Financial Report 06-30-2014www.cupertino.org
City of Cupertino, California
20142013–Comprehensive AnnuAl FinAnCiAl report
For FisCAl YeAr ended June 30, 2014
Building a safe,
vibrant and economically
strong city
Cupertino Community Hall
Rendering, Apple Campus 2
Stevens Creek Corridor Park & Restoration Phase 2
Proposed Environmental Education Center at McClellan Ranch Preserve
Rendering, Saich Way StationAloft Hotel
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CITY OF CUPERTINO, CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR FISCAL YEAR ENDED
JUNE 30, 2014
PREPARED BY:
CITY OF CUPERTINO
ADMINISTRATIVE SERVICES DEPARTMENT
FINANCE DIVISION
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INTRODUCTORY SECTION
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CITY OF CUPERTINO
Comprehensive Annual Financial Report
For the Year Ended June 30, 2014
Table of Contents
INTRODUCTORY SECTION
Page
Table of Contents ........................................................................................................................................... i
Letter of Transmittal .................................................................................................................................... iii
Organization Chart ..................................................................................................................................... viii
City Council and Directory of City Officials ............................................................................................... ix
Commissions and Committees ...................................................................................................................... x
Certificate of Award for Excellence in Financial Reporting ....................................................................... xi
FINANCIAL SECTION
Independent Auditor’s Report ................................................................................................................... 1
Management’s Discussion and Analysis (Unaudited) .............................................................................. 5
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position ................................................................................................................. 22
Statement of Activities ..................................................................................................................... 23
Fund Financial Statements:
Balance Sheet .................................................................................................................................... 26
Reconciliation of the Governmental Funds Balance Sheet with the
Statement of Net Position ................................................................................................................ 27
Statement of Revenues, Expenditures and Changes in Fund Balances ............................................. 28
Reconciliation of the Net Change in Fund Balances – Total Governmental Funds
with the Statement of Activities ...................................................................................................... 29
Statement of Revenues, Expenditures and Changes in Fund Balance –
Budget to Actual - General Fund .................................................................................................... 30
Proprietary Funds:
Statement of Net Position .................................................................................................................. 32
Statement of Revenue, Expenses and Changes in Fund Net Position ............................................... 33
Statement of Cash Flows ................................................................................................................... 34
Fiduciary Funds:
Statement of Net Position .................................................................................................................. 36
Statement of Changes in Fiduciary Net Position .............................................................................. 37
Notes to the Basic Financial Statements ................................................................................................ 39
Required Supplementary Information (Unaudited):
Schedule of Funding Progress ............................................................................................................. 70
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CITY OF CUPERTINO
Comprehensive Annual Financial Report
For the Year Ended June 30, 2014
Table of Contents
FINANCIAL SECTION (Continued)
Page
Other Supplementary Information:
Schedule of Revenues, Expenditures, and Changes in Fund Balance –
Budget and Actual - Public Facilities Corporation Debt Service Fund ............................................ 72
Nonmajor Governmental Funds:
Combining Balance Sheets ............................................................................................................... 74
Combining Statements of Revenues, Expenditures and
Changes in Fund Balances .............................................................................................................. 76
Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual ............................................................................ 78
Internal Service Funds:
Combining Statement of Net Position ............................................................................................... 82
Combining Statements of Revenues, Expenses and
Changes in Fund Net Position ......................................................................................................... 84
Combining Statements of Cash Flows .............................................................................................. 86
Agency Fund:
Statement of Changes in Assets and Liabilities ............................................................................... 90
STATISTICAL SECTION
Financial Trends:
Net Position by Component – Last Ten Fiscal Years ......................................................................... 93
Changes in Net Position – Last Ten Fiscal Years ............................................................................... 94
Fund Balances of Governmental Funds – Last Ten Fiscal Years ....................................................... 96
Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years..................................... 97
Revenue Capacity:
Assessed and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ........................ 98
Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years ................................................ 99
Principal Property Taxpayers – Current Year and Five Years Ago .................................................. 100
Property Tax Levies and Collections – Last Ten Fiscal Years ......................................................... 101
Debt Capacity:
Ratios of Outstanding Debt by Type – Last Ten Fiscal Years .......................................................... 102
Direct and Overlapping Bonded Debt ............................................................................................... 103
Legal Debt Margin Information – Last Ten Fiscal Years ................................................................. 104
Ratio of General Bonded Debt – Last Ten Fiscal Years ................................................................... 105
Demographic and Economic Information:
Demographic and Economic Statistics – Last Ten Fiscal Years ....................................................... 106
2014 Employer Ranking ................................................................................................................... 107
Operating Information:
Full-Time Equivalent City Employees by Function/Program – Last Ten Fiscal Years .................... 108
Operating Indicators by Function/Program – Last Ten Fiscal Years ................................................ 109
Capital Asset Statistics by Function/Program – Last Ten Fiscal Years ............................................ 110
Other Property Tax and Sale Statistics ................................................................................................. 111
COMMUNITY PROFILE
ii
November 18, 2014
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, 2014. The report is prepared in accordance with
generally accepted accounting principles (GAAP) set by the Governmental Accounting Standards Board
(GASB). The report presents City information on an entity-wide basis and on a more detailed fund level
basis. The fund-level reports emphasize the City’s major funds. A Management Discussion and Analysis
(MD&A) presents a comparative analysis of current and prior year results, changes in financial position, a
comparison of actual versus budget, financial highlights, trends, and disclosure of any known significant
events or decisions that affect the financial condition of the City. This transmittal letter is designed to
complement the MD&A, and should therefore be read in conjunction with it. The MD&A is required
supplementary information and is found in the Financial Section of the CAFR.
The accuracy of the data presented and the completeness and fairness of the presentations, including all
disclosures, are the responsibility of the management of the City. To provide a reasonable basis for
making these representations, management has established a comprehensive internal control framework
that is designed to protect the City’s assets and provide sufficient, reliable information for the proper
preparation of these financial statements. We believe the data is accurate in all material respects and is
presented in a manner that fairly sets forth the City’s financial position. Furthermore, we believe that all
disclosures necessary to enable the reader to gain an understanding of the City’s financial activity have
been included.
REPORTING ENTITY
This CAFR includes all component units and funds of the City. It reports all activities for which the City
is considered to be financially accountable. The general governmental funds support a full range of
services, including law enforcement, community development, recreation, public works, public and
environmental affairs, and general administration. Enterprise funds account for recreation and solid waste
operations supported by user fees. This financial report incorporates data for the City of Cupertino and its
component unit, the Cupertino Public Facilities Corporation.
The City operates under a Council-City Manager form of government. There are five council members,
including the Mayor, who serve staggered four-year terms. The City Council appoints the City Manager
who is responsible for the daily administration of City affairs. The City Council also appoints the City
Attorney and the City Treasurer. All other employees are appointed by the City Manager.
CITY OF CUPERTINO
CITY HALL
10300 TORRE AVENUE • CUPERTINO, CA 95014-3202
(408) 777-CITY • WWW.CUPERTINO.ORG
iii
ECONOMIC CONDITIONS
The City of Cupertino is located in Santa Clara County at the southern end of the San Francisco Bay
Peninsula. The City is comprised of 13 square miles and is bordered by the cities of San Jose, Saratoga,
Sunnyvale, Santa Clara and Los Altos. It has a residential population of 60,550.
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 Silicon 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. National surveys rank the City high in
education levels, median household incomes, and registered patent numbers.
Cupertino is the corporate headquarters of several notable companies including Apple Inc., CRC Health,
Durect, Mirapath, Seagate Technology, Trend Micro, Bromium, and SugarCRM Inc., and home to many
other well-known firms, such as Lab 126, Panasonic Ventures, and Ducati North America. Other major
employers include DeAnza College, one of the largest single-campus community colleges in the country,
the Fremont Union High School District, and Cupertino Union School District.
As of the third quarter 2014, over 8.8 million square feet of office, research, and development space
existed in the City with the lowest vacancy rates in Silicon Valley at 0.98% for office and zero percent for
research and development. Leasing activity of office space has increased from 2013 to 2014. As of
August 2014, the City’s unemployment rate was 3.5%, well below the statewide rate of 7.4%.
The City features thirteen retail centers and over one hundred sixty eating establishments. The 1.2 million
square feet Vallco Shopping Mall features two levels of enclosed shopping, three anchor stores, a 16-
screen AMC theatre, a bowling center, an ice rink, an international food court, and an upscale health club.
Even with additions and remodeling, the shopping center continues to underperform. The construction of
three new mixed-use projects, including Nineteen800 (formerly known as the Rosebowl), Main Street,
and The Biltmore Adjacent Project, which is nearing completion and will include The Counter restaurant
as a new tenant, are currently underway. The Saich Way Project, located on Stevens Creek Boulevard
next to Panera Bread and Peet’s Coffee, will be completed by end of 2014 and include new retail,
restaurant, and service uses. Homestead Square is nearing completion of its redevelopment having added
a 24-hour Safeway as its anchor in May 2014. Coming soon to this neighborhood shopping center are
Ulta, SteinMart, Ross, and additional quick-casual dining options.
The assessed value of City properties grew 5.5% for fiscal 2014-15. Because of the housing market
recovery, the number of City properties with a temporary reduction in assessed value decreased from
1,325 to 139 and the dollar cost of the reductions fell from $185 million to $60 million. Apple is the
leading property owner in the City in terms of assessed value and is second, county-wide, for business
personal property assessment.
Based on second quarter 2014 data, Cupertino has 71% of its sales taxes coming from business-to-
business commerce, compared to 17% for California and 19% for the San Francisco Bay Area. The City
is not as diversified into retail, food products, and transportation compared to the state and Bay Area. The
following chart shows City sales tax variations over the past ten years, reflecting two recessions, their
subsequent recoveries, and the volatility of the business-to-business and company concentration.
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Sales Tax Trend
With the economic recovery and easing of credit, commercial development activity picked up
considerably in 2012-13 and 2013-14 led by plan reviews of the new Apple Campus 2. The new 123-
room Aloft Hotel was completed and opened in December 2012. Two major mixed-use projects
postponed during the recession, Rose Bowl and Main Street Cupertino were either under construction or
will begin construction. The previously postponed Homestead Square shopping center reconstruction
project and the new Biltmore residential and commercial expansion project resumed and both are nearing
completion.
The City’s pension and retiree medical unfunded actuarial accrued liabilities are discussed in the Notes to
the Basic Financial Statements. The City must pay CalPERS, the state’s government pension system,
annually to reduce this long-term liability. Cupertino’s pension actuarial valuation report of June 2011
reported a pension unfunded liability of $20,375,000 with annual payments to CalPERS of 21.1% and
21.8% of payroll for 2012-13 and 2013-14, with ongoing increases after that because of actuarial
assumption changes. To address long-term rising costs, Cupertino and state law has reduced pension
benefits for new hires and increased employee contributions. As of the January 2013 health cost actuarial
valuation report, the City has a retiree medical unfunded liability of $11,956,000 with annual payments to
a retiree health plan trust at 15.4% of payroll. To reduce the unfunded liability, the City plans to negotiate
retiree health plan changes and use new one-time revenues.
Because the City contracts out police services to the County Sheriff and because fire protection is handled
by a special district, the City avoids the high pension, capital, and operating costs of a City-operated
public safety function. The City caps its contributions to employee health insurance premiums and
recently approved a three-year labor agreement with its bargaining units that benefit both the City and
employees. A build-up of operating reserves from strong revenue years, such as 2013-14, along with a
traditional under-spending of budgets, enables the City to withstand weak revenue years that occur
periodically, such as in 2009-10.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
2005200620072008200920102011201220132014
v
ECONOMIC INITIATIVES
With Hewlett-Packard, a primary employer, leaving the City in 2013, Apple purchased their properties as
part of 176 acres acquired for a major expansion of their corporate headquarters, called Apple Campus 2,
enclosed by Interstate 280, Homestead Road, Wolfe Road and Tantau Avenue. With the expanded Apple
presence, the City’s revenue base will remain concentrated among its top companies and top economic
sector, the volatile business-to-business area. Past recessions and the departure of a major tax provider,
Hewlett-Packard, demonstrates the need for diversification of the City’s revenue base and a long-term
balance of revenues and expenditures. The City needs to find other revenues to mitigate the fluctuating
nature of sales taxes, hotel taxes, user fees, and state grabs of local taxes in times of budget distress.
Legislation raising the City’s property tax share, the update of the utility user tax, the increase in the
transient occupancy tax, and refinancing of the City’s debt are past successes to help diversify and
balance revenues and expenditures. The City Council work program underway in 2013-14 describes
economic development and administrative initiatives to further increase the City’s property tax share;
negotiate long-term contracts that are fair, financially accountable, and competitive in the local labor
market; negotiate a new Sheriff contract; implement a back to work/modified duty policy; streamline City
web content for new businesses; continue sponsoring seminars and workshops for new small businesses;
increase coordination with the Chamber of Commerce and other regional business organizations;
strengthen shop local habits of residents and daytime visitors; and enhance business access to City
services.
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 and fund balance 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 restructured the 2013-14 budget
process and document to increase transparency and plans to replace the City’s obsolete financial software.
INDEPENDENT AUDIT
City ordinance requires an annual audit of the financial records by an independent certified public
accounting firm selected by the City Council and its audit committee. 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, 2013. In order to be awarded a Certificate of Achievement, a government unit
vi
must publish an easily readable and efficiently organized CAFR. This report must satisfy both GAAP
and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that the current report
continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the
GFOA to determine its eligibility for another certificate.
Respectfully submitted,
Lisa Taitano
Finance Manager
ACKNOWLEDGMENTS
I would like to express my appreciation to the City employees and department heads, 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 Yulia Rumalean, Richard Wong, and Tina Mao of the Finance
staff for their continued support and dedication. Special recognition goes to Jennifer Chang and Mary
Redwine for their efforts in the preparation and production of this report.
Reviewed by,
Kristina Alfaro
Interim Director of Administrative Services
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viii
CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2014-15
CITY COUNCIL
Gilbert Wong Rod Sinks
Mayor Vice Mayor
Barry Chang Orrin Mahoney
Councilmember Councilmember
DIRECTORY OF CITY OFFICIALS
David Brandt – City Manager
Carol Korade – City Attorney
Carol Atwood – Director of Recreation and Community Services
Kristina Alfaro – Interim Director of Administrative Services
Timm Borden – Director of Public Works
Aarti Shrivastava – Assistant City Manager/Director of Community Development
Mark Santoro
Councilmember
ix
CITY OF CUPERTINO, CALIFORNIA Fiscal Year 2014/15 COMMISSIONS AND COMMITTEES
AUDIT COMMITTEE RECREATION AND COMMUNITY SERVICES COMMISSION Angela Chen Eno Schmidt David Fung Mark Santoro Darcy Paul Rod Sinks Geoffrey Paulsen Raymond Yin Neesha Tambe Judy Wilson HOUSING COMMISSION LIBRARY COMMISSION
Harvey Barnett Rose Grymes Jimmy Chien Annie Ho Nicole Maroko Adrian Kolb Rajeev Raman Jerry Liu Krista Wilson Ann Stevenson FINE ARTS COMMISSION PLANNING COMMISSION
Jessi Kaur Paul Brophy Russell Leong Margaret Gong Rajeswari Mahaliagan Winnie Lee Diana Matley Don Sun Michael Sanchez Alan Takahashi PUBLIC SAFETY COMMISSION BICYCLE PEDESTRIAN COMMISSION
Bob Cascone Vidula Aiyer Andy Huang William Chan Lily Lim Pete Heller Robert McCoy Ashish Kolli Gerald Tallinger Jill Mitsch TEEN COMMISSION ECONOMIC DEVELOPMENT
Meyhaa Buvanesh Varsha Swamy Carol Atwood Erin Cooke Chris Doyle Harshitha Sriraman Orrin Mahoney Aarti Shrivastava Celine Mol Shail Trivedi Timm Borden Rod Sinks Ajay Prasad Taeyoung Yun Tyler Smithline Mike Foulkes John Zirelli Mike Rohde Kevin McClelland Darcy Paul Maria Streeby Winnie Lee TECHNOLOGY, INFORMATION & FISCAL STRATEGIC COMMITTEE COMMUNICATIONS COMMISSION
Shishir Chavan Rod Livingood Kristina Alfaro Aarti Shrivastava
Peter Friedland Beverly Siegel Carol Atwood Mark Santoro Wallace Iimura Timm Borden Gilbert Wong
x
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FINANCIAL SECTION
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INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and City Council
City of Cupertino, California
Report on Financial Statements
We have audited the accompanying financial statements of the governmental activities, the
business-type activities, each major fund, and the aggregate remaining fund information of the City
of Cupertino as of and for the year ended June 30, 2014, and the related notes to the financial
statements, which collectively comprise the City’s basic financial statements as listed in the Table
of Contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of the financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the City’s preparation and fair presentation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the City’s internal control. Accordingly, we express no such
opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
1
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of the City as of June 30, 2014, and the
respective changes in financial position and, where applicable, cash flows thereof and the respective
budgetary comparisons listed as part of the basic financial statements for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that
Management’s Discussion and Analysis and Schedule of Funding Progress be presented to
supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board, who considers
it to be an essential part of financial reporting for placing the basic financial statements in an
appropriate operational, economic or historical context. We have applied certain limited procedures
to the required supplementary information in accordance with auditing standards generally accepted
in the United States of America, which consisted of inquiries of management about the methods of
preparing the information and comparing the information for consistency with management’s
responses to our inquiries, the basic financial statements, and other knowledge we obtained during
our audit of the basic financial statements. We do not express an opinion or provide any assurance
on the information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City’s basic financial statements as a whole. The Introductory Section,
Other Supplementary Information, and Statistical Section as listed in the Table of Contents are
presented for purposes of additional analysis and are not required parts of the basic financial
statements.
The Other Supplementary Information is the responsibility of management and was derived from
and relates directly to the underlying accounting and other records used to prepare the basic
financial statements. The information has been subjected to the auditing procedures applied in the
audit of the basic financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to prepare
the basic financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of
America. In our opinion, the Supplemental Information is fairly stated, in all material respects, in
relation to the basic financial statements as a whole.
The Introductory and Statistical Sections have not been subjected to the auditing procedures applied
in the audit of the basic financial statements and, accordingly, we do not express an opinion or
provide any assurance on them.
2
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
October 22, 2014, on our consideration of the City’s internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to
provide an opinion on internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards in
considering the City’s internal control over financial reporting and compliance.
Pleasant Hill, California
October 22, 2014
3
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CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
This describes the City of Cupertino’s financial performance for the year. Please read it in conjunction with the
accompanying Transmittal Letter and Basic Financial Statements.
2013-14 FINANCIAL HIGHLIGHTS
Governmental activity revenues climbed 59% over last year while expenses increased 8%.
Governmental net position increased 23% to $212,184,000.
General Fund revenues increased 35% from the prior year while General Fund expenditures rose 14%.
General Fund expenditures came in 26% under budget, with revenues 3% over budget.
The General Fund balance grew 27% to end the year at $45,680,000.
OVERVIEW OF THE FINANCIAL STATEMENTS
The Basic Financial Statements comprise the City-wide Financial Statements and the Fund Financial
Statements; these two sets of financial statements provide two different views of the City’s financial activities
and position.
The City-Wide Financial Statements provide a long-term view of the City’s activities as a whole, and
comprise the Statement of Net Position and the Statement of Activities. These statements are prepared on the
accrual basis, which means they measure the flow of all economic resources of the City as a whole. The accrual
basis of accounting is similar to the accounting used by most private sector companies. The Statement of Net
Position provides information about the financial position of the City as a whole, including all its capital assets
and long-term liabilities. The Statement of Activities provides information about all the City’s revenues and all
its expenses, with the emphasis on measuring net revenues or expenses for each of the City’s programs. The
Statement of Activities explains in detail the change in net position for the year. Over time, increases or
decreases in net position can be indicators of whether the financial condition of the City is improving or
deteriorating.
