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Financial Report 06-30-2009CITY OF CUPERTINO, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30., 2009 PREPARF;D BY: CITY OF CUPERTINO ADMINISTRATIVE SERVICES DEPARTMENT ACCOUNTINCJ DIVISION Carol Atwood, David Woo, Jennifer Chang, Tina Mao, Yulia Rumalean, Dorothy Steenfott, Richard Wong INTROD UCTO~K Y SECTION CITY OF CUPERTIN~~, CALIFORNIA Comprehensive Annual Financial Report For the Year Endecl June 30, 2009 Table of Contents Page INTRODUCTORY SECTION Table of Contents . i Letter of Transmittal iv Organization Chart x Commissions and Committees xi City Council and Directory of City Officials . xii Certificate of Award for Excellence in Financial Re-porting . xiii FINANCIAL SECTION Independent Auditor's Report on Basic Financial Statements. 2 Management's Discussion and Analysis 4 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 24 Statement of Activities 25 Fund Financial Statements: Major Governmental Funds: Balance Sheet . 27 Reconciliation of the Governmental Funds -Balance Sheet with the Statement of Net Assets 28 Statement of Revenues, Expenditures, a;nd Changes in Fund Balance 29 Reconciliation of the Net Change in Furid Balances Total Governmental Funds with the Statement of Activities 30 Statement of Revenues, Expenditures, a:nd Changes in Fund Balances - Budget and Actual: General Fund 31 Major Proprietary Funds: Statement of Net Assets 33 Statement of Revenue, Expenses, and Changes in Fund Net Assets . 34 Statement of Cash Flows . 35 i CITY OF CUPERTINO, CALIFORNIA Comprehensive Annual Financial Report For the Year Endedl June 30, 2009 Table of Contents Page FINANCIAL SECTION (Continued) Fiduciary Funds: Statement of Fiduciary Net Assets 37 Notes to Basic Financial Statements 39 Supplemental Information: Major Governmental Funds Other Than the General Fund and Special Revenue Funds: Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual: Public Facilities Corporation Debt Service Fund . 67 Non-major Governmental Funds: Combining Balance Sheets 70 Combining Statements of Revenues, Expen~~itures, and Changes in Fund Balance . 72 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 74 Internal Service Funds: Combining Statement of Net Assets 79 Combining Statements of Revenues, Expen,~es and Changes in Net Assets . 80 Combining Statements of Cash Flows 81 Fiduciary Funds: Combining Statement of Changes in Assets and Liabilities -All Agency Funds 83 ii CITY OF CUPERTIN~O, CALIFORNIA Comprehensive Annual Financial Report For the Year Endecl June 30, 2009 Table of Contents Page STATISTICAL SECTION Financial Trends: Net Assets by Component Changes in Net Assets Fund Balances of Governmental Funds Changes in Fund Balance of Governmental Funds Revenue Capacity: Assessed and Estimated Actual Value of Taxable Property . Property Tax Rates, All Overlapping Governments . Principal Property Taxpayers . Property Tax Levies and Collections . Debt Capacity: Ratio of Outstanding Debt by Type Computation of Direct and Overlapping Debt Computation of Legal Bonded Debt Margin . Ratio of General Bonded Debt Outstanding . Demographic and Economic Information: Demographic and Economic Statistics Principal Employers Operating Information: Full-Time Equivalent City Government Emplo~~ees by Function Operating Indicators by Function/Program Capital Asset Statistics by Function/Program. COMMUNITY PROFILE 88 90 94 96 98 99 100 101 102 103 104 105 106 107 108 109 112 iii CITY OF CUPERTINO CUPERTINO November 19, 2009 CITY HALL 10300 TORRE AVENUE • CUPERTINO, CA 95014-3202 (408) 777-CITY • WWW.CUPERTINO.ORG To the Citizens of Cupertino, Honorable Mayor, Members of the City Council, and City Manager It is our pleasure to submit the Comprehensive Annual Financial Report (CAFR) for the City of Cupertino (the City) for the fiscal year ended June 30. 2009. The report is prepared in accordance with generally accepted accounting principles (GAAP) set try the Governmental Accounting Standards Board (GASB). The report presents City information on an entity-wide basis and on a more detailed fund level basis. The fund-level reports emphasize the City's major funds. A Management Discussion and Analysis (MD&A) presents a comparative analysis of current and prior year results, changes in financial position, a comparison of actual versus budget, financial highlights, trends, and disclosure of any known significant events or decisions that affect the financial condition of the City. This transmittal letter is designed to complement the MD&A, and should therefore be read in conjunction with it. The MD&A is required supplementary information and is found in the Financial Section of the CAFR. The accuracy of the data presented and the completeness and fairness of the presentations, including all disclosures, are the responsibility of the management of the City. To provide a reasonable basis for making these representations, management has establi;~hed 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 CAFR 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 de~~elopment, recreation, public works, public and environmental affairs, and general administration. This; financial report incorporates data for the City of Cupertino, the Cupertino Public Facilities Corporation end the Cupertino Redevelopment Agency. The City operates under aCouncil-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 the City affairs. The City Council also appoints the City Attorney and the City Treasurer. All other emplo}'ees are appointed by the City Manager. iv 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. Its residential population of 55,162 expands to 71,]94 when including the daytime workforce. Petaluma. U Vallejo San \ Ralael Mill Valley .Richmond V Oakland Sl~ •Alameda Francisco .San Leandro • Hayward San • Mateo. •Fremont 1'~n•iJir 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 residenti,~l neighborhoods, community parks and public facilities. The excellent reputation of Cupertino's schools has been a major attraction for families wishing to settle in close proximity to jobs in the Santa Clara Valley. The City recognizes the importance of quality school facilities and programs to all Cupertino residents, and works in partnershlip with the schools in many programs affecting education and youth. ~'""" Cupertino is the corporate headquarters of almost twenty • Mountain. Miipi:a: companies including Apple, Verigy, Durect, and ArcSight vew •Sunnyvale •san and houses sixty high-tech firms including key divisions of CUPERTINO ~-~~~ JO3e Hewlett-Packard. Other major employers include DeAnza College, one of the largest single-campus community colleges in the country, the Fremont Union High School District, and Cupertino Union School District. Apple has purchased over 60 acres for a major expansion north of Highway 280 along Pruneridge Avenue between Wolfe Road and Tantau Avenue. In 2009, 3.86 million square feet of office space existed with an average vacancy rate of 13%. The City's unemployment rate of 7.3% falls below the statewide rate of 11.2%. Retail space encompassed 3.6 million square feet in 2009, with 150 eating establishments. The 1.2 million square feet Cupertino Square Mall comprises most of the City's redevelopment project area and features two levels of enclosed shopping, three anchor :Mores, a new 16-screen AMC theatre, a new Strike Cupertino bowling center, and new International Food Court. In spite of the mall's additions and remodel and aside from the theatre being one of the top attended AMC cinemas regionally, the shopping center continues to underperform. Moreover, financing problems hit the mall owners, resulting in a bankruptcy filing in September 2008, a foreclosure in May 2009, ilnd eventual sale of the property in October 2009. Retail has a better outlook outside of the mall, with a Staples office supply store, Marukai Japanese Supermarket, and Target store, either recently opening or maintaining same store sales that were stronger than other regions. However a local Mervyn's closed when this national clothing retailer ceased operations and the City's largest company reported less sales tax. The recession did not hit the City as severely as some; other municipalities in the state as property and sales taxes, which comprise almost half of revenues, experienced year-to-year growth of 18% and 7%, respectively. Cupertino's low number of foreclosure:: and desirability of its school districts has kept assessed values up while 2007 parcel sales in the Cupertino Square project area boosted 2008-09 Redevelopment Agency property tax revenues. Howl;ver, fewer home sales in the higher end of the market began to affect the City during 2008-09 and along with appeals and re-assessments by the county, assessed value growth for the 2009-10 tax roll was ull only 2%. Much of the 2008-09 sales tax growth resulted from the state's sales tax payment to cities methodology which entails providing estimates of a year's receipts and then sending in a correction to actu~ll amounts in the subsequent year. v Estimates are based on recent history which means that changes in the economy have a lagging effect. The City projects that sales taxes in 2009-10 will frll off 13% from 2008-09 results as underlying weakness in retail, restaurants, and the leading business-to-business sector will emerge. The following chart shows sales tax receipts over the p~ist ten years. Sales Tax 'Crend $1+6.f)OU _.~ . ___ _.._. _. ___ 'l:l ~ .0~`.}q $1 Z,OC-t1 $ i (r,Ot1n SB.ttff~J ~~ ,t1 t10 ~a.t1t~0 $? .(lU0 $0 The 2006 voter referendum on two housing project approvals, the difficult housing market, tight credit and higher office vacancy rate continued to hurt the residential and commercial construction market in 2008-09. Development-related fees for the City were flat in 2008-09. Fee revenue growth will depend on major commercial or residential projects approved in rf;cent years, but yet to be built, such as the mixed- use Main Street Cupertino complex, the 24,455 sq. ft. retail expansion of Cupertino Village, the 10,582 sq. ft. retail building at Tantau Avenue and Stevens Creek Blvd., the 51,000 sq. ft. mixed-use building and 122-room hotel at the Oaks Shopping Center, the 19.8 acre One Results Way office campus redevelopment, and the 138-room hotel on North DeA.nza Boulevard. Foundation and podium work on the Rose Bowl mixed-use project began in mid-2009 but ultimate construction of the structures themselves is still pending. On the positive side, the third new retail building at the Marketplace was completed and construction is progressing on the 20-unit Las Palmas single-family development and 116- unit Villa Serra and Grove apartment expansion. As anticipated, California's 2009-10 budget borrows $1,419,000 of the City's General Funds in order to balance the state deficit. It will completely seize, without repayment, $63,000 in City Redevelopment Agency money in 2009-10 and $13,000 in 2010-11. Furthermore, the state is delaying, until April 2010, their release of five months worth of gasoline taxes to the city. They will also put off remitting gasoline sales taxes to Cupertino until May 2010. State payment of the $100,000 Citizens Option for Public Safety grant is precarious because funding for it come; from vehicle license fees. Low receipts of these fees due to falling auto sales forced late payments of tl-~e 2008-09 grant and there are early indications of similar problems in 2009-10. Legislation stipulates state repayment of the General fund property tax borrowing with 2% interest by June 30, 2013, but because of the state's forecast of large budget deficits through that time, re-payment cannot be a certainty, nor can a re-borrowing of the funds after repayment be ruled out. vi ?C1t?t1 }C)C)I ZC-t)? ?()t)3 2C1€r-1 _'C}#1~ .'OC-fi ?CtC-' ?t}(t~, ?{qty}) The City will use General Fund and equipment reserves to cover the General Fund shortfall until the money comes back. A Redevelopment Agency takeavr~ay in 2008-09 was reversed by the courts and a new lawsuit by the California Redevelopment Association was filed in October 2009 for the current hit. City voters passed a modern telecommunication utility user tax (UUT) ordinance on November 3, 2009 in order to preserve approximately $600,000 per ~/ear in ongoing UUT revenues from wireless communications. The City was collecting the tax under an outdated ordinance written in the days of traditional landline service. The revenues support general City services such as parks, streets, and public safety. The recession demonstrates the need for diversification of the City's revenue base and along-term balance of revenues and expenditures as described in the City's Fiscal Strategic Plan. The City needs to find other revenues to mitigate the fluctuating nature of sales taxes, hotel taxes, user fees, and state borrowings of local taxes in times of budget distress. It needs to reduce the concentration of sales taxes among its top companies and top economic sector, the volatile business-to-business area. Legislation raising the City's property tax share, the opening of a western region sales office of a major technology solution provider, and update of the UUT are successes of the strategic plan, but many other tax or fee initiatives in the plan have incurred opposition t~~ their implementation. The City's Economic Development department strives to generate revenues by recruiting and retaining retail, facilitating development, branding and outreaching to new busirn~ss, revising policies, coordinating with regional organizations, and promoting economic vitality. The City's unfunded retiree medical liability is a new disclosure in Note 10 to the Basic Financial Statements. The City must expense the annual installment to payoff this long-term liability. These financials, using a 2007 valuation, report a $21,982,000 unfunded liability with a $2,475,000 annual expense for 2008-09. Anew 2009 valuation recently available describes a $24,305,000 unfunded liability as of June 30, 2010 with an annual cost of $2,700,000, assuming the City continues to fund the benefits on apay-as-you-go basis. The City has been setting aside monies annually for this purpose since 2004 and will accumulate about $9,000,000 in a separate City fund by the end of 2009-10. The City plans to invest these assets in an irrevocable trust with higher yielding investments during 2009-10 in order to reduce the unfunded liability and annual cost. ECONOMIC IN:[TIATIVES The City has taken advantage of grant and economic :stimulus opportunities from the federal American Recovery and Reinvestment Act. So far in 2009-10 it has received $1,731,000 in various ARRA grants for streets, energy efficiency, housing improvements, and emergency preparedness purposes. The City amended its temporary sign ordinance to encourage will designed, pedestrian oriented signage. As part of its service delivery automation and streamlining initiative, it has reviewed the permitting process and continues to rollout electronic services with the goal of bringing City Hall closer to the customer with reduced costs. The long-term fiscal strategic plan promotes the streamlining and repositioning of the workforce as opportunities arise and the stabilizing avid repositioning of revenue sources with a heavy vehicle street impact fee and re-evaluation of park dedication fees. Decreasing expenditures and risk exposure with a requirement that developers maintain r~ew open space associated with their projects, that private and public capital projects be added only if ongoing maintenance is funded, and that block leaders, neighborhood watch programs, and certified emergency response teams be expanded are other strategic plan elements. vu 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 finan~~ial statements and maintaining accountability of assets. The concept of reasonable assurance recognize: 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 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. Cash Management The City maintains a cash and investment pool for all City funds. The City Treasurer invests the City's funds according to state code and the investment policy adopted by the City Council. The objectives of the policy, in order of priority, are safety, liquidity, and yield. The policy addresses soundness of financial institutions and the types of investments permitted by the California government code. The City's investments consists of U.S. Treasury and Federal agency obligations, the State Treasurer's Local Agency Investment Fund, money market funds consisting of Treasuries, Federal agency notes, and repurchase agreements, and FDIC insured certificates of deposit. Year-end cash and investments had market and book values of $58,227,000 and $58,158,000, respectively, with the balance down $5,709,000 from the previous year due to major capit~~l outlays in 2008-09. The average portfolio yield dropped to 0.74% at June 30, 2009 compared to 2.94% a year ago. Rates decreased as the Federal Reserve maintained low rates in order to combat the :recession and tight credit market. Because of the ongoing problems in financial markets, the City kept the portfolio mostly in conservative Treasury bonds and bills. See Note 2 to the Basic Financial Statements for more information. Risk Management Risk management issues factor substantially in the City's long term financial planning. Whether through risk pools or self-insurance programs, the City strives to maintain sufficient assets to pay expected losses, maintain funding stability to avoid substantial fluctuation in annual expense, and monitor risk management policies and claim administration to mitig~ite future losses. The City maintains a program of commercial insurance combined with self-insurance for substantially all of its governmental operations except for major construction projects and contractor-supplied services. In such circumstances, insurance to protect the City is f~rovided by each contractor. INDEPENDEI\~T 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 au~Jit committee. Maze and Associates Accountancy Corporation audited the City's Basic Financial Statements, and their opinion thereon is included in the Financial Section of this report. viii 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 CAFR for the year ended June 30, 2008. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized CAFR. 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 and we are submitting it to the GFOA to determine its eligibility for another certificate. Respectfully-submitted, l David Woo Finance Director ACKNOWLEDGMENTS I would like to express my appreciation to the City employees, City Manager, and the members of the City Council for their interest in conducting the financial operations of the City in a responsible manner. Special thanks go to the Finance staff -Tina Mao, Yulia Rumalean, and Richard Wong -for their continued support and dedication. Special recognition goes to Jennifer Chang, Dorothy Steenfott, and David Woo for their efforts in the preparation and production of this report. Reviewed by, ~~ Carol A. Atwood Director of Administrative Services i~s_ Citizens of Cupertino CITY O F City Council Citizen Adivisory Commissions and Committees CUPERTIN4 City Attorney City Manager City Treasurer Carol Korade David Knapp Carol Atwood Public & Environmental Affavs Director Rick Kitson Director of Director of Director of Director of Administrative Services Community Development Parks and Recreation Public Works Carol Atwood Aarti Shrivastava Mark Linder Ralph Qualls IT Manager City Clerk Building Official Recreation Supervisor Sr. Recreation Supervisor CityArchitect Assistant Director Mariyah Serraros Kimberly Smith Greg Cas[eel Sports Center Senior Center Teny Greene of Public Works -Eng. Don McCarthy Julia Lamy Glenn Goepfert Finance Director Human Resources City Planner Recreation Supervisor Recreation Supervisor Public Works Environmental David Woo Director Gary Chao Youth Programs Facilities/Community Events Project Manager Programs Manager Vacant Christine Hanel Tom Walters Carmen Lynaugh Cheri Donnelly Code Neighborhood Economic DevelopmenU Assistant Director Senior Civil Engineer Enforcement Watch RDA Manager of Public Works - Mai nt David Stillman Kelly Kline Roger Lee Emergency Preparedness Parks Facilities Streets Public Works Supervisor Supervisor Supervisor Supervisor John Bisely Chris Orr Diane Mahan Vacant CITY OF CUPERTII~TO, CALIFORNIA Fiscal Year 2008/09 COMMISSIONS ArID COMMITTEES AUDIT COMMITTEE PARKS & RECREATION COMMISSION Myoung Kang Mark Santoro Stanley Stemkoski Garrett Wade Gilbert Wong HOUSING COMMISSION Harvey Barnett Radha Kulkarni Nicole Maroko Frances Seward FINE ARTS COMMISSION KC Chandratreya John Fiegel Christina Hackworth Robert Harrison Jessi Kaur PUBLIC SAFETY COMMISSION Charles Caldwell Nina Daruwalla Craig Lee Daniel Nguyen Tamara Pow TEEN COMMISSION Utkarsh Bhagi Sruthi Damodar Ojas Goyal Esther Lim Laura Liu Nikhil Menon Sanjana Ramachandran Shailee Samar Anna Kathryn Sengupta Nirali Shah Stephanie Szeto TECHNOLOGY, INFORMATION & COMMUNICATIONS COMMISSION William Allen Peter Friedland Avinash Gadre Wallace Iimura Andrew Radle Jeanne Bradford David Greenstein David Lee Darcy Paul Debbie Stephens Stauffer LIBRARY COMMISSION Adrian Kolb Ronald Miller Katherine Stakey Ann Stevenson Susanna Tsai PLANNING COMMISSION Paul Brophy Lisa Giefer David Kaneda Winnie Lee Marty Miller BICYCLE PEDESTRIAN COMMISSION Mark Fantozzi Geoffrey Paulsen Alan Takahashi James Wiant ECONOMIC DEVELOPMENT Bob Adams Carol Atwood Mike Foulkes Shawna Holmes Kelly Kline David Knapp Orrin Mahoney Marty Miller Ralph Qualls Aarti Shrivastava Kris Wang