commercial improvements, changes in interest rates, and solid
lodging demand from local businesses. The better-than-anticipated results in these areas overcame sales
taxes ending up under budget due to the delayed arrival of revenues from a major new business-to-
business sales office.
Total revenues climbed $5.1 million or 14% over last year. Property taxes, sales taxes, hotel taxes,
construction taxes, investment income, franchise fees, and fines were up while permits, charges for
services, and revenue from property sales were down. Successful property tax allocation legislation,
strong electronic and office equipment sales from the leading tax providers, business demand for hotel
rooms, and higher utility revenues helped the tax and franchise fee sector, while the downturn in
residential building activity punished permit revenues. The end of the two-year takeaway of local taxes by
the State helped the intergovernmental revenue results.
Property taxes ended the year at $6.5 million, rising 38% or $1.8 million over last year's result, 34% or
$1.6 million over the original budget, and 3% or $0.2 million higher over the final budget. Increases over
last year and the original budget are due to the passing of State legislation which removed Cupertino's
55% limit on the normal 7% share of property tax that other cities in the County get.
Sales taxes of $11.3 million increased $0.6 million or 5% higher than last year and $0.9 million or 8%
over the original budget. However, it was $0.3 million or 3% below the final budget. Business-to-business
office and electronic equipment sectors continued its recent robust growth led by sales increases by the
City's largest tax providers. The final budget anticipated revenues from a new company offering
business-to-business services, but due to tax reporting setup issues those revenues won't come in until
next year.
Transient occupancy taxes of $2.5 million jumped 22% or $0.5 million over last year, 13% or $0.3
million over the original budget, and 6% or $0.1 million over the final budget as strength in the regional
high-tech sector created robust occupancy & room rates in the four City hotels.
Franchise, utility user, construction, business license, property transfer, and other taxes of $7.9 million
rose 13% or $0.9 million over last year, 32% or $l.9 million over the original budget, and 10% or $0.7
million over final budget. The increases were all or partially caused by $0.8 million in construction taxes
from the new AMC Theatres and Whole Foods Market, $0.5 million in utility user taxes from wireless
carriers, $0.2 million in higher franchise fees from utilities, and cone-time $0.1 million transfer of
maintenance district funds to the General Fund.
16
Licenses and permits declined 8% from $3.6 million in 2005-06 to $3.3 million in 2006-07. The budget
had anticipated a more severe decline in building permits but ongoing strength in the commercial building
sector offset the drop in residential construction. The actual numbers exceeded original and final budget
expectations by $0.3 million or 9%.
The development picture that affected building permits also struck zoning and planning fees, which
comprise 90% of the charges for services category. The category fell from $1.8 million last year to $1.5
million this year, a 14% drop. The decline however was less than originally anticipated as the original
budget had predicted a decrease down to $1.2 million. The final budget agreed with the actual results.
Intergovernmental revenues increased from $3.6 million to $4.6 million this year due to the end of the
two-year state takeaway of local tax revenues, higher state mandated cost reimbursements, and more
property taxes received as a replacement for the statutorily reduced motor vehicle license fee. Current
year results were in-line with the original budget but $0.1 million below the final budget, as the property
tax/vehicle license fee did not rise as much as expected.
Use of money and property jumped 72% over last year, finishing at $1.8 million compared to $1 million
last year. It includes $0.2 million in unrealized gains from increases in market value. The average
portfolio yield increased from 4.15% to 4.85% and the cash and investment balance rose $10 million
during the year. Current results were $0.4 million and $0.9 million better than final and original budget,
respectively, as the changing expenditure timeline on the Mary Ave Footbridge kept cash balances higher
than expected and unrealized gains were better than expected.
Fines and forfeitures soared 47% or $0.3 million over last year and 36% or $0.2 million over the final
budget as $0.2 million arrived retroactively from the County, resulting from a fiscal 2002 through 2004
audit by them.
One-time proceeds from the sale of property decreased $0.7 million compared to last year. In 2006-07,
two surplus parcels related to the former City-operated water system were sold for $1.7 million, $0.1
million below the original estimates and budget. The proceeds are earmarked for parkland acquisition in
the five-year capital improvement program. In the prior year, two Oak Valley parcels were sold for $2.4
million.
Transfers into the General Fund decreased $1 million from the prior year to a current year amount of $0.5
million. Instead of moving all annually collected park in-lieu development fees to the General Fund, the
City decided at midyear to resume its previous practice of accumulating the fees in the fund dedicated to
future park acquisition or improvements. The remaining $0.5 million transfer into the General Fund
represents the second-to-last installment of a live-year re-payment from the Resources Recovery
enterprise fund of solid waste collection improvements originally financed by the General Fund.
Expenditures
Fiscal 2006-07 overall expenditures, at $28.5 million, were $0.9 million or 3% higher than last year's
total of $27.6 million. However, this result came in 8% or $2.3 million under the final budget and 5% or
$1.5 million under the original budget.
Current year Law Enforcement costs of $7 million was under the final budget by $0.5 million or 7% due
to the lower usage of general law enforcement, service and emergency calls, patrol, and investigations.
However, it exceeded past year expenditures by 7% or $0.5 million, due to the addition of two officers at
mid-year, plus the normal consumer price index and compensation escalators built into the sheriff
contract.
Public Information expenditures hiked 31% from $0.9 million in 2005-06 to $1.1 million this year. It
exceeded the final budget by $10,000. The final budget was $0.1 million over the original budget. The
17
variations were caused by expansion of community affairs programming, increased media and Internet
coverage of City meetings, the biennial City survey, and extensive community hearings on various private
development and City projects. The Department recently received a national award on its extensive media
coverage.
Administrative Services outlays dropped from $4.1 million in 2005-06 to $3.7 million in 2006-07. Retiree
health insurance costs were shifted to an internal service fund beginning in 2006-07. Excluding this year's
$0.5 million shift, administrative expenditures would have shown a slight increase from $3.6 million to
$3.7 million. The $3.7 million was $0.6 million and $0.4 million under the final and original budget,
respectively, because spending in disaster preparedness, elections, mailings, insurance claims, and
litigation came out lower than anticipated while monies targeted for Monday opening of the library were
deferred until next year. The original budget was augmented to address litigation, claims, disaster
preparedness, financial system upgrades, and recruitment.
A lower amount of building activity and the associated reduction in contract plan checking caused
Community Development costs to fall 4% from $3.6 million last year to $3.5 million this year. It was 3%
below the final and original budget due to staffing vacancies.
Public Works and capital outlay expenditures of $9.5 million were $0.9 million or 9% under final budget
due to remaining maintenance vacancies and unneeded engineering contingencies. It was $0.6 million or
6% over the prior year due to the filling of some vacancies, playground and sport field improvements, and
City Hall office changes.
Transfers out of the General Fund more than doubled from $7 million in 2005-06 to $14.6 million in
2006-07, as finally budgeted, with $5.3 million representing retiree health reserves moving to a new
internal service fund, $1 million going toward the Mary Ave Bicycle Footbridge, $0.7 million targeted for
the Stevens Creek Corridor Park, $0.5 million set-aside for infrastructure reserves, $3.5 million for
ongoing debt service, and $3.2 million for other capital work involving streets, parks, and facilities. The
retiree health separation was not in the original budget.
Table 10
General Fund Budget and Actual Comparison, 2006-07
(in millions)
Budgeted Amounts
Ord Final Actual Variance
Revenues $33.9 $38.8 $40.4 $1.6
Expenditures (30.0) (30.8) (28.5) 2.3
Proceeds from sale of land 1.7 1.6 1.7 .1
Transfers in 1.0 .5 .5 -
Transfers out 9.2 14.6 X14.6)
Increase (decrease) in fund balance 2.6 4.5 $(0.51 4.0
Fund Balance
At June 30, 2007, the General Fund reported a combined ending fund balance of $26.3 million, down
$0.5 million from the prior year. The City Council designated $16.5 million of this amount for a buffer in
times of future economic uncertainty; for operating contingencies and emergencies; for defined benefit
pension plan funding; and for future capital projects. It also includes a portion of utility user taxes set-
aside pending the passage of a new ordinance.
18
$2.7 million was reserved for loans due to the City, outstanding purchase orders, advances to the
Redevelopment Agency, and public access programming. $7.1 million represented the unreserved,
undesignated balance that the City re-deploys in the five-year operating and capital budget.
Designated fund balances declined by $5.8 million from last year due to the transfer of retiree health and
infrastructure reserves to internal service and capital project funds. Reserved fund balances decreased
slightly by $0.2 million due to decreases in purchase orders, loans outstanding, and public access
television reserves. The unreserved, undesignated balance improved by $5.5 million caused by the $11.9
million excess of revenues over expenditures, augmented by the $1.7 million in land sale proceeds,
increased by the $0.2 million reduction in reserves, and decreased by the $8.3 million in net transfers out
for 2006-07 capital projects and debt service.
Public Facilities Corporation
This fund accounts for the payments of principal and interest on the 2002 certificates of participation
(COPs), which refinanced the long-term debt that funded many of the City's major parks and facilities. As
in 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 $10.7 million pedestrian and bicycle bridge over
Interstate 280 at the end of Mary Avenue. Preliminary engineering and design of the bridge was almost
completed during the year resulting in the $0.9 million capital outlay compared with $1.4 million in the
previous year. Local grant reimbursements and General Fund contributions of $1.2 million and $1
million, respectively, were received this year, compared to zero and $0.8 million, respectively, last year.
The initial construction bids on the project were way over engineer estimates and the budget,
necessitating a re-design of the structure and re-bid of the project in the first half of 2007-08. The
General Fund backs $2 million of the current project budget, with the rest coming from federal, state and
local grants.
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 most of its
Capital Project funds, both of which account for revenue sources that are legally restricted to expenditure
for specific purposes such as streets, parks, housing, storm drainage, and the Redevelopment Agency.
$4.1 million in overall revenues for Other Governmental funds represented a decrease of $0.3 million or
7% from last year. Park in-lieu revenues can vary widely year-to-year based on the different development
projects going thru the planning and permit process. These taxes declined $0.4 million due to fewer multi-
family housing projects occurring in the City. Intergovernmental revenues had a net increase of $0.1
million, with street-related grant receipts increasing by $0.8 million and grants for housing decreasing by
$0.7 million. The timing of various projects can greatly affect this type of income. Grant reimbursements
for street re-surfacing, Mary Avenue Gateway and Calabazas Creek bridge projects came in this year
while last year saw significant Community Development Block Grant receipts for the LeBeaulieu housing
project and the purchase of land for low-income housing at Cleo Avenue.
Other Governmental expenditures rose from $3.6 million to $4.8 million this year, a 33% increase, due to
the grant-funded outlays for pavement management.
Net transfers-in of General Fund monies for the current capital program increased by $2.5 million. The
Stevens Creek Corridor Park, Civic Center and Library buildings, Monta Vista recreation building, the
19
Memorial Park and Library sports fields, the infrastructure reserve fund, and the park in-lieu fund were
the major benefactors.
The overall Other Governmental fund balance increased by $3.7 million, finishing the year at $14.4
million. $6.8 million of the ending fund balance represented unreserved cash set-aside for street
maintenance, affordable housing needs, storm drain work, and environmental programs. $3.9 million was
General Fund money budgetarily committed for building, park, and traffic capital projects. $1.7 million is
reserved for non-cash assets related to the City's housing programs and $1.5 million represents
outstanding purchase orders. $0.5 million is reserved for future infrastructure needs. The overall fund
balance increase resulted mostly from the $4.4 million in net transfers-in from the General Fund for this
year's approved capital projects, for annual street maintenance, and for the establishment of a separate
infrastructure reserve. Taking the $0.7 million excess of expenditures over revenues away from net
transfers-in results in the overall fund balance increase.
Enterprise Funds
Resources Recovery
The City's solid waste disposal enterprise did not have significant differences in waste pickup revenues.
Contract service costs for pickup, landfill disposal, and recycling increased 4% or $83,000, per the
contract, while salaries expenses declined $52,000 due to a vacant environmental assistant position. Other
revenues decreased $0.1 million because of last year's receipt of a Bay Area Air Quality Management
District grant. Operating income fell to $0.1 million compared to $0.2 million in 2005-06. $0.3 million in
interest earnings, twice the amount of last year, plus the third of four annual half million-dollar
reimbursements to the General Fund for waste cleanup costs, caused a $0.1 million drop in unrestricted
net assets to $5.5 million.
Blackberry Farm
While operating revenues of $1.1 million were flat with last year, operating expenses dropped
significantly from $1.3 million in 2005-07 to $1 million this year. The picnic grounds closed temporarily
in September 2006 for major renovations and restoration as planned in the Stevens Creek Corridor Park
project. The City will continue to keep the golf course open. The drop in expenses resulted in an operating
income of $0.1 million, an improvement over the $0.1 million loss last year. Unrestricted net assets
increased accordingly by $0.1 million to end the current year at that number. The $0.4 million in net
assets invested as capital was unchanged from last year. The Corridor Park project is funded by a separate
governmental fund.