All of the City’s activities are grouped into Governmental activities and Business-type activities, as explained
below. The Statement of Net Position and the Statement of Activities provide a summary of these two types of
activities for the City as a whole.
Governmental activities—Most of the City’s basic services are considered to be governmental activities,
including public works, law enforcement, community development, recreation, public & environmental
affairs, and general administration. These services are supported by general City revenues such as property,
sales and other taxes, and by specific program revenues such as developer fees and grants.
The City’s governmental activities include the activities of a separate legal entity, the Cupertino Public
Facilities Corporation, because the City is considered to be financially accountable for the Corporation. The
City leases its major facilities from the Corporation, which then uses the lease payments to pay principal and
interest on the Corporation’s long-term debt.
Business-type activities—All the City’s enterprises are reported here, including solid waste management
and most 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, liabilities, and deferred
inflows and outflows of resources; they exclude long-term assets and liabilities. Because these statements focus
on the near-term inflows and outflows of spendable resources, such information may be useful in evaluating
near-term financing requirements.
5
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
The Fund Financial Statements provide detailed information about each of the City’s most significant funds,
called major funds. Cupertino’s Fund Financial Statements include governmental, enterprise and internal
service funds as discussed below. Each major fund is presented individually, with all non-major funds
summarized and presented only in a single column. Subordinate schedules, which follow the Notes to Basic
Financial Statements, present the detail of these non-major funds. Major funds present the significant activities
of the City for the year, and may change from year to year as a result of changes in the pattern of City’s
activities and public interest. For example, the Capital Improvement Projects Fund may or may not appear as a
major fund depending on the volume of construction activity in a certain year.
Governmental Fund financial statements are prepared on the modified accrual basis, which means they measure
only current financial resources and uses. They present essentially the same functions reported as governmental
activities in the government-wide financial statements. However, capital assets and other long-lived assets,
along with long-term liabilities, are not presented in the Governmental Fund financial statements.
Reconciliations are provided to facilitate a comparison between governmental funds and governmental activities
statements to allow a better understanding of the long-term impact of the government’s near-term financial
decisions.
Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis and include
current and long-term assets and liabilities and deferred inflows and outflows of resources. Enterprise funds are
used to report the same functions presented as business-type activities in the government-wide financial
statements, and in more detail in the fund financial statements.
Since the City’s Internal Service Funds provide goods and services only to the City’s governmental and
business-type activities, their activities are reported only in total at the fund level. Internal Service Funds may
not be major funds because their revenues are derived from other City funds. These revenues are eliminated in
the City-wide financial statements and any related profits or losses are returned to the activities which created
them, along with any residual net position 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 included in the Basic Financial Statements for the
General Fund and other major Special Revenue Funds. Since none of the City’s Special Revenue Funds are
considered major funds, budgetary comparison schedules for these funds are included in this document as
supplemental information only.
Fiduciary Fund statements provide financial information about the activities of the Successor Agency to the
Redevelopment Agency and of a special assessment district. The City’s fiduciary activities are reported in the
Statement of Net Position and Statement of Changes in Fiduciary Net Position. These activities are excluded
from the City’s other financial statements because the City cannot use these assets to finance its own operations.
The Successor Agency to Redevelopment Agency Private-Purpose Trust Fund holds the remaining assets,
liabilities, and deferred inflows and outflows of the City’s former Redevelopment Agency. See Note 14 to the
Basic Financial Statements. The City’s Agency Fund holds special assessment district taxes remaining after the
maturity of the special assessment district’s debt. The City acts strictly as an agent for the special assessment
district.
The Notes to Basic Financial Statements provide additional detail that is essential to a full understanding of
the information provided in the government-wide and fund financial statements.
6
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
CITY-WIDE FINANCIAL ACTIVITIES
This analysis focuses on the net position and changes in net position of the City’s Governmental Activities
(Tables 1 and 2) and Business-Type Activities (Tables 3 and 4) presented in the City-wide Statement of Net
Position and Statement of Activities that follow. The Statement of Activities Tables 2 and 4 show activity from
a revenue and expense perspective.
Governmental Activities
20142013
Assets:
Cash and investments107,288$ 61,008$
Other assets10,481 9,391
Capital assets162,061 158,364
Total assets279,830 228,763
Liabilities:
Long term debt39,980 42,020
Other liabilities27,666 14,489
Total liabilities67,646 56,509
Net Position:
Invested in capital assets, net of debt122,081 116,344
Restricted24,232 8,351
Unrestricted65,871 47,559
Total net position212,184$ 172,254$
23.181%
Table 1
Condensed Statement of Net Position at June 30
(in thousands)
Governmental Activities
The City’s net position from governmental activities rose 23% from the prior year. Increased cash and
investments was the primary contributor to the significant increase in net position. Tax revenues and charges for
services increased by $23.8 million or 49% and $8.9 million or 198%, respectively. The increased revenues were
mostly attributable to Apple’s development of its second campus in the City of Cupertino and the resulting
development-related taxes and fees for City services. Once development is completed, these revenues will return
to normal levels, but property tax receipts will increase as a result of increased valuation of the property. The
increased property tax revenues estimated to be approximately $1.7 million per year will be ongoing.
7
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
As the Sources of Revenue chart above shows, property and sales taxes make up 36% of governmental revenue.
The Functional Expenses chart below includes only current year expenses with Public Works maintenance and
repairs of streets, facilities, parks, and storm drains comprising the largest activity. The chart does not include
capital outlays or principal payments on debt. Capital outlays are instead shown as additions to capital assets
and principal payments are reported as long-term liability reductions.
Charges for
Services
21%
Operating Grants &
Contributions
10%
Capital Grants &
Contributions
1%Property Tax
15%
Sales Tax
21%
Transient
Occupancy Tax
5%
Utility User Tax
3%
Franchise Tax 3%
Other Taxes
20%
Misc. 1%
Sources of Revenues, Governmental Activities
2013‐14
Administration
8%
Law Enforcement
19%
Public Affairs
1%
Administrative
Services
5%
Recreation Services
9%Community
Development
17%
Public
Works
39%
Interest
2%
Functional Expenses, Governmental Activities
2013‐14
8
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
The Statement of Activities presents program revenues, expenses, general revenues, and the resulting change in
net position as summarized in the next table.
Table 2
Condensed Statement of Activities for the Year Ended June 30
(in thousands)
Governmental Activities
2014 2013
Expenses
Administration $4,530 $2,367
Law enforcement 10,062 9,275
Public and environmental affairs 513 1,596
Administrative services 2,662 4,171
Recreation services 4,867 4,474
Community development 9,109 4,676
Public works 21,143 22,149
Interest on long-term debt 1,130 1,257
Total expenses 54,016 49,965
Revenues
Program revenues:
Charges for services 20,054 8,973
Operating grants and contributions 10,000 2,752
Capital grants and contributions 569 720
Total program revenues 30,623 12,445
General revenues:
Taxes:
Property tax 9,169 8,793
Property tax in-lieu of motor vehicle fee 5,289 4,772
Sales tax 19,794 18,721
Transient occupancy tax 4,590 3,769
Utility user tax 3,099 2,995
Franchise tax 2,776 2,849
Other taxes 18,792 4,561
Intergovernmental, unrestricted:
Motor vehicle license fee 25 30
Investment earnings 133 177
Miscellaneous 57 127
Total general revenues 63,724 46,794
Total revenues 94,347 59,239
Excess of revenues over expenses,
before extraordinary item and transfers 40,331 9,274
Transfers (401) (150)
Change in net position 39,930 9,124
Beginning net position 172,254 163,130
Ending net position 212,184 172,254
9
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
City-wide Governmental Revenues
Table 2 shows that total governmental revenues jumped $35,108,000 or 59% over last year, finishing at
$94,347,000. Sales tax continues to be the largest revenue source for the City with $19,794,000 or 21% of total
revenues for 2013-14. Compared to last year’s $18,721,000 sales tax revenue, this represents a 6% increase.
Sales tax from business services (business-to-business and construction) activity accounted for the increase as a
result of new and continued construction activity with Apple’s second campus, the Main Street project, and
numerous other small construction projects.
Property tax categories rose $893,000 or 7% over last year due to assessed value increases reflective of the
strong housing recovery in the South Bay area, this growth is expected to slow to about 3% in the beginning
with FY 2014-15. One time Construction Tax Related to the Apple Campus 2 Development Agreement and
increased TOT from realizing a full fiscal year with the 2% increase in rate and the opening of a new hotel in
Cupertino caused the other tax category to rise by 312% or $14,231,000 over last year.
Program revenues grew $18,178,000 or 146% over last year, primarily due to implementation of a cost
allocation plan and reimbursement and overhead costs for the Apple Campus 2 project.
City-wide Governmental Expenses
City-wide governmental expenses in Table 2 rose $4,051,000 or 8% above 2012-13. Administration, Law
Enforcement, Administration, Recreation Services and Community Development rose while Public Affairs,
Administrative Services, Public Works, and debt interest declined.
Administration rose because there was a City Manager vacancy for two months in the prior year and an
Assistant to the City Manager was added in 2012-13 that had been vacant for half that year but filled for all of
2013-14. Legal costs of other programs were consolidated under this function, new sales tax legal costs were
incurred, and legal costs related to Apple Campus 2. In addition, the transfer in of the Environmental Affairs
and Economic Development programs from Public Affairs and Planning respectively, resulted in increased
costs.
Law Enforcement was higher because of the transfer in of the Code Enforcement program costs from the
Administrative Services Department.
Public Affairs declined due to the transfer out of the Environmental Affairs program to Administration and the
transfer out of the Community Outreach, Neighborhood Watch, and Emergency/Disaster Preparedness programs
to Recreation Services
Administrative Services fell because of transfers out of several programs including, Library Service Extra
Hours, Neighborhood Watch, and Emergency/Disaster Preparedness.
Recreation Services increased due to the transfer in of several programs from Administrative Services and
Public Affairs, including Library Extra Hours, Emergency/Disaster Preparedness, Neighborhood Watch, and
several programs under Community Services.
Community Development General Fund costs grew over last year because of more planning and building
applications. A large portion was related to increased contract costs associated with Apple Campus 2. The City
pays for consultants to expedite Planning and Public Work items related to Apple Campus 2. All expenses are
paid for by the City and then reimbursed by Apple through a refundable deposit.
As for the Public Works decrease, this is primarily driven by the decreased costs associated with special
projects.
10
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
Annual debt service payments dropped in accordance with the fixed debt service schedule of the Public
Facilities Corporation’s May 2012 certificates of participation.
Change in Net Position
The City-wide $39,930,000 governmental net position increase significantly exceeded the $9,124,000 increase
of a year ago, reflecting the strong 59% jump in revenues against the modest 8% rise in expenses.
Business Type Activities
Business-type activities in the City-wide Financial Statements include the City’s four enterprise funds.
Enterprise funds are used to account for recreational and solid waste management operations that are financed
and operated in a manner similar to private business enterprises where the intent is that the costs of providing
services and facilities to the general public on a continuing basis can be financed or recovered primarily through
user fees. The major proprietary funds section of this report provides more information on business-type results.
As shown in Table 3, the business-type net position totaled $11,402,000 at June 30, 2014, a decrease of
$225,000 from the prior year with unrestricted net position declining $573,000 and the net position of capital
assets increasing by $348,000.
In Table 4, revenues for all business-type activities rose 3% to $7,045,000 in 2013-14. Expenses climbed 23%
over last year to $7,682,000. These changes had a negative impact on net position of $225,000.
20142013
Assets:
Cash and investments11,606$ 11,768$
Other assets337 271
Capital assets1,110 762
Total assets13,053 12,801
Other liabilities 1,650 1,174
Total liabilities1,650 1,174
Net Position:
Invested in capital assets1,111 762
Unrestricted10,292 10,865
Total net position11,403$ 11,627$
Table 3
Condensed Statement of Net Position at June 30
(in thousands)
Business Type Activities
11
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
20142013
Expenses
Resources recovery 2,159$ 1,765$
Blackberry farm571 463
Sports center2,221 2,012
Recreation programs2,731 2,025
Total expenses7,682 6,265
Revenues
Program revenues:
Charges for services 7,045 6,829
Total program revenues 7,045 6,829
General revenues:
Investment income 11 31
Total revenues 7,056 6,860
Transfers 401 150
Change in net position (225) 745
Beginning net position 11,627 10,882
Ending net position 11,402$ 11,627$
(in thousands)
Business Type Activities
Condensed Statement of Activities For The Year Ended June 30
Table 4
MAJOR GOVERNMENTAL FUNDS
General Fund
General Fund Revenues
General Fund revenues of $74,000,000 ended $1,897,000 or 3% above the final budget and $52,189,000 above
the original 2013-14 budget. Actual revenues were up $19,338,000 or 35% compared to the prior year. All
revenue sources showed year-over-year gains with the exception of Use of Money and Property. Table 5
displays the variations in actual revenues, while Table 6 shows budgeted revenues compared to actuals.
Property taxes ended the year at $14,409,000, down 4% or $525,000 below last year and consistent with the
final budget. This decrease is mostly due to a one-time state pay back of $1.4 million of taxes borrowed in 2010
under Proposition 1A and a refund of county tax administration charges of $593,000. Excluding these one-time
tax payments, actual property growth was 10% due to assessed value increases reflective of the strong housing
recovery in the South Bay Area.
Sales taxes grew by $1,072,000 or 6% above last year to finish at $19,794,000. It exceeded the final budget by
$3,579,000 or 22%. The growth in sales tax was primarily driven by strong business-to-business sales tax
growth.
12
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
The City’s five hotels paid $4,590,000 in transient occupancy taxes this year which was $822,000 or 22% over
last year’s performance due to the opening of the new Aloft Hotel in December 2012. Revenue was consistent
with the final and original budget. Additionally, the voter-approved increase in the City’s transient occupancy
tax rate from 10% to 12% of the room charge became effective January 1, 2012. Fiscal Year 2013-14 was the
first year to see both the 2% increase and the impact of the Aloft Hotel being open for a full year.
The City’s 2.4% utility user tax on telecommunication, gas, and electric services provided $3,099,000 in
revenues, which were up 3% compared to last year and $154,000 or 5% under the original and final budget.
This decrease is reflective of lower electricity usage resulting from the large investments in solar infrastructure
by educational institutions in Cupertino.
Franchise taxes were relatively unchanged from last year while other taxes greatly exceeded expectations. Other
taxes experienced a year-over-year growth of $8,346,000 or 402% and surpassed the final budget by 10%. The
increase in other taxes was led by the onetime construction tax payment from Apple as part of the Development
Agreement.
Revenues from use of money and property and intergovernmental revenues showed slight change from 2012-13,
-4% and 5% respectively. Licenses and permits include fees for reviewing building plans, building inspections,
construction, tenant improvements, and commercial/residential installations for compliance with state and
municipal building codes. License and permit fees grew by 5% compared to last year due to the Rose Bowl and
Biltmore construction and Apple Campus 2 projects. The fee ended slightly higher than final budget targets by
6%.
Charges for services increased dramatically primarily due to a sharp increase in development-related activity
from the Apple Campus 2 project and the implementation of the City’s cost Allocation Plan.
Fines and forfeitures grew by 10% or $55,000 compared to the prior year and in line with budgeted revenues of
$620,000. Revenues had been decreasing for several years as courts assessed lower fines and fewer officers
issued parking fines. In 2013-14 an additional traffic officer position was added as the Sheriff’s contract and
was the primary reason for the increase.
Other revenues of $545,000 increased due to the Successor Agency fund and the Traffic Impact Assessment
District fund being closed to the general fund. The final budget for other revenues was $23,877,000, but this
level was not reached due to the sale of Pruneridge Avenue not closing in 2013-14.
No transfers into the General Fund occurred in 2013-14.
13
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
Revenue by Source Amount% of TotalAmountPercent
Taxes:
Property $ 14,409 19% $ (525)-4%
Sales 19,794 27% 1,073 6%
Transient occupancy 4,590 6% 822 22%
Utility user 3,099 4% 104 3%
Franchise 2,776 4% (73)-3%
Other 10,422 14% 8,346 402%
Use of money & property 691 1% (30)-4%
Intergovernmental 403 1% 20 5%
Licenses and permits 3,680 5% 177 5%
Charges for services 12,975 18% 8,880 217%
Fines and forfeitures 615 1% 55 10%
Other 545 1% 489 872%
Total revenues $ 73,999 100% $ 19,338 35%
Other financing sources:
Proceeds from sale of land 38 0% $ - 0%
Total other financing sources $ 38 0% $ - 0%
Fiscal 2014 From Fiscal 2013
Table 5
Revenue Changes
General Fund, Fiscal 2014 vs. 2013
(in thousands)
Increase/(Decrease)
14
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
Over/(Under)
OriginalFinalActualFinal
Taxes:
Property13,138$ 14,459$ $ 14,409 (50)$
Sales16,215 16,215 19,794 3,579
Transient occupancy4,400 4,400 4,590 190
Utility user3,253 3,253 3,099 (154)
Franchise 2,905 2,905 2,776 (129)
Other 2,700 9,492 10,422 930
Use of money & property660 660 691 31
Intergovernmental 265 265 403 138
Licenses and permits 3,480 3,480 3,680 200
Charges for services 4,515 16,266 12,975 (3,291)
Fines and forfeitures 620 620 615 (5)
Other 38 23,877 545 (23,332)
Total revenues 52,189$ 95,892$ 73,999$ (21,893)$
Table 6
Budgeted Amounts
(in thousands)
General Fund, 2013-14
Revenue Budget and Actual Comparisons
General Fund Expenditures
Fiscal 2013-14 overall expenditures, at $41,509,000, were $5,014,000 or 14% higher than last year. However,
this result came in 26% or $14,403,000 under the final budget and 28% or $15,996,000 below the original
budget. Year-over-year and budget versus actual results for General Fund programs are described below and in
Tables 7 and 8.
Administration expenditures rose because there was a City Manager vacancy for two months in the prior year
and an Assistant to the City Manager was added in 2012-13 that had been vacant for half that year but filled for
all of 2013-14. Legal costs of other programs were consolidated under this function and new sales tax legal
costs were incurred, including legal costs related to Apple Campus 2. In addition, the transfer in of the
Environmental Affairs and Economic Development programs from Public Affairs and Planning respectively,
resulted in increased costs.
Law Enforcement was higher because of the transfer in of the Code Enforcement program costs from the
Administrative Services Department.
Public Affairs declined due to the transfer out of the Environmental Affairs program to Administration and the
transfers out of Community Outreach, Neighborhood Watch, and Emergency/Disaster Preparedness to
Recreation Services.
Administrative Services fell because transfers out of several programs including, Library Service Extra Hours,
Neighborhood Watch and Emergency/Disaster Preparedness to Public Affairs.
Recreation Services increased due to the transfer in of several programs and Administrative Services and Public
Affairs, including Library Extra Hours, Emergency/Disaster Preparedness, Neighborhood Watch, and several
programs under Community Services.
15
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
Community Development General Fund costs grew over last year because of more planning and building
applications. A large portion of this was related to increased contract costs associated with Apple Campus 2.
The City pays for consultants to expedite Planning and Public Work items related to Apple Campus 2. All
expenses are paid for by the City and then reimbursed by Apple through a refundable deposit.
As for the Public Works decrease, this is primarily driven by the decreased costs associated with special
projects.
