Cities Index.
A – FY 2022-23 ACFR

Cupertino City Council
July 9, 2024

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A – FY 2022-23 ACFR
Meeting
July 9, 2024
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Cupertino City Council
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FISCAL YEAR 2022-2023
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CITY OF CUPERTINO, CALIFORNIA

ANNUAL COMPREHENSIVE

FINANCIAL REPORT

WITH REPORTS ON AUDIT

BY INDEPENDENT

CERTIFIED PUBLIC ACCOUNTANTS

FOR THE YEAR ENDED
JUNE 30, 2023
Prepared by:

The City of Cupertino Administrative Services Department Finance Division

City of Cupertino
Annual Comprehensive Financial Report
For the Year Ended June 30, 2023
Table of Contents
Page
INTRODUCTORY SECTION (Unaudited)
Letter of Transmittal ...................................................................................................................................................... i City Council and Directory of City Officials .............................................................................................................. vii Organizational Chart .................................................................................................................................................. viii Commissions and Committees ..................................................................................................................................... ix GFOA Certificate of Achievement for Excellence in Financial Reporting .................................................................. x

FINANCIAL SECTION
Independent Auditors’ Report on Financial Statements ......................................................................................... 1 Management’ s Discussion and Analysis (Required Supplementary Information) (Unaudited) ......................... 5 Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position .............................................................................................................................. 28 Statement of Activities ................................................................................................................................... 30 Fund Financial Statements:

Governmental Fund Financial Statements:

Balance Sheet .......................................................................................................................................... 34 Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Position ......................................................................... 37 Statement of Revenues, Expenditures, and
Changes in Fund Balances ................................................................................................................ 38 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities ...................................................................................................................... 40 Proprietary Fund Financial Statements:

Statement of Net Position ........................................................................................................................ 42 Statement of Revenues, Expenses, and Changes in Net Position ............................................................ 46 Statement of Cash Flows ......................................................................................................................... 48 Notes to the Basic Financial Statements ........................................................................................................... 57 City of Cupertino
Annual Comprehensive Financial Report
For the Year Ended June 30, 2023
Table of Contents (Continued)
Page
FINANCIAL SECTION (Continued)
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule:

General Fund ................................................................................................................................................ 103 Transportation Special Revenue Fund ......................................................................................................... 104 Housing Development Special Revenue Fund ............................................................................................. 105 Notes to the Budgetary Comparison Schedules ................................................................................................ 107 Schedule of Changes inthe Net Pension Liability and Related Ratios– Last Ten Fiscal Years Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan ..................................... 108 Schedule of Plan Contributions - Pension – Last Ten Fiscal Years Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan ..................................... 110 Schedule of Changes in the Net OPEB Liability and Related Ratios – Last Ten Fiscal Years Single Employer Defined Benefit Other Post Employment Benefit Plan .................................................... 112 Schedule of Plan Contributions - Other postemployment Benefits Single Employer Defined Benefit OPEB Plan ............................................................................................. 114 Supplementary Information:

Other than the General Fund and Special Revenue Funds ................................................................................. 117 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual:

Public Facilities Corporation Debt Service Fund ......................................................................................... 119 Capital Improvement Projects Capital Projects Fund .................................................................................. 120 Nonmajor Governmental Funds:

Description of Nonmajor Governmental Funds ........................................................................................... 121 Combining Balance Sheet ............................................................................................................................ 122 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .................................... 124 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual:

Storm Drain Improvement Special Revenue Fund ................................................................................ 126 Park Dedication Special Revenue Fund ................................................................................................ 127 Environmental Management/Clean Creeks Special Revenue Fund ...................................................... 128 Traffic Impact Special Revenue Fund ................................................................................................... 129 Stevens Creek Corridor Park Capital Projects Fund .............................................................................. 130 Nonmajor Enterprise Funds:

Combining Statement of Net Position.......................................................................................................... 133 Combining Statement of Revenues, Expenses and Changes in Net Position .............................................. 134 Combining Statement of Cash Flows ........................................................................................................... 135 Internal Service Funds:

Combining Statement of Net Position.......................................................................................................... 138 Combining Statement of Revenues, Expenses, and Changes in Net Position ............................................. 140 Combining Statement of Cash Flows ........................................................................................................... 142 City of Cupertino
Annual Comprehensive Financial Report
For the Year Ended June 30, 2023
Table of Contents (Continued)
Page
STATISTICAL SECTION (Unaudited)
Description of Statistical Section Contents ............................................................................................................... 147 Financial Trends:

Net Position By Component - Last Ten Fiscal Years ............................................................................................ 148 Changes in Net Position - Last Ten Fiscal Years .................................................................................................. 150 Fund Balances of Governmental Funds - Last Ten Fiscal Years ........................................................................... 154 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years ........................................................ 156 Revenue Capacity:

Assessed and Estimated Actual Value of Taxable Property - Last Five Fiscal Years .......................................... 159 Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years .................................................................... 160 Principal Property Taxpayers – Last Fiscal Year and Nine Fiscal Years Ago ...................................................... 162 Property Tax Levies, and Tax Collections - Last Ten Fiscal Years ...................................................................... 163 Debt Capacity:

Ratios of Outstanding Debt by Type - Last Ten Fiscal Years ............................................................................... 164 Direct and Overlapping Bonded Debt .................................................................................................................... 165 Legal Debt Margin Information - Last Ten Fiscal Years ....................................................................................... 166 Ratio of General Bonded Debt Outstanding - Last Ten Fiscal Years .................................................................... 167 Demographic and Economic Information:

Demographic and Economic Statistics – Last Ten Fiscal Years ........................................................................... 168 2023 Employee Ranking ........................................................................................................................................ 169 Operating Information:

Full-Time Equivalent City Employees By Function/Program – Last Ten Fiscal Years ........................................ 171 Operating Indicators by Function / Program – Last Ten Fiscal Years ................................................................... 172 Capital Assets By Function – Last Ten Fiscal Years ............................................................................................. 174 Community Economic Profile ................................................................................................................................ 177 This page intentionally left blank.
i
July 1, 2024
To the Citizens of Cupertino, Honorable Mayor,
Members of the City Council, and City Manager:

Itis our pleasure to submit the Annual Comprehensive Financial Report (ACFR) for the City of Cupertino the City), California for the fiscal year ended June 30, 2023. The report is prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) set by the Governmental Accounting Standards Board ( GASB). The report presents City information on an entity- wide basis and a more detailed fund-level basis. The fund-level reports emphasize the City’s major funds. A Management Discussion and Analysis (MD&A) presents acomparative analysis of current andprior 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 ofthe 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. The Director of Administrative Services shall also be appointed Treasurer per the Cupertino Municipal Code 2.48.020. 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
ii

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 59,471 (California Department of Finance, January 2024).

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 ofthe 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 tothrive. The City strives to retain and attract local companies through active outreach and a responsive and customer-oriented entitlement process. The City 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.

According to the 2022- 2023 Assessor’ s Annual Report for Santa Clara County, Cupertino’ s net assessment roll growth increased by nearly $2,084 million, or 7.2%, from the prior year. Residential use values increased 7.2% a total of $1,260 million and represented 61.1% of all growth experienced in the City.

Commercial properties posted an increase of $1,066 million, or 13.1%, due to the movement of assets from the unsecured to the secure roll. The industrial properties reported growth of $280 million, or 24.7%, on thestrength of parcels adding improvement values between tax years or tenants at these sites adding fixtures and business assets. Unsecured assets in Cupertino decreased by $655 million, or 38% due tothe movement of assets from the unsecured to the secured roll, which contributed to the large growth seen in the commercial use category.

The City of Cupertino has experienced significant fluctuations in sales tax revenues over the past several fiscal years. In FY 2018-19, the City received $24.9 million in sales tax revenue. This amount increased substantially in FY 2019-20 to $35.7 million, and further to $42.6 million in FY 2020-21. During FY 2021- 22, the sales tax revenue slightly decreased to $42.2 million. In FY 2022- 23, sales tax revenue has decreased to $34.8 million, to a pre-pandemic level, driven by a return to in-person purchases. iii
The increase in sales tax revenue during FY 2020-21 and FY 2021-22 can be attributed to strong growth in two major industry groups: Business and Industry, and State & County Pools. These groups experienced the greatest growth during the pandemic. However, in the current fiscal year, these groups have returned to FY 2019-20 levels. Other industry groups have shown modest but constant growth over the years, contributing to the City's diversified economic base.

Sales taxes are comprised of eight major industry groups: Business and Industry, State & County Pools, Restaurants and Hotels, General Consumer Goods, Fuel and Service Stations, Food and Drugs, Building and Construction, and Autos and Transportation. For FY 2022-23, the composition of sales tax revenue received from these groups is as follows: Business and Industry (71.6%), State & County Pools (19.3%), Restaurants and Hotels (4.1%), General Consumer Goods (2.5%), Fuel and Service Stations (1.2%), Food and Drugs (0.8%), Building and Construction (0.4%), and Autos and Transportation (0.1%).

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 sq. ft. 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 inthe 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, 2022 reported a pension unfunded accrued liability of $41.3 million with annual payments to CalPERS of 32.75% and 32.81% of projected payroll for 2023-24 and 2024-25, respectively, with ongoing decreases after that. CalPERS’ strong performance in FY 2020-21 with a return of 21.3%,triggered a reduction in the discount rate from 7% to

6.9%, leading to a greater unfunded liability for all agencies and increased normal costs and mandatory annual contributions. To address long-term rising costs, Cupertino and state law has reduced pension benefits for new hires and increased employee contributions. As of the June 30, 2023, the City has a Net OPEB Liability of $0.5 million with annual payments to a retiree health plan trust at 2.1% of payroll. The funding status changed from over-funded to a liability due to negative year-over-year market conditions and change in demographic assumptions.
5,000
10,000
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30,000
35,000
40,000
45,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Sales Tax in thousands)
iv
In addition to the City’ s Section 115 OPEB Investment Trust established in 2010, in FY 2017-18, the City Council approved the establishment of a Section 115 trust as part of a pension rate stabilization program.

An initial investment of $8 million was made in FY 2018- 19, with additional contributions of $4 million in FY 2019-20, $ 2 million in FY 2020-21, and $ 2 million in FY 2021-22. In FY 2022-23 instead of contributing additional funds to the trust, the Council authorized theuse oftrust funds to cover direct OPEB costs amounting to $1,385,359 to assist the City in balancing a projected deficit due to a potential loss of sales tax revenue due to the California Department of Tax and Fee Administration ( CDTFA) Audit of one the City’s sales taxpayers.

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. Abuild-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 FY 2009-10.

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

The ARP is a $1.9 trillion economic stimulus bill. Within the ARP, the Coronavirus Local Fiscal Recovery Fund provided $350 billionfor 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 received two payments totaling $9,694,773 in SLFRF funding, with the first payment received in May 2021 in the amount of $4,847, 386. 50 and the second payment 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 longas the award funds for the obligations incurred by December 31, 2024 are spent by December 31, 2026.

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. The City subsequently submitted compliance reporting allocating $3,594,028 and $6,100,745 for fiscal year 2021-22 and 2022-23, respectively, fully reporting allocated funds to offset revenue losses in transient occupancy taxes.

ECONOMIC INITIATIVES
With the expanded Apple presence, the City’ s revenue base will remain concentrated among its top companies and top economic sector, the volatile business-to-business area. Past recessions and the historic departure of a major tax provider, Hewlett-Packard, demonstrates the need for diversification of the City’ s revenue base and a long- term balance of revenues and expenditures. The City desires other revenues to mitigate the fluctuating nature of sales taxes, transient occupancy (hotel) taxes, user fees, and state grabs of local taxes in times of budget distress.
v
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 onits sales tax. While the City’s revenues remained strong in FY 2019- 20 and are currently on pace with projections in FY 2020- 21, 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. The Pun Group 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, former City of Cupertino employee Jennifer “ Yuen-Cheng” Chang, Senior Accountant, was arrested by the Santa Clara County Sheriff’ s Office for embezzling $791,494 in public funds through fraudulent checks between 2000 and 2014. The scheme ended in September 2014 with the implementation of an upgraded financial system that tightened internal controls. Ms. Chang retired in July 2015.

The fraudulent checks were discovered in early 2018 during a detailed review of several accounts after the new financial system was implemented. These checks, debited against a liability account, were suspicious due to their nature, size, and lack of supporting documentation.

In 2018, the Santa Clara County Sheriff’ s Office submitted its case to the District Attorney’ s Office, resulting in68 criminal charges against Ms. Chang. At a Preliminary Hearing on December 10, 2019, Judge Pennypacker ruled that Ms. Chang would stand trial on 53 felony counts. In December 2021, Ms. Chang pled guilty to three felony counts and paid $612,000 incriminal restitution to the City on January 31, 2022.

The City is pursuing civil remedies to recover the full amount embezzled, interest, and investigation costs. vi
The City has since strengthened internal controls, hired additional accounting staff to enhance segregation of duties, and approved theimplementation of aninternal auditfunction in FY 2019-20. Additionally, Moss Adams, LLP was engaged as the City’ s 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 theyear ended June 30, 2022. Inorder 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.

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, Jonathan Orozco, Zeng Wang, Min Zhao, Jumaini Judoprasetijo, Vi Tran, and Amber Chang of the Finance staff for their continued support and dedication. Special recognition to Beth Viajar, Richard Wong, Giang Dinh, and Janet Liang for their efforts in the preparation and production of this report.

Reviewed by,
Kristina Alfaro
Director of Administrative Services
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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, 2022
Executive Director/ CEO
x
200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and the Members of the City Council of the City of Cupertino
Cupertino, California
Report on the Audit of the Financial Statements
Opinions
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 City of Cupertino, California (the “ City”) as of and for the year ended June 30, 2023, and the related notes to the basic financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

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, 2023, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Other Matters
Change in Accounting Principle - Implementation of GASB 96 As discussed in Note 1 to the basic financial statements, the City adopted new accounting guidance, Governmental Accounting Standards Board (“ GASB”) Statement No. 96, Subscription-based Information Technology Arrangements. Our opinion is not modified with respect to this matter.

Prior Period Adjustments
As discussed in the Note 14 to the basic financial statements, the City also recorded prior period adjustment in the governmental activities in the amount of $1,562,736 due to correction of recording loans related interest receivable.

The City also recorded prior period adjustments in the General Fund and the Housing Development Special Revenue Fund in the amount of $509,278 and $4,725,458, respectively, due to correction of recording loans related interest receivable and the restatement of unavailable revenue related to the loans receivable to the fund balance.

To the Honorable Mayor and the Members of the City Council of the City of Cupertino
Cupertino, California

Page 2 ends

2 Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’ s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’ s internal control. Accordingly, no such opinion is expressed.

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’ s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

To the Honorable Mayor and the Members of the City Council of the City of Cupertino
Cupertino, California

Page 3 ends

3 Required Supplementary Information
Accounting principles generally accepted in the United States of America require that Management’ s Discussion and Analysis, the Budgetary Comparison Schedules – General Fund and Major Special Revenue Funds, the Schedule of Changes in Net Pension Liability and Related Ratios, the Schedules of Contributions – Pensions, the Schedules of Changes in Net Other Postemployment Benefits Liability and Related Ratios, and the Schedules of Contributions – Other Postemployment Benefits as listed in the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’ s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

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 accompanying combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are 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 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 combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual report. The other information comprises the Introductory Section and the Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

To the Honorable Mayor and the Members of the City Council of the City of Cupertino
Cupertino, California

Page 4 ends

4 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July 1, 2024, 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 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. 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.

Santa Ana, California
July 1, 2024

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2023
5 This section describes the City of Cupertino’ s (the ” City”) financial performance for the year. Readers are encouraged to consider the following information in conjunction with the accompanying Transmittal Letter and Basic Financial Statements.
2022-23 FINANCIAL HIGHLIGHTS
In December 2021, the California Department of Tax and Fee Administration (CDTFA) informed the City that an audit would be conducted on one of the City’s major sales taxpayers. While the full impact of the audit was not known at that time, the City ceased its large annual transfers of excess unassigned fund balance to the Capital Reserve Fund. In March 2023, the CDTFA verbally notified the City of its preliminary determination that tax dollars had been misallocated to the City, resulting in an adverse outcome for the City. In October 2023, the City formally received the results of the audit and took many steps to mitigate the impact which are discussed in the City’ s FY 2023- 24 and FY 2024- 25 Adopted Budgets. The City is currently appealing the decision by the CDTFA and continues to receive disputed sales tax revenues. Those revenues are set aside in a committed Sales Tax Repayment Reserve that was created in October 2023.

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 2022-23 by $388.1 million (net position). Of this amount, $120.5 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 2022- 23 with base governmental revenues showing a $5.9 million increase, or 6%, over 2021-22. The primary fluctuations include an increase in use of money and property and intergovernmental revenues that are offset by decreases in sales tax and charges for services. According to the 2022-23 Assessor’ s Annual Report for Santa Clara County, Cupertino’ s net assessment roll growth increased $2.08 billion, or 7.2%, from the prior year.

Residential use values increased 7.2%, a total of $1,260 million, and represented 61.1% of all growth experienced in the City. Commercial properties posted an increase of $1,066 million, or 13.1%, due to the movement of assets from the unsecured to the secure roll. The industrial properties reported growth of $280 million, or 24.7%, on the strength of parcels adding improvement values between tax years or tenants at these sites adding fixtures and business assets. Unsecured assets in Cupertino decreased by $655 million, or 38.0% due to the movement of assets from the unsecured to the secured roll, which contributed to the large growth seen in the commercial use category.

The City experienced a decrease of approximately $8.3 million, or 20% in FY 2022-23 sales tax revenues compared to the previous year. The decrease was mainly due to a return to in store versus online purchases. Although the City experienced declines in many of the sectors, including business and industry, general consumer goods, and State and County pools, theseexperiences were mitigatedby strongperformances intheremaining major industry groups.

The City continued to make substantial investments 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 $4.3 million, or 2.0%, after depreciation.

The City’s change in net position was $28.2 million for governmental activities reflecting the continued positive experience in sales and property tax and modest departmental spending.

The City’s Net Pension Liability for June 30, 2022, (measurement date) was $55.8 million, increased by $21.8 million from June 30, 2021, or 64%. The Plan Fiduciary Net Position as a Percentage of the Total Pension Liability for the City’s pension plan with CalPERS maintained at 68%. 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. The Trust’ s ending balance as of June 30, 2023 was $19.1 million.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
6 Business-type activities contributed $7.2 million to citywide revenues totaling $25.7 million, while the same activities contributed over $8.0 million to citywide expenses of $98.4 million.

As of June 30, 2023, the City reported an increased in Net OPEB Liability of $7.9 million primarily due to the investment return being less than the service cost plus interest on Total OPEB Liability (TOL). The City’s actuarial valuation generated a Net OPEB Liability of $0.5 million. The City also reported deferred outflows and inflows related to OPEB of $6.2 million and $2.3 million, respectively. As of June 30, 2023, the City’ s OPEB plan had a funding ratio or funded ratio or status of 98%.

On March 11, 2021, the American Rescue Plan ( ARP) Act of 2021 was signed into law, establishing the Coronavirus State and Local Fiscal Recovery Funds (SLFRF). The ARP Act is a $1.9 trillion stimulus bill, with 350 billion allocated for states, municipalities, counties, tribes, and territories, including $130 billion for local governments. California cities are expected to receive over $7 billion to offset revenue shortfalls and cover costs incurred due to the pandemic.

The City of Cupertino received two payments totaling $9,694,773 in SLFRF funding: $4,847,386.50 in May 2021 and a second payment in May 2022. These funds can be used for eligible costs incurred between March 3, 2021, and December 31, 2024, with the funds spent by December 31, 2026. The City has discretion to use these funds within four statutory categories set by the U.S. Department of the Treasury.

On September 7, 2021, the Cupertino City Council approved a plan to allocate the ARP funding towards an estimated $29 million revenue loss. The $9.7 million in ARP funding was designated for general government services in the General Fund, including City Work Program and special projects. Compliance reporting submitted by the City allocated $ 3,594,028 and $ 6,100,745 for fiscal years 2021- 22 and 2022- 23, respectively, fully offsetting revenue losses in transient occupancy taxes.

The net position presentation has been updated to reflect the implementation of Governmental Accounting Standards Board ( GASB) Statement No. 96, effective FY 2022- 23, resulting in new asset and liability categories.

Theobjective ofthe new statement is to better meet the information needs offinancial statement users by improving accounting and financial reporting for leases by governments.

The City recorded a prior periodadjustment, necessary torecord interest receivable due totwohousing development loans that the City has historically not recorded. This adjustment ensures that all financial activities are accurately reflected in the City's financial statements. Information on the Loan Receivable can be found in Note 3 – Loans Receivable, and details of the adjustment are provided in Note 14 – Prior Period Adjustment. This adjustment aims to improve transparency and accuracy in our financial reporting.

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 ofthe City-wide Financial Statements, the Fund Financial Statements, and thenotes to the Basic Financial Statements. These two sets of financial statements provide two different views of the City’ s financial activities and positions.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
7 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 ofthe City as a whole. Theaccrual 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, innovation and technology, 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.

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 details 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 the 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 a 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 long- lived assets, along with long- term liabilities, are not presented inthe Governmental Fund financial statements. Reconciliations are provided tofacilitate 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.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
8 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 a 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 City- wide Financial Statements, and in more detail in the Fund Financial Statements.

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

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
9 Table 1
Condensed Statement of Net Position at June 30
in thousands)
Governmental Activities
2023 2022
Assets:

Cash and investments $ 205,572 $ 190,003
Restricted cash and investments 19,089 17,248
Other assets 25,222 20,849
Capital assets 219,168 214, 927
Total assets 469,051 443,027
Deferred Outflows of Resources:

Loss on refunding 159 199
Related to Pensions (Note 8) 17,294 8,317
Related to OPEB (Note 9) 5,859 4,786
Total deferred outflows of resources 23,312 13,302
Liabilities:

Long term debt 18,850 21,269
Other liabilities 80,725 58,527
Total liabilities 99,575 79,796
Deferred Inflows of Resources:

Leases Receivable 2,380 2,495
Related to Pensions (Note 8) 131 11,161
Related to OPEB (Note 9) 2,169 2,993
Total deferred inflows of resources 4,680 16,649
Net Position:

Net Investment in capital assets 198,450 196,916
Restricted 69,129 69,355
Unrestricted 120,529 93,613
Total net position $ 388,108 $ 359,884
Updated to reflect prior period adjustment (see Note 3 and 14)

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
10 The City’ s change in net position from governmental activities was $28.2 million. The following significant changes within assets, liability, and net position categories occurred:

As part of the City’s budget balancing efforts, the City did not make an additional contribution into its Section 115 Pension Trust during the fiscal year. 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 inthe Section 115 Trust are not used todirectly 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.

Cash and investments increased by $15.6 million, or 8.2%, over the previous fiscal year. This was largely due to the City’s efforts to reduce expenses as part of it’s budget strategy to address the structural deficit while relying other sources of funding to .

The City utilized the Section 115 OPEB Trust to pay for the direct benefit costs instead of relying on the General Fund to subsidize the expense. Additionally, the change in demographic assumptions and investment performance, the Net OPEB Liability grew to $ 0.6 million, a shift of $2.1 million from the previous year’ s Net OPEB Asset of $1.5 million.

Capital assets increased approximately $ 4.2 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 $2.4 million or 11.4% over the previous year and resulted from the regular debt service payment and amortization on the issuance premium.

Other liabilities decreased by approximately $22.2 million or 37.9%, primarily due to an increase in the City’ s Net Pension and OPEB Liabilities.

Deferred Outflows Related to Pension and OPEB increased $ 10.1 million primarily due to actuarial changes of assumptions. Deferred Inflows of Resources Related to Pension and OPEB increased approximately

11.9 million primarily due to actuarial changes of assumptions.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
11 Sources of Revenue, Governmental Activities
2022-23
Revenue categories are returning totheir proportionate pre-pandemic amounts, withtheexception oftransient occupancy tax (TOT), which has gradually increased but has not yet returned to FY 2018-19 levels.

Charges for
Services 15.5%
Operating Grants &
Contributions 9.2%
Capital Grants &
Contributions

1.3%
Property Tax 26.9%
Sales Tax 29.3%
Transient
Occupancy Tax 6.0%
Utility User Tax

3.5%
Franchise Tax 3.4%
Other Taxes 2.4%
Investment Earnings 2.4%
Gain on capital assets 0.0%
Transfers - 0.2%
Miscellaneous 0.4%

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
12 Functional Expenses, Governmental Activities
2022-23
Similarly to TOT in the previous chart, Parks and Recreation was adversely affected by the pandemic, but program activity has gradually increased over the course of the last two fiscal years.

Administration 9.8%
Law Enforcement

17. 5%
Public Works 43. 0%
Innovation and
Technology 2.2%
Administrative
Services 7.1%
Parks and Recreations

6.7%
Community
Development 13.8%
Administration Law Enforcement Public Works
Innovation and Technology Administrative Services Parks and Recreations Community Development

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
13 The Statement of Activities presents program revenues, expenses, general revenues, and the resulting change in net position as summarized in the next table.

Table 2
Condensed Statement of Activities for the Year Ended June 30 inthousands)
Governmental Activities
Expenses 2023 2022
Administration $ 8,830 $ 7,293
Law enforcement 15,716 16,100
Innovation and technology 1,951 2,004
Administrative services 6,363 5,364
Parks and recreation 6,021 3,977
Community development 12,463 12,210
Public works 38,696 35,654
Interest on long- term debt 370 637
Total expenses 90,410 83,239
Revenues
Program revenues:

Charges for services 18,405 21,387
Operating grants and contributions 10,881 7,601
Capital grants and contributions 1,594 1,283
Total program revenues 30,881 30,271
General revenues:

Taxes:

Property tax 21,808 20,323
Property tax in-lieu of motor vehicle fee 10,082 9,402
Sales tax 34,819 43,647
Transient occupancy tax 7,062 4,405
Utility user tax 4,104 3,356
Franchise tax 3,995 3,480
Other taxes 2,873 11,118
Intergovernmental, unrestricted:

Motor vehicle license fee 62 68
Investment earnings 2,802 ( 9,242)
Gain on sale of capital assets - -
Miscellaneous 444 1,948
Total general revenues 88,051 88,504
Total revenues 118,932 118,775
Excess of revenues over expenses,
before extraordinary item and transfers 28,521 35,536
Transfers (Note 5) ( 296) ( 887)
Change innet position 28,225 34,649
Beginning net position (Restated) ( Note 14) 359,884 323,672 Prior period adjustment - 1,563
Ending net position $ 388,109 $ 359,884

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
14 City-Wide Governmental Activities Revenues
Table 2 shows that revenues from governmental activities increased $0.16 million or 0.1% from last year, finishing at 119 million. The modest increase is largely due to increases in Operating grants, property taxes, TOT, and investment earning offset by decreases in charges for service, sales taxes, and other taxes.

Increases in the City’ s general revenues are attributable to a $ 1.5 million increase in property tax over the prior year.

According tothe2022/23 City of Cupertino Property Tax Review from HDL (Assessor’ s Annual Report for Santa Clara County) the net assessment roll growth increased $2.1 billion million, or 7.24%, from the prior year. Approximately 100% was attributable to residential, commercial, industrial, recreational, vacant properties, Miscellaneous and Institutional use values and 2.27% decreased in Unsecured Value change.

The City experienced a sales tax decrease of $8.3 million in FY 2022-23, decreasing by 20.2% 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 decrease in sales tax was expected as consumers transitioned back to in store shopping from online.

In FY 2022-23, total transient occupancy tax increased $2.7 million, or 60.3%, over the prior year. The City continues on the road to recovery for this tax source, although it was anticipated to take longer than other areas as employers’ long- term and permanent telework policies will have a substantial impact on the timing and extent of recovery.

Other taxes experienced a decrease of $8.3 million, or 74.7%, which was primarily driven federal funding received from the CARES Act and the revenue is recognized in, FY21- 22.

Investment earnings increased by $12.0 million over the prior year. This was due to the shift from a negative market adjustment (4.76%) in FY 2021-22 inthe City’ s portfolio’ s rate of return of .36% (net offee) for the fiscal year (source:

Chandler Asset Management).

Program revenues showed a modest increase of $0.6 million or 2%, and is primarily attributable to the revenue recognition of the remaining SLFRF funds, offset by decreases in charges for services across all programs.

City-wide Governmental Activities Expenses
City-wide governmental activities expenses increased by $7.2 million, or 9%. This was primarily driven by increases in Administration due to , Recreation due to a return to normalcy following the global pandemic and Recreation and Public Works.

Change in Net Position
The City- wide governmental net position increase of $28.2 million nearly matching the previous year’ s $ 34.5 million increase, and can be best explained by budget reduction strategies and continued revenue recognition of the federal funding assistance.