xi CITY OF CUPERTINO, CALIFORNIA Fiscal Year 2008/09 CITY COUNCIL Orrin Mahoney Kris Wang Mayor Vice Mayor Dolly Sandoval Councilmember Mark Santoro Gilbert Wong Councilmember Councilmember DIRECTORY OF CITY OFFICIALS David W. Knapp -City Manager Carol Korade -City Attorney Carol Atwood -Director of Administrative Services Mark Linder -Director of Parks and Recreation Ralph Qualls -Director of Public Works Aarti Shrivastava -Director of Community Development xii Certificate of Achievement for Excellence in Financial Reporting Presented to City of Cupertino California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2008 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. PNLE OFpjC h `~~•'`OPlFI~' ~,p~ UN tF0 STATE u~ u~'I AYO ~' CANAOp President d~COAPOWITMIN `~ "v • ~$~il. ~s o~~_„ ~o CN~~aDD Executive Director xiii FINANCIAL SECTION MazE & ASSOCIATES ACCOUNTANCY CORPORATION 3478 Buskirk Ave. -Suite 215 Pleasant Hill, California 94523 INDEPENDENT AUDJ[TOR'S REPORT ON (925) 930-0902 • FAX (925) 930-0135 BASIC FINANCIAL STATEMENTS mazeCmazeassociates.com www. mazeassociates. com To the City Council City of Cupertino, California We have audited the basic fmancial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Cupertino as of and for the year ended June 30, 2009, which collectively comprise the City's basic financial statements as listed in the Table of Contents. These basic fmancial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these basic fmancial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States of America and generally accepted government audit standards issued by the Comptroller General of the United States of America. Those standards require th~rt we plan and perform the audit to obtain reasonable assurance as to whether the fmancial statements are free of material misstatement. An audit includes examining on a test basis evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall fmancial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the basic fmancial statements referred to above present fairly in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Cupertino at June 30, 2009 and the results of its operations and the cash flows of its proprietary fund types thereof and the respective budgetary comparisons listed as part of the basic financial statements for the y~:az then ended, in conformity with generally accepted accounting principles in the United States of America. As described in Note 10, the City implemented the provision of GASB Statement No. 45, Accounting and Financial Reporting by Employers of Post Employmen f Benefits other then Pensions. In accordance with Government Auditing Standards, we have also issued our report dated September 14, 2009 on our consideration of the City of Cupertino's internal control over fmancial reporting and on our tests of its compliance with certain provisions of laws, re;;ulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the ;cope 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 internal control over fmancial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standazds and should be considered in assessing the results of our audit. Management's Discussion and Analysis is required by the Government Accounting Standards Board, but is not part of the basic component unit financial statements. We have applied certain limited procedures to this information, principally inquir7es of manag~;ment regarding the methods of measurement and presentation of this information, but we did not audit this information and we express no opinion on it. 2 A Professional Corporation Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental section listed in the Table of Contents are presented for purposes of additional analysis and are not a required part of the basic financial statements of the City of Cupertino. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements, and in our opinion are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical section listed ni the Table of Contents were not audited by us, and we do not express an opinion on these information. ~~~ ~ ~~ September 14, 2009 3 MANAGEMENT'S DISCUSSION AND ANALYSIS This is the Administrative Services Department's report on the City of Cupertino's financial performance for the year. Please read it in conjunction with the accompanying Transmittal Letter and Basic Financial Statements. 2008-09 FINANCIAL HIGHLIGHTS • The City's total net assets increased $6,102,000 during 2008-09, ending the year at $152,378,000. • Total City revenues and expenses were $58,737,0+JO and $52,635,000, respectively, in 2008-09. • Governmental revenues were $51,756,000, up from $49,612,000 in 2007-08. • Governmental expenses were $46,807,000 in 2008-09, up from $41,1 ] 3,000 in the prior year. • Revenues from business-type activities were $6,930,000 in current year, down from $7,387,000 in the prior year. • Expenses of business-type activities were $5,82,000 in current year, down from $5,907,000 in the prior year. • General Fund revenues of $41,293,000 represented a decrease of $72,000 fi-om the prior year; General Fund expenditures increased from $31,010,000 to $32,276,000 in 2008-09. • The General Fund experienced expenditure budget savings of $3,712,000; however, revenues fell short of budget by $396,000. y • With revenues exceeding expenditures by $9,016,000 and net transfers out of $6,486,000, the General Fund balance rose $2,530,000 to end the year at $22,197,000. OVERVIEW OF THE FINANCIAL STATEMEN'CS The Basic Financial Statements comprise the City-wide Financial Statements and the Fund Financial Statements; these two sets of financial statements F~rovide two different views of the City's financial activities and position. The City-Wide Financial Statements provide a lon;-term view of the City's activities as a whole, and comprise the Statement of Net Assets and the Statement of Activities. These statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole. The accrual basis of accounting is similar to the accounting used by most private sector companies. The Statement of Net Assets provides information abo~~t the financial position of the City as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about all the City's revenues and all its expenses, a.so on the full accrual basis, with the emphasis on measuring net revenues or expenses for each of the City's programs. The Statement of Activities explains in detail the chance in Net Assets for the year. Over time, increases or decreases in net assets can be indicators of whether the financial condition of the City is improving or deteriorating. All of the City's activities are grouped into Governmental activities and Business-type activities, as explained below. The Statement of Net Assets 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 enforce,nent, community development, recreation, public information, 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 Redevelopment Agency, because the City is considered to be financially accountable for the Agency. The Cupertino Public Facilities Corporation, from which the City leases its major facilities through the payment of long-term debt, is also included as a component unit. 4 • Business-type activities-All the City's enterprises are reported here, including solid waste management and some of the City's recreationz.l operations. Unlike governmental services, these services are supported by charges paid by users bTrsed on the arnouut of the service they use. The Fund Financial Statements report the City's operations in more detail than the government-wide statements and focus primarily on the short-term activities of the City's General Fund and other major funds. The Fund Financial Statements measure only current revenues, expenditures, assets, and liabilities; 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 fiends. Cupertino's Fund Financial Statements include governmental, enterprise and internal service funds as discussed below. Each major fund is presented individually, with all non-major funds summarized and presented only in a single column. Subordinate schedules, which follow the Notes to Basic Financial Statements, present the detail of these non-major funds. Major funds present the significant activities of the City for the year, and ma~/ change from year to year as a result of changes in the pattern of City's activities and public interest. For example, the Capital Improvement Projects Fund may or may not appear as a major fund depending on the volume of construction activity in a certain }'ear. Governmental Fund Financial Statements are prepared on the modified accrual basis, which means they measure only current financial resources and uses. They present essentially the same functions reported as governmental activities in the government-wide financial statements. However, capital assets and other long-lived assets, along with long-term liabilities, are not presented in the Governmental Fuud Financial Statements. Reconciliations are provided to facilitate a comparison between governmental funds and governmental activities statements to allow a better understanding of the long-te.r•m impact of the government's near-term financial decisions. Enterprise attd Internal Service Fund financial statements are prepared on the full accrual basis and include all their assets and liabilities, current and long;-term. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements, and in more detail in the fund financial statements. Since the City's Internal Service Funds provide goods and services only to the City's governmental and business-type activities, their activities are reported o:~ly in total at the fund level. Internal Service Funds may not be major funds because their revenues ar-e derived from other City funds. These revenues are elinunated 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 assets of the Internal Service Fwids. For this City, internal service activities predominantly benefit governmental rather than business-type functions, and are therefore included within Governmental activities in the Government-wide financial statements. Comparisons of budget and actual financial information are required iTi the Basic Financial Statements only for the General Fund and other major funds that are Special Revenue Funds. Since none of the City's Special Revenue Funds are considered majo- funds, budgetary comparison schedules for these funds are included in this document as supplemental information only. Fiduciary Fund statements provide financial information about the activity of an assessment district. The City acts strictly as an agent for the district holding amounts collected from property owners, prior to transferring the money to the districts' bond trustees. The City's fiduciary activities are reported in the separate Statement of Fiduciary Net Assets and the Agency Funds Statement of Changes u~ Assets and Liabilities. These activities are excluded from the City's other financial statements because the City cannot use these assets to finance its own operations. The Notes to Basic Financial Statements provide additional detail that is essential to a full understanding of the information provided in the government-wide and fund financial statements. CITY-WIDE FINANCIAL ACTIVITIES This analysis focuses on the net assets and changes in net assets of the City's Governmental Activities (Tables 1, 2 and 3) and Business-Type Activities (Taf~les 4, 5 and 6) presented in the City-wide Statement of Net Assets and Statement of Activities that follow. Goverrrntental Activities Table 1 Governmental Net Assets at June 30 (in thousands) Governmental Activities 2009 2008 Cash and investments X48,363 $55,164 Other assets 6,446 9,478 Capital assets 150,312 133.559 Total assets 205,121 198,201 Long-term debt 46,970 48.385 Other liabilities 14.858 11.473 Total liabilities 61,828 59,858 Net assets: vlvested in capital assets, net of debt 103,342 85,174 Restricted 6,661 9,927 Unrestricted 33,290 43.242 Total net assets ~1_ 43,293 X138.343 The City's net assets from governmental activities increased $4,950,000 or 4% from the prior year. The Change in Governmental Net Assets, Table 2, shows the increase from a revenue and expense perspective. The change vas distributed among assets, liabilities, ar~d net asset categories as follows: • Capital assets increased by $16,753,000 as _wo major construction projects, the Mary Avenue Bicycle Footbridge and Stevens Creek Corridor Park, ~~~ere completed and t~~~o parcels at Sterling Boulevard and Barnhart Avenue were purchased for a future park. Further information on these transactions is provided in the Major Governr:~ental Funds section of this report. • $6,801,000 of net cash was disbursed to pay for the major capital outlays. • Other assets decreased $3,032,000 as the amount of outstanding grants due from the Santa Clara Valley Transportation Authority (VTA) for the Mary Avenue Bicycle Footbridge project decreased as the project winded down. • Principal payments on the 2002 certificates of participation reduced long-term debt by $1,415,000. • Capital assets net of related debt rose $18, l 68,000 due to the ~ 16,753,000 capital asset increase and $1,415,000 debt decrease. 6 • Restricted net assets fell by 53,?66,000 as Gasoline taxes and state bond monies ~~'ere expended on street repaving projects and development impact fees ~e~ere spent on helping anon-profit agency acquire a single family home for congregate senior housing. RemaininG net assets of 56,661,000 are restricted to future storm drain, street. housing, park acquisition, redevelopment, public access television. and debt service purposes. Unrestricted net assets are the part of net assets that can be used to finance day-to-day operations or designated for certain purposes by the City Council.. without constraints established by debt covenants or other legal requirements. 533?90,000 of unrestricted net assets existed at June 30, 2009, 59.952,000 lower than a}'ear ago. The change reflects the above descriptions of cash and grant receivables converted into capital assets. The unrestricted net asset balance is divided into: 515,015.000 in General Funds designated for economic continGencies, disasters, state raids, and utility user taxes, 58,889.000 for retiree health costs, equipment replacement, information technology projects, and insurance reserves. 54.857,000 in General Funds available to balance the five-fear operating and capital budget, 52.07,000 for open purchase orders, 51,223.000 for housing loans given out b~' the Cit}. and 5968,000 for capital funds committed but not yet encumbered. Sources of Re~~enue, Go~~ernmenta! Acti~'ities, 2008-09 Other Taxes ~mectment '`~~ Earnings Charges for ~~'~ Services Franchise Tax I 1 1 ~~ Operatins ~'~ Contributions & Utility User Tax r / Grants 6 r ~~ 4M1 8 ~7r Transient Occupanc}~ Tax ~ ~ Capital Grants ., ~`%~ ~. ~ Contributions "-'- ~4r,€ ~; 9 i~ Sales Tax. '~ ` / ~~" 27 %r ".`~ ~ !l. ~,. __ I'ri~perty Tax ~~~~ As the Sources of Revenue chart above shoe's, sales and property taxes, at 27 and 25 percent respectively, continue to be largest providers of Governmental revenue. The division of revenue sources remained mostly unchanged from the previous year. 7 Functional Expenses, Governmental Activities, 2008-09 Public \0'orks ;9~~ Administration Interest ~~~ ,~ r~ Lai\' xcement 19c~ Puhlic 5c Enviromnental Affair: 3 ~%~ Administrative Serrices 9 `ii 9 ~7c - The Functional Expenses chart above includes onl}~ current year expenses. ~~~hich are discussed in detail below. Percentages are consistent ~~ith last near. The chart does not include capital outlays or principal pa}~ments on debt. Capital outlays are instead shoe n as additions to capital assets and principal payments are reported as long-teen liabilit}~ reductions. The Statement of Activities presents program revenues, expenses, and general revenues. These are all elements of the Changes in Governmental Net assets summarized in the next table. 8 COtllmllnlll' Development ] ?~%~ Table 2 Change in Governmental Net Assets (in thou~~ands) Expenses Administration Law Enforcement Public and Environmental Affairs Administrative Services Recreation Services Community Development Public Works Iliterest on long-term debt Total expenses Revenues Program revenues: Charges for services Operating contributions and grants Capital grants and contributions Total program revenues Ge-Herat revenues: Taxes: Property tax Property tax in-lieu of motor vehich; fee Incremental property tax Sales tax Transient occupancy tax Utility user tax Franchise tax Other taxes h~tergovernmental, unrestricted: Motor vehicle license fee hwestment earnings Miscellaneous Total general revenues Total revenues Excess of revenues over expenses, before transfers Transfer-in of non-capital assets Transfer-in of capital assets Increase in net assets Governmental Activities 2008-09 2007-08 $1,770 $1,636 8,804 7,680 1,624 1,216 4,002 3,923 4,206 3,846 6,178 4,060 18,104 16,569 2,119 2.183 46.807 41,113 5,417 5,345 4,014 2,393 4,760 5,696 14.191 13.434 7,492 6,942 4,300 3,894 1,211 220 14,139 13,155 2,140 2,712 3,205 3,176 2,618 2,547 1,318 1,710 172 267 890 1,452 81 103 37,566 36,178 51,757 49.612 4,950 8,499 ---- 550 442 $4.4 Q $2,421 9 Revenues Table 2 shows that total governmental revenues rase $2,144,000 or 4% over last year, finishing at $51,756,000. The City's Redevelopment Agency began to realize growth in incremental property tax revenues as the sale of the Rose Bowl parcel and potential hotel site in Cupertino Square generated a property value reassessment that resulted in $991,000 of additional property taxes for the Agency's econonuc development and low and moderate income housing programs, more than five times higher than previously received annually. The term increme~ual refers to the tax allocation methodology for redevelopment agencies where upon most of the tax growth in a project area is directed toward eliminating blight in the project area and increasing affordable housing in the City. Grants and contributions, both operating and capita] related, rose a combined $685,000 or 8% over the previous year as $800,000 in federal Community Development Block Grant (CDBG) money was received and then awarded to Maitri h~corporated to finance its purchase of a transitional home for domestic violence victims. Maly Avenue Bicycle Footbridge grant revenue declines offset a part of this rise. The remaining $468,000 of the govennmental revenue expansion is from a mixed bag of moderate growth in General Fund property and sales taxes partially offset by declines in investment earnings, transient occupancy taxes, and propert}~ transfer taxes. The rf;cession had an immediate affect on the last three areas while the first two areas will be impacted more in 2009-10. See the General Fund analysis later in this report for further explanation. Expenses City-wide governmental expenses, representing non--capitalized spending, climbed $5,694,000 or 14% over 2007-08. All areas, except for interest on the City's debt, incurred increases with Law Enforcement, Public and Environmental Affairs, Community Development, and Public Works bearing the bulk of the rise on an amount or percentage basis. The $1,828,000 initial recording of long-term retiree health cost liabilities is part of this increase, affecting all governmental activities. The county sheriff, under a Law Enforcement contract with the City, utilized 1,124,000 more dollars to deploy more investigative, enforcement and patrol services than in previous }ears to address school safety, home and auto burglaries, identity theft, and accident prevention concerns. Public and Environmental Affairs began citywide efforts to reduce greenhouse gas emissions through energy reduction and resource sustainabilit}' programs involving Cit}~ operations, residents and businesses. An environmental affairs coordinator ~~'as hired and was instrumental in getting the City a $526,000 Energy Efficiency and Conservation Block Grant for these initiatives from the federal stimulus package in August 2009. In addition, a portion of the $408,000 or 34% jump in expenses went toward the replacement of communication equipment. Despite Community Development's lower outlays for building pernvts, inspections, and planning reviews, reflecting the recession's effect on entitlement and construction applications, total expense for this activity rose $2, 118,000 or 52% because of $800,000 in CDBG grant disbursements for the Maitri domestic violence shelter plus S1,090,000 in City development impact fees awarded to Senior Housing Solutions to aid in their purchase of a group senior living residence. School field improvements and the passing through of a portion of the property tax growth to the county, schools, and special districts comprised the Redevelopment Agency's $186,000 in additional outlays this year. More street repair, design engineering, overpass and median work, building maintenance, and utility costs caused Public Works expenditures to go up $1,535,000 or 9% over the prior year. The City took advantage of federal grants, state bond money, and the sales tax on gasoline to address the street maintenance backlog. 