Transfers out of the General Fund rose from $8,221,000 in 2012-13 to $22,892,000 in 2013-14, with $3,079,000
for annual debt service, $230,000 to fund the Golf Course Master Plan and other costs of the course, $154,000 to
assist the Sports Center with increased costs resulting from the City’s Cost Allocation Plan, $8,941,000 to fund
capital projects, and $10,487,500 to internal service funds to cover a large contribution to retiree medical and
support IT operations and equipment replacement. The contribution to retiree medical did not occur because it
was contingent upon the close of the sale of Pruneridge Avenue to Apple Inc. that did not occur in 2013-14.
Escrow is expected to close before December 2014.
Function/Program Amount% of TotalAmountPercent
Administration $ 3,958 10% $ 1,953 97%
Law enforcement 9,626 23% 842 10%
Public and environmental affairs 478 1% (1,009)-68%
Administrative services 2,445 6% (1,328)-35%
Recreation services 4,536 11% 452 11%
Community development 7,870 19% 4,108 109%
Public works 12,486 30% (24)0%
Capital outlay 110 0% 20 22%
Total expenditures $ 41,509 100% $ 5,014 14%
Transfers out $ 22,892 100% $ 14,671 228%
Table 7
Increase/(Decrease)
From Fiscal 2013
Expenditure Changes from Prior Year
General Fund, Fiscal 2014 vs. 2013
(in thousands)
Fiscal 2014
16
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
Under
(Over)
Function/ProgramOriginalFinalActualFinal
Administration $ 5,036 $ 4,897 $ 3,958 $ 939
Law enforcement 9,427 10,026 9,626 400
Public and environmental affairs 544 540 478 62
Administrative services 4,741 4,610 2,445 2,165
Recreation services 5,053 4,913 4,536 376
Community development 16,903 15,941 7,870 8,071
Public works 15,773 14,843 12,486 2,357
Capital outlay 28 143 110 33
Total expenditures $ 57,505 $ 55,913 $ 41,509 $ 14,403
Transfers out $ - $ 22,892 $ 22,892 $ -
Budgeted Amounts
(in thousands)
General Fund, 2013-14
Expenditure Budget and Actual Comparison
Table 8
General Fund - Fund Balance
The General Fund carried a June 30, 2014, ending fund balance of $45,680,000, up 27% or $9,636,000 from the
prior year. The City assigned $12,500,000 of this for general economic uncertainty, $1,400,000 for state budget
actions that impact City revenues, $2,000,000 for economic fluctuations, and $500,000 for potential pension
liabilities. Non-spendable rehabilitation and employee housing loan receivables, prepaid expenses, and
advances totaled to $3,363,000 of fund balance. Lastly, $25,917,000 was unassigned as of June 30, 2014, and
available for purchase orders and future budget actions.
The increase in total fund balance resulted from revenues exceeding expenditures by $32,490,000 reduced by
$22,891,804 in transfers to other funds. The $9,636,087 increase was distributed as follows: $7,956,000 went
to unassigned fund balance, $726,000 was released from restricted fund balance for public, education, and
government access programming, and an additional $2,406,000 was added to non-spendable loan receivables
and prepaid expenses.
Public Facilities Corporation
A transfer of $3,079,000 was made from the General Fund to the Public Facilities Corporation Debt Service
Fund to cover principal and interest on the 2012 Certificates of Participation lease payments. See Note 6 to the
Basic Financial Statements and the Debt Administration section of this Analysis for more information.
MAJOR PROPRIETARY FUNDS
Resources Recovery
The City has a solid waste franchise agreement with Recology that shares collection, landfill disposal, and
recycling revenues and costs. This enterprise fund receives 17% of Recology's revenues in the City, with the
funds going toward landfill costs, regulatory fees, and staffing costs that the City incurs to manage solid waste,
recycling, and household hazardous waste programs. Because of the improving economy and resulting increase
in tonnage that Recology handled, this fund experienced a 10% increase in residential and commercial pickup
17
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
revenues offset by 8% higher contract expenses for landfill disposal. Total operating revenue rose from
$1,883,000 last year to $2,074,000 this year, while expenses increased by $394,000. With interest earnings, net
position decreased by $78,000, down from the $135,000 increase from last year and ended the year with a
$6,265,000 unrestricted balance.
Blackberry Farm
City employees, with a teaching professional on contract, staff the City-owned Blackberry Farm golf course and
pro shop. The number of rounds played and accordingly, green fees, have been declining for six years. With
rounds played falling from 29,893 in 2012-13 to 24,594 in 2013-14, operating revenues accordingly dropped 6%
from $388,000 to $302,000. This year’s decline was exacerbated by the Creek Restoration Project that severely
affected number of rounds played. Expenses increased by $108,000 to $571,000 this year due to increases in all
expense categories, including salaries and benefits, materials and supplies, and contractual services.
Implementation of the City’s Cost Allocation Plan contributed substantially to the increase in materials and
supplies expenses. Altogether, the golf course’s operating loss increased from $77,000 last year to $269,000
this year. After interest income and a transfer in from the General Fund, net position declined $38,000,
compared to last year’s $74,000 decrease. At June 30, 2014, unrestricted net position was $775,000.
Cupertino Sports Center
Tennis lesson, membership, fitness class and rent revenues of $2,187,000 rose by $38,000 or 2% over last year,
resulting from moderate increases across the Center’s major revenue sources. Expenses on the other hand,
increased by $210,000 or 11%, resulting in a net operating loss of $34,000. After interest income and a transfer
in from the General Fund, net position increased $121,000, compared to last year’s increase of $141,000. At
June 30, 2014, unrestricted net position was $813,000.
Recreation Programs
This enterprise operates the Quinlan Community Center, Monta Vista Recreation Center, McClellan Ranch,
Creekside Park building, eight school sites, and various parks. The improved economy and enhanced marketing
helped cultural events, youth and teen programs, sports, dance and fitness classes generate $2,480,000 in
revenues that were 3% better than last year. Ongoing program expenses of $2,731,000, including full-time
administrative and programming staff, part-time activity leaders, and class instructors on contract increased 35%
from 2012-13. This resulted in a net operating loss of $251,000 as compared to operating income of $384,000 a
year ago. The largest contributors to higher operating expenses were reallocation of positions increasing salary
and benefit expenses, and implementation of the City’s Cost Allocation Plan. To complete final improvements
to the fenced dog park, the fund received a $17,000 transfer in from Other Governmental Funds. After interest
earnings and transfers, the fund ended up with a decrease in net position of $230,000 and an unrestricted net
position of $3,549,000 that is needed for future operating budgets.
CAPITAL ASSETS
At June 30, 2014 the City had $163,171,000, net of depreciation, invested in a broad range of capital assets used
in governmental and business-type activities, as shown in Table 9 and in Note 5 to the Basic Financial
Statements. While the City’s capital asset total declined by 3%, improvements other than buildings and street
improvements provided major capital additions with depreciation of existing assets offsetting the additions.
18
CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2014
20142013
Governmental Activities:
Land62,046$ 60,471$
Easements19,492 19,492
Buildings 19,693 21,042
Improvements other than buildings17,648 14,941
Machinery and equipment1,799 1,762
Roads, curbs, gutters, sidewalks, medians and bridges35,370 33,803
Streetlights1,823 1,835
Storm drain structures and mains3,073 3,798
Traffic signals1,117 1,220
Total Governmental Activities 162,061 158,364
Business-Type Activities
Buildings252 241
Improvements other than buildings846 490
Machinery and equipment12 31
Total Business-Type Activities 1,110 762
Total City 163,171$ 159,126$
Table 9
Capital Assets, Net of Depreciation, at June 30
(in thousands)
DEBT ADMINISTRATION
The City’s only long-term debt liability at June 30, 2014, comes from $43,940,000 in Certificates of
Participation (COPs) issued in May 2012 by the Cupertino Public Facilities Corporation. The certificates
refunded previously issued COPs that financed the Wilson Park, Blackberry Farm, and Creekside Park
purchases, the Memorial Park expansion, the Quinlan Community Center construction, the City Hall remodel,
and the new library opened in 2004. The serial fixed rate debt ranging from 0.35% to 3.125% requires annual
debt payments of approximately $3,171,000 that are covered by the General Fund. The June 30, 2014,
outstanding principal of $39,980,000 is due to be paid off by 2030. More information can be found in Note 6 to
the Basic Financial Statements and in the Public Facilities Corporation discussion earlier in this Analysis.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This Comprehensive Annual Financial Report is intended to provide a general overview of the City’s finances.
Further information can be provided by the City of Cupertino Finance Department, 10300 Torre Avenue,
Cupertino CA 95014, phone (408) 777-3280, or by the City website at www.cupertino.org.
19
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STATEMENT OF NET POSITION AND
STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire City’s financial
activities and financial position. They are prepared on the same basis as is used by most businesses,
which means they include all the City’s assets and all its liabilities, as well as all its revenues and
expenses. This is known as the full accrual basis – the effect of all the City’s transactions is taken into
account, regardless of whether or when cash changes hands, but all material internal transactions between
City funds have been eliminated.
The Statement of Net Position reports the difference between the City’s total assets and deferred outflows
and the City’s total liabilities and deferred outflows, including all the City’s capital assets and all its long-
term debt.
The Statement of Net Position summarizes the financial position of all the City’s Governmental Activities
in a single column, and the financial position of all the City’s Business-Type Activities in a single
column; these columns are followed by a Total column which presents the financial position of the entire
City.
The City’s Governmental Activities include the activities of its General Fund, along with all its Special
Revenue, Capital Projects and Debt Service Funds. Since the City’s Internal Service Funds service these
Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund
transactions and balances. The City’s Business Type Activities include all its Enterprise Fund activities.
The Statement of Activities reports increases and decreases in the City’s net position. 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 are revenues which
are generated directly by these programs, are then deducted from program expenses to arrive at the net
expense of each governmental and business-type program. The City’s general revenues are then listed in
the Governmental Activities or Business-type Activities column, as appropriate, and the Change in Net
Position is computed and reconciled with the Statement of Net Position.
Both these Statements include the financial activities of the City and the Cupertino Public Facilities
Corporation, which is a legally separate component unit of the City because it is controlled by and
financially accountable to the City.
21
CITY OF CUPERTINO
STATEMENT OF NET POSITION
JUNE 30, 2014
GovernmentalBusiness-Type
ActivitiesActivitiesTotal
ASSETS
Cash and investments (Note 2)$103,095,363$11,605,682$114,701,045
Restricted cash and investments (Note 2)4,193,1994,193,199
Receivables:
Accounts5,396,101331,5065,727,607
Interest47,9575,37153,328
Loans (Note 3)1,619,2781,619,278
Prepaid expenses and other assets426,065426,065
Net OPEB asset (Note 11)2,991,1322,991,132
Capital assets (Note 5):
Non-depreciable81,537,92881,537,928
Depreciable, net of accumulated depreciation80,523,2951,110,41481,633,709
Total Assets279,830,31813,052,973292,883,291
LIABILITIES
Accounts payable and accruals16,726,563737,22817,463,791
Accrued payroll and benefits684,90783,203768,110
Deposits4,878,0294,878,029
Unearned revenue228,073697,028925,101
Compensated absences (Note 1h):
Due in one year 450,250 56,405 506,655
Due in more than one year 2,592,508 76,485 2,668,993
Claims payable (Note 9):
Due in one year 478,051 478,051
Due in more than one year 1,627,846 1,627,846
Long-term debt (Note 6):
Due in one year 2,055,000 2,055,000
Due in more than one year 37,925,000 37,925,000
Total Liabilities 67,646,2271,650,34969,296,576
NET POSITION (Note 7)
Net investment in capital assets 122,081,2231,110,414123,191,637
Restricted for:
Special revenue projects 13,323,402 13,323,402
Affordable housing 9,312,268 9,312,268
Public access television
Debt service 1,596,697 1,596,697
Total Restricted Net Position 24,232,367 24,232,367
Unrestricted 65,870,50110,292,21076,162,711
Total Net Position $212,184,091 $11,402,624$223,586,715
See accompanying notes to financial statements
22
CITY OF CUPERTINO
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2014
Net (Expense) Revenue and
Program Revenues Changes in Net Assets
Operating Capital
Charges for Grants and Grants and Governmental Business-type
Functions/Programs ExpensesServicesContributionsContributionsActivitiesActivitiesTotal
Governmental Activities:
Administration $4,529,539$1,087,393$101,849 ($3,340,297)($3,340,297)
Law enforcement 10,062,192725,631116,667 (9,219,894)(9,219,894)
Public and environmental affairs512,895 (512,895)(512,895)
Administrative services 2,662,008 (2,662,008)(2,662,008)
Recreation services 4,866,974955,081 (3,911,893)(3,911,893)
Community development 9,108,9496,649,2927,437,820 4,978,163 4,978,163
Public works 21,143,33110,636,8502,343,795$569,159(7,593,527)(7,593,527)
Interest on long - term debt 1,130,428 (1,130,428)(1,130,428)
Total Governmental Activities54,016,31620,054,24710,000,131569,159(23,392,779)(23,392,779)
Business-type Activities:
Resource recovery 2,159,0472,074,251 ($84,796)(84,796)
Blackberry farm 571,000302,472 (268,528)(268,528)
Cupertino sports center 2,221,7032,188,127 (33,576)(33,576)
Recreation programs 2,730,7652,480,209 (250,556)(250,556)
Total Business-type Activities7,682,5157,045,059 (637,456)(637,456)
Total $61,698,831$27,099,306$10,000,131$569,159(23,392,779)(637,456)(24,030,235)
General revenues:
Taxes:
Property taxes 9,169,1839,169,183
Property tax in lieu of motor vehicle fee 5,289,476 5,289,476
Sales taxes 19,794,036 19,794,036
Transient occupancy tax 4,590,1564,590,156
Utility user tax 3,098,6393,098,639
Franchise tax 2,775,8922,775,892
Other taxes 18,791,55918,791,559
Intergovernmental, unrestricted:
Motor vehicle license fee 25,29425,294
Investment earnings 133,24311,238144,481
Miscellaneous 57,00557,005
Transfers (Note 4)(401,350)401,350
Total general revenues and transfers 63,323,133 412,58863,735,721
Change in Net Position 39,930,354(224,868)39,705,486
Net Position, beginning of year 172,253,73711,627,492183,881,229
Net Position, end of year $212,184,091$11,402,624$223,586,715
See accompanying notes to financial statements
23
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FUND FINANCIAL STATEMENTS
In the Fund Financial Statements only individual major funds are presented, while non-major funds are
combined in a single column. Major funds are defined generally as having significant activities or
balances in the current year.
The funds described below were determined to be Major Funds by the City for fiscal 2013-14. Individual
non-major funds may be found in the Supplemental section.
GENERAL FUND
The general fund is the general operating fund of the City. It is used to account for all financial resources
except those that are required to be accounted for in another fund.
PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND
This fund accounts for the payments of principal and interest on certificates of participation issued to
provide for the financing of the Civic Center, Library, Wilson Park, Memorial Park, and other City
facilities.
STEVENS CREEK CORRIDOR PARK CAPITAL PROJECT FUND
Accounts for the design and construction of the Stevens Creek Corridor Park projects.
25
CITY OF CUPERTINO
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2014
Public
FacilitiesStevens CreekOther Total
CorporationCorridor ParkGovernmentalGovernmental
GeneralDebt Service FundCapital Project FundFundsFunds
ASSETS
Cash and investments (Note 2)$55,700,992$7,916$30,334,957$86,043,865
Restricted cash and investments (Note 2)4,193,1994,193,199
Receivables:
Accounts5,100,392122,713172,9965,396,101
Interest29,48310,49139,974
Loans (Note 3)903,811715,4671,619,278
Prepaid items194,891194,891
Advance to other funds (Note 4)2,264,3622,264,362
Other assets3,884160,617164,501
Total Assets$64,197,815$4,201,115$283,330$31,233,911$99,916,171
LIABILITIES
Accounts payable and accruals$12,817,770$2,604,418$299,929$849,535$16,571,652
Accrued payroll and benefits593,54736,597630,144
Advance from other funds (Note 4)2,264,3622,264,362
Deposits4,878,0294,878,029
Unearned revenue228,073228,073
Total Liabilities18,517,4192,604,4182,564,291886,13224,572,260
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - loans 92,57592,575
Total Deferred Inflows of Resources 92,57592,575
FUND BALANCES (Note 7):
Nonspendable3,363,0653,363,065
Restricted1,596,69722,635,67024,232,367
Assigned16,400,0007,619,53424,019,534
Unassigned25,917,331(2,280,961)23,636,370
Total Fund Balances45,680,3961,596,697(2,280,961)30,255,20475,251,336
Total Liabilities, Deferred Inflows of Resources
and Fund Balances$64,197,815$4,201,115$283,330$31,233,911$99,916,171
See accompanying notes to financial statements
26
CITY OF CUPERTINO
Reconciliation of the
GOVERNMENTAL FUNDS -- BALANCE SHEET
with the
STATEMENT OF NET POSITION
JUNE 30, 2014
Total fund balances reported on the governmental funds balance sheet $75,251,336
Amounts reported for Governmental Activities in the Statement of Net Position
are different from those reported in the Governmental Funds above because of the following:
CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and
therefore are not reported in the Governmental Funds.160,546,106
ALLOCATION OF INTERNAL SERVICE FUND NET POSITION
Internal service funds are used by management to charge the costs of activities such as
information technology, insurance, equipment acquisition and maintenance, and certain
employees' benefits to governmental funds. The assets and liabilities of the internal service
funds are therefore included in the governmental activities of the statement of net position.19,277,116
RECEIVABLES NOT AVAILABLE
Certain receivables are not available to pay for current period expenditures and
therefore are deferred in the governmental funds.92,575
LONG TERM LIABILITIES
The liabilities below are not due and payable in the current period and therefore are not
reported in the governmental funds:
Long-term debt (39,980,000)
Claims payable (225,129)
Compensated absences (2,777,913)
NET POSITION OF GOVERNMENTAL ACTIVITIES $212,184,091
See accompanying notes to financial statements
27
CITY OF CUPERTINO
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2014
Stevens Creek
PublicCorridor Park Other Total
FacilitiesCapital ProjectGovernmentalGovernmental
GeneralCorporationFund Funds Funds
REVENUES
Taxes $55,090,481 $17,121,243$72,211,724
Use of money and property 690,484 $1,151 72,664764,299
Intergovernmental 403,439 $122,7132,543,2483,069,400
Licenses and permits 3,679,943 3,679,943
Charges for services 12,975,029 489,03713,464,066
Fines and forfeitures 615,085 1,804616,889
Other revenue 545,052 545,052
Total Revenues 73,999,513 1,151122,71320,227,99694,351,373
EXPENDITURES
Current:
Administration 3,957,739 3,957,739
Law enforcement 9,626,121 9,626,121
Public and environmental affairs 477,852 477,852
Administrative services 2,444,670 2,444,670
Recreation services 4,536,519 4,536,519
Community development 7,870,610 553,6448,424,254
Public works 12,485,925 4,983,70217,469,627
Capital outlay 109,755 4,060,8032,940,4167,110,974
Debt service:
Principal 2,040,000 2,040,000
Interest and fiscal charges 1,130,428 1,130,428
Total Expenditures 41,509,1913,170,4284,060,8038,477,76257,218,184
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 32,490,322(3,169,277)(3,938,090)11,750,23437,133,189
OTHER FINANCING SOURCES (USES)
Proceeds from sale of land 37,569 37,569
Transfers in (Note 4)3,079,000 10,531,30413,610,304
Transfers (out) (Note 4)(22,891,804)(1,607,350)(24,499,154)
Total Other Financing Sources (Uses)(22,854,235)3,079,000 8,923,954(10,851,281)
NET CHANGE IN FUND BALANCES 9,636,087(90,277)(3,938,090)20,674,18826,281,908
BEGINNING FUND BALANCES 36,044,3091,686,9741,657,1299,581,01648,969,428
ENDING FUND BALANCES $45,680,396$1,596,697($2,280,961)$30,255,204$75,251,336
See accompanying notes to financial statements
28
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, 2014
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of
Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and current
liabilities on the modified accrual basis, with the Change in Net Position of Governmental Activities reported in the
Statement of Activities, which is prepared on the full accrual basis.