Cupertino Sports Center
Compared to last year, tennis program revenues rose $0.2 million and membership revenues increased
$0.1 million to more than offset the minor decline in rent from the closing of the swim school. Total
operating revenues and operating expenses both grew by $0.2 million the latter caused by a growth in
contract services. The private tennis operator gets paid a percentage of the gross tennis revenues. The
Center maintained its breakeven operating margin, and kept net assets at last year's $0.1 million level,
most of which is unrestricted.
Recreation Programs
Contract expenses increased 10% or $0.1 million over the prior year while operating revenues from
classes and sports programs rose 3%. There were contract increases for the many instructors of recreation
classes, most notably for music and sports, and instructors hired for new classes.
20
Operating income was $0.1 million down from last year, ending up at $0.6 million for 2006-07. The fund
ended up with an increase in net assets of $0.6 million and an unrestricted net asset balance of $1.2
million.
Senior Center
Vacation trips and local excursions are a major revenue/expense program of the Center. Trip itineraries
are different every year and the number of participants or number of trips can also vary. Operating
revenues declined slightly by 2% due to last year's one-time recognition of travel deposits received in
prior years. Operating expenses jumped 31 % or $0.2 million due to the mix of trips that were taken this
year. Without personnel costs, the travel program was break-even this year. The Center had an overall
operating loss of $0.1 million due to the non-revenue programs that are only partially covered by the
Center's low membership fee. This is compared to an operating income of $0.1 million last year, which
was boosted by the one-time travel revenue recognition. Net assets decreased by $0.1 million, leaving net
assets at almost zero by year-end. The Center will become a part of the General Fund in 2007-08.
CAPITAL ASSETS
At June 30, 2007 the City had $130.6 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):
Table 11
Capital Assets, Net of Depreciation, at June 30
(in Millions)
2007 2006
Governmental Activities:
Land $ 58.9 $ 59.0
Construction in progress 3.4 2.0
Buildings 29.0 30.5
Improvements other than buildings 7.1 7.8
Machinery and equipment 1.2 l .1
Roads, curbs, gutters, sidewalks, medians and bridges 20.6 20.8
Storm drain structures and mains 8.2 8.8
Traffic signals 1.7 1.7
Total Governmental Activities $130.1 $131.7
Business-type Activities:
Land $ .4 $ .4
Improvements other than buildings .1 _1
Total Business-type Activities $ 0.5 $ 0.5
Total City 130.6 132.2
Two surplus land parcels, sold for $1.7 million this year, had a cost of $0.2 million removed from the
capital asset list. $2.5 million in street, storm, and traffic improvements were done. $1.4 million in Mary
Avenue Bicycle Footbridge and Stevens Creek Corridor Park design work were added to construction in
progress. $0.7 million of machinery and equipment was acquired. Depreciation was $6 million for the
year.
21
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, 2007 is $49.7 million.
At June 30, 2007, 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. Further information can be provided by the City
of Cupertino Finance Department, City Hall, 10300 Torre Avenue, Cupertino CA 95014, phone (408)
777-3220, or by the City website at www.cupertino.org.
22
CITY OF CUPERTINO
STATEMENT OF NET ASSETS AND
STATEMENT OF ACTIVITIES
"fhe 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.
"I~he 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 Govenunental 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 of the 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 govermnental and business-type program. The City's general revenues are then listed in the
Goven~mental 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.
23
CITY OF CUPERTINO
STATEMENT OF NET ASSETS
JUNE 30, 2007
ASSE"I S
Cash and investments (Note 2)
Cash and investments with fiscal agents (Note 2)
Receivables:
Accounts
Loans (Note 3)
Nrepaid expenses and other assets
Land held for housing development (Note 1 f)
Capital assets (Note 5)
Non-depreciable
Depreciable, net accumulated depreciation
I~otal Assets
LIA[31L1'f1ES
Accounts payable and accruals
Accrued payroll and benefits
Deposits
Unearned revenue
Compensated absences (Note 1 h)
Due in one year
Due in more than one year
Claims payable (Note 9)
Duc in one vear
Duc in more than one vear
Long-term debt (Note 6)
Due in one year
Due in more than one year
Total Liabilities
NET ASSETS (Note 7)
Invested in capital assets, net of related debt
Restricted tor:
Governmental [3usiness-Type
Activities Activities Total
$49,257,025 $7.870,897 $57,127,922
2,413,677 2,413,677
3,647,351 407,661 4,055,012
2,313,694 2,313,694
330,540 84,084 414,624
6 15,000 615,000
62,318,512 389,929 62,708,441
67,764,542 77,487 67,842,029
188,660,34 I 8,830,058 197,490,399
4,189,375 374,229 4,563,604
274,03 I 29,801 303,832
1,592,757 64,462 1,657,219
76,198 836,450 912,648
129,012 79,791 208,803
2,431,633 473 2,432,106
356,000 356,000
I ,0 19,000 1,019,000
1,355,000 1,355,000
48,385.000 48,385,000
59,808,006 1,385,206 61,193,212
80,343,053 467,416 80,810,469
Special revenue projects 7,755,034
Affordable housing 753,019
Public access television 711,161
Debt service 46,351
"otal Restricted Net Assets 9,265,565
Unrestricted 39,243,717 6,977,436
"1"otal Net Assets 128,852,335 $7,444,852
See accompanying notes to financial statements
7,755,034
753,019
7] 1,161
46,35 I
9,265,565
46,221,153
$136,297, 187
24
CITY OF CUPERTINO
STATEMENT OF ACTIVITIES
FOR'THF; YEAR ENDL-'D.IIJNE 30, 2007
Net (Expense) Revenue and
Program Revenues Changes in Net Assets
Operating Capital
Charges for Grants and Grants and Governmental Business-type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities
Administration $1,675,443 $3,618 $53,355 ($1,618,470
($1,618,470)
Law enforcement 7,148,187 1,031,736 104,792 (6,011,659) (6,011,659)
Public information 1,186,929 (1,186,929
(1,186,929)
Administrative services 3,874,003 (3,874,003) (3,874,003)
Recreation services 2,517,725 193,752 (2,323,973) (2,323,973)
Community development 4,090,959 4,768,026 577,274 1,254,341 1,254,341
Puhlic works 16,230,274 200,969 2,313,091 $3,496,095 (10,220,119) (10,220,119)
Interest on long term dcht 2,239,657 (2,239,657) (2,239,657)
Total Governmental Activities 38,963.177 6,198,101 3,048,512 3,496,095 (26,220,469) (26,220,469)
Business-q~pe Actrvrties
Resource recovery 2,122,805 2,254,416 14,343 $145,954 145,954
Blackberry farm 975,064 1,101,564 126,500 126,500
Cupemno sports center 1,623,839 1,655,169 31,330 31,330
Recreation programs 1,830,401 2,396,720 566,319 566,319
Seniorccnter 771,570 690,603 (80,967) (80,967)
Total Business-type Activities 7,323,679 8,098,472 14,343 789,136 789,136
Ibtal $46,286,856 $14,296,573 $3,062,855 $3,496,095 (26,22Q469) 789,136 (25,431,333)
General revenues
'faxes
Property taxes
Incremental property tax
Salestaxcs
Other taxes
Intergovernmental, unrestricted.
Motor vehicle in lieu
Investment earnings
Miscellaneous
Gain on the sale of capital asset
l7ansfers (Note 4)
6,529,772
187,276
11,252,341
10,721,406
6,529,772
187,276
11,252,341
10,721,406
Total general revenues and transfers
Change in Net Assets
Net Assets-Beginning
Nct Atitie'tS-Ending
Sec accompanying notes to financial statements
4,016,770 4,016,770
1,752,177 366,596 2,118,773
291,423 291,423
1,510,410 1,510,410
500,000 (500,000)
36,761,575 (133,404) 36,628,171
10,541,106 655,732 11,196,838
118,31 1,229 6,789,120 125,100,349
$128,852,335 $7,444,852 $ 136,297,187
25
FUND FINANCIAL STATEMENTS
[n 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
in the current year.
The funds described below were determined to be Major Funds by the City for fiscal 2007. Individual
non-major funds may be found in the Supplemental section.
GF,NF.I2AL FUND
The general fiend is the general operating fund of tl~e 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.
26
CITY OF CUPERTINO
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2007
ASSETS
Cash and investments (Note 2)
Cash and investments with fiscal agents (Note 2)
Receivables:
Accounts
loans (Note 3)
Prepaid items
band held for housing development (Note 1 I)
Advance to other funds (Note 4)
Other assets
'total Assets
LIABILITIES
Accounts payable and accruals
Accrued payroll and benefits
Deposits
Advance from other funds (Note 4)
Unearned revenue
Deferred revenue
Dotal Liabilities
Fund balance (Note 7)
Reserved tor:
Encumbrances
Debt service
Advances to other funds
Prepaid items and other assets
Loans receivable
Land held for housing development
Low and moderate income housing
Capital prgjects
Public access television
Unreserved, reported in:
General Fund
Special Revenue Funds
Capital Project Funds
TOTAL FUND BAI,ANCF-,S
"Dotal Liabilities and Fund Balances
Public Mary Avenue Other
Facilities Bicycle Governmental
General Corporation Footbridge Funds
$25,656,386 $46,342 $530,735 $13,483,761
2,413,677
2,095,414 1,436,476 115,461
1,395.264 918,430
1 15.675
615,000
258,712
3,884 200,000
$29,525,335 $2,460,019 $1,967,211 $15,332,652
$1,269,313
246,366
1,592,757
70,439
$2,413,668 $26,372
3,178,875 2,413,668 1,462,848
230,774
258,712
115,675
1,395,264
711,161
23,634,874
46,351
26,346,460 46,351
$433,130
15,397
258,712
5,759
243,099
956,097
Total
Governmental
$39,717,224
2,413,677
3,647,351
2,313,694
115,675
615,000
258,712
203,884
$4, 142,483
261,763
1,592,757
258,712
76, 198
1,679,575
8.011,488
933,82 I 1,526, 381 2,690,976
46,351
258,712
200,000 315,675
675,331 2,070,595
615,000 615.000
138,019 138,019
4,420, 139 4,420,139
711,161
23,634,874
6,844,632 6,844,632
(429,458) (42,947) (472,405)
504,363 14,376,555 41,273,729
$1,967,21 1 $15,332,652 $49,285,217
See accompanying notes to financial statements
27
CITY OF CUPERTINO
Reconciliation of the
GOVERNMENTAL FUNDS -- BALANCE SHEET
with the
STATEMENT OF NET ASSETS
JUNE 30, 2007
total fund balances 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:
C'API l"AL ASSE"l~S
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
Prcpaids
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
NI°f ASSF."1'S OP GOVERNMENTAL ACTIVITIES
See accompanying notes to financial statements
$41,273,729
129,345,684
9,539,801
10,9x1
737,370
(46,892)
(12,268)
(86,280)
(1,375,000)
1,679,575
(49,740,000)
(2,474,365)
$128,852,335
28
CITY OF CUPERTINO
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2007
Public Mary Avenue Other Total
Facilities Bicycle Governmental Governmental
General Corporation Footbridge Funds Funds
REVENUF.,S
Taxes $28,158,024 $745,969 $28,903,993
Use of money and property 1,764,215 ($6,305) 412,067 2,169,977
Intergovernmental 4,587,019 $1,222,419 2,391,081 8,200,519
Licenses and permits 3,325,844 3,325,844
Charges for services 1,537,527 524,540 2,062,067
Dines and forfeitures 926.310 926,310
Otherrcvcnuc 154.235 154,235
focal Revenues 40,453.174 (6,305) 1,222,419 4,073,657 45.742.945
I:XPI;NDI"fURI;S
Current:
Administration 1,287.101 1,287,101
I,aw enforcement 6,975.517 6,975,517
Public information 1,121,437 1,121,437
Administrative services 3,715,994 3,715,994
Recreation services 2,403,296 2,403.296
Community development 3,485,790 484,047 3,969,837
Public works 9,324,001 1,153,726 10,477,727
Capital outlay 177,534 $936,91 1 3,177,724 4,292.169
Debt service
Principal 1,295,000 1,295,000
Interest and fiscal charges 2,239,657 2,239,657
total Expenditures 28,490,670 3,534,657 936,911 4,815,497 37,777,735
EXCI?SS (DEFICIENCY) OF Rb"VF,NUFS
OVER F.XPENDI"LURES 11,962,504 (3,540,962) 285,508 (741,840) 7,965,210
O"fHFR FINANCING SOURCES (USES)
Proceeds from sale of land 1,663,842 1,663,842
Transfers in (Note 4) 500,000 3,535,000 1,000,000 4,623,000 9,658,000
Transfers (out) (Note 4) (14,577,500) (20Q000) (14,777,500)
total Other Financing Sources (Uses) (12,413,658) 3,535,000 1,000,000 4,423,000 (3,455,658)
NI?"f CIIANGI; IN FUND BALANCES (451,154) (5,962) 1,285,508 3,681,160 4,509,552
BEGINNING Pl1ND BALANCES (DEFICI"f) 26,797,614 52,313 (781,145) 10,695,395 36,764,177
ENDING Fl1ND BALANCES $26,346,460 $46,351 $504,363 $14,376,555 $41,273,729
See accompanying notes to financial statements
29
CITY OF CUPERTINO
Reconciliation of the
NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS
with the
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007
fhe 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 GOVL'RNMENTAL FUNDS $4,509,552
Amounts reported for governmental activities in the Statement of Activities
are different because of the following:
CAPITAL ASSF,TS TRANSACTIONS
Governmental Funds report capital outlays as expenditures. However,
in the Statement of Activities the cost of those assets is capitalized and allocated over
their estimated useful lives and reported as depreciation expense.
