Cupertino City Council
May 19, 2022

CITY OF CUPERTINO

CITY COUNCIL
AGENDA
This will be a teleconference meeting without a physical location.

Thursday, May 19, 2022
5:30 PM
Televised Special Meeting - Continuation from May 17, 2022

TELECONFERENCE / PUBLIC PARTICIPATION INFORMATION TO HELP STOP THE SPREAD OF COVID-19
In accordance with Government Code 54953(e), this will be a teleconference meeting without a physical location to help stop the spread of COVID-19.

Members of the public wishing comment on an item on the agenda may do so in the following ways:
1) E-mail comments by 4:30 p.m. on Thursday, May 19, 2022 to the Council at [email protected]. These e-mail comments will also be forwarded to Councilmembers by the City Clerk’s office before the meeting and posted to the City’s website after the meeting.
2) E-mail comments during the times for public comment during the meeting to the City Clerk at [email protected]. The City Clerk will read the emails into the record, and display any attachments on the screen, for up to 3 minutes (subject to the Mayor’s discretion to shorten time for public comments). Members of the public that wish to share a document must email [email protected] prior to speaking. 3) Teleconferencing Instructions
Members of the public may provide oral public comments pertaining to the agenda during the teleconference meeting as follows:

Oral public comments will be accepted during the teleconference meeting. Comments may be made during the public comment period for each agenda item.

To address the City Council, click on the link below to register in advance and access the meeting:

1 CC 05-19-2022
1 of 1613
City Council Agenda May 19, 2022
Online
Register in advance for this webinar:
https://cityofcupertino.zoom.us/webinar/register/WN_GhAVJLMZS4GV8dSZZ77m5g Phone
Dial: 669-900-6833 and enter Webinar ID: 986 3470 5326 (Type *9 to raise hand to speak).

Unregistered participants will be called on by the last four digits of their phone number.

Or an H.323/SIP room system:

H.323:
162.255.37.11 (US West)
162.255.36.11 (US East)
Meeting ID: 986 3470 5326
SIP: [email protected]
After registering, you will receive a confirmation email containing information about joining the webinar.

Please read the following instructions carefully:

1.You can directly download the teleconference software or connect to the meeting in your internet browser. If you are using your browser, make sure you are using a current and up-to-date browser: Chrome 30+, Firefox 27+, Microsoft Edge 12+, Safari 7+. Certain functionality may be disabled in older browsers, including Internet Explorer.

2. You will be asked to enter an email address and a name, followed by an email with instructions on how to connect to the meeting. Your email address will not be disclosed to the public. If you wish to make an oral public comment but do not wish to provide your name, you may enter “Cupertino Resident” or similar designation.

3. When the Mayor calls for the item on which you wish to speak, click on “raise hand,” or, if you are calling in, press *9. Speakers will be notified shortly before they are called to speak.

4. When called, please limit your remarks to the time allotted and the specific agenda topic.

In compliance with the Americans with Disabilities Act (ADA), anyone who is planning to attend this teleconference City Council meeting who is visually or hearing impaired or has any disability that needs special assistance should call the City Clerk's Office at 408-777-3223, at least 6 hours in advance of the Council meeting to arrange for assistance. In addition, upon request, in advance, by a person with a disability, City Council meeting agendas and writings distributed for the meeting that are public records will be made

2 CC 05-19-2022
2 of 1613
City Council Agenda May 19, 2022
available in the appropriate alternative format.

NOTICE AND CALL FOR A SPECIAL MEETING OF THE CUPERTINO CITY COUNCIL NOTICE IS HEREBY GIVEN that a special meeting of the Cupertino City Council is hereby called for Thursday, May 19, 2022, commencing at 5:30 p.m. In accordance with Government Code 54953(e), this will be a teleconference meeting without a physical location to help stop the spread of COVID-19. Said special meeting shall be for the purpose of conducting business on the subject matters listed below under the heading, “Special Meeting."

SPECIAL MEETING

ROLL CALL
CONSENT CALENDAR (Items 1-14)
Unless there are separate discussions and/or actions requested by council, staff or a member of the public, it is requested that items under the Consent Calendar be acted on simultaneously.

1. Subject: Approve the April 26 City Council minutes (Continued from May 17, 2022) Recommended Action: Approve the April 26 City Council minutes A - Draft Minutes

2. Subject: Approve the April 28 City Council minutes (Continued from May 17, 2022) Recommended Action: Approve the April 28 City Council minutes A - Draft Minutes

3. Subject: Approve the May 2 City Council minutes (Continued from May 17, 2022) Recommended Action: Approve the May 2 City Council minutes A - Draft Minutes

4. Subject: Approve the May 3 City Council minutes (Continued from May 17, 2022) Recommended Action: Approve the May 3 City Council minutes A - Draft Minutes

5. Subject: Consider setting a hearing date to declare brush with potential fire hazard a public nuisance and for objections to proposed removal through the Cupertino Brush Abatement Program WUI (Wildland-Urban Interface Fire Area); adopting a resolution declaring properties as having potential fire hazards from brush and authorizing removal (Continued from May 17, 2022)

3 CC 05-19-2022
3 of 1613
City Council Agenda May 19, 2022
Recommended Action: Adopt Resolution No. 22-055 declaring properties as having potential fire hazards from brush; and set a hearing date of June 21, 2022 to declare brush with potential fire hazard a public nuisance and to hear objections to proposed removal
Staff Report
A - Draft Resolution

6. Subject: Set a voluntary campaign expenditure limit of $34,470 for the November 8, 2022 City Council election (Continued from May 17, 2022) Recommended Action: Adopt the Resolution No. 22-056 setting a voluntary campaign expenditure limit of $34,470 for the November 8, 2022 City Council election Staff Report
A - Draft Resolution

7. Subject: Consider adopting a resolution authorizing continued remote teleconference meetings of the legislative bodies of the City of Cupertino for the period May 19, 2022 through June 18, 2022 pursuant to the Brown Act, as amended by AB 361 (Continued from May 17, 2022)
Recommended Action: Adopt Resolution No. 22-057 authorizing continued remote teleconference meetings of the legislative bodies of the City of Cupertino for the period May 19, 2022 through June 18, 2022 pursuant to the Brown Act, as amended by AB 361 Staff Report
A - Draft Resolution
B – Adopted Resolution No. 22-050
C – Health Officer Recommendation Regarding Public Governmental Meetings

8. Subject: Consider the FY 2020-21 Annual Comprehensive Financial Report (ACFR) and related supplemental reports (Continued from May 17, 2022) Recommended Action: Accept the FY 2020-21 Annual Comprehensive Financial Report (ACFR) and related supplemental reports
Staff Report
A - FY 2020-21 ACFR
B - FY 2020-21 GAGAS Report
C - FY 2020-21 Appropriation Limit AUP Report
D - FY 2020-21 Storm Drain AUP Report
E - FY 2020-21 Investment AUP Report
F - Management Letter

9. Subject: Consider accepting the City Investment Policy (Continued from May 17, 2022) Recommended Action: Adopt Resolution No. 22-058 accepting the City Investment Policy
Staff Report
A - Draft Resolution
B - Investment Policy (redline)

4 CC 05-19-2022
4 of 1613
City Council Agenda May 19, 2022

10. Subject: Consider accepting the Third Quarter Financial Report for Fiscal Year 2021-22; consider adopting Resolution 22-059 approving Budget Modification #2122-198 increasing appropriations by $529,935 and revenues by $9,448,487 (Continued from May 17, 2022)
Recommended Action: 1. Accept the City Manager's Third Quarter Financial Report for FY 2021-22.

2. Adopt Resolution 22-059 approving Budget Modification #2122-198 increasing appropriations by $529,935 and revenues by $9,448,487
Staff Report
A - Draft Resolution
B - FY 2021-22 Third Quarter Financial Report
C - FY 2021-22 Third Quarter Budget Adjustment Journal
D - Amended Budget Detail as of March 31, 2022
E - Budget Transfers Detail as of March 31, 2022

11. Subject: Consider the 2022 Annual Pavement Report (Continued from May 17, 2022) Recommended Action: Receive the 2022 Annual Pavement Report Staff Report
A - Ranges of PCI Values and Street Conditions
B- 2022 Pavement Maintenance Project Location List

12. Subject: Consider acceptance of Offers of Dedication and a Waiver of Future Reimbursement from the property owners at 10155, 10165, and 10420 Orange Avenue, related to the Orange Avenue Sidewalk Improvements Project (Continued from May 17, 2022)
Recommended Action: Adopt Resolution No. 22-060 (Attachment A) accepting the Offers of Dedication and Waiver of Future Reimbursement from the property owners at 10155, 10165, and 10420 Orange Avenue, related to the Orange Avenue Sidewalk Improvements Project
Staff Report
A - Draft Resolution
B - Signed Agreement

13. Subject: Consider award of a construction contract for the Orange Avenue Sidewalk Improvements Project (Project 2016-10.1) for the construction of sidewalk, curb, gutter, storm drainage modifications, and associated improvements on Orange Avenue, between McClellan Road and Stevens Creek Boulevard (Continued from May 17, 2022) Recommended Action: Award a construction contract for the Orange Avenue Sidewalk Improvements Project, authorize the City Manager to execute a contract in the amount of $1,738,875.00 with Redgwick Construction Company and authorize the Director of Public Works to execute any necessary change orders, up to the construction contingency amount of $173,888.00 (10% of contract amount,) for a total authorized contract amount of $1,912,763.00

5 CC 05-19-2022
5 of 1613
City Council Agenda May 19, 2022
Staff Report
A - Draft Contract

14. Subject: Consider authorizing a Seventh Amendment of Agreement 15-206 between the City of Cupertino and Professional Turf Management extending the contract for six months and resulting in $102,600 in maintenance related expenses for Fiscal Year 2022-2023 (Continued from May 17, 2022)
Recommended Action: Consider approving the Seventh Amendment of Agreement 15-206 between the City of Cupertino and Professional Turf Management, to extend the term of the agreement up to six months and resulting in $102,600 in maintenance related expenses for Fiscal Year 2022-2023
Staff Report
A - Seventh Amendment for Blackberry Farm Golf Course Maintenance

STUDY SESSION

15. Subject: Initial Study Session on Fiscal Year (FY) 2022-23 Proposed Budget (Continued from May 17, 2022)
Recommended Action: Conduct Initial Study Session on Fiscal Year (FY) 2022-23 Proposed Budget and provide direction to staff
Presenter: Thomas Leung, Senior Management Analyst
A - Table of Contents
B - Introduction
C - Budget Message
D - Budget Guide
E - Community Profile
F - Financial Policies
G - Financial Schedules
H - Council and Commissions
I - Administration
J - Law Enforcement
K - Innovation and Technology
L - Administrative Services
M - Parks and Recreation
N - Community Development
O - Public Works
P - Non-Departmental
Q - Appendix A
R - Appendix B
S - FY 22-23 Proposed Budget Questions and Reponses

6 CC 05-19-2022
6 of 1613
City Council Agenda May 19, 2022

16. Subject: Recommendation from the Parks and Recreation Commission to approve funds in the amount of $96,460.46 for the Fiscal Year 2022-2023 Community Funding Grant Program and approval of final funding amounts for the Community Funding Program, to be included in the Recommended Budget for Fiscal Year 2022-2023 (Continued from May 17, 2022)
Recommended Action: Consider the recommendation from the Parks and Recreation Commission to approve funds in the amount of $96,460.46 for the Fiscal Year 2022-2023 Community Funding Grant Program. Determine and approve final funding amounts for the Community Funding Program, to be included in the Recommended Budget for Fiscal Year 2022-2023; and provide direction to staff
Presenter: Rachelle Sander, Assistant Director of Parks and Recreation Staff Report
A - Community Funding Applications and Preliminary Eligibility Evaluations B - Commissioner Community Funding Evaluation Form
C - Evaluation Totals and Parks and Recreation Commission Recommendation D - Community Funding Grant Policy
E - Community Funding Historical Funding Information FY 2018-2022

PUBLIC HEARINGS

17. Subject: Consider the Fiscal Year (FY) 2022-23 Fee Schedule Update (Continued from May 17, 2022)
Recommended Action: Adopt Resolution No. 22-049 approving FY 2022-23 Fee Schedules A, B, C, D and E effective July 18, 2022
Presenter: Thomas Leung, Senior Management Analyst
Staff Report
A - FY2022-23 Fee Schedule A - General Fees (redline)
B - FY2022-23 Fee Schedule B - Engineering Fees (redline) C - FY2022-23 Fee Schedule C - Planning Fees (redline)
D - FY2022-23 Fee Schedule D - Building Fees (redline)
E - FY2022-23 Fee Schedule E - Recreation (redline)
F - FY2022-23 Fee Schedule A - General Fees (clean)
G - FY2022-23 Fee Schedule B - Engineering Fees (clean) H - FY2022-23 Fee Schedule C - Planning Fees (clean)
I - FY2022-23 Fee Schedule D - Building Fees (clean)
J - FY2022-23 Fee Schedule E - Recreation (clean)
K - User Fee Study 2016
L - Draft Resolution No. 22-049 approving FY 2022-23 Fee Schedule A, B, C, D, and E

ORDINANCES AND ACTION ITEMS

18. Subject: Consideration of Municipal Code amendments to the Cupertino Municipal Code, Title 2 to add Chapter 2.96 and codify the Economic Development Committee (Continued from May 17, 2022)

7 CC 05-19-2022
7 of 1613
City Council Agenda May 19, 2022
Recommended Action: 1. Conduct the first reading of Ordinance No. 22-2240; “An Ordinance of the City Council of the City of Cupertino Adding Chapter 2.96 of Title 2 (Administration and Personnel) to Codify the Economic Development Committee"

2. Find that the proposed actions are exempt from CEQA
Presenter: Tina Kapoor, Economic Development Manager
Staff Report
A - Draft Ordinance

ADJOURNMENT
The City of Cupertino has adopted the provisions of Code of Civil Procedure §1094.6; litigation challenging a final decision of the City Council must be brought within 90 days after a decision is announced unless a shorter time is required by State or Federal law.

Prior to seeking judicial review of any adjudicatory (quasi-judicial) decision, interested persons must file a petition for reconsideration within ten calendar days of the date the City Clerk mails notice of the City’s decision. Reconsideration petitions must comply with the requirements of Cupertino Municipal Code §2.08.096. Contact the City Clerk’s office for more information or go to http://www.cupertino.org/cityclerk for a reconsideration petition form.

In compliance with the Americans with Disabilities Act (ADA), anyone who is planning to attend this meeting who is visually or hearing impaired or has any disability that needs special assistance should call the City Clerk's Office at 408-777-3223, at least 6 hours in advance of the meeting to arrange for assistance. In addition, upon request, in advance, by a person with a disability, meeting agendas and writings distributed for the meeting that are public records will be made available in the appropriate alternative format.

Any writings or documents provided to a majority of the Cupertino City Council after publication of the packet will be made available for public inspection in the City Clerk’s Office located at City Hall, 10300 Torre Avenue, Cupertino, California 95014, during normal business hours; and in Council packet archives linked from the agenda/minutes page on the Cupertino web site.

IMPORTANT NOTICE: Please be advised that pursuant to Cupertino Municipal Code section

2.08.100 written communications sent to the Cupertino City Council, Commissioners or City staff concerning a matter on the agenda are included as supplemental material to the agendized item. These written communications are accessible to the public through the City’s website and kept in packet archives. Do not include any personal or private information in written communications to the City that you do not wish to make public, as written communications are considered public records and will be made publicly available on the City website.

8 CC 05-19-2022
8 of 1613

CITY OF CUPERTINO
Agenda Item
22-10850 Agenda Date: 5/19/2022
Agenda #: 1.

Subject: Approve the April 26 City Council minutes (Continued from May 17, 2022) Approve the April 26 City Council minutes
CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™ 9
CC 05-19-2022
9 of 1613

DRAFT MINUTES

CUPERTINO CITY COUNCIL
Tuesday, April 26, 2022

SPECIAL MEETING
At 7:00 p.m., Mayor Darcy Paul called the Special City Council Meeting to order in the Cupertino Community Hall Council Chamber, 10350 Torre Avenue.

ROLL CALL

Present: Mayor Darcy Paul, Vice Mayor Liang Chao, and Councilmembers Kitty Moore, Hung Wei (attended via teleconference) and Jon Robert Willey. Absent: None.

COMMISSION INTERVIEWS

1. Subject: Interview applicants for the unexpected Bicycle Pedestrian Commission vacancy
Recommended Action: Conduct interviews and make appointment to the Bicycle Pedestrian Commission with a term ending January 30, 2025 and make appointments for any alternates
Council conducted interviews for the Bicycle Pedestrian Commission.

Councilmembers asked questions and made comments.

Council unanimously consented to forego the scheduled break and interview candidates who had arrived early.

Council recessed from 8:30 p.m. to 8:43 p.m.

Council continued conducting interviews.

Council conducted straw poll rounds for consensus on their top three candidates.

Council unanimously consented to vote for their top three candidates and assign points 10 CC 05-19-2022
10 of 1613

City Council Minutes April 26, 2022
to each, with the top candidate scoring three points, the second candidate scoring two points, and the third scoring one point.

The points scoring tally was as follows:

Grace John: Moore (1), Wei (3), Willey (3), Chao (1), Paul (3) = 11 points Fari Aberg: Moore (2), Wei (1), Willey (2), Chao (3), Paul (2) = 10 points Richard Railton: Moore (3), Wei (2), Willey (1), Paul (1) = 7 points Ravi Kumar: Chao (2) = 2 points
Moore moved and Chao seconded to appoint Grace John to the Bicycle Pedestrian Commission with a term ending January 30, 2025; and appointed Fari Aberg as 1st Alternate and Richard Railton as 2nd Alternate.

Paul made a friendly amendment to direct staff to inform all applicants that there will be three Bicycle Pedestrian Commission terms expiring on January 30, 2023 and to encourage them to apply during the annual recruitment cycle if they are interested. (Moore and Chao accepted the friendly amendment).

The amended motion carried unanimously.

ADJOURNMENT
At 9:37 p.m., Mayor Paul adjourned the Special City Council Meeting. _______________________________
Lauren Sapudar, Deputy City Clerk
11 CC 05-19-2022
11 of 1613

CITY OF CUPERTINO
Agenda Item
22-10851 Agenda Date: 5/19/2022
Agenda #: 2.

Subject: Approve the April 28 City Council minutes (Continued from May 17, 2022) Approve the April 28 City Council minutes
CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™ 12
CC 05-19-2022
12 of 1613

DRAFT MINUTES

CUPERTINO CITY COUNCIL
Thursday, April 28, 2022

SPECIAL MEETING
At 6:00 p.m., Mayor Darcy Paul called the Special City Council Meeting to order in City Hall Conference Room C, 10300 Torre Avenue.

ROLL CALL

Present: Mayor Darcy Paul, Vice Mayor Liang Chao, and Councilmembers Kitty Moore, Hung Wei, and Councilmember Jon Robert Willey.

In open session before Council convened in closed session, the Mayor called for any members of the public who were present to provide comment regarding any item on the agenda. No members of the public requested to speak.

CLOSED SESSION

1. Subject: Conference with Legal Counsel - Anticipated Litigation. Significant exposure to litigation pursuant to Government Code § 54956.9(d) (two cases) Council conducted the Conference with Legal Counsel - Anticipated Litigation.

Significant exposure to litigation pursuant to Government Code § 54956.9(d) (two cases).

No reportable action was taken.

OPEN SESSION

REPORT REGARDING CLOSED SESSION
Mayor Paul conducted the report regarding closed session.

ADJOURNMENT
13 CC 05-19-2022
13 of 1613

City Council Minutes April 28, 2022
At 8:06 p.m., Mayor Paul adjourned the Special City Council Meeting. _________________________
Kirsten Squarcia, City Clerk
14 CC 05-19-2022
14 of 1613

CITY OF CUPERTINO
Agenda Item
22-10852 Agenda Date: 5/19/2022
Agenda #: 3.

Subject: Approve the May 2 City Council minutes (Continued from May 17, 2022) Approve the May 2 City Council minutes
CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™ 15
CC 05-19-2022
15 of 1613

DRAFT MINUTES

CUPERTINO CITY COUNCIL
Monday, May 2, 2022

SPECIAL MEETING
At 7:30 a.m., Mayor Darcy Paul called the Special City Council Meeting to order in the Cupertino Community Hall Council Chamber, 10350 Torre Avenue.

In open session before Council convened in closed session, the Mayor called for any members of the public who were present to provide comment regarding any item on the agenda. No members of the public requested to speak.

ROLL CALL

Present: Mayor Darcy Paul, Vice Mayor Liang Chao, and Councilmembers Kitty Moore, Hung Wei, and Jon Robert Willey. Absent: None.

CLOSED SESSION

1. Subject: Public Employee Performance Evaluation (Gov. Code § 54957(b)(1)); Title: City Manager
Council conducted the Public Employee Performance Evaluation (Gov. Code § 54957(b)(1)); Title: City Manager
No reportable action was taken.

OPEN SESSION

REPORT REGARDING CLOSED SESSION
Mayor Paul conducted the open session report regarding closed session.

ADJOURNMENT
16 CC 05-19-2022
16 of 1613

City Council Minutes May 2, 2022
At 9:03 a.m., Mayor Paul adjourned the Special City Council Meeting. _______________________________
Kirsten Squarcia, City Clerk
17 CC 05-19-2022
17 of 1613

CITY OF CUPERTINO
Agenda Item
22-10491 Agenda Date: 5/19/2022
Agenda #: 4.

Subject: Approve the May 3 City Council minutes (Continued from May 17, 2022) Approve the May 3 City Council minutes
CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™ 18
CC 05-19-2022
18 of 1613

DRAFT MINUTES

CUPERTINO CITY COUNCIL
Tuesday, May 3, 2022

SPECIAL MEETING
At 5:30 p.m., Mayor Darcy Paul called the Special City Council Meeting to order in the Cupertino Community Hall Council Chamber, 10350 Torre Avenue and via teleconference.

ROLL CALL

Present: Mayor Darcy Paul, Vice Mayor Liang Chao, and Councilmembers Kitty Moore, Hung Wei, and Jon Robert Willey. Absent: None.

STUDY SESSION

1. Subject: Consider a Study Session on the Capital Improvements Program (CIP,) including review of the five-year CIP (Fiscal Year (FY) 22-27) and new proposed projects for FY 22-23
Recommended Action: Receive report on the five-year CIP (FY 22-27,) including new proposed projects for FY 22-23, requesting comments and direction Presenter: Susan Michael, Capital Improvements Program Manager Written Communications for this item included a staff presentation and emails to Council.

Capital Improvements Program Manager Susan Michael gave a presentation.

Mayor Paul opened the public comment period and the following people spoke.

Peggy Griffin supported adding Torre Ave. to the properties list, a Memorial Park Master Plan, a design plan for Lawrence Mitty, and addressing City Hall with public input.

Housing Commissioner Tessa Parish (representing self) was concerned about City parking, the BBF Splash Pad cost, and use of funds for City Hall, and supported public input. 19 CC 05-19-2022
19 of 1613
City Council Minutes May 3, 2022

Jean Bedord supported starting the funding and planning process for the City Hall renovation replacement and library parking garage project.

Lisa Warren supported alternative options for the Blackberry Farm Splash Pad and the City Hall renovation and studying usage requirements.

Housing Commissioner Connie Cunningham (representing self) supported prioritizing the new City Hall study and was concerned about delaying a seismic retrofit and safety.

Jennifer Griffin supported the CIP report and prioritizing the Stocklmeir House as a farming historical site.

Larry Dean supported keeping the Carmen Road Bridge Project on the list.

Heather Dean supported prioritizing a City Hall rebuild and was concerned about employee safety and parking deficiencies.

Mayor Paul closed the public comment period.

Councilmembers asked questions and made comments.

Paul moved and Chao seconded that Council support putting forward 10455 Torre Avenue upgrades in the CIP to allow for office space use for City Hall employees. With regard to City Hall, Paul further moved that Council: provide direction to staff to reduce above-surface parking impacts; provide direction to staff to be conscious of costs and to provide a plan for cost-auditing; provide direction to staff that the City complete the process for securing a procurement officer for an auditing mechanism before proceeding with further estimates. Further, Paul moved that Council direct staff, in future years, to refer to the Planning Commission for input on the proposed CIP projects in addition to an assessment of conformance with the General Plan. Further, Paul moved that Council direct staff to inform Council and the public of what the funds for the Westport project park mitigation fees are being allocated towards. Further, Paul moved that Council direct staff to return to the public with a study session on Memorial Park consistent with or at least addressing the recommendations of the Parks & Recreation Master Plan. Council did not vote on this motion.

Wei moved and Chao seconded to continue the Study Session to the Regular Meeting. The motion carried unanimously.

ADJOURNMENT
20 CC 05-19-2022
20 of 1613
City Council Minutes May 3, 2022

At 6:44 p.m., Mayor Paul adjourned the Special City Council Meeting.

REGULAR MEETING
At 6:50 p.m., Mayor Darcy Paul called the Regular City Council Meeting to order and led the Pledge of Allegiance in the Cupertino Community Hall Council Chamber, 10350 Torre Avenue and via teleconference.

ROLL CALL

Present: Mayor Darcy Paul, Vice Mayor Liang Chao, and Councilmembers Kitty Moore, Hung Wei, and Jon Robert Willey. Absent: None.

CEREMONIAL MATTERS AND PRESENTATIONS

1. Subject: Proclamations honoring musicians from two Cupertino High Schools (Homestead-Cupertino Symphony Orchestra and Homestead Symphonic Wind Ensemble) for their performances at the Washington D.C. International Music Festival on April 16 and 17, 2022
Recommended Action: Present proclamations honoring musicians from two Cupertino High Schools (Homestead-Cupertino Symphony Orchestra and Homestead Symphonic Wind Ensemble) for their performances at the Washington D.C. International Music Festival on April 16 and 17, 2022
Homestead High School Associate Director of Bands Benjamin Scharf received the proclamations on behalf of the Homestead-Cupertino Symphony Orchestra and Homestead Symphonic Wind Ensemble.

Mayor Paul presented the proclamations honoring musicians from two Cupertino High Schools (Homestead-Cupertino Symphony Orchestra and Homestead Symphonic Wind Ensemble) for their performances at the Washington D.C. International Music Festival on April 16 and 17, 2022.

2. Subject: Proclamation commemorating the Eid al-Fitr holiday, honoring the end of Ramadan for members of the Islamic faith and celebrating religious freedoms for every member of the Cupertino community
Recommended Action: Present proclamation commemorating the Eid al-Fitr holiday, honoring the end of Ramadan for members of the Islamic faith and celebrating religious freedoms for every member of the Cupertino community
Written communication for this item included a desk item Eid al-Fitr Proclamation to the 21 CC 05-19-2022
21 of 1613
City Council Minutes May 3, 2022

West Valley Muslim Association.

Cupertino resident Leila Qureishi accepted the proclamations on behalf of the community.

Mayor Paul presented the proclamations commemorating the Eid al-Fitr holiday, honoring the end of Ramadan for members of the Islamic faith and celebrating religious freedoms for every member of the Cupertino community.

POSTPONEMENTS AND ORDERS OF THE DAY
Moore moved and Willey seconded to move the Special Meeting Study Session Item 1 that was continued from 5:30 PM to directly after the Consent Calendar; and move Regular Meeting Agenda Item 26 before Item 25. The motion carried unanimously.

ORAL COMMUNICATIONS
Written comments for this item included an email from Kiran Choudhry regarding the Planning Commission Housing Element process and emails from Jean Bedord regarding a Mercury News Letter to the Editor on the City Council and fiscal responsibility.

Lisa Warren supported renaming Lawrence-Mitty Park, a housing audit, a study of bike lanes and treatments prior to additional funding, and public input for BBF Splash Pad alternatives.

Peggy Griffin was concerned about the square footage of The Rise 2022 project when compared to the 2018 Vallco SB-35 project. (Submitted written comments).

Housing Commissioner Connie Cunningham (representing self) was concerned about the Housing Element displacing people from their homes and supported revising the report.

Jennifer Griffin was concerned about AB 1120 to allow housing on commercial site tech parks and office buildings ministerially, with no CEQA, and added density bonus.

Rick Kitson (representing self) generally discussed the Chamber of Commerce and supported a written agreement of expectations for anyone doing business with the City.

REPORTS BY COUNCIL AND STAFF (10 minutes)

3. Subject: Brief reports on councilmember activities and brief announcements Recommended Action: Receive brief reports on councilmember activities and brief announcements
22 CC 05-19-2022
22 of 1613
City Council Minutes May 3, 2022

Council received brief reports on councilmember activities and brief announcements.

4. Subject: Report on Committee assignments
Recommended Action: Report on Committee assignments
Councilmembers highlighted the activities of their various committees.

5. Subject: City Manager update
Recommended Action: Receive City Manager update on City business Council received the City Manager update on City business.

CONSENT CALENDAR (Items 6-22)
Willey moved and Moore seconded to approve Items 6, 7 as amended, and 11 on the Consent Calendar. Ayes: Paul, Chao, Moore, Wei, and Willey. Noes: None. Abstain: None. Absent: None.

Moore moved and Willey seconded to pull Items 8, 9, 10, and 22 for discussion and table Items 12 through 21 to the City Council meeting on May 17, 2022. Willey withdrew his second to the motion for further discussion on Items 12 through 21. Council did not vote on this item.

Moore moved and Willey seconded to pull Items 8, 9, 10, and 22 for discussion and table Items 12 through 21 for continuation to the Regular City Council Meeting on May 17, 2022. Ayes: Paul, Chao, Moore, Wei, and Willey. Noes: None. Abstain: None. Absent: None.

Council recessed from 7:59 p.m. to 8:05 p.m.

6. Subject: Approve the April 19 City Council minutes
Recommended Action: Approve the April 19 City Council minutes Council approved this item on the Consent Calendar.

7. Subject: Approve the April 21 City Council minutes
Recommended Action: Approve the April 21 City Council minutes Written communications for this item included an Amended Attachment A - (Redline) Draft Minutes
Council approved this item on the Consent Calendar as amended. 23 CC 05-19-2022
23 of 1613
City Council Minutes May 3, 2022

8. Subject: Consider adopting a resolution authorizing continued remote teleconference meetings of the legislative bodies of the City of Cupertino for the period May 3, 2022 through June 2, 2022 pursuant to the Brown Act, as amended by AB 361 Recommended Action: Adopt Resolution No. 22-050 authorizing continued remote teleconference meetings of the legislative bodies of the City of Cupertino for the period May 3, 2022 through June 2, 2022 pursuant to the Brown Act, as amended by AB 361 Written communications for this item included emails to Council.

City Clerk Kirsten Squarcia reviewed the staff report.

Mayor Paul opened the public comment period.

Peggy Griffin supported permanently conducting hybrid meetings for meetings held in Community Hall and hybrid or remote for meetings held elsewhere.

Lisa Warren supported in-person and hybrid meetings for City Council and Planning Commission and in-person-only for certain commissions and committees.

Rhoda Fry supported an option for in-person meetings as well as a remote option for meetings.

Jennifer Griffin supported hybrid meetings and maintaining an in-person alternative.

Mayor Paul closed the public comment period.

Councilmembers asked questions and made comments.

Wei moved and Moore seconded to adopt Resolution No. 22-050 authorizing continued remote teleconference meetings of the legislative bodies of the City of Cupertino for the period May 3, 2022 through June 2, 2022 pursuant to the Brown Act, as amended by AB 361. The motion carried unanimously.

9. Subject: Consider a donation from Marilyn Francesco for a memorial plaque to be placed on a bench in Memorial Park, in memory of Robin Andy.

Recommended Action: Authorize the following regarding a plaque in memory of Robin Andy.
1) Acceptance of the plaque donation
2) Wording of the plaque
3) Installation on a designated bench at Memorial Park
24 CC 05-19-2022
24 of 1613
City Council Minutes May 3, 2022

Parks and Recreation Director Joanne Magrini reviewed the staff report.

Mayor Paul opened the public comment period.

Rhoda Fry supported Council further discussing donating memorial plaques and benches.

Mayor Paul closed the public comment period.

Councilmembers asked questions and made comments.

Paul moved and Willey seconded that Council direct staff to bring back to Council proposed policy and procedures for considering requests for memorial plaques on City public property prior to consideration of further action on the current item, and that the current and any similar pending proposal be reconsidered subsequent to the results of the consideration by Council of proposed policy and procedures for memorial plaques.

Council did not vote on this motion.

Chao moved and Moore seconded a substitute motion that Council direct staff to bring back to Council proposed policy and procedures for considering requests for memorial plaques on City public property considering requests for donation of objects on City public property, including potential locations for memorial plaques, prior to consideration of further action on the current item, and that the current and any similar pending proposal be reconsidered subsequent to the results of the consideration by Council of proposed policy and procedures for memorial plaques.

Paul made a friendly amendment to the substitute motion: that Council direct staff to bring back to Council proposed policy and procedures, including historical information regarding similar types of donations to the City in the past, for considering requests for donation of objects on City public property, including potential locations for memorial plaques, prior to consideration of further action on the current item, and that the current and any similar pending proposal be re-considered subsequent to the results of the consideration by Council of proposed policy and procedures for memorial plaques.

Chao made a friendly amendment to the substitute motion: that Council direct staff to bring back to Council proposed policy and procedures, including historical information regarding similar types of donations to the City in the past, for considering requests for donation of objects on City public property, including potential locations for memorial plaques, prior to consideration of further action on the current item, and that the current and any similar pending proposal be re-considered subsequent to the results of the consideration by Council of proposed policy and procedures for memorial plaques. 25 CC 05-19-2022
25 of 1613
City Council Minutes May 3, 2022

Further, that staff bring back to Council recommended policies and procedures regarding movement of donated objects on City property.

Chao and Moore accepted the friendly amendments to the substitute motion.

The amended substitute motion carried unanimously.

Final motion summary:

Chao moved and Moore seconded to direct staff to bring back to Council proposed policy and procedures, including historical information regarding similar types of donations to the City in the past, for considering requests for donation of objects on City public property, including potential locations for memorial plaques, prior to consideration of further action on the current item, and that the current and any similar pending proposal be re-considered subsequent to the results of the consideration by Council of proposed policy and procedures for memorial plaques. Further, that staff bring back to Council recommended policies and procedures regarding movement of donated objects on City property. The amended substitute motion carried unanimously.

Council recessed from 9:15 p.m. to 9:21 p.m.

10. Subject: Consider the Fiscal Year (FY) 2022-23 Community Development Block Grant (CDBG) Program and Below Market Rate (BMR) Affordable Housing Fund (AHF) funding allocations.

Recommended Action: Authorize the City Manager to execute FY 2022-23 CDBG and BMR AHF funding agreements
Written Communications for this item included a staff report.

Housing Manager Kerri Heusler gave a presentation.

Mayor Paul opened the public comment period.

Peggy Griffin asked about land acquisition allowances for affordable housing and protections for renters.

Mayor Paul closed the public comment period.

Councilmembers asked questions and made comments.

Moore moved and Chao seconded to authorize the City Manager to execute FY 2022-23 CDBG and BMR AHF funding agreements. The motion carried unanimously. 26 CC 05-19-2022
26 of 1613
City Council Minutes May 3, 2022

11. Subject: Consideration of Amended and Restated Agreement with the County of Santa Clara for Weed Abatement Services
Recommended Action: Authorize the City Manager to execute an Amended and Restated Agreement with the County of Santa Clara to continue the Weed Abatement Program in Cupertino
Council approved this item on the Consent Calendar.

12. Subject: Consider accepting Accounts Payable for the period ending February 7, 2022 Recommended Action: Adopt Resolution No. 22-036 accepting Accounts Payable for the period ending February 7, 2022
Council continued this item to the May 17, 2022 City Council meeting.

13. Subject: Consider accepting Accounts Payable for the period ending February 14, 2022 Recommended Action: Adopt Resolution No. 22-037 accepting Accounts Payable for the period ending February 14, 2022
Council continued this item to the May 17, 2022 City Council meeting.

14. Subject: Consider accepting Accounts Payable for the period ending February 21, 2022 Recommended Action: Adopt Resolution No. 22-038 accepting Accounts Payable for the period ending February 21, 2022
Council continued this item to the May 17, 2022 City Council meeting.

15. Subject: Consider accepting Accounts Payable for the period ending February 22, 2022 MISC
Recommended Action: Adopt Resolution No. 22-039 accepting Accounts Payable for the period ending February 22, 2022 MISC
Council continued this item to the May 17, 2022 City Council meeting.

16. Subject: Consider accepting Accounts Payable for the period ending February 28, 2022 Recommended Action: Adopt Resolution No. 22-040 accepting Accounts Payable for the period ending February 28, 2022
Council continued this item to the May 17, 2022 City Council meeting.

17. Subject: Consider accepting Accounts Payable for the period ending March 7, 2022 27 CC 05-19-2022
27 of 1613
City Council Minutes May 3, 2022

Recommended Action: Adopt Resolution No. 22-041 accepting Accounts Payable for the period ending March 7, 2022
Council continued this item to the May 17, 2022 City Council meeting.

18. Subject: Consider accepting Accounts Payable for the period ending March 14, 2022 Recommended Action: Adopt Resolution No. 22-042 accepting Accounts Payable for the period ending March 14, 2022
Council continued this item to the May 17, 2022 City Council meeting.

19. Subject: Consider accepting Accounts Payable for the period ending March 21, 2022 Recommended Action: Adopt Resolution No. 22-043 accepting Accounts Payable for the period ending March 21, 2022
Council continued this item to the May 17, 2022 City Council meeting.

20. Subject: Consider accepting Accounts Payable for the period ending March 28, 2022 Recommended Action: Adopt Resolution No. 22-044 accepting Accounts Payable for the period ending March 28, 2022
Council continued this item to the May 17, 2022 City Council meeting.

21. Subject: Consider accepting Accounts Payable for the period ending March 28, 2022 MISC
Recommended Action: Adopt Resolution No. 22-045 accepting Accounts Payable for the period ending March 28, 2022 MISC
Council continued this item to the May 17, 2022 City Council meeting.

22. Subject: Consider proposed resolutions for submission to the United States Conference of Mayors Annual Meeting held from June 3-6, 2022
Recommended Action: Approve proposed resolutions for submission to the United States Conference of Mayors Annual Meeting held from June 3-6, 2022 Mayor Paul read a statement. (Submitted written comments).

Mayor Paul opened the public comment period.

Lisa Warren supported Mayor Paul’s statement and approval of the item. 28 CC 05-19-2022
28 of 1613
City Council Minutes May 3, 2022

Peggy Griffin supported Mayor Paul’s statement and approval of the item.

Jennifer Griffin supported Mayor Paul’s statement and was concerned about loss of local control.

Mayor Paul closed the public comment period.

Councilmembers asked questions and made comments.

Paul moved and Willey seconded to approve proposed resolutions for submission to the United States Conference of Mayors Annual Meeting held from June 3-6, 2022. The motion carried unanimously.

Council recessed from 10:26 p.m. to 10:31 p.m.

STUDY SESSION – CONTINUED FROM SPECIAL MEETING AT 5:30 PM Council continued the hearing, consideration, deliberation, and decisions for Item 1 (Study Session) on the Tuesday, May 3, 2022 City Council Special Meeting agenda. The public comment period remained closed.

1. Subject: Consider a Study Session on the Capital Improvements Program (CIP) including review of the five-year CIP (Fiscal Year (FY) 22-27) and new proposed projects for FY 22-23
Recommended Action: Receive report on the five-year CIP (FY 22-27) including new proposed projects for FY 22-23, requesting comments and direction Chao moved and Willey seconded a substitute motion:
 City Hall Related:
o Keep the description of the CY21-22 for “City Hall and Community Hall Improvements - Programming and Feasibility” until a separate agenda item is brought forward for an update and any request to modify the scope of the project.
 Provide information on other public buildings that’s 30 years or older and whether they have re-built it or only did earthquake retrofit. o Keep the description of the CY21-22 for “10455 Torre Avenue Improvements” and bring it to the Council to get direction on the long-term use of this facility before finalizing the programming and planning
 Memorial Park:
o Prioritize Memorial Park Master Plan with a process “to obtain community input and consensus will assist in formulating plans to renovate portions of 29 CC 05-19-2022
29 of 1613
City Council Minutes May 3, 2022

the park including parking requirements and upgrades for surrounding facilities”, as specified in FY19-20 CIP plan in order to comply with the Parks and Rec Master Plan approved by the City Council.
o Postpone the “Memorial Park – Pond Repurposing - $3M “until the Memorial Park Master Plan is complete
o For this item “Memorial Park – Amphitheater Improvements - $1.15M”, it should first come to the Council agenda with proposed changes to seek Council direction and community input
 Parks and Rec Master Plan related => get input from Parks and Rec Commission next year
o Remove Major Recreational Facilities item (until the financing options of other unfunded projects are analyzed)
o Remove Splash pad from Blackberry Farm project in order to comply with the Parks and Rec Master Plan to consider geographical diversity for water play areas.
 Items to edit:
o Consider either painted bike lane or bollards as separators on De Anza and provide options for the Bike & Ped and City Council to consider  Items Added:
o add one item for funding for amenities for dog parks, such as fence or water dish, as new locations are identified.
o Include Bollinger bike path improvement due to pedestrian accident and death (with staff recommendation)
Willey requested modifications to the substitute motion for use of funds for Memorial Park - Pond Repurposing and receive input from the Bicycle Pedestrian Commission for Bollinger Road Improvements. (Chao declined the modifications).

Chao made a friendly amendment to her substitute motion:
 More items added
 EOC - examine the effects of the option of locating the EOC in allocation other than the City Hall
 Bring back more detailed cost estimates of Carmen Bridge project (Willey accepted the friendly amendment to the substitute motion).

Council did not vote on the substitute motion.

Paul moved and Chao seconded to bring this item back based upon the comments that Council provided this evening to a date certain at the May 17, 2022 City Council meeting.

The motion carried unanimously.

Moore moved and Wei seconded to continue Items 23 through 26 (as reordered with Item 26 30 CC 05-19-2022
30 of 1613
City Council Minutes May 3, 2022

before Item 25) to the May 17, 2022 City Council meeting. The motion carried unanimously.

SECOND READING OF ORDINANCES - None

PUBLIC HEARINGS

23. Subject: Consider the Fiscal Year (FY) 2022-23 Fee Schedule Update (Continued from April 19, 2022)
Recommended Action: Adopt Resolution No. 22-049 approving FY 2022-23 Fee Schedule A, B, C, D and E effective July 1, 2022
Presenter: Thomas Leung, Senior Management Analyst
Written Communications for this item included a staff presentation, written comments by City Attorney Chris Jensen and an email to Council.

Council continued this item to the May 17, 2022 City Council meeting.

ORDINANCES AND ACTION ITEMS

24. Subject: Consider conducting the first reading of an Ordinance related to regulation of single-use plastic foodware and single-use carryout bags (continued from April 19, 2022) Recommended Action: Conduct the first reading of Ordinance No. 22-2239: “An Ordinance of the City Council of the City of Cupertino amending City Code to change the name of section 9.15, adopt new sections 9.15.090 and 9.15.125, and amend sections

9.15.100, 9.15.110, 9.15.120, 9.15.130, 9.17.130, and 9.17.140 to regulate the use of single-use food service ware by food providers, regulate sale of single-use food service ware and expanded polystyrene foam coolers, and regulate single-use carryout bags” (Attachment A), which includes a finding that adoption of the Ordinance is exempt from the California Environmental Quality Act (CEQA.)
Presenter: Ursula Syrova, Environmental Programs Manager Written Communications for this item included a staff presentation.

Council continued this item to the May 17, 2022 City Council meeting.

As noted under Postponements and Orders of the Day, the agenda was reordered to place Item 26 before Item 25.

26. Subject: Consider accepting Accounts Payable for the period ending December 20, 2021 Recommended Action: Adopt Resolution No. 22-015 accepting Accounts Payable for the period ending December 20, 2021
31 CC 05-19-2022
31 of 1613
City Council Minutes May 3, 2022

Presenter: Katy Nomura, Deputy City Manager
Written Communications for this item included a staff presentation, Accounts Payable Report Ending December 20, 2021 - I Love Cupertino Invoices Desk Item, emails to Council, and written comments by Councilmember Moore.

Council continued this item to the May 17, 2022 City Council meeting.

25. Subject: Consideration of Municipal Code amendments to the Cupertino Municipal Code, Title 2 to add Chapter 2.96 and codify the Economic Development Committee (continued from April 19, 2022)
Recommended Action: 1. Conduct the first reading of Ordinance No. 22-2240; “An Ordinance of the City Council of the City of Cupertino Adding Chapter 2.96 of Title 2 (Administration and Personnel) to Codify the Economic Development Committee"

2. Find that the proposed actions are exempt from CEQA
Presenter: Tina Kapoor, Economic Development Manager
Written Communications for this item included a staff presentation.

Council continued this item to the May 17, 2022 City Council meeting.

27. Subject: Consideration of a City Council summer recess and cancellation of meeting(s) Recommended Action: Consider a City Council summer recess and cancel any meetings
Presenter: Kirsten Squarcia, City Clerk
City Clerk Kirsten Squarcia reviewed the staff report.

Mayor Paul opened the public comment period and, seeing no one, closed the public comment period.

Councilmembers asked questions and made comments.

Paul moved and Chao seconded to cancel the August 2, 2022 meeting.

Paul modified his motion to cancel the August 2, 2022 and July 5, 2022 Regular Meetings and add a special meeting on July 7, 2022. (Chao accepted the modification). The modified motion carried unanimously.

ORAL COMMUNICATIONS - CONTINUED (As necessary) – None
32 CC 05-19-2022
32 of 1613
City Council Minutes May 3, 2022

COUNCIL AND STAFF COMMENTS AND FUTURE AGENDA ITEMS
Council did not hear this item.

ADJOURNMENT
At 11:53 p.m., Mayor Paul adjourned the Regular City Council Meeting to May 17, 2022. _________________________
Kirsten Squarcia City Clerk
33 CC 05-19-2022
33 of 1613

CITY OF CUPERTINO
Agenda Item
22-10597 Agenda Date: 5/19/2022
Agenda #: 5.

Subject: Consider setting a hearing date to declare brush with potential fire hazard a public nuisance and for objections to proposed removal through the Cupertino Brush Abatement Program WUI (Wildland-Urban Interface Fire Area); adopting a resolution declaring properties as having potential fire hazards from brush and authorizing removal (Continued from May 17, 2022)
Adopt Resolution No. 22-055 declaring properties as having potential fire hazards from brush; and set a hearing date of June 21, 2022 to declare brush with potential fire hazard a public nuisance and to hear objections to proposed removal
CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™ 34
CC 05-19-2022
34 of 1613
1 CITY COUNCIL STAFF REPORT
Meeting: May 19, 2022
Subject
Consider setting a hearing date of June 21, 2022 to declare brush with potential fire hazard a public nuisance and for objections to proposed removal through the Cupertino Brush Abatement Program (Wildland-Urban Interface Fire Area); and consider adopting a resolution declaring properties as having potential fire hazards from brush and authorizing removal.

Recommended Action
Adopt Resolution No 22-___ declaring properties as having potential fire hazards from brush; and set a hearing date of June 21, 2022 to declare brush with potential fire hazard a public nuisance and to hear objections to proposed removal.

Discussion
The Cupertino Brush Abatement Program is a separate program from the County Weed Abatement Program that works to protect the City from wildfire risk by reducing potential fuel, such as brush, for hillside areas. This program is managed by the Santa Clara County Fire Department. Cupertino Municipal Code Section 16.40.200 requires property owners in the locally adopted Wildland-Urban Interface Fire Area (WUI) to maintain effective defensible space by removing brush, flammable vegetation and combustible growth when required by the fire code official due to steepness of terrain or other conditions. All properties in the WUI area are subject to the requirements of the Brush Abatement Program. It also authorizes the County to remove the brush if the property owner does not and to recover the cost of abatement.

In February of each year, homeowners are reminded that they must remove native brush and vegetation from around their home to create defensible space. The brush abatement program entails inspections of hillside properties by fire crews beginning early April each year. If properties are found to not be in compliance with the regulations found in the California Fire Code relative to vegetation clearance, the property owners are given notice of the violation. If compliance is still not achieved by approximately the end of June each year, a contractor is authorized to perform the necessary work. The costs associated with the abatement work are then placed on the property tax bill for that parcel. 35 CC 05-19-2022
35 of 1613
Sustainability Impact
None.

Fiscal Impact
None.
_____________________________________
Prepared by: Kirsten Squarcia, City Clerk
Reviewed by: Dianne Thompson, Assistant City Manager
Attachments:

A - Draft Resolution
36 CC 05-19-2022
36 of 1613
RESOLUTION NO. 22-

A RESOLUTION OF THE CUPERTINO CITY COUNCIL

DECLARING PROPERTIES AS HAVING POTENTIAL FIRE HAZARDS

FROM BRUSH AND SETTING A PUBLIC HEARING TO DECLARE A

PUBLIC NUISANCE AND FOR OBJECTIONS TO PROPOSED REMOVAL
WHEREAS, brush is growing in the City of Cupertino upon certain streets, sidewalks, highways, roads and private property; and
WHEREAS, said brush may attain such growth as to become a fire menace or which are otherwise noxious or dangerous; and
WHEREAS, said brush appears to be a public nuisance;
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Cupertino does hereby declare:

1. That said brush does now appear to be a public nuisance and potential fire hazard;

2. That said condition and potential fire hazard exists upon all of the streets, sidewalks, highways, roads, and private property more particularly described by common names or by reference to the tract, block, lot, code area, and parcel number on the report to be provided by the Santa Clara County Fire Department;

3. That the 21st day of June, 2022, at the hour of 6:45 p.m., or as soon thereafter as the matter can be heard, in the Council Chamber in the Community Hall, City of Cupertino and via teleconference, with details on how to attend the meeting appearing on the City Council agenda for that date, are hereby set as the time and place to determine whether the condition is a public nuisance and where all property owners having any objections to the proposed removal of such brush may be heard;

4. That the Santa Clara County Fire Marshal is hereby designated and ordered as the person to give notice of the adoption of this resolution in the manner and form provided in Section 16.40.200 of the Cupertino Municipal Code. 37 CC 05-19-2022
37 of 1613
Resolution No. 22-___

PASSED AND ADOPTED at a special meeting of the City Council of the City of Cupertino this 19th day of May, 2022 by the following vote:

Members of the City Council
AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:
________
Darcy Paul, Mayor
City of Cupertino
________________________
Date
ATTEST:
________
Kirsten Squarcia, City Clerk
________________________
Date
38 CC 05-19-2022
38 of 1613

CITY OF CUPERTINO
Agenda Item
22-10842 Agenda Date: 5/19/2022
Agenda #: 6.

Subject: Set a voluntary campaign expenditure limit of $34,470 for the November 8, 2022 City Council election (Continued from May 17, 2022)
Adopt the Resolution No. 22-056 setting a voluntary campaign expenditure limit of $34,470 for the November 8, 2022 City Council election
CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™ 39
CC 05-19-2022
39 of 1613
1 CITY COUNCIL STAFF REPORT
Meeting: May 19, 2022
Subject
Set a voluntary campaign expenditure limit of $34,470 for the November 8, 2022 City Council election.

Recommended Action
Adopt the draft resolution setting a voluntary campaign expenditure limit of $34,470 for the November 8, 2022 City Council election.

Discussion
Voluntary expenditure limits enable both candidates and officeholders to spend less time on fundraising and more time communicating issues of importance to voters and constituents. Beginning in 1997, the City Council set a voluntary campaign expenditure limit of $15,000. In later years this amount was adjusted because of increases in postage costs or when the population was increased through annexations.

A General Municipal Election will be held Tuesday, November 8, 2022 to fill three City Council seats. If Council wishes to establish a limit for the 2022 election, it would be voluntary, is not required, and would have no force of law. The candidate decision of whether to accept the ceiling is made at the time of filing the nomination papers.

Candidates who agree to voluntarily limit campaign expenditures receive an asterisk designation next to their name in the official voter’s pamphlet.

Campaign expenditures include allocations for mailing or distribution of campaign literature, publications in broadcast, print or electronic media, telephone banks, professional services, overhead expenditures, and campaign fundraising. The cost of printing and translating Candidate Statements shall not be counted against the voluntary expenditure ceiling.
40 CC 05-19-2022
40 of 1613
Staff recommends an increase of $4,470 to the voluntary expenditure limit set in 2020.

The escalated amount is based on the U.S. Bureau of Labor Statistics Consumer Price Index (CPI) which measures increases in the cost of paper, printing, and other goods and services. The change in the CPI (5.2%) is multiplied by the current number of registered Cupertino voters (32,766), as determined by the State’s Report of Registration, and rounded up.

ELECTION YEAR VOLUNTARY

EXPENDITURE LIMIT
1997 $15,000
1999 $20,000
2001 $20,000
2003 $20,000
2005 $26,000
2007 $26,500
2008 Special Election $26,500
2009 $28,000
2011 $28,000
2014 $28,000
2016 $33,000
2018 $29,000
2020 $30,000
2022 $34,470
Sustainability Impact
None
Fiscal Impact
None
_____________________________________
Prepared by: Kirsten Squarcia, City Clerk
Approved for Submission by: Dianne Thompson, Assistant City Manager Attachments:

A – Draft Resolution
41 CC 05-19-2022
41 of 1613
RESOLUTION NO. 22-___

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CUPERTINO ADOPTING A VOLUNTARY CAMPAIGN EXPENDITURE LIMIT OF $34,470 FOR THE NOVEMBER 8, 2022 CITY COUNCIL ELECTION
WHEREAS, the City Council adopted Resolution No. 9854 establishing a voluntary campaign expenditure limit for the 1997 City Council election in order to allow both candidates and officeholders to spend a lesser proportion of their time on fundraising and a greater proportion of their time communicating issues of importance to voters and constituents.

WHEREAS, the City Council has adopted a voluntary campaign expenditure limit each Cupertino election year since 1997, the most recent being Resolution No. 20-041 which established a voluntary campaign expenditure limit of $30,000 for the November 2020 election.

WHEREAS, on November 8, 2022, a General Municipal Election will be held to fill vacant Council seats, and the City Council wishes to apply a voluntary campaign expenditure limit of $34,470 to that election.

NOW, THEREFORE, BE IT RESOLVED:
1) The voluntary expenditure limit for the November 8, 2022 Municipal General Election shall be $34,470.
2) Any non-monetary contribution is deemed to be a campaign expenditure made by the receiving committee on the date of receipt, and it counts against the voluntary expenditure limits established by this resolution if an expenditure for equivalent goods or services would have been a campaign expenditure described in Attachment A. The amount of the expenditure shall be the fair market value of the contribution on the date of receipt. 3) In the event that any candidate for City Council wishes to abide by the campaign contribution limit requested by the City Council, they may file with the City Clerk a written notice of their intent to limit their campaign expenditures to $34,470 for the 2022 election, and such intent will be indicated in the official voter’s pamphlet by a black diamond next to their name.
4) The cost of printing and translating Candidate Statements shall not be counted against the voluntary expenditure cap of $34,470.
42 CC 05-19-2022
42 of 1613
Resolution No. 22-___

5) The provisions of this resolution have no force of law.

