Private and Confidential
CITY OF CUPERTINO
Cost Allowability and Compliance with Government
Code §51350
Fiscal Year 2026-27
Sheriff Contract Cost
Review
2 EXECUTIVE SUMMARY
The County's FY 2026-27 proposal changes both the composition of overhead and the method used to allocate it. Departmental support moves to an annual cost-per-position basis, Records and Investigations move to a three-year RMS caseload share, and the overhead base expands to include countywide Investigations, Sheriff's Office Administration, and Internal Affairs. $6.0M
Increase in overhead allocated to the
West Valley Station compared with
the prior year
$40.4M
Projected FY 2026-27 cost for
Cupertino, Saratoga, and Los Altos
Hills combined
$10.7M
West Valley cost classified as not
allocable in the category-level
overhead review
128%
Cupertino overhead as a percentage
of direct cost, against 16%-34% for
the benchmark cities
Principal observations
Common allocation basis. A single 50% caseload / 50% service-hour driver is applied across cost categories that perform substantially different functions, and caseload does not distinguish among cases by complexity or effort.
Alternative allocation. Reallocating the same West Valley amounts on assigned FTE reduces the three-city total from $40.4 million to $33.9 million, a decrease of $6.5 million or 16.1%.
County's own estimate. The FY 2026-27 Recommended Budget identifies $23.6 million of expenditure reductions and a net 71-position decrease if the city contracts were discontinued.
Benchmark position. Removing the three-city share of costs classified as not allocable lowers the fully loaded cost from $747,608 to $571,340 per FTE — explaining 48% to 78% of the gap to the benchmark jurisdictions, but not all of it. / What Changed, and What It Costs the Three Cities
3 Government Code section 51350. A county must charge a city the costs incurred in providing contracted services and may not include general County overhead costs that would have been incurred regardless of the contract.
What an allocation formula establishes
• How a cost pool is distributed among Cupertino, Saratoga, Los Altos Hills, and the unincorporated area
• That the distribution can be independently recalculated from the supporting schedules
• That the same basis has been applied consistently across the categories presented
What it does not establish
• That the cost was incurred in providing services to the contract cities
• That the chosen driver reflects how each function consumes resources
• That case counts capture complexity, staff time, or level of effort per case
The analysis therefore evaluates each component on whether it is associated with providing law-enforcement services to the three cities, rather than on whether it can be distributed by formula.
SECTION 4 - CONTRACT LAW ENFORCEMENT OVERHEAD
/ The Standard Applied to Each Cost Component
4 Overhead category West Valley
share Component-level considerations Classification
Countywide Cost Allocation $580,573 County counsel, finance, and technology costs allocated through the Countywide Cost Allocation Plan; attributable to services available to all County departments.
Not allocable
Personnel and Training $1,057,612 Custody academy, recruitment, and baseline training capacity are unrelated or baseline; recruiting and training caused by West Valley staffing may be allocable in part.
Not allocable
Fiscal Services $298,434 Custody fiscal services and baseline accounting capacity are excluded; actual contract billing, payroll, and accounting transactions are mixed where specifically supported.
Not allocable
IT Services $997,556 Custody IT and baseline enterprise-system capacity are excluded; contract-specific devices, licenses, users, and support may be attributable to the service.
Not allocable
Internal Affairs $253,085 Custody units and baseline governance capacity are excluded or unrelated; city-service incidents may create some mixed workload.
Not allocable
Sheriff Administration $349,433 Sheriff and Undersheriff positions were excluded by the County; baseline executive functions and newly included CC3900 functions lack a demonstrated West Valley nexus. Three-city portion is $282,306.
Not allocable
Subtotal $3,536,693 Category-level classification; the component review shows several pools contain both contract-related and baseline activity.
$3,536,693
Observation. These pools are presented as combined amounts rather than separately identifying baseline County operations and the portion associated with West Valley contract services. The component-level review distinguishes custody operations, the Sheriff's South County investigative unit, baseline executive management, and departmentwide administrative functions within the broader categories.
SECTION 4 - COUNTYWIDE AND DEPARTMENT SUPPORT
/ Treatment of the Departmental Overhead Categories
5 Investigative Services $5,531,736
West Valley share
• Only $1,233,709 is identified as allocable to West Valley; $4,298,027 is classified as not allocable.
• South County Investigations (cost center 3931; two FTE; approximately $706,929) is unrelated to West Valley.
• Other headquarters and regional positions require a documented West Valley service nexus.
• The source comment reflects 43 of 49 headquarters FTE against only four West Valley FTE.
Records Services $2,832,389
West Valley share
• The full amount is classified as not allocable at the category level. • A Records Sheriff overhead allocation of approximately $1,492,651 represents second-order mixed overhead.
• Records Technician and Office Specialist transaction work may be attributable in part.
• The component review supports a narrower split between city transactions and baseline capacity.
$11,900,818
West Valley share of the overhead and
support pools reviewed
$10,667,109
Classified as not allocable in the category-
level review
The $10,667,109 reflects classification of entire categories.