The capital outlay expenditures are therefore added back to fund balance
(Net of internal service fund additions of $327,104) 4,292,169
Capital outlay expenditures not capitalized are deducted from fund balance (41,180)
Depreciation expense is deducted from the fund balance
(Depreciation expense is net of internal service fund depreciation
of $283,639 which has already been allocated to serviced funds) (5,772,737)
Retirement of capital assets, net of proceeds from sale of land (161,239)
LONG l~F-,RM 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-term liabilities.
Repayment of debt principal is added back to fund balance 1,295,000
ACCRUAL OFNON-CURRENT ITEMS
"1'he 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 (282,353)
Deferred revenue 1,431,045
AI,LOCA"PION OF INTERNAL SF-,RVICL-' 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 5,270,849
Cl1ANG1; IN NET ASSE"hS OF GOVERNMENTAL ACTIVI"PIES $10,541,106
Sec accompanying notes to financial statements
30
CI"fY OF CUPERTINO
GENERAL FUND
S'T'ATEMENT OP REVBNUES. EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THF, YEAR ENDED ,TUNE 30, 2007
Revenues:
"Faxes
Use of money and property
Intergovernmental
Licenses and permits
Charges for services
Fines and forfeitures
Uthcrrcvcnuc
Amounts available for appropriation
Charges for appropriation (outflows)
Administration
Law enforcement
Public information
Administrative services
Recreation services
Community development
Public works
Capital outlay
"Dotal charges for appropriations
EXCESS OF REVENUES
OVER E:XPIiNDI"fURES
Ol HER FINANCING SOURCES (USES)
Proceeds from sale of land
Transfers in
Transfers (out)
Total other financing sources (uses)
NE"1' CHANGE IN FUND BALANCE
Bf~,GINNING FUND BALANCI?
IiNDING FUND BAI.ANCF:
See accompanying notes to financial statements
Budgeted Amounts
Original Final
Variance with
Final Budget
Positive
Actual Amounts (Negative)
$23,458,000 $27,428,000 $28,158,024 $730,024
880,000 1,380,000 1,764,215 384,215
4,585,000 4,706,114 4,587,019 (119,095)
3,050,000 3,050,000 3,325,844 275,844
1,200,000 1,482,000 1,537,527 55,527
560,000 680,000 926,310 246,310
120,000 14Q000 154,235 14,235
33,853,000 38,866,1 14 40,453, 174 1,587,060
1,346,000 1,390,293 1,287,101 103,192
7,269,000 7,465,885 6,975,517 490,368
987,000 1,111,863 1,121,437 (9,574)
4,074,000 4,317,448 3,715,994 601,454
2,561,000 2,569,704 2,403,296 166,408
3,634,000 3,591,814 3,485,790 106,024
9,931,466 1Q224,477 9,324,001 900,476
177,534 177,534 177,534
29,980,000 30,849,018 28,490,670 2,358,348
3,873,000 8,017,096 11,962,504 3,945,408
1,750;000 1,600,000 1,663,842 63,842
1,000,000 500,000 •500,000
(9,215,000) (14,577,500) (14,577,500)
(6,465,000) (12,477,500) (12,413,658) 63,842
($2,592,000) ($4,460,404) (451,154) $4,009,250
26,797,614
$26,346,460
31
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 2007.
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.
32
CITY OF CUPER"I'INO
PROPRIE"fARY FUNDS
STATEMENT OF NET ASSETS
JUNE 30, 2007
ASSETS
Current assets
Cash and investments (Note 2)
Accounts receivable
Prepaid e~pensc
Total current assets
Capital assets (Note 5).
Non-depreciable
Depreciable, net of
accumulated depreciation
"fo[al Assets
LL~BILI"1'1F,S
Current LiahiliUes
Accounts pavahle and accruals
Accrued payroll and benefits
Compensated absences
Claims payable (Note 9)
Deposits
LJnearnedrevenue
Total current liabilities
Non-current Liabilities:
Compensated absences (Note lh)
Claims payable (Note 9)
Total Liabilities
Nla ASS1:'fS (Note 7)
Invested in capital assets
Unrestricted
'Ib[al Net Assets
Business-type Activities-Enterprise Funds Governmental
Cupertino Activities-
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Farm Center Programs Center Totals Funds
$5,461,360 $142,179 $444,810 $1,754,928 $67,620 $7,870,897 $9,539,801
305,182 9,240 16,882 76,357 407,661
84,084 84,084 10,981
5,766,542 151,419 444,810 1,771,810 228,061 8,362,642 9,550,782
389,929 389,929
1,474 58,455 17,558 77,487 737,370
5,768,016 599,803 462,368 1,771,810 228,061 8,830,058 10,288,152
167,012 37,980 153,689 14,522 1,026 374,229 46,892
1,997 3,428 5,066 16,850 2,460 29,801 12,268
57,401 4,261 18,129 79,791
356,000
64,462 64,462
159,588 585,043 91,819 836,450
226,410 45,669 318,343 616,415 177,896 1,384,733 415,160
473 473 86,280
1,019,000
226,410 46,142 318,343 616,415 177,896 1,385,206 1,520,440
1,474 448,384 17,558 467,416 737,369
5,540,132 105,277 126,467 1,155,395 50,165 6,977,436 8,030,343
$5,541,606 $553,661 $144,025 $1,155,395 $50,165 $7,444,852 $8,767,712
See accompanying notes to financial statements
33
CITY OF CUPERTINO
PROPRIE"I'ARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR FiNDED JUNE 30, 2007
Business-IVpe Activities-Enterprise Funds Governmental
Cupertino Activities-
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Farm Center Programs Center Totals Funds
OPERA PING RIiVENUES
Charges forscrvwcs $2,252,589 $968,707 $1,643,712 $2,396,720 $690,603 $7,952,331 $2,050,923
Uthcr 16,170 132,903 I I ,457 160,530
"fo[alOperatingRevenues 2,268,759 1,101,610 1,655,169 2,396,720 690,603 8,112,861 2,050,923
OPERATING EXPENSES
Salaries and benefits 111,563 324,779 273,044 482,017 130,242 1,321,645 754,635
Materials and supplies 44,132 222,907 141,200 151,191 633,476 1,192 906 512,929
Contractual services 1,966,267 394,738 1,199,921 1,195,546 7,071 4,763,543 208,971
Insurance and claims 947 918
Depreciation 843 32,640 9,674 1,647 781 45,585 283,639
Total Operating Expenses 2,122,805 975,064 1,623,839 1,830,401 771,570 7,323,679 2,708,092
OpcraunglncomclLoss) 145,954 126,546 31,330 566,319 (80,967) 789,182 (657,169)
NONOPI~:RAIING RI:VF,NUES (EXPENSES)
Interest income 282,335 5,302 13991 59,373 5,549 366,550 314,452
Loss on capital asset disposal
Total Nonoperating Revenues (Expenses) 282,335 5,302 13,991 59,373 5,549 366,550 314,452
Income (Loss) Before Contributions and l'ransfers 428,289 131,848 45,321 625,692 (75,418) 1,155,732 (342,717)
Loss on equipment disposal (5 934)
transfers in (Note 4) 5,619,500
Transfers (out) (Note 4) (500,000) (500,000)
Net transfers (500,000) (500,000) 5,613,566
Change in net assets (71,711) 131,848 45,321 625,692 (75,418) 655,732 5,270,849
Net Assets-Beginning 5,613,317 421,813 98,704 529,703 125,583 6,789,120 3,496,863
Net Assets-Ending $5,541,606 $553,661 $144,025 $1,155,395 $50,165 $7,444,852 $8,767,712
See accompanying notes to financial statements
34
CITY OF CUPERTINO
PROPRIE"GARY FUNDS
STA TEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2007
Business-type Activi ties-Enterprise Funds
Governmental
Cupertino Activities-
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Farm Center Programs Center Totals Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $2,282,214 $1,101,359 $1,660,565 $2,463,241 $482,022 $7,989,401 $2,050,923
Cash payments to suppliers
for goods and services (1,995,116) (739,445) (1,213,540) (1,353,406) (453,789) (5,755,296) (1,841,162)
Cash payments to employees (110,396) (421,322) (272,633) (480,881) (115,946) (1,401,178) (747,166)
Net cash provided by operating activities 176,702 (59,408) 174,392 628,954 (87,713) 832,927 (237,405)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Advance to other funds 22,092 22,092
Transfers in 5,619,500
Transfers (out) (500,000) (500,000)
Cash Flows from Noncapital
Financing Activities (477,908) (477,908) 5;619,500
CASH PLOWS FROM CAPITAL AND RELATED
FINANCING AC'PIVI"fIES
Purchase of capital assets (15,320) (15,320) (351,170)
Loss on equipment disposal (5,934)
Cash Flows from Capital and
Related Financing Activities (15,320) (15,320) (357,104)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 282,335 5,302 13,991 59,373 5,549 366,550 314,452
Cash Flows from Investing Activities 282,335 5,302 13,991 59,373 5,549 366,550 314,452
Net Cash Flows (18,871) (54,106) 173,063 688,327 (82,164) 706,249 5,339,443
Cash and investments at beginning of year 5,480,231 196,285 271,747 1,066,601 149,784 7,164,648 4,200,358
Cash and investments at end of year $5,461,360 $142,179 $444,810 $1,754,928 $67,620 $7,870,897 $9,539,801
Reconciliation of operating income (loss) to
net cash provided by operating activities'
Opera[ingincome(loss) $145,954 $126,546 $31,330 $566,319 ($80,967) $789,182 ($657,169)
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation 843 32,640 9,674 1,647 781 45,585 283,639
Change in assets and liabilities:
Accounts receivable 13,455 (251) 43,131 392 56,727
Prepaid expense 896 103,496 104,392 8,546
Accounts payable and accruals 15,283 (25,940) 126,685 (6,669) (822) 108,537 20,110
Accrued payroll and benefits (367) (11,155) 411 1,136 307 (9,668) (63)
Deposits (95,860) (8,367) (104,227) 7,532
Deferred revenue 5,396 23,390 (1 16,522) (87,736) 100,000
Compensated absences 1,534 (85,388) 13,989 (69,865)
Net cash provided by operating activities $176,702 ($59,408) $174,392 $628,954 ($87,713) $832,927_ ($237,405)
See accompanying notes to financial statements
35
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.
36
CITY OF CUPERTINO
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30, 2007
ASSETS
Agency
Funds
Cash and investments (Note 2) $119,252
Total Assets
$119,252
LIABILITIES
Deposits
$1 19,252
Total Liabilities $119,252
See accompanying notes to financial statements
37
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Reporting Entity
The City of Cupertino, California (the City) was incorporated on October 3, 1955, under
the laws of the State of California. The City operates under aCouncil -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 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. Tl~e 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. The Redevelopment Agency's separate
report is available from the City of Cupertino's website at www.cupertino.org.
(b) Measurement Focus, Basis of Accounting and Basis of Presentation
The City's Basic Financial Statements are prepared in conformity with accounting
principles generally accepted in the United States 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.
39
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Measurement Focus Basis of Accounting and Basis of Presentation (continued)
Government-wide Statements: 1'he Statement of Net Assets and the Statement of
Activities display information about the primary government (the City) and its
component units. These statements include the financial activities of the overall City
government, except for fiduciary activities. These statements distinguish between the
governmental and business-type activities of the City. Governmental activities generally
are financed through taxes, intergovernmental revenues, and other nonexchange
transactions. Business-type activities are financed in whole or in part by fees charged to
external parties.
The Statement of Activities presents a comparison between expenses and program
revenues for each segment of the business-type activities of the City and for each
function of the City's governmental activities. Expenses include direct and indirect
types. Direct expenses are those that are specifically associated with a program or
function and, therefore, are clearly identifiable to a particular function. Indirect expenses
such as depreciation, information technology, insurance and equipment replacement are
included in expenses for individual activities and functions. Program revenues include
(a) charges paid by the recipients of goods or services offered by the programs, (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. Program revenues and direct expenses related to
interfund services are included and indirect expenses funded by interfund transfers are
excluded from the Statement of Activities. The Statement of Net Assets eliminates
interfund balances between governmental funds and interfund balances between
proprietary funds.
Fund Financial Statements: The fund financial statements provide information about
the City's funds, including fiduciary funds and blended component units. Separate
statements for each fund category -governmental, proprietary, and frduciary -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. Nonoperatrng
revenues, such as subsidies and investment earnings, result from nonexchange
transactions or ancillary activities.
40
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(I) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (continued)
Major Funds -The City's major governmental and business-type funds are 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 in the accompanying
financial statements:
The General Fund is the general operating fund of the City. It is used to account for all
financial resources except those that are required to be accounted for in another fund.
The Public Facilities Corporation Debt Service Fund accounts for the payments of
principal and interest on certificates of participation issued to provide for the advance
refunding of the City Hall/Library, Wilson Park and Memorial Park certificates of
participation.