PASSED AND ADOPTED at a special meeting of the City Council of the City of Cupertino this 19th day of May, 2022, by the following vote:

Vote Members of the City Council
AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:
___________________ ________
Darcy Paul, Mayor
City of Cupertino
_________________________
Date
ATTEST:
_________________________________
Kirsten Squarcia, City Clerk
_________________________
Date
43 CC 05-19-2022
43 of 1613
3 Resolution No. 22-___

ATTACHMENT A
(Regulations of the Fair Political Practices Commission, Title 2, Division 6, California Code of Regulations)
§ 18540. Voluntary Expenditure Ceilings.
(a) For purposes of Government Code section 85400, campaign expenditures shall be allocated to primary, general, special, or runoff elections as follows:
(1) Expenditures related to mailing or distribution of campaign literature, signs, buttons, bumper stickers and similar items, shall be allocated to the next election following the date(s) on which the expenditures were made or, if the election is held on the date when the expenditures were made, to the election held on that date.
(2) Expenditures related to publications in broadcast, print or electronic media shall be allocated to the next election following the date(s) specified in the contract for broadcast, publication, or dissemination or, if the election is held on the date specified for publication, broadcast, or dissemination, to the election held on that date. (3) Expenditures related to telephone banks, including costs of design and operation, costs of installing or renting telephone lines and equipment, toll charges, personnel costs, rental of office space, and associated consultants' fees, shall be allocated to the next election following the date(s) on which the expenditures were made or, if the election is held on the date when the expenditures were made, to the election held on that date. (4) Expenditures on professional services, including fees and costs of campaign consultants and pollsters, shall be allocated to the next election following the date(s) on which the expenditures were made or, if the election is held on the date when the expenditure was made, to the election held on that date. In the event that a contract for professional services 44 CC 05-19-2022
44 of 1613
4 Resolution No. 22-___

allocates specific fees and costs to particular elections, the terms of the contract will govern allocation of expenditures to each election. If a contract provides for a bonus payment should the candidate win a particular election, the bonus payment is an expense of the election whose result triggers the payment obligation.
(5) Overhead expenditures, including expenditures related to the lease of office space, payments for utilities, rental or purchase of office equipment and furnishings, miscellaneous supplies, costs of internal copying and printing, monthly telephone charges, personnel costs, and candidate or staff travel expenses, shall be allocated to the next election following the date(s) on which the expenditures were made or, if the election is held on the date when the expenditures were made, to the election held on that date.
(6) Expenditures related to campaign fundraising shall be allocated to the election for which the funds were raised. If fundraising expenditures cannot be assigned in this manner to a particular election, fundraising expenditures shall be allocated to the next election following the date(s) on which the expenditures were made or, if the election is held on the date when the expense was incurred, to the election held on that date. Fundraising expenditures for the payment of debts under Government Code section 85316 shall not be counted against the voluntary expenditure ceilings established under Government Code section 85400. (7) Unless there is a clear indication to the contrary, campaign expenditures not described in subdivisions (a)(1) through (a)(6) of this regulation shall be allocated to the next election following the date(s) on which the expenditures were made or, if the election is held on the date when the expenditure was made, to the election held on that date. Refunds of any expenditure on goods or services not provided to or used by the campaign shall be credited to the election for which the expenditure would otherwise have been allocated. 45 CC 05-19-2022
45 of 1613
5 Resolution No. 22-___

(8) The candidate shall maintain records establishing that the candidate's allocation of campaign expenditures under Government Code section 85400 was consistent with the provisions of the Act and of this regulation.
(b) The allocation of expenditures under this regulation shall be reported pursuant to subdivision (c) of 2 Cal. Code Regs. section 18421.4.
(c) A non-monetary contribution is deemed to be a campaign expenditure made by the receiving committee on the date of receipt, which counts against the voluntary expenditure limits prescribed by Government Code section 85400, if an expenditure for equivalent goods or services would have been a campaign expenditure described in subdivision (a) of this regulation.

For purposes of Government Code section 85400, the amount of the expenditure shall be the fair market value of the contribution on the date of receipt. (d) Expenditures not counted against the voluntary expenditure limits prescribed by Government Code section 85400 include, but are not limited to, contributions to other candidates or committees, costs associated with preparing and filing campaign finance reports required under the Act, candidate filing fees, and costs of ballot pamphlet statements.

Note: Authority cited: Section 83112, Government Code. Reference: Sections 82015, 85400 and 85402, Government Code.

HISTORY

1. New section filed 11-26-2001; operative 12-26-2001 (Register 2001, No. 48). For prior history, see Register 92, No. 28.

2. Amendment of subsection (b) filed 9-12-2002 as a change without regulatory effect.

Submitted to OAL for filing pursuant to Fair Political Practices Commission v. Office of Administrative Law, 3 Civil C010924, California Court of Appeal, Third Appellate District, 46 CC 05-19-2022
46 of 1613
6 Resolution No. 22-___

nonpublished decision, April 27, 1992 (FPPC regulations only subject to 1974 Administrative Procedure Act rulemaking requirements and not subject to procedural or substantive review by OAL) (Register 2002, No. 37).

3. Amendment of subsection (a)(8) filed 5-12-2021; operative 6-11-2021 pursuant to Cal. Code Regs., tit. 2, section 18312(e). Submitted to OAL for filing pursuant to Fair Political Practices Commission v. Office of Administrative Law, 3 Civil C010924, California Court of Appeal, Third Appellate District, nonpublished decision, April 27, 1992 (FPPC regulations only subject to 1974 Administrative Procedure Act rulemaking requirements and not subject to procedural or substantive review by OAL) (Register 2021, No. 20).
47 CC 05-19-2022
47 of 1613

CITY OF CUPERTINO
Agenda Item
22-10912 Agenda Date: 5/19/2022
Agenda #: 7.

Subject: Consider adopting a resolution authorizing continued remote teleconference meetings of the legislative bodies of the City of Cupertino for the period May 19, 2022 through June 18, 2022 pursuant to the Brown Act, as amended by AB 361 (Continued from May 17, 2022) Adopt Resolution No. 22-057 authorizing continued remote teleconference meetings of the legislative bodies of the City of Cupertino for the period May 19, 2022 through June 18, 2022 pursuant to the Brown Act, as amended by AB 361
CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™ 48
CC 05-19-2022
48 of 1613
1 CITY COUNCIL STAFF REPORT
Meeting: May 19, 2022
Subject
Consider adopting a resolution authorizing continued remote teleconference meetings of the legislative bodies of the City of Cupertino for the period May 19, 2022 through June 18, 2022 pursuant to the Brown Act, as amended by AB 361 Recommended Action
Adopt the Draft Resolution authorizing continued remote teleconference meetings of the legislative bodies of the City of Cupertino for the period May 19, 2022 through June 18, 2022 pursuant to the Brown Act, as amended by AB 361
Background
On March 2, 2020, Governor Newsom declared a state of emergency due to the public health threat posed by COVID-19. On March 4, 2020, Governor Newsom issued Executive Order No-29-20, which suspended certain elements of the Brown Act and specifically allowed legislative bodies to hold meetings entirely electronically with no physical meeting. In accordance with the Executive Order, the City held its first teleconference meeting on March 24, 2020, to help stop the spread of COVID-19. On June 11, 2021, Governor Newsom issued Executive Order No-08-21, which stated that the provisions in Executive Order No-29-20, suspending certain elements of the Brown Act, would continue to apply through September 30, 2021.

On September 15, 2021, Governor Newsom signed AB 361 into law, which allows state and local agencies to continue using teleconferencing during certain state-declared emergencies under modified Brown Act requirements. AB 361 became effective immediately after signing due to its emergency clause and is set to sunset on January 1, 2024. Under AB 361, teleconference meetings may be held during a state of emergency if (1) state or local officials have imposed or recommended measures to promote social distancing, or (2) a legislative body determines by a majority vote that meeting in person would present imminent risks to the health or safety of attendees. (Gov. Code, § 54953(e)(1).)
49 CC 05-19-2022
49 of 1613
2 To continue teleconference meetings beyond a 30-day period, AB 361 requires the Council to make a determination that either (i) "[t]he state of emergency continues to directly impact the ability of the members to meet safely in person, or (ii) “State or local officials continue to impose or recommend measures to promote social distancing.” (Gov. Code, § 54953(e)(3)(B).) That determination must be reviewed each 30 days thereafter to continue teleconference meetings. (Ibid.)
Discussion
AB 361 allows the City Council and other City legislative bodies to continue meeting exclusively via teleconference so long as a state emergency declaration remains in place and the statute’s conditions for permitting remote meetings are met. To continue meeting remotely, the City Council must find that state or local officials have imposed or recommend measures to support social distancing, or that the state of emergency continues to directly impact the ability of the members to meet safely in person.

On May 3, 2022, Council adopted Resolution No. 22-050 affirming findings related to AB 361 and authorizing the City Manager and legislative bodies of the City of Cupertino to meet exclusively by teleconference in accordance with Government Code section 54953(e)(3) and other applicable provisions of the Brown Act through June 2, 2022 (Attachment B). Council may make either or both of the permitted findings to extend the time to allow teleconference meetings to continue. The Santa Clara County Health Officer continues to recommend that public bodies meet remotely to the extent possible, specifically including use of newly enacted AB 361 to maintain remote meetings under the Ralph M. Brown Act and similar laws (Attachment C). It is therefore recommended that Council adopt the Draft Resolution authorizing continued teleconference meetings for the City of Cupertino’s legislative bodies in order to protect the health and safety of all attendees and participants, particularly those who are unvaccinated (Attachment A).

Sustainability Impact
Conducting meetings remotely has reduced paper consumption by providing electronic access to meeting materials instead of printed materials.

Fiscal Impact
No fiscal impact.
_____________________________________
Prepared by: Kirsten Squarcia, City Clerk
Approved for Submission by: Dianne Thompson, Assistant City Manager Attachments:

A – Draft Resolution
B – Adopted Resolution No. 22-050
C – Health Officer Recommendation Regarding Public Governmental Meetings 50 CC 05-19-2022
50 of 1613
RESOLUTION NO. 22-___

A RESOLUTION OF THE CUPERTINO CITY COUNCIL

AUTHORIZING CONTINUED REMOTE TELECONFERENCE MEETINGS OF THE LEGISLATIVE BODIES OF THE CITY OF CUPERTINO FOR THE PERIOD MAY 19, 2022 THROUGH JUNE 18, 2022 PURSUANT TO BROWN ACT PROVISIONS WHEREAS, the City of Cupertino is committed to preserving and nurturing public access and participation in meetings of the City Council, commissions, and committees; and
WHEREAS, all meetings of the City of Cupertino’s legislative bodies are open and public, as required by the Ralph M. Brown Act (Government Code sections 54950–54963), so that any member of the public may attend, participate, and watch the City’s legislative bodies conduct their business; and
WHEREAS, the Brown Act, Government Code section 54953(e), makes provisions for remote teleconferencing participation in meetings by members of a legislative body, without compliance with the requirements of Government Code section 54953(b)(3), subject to the existence of certain conditions; and
WHEREAS, a required condition for holding meetings exclusively by teleconference is that a state of emergency is declared by the Governor pursuant to Government Code section 8625, proclaiming the existence of conditions of disaster or of extreme peril to the safety of persons and property within the state caused by conditions as described in Government Code section 8558; and
WHEREAS, Government Code section 54953(e) further requires that in order to authorize meetings exclusively by teleconference, a legislative body must determine that state or local officials have imposed or recommended measures to promote social distancing, or that meeting in person would present imminent risks to the health and safety of attendees; and
WHEREAS, on October 5, 2021, November 2, 2021, November 30, 2021, December 21, 2021, January 18, 2022, February 15, 2022, March 15, 2022, April 5, 2022, and May 3, 2022, the Cupertino City Council made the findings required under Government Code section 54953(e) and resolved that the legislative bodies of the City of Cupertino shall conduct their meetings without compliance with Government Code section 54953(b)(3), as authorized by Government Code section 54953(e), and that such legislative bodies 51 CC 05-19-2022
51 of 1613
Resolution No. 22-___

should comply with the requirements to provide the public with access to the meetings as prescribed in section 54953(e)(2); and
WHEREAS, Government Code section 54593(e)(3) provides that to continue to holding meetings of legislative bodies exclusively by teleconference, the legislative body must reconsider the circumstances of the state of emergency every 30 days, and find that either (i) the state of emergency continues to directly impact the ability of the members to meet safely in person, or (ii) State or local officials continue to impose or recommend measures to promote social distancing; and
WHEREAS, the City Council has reconsidered the circumstances of the state of emergency that now exists, specifically defined in the County of Santa Clara proclamation of a local emergency beginning February 3, 2020, the City of Cupertino proclamation of a local emergency on March 11, 2020, the Governor of the State of California proclamation of a state of emergency beginning on March 4, 2020, and the national emergency declaration in Proclamation 9994 of March 13, 2020, beginning March 1, 2020, concerning the COVID-19 pandemic; and
WHEREAS, the County of Santa Clara Health Officer's Recommendation Regarding Continued Remote Public Meetings of Governmental Entities dated September 21, 2021 and the California Department of Industrial Relations Revised Emergency Temporary Standards, effective January 14, 2022, continue to require or recommend social distancing in the workplace in certain circumstances; and WHEREAS, the Health Officer's Recommendations, the Revised Emergency Temporary Standards, and evidence documenting the transmission of COVID-19 in indoor spaces establishes that the state of emergency continues to directly impact the ability of the members to meet safely in person; and
WHEREAS, based on the above findings, the Cupertino City Council hereby determines that the legislative bodies of the City of Cupertino shall continue to conduct their meetings without compliance with Government Code section 54953(b)(3), as authorized by Government Code section 54953(e), and that such legislative bodies shall comply with the requirements to provide the public with access to the meetings as prescribed in section 54953(e)(2); and
WHEREAS, the City has and will continue to provide access for the public to legislative meetings and procedures through video teleconference technologies. 52 CC 05-19-2022
52 of 1613
Resolution No. 22-___

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Cupertino, as follows:

1. Remote Teleconference Meetings. The City Manager and legislative bodies of the City of Cupertino are hereby authorized and directed to meet exclusively by teleconference and to take all actions necessary to carry out the intent and purpose of this Resolution, including conducting open and public meetings in accordance with Government Code section 54953(e) and other applicable provisions of the Brown Act.

2. Effective Date of Resolution. This Resolution shall take effect immediately upon its adoption and shall be effective through June 18, 2022, or such time as the City Council adopts a subsequent resolution in accordance with Government Code section 54953(e)(3) to extend the time during which the City Council of the City of Cupertino may continue to teleconference without compliance with Government Code section 54953(b)(3).

PASSED AND ADOPTED at a special meeting of the City Council of the City of Cupertino this 19th day of May 2022, by the following vote:

Vote Members of the City Council
AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:
_______________ ________________
Darcy Paul, Mayor
City of Cupertino
________________________
Date
ATTEST:
____________________ ___________
Kirsten Squarcia, City Clerk
________________________
Date
53 CC 05-19-2022
53 of 1613
RESO[UTION N0. 22-050

A RESOLUTION OF THE CUPERTINO CITY COUNCIL

AUTHORIZING CONTINUED REMOTE TELECONFERENCE MEETINGS OF THE LEGISLATIVE BODIES OF THE CITY OF CUPERTINO FOR THE PERIOD MAY 3, 2022 THROUGH JUNE 2, 2022 PURSUANT TO BROWN ACT PROVISIONS WHERE AS, the City of Cupertino is committed to preserving and nurturing public access and participation in meetings of the City Council, commissions, and committees; and
WHEREAS, all meetings of the City of Cupertino's legislative bodies are open and public, as required by the Ralph M. Brown Act (Government Code sections 54950-54963), so that any member of the public may attend, participate, and watch the City's legislative bodies conduct their business; and
WHEREAS, the Brown Act, Government Code section 54953(e), makes provisions for remote teleconferencing participation in meetings by members of a legislative body, without compliance with the requirements of Government Code section 54953(b)(3), subject to the existence of certain conditions; and
WHEREAS, a required condition for holding meetings exclusively by teleconference is that a state of emergency is declared by the Governor pursuant to Government Code section 8625, proclaiming the existence of conditions of disaster or of extreme peril to the safety of persons and property within the state caused by conditions as described in Government Code section 8558; and
WHEREAS, Government Code section 54953(e) further requires that in order to authorize meetings exclusively by teleconference, a legislative body must determine that state or local officials have imposed or recommended measures to promote social distancing, or that meeting in person would present imminent risks to the health and safety of attendees; and
WHEREAS, on October 5, 2021, November 2, 2021, November 30, 2021, December 21, 2021, January 18, 2022, February 15, 2022, March 15, 2022, and April 5, 2022 the Cupertino City Council made the findings required under Government Code section 54953(e) and resolved that the legislative bodies of the City of Cupertino shall conduct their meetings without compliance with Government Code section 54953(b)(3), as authorized by Government Code section 54953(e), and that such legislative bodies should 54 CC 05-19-2022
54 of 1613
Resolution No. 22-050

comply with the requirements to provide the public with access to the meetings as prescribed in section 54953(e)(2); and
WHEREAS, Government Code section 54593(e)(3) provides that to continue to holding meetings of legislative bodies exclusively by teleconference, the legislative body must reconsider the circumstances of the state of emergency every 30 days, and find that either (i) the state of emergency continues to directly impact the ability of the members to meet safely in person, or (ii) State or local officials continue to impose or recommend measures to promote social distancing; and
WHEREAS, the City Council has reconsidered the circumstances of the state of emergency that now exists, specifically defined in the County of Santa Clara proclamation of a local emergency beginning February 3, 2020, the City of Cupertino proclamation of a local emergency on March 11, 2020, the Governor of the State of California proclamation of a state of emergency beginning on March 4, 2020, and the national emergency declaration in Proclamation 9994 of March 13, 2020, beginning March 1, 2020, concerning the COVID-19 pandemic; and
WHEREAS, the County of Santa Clara Health Officer's Recommendation Regarding Continued Remote Public Meetings of Governmental Entities dated September 21, 2021 and the California Department of Industrial Relations Revised Emergency Temporary Standards, effective January 14, 2022, continue to require or recommend social distancing in the workplace in certain circumstances; and WHEREAS, the Health Officer's Recommendations, the Revised Emergency Temporary Standards, and evidence documenting the transmission of COVID-19 in indoor spaces establishes that the state of emergency continues to directly impact the ability of the members to meet safely in person; and
WHEREAS, based on the above findings, the Cupertino City Council hereby determines that the legislative bodies of the City of Cupertino shall continue to conduct their meetings without compliance with Government Code section 549530ri)(3), as authorized by Government Code section 54953(e) and that such legislative bodies shall comply with the requirements to provide the public with access to the meetings as prescribed in section 54953(e)(2); and
WHEREAS, the City has and will continue to provide access for the public to legislative meetings and procedures through video teleconference technologies. 55 CC 05-19-2022
55 of 1613
Resolution No. 22-050

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Cupertino, as follows:

1. Remote Teleconference Meetings. The City Manager and legislative bodies of the City of Cupertino are hereby authorized and directed to meet exclusively by teleconference and to take all actions necessary to carry out the intent and purpose of this Resolution, including conducting open and public meetings in accordance with Government Code section 54953(e) and other applicable provisions of the Brown Act.

2. Effective Date of Resolution. This Resolution shall take effect immediately upon its adoption and shall be effective through June 2, 2022, or such time as the City Council adopts a subsequent resolution in accordance with Government Code section 54953(e)(3) to extend the time during which the City Council of the City of Cupertino may continue to teleconference without compliance with Government Code section 54953(b)(3).

PASSED AND ADOPTED at a regular meeting of the City Council of the City of Cupertino this 3rd day of May 2022, by the following vote:

Vote
AYES:

NOES:

ABSENT:

ABST AIN:

Members of the City Council
Paul, Chao, Moore, Wei, Willey
None
None
None
SIGNED:
r/r/-oz-z
(Darcy Paul+
City of Cupertino
Date
ATTEST:

Kirsten Squarcia, City Clerk Date
5/6/22
56 CC 05-19-2022
56 of 1613
County of Santa Clara
Public Health Department
Health Officer
976 Lenzen Avenue, 2nd Floor
San José, CA 95126
408.792.3798
Board of Supervisors: Mike Wasserman, Cindy Chavez, Otto Lee, Susan Ellenberg, S. Joseph Simitian County Executive: Jeffrey V. Smith
Recommendation Regarding Continued Remote Public Meetings of Governmental Entities Issued: September 21, 2021
In light of the continued state of emergency related to COVID-19, the County Public Health Officer continues to recommend that public bodies meet remotely to the extent possible, specifically including use of newly enacted AB 361 to maintain remote meetings under the Ralph M. Brown Act and similar laws.

Among other reasons, this recommendation is made due to the continued threat of COVID-19 to the community, the unique characteristics of public governmental meetings (such as the increased mixing associated with bringing together people from across the community, the need to enable those who are immunocompromised or unvaccinated to be able to safely continue to fully participate in public governmental meetings, and the challenges with fully ascertaining and ensuring compliance with vaccination and other safety recommendations at such meetings), and the continued increased safety protection that social distancing provides as one means by which to reduce the risk of COVID-19 transmission. This recommendation does not apply to those meetings of a quasi-judicial nature that have been already meeting in person prior to September 21, 2021, for example to allow for credibility determinations of witnesses.

The Health Officer will continue to evaluate this recommendation on an ongoing basis and will communicate when there is no longer such a recommendation with respect to meetings for public bodies.
57 CC 05-19-2022
57 of 1613

CITY OF CUPERTINO
Agenda Item
22-10595 Agenda Date: 5/19/2022
Agenda #: 8.

Subject: Consider the FY 2020-21 Annual Comprehensive Financial Report (ACFR) and related supplemental reports (Continued from May 17, 2022)
Accept the FY 2020-21 Annual Comprehensive Financial Report (ACFR) and related supplemental reports CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™ 58
CC 05-19-2022
58 of 1613

CITY COUNCIL STAFF REPORT
Meeting: May 19, 2022
Subject
Consider the FY 2020‐21 Annual Comprehensive Financial Report (ACFR) and related supplemental reports.

Recommended Action
Accept the FY 2020‐21 Annual Comprehensive Financial Report (ACFR) and related supplemental reports.

Discussion
The City of Cupertino’s external auditor, Crowe LLP, audited the City’s accompanying financial statements as of and for the year ended June 30, 2021. During the audit, procedures were performed to obtain audit evidence regarding amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design appropriate audit procedures. Audit procedures are not designed to express an opinion on the effectiveness of the entity’s internal control.

Crowe LLP expressed an unmodified (or clean) opinion, stating “the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business‐type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2021, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund, the Transportation Special Revenue Fund, and the Housing Development Special Revenue Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America” (see FY 2020‐21 ACFR, page 2).

Crowe LLP also issued an Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards (GAGAS Report). The purpose of this report is solely to describe the scope of the auditor’s testing 59 CC 05-19-2022
59 of 1613
of internal control over financial reporting and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance.

The report disclosed no instances of noncompliance or other matters required to be reported under Government Auditing Standards.

The City of Cupertino engaged Crowe LLP to perform an Agreed‐Upon‐Procedures (AUP) on the City’s Appropriations Limit Worksheetrelated to the City’s compliance with Section 1.5 of Article XIIIB of the California Constitution during the period ending June 30, 2021. City Council adopted Resolution 20‐086, establishing an Appropriations Limit of $109,062,934 for FY 2020‐21; no exceptions were noted.

The City of Cupertino engaged Crowe LLP to perform an AUP on the 2019 Clean Water and Storm Protection Fee for the City of Cupertino; no exceptions were noted.

Lastly, the City of Cupertino engaged Crowe LLP to perform an AUP on the City’s investment policy dated May 2020; no exceptions were noted.

Sustainability Impact
No sustainability impact.

Fiscal Impact
No fiscal impact.
_____________________________________
Prepared by: Thomas Leung, Acting Finance Manager
Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Dianne Thompson, Assistant City Manager Attachments:

A – FY 2020‐21 ACFR
B – FY 2020‐21 GAGAS Report
C – FY 2020‐21 Appropriation Limit AUP Report
D – FY 2020‐21 Storm Drain AUP Report
E – FY 2020‐21 Investment AUP Report
F – Management Letter
60 CC 05-19-2022
60 of 1613

FISCAL YEAR
2020 - 2021
Annual
Comprehensive
Financial Report
61 CC 05-19-2022
61 of 1613

CITY OF CUPERTINO, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2021
Prepared by the City of Cupertino Administrative Services Department Finance Division
62 CC 05-19-2022
62 of 1613
i.

CITY OF CUPERTINO, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
For the year ended June 30, 2021

CONTENTS

INTRODUCTORY SECTION
TABLE OF CONTENTS ..................................................................................................................... i LETTER OF TRANSMITTAL .............................................................................................................. iii ORGANIZATION CHART ................................................................................................................... x CITY COUNCIL AND DIRECTORY OF CITY OFFICIALS ................................................................ xi COMMISSIONS AND COMMITTEES ................................................................................................ xii CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING .................. xiii

FINANCIAL SECTION
INDEPENDENT AUDITOR'S REPORT .................................................................................................... 1 MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) .......................................................... 4 BASIC FINANCIAL STATEMENTS:

GOVERNMENT-WIDE FINANCIAL STATEMENTS:

STATEMENT OF NET POSITION ..................................................................................................... 25 STATEMENT OF ACTIVITIES ........................................................................................................... 26 FUND FINANCIAL STATEMENTS:

GOVERNMENTAL FUNDS:

BALANCE SHEET .............................................................................................................................. 28

RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO
STATEMENT OF NET POSITION ................................................................................................... 29

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES ........................................................................................................................... 30 RECONCILIATION OF NET CHANGES IN FUND BALANCES —
GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES .............................................. 31 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES — BUDGET AND ACTUAL — GENERAL FUND ................................................................................... 32 BUDGET AND ACTUAL — TRANSPORTATION SPECIAL REVENUE FUND ................................ 33 BUDGET AND ACTUAL — HOUSING DEVELOPMENT SPECIAL REVENUE FUND .................... 34 PROPRIETARY FUNDS:

STATEMENT OF NET POSITION ..................................................................................................... 36 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION ........................... 37 STATEMENT OF CASH FLOWS ....................................................................................................... 38 NOTES TO BASIC FINANCIAL STATEMENTS ....................................................................................... 39 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED):

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS .............. 74 SCHEDULE OF CONTRIBUTIONS — PENSION ............................................................................. 75 SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS ..................... 76 SCHEDULE OF CONTRIBUTIONS – OPEB ..................................................................................... 77 63 CC 05-19-2022
63 of 1613
ii.

CITY OF CUPERTINO, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
For the year ended June 30, 2021
CONTENTS (Continued)
OTHER SUPPLEMENTARY INFORMATION:

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE — BUDGET AND ACTUAL - PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND .............. 79 NONMAJOR GOVERNMENTAL FUNDS:

COMBINING BALANCE SHEET ........................................................................................................ 81

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES .................................................................................................... 82

SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES — BUDGET AND ACTUAL ....................................................... 83 NONMAJOR ENTERPRISE FUND:

COMBINING STATEMENT OF NET POSITION ............................................................................... 87

COMBINING STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN NET POSITION ......................................................................................................... 88 COMBINING STATEMENT OF CASH FLOWS ................................................................................. 89 INTERNAL SERVICE FUNDS:

COMBINING STATEMENT OF NET POSITION ............................................................................... 91

COMBINING STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN NET POSITION ......................................................................................................... 92 COMBINING STATEMENT OF CASH FLOWS ................................................................................. 93

STATISTICAL SECTION
FINANCIAL TRENDS:

NET POSITION/ASSETS BY COMPONENT — LAST TEN FISCAL YEARS ................................... 96 CHANGES IN NET POSITION/ASSETS — LAST TEN FISCAL YEARS.......................................... 97 FUND BALANCES OF GOVERNMENTAL FUNDS — LAST TEN FISCAL YEARS ......................... 99 CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS —
LAST TEN FISCAL YEARS .............................................................................................................. 100 REVENUE CAPACITY:

ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE
PROPERTY — LAST TEN FISCAL YEARS .................................................................................... 101 DIRECT AND OVERLAPPING PROPERTY TAX RATES — LAST TEN FISCAL YEARS ............... 102 PRINCIPAL PROPERTY TAXPAYERS — CURRENT YEAR AND TEN YEARS AGO .................... 103 PROPERTY TAX LEVIES AND COLLECTIONS — LAST TEN FISCAL YEARS ............................. 104 DEBT CAPACITY:

RATIOS OF OUTSTANDING DEBT BY TYPE — LAST TEN FISCAL YEARS ................................ 105 DIRECT AND OVERLAPPING BONDED DEBT ................................................................................ 106 LEGAL DEBT MARGIN INFORMATION — LAST TEN FISCAL YEARS .......................................... 107 RATIO OF GENERAL BONDED DEBT — LAST TEN FISCAL YEARS ........................................... 108 DEMOGRAPHIC AND ECONOMIC INFORMATION:

DEMOGRAPHIC AND ECONOMIC STATISTICS — LAST TEN FISCAL YEARS ........................... 109 2021 EMPLOYER RANKING ............................................................................................................. 110 OPERATING INFORMATION:

FULL-TIME EQUIVALENT CITY EMPLOYEES BY
FUNCTION/PROGRAM — LAST TEN FISCAL YEARS ................................................................. 111 OPERATING INDICATORS BY FUNCTION/PROGRAM — LAST TEN FISCAL YEARS ................ 112 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM — LAST TEN FISCAL YEARS ........... 113

COMMUNITY PROFILE
64 CC 05-19-2022
64 of 1613
iii.
_________, 2022
To the Citizens of Cupertino, Honorable Mayor,
Members of the City Council, and City Manager
It is our pleasure to submit the Annual Comprehensive Financial Report (ACFR) for the City of Cupertino (the City) for the fiscal year ended June 30, 2021. The report is prepared in accordance with generally accepted accounting principles (GAAP) set by the Governmental Accounting Standards Board (GASB).

The report presents City information on an entity-wide basis and on a more detailed fund level basis. The fund-level reports emphasize the City’s major funds. A Management Discussion and Analysis (MD&A) presents a comparative analysis of current and prior year results, changes in financial position, a comparison of actual versus budget, financial highlights, trends, and disclosure of any known significant events or decisions that affect the financial condition of the City. This transmittal letter is designed to complement the MD&A and should therefore be read in conjunction with it. The MD&A is required supplementary information and is found in the Financial Section of the ACFR.

The accuracy of the data presented and the completeness and fairness of the presentations, including all disclosures, are the responsibility of the management of the City. To provide a reasonable basis for making these representations, management has established a comprehensive internal control framework that is designed to protect the City’s assets and provide sufficient, reliable information for the proper preparation of these financial statements. We believe the data is accurate in all material respects and is presented in a manner that fairly sets forth the City’s financial position. Furthermore, we believe that all disclosures necessary to enable the reader to gain an understanding of the City’s financial activity have been included.

REPORTING ENTITY
This ACFR includes all component units and funds of the City. It reports all activities for which the City is considered to be financially accountable. The general governmental funds support a full range of services, including law enforcement, community development, recreation, public works, public and environmental affairs, and general administration. Enterprise funds account for recreation and solid waste operations supported by user fees. This financial report incorporates data for the City of Cupertino and its component unit, the Cupertino Public Facilities Corporation.

The City operates under a Council-City Manager form of government. There are five council members, including the Mayor, who serve staggered four-year terms. The City Council appoints the City Manager who is responsible for the daily administration of City affairs. The City Council also appoints the City Attorney and the City Treasurer via resolution. All other employees are appointed by the City Manager.

CITY OF CUPERTINO

CITY HALL
10300 TORRE AVENUE • CUPERTINO, CA 95014-3202
(408) 777-CITY • WWW.CUPERTINO.ORG
65 CC 05-19-2022
65 of 1613

ECONOMIC CONDITIONS
The City of Cupertino is located in Santa Clara County at the southern end of the San Francisco Bay Peninsula. The City is comprised of 13-square miles and is bordered by the cities of San Jose, Saratoga, Sunnyvale, Santa Clara, and Los Altos. It has a residential population of 66,274.

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 is a major attraction for families wishing to settle in close proximity to high paying jobs in Silicon Valley. The City recognizes the importance of quality school facilities and programs to all Cupertino residents, and works in partnership with the schools in many programs affecting education and youth. National surveys rank the City high in education levels, average household incomes, and registered patent numbers, as well as one of the best cities in which to live and raise a family.

Because Cupertino is a mature, 93% built-out city, the City of Cupertino focuses on business retention and revitalization. Cupertino is world renowned as the home of high-tech giants, such as Apple, Inc., and as a community with stellar public schools. De Anza College, one of the largest single-campus community colleges in the country, is another major employer and a magnet for attracting local and international students. The City’s proactive economic development efforts have resulted in an innovative environment for start-ups and growing companies to thrive. The City strives to retain and attract local companies through active outreach and a responsive and customer-oriented entitlement process.

Cupertino approved a new mixed-use development project, Westport Cupertino, on the site of the former Oaks Shopping Center. The new development will include 88 townhome/rowhouses, 128 senior assisted living units, as well as 48 Senior Below Market Rate apartments. Further, the development will continue to provide approximately 20,000 square feet of retail open to the public.

The Main Street and Nineteen800 mixed-use developments continue to provide a vibrant downtown area for Cupertino, offering a large selection of restaurants and retailers, including Alexander’s Steakhouse, Eureka!, Oren’s Hummus, Lazy Dog, Ippudo, HaiDiLao Hot Pot Restaurant, Pressed Juicery, Orangetheory, 85 Degree Bakery, Somi Somi, Sul & Beans, Kura Sushi, La Pizzeria, Boiling Point and Jin Tea, Koja Kitchen, Bishops Cuts & Colors, Capezio, Howard’s Shoes, Tan Cha, and Meet Fresh. Housing, office, and the Residence Inn by Marriott are available to support the thriving area. Benihana, Bowlmor, and Ice Center Cupertino also serve as long-time anchors of the remaining portion of Vallco.

The existing retail and commercial developments, many of which have been recently redeveloped, strengthens existing popular venues in Cupertino, including The Marketplace, Cupertino Village, Crossroads, and Homestead Square. The Marketplace has a variety of stores and restaurants popular with students, families, and working professionals. They include Galpao Gaucho, Daiso, Marukai Groceries, Harumi Sushi, La Patisserie Bakery, Beard Papa’s, Legend’s Pizza,, while Cupertino Village continues to be home to 99 Ranch Market, Duke of Edinburgh Pub & Restaurant, JSJ Street Kitchen, Kira Kira Beauty, MOD Pizza, Ten Ren Tea, Fantasia Coffee & Tea, , and many other Asian restaurants, bakeries, and shops.

Homestead Square Shopping Center, located at Homestead Road and De Anza Boulevard, includes a 24- hour Safeway, Ulta Beauty, Ross Stores, Stein Mart, Pet Club, Michael’s, Rite Aid, FedEx, and numerous restaurants, such as Fish’s Wild, Pho Hoa Noodle Soup, Yayoi Teishoku Japanese Restaurant, Starbucks, and Chipotle.

Cupertino features many other retail opportunities, including TJ Maxx and Home Goods, Whole Foods, Target, Party City, and over 180 restaurants to serve residents and the local workforce. There are now seven 66 CC 05-19-2022
66 of 1613
v.
hotels providing over 1,000 rooms, to serve the area: The Aloft Cupertino, Cupertino Hotel, Hilton Garden Inn, Juniper Hotel operated by Curio, Marriott Courtyard, the Residence Inn by Marriott, and the Hyatt House. Two hotel sites have been approved since 2019, which include the De Anza Hotel at 10931 N. De Anza Blvd. and the Cupertino Village Hotel at 10801 N. Wolfe Road.

According to the 2020-2021 Assessor’s Annual Report for Santa Clara County, Cupertino’s net assessment roll growth increased over $1.8 billion, or 6.95%, from the prior year. Approximately $802 million was attributable to residential use values and $782 million were attributable to unsecured asset increases such as business fixtures and personal property.

The City’s sales tax revenues are generated from five principal economic categories: business-to-business (includes electronic equipment and software manufacturers and distributors), state and county pools 20%, restaurants and hotels 2%, general retail 2%, and fuel and service stations 1%.

Our two largest sales taxpayers in the business-to-business category represent a large part of that sector and therefore can significantly affect sales tax trends. Due to taxpayer confidentiality constraints, the City is unable to disclose the amounts of sales tax reported for these businesses. The top taxpayers’ corporate and business technology spending has driven growth in this sector. Sales tax activity has increased across most sectors with a decrease primarily in construction. This decrease is attributed to the winding down of construction projects in the City, particularly, the Apple Park campus development. Given these trends, the City’s FY 2020-21 sales tax revenue is projected to show a more modest increase going forward.

Continued economic growth driven primarily by the business-to-business sector continued through FY 2014-15 until a slight $400,000 decline in FY 2015-16 due to a one-time clean up payment from the previous year received in FY 2016-17. FY 2016-17 increased significantly with a $3.5 million “triple-flip” close-out payment. There was a modest decrease in FY 2017-18 which was again attributable to the onetime “triple-flip” close-out payment from FY 2016-17 that was not received in FY 2017-18. Despite the fluctuation, the sales tax base experienced strong growth. FY 2018-19 experienced a slight decrease due to the tapering of localized sales tax dollars from construction and completion of Apple Campus 2 which further indicates a return to normalcy in respect to previous years. Additionally, the City received a onetime quarterly clean-up payment in FY 2017-18 of $1.6 million that contributed to the comparative decrease in FY 2018-19. In FY 2019-20, the City’s sales taxes experienced growth due to a one-time double payment 67 CC 05-19-2022
67 of 1613
from Apple. Additionally, a change in estimate in which the City adjusted its accrual practice to include the full remittance amounts from July and August 2020 contributed to approximately $9.0 million of the increase over the previous fiscal year. This change in estimate will be applied prospectively and consistently moving forward. Though much uncertainty remains during the course of the pandemic, the City has seen continued increases in FY 2020-21 due to the telework transition, the state-wide need for additional electronic equipment and infrastructure, and the Wayfair decision.

With the economic recovery and easing of credit, commercial development activity picked up considerably in 2012-13 and 2013-14 led by plan reviews of the new Apple Campus 2. Plans for the redevelopment of the Marina shopping center into a mixed-use project, Marina Plaza, was approved in 2016. This project will include 23,000 SF of retail and restaurant use, a 122-room boutique hotel, and 188 residential units including 16 below market rate units. Construction of a five story, 148-room Hyatt House hotel was completed in April 2019 and includes a full-service restaurant and meeting rooms. Through the City’s new General Plan Amendment (GPA) Authorization Process applications for two development projects were authorized by City Council during FY 2019-20 with the De Anza Hotel and the Cupertino Village Hotel.

The City’s pension and retiree medical (also referred to as OPEB, Other Post-Employment Benefits) unfunded actuarial accrued liabilities are discussed in the Notes to the Basic Financial Statements. The City must pay CalPERS, the state’s government pension system, annually to reduce its long-term liability for pensions. Cupertino’s CalPERS actuarial valuation report as of June 30, 2020 reported a pension unfunded accrued liability of $49.2 million with annual payments to CalPERS of 31.9% and 32.6% of projected payroll for 2022-23 and 2023-24, respectively, with ongoing increases after that because of actuarial assumption changes. CalPERS recently experienced strong performance in FY 20-21 with a return of 21.3% that ultimately triggered a reduction in the discount rate from 7% to 6.8%. To address long-term rising costs, Cupertino and state law has reduced pension benefits for new hires and increased employee contributions. As of June 30, 2021,the City has a Net OPEB Asset of $9.4 million with annual payments to a retiree health plan trust at -40.7% of payroll. The negative percentage of payroll further represents an over-funded status.

In addition to the City’s Section 115 OPEB Investment Trust established in 2010, in fiscal year 2017-18, the City Council approved the establishment of a Section 115 Pension Investment Trust as part of a pension rate stabilization program. An initial investment of $8,000,000 was made in FY 2018-19 and an additional contribution of $4 million and $2 million was made in FY 2019-20 and FY 2020-21, respectively.

Because the City contracts out police services to the County Sheriff and because fire protection is handled by a special district, the City avoids the high pension, capital, and operating costs of a City-operated public safety function. The City caps its contributions to employee health insurance premiums that benefit both the City and employees. A build-up of operating reserves from strong revenue years, such as 2013-14, along with a traditional under-spending of budgets, enables the City to withstand weak revenue years that occur periodically, such as in 2009-10.

On March 11, 2021, the American Rescue Plan Act (ARP) of 2021 was signed into law and established the Coronavirus State Fiscal Recovery Fund and Coronavirus Local Fiscal Recovery Funds, which together make up the Coronavirus State and Local Fiscal Recovery Funds (“SLFRF”).

The ARP is a $1.9 trillion economic stimulus bill. Within the ARP, the Coronavirus Local Fiscal Recovery Fund provided $350 billion for states, municipalities, counties, tribes, and territories, including $130 billion for local governments split evenly between municipalities and counties. California cities are expected to receive more than $7 billion dollars in much needed assistance to help offset the billions of dollars in revenue shortfalls due to the shutdown of local economies and the billions spent protecting public health, 68 CC 05-19-2022
68 of 1613
vii.
delivering essential services, protecting vulnerable populations, and helping small businesses survive during the pandemic.

The City of Cupertino is expected to receive two payments totaling $9,694,773 in SLFRF funding. The first payment was received in May 2021 in the amount of $4,847,386.50 and the second payment is expected in May 2022. The City may use SLFRF funds to cover these eligible costs incurred during the period that begins on March 3, 2021 and ends on December 31, 2024, as long as the award funds for the obligations incurred by December 31, 2024 are spent by December 31, 2026.

As a recipient of the SLFRF award, the City has substantial discretion to use the award funds in the ways that best suit the needs of the City’s constituents – as long as such use fits into one of the following four statutory categories determined by the U.S. Department of the Treasury:
 Public Health/Negative Economic Impacts: Recipients may use SLFRF award funds to provide assistance to households – such as rent, mortgage, or utility assistance – for costs incurred by the household prior to March 3, 2021, provided that the City did not incur the cost of providing such assistance prior to March 3, 2021.
 Premium Pay: Recipients may provide premium pay retrospectively for work performed at any time since the start of the COVID-19 public health emergency. Such premium pay must be “in addition to” wages and remuneration already received and the obligation to provide such pay must not have been incurred by the recipient prior to March 3, 2021.
 Revenue Loss: Treasury’s Final Rule gives recipients broad latitude to use funds for the provision of government services to the extent of reduction in revenue. While calculation of los revenue begins with the recipient’s revenue in the last full fiscal year prior to the COVID-19 public health emergency and includes the 12-month period ending December 31, 2020, use of funds for government services must be forward looking for costs incurred by the recipient after March 3, 2021.  Investments in Water, Sewer, and Broadband: Recipients may use SLFRF award funds to make necessary investments in water, sewer, and broadband. Recipients may use SLFRF award funds to cover costs incurred for eligible projects planned or started prior to March 3, 2021, provided that the project costs covered by the SLFRF award funds were incurred after March 3, 2021.

On September 7, 2021, the Cupertino City Council approved a plan which allocated the ARP funding towards revenue loss which was estimated at approximately $29 million. Additionally, the $9.7 million in total ARP funding was approved to be spent on general government services in the General Fund, specifically, City Work Program and special project items. Subsequently, and in accordance with the Treasury’s Final Rule, a $10 million “standard allowance” may be taken which would relieve a jurisdiction’s substantiation of revenue loss. Nevertheless, the City plans to continue using the ARP funding as originally authorized and will continue to monitor and report out on the estimated and actual revenue losses resulting from the pandemic.

ECONOMIC INITIATIVES
With the expanded Apple presence, and the on-going pandemic, the City’s revenue base will remain concentrated among its top companies and top economic sector, the volatile business-to-business area. Past recessions and the historic departure of major tax providers including, but not limited to, Hewlett-Packard and Seagate, demonstrates the need for diversification of the City’s revenue base and a long-term balance of revenues and expenditures. The City desires other revenues to mitigate the fluctuating nature of sales taxes, hotel taxes, user fees, and state grabs of local taxes in times of budget distress. 69 CC 05-19-2022
69 of 1613
COVID-19 has had significant adverse impacts on the City’s transient occupancy taxes, charges for services, and is sure to have long-lasting impacts on its sales tax. While the City’s revenues remained strong in FY 2020-21 and are currently on pace with projections in FY 2021-22, the City’s strong, untapped reserves afford the City to continue actively mitigating the impacts of the pandemic on the community.

Efforts to reduce operating costs, additional allocations for tenants at risk of eviction and homeless assistance, public facility and area sanitation enhancements, and small business grant assistance are all examples in FY 2019-20 and FY 2020-21 of the City’s on-going ability and commitment to overcome these challenges.

ACCOUNTING AND BUDGETARY CONTROL
In developing and evaluating the City’s accounting system, consideration is given to the adequacy of internal accounting controls. The City’s controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against losses from unauthorized use or disposition and the reliability of financial records for preparing financial statements and maintaining accountability of assets.

The concept of reasonable assurance recognizes that the costs of a control should not exceed the benefits likely to be derived and that the evaluation of costs and benefits requires estimates and judgments by management.

The City’s budget is a detailed operating plan that identifies estimated costs and results in relation to estimated revenues. The budget includes 1) the programs, projects, services and activities to be provided during the fiscal year; 2) estimated revenue and fund balance available to finance the operating plan; and 3) the estimated spending requirements of the operating plan. The budget represents a process through which policy decisions are made, implemented and controlled.

INDEPENDENT AUDIT
City ordinance requires an annual audit of the financial records by an independent certified public accounting firm selected by the City Council and its audit committee. Crowe LLP audited the City’s Basic Financial Statements, and their opinion thereon is included in the Financial Section of this report.

FRAUD INVESTIGATION
On September 5, 2018 the Santa Clara County Sheriff’s Office arrested former City of Cupertino employee Jennifer “Yuen-Cheng” Chang, Senior Accountant, for her role in the embezzlement of public funds. It is believed that Ms. Chang issued and cashed numerous fraudulent checks between 2000 and 2014 for a total of $791,494.

The scheme ended in September 2014 right before the implementation of an upgraded financial system in December 2014 that tightened internal controls. Ms. Chang, who was hired by the City in 1997, retired in July 2015.

The checks were uncovered earlier this year by staff during a multi-year, detailed review of several accounts—including payroll, bank reconciliations, and deposits—which began after the implementation of the new financial system in fiscal year 2014-2015. The checks were found debited against a liability account and deemed suspicious due to their nature, size, and lack of supporting documentation.

The Santa Clara County Sheriff’s Office submitted its case to the Santa Clara County District Attorney’s Office for the issuance of a warrant for Ms. Chang. The California Attorney General has brought forward 68 criminal charges against Ms. Chang. The City of Cupertino is seeking full restitution from Ms. Chang through upcoming criminal and civil proceedings.
70 CC 05-19-2022
70 of 1613
ix.

At a Preliminary Hearing on December 10, 2019, Judge Pennypacker ruled that Ms. Chang will have to stand trial on 53 felony counts. The counts include Grand Theft and Computer Intrusion for the period September 28, 2000 to September 5, 2014, and Embezzlement for the period July 22, 2011 to September 5, 2014. Because Ms. Chang’s bank does not save documents from prior to 2011, the State cannot prove an element of the crime of embezzlement. Currently, the Judge set the case for an arraignment for further decision. It is the City’s position to support prosecution to the fullest extent of the law, including full restitution and jail time if criminal liability is found.

Among other internal controls maintained by the City over its financial records, in addition to the upgraded financial system in December 2014 that tightened internal controls, the City also hired additional accounting staff to enhance segregation of duties and established an internal audit function that was approved for implementation in fiscal year 2019-20. Lastly, the City has engaged Moss Adams, LLP to serve as its internal auditor.

CERTIFICATE OF ACHIEVEMENT
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Cupertino for its ACFR for the year ended June 30, 2020. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized ACFR. This report must satisfy both GAAP and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that the current report continues to meet the Certificate of Achievement Program’s requirements.

Respectfully submitted,
Zach Korach
Finance Manager

ACKNOWLEDGMENTS
I would like to express my appreciation to City employees, department heads, the City Manager, members of the Audit Committee, and members of City Council for their interest in conducting the financial operations of the City in a responsible manner. Special thanks go to, Thomas Leung, Zeng Wang, Min Zhao, Jumaini Judoprasetijo, Vi Tran, and Amber Chang of the Finance Division for their continued support and dedication. Special recognition to Beth Viajar, Richard Wong, and Giang Dinh for their efforts in the preparation and production of this report.

Reviewed by,
Kristina Alfaro
Director of Administrative Services
71 CC 05-19-2022
71 of 1613
Citizens of
Cupertino
City Council
Committees and
Commissions
City Attorney City Manager City Treasurer
City Clerk Public Affairs Sustainability
Programs
Law Enforcement
(Santa Clara County
Sherriff – Contract)
Administrative
Services
Community
Development
Recreation and
Community Services Public Works Innovation &
Technology
Code Enforcement
Finance Building Recreation &
Education
Capital Improvement
Program Transportation GIS Infrastructure
Human Resources Planning Sports, Safety &
Outdoor Recreation
Development
Services
Environmental
Programs Video Applications
Economic
Development
Business &
Community Services Service Center
Code Enforcement
(Zoning & Building) Grounds Streets Trees & ROW Facilities & Fleet Housing
x.
72 CC 05-19-2022
72 of 1613
Directory of City Officials
City Council
Darcy Paul Liang Chao
Mayor Vice Mayor
Kitty Moore Jon Willey
Council member Council member
Hung Wei
Council member
Directory of City Officials
Deborah L. Feng – City Manager
Dianne Thompson – Assistant City Manager
Heather Minner – City Attorney (Contract)
Kristina Alfaro – Director of Administrative Services
Ben Fu – Director of Community Development
Roger Lee – Director of Public Works
Joanne Magrini – Director of Parks and Recreation
Bill Mitchell – Chief Technology Officer
xi.
73 CC 05-19-2022
73 of 1613
Commissions and Committees

BICYCLE PEDESTRIAN

COMMISSION
Gerhard Eschelbeck
Erik Lindskog
Jack Carter
Maanya Condamoor
Ilango Ganga

FINE ARTS COMMISSION
Diana Matley
Janki Chokshi
Satish Tare
Esha Rao
Sudha Kasamsetty

HOUSING COMMISSION
Govind Tatachari
Tess Parish
Sue Bose
Connie Cunningham
Siva Gandikota

LIBRARY COMMISSION
Archana Panda
Liyan Zhao
Sheela Sreekanth
Qin Pan
Rahul Vasanth

PARKS AND RECREATION

COMMISSION
Carol Stanek
Xiangchen "Minna" Xu
Gopal Kumarappan
Neesha Tambe
Sashikala Begur

TECHNOLOGY,

INFORMATION &

COMMUNICATIONS

COMMISSION
Eliza Du
Mukesh Garg
Naidu Bollineni
Rajaram Soundararajam
Prabir Mohanty

AUDIT COMMITTEE
Angela Chen
Mingming (Daisy) Liang
Yan (Sophie) Song
Liang Chao
Kitty Moore

DESIGN REVIEW COMMITTEE
Steven Scharf
Vikram Saxena
Muni Madhdhipatla

ENVIRONMENTAL REVIEW

COMMITTEE
Kitty Moore
R "Ray" Wang
Dianne Thompson
Ben Fu
Chad Mosley

LEGISLATIVE REVIEW

COMMITTEE
Liang Chao
Kitty Moore

PLANNING COMMISSION
R "Ray" Wang
Vikram Saxena
Sanjiv Kapil
Muni Madhdhipatla
Steven Scharf

PUBLIC SAFETY COMMISSION
Eric Shan
Hymanand Nellore
Lakshminarasimha
Ankireddipally
Tiffany Wang
Yvonne Chao

SUSTAINABILITY

COMMISSION
Anna Weber
Gary Latshaw
Meera Ramanathan
Ram Mohan
Vignesh Swaminathan

TEEN COMMISSION
Arya Srivastava
Alden Gu
Rushil Jayant
Maple Leung
Zehra Naqvi
Samikshaa Natarajan
Anagaa Nathan
Jay Yeung
Alex Zhang
xii.
74 CC 05-19-2022
74 of 1613
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Cupertino
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2020
Executive Director/CEO
xiii.
75 CC 05-19-2022
75 of 1613
(Continued)

1. INDEPENDENT AUDITOR'S REPORT
To the Honorable Mayor and City Council
City of Cupertino, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Cupertino, California (City) as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
76 CC 05-19-2022
76 of 1613
(Continued)

2. Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2021, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund, the Transportation Special Revenue Fund, and the Housing Development Special Revenue Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter
As discussed in Note 1 to the financial statements, during the year ended June 30, 2021, the City implemented GASB Statement No. 84, Fiduciary Activities, effective July 1, 2020. This change resulted in the previously reported fiduciary fund to no longer be considered a component unit or a fiduciary fund of the City and as such it is no longer included in the City’s financial statements. Our opinions are not modified with respect to this matter.

Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, and the required supplementary information section on pages 4-21 and 77-81 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, other supplementary information section, statistical section and community profile are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The other supplementary information section is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the other supplementary information section is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory section, statistical section and community profile has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.
77 CC 05-19-2022
77 of 1613

3. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated <>, 2021 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Crowe LLP
Costa Mesa, California
<>, 2021
78 CC 05-19-2022
78 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
4 This section describes the City of Cupertino’s financial performance for the year. Readers are encouraged to consider the following information in conjunction with the accompanying Transmittal Letter and Basic Financial Statements.
2020-21 FINANCIAL HIGHLIGHTS
 The COVID-19 pandemic, and the ensuing lockdowns, has negatively affected economies not only in the region, but around the world. Sales tax, transient occupancy tax, and charges for services were both positively and negatively impacted as explained further below. However, while much uncertainty remains regarding the length and magnitude of these impacts, the City stands well positioned with robust fund balance reserves that have been bolstered by strong sales tax performance, federal funding from the American Rescue Plan Act of 2021, and budget reduction strategies.
 The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the fiscal year 2020-21 by $335.1 million (net position). Of this amount, $92.8 million represents unrestricted net position, which may be used to meet the City’s ongoing obligations to citizens and creditors.
 City revenues have increased in 2020-21 with base governmental revenues showing a $3.4 million increase, or 3%, over 2019-20. The primary fluctuations include an increase in property and sales tax and program revenues that are offset by decreases in transient occupancy tax and charges for services. According to the 2020-2021 Assessor’s Annual Report for Santa Clara County, Cupertino’s net assessment roll growth increased $1.8 billion million, or 6.95%, from the prior year.