Business Type Activities
Business-type activities inthe 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.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
15 As shown in Table 3 and Table 4, the business-type net position totaled $10.4 million at June 30, 2023, decreased by 255,000 or 2.4%, largely due to decreased cash and investments from negative operating activities. Business-type activities transferred in (net) decreased by approximately $0.5 million over the prior year. An increase in capital asset additions of $181, 863 offset with $161, 840 in depreciation expense resulted in a net increase of $20,023 over the prior year. Enterprise activities experienced an overall increase inassets due primarily to investment income which increased cash and cash equivalents. Liabilities for business-type activities increased by $268,000 or 6.5% over the previous year.

In Table 4, revenues for all business-type activities increased $1.6 million, or 26.9% and operating expenses increased by $0.45 million, as the enterprise funds continue to return to normal, pre-pandemic operations.

Table 3
Condensed Statement of Net Position at June 30
inthousands)
Business Type Activities
2023 2022
Assets:

Cash and investments $ 11,373 $ 12,342
Other assets 307 230
Capital assets 2,109 2,091
Total assets 13,789 14,663
Deferred Outflows of Resources:

Related to pensions 832 565
Related to OPEB 311 256
Total deferred outflows of resources 1,143 821
Other Liabilities: 4,386 4,118
Total liabilities 4,386 4,118
Deferred Inflows of Resources:

Related to pensions 6 498
Related to OPEB 115 188
Total deferred inflows of resources 121 686
Net Position:

Net Investment in capital assets 2,110 2,090
Restricted 167 167
Unrestricted 8,148 8,423
Total net position $ 10,425 $ 10,679

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
16 Table 4
Condensed Statement of Activities for the Year Ended June 30 in thousands)
Business Type Activities
Expenses 2023 2022
Resource recovery $ 2,038 $ 1,838
Blackberry farm 3,456 655
Cupertino sports center 1,662 3,396
Recreation programs 799 1,618
Total expenses 7,955 7,507
Revenues
Program revenues:

Charges for services 7,249 6,239
General revenues:

Investment earnings 156 ( 404)
Total revenues 7,405 5,835
Excess of revenues over expenses,
before extraordinary item and transfers ( 551) ( 1,672) Transfers 296 887
Change innet position ( 255) ( 785)
Beginning net position 10,679 11,465
Ending net position $ 10,425 $ 10,679

MAJOR GOVERNMENTAL FUNDS
General Fund
General Fund Revenues
General Fund actual revenues of $111 million ended $16.4 million, or 17.3%, above the original budget and $24.3 million, or 18.0%, below the final budget. Table 5 displays the variations in actual revenues, while Table 6 shows budgeted revenues compared to actuals.

Property taxes increased $2.2 million, or 7.3%, over the prior year due to continued roll-growth. According to the 2022- 2023 Assessor’ s Annual Report for Santa Clara County, Cupertino’ s net assessment roll growth increased by $2.1, or

7.24%, from the prior year.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
17 Sales tax decreased by 20% or $8.3 million, returning to pre-pandemic levels. Sales Tax revenue continues to be the City’s greatest revenue at 29.3% of total.

Transient occupancy tax increased $ 2.7 million, or 60%, due to the continual growth following the heavy decline caused by the pandemic.

Charges for services decreased by 24%, nearly $ 3.5M under the previous year.

Licenses and permits decreased by $ 48,000, or 1%, due to a decrease in permitting on animal licenses, Mech/Elec/Plumbing, and others.

Table 5
Revenue Changes
General Fund, Fiscal Year 2023 vs. 2022
in thousands)
Increase/(Decrease)
Fiscal Year 2023
From Fiscal
Year 2022
Revenue by Source Amount % of Total Amount Percent
Taxes:

Property $ 31,890 29% $ 2,165 7%
Sales 34,819 31% ( 8,318) - 20%
Transient occupancy 7,062 6% 2,657 60%
Utility user 4,104 4% 748 22%
Franchise 3,995 4% 515 15%
Other 1,472 1% 458 24%
Use of money & property 3,034 3% 8,557 - 155%
Intergovernmental 7,771 7% 3,386 77%
Licenses and permits 4,094 4% ( 48) - 1%
Charges for services 11,114 10% ( 3,478) - 24%
Fines and forfeitures 304 0% ( 66) - 18%
Other 1,306 1% ( 635) - 33%
Total revenues $ 110,964 100% $ 5,940 6%
Other financing sources:

Inception of subscription liability $ 965 53% $ 965 -
Transfers in $ 861 47% $ 846 5640%
Total other financing sources $ 1,826 100% $ 846 5640%

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
18 Table 6
Revenue, Budget, and Actual Comparisons
General Fund 2022-23
inthousands)
Budgeted Amounts Over/(Under)
Original Final Actual Final
Taxes:

Property $ 30,040 $ 30,040 $ 31,890 $ 1,850
Sales 31,944 31,944 34,819 2,875
Transient occupancy 5,000 6,000 7,062 1,062
Utility user 2,955 2,955 4,104 1,149
Franchise 3,230 3,230 3,995 765
Other 1,788 1,788 1,472 ( 316)
Use of money & property 1,275 1,275 3,034 1,759
Intergovernmental 1,434 7,946 7,771 ( 175)
Licenses and permits 3,541 34,058 4,094 ( 29,964)
Charges for services 11,799 14,428 11,114 ( 3,314)
Fines and forfeitures 427 427 304 ( 123)
Other 1,160 1,183 1,306 124
Total revenues $ 94,594 $ 135,273 $ 110,964 $ ( 24,309) Inception of subscription liability $ - $ - $ 965
Transfers in $ 61 $ 861 $ 861 $ -
General Fund Expenditures
Fiscal 2022-23 overall expenditures, at $72.6 million, were $2.1 million, or 3.0%, higher than last year. This result came in $12.4 million, or 14.6%, under the final budget. Year-over-year and budget-versus-actual results for General Fund programs are described below and in Tables 7 and 8.

Administration increased of $110,000 or 1% from 2021-22 and is primarily due to the Economic Development and Video functions moving from Community Development and Innovation & Technology departments, respectively.

Law Enforcement was $437,000 lower by approximately 3%, which is attributed to a shift in reclassing the Santa Clara County Sheriff’ s reconciling year end refund payment from a miscellaneous revenue to a reduction in expenditure and the year-over-year increases to services provided.

Innovation & Technology decreased by $450,000, or 8%, over the prior year. This was driven by the Department’ s reorganization.

Administrative Services’ expenditures increased approximately $332,000, or 6%, over the prior year largely due to increases in insurance premiums.

Parks & Recreation General Fund expenditures experienced a 15% increase, or $703,000, across its programs. Theincrease is attributed to the program returning to pre-pandemic level of activity.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
19 Community Development expenditures in the General Fund decreased $5 million, or 5%, and resulted primarily from increases in cost allocation charges.

Public Works expenditures increased by approximately $ 0.6 million or 2%. 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 $21.4 million in 2021-22 to $12.3 million a 42%. This was due to a reduction transfers from the General Fund to the Capital Reserve.

Function/Program Amount % of Total Amount Percent
Administration $ 7,602 10% $ 110 1%
Law enforcement 15,277 21% ( 439)- 3%
Innovation and technology 1,826 3% ( 237)- 11%
Administrative services 5,976 8% 450 8%
Parks and recreation 5,432 7% 703 15%
Community development 10,667 15% ( 521)- 5%
Public works 23,880 33% 553 2%
Capital outlay 1,263 2% 867 219%
Debt service 645 1% 645 -
Total expenditures $ 72,568 100% $ 2,131 3.0%
Transfers out $ 12,344 190% $ ( 9,081) - 42%
Fiscal Year 2023 From Year Fiscal 2022
Table 7
Expenditure Changes
General Fund, Fiscal Year 2023 vs. 2022
in thousands)
Increase/( Decrease)

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
20 Over/(Under)
Original Final Actual Final
Administration 11,046$ 10,275$ 7,602$ 2,673$
Law enforcement 16,815 16,815 15,277 1,538
Innovation and technology 3,397 2,779 1,826 953
Administrative services 7,209 7,164 5,976 1,188
Parks and recreation 7,462 7,663 5,432 2,231
Community development 11,349 12,782 10,667 2,115
Public works 25,581 27,184 23,880 3,304
Capital outlay 306 287 1,263 ( 976)
Debt service - - 645 ( 645)
Total expenditures 83,165$ 84,949$ 72,568$ 12,381$
Transfers out 11,252$ 26,124$ 12,344$ ( 13,780)$
Budgeted Amounts
in thousands)
General Fund 2022-23
Table 8
Expenditure Changes
General Fund - Fund Balance
The General Fund carried a June 30, 2023, ending fund balance of $138.6 million, up25.2% over prior fiscal year. Loan receivables totaled $970,962 of non-spendable fundbalance out of $4,000,588 total non-spendable. The remaining nonspendable is related to advances, inventories, and prepaid items . The City committed $34.1 million for general economic uncertainty and $ 127,891 for sustainability. The City assigned $ 9,735, 187 million for encumbrances. The City restricted $19,088,859 for the pension rate stabilization program (Section 115 Trust). $71,603,813 was classified as unassigned.

Transportation
The Transportation Special Revenue Fund carried a June 30, 2023, ending fund balance of $10,6 million down 10.5%, or $1.2 million from the beginning of the fiscal year. In recent years this fund has accumulated fund balance year over year. The decrease infund balance can beattributed to the progression of scheduled projects, funded by available funds.

Housing Development
The Housing Development Special Revenue Fund carried a June 30, 2023, ending fund balance of $11.5 million, down

3.4%, or $0.4 million, from the beginning of the fiscal year. The decrease can be attributed to lower intergovernmental revenue recognized.

Public Facilities Corporation
On September 29th, 2020, 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 topnotch AA+ rating, the sizable annual principal amounts and short maturity, and favorable supply and demand dynamics in the California municipal market.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
21 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 1st) 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, 2023 was $1,750 lower than the previous year, which will remain at this approximate fund balance in future fiscal years.

Capital Improvement Projects
The Capital Improvement Projects Capital Projects Fund carried a June 30, 2023, ending fund balance of $ 34.8 million,largely unchanged to the prior fiscal year.

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 is at $1.77 million and $2.04 million, respectively. Net position decreased by $207,128. The fund ended the year with $4.8 million in net position.

Recreation Programs
This enterprise operates the Quinlan Community Center, Monta Vista Recreation Center, McClellan Ranch, Creekside Park building, eight school sites, and various parks. These programs generated approximately $ 1.7 million in revenues and program expenses of approximately $1.7 million. This resulted in a net operating gain of $80,756. The fund ended the year with a net position of $2.8 million.

Cupertino Sports Center
Revenue increased by $ 1,307,386 or 72.2% as the activities continued to increase post- pandemic. As a result of the increase in services generating more revenue, expenses increased by $1.3 million or 58.3%, resulting in a net operating loss of $338,959. This fund’s net position was $1.9 million as of June 30, 2023.

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 from $602,778 to $616,461 or 2.27%. Operating expenses increased by $143,984, or 22.0%, to $799,168 this year, which ended up with the operating loss of $182,707. After a transfer in from the General Fund of $23,600 and investment earnings of 37,286, net position decreased by $121,821. As of June 30, 2023, this fund’ s net position was $734,400.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
22 CAPITAL ASSETS
At June 30, 2023, the City had $ 221 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 6 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 $4.2 million, after depreciation and amortization.

Table 9
Capital Assets, Net of Depreciation and Amortization, at June 30 in thousands)
2023 2022
Governmental Activities:

Land $ 64,787 $ 64,787
Easements 19,615 19,615
Construction in progress 28,594 23,406
Buildings 12,504 14,118
Improvements other than buildings 13,373 15,405
Machinery and equipment 3,640 4,195
Roads, curbs, gutters, sidewalks, medians and bridges 69,369 67,932 Streetlights 1,241 1,270
Storm drain structures and mains 3,541 3,691
Traffic signals 420 508
Right-to-use subscription asset 2,083 1,773
Total Governmental Activities 219,167 216,700
Business-Type Activities
Construction in progress 358 185
Buildings 1,419 1,501
Improvements other than buildings 262 315
Machinery and equipment 70 89
Total Business-Type Activities 2,109 2,090
Total City $ 221, 276 $ 217,017

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.

CITY OF CUPERTINO
Management’ s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023
23 The June 30, 2023, outstanding principal of $16,065,000 is due to be paid off by June 1, 2030. More information can be found in Note 7 to the Basic Financial Statements and in the Public Facilities Corporation discussion earlier in this analysis.

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 Annual Comprehensive 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. 24 This page intentionally left blank.

BASIC FINANCIAL STATEMENTS
25 This page intentionally left blank.
26 GOVERNMENT- WIDE

FINANCIAL STATEMENTS
27 Governmental Business-Type
Activities Activities Total
ASSETS
Current assets:

Cash and investments 205,571,569$ 11,372,546$ 216,944,115$ Receivables:

Accounts 15,591,022 267,136 15,858,158
Interest 732,160 39,832 771,992
Leases, due within one year 221,644 - 221,644
Inventories 21,383 - 21,383
Prepaid items 8,243 - 8,243
Other assets 3,884 - 3,884
Total current assets 222,149,905 11,679,514 233,829,419 Noncurrent assets:

Restricted cash and investments 19,088,859 - 19,088,859 Lease receivable, due in more than one year 2,271,395 - 2,271,395 Loans receivable, net 6,373,278 - 6,373,278
Capital assets:

Capital assets, not being depreciated 112,996,509 358,231 113,354,740 Capital assets, being depreciated and amortized 106,171,455 1,751,361 107,922,816 Total noncurrent assets 246,901,496 2,109,592 249,011,088 Total assets 469,051,401 13,789,106 482,840,507

DEFERRED OUTFLOWS OF RESOURCES
Deferred charges on refunding 159,478 - 159,478
Related to pensions 17,294,067 831,986 18,126,053
Related to other postemployment benefit 5,858,718 311,282 6,170,000 Total deferred outflows of resources 23,312,263 1,143,268 24,455,531 City of Cupertino
Statement of Net Position
June 30, 2023
See accompanying Notes to the Basic Financial Statements 28 Governmental Business-Type
Activities Activities Total

LIABILITIES
Current liabilities:

Accounts payable and accruals 8,094,159 475,433 8,569,592 Accrued payroll and benefits 602,421 289 602,710
Deposits payable 8,645,547 - 8,645,547
Interest payable 53,550 - 53,550
Unearned revenues 167,673 1,097,879 1,265,552
Compensated absences, due within one year 501,158 10,492 511,650 Claims payable, due within one year 382,000 - 382,000
Subscription liabilities, due within one year 783,067 - 783,067 Long-term debt, due within one year 2,035,000 - 2,035,000 Total current liabilities 21,264,575 1,584,093 22,848,668 Noncurrent liabilities:

Compensated absences, due in more than one year 4,580,402 209,749 4,790,151 Claims payable, due in more than one year 1,840,786 - 1,840,786 Subscription liabilities, due more than one year 1,244,223 - 1,244,223 Long-term debt, due in more than one year 16,814,711 - 16,814,711 Aggregate net pension liabilities 53,277,801 2,563,097 55,840,898 Net other postemployment benefit liability 552,638 29,362 582,000 Total noncurrent liabilities 78,310,561 2,802,208 81,112,769 Total liabilities 99,575,136 4,386,301 103,961,437

DEFERRED INFLOWS OF RESOURCES
Leases 2,379,733 - 2,379,733
Related to pensions 131,066 6,305 137,371
Related to other postemployment benefit 2,168,769 115,231 2,284,000 Total deferred inflows of resources 4,679,568 121,536 4,801,104

NET POSITION
Net investment in capital assets 198,450,441 2,109,592 200,560,033 Restricted for:

Public works 35,408,750 - 35,408,750
Affordable housing 11,492,607 - 11,492,607
Pension trust 19,088,859 - 19,088,859
Other postemployment benefit 3,137,311 166,689 3,304,000 Debt service 1,750 - 1,750
Total restricted 69,129,277 166,689 69,295,966
Unrestricted 120,529,242 8,148,256 128,677,498
Total net position 388,108,960$ 10,424,537$ 398,533,497$ June 30, 2023
Statement of Net Position (Continued)
City of Cupertino
See accompanying Notes to the Basic Financial Statements 29 Capital Grants
Charges for Operating Grants and
Expenses Services and Contributions Contributions
Functions/ Programs
Governmental Activities:

Administration 8,830,127$ 3,098,916$ 6,125,745$ -$
Law enforcement 15,716,301 612,993 1,255,790 -
Innovation and technology 1,950,718 - - -
Administrative services 6,363,343 5,419,347 - -
Recreation services 6,020,526 621,587 - -
Community development 12,463,257 5,361,837 407,090 -
Public works 38,696,234 3,290,506 3,092,813 1,593,910
Interest and fiscal charges 369,502 - - -
Total Governmental Activities 90,410,008 18,405,186 10,881,438 1,593,910 Business-Type Activities:

Resource recovery 2,038,313 1,772,252 - -
Cupertino sports center 3,456,539 3,117,580 - -
Recreation programs 1,661,686 1,742,442 - -
Blackberry farm 799,168 616,461 - -
Total Business-Type Activities 7,955,706 7,248,735 - -
Total Primary Government 98,365,714$ 25,653,921$ 10,881,438$ 1,593,910$ City of Cupertino
Statement of Activities
For the Year Ended June 30, 2023
Program Revenues
See accompanying Notes to the Basic Financial Statements 30 Governmental Business- Type
Activities Activities Total
Functions/ Programs
Governmental Activities:

Administration 394,534$ -$ 394,534$
Law enforcement ( 13,847,518) - ( 13,847,518)
Innovation and technology ( 1,950,718) - ( 1,950,718)
Administrative services ( 943,996) - ( 943,996)
Recreation services ( 5,398,939) - ( 5,398,939)
Community development ( 6,694,330) - ( 6,694,330)
Public works ( 30,719,005) - ( 30,719,005)
Interest and fiscal charges ( 369,502) - ( 369,502)
Total Governmental Activities ( 59,529,474) - ( 59,529,474) Business-Type Activities:

Resource recovery - ( 266,061) ( 266,061)
Cupertino sports center - ( 338,959) ( 338,959)
Recreation programs - 80,756 80,756
Blackberry farm - ( 182,707) ( 182,707)
Total Business-Type Activities - ( 706,971) ( 706,971)
Total Primary Government ( 59,529,474) ( 706,971) ( 60,236,445) General Revenues:

Taxes:

Property taxes 21,807,628 - 21,807,628
Property tax in lieu of motor vehicle fee 10,082,011 - 10,082,011 Sales taxes 34,819,341 - 34,819,341
Transient occupancy tax (TOT) 7,062,150 - 7,062,150
Utility user tax (UUT) 4,103,906 - 4,103,906
Franchise tax 3,995,018 - 3,995,018
Other taxes 2,872,571 - 2,872,571
Motor vehicle license fee 62,072 - 62,072
Investment earnings 2,801,930 155,921 2,957,851
Miscellaneous 444,339 - 444,339
Total General Revenues 88,050,966 155,921 88,206,887
Transfers ( 296,481) 296,481 -
Changes in Net Position 28,225,011 ( 254,569) 27,970,442 Net Position - Beginning, as restated (Note 14) 359,883,949 10,679,106 370,563,055 Net Position - Ending 388,108,960$ 10,424,537$ 398,533,497$ Net (Expense) Revenue and Changes in Net Position
City of Cupertino
Statement of Activities (Continued)
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements 31 This page intentionally left blank.
32 Capital Improvement Projects Capital Projects Fund - This fund accounts for activities related to the acquisition or construction of major capital facilities.

GOVERNMENTAL FUND

FINANCIAL STATEMENTS
General Fund - This fund is the general operating fund of the City and is used to pay for core services such as public safety, parks and recreation, community development, public works, and a host of other vital services. The revenue used to pay for these services comes primarily from local taxes such as sales tax, property tax, franchise fees, charges for services, and a variety of other discretionary sources. It also accounts for activities related to the City’ s investment portfolio. 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 - This 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 - This fund accounts for the Federal Housing and Community development Grant Program activities administered through the County, including rehabilitation loans. 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.

In the Fund Financial Statements only individual major funds are presented, while nonmajor 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 the fiscal year 2022- 23. Individual nonmajor funds can be found in the Supplementary Section.
33 Housing
General Transportation Development
ASSETS
Cash and investments 116,051,281$ 11,425,764$ 6,095,719$ Restricted cash and investments 19,088,859 - -
Receivables:

Accounts 13,762,883 255,483 97,332
Interest 550,744 40,067 21,334
Loans, net 970,962 - 5,402,316
Leases 2,493,039 - -
Due from other funds 1,395,657 - -
Advances to other funds 3,000,000 - -
Inventories 21,383 - -
Prepaid items 8,243 - -
Other assets 3,884 - -
Total assets 157,346,935 11,721,314 11,616,701

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable and accruals 6,206,007 1,134,640 124,094 Accrued payroll and benefits 602,349 - -
Advances from other funds - - -
Deposits 8,645,547 - -
Unearned revenue 158,400 - -
Total liabilities 15,612,303 1,134,640 124,094
Deferred inflows of resources:

Leases 2,379,733 - -
Unavailable revenue 798,561 - -
Total deferred inflows of resources 3,178,294 - -
Fund balances:

Nonspendable 4,000,588 - -
Restricted 19,088,859 10,586,674 11,492,607
Committed 34,127,891 - -
Assigned 9,735,187 - -
Unassigned 71,603,813 - -
Total fund balances 138,556,338 10,586,674 11,492,607
Total liabilities, deferred inflows
of resources, and fund balances 157,346,935$ 11,721,314$ 11,616,701$ Continued)
Special Revenue Funds
City of Cupertino
Balance Sheet
June 30, 2023
Governmental Funds
See accompanying Notes to the Basic Financial Statements 34 Public Capital
Facilities Improvement
Corporation Projects Nonmajor Total
Debt Capital Governmental Governmental
Service Fund Projects Fund Funds Funds
ASSETS
Cash and investments 1,750$ 38,141,292$ 24,916,749$ 196,632,555$ Restricted cash and investments - - - 19,088,859
Receivables:

Accounts - 74,431 15,134 14,205,263
Interest - - 87,221 699,366
Loans, net - - - 6,373,278
Leases - - - 2,493,039
Due from other funds - - - 1,395,657
Advances to other funds - - - 3,000,000
Inventories - - - 21,383
Prepaid items - - - 8,243
Other assets - - - 3,884
Total assets 1,750 38,215,723 25,019,104 243,921,527

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable and accruals - 364,825 114,116 7,943,682 Accrued payroll and benefits - - - 602,349
Advances from other funds - 3,000,000 - 3,000,000
Deposits - - - 8,645,547
Unearned revenue - 9,273 - 167,673
Total liabilities - 3,374,098 114,116 20,359,251
Deferred inflows of resources:

Leases - - - 2,379,733
Unavailable revenue - 74,431 - 872,992
Total deferred inflows of resources - 74,431 - 3,252,725 Fund balances:

Nonspendable - - - 4,000,588
Restricted 1,750 - 24,747,645 65,917,535
Committed - - - 34,127,891
Assigned - 34,767,194 157,343 44,659,724
Unassigned - - - 71,603,813
Total fund balances 1,750 34,767,194 24,904,988 220,309,551 Total liabilities, deferred inflows
of resources, and fund balances 1,750$ 38,215,723$ 25,019,104$ 243,921,527$ Concluded)
City of Cupertino
Balance Sheet (Continued)
Governmental Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements 35 This page intentionally left blank.
36 Total Fund Balances - Total Governmental Funds 220,309,551$ Nondepreciable, net of $119,408 reported in the Internal Service Fund 112,877,101$ Depreciable and amortizable,
net of $2,789,976 reported in the Internal Service Fund 103,381,479 216,258,580 Bonds payable ( 16,065,000)
Premium on bonds payable ( 2,784,711)
Deferred charges on refunding 159,478
1,828,796)
Interest payable ( 53,550)
4,692,670)
Claims liability, net of $1,654,000 reported in the Internal Service Funds ( 568,786) ( 25,834,035) 16,081,434$
49,542,045)
121,876) ( 33,582,487)
5,448,074$
513,903)
2,016,757) 2,917,414
872,992
7,166,945
Net Position of Governmental Activities 388,108,960$
City of Cupertino
Reconciliation of the Governmental Funds Balance Sheet to the June 30, 2023
Government-Wide Statement of Net Position
Amounts reported for governmental activities in the Statement of Net Position were reported differently because:

Long-term liabilities are not due and payable in the current period and accordingly are not reported as fund liabilities. All liabilities, both current and long-term, are reported in the Statement of Net Position:

Capital assets used in governmental activities were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet.

Internal Service Funds were used by management to charge the costs of certain activities, such as insurance and equipment replacement to individual funds. The assets and liabilities of the Internal Service Funds were included in the governmental activities in the Government-Wide Statement of Net Position.

Revenue reported as unavailable revenue in the governmental funds when it is not received soon enough after year-end to be considered available. The availability criteria does not apply to the Government-Wide Financial Statements and, therefore, the revenue is recognized when eligibility requirements are met and earned.

Net pension liabilities and the related deferred outflows of resources and deferred inflows of resources are not due and payable in the current period or not available for current expenditures and are not reported in the governmental fund financial statements:

Net other postemployment benefit liability and the related deferred outflows of resources and deferred inflows of resources are not due and payable in the current period or not available for current expenditures and are not reported in the governmental fund financial statements:

Pension related deferred outflows of resources, net of $1,212,633 reported in the Internal Service Funds
Pension related deferred inflows of resources, net of $9,190 reported in the Internal Service Funds
Aggregate net pension liability, net of $3,735,756 reported in the Internal Service Funds Subscription liabilities, net of $198,494 reported in the Internal Services Funds Compensated absences, net of $388,890 reported in the Internal Service Fund Other postemployment benefits related deferred outflows of resources, net of $410,644 reported in the Internal Service Funds
Other postemployment benefits related deferred inflows of resources, net of $152,012 reported in the Internal Service Funds
Net Other postemployment benefits liability, net of $38,735 reported in the Internal Service Funds
See accompanying Notes to the Basic Financial Statements 37 Housing
General Transportation Development
Revenues:

Taxes 83,341,842$ -$ 170,824$
Use of money and property 3,033,683 211,271 194,096
Intergovernmental 7,771,411 3,385,823 196,616
Licenses and permits 4,093,631 - -
Charges for services 11,113,598 34,012 1,640
Fines and forfeitures 303,573 - -
Other revenue 1,306,455 2,000 28,082
Total revenues 110,964,193 3,633,106 591,258
Expenditures:

Current:

Administration 7,602,232 - -
Law enforcement 15,276,950 - -
Innovation and technology 1,825,667 - -
Administrative services 5,976,301 - -
Recreation services 5,432,183 - -
Community development 10,666,834 - 1,026,720
Public works 23,879,927 2,726,550 -
Capital outlay 1,263,412 4,950,786 -
Debt service:

Principal 626,181 - -
Interest and fiscal charges 18,540 - -
Total expenditures 72,568,227 7,677,336 1,026,720
Excess of revenues over
expenditures - 38,395,966 ( 4,044,230) ( 435,462)
Other financing sources (uses):

Inception of subscription liability 964,745 - -
Transfers in 861,140 3,000,000 25,000
Transfers out ( 12,344,345) ( 197,491) -
Total other financing sources (uses)( 10,518,460) 2,802,509 25,000 Net Change in Fund Balances 27,877,506 ( 1,241,721) ( 410,462) Fund balances:

Beginning of year, as restated (Note 14) 110,678,832 11,828,395 11,903,069 End of year 138,556,338$ 10,586,674$ 11,492,607$
Continued)
Special Revenue Funds
City of Cupertino
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements 38 Public Capital
Facilities Improvement
Corporation Projects Nonmajor Total
Debt Capital Governmental Governmental
Service Fund Projects Fund Funds Funds
Revenues:

Taxes -$ -$ 720,679$ 84,233,345$
Use of money and property ( 5,100) ( 326,691) 314,847 3,422,106 Intergovernmental - 515,814 - 11,869,664
Licenses and permits - - - 4,093,631
Charges for services - 51,675 1,541,027 12,741,952
Fines and forfeitures - - 23,371 326,944
Other revenue - 56,522 - 1,393,059
Total revenues ( 5,100) 297,320 2,599,924 118,080,701
Expenditures:

Current:

Administration 1,500 - - 7,603,732
Law enforcement - - - 15,276,950
Innovation and technology - - - 1,825,667
Administrative services - - - 5,976,301
Recreation services - - - 5,432,183
Community development - - - 11,693,554
Public works - - 1,615,379 28,221,856
Capital outlay - 4,417,593 1,901,525 12,533,316
Debt service:

Principal 1,955,000 - - 2,581,181
Interest and fiscal charges 720,800 - - 739,340
Total expenditures 2,677,300 4,417,593 3,516,904 91,884,080 Excess of revenues over
expenditures ( 2,682,400) ( 4,120,273) ( 916,980) 26,196,621 Other financing sources (uses):

Inception of subscription liability - - - 964,745
Transfers in 2,675,800 4,788,757 - 11,350,697
Transfers out - ( 823,600) ( 1,711,140) ( 15,076,576)
Total other financing sources (uses) 2,675,800 3,965,157 ( 1,711,140) ( 2,761,134) Net Change in Fund Balances ( 6,600) ( 155,116) ( 2,628,120) 23,435,487 Fund balances:

Beginning of year, as restated (Note 14) 8,350 34,922,310 27,533,108 196,874,064 End of year 1,750$ 34,767,194$ 24,904,988$ 220,309,551$ Concluded)
City of Cupertino
Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Governmental Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements 39 Net Change in Fund Balances - Total Governmental Funds 23,435,487$ Capital outlay, net of $527,793 reported in Internal Service Fund 11,622,819$ Depreciation amortization, net of $904,610 reported in Internal Service Funds ( 8,327,056) Net effect on disposal of capital assets ( 476,537) 2,819,226 872,992
Bonds payable 1,955,000$
Subscription liabiltiies, net of $109,339 reported in the Internal Service Funds 626,181 2,581,181 53,550)
424,249
964,745)
322,269)
568,786)
1,244,041)
4,686)
1,249,953
Change in Net Position of Governmental Activities 28,225,011$ Internal Service Funds are used by management to charge the costs of certain activities, such as insurance and equipment replacement, to individual funds. The net revenue of the Internal Service Funds is reported in governmental activities.