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS$26,281,908
Amounts reported for governmental activities in the Statement of Activities
are different because of the following:
CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures. However,
in the Statement of Activities the cost of those assets is capitalized and allocated over
their estimated useful lives and reported as depreciation expense.
Expenditures for capital assets reported as:
Capital outlay9,471,546
Depreciation expense is deducted from the fund balance(5,824,766)
LONG TERM DEBT TRANSACTIONS
Principal payments2,040,000
ACCRUAL OF NON-CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or (require) the use of
current financial resources and therefore are not reported as revenue or expenditures in
governmental funds (net change):
Compensated absences65,533
Claims payable (125,129)
Deferred revenue (62,027)
ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY
Internal Service Funds are used by management to charge the costs of certain activities,
such as equipment acquisition, maintenance, and insurance to individual funds.
The portion of the net revenue (expense) of these Internal Service Funds arising out
of their transactions with governmental funds is reported with governmental activities,
because they service those activities.
Change in Net Position - All Internal Service Funds8,083,289
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES$39,930,354
See accompanying notes to financial statements
29
CITY OF CUPERTINO
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2014
Variance with
Budgeted AmountsFinal Budget
Positive
OriginalFinalActual Amounts(Negative)
Revenues:
Taxes$42,611,000$50,724,000$55,090,481$4,366,481
Use of money and property660,000660,000690,48430,484
Intergovernmental265,000289,500403,439113,939
Licenses and permits3,480,0003,480,0003,679,943199,943
Charges for services4,514,66016,265,68912,975,029(3,290,660)
Fines and forfeitures620,000620,000615,085(4,915)
Other revenue38,00063,000545,052482,052
Amounts available for appropriation52,188,66072,102,18973,999,5131,897,324
Charges for appropriation (outflows)
Current
Administration5,036,2644,896,7863,957,739939,047
Law enforcement9,426,86510,025,8919,626,121399,770
Public and environmental affairs543,720539,772477,85261,920
Administrative services4,741,4914,610,1772,444,6702,165,507
Recreation services5,052,9644,913,0244,536,519376,505
Community development16,902,82015,941,3397,870,6108,070,729
Public works15,773,14614,842,95012,485,9252,357,025
Capital outlay28,000142,738109,75532,983
Total charges for appropriations57,505,27055,912,67741,509,19114,403,486
EXCESS OF REVENUES
OVER EXPENDITURES(5,316,610)16,189,51232,490,32216,300,810
OTHER FINANCING SOURCES (USES)
Proceeds from sale of land 23,814,257 37,569(23,776,688)
Transfers (out)(22,891,804)(22,891,804)
Total other financing sources (uses)922,453(22,854,235)(23,776,688)
NET CHANGE IN FUND BALANCE ($5,316,610)$17,111,9659,636,087($7,475,878)
BEGINNING FUND BALANCE 36,044,309
ENDING FUND BALANCE $45,680,396
See accompanying notes to financial statements
30
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 2013-14.
RESOURCES RECOVERY FUND
This fund accounts for activity related to the collection, disposal, and recycling 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 City-owned golf course.
CUPERTINO SPORTS CENTER FUND
This fund accounts for the operation and maintenance of the Cupertino Sports Center.
RECREATION PROGRAMS FUND
This fund accounts for activities of the City’s community centers and park facilities.
31
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2014
Business-type Activities-Enterprise Funds Governmental
Cupertino Activities-
Resources Blackberry Sports Recreation Internal Service
RecoveryFarmCenter ProgramsTotalsFunds
ASSETS
Current Assets:
Cash and investments (Note 2)$6,367,056$784,409$1,071,262$3,382,955$11,605,682$17,051,498
Accounts receivable 293,27938,227331,506
Interest receivable2,9713704981,5325,3717,983
Prepaid items 66,673
Total current assets6,663,306784,7791,071,7603,422,71411,942,55917,126,154
Noncurrent assets:
Net OPEB asset (Note 11)2,991,132
Capital Assets (Note 5):
Depreciable, net of
accumulated depreciation 27,13256,55480,261946,4671,110,4141,515,117
Total noncurrent assets 27,13256,55480,261946,4671,110,4144,506,249
Total Assets 6,690,438841,3331,152,0214,369,18113,052,97321,632,403
LIABILITIES
Current Liabilities:
Accounts payable and accruals391,36226,600197,443121,823737,228154,911
Accrued payroll and benefits14,0096,72914,50647,95983,20354,763
Compensated absences (Note 1h)8,41914,1232,84631,01756,40536,052
Claims payable (Note 9)478,051
Unearned revenue 120,187576,841697,028
Total current liabilities 413,79047,452334,982777,6401,573,864723,777
Non-current Liabilities:
Compensated absences (Note 1h)11,41719,1503,85942,05976,485228,793
Claims payable (Note 9)1,402,717
Total Liabilities 425,20766,602338,841819,6991,650,3492,355,287
NET POSITION (Note 7)
Net investment in capital assets27,13256,55480,261946,4671,110,4141,515,117
Unrestricted 6,238,099718,177732,9192,603,01510,292,21017,761,999
Total Net Position$6,265,231$774,731$813,180 $3,549,482 $11,402,624$19,277,116
See accompanying notes to financial statements
32
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2014
Business-type Activities-Enterprise Funds Governmental
Cupertino Activities-
Resources Blackberry Sports Recreation Internal Service
RecoveryFarmCenter ProgramsTotalsFunds
OPERATING REVENUES
Charges for services$2,058,410$290,609$2,186,741$2,480,207$7,015,967$3,802,391
Other 15,84111,8631,386 229,09221,993
Total Operating Revenues2,074,251302,4722,188,1272,480,2097,045,0593,824,384
OPERATING EXPENSES
Salaries and benefits 383,995181,363371,440806,5121,743,3103,706,730
Materials and supplies 160,121125,576370,601439,1321,095,4301,108,153
Contractual services 1,611,580252,4691,451,7501,375,6094,691,408400,566
Insurance and claims and premium 566,859
Depreciation (Note 5)3,35111,59227,912109,512152,367467,392
Total Operating Expenses 2,159,047571,0002,221,7032,730,7657,682,5156,249,700
Operating Income (Loss)(84,796)(268,528)(33,576)(250,556)(637,456)(2,425,316)
NONOPERATING REVENUES
Investment income 6,4907639573,02811,23821,105
Total Nonoperating Revenues 6,4907639573,02811,23821,105
Income (Loss) Before Transfers (78,306)(267,765)(32,619)(247,528)(626,218)(2,404,211)
Transfers in (Note 4)230,000154,00017,350401,35011,395,036
Transfers (out) (Note 4)(907,536)
Change in net position (78,306)(37,765)121,381(230,178)(224,868)8,083,289
Net Position-Beginning of year 6,343,537812,496691,7993,779,66011,627,49211,193,827
Net Position-End of year $6,265,231$774,731$813,180$3,549,482$11,402,624$19,277,116
See accompanying notes to financial statements
33
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2014
Business-type Activities-Enterprise Funds
Governmental
Cupertino Activities-
Resources Blackberry Sports RecreationInternal Service
RecoveryFarmCenter ProgramsTotalsFunds
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers$2,024,585$302,712$2,203,846$2,457,797$6,988,940$3,834,487
Cash payments to suppliers
for goods and services(1,513,808)(359,585)(1,799,797)(1,791,762)(5,464,952)(1,521,137)
Cash payments to employees(362,286)(175,348)(364,085)(719,071)(1,620,790)(2,222,233)
Cash payments for judgment and claims (563,640)
Net cash provided (used) by operating activities148,491(232,221)39,964(53,036)(96,802)(472,523)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Advance from other funds (560,564)
Transfers in230,000154,00017,350401,35011,395,036
Transfers (out)(907,536)
Cash Flows from Noncapital
Financing Activities230,000154,00017,350401,3509,926,936
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition of capital assets(5,999)(494,769)(500,768)(517,917)
Cash Flows from Capital and
Related Financing Activities (5,999)(494,769)(500,768)(517,917)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 18,1842,2602,52710,45633,42732,222
Cash Flows from Investing Activities18,1842,2602,52710,45633,42732,222
Net Cash Flows166,675(5,960)196,491(519,999)(162,793)8,968,718
Cash and investments at beginning of year 6,200,381790,369874,7713,902,95411,768,4758,082,780
Cash and investments at end of year $6,367,056 $784,409 $1,071,262$3,382,955$11,605,682$17,051,498
Reconciliation of operating income (loss) to
net cash provided by operating activities:
Operating income (loss)($84,796)($268,528)($33,576)($250,556)($637,456)($2,425,316)
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation3,35111,59227,912109,512152,367467,392
Change in assets and liabilities:
Accounts receivable(49,666)240(38,227)(87,653)
Prepaid expense (534)
Net OPEB assets 1,268,765
Accounts payable and accruals257,89318,46022,55422,979321,886(18,266)
Accrued payroll and benefits6,6721,6094,47314,36527,11924,679
Deposits 207,538
Deferred revenue15,71915,81531,534
Claims payable 3,219
Compensated absences15,0374,4062,88273,07695,401
Net cash provided (used) by operating activities $148,491 ($232,221)$39,964($53,036)($96,802)($472,523)
See accompanying notes to financial statements
34
FIDUCIARY FUNDS
Fiduciary Funds include a private-purpose trust fund that accounts for the accumulation of resources to be
used for payments at appropriate amounts and times in the future.
Fiduciary Funds also include agency funds that account for assets held by the City as an agent for
individuals, private organizations, other governmental units, or other entities. Agency Funds are custodial
in nature and do not involve measurement of operation results. Such funds have no equity since all assets
are due to individuals or other entities in the future.
SUCCESSOR AGENCY TO FORMER REDEVELOPMENT AGENCY PRIVATE-PURPOSE
TRUST FUND
This fund holds the net position of the City’s former redevelopment agency. The net position is dedicated
to remaining agency obligations.
AGENCY FUNDS
Special district assessments held by the City, acting as an agent for bond debt service payments, comprise
City Agency funds. The City is not liable for the debt payments.
35
CITY OF CUPERTINO
FIDUCIARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2014
Successor
Agency to
Redevelopment
Agency
Private-purposeAgency
Trust FundFunds
ASSETS
Cash and investments$0$0
Total Assets$0$0
LIABILITIES
Accrued payroll and benefits $0
Deposits $0
Total Liabilities 0 $0
NET POSITION
Held in trust for restricted purposes$0
See accompanying notes to financial statements
36
CITY OF CUPERTINO
FIDUCIARY FUND
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30, 2014
Successor
Agency to
Redevelopment
Agency
Private-purpose
Trust Fund
DEDUCTIONS
Community development activities $773,727
Total deductions 773,727
Change in net position (773,727)
Net position - beginning of year 773,727
Net position - end of year
See accompanying notes to financial statements
37
This Page Left Intentionally Blank
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Reporting Entity
The City of Cupertino, California (the City) was incorporated on October 3, 1955, under the laws of the
State of California. The City operates under a Council - City Manager form of government and provides
services through the following departments: Administrative Services, Community Development, City
Manager, Parks and Recreation, Public and Environmental Affairs, and Public Works. Fire services are
provided by the Santa Clara County Fire District, and the City contracts with the Santa Clara County
Sheriff’s Department for police services, and with Recology for garbage and recycling services.
The accompanying basic financial statements include all funds and boards and commissions that are
controlled by the City Council. The basic financial statements include the City’s blended component
unit entity 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 unit - 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 Corporation does not issue separate financial statements, since it is reported separately in the City’s
basic financial statements.
(b) Measurement Focus, Basis of Accounting and Basis of Presentation
The City’s basic financial statements are prepared in conformity with accounting principles generally
accepted in the United States. The Government Accounting Standards Board (GASB) is the
acknowledged standard setting body for establishing accounting and financial reporting standards
followed by governmental entities in the United States.
Government-wide Statements - The Statement of Net Position 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.
39
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (Continued)
The Statement of Activities presents a comparison between expenses and program revenues for each
segment of the business-type activities of the City and for each function of the City’s governmental
activities. Expenses include direct and indirect types. Direct expenses are those that are specifically
associated with a program or function and, therefore, are clearly identifiable to a particular function.
Indirect expenses such as depreciation, information technology, insurance and equipment replacement
are included in expenses for individual activities and functions. Program revenues include (a) charges
paid by the recipients of goods or services offered by the programs and (b) grants and contributions that
are restricted to meeting the operational or capital needs of a particular program. Revenues that are not
classified as program revenues, including taxes, are presented as general revenues. Program revenues
and direct expenses related to interfund services are included and indirect expenses funded by interfund
transfers are excluded from the Statement of Activities. The Statement of Net Position 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 fiduciary – are presented. The emphasis of fund financial
statements is on major individual governmental and enterprise funds, each of which is displayed in a
separate column. All remaining governmental funds are aggregated and reported as nonmajor funds.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions
associated with the principal activity of the fund. Exchange transactions are those in which each party
receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and
investment earnings, result from nonexchange transactions or ancillary activities.
Major Funds - The City’s major governmental and enterprise funds are identified and presented
separately in the fund financial statements. All other funds, called nonmajor funds, are combined and
reported in a single column, regardless of their fund type.
Major funds are defined as funds, which have either assets (plus deferred outflows), liabilities (plus
deferred inflows), revenues or expenditures in excess of ten percent of their fund-type total and five
percent of the aggregate total for both governmental funds and enterprise funds. The General Fund is
always a major fund. The City may select other funds it believes should be presented as major funds.
40
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (Continued)
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 financing of City Hall, Library, Wilson
Park, Memorial Park, and other City facilities.
The Stevens Creek Corridor Park Capital Projects Fund accounts for the design and construction of
the Stevens Creek Corridor Park projects.
The City reports all its enterprise funds as major funds in the accompanying financial statements:
The Resources Recovery Fund accounts for activity related to the collection, disposal, and recycling of
solid waste. A private company has been issued an exclusive franchise to perform these services.
The Blackberry Farm Fund accounts for activities related to the municipal golf course.
The Cupertino Sports Center Fund accounts for the operation and maintenance of the Cupertino
Sports Center.
The Recreation Programs Fund accounts for activities of the City’s community centers and park
facilities.
The City also reports the following fund types:
Internal Service Funds. These funds account for workers’ compensation, management information
systems maintenance and replacement, equipment maintenance and replacement, retiree health costs,
accrued leave payouts, and long-term disability coverage; all of which are provided to other departments
on a cost-reimbursement basis.
Fiduciary Fund Types. The financial activities of these funds are excluded from the Government-wide
financial statements. The Successor Agency to Redevelopment Agency Private-Purpose Trust Fund
accounts for net position restricted to satisfying the remaining obligations of the former Redevelopment
Agency. See Note 14 for more information. The Agency Fund accounts for the City’s role as an agent
for repaying special assessment debt.
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.
41
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (Continued)
Governmental funds are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Under this method, revenues are recognized when measurable
and available. The City considers all revenues reported in the governmental funds to be available if the
revenues are collected within sixty days after year-end. Expenditures are recorded when the related
fund liability is incurred, except for principal and interest on long-term debt which are recognized as
expenditures to the extent the City has provided financial resources to a debt service fund for payment
of these liabilities that mature early in the following year. General capital asset acquisitions are reported
as expenditures in governmental funds. Proceeds from long-term debt and acquisitions under capital
leases are reported as other financing sources.
Unearned revenues are considered on a full accrual basis, while unavailable revenues are based on the
modified accrual measure.
Fiduciary financial statements consist of a private-purpose trust fund and agency fund. The
measurement focus and basis of accounting of the private-purpose trust fund is similar to a proprietary
fund. The agency fund reports only assets and liabilities and therefore has no measurement focus. It
recognizes 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. Other receipts and taxes are recognized as revenue when the cash is received.
Sales taxes collected and held by the state at year end on behalf of the City are also recognized as
revenue. Sales tax consultant payments which are contingent on revenues collected are netted against
the related revenues.
Under the terms of grant agreements, the City may fund certain programs with a combination of cost-
reimbursement grants, categorical block grants, and general revenue. The City’s policy is to first apply
restricted grant resources to such programs, followed by general revenues if necessary. Grant revenues
are recognized after eligibility and billing occurs, but may be a deferred inflow if not received within
sixty days of year-end. Because of the cost-reimbursement and recognition nature of some grants,
certain capital project funds may carry deficit fund balances until billing and receipt of grants. The City
may also front the capital outlays with cash advances from other funds.
Non-exchange transactions, in which the City gives or receives value without directly receiving or
giving equal value in exchange, include property taxes, grants, entitlements, and donations. On the
accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied
or assessed. Revenue from grants is recognized as described above. Entitlement and donation revenues
are recognized when cash is received.
42
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Budgetary Practices
The budget of the City is a detailed operating plan which identifies estimated costs and results in
relation to estimated revenues. The budget includes (1) the programs, projects, services and activities to
be provided during the fiscal year; (2) estimated revenue available to finance the operating plan; and (3)
the estimated spending requirements of the operating plan. The budget represents a process through
which policy decisions are made, implemented and controlled. The City prohibits expending funds for
which there is no legal appropriation. Operating appropriations lapse at fiscal year end.
In May of each year, the City Manager submits to the City Council a proposed budget for the fiscal year
beginning July 1. Public hearings on the proposed budget are held during the month of June and the
budgets for all fund types are legally adopted by Resolution prior to June 30. Original budget amounts
are presented on the accompanying budgetary statements include these legally adopted amounts.
The City’s legal level of budgetary control is at the functional level for the general fund and at the fund
level for other funds. The City Manager is responsible for controlling the City’s expenditures in
accordance with the adopted budget. The City Manager is authorized to administer and transfer
appropriations between budget accounts within the operating budget when in his opinion such transfers
become necessary for administrative purposes. Any revision which increases total appropriations must
be approved by the City Council. Requests for additional personnel or capital outlay also require the
approval of the City Council.
Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting
principles. Budget information is presented for the general, special revenue and debt service funds only.
Capital projects funds are budgeted on a long-term project-by-project basis and, hence, budgets for these
funds are not presented in the basic financial statements.
(d) Cash and Investments
The City pools its cash resources, consisting of cash and investments, of all funds for investment except
for restricted funds generally held by an outside fiscal agent. Cash amounts are reported net of
outstanding warrants. Investments are stated at fair value.
(e) Capital Assets
Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Donated
capital assets are recorded at their estimated fair value on the date donated. Public domain
(infrastructure) capital assets consisting of roads, bridges, curbs, gutters, medians, sidewalks, drainage
and lighting systems have been capitalized and depreciated. Capital assets are defined as assets with an
initial individual cost of more than $5,000 for general capital assets and $100,000 for intangible assets.
43
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(e) Capital Assets (Continued)
Depreciation is recorded using the straight-line method over the following useful lives:
Years
Buildings 15 - 25
Improvements 10 - 15
Vehicles 4 - 10
Street equipment 3 - 20
Water equipment 3 - 50
Office equipment 3 - 5
Road, curbs, gutters, sidewalks, medians and bridges 30 - 40
Streetlights 20
Storm drain structure and mains 40
Traffic signals 20
Major outlays for capital assets and improvements are capitalized as projects are constructed. For
enterprise funds, interest incurred during the construction phase is reflected in the capitalized value of
the asset constructed, net of interest earned on the invested proceeds over the same period. Some capital
assets may be acquired using federal and state grant funds, or they may be contributed by developers or
other governments. These contributions are accounted for as revenues at the time the capital assets are
contributed.