The 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 Prograrras Fund accounts for activities of the City's community center.
The Senior Center Fund accounts for the activities of the City's senior center.
41
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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 acost-reimbursement basis. Funds for current and future retiree health
costs are also reserved here.
Fiduciary Fund. The City acts as an agent for re-payment of certain special assessment
debt described in Note 6 of this section. This fund accounts for the tax assessments used
for bond payments.
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 ftnancial 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, transient occupancy 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 ofcost-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.
42
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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 (1) the programs, projects,
services and activities to be provided during the fiscal year; (2) estimated revenue
available to finance the operating plan; and (3) the estimated spending requirements of
the operating plan. The budget represents a process through which policy decisions are
made, implemented and controlled. The City prohibits expending funds for which there
is no legal appropriation. Operating appropriations lapse at fiscal year end.
In May of each year, the City Manager submits to the City Council a proposed budget for
the fiscal year beginning July 1. Public hearings on the proposed budget are held during
the month of June and the budgets for all fund types are legally adopted by Resolution
prior to June 30. Original budget amounts are presented on the accompanying budgetary
statements include these legally adopted amounts.
The City 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.
43
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(I)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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:
Years
Buildings 25
Improvements 31
Vehicles 4-10
Street equipment 3-20
Water equipment 3-50
Office equipment 3-5
Road, curbs, gutters, sidewalks, medians and bridges 30-40
Streetlights 20
Storm drain structure and mains 40
Traffic signals 20
The City capitalizes capital assets exceeding $5,000.
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.
44
CITY OF CUPF,RTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(1)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Land Held for Housing Development
Land held for redevelopment of $615,000 at June 30, 2007 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 Payable
Claims and judgments payable are accrued when the liability is incurred and the amount
can be reasonably estimated. Claims and judgments payable are recorded in an internal
service fund for workers' compensation and long-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 or proprietary 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:
Beginning Balance
Additions
Payments
Governmental
Activities
$2,270,760
386,415
(96,530)
Business-Type
Activities
$150, ] 29
2,341
(72,206)
Total
$2,420,889
388,756
(168,736)
Ending Balance $2,560,645 $80,264 $2,640,909
Current Portion $129,012 $79,791 $208,803
45
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Fund Equity
Reservations of fund balances represent those portions of fund balances which are not
available for appropriation or expenditure or are legally restricted for a specific future
use. Designated fund balances represent management's tentative plans for future use of
financial resources.
(j) Property Tax Calendar
All property taxes are levied and collected by the County of Santa Clara. Secured taxes
are levied on ,luly 1, are due in two installments on November 1 and March 1 and become
delinquent on December 10 and April 10. ilnsecured 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, are recorded as
expenditures/expenses in the reimbursing fund and as reductions of
expenditures/expenses in the fund that is reimbursed.
(1) Statement of Cash Flows
For purposes of reporting cash flows for the City's proprietary funds, pooled cash and
investments are considered cash equivalents as the proprietary funds can access pooled
cash and investments in a manner similar to a demand deposit account.
(m) 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.
46
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) Inventories and Prepaids
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.
(o) Expenditures in Excess of Budget
For the year ended June 30, 2007, expenditures exceeded the budgeted expenditures by
$9,574 and $69 in the General Fund Public Information Program and Public Facilities
Debt Service Fund, respectively.
(2) CASH AND INVESTMENTS
The City's pooled idle funds are invested pursuant to investment policy guidelines adopted by the
City Council. The objectives of the policy are to invest funds to the fullest extent possible and to
invest in accordance with the provisions of the California Government Code with the priority of
safety, liquidity and yield. The policy addresses the safekeeping of securities, types of investment
instruments, diversification, maturities, reporting requirements, and internal control. The City
maintains a cash and investment pool that is available for use by all funds. Each fund type's portion
of this pool is displayed on the 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.
The City's investments are carried at fair value. The City adjusts the carrying value of its
investments to reflect their fair value at each fiscal year end, and it includes the effects of
these adjustments in interest income for that fiscal year.
47
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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 for bond repayments
Subtotal
Fiduciary Funds
Cash and investments
Total Cash and investments
$57,127,922
2,413,677
59,541,599
119,252
$59,660,851
48
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(2) CASH AND INVESTMENTS (continued)
(c) Authorized Investments by the City_
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
Maximum Minimum Percentage of Maximum Investment
Authorized Investment'Fype Maturity Credit Quality Portfolio In One Issuer
U.S. "I"reasury obligations 5 years N/A None None
Federal Agency securities (A) 5 years (B) N/A None None
Up to $40
California Local Agency Investment million, per State
Fund N/A N/A law None
Non-negotiable Certificates of Deposit 5 years N/A None 10% of portfolio; 5% of
(time deposits) issuer's net worth
State of California registered state 5 years N/A None 10%
warrants, treasury notes, or bonds
California local agency bonds, notes, 5 years N/A None 10%
warrants or other obligations
Bonds issued by the local agency 5 years N/A None 10%
Bankers Acceptances ~ 180 days N/A 40% None
10°~> of portfolio: 5% of
Commercial Paper 270 days A-I+ / P-1 25% issuer's ne[ worth; 10°4~
of outstanding paper of
issuer.
Negotiable Certificates of Deposit 5 years N/A 30% 10% of portfolio; 5% of
issuer's net worth
10% of portfolio; 5% of
Repurchase Agreements 1 year N/A None issuer's net worth
Medium "berm Corporate Notes 5 years A or better 30% 10% of portfolio; 5% of
issuer's net worth
Money market mutual funds investing
in 11.S. "treasury, Government Agency N/A N/A 20% 10%
securities. or repurchase agreements
IA) Securities issued by agencies of the federal government such as the Government National Mortgage Association, (GNMA), the
Federal I tome Loan bank (FI ILB), the Federal National Mortgage Association (FNMA), the Federal }tome Loan Mortgage
Corporation (F}ILMC), and the Federal 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
1993 of one FHLMC security with maturity in 2007. The investment principal amortizes to zero upon maturity.
49
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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. ~'he 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:
Maximum
Maximum Minimum Credit Percentage of
Authorized Investment Type Maturity Quality Portfolio
Aaam or
Money market mutual funds N/A AAAm-G None
Up to $40
California Local Agency Investment million, per
Fund N/A N/A State law
U.S. "Treasury obligations N/A N/A None
U.S. Federal agency obligations (A) N/A N/A None
Pre-refunded local agency municipal
obligations that arc non-callable or Flighest rating
irrevocably callable on a specified date N/A category Nonc
General obligations of states N/A A2/A None
U.S. dollar denominated deposit
accounts, federal funds and bankers
acceptances 360 days P-], A-1+, A-1 Nonc
Commercial paper 270 days P-l, A-1 None
Time or demand accounts or certificates
of deposits. collateralized N/A N/A Nonc
Investment agreements or other forms of
investments, including repurchase
agreements, approved by the financial
guaranty insurance carrier. 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 (FFII,B), the Federal National Mortgage Association
(FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and the Federal Farm Credit Bank
(FPCB).
50
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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 $988,690 $988,690
Federal Agency Obligations 8,835,898 $5,451,670 $2,701,778 16,989,346
Local Agency Investment Fund 30,706,440 30,706,440
Government Securities Money Market Funds 9,021,150 9,021,150
Non-negotiable Certificates of Deposit 1,360,382 283,775 190,490 1,834,647
Totallnvestments $50,912,560 $5,735,445 $2,892,268 59,540,273
Cash in banks and on hand 120,578
Total Cash and Investments $59,660,851
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 U.S. Treasuries, Federal Agency obligations, time deposits, negotiable
certificates of deposits, commercial paper, corporate bonds, and security loans. At June
30, 2007, these investments had weighted average maturity of 176 days.
Money market funds are available for withdrawal on demand and at June 30, 2007,
carried investments with an 18 day average maturity.
51
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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, 2007 for each investment type, including those with fiscal agents, as provided by
Moody's ratings:
Investment Type Aaa Total
Federal Agency Obligations $16,989,346 $16,989,346
Government Securities Money Market Funds 9,021,150 9,021,150
Totals
Exempt from Credit Rating Disclosure:
U.S. Treasury Securities
Not Rated:
Local Agency Investment Fund
Certificates of deposit
Total Investments
(g) Concentration of Credit Risk
$26,010,496 26,010,496
988,690
30,706,440
1,834,647
$59,540,273
The City's investment policy contains certain limitations on the amount that can be
invested in any one issuer. In certain categories, these limitations are more restrictive
than those required by California Government Code Sections 53600 et seq. Investments
in any one 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, 2007:
Issuer Investment Type Amount
Federal Home loan Bank Federal Agencies Obligation $5,781,872
Federal National Mortgage Association Federal Agencies Obligation 3,306,394
Federal Home Loan Mortgage Corporation Federal Agencies Obligation 4,938,000
52
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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 1 lth 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 1 lth District Cost of Funds for the remainder of the loan. At June
30, 2007, the balance remaining on the three loans was $890,962.
(4) INTERFUND TRANSACTIONS
Transfers between funds during the fiscal year ended June 30, 2007 were as follows:
Amount
Fund Malting"Transfers Fund Receiving"Transfers 'Transferred
General Fund Public Facilities Corporation Debt Service Fund $3,535,000 (A)
Mary Avenue Bicycle Footbridge Capital Project Fund 1,000,000 (B)
Non-major governmental funds 4,423,000 (C )
Internal Service Funds 5,619,500 (F)
Non-majorgovernmental funds Non-major governmental funds 200,000 (D)
Enterprise Fund
Resource Recovery General Fund 500,000 (F)
Total Intert'und Transfers
$15,277,500
The reasons for these transfers are set forth below:
(A) For debt service.
(B) For capital projects (budget and mid year adjustments)
(C) "fo fund other capital projects (budget and midyear adjustment) and street maintenance.
(D) Park Dedication Special Revenue Fund to back till Stevens Creek Corridor Park which lost the Department of
Water Resources grant.
(F;) To fund retiree medical, IT and equipment replacement.
(F) "To reimburse General Fund costs for waste cleanup.
53
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(4) INTERFUND TRANSACTIONS (continued)
As development of the Cupertino Square project area is still in progress, tax increment
revenues are not yet sufficient to finance Redevelopment 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, 2007 the balance of the advance was $258,712.
Internal Balances -The City-wide financial statements had no net interfund receivables
and payable remaining after the elimination of all such balances within governmental and
business-type activities.
54
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(5) CAPITAL ASSETS
A summary of changes in capital assets follows:
Balance at Balance at
June 30, 2006 additions Retirements June 30, 2007
Governments! nctivilles
Capital assets not being depreciated:
hand $59,035,080 $26,745 ($153,432) $58,908,393
Construction in progress:
Infrastructure 1,725,875 936,910 2,662,785
Other capital prgjects 275,014 472,320 747,334
Dotal capital assets not being depreciated 61,035,969 1,435,975 (153,432) 62,318,512
Capital assets tx;ing depreciated:
Buildings 39,737,714 37,067 39,774,781
Improvements other than buildings 24,854,273 104,906 24,959,179
Machinery and Equipment -governmental funds 1,697,687 206,350 (34,103) 1,869,934
Road, curbs, gutters, sidewalks, medians
and bridges 97,545, 117 2,21 1,944 99,757,061
Streetlights 6,547,255 6,547,255
Storm drain structure and mains 31,422,635 181,572 31,604,207
'traffic signals 5,844,236 73,175 5,917,411
l Dial capital assets being depreciated 207,648,917 2,815,014 (34,103) 210,429,828
Less accumulated depreciation for:
Buildings 9,253,308 1,538,271 10,791,579
Improvements other than buildings 17,063,336 786.349 17,849,685
Machinery and Equipment -governmental funds 1,295,240 136,412 (26,296) 1,405,356
Road, curbs, gutters, sidewalks, medians
and bridges 76,774,421 2,403,196 79,177,6 17
Streetlights 6,501,728 2,363 6,504,091
Storm drain structure and mains 22,655,125 785,566 23,440,691
Traffic signals 4,113,057 120,580 4,233,637
Dotal accumulated depreciation 137,656,215 5,772,737 (26,296) 143,402,656
Net governmental fund program
Capital assets being depreciated 69,992,702 (2,957,723) (7,807) 67,027,172
Internal service fund capital assets
Machinery and equipment 4,322,817 357,104 (89,347) 4,590,574
Accumulated depreciation 3,652,978 283,639 (83,413) 3,853,204
Net internal service capital assets
Being depreciated 669,839 73,465 (5,934) 737,370
Governmental activity capital assets, net $131,698,510 ($1,448,283) ($167,173) $130,083,054
55
(5)
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
CAPITAL ASSETS (continued)
Balance at Balance at
June 30, 2006 Additions Retirements .tune 30, 2007
Business-type aclivilies:
Capital assets not being depreciated:
Land and improvements
focal capital assets not being depreciated
Capital assets Ding depreciated:
Improvements other than buildings
Machinery and P;quipment
Total capital assets being depreciated
Less accumulated depreciation for:
Improvements other than buildings
Machinery and Equipment
1"otal accumulated depreciation
Net capital assets being depreciated
Business-type activity capital assets, net
$389,929 $389,929
389,929 389,929
628,464 628,464
305,097 $15,320 ($17,158) 303,259
933,561 15,320 (17,158) 931,723
509,859 509,859
315,950 45,585 (17,158) 344,377
825,809 45,585 (17,158) 854,236
107,752 (30,265) 77,487
$497,681 ($30,265) $467,416
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
I,aw Enforcement
Public Information
Administrative Services
Recreation Service
Community Development
Public Works
Internal Service hands
Amount
$324,449
1 1,271
27,587
25,199
16,903
574
5,366,754
283,639
Total $6,056,376
56
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(5)
CAPITAL ASSETS (continued)
Business-Type Activities Amount
Resources Recovery $843
Blackberry Farms 32,640
Cupertino Sports Center 9,674
Recreation Program 1,647
Senior Center 781
Total $45,585
The Blackberry Farm picnic grounds closed temporarily on September 29, 2006 for
approximately two years to allow for a major renovation and re-design of the grounds as
planned in the Stevens Creek Corridor Park capital improvement project. The only major
capital asset temporarily affected is the picnic ground portion of the $389,929 land value
shown under business-type activities. The closed area takes up approximately 58% of the
Farm acreage. The City's municipal golf course, which takes up the remaining acreage,
remains in full operation.