10 Chmige in Net Assets City-wide governmental revenues in excess of expenditures fell to $4,950,000 compared to $8,499,000 of last year, due to revenues not keeping pace with risins; expenses. $500,000 in transfers, from the Resource Recovery enterprise to the General Fund, for reimbursement of past waste "cleanup costs stopped this year and one-time $442,000 and $50,000 transfers of Blacl:beny Farm and Senior Center business-type capital and non-capital assets, respectively to the General Fund occun-ed last year. After transfers, overall net assets of governmental activities increased $4,950,000, compared to $9,491,000 during 2007-08. The City's intense capital improvement program of the past few years, led by the Mary Avenue Bicycle Footbridge construction, Stevens Creek Corridor Park creation, and the Sterling/Ban~hart Park acquisition, funded by sales and property tax growth r.nd grants, has increased net assets significantly. Net Cost acrd Revenues Table 3 presents the net cost or revenue of the Cit}''s programs. Net cost is defined as total program cost less the revenues generated by those specific activities; it reflects the financial burden placed on the City's General taxpayers by each function. Net revenue represents activities that Qenerate revenues in excess of direct costs. General taxpayers are not supporting that function; instead the net revenue generated covers overhead provided by other City functions. Tab] e 3 Net Cost (Revenue) of Governmental Activities (in thousands) I~Tet Cost (Revenue) Of Activities 2008-09 2007-08 Administration $1,720 $1,581 Law Enforcement 7,871 6,690 Public and Environmental Affairs 1,624 1,216 Admnistrative Services 4,002 3,923 Recreation Services 3,405 2,976 Community Development 819 (87) Public Works 11;057 9,197 Interest on Long-term Debt 2.119 2.183 Total Governmental Activities ~32,6I7 $27.679 • Administration includes activities of the City Council, Commissions, City Manager and City Attorney. Net cost rose $139,000 due to tare ne«~ retiree health cost recognition and higher equipment depreciation. • The City's $1,181,000 net cost increase for Law Enforcement provided by the county sheriff lines up with their expense increase. The delayed $40,000 Citizens Option for Public Safety grant receipt also contributed to the net cost rise. • New green program initiatives and equipment costs caused the net cost of Public and Environmental Affairs to go up $408,000, matching their expense hike. • Administrative Services includes Finance, Human Resources, Information Technology, City Clerk, Code Enforcement and Emergency Frepar•edness. Net cost was steady behveen the two years. ll Some of the City's Recreation programs are reported as business-type activities for which fees are charged to fully recover the costs of the prop,-ams. However, many community events, programs and services are available to the public for fr~;e or at a reduced price. The costs of administering these general (governmental) activities are partially offset by fees for membership, classes, travel, rentals, and leases that amounted to $801,000 in 2008-09. Net cost of recreation rose from $2,976,000 to $3,405,000 due to retiree health costs, lower travel program revenues, and higher depreciation. • Community Development programs include the Planning, Building, Economic Development, and Housing divisions, and the Redevelopment Agency. The $1,090,000 award of accumulated development impact fees to Senior Housing Solutions to subsidize their acquisition of a senior citizen home largely caused the activity to go from an $87,000 net revenue position in 2007-08 to an $819,000 net cost result in 2008-09. Public Works expenses include transportation, engineering, storm drains, and the maintenance and improvement of the City's streets, parks, and facilities. Offsetting revenues include federal, state, and local grants, gasoline taxes, environmental fees, facility rental, damage restitutions, and storm drain fees totaling $7,047,000, leaving $11,057,000 as the 2008-09 net cost of public works. $890,000 in state bond money for pavement impro~~ement projects was received late last year, but not utilized until this year. $257,000 of federally funded pavement work was completed this year with grant reimbursements to come next year. VTA grant payments for the Mary Avenue Footbridge declined as the project ruched completion. All of these contributed to the $1,860,000 net cost jump. • Interest on loner term debt dropped slightly to $2,119,000. Busi~tess Type Activities Business-type activities in the City-wide Financial Statements include the City's 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 the costs of providing services and facilities to the Qeneral public on a continuing basis can be financed or recovered primarily through user fees. Business-type net assets totaled $9,085,000 at June 30, 2009, an increase of $1,152,000 from the prior year with $1,094,000 of the rise going into cash and investments. Overall revenues of $6,980,000 this year were $407,000 or 6% lower than last year. The City's Resource Recovery solid waste disposal franchise had a $154,000 or 7~Io decline in solid waste pickup and debris box revenues from the previous year. Blackberry Farm golf course fees were down $44,000 or 7%. Recreation's cultural events, youth and teen programs, sports, dance and fitness classes brought in $129,000 or 5% less than last year, but this was offsfa by $127,000 more from Sports Center tennis and membership. Half of the total decline originates outside of operations as interest income on the surplus cash of all the enterprises fe1155% or $207,000. Expenses for all business-type activities were $79,000 or l~Ic below last year. Revenues over expenses, before transfers, was $1,152,000 in 2008-09, off of the $1,480.000 outcome in 2007-08, reflecting the tighter operating margins of the golf course, recreational, and solid waste enterprises. Last year's transfers of solid waste, Blackberry Farm picnic area, and Sealior Center assets to the General Fund were one-time or temporary events that were discontinued this year. The major proprietary funds section of this report provides more information on business-type results. 12 Table 4 Business-Type Net Assets at June 30 (in thousands) Cash and investments Other current assets Capital assets Total assets Current liabilities Total liabilities Net assets: 1;rvested in capital assets Unrestricted Total net assets Business-Tvoe Activities 2009 2008 $9,749 $8,655 353 343 136 84 10.238 9,082 1,153 1,149 1.153 1,149 136 8.949 $9.085 84 7, 849 $7.933 Table 5 Change in Busines~~-Type l~'et Assets (in thousands) E?~penses Resource Recovery BlackbeiTy Farm Sports Center Recreation Programs Total expenses Revenues Program revenues: Charges for services Operating contributions and grants Total program revenues General revenues: Investment income Total revenues Excess of revenues over expenses, before transfers Transfer-out of non-capital assets Transfer-out of capital assets Change in net assets Business-Type Activities 2008-09 2.007-08 X1,998 52,056 496 450 1,594 1,548 1,740 1,853 5.828 5.907 6,794 6.994 14 14 6.808 7,008 172 379 6.980 7.387 1,152 1,480 ---- 4( 42? 1.152 $_48$ l .. By excluding $172,000 in interest income from the excess of revenues over expenses, overall net revenue of business-type activities was $980,000 for 2008-09. Recreation's cultural events, youth and teen programs, sports, dance and fitness classes comprise r--ost of this margin continuing the trend of last year. Many of the Recreation Programs are taught by contract instructors, with the instructors getting a portion of the enrollment fee. Table 6 Net Cost (Revenue) of Business-Type Acti~~ities (in thou:~ands) Net Cost (Revenue) Of Activities 2008-09 2D07-08 Resource Recovery $(117) $(213) Blackberry Farm (101) (191) Cupertino Sports Center (138) (58) Recreation Programs (624) (640) Total Business-type Acti~~ities $12$.41 $8.102) MAJOR GOVERNI\TENTAL FUNDS General Fund Revenares General Fund revenues of $41,293,000 ended up $34+6,000 or 1% below the final budget and $375,000 below the original budget for the year ended June 30, 2009. This was $72,000 or less than 1% under last year. Although essentially unchanged in total, offsetting trends comprised the stable picture. Severe downturns in transient occupancy taxes, property transfer taxes, interest earnings, vehicle license fees, and grant revenues were offset by increases in property and sales taxes. The recession affected some of these areas immediately while some will be affected later because of the tax calculation and remitting process. Also the local real estate market and mix of l:usinesses in the City has spared it from some of the economic fallout hitting other state municipalities. TahIe 7 displays year-to-year variations, while Table 8 shows budget versus actual differences. Property taxes ended the year at 511,743,000, rising !~% or $954,000 over last year and 6% or $663,000 higher over the original and final budget. This reflects sustained tax roll growth in 2008 because of the City's lo~v foreclosure rates and continued demand for housing because of the popular local school district. However, the county reported much lower assessed valuation growth for 2009 (about 2%) because of fewer home resales and because of propert,~ value appeals and re-assessments required by state law whenever general market values are in a decline. Therefore, the City expects 2009-JO property tax growth to be much lower than what it has recently been. This category includes property taxes received to replace motor vehicle license fees lost due to the state~.~-ide fee reduction in 2005. Sales taxes increased $985,000 or 7% higher than last year to finish up at $14,139,000. It was $249,000 or 2% above the original budget and $749,000 or 6% beaer than the final budget. The results, though, mask the underlying trend in actual receipts. In California, three-quarters of the local portion of sales taxes are re+nitted dil-ectly to the local jurisdictions, while one-quarter is diverted to pay state bonds issued to finance the state's budget deficit. The one-quarter po;-tion is replaced by property taxes that normally go to the schools. The state estimates the one-quarter portion at the beginning of the fiscal year and remits that to the cities in rivo installments during the year. The state then reconciles the estimate «-ith the actual 14 sales tax receipts for that year and trues up the difference as an adjustment the following fiscal year. The estimates and prior-year true-up received in 2008-09 ,vas $966,000 over actual receipts and 64% over last year. This will impact the City as a negative adjustment in 2009-10. Actual sales tax collections, however, were down 14% from last year. The City's leading tax provider and a bellwether for sales tax results, showed year-to-year double digit percentage declines every quarter, as computer and MP3 music device sales from their local sales office fell. After the City saw declines in the first two quarters, it lowered its sales tax budget by $500,000. The four hotels in the City remitted $2,140,000 in transient occupancy taxes this year, a large drop of 21% or $571,000 off of last year and 20% or $520,000 under the original and final budget. The recession had an immediate and hard effect on the City coffers in this area as tax receipts started falling in November 2008 when the hotels, which all cater to business, experienced the cutback incorporate travel. The City's 2.4% utility user tax on telephone, gas, and electric services was mostly unchanged from last year. This $3,205,000 in revenues was $9,000 or 3 i, under the original and final budget. On November 3, 2009, voters passed an update of the local tax ordinance to ensure that this tax can continue to be collected on contemporary telecom systems. The Ci:y has kept $1,600,000 of these revenues in General Fund reserves until the protection of these revenues can be assured. Franchise taxes from electric, gas, water, solid waste, and cable utilities rose 3% or $71,000 from last year. The $2,618,000 received was in-line with this year's original and final budget. Other taxes include business license, construction, and property transfer taxes. The county assesses the transfer tax, at $1.10 per $1,000 in sales price, upon recording the ownership change, and gives the City one-half of the tax. The decline in housing transactions and lower sale prices caused these receipts to fall by 60% or $396,000 off of 2007-08 figures and 56~'/c or $335,000 off of the original and final budget. Business license and construction taxes were comparable to last year, although only 19% of budgeted construction taxes were realized this year, as difficulties in commercial financing delayed anticipated building projects. Licenses and permits were steady at $2,740,000 for 2008-09. However, they were 8% or $240,000 below the final budget and 10% or 5440,000 below the original budget. The slump in residential construction continued, while expected ne«~ conunercial projects did not come to fruition. Tenant improvements and permits on existing projects kept revenues in-line with the previous year. The original budget was reduced to meet the Lowered expectations. Zoning, planning, and emgineeting review fees comprise two-thirds of the charges for services category, with senior recreational programs encompassing the rest. The category declined from $1,363,000 last year to $1,266,000 this year, a 7% drop. It finished $202,000 or 14% below the final and original budget. Review fees were relatively flat. Senior Center earnings fell $93,000 off of last year's pace and 5194,000 off of budget, as the weak economy effected travel program bookings and trip deposits were ~~-ritten off. Intergovernmental revenues of 5421,000 fell 36% or $238,000 from last year and were short of the final budget by 15% or $73,000. However, it exceeded the original budget by 10%. Due to weakness in car sales, state vehicle license fees allocated to the City ~-,sere down by $95,000 from last year. Silce the state also started using a separate portion of these fees to pay for Citizens Option for Public Safety (COPS) grants, the lower collection of fees caused a funding shortfall for the COPS, which left the City with $40,000 owed in these grant dollars. The City did nut receive these monies until October 2009, after the accrual period for 2008-09 had passed. 2007-08 also had $76,000 in one-time recognition of earlier year COPS grants. The $100,000 total COPS funding was not original)}~ budgeted because of the state's fiscal problems, but after the state restored the grant and established this funding mechanism, the City added it to the budget. General Fund cash is part of the City's pooled investment portfolio. hivestment returns of the pool are allocated to the Fund based on the Fund's monthly •.ash balance. These returns plus the renting of City 1S facilities comprise use of money and property revenues, which declined 42% from last year, finishing at $1,163,000 compared to $2,016,000 last year, including unrealized gains from increases in market value on the fixed rate securities in the portfolio. Current results were 8% and 14% under the final and original budgets, respectively. Lower cash balances because of large outlays on the Mary Avenue Footbridge and Stevens Creek Corridor Park capital projects and the portfolio's heavy concentration in safe short-term Treasuries kept yields down. A further explanation of the investment picture for the year is in the transmittal letter and in Note 2 of the Basic Financial Statements. Rent income was stable and on budget. Fines and forfeitures year-to-year were relatively unchanged and within budget. Transfers into the General Fund dropped 52% from $1,300,000 last year to $624,000 this year. The fund no longer received $500,000 from the Resources 1<recovery enterprise fund for waste cleanup costs. Additionally, there were fewer surplus dollars returnzd to the Fund from project savings in the Capital Project Improvement Fund. The budget for transfers rose from $70,000 to $624,OOO~as decisions on capital project savings were made. Tabl~z 7 Revenue Changes General Fund, Fisca12009 vs. 2008 (in thousands) hlcrease/( Decrease) Fiscal ='009 From Fisca12008 Revenue by Source Amount % of Total Amount Percent Property Taxes $11,743 28% $954 9% Sales Taxes 14, 139 34 985 7 Transient Occupancy Taxes 2,140 5 (571) (21) Utility User Taxes 3,2.05 8 29 1 Franchise Taxes 2,618 6 71 3 Other Taxes 1,018 3 (469) (32) Use of Money & Property 1,163 3 (852) (42) fi~tergovernmental 421 1 (238) (36) Licenses and Pernuts 2,740 7 84 3 Charges for Services 1,266 3 (98) (7) Fines and Forfeitures 761 2 39 ~ Other Revenue 79 - (6) (7) Total Revenues $4 2 ~% $~ ---%n Transfers Ili S 624 100% S: (676) ~52~% Tabl~z 8 Revenue Budget and Actual Comparisons General Fund, 2008-09 (in thousands) Budgeted Amounts Actual Over/ Original Final (Under) Final Property Taxes $10,:65 $11,080 $1 I ,743 $663 Sales Taxes 13,x;90 13.390 14,139 749 Transient Oceupanc}~ Taxes 2,660 2,660 2,140 (520) Utility User Taxes 3,=~00 3,300 3,205 (95) Franchise Taxes 2,630 2,630 2.618 (12) Other Taxes 1,`00 1,00 1,018 (482) 16 Use of Money and Property 1,~~70 1,267 1,163 (104) Intergovernmental .385 494 421 (73) Licenses and Pernuts 3,180 2,980 2,740 (240) Charges for Services 1,~I68 1,468 1,266 (202) Fines and Forfeitures 820 820 761 (59) Other Revenue 100 100 79 (21) Total Revenues ~~ 4 6 $41.293 Transfers In E.a~enditures ;D70 5624 624 5---- Fiscal 2008-09 overall expenditures, at $32,276,000, were $1,266,000 or 4% higher than last year's total of $31,010,000. However, this result came in 10% o- $3,712,000 under the final budget and 53,101,000 below the original budget. Year-to-year and budget versus actual results by General Fund department are described below and in Tables 9 and 10. Administration expenses of $1,337,000 were consistent with last year while finishing $146,000 or 10% under final budget. $112,000 in budget reductions reflected savings from an existing assistant city attorney vacancy. Law Enforcement sheriff contract costs of $8,133,000 were under the final budget by $348,000 or 4%. The budget contains dollars for unexpected events or : ncidences, so by the end of the year, the normal rate of general law enforcement, service requests, emergency calls, patrol, and investigations usually brings budget savings. Funds for improving school traffic safety was carried over from the previous year and inserted intoythe amended budget. The results exceeded past year expenditures by 9% or $677,000, because of increased sheriff deployment and detective investigations. Public and Environmental Affairs expenditures increased 27% to $1,486,000 this year, in-line with its final and original budget. The department, formerly called Public h~formation, added a new full-time position and division to coordinate city-wide ener;y sustainability and carbon reduction initiatives. Replacement funding for the City's commwlication equipment also was increased. Administrative Services decreased 4% from last year and finished 15% or $620,000 under final budget. This was an off-year for biennial City Council elections. A human resource director vacancy and lower- than-expected insurance claim payouts caused most of the budget surplus. The final budget was 5144,000 over the original budget due to appropriations from the previous year caiz-ied over to the current year for possible insurance and litigation. Recreation expenditures varied little from last year, but ended up $608,000 or 14% below final budget, which was similar to original budget. Because of the lower number of trips sold in the senior travel program, the cost of the trips sold were accordingly down and below budgetary expectations. In addition, start-up costs for the new Stevens Creek Corridor Park were belo~~~ budget as staffing ramped-up later than expected and some savings were realized for ne~~~ equipment. Community Development costs of $3,209,000 were nearly $1 nullion or 24% below the final and original budget due to a lower amount of building activity and associated reduction in plan checking, inspections, and development approvals. Costs dipped 6% or $209,000 from last year as the hiring of a plan check engineer allowed the department to reduce spending on contract plan checking services. Public Works expenditures of $10,688,000 were $614,000 or 6% over the prior year due to more design engineering, overpass and median work, building m~.intenance, and utility costs, matching the expected budgetary increase. It was $964,000 or 8% under final budget due to pending school traffic safety work, 17 and unneeded engineering, traffic study, and maintenance contingencies. Carried-over open purchase orders from last year comprised the $363,000 increase from original to final budget. Transfers out of the General Fund tumbled from $18,335,000 in 2007-08 to $7,110,000 in 2008-09, as finally budgeted, with $3,537,000 for ongoing debt service, $1,946,000 for retiree health obligations, $750,000 for road maintenance, $400,000 for accnied leave payouts, $377,000 for new information technology and equipment, and $100,000 for infrastructure resen~es. The falloff was due to no new General Fund commitments to capital projects in 2008-09, as there were plenty of existing projects that were scheduled for completion or progress. $10,000 was added to the budget at mid-year for information technology improvements. Table 9 Expenditure Changes from Prior Year General Furid, 2008-09 (in thousands) Service Area Increase/(Decrease) from previous year Amount % of Total Amount Percent Administration $ 1,337 4% $ (14) (1)% Law Enforcement 8,133 25 677 9 Public & Environmental Affairs 1.486 5 317 27 Administrative Services 3,634 11 (163) (4) Recreation Services 3.789 12 44 1 Community Development 3,209 10 (209) (6) Public Works 10.688 33 614 6 Total Expenditures 532.276 100% 51.2b6 4% Transfers Out 57.110 100% $ 1( 1.2251 (61 Tabh~ 10 Expenditure Budget and Actual Comparison General Furid, 2008-09 (in thousands) Budgeted Amounts Actual Under Original Final Final Administration $1,595 $1,483 $1,337 $146 Law Enforcement 8,:315 8,481 8,133 348 Public & Environmental Affairs 1,191 1,613 1,486 27 Adnnistrative Services 4,110 4,254 3,634 620 Recreation Services 4,:386 4,397 3,789 608 Community Development 4,191 4,208 3,209 999 Public Works 11.:289 11,652 10,688 964 Total Expenditures 535..377 35 988 32.276 53.712 Transfers Out X7,.100 $7,110 57,110 5=-- 18 Fund Balance At June 30, 2009, the General Fund reported a total ending fund balance of $22,197,000, up 13% or $2,530,000 from the prior year. The City designares $13,415,000 of this for economic uncertainty, disaster contingencies, and state budget raids of local tax revenues. $1,600,000 is set-aside pending the outcome of a November 3, 2009 utility tax ballot measure. That measure, which ensures the conti~lued collection of the telecommunications portion of this tax, eventually passed. $1,102,000 is reserved mostly for open purchase orders and future public access programming. $1,223,000 is earmarked as rehabilitation and employee housing loans due back to the City. Finally, $4,857,000 in unreserved, undesib gated funds is available to balance the five-}year operating and capital budget. The fund balance rise resulted from revenues exceeding expenditures by $9,016,000 offset by a net transfer out of $6,486,000. The City re-classed a $1,731,000 one-time revenue designation to address changing conditions, establishing a $915,000 reserve: for state budget raids, adding $495,000 to utility user tax reserves, and infusing $321,000 to undesignated reserves. The unreserved, undesignated balance itself climbed $3,195,000, with the $2,530,000 current year surplus, $321,000 shift of one-time revenue reserves, and $263,000 Redevelopment Agency loan payback causing most of the change. The state's 2009-10 budget, adopted on July 28, 2009, mandated a $1,419,000 borrowing of Cit}~ funds for up to three years. State budget raid reserves and equipmf:nt replacement contingency funds will cover the shortfall until the state pays back the City. Public Facilities Corporation This fund accounts for the payments of principal and interest on the 2002 certificates of participation (COPS), which refinanced the loner term debt that funded many of the City's major parks and facilities. As in the previous }year, General Fund transfers into the ft!nd cover the debt service payments of $3,534,000. Capital Improvement Projects All of the City's non-enterprise capital projects are in tlvs fund, except for the Mary Avenue Bicycle Footbridge and Stevens Creek Corridor Park, which are in their own funds. Outlays for park, facility, and traffic projects jumped from $752,000 in 2007-08 to $2,048,000 in 2008-09, as $1,508,000 to buy land for the future Sterling/Barnhart Park occurred in the current year. McClellan Ranch renovations, Civic Center fountain repairs, Library book return automation, Community Hall light>11~ upgrades, and traffic signal modifications were some of the other projects worked on this year. Many of these projects were funded in previous years by the General Fund. Reflecting the tight economic conditions, the General Fund financed no new projects this year compared to providing $3,191,000 the previous year. Moreover, $574,000 in project cost savings were transferred back to help balance the General Fund budget in 2008- 09. The General Fund, however, maintained its commitment of contributing at least $100,000 annually to Capital Improvement Fund uncomnutted reserves, increasing that reserve to $1,599,000 by June 30, 2009, with $900,000 toward infrastructure and $699,000 toward other potential projects. Stevens Creek Corridor Park This $13,577,000 project to completely re-design the picnic grounds at Blackberry Farm, to re-align and restore the natural habitat of the creek, to renovate the swimming pool facilities, and to build the creek trail, completed construction and opened to the public on July 4, 2009. Outlays jumped to $9,472,000 compared to $1,357,000 the previous year, as a great deal of the park's construction occurred during the current year. The General Fund finances two-thirds of the project, with the City's recreation enterprise fund, State grants, and the Santa Clara Valley Vv ater District (SCVWD) backing the rest of the undertaking. SCVWD remitted $804,000 toward the project during the fiscal year, compared to none the prior }year. Since grants and the SCVWD are billed ar.d paid on acost-reimbursement basis, an $838,000 19 fund balance deficit developed by year-end, after an $8,718,000 net usage of capital. The deficit will be eliminated as the City claims and receives its authorized grant funding. Mary Avenue Bicycle Footbridge This fund accounts for the design and construction of a $14,800,000 pedestrian and bicycle bridge over Interstate 280 at the end of Mary Avenue. The General Fund backs $1,940,000 of the project, with the rest conung from the state general fund, grants and sales taxes provided by the Santa Clara Valley Transportation Authority (VTA), grants and general funds from the City of Sunnyvale, and gasoline taxes. Final plans and specifications were completed in September 2007; a contract was awarded in November 2007; construction started in early 2008; and the bridge opened in April 2009. Capital outlays for 2008-09 were $6,205,000 compared to $4,847,000 in 2007-08. Grants are received on a cost reimbursement basis, with the City General Fund fronting the expenditures. As of June 30, 2009, $838,000 of General Fund cash was advanced to the project for this purpose and is shown as a liability. Grants received up to sixty days after year-end ate accrued as fund revenues. $3,330,000 in grant revenues «~ere recognized for 2008-09 compared to $5,545,000 for 2007-08, reflecting the different timing in billing and processing by the City and grantors. As of June 30, 2009, $647,000 was billed and due as a receivable from VTA, with most of it deferred as revenue because it was not received in cash by August 30, 2009. A $956,000 fund balance deficit exists at year-e-nd because of the deferred revenue and because of other grants that need to be billed. MAJOR PROPRIETARY FUNDS Resources Recovery The City's solid waste disposal enterprise had a $154,000 or 7% decline in solid waste pickup and debris box revenues from the previous year due to declines in commercial services reflective of higher office vacancy rates. Operating costs were down $58,000 or 3olc from last year with lower contract service costs for pickup, landfill disposal, and recycling offset by higher personnel costs due to the filling of the environmental programs manager vacancy. Operating income declined 596,000 to $117,000 this year. With interest earnings of 5105,000, net assets increased by $222,000 ending the year at 55,690,000 in unrestricted net assets. ~ The increase reversed the de,c-ease of 530,000 last year, mostly due to the ending of transfers to the General Fund for waste cleanup costs. Blackberry Farm City employees, with a teaching professional on co~~tract, staff the City-owned Blackberry Farm golf course and pro shop. Golfing green fees were down, as the older demographics of golf course users led to declining customer counts. Salaries for the golf course staff and contract expenses for the golf pro did decline slightly from last year, but water irrigation costs went up significantly beginning in Jwle 2008 because of more accurate water meters employed b:r the utility company. Overall operating revenues dropped $44,000 to 5597,000 while expenses increased by 546,000 to $496,000 this year. Operating income and the increase in net assets was 5101,000, nearly half of the amount in 2007-08. At June 30, 2009, unrestricted net assets were 5418,000. Cupertino Sports Center Tennis lesson, membership, and fitness class revenues of $1,727,000 were up over last year by 8%, led by growth in the tennis program. With contract instructor, staff and maintenance costs flat, operating income more than doubled from $58,000 in 2007-08 to 513,000 in 2008-09. After adding-in interest earnings, the increase in net assets of $147,000 brought ending unrestricted net assets to 5311,000 b}~ year-end. 20 Recreation Programs Cultural events, youth and teen programs, sports, dance and fitness classes generated earnings of $2,364,000, which was $129,000 or S~Ic less than last year, for this enterprise operated out of the Quinlan Community Center, Monta Vista Recreation Center. McClellan Ranch, Creekside Park building, eight school sites, and various parks. Program expenses, including full-time administrative and programnung staff, part-time activity leaders, and class instructors on contract correspondingly declined $113,000 from 2007-08, maintaining ayear-to-year consistent operating income of $624,000. After adding interest earnings, the fund ended up with an increase in net assets of $674,000 and an unrestricted net asset balance of $2,530,000. $1 million of these reserves are committed toward Memorial Park softball and Library multi-purpose field renovations, tennis court resurfacinas, and Monta Vista Recreation Center roofing. CAPITAL ASSETS At June 30, 2009 the City had $150,448,000, net of depreciation, invested in a broad range of capital assets used in governmental and business-type activities, as shown in the following table and in Note ~ to the Basic Financial Statements: Table 11 Capital Assets, Net of Depreciation, at June 30 (in thousands) 2009 2008 Governmental Activities: Land $ 60,806 $ 59,298 Construction in progress --- 9,614 Buildings 26,787 28,063 Improvements other than buildings 17,606 6,608 Machinery and equipment 1,566 1,348 Roads, curbs, gutters, sidewalks, medians and bridges 35,273 19,539 Streetlights 46 41 Storm drain structures and mains 6,701 7,436 Traffic signals 1.527 1.612 Total Governmental Activities $1 " 2 $ 3l 3.559 Business-type Activities: Machinery and equipment 136 84 Total Business-type Activities $ ~ $ Total City $150.448 43 Capital assets increased by a net $16,805,000. Most of the gain came from the completion of two major projects, the construction of the Mary Avenue Bicycle Footbridge and the creation of the Stevens Creek Corridor Park out of the former Blackberry Farm picnic grounds. 21 DEBT ADMINISTRATION The City's only lonb term debt liability comes from :56,640,000 in Certificates of Participation (COPS) issued in 2002 by the Cupertino Public Facilities Corporation. The certificates refunded previously issued COPs that financed the Wilson Park, Blackberry Farris, and Creekside Park purchases, the Memorial Park expansion, the Quinlan Community Center construction, and the City Hall remodel. It provided capital for the new library opened in 2004. The serial, fixed interest rate debt ranging from 2% to 5% requires annual debt payments of $3,534,000 that are paid out of the General Fund. The June 30, 2009 outstanding principal of $46,970,000 is due to be paid off by 2030. At June 30, 2009, a total of 565,000 in special assessment district debt was outstanding. This debt is secured by a traffic impact fee, charged as a special assessment on the three commercial parce]s in the district. The City, which is not liable for the debt, acts solely as the district's agent for the collection and remittance of the assessment. More information can be found in Note 6 to the Basic Financial Statements. ECONOI\~C OUTLOOK AND MAJOR INITIAT[VES The impact of the economic environment and a description of the City's major initiatives for the coming year are discussed in detail in the accompanying Transmittal Letter. CONTACTING THE CITY'S FINANCIAL MANf~GEMENT This Comprehensive Annual Financial Report is intended to provide a general overview of the City's finances. Further information can be provided by the City of Cupertino Finance Department, 10300 Torre Avenue, Cupertino CA 95014, phone (408) 777-3220, or by the City «~ebsite at www.cupertino.org. 22 CITY OF CUI'ERTINO STATEMENT OF N)E;T ASSETS AND STATEMENT OF ACTIVITIES The Statement of Net Assets and the Statement of Activities summarize the entire City's financial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all the City's assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis-the effect of all the City's transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between City funds have been eliminated. The Statement of Net Assets reports the difference bf;tween the City's total assets and the City's total liabilities, including all the City's capital assets and all its long-term debt. The Statement of Net Assets presents similar information to the old balance sheet format, but presents it in a way that focuses the reader on the composition of the City's net assets, by subtractin; total liabilities from total assets. The Statement of Net Assets summarizes the financial position of all the City's Governmental Activities in a single column, and the financial position of all the City'; Business-Type Activities in a single column; these columns are followed by a Total column which presents the financial position of the entire City. The City's Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Funds. Since the City's Internal Service Funds service these Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund transactions and balances. The City's Business Type Activities include all its Enterprise Fund activities. The Statement of Activities reports increases and decreases in the City's net assets. It is also prepared on the full accrual basis, which means it includes all the City' ~ revenues and all its expenses, regardless of when cash changes hands. This differs from the "modified accrual" basis used in the Fund financial statements, which reflect only current assets, curt•ent liabilities, available revenues and measurable expenditures. The format of the Statement of Activities presents the C'ity's expenses first, listed by program, and follows these with the expenses of its business-type activities;. Program revenues, that is revenues which are generated directly by these programs, are then deducted from program expenses to arrive at the net expense of each governmental and business-type program. The City's general revenues are then listed in the Governmental Activities or Business-type Activities column, as appropriate, and the Change in Net Assets is computed and reconciled with the Statement of Net Assets. Both these Statements include the financial activities of the City, the Cupertino Redevelopment Agency, and the Cupertino Public Facilities Corporation, which are legally separate but are component units of the City because they are controlled by the City, which is financi~illy accountable for their activities. 2.• CITY OF CL PERTINO STATEMENT OF' NET ASSETS JUNE 30, 2009 ASSETS , Cash and investments (Note 2) Restricted cash and investments (Note 2) Receivables: Accounts Loans (Note 3) Prepaid expenses and other assets Land held for housing development (Note 1 fl Capital assets (Note 5): Non-depreciable Depreciable, net of accumulated depreciation Total Assets LIABILITIES Accounts payable and accruals Accrued payroll and benefits Deposits Unearned revenue Compensated absences (Note I h): Due in one year Due in more than one year Claims payable (Note 9): Due in one year Due in more than one year Net OPEB Obligation (Note ]0) Long-term debt (Note 6): Due in one year Due in more than one year Total Liabilities NET ASSETS (Note 7) Invested in capital assets, net of related debt Restricted for: Special revenue projects Affordable housing Public access television Debt service Total Restricted Net Assets Unrestricted Total Net Assets Governmental Business-Type Activities Activities Total $45,022,420 $9,749,184 $54,771,604 3,340,153 3,340,153 3,758,873 352,765 4,111,638 2,062,244 2,062,244 10,887 10,887 615,000 615,000 60,806,081 60,806,081 89,808,824 136,127 89,641,951 205,]21,482 10,238,076 215,359,558 7,110,390 452,609 7,562,999 437,344 37,203 474,547 1,484,816 1,484,816 31,338 627,582 658,920 153,419 35,413 188,832 2,246,069 2,246,069 411,000 411,000 1,157,000 1,157,000 1,827,077 1,827,077 1,460,000 I ,460,000 _ 45,510,000 45,510,000 _ 6t,828,453 1,152,807 62,981,260 _ 103,341,905 136,127 103,478,032 4,885,218 4,885,218 I , 122,037 1,122,03 7 597,878 597,878 _ 55,941 55,941 _ 6,661,074 6,661,074 33,290,050 8,949,142 42,239,192 $143,293,029 $9,085,269 $152,378,298 See accompanying notes to financial statements 2L. CITY OF CL PERTINO STATEMENT O]~ ACTIVITIES FOR THE YEAR ENDED Ji1NE 30, 2009 Net (Expense) Revenue and Program Revenues Changes in Net Assets Operating Capital Charges for Grants and Grants and Govemmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Govemmental Activities: Administration $1,769,500 $2,240 $47,462 ($1,719,798) ($1,719,798) Law enforcement 8,804,]95 869,295 64,135 (7,870,765) (7,870,765) Public information 1,624,210 (],624,210) (1,624,210) Administrative services 4,001,738 (4,001,738) (4,001,738) Recreation services 4,206,343 801,280 (3,405,063) (3,405,063) Community development 6,177,879 3,586,993 !,771,892 (818,994) (8]8,994) Public works 18,104,649 157,311 2,130,547 $4,759,485 (11,057,306) (11,057,306) Interest on long -term debt 2, 118,714 (2, i 18,714) (2, 118,714) Total Governmental Activities 46,807,228 5,417,119 4,011,036 4,759,485 (32,616,588) (32,616,588) Business-type Activities: Resource recovery 1,998,184 2,100,704 11,471 $116,991 116,991 Blackberry fame 495,845 596,944 101,099 101,099 Cupertino sports center 1,594,325 1,732,282 137,957 137,957 Recreation programs 1,739,892 2,364,037 624,145 624,145 Total Business-type Activities 5,828,246 6,793,967 11,471 980,192 980,192 Total $52,635,474 $12,211,086 $4,028,507 $4,759,485 (32,616,588) 980,192 (31,636,396) General revenues: Taxes: Property taxes Property tax in lieu of motor vehicle fee Incremental property tax Sales taxes Transient occupancy tax Utility user tax Franchise tax Other taxes intergovernmental, unrestricted; Motor vehicle license fee Investment earnings Miscellaneous Total general revenues and transfers Change in Net Assets 7,491,965 7,491,965 4,299,902 4,299,902 1,211,128 1,211,128 14, 139,190 14, ] 39,140 2,140,274 2,140,274 3,205,073 3,205,073 2,618,125 2,618,125 1,317,767 1,317,767 171,621 171,621 889,823 17(,804 1,061.627 81,342 81,342 37,566,210 171,804 37,738,014 4,949,622 1,151,996 6,101,6]8 Net Assets-Beginning Net Assets-Ending See accompanying notes tc financial statements 138,343,407 7,933,273 146,276,680 $143,293,029 $9,085,269 $152,378,298 25 FUND FINANCIAL STATEMENTS In the Fund Financial Statements only individual major funds are presented, while non-major funds are combined in a single column. Major funds are defined generally as having significant activities or balances in the current year. The funds described below were determined to be Major Funds by the City for fiscal 2009. Individual non-major funds may be found in the Supplemental section. GENERAL FUND The general fund is the general operating fund of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund. PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND This fund accounts for the payments of principal and interest on certificates of participation issued to provide for the financing of the Civic Center/Library, Wilson Park and Memorial Park and other City facilities. CAPITAL IMPROVEMENT PROJECT FUND This fund accounts for activities related to the acquisition or construction of major capital facilities. STEVENS CREEK CORRIDOR PARK CAPITAL PROJECT FUND This fund accounts for the development of the master plan and the design and construction of the Stevens Creek Corridor Park. MARY AVENUE BICYCLE FOOTBRIDGE CAPITAL PROJECT FUND This fund accounts for the design and construction of a bicycle footbridge extension of Mary Avenue over Interstate 280. It includes gateways, paths, residential buffering elements and landscaping. 