Approximately $802 million was attributable to residential use values and $782 million were attributable to unsecured asset increases.
 The City experienced an increase of approximately $10.8 million, or 43.2%, in FY 2019-20 sales tax revenues compared to the previous year. This trend continued in FY 2020-21 with sales tax revenues increasing by $6.9 million or 19.4% over the previous fiscal year. Although the City experienced declines in many of the sectors including autos and transportation, building and construction, fuel and service stations, general consumer goods, and restaurants and hotels over the last two year, these experiences were mitigated by strong performance in the business and industry sector and the City’s county pool allocation. The COVID-19 pandemic has brought great uncertainty to the economy and although the business and industry sector has experienced significant growth due to the telework conversion and closure of brick-and-mortar retail, the City continues to monitor and forecast these sectors conservatively. COVID-19 and shelter-in-place orders brought the City’s transient occupancy taxes to a near halt beginning in March of 2020. As a result, the City’s experienced a $5.1 million, or 70.6%, decrease in transient occupancy tax over the previous fiscal year.  The City continued to make substantial investment into capital projects dedicated to street and transportation improvements, storm drain improvements, and maintenance of and improvements to City facilities, resulting in an increase in net capital assets of $11.5 million, or 6%, after depreciation.  The City’s change in net position was $32.0 million for governmental activities and $34.3 million in total, reflecting the continued positive experience in sales tax and modest departmental spending.  The City’s Net Pension Liability for June 30, 2021, was $48.5 million, up $2.4 million from June 30, 2020, or 5.2%. The Plan Fiduciary Net Position as a Percentage of the Total Pension Liability for the City’s pension plan with CalPERS maintained at 68.2%. During fiscal year 2020-21, the City Council approved an additional $2 million contribution to the City’s recently established pension rate stabilization program (Section 115 Trust). Annual contributions to this trust will continue on an annual basis and as part of the City’s budget process. In accordance with guidance under GASB 67/68, the assets in the Section 115 Trust are reported as restricted cash and investments in the City’s General Fund. While the Section 115 Trust qualifies as a “trust,” the assets in the Section 115 Trust 79 CC 05-19-2022
79 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
5 are not used to directly pay benefits to beneficiaries; rather, they are used to pay CalPERS via the CERBT Trust and as a result, the activities are not required to be reported in a fiduciary fund. The Trust’s ending balance as of June 30, 2021 was $18.5 million.  Business-type activities contributed $4.9 million to citywide revenues totaling $120.6 million, while the same activities contributed over $5.5 million to citywide expenses of $86.4 million.  The City implemented the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, during fiscal year 2017-18. This statement requires governments to report a liability on the face of the financial statements for the OPEB provided by the City. During FY 2019-20, the City reduced the discount rate from 7.0% to

6.5% which consequently increased the Total OPEB Liability. As of June 30, 2020, the City reported a Net OPEB Liability of $2.0 million. With strong investment performance during FY 2020-21, the City’s actuarial valuation generated a Net OPEB Asset of $9.4 million. The City also reported deferred outflows and inflows related to OPEB of $1.6 million and $9.8 million, respectively. As of June 30, 2021, the City’s OPEB plan had a funding ratio or funded ratio or status of 132%.  On September 29, 2020, the City of Cupertino’s 2020A Certificates of Participation (2020 COPs) were successfully sold in order to refund the City’s 2012 Certificates of Participation for debt service savings. The 2020 COPs were very well received by investors due in large part to the well-regarded Cupertino name, the top-notch AA+ rating, the sizable annual principal amounts and short maturity, and favorable supply and demand dynamics in the California municipal market. The refunding generated net present value savings of approximately $3.14 million, 11.61% of refunded par and a True Interest Cost of 0.72%. Savings to the City’s General Fund amounts to approximately $494,000 per year for the next 10 years, or almost $5 million in total savings.  On March 11, 2021, the American Rescue Plan Act (ARP) of 2021 was signed into law and established the Coronavirus State Fiscal Recovery Fund and Coronavirus Local Fiscal Recovery Funds, which together make up the Coronavirus State and Local Fiscal Recovery Funds (“SLFRF”).

The American Rescue Plan (ARP) Act of 2021 is a $1.9 trillion economic stimulus bill. Within the ARP, the Coronavirus Local Fiscal Recovery Fund provided $350 billion for states, municipalities, counties, tribes, and territories, including $130 billion for local governments split evenly between municipalities and counties. California cities are expected to receive more than $7 billion dollars in much needed assistance to help offset the billions of dollars in revenue shortfalls due to the shutdown of local economies and the billions spent protecting public health, delivering essential services, protecting vulnerable populations, and helping small businesses survive during the pandemic.

The City of Cupertino is expected to receive two payments totaling $9,694,773 in SLFRF funding.

The first payment was received in May 2021 in the amount of $4,847,386.50 and the second payment is expected in May 2022. The City may use SLFRF funds to cover these eligible costs incurred during the period that begins on March 3, 2021 and ends on December 31, 2024, as long as the award funds for the obligations incurred by December 31, 2024 are spent by December 31, 2026.

As a recipient of the SLFRF award, the City has substantial discretion to use the award funds in the ways that best suit the needs of the City’s constituents – as long as such use fits into one of the following four statutory categories determined by the U.S. Department of the Treasury:
- Public Health/Negative Economic Impacts: Recipients may use SLFRF award funds to provide assistance to households – such as rent, mortgage, or utility assistance – for costs incurred by the household prior to March 3, 2021, provided that the City did not incur the cost of providing such assistance prior to March 3, 2021.
- Premium Pay: Recipients may provide premium pay retrospectively for work performed at any time since the start of the COVID-19 public health emergency. Such premium pay must be “in addition to” wages and remuneration already received and the obligation to provide such pay must not have been incurred by the recipient prior to March 3, 2021. 80 CC 05-19-2022
80 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
6 - Revenue Loss: Treasury’s Final Rule gives recipients broad latitude to use funds for the provision of government services to the extent of reduction in revenue. While calculation of lost revenue begins with the recipient’s revenue in the last full fiscal year prior to the COVID-19 public health emergency and includes the 12-month period ending December 31, 2020, use of funds for government services must be forward looking for costs incurred by the recipient after March 3, 2021.
- Investments in Water, Sewer, and Broadband: Recipients may use SLFRF award funds to make necessary investments in water, sewer, and broadband. Recipients may use SLFRF award funds to cover costs incurred for eligible projects planned or started prior to March 3, 2021, provided that the project costs covered by the SLFRF award funds were incurred after March 3, 2021.

On September 7, 2021, the Cupertino City Council approved a plan which allocated the ARP funding towards revenue loss which was estimated at approximately $29 million. Additionally, the $9.7 million in total ARP funding was approved to be spent on general government services in the General Fund, specifically, City Work Program and special project items. Subsequently, and in accordance with the Treasury’s Final Rule, a $10 million “standard allowance” may be taken which would relieve a jurisdiction’s substantiation of revenue loss. Nevertheless, the City plans to continue using the ARP funding as originally authorized and will continue to monitor and report out on the estimated and actual revenue losses resulting from the pandemic.

OVERVIEW OF THE FINANCIAL STATEMENTS
The discussion and analysis is intended to serve as an introduction to the City’s Basic Financial Statements. The Basic Financial Statements are comprised of the City-wide Financial Statements, the Fund Financial Statements, and the notes to the Basic Financial Statements. These two sets of financial statements provide two different views of the City’s financial activities and positions.

The City-Wide Financial Statements provide a long-term view of the City’s activities as a whole, and comprise the Statement of Net Position and the Statement of Activities. These statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole. The accrual basis of accounting is similar to the accounting used by most private sector companies. The Statement of Net Position provides information about the financial position of the City as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about all the City’s revenues and expenses, with the emphasis on measuring net revenues and expenses for each of the City’s programs. The Statement of Activities explains in detail the change in net position for the year. Over time, increases or decreases in net position can be indicators of whether the financial condition of the City is improving or deteriorating.

All of the City’s activities are grouped into Governmental activities and Business-type activities, as explained below. The Statement of Net Position and the Statement of Activities provide a summary of these two types of activities for the City as a whole.
 Governmental activities—Most of the City’s basic services are considered to be governmental activities, including public works, law enforcement, community development, recreation, public & environmental affairs, and general administration. These services are supported by general City revenues such as property, sales and other taxes, and by specific program revenues such as developer fees and grants.

The City’s governmental activities include the activities of a separate legal entity, the Cupertino Public Facilities Corporation (the “Corporation”), because the City is considered to be financially accountable for the Corporation. The City leases its major facilities from the Corporation, which then uses the lease payments to pay principal and interest on the Corporation’s long-term debt. 81 CC 05-19-2022
81 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
7  Business-type activities—All of the City’s enterprises are reported here, including solid waste management and most of the City’s recreational operations. Unlike governmental services, these services are supported by charges paid by users based on the amount of services used.

The Fund Financial Statements report the City’s operations in more detail than the City-wide Financial Statements and focus primarily on the short-term activities of the City’s General Fund and other major funds. The Fund Financial Statements measure only current revenues, expenditures, assets, liabilities, and deferred inflows and outflows of resources; they exclude long-term assets and liabilities. Because these statements focus on the near-term inflows and outflows of spendable resources, such information may be useful in evaluating near-term financing requirements.

The Fund Financial Statements provide detailed information about each of the City’s most significant funds, called major funds. Cupertino’s Fund Financial Statements include governmental, enterprise and internal service funds as discussed below. Each major fund is presented individually, with all non-major funds summarized and presented only in a single column. Subordinate schedules, which follow the Notes to Basic Financial Statements, present the detail of these non-major funds. Major funds present the significant activities of the City for the year, and may change from year to year as a result of changes in the pattern of City’s activities and public interest. For example, the Capital Improvement Projects Fund may or may not appear as a major fund depending on the volume of construction activity in a certain year.

Governmental Fund financial statements are prepared on the modified accrual basis, which means they measure only current financial resources and uses. They present essentially the same functions reported as governmental activities in the city-wide financial statements. However, capital assets and other longlived 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 activity statements to allow a better understanding of the long-term impact of the government’s near-term financial decisions.

Comparisons of budget and actual financial information are included in the Basic Financial Statements for the General Fund and other major Special Revenue Funds. For other nonmajor funds, budgetary comparison schedules for these funds are included in this document as supplemental information only.

Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis and include current and long-term assets and liabilities and deferred outflows and inflows of resources.

Enterprise funds are used to report the same functions presented as business-type activities in the Citywide Financial Statements, and in more detail in the Fund Financial Statements.

Since the City’s Internal Service funds provide goods and services only to the City’s governmental and business-type activities, their activities are reported only in total at the fund level. Internal Service funds may not be major funds because their revenues are derived from other City funds. These revenues are eliminated in the City-wide financial statements and any related profits or losses are returned to the activities which created them, along with any residual net position of the Internal Service funds. For this City, internal service activities predominantly benefit governmental rather than business-type functions, and are therefore included within governmental activities in the City-wide Financial Statements.

The Notes to Basic Financial Statements provide important additional detail that is essential to a full understanding of the data reported in the City-wide and Fund Financial Statements.

CITY-WIDE FINANCIAL ACTIVITIES
This analysis focuses on the net position and changes in net position of the City’s Governmental Activities (Tables 1 and 2) and Business-Type Activities (Tables 3 and 4) as presented in the City-wide Statement of Net Position and the Statement of Activities. 82 CC 05-19-2022
82 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
8 Governmental Activities
Table 1
Condensed Statement of Net Position at June 30
(in thousands)
Governmental Activities
2021 2020
Assets:

Cash and investments $ 167,810 $ 147,608
Restricted cash and investments 18,499 17,088
Other assets 17,260 17,150
Net OPEB assets 8,958 -
Capital assets 210,273 199,776
Total assets 422,800 381,622
Deferred Outflows of Resources:

Loss on refunding 239 -
Related to Pension (Note 10) 8,623 9,050
Related to OPEB (Note 11) 1,468 2,590
Total deferred outflows of resources 10,330 11,640
Liabilities:

Long term debt 23,348 27,010
Other liabilities 77,687 72,819
Total liabilities 101,035 99,829
Deferred Inflows of Resources:

Related to Pension (Note 10) 100 774
Related to OPEB (Note 11) 8,323 1,032
Total deferred inflows of resources 8,423 1,806
Net Position:

Net Investment in capital assets 186,503 177,128
Restricted 53,711 48,006
Unrestricted 83,458 66,493
Total net position $ 323,672 $ 291,627
The City’s change in net position from governmental activities was $32.0 million. The following significant changes within assets, liability, and net position categories occurred:
 The City made an additional $2 million contribution to its Section 115 Trust as part of the City’s pension rate stabilization program. In accordance with guidance under GASB 67/68, the assets in the Section 115 Trust are reported as restricted cash and investments in the City’s General Fund. While the Section 115 Trust qualifies as a “trust,” the assets in the Section 115 Trust are not used to directly pay benefits to beneficiaries; rather, they are used to pay CalPERS via the CERBT Trust and as a result, the activities are not required to be reported in a fiduciary fund.
83 CC 05-19-2022
83 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
9  Cash and investments increased by $20.2 million, or 13.7%, over the previous fiscal year.

This was due to continued positive performance of the City’s sales tax, receiving of the 1st tranche of American Rescue Plan Act funding ($4.8 million), and reduced departmental spending in an effort to mitigate the fiscal impacts brought on by the pandemic.  With strong investment performance in the City’s Section 115 OPEB Investment Trust, the City’s Net OPEB Liability was converted to a Net OPEB Asset in FY 2020-21 and was reported at $9.4 million.
 Capital assets increased approximately $10.5 million. This consisted of continued significant capital investment into capital projects dedicated to street and transportation improvements, storm drain improvements, and maintenance of and improvements to City facilities that were offset with current year depreciation expense.
 Long-term debt decreased by $3.7 million or 13.6% over the previous year and resulted from the successful refunding of the City’s 2012 Certificates of Participation in September 2020.  Other liabilities increased by approximately $4.9 million, primarily due to an increase in the City’s Net Pension Liability as well as a $4.8 million unearned revenue related to the American Rescue Plan Act of 2021.
 Deferred Outflows Related to Pension and OPEB decreased $1.6 million primarily due to actuarial changes of assumptions. Deferred Inflows of Resources Related to Pension and OPEB increased approximately $6.6 million primarily due to actuarial changes of assumptions.

Sources of Revenue, Governmental Activities
2020-21
Program revenues experienced consistent performance year-over-year as the pandemic has had significant adverse impact on charges for services, particularly in the Parks and Recreation department.

With the exception of transient occupancy taxes, the City’s general tax revenues remained strong with sales tax continuing its unprecedented positive performance throughout the pandemic. Revenues increased $3.4 million from the prior year, primarily due to decreases in functional program revenues offset with increases in general revenues.
84 CC 05-19-2022
84 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
10 Functional Expenses, Governmental Activities
2020-21
The Statement of Activities presents program revenues, expenses, general revenues, and the resulting change in net position as summarized in the next table. 85 CC 05-19-2022
85 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
11 Table 2
Condensed Statement of Activities for the Year Ended June 30 (in thousands)
Governmental Activities
Expenses 2021 2020
Administration $3,637 $7,975
Law enforcement 15,212 14,698
Innovation & technology 1,722 3,637
Administrative services 5,358 5,176
Recreation and community services 1,183 8,763
Community development 11,496 10,286
Public works 41,870 33,339
Interest on long-term debt 398 883
80,876 84,757
Revenues
Program revenues:

Charges for services 18,137 19,911
Operating grants and contributions 5,998 5,794
Capital grants and contributions 1,792 1,047
Total program revenues 25,928 26,752
General revenues:

Taxes:

Property tax 19,198 18,117
Property tax in-lieu of motor vehicle fee 9,080 8,490
Sales tax 42,581 35,657
Transient occupancy tax 2,141 7,286
Utility user tax 3,074 3,182
Franchise tax 3,368 3,419
Other taxes 3,022 1,774
Intergovernmental, unrestricted:

Motor vehicle license fee 44 47
Investment earnings 4,148 3,259
Gain on sale of capital assets - 4
Miscellaneous 3,185 1,187
Total general revenues 89,842 85,586
Total revenues 115,770 112,338
Excess of revenues over expenses,
before transfers 34,894 27,581
Transfers (Note 4) (2,849) (3,523)
Change in net position 32,045 24,058
Beginning net position 291,627 267,569
Ending net position $ 323,672 $ 291,627
86 CC 05-19-2022
86 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
12 City-wide Governmental Activities Revenues
Table 2 shows that revenues from governmental activities increased $3.4 million or 3.1% from last year, finishing at $115.8 million. General revenues also experienced a net increase namely, property tax, sales tax, and other taxes as further discussed below.

Increases in the City’s general revenues are attributable to a $1.6 million increase in property tax over the prior year. According to the 2020-2021 Assessor’s Annual Report for Santa Clara County, Cupertino’s net assessment roll growth increased $1.8 billion million, or 6.95%, from the prior year.

Approximately $802 million was attributable to residential use values and $782 million were attributable to unsecured asset increases.

The City experienced an increase of approximately $10.8 million, or 43.2%, in FY 2019-20 sales tax revenues compared to the previous year. This trend continued in FY 2020-21 with sales tax revenues increasing by $6.9 million or 19.4% over the previous fiscal year. Although the City experienced declines in many of the sectors including autos and transportation, building and construction, fuel and service stations, general consumer goods, and restaurants and hotels over the last two year, these experiences were mitigated by strong performance in the business and industry sector and the City’s county pool allocation. The COVID-19 pandemic has brought great uncertainty to the economy and although the business and industry sector has experienced significant growth due to the telework conversion and closure of brick-and-mortar retail, the City continues to monitor and forecast these sectors conservatively.

In FY 2019-20, transient occupancy tax had decreased $1.6 million, or 18.1%, over the prior year due to the COVID-19 and related shelter in place orders. FY 2020-21 experienced similar trends, but were extrapolated for the entire year. Total transient occupancy taxes amounted to $2.1 million and were down $5.1 million, or 70.6%. The road to recovery for this tax source is anticipated to take longer than other areas as employers’ long-term and permanent telework policies will have substantial impact on the timing and extent of recovery.

Other taxes experienced a $1.2 million, or 70.3% increase which was primarily driven by $735,259 in federal funding received from the CARES Act. While the revenue was not recognized in FY 2020-21, it is important to note that $4.8 million in federal funding was received from the American Rescue Plan Act of 2021. This amount, in addition to the second payment of $4.8 million to be received in May 2022 will all be recognized in FY 2021-22.

Investment earnings saw a decrease of $1.5 million, or 27.1%, over the prior year. This was due to the City’s portfolio’s total rate of return of 0.27% (net of fee) for the fiscal year (source: Chandler Asset Management).

Program revenues showed a decrease of $824,000, or 3%, and is primarily attributable to a decline in charges for services within the Parks & Recreation department. 87 CC 05-19-2022
87 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
13 City-wide Governmental Activities Expenses
City-wide governmental activities expenses decreased by $3.9 million, or 5%. This was primarily driven by budget reduction strategies that were incorporated as part of the FY 2020-21 Adopted Budget in response to the COVID-19 pandemic.

Change in Net Position
The City-wide governmental net position increase of $32 million was significantly up compared to the increase in 2019-20 and can be best explained by continued positive sales tax performance, federal funding assistance, and budget reduction strategies.

Business Type Activities
Business-type activities in the City-wide Financial Statements include the City’s four enterprise funds.

Enterprise funds are used to account for recreational and solid waste management operations that are financed and operated in a manner similar to private business enterprises where the intent is that costs of providing services and facilities to the general public on a continuing basis be financed or recovered primarily through user fees. The major proprietary funds section of this report provides more information on business-type results.

As shown in Table 3 and Table 4, the business-type net position totaled $11.5 million at June 30, 2021, an increase of $2.2 million, or 23.9%, from the prior year with unrestricted net position increasing $1.2 million and the net investment in capital assets increasing by $972,000. Business-type activities transferred in (net) $2.8 million, a decrease of $674,000 over the prior year. An increase in capital asset additions offset with $178,000 in depreciation expense resulted in a net increase of $972,000 over the prior year. Enterprise activities experienced an overall increase in assets due primarily to investment income which increased cash and cash equivalents. Liabilities for business-type activities remained consistent over the previous year, increasing by $24,000, or 0.5%.

In Table 4, revenues for all business-type activities decreased $1.7 million and operating expenses decreased by $3.4 million, primarily attributable the impacts set forth by the pandemic. 88 CC 05-19-2022
88 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
14 Table 3
Condensed Statement of Net Position at June 30
(in thousands)
Business Type Activities
2021 2020
Assets:

Cash and investments $ 12,961 $ 11,524
Other assets 577 348
Capital assets 2,091 1,119
Total assets 15,629 12,991
Deferred Outflows of Resources:

Related to pension 579 598
Related to OPEB 101 156
Total deferred outflows of
resources 680 754
Other Liabilities: 4,389 4,365
Total liabilities 4,389 4,365
Deferred Inflows of Resources:

Related to pension 21 51
Related to OPEB 434 75
Total deferred inflows of resources 455 126
Net Position:

Net Investment in capital assets 2,091 1,119
Unrestricted 9,374 8,135
Total net position $ 11,465 $ 9,254
89 CC 05-19-2022
89 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
15 Table 4
Condensed Statement of Activities for the Year Ended June 30 (in thousands)
Business Type Activities
Expenses 2021 2020
Resource recovery $ 1,670 $ 2,213
Blackberry farm 535 664
Cupertino sports center 2,183 2,884
Recreation programs 1,117 3,141
Total expenses 5,505 8,902
Revenues
Program revenues:

Charges for services 4,831 6,114
General revenues:

Investment earnings 36 462
Total revenues 4,867 6,576
Excess of revenues over expenses,
before extraordinary item and
transfers (638) (2,326)
Transfers 2,849 3,523
Change in net position 2,211 1,197
Beginning net position 9,254 8,057
Ending net position $ 11,465 $ 9,254

MAJOR GOVERNMENTAL FUNDS
General Fund
General Fund Revenues
General Fund actual revenues of $105.7 million ended $26.7 million, or 33.7%, above the original budget and $20.4 million, or 16.2%, below the final budget. Conservative estimates were applied to the original budget due to the pandemic. The final budget reflected a $30 million revenue estimate related to Vallco Town Center which will be carried forward and recognized over multiple years. Actual revenues were up $4.7 million or 5% when compared to 2019-20 actuals. Table 5 displays the variations in actual revenues, while Table 6 shows budgeted revenues compared to actuals. 90 CC 05-19-2022
90 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
16 Property taxes increased $1.7 million, or 6%, over the prior year due to continued roll-growth.

According to the 2020-2021 Assessor’s Annual Report for Santa Clara County, Cupertino’s net assessment roll growth increased nearly $1.8 billion, or 6.95%, from the prior year.

Sales tax increased $6.9 million, or 19%, over the prior year due to strong business and industry and county pool allocation growth due primarily to the impact of the pandemic state-wide.

Transient occupancy tax decreased $5.1 million, or 71%, due to the COVID-19 and the related shelterin-place orders which brought transient occupancy tax revenues to a near halt beginning in March 2020.

Charges for services remained relatively consistent in total, decreasing by $553,000 over the previous year. The decrease was primarily driven by a reduction of programming in the Parks & Recreation department.

Licenses and permits decreased $625,000, or 13%, due to decreased construction plan check building permits.

Table 5
Revenue Changes
General Fund, Fiscal 2021 vs. 2020
(in thousands)
Increase/(Decrease)
Fiscal 2021 From Fiscal 2020
Revenue by Source Amount % of Total Amount Percent
Taxes:

Property $ 28,278 27% $ 1,671 6%
Sales 42,581 40% 6,924 19%
Transient occupancy 2,141 2% (5,145) -71%
Utility user 3,074 3% (108) -3%
Franchise 3,368 3% (51) -1%
Other 2,640 2% 1,238 88%
Use of money & property 4,838 5% 760 19%
Intergovernmental 1,447 1% 699 93%
Licenses and permits 4,068 4% (625) -13%
Charges for services 11,882 11% (553) -4%
Fines and forfeitures 129 0% (199) -61%
Other 1,263 1% 45 4%
Total revenues $ 105,710 100% $ 4,657 5%
Other financing sources:

Transfers in $ 508 100% $ (9,504) -95%
Total other financing sources $ 508 100% $ (9,504) -95% 91 CC 05-19-2022
91 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
17 Table 6
Revenue, Budget and Actual Comparisons
General Fund 2020-21
(in thousands)
Budgeted Amounts Over/(Under)
Original Final Actual Final
Taxes:

Property $ 25,354 $ 25,354 $ 28,278 $ 2,924
Sales 20,911 33,523 42,581 9,058
Transient occupancy 7,547 2,047 2,141 94
Utility user 3,224 3,224 3,074 (150)
Franchise 3,280 3,280 3,368 88
Other 1,213 1,213 2,640 1,427
Use of money &
property 1,249 1,249 4,838 3,589
Intergovernmental 336 5,931 1,447 (4,484)
Licenses and permits 3,139 33,123 4,068 (29,055)
Charges for services 11,364 15,229 11,882 (3,347)
Fines and forfeitures 425 425 129 (296)
Other 1,004 1,507 1,263 (244)
Total revenues $ 79,046 $ 126,105 $ 105,710 $ (20,395)
Transfers in $ 15 $ 508 $ 508 $ -
General Fund Expenditures
Fiscal 2020-21 overall expenditures, at $68.7 million, were $4.1 million, or 6%, higher than last year.

This result came in $10.5 million, or 13.3%, under the final budget. Year-over-year and budget-versusactual results for General Fund programs are described below and in Tables 7 and 8.

Administration increased $599,000, or 9%, from 2019-20 and is primarily due to the Economic Development and Video functions moving from Community Development and Innovation & Technology departments, respectively.

Law Enforcement was higher by approximately $625,000, or 4%, which was the automatic increase in the existing contract with the Santa Clara County Sheriff’s Office triggered by increases in the lease and CalPERS costs.

Innovation & Technology decreased by $1.4 million, or 43%, over the prior year. This was driven by the Video division moving to the Administration department.

Administrative Services’ expenditures increased approximately $578,000, or 13%, over the prior year due to negotiated increases in salary and benefits. This increase also reflected the establishment of the internal audit function.
92 CC 05-19-2022
92 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
18 Parks & Recreation General Fund expenditures experienced a 38% decrease, or $2.9 million, across its programs. The majority of this decrease was due to COVID-19 and the inability to hold related program activities and events in FY 2020-21.

Community Development expenditures in the General Fund increased $1.3 million, or 15%, and resulted primarily from increases in cost allocation charges.

Public Works expenditures increased approximately $1.2 million or 6%. This is primarily represented by an increase in compensation and benefits. Various divisions and programs fluctuated over the prior year due to the addition and completion of one-time special projects.

Transfers out of the General Fund decreased from $30.9 million in 2019-20 to $15.1 million. This was due to a reduction in one-time transfers from the General Fund to the Capital Reserve.

Table 7
Expenditure Changes
General Fund, Fiscal 2021 vs. 2020
(in thousands)
Increase/(Decrease)
Fiscal 2021 From Fiscal 2020
Function/Program Amount % of Total Amount Percent
Administration $ 7,549 11% $ 599 9%
Law enforcement 14,776 22% 625 4%
Innovation and
technology 1,837 3% (1,386) -43%
Administrative
services 5,196 8% 578 13%
Parks and
recreation 4,788 7% (2,901) -38%
Community
development 9,679 14% 1,256 15%
Public works 20,025 29% 1,196 6%
Capital outlay 4,872 7% 4,167 591%
Total expenditures $ 68,722 100% $ 4,134 6%
Transfers out $ 15,149 189% $ (15,743) -51%
93 CC 05-19-2022
93 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
19 Table 8
Expenditure Changes
General Fund 2020-21
(in thousands)
Budgeted Amounts (Over)/Under
Function/Program Original Final Actual Final
Administration $ 9,183 $ 9,190 $ 7,549 $ 1,641
Law enforcement 14,792 14,792 14,776 16
Innovation and
technology 1,981 1,950 1,837 113
Administrative
services 4,956 5,314 5,196 118
Parks and recreation 6,805 6,725 4,788 1,937
Community
development 9,801 12,158 9,679 2,479
Public works 22,559 23,627 20,025 3,602
Capital outlay 503 5,498 4,872 626
Total expenditures $ 70,580 $ 79,254 $ 68,722 $ 10,532
Transfers out $ 9,949 $ 15,149 $ 15,149 $ -
General Fund - Fund Balance
The General Fund carried a June 30, 2021, ending fund balance of $96.9 million, up 30% or $22.4 million from beginning of the fiscal year. Loan receivables totaled $444,346 of non-spendable fund balance.

The City committed $19 million for general economic uncertainty and $127,891 for sustainability. The City assigned $4,906,139 million for encumbrances. $1,418,472 million was restricted for public access television purposes, $13,392 for CASp certification training, $217,551 for Public safety power shutoff, and $18,491,004 for the pension rate stabilization program (Section 115 Trust). $49,231,996 was classified as unassigned.

Transportation
The Transportation Special Revenue Fund carried a June 30, 2021, ending fund balance of $9,409,837, up 81.8%, or $4.2 million from the beginning of the fiscal year. In recent years this fund has accumulated fund balance year over year. The increase was primarily driven by a reduction of spending due to the pandemic as well as an accumulation of SB1 revenues which will be used for transportation projects in FY 2021-22.
94 CC 05-19-2022
94 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
20 Housing Development
The Housing Development Special Revenue Fund carried a June 30, 2021, ending fund balance of $7.9 million, down 6%, or $500,000, from the beginning of the fiscal year. The activities in this fund remained relatively consistent with the previous fiscal year.

Public Facilities Corporation
On September 29th, the City of Cupertino 2020A Certificates of Participation (2020 COPs) were successfully sold at very attractive interest rates in order to refund the City’s 2012 Certificates of Participation for debt service savings. The 2020 COPs were very well received by investors due in large part to the well-regarded Cupertino name, the top-notch AA+ rating, the sizable annual principal amounts and short maturity, and favorable supply and demand dynamics in the California municipal market.

At the end of the order period, there were nearly eight times as many orders as there were bonds for sale. This strong investor demand enabled the underwriter to further lower yields. The refunding ultimately generated net present value savings of approximately $3.14 million, or 11.61% of refunded par (compared to $2.26 million, or 8.36% of refunded par, when presented to Council on September 1 st) and a True Interest Cost of 0.72%. Savings to the City’s General Fund amounts to approximately $494,000 per year for the next 10 years, or almost $5 million in total savings. Fund balance as of June 30, 2021 was $63,350, substantially lower than the previous year, due to the reserve fund requirement being removed from the new issuance.

Capital Improvement Projects
The Capital Improvement Projects Capital Projects Fund carried a June 30, 2021, ending fund balance of $36,859,117, down 8.7%, or $3.5 million from the beginning of the fiscal year. During fiscal year 2020-21, a $5 million transfer in from the General Fund was received for purposes of fund capital-related projects. The following capital projects incurred the highest expenditures: Library Expansion and 2016 Bike Plan Implementation projects.

MAJOR PROPRIETARY FUNDS
Resource Recovery
The City has a solid waste franchise agreement with Recology that shares collection, landfill disposal, and recycling revenues and costs. This fund receives revenues from Recology with the funds going toward landfill costs, regulatory fees, and staffing costs that the City incurs to manage its solid waste, recycling, and household hazardous waste programs. Total operating revenue and expenses remained steady at $1.82 million and $1.7 million, respectively. Net position increased by approximately $164,000. The fund ended the year with $5.5 million in net position. 95 CC 05-19-2022
95 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
21 Recreation Programs
This enterprise operates the Quinlan Community Center, Monta Vista Recreation Center, McClellan Ranch, Creekside Park building, eight school sites, and various parks. Recreation Programs experienced the severe impacts of the pandemic with revenue and expense reductions of over 60%. These programs generated approximately $591,000 in revenues and program expenses of approximately $1.1 million.

This resulted in a net operating loss of $519,000. After the $1.7 million transfer from the General Fund, the fund ended up with an increase in net position of $1.1 million. The fund ended the year with a net position of $2.2 million.

Cupertino Sports Center
Tennis lesson, membership, fitness class and rent revenues of $1.5 million and decreased by $900,000 over last year and were also heavily impacted by COVID-19. As a result of the reduction in programming and availability, expenses decreased by $701,000 or 24%, resulting in a net operating loss of $361,000. This fund’s net position was $2.9 million as of June 30, 2021.

NONMAJOR PROPRIETARY FUNDS
Blackberry Farm
City employees, with a teaching professional contractor, staff the City-owned Blackberry Farm golf course and pro shop. Operating revenues increased 81% in 2020-21 from $338,000 to $611,000.

Operating expenses decreased by $129,000, or 19%, to $535,000 this year. The golf course’s operating loss decreased from $325,000 last year to a surplus of $77,000 this year. After a transfer in from the General Fund of $450,000 and $50,000 from the Capital Reserve, net position increased $577,000. As of June 30, 2021, this fund’s net position was $868,510.

CAPITAL ASSETS
At June 30, 2021, the City had $212.4 million, net of depreciation, invested in a broad range of capital assets used in governmental and business-type activities, as shown in Table 9 and in Note 5 to the Basic Financial Statements. This reflects the City’s continued investment into capital projects dedicated to street and transportation improvements, storm drain improvements, and maintenance of and improvements to City facilities, resulting in an increase in net capital assets of $11.5 million, after depreciation.
96 CC 05-19-2022
96 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
22 Table 9
Capital Assets, Net of Depreciation, at June 30
(in thousands)
2021 2020
Governmental Activities:

Land $ 64,787 $ 62,046
Easements 19,615 19,615
Construction in Progress 15,951 5,530
Buildings 14,578 16,015
Improvements other than buildings 17,753 17,483
Machinery and equipment 4,621 4,793
Roads, curbs, gutters, sidewalks, medians and
bridges 66,900 67,713
Streetlights 1,620 1,589
Storm drain structures and mains 3,831 4,263
Traffic signals 617 729
Total Governmental Activities 210,273 199,776
Business-Type Activities
Construction in Progress 125 -
Buildings 1,546 574
Improvements other than buildings 337 437
Machinery and equipment 83 108
Total Business-Type Activities 2,091 1,119
Total City $ 212,364 $ 200,895

DEBT ADMINISTRATION
On September 29, 2020, the City of Cupertino’s 2020A Certificates of Participation (2020 COPs) were successfully sold in order to refund the City’s 2012 Certificates of Participation for debt service savings.

The 2020 COPs were very well received by investors due in large part to the well-regarded Cupertino name, the top-notch AA+ rating, the sizable annual principal amounts and short maturity, and favorable supply and demand dynamics in the California municipal market. The refunding generated net present value savings of approximately $3.14 million, 11.61% of refunded par and a True Interest Cost of 0.72%.

Savings to the City’s General Fund amounts to approximately $494,000 per year for the next 10 years, or almost $5 million in total savings.

The June 30, 2021, outstanding principal of $19,900,000 is due to be paid off by June 1, 2030. More information can be found in Note 6 to the Basic Financial Statements and in the Public Facilities Corporation discussion earlier in this analysis.
97 CC 05-19-2022
97 of 1613

CITY OF CUPERTINO
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2021
23 CURRENTLY KNOWN FACTS AND CONDITIONS
The COVID-19 pandemic has had significant impacts on the City, both financially as well as operationally. Although revenues in transient occupancy tax and charges for services have experienced declines since the start of the pandemic, the City has put forth efforts to reduce its operating costs to mitigate the future impacts. Additionally, through the assistance of the CARES Act and American Rescue Plan Act, the City anticipates these funds will mitigate much of the revenue loss and fiscal impact of the pandemic over the short- and long-term. The City’s reserves remain intact and the City does not anticipate requiring the use of these Committed and Restricted funds.

Aside from the pandemic, the City is unaware of any other facts or conditions or decisions that are expected to have a significant effect on net position or results of operations.

CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This Comprehensive Annual Financial Report is intended to provide a general overview of the City’s finances. Further information can be provided by the City of Cupertino Finance Department, 10300 Torre Avenue, Cupertino CA 95014, phone (408) 777-3280, or by the City website at www.cupertino.org.
98 CC 05-19-2022
98 of 1613
This Page Left Intentionally Blank
99 CC 05-19-2022
99 of 1613

STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES

24. The Statement of Net Position and the Statement of Activities summarize the entire City's financial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all the City's assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis - the effect of all the City' s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between City funds have been eliminated.

The Statement of Net Position reports the difference between the City's total assets and deferred outflows and the City's total liabilities and deferred inflows, including all the City's capital assets and all its long term debt.

The Statement of Net Position summarizes the financial position of all the City's Governmental Activities in a single column, and the financial position of all the City's Business-Type Activities in a single column; these columns are followed by a Total column which presents the financial position of the entire City.

The City's Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Funds. Since the City's Internal Service Funds service these Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund transactions and balances. The City's Business Type Activities include all of its Enterprise Fund activities.

The Statement of Activities reports increases and decreases in the City's net position. It is also prepared on the full accrual basis, which means it includes all the City's revenues and all its expenses, regardless of when cash changes hands. This differs from the "modified accrual" basis used in the Fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures.

The format of the Statement of Activities presents the City's expenses first, listed by program, and follows these with the expenses of its business-type activities. Program revenues, that are revenues which are generated directly by these programs, are then deducted from program expenses to arrive at the net expense of each governmental and business-type program. The City's general revenues are then listed in the Governmental Activities or Business-type Activities column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position.

Both these Statements include the financial activities of the City and the Cupertino Public Facilities Corporation, which is a legally separate component unit of the City because it is controlled by and financially accountable to the City.
100
CC 05-19-2022
100 of 1613

CITY OF CUPERTINO, CALIFORNIA

STATEMENT OF NET POSITION
June 30, 2021
See accompanying notes to financial statements.

25. Governmental Business-Type
Activities Activities Total
ASSETS
Cash and cash investments (Note 2) $ 167,810,281 $ 12,961,371 $ 180,771,652 Restricted cash and investments (Note 2) 18,499,337 18,499,337 - Receivables Accounts 12,546,432 135,982 12,682,414
Interest 17,148 - 17,148
Loans (Note 3) 4,691,177 - 4,691,177
Prepaid expenses and other assets 3,884 - 3,884
Net OPEB asset (Note 11) 8,957,782 441,219 9,399,001
Capital assets (Note 5):

Non-depreciable 100,352,704 125,331 100,478,035
Depreciable, net of
accumulated depreciation 109,920,783 1,965,199 111,885,982 Total assets 422,799,528 15,629,102 438,428,630

DEFERRED OUTFLOWS OF RESOURCES
Deferred loss on refunding 239,216 - 239,216
Related to pension (Note 10) 8,623,265 578,778 9,202,043 Related to OPEB (Note 11) 1,467,924 101,075 1,568,999
Total deferred outflows of resources 10,330,405 679,853 11,010,258

LIABILITIES
Accounts payable and accruals 7,139,329 367,435 7,506,764 Accrued payroll and benefits 1,872,821 289 1,873,110
Deposits 11,554,041 11,554,041 - Unearned revenue 4,892,867 833,213 5,726,080 Compensated absences (Note 1):

Due in one year 652,810 17,611 670,421
Due in more than one year 4,642,386 216,127 4,858,513
Claims payable (Note 9):

Due in one year 245,000 - 245,000
Due in more than one year 1,129,000 - 1,129,000
Long-term debt (Note 6):

Due in one year 1,880,000 - 1,880,000
Due in more than one year 21,467,737 21,467,737 - Net pension liability - noncurrent (Note 10) 45,558,458 2,954,562 48,513,020 Total liabilities 101,034,449 4,389,237 105,423,686

DEFERRED INFLOWS OF RESOURCES
Related to pension (Note 10) 99,671 21,417 121,088
Related to OPEB (Note 11) 8,323,358 433,642 8,757,000
Total deferred inflows of resources 8,423,029 455,059 8,878,088 NET POSITION (Note 7)
Net investment in capital assets 186,503,116 2,090,530 188,593,646 Restricted for:

Special revenue projects 45,699,577 45,699,577 - Affordable housing 7,948,113 - 7,948,113 Debt service 63,350 - 63,350
Total restricted net position 53,711,040 53,711,040 - Unrestricted 83,458,299 9,374,129 92,832,428 Total net position $ 323,672,455 $ 11,464,659 $ 335,137,114 101
CC 05-19-2022
101 of 1613

CITY OF CUPERTINO, CALIFORNIA

STATEMENT OF ACTIVITIES
For the year ended June 30, 2021
See accompanying notes to financial statements.

26. Operating Capital BusinessCharges for Grants and Grants and Governmental Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental activities:

Administration $ 3,637,467 $ 2,387,412 $ - $ (1,250,055) - $ $ (1,250,055) - $ Law enforcement 15,211,646 550,051 156,727 (14,504,868) - (14,504,868) - Public and environmental affairs 1,721,729 - - (1,721,729) - (1,721,729) - Administrative services 5,358,183 5,232,679 - - (125,504) - (125,504) Recreation services 1,182,662 264,426 - - (918,236) - (918,236) Community development 11,495,788 5,736,587 618,292 (5,140,909) - (5,140,909) - Public works 41,870,240 3,966,206 5,223,190 1,792,376 (30,888,468) (30,888,468) - Interest on long - term debt 397,682 - - - (397,682) - (397,682) Total governmental activities 80,875,397 18,137,361 5,998,209 1,792,376 (54,947,451) (54,947,451) - Business-type activities:

Resource recovery 1,670,261 1,819,861 - - - 149,600 149,600 Blackberry farm 535,274 610,603 - - - 75,329 75,329
Cupertino sports center 2,182,900 1,810,194 - - - (372,706) (372,706) Recreation programs 1,117,244 590,871 - - - (526,373) (526,373) Total business-type activities 5,505,679 4,831,529 - - - (674,150) (674,150) Total $ 86,381,076 $ 22,968,890 $ 5,998,209 $ 1,792,376 (54,947,451) (674,150) (55,621,601) General revenues:

Taxes:

Property taxes 19,197,994 19,197,994 - Property tax in lieu of motor vehicle fee 9,079,845 - 9,079,845 Sales taxes 42,581,070 42,581,070 - Transient occupancy tax 2,141,058 - 2,141,058 Utility user tax 3,074,358 - 3,074,358
Franchise tax 3,368,286 - 3,368,286
Other taxes 3,022,333 - 3,022,333
Intergovernmental, unrestricted:

Motor vehicle license fee 43,675 - 43,675
Investment earnings 4,147,907 35,983 4,183,890
Miscellaneous 3,185,110 - 3,185,110
Transfers (Note 4) (2,849,000) 2,849,000 - Total general revenues and transfers 86,992,636 2,884,983 89,877,619 Change in Net Position 32,045,185 2,210,833 34,256,018
Net Position, beginning of year 291,627,270 9,253,826 300,881,096 Net Position, end of year $ 323,672,455 $ 11,464,659 $ 335,137,114 Program Revenues Changes in Net Position
Net (Expense) Revenue and
102
CC 05-19-2022
102 of 1613

FUND FINANCIAL STATEMENTS

27. In the Fund Financial Statements only individual major funds are presented, while non-major funds are combined in a single column. Major funds are defined generally as having significant activities or balances in the current year.

The funds described below were determined to be Major Funds by the City for fiscal 2020-20. Individual non-major funds may be found in the Supplementary 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.

Transportation Special Revenue Fund: Accounts for the City's gas tax, vehicle registration fees and grant revenues and expenditures related to the maintenance and construction of City streets. All revenue in this fund is restricted exclusively for street and road purposes including related engineering and administrative expenditures.

Housing Development Special Revenue Fund: Accounts for the Federal Housing and Community Development Grant Program activities administered through the County. Monies collected from developers that mitigate the impact of housing needs are also included. Monies in this fund are governed by the program's rules.

Public Facilities Corporation Debt Service Fund: This fund accounts for the payments of principal and interest on certificates of participation issued to provide for the financing of the Civic Center, Library, Wilson Park, Memorial Park, and other City facilities.

Capital Improvement Projects Capital Projects Fund: This fund accounts for activities related to the acquisition or construction of major capital facilities. 103
CC 05-19-2022
103 of 1613

CITY OF CUPERTINO, CALIFORNIA

GOVERNMENTAL FUNDS

BALANCE SHEET
June 30, 2021
See accompanying notes to financial statements.

28. Public Capital
Facilities Improvement
Corporation Projects Nonmajor Total
Housing Debt Capital Governmental Governmental
General Transportation Development Service Fund Projects Fund Funds Funds ASSETS
Cash and investments (Note 2) $ 87,894,638 $ 8,816,300 $ 7,345,602 $ 55,017 $ 39,673,656 $ 16,315,922 $ 160,101,135 Restricted cash and investments (Note 2) 18,491,004 - - 8,333 - - 18,499,337 Receivables:

Accounts 9,919,781 683,815 259,168 - 1,661,507 22,161 12,546,432 Interest 17,148 - - - - - 17,148
Loans (Note 3) 444,346 - 4,246,831 - - - 4,691,177
Due from other funds (Note 4) 539,204 - - - - - 539,204 Advances to other funds (Note 4) 3,000,000 - - - - - 3,000,000 Other assets 3,884 - - - - - 3,884
Total assets $ 120,310,005 $ 9,500,115 $ 11,851,601 $ 63,350 $ 41,335,163 $ 16,338,083 $ 199,398,317

LIABILITIES
Accounts payable and accruals $ 5,139,557 $ 90,278 $ 191,368 $ - $ 1,476,046 $ 9,705 $ 6,906,954 Accrued payroll and benefits 1,872,749 - - - - - 1,872,749 Advances from other funds (Note 4) - - - - 3,000,000 - 3,000,000 Deposits 11,554,041 - - - - - 11,554,041
Unearned revenue 4,892,867 - - - - - 4,892,867
Total liabilities 23,459,214 90,278 191,368 - 4,476,046 9,705 28,226,611

DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - loans - - 3,712,120 - - - 3,712,120 Total deferred inflows of resources - - 3,712,120 - - - 3,712,120 FUND BALANCES (Note 7)
Nonspendable 3,444,346 - - - - - 3,444,346
Restricted 20,140,419 9,409,837 7,948,113 63,350 - 16,149,321 53,711,040 Committed 19,127,891 - - - - - 19,127,891
Assigned 4,906,139 - - - 36,859,117 179,057 41,944,313
Unassigned 49,231,996 - - - - - 49,231,996
Total fund balances 96,850,791 9,409,837 7,948,113 63,350 36,859,117 16,328,378 167,459,586 Total liabilities, deferred inflows
of resources and fund balances $ 120,310,005 $ 9,500,115 $ 11,851,601 $ 63,350 $ 41,335,163 $ 16,338,083 $ 199,398,317 Special Revenue Funds
104
CC 05-19-2022
104 of 1613

CITY OF CUPERTINO, CALIFORNIA

RECONCILIATION OF GOVERNMENTAL FUNDS

BALANCE SHEET TO STATEMENT OF NET POSITION
June 30, 2021
See accompanying notes to financial statements.

29. Total fund balances reported on the governmental funds balance sheet $ 167,459,586 206,927,675
6,313,071
3,712,120
Long-term debt (23,347,737)
Net pension liability (42,634,977)
Net OPEB asset 8,331,162
Deferred loss on refunding 239,216
Pension-related deferred outflows of resources 8,082,073 Pension-related deferred inflows of resources (96,065)
OPEB-related deferred outflows of resources 1,360,524
OPEB-related deferred inflows of resources (7,753,657)
Compensated absences (4,920,536)
Net position for governmental activities $ 323,672,455
The liabilities, deferred inflows of resources and deferred outflows of resources are not related to the current period and therefore are not reported in the governmental funds:

Capital assets used in governmental activities are not current assets or financial resources and therefore are not reported in the governmental funds.

Internal service funds are used by management to charge the costs of activities such as information technology, insurance, equipment acquisition and maintenance, and certain employee benefits to governmental funds. The assets and liabilities of the internal service funds are therefore included in the governmental activities of the statement of net position.

Certain receivables are not available to pay for current period expenditures and therefore are deferred in the governmental funds.

Amounts reported for governmental activities in the statement of net position are different from those reported in the governmental funds because of the following:
105
CC 05-19-2022
105 of 1613

CITY OF CUPERTINO, CALIFORNIA

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES For the year ended June 30, 2021
See accompanying notes to financial statements.

30. Public Capital
Facilities Improvement
Corporation Projects Nonmajor Total
Housing Debt Capital Governmental Governmental
General Transportation Development Service Fund Projects Fund Funds Funds Revenues
Taxes $ 82,081,611 $ - $ 197,661 $ - $ - $ 185,672 $ 82,464,944 Use of money and property 4,838,319 24,106 23,553 332 (470,353) 32,013 4,447,970 Intergovernmental 1,446,593 3,481,620 559,010 - 2,347,037 - 7,834,260 Licenses and permits 4,068,238 - - - - - 4,068,238
Charges for services 11,882,349 8,970 7,269 - - 1,702,714 13,601,302 Fines and forfeitures 129,394 - - - - 5,065 134,459
Other revenue 1,263,174 1,921,336 - - - 600 3,185,110
Total revenues 105,709,678 5,436,032 787,493 332 1,876,684 1,926,064 115,736,283 Expenditures
Current:

Administration 7,549,386 - - - - - 7,549,386
Law enforcement 14,776,409 - - - - 14,776,409 - Public and environmental affairs 1,836,725 - - - - - 1,836,725 Administrative services 5,196,299 - - - - - 5,196,299
Recreation services 4,787,914 - - - - - 4,787,914
Community development 9,679,182 - 1,498,508 - - 11,177,690 - Public works 20,025,442 3,164,395 - - - 1,378,318 24,568,155 Capital outlay 4,872,485 2,036,314 - - 9,812,205 2,762,941 19,483,945 Debt service:

Principal - - - 2,140,000 - - 2,140,000
Interest and fiscal charges - - - 798,747 - - 798,747
Total expenditures 68,723,842 5,200,709 1,498,508 2,938,747 9,812,205 4,141,259 92,315,270 Excess (deficiency) of revenues
over expenditures 36,985,836 235,323 (711,015) (2,938,415) (7,935,521) (2,215,195) 23,421,013 Other financing sources (uses)
Proceeds from debt issuance - - 22,040,000 - - 22,040,000 - Proceeds from debt issuance premium - - - 3,878,704 - - 3,878,704 Payments to refunding agent - - (27,279,118) - - (27,279,118) - Transfers in (Note 4) 507,831 4,000,000 200,000 3,169,138 5,000,000 12,876,969 - Transfers (out) (Note 4) (15,148,689) - - (492,831) (559,449) (15,000) (16,215,969) Total other financing sources (uses) (14,640,858) 4,000,000 200,000 1,315,893 4,440,551 (15,000) (4,699,414) Net change in fund balances 22,344,978 4,235,323 (511,015) (1,622,522) (3,494,970) (2,230,195) 18,721,599 Beginning fund balances 74,505,813 5,174,514 8,459,128 1,685,872 40,354,087 18,558,573 148,737,987 Ending fund balances $ 96,850,791 $ 9,409,837 $ 7,948,113 $ 63,350 $ 36,859,117 $ 16,328,378 $ 167,459,586 Special Revenue Funds
106
CC 05-19-2022
106 of 1613

CITY OF CUPERTINO, CALIFORNIA

GOVERNMENTAL FUNDS
RECONCILIATION OF NET CHANGES IN FUND BALANCES –

GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
For the year ended June 30, 2021
See accompanying notes to financial statements.

31. Total net changes in fund balances reported on the
governmental funds balance sheet $ 18,721,599
Amounts reported for governmental activities in the statement of activities are different from those reported in the governmental funds because of the following:

Capital outlay 18,448,448
Depreciation expense (7,641,656)
Net retirements 1
2,140,000
Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position.

Bonds issued (22,040,000)
Premium on bonds issued (3,878,704)
Payment to escrow agent 27,279,118
Amortization of premium 430,967
Amortization of deferred loss on refunding (29,902)
Compensated absences (58,919)
Net pension liability (2,146,205)
Net OPEB liability (asset) 10,061,292
Pension-related deferred outflows of resources (396,067) Pension-related deferred inflows of resources 625,738
OPEB-related deferred outflows of resources (1,043,279) OPEB-related deferred inflows of resources (6,780,870)
(1,646,376)
Change in net position of governmental activities $32,045,185 Internal service funds are used by management to charge the costs of activities such as information technology, insurance, equipment acquisition and maintenance, and certain employee benefits to governmental funds. The portion of the net expense of these internal service funds arising out of their transactions with governmental funds is reported with governmental activities because they service those activities.

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets are capitalized and depreciated over their estimated useful lives, which is reported as depreciation expense. Expenditures for capital assets reported as:

Long term debt principal payments are reported as expenditures in the governmental funds but are not reported as expenses in the statement of activities.

The changes in the amounts below do not provide or require the use of current financial resources and therefore are not reported as revenues or expenditures in the governmental funds:

The schedule below reconciles the net changes in fund balances reported on the governmental funds statement of revenues, expenditures and changes in fund balances, which measures only changes in current assets and current liabilities on the modified accrual basis, with the change in net position of governmental activities reported in the statement of activities, which is prepared on the full accrual basis. 107
CC 05-19-2022
107 of 1613

CITY OF CUPERTINO, CALIFORNIA

GENERAL FUND

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES – BUDGET AND ACTUAL
For the year ended June 30, 2021
See accompanying notes to financial statements.

32. Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Taxes $ 61,528,654 $ 68,640,655 $ 82,081,611 $ 13,440,956 Use of money and property 1,249,010 1,249,010 4,838,319 3,589,309 Intergovernmental 335,567 5,931,334 1,446,593 (4,484,741) Licenses and permits 3,139,473 33,123,003 4,068,238 (29,054,765) Charges for services 11,363,564 15,229,233 11,882,349 (3,346,884) Fines and forfeitures 425,000 425,000 129,394 (295,606) Other revenue 1,003,857 1,507,457 1,263,174 (244,283)
Total revenues 79,045,125 126,105,692 105,709,678 (20,396,014) Expenditures
Current
Administration 9,183,155 9,190,291 7,549,386 1,640,905
Law enforcement 14,792,448 14,792,448 14,776,409 16,039 Public and environmental affairs 1,981,299 1,949,807 1,836,725 113,082 Administrative services 4,955,568 5,314,437 5,196,299 118,138 Recreation services 6,804,768 6,725,248 4,787,914 1,937,334 Community development 9,801,449 12,157,549 9,679,182 2,478,367 Public works 22,558,616 23,627,089 20,025,442 3,601,647 Capital outlay 502,500 5,497,792 4,872,485 625,307
Total expenditures 70,579,803 79,254,661 68,723,842 10,530,819 Excess of revenues
over expenditures 8,465,322 46,851,031 36,985,836 (9,865,195) Other financing sources (uses)
Transfers in 15,000 507,832 507,831 (1)
Transfers (out) (9,948,689) (15,148,689) (15,148,689) - Total other financing sources (uses) (9,933,689) (14,640,857) (14,640,858) (1) Net change in fund balance $ (1,468,367) $ 32,210,174 22,344,978 $ (9,865,196) Beginning fund balance 74,505,813
Ending fund balance $ 96,850,791
Budgeted Amounts
108
CC 05-19-2022
108 of 1613

CITY OF CUPERTINO, CALIFORNIA

TRANSPORTATION SPECIAL REVENUE FUND

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES – BUDGET AND ACTUAL
For the year ended June 30, 2021
See accompanying notes to financial statements.

33. Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Use of money and property $ - $ 24,106 - $ $ 24,106
Intergovernmental 2,898,325 3,880,625 3,481,620 (399,005) Charges for services 3,978 3,978 8,970 4,992
Other revenue 87,057 1,443,723 1,921,336 477,613
Total revenues 2,989,360 5,328,326 5,436,032 107,706
Expenditures
Current
Public works 3,875,600 3,700,019 3,164,395 535,624
Capital outlay 1,000,000 4,565,929 2,036,314 2,529,615
Total expenditures 4,875,600 8,265,948 5,200,709 3,065,239 Deficiency of revenues
under expenditures (1,886,240) (2,937,622) 235,323 3,172,945 Other financing sources (uses)
Transfers in 4,000,000 4,000,000 4,000,000 - Total other financing sources (uses) 4,000,000 4,000,000 4,000,000 - Net change in fund balance $ 2,113,760 $ 1,062,378 4,235,323 $ 3,172,945 Beginning fund balance 5,174,514
Ending fund balance $ 9,409,837
Budgeted Amounts
109
CC 05-19-2022
109 of 1613

CITY OF CUPERTINO, CALIFORNIA

HOUSING DEVELOPMENT SPECIAL REVENUE FUND

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES – BUDGET AND ACTUAL
For the year ended June 30, 2021
See accompanying notes to financial statements.

34. Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Taxes $ 3,025,898 $ 3,025,898 $ 197,661 $ (2,828,237)
Use of money and property 3,300 3,300 23,553 20,253
Intergovernmental 397,270 951,209 559,010 (392,199)
Charges for services - - 7,269 7,269
Total revenues 3,426,468 3,980,407 787,493 (3,192,914)
Expenditures
Current
Community development 1,083,266 1,951,844 1,498,508 453,336 Total expenditures 1,083,266 1,951,844 1,498,508 453,336 Deficiency of revenues
under expenditures 2,343,202 2,028,563 (711,015) (2,739,578) Other financing sources (uses)
Transfers in 200,000 - 200,000 - Total other financing
sources (uses) 200,000 - 200,000 - Net change in fund balance $ 2,343,202 $ 2,228,563 (511,015) $ (2,739,578) Beginning fund balance 8,459,128
Ending fund balance $ 7,948,113
Budgeted Amounts
110
CC 05-19-2022
110 of 1613

MAJOR PROPRIETARY FUNDS

35. Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges.

The City has identified the funds below as major proprietary funds for fiscal 2020 - 21.

Resources Recovery Fund: This fund accounts for activity related to the collection, disposal, and recycling of solid waste. A private company has been issued an exclusive franchise to perform these services.

Recreation Programs Fund: This fund accounts for activities of the City's community centers and park facilities.

Cupertino Sports Center Fund: This fund accounts for the operation and maintenance of the Cupertino Sports Center.
111
CC 05-19-2022
111 of 1613

CITY OF CUPERTINO, CALIFORNIA

PROPRIETARY FUNDS

STATEMENT OF NET POSITION
June 30, 2021
See accompanying notes to financial statements.

36. Governmental
Cupertino Nonmajor Activities -
Resources Recreation Sports Enterprise Internal Service Recovery Programs Center Fund Totals Funds
ASSETS
Current assets
Cash and cash investments (Note 2) $ 6,369,452 $ 2,818,076 $ 2,636,289 $ 1,137,554 $ 12,961,371 $ 7,709,146 Accounts receivable 132,839 1,863 1,280 135,982 - - Total current assets 6,502,291 2,819,939 2,637,569 1,137,554 13,097,353 7,709,146 Noncurrent assets
Net OPEB asset (Note 11) 127,693 134,939 178,587 441,219 - 626,620 Capital assets (Note 5):

Nondepreciable 88,031 - 37,300 125,331 - - Depreciable, net of - accumulated depreciation 3,827 560,087 1,377,579 23,706 1,965,199 3,345,812 Total noncurrent assets 131,520 783,057 1,593,466 23,706 2,531,749 3,972,432 Total assets 6,633,811 3,602,996 4,231,035 1,161,260 15,629,102 11,681,578

DEFERRED OUTFLOWS OF RESOURCES
Related to pension (Note 10) 217,859 179,490 122,119 59,310 578,778 541,192 Related to OPEB (Note 11) 42,749 24,385 25,820 8,121 101,075 107,400 Total deferred outflows of resources 260,608 203,875 147,939 67,431 679,853 648,592

LIABILITIES
Current liabilities
Accounts payable and accruals 73,514 162,336 120,003 11,582 367,435 232,375 Accrued payroll and benefits 289 - - - 289 72
Due to other funds (Note 4) - - - - 539,204 - Compensated absences (Note 1): 5,219 7,907 4,274 211 17,611 46,188 Claims payable (Note 9) - - - - 245,000 - Unearned revenue 278,161 - 496,440 58,612 833,213 - Total current liabilities 79,022 448,404 620,717 70,405 1,218,548 1,062,839 Noncurrent liabilities
Compensated absences (Note 1) 64,045 97,037 52,451 2,594 216,127 328,472 Claims payable (Note 9) - - - - 1,129,000 - Net pension liability (Note 10) 1,107,110 925,796 643,636 278,020 2,954,562 2,923,481 Total noncurrent liabilities 1,171,155 1,022,833 696,087 280,614 3,170,689 4,380,953 Total liabilities 1,250,177 1,471,237 1,316,804 351,019 4,389,237 5,443,792

DEFERRED INFLOWS OF RESOURCES
Related to pension (Note 10) 9,651 4,448 2,852 4,466 21,417 3,606 Related to OPEB (Note 11) 136,528 130,506 161,912 4,696 433,642 569,701 Total deferred inflows of resources 146,179 134,954 164,764 9,162 455,059 573,307 NET POSITION (Note 7)
Net investment in capital assets 3,827 648,118 1,414,879 23,706 2,090,530 3,345,812 Unrestricted 5,494,236 1,552,562 1,482,527 844,804 9,374,129 2,967,259 Total Net Position $ 5,498,063 $ 2,200,680 $ 2,897,406 $ 868,510 $ 11,464,659 $ 6,313,071 Business-type Activities - Enterprise Funds
112
CC 05-19-2022
112 of 1613

CITY OF CUPERTINO, CALIFORNIA

PROPRIETARY FUNDS

STATEMENT OF REVENUES, EXPENSES AND

CHANGES IN NET POSITION
For the year ended June 30, 2021
See accompanying notes to financial statements.

37. Governmental
Cupertino Nonmajor Activities -
Resources Recreation Sports Enterprise Internal Service Recovery Programs Center Fund Totals Funds
Operating revenues
Charges for services $ 1,804,945 $ 508,838 $ 1,537,387 $ 564,126 $ 4,415,296 $ 4,689,465 Other 14,916 82,033 272,807 46,477 416,233 9,799
Total operating revenue 1,819,861 590,871 1,810,194 610,603 4,831,529 4,699,264 Operating expenses
Salaries and benefits 344,248 462,437 491,686 107,567 1,405,938 3,604,711 Materials and supplies 301,234 320,895 241,872 174,183 1,038,184 1,321,229 Contractual services 1,021,465 229,254 1,382,540 250,692 2,883,951 201,964 Insurance and claims and premium - - - - 862,225 - Depreciation (Note 5) 3,314 104,658 66,802 2,832 177,606 968,791 Total operating expenses 1,670,261 1,117,244 2,182,900 535,274 5,505,679 6,958,920 Operating income (loss) 149,600 (526,373) (372,706) 75,329 (674,150) (2,259,656) Nonoperating revenues
Investment Income 14,795 7,190 11,915 2,083 35,983 33,299 Gain on sale of capital assets - - - - 89,981 - Total nonoperating revenues 14,795 7,190 11,915 2,083 35,983 123,280 Income (loss) before transfers 164,395 (519,183) (360,791) 77,412 (638,167) (2,136,376) Transfers in (Note 4) 1,664,000 - 685,000 500,000 2,849,000 490,000 Changes in net position 164,395 1,144,817 324,209 577,412 2,210,833 (1,646,376) Net position - beginning of year 5,333,668 1,055,863 2,573,197 291,098 9,253,826 7,959,447 Net position - end of year $ 5,498,063 $ 2,200,680 $ 2,897,406 $ 868,510 $ 11,464,659 $ 6,313,071 Business-type Activities - Enterprise Funds
113
CC 05-19-2022
113 of 1613

CITY OF CUPERTINO, CALIFORNIA

PROPRIETARY FUNDS

STATEMENT OF CASH FLOWS
For the year ended June 30, 2021
See accompanying notes to financial statements.

38. Governmental
Cupertino Nonmajor Activities -
Resources Recreation Sports Enterprise Internal Service Recovery Programs Center Fund Totals Funds
Cash flows from operating activities
Cash received from customers $ 2,035,309 $ 632,323 $ 2,026,745 $ 646,130 $ 5,340,507 $ 4,706,264 Cash payments to suppliers for
goods and services (1,417,480) (687,146) (1,513,828) (442,996) (4,061,450) (1,634,879) Cash payments to employees for salaries
and benefits (447,491) (506,804) (512,572) (110,164) (1,577,031) (3,538,193) Cash payments for judgment and claims - - - - (1,015,225) - Net cash provided (used) by operating activities 170,338 (561,627) 345 92,970 (297,974) (1,482,033) Cash flows from noncapital financing activities
Transfers in 1,664,000 - 685,000 500,000 2,849,000 490,000 Cash flows from noncapital financing activities 1,664,000 - 685,000 500,000 2,849,000 490,000 Cash flows from capital and related financing activities Acquisition of capital assets (88,031) - (1,061,223) (1,149,254) - (661,449) Sale of capital assets - - - - 91,758 - Cash flows from capital and related (88,031) - (1,061,223) (1,149,254) - (569,691) financing activities
Cash Flows from investing activities
Interest received 14,795 7,190 11,915 2,083 35,983 33,299 Cash flows from investing activities 14,795 7,190 11,915 2,083 35,983 33,299 Net cash flows 185,133 1,021,532 (363,963) 595,053 1,437,755 (1,528,425) Cash and investments at beginning of year 6,184,319 1,796,544 3,000,252 542,501 11,523,616 9,237,571 Cash and investments at end of year $ 6,369,452 $ 2,818,076 $ 2,636,289 $ 1,137,554 $ 12,961,371 $ 7,709,146 Reconciliation of operating income (loss) to
to net cash provided by operating activities:

Operating income (loss) $ 149,600 $ (526,373) $ (372,706) $ 75,329 $ (674,150) $ (2,259,656) Adjustments to reconcile operating income to
net cash provided by operating activities:

Depreciation 3,314 104,658 66,802 2,832 177,606 $ 968,791 Change in assets, deferred outflows of
resources, liabilities and deferred inflows
of resources
Accounts receivable 215,448 (1,864) (1,220) 212,364 - 7,000 Due to retirement system 29,108 32,804 27,598 2,157 91,667 147,907 Due to OPEB system (43,549) (37,798) (46,898) (4,735) (132,980) (169,875) Accounts payable and accruals (94,781) (136,997) 110,584 (18,121) (139,315) (111,686) Unearned revenue 43,316 - 217,771 35,527 296,614 - Compensated absences (88,802) (39,373) (1,586) (19) (129,780) 88,486 Claims payable - - - - (153,000) - Net cash provided (used) by operating activities $ 170,338 $ (561,627) $ 345 $ 92,970 $ (297,974) $ (1,482,033) Business-type Activities - Enterprise Funds
114
CC 05-19-2022
114 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

39. NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity: The City of Cupertino, California (the City) was incorporated on October 3, 1955, under the laws of the State of California. The City operates under a Council - City Manager form of government and provides services through the following departments: Administrative Services, Community Development, City Manager, Parks and Recreation, Public and Environmental Affairs, and Public Works.

Fire services are provided by the Santa Clara County Fire District, and the City contracts with the Santa Clara County Sheriff’s Department for police services, and with Recology for garbage and recycling services.

The accompanying basic financial statements include all funds and boards and commissions that are controlled by the City Council. The basic financial statements include the City's blended component unit entity for which the City is considered to be financially accountable. A blended component unit, although a legally separate entity, is in substance, part of the City's operations and so data from this unit is combined with the City.

Blended Component Unit: The Cupertino Public Facilities Corporation (the Corporation) was incorporated in May 1986, under the Nonprofit Public Benefit Corporation Law of the State of California. The Corporation was organized as a nonprofit corporation solely for the purpose of assisting the City in the acquisition, construction, and financing of public improvements which are of public benefit to the City. The Corporation, after acquiring certain properties from the City, leases these back to the City. The lease money provides the funds for the debt service for the Certificates of Participation issued by the Corporation to acquire the properties. The Corporation does not issue separate financial statements, since it is reported separately in the City's basic financial statements.

Measurement Focus, Basis of Accounting and Basis of Presentation: The City's basic financial statements are prepared in conformity with accounting principles generally accepted in the United States. The Government Accounting Standards Board (GASB) is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States.

Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government (the City) and its component units. These statements include the financial activities of the overall City government and distinguish between the governmental and businesstype activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties.

The Statement of Activities presents a comparison between expenses and program revenues for each segment of the business-type activities of the City and for each function of the City's governmental activities.

Expenses include direct and indirect types. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses such as depreciation, information technology, insurance and equipment replacement are included in expenses for individual activities and functions. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital needs of a particular program. Revenues that are not classified as program revenues, including taxes, are presented as general revenues. Program revenues and direct expenses related to interfund services are included and indirect expenses funded by interfund transfers are excluded from the Statement of Activities. The Statement of Net Position eliminates interfund balances between governmental funds and interfund balances between proprietary funds. 115
CC 05-19-2022
115 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

40. NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Financial Statements: The fund financial statements provide information about the City's funds, including blended component units. Separate statements for each fund category — governmental and proprietary — are presented. The emphasis of fund financial statements is on major individual governmental and enterprise funds, each of which is displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities.

Major Funds: The City's major governmental and enterprise funds are identified and presented separately in the fund financial statements. All other funds, called nonmajor funds, are combined and reported in a single column, regardless of their fund type.

Major funds are defined as funds, which have either assets (plus deferred outflows), liabilities (plus deferred inflows), revenues or expenditures in excess of 10 percent of their fund-type total and five percent of the aggregate total for both governmental funds and enterprise funds. The General Fund is always a major fund. The City may select other funds it believes should be presented as major funds.

The City reported the following major governmental funds in the accompanying financial statements:
 The General Fund is the general operating fund of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund.  The Transportation Special Revenue Fund accounts for the City's gas tax, vehicle registration fees and grant revenues and expenditures related to the maintenance and construction of City streets. All revenue in this fund is restricted exclusively for street and road purposes including related engineering and administrative expenses. Management considers this fund qualitatively major and has elected to present this fund as such, even if mathematically it does not qualify per applicable GASB requirements.  The Housing Development Special Revenue Fund accounts for the Federal Housing and Community Development Grant Program activities administered through the County. Monies collected from developers that mitigate the impact of housing needs are also included. Monies in this fund are governed by the program's rules.
 The Public Facilities Corporation Debt Service Fund accounts for the payments of principal and interest on certificates of participation issued to provide for the financing of City Hall, Library, Wilson Park, Memorial Park, and other City facilities.
 Capital Improvement Projects Capital Projects Fund Accounts for activities related to the acquisition or construction of major capital facilities.

The City reports the following enterprise funds as major funds in the accompanying financial statements:
 The Resources Recovery Fund accounts for activity related to the collection, disposal, and recycling of solid waste. A private company has been issued an exclusive franchise to perform these services.  The Recreation Programs Fund accounts for activities of the City's community centers and park facilities.
 The Cupertino Sports Center Fund accounts for activities of the City’s sports center facility. 116
CC 05-19-2022
116 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

41. NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The City also reports the following fund types:
 Internal Service Funds. These funds account for workers' compensation, management information systems maintenance and replacement, equipment maintenance and replacement, retiree health costs, accrued leave payouts, and long-term disability coverage which are provided to other departments on a cost-reimbursement basis.

Basis of Accounting: The government-wide and proprietary financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.

Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt which are recognized as expenditures to the extent the City has provided financial resources to a debt service fund for payment of these liabilities that mature early in the following year. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from long-term debt and acquisitions under capital leases are reported as other financing sources.

Unearned revenues are considered on a full accrual basis, while unavailable revenues are based on the modified accrual measure.

Property taxes, transient occupancy taxes, utility taxes, franchise taxes, interest and special assessments are susceptible to accrual. Other receipts and taxes are recognized as revenue when the cash is received.

Sales taxes collected and held by the state at year end on behalf of the City are also recognized as revenue.

Sales tax consultant payments which are contingent on revenues collected are netted against the related revenues.

Under the terms of grant agreements, the City may fund certain programs with a combination of cost reimbursement grants, categorical block grants, and general revenue. The City's policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary. Grant revenues are recognized after eligibility and billing occurs, but may be a deferred inflow if not received within sixty days of year-end. Because of the cost-reimbursement and recognition nature of some grants, certain capital project funds may carry deficit fund balances until billing and receipt of grants. The City may also front the capital outlays with cash advances from other funds.

Non-exchange transactions, in which the City gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants, entitlements, and donations. On the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied or assessed.

Revenue from grants is recognized as described above. Entitlement and donation revenues are recognized when cash is received.
117
CC 05-19-2022
117 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

42. NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Budgetary Practices: The budget of the City is a detailed operating plan which identifies estimated costs and results in relation to estimated revenues. The budget includes (1) the programs, projects, services and activities to be provided during the fiscal year; (2) estimated revenue available to finance the operating plan; and (3) the estimated spending requirements of the operating plan. The budget represents a process through which policy decisions are made, implemented and controlled. The City prohibits expending funds for which there is no legal appropriation. Operating appropriations lapse at fiscal year end.

In May of each year, the City Manager submits to the City Council a proposed budget for the fiscal year beginning July 1. Public hearings on the proposed budget are held during the month of June and the budgets for all fund types are legally adopted by Resolution prior to June 30. Original budget amounts are presented on the accompanying budgetary statements include these legally adopted amounts.

The City's legal level of budgetary control is at the functional level for the general fund and at the fund level for other funds. The City Manager is responsible for controlling the City's expenditures in accordance with the adopted budget. The City Manager is authorized to administer and transfer appropriations between budget accounts within the operating budget when in his opinion such transfers become necessary for administrative purposes. Any revision which increases total appropriations must be approved by the City Council. Requests for additional personnel or capital outlay also require the approval of the City Council.

Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting principles. Budget information is presented for the general, special revenue and debt service funds only.

Capital projects funds are budgeted on a long-term project-by-project basis and, hence, budgets for these funds are not presented in the basic financial statements. The Traffic Impact Fund does not have a legally adopted budget. During the fiscal year, no funds had expenditures which exceeded appropriations.

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, except for money market mutual funds which are reported at amortized cost. Adjustments to fair value, as well as dividend and interest income received is recorded by the City in its governmental funds in the Use of money and property caption while proprietary funds report these items as Investment income.

Capital Assets: Capital assets are recorded at cost or estimated historical cost if purchased or constructed.

Donated capital assets are recorded at their estimated acquisition value on the date donated. Public domain (infrastructure) capital assets consisting of roads, bridges, curbs, gutters, medians, sidewalks, drainage and lighting systems have been capitalized and depreciated. Capital assets are defined as assets with an initial individual cost of more than $5,000 for general capital assets and $100,000 for intangible assets.

Depreciation is recorded using the straight-line method over the following useful lives:

Buildings 15 – 25 years
Improvements 10 – 15 years
Vehicles 4 – 10 years
Street equipment 3 – 20 years
Water equipment 3 – 50 years
Office equipment 3 – 5 years
Road, curbs, gutters, sidewalks, medians and bridges 30 – 40 years Streetlights 20 years
Storm drain structure and mains 40 years
Traffic signals 20 years
118
CC 05-19-2022
118 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

43. NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Major outlays for capital assets and improvements are capitalized as projects are constructed. For enterprise funds, interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. Some capital assets may be acquired using federal and state grant funds, or they may be contributed by developers or other governments. These contributions are accounted for as revenues at the time the capital assets are contributed.

Claims and Judgment Payable: Claims and judgments payable are accrued when the liability is incurred and the amount can be reasonably estimated. Claims and judgments payable are recorded in an internal service fund for workers' compensation and long-term disability, and other claims and judgments are recorded in the General Fund or enterprise funds, as appropriate.

Compensated Absences: Compensated absences comprise vested accumulated vacation and sick leave.

The City's liability for compensated absences is recorded in governmental or business-type activities as appropriate. The liability for compensated absences is determined annually. For all governmental funds, amounts expected to be "permanently liquidated," such as what is due to be paid because of a realized employment action, are recorded as fund liabilities; the long-term portion is recorded in the Statement of Net Position.

Compensated absences are liquidated by the fund that has recorded the liability. The long-term portion of governmental activities compensated absences are liquidated primarily by the General Fund, using the Compensated Absences and Long-Term Disability internal service fund to account for termination payouts.

The changes in compensated absences for the year ended June 30, 2021 were as follows:

Governmental Business-Type
Activities Activities Total
Beginning balance $ 5,147,792 $ 363,518 $ 5,511,311
Additions 824,175 (102,841) 721,334
Reductions (676,771) (26,940) (703,711)
Ending balance $ 5,295,199 $ 233,737 $ 5,528,934
Current portion $ 652,810 $ 17,611 $ 670,421
Non-current portion $ 4,642,386 $ 216,127 $ 4,858,513
Deferred Outflows/Inflows of Resources: In addition to assets, the statement of financial position or balance sheet reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City reports differences between expected and actual experience, changes in pension and OPEB assumptions, loss on pension and OPEB investments, and contributions made subsequent to the measurement date as well. Differences between expected and actual experience and changes in pension and OPEB plan assumptions are deferred and amortized over the average of the expected remaining service lives of employees who are provided with benefits through the pension and OPEB plans. Loss on pension and OPEB investments are deferred and amortized over five years. Employer contributions made subsequent to the measurement date and change in proportionate share are deferred and recognized as a reduction of the net pension and net OPEB liability in the subsequent reporting year. 119
CC 05-19-2022
119 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

44. NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In addition to liabilities, the statement of financial position or balance sheet reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Under the accrual basis of accounting differences between expected and actual experience are deferred and amortized over the average of the expected remaining service lives of all employees who are provided with benefits through the pension and OPEB plans.

Property Tax Calendar: All property taxes are levied and collected by the County of Santa Clara. Secured taxes are levied on July 1, are due in two installments on November 1 and February 1 and become delinquent after December 10 and April 10. Unsecured taxes are levied on July 1 and become delinquent on August 31. The lien date for secured and unsecured property taxes is January 1.

The City, in fiscal year 1993-94, adopted an alternative method of property tax distribution (the "Teeter Plan"). Under this method, the City receives 100 percent 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.

Interfund Transactions: Transactions constituting reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed.

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.

Prepaid Items: Prepaid items are reported under the consumption method, which recognizes the expenditures/expense in the period associated with the service rendered or goods consumed.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain amounts and disclosures. Accordingly, actual results could differ from those estimates.

Implementation of Governmental Accounting Standards Board (GASB) Pronouncements: Management adopted the provisions of the following Governmental Accounting Standards Board (GASB) Statements, which became effective during the year ended June 30, 2021.

In January 2017, the GASB issued Statement 84, Fiduciary Activities. The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. This Statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. This Statement is now effective for the City’s fiscal year ended June 30, 2021. The implementation of this standard specifically impacted the financial statement presentation of the fiduciary fund financial statements. The City participates in the Public Agency Retirement System (PARS) Public Agencies Post Retirement Health Care Plan Trust Program (PARS Trust), an agent-multiple employer irrevocable trust established to fund other postemployment benefits. 120
CC 05-19-2022
120 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

45. NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The PARS Trust functions for the benefit of the employees. The City funds all PARS Trust costs based on actuarial valuations for its specific portion of the PARS Trust as opposed to the PARS Trust as a whole.

Previously, the City reported in its fiduciary fund financial statements the PARS Trust that pertains to the City as well as OPEB benefit payments of the Plan initiated by the City but reimbursed to the PARS Trust in accordance with GASB Statement 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as the City reviewed the PARS Trust separately issued financial statements and determined that inclusion of the City OPEB Plan component unit financial statements and related disclosures as a City trust fund were necessary as omission would have been misleading. However, with the implementation of GASB Statement 84, this is no longer considered applicable. As such, the fiduciary fund financial statements are no longer included in the financial statements of the City.

Fair Value Measurements: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are inputs — other than quoted prices included within level 1 — that are observable for an asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for an asset or liability.

If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement.
121
CC 05-19-2022
121 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

46. NOTE 2 – CASH AND INVESTMENTS
Primary Government: The City's pooled idle funds are invested pursuant to investment policy guidelines adopted by the City Council. The objectives of the policy are to invest funds to the fullest extent possible and to invest in accordance with the provisions of the California Government Code with the priority of safety, liquidity and yield. The policy addresses the safekeeping of securities, types of investment instruments, diversification, maturities, reporting requirements, and internal control. The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the Statement of Net Position and the balance sheet as "cash and investments." Policies: California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110 percent of the City's cash on deposit, or first trust deed mortgage notes with a market value of 150 percent of the deposit, as collateral for these deposits. Under California Law, this collateral is held in a separate investment pool by another institution in the City's name and places the City ahead of general creditors of the institution.

The City and its fiscal agents invest in individual investments and in investment pools. Individual investments are evidenced by specific identifiable securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system.

Security instruments owned by the City are held in safekeeping by a third party custodian acting as agent for the City under the terms of a custody agreement.

The City's investments are carried at fair value with the exception of money market mutual funds, which are carried at amortized cost. The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in investment income for that fiscal year.

Classification: The City's total cash and investments, at fair value, are presented on the financial statements in the following allocation:

Primary Government
Cash and investments $ 180,771,652
Restricted cash and investments:

Held by fiscal agent for pension 18,491,004
Held by fiscal agent for bond repayments 8,333
Total cash and investments $ 199,270,989
The bank value of the City’s cash deposits is $19,281,316 with cash per books of $19,459,827. All deposits in excess of FDIC coverage limits were collateralized with securities at year end. 122
CC 05-19-2022
122 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

47. NOTE 2 – CASH AND INVESTMENTS (Continued)
Authorized Investments by the City: The City's Investment Policy and the California Government Code allow the City to invest its pooled idle funds in the following, under limits and provisions that address interest rate risk, credit risk, and concentration of credit risk. This does not include the City's investments of debt proceeds held by fiscal agents that are governed by the provisions of debt agreements of the City.

Minimum Maximum Maximum
Maximum Credit Percentage of Investment in
Authorized Investment Type Maturity Quality Portfolio One Issuer U.S. Treasury Obligations 5 years N/A None None
U.S. Agency Securities * 5 years N/A None None
California Local Agency Investment
Fund (LAIF) N/A N/A Up to $65 million None
Non-negotiable Certificates of
Deposits (time deposits) 5 years N/A 30%*** 10% of portfolio; 5% of issuer’s net worth **
State of California registered state
warrants, treasury notes, or bonds 5 years N/A None None California local agency bonds, notes,
warrants, or other obligations 5 years N/A None None
Bond issued by the local agency 5 years N/A None None
Bankers' Acceptances 180 days N/A 40% None
Commercial Paper 270 days A-1+P-1 25% 10% of portfolio; 5% of issuer’s net worth; 10% of
outstanding paper of
Issuer. **
Negotiable Certificates of Deposit 5 years N/A 30% 10% of portfolio; 5% of issuer’s net worth. **
Repurchase Agreements 1 year N/A None 10% of portfolio; 5% of issuer’s net worth. **
Medium Term Corporate Notes 5 years A or better 30% 10% of portfolio; 5% of issuer’s net worth. **
Money market mutual funds investing
in U.S. Treasury, Government Agency
securities or repurchase agreements
collateralized by U.S. Treasury or
Government Agency securities 5 years Aaa/AAA 20% None
Supranationals 5 years AA or better 30% 10% of portfolio * Securities issued by agencies of the federal government such as the Government National Mortgage Association (GNMA), the Federal Farm Credit System (FFCB), the Federal Home Loan Bank (FHLB), the Federal National Mortgage Association (FNMA), the Student Loan Marketing Association (SLMA), and the Federal Home Loan Mortgage Association (FHLMC). ** Represents restriction in which the City's investment policy is more restrictive than the California Government Code. *** 30% maximum percent of portfolio if using a private sector entity to assist in the placement of the time deposits. No maximum for others.

Authorized Investments by Debt Agreements: The City must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged reserves to be used if the City fails to meet its obligations under these debt issues. The California Government Code requires these funds to be invested in accordance with City ordinances, bond indentures or State statutes. The City's Investment Policy allows investments of bond proceeds to be governed by provisions of the related bond indentures. The following identifies the investment types that are authorized for investments held by fiscal agents under the terms of the bond indentures of the related debt issue:
123
CC 05-19-2022
123 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

48. NOTE 2 – CASH AND INVESTMENTS (Continued)
Minimum Maximum
Maximum Credit Percentage of
Authorized Investment Type Maturity Quality Portfolio
Cash or obligations of the U.S. including U.S. Treasury obligations N/A N/A None Federal agencies obligations which represent
full faith and credit of the U.S. N/A N/A None
Direct federal agencies obligations which are not
fully guaranteed by the full faith and credit of the U.S. N/A N/A None U.S. dollar denominated deposit accounts, federal funds and bankers' acceptances with domestic commercial banks 360 days P-1, A-1+, A-1 None Commercial Paper 270 days P-1, A-1 None
Money market funds N/A Aaam or AAAm-G None
Pre-refunded municipal obligations that are not callable prior to maturity or as to which irrevocable instructions have been Highest given to call on the date specified in the notice N/A rating category None Municipal obligations or General obligations of states N/A Aaa, AAA, A2, A None California Local Agency Investment Fund (LAIF) N/A N/A Up to $65 million Shares in a California common law trust established pursuant to Title 1, Division 7, Chapter 5 of the California Government Code which invests exclusively in investments permitted by Section 53635 of Title 5, Division 2, Chapter of the California Government Code, as it may be amended. N/A N/A None
Interest Rate Risk: Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates.

Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity or earliest call date:
12 Months 13 to More than
Investment Type or less 24 Months 24 Months Total
U.S. Treasury Securities $ 1,275,250 $ 4,098,360 $ 27,757,105 $ 33,130,715 Corporate Notes 7,328,970 - 20,629,828 27,958,798
U.S. Agency Notes
Federal Home Loan Mortgage Corporation 1,518,360 2,343,312 7,886,280 11,747,952 Federal National Mortgage Association - 15,806,748 - 15,806,748 Federal Home Loan Banks 1,305,733 2,045,180 5,472,576 8,823,489 Federal Farm Credit Banks 1,339,986 4,239,160 - 5,579,146 Local Agency Investment Fund 21,001,116 - 21,001,116 - Municipal Bonds 796,570 796,570 Asset-Backed Securities 1,367,843 - 9,836,186 11,204,029 Negotiable Certificates of Deposit 3,352,320 - - 3,352,320 Supranationals 7,283,885 - - 7,283,885
Collateralized Mortgage Obligations - 3,170,720 - 3,170,720 Money Market Mutual Funds - Restricted for Pension (PARS) 18,491,004 - 18,491,004 - Money Market Mutual Funds 11,464,670 - - 11,464,670 Total Investments $ 67,032,324 $ 17,183,665 $ 95,595,173 179,811,162 Cash in banks and on hand 19,459,827
Total Cash and Investments
$ 199,270,989
124
CC 05-19-2022
124 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

49. NOTE 2 – CASH AND INVESTMENTS (Continued)
The City is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The Local Investment Advisory Board (Board) has oversight responsibility for LAIF. The Board consists of five members as designated by State Statute. The City reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are U.S. Treasuries, Federal Agency obligations, time deposits, negotiable certificates of deposits, commercial paper, corporate bonds, and security loans. These investments had weighted average maturity of 191 days.

Money market mutual funds are available for withdrawal on demand. At June 30, 2021, money market mutual funds, used for pooled investment and held by fiscal agent purposes, had a weighted average maturity of 46 days or less.

Fair Value Hierarchy: The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.

The following is a summary of the fair value hierarchy of the fair value of investments of the City as of June 30, 2021:

Investments by Fair Value Level Level 1 Level 2 Total
U.S. Treasury Securities $ 33,130,715 - $ $ 33,130,715
Corporate Notes 27,958,798 - 27,958,798
U.S. Agency Notes - Federal Home Loan Mortgage Corporation 11,747,952 - 11,747,952 Federal National Mortgage Association 15,806,748 - 15,806,748 Federal Home Loan Banks 8,823,489 - 8,823,489
Federal Farm Credit Banks 5,579,146 - 5,579,146
Asset-Backed Securities 11,204,029 - 11,204,029
Collateralized Mortgage Obligations 3,170,720 - 3,170,720 Supranationals 7,283,885 - 7,283,885
Negotiable Certificates of Deposit 3,352,320 - 3,352,320 Municipal Bonds - 796,570 796,570
Total Investments $ - 128,854,372 $ 128,854,372
Investments Measured at Amortized Cost:

Money Market Mutual Funds 11,464,670
Money Market Mutual Funds - Restricted for Pension (PARS) 18,491,004 Investments Exempt from Fair Value Hierarchy:

Local Agency Investment Fund 21,001,116
Cash in banks and on hand 19,459,827
Total Cash and Investments $ 199,270,989
125
CC 05-19-2022
125 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

50. NOTE 2 – CASH AND INVESTMENTS (Continued)
Investments classified in Level 1 of the fair value hierarchy include securities valued using quoted prices in active markets. Federal Agency Securities and other U.S. Treasury Securities, classified in Level 2 of the fair value hierarchy are valued using matrix pricing techniques maintained by various pricing vendors.

Matrix pricing is used to value securities based on the securities' relationship to benchmark quoted prices.

Fair value is defined as the quoted market value on the last trading day of the period. These prices are obtained from various pricing sources by the custodian bank. The California Local Agency Investment Fund (LAIF) is valued using factors provided in the Pooled Money Investment Account (PMIA) Performance Report by the State Treasurer’s Office. Money market funds and negotiable certificates of deposit are exempt from fair value measurement and are reported at amortized cost.

Credit Risk: Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of June 30, 2021 for each investment type, including those with fiscal agents, as provided by Moody's ratings:

Investment Type Ratings Total
Money Market Mutual Funds Aaa 29,955,674 $
Corporate Notes A1,A2,A3 27,958,798 U.S. Agency Notes
Federal Home Loan Mortgage Corporation Aaa 11,747,952 Federal National Mortgage Association Aaa 15,806,748 Federal Home Loan Banks Aaa 8,823,489 Federal Farm Credit Banks Aaa 5,579,146 Asset-Backed Securities Aaa 11,204,029 Collateralized Mortgage Obligations Aaa 3,170,720 Negotiable Certificates of Deposit Aaa 3,352,320 Supranationals Aaa 7,283,885
Municipal Bonds Aa2 796,570
U.S. Treasury Securities Aaa 33,130,715 Not Rated:

Local Agency Investment Fund Not Rated 21,001,116 Total Investments $179,811,162 Concentration of Credit Risk: The City's investment policy contains certain limitations on the amount that can be invested in any one issuer. In certain categories, these limitations are more restrictive than those required by California Government Code Sections 53600 et seq. Excluding those issued or explicitly guaranteed by the U.S. government and investments in the local agency investment fund and mutual funds, the City had the following investments that represent five percent or more of total City-wide investments:

Issuer Investment Type Amount
Federal Home Loan Mortgage Corporation (FHLMC) U.S. Agency Notes $11,747,952 Federal Home Loan Banks (FHLB) U.S. Agency Notes 8,823,489 Federal National Mortgage Association (FNMA) U.S. Agency Notes 15,806,748 126
CC 05-19-2022
126 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

51. NOTE 3 – LOANS RECEIVABLE
Housing Program Loans: On June 30, 1995, the City loaned $821,000 to Community Housing Developers, a California nonprofit public benefit corporation. The note bears interest at three percent per annum, compounded annually, payable to the extent of surplus cash, and all unpaid principal and interest due June 30, 2035. As of June 30, 2021, the balance remaining on the loan was $821,000. The loan was issued using resources in the Housing Development Fund and is considered governmental activities.

On June 6, 1996, the City loaned $320,000 to Cupertino Community Services, a California nonprofit public benefit corporation. The note bears interest at three percent per annum and due on July 14, 2026. As of June 30, 2021, the balance on the loan was $158,057. The loan was issued using resources in the Housing Development Fund and is considered governmental activities.

On September 11, 2017 the City loaned $3,672,000 to Stevens Creek, L.P., a California limited partnership.

The note bears interest at three percent per annum for 55 years. After the completion of construction of the development, no later than April 30th of each calendar year, the Developer shall make repayments of the loan in an amount equal to the City loan percentage of the lenders’ share of residual receipts. The payments shall be credited first against accrued interest and then against outstanding principal of the loan, and shall be accompanied by the developer’s report of residual receipts. As of June 30, 2021, the balance remaining on the loan was $3,672,000. The loan was issued using resources in the Housing Development Fund and is considered governmental activities.

In addition to these loans, the City has $40,120 in housing and other loans receivable as of June 30, 2021.

These loans bear interest at three to six percent and are due by June 30, 2025. The loan was issued using resources in the Housing Development Fund and is considered governmental activities. 127
CC 05-19-2022
127 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

52. NOTE 4 – INTERFUND TRANSACTIONS
Transfers between funds during the fiscal year ended June 30, 2021 were as follows:

Fund Making Transfers Fund Receiving Transfers Amount Transferred General Fund Transportation Special Revenue Fund $3,800,000 (D) ` Housing Special Revenue Fund 200,000 (G)
Public Financing Corporation Debt Service Fund 3,169,138 (B,D) Capital Improvement Projects Capital Projects Fund 5,000,000 (A) Non-major Enterprise Funds 450,000 (D)
Cupertino Sports Center Fund 660,000 (D)
Recreation Programs Fund 1,379,551 (D)
Internal Service Funds 490,000 (E)
Public Facilities Corporation Debt Service Fund General Fund 492,831 Capital Improvements Projects
Capital Projects Fund Transportation Special Revenue Fund 200,000 (A) Cupertino Sports Center Fund 25,000 (A)
Recreation Programs Fund 284,449 (C)
Non-Major Enterprise Funds 50,000 (A)
Non-major Governmental Funds General Fund 15,000 (F)
Total Interfund Transfers $16,215,969
The reasons for these transfers are set forth below:
(A) To fund capital projects.
(B) For annual lease payment for 2012 Certificates of Participation debt service. (C) To support state-mandated activities including complaint response and enforcement programs. (D) Operating subsidy from General Fund.
(E) To fund IT operations, personnel costs associated with staffing special project, and compensated absences and retiree health. (F) To fund purchase of trees
(G) To fund Homelessness Encampment Services.

Current Interfund Balances: Current interfund balances arise in the normal course of business and are expected to be repaid shortly after the end of the fiscal year. As of June 30, 2021, the Equipment Revolving Internal Service Fund owed the General Fund $539,204.

Interfund Advances: Interfund advances are balances between funds that are not expected to be repaid within the current fiscal year. As of June 30, 2021, the General Fund advanced $3,000,000 to the Capital Improvement Projects Capital Projects Fund for advance funding of planned projects that will be repaid in subsequent years.
128
CC 05-19-2022
128 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

53. NOTE 5 – CAPITAL ASSETS
A summary of changes in governmental activities capital assets is as follows:

Balance at Balance at
July 1, 2020 Additions Deletions Transfers June 30, 2021 Governmental activities:

Capital assets not being depreciated:

Land $ 62,045,969 $ 2,740,700 $ - $ 64,786,669 - $
Easements 19,615,039 - - 19,615,039 - Construction in progress 5,315,170 15,707,748 (5,071,922) - 15,950,996 Total general government capital
assets not being depreciated 86,976,178 18,448,448 (5,071,922) - 100,352,704 Capital assets being depreciated:

Buildings 46,207,927 - 332,630 - 46,540,557
Improvements other than buildings 58,557,845 - 2,571,857 - 61,129,702 Machinery and equipment 4,149,407 (12,773) - 203,807 4,340,441 Roads, curbs, gutters, sidewalks, medians
and bridges 177,971,273 - 1,802,320 - 179,773,593
Streetlights 9,058,330 - 161,308 - 9,219,638
Storm drain structure and mains 37,373,158 - - 37,373,158 - Traffic signals 6,418,246 - - 6,418,246 - Total capital assets being depreciated 339,736,186 (12,773) - 5,071,922 344,795,335 Less accumulated depreciation for:

Buildings (30,193,858) (1,768,781) - (31,962,639) -
Improvements other than buildings (41,075,643) (2,301,680) - (43,377,323) - Machinery and equipment (2,795,651) (282,140) 12,772 (3,065,019) - Roads, curbs, gutters, sidewalks, medians and bridges (110,258,263) (2,613,878) - (112,872,141) - Streetlights (7,469,142) (130,676) - (7,599,818) - Storm drain structure and mains (33,110,382) (431,927) - (33,542,309) - Traffic signals (5,688,539) (112,576) - (5,801,115) - Total accumulated depreciation (230,591,478) (7,641,658) 12,772 (238,220,364) - Total general government capital assets being depreciated, net 109,144,708 (7,641,658) 5,071,922 (1) 106,574,971 Internal service fund capital assets:

Capital assets not being depreciated:

Construction in progress 214,666 661,449 (876,115) - - Total internal fund capital assets not being depreciated 214,666 661,449 (876,115) - - Capital assets being depreciated:

Machinery and equipment 11,422,217 (80,081) - 876,115 12,218,251 Less accumulated depreciation (7,981,952) (968,791) 78,304 (8,872,439) - Total internal fund capital assets being depreciated, net 3,440,265 (968,791) (1,777) 876,115 3,345,812 Governmental activities capital assets, net $199,775,817 $ 10,499,448 $ (1,778) $ 210,273,487 - $ 129
CC 05-19-2022
129 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

54. NOTE 5 – CAPITAL ASSETS (Continued)
Balance at Balance at
July 1, 2020 Additions Deletions Transfers June 30, 2021 Business-type activities:

Capital assets not being depreciated:

Construction in progress $ 1,149,254 - $ $ (1,023,923) - $ $ 125,331 Total capital assets not being depreciated 1,149,254 - (1,023,923) - 125,331 Capital assets being depreciated:

Buildings 1,006,002 - 1,023,923 - 2,029,925
Improvements other than buildings 2,089,743 - - 2,089,743 - Machinery and equipment 711,119 - - 711,119 - Total capital assets being depreciated 3,806,864 - 1,023,923 - 4,830,787 Less accumulated depreciation for:

Buildings (432,036) (52,398) - (484,434) -
Improvements other than buildings (1,653,421) (99,788) - (1,753,209) - Machinery and equipment (602,525) (25,420) - (627,945) - Total accumulated depreciation (2,687,982) (177,606) - (2,865,588) - Total capital assets being depreciated, net 1,118,882 (177,606) 1,023,923 - 1,965,199 Business-type activity capital assets, net $ 1,118,882 $ 971,648 $ - $ 2,090,530 - $ Depreciation expense was charged to functions and programs based on their usage of the related assets.

Depreciation expense was charged to governmental activities as follows:

Governmental Activities
Administration $ 187,220
Public and Environment Affairs 16,047
Administrative Services 29,038
Parks and Recreation 166,588
Public Works 7,242,765

Total $ 7,641,658
Depreciation expense was charged to the business-type activities as follows:

Business-Type Activities
Resources Recovery $ 3,314
Blackberry Farm 2,832
Cupertino Sports Center 66,802
Recreation Program 104,658
Total $ 177,606
130
CC 05-19-2022
130 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

55. NOTE 6 – LONG-TERM DEBT
Cupertino Public Facilities Corporation Certificates of Participation:

Original Balance Balance
Issue June 30, June 30, Current
Amount 2020 Additions Retirements 2021 Portion
2012 Refinancing Certificates
of Participation

0.350-3.125%, due
07/01/2030 $43,940,000 27,010,000 $ $ 27,010,000 - $ $ - $ - 2020A Certificates of Participation
4%, due 06/01/2030 $22,040,000 22,040,000 - 2,140,000 19,900,000 1,880,000 Issuance Premium 3,878,704 - 430,967 3,447,737 - Total long-term debt $27,010,000 $25,918,704 $29,580,967 $23,347,737 $1,880,000 The Cupertino Public Facilities Corporation issued Certificates of Participation to provide financing for the construction of the Community Center, improvements of the City Hall and the Library in July 1986; purchase of Wilson Park in 1989; finance the Memorial Park Expansion in 1990; and purchase the Blackberry Farm and Fremont Older site in 1991. The Cupertino Public Facilities Corporation, as lessor, leased real property to the City (under the Lease Agreement with the lessee) and assigned the base rental payments to the trustee for the benefit of the owners of the certificates of participation. The rental payments which represent the pledged revenues are scheduled to be sufficient in both time and amount, when the principal and interest of the certificates are due, which was the case for the year ended June 30, 2021.

On May 9, 2012, $43,940,000 principal amount of 2012 Refinancing Certificates of Participation (2012 COPs) were issued to refund the 2002 COPs, to fund a reserve fund for the 2012 COPs, and pay costs incurred in connection with issuance.

On September 29, 2020, $22,040,000 principal amount of 2020A Certificates of Participation (2020 COPs) were issued to refund the 2012 COPs and pay costs incurred in connection with issuance. The proceeds were placed into an escrow account, along with funds from the City’s 2012 COPs Reserve and on October 30, 2020, the 2012 COPS were prepaid, resulting no amounts outstanding as of June 30, 2021 for the 2012 COPs. The result of the transaction was an economic gain of $3,133,819.

The 2020A COPs are payable by a pledge of revenues from the lease payments payable by the City pursuant to the Lease Agreement between the Cupertino Public Facilities Corporation and the City for the use and possession of the Site and Facility as described in the Lease Agreement. The City also covenanted in the Lease Agreement to include all lease payments in its annual budget. Total debt service payments remaining on the 2020 COPs is $24,088,000 payable through June 1, 2030. For the year ended June 30, 2021, the bonds had $2,140,000 of principal and $799,047 interest due. 131
CC 05-19-2022
131 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

56. NOTE 6 – LONG-TERM DEBT (Continued)
Annual debt service requirements for the 2020A COPS are shown below:

NOTE 7 – NET POSITION AND FUND BALANCES
Net Position is measured on the full accrual basis while Fund Balance is measured on the modified accrual basis.

Net Position: The government-wide and proprietary fund financial statements utilize a net position presentation. Net position is categorized as follows:

Net investment in capital assets - This category groups all capital assets including, infrastructure, into one component of net position. Accumulated depreciation and outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category.

Restricted - This category represents net position that has external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.

Unrestricted - This category represents net position of the City that do not meet the definition of "net investment in capital assets" or "restricted."
Fund Balances: As prescribed by GASB Statement No. 54, governmental funds report fund balance in classifications based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. Fund balances for governmental funds are made up of the followings:

Nonspendable Fund Balance - includes amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The "not in spendable form" criterion includes items that are not expected to be converted to cash, for example: prepaid items, property held for resale and long term notes receivable.

Restricted Fund Balance - includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers.

For the Year
Ending June 30 Principal Interest
2022 $ 1,880,000 $ 796,000
2023 1,955,000 720,800
2024 2,035,000 642,600
2025 2,115,000 561,200
2026 2,200,000 476,600
2027-2030 9,715,000 990,800
Total $ 19,900,000 $ 4,188,000
Governmental Activities
132
CC 05-19-2022
132 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

57. NOTE 7 – NET POSITION AND FUND BALANCES (Continued) Committed Fund Balance - includes amounts that can only be used for the specific purposes determined by a formal action of the City's highest level of decision-making authority, the City Council. Commitments may be changed or lifted only by the City taking the same formal action (resolution) that imposed the constraint originally.

Assigned Fund Balance - comprises amounts intended to be used by the City for specific purposes that are neither restricted nor committed. Intent is expressed by the City Council or official to which the City Council has delegated the authority to assign amounts to be used for specific purposes. Through the adopted budget, the City Council establishes assigned fund balance policy levels and also sets the means and priority for the City Manager to fund these levels.

Unassigned Fund Balance - is the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose. Only the General Fund reports unassigned positive fund balance. A governmental fund other than the General Fund may report a negative unassigned fund balance if expenditures incurred for a specific purpose exceed the amounts that are restricted, committed or assigned to those purposes.

In circumstances when an expenditure may be made for which amounts are available in multiple fund balance classifications, the fund balance in General Fund will generally be used in the order of restricted, unassigned, and then assigned reserves. In other governmental funds, the order will generally be restricted and then assigned.
133
CC 05-19-2022
133 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

58. NOTE 7 – NET POSITION AND FUND BALANCES (Continued) Fund balances for all major and nonmajor governmental funds as of June 30, 2021, were distributed as follows:

Public Capital Other
Housing Facilities Improvements Governmental
General Transportation Development Corporation Projects Funds Total Nonspendable:

Loans receivable $ 444,346 $ - $ - $ - $ - $ 444,346 - $ Advances to other funds 3,000,000 - - - - 3,000,000 - Subtotal 3,444,346 - - - - 3,444,346 - Restricted for:

Public access television 1,418,472 - - - - 1,418,472 - Debt service 13,392 - - - - 13,392 - PRSP Section 115 Trust 18,491,004 - - - - 18,491,004 - Public safety power shutoff 217,551 - - - - 217,551 - Debt service - - 63,350 - - 63,350 - Storm drain system - - - - 4,084,025 - 4,084,025 Parks and open space - - - - 9,708,675 - 9,708,675
Environmental management - - - - 1,887,623 - 1,887,623
Streets and road projects 9,409,837 - - - 468,998 - 9,878,835 Housing programs - 7,948,113 - - - 7,948,113 - Subtotal 20,140,419 9,409,837 7,948,113 63,350 16,149,321 - 53,711,040 Committed for:

Economic uncertainty I 19,000,000 - - - - 19,000,000 - Sustainability Reserve 127,891 - - - - 127,891 - Subtotal 19,127,891 - - - - 19,127,891 - Assigned to:

Encumbrances 4,906,139 - - - - 4,906,139 - Capital projects - - - 36,859,117 - 179,057 37,038,174 Subtotal 4,906,139 - - 36,859,117 - 179,057 41,944,313
Unassigned 49,231,996 - - - - 49,231,996 - Total $ 96,850,791 $ 9,409,837 $ 7,948,113 $ 36,859,117 63,350 $ $ 16,328,378 $ 167,459,586 NOTE 8 – COMMITMENTS AND CONTINGENCIES
Federal and State Grant: The City participates in a number of federal and state grant programs subject to financial and compliance audits by the grantors or their representatives. Audits of certain grant programs, including those for the year ended June 30, 2021, 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.

Encumbrances: The City uses encumbrances to control expenditure commitments for the year.

Encumbrances represent commitments related to executor contracts not yet performed and purchase orders not yet filled. Commitments for such expenditure of monies are encumbered to reserve a portion of applicable appropriations. Encumbrances still open at year end are not accounted for as expenditures and liabilities, but as restricted, or assigned fund balance. 134
CC 05-19-2022
134 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

59. NOTE 8 – COMMITMENTS AND CONTINGENCIES (Continued)
As of June 30, 2021, the City had the following encumbrances outstanding:

Governmental Funds:

General Fund $ 4,906,139
Transportation Special Revenue Fund 2,313,039
Housing Development Special Revenue Fund 13,933
Capital Improvements Projects Capital Projects Fund 9,149,569 Other Governmental Funds 87,145
Total Encumbrances $ 16,469,824
Lease Agreement with County of Santa Clara: The City has an agreement (commitment), expired in 2020 but still being honored, to lease a building to the County of Santa Clara for the purpose of providing library service to the City's residents. The lease requires a minimum annual payment of $120,000 adjusted for Cupertino's portion of book circulation and increase of assessed valuation. This is an operating lease with a renewable option. The City is currently negotiating the terms with the Santa Clara County Library District JPA to renew the operating lease. At June 30, 2021, the cost and carrying value of the building which opened in October 2004, is $21,952,133 and $7,182,100 respectively, with $14,770,033 in accumulated depreciation.

Consulting Agreement for Sales Taxes: The City entered into agreements (commitments) with two companies to provide services consisting of the assessment and creation of new sales and use tax revenue sources for the City. The City agreed to pay the companies based on a sliding scale payment schedule dependent on the level of new sales tax revenue realized by the City as defined in the consulting agreements. These agreements qualify as tax abatements under the provisions of GASB Statement 77.

However, due to legal restrictions per the California Revenue and Taxation Code, Section 7056, additional disclosures cannot be provided.

Santa Clara County Vehicle Registration Fee (VRF): The City is required to report VRF revenues, expenditures and fund balances as of the year ended June 30, 2021:

VRF Balance as of July 1, 2020 $ -
VRF Revenue 382,102
VRF Interest -
VRF Expended (382,102)
VRF Balance as of June 30, 2021 $ -
NOTE 9 – LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT General and Property Liability: The City is self-insured for the first $250,000 of general and property liability for each occurrence, and the excess (up to $10,000,000 for each occurrence and annual aggregate) is covered through the City's participation in the Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA – formerly the Association of Bay Area Governments Pooled Liability Assurance Network or ABAG PLAN). The risk pool consists of 28 agencies within the San Francisco Bay Area. The stated purpose of the PLAN JPA is to provide certain levels of liability insurance coverage, claims management, risk management services, and legal defense to its participating members. PLAN JPA is governed by a Board of Directors, which comprises officials appointed by each participating member. Premiums paid to PLAN JPA are subject to possible refund based on the results of actuarial studies and approval by the Board of Directors. Complete financial statements for PLAN JPA may be obtained from their offices at the following address: PLAN JPA, c/o Sedgwick, 1750 Creekside Oaks Drive Suite 200, Sacramento, CA, 95833.

Premiums are revised each year based on the City's claims experience and risk exposure. For the year ended June 30, 2021, the City paid ABAG PLAN premiums of $639,636. 135
CC 05-19-2022
135 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

60. NOTE 9 – LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT (Continued) Workers' Compensation Liability: The City belongs to the CSAC Excess Insurance Authority (EIA), a joint power authority which provides excess workers' compensation liability claims coverage above the City's self-insured retention of $500,000 per occurrence. Losses above the self-insured retention are pooled with excess reinsurance purchased to a $50,000,000 statutory limit. EIA was established in 1979 for the purpose of creating a risk management pool for all California public entities. EIA is governed by a Board of Directors consisting of representatives of its member public entities. Complete financial statements for ETA may be obtained from their offices at the following address: CSAC Excess Insurance Authority, Finance Department, EIA 75 Iron Point Circle, Suite 200, Folsom, CA 95630. For the year ended June 30, 2021, the City paid premiums of $100,967.

It is the City's practice to obtain biennial actuarial studies for the self-insured workers' compensation liability.

The claims liabilities included in the workers' compensation internal service fund is based on the results of actuarial studies and include amounts for claims incurred but not reported and loss adjustment expenses.

Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends, including frequency and amount of payouts, and other economic and social factors. Inflation of 2.5 percent, annual rate of return of two percent, claim severity increase at 2.5 percent were assumed. In the current year, management used actuarial estimates based on a 90 percent confidence level.

Settlements have not exceeded insurance coverage in the past three years.

Changes in the balances of workers' compensation and general claims liabilities during the years ended June 30 are as follows:
2021 2020
Claims liability, beginning of year $ 1,527,000 $ 1,553,277 Incurred claims and changes in estimate (117,896) 127,471 Claim payments and credits (35,104) (153,478)
Total claims liability, end of year 1,374,000 1,527,000 Less current portion (245,000) (274,000)
Non-current portion $ 1,129,000 $ 1,253,000
NOTE 10 – DEFINED BENEFIT PENSION PLAN
Plan Descriptions and Summary of Balances by Plan: The City has one defined benefit pension plan. The Miscellaneous Plan (Plan) is an Agent-Multiple Employer Plan. Benefit provisions under the Plan is established by State statute and City Ordinance. All qualified permanent and probationary employees are eligible to participate in the Plan for which they are an eligible member based on their employment position with the City.