Certain pension expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds, net of $325,644 reported in Internal Service Funds.

Certain OPEB expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds net of $21,395 reported in Internal Service Funds.

Compensated absences were reported in the Government-Wide Statement of Activities, but they did not require the use of current financial resources. Therefore, compensated absences were not reported as expenditures in the governmental funds. Compensated absences is net of $68,970 reported in the Internal Service Funds.

Net change in revenues that was considered unavailable in the governmental funds. These items have been reported as revenue in the Statement of Activities.

Amortization of bond premium and deferred charges were recognized in interest expense on the Government- Wide Statement of Activities, but did not require the use of current financial resources. Therefore amortization of bond discount was not reported as an expenditure in the governmental funds.

Interest accrued on long-term debt is reported in the Statement of Activities, but does not require the use of current financial resources. Therefore, accrued interest is not reported as an expenditure in governmental funds. This amount represents the change in accrued interest from the prior year.

Certain claims expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds net of $85,000 reported in Internal Service Funds.

Inception of subscription liability, net of $24,865 reported in the Internal Service Funds.

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

Governmental activities in the Statement of Activities were reported differently because:

City of Cupertino
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes For the Year Ended June 30, 2023
in Fund Balances to the Government- Wide Statement of Activities See accompanying Notes to the Basic Financial Statements 40 PROPRIETARY FUND

FINANCIAL STATEMENTS
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.

Proprietary funds account for City operations financed and operated a in 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 year 2022-2023. 41 Cupertino
Resources Recreation Sports
Recovery Programs Center
ASSETS
Current assets:

Cash and investments 5,351,316$ 3,484,602$ 1,639,687$
Accounts receivable 222,326 41,981 1,000
Interest receivable 18,754 12,210 5,732
Total current assets 5,592,396 3,538,793 1,646,419
Noncurrent assets:

Capital assets:

Nondepreciable - 220,888 -
Depreciable and amortizable, net - 492,149 1,241,170
Total noncurrent assets - 713,037 1,241,170
Total assets 5,592,396 4,251,830 2,887,589

DEFERRED OUTFLOWS OF RESOURCES
Related to pensions 326,269 241,077 163,134
Related to other postemployment benefit 104,839 106,877 81,087 Total deferred outflows of resources 431,108 347,954 244,221 Business-Type Activities - Enterprise Funds
City of Cupertino
Statement of Net Position
Proprietary Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements 42 Governmental
Activities
Nonmajor Internal
Enterprise Service
Fund Total Funds
ASSETS
Current assets:

Cash and investments 896,941$ 11,372,546$ 8,939,014$
Accounts receivable 1,829 267,136 1,385,759
Interest receivable 3,136 39,832 32,794
Total current assets 901,906 11,679,514 10,357,567
Noncurrent assets:

Capital assets:

Nondepreciable 137,343 358,231 119,408
Depreciable and amortizable, net 18,042 1,751,361 2,789,976 Total noncurrent assets 155,385 2,109,592 2,909,384
Total assets 1,057,291 13,789,106 13,266,951

DEFERRED OUTFLOWS OF RESOURCES
Related to pensions 101,506 831,986 1,212,633
Related to other postemployment benefit 18,479 311,282 410,644 Total deferred outflows of resources 119,985 1,143,268 1,623,277 Business-Type Activities
Enterprise Funds
City of Cupertino
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements 43 Cupertino
Resources Recreation Sports
Recovery Programs Center

LIABILITIES
Current liabilities:

Accounts payable and accruals 98,762 244,711 112,984
Accrued payroll and benefits 289 - -
Due to other funds - - -
Compensated absences 3,062 4,623 2,349
Claims payable
Unearned revenue - 488,175 517,481
Subscription liabilities - - -
Total current liabilities 102,113 737,509 632,814
Noncurrent liabilities:

Compensated absences 61,214 92,416 46,962
Claims payable - - -
Net pension liability 1,005,136 742,684 502,568
Net other postemployment benefit liability 9,889 10,081 7,649 Subscription liabilities - - -
Total noncurrent liabilities 1,076,239 845,181 557,179
Total liabilities 1,178,352 1,582,690 1,189,993

DEFERRED INFLOWS OF RESOURCES
Related to pensions 2,473 1,827 1,236
Related to other postemployment benefit 38,809 39,564 30,017 Total deferred inflows of resources 41,282 41,391 31,253

NET POSITION
Net investment in capital assets - 713,037 1,241,170
Restricted 56,141 57,232 43,421
Unrestricted 4,747,729 2,205,434 625,973
Total net position 4,803,870$ 2,975,703$ 1,910,564$
Continued)
Business-Type Activities - Enterprise Funds
City of Cupertino
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements 44 Governmental
Activities
Nonmajor Internal
Enterprise Service
Fund Total Funds

LIABILITIES
Current liabilities:

Accounts payable and accruals 18,976 475,433 150,477
Accrued payroll and benefits - 289 72
Due to other funds - - 1,395,657
Compensated absences 458 10,492 38,354
Claims payable - - 292,000
Unearned revenue 92,223 1,097,879 -
Subscription liabilities - - 125,990
Total current liabilities 111,657 1,584,093 2,002,550
Noncurrent liabilities:

Compensated absences 9,157 209,749 350,536
Claims payable - - 1,362,000
Net pension liability 312,709 2,563,097 3,735,756
Net other postemployment benefit liability 1,743 29,362 38,735 Subscription liabilities - - 72,504
Total noncurrent liabilities 323,609 2,802,208 5,559,531 Total liabilities 435,266 4,386,301 7,562,081

DEFERRED INFLOWS OF RESOURCES
Related to pensions 769 6,305 9,190
Related to other postemployment benefit 6,841 115,231 152,012 Total deferred inflows of resources 7,610 121,536 161,202

NET POSITION
Net investment in capital assets 155,385 2,109,592 2,789,976 Restricted 9,895 166,689 410,644
Unrestricted 569,120 8,148,256 3,966,325
Total net position 734,400$ 10,424,537$ 7,166,945$
Concluded)
Business-Type Activities
Enterprise Funds
City of Cupertino
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements 45 Cupertino
Resources Recreation Sports
Recovery Programs Center
OPERATING REVENUES:

Charges for services 1,673,401$ 1,591,303$ 2,756,264$
Other 98,851 151,139 361,316
TOTAL OPERATING REVENUES 1,772,252 1,742,442 3,117,580
OPERATING EXPENSES:

Salaries and benefits 487,020 482,651 355,109
Materials and supplies 284,671 261,484 448,263
Contractual services 1,266,109 870,494 2,541,729
Insurance and claims and premium - - -
Depreciation and amortization 513 47,057 111,438
TOTAL OPERATING EXPENSES 2,038,313 1,661,686 3,456,539
OPERATING INCOME (LOSS)( 266,061) 80,756 ( 338,959)
NONOPERATING REVENUES (EXPENSES):

Investment income (loss) 58,933 45,346 14,356
Gain on sale of capital assets - - -
Interest expense - - -
Total Nonoperating Income (Expenses) 58,933 45,346 14,356

NET INCOME (LOSS) BEFORE TRANSFERS
AND CAPITAL CONTRIBUTIONS ( 207,128) 126,102 ( 324,603) TRANSFERS AND CAPITAL CONTRIBUTIONS:

Transfers in - 376,000 -
Transfers out - ( 103,119) -

TOTAL TRANSFERS AND
CAPITAL CONTRIBUTIONS - 272,881 -
CHANGES IN NET POSITION ( 207,128) 398,983 ( 324,603)
NET POSITION:

Beginning of year 5,010,998 2,576,720 2,235,167
End of year 4,803,870$ 2,975,703$ 1,910,564$
Continued)
Business-Type Activities - Enterprise Funds
City of Cupertino
Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements 46 Activities
Nonmajor Internal
Enterprise Service
Fund Total Funds
OPERATING REVENUES:

Charges for services 570,038$ 6,591,006$ 4,606,283$
Other 46,423 657,729 1,385,759
TOTAL OPERATING REVENUES 616,461 7,248,735 5,992,042
OPERATING EXPENSES:

Salaries and benefits 233,013 1,557,793 4,289,604
Materials and supplies 208,348 1,202,766 1,279,946
Contractual services 354,975 5,033,307 617,432
Insurance and claims and premium - - 1,086,999
Depreciation and amortization 2,832 161,840 904,610
TOTAL OPERATING EXPENSES 799,168 7,955,706 8,178,591
OPERATING INCOME (LOSS)( 182,707) ( 706,971) ( 2,186,549) NONOPERATING REVENUES (EXPENSES):

Investment income (loss) 37,286 155,921 ( 22,193)
Gain on sale of capital assets - - 30,158
Interest expense - - ( 861)
Total Nonoperating Income (Expenses) 37,286 155,921 7,104

NET INCOME (LOSS) BEFORE TRANSFERS
AND CAPITAL CONTRIBUTIONS ( 145,421) ( 551,050) ( 2,179,445) TRANSFERS AND CAPITAL CONTRIBUTIONS:

Transfers in 23,600 399,600 3,429,398
Transfers out - ( 103,119) -

TOTAL TRANSFERS AND
CAPITAL CONTRIBUTIONS 23,600 296,481 3,429,398
CHANGES IN NET POSITION ( 121,821) ( 254,569) 1,249,953 NET POSITION:

Beginning of year 856,221 10,679,106 5,916,992
End of year 734,400$ 10,424,537$ 7,166,945$
Concluded)
Enterprise Funds
City of Cupertino
Statement of Revenues, Expenses, and Changes in Net Position (Continued) Proprietary Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements 47 Cupertino
Resources Recreation Sports
Recovery Programs Center

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers and users 1,596,163$ 1,795,593$ 3,099,825$ Cash paid to suppliers for goods and services ( 1,553,924) ( 1,121,474) ( 2,939,258) Cash paid to employees for services ( 664,327) ( 705,749) ( 491,404) Recovery for insurance claims - - -
Net Cash Provided by (Used in) Operating
Activities ( 622,088) ( 31,630) ( 330,837)

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Cash received from (paid to) other funds - 272,881 -
Net Cash Provided by (Used in)
Noncapital Financing Activities - 272,881 -

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets - ( 36,220) ( 8,300)
Principal paid - - -
Interest paid - - -
Proceed from sale of capital assets - - -
Net Cash (Used in) Capital and
Related Financing Activities - ( 36,220) ( 8,300)

CASH FLOWS FROM INVESTING
ACTIVITIES:

Investment income ( loss) 40,179 33,136 8,624
Net Cash (Used in) Provided by
Investing Activities 40,179 33,136 8,624
Net Change In Cash and Cash
Equivalents ( 581,909) 238,167 ( 330,513)
CASH AND CASH EQUIVALENTS:

Beginning of year 5,933,225 3,246,435 1,970,200
End of year 5,351,316$ 3,484,602 1,639,687$
CASH AND CASH EQUIVALENTS:

Cash and investments 5,351,316$ 3,484,602$ 1,639,687$
Total cash and cash equivalents 5,351,316$ 3,484,602$ 1,639,687$ Continued)
Business- Type Activities - Enterprise Funds
City of Cupertino
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements 48 Governmental
Activities
Nonmajor Internal
Enterprise Service
Fund Total Funds

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers and users 612,394$ 7,103,975$ 4,606,283$ Cash paid to suppliers for goods and services ( 582,924) ( 6,197,580) ( 2,952,729) Cash paid to employees for services ( 245,311) ( 2,106,791) ( 3,873,595) Recovery for insurance claims - - 85,000
Net Cash Provided by (Used in) Operating
Activities ( 215,841) ( 1,200,396) ( 2,135,041)

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Cash received from (paid to) other funds 23,600 296,481 4,285,851 Net Cash Provided by (Used in)
Noncapital Financing Activities 23,600 296,481 4,285,851

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets ( 137,343) ( 181,863) ( 527,793) Principal paid - - ( 109,339)
Interest paid - - ( 861)
Proceed from sale of capital assets - - 30,158
Net Cash (Used in) Capital and
Related Financing Activities ( 137,343) ( 181,863) ( 607,835)

CASH FLOWS FROM INVESTING
ACTIVITIES:

Investment income ( loss) 34,150 116,089 ( 54,987)
Net Cash (Used in) Provided by
Investing Activities 34,150 116,089 ( 54,987)
Net Change In Cash and Cash
Equivalents ( 295,434) ( 969,689) 1,487,988
CASH AND CASH EQUIVALENTS:

Beginning of year 1,192,375 12,342,235 7,451,026
End of year 896,941$ 11,372,546$ 8,939,014$
CASH AND CASH EQUIVALENTS:

Cash and investments 896,941$ 11,372,546$ 8,939,014$
Total cash and cash equivalents 896,941$ 11,372,546$ 8,939,014$ Concluded)
Enterprise Funds
Business-Type Activities
City of Cupertino
Statement of Cash Flows (Continued)
Proprietary Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements 49 Cupertino
Resources Recreation Sports
Recovery Programs Center
Reconciliation of Operating Income (Loss) to
Net Cash Provided by (Used in) Operating Activities:

Operating income (loss) ( 266,061)$ 80,756$ ( 338,959)$ Adjustments to reconcile to net cash provided by
Operating activities:

Depreciation and amortization 513 47,057 111,438
Changes in assets and liabilities:

Increase)/ decrease in accounts receivables ( 92,396) ( 41,423) - Increase)/ decrease in deferred outflows of resources
related to pensions ( 113,387) ( 65,682) ( 44,533)
Increase)/ decrease in deferred outflows of resources
related to OPEB ( 8,356) ( 39,534) ( 2,110)
Increase/( decrease) in accounts payable ( 3,144) 10,504 50,734 Increase/( decrease) in unearned revenue ( 83,693) 94,574 ( 17,755) Increase/( decrease) in compensated absences 4,740 5,528 2,627 Increase/( decrease) in claims payable - - -
Increase/( decrease) in net pension liabilities 123,045 2,046 17,988 Increase/( decrease) in other postemployment benefit liabilities 14,890 46,933 64,861 Increase/( decrease) in deferred inflows of resources
related to pensions ( 186,791) ( 150,417) ( 128,578)
Increase/( decrease) in deferred inflows of resources
related to OPEB ( 11,448) ( 21,972) ( 46,550)
Net Cash Provided by (Used in) Operating Activities ( 622,088)$ ( 31,630)$ ( 330,837)$ Continued)
City of Cupertino
For the Year Ended June 30, 2023
Business-Type Activities - Enterprise Funds
Statement of Cash Flows (Continued)
Proprietary Funds
See accompanying Notes to the Basic Financial Statements 50 Governmental
Activities
Nonmajor Internal
Enterprise Service
Fund Toals Funds
Reconciliation of Operating Income (Loss) to
Net Cash Provided by (Used in) Operating Activities:

Operating income (loss) ( 182,707)$ ( 706,971)$ ( 2,186,549)$ Adjustments to reconcile to net cash provided by
Operating activities:

Depreciation and amortization 2,832 161,840 904,610
Changes in assets and liabilities:

Increase)/ decrease in accounts receivables ( 1,659) ( 135,478) ( 1,385,759) Increase)/ decrease in deferred outflows of resources
related to pensions ( 42,810) ( 266,412) ( 693,504)
Increase)/ decrease in deferred outflows of resources
related to OPEB ( 5,380) ( 55,380) ( 64,342)
Increase/( decrease) in accounts payable ( 19,601) 38,493 31,648 Increase/( decrease) in unearned revenue ( 2,408) ( 9,282) - Increase/( decrease) in compensated absences ( 9,290) 3,605 68,970 Increase/( decrease) in claims payable - - 85,000
Increase/( decrease) in net pension liabilities 62,474 205,553 1,809,813 Increase/( decrease) in other postemployment benefit liabilities 1,743 128,427 119,864 Increase/( decrease) in deferred inflows of resources
related to pensions ( 25,876) ( 491,662) ( 790,665)
Increase/( decrease) in deferred inflows of resources
related to OPEB 6,841 ( 73,129) ( 34,127)
Net Cash Provided by (Used in) Operating Activities ( 215,841)$ ( 1,200,396)$ ( 2,135,041)$ Concluded)
City of Cupertino
For the Year Ended June 30, 2023
Business-Type Activities
Enterprise Funds
Statement of Cash Flows (Continued)
Proprietary Funds
See accompanying Notes to the Basic Financial Statements 51 This page intentionally left blank.
52 53

NOTES TO THE BASIC FINANCIAL STATEMENTS
54 This page intentionally left blank.

City of Cupertino
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
55 Page
Note 1 – Summary of Significant Accounting Policies
57 A. Financial Reporting Entity
57B. Basis of
Presentation 58 C. Measurement Focus, Basis of Accounting and Financial Statements Presentation 58D. Cash, Cash
Equivalents, and Investments 61
E. Fair Value
Measurements 62 F.

Receivables 62
G. Leases Receivables
62 H. Inventories
63 I. Prepaid Items
63J. Interfund Transactions 63K. Capital Assets
63 L. Deferred Outflows
of Resources and Deferred
Inflows ofResources 64
M. Interest Payable 64 N.

Unearned Revenue 64
O. Compensated Absences 65
P. Claims and
Judgement Payable 65 Q. Subscription Liabilities
65R. LongTerm Debt 65
S. Pensions 66
T. Other Postemployment Benefits (“ OPEB”)
Plan 66 U. NetPosition
67 V. Fund Balances67 W.

Property Taxes 68X. Use
of Estimates
68 Y. Implementation of New GASB Pronouncements 69Z. Upcoming New GANB Pronouncements 69 Note2 – Cash and Investments
70 A. Deposits
71 B. Investments Authorized by the
California Government Code andtheCity’s Investment Policy 72 C. Investments Authorized
by Debt Agreements 73D. Risk Disclosures 73E. Fair
Value Measurement Disclosure 76
F. Investment in
Local Agency Investment Fund (LAIF) 76 Note
3 – Loans Receivable 77 Note
City of Cupertino
Index to the Notes to the Basic Financial Statements ( Continued) For the Year Ended June 30, 2023
56 Page
Note 6 – Capital Assets
80 A. Governmental Activities
80B. Business- Type
Activities 81 Note 7 – LongTerm Liabilities 82
A. Governmental Activities 82
B. Business- Type Activities 84 Note
8 – Defined Benefit Pension Plan 84 A.

General Information about the Pension
Plan 84 B. Net Pension Liability
86 C. Changes intheNet Pension Liability
88Note9 – Other Post Employment Benefits (
OPEB) 90A. General
Information about the OPEB Plan 90
B. Net OPEB Liability 91 C. Change in Net OPEB Liability 94 D. OPEB Expense and Deferred Inflowsof Resources
Related to OPEB 95 Note 10 – Liabilities
Under Self-Insurance and Risk Management
95 Note 11 – Net Position
and Fund Balances 96 A.

Net Investment in Capital Assets
96 B. Fund
Balance Classifications 97 Note 12 – Commitments
and Contingencies 97A. Federal and State Grants
97B. Encumbrances
98 C. Consulting Agreement
for Sales Taxes 98 D.

Santa Clara County Vehicle Registration Fee (
VRF) 98E. Unasserted Claim
City of Cupertino
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
57 Note 1 – Summary of Significant Accounting Policies
A. Financial 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, Innovation and Technology, 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
In evaluating how to define the City for financial reporting purposes, management has considered all potential component units. The primary criteria for including a potential component unit within the reporting entity are the governing body’ s financial accountability and a financial benefit or burden relationship and whether itis misleading to exclude. A primary government is financially accountable and shares a financial benefit or burden relationship, if it appoints a voting majority of an organization’ s governing body and it is able to impose its will on the organization, or if there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the primary government. A primary government may also be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has a separately elected governing board, a governing board appointed by a higher level of government, or a jointly appointed board, and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the primary government.

Management determined that the following component unit should be blended based on the criteria above:

Although the following is legally separate from the City, it has been “ blended” as though it is part of the City because the component unit’ s governing body is substantially the same as the City’ s and there is a financial benefit or burden relationship between the City and the component unit; management of the City has operational responsibilities for the component unit; and/or the component unit provides services entirely, or almost entirely, to the City or otherwise exclusively, or almost exclusively, benefits the City, even though it does not provide services directly to it.

The Cupertino Public Facilities Corporation (the “ 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 inthe 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 itis reported separately in the City's basic financial statements.

The City had no discretely presented component units.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
58 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Presentation
Financial statement presentation follows the recommendations promulgated by the Governmental Accounting Standards Board (“ GASB”) commonly referred to as accounting principles generally accepted in the United States of America (“ U.S. GAAP”). GASB is the accepted standard- setting body for establishing governmental accounting and financial reporting standards.

C. Measurement Focus, Basis of Accounting and Financial Statements Presentation The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained in accordance with legal and managerial requirements.

Government-wide Statements
The City’s Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities. These statements present summaries of governmental and business-type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements.

These financial statements are presented on an “ economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, including capital assets, as well as infrastructure assets, and long- term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred.

Certain types of transactions are reported as program revenues for the City in three categories:

Charges for services
Operating grants and contributions
Capital grants and contributions
Certain eliminations have been made in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities and Changes in Net Position, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The following interfund activities have been eliminated:

Due to/from other funds
Transfers in/out
City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
59 Note 1 – Summary of Significant Accounting Policies (Continued) C. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued) Governmental Fund Financial Statements
Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and nonmajor funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net position as presented in these statements to the net position presented in the Government- Wide Financial Statements. The City has presented all major funds that met the applicable criteria.

All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances presents increases revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.

Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both “ measurable” and “ available” to finance expenditures of the current period.

Revenues are recognized as soon as they are both “ measurable” and “ available”. Revenues are considered to be available when they are collectible within the current period as soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available ifthey are collected within 60 days of the end of the current fiscal period. The primary revenue sources, which have been treated as susceptible to accrual by the City, are property taxes, sales tax, intergovernmental revenues and other taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred.

The Reconciliation of the Fund Financial Statements to the Government- Wide Financial Statements is provided to explain the differences.

The City reports the following major Governmental Funds:

General Fund – The General Fund is thegeneral operating fundofthe City. Itis used toaccount for all financial resources except those that are required to be accounted for in another fund.

Housing Development Special Revenue Fund – 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. 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.

Transportation Special Revenue 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.

Public Facilities Corporation Debt Service Fund – The Public Facilities Corporation Debt Service Fund accounts for the payments of principal and interest on certificates of participation issued to provide for the financing of City Hall, Library, Wilson Park, Memorial Park, and other City facilities. 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.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
60 Note 1 – Summary of Significant Accounting Policies (Continued) C. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued) Governmental Fund Financial Statements (Continued)
Capital Improvement Projects Capital Projects Fund – The Capital Improvement Projects Capital Projects Fund Accounts for activities related to the acquisition or construction of major capital facilities.

Proprietary Fund Financial Statements
Proprietary Fund Financial Statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Fund Net Position, and a Statement of Cash Flows for each major Proprietary Fund.

A separate column representing internal service funds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the Government-Wide Financial Statements. The City’ s internal service funds include two individual funds which provide services directly to other City funds. These areas of service include Central Garage and Print Shop.

Proprietary funds are accounted for using the " economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Fund Net Positionpresents increases (revenues) and decreases ( expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred.

Inthese funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts.

Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as nonoperating expenses.

The City reports the following major proprietary funds:

Resources Recovery Enterprise Fund - The Resources Recovery Enterprise 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 Enterprise Fund - The Recreation Programs Enterprise Fund accounts for activities of the City's community centers and park facilities.

Cupertino Sports Center Enterprise Fund - The Cupertino Sports Center Enterprise Fund accounts for activities of the City’ s sports center facility.

The City also reports the following fund as proprietary fund type:

Internal Service Funds. These funds account for management information systems maintenance and replacement, workers' compensation, equipment maintenance and replacement, accrued leave payouts, and long-term disability, retiree health costs, coverage which are provided to other departments on a costreimbursement basis.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
61 Note 1 – Summary of Significant Accounting Policies (Continued) C. Measurement Focus, Basis of Accounting and Financial Statements Presentation (Continued) 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 ifthe 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 ofthe 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 witha combination of cost reimbursement grants, categorical block grants, and general revenue. The City's policy is to first apply restricted grant resources to suchprograms, followedby 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 costreimbursement 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.

D. Cash, Cash Equivalents, 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.

The statement of cash flows requires presentation of “cash and cash equivalents”. For the purposes ofthe statement of cash flows, the City considers all proprietary fund pooled cash and investments as “ cash and cash equivalents”, as such funds are available to the various funds as needed.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
62 Note 1 – Summary of Significant Accounting Policies (Continued) D. Cash, Cash Equivalents, and Investments (Continued)
Certain disclosure requirements, if applicable, for Deposits and Investment Risks in the following areas:

Interest Rate Risk
Credit Risk
Overall
Custodial Credit Risk
Concentration of Credit Risk
Foreign Currency Risk
In addition, other disclosures are specified including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year- end and other disclosures.

E. Fair Value Measurements
U.S. GAAP defines fair value, establishes a framework for measuring fair value and establishes disclosures about fair value measurement. Investments, unless otherwise specified, recorded at fair value in the financial statements, are categorized based upon the level ofjudgment associated with the inputs used to measure their fair value. Levels of inputs are as follows:

The three levels of the fair value measurement hierarchy are described below:

Level 1 - Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level 2 - Inputs, other than quoted prices included in Level 1, that are observable for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 - Unobservable inputs that reflect management’ s best estimate of what market participants would use in pricing the assets or liabilities at the measurement date.

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.

F. Receivables
Receivables include such items as taxes, intergovernmental revenues, charges for services, miscellaneous accounts receivable, and interest receivable. No allowance for doubtful accounts has been established, as the City believes all amounts are considered to be collectible in the normal course of business.

G. Leases Receivables
The City is a lessor for leases of buildings and land and recognizes leases receivable and deferred inflows of resources in the financial statements. Variable payments based on future performance or usage of the underlying asset are not included in the measurement of the lease receivable.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
63 Note 1 – Summary of Significant Accounting Policies (Continued) G. Leases Receivables (Continued)
At the commencement of a lease, the lease receivable is measured at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflows of resources are initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflows of resources are recognized as revenue over the life of the lease term in a systematic and rational method.

Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts.

The City uses the incremental borrowing rate (IBR) provided by the City’ s financial institution for existing leases or the current rate at the time a new lease is executed.

The lease term includes the noncancelable period of the lease plus any option periods that are likely to be exercised.

Lease receipts included inthe measurement ofthe lease receivable is composed offixed payments from the lessee.

The City monitors changes incircumstances that would require a remeasurement ofits lease and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable.

H. Inventories
Inventories consist of fuel.

I. Prepaid Items
Prepaid items are reported under theconsumption method, which recognizes theexpenditures/expense intheperiod associated with the service rendered or goods consumed.

J. Interfund Transactions
Activity between funds that are representative of lending/ borrowing arrangements outstanding at the end of the fiscal year are referred to as either “ due to/from other funds” or “ advances to/from other funds” ( i.e., the current portion of interfund loans). Any residual balances outstanding between the governmental activities and businesstype activities are reported in the Government-Wide Financial Statements as “ internal balances”.

K. 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 lightingsystems 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.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
64 Note 1 – Summary of Significant Accounting Policies (Continued) K. Capital Assets (Continued)
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
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.

Right-of-Use Subscription Assets
Subscription assets are recorded at the amount of the initial measurement of the SBITA liabilities (“ subscription liabilities”) and adjusted by any subscription payments to the SBITA vendor at or before the commencement of the subscription term, less any incentives received from the SBITA vendor at or before the commencement of the subscription term along with subscription implementation costs. Subscription assets are amortized over the shorter of the subscription term or the useful life of the underlying information technology assets.

L. Deferred Outflows of Resources and Deferred Inflows of Resources The Statement and Net Position and the Balance Sheet report separate sections for deferred outflows of resources, and deferred inflows of resources, when applicable.