26 CITY OF CUYERTINO GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2009 Public Capital Stevens Creek Mary Avenue Other Total Facilities Improvement Corridor Bicycle Governmental Governmental General _ Corporation Projects Park Footbridge Funds Funds ASSETS Cash and investments (Note 2) $22,615,824 $55,941 $4,602,066 $44,613 $4,631,883 $31 949 997 Cash and investments with fiscal agents (Note 2) 2,473,197 459,216 $407,740 , , 3 340 153 Receivables: , , Accounts 1,759,822 81,190 725,346 647,260 545,255 3,758 873 Loans (Note 3) 1,222,918 839,326 , 2 062 244 Prepaid items 7,003 , , 7 003 Due from other funds (Note 4) 837,629 , 837 629 Land held for housing development (Note 1 f) 615,000 , 615 000 Other assets 3,884 , 3,884 Total Assets $26,447,080 $2,529,138 $1,683,256 $1,229,175 $1,055,000 $6,631,134 $42,574,783 LIABILITIES Accounts payable and accruals $2,373,835 $2,473,197 $30,073 $1,341,954 $568,621 $131,051 $6 918 731 Accrued payroll and benefits 372,983 45,305 , , 418 288 Deposits 1,484,816 , 484 816 1 Due to other funds (Note 4) 837,629 , , 837 629 Unearned revenue 18,589 12,749 , 31 338 Deferred revenue 81,190 725,346 605,067 434,774 , 1,846,377 Total Liabilities 4,250,223 2,473,197 111,263 2,067,300 2,011,317 623,879 11,537,179 Fund balance (Note 7) Reserved for: Encumbrances 497,484 594,454 965,782 249,238 353,705 2 660 663 Debt service 55,941 , , 55 941 Advances to other funds , Prepaid items and other assets 7 003 Loans receivable , 1,222,918 839 326 7,003 2 062 244 Land held for housing development , 615 000 , , 615 000 Low and moderate income housing , , Public access television 597 878 507,037 507,037 Unreserved, reported in: , 597,878 General Fund 19,871,574 19 871 574 Special Revenue Funds . , Capital Project Funds 3,977,539 (1,803,907) (],205,555) 3,692,187 3,692,187 968,077 TOTAL FUND BALANCES 22,196,857 55,941 4 571,993 (838,125) (956,317) 6,007,255 31,037,604 Total Liabilities and Fund Balances $26,447,080 $2,529,138 $4.683,256_ $1,229,]75 $1,055,000 $6,631,134 $42,574,783 See accompanying notes to f nancial statements 27 CITY OF Ct; PERTINO Reconciliat: on of the GOVERNMENTAL FUNL>S -- BALANCE SHEET with the STATEMENT OF' NET ASSETS JlJNE 30, 2009 Total fund balances reported on the governmental funds balance shf~et Amounts reported for Governmental Activities in the Statement of Net Assets are different from those reported in the Governmental Funds above because of the following: CAPITAL ASSETS Capital assets used in Governmental Activities are not current assets or financial resources and therefore are not reported in the Governmental Funds. ALLOCATION OF INTERNAL SERVICE FUND NET ASSE']'S Internal service funds are not governmental funds. However, they are used by management to charge the costs of certain activities, such as insurance and central services and maintenance to individual governmental funds. The net current asses of the Internal Service Funds are therefore included in Governmental Activities in the following line items in the Statement of Net Assets. Cash and investments Capital assets, net of accumulated depreciation Accounts payable and accruals Accrued payroll and benefits Compensated absences Claims payable Net OPEB obligation ACCRUAL OFNON-CURRENT REVENUES AND EXPENSES Revenues which are deferred on the Fund Balance Sheets b~:cause they are not available currently are taken into revenue in the Statement of Activities. $31,03 7,604 149,176,788 13,072,423 1,135,117 (191,69) (I 9,056) (30,558) (1,568,000) (1,827,077) 1,846,377 LONG TERM ASSETS AND LIABILITIES The assets and liabilities below are not due and payable in tie current period and therefore are not reported in the Funds: Long-term debt (46,970,000) Non-current portion of compensated absences (2,368,930) NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes t~~ financial statements $143,293,029 2g CITY OF CUPERTINO GOVERNMEN'['AL FUNDS STATEA9ENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2009 Public Capital Stevens Creek Mary Avenue Other Total Facilities Improvement Corridor Bicycle Governmental Governmental General Corporation Projects Park Footbridge Funds Funds REVENUES Taxes $34,861,876 $I,S34,074 $36,395,950 Use of money and property 1,163,492 $940 136,076 1,300,508 Intergovernmental 421,238 $20,000 $803,768 $3,329,776 2,321,612 6,896,394 Licenses and permits 2,740,463 2,740,463 Charges for services 1,265,509 442,024 1,707,533 Fines and forfeitures 761,320 761,320 Other revenue 79,042 1,793 80,835 Total Revenues 41,292,940 940 21,793 803,768 3,329,776 4,433,786 49,883,003 EXPENDITURES Current; Administration I , 336,921 1,336,92 I La~v enforcement 8,133,168 8,133,168 Public information 1,486,443 1,486,443 Administrative services 3,634,043 ~ 3,634,043 Recreation services 3,789,260 3,789,260 Community development 3,209,030 2,632,398 5,841,428 Public works 10,687,626 1,226,958 11,914,584 Capital outlay 2,048,036 $9,471,586 6,204,560 4,538,187 22,262,369 Debt service Principal 1,415,000 1,415,000 Interest and fiscal chazges 2,118,714 2 118 714 Total Expenditures 32,276,491 3,533,714 2,)48,036 9,471,586 6,204,560 8,397,543 61,931,930 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 9,016,449 (3,532,774) (2;)26,243) (8,667,818) (2,874,784) (3,963,757) (12,048,927) OTHER FINANCING SOURCES (USES) Transfers in (Note 4) 623,925 3,537,000 ! 00,000 775,000 5,035,925 Transfers(out)(Note 4) (7,110,000) (:173,925) (50,000) (25,000) (7,758,925) Total Other Financing Sources (Uses) (6,486,075) 3,537,000 (173,925) (50,000) 750,000 (2,723,000) NE-TCHANGEINFUNDBALANCES 2,530,374 4,226 (2,500,168) (8,717,818) (2,874,784) (3,213,757) (14,771,927) BEG1NNiNGFUNDBALANCES 19,666,483 51,715 7,072,161 7,879,693 1,9]8,467 9,221,012 45,809,531 ENDING FUND BALANCES $22,196,857 $55,941 $4,571,993 ($838,125) ($956,317) $6,007,255 $31,037,604 See accompanying notes to financial statements 29 CITY OF CUPERTINO Reconciliation of the NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS with the STATEMENT OI' ACTIVITIES FOR THE YEAR EN)/~ED JUNE 30, 2009 The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and current liabilities on the modified accrual basis, with the Change in 1`Iet Assets of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis. NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS ($14,771,927) Amounts reported for governnental activities in the Statement of Activities are different because of the following: CAPITAL ASSETS TRANSACTIONS Governmental Funds report capital outlays as expenditure;. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense. The capital asset expenditures are therefore added back to fund balance (Net of internal service fund additions of $541,708): Capital outlay 22,262,369 Public Works 179,724 Depreciation expense is deducted from the fund bal<<nce (Depreciation expense is net of internal service fund depreciation of $370,568 which has already been allocated to serviced funds) (5,860,128) Retirement of capital assets, net of proceeds from sale (197) LONG TERM DEBT PROCEEDS AND PAYMENTS Repayment of bond principal is an expenditure in the governmental funds, but in the Statement of Net Assets the repayment reduces long-term liabilities. Repayment of debt principal is added back to fund balance 1,415,000 ACCRUAL OF NON-CURRENT ITEMS The amounts below included in the Statement of Activities do not provide or (require) the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change): Non-current portion of compensated absences (34,279) Deferred revenue 1,648,502 ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY Internal Service Funds are used by management to charge the costs of certain activities, such as equipment acquisition, maintenance, and insurance to individual funds. The portion of the net revenue (expense) of these Internal Service Funds arising out of their transactions with governmental funds is reported with governmental activities, because they service those activities. Change in Ne[ Assets -All Internal Service Funds 110,558 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $4,949,622 See accompanying notes tc financial statements 3 C~ CITY OF CUPERTINO GENERAI, FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN ]?UND BALANCE BUDGET ANI~ ACTUAL FOR THE YEAR ENDED JUNE 30, 2009 Variance with Budgeted Amounts Final Budget Positive Ori ing al Final Actual Amounts (Negative) Revenues: Taxes $34,245,000 $34,560,000 $34,861,876 $301,876 Use of money and property 1,470,000 1,267,000 1,163,492 (103,508) Intergovernmental 385,000 493,892 421,238 {72,654) Licenses and permits 3,180,000 2,980,000 2,740,463 (239,537) Charges for services 1,468,000 1,468,000 1,265,509 (202,441) Fines and forfeitures 820,000 820,000 761,320 (58,680) Other revenue 100,000 100,000 79,042 (20,458) Amounts available for appropriation 41,668,000 41,688,892 41,292,940 (395,952) Charges for appropriation (outflows) Administration 1595,000 ],483,395 1,336,921 146,474 Law enforcement 8.315,000 8,480,671 8, 133,168 347,503 Public information 1,491,000 1,512,745 1,486,443 26,352 Administrative services 4,110,000 4,254,006 3,634,043 6]9,963 Recreation services 4.386,000 4,397,447 3,789,260 608,187 Community development 4;191,000 4,207,724 3,209,030 998,694 Public works 11.289,000 1 ],652,062 10,687,626 964,436 Total charges for appropriations 35,377,000 35,988,100 32,276,491 3,711,609 EXCESS OF REVENUES OVER EXPENDITURES 6,291,000 5,700,792 9,016,449 3,315,657 OTHER FINANCING SOURCES (USES) Transfers in 70,000 623,925 623,925 Transfers (out) (7,100,000) (7,110,000) (7,110,000) Tota! other f nancing sources (uses) (7,030,000) (6,486,075) (6,486,075) NET CHANGE IN FUND BALANCE ($739,000) ($785,283) 2,530,374 $3,315,657 BEGINNING FUND BALANCE 19,666,483 ENDING FUND BALANCE $22,196,857 See accompanying notes to financial statements 31 MAJOR PROPRIETARY FUNDS Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges. The City has identified the funds below as major proprie~_ary funds for fiscal 2009. RESOURCES RECOVERY FUND This fund accounts for activity related to the collection ;md disposal of solid waste. A private company has been issued an exclusive franchise to perform these services. BLACKBERRY FARM FUND This fund accounts for activities related to operating the ;;olf course. CUPERTINO SPORTS CENTER FUND This fund accounts for the operation and maintenance of the Cupertino Sports Facility. RECREATION PROGRAMS FUND This fund accounts for activities of the City's communit} center. 32 CITY OF CU?ERTINO PROPRIETARY FUNDS STATEMENT OF NET ASSETS JUNE 30, 2009 Business-ryl~e Activities-Enterprise Funds Governmental Cupertino Activities- Resources Blackberry Sports Recreation Internal Service Recovery Farm Center Programs Totals Funds ASSETS Current Assets: Cash and investments (Note 2) $5,519,083 $468,858 $632,928 $3,128,315 $9,749,184 $13,072,423 Accounts receivable 338,099 14,666 352,765 Total current assets 5,857,182 468,858 632,928 3,142,981 10,101,949 13,072,423 Capital Assets (Note 5): Depreciable, net of accumulated depreciation 43,889 5,235 57,890 29,113 136,127 1,135,117 Total Assets 5,901,071 474,093 690,818 3,172,094 10,238,076 14,207,540 LIABILITIES Current Liabilities: Accounts payable and accruals 160,804 30,612 193,983 67,210 452,609 191,659 Accrued payroll and benefits 4,137 3,084 7,041 22,941 37,203 19,056 Compensated absences (Note Ih) 2,295 17,037 16,081 35,413 Claims payable (Note 9) 41 1,000 Unearned revenue 105,008 522,574 627,582 Total current liabilities 167,236 50,733 322,113 612,725 1,152,807 621,715 Non-current Liabilities: Compensated absences (Note th) 30,558 Claims payable (Note 9) 1,157,000 Net OPEB Obligation (Note 10) 1,827,077 Total Liabilities 167,236 50,733 322,113 612,725 1,152,807 3;636,350 NET ASSETS (Note 7) Invested in capital assets 43,889 5,235 57,890 29,113 136,127 1,135,117 Unrestricted 5,689,946 418,]25 310,815 2,530,256 8,949,142 9,436,073 Total Net Assets $5,733,835 $423,360 $368,705 $2,559,369 $9,085,269 $10,571,190 See accompanying notes to financial statements 33 CITY OF CUPERTINO PROPRIETAR`.l FUNDS STATEMENT OF REVENUE, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED JUNE 30, 2009 Busine:;s-ty pe Activities-Enter prise Funds Govemmenta) Cupertino Activities- Resources Blackberry Sports Recreation Internal Service Recovery Farm _ Center Programs Totals Funds OPERATING REVENUES Charges for services $2,100,704 $580,621 $1,727,054 $2,363,837 $6,772,216 $2,540,837 Other 14,471 ]6,323 5,228 200 36,222 Total Operating Revenues 2,115,175 596,944 1,732,282 2,364,037 6,808,438 2,540,837 OPERATING EXPENSES Salaries and benefits 115,048 123,978 310,319 457,528 1,006,873 3,686,275 Materials and supplies 29,739 45,506 180,129 148,806 454,180 606,120 Contractual services 1,849,414 273,276 1,092,951 1,130,911 4,346,552 336,566 Insurance and claims 379,095 Depreciation (Note 5) 3,983 3,085 10,926 2,647 20,641 370,568 Total Operating Expenses 1,498,]84 495,845 1,594,325 1,739,892 5,828,246 5,378,624 OperatingIncome(Loss) 116,991 101,099 137,957 624,145 980,192 (2,837,787) NONOPERATING REVENUES Interest income 105,144 8,038 8,862 49,760 171,804 225,345 TotalNonoperatingRevenues ]05,144 8,038 8,862 49,760 171,804 225,345 Income (Loss) Before Transfers 222,135 109,137 146,819 673,905 1,151,996 (2,612,442) Transfers in (Note 4) _ 2,723,000 Net transfers _ 2,723,000 Change in net assets 222,135 109,137 146,819 673,905 1,151,996 } 10,558 Net Assets-Beginning 5,511,700 314,223 221,886 1,885,464 7,933,273 10,460,632 Net Assets-Ending $5,733,835 $423,36) $368,705 $2,559,369 $9,085,269 $10,571,190 See accompanying notes to financial statements 34 CITY OF CUPL'RTMO PROPRIETARI' FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2009 Business-ty pe Activities-Enter prise Funds Governmental Cupertino Activities- Resources Black~erry Sports Recreation Internal Service Recovery Farm Center Programs Totals Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $2,112,598 $596,944 $1,660,054 $2,332,497 $6,702,093 $2,540,837 Cash payments to suppliers for goods and services (1,890,191) (358,697) (1,222,467) (1,258,944) (4,730,299) (1,763,773) Cash payments to employees (111,506) (120,037) (292,809) (452,577) (976,929) (1,279,211) Net cash provided (used) by operating activities 110,901 1 18,210 144,778 620,976 994,865 (502,147) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Medicare retiree drug subsidy 36,043 Transfers in 2,723,000 Cash Flows from Noncapital Financing Activities 2,759,043 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of capital assets (1) (40,881) (31,760) (72,642) (541,707) Cash Flows from Capital and Related Financing Activities (1) (40,881) (31,760) (72,642) (541,707) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 105,144 8,038 8,862 49,760 171,804 225,345 Cash Flows from Investing Activities 105,144 8,038 8,862 49,760 171,804 225,345 Net Cash Flows 216,044 125,248 112,759 638,976 1,094,027 1,940,534 Cash and investments at beginning of year 5,303,039 342,610 520,169 2,489,339 8,655,157 11,131,889 Cash and investments at end of yeaz $5,519,083 $4ti8,858 $632,928 $3,128,315 $9,749,184 $13,072,423 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $116,991 $101,099 $137,957 $624,145 $980,192 ($2,837,787) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 3,983 3,085 ]0,926 2,647 20,641 370,568 Change in assets and liabilities: Accounts receivable (2,577) (8,385) (10,962) Prepaid expense 1,110 1, t 10 15,919 Accounts payable and accmals (11,038) 10,085 50,613 19,663 69,323 119,012 Accrued payroll and benefits 1,756 466 1,429 4,951 8,602 864 Deposits (68,800) Deferred revenue (72,228) (23,155) (95,383) Claims payable 71,000 Net OPEB Obligation 1;827,077 Compensated absences 1,786 3,475 16,081 21,342 Net cash provided (used) by operating activities $110,901 $I 1.8,210 $144,778 $620,976 $994,865 ($502,147) See accompanying notes to financial statements 35 FIDUCIARY FUNDS Fiduciary Funds include all agency funds that account for assets held by the City as an agent for individuals, private organizations, other governmental units and/or other funds. Agency Funds are custodial in nature and do not involve measurement of results of operations. Such funds have no equity since any assets are due to individuals or other entities at some future time. Special district assessments held by the City, acting as yin agent for bond debt service payments, comprise Agency funds. The City is not liable for re-payment of the bonds. 36 CITY OF CUPI3RTINO FIDUCIARY 1?UNDS STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, :'009 ASSETS Agency Funds Cash and investments (Note 2) $ 115,322 Total Assets $115,322 LIABILITIES Deposits $115,322 Total Liabilities $ I 15,322 See accompanying notes to financial statements 37 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA]\fCIAL STATEMENTS For the Year Endecl June 30, 2009 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Reporting, Entity The City of Cupertino, California (the City) was incorporated on October 3, 1955, under the laws of the State of California. The City operates under aCouncil -City Manager form of government and provides services thl•ough the following departments: Administrative Services, Community 1;-evelopment, City Manager, Parks and Recreation, Public Information, and Public Work~;/Engineering. Fire services are provided by the Santa Clara County Fire District, and the City contracts with the Santa Clara County Sheriff's Department for police services, and with the Los Altos Garbage Company for garbage and recycling services. The accompanying basic financial statements include all funds and boards and commissions that are controlled by the City Council. The basic financial statements include the City's blended component units, entities for which the City is considered to be financially accountable. A blended component unit, although a legally separate entity, is in substance, part of the ~~ity's operations and so data from this unit is combined with the City. Blended component units - The Cupertino Public Facilities Corporation (the Corporation) was incorporated in A7ay 1986, under the Nonprofit Public Benefit Corporation Law of the State of C:~lifornia. The Corporation was organized as a nonprofit corporation for the purpose of assisting the City in the acquisition, construction, and financing of public improvements which are of public benefit to the City. The Corporation, after acquiring certain properties from the City, leases these back to the City. The lease money provides the funds for the debt service for the Certificates of Participation issued by the Corporation to acquire the properties. The Cupertino Redevelopment Agency was formed in 2000 under the California Health & Safety Code to assist in the elimination of areas considered to be in a blighted condition. The City Council acts as the Board of Directory of the Corporation and the Agency. The Mayor and Vice Mayor of the City have been elected President and Vice President, respectively, of the Corporation. The City Clerk has been elected Secretary, and the City's Director of Administrative Services has been appcinted Treasurer of both entities. No separate financial statements are issued for the Corporation, since it is reported separately in the basic financial statements. The Redevelopment Agency's separate report is available from the City of Cuj~ertino's website at www.cupertino.org. (b) Measurement Focus, Basis of Accounting and Basis of Presentation The City's Basic Financial Statements are prepared in conformity with accounting principles generally accepted in they United States of America. The Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A. 39 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Endecl June 30, 2009 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Measurement Focus, Basis of Accounti ag and Basis of Presentation (continued) Government-wide Statements: The Statement of Net Assets and the Statement of Activities display information abou~: the primary government (the City) and its component units. These statements include the financial activities of the overall City government, except for fiduciary acti~~ities. These statements distinguish between the governmental and business-type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. The Statement of Activities present: a comparison between expenses and program revenues for each segment of the business-type activities of the City and for each function of the City's governmental activities. Expenses include direct and indirect types. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses such as depreciation, information technology, insurance and equipment replacement are included in expenses for individual activities and functions. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted t:o meeting the operational or capital needs of a particular program and (c) development fees which are considered capital grants under California law. Revenues that are not classified as program revenues, including taxes, are presented as general revenues. Program revenues and direct expenses related to interfund services are included and indirect expenses funded by interfund transfers are excluded from the Statement of Activities. The Statement of Net Assets eliminates interfund balances between govermnental funds and interfund balances between proprietary funds. Fund Financial Statements: The fund financial statements provide information about the City's funds, including fiduciar}' funds and blended component units. Separate statements for each fund category -governmental, proprietary, and fiduciary -are presented. The emphasis of fund financial statements is on major individual governmental and enterprise funds, ea~;h of which is displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Proprietary fund operating revenues, ~:uch as charges foi• services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nof~operating. revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. 40 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINAl`ICIAL STATEMENTS For the Year Ended June 30, 2009 (1) SUMMARY OF SIGNIFICANT ACCOUN7CING POLICIES (continued) (b) Measurement Focus. Basis of Accounting and Basis of Presentation (continued) Major Funds -The City's major governmental and business-type funds are identified and presented separately in the fund financial statements. All other funds, called non- major funds, are combined and reported in a single column, regardless of their fund-type. Major funds are defined as funds, which have either assets, liabilities, revenues or expenditures equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The City may select other funds it believes should be presented as major Funds. The City reported the following major governmental funds in the accompanying financial statements: The General Fund is the general oper;iting fund of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund. The Public Facilities Corporation Debt Service Fund accounts for the payments of principal and interest on certificates of participation issued to provide for the advance refunding of the City Hall/Library, Wilson Park and Memorial Park certificates of participation. The Capital Improvement Project Funcl accounts for activities related to the acquisition or construction of major capital facilities. The Stevens Creek Cor~~idor Park Calital Project Fund accounts for the development of the master plan and the design and construction of the Stevens Ci•eek Corridor Park. The Mary Avenue Bicycle Footbridge Capital Project Fund accounts for design and construction of a bicycle footbridge extension of Mary Avenue over Interstate 280. It includes gateways, paths, residential buffering elements and landscaping. The City reports all its enterprise funds as major funds in the accompanying financial statements: The Resources Recovery Fund accounts; for activity related to the collection and disposal of solid waste. A private company has been issued an exclusive franchise to perform these services. The Blackberry Farm Fzmd accounts fcr activities related to the municipal golf course. The Cupertino Sports Center Fund accounts for the operation and maintenance of the Cupertino Sports Facility. 