Financial Report 06-30-2004
CITY OF CUPERTINO, CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR FISCAL YEAR ENDED
JUNE 30, 2004
PREPARED BY:
CITY OF CUPERTINO
FINANCE DEPARTMENT
CAROL A. ATWOOD
DIRECTOR OF ADMINISTRATIVE SERVICES
INTRODUCTORY SECTION
CITY OF CUPERTINO
Comprehensive Annnal Financial Report
For the Year Ended June 30, 2004
Table of Contents
Table of Contents
Letter of Transmittal
Organization Chart .
Commissions and Committees
City Council and Directory of City Officials
Certificate of Award for Excellence in Financial Reporting
I FINANCIAL SECTION I
Independent Auditor's Report on Basic Financial Statements
Management's Discnssion and Analysis
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets.
Statement of Activities .
Fund Financial Statements:
Major Governmental Funds:
Balance Sheet.
Reconciliation of the Governmental Funds-Balance Sheet with the
Statement of Net Assets.
Statement of Revenues, Expenditures, and Changes in Fund Balance.
Reconciliation of the Net Change in Fund Balances Total Governmental
Funds with the Statement of Activities
Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual:
General Fund .
Page
IV
XIV
XV
XVI
XVII
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4
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21
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27
CITY OF CUPERTINO
Comprehensive Annual Financial Report
For the Year Ended June 30, 2004
Table of Contents
I FINANCIAL SECTION (Continued):
Major Proprietary Funds:
Statement of Net Assets
Statement of Revenue, Expenses, and Changes in Fund Net Assets
Statement of Cash Flows
Fiduciary Funds:
Statement of Fiduciary Net Assets.
Notes to Basic Financial Statements.
Supplemental Information:
Major Governmental Funds Other Than the General Fund and Special Revenne Fnnds:
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual:
Public Facilities Corporation Debt Service Fund
Non-major Governmental Funds:
Combining Balance Sheets .
Combining Statements of Revenues, Expenditures, and Changes
in Fund Balance
Combining Schedule of Revenues, Expenditures, and Changes
in Fund Balance - Budget and Actual
Internal Service Funds:
Combining Statement of Net Assets
Combining Statements of Revenues, Expenses and Changes in Net Assets
Combining Statements of Cash Flows
Fiduciary Funds:
Combining Statement of Changes in Assets and Liabilities - All Agency Funds
ii
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CITY OF CUPERTINO
Comprehensive Annual Financial Report
For the Year Ended Jnne 30, 2004
Table of Contents
Page
I STATISTICAL SECTION
General Governmental Expenditures by Function -
Last Ten Fiscal Years (Table I) .
76
General Governmental Revenues by Source -
Last Ten Fiscal Years (Table 2) .
78
Assessed and Estimated Actual Values of Taxable Property-
Last Ten Fiscal Years (Table 3) .
79
Property Tax Rates - Direct and Overlapping Governments -
Last Ten Fiscal Years (Table 4) .
80
Principal Taxpayers (Table 5)
81
Computation of Legal Debt Margin (Table 6) .
82
Ratio of General Bonded Debt to Assessed Value and Bonded Debt
Per Capita - Last Ten Fiscal Years (Table 7) .
83
Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total
General Governmental Expenditures - Last Ten Fiscal Years (Table 8)
84
Demographic Statistics - Last Ten Fiscal Years (Table 9)
85
Property Values, Construction and Bank Deposits -
Last Ten Fiscal Years (Table 10)
86
Community Profile .
87
111
REPORTING ENTITY
This Comprehensive Annual Financial Report includes all component units, funds and account
groups of the City. It reports all activities for which the City is considered to be financially
accountable. The general goverrunental funds provide a full range of services, including
planning, building, parks and recreation, public works, engineering, maintenance and general
administrative activities. This financial report incorporates data for the City of Cupertino, the
Cupertino Public Facilities Corporation and the Cupertino Redevelopment Agency.
The City operates under a Council-City Manager form of goverrunent. There are five council
members, including the Mayor, who serve four-year terms. The City Council appoints the City
Manager who is responsible for the daily administration of the City affairs. The City Council
also appoints the City Attorney and the City Treasurer. All other employees are appointed by the
City Manager.
FACTORS AFFECTING ECONOMIC CONDITIONS
The City of Cupertino is located in Santa Clara County at the southern end of the San Francisco
Bay Peninsula. The City is comprised of II square miles and is bordered by the cities of San
Jose, Saratoga, Sunnyvale, Santa Clara and Los Altos.
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Situated at the west end of Silicon Valley, Cupertino
has earned the reputation of a balanced community
with a healthy climate for business and well
maintained residential neighborhoods, community
parks and public facilities. The excellent reputation of
Cupertino's schools has been a major attraction for
families wishing to settle in close proximity to jobs in
the Santa Clara Valley. The City recognizes the
importance of quality school facilities and programs to
all Cupertino residents, and works in partnership with
the schools in many programs affecting education and
youth.
Cupertino is the world headquarters for major
corporations such as Apple Computer, Portal Software
and Symantec. Key divisions of Hewlett-Packard and
Borland Software are also located in Cupertino.
The City has eight large shopping centers including its own regional mall, Vallco Fashion Park.
Developments at the national, state and local level continue to present fiscal challenges to all
municipalities in the area. On the national level, the costs of an inconclusive war in Iraq and
maintenance of the country's heightened state of security serve to dampen hints of economic
recovery.
v
As in the prior fiscal year, economists argue whether the national recovery is "sustainable". It is
clear that the economy has not realized significant growth, particularly in northern California.
Over the past few years, the Silicon Valley's economy has been hardest hit, with reduced demand
in the electronics and technology manufacturing industry and the highest unemployment rates in
the country. The City of Cupertino experienced its fourth consecutive year of decline in sales tax
revenue, its largest revenue source. As shown in the chart below, sales tax has fallen 29.7% from
the exceptional levels of 1999-2000. Many other tax revenues have falling behind as well.
SALES TAX TREND
$14,000
$12,000
$8,000
. ACTUALÆST.
~ADJ BY CPI
$10,000
$6,000
$4,000
$2,000
$0
1996 1997 1998 1999 2000 2001 2002 2003 2004
(In thousands)
Property taxes, however, have continued to grow at a very moderate pace. Cupertino is a no/low
property tax City, which means that it is one of four in the State that receive a lower percentage
share of the property tax dollar. In 1978 when voters approved the passage of Proposition 13,
Cupertino's low rate was frozen at 2% of every property tax dollar. The county agreed to pay an
additional 2% as a tax equity allocation, but the rate to the City is still very low. Property values
in the Silicon Valley have maintained healthy assessments throughout the economic downturn
despite the lack of job growth and relatively low mortgage rates have helped support these
values. In addition, Cupertino's assessed value has grown with two residential annexations in
recent years.
As for interest earnings, lower interest rates have resulted in lower yields on investments. Due to
these diminishing yields and decreased cash holdings, the City's investment income has fallen
over 50% (from $2.3 to $1.1 million) in the past two years alone.
Of larger concern to the City's financial well-being is the State goverrunent, which continues to
operate under a massive budget deficit.
vi
The recall of the governor in November 2003 led to the repeal of the increase in the Vehicle
License fees (VLF), a local goverrunent source. Subsequently, the State withheld, or
"borrowed", $1.2 billion dollars from cities and counties ($885,764 from Cupertino) of 2003-04
VLF funds, to be repaid in 2006. As the 2004-05 state budget was "balanced" via extensive use
of deferrals, deductions and debt, California municipalities persisted in their efforts to protect
local goverrunent revenues from the State Treasury's reach. A campaign that culminated in a
November 2004 ballot initiative to prevent the continuing shift oflocal tax funding to other state
priorities proved successful. But the ongoing deficit situation at the State level promises to be a
difficult one that could have an adverse impact on the City's revenues going forward.
MAJOR INITIATIVES
Current Year Projects
I. Foster a Sense of Community
· Continue partnerships with area schools to add value to the quality of education and
recreational prospects in the City.
· Offer opportunities and programs to address the needs of our diverse community.
· Foster a better sense of community through recreation activities, outreach programs, and
our Emergency Preparedness and Neighborhood Captains Programs.
2. Ensure Land Use is Compatible with Community Character
· Review and update the General Plan.
· Ensure that the ''walkable city" concept is present (trails, paths, public access) in all
development/redevelopment projects.
· Continue to develop a master plan for the City Center, Town Center, and Heart of City
projects.
· Investigate feasibility of opportunities of the Stevens Creek Corridor Plan.
· Optimize community benefit with mixed-use development.
3. Protect and Promote our Public Safety
· Continue to expand our "safe routes to school" program.
· Evaluate methods for communicating (electronically and in writing) to our non-English
speaking population regarding crime prevention.
· Continue emphasis on our neighborhood watch, disaster preparedness, and school
resource officer programs.
vii
4. Enhance Services
· Identify needs and provide affordable housing opportunities in Cupertino.
· Expand quality municipal services to newly annexed regions of the City.
· Expand access to our City Council and Commission meetings by making them available
worldwide through the City's website.
· Enhance responses to customer inquiries through our new "Access Cupertino" program.
5. Ensure the Financial Health of the Community
· Encourage a healthy environment for retail growth.
· Add a revenue enhancement incentive policy component of review for new development.
· Monitor revenue trends and proactively adjust our expenditures to ensure a balanced
budget and preservation of customer service.
· Complete the developmental fees analysis for implementation of revised fee schedule in
2004-05.
6. Pursue Infrastructure Improvements
· Advance construction of a new Library and Civic Center Park.
· Redesign and upgrade the Cupertino Sports Center and Teen Center.
· Continue an active street improvement program.
· Design and construct Cali Mill Plaza at City Center.
Future Projects
The City is currently constructing several major capital improvements throughout the
community. With the completion of the City Center (which includes the new library) and Sports
Center projects, master plans will be implemented at the Blackberry Farm Golf and Picnic
Facility, and transportation projects will remain a priority. Such growth in capital spending will
directly impact the City's revenues, service efforts and traffic configurations.
Vlll
Department Focus - Efforts and Accomplislunents
Each year, we feature a department in the city that has made notable contributions to the
organization or community. This year, the spotlight falls on the Public Works Department.
This department consists of several divisions - Engineering, Environmental Programs,
Transportation, Facilities, General Services, Grounds, and Streets. The overall service objectives
are:
· To carry out their responsibilities in the most efficient and productive manner by
continuously assessing current programs;
· To provide response to the community on complaints and requests for service within 24
hours;
· To provide public education and information to residents, businesses, and schools;
· To represent the City on a variety of county and regional issues.
~ Renovation of the Cupertino Sports Center.
Specific accomplislunents this year include:
~ Construction and completion of Cali Mill Plaza.
~ Construction of a new Cupertino Library and
Community Hall; opening in October 2004.
~ Completion of Wolfe Road/I-280 Safety
Improvements.
~ Completion of Stevens Canyon Road Widening.
~ Completion of the Safe Routes to School- Cupertino High project.
~ Completion of the Advanced Traffic Management System and Ramp Meter Interchange
Interconnect System traffic signal communication projects and the Cupertino Adaptive Signal
Timing traffic signal timing project.
The above projects were accomplished with a 13 percent reduction III staff due to budget
constraints.
We congratulate the Public Works Department for their achievements in all of their projects and
wish them continued success in the implementation of their programs.
ix
LONG TERM FINANCIAL PLANNING
The City will continue to focus on a number of important long-term issues. These issues include
holding the line on City expenditures, partnership opportunities with our schools and other
agencies, continued automation, funding of the capital improvement program and enhancing
economic development efforts.
In order to assure that the City can maintain capital facilities and infrastructure as they age, and
can continue to conduct essential business while providing expected services to its residents, the
City prepares a five-year forecast for all funds, which is detailed in the annual budget. The
General Fund forecast assumes a moderate rate of revenue growth in 2005 and beyond, with a
conservative inflationary rate and sustained levels of service. Even though the forecast assumes
that the State does not resort to additional local revenue grabs in three of the next five years, a
number of factors - mainly rising retirement and health care costs - will create upward pressure
on the City's operating expenditures. The resulting deficit spending could deplete the City's
reserves by fiscal year 2008-09.
However, the City has been able to maintain its fiscal stability through prudent use of reserves,
proactive debt refinancing, aggressive pursuit of available revenues, and conservative fiscal
management. As economic recovery builds throughout the State and into the Silicon Valley, the
City plans to increase its efforts in the area of economic development, make the most of the
Redevelopment Agency to improve utilization at Vallco Mall, and collaborate with other local
agencies to maximize resources and funding for regional programs. As revenues are generated
from additional mixed-use development, they will accelerate the City's ability to avoid deficit
spending, replenish its Capital Improvement Projects funding and fund other long-term reserves.
Accounting System and Budgetary Control
The City's accounting records are maintained on a modified accrual basis of accounting for all
goverrunental fund types and agency funds. Under this basis, revenues are recognized when
susceptible to accrual, i.e., both measurable and available, and expenditures, other than interest
on long-term obligations which is recorded when paid, are recognized when the liability is
incurred. The accrual basis of accounting is used by the proprietary fund types where revenues
are recognized when earned and expenses are recorded when incurred. In compiling the
goverrunent-wide financial statements in conformance with GASB 34, the accrual basis of
accounting is used to report all of the City's financial activities. Since the fund financial
statements are still compiled using the modified accrual method for goverrunental funds, a
reconciliation report is provided to show the changes between the two reporting methods.
In developing and evaluating the City's accounting system, consideration is given to the
adequacy of internal accounting controls. Such controls are designed to provide reasonable, but
not absolute, assurance regarding the safeguarding of assets against losses from unauthorized use
or disposition and the reliability of financial records for preparing financial statements and
maintaining accountability of assets.
x
The concept of reasonable assurance recognizes that the costs of a control should not exceed the
benefits likely to be derived and that the evaluation of costs and benefits requires estimates and
judgments by management. The City's internal accounting controls adequately safeguard assets
and provide reasonable assurance of the proper recording of financial transactions.
The City's budget is a detailed operating plan that identifies estimated costs and results in
relation to estimated revenues. The budget includes 1) the programs, projects, services and
activities to be provided during the fiscal year; 2) estimated revenue available to finance the
operating plan; and 3) the estimated spending requirements of the operating plan. The budget
represents a process through which policy decisions are made, implemented and controlled. The
level of budgetary control (i.e., the level at which expenditures cannot legally exceed the
appropriated amount) is the departmental level within the General and Special Revenue funds,
and the project level within the Capital funds.
Changes in Financial Reporting
In addition to providing for new, goverrunent-wide financial statements and formatting, GASB
34 requires a Management's Discussion and Analysis (referred to as MD&A) with the intent of
giving readers an objective and easily readable analysis of the City's financial performance for
the year. Much of the information needed for the new MD&A was previously provided in this
transmittal letter; it includes a discussion of the basic financial statements, some condensed
financial information, an analysis of the City's financial position and results of operations on
both a City-wide and Fund basis. Comparative figures are available only on the fund basis in this
first year of GASB 34 implementation. The Management Discussion and Analysis begins on
page four.
One of the most significant and far-reaching new requirements of GASB 34 deals with the
reporting of general infrastructure assets. GASB defines public infrastructure assets as long-lived
capital assets associated with Governmental Activities that normally are stationary in nature and
can be preserved for a significantly greater number of years than most capital assets. Therefore,
in fiscal year 2002-03, the City needed to capture cost information for land, roads, bridges,
sidewalks, streetlights, storm drains and traffic signal systems. An inventory for each of these
infrastructure systems was drawn from the various asset management systems in place within the
Public Works Department. The data was updated, and a valuation determined for each
infrastructure item. GASB 34 requires that infrastructure assets be reported at historical cost or
deflated replacement cost, so some estimates had to be made drawing on price-level indices to
the likely year of acquisition. These assets then were depreciated over their estimated useful
lives. The City's general fixed assets, which had not previously been capitalized outside of those
used for business-type (enterprise fund) activities, were also depreciated for proper presentation.
Utilizing these estimates and cost data, the City was able to report infrastructure and other capital
asset inventories in compliance with GASB 34 as of July I, 2002. In 2003-04, depreciation was
calculated by asset type, current-year capital acquisitions were determined, completed projects
were transferred from "Construction in Progress" status to the proper asset group, and the book
value of capital assets disposed of during the year was calculated.
xi
As infrastructure and general fixed assets are accumulated with current cost values each year, the
City's reporting on capital assets will rely less heavily on the estimates made for prior year
assets, and provide a more accurate picture ofthe City's total investment in capital assets.
Also in the current fiscal year, GASB finalized its Statement #45, establishing standards for the
measurement, recognition and display of Other Post Employment Benefit expenses (OPEB),
liabilities and note disclosures in the financial reports of state and local goverrunental employers.
The standard requires that the cost of OPEB be accrued as an expense for financial reporting
purposes as benefits are earned by employees. Although the reporting requirements are not
effective for Cupertino until fiscal year 2009, the City pro-actively commissioned an actuarial
analysis of its retiree medical benefit program, an OPEB that the City has traditionally accounted
for and financed on a pay-as-you-go basis. Council then approved a designation of the City's
General fund balance to begin funding the estimated liability along with the current cost of this
program each year. Reporting compliance for GASB 45 will be implemented prior to the
required effective date of the statement.
Cash Management
The City maintains a cash and investment pool for all City funds. The City's funds are invested
by the City Treasurer according to the investment policy adopted by the City Council. The
objectives of the policy are legality, safety, liquidity, diversity and yield. The policy addresses
soundness of financial institutions and the types of investments permitted by the California
goverrunent code.
The City investments may include obligations of the U.S. Treasury, agencies and
instrumentalities, commercial paper, banker's acceptances, corporate bonds, repurchase
agreements, certificates of deposit and the State Treasurer's Local Agency Investment Fund.
Total investment earnings for all funds was approximately $1.1 million.
Risk Management
Risk management issues factor substantially in the City's long term financial planning. Whether
through partnership or self-insurance programs, the City strives to maintain sufficient assets to
pay expected losses, maintain funding stability to avoid substantial fluctuation in annual expense,
and monitor risk management policies and claim administration to mitigate future losses.
The City maintains a program of commercial insurance combined with self-insurance for
substantially all of its goverrunental operations except for major construction projects and
contractor-supplied services. In such circumstances, insurance to protect the City is provided by
each contractor.
xii
INDEPENDENT AUDIT
City Ordinance requires an annual audit of the financial records by an independent certified
public accounting firm selected by the City Council. The City's general purpose financial
statements were audited by Maze and Associates, and their opinion thereon is included in the
Financial Section of this report.
CERTIFICATE OF ACHIEVEMENT
The Goverrunent Finance Officers Association of the United States and Canada (GFOA) awarded
a Certificate of Achievement for Excellence in Financial Reporting to the City of Cupertino for
its Comprehensive Annual Financial Report for the year ended June 30, 2003.
In order to be awarded a Certificate of Achievement, a goverrunental unit must publish an easily
readable and efficiently organized Comprehensive Annual Financial Report, whose contents
conform to program standards. Such reports must satisfy both generally accepted accounting
principles and applicable legal requirements. A Certificate of Achievement is valid for a period
of one year only. We believe our current report continues to meet the program's requirements
and we are submitting it to the GFOA to determine its eligibility for another certificate.
ACKNOWLEDGMENTS
I would like to express my appreciation to the City employees, City Manager, and the members
of the City Council for their interest in conducting the financial operations of the City in a
responsible manner. Special thanks go to the Finance staff - Jennifer Chang, Dixie Farley, Tina
Mao, and Beth Ebben - for their continued support and dedication. Special recognition goes to
Carol Augustine and Dorothy Steenfott for their efforts in the preparation and production of this
report.