Deferred Outflows of Resources represent a consumption of net assets that applies to future periods.

Deferred Inflows of Resources represent an acquisition of net assets that applies to future periods.

M. Interest Payable
In the government-wide financial statements, interest payable on long-term debt is recognized as the liability is incurred for governmental activities and business-type activities.

N. Unearned Revenue
Unearned revenue is reported for transactions for which revenue has not yet been earned. Typical transactions recorded as unearned revenues are prepaid charges for services.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
65 Note 1 – Summary of Significant Accounting Policies (Continued) O. 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 longterm 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.

P. Claims and Judgement 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.

Q. Subscription Liabilities
The City recognizes subscription liabilities with an initial, individual value of $5,000 or more with a subscription term greater than one year in the government- wide and proprietary fund financial statements. Variable payments based on future performance of the City, usage of the underlying information technology assets, or number of user seats are not included in the measurement of the subscription liability.

At the commencement of a subscription, the City initially measures the subscription liability at the present value of payments expected to be made during the subscription term. Subsequently, the subscription liability is reduced by the principal portion of subscription payments made.

Key estimates and judgments related tosubscription liabilities include how the City determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and ( 3) subscription payments.

The City uses incremental borrowing rate provided by the financial institution at July 1, 2022 for existing subscription or the current rate at the time a new subscription is executed.

The subscription term includes the noncancellable period of the SBITA. Subscription payments included in the measurement of the subscription liability are composed of fixed payments.

The City monitors changes in circumstances that would require a remeasurement of its SBITA and will remeasure any subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.

R. Long-Term Debt
Government- Wide Financial Statements
Long-term debt and other financial obligations are reported as liabilities in the statement of net position.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
66 Note 1 – Summary of Significant Accounting Policies (Continued) R. Long-Term Debt (Continued)
Government-Wide Financial Statements (Continued)
Bond premiums and discounts, as well as gains and losses on refunding, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net ofthe applicable premium or discount.

Issuance costs are expensed in the year of issuance.

Fund Financial Statements
The fund financial statements do not present long-term debt but are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government- Wide Statement of Net Position.

S. Pensions
For purposes of measuring thenet pensionliability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by theplans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

The following timeframes are used for pension reporting:

Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight- line over the average expected remaining service lives of all members that are provided with benefits ( active, inactive, and retired) as of the beginning of the measurement period.

General Fund is typically used to liquidate pension liabilities to governmental funds.

T. Other Postemployment Benefits (“ OPEB”) Plan
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’ s OPEB Plan and additions to/deductions from the OPEB Plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
67 Note 1 – Summary of Significant Accounting Policies (Continued) T. Other Postemployment Benefits (“ OPEB”) Plan (Continued) The following timeframes are used for OPEB reporting:

Valuation Date June 30, 2023
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. The first amortized amounts are recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight- line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits ( active, inactive, and retired) as of the beginning of the measurement period.

General Fund is typically used to liquidate OPEB liabilities to governmental funds.

U. Net Position
In governmental-wide and proprietary fund financial statements, net positions are categorized as follows:

Net Investment in Capital Assets – This category consists of capital assets, net of accumulated depreciation/amortization, reduced by the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of those assets and retention payable.

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."
When expenses are incurred for purposes for which both restricted and unrestricted net position are available, the City’s policy is to apply restricted net position first, then unrestricted net position as they are needed.

V. 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.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
68 Note 1 – Summary of Significant Accounting Policies (Continued) V. Fund Balances (Continued)
Restricted Fund Balance - includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers.

Committed Fund Balance - includes amounts that can only be used for the specific purposes determined by a formal action of the City' s highest level of decision- making authority, the City Council. Commitments may be changed or lifted only by the City taking the same formal action (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.

W. Property Taxes
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.

X. Use of Estimates
The preparation of the basic financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
69 Note 1 – Summary of Significant Accounting Policies (Continued) Y. Implementation of New GASB Pronouncements
GASB Statement No. 91 In May 2019, GASB issued Statement No. 91, Conduit Debt Obligations ( GASB Statement No. 91), 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. Implementation of this Statement did not have a significant effect on the City’ s financial statements for the fiscal year ended June 30, 2023.

GASB Statement No. 94 In March 2020, GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements (GASB Statement No. 94) to improve financial reporting by addressing issues related to public- private and public- public partnership arrangements ( PPPs). This Statement also provides guidance for accounting and financial reporting for availability payment arrangements ( APAs).

Implementation of this Statement did not have a significant effect on the City’s financial statements for the fiscal year ended June 30, 2023.

GASB Statement No. 96 In May 2020, GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements (GASB Statement No. 96), toprovide guidance ontheaccounting 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. Implementation of this Statement had a significant effect on the City’s financial statements for the fiscal year ended June 30, 2023.

GASB Statement No. 99 - In April 2022, the GASB issued Statement No. 99, Omnibus 2022. The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing ( 1) practice issues that have been identified during implementation and application of certain GASB Statements and ( 2) accounting and financial reporting for financial guarantees. The Statement is effective immediately for the requirements related to extension of the use of LIBOR, accounting for SNAP distributions, disclosures of nonmonetary transactions, pledges offuture revenues by pledging governments, clarification of certain provisions in Statement 34, as amended, and terminology updates related to Statement 53 and Statement 63. The Statement is effective for fiscal year years beginning after June 15, 2022 for requirements related to leases, PPPs, and SBITAS. Implementation of this Statement did not have a significant effect on the City’ s financial statements for the fiscal year ended June 30, 2023.

Z. Upcoming New GANB Pronouncements
The City is currently evaluating its accounting practices to determine the potential impact on the financial statements for the following GASB Statements:

In June 2022, GASB issued Statement No. 100, Accounting Changes and Error Corrections – an Amendment of GASB Statement No. 62. The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. Application of this statement is effective for the City’ s fiscal year ending June 30, 2024.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
70 Note 1 – Summary of Significant Accounting Policies (Continued) Z. Upcoming New GANB Pronouncements (Continued)
InJune 2022, GASB issued Statement No. 101, Compensated Absences. The objective ofthis Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. Application of this statement is effective for the City’s fiscal year ending June 30, 2025.

In December 2023, GASB issued Statement 102, Certain Risk Disclosures. The objective of this Statement is to provide users of government financial statements with essential information about risks related to a government’ s vulnerabilities due to certain concentrations or constraints. That objective is achieved by requiring governments to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. The statement also requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued. Application ofthis statement is effective for the City’ s fiscal year ending June 30, 2025. Earlier application is encouraged.

In April 2024, GASB issued Statement 103, Financial Reporting Model Improvements - The objective of this Statement is to improve key components of the financial reporting model. The purposes of the improvements are to (a) enhance the effectiveness of the financial reporting model in providing information that is essential for decision making and assessing a government’ s accountability and ( b) address certain application issues identified through pre-agenda research conducted by the GASB. Application of this statement is effective for the City’s fiscal year ending June 30, 2027. Earlier application is encouraged.

Note 2 – Cash and Investments
The City had the following cash and investments at June 30, 2023:

Governmental Business- Type
Activities Activities Total
Cash and investments 205, 571, 569$ 11,372, 546$ 216, 944, 115$ Restricted cash and investments:

Held by fiscal agent for pension 19,088,859 - 19,088,859 Total cash and investments 224, 660, 428$ 11,372, 546$ 236, 032, 974$ Government-Wide
Statement of Net Position
City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
71 Note 2 – Cash and Investments (Continued)
The City’s cash and investments at June 30, 2023, in more detail:

Cash on hand 3,586$
Deposits with financial institutions 47,281, 611
Total cash 47,285, 197
Investments 169, 658, 918
Investments with PARS 19,088, 859
Total investments 188,747,777
Total cash and investments 236, 032, 974$
A. Deposits
The carrying amounts ofthe City’s demand deposits were $47,281,611 at June 30, 2023. Bank balances at that date were $ 48,018, 306 the total amount of which was collateralized or insured with accounts held by the pledging financial institutions in the City’s name as discussed below.

Cash and Investments with PARS were related to the City’s Pension Trust.

The California Government Code requires California banks and savings and loan associations to secure the City’ s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name.

The market value of pledged securities must equal at least 110% of the City' s cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive collateral requirements for cash deposits, deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation (“ FDIC”). The City did not waive the collateral requirement for deposits insured by FDIC.

The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the period-end cash and investment balances.

Interest income from cash and investments with fiscal agents is credited directly to the related fund.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
72 Note 2 – Cash and Investments (Continued)
B. Investments Authorized by the California Government Code and the City’s Investment Policy The following table identifies the investment types that are authorized for the City by the California Government Code (or the City’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code ( or the City’ s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements ofthe City, rather than the general provisions of the California Government Code or the City’ s investment policy: 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.

Authorized Investment Type
Maximum
Maturity
Minimum Credit
Quality
Maximum
Percentage of
Portfolio
Maximum Investment in
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 Corperate Notes 5 years A or better 25%
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
Supernationals 5 years AA or better 30% 10% of portfolio 30% maximum percent of portfolio if using a private sector entity to assist in the placement of the time deposits. No maximum Securities issued by agencies of the federal government such as the Government National Mortgage Association ( GNMA), Represents restriction in which the City' s investment policy is more restrictive than the California Government Code.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
73 Note 2 – Cash and Investments (Continued)
C. Investments Authorized 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 ifthe 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 ofthe related bond indentures. The following identifies the investment types that are authorized for investments held by fiscal agents under the terms of the bond indentures of the related debt issue:

Authorized Investment Type
Maximum
Maturity
Minimum Credit
Quality
Maximum
Percentage of
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
D. Risk Disclosures
Disclosures Relating to 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. One ofthe ways that the City manages its exposure tointerest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
74 Note 2 – Cash and Investments (Continued)
D. Risk Disclosures (Continued)
Disclosures Relating to Interest Rate Risk (Continued)
Information about the sensitivity of the fair values of the City' s investments ( including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity:

Investment Type
12 Months of
less 13 to 24 Months
More than 24
Months Total
U.S. Treasury Securities 4,588, 328$ 12,214,180$ 36,160,305$ 52,962,813$ Corporate Notes 1,454,667 19,059,694 19,537,835 40,052,196 U.S. Agency Notes:

Federal Home Loan Mortgage Corporation 836,535 2,232,499 3,408, 904 6,477, 938 Federal National Mortgage Association - 8,574,094 4,540,665 13,114,759 Federal Home loan Banks 1,463, 544 1,943, 320 - 3,406,864 MunicipalBonds - 726,121 - 726,121
Asset- Backed Securities 329,142 4,647, 343 11,558, 949 16,535, 434 Supranationals 2,747,746 - 6,683,579 9,431,325
Collateralized Mortgage Obligations - 1,261, 927 4,392, 528 5,654, 455 LocalAgency Investment Fund 21,099,954 21,099,954
Money Market Mutual Funds 197,059 - - 197, 059
Restricted investment with PARS 19,088,859 - - 19,088,859 Total investments 51,805,834$ 50,659,178$ 86,282,765$ 188,747,777 Cash in banks and on hand 47,285,197
Total Cash and Investments 236,032,974$
Remaining Maturity ( In Months)
Disclosures Relating to Credit Risk
Generally, 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 ratingby a nationally recognized statistical rating organization.

Presented below is the minimum rating required by (where applicable) the California Government Code, the City' s investment policy, or debt agreements, and the actual rating, by Standard and Poor’ s or Moody’ s’, as of June 30, 2023 for each investment type:

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
75 Note 2 – Cash and Investments (Continued)
D. Risk Disclosures (Continued)
Disclosures Relating to Credit Risk (Continued)
Investment Type Total AAA AA A Not Required
U.S. Treasury Securities 52,962,813$ 52,962,813$ -$ -$ -$ Corporate Notes 40,052,196 - 12,415,464 27,636,732 -
U.S. Agency Notes
Federal Home Loan Mortgage Corporation 6,477,938 6,477,938 - - - Federal National Mortgage Association 13,114,759 13,114,759 - - - Federal Home Loan Banks 3,406,864 3,406,864 - - -
Municipal Bonds 726,121 726,121 - - -
Asset-Backed Securities 16,535,434 16,535,434 - - -
Supranationals 9,431,325 9,431,325 - - -
Collateralized Mortgage Obligations 5,654,455 5,654,455 - - - Local Agency Investment Fund 21,099,954 - - - 21,099,954 Money Market Mutual Funds 197,059 197,059 - - -
Restricted investment with PARS 19,088,859 - - - 19,088,859 Total Investments 188,747,777$ 108,506,768$ 12,415,464$ 27,636,732$ 40,188,813$ Disclosures Relating to Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. At June 30, 2023, the following investment represent 5% or more of total City investments:

Issuer Investment Type Amount Percentage
Federal National Mortgage Association ( FNMA) U.S. Agency Notes 13,114, 759$ 7% Disclosures Relating to Custodial Credit Risk
Custodial credit risk is the risk that, in the event of the failure of the counter party, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. All securities, with the exception of LAIF and other pooled investments, are held by a third-party custodian.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
76 Note 2 – Cash and Investments (Continued)
E. Fair Value Measurement Disclosure
At June 30, 2023, investments are reported at fair value. The following table presents the fair value measurement of investments on a recurring basis and the levels within GASB 72 fair value hierarchy in which the fair value measurements fall at June 30, 2023:

Investments by Fair Value Level
Quoted Prices
in Active
Markets for
Identical Assets
Level 1)
Significant
Other
Observable
Inputs
Level 2) Total
U.S. Treasury Securities 52,962, 813$ -$ 52,962, 813$
Corporate Notes - 40,052, 196 40,052, 196
U.S. Agency Notes
Federal Home Loan Mortgage Corporation - 6,477,938 6,477,938 Federal National Mortgage Association - 13,114, 759 13,114, 759 Federal Home Loan Banks - 3,406, 864 3,406, 864
Asset- Backed Securities - 16,535, 434 16,535, 434
Collateralized Mortgage Obligations - 5,654, 455 5,654, 455 Supranationals - 9,431, 325 9,431, 325
Municipal Bonds - 726, 121 726, 121
Total Investments 52,962, 813$ 95,399, 092$ 148, 361, 905 Investments Measured at Amortized Cost:

Money Markel Mutual Funds - Restricted for Pension ( PARS) 19,088, 859 Money Markel Mutual Funds 197, 059
Investments Exempt from Fair Value Hierarchy:

Local Agency Investment Fund 21,099, 954
Cash in banks and on hand 47,285, 197
Total Cash and Investments 236, 032, 974$
F. Investment in Local Agency Investment Fund (LAIF)
The City is a participant in LAIF which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City’s investments in LAIF at June 30, 2023 included a portion of pool funds invested in Structure Notes and Asset-Backed Securities:

Structured Notes are debt securities ( other than asset-backed securities) whose cash-flow characteristics coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options.

Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from pool of assets such as principal and interest repayments from a pool of mortgages such as Collateralized Mortgage Obligations) or credit card receivables.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
77 Note 2 – Cash and Investments (Continued)
F. Investment in Local Agency Investment Fund (LAIF) (Continued) As of June 30, 2023, the City had $21,099,954 invested in LAIF, which had invested 2.78% ofthe pool investment funds in Structured Notes and Asset-Back Securities. LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where market value is not readily available. LAIF is reported at amortized cost, which approximates fair value.

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, 2023, the balance remaining on the loan was $1,878,389 including principal and interest inthe amounts of $821,000 and $1,057,389, respectively. The loan was issued using resources in the amount of $417,000 and $404,000 in the General Fund and the Housing Development Special Revenue Fund, respectively 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, 2023, the balance on the loan was $135,871. The loan was issued using resources in the Housing Development Special Revenue 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 ofthe 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, 2023, the balance remaining on the loan was $4,359,018 including principal and interest in the amounts of $ 3,672, 000 and $ 687,018, respectively in the Housing Development Special Revenue Fund and is considered as governmental activities.

Note 4 – Leases Receivable and Lease-Related Deferred Inflows of Resources The City leases various City assets to other entities via contractual arrangements under the provisions of GASB Statement No. 87, Leases. The leases include land leases utilized for cell phone towers as well as property leases of the McClellan Ranch House and the Cupertino Public Library. The City receives fixed payments from the lessees, with a total of $220,308 recognized as rental revenue and $31,333 recognized as interest revenue on the lease for the year ended June 30, 2023 and a receivable for the remaining payments under the leases of $2,493,039.

A summary of changes in lease receivable for the year ended June 30, 2023 is as follows:

Balance
July 1, 2022 Additions Retirements
Balance
June 30, 2023
Current
Portion
Long-term
Portion
2,495,226$ 218,121$ ( 220,308)$ 2,493,039$ 221,644$ 2,271,395$ City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
78 Note 4 – Leases Receivable and Lease-Related Deferred Inflows of Resources (Continued) At June 30, 2023, the required payments for these leases, including interest, are:

Year Ending
June 30,
NPV Leases
Receivable Interest
Total Lease
Payment
2024 221,644$ 29,203$ 250,847$
2025 215,649 27,022 242,671
2026 216, 753 24,745 241, 498
2027 227, 844 22,348 250, 192
2028 238, 976 19,832 258, 808
2029- 2033 930, 850 60,105 990, 955
2034- 2038 335, 529 17,807 353, 336
2039- 2041 105, 794 1,720 107, 514
Total 2,493, 039$ 202, 782$ 2,695, 821$
At June 30, 2023, the amounts reported as deferred inflows of resources related to leases will be recognized as lease revenue as follows:

Year Ending
June 30, Amount
2024 263, 427$
2025 248, 416
2026 236, 054
2027 236, 054
2028 236, 054
2029- 2033 822, 454
2034- 2038 259, 170
2039- 2041 78,104
Total 2,379, 733$
Note 5 – Interfund Transactions
A. Advances
Interfund advances are balances between funds that are not expected to be repaid within the current fiscal year. As of June 30, 2023, the General Fund advanced $3,000,000 tothe Capital Improvement Projects Capital Projects Fund for advance funding of planned projects that will be repaid in subsequent years.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
79 Note 5 – Interfund Transactions (Continued)
B. Due from and To other Funds
At June 30, 2023, the City has the following due from and to other funds:

Internal Service
Funds Total
Due From Other Funds
Governmental Funds:

General Fund 1,395, 657$ 1,395, 657$
1,395,657$ 1,395,657$
Due to Other Funds
These interfund balances represent routine short-term cash flow assistance.

C. Transfers in and Out
Transfers between funds during the fiscal year ended June 30, 2023 were as follows:

Capital
Housing Public Facilities Improvement Recreation
Transportation Development Corporation Projects Programs Nonmajor Internal Special RevenueSpecial Revenue Debt Capital Project Enterprise Enterprise Service Transfers Out General Fund Fund Fund Service Fund Fund Fund Fund Funds Total Governmental Funds:

General Fund -$ 3,000,000$ 25,000$ 2,675,800$ 2,838,147$ 376,000$ -$ 3,429,398$ 12,344,345$ Transportation
Special Revenue Fund - - - - 197,491 - - - 197,491
Capital Improvement Projects
Capital Projects Fund 800,000 - - - - - 23,600 - 823,600 Nonmajor Governmental Funds 61,140 - - - 1,650,000 - - - 1,711,140 Proprietary Funds:

Recreation Programs Enterprise Fund - - - - 103,119 - - - 103,119 861,140$ 3,000,000$ 25,000$ 2,675,800$ 4,788,757$ 376,000$ 23,600$ 3,429,398$ 15,179,695$ Proprietary Funds
Transfers In
Governmental Funds
Transfers provided funding for operating subsidies, capital projects, capital acquisitions, internal service funds personnel costs associated with staff special project, compensated absences and retiree health, and debt service.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
80 Note 6 – Capital Assets
A. Governmental Activities
Asummary of changes incapital assets ofthegovernmental activities for theyear ended June 30, 2023 is as follows:

Balance
July 1, 2022 Balance
As Restated) Additions Deletions Transfers June 30, 2023 Governmental Activities:

General Government Capital Asset:

Capital assets not being depreciated:

Land 64,786, 669$ -$ -$ -$ 64,786,669$
Easements 19,615, 039 - - - 19,615,039
Construction in progress 23,398,649 10,658,074 ( 476,537) ( 5,104,793) 28,475,393 Total general government capital assets not being depreciated 107, 800, 357 10,658,074 ( 476,537) ( 5,104, 793) 112, 877, 101 Capital assets being depreciated:

Buildings 47,763, 913 - - - 47,763,913
Improvements other than buildings 61,263,926 - - 359,435 61,623,361 Machinery and equipment 4,529,929 - - 45,697 4,575,626
Roads, curbs, gutters, sidewalks, medians
and bridges 183, 534, 212 - - 4,275,603 187, 809, 815
Streetlights 9,302,437 - - 402,243 9,704,680
Storm drain structure and mains 37,373,158 - - - 37,373,158 Traffic signals 6,418, 246 - - 21,815 6,440,061
Total capital assets being depreciated 350, 185, 821 - - 5,104,793 355, 290, 614 Less accumulated depreciation for:

Buildings ( 33,646,294) ( 1,612,633) - - ( 35,258,927)
Improvements other than buildings ( 45,859,016) ( 2,390,853) - - ( 48,249,869) Machinery and equipment ( 3,306,110) ( 218,247) - - ( 3,524,357) Roads, curbs, gutters, sidewalks, medians and bridges ( 115,601,625) ( 2,839,730) - - ( 118,441,355) Streetlights ( 8,031, 745) ( 431,927) - - ( 8,463,672)
Storm drain structure and mains ( 33,682,048) ( 149, 952) - - ( 33,832,000) Traffic signals ( 5,910, 218) ( 109,425) - - ( 6,019,643) Total accumulated depreciation ( 246, 037, 056) ( 7,752,767) - - ( 253,789,823) Total capital assets being depreciated, net 104, 148, 765 ( 7,752,767) - 5,104,793 101, 500, 791 Intangible assets, being amortized
Right- to-use subscription assets 1,490,232 964,745 - - 2,454,977 Total intangible assets, being amortized 1,490,232 964,745 - - 2,454,977 Less accumulated amortization for:

Right- to-use subscription assets - ( 574,289) - - ( 574,289) Total accumulated amortization - ( 574,289) - - ( 574,289) Total intangible assets, being amortized, net 1,490,232 390,456 - - 1,880,688 Total general government capital asset, net 213,439,354 3,295,763 ( 476,537) - 216,258,580 Internal Service Fund Capital Assets:

Capital assets not being depreciated:

Construction in progress 7,828 527,792 - ( 416,212) 119,408 Total internal fund capital
assets not being depreciated 7,828 527,792 - ( 416,212) 119,408 Capital assets being depreciated:

Machinery and equipment 12,769,434 - ( 118,475) 416,212 13,067,171 Less accumulated depreciation ( 9,798,894) ( 798,599) 118,475 - ( 10,479,018) Total internal fund capital
assets being depreciated, net 2,970, 540 ( 798,599) - 416,212 2,588,153 Intangible assets, being amortized
Right-to-use subscription assets 282,968 24,866 - - 307,834 Total intangible assets, being amortized 282,968 24,866 - - 307,834 Less accumulated amortization for:

Right-to-use subscription assets - ( 106,011) - - ( 106,011) Total accumulated amortization - ( 106,011) - - ( 106,011) Total intangible assets, being amortized, net 282,968 ( 81,145) - - 201,823 Total internal service fund capital assets, net 3,261,336 ( 351,952) - - 2,909,384 Governmental activities capital assets, net 216, 700, 690$ 2,943, 811$ ( 476,537)$ -$ 219,167,964$ City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
81 Note 6 – Capital Assets (Continued)
A. Governmental Activities (Continued)
Depreciation and amortization expenses were charged to functions and programs based on their usage ofthe related assets. Depreciation and amortization expenses were charged to governmental activities as follows:

Governmental Activities Depreciation Amortization
Administration 189,942$ 49,676$
Innovation and technology 16,281 -
Administrative services 29,461 16,138
Parks and recreation 169,010 63,689
Community development - 147, 707
Public works 7,348, 073 297, 079
Subtotal 7,752, 767 574, 289
Internal Service Allocation
Administration 247, 725 9,170
Innovation and technology 21,642 -
Administrative services 55,264 2,979
Parks and recreation 73,072 11,757
Community development - 27,266
Public works 400, 896 54,839
Subtotal 798,599 106,011
Total - Governmental Activities 8,551,366$ 680,300$
B. Business-Type Activities
A summary of changes in capital assets of the business- type activities for the year ended June 30, 2023 is as follows:

Balance Balance
July 1, 2022 Additions Deletions Transfers June 30, 2023 Business- type activities:

Capital assets not being depreciated:

Construction in progress 184,667$ 181,863$ ( 8,299)$ -$ 358,231$ Total capital assets not being depreciated 184,667 181,863 ( 8,299) - 358,231 Capital assets being depreciated:

Buildings 2,073,689 - - 2,073,689
Improvements other than buildings 2,175,914 - - 2,175,914 Machinery and equipment 743,453 - 8,299 751,752
Total capital assets being depreciated 4,993,056 - 8,299 - 5,001,355 Less accumulated depreciation for:

Buildings ( 573,223) ( 81,796) - - ( 655,019)
Improvements other than buildings ( 1,860,740) ( 51,912) - - ( 1,912,652) Machinery and equipment ( 654,191) ( 28,132) - - ( 682,323) Total accumulated depreciation ( 3,088,154) ( 161,840) - - ( 3,249,994) Total capital assets being depreciated, net 1,904,902 ( 161,840) 8,299 - 1,751,361 Business- type activity capital assets, net 2,089,569$ 20,023$ -$ -$ 2,109,592$ City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
82 Note 6 – Capital Assets (Continued)
B. Business-Type Activities (Continued)
Depreciation expense was charged to the business-type activities as follows:

Business- Type Activities Depreciation
Cupertino sports center 111, 438$
Recreation program 47,057
Blackberry farm 2,832
Resources recovery 513
Total 161, 840$
Note 7 – Long-Term Liabilities
A. Governmental Activities
A summary of changes in long-term liabilities for governmental activities for the year ended June 30, 2023 is as follows:

Balance
July 1, 2022
As Restated) Additions Retirements
Balance
June 30, 2023
Current
Portion
Long- term
Portion
2020A Certificates of Participation 18,020, 000$ -$ ( 1,955, 000)$ 16,065, 000$ 2,035, 000$ 14,030, 000$ Issuance Premium 3,248, 829 - ( 464, 118) 2,784, 711 - 2,784, 711 Subscription liabilities 1,773, 200 989,611 ( 735,521) 2,027,290 783,067 1,244,223 Claims payable 1,569,000 765, 116 ( 111, 330) 2,222, 786 382, 000 1,840, 786 Compensated absences 4,690,321 797,673 ( 406,434) 5,081,560 501,158 4,580,402 Total long- term liabilities 29, 301, 350$ 2,552, 400$ ( 3,672, 403)$ 28,181, 347$ 3,701, 225$ 24,480, 122$ 2020 A Certificates of Participation
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 inboth time and amount, when the principal and interest ofthe certificates are due, which was the case for the year ended June 30, 2023.

On May 9, 2012, $43,940,000 principal amount of 2012 Refinancing Certificates of Participation ( 2012 COPs) wereissued torefundthe2002 COPs, tofunda reserve fundforthe2012 COPs, and pay costs incurredinconnection 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 noamounts outstanding as of June 30, 2023 for the 2012 COPs. Theresult ofthe transaction was an economic gain of $3,133,819.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
83 Note 7 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
2020 A Certificates of Participation (Continued)
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 18,736,200 payable through June 1, 2030. For theyear ended June 30, 2023, the bonds had $1,955,000of principal and $720,800 interest due. The annual debt service requirements on these certificates are as follows:

Year Ending
June 30, Principal Interest Total
2024 2,035, 000$ 642, 600$ 2,677, 600$
2025 2,115, 000 561, 200 2,676, 200
2026 2,200, 000 476, 600 2,676, 600
2027 2,285, 000 388, 600 2,673, 600
2028 2,380, 000 297, 200 2,677, 200
2029- 2030 5,050, 000 305, 000 5,355, 000
Total 16,065, 000$ 2,671, 200$ 18,736, 200$
Subscription Liabilities
The City has entered into subscriptions for information technology arrangements. The terms of the arrangements range from 24 to 63 months with implicit rates used between 1.710% to of 3.331%. Principal and interest to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2024 783, 067$ 43,045$ 826, 112$
2025 710, 777 26,433 737, 210
2026 481, 502 11,133 492, 635
2027 51,944 1,424 53,368
Total 2,027, 290$ 82,035$ 2,109, 325$
Compensated Absences
The long-term portion of compensated absences payable has been accrued for the Governmental Activities on the Government-Wide Financial Statements. In prior years, the General Fund has typically been used to liquidate the liability. The balance outstanding at June 30, 2023 was $ 5,081,560.