The Plan is administered by the California Public Employees' Retirement System (CalPERS) which acts as a common investment and administrative agent for its participating member employers. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website at www.calpers.ca.gov.
136
CC 05-19-2022
136 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

61. NOTE 10 – DEFINED BENEFIT PENSION PLAN (Continued)
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Miscellaneous Plan and additions to/deductions from the Plan's fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

Below is a summary of the deferred outflows of resources, net pension liabilities and deferred inflows of resources by Plan:

Deferred Outflows Net Pension Deferred Inflows
of Resources Liability of Resources
Miscellaneous $ 9,202,043 $ 48,513,020 $ 121,088
Benefits Provided: CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries.

Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. The Pension Reform Act of 2013 (PEPRA), Assembly Bill 340, is applicable to employees new to CalPERS and hired after December 31, 2012. The Plans' provisions and benefits in effect at June 30, 2021, are summarized as follows:

Hire date
Prior to On or after
January 1, 2013 January 1, 2013
Benefit formula 2.7% @ 55 2.0% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Minimum retirement age 50 52
Monthly benefits, as a % of eligible compensation 2% to 2.7% 1% to 2% Required employee contribution rates 8.00% 6.25%
Required employer contribution rates 23.54% 25.653%
Employees Covered: As of the June 30, 2020 actuarial valuation date (most current), the following employees were covered by the benefit terms of the Plan:

Inactive employees or beneficiaries currently receiving benefits 239 Inactive employees entitled to but not yet receiving benefits 150 Active employees 197
Total 586
Contributions: Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. 137
CC 05-19-2022
137 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

62. NOTE 10 – DEFINED BENEFIT PENSION PLAN (Continued)
Net Pension Liability: The City's net pension liability for the Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2020 using an annual actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions: The total pension liabilities in the June 30, 2020 actuarial valuations were determined using the following actuarial assumptions:

Valuation Date June 30, 2019
Measurement Date June 30, 2020
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 7.15%
Inflation 2.63%
Payroll Growth 2.88%
Projected Salary Increase Varies by Entry Age and Service (1) Investment Rate of Return 7.25% (2)
Derived using CaIPERS' Membership
Mortality Data for all Funds (3)
(1) Depending on age, service and type of employment
(2) Net of pension plan investment expenses and administrative expenses, including inflation (3) The mortality table used was developed based on CaIPERS' specific data. The table includes 15 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the CaIPERS 2017 experience study report available on CaIPERS website.

All other actuarial assumptions used in the June 30, 2019 valuation were based on the results of a December 2017 actuarial experience study for the period 1997 to 2015, including updates to salary increase, mortality and retirement rates. Further details of the Experience Study can be found on the CaIPERS website under Forms and Publications.

Change of Assumptions: None in 2021.

Discount Rate: The discount rate used to measure the total pension liability was 7.15 percent for the Plan.

To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CaIPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets.

Therefore, the current 7.15 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.15 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. 138
CC 05-19-2022
138 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

63. NOTE 10 – DEFINED BENEFIT PENSION PLAN (Continued)
In determining the long-term expected rate of return, CaIPERS took into account both short-term and longterm market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

Asset Class
New
Strategic
Allocation
Real Return
Years 1 - 10(a)
Real Return
Years 11+(b)
Global Equity 50.00% 4.80% 5.98%
Fixed Income 28.00% 1.00% 2.62%
Inflation Assets 0.00% 0.77% 1.81%
Private Equity 8.00% 6.30% 7.23%
Real Estate 13.00% 3.75% 4.93%
Liquidity 1.00% 0.00% -0.92%
Total 100.00%
(a) An expected inflation of 2.00% used for this period. (b) An expected inflation of 2.92% used for this period.

The table above reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation.

These rates of return (presented as geometric means) are net of administrative expenses.

Changes in Net Pension Liability: The changes in the Net Pension Liability for the City's Miscellaneous Plan are as follows:
139
CC 05-19-2022
139 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

64. NOTE 10 – DEFINED BENEFIT PENSION PLAN (Continued)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability
Balance at June 30, 2019 $ 145,432,153 $ 99,333,623 $ 46,098,530 Changes in the year:

Service cost 3,241,719 - 3,241,719
Interest on the total pension liability 10,302,395 10,302,395 - Change of Assumptions - - - Differences between actual and expected experience 444,188 - 444,188 Contribution - employer 5,308,580 - (5,308,580)
Contribution - employee 1,429,446 - (1,429,446)
Net investment income 4,975,822 - (4,975,822)
Administrative expenses - (140,036) 140,036
Other miscellaneous income/(expenses) - - -
Benefit payments, including refunds of employee
contributions (6,815,494) (6,815,494) -
Net changes 7,172,808 4,758,318 2,414,490
Balance at June 30, 2020 $ 152,604,961 $ 104,091,941 $ 48,513,020 Increase (Decrease)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate: The following presents the net pension liability of the City, calculated using the discount rate for the Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:

Miscellaneous
1% Decrease 6.15%
Net Pension Liability $ 68,586,079
Current Discount Rate 7.15%
Net Pension Liability $ 48,513,020
1% Increase 8.15%
Net Pension Liability $ 31,903,241
Pension Plan Fiduciary Net Position: Detailed information about the Plan's fiduciary net position is available in the separately issued CalPERS financial reports.
140
CC 05-19-2022
140 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

65. NOTE 10 – DEFINED BENEFIT PENSION PLAN (Continued)
Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions: For the year ended June 30, 2021, the City recognized pension expense of $8,113,684. As of June 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $ 5,957,573 $ - Differences between actual and expected experience 2,331,941 - Changes in assumptions - 121,088
Net differences between projected and actual earnings
on plan investments 912,519 -
Total $ 9,202,043 $ 121,088
The $5,957,573 of contributions for the fiscal year ended June 30, 2021 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2022. Other amounts reported as deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Year Ended Annual
June 30 Amortization
2021 $ 983,031
2022 1,111,471
2023 607,690
2024 421,191
$ 3,123,382
NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB)
Plan Description: Permanent employees who retire under the City's CaIPERS retirement plan are, pursuant to their respective collective bargaining agreements, eligible to have their medical insurance premiums paid by the City. Retirees receive the amount necessary to pay the cost of his/her enrollment, including the enrollment of his/her family members, in a health benefit plan provided by CalPERS up to the maximum received by active employees in their respective bargaining unit.

The City contracts with CaIPERS for this insured-benefit plan established under the state Public Employees' Medical and Hospital Care Act (PEMHCA). The plan offers employees and retirees three CalPERS' selffunded options, setup as insurance risk pools, or offers various third-party insured health plans. The plan's medical benefits and premium rates are established by CalPERS and the insurance providers. The City contribution is established by City resolution. Retirees and active employees pay the difference between the premium rate and the City's contribution. Premiums and City contributions are based on the plan and coverage selected by actives and retirees, with the City's potential contribution ranging from zero to $1,605 per month per employee or retiree. The responsibility for benefit payments has transferred to the insurers and the City does not guarantee the benefits in the event of default by the insurers. A comprehensive annual financial report of CalPERS, inclusive of their benefit plans, is available at www.calpers.ca.gov. 141
CC 05-19-2022
141 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

66. NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) The City participates in the Public Agency Retirement System (PARS) Public Agencies Post Retirement Health Care Plan Trust Program (PARS Trust), an agent-multiple employer irrevocable trust established to fund other postemployment benefits. The City Council adopted the PARS Public Agencies Post-Retirement Health Care Plan Trust, including the PARS Public Agencies Post-Retirement Health Care Plan, to fund medical insurance costs for its retired employees, effective February 17, 2010. The City Council appointed the City Treasurer, or his/her successor or his/her designee as the City’s plan administrator. The plan administrator is authorized to execute the PARS legal documents on behalf of the City and to take whatever additional actions necessary to maintain the City’s participation in the Program and to maintain compliance of any relevant regulation issued or as may be issued; therefore, authorizing him/her to take whatever additional actions are required to administer the City’s PARS Plan. The PARS Trust is approved by the Internal Revenue Code Section 115 and invests funds in equity, bond, and money market mutual funds.

Copies of PARS Trust annual financial report is available at the City's Finance Department.

An employee is eligible for lifetime medical benefits under the OPEB Plan, along with his/her spouse or declared domestic partner at the time of retirement, if all criteria listed below are met:
 The employee was hired or the City Council member was elected prior to August 1, 2004, and the employee has five or more full-time years of service and the City Council member has five or more years of elected service with the City of Cupertino; or  The employee was hired or the City Council member was elected on or after August 1, 2004, and the employee has ten or more full-time and/or elected years of CalPERS service, five years of which must be from the City of Cupertino; and
 The employee is eligible for retirement as defined under the CaIPERS retirement system; and the employee retires from the City of Cupertino.

In addition, the eligible employee's dependent children at the time of retirement who are under 23 years old are eligible for medical benefits. In addition to extending the eligibility of dependents from age 23 to age 26 in accordance with the recent healthcare reform act, effective July 1, 2010, employees that retire or resign from service with the City of Cupertino and who are not eligible for retiree medical benefits can continue on the City's medical and dental plans provided that they pay the premiums in full.

Plan membership: At January 1, 2021 (the latest information available), Plan membership consisted of the following:

Inactive plan members or beneficiaries currently receiving benefit payments 148 Inactive plan members entitled to but not yet receiving benefit payments 0 Active plan members 173
321
Contributions: OPEB Plan contributions are set by the adopted budget. The cost of the benefits provided by the OPEB Plan is currently being paid by the City on a fully pre-funded basis. Based on the actuarial valuation date of January 1, 2021, the annual required contribution rate is 0.54 percent of annual covered payroll. For the year ended June 30, 2021, the City paid $1,550,000 in healthcare premium payments. Plan members are not required to contribute to the plan.
142
CC 05-19-2022
142 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

67. NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) Net OPEB Liability of the City: The components of the net OPEB liability of the City as of June 30, 2021 (expressed in thousands) were as follows:

Total OPEB liability $ 28,626
Plan fiduciary net position 38,025
City's net OPEB liability (asset) $ (9,399)
Plan fiduciary net position as a percentage of the total OPEB liability 133% Investment rate of return: The long-term expected rate of return on OPEB plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of investment expense and inflation) are developed for each major asset class.

These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of geometric real rates of return for each major asset class included in the target asset allocation as of June 30, 2021 (see the discussion of the Plan’s investment policy) are summarized in the following table:

Long-Term Expected
Asset Class Real Rate of Return
Fixed income – core 0.69%
Fixed income – high yield 3.06%
Equities – domestic 6.88%
Equities – developed foreign 6.73%
Equities – emerging foreign 8.60%
Real estate 4.89%
Commodities 3.37%
Cash 0.44%
Investment policy: The Plan’s policy in regard to the allocation of invested assets is established and may be amended by the Plan’s Board by a majority vote of its members. It is the policy of the Plan Board to pursue an investment strategy that reduces risk through the prudent diversification of the portfolio across a broad selection of distinct asset classes. The Plan’s investment policy discourages the use of cash equivalents, except for liquidity purposes, and aims to refrain from dramatically shifting asset class allocations over short time spans. The following was the Board’s adopted asset allocation policy as of June 30, 2021:

Asset Class Target Allocation
Fixed income 29%
Equities 62%
Real estate 6%
Commodities 2%
Cash 1%
Total 100%
143
CC 05-19-2022
143 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

68. NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) Concentrations: The Plan did not have investments outside of mutual funds that comprise five percent or more of the Plan’s total fiduciary net position.

Rate of return: For the year ended June 30, 2021, the annual money-weighted rate of return on investments, net of investment expense, was 5.28 percent. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Actuarial assumptions: The total OPEB liability was determined by an actuarial valuation as of January 1, 2021, using the previously listed actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified. Mortality rates were based on the CalPERS mortality assumptions.

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with long-term perspective of the calculations.

The other significant actuarial assumptions used to prepare the City's January 1, 2021 actuarial valuation include the following:

Valuation date: January 1, 2021
Measurement date: June 30, 2021
Actuarial Cost Method: Entry Age Normal
Amortization Method: Level percent of pay closed
Amortization Period: 10 year
Asset Valuation Method: Market value
Actuarial Assumptions:

Discount Rate 6.50%
Payroll Growth 3.00%
Ultimate Rate of Medical Inflation 4.50%
Mortality (1) CalPERS mortality assumptions
Health Care Trend The annual cost of healthcare is
expected to decrease from

6.5% in 2020 to 4.5% from 2076
and later.
(1) 2017 CalPERS Experience Study, Recipients with attained age of 50 Discount rate: The discount rate used to measure the total OPEB liability was 6.5 percent. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability. 144
CC 05-19-2022
144 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

69. NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) Changes in the Net OPEB Liability: The changes in the City’s net OPEB liability (asset) are (in thousands):

Net Increase (Decrease)
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability (Asset)
Balance at July 1, 2020 $ 31,338 $ 29,370 $ 1,968
Changes in the year
Service cost 844 - 844
Interest on the total OPEB liability 2,042 - 2,042
Change of assumptions 640 - 640
Differences between actual and
expected experience (4,688) - (4,688)
Contribution – employer - 1,550 (1,550)
Contribution – employee - - -
Net investment income - 8,776 (8,776)
Administrative expenses - (121) 121
Benefit payments, including refunds of
Employee contributions (1,550) (1,550) -
Net changes (2,712) 8,655 (11,367)
Balance at June 30, 2021 $ 28,626 $ 38,025 $ (9,399)
Sensitivity of the net OPEB liability (asset) to changes in the discount rate: The following presents the net OPEB asset of the City, as well as what the City’s net OPEB liability would be if it were calculated using a discount rate that is one-percentage-point lower (5.5 percent) or one-percentage-point higher (7.5 percent) than the current discount rate (expressed in thousands):
1% Current 1%
Decrease Discount Rate Increase

5.50% 6.50% 7.50%
City of Cupertino’s net OPEB liability
(asset) for the plan $ (5,806) $ (9,399) $ (12,383)
Sensitivity of the net OPEB liability (asset) to changes in the healthcare cost trend rates: The following presents the net OPEB asset of the City, as well as what the City’s net OPEB liability would be if it were calculated using healthcare cost trend rates that are one-percentage-point lower (decreasing to 3.5 percent) or one-percentage-point higher (increasing to 5.5 percent) than the current healthcare cost trend rates (expressed in thousands):

Current
1% Healthcare Cost 1%
Decrease Trend Rate Increase
City of Cupertino’s net OPEB liability
(asset) for the plan $ (12,598) $ (9,399) $ (5,469)
145
CC 05-19-2022
145 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

70. NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) OPEB Expense and Deferred Inflows of Resources Related to OPEB: For the year ended June 30, 2021, the City recognized OPEB expense of $(990,000). As of June 30, 2021, the City reported deferred inflows of resources related to OPEB from the following sources (in thousands):

Deferred Outflows Deferred Inflows
of Resources of Resources
Net difference between projected and actual
earnings on investments $ - $ 4,269
Differences between expected and actual experience - 4,473 Changes in assumption 1,569 15
$ 1,569 $ 8,757
Amounts reported as deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows (in thousands):

Year Ended Deferred Inflows
June 30 of Resources
2022 $ (1,820)
2023 (1,706)
2024 (1,479)
2025 (2,183)
Total $ (7,188)
NOTE 12 – CONCENTRATION RISK
The City has an economic dependency on revenues generated directly or indirectly from one company. For the year ended June 30, 2021, more than 10 percent of the City General Fund's total revenues are derived from the company. The City's operations would be adversely impacted if there are any significant declines in taxes received from the company.

NOTE 13 – UPCOMING GASB PRONOUCEMENTS
In June 2017, the GASB issued Statement 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. This Statement is now effective for the City’s fiscal year ended June 30, 2022 due to the postponement impacts of GASB Statement 95.

Management has not determined what impact, if any, this statement will have on its financial statements. 146
CC 05-19-2022
146 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

71. NOTE 13 – UPCOMING GASB PRONOUCEMENTS (Continued)
In June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period. The objectives of this Statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. This Statement is now effective for the City’s fiscal year ended June 30, 2022 due to the postponement impacts of GASB Statement 95. Management has not determined what impact, if any, this statement will have on its financial statements.”
In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations. The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures. This Statement is effective for the City’s fiscal year ended June 30, 2022. Management has not determined what impact, if any, this statement will have on its financial statements.

In January 2020, GASB issued Statement No. 92, Omnibus 2021. The primary objectives of this Statement are to enhance comparability in accounting and financial reporting and improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB statements. Upon the City’s adoption of GASB Statement No 95, effective date for the Statement was delayed for the City until their fiscal year ended June 30, 2022, with the exception of paragraphs 11 and 13 which are now effective and the City has implemented with no material impact to the City’s financial statements. Management has not yet determined the impact of the remainder of this statement on the City’s financial statements.

In March 2021, GASB issued Statement No. 93, Replacement of Interbank Offered Rates. The primary objectives of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. Upon the City’s adoption of GASB Statement No 95, effective date for the Statement was delayed for the City until their fiscal year ended June 30, 2022. Management has not yet determined the impact of this statement on the City’s financial statements.

In March 2021, GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The primary objectives of this Statement is improve financial reporting by addressing issues related to public-private and public-public partnership arrangements. This Statement also provides guidance for accounting and financial reporting for availability payments arrangements. The requirements of this Statement are effective for the City’s fiscal year ended June 30, 2023. Management has not yet determined the impact of this statement on the City’s financial statements.

In May 2021, GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements.

This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. The requirements of this Statement are effective for the City’s fiscal year ended June 30, 2023. Management has not yet determined the impact of this statement on the City’s financial statements.
147
CC 05-19-2022
147 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021
(Continued)

72. NOTE 13 – UPCOMING GASB PRONOUCEMENTS (Continued)
In June 2021, GASB issued Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The primary objectives of this Statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. The requirements of this Statement are effective for the City’s fiscal year ended June 30, 2022, with the exception of paragraphs 4 and 5 which are now effective and the City has implemented with no material impact to the City’s financial statements. Management has not yet determined the impact of the remainder of this statement on the City’s financial statements.

NOTE 14 – COVID-19 IMPACT
In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments have adversely affected workforces, customers, economies, and financial markets globally. It has also disrupted the normal operations of many governments, including the City of Cupertino. The City expects this outbreak to impact the City’s operations for future reporting periods; however, it is not possible for the City to predict the duration or magnitude of the adverse results of the outbreak and its effects on the City’s operations. In response to the global pandemic, the Federal government initiated two federal relief programs designed to provide direct funding to states and cities.

The first program, the Coronavirus Aid, Relief, and Economic Security (CARES) Act established a $150 billion Coronavirus Relief Fund. Federal law specifies that these funds may only be used for unbudgeted costs incurred between March 1, 2020 and December 31, 2020. Control Section 11.90 of the 2021 Budget Act extended the expenditures deadline for cities, counties and community colleges to September 1, 2021.

The Budget Act authorized the California Department of Finance to allocate $1,289,065,000 to address the public health and public safety impacts of COVID19, including homelessness. Pursuant to the provisions of Control Section 11.90, cities with populations between 300,000 and 500,000 were allocated $225 million and cities with populations less than 300,000 were allocated $275 million. Allocations generally for cities were derived using the proportional share of the State population. The City of Cupertino’s nonrecurring allocation of $735,259 was received in July 2020. The CARES Act established six eligible expense categories, as follows: (A) Medical Expenses; (B) Public Health Expenses; (C) Substantially Dedicated Payroll Expenses; (D) Comply with Public Health Measures and Mitigate the Effects of COVID19; (E) Economic Support; or (F) Other.
148
CC 05-19-2022
148 of 1613

CITY OF CUPERTINO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
For the year ended June 30, 2021

73. NOTE 14 – COVID-19 IMPACT (Continued)
The entire CARES Act amount of the $759,259 was recognized as revenue in FY 2020/21 and categorized as Operating Grants and Contributions in the Statement of Activities Schedule, and Intergovernmental Revenues in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance Schedule. On March 11, 2021, the second program, the American Rescue Plan Act (ARPA) was signed into law by President Biden. The $1.9 trillion package (the Act) provides financial aid to families, governments, businesses, schools, nonprofits and others impacted by the COVID-19 public health crisis.

Of the $1.9 trillion, $350 billion is being directed toward state and local governments. All 19,000 municipal governments are entitled to a direct, noncompetitive federal formula grant from the U.S. Treasury Department. The portion allocated to cities, towns, and villages totals $65.1 billion. The Act will allocate $9,694,773 to the City over a two year period. The first tranche payment of $4,847,387 was received on May 19, 2021, and the second payment no earlier than 12 months after the first payment. Section 603.

CORONAVIRUS LOCAL FISCAL RECOCERY FUND of the Act identified four eligible uses for funding, as follows: (A) to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality; (B) to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the metropolitan city, non-entitlement unit of local government, or county that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work; (C) for the provision of government services to the extent of the reduction in revenue of such metropolitan city, non-entitlement unit of local government, or county due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year of the metropolitan city, non-entitlement unit of local government, or county prior to the emergency; or (D) to make necessary investments in water, sewer, or broadband infrastructure. Initial revenue loss estimates amounted to $29 million through December 31, 2023 and as a result, the Cupertino City Council approved the use of ARP funds for revenue loss. As of and for the fiscal year ending June 30, 2021, the $4.8 million received in May 2021 was recorded as unearned revenue. The City plans to recognize revenues for both tranches of payment in FY 21/22. In accordance with the Treasury’s Final Rule, a standard allowance for revenue loss of up to $10 million may be elected. Recipients that select the standard allowance may use that amount for government services. The City anticipates recognizing these revenues in the General Fund and using them to support continued government services.
149
CC 05-19-2022
149 of 1613

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
150
CC 05-19-2022
150 of 1613

CITY OF CUPERTINO, CALIFORNIA

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY

AND RELATED RATIOS
For the year ended June 30, 2021

74. Measurement Date 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 Total Pension Liability
Service Cost $ 2,504,228 $ 2,444,939 $ 2,525,314 $ 2,895,549 $ 3,058,629 $ 3,324,361 $ 3,241,719 Interest 7,349,943 7,789,134 8,253,983 8,619,588 9,065,322 9,800,245 10,302,395 Changes of benefit terms - - - - - - - Differences between expected and actual experience 372,917 - 696,347 (182,397) 1,184,340 4,144,384 444,188 Changes in assumptions (1,883,633) - 7,125,558 - (847,606) - - Benefit payments, including refunds of employee contributions (4,351,614) (4,637,005) (5,151,298) (5,346,890) (6,051,845) (6,193,271) (6,815,494) Net change in total pension liability 5,502,557 4,086,352 6,324,346 13,111,408 6,408,840 11,075,719 7,172,808 Total pension liability - beginning 98,922,931 104,425,488 108,511,840 114,836,186 127,947,594 134,356,434 145,432,153 Total pension liability - ending (a) $ 104,425,488 $ 108,511,840 $ 114,836,186 $ 127,947,594 $ 134,356,434 $ 145,432,153 $152,604,961 Plan fiduciary net position
Contributions - employer $ 2,891,986 $ 3,301,642 $ 3,659,170 $ 4,183,822 $ 4,263,020 $ 4,654,841 $ 5,308,580 Contributions - employee 1,061,884 1,149,894 1,169,921 1,236,052 1,506,888 1,364,731 1,429,446 Net investment income 11,379,985 1,724,204 466,704 8,749,288 7,347,936 6,096,968 4,975,822 Benefit payments, including refunds of employee contributions (4,351,614) (4,637,005) (5,151,298) (5,346,890) (6,051,845) (6,193,271) (6,815,494) Administrative expense (87,780) - (47,536) (115,304) (392,346) (66,707) (140,036) Other miscellaneous Income/(Expense) - - - - - 216 - Net change in plan fiduciary net position 10,982,241 1,450,955 96,961 8,706,968 6,673,653 5,856,778 4,758,318 Plan fiduciary net position - beginning 65,566,067 76,548,308 77,999,263 78,096,224 86,803,192 93,476,845 99,333,623 Plan fiduciary net position - ending (b) $ 76,548,308 $ 77,999,263 $ 78,096,224 $ 86,803,192 $ 93,476,845 $ 99,333,623 $104,091,941 Net pension liability - ending (a)-(b) $ 27,877,180 $ 30,512,577 $ 36,739,962 $ 41,144,402 $ 40,879,589 $ 46,098,530 $ 48,513,020 Plan fiduciary net position as a percentage of the total pension liability 73.30% 71.88% 68.01% 67.84% 69.57% 68.30% 68.21% Covered payroll $ 13,080,327 $ 13,504,966 $ 14,336,969 $ 15,595,136 $ 16,809,349 $ 19,664,057 $ 19,871,414 Net pension liability as percentage of covered payroll 213.12% 225.94% 256.26% 263.83% 243.20% 234.43% 244.13% Notes to Schedule:
* - Fiscal year 2015 was the 1st year of implementation, therefore only six years are shown.

Source: CalPERS Accounting Valuation
Benefit changes. The figures above do not include any liability impact that may have resulted from plan changes which occurred after the actuarial valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes).

Changes in assumptions. None in 2019. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions from December 2017. In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes.

In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate.

Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan Last 10 years*
151
CC 05-19-2022
151 of 1613

CITY OF CUPERTINO, CALIFORNIA

SCHEDULE OF CONTRIBUTIONS - PENSION
For the year ended June 30, 2021

75. 2015 2016 2017 2018 2019 2020 2021 Actuarially determined contribution $ 3,608,853 $ 3,659,170 $ 4,183,821 $ 4,263,020 $ 4,654,841 $ 5,308,577 $ 5,957,573 Contributions in relation to the actuarially determined contributions (3,608,853) (3,659,170) (4,183,821) (4,263,020) (4,654,841) (5,308,577) (5,957,573) Contribution deficiency (excess) $ - $ - $ - $ - $ - $ - $ - Covered payroll $ 13,504,966 $ 14,336,969 $ 15,595,136 $ 16,809,349 $ 19,664,057 $ 19,871,414 $ 20,103,210 Contributions as a percentage of covered payroll 26.72% 25.52% 26.83% 25.36% 23.67% 26.71% 29.63% Notes to Schedule Valuation date: 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age Amortization method Level percentage of payroll, closed Remaining amortization period 19 Years as of the Valuation Date Asset valuation method 15 Year Smoothed Market Inflation 2.65%
Salary increases Varies by Entry age and Service
Investment rate of return
Retirement age
Mortality
* - Fiscal year 2015 was the 1st year of implementation, therefore only six years are shown.

Source: City of Cupertino's general ledger and CalPERS Actuarial Valuation Notes to Schedule:
* - Fiscal year 2015 was the 1st year of implementation, therefore only three years are shown.

Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan Last 10 years*
Source: CalPERS Accounting Valuation

7.25% Net of Pension Plan
The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

Pre-retirement and Post-retirement mortality rates include 20 years of projected mortality improvement using Scale BB published by the Society of Actuaries.

Benefit changes. The figures above do not include any liability impact that may have resulted from plan changes which occurred after the actuarial valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes).

Changes in assumptions. None in 2019 or 2020. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions from December 2017. In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate.
152
CC 05-19-2022
152 of 1613

CITY OF CUPERTINO, CALIFORNIA

SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY

AND RELATED RATIOS
For the year ended June 30, 2021

76. 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021
Total OPEB liability
Service cost $ 908 $ 1,008 $ 865 $ 1,009 $ 844
Interest 1,781 1,876 2,005 1,985 2,042
Changes of benefit terms - - - - - Differences between expected and actual experience - (1,808) - (4,688) - Changes of assumptions - - (37) 1,412 640 Benefit payments (1,333) (1,419) (1,423) (1,141) (1,550) Net change in total OPEB liability 1,356 1,465 (398) 3,265 (2,712) Total OPEB liability - beginning 25,650 27,006 28,471 28,073 31,338 Total OPEB liability - ending (a) $ 27,006 $ 28,471 $ 28,073 $ 31,338 $ 28,626 Plan fiduciary net position
Contributions - employer 1,333 1,419 1,423 1,141 1,550
Net investment income 2,960 2,365 1,259 219 8,776
Benefit payments (1,333) (1,419) (1,423) (1,141) (1,550) Administrative expense (49) (54) (97) (67) (121)
Net change in fiduciary net position 2,911 2,311 1,162 152 8,655 Plan fiduciary net position - beginning 22,834 25,745 28,056 29,218 29,370 Plan fiduciary net position - ending (b) $ 25,745 $ 28,056 $ 29,218 $ 29,370 $ 38,025

2.65%
Net OPEB liability (asset) - ending (a-b) $ 1,261 $ 415 $ (1,145) $ 1,968 $ (9,399) Plan fiduciary net position as a percentage of the total OPEB liability 95.33% 98.54% 104.08% 93.72% 132.83% Covered payroll $ 17,255 $ 19,153 $ 20,086 $ 21,643 $ 23,082 Net OPEB liability (asset) as a percentage of covered payroll 7.31% 2.17% -5.70% 9.09% -40.72% Notes to schedule:
* - Fiscal year 2017 was the 1st year of implementation, therefore only five years are shown.

Expressed in thousands
Single Employer Defined Benefit OPEB Plan
Last 10 years*
153
CC 05-19-2022
153 of 1613

CITY OF CUPERTINO, CALIFORNIA

SCHEDULE OF CONTRIBUTIONS - OPEB
For the year ended June 30, 2021

77. 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021
Actuarially determined contribution $ 1,117 $ 1,362 $ 1,300 $ 1,401 $ 124 Contributions in relation to the actuarially determined contributions 1,333 1,419 1,423 1,141 1,550 Contribution deficiency (excess) $ (216) $ (57) $ (123) $ 260 $ (1,426) Covered payroll $ 17,255 $ 19,153 $ 20,086 $ 21,643 $ 23,082 Contributions as a percentage of covered payroll 7.73% 7.41% 7.08% 5.27% 6.72% Notes to schedule:
* - Fiscal year 2017 was the 1st year of implementation, therefore only five years are shown.

Valuation Date 1/1/2021
Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry age
Amortization method 2.65%
Remaining amortization period Varies by Entry age and Service Asset valuation method Market Value of Assets
Discount rate 6.50%
Amortization growth rate 2.75%
Ultimate rate of medical inflation 4.30%
Salary increases 2.75% plus merit component based on years of service Mortality CalPERS mortality assumptions
Expressed in thousands
Single Employer Defined Benefit OPEB Plan
Last 10 years*
154
CC 05-19-2022
154 of 1613

MAJOR GOVERNMENTAL FUNDS OTHER

THAN THE GENERAL FUND AND SPECIAL

REVENUE FUNDS

78. This section is provided for the presentation of budget-to-actual statements for the Public Facilities Corporation Debt Service Fund. Although the fund is considered to be a major government fund, budgetto-actual information in the basic financial statements is limited to the General Fund and major Special Revenue Funds. All other major governmental fund schedules with such information are therefore included as Supplemental Information. The Capital Projects Funds are budgeted on a major project length basis and therefore not comparable on an annual basis.

Public Facilities Corporation Debt Service Fund: This fund accounts for the payments of principal and interest on certificates of participation issued to provide for the financing of the Civic Center, Library, Wilson Park, Memorial Park, and other City facilities.
155
CC 05-19-2022
155 of 1613

CITY OF CUPERTINO, CALIFORNIA

PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
For the year ended June 30, 2021

79. Variance
Positive
Original Final Actual (Negative)
Revenues
Use of money and property $ - $ - $ 332 $ 332
Total revenues - - 332 332
Expenditures
Debt service:

Principal 2,355,000 2,140,000 2,140,000 -
Interest and fiscal charges 814,138 807,080 798,747 8,333 Total expenditures 3,169,138 2,947,080 2,938,747 8,333
Excess (deficiency) of revenues
over expenditures (3,169,138) (2,947,080) (2,938,415) 8,665 Other financing sources (uses)
Proceeds from debt issuance 22,040,000 - 22,040,000 - Proceeds from debt issuance premium 3,878,704 - 3,878,704 - Payment to refunding agent (27,279,118) - (27,279,118) - Transfers in 3,169,138 3,169,138 3,169,138 - Transfers out (492,832) - (492,831) 1 Total other financing sources (uses) 3,169,138 1,315,892 1,315,893 1 Net change in fund balance $ (1,631,188) - $ (1,622,522) $ 8,666 Beginning fund balance 1,685,872
Ending fund balance $ 63,350
Budgeted Amounts
156
CC 05-19-2022
156 of 1613

NON-MAJOR GOVERNMENTAL FUNDS

80. All funds not considered as major funds on the Fund Financial Statements are consolidated in one column entitled "Other Governmental Funds." These non-major funds are identified and included in this supplementary section and includes the City's Special Revenue Funds and Capital Project Funds.

The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes.

Storm Drain Improvement — Accounts for the construction and maintenance of storm drain facilities including drainage and sanitary sewer facilities. Revenues were collected from developers as a result of connections to the storm drainage sewer system.

Park Dedication — Accounts for the activity granted by the business and professions code of the State of California in accordance with the open space and conservation element of the City's General Plan. Revenues of this fund are restricted for the acquisition, improvement, expansion and implementation of the City's parks and recreation facilities.

Environmental Management / Clean Creeks — Accounts for all activities related to operating the non-point source pollution program. A parcel tax provides revenues.

Traffic Impact – Accounts for development impact fees and related that ensure that new development and redevelopment projects pay their “fair share” to mitigate traffic impacts.

Capital Projects Funds account for the financial resources committed to the construction or improvement of major facilities.

Stevens Creek Corridor Park Capital Projects Fund — Accounts for the design and construction of the Stevens Creek Corridor Park projects.
157
CC 05-19-2022
157 of 1613

CITY OF CUPERTINO, CALIFORNIA

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET
June 30, 2021

81. Total
Storm Environmental Nonmajor
Drain Park Management/ Traffic Stevens Creek Governmental Improvement Dedication Clean Creeks Impact Corridor Park Funds Assets
Cash and investments $ 4,084,025 $ 9,708,075 $ 1,874,887 $ 468,998 $ 179,937 $ 16,315,922 Accounts receivable - 600 21,561 - - 22,161
Total assets $ 4,084,025 $ 9,708,675 $ 1,896,448 $ 468,998 $ 179,937 $ 16,338,083 Liabilities
Accounts payable and
accruals $ - $ - $ 8,825 $ - $ 880 $ 9,705
Total liabilities - - 8,825 - 880 9,705
Fund balances
Restricted 4,084,025 9,708,675 1,887,623 468,998 16,149,321 - Assigned - - - 179,057 - 179,057 Total fund balances 4,084,025 9,708,675 1,887,623 468,998 179,057 16,328,378 Total liabilities and
fund balances $ 4,084,025 $ 9,708,675 $ 1,896,448 $ 468,998 $ 179,937 $ 16,338,083 Fund
Capital Projects
Special Revenue Funds
158
CC 05-19-2022
158 of 1613

CITY OF CUPERTINO, CALIFORNIA

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES
For the year ended June 30, 2021

82. Fund
Total
Storm Environmental Nonmajor
Drain Park Management/ Traffic Stevens Creek Governmental Improvement Dedication Clean Creeks Impact Corridor Park Funds Revenues
Taxes $ 81,471 $ 104,201 $ - $ - $ 185,672 - $
Use of money and property 9,547 23,188 263 1,151 (2,136) 32,013 Charges for services - 1,475,982 4 226,728 1,702,714 - Fines and forfeitures - - 5,065 - - 5,065 Other revenue - 600 - - - 600
Total revenues 91,018 127,993 1,481,310 227,879 (2,136) 1,926,064 Expenditures
Current:

Public works 1,000 1,374,667 - - 2,651 1,378,318
Capital outlay 2,749,741 - - - 13,200 2,762,941
Total expenditures 1,000 2,749,741 1,374,667 - 15,851 4,141,259 Excess of revenues over
(under) expenditures 90,018 (2,621,748) 106,643 227,879 (17,987) (2,215,195) Other finances sources (uses)
Transfers in - - - - - - Transfers out (15,000) - - - - (15,000) Total other financing sources (uses) (15,000) - - - - (15,000) Net change in fund balances 90,018 (2,636,748) 106,643 227,879 (17,987) (2,230,195) Beginning fund balances 3,994,007 12,345,423 1,780,980 241,119 197,044 18,558,573 Ending fund balances $ 4,084,025 $ 9,708,675 $ 1,887,623 $ 468,998 $ 179,057 $ 16,328,378 Special Revenue Funds
Capital Projects
159
CC 05-19-2022
159 of 1613

CITY OF CUPERTINO, CALIFORNIA

NON-MAJOR GOVERNMENTAL FUNDS

SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES – BUDGET AND ACTUAL
For the year ended June 30, 2021
(Continued)

83. Variance
Original Final Positive
Budget Budget Actual (Negative)
Revenues
Taxes $ 76,984 $ 76,984 $ 81,471 $ 4,487
Use of money and property - - 9,547 9,547
Charges for services - - - - Fines for forfeitures - - - - Other revenue - - - - Total revenues 76,984 76,984 91,018 14,034 Expenditures
Current:

Public works 1,000 1,000 1,000 - Capital outlay - - - - Total expenditures 1,000 1,000 1,000 - Excess (deficiency) of revenues over expenditures 75,984 75,984 90,018 14,034
Other financing sources (uses)
Transfers (out) - - - - Total other financing sources (uses) - - - - Net change in fund balance $ 75,984 $ 75,984 90,018 $ 14,034 Beginning fund balance 3,994,007
Ending fund balance $ 4,084,025
Storm Drain Improvement
Special Revenue Funds
160
CC 05-19-2022
160 of 1613

CITY OF CUPERTINO, CALIFORNIA

NON-MAJOR GOVERNMENTAL FUNDS

SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES – BUDGET AND ACTUAL
For the year ended June 30, 2021
(Continued)

84. Variance
Original Final Positive
Budget Budget Actual (Negative)
Revenues
Taxes $ - $ 104,201 - $ $ 104,201
Use of money and property - 23,188 - 23,188
Charges for services - - 4 4
Fines for forfeitures - - - - Other revenue - - 600 600 Total revenues - 127,993 - 127,993
Expenditures
Current:

Public works - - - - Capital outlay 9,541 2,749,741 2,749,741 - Total expenditures 9,541 2,749,741 2,749,741 - Excess (deficiency) of revenues over expenditures (9,541) (2,749,741) (2,621,748) 127,993 Other financing sources (uses)
Transfers (out) (15,000) (15,000) (15,000) - Total other financing sources (uses) (15,000) (15,000) (15,000) - Net change in fund balance $ (24,541) $ (2,764,741) (2,636,748) $ 127,993 Beginning fund balance 12,345,423
Ending fund balance $ 9,708,675
Park Dedication
Special Revenue Funds
161
CC 05-19-2022
161 of 1613

CITY OF CUPERTINO, CALIFORNIA

NON-MAJOR GOVERNMENTAL FUNDS

SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES – BUDGET AND ACTUAL
For the year ended June 30, 2021

85. Variance
Original Final Positive
Budget Budget Actual (Negative)
Revenues
Taxes $ - $ - $ - $ - Use of money and property 905 905 263 (642) Charges for services 1,522,493 1,553,406 1,475,982 (77,424) Fines for forfeitures 10,000 10,000 5,065 (4,935)
Other revenue - - - - Total revenues 1,533,398 1,564,311 1,481,310 (83,001) Expenditures
Current:

Public works 1,794,154 1,693,783 1,374,667 319,116
Capital outlay - - - - Total expenditures 1,794,154 1,693,783 1,374,667 319,116 Excess (deficiency) of revenues
over expenditures (260,756) (129,472) 106,643 236,115
Other financing sources (uses)
Transfers (out) - - - - Total other financing sources (uses) - - - - Net change in fund balance $ (260,756) $ (129,472) 106,643 $ 236,115 Beginning fund balance 1,780,980
Ending fund balance $ 1,887,623
Environmental Management/Clean Creeks
Special Revenue Funds
162
CC 05-19-2022
162 of 1613

NON-MAJOR ENTERPRISE FUND

86. Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges.

The City has identified the fund below as a nonmajor proprietary fund for fiscal 2020-21.

Blackberry Farm Fund: This fund accounts for activities related to operating the City-owned golf course. 163
CC 05-19-2022
163 of 1613

CITY OF CUPERTINO, CALIFORNIA

NON-MAJOR ENTERPRISE FUND

COMBINING STATEMENT OF NET POSITION
For the year ended June 30, 2021

87. Blackberry
Farm
ASSETS
Current assets
Cash and cash investments (Note 2) $ 1,137,554
Total current assets 1,137,554
Noncurrent assets
Capital assets (Note 5):

Depreciable, net of
accumulated depreciation 23,706
Total non current assets 23,706
Total assets 1,161,260

DEFERRED OUTFLOWS OF RESOURCES
Related to pension (Note 10) 59,310
Related to OPEB (Note 11) 8,121
Total deferred outflows of resources 67,431

LIABILITIES
Current liabilities
Accounts payable and accruals 11,582
Compensated absences (Note 1) 211
Unearned revenue 58,612
Total current liabilities 70,405
Noncurrent liabilities
Compensated absences (Note 1) 2,594
Net pension liability (Note 10) 278,020
Total noncurrent liabilities 280,614
Total liabilities 351,019

DEFERRED INFLOWS OF RESOURCES
Related to pension (Note 10) 4,466
Related to OPEB (Note 11) 4,696
Total deferred inflows of resources 9,162
NET POSITION (Note 7)
Net investment in capital assets 23,706
Unrestricted 844,804
Total Net Position $ 868,510
164
CC 05-19-2022
164 of 1613

CITY OF CUPERTINO, CALIFORNIA

NON-MAJOR ENTERPRISE FUND

COMBINING STATEMENT OF REVENUES, EXPENSES AND

CHANGES IN NET POSITION
For the year ended June 30, 2021

88. Blackberry
Farm
Operating revenues
Charges for services $ 564,126
Other 46,477
Total operating revenue 610,603
Operating expenses
Salaries and benefits 107,567
Materials and supplies 174,183
Contractual services 250,692
Depreciation (Note 5) 2,832
Total operating expenses 535,274
Operating income (loss) 75,329
Nonoperating revenues
Investment income 2,083
Total nonoperating revenues 2,083
Income (loss) before transfers 77,412
Transfers in (Note 4) 500,000
Changes in net position 577,412
Net position - beginning of year 291,098
Net position - end of year $ 868,510
165
CC 05-19-2022
165 of 1613

CITY OF CUPERTINO, CALIFORNIA

NON-MAJOR ENTERPRISE FUND

COMBINING STATEMENT OF CASH FLOWS
For the year ended June 30, 2021

89. Blackberry
Farm
Cash flows from operating activities
Cash received from customers $ 646,130
Cash payments to suppliers for
goods and services (442,996)
Cash payments to employees for salaries and benefits (110,164) Net cash provided (used) by operating activities 92,970 Cash flows from noncapital financing activities
Transfers in 500,000
Cash flows from noncapital financing activities 500,000 Cash Flows from Investing Activities
Interest received 2,083
Cash flows from investing activities 2,083
Net cash flows 595,053
Cash and investments at beginning of year 542,501
Cash and investments at end of year $ 1,137,554
Reconciliation of operating income (loss) to
to net cash provided by operating activities:

Operating income (loss) $ 75,329
Adjustments to reconcile operating income to
net cash provided by operating activities:

Depreciation 2,832
Change in assets, deferred outflows of resources, liabilities, and deferred inflows of resources
Due to retirement system 2,157
Due to OPEB system (4,735)
Accounts payable and accruals (18,121)
Unearned revenue 35,527
Compensated absences (19)
Net cash provided (used) by operating activities $ 92,970 166
CC 05-19-2022
166 of 1613

INTERNAL SERVICE FUNDS

90. Internal Service Funds are used to finance and account for special activities and services provided by one department or program to other departments of the City on a cost reimbursement basis.

The concept of major funds does not extend to internal service funds because they do not do business with outside parties. For the Statement of Activities, the net revenues or expenses of each internal service fund are eliminated by netting them against the operations of the City departments that generated them. The remaining balance sheet items are consolidated with these same funds in the Statement of Net Position.

However, internal service funds are still presented separately in the Fund financial statements.

Information Technology - Accounts for the activities related to the maintenance and replacement of the City's technology infrastructure.

Workers' Compensation - Accounts for the activities in support of the self-insured workers' compensation program.

Equipment Revolving - Accounts for the activities related to the maintenance and replacement of the City's vehicle fleet and other equipment.

Compensated Absences and Long-Term Disability - Accounts for accrued leave payouts and the City's long term disability insurance program.

Retiree Medical - Accounts for funds set-aside for other post-employment retirement benefits. 167
CC 05-19-2022
167 of 1613

CITY OF CUPERTINO, CALIFORNIA

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF NET POSITION
For the year ended June 30, 2021

91. Compensated
Absences and
Information Workers' Equipment Long-Term Retiree
Technology Compensation Revolving Disability Medical Total ASSETS
Current assets:

Cash and investments $ 2,497,050 $ 3,976,757 $ 408,079 $ 669,671 $ 157,589 $ 7,709,146 Total current assets 2,497,050 3,976,757 408,079 669,671 157,589 7,709,146 Noncurrent assets:

Net OPEB asset (Note 11) 474,902 5,001 146,717 - - 626,620 Capital assets (Note 5):

Capital assets, depreciable net
of accumulated depreciation 868,003 - 2,477,809 - - 3,345,812 Total noncurrent assets 1,342,905 5,001 2,624,526 - - 3,972,432 Total assets 3,839,955 3,981,758 3,032,605 669,671 157,589 11,681,578

DEFERRED OUTFLOWS OF RESOURCES
Related to pension (Note 10) 401,132 13,826 126,234 - - 541,192 Related to OPEB (Note 11) 79,652 2,079 25,669 - - 107,400 Total deferred outflows of resources 480,784 15,905 151,903 - - 648,592

LIABILITIES
Current liabilities
Accounts payable and accruals 206,651 - 25,724 - - 232,375 Accrued payroll and benefits - - 72 - - 72
Due to other funds - - 539,204 - - 539,204
Compensated absences 39,873 1,311 5,004 - - 46,188
Claims payable - 245,000 - - - 245,000
Total current liabilities 246,524 246,311 570,004 - - 1,062,839 Noncurrent liabilities
Compensated absences 283,554 9,336 35,582 - - 328,472
Claims payable - 1,129,000 - - - 1,129,000
Net pension liability (Note 10) 2,216,081 67,621 639,779 - - 2,923,481 Total noncurrent liabilities 2,499,635 1,205,957 675,361 - - 4,380,953 Total liabilities 2,746,159 1,452,268 1,245,365 - - 5,443,792

DEFERRED INFLOWS OF RESOURCES
Related to pension (Note 10) 2,878 189 539 - - 3,606
Related to OPEB (Note 11) 428,063 4,860 136,778 - - 569,701 Total deferred inflows of resources 430,941 5,049 137,317 - - 573,307

NET POSITION
Net investment in capital assets 868,003 - 2,477,809 - - 3,345,812 Unrestricted 275,636 2,540,346 (675,983) 669,671 157,589 2,967,259 Total net position $ 1,143,639 $ 2,540,346 $ 1,801,826 $ 669,671 $ 157,589 $ 6,313,071 168
CC 05-19-2022
168 of 1613

CITY OF CUPERTINO, CALIFORNIA

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF REVENUES, EXPENSES AND

CHANGES IN NET POSITION
For the year ended June 30, 2021

92. Compensated
Absences and
Information Workers' Equipment Long-Term Retiree
Technology Compensation Revolving Disability Medical Total Operating revenues
Charges for services $ 2,681,434 $ 246,379 $ 1,633,518 $ 128,134 $ 4,689,465 - $ Other - - 9,799 - - 9,799
Total operating revenues 2,681,434 246,379 1,643,317 128,134 - 4,699,264 Operating expenses Salaries and related expenses 1,915,383 38,415 430,839 1,220,074 - 3,604,711 Materials and supplies 980,049 24,572 297,859 7,767 10,982 1,321,229 Contractual services 126,221 - 75,743 - - 201,964
Insurance claims and premiums - 35,104 - 827,121 - 862,225 Depreciation 299,745 - 669,046 - - 968,791
Total operating expenses 3,321,398 98,091 1,473,487 834,888 1,231,056 6,958,920 Operating income (loss) (639,964) 148,288 169,830 (706,754) (1,231,056) (2,259,656) Nonoperating revenue (expenses)
Interest income 9,344 9,914 2,033 4,157 7,851 33,299
Gain on sale of capital assets - - 89,981 - - 89,981
Total nonoperating
revenue (expenses) 9,344 9,914 92,014 4,157 7,851 123,280 Income (loss) before transfers (630,620) 158,202 261,844 (702,597) (1,223,205) (2,136,376) Transfers in 245,000 - 6,000 193,000 46,000 490,000
Change in net position (385,620) 158,202 267,844 (509,597) (1,177,205) (1,646,376) Beginning net position 1,529,259 2,382,144 1,533,982 1,179,268 1,334,794 7,959,447 Ending net position $ 1,143,639 $ 2,540,346 $ 1,801,826 $ 669,671 $ 157,589 $ 6,313,071 169
CC 05-19-2022
169 of 1613

CITY OF CUPERTINO, CALIFORNIA

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF CASH FLOWS
For the year ended June 30, 2021
(Continued)

93. Compensated
Absences and
Information Workers' Equipment Long-Term Retiree
Technology Compensation Revolving Disability Medical Total Cash flows from operating activities
Cash received from customers $ 2,681,434 $ 253,379 $ 1,643,317 $ 128,134 $ 4,706,264 - $ Cash payments to suppliers for
goods and services (1,131,712) (24,572) (445,563) (22,050) (10,982) (1,634,879) Cash payments to employees (1,840,491) (37,099) (440,529) (1,220,074) - (3,538,193) Cash payment for judgment
and claims (188,104) - - (827,121) (1,015,225) - Net cash from operating activities (290,769) 3,604 757,225 (721,037) (1,231,056) (1,482,033) Cash flows from noncapital
financing activities
Transfers in 245,000 - 6,000 193,000 46,000 490,000
Net cash from noncapital
financing activities 245,000 - 6,000 193,000 46,000 490,000 Cash flows from capital and related
financing activities
Acquisition of capital assets (212,512) (448,937) - - (661,449) - Sale of capital assets - - 91,758 - - 91,758 Net cash from capital and related
financing activities (212,512) (357,179) - - (569,691) - Cash flows from investing activities Interest received 9,344 9,914 2,033 4,157 7,851 33,299
Net cash flows from
investing activities 9,344 9,914 2,033 4,157 7,851 33,299 Net cash flows (248,937) 13,518 408,079 (523,880) (1,177,205) (1,528,425) Cash and investments beginning of year 2,745,987 3,963,239 1,193,551 - 1,334,794 9,237,571 Cash and investments end of year $ 2,497,050 $ 3,976,757 $ 408,079 $ 669,671 $ 157,589 $ 7,709,146 170
CC 05-19-2022
170 of 1613

CITY OF CUPERTINO, CALIFORNIA

INTERNAL SERVICE FUNDS

COMBINING STATEMENT OF CASH FLOWS
For the year ended June 30, 2021

94. Compensated
Absences and
Information Workers' Equipment Long-Term Retiree
Technology Compensation Revolving Disability Medical Total Reconciliation of operating income (loss)
to net cash flows from operating activities
Operating income (loss) $ (639,964) $ 148,288 $ 169,830 $ (706,754) $ (1,231,056) $ (2,259,656) Adjustments to reconcile operating
income (loss) to net cash flows
from operating activities
Depreciation 299,745 - 669,046 - 968,791 - Change in assets, deferred outflows of resources, liabilities and deferred inflows of resources
Accounts receivable - 7,000 - - - 7,000
Due to retirement system 116,645 2,587 28,675 - 147,907 - Due to OPEB system (124,054) (2,851) (42,970) - (169,875) - Accounts payable and accruals (25,442) - (71,961) (14,283) (111,686) - Compensated absences 82,301 1,580 4,605 - - 88,486 Claims payable (153,000) - - - (153,000) - Cash flows from operating activities $ (290,769) $ 3,604 $ 757,225 $ (721,037) $ (1,231,056) $ (1,482,033) 171
CC 05-19-2022
171 of 1613

95. STATISTICAL SECTION
This part of the City’s Annual Comprehensive Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit.

Financial Trends
These schedules contain trend information to help the reader understand how the City’s financial performance and wellbeing have changed over time:

1. Net Position/Assets by Component

2. Changes in Net Position/Assets

3. Fund Balances of Governmental Funds

4. Changes in Fund Balance of Governmental Funds
Revenue Capacity
These schedules contain information to help the reader assess the City’s most significant own-source revenue, property tax.

1. Assessed and Estimated Actual Value of Taxable Property

2. Direct and Overlapping Property Tax Rates

3. Principal Property Taxpayers

4. Property Tax Levies and Collections
Debt Capacity
These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future:

1. Ratios of Outstanding Debt by Type

2. Direct and Overlapping Bonded Debt

3. Legal Debt Margin Information

4. Ratio of General Bonded Debt Outstanding
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place:

1. Demographic and Economic Statistics

2. 2021 Employer Ranking
Operating Information
These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs:

1. Full-Time Equivalent Employees by Function/Program

2. Operating Indicators by Function/Program

3. Capital Assets Statistics by Function/Program
Sources
Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Reports for the relevant year.
172
CC 05-19-2022
172 of 1613
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Governmental Activities
Net investment in capital assets $ 117,440,257 $ 116,343,918 $ 122,081,223 $ 131,425,677 $ 148,168,074 $ 153,239,534 $ 167,606,366 $ 170,973,897 $ 177,128,134 $ 186,503,116 Restricted 7,572,865 8,351,118 24,232,367 38,327,705 34,861,807 34,991,692 32,073,195 45,405,508 48,005,800 53,711,040 Unrestricted 38,117,361 47,558,701 63,150,548 51,003,950 51,164,063 59,385,309 50,457,871 51,190,017 66,493,336 83,458,299 Total governmental activities net position/assets 163,130,483 172,253,737 209,464,138 220,757,332 234,193,944 247,616,535 250,137,432 267,569,422 291,627,270 323,672,455 Business-Type Activities
Net investment in capital assets 824,687 762,013 1,110,414 2,079,561 1,708,183 1,972,169 1,597,700 1,318,744 1,118,882 2,090,530 Unrestricted 10,057,331 10,865,479 10,292,210 6,604,578 7,375,444 9,092,584 8,051,015 6,737,758 8,134,944 9,374,129 Total business-type activities net position/assets 10,882,018 11,627,492 11,402,624 8,684,139 9,083,627 11,064,753 9,648,715 8,056,502 9,253,826 11,464,659 Primary Government
Net investment in capital assets 118,264,944 117,105,931 123,191,637 133,505,238 149,876,257 155,211,703 169,204,066 172,292,641 178,247,016 188,593,646 Restricted 7,572,865 8,351,118 24,232,367 38,327,705 34,861,807 34,991,692 32,073,195 45,405,508 48,005,800 53,711,040 Unrestricted 48,174,692 58,424,180 73,442,758 57,608,528 58,539,507 68,477,893 58,508,886 57,927,775 74,628,280 92,832,428 (1), (2) $ 174,012,501 $ 183,881,229 $ 220,866,762 $ 229,441,471 $ 243,277,571 $ 258,681,288 $ 259,786,147 $ 275,625,924 $ 300,881,096 $ 335,137,114 (1) Represents net assets thru June 30, 2012 and net position after that. (2) Noted that restatements due to prior period adjustments and changes in accounting principles are not reflected in the prior year balances.