Respectfully submitted,
~û/li,~ t7
Carol A. Atwood L-(.4 (./(./(1 ~
Director of Administrative Services
xiii
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CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2003/04
COMMISSIONS AND COMMITTEES
AUDIT COMMITTEE
PARKS & RECREATION COMMISSION
Gillian Enos
Myoung Kang
Dolly Sandoval
Garrett Wade
Kris Wang
Rod Brown
Jeanne Bradford
Cary Chien
Frank Jelinch
Roger Peng
HOUSING COMMISSION
TELECOMMUNICATIONS COMMISSION
Richard Abdalah
Kim Dovel
Sarah Hathaway-Feit
Mahesh Nihalani
Frances Seward
Salvatore Algeri
David Eggleston
1. T. Guttadauro
Charlon McIntosh
Steven Ting
FINE ARTS COMMISSION
LIBRARY COMMISSION
Nancy Canter
Hema Kundargi
Shirley Lin Kinoshita
Janet Mohr
Carl Orr
Sheila Mohan
Janet Riddell
Eno Schmidt
Katherine Stakey
Yuhfen Diana Wu
PUBLIC SAFETY COMMISSION
PLANNING COMMISSION
Charles Caldwell
Jay Cena
Barry Chang
Nolan Chen
Hugh Riddell
TEEN COMMISSION
Angela Chen
Lisa Giefer
Marty Miller
Taghi Saadati
Gilbert Wong
ECONOMIC DEVELOPMENT
Princess Castaneda
Alexander Cohn
Page Dickson
Piyush Goyal
Christopher Haley
Cosmo Jiang
Alexander Lee
Irem Mertol
Raviv Rotem
Kevin Schroeder
Utsav Sohoni
Danh Trang
Katherine Weng
Carol Atwood
Jody Hansen
Sandra James
David Knapp
Richard Lowenthal
Orrin Mahoney
Mark McKenna
Steve Piasecki
Ralph Qualls
Gilbert Wong
BICYCLE PEDESTRIAN COMMISSION
SENIOR COMMISSION
Hua Julia Fu
David Greenstein
Geoffiey Paulsen
Joseph Walton
Estelle Incociati
Christine Pierce
Mavis Smith
Linda Walker
Frank Yap
xv
CITY OF CUPERTINO, CALIFORNIA
Fiscal Year 2003/04
CITY COUNCIL
Sandra James
Mayor
Patrick K wok
Vice Mayor
Richard Lowenthal
Councilmember
Dolly Sandoval
Councilmember
Kris Wang
Councilmember
DIRECTORY OF CITY OFFICIALS
David W. Knapp - City Manager
Charles T. Kilian - City Attorney
Carol Atwood - Director of Administrative Services
Rick Kitson - Public Information Officer
Steve Piasecki - Director of Community Development
Ralph Qualls - Director of Public Works
Kimberly Smith - City Clerk
Therese Smith - Director of Parks and Recreation
XVI
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Cupertino,
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2003
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and [manciaI reporting.
-?l~~~
President
~/~
Executive Director
xvii
FINANCIAL SECTION
AAAZE &
I r" ASSOCIA TES
- - --- ----------------------- ----- - -
--------------------
-..-------..-
__u__________
INDEPENDENT AUDITOR'S REPORT ON
BASIC FINANCIAL STATEMENTS
ACCOUNTANCY CORPORATION
1931 San Miguel Drive - Suite 100
Walnut Creek, California 94596
(925) 930-0902 . FAX (925) 930-0135
E-Mail: maze@mazeassociates.com
Website: www.mazeassociates.com
To the City Council
City of Cupertino, Califomia
We have audited the basic financial statements of the governmental activities, the business-type
activities, each major fund, and the aggregate remaining fund information of the City of Cupertino as of
and for the year ended June 30, 2004, as listed in the Table of Contents. These financial statements are
the responsibility of the City's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in the United States of
America and generally accepted govemment audit standards issued by the Comptroller General of the
United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance as to whether the financial statements are free of material misstatement. An audit
includes examining on a test basis evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
We have also issued our report on the City's intemal controls and compliance with laws, rules and
regulations which is dated September 1, 2004.
In our opinion, the basic financial statements referred to above present fairly in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major fund,
and the aggregate remaining fund information of the City of Cupertino at June 30, 2004 and the results
of its operations and the cash flows of its proprietary fund types thereof and the respective budgetary
comparisons listed as part of the basic financial statements for the year then ended, in conformity with
generally accepted accounting principles in the United States of America.
Management's Discussion and Analysis is required by the Government Accounting Standards Board,
but is not part of the basic component unit financial statements. We have applied certain limited
procedures to this information, principally inquiries of management regarding the methods of
measurement and presentation of this information, but we did not audit this information and we
express no opinion on it.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a
whole. The supplemental section listed in the Table of Contents are presented for purposes of
additional analysis and are not a required part of the basic financial statements of the City of
Cupertino. Such information has been subjected to the auditing procedures applied in our audit of the
basic financial statements, and in our opinion are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
The statistical section listed in the Table of Contents was not audited by us, and we do not express an
opinion on this information.
September 30, 2004
"Yiì~ >v~~
3
A Professional Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS
Fiscal 2004 is only the second year that the City of Cupertino has issued its financial statements in the
format prescribed by the provisions of Government Accounting Standards Board Statement 34 (GASB
34). GASB 34 requires that the City to provide this overview (MD&A) of its financial activities for the
fiscal year. The MD&A is intended to provide an objective and easily readable analysis of the City's
financial performance for the year. Please read it in conjunction with the accompanying Transmittal
Letter and Basic Financial Statements.
FISCAL 2004 FINANCIAL IDGHLIGHTS
Although the economy of California's Silicon Valley showed sporadic signs of recovery rrom the
slowdown of the last four years, Cupertino continued to be affected by sluggish economic activity and the
State's budgetary crisis. Financial highlights ofthe year include the following:
· The City's total net assets decreased $1.2 million during Fiscal 2004. At June 30, 2004, net assets
totaled $119.3 million.
· Total City revenues, including program and general revenues, were $40.3 million, while total
expenses were $41.5 million in fiscal 2004.
· Net assets in Governmental funds were $111.4 million, while net assets in business activities were
$8.0 million.
· Governmental Program Revenues were $9.4 million compared with $6.3 million in fiscal 2003.
· Governmental Program Expenses were $34.9 million in fiscal 2004, compared with $38.7 million in
the prior year.
· Revenues rrom Business-Type activities were $7.3 million in fiscal 2004, compared with $7.4 million
from the prior year.
· Expenses of Business-Type Activities were $6.6 million in fiscal 2004, compared with $6.7 in the
prIor year.
· General Fund revenues of $27.2 million represented a decrease of $.5 million rrom the prior year;
General Fund expenditures decreased rrom $25.6 to $23.8 million in fiscal 2004.
· Actual expenditures in the General Fund were $2.7 million less than the final fiscal 2004 budget
primarily because of significant expenditure reduction efforts by City departments and management
under the direction of the City Council.
· General Fund fund balance of $ I 6.5 million at the 2004 fiscal year end compared favorably with the
budgeted fund balance of $13.2 million.
OVERVIEW OF THE FINANCIAL STATEMENTS
The Basic Financial Statements comprise the City-wide Financial Statements and the Fund Financial
Statements; these two sets of financial statements provide two different views of the City's financial
activities and financial position.
The City-Wide Financial Statements provide a longer-term view of the City's activities as a whole, and
comprise the Statement of Net Assets and the Statement of Activities. These statements are prepared on
the accrual basis, which means they measure the flow of all economic resources of the City as a whole.
The accrual basis of accounting is similar to the accounting used by most private sector companies. The
Statement of Net Assets provides information about the financial position of the City as a whole,
including all its capital assets and long-term liabilities. The Statement of Activities provides information
about all the City's revenues and all its expenses, also on the full accrual basis, with the emphasis on
measuring net revenues or expenses of each the City's programs. The Statement of Activities explains in
detail the change in Net Assets for the year. Over time, increases or decreases in net assets can be
indicators of whether the financial condition of the City is improving or deteriorating.
4
All of the City's activities presented are grouped into Government Activities and Business-type activities,
as explained below. All the amounts in the Statement of Net Assets and the Statement of Activities are
separated in order to provide a summary of these two types of activities for the City as a whole.
. Governmental activities-Most of the City's basic services are considered to be governmental
activities, including general government, community development, public safety, public works,
culture-recreation, public improvements, planning and zoning, and general administration services.
These services are supported by general City revenues such as property, sales and other taxes, and by
specific program revenues such as developer fees and grants.
The City's governmental activities include the activities of a separate legal entity, the Cupertino
Redevelopment Agency, because the City is considered to be fmancially accountable for the Agency.
The Cupertino Public Facilities Corporation, !Tom which the City leases its major facilities through the
payment oflong-term debt, is also included as a component unit.
. Business-type activities-All the City's enterprise activities are reported here, including solid waste
collection and disposal and the recreational operations of each of the City's various community
facilities. Unlike governmental services, these services are supported by charges paid by users based
on the amount of the service they use.
The Fund Financial Statements report the City's operations in more detail than the government-wide
statements and focus primarily on the short-term activities of the City's General Fund and other Major
Funds. The Fund Financial Statements measure only current revenues and expenditures and fund
balances; they exclude capital assets, long-term debt and other long-term amounts. Because these
statements focus on the near-term inflows and outflows of spendable resources, such information may be
useful in evaluating near-term financing requirements.
The Fund Financial Statements provide detailed information about each of the City's most significant
funds, called Major Funds. Cupertino's Fund Financial Statements include governmental, enterprise and
internal service funds as discussed below. The concept of major funds, and the determination of which
are major funds, was established by GASB Statement 34 and replaces the concept of combining like
funds and presenting them in total. Instead, each Major Fund is presented individually, with all Non-
major Funds summarized and presented only in a single column. (Subordinate schedules, which follow
the Notes to the Financial Statements, present the detail of these Non-major funds.) Major Funds present
the major activities of the City for the year, and may change !Tom year to year as a result of changes in the
pattern of City's activities and public interest. For example, the Library Construction Fund is included in
both the current and prior year fund financial statements.
Governmental Fund Financial Statements are prepared on the modified accrual basis, which means they
measure only current financial resources and uses. They present essentially the same functions reported
as governmental activities in the government-wide financial statements. However, capital assets and
other long-lived assets, along with long-term liabilities, are not presented in the Governmental Fund
Financial Statements. Reconciliations are provided to facilitate a comparison between governmental
funds and governmental activities statements to allow a better understanding of the long-term impact of
the government's near-term financial decisions.
Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis, as in
the past, and include all their assets and liabilities, current and long-term. Enterprise funds are used to
report the same functions presented as business-type activities in the government-wide financial
statements, and in more detail in the fund financial statements.
Since the City's Internal Service Funds provide goods and services only to the City's governmental and
business-type activities, their activities are reported only in total at the Fund level. Internal Service Funds
may not be Major Funds because their revenues are derived !Tom other City Funds. These revenues are
eliminated in the City-wide financial statements and any related profits or losses are returned to the
5
Activities which created them, along with any residual net assets of the Internal Service Funds. For the
City of Cupertino, the internal service activities predominantly benefit governmental rather than business-
type functions, and are therefore included within governmental activities in the government-wide
financial statements.
Comparisons of Budget and Actual financial information are required in the Major Governmental Fund
Financial Statements only for the General Fund and other Major funds that are Special Revenue Funds.
Since none of the City's Special Revenue funds are considered Major funds for financial statement
purposes, budgetary comparison statements for these funds are included in this document as supplemental
statements only.
Fiduciary Fund statements provide financial information about the actiVIties of certain assessment
districts. The City acts strictly as an agent for these districts holding amounts collected rrom property
owners which await transfer to the districts' bond trustees. The City's fiduciary activities are reported in
the separate Statement of Fiduciary Net Assets and the Agency Funds Statement of Changes in Assets
and Liabilities. These activities are excluded ITom the City's other financial statements because the City
cannot use these assets to finance its own operations.
Notes to the Financial Statements provide additional detail that is essential to a full understanding of the
information provided in the government-wide and fund financial statements.
FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE
This analysis focuses on the net assets and changes in net assets of the City's Governmental Activities
(Tables 1,2 and 3) and Business-Type Activities (Tables 4 and 5) presented in the City-wide Statement of
Net Assets and Statement of Activities that follow.
Governmental Activities
Table 1
Governmental Net Assets at June 30, 2004
(in Millions)
Governmental Activities
2004 2003
Cash and investments $ 38.7 $ 52.8
Other assets 5.2 5.5
Capital assets 132.2 118.5
Total assets 176.1 176.8
Long-term debt outstanding 53.6 54.8
Other liabilities --1lJ. --.U
Total liabilities 64.7 63.5
Net assets:
Invested in capital assets, net of debt 85.4 79.7
Restricted 7.4 9.1
Unrestricted ---1.M 24.5
Total net assets $l.l.lA S1.l.3.J
6
The City's net assets from governmental activities decreased 1.9 million in 2004, or 1.7% from the prior
year. This decrease is the Change in Net Assets reflected in the Statement of Activities, as shown in Table
2, and is explained below:
· Cash and investments decreased $14.1 million, principally as a result of the disbursement of
$13.2 million of bond proceeds or otherwise restricted funds for library construction and other
capital improvement projects.
· Capital assets increased $13.7 million as major construction projects neared completion.
· Long-term debt decreased $1.2 million as principal debt payments were paid, partially from debt
reserves.
· Other liabilities increased $2.4 million primarily due to large outstanding payments, reflecting
increased construction activity, accrued at year-end.
· Net assets invested in capital assets net of related debt increased $5.7 million primarily due to the
large volume of capital projects in process. Though much of this capital investment was funded
by long-term debt, capital projects previously funded from governmental appropriations were also
near completion. In addition, the City constructed street drainage, grading, curb and gutter,
sidewalk and driveway approaches and purchased equipment costing $1.9 million.
· Restricted net assets increased $6.4 million largely as a result of the increased commitment of
capital funds at year-end, reported as governmental fund encumbrances.
· Unrestricted net assets is the part of net assets that can be used to finance day-to-day operations
without constraints established by debt covenants or other legal requirements. Unrestricted net
assets of $18.6 million are available to finance day-to-day operations and other expenditures
approved by City Council.
Fiscal Year 2004 Government Activities
Sources of Revenues
Functional Expense
-
....... .......-....
~. '" 4%
....,~
W~
44.!'"
""1"_000
~
~""'"..eo._,~
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C.-..;tyDo..........'
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7
As the Sources of Revenue Chart above shows, slightly over $8.6 million, or 26.3% of the City's Fiscal
2004 revenue, came [¡-om sales tax, the City's largest single revenue source. In Fiscal 2003, this revenue
was $8.8 million, or 28.1 % of that year's total revenue. Fiscal 2004 recorded the fourth consecutive year
of decline in sales tax revenue, although the rate of decline slowed significantly in the most recent of
these years. As a whole, governmental revenues increased $1.5 million, as a result in increased program
revenues.
The Functional Expenses Chart above includes only current year expenses, which are discussed in detail
below. It does not include capital outlays, which are added to the City's capital assets. In fiscal 2004, the
City added $13.7 million in net capital assets, as shown in detail at Table 6.
The Statement of Activities presents program revenues and expenses and general revenues in detail. All
these are elements in the Changes in Governmental Net Assets summarized below.
Table 2
Changes in Governmental Net Assets
(in Millions)
Governmental Activities
2004 2003
Expenses
Administration
Law Enforcement
Public Information
Administrative Services
Recreation Services
Community Development
Public Works
Interest on long-term debt
Total expenses
$1.4
6.1
.7
3.9
2.2
2.7
15.5
2.3
34.9
Revenues
Program revenues:
Charges for services
Operating contributions and grants
Capital grants and contributions
Total program revenues
3.2
2.5
3.6
9.3
General revenues:
Taxes:
Property taxes
Sales taxes
Other taxes
Motor vehicle in lieu
Investment income
Miscellaneous
Transfers
Total general revenues
Total revenues
$1.6
6.0
.8
3.6
2.2
3.2
17.5
~
38.7
2.9
2.4
.LQ
6.3
4.0 3.8
8.7 8.8
7.7 7.9
2.5 3.2
.5 1.2
.2 .1
.2 .2
23.7 25.2
33.1 31.5
$~ $aJ}
Change in net assets
8
Table 2 shows that total government revenues increased $1.6 million in fiscal 2004, as a $3.1 million
surge in program revenues (largely for capital grants and contributions) more than offset the decrease in
general revenues of $1.5 million. Although property taxes increased almost 6.8% ($254 thousand), most
other general revenues declined.
Total governmental expenses decreased by $3.8 million from fiscal 2003. But despite City-wide efforts
to reduce governmental spending and increase program revenues in recent fiscal years, the pressure of
decreasing general revenues (taxes, revenues ITom other governments, income ITom property and
investments) limited the possibility of a positive change in net assets ITom governmental activities.
The cost of governmental activities continued to outstrip available revenue sources, by $1.9 million. The
main factor contributing to the much larger decline in net assets in the prior fiscal year was the accounting
treatment required for the 2002 Refinancing and Capital Improvement Project ClP issuance. The use of
debt reserve funds ($5.1 million) to refund the prior debt was reported as current year expenditures.
Table 3 presents the net cost of each of the City's largest programs-general government, public safety,
development and engineering, public works, parks and recreation, capital asset maintenance and
preservation, and interest on long-term debt. Net cost is defined as total program cost less the revenues
generated by those specific activities; it reflects the financial burden placed on the City's taxpayers by
each function.
Table 3
Governmental Activities
(in MiUions)
Net Cost (Revenue)
Of Activities
Administration
Law Enforcement
Public Information
Administrative Services
Recreation Services
Community Development
Public Works
Interest on Long-term Debt
2004
$1.4
5.0
.7
3.9
2.1
( .1)
10.2
----.U.
Totals
$2.5.6
2003
$1.6
5.4
.8
3.3
2.0
1.2
14.5
~
$32..S
. The total cost for all governmental activities this year was $34.9 million. The City's taxpayers
paid for approximately 77 percent ($26.9 million) of these costs through general revenues and
charges for services. Grants and contributions funded $6.1 million, and the balance of the costs
of governmental activities was drawn from reserves.
. Administrative costs comprise 4.1 percent of governmental services expenses, and include
activities of the City Council, City Manager and City Attorney. Administrative Services
activities, which include financial, personnel, information systems, City Clerk, Code enforcement
and emergency preparedness services, accounts for 11.2 percent of all governmental services.
9
· The City's costs for Law Enforcement, procured by contract with the Santa Clara County
Sheriff's Office, were partially offset by various fines and reimbursements ($838 thousand), and
by state grants ($202 thousand). Although public safety costs throughout the State continue to
grow with increased personnel costs, the City reduced the scope of certain contract services and
aggressively sought reimbursement from other liable parties. As a result, the City's net cost for
law enforcement activities in fiscal 2004 actually decreased by $306 thousand.
· Public Works expenses included transportation, engineering, environmental programs and the
maintenance of the City's streets, grounds and facilities. Also included are the costs of capital
improvement projects. Offsetting revenues this year include federal capital grants ($1.4 million),
capital contributions ($637 thousand), and facility rental ($166 thousand.) Revenues from grants
and contributions for specific capital projects (up a total of $2.4 million) helped decrease net
public works expenses from fiscal year 2003.
· Community Development programs include Planning, Building and Housing Services. Expenses
in these programs decreased over $556 thousand in personnel costs and through the conservative
use of outside contractors. Yet development fees for plan checks and building permit revenues
(which offset the cost of community development activities) increased $279 thousand from the
prior fiscal year. Housing mitigation fees, along with Community Development grants and loans,
provided revenues of $583 thousand for the City's housing services program, up $195 thousand.
· Most of the costs of the City's Park and Recreation programs are reported as business-type
activities for which fees are charged to recover the costs of the programs. However, many
community events, programs and services are available to the public free of charge. The costs of
administering these general (governmental) activities are partially offset by facility rental fees,
which amounted to $148 thousand in fiscal year 2003-04.
· Prior to the long-term refinancing debt issuance in October 2002, interest on long-term debt cost
the City approximately $2.6 million per year. By extending the term of the debt repayment and
the favorable interest rates when the debt was issued, the City's total debt payments have been
reduced from $4.9 million to approximately $3.5 million annually.
Business Type Activities
Table 4
Business-Type Net Assets
(in Millions)
Business-Type Activities
2004 2003
Cash and investments $7.9 $7.6
Other current assets 1.0 0.4
Capital assets 0.7 0.7
Total assets 9.6 8.7
Total liabilities 1.6 1.S
Net assets:
Invested in capital assets, net of debt 0.6 0.7
Unrestricted 1J. 6.6
Total net assets $ILI! $U
10
The net assets of business-type activities increased $.7 million in fiscal 2004, primarily as the result of net
revenues over expenditures in the Resources Recovery Program and in the City's Recreation programs, as
discussed below. The fiscal 2004 increase in net assets about the same as the increase experienced in the
prIor year.