Claims Payable
Refer to Note 10 for more details.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
84 Note 7 – Long-Term Liabilities (Continued)
B. Business-Type Activities
The following is a summary of changes in long-term liabilities for business-type activities for the year ended June 30, 2023:

Balance
July 1, 2022 Additions Retirements
Balance
June 30, 2023
Current
Portion
Long- term
Portion
Compensated absences 216,636$ 52,873$ ( 49,268)$ 220, 241$ 10,492$ 209, 749$ Total long- term liabilities 216, 636$ 52,873$ ( 49,268)$ 220, 241$ 10,492$ 209, 749$ Compensated Absences
All vested vacation and compensatory leave time is recognized as an expense and as a liability in the business-type funds at the time the liability vests. All of the enterprise funds of the City have been used to liquidate the liability.

The balance outstanding at June 30, 2023 was $220,241.

Note 8 – Defined Benefit Pension Plan
Below is a summary of the deferred outflows of resources, net pension liabilities and deferred inflows of resources by Plan at June 30, 2023:

Deferred Outflows of
Resources Net Pension Liability
Deferred Inflows of
Resources
Miscellaneous Plan 18,126,053$ 55,840,898$ 137,371$
A. General Information about the Pension Plan
Plan Description
The City contributes to the California Public Employees’ Retirement System (“ CalPERS”), an agent multipleemployer public employee defined benefit pension plan. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute and City ordinance. A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the Annual Actuarial Valuation Report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website at www.calpers.ca.gov under Forms and Publications.

Benefit 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.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
85 Note 8 – Defined Benefit Pension Plan (Continued)
A. General Information about the Pension Plan (Continued) Benefit Provided (Continued)
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, 2023, are summarized as follows:

Prior to January 1 ,
2013
On or after 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% 7.00%
Required employer contribution rates 9.74% 9.74%
Hire date
Participant is eligible for non- industrial disability retirement if becomes disabled and has at least 5 years of credited service. There is no special age requirement. The standard non-industrial disability retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service. Industrial disability benefits are not offered.

An employee's beneficiary may receive the basic death benefit ifthe employee dies while actively employed. The employee must be actively employed with the City to be eligible for this benefit. An employee's survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit. The basic death benefit is a lump sum in the amount of the employee's accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one-month salary for each completed year of current service, up to a maximum of six-months salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.

Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree's designated survivor(s), or to the retiree's estate.

Benefit terms provide for annual cost- of-living adjustments to each employee’ s retirement allowance. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2 percent.

Employees Covered by Benefit Terms
As of the June 30, 2021 actuarial valuation date ( most current), the following employees were covered by the benefit terms of the Plan:

Active employees 205
Transferred and terminated employees 169
Retired Employees and Beneficiaries 273
Total 647
City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
86 Note 8 – Defined Benefit Pension Plan (Continued)
A. General Information about the Pension Plan (Continued) 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.

B. Net Pension Liability
Actuarial Methods and Assumptions Used to Determine Total Pension Liability The June 30, 2021 valuation was rolled forward to determine the June 30, 2022 total pension liability, based on the following actuarial methods and assumptions:

Actuarial Cost Method
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Salary Increases
Mortality Rate Table1
Post Retirement Benefit Increase
1 The mortality table used was developed based on CalPERS- specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre- retirement and Post- retirement mortality rates include generational mortality improvement using 80% of Scale MP- 2020 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021 that can be found on the CalPERS website.

Entry Age Normal in accordance with the requirement of GASB Statement No. 68
Varies by Entry Age and Service
Derived using CalPERS’ Membership Data for all Funds.

The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.30% thereafter
Change of Assumptions
Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
87 Note 8 – Defined Benefit Pension Plan (Continued)
B. Net Pension Liability (Continued)
Long-term Expected Rate of Return
The long- term expected rate of return on pension plan investments was determined using a building- block method in which expected futurereal rates of return (expected returns, net of pension planinvestment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points. The expected real rates of return by asset class are as follows:

Asset Class1
Assumed
Asset
Allocation Real Return 1,2
Global Equity - Cap- weighted 30.00% 4.54%
Global Equity - Non- Cap- weighted 12.00% 3.84%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage- backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage - 5.00%- 0.59%
100. 00%
1An expected inflation of 2.30% used for this period.
2 Figures are based on the 2021 Asset Liability Management study.

Discount Rate
The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the 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 plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
88 Note 8 – Defined Benefit Pension Plan (Continued)
C. Changes in the Net Pension Liability
The following table shows the changes in net pension liability for the City’s Miscellaneous Plan recognized over the measurement period.

Total Pension
Liability ( a)
Plan Fiduciary Net
Position ( b)
Net Pension Liability
c) = ( a) - (b)
Balance at June 30, 2021 ( Valuation Date) 161, 180, 149$ 127, 121, 572$ 34,058, 577$ Changes in the year:

Service cost 3,614, 486 - 3,614, 486
Interest on the total pension liability 11,312, 835 - 11,312, 835 Change of Benefit Terms - - -
Change of Assumptions 5,380, 881 - 5,380, 881
Differences between actual and expected experien ( 188, 249) - ( 188, 249) Contribution - employer - 6,396, 030 ( 6,396, 030)
Contribution - employee - 1,632, 861 ( 1,632, 861)
Net investment income - ( 9,612, 070) 9,612, 070
Administrative expenses - ( 79,189) 79,189
Other miscellaneous income/(expenses) - - -
Benefit payments, including refunds of employee
contributions ( 8,451, 800) ( 8,451, 800) -
Net Changes during July 1, 2021 to June 30, 2022 11,668, 153 ( 10,114, 168) 21,782, 321 Balance at June 30, 2022 ( Measurement Date) 172, 848, 302$ 117, 007, 404$ 55,840, 898$ Miscellaneous Plan
Increase ( Decrease)
Sensitivity of the Net Pension Liability to Changes inthe Discount Rate The following presents the net pension liability of the plans as of the measurement date, calculated using the discount rate of 6.90%, as well as what the net pension liability would be ifit were calculated using a discount rate that is 1 percentage-point lower (5.90%) or 1 percentage-point higher (7.90%) than the current rate:

Discount Rate Current Discount Discount Rate
1% ( 5.90%) Rate ( 6.90%) + 1% ( 7.90%)
Miscellaneous Plan 79,168, 477$ 55,840, 898$ 36,670, 370$ Plan' s Net Pension Liability/( Asset)
Pension Plan Fiduciary Net Position
Detailed information about the plan’ s fiduciary net position is available in the separately issued CalPERS financial report.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
89 Note 8 – Defined Benefit Pension Plan (Continued)
C. Changes in the Net Pension Liability (Continued)
Pension Expense (Credit) and Deferred Outflows and Deferred Inflows of Resources Related to Pensions For the year ended June 30, 2023, the City recognized pension expense of $8,200, 508. As of June 30, 2023, 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 contribution made after measurement date 7,183,364$ -$ Changes of assumptions 3,926, 589 -
Difference between expected and actual experience 1,057,512 ( 137,371) Net difference between projected and actual earning on
pension plan investments 5,958,588 -
Total 18,126,053$ ( 137,371)$
Miscellaneous Plan
The amounts above are net of outflows and inflows recognized in the 2021-22 measurement period expense.

The expected average remaining service lifetime (“ EARSL”) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired). The EARSL for the miscellaneous plan for the 2021-22 measurement period is 3.7 years, which was obtained by dividing the total service years of 2,275 (the sum of remaining service lifetimes of the active employees) by 612 ( the total number of participants: active, inactive, and retired).

The $7,183,364 of contributions for the fiscal year ended June 30, 2023 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 ending June 30, 2024.

Other amounts reported as deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Measurement
Period
Ending June 30
2023 3,069, 776$
2024 2,637, 405
2025 1,426, 385
2026 3,671, 752
2027 -
Thereafter -
Total 10,805, 318$
Deferred
Outflows/( Inflows)
City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
90 Note 9 – Other Post Employment Benefits (OPEB)
A. General Information about the OPEB Plan
Plan Description
Permanent employees who retire under the City' s CalPERS retirement plan are, pursuant to their respective collective bargaining agreements, eligible to have their medical insurance premiums paid by the City. Retirees receive the amount necessary to pay the cost of his/her enrollment, including the enrollment of his/her family members, in a health benefit plan provided by CalPERS up to the maximum received by active employees in their respective bargaining unit.

The City contracts with CalPERS for this insured-benefit plan established under the state Public Employees' Medical and Hospital Care Act ( PEMHCA). The plan offers employees and retirees three CalPERS' self- funded options, setup as insurance risk pools, or offers various third-party insured health plans. The plan's medical benefits and premium rates are established by CalPERS and the insurance providers. The City contribution is established by City resolution. Retirees and active employees pay the difference between the premium rate and the City' s contribution. Premiums and City contributions are based on the plan and coverage selected by actives and retirees, with the City's potential contribution ranging from zero to $1,605 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.

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 CalPERS retirement system; and the employee retires from the City of Cupertino.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
91 Note 9 – Other Post Employment Benefits (OPEB) (Continued) A. General Information about the OPEB Plan (Continued)
Plan Description (Continued)
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 withtherecent 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 Members Covered by Benefit Terms
At June 30, 2023 (the latest information available), Plan membership consisted of the following:

Inactive plan members or beneficiaries currently receiving benefit payments 156 Inactive plan members entitled to but not yet receiving benefit payments 0 Active plan members 171
327
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 June 30, 2023, the annual required contribution rate is 7.3 percent of annual covered payroll. For the year ended June 30, 2023, the City paid $ 1,753,000 in healthcare premium payments including implied subsidy. Plan members are not required to contribute to the plan.

B. Net OPEB Liability
The City’s net OPEB liability was measured as of June 30, 2023 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of July 1, 2023. Standard actuarial update procedures were used to project/discount from valuation to measurement dates.

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 inthetarget asset allocation as of June 30, 2023 (see thediscussion ofthe Plan’ s investment policy) are summarized in the following table:

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
92 Note 9 – Other Post Employment Benefits (OPEB) (Continued) B. Net OPEB Liability (Continued)
Investment Rate of Return (Continued)
Asset Class
Long-Term
Expected Real Rate
of Return
Fixed income - core 5.17%
Fixed income - high yield 8.06%
Equities - domestic 6.96%
Equities - developed foreign 9.94%
Equities - emerging foreign 11.22%
Real estate 7.67%
Cash 2.95%
Investment Policy
The Plan’ s policy in regard to the allocation of invested assets is established and may be amended by the City Council by a majority vote of its members. Itis the policy of the City Council 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 refrainfrom dramatically shiftingasset class allocations over shorttimespans. Thefollowing was the City Council’ s adopted asset allocation policy as of June 30, 2023:

Asset Class Target Allocation
Fixed income 29.00%
Equities 63.00%
Real estate 5.00%
Commodities 2.00%
Cash 1.00%
Total 100.00%
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, 2023, the annual money-weighted rate of return on investments, net of investment expense, was 10.94 percent. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
93 Note 9 – Other Post Employment Benefits (OPEB) (Continued) B. Net OPEB Liability (Continued)
Actuarial Assumptions
The total OPEB liability was determined by an actuarial valuation as of July 1, 2023, 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 June 30, 2023 actuarial valuation include the following:

Valuation date: June 30, 2023
Measurement date: June 30, 2023
Actuarial Cost Method: Entry Age Normal
Amortization Method: Level percent of pay closed, 5.5 years as of June 30, 2023 Amortization Period: 10 year
Asset Valuation Method: Market value of Assets
Actuarial Assumptions:

Discount Rate 6.50%
Amortization growth rate 2.75%
Ultimate Rate of Medical Inflation 4.25%
Salary increases 2.75% plus merit component based on years of service Mortality CalPERS mortality assumptions
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 theactuarially 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.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
94 Note 9 – Other Post Employment Benefits (OPEB) (Continued) C. Change in Net OPEB Liability
Changes in the Net OPEB Liability: The changes in the City’s net OPEB liability (asset) are:

Total OPEB
Liability ( a)
Plan Fiduciary Net
Position ( b)
Net OPEB Liability
Asset)
c) = ( a) - (b)
Balance at June 30, 2022 29,871, 000$ 31,340,000$ ( 1,469,000)$ Changes in the year
Service cost 1,260,000 - 1,260,000
Interest on the total OPEB liability 1,967, 000 - 1,967,000 Change of assumptions ( 492,000) - ( 492,000)
Differences between actual and
expected experience 4,437,000 - 4,437,000
Contribution - employer - 1,753,000 ( 1,753,000)
Contribution - employee - - -
Net investment income - 3,484,000 ( 3,484,000)
Administrative expenses - ( 116,000) 116,000
Benefit payments, including refunds of
Employee contributions ( 1,753,000) ( 1,753,000) -
Net Changes during July 1, 2021 to June 30, 2022 5,419, 000 3,368,000 2,051,000 Balance at June 30, 2023 ( Measurement Date) 35,290,000$ 34,708,000$ 582,000$ Net Increase ( Decrease)
Sensitivity of the net OPEB Liability (Asset) to Changes inthe Discount Rate The following presents the net OPEB asset of the City, as well as what the City’ s net OPEB liability would be ifit 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:
1% Decrease

5.50%
Current Discount
Rate 6. 50%
1% Increase

7.50%
4,827,000$ 582,000$ ( 2,959,000)$
Plan's Net OPEB Liability/(Asset)
Sensitivity of the Net OPEB Liability (Asset) to Changes in the Health Care 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:
1% Decrease
Current Healthcare
Cost Trend Rate 1% Increase
3,119,000)$ 582,000$ 5,110,000$
Plan's Net OPEB Liability/(Asset)
City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
95 Note 9 – Other Post Employment Benefits (OPEB) (Continued) D. OPEB Expense and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2023, the City recognized OPEB expense of $1,779,000. As of June 30, 2023, the City reported deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows
of Resources
Deferred Inflows of
Resources
Net difference between projected and actual
earnings on investments 1,864, 000$ -$
Differences between expected and actual experience 3,697,000 1,874,000 Changes in assumption 609,000 410,000
6,170, 000$ 2,284, 000$
OPEB Plan
The difference between projected OPEB plan investment earnings and actual earnings is amortized over a five-year period. The remaining gains and losses are amortized over the expected average remaining service life. The expected average remaining service life is 6 years, which was determined as of June 30, 2022, the beginning of the measurement period, for employees covered by the OPEB plan benefit terms.

Amounts reported as deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows:

Measurement
Period
Ending June 30
2024 696, 000$
2025 ( 8,000)
2026 2,176, 000
2027 367, 000
2028 655, 000
Thereafter -
Total 3,886,000$
Deferred
Outflows/( Inflows)
Note 10 – 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 inthe 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, 2023, the City paid the PLAN JPA premiums of $1,263,191.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
96 Note 10 – 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, 2023, the City paid premiums of $158,781.

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:
2023 2022
Claims liability, beginning of year 1,569, 000$ 1,374, 000$ Incurred claims and changes in estimate 1,122,626 671, 344 Claim payments and credits ( 468, 840) ( 476, 344)
Total claims liability, end of year 2,222,786 1,569, 000 Less current portion ( 382, 000) ( 282, 000)
Non- current portion 1,840, 786$ 1,287, 000$
Note 11 – Net Position and Fund Balances
A. Net Investment in Capital Assets
The following is the calculation of net investment in capital assets at June 30, 2023:

Governmental Business-Type
Activities Activities
Capital assets, net of accumulated depreciation and amortization 219,167,964$ 2,109,592$ Add: deferred charges on refunding 159,478 -
Less: outstanding principal on capital related debts ( 16,065,000) - Less: bond premium ( 2,784,711) -
Less: subscription liabilities ( 2,027,290) -
Net investment in capital assets 198,450,441$ 2,109,592$ City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
97 Note 11 – Net Position and Fund Balances (Continued) B. Fund Balance Classifications
At June 30, 2023, fund balances are classified in the governmental funds as follows:

General Transportation
Housing
Development
Public Facilities
Corporation
Debt Service
Fund
Capital
Investments
Projects
Capital Projects
Fund
Nonmajor
Governmental
Funds Total
Nonspendable:

Loans receivable 970, 962$ -$ 5,402, 316$ -$ -$ -$ 6,373, 278$ Advances to other funds 3,000,000 - - - - - 3,000, 000
Inventories 21,383 - - - - - 21,383
Prepaid items 8,243 - - - - - 8,243
Subtotal 4,000, 588 - 5,402, 316 - - - 9,402, 904
Restricted for:

Public access television - - - - - - -
Debt service - - - - - - -
PARS Section 115 Trust 19, 088, 859 - - - - - 19, 088, 859 Public safety power shutoff - - - - - - -
Debt services - - - 1,750 - - 1,750
Storm drain system - - - - - 3,993, 672 3,993, 672
Parks and open space - - - - - 18,763, 732 18,763, 732
Environmental management - - - - - 1,220, 134 1,220, 134 Streets and road projects - 10,586, 674 - - - 770, 107 11,356, 781 Housing programs - - 11, 492, 607 - - - 11, 492, 607
Subtotal 19,088, 859 10,586, 674 11,492, 607 1,750 - 24,747, 645 65,917, 535 Committed for:

Economic uncertainty 24,000,000 - - - - - 24, 000, 000
Sustainability reserve 127,891 - - - - - 127,891
Capital project reserve 10, 000, 000 - - - - - 10, 000, 000 Subtotal 34, 127, 891 - - - - - 34, 127, 891
Assigned to:

Encumbrances 9,735, 187 - - - - - 9,735, 187
Capital projects - - - - 34,767, 194 157, 343 34,924, 537 Subtotal 9,735, 187 - - - 34,767, 194 157, 343 44,659,724 Un assigned 71, 603, 813 - - - - - 71, 603, 813
Total 138, 556, 338$ 10, 586, 674$ 16, 894, 923$ 1,750$ 34, 767, 194$ 24,904, 988$ 225, 711, 867$ Note 12 – Commitments and Contingencies
A. Federal and State Grants
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, 2023, have yettobe conducted. Theamount, if any, of expenditures that may bedisallowed by thegranting agencies cannot be determined at this time. Management believes that such disallowances, if any, would not have a material effect on the financial statements.

City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
98 Note 12 – Commitments and Contingencies (Continued)
B. Encumbrances
The City uses encumbrances to control expenditure commitments for the year. Encumbrances represent commitments related to executor contracts not yet performed and purchase orders not yet filled. Commitments for such expenditure of monies are encumbered to reserve a portion of applicable appropriations. Encumbrances still open at year end are not accounted for as expenditures and liabilities, but as restricted, or assigned fund balance.

As of June 30, 2023, the City had the following encumbrances outstanding:

Governmental Funds:

General Fund 9,735,187$
Transportation Special Revenue Fund 1,998,991
Capital Improvements Projects Capital Projects Fund 1,994, 887 Housing Development Special Revenue Fund 3,666
Nonmajor Governmental Funds 2,106, 625
Proprietary Funds:

Resource Recovery Enterprise Fund 284, 540
Cupertino Sports Center Enterprise Fund 7,925
Nonmajor Enterprise Fund 5,858
Internal Service Funds 1,001, 388
Total Encumbrances 17,139,067$
C. 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 topay thecompanies 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. For the year ended June 30, 2023, the City abated taxes totaling $9,056,208.

D. Santa Clara County Vehicle Registration Fee (VRF)
The City is required to report VRF revenues, expenditures and fund balances for the year ended June 30, 2023:

VRF Balance as of July 1, 2022 -$
VRF Revenue 343,735
VRF Interest -
VRF Expended ( 343,735)
VRF Balance as of June 30, 2023 -$
City of Cupertino
Notes to the Basic Financial Statements ( Continued)
For the Year Ended June 30, 2023
99 Note 12 – Commitments and Contingencies (Continued)
E. Unasserted Claim
The City is aware of a probable reallocation of sales and use tax revenues pursuant to Revenue and Taxation Code Section 7209. Giventhe limited information available about this matter, the City is not able to predict the likelihood of an unfavorable outcome or the amount or the range of any potential loss. However, the City had $ 56.5 million reserved for the potential reallocation.

Note 13 – Concentration Risk
The City has an economic dependency on revenues generated directly or indirectly from one company. For the year ended June 30, 2023, 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 14 – Prior Period Adjustments
A. Government-Wide Financial Statements
The beginning net position was restated as following:

Governmental
Activities
Net position at July 1, 2022, as previously reported 358,321,213$ Correction on the interest receivable related to loans 1,562,736 Net position at July 1, 2022, as restated 359,883,949$
B. Governmental Fund Financial Statements
The beginning fund balance was restated as following:

Housing
Development
Special
General Fund Revenue Fund Total
Fund balances at July 1, 2022, as previously reported 110,169,554$ 7,177,611$ 117,347,165$ Interest receivable related to loans 509,278 1,053,458 1,562,736 Restatement of unavailable revenue from loan receivable to fund balance - 3,672,000 3,672,000 Fund balances at July 1, 2022, as restated 110,678,832$ 11,903,069$ 121,019,165$ 100
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REQUIRED SUPPLEMENTARY

INFORMATION ( UNAUDITED)
101
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102
Original Final Variance with
Budget Budget Actual Final Budget
REVENUES:

Taxes:

Property 30,039,574$ 30,039,574$ 31,889,638$ 1,850,064$ Sales 31,944,089 31,944,089 34,819,341 2,875,252
Transient occupancy 5,000,000 6,000,000 7,062,150 1,062,150 Utility user 2,955,404 2,955,404 4,103,906 1,148,502
Franchise 3,230,101 3,230,101 3,995,018 764,917
Other 1,787,691 1,787,691 1,471,789 ( 315,902)
Use of money and property 1,275,113 1,275,113 3,033,683 1,758,570 Intergovernmental 1,434,491 7,946,051 7,771,411 ( 174,640) Licenses and permits 3,541,012 34,057,523 4,093,631 ( 29,963,892) Charges for services 11,798,652 14,427,740 11,113,598 ( 3,314,142) Fines and forfeitures 427,000 427,000 303,573 ( 123,427) Other revenue 1,160,437 1,182,892 1,306,455 123,563
Total revenues 94,593,564 135,273,178 110,964,193 ( 24,308,985) EXPENDITURES:

Current:

Administration 10,944,795 10,164,030 7,602,232 2,561,798 Law enforcement 16,814,519 16,814,519 15,276,950 1,537,569 Innovation and technology 3,321,862 2,774,746 1,825,667 949,079 Administrative services 7,386,069 7,278,861 5,976,301 1,302,560 Recreation services 7,461,888 7,663,132 5,432,183 2,230,949 Community development 11,348,827 12,781,783 10,666,834 2,114,949 Public works 25,580,835 27,184,374 23,879,927 3,304,447 Capital outlay 306,000 287,292 1,263,412 ( 976,120)
Debt service:

Principal - - 626,181 ( 626,181)
Interest and fiscal charges - - 18,540 ( 18,540)
TOTAL EXPENDITURES 83,164,795 84,948,737 72,568,227 12,380,510

EXCESS OF REVENUES OVER
EXPENDITURES 11,428,769 50,324,441 38,395,966 ( 11,928,475) OTHER FINANCING SOURCES (USES):

Inception of subscription liability - - 964,745 964,745 Transfers in 61,140 861,140 861,140 -
Transfers out ( 11,996,300) ( 12,453,213) ( 12,344,345) 108,868 Total other financing sources (uses)( 11,935,160) ( 11,592,073) ( 10,518,460) 1,073,613 NET CHANGE IN FUND BALANCE ( 506,391)$ 38,732,368$ 27,877,506 ( 10,854,862)$ FUND BALANCE:

Beginning of year, as restated (Note 14) 110,678,832
End of year 138,556,338$
City of Cupertino
Required Supplementary Information
Budgetary Comparison Schedule - General Fund
For the Year Ended June 30, 2023
103
Original Final Variance with
Budget Budget Actual Final Budget
REVENUES:

Use of money and property -$ -$ 211,271$ 211,271$
Intergovernmental 3,008,043 3,008,043 3,385,823 377,780 Charges for services 1,654 1,654 34,012 32,358
Other revenue - - 2,000 2,000
Total revenues 3,009,697 3,009,697 3,633,106 623,409
EXPENDITURES:

Current:

Public works 4,181,513 3,031,021 2,726,550 304,471
Capital outlay 3,217,800 4,944,938 4,950,786 ( 5,848)
TOTAL EXPENDITURES 7,399,313 7,975,959 7,677,336 298,623

EXCESS OF REVENUES OVER
EXPENDITURES ( 4,389,616) ( 4,966,262) ( 4,044,230) 922,032 OTHER FINANCING SOURCES (USES):

Transfers in 3,000,000 3,000,000 3,000,000 -
Transfers out - ( 197,491) ( 197,491) -
Total other financing sources (uses) 3,000,000 2,802,509 2,802,509 - NET CHANGE IN FUND BALANCE ( 1,389,616)$ ( 2,163,753)$ ( 1,241,721) 922,032$ FUND BALANCE:

Beginning of year 11,828,395
End of year 10,586,674$
City of Cupertino
Required Supplementary Information
Budgetary Comparison Schedule - Transportation Special Revenue Fund For the Year Ended June 30, 2023
104
Original Final Variance with
Budget Budget Actual Final Budget
REVENUES:

Taxes 8,002,202$ 8,002,202$ 170,824$ ( 7,831,378)$
Use of money and property 3,300 3,300 194,096 190,796
Intergovernmental 492,181 492,181 196,616 ( 295,565)
Charges for services - - 1,640 1,640
Other revenue - - 28,082 28,082
Total revenues 8,497,683 8,497,683 591,258 ( 7,906,425) EXPENDITURES:

Current:

Community development 1,777,397 2,058,310 1,026,720 1,031,590 TOTAL EXPENDITURES 1,777,397 2,058,310 1,026,720 1,031,590

EXCESS OF REVENUES OVER
EXPENDITURES 6,720,286 6,439,373 ( 435,462) ( 6,874,835) OTHER FINANCING SOURCES:

Transfers in 25,000 25,000 25,000 -
Total other financing sources 25,000 25,000 25,000 -
NET CHANGE IN FUND BALANCE 6,745,286$ 6,464,373$ ( 410,462) ( 6,874,835)$ FUND BALANCE:

Beginning of year, as restated (Note 14) 11,903,069
End of year 11,492,607$
City of Cupertino
Required Supplementary Information
Budgetary Comparison Schedule - Housing Development Special Revenue Fund For the Year Ended June 30, 2023
105
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106
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.

Budgets for governmental funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America. 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.

City of Cupertino
Required Supplementary Information
Notes to the Budgetary Comparison Schedules
For the Year Ended June 30, 2023
Budget and Budgetary Accounting
107
Measurement period 2021- 22 2020- 21 2019- 20 2018- 19 2017- 18 Total pension liability
Service cost 3,614,486$ 3,392,942$ 3,241,719$ 3,324,361$ 3,058,629$ Interest 11,312,835 10,907,002 10,302,395 9,800,245 9,065,322 Changes of benefit terms - - - - -
Changes of assumptions 5,380,881 - - - ( 847,606)
Differences between expected and actual experience ( 188,249) 2,212,836 444,188 4,144,384 1,184,340 Benefit payments, including refunds of employee
contributions ( 8,451,800) ( 7,937,592) ( 6,815,494) ( 6,193,271) ( 6,051,845) Net change in total pension liability 11,668,153 8,575,188 7,172,808 11,075,719 6,408,840 Total pension liability - beginning 161,180,149 152,604,961 145,432,153 134,356,434 127,947,594 Total pension liability - ending (a) 172,848,302$ 161,180,149$ 152,604,961$ 145,432,153$ 134,356,434$ Pension fiduciary net position
Contributions - employer 6,396,030$ 5,957,595$ 5,308,579$ 4,654,841$ 4,263,020$ Contributions - employee 1,632,861 1,560,532 1,429,446 1,364,731 1,506,888 Net investment income ( 9,612,070) 23,553,078 4,975,822 6,096,968 7,347,936 Benefit payments, including refunds of employee
contributions ( 8,451,800) ( 7,937,592) ( 6,815,494) ( 6,193,271) ( 6,051,845) Net Plan to Plan Resource Movement - - - - ( 216)
Administrative expense ( 79,189) ( 103,981) ( 140,036) ( 66,707) ( 135,263) Other Miscellaneous Income/( Expense) 2 - - - 216 (256,867) Net change in plan fiduciary net position ( 10,114,168) 23,029,632 4,758,317 5,856,778 6,673,653 Plan fiduciary net position - beginning 3
127,121,572 104,091,940 99,333,623 93,476,845 86,803,192 Plan fiduciary net position - ending ( b) 117,007,404$ 127,121,572$ 104,091,940$ 99,333,623$ 93,476,845$ Plan net pension liability - ending ( a) - (b) 55,840,898$ 34,058,577$ 48,513,021$ 46,098,530$ 40,879,589$ Plan fiduciary net position as a percentage 67.69% 78.87% 68.21% 68.30% 69.57% of the total pension liability
Covered payroll4 20,455,494$ 20,427,103$ 18,662,748$ 18,461,490$ 16,809,349$ Plan net pension liability as a percentage of covered
payroll 272.99% 166.73% 259.95% 249.70% 243.20%
Notes to Schedule:
3 Includes any beginning of year adjustment.