(6)
LONG-TERM DEBT
(a) Cupertino Public Facilities Corporation Certificates of Participation
Original Balance Balance
Issue June 30, June 30, Current
Amount 2006 Retirements 2007 Portion
Governmental Activity Debt:
2002 Refinancing and Capital
Improvement Project,
2 00-5 00°/n, due 07/01/2030 $56,640,000 $51,035,000 $1,295,000 $49,740,000 $1,355,000
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 F,xpansion in ]990, 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").
57
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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:
Governmental Activities
For the Year
Ending June 30 Principal Interest
2008 $1,355,000 $2,179,063
2009 1,415,000 2, 116,394
2010 1,460,000 2,073,944
2011 1,500,000 2,030,144
2012 1, 545,000 I ,985,144
2013-2017 8,655,000 9,009,255
2018-2022 10,725,000 6,938,530
2023-2027 13,420,000 4.246,337
2028-2030 9,665,000 932,187
Total $49,740,000 $31,10,998
(b) 1915 Act Bonds Without City Commitment
The City acts as agent for the property owners of parcels upon which assessments were
made for local improvements. 'The City collects the assessments and forwards the
collections to bond holders. 1'he 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 ttntnatured bond principal at June 30, 2007 was $95,000.
(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 fi-om the developer. The City
has no legal or moral liability with respect to the payment of this debt.
58
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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.
Kesvricted 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 Ba/antes, 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
designated fund balance for the Governmental Funds at June 30, 2007 are as follows:
General Fund:
Economic Uncertainty $10,000,000
Utilities Users Tax Revenue 500,000
PERS Future Liability 1,000,000
CIP Future Projects 5,000,000
Special Revenue Funds, Gas Tax Projects 3,505,44?
T'otaldesignated fund balances $20,005,442
59
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(7) NET ASSETS AND FUND BALANCES (continued)
(a) Closed fund and new fund
In fiscal 2006-07, the Library Construction Capital Project Fund was closed; and the Retiree
Medical Internal Service Fund was established.
(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, 2007, 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. At June 30, 2007, the cost
and carrying value of the building, opened in October 2004, is $21,935,325 and $20,180,499,
respectively, with $1,754,826 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. T'he 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.
60
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(9)
LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT (continued)
The City belongs to 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.
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, .tune 30, 2005 $1,064,000
Incurred claims 363,859
Claim payments/credits (152,859)
Claims liability, .tune 30, 2006 1,275,000
Incun•ed claims 161,228
Claim payments/credits (61,228)
Claims liability, June 30, 2007 $1,375,000
Current portion $356,000
61
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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 79
retirees participating in the plan as of June 30, 2007. The City has established an Internal Service
Fund to fund the liabilities associated with this retiree medical benefit. That fund had $4,784,687
in net assets.
Retiree medical insurance premium expenses for the past five fiscal years ended June 30 are as
follows:
2003 $427,312
2004 501,568
2005 536, 190
2006 558,366
2007 614,692
62
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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 $11,413,922 as of June 30, 2007. 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
pro-visions 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 Policy
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, 2007, are summarized as follows:
Miscellaneous
Benefit vesting schedule 5 years service
Benefit payments Monthly for life
Eligble retirement age 50
Benefits, as a % of annual salary
muhiplied by years of service and
annual salary 1.426% - 2.418%
Required employee contribution rates 7%
Required employer contribution rates 1 1.529%
63
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(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, 2007, 2006 and 2005 amounted to $1,237,257, $1,312,167 and $870,110 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, 2005.
Miscellaneous Plan:
Actuarial
Entry Age Unfunded
Valuation Accrued Value of (Overfunded)
Date Liability Assets Liability
6/30/03 $4Q 199,604 $36,349,011 $3,850,593
6/30/04 44,001,844 38,356,851 5,644,993
6/30/05 47,054,446 41,347,290 5,707,156
Annual
Funded Covered
Ratio Payroll
90.4% $9,619,149
87.2% 9,749,961
87.9% 9,304,690
Unfunded
(Overfunded)
Liability as
ofPavroll
40.0%
57.9%
61.3%
64
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2007
(13) DEFICIT FUND BALANCE
As of June 30, 2007, the General Fund had advanced funds to the Redevelopment Agency (RDA)
for staffing costs, legal and consulting fees as the Cupertino Square project area's tax increment
revenues are not yet sufficient to finance Agency operations. Such expenditures have resulted in
a deficit fund balance of $85,357. Once development leads to improved tax increment, the RDA
will repay the advance.
(14) SUBSEQUENT EVENT
Employees retiring on or after December 22, 2007 will receive an enhanced defined benefit
pension based on a 2.7% at age 55 CaIPERS formula. Benefits will range from 2% to 2.7% of
annual salary multiplied by years of service. To pay for the package, first year annual pension
costs will increase by 5.6$% of payroll or $665,000. Employees will pay 1% of the increase,
with the City incurring the remaining 4.68%.
65
MAJOR GOVIH;RNMENTAL 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.
66
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, 2007
REVENUES
Use of money and property
Total Revenues
EXPENDITURES
Debt service:
Principal
Interest and fiscal charges
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTF(ER FINANCING SOURCES (USES)
Transfers in
Total Other Financing Sources (Uses)
NET CHANGE [N FUND BALANCE
BEGINNING FUND BALANCE
ENDING FUND BALANCE
Variance
Positive
Budget Actual (Negative)
($6,305) ($6,305)
(6,305) (6,305)
$1,295,000 1,295,000
2,239,588 ~ 2,239,657 (69)
3,534,588 3,534,657 (69)
(3,534,588) (3,540,962) (6,374)
3,535,000 3,535,000
3,535,000 3,535,000
$412 (5,962) ($6,374)
52,313
$46,351
67
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
Finds.
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.
Pay°k 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.
L'nvironmental Marra~ement -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.
Redevelopmen! Agency -Accounts for the Cupertino Square project area and low and moderate
income housing funds.
'['he 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.
69
CITY OF CUPERTINO
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2007
SPECIAL REVENUE FUNDS
Storm Park Environmental Housing
Drain Dedication Management Transportation Development
Assets
Cash and investments $1,114,539 $150,353 $177,835 $3,904,131 $2,291,609
Accounts receivable 50,847 64,614
Loans receivable 918,430
Land held for housing development 615,000
Other assets
Total assets $1,114,539 $150,353 $177,835 $3,954,978 $3,889,653
Liabilities
Accounts payable and accruals $69 $211,033 $221,574
Accrued payroll and benefits $864 1,816 7,976 1,758
Advance from other funds
Unearned revenue 5,759
Deferred revenue 243,099
Total Liabilities 864 1,885 224,768 466,431
Fund balances
Reserved for:
Encumbrances 6,175 224,768 4,128
Loans receivable 675,331
Land held for housing development 615,000
Low and moderate income housing
Prepaids and other assets
Capital projects
lJnreserved, reported in:
Special Revenue Funds 1,113,675 $150,353 169,775 3,505,442 2,128,763
Capital Project Funds
Total fund balances (deficit) 1,1 13,675 150,353 175,950 3,730,210 3,423,222
Total liabilities and fund balances $1,114,539 $150,353 $177,835 $3,954,978 $3,889,653
7~
SPECIAL
REVENUE
FUND CAPITAL PROJECT FUNDS
Total
Capital Stevens Creek Nonmajor
Redevelopment Improvement Library Corridor Governmental
Agency Projects Construction Park Funds
$176,338 $4,558,606 $1,110,350 13,483,761
115,461
918,430
615,000
200,000 200,000
$176,338 $4,758,606 $1,110,350 $15,332,652
$454 $433,130
$2,983 15,397
258,712 258,712
5,759
243,099
261,695 454 956,097
$138,013 $1,153,297 1,526,381
675,331
615,000
138,019 138,019
200,000 200,000
4,420,139 4,420,139
(223,376) 6,844,632
(42,947) (42,947)
(85,357) 4,758,152 1,110,350 14,376,555
$176,338 $4,758,606 $1,110,350 $15,332,652
71
CITY OF CUPERTINO
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2007
SPECIAL REVENUE FUNDS
Storm Park Environmental Housing
Drain Dedication Management Transportation Development
REVENUES
Taxes $43,057 $252,950 $262,687
Use of money and property 55,246 6,745 $825 $196,115 147,085
Intergovernmental 105,609 2,004,858 189,163
Charges for services 363,040 15,800
Total Revenues 203,912 259,695 363,865 2,216,773 598,935
EXPENDITURES
Current
Community development 330,173
Public works 333,349 820,377
Capital outlay 181,571 2,211,908
Total Expenditures 181,571 333,349 3,032,285 330,173
EXC[?SS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 22,341 259,695 30,516
(815,5]2)
268,762
OTHF.'.R FINANCING SOURCES (USES)
'Transfers in 50,000 800,000
Transfers (out) (200,000)
Total Other Financing Sources (Uses) (150,000) 800,000
NET CHANGE IN FUND BALANCES 22,341 109,695 30,516
(15,5]2)
268,762
BEGINNING FUND BALANCES (DEFICIT) 1,091,334 40,658 145,434 3,745,722 3,154,460
ENDING FUND BALANCES (DEFICIT) $l,] 13,675 $150,353 $175,950 $3,730,210 $3,423,222
72
SPECIAL
REVENUE
FUND CAPITAL PROJECTS FUNDS
Total
Capital Stevens Creek Nonmajor
Redevelopment Improvement Library Corridor Governmental
Agency Projects Construction Park Funds
$187,275 $745,969
6,051 412,067
$91,451 2,391,081
$145,700 524,540
193,326 145,700 91,451 4,073,657
153,874 484,047
1,153,726
309,876 $2,050 472,319 3,177,724
153,874 309,876 2,050 472,319 4,815,497
39,452 (164,176) (2,050) (380,868) (741,840)
2,872,000 901,000 4,623,000
(200,000)
2,872,000 90],000 4,423,000
39,452 2,707,824 (2,050) 520,132 3,681,160
(124,809) 2,050,328 2,050 590,218 10,695,395
($85,357) $4,758,152 $1,110,350 $14,376,555
73
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, 2007
SPECIAL REVENUE FUNDS
REVENUES
Taxes
Use of money and property
Intergovernmental
Charges for services
Total Revenues
EXPENDITURES
Current:
Community development
Public works
Capital outlay
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out)
Total Other Financing Sources (Uses)
NET CHANGE IN FUND BALANCES
BEGINNING FUND BALANCES (DEFICIT)
ENDING FUND BALANCES (DEFICIT)
STORM DRAIN PARK UEDICAT[ON
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)
$50,000 $43,057 ($6,943) $700,000 $252,950 ($447,050)
26,000 55,246 29,246 6,745 $6,745
200,000 105,609 (94,391)
276,000 203,912 (72,088) 700,000 259,695 (440,305)
1,280,448 181,571 ],098,877 72,673 72,673
1,280,448 18],571 1,098,877 72,673 72,673
(1,004,448) 22,341 ],026,789 627,327 259,695 (367,632)
50,000 50,000
(200,000) (200,000)
(150,000) (150,000)
($1,004,448) 22,341 $1,026,789 $477,327 109,695 ($367,632)
1,091,334 40,658
$1,113,675 $150,353
74
SPECIAL REVENUE FUNDS
ENVIRONMENTAL
MANAGEMENT TRANSPORTATION HOUSING DEVELOPMENT
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative)
$250,000 $262,687 $12,687
$1,000 $825 ($175) $80,000 $196,115 $116,115 115,000 147,085 32,085
1,414,289 2,004,858 590,569 398,000 189,163 (208,837)
365,000 363,040 (1,960) 15,800 15,800
366,000 363,865 (2,135) 1,494,289 2,216,773 722,484 763,000 598,935 (164,065)
689,153 330,173 358,980
396,836 333,349 63,487 859,985 820,377 39,608
4,904,138 2,211,908 2,692,230
396,836 333,349 63,487 5,764,123 3,032,285 2,731,838 689,153 330,173 358,980
(30,836) 30,516 61,352 (4,269,834) (815,512) 3,454,322 73,847 268,762 194,915
800,000 800,000
800,000 800,000
($30,836) 30,516 $61,352 ($3,469,834) (15,512) $3,454,322 $73,847
145,434 3,745,722
$175,950 $3,730,210
268,762 $194,915
3,154,460
$3,423,222
(Continued)
75
CITY OF CUPERTINO
BUDGETED NON-MAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES [N FUND BALANCES
BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2007
SPECIAL REVENUE FUND
REDEVELOPMENT AGENCY
REVENUES
Taxes
Use of money and property
Intergovernmental
Charges for services
Total Revenues
EXPENDITURES
Current:
Community development
Public works
Capital outlay
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out)
Total Other Financing Sources (Uses)
NET CFIANGE IN FUND BALANCES
BEGINNING FUND BALANCES (DEFICIT')
ENDING FUND BALANCES (DEFICIT)
Variance
Positive
Budget Actual (Negative)
$90,000 $187,275 $97,275
6,051 6,051
90,000 ]93,326 103,326
217,438 153,874 63,564
217,438 153,874 63,564
(127,438) 39,452 166,890
($127,438) 39,452 $166,890
(124,809)
($85,357)
76
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.