Investinent earnings also contributed $95 thousand to the increase in Net Assets, as opposed to the $331
thousand earned in the prior fiscal year. Operating earnings contributed a net of $754 thousand. $175
thousand was transferred to the general fund as provided for in the operating budget for fiscal year 2004.
Table 5
Changes in Business-Type Net Assets
(in thousands)
Business-type Activities
2004 2003
Net Revenues from Business-type activities:
Resource Recovery
Blackberry Farm
Cupertino Sports Center
Recreation Programs
Senior Center
Total Business-type Activities
$690
(52)
(168)
320
-1m
$15.4
$549
(6)
(20)
317
ill}
$15.4
Operating revenues of business-type activities remained level with the prior year, as these activities were
profitable as a whole. But several of the funds incurred losses due to continued lack of consumer
demand. Rates remained flat, but no growth in volume was experienced. Operating expenditures
decreased slightly, but revenues also declined, at both Blackberry Farm and the Senior Center. Each of
the proprietary funds is discussed in more detail later in this report.
The City's Fund Financial Statements
Governmental Funds
At June 30, 2004, the City's governmental funds reported combined fund balances of $32.3 million,
which is a decrease of 16.0 million or 33.2% compared with the prior year. Much of this decrease
occurred in the Library Construction fund, which accounted for $9 million, while the Capital
Improvement Project fund, decreased $3 million. The remainder of the decrease was primarily in non-
Major funds, which accounted for $5.8 million, or 17.9% of all fund balances at June 30, 2004.
The table below presents governmental fund revenues by source and the related changes for the prior
year. Governmental fund revenues increased $2.1 million this year to a new total of $33.4 million.
Approximately half of this increase was government grants for capital improvement projects, (included as
intergovernmental revenues). Donations to the Library Construction fund accounted for $963 thousand of
the increase in other revenue. Park dedication fees, a much more variable revenue collected at the
completion of major development projects, increase $231 thousand.
Revenue from use of money and property decreased significantly in 2003-04 due to short-term interest
rates that continued to drop through February 2004, and decreased cash and investinent balances. The
Local Agency Investinent Fund (LAlF), which typically constitutes a third of the City's investinent
portfolio, was yielding 1.47% at June 30, 2004, as opposed to the 1.70% at the prior fiscal year end, and
2.69% from two years ago. The City's portfolio as a whole yielded 2.36% in June. Investinent holdings
dropped from $61 million to $47 million as bond proceeds were spent for the Library, Civic Center and
other capital projects.
11
Table 6
Revenues Classified by Source
Governmental Fund Types
(in thousands)
Total
Increase/(Decrease)
From previous vear
Amount % of Total Amount Percent
$21,004 62.9% $ 804 4.0%
941 2.8 (969) (50.7)
7,237 21.7 919 14.5
1,541 4.6 130 9.3
930 2.8 74 8.7
724 2.2 173 31.5
1.009 3.0 950 1.604.3
$1UM 100.00% $~ M%
Revenues bv Source
Taxes
Use of Money & Property
Intergovernmental
Licenses and Permits
Charges for Services
Fines and Forfeitures
Other Revenue
Governmental fund expenditures increased $5.4 million this year to a new total of $49.4 million.
Expenditures by major service area and the related changes ITom the prior fiscal year are shown in the
following table:
Table 7
Expenditures Classified by Major Service Area
Governmental Fund Types
(in thousands)
Increase/( (Decrease)
ITom previous vear
Expenditures bv Service Area Amount % of Total Amount Percent
Administration $ 1,223 2.4% $ (252) (17.1)%
Law Enforcement 5,951 12.0 (64) (1.1)
Public Information 687 1.4 (17) (2.4)
Administrative Services 3,759 7.6 283 8.1
Recreation Services 2,141 4.3 37 1.8
Community Development 2,563 5.2 (614) (19.3)
Public Works 9,322 18.9 (1,118) (10.7)
Capital Outlay 20,246 41.0 13,433 197.2
Debt Service:
Principal 1,220 2.5 (5,706) (82.4)
Interest 2,371 4.7 ( 623) (21.2)
Total $:l2dlQ 100.00% $~ 12.16%
Total expenditures rose as a result of accelerated capital spending - a $7.1 million dollar increase in the
Library Construction Fund, a $3.6 million increase in the Capital Improvement Fund, and a $2.7 million
increase in other capital project (non-major governmental) funds. The offsetting decrease of $6.3 million
in the Public Facilities Corporation fund debt service expenditures reflects the prior year accounting
treatment for the 2002 Refinancing and Capital Improvement debt: the use of debt reserve funds ($5.1
million) to refund debt is reported in the year of the refunding.
12
Proprietary Funds
Proprietary funds include the City's enterprise funds and internal service funds. Enterprise funds are used
to account for operations that are financed and operated in a manner similar to private business enterprise
where the intent is that the costs of providing goods or services to the general public on a continuing basis
be financed or recovered primarily through user charges. Enterprise activities are included as business-
type activities in the City-wide Financial Statements, and each fund is considered a major proprietary
fund in the Fund Financial Statements.
Enterprise Fund net assets totaled $8.0 million at June 30, 2004, an increase of $.7 million ITom the prior
year. Enterprise operating revenues were $7.4 million this year, a decline of about I percent ITom last
year, while net non-operating revenues were down ITom $276 thousand to $95 thousand this year.
Contributions and net transfers out declined to $175 thousand in fiscal 2004, down $50 thousand ITom
fiscal 2003. Enterprise Fund operating expenses were $6.6 million in fiscal 2004, up very slightly ($68
thousand) ITom the prior year.
Internal Service Funds are used to account for the financing of services provided by one department or
agency to other departments or agencies of the City on a cost-reimbursement basis. Because the services
are provided primarily to the general government, these operations are reported as part of government
activities in the citywide financial statements under GASB 34. In essence, any income or losses that are
related to an internal service fund activity represent an adjusttnent of the expenses recorded by the various
governmental functions. The following table shows actual revenues, expenses (including depreciation)
and results of operations for the fiscal year ended June 30, 2004.
Table 8
Revenues, Expenses, and Results of Operations
Internal Service Funds
(in thousands)
Operating Operating Operating Net
Fund Revenues Expenses Income Income/(Loss )
Management Information Systems $774 $906 $(132) $ 49
Workers' Compensation 153 650 (497) (481)
Equipment Revolving 906 809 97 109
Long-Term Disability --.1Q 90 (20) (20)
Totals $l,2!U $2 454 $(5.5.2) $(lli.)
Resources are being accumulated in the Management Information Systems fund (which received a
budgeted $170 thousand transfer in ITom the General Fund for new hardware purchases), and the
Equipment Revolving fund to provide for future replacement of existing equipment. The Workers'
Compensation fund expense for claims was determined by actuarial analyses, and was much higher than
anticipated due to increases in recent year claim frequency and severity. The Workers Compensation
fund net assets decreased ITom $490 thousand to $9 thousand at fiscal year end.
Maior Governmental Fnnds
General Fund
General fund revenues decreased approximately by $550 thousand this fiscal year, mostly due to
decreases in intergovernmental revenues.
13
Total Motor Vehic\e m Lieu Fees (MVLF) decreased almost $756 thousand as a !esult of the State budget
situation, which triggered a repeal of the state's offset of vehicle license fees to California counties and
cities. The State withheld MVLF revenues in the first quarter of the fiscal year, an amount totaling
$885,764 for Cupertino. Although the withheld amounts ($1.3 billion statewide) are to be repaid by
August 2006, the revenues will not be booked until they are received from the State. Later in fiscal year,
state vehicle license fees were permanently cut by two-thirds, but the State's offset to counties and cities
for the loss in revenues continued through June 2004.
Most other general fund revenues increased to some extent. Property taxes increased $ .2 million, as
assessed valuations rose approximately 5.5 percent. Licenses and permits increased 9.2 percent ($130
thousand) and charges for services were up 14.4 percent ($73 thousand) from the prior year. General
fund investtnent earnings were down by 38.4 percent ($429 thousand) due to declined interest rates and
less investtnent holdings.
Fiscal 2004 general fund expenditures decreased overall and were $2.7 million less than budgeted. This
represents a $1.1 million decline over the previous year for a total of $23.8 million, as City departments
tightly controlled operational expenditures, and kept vacancies unfilled in this fourth year of declining tax
revenues. Transfers out of the General Fund decreased to $4.3million in Fiscal 2004. Prior year transfers
included $17.3 million in bond proceeds to the debt service fund.
At June 30, 2004, the General Fund Balance comprised $12.6 million in unreserved, undesignated
balances and $3.9 million reserved almost entirely for loans, encumbrances and advances to other funds.
Only the unreserved portion represents available liquid resources, since the reserved portion is
represented by non-cash assets or by open purchase orders.
Table 9
General Fund Budget and Actual Comparison
(in millions)
Budgeted Amounts
Original Final
Actual
Variance
Revenues (amount available for appropriation) $29.7 $26.6 $27.1
Charges for Appropriation (26.4) (26.6) (23.8)
Other Financing Sources Q.Q} Q..1} Q..1}
Excess (Deficiency) m21 ~ ~
$(.6)
2.7
$1.2
General Fund revenue shortfalls became apparent early in the fiscal year, and appropriate budget
adjusttnents were made at mid-year. The $2.7 million in departmental savings offset much of the decline
in revenues, so that the impact to reserves was not as severe as projected, totaling only $352 thousand.
At June 30, 2004, the City's General Fund Balance reported combined ending fund balances of $16.5
million, down from $16.9 million in the prior year. Of this amount, almost $3.9 million is reserved
almost entirely for loans receivable, affordable housing and the public access television program.
The remainder of the fund balance is unreserved, designated by the City Council to indicate that it is not
available for new spending because it has already been committed (I) for future operating contingencies,
(2) to fund long-term actuarial liabilities of the City's retiree medical prograrn (3) for future capital
projects, (4) for fluctuations in the City's CalPERS retirement rates, and (5) as a buffer in times of further
economic uncertainty. These are detailed (as with other govemmental fund balances) in the Footnotes to
the Financial Statements (#7).
14
Pnblic Facilities Corporation
This fund accounts for the payments of principal and interest on certificates of participation (COPs), the
long-term debt issued to provide for funding many of the City's major parks and facilities. This year the
fund activity merely reflects the necessary funding transferred in from the General Fund in order to
complete total debt service payments of $3.5 million. In the prior year, the City issued a COP refunding
series in the amount of $56,640,000. This issuance effectively consolidated the City's long-term debt
through the Public Facilities Corporation and provided addition funding of $17.3 million for the library
construction project and other current capital improvements.
Library Construction Fund
This fund accounts for the activities related to the demolition of the existing library facility and the
construction of a new public library at the City's Civic Center. The site was cleared and construction
began in July 2003, with a temporary library established for use until the project completion in October
2004. The new Cupertino Library will be a 54 thousand square foot, two story building constructed at a
cost $21 million. The project was partially funded through the issuance of the 2002 Refinancing and
Capital Improvement Project debt. In the fiscal 2004, Library Construction fund revenues consisted of
contributions from various residents and community groups. An additional $476 thousand advance was
made from the City's Resource Recovery fund to allow procurement of necessary shelving, furniture and
equipment. Most of the $8 million fund balance is encumbered for the completion of the contracts
associated with the remaining building construction and interior décor.
Capital Improvement Projects
The Capital Improvement Projects Fund is reported as a major governmental fund in these financial
reports. Included are twenty-four projects for which funds have been approved by the City Council, in
various stages of completion. The largest of these are the new Community Hall construction, a 6,000
square foot, $2.5 million building connected to the new library by a covered arcade, and the Civic Center
Plaza, with a budget of$1 million. Both of these projects are set to be complete with the new library, and
are reflected in the large increase in Construction in Progress for the City at fiscal 2004 year-end. $3.4
million of the fund's total expenditures of $5.2 million were spent on the Community Hall and Civic
Center Plaza projects. Another $1 million was spent this year on traffic signal projects, reflected as
additions to the City's capital assets, and $500 thousand was paid out for animal control facilities under
contractual obligation to the City of San Jose.
Other Governmental Fund
Non-major funds are not presented separately in the Basic Financial statements, but are individually
presented as Supplemental Information. They include all the City's Special Revenue funds, which
account for revenue sources that are legally restricted to expenditure for specific purpose. Expenditures
of the Gas Tax fund, for example, are restricted exclusively for street and road purposes, and account for
much of the City's infrastructure improvements and maintenance. Total expenditures this year exceeded
$2.4 million.
The Housing Development fund accounts for Federal Housing and Community Development Grant
Program activities. This year's expenditures were less than $200 thousand, leaving a fund balance of$1.8
million. The Redevelopment Vallco fund, which accounts for revenues and expenditures of the Cupertino
Redevelopment Agency, is also included as a Special Revenue fund.
15
Although it is a separate legal entity for which separate fmancial statements are pre¡¡ared, the agency is
also included in this report as a component unit of the City.
ProDrietarv Funds
Resource Recovery Fund
The Resource Recovery fund's total revenues decreased slightly this year due mainly to a drop in interest
income. Operating income and expenses were consistent with the prior year, however, and the fund
experienced a $770 thousand increase in net assets to $6.5 million. The Resource Recovery Fund's entire
fiscal year end Net Assets balance was unrestricted.
Blackberry Farm Fund
Blackberry Farm incurred a slight operating loss ($48 thousand) in the current year. Revenues decreased
$174 thousand (11.8%), while expenses dropped only $144 thousand. Added to a drop in interest
earnings and $75 thousand transfer to the General Fund, net assets of this Fund decreased almost of $120
thousand to $681 thousand.
Much of the fund's total net assets are invested in capital assets. A master plan for Blackberry Farm
facilities has resulted in a project list. The most effective use of these assets is for leveraging grant funds
to accomplish identified projects.
Cupertino Sports Center Fund
Despite a 7 -month closure, operating income at the Cupertino Sports Center Fund increased slightly over
$100 thousand in fiscal 2004. Additional expenses associated with the re-opening of the newly renovated
fitness center (in January) resulted in operating expenses which were $223 thousand more than the prior
year. Net assets decreased a total of $162 thousand, to $279 thousand at June 30, 2004.
Recreation Programs Fund
Net income for the City's recreation programs was $320 thousand before transfers out, comparable to last
year's operating results. After a budgeted transfer of$IOO thousand to the General Fund, the Recreation
Program fund posted an increase of net assets of $228 thousand for a total balance of almost $485
thousand. Most of the Recreation Programs Fund's net assets are unrestricted.
Senior Center Fund
Although operating revenue at Cupertino's Senior Center was comparable to the prior year, operating
expenses were shaved by 13.5%, to $493 thousand in fiscal 2004. Interest income was minimal. Net
assets decreased $18 thousand as compared to the prior year decrease of $128 thousand. The result is a
negative balance in the fund's net assets ($32 thousand).
CAPITAL ASSETS
At the end of fiscal 2004 the City had 132.9 million, net of depreciation, invested in a broad range capital
assets used in governmental activities, as shown in Table 10 below (further detail may be found in Note 5
to the financial statements):
16
Table 10
Net Capital Assets at Year-end
(in Millions)
Governmental Activities:
Land
Construction in progress
Buildings
Improvements other than buildings
Machinery and Equipment
Roads, curbs, gutters, sidewalks, medians and bridges
Storm drain structures and mains
Traffic signals
Government Activities
2004 2003
$ 60.8 $ 60.8
19.3 5.4
10.3 8.2
4.5 4.8
1.7 2.2
24.2 25.9
10.1 10.9
-Ll -----.J.
$1322 $118.5
$ 0.4 $ 0.4
.2 .2
---.J. ---.J.
$ !U $ 0.7
Totals
Business-type Activities
Land
Improvements other than buildings
Machinery & Equipment
Totals
Included in Construction in Progress are the City' new library, community hall and Civic Plaza,
scheduled to open October 2004.
DEBT ADMINISTRATION
The City's debt issues are discussed in detail in Note 6 to the financial statements. Last year the City
effectively consolidated all previous debt issues and procured additional bond financing for the
construction of a new public library and other capital improvements projects. As in the past, the City's
debt comprises Certificates of Participation (COPs) issued by the Cupertino Public Facilities Corporation,
and is serviced by the City through lease payments to the corporation. The total outstanding issuance at
June 30, 2004 is $54.77 million.
SPECIAL ASSESSMENT DISTRICT DEBT
At June 30, 2004, a total of $175 thousand in special assessment district debt was outstanding, issued by
one special assessment district. This debt is secured by a traffic impact fee, charged as a special
assessment on the real property in the district issuing the debt, and is not the City's responsibility. The
City acts solely as the District's agent in the collection and remittance of the assessment.
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The impact of the economic environment and a description of the City's major initiatives for the coming
year are discussed in detail in the accompanying Transmittal Letter.
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This Comprehensive Annual Financial Report is intended to provide citizens, taxpayers, investors, and
creditors with a general overview of the City's finances. Questions about this Report should be directed
to the Finance Department at City Hall, 10300 Torre Avenue in Cupertino.
17
CITY OF CUPERTINO
STATEMENT OF NET ASSETS AND
STATEMENT OF ACTIVITIES
The Statement of Net Assets and the Statement of Activities summarize the entire City's financial activities
and financial position. They are prepared on the same basis as is used by most businesses, which means
they include all the City's assets and all its liabilities, as well as all its revenues and expenses. This is
known as the full accrual basis-the effect of all the City's transactions is taken into account, regardless of
whether or when cash changes hands, but all material internal transactions between City funds have been
eliminated.
The Statement of Net Assets reports the difference between the City's total assets and the City's total
liabilities, including all the City's capital assets and all its long-term debt. The Statement of Net Assets
presents similar inforrnàtion to the old balance sheet format, but presents it in a way that focuses the reader
on the composition of the City's net assets, by subtracting total liabilities from total assets.
The Statement of Net Assets summarizes the financial position of all the City's Governmental Activities in a
single column, and the financial position of all the City's Business-Type Activities in a single column; these
columns are followed by a Total column which presents the financial position ofthe entire City.
The City's Governmental Activities include the activities of its General Fund, along with all its Special
Revenue, Capital Projects and Debt Service Funds. Since the City's Internal Service Funds service these
Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund
transactions and balances. The City's Business Type Activities include all its Enterprise Fund activities.
The Statement of Activities reports increases and decreases in the City's net assets. It is also prepared on the
full accrual basis, which means it includes all the City's revenues and all its expenses, regardless of when
cash changes hands. This differs from the "modified accrual" basis used in the Fund financial statements,
which reflect only current assets, current liabilities, available revenues and measurable expenditures.
The format of the Statement of Activities differs considerably from those used prior to GASB Statement 34
implementation. It presents the City's expenses first, listed by program, and follows these with the expenses
of its business-type activities. Program revenues, that is revenues which are generated directly by these
programs, are then deducted from program expenses to arrive at the net expense of each governmental and
business-type program. The City's general revenues are then listed in the Governmental Activities or
Business-type Activities column, as appropriate, and the Change in Net Assets is computed and reconciled
with the Statement of Net Assets.
Both these Statements include the financial activities of the City, the Cupertino Redevelopment Agency, and
the Cupertino Public Facilities Corporation, which are legally separate but are component units of the City
because they are controlled by the City, which is financially accountable for their activities.
This is the second year in which the City of Cupertino has prepared its financial statements in accordance
with GASB Statement 34. These new financial statements along with the fund financial statements and
footnotes are called Basic financial Statements; the term General Purpose Financial Statements is no longer
used.
