FINANCE DEPARTMENT
CITY HALL
10300 TORRE AVENUE • CUPERTINO, CA 95014-3255
TELEPHONE: (408) 777-3120
CUPERTINO.GOV
CITY COUNCIL STAFF REPORT
Meeting: September 15, 2026
Subject
Law Enforcement Services Agreement with the County of Santa Clara.
Recommended Action
Receive an update regarding the City's law enforcement services agreement with the County of Santa Clara, discuss the findings of the City's independent financial review, receive a proposed draft long-term agreement from the County of Santa Clara, and provide direction to staff as appropriate.
Background
For decades, the City of Cupertino, along with City of Saratoga and Town of Los Altos Hills have contracted with the County of Santa Clara for law enforcement services provided by the Santa Clara County Sheriff's Office. The last agreement expired on June 30, 2026. On December 31, 2025, the County provided proposed contract terms effective July 1, 2026, which contained a new cost methodology that dramatically increased the contract cost by approximately $7,500,000 annually, representing a 40% increase . Over the spring, the parties me t regularly to negotiate contract terms, resulting in an overall 34% rate increase.
Since the driver of these negotiations was the County’s new cost methodology, the parties agreed to a three- month contract extension through September 30, 2026, in order for a third-party financial firm to provide an independent review of the contract cost metho dology. The current three-month extension was executed with all terms set forth by the County, including the 3 4% rate increase. In July, the three Cities retained Vasquez & Company LLP (“Vasquez”) to conduct the independent financial review of the County's methodology and supporting financial information.
As discussed below, the final Vasquez report was completed in late August. With the contract termination date imminent, the City and County have continued discussions regarding the terms and costs of a successor agreement, the absen ce of which will impact public safety service levels in the City. In order for the parties to amicably continue their negotiations and preserve public safety, the City has requested that the County agree to another short -term extension and are awaiting the County’s response. The significant focus of the discussions remain the County's
proposed cost methodology and its conformance with Government Code Section 51350, which governs the costs counties may charge cities for contracted services.
Vasquez Financial Review
Vasquez worked closely with the cities and the County to assess the methodology and finalized its report on Wednesday, August 26, 2026. The final report (“Report”) has been provided to the County administration and Board of Supervisors. The City is currently awaiting the County's formal response.
Prior to finalization, the City provided the County with a draft of the report and an opportunity to review and comment. The County provided feedback on the draft, which Vasquez evaluated as part of its final review. Where appropriate, the County's comments were incorporated into the final report or otherwise addressed by Vasquez in a separate written response.
The Report evaluates the County's proposed FY 2026 -27 costs, including the allocation of direct and indirect costs, the methodologies used to distribute shared costs, comparisons with other California contract-service models, and the County's FY 2026-27 Recommended Budget scenario assuming discontinuation of the West Valley city contracts. Key observations from the review include:
- Changes in overhead costs and methodology. The County's FY 2026 -27 proposal increases overhead allocated to the West Valley Station by app roximately $6.0 million compared with the prior year and expands the overhead base to include additional countywide functions.
- Allocation methodology. The County applies caseload, either independently or in combination with service hours, across several co st categories. Vasquez found that case counts do not account for differences in case complexity, staff time, or level of effort and that the County had not provided information sufficient to substantiate caseload as a cost- causative basis for allocating general operating or overhead costs. For instance, there is a significant delta in the amount of investigation time, analysis and reporting from a burglary alarm incident vs a homicide.
- Costs identified as not allocable. At the category level, Vasquez classified approximately $10.7 million of the West Valley overhead and support costs reviewed as not allocable to the West Valley Cities, i.e. the County’s cost proposal sought to pass through to the contract cities $10.7 million of their overhead co sts that they would continue to incur without these contracts. The R eport notes, however, that several of these cost categories contain both contract -related and baseline activities and that further component-level information is necessary to determine the appropriate amount attributable to the contract cities. The City has reached out to the County to further this discussion. - Alternative allocation analysis. As an illustrative comparison, Vasquez reallocated the same West Valley costs using assigned staff ing rather than the County's proposed methodology. The FTE-based approach – the methodology that had been the basis for all prior contracts reduced the combined projected cost for Cupertino, Saratoga, and Los Altos Hills from approximately $40.4 million to $33.9 million, a reduction of approximately $6.5 million, or 16.1%. Vasquez notes that this analysis is illustrative and does not establish the required allocation methodology or whether every cost is allocable. - County's no-contract budget scenario. Vasquez also reviewed the County's FY 2026 -27 Recommended Budget, which identifies reductions in staffing and expenditures if the West Valley city contracts are discontinued. The review found that some costs would be reduced or eliminated, while other County costs would continue even without the city contracts. Vasquez noted that additional analysis is needed to reconcile these changes with the costs included in the County's contract proposal and determine which costs are attributable to the contract cities.
The Report is available on the City's Law Enforcement Contract Negotiations webpage and is
included as an attachment to this staff report. The report provides additional detail regarding the firm's analysis and observations.
Request for Ongoing Discussions
City staff has reached out to the County multiple times to continue discussions regarding the parties' respective interpretations and application of Government Code Section 51350 , the County's proposed costs , and the findings contained in the Vasquez report. The financial discussion is intended to work through the underlying cost categories in greater detail, including identifying costs directly attributable to providing services to contract cities and distinguishing those from costs the County would continue to incur in the absence of the contracts. The City is awaiting a response from the County.
September 30 Contract Expiration and Service Levels
The current law enforcement services agreement remains scheduled to expire on September 30, 2026. The County has indicated that, absent an executed successor agreement, law enforcement service levels within Cupertino would be significantly reduced . On multiple occasions, the City has requested another short extension to continue to negotiate, while continuing to pay the full costs that the County has proposed in order to not dis rupt law enforcement services to the residents of Cupertino or personnel within the West Valley Division.
City staff has also made multiple inquiries seeking additional information regarding the specific services and staffing that would be provided to Cupertino following expiration of the agreement, but no formal response from the County , providing a clear description of the service levels that would remain in place after September 30, has been provided.
Community Engagement
On September 9, 2026, the City hosted a Mayor's Chat focused on the Sheriff's contract. The event provided an informal setting to share information regarding the contract and ongoing negotiations and to engage with community members on the issue. Many of the questions centered on the need for additional time for contract negotiations to continue. S ince a further extension would be based on the County’s current disputed cost proposal, the County would not incur any financial loss.
Next Steps
Depending on Council direction, staff will continue working with the County on the long -term agreement.
Sustainability Impact
No sustainability impact.
Fiscal Impact
Fiscal impact is contingent upon direction by the Council.
City Work Program (CWP) Item/Description
None.
Council Goal:
Public Engagement & Transparency.
Fiscal Strategy.
Quality of Life.
TBD Item:
No.
California Environmental Quality Act
The proposed action does not constitute a “project” subject to CEQA. _____________________________________
Prepared by: Jonathan Orozco, Director of Finance
Reviewed by: Michael Woo, Senior Assistant City Attorney Floy Andrews, Interim City Attorney
Approved for Submission by: Tina Kapoor, City Manager
Attachments:
A - Draft County of Santa Clara Law Enforcement Services Contract B - County of Santa Clara Law Enforcement Services Three-Month Extension C - Vasquez Report - Sheriff Contract Cost Allowability and Compliance with Government Code § 51350
D - Vasquez Presentation – Sheriff Contract Cost Review