"i~he concept of major funds does not extend to internal service funds because they do not do business
with outside parties. For the Statement of Activities, the net revenues and expenses of each internal
service fund are eliminated by netting them against the operations of the City departments that generated
them. The remaining balance sheet items are consolidated with these same funds in the Statement of Net
Assets. However, internal service funds are still presented separately in the Fund Financial Statements.
Management Information Systems -Accounts for the activities related to the maintenance and
replacement of the City's technology infrastructure.
Wog°kers' Compensation -Accounts for the activities in support of the self-insured workers'
compensation program.
F,quipment 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.
Retiree Medical -Contains funds set aside for other post employment retirement benefits.
78
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET ASSETS
JUNE 30, 2007
Management
Information Workers' Equipment Long-Term Retiree
Systems Compensation Revolving Disability Medical Total
ASSETS
Cash and investments $1,512,605 $1,489,716 $1,735,703 $17,090 $4,784,687 $9,539,801
Prepaid expense ]0,981 10,981
Total current assets 1,523,586 1,489,716 1,735,703 17,090 4,784,687 9,550,782
Capital assets,
net of accumulated depreciation 139,970 597,400 737,370
Total Assets 1,663,556 1,489,716 2,333,103 17,090 4,784,687 10,288,152
LIABILITIES
Current Liabilities:
Accounts payable and accruals 15,067 31,825 46,892
Accrued payroll and benefits 5,803 346 6,119 12,268
Claims payable 356,000 356,000
Total current liabilities 20,870 356,346 37,944 415,160
Non-current Liabilities:
Compensated absences ] 9,286 66,994 86,280
Claims payable 1,019,000 1,019,000
Total Liabilities 40,156 1,375,346 104,938 1,520,440
NET ASSETS
Invested in capital assets 139,969 597,400 737,369
Unrestricted 1,483,431 114,370 1,630,765 17,090 4,784,687 8,030,343
Total Net Assets $1,623,400 $114,370 $2,228,165 $17,090 $4,784,687 $8,767,712
79
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENSES AND
CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2007
Management
Information Workers' Equipment Long-Term Retiree
Systems Compensation Revolving Disability Medical To[al
OPERATING REVENUES
Charges for services $883,310 $280,147 $841,000 $46,466 $2,050,923
Total Operating Revenues 883,310 280,147 841,000 46,466 2,050,923
OPERATING EXPENSES
Salaries and related expenses 382,667 18,924 353,044 754,635
Materials and supplies 306,966 205,963 512,929
Contractual services 138,190 70,781 208,971
Insurance claims 287,785 45,44 ] $614,692 947,918
Depreciation 99,424 184,215 283,639
Total Operating Expenses 927,247 306,709 814,003 45,441 614,692 2,708,092
Operating Income (Loss) (43,937) (26,562) 26,997 1,025 (614,692) (657,169
NONOPERATING REVENUES (EXPENSES)
Interest income 64,388 70,780 89,088 817 89,379 314,452
Loss on capital asset disposal
~'otal Nonopera[ing Revenues (Expenses) 64,388 70,780 89,088 817 89,379 314,452
Income (Loss) Before Transfers 20,451 44,218 116,085 1,842 (525,313) (342,717)
Loss on equipment disposal (5,934) (5,934)
Transfers m 284,500 25,000 5,310,000 5,619,500
Change in Net Assets 304,951 44,218 135,151 1,842 4,784,687 5,270,849
BEGINNING NET ASSETS 1,318,449 70,152 2,093,014 15,248 3,496,863
ENDING NET ASSETS $1,623,400 $114,370 $2,228,165 $17,090 $4,784,687 $8,767,712
g~
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers
Cash payments to suppliers for goods and services
Cash payments to employees
Cash Flows from Operating Activities
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
"transfers in
Cash Flows from Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchase of capital assets
Loss on equipment disposal
Cash Flows from Capital and Related
Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Cash Flows from Investing Activities
Net Cash Flows
Cash and investments at beginning of year
Cash and investments at end of year
Reconciliation of operating income (loss) to net cash flows
from operating activities:
Operating income (loss)
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities:
Depreciation
Change in assets and liabilities:
Prepaid expenses
Accounts payable and accruals
Accrued payroll and benefits
Compensated absences
Claims Payable
Cash Flows from Operating Activities
Management
Information Workers' Equipment Long-Term Retiree
Systems Compensation Revolving Disability Medical Total
$883,310 $280,147 $841,000 $46,466 $2,050,923
(440,759) (189,835) (250,435) (45,441) ($614,692) (1,541,162)
(389,786) (18,910) (338,470) (747,166)
52,765 71,402 252,095 1,025 (614,692) (237,405)
284,500 25,000 5,310,000 5,619,500
284,500 25,000 5,310,000 5,619,500
(48,700)
(302,470)
(5,934)
(351,170)
(5,934)
(48,700)
(308,404)
(357,104)
64,388 70,780 89,088 817 89,379 314,452
64,388 70,780 89,088 817 89,379 314,452
352,953 142,182 57,779 1,842 4,784,687 5,339,443
1,159,652 1,347,534 1,677,924 15,248 4,200,358
$1,512,605 $1,489,716 $1,735,703 $17,090 $4,784,687 $9,539,801
($43,937) ($26,562) $26,997
99,424 184,21 S
$1,025 ($614,692) ($657,169)
283,639
8,546 8,546
(4,149) (2,050) 26,309 20,110
(556) 14 479 (63)
(6,563) 14,095 7,532
100,000 100,000
$52,765 $71,402 $252,095 $1,025 ($614,692) ($237,405)
gl
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.
82
CITY OF CUPERTINO
Combining Statement of Changes in Assets and Liabilities
All Agency Funds
All Agency Funds
Assets
Cash and investments
Liabilities
Deposits
For the Fiscal Year Ended June 30, 2007
Balance
June 30, 2006
Additions
Deletions
Balance
June 30, 2007
$236,049 $116,797 $119,252
$236,049 $116,797 $119,252
83
STATISTICAL SECTION
85
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:
I . Net Assets by Component
2. Changes in Net Assets
3. Fund Balances of Governmental Funds
4. Changes in Fund Balance of Governmental Funds
Revenue Capacity
These schedules contain information to help the reader assess the City's most significant own-source
revenue, property tax. Sales tax, the City's largest revenue, is not considered own-source since the State
collects and governs it.
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. Schedules presenting government-wide information include data
from the year of GASB Statement 34 implementation.
87
CITY OF CUPERTINO
NET ASSETS BY COMPONENT
LAST FIVE FISCAL YEARS
(Accrual basis of accounting)
Governmental Activities
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total governmental activities net assets
2003
$79,705,041
9,081,791
24,472,451
$113,259,283
Fiscal Year Ended June 30
2004 2005 2006
$85,425,753 $86,530,017 $83,064,879
7,416,930 7,291,925 8,329,671
18,541,954 21,202,795 26,916,679
$111,384,637 $115,024,737 $118,311,229
Business-Type Activities
Invested in capital assets, net of related debt
Unrestricted
"Total business-type activities net assets
Primary Government
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total primary government net assets
688,331
6,573,514
$7,261,845
80,393,372
9,081,791
31,045,965
$120,521,128
645,290
7,314,068
$7,959,358
578,962
6,028,989
$6,607,951
497,681
6,291,439
$6,789,120
86,071,043
7,416,930
25,856,022
$119,343,995
87,108,979
7,291,925
27,231,784
$121,632,688
83,562,560
8,329,671
33,208,118
$125,100,349
88
CITY OF CUPERTINO
NET ASSETS BY COMPONENT
LAST FIVE FISCAL YEARS
(Accrual basis of accounting)
2007
$80,343,053
9,265,565
39,243,717
$128,852,335
467,416
6,977,436
$7,444,852
80,810,469
9,265,565
46,221,153
136,297,187
89
CITY OF CUPERTINO
CHANGES IN NET ASSETS
LAST FIVE FISCAL YEARS
(Accrual Basis of Accounting)
Fiscal Year Ended June 30
2003 2004 2005 2006
Expenses
Governmental Activities:
Administration
Law Enforcement
Public Information
Administrative Services
Recreation Services
Community Development
Public Works
Interest on Long Term Debt
Total Governmental Activities Expenses
Business-Type Activities:
Resource Recovery
Blackberry Farm
Cupertino Sports Center
Recreation Programs
Senior Center
Total Business-Type Activities Expense
Total Primary Government Expenses
Program Revenues
Governmental Activities:
Charges for Services:
Administration
Law Enforcement
Administrative Services
Recreation Services
Community Development
Public Works
Operating Grants and Contributions
Capital Grants and Contributions
Total Government Activities Program Revenues
Business-Type Activities:
Charges for Services:
Resource Recovery
Blackberry Farm
Cupertino Sports Center
Recreation Programs
Senior Center
$1,635,846 $1,430,523 $1,2$0,339 $1,354,543
6,041,831 6,090,038 6,179,326 6,577,199
763,254 710,754 824,317 914,024
3,556,129 3,923,377 3,750,174 4,208,389
2,156,972 2,234,509 2,173,936 2,359,966
3,234,456 2,678,109 3,269,475 4,541,965
17,534,128 15,546,461 14,585,232 16,384,026
3,796,472 2,317,837 2,289,526 2,262,913
38,719,088 34,931,608 34,352,325 38,603,025
1,897,425 1,793,083 2,927,060 2,101,198
1,497,420 1,353,362 1,341,712 1,302,855
1,130,077 1,352,509 l ,452,957 1,448,048
1,554,834 1,590,302 1,689,436 1,729,194
570,412 493,244 438,440 588,818
6,650,168 6,582,500 7,849,605 7,170,113
$45,369,256 41,514,]08 42,201,930 45,773,138
--- --- --- $23,20 ]
$468,110 $838,457 $694,952 722,164
294,577 16,650 --- ---
161,969 148,337 163,462 240,074
1,624,181 1,903,277 4,164,792 5,286,336
348,905 325,959 286,280 201,250
2,388,199 2,496,689 593,657 3,403,762
965,211 3,612,102 2,164,907 522,950
6,251,152 9,341,471 8,068,050 10,399,737
2,397,439 2,398,819 2,395,282 2,203,127
1,479,3 l2 1,301,092 1,218,958 1,155,986
1,109,799 1,184,860 1,385,837 1,419,672
1,872,004 1,910,599 2,167,705 2,331,409
484,530 456,211 473,787 704,390
90
CITY OF CUPERTINO
CHANGES IN NET ASSETS
LAST FIVE FISCAL YEARS
(Accrual Basis of Accounting)
2007
$1,675,443
7,148,187
1,186,929
3,874,003
2,517,725
4,090,959
16,230,274
2,239,657
't R 9f't 177
2,122,805
975,064
1,623,839
1,830,401
771.570
7_"iZ"i_f~"/y
46,L2S6,2SJ6
$3,618
1,031,736
193,752
4,768,026
200,969
3,048,512
~ 49~ nq5
17 747 7OX
2,254,416
1,101,564
1,655,169
2,396,720
690,603 91
CITY OF CUPERTINO
CHANGES IN NET ASSETS
LAST FIVE FISCAL YEARS
(Accrual Basis of Accounting)
Fiscal Year Ended June 30
2003 2004 2005 2006
Operating Grants and Contributions 61,441 84,660 28,860 135,539
Total Business-Type Activities Program Revenue 7,404,525 7,336,241 7,670,429 7,950,123
Total Primary Government Program Revenues 13,594,236 16,677,712 15,738,479 18,349,860
Net (Expense) Revenue
Governmental Activities
Business-Type Activities
Total Primary Government Net Expense
General Revenues and Transfers
Governmental Activities:
Taxes:
Property Taxes
Incremental Property Tax
Sales Taxes
Other Taxes
Transfers
Motor Vehicle In Lieu (1)
Investment Earnings
Miscellaneous
Total Government Activities
Business-Type Activities:
Investment Earnings
Transfers
Total Business-Type Activities
Total Primary Government
Change in Net Assets
Government Activities
Business-Type Activities
Total Primary Government
-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
$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 3,908,059 3,269,261
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
-$7,238,346 -1,874,646 3,640,100 3,286,492
860,853 697,513 -1,351,407 181,169
-$6,377,493 -$],]77,133 $2,288,693 $3,467,661
(l) Includes intergovernmental revenues received as a replacement for motor vehicle in-lieu starting
in 2005.