19
CITY OF CUPERTINO
STATEMENT OF NET ASSETS
JUNE 30, 2004
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and investments (Note 2) $38,682,783 $7,854,021 $46,536,804
Receivables:
Accounts 2,656,819 548,685 3,205,504
Loans (Note 3) 3,017,652 3,017,652
Prepaid expenses and other asse1s 4,446 14,500 18,946
Internal balances (Note 4) (476,613) 476,613
Capital assets, net of accumulated depreciation (Note 5) 132,196,216 645,290 132,84 1,506
Total Assets 176,081,303 9,539,109 185,620,412
LIABILITIES
Accounts payable and accruals 6,384,948 362,364 6,747,312
Accrued payroll and benefits 856,086 106,953 963,039
Deposits 1,013,476 185,422 1,198,898
Deferred revenue 136,579 819,499 956,078
Non-current portion of compensated absences (Note 1 g) 1,955,723 105,513 2,061,236
Non-current portion of claims payable 799,854 799,854
Long-term debt (Note 6):
Due within one year 1,245,000 1,245,000
Due in more than one year 52,305,000 52,305,000
T atal Liabilities 64,696,666 1,579,751 66,276,417
NET ASSETS (Note 7)
Invested in capital assets, net of related debt 85,425,753 645,290 86,071 ,043
Restricted for:
Special revenue projects 5,881,648 5,881,648
Affordable housing 670,485 670,485
Public access television 854,817 854,817
Debt service 9,980 9,980
Total Restricted Net Assets 7,416,930 7,416,930
Unrestricted 18,541,954 7,314,068 25,856,022
Total Net Assets $111,384,637 $7,959,358 $119,343,995
See accompanying notes to financial statements
20
FunctionslPrograms
Governmental Activities:
Administration
Law enforcement
Public infonnation
Administrative services
Recreation services
Community development
Public works
Interest on long tenn debt
Total Governmental Activities
Business-type Activities:
Resource recovery
Blackberry fann
Cupertino sports center
Recreåtion programs
Senior center
Total Business.type Activities
ToW
General revenues:
Taxes:
Property taxes
Incremental property tax
Sales taxes
Other taxes
Motor vehicle in lieu
Investment earnings
Miscellaneous
Transfers (Note 4)
Expenses
$1,430,523
6,090,038
710,754
3.923,377
2.234.509
2.678,109
15,546,461
2.317,837
34,931,608
1,793,083
1,353,362
1,352,509
1,590,302
493,244
6,582.500
$41,514.108
Change in Net Assets
Total general revenues and transfers
Net Assets-Beginning
Net Assets-Ending
CITY OF CUPERTlNO
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2004
Net (Expense) Revenue and
Program Revenues Changes in Net Assets
Operating Capital
Charges for Grants and Grants and Governmental Business-type
Services Contributions Contributions Activities Activities Total
($1,430,523) ($1,430,523)
$838,457 $202,136 (5,049.445) (5,049,445)
(710,754) (710,754)
16,650 817 (3,905,910) (3,905,910)
148,337 590 (2,085,582) (2,085,582)
1,903,277 582,670 $278,100 85,938 85,938
325,959 1,710.476 3,334,002 (10,176,024) (10.176,024)
(2,317,837) (2,317,837)
3,232,680 2,496,689 3,612,102 (25,590,137) (25,590,137)
2,398,819 84,660 $690,396 690,396
1,301,092 (52,270) (52,270)
1,184,860 (167.649) (167,649)
1,910,599 320.297 320,297
456,211 (37,033) (37,033)
7,251,581 84,660 753,741 753,741
$10,484,261 $2,581,349 $3,612,102 (25,590,137) 753,741 (24,836,396)
3,944.459 3,944.459
76,570 76.570
8,654,185 8,654,185
7,711.866 7,711,866
2,460,137 2,460,137
526,560 95,127 621,687
166,714 23,645 190,359
175,000 (175,000)
23,715,491 (56.228) 23,659,263
(1.874,646) 697,513 (1,177,133)
113,259,283 7,261,845 120,521,128
$111,384,637 $7,959,358 $119,343,995
See accompanying notes to financial statements
21
FUND FINANCIAL STATEMENTS
GASB 34 revises the format of the Fund Financial Statements so that 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. No distinction is made between Fund types and
the practice of combining like funds and presenting their totals in separate columns (Combined Financial
Statements) has been discontinued, along with the use of the General Fixed Assets and General Long-term
Debt Groups of Accounts.
The funds described below were determined to be Major Funds by the City for fiscal 2004. Individual
non-major funds may be found in the Supplemental section.
GENERAL FUND
The general fund is the general operating fund of the City. It is used to account for all financial resources
except those that are required to be accounted for in another fund.
PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND
This fund accounts for the payments of principal and interest on certificates of participation issued to
provide for the financing of the Civic Center/Library, Wilson Park and Memorial Park and other City
facilities, through the issuance of certificates of participation.
CAPITAL IMPROVEMENT PROJECTS FUND
This fund accounts for activities related to the acquisition or construction of major capital facilities.
LIBRARY CONSTRUCTION FUND
This fund accounts for costs associated with demolition of an old library building, and the design and
construction of a new library on that site.
22
CITY OF CUPERTINO
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2004
Public Capital Other Total
Facilities Improvement Library Governmental Governmental
General Corporation Projects Construction Funds Funds
ASSETS
Cash and investments (Note 2) $14,865.075 $2,386,017 $1,878,084 $10,819,871 $5,497.788 $35,446.835
Receivables:
Accounts 2,057,569 10,455 370,000 215,045 2,653,069
Loans (Note 3) 1,979,740 1,037,912 3,017,652
Prepaid items 562 562
Advance to other funds (Note 4) 209,728 209,728
Other assets 3,884 3,884
T ataI Assets $19,116,558 $2,386,017 $1,888.539 $11,189,871 $6,750,745 $41,331,730
LIABILITIES
Accounts payable and accruals $911,390 $2,376.037 $2.647,387 $374.935 $6,309,749
Accrued payroll and benefits 531,565 31,996 563.561
Deposits 1.013,476 1,013,476
Advance from other funds (Note 4) 476.613 209,728 686,341
Deferred revenue 130.571 340,655 471.226
Total Liabilities 2,587,002 2,376,037 3,124,000 957.314 9,044,353
Fund balance (Note 7)
Reserved for:
Encumbrances 181,938 335,318 7,460,382 1,240.968 9,218.606
Debt service 9,980 9,980
Advances to other funds 209,728 209,728
Prepaid items 562 562
Capital project..
Loans receivable 1,979.740 703,266 2,683,006
Affordable housing 670,485 670,485
Low and moderate income housing 34,731 34,731
Public access television 854,817 854.817
Unreserved, reported in:
General Fund 12,632,286 12,632,286
Special Revenue Funds 3,736,446 3,736,446
Capital Projects Funds 1,553,221 605,489 78,020 2,236,730
TOTAL FUND BALANCES 16,529,556 9.980 1,888,539 8,065,87 ] 5,793,431 32,287,377
Total Liabilities and Fund Balances $19,116,558 $2,386,017 $1,888.539 $11,189,871 $6,750.745 $41,331.730
See accompanying notes to financial statements
23
CITY OF CUPERTINO
Reconciliation of the
GOVERNMENTAL FUNDS -- BALANCE SHEET
with the
STATEMENT OF NET ASSETS
JUNE 30, 2004
Total fund balances reported on the govenunental funds balance sheet
Amounts reported for Governmental Activities in the Statement of Net Assets
are different from those reported in the Governmental Funds above because of the following:
CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and
therefore are not reported in the Governmental Funds.
ALLOCATION OF INlERNAL SERVICE FUND NET ASSETS
Internal service funds are not govenunental funds. However, they are used by management to
charge the costs of certain activities, such as insurance and central services and maintenance
to individual governmental funds. The net current assets of the Internal Service Funds are therefore
included in Governmental Activities in the following line items in the Statement of Net Assets.
Cash and investments
Accounts receivable
Capital assets, net of accumulated depreciation
Accounts payabJe and accruals
Accrued payroll and benefits
Noncurrent portion of compensated absences
Noncurrent portion of claims payable
ACCRUAL OF NON-CURRENT REVENUES AND EXPENSES
Revenues which are deferred on the Fund Balance Sheets because they are not available currently
are taken into revenue in the Statement of Activities.
LONG TERM ASSETS AND LIABILITIES
The assets and liabilities below are not due and payable in the current period and therefore are not
reported in the Funds:
Long-tenn debt
Non-current portion of compensated absences
NET ASSETS OF GOVERNMENTAL ACTIVITIES
See accompanying notes to financial statements
24
$32,287,377
13I,096,50I
3,235,948
3,750
1,099,715
(75,199)
(292,525)
(64,712)
(799,854)
334,647
(53,550,000)
(1,891,011)
$111,384,637
CI1Y OF CUPERTINO
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITIJRES AND CHANGES IN FUND BAlANCES
FOR TIIE YEAR ENDED JUNE 30, 2004
Public Capital Qth" Total
Facilities Improvement Library Governmental Governmental
General Corporation Projects Construction Funds Funds
REVENUES
Taxes $20,607,818 $396,587 $21,004,405
Use of money and property 842,939 $817 $111 97,096 940,963
Intergovernmental 2,864,911 2,047,005 2,325,039 7,236,955
Licenses and permits 1,540,760 1,540,760
Charges for services 576,382 353,668 930.050
Fines and forfeitures 700,437 23,311 723,748
Other revenue 29,860 $962.750 16,650 1,009,260
Total Revenues 27,163,107 817 2,047,116 962,750 3,212,351 33,386,141
EXPENDl1URES
Current:
Administration 1,222,581 1.222,581
Law enforcement 5,950,849 5,950,849
Public information 686,798 686,798
Administrative services 3,758,806 3,758,806
Recreation services 2,141,431 2,141.431
Community development 2,274,354 288,888 2,563,242
Public works 7,809,047 1,513,039 9,322,086
Capital outlay 5,230,502 9,940,299 5,075,436 20,246,237
Debt service
Principal 1,220,000 1.220,000
Interest and fiscal charges 2,317,837 2,317,837
Total Expenditures 23,843,866 3,537,837 5,230,502 9,940,299 6,877,363 49,429,867
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDl1URES 3,319,241 (3,537,020) (3,183,386) (8,977,549) (3.665,012) (16,043,726)
OTHER FINANCING SOURCES (USES)
Transfers in (Note 4) 631,950 2,841,357 369,000 923,000 4,765,307
Transfers (out) (Note 4) (4,303,357) (181,950) (275,000) (4,760,307)
Total Other Financing Sources (Uses) (3,671,407) 2,841,357 187.050 648,000 5,000
NET CHANGE IN FUND BALANCES (352,166) (695,663) (2,996,336) (8,977,549) (3,017,012) (16,038,726)
BEGINNING FUND BALANCES 16,881,722 705,643 4,884,875 17,043,420 8,810,443 48,326,103
ENDING FUND BALANCES $16,529,556 $9,980 $1,'"8,539 $8,065,871 $5,793,431 $32,287,377
See accompanying notes to financial statements
25
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, 2004
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 oruy changes in current assets and current
liabilities on the modified accrual basis, with the Change in Net Assets of Gvvemmental Activities reported in the
Statement of Actiyities, which is prepared on the full accrual basis.
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
($16,038,726)
Amounts reported for govenunental 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.
The capital outlay expenditures are therefore added back to fund balance
(Net of internal service fund additions of $54,399)
I8,95S,624
Depreciation expense is deducted from the fund balance
(Depreciation expense is net of internal scrvice fund depreciation
of$5I2,270 which has already been allocated to serviced funds)
(4,830,259)
LONG TERM DEBT PROCEEDS AND PAYMENTS
Repayment of bond principal is an expenditure in the governmental funds, but
in the Statement of Net Assets the repayment reduces long-term liabilities.
Repayment of debt principal is added back to fund balance
] ,220,000
ACCRUAL OF NON-CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or (require) the use of
current flllancial resources and therefore are not reported as revenue or expenditures in
governmental funds (net change):
Non-current portion of compensated absences
Deferred revenue
(298,212)
(542,775)
ALLOCA nON 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 \V:ith governmental activities,
because they service those activities.
Change in Net Assets - All Internal Service Funds
(343,298)
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVTTIES
($1,874,646)
See accompanying notes to financial statements
26
CITY OF CUPERTINO
GENERAL FUND
STA1EMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR TIfE YEAR ENDED JUNE 30, 2004
Original Final
Variance with
Final Budget
Positive
Actual Amounts (Negative)
Budgeted Amounts
Revenues:
Taxes $22.185,000 $20,495,000 $20,607,818 $112,818
Use of money and property 1,500.000 1,110.000 842,939 (267,061)
Intergovernmental 3,330,000 2,605,034 2,864,9Il 259,877
Licenses and permits 1,630,000 1,285,000 1,540,760 255,760
Charges for services 410,000 410,000 576,382 166,382
Fines and forfeitures 600,000 640,000 700,437 60.437
Other revenue 40,000 40,000 29,860 (10.140)
Amounts available for appropriation 29.695,000 26,585,034 27.163,107 578,073
Charges for appropriation (outflows)
Administration 1,322,000 1,301,805 1,222,581 79,224
Law enforcement 6,453,000 6,697,396 5,950,849 746,547
Public information 791,000 686.888 686,798 90
Administrative services 3,945,000 4,180.215 3,758,806 421,409
Recreation services 2,169,000 2,220.031 2,141,431 78,600
Community development 2.681,000 2,888,800 2.274,354 614,446
Public works 9.049,000 8,577.778 7,809,047 768.731
Total charges for appropriations 26,410,000 26.552,913 23,843,866 2,709,047
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,285,000 32,121 3,319,241 3.287,120
OTHER FINANCING SOURCES (USES)
Transfers in 631,950 631,950
Transfers (out) (4,955,000) (4,303,357) (4,303,357)
Total other financing sources (uses) (4.955,000) (3,671,407) (3,671,407)
EXCESS (DEFICIENCY) OF REVENUES AND OTHER
SOURCES OVER EXPENDITURES AND OTHER USES ($1,670,000) ($3.639,286) (352,166) $3,287,120
BEGINNING FUND BALANCES 16,881,722
ENDING FUND BALANCES $16,529,556
See accompanying notes to financial statements
27
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 concept of major funds established by GASB Statement 34 extends to Proprietary Funds. The City has
identified the funds below as major proprietary funds for fiscal 2004.
GASB 34 does not provide for the disclosure of budget vs. actual comparisons regarding proprietary funds
that are major funds.
RESOURCES RECOVERY FUND
This fund accounts for activity related to the collection and disposal of solid waste. A private company has
been issued an exclusive franchise to perform these services.
BLACKBERRY FARM FUND
This fund accounts for activities related to operating the picnic area and golf course.
CUPERTINO SPORTS CENTER FUND
This fund accounts for the operation and maintenance of the Cupertino Sports Facility.
RECREATION PROGRAMS FUND
This fund accounts for activities of the City's community center.
SENIOR CENTER FUND
This fund accounts for the activities of the City's senior center.
28
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENf OF NET ASSETS
FOR TIlE YEAR ENDED JUNE 30, 2004
Business-type Activities-Enterprise Funds Governmental
Cupertino Activities-
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fann Center Programs Center Totals Funds
ASSETS
Current assets:
Cash and investments (Note 2) $5,959,382 $337,547 $445,128 $1,004,981 $106,983 $7,854,021 $3,235,948
Accounts receivable 378,394 8,664 3,213 68,050 90,364 548,685 3,750
Prepaid expense 14.500 14,500
Advance to other funds (Note 4) 476,613 476,613
Total current assets 6.814.389 346,211 448,341 1,073,031 211,847 8,893,819 3,239,698
Capital assets, net of
accumulated depreciation (Note 6) 608,786 23,819 8,778 3,907 645,290 1,099,715
Total Assets 6,814.389 954,997 472,160 1,081,809 215,754 9,539,109 4,339,413
LIABILITIES
Current Liabilities:
Accounts payable and accruals 264.504 58.742 22,289 14.754 2.075 362.364 75.199
Accrued payroll and benefit·, 3,877 39,566 11,238 49,427 2,845 106,953 292,525
Deposits 100.325 250 84,847 185,422
Deferred revenue 154,556 532,819 132,124 819,499
Total current liabilities 268.381 198,633 188.333 597,000 221,891 1,474.238 367.724
Non-current Liabilities:
Compensated absences (Note 19) 75,390 4,667 25,456 105,513 64,712
Claims Payable (Note 9) 799,854
Total Liabilities 268,381 274,023 193,000 597.000 247,347 1,579,751 1,232,290
NET ASSETS
Invested in capital assets,
net of related debt 608,786 23,819 8.778 3.907 645.290 1.099,715
Unrestricted 6,546,008 72,188 255,341 476,031 (35,500) 7,314,068 2.007,408
Tutal Net Assets (Deficit) $6.546,008 $680,974 $279,160 $484,809 ($31.593) $7,959,358 $3,107,123
See accompanying notes to financial statements
29
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2004
Business~type Activities·Enterprise Funds' Governmental
Cupertino Activities·
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fanns Center Programs Center Totals Funds
OPERATING REVENUES
Charges for services $2,468,753 $1,169,502 $1,156,496 $1,910,599 $473,615 $7,178,965 $1,902,436
Other 17,236 135,793 27,246 550 94 180,919
Total Operating Revenues 2,485,989 1,305,295 1,183,742 1,911,149 473,709 7,359,884 1,902,436
OPERATING EXPENSES
Salaries and benefits 139,550 615,776 217,646 498,478 78,968 1,550,418 561,331
Materials and supplies 6,761 291,051 267,981 136,982 406,354 1,109,129 423,676
Contractual services 1,646,534 369,680 864,048 952,924 6,359 3,839,545 232,827
Insurance and claims 724,226
Depreciation 238 76,855 2,834 1,918 1,563 83,408 512,270
Total Operating Expenses 1,793,083 1,353,362 1,352,509 1,590,302 493,244 6,582,500 2,454,330
Operating Income (Loss) 692,906 (48,067) (168,767) 320,847 (19.535) 777,384 (551,894)
NONOPERATING REVENUES (EXPENSES)
Interest income 77,410 3,252 6,443 6,970 1,054 95,129 38,596
Total Nonoperating Revenues (Expenses) 77,410 3,252 6,443 6,970 1,054 95,129 38,596
Income (Loss) Before Contributions and Transfers 770,316 (44,815) (162,324) 327,817 (18,481) 872,513 (513,298)
Transfers in (Note 4) 170,000
Transfers (out) (Note 4) (75,000) (100,000) (175,000)
Net transfers (75,000) (100,000) (175,000) 170,000
Change in net assets 770,316 (119,815) (162,324) 227,817 (18,481) 697,513 (343,298)
Net Assets (Deficit)·Beginning 5,775,692 800,789 441,484 256,992 (13,112) 7,261,845 3,450,421
Net Assets (Deficit)-Ending $6,546,008 $680,974 $279,160 $484,809 ($31,593) $7,959,358 $3,107,123
See accompanying notes to financial statements
30
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2004
Business·type Activities-Enterprise Funds
Governmental
Cupertino Activities-
Resources Blackberry Sports Recreation Senior Internal Service
Recovery F"m Center Programs Center Totals Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $2,441,401 $1,296,631 $1,206,352 $1,925,130 $447,572 $7,317,086 $1,898,686
Cash payments to suppliers
for goods and services (1,655.626) (666,410) (1,130,589) (1,085,202) (418,192) (4,956,019) (563,576)
Cash payments to employees (141,085) (611.320) (215,026) (489,842) (73,739) (1,531,012) (945,381)
Net cash provided by operating activities 644,690 18,901 (139,263) 350,086 (44,359) 830,055 389,729
CASH FLOWS FROM NONCAPIT AL
FINANCING ACTIVITIES
Advance to other funds (476,613) (476,613)
Transfers in 170,000
Transfers (out) (75,000) (100,000) (175,000)
Cash Flows from Noncapital
Financing Activities (476,613) (75,000) (100,000) (651,613) 170,000
CASH FLOWS FROM CAPITAL AND RELATED
FIN"ANCIN"G ACTIVITIES
Purchase of capital assets (7,446) (22,224) (10,696) (1) (40,367) (49,407)
Cash Flows from Capital and
Related Financing Activities (7.446) (22,224) (10,696) (I) (40,367) (49,407)
CASH FLOWS FROM INVESTIN"G ACTIVITIES
Interest received 77,410 3,252 6,442 6,970 1,055 95,129 38,596
Cash Flows from Investing Activities 77,410 3,252 6,442 6,970 1,055 95,129 38,596
Net Cash Flows 245,487 (60,293) (155,045) 246,360 (43,305) 233,204 548,918
Cash and investments at beginning of year 5,713,895 397,840 600,173 758,621 150,288 7,620,817 2,687,030
Cash and investments at end of year $5,959,382 $337,547 $445,128 $1,004,981 $106,983 $7,854,021 $3,235,948
Reconciliaûon of operaûng income (loss) to
net cash provided by operaûng acûvities:
Operaûng income (loss) $692,906 ($48,067) ($168,767) $320,847 ($19.535) $777,384 ($551,894)
Adjustments to reconcile operaûng income to
net cash provided by operating activities:
Depreciation 238 76,855 2,834 1,918 1,563 83,408 512,270
Change in assets and liabilities:
Accounts receivable (44,588) (8.664) (3.213) 8,532 (90,364) (138,297) (3,750)
Prepaid expense 11,898 11,898
Accounts payable and accruals (2,331) 5,836 1,440 4,704 (5,479) 4,170 17,299
Accrued payroll and benefits (1,535) (70,934) (2.047) 8,636 (20.227) (86,107) (448,762)
Deposits (11,515) (14,163) (25,678)
Deferred revenue 25,823 5,449 66,492 97,764
Noncurrent portion of compensated absences 75,390 4,667 25,456 105,513 64,712
Noncurrent portion of claims payable 799,854
Net cash provided by operating IIcûvities $644,690 $18,901 ($139,263) $350,086 ($44,359) $830,055 $389,729
See accompanying notes to financial statements
31
CITY OF CUPERTINO
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30, 2004
Agency
Funds
ASSETS
Cash and investments (Note 2)
$234,130
Total Assets
$234,130
LIABILITIES
Deposits
$234,130
Total Liabilities
$234,130
See accompanying notes to fmanciaI statements
32
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(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 Information, and Public Works/Engineering. Fire services are provided by the
Santa Clara County Fire District, and the City contracts with the Santa Clara County
Sheriff s Department for police services, and with the Los Altos Garbage Company for
garbage and recycling services.