Fiscal Year Ended June 30

CITY OF CUPERTINO
Net Positions/Assets by Component
Last Ten Fiscal Years
(Accrual basis of accounting)
(Unaudited)

96. 173
CC 05-19-2022
173 of 1613
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Expenses
Governmental Activities:

Administration $ 1,837,072 $ 2,367,255 $ 4,529,539 $ 3,286,919 $ 3,710,388 $ 2,873,744 $ 5,612,733 $ 6,849,046 $ 7,974,520 $ 3,637,467 Law enforcement 8,776,633 9,274,536 10,062,192 10,705,328 11,316,271 12,528,328 12,674,042 13,381,113 14,698,130 15,211,646 Public and environmental affairs 1,743,151 1,595,982 512,895 649,442 575,260 1,884,165 3,244,846 3,210,343 3,637,354 1,721,729 Administrative services 4,309,503 4,171,440 2,662,008 4,300,336 2,994,611 5,898,479 4,415,647 4,290,818 5,175,596 5,358,183 Recreation services 4,577,243 4,473,861 4,866,974 5,365,282 5,758,194 10,651,557 9,352,551 7,389,915 8,763,194 1,182,662 Community development 4,922,237 4,676,273 9,108,949 5,976,797 6,259,734 13,775,591 16,789,351 10,470,973 10,286,317 11,495,788 Public works 20,387,508 22,149,063 21,143,331 27,893,361 31,313,396 32,491,244 28,995,382 31,870,165 33,339,191 41,870,240 Interest on long-term debt 1,837,655 1,256,922 1,130,428 1,120,138 1,077,538 1,035,738 993,038 949,438 882,837 397,682 Total governmental activities expense 48,391,002 49,965,332 54,016,316 59,297,603 63,005,392 81,138,846 82,077,590 78,411,811 84,757,139 80,875,397 Business-Type Activities:

Resources recovery 1,566,229 1,764,993 2,159,047 2,548,461 2,997,200 2,991,177 2,594,511 1,735,885 2,213,404 1,670,261 Blackberry farm 460,698 463,336 571,000 547,185 576,177 597,406 656,112 645,469 663,663 535,274 Cupertino sports center 1,897,611 2,011,483 2,221,703 2,269,420 2,299,210 2,159,243 2,633,748 3,036,037 2,883,903 2,182,900 Recreation programs 1,985,618 2,025,416 2,730,765 2,342,457 3,136,011 2,351,501 3,232,593 2,923,336 3,141,225 1,117,244 Total business-type activities expense 5,910,156 6,265,228 7,682,515 7,707,523 9,008,598 8,099,327 9,116,964 8,340,727 8,902,195 5,505,679 Total primary government expense 54,301,158 56,230,560 61,698,831 67,005,126 72,013,990 89,238,173 91,194,554 86,752,538 93,659,334 86,381,076 Program Revenues
Governmental Activities:

Charges for services:

Administration 6,454 5,676 1,087,393 322,534 369,069 3,992,716 5,062,988 1,319,395 2,091,811 2,387,412 Law enforcement 696,498 637,595 725,631 590,378 664,483 603,194 732,544 889,923 1,102,888 550,051 Public and environmental affairs - - - 41,352 41,352 - - - - - Administrative services - - - 481,616 359,148 3,565,627 2,635,885 3,113,731 3,889,180 5,232,679 Recreation services 1,166,323 970,292 955,081 1,798,134 1,421,185 2,016,159 1,589,134 1,563,262 1,309,906 264,426 Community development 4,919,216 6,765,564 6,649,292 8,511,745 10,534,457 10,902,822 8,598,935 7,470,690 5,859,847 5,736,587 Public works 503,225 593,501 7,916,897 2,869,357 6,358,870 6,873,487 4,720,646 4,504,104 5,657,315 3,966,206 Operating grants and contributions 2,508,917 2,752,493 10,000,131 6,002,617 1,851,282 2,313,632 4,819,696 2,557,470 5,794,443 5,998,209 Capital grants and contributions 780,761 719,880 569,159 4,022,190 362,491 245,288 271,587 1,082,243 1,046,756 1,792,376 Total governmental activities program revenue 10,581,394 12,445,001 27,903,584 24,639,923 21,962,337 30,512,925 28,431,415 22,500,818 26,752,146 25,927,946 Business-Type Activities:

Charges for services:

Resources recovery 1,727,783 1,882,517 2,074,251 2,591,276 2,664,888 2,792,190 2,559,862 1,750,279 1,821,677 1,819,861 Blackberry farm 411,056 386,753 302,472 388,091 334,529 325,224 345,667 316,615 338,212 610,603 Cupertino sports center 1,965,684 2,150,139 2,188,127 2,152,498 2,224,146 2,238,023 2,403,665 2,349,468 2,365,667 1,810,194 Recreation programs 2,325,705 2,409,720 2,480,209 2,532,800 2,466,336 2,778,588 2,516,678 1,986,781 1,588,576 590,871 Operating grants and contributions - - - - - - - - - -
Total business-type activities program revenue 6,430,228 6,829,129 7,045,059 7,664,665 7,689,899 8,134,025 7,825,872 6,403,143 6,114,132 4,831,529 Total primary government program revenue 17,011,622 19,274,130 34,948,643 32,304,588 29,652,236 38,646,950 36,257,287 28,903,961 32,866,278 30,759,475 (continued)
Fiscal Year Ended June 30

CITY OF CUPERTINO
Change in Net Positions/Assets
Last Ten Fiscal Years
(Accrual basis of accounting)
(Unaudited)

97. 174
CC 05-19-2022
174 of 1613
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Net (Expense) Revenue:

Governmental activities $ (37,809,608) $ (37,520,331) $ (26,112,732) $ (34,657,680) $ (41,043,055) $ (50,625,921) $ (53,646,175) $ (55,910,993) $ (58,004,993) $ (54,947,451) Business-Type activities 520,072 563,901 (637,456) (42,858) (1,318,699) 34,698 (1,291,092) (1,937,584) (2,788,063) (674,150) Total primary government net expense (37,289,536) (36,956,430) (26,750,188) (34,700,538) (42,361,754) (50,591,223) (54,937,267) (57,848,577) (60,793,056) (55,621,601) General Revenues and Transfers
Governmental Activities:

Taxes:

Property taxes 7,479,132 8,793,110 9,169,183 - 11,864,027 13,251,840 14,881,533 17,082,005 18,117,304 19,197,994 Property taxes in lieu of motor vehicle fee 4,487,412 4,772,355 5,289,476 - 6,330,436 6,967,237 7,552,272 8,219,090 8,489,541 9,079,845 Incremental property tax 202,793 - - - - - - - - -
Sales tax 17,326 18,721,193 19,794,036 - 21,350,056 26,932,012 26,164,531 24,901,779 35,657,214 42,581,070 Transient occupancy tax 3,112,934 3,768,504 4,590,156 - 5,852,244 6,023,681 6,810,718 8,901,337 7,286,083 2,141,058 Utility user tax 3,264,896 2,994,526 3,098,639 - 3,370,830 3,082,407 3,146,398 3,089,922 3,182,086 3,074,358 Franchise tax 2,808,136 2,848,950 2,775,892 - 3,478,024 3,409,572 3,563,820 3,445,253 3,418,908 3,368,286 Other taxes 1,377,211 4,561,219 18,791,559 - 2,818,019 3,258,118 1,943,652 3,299,587 1,774,235 3,022,333 Intergovernmental (1) 29,064 30,256 25,294 - 24,111 26,118 31,013 28,844 47,391 43,675 Investment earnings 61,096 176,782 133,243 40,751 807,287 694,730 916,638 3,258,550 5,690,723 4,147,907 Miscellaneous 82,684 126,690 57,005 (2) 219,053 2,004,906 1,834,492 1,187,741 1,922,356 3,185,110 Gain on sale of capital assets - - - 23,715,897 580 - 740,570 3,875 - - Extraordinary items (2) (1,130,797) - - - - - - - - -
Transfers - fund closings (3) - - - - - 272,011 - - - - Transfers 207,000 (150,000) (401,350) 872,340 (1,635,000) (1,874,120) 107,030 (75,000) (3,523,000) (2,849,000) Total governmental activities 21,998,887 46,643,585 63,323,133 24,628,986 54,479,667 64,048,512 67,692,667 73,342,983 82,062,841 86,992,636 Business-Type Activities:

Investment earnings 12,338 31,573 11,238 42,531 82,187 59,012 75,663 270,371 462,387 35,983 Transfers (207,000) 150,000 401,350 (872,340) 1,635,000 1,874,120 (107,030) 75,000 3,523,000 2,849,000 Total business-type activities (194,662) 181,573 412,588 (829,809) 1,717,187 1,933,132 (31,367) 345,371 3,985,387 2,884,983 Total primary government 21,804,225 46,825,158 63,735,721 23,799,177 56,196,854 65,981,644 67,661,300 73,688,354 86,048,228 89,877,619 Change in Net Position/Assets (4)
Governmental activities (15,810,721) 9,123,254 37,210,401 (10,028,694) 13,436,612 13,422,591 14,046,492 17,431,990 24,057,848 32,045,185 Business-Type activities 325,410 745,474 (224,868) (872,667) 398,488 1,967,830 (1,322,459) (1,592,213) 1,197,324 2,210,833 Total primary government $ (15,485,311) $ 9,868,728 $ 36,985,533 $ (10,901,361) $ 13,835,100 $ 15,390,421 $ 12,724,033 $ 15,839,777 $ 25,255,172 $ 34,256,018 (1) The 2006 state take-away of sales taxes, property taxes and vehicle license fees is reported in this category. (2) Asset transfer to Successor to Redevelopment Agency fiduciary trust in 2012. (3) Asset and liability transfer from the closed City Channel/Web Internal Service Fund in 2017. (4) Representes changes in net assets thru fiscal year ended June 30, 2012 and changes in net position after that.

Fiscal Year Ended June 30

CITY OF CUPERTINO
Change in Net Positions/Assets
Last Ten Fiscal Years
(Accrual basis of accounting)
(Unaudited)

98. 175
CC 05-19-2022
175 of 1613
2012 2013 2014 2015 2016 2017 2018 2019 (2) 2020 2021
General Fund
Nonspendable $ 1,003,438 $ 956,827 $ 3,363,065 $ 938,245 $ 937,381 $ 876,939 $ 464,893 $ 454,188 $ 3,449,341 $ 3,444,346 Restricted 695,564 725,903 - 761,653 888,374 1,016,771 1,254,578 9,469,670 14,324,757 20,140,419 Committed - - - - - 19,000,000 19,122,754 19,123,397 19,127,891 19,127,891 Assigned 17,729,297 16,400,000 16,400,000 28,849,679 20,500,000 4,638,181 9,963,310 1,979,202 3,176,882 4,906,139 Unassigned 6,669,379 17,961,579 23,197,378 8,774,966 29,869,085 28,057,799 21,704,922 27,896,128 34,426,942 49,231,996 Total General Fund 26,097,678 36,044,309 42,960,443 39,324,543 52,194,840 53,589,690 52,510,457 58,922,585 74,505,813 96,850,791 All Other Governmental Funds
Nonspendable - - - - - - - - - -
Restricted 6,877,301 7,625,215 24,232,367 37,566,052 33,973,433 33,974,921 30,818,617 35,935,838 33,681,043 33,570,621 Committed - - - 1,398,665 1,398,665 1,398,665 - - - -
Assigned 3,646,073 5,299,904 7,619,534 20,671,116 15,344,191 25,305,974 29,129,616 33,211,946 40,551,131 37,038,174 Unassigned - - (2,280,961) - - - - - - -
Total All Other Governmental Funds 10,523,374 12,925,119 29,570,940 59,635,833 50,716,289 60,679,560 59,948,233 69,147,784 74,232,174 70,608,795 Total Governmental Funds $ 36,621,052 $ 48,969,428 $ 72,531,383 $ 98,960,376 $ 102,911,129 $ 114,269,250 $ 112,458,690 $ 128,070,369 $ 148,737,987 $ 167,459,586 (1) The City implemented GASB Statement No. 54 under which governmental fund balances are reported as nonspendable, restricted, committed, assigned and unassigned compared to reserved and unreserved (2) The City established a trust to fund Other Post-Employment Benefit contributions, which is classified as a restriction in fund balance.

Fiscal Year Ended June 30

CITY OF CUPERTINO
Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified accrual basis of accounting
(Unaudited)

99. 176
CC 05-19-2022
176 of 1613
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Revenues
Taxes $ 40,265,944 $ 48,382,570 $ 72,211,724 $ 55,134,238 $ 55,462,956 $ 62,924,867 $ 64,062,924 $ 68,938,973 $ 77,925,371 $ 82,464,944 Use of money and property 661,602 744,196 764,299 915,933 1,654,702 1,425,629 1,543,818 3,896,813 6,259,342 4,447,970 Intergovernmental 2,678,888 2,841,407 3,069,400 7,210,562 2,532,025 2,585,038 5,122,296 3,668,557 6,888,590 7,834,260 Licenses and permits 2,900,936 3,502,617 3,679,943 3,170,445 3,073,110 2,536,925 2,757,928 4,102,665 4,692,847 4,068,238 Charges for services 3,273,946 4,515,066 10,744,113 5,203,371 17,249,123 24,103,167 15,638,247 13,385,698 13,937,950 13,601,302 Fines and forfeitures 661,899 560,417 616,889 554,002 564,903 603,194 602,934 534,012 344,008 134,459 Other 264,302 57,828 545,052 542,429 1,289,013 2,004,904 1,834,492 1,187,741 1,922,356 3,185,110 Total revenues 50,707,517 60,604,101 91,631,420 72,730,980 81,825,832 96,183,724 91,562,639 95,714,459 111,970,464 115,736,283 Expenditures:

Current:

Administration 1,533,070 2,005,176 3,957,739 3,897,701 4,053,741 5,942,633 4,943,052 6,294,111 6,951,541 7,549,386 Law enforcement 8,445,917 8,783,885 9,626,121 10,283,772 10,988,735 11,939,095 12,362,621 13,108,732 14,151,413 14,776,409 Public and environmental affairs 1,659,856 1,486,910 477,852 624,295 544,718 1,864,746 2,835,768 2,843,540 3,223,185 1,836,725 Administrative services 4,103,982 3,772,714 2,444,670 3,226,164 2,811,117 5,054,539 4,430,300 4,197,582 4,617,787 5,196,299 Recreation services 4,319,983 4,083,822 4,536,519 5,047,548 5,441,200 9,361,934 8,686,076 8,996,118 7,688,935 4,787,914 Community development 4,762,229 4,395,601 8,424,254 5,180,659 6,102,820 7,431,292 12,907,086 9,359,835 9,310,827 11,177,690 Public works 12,528,194 13,996,516 17,469,627 14,625,038 15,078,174 18,623,585 18,191,714 19,955,579 22,445,948 24,568,155 Capital Outlay 3,523,047 4,684,676 7,110,974 21,760,899 26,171,127 18,731,165 23,395,112 10,528,246 12,644,373 19,483,945 Debt service:

Principal repayment - 1,920,000 2,040,000 2,055,000 2,090,000 2,135,000 2,180,000 2,220,000 2,290,000 2,140,000 Interest and fiscal charges 1,837,665 1,256,922 1,130,428 1,120,138 1,077,538 1,035,738 993,038 949,438 882,837 798,747 Payment to refunded debt escrow agent 44,897,800 - - - - - - - - - Total expenditures 87,611,743 46,386,222 57,218,184 67,821,214 74,359,170 82,119,727 90,924,767 78,453,181 84,206,846 92,315,270 Excess (deficiency) of revenues over
(under) expenditures (36,904,226) 14,217,879 34,413,236 4,909,766 7,466,662 14,063,997 637,872 17,261,278 27,763,618 23,421,013 Other Financing Sources (Uses)
Proceeds from debt issuance 44,823,839 - - - - - - - - 22,040,000 Proceeds from debt issuance premium - - - - - - - - - 3,878,704 Payments to refunding agent - - - - - - - - - (27,279,118) Proceeds from sale of capital assets 421 - 37,569 23,814,257 580 - 872,250 3,875 - - Transfers in 6,484,426 8,438,707 13,610,304 39,408,990 11,905,724 26,446,090 31,028,218 19,407,613 35,208,276 12,876,969 Transfers in - fund closing - - - - - 260,374 - - - -
Transfers out (7,692,426) (10,308,210) (24,499,154) (39,177,284) (15,422,213) (29,412,340) (34,348,900) (21,061,087) (42,304,276) (16,215,969) Total other financing sources (uses) 43,616,260 (1,869,503) (10,851,281) 24,045,963 (3,515,909) (2,705,876) (2,448,432) (1,649,599) (7,096,000) (4,699,414) Extraordinary Item
Asset transferred to Successor Agencies - (1,130,797) - - - - - - - - Change in fund balances $ 6,712,034 $ 11,217,579 $ 23,561,955 $ 28,955,729 $ 3,950,753 $ 11,358,121 $ (1,810,560) $ 15,611,679 $ 20,667,618 $ 18,721,599 Debt service as a percentage of
noncapital expenditures (1) 55.6% 7.6% 6.3% 6.9% 6.6% 5.0% 4.7% 4.7% 4.4% 4.0% (1) Noncapital expenditures is total expenditures less capital assets added each year to the statement of net position/assets.

Fiscal Year Ended June 30

CITY OF CUPERTINO
Change in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Unaudited)
100. 177
CC 05-19-2022
177 of 1613
State Board of Total Assessed & Direct
Total Equalization Secured Est. Full Market Tax
Fiscal Year Secured (a) Unsecured (a) Non-Unitary Exemptions Valuation (a) Rate 2007 10,794,991,704 381,307,801 213,610 94,957,979 11,176,513,115 5.74% 2012 $ 13,219,574,367 $ 527,310,319 $ 1,390,000 $ 96,081,912 $ 13,748,274,686 6.24% 2013 13,882,147,291 738,243,050 1,390,000 108,468,872 14,621,780,341 6.20% 2014 15,391,656,690 813,117,019 1,390,000 113,744,809 16,206,163,709 5.62% 2015 16,133,637,244 965,141,148 - 119,476,276 17,098,778,392 5.61% 2016 18,308,720,226 1,086,786,901 - 114,223,063 19,395,507,127 5.59% 2017 20,196,258,418 1,150,311,942 - 118,257,368 21,346,570,360 5.98% 2018 22,024,906,420 1,114,123,426 - 122,805,695 23,139,029,846 6.19% 2019 23,402,123,229 1,779,936,377 - 125,245,819 25,182,059,606 6.38% 2020 24,370,718,536 1,641,863,322 - 138,025,761 26,012,581,858 6.50% 2021 25,397,331,860 2,423,984,683 - 145,644,653 27,821,316,543 6.46% (a) Net of exemptions
Source: HdL, Coren & Cone
Data Source: Santa Clara County Assessor 2011-12 - 2020-21 Combined Tax Rolls

CITY OF CUPERTINO
(Unaudited)
Last Ten Fiscal Years
Assessed and Estimated Actual Value of Taxable Property $0
$2
$4
$6
$8
$10
$12
$14
$16
$18 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Billions Secured Property Unsecured Property
101. 178
CC 05-19-2022
178 of 1613
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018-19 2019-20 2020-21 Basic Levy¹ 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 Co. Housing Bond 2016 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.01266 0.01050 0.01000 0.00000 County Bond 2008 Hospital Facility 0.00470 0.00510 0.00350 0.00910 0.00880 0.00860 0.00820 0.00720 0.00690 0.00690 County Library Retirement Levy 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 County Retirement Levy 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 Cupertino Elementary 0.02900 0.05980 0.05250 0.05400 0.05190 0.05090 0.04960 0.03970 0.04150 0.04030 El Camino Hospital 2003 0.01290 0.01290 0.01290 0.01290 0.01290 0.01290 0.01000 0.01000 0.01000 0.01000 Foothill De Anza College 0.02970 0.02870 0.02900 0.02760 0.02400 0.02340 0.02200 0.02170 0.02080 0.03640 Fremont High 0.04150 0.03900 0.04050 0.03960 0.05250 0.04030 0.04640 0.04300 0.04790 0.04780 Los Gatos-Saratoga High 1998 0.03810 0.03680 0.03510 0.05160 0.04230 0.04690 0.04570 0.03040 0.01770 0.01930 MidPeninsula Open Space 2014 0.00000 0.00000 0.00000 0.00000 0.00080 0.00060 0.00090 0.00180 0.00160 0.00150 Santa Clara Unified 0.08360 0.08190 0.07070 0.07040 0.09420 0.08180 0.08280 0.07070 0.11760 0.10450 Santa Clara Valley Water District 0.00640 0.00690 0.00700 0.00650 0.00570 0.00860 0.00620 0.00420 0.00410 0.00370 Saratoga Elementary 0.04440 0.04520 0.04500 0.04580 0.04490 0.04560 0.04580 0.04580 0.04640 0.04850 West Valley College 0.01370 0.02890 0.02550 0.01200 0.02320 0.01960 0.02000 0.01980 0.01860 0.03110 Total Direct & Overlapping² Tax Rates 1.34520 1.38640 1.36290 1.37070 1.40240 1.38040 1.39146 1.34600 1.39530 1.39120 City's Share of 1% Levy Per Prop 13³ 0.05650 0.05652 0.05626 0.05617 0.05571 0.05962 0.06148 0.06320 0.06531 0.06515 General Obiligation Debt Rate
Redevelopment Rate⁴ 1.04760
Total Direct Rate⁵ 0.06238 0.06204 0.05623 0.05610 0.05588 0.05976 0.06187 0.06381 0.06499 0.06463 Notes:
²Overlapping rates are those of local and county governments that apply to property owners within the City. Not all overlapping rates apply to all city property owners.

Data Source: Santa Clara County Assessor 2011/12 - 2020/21 Tax Rate Table

THE CITY OF CUPERTINO
Direct and Overlapping Property Tax Rates
(Rate per $100 of taxable value)
Last 10 Fiscal Years
³City's Share of 1% Levy is based on the City's share of the general fund tax rate area with the largest net taxable value within the city.

ERAF general fund tax shifts may not be included in tax ratio figues.

Agency
⁴Redevelopment Rate is based on the largest RDA tax rate area and only includes rate(s) from indebtedness adopted prior to 1989 per California State statute. RDA direct and overlapping rates are applied only to the incremental property values. The approval of ABX1 26 eliminated Redevelopment from the State of California for the fiscal year 2012/13 and years thereafter. ⁵Total Direct Rate is the weighted average of all individual direct rates applied to by the government preparing the statistical section information and excludes revenues derived from aircraft. Beginning in 2013/14 the Total Direct Rate no longer includes revenue generated from the former redevelopment tax rate areas. Challenges to recognized enforceable obligations are assumed to have been resolved during 2012/13. For the purposes of this report, residual revenue is assumed to be distributed to the City in the same proportions as general fund revenue.
¹In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of any voter approved bonds. 102. 179
CC 05-19-2022
179 of 1613
2021 Percentage of 2012 Percentage of
Assessed Total Assessed Assessed Total Assessed
Valuation Valuation Valuation Valuation
Apple Inc. $ 7,092,034,206 25.49% $ 916,229,008 9.36%
Main Street Cupertino 368,688,300 1.33% - 0.75%
Vallco Property Owner LLC 311,083,000 1.12% 92,759,700 1.63% Cupertino City Center 276,811,408 0.99% 136,245,008 0.73% Cupertino Property Development 208,775,727 0.75% - 0.58% Swift Results Way LLC 184,947,832 0.66% - 0.00%
Mission West Properties LP II ETAL 143,225,274 0.51% - 0.67% PR Cupertino Gateway LLC 133,326,728 0.48% - -
Markham Apartments LP 106,337,637 0.38% - -
Cupertino Hotel Owner LLC 99,134,506 0.36% - -
Total $ 8,924,364,618 32.07% $ 1,145,233,716 13.72%
Source: HdL, Coren & Cone

CITY OF CUPERTINO
Principal Property Taxpayers
Current Year and Ten Years Ago
(Unaudited)
Taxpayer
103. 180
CC 05-19-2022
180 of 1613
Percent of
Percent Delinquent Total Total Tax
Fiscal Total Current Tax of Levy Tax Tax Collections
Year Tax Levy Collections Collected (1) Collections (1) Collections to Tax Levy 2007 6,717,048 6,717,048 100.00% - 6,717,048 100.00%
2012 $ 7,681,925 $ 7,681,925 100.00% $ - $ 7,681,925 100.00% 2013 8,199,752 8,199,752 100.00% - 8,199,752 100.00%
2014 9,169,183 9,169,183 100.00% - 9,169,183 100.00%
2015 10,178,734 10,178,734 100.00% - 10,178,734 100.00% 2016 11,864,026 11,864,026 100.00% - 11,864,026 100.00% 2017 13,308,884 13,308,884 100.00% - 13,308,884 100.00% 2018 13,172,425 13,172,425 100.00% - 13,172,425 100.00% 2019 16,049,112 16,049,112 100.00% - 16,049,112 100.00% 2020 18,117,304 18,117,304 100.00% - 18,117,304 100.00% 2021 19,197,994 19,197,994 100.00% - 19,197,994 100.00% (1) Per the Teeter Plan, the City receives 100% of the tax levy, while the County receives delinquencies and penalties.

Source: City of Cupertino

CITY OF CUPERTINO
Property Tax Levies and Collections
Last Ten Fiscal Years
(Unaudited)
104. 181
CC 05-19-2022
181 of 1613
Percentage
of Estimated % of
Fiscal Certificates Actual Market Value Personal
Year of Participation of Taxable Property Per Capita Income 2007 49,740,000 0.45% 929 1.60%
2012 $ 43,940,000 0.27% $ 744 1.56%
2013 42,020,000 0.26% 705 1.41%
2014 39,980,000 0.23% 671 1.38%
2015 37,925,000 0.20% 633 1.28%
2016 35,835,000 0.18% 598 1.21%
2017 33,700,000 0.15% 579 1.02%
2018 31,520,000 0.12% 525 0.87%
2019 29,300,000 0.11% 488 0.81%
2020 27,010,000 0.10% 451 0.71%
2021 22,040,000 0.08% 370 0.54%
Source: City of Cupertino

CITY OF CUPERTINO
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
(Unaudited)
105. 182
CC 05-19-2022
182 of 1613
$ 27,821,316,543
Total Debt % City’s Share of
6/30/2021 Applicable (1) Debt 6/30/21
Santa Clara County $ 991,587,000 5.096% $ 50,531,274
Santa Clara County General Fund Obligations 812,685,000 5.096% 41,414,428 Santa Clara County Pension Obligations 341,399,000 5.096% 17,397,693 Santa Clara County Board of Education Certificates of Participation 2,670,000 5.096% 136,063 Foothill-DeAnza Community College District 1,251,133,487 13.454% 168,327,499 West Valley Community College District 635,310,000 1.634% 10,380,965 West Valley-Mission Community College District General Fund Obligations 62,200,000 1.634% 1,016,348 Santa Clara Unified School District 1,081,495,000 3.813% 41,237,404 Santa Clara County Vector Control District Certificates of Participation 1,756,000 5.096% 89,486 Fremont Union High School District 617,160,088 29.883% 184,425,949 Cupertino Union School District 274,238,303 50.963% 139,760,066 El Camino Hospital District 116,290,000 1.056% 1,228,022 Midpeninsula Regional Open Space District and General Fund Obligations 192,400,600 8.134% 15,649,865 Santa Clara Valley Water District Benefit Assessment 65,000,000 5.096% 3,312,400 Total Overlapping Tax and Assessment Debt 6,445,324,478 674,907,463 Direct Debt: City of Cupertino Certificates of Participation 22,040,000 100.000% 22,040,000 Total Direct and Overlapping General Fund Debt 22,040,000 22,040,000 Totals by Category: (3)
Total Direct Debt 22,040,000 22,040,000
Total Overlapping Debt 6,445,324,478 674,907,463
Combined Total Debt $ 6,467,364,478 $ 696,947,463
Ratios to 2020-21 Assessed Valuation:

Total Overlapping Tax and Assessment Debt 2.43%

0.08%
Combined Total Debt 2.51%
(1)
(2) Principal amount as of 6/30/21.
(3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

Direct and Overlapping Bonded Debt

CITY OF CUPERTINO
Sources: HdL, Coren & Cone
Overlapping Tax and Assessment Debt:
(Unaudited)
2020-21 Assessed Valuation
June 30, 2021
The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable 106. 183
CC 05-19-2022
183 of 1613
Total net debt
Total Net Legal applicable to the
Fiscal Debt Debt Applicable Debt limit as a % of
Year Limit to Limit Margin debt limit
2007 408,373,114 - 408,373,114 -
2012 $ 495,734,039 $ - $ 495,734,039 $ -
2013 520,580,523 - 520,580,523 -
2014 577,187,126 - 577,187,126 -
2015 605,011,397 - 605,011,397 -
2016 686,577,008 - 686,577,008 -
2017 757,359,691 - 757,359,691 -
2018 825,933,991 - 825,933,991 -
2019 877,579,621 - 877,579,621 -
2020 913,901,945 - 913,901,945 -
2021 952,399,945 - 952,399,945 -
Debt Limit:

Secured property assessed value, net of exempt real property $ 25,397,331,860 Adjusted valuation - 25% of assessed valuation 6,349,332,965 Debt limit - 15% of adjusted valuation 952,399,945
Amount of Debt Subject to Limit:

Total Bonded Debt 22,040,000
Less: Certificates of Participation not subject to debt limit (22,040,000) Amount of debt subject to limit -
Legal Debt Margin $ 952,399,945
Source: City of Cupertino
Last Ten Fiscal Years
Note: The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted by the State of California for local governments located within the state.

CITY OF CUPERTINO
Legal Debt Margin Information
(Unaudited)
107. 184
CC 05-19-2022
184 of 1613
Ratio of General
Fiscal Assessed General Bonded Debt Bonded Debt to
Year Population Value Bonded Debt Per Capita Assessed Value 2007 53,549 11,176,513,115 - - - 2012 59,022 $ 13,748,274,686 $ - $ - $ -
2013 59,620 14,621,780,341 - - -
2014 59,946 17,098,778,392 - - -
2015 59,777 19,395,507,127 - - -
2016 58,185 19,395,507,127 - - -
2017 58,917 21,346,570,360 - - -
2018 60,091 23,139,029,846 - - -
2019 59,879 25,182,059,606 - - -
2020 59,549 27,821,316,543 - - -
2021 60,656 27,821,316,543 - - -
Sources: HdL, Coren & Cone

CITY OF CUPERTINO
Ratio of General Bonded Debt
Last Ten Fiscal Years
(Unaudited)
108. 185
CC 05-19-2022
185 of 1613
Fiscal
Year
City
Population
(1)
County
Population
(1)
City
Population
% of County
City Personal
Income (2)
Per
Capita
Personal
Income
(2)
**Public
School
Enrollment
City
Unemploy
ment Rate
(%) (3)
County
Unemploy
ment Rate
(%) (3)
Median
Age (4)
% of
Population
Over 25
with High
School
Degree
% of
Population
Over 25
with
Bachelor's
Degree
2011-12 59,022 1,809,378 3.26% 2,818,655,000 47,756 10,625 6.3% - 39.2 97.0% 74.7% 2012-13 59,620 1,842,254 3.24% 2,985,829,000 50,081 29,699 4.1% 8.4% 39.5 96.7% 75.5% 2013-14 59,946 1,868,558 3.21% 3,090,636,000 51,557 29,904 3.4% 6.8% 40.0 96.2% 74.2% 2014-15 59,777 1,889,638 3.16% 3,186,772,000 53,311 29,871 4.2% 3.8% 40.0 96.5% 74.6% 2015-16 58,185 1,927,888 3.02% 3,340,132,000 57,405 29,684 3.4% 4.2% 40.2 96.5% 75.6% 2016-17 58,917 1,938,180 3.04% 3,486,805,000 59,181 29,467 3.0% 3.8% 40.6 96.7% 76.0% 2017-18 60,091 1,938,153 3.10% 3,620,255,000 60,246 29,255 3.3% 3.8% 40.7 97.1% 76.6% 2018-19 59,879 1,937,570 3.09% 3,821,320,000 63,817 29,240 2.6% 2.3% 41.1 97.1% 77.2% 2019-20 59,549 1,927,852 3.09% 4,114,967,000 69,102 29,550 2.4% 10.7% 41.1 97.2% 78.1% 2020-21 60,656 1,936,259 3.13% 4,378,045,000 74,485 30,900 4.9% 5.2% 41.6 97.2% 78.8% Notes and Data Sources:

Population: California State Department of Finance. Unemployment Data: California Employment Development Department Income, Age, and Education Data: ESRI - Demographic Estimates are based on the last available Census. Projections are developed by incorporating all of the prior census data released to date. Demographic Data is totaled from Census Block Groups that overlap the City's boundaries 201- and later - Income, Age and education Data - US Census Bureau, most recent American Community Survey **Reported Public School Enrollment reflects the total number of students in the Fremont Union High School District and Cupertino Union School District.

Previously published reports included Fremont Union High School District only.

City of Cupertino
Demographic and Economic Statistics
Last Ten Fiscal Years
109. 186
CC 05-19-2022
186 of 1613

CITY OF CUPERTINO
2021 Employer Ranking
(Unaudited)
Employer Ranking Employer_________________ Ranking
Apple 1 Panasonic Corporation 11
Cupertino Union School District 2 Pleasant View Convalescent Hospital 12 Corinthian International Parking Services, Inc. 3 Sunny Retirement Home 13 Synophic Systems Inc. 4 City of Cupertino 14
De Anza Community College District 5 Ch Cupertino Owner LLC 15 Target Stores, Inc. 6 Zend Technologies Usa, Inc. 16
Fremont Union High School District 7 Mist Systems, Inc. 17 Forum Healthcare Center 8 County of Santa Clara 18
Whole Foods Market 9 Cupertino Lessee LLC 19
Mobileum, Inc. 10 Posh Bakery Inc. 20
Source: InfoUSA
110. 187
CC 05-19-2022
187 of 1613
Function/Program 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Council and Commissions 1.47 1.52 1.57 1.55 1.60 1.55 2.35 2.35 2.51 2.53 Administration 5.05 5.05 10.75 10.75 10.85 10.57 14.12 15.47 15.15 17.85 Innovation & Technology 6.95 6.90 11.00 10.25 11.40 13.95 14.55 15.05 14.95 11.93 Administrative Services 22.48 22.26 11.00 12.00 12.30 12.30 12.00 14.00 16.00 15.90 Parks & Recreation 29.78 29.53 29.48 31.28 32.18 33.08 35.13 34.80 32.10 31.90 Community Development 23.43 23.90 24.83 24.80 27.30 28.18 28.08 28.13 28.29 28.49 Public Works 73.59 73.59 74.12 77.12 82.12 84.12 84.52 84.95 88.75 90.15 Law Enforcement 0.00 0.00 2.00 2.00 2.00 2.00 2.00 2.00 0.00 0.00 Total 162.75 162.75 164.75 169.75 179.75 185.75 192.75 196.75 197.75 198.75 Source: City of Cupertino Budget

CITY OF CUPERTINO
Full-Time Equivalent City Employees by Function/Program Last Ten Fiscal Years
(Unaudited)
0 50
100
150
200
250
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Public Works
Community
Development
Parks &
Recreation
Administrative
Services
Innovation &
Technology
Administration
Council and
Commissions
111. 188
CC 05-19-2022
188 of 1613
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Law Enforcement Sheriff Response
Priority One-Respond within 5 minutes 4.84 Min. 3.76 Min. 4.30 Min. 4.90 Min. 4.90 Min. 5.07 Min 4.23 Min. 4.39 Min. 3.51 Min. 3.10 Min.

Priority Two-Respond within 9 minutes 6.44 Min. 5.98 Min. 6.39 Min. 6.56 Min. 6.56 Min. 8.00 Min. 7.49 Min. 6.23 Min. 6.37 Min. 5.96 Min.

Priority Three-Respond within 20 minutes 10.62 Min. 10.29 Min. 10.76 Min. 10.52 Min. 10.52 Min. 15.79 Min 14.79 Min. 12.11 Min. 11.96 Min. 12.05 Min.

Public Works
Street Sweeping 575 Curb Miles 575 Curb Miles 575 Curb Miles 575 Curb Miles 575 Curb Miles 534 Curb Miles 534 Curb Miles 534 Curb Miles 534 Curb Miles 534 Curb Miles Street Maintenance 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call Number of development permit applications received 428 434 428 230 Number of encroachment permits received 121 136 134 548 Storm Drain Inlets Inspected/Cleaned 815 1063 1638 1802 Roadway Signs Repaired/Replaced 404 721 346 1151
Number of trees planted vs. removed 53/67 155/192 164/190 197/187 Parks & Recreation
Number of reservations at Quinlan Center 560 402 526 0
Number of rounds of golf at BBF Golf Course 28,193 27,205 28,952 43,650 Sports Center Memberships 1,776 1,852 1,950 2,000 1,989 2,015 1,850 1,952 1,802 1,792 Number of Senior Center classes offered 246 320 258 76
Senior Center Memberships 2,470 2,456 2,623 2,549 2,493 2,094 2,260 2,171 2,171 1,528 Quinlan Community Center Rental Revenue $133,000 $120,000 $109,342 $110,033 $104,150 $128,778 $72,948 $139,590 $139,590 $0 Community Development
Approved Building Plan Sets 93% Within 5 Days 92% Within 5 Days 95% Within 7 Work Days 95% Within 7 Work Days 95% Within 7 Work Days 95% Within 7 Work Days 95% Within 7 Work Days 95% Within 7 Work Days 95% Within 7 Work Days 95% Within 7 Work Days Discretionary Land Use Applications 99% Within 21 Days 99% Within 21 Days 99% Within 21 Work Days 99% Within 21 Work Days 99% Within 21 Work Days 99% Within 21 Work Days 99% Within 21 Work Days 99% Within 21 Work Days 99% Within 21 Work Days 99% Within 21 Work Days Public Notice of Upcoming Projects 100% Within 10 Days 100% Within 10 Days 100% Within 10 Days 100% Within 10 Days 100% Within 10 Days 100% Within 10 Days 100% Within 10 Days 100% Within 10 Days 100% Within 10 Days 100% Within 10 Days Number of preliminary reviews 82 90 110 163
Number of planning applications received 169 138 194 237 Number of permits received 2322 2,321 2,534 2,497
Number of inspections requested 16026 13,625 14,596 13,787 Administrative Services
Accounts Payable Processing 7 Days 7 Days 7 Days 7 Days 7 Days 7 Days 7 Days 7 Days 7 Days 7 Days Business License Renewal Certificates 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days 3 Days Number of regular recruitments 21 21 28 24
Number of new hires 26 16 14 21
Number of temporary new hires 101 105 38 17
Number of vendor checks processes 6793 6,536 5,906 4,457 Number of payroll checks process 10387 10,301 10,802 7,816 Number of business license applications 1294 1,154 1,032 1,061 Number of journal entries posted 2830 4,521 4,558 3,915 Number of receipts processed 9766 13,913 18,992 10,367
Library
Volumes in Collection - - - 361817 364,557 369,924 367,979 367,101 368,461 350,088 Annual Gate Count - - - 869762 880,894 835,073 873,862 904,349 620,007 128,912 Annual Circulation Children's Items - - - 1474996 1,544,095 1,448,265 1,453,173 1,535,842 1,192,880 1,207,878 Annual Circulation Adult and Teen Items - - - 999766 1,032,326 950,453 980,609 1,049,166 831,114 750,602 Adult Classes and Events - - - 209 215 242 206 207 396 459 Adult Classes and Events Attendence - - - 11860 8,855 9,242 7,622 8,304 9,986 19,223 Teen Classes and Events - - - 52 78 66 79 52 57 31
Teen Classes and Events Attendence - - - 3393 3,135 2,571 2,495 1,283 8,495 7,151 Children's Classes and Events - - - 458 493 440 426 424 477 464 Children's Classes and Events Attendence - - - 25529 28,532 25,857 24,675 22,851 26,032 52,634 Volunteer Hours - - - 11786 10,000 9,645 10,302 10,191 6,592 465 Sources: City of Cupertino and Santa Clara County Library District Function/Program

CITY OF CUPERTINO
Operating Indicators by Function/Program
Last Ten Fiscal Years
(Unaudited)
112. 189
CC 05-19-2022
189 of 1613
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Public Works
Centerlane Miles of Streets 142 142 142 142 142 142 142 142 142 142 Streetlights 2,950 2,950 2,950 2,950 2,950 2,950 2,950 2,950 2,950 2,950 Traffic Signals 39 48 48 48 48 48 52 52 52 52
Culture & Recreation
Parks and Open Spaces 19 19 21 21 21 21 21 21 21 21
Park and Landscape Acreage 169 169 169 169 169 169 169 169 169 169 City Trails 1 1 3 3 3 3 3 3 3 3
Golf Courses 1 1 1 1 1 1 1 1 1 1
Community Center 1 1 1 1 1 1 1 1 1 1
Community Hall 1 1 1 1 1 1 1 1 1 1
Senior Center 1 1 1 1 1 1 1 1 1 1
Sports Center 1 1 1 1 1 1 1 1 1 1
Swimming Pools 1 1 1 1 1 1 1 1 1 1
Tennis Courts 17 17 17 28 28 28 28 28 28 28
Sports Fields 41 41 41 41 41 41 41 41 41 41
City Library 1 1 1 1 1 1 1 1 1 1
Source: City of Cupertino
Function/Program

CITY OF CUPERTINO
Capital Assets Statistics by Function/Program
Last Ten Fiscal Years
(Unaudited)
113. 190
CC 05-19-2022
190 of 1613
History
“This place of San Joseph Cupertino has good water and much firewood, but nothing suitable for a settlement because it is among the hills very near to the range of cedars which I mentioned yesterday, and lacks level lands.”
When Spanish explorer San Juan Bautista De Anza traveled through California in 1776, he and his party documented these words about the land surrounding Stevens Creek, named back then as Arroyo San Joseph Cupertino. However, first impressions can often be misleading.

Underneath the spiny, overgrown bush was a completely different land waiting to be uncovered. During this time, the area was populated by Native Americans who hunted and gathered, prospering from the abundant resources the land had to offer.

It wasn’t until 1848 when the first American settler, Elijah Stephens, a blacksmith from South Carolina, moved to the area—at this time, named simply ‘West Side’ and primarily owned by the government. After crossing over the Sierra Nevada in wagons, he discovered the true value of the land underneath the bush, and proceeded to purchase over 300 acres of farmland to grow grapes and blackberries. Stephens pioneered the way for farmers, which established West Side as an agricultural hot spot. The land Stephens owned eventually became Blackberry Farm, and the road, creek, and reservoir were all named after him, although misspelled.

In early West Side, many of the newest advances in agriculture were being developed. Settlers were drawn to the land because of its rich earth, where they were able to grow products that competed on the world market. Once the bush had been cleared, they grew grapes, which covered the West Valley area with vineyards by the late 1800s. By the 1900s, a plant louse called Phylloxera spread throughout the vineyards, attacking the roots of the grape vines, killing the grapes and putting a halt to wine production. As a solution, nearly everything was replanted with fruit orchards. When the fruit trees blossomed, visitors would come to the orchards for “The Valley of Heart’s Delight” festivals, which celebrated the prosperous agriculture of the West Valley area.

Apart from the farmland, West Side was primarily known as a crossroads, an intersection between Saratoga-Sunnyvale Road and Stevens Creek. This served as a way station for travelers to pass through while going from town to town. As more people came to West Side to take advantage of the rich farm land, more family holdings gathered around the cross-roads.

Starting off as just a post office and home union store, West Side’s humble cross-roads brought many diverse communities, all attracted by the preferable climate and profitable market for crops.

As more people were drawn to the area around the cross-roads, the orchards were gradually replaced with modern houses for workers. The population steadily grew, and the face of West Side changed, progressing to a more modern town. The community wanted to rename the city, as to not confuse it with other cities, as well as establish a unique identity. John T. Doyle, a 191
CC 05-19-2022
191 of 1613
lawyer from San Francisco, and writer of historical anthologies on the area, chose the name “Cupertino” after the original name of the creek.

After the post-World War II population boom, the growing community petitioned for Cupertino to become an incorporated town. Members of the community were worried that the alternative to incorporation was to have parts of Cupertino annexed by surrounding cities, splitting up the community and erasing the local culture. To preserve the rural atmosphere, lower taxes for farmers, start a local government, and prepare for growth, Cupertino voted for incorporation. In 1955, Cupertino officially became the 13th city in Santa Clara County.

By the 1970s, Cupertino once again began to undergo dramatic changes. The growing community attracted several large technology corporations. Lockheed Martin, HP, Intel, and many other big names established themselves in the Silicon Valley. Apple Inc. was founded in Cupertino in 1976 and quickly grew into the tech giant it’s known for today.

In the late 20th century, Cupertino and the surrounding areas experienced another surge in population growth, this time due to the immigration of people from Asian countries.

Immigration laws at the time were in the favor of families looking to move to the Silicon Valley.

People immigrated here for a variety of reasons—whether they were aspiring for career prospects with major tech companies, or striving for a quality education for their children, everyone who immigrated here had a common goal: to find opportunities to work hard for a better life for themselves and their families.
2020 Community Economic Profile
Cupertino, with a population of 66,762 and City limits stretching across 13 square miles, is considered one of the most prestigious cities to live and work in the Bay Area.

Economic health is an essential component to maintaining a balanced city, which provides highlevel opportunities and services that create and help sustain a sense of community and quality of life. Public and private interests must be mutual so that success as a partnership is a direct reflection of success as a community. The cornerstone of this partnership is a cooperative and responsive government that fosters residential and business prosperity and strengthens working relationships among all sectors of the community.

Because Cupertino is a mature, 93% built-out city, the City of Cupertino focuses on business retention and revitalization. Cupertino is world renowned as the home of high-tech giants, such as Apple, Inc. and Seagate Technologies, and as a community with stellar public schools. De Anza College, one of the largest single-campus community colleges in the country, is another major employer and a magnet for attracting local and international students. The City’s proactive economic development efforts have resulted in an innovative environment for startups and growing companies to thrive. The City strives to retain and attract local companies through active outreach and a responsive and customer-oriented entitlement process. 192
CC 05-19-2022
192 of 1613
Cupertino is excited to have a number of new mixed-use development projects offering more retail and dining options, as well as provide additional housing opportunities to meet the needs of the growing community.

The Main Street and Nineteen800 mixed-use developments have created a vibrant downtown area for Cupertino, offering a large selection of restaurants and retailers, including Alexander’s Steakhouse, Eureka!, Rootstock Wine Bar, Oren’s Hummus, Lazy Dog, Ippudo, HaiDiLao Hot Pot Restaurant, Pressed Juicery, Orangetheory, 85 Degree Bakery, Somi Somi, Sul & Beans, Target Express, Kura Sushi, Vitality Bowls, Doppio Zero, Boiling Point and Jin Tea, Koja Kitchen, Bishops Cuts & Colors, Capezio, Howard’s Shoes, Tan Cha, and Meet Fresh. Housing, office, and a new Residence Inn by Marriott are available to support the thriving area. Benihana, Bowlmor, and Ice Center Cupertino also serve as long-time anchors.

The construction of new retail and commercial development strengthens existing popular venues in Cupertino, including The Marketplace. The Marketplace has a variety of stores and restaurants popular with students, families, and working professionals. They include Galpao Gaucho, Daiso, Marukai Groceries, Harumi Sushi, La Patisserie Bakery, Beard Papa’s, Legend’s Pizza, Merlion Restaurant, Icicles, Kong’s Tofu & BBQ, Rori Rice, One Pot Shabu Shabu, Olarn Thai, and Erik’s DeliCafé to name a few.

Cupertino Village is undergoing renovations to upgrade existing buildings, construct new buildings, parking, and open-courtyard space. The shopping center is home to 99 Ranch Market, Duke of Edinburgh Pub & Restaurant, JSJ Street Kitchen, Kira Kira Beauty, MOD Pizza, Ten Ren Tea, Fantasia Coffee & Tea, Yoga Wave, Happy Lemon, Joy Luck Palace, Kee Wah Bakery, and many other Asian restaurants, bakeries, and shops.

Cupertino features many other retail opportunities, including TJ Maxx and Home Goods, Whole Foods, Target, Party City, and over 180 restaurants to serve residents and the local workforce. There are now seven hotels providing over 1,000 rooms, to serve the area: The Aloft Cupertino, Cupertino Hotel, Hilton Garden Inn, Juniper Hotel operated by Curio, Marriott Courtyard, the Residence Inn by Marriott, and the newest addition is the Hyatt House.

The redevelopment of the Homestead Square Shopping Center, located at Homestead Road and De Anza Boulevard, includes a 24-hour Safeway, Ulta Beauty, Ross Stores, Stein Mart, Pet Club, Michael’s, Rite Aid, FedEx, and numerous restaurants, such as Fish’s Wild, Pho Hoa Noodle Soup, Yayoi Teishoku Japanese Restaurant, Starbucks, and Chipotle.

Apple completed construction of its new corporate campus, Apple Park, which includes approximately 2.8 million square feet of office and R&D space north of Highway 280 between Wolfe Road and Tantau Avenue. A state-of-the-art Visitors Center, Observation 193
CC 05-19-2022
193 of 1613
Deck, flagship retail store and café are open to the public seven days a week. 2020 City Profile
The City of Cupertino operates as a general law city with a City Council-City Manager form of government. Five council members serve four year, overlapping terms, with elections held every two years. The Council meets twice a month on the first and third Tuesday at 6:45 p.m. in Cupertino Community Hall. The meetings can be viewed on the City website.

The City has 197.75 authorized full-time benefited employee positions. Departments include:
• City Council & Commissions
• Administration (City Manager, City Clerk, City Attorney) • Innovation Technology (GIS, Infrastructure, Applications) • Administrative Services (Finance, Human Resources)
• Parks and Recreation (Business and Community Services, Recreation and Education, Sports, Safety, and Outdoor Recreation)
• Community Development (Planning, Building, Housing Services, Code Enforcement) • Public Works (Environmental Programs, Developmental Services, Service Center, Grounds, Streets, Trees and Right of Way, Facilities and Fleet, Transportation, Storm Drain Management)
• Public Safety services are provided by the Santa Clara County Sheriff’s Department and the Santa Clara County Fire District.

Assisting the City Council are several citizen advisory commissions and one committee including:
• Audit Committee
• Fine Arts Commission
• Housing Commission
• Library Commission
• Parks and Recreation Commission
• Planning Commission
• Public Safety Commission
• Sustainability Commission
• Teen Commission
• Technology, Information and
Communication Commission
The Commissioners are appointed by Council and vacancies are announced so that interested residents can apply for the positions. For more information, visit cupertino.org/commissions.

Housing
Based on data from Corelogic the median sales price for an existing single-family home was $2,080,000 in February 2020. For housing programs in Cupertino, please see “Programs & Applications.”
Community Health Care Facilities
Cupertino is served by the Cupertino Medical Clinic, NovaCare Occupational Health Services.

Nearby hospitals include Kaiser Permanente Medical Center in Santa Clara, El Camino Hospital in Mountain View, O’Connor Hospital in San Jose, Community Hospital of Los Gatos, Stanford Hospital in Palo Alto, and the Saratoga Walk-in Clinic in Saratoga. 194
CC 05-19-2022
194 of 1613
Utilities
Gas & Electric Pacific Gas and Electric, 800-743-5000
Phone AT&T residential service, 800-894-2355
AT&T business service, 800-750-2355
Cable Comcast, 800- 945-2288
Solid Waste & Recycling Recology, 408-588-7200
Water San Jose Water Company, 408-279-7900
California Water Service, 650-917-0152
Sewer Service Cupertino Sanitary District, 408-253-7071 Tax Rates and Government Services
Residential, commercial, and industrial property is appraised at full market value as it existed on March 1, 1975, with increases limited to a maximum of 2% annually. Property created or sold since March 1, 1975 bears 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, and other taxing agencies. Assessed valuations and tax rates are published annually after July 1.

Assessed Valuation (Secured and Unsecured)
Cupertino: $26,013,180,424 (7/19)
County: $516,068,803,614 (7/19)
Retail Sales Tax Distribution
Agency Sales Tax Distribution
• State 6.000%
• VTA 1.125%
• City of Cupertino 1.000%
• County General Purpose 0.625%
• County Transportation 0.250%
Total: 9.000%
Transportation
Rail: The CalTrain station is four miles north of Cupertino. The Amtrak station is 10 miles south.

Air: The San Francisco International Airport is located roughly 30 miles north, and the Mineta San Jose International Airport is located approximately 11 miles south.

Bus: Cupertino is served by the Santa Clara Valley Transportation Authority. The routes listed below pass through the City. For Cupertino-specific schedules and maps visit their online website:

Route 23 San Jose – Mountain View/Palo Alto
Route 25 San Jose – De Anza College
Route 26 Eastridge – Lockheed
195
CC 05-19-2022
195 of 1613
Route 36 East San Jose – Vallco
Route 51 Vallco – Moffett/Ames
Route 53 Westgate – Sunnyvale
Route 55 De Anza – Great America
Route 81 East San Jose – Vallco
Express 101 Camden/Branham – Palo Alto
Express 501 Palo Alto – I.B.M Bailey
Car: The City of Cupertino is in the heart of the world-renowned Silicon Valley. The major highway transportation facilities are Interstate Route 280 and State Route 85 freeways. The City is linked internally by several principal arterials and Santa Clara County expressways. Principal arterials are De Anza Boulevard, Stevens Creek Boulevard, and Wolfe Road. Nearby expressways are Lawrence Expressway and Foothill Expressway.

Sister Cities
City of Cupertino recognizes the value of developing people-to-people contacts by strengthening the partnerships between the city and its four sister cities of Copertino, Italy; Hsinchu, Taiwan; Toyokawa, Japan, and Bhubaneswar, India. Cupertino’s Sister City partnerships have proven successful in fostering educational, technical, economic, and cultural exchanges. Over the years, there have been many delegations visiting both the cities as well as many local students participating in annual student exchange programs.

Education
________________________________________________________________________________________________________________ Winners of numerous state and national awards for excellence, Cupertino’s schools are widely acknowledged as models of quality instruction.

Cupertino Union School District serves over 18,000 students in a 26 square mile area that includes Cupertino and portions of five other cities. The district has 20 elementary schools and five middle schools, including several choice programs. Eighteen schools have received state and/or national awards for educational excellence.

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 standards-based system of education and is nationally recognized for leadership in the use of technology as an effective tool for learning. Quality teaching and parent involvement are the keys to the district’s success.

The Fremont Union High School District serves 10,000 students in a 42 square mile area covering all of Cupertino, most of Sunnyvale, and portions of San Jose, Los Altos, Saratoga, and Santa Clara. The five high schools of the district have garnered many awards and recognition based on both the achievement of students and the programs designed to support student 196
CC 05-19-2022
196 of 1613
achievements. Many high schools in the district exceed their established achievement targets for the State Academic Performance Index. District students are encouraged to volunteer and provide service to organizations within the community. During their senior year, if students complete 80 hours of service to a non-profit community organization, they are recognized with a “Community Service Award” medal that may be worn at their graduation ceremonies.

Building on its tradition of excellence and innovation, De Anza 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.

De Anza 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 customized training arranged by employers. Several De Anza programs encourage economic development through college credit courses, short-term programs, services for manufacturers, technical assistance, and/or recruitment and retention services.