(f) Claims and Judgment Payable
Claims and judgments payable are accrued when the liability is incurred and the amount can be
reasonably estimated. Claims and judgments payable are recorded in an internal service fund for
workers’ compensation and long-term disability, and other claims and judgments are recorded in the
General Fund or enterprise funds, as appropriate.
44
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(g) Compensated Absences
Compensated absences comprise vested accumulated vacation and sick leave. The City’s liability for
compensated absences is recorded in governmental or business-type activities as appropriate. The
liability for compensated absences is determined annually. For all governmental funds, amounts
expected to be “permanently liquidated,” such as what is due to be paid because of a realized
employment action, are recorded as fund liabilities; the long-term portion is recorded in the Statement of
Net Position.
Compensated absences are liquidated by the fund that has recorded the liability. The long-term portion
of governmental activities compensated absences are liquidated primarily by the General Fund, using
the Compensated Absences and Long-Term Disability internal service fund to account for termination
payouts.
The changes in compensated absences for the year ended June 30, 2014 were as follows:
Governmental
Activities
Business-Type
ActivitiesTotal
Beginning Balance$2,900,753$37,489$2,938,242
Additions 409,04396,721505,764
Payments(267,038)(1,320)(268,358)
Ending Balance$3,042,758$132,890$3,175,648
Current Portion$450,250$56,405$506,655
Non-current Portion$2,592,508$76,485$2,668,993
(h) Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position or balance sheet will sometimes report a
separate section for deferred outflows of resources. This separate financial statement element, deferred
outflows of resources, represents a consumption of net position or fund balance that applies to a future
period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then.
In addition to liabilities, the statement of financial position or balance sheet will sometimes report a
separate section for deferred inflows of resources. This separate financial statement element, deferred
inflows of resources, represents an acquisition of net position or fund balance that applies to a future
period(s) and so will not be recognized as an inflow of resources (revenue) until that time.
45
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i) Property Tax Calendar
All property taxes are levied and collected by the County of Santa Clara. Secured taxes are levied on
July 1, are due in two installments on November 1 and February 1 and become delinquent after
December 10 and April 10. Unsecured taxes are levied on July 1 and become delinquent on August 31.
The lien date for secured and unsecured property taxes is January 1.
The City, in fiscal year 1993-94, adopted an alternative method of property tax distribution (the “Teeter
Plan”). Under this method, the City receives 100% of its secured property tax levied in exchange for
foregoing any interest and penalties collected on delinquent taxes. The City receives remittances as a
series of advances made by the County during the year.
(j) 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.
(k) 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.
(l) Prepaid Items
Prepaid items are reported under the consumption method, which recognizes the expenditures/expense
in the period associated with the service rendered or goods consumed.
(m) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect
certain amounts and disclosures. Accordingly, actual results could differ from those estimates.
(n) Closed Funds
As of June 30, 2014, the Successor Agency to Redevelopment Agency Private-Purpose Trust Fund and
the Agency Funds were closed.
(o) General Fund Accounts Payable
In January 2014, the City received a $6.8 million prepayment for a construction project permit fees.
However, in May 2014, when the building permit was issued, the City received another $9.8 million
which included the $6.8 million construction tax that was already collected earlier in January 2014.
Accordingly, on June 30, 2014, the City recorded the $6.8 million overpayment as an accrued payable.
The overpayment was refunded to the company on July 2014.
46
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 2 – CASH AND INVESTMENTS
The City’s pooled idle funds are invested pursuant to investment policy guidelines adopted by the City
Council. The objectives of the policy are to invest funds to the fullest extent possible and to invest in
accordance with the provisions of the California Government Code with the priority of safety, liquidity and
yield. The policy addresses the safekeeping of securities, types of investment instruments, diversification,
maturities, reporting requirements, and internal control. The City maintains a cash and investment pool that
is available for use by all funds. Each fund type’s portion of this pool is displayed on the Statement of Net
Position and the balance sheet as “cash and investments.”
(a) Policies
California Law requires banks and savings and loan institutions to pledge government securities with a
market value of 110% of the City’s cash on deposit, or first trust deed mortgage notes with a market value
of 150% of the deposit, as collateral for these deposits. Under California Law, this collateral is held in a
separate investment pool by another institution in the City’s name and places the City ahead of general
creditors of the institution.
The City and its fiscal agents invest in individual investments and in investment pools. Individual
investments are evidenced by specific identifiable securities instruments, or by an electronic entry
registering the owner in the records of the institution issuing the security, called the book entry system.
Security instruments owned by the City are held in safekeeping by a third 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 investment
income for that fiscal year.
(b) Classification
The City's total cash and investments, at fair value, are presented on the accompanying financial
statements in the following allocation:
Primary
Government
Cash and Investments$114,701,045
Restricted Cash and Investments:
Held by Fiscal Agent for Bond Repayments4,193,199
Total Cash and Investments$118,894,244
47
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 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.
Minimum Maximum Maximum
Maximum Credit Percentage of Investment in
Authorized Investment Type Maturity Quality Portfolio One Issuer
U.S. Treasury Obligations 5 years N/A None None
U.S. Agency Securities * 5 years N/A None None
California Local Agency Investment N/A N/A Up to $50
million
None
Fund (LAIF)
Non-negotiable Certificates of 5 years N/A 30% *** 10% of portfolio;
Deposits (time deposits) 5% of issuer's net worth. **
State of California registered state 5 years N/A None None
warrants, treasury notes, or bonds
California local agency bonds, notes, 5 years N/A None None
warrants, or other obligations
Bond issued by the local agency 5 years N/A None None
Bankers' Acceptances 180 days N/A 40% None
10% of portfolio;
Commercial Paper 270 days A-1+/P-1 25% 5% of issuer's net worth;
10% of outstanding paper of
issuer. **
Negotiable Certificates of Deposit 5 years N/A 30% 10% of portfolio;
5% of issuer's net worth. **
Repurchase Agreements 1 year N/A None 10% of portfolio;
5% of issuer's net worth. **
Medium Term Corporate Notes 5 years A or better 30% 10% of portfolio;
5% of issuer's net worth. **
Money market mutual funds investing
5 years
Aaa/AAA
20%
None
in U.S. Treasury, Government
Agency securities or repurchase
agreements collateralized by
U.S. Treasury or Government
Agency securities
* Securities issued by agencies of the federal government such as the Government National Mortgage Association (GNMA), the
Federal Farm Credit System (FFCB), the Federal Home Loan Bank (FHLB), the Federal National Mortgage Association
(FNMA), the Student Loan Marketing Association (SLMA), and the Federal Home Loan Mortgage Association (FHLMC).
** Represents restriction in which the City’s investment policy is more restrictive than the California Government Code.
*** 30% maximum % of portfolio if using a private sector entity to assist in the placement of the time deposits. No maximum for
others.
48
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 2 – CASH AND INVESTMENTS (Continued)
(d) Authorized Investments by Debt Agreements
The City must maintain required amounts of cash and investments with trustees or fiscal agents under
the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged reserves to
be used if the City fails to meet its obligations under these debt issues. The California Government
Code requires these funds to be invested in accordance with City ordinances, bond indentures or State
statutes. The City’s Investment Policy allows investments of bond proceeds to be governed by
provisions of the related bond indentures. The following identifies the investment types that are
authorized for investments held by fiscal agents under the terms of the bond indentures of the related
debt issue:
Minimum Maximum
Maximum Credit Percentage of
Authorized Investment Type Maturity Quality Portfolio
Cash or obligations of the U.S. including U.S. Treasury obligations N/A N/A None
Federal agencies obligations which represent full faith N/A N/A None and credit of the U.S.
Direct federal agencies obligations which are not fully N/A N/A None guaranteed by the full faith and credit of the U.S.
U.S. dollar denominated deposit accounts, federal funds and 360 days P-1, A-1+, A-1 None
bankers' acceptances with domestic commercial banks
Commercial Paper 270 days P-1, A-1 None
Money market funds N/A Aaam or AAAm-G None
Pre-refunded municipal obligations that are not callable Highest rating
category
prior to maturity or as to which irrevocable instructions N/A None
have been given to call on the date specified in the notice
Municipal obligations or General obligations of states N/A Aaa, AAA, A2, A None
California Local Agency Investment Fund (LAIF) N/A N/A Up to $50
million
Shares in a California common law trust established pursuant
to Title 1, Division 7, Chapter 5 of the California Government
Code which invests exclusively in investments permitted by N/A N/A None
Section 53635 of Title 5, Division 2, Chapter of the California
Government Code, as it may be amended.
49
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 2 – CASH AND INVESTMENTS (Continued)
(e) Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair
value to changes in market interest rates.
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 toMore than
Investment Type or less24 Months24 MonthsTotal
U.S. Treasury Securities$12,006,760$21,134,880$33,141,640
U.S. Agency Notes29,597,750 29,597,750
Local Agency Investment Fund$30,929,24730,929,247
Money Market Mutual Funds17,267,89917,267,899
Total Investments$48,197,146$12,006,760$50,732,630110,936,536
Cash in banks and on hand7,957,708
Total Cash and Investments$118,894,244
The City is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California
Government Code Section 16429 under the oversight of the Treasurer of the State of California. The
Local Investment Advisory Board (Board) has oversight responsibility for LAIF. The Board consists of
five members as designated by State Statute. The City reports its investment in LAIF at the fair value
amount provided by LAIF, which is the same as the value of the pool share. The balance is available for
withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded
on an amortized cost basis. Included in LAIF’s investment portfolio are U.S. Treasuries, Federal
Agency obligations, time deposits, negotiable certificates of deposits, commercial paper, corporate
bonds, and security loans. These investments had weighted average maturity of 232 days.
Money market mutual funds are available for withdrawal on demand. At June 30, 2014, money market
mutual funds, used for pooled investment and held by fiscal agent purposes, had a weighted average
maturity of approximately 50 days.
50
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 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, 2014 for each investment type,
including those with fiscal agents, as provided by Moody’s ratings:
Investment Type Ratings Total
Money Market Mutual Funds AAA $17,267,899
U.S. Agency Notes AAA 29,597,750
Exempt from Credit Rating Disclosure:
U.S. Treasury Securities Exempt 33,141,640
Not Rated:
Local Agency Investment Fund Not Rated30,929,247
Total Investments $110,936,536
(g) Concentration of Credit Risk
The City’s investment policy contains certain limitations on the amount that can be invested in any one
issuer. In certain categories, these limitations are more restrictive than those required by California
Government Code Sections 53600 et seq. Excluding those issued or explicitly guaranteed by the U.S.
government and investments in the local agency investment fund and mutual funds, the City had the
following investments that represent 5% or more of total City-wide investments:
Issuer Investment Type2014
Federal Home Loan Mortgage Corporation (FHLMC)U.S. Agency Notes$7,185,740
Federal National Mortgage Association (FNMA)U.S. Agency Notes11,230,460
Federal Home Loan Banks (FHLB)U.S. Agency Notes6,147,330
51
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 3 – LOANS RECEIVABLE
(a) Related Party Loans
In conjunction with the City’s executive housing assistance program, a loan totaling $584,360 has been
provided to an executive manager. The 40-year loan bears an interest rate equal to the 11th District Cost
of Funds at the time of the loan, and requires bi-weekly principal and interest payments. In addition,
there is a two percent deferral on the interest rate for the first five years of the loan, at which time the
interest rate may be adjusted to the current 11th District Cost of Funds for the remainder of the loan. At
June 30, 2014, the balance remaining on the loan was $427,447.
(b) Housing Program Loans
On June 30, 1995, the City loaned $821,000 to Community Housing Developers, a California nonprofit
public benefit corporation. The note bears interest at three percent per annum, compounded annually,
payable to the extent of surplus cash, and all unpaid principal and interest due June 30, 2035. At
June 30, 2014, the balance remaining on the loan was $821,000.
On June 6, 1996, the City loaned $320,000 to Cupertino Community Services, a California nonprofit
public benefit corporation. The note bears interest at three percent per annum and due on July 14, 2026.
At June 30, 2014, the balance on the loan was $226,031.
In addition to these loans, the City has $144,800 in housing and other loans receivable at June 30, 2014.
These loans bear interest at 3 to 6 percent and are due by June 30, 2025.
52
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 4 - INTERFUND TRANSACTIONS
Transfers between funds during the fiscal year ended June 30, 2014 were as follows:
Fund Making Transfers Fund Receiving Transfers Amount Transferred
General Fund Public Facilities Corporation Debt Service Fund $3,079,000 (A)
Blackberry Farm Enterprise Fund 230,000(B)
Sports Center Enterprise Fund 154,000(C)
Non-major governmental funds 8,941,304 (D)
Internal service funds 10,487,500 (E)
Non-major governmental funds Recreation Programs Enterprise Fund 17,350 (F)
Non-major governmental funds 1,590,000 (G)
Internal service funds Internal service funds 907,536 (H)
Total Interfund Transfers $25,406,690
The reasons for these transfers are set forth below:
(A)For annual lease payment for 2012 Certificates of Participation debt service.
(B)To fund the Golf Course Master Plan and cover increasing costs and declining revenues.
(C)To fund the implementation of the City’s Cost Allocation Plan (CAP).
(D)To fund capital projects.
(E)To fund retiree medical, support IT operations, and equipment replacement.
(F)To fund additional dog park improvements needed to complete project.
(G)To fund the Environmental Education Center.
(H)To fund City Channel operational costs.
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.
Advance to and advance from other funds
During fiscal year ended June 30, 2014, the General Fund loaned the Stevens Creek Corridor Park
Capital Project Fund $2,264,362 to fund the Stevens Creek Corridor Park construction project. The
Capital Project Fund is expected to repay the General Fund during fiscal year ended June 30, 2015
through various funding sources from other agencies.
53
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 5 - CAPITAL ASSETS
A summary of changes in governmental activities capital assets is as follows:
Balance at Balance at
June 30, 2013AdditionsRetirementsJune 30, 2014
Governmental activities
Capital assets not being depreciated:
Land $60,470,969$1,575,000 $62,045,969
Easements 19,491,959 19,491,959
Total capital assets not being depreciated 79,962,9281,575,000 81,537,928
Capital assets being depreciated:
Buildings 40,864,254169,630 41,033,884
Improvements other than buildings 41,787,9214,210,617 45,998,538
Machinery and Equipment - governmental funds 2,141,820 73,308($22,352)2,192,776
Road, curbs, gutters, sidewalks, medians and bridges 129,899,1143,266,857 133,165,971
Streetlights 8,543,894 89,875 8,633,769
Storm drain structure and mains 32,011,422 74,560 32,085,982
Traffic signals 6,143,610 11,699 6,155,309
Total capital assets being depreciated 261,392,0357,896,546 (22,352)269,266,229
Less accumulated depreciation for:
Buildings (19,822,656)(1,518,194)(21,340,850)
Improvements other than buildings (26,846,578)(1,503,984)(28,350,562)
Machinery and Equipment - governmental funds (1,844,191)(86,672)22,352 (1,908,511)
Road, curbs, gutters, sidewalks, medians and bridges (96,096,554)(1,699,422)(97,795,976)
Streetlights (6,708,800)(102,195)(6,810,995)
Storm drain structure and mains (28,213,007)(800,286)(29,013,293)
Traffic signals (4,923,851)(114,013)(5,037,864)
Total accumulated depreciation (184,455,637)(5,824,766)22,352(190,258,051)
Net governmental fund program
Capital assets being depreciated 76,936,3982,071,780 79,008,178
Internal service fund capital assets
Machinery and equipment 6,633,667517,917(168,925) 6,982,659
Less Accumulated depreciation (5,169,075)(467,392)168,925 (5,467,542)
Net internal service fund capital assets
being depreciated 1,464,592 50,525 1,515,117
Governmental activity capital assets, net $158,363,918$3,697,305 $162,061,223
54
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 5 - CAPITAL ASSETS (Continued)
A summary of changes in business-type activities capital assets is as follows:
Balance at Balance at
June 30, 2013AdditionsJune 30, 2014
Business-type activities:
Capital assets being depreciated:
Buildings $337,118$44,038$381,156
Improvements other than buildings 709,869456,7301,166,599
Machinery and Equipment 248,524 248,524
Total capital assets being depreciated 1,295,511500,7681,796,279
Less accumulated depreciation for:
Buildings (96,447)(32,128)(128,575)
Improvements other than buildings (219,455)(101,055)(320,510)
Machinery and Equipment (217,596)(19,184)(236,780)
Total accumulated depreciation (533,498)(152,367)(685,865)
Total capital assets, being depreciated, net 762,013348,4011,110,414
Business-type activity capital assets, net $762,013$348,401$1,110,414
Depreciation expense was charged to functions and programs based on their usage of the related assets.
Depreciation expense was charged to governmental activities as follows:
Governmental Activities Amount
Administration $237,838
Public and environment affairs12,946
Administrative Services 22,892
Parks and Recreation 130,343
Public Works 5,420,747
Internal Service funds 467,392
Total $6,292,158
Depreciation expense was charged to the business-type activities as follows:
Resources Recovery $3,351
Blackberry Farms 11,592
Cupertino Sports Center 27,912
Recreation Program 109,512
Total $152,367
55
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 6 - LONG-TERM DEBT
(a) Cupertino Public Facilities Corporation Certificates of Participation
OriginalBalance Balance
IssueJune 30,June 30,Current
Amount2013Retirements2014Portion
2012 Refinancing Certificates
of Participation
0.350-3.125%, due 07/01/2030 $43,940,000$42,020,000$2,040,000$39,980,000$2,055,000
Total long-term debt 42,020,0002,040,00039,980,000$2,055,000
Less current portions (2,040,000)(2,055,000)
Non-current portions $39,980,000$2,040,000$37,925,000
The Cupertino Public Facilities Corporation issued Certificates of Participation to provide financing for
the construction of the Community Center, improvements of the City Hall and the Library in July 1986;
purchase of Wilson Park in 1989; finance the Memorial Park Expansion in 1990; and purchase the
Blackberry Farm and Fremont Older site in 1991. The Cupertino Public Facilities Corporation, as lessor,
leased real property to the City (under the Lease Agreement with the lessee) and assigned the base rental
payments to the trustee for the benefit of the owners of the certificates of participation. The rental
payments are scheduled to be sufficient in both time and amount, when the principal and interest of the
certificates are due.
On October 1, 2002, $56,640,000 principal amount of 2002 Refinancing and Capital Improvement Project
Certificates of Participation (2002 COPs), were issued to finance the costs of acquiring and constructing a
new public library and to refund the 1992A COPs, the 1992B COPS and the 1993A COPs (“Prior
COPS”).
On May 9, 2012, $43,940,000 principal amount of 2012 Refinancing Certificates of Participation (2012
COPs) were issued to refund the 2002 COPs, to fund a reserve fund for the 2012 COPS, and pay costs
incurred in connection with issuance. This current refunding was undertaken to reduce debt service
payments over the next 18 years by $6,518,000, and resulted in an economic gain (difference between
the present value of the debt service requirements on the old and new bonds discounted at the effective
interest rate on the new debt and adjusted for any additional cash) of $6,637,000.
The 2012 COPs are payable by a pledge of revenues from the lease payments payable by the City
pursuant to the Lease Agreement between the Cupertino Public Facilities Corporation and the City for
the use and possession of the Site and Facility as described in the Lease Agreement. The City also
covenanted in the Lease Agreement to include all lease payments in its annual budget. Total debt
service payments remaining on the 2012 COPs is $53,898,337 payable through July 1, 2030. For the
year-ended June 30, 2014, the bonds had $2,040,000 principal and $1,128,838 interest due.