The accompanying basic financial statements include all funds, account groups, and
boards and commissions that are controlled by the City Council. The basic financial
statements include the City's blended component units, entities for which the City is
considered to be financially accountable. A blended component unit, although a legally
separate entity, is in substance, part of the City's operations and so data from this unit is
combined with the City.
Blended component units - The Cupertino Public Facilities Corporation (the
Corporation) was incorporated in May 1986, under the Nonprofit Public Benefit
Corporation Law of the State of California. The Corporation was organized as a
nonprofit corporation for the purpose of assisting the City in the acquisition,
construction, and financing of public improvements which are of public benefit to the
City. The Corporation, after acquiring certain properties from the City, leases these back
to the City. The lease money provides the funds for the debt service for the Certificates
of Participation issued by the Corporation to acquire the properties. The Cupertino
Redevelopment Agency was formed in 2000 under the California Health & Safety Code
to assist in the elimination of areas considered to be in a blighted condition. The City
Council acts as the Board of Directors of the Corporation and the Agency. The Mayor
and Vice Mayor of the City have been elected President and Vice President, respectively,
of the Corporation. The City Clerk has been elected Secretary, and the City's Director of
Administrative Services has been appointed Treasurer of both entities.
Separate financial statements for those component units that issue them are available
ITom the City at 10300 Torre Avenue, Cupertino, CA 95014-3202.
(b) Measurement Focus. Basis of Accounting and Basis of Presentation
The City's Basic Financial Statements are prepared in conformity with accounting
principles generally accepted in the United States of America. The Government
Accounting Standards Board is the acknowledged standard setting body for establishing
accounting and financial reporting standards followed by governmental entities in the
U.S.A.
33
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Measurement Focus. Basis of Accounting and Basis of Presentation (continued)
The accompanying financial statements are presented on the basis set forth in
Government Accounting Standards Board Statements No. 34, Basic Financial
Statements-and Management's Discussion and Analysis-Jor State and Local
Governments, No. 36, Recipient Reporting Jor Certain Non-exchange Revenues, an
Amendment oj GASB Statement No. 33, No. 37, Basic Financial Statements-and
Management's Discussion and Analysis-Jor State and Local Governments; Omnibus, and
No. 38, Certain Financial Statement Note Disclosures.
These Statements require that the financial statements described below be presented.
Government-wide Statements: The Statement of Net Assets and the Statement of
Activities display information about the primary government (the City) and its
component units. These statements include the financial activities of the overall City
government, except for fiduciary activities. Eliminations have been made to minimize the
double counting of internal activities. These statements distinguish between the
governmental and business-type activities of the City. Governmental activities generally
are financed through taxes, intergovernmental revenues, and other nonexchange
transactions. Business-type activities are financed in whole or in part by fees charged to
external parties.
The Statement of Activities presents a comparison between direct expenses and
program revenues for each segment of the business-type activities of the City and
for each function of the City's goverrunental activities. Direct expenses are those
that are specifically associated with a program or function and, therefore, are
clearly identifiable to a particular function. Program revenues include (a) charges
paid by the recipients of goods or services offered by the programs, (b) grants and
contributions that are restricted to meeting the operational needs of a particular program
and (c) development fees and permits, all of which are capital grants under California
law. Revenues that are not classified as program revenues, including all taxes, are
presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about
the City's funds, including fiduciary funds and blended component units. Separate
statements for each fund category - governmental, proprietary, and fiduciary - are
presented. The emphasis of fund financial statements is on major individual
governmental and enterprise funds, each of which is displayed in a separate column. All
remaining governmental and enterprise funds are aggregated and reported as nonmajor
funds.
34
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (continued)
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 - GASB Statement 34 defines major funds and requires that the City's
major governmental and business-type funds be identified and presented separately in the
fund financial statements. All other funds, called non-major funds, are combined and
reported in a single column, regardless of their fund-type.
Major funds are defined as funds which have either assets, liabilities, revenues or
expenditures equal to ten percent of their fund-type total and five percent of the grand
total. The General Fund is always a major fund. The City may select other funds it
believes should be presented as major funds, and has selected the Library Construction
Fund to be treated as Major Fund in 2004.
The City reported the following major governmental funds m the accompanying
financial statements:
The General Fund is the general operating fund of the City. It is used to account for all
fmancial resources except those that are required to be accounted for in another fund.
The Public Facilities Corporation Debt Service Fund accounts for the payments of
principal and interest on certificates of participation issued to provide for the advance
refunding of the City Hall/Library, Wilson Park and Memorial Park certificates of
participation.
The Capital Improvement Projects Fund accounts for activities related to the acquisition or
construction of major capital facilities.
The Library Construction Fund accounts for costs associated with demolition of an old
library building, and the design and construction of a new library on that site
The City reports its enterprise funds as major funds in the accompanying financial
statements:
The Resources Recovery Fund accounts for activity related to the collection and disposal
of solid waste. A private company has been issued an exclusive franchise to perform these
serVIces.
35
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Measurement Focus. Basis of Accounting and Basis of Presentation (continued)
The Blackberry Farm Fund accounts for activities related to operating the picnic area and
golf course.
The Cupertino Sports Center Fund accounts for the operation and maintenance of the
Cupertino Sports Facility.
The Recreation Programs Fund accounts for activities of the City's community center.
The Senior Center Fund accounts for the activities of the City's senior center.
The City also reports the following fund types:
Internal Service Funds. These funds account for workers' compensation, management
information system maintenance and replacement, equipment maintenance and
replacement, and long-term disability coverage; all of which are provided to other
departments on a cost-reimbursement basis.
Fiduciary Fund. This fund accounts for deposits held by the City as an agent.
Basis of Accounting - The government-wide, proprietary, and fiduciary fund financial
statements are reported using the economic resources measurement focus and the full
accrual basis of accounting. Revenues are recorded when earned and expenses are
recorded at the time liabilities are incurred, regardless of when the related cash flows
take place.
Governmental funds are reported using the current financial resources measurement
focus and the modified accrual basis of accounting. Under this method, revenues are
recognized when measurable and available. The City considers all revenues reported in
the governmental funds to be available if the revenues are collected within sixty days
after year-end. Expenditures are recorded when the related fund liability is incurred,
except for principal and interest on long-term debt, claims and judgments, and
compensated absences, which are recognized as expenditures to the extent they have
matured. General capital asset acquisitions are reported as expenditures in governmental
funds. Proceeds rrom long-term debt and acquisitions under capital leases are reported as
other financing sources.
Property taxes, utility taxes, rranchise taxes, interest and special assessments are
susceptible to accrual. Sales taxes collected and held by the state at year end on behalf
of the City are also recognized as revenue. Other receipts and taxes are recognized as
revenue when the cash is received.
36
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
Jnne 30, 2004
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continned)
(b) Measurement Focus, Basis of Accounting and Basis of Presentation (continued)
Grant revenues are recognized in the fiscal year in which all eligibility requirements are
met. Under the terms of grant agreements, the City may fund certain programs with a
combination of cost-reimbursement grants, categorical block grants, and general revenue.
Thus, both restricted and unrestricted net assets may available to finance program
expenditures. The City's policy is to first apply restricted grant resources to such
programs, followed by general revenues if necessary.
The City follows statements and interpretations of the Financial Accounting Standards
Board and its predecessors that were issued on or before November 30, 1989, in
accounting for its business-type activities, unless they conflict with Government
Accounting Standards Board pronouncements.
GASB 33 Non-Exchange Transaction - Non-exchange transactions, in which the City
gives or receives value without directly receiving or giving equal value in exchange,
include property taxes, grants, entitlements, and donations. On the accrual basis, revenue
from property taxes is recognized in the fiscal year for which the taxes are levied or
assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal
year in which all eligibility requirements have been satisfied.
(c) Budgetary Practices
The budget of the City is a detailed operating plan which identifies estimated costs and
results in relation to estimated revenues. The budget includes (I) the programs, projects,
services and activities to be provided during the fiscal year; (2) estimated revenue
available to finance the operating plan; and (3) the estimated spending requirements of
the operating plan. The budget represents a process through which policy decisions are
made, implemented and controlled. The City prohibits expending funds for which there
is no legal appropriation. All appropriations lapse at fiscal year end.
In May of each year, the City Manager submits to the City Council a proposed budget for
the fiscal year beginning July 1. Public hearings on the proposed budget are held during
the month of June and the budgets for all fund types are legally adopted by Resolution
prior to June 30. Original budget amounts are presented on the accompanying budgetary
statements include these legally adopted amounts.
37
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Budgetary Practices (continued)
The City Manager is responsible for controlling the City's expenditures in accordance
with the adopted budget. The City Manager is authorized to transfer appropriations
within functional expenditure classifications. Any revision which requires transfers
between functional expenditure classifications or increases total appropriations must be
approved by the City Council. Requests for additional personnel or capital outlay also
require the approval of the City Council. The legal level of budgetary control is at the
departmental or project level.
Budgets for governmental funds are adopted on a basis consistent with generally
accepted accounting principles. Budget information is presented for the general, special
revenue and debt service funds only. Capital project funds are budgeted on a long-term
project-by-project basis and, hence, budgets for these funds are not presented in the basic
financial statements.
(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 fixed assets are recorded at their estimated fair value on the date
donated.
Prior year public domain (infrastructure) capital assets conslstmg of roads, bridges,
curbs, gutters, streets, sidewalks, drainage and lighting systems are not capitalized.
Current year infrastructure costs have been capitalized.
38
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) Capital Assets (continued)
Depreciation is recorded using the straight-line method over the following useful lives:
Buildings
Improvements
Vehicles
Street equipment
Water equipment
Office equipment
Road, curbs, gutters, sidewalks, medians and bridges
Streetlights
Storm drain structure and mains
Traffic signals
The City capitalizes fixed assets exceeding $1,000.
Years
25
31
4-10
3-20
3-50
3-5
30-40
20
40
20
Major outlays for capital assets and improvements are capitalized as projects are
constructed. Interest incurred during the construction phase is reflected in the capitalized
value of the asset constructed, net of interest earned on the invested proceeds over' the
same period.
Some capital assets may be acquired using federal and state grant funds, or they may be
contributed by developers or other govemments. GASB Statement 34 requires that these
contributions be accounted for as revenues at the time the capital assets are contributed.
(f) Claims and Judgments Payable
Claims and judgments payable are accrued when the liability is incurred and the amount
can be reasonably estimated. Claims and judgments payable are recorded in an internal
service fund for workers' compensation and long-term disability. General liability claims
and judgments are not material and are not accrued.
39
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(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 Activities or various
Proprietary funds as appropriate. The liability for compensated absences is determined
annually. For all governmental funds, amounts expected to be "permanently liquidated"
are recorded as fund liabilities; the long-term portion is recorded in the Statement of Net
Assets.
The changes in compensated absences were as follows:
Governmental Business-Type
Activities Activities Total
Beginning Balance $1,726,908 $101,069 $1,827,977
Additions 434,493 12,843 447,336
Payments (166.781) (8.399) (175.180)
Ending Balance $1.994.620 $105.513 $2 100 133
Current Portion $ ~ $ ~
(h) Fund Equity
Reservations of fund balances represent those portions of fund balances which are not
available for appropriation or expenditure or are legally restricted for a specific future
use. Designated fund balances represent management's tentative plans for future use of
financial resources.
(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 March 1 and
become delinquent on December 10 and April 10. Unsecured taxes are due on July I
and become delinquent on August 31. The lien date for secured and unsecured property
taxes is March 1.
40
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Property Tax Calendar (continued)
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,
expenditures/expenses in the reimbursing fund and as
expenditures/expenses in the fund that is reimbursed.
are recorded as
reductions of
(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.
(I) Bond Discounts and Issue Costs
Debt discounts and issuance costs are recognized in the current period. Debt discounts
and issuance costs incurred by proprietary fund types are amortized over the term of the
debt using the bonds-outstanding method, which approximates the effective interest
method.
(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 provisions of California Government Code with the priority of
safety, liquidity and yield. The policy addresses the safekeeping of securities, types of
investment instruments, the percentage of the portfolio which may be invested, terms to maturity,
reporting requirements, and policy renewal.
The City maintains a cash and investment pool that is available for use by all funds. Each fund
type's portion of this pool is displayed on the combined balance sheet as "cash and investments".
41
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(2) CASH AND INVESTMENTS (continued)
(a) Deposits
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 value of 150% of the deposit as collateral for these deposits.
Under California law this collateral is held in the City's name and places the City ahead
of general creditors of the institution. The City has waived collateral requirements for
the portion of deposits covered by federal deposit insurance.
Cash in banks is entirely insured (Category I) or collateralized by the institution holding
the deposit in the City's name (Category 2), as discussed above.
The carrying amount of the City's cash deposits was $967,564 at June 30, 2004. Bank
balances before reconciling items were $1,119,053, of which the entire amount was
insured (Category I).
(b) Investinents
Investinents made by the City are classified as to credit risk into three categories.
Category I includes securities insured or registered, or held by the City or its agent in the
City's name. Category 2 includes securities uninsured and unregistered, and held by the
counterparty's trust department or agent in the City's name. Category 3 includes
securities uninsured and unregistered, and held by the counterparty or by its trust
department or agent, but not in the City's name.
The City's investinent portfolio is stated at fair value based on quotes obtained at June
30. It is generally the City's intent to hold investinents until maturity. At year-end, the
City's investinent balances were as follows:
City Fiduciary
Funds Funds Total
Category 1:
U.S. Government Agency Securities $23,525,020 $23,525,020
Non-categorized investments:
Government Securities Money Market
Mutual Funds 2,387,876 2,387,876
Local Agency Investment Fund 19.883.325 19.883.325
Tolallnvestments 45,796,221 45,796,221
Cash Deposits with Banks (252,566) $192,474 (60,092)
Certificates of Deposit 986,000 41,656 1,027,656
Cash on hand 7.149 7.149
Total Cash and Investments $46.536 804 $234.130 $46 770 934
42
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(2) CASH AND INVESTMENTS (continued)
(b) Investments (continued)
Interest earned on pooled cash resources is allocated to funds which require interest to be
added based on the ratio of the individual funds' monthly cash balance to the total pool.
Cash and investments are classified in the financial statements as shown below, based on
whether or not their use is restricted under the terms of City debt instruments or Agency
agreements.
For purpose of the statement of cash flows, the City considers all highly liquid
investments (including restricted assets), with a maturity of three months or less from the
original date of purchase, to be cash equivalents.
The City is a voluntary 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 fair value of the City's investment in this pool
is reported in the accompanying financial statements at amounts based upon the City's
pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in
relations to the amortized cost of that portfolio). The balance available for withdrawal is
based on the accounting records maintained by LAlF, which are recorded on an
amortized cost basis. Included in LAIF's investment portfolio are collateralized
mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to
certain state funds, and floating rate securities issued by federal agencies, government
sponsored enterprises, and corporations.
(3) RELATED PARTY LOAN
In conjunction with the City's executive housing assistance program, loans totaling $1,535,860
have been provided to three executive managers. These 40-year loans bear an interest rate equal
to the II th district cost of funds at the time of the loan, and require monthly principal and interest
payments. In addition, there is a two percent deferral on the interest rate for the first five years of
the loan, at which time the interest rate may be adjusted to the current cost of district funds for
the remainder of the loan. At June 30, 2004, the balance remaining on the three loans was
$1,432,363.
43
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(4) INTERFUND TRANSACTIONS
Transfers between funds during the fiscal year ended June 30, 2004 were as follows:
General Fund:
Leadership Cupertino Special Revenue Fund
Gas Tax Special Revenue Fund
Public Facilities Corporation Debt Service Fund
Capital Improvements Projects Capital Projects Fund
Four Seasons Park Capital Projects Fund
Sports Center Building Capital Projects Fund
Management Information Systems Internal Service Fund
$ 18,000 (E)
644,000 (D)
2,841,357 (F)
369,000 (G)
131,000 (G)
130,000 (G)
170,000 (H)
Special Revenue Funds:
Park Dedication
General Fund
275,000 (A)
181,950 (B)
75,000 (C)
100,000 (C)
$4 935 307
Capital Improvement Projects:
Capital Improvement Projects
General Fund
Enterprise Funds:
Blackberry Fann
Recreation Program
General Fund
General Fund
Total Interfund Transfers
The reasons for these transfers are set forth below:
(A) All park dedication fees collected are transferred to the General Fund.
(B) To close out ClP project (Midyear Skate Park)
(C) Budgeted (enterprise funds) transfer of excess earnings over expenditures for cost reimbursement to the Genera] Fund.
(D) To fund gas tax projects (budget and midyear adjustment)
(E) To augment ~adership Cupertino program
(F) For debt service
(G) For capital projects (budget and midyear adjustments)
(H) To provide budgeted new technology equipment
As of June 30, 2004 the owners of the Vallco redevelopment project area submitted plans to the
RDA and were in the process of securing letters of intent and additional approvals for property
redevelopment. As new building has not yet commenced, tax increment revenues are not yet
sufficient to finance Agency operations. To assist the Agency until project redevelopment generates
additional tax increment revenues, the City has advanced funds to the Agency to finance operations.
As of June 30, 2004 the balance of the advance is $209,728.
In fiscal year 2001/02, City Council, approved a budget of approximately $20,800,000 for the
construction of a new library. At that time, the library community pledged to raise an additional
$1.2 million to pay for the furniture and fixtures in the new building which effectively increased the
size of the building. As of June 30, 2004, the campaign committee had fallen short of their
fundraising effort by $476,613. In order to keep the project on its construction schedule, the City
Council approved a loan from the Resource Recovery Enterprise fund for this shortfall. It is the
intent of the campaign committee to raise these funds and repay this interim loan during fiscal year
2004/05.
Internal Balances - Internal balances are presented only in the City-wide financial statements.
They represent the net interfund receivables and payables remaining after the elimination of all
such balances within governmental and business-type activities.