Because several of those categories include activities that may relate to the contract cities as well as activities that may not, the amount is used in Section 8 solely to measure its effect on the benchmark comparison.
SECTION 4 - INVESTIGATIVE AND RECORDS SERVICES
/ The Two Largest Support Pools Drive the Classification 6 County Contract structure Staffing exhibit Pricing method Los Angeles Standardized countywide Municipal Law
Enforcement Services Agreement
Detailed deployment schedules and annual
service levels Full cost recovery using County-approved billing rates Orange Municipal contract with the Sheriff's Department Service levels customized by city Cost reimbursement for personnel, equipment, overhead, and special services
San Bernardino Sheriff's Law Enforcement Services Contract Schedule A listing staffing, vehicles, dispatch, support services, and annual costs
Annual Schedule A cost allocation, frequently
amended during the year
San Diego Sheriff's Municipal Services Agreements Annual staffing schedules and service plans Cost recovery based on staffing assignments and support services
San Mateo Municipal agreements for Sheriff-provided
services
Assigned personnel and service levels set by
contract, updated annually
Cost recovery based on assigned personnel, operating
costs, and support services
Contra Costa Sheriff-staffed municipal police department City-funded Sheriff staffing organized by police function
City-funded Sheriff positions and related operating and support costs
Santa Clara Individual contract with the Sheriff's Office Negotiated staffing levels tailored to each city
Direct reimbursement of Sheriff's costs plus
overhead
Observation. The materials examined did not identify caseload as a basis for allocating general operating or overhead costs in any of the six comparative counties. Those methodologies use assigned staffing or FTEs, defined service levels, separately identified support costs, or predetermined overhead percentages.
SECTION 8 - COMPARATIVE ANALYSIS
/ How Other California Counties Structure Contract Services 7 16% 18% 23% 24% 24% 26%
34%
117%
125% 128%
0 20
40 60
80 100
120
140
By county methodology
Los Angeles — station overhead built into the annual rate per position, plus 12.5% for the liability trust fund; countywide overhead does not appear to be allocated.
Orange — regional shared costs of 3% to 4% and, other
county overhead of 21% to 22%, for a total of 24% to 26%.
San Diego — overhead allocated on FTE at approximately
34% of direct costs; no countywide costs allocated.
San Bernardino — overhead of approximately 25% of direct personnel costs, plus roughly 2% county administrative cost.
San Mateo — separately identified operating and support costs of approximately 16% to 23% of direct policing costs.
Contra Costa — additional costs of approximately 24% of direct policing costs under a Sheriff-staffed municipal model.
SECTION 8 - OVERHEAD ALLOCATION METHODOLOGY
/ Overhead as a Percentage of Direct Cost
8 Direct patrol, traffic, and school-resource staffing costs remain unchanged. West Valley station, countywide, and department support costs — including Investigative and Records Services — are reallocated using each city's assigned FTE as a share of the 89 budgeted West Valley FTE. $11.8
$5.4
$2.8
$0.9 $0.8
$0.3 $0.2 $0.2
$8.7
$3.5
$1.8
$0.7 $0.7
$0.2 $0.2 $0.1
$0M
$2M
$4M
$6M
$8M
$10M
$12M
Station and
countywide
support
Investigative
Services
Records
Services
Personnel and
Training
IT Services SO
Administration
Fiscal Services Internal Affairs
Current proposal FTE-based allocation
$6.5M · 16.1%
Generally, more consistent with the benchmark contracts reviewed. The analysis illustrates how the amounts already assigned to West Valley would change; it does not establish the required allocation method or whether every cost in the proposal is allocable.
City Current FTE-
based Change % FTE
Cupertino $25.4 $21.0 $4.4 17.3% 33
Los Altos Hills $3.4 $2.9 $0.5 14.7% 5
Saratoga $11.6 $10.0 $1.6 13.8% 16
Three-city total $40.4 $33.9 $6.5 16.1% 54
SECTION 9 - COMPARATIVE FTE- BASED ALLOCATION
/ Reallocating the West Valley Costs on Assigned Staffing (FTE-Based) 9 What it supports
• Direct West Valley staffing and specifically
identified operational resources are
associated with the city contracts.
• Investigative, Records, fiscal, data-
management, and technology support are
not uniformly fixed; the County expects
some level of these activities to decrease.
• A specifically identified 17-position West
Valley dispatch unit is eliminated,
evidencing that dispatch capacity changes
with the contracts.
What it does not establish
• The precise amount of each broader
support pool attributable to the contract
cities.
• That all County Communications costs are
attributable to the contracts; the County
would continue to maintain dispatch for its
remaining responsibilities.
• That differences between Recommended
Budget amounts and contract-cost
calculations represent an error or an
additional reduction.
Reconciliation
• The contract proposal combines cost
centers, staffing, Countywide allocations,
and operating expenditures into support
categories.
• The Recommended Budget is organized by
budget action, position, department, and
expenditure category.