56
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 6 - LONG-TERM DEBT (Continued)
(a) Cupertino Public Facilities Corporation Certificates of Participation (Continued)
Annual debt service requirements for the 2012 COPs are shown below:
For the Year
Ending June 30PrincipalInterest
2015$2,055,000$1,118,638
20162,090,0001,077,538
20172,135,0001,035,738
20182,180,000993,038
20192,220,000949,438
2020 - 202412,145,0003,706,938
2025 - 202914,085,0001,772,240
2030 - 20313,070,00095,931
Total$39,980,000$10,749,499
Governmental Activities
NOTE 7 - NET POSITION AND FUND BALANCES
Net Position is measured on the full accrual basis while Fund Balance is measured on the modified accrual
basis.
Net Position – The government-wide and proprietary fund financial statements utilize a net position
presentation. Net position is categorized as follows:
Net investment in capital assets – This category groups all capital assets including, infrastructure, into one
component of net position. Accumulated depreciation and outstanding balances of debt that are attributable to the
acquisition, construction or improvement of these assets reduce the balance in this category.
57
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 7 - NET POSITION AND FUND BALANCES (Continued)
Restricted – This category represents net position that has external restrictions imposed by creditors,
grantors, contributors or laws or regulations of other governments and restrictions imposed by law
through constitutional provisions or enabling legislation.
Unrestricted – This category represents net position of the City that do not meet the definition of “net
investment in capital assets” or “restricted.”
Fund Balances – As prescribed by GASB Statement No. 54, governmental funds report fund balance in
classifications based primarily on the extent to which the City is bound to honor constraints on the
specific purposes for which amounts in the funds can be spent. Fund balances for governmental funds
are made up of the followings:
Nonspendable Fund Balance – includes amounts that are (a) not in spendable form, or (b) legally or
contractually required to be maintained intact. The “not in spendable form” criterion includes items that
are not expected to be converted to cash, for example: prepaid items, property held for resale and long-
term notes receivable.
Restricted Fund Balance – includes amounts that can be spent only for the specific purposes stipulated
by external resource providers, constitutionally or through enabling legislation. Restrictions may
effectively be changed or lifted only with the consent of resource providers.
Committed Fund Balance – includes amounts that can only be used for the specific purposes determined
by a formal action of the City’s highest level of decision-making authority, the City Council.
Commitments may be changed or lifted only by the City taking the same formal action that imposed the
constraint originally (for example: resolution and ordinance). The City has no amount in this category.
Assigned Fund Balance – comprises amounts intended to be used by the City for specific purposes that
are neither restricted nor committed. Intent is expressed by the City Council or official to which the City
Council has delegated the authority to assign amounts to be used for specific purposes. Through the
adopted budget, the City Council establishes assigned fund balance policy levels and also sets the means
and priority for the City Manager to fund these levels.
Unassigned Fund Balance – is the residual classification for the General Fund and includes all amounts
not contained in the other classifications. Unassigned amounts are technically available for any purpose.
In circumstances when an expenditure may be made for which amounts are available in multiple fund
balance classifications, the fund balance in General Fund will generally be used in the order of
restricted, unassigned, and then assigned reserves. In other governmental funds, the order will generally
be restricted and then assigned.
58
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 7 - NET POSITION AND FUND BALANCES (Continued)
The City Council has established reserve policy levels for various capital and contingency purposes.
These balances are reported as part of the governmental funds’ assigned fund balance as follows:
Fund Amount
General Fund:
Economic uncertainty I$12,500,000
Economic uncertainty II 1,400,000
Economic fluctuation 2,000,000
PERS liability 500,000
Capital Project Funds:
Capital Improvement reserve200,113
Infrastructure Reserve 1,200,000
Budgeted projects 6,143,497
Designated project 75,924
Total assigned fund balances $24,019,534
Fund balances for all major and nonmajor governmental funds as of June 30, 2014, were distributed as
follows:
General
Public
Facilities
Corporation
Stevens
Creek
Corridor Park
Other
Governmental
FundsTotal
Nonspendable:
Loans receivable$903,812$903,812
Prepaid items194,891194,891
Advances2,264,3622,264,362
Subtotal3,363,0653,363,065
Restricted for:
Public access television
Debt service$1,596,6971,596,697
Storm drain system$2,701,6302,701,630
Parks and open space8,533,2888,533,288
Environmental management363,865363,865
Streets and road projects1,724,6191,724,619
Housing programs9,312,2689,312,268
Subtotal1,596,69722,635,67024,232,367
Assigned to:
General government 16,400,000 16,400,000
Capital projects 7,619,5347,619,534
Subtotal 16,400,000 7,619,53424,019,534
Unassigned 25,917,331($2,280,961)23,636,370
Total$45,680,396$1,596,697($2,280,961)$30,255,204$75,251,336
59
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 8 - COMMITMENTS AND CONTINGENCIES
(a) Federal and State Grant
The City participates in a number of federal and state grant programs subject to financial and
compliance audits by the grantors or their representatives. Audits of certain grant programs, including
those for the year ended June 30, 2014, have yet to be conducted. The amount, if any, of expenditures
that may be disallowed by the granting agencies cannot be determined at this time. Management
believes that such disallowances, if any, would not have a material effect on the financial statements.
(b) Encumbrances
The City uses encumbrances to control expenditure commitments for the year. Encumbrances represent
commitments related to executor contracts not yet performed and purchase orders not yet filled.
Commitments for such expenditure of monies are encumbered to reserve a portion of applicable
appropriations. Encumbrances still open at year end are not accounted for as expenditures and
liabilities, but as restricted, or unassigned fund balance. As of June 30, 2014, the City had the following
encumbrances outstanding:
Governmental Funds:
General Fund$11,081,064
Stevens Creek Corridor Park177,681
Other Governmental Funds4,419,378
Total encumbrances$15,678,123
(c) Lease Agreement with County of Santa Clara
The City has an agreement, expiring in 2019, to lease a building to the County of Santa Clara for the
purpose of providing library service to the City’s residents. The lease requires a minimum annual
payment of $120,000 adjusted for Cupertino’s portion of book circulation and increase of assessed
valuation. This is an operating lease with a renewable option. At June 30, 2014, the cost and carrying
value of the building which opened in October 2004, is $21,935,325 and $14,033,800 respectively, with
$7,901,525 in accumulated depreciation.
(d) Consulting Agreement for Sales Taxes
The City entered into agreements with two companies to provide services consisting of the assessment
and creation of new sales and use tax revenue sources for the City. The City agreed to pay the
companies based on a sliding scale payment schedule dependent on the level of new sales tax revenue
realized by the City as defined in the consulting agreements.
60
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 9 - LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT
(a) General and Property Liability
The City is self-insured for the first $250,000 of general and property liability for each occurrence, and
the excess (up to $10,000,000 for each occurrence and annual aggregate) is covered through the City’s
participation in the Association of Bay Area Governments Pooled Liability Assurance Network (ABAG
PLAN). The risk pool consists of 30 agencies within the San Francisco Bay Area. The stated purpose
of the ABAG PLAN is to provide certain levels of liability insurance coverage, claims management, risk
management services, and legal defense to its participating members. ABAG PLAN is governed by a
Board of Directors, which comprises officials appointed by each participating member. Premiums paid
to ABAG are subject to possible refund based on the results of actuarial studies and approval by the
Board of Directors. Complete financial statements for ABAG PLAN may be obtained from their offices
at the following address: ABAG PLAN, Finance Department, P.O. Box 2050, Oakland, CA 94604.
Premiums are revised each year based on the City’s claims experience and risk exposure. For the year
ended June 30, 2014, the City paid ABAG PLAN premiums of $266,006.
(b) Workers’ Compensation Liability
The City belongs to the CSAC Excess Insurance Authority (EIA), a joint power authority which
provides excess workers’ compensation liability claims coverage above the City’s self-insured retention
of $500,000 per occurrence. Losses above the self-insured retention are pooled with excess reinsurance
purchased to a $50,000,000 statutory limit. EIA was established in 1979 for the purpose of creating a risk
management pool for all California public entities. EIA is governed by a Board of Directors consisting of
representatives of its member public entities. Complete financial statements for EIA may be obtained
from their offices at the following address: CSAC Excess Insurance Authority, Finance Department,
75 Iron Point Circle, Suite 200, Folsom, CA 95630. For the year ended June 30, 2014, the City paid
premiums of $213,816 EIA.
It is the City’s practice to obtain biennial actuarial studies for the self-insured workers’ compensation
liability. The claims liabilities included in the workers’ compensation internal service fund is based on
the results of actuarial studies and include amounts for claims incurred but not reported and loss
adjustment expenses. Claim liabilities are calculated considering the effects of inflation, recent claim
settlement trends, including frequency and amount of payouts, and other economic and social factors.
Inflation of 2.5%, annual rate of return of 2%, claim severity increase at 2.5% were assumed. In the
current year, management used actuarial estimates based on a 90% confidence level.
Settlements have not exceeded insurance coverage in the past three years.
61
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 9 - LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT (Continued)
Changes in the balances of workers’ compensation and general claims liabilities during the years ended
June 30 are as follows:
20142013
Claims liability, beginning of year$1,977,549$1,495,978
Incurred claims and changes in estimate345,383693,219
Claim payments and credits(217,035)(211,648)
Total claims liability, end of year2,105,8971,977,549
Less current portion(478,051)(436,636)
Non-current portion$1,627,846$1,540,913
NOTE 10 - DEFINED BENEFIT PENSION PLAN
(a) Plan Description
Substantially all City employees are eligible to participate in pension plans offered by California Public
Employees Retirement System (CalPERS), an agent multiple employer defined benefit pension plan
which acts as a common investment and administrative agent for its participating member employers.
CalPERS provides retirement and disability benefits, annual cost of living adjustments and death
benefits to plan members, who must be public employees and beneficiaries. The City’s employees
participate in the Miscellaneous Employee Plan (Plan). Benefit provisions under the Plan are
established by State statute and City resolution. Benefits are based on years of credited service and
compensation. Audited annual financial statements are available from CalPERS at www.calpers.ca.gov.
(b) Funding Policy
The contribution requirements of plan members and the City are established and may be amended by
CalPERS. The City is required to contribute at an actuarially determined rate for 2013-14 based on the
June 30, 2012 actuarial report.
The City covered 56.25% of the employees’ required payroll contributions for fiscal year 2013-14. The
City uses the actuarially determined percentages of payroll to calculate and pay 100% of the required
contributions to CalPERS. This results in no net pension obligations or unpaid contributions.
62
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 10 - DEFINED BENEFIT PENSION PLAN (Continued)
(c) Annual Pension Cost
The required contribution was determined as part of June 30, 2012 actuarial valuations using the entry
age normal method. The actuarial value of CalPERS assets was determined using techniques that
smooth the effects of short-term volatility in the market value of investments over a fifteen-year period.
The excess of the total actuarial accrued liability over the actuarial value of plan assets is called the
unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost
and an amortization of the unfunded liability as a level percentage of assumed future payrolls. Initial
unfunded liabilities are amortized over a closed period that depends on the plan’s date of entry into
CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-
year period. Gains and losses that occur in the operation of the plan are amortized over a 30-year rolling
period, which results in an amortization of about 6% of unamortized gains or losses each year.
Recent Annual Pension Costs, which equal the Annual Required Contribution to CALPERS, were as
follows:
Fiscal Year Annual Pension Cost (APC) Contribution
6/30/2012 $2,657,476 100%
6/30/2013 2,880,647 100%
6/30/2014 2,962,493 100%
(d) Funded Status and Funding Progress
The significant actuarial assumptions used to prepare the City’s June 30, 2012 actuarial valuation
include the following:
Valuation date:June 30, 2012
ARC:Determined for fiscal year 2014/2015
Actuarial Cost Method:Entry Age Normal Cost Method
Amortization Method:Level percent of payroll
Average Remaining Period20 Years as of Valuation Date
Asset Valuation Method:15 Year Smoothed Market
Actuarial Assumptions:
Investment Rate of Return:7.50% (net of administrative expenses)
Projected Salary Increase:3.30% to 14.20% depending on Age, Service and type of employment
Inflation:2.75%
Payroll Growth:3.00%
Individual Salary Growth:A merit scale varying by duration of employment coupled with an assumed
annual inflation growth of 2.75% and an annual production growth of 0.25%.
63
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 10 - DEFINED BENEFIT PENSION PLAN (Continued)
CalPERS’ latest available actuarial data and funding progress are set forth below at their actuarial
valuation date as of June 30, 2012.
Actuarial accrued liability (AAL)$85,378,376
Actuarial value of plan assets (65,003,058)
Unfunded actuarial accrued liability (UAAL)$20,375,318
Funded ratio (actuarial value of plan assets/AAL)76.1%
Covered payroll (active plan members)$12,449,203
UAAL as a percentage of covered payroll 163.7%
Actuarial valuations of an on-going plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Amounts determined
regarding the funded status of the plan and the annual required contribution of the City are subject to
continual revision as actual results are compared with past expectations and new estimates are made
about the future. The schedule of funding progress, presented as required supplementary information
following the notes to basic financial statements, presents multi-year trend information about whether
the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued
liability for benefits.
(e) Public Employees’ Pension Reform Act (PEPRA)
Assembly Bill (AB) 340 pension reform created the Public Employees’ Pension Reform Act (PEPRA)
that implemented new benefit formulas and final compensation period, as well as new contribution
requirements for new employees hired on or after January 1, 2013 who meet the definition of new
member under PEPRA.
The bill limits new members to a retirement package that provides for a 2% at 62, three year average.
However, the City has negotiated a 2% at 60, three year average retirement benefit which would apply
to any new Cupertino employee who had previously served with a CalPERS participating agency within
the previous six month period.
64
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 10 - DEFINED BENEFIT PENSION PLAN (Continued)
(e) Public Employees’ Pension Reform Act (PEPRA) (Continued)
The Table below provides information on the benefit formula compensation information on the benefit
formula, final compensation period and the employer and member contribution rates effective January
1, 2013 for the City employees under PEPRA.
Benefit Formula 2.7% at Age 55 2% at Age 60 2% at Age 62
Applies to
Current employees
hired before
12/29/12
New employees to
Cupertino hired after
12/29/12 and in the
CalPERS system or a
reciprocity
New Employees to
Cupertino and
CalPERS (or has not
worked for 6months in
CalPERS)
Employer Contribution Rate
as a percentage payroll 21.777% 21.777% 21.777%
Member Contribution Rate
as a percentage of payroll 8% 7% 6.25
Member Contribution Rate
at 50% Normal Cost
(12.5%) N/A until 2018 N/A until 2018 6.25%
Final Compensation Period Highest year Highest 3 year average Highest 3 year average
Benefit Vesting Schedule 5 years of service 5 years of service 5 years of service
Benefit payments Monthly for life Monthly for life Monthly for life
Minimum retirement age 50 50 52
65
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 11 - OTHER POST EMPLOYMENT BENEFITS (OPEB)
(a) Plan Description
Permanent employees who retire under the City’s CalPERS retirement plan are, pursuant to their
respective collective bargaining agreements, eligible to have their medical insurance premiums paid by
the City. Retirees receive the amount necessary to pay the cost of his/her enrollment, including the
enrollment of his/her family members, in a health benefit plan provided by CalPERS up to the
maximum received by active employees in their respective bargaining unit.
The City contracts with CalPERS for this insured-benefit plan established under the state Public
Employees’ Medical and Hospital Care Act (PEMHCA). The plan offers employees and retirees three
CalPERS’ self-funded options, setup as insurance risk pools, or offers various third-party insured health
plans. The plan’s medical benefits and premium rates are established by CalPERS and the insurance
providers. The City contribution is established by City resolution. Retirees and active employees pay
the difference between the premium rate and the City’s contribution. Premiums and City contributions
are based on the plan and coverage selected by actives and retirees, with the City’s potential
contribution ranging from zero to $1,515 per month per employee or retiree. The responsibility for
benefit payments has transferred to the insurers and the City does not guarantee the benefits in the event
of default by the insurers. A comprehensive annual financial report of CalPERS, inclusive of their
benefit plans, is available at www.calpers.ca.gov.
The City participates in the Public Agency Retirement System (PARS) Public Agencies Post Retirement
Health Care Plan Trust Program (PARS Trust), an agent-multiple employer irrevocable trust established
to fund other postemployment benefits. The PARS Trust is approved by the Internal Revenue Code
Section 115 and invests funds in equity, bond, and money market mutual funds. Copies of PARS Trust
annual financial report is available at the City’s Finance Department.
An employee is eligible for lifetime medical benefits under the OPEB Plan, along with his/her spouse or
declared domestic partner at the time of retirement, if all criteria listed below are met:
The employee was hired or the City Council member was elected prior to August 1, 2004, and the
employee has five or more full-time years of service and the City Council member has five or more
years of elected service with the City of Cupertino; or
The employee was hired or the City Council member was elected on or after August 1, 2004, and
the employee has ten or more full-time and/or elected years of CalPERS service, five years of which
must be from the City of Cupertino; and
The employee is eligible for retirement as defined under the CalPERS retirement system; and
The employee retires from the City of Cupertino.
In addition, the eligible employee’s dependent children at the time of retirement who are under 23 years
old are eligible for medical benefits. In addition to extending the eligibility of dependents from age 23
to age 26 in accordance with the recent healthcare reform act, effective July 1, 2010, employees that
retire or resign from service with the City of Cupertino and who are not eligible for retiree medical
benefits can continue on the City’s medical and dental plans provided that they pay the premiums in full.
66
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 11 - OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
(b) Funding Policy
OPEB Plan contributions are set by the adopted budget. The cost of the benefits provided by the OPEB
Plan is currently being paid by the City on a fully pre-funded basis. The City has expressed intent to
fully fund the annual required contribution (ARC) each year. Based on the actuarial valuation date of
January 1, 2013, the annual required contribution rate is 15.40% of annual covered payroll. For the year
ended June 30, 2014, the City contributed $247,000 to the PARS Trust and paid $779,967 in healthcare
premium payments to pre-fund the OPEB Plan.
(c) Annual OPEB Cost and Funded Status
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of certain events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined
regarding the funded status of the plan and the annual required contributions of the employer are subject
to continual revision as actual results are compared with past expectations and new estimates are made
about the future. The schedule of funding progress, presented as required supplementary information
following the notes to the financial statements, presents multi-year trend information about whether the
actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued
liabilities for benefits.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as
understood by the employer and the plan members) and include the types of benefits provided at the
time of each valuation and the historical pattern of sharing of benefit costs between the employer and
plan members to that point. The actuarial methods and assumptions used include techniques that are
designed to reduce effects of short-term volatility in actuarial accrued liabilities and the actuarial value
of assets, consistent with long-term perspective of the calculations.
The other significant actuarial assumptions used to prepare the City’s January 1, 2013 actuarial
valuation include the following:
Valuation date:January 1, 2013
Actuarial Cost Method:Entry Age Normal
Amortization Method:Level percent of pay closed
Amortization Period:15 year
Asset Valuation Method:Market value
Actuarial Assumptions:
Discount Rate6.00%
Payroll Growth 3.00%
Ultimate Rate of Medical Inflation:5.00%
The January 1, 2013 actuarial valuation also included implicit subsidy for the first time. Prior valuation
as of January 1, 2011, did not include implicit subsidy.