Changes of Benefit Terms: The figures above generallyinclude any liability impact that may have resulted from voluntary benefit changes that occurre d on or before the Measurement Date. However, offers of Two Years Additional Service Credit ( a.k.a. Golden Handshakes) that occurred after the Valuation Date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary. 4 Includes one year’ s payroll growth using 2.80% payroll growth assumption for fiscal year ended June 30, 2022; 2.75% payroll growth assumption for fiscal years ended June 30, 2018-21; 3.00% payroll growth assumption for fiscal years ended June 30, 2014-17.

City of Cupertino
Required Supplementary Information (Unaudited)
Schedule of Changes in the Net Pension Liability and Related Ratios For the Year Ended June 30, 2023
Last Ten Fiscal Years 1
1Historical information is presented only for periods after GASB 68 was implemented in 2013- 14. Additional years of information will be displayed as it becomes available.

Changes of Assumptions: Effective with the June 30, 2021 valuation date ( 2022 measurement date), the accounting discount rate was reduced from 7.15% to

6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project comp ound ( geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. The accounting discount rate was

7.15% for measurement dates 2017 through 2021, 7.65% for measurement dates 2015 through 2016, and 7.50% for measurement date 2014.

Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan 2 During Fiscal Year 2017-18, as a result of Governmental Accounting Standards Board Statement ( GASB) No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other than Pensions ( GASB 75), CalPERS reported its proportionate share of activity related to postemployment benefits for participation in the State of California’ s agent OPEB plan. Accordingly, CalPERS recorded a one-time expense as a result of the adoption of GASB 75. Additionally, CalPERS employees participate in various State of California agent pension plans and during Fiscal Year 2017 - 18, CalPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to pensions in accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions ( GASB 68).
108
Measurement period 2016- 17 2015- 16 2014- 15 2013- 14
Total pension liability
Service cost 2,895,549$ 2,525,314$ 2,444,939$ 2,504,228$ Interest 8,619,588 8,253,983 7,789,134 7,349,943
Changes of benefit terms - - - -
Changes of assumptions 7,125,558 - ( 1,883,633) -
Differences between expected and actual experience ( 182,397) 696,347 372,917 - Benefit payments, including refunds of employee
contributions ( 5,346,890) ( 5,151,298) ( 4,637,005) ( 4,351,614) Net change in total pension liability 13,111,408 6,324,346 4,086,352 5,502,557 Total pension liability - beginning 114,836,186 108,511,840 104,425,488 98,922,931 Total pension liability - ending (a) 127,947,594$ 114,836,186$ 108,511,840$ 104,425,488$ Pension fiduciary net position
Contributions - employer 4,183,822$ 3,659,170$ 3,301,642$ 2,891,986$ Contributions - employee 1,236,052 1,169,921 1,149,894 1,061,884 Net investment income 8,749,288 466,704 1,724,204 11,379,985 Benefit payments, including refunds of employee
contributions ( 5,346,890) ( 5,151,298) ( 4,637,005) ( 4,351,614) Net Plan to Plan Resource Movement - - - -
Administrative expense2 ( 115,304) ( 47,536) ( 87,780) - Other Miscellaneous Income/( Expense) 2 - - - -
Net change in plan fiduciary net position 8,706,968 96,961 1,450,955 10,982,241 Plan fiduciary net position - beginning 3
78,096,224 77,999,263 76,548,308 65,566,067
Plan fiduciary net position - ending ( b) 86,803,192$ 78,096,224$ 77,999,263$ 76,548,308$ Plan net pension liability - ending ( a) - (b) 41,144,402$ 36,739,962$ 30,512,577$ 27,877,180$ Plan fiduciary net position as a percentage 67.84% 68.01% 71.88% 73.30% of the total pension liability
Covered payroll4 15,595,136$ 14,336,969$ 13,504,966$ 13,080,327$ Plan net pension liability as a percentage of covered
payroll 263.83% 256.26% 225.94% 213.12%
City of Cupertino
Required Supplementary Information (Unaudited)
Schedule of Changes in the Net Pension Liability and Related Ratios ( Continued) For the Year Ended June 30, 2023
Last Ten Fiscal Years
Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan 109
Fiscal Year End 2022-23 2021-22 2020-21 2019-20 2018-19 Actuarially determined contribution1 7,183,364$ 6,396,030$ 5,957,595$ 5,308,579$ 4,654,841$ Contributions in relation to the actuarially
determined contribution1 ( 7,183,364) ( 6,396,030) ( 5,957,595) ( 5,308,579) ( 4,654,841) Contribution deficiency ( excess) -$ -$ -$ -$ -$
Covered payroll2 21,028,248$ 20,455,494$ 20,427,103$ 18,662,748$ 18,461,490$ Contributions as a percentage of covered
payroll2 34.16% 31.27% 29.17% 28.44% 25.21%
Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Actuarial Cost Method
Amortization method Level percentage of payroll, closed Asset valuation method Fair Value of Assets
Inflation 2.50%
Salary increases Varies by entry age and service
Payroll Growth 2.75%
Investment rate of return
Retirement age
Mortality

7.00% net of pension plan investment and administrative expenses; includes inflation.

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 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries .
2 Includes one year’ s payroll growth using 2.80% payroll growth assumption for fiscal year ended June 30, 2022; 2.75% payroll growth assumption for fiscal years ended June 30, 2018- 21; 3.00% payroll growth assumption for fiscal years ended June 30, 2014-17. 1 Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers may choose to make additional contributions towards their unfunded liability. Employer contributions for such plans exceed the actuarially determined contributions.

City of Cupertino
Required Supplementary Information (Unaudited)
Schedule of Plan Contributions - Pension
For the Year Ended June 30, 2023
Last Ten Fiscal Years
Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022-23 were derived from the June 30, 2020 funding valuation report.
110
Fiscal Year End 2017-18 2016-17 2015-16 2014-15 2013-14 Actuarially determined contribution 4,263,020$ 4,183,822$ 3,659,170$ 3,301,642$ 2,891,986$ Contributions in relation to the actuarially
determined contribution1 ( 4,263,020) ( 4,183,822) ( 3,659,170) ( 3,301,642) ( 2,891,986) Contribution deficiency ( excess) -$ -$ -$ -$ -$
Covered payroll2 16,809,349$ 15,595,136$ 14,336,969$ 13,504,966$ 13,080,327$ Contributions as a percentage of covered
payroll2 25.36% 26.83% 25.52% 24.45% 22.11%
City of Cupertino
Required Supplementary Information (Unaudited)
Schedule of Plan Contributions - Pension ( Continued)
For the Year Ended June 30, 2023
Last Ten Fiscal Years
Agent Multiple Employer Defined Benefit Retirement Plan - Miscellaneous Plan 111
Measurement period 2022-23 2021-22 2020-21 2019-20
Total OPEB liability
Service cost 1,260$ 1,015$ 844$ 1,009$
Interest 1,967 1,921 2,042 1,985
Changes of benefit terms - - - -
Difference between expected vs actual experience 4,437 - ( 4,688) - Changes of assumptions ( 492) - 640 1,412
Benefit payments, including refunds of employee contributions ( 1,753) ( 1,691) ( 1,550) ( 1,141) Net change in total OPEB liability 5,419 1,245 ( 2,712) 3,265 Total OPEB liability - beginning 29,871 28,626 31,338 28,073 Total OPEB liability - ending (a) 35,290$ 29,871$ 28,626$ 31,338$ Contributions - employer 1,753 1,691 1,550 1,141
Net investment income 3,484 ( 6,568) 8,776 219
Benefit payments ( 1,753) ( 1,691) ( 1,550) ( 1,141)
Administrative expense ( 116) ( 117) ( 121) ( 67)
Net change in fiduciary net position 3,368 ( 6,685) 8,655 152 Plan fiduciary net position - beginning 31,340 38,025 29,370 29,218 Plan fiduciary net position - ending (b) 34,708$ 31,340$ 38,025$ 29,370$ Net OPEB liability (asset) - ending (a-b) 582$ ( 1,469)$ ( 9,399)$ 1,968$ Plan fiduciary net position as a percentage 98.35% 104.92% 132.83% 93.72% of the total OPEB liability
Covered employee-payroll 3
27,344$ 24,015$ 23,082$ 21,643$
Plan OPEB liability as a percentage of covered payroll 2.13% - 6.12% - 40.72% 9.09% Notes to Schedule:

Fiscal year 2017 was the 1st year of implementation, therefore only seven (7) years are shown.

For the Year Ended June 30, 2023
Schedule of Changes in the Net OPEB Liability and Related Ratios Required Supplementary Information (Unaudited)
City of Cupertino
Single Employer Defined Benefit Other Post Employment Benefit Plan Last Ten Fiscal Years*
Expressed in thousands
112
Measurement period 2018-19 2017-18 2016-17 *
Total OPEB liability
Service cost 865$ 1,008$ 908$
Interest 2,005 1,876 1,781
Changes of benefit terms - - -
Actual vs. expected experience ( 1,808) - -
Changes of assumptions ( 37) - -
Benefit payments, including refunds of employee contributions ( 1,423) ( 1,419) ( 1,333) Net change in total OPEB liability ( 398) 1,465 1,356
Total OPEB liability - beginning 28,471 27,006 25,650
Total OPEB liability - ending (a) 28,073$ 28,471$ 27,006$ Contributions - employer 1,423 1,419 1,333
Net investment income 1,259 2,365 2,960
Benefit payments ( 1,423) ( 1,419) ( 1,333)
Administrative expense ( 97) ( 54) ( 49)
Net change in fiduciary net position 1,162 2,311 2,911
Plan fiduciary net position - beginning 28,056 25,745 22,834 Plan fiduciary net position - ending (b) 29,218$ 28,056$ 25,745$ Net OPEB liability (asset) - ending (a-b) ( 1,145)$ 415$ 1,261$ Plan fiduciary net position as a percentage 104.08% 98.54% 95.33% of the total OPEB liability
Covered employee-payroll 3
20,086$ 19,153$ 17,255$
Plan OPEB liability as a percentage of covered payroll - 5.70% 2.17% 7.31% Notes to Schedule:

Fiscal year 2017 was the 1st year of implementation, therefore only seven (7) years are shown.

Single Employer Defined Benefit Other Post Employment Benefit Plan Expressed in thousands
City of Cupertino
Required Supplementary Information (Unaudited)
Schedule of Changes in the Net OPEB Liability and Related Ratios ( Continued) For the Year Ended June 30, 2023
Last Ten Fiscal Years*
113
2022-23 2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 Actuarially determined contribution 147$ 129$ 124$ 1,401$ 1,300$ 1,362$ 1,117$ Contributions in relation to the actuarially
determined contribution 1,753 1,691 1,550 1,141 1,423 1,419 1,333 Contribution deficiency ( excess) ( 1,606)$ ( 1,562)$ ( 1,426)$ 260$ ( 123)$ ( 57)$ ( 216)$ Covered payroll 27,344$ 24,015$ 23,082$ 21,643$ 20,086$ 19,153$ 17,255$ Contributions as a percentage of covered
payroll - 6.41% - 7.04% - 6.72% - 5.27% - 7.08% - 7.41% - 7.73% Notes to Schedule:

Valuation Date 7/1/2023
Timing
Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age
Amortization method Level Percent of Pay, Closed, 5.5 years as of 7/1/2023 Asset valuation method Market value of assets
Discount rate 6.50%
Amortization growth rate 2.75%
Ultimate rate of medical inflation 4.250%
Salary increases
Mortality
Single Employer Defined Benefit OPEB Plan
Fiscal year 2017 was the 1st year of implementation, therefore only seven ( 7) years are shown.

City of Cupertino
Required Supplementary Information (Unaudited)
Schedule of Plan Contributions - Other postemployment Benefits For the Year Ended June 30, 2023
Last Ten Fiscal Years*

2.75% plus merit component based on years of service
CalPERS mortality assumptions
Actuarially determined contributions are calculated based on the most recently performed actuarial valuation, which for the fiscal year end 2023, was the 7/1/2023
114

SUPPLEMENTARY

INFORMATION
115
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116
City of Cupertino
Major Governmental Funds
Other than the General Fund and Special Revenue Funds
This section is provided for the presentation of budget- to- actual schedules for the Public Facilities Corporation Debt Service Fund and the Capital Improvement Projects Capital Projects Fund. Although the funds are considered to be major government funds, budget- toactual information in the required supplementary information is limited to the General Fund and major Special Revenue Funds. All other major governmental fund schedules with such information are therefore included as Supplemental Information.

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

Capital Improvement Projects Capital Projects Fund - This fund accounts for activities related to the acquisition or construction of major capital facilities.
117
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118
Original Final Variance with
Budget Budget Actual Final Budget
REVENUES:

Use of money and property -$ -$ ( 5,100)$ ( 5,100)$
Total revenues - - ( 5,100) ( 5,100)
EXPENDITURES:

Current:

Administration - - 1,500 ( 1,500)
Debt service:

Principal 1,955,000 1,955,000 1,955,000 -
Interest and fiscal charges 720,800 720,800 720,800 -
Total expenditures 2,675,800 2,675,800 2,677,300 ( 1,500)

EXCESS OF REVENUES OVER
UNDER) EXPENDITURES ( 2,675,800) ( 2,675,800) ( 2,682,400) ( 6,600) OTHER FINANCIN SOURCES:

Transfers in 2,675,800 2,675,800 2,675,800 -
Total other financing sources 2,675,800 2,675,800 2,675,800 - NET CHANGE IN FUND BALANCE -$ -$ ( 6,600) ( 6,600)$
FUND BALANCE:

Beginning of year 8,350
End of year 1,750$
City of Cupertino
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Public Facilities Corporation Debt Service Fund
For the Year Ended June 30, 2023
119
Original Final Variance with
Budget Budget Actual Final Budget
REVENUES:

Use of money and property -$ -$ ( 326,691)$ ( 326,691)$ Intergovernmental - 5,320,973 515,814 ( 4,805,159)
Charges for services - - 51,675 51,675
Other revenue - 610,931 56,522 ( 554,409)
Total revenues - 5,931,904 297,320 ( 5,634,584)
EXPENDITURES:

Capital outlay 3,610,000 5,831,818 4,417,593 1,414,225
TOTAL EXPENDITURES 3,610,000 5,831,818 4,417,593 1,414,225

EXCESS OF REVENUES OVER
EXPENDITURES ( 3,610,000) 100,086 ( 4,120,273) ( 4,220,359) OTHER FINANCING SOURCES (USES):

Transfers in 2,500,000 6,454,311 4,788,757 ( 1,665,554) Transfers out ( 23,600) ( 2,489,154) ( 823,600) 1,665,554 Total other financing sources (uses) 2,476,400 3,965,157 3,965,157 - NET CHANGE IN FUND BALANCE ( 1,133,600)$ 4,065,243$ ( 155,116) ( 4,220,359)$ FUND BALANCE:

Beginning of year 34,922,310
End of year 34,767,194$
City of Cupertino
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Capital Improvement Projects Capital Projects Fund
For the Year Ended June 30, 2023
120
Traffic Impact - This fund 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
Capital Projects Funds account for the financial resources committed to the construction or improvement of major facilities.

Stevens Creek Corridor Park Capital Projects Fund - This fund accounts for the design and construction of the Stevens Creek Corridor Park projects.

Environmental Management I Clean Creeks - This fund accounts for all activities related to operating the non-point source pollution program. A parcel tax provides revenues.

NONMAJOR GOVERNMENTAL FUNDS
All funds not considered as major funds on the Fund Financial Statements are consolidated in one column entitled " Other Governmental Funds." These non-major funds are identified and included in this supplementary section and includes the City's Special Revenue Funds and Capital Project Funds.

Storm Drain Improvement - This fund 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 - This fund 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.

SPECIAL REVENUE 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.
121
Storm Environmental
Drain Park Management/ Traffic
Improvement Dedication Clean Creeks Impact
ASSETS
Cash and investments 3,985,841$ 18,778,647$ 1,227,519$ 767,399$ Accounts receivable - - 15,134 -
Interest receivable 14,071 66,271 4,171 2,708
Total assets 3,999,912 18,844,918 1,246,824 770,107

LIABILITIES AND FUND BALANCES
Liabilities:

Accounts payable and accruals 6,240 81,186 26,690 -
Total liabilities 6,240 81,186 26,690 -
Fund balances:

Restricted 3,993,672 18,763,732 1,220,134 770,107
Assigned - - - -
Total fund balances 3,993,672 18,763,732 1,220,134 770,107 Total liabilities and fund balances 3,999,912$ 18,844,918$ 1,246,824$ 770,107$ Special Revenue Funds
City of Cupertino
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2023
122
Capital Projects
Fund
Total Nonmajor
Stevens Creek Governmental
Corridor Park Funds
ASSETS
Cash and investments 157,343$ 24,916,749$
Accounts receivable - 15,134
Interest receivable - 87,221
Total assets 157,343 25,019,104

LIABILITIES AND FUND BALANCES
Liabilities:

Accounts payable and accruals - 114,116
Total liabilities - 114,116
Fund balances:

Restricted - 24,747,645
Assigned 157,343 157,343
Total fund balances 157,343 24,904,988
Total liabilities and fund balances 157,343$ 25,019,104$ City of Cupertino
Combining Balance Sheet (Continued)
Nonmajor Governmental Funds
June 30, 2023
123
Storm Environmental
Drain Park Management/ Traffic
Improvement Dedication Clean Creeks Impact
Revenues:

Taxes 73,912$ 646,767$ -$ -$
Use of money and property 21,801 277,663 4,476 11,710
Charges for services - 4,810 1,498,017 38,200
Fines and forfeitures - - 23,371 -
Total revenues 95,713 929,240 1,525,864 49,910
Expenditures:

Current:

Public works - - 1,615,379 -
Capital outlay 135,840 1,757,252 - -
Total expenditures 135,840 1,757,252 1,615,379 -
Revenues over (under)
expenditures ( 40,127) ( 828,012) ( 89,515) 49,910
Other financing sources (uses):

Transfers out - ( 1,711,140) - -
Total other financing sources (uses)- ( 1,711,140) - -
Net Change in Fund Balances ( 40,127) (2,539,152) ( 89,515) 49,910 Fund balances:

Beginning of year 4,033,799 21,302,884 1,309,649 720,197 End of year 3,993,672$ 18,763,732$ 1,220,134$ 770,107$
Special Revenue Funds
City of Cupertino
Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds
For the Year Ended June 30, 2023
124
Capital Projects
Fund
Total Nonmajor
Stevens Creek Governmental
Corridor Park Funds
Revenues:

Taxes -$ 720,679$
Use of money and property ( 803) 314,847
Charges for services - 1,541,027
Fines and forfeitures - 23,371
Total revenues ( 803) 2,599,924
Expenditures:

Current:

Public works - 1,615,379
Capital outlay 8,433 1,901,525
Total expenditures 8,433 3,516,904
Revenues over (under)
expenditures ( 9,236) ( 916,980)
Other financing sources (uses):

Transfers out - ( 1,711,140)
Total other financing sources (uses)- ( 1,711,140)
Net Change in Fund Balances ( 9,236) (2,628,120)
Fund balances:

Beginning of year 166,579 27,533,108
End of year 157,343$ 24,904,988$
City of Cupertino
Combining Statement of Revenues, Expenditures, and Changes in Fund Balance (Continued) Nonmajor Governmental Funds
For the Year Ended June 30, 2023
125
Variance with
Final Budget
Actual Positive
Original Final Amounts ( Negative)
Revenues:

Taxes 201,229$ 201,229$ 73,912$ ( 127,317)$
Use of money and property - - 21,801 21,801
Total revenues 201,229 201,229 95,713 ( 105,516)
Expenditures:

Capital outlay - 135,840 135,840 -
Total expenditures - 135,840 135,840 -
Net Change in Fund Balance 201,229$ 65,389$ ( 40,127) ( 105,516)$ Fund balance:

Beginning of year 4,033,799
End of year 3,993,672$
Budgeted Amounts
City of Cupertino
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Storm Drain Improvement Special Revenue Fund
For the Year Ended June 30, 2023
126
Variance with
Final Budget
Actual Positive
Original Final Amounts ( Negative)
Revenues:

Taxes -$ -$ 646,767$ 646,767$
Use of money and property - - 277,663 277,663
Charges for services - - 4,810 4,810
Total Revenues - - 929,240 929,240
Expenditures:

Capital outlay - 1,832,007 1,757,252 74,755
Total Expenditures - 1,832,007 1,757,252 74,755

REVENUE OVER
UNDER) EXPENDITURES - ( 1,832,007) ( 828,012) 1,003,995 Other Financing Sources (Uses):

Transfers out - ( 1,650,000) ( 1,711,140) ( 61,140)
Total Other Financing Sources (Uses)- ( 1,650,000) ( 1,711,140) ( 61,140) NET CHANGE IN FUND BALANCE -$ ( 3,482,007)$ ( 2,539,152) 942,855$ FUND BALANCE:

Beginning of Year 21,302,884
End of Year 18,763,732$
City of Cupertino
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2023
Budgeted Amounts
Park Dedication Special Revenue Fund
127
Variance with
Final Budget
Actual Positive
Original Final Amounts ( Negative)
Revenues:

Use of money and property 2,248$ 2,248$ 4,476$ 2,228$
Charges for services 1,510,555 1,510,555 1,498,017 ( 12,538) Fines and forfeitures 68,669 68,669 23,371 ( 45,298)
Total Revenues 1,512,803 1,512,803 1,525,864 ( 10,310)
Expenditures:

Current:

Public works 2,067,399 1,724,715 1,615,379 109,336
Total Expenditures 2,067,399 1,724,715 1,615,379 109,336 NET CHANGE IN FUND BALANCE ( 554,596)$ ( 211,912)$ ( 89,515) 122,397$ FUND BALANCE:

Beginning of Year 1,309,649
End of Year 1,220,134$
Budgeted Amounts
City of Cupertino
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Environmental Management/ Clean Creeks Special Revenue Fund For the Year Ended June 30, 2023
128
Variance with
Final Budget
Actual Positive
Original Final Amounts ( Negative)
Revenues:

Use of money and property -$ -$ 11,710$ 11,710$
Charges for services - - 38,200 38,200
Total Revenues - - 49,910 49,910
NET CHANGE IN FUND BALANCE -$ -$ 49,910 49,910$
FUND BALANCE:

Beginning of Year 720,197
End of Year 770,107$
Budgeted Amounts
City of Cupertino
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Traffic Impact Special Revenue Fund
For the Year Ended June 30, 2023
129
Variance with
Final Budget
Actual Positive
Original Final Amounts ( Negative)
Revenues:

Use of money and property -$ -$ ( 803)$ ( 803)$
Total Revenues - - ( 803) ( 803)
Expenditures:

Capital outlay - 8,543 8,433 110
Total Expenditures - 8,543 8,433 110
NET CHANGE IN FUND BALANCE -$ ( 8,543)$ ( 9,236) ( 693)$ FUND BALANCE:

Beginning of Year 166,579
End of Year 157,343$
Budgeted Amounts
City of Cupertino
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Stevens Creek Corridor Park Capital Projects Fund
For the Year Ended June 30, 2023
130

NONMAJOR ENTERPRISE FUND
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 2022- 23.

Blackberry Farm Fund - This fund accounts for activities related to operating the City-owned golf course. 131
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132
Blackberry
Farm
ASSETS
Current assets:

Cash and investments 896,941$
Accounts receivable 1,829
Interest receivable 3,136
Total current assets 901,906
Noncurrent assets:

Capital assets:

Nondepreciable 137,343
Depreciable, net 18,042
Total capital assets 155,385
Total noncurrent assets 155,385
Total assets 1,057,291

DEFERRED OUTFLOWS OF RESOURCES
Related to pensions 101,506
Related to other postemployment benefit 18,479
Total deferred outflows of resources 119,985

LIABILITIES
Current Liabilities:

Accounts payable and accruals 18,976
Compensated absences, current portion 458
Unearned revenue 92,223
Total current liabilities 111,657
Noncurrent liabilities:

Compensated absences 9,157
Net pension liability 312,709
Net other postemployment benefit liability 1,743
Total noncurrent liabilities 323,609
Total liabilities 435,266

DEFERRED INFLOW OF RESOURCES
Related to pensions 769
Related to other postemployment benefit 6,841
Total deferred inflows of resources 7,610
NET POSITION:

Net investment in capital assets 155,385
Unrestricted 579,015
Total net position 734,400$
City of Cupertino
Combining Statement of Net Position
Nonmajor Enterprise Fund
June 30, 2023
133
Blackberry
Farm
OPERATING REVENUES:

Charges for services 570,038$
Others 46,423
Total operating revenues 616,461
OPERATING EXPENSES:

Salaries and benefits 233,013
Materials and supplies 208,348
Contractual services 354,975
Depreciation 2,832
Total operating expenses 799,168
OPERATING INCOME (LOSS)( 182,707)
NONOPERATING REVENUES:

Investment income 37,286
Total nonoperating revenues 37,286
INCOME (LOSS) BEFORE TRANSFERS ( 145,421)
TRANSFERS:

Transfers in 23,600
Total transfers 23,600
CHANGES IN NET POSITION ( 121,821)
NET POSITION:

Beginning of year 856,221
End of year 734,400$
City of Cupertino
Combining Statement of Revenues, Expenses, and Changes in Net Position Nonmajor Enterprise Fund
For the Year Ended June 30, 2023
134
Blackberry
Farm

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 612,394$
Cash paid to suppliers for goods and services ( 582,924) Cash paid to employees for services ( 245,311)
Net cash ( used in) operating activities ( 215,841)

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Cash received from other funds 23,600
Net cash provided by noncapital financing activities 23,600

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets ( 137,343)
Net cash (used in) capital and related
financing activities ( 137,343)
CASH FLOWS FROM INVESTING ACTIVITIES:

Interest received 34,150
Net cash provided by investing activities 34,150
Net change in cash and cash equivalents ( 295,434)

RECONCILIATION OF CASH AND CASH EQUIVALENTS
TO STATEMENTOF NET POSITION:

Beginning of year 1,192,375
End of year 896,941$
CASH AND CASH EQUIVALENTS:

Cash and investments 896,941$
Total cash and cash equivalents 896,941$
Reconciliation of Operating Income (Loss)
to Net Cash (used in) Operating Activities:

Operating income (loss)( 182,707)$
Adjustments to reconcile operating income (loss)
to net cash provided by (used in) operating activities:

Depreciation 2,832
Changes in assets and liabilities:

Increase)/ decrease in accounts receivables ( 1,659)
Increase)/ decrease in deferred outflows of resources pension related ( 42,810) Increase)/ decrease in deferred outflows of resources OPEB related ( 5,380) Increase/( decrease) in accounts payable ( 19,601)
Increase/( decrease) in unearned revenue ( 2,408)
Increase/( decrease) in compensated absences ( 9,290)
Increase/( decrease) in net pension liability 62,474
Increase/( decrease) in OPEB 1,743
Increase/( decrease) in deferred inflows of resources pension related ( 25,876) Increase/( decrease) in deferred inflows of resources OPEB related 6,841 Net cash ( used in) operating activities ( 215,841)$
For the Year Ended June 30, 2023
City of Cupertino
Combining Statement of Cash Flows
Nonmajor Enterprise Fund
135
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136
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.

Equipment Revolving - Accounts for the activities related to the maintenance and replacement of the City's vehicle fleet and other equipment.

INTERNAL SERVICE FUNDS
These funds account for goods or services provided to other departments of the City where the intent of the City is that the costs of these goods or services are to be recovered through interdepartmental charges at the time that the goods are delivered or the services rendered to those departments.