44
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(5) CAPITAL ASSETS
A summary of changes in general capital assets follows:
Balance at Balance at
June 30, 2003 Additions Retirements Transfers June 30, 2004
Governmental activities
Capital assets not being depreciated:
Land $60,835,080 $60,835,080
Construction in progress 5,373,472 $14,564,502 ($644,844) 19,293,130
Total capital assets not being depreciated 66,208,552 14,564,502 (644,844) 80,128,210
Capital assets being depreciated:
Buildings 14,697,002 2,331,637 376,386 17,405,025
Improvements other than buildings 19,060,775 237.688 225,113 19,523,576
Machinery and Equipment 6,080,230 142,732 ($322,209) (2,912) 5,897,841
Road, curbs, gutters, sidewalks, medians
and bridges 95,540,000 637,330 46,257 96,223,587
Streetlights 6,500,000 6,500,000
Storm drain structure and mains 31,091,215 137,468 31,228,683
Traffic signals 4,241,250 961,669 5,202,919
Tota] capita! assets being depreciated 177,210,472 4,448,524 (322,209) 644,844 181,981,631
Less accumulated depreciation for:
Buildings 6,526,239 551,060 7,077 ,299
Improvements other than buildings 14,228,601 842,103 15,070,704
Machinery and Equipment 3,889,344 679,596 (317,214) 4,251,726
Road, curbs, gutters, sidewalks, medians
and bridges 69,655,732 2,356,939 72,012,671
Streetlights 6,500,000 6,500,000
Storm drain structure and mains 20,219,937 872,258 21,092,195
Traffic signals 3;868,457 40,573 3,909,030
Total accumulated depreciation 124,888,310 5.342,529 (317,214) 129,913,625
Net capital assets being depreciated 52,322,162 (894,005) (4,995) 644,844 52,068,006
Governmental activity capital assets. net $118,530,714 $13,670,497 ($4,995) $132,196,216
45
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(5) CAPITAL ASSETS (continued)
Balance at
June 30, 2003
Additions
Balance at
Retirements Transfers June 30, 2004
Business-type activities:
Capital assets not being depreciated:
Land and improvements
$389,929
$389,929
Total capital assets not being depreciated
389,929
389,929
Capita] assets being depreciated:
Improvements other than buildings
Machinery and Equipment
Total capital assets being depreciated
635,500
288,692
924,192
$40,580
40,580
$12,230
12,230
$2,964
(2,964)
638,464
314,078
952,542
Less accumulated depreciation for:
Improvements other than buildings
Machinery and Equipment
Total accumulated depreciation
418,250 53,066 471,316
207,540 30,555 12,230 225,865
625,790 83,621 12,230 697,181
298,402 (43,041) 255,361
$688,331 ($43,041) $645,290
Net capital assets being depreciated
Business-type activity capita! assets, net
Depreciation expense was charged to functions and programs based on their usage of the related
assets. The amounts allocated to each function or program were as follows:
Governmental Activities
Adnrinistration
Administrative Services
Recreation Services
Community Development
Public Works
Internal Service Funds
$145,501
40,158
16,344
576
4,627 ,680
512,270
$5 342 529
46
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(5) CAPITAL ASSETS (continued)
Business- Type Activities
Resource Recovery
Blackberry Farm
Cupertino Sports Center
Recreation Programs
Senior Center
$ 238
77 ,068
2,834
1,918
1.563
$am
(6) LONG-TERM DEBT
(a) Cupertino Public Facilities Corporation Certificates of Participation
Original Balance Balance
Issue June 30, June 30, Current
Amount 2003 Retirements 2004 Portion
Governmental Activity Debt:
2002 Refinancing and Capital
Improvement Project,
2.00-5.00%, due 07/01/2031 $56 640 000 $54 770 000 $1 220000 $:'515:'50000 $1 245000
The Cupertino Public Facilities Corporation issued Certificates of Participation to provide
financing for the construction of the Community Center, remodeling of City Hall and the Library
in July of 1986, to purchase Wilson Park in 1989, to finance Memorial Park Expansion in 1990,
and to purchase Blackberry Farm and Fremont Older site in 1991. Cupertino Public Facilities
Corporation, as lessor, leased real property to the City (under the lease agreement with the
lessee) and assigned the base rental payments to the trustee for the benefit of the owners of the
certificates of participation. The rental payments are scheduled to be sufficient in both time and
amount, when the principal and interest of the certificates are due.
On October I, 2002, $56,640,000 principal amount of 2002 Refinancing and Capital
Improvement Project Certificates of Participation, (2002 COPs) were issued to finance the costs
of acquiring and constructing a new public library and to refund the 1992A COPs, the 1992B COPS
and the 1993A COPs ("Refunded COPS").
47
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(6) LONG-TERM DEBT (continued)
(a) CUDertino Public Facilities Corporation Certificates ofParticiDation (continued)
Annual debt service requirements for the Certificates of Participation are shown below:
Governmental Activities
For the Year
Ending June 30 PrinciDal Interest
2005 $1,245,000 $2,287,638
2006 1,270,000 2,262,738
2007 1,295,000 2,237,338
2008 1,355,000 2,179,063
2009 1,415,000 2,116,394
2010-2014 7,765,000 9,895,094
2015-2019 9,380,000 8,283,605
2020-2024 11,750,000 5,916,093
2025-2029 14,705,000 2,960,674
2030 3.370,000 160.075
Total $53 550.000 $38.298712
(b) 1915 Act Bonds Without City Commitment
The City acts as agent for the property owners of parcels upon which assessments were
made for local improvements. The City collects the assessments and forwards the
collections to bond holders. The City is not directly liable for the repayment of special
assessment district bonds as such bonds and interest payable are secured by fixed lien
assessments on real property; however, the City has determined that it is not probable
that the government would assume responsibility for all or part of the debt in the event of
default. The amount of unmatured bond principal at June 30, 2004 was $175,000.
(c) Conduit Debt
On October I, 2001, the City authorized the issuance of the multi-family housing
revenue bonds in an amount up to $1.6 million to assist a developer in financing the cost
of site acquisition and construction of a 24 unit multi-family rental housing project. The
bonds are payable solely out of loan repayments received from the developer. The City
has no legal or moral liability with respect to the payment of this debt.
48
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(7) NET ASSETS AND FUND BALANCES
GASB Statement 34 adds the concept of Net Assets, which is measured on the full accrual basis, to
the concept of Fund Balance, which is measured on the modified accrual basis.
Net Assets - Net Assets is the excess of all the City's assets over all its liabilities, regardless of
fund. Net Assets are divided into three captions under GASB Statement 34. These captions
apply only to Net Assets, which is determined only at the Government-wide level, and are
described below:
Invested in Capital Assets, net of related debt describes the portion of Net Assets which is
represented by the current net book value of the City's capital assets, less the outstanding balance of
any debt issued to finance these assets.
Restricted describes the portion of Net Assets which is restricted as to use by the terms and
conditions of agreements with outside parties, governmental regulations, laws, or other restrictions
which the City cannot unilaterally alter. These principally include developer fees received for use
on capital projects, debt service requirements, redevelopment funds restricted to low and moderate
mcome purposes.
Governmental fund balances represent the net current assets of each fund. Net current assets
generally represent a fund's cash and receivables, less its liabilities. Portions of a fund's balance
may be reserved or designated for future expenditure.
Fund Balances, Reserves and Designations - In the Fund financial statements, fund balances
represent the net current assets of each fund. Net current assets generally represent a fund's cash
and receivables, less its liabilities. Portions of a fund's balance may be reserved or designated
for future expenditure.
The umeserved-designated fund balances include amounts which have been internally designated
to be set aside and are not considered to be available for immediate appropriation. The
components of the unreserved-designated fund balance for the Governmental Funds at June 30,
2004 are as follows:
General Fund:
Economic Uncertainty
Disaster Preparedness
PERS Stabilization
Retiree Medical Liability
CIP-Future Acquisitions
Special Revenue Funds
Capital Projects funds, CIP
$2,500,000
7,500,000
1,000,000
1,151,000
481,286
3,736,446
2.236.730
Total designated fund balances
$18605462
49
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(8) COMMITMENTS AND CONTINGENCIES
The City participates in a number of federal and state grant programs subject to financial and
compliance audits by the grantors or their representatives. Audits of certain grant programs,
including those for the year ended June 30, 2001, have yet to be conducted. The amount, if any,
of expenditures that may be disallowed by the granting agencies cannot be determined at this
time. Management believes that such disallowances, if any, would not have a material effect on
the financial statements.
The City has an agreement, expiring in 2019, to lease a building to the County of Santa Clara for
the purpose of providing library service to the City's residents. The lease requires a minimum
annual payment of $120,000 adjusted annually for Cupertino's portion of book circulation and
increase of assessed valuation. This is an operating lease with a renewable option. The City is
currently negotiating an amendment to the lease to reflect the operating costs of a new library
building which was dedicated on October 30, 2004.
It is management's intent to increase future minimum rentals as a result of current negotiations.
The future minimum rentals rromthe existing lease are as follows:
For the Year
Ending June 30
Amount
2005
2006
2007
2008
2009
2010-2014
2015-2019
$120,000
120,000
120,000
120,000
120,000
600,000
600.000
Total
$1 800.000
(9) LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT
The City is self-insured for the first $100,000 of general and automobile liability for each
occurrence, and the excess (up to $10,000,000) is covered through the City's participation in the
Association of Bay Area Governments (ABAG) general liability risk pool. The pool consists of
31 agencies within the San Francisco Bay area. The stated purpose of the ABAG pool is to
provide certain levels of liability insurance coverage, claims management, risk management
services, and legal defense to each participating city within the pool. Each city was required to
make an initial deposit premium based on an actuarial study of each City's risk exposure. The
premium consists of a risk portion and administrative portion. The premium is revised each year
based on claims experience and risk exposure. Complete financial statements for ABAG plan
may be obtained from their offices at the following address: ABAG Plan Corporation, Finance
Department, P.O. Box 2050, Oakland, CA 94604.
50
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
Jnne 30, 2004
(9) LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT (continued)
In January 2004, the City joined the California Public Entity Insurance Authority (CPElA), 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 limit. CPElA was
established in 200 I for the purpose of creating a risk management pool for all California public
entities. CPElA is govemed by a Board of Directors consisting of representatives of its member
public entities.
During the fiscal year 2003/04, the City had a two-year analysis performed of its workers'
compensation program by an independent actuary. This resulted in an increase in the City's
reserve for unpaid claims of approximately $402,944 with a discount rate of 3 .5%.
Changes in the balances of claim liabilities during the past two fiscal years are as follows:
Workers'
COffiDensation
Claims liability, June 30, 2002
Incurred claims
Claim payments/credits
$662,812
158,836
(160.592)
Claims liability, June 30, 2003
Incurred claims
Claim payments/credits
661,056
567,506
(164.562)
Claims liability, June 30, 2004
$1 064.000
(10) OTHER POST EMPLOYMENT RETIREMENT BENEFITS
Permanent employees who retire under the City's retirement plan (PERS) are, pursuant to their
respective collective bargaining agreements, eligible to have their medical insurance premiums
paid by the City. Retirees receive the amount necessary to pay the cost of his/her enrollment,
including the enrollment of his/her family members, in a health benefit plan up to the maximum
received by active employees in their respective bargaining unit. The cost of retiree medical
insurance premiums are recognized as an expenditure when benefits are paid. There were 78
retirees participating in the plan as of June 30, 2004. The City has established a designation of
General Fund Balance to fund the liabilities associated with this retiree medical benefit.
51
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(10) OTHER POST EMPLOYMENT RETIREMENT BENEFITS (continued)
Retiree medical insurance premium expenses for the past five fiscal years ended June 30, are as
follows:
2000
2001
2002
2003
2004
$244,824
299,054
346,202
427,312
501,568
(11) DEFERRED COMPENSATION PLAN
Due to the passage of the Small Business Job Protection Act (Act) of 1996, and the issuance of
Governmental Accounting Standards Board Statement No. 32 "Accounting and Financial
Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans," governmental
entities who have established deferred compensation plans under Internal Revenue Code Section
457 are required to establish trusts to hold plan assets for the exclusive benefit of plan
participants and their beneficiaries. This Act supercedes previous regulations, which required
that plan assets remain the property of the City until paid or made available to the participants,
subject only to the City's general creditors. In compliance with the new regulations, the City
established separate trusts to hold plan assets. The value of assets held in trust under Section 457
deferred compensation plans is approximately $10,265,816 as of June 30, 2004, which have been
excluded rrom the financial statements.
(12) DEFINED BENEFIT PENSION PLAN
(a) Plan Description
The City of Cupertino's defined benefit pension plan provides retirement and disability
benefits, annual cost-of-living adjustinents, and death benefits to plan members and
beneficiaries. The plan is part of the Public Agency portion of the California Public
Employees Retirement System (CaIPERS), an agent multiple-employer plan
administered by CalPERS, which acts as a common investinent and administrative agent
for participating public employers within the State of California.
A menu of benefit provisions as well as other requirements are established by State
statutes within the Public Employees' Retirement Law. The City selects optional benefit
provisions rrom the benefit menu by contract with CalPERS and adopts those benefits
through local ordinance. CalPERS issues a separate comprehensive annual financial
report. Copies of the CalPERS' annual financial report may be obtained ftom the
CalPERS Executive Office, 400 P Street, Sacramento, CA 95814.
52
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(12) DEFINED BENEFIT PENSION PLAN (continued)
(b) Funding Policy
Active plan members are required to contribute 7% of their annual covered salary, which
is paid by the City on behalf of the employee. The City is required to contribute the
actuarially determined remaining amounts necessary to fund the benefits for its members.
The actuarial methods and assumptions used are those adopted by the CalPERS Board of
Administration. The required employer contribution rate for fiscal year 2003/04 was
1.895%. The contribution requirements of the plan members are established by State
statute and the employer contribution rate is established and may be amended by
CaIPERS.
(c) Annual Pension Cost
The required contribution for fiscal year 2003/04 was determined as part of the June 30,
2002 actuarial valuation using the entry age normal actuarial cost method with the
contributions determined as a percent of pay. The actuarial assumptions included a)
8.25% investment rate of return (net of administrative expenses); b) projected salary
increases that vary by duration of service ranging rrom 3.75% to 14.20% for
miscellaneous members and c) no cost-of-living adjustment. Both (a) and (b) include an
inflation component of 3.5% and a payroll growth of 3.75%. The actuarial value of the
City of Cupertino's assets was determined using a technique that smoothes the effect of
short-term volatility in the market value of investments over a two to five year period
depending on the size of investment gains and/or losses. The City of Cupertino's
overfunded actuarially accrued liability is being amortized as a level percentage of
projected payroll on a closed basis. The remaining amortization period at June 30, 2004
was 4 years.
Three year trend information for City of Cupertino:
Annual Percentage
Fiscal Year Pension of APC
Ending Cost (APe) Contributed
6/30/02 $619,288 100.0%
6/30/03 712,014 100.0%
6/30/04 877 ,928 100.0%
Funding Analysis for CALPERS (in thousands)
53
CITY OF CUPERTINO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
(12) DEFINED BENEFIT PENSION PLAN (continued)
(c) Annual Pension Cost
Miscellaneous Plan:
Actuarial
Unfunded
EntTy Age Unfunded Annual (Overfunded)
Valuation Accrued Value of ( Overfunded) Funded Covered Liability as %
Date Liabilitv Assets Liabilitv Ratio Payroll ofPavroll
2000 $29,259,413 $37,433,639 $(8,174,226) 127.9% $7,849,639 (104.1)%
2001 32,474,733 38,534,381 (6,059,648) 118.7% 8,533,904 (71.0)%
2002 35,125,628 36,012,654 (887,026) 102.5% 9,370,084 (9.5)%
(13) JOINT POWERS AGREEMENT
The City is a member of Silicon Valley Animal Control Authority, (the Authority), established in
2000 to deliver animal control services. The Authority provides its own field services and has an
agreement with the Humane Society of Santa Clara Valley to provide facilities, personnel, shelter
and animal services. The Authority is governed by a Board of Directors consisting of
representatives ÍÌ'om member Cities. Effective June 30, 2004, the City terminated it's
participation in the Authority.
During the fiscal year ended June 30, 2004 the City contributed $230,715 to the Authority. Audited
financial statements are available ÍÌ'om the Authority at 2340-A Walsh Avenue, Santa Clara, CA
95051.
(14) DEFICIT FUND BALANCE
As of June 30, 2004, the General Fund had advanced to the Redevelopment Agency (RDA) for
staffing costs, legal and consulting fees. As the Vallco Agency Project Area was not formalized
until October 19, 2000, such expenditures have resulted in a deficit fund balance of $178,913.
Once the project tax increment is generated, the RDA will repay the advance. The Senior Center
Enterprise Fund had a retained deficit in the amount of$31,593.
54
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 governmental fund,
GASB Statement 34 dictates that budget-to-actual information in the basic financial statements should be
limited to the General Fund and major Special Revenue Funds. All other major governmental fund
schedules with such information must be included as Supplemental Information.
55
CITY OF CUPERTINO
PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Variance
Positive
Budget Actual (Negative)
REVENUES
Use of money and property $817 $817
Total Revenues 817 817
EXPENDITURES
Debt service:
Principal $1,870,000 1,220,000 650,000
luterest 1,677,185 2,317,837 (640,652)
ToW Expenditures 3,547,185 3,537,837 9,348
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDffiJRES (3,547,185) (3,537,020) 10,165
OTIIER FINANCING SOURCES (USES)
Transfers in 2,84] ,357 2,841,357
Total Other Financing Sources (Uses) 2,841,357 2,841,357
EXCESS (DEFICIENCY) OF REVENUES AND
OTIIER SOURCES OVER EXPENDffiJRES
AND OTIIER USES ($705,828) (695,663) $10,165
BEGINNlNG FUND BALANCE 705,643
ENDING FUND BALANCE $9,980
56
NON-MAJOR GOVERNMENTAL FUNDS
\
All funds not defined as major funds for the Fund Financial Statements are consolidated in one column
entitled "Other Governmental Funds". These non-major funds are identified and included in this
supplemental section and includes all the City's Special Revenue Funds and several distinct Capital
Project Funds.
The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are
legally restricted to expenditures for specified purposes.
Storm Drain - Accounts for the construction and maintenance of storm drain facilities including
drainage and sanitary sewer facilities.
Park Dedication - Accounts for the activity granted by the business and professions code of the
State of California in accordance with the open space and conservation element of the City's
General Plan. Revenues of this fund are restricted for the acquisition, improvement, expansion
and implementation of the City's parks and recreation facilities.
Environmental Management - Accounts for all activities related to operating the non-point source
pollution program.
Gas Tax - Accounts for the City's gas tax apportionment revenues and expenditures related to the
maintenance and construction of city streets. All revenue in this fund is restricted exclusively for
street and road purposes including related engineering and administrative expenses.
Housing Development - Accounts for the Federal Housing and Community Development Grant
Program activities administered through the county. Monies in this fund are governed by the
program rules.
Leadership Cupertino - Accounts for revenue and expenditures for the purpose of supporting a
leadership training course in the community.
Redevelopment Valleo - Accounts for revenue and expenditures related to the construction of a
redevelopment agency project area at the Vallco Regional Mall.
The Capital Project Funds are used to account for financial resources to be used for the acquisition or
construction of major capital facilities (other than those financed by Proprietary Funds).
Senior Center Expansion - Accounts for activities related to design and construction of additional
space for the Senior Center.
Four Seasons Park - Accounts for activities related to the construction of the Four Seasons Park
located at the southeast comer of DeAnza Boulevard and Stevens Creek Boulevard.
Sports Center Building - Accounts for activities related to the design and construction of a new
Sports Center.