67
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 11 - OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
(c) Annual OPEB Cost and Funded Status (Continued)
The City’s annual OPEB cost and actual contributions to the OPEB Plan for the past three years are as
follows:
Fiscal Year
OPEB Annual
Cost (AOC)
Actual
Contribution
Percentage of
AOC
Contributed
Net OPEB
Obligation
(Asset)
6/30/2012$1,900,000 $1,622,549 85%($4,287,955)
6/30/20132,214,7192,186,66199%(4,259,897)
6/30/20142,295,7321,026,96745%(2,991,132)
The City’s Net OPEB asset is recorded in the Retiree Medical Internal Service Fund and is calculated as
of June 30, 2014 as follows:
Annual required contribution $2,206,776
Interest on prior year net OPEB asset(255,594)
Adjustment to annual required contribution 344,550
Annual OPEB cost2,295,732
Insurance premiums paid on behalf of retirees (779,967)
Implicit subsidy (247,000)
Decrease in net OPEB asset1,268,765
Net OPEB (asset) June 30, 2013 (4,259,897)
Net OPEB (asset) June 30, 2014 ($2,991,132)
The latest available actuarial data and funding progress are set forth below at their actuarial valuation
date of January 1, 2013.
Actuarial accrued liability (AAL) $24,791,457
Actuarial value of planned assets (12,835,681)
Unfunded actuarial accrued liability (UAAL)$11,955,776
Funded Ratio (actuarial value of plan assets/AAL)51.8%
Covered payroll (active plan members)$13,909,000
UAAL as a percentage of covered payroll 86.0%
NOTE 12 – CONCENTRATION RISK
The City has an economic dependency on revenues generated directly or indirectly from one company.
For the year ended June 30, 2014, more than 10% of the City General Fund’s total revenues are derived
from the company. The City’s operations would be adversely impacted if there are any significant
declines in taxes received from the company.
68
CITY OF CUPERTINO
Notes to Basic Financial Statements
For the Year Ended June 30, 2014
NOTE 13 – SUCCESSOR AGENCY TO REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST
FUND (SUCCESSOR AGENCY)
The redevelopment agency dissolution acts, ABx1 26 and AB 1484 provide mechanisms for: a) state and
county reviews of the activities of the former Redevelopment Agency and current Successor Agency
(Agencies) to ultimately determine the amount available for distribution to other taxing entities; b) paying
remaining obligations of the Agencies; c) management of remaining assets of the Agency; and d) effecting
the eventual dissolution of the Successor Agency.
The County Auditor-Controller (CAC) completed the agreed-upon procedure and the due diligence
reviews of all funds of the Agencies and concluded that there was no amount available for distribution to
other taxing entities. On September 6, 2012, the Oversight Board of the Cupertino Successor to the
Former Redevelopment Agency approved the reviews and authorized the transmission of the reviews to
the State Department of Finance (DOF) and to the CAC. The DOF accepted the review conclusions on
January 11, 2013 and March 27, 2013. The DOF subsequently issued a Finding of Completion letter to the
Successor Agency on April 26, 2013, signifying the completion of the reviews. Because the reviews
identified no real property assets for the Successor Agency, the Agency will not issue a long-range
property management plan.
In addition, ABx1 26 and AB 1484 direct the State Controller Office (SCO) to review the activities of all
redevelopment agencies to determine whether an asset transfer between an agency and any public agency
occurred on or after January 1, 2011. If an asset transfer did occur and the public agency that received the
asset is not contractually committed to a third party for the expenditure or encumbrance of the asset, the
legislation purports to require the SCO to order the asset returned to the Successor Agency. On May 3,
2013, the SCO allowed the asset transfers that occurred during the review period.
AB 1484 directs the Successor Agency to dissolve within one year after the Agency’s final payment
obligation as shown in the Agency’s final Recognized Obligation Payment Schedule (ROPS). With the
final payment which occurred in July 2012, as per the ROPS, the DOF acknowledged the Agency’s
complete dissolution in an October 20, 2012 letter. In Fiscal Year 2013, the State Board of Equalization
removed the Agency’s tax rate area, the CAC apportioned its property taxes directly to other jurisdictions,
and the Successor Agency dissolved. As of June 30, 2014, the Successor Agency to Redevelopment
Agency Private-Purpose Trust Fund was closed.
69
CITY OF CUPERTINO
Required Supplementary Information (Unaudited)
For the Year Ended June 30, 2014
Schedule of Funding Progress – CalPERS Defined Benefit Retirement Miscellaneous Plan:
Unfunded
Entry AgeUnfundedAnnual(Overfunded)
Valuation Accrued Value of(Overfunded)FundedCoveredLiability as %
DateLiabilityAssetsLiabilityRatioPayrollof Payroll
6/30/2010$79,939,987$61,358,259$18,581,72876.8%$12,428,055149.5%
6/30/201185,378,37665,003,05820,375,31876.1%12,449,203163.7%
6/30/201290,651,63168,899,95121,751,68076.0%12,118,641179.5%
Schedule of Funding Progress – Defined Benefit Other Post Employment Benefits Plan:
Unfunded
ActuarialUnfundedActuarial
ActuarialAccruedActuarialActuarialLiability as
ValuationLiability Value ofAccruedFundedCoveredPercentage of
DateEntry AgeAssetsLiability RatioPayrollCovered Payroll
1/1/2009$18,069,366$18,069,3660.00%$11,892,000151.95%
1/1/201120,869,058$7,438,34113,430,71735.64%12,724,000105.55%
1/1/201324,791,45712,835,681 11,955,77651.77%13,909,00085.96%
70
MAJOR GOVERNMENTAL FUNDS OTHER THAN THE
GENERAL FUND AND SPECIAL REVENUE FUNDS
This section is provided for the presentation of budget-to-actual statements for the Public Facilities
Corporation Debt Service Fund. Although the fund is considered to be a major government fund, budget-
to-actual information in the basic financial statements is limited to the General Fund and major Special
Revenue Funds. All other major governmental fund schedules with such information are therefore
included as Supplemental Information.
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, Memorial Park, and other City
facilities.
71
CITY OF CUPERTINO
PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2014
Variance
FinalPositive
BudgetActual(Negative)
REVENUES
Use of money and property$1,151$1,151
Total Revenues1,1511,151
EXPENDITURES
Debt service:
Principal $2,040,0002,040,000
Interest and fiscal charges1,131,8381,130,4281,410
Total Expenditures3,171,8383,170,4281,410
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES(3,171,838)(3,169,277)2,561
OTHER FINANCING SOURCES (USES)
Transfers in3,079,0003,079,000
Total Other Financing Sources (Uses)3,079,0003,079,000
NET CHANGE IN FUND BALANCE($92,838)(90,277)$2,561
BEGINNING FUND BALANCE1,686,974
ENDING FUND BALANCE$1,596,697
72
NONMAJOR GOVERNMENTAL FUNDS
All funds not considered as major funds on the Fund Financial Statements are consolidated in one column
entitled “Other Governmental Funds.” These non-major funds are identified and included in this
supplementary section and includes the City’s Special Revenue Funds and Capital Project Funds.
The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are
legally restricted to expenditures for specified purposes.
Storm Drain Improvement - Accounts for the construction and maintenance of storm drain
facilities including drainage and sanitary sewer facilities. Revenues were collected from
developers as a result of connections to the storm drainage sewer system.
Park Dedication - Accounts for the activity granted by the business and professions code of the
State of California in accordance with the open space and conservation element of the City’s
General Plan. Revenues of this fund are restricted for the acquisition, improvement, expansion
and implementation of the City’s parks and recreation facilities.
Environmental Management / Clean Creeks - Accounts for all activities related to operating the
non-point source pollution program. A parcel tax provides revenues.
Transportation - Accounts for the City's gas tax, vehicle registration fees and grant revenues and
expenditures related to the maintenance and construction of City streets. All revenue in this fund
is restricted exclusively for street and road purposes including related engineering and
administrative expenditures.
Housing Development - Accounts for the Federal Housing and Community Development Grant
Program activities administered through the County. Monies collected from developers that
mitigate the impact of housing needs are also included. Monies in this fund are governed by the
program’s rules.
Capital Projects Funds account for the financial resources committed to the construction or improvement
of major facilities.
Capital Improvement Projects Fund – Accounts for activities related to the acquisition or
construction of major capital facilities.
Don Burnett Bicycle-Pedestrian Bridge – Accounts for the design and construction of a bicycle
footbridge extension of Mary Avenue over Interstate 280. It includes gateways, paths, residential
buffering elements, and landscaping.
73
SPECIAL REVENUE FUNDS
StormEnvironmental
DrainPark Management/Housing
Improvement DedicationClean CreeksTransportationDevelopment
Assets
Cash and investments $2,703,615$8,528,710$371,178$2,151,071$8,720,981
Accounts receivable600200136,08136,115
Interest receivable1,2633,9781741,0094,067
Loans receivable 715,467
Total assets$2,704,878$8,533,288$371,552$2,288,161$9,476,630
Liabilities
Accounts payable and accruals$3,248$2,290$536,277$67,852
Accrued payroll and benefits5,39727,2653,935
Advance from other funds
Total liabilities3,2487,687563,54271,787
Deferred Inflows of Resources
Unavailable revenue - loans 92,575
Total deferred inflows of resources 92,575
Fund balances
Restricted 2,701,630$8,533,288363,8651,724,6199,312,268
Assigned
Total fund balances 2,701,6308,533,288363,8651,724,6199,312,268
Total liabilities, deferred inflows of resources
and fund balances $2,704,878$8,533,288$371,552$2,288,161$9,476,630
CITY OF CUPERTINO
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2014
74
Don BurnettTotal
Capital BicycleNonmajor
Improvement PedestrianGovernmental
ProjectsBridgeFunds
$7,854,028$5,37430,334,957
172,996
10,491
715,467
$7,854,028$5,374$31,233,911
$239,868$849,535
36,597
239,868886,132
92,575
92,575
22,635,670
7,614,160$5,3747,619,534
7,614,1605,37430,255,204
$7,854,028$5,374$31,233,911
CAPITAL PROJECT FUNDS
75
SPECIAL REVENUE FUNDS
StormEnvironmental
DrainPark Management/Housing
Improvement DedicationClean CreeksTransportationDevelopment
REVENUES
Taxes$1,524,575$8,369,259$7,227,409
Use of money and property3,44611,168$416$2,18455,450
Intergovernmental 2,375,413 159,835
Charges for services76,017367,40045,620
Fines and forfeitures1,804
Total Revenues1,528,0218,456,444369,6202,423,2177,442,694
EXPENDITURES
Current:
Community development 553,644
Public works4,000461,0644,518,638
Capital outlay 70,5601,575,000 229,115
Total Expenditures 74,5601,575,000461,0644,747,753553,644
EXCESS OF REVENUES
OVER (UNDER) EXPENDITURES 1,453,4616,881,444(91,444)(2,324,536)6,889,050
OTHER FINANCING SOURCES (USES)
Transfers in 210,000 135,0003,350,000211,804
Transfers (out)(17,350)
Total Other Financing Sources (Uses)210,000(17,350)135,0003,350,000211,804
NET CHANGE IN FUND BALANCES 1,663,4616,864,09443,5561,025,4647,100,854
BEGINNING FUND BALANCES 1,038,1691,669,194320,309699,1552,211,414
ENDING FUND BALANCES $2,701,630$8,533,288$363,865$1,724,619$9,312,268
CITY OF CUPERTINO
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2014
76
Don BurnettTotal
CapitalBicycleNonmajor
Improvement PedestrianGovernmental
ProjectsBridgeFunds
$17,121,243
72,664
$8,0002,543,248
489,037
1,804
8,00020,227,996
553,644
4,983,702
1,057,265$8,4762,940,416
1,057,2658,4768,477,762
(1,049,265)(8,476)11,750,234
6,624,50010,531,304
(1,590,000)(1,607,350)
5,034,5008,923,954
3,985,235(8,476)20,674,188
3,628,92513,8509,581,016
$7,614,160$5,374$30,255,204
CAPITAL PROJECT FUNDS
77
BUDGETED NON-MAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2014
SPECIAL REVENUE FUNDS
STORM DRAIN IMPROVEMENTPARK DEDICATION
VarianceVariance
FinalPositiveFinalPositive
Budget Actual(Negative)Budget Actual(Negative)
REVENUES
Taxes$100,000$1,524,575$1,424,575$8,470,994$8,369,259($101,735)
Use of money and property1,0003,4462,4461,00011,16810,168
Intergovernmental
Charges for services 76,017
Fines for forfeitures
Total Revenues101,0001,528,0211,427,0218,471,9948,456,444(91,567)
EXPENDITURES
Current:
Community development
Public works 135,0004,000131,000
Capital outlay 1,103,77170,5601,033,2111,575,0001,575,000
Total Expenditures1,238,77174,5601,164,2111,575,0001,575,000
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES(1,137,771)1,453,4612,591,2326,896,9946,881,444(15,550)
OTHER FINANCING SOURCES (USES)
Transfers in210,000210,000
Transfers (out)(17,350)(17,350)
Total Other Financing Sources (Uses)210,000210,000(17,350)(17,350)
NET CHANGE IN FUND BALANCES($927,771)1,663,461$2,591,232$6,879,6446,864,094($15,550)
BEGINNING FUND BALANCES 1,038,1691,669,194
ENDING FUND BALANCES $2,701,630$8,533,288
CITY OF CUPERTINO
78
SPECIAL REVENUE FUNDS
ENVIRONMENTAL MANAGEMENT/
CLEAN CREEKSTRANSPORTATIONHOUSING DEVELOPMENT
VarianceVarianceVariance
FinalPositiveFinalPositiveFinalPositive
Budget Actual(Negative)Budget Actual(Negative)Budget Actual(Negative)
$5,108,050$7,227,409$2,119,359
$1,000$416($584)$2,000$2,184$18445,00055,45010,450
4,432,0002,375,413(2,056,587)310,000159,835(150,165)
365,000367,4002,40045,62045,620
1,8041,804
366,000369,6203,6204,434,0002,423,217(2,010,783)5,463,0507,442,6941,979,644
783,332553,644229,688
509,452461,06448,3885,989,1624,518,6381,470,524
2,473,696229,1152,244,581
509,452461,06448,3888,462,8584,747,7533,715,105783,332553,644229,688
(143,452)(91,444)52,008(4,028,858)(2,324,536)1,704,3224,679,7186,889,0502,209,332
135,000135,0003,350,0003,350,000211,804211,804
135,000135,0003,350,0003,350,000211,804211,804
($8,452)43,556$52,008($678,858)1,025,464$1,704,322$4,891,5227,100,854$2,209,332
320,309699,1552,211,414
$363,865$1,724,619$9,312,268
79
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INTERNAL SERVICE FUNDS
Internal Service Funds are used to finance and account for special activities and services provided by one
department or program to other departments of the City on a cost reimbursement basis.
The concept of major funds does not extend to internal service funds because they do not do business with
outside parties. For the Statement of Activities, the net revenues or 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 Position.
However, internal service funds are still presented separately in the Fund financial statements.
Information Technology - Accounts for the activities related to the maintenance and replacement
of the City’s technology infrastructure.
Workers’ Compensation - Accounts for the activities in support of the self-insured workers’
compensation program.
Equipment Revolving - Accounts for the activities related to the maintenance and replacement of
the City's vehicle fleet and other equipment.
Compensated Absences and Long-Term Disability - Accounts for accrued leave payouts and the
City’s long term disability insurance program.
Retiree Medical – Accounts for funds set-aside for other post employment retirement benefits.
City Channel/Web – Accounts for government access television station and website maintenance.
81
Compensated
Absences and
Information Workers'Equipment Long-Term Retiree
TechnologyCompensationRevolvingDisabilityMedical
ASSETS
Current Assets:
Cash and investments $3,041,712$2,081,593$2,280,362$145,939$8,350,563
Interest receivable1,4199701,062983,897
Prepaid items50,882
Total current assets3,094,0132,082,5632,281,424146,0378,354,460
Noncurrent Assets:
Net OPEB assets 2,991,132
Capital assets, depreciable net of
accumulated depreciation 498,673 981,345
Total noncurrent assets 498,673 981,345 2,991,132
Total Assets $3,592,686$2,082,563$3,262,769$146,037$11,345,592
LIABILITIES
Current Liabilities:
Accounts payable and accruals $35,444$2,081$54,888
Accrued payroll and benefits 23,370 1,06312,038
Compensated absences 6,639 1,573
Claims payable 478,051
Total current liabilities 65,453481,19568,499
Non-current Liabilities:
Compensated absences 42,133 9,984
Claims payable 1,402,717
Total non-current liabilities 42,1331,402,717 9,984
Total Liabilities 107,5861,883,91278,483
NET POSITION
Net investment in capital assets 498,673 981,345
Unrestricted 2,986,427198,6512,202,941$146,037$11,345,592
Total Net Position $3,485,100$198,651$3,184,286$146,037$11,345,592
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET POSITION
JUNE 30, 2014
82
City
Channel/WebTotal
$1,151,329$17,051,498
5377,983
15,79166,673
1,167,65717,126,154
2,991,132
35,0991,515,117
35,0994,506,249
$1,202,756$21,632,403
$62,498154,911
18,29254,763
27,84036,052
478,051
108,630723,777
176,676228,793
1,402,717
176,6761,631,510
285,3062,355,287
35,0991,515,117
882,35117,761,999
$917,450$19,277,116
83
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENSES AND
CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2014
Compensated
Absences and
Information Workers'Equipment Long-Term Retiree
TechnologyCompensationRevolvingDisabilityMedical
OPERATING REVENUES
Charges for services$1,399,734$317,937$1,077,099$68,137
Other 21,993
Total Operating Revenues1,399,734317,9371,099,09268,137
OPERATING EXPENSES
Salaries and related expenses569,29227,789337,090$2,048,732
Materials and supplies513,9913,595354,740
Contractual services177,78530114,9306,485
Insurance claims and premium 337,282 229,577
Depreciation 185,263 268,371
Total Operating Expenses 1,446,331368,6961,075,131229,5772,055,217
Operating Income (Loss)(46,597)(50,759)23,961(161,440)(2,055,217)
NONOPERATING REVENUES (EXPENSES)
Interest income 2,728 1,857 3,000 36611,476
Total Nonoperating Revenues (Expenses)2,728 1,857 3,000 36611,476
Income (Loss) Before Transfers (43,869)(48,902)26,961(161,074)(2,043,741)
Transfers in 344,000 300,0009,700,000
Transfers (out)(907,536)
Change in Net Position (607,405)(48,902)26,961138,9267,656,259
BEGINNING NET POSITION4,092,505247,5533,157,3257,1113,689,333
ENDING NET POSITION$3,485,100$198,651$3,184,286$146,037$11,345,592
84
City
Channel/WebTotal
$939,484$3,802,391
21,993
939,4843,824,384
$723,8273,706,730
235,8271,108,153
101,336400,566
566,859
13,758467,392
1,074,7486,249,700
(135,264)(2,425,316)
1,67821,105
1,67821,105
(133,586)(2,404,211)
1,051,03611,395,036
(907,536)
917,4508,083,289
11,193,827
$917,450$19,277,116
85
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2014
Compensated
Absences and
Information Workers'Long-TermRetiree
TechnologyCompensationEquipment DisabilityMedical
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers$1,399,734$321,807$1,099,092$74,370
Cash payments to suppliers for goods and services(780,005)(11,534)(426,676)(12,466)
Cash payments to employees(562,109)(27,627)(335,026)($796,452)
Cash payment for judgment and claims(334,063)(229,577)
Cash Flows from (used for) Operating Activities57,620(51,417)337,390(167,673)(796,452)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Advance repayment from other funds
Advance from other funds (560,564)
Transfers in344,000300,0009,700,000
Transfers (out)(907,536)
Cash Flows (used for) Noncapital Financing Activities(563,536)300,0009,139,436
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchase of capital assets(141,025)(328,035)
Cash Flows from Capital and Related
Financing Activities (141,025)(328,035)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 10,0105,9017,2922997,579
Cash Flows from Investing Activities10,0105,9017,2922997,579
Net Cash Flows(636,931)(45,516)16,647132,6268,350,563
Cash and investments at beginning of year 3,678,6432,127,1092,263,71513,313
Cash and investments at end of year $3,041,712 $2,081,593 $2,280,362 $145,939 $8,350,563
Reconciliation of operating income (loss) to net cash flows
from operating activities:
Operating income (loss)($46,597)($50,759)$23,961($161,440)($2,055,217)
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities:
Depreciation185,263268,371
Change in assets and liabilities:
Prepaid expenses15,257
Net OPEB asset 1,268,765
Accounts payable and accruals(103,486)(4,039)42,994(6,233)(10,000)
Accrued payroll and benefits4,8611621,364
Compensated absences2,322700
Claims Payable3,219
Cash Flows from Operating Activities$57,620($51,417)$337,390 ($167,673)($796,452)
86
City
Channel WebTotal
$939,484$3,834,487
(290,456)(1,521,137)
(501,019)(2,222,233)
(563,640)
148,009(472,523)
(560,564)
1,051,03611,395,036
(907,536)
1,051,0369,926,936
(48,857)(517,917)
(48,857)(517,917)
1,14132,222
1,14132,222
1,151,3298,968,718
8,082,780
$1,151,329 $17,051,498
($135,264)($2,425,316)
13,758467,392
(15,791)(534)
1,268,765
62,498(18,266)
18,29224,679
204,516207,538
3,219
$148,009($472,523)
87
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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.