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 - This fund is used to account for all expenses relating to workers’ compensation ( i.e., injury claims, insurance premiums, etc.). The costs are recovered through an annual “ user fee” which is charged to all departments/funds that have employees.
137
Information Workers' Equipment
Technology Compensation Revolving
ASSETS
Current assets:

Cash and investments 3,437,113$ 3,841,250$ 941,189$
Accounts receivable - - -
Interest receivable 11,734 13,429 4,870
Total current assets 3,448,847 3,854,679 946,059
Noncurrent assets:

Capital assets:

Nondepreciable - - 119,408
Depreciable and amortizable, net 764,856 - 2,025,120
Total capital assets 764,856 - 2,144,528
Total noncurrent assets 764,856 - 2,144,528
Total assets 4,213,703 3,854,679 3,090,587

DEFERRED INFLOW OF RESOURCES
Related to pensions 935,304 23,564 253,765
Related to other postemployment benefit liability 311,746 3,328 95,570 Total deferred outflows of resources 1,247,050 26,892 349,335 Current Liabilities:

Accounts payable and accruals 71,950 - 78,527
Accrued payroll and benefits - - 72
Due to other funds - - -
Compensated absences 32,052 1,285 5,017
Claims payable - 292,000 -
Subscription liabilities 125,990 - -
Total current liabilities 229,992 293,285 83,616
Noncurrent liabilities:

Compensated absences 292,942 11,742 45,852
Claims payable - 1,362,000 -
Subscription liabilities 72,504 - -
Net pension liability 2,881,390 72,593 781,773
Net other postemployment benefit liability 29,406 314 9,015 Total noncurrent liabilities 3,276,242 1,446,649 836,640 Total liabilities 3,506,234 1,739,934 920,256

DEFERRED INFLOW OF RESOURCES
Related to pensions 7,088 179 1,923
Related to other postemployment benefit liability 115,402 1,232 35,378 Total deferred inflows of resources 122,490 1,411 37,301 NET POSITION:

Net investment in capital assets 566,362 - 2,144,528
Restricted 166,938 1,782 51,177
Unrestricted 1,098,729 2,138,444 286,660
Total net position 1,832,029$ 2,140,226$ 2,482,365$
City of Cupertino
Combining Statement of Net Position
Internal Service Funds
June 30, 2023

LIABILITIES
138
Compensated
Absences and
Long-Term Retiree
Disability Medical Total
ASSETS
Current assets:

Cash and investments 709,564$ 9,898$ 8,939,014$
Accounts receivable - 1,385,759 1,385,759
Interest receivable 2,761 - 32,794
Total current assets 712,325 1,395,657 10,357,567
Noncurrent assets:

Capital assets:

Nondepreciable - - 119,408
Depreciable and amortizable, net - - 2,789,976
Total capital assets - - 2,909,384
Total noncurrent assets - - 2,909,384
Total assets 712,325 1,395,657 13,266,951

DEFERRED INFLOW OF RESOURCES
Related to pensions - - 1,212,633
Related to other postemployment benefit liability - - 410,644 Total deferred outflows of resources - - 1,623,277
Current Liabilities:

Accounts payable and accruals - - 150,477
Accrued payroll and benefits - - 72
Due to other funds - 1,395,657 1,395,657
Compensated absences - - 38,354
Claims payable - - 292,000
Subscription liabilities - - 125,990
Total current liabilities - 1,395,657 2,002,550
Noncurrent liabilities:

Compensated absences - - 350,536
Claims payable - - 1,362,000
Subscription liabilities - - 72,504
Net pension liability - - 3,735,756
Net other postemployment benefit liability - - 38,735
Total noncurrent liabilities - - 5,559,531
Total liabilities - 1,395,657 7,562,081

DEFERRED INFLOW OF RESOURCES
Related to pensions - - 9,190
Related to other postemployment benefit liability - - 152,012 Total deferred inflows of resources - - 161,202
NET POSITION:

Net investment in capital assets - - 2,710,890
Restricted - - 219,897
Unrestricted 712,325 - 4,236,158
Total net position 712,325$ -$ 7,166,945$

LIABILITIES
City of Cupertino
Combining Statement of Net Position (Continued)
Internal Service Funds
June 30, 2023
139
Information Workers' Equipment
Technology Compensation Revolving
OPERATING REVENUES:

Charges for services 2,485,218$ 436,462$ 1,568,633$
Other - - -
Total operating revenues 2,485,218 436,462 1,568,633
OPERATING EXPENSES:

Salaries and benefits 2,309,184 42,636 556,909
Materials and supplies 867,945 28,369 357,803
Contractual services 530,557 - 86,875
Insurance and claims and premium - 470,630 -
Depreciation and amortization 327,470 - 577,140
Total operating expenses 4,035,156 541,635 1,578,727
OPERATING INCOME (LOSS)( 1,549,938) ( 105,173) ( 10,094) NONOPERATING REVENUES (EXPENSES):

Investment income ( 30,819) 18,646 12,099
Gain on sale of capital assets - - 30,158
Interest expense ( 861) - -
Total nonoperating revenues ( 31,680) 18,646 42,257
1,581,618) ( 86,527) 32,163
TRANSFERS:

Transfers in 2,537,500 - -
Total transfers 2,537,500 - -
CHANGES IN NET POSITION 955,882 ( 86,527) 32,163
NET POSITION:

Beginning of year 876,147 2,226,753 2,450,202
End of year 1,832,029$ 2,140,226$ 2,482,365$

INCOME (LOSS) BEFORE TRANSFERS
City of Cupertino
Combining Statement of Revenues, Expenses, and Changes in Net Position Internal Service Funds
For the Year Ended June 30, 2023
140
Compensated
Absences and
Long-Term Retiree
Disability Medical Total
OPERATING REVENUES:

Charges for services 115,970$ -$ 4,606,283$
Other - 1,385,759 1,385,759
Total operating revenues 115,970 1,385,759 5,992,042
OPERATING EXPENSES:

Salaries and benefits - 1,380,875 4,289,604
Materials and supplies 11,047 14,782 1,279,946
Contractual services - - 617,432
Insurance and claims and premium 616,369 - 1,086,999
Depreciation and amortization - - 904,610
Total operating expenses 627,416 1,395,657 8,178,591
OPERATING INCOME (LOSS)( 511,446) ( 9,898) (2,186,549)
NONOPERATING REVENUES (EXPENSES):

Investment income 4,435 ( 26,554) ( 22,193)
Gain on sale of capital assets - - 30,158
Interest expense - - ( 861)
Total nonoperating revenues 4,435 ( 26,554) 7,104
507,011) ( 36,452) (2,179,445)
TRANSFERS:

Transfers in 882,000 9,898 3,429,398
Total transfers 882,000 9,898 3,429,398
CHANGES IN NET POSITION 374,989 ( 26,554) 1,249,953
NET POSITION:

Beginning of year 337,336 26,554 5,916,992
End of year 712,325$ -$ 7,166,945$

INCOME (LOSS) BEFORE TRANSFERS
City of Cupertino
Combining Statement of Revenues, Expenses, and Changes in Net Position (Continued) Internal Service Funds
For the Year Ended June 30, 2023
141
Information Workers' Equipment
Technology Compensation Revolving

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers and users 2,485,218$ 436,462$ 1,568,633$ Cash paid to suppliers for goods and services ( 1,397,669) ( 498,999) ( 413,863) Cash paid to employees for services ( 1,974,702) ( 42,379) ( 475,639) Cash paid for insurance claims - 85,000 -
Net cash provided by (used in) operating activities ( 887,153) ( 19,916) 679,131

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Cash received (paid) from other funds 2,537,500 - ( 539,204) Net cash provided by (used in) noncapital financing activities 2,537,500 - ( 539,204)

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets ( 173,813) - ( 353,980)
Principal paid ( 109,339) - -
Interest paid ( 861) - -
Proceeds from sale of capital assets - - 30,158
Net cash (used in) capital and related
financing activities ( 284,013) - ( 323,822)
CASH FLOWS FROM INVESTING ACTIVITIES:

Interest earnings ( 42,553) 5,217 7,229
Net cash provided by (used in) investing activities ( 42,553) 5,217 7,229 Net change in cash and cash equivalents 1,323,781 ( 14,699) ( 176,666) CASH AND CASH EQUIVALENTS:

Beginning of year 2,113,332 3,855,949 1,117,855
End of year 3,437,113$ 3,841,250$ 941,189$
Reconciliation of Operating Income (Loss) to
to Net Cash Provided by (Used in) Operating Activities:

Operating income (loss)( 1,549,938)$ ( 105,173)$ ( 10,094)$ Adjustments to reconcile operating income (loss)
to net cash provided by (used in) operating activities:

Depreciation and amortization 327,470 - 577,140
Changes in assets and liabilities:

Increase)/ decrease in accounts receviables - - -
Increase)/ decrease in deferred outflows of resources related to pensions ( 551,497) ( 10,154) ( 131,853) Increase)/ decrease in deferred outflows of resources related to OPEB ( 49,897) 618 (15,063) Increase/( decrease) in accounts payable 833 - 30,815
Increase/( decrease) in compensated absences 40,142 616 28,212 Increase/( decrease) in claims payable - 85,000 -
Increase/( decrease) in net pension liabilities 1,448,629 23,775 337,409 Increase/( decrease) in other postemployment benefit liabilities 88,291 1,052 30,521 Increase/( decrease) in deferred inflows of resources related to pensions ( 621,047) ( 15,019) ( 154,599) Increase/( decrease) in deferred inflows of resources related to OPEB ( 20,139) ( 631) (13,357) Net cash provided by (used in) operating activities ( 887,153)$ ( 19,916)$ 679,131$ Continued)
City of Cupertino
Combining Statement of Cash Flows
Internal Service Funds
For the Year Ended June 30, 2023
142
Compensated
Absences and
Long-Term Retiree
Disability Medical Total

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers and users 115,970$ -$ 4,606,283$ Cash paid to suppliers for goods and services ( 627,416) ( 14,782) (2,952,729) Cash paid to employees for services - ( 1,380,875) ( 3,873,595) Cash paid for insurance claims - - 85,000
Net cash provided by (used in) operating activities ( 511,446) ( 1,395,657) ( 2,135,041)

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Cash received (paid) from other funds 882,000 1,405,555 4,285,851 Net cash provided by (used in) noncapital financing activities 882,000 1,405,555 4,285,851

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets - - ( 527,793)
Principal paid - - ( 109,339)
Interest paid - - ( 861)
Proceeds from sale of capital assets - - 30,158
Net cash (used in) capital and related
financing activities - - ( 607,835)
CASH FLOWS FROM INVESTING ACTIVITIES:

Interest earnings 1,674 ( 26,554) ( 54,987)
Net cash provided by (used in) investing activities 1,674 ( 26,554) ( 54,987) Net change in cash and cash equivalents 372,228 ( 16,656) 1,487,988 CASH AND CASH EQUIVALENTS:

Beginning of year 337,336 26,554 7,451,026
End of year 709,564$ 9,898$ 8,939,014$
Reconciliation of Operating Income (Loss) to
to Net Cash Provided by (Used in) Operating Activities:

Operating income (loss)( 511,446)$ ( 9,898)$ (2,186,549)$ Adjustments to reconcile operating income (loss)
to net cash provided by (used in) operating activities:

Depreciation and amortization - - 904,610
Changes in assets and liabilities:

Increase)/ decrease in accounts receviables - ( 1,385,759) ( 1,385,759) Increase)/ decrease in deferred outflows of resources related to pensions - - ( 693,504) Increase)/ decrease in deferred outflows of resources related to OPEB - - ( 64,342) Increase/( decrease) in accounts payable - - 31,648
Increase/( decrease) in compensated absences - - 68,970 Increase/( decrease) in claims payable - - 85,000
Increase/( decrease) in net pension liabilities - - 1,809,813 Increase/( decrease) in other postemployment benefit liabilities - - 119,864 Increase)/ decrease in deferred inflows of resources related to pensions - - ( 790,665) Increase/( decrease) in deferred inflows of resources related to OPEB - - ( 34,127) Net cash provided by (used in) operating activities ( 511,446)$ ( 1,395,657)$ ( 2,135,041)$ Concluded)
City of Cupertino
Combining Statement of Cash Flows (Continued)
Internal Service Funds
For the Year Ended June 30, 2023
143
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144

STATISTICAL SECTION
145
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146
Contents: Pages
148- 157
159-163
164-167
168-169
170-175
Financial Trends - These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time.

Revenue Capacity - These schedules contain information to help the reader assess the City's most significant local revenue source, the property tax.

Debt Capacity - These schedules present information to help the reader assess the affordability of the City's current level of outstanding debt and the City's ability to issue additional debt in the future.

Demographic and Economic Information - These schedules offer demographics and economic indicators to help the reader understand the environment within which the City's financial activities take place.

Operating Information - These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report related to the services the City provides and activities it performs.

This part of the City of Cupertino'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 say about the government' s overall financial health.

City of Cupertino
Description of Statistical Section Contents
June 30, 2023
147
2014 2015 2016 2017 2018
Government activities:

Net investment in capital assets 122,081,223$ 131,425,677$ 148,168,074$ 153,239,534$ 167,606,366$ Restricted 24,232,367 38,327,705 34,861,807 34,991,692 32,073,195 Unrestricted 63,150,548 51,003,950 51,164,063 59,385,309 50,457,871 Total governmental activities net position 209,464,138$ 220,757,332$ 234,193,944$ 247,616,535$ 250,137,432$ Business-type activities:

Net investment in capital assets 1,110,414$ 2,079,561$ 1,708,183$ 1,972,169$ 1,597,700$ Restricted - - - - -
Unrestricted 10,292,210 6,604,578 7,375,444 9,092,584 8,051,015 Total business-type activities net position 11,402,624$ 8,684,139$ 9,083,627$ 11,064,753$ 9,648,715$ Primary government:

Net investment in capital assets 123,191,637$ 133,505,238$ 149,876,257$ 155,211,703$ 169,204,066$ Restricted 24,232,367 38,327,705 34,861,807 34,991,692 32,073,195 Unrestricted 73,442,758 57,608,528 58,539,507 68,477,893 58,508,886 Total primary government net position 220,866,762$ 229,441,471$ 243,277,571$ 258,681,288$ 259,786,147$ City of Cupertino
Net Position by Component
Last Ten Fiscal Years
accrual basis of accounting)
Fiscal Year
Source: Department of Administrative Services, City of Cupertino. 148
2019 2020 2021 2022* 2023
Government activities:

Net investment in capital assets 170,973,897$ 177,128,134$ 186,503,116$ 196,915,823$ 198,450,441$ Restricted 45,405,508 48,005,800 53,711,040 69,354,217 69,129,277 Unrestricted 51,190,017 66,493,336 83,458,299 93,613,909 120,529,242 Total governmental activities net position 267,569,422$ 291,627,270$ 323,672,455$ 359,883,949$ 388,108,960$ Business-type activities:

Net investment in capital assets 1,318,744$ 1,118,882$ 2,090,530$ 2,089,569$ 2,109,592$ Restricted - - - 166,607 166,689
Unrestricted 6,737,758 8,134,944 9,374,129 8,422,930 8,148,256 Total business-type activities net position 8,056,502$ 9,253,826$ 11,464,659$ 10,679,106$ 10,424,537$ Primary government:

Net investment in capital assets 172,292,641$ 178,247,016$ 188,593,646$ 199,005,392$ 200,560,033$ Restricted 45,405,508 48,005,800 53,711,040 69,520,824 69,295,966 Unrestricted 57,927,775 74,628,280 92,832,428 102,036,839 128,677,498 Total primary government net position 275,625,924$ 300,881,096$ 335,137,114$ 370,563,055$ 398,533,497$ 2022 restricted and unrestricted net positions are restated as result of a prior period adjustment City of Cupertino
Net Position by Component (Continued)
Last Ten Fiscal Years
accrual basis of accounting)
Fiscal Year
Source: Department of Administrative Services, City of Cupertino. 149
2014 2015 2016 2017 2018
Expenses:

Governmental Activities:

Administration 4,529,539$ 3,286,919$ 3,710,388$ 2,873,744$ 5,612,733$ Law enforcement 10,062,192 10,705,328 11,316,271 12,528,328 12,674,042 Innovation and technology 512,895 649,442 575,260 1,884,165 3,244,846 Administrative services 2,662,008 4,300,336 2,994,611 5,898,479 4,415,647 Recreation services 4,866,974 5,365,282 5,758,194 10,651,557 9,352,551 Community development 9,108,949 5,976,797 6,259,734 13,775,591 16,789,351 Public works 21,143,331 27,893,361 31,313,396 32,491,244 28,995,382 Interest on long-term debt 1,130,428 1,120,138 1,077,538 1,035,738 993,038 Total governmental activities expenses 54,016,316 59,297,603 63,005,392 81,138,846 82,077,590 Business-type activities:

Resources recovery 2,159,047$ 2,548,461$ 2,997,200$ 2,991,177$ 2,594,511$ Blackberry farm 571,000 547,185 576,177 597,406 656,112 Cupertino sports center 2,221,703 2,269,420 2,299,210 2,159,243 2,633,748 Recreation programs 2,730,765 2,342,457 3,136,011 2,351,501 3,232,593 Total business- type activities expenses 7,682,515 7,707,523 9,008,598 8,099,327 9,116,964 Total primary government expenses 61,698,831$ 67,005,126$ 72,013,990$ 89,238,173$ 91,194,554$ Program revenues:

Governmental activities:

Charges for services:

Administration 1,087,393$ 322,534$ 369,069$ 3,992,716$ 5,062,988$ Law enforcement 725,631 590,378 664,483 603,194 732,544 Innovation and technology - 41,352 41,352 - -
Administrative services - 481,616 359,148 3,565,627 2,635,885 Recreation services 955,081 1,798,134 1,421,185 2,016,159 1,589,134 Community development 6,649,292 8,511,745 10,534,457 10,902,822 8,598,935 Public works 7,916,897 2,869,357 6,358,870 6,873,487 4,720,646 Operating grants and contributions 10,000,131 6,002,617 1,851,282 2,313,632 4,819,696 Capital grants and contributions 569,159 4,022,190 362,491 245,288 271,587 Total governmental activities program revenues 27,903,584 24,639,923 21,962,337 30,512,925 28,431,415 Business- type activities:

Charges for services:

Resources recovery 2,074,251$ 2,591,276$ 2,664,888$ 2,792,190$ 2,559,862$ Blackberry farm 302,472 388,091 334,529 325,224 345,667 Cupertino sports center 2,188,127 2,152,498 2,224,146 2,238,023 2,403,665 Recreation programs 2,480,209 2,532,800 2,466,336 2,778,588 2,516,678 Total business- type activities program revenues 7,045,059 7,664,665 7,689,899 8,134,025 7,825,872 Total primary government program revenues 34,948,643$ 32,304,588$ 29,652,236$ 38,646,950$ 36,257,287$ continued)
Fiscal Year
City of Cupertino
Changes in Net Position - Expenses and Program Revenues Last Ten Fiscal Years
accrual basis of accounting)
Source: Department of Administrative Services, City of Cupertino. 150
2019 2020 2021 2022 2023
Expenses:

Governmental Activities:

Administration 6,849,046$ 7,974,520$ 3,637,467$ 7,293,244$ 8,830,127$ Law enforcement 13,381,113 14,698,130 15,211,646 16,100,903 15,716,301 Innovation and technology 3,210,343 3,637,354 1,721,729 2,004,515 1,950,718 Administrative services 4,290,818 5,175,596 5,358,183 5,363,745 6,363,343 Recreation services 7,389,915 8,763,194 1,182,662 3,976,793 6,020,526 Community development 10,470,973 10,286,317 11,495,788 12,209,547 12,463,257 Public works 31,870,165 33,339,191 41,870,240 35,653,588 38,696,234 Interest on long-term debt 949,438 882,837 397,682 636,960 369,502 Total governmental activities expenses 78,411,811 84,757,139 80,875,397 83,239,295 90,410,008 Business-type activities:

Resources recovery 1,735,885$ 2,213,404$ 1,670,261$ 1,837,781$ 2,038,313 Blackberry farm 645,469 663,663 535,274 655,184 799,168 Cupertino sports center 3,036,037 2,883,903 2,182,900 3,396,146 3,456,539 Recreation programs 2,923,336 3,141,225 1,117,244 1,617,717 1,661,686 Total business- type activities expenses 8,340,727 8,902,195 5,505,679 7,506,828 7,955,706 Total primary government expenses 86,752,538$ 93,659,334$ 86,381,076$ 90,746,123$ 98,365,714$ Program revenues:

Governmental activities:

Charges for services:

Administration 1,319,395$ 2,091,811$ 2,387,412$ 2,551,205$ 3,098,916$ Law enforcement 889,923 1,102,888 550,051 940,797 612,993 Innovation and technology -----
Administrative services 3,113,731 3,889,180 5,232,679 7,457,032 5,419,347 Recreation services 1,563,262 1,309,906 264,426 653,994 621,587 Community development 7,470,690 5,859,847 5,736,587 5,768,850 5,361,837 Public works 4,504,104 5,657,315 3,966,206 4,015,183 3,290,506 Operating grants and contributions 2,557,470 5,794,443 5,998,209 7,601,210 10,881,438 Capital grants and contributions 1,082,243 1,046,756 1,792,376 1,282,617 1,593,910 Total governmental activities program revenues 22,500,818 26,752,146 25,927,946 30,270,888 30,880,534 Business- type activities:

Charges for services:

Resources recovery 1,750,279$ 1,821,677$ 1,819,861$ 1,545,683$ 1,772,252$ Blackberry farm 316,615 338,212 610,603 602,778 616,461 Cupertino sports center 2,349,468 2,365,667 1,810,194 2,796,329 3,117,580 Recreation programs 1,986,781 1,588,576 590,871 1,294,128 1,742,442 Total business- type activities program revenues 6,403,143 6,114,132 4,831,529 6,238,918 7,248,735 Total primary government program revenues 28,903,961$ 32,866,278$ 30,759,475$ 36,509,806$ 38,129,269$ City of Cupertino
Changes in Net Position - Expenses and Program Revenues (Continued) Last Ten Fiscal Years
accrual basis of accounting)
Source: Department of Administrative Services, City of Cupertino. 151
2014 2015 2016 2017 2018
Net revenues ( expenses):

Governmental activities ( 26,112,732)$ ( 34,657,680)$ ( 41,043,055)$ ( 50,625,921)$ ( 53,646,175)$ Business-type activities ( 637,456) ( 42,858) (1,318,699) 34,698 (1,291,092) Total net revenues (expenses)( 26,750,188)$ ( 34,700,538)$ ( 42,361,754)$ ( 50,591,223)$ ( 54,937,267)$ General revenues and Transfers
Governmental activities:

Taxes:

Property taxes 9,169,183$ - 11,864,027$ 13,251,840$ 14,881,533$ Property taxes in lieu of motor vehicle fee 5,289,476 - 6,330,436 6,967,237 7,552,272 Sales taxes 19,794,036 - 21,350,056 26,932,012 26,164,531 Transient occupancy tax 4,590,156 - 5,852,244 6,023,681 6,810,718 Utility user taxes 3,098,639 - 3,370,830 3,082,407 3,146,398 Franchise taxes 2,775,892 - 3,478,024 3,409,572 3,563,820 Other taxes 18,791,559 - 2,818,019 3,258,118 1,943,652
Intergovernmental 25,294 - 24,111 26,118 31,013
Investment earnings (loss) 133,243 40,751 807,287 694,730 916,638 Miscellaneous 57,005 ( 2) 219,053 2,004,906 1,834,492
Gain on sale of capital assets - 23,715,897 580 - 740,570 Transfers - fund closing1 --- 272,011 -
Transfers ( 401,350) 872,340 ( 1,635,000) ( 1,874,120) 107,030 Total governmental activities 63,323,133 24,628,986 54,479,667 64,048,512 67,692,667 Business-type activities:

Investment earnings 11,238 42,561 82,187 59,012 75,663
Transfers 401,350 ( 872,340) 1,635,000 1,874,120 ( 107,030) Total business-type activities 412,588 ( 829,779) 1,717,187 1,933,132 ( 31,367) Total primary government 63,735,721$ 23,799,207$ 56,196,854$ 65,981,644$ 67,661,300$ Changes in net position
Governmental activities 37,210,401$ ( 10,028,694)$ 13,436,612$ 13,422,591$ 14,046,492$ Business-type activities ( 224,868) ( 872,637) 398,488 1,967,830 ( 1,322,459) Total primary government 36,985,533$ ( 10,901,331)$ 13,835,100$ 15,390,421$ 12,724,033$ City of Cupertino
Fiscal Year
accrual basis of accounting)
Last Ten Fiscal Years
Changes in Net Position - Expenses and Program Revenues (Continued) Source: Department of Administrative Services, City of Cupertino. 152
2019 2020 2021 2022 2023
Net revenues ( expenses):

Governmental activities ( 55,910,993)$ ( 58,004,993)$ ( 54,947,451)$ ( 52,968,407)$ ( 59,529,474)$ Business-type activities ( 1,937,584) ( 2,788,063) ( 674,150) ( 1,267,910) ( 706,971) Total net revenues (expenses)( 57,848,577)$ ( 60,793,056)$ ( 55,621,601)$ ( 54,236,317)$ ( 60,236,445)$ General revenues and Transfers
Governmental activities:

Taxes:

Property taxes 17,082,005$ 18,117,304$ 19,197,994$ 20,322,779$ 21,807,628$ Property taxes in lieu of motor vehicle fee 8,219,090 8,489,541 9,079,845 9,401,632 10,082,011 Sales taxes 24,901,779 35,657,214 42,581,070 43,646,813 34,819,341 Transient occupancy tax 8,901,337 7,286,083 2,141,058 4,404,958 7,062,150 Utility user taxes 3,089,922 3,182,086 3,074,358 3,356,389 4,103,906 Franchise taxes 3,445,253 3,418,908 3,368,286 3,479,554 3,995,018 Other taxes 3,299,587 1,774,235 3,022,333 11,117,528 2,872,571 Intergovernmental 28,844 47,391 43,675 67,762 62,072
Investment earnings (loss) 3,258,550 5,690,723 4,147,907 ( 9,241,781) 2,801,930 Miscellaneous 1,187,741 1,922,356 3,185,110 1,948,332 444,339 Gain on sale of capital assets 3,875 ----
Transfers - fund closing1 -----
Transfers ( 75,000) (3,523,000) ( 2,849,000) ( 886,801) ( 296,481) Total governmental activities 73,342,983 82,062,841 86,992,636 87,617,165 87,754,485 Business-type activities:

Investment earnings 270,371 462,387 35,983 ( 404,444) 155,921 Transfers 75,000 3,523,000 2,849,000 886,801 296,481
Total business-type activities 345,371 3,985,387 2,884,983 482,357 452,402 Total primary government 73,688,354$ 86,048,228$ 89,877,619$ 88,099,522$ 88,206,887$ Changes in net position
Governmental activities 17,431,990$ 24,057,848$ 32,045,185$ 34,648,758$ 28,225,011$ Business-type activities ( 1,592,213) 1,197,324 2,210,833 ( 785,553) ( 254,569) Total primary government 15,839,777$ 25,255,172$ 34,256,018$ 33,863,205$ 27,970,442$ 1 Asset and liability transfer from the closed City Channel/Web Internal Service Fund in 2017.

City of Cupertino
Changes in Net Position - Expenses and Program Revenues (Continued) Last Ten Fiscal Years
accrual basis of accounting)
Fiscal Year
Source: Department of Administrative Services, City of Cupertino. 153
2014 2015 2016 2017 2018
General fund:

Nonspendable 3,363,065$ 938,245$ 937,381$ 876,939$ 464,893$ Restricted - 761,653 888,374 1,016,771 1,254,578
Committed --- 19,000,000 19,122,754
Assigned 16,400,000 28,849,679 20,500,000 4,638,181 9,963,310 Unassigned 23,197,378 8,774,966 29,869,085 28,057,799 21,704,922 Total general fund 42,960,443$ 39,324,543$ 52,194,840$ 53,589,690$ 52,510,457$ All other governmental funds:

Nonspendable -----
Restricted 24,232,367 37,566,052 33,973,433 33,974,921 30,818,617 Committed - 1,398,665 1,398,665 1,398,665 -
Assigned 7,619,534 20,671,116 15,344,191 25,305,974 29,129,616 Unassigned ( 2,280,961) - - - -
Total all other governmental funds 29,570,940$ 59,635,833$ 50,716,289$ 60,679,560$ 59,948,233$ Total Governmental Funds 72,531,383 98,960,376 102,911,129 114,269,250 112,458,690 City of Cupertino
Fund Balances of Governmental Funds
Last Ten Fiscal Years
modified accrual basis of accounting)
Fiscal Year
Source: Department of Administrative Services, City of Cupertino. 154
2019 (1) 2020 2021 2022(2) 2023
General fund:

Nonspendable 454,188$ 3,449,341$ 3,444,346$ 4,055,956$ 4,000,588$ Restricted 9,469,670 14,324,757 20,140,419 18,756,482 19,088,859 Committed 19,123,397 19,127,891 19,127,891 34,127,891 34,127,891 Assigned 1,979,202 3,176,882 4,906,139 5,041,682 9,735,187 Unassigned 27,896,128 34,426,942 49,231,996 48,696,821 71,603,813 Total general fund 58,922,585$ 74,505,813$ 96,850,791$ 110,678,832$ 138,556,338$ All other governmental funds:

Nonspendable -----$
Restricted 35,935,838 33,681,043 33,570,621 51,106,343 46,828,676 Committed -----
Assigned 33,211,946 40,551,131 37,038,174 35,088,889 34,924,537 Unassigned - - - - -
Total all other governmental funds 69,147,784$ 74,232,174$ 70,608,795$ 86,195,232$ 81,753,213$ Total Governmental Funds 128,070,369 148,737,987 167,459,586 196,874,064 220,309,551 1The City established a trust to fund Other Post-Employment Benefit contributions, which is classified as a restriction in fund balance. 22022 balances were restated due to prior period adjustments.