4l CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Endecl June 30, 2009 (I) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Measurement Focus, Basis of Accounting and Basis of Presentation (continued) The Recreation Programs Fund accounts for activities of the City's community center. The City also reports the following fund types: Internal Service Funds. These funds account for workers' compensation, management information system maintenance and replacement, equipment maintenance and replacement, and long-term disabilit;~ coverage; all of which are provided to other departments on acost-reimbursement basis. Funds for retiree health costs and accrued leave payouts are also reserved here. Fiduciary Fund. The City acts as an ;gent for re-payment of certain special assessment debt described in Note 6 of this sectior-. This fund accounts for the tax assessments used for bond payments. Basis of Accounting -The governm~;nt-wide and proprietary financial statements are reported using the economic resource:. nteasurentent 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 tttodifted accrual basis of accounting. Under this method, revenues are recognized when measurable attd ava.%lable. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are rec~~rded when the related fund liability is incurred, except for principal and interest on long-term debt which are recognized as expenditures to the extent they have become due and payable. 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 sotrr•ces. Unearned revenues are considered on a full accrual basis, while deferred revenues are based on the modified accrual measure. Fiduciary financial statements consisting of agency funds, report only assets and liabilities, and therefore have no me;isui•ement focus. They recognize receivables and payables on a full accrual basis. Property taxes, transient occupancy taxes, utility taxes, franchise taxes, interest and special assessments are susceptible to accrual. Sales taxes collected and held by the state at year end on behalf of the City are also recognized as revenue. Other receipts and taxes are recognized as revenue when the cash is received. 42 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2009 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Measurement Focus, Basis of Accounti~lg, and Basis of Presentation (continued) Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block grants, and general revenue. The City's policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary. Grant revenues are recognized after eligibility and billing occurs, but may be deferred if not received within sixty days of year-end. Because of the cost-reimbursement and recognition nature of some grants, certain capital project funds may carry deficit fund valances until billing and receipt of grants. The City may also front the capital outlays ~,vith cash advances from other funds. The City follows statements and interpretations of the Financial Accounting Standards Board and its predecessors that were issued on or before November 30, 1989, in accounting for its business-type activities, unless they conflict with Government Accounting Standards Board pronouna~ments. GASB 33 Non-Exchange Transaction -Non-exchange transactions, in which the City gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants, entitlements, and donations. On the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants is recognized as described above. Entitlement and donation revenues are recognized where cash is received. (c) Budgetary Practices The budget of the City is a detailed operating plan which identifies estimated costs and results in relation to estimated revenues. The budget includes (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 af~propriations 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 dw•ing the month of June and the budgets for all fund types are legally adopted by Resolution prior to June 30. Original budget amounts are presented on the accompanying budgetary statements include these legally adopted amounts. The City Manager is responsible for controlling the City's expenditures in accordance with the adopted budget. The City Manager is authorized to transfer appropriations within functional expenditure classifications. Any revision which requires transfers between functional expenditure classi Eications or increases total appropriations must be approved by the City Council. Requests for additional personnel or capital outlay also require the approval of the City Council. The legal level of budgetary control is at the departmental or project level. 43 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2009 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Budgetary Practices (continued) Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting principles. Budgf;t information is presented for the general, special revenue and debt service funds only. ~~apital project funds are budgeted on a long-term project-by-project basis and, hence, bu~~gets for these funds are not presented in the basic financial statements. (d) Cash and Investments The City pools its cash resources, consisting of cash and investments, of all funds for investment except for restricted funds generally held by an outside fiscal agent. Cash amounts are reported net of outstanding; warrants. Investments are stated at fair value. (e) Capital Assets Capital assets are recorded at cost or• estimated historical cost if purchased or constructed. Donated capital assets are recorded at their estimated fair value on the date donated. Public domain (infrastructure) capital assets consisting of roads, bridges, curbs, gutters, medians, sidewalks, drainage and lighting systems have been capitalized and depreciated. Depreciation is recorded using the straight-line method over the following useful lives: Years Buildings 25 Improvements 31 Vehicles 4-10 Street equipment 3-20 Water equipment 3-50 Office equipment 3-5 Road, curbs, gutters, sidev~~alks, medians and bridges 30-40 Streetlights 20 Storm drain structure and mains 40 Traffic signals 20 The City capitalizes capital assets exceeding $5,000. Major outlays for capital assets an~3 improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. 44 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA>\ CIAL STATEMENTS For the Year Endecl June 30, 2009 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (e) Capital Assets (continued) 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. (f) Land Held for Housing Development Land held for redevelopment of $61 x,000 at June 30, 2009 is stated at the lowest of historical cost, net realizable value or agreed-upon sales price. The land was purchased using Federal grant funds for housing activities. (g) Claims and Judgments Payable Claims and judgments payable are accrued when the liability is incurred and the amount can be reasonably estimated. Claims ~rnd judgments payable are recorded in an internal service fund for workers' compensati~~n and long-term disability, the General Fund or enterprise funds, as appropriate. (h) Compensated Absences Compensated absences comprise vested accumulated vacation and sick leave. The City's liability for compensated absences is recorded in Governmental or Business-Type Activities as appropriate. The liability for compensated absences is determined annually. For all governmental funds, amounts expected to be "permanently liquidated," such as what is due to be paid because of a realized employment action, are recorded as fund liabilities; the long-term portion is recorded in the Statement of Net Assets. In prior years, the governmental or proprietary fund associated with the ongoing salary and benefit cost of the employee has liquidated the long-term liability. Compensated absences are liquidated by the fund that has recorded the liability. The long-teem portion of governmental activities compensated absences are liquidated primarily by the General Fund, using the Compensated Absences and Long-Term Disability internal service fund as the account for• termination payouts. 4 `i CITY OF CUPERTIN~~, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended: June 30, 2009 (1) SUMMARY OF SIGNIFICANT ACCOUNTI]yG POLICIES (continued) The changes in compensated absences were as follows: Governmental Business-Type Activities Activities Total Beginning Balance `2,434,009 $14,071 $2,448,080 Additions 463,852 21,606 485,458 Payments (498.373) (264) (498,637) Ending Balance `.12,399,488 $35,413 $2,434,901 Current Portion $153,419 $35,413 $188,832 (i) Fund Equity Reservations of fund balances represent those portions of fund balances which are not available for appropriation or expenditure or are legally restricted for a specific future use. Designated fund balances represent management's tentative plans for future use of financial resources. (j) Property Tax Calendar All property taxes are levied and colle~;ted by the County of Santa Clara. Secured taxes are levied on July 1, are due in two installments on November 1 and March 1 and become delinquent on December 10 and April 10. Unsecured taxes are due on July 1 and become delinquent on August 31. The lien ijate for secured and unsecured property taxes is March 1. The City, in fiscal year 1993-94, ~.dopted an alternative method of property tax distribution (the "Teeter Plan"). Under this method, the City receives 100% of its secured property tax levied in exchange; for foregoing any interest and penalties collected on delinquent taxes. The City receive; remittances as a series of advances made by the County during the year. (k) Interfund Transactions Transactions constituting reimbursements to a fund for expenditures/expenses initially made from it that are properly ;applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that : s reimbursed. 4fi CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA1\ CIAL STATEMENTS For the Year Endecl June 30, 2009 (I) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (1) Statement of Cash Flows For purposes of reporting cash flows for the City's proprietary funds, pooled cash and investments are considered cash equivalents as the proprietary funds can access pooled cash and investments in a manner similar to a demand deposit account. (m) Bond Discounts and Issue Costs Debt discounts and issuance costs are recognized in the current period. Debt discounts and issuance costs incurred by proprie~:ary fund types are amortized over the term of the debt using the bonds-outstanding method, which approximates the effective interest method. (n) Inventories and Prepaids Inventories are accounted for under the purchases method, which considers inventories to be recognized as an expenditure upon purchase, with inventories insignificant at year- end. Prepaid expenses are reported under the consumption method, which recognizes the expense in the period associated with t}re service rendered or goods consumed. (o) Fund Name Change During fiscal year 2008/2009, the City changed the name of the Long-Term Disability Internal Service Fund to the Compensated Absences and Long-Term Disability Internal Service Fund. (2) CASH AND INVESTMENTS The City's pooled idle funds are invested pur•sirant to investment policy guidelines adopted by the City Council. The objectives of the policy are to invest funds to the fullest extent possible and to invest in accordance with the provisions of thy; California Government Code with the priority of safety, liquidity and yield. The policy addresses the safekeeping of securities, types of investment instruments, diversification, maturities, reporting requirements, and internal control. The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the combined balance sheet as "cash and investments." (a) Policies California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110°% of the City's cash on deposit, or first trust deed mortgage notes with a market value of 150% of the deposit, as collateral for• these deposits. Under California Law this collateral is held in a separate investment pool by another institution in the City's name and places the City ahead of general creditors of the institution. 47 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINAI`1CIAL STATEMENTS For the Year Ended June 30, 2009 (2) CASH AND INVESTMENTS (continued) The City and its fiscal agents invest i~ individual investments and in investment pools. Individual investments are evidenced by specific identifiable securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. Security instruments owned by the City are held in safekeeping by a third party custodian acting as agent for the City under the ternis of a custody agreement. The City's investments are carried at f<<ir value. The City adjusts the carrying value of its investments to reflect their fair value a1 each fiscal year end, and it includes the effects of these adjustments in interest income for that fiscal year. (b) Classification The City's total cash and investments, at fair value, are presented on the accompanying statement of net assets in the following allocation: Statement of Net Assets Cash and investments Restricted cash and investments: Held by Fiscal Agent for bond repayments Held in escrow accounts for contractor retentions Total restricted cash and investments Total City cash and investments Fiduciary Funds Cash and investments Total Cash and investments $54,771,604 2,473,197 866,956 3,340,153 58,111,757 115,322 $58,227,079 4,3 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINAI\!CIAL STATEMENTS For the Year Endecl June 30, 2009 (2) CASH AND INVESTMENTS (continued) (c) Attthorized Investments by the City The City's Investment Policy and the California Government Code allow the City to invest its pooled idle funds in the following, under limits and provisions that address interest rate risk, credit risk, and concentration of credit risk. This does not include the City's investments of debt proceeds held by fiscal agents that are governed by the provisions of debt agreements of the City. Maximum Minimum Authorized Investment Type Maturity Credit Quality U.S. Treasury obligations 5 years N/A Federal Agency securities (A) 5 years N/A California Locai Agency Investment Fund Non-negotiable Certificates of Deposit (time deposits) State of California registered state warrants, treasury notes, or bonds California local agency bonds, notes, warrants or other obligations Bonds issued by the local agency Bankers Acceptances Commercial Paper Negotiable Certificates of Deposit N/A N/A 5 years N/A 5 years N/A 5 years N/A 5 years N/A 180 days N/A 270 days A-l+ / P-1 5 years N/A Repurchase Agreements Medium Term Corporate Notes Money market mutual funds investing 1 year N/A Maximum Percentage of Portfolio Maximum Investment In One Issuer None None None None Up to $40 million, per State la~v None None 10% of portfolio; 5% of issuer's net worth None ] 0% None 10% None 10% 40% None 10% of portfolio; 5% of 25% issuer's net worth; 10% of outstanding paper of issuer. 30% 10% of portfolio; 5% of issuer's net worth None 10% of portfolio; 5% of issuer's net worth 5 years A or better 30% 10% of portfolio; 5% of issuer's net worth in U.S. Treasury, Government Agency N/A N/A 20% 10% securities, or repurchase agreements (A) Securities issued by agencies of the federal government such as the Government 7`'ational Mortgage Association, (GNMA), the Federal Home Loan Bank (FHLB), the Federal National Mort€;age Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and the Federal Farm Credit Bank (FFCB). 49 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA)\`CIAL STATEMENTS For the Year Endecl June 30, 2009 (Z) CASH AND INVESTMENTS (continued) (d) Authorized Investments by Debt A~nents The City must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt i;~sues. These funds are unexpended bond proceeds or are pledged reserves to be used if tht; 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, bind indentures or State statutes. The City's Investment Policy allows investments ~~f bond proceeds to be governed by provisions of the related bond indentures. The following identifies the investment types that are authorized for investments held by fisc;il agents under the terms of the bond indentures of the related debt issue: Maximum ~4aximum Minimum Credit Percentage of Authorized Investment Type ~Iaturi Quality Portfolio _ Aaam or Money market mutual funds TI/A AAAm-G None Up to $40 California Local Agency Investment million, per Fund TJ/A N1A State law U.S. Treasury obligations 1`!/A NIA None U.S. Federal agency obligations (A) T!/A N/A None Pre-refunded local agency municipal obligations that are non-callable or Highest rating irrevocably callable on a specified date rI/A category None General obligations of states I`I/A A2/A None U.S. dollar denominated deposit accounts, federal funds and bankers acceptances 360 days P-l, A-1+, A-1 None Commercial paper 270 days P-1, A-1 None Time or demand accounts or certificates of deposits, collateralized 1`I/A N/A None Investment agreements or other forms of investments, including repurchase agreements, approved by the financial guaranty insurance carrier. td/A N/A None (A) Securities issued by agencies of the federal government such as the Government National Mortgage Association, (GNMA), the Federal Home Loan Bank (FHLB), the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (F[-ILMC), and the Federal Farm Credit Bank (FFCB). 50 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2009 (2) CASH AND INVESTMENTS (continued) (e) Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distri'~ution of the City's investments by maturity or earliest call date: U.S. Treasury Securities Federal Agency Obligations Local Agency Investment Fund Government Securities Money Market funds Non-negotiable Certificates of Deposit Total Investments 12 Months 13 to or less 24 Months Total $27,916,SS0 $8,166,880 $36,083,430 4,069,390 3,059,260 7,I28,6S0 587,959 587,959 12,641,836 12,641,836 100,749 99,634 200,383 $45,316,484 $11,325,774 56,642,258 Cash in banks and on hand 717,864 Cash held in retention deposit escrow ~.ccounts 866,957 Total Cash and Investments $58,227,079 The City is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City report: its investment in LAIF at the fair value amount provided by LAIF, which is the same a:~ the value of the pool share. The balance is available for• withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an am~~rtized cost basis. Included in LAIF's investment portfolio are U.S. Treasuries, Federal ~~gency obligations, time deposits, negotiable certificates of deposits, commercial paper, corporate bonds, and security loans. At June 30, 2009, these investments had weighted average maturity of 23S days. Money market funds are available for withdrawal on demand and at June 30, 2009, carried investments with a SS day aver~rge maturity. Sl CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINAr1CIAL STATEMENTS For the Year Ended June 30, 2009 (2) CASH AND INVESTMENTS (continued) (~ Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of June 30, 2009 for each investment type, including those with fiscal agents, as provided by Moody's ratings: Investment Type AAA Total Federal Agency Obligations $7,128,650 $7,128,650 Government Securities Money Market Funds 12,641,836 12,641,836 Totals $19,770,486 19,770,486 Exempt from Credit Rating Disclosure: U.S. Treasury Securities 36,083,430 Not Rated: Local Agency Investment Fund 587,959 Certificates of deposit 200,383 Total Investments $56,642,258 (g) Concentration of Credit Risk The City's investment policy contains certain limitations on the amount that can be invested in any one issuer. In certain categories, these limitations are more restrictive than those required by California Government Code Sections 53600 et seq. Investments in any one issuer, other than U.S. Treasury securities, mutual funds, and exterr-al investment pools, that represent 5% or more of total City-wide investments are as follows at June 30, 2009: Issuer Investment Type Amount Federal Farm Credit Bank Federal Agencies Obligation $4,048,140 5~: CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA)\fCIAL STATEMENTS For the Year Endetl June 30, 2009 (3) (4) RELATED PARTY LOANS In conjunction with the City's executive housing assistance program, loans totaling $1,535,860 have been provided to three executive managers. These 40-year loans bear an interest rate equal to the l lth District Cost of Funds at the time of the loan, and require monthly principal and interest payments. In addition, there is a t,vo percent deferral on the interest rate for the first five years of the loan, at which time the interest rate may be adjusted to the current 1 lth District Cost of Funds fot• the remainder of the loan. At June 30, 2009, one of the loans was completely paid off, and the balance remaining on the two loam; was $727,468. INTERFUND TRANSACTIONS Transfers between funds during the fiscal year ended June 30, 2009 were as follows: Fund M along Transfers Fund Receiving Transfers Amount Transferred General Fund Public Facilities Corporation Debt Service Fund $3,537,000 (A) Capital Improveme;nt Projects Funds 100,000 (B) Non-major govemrnental funds 750,000 (C) Internal Service Funds 2,723,000 (D) Stevens Creek Corridor Park Fund General Fund 50,000 (E) Capital Improvement Projects Funds General Fund 573,925 (F) Non-major governmental funds Non-major governmental funds 25,000 (G) $7,758,925 Total Interfund Transfers The reasons for these transfers are set forth below: (A) For debt service. (B) For capital project infrastructure reserve. (C) To fund street maintenance. (D) To fund retiree medical, IT, equipment replacement, and compensated absences. (E) To return project savings to General Fund. (F) To return project funding to General Fund. (G) To fund the Bollinger Bike Lane project. Internal Balances -The City-wide financial statements had no net intet•fimd receivables and payable remaining after the elimin<<tion of all such balances within governmental and business-type activities. The General Fund loaned the Mary Avenue Bicycle Footbridge Capital Projects Fund $837,629 to fund a temporary cash shortfall. 