• Amounts in the two documents are not
directly interchangeable without a
component-level crosswalk of the
underlying cost populations.
Observation. To the extent the FY 2026-27 proposal allocates the standing or baseline costs of functions that continue after the contracts end, those components appear to represent costs the County would incur regardless and would not be allocable under section 51350. Because the Recommended Budget does not reconcile its reductions to each cost pool in the proposal, it is most useful as corroborating evidence of cost behavior rather than as a standalone calculation of the amount attributable to the cities.
SECTION 10 - RECOMMENDED BUDGET
/ What the No-Contract Scenario Budget Does and Does Not Establish 10 Allocation basis
A single 50/50 caseload and service-hour driver is
applied across functions with different cost
behavior, and no benchmark county reviewed uses
caseload for general operating or overhead costs.
Category classification
$10,667,109 of the West Valley cost is classified as
not allocable at the category level, concentrated in
Investigative Services, Records Services, and
countywide support.
Benchmark position
Removing the unallowed overhead cost of
$10,667,109, adjusted fully loaded cost to $571,340
per FTE, West Valley is comparable to the upper-
range benchmarks at a screening level but remains
10.5% to 50.8% above the jurisdictions presented.
Alternative allocation
Assigned FTE-based reallocation of the same West
Valley amounts reduces the three-city total by $6.5
million, or 16.1%, and aligns more closely with the
benchmark contracts.
County corroboration
The Recommended Budget identifies $23.6 million
of expenditure reductions and a net 71-position
decrease under a no-contract scenario, evidencing
contract-related cost behavior.
Reconciliation
A component-level reconciliation between the
Recommended Budget and each contract cost pool
is required to quantify the amounts attributable to
the contract cities.
SUMMARY OF OBSERVATIONS
/ Where the Analysis Leaves the Proposed FY 2026-27 Charges 11 Government Code section 51350
A county which provides services through its appropriate departments, boards, commissions, officers or employees, to any city pursuant to contract or as authorized by law, shall charge the city all those costs which are incurred in providing the services so contracted or authorized. A county shall not charge a city contracting for a particular service, either as a direct or an indirect overhead charge, any portion of those costs which are attributable to services made available to all portions of the county, as determined by resolution of the board of supervisors, or which are general overhead costs of operation of the county government. General overhead costs, for the purpose of this section, are those costs which a county would incur regardless of whether or not it provided a service under contract to a city.
Any determination of general overhead costs shall be subject to court review as to the reasonableness of such determination.
SUMMARY OF OBSERVATIONS
/ Matters Requiring County Action – Not Allocable OH Costs 12 The burden of proof rests with the County. These cost components were not eliminated in the Recommended Budget and therefore, represent costs the County would incur regardless and would not be allocable under section 51350.
County Action Required:
To support its position, the County must provide persuasive and substantiated evidence that the $10.667 million in costs identified as not allocable are not general costs of County operations and would be avoided if the contracts with the three cities were discontinued.
SUMMARY OF OBSERVATIONS
/ Matters Requiring County Action – Not Allocable OH Costs 13 The burden of proof rests with the County. West Valley’s staffing allocation of 89 FTEs represents only approximately 5% of the combined staffing of the Sheriff’s Department and Department of Corrections (BUs 230, 235, and 240), which total 1,768 FTEs, and approximately 12% of BU230’s 720 FTEs. The 89 FTEs assigned to West Valley include three Law Enforcement Records Technicians; however, West Valley is also allocated an additional 34.4% share of countywide records services overhead costs based on caseload.
Similarly, of the 49 FTEs assigned to BU230’s Investigative Divisions, only 4 FTEs (8%) are dedicated to West Valley. Despitethis limited staffing assignment, West Valley is allocated 34.4% of countywide investigative costs under the caseload-based allocation methodology.
None of the benchmark counties reviewed use caseload to allocate general operating or overhead costs. While West Valley Station represents 34.40% of the Countywide caseload based on case counts, case volume alone does not measure the level of resources consumed. Case counts do not capture differences in case complexity, staff time or effort required to provide services.
The County has not provided data regarding the complexity of cases, staff hours incurred, or effort associated with the cases attributed to West Valley Station.
Without such information, caseload cannot be substantiated as a reasonable, equitable or cost-causative basis for allocating general operating or overhead costs.
County Action Required:
The County should provide data supporting the relative complexity of cases, staff hours expended, and level of effort associated with the cases attributed to West Valley Station to demonstrate that caseload is an appropriate allocation methodology.
This presentation was prepared for the City of Cupertino for the purposes described in the related report. Its distribution is limited to authorized representatives of Cupertino, Saratoga, Los Altos Hills, and the County of Santa Clara. Distribution to these parties does not create a professional duty or responsibility to any party other than the City of Cupertino. The presentation is not intended for use or reliance by any other party without Vasquez’s prior written consent.
SUMMARY OF OBSERVATIONS
/ Matters Requiring County Action – Use of Caseload