Programs & Applications
Community Outreach Programs
Leadership 95014
Leadership 95014 is a program designed by the City of Cupertino, Wilfred Jarvis Institute, and other local sponsors to offer an exciting adult program that is guaranteed to enhance the participants’ leadership skills. The ten full-day sessions feature inside looks at local governments, the social sector, local non-profit organizations, and educational institutions. This 9-month program is offered annually, September to May, and applications can be found online.

Neighborhood Block Leader Program
Good neighborhoods are those where neighbors work together on common issues and look out for each other. Block leaders take extra steps to connect neighbors and build community, making our neighborhoods safer and more harmonious. The Block Leader Program teaches residents how to get to know their neighbors and how to organize activities so neighbors can more easily communicate with each other. Block leaders are vital links between City Hall and the neighborhoods, and leaders gain the inside track on neighborhood development activities.

Neighborhood Watch
Neighborhood Watch is a crime prevention program that enlists the active participation of citizens in cooperation with law enforcement to reduce crime in our communities. The program involves: neighbors getting to know each other and working together in a program of mutual assistance; citizens being trained to recognize and report suspicious activities in their 197
CC 05-19-2022
197 of 1613
neighborhoods; and implementation of crime prevention techniques such as home security and operation identification. To organize a Neighborhood Watch program in your neighborhood, please contact the Neighborhood Watch Coordinator at 408-777-3177. eCAP
Email Community Alert Program (eCAP) was created by the Santa Clara County Sheriff’s Office to prevent and reduce crime by raising community awareness, minimizing opportunities for crime, and increasing the possibility of solving crimes with the public’s help. Cupertino residents may voluntarily register their email addresses with the Sheriff’s Office for community alert messages. Citizens can sign-up at a Neighborhood Watch meeting or log-on to the City of Cupertino’s eCAP online registration.

Affordable Housing: BMR (Below Market Rate) Program
The City of Cupertino requires 15% of all new construction be affordable to households below 120% of the County median income. Rental units are affordable to very low and low-income households while ownership units are affordable to median and moderate-income households.

The City of Cupertino contracts with West Valley Community Services (WVCS) to screen and place qualified households in most of the city’s BMR units. WVCS maintains a waiting list of interested persons for these BMR units. If interested, please call 408-255-8033. More information can be found online.

Smart Phone Applications
Mobile 95014
City of Cupertino’s Mobile 95014 app offers latest listing of Cupertino news and events as well as local parks, schools, and recreation offerings in the city. This app showcases environmental services and community services such as Block Leaders and Neighborhood Watch programs. Users can learn about public safety and contact City Council members and City officials. The app also offers links to Cupertino’s social media sites.

Trees 95014
Trees 95014 is an iPhone/iPad and Android app which provides details about the city-planted trees in Cupertino. Users can search for trees by street name or by current location. The search results show the picture of the tree and details such as location, height, diameter, and species.

Cupertino residents can also sign up their tree, name their tree, and request tree service through this app.

Eats 95014
Eats 95014 is the local restaurant app that showcases Cupertino’s dining options such as restaurants, grocery stores, farmers’ markets, and vineyards. The app provides information on the services offered at such eating places including store hours, parking information, noise level, directions, and website link.
198
CC 05-19-2022
198 of 1613
Ready 95014
Ready 95014 is an app that puts safety information into the hands of Cupertino residents. Steps to prepare and respond to emergencies including earthquakes, floods, fires, and pandemics are outlined in an easy-to-understand format. The app also streams Cupertino’s own AM radio station (1670 AM) and has a map of the City’s Area Resource Centers, satellite locations opened after disasters to provide public assistance.

Website Applications
Cupertino.org/ShopAndDine
This interactive website app offers users mapping features of current Cupertino businesses and restaurants.

Community Statistics
Facts and Figures1
1 Claritas 2020 Estimates and California Statewide Direct Primary Election June 5, 2018 Population in City Limits 66,762
Average Household Income $242,777
Average Age 40.4
Registered Voters 28,539
Democrats 11,113
Republicans 4,648
American Independent 402
Other 218
No Political Party Designated 12,158
199
CC 05-19-2022
199 of 1613
Top 25 Sales Tax Producers
Fourth Quarter 2019 in Alphabetical Order
7 Eleven BJ’s Restaurant &
Brewhouse
Lazy Dog Cafe TJ Maxx
99 Ranch Market California Dental Arts Rotten Robbie Ulta Beauty Alexander’s Steak
House
Chevron Safeway Valero
Alliance Estel Group Seagate Technology Whole Foods Market Apple Galpao Gaucho Shane Company
Argonaut Window & Door Haidilao Hot Pot Shell
Benihana Insight Direct Target

200
CC 05-19-2022
200 of 1613
Community and Recreation Services
Blackberry Farm
Blackberry Farm has been upgraded and restored to improve the natural habitat for native trees, animals, and fish. Improvements to the park include construction of a new ticket kiosk, replastered pools, a new water slide, bocce ball, horseshoe courts, and numerous upgrades to the west bank picnic area. The park is located at 21979 San Fernando Avenue. Telephone: 408-777- 3140.

The Blackberry Farm Golf Course is located at 22100 Stevens Creek Boulevard. Telephone: 408- 253-9200.

The Quinlan Community Center
The City of Cupertino’s Quinlan Community Center is a 27,000 square foot facility that provides a variety of recreational opportunities.

Most prominent is the Cupertino Room - a multi-purpose room that can accommodate 300 people in a banquet format.

Telephone: 408-777-3120.

Cupertino Sports Center
The Sports Center is a great place to meet friends. The facility features 17 tennis courts, complete locker room facilities, and a fully-equipped fitness center featuring free weights, Cybex, and cardio equipment. A teen center and a child-watch center are also included. The center is located at the corner of Stevens Creek Boulevard and Stelling Road. Telephone: 408- 777-3160.

Cupertino Senior Center
The Senior Center provides a welcome and friendly environment for adults over age 50. There is a full calendar of opportunities for learning, volunteering, and enjoying life. There are exercise classes, computer lab classes, and English as a second language classes, and cultural and special interest classes. The center also coordinates trips and socials.

The Senior Center is located at 21251 Stevens Creek Boulevard and is open Monday through Friday, 8 a.m. to 5 p.m. Telephone: 408-777-3150.

Civic Center and Library
The complex has a 6,000 square foot Community Hall, plaza with fountain, trees, and seating areas. City Council meetings, Planning Commission sessions, and Parks and Recreation Commission sessions are held in the Community Hall.

The 54,000 square foot library continues to be one of the busiest libraries in the Santa Clara County Library system. For more information, call 408-446-1677. 201
CC 05-19-2022
201 of 1613
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. The Junior Nature Museum, which features small live animal exhibits and dispenses information about bird, animal, and plant species of the area, is also located at the ranch. The newly opened Environmental Education Center has Open House hours on Friday, Saturday, and Sunday. McClellan Ranch is located at 22221 McClellan Road. Telephone: 408-777-3120.

Things to Do and See
Euphrat Museum of Art
The highly regarded Euphrat Museum of Art, at its new location next to the new Visual Arts and Performance Center at De Anza College, presents one-of-a-kind exhibitions, publications, and events reflecting the rich diverse heritage of our area. The Museum prides itself on its changing exhibitions of national and international stature emphasizing Bay Area artists.

Museum hours are 10 a.m. – 3 p.m. Monday through Thursday. Telephone: 408-864-5464 Apple Park Visitor Center, Store & Café
A state-of-the-art Visitors Center, Observation Deck, flagship retail store and café are open to the public seven days a week. The Visitor Center is located at 10600 N Tantau Avenue.

Free parking is available. For more information, visit the website at www.apple.com/retail/appleparkvisitorcenter or call 408-961-1560.

Fujitsu Planetarium
The Fujitsu Planetarium on the De Anza College campus is a must-visit Cupertino facility for stargazers. It hosts a variety of planetarium shows and events, including educational programs for school groups and family astronomy evenings. For more information, visit the website at http://planetarium.deanza.edu or call 408-864-8814.

Cupertino Historical Society
The Cupertino Historical Society was founded in 1966 by a group of 177 longtime residents and is dedicated to the preservation and exhibition of the city’s history. Their museum, located at the Quinlan Community Center, develops and expands the learning opportunities that it offers to the ethnically diverse community of the City of Cupertino. Telephone: 408-973-1495.

Farmers’ Markets
There are two farmers’ markets located in the City of Cupertino. One is held on Fridays from 8:30 a.m. to 1:00 p.m. at Creekside Park located at 10455 Miller Avenue, and the other is held 202
CC 05-19-2022
202 of 1613
every Sunday from 9:00 a.m. to 1:00 p.m. at The Oaks Shopping Center, 21275 Stevens Creek Blvd.

California History Center
The California History Center and Foundation is located on the De Anza College campus. The center has published 37 volumes on California history and has a changing exhibit program. The center’s Stocklmeir Library Archives boast a large collection of books, pamphlet files, oral history tapes, videotapes, and a couple thousand student research papers. The library’s collection is for reference only. Heritage events focusing on California’s cultural and/or natural history are offered by the center each quarter. For more information, call 408-864-8987. The center is open September through June, Tuesday through Thursday, from 9:30 a.m. to noon and 1:00 p.m. to 4:00 p.m.

Local Wineries
The Santa Cruz Mountains has played a pivotal role in the history of winemaking in California, with roots going back over 100 years, and including legendary winemakers such as Paul Masson, Martin Ray, David Bennion (Ridge), and David Bruce. The Santa Clara Valley Wine Trail features wineries in the southern portion of Santa Clara County, including Cupertino.

Take some time to enjoy Cupertino-based wineries: Fellom Ranch Vineyards, Naumann Vineyards, Picchetti Winery, R&W Vineyards, Ridge Vineyards, and Vidovich Vineyards, as well as the breathtaking scenery of the surrounding foothills.

Photo courtesy of Ridge Vineyards
203
CC 05-19-2022
203 of 1613
Preliminary Draft

CITY OF CUPERTINO,

CALIFORNIA

SINGLE AUDIT
Year ended June 30, 2021
204
CC 05-19-2022
204 of 1613
Preliminary Draft

CITY OF CUPERTINO
Cupertino, California

SINGLE AUDIT
Year ended June 30, 2021

CONTENTS
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL

REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS............................................................................................ 1 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE;

AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE ........................................................................................ 3

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS ................................................................... 5 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS ............................................... 6 SCHEDULE OF FINDINGS AND QUESTIONED COSTS ....................................................................... 7 SCHEDULE OF PRIOR YEAR FINDINGS ............................................................................................... 8 205
CC 05-19-2022
205 of 1613
Preliminary Draft
Crowe LLP
Independent Member Crowe Global
(Continued)
1 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and City Council
City of Cupertino, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Cupertino, California (the City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated November 16, 2021.

Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weakness. However, material weaknesses may exist that have not been identified.
206
CC 05-19-2022
206 of 1613
Preliminary Draft
2 Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Crowe LLP
Costa Mesa, California
April 8, 2022
207
CC 05-19-2022
207 of 1613
Preliminary Draft
Crowe LLP
Independent Member Crowe Global
(Continued)
3 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR
EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF

FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE
To the Honorable Mayor and City Council
City of Cupertino, California
Report on Compliance for Each Major Federal Program
We have audited the City of Cupertino, California (the City’s) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of City’s major federal programs for the year ended June 30, 2021. The City’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the City’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City’s compliance.

Opinion on Each Major Federal Program
In our opinion, the City of Cupertino complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2021.
208
CC 05-19-2022
208 of 1613
Preliminary Draft
4 Report on Internal Control over Compliance
Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated November 16, 2021, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.

Crowe LLP
Costa Mesa, California
November 16, 2021
209
CC 05-19-2022
209 of 1613
Preliminary Draft

CITY OF CUPERTINO, CALIFORNIA

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year ended June 30, 2021
See accompanying notes to schedule of expenditures of federal awards. 5 Federal Agreement Number
Assistance / Pass-Through Amount
Federal Grantor/ Listing Identifying Federal Provided to Pass-Through Grantor/Program or Cluster Title Number Number Expenditures Subrecipients U.S. Department of Housing and Urban Development
CDBG – Entitlement Grants Cluster
Community Development Block Grants/Entitlement Grants 14.218 B20MC060057 $ 360,438 $ 288,981 COVID-19 - CDBG 14.218 N/A 229,017 185,000
Total U.S. Department of Housing and Urban Development 589,455 473,981 U.S Department of Treasury
Passed through the State of California Controller's Office COVID-19 - Coronavirus Relief Fund 21.019
Budget Act of 2020,
Control Section 11.90 735,259 - Total U.S. Department of Treasury 735,259 - U.S. Department of Transportation Passed through the State of California Department of Transportation Highway Planning and Construction Cluster
Highway Planning and Construction 20.205 BPMP-5318(029) 13,656 - Highway Safety Improvement Program (HSIP) 20.205 HSIPL-5318 (030) 18,866 - 750 OBAG 20.205 STPL 5318(031) 701,250 - Total U.S. Department of Transportation 733,772 - Total Expenditures of Federal Awards $ 2,058,486 $ 473,981 210
CC 05-19-2022
210 of 1613
Preliminary Draft

CITY OF CUPERTINO, CALIFORNIA

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year ended June 30, 2021
6 NOTE 1 - BASIS OF PRESENTATION
The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the City of Cupertino, California (the City) for the year ended June 30, 2021. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the City’s operations, it does not present the financial position, changes in net position, or cash flows of the City.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the principles contained in the Uniform Guidance wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. The City has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance.

NOTE 3 – MAJOR PROGRAMS
In accordance with the Uniform Guidance, major programs for the City are individual programs or a cluster of programs determined by using a risk-based analysis. The threshold for distinguishing Type A and Type B programs was $750,000 and $187,500, respectively. Awards from the CDBG-Entitlement Grants Cluster and Highway Planning and Construction Cluster are designated as clusters of programs.

NOTE 4 - NON-CASH ASSISTANCE
The City had no non-cash assistance during the year.

NOTE 5 - FEDERAL INSURANCE
The City had no Federal Insurance in force during the year. 211
CC 05-19-2022
211 of 1613
Preliminary Draft

CITY OF CUPERTINO, CALIFORNIA

SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year ended June 30, 2021
7 SECTION I - SUMMARY OF AUDITOR’S RESULTS
Financial Statements
Type of report the auditor issued on whether
the financial statements audited were prepared
in accordance with GAAP: Unmodified
Internal control over financial reporting:

Material weakness(es) identified? Yes X No
Significant deficiency(ies) identified? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards
Internal control over major federal programs:

Material weakness(es) identified? Yes X No
Significant deficiencies identified not
considered to be material weaknesses? Yes X None reported Type of auditor’s report issued on compliance for
major federal programs: Unmodified
Any audit findings disclosed that are required to be
reported in accordance with 2 CFR 200.516(a)? Yes X No
Identification of major federal programs:

Federal Assistance Listing Number Name of Federal Program or Cluster

20.205 Highway Planning and Construction Cluster

21.019 COVID-19 - Coronavirus Relief Funding
Dollar threshold used to distinguish between
type A and type B programs: $ 750,000
Auditee qualified as low-risk auditee? Yes x No
SECTION II – FINANCIAL STATEMENT FINDINGS
None.

SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None.
212
CC 05-19-2022
212 of 1613
Preliminary Draft

CITY OF CUPERTINO, CALIFORNIA

SCHEDULE OF PRIOR YEAR FINDINGS
Year ended June 30, 2021
8 None.
213
CC 05-19-2022
213 of 1613
Preliminary Draft

REPORT OF INDEPENDENT ACCOUNTANTS ON APPLYING AGREED-UPON

PROCEDURES
To the Honorable Mayor and City Council
City of Cupertino, California
10300 Torre Avenue
Cupertino, California 95014-3202
Ladies and Gentlemen:

We have performed the procedures enumerated below, which were agreed to by the Honorable Mayor and City Council of the City of Cupertino, California (the “City”) on the Appropriations Limit Worksheet (Worksheet), related to the City’s compliance with Section 1.5 of Article XIIIB of the California Constitution during the period ending June 30, 2021. Management is responsible for compliance with Section 1.5 of Article XIIIB of the California Constitution. The sufficiency of these procedures is solely the responsibility of the City. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.

Refer to Appendix A.

This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on compliance with Section 1.5 of Article XIIIB of the California Constitution. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

This report is intended solely for the information and use of the Honorable Mayor and the City Council and is not intended to be and should not be used by anyone other than these specified parties.

Crowe LLP
Costa Mesa, California
January 25, 2022
214
CC 05-19-2022
214 of 1613
Preliminary Draft
APPENDIX A – SCHEDULE OF PROCEDURES AND FINDINGS
The procedures to be performed were as follows:

1. Procedure: We obtained the Worksheet provided by the City and determined that the 2020-2021 Limit amounting to $109,062,934 and annual adjustment factors were adopted by Resolution 20-086 of the Honorable Mayor and City Council. We also determined that the population and inflation factors were selected by a recorded vote of the Honorable Mayor and City Council.

Result: The procedures were performed without exception.

2. Procedure: We recomputed the 2020-2021 Appropriations Limit by multiplying the 2019-2020 Appropriations Limit by the adjustment factors.

Result: The procedures were performed without exception.

3. Procedure: For the Worksheet, we agreed the Per Capita Income, County and City Population Factors to California State Department of Finance Worksheets.

Result: The procedures were performed without exception. 215
CC 05-19-2022
215 of 1613

REPORT OF INDEPENDENT ACCOUNTANTS ON APPLYING AGREED-UPON

PROCEDURES
To the Honorable Mayor and City Council
City of Cupertino, California
10300 Torre Avenue
Cupertino, California 95014-3202
Ladies and Gentlemen:

We have performed the procedures enumerated in Appendix A on the 2019 Clean Water and Storm Protection Fee of the City of Cupertino, California (the “City”). The City’s management is responsible for the 2019 Clean Water and Storm Protection Fee.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of assisting users in understanding the 2019 Clean Water and Storm Protection Fee. We make no representation regarding the appropriateness of the procedures either for the purpose for which this report has been requested or for any other purpose. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes. An agreed-upon procedures engagement involves performing specific procedures that the engaging party has agreed to and acknowledged to be appropriate for the intended purpose of the engagement and reporting on findings based on the procedures performed.

The procedures and the associated findings are contained in Appendix A.

We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the 2019 Clean Water and Storm Protection Fee. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of the City and is not intended to be and should not be used by anyone other than these specified parties. 216
CC 05-19-2022
216 of 1613
Crowe LLP
Costa Mesa, California
February 24, 2022
217
CC 05-19-2022
217 of 1613
APPENDIX A – SCHEDULE OF PROCEDURES AND FINDINGS
The procedures to be performed were as follows:

1. Procedure: We selected 100% of the revenue transactions recorded in the Environmental Management/Clean Creeks Special Revenue Fund (Fund 230) for the period January 1, 2020 thru December 31, 2020 and performed the following procedures:
a. Observed the Clean Water and Storm Protection fees have been deposited and recorded in Fund 230 per Section 3.38.160A of the Cupertino Municipal Code. b. Obtained the County tax remittance statement for each specific receipt (as provided by the County) and observed the cash collected in total on the statement agrees to the amount deposited in Fund 230 in accordance with Section 3.38.070 of the Cupertino Municipal Code, which specifies that the City elects to have fees collection on the tax roll in the same manner as property taxes.
c. Obtained the City support <e.g., schedule of fees billed to property owners in situation where the fee was not included in the annual tax assessment or Schedule> and observed the cash collected in total per the City’s Schedule agrees to the amount deposited in Fund 230 in accordance with Section 3.38.090 of the Cupertino Municipal Code, which specifies that the City Finance Department bills out fees to property owners in situations where the fee was not included in the annual tax assessment.

Finding: The procedure was performed with no exceptions noted.

2. Procedure: We selected 60% of the non-payroll expenditure transactions recorded in Fund 230 for the period January 1, 2020 thru December 31, 2020 and performed the following procedures:
a. Obtained the City invoices and purchase orders for the expenditures selected, and observed the description of expenditures on the invoice and purchase order, as well as the assigned object code on the purchase order from the City were for allowed purposes per Section

3.38.010B of the Cupertino Municipal Code, which specifies allowable activities are defined as acquisition, construction, reconstruction, maintenance, and operation of the storm drainage system of the City or related green infrastructure or other activities required by the City’s NPDES permits, to repay principal and interest on any bonds which may hereafter be issued for said purposes, to repay loans or advances which may hereafter be made for said purposes. b. Obtained the City invoices and purchase orders for the nonpayroll expenditures selected and observe the description of expenditures on the invoice and purchase order were for allowed purposes per Section 3.38.0160A and 3.38.0160B of the Cupertino Municipal Code. Section

3.38.160A of the Cupertino Municipal Code specifies allowable from the overall perspective as direct costs and administrative costs, while 3.38.160B of the Cupertino Municipal Code specifically defines direct costs as wages and salaries and costs of employee fringe benefits and mileage reimbursement attributable to said collection activities, with administrative costs as all costs for computer service, materials, postage supplies and equipment. c. Obtained the City documentation for all refunds issued and observe the Finance Director authorized the refund through written approval in accordance with Section 3.38.170 of the Cupertino Municipal Code.

Finding: The procedure was performed with no exceptions noted.

3. Procedure: We sampled one pay period (selected on a haphazard basis) between January 1, 2020 and December 31, 2020 to recompute employee allocation in the general ledger for activity recorded in Fund 230 and compared to the City’s calculations as follows:
a. Sampled at least 10% of the time cards of applicable employees charged in Fund 230 to the selected payroll period (selected on a haphazard basis) and observe written approval by supervisors.
b. Obtained documentation of the general ledger distribution for the payroll period selected and recalculate the distribution and agree the results to the budgeted allocation and the functional allocation matrix established by management. The budgeted allocation shall be specified by City-established allocation worksheets used to estimate the amount of actual time spent on the acquisition, construction, reconstruction, maintenance, and operation of the storm drainage 218
CC 05-19-2022
218 of 1613
system of the City or related green infrastructure or other activities required by the City’s NPDES permits.

Finding: The procedure was performed with no exceptions noted. 219
CC 05-19-2022
219 of 1613
Preliminary Draft

REPORT OF INDEPENDENT ACCOUNTANTS ON APPLYING AGREED-UPON

PROCEDURES
To the Honorable Mayor and City Council
City of Cupertino, California
10300 Torre Avenue
Cupertino, California 95014-3202
Ladies and Gentlemen:

We have performed the procedures enumerated below, which were agreed to by the Honorable Mayor and the City Council of the City of Cupertino, California (the “City”), on the Investment Policy of the City. The City’s management is responsible for the Investment Policy. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures enumerated below either for the purpose for which this report has been requested or for any other purpose.

Refer to Appendix A.

This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the Investment Policy. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

This report is intended solely for the information and use of the Honorable Mayor and City Council and is not intended to be and should not be used by anyone other than these specified parties.

Crowe LLP
Costa Mesa, California
January 27, 2022
220
CC 05-19-2022
220 of 1613
Preliminary Draft
APPENDIX A – SCHEDULE OF PROCEDURES AND FINDINGS
The procedures to be performed were as follows:

1. Procedure: We obtained the Investment Policies (policies), dated May 2020, approved by the Honorable Mayor and the City Council. We compared the investments authorized by the policy with the investments listed in the March 2021 Treasurer’s Investment Report to determine if all investment types are allowed by the investment policy.

Result: The procedure was performed with no exceptions noted.

2. Procedure: We compared the City’s Investment Policy with California Government Code Section 53601 to determine whether the City’s Investment Policy complied with California Government Code Section 53601.

Result: The procedure was performed with no exceptions noted.

3. Procedure: We compared the March 2021 Treasurer’s Investment Report with California Government Code Section 53646 to ensure that the March 2021 Treasurer’s Investment Report complied with California Government Code Section 53646.

Result: The procedure was performed with no exceptions noted.

4. Procedure: We inquired of the Finance Manager whether investment performance statistics and activity reports were generated on a quarterly basis for presentation to the Oversight (Audit) Committee, City Manager and the Honorable Mayor and the City Council, as required by the Investment Policy.

Result: The procedure was performed with no exceptions noted.

5. Procedure: We inquired of the Finance Manager and documented our understanding of the wire transfer procedures.

Result: The procedure was performed with no exceptions noted. We noted that the City’s wire transfer procedures indicate that if a wire is initiated by one of the City’s accountants, then the Finance Manager has the authority to approve the transfer, pending that the applicable expenses and reasoning/need for the wire are appropriate relating to the request. If the Finance Manager initiates the wire, then the Director of Administration can approve the wire transfer pending the requirements noted above.

6. Procedure: We randomly selected three investment sales/maturities from various quarters of Treasurer’s Reports and performed the following:
• Traced investment type to the supporting broker’s confirmation and the Chandler Report. • Traced the maturity date to the supporting broker’s confirmation and the Chandler Report. • Traced the amount of the investment sold to the supporting broker’s confirmation and the Chandler Report.

Result: The procedure was performed with no exceptions noted.

7. Procedure: We randomly selected two investments purchased (one as of October 2020 and one as of March 2021) for fiscal year 2021 from the City’s investments files and performed the following:
• Trace the purchased investments to the corresponding Treasurer’s Investment Report for the month in which the investments were acquired.
• Agree the amount, terms and interest rate to the Treasurer’s Investment Report. 221
CC 05-19-2022
221 of 1613
Preliminary Draft
• Verify that the investment type is authorized by the Investment Policy by comparing the type of investment to the allowable types per the Investment Policy.

Result: The procedure was performed with no exceptions noted.

8. Procedure: We obtained the Wells Fargo Bank Market/Cost Value Comparison Report, the City’s third party investment safekeeping custodian, for March 2021 and traced the following from each investment listed in the Wells Fargo statement to the City’s March 2021 Treasurer’s Investment Report:
• Investment description
• Market value
• Purchase date
• Maturity date
• Coupon rate
Result: Per observation of the Wells Fargo Bank Market/Cost Value Comparison report, purchase dates are not presented and could not be agreed to the City’s Treasury Investment Report. This section of the procedure could not be performed. The remainder of the procedure was performed with no exception.

9. Procedure: We traced three randomly selected Federal Agency investments that were purchased in fiscal 2021 and traced the reported ratings to Moody’s rating online.

Result: The procedure was performed with no exception noted.

10. Procedure: For the March 2021 Treasurer’s Investment Report, we re-computed or obtained third-party corroborating evidence of the correct listing of:
• Average Yield
• Market value
• Purchase date
• Duration
Result: We obtained the March 2021 Treasurer’s Investment Report prepared by Chandler Asset Management, Inc. and the Wells Fargo Market/Cost Value Comparison. The procedure was performed with no exceptions noted.
222
CC 05-19-2022
222 of 1613
Preliminary Draft

1. To the Honorable Mayor and City Council
City of Cupertino, California
In planning and performing our audit of the financial statements of the City of Cupertino, California (“City”) as of and for the year ended June 30, 2021, in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, we considered the City’s internal control over financial reporting (“internal control”) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified certain matters that we wish to communicate to you. Matters communicated in this letter are classified as follows:
 Deficiency – A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis.

Immaterial Noncompliance over Procurement – Highway
Planning and Construction Cluster
Deficiency
Control Deficiency: Per the Part III of the Annual Compliance Supplement, the City's procurement policies and procedures are required to conform to 2 CFR 200.318 of the Uniform Guidance, which detail the federal procurements requirements.

The City's documented procurement policies provide specific references to state and local procurement requirements. However, there are no references to federal requirements under the Uniform Guidance.

Context: Although the City’s documented procurement policies and procedures do not specifically reference the federal requirements, the results of our compliance testing did not note any specific noncompliance with the applicable federal regulations.

Potential Effect: As the City's procurement policies and procedures do not reference the Uniform Guidance, the City may be susceptible to noncompliance with federal requirements.

Recommendation: We understand that the City has been updating its policies and procedures related to procurement as part of a pre-existing City-wide project. We recommend that the City continue its efforts to update its policies and procedures and ensure that applicable federal requirements are reflected in the updated documentation.

The purpose of this letter is solely to describe the scope of our testing of internal control over financial reporting and compliance, and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. This letter is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Accordingly, this letter is not suitable for any other purpose. 223
CC 05-19-2022
223 of 1613
Preliminary Draft

2. Crowe LLP
Costa Mesa, California
March xx, 2022
224
CC 05-19-2022
224 of 1613

CITY OF CUPERTINO
Agenda Item
22-10862 Agenda Date: 5/19/2022
Agenda #: 9.

Subject: Consider accepting the City Investment Policy (Continued from May 17, 2022) Adopt Resolution No. 22‐058 accepting the City Investment Policy CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™225
CC 05-19-2022
225 of 1613

CITY COUNCIL STAFF REPORT
Meeting: May 19, 2022
Subject
Consider accepting the City Investment Policy.

Recommended Action
Adopt Resolution No. 22‐XXX accepting the City Investment Policy.

Discussion
On an annual basis, the Audit Committee reviews the Cityʹs investment policy before it is presented to City Council.

The investment policy is the foundation of the Cityʹs investment goals and priorities. It can help protect the Cityʹs assets if it is carefully researched, effectively drafted, and regularly reviewed to assure that it continues to meet the Cityʹs investment objectives.

The existence of an approved investment policy demonstrates that the City is performing its fiduciary responsibilities, thereby inspiring trust and confidence among the public that it serves.

The investment policy provides guidelines for the prudent investment of the Cityʹs temporary idle cash. It outlines the policies for maximizing the efficiency of the Cityʹs cash management system.

California Government Code section 53646(a)(2) states:
[T]he treasurer or chief fiscal officer of the local agency may annually render to the legislative body of that local agency and any oversight committee of that local agency a statement of investment policy, which the legislative body of the local agency shall consider at a public meeting. Any change in the policy shall also be considered by the legislative body of the local agency at a public meeting.

Assembly Bill 2853 (Chapter 889, Statutes of 2004) amended section 53646(a)(2) to make presentation of the investment policy to the City Council optional. While no longer 226
CC 05-19-2022
226 of 1613
required by Code, the City annually presents the investment policy to the Audit Committee before presenting it to City Council for approval.

In FY 2018‐19, the City selected Chandler Asset Management for investment management services through a Request for Proposal (RFP). Under the Cityʹs Treasurerʹs direction, Chandler Asset Management manages the Cityʹs investment portfolio in accordance with the Cityʹs investment objectives. The Cityʹs investment objectives, in order of priority, are to provide
 Safety to ensure the preservation of capital in the overall portfolio  Sufficient liquidity for cash needs
 A market rate of return consistent with the investment program The performance objective is to earn a total rate of return through a market cycle equal to or above the return on the benchmark index. To achieve the objective, Chandler Asset Management invests in high‐quality fixed‐income securities consistent with the Cityʹs investment policy and Code.

Chandler Asset Management reviewed the Cityʹs investment policy. The review of the policy focused on compliance with the statutes of Code that govern the investment of public funds and the inclusion of current best practices. There were no changes to Code for 2022. The Cityʹs policy continues to be effective as written.

Sustainability Impact
No sustainability impact.

Fiscal Impact
No fiscal impact.
_____________________________________
Prepared by:  Thomas Leung, Acting Finance Manager
Reviewed by: Kristina Alfaro, Director of Administrative Services and City Treasurer Approved for Submission by:  Jim Throop, City Manager
Attachments:

A – Draft Resolution
B – Investment Policy (redline)
227
CC 05-19-2022
227 of 1613
RESOLUTION NO. 22‐XXX

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CUPERTINO

ACCEPTING THE CITY INVESTMENT POLICY
WHEREAS, the City has available funds to invest in accordance with principles of sound treasury management; and
WHEREAS, the City invests funds in accordance with provisions of California Government Code Section 53600 et seq.; and
WHEREAS, the City’s Audit Committee reviewed and accepted the attached City Investment Policy on April 25, 2022.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Cupertino accepts the attached City Investment Policy dated May 19, 2022.

PASSED AND ADOPTED at a special meeting of the City Council of the City of Cupertino this 19th day of May 2022, by the following vote:

Vote                Members of the City Council
AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:
________
Darcy Paul, Mayor
City of Cupertino
________________________
Date
ATTEST:
________________________

Kirsten Squarcia, City Clerk
________________________
Date
228
CC 05-19-2022
228 of 1613
1 | Page
City Investment Policy
Citywide Policy Manual
Attachments: N/A
Effective Date:

May 19, 2022
Responsible Department:

Administrative Services
Related Policies & Notes:

Pension Investment Policy, OPEB Investment Policy
POLICY
Under authority granted by the City Council, the City Treasurer and Deputy Treasurer are responsible for investing the surplus funds of the City.

The investment of the funds of the City of Cupertino is directed to the goals of safety, liquidity and yield. The authority governing investments for municipal governments is set forth in the California Government Code, Sections 53600 et seq.

The primary objective of the investment policy of the City of Cupertino is SAFETY OF PRINCIPAL. Investments shall be placed in those securities as outlined by type and maturity sector in this document. Effective cash flow management and resulting cash investment practices are recognized as essential to good fiscal management and control. The City’s portfolio shall be designed and managed in a manner responsive to the public trust and consistent with state and local law. Portfolio management requires continual analysis and as a result the balance between the various investments and maturities may change in order to give the City of Cupertino the optimum combination of necessary liquidity and optimal yield based on cash flow projections.

SCOPE
The investment policy applies to all financial assets of the City of Cupertino as accounted for in the Annual Comprehensive Financial Report (ACFR). Policy statements outlined in this document focus on the City of Cupertino’s pooled, surplus funds, but will also apply to all other funds under the City Treasurer’s span of control unless specifically exempted by statute or ordinance. This policy is applicable, but not limited to all funds listed below:
 General Fund
 Special Revenue Funds
 Capital Project Funds
 Enterprise Funds
 Internal Service Funds
 Trust and Agency Funds
229
CC 05-19-2022
229 of 1613
2 | Page
 Any new fund unless specifically exempted
Investments of bond proceeds shall be governed by the provisions of the related bond indentures and/or cash flow requirements and therefore may extend beyond the maturity limitations as outlined in this document. Other post‐employment benefit (OPEB) and Pension trust investments are governed by California Government Code Sections 53620 through 53622 and trust documents.

The trusts are governed by separate investment policies entitled Investment Policy Statement City of Cupertino Investment Trust that were reviewed by the City of Cupertino Audit Committee on September 27, 2021 and October 25, 2021 and City Council on December 7, 2021.

PRUDENCE
Pursuant to California Government Code, Section 53600.3, all persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the Prudent Investor Standard:
“…all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard.

When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the Agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the Agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.”
It is the City’s intent, at the time of purchase, to hold all investments until maturity to ensure the return of all invested principal dollars. However, it is realized that market prices of securities will vary depending on economic and interest rate conditions at any point in time. It is further recognized that in a well‐diversified investment portfolio, occasional measured losses are inevitable due to economic, bond market, or individual security valuation fluctuations. These occasional losses must be considered within the context of the overall investment program objectives and the resultant long‐term rate of return. The City Treasurer and Deputy Treasurer, acting within the intent and scope of the investment policy and other written procedures and exercising due diligence, shall be relieved of personal responsibility and liability for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely manner and appropriate action is taken to control adverse developments.

OBJECTIVES
The primary objectives, in order of priority, of the City of Cupertino’s investment activities shall be:
230
CC 05-19-2022
230 of 1613
3 | Page
A. Safety of Principal
Safety of principal is the foremost objective of the City of Cupertino. Investments will be undertaken in a mannerthat seeks to ensure the preservation of capital in the overall portfolio.

To attain this objective, the City will diversify its investments by investing funds among a variety of securities with independent returns.

B. Liquidity
The City’s investment portfolio will remain sufficiently liquid to meet all operating requirements which might be reasonably anticipated and provide the City with adequate cash flows to pay its obligations overthe next six months. Additionally, the portfolio should consist largely of securities with active secondary resale markets.

C. Return
The City’s investment portfolio shall be designed with the objective of attaining a rate of return throughout budgetary and economic cycles, commensurate with Cupertino’s investment risk constraints and cash flow characteristics of the portfolio.

MAXIMUM MATURITIES
Maturities of investments will be selected based on liquidity requirements to minimize interest rate risk and maximize earnings. Investment of surplus funds shall comply with the maturity limits as set forth in the California Government Code 53600, et seq. Where this section does not specify a limitation on the term or remaining maturity at the time of the investment, no investment shall be made in any security that at the time of the investment has a term remaining to maturity in excess of five years, unless the Council has granted express authority to make that investment either specifically or as a part of an investment program approved by the Council no less than three months prior to the investment. Reserve funds may be invested in securities exceeding five years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the funds.

PERFORMANCE EVALUATION
Investment performance is continually monitored and evaluated by the City Treasurer.

Investment performance statistics and activity reports are generated on a quarterly basis for presentation to the oversight (audit) committee, City Manager and City Council. Yield on the City’s investment portfolio is of secondary importance compared to the safety and liquidity objectives described above. The City’s investment portfolio shall be designed to attain a market average rate of return through economic cycles. The Treasurer shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s quarterly report. The Treasurer shall select an appropriate, readily available index to use as a market benchmark.  Whenever possible, and consistent with risk limitations as defined herein and prudent investment principles, the Treasurer shall seek to augment return above the market average rate of return. The City may select alternative benchmarks for identified pools of City funds that have different objectives.

231
CC 05-19-2022
231 of 1613
4 | Page

DELEGATION OF AUTHORITY
Authority to manage the City’s investment program is derived from California Government Code, Sections 41006 and 53600 et seq. The Treasurer is responsible for investment management decisions and activities per City Council Resolution.

The Treasurer shall designate a staff person as a liaison/deputy in the event circumstances require timely action and the Treasurer is not present.

No officer or designee may engage in an investment transaction except as provided under terms of this policy and the procedures by the Treasurer and approved by the City Manager/Council.

The Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials.

If an investment adviser is retained by the City, the investment adviser, registered under the Investment Advisers Act of 1940, must have at least five yearsʹ  experience investing in the securities and obligations authorized by California Government Code 53601 subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, and with assets under management in excess of five hundred million dollars ($500,000,000). External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy.

The City’s overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that in a diversified portfolio, occasional measured losses may be inevitable and must be considered within the context of the overall portfolio’s return and the cash flow requirements of the City.

OVERSIGHT COMMITTEE
An audit committee consisting of appropriate internal and external members, appointed by the City Council, shall be established to provide general oversight and direction concerning the policies related to management of the City’s investment pool, OPEB trust, and Pension Rate Stabilization Program trust. The City Treasurer shall serve in a staff and advisory capacity. The committee shall meet at least quarterly to review policy changes, new legislation and portfolio status.

ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall refrain from personal business activity that conflicts with proper execution of the investment program, or impairs their ability to make impartial investment decisions. Additionally the City Treasurer and the Deputy Treasurer are required to annually file applicable financial disclosures as required by the Fair Political Practices Commission (FPPC).

232
CC 05-19-2022
232 of 1613
5 | Page

SAFEKEEPING OF SECURITIES
To protect against fraud or embezzlement or losses caused by collapse of an individual securities dealer, all securities owned by the City shall be held in safekeeping by a third party custodian acting as agent for the City under the terms of a custody agreement. All trades executed by a dealer will settle delivery versus payment (DVP) through the City’s safekeeping agent. In order to verify investment holdings, an external auditor, on an annual basis, shall independently verify securities held in custody for the City. Additionally, the City Treasurer shall include a listing of holdings provided by the City’s custodian to the quarterly investment report as verification between annual reviews by the external auditor.

The only exceptions to the foregoing shall be depository accounts and securities purchases made with: (i) local government investment pools; (ii) time certificates of deposit, and, (iii) money mutual funds, since the purchased securities are not deliverable. All other exceptions to this safekeeping policy must be approved by the City Treasurer in written form and included in the quarterly report to City Council.

INTERNAL CONTROL
Separation of duties between the Treasurer’s function and Finance is designed to provide proper internal controls to prevent the potential for converting assets or concealing transactions. Dual transaction controls, separate and independent notifications, and reports provided by financial institutions shall be used to help implement these controls.

Wire transfers shall be approved prior to being submitted to the financial institution. Wire transfers initiated by Treasury staff must be reconfirmed by the appropriate financial institution to Finance staff. Proper documentation is required for each investment transaction and must include a broker trade confirmation and a cash disbursement wire transfer confirmation. Timely bank reconciliation is conducted to ensure proper handling of all transactions. The investment portfolio and all related transactions are reviewed and balanced to appropriate general ledger accounts by Finance staff on a monthly basis.

An annual agreed‐upon procedures engagement in accordance with the attestation standards established by the American Institute of Certified Public Accountants shall be conducted by an auditor solely to assist management in determining the City’s compliance with this investment policy. At the conclusion of such engagement, the agreed‐upon procedures report detailing all procedures performed and findings noted (if applicable) shall be provided to the Audit Committee of the City.

REPORTING
Monthly transaction reports will be submitted by the Treasurer to the City Council within 30 days of the end of the reporting period in accordance with California Government Code Section 53607. 233
CC 05-19-2022
233 of 1613
6 | Page
The City Treasurer shall also prepare a quarterly investment report, including a succinct management summary that provides a clear picture of the status of the current investment portfolio. The report will be prepared in a manner that will report all information required under this policy and as recommended by California Government Code. The Treasurer will submit the report to Council no later than the second regular council meeting, or approximately 45 days following the end of the quarter covered by the report.

AUTHORIZED FINANCIAL INSTITUTIONS, DEPOSITORIES, AND QUALIFIED

BROKER/DEALERS
To the extent practicable, the Treasurer shall endeavor to complete investment transactions using a competitive bid process whenever possible. The City’s Treasurer will determine which financial institutions are authorized to provide investment services to the City. It shall be the City’s policy to purchase securities only from authorized institutions and firms.

The Treasurer shall maintain procedures for establishing a list of authorized broker/dealers and financial institutions which are approved for investment purposes that are selected through a process of due diligence as determined by the City. Due inquiry shall determine whether such authorized broker/dealers, and the individuals covering the City are reputable and trustworthy, knowledgeable and experienced in Public Agency investing and able to meet all of their financial obligations. These institutions may include ʺprimaryʺ dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15c3‐1 (uniform net capital rule).

In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
 Primary government dealers as designated by the Federal Reserve Bank and non‐primary government dealers.
 Nationally or state‐chartered banks.
 The Federal Reserve Bank.
 Direct issuers of securities eligible for purchase.

Selection of financial institutions and broker/dealers authorized to engage in transactions will be at the sole discretion of the City, except where the City utilizes an external investment adviser in which case the City may rely on the adviser for selection.

All financial institutions which desire to become qualified bidders for investment transactions (and which are not dealing only with the investment adviser) must supply the Treasurer with audited financials and a statement certifying that the institution has reviewed the California Government Code, Section 53600 et seq. and the City’s investment policy. The Treasurer will conduct an annual review of the financial condition and registrations of such qualified bidders.

Public deposits will be made only in qualified public depositories as established by State law.

Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law. 234
CC 05-19-2022
234 of 1613
7 | Page
Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities at the same original issue price.

COLLATERAL REQUIREMENTS
CERTIFICATES OF DEPOSIT (CDS). The City shall require any commercial bank or savings and loan association to deposit eligible securities with an agency of a depository approved by the State Banking Department to secure any uninsured portion of a Non‐Negotiable Certificate of Deposit. The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the CD if the securities are classified as mortgages and 110% of the face value of the CD for all other classes of security.

COLLATERALIZATION OF BANK DEPOSITS. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds.  The City shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.

REPURCHASE AGREEMENTS. The City requires that Repurchase Agreements be collateralized only by securities authorized in accordance with California Government Code:
 The securities which collateralize the repurchase agreement shall be priced at Market Value, including any Accrued Interest plus a margin. The Market Value of the securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities.
 Financial institutions shall mark the value of the collateral to market at least monthly and increase or decrease the collateral to satisfy the ratio requirement described above.  The City shall receive monthly statements of collateral.

AUTHORIZED INVESTMENTS
Investment of City funds is governed by the California Government Code Sections 53600 et seq. Within the context of the limitations, the following investments are authorized, subject to the restrictions below. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence. Percentage holding limits listed in this section apply at the time the security is purchased.

Any investment currently held at the time the policy is adopted which does not meet the new policy guidelines can be held until maturity and shall be exempt from the current policy. At the time of the investment’s maturity or liquidation, such funds shall be reinvested only as provided in the current policy.
235
CC 05-19-2022
235 of 1613
8 | Page
An appropriate risk level shall be maintained by primarily purchasing securities that are of high quality, liquid, and marketable. The portfolio shall be diversified by security type and institution to avoid incurring unreasonable and avoidable risks regarding specific security types or individual issuers.

1. United States Treasury Bills, Bonds, and Notes or those for which the full faith and credit of the United States are pledged for payment of principal and interest. There is no percentage limitation of the portfolio that can be invested in this category, although a five‐ year maturity limitation is applicable.

2. Obligations issued by Federal agencies or United States Government‐Sponsored Enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government‐sponsored enterprises. There are no limits on the dollar amount or percentage that the City may invest in Federal Agency or Government‐Sponsored Enterprises (GSEs), provided that:
 No more than 25% of the portfolio may be invested in any single Agency/GSE issuer.
 The maximum maturity does not exceed five (5) years.
 The maximum percent of agency callable securities in the portfolio will be 20%.

3. Banker’s Acceptances (bills of exchange or time drafts drawn on and accepted by commercial banks) may not exceed 180 days to maturity or 40% of the portfolio.  They are issued by institutions which have short‐term debt obligations rated “A‐1” or its equivalent or better by at least one NRSRO; or long‐term debt obligations which are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
 No more than 5% of the portfolio may be invested in any single issuer.

4. Local Agency Investment Fund (LAIF), which is a State of California managed investment pool, may be used up to the maximum permitted by California state law.

LAIF’s investments in instruments prohibited by or not specified in the City’s policy do not exclude the investment in LAIF itself from the City’s list of allowable investments, provided LAIF’s reports allow the Treasurerto adequately judge the risk inherent in LAIF’s portfolio..

5. Commercial paper issued by corporations organized and operating in the United States having assets in excess of $500,000,000, ranked “A‐1” or its equivalent or better by at least one Nationally Ranked Statistical Rating Organization (NRSRO), issued by corporations which have long‐term obligations rated in a rating category of “A” or its equivalent or better by one NRSRO.

Purchases of eligible commercial paper may not exceed 270 days to maturity nor 236
CC 05-19-2022
236 of 1613
9 | Page
represent more than 10% of the outstanding paper of the issuing corporation.

Purchases of commercial paper may not exceed 25% of the portfolio.   Under a provision sunsetting on January 1, 2026, no more than 40% of the City’s portfolio may be invested in Commercial Paper if the City’s investment assets under management are greater than $100,000,000. No more than 10% of the total investments may be invested the in commercial paper and medium term notes of any single issuer.

6. Negotiable Certificates of Deposits issued by nationally or state‐chartered banks, state or federal savings associations, or state or federal credit unions, or by a federally licensed or state‐licensed branch of a foreign bank. Purchases of Negotiable Certificates of Deposit may not exceed 30% of the portfolio. No more than 5% of the portfolio may be invested in any single issuer. A maturity limitation of five years is applicable. The amount of the NCD insured up to the FDIC limit does not require any credit ratings. Any amount above the FDIC insured limit must be issued by institutions which have short‐term debt obligations rated “A‐1” or its equivalent or better by at least one NRSRO; or long‐term obligations rated in a rating category of “A” or its equivalent or better by at least one NRSRO.

7. Repurchase agreements that specify terms and conditions may be transacted with banks and broker dealers. The maturity of the repurchase agreements shall not exceed one year.

The market value of the securities used as collateral for the repurchase agreements shall be monitored by the investment staff and shall not be allowed to fall below 102% of the value of the repurchase agreement. A PSA Master Repurchase Agreement is required between the City of Cupertino and the broker/dealer or financial institution for all repurchase agreements transacted.

8. Reverse repurchase agreements are not authorized.

9. Certificates of Deposit (time deposits), non‐negotiable and collateralized in accordance with the California Government Code, may be purchased through banks, savings and loan associations, or credit unions. Within a limit of 30% of the portfolio, these institutions may use a private sector entity to assist in the placement of the time deposits under the conditions specified by the Government Code.

10. Medium Term Corporate Notes issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any state and operating within the United States, with a maximum maturity of five years may be purchased. Securities eligible for investment shall be rated in the rating category of “A” or better by at least one NRSRO. Purchase of medium term note s may not exceed 30% of the portfolio. No more than 10% of the total investments may be invested in the commercial paper and medium term notes of any single issuer.

11. Municipal securities, including obligations of the City, the State of California, and any 237
CC 05-19-2022
237 of 1613
10 | Page
local agency within the State of California, provided that:
 The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
 No more than 5% of the portfolio may be invested in any single issuer.  No more than 30% of the portfolio may be in Municipal Securities.  The maximum maturity does not exceed five (5) years.

12. Municipal securities (Registered Treasury Notes or Bonds) of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue‐producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California.
 The securities are rated in a rating category of “A” or its equivalent or better by at least one nationally recognized statistical rating organization (“NRSRO”).
 No more than 5% of the portfolio may be invested in any single issuer.  No more than 30% of the portfolio may be in Municipal Securities.  The maximum maturity does not exceed five (5) years.

13. Asset‐backed, mortgage‐backed, mortgage pass‐through securities, and collateralized mortgage obligations, provided that:
 The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
 No more than 20% of the total portfolio may be invested in these securities.  No more than 5% of the portfolio may be invested in any single Asset‐Backed or Commercial Mortgage security issuer. There is no issuer limitation on any Mortgage security where the issuer is the US Treasury or a Federal Agency/GSE.  The maximum legal final maturity does not exceed five (5) years.

14. Supranationals, provided that:
 Issues are US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter‐American Development Bank.
 The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
 No more than 30% of the total portfolio may be invested in these securities.  No more than 10% of the portfolio may be invested in any single issuer.  The maximum maturity does not exceed five (5) years.
238
CC 05-19-2022
238 of 1613
11 | Page

15. Various daily money market funds administered for or by trustees, paying agents and custodian banks contracted by the City of Cupertino may be purchased as allowed under State of California Government Code. Only funds holding U.S. Treasury obligations, Government agency obligations, or repurchase agreements collateralized by U.S.

Treasury or Government agency obligations can be utilized and may not exceed 20% of the cost value of the portfolio.

16. Ineligible investments are those that are not described herein, including but not limited to, common stocks and long‐term (over five years in maturity) notes and bonds are prohibited from use in this portfolio. It is noted that special circumstances arise that necessitate the purchase of securities beyond the five‐year limitation. On such occasions, requests must be approved by City Council prior to purchase. Additionally:
 State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options.  In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest‐only strips is prohibited.
 Investment in any security that could result in a zero‐interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that could result zero‐  or negative‐interest accrual if held to maturity are permitted.  Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited.
 Purchasing or selling securities on margin is prohibited.  The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited.
 The purchase of foreign currency denominated securities is prohibited.

RISK MANAGEMENT AND DIVERSIFICATION
Mitigating Credit Risk in the Portfolio
Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate credit risk by adopting the following strategies:

The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio.  No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy.  The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to manage the quality, liquidity or yield of the portfolio in 239
CC 05-19-2022
239 of 1613
12 | Page
response to market conditions or City’s risk preferences.  If the credit ratings of any security owned by the City are downgraded to a level below the quality required by this investment policy, it will be the City’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio.
 If a security is downgraded, the Treasurer will use discretion in determining whether to sell or hold the security based on its current maturity, the economic outlook for the issuer, and other relevant factors.
 If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported monthly to the City Council.

Mitigating Market Risk in the Portfolio
Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City recognizes that, over time, longer‐term portfolios have the potential to achieve higher returns. On the other hand, longer‐term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for short‐term cash needs, and by making longer‐term investments only with funds that are not needed for current cash flow purposes.

The City further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments. The City, therefore, adopts the following strategies to control and mitigate its exposure to market risk:
 The City will maintain a minimum of six months of budgeted operating expenditures in short term investments to provide sufficient liquidity for expected disbursements.
 The maximum stated final maturity of individual securities in the portfolio will be five (5) years, except as otherwise stated in this policy.  The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by the City based on the City’s investment objectives, constraints and risk tolerances.

DEPOSITS
To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured industrial loan company shall have received an overall rating of not less than “satisfactory” in its most recent evaluation by the appropriate federal financial supervisorial agency of its record of meeting the credit needs of California’s communities. 240
CC 05-19-2022
240 of 1613
13 | Page

INTEREST EARNINGS
All moneys earned and collected from investments authorized in this policy shall be allocated monthly to various fund accounts based on the cash balance in each fund as a percentage of the entire pooled portfolio.

REVIEW OF INVESTMENT PORTFOLIO
The Treasurer shall periodically, but no less than quarterly, review the portfolio to identify investments that do not comply with this investment policy and establish protocols for reporting major and critical incidences of noncompliance to the City Council.

POLICY REVIEW
The City of Cupertino’s investment policy shall be adopted by resolution of the City Council on an annual basis. This investment policy shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation of principal, liquidity, and yield, and its relevance to current law and financial and economic trends.

241
CC 05-19-2022
241 of 1613
14 | Page

GLOSSARY OF INVESTMENT TERMS
AGENCIES. Shorthand market terminology for any obligation issued by a government‐ sponsored entity (GSE), or a federally related institution. Most obligations of GSEs are not guaranteed by the full faith and credit of the US government. Examples are:

FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the agricultural industry. FFCB issues discount notes and bonds.

FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing market. FHLB issues discount notes and bonds.

FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and liquidity in the housing market. FHLMC, also called “FreddieMac” issues discount notes, bonds and mortgage pass‐through securities.

FNMA. Like FHLB and Freddie Mac, the Federal National Mortgage Association was established to provide credit and liquidity in the housing market. FNMA, also known as “Fannie Mae,” issues discount notes, bonds and mortgage pass‐through securities.

GNMA. The Government National Mortgage Association, known as “Ginnie Mae,” issues mortgage pass‐through securities, which are guaranteed by the full faith and credit of the US Government.

PEFCO. The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government.

TVA. The Tennessee Valley Authority provides flood control and power and promotes development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA currently issues discount notes and bonds.

ASKED. The price at which a seller offers to sell a security.

ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.

AVERAGE LIFE. In mortgage‐related investments, including CMOs, the average time to expected receipt of principal payments, weighted by the amount of principal expected.

BANKER’S ACCEPTANCE. A money market instrument created to facilitate international trade transactions. It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which “accepts” the obligation to pay the investor.

BENCHMARK. A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.

BID. The price at which a buyer offers to buy a security. 242
CC 05-19-2022
242 of 1613
15 | Page
BROKER. A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from his own position.

CALLABLE. A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline since an issuer issues securities, it will likely call its current securities and reissue them at a lower rate of interest. Callable securities have reinvestment risk as the investor may receive its principal back when interest rates are lower than when the investment was initially made.

CERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a certificate. Large denomination CDs may be marketable.

CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS).  A private placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage. CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.

COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public monies.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMO). Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.

COMMERCIAL PAPER. The short‐term unsecured debt of corporations.

COST YIELD. The annual income from an investment divided by the purchase cost. Because it does not give effect to premiums and discounts which may have been included in the purchase cost, it is an incomplete measure of return.

COUPON. The rate of return at which interest is paid on a bond.

CREDIT RISK. The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer.

CURRENT YIELD. The annual income from an investment divided by the current market value.