53 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2009 (5) CAPITAL ASSETS A summary of changes in capital assets follows: Balance at Balance at June 30, 2008 Additions Retirements Transfers June 30, 2009 Governmental activities Capital assets not being depreciated: Land $59,2')8,322 $1,507,759 $60,806,081 Construction in progress: Infrastructure 7,509,565 6,204,560 ($13,714,125) Other capital projects 2,103,992 9,410,189 (11,514,151) Total capital assets not being depreciated 68,911,879 17,122,478 (25,228,276) 60,806,081 Capital assets being depreciated: Buildings 40,3 17,576 277,651 40,635,227 lmprovementsotherthanbuildings 25,814,968 311,941 11,514,151 37,681,060 Machinery and Equipment -governmental funds 1,9)3,499 158,380 ($10,255) 2,051,624 Road, curbs, gutters, side«alks, medians and bridges 101,019,337 4,474,758 13,714,125 119,258,220 Streetlights 6,597,255 7,849 6,555,104 Storm drain structure and mains 31,659,084 57,048 31,726,132 Traffic signals 5,957,41 ] 31,988 5,999,399 Total capital assets being depreciated 213,359,130 5,3]9,615 (10,255) 25,228,276 243,906,766 Less accumulated depreciation for: Buildings 12,294,958 1,553,202 13,848,160 Improvements other than buildings 19,247,032 827,067 20,074,099 Machinery and Equipment -governmental funds 1,518,268 ] 12,296 (10,057) 1,620,507 Road, curbs, gutters, side~~alks, medians and bridges 81,531,071 2,456,230 83,987,301 Streetlights 6,506,460 2,617 6,509,077 Storm drain structure and mains 24,232,960 791,727 25,024,687 Traffic signals 4,355,239 116,989 4,472,228 Total accumulated depreciation 149,685,988 5,860,128 (10,057) 155,536,059 Net governmental fund program Capital assets being depreciated 63,683,142 (540,513) (198) 25,228,276 88,370,707 Internal service fund capital assets Machinery and equipment 4,983,608 541,708 5,>25,316 Less Accumulated depreciation 4,C 19,631 370,568 4,390,199 Net internal service capital assets Being depreciated 563,977 171,140 I , 135, 117 Governmental activity capital assets, net $133,558,998 $16,753,105 ($198) $150,311,905 5~~ CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Endedl June 30, 2009 CAPITAL ASSETS (continued) Balance at Balance at June 30,1008 Additions Retirements Transfers June 30, 2009 (5) Business-q~pe nctn~ilies; Capital assets being depreciated: Improvements other than buildings Machinery and Equipment Total capital assets being depreciated Less accumulated depreciation for: 55,053 238,113 572,642 SS,053 3]0,755 243,166 72,642 315,808 Improvements other than buildings 5,053 S,OS3 Machinery and Equipment 153,987 20,641 174,628 Total accumulated depreciation 159,040 20,641 179,681 Net capital assets being depreciated 84,126 52,001 136,127 Business-type activity capital assets, net 584,126 552,001 5136,127 Depreciation expense w as charged to function; and programs based on their usage of the related assets. The amounts allo cated to each function or program is as follows: Governmental Activities Amount Administration $311,550 Law Enforcement 2,160 Public Information 16,613 Administrative Services 26,441 Recreation Service 65,507 Community Developtr~ent 600 Public Works 5,437,257 Internal Service funds 370,568 Total $6,230,696 S:i CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA>\fCIAL STATEMENTS For the Year Endetl June 30, 2009 (5) CAPITAL ASSETS (continued) Business-Type Activities Amount Resources Recovery $3,983 Blackberry Farms 3,085 Cupertino Spo~4s Center 10,926 2,647 Total $20,641 (6) LONG-TERM DEBT (a) Cupertino Public Facilities Corporation Certificates of Participation Original Balance Balance Issue June 30, June 30, Current Amount 2008 Retirements 2009 Portion Governmental Activity Debt: 2002 Refinancing and Capital Improvement Project, 2.00-5.00%, due 07/01/2030 $56,640,000 $48,385,000 $1,415,000 $46,970,000 $1,460,000 The Cupertino Public Facilities Corporation issued Certificates of Participation to provide financing for the construction of the Community Center, remodeling of City Hall and the Library in July of 1986, to purchase Wilson Park in 1989, to finance Memorial Park Expansion in 1990, and to purchase Blackberry Farm and Fremont Older site in 1991. Cupertino Public Facilities Corp~~ration, as lessor, leased real property to the City (under the lease agreement with the les~:ee) and assigned the base rental payments to the trustee for the benefit of the owners of the certificates of participation. The rental payments are scheduled to be sufficient in both time and amount, when the principal and interest of the certificates are due. On October 1, 2002, $56,640,000 principal amount of 2002 Refinancing and Capital Improvement Project Certiftcates of Participation, (2002 COPs) were issued to finance the costs of acquiring and constructing a ne~v public library and to refund the 1992A COPs, the 1992B COPS and the 1993A COPs ("Refunded COPS"). 56 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA)\`CIAL STATEMENTS For the Year Endeci June 30, 2009 (6) LONG-TERM DEBT (continued) (a) Cupertino Public Facilities Corporation Certificates of Participation (continued) Annual debt service requirements fot• the; Certificates of Participation are shown below: _ Governmental Activities For the Year Ending June 30 Principal Interest 2010 $1,460,000 $2,073,944 2011 1,500,000 2,03Q144 2012 1,545,000 1,985,144 2013 1,600,000 1,934,931 2014 1,660,000 1, 870,931 2015-2019 9,380,000 8,283,605 2020-2024 11,750,000 5,916,093 2025-2029 14,705,000 2,960,674 2030 3,370,000 160,075 Total $46,970,000 $27,215,541 (b) 1915 Act Bonds Without City Commitment The City acts as agent for the properh~ owners of parcels upon which assessments were made for local improvements. The City collects the assessments and forwards the collections to bond holdet•s. The City is not directly liable for the repayment of special assessment district bonds as such bonds and interest payable are secured by fixed lien assessments on real property; however, the City has determined that it is not probable that the government would assume responsibility for all or part of the debt in the event of default. The amount of unmatured bond principal at June 30, 2009 was $65,000. (c) Conduit Debt On October 1, 2001, the City authorized the issuance of the Multi-Family Housing Revenue Bonds in an amount up to $1.6 million to assist a developer in financing the cost of site acquisition and construction of a 24 unit multi-family rental housing pt•oject. The bonds are payable solely out of loan repayments received from the developer. The City has no legal or moral liability with respect to the payment of this debt. 5 "7 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA1\'CIAL STATEMENTS For the Year Endecl June 30, 2009 (7) NET ASSETS AND FUND BALANCES Net Assets are measured on the full accrual basis while Fund Balance is measured on the modified accrual basis. Net Assets -Net Assets is the excess of all thy; City's assets over all its liabilities, regardless of fund. Net Assets are divided into three captions. These captions apply only to Net Assets, which is determined only at the Government-wide level, and are described below: hwested in Capital Assets, net of related de5t describes the portion of Net Assets which is represented by the current net book value of the City's capital assets, less the outstanding balance of any debt issued to finance these assets. Restricted describes the portion of Net Assets which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot unilaterally alter. These principally include developer fees received for use on capital projects, debt service requirements, and redevelopment funds restricted to low and moderate income purposes. Fund Balances, Reserves and Designatlor:s ~- In the Fund financial statements, fund balances represent the net current assets of each fund. Tdet current assets generally represent a fund's cash and receivables, less its liabilities. Portions of a fund's balance may be reserved or designated for future expenditure. The unreserved fund balances include amounts which have been internally designated to be set aside and are not considered to be available for immediate appropriation. The components of the designated fund balance for the Governmental ]?unds at June 30, 2009 are as follows: General Fund: Economic Uncertainty $13,415,000 Utilities Users Tax Revenue 1,600,000 Special Revenue Funds, Gas Tax Projects 799,022 Capital Project Funds: Capital Improvement Projects 699,000 Construction in Progress - Futur<~ Projects 76,000 Infrastructure 900,000 Total designated fund balances $17,489,022 5& CITY OF CUPERTIN~, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Endecl June 30, 2009 (8) COMMITMENTS AND CONTINGENCIES The City participates in a number of federal and state grant programs subject to financial and compliance audits by the grantors or their representatives. Audits of certain grant programs, including those for the year ended June 30, 2009, have yet to be conducted. The amount, if any, of expenditures that may be disallowed by the granting agencies cannot be determined at this time. Management believes that such disallowances, if any, would not have a material effect on the financial statements. The City has an agreement, expiring in 2019, t~~ lease a building to the County of Santa Clara for the purpose of providing library service to thf; City's residents. The lease requires a minimum annual payment of $120,000 adjusted for Cupertino's portion of book circulation and increase of assessed valuation. This is an operating lease ~r~ith a renewable option. At June 30, 2009, the cost and carrying value of the building which opened in October 2004, is $21,935,325 and $18,423,269 respectively, with $3,512,056 in a~;cumulated depreciation. (9) LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT The City is self-insured for the first $250,000 of general and automobile liability for each occurrence, and the excess (up to $10,000,000) is covered through the City's participation in the Association of Bay Area Governments (ABAG) Plan general liability risk pool. The pool consists of 32 agencies within the San Francisco Bay area. The stated purpose of the ABAG pool is to provide certain levels of liability insurance coverage, claims management, risk management services, and legal defense to each participating city within the pool. Each city was required to make an initial deposit premium based on an actuarial study of each City's risk exposure. The premium consists of a risk portion and administrative portion. The premium is revised each year based on claims experience and risk exposurE;. Complete financial statements for ABAG plan may be obtained from their offices at the following address: ABAG Plan Corporation, Finance Department, P.O. Box 2050, Oakland, CA 946(-4. 59 CITY OF CUPERTIN~~, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Endetll June 30, 2009 (9) LIABILITIES UNDER SELF-INSURANCE AND RISK MANAGEMENT (continued) The City belongs to the CSAC Excess Insur•an~;e 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 $50,000,00(1 statutory limit. EIA was established in ] 979 for the purpose of creating a risk management pool for all California public entities. ElA is governed by a Board of Directors consisting of representatives of its member public entities. Changes in the balances of claim liabilities during the past two fiscal years are as follows: Workers' Compensation Claims liability June 30, 2007 $1,375,000 Incurred claims 288,148 Claim payments/credits (166,148) Claims liability June 30, 2008 1,497,000 Incurred clairru 313,642 Claim payments/credits (242,642) Total Claims liability June 30, 2005 $1,568,000 Current portion $411,000 Non-current Portion $1,157,000 The claims liability includes those based on existing open claims plus those estimated on an incurred but not reported basis. Allocated loss adjustment expenses, such as legal fees, were also considered. Settlements have not exceeded insiar•ance coverage in the past three years. 60 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA)`ICIAL STATEMENTS For the Year Endeil June 30, 2009 (10) OTHER POST EMPLOYMENT BENEFITS (OPEB) Permanent employees who retire under the Ci.ty's retirement plan (CALPERS) 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 plans, 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 beriveen 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 f-•om zero to $1,042 per month per the employee or retiree. The responsibility for benefit payments has transferred to the insurers and the City does not guarantee the t~enefits 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 cost of the benefits provided by the Plan is currently being paid by the City on a pay-as-you- go basis. The long-term strategy for funding the benefits provided under the Plan is currently being evaluated. An employee is eligible for lifetime medical benefits under the 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 mere 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 t:ouncil member was elected on or after August 1, 2004, and the employee has ten or more full-time and/or elected years of CaIPERS service, five years of which must be from the City of Cupertino; and • The employee is eligible for retirement as defined under the Ca1PERS retirement system; and, • The employee retires from the City of Cupertino. 61 CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINA]\"CIAL STATEMENTS For the Year Endecl June 30, 2009 (10) OTHER POST EMPLOYMENT BENEFIT;~OPEB) (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. The City's actuary determined the City's OPEI3 liability and contribution requirements using the Entry Age Normal Actuarial Cost Method. As of the January I, 2007 valuation date, there were no actuarial plan assets. The annual rate of return on future assets for benefit payments was assumed to be 5% on apay-as-you-go basis. Inflation of 3%, annual salary increases of 3.25%, City contribution increases of 3.5%, and healthcare cost growth ranging from 13% initially down to 5% long-term were also assumed. The Unfunded Actuarial Accrued Liability is amortized as a level percentage of pay (assuming 3.25% per ;/ear growth in total payroll) over a rolling twenty year period. The payment for a given year is expressed as a percentage of projected active member payroll for that year. PEMHCA is a community-rated plan, where the same premiums apply for all plan participants regardless of the presence or number of active employees. There is no implicit rate subsidy in the premiums for prey-Medicare retirees. The City's annual OPEB cost and actual contributions to the Plan for the year ended 2009 is as follows: OPEB Annual P.ctual Fiscal Year Cost (AOCI Contribution June 3Q ZUUy $2,475,000 $647,923 Percentage of Net OPEB AOC Obligation Contributed (Asset) 26% $1,827,077 The City's Net OPEB Obligation (NOO) is recorded in the Retiree Medical Internal Set•vice Fund, and is calculated as follows: Annual required contribution $2,475,000 Annual OPEB cost 2,475,000 Contributions made -Pay-as-you-go payment (647,923) (Decrease) increase in net OPEB obligations 1,827,077 Net OPEB obligation (asset) June 30, 2008 0 Net OPEB obligation (asset) June 30, 2009 $1,827,077 6:? CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINAI\"CIAL STATEMENTS For the Year Endecl June 30, 2009 (10) OTHER POST EMPLOYMENT BENEFIT, ~OPEB) (continued) The Schedule of Funding Progress presents trt;nd information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Trend data from the January I, 2007 actuarial study is presented below, reflecting the initial study since the implementation of new OPEB reporting requirements. Actuarial Actuarial Value of Valuation Assets Date (A) U~ifunded Entry Age (Overfunded) Actuarial Actuarial Unfunded (Overfunded) Actuarial Liability as Accrued Accrued Funded Covered Percentage of Liability Lability Ratio Payroll Covered Payroll 1/1/2007 $0 $21,981,544 $21,981,544 (11) DEFERRED COMPENSATION PLAN 0.00% $11,118,000 197.71 Due to the passage of the Small Business Job Protection Act (Act) of 1996, and the issuance of Governmental Accounting Standards Board Statement No. 32 "Accounting and Financial Reporting for Internal Revenue Code Section 157 Deferred Compensation Plans," governmental entities who have established deferred compensation plans under Internal Revenue Code Section 457 are required to establish trusts to hole: plan assets for the exclusive benefit of plan participants and their beneficiaries. This Act supercedes previous regulations, which required that plan assets remain the properly of the City until paid or made available to the participants, subject only to the City's general creditors. [n compliance with the new regulations, the City established separate trusts to hold plan assets. The value of assets held in trust under Section 457 deferred compensation plans is approximate(}~ $10,681,304 as of June 30, 2009. These assets have been excluded from the financial statements. (12) DEFINED BENEFIT PENSION PLAN (a) Plan Description Substantially all City employees are t;ligible to participate in pension plans offered by California Public Employees Retirement System (CALPERS), an agent multiple employer defined benefit pension elan which acts as a common investment and administrative agent for its participating member employers. CALPERS provides retirement and disability benefits, annrtal cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. The City's employees participate in the Miscellaneous Employee Plan. Benefit provisions under both Plans are established by State statute and City resolution. Benefits are based on years of credited service and compensation. Audited annual financial statements are available from CALPERS at www.calpers.ca.gov. 6.i CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINAI`1CIAL STATEMENTS For the Year Ended June 30, 2009 (12) DEFINED BENEFIT PENSION PLAN (continued (b) Funding_PolicX Funding contributions for the Plan are determined annually by CALPERS on an actuarial basis as of June 30 three years prior to funding. The City must contribute these amounts. The Plans' provisions and benefits in effect at June 30, 2009, are summarized as follows: Miscellaneous Benefit vesting schedule 5 years service Benefit payments Monthly for life Eligible retirement age 50 Benefits, as a % of annual salary muhiplied by years of service and annual salary 2% - 2.7% Requu•ed employee contribution rates 8% Required employer contribution rates 16.456% (c) Annual Pension Cost CALPERS determines contribution requirements using a modification of the Entry Age Normal Method. Under this metho~~, the City's total normal benefit cost for each employee from date of hire to date of retirement is expressed as a level percentage of the related total payroll cost. Normal benefit cost under this Method is the level amount the employer must pay annually to fund ;in employee's projected retirement benefit. This level percentage of payroll method is used to amortize any unfunded actuarial liabilities. The actuarial assumptions used to compute contribution requirements are also used to compute the actuarially accrued liability. The City uses the actuarially determined percentages of payroll to calculate and pay contributions to CALPERS. This results in no net pension obligations or unpaid contributions. Recent Annual Pension Costs, which equal the annual required contribution to CALPERS, were as follows: E~nnual Pension Cost Contribution Fiscal Year (APC) Rate 6/30/2007 $1,237,257 11.529% 6/30/2008 1,454,415 14.201 6/30/2009 1,835,521 15.560% 6~I CITY OF CUPERTINO, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2009 (12) DEFINED BENEFIT PENSION PLAN (continued CALPERS uses the market related value method of valuing the Plan's assets. An investment rate of return of 7.75% is assumed, including inflation rate at 3.0%. Annual salary increases are assumed to vary by duration of service. Chan€;es in liability due to plan amendments, changes in actuarial assumptions, or changes in actuarial methods are amortized as a level percentage of payroll on a closed basis over twenty years. All gains and losses are realized and amortized over a rolling thirty year period. Market value fluctuations in the actuarial value of plan assets are smoothed over 15 years. CALPERS' latest available actuarial value ;which differs from market value) and funding progress are set forth below at their actuari<l valuation date of June 30, 2007. This shows whether the value is increasing or decreasing ever time relative to the actuarial accrued liability for benefits. Actuarial Unfunded Entry Age Unfunded Annual (Overfunded) Valuation Accrued Value of (Overfunded) Funded Covered Liability as Date Liability Assets Li3bilit>, Ratio Payroll of Payroll 6/30/05 $47,054,446 $41,347,290 $`i,707,156 87.9% $9,304,b90 61.3% 6/30/06 54,287,591 44,876,584 9,411,007 82.7% 10,133,914 92.9% b/30/07 59,241,300 50,157,077 9,084,223 84.7% 10,751,350 84.5% (13) DEFICIT FUND BALANCE As of June 30, 2009, the Stevens Creek Corridor Park and Mary Avenue Bicycle Footbridge Capital Project Funds had negative fund balan~:es of $838,125 and $956,137, respectively. These balances are expected to be offset by eventual billing and receipt of all expected grant awards. 