57
CITY OF CUPERTINO
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
ruNE 30, 2004
SPECIAL REVENUE FUNDS
Stann Park Environmental Gas Tax Housing
Drain Dedication Management Fund Development
Assets
Cash and investments $1,096,981 $216,281 $153,003 $2,647,551 $1,052,649
Accounts receivable 62,373 86,232 66,440
Loans receivable 1,037,912
Total assets $1,159,354 $216,281 $153,003 $2,733,783 $2,157,001
Liabilities
Accounts payable and accruals $31,838 $15,234 $74,039 $47,928
Accrued payroll and benefits 1,085 3,711 20,005 3,279
Advance from other funds
Deferred revenue 6,008 334,647
Total Liabilities 32,923 18,945 100,052 385,854
Fund balances
Reserved for:
Encumbrances 28,320 3,575 1,202,233 1,840
Loans receivable 703,266
Low and moderate income housing
Unreserved, reported in:
Special Revenue Funds 1,098,111 $216,281 130,483 1,431,498 ] ,066,041
Capital Project Funds
Total fund balances 1,]26,431 216,281 134,058 2,633,731 1,771,147
ToW liabilities and fund balances $],159,354 $216,281 $153,003 $2,733,783 $2,157,00]
58
SPECIAL
REVENUE F1JNDS CAPITAL PROJECTS F1JND
Total
Four Sports Nonmajor
Leadership Redevelopment Seasons Center Governmental
Cupertino Valleo Park Building Funds
$7,686 $34,731 $95,350 $193,556 5,497,788
215,045
],037,912
$7,686 $34,731 $95,350 $193,556 $6,750,745
$10 $13,483 $192,403 $374,935
$3,916 31,996
209,728 209,728
340,655
10 213,644 13,483 192,403 957,314
5,000 1,240,968
703,266
34,731 34,731
7,676 (213,644) 3,736,446
76,867 1,153 78,020
7,676 (178,913) 81,867 1,153 5,793,431
$7,686 $34,731 $95,350 $193,556 $6,750,745
59
CITY OF CUPERTINO
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
FOR 1HE YEAR ENDED JUNE 30, 2004
SPECIAL REVENUE FUNDS
Stann Park Environmental Gas Tax Housing
Drain Dedication Management Food Development
REVENUES
Taxes $41,918 $278,100
Use of money and property 16,178 252 $656 $32,044 $47,914
Intergovenunental 298,917 1,825,222 200,900
Charges for services 353,668
Fines and forfeitures 23,311
Other revenue
Total Revenues 357,013 278,352 354,324 1,880,577 248,814
EXPENDITURES
Current
Community development 189,939
Public works 377,541 1,135,498
Capital outlay 551,579 1,290,961
Total Expenditures 55],579 377,541 2,426,459 189,939
EXCESS (DEFICIENCY) OF REVENtJES
OVER EXPENDITURES (194,566) 278,352 (23,217) (545,882) 58,875
OTIffiR FINANCING SOURCES (USES)
Transfers in 644,000
Transfers (out) (275,000)
Total Other Financing Sources (Uses) (275,000) 644,000
EXCESS (DEFICIENCY) OF REVENUES AND
OlHER SOURCES OVER EXPENDITIJRES
AND OTIffiR USES (194,566) 3,352 (23,217) 98,118 58,875
BEGINNING FUND BALANCES (DEFICIT) ] ,320,997 212,929 157,275 2,535,613 1,712,272
ENDING FUND BALANCES (DEF1CIT) $1,126,431 $216,281 $134,058 $2,633,731 $1,771,147
60
SPECIAL
REVENUE FUNDS
CAPITAL PROJECTS FUNDS
Leadership
Cupertino
Redevelopment
Valleo
Four
Seasons
Park
Sports
Center
Building
Total
Nonmajor
Governmental
Funds
$76,569
52
$16,650
$396,587
97,096
2,325,039
353,668
23,311
16,650
16,650
76,621
3,212,351
98,949 288,888
1,513,039
27,002 $1,112,513 $2,093,381 5,075,436
27,002 98,949 1,112,513 2,093,381 6,877,363
(10,352) (22,328) (1,112,513) (2,093,381) (3,665,012)
18,000 131,000 130,000 923,000
(275,000)
18,000 131,000 130,000 648,000
7,648 (22,328) (981,513) (1,963,381) (3,017,012)
28 (156,585) 1,063,380 1,964,534 8,810,443
$7,676 ($178,913) $81,867 $1,153 $5,793,431
61
CITI OF CUPERTINO
BUDGETED NON-MAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR 1HE FISCAL YEAR ENDED JUNE 30, 2004
SPECIAL REVENUE FUNDS
STORM DRAIN PARK DEDICATION
Variance Variance
Positive PmÚtive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Taxes $50,000 $41,918 ($8.082) $275,000 $278,100 $3,100
Use of money and property 50,000 16,178 (33,822) 252 252
Intergovernmental 336,500 298,917 (37,583)
Charges for services
Other revenue
Total Revenues 436.500 357,013 (79,487) 275,000 278,352 3,352
EXPENDITURES
Current:
Community development
Public works
Capital outlay 1,464,579 551,579 913,000 211,652 211,652
Total Expenditures 1.464,579 551.579 913,000 211,652 211.652
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (1,028,079) (194.566) 833,513 63.348 278,352 215,004
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out) (275.000) (275,000)
Total Other Financing Sources (Uses) (275,000) (275,000)
EXCESS (DEFICIENCY) OF REVENUES AND
OTHER SOURCES OVER EXPENDITURES
AND OTHER USES ($1.028,079) (194,566) $833,513 ($211,652) 3,352 $215.004
BEGINNING FUND BALANCES (DEFICIT) 1,320,997 212,929
ENDING FUND BALANCES (DEFICIT) $1,126,431 $216,281
62
SPECIAL REVENUE FUNDS
ENVIRONMENTAL
MANAGEMENT
GAS TAX
Budget
Actual
Variance
Positive
(Negative)
HOUSING DEVELOPMENT
Variance
Positive
(Negative)
Actual
Budget
Actual
Variance
Positive
(Negative)
Budget
$1,000 $656 ($344) $70,000 $32,044 ($37,956) $71,000 $47,914 ($23,086)
1,806,000 1,825,222 19,222 476,000 200.900 (275,100)
366,000 353,668 (12,332)
23,311 23,311
367,000 354,324 (12,676) 1,876,000 1,880,577 4,577 547,000 248.814 (298,186)
525,741 189,939 335,802
363,218 377,541 (14,323) 1,451,426 1.135,498 315,928
3,864,927 1,290,961 2,573.966
363,218 377,541 (14,323) 5,316,353 2,426,459 2,889,894 525,741 189,939 335,802
3,782 (23,217) (26,999) (3,440,353) (545,882) 2,894.471 21,259 58,875 37,616
644,000 644,000
644,000 644,000
$3,782 (23,217) ($26,999) ($2,796,353) 98,118 $2,894,471 $21,259 58,875 $37,616
157,275 2,535,613 1,712.272
$134.058 $2,633,731 $1,771.147
(Continued)
63
CIITOf CUPERTINO
BUDGEIED NON-MAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITIJRES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR 1HE FISCAL YEAR ENDED JUNE 30, 2004
SPECIAL REVENUE FUNDS
LEADERSHIP CUPERTINO
Variance
Positive
Budget Actual (Negative)
REDEVELOPMENTVALLCO
Variance
Positive
Budget Actual (Negative)
REVENUES
Taxes
Use of money and property
Intergovernmental
Charges for services
Other revenue
Total Revenues
$27,000 $76,569 $49,569
52 52
$20,000 $16.650 ($3,350)
20,000 16.650 (3,350) 27,000 76,621 49,621
EXPENDITURES
Current:
Community development
Public works
Capital outlay
231,902
38.000 27,002 10,998
38,000 27,002 10.998 231,902
(18,000) (10,352) 7,648 (204,902)
18.000 18,000
18,000 18,000
98,949
132,953
Total Expenditures
98,949
132,953
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
(22.328)
182,574
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out)
Total Other Financing Sources (Uses)
EXCESS (DEFICIENCY) OF REVENUES AND
OTHER SOURCES OVER EXPENDITURES
AND OTHER USES
7,648 $7,648 ($204,902) (22,328) $182,574
28 (156.585)
$7,676 ($178.913)
BEGINNING FUND BALANCES (DEFICIT)
ENDING FUND BALANCES (DEFICIT)
64
TOTALS
Variance
Positive
Budget Actual (Negative)
$352,000 $396,587 $44,587
192,000 97,096 (94,904)
2,618,500 2,325.039 (293,461)
366,000 353,668 (12,332)
20.000 39,961 19,961
3,548,500 3.212,351 (336,149)
757,643 288.888 468.755
1,814,644 1.513.039 301.605
5.579,158 1,869.542 3.709.616
8,151,445 3,671,469 4,479,976
(4,602.945) (459,118) 4,143,827
662,000 662,000
(275,000) (275,000)
387,000 387,000
($4.215.945)
(72.118)
$4.143,827
3,246,916
$3,174.798
65
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 introduced by GASB Statement 34 does not extend to internal service funds
because they do not do business with outside parties. GASB Statement 34 requires that for the Statement
of Activities, the net revenues or expenses of each internal service fund be eliminated by netting them
against the operations of the City departments that generated them. The remaining balance sheet items
are consolidated with these same funds in the Statement of Net Assets.
However, internal service funds are still presented separately in the Fund financial statements.
Management Information Systems - Accounts for the activities related to the maintenance and
replacement of the City's technology infTastructure.
Workers' Compensation - Accounts for the activities in support of the self-insured workers'
compensation program.
Equipment Revolving - Accounts for the activities related to the maintenance and replacement of
the City's vehicle fleet.
Long- Term Disability - Accounts for the activities related to the City's program for long term
disability.
66
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STA1EMENT OF NET ASSETS
JUNE 30, 2004
Management
Infonnation W orkers' Equipment Long-Term
Systems Compensation Revolving Disability Total
ASSETS
Cash and investments $967,914 $1,080,255 $1,174,617 $13,162 $3,235,948
Accounts receivable 3,750 3,750
Total current assets 971,664 1,080,255 1,174,617 13,162 3,239,698
Capital assets, net of accumulated depreciation 217,124 882,591 1,099,715
Total Assets 1,188,788 1,080,255 2,057,208 13,162 4,339,413
LIABILITIES
Current Liabilities:
Accounts payable and accruals 60,903 6,259 8,037 75,199
Accrued payroll and benefits 13,892 264,870 13,763 292,525
Total current liabilities 74,795 271,129 21,800 367,724
Non-current Liabilities:
Compensated absences 14,241 50,471 64,712
Claims Payable 799,854 799,854
Total Liabilities 89,036 1,070,983 72,271 1,232,290
NET ASSETS
Invested in capital assets, net of related debt 217,124 882,59] ],099,715
Unrestricted 882,628 9,272 1,102,346 13,162 2,007,408
Total Net Assets $1,099,752 $9,272 $1,984,937 $13,]62 $3,107,123
67
CI1Y OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STA1EMENTS OF REVENUES, EXPENSES AND
CHANGES IN FUND NET ASSETS
FOR TIIE YEAR ENDED JUNE 30, 2004
Management
Information Workers' Equipment Long-Teon
Systems Compensation Revolving Disability Total
OPERATING REVENUES
Charges for services $773,800 $153,299 $905,697 $69,640 $1,902,436
Total Operating Revenues 773,800 153,299 905,697 69,640 1,902,436
OPERATING EXPENSES
Salaries and related expenses 292,730 15,344 253,257 561,331
Materials and supplies 279,739 143,937 423,676
Contractual services 153,050 79,777 232,827
Insurance claims 634,353 89.873 724,226
Depreciation 180,405 331,865 512,270
Total Operating Expenses 905.924 649.697 808,836 89,873 2,454,330
Operating Income (Loss) (132,124) (496,398) 96,861 (20,233) (551,894)
NONOPERATING REVENUES (EXPENSES)
Interest income 10,683 15.060 12.627 226 38,596
Total Nonoperating Revenues (Expenses) 10,683 15,060 12,627 226 38,596
Income (Loss) Before Transfers (121,441) (481.338) 109,488 (20,007) (513.298)
Transfers in 170.000 170.000
Net Transfers 170.000 170,000
Change in Net Asset" 48,559 (481,338) 109,488 (20,007) (343,298)
BEGINNING NET ASSETS 1,051,193 490,610 1,875,449 33,169 3,450,421
ENDING NET ASSETS $1,099,752 $9.272 $1.984,937 $13,162 $3,107,123
68
CITY OF CUPERTINO
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2004
Management
Information Workers' Equipment Long-Term
Systems Com pensation Revolving Disability Total
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $770,050 $153,299 $905,697 $69.640 $1,898,686
Cash payments to suppliers for goods and services (412,874) 171,760 (232.589) (89,873) (563,576)
Cash payments to employees (286,278) (412,080) (247,023) (945,381)
Cash Flows from Operating Activities 70,898 (87,021) 426.085 (20,233) 389,729
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers in 170,000 170,000
Cash Flows from Noncapital Financing Activities 170,000 170,000
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Purchase of capital assets (52,690) 3,283 (49,407)
Cash Flows from Capital and Related
Financing Activities (52,690) 3,283 (49,407)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 10,683 15,060 12,627 226 38,596
Cash Flows from Investing Activities 10,683 15,060 12,627 226 38.596
Net Cash Flows 198,891 (71,961) 441,995 (20.007) 548.918
Cash and investments at beginning of year 769.023 1,152,216 732,622 33,169 2,687,030
Cash and investments at end of year $967.914 $1,080,255 $1.174,617 $13,162 $3,235,948
Reconciliation of operating income (loss) to net cash flows
from operating activities:
Operating income (loss) ($132,124) ($496,398) $96,861 ($20,233) ($551,894)
Adjustments to reconcile operating income (loss)
to net cash flows from operating activities:
Depreciation 180,405 331,865 512,270
Change in assets and liabi1ities:
Accounts receivable (3,750) (3,750)
Accounts payable and accruals 19,915 6,259 (8,875) 17,299
Accrued payroll and benefits (7.789) (396,736) (44,237) (448,762)
Compensated absences 14,241 50,471 64,712
Claims PayabJe 799.854 799,854
Cash Flows from Operating Activities $70,898 ($87,021) $426,085 ($20,233) $389,729
69
FIDUCIARY FUNDS
GASB Statement 34 requires that Agency Funds, the only fiduciary funds the City has, be presented
separately from the Governmental and Fund financial statements.
Agency funds, which account for assets held by the City as an agent for individuals, private organizations,
other governmental units and/or other funds, are custodial in nature and do not involve measurement of
results of operations. Such funds have no equity since any assets are due to individuals or other entities at
some future time.
70
CITY OF CUPERTINO
Combining Statement of Changes in Assets and Liabilities
All Agency Funds
For the Fiscal Year Ended June 30, 2004
Balance Balance
June 30, 2003 Additions Deletions June 30, 2004
All Agency Funds
Assets
Cash and investments $197,023 $37,107 $234,130
Liabilities
Deposits $197,023 $37,107 $234,130
71
STATISTICAL SECTION
73
STATISTICAL SECTION
The statistical section was unchanged by GASB Statement 34. It contains comprehensive
statistical data that relates to physical, economic, social and political characteristics of the City. It
is intended to provide users with a broader and more complete understanding of the City and its
financial affairs than is possible from the financial statements and supporting schedules included
in the financial section.
This section includes comparative information related to the City's revenue sources,
expenditures, property tax valuations, property tax rates, and demographic statistics, all for the
last ten years. Also presented is the computation of the City's legal debt margin, and a listing of
principal taxpayers.
In contrast to the financial section, the statistical section information is not subject to independent
audit.
75
CITY OF CUPERTINO
GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION (1)
LAST TEN FISCAL YEARS
Table 1
Fiscal Law Public Administrative Recreation Community
Year Administration Enforcement Information Services (2) Services Development
1995 (3) $692,704 $3,769,584 $472,633 $1,549,162 $1,004,116 $2,859,582
1996 $809,492 $4,123,214 $513,106 $1,817,122 $1,045,300 $1,580,017
1997 $854,531 $4,118,027 $537,268 $1,750,575 $1,121,666 $1,608,010
1998 $856,836 $4,393,319 $590,667 $1,991,328 $1,164,822 $1,850,490
1999 $1,133,408 $4,892,704 $631,035 $2,008,976 $1,363,410 $2,101,942
2000 $1,242,310 $4,693,565 $796,458 $2,410,754 $1,536,152 $2,349,874
2001 $1,387,086 $5,351,653 $617,894 $3,033,073 $1,774,484 $2,700,888
2002 $1,464,165 $5,765,208 $707,885 $3,314,944 $1,858,338 $4,473,788
2003 $1,474,924 $6,015,036 $703,431 $3,475,991 $2,104,167 $3,177,406
2004 $1,222,581 $5,950,849 $686,798 $3,758,806 $2,141,431 $2,563,242
Note:
(1) Includes General, Special Revenue, Debt Service and Capital Project Funds. (Does not
include other financing uses).
(2) Beginning in 1993 the lease payments in Administrative Services have been reallocated
to the Debt Service column.
(3) Excludes losses from sales of investments of $570,085 in 1995.
(4) Beginning in 1999 the debt service for 1915 Act and special assessment debt were excluded
from these tables as it was determined that the City has no obligation for the debt.
Source: City Administrative Services
76
Public Capital Debt
Works Outlav Service (4) Total
$6,759,807 $1,683,213 $6,206,507 $24,997,308
$6,209,090 $5,005,071 $6,196,680 $27,299,092
$6,786,574 $1,234,165 $7,125,413 $25,136,229
$9,047,794 $4,412,291 $5,193,242 $29,500,789
$9,167,386 $8,059,124 $5,178,897 $34,536,882
$12,480,766 $3,404,088 $4,953,360 $33,867,327
$10,979,150 $5,348,378 $4,944,710 $36,137,316
$11,079,959 $5,435,850 $4,934,973 $39,035, II 0
$10,440,335 $6,812,856 $9,865,705 $44,069,851
$9,322,086 $20,246,237 $3,537,837 $49,429,867
77
CITY OF CUPERTINO
GENERAL GOVERNMENTAL REVENUES BY SOURCE (1)
LAST TEN FISCAL YEARS
Table 2
Fiscal Use of Money Inter- Licenses & Charges Fines and Other
Year Taxes (2) and ProDertv Q:overnmental Pennits (3) for Services Forfeitures Revenue Total
1995 $14,363,104 $2,490,794 $5,605,848 $1,924,429 $202,055 $456,413 $25,042,643
1996 $18,626,169 $2,417,589 $4,660,903 $2,241,106 $193,720 $1,320,878 $29,460,365
1997 $18,182,889 $2,671,812 $2,903,880 $2,077,637 $205,366 $792,679 $26,834,263
1998 $20,447,603 $2,776,441 $3,602,596 $2,366,376 $241,293 $1,146,454 $30,580,763
1999 $18,837,091 $3,114,595 $5,650,954 $2,578,015 $503,223 $475,266 $31,159,144
2000 $23,587,459 $2,866,012 $4,807,077 $1,359,949 $887,907 $524,057 $737,066 $34,769,527
2001 $23,859,776 $3,336,651 $5,483,956 $1,230,060 $987,563 $470,627 $435,351 $35,803,984
2002 $24,321,923 $2,262,622 $7,205,476 $1,310,470 $993,890 $616,227 $127,186 $36,837,794
2003 $20,200,250 $1,910,503 $6,318,523 $1,410,572 $855,844 $550,377 $59,219 $31,505,288
2004 $21,004,405 $940,963 $7,236,955 $1,540,760 $930,050 $723,748 $1,009,260 $33,386,141
Note;
(1) Includes General, Special Revenue, Debt Service and Capital Projects Funds. (Does not include
other financing sources.)
(2) Beginning in 1999 the debt service for 1915 Act and special assessment debt were excluded
from these tables as it was detennined that the City has no obligation for the debt.
(3) Prior to the fiscal year ended June 30, 2000, revenues derived from Licenses and Pennits were included
as Charges for Services.