92
CITY OF CUPERTINO
CHANGES IN NET ASSETS
LAST FIVE FISCAL YEARS
(Accrual Basis of Accounting)
2007
14,343
8,112,815
20,855,523
-26,220,469
789.136
-$25,431,333
$6,529,772
187,276
11,252,341
10,721,406
500,000
4,016,770
1,752,177
291,423
36.761.575
366,596
-500.000
-13 3.404
36,628,171
10,541,106
655.732
11,196,838
93
CITY OF CUPERTINO
FUND BALANCES OF GOVERNMENTAL FUNDS
LAST FIVE FISCAL YEARS
(Modified Accrual Basis of Accounting)
Fiscal Year Ended June 30
2003 2004 2005 2006 2007
General Fund
Reserved
ilnreserved
Total General Fund
All Other Governmental Funds
Reserved
Unreserved, reported in:
Special Revenue Funds
Capital Project Funds
Total All Other Governmental Funds
$3,782,689 $3,897,270 $3,864,969 $2,931,046 $2,711,586
13,099,033 12,632,286 18,313,846 23,866,568 23,634,874
$16,881,722 $16,529,556 $22,178,815 $26,797,614 26,346,460
$20,891,656 $9,784,645 $2,701,067 $4,925,900 $8,555,042
3,976,517 3,736,446 3,618,814 6,249,004 6,844,632
6,576,208 2,236,730 1,663,033 -1,208,341 -472,405
$31,444,381 $15,757,821 $7,982,914 $9,966,563 14,927,269
The City implemented GASB Statement 34 in fiscal year 2003 and has elected to show the above information
from that date.
94
CITY OF CUPERTINO
CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
LAST FIVE FISCAL YEARS
(Modified Accrual Basis of Accounting)
Fiscal Year Ended June 30
2003 2004 2005 2006
Revenues
Taxes $20,200,250 $21,004,405 $23,614,623 $25,616,553
Use of Money and Property 1,910,503 940,963 1,119,399 1,607,837
Intergovernmental 6,318,523 7,236,955 5,567,266 5,896,167
Licenses and Permits 1,410,572 1,540,760 2,896,000 3,614,953
Charges for Services 855,844 930,050 1,568,935 2,143,729
Fines and Forfeitures 550,377 723,748 559,791 629,586
Other Revenue 59,219 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 1,474,924 1,222,581 1,162,096 1,236,390
Law Enforcement 6,015,036 5,950,849 6,144,695 6,499,911
Public Information 703,431 686,798 758,314 853,484
Administrative Services 3,475,991 3,758,806 3,671,303 4,103,497
Recreation Services 2,104,167 2,141,431 2,121,366 2,302,995
Community Development 3,177,406 2,563,242 3,156,908 4,467,655
Public Works 10,440,335 9,322,086 9,637,314 10,386,055
Capital Outlay 6,812,856 20,246,237 10,025,935 2,771,502
Debt Service
Principal Repayment 6,925,948 1,220,000 1,245,000 1,270,000
Interest and Fiscal Charges 2,939,757 2,317,837 2,289,526 2,262,913
Total Expenditures 44,069,851 49,429,867 40,212,457 36,154,402
Excess (deficiency) of Revenues Over
(under) expenditures -12,764,563 -16,043,726 -3,093,648 3,599,599
Other Financing Sources (Uses)
Bond Proceeds 57,677,519 --- --- ---
Proceeds from Sale of Land --- --- --- 2,422,849
Payment to Refunded Debt Escrow Agent -39,208,286 --- --- ---
Transfers In 25,775,538 4,765,307 7,904,763 8,364,084
Transfers Out -25,840,538 -4,760,307 -6,936,763 -7,784,084
Total Other Financing Sources 18,404,233 5,000 968,000 3,002,849
Net Change in Fund Balances $5,639,670 -$16,038,726 -$2,125,648 $6,602,448
Debt service as a percentage of
noncapital expenditures 25.3% 11.6% 11.4% 10.6%
The City implemented GASB Statement 34 in fiscal year 2003. This calculation is included only for
fiscal years from that date.
1) Noncapital expenditures is total expenditures less capital assets added each year to statement of
net assets. 96
CITY OF CUPERTINO
CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
LAST FIVE FISCAL YEARS
(Modified Accrual Basis of Accounting)
2007
$28,903,993
2,169,977
8,200,519
3,325,844
2,062,067
926,310
154.23 5
45,742,945
] ,287,101
6,975,517
1,121,437
3,715,994
2,403,296
3,969,837
10,477,727
4,292,169
1,295,000
2,239,657
37,777,735
7,965,210
1,663,842
9,658,000
-14,777,500
-3,455,658
4,509,552
10.6% (1)
97
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
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%
2007 $10,794,991,704 $381,307,80] $94,957,979 $11,176,513,115 $11,176,513,115 0.06%
Property Tax Comparison
$12,000,000,000
$10,000,000,000
$8,000,000,000
$6,000,000,000
$4,000,000,000
$2,000,000,000
$0
a`~
ti~
~~qq ~~o ~~ti ~~ti ~oo^~ ~oo~ ~OpS
Source: HdL Companies
~~b ti~^
®Secured Property ~I
(^UnsecuredProperty
98
CITY OF CUPERTINO
PROPERTY TAX RATES
ALL OVERLAPPING GOVERNMENTS
LAST TEN FISCAL YEARS
County
County School Service
County Bond
County Retirement
Library Retirement
Central Fire District
Cupertino Elementary
Foothill College Maintenance
Fremont High Maintenance
Mid Peninsula Open Space
Bay Area Air Quality Mgmt
SCV Water D-N Central
SCV WD State Water Project
SCV Water District D-Zone W-4
SCV Water D-District
Cupertino
TOTALS
Source: The HdL Companies
1998 1999 2000
1.000 1.000 1.000
.0388 .0388 .0388
.0024 .0043 .0043
0.151 0.151 0.151
.0292 .0247 .0247
0.064 0.064 0.064
0.167 0.167 0.167
.0156 .0156 .0156
.0018 .0018 .0018
.0097 .0097 .0097
.0076 .0053 .0053
.0023 0.002 0.002
.0018 .0018 .0018
.0002 .0002 .0002
1.491 1.486 1.486
2001
1.000
.0388
.0043
0.151
.0247
0.064
0.167
.0156
.0018
.0097
.0053
0.002
.0018
.0002
1.486
99
2002
1.000
.0388
.0043
0.151
.0247
0.064
0.167
.0156
.0018
.0097
.0053
0.002
.0018
.0002
1.486
2003 2004
1.000 1.000
.03 88 .03 88
.0043 .0043
0.151 0.151
.0247 .0247
0.064 0.064
0.167 0.167
.0156 .0156
.0018 .0018
.0097 .0097
.0053 .0053
0.002 0.002
.0018 .0018
.0002 .0002
1.486 1.486
2005
1.000
0.031
0.239
0.031
.0043
0.151
.0247
0.064
0.167
.0156
.0018
.0097
.0053
.0014
.0018
.0002
1.747
2006 2007
1.000 1.000
0.031 0.031
0.239 0.135
0.031 0.038
.0043 .0258
0.151 0.151
.0247 .0247
0.064 0.063
0.167 0.167
.0156 .0155
.0018 .0018
.0097 .0090
.0053 .0048
.0014 .0012
.0018 .0016
.0002 0.057
1.747 1.726
CITY OF CUPERTINO
PRINCIPAL PROPERTY TAX PAYERS
CURRENT YEAR AND NINE YEARS AGO
2007 Percentage of 1998 Percentage of
Assessed Total Assessed Assessed Total Assessed
Taxpayer Valuation Valuation Valuation Valuation
Apple Inc. $535,082,823 4.75% $331,760,541 3.19%
Hewlett Packard 373,734,312 3.31% 315,359,766 5.63%
Tandem Computer --- 0.00% 310,820,925 5.55%
Cupertino Gateway Partners --- 0.00% 159,978,044 2.86%
Symantec 138,419,495 1.23% --- 0.00%
Cupertino City Center Buildings 114,479,858 1.02% 71,059,251 1.27%
Westland Properties --- 0.00% 103,639,662 1.85%
Roman Catholic Bishop of San Jose --- 0.00% 96,4]2,407 1.72%
Irvine Apartment Communities 67,354,050 0.60% --- 0.00%
ECI Two Results LLC 66,325,189 0.59% --- 0.00%
Cupertino Square LLC 65,317,592 0.58% --- 0.00%
Sfers Real Estate Corporation 57,460,000 0.51 % --- 0.00%
Villa Serra Apartments 56,102,610 0.50% --- 0.00%
Compaq Computers 52,083,748 0.46% --- 0.00%
WDCIInc. --- 0.00% 30,800,000 0.55%
Behring Diagnostics --- 0.00% 25,916,043 0.46%
Measurex Corporation _ 0.00% 25,494,413 0.46%
$1,526,359,677 13.55% $1,471,241,052 23.54%
Source: The HdL Companies
100
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
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%
2001 $3,209,623 $3,209,623 100.00%
2002 $4,024,705 $4,024,705 100.00%
2003 $4,126,687 $4,126,687 100.00%
2004 $4,021,029 $4,021,029 100.00%
2005 $4,312,914 $4,312,914 100.00%
2006 $4,914,487 $4,914,487 100.00%
2007 $6,717,048 $6,717,048 100.00%
Source: County of Santa Clara, Department of Finance
$0 $3,075,546 100.00%
$0 $3,209,623 100.00%
$0 $4,024,705 100.00%
$0 $4,126,687 100.00%
$0 $4,021,029 100.00%
$0 $4,312,914 100.00%
$0 4,914,487 100.00%
$0 6,717,048 100.00%
101
CITY OF CUPERTINO
RATIO OF OUTSTANDING DEBT BY TYPE
LAST TEN FISCAL YEARS
Governmental Activities and Primary Government
Percentage of Estimated
Fiscal Certificates Actual Market Value
Year of Participation 1915 Act Bonds Total of Taxable Property Per Capita
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% 0.10%
2006 51,035,000 --- 51,035,000 0.50% 0.11%
2007 49,740,000 --- 49,740,000 0.45% 0.11
102
CITY OF CUPERTINO
COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT
JUNF. 30, 2007
2006-07 Assessed Valuation: $11,176,513,115
Redevelopment Incremental Valuation: 19,471,766
Adjusted Assessed Valuation: $11,157,041,349
Total Debt City's Share of
OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/07 % Applicable (1) Debt 6/30/07
Foothill-DeAnza Community College District $486,686,935 13.976% $ 68,019,366
West Valley Community College District 91,585,000 0.708 648,422
Santa Clara Unified School District 183,855,000 2.272 4,177,186
Fremont Union High School District 135,495,000 29.770 40,336,862
Cupertino Union School District 121,617,087 49.122 59,740,745
EI Camino Hospital District 148,000,000 1.566 2,317,680
Santa Clara Valley Water Benefit Assessment District 173,070,000 4.738 8,200,057
City of Cupertino 1915 Act Bonds 125,000 l 00. 125,000
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $183,565,318
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Santa Clara County General Fund Obligations $831,605,000 4.738% $ 39,401,445
Santa Clara County Board of Education Certificates of
Participation 16,325,000 4.738 773,479
Foothill-De Anza Community College District Certificates
of Participation 29,700,000 13.976 4,150,872
West Valley-Mission Community College District
Certificates of Participation 33,920,000 0.708 240,154
Santa Clara Unified School District Certificates
of Participation 12,980,000 2.272 294,906
Cupertino Union School District Certificates of
Participation 3,475,000 49.122 1,706,990
City of Cupertino Certificates of Participation 51,035,000 100. 51,035,000
Santa Clara County Vector Control District Certificates of
Participation 4,420,000 4.738 209,420
Midpeninsula Regional Open Space Park District
Certificates of Participation 108,465,193 7.742 8,397,375
TOTAL DIRECT AND OVERLAPPING GENERAL
FUND DEBT $106,209,641
COMBINED TOTAL DEBT $289,774,959 (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 2006-07 Assessed Valuation:
Total Overlapping Tax and Assessment Debt 1.64%
Ratios to Adjusted Assessed Valuation:
Combined Direct Debt ($52,305,000) 0.51%
Combined Total Debt 2.53%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/07: $0
Source: Municipal Resource Consultants
103
CITY OF CUPERTINO
COMPUTATION OF LEGAL BONDED DEBT MARGIN
JUNE 30, 2007
Assessed Valuation:
Secured property assessed value, net of exempt real property $10,794,991,704
Adjusted valuation - 25% of assessed valuation
Debt limit - 15% of adjusted valuation
Amount of Debt Subject to Limit:
Total Bonded Debt $49,740,000
Less: Certificates of Participation not subject to
debt limit - 49,740,000
Amount of debt subject to limit
Legal Bonded Debt Margin
Total net debt
Total Net Legal applicable to the
Fiscal Debt Debt Applicable Debt limit as a % of
Year Limit to Limit Margin debt limit
1998 207,710,118 0 207,710,118 0
1999 226,637,606 0 226,637,606 0
2000 245,747,930 0 245,747,930 0
2001 277,770,332 0 277,770,332 0
2002 321,111,800 0 321,111,800 0
2003 325,706,841 0 325,706,841 0
2004 345,745,500 0 345,745,500 0
2005 357,745,500 0 357,256,552 0
2006 376,159,758 0 376,159,752 0
2007 408,373,114 0 408,373,114 0
$2,698,747,926
$404,812,189
0
$404,812,189
The Government 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 governments located within the state.