Special district assessments held by the City, acting as an agent for bond debt service payments, comprise
City Agency funds. The City is not liable for the debt payments.
89
CITY OF CUPERTINO
Statement of Changes in Assets and Liabilities
All Agency Funds
For the year ended June 30, 2014
BalanceBalance
June 30, 2013AdditionsDeletionsJune 30, 2014
All Agency Funds
Assets
Cash and investments$81,403$81,403
Liabilities
Deposits$81,403$81,403
90
STATISTICAL SECTION
This Page Left Intentionally Blank
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 wellbeing have changed over time:
1. Net Position by Component
2. Changes in Net Position
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.
1. Assessed and Estimated Actual Value of Taxable Property
2. Direct and Overlapping Property Tax Rates
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. Ratios 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
Other Property Tax and Sale Statistics
Sources
Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual
Financial Reports for the relevant year.
91
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16,206,163,709$
Total Debt%City’s Share of
6/30/2014Applicable (1)Debt 6/30/14
Santa Clara County804,700,000$ 4.845%38,987,715$
Foothill-DeAnza Community College District613,179,288 13.701%84,011,694
West Valley Community College District294,322,663 0.713%2,098,521
Santa Clara Unified School District416,910,000 1.840%7,671,144
Fremont Union High School District290,570,108 30.191%87,726,021
Cupertino Union School District261,223,462 50.007%130,630,017
El Camino Hospital District140,010,000 1.250%1,750,125
Santa Clara Valley Water District Benefit Assessment115,045,000 4.845%5,573,930
Total Overlapping Tax and Assessment Debt2,935,960,521 358,449,167
Overlapping Debt:
Santa Clara County General Fund Obligations 757,814,320 4.845%36,716,104$
Santa Clara County Pension Obligations 375,419,144 4.845%18,189,058
Santa Clara County Board of Education Certificates of Participation 9,730,000 4.845%471,419
Foothill-De Anza Community College District Certificates of Participation 13,468,694 13.701%1,845,346
West Valley-Mission Community College District General Fund Obligations 65,095,000 0.713%464,127
Santa Clara Unified School District Certificates of Participation 13,430,000 1.840%247,112
Santa Clara County Vector Control District Certificates of Participation 3,275,000 4.845%158,674
Midpeninsula Regional Open Space Park District Certificates of Participation 133,209,717 7.758%10,334,410
Subtotal Overlapping General Fund Debt 1,371,441,875 68,426,249
Direct Debt: City of Cupertino Certificates of Participation 39,980,000 100.000%39,980,000
Total Direct and Overlapping General Fund Debt1,411,421,875 108,406,249
Totals by Category:
Total Direct Debt 39,980,000 39,980,000
Total Overlapping Debt 4,307,402,396 426,875,416
Combined Total Debt 4,347,382,396$ 466,855,416$ (2)
Ratios to 2013-14 Assessed Valuation:
Total Overlapping Tax and Assessment Debt 2.21%
Total Direct Debt ($39,980,000)0.25%
Combined Total Debt 2.88%
(1)
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and
non-bonded capital lease obligations.
Direct and Overlapping Bonded Debt
CITY OF CUPERTINO
Percentage of overlapping agency's assessed valuation located within boundaries of the city.
Source: MuniServices
Overlapping Tax and Assessment Debt:
(Unaudited)
2013-14 Assessed Valuation
Direct and Overlapping General Fund Debt
June 30, 2014
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Function/Program 2005200620072008200920102011201220132014
Council and Commissions 0.800.801.401.401.401.471.461.471.521.57
Administration 4.704.704.304.304.854.904.855.055.0510.75
Public & Environmental Affairs4.404.405.556.507.456.956.956.956.9011.00
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Recreation & Community Services32.1332.1331.9631.7630.7730.7830.7829.7829.5331.48
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Total 154.75154.75158.75160.75162.75162.75162.75162.75162.75164.75
Source: City of Cupertino Budget
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COMMUNITY
PROFILE
This Page Left Intentionally Blank
History
Cupertino owes its name and earliest mention in recorded history to the 1776 expedition led by
the Spaniard, Don Juan Bautista de Anza, from
Sonora, Mexico to the Port of San Francisco to
found the presidio of St. Francis. Leaving the
majority of the party of men, women, and children
in Monterey to rest from their travels, deAnza, his
diarist and cartographer, Petrus Font, and 18 other
men pressed on through the Santa Clara Valley in
late March to their San Francisco destination.
With the expedition encamped in what is now Cupertino, Font christened the creek next to the
encampment the Arroyo San Joseph Cupertino in honor of his patron, San Guiseppe (San
Joseph) of Cupertino, Italy. The arroyo is now known as Stevens Creek.
The village of Cupertino sprang up at the crossroads of Saratoga-Sunnyvale Road (now DeAnza
Boulevard) and Stevens Creek Boulevard. It was first known as West Side; but by 1898 the post
office at the Crossroads needed a new name to distinguish it from other similarly named towns.
John T. Doyle, a San Francisco lawyer and historian, had given the name Cupertino to his
winery in recognition of the name bestowed on the nearby creek by Petrus Font. In 1904 the
name was applied to the Crossroads and to the post office when the Home Union Store
incorporated under the name, The Cupertino Stores, Inc.
Many of Cupertino’s pioneer European settlers
planted their land in grapes. Vineyards and
wineries proliferated on Montebello Ridge, on the
lower foothills, and on the flat lands below. After
1906 a lot more than grape growing was going on
in Cupertino. Orchards were thriving and new
businesses were being started. In the late 1940’s
Cupertino was swept up in Santa Clara Valley’s
postwar population explosion. Concerned by
unplanned development, higher taxes, and
piecemeal annexation to adjacent cities, Cupertino’s community leaders began a drive in 1954
for incorporation. Cupertino rancher Norman Nathanson, the Cupertino – Monta Vista
Improvement Association, and the Fact Finding Committee played important roles in this
movement.
Incorporation was approved in the September 27, 1955 election. Cupertino officially became
Santa Clara County’s 13th City on October 10, 1955.
115
A major milestone in Cupertino’s development was the creation by some of the city’s largest
landowners of Vallco Business and Industrial Park in the early 1960’s. Of the 25 property
owners, 17 decided to pool their land to form Vallco Park, six sold to Varian Associates, a
thriving young electronics firm, founded by Russell Varian, and two opted for transplanting to
farms elsewhere. The name Vallco was derived from the names of the principal developers:
Varian Associates and the Leonard, Lester, Craft, and Orlando families.
2014 Community Economic Profile
Cupertino, with a population of 60,550 and city limits stretching across 13 square miles, is
considered to be one of the San Francisco Bay Area’s most prestigious cities in which to live and
work.
Economic health is an essential component to maintaining a balanced city, 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 so that successful partnerships are a direct
reflection of a success community. The cornerstone of partnership is a cooperative and
responsive government that fosters business and residential prosperity and strengthens
working relationships among all sectors of the community.
Economic development strategies are tailored to address the specific needs of Cupertino.
Because it is a mature and 90% built-out city, focus is on business retention and revitalization.
Business recruitment is site specific and targeted to industries that enhance, rather than draw
from, the existing business base.
Cupertino is home to many well-known high-tech companies, and offers a dynamic and
exciting business climate. Apple Inc., CRC Health, Durect, Mirapath, Seagate Technology,
Trend Micro, Bromium, and SugarCRM Inc. are headquartered in the city. DeAnza College,
one of the largest single-campus community colleges in the country, is another major employer.
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
116
local companies through active outreach and an entitlement process that is responsive and
customer oriented.
At the Vallco Shopping Mall, visitors can shop at its three anchor stores, enjoy the latest shows
at the AMC 16-screen theater, skate at the mall’s full-size ice rink, workout at the Bay Club
Silicon Valley, and bowl at the chic and upscale BowlMor Lanes. They can begin or top off the
evening with fine dining at the critically-acclaimed Alexander’s Steakhouse or enjoy more
casual cuisine at TGI Friday’s, Benihana’s, Dynasty Seafood Restaurant, Tatami, and the
international food court. The city features many other stores, including Target, TJ Maxx and
Home Goods, and Whole Foods, and over 160 restaurants to serve the local workforce and
residents.
Five hotels occupy the city: Hilton Garden Inn, Marriott Courtyard, Cupertino Inn and the
Cypress Hotel, operated by the Kimpton Group. The fifth hotel, The Aloft Cupertino Hotel,
operated by Starwood Hotels & Resorts, opened in 2012.
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 its 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.
2014 City Profile
The City of Cupertino operates as a general law city with a City Council-City Manager form of
government. Five council members serve four year, overlapping terms, with elections held
every two years. The council meets twice a month on the first and third Tuesday at 6:45 p.m. in
the Community Hall.
The City has 165 authorized full-time benefited employee positions. City departments include
Administration, Administrative Services, Community Development, Recreation and
Community Services, and Public Works. Police service is provided by the Santa Clara County
Sheriff’s Department, and fire service is provided through the Santa Clara County Fire District.
Assisting the City Council are several citizen advisory commissions/committees which include
housing, telecommunications, fine arts, library, planning, audit, parks and recreation, bicycle
and pedestrian, teen, economic development, strategic planning, and public safety. Members of
the volunteer boards are appointed by the City Council and vacancies are announced so that
interested residents may apply for the positions. Residents are kept informed about city
services and programs through the Cupertino Scene, a monthly newsletter; The City Channel,
Cupertino’s government access cable TV channel; and the city’s website.
117
Housing
The average sales price of an existing single-
family home is $1,441,342 as of 2014.
Community Health Care Facilities
Cupertino is served by the Cupertino Medical
Clinic, NovaCare Occupational Health
Services. Nearby hospitals include Kaiser
Permanente Medical Center in Santa Clara, El
Camino Hospital in Mountain View,
O’Connor Hospital in San Jose, Community
Hospital of Los Gatos, Stanford Hospital in
Palo Alto, and the Saratoga Walk-in Clinic in
Saratoga.
Utilities
Gas & Electric – Pacific Gas and Electric, 800-
743-5000.
Phone – AT&T, residential service, 800-894-
2355; business service, 800-750-2355.
Cable – Comcast, 800- 945-2288.
Solid Waste & Recycling – Recology, 408-725-
0420.
Water – San Jose Water Company, 408-279-
7900 and California Water, 650-917-0152.
Sewer Service – Cupertino Sanitary District,
408-253-7071.
Tax Rates
Residential, commercial, and industrial
property is appraised at full market value, as it
existed on March 1, 1975, with increases
limited to a maximum of 2% annually.
Property created or sold since March 1, 1975
will bear full cash value as of the time created
or sold, plus the 2% annual increase. The basic
tax rate is $1.00 per $100 full cash value plus
any tax levied to cover bonded indebtedness
for county, city, school, or other taxing
agencies. Assessed valuations and tax rates
are published annually after July 1.
Retail Sales Tax: Cupertino 1%, State General
Fund 3.9375%, State and Local Revenue Fund
1.0625%, State Local Public Safety 0.5%, State
Local Revenue 0.5%, County Transportation
0.25%, Local District (Valley Transportation
Authority) 1.125%. Grand Total = 8.7500%.
Assessed Valuation: (Secured and Unsecured)
Cupertino: $16,206,163,709 (7/1/14)
County: $357,339,245,945 (7/1/14)
Transportation
Rail – CalTrain service to Gilroy and San
Francisco, with local station four miles north of
city; Amtrak station is 10 miles south.
Air –Mineta San Jose International Airport 11
miles south; San Francisco International
Airport 30 miles north.
Bus – Santa Clara Valley Transportation
Authority.
Highways – Interstate Route 280, State Route
85.
118
Community Statistics
Facts and Figures
Population in City Limits 60,550
Median Household Income $140,034
Median Age 40.4
Registered Voters 20,049
Democrats 7,386
Republicans 4,121
American Independent 285
Other 173
No Political Party designated 8,084
Top 25 Sales/Use Tax Contributors
The following are Cupertino’s top 25 sales and use tax contributors for 2013-2014 in alphabetical
order. Collectively, these contributors generate 84.9% of Cupertino’s total sales and use tax
revenue.
99 Ranch Market Macy's Department Store
A2Z Development Mirapath
Alexander’s Steakhouse Rotten Robbie Service Stations
Apple Computers Corporation Scandinavian Designs
Argonaut Window & Door Sears Roebuck & Company
BJ's Restaurant & Brewery Shane Diamond Jewelers
California Dental Arts Shell Service Stations
Chevron Service Stations Skanska
Clark Pacific Target Stores
Dynasty Chinese Seafood TJ Maxx
Granite Rock Company Valero Service Stations
Insight Direct USA Whole Foods Market
JC Penney Company
119
Demographic Information
Community and Recreation Services
Blackberry Farm
Blackberry Farm has been upgraded and
restored to improve the natural habitat for
native trees, animals, and fish.
Improvements to the park include
construction of a new ticket kiosk, re-
plastered pools, a new water slide, bocce
ball, horseshoe courts, and numerous
upgrades to the west bank picnic area. The
park is located at 21979 San Fernando
Avenue, telephone 408-777-3140. The
Blackberry Farm golf course is located at
22100 Stevens Creek Boulevard, telephone
408-253-9200.
The Quinlan Community Center
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. The community center is
located at 10185 North Stelling Road,
telephone 408-777-3120.
Cupertino Sports Center
The Sports Center is a great place to meet
friends. The facility features 17 tennis
courts, complete locker room facilities, and
a fully equipped fitness center featuring free
weights, Cybex, and cardio equipment. A
120
teen center is also included as well as a
child watch center. The center is located at
the corner of Stevens Creek Boulevard and
Stelling Road, telephone 408-777-3160.
Cupertino Senior Center
The Senior Center provides a welcome and
friendly environment for adults over age 50.
There is a full calendar of opportunities for
learning, volunteering, and enjoying life.
There are exercise classes, a computer lab
and classes, language instruction including
English as a second language, and cultural
and special interest classes. The center also
coordinates trips and socials. The Senior
Center is located at 21251 Stevens Creek
Boulevard, telephone 408-777-3150.
Civic Center and Library
The complex has a 6,000 square foot
Community Hall, plaza with fountain, trees
and seating areas. City Council meetings
are held in the
Community Hall
as well as
Planning
Commission and
Parks and
Recreation Commission sessions. The
54,000 square foot library continues to be
one of the busiest in the Santa Clara County
Library system. For more information, call
408-446-1677.
McClellan Ranch Park
A horse ranch during the 1930’s and 40’s,
this 18-acre park has the appearance of a
working ranch. Preserved on the property
are the original ranch house, milk barn,
livestock barn, and two historic buildings:
Baer’s Blacksmith Shop, originally located
at DeAnza and Stevens Creek, and the old
water tower from the Parish Ranch, now the
site of Memorial Park. Rolling Hills 4-H
Club members raise rabbits, chickens,
sheep, swine, and cattle and a Junior Nature
Museum, which features small live animal
exhibits and dispenses information about
bird, animal, and plant species of the area.
McClellan Ranch is located at 22221
McClellan Road, telephone 408-777-3120.
Teen Center
This new facility has all of the latest gaming
equipment and cool features that teens
enjoy. Teens can pick from pool, foosball,
pin ball, ping pong, Xbox 360, Wii, five
computers, board games, two big screen
televisions, movies, and more! The Teen
Center is also the ideal place to host a
birthday party or special occasion. The
facility includes a kitchenette equipped with
a refrigerator/freezer, a microwave, and a
toaster oven. Tables and chairs are also
available. The Teen Center is located at
21111 Stevens Creek Boulevard, telephone
408-777-1335.
Education
Winner of numerous state and national awards for excellence, Cupertino’s schools are widely
acknowledged to be models of quality instruction. Cupertino Union School District serves
18,000 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.
121
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 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. Many high schools in the district exceed their established achievement targets for
the State Academic Performance Index. District students are encouraged to volunteer and/or
provide service to organizations within the community. During their senior year, if students
complete 80 hours of service to a non-profit community organization, they are recognized with
a “Community Service Award” medal that may be worn during their graduation ceremonies.
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 the 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.
Things to do and See
Euphrat Museum of Art
The highly regarded Euphrat Museum of Art, at its new location next to the new Visual Arts
and Performance Center at DeAnza College, traditionally presents one-of-a-kind exhibitions,
publications and events reflecting the rich diverse heritage of the area. The Museum prides
itself on its changing exhibitions of national and international stature, emphasizing Bay Area
artists. Museum hours are 10 a.m. – 3 p.m. Monday through Thursday. Telephone: 408-864-
5464.
Cupertino is served by two local
institutions of higher education: DeAnza
College and the University of San
Francisco. In addition to these schools,
Cupertino’s location offers easy access to
Stanford University, Santa Clara
University and San Jose State
University.
122
Fujitsu Planetarium
Stargazers have a Cupertino facility catering to their interests, the Fujitsu 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. For more information,
visit the website at http://planetarium.deanza.edu or call 408-864-8814.
Flint Center
The cultural life of the Peninsula and South Bay is enhanced by programs presented at the Flint
Center for Performing Arts located at 21250 Stevens Creek Boulevard at DeAnza College
campus. The center opened in 1971 and was named in honor of Calvin C. Flint, the first
chancellor of the Foothill-DeAnza Community College District. The box office is open 10 a.m. –
4 p.m. Tuesday through Friday and one and one half hours prior to any performance. Box
office: 408-864-8816; administrative office: 408-864-8820.
Cupertino Historical Society
The Cupertino Historical Society was founded in 1966 by a group of 177 longtime residents and
is dedicated to the preservation and exhibition of the city’s history. Their museum, located at
the Quinlan Community Center, 10185 N. Stelling Road, attempts to develop and expand the
learning opportunities that it offers to the ethnically diverse community of the City of
Cupertino. Telephone: 408-973-1495.
Farmers’ Market
Residents and visitors can visit the two farmers’ markets on Friday
from 9:00 a.m. to 1:00 p.m. at the Vallco Shopping Mall parking lot
behind JCPenney, and every Sunday from 9:00 a.m. to 1:00 p.m. at
the Cupertino Oaks Shopping Center, 21275 Stevens Creek Blvd.
California History Center
The California History Center and Foundation is located on the DeAnza College campus. The
center has published 37 volumes on California history and has a changing exhibit program. The
center’s Stocklmeir Library Archives boasts a large collection of
books, a pamphlet file, oral history tapes, videotapes and a couple
thousand student research papers. The library’s collection is for
reference only. Heritage events focusing on California’s cultural
and natural history are offered by the center each quarter. For more
information, call 408-864-8987.
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