Since the mathematical calculation relies on the current market value rather than the investor’s cost, current yield is unrelated to the actual return the investor will earn if the security is held to maturity.

DEALER. A dealer acts as a principal in security transactions, selling securities from and buying securities for his own position.

DEBENTURE. A bond secured only by the general credit of the issuer. 243
CC 05-19-2022
243 of 1613
16 | Page
DELIVERY VS. PAYMENT (DVP). A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser’s agent.

DERIVATIVE. Any security that has principal and/or interest payments which are subject to uncertainty (but not for reasons of default or credit risk) as to timing and/or amount, or any security which represents a component of another security which has been separated from other components (“Stripped” coupons and principal). A derivative is also defined as a financial instrument the value of which is totally or partially derived from the value of another instrument, interest rate, or index.

DISCOUNT. The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short‐term securities, such as T‐bills and banker’s acceptances, are known as discount securities. They sell at a discount from par, and return the par value to the investor at maturity without additional interest. Other securities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.

DIVERSIFICATION. Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.

DURATION. The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a bond to changes in interest rates. (See modified duration).

FEDERAL FUNDS RATE. The rate of interest charged by banks for short‐term loans to other banks. The Federal Reserve Bank through open‐market operations establishes it.

FEDERAL OPEN MARKET COMMITTEE. A committee of the Federal Reserve Board that establishes monetary policy and executes it through temporary and permanent changes to the supply of bank reserves.

LEVERAGE. Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.

LIQUIDITY. The speed and ease with which an asset can be converted to cash.

LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government entities and certain non‐profit organizations in California that is managed by the State Treasurer’s Office.

LOCAL GOVERNMENT INVESTMENT POOL.   Investment pools that range from the State Treasurer’s Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers Authorities (JPAs). These funds are not subject to the same SEC rules applicable to money market mutual funds.

MAKE WHOLE CALL. A type of call provision on a bond that allows the issuer to pay off the remaining debt early. Unlike a call option, with a make whole call provision, the issuer makes a 244
CC 05-19-2022
244 of 1613
17 | Page
lump sum payment that equals the net present value (NPV) of future coupon payments that will not be paid because of the call. With this type of call, an investoris compensated, or ʺmade whole.ʺ MARGIN. The difference between the market value of a security and the loan a broker makes using that security as collateral.

MARKET RISK. The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.

MARKET VALUE. The price at which a security can be traded.

MARKING TO MARKET. The process of posting current market values for securities in a portfolio.

MATURITY. The final date upon which the principal of a security becomes due and payable.

MEDIUM TERM NOTES. Unsecured, investment‐grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.

MODIFIED DURATION. The percent change in price for a 100 basis point change in yields.

Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk.

MONEY MARKET. The market in which short‐term debt instruments (T‐bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.

MORTGAGE PASS‐THROUGH SECURITIES. A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security.

MUNICIPAL SECURITIES. Securities issued by state and local agencies to finance capital and operating expenses.

MUTUAL FUND. An entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund’s prospectus. Mutual funds can be invested in various types of domestic and/or international stocks, bonds, and money market instruments, as set forth in the individual fund’s prospectus. For most large, institutional investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio.

NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO).

A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investmentʹs risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moodyʹs. 245
CC 05-19-2022
245 of 1613
18 | Page
NEGOTIABLE CD.  A short‐term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state‐licensed branch of a foreign bank.  Negotiable CDs are traded in a secondary market and are payable upon order to the bearer or initial depositor (investor).

PREMIUM. The difference between the par value of a bond and the cost of the bond, when the cost is above par.

PREPAYMENT SPEED. A measure of how quickly principal is repaid to investors in mortgage securities.

PREPAYMENT WINDOW. The time period over which principal repayments will be received on mortgage securities at a specified prepayment speed.

PRIMARY DEALER. A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S.

Government securities market.

PRUDENT PERSON (PRUDENT INVESTOR) RULE. A standard of responsibility which applies to fiduciaries. In California, the rule is stated as “Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes.” REALIZED YIELD. The change in value of the portfolio due to interest received and interest earned and realized gains and losses. It does not give effect to changes in market value on securities, which have not been sold from the portfolio.

REGIONAL DEALER. A financial intermediary that buys and sells securities for the benefit of its customers without maintaining substantial inventories of securities and that is not a primary dealer.

REPURCHASE AGREEMENT. Short‐term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller’s point of view, the same transaction is a reverse repurchase agreement.

SAFEKEEPING. A service to bank customers whereby securities are held by the bank in the customer’s name.

STRUCTURED NOTE. A complex, fixed income instrument, which pays interest, based on a formula tied to other interest rates, commodities or indices. Examples include inverse floating rate notes which have coupons that increase when other interest rates are falling, and which fall when other interest rates are rising, and ʺdual index floaters,ʺ which pay interest based on the relationship between two other interest rates  ‐ for example, the yield on the ten‐year Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements.
246
CC 05-19-2022
246 of 1613
19 | Page
SUPRANATIONAL.  A Supranational is a multi‐national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.

TOTAL RATE OF RETURN. A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains, and losses in the portfolio.

U.S. TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk, and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds.

TREASURY BILLS. All securities issued with initial maturities of one year or less are issued as discounted instruments, and are called Treasury bills. The Treasury currently issues three‐ and six‐month T‐bills at regular weekly auctions. It also issues “cash management” bills as needed to smooth out cash flows.

TREASURY NOTES. All securities issued with initial maturities of two to ten years are called Treasury notes, and pay interest semi‐annually.

TREASURY BONDS. All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi‐annually.

VOLATILITY. The rate at which security prices change with changes in general economic conditions or the general level of interest rates.

YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the expected cash flows from the investment to its cost.

City Manager’s signature: _______________________________ Date: _______________________________
Director of Administrative Services’ signature: _______________________________ Date: _______________________________
247
CC 05-19-2022
247 of 1613
20 | Page
Revisions:
248
CC 05-19-2022
248 of 1613
1 | Page
City Investment Policy
Citywide Policy Manual
Attachments: N/A
Effective Date:

May 19, 2022May 18, 2021
Responsible Department:

Administrative Services
Related Policies & Notes:

Pension Investment Policy, OPEB Investment Policy
POLICY
Under authority granted by the City Council, the City Treasurer and Deputy Treasurer are responsible for investing the surplus funds of the City.

The investment of the funds of the City of Cupertino is directed to the goals of safety, liquidity and yield. The authority governing investments for municipal governments is set forth in the California Government Code, Sections 53600 et seq.

The primary objective of the investment policy of the City of Cupertino is SAFETY OF PRINCIPAL. Investments shall be placed in those securities as outlined by type and maturity sector in this document. Effective cash flow management and resulting cash investment practices are recognized as essential to good fiscal management and control. The City’s portfolio shall be designed and managed in a manner responsive to the public trust and consistent with state and local law. Portfolio management requires continual analysis and as a result the balance between the various investments and maturities may change in order to give the City of Cupertino the optimum combination of necessary liquidity and optimal yield based on cash flow projections.

SCOPE
The investment policy applies to all financial assets of the City of Cupertino as accounted for in the Annual Comprehensive Annual Financial Report (ACAFR). Policy statements outlined in this document focus on the City of Cupertino’s pooled, surplus funds, but will also apply to all other funds under the City Treasurer’s span of control unless specifically exempted by statute or ordinance. This policy is applicable, but not limited to all funds listed below:
 General Fund
 Special Revenue Funds
 Capital Project Funds
 Enterprise Funds
 Internal Service Funds
 Trust and Agency Funds
249
CC 05-19-2022
249 of 1613
2 | Page
 Any new fund unless specifically exempted
Investments of bond proceeds shall be governed by the provisions of the related bond indentures and/or cash flow requirements and therefore may extend beyond the maturity limitations as outlined in this document. Other post‐employment benefit (OPEB) and Pension trust investments are governed by California Government Code Sections 53620 through 53622 and trust documents.

The trusts are governed by separate investment policies entitled Investment Policy Statement City of Cupertino Investment Trust that were reviewed by the City of Cupertino Audit Committee on September 27, 2021 and October 25, 2021 and City Council on December 7, 2021October 27, 2020 and November 17, 2020, respectively.

PRUDENCE
Pursuant to California Government Code, Section 53600.3, all persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the Prudent Investor Standard:
“…all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard.

When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the Agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the Agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law.”
It is the City’s intent, at the time of purchase, to hold all investments until maturity to ensure the return of all invested principal dollars. However, it is realized that market prices of securities will vary depending on economic and interest rate conditions at any point in time. It is further recognized that in a well‐diversified investment portfolio, occasional measured losses are inevitable due to economic, bond market, or individual security valuation fluctuations. These occasional losses must be considered within the context of the overall investment program objectives and the resultant long‐term rate of return. The City Treasurer and Deputy Treasurer, acting within the intent and scope of the investment policy and other written procedures and exercising due diligence, shall be relieved of personal responsibility and liability for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely manner and appropriate action is taken to control adverse developments.

OBJECTIVES
250
CC 05-19-2022
250 of 1613
3 | Page
The primary objectives, in order of priority, of the City of Cupertino’s investment activities shall be:
251
CC 05-19-2022
251 of 1613
4 | Page
A. Safety of Principal
Safety of principal is the foremost objective of the City of Cupertino. Investments will be undertaken in a mannerthat seeks to ensure the preservation of capital in the overall portfolio.

To attain this objective, the City will diversify its investments by investing funds among a variety of securities with independent returns.

B. Liquidity
The City’s investment portfolio will remain sufficiently liquid to meet all operating requirements which might be reasonably anticipated and provide the City with adequate cash flows to pay its obligations overthe next six months. Additionally, the portfolio should consist largely of securities with active secondary resale markets.

C. Return
The City’s investment portfolio shall be designed with the objective of attaining a rate of return throughout budgetary and economic cycles, commensurate with Cupertino’s investment risk constraints and cash flow characteristics of the portfolio.

MAXIMUM MATURITIES
Maturities of investments will be selected based on liquidity requirements to minimize interest rate risk and maximize earnings. Investment of surplus funds shall comply with the maturity limits as set forth in the California Government Code 53600, et seq. Where this section does not specify a limitation on the term or remaining maturity at the time of the investment, no investment shall be made in any security that at the time of the investment has a term remaining to maturity in excess of five years, unless the Council has granted express authority to make that investment either specifically or as a part of an investment program approved by the Council no less than three months prior to the investment. Reserve funds may be invested in securities exceeding five years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the funds.

PERFORMANCE EVALUATION
Investment performance is continually monitored and evaluated by the City Treasurer.

Investment performance statistics and activity reports are generated on a quarterly basis for presentation to the oversight (audit) committee, City Manager and City Council. Yield on the City’s investment portfolio is of secondary importance compared to the safety and liquidity objectives described above. The City’s investment portfolio shall be designed to attain a market average rate of return through economic cycles. The Treasurer shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s quarterly report. The Treasurer shall select an appropriate, readily available index to use as a market benchmark.  Whenever possible, and consistent with risk limitations as defined herein and prudent investment principles, the Treasurer shall seek to augment return above the market average rate of return. The City may select alternative benchmarks for identified pools of City funds that have different objectives.

252
CC 05-19-2022
252 of 1613
5 | Page

DELEGATION OF AUTHORITY
Authority to manage the City’s investment program is derived from California Government Code, Sections 41006 and 53600 et seq. The Treasurer is responsible for investment management decisions and activities per City Council Resolution.

The Treasurer shall designate a staff person as a liaison/deputy in the event circumstances require timely action and the Treasurer is not present.

No officer or designee may engage in an investment transaction except as provided under terms of this policy and the procedures by the Treasurer and approved by the City Manager/Council.

The Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials.

If an investment adviser is retained by the City, the investment adviser, registered under the Investment Advisers Act of 1940, must have at least five yearsʹ  experience investing in the securities and obligations authorized by California Government Code 53601 subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, and with assets under management in excess of five hundred million dollars ($500,000,000). External investment advisers may be granted discretion to purchase and sell investment securities in accordance with this investment policy.

The City’s overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. The City recognizes that in a diversified portfolio, occasional measured losses may be inevitable and must be considered within the context of the overall portfolio’s return and the cash flow requirements of the City.

OVERSIGHT COMMITTEE
An audit committee consisting of appropriate internal and external members, appointed by the City Council, shall be established to provide general oversight and direction concerning the policies related to management of the City’s investment pool, OPEB trust, and Pension Rate Stabilization Program trust. The City Treasurer shall serve in a staff and advisory capacity. The committee shall meet at least quarterly to review policy changes, new legislation and portfolio status.

ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall refrain from personal business activity that conflicts with proper execution of the investment program, or impairs their ability to make impartial investment decisions. Additionally the City Treasurer and the Deputy Treasurer are required to annually file applicable financial disclosures as required by the Fair Political Practices Commission (FPPC).

253
CC 05-19-2022
253 of 1613
6 | Page

SAFEKEEPING OF SECURITIES
To protect against fraud or embezzlement or losses caused by collapse of an individual securities dealer, all securities owned by the City shall be held in safekeeping by a third party custodian acting as agent for the City under the terms of a custody agreement. All trades executed by a dealer will settle delivery versus payment (DVP) through the City’s safekeeping agent. In order to verify investment holdings, an external auditor, on an annual basis, shall independently verify securities held in custody for the City. Additionally, the City Treasurer shall include a listing of holdings provided by the City’s custodian to the quarterly investment report as verification between annual reviews by the external auditor.

The only exceptions to the foregoing shall be depository accounts and securities purchases made with: (i) local government investment pools; (ii) time certificates of deposit, and, (iii) money mutual funds, since the purchased securities are not deliverable. All other exceptions to this safekeeping policy must be approved by the City Treasurer in written form and included in the quarterly report to City Council.

INTERNAL CONTROL
Separation of duties between the Treasurer’s function and Finance is designed to provide proper internal controls to prevent the potential for converting assets or concealing transactions. Dual transaction controls, separate and independent notifications, and reports provided by financial institutions shall be used to help implement these controls.

Wire transfers shall be approved prior to being submitted to the financial institution. Wire transfers initiated by Treasury staff must be reconfirmed by the appropriate financial institution to Finance staff. Proper documentation is required for each investment transaction and must include a broker trade confirmation and a cash disbursement wire transfer confirmation. Timely bank reconciliation is conducted to ensure proper handling of all transactions. The investment portfolio and all related transactions are reviewed and balanced to appropriate general ledger accounts by Finance staff on a monthly basis.

An annual agreed‐upon procedures engagement in accordance with the attestation standards established by the American Institute of Certified Public Accountants shall be conducted by an auditor solely to assist management in determining the City’s compliance with this investment policy. At the conclusion of such engagement, the agreed‐upon procedures report detailing all procedures performed and findings noted (if applicable) shall be provided to the Audit Committee of the City.

REPORTING
Monthly transaction reports will be submitted by the Treasurer to the City Council within 30 days of the end of the reporting period in accordance with California Government Code Section 53607. 254
CC 05-19-2022
254 of 1613
7 | Page
The City Treasurer shall also prepare a quarterly investment report, including a succinct management summary that provides a clear picture of the status of the current investment portfolio. The report will be prepared in a manner that will report all information required under this policy and as recommended by California Government Code. The Treasurer will submit the report to Council no later than the second regular council meeting, or approximately 45 days following the end of the quarter covered by the report.

AUTHORIZED FINANCIAL INSTITUTIONS, DEPOSITORIES, AND QUALIFIED

BROKER/DEALERS
To the extent practicable, the Treasurer shall endeavor to complete investment transactions using a competitive bid process whenever possible. The City’s Treasurer will determine which financial institutions are authorized to provide investment services to the City. It shall be the City’s policy to purchase securities only from authorized institutions and firms.

The Treasurer shall maintain procedures for establishing a list of authorized broker/dealers and financial institutions which are approved for investment purposes that are selected through a process of due diligence as determined by the City. Due inquiry shall determine whether such authorized broker/dealers, and the individuals covering the City are reputable and trustworthy, knowledgeable and experienced in Public Agency investing and able to meet all of their financial obligations. These institutions may include ʺprimaryʺ dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15c3‐1 (uniform net capital rule).

In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
 Primary government dealers as designated by the Federal Reserve Bank and non‐primary government dealers.
 Nationally or state‐chartered banks.
 The Federal Reserve Bank.
 Direct issuers of securities eligible for purchase.

Selection of financial institutions and broker/dealers authorized to engage in transactions will be at the sole discretion of the City, except where the City utilizes an external investment adviser in which case the City may rely on the adviser for selection.

All financial institutions which desire to become qualified bidders for investment transactions (and which are not dealing only with the investment adviser) must supply the Treasurer with audited financials and a statement certifying that the institution has reviewed the California Government Code, Section 53600 et seq. and the City’s investment policy. The Treasurer will conduct an annual review of the financial condition and registrations of such qualified bidders.

Public deposits will be made only in qualified public depositories as established by State law.

Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law. 255
CC 05-19-2022
255 of 1613
8 | Page
Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities at the same original issue price.

COLLATERAL REQUIREMENTS
CERTIFICATES OF DEPOSIT (CDS). The City shall require any commercial bank or savings and loan association to deposit eligible securities with an agency of a depository approved by the State Banking Department to secure any uninsured portion of a Non‐Negotiable Certificate of Deposit. The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the CD if the securities are classified as mortgages and 110% of the face value of the CD for all other classes of security.

COLLATERALIZATION OF BANK DEPOSITS. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds.  The City shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.

REPURCHASE AGREEMENTS. The City requires that Repurchase Agreements be collateralized only by securities authorized in accordance with California Government Code:
 The securities which collateralize the repurchase agreement shall be priced at Market Value, including any Accrued Interest plus a margin. The Market Value of the securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities.
 Financial institutions shall mark the value of the collateral to market at least monthly and increase or decrease the collateral to satisfy the ratio requirement described above.  The City shall receive monthly statements of collateral.

AUTHORIZED INVESTMENTS
Investment of City funds is governed by the California Government Code Sections 53600 et seq. Within the context of the limitations, the following investments are authorized, subject to the restrictions below. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence. Percentage holding limits listed in this section apply at the time the security is purchased.

Any investment currently held at the time the policy is adopted which does not meet the new policy guidelines can be held until maturity and shall be exempt from the current policy. At the time of the investment’s maturity or liquidation, such funds shall be reinvested only as provided in the current policy.
256
CC 05-19-2022
256 of 1613
9 | Page
An appropriate risk level shall be maintained by primarily purchasing securities that are of high quality, liquid, and marketable. The portfolio shall be diversified by security type and institution to avoid incurring unreasonable and avoidable risks regarding specific security types or individual issuers.

1. United States Treasury Bills, Bonds, and Notes or those for which the full faith and credit of the United States are pledged for payment of principal and interest. There is no percentage limitation of the portfolio that can be invested in this category, although a five‐ year maturity limitation is applicable.

2. Obligations issued by Federal agencies or United States Government‐Sponsored Enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government‐sponsored enterprises. There are no limits on the dollar amount or percentage that the City may invest in Federal Agency or Government‐Sponsored Enterprises (GSEs), provided that:
 No more than 25% of the portfolio may be invested in any single Agency/GSE issuer.
 The maximum maturity does not exceed five (5) years.
 The maximum percent of agency callable securities in the portfolio will be 20%.

3. Banker’s Acceptances (bills of exchange or time drafts drawn on and accepted by commercial banks) may not exceed 180 days to maturity or 40% of the portfolio.  They are issued by institutions which have short‐term debt obligations rated “A‐1” or its equivalent or better by at least one NRSRO; or long‐term debt obligations which are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
 No more than 5% of the portfolio may be invested in any single issuer.

4. Local Agency Investment Fund (LAIF), which is a State of California managed investment pool, may be used up to the maximum permitted by California state law.

LAIF’s investments in instruments prohibited by or not specified in the City’s policy do not exclude the investment in LAIF itself from the City’s list of allowable investments, provided LAIF’s reports allow the Treasurerto adequately judge the risk inherent in LAIF’s portfolio..

5. Commercial paper issued by corporations organized and operating in the United States having assets in excess of $500,000,000, ranked “A‐1” or its equivalent or better by at least one Nationally Ranked Statistical Rating Organization (NRSRO), issued by corporations which have long‐term obligations rated in a rating category of “A” or its equivalent or better by one NRSRO.

Purchases of eligible commercial paper may not exceed 270 days to maturity nor 257
CC 05-19-2022
257 of 1613
10 | Page
represent more than 10% of the outstanding paper of the issuing corporation.

Purchases of commercial paper may not exceed 25% of the portfolio.   Under a provision sunsetting on January 1, 2026, no more than 40% of the City’s portfolio may be invested in Commercial Paper if the City’s investment assets under management are greater than $100,000,000. No more than 10% of the total investments may be invested the in commercial paper and medium term notes of any single issuer.

6. Negotiable Certificates of Deposits issued by nationally or state‐chartered banks, state or federal savings associations, or state or federal credit unions, or by a federally licensed or state‐licensed branch of a foreign bank. Purchases of Negotiable Certificates of Deposit may not exceed 30% of the portfolio. No more than 5% of the portfolio may be invested in any single issuer. A maturity limitation of five years is applicable. The amount of the NCD insured up to the FDIC limit does not require any credit ratings. Any amount above the FDIC insured limit must be issued by institutions which have short‐term debt obligations rated “A‐1” or its equivalent or better by at least one NRSRO; or long‐term obligations rated in a rating category of “A” or its equivalent or better by at least one NRSRO.

7. Repurchase agreements that specify terms and conditions may be transacted with banks and broker dealers. The maturity of the repurchase agreements shall not exceed one year.

The market value of the securities used as collateral for the repurchase agreements shall be monitored by the investment staff and shall not be allowed to fall below 102% of the value of the repurchase agreement. A PSA Master Repurchase Agreement is required between the City of Cupertino and the broker/dealer or financial institution for all repurchase agreements transacted.

8. Reverse repurchase agreements are not authorized.

9. Certificates of Deposit (time deposits), non‐negotiable and collateralized in accordance with the California Government Code, may be purchased through banks, savings and loan associations, or credit unions. Within a limit of 30% of the portfolio, these institutions may use a private sector entity to assist in the placement of the time deposits under the conditions specified by the Government Code.

10. Medium Term Corporate Notes issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any state and operating within the United States, with a maximum maturity of five years may be purchased. Securities eligible for investment shall be rated in the rating category of “A” or better by at least one NRSRO. Purchase of medium term note s may not exceed 30% of the portfolio. No more than 10% of the total investments may be invested in the commercial paper and medium term notes of any single issuer.

11. Municipal securities, including obligations of the City, the State of California, and any 258
CC 05-19-2022
258 of 1613
11 | Page
local agency within the State of California, provided that:
 The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
 No more than 5% of the portfolio may be invested in any single issuer.  No more than 30% of the portfolio may be in Municipal Securities.  The maximum maturity does not exceed five (5) years.

12. Municipal securities (Registered Treasury Notes or Bonds) of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue‐producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California.
 The securities are rated in a rating category of “A” or its equivalent or better by at least one nationally recognized statistical rating organization (“NRSRO”).
 No more than 5% of the portfolio may be invested in any single issuer.  No more than 30% of the portfolio may be in Municipal Securities.  The maximum maturity does not exceed five (5) years.

13. Asset‐backed, mortgage‐backed, mortgage pass‐through securities, and collateralized mortgage obligations, provided that:
 The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
 No more than 20% of the total portfolio may be invested in these securities.  No more than 5% of the portfolio may be invested in any single Asset‐Backed or Commercial Mortgage security issuer. There is no issuer limitation on any Mortgage security where the issuer is the US Treasury or a Federal Agency/GSE.  The maximum legal final maturity does not exceed five (5) years.

14. Supranationals, provided that:
 Issues are US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter‐American Development Bank.
 The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO.
 No more than 30% of the total portfolio may be invested in these securities.  No more than 10% of the portfolio may be invested in any single issuer.  The maximum maturity does not exceed five (5) years.
259
CC 05-19-2022
259 of 1613
12 | Page

15. Various daily money market funds administered for or by trustees, paying agents and custodian banks contracted by the City of Cupertino may be purchased as allowed under State of California Government Code. Only funds holding U.S. Treasury obligations, Government agency obligations, or repurchase agreements collateralized by U.S.

Treasury or Government agency obligations can be utilized and may not exceed 20% of the cost value of the portfolio.

16. Ineligible investments are those that are not described herein, including but not limited to, common stocks and long‐term (over five years in maturity) notes and bonds are prohibited from use in this portfolio. It is noted that special circumstances arise that necessitate the purchase of securities beyond the five‐year limitation. On such occasions, requests must be approved by City Council prior to purchase. Additionally:
 State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options.  In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest‐only strips is prohibited.
 Investment in any security that could result in a zero‐interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that could result zero‐  or negative‐interest accrual if held to maturity are permitted.  Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited.
 Purchasing or selling securities on margin is prohibited.  The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited.
 The purchase of foreign currency denominated securities is prohibited.

RISK MANAGEMENT AND DIVERSIFICATION
Mitigating Credit Risk in the Portfolio
Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate credit risk by adopting the following strategies:

The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio.  No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy.  The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to manage the quality, liquidity or yield of the portfolio in 260
CC 05-19-2022
260 of 1613
13 | Page
response to market conditions or City’s risk preferences.  If the credit ratings of any security owned by the City are downgraded to a level below the quality required by this investment policy, it will be the City’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio.
 If a security is downgraded, the Treasurer will use discretion in determining whether to sell or hold the security based on its current maturity, the economic outlook for the issuer, and other relevant factors.
 If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio will be monitored and reported monthly to the City Council.

Mitigating Market Risk in the Portfolio
Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City recognizes that, over time, longer‐term portfolios have the potential to achieve higher returns. On the other hand, longer‐term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for short‐term cash needs, and by making longer‐term investments only with funds that are not needed for current cash flow purposes.

The City further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments. The City, therefore, adopts the following strategies to control and mitigate its exposure to market risk:
 The City will maintain a minimum of six months of budgeted operating expenditures in short term investments to provide sufficient liquidity for expected disbursements.
 The maximum stated final maturity of individual securities in the portfolio will be five (5) years, except as otherwise stated in this policy.  The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by the City based on the City’s investment objectives, constraints and risk tolerances.

DEPOSITS
To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured industrial loan company shall have received an overall rating of not less than “satisfactory” in its most recent evaluation by the appropriate federal financial supervisorial agency of its record of meeting the credit needs of California’s communities. 261
CC 05-19-2022
261 of 1613
14 | Page

INTEREST EARNINGS
All moneys earned and collected from investments authorized in this policy shall be allocated monthly to various fund accounts based on the cash balance in each fund as a percentage of the entire pooled portfolio.

REVIEW OF INVESTMENT PORTFOLIO
The Treasurer shall periodically, but no less than quarterly, review the portfolio to identify investments that do not comply with this investment policy and establish protocols for reporting major and critical incidences of noncompliance to the City Council.

POLICY REVIEW
The City of Cupertino’s investment policy shall be adopted by resolution of the City Council on an annual basis. This investment policy shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation of principal, liquidity, and yield, and its relevance to current law and financial and economic trends.

262
CC 05-19-2022
262 of 1613
15 | Page

GLOSSARY OF INVESTMENT TERMS
AGENCIES. Shorthand market terminology for any obligation issued by a government‐ sponsored entity (GSE), or a federally related institution. Most obligations of GSEs are not guaranteed by the full faith and credit of the US government. Examples are:

FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the agricultural industry. FFCB issues discount notes and bonds.

FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing market. FHLB issues discount notes and bonds.

FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and liquidity in the housing market. FHLMC, also called “FreddieMac” issues discount notes, bonds and mortgage pass‐through securities.

FNMA. Like FHLB and Freddie Mac, the Federal National Mortgage Association was established to provide credit and liquidity in the housing market. FNMA, also known as “Fannie Mae,” issues discount notes, bonds and mortgage pass‐through securities.

GNMA. The Government National Mortgage Association, known as “Ginnie Mae,” issues mortgage pass‐through securities, which are guaranteed by the full faith and credit of the US Government.

PEFCO. The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government.

TVA. The Tennessee Valley Authority provides flood control and power and promotes development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA currently issues discount notes and bonds.

ASKED. The price at which a seller offers to sell a security.

ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.

AVERAGE LIFE. In mortgage‐related investments, including CMOs, the average time to expected receipt of principal payments, weighted by the amount of principal expected.

BANKER’S ACCEPTANCE. A money market instrument created to facilitate international trade transactions. It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which “accepts” the obligation to pay the investor.

BENCHMARK. A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.

BID. The price at which a buyer offers to buy a security. 263
CC 05-19-2022
263 of 1613
16 | Page
BROKER. A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from his own position.

CALLABLE. A callable security gives the issuer the option to call it from the investor prior to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline since an issuer issues securities, it will likely call its current securities and reissue them at a lower rate of interest. Callable securities have reinvestment risk as the investor may receive its principal back when interest rates are lower than when the investment was initially made.

CERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a certificate. Large denomination CDs may be marketable.

CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS).  A private placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage. CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.

COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public monies.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMO). Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.

COMMERCIAL PAPER. The short‐term unsecured debt of corporations.

COST YIELD. The annual income from an investment divided by the purchase cost. Because it does not give effect to premiums and discounts which may have been included in the purchase cost, it is an incomplete measure of return.

COUPON. The rate of return at which interest is paid on a bond.

CREDIT RISK. The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer.

CURRENT YIELD. The annual income from an investment divided by the current market value.

Since the mathematical calculation relies on the current market value rather than the investor’s cost, current yield is unrelated to the actual return the investor will earn if the security is held to maturity.

DEALER. A dealer acts as a principal in security transactions, selling securities from and buying securities for his own position.

DEBENTURE. A bond secured only by the general credit of the issuer. 264
CC 05-19-2022
264 of 1613
17 | Page
DELIVERY VS. PAYMENT (DVP). A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser’s agent.

DERIVATIVE. Any security that has principal and/or interest payments which are subject to uncertainty (but not for reasons of default or credit risk) as to timing and/or amount, or any security which represents a component of another security which has been separated from other components (“Stripped” coupons and principal). A derivative is also defined as a financial instrument the value of which is totally or partially derived from the value of another instrument, interest rate, or index.

DISCOUNT. The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short‐term securities, such as T‐bills and banker’s acceptances, are known as discount securities. They sell at a discount from par, and return the par value to the investor at maturity without additional interest. Other securities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.

DIVERSIFICATION. Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.

DURATION. The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a bond to changes in interest rates. (See modified duration).

FEDERAL FUNDS RATE. The rate of interest charged by banks for short‐term loans to other banks. The Federal Reserve Bank through open‐market operations establishes it.

FEDERAL OPEN MARKET COMMITTEE. A committee of the Federal Reserve Board that establishes monetary policy and executes it through temporary and permanent changes to the supply of bank reserves.

LEVERAGE. Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.

LIQUIDITY. The speed and ease with which an asset can be converted to cash.

LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government entities and certain non‐profit organizations in California that is managed by the State Treasurer’s Office.

LOCAL GOVERNMENT INVESTMENT POOL.   Investment pools that range from the State Treasurer’s Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers Authorities (JPAs). These funds are not subject to the same SEC rules applicable to money market mutual funds.

MAKE WHOLE CALL. A type of call provision on a bond that allows the issuer to pay off the remaining debt early. Unlike a call option, with a make whole call provision, the issuer makes a 265
CC 05-19-2022
265 of 1613
18 | Page
lump sum payment that equals the net present value (NPV) of future coupon payments that will not be paid because of the call. With this type of call, an investoris compensated, or ʺmade whole.ʺ MARGIN. The difference between the market value of a security and the loan a broker makes using that security as collateral.

MARKET RISK. The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.

MARKET VALUE. The price at which a security can be traded.

MARKING TO MARKET. The process of posting current market values for securities in a portfolio.

MATURITY. The final date upon which the principal of a security becomes due and payable.

MEDIUM TERM NOTES. Unsecured, investment‐grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.

MODIFIED DURATION. The percent change in price for a 100 basis point change in yields.

Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk.

MONEY MARKET. The market in which short‐term debt instruments (T‐bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.

MORTGAGE PASS‐THROUGH SECURITIES. A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security.

MUNICIPAL SECURITIES. Securities issued by state and local agencies to finance capital and operating expenses.

MUTUAL FUND. An entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund’s prospectus. Mutual funds can be invested in various types of domestic and/or international stocks, bonds, and money market instruments, as set forth in the individual fund’s prospectus. For most large, institutional investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio.

NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO).

A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investmentʹs risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moodyʹs. 266
CC 05-19-2022
266 of 1613
19 | Page
NEGOTIABLE CD.  A short‐term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state‐licensed branch of a foreign bank.  Negotiable CDs are traded in a secondary market and are payable upon order to the bearer or initial depositor (investor).

PREMIUM. The difference between the par value of a bond and the cost of the bond, when the cost is above par.

PREPAYMENT SPEED. A measure of how quickly principal is repaid to investors in mortgage securities.

PREPAYMENT WINDOW. The time period over which principal repayments will be received on mortgage securities at a specified prepayment speed.

PRIMARY DEALER. A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S.

Government securities market.

PRUDENT PERSON (PRUDENT INVESTOR) RULE. A standard of responsibility which applies to fiduciaries. In California, the rule is stated as “Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes.” REALIZED YIELD. The change in value of the portfolio due to interest received and interest earned and realized gains and losses. It does not give effect to changes in market value on securities, which have not been sold from the portfolio.

REGIONAL DEALER. A financial intermediary that buys and sells securities for the benefit of its customers without maintaining substantial inventories of securities and that is not a primary dealer.

REPURCHASE AGREEMENT. Short‐term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller’s point of view, the same transaction is a reverse repurchase agreement.

SAFEKEEPING. A service to bank customers whereby securities are held by the bank in the customer’s name.

STRUCTURED NOTE. A complex, fixed income instrument, which pays interest, based on a formula tied to other interest rates, commodities or indices. Examples include inverse floating rate notes which have coupons that increase when other interest rates are falling, and which fall when other interest rates are rising, and ʺdual index floaters,ʺ which pay interest based on the relationship between two other interest rates  ‐ for example, the yield on the ten‐year Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements.
267
CC 05-19-2022
267 of 1613
20 | Page
SUPRANATIONAL.  A Supranational is a multi‐national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.

TOTAL RATE OF RETURN. A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains, and losses in the portfolio.

U.S. TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk, and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds.

TREASURY BILLS. All securities issued with initial maturities of one year or less are issued as discounted instruments, and are called Treasury bills. The Treasury currently issues three‐ and six‐month T‐bills at regular weekly auctions. It also issues “cash management” bills as needed to smooth out cash flows.

TREASURY NOTES. All securities issued with initial maturities of two to ten years are called Treasury notes, and pay interest semi‐annually.

TREASURY BONDS. All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi‐annually.

VOLATILITY. The rate at which security prices change with changes in general economic conditions or the general level of interest rates.

YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the expected cash flows from the investment to its cost.

City Manager’s signature: _______________________________ Date: _______________________________
Director of Administrative Services’ signature: _______________________________ Date: _______________________________
268
CC 05-19-2022
268 of 1613
21 | Page
Revisions:

Revisions:

City Manager’s signature: _______________________________ Date: _______________________________
269
CC 05-19-2022
269 of 1613

CITY OF CUPERTINO
Agenda Item
22-10866 Agenda Date: 5/19/2022
Agenda #: 10.

Subject: Consider accepting the Third Quarter Financial Report for Fiscal Year 2021‐22; consider adopting Resolution 22‐059 approving Budget Modification #2122-198 increasing appropriations by $529,935 and revenues by $9,448,487 (Continued from May 17, 2022)

1. Accept the City Manager's Third Quarter Financial Report for FY 2021-22.

2. Adopt Resolution 22-059 approving Budget Modification #2122-198 increasing appropriations by $529,935 and revenues by $9,448,487
CITY OF CUPERTINO Page 1 of 1 Printed on 5/18/2022
powered by Legistar™270
CC 05-19-2022
270 of 1613

CITY COUNCIL STAFF REPORT
Meeting: May 19, 2022
Subject
Consider accepting the Third Quarter Financial Report for Fiscal Year 2021‐22; consider adopting Resolution 22‐XXX approving Budget Modification #2122‐198 increasing appropriations by $529,935 and revenues by $9,448,487.

Recommended Action

1. Accept the City Managerʹs Third Quarter Financial Report for FY 2021‐22.

2. Adopt Resolution 22‐XXX approving Budget Modification #2122‐198 increasing appropriations by $529,935 and revenues by $9,448,487.

Background
On June 15, 2021, the City Council adopted the Fiscal Year (FY) 2021‐22 Budget, a $148,845,235 spending plan funded by $132,850,958 of revenues and $15,994,277 of fund balance. On November 16, 2021, Council received the City Managerʹs First Quarter Financial Report, which revised the budget to account for encumbrances of $16,868,361 and carryover appropriations of $53,863,626 from FY 2021‐22. The carryover appropriations included $18.5 million for capital projects, $19 million for Vallco Town Center (renamed The Rise), and $5.9 million for Transportation projects. Encumbrances represent funds for obligations related to unfilled purchase orders or unfilled contracts rolled over from one year to the next until those obligations are fulfilled or terminated.

Carryover appropriations are unencumbered funds for unfinished projects carried over to the following fiscal year to complete those projects.

In the first three quarters of FY 2021‐22, Council approved $19.0 million in additional appropriations, mostly related to the American Rescue Plan Act of 2021 ($4.9 million), I‐ 280 Trail ($1.9 million), First Quarter Adjustments ($1.6 million), and Mid‐Year Adjustments ($10.0 million).

With carryovers, encumbrances, and Council‐approved adjustments, the amended budget is $238,620,305. The FY 2021‐22 budget adjustments are summarized in the following table:
271
CC 05-19-2022
271 of 1613
2 Third Quarter Financial Report Summary of Budget Adjustments by Fund Discussion
The Third Quarter Financial Report focuses on the Cityʹs budget as of March 31, 2022. It recommends adjustments to ensure the budget reflects the Cityʹs current revenue outlook and is responsive to changing spending priorities.

The chart below shows that $529,935 in additional appropriations are requested, offset by $9,448,487 in additional revenue. If approved, the Cityʹs new spending plan would total $239,150,240 for all funds.

Third Quarter Financial Report Summary by Fund
Approval of these requests would increase the projected ending fund balance for all funds by $8,918,552, as summarized in the table below:

Third Quarter Requests by Department

Fund
FY 2021‐22
Adopted Budget Carryovers Encumbrances
Adjustments
Approved in
1st‐3rd Quarter
FY 2021‐22
Amended Budget
as of March 31, 2021
General $        89,767,034 $           22,657,533 $          4,906,141 $              17,138,606 $                 134,469,314 Special Revenue           18,597,024                          11,749,252 2,414,116                   1,122,681                      33,883,073 Debt Service              ‐ 2,676,000                                                        ‐  ‐                                                          2,676,000 Capital Projects           19,540,048                          18,540,682 9,149,571                        88,301                      47,318,602 Enterprise             9,417,117                                  855,369 189,833                      477,450                      10,939,769 Internal Service             8,848,012                                    60,790 208,700                      216,045                        9,333,547 Total All Funds 148, $       845,235 $        53,863,626 $        16,868,361 $              19,043,083 $                 238,620,305 Fund
FY 2021‐22
Amended Budget
as of March 31, 2021
Requested
3rd Quarter
Adjustments
FY 2021‐22
Year‐End
Projection
General $                    134,469,314 $                  327,600 $           134,796,914 Special Revenue                         33,883,073                                                   ‐ 33,883,073 Debt Service                           2,676,000                                                     ‐ 2,676,000 Capital Projects                         47,318,602                                       130,235 47,448,837 Enterprise                         10,939,769                                         72,100 11,011,869 Internal Service                           9,333,547                                                     ‐ 9,333,547 Total All Funds $                    238,620,305 $                  529,935 $           239,150,240 Department Expense Revenue Change in
Fund Balance
Community Development $         200,642 $         261,815 $              61,173 CIP            130,235            130,235                          ‐ Parks and Recreation              72,100                       ‐               (72,100) Public Works              (3,277)                       ‐                  3,277 Non‐Departmental            130,235         9,056,437            8,926,202 Total All Departments $         529,935 $      9,448,487 $         8,918,552 272
CC 05-19-2022
272 of 1613
3 General Fund Update
4‐Year Comparison of Revenues, Expenditures, and Changes to Fund Balance The General Fundʹs historical revenue, expenditures, and fund balance demonstrate that amended expenditures have exceeded revenues, leading to the use of fund balance.

However, it was not due to a structural deficit but due to the transfer out of excess fund balance from the General Fund to the Capital Reserve per the Cityʹs use of one‐time funds policy. Due to the Cityʹs encumbrance and budget carryover process, fund balance increased as part of year‐end actuals.

Revenue
As of Third Quarter, General Fund revenue is $83.4 million, an increase of $10.4 million (or 14%) from last year due to a one‐time transfer related to the American Rescue Plan Act. Additionally, transient occupancy tax revenue is $1.0 million, or 81%, higher than last year as travel rebounds due to the relaxation of pandemic‐based restrictions. 273
CC 05-19-2022
273 of 1613
4 Comparison of FY 2020‐21 and FY 2021‐22 General Fund Third Quarter Revenues Sales Tax received as of the third quarter was $0.2 million (or 1%) higher than last year due to increases in Business and Industry, Restaurants and Hotels, General Consumer Goods, and Fuel and Service Stations, offset by a decrease in the county pool allocation.

HdL, the Cityʹs sales tax consultant, recently reported sales tax performance from October 2021 to December 2021. Business and Industry increased from last year. As the economy reopened, Restaurants and Hotels, General Consumer Goods, Fuel and Service Stations, and Autos and Transportation were up 68%, 22%, 78%, and 9%, respectively. The increases were offset by a decrease in the county pool allocation.

The Cityʹs gross sales tax receipts for October 2021 to December 2021 increased from last year. The holiday shopping season saw increased online and in‐person shopping. Family apparel and specialty store sales boosted general consumer goods results. With capacity restrictions fading away, restaurant‐hotel receipts jumped 68% as people enjoyed dining experiences outside the home. The return to the office also added to the surge in casual and fast‐casual receipts. Similarly, service station revenues skyrocketed as high gas prices and increased travel propelled receipts up. Conversely, the Cityʹs share of the county pool allocation declined, driven by taxpayer reporting changes and a shift as other agencies in the county realized larger quarterly growth. Nonetheless, e‐commerce and the countywide pool remain a reliable source of revenue.

As prior pandemic‐based restrictions are relaxed, the Cityʹs major industry groups are returning to normalcy. As of March 31, 2022, the Cityʹs sales tax revenues were approximately 119% of the budget estimate. Staff recommends a $9,056,437 increase in the Cityʹs sales tax estimate to align with year‐end projections. 3rd Quarter 3rd Quarter
2021 2022
05 ‐ Sales tax 33,009,456 $              $             33,222,420 $                  212,964 1% 10 ‐ Property tax 17,078,696                                17,987,045                     908,349 5% 15 ‐ Transient occupancy                  1,257,976                  2,276,564                  1,018,587 81% 20 ‐ Utility tax                  2,053,658                  2,135,032                       81,374 4% 25 ‐ Franchise fees                  1,486,102                  1,521,067                       34,965 2% 30 ‐ Other taxes                  2,156,548                  1,482,448                    (674,100) ‐31% 35 ‐ Licenses and permits                  3,099,012                  3,096,601                        (2,411) 0% 40 ‐ Use of money and property                  1,427,530                  1,710,744                    283,214 20% 45 ‐ Intergovernmental revenue                  1,139,709                  3,594,821                  2,455,112 215% 50 ‐ Charges for services                  8,207,298                  9,786,625                  1,579,328 19% 55 ‐ Fines and forfeitures                       83,408                     193,836                     110,428 132% 60 ‐ Miscellaneous                  1,167,244                  1,491,835                     324,591 28% 65 ‐ Transfers in                     507,831                  4,862,387                  4,354,556 857% 70 ‐ Other financing sources                     391,475                       77,537                    (313,938) ‐80% Grand Total $             73,065,944 $             83,438,962 $             10,373,018 14% Revenue Category Variance % Change
274
CC 05-19-2022
274 of 1613
5 While sales tax was anticipated to decrease during the pandemic, it increased significantly due to positive impacts from online sales. The City continues to closely monitor the situation as it is believed to be a one‐time increase due to the pandemic. In addition, the California Department of Tax and Fee Administration (CDTFA) is currently auditing the Cityʹs sales tax revenues. The impact of this audit is unknown, but it has the potential to have a significant effect on the Cityʹs sales tax revenues.

Property Tax revenue is $0.9 million (or 5%) higher than last year. The largest category, Residential properties, increased by $829.9 million (or 5%). Commercial properties increased $572.8 million (or 7.6%). Unsecured assets in Cupertino decreased by $699.7 million (or 28.9%). Overall, the FY 2021‐22 property tax revenues are anticipated to increase by 3.7% from the previous fiscal year. The County Assessorʹs Office will apply a 2% inflator to the 2022‐23 roll. The impact of telecommuting on property values is still uncertain. Despite the uncertainty, the Cityʹs property tax base remains strong, and HdL is currently projecting property taxes over the next five years, as presented below:

FY 2022‐23 FY 2023‐24 FY 2024‐25 FY 2025‐26 FY 2026‐27
$29,628,266 $30,898,414 $32,223,572 $33,616,619 $35,072,745 Transient Occupancy Tax continued to be affected by the pandemic. While the City anticipates moderate recovery as the economy reopens, much of the transient occupancy taxʹs recovery will be driven by whether business travel resumes. Staff estimates a recovery to 75% of pre‐pandemic levels in FY 2023‐24. As of the third quarter, the City recognized $2.3 million in transient occupancy tax, a $1.0 million (or 81%) increase from last year.

Utility Tax is up approximately $81,000 (or 4%), mainly due to increases in utility tax revenue from PG&E.

Other Taxes decreased by approximately $0.7 million (or 31%) primarily due to a decrease in construction tax, partially offset by an increase in property transfer tax.

Franchise Fees increased by $35,000 (or 2%) primarily due to Recology franchise fees.

Licenses and Permits are relatively unchanged from the last fiscal year.

Use of Money and Property increased by $0.3 million (or 20%) due to rental revenues from City properties and antenna sites.

Intergovernmental Revenue increased by $2.5 million (or 215%) due to American Rescue Plan Act (ARPA) funding. The increase was partially offset by Coronavirus Relief Funds received last year.
275
CC 05-19-2022
275 of 1613
6 Charges for Services increased by $1.6 million (or 19%), driven mainly by increases in Cost Allocation Plan revenues and revenues from the library to reimburse the City for library operational maintenance costs.

Fines and Forfeitures decreased by $0.1 million (or 132%) primarily due to increased parking fines as pandemic restrictions were relaxed.

Miscellaneous revenue increased by $0.3 million (or 28%) due to receipt of restitution from former City employee Jennifer Chang as a result of her criminal conviction. Decreases in miscellaneous development revenues partially offset the increase due to the restitution.

Transfers In increased by $4.4 million (or 857%) due to transfers to allocate American Rescue Plan Act funding to departments.

Other Financing Sources decreased by $0.3 million (or 80%) due to a decrease in refundable deposit administrative fees received by the Community Development Department.

Expenditures
As of Third Quarter, General Fund expenditures are $77.9 million, an increase of $15.0 million (or 24%) compared to last year. Transfers increased due to transfers to allocate American Rescue Plan Act funding to departments and transfers to the Capital Reserve.

The following table shows the differences between General Fund expenditures as of the third quarter in the current and prior fiscal years:

276
CC 05-19-2022
276 of 1613
7 Comparison of FY 2020‐21 and FY 2021‐22 General Fund Third Quarter Expenditures Salary and Benefits are increasing by approximately $1.2 million (or 6%). Compensation increases are due primarily to cost‐of‐living adjustments (COLAs) approved by Council on July 16, 2019, the transfer of the City Attorneyʹs Office in‐house, and additional part‐ time staff for Outdoor Recreation. The most recent COLAs were effective July 2021. As the Cityʹs current labor agreements expire on June 30, 2022, the City is currently negotiating labor agreements. Transferring the City Attorneyʹs Office in‐house shifted the costs from Contract Services to Compensation and Benefits. Benefit increases were primarily due to increases in retirement, health, and workersʹ compensation costs. As part of the budget reduction strategies in FY 2020‐21, savings through attrition of approximately $0.8 million are anticipated, and current year‐end projections are aligned.

Materials costs are up approximately $0.5 million (or 17%). Materials costs are higher due to software, electricity, general supplies, and conference and training increases. Last year, Materials costs were lower due to budget reduction strategies. Many delayed projects due to budget reduction strategies resumed in FY 2021‐22. Conference and training expenses increased as travel restrictions ended. Electricity costs increased due to higher rates.

Contract Services have increased by approximately $0.3 million (or 2%). Contract Services costs are higher due to increased law enforcement costs per the Santa Clara County Sheriffʹs Office contract, increased insurance costs for Workersʹ  Compensation and general liability insurance, and crossing guard services for Safe Routes 2 School. Crossing guard services, which were suspended due to COVID‐19, resumed in August 2021 as schools reopened. Transferring the City Attorneyʹs Office in‐house shifted the costs from Contract Services to Compensation and Benefits.

Cost Allocation increases are approximately $1.1 million (or 14%) primarily due to higher Innovation & Technology and Human Resources costs.

Capital Outlay costs are decreasing by approximately $0.1 million (or 81%). Last year, the City made a $0.1 million deposit for the 10455 Torre Avenue property acquisition. 3rd Quarter 3rd Quarter
2021 2022
05 ‐ Employee compensation 14,025,160 $              $             14,648,204 $                  623,045 4% 10 ‐ Employee benefits 6,400,137                                    6,939,529                     539,392 8% 15 ‐ Materials                  2,670,336                  3,127,620                     457,285 17% 20 ‐ Contract services                15,384,032                15,723,904                     339,872 2% 25 ‐ Cost allocation                  7,855,155                  8,961,047                  1,105,892 14% 30 ‐ Capital outlays                     171,322                       32,700                    (138,622) ‐81% 31 ‐ Special projects                     988,806                  1,842,843                     854,037 86% 45 ‐ Transfer out                15,148,689                26,099,371                10,950,682 72% 50 ‐ Other financing uses                     205,633                     477,138                     271,505 132% Grand Total $             62,849,562 $             77,854,996 $             15,005,433 24% Expenditure Category Variance % Change
277
CC 05-19-2022
277 of 1613
8 Special Projects increases are approximately $0.9 million (or 86%) due to increased one‐ time expenditures. Spending on Special Projects varies from year to year. Last year, Special Projects costs were lower due to budget reduction strategies.

Transfers Out are increasing by approximately $11.0 million (or 72%) due to transfers to allocate American Rescue Plan Act funding to departments and a mid‐year transfer to the Capital Reserve.

Other Financing Uses have increased by $0.3 million (or 132%) due to refundable deposit on‐call contracts and special contracts for the Community Development Department.

All Other Funds Update and Year‐End Projections
Revenue
As of Third Quarter, revenue in all other funds is $55.7 million, $1.2 million (or 2%) lower than last year. Other Taxes increased due to increased park dedication fees, and Transfers increased due to American Rescue Plan Act funding. Last year, Other Financing Sources were higher due to refinancing the Cityʹs debt.

Other Taxes increased by approximately $8.8 million (or 2,792%) due to increased park dedication fees related to the Westport development.

Use of Money and Property decreased by approximately $51,000 (or 6%) due to reduced interest earnings from the Cityʹs investment portfolio compared to the previous fiscal year.

Intergovernmental Revenue increased by approximately $0.9 million (or 29%) due to Valley Transportation Authority (VTA) Measure B funding for the I‐280/Junipero Serra Trail project.
3rd Quarter 3rd Quarter
2021 2022
30 ‐ Other taxes $                  316,965 $               9,166,712 $               8,849,747 2792% 40 ‐ Use of money and property                     811,589                     760,208                      (51,382) ‐6% 45 ‐ Intergovernmental revenue                  2,926,799                  3,782,723                     855,924 29% 50 ‐ Charges for services                  7,453,156                  8,568,039                  1,114,883 15% 55 ‐ Fines and forfeitures                         3,923                       36,154                       32,231 822% 60 ‐ Miscellaneous                  2,042,549                       86,803                 (1,955,747) ‐96% 65 ‐ Transfers in                17,138,138                33,040,032                15,901,894 93% 70 ‐ Other financing sources                26,193,470                    277,364               (25,916,106) ‐99% Grand Total $             56,886,590 $             55,718,034 $              (1,168,556) ‐2% Revenue Category Variance % Change
278
CC 05-19-2022
278 of 1613
9 Charges for services increased by approximately $1.1 million (or 15%) due to increased Youth and Teen Recreation, Outdoor Recreation, and Sports Center revenues. The Parks and Recreation Department was able to resume programs as pandemic restrictions eased.

Fines and forfeitures increased by approximately $32,000 (or 822%) due to increased citations. Last year, citations were lower due to shelter‐in‐place restrictions.

Miscellaneous revenue decreased by approximately $2.0 million (or 96%). Last year, revenue was higher due to an Apple grant to fund Capital Improvement Program projects for bikeways, trails, and sidewalks.

Transfers In increased by approximately $15.9 million (or 93%) due to a mid‐year transfer to the Capital Reserve and transfers to fund Capital Improvement Program projects.

Other financing sources decreased by approximately $25.9 million (or 99%). Last year, one‐ time revenue increases were due to the refinancing of the Cityʹs debt.

Expenditures
As of Third Quarter, expenditures in all other funds are $36.5 million, a decrease of $18.4 million (or 33%) from last year. Last year, debt service expenditures were higher due to refinancing the Cityʹs debt. This year, transfers increased to fund Capital Improvement Projects. Contract services also increased due to a new Recology agreement and the resumption of in‐person programs at the Sports Center.

Salary and Benefits are increasing by approximately $18,000 (or 0%). Compensation decreased because Public Works staff stopped charging staff time to Capital Improvement Program project budgets. Staff time is charged to the Public Works department instead.

Savings through attrition of approximately $800,000 are anticipated, and current year‐end projections are aligned.
3rd Quarter 3rd Quarter
2021 2022
05 ‐ Employee compensation 3,452,686 $                $               3,402,273 $                   (50,413) ‐1% 10 ‐ Employee benefits                  2,478,311                  2,546,863 68,552 3% 15 ‐ Materials                  1,736,435                  1,576,534 (159,901) ‐9% 20 ‐ Contract services                  2,568,375                  3,607,126 1,038,751 40% 25 ‐ Cost allocation                  1,642,905                  1,815,652 172,747 11% 30 ‐ Capital outlays                  9,106,301                  8,682,369 (423,932) ‐5% 31 ‐ Special projects                  2,904,042                  2,401,778 (502,264) ‐17% 40 ‐ Debt services                27,645,398                     398,000 (27,247,398) ‐99% 45 ‐ Transfer out                  2,497,280                11,803,048 9,305,768 373% Grand Total $             54,890,745 $             36,520,794 $            (18,369,951) ‐33% Expenditure Category Variance % Change
279
CC 05-19-2022
279 of 1613
10 Materials have decreased by approximately $0.2 million (or 9%). Expenditures were higher last year due to COVID‐19 grant expenditures in the Community Development Block Grant (CDBG) Fund. Telephone and data services increased due to the addition of Wi‐Fi at three public parks.