City of Cupertino
Fund Balances of Governmental Funds (Continued)
Last Ten Fiscal Years
modified accrual basis of accounting)
Fiscal Year
Source: Department of Administrative Services, City of Cupertino. 155
2014 2015 2016 2017 2018
Revenues:

Taxes 72,211,724$ 55,134,238$ 55,462,956$ 62,924,867$ 64,062,924$ Use of money and property 764,299 915,933 1,654,702 1,425,629 1,543,818 Intergovernmental 3,069,400 7,210,562 2,532,025 2,585,038 5,122,296 Licenses and permits 3,679,943 3,170,445 3,073,110 2,536,925 2,757,928 Charges for services 10,744,113 5,203,371 17,249,123 24,103,167 15,638,247 Fines and forfeitures 616,889 554,002 564,903 603,194 602,934 Other 545,052 542,429 1,289,013 2,004,904 1,834,492
Total revenues 91,631,420 72,730,980 81,825,832 96,183,724 91,562,639 Expenditures:

Current:

Administration 3,957,739 3,897,701 4,053,741 5,942,633 4,943,052 Law enforcement 9,626,121 10,283,772 10,988,735 11,939,095 12,362,621 Innovation and technology 477,852 624,295 544,718 1,864,746 2,835,768 Administrative services 2,444,670 3,226,164 2,811,117 5,054,539 4,430,300 Recreation services 4,536,519 5,047,548 5,441,200 9,361,934 8,686,076 Community development 8,424,254 5,180,659 6,102,820 7,431,292 12,907,086 Public works 17,469,627 14,625,038 15,078,174 18,623,585 18,191,714 Capital outlay: 7,110,974 21,760,899 26,171,127 18,731,165 23,395,112 Debt service:

Principal repayment 2,040,000 2,055,000 2,090,000 2,135,000 2,180,000 Interest and fiscal charges 1,130,428 1,120,138 1,077,538 1,035,738 993,038 Total expenditures 57,218,184 67,821,214 74,359,170 82,119,727 90,924,767 Excess of revenues over (under) expenditures 34,413,236 4,909,766 7,466,662 14,063,997 637,872 Other financing sources (uses):

Proceeds from debt issuance -----
Proceeds from debt issuance premium -----
Payments to refunding agent -----
Proceeds from sale of capital assets 37,569 23,814,257 580 - 872,250 Inception of subscription liability - - - - -
Transfers in 13,610,304 39,408,990 11,905,724 26,446,090 31,028,218 Transfers in - fund closing --- 260,374 -
Transfers out ( 24,499,154) ( 39,177,284) ( 15,422,213) ( 29,412,340) ( 34,348,900) Total other financing sources (uses)( 10,851,281) 24,045,963 ( 3,515,909) ( 2,705,876) ( 2,448,432) Net change in fund balances 23,561,955$ 28,955,729$ 3,950,753$ 11,358,121$ ( 1,810,560)$ Debt service as a percentage of
noncapital expenditures 0.00% 0.00% 6.57% 5.00% 4.70%
Fiscal Year
City of Cupertino
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
modified accrual basis of accounting)
Source: Department of Administrative Services, City of Cupertino. 156
2019 2020 2021 2022 2023
Revenues:

Taxes 68,938,973$ 77,925,371$ 82,464,944$ 95,729,653$ 84,233,345$ Use of money and property 3,896,813 6,259,342 4,447,970 ( 8,501,439) 3,422,106 Intergovernmental 3,668,557 6,888,590 7,834,260 8,951,589 11,869,664 Licenses and permits 4,102,665 4,692,847 4,068,238 4,141,902 4,093,631 Charges for services 13,385,698 13,937,950 13,601,302 16,373,903 12,741,952 Fines and forfeitures 534,012 344,008 134,459 373,722 326,944 Other 1,187,741 1,922,356 3,185,110 1,948,332 1,393,059 Total revenues 95,714,459 111,970,464 115,736,283 119,017,662 118,080,701 Expenditures:

Current:

Administration 6,294,111 6,951,541 7,549,386 7,492,277 7,603,732 Law enforcement 13,108,732 14,151,413 14,776,409 15,715,815 15,276,950 Innovation and technology 2,843,540 3,223,185 1,836,725 2,063,176 1,825,667 Administrative services 4,197,582 4,617,787 5,196,299 5,525,888 5,976,301 Recreation services 8,996,118 7,688,935 4,787,914 4,729,438 5,432,183 Community development 9,359,835 9,310,827 11,177,690 12,627,702 11,693,554 Public works 19,955,579 22,445,948 24,568,155 28,542,850 28,221,856 Capital outlay: 10,528,246 12,644,373 19,483,945 12,777,121 12,533,316 Debt service:

Principal repayment 2,220,000 2,290,000 2,140,000 1,880,000 2,581,181 Interest and fiscal charges 949,438 882,837 798,747 796,000 739,340 Total expenditures 78,453,181 84,206,846 92,315,270 92,150,267 91,884,080 Excess of revenues over (under) expenditures 17,261,278 27,763,618 23,421,013 26,867,395 26,196,621 Other financing sources (uses):

Proceeds from debt issuance -- 22,040,000 - -
Proceeds from debt issuance premium -- 3,878,704 - -
Payments to refunding agent -- ( 27,279,118) - -
Proceeds from sale of capital assets 3,875 --- -
Inception of subscription liability - - - - 964,745
Transfers in 19,407,613 35,208,276 12,876,969 23,089,059 11,350,697 Transfers in - fund closing ---- -
Transfers out ( 21,061,087) ( 42,304,276) ( 16,215,969) ( 25,776,712) ( 15,076,576) Total other financing sources (uses)( 1,649,599) ( 7,096,000) ( 4,699,414) ( 2,687,653) ( 2,761,134) Net change in fund balances 15,611,679$ 20,667,618$ 18,721,599$ 24,179,742$ 23,435,487$ Debt service as a percentage of
noncapital expenditures 4.67% 4.43% 4.04% 3.37% 4.18%
Fiscal Year
City of Cupertino
Changes in Fund Balances of Governmental Funds (Continued) Last Ten Fiscal Years
modified accrual basis of accounting)
Source: Department of Administrative Services, City of Cupertino. 157
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158
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 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 6.48% 2022 27,083,468,890 1,724,247,088 - 149,658,614 28,807,715,978 3.55% 2023 29,822,398,085 1,069,629,678 - 154,098,046 30,892,027,763 7.24% a) Net of exemptions
Source: HdL, Coren & Cone
Data Source: Santa Clara County Assessor 2013-14 - 2022-2 Combined Tax Rolls City of Cupertino
Unaudited)
Last Ten Fiscal Years
Assessed and Estimated Actual Value of Taxable Property 0 5
10 15
20 25
30 35
20 1
4 20
1 5
20 1
6 20
1 7
20 1
8 20
1 9
20 2
0 20
2 1
20 2
2 20
2 3
Bi
l
l
i
o
n
s
Secured Property Unsecured Property
159
Agency 2013-14 2014-15 2015-16 2016-17 2017-18
Basic Levy¹ 1.00000 1.00000 1.00000 1.00000 1.00000
Co. Housing Bond 2016 0.00000 0.00000 0.00000 0.00000 0.01266 County Bond 2008 Hospital Facility 0.00350 0.00910 0.00880 0.00860 0.00820 County Library Retirement Levy 0.00240 0.00240 0.00240 0.00240 0.00240 County Retirement Levy 0.03880 0.03880 0.03880 0.03880 0.03880 Cupertino Elementary 0.05250 0.05400 0.05190 0.05090 0.04960 El Camino Hospital 2003 0.01290 0.01290 0.01290 0.01290 0.01000 Foothill De Anza College 0.02900 0.02760 0.02400 0.02340 0.02200 Fremont High 0.04050 0.03960 0.05250 0.04030 0.04640
Los Gatos-Saratoga High 1998 0.03510 0.05160 0.04230 0.04690 0.04570 MidPeninsula Open Space 2014 0.00000 0.00000 0.00080 0.00060 0.00090 Santa Clara Unified 0.07070 0.07040 0.09420 0.08180 0.08280 Santa Clara Valley Water District 0.00700 0.00650 0.00570 0.00860 0.00620 Saratoga Elementary 0.04500 0.04580 0.04490 0.04560 0.04580 West Valley College 0.02550 0.01200 0.02320 0.01960 0.02000 Total Direct & Overlapping² Tax Rates 1.36290 1.37070 1.40240 1.38040 1.39146 City's Share of 1% Levy Per Prop 13³ 0.05626 0.05617 0.05571 0.05962 0.06148 General Obiligation Debt Rate
Redevelopment Rate
Total Direct Rate 0.05623 0.05610 0.05588 0.05976 0.06187 Notes:

Data Source: Santa Clara County Assessor 2013/14 - 2022/23 Tax Rate Table City'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.

Redevelopment 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.

Total 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.

Overlapping 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.

City of Cupertino
Direct and Overlapping Property Tax Rates
Rate per $100 of taxable value)
Last 10 Fiscal Years
In 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. 160
Agency 2018-19 2019-20 2020-21 2021-22 2022-23
Basic Levy¹ 1.00000 1.00000 1.00000 1.00000 1.00000
Co. Housing Bond 2016 0.01050 0.01000 0.00000 0.01266 0.01080 County Bond 2008 Hospital Facility 0.00720 0.00690 0.00690 0.00610 0.00630 County Library Retirement Levy 0.00240 0.00240 0.00240 0.00240 0.00240 County Retirement Levy 0.03880 0.03880 0.03880 0.03880 0.03880 Cupertino Elementary 0.03970 0.04150 0.04030 0.03800 0.03680 El Camino Hospital 2003 0.01000 0.01000 0.01000 0.01000 0.00900 Foothill De Anza College 0.02170 0.02080 0.03640 0.03310 0.02910 Fremont High 0.04300 0.04790 0.04780 0.04160 0.03710
Los Gatos-Saratoga High 1998 0.03040 0.01770 0.01930 0.01850 0.01790 MidPeninsula Open Space 2014 0.00180 0.00160 0.00150 0.00150 0.00130 Santa Clara Unified 0.07070 0.11760 0.10450 0.10140 0.08670 Santa Clara Valley Water District 0.00420 0.00410 0.00370 0.00510 0.00440 Saratoga Elementary 0.04580 0.04640 0.04850 0.04830 0.04850 West Valley College 0.01980 0.01860 0.03110 0.03040 0.02830 Total Direct & Overlapping² Tax Rates 1.34600 1.39530 1.39120 1.38786 1.35740 City's Share of 1% Levy Per Prop 13³ 0.06320 0.06531 0.06515 0.06528 0.06504 General Obiligation Debt Rate
Redevelopment Rate
Total Direct Rate 0.06381 0.06499 0.06463 0.06477 0.06482 Notes:

Data Source: Santa Clara County Assessor 2013/14 - 2022/23 Tax Rate Table City'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.

Redevelopment 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.

Total 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.

In 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.

Overlapping 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.

City of Cupertino
Direct and Overlapping Property Tax Rates (Continued)
Rate per $100 of taxable value)
Last 10 Fiscal Years
161
2023 Percentage of 2014 Percentage of
Assessed Total Assessed Assessed Total Assessed
Valuation Valuation Valuation Valuation
Apple Inc. 8,080,536,959$ 26.16% 1,324,522,880$ 6.38%
Main Street Cupertino 379,188,743 1.23%- 0.00%
Vallco Property Owner LLC 357,133,944 1.16% 89,929,542 0.50% Cupertino City Center 253,985,462 0.82% 139,150,359 0.00% Cupertino Property Development 216,935,305 0.70%- 0.00% PR Cupertino Gateway LLC 137,402,151 0.44%- 0.00%
Avery Glenbrook LP 113,723,103 0.37%- 0.00%
Markham Apartments LP 109,473,477 0.35%- 0.00%
Preg Emerson LLC 107,770,538 0.35%- 0.00%
Cupertino Village 91,710,720 0.30%- 0.00%
Total 9,847,860,402$ 31.88% 1,553,602,781$ 6.88%
Source: HdL, Coren & Cone
Taxpayer
City of Cupertino
Principal Property Taxpayers
Current Year and Ten Years Ago
Unaudited)
162
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 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% 2022 20,322,779 20,322,779 100.00% - 20,322,779 100.00% 2023 21,807,628 21,807,628 100.00% - 21,807,628 100.00% 1) Per the Teeter Plan, the City receives 100% of the tax levy, while the County receives delinquencies and penalties.

Source: City of Cupertino NWS
City of Cupertino
Property Tax Levies and Collections
Last Ten Fiscal Years
Unaudited)
163
Percentage
of Estimated % of
Fiscal Certificates Actual Market Value Personal
Year of Participation of Taxable Property Per Capita Income 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 19,900,000 0.07% 334 0.48%
2022 18,020,000 0.06% 297 0.40%
2023 16,065,000 0.06% 269 0.36%
Source: City of Cupertino Budget Book
City of Cupertino
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
Unaudited)
164
30,892,027,763$
Total Debt % City’s Share of
6/30/2023 Applicable (1) Debt 6/30/23
Santa Clara County $ 1,041,125,000 4.998% 52,035,428$
Santa Clara County General Fund Obligations 1,120,404,570 4.998% 55,997,820 Santa Clara County Pension Obligations 329,741,844 4.998% 16,480,497 Santa Clara County Board of Education Certificates of Participation 935,000 4.998% 46,731 Foothill-DeAnza Community College District 603,653,754 12.559% 75,812,875 Foothill-DeAnza Community College District Certificates of Participation 20,645,000 12.559% 2,592,806 West Valley Community College District 694,320,000 1.977% 13,726,706 West Valley-Mission Community College District General Fund Obligations 8,160,000 1.977% 161,323 Santa Clara Unified School District & General Fund Obligations 1,088,048,000 4.380% 47,656,502 Santa Clara County Vector Control District Certificates of Participation 1,230,000 4.998% 61,475 Fremont Union High School District 771,685,088 28.026% 216,272,463 Cupertino Union School District 258,383,303 51.138% 132,132,053 El Camino Hospital District 105,480,000 0.891% 939,827
Midpeninsula Regional Open Space District and General Fund Obligations 82,680,000 7.600% 6,283,680 Santa Clara Valley Water District Benefit Assessment 38,900,000 4.998% 1,944,222 Total Overlapping Tax and Assessment Debt 6,165,391,559$ 622,144,410$ Direct Debt: City of Cupertino Certificates of Participation 16,065,000 100.000% 16,065,000 Total Direct and Overlapping General Fund Debt 16,065,000 16,065,000 Totals by Category:

Total Direct Debt 16,065,000 16,065,000
Total Overlapping Debt 6,165,391,559 622,144,410
Combined Total Debt 6,181,456,559$ 638,209,410$
Ratios to 2022- 23 Assessed Valuation:

Total Overlapping Tax and Assessment Debt 2.01%

0.05%
Combined Total Debt 2.07%
1)
2) Principal amount as of 6/30322.

Direct and Overlapping Bonded Debt
City of Cupertino
Overlapping Tax and Assessment Debt:

Unaudited)
2022-23 Assessed Valuation
June 30, 2023
The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value.
165
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
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 1,118,339,928 - 1,118,339,928 -
2022 1,015,630,083 - 1,015,630,083 -
2023 1,118,339,928 - 1,118,339,928 -
Debt Limit:

Secured property assessed value, net of exempt real property 29,822,398,085$ Adjusted valuation - 25% of assessed valuation 7,455,599,521 Debt limit - 15% of adjusted valuation 1,118,339,928
Amount of Debt Subject to Limit:

Total Bonded Debt 16,065,000
Less: Certificates of Participation not subject to debt limit ( 16,065,000) Amount of debt subject to limit -
Legal Debt Margin 1,118,339,928$
Source: City of Cupertino Budget Book
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)
166
Ratio of General
Fiscal Assessed General Bonded Debt Bonded Debt to
Year Population Value Bonded Debt Per Capita Assessed Value 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 - - -
2022 66,274 28,807,715,978 - - -
2023 59,656 30,892,027,763 - - -
Sources: HdL, Coren & Cone/Cupertino Budget Book
City of Cupertino
Ratio of General Bonded Debt
Last Ten Fiscal Years
Unaudited)
167
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
Unemploym
ent Rate
3)
Median
Age (4)
of
Population
Over 25 with
High School
Degree
of
Population
Over 25 with
Bachelor' s
Degree
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% 2021- 22 66,274 1,934,171 3.43% 4,571,170,000 76,684 24,380 3.7% 2.2% 41.2 97.3% 79.6% 2022- 23 59,656 1,902,799 3.14% 5,214,787,000 88,156 23,486 2.3% 3.7% 41.0 97.0% 80.9% https:// dq.cde.ca.gov/dataquest/ dqcensus/ EnrAgeGrd. aspx? cds=4369468& agglevel= district& year=2021-22 https:// dq.cde.ca.gov/dataquest/ dqcensus/ EnrAgeGrd. aspx?cds=4369419& agglevel= district& year=2021- 22 https:// labormarketinfo. edd.ca.gov/data/industry- employment- and-unemployment- rates-for-counties. html chrome- extension:// efaidnbmnnnibpcajpcglclefindmkaj/ https:// labormarketinfo. edd.ca.gov/file/lfmonth/ 2306rcou. pdf 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
Last Ten Fiscal Years
Demographic and Economic Statistics
168
Employer Ranking Employer Ranking
Apple 1 Intero Real Estate Services, Inc 11
De Anza College 2 Keller Williams Realty 12
Force 5 Software Inc 3 Cupertino Healthcare & Wellness Center 13 Whole Foods Market 4 Exilant 14
Claris International, Inc 5 BJ's Resturant & Brewhouse 15 Health Care Center at the Forum 6 Sunny View Retirement Community 16 Target 7 Insight Solutions Inc 17
Cupertino Union School District 8 Cupertino High School 18 City of Cupertino 9 Monta Vista High School 19
Mist Systems, Inc. 10 Nexsales Corp 20
Source: Data-Axle
City of Cupertino
2023 Employer Ranking
Unaudited)
169
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170
Function/Program 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Council and Commissions 1.57 1.55 1.60 1.55 2.35 2.35 2.51 2.53 7.30 7.2 Administration 10.75 10.75 10.85 10.57 14.12 15.47 15.15 17.85 24.30 21.8 Innovation & Technology 11.00 10.25 11.40 13.95 14.55 15.05 14.95 11.93 13.40 14.9 Administrative Services 11.00 12.00 12.30 12.30 12.00 14.00 16.00 15.90 18.90 17.9 Parks & Recreation 29.48 31.28 32.18 33.08 35.13 34.80 32.10 31.90 29.50 27.6 Community Development 24.83 24.80 27.30 28.18 28.08 28.13 28.29 28.49 37.50 34.4 Public Works 74.12 77.12 82.12 84.12 84.52 84.95 88.75 90.15 94.10 88.1 Law Enforcement 2.00 2.00 2.00 2.00 2.00 2.00 0.00 0.00 0.00 0.00 Total 164.75 169.75 179.75 185.75 192.75 196.75 197.75 198.75 225.00 211.90 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
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Public Works
Community
Development
Parks &
Recreation
Administrative
Services
Innovation &
Technology
Administration
Council and
Commissions
171
2014 2015 2016 2017 2018
Law Enforcement Sheriff Response
Priority One-Respond within 5 minutes 4.30 Min. 4.90 Min. 4.90 Min. 5.07 Min 4.23 Min.

Priority Two-Respond within 9 minutes 6.39 Min. 6.56 Min. 6.56 Min. 8.00 Min. 7.49 Min.

Priority Three- Respond within 20 minutes 10.76 Min. 10.52 Min. 10.52 Min. 15.79 Min 14.79 Min.

Public Works
Street Sweeping 575 Curb Miles 575 Curb Miles 575 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 Number of development permit applications received 428
Number of encroachment permits received 121
Storm Drain Inlets Inspected/Cleaned 815
Roadway Signs Repaired/ Replaced 404
Number of trees planted vs. removed 53/67
Parks & Recreation
Number of reservations at Quinlan Center 560
Number of rounds of golf at BBF Golf Course 28,193
Sports Center Memberships 1,950 2,000 1,989 2,015 1,850 Number of Senior Center classes offered 246
Senior Center Memberships 2,623 2,549 2,493 2,094 2,260 Quinlan Community Center Rental Reven $ 109,342 $ 110,033 $ 104,150 $ 128,778 $ 72,948 Community Development
Approved Building Plan Sets 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 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 Number of preliminary reviews 82
Number of planning applications received 169
Number of permits received 2322
Number of inspections requested 16026
Administrative Services
Accounts Payable Processing 7 Days 7 Days 7 Days 7 Days 7 Days Business License Renewal Certificates 3 Days 3 Days 3 Days 3 Days 3 Days Number of regular recruitments 21
Number of new hires 26
Number of temporary new hires 101
Number of vendor checks processes 6793
Number of payroll checks process 10387
Number of business license applications 1294
Number of journal entries posted 2830
Number of receipts processed 9766
Library
Volumes in Collection - 361817 364,557 369,924 367,979
Annual Gate Count - 869762 880,894 835,073 873,862
Annual Circulation Children' s Items - 1474996 1,544,095 1,448,265 1,453,173 Annual Circulation Adult and Teen Items - 999766 1,032,326 950,453 980,609 Adult Classes and Events - 209 215 242 206
Adult Classes and Events Attendence - 11860 8,855 9,242 7,622 Teen Classes and Events - 52 78 66 79
Teen Classes and Events Attendence - 3393 3,135 2,571 2,495 Children' s Classes and Events - 458 493 440 426
Children' s Classes and Events Attendence - 25529 28,532 25,857 24,675 Volunteer Hours - 11786 10,000 9,645 10,302
Sources: City of Cupertino PM & WIs and Santa Clara County Library District City of Cupertino
Operating Indicators by Function/Program
Last Ten Fiscal Years
Unaudited)
Function/Program
172
2019 2020 2021 2022 2023
Law Enforcement Sheriff Response
Priority One-Respond within 5 minutes 4.39 Min. 3.51 Min. 3.40 Min. 5.33 Min 6.57 Min Priority Two-Respond within 9 minutes 6.23 Min. 6.37 Min. 6.07 Min. 6.94 Min. 7.46 Min.

Priority Three- Respond within 20 minutes 12.11 Min. 11.96 Min. 11.80 Min. 11.73 Min 12.72 Min Public Works
Street Sweeping 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 Number of development permit applications 434 428 127 128 127 Number of encroachment permits received 136 134 577 426 449 Storm Drain Inlets Inspected/Cleaned 1063 1638 1802 80% 53% Roadway Signs Repaired/ Replaced 721 346 1151 3.5% 2.0% Number of trees planted vs. removed 155/192 164/190 187/202 211/187 153/105 Parks & Recreation
Number of reservations at Quinlan Center 402 526 8 260 405 Number of rounds of golf at BBF Golf Cour 27,205 28,952 43,650 45367 37961 Sports Center Memberships 1,952 1,802 1,655 1186 1394
Number of Senior Center classes offered 320 258 100 183 235 Senior Center Memberships 2,171 2,171 1,470 210 1087
Quinlan Community Center Rental Revenue $ 139,590 $ 139,590 $ 5,507 $ 115,093 $ 126,670 Community Development
Approved Building Plan Sets 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 Work Days 99% Within 21 Work Days 99% Within 21 Work Days99% Within 21 Work Days99% 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 Number of preliminary reviews 90 110 163 142 127
Number of planning applications received 138 194 237 301 232 Number of permits received 2,321 2,534 2,364 2380 2618
Number of inspections requested 13,625 14,596 13,374 11906 15181 Administrative Services
Accounts Payable Processing 7 Days 7 Days 7 Days 7 Days 7 Days Business License Renewal Certificates 3 Days 3 Days 3 Days 3 Days 3 Days Number of regular recruitments 21 28 24 33 29
Number of new hires 16 14 21 38 31
Number of temporary new hires 105 38 17 77 70
Number of vendor checks processes 6,536 5,906 4,457 4993 5130 Number of payroll checks process 10,301 10,802 7,816 8119 9176 Number of business license applications 1,154 1,032 1,061 884 969 Number of journal entries posted 4,521 4,558 3,915 3635 3695 Number of receipts processed 13,913 18,992 10,367 9353 11275 Library
Volumes in Collection 367,101 368,461 350,088 367,745 367,745 Annual Gate Count 904,349 620,007 128,912 387,285 387,285 Annual Circulation Children's Items 1,535,842 1,192,880 1,207,878 1,771,986 1,771,986 Annual Circulation Adult and Teen Items 1,049,166 831,114 750,602 1,056,451 1,056,451 Adult Classes and Events 207 396 459 62 62
Adult Classes and Events Attendence 8,304 9,986 19,223 861 861 Teen Classes and Events 52 57 31 21 21
Teen Classes and Events Attendence 1,283 8,495 7,151 916 916 Children's Classes and Events 424 477 464 105 105
Children' s Classes and Events Attendence 22,851 26,032 52,634 7,711 7,711 Volunteer Hours 10,191 6,592 465 4305.8 4305.8
Function/ Program
City of Cupertino
Operating Indicators by Function/Program (Continued)
Last Ten Fiscal Years
Unaudited)
173
2014 2015 2016 2017 2018
Public Works
Centerlane Miles of Streets 142 142 142 142 142
Streetlights 2,950 2,950 2,950 2,950 2,950
Traffic Signals 48 48 48 48 52
Culture & Recreation
Parks and Open Spaces 21 21 21 21 21
Park and Landscape Acreage 169 169 169 169 169
City Trails 3 3 3 3 3
Golf Courses 1 1 1 1 1
Community Center 1 1 1 1 1
Community Hall 1 1 1 1 1
Senior Center 1 1 1 1 1
Sports Center 1 1 1 1 1
Swimming Pools 1 1 1 1 1
Tennis Courts 17 28 28 28 28
Sports Fields 41 41 41 41 41
City Library 1 1 1 1 1
Source: City of Cupertino Budget Book/GIS Team
City of Cupertino
Capital Assets Statistics by Function/Program
Last Ten Fiscal Years
Unaudited)
Function/Program
174
2019 2020 2021 2022 2023
Public Works
Centerlane Miles of Streets 142 142 142 142 142
Streetlights 2,950 2,950 2,950 2,950 2,870
Traffic Signals 52 52 52 52 61
Culture & Recreation
Parks and Open Spaces 21 21 21 21 21
Park and Landscape Acreage 169 169 169 169 169
City Trails 3 3 3 3 5
Golf Courses 1 1 1 1 1
Community Center 1 1 1 1 1
Community Hall 1 1 1 1 1
Senior Center 1 1 1 1 1
Sports Center 1 1 1 1 1
Swimming Pools 1 1 1 1 1
Tennis Courts 28 28 28 28 28
Sports Fields 41 41 41 41 41
City Library 1 1 1 1 1
Function/Program
City of Cupertino
Capital Assets Statistics by Function/Program (Continued) Last Ten Fiscal Years
Unaudited)
175
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Community Economic Profile
Cupertino, with a population of 66,274 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 high-level opportunities and services that create and help sustain a sense of community and quality of life. Public and private interests must be mutual so that 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 to high-tech giant 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 aWracting 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, including Bromium, DURECT, SugarCRM, Panasonic Venture Group, Altia Systems, Mirapath, Aemetis Inc, Mist Systems, and Plus. The City strives to retain and aWract local companies through active outreach and a responsive and customer- oriented entitlement process.

Cupertino is excited to have a number of new mixed- use development projects offering more retail and dining options, as well as providing 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!, Oren’ s Hummus, Lazy Dog, Ippudo, Pasta Armellino, HaiDiLao Hot Pot Restaurant, Pineapple Thai, Pressed Juicery, Orangetheory, 85 Degree Bakery, SomiSomi, Sul & Beans, Kura Sushi, Vitality Bowls, La Pizzeria, Tancha, Koja Kitchen, Bishops Cuts & Colors, Capezio, Howard’ s Shoes, and Meet Fresh. Housing, office, and the Residence Inn by Marriott are available to support the thriving area.

Serving as a long-time retail anchor for the community, 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, 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, Kee Wah Bakery, Happy Lemon, and many other Asian restaurants, bakeries, and shops. The property owners have received approval to construct a new full-service boutique hotel with 185 rooms to accommodate business and leisure travelers.

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 Alo Cupertino, Cupertino Hotel, Hilton Garden Inn, Hya House, Juniper Hotel operated by Curio, Marriott Courtyard, and Residence Inn by Marriott.

Another longtime retail anchor in north Cupertino is Homestead Square Shopping Center, located at Homestead Road and De Anza Boulevard. This shopping center includes a 24-hour Safeway, Ulta Beauty, Ross Stores, Pet Club, Michael’ s, Rite Aid, FedEx, and numerous restaurants, such as Fish’ s Wild, Pho Hoa Noodle Soup, Yayoi Teishoku Japanese Restaurant, Starbucks, Chipotle, and financial institutions. 177
Recently approved is the redevelopment of The Oaks Shopping Center site, located off of State Route 85 freeway and across from De Anza College. The Westport Cupertino project will be a mixed- used development consisting of 259 housing units ( Rowhouse/ Townhomes, senior apartments) 35 memory care rooms, and 20,000 square feet of commercial space.

Apple Park, Apple’ s newest corporate campus, features 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 Deck, flagship retail store, and café are open to the public. 178

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