Source: City Administrative Services
78
CITY OF CUPERTINO
ASSESSED AND ESTIMATED ACTUAL VALUES OF TAXABLE PROPERTY
LAST TEN FISCAL YEARS
Table 3
Total Estimated
Fiscal Total Assessed Full Market
Year Secured Exemotions Unsecured Valuation Valuation
1995 $4,563,933,460 $64,604,400 $550,201,549 $5,178,739,409 $5,178,739,409
1996 $4,585,406,820 $65,248,400 $470,880,987 $5,121,536,207 $5,121,536,207
1997 $4,730,865,467 $66,172,400 $440,005,909 $5,170,871,376 $5,298,764,322
1998 $5,078,070,121 $57,445,281 $452,549,925 $5,538,936,459 $5,538,936,459
1999 $5,591,299,195 $67,859,400 $443,973,509 $6,043,669,471 $6,043,669,471
2000 $6,045,504,382 $73,148,676 $500,020,465 $6,553,278,115 $6,553,278,115
2001 $6,986,833,015 $67,242,848 $416,844,493 $7,407,208,836 $7,407,208,836
2002 $7,836,349,904 $82,089,594 $634,624,124 $8,562,981,335 $8,562,981,335
2003 $8,119,969,820 $75,795,294 $565,212,987 $8,685,515,766 $8,685,515,766
2004 $8,689,558,802 $80,704,482 $530,097,614 $9,219,879,996 $9,219,879,996
Source: County of Santa Clara, Department of Finance
79
CITY OF CUPERTINO
PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS
(PER $100 OF ASSESSED VALUE)
LAST TEN FISCAL YEARS
Table 4
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
County 1. 000 1. 000 1.000 1. 000 1. 000 1. 000 1. 000 1.000 1.000 1.000
County Bond
County Retirement .0332 .0338 .0341 .0388 .0388 .0388 .0388 .0388 .0388 .0388
Library Retirement .0024 .0024 .0024 .0024 .0043 .0043 .0043 .0043 .0043 .0043
Cupertino City Bond
Elem and/or Vnif Sch Bonds .0182 .0303 .0292 .0247 .0247 .0247 .0247 .0247 .0247
High School Bonds
Junior College Bonds
Loan Repay-Cupertino
Cupertino San Dist-Bond
SCVWD-State Water Proj .0092 .0072 .0076 .0076 .0053 .0053 .0053 .0053 .0053 .0053
SCVWD-Zone W-I Bond .0023 .0026 .0026 0.002 0.002 0.002 0.002 0.002 0.002 0.002
TOTALS ..I...!W 1...Q:I1 ~ .1...Q8() J..!ill. .l..!W. .1..Q15. ~ l.QZJ. .J.JUl
Source: County of Santa Clara Annual Tax Increment Tables
80
CITY OF CUPERTINO
PRINCIPAL TAXPAYERS
JUNE 30, 2004
Table 5
2003-04 Percentage of
Assessed Total Assessed
Taxpayer Tvve of Business Valuation Valuation
Hewlett Packard Electronic Equipment $421,404,587 4.52%
Apple Computer Electronic Equipment $240,237,868 2.58%
Tandem Computers Electronic Equipment $191,840,146 2.06%
Val1co International Shopping Commercial $87,412,745 0.94%
Cupertino City Center Land Developer $76,076,211 0.82%
Symantec Commercial $71,214,688 0.76%
Irvine Apartments Residential $63,710,592 0.68%
RWC LLC Industrial $61,596,512 0.66%
Ridgeview Court Associates Industrial $55,664,911 0.61%
Berg Family Partners Industrial $54,062,246 0.58%
$1 324333 R03 1421%
Source: The HdL Companies
81
CITY OF CUPERTINO
COMPUTATION OF LEGAL DEBT MARGIN
JUNE 30, 2004
Table 6
Total Assessed Valuation
$9,219,879,996
Debt limit - 15 percent of Total Assessed Valuation
$1,382,981,999
Less - outstanding bonded debts
Legal debt margin
$1,382,981,999
Source: County of Santa Clara and City Administrative Services
82
CITY OF CUPERTINO
RATIO OF GENERAL BONDED DEBT TO ASSESSED
VALUE AND BONDED DEBT PER CAPITA
LAST TEN FISCAL YEARS
Table 7
Ratio of General
Fiscal Assessed General Bonded Debt Bonded Debt to
Year Population Value Bonded Debt Per Capita Assessed Value
1995 43,489 $5,178,739,409
1996 43,627 $5,121,536,207
1997 44,775 $5,298,764,322
1998 46,682 $5,538,936,459
1999 50,000 $6,043,669,471
2000 52,000 $6,553,278,115
2001 50,546 $7,407,208,836
2002 50,546 $8,562,981,335
2003 52,000 $8,685,515,766
2004 52,628 $9,219,879,996
Source: (1) State of California, Department of Finance, Demographics Research Unit
(2) County of Santa Clara and City Administrative Services
83
CITY OF CUPERTINO
RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL BONDED
DEBT TO TOTAL GENERAL GOVERNMENTAL EXPENDITURES
LAST TEN FISCAL YEARS
Table 8
Ratio of Debt
Fiscal Total Debt Total General To General
Year Principal Interest Service Expenditures (] ) Expenditures
1995 $24,997,308
(2)
1996 $27,299,092
1997 $25,136,229
1998 $29,500,789
1999 $34,536,882
2000 $33,867,327
2001 $36,137,316
2002 $39,035,110
2003 $44,069,851
2004 $49,429,867
(1) Includes General, Special Revenue, Debt Service, and Capital Projects Funds
(2) Excludes losses from sales of investments of $570,085
Source: City Administrative Services
84
CITY OF CUPERTINO
DEMOGRAPHIC STATISTICS
LAST TEN FISCAL YEARS
Table 9
School
Fiscal Median Age Enrollment Unemployment
Year Population (]) Years (2) Grades 9-12 (3) Rate (4)
1995 43,489 36.0 6,969 3.8%
1996 43,627 N/A 8,199 2.2%
1997 44,775 N/A 8,380 1.8%
1998 46,682 N/A 8,380 1.7%
1999 50,000 N/A 8,762 1.9%
2000 52,000 N/A 8,822 1.3%
2001 50,546 N/A 8,822 2.4%
2002 50,546 N/A 9,063 4.6%
2003 52,000 N/A 9,108 5.1%
2004 52,628 N/A 9,147 3.7%
Source: (I) State of California, Department of Finance, Demographics Research Unit
(2) Cupertino Chamber of Commerce
(3) Fremont Union High School District
(4) Department of Employment Statistics
85
CITY OF CUPERTINO
PROPERTY VALUE, CONSTRUCTION, AND BANK DEPOSITS
LAST TEN YEARS
Table 10
Property Commercial
Value (I) Residential Construction (2) Construction (2)
Fiscal Assessed Number
Year Valuation of Units Value Value
1995 $5,178,739,409 118 $24,626,353
1996 $5,121,536,207 126 $23,423,228 $271 ,222
1997 $5,298,764,322 521 $51,129,923 $31,775,355
1998 $5,538,936,459 578 $62,019,693 $45,254,694
1999 $6,043,669,471 125 $42,771,247 $7,476,590
2000 $6,553,278,115 207 $72,983,009 $9,092,350
2001 $7,407,208,836 83 $22,251,562 $3,000,000
2002 $8,562,981,335 72 $17,674,435 $20,109,541
2003 $8,685,515,766 362 $69,763,102 $6,172,755
2004 $9,219,879,996 41 $19,258,573 $13,340,587
Source: (I) County of Santa Clara, Department of Finance
(2) City Building Department
(3) Findley Reports
86
COMMUNITY
PROFILE
87
Cupertino owes its name and earliest mention in
recorded history to the 1776 expedition led by the
Spaniard, Don Juan Bautista de Anza, tì-om 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 rrom 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 rrom 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.
H Í4ítOry
CUP£RTtNO
HISTORICAL SOCIETY
MUSEUM
Many of Cupertino's pioneer European settlers planted their land in grapes. Vineyards and wineries proliferated on
Montebello Ridge, on the lower foothills, and on the flat lands below.
After 1906 a lot more than grape growing was going on in Cupertino. Orchards were thriving and new businesses were
being started. In the late 1940's Cupertino was swept up in Santa Clara Valley's postwar population explosion.
Concerned by unplanned development, higher taxes, and piecemeal annexation to adjacent cities, Cupertino's community
leaders began a drive in 1954 for incorporation. Cupertino rancher Norman Nathanson, the Cupertino - Monta Vista
Improvement Association, and the Fact Finding Committee played important roles in this movement. Incorporation was
approved in the September 27, 1955 election. Cupertino officially became Santa Clara County's 13th City on October 10,
1955.
A major milestone in Cupertino's development was the creation by some of the city's largest landowners of Vallco
Business and Industrial Park in the early 1960's. 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 rrom the names of the principal developers: Varian
Associates and the Leonard, Lester, Craft, and Orlando families.
89
2004C~c~PY~
The City of Cupertino, high-tech heart of Silicon Valley, was
born rrom a community of farmers. In 1955, when Cupertino
officially became the 13"' city in Santa Clara County, its
population was about 2,000 and its geographical area
encompassed 3.76 square miles.
Today, with a population numbering of 52,000 and city limits
stretching across 11 square miles, Cupertino is considered to be
one of the San Francisco Bay Area's most prestigious cities in
which to live and work.
Among the many factors that make Cupertino so desirable are
the city's highly acclaimed educational programs, its vibrant
business environment, its convenient access to major
transportation systems and its attractive well-planned
neighborhoods.
Schools in Cupertino are operated by the Cupertino Union School District (CUSD) that serve students rrom kindergarten
through 8"' grade in several different cities, and the Fremont Union High School District (FUHSD), which operates five
high schools in Cupertino and nearby cities. Twenty elementary schools and four middle schools are under the CUSD
umbrella. Nationally recognized for its innovative use of technology to enrich student learning, the district's reputation
reaches around the world.
One of California's premiere community colleges is also located in Cupertino. DeAnza College serves nearly 25,000
students per quarter. The college operates a planetarium and an Advanced Technology Center, where training in math,
physics, computers and programming is offered. In addition, one of the area's leading performing arts facilities, the Flint
Center, is located on the DeAnza College campus.
As home to many well-known high-tech companies, Cupertino offers a dynamic and exciting business climate. Apple
Computer is headquartered in the city along with Symantec and Portal Software. In addition, key divisions of Hewlett
Packard, Sun Microsystems and Borland are also located in Cupertino.
The City's proactive economic development efforts have resulted in a number of innovative, mutually beneficial
partnerships with local companies. The City strives to retain and attract local companies through policies of balanced
growth and streamlined permitting.
Residents and visitors can browse in a variety of small specialty shops at Vallco Fashion Park. The mall includes Macy's,
Penney's and Sears as anchors and features popular chain stores such as Victoria's Secret, Express and Natural Wonders.
Shoppers can also enjoy iceskating at the mall's ice skating rink. The mall is expected to undergo major changes in the
next two years with the addition of a 16-screen movie theater and many new shops and restaurants.
There's more to a community than its schools, its businesses and its quality of life. A community is people. And,
Cupertino's people come rrom all over the world. The city prides itself on being a diverse community and appreciates
the cultural differences that make each resident individual and unique. Cupertino has become a place that people are
proud to call home.
90
c~ S~t,.ft"~
Facts and Figures
Population in City Limits
Median Household Income
Median Age
Sales Tax Rate
Registered Voters
Democrats
Republicans
Independent
Other
52,000
$100,411
38
8.25%
25,590
9,543
8,217
342
4,140
Anderson Chevrolet
Apple Computer
Benihana's
BJ's Bar and Grill
Chevron Service Station
Chili's Grill & Bar
Crossroads Chevron Station
Cupertino Clean Scene
Cypress HoteVHelios Restaurant
DeAnza College Campus Center
DeAnza Shell Service Station
Dental Arts of California
Hewlett-Packard
Homestead BP Service Station
Top 40 Sales Tax Producers
Second Quarter 2004
(In Alphabetical Order)
Jade Galore
JC Penney
Joann Fabrics
Joy Luck Place
Long's Drug Store
Macy's
Marina Foods
Mervyn's
Michael's Arts & Crafts
Outback Steakhouse
PW Supermarket
Rite Aid Drug Store
Rotten Robbie Service Station
Sears
Shane Diamond Jewelers
Sodexho Marriott Management
Suburban House
Summerwind Garden Centers
Symantec
Target
TGI Friday's
TJ Maxx
Todai Restaurant
Verizon Wireless
Whole Foods Market
Yamagami's Nursery
Demographic Information
White
Asian
Hispanic
Black
American Indian
Native Hawaiian
50.1%
44.4%
4.0%
0.7%
0.2%
0.1%
91
2004 City PY'~
The City of Cupertino operates as a general law city with a city council-city manager form of government. Five council
members serve four year, overlapping terms, with elections held every two years. The council meets twice a month on the
first and third Mondays at 6:45 p.m. in City Hall.
Municipal services are provided by the City's 142 full time benefited employees. City departinents include administrative
services (fmance, human resources, IT, city clerk, outreach programs, code enforcement, and economic development);
community development (planning and building); parks and recreation; public works (engineering, maintenance,
transportation, and environmental); and public information. Police service is contracted through the County of Santa
Clara and fire service is provided through Santa Clara County Fire District.
Assisting the city council are several citizen advisory commissions/committees which include housing,
telecommunications, fine arts, library, planning, audit, parks and recreation, bicycle and pedestrian, teen, senior, and
public safety. Members of the volunteer boards are appointed by the city council and vacancies are announced so that
interested residents may apply for the positions. Residents are kept informed about city services and programs through
the Cupertino Scene, a monthly newsletter; Cupertino's government access cable TV channel; The City Channel; and the
city's website.
Honsing
Rentals for one and two bedroom apartments and duplexes
range from $1,100 to $2, I 00 per month. Rent for a two
bedroom house ranges from $2,200 to $3,250 per month.
The average price of existing single family homes is
$942,875 as of March 2004. The average condo-
minimum/townhouse sale price is $597,742.
Community Health Care Facilities
Cupertino is served by the Cupertino Medical Clinic,
NovaCare Occupational Health Services. Nearby hospitals
include El Camino Hospital in Mountain View, O'Connor
Hospital in San Jose, San Jose Hospital, Community
Hospital of Los Gatos, Kaiser Permanente Medical Center
in Santa Clara, Stanford Hospital in Palo Alto, and the
Saratoga Walk-in Clinic in Saratoga.
Utilities
Natural gas and electric - Pacific Gas and Electric
Company, (800) 743-5000.
Telephone - SBC. For residential service call (800) 894-
2355; for business service call (800) 750-2355.
Cable - Comcast, (800) 945-2288.
Garbage - Los Altos Garbage, (408) 725-0420.
Water - San Jose Water Company (408) 279-7900 and
California Water (650) 917-0152.
Sewer Service - Cupertino Sanitary District (408) 253-7071
Tax Rates and Government Services
Residential, commercial, and industrial property IS
appraised at full market value as it existed on March I,
1975, with increases limited to a maximum of2% annually.
Property created or sold since March I, 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 I.
Retail Sales Tax: Santa Clara County: I %; Local: 1%;
State: 6%; County: .25%; Total: 8.25%.
Assessed Valuation: (Secured and Unsecured)
Cupertino: $9,219,879,996 (2004)
County: $210,596,589,070 (2003)
Transportation
Rail- Southern Pacific, San Jose to San Francisco, with
spur line in Cupertino.
Air - Seven miles north of San Jose International Airport;
32 miles south of San Francisco airport.
Bus - Santa Clara County Transit Systems, Greyhound bus
lines
Highways - Interstate Route 280, State Route 85.
92
c~ ~R.ecre.cc.tLoY\lSef"V~
Library
The exciting, new two story Cupertino Library is nearing
completion and is scheduled to open in October, 2004.
A temporary library has been serving the community's
needs during construction. Before moving into its
smaller building, the Library had the highest circulation
among the members of the Santa Clara County Library
system.
Despite its temporary location, library staff members
checked out 1,737,447 items to the community in fiscal
year 2002-03. For more information call (408) 446-
1677.
Cupertino Senior Center
Adults over age 50 can find a full calendar of
opportunities for learning, volunteering, and enjoying
life. There are exercise classes (over 30 hours a week), a
computer lab and classes, language instruction including
English as a second language, and cultural and special
interest classes.
The Senior Center is located at 21251 Stevens Creek
Boulevard at Mary in Memorial Park and is open
Monday through Friday 8 a.m. to 5 p.m.
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 which is a multi-purpose room that can
accommodate 300 people in a banquet format. The
Quinlan Center is also home to the Cupertino Historical
Society. For more information, call (408) 777-3120.
Cupertino Sports Center
The newly renovated Sports Center is a great place to
meet friends. The facility features 17 tennis courts (12
lighted), complete locker room facilities, saunas,
Jacuzzis, and a fully equipped fitness center featuring
rree weights, Cydesc, and cardio equipment. A new teen
center was added as well as a child watch center. The
center is located at the corner of Stevens Creek
Boulevard and Stelling Road. Telephone: (408) 777-
3160.
Blackberry Farm
This 33 acre recreational facility offers two large
swimming pools, softball field, basketball courts,
volleyball courts, horseshoe pits, and a nine hole golf
course. The picnic grounds are located at 21975 San
Fernando Avenue and the golf course is located at 22100
Stevens Creek Boulevard. Telephone: (408) 777-3140.
Blackberry Farm Retreat
Center is a 2,000 square foot
house that overlooks the
picnic grounds and golf
course. The center has one
large conference room that
will accommodate up to 25
people. The retreat center is
located at 21979 San
Fernando Avenue. Telephone: (408) 777-3140.
McClellan Ranch Park
A horse ranch during the 1930'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.
93
EiLucctt:wvv
Winner of numerous state and national awards for excellence, our
City's schools are widely acknowledged to be models of quality
instruction.
Cupertino Union School District serves 15,700 students in a 26 square
mile area that includes Cupertino and portions of five other cities. The
district has 20 elementary schools and four middle schools, including
several choice programs. Eighteen schools have received state and/or
national awards for educational excellence.
Student achievement is exceptionally high. Historically, district test
scores place Cupertino among the premier public school districts in
California. The
district is a leader in
the development of a standards-based system of education and is
nationally recognized for leadership in the use of technology as an
effective tool for learning. Quality teaching and parent involvement are
the keys to the district's success.
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The Fremont Union High School District serves over 9,000 students in a
42 square mile area covering all of Cupertino, most of Sunnyvale and
portions of San Jose, Los Altos, Saratoga, and Santa Clara. The five high
schools of the district have garnered many awards and recognition based
on both the achievement of students and the programs designed to support
student achievement. Student achievement is at an all time high based on
the statewide Academic Performance Index (API). All five high schools
in the district exceeded their state established achievement targets for the
2000 API. District students are encouraged to volunteer and/or provide service to organizations within the community.
During their senior year, if students complete 80 hours of service to a non-profit community organization, they are
recognized with a "Community Service A ward" medal that may be worn during their graduation ceremonies.
Cupertino is served by four local
institutions of higher education:
DeAnza College, the University of San
Francisco, National University and
the UCSC Extension. In addition to
these schools, Cupertino's location
offers easy access to Stanford
University, Santa Clara University and
San Jose State University.
Building on its tradition of excellence and innovation, DeAnza
College challenges students of every background to develop their
intellect, character and abilities; to achieve their educational
goals; and to serve their community in a diverse and changing
world.
DeAnza College offers a wide range of quality programs and
services to meet the work force development needs of our region.
The college prepares current and future employees of Silicon
Valley in traditional classroom settings and through customized
training arranged by employers. Several DeAnza programs
encourage economic development through college credit courses,
short term programs, services for manufacturers, technical
assistance, and/or recruittnent and retention services.
94
~to-d&tu1iLsu/
Euphrat Museum of Art
The highly regarded Euphrat Museum of Art adjacent to the Flint Center on the DeAnza College campus traditionally
presents one-of-a-kind exhibitions, publications and events reflecting the rich diverse heritage of our area. The Museum
prides itself on its changing exhibitions of national and international stature, emphasizing Bay Area artists. Museum
hours are II a.m. - 4 p.m. Tuesday, Wednesday, Thursday; 6-8 p.m. Tuesday and II a.m. - 2 p.m. Saturday. Telephone:
408-864-8836.
Minolta DeAnza Planetarium
Stargazers have a Cupertino facility catering to their interests, the Minolta Planetarium on the DeAnza College campus. It
hosts a variety of planetarium shows and events, including educational programs for school groups and family astronomy
evenings on Saturdays at 7:00 p.m. For more information and current schedule of events, visit the website at
www.planetarium.deanza.fhda or call 408-864-8814.
Flint Center
The cultural life of the Peninsula and South Bay is enhanced by programs presented at the Flint Center for Performing
Arts located at 21250 Stevens Creek Boulevard at DeAnza College campus. The center opened in 1971 and was named in
honor of Calvin C. Flint, the first chancellor of the Foothill-DeAnza Community College District. The box office is open
10 a.m. - 4 p.m. Monday through Friday and one and one half hours prior to any performance. Box office: 408-864-
8816; administrative office: 408-864-8820.
Cupertino Historical Society
On May 2, 1966, the Cupertino Historical Society was founded as a non-profit organization by a group of 177 longtime
residents concerned about the rapid growth in the area and its impact on the quickly vanishing Cupertino heritage. On
March 30,1990, the Society opened the Cupertino Historical Museum dedicated to the preservation and exhibition of the
city's history. Through its exhibits the museum attempts to develop and expand the learning opportunities that it offers to
the ethnically diverse community of the City of Cupertino. The Society continues to build partnerships with the local
school districts to ensure that the history of Cupertino is offered as part of the educational curriculum. The Society is
located at the Quinlan Community Center, 10185 N. Stelling Road. Telephone: 408-973-8049.
Farmers' Market
Residents and visitors can visit the farmers' market every Friday from 9:00 a.m. to
1:00 p.m. The market is located at the Vallco Fashion Park behind Macy's.
California History Center
The California History Center is located on the DeAnza College campus. The
center has published 39 volumes on California history and has a changing exhibit
program. The center's Stocklmeir Library Archives boasts a large collection of books, a pamphlet file, oral history tapes,
video tapes and a couple thousand student research papers. The library's collection is for reference only. Heritage events
focusing on California's cultural or natural history are offered by the center each quarter. For more information, call 408-
864-8712. The center is open September through June 8:30 a.m. to noon and 1:00 p.m. to 4:30 p.m. Monday through
Thursday.
95