Source: City Finance Department
104
CITY OF CUPERTINO
RATIO OF GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
Fiscal Assessed
Year Population Value
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
2007 5 5,162 $11,176,513,115
Ratio of General
General Bonded Debt Bonded Debt to
Bonded Debt Per Capita Assessed Value
Source: (1) State of California, Department of Finance, Demographics Research Unit
(2) County of Santa Clara and City Administrative Services
105
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
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%
2007 55,162 1,794,522 9,823 3.0% 3.07%
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
106
CITY OF CUPERTINO
PRINCIPAL EMPLOYERS
CURRENT YEAR AND SEVEN YEARS AGO (1)
2006-07
Employer
Apple, Inc.
Symantec
Hewlett-Packard
DeAnza College
Borland Software
Fremont Union High School District
Chordiant Software
Corio Inc.
Packeteer Inc.
Health Care Center at the Forum
Trend Micro Inc.
Tandem Computers
Cupertino Union School District
Sears
JC Penney
Pacific Gas and Electric
Percentage
Number of of Total City
Employees Employment (3)
23,000 --- (2)
16,000 --- (2)
4,500 18.91%
1,347 5.66%
1,269 5.33%
821 3.45%
325 1.37%
314 1.32%
304 1.28%
250 1.05%
250 1.05%
0 0.00%
Not avail. 0.00%
Not avail. 0.00%
Not avail. 0.00%
Not avail. 0.00%
1999-00
Number of
Employees
3,000
1,300
3,500
3,000
0
722
0
0
0
0
0
3,000
1,400
294
280
278
Percentage
of Total City
Employment
11.45%
4.96%
13.36%
1 ] .45%
0.00%
2.76%
0.00%
0.00%
0.00%
0.00%
0.00%
11.45%
5.34%
1.12%
1.07%
1.06%
(1) The City was able to obtain historical data only back to fiscal year 1999-00.
(2) Because employees outside of the City are included, percentage of City employment is not included.
(3) Total city labor force is 23,800 in 2007 according to the California Employment Development Dept.
Other Source: InfoUSA.com
107
CITY OF CUPERTINO
FULL-TIME EQUIVALENT
CITY GOVERNMENT EMPLOYEES BY FUNCTION
LAST TEN FISCAL YEARS
ao.oo
~o.oo
60.00
50.00
40.00
30.00
20.00
10.00
0.00
i~
^ Council/Commissions
^ Administration
^ Public Information
^ Administrative Services
^ Parks & Recreation
®Community Development
^ Public Works
^ Redevelopment Agency
Function 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Council/Commissions 0.49 0.49 0.50 0.50 0.50 0.80 0.80 0.80 1.40 1.40
Administration 4.10 4.85 4.85 4.85 4.60 4.70 4.65 4.70 4.30 4.30
Public Information 4.15 4.15 4.15 4.15 4.15 4.40 4.40 4.40 5.55 6.50
Administrative Services 16.90 16.90 18.90 17.90 19.90 20.30 20.30 20.35 21.63 21.83
Parks & Recreation 23.15 24.65 24.65 28.65 35.15 32.63 33.1.3 32.13 31.96 28.76
Community Development 17.86 17.96 18.95 18.95 19.95 20.75 20.75 19.34 20.47 23.68
Public Works 66.85 63.00 66.00 69.00 70.00 70.22 70.22 71.22 71.13 71.13
Redevelopment Agency 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.32 0.92 1.42
Source: City of Cupertino Budget
108
CITY OF CUPERTINO
OPERATING INDICATORS BY FUNCTION/PROGRAM
LAST THREE FISCAL YEARS (1)
Function/Pro~ram 2005 2006 2007
Public Information:
Access Cupertino 3 Days 3 Days 3 Days
Public Safety Sheriff Response:
Priority One 5.37 Minutes 4.94 Minutes 4.94 Minutes
Priority Two 8.61 Minutes 8.09 Minutes 7.15 Minutes
Priority Three 18.92 Minutes 16.74 Minutes 15.82 Minutes
Public Works:
Street Sweeping 696 Curb Miles 696 Curb Miles 696 Curb Miles
Street Maintainence 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call
Culture & Recreation:
Recreation Classes 3,805 4,067 4,465
Teen Center Memberships 441 550 510
Teen Dances 10 10 9
Sports Center Memberships 916 1,021 1,336
Senior Center Memberships 2,000 3,100 1,935
Community Development:
Planning Applications 165 216 207
Building Permit Applications 2,252 2,190 2,302
Building Inspections 19,243 21,022 24,423
Administrative Services:
Investment Return Greater than LAIF Less than LAIF Less than LAIF
Accounts Payable Processing 5 Days 5 Days 5 Days
Duplication Requests 1 Day 1 Day 1 Day
Recruitments 60 Days 45 Days 45 Days
(1) Statistical information was not tracked prior to 2005.
109
CITY OF CUPERTINO
CAPITAL ASSET STATISTICS BY
FUNCTION/PROGRAM
LAST TEN FISCAL YEARS
Fiscal Year
Function/Program 1998 1999 2000 2001 2002 2003 2004
Public Works (1):
Miles of Streets 450 450 450 450 450 450
Streetlights 3250 3,250 3,250 3,250 3,250 3,250
Traffic Signals 39 39 39 39 39 39
Culture & Recreation:
City Parks 14 15 15 15 15 15 15
City Park Acreage (1) 150.8 150.8 150.8 150.8 150.8 150.8
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
Swimming Pools 1 1 1 1 1 1 1
Tennis Courts 17 17 17 17 17 17 17
Sports Fields 1 1 1 1 1 1 1
City Library 1 I 1 1 1 1 1
(1) Historical data prior to 1999 is not available.
110
CITY OF CUPERTINO
CAPITAL ASSET STATISTICS BY
FUNCTION/PROGRAM
LAST TEN FISCAL YEARS
2005 2006 2007
450 450 450
3,250 3,250 3,250
39 39 39
15 15 15
150.8 150.8 150.8
1 1 1
1 1 1
1 1 1
] 1 1
1 1 1
1 1 1
1 1 1
1 1 1
17 17 17
1 1 1
1 1 1
111
COMMUNITY
PROFILE
113
~stoY~
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.
~Y- THE C"'L ~~xiTt~O ~"I'nFri:.
-' GENERAL MERCMAND~S£
---
___
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 13~'
City on October 10, 1955.
A major milestone in Cupertino's development was the creation by some of the city's largest landowners of Vallco
Business and Industrial Park in the early 1960's. Of the 25 property owners, 17 decided to pool their land to form Vallco
Park, six sold to Varian Associates, a thriving young electronics firm, founded by Russell Varian, and two opted for
transplanting to farms elsewhere. The name Vallco was derived from the names of the principal developers: Varian
Associates and the Leonard, Lester, Crag, and Orlando families.
115
2007 C ' y ~ ~~'d~
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.
~. ,.
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 permitting.
Cupertino Square 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 with the addition of a 16-screen movie theater, which opened in
Apri12007, California Pizza Kitchen, and many other new shops. Cupertino Square 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.
116
sf . -
c ~ y st~~~
Facts and Figures
Population in City Limits 55,162
Median Household Income $143,000
Median Age 38
Sales Tax Rate 8.25%
Registered Voters 26,128
Democrats 9,685
Republicans 8,188
Independent 357
Other 533
Did Not State 7,365
Top 40 Sales Tax Producers
Second Quarter 2007
(In Alphabetical Order)
Alexander's Steakhouse
Apple Inc.
Argonaut Window & Door
Benihana's
BJ's Bar & Grill
Chevron Service Stations
Cupertino Clean Scene
Cupertino Supply
Cypress Hotel & Park Place
DeAnza College Campus Center
Dental Arts of California
Dynasty Restaurant
Elephant Bar
Hewlett-Packard
Insight Direct USA
Jade Galore
JC Penney
Joy Luck Place
Longs Drug Store
Macy's
Marina Foods
Mervyn's
Michael's Arts & Crafts
Mirapath
Outback Steakhouse
Ranch 99 Market
Rotten Robbie Service Station
Scandinavian Designs
Sears
Shane Diamond Jewelers
Shell Service Station
Sodexho Marriott Management
Symantec Corporation
Target
TGI Friday's
TJ Maxx
Union 76 Service Station
Valero Service Station
Verizon Wireless
Whole Foods
Demographic Information
White 50.1
Asian 44.4%
Hispanic 4.0%
Black 0.7%
American Indian 0.2%
Native Hawaiian 0.1
117
2007 Ci,~y ~rof~,l,Pi
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. "1'he council meets twice a month on the
first and third Tuesday at 6:45 p.m. in the Community Hall.
The City has 160 authorised full-time benefited employees. City deparhnents include adlninistt•ative 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 110USIllg,
telecommunications, fine arts, library, planning, audit, parks and recreation, bicycle and pedestrian, teen, senior, and
public safety. Members of the volunteer boards arc appointed by the city council and vacancies are announced so that
interested residents may apply for the positions. Residents are kept informed about city services and programs through
the Cupertino Scene, a monthly newsletter; Cupertino's government access cable TV channel; The City Channel; and the
city's website.
Housing
Apartment and duplex rentals range from $1,125 to $2,900
per month. As of April 2007, the average price of an
existing single family home is $1,050,000 and the average
price of a condominimum/townhouse is $675,000.
Community Hecrltlr 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 Permanents Medical Center in Santa Clara, Stanford
Hospital in Palo Alto, and the Saratoga Walk-in Clinic in
Saratoga.
Tax Rates aracl Government Services
Residential, commercial, and industrial prope-Ty 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 fu II
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 ,luly 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
Utilities
Gas c~c elec/ric - Pacific Gas and Electric, (800) 743-5000.
Phone - AT&T, residential service (800) 894-2355;
business service (800) 750-2355.
Cable - Comcast, (800) 945-2288.
Garbage -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
Transportation Fund: 0.25%. Total
8.25%.
Assessed Valuation: (Secured and lJnsecured)
Cupertino: $1 1,176,513,1 15 (6/30/07)
County: $262,468,080,253 (6/30/07)
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.
118
C ~r~z~/~e~c~ea,>t~~Se~v~;~
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.
-- ...
t, .:.~ _ -
~ --
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.
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-
3 l 60.
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.
Blackberry Farm
This 33-acre recreational facility is currently closed. The
City is currently working on the Stevens Creek Restoration
Project which affects the grounds of Blackberry Farm.
Highlights of the completed project include: a new
Blackberry Farm community park, park/picnic upgrades,
remodeled pool and catering station, and a fully accessible
trail between Blackberry Farm and McClellan Ranch. The
project is expected to be completed in the spring of 2009.
The nine-hole golf course remains open during the
restoration project. The golf course is located at 22100
Stevens Creek Boulevard. Telephone: (408) 253-9200.
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.
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.
119
~~~,%cCat~P~2
Winner of numerous state and national awards for excellence, our
city's schools are widely acknowledged to be models of quality
instruction.
Cupertino Union School District serves 16,542 students in a 26 square
mile area that includes Cupertino and portions of five other cities. The
district has 20 elementary schools and five middle schools, including
several choice programs. Eighteen schools have received state and/or
national awards for educational excellence.
Student achievement is exceptionally high. Historically, district test
scores place Cupertino among the premier public school districts in
California. The district is a leader in the development of a standards-
based system of education and is nationally recognized for leadership
in the use of technology as an effective tool for learning. Quality teaching and parent involvement are the keys to the
district's success.
The Fremont Union High School District serves over 10,000 students in a 42 square mile area covering all of Cupertino,
most of Sunnyvale and portions of San Jose, Los Altos, Saratoga, and Santa Clara. The five high schools of the district
have garnered many awards and recognition based on both the achievement of students and the programs designed to
support student achievement. 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 anon-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.
120
T1tiivu~-to- do- a vi,cLSew
Euphrat Museum of Art
The highly regarded Euphrat 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 ] 1 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 anon-profit organization by a group of 177 longtime
residents concerned about the rapid growth in the area and its impact on the quickly vanishing Cupertino heritage. On
March 30, 1990, the Society opened the Cupertino Historical Museum dedicated to the preservation and exhibition of the
city's history. Through its exhibits the museum attempts to develop and expand the learning opportunities that it offers to
the ethnically diverse community of the City of Cupertino. The Society continues to build partnerships with the local
school districts to ensure that the history of Cupertino is offered as part of the educational curriculum. The Society is
located at the Quinlan Community Center, 10185 N. Stelling Road. Telephone: 408-973-8049.
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 Vallco Fashion Park behind Macy's.
California History Center
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, ca11408-
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.
121
NOTES
122