6:i MAJOR GOVERNMENTAL FUNDS OTH)E.R THAN THE GENERAL FUND AND SPECIAL REVENUE FUNDS This section is provided for the presentation of Budget-to-Actual Statements for the Public Facilities Corporation Debt Service Fund, Although the fund is considered to be a major goveznment fund, GASB Statement 34 dictates that budget-to-actual information in the basic financial statements should be limited to the General Fund and major Special Revenue Funds. .All other major governmental fund schedules with such information must be included as Supplemental Information. Public Facilities Corporationz Debt Service Furzd - Ac:counts for the accumulation of resources for and the payments of principal and interest on certificates ~~f participation issued in 2002 to advance refund debt that was previously issued to finance City Hall, Li~rary, Wilson Park and Memorial Park projects. 6E CITY OF CU:PERTINO PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET ANI) ACTUAL FOR THE YEAR ENDED JUNE 30, 2009 REVENUES Use of money and property Total Revenues EXPENDITURES Debt service: Principal Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCE BEGINNING FUND BALANCE ENDII~'G FUND BALANCE Variance Positive Budget Actual (Negative) $940 $940 940 940 $1,415,000 1,415,000 2,121,994 2,118,714 3,280 3,536,994 3,533,714 3,280 (3,536,994) (3,532,774) 4,220 3,537,000 3,537,000 3,537,000 3,537,000 $6 4,226 $4,220 51,715 $55,941 6~ NON-MAJOR GOVER1yMENTAL FUNDS All funds not defined as major funds for the Fund Financial Statements are consolidated in one column entitled "Other Governmental Funds." These non-major funds are identified and included in this supplemental section and includes all of the City's 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. Storm Drain -Accounts for the construction and maintenance of storm drain facilities including drainage and sanitary sewer facilities. Park Dedication -Accounts for the activity granted by the business and professions code of the State of California in accordance with the o~~en space and conservation element of the City's General Plan. Revenues of this fund are restricted for the acquisition, improvement, expansion and implementation of the City's parks and recreation facilities. Environmental Ma~aagement -Accounts for all activities related to operating the non-point source pollution program. Transportation -Accounts for the City's gas tax, sales tax 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. Housing Development -Accounts for the Fed~;ral 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 rules. Redevelopment Agency -Accounts for the Cupertino Square project area and low and moderate income housing funds. 6~a CITY OF CUPERTINO NON-MAJOR GOVERNMENTAL FUNDS COMBMING BALANCE SHEETS JUNE 30, x:009 SPECIAL REVENUE FUNDS Assets Cash and im~estments Accounts receivable Loans receivable Land held for housing development Total assets Liabilities Accounts payable and accruals Accrued payroll and benefits Unearned revenue Deferred revenue Total Liabilities Fund balances Reserved for: Encumbrances Loans receivable Land held for housing development Low and moderate income housing Unreserved, reported in: Special Revenue Funds Total fund balances Total liabilities and fund balances Storm Park Environmental Housing Drain D:dication Management Transportation Development $1,060,559 $578,357 $202,980 ' $828,730 $1,201,710 481,909 63,346 839,326 615,000 $1,060,559 $578,357 $202,980 $1,310,639 $2,719,382 $882 $9,556 $12,664 $106,181 $670 28,291 10,483 1,747 12,749 _ 256,2] 1 178,563 670 882 37,84? 292,107 286,491 24, ] 18 219,510 70,545 839,326 615,000 1,059,889 553,357 ]65,133 799,022 908,020 1,059,889 577,475 165,133 1,018,532 2,432,891 $1,060,559 $578,357 $202,980 $],310,639 $2,719,382 ~l) SPECIAL REVENUE FUND Redevelopment Agency Total Nonmajor Governmental Funds $759,2]7 4,631,553 545,255 839,326 615,000 $759,217 $6,631,134 $1,768 $131,051 4, 114 45,305 12,749 434,774 5,882 623,879 39,532 353,705 839,326 615,000 507,037 507,037 206,766 3,692,187 753,335 6,007,255 $759,217 $6,631,134 7l CITY OF CUl'ERTINO NON-MAJOR GOVERrdMENTAL FUNDS COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2009 SPECIAL REVENUE FUNDS REVE1~'UES Taxes Use of money and property Intergovernmental Charges for services Total Revenues EXPENDITURES Current: Community development Public works Capital out]ay Total Expenditures EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers (out) Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES BEGINNING FUND BALANCES (DEFICIT) ENDING FUND BALANCES Storm Park Environmental Housing Drain ,Dedication Management Transportation Development $66,598 $233,750 $22,598 20,367 9,624 $2,012 $27,380 72,305 1,479,005 842,607 _ 507 365,060 76,457 86,965 _ 243,881 367,072 1,582,842 937,510 2,237,588 418,148 808,810 57,047 _ 882 4,480,258 57,047 _ 882 418,148 5,289,068 2,237,588 29,918 - 242,999 (51,076) (3,706,226) (1,300,078) 775,000 (25,000) (25,000) _ 775,000 4,918 242,999 (51,076) (2,931,226) (1,300,078) 1,054,971 - 334,476 216,209 3,949,758 3,732,969 $1,059,889 $577,475 $165,133 $1,018,532 $2,432,891 ~.~ SPECIAL REVENUE FTTNTI Total Nonmajor Redevelopment Governmental Agency Funds $1,211,128 $1,534,074 4,388 136,076 2,321,612 442,024 1,215,516 4,433,786 394,810 2,632,398 1,226,958 4,538,187 394,810 8,397,543 820,706 (3,963,757) 775,000 (25,000) 750,000 820,706 (3,213,757) (67,371) 9,221,012 $753,335 $6,007,255 73 CITY OF CUPERTINO BUDGETED NOr1-MAJOR FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AT1D ACTUAL FOR THE FISCAL YEAI: ENDED JUNE 30, 2009 SPECIAL REVENUE FUNDS REVENUES Taxes Use of money and property Intergovernmental Charges for services Total Revenues EXPENDITURES Current: Community development Public works Capital outlay Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FTNANCING SOURCES (USES) Transfers in Transfers (out) Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES BEGINNING FUND BALANCES (DEFICIT) ENDING FUND BALANCES STORM DRAIN PARK DEDICATION Vaziance Variance Positive Positive Budget Actual (Negative) Budget Actual (Negative) $50,000 $65,598 $16,598 $300,000 $233,750 ($66,250) 30,000 2),367 (9,633) 16,000 9,624 ($6,376) 507 80,000 8~i,965 6,965 316,000 243,881 (72,626) 638,669 5'x,047 581,622 50,000 882 49,118 638,669 5'',047 581,622 50,000 882 49,118 (558,669) 29,918 588,587 266,000 242,999 (23,001) (25,000) (2`,000) ($558,669) 25,918 $588,587 $266,000 1,054,971 $1,084,889 242,999 ($23,001) 334,476 $577,475 7~I SPECIAL REVENUE FUNDS ENVIRONMENTAL MANAGEMENT TRANSPORTATION HOUSiN_G DEVELOPMENT Variance Variance Positive Positive Budget Actual (Negative) Budget Actual (Negative) Budget Variance Positive AcNal (Negative) $4,000 $2,012 $320,000 $22,598 ($297,402) ($1,988) $]00,000 $:'7,380 ($72,620) 113,000 72,305 (40,695) 2,578,000 1,4''9,005 (1,098,995) 510,0]3 842,607 332,594 365,000 365,060 60 ''6,457 76,457 369,000 367,072 (],928) 2,678,000 I,Sf,2,842 (1,095,158) 943,013 937,510 (5,503) 2,561,293 2,237,588 323,705 451,131 418,148 32,983 823,395 868,810 14,585 5,453,114 4,480,258 972,856 451,131 418,148 32,983 6,276,509 5,289,068 987,441 2,56],293 2,237;588 323,705 (82,131) (51,076) 31,055 (3,598,509) (3,706,226) (107,717) (1,618,280 (1,300,078) 318,202 775,000 775,000 775,000 775,000 ($82,131) (51,076) $31,055 ($2,823,509) (2,931,226) ($]07,717) ($1,618,280) 216,209 3,949,758 $165,133 $1,014,532 (1,300,078) $318,202 3,732,969 $2,432,891 (Continued) 75 CITY OF CIJPERTINO BUDGETED NON-MAJOR FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AI:D ACTUAL FOR THE FISCAL YEAR. ENDED JUNE 30, 2009 REVENUES Taxes Use of money and property Intergovernmental Charges for services Total Revenues EXPENDITURES Current: Community development Public works Capital outlay Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers (out) Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES BEGINNING FUND BALANCES (DEFICIT) ENDING FUND BALANCES SPECIAL REVENUE FUND REDEVELOPMENT AGENCY Variance Positive Budget Actual (Negative) $814,000 $1,21],128 $397,128 10,000 4,388 (5,612) 824,000 1,215,516 39],516 520,931 394,810 126,121 520,931 394,810 126,12 I 303,069 820,706 517,637 $303,069 820,706 $517,637 (67,371) $753,335 7E. INTERNAL SERVICE FUNDS The Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the City on a cost r~;imbursement basis. The concept of major funds does not extend to internal service funds because they do not do business with outside parties. For the Statement of Activities. the net revenues and 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 Assets. However, internal service funds are still presented separately in the Fund Financial Statements. Management Information Systerns -Accounts for the activities related to the maintenance and replacement of the City's technology infrastructure. Workers' Compensation -Accounts for the activities in support of the self-insured workers' compensation program. Equipment Revoh~ing -Accounts for the activities related to the maintenance and replacement of the City's vehicle fleet. Compensated Absences and Long-Term Disa,hilil}~ -Accounts for the activities related to the City's program for compensated absences payouts and long-term disability. Retiree Medical -Contains funds set aside for other post employment retirement benefits. 7~ CITY OF CUYERTINO INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET ASSETS JANE 30, 2009 Compensated Management Absences and Information Workers' Equipment Long-Term Retiree Systems Compensation _ Revolving Disability Medical Tota] ASSETS Cash and investments $1,715,827 $1,645,368 _ $1,942,052 $18,802 $7,750,374 $13,072,423 Total current assets 1,715,827 1,645,368 _ 1,942,052 18,802 7,750,374 13,072,423 Capital assets, net of accumulated depreciation 339,669 _ 795,448 1,135,117 Total Assets 2,055,496 1,645,368 _ 2,737,500 18,802 7,750,374 ]4,207,540 LIABILITIES Current Liabilities: Accounts payable and accruals 44,638 147,021 191,659 Accrued payroll and benefits 12,293 564 6,199 19,056 Claims payable 411,000 _ 411,000 Total current liabilities 56,931 411,564 _ 153,220 621,715 Non-current Liabilities: Compensated absences 21,404 9,154 30,558 Claims payable 1,157,000 1,157,000 Net OPEB Obligation _ 1,827,077 1,827,077 Total Liabilities 78,335 1,568,564 _ 162,374 1,827,077 3,636,350 NET ASSETS Invested in capital assets 339,669 795,448 1,135,1 ]7 Unrestricted 1,637,492 76,804 _ 1,779,678 18,802 5,923,297 9,436,073 Total Net Assets $1,977,161 $76,804 $2,575,126 $18,802 $5,923,297 $10,571,190 ~~- CITY OF CUl'ERTINO INTERNAL SER'JICE FUNDS COMBINING STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED JUNE 30, 2009 OPERATING REVENUES Charges for services Total Operating Revenues OPERATING EXPENSES Salaries and related expenses Materials and supplies Contractual services Insurance claims Depreciation Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Interest income Total Nonoperating Revenues (Expenses) Income (Loss) Before Transfers Transfers in Change in Net Assets BEGINNING NET ASSETS ENDING NET ASSETS Compensated Management Absences and Information Workers Equipment Long-Term Retiree Systems Compensat on Revolving Disability Medical Total $1,065,651 $305,053 $1,101,448 $68,685 $2,540,837 1,065,651 305,053 1,10],448 68,685 2,540,837 493,156 25,68 284,311 408,110 $2,475,000 3,686,275 303,162 302,958 606,120 242,771 93,795 336,566 315,6:11 63,444 379,095 157,687 _ 212,881 370,568 1,196,776 341,319 893,945 471,554 2,475,000 5,378,624 (13],125) (36,296) 207,503 (402,869) (2,475,000) (2,837,787) 28,699 29,9;4 32,741 1,830 132,]01 225,345 28,699 29,9;4 32,741 1,830 132,101 225,345 (102,426) (6,322) 240,244 (401,039) (2,342,899) (2,612,442) 332,000 _ 45,000 400,000 1,946,000 2,723,000 229,574 (6,322) 285,244 (1,039) (396,899) 110,558 1,747,587 83,126 2,289,882 19,841 6,320,196 10,460,632 $1,977,161 $76,804 $2,575,126 $18,802 $5,923,297 $]0,571,190 g ~' CITY OF CUF'ERTINO INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR END]:D JUNE 30, 2009 Compensated Management Absences and Information Wcrkers' Equipment Long-Term Retiree Systems Compensation Revolving Disability Medical Total CASH FLOWS FROM OPERATING ACTNITIES Cash received from customers $1,065,651 $305,053 $1,101,448 $68,685 $2,540,837 Cash payments to suppliers for goods and services (514,453) (:?46,890) (291,063) (63,444) ($647,923) (1,763,773) Cash payments to employees (491,585) (25,579) (353,937) (408,110) (1,279.211) Cash Flows from (used for) Operating Activities 59,613 32,584 456,448 (402,869) (647,923) (502,147) CASH FLOWS FROM NONCAPITAL FINANCING ACTNITIES Medicare retiree drug subsidy 36,043 36,043 Transfers in 332,000 45,000 400,000 1,946,000 2,723,000 Cash Flows (used for) Noncapital Financing Activities 332,000 45,000 400,000 1,982,043 2,759,043 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of capital assets (269,668) (272,039) (541,707) Cash Flows from Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Cash Flows from Investing Activities Net Cash Flows Cash and investments at beginning of year Cash and investments at end of year Reconciliation of operating income (loss) to net cash flows from operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation Change in assets and liabilities: Prepaid expenses Accounts payable and accruals Accrued payroll and benefits Compensated absences Claims Payable Net OPEB Obligation Cash Flows from Operating Activities (269,668) (272,039) (541,707) 28,699 29,974 32,741 1,830 132,101 225,345 28,699 29,974 32,741 1,830 132,101 225,345 150,644 62,558 262,150 (1,039) 1,466,221 1,940,534 ],565,183 1,582,810 1,679,902 19,841 6,284,153 11,131,889 $1,715,827 $I,ti45,368 $1,942,052 $18,802 $7,750,374 $13,072,423 ($131,125) 157,687 ($36,296) $207,503 ($402,869) ($2,475,000) ($2,837,787) 212,881 370,568 15,919 15,919 ]5,561 ,2,239) 105,690 119,0!2 2,409 119 (1,664) 864 (838) (67,962) (68,800) '' 1,000 7 ] ,000 1,827,077 1,827,077 $59,613 $:2,584 $456,448 ($402,869) ($647,923) ($502,147) 81 AGENCY ]~ UNDS All Agency Funds, representing all fiduciary funds of the City, are custodial in nature and do not involve measurement of results of operations. Such funds have no equity since any assets are due to individuals or other entities at some future time. These funds are presented separately from the Governmental and Fund Financial Statements. 82 CITY OF CUPERTINO Combining Statement of Changes in Assets and Liabilities All Agency funds All Agency Funds Assets Cash and investments Liabilities Deposits For the fiscal year ended June 30, 2009 Balance June 30, 2008 Additions Deletions Balance June 30, 2009 $117,308 $1,986 $115,322 $117,308 $1,986 $115,322 83 STA TISTICA.~ SECTION gs STATISTICAL SECTION This part of the City's Comprehensive Annua( Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. In contrast to the financial section, the statistical section information is not subject t~~ independent audit. 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: 1. Net Assets by Component 2. Changes in Net Assets 3. Fund Balances of Governmental Funds 4. Changes in Fund Balance of Governmental Func.s Revenue Capacity These schedules contain information to help the reader assess the City's most significant own-source revenues, properly tax: 1. Assessed and Estimated Actual Value of Taxable Property 2. Property Tax Rates, All Overlapping Governme~its 3. Principal Property Taxpayers 4. Property Tax Levies and Collections Debt Capacity These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future: 1. Ratio of Outstanding Debt by Type 2. Computation of Direct and Overlapping Debt 3. Computation of Legal Bonded Debt Margin 4. Ratio of General Bonded Debt Outstanding Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place: 1. Demographic and Economic Statistics 2. Principal Employers Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs: 1. Full-Time Equivalent City Government Employees by Function 2. Operating Indicators by Function/Program 3. Capital Asset Statistics by Function/Program Sources Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. The City implemented GASB Statement 34 in 2002-03; schedules presenting government-wide information include information beginning in that year. 8'7 CITY OF CUI'ERTINO NET ASSETS BY (~OMPONENT LAST SIX FISCAL YEARS (Accrual basis of accounting) Governmental Activities Invested in capital assets, net of related debt Restricted Unrestricted Total governmental activities net assets 20(13 $79,705,041 9,081,791 24,472,451 $113,259,283 Fiscal Year Ended June 30 2004 2005 2006 $85,425,753 $86,530,017 $83,064,879 7,416,930 7,291,925 8,329,671 18,541,954 21,202,795 26,916,679 $111,384,637 $115,024,737 $118,311,229 Business-Type Activities Invested in capital assets, net of related debt Unrestricted Total business-type activities net assets Primary Government Invested in capital assets, net of related debt Restricted Unrestricted Total primary government net assets 688,331 6,573,514 $7,261,845 80,393,372 9,081,791 31,045,965 $120,521,128 645,290 7,314,068 $7,959,358 578,962 6,028,989 $6,607,951 497,681 6,291,439 $6,789,120 86,071,043 7,416,930 25,856,022 $119,343,995 87,108,979 7,291,925 27,231,784 $121,632,688 83,562,560 8,329,671 33,208,118 $125,100,349 88 CITY OF CUPERTINO NET ASSETS BY I~OMPONENT LAST SIX FISCAL YEARS (Accrual basis of accounting) 2007 2008 2009 $80,343,053 $85,173,998 $103,341,905 9,265,565 9,926,770 6,661,074 39,243,717 43,242,639 33,290,050 $128,852,335 $138,343,407 $143,293,029 467,416 84,126 136,127 6,977,436 7,849,147 8,949,142 $7,444,852 $7,933,273 $9,085,269 80,810,469 85,258,124 103,478,032 9,265,565 9,926,770 6,661,074 46,221,153 51,091,786 42,239,192 $136,297,187 $146,276,680 $152,378,298 89 CITY OF CUI'ERTINO CHANGES IN NET ASSETS LAST SEVEN FISCAL YEARS (Accrual Basis of Accounting) Fiscal Year Ended June 30 2003 2004 2005 2006 Expenses Governmental Activities: Administration Law Enforcement Public Information Administrative Services Recreation Services Community Development Public Works Interest on Long Term Debt Total Governmental Activities Expenses Business-Type Activities: Resource Recovery Blackberry Farm Cupertino Sports Center Recreation Programs Senior Center Total Business-Type Activities Expense Total Primary Government Expenses $1,635,846 $1,430,523 $1,280,339 $1,354,543 6,041,831 6,090,038 6,179,326 6,577,199 763,254 710,754 824,317 9,14,024 :3,556,129 3,923,377 3,750,174 4,208,389 :?,156,972 2,234,509 2,173,936 2,359,966 :3,234,456 2,678,109 3,269,475 4,541,965 1 "1,534,128 15,546,461 14,585,232 16,384,026 3,796,472 2,317,837 2,289,526 2,262,913 33,719,088 34,931,608 34,352,325 38,603,025 1,897,425 1,793,083 2,927,060 2,101,198 1,497,420 1,353,362 1,341,712 1,302,855 ,130,077 1,352,509 1,452,957 1,448,048 !,554,834 1,590,302 1,689,436 1,729,194 570,412 493,244 438,440 588,818 (1,650,168 6,582,500 7,849,605 7,170,113 $4;1,369,256 41,514,108 42,201,930 45,773,]38 Program Revenues Governmental Activities: Charges for Services: Administration Law Enforcement Administrative Services Recreation Services Community Development Public Works Operating Grants and Contributions Capital Grants and Contributions Total Government Activities Program Revenues Business-Type Activities: Charges for Services: Resource Recovery Blackberry Farm Cupertino Sports Center Recreation Programs Senior Center --- --- --- $23,201 $468,110 $838,457 $694,952 722,164 294,577 16,650 --- --- 161,969 148,337 163,462 240,074 ,624,181 1,903,277 4,164,792 5,286,336 348,905 325,959 286,280 201,250 :'.,388,199 2,496,689 593,b57 3,403,762 965,211 3,612,102 2,164,907 522,950 (1,251,152 9,341,471 8,068,050 10,399,737 :'.,397,439 2,398,819 2,395,282 2,203,127 ,479,312 1,301,092 1,218,958 1,155,986 ,109,799 1,184,860 1,385,837 1,419,672 '.,872,004 1,910,599 2,167,705 2,331,409 484,530 456,211 473,787 704,390 90 CITY OF CUI'ERTINO CHANGES IN NET ASSETS LAST SEVEN FISCAL YEARS (Accrual Basis of Accounting) 2007 2008 2009 $1,675,443 $1,636,284 $1,769,500 7,148,187 7,679,467 8,804,195 1,186,929 1,216,164 1,624,210 3,874,003 3,923,217 4,001,738 2,517,725 3,845,873 4,206,343 4,090,959 4,059,740 6,177,879 16,230,274 16,569,310 18,104,649 2,239,657 2,183,403 2,118,714 38,963,177 41,113,458 46,807,228 2,122,805 2,056,061 1,998,184 975,064 450,206 495,845 1,623,839 1,547,402 1,594,325 1,830,401 1,853,217 1,739,892 771,570 --- --- 7,323,679 5,906,886 5,828,246 46,286,856 47,020,344 52,635,474 $3,618 $10,711 2,240 1,031,736 799,350 869,295 193,752 847,424 80],280 4,768,026 3,551,478 3,586,993 200,969 13 5,942 15 7,311 3,048,512 2,392,987 4,014,036 3,496,095 5,696,124 4,759,485 12,742,708 13,434,016 14,190,640 2,254,416 2,254,790 2,100,704 1,101,564 640,771 596,944 1,655,169 1,605,545 1,732,282 2,396,720 2,493,214 2,364,037 690,603 --- --- 91 CITY OF CUPERTINO CHANGES IN NIET ASSETS LAST SEVEN FISCAL YEARS (Accrual Basis of Accounting) Fiscal Year Ended June 30 2003 2004 2005 2006 Operating Grants and Contributions 61,441 84,660 28,860 135,539 Total Business-Type Activities Program Revenue .,404,525 7,336,241 7,670,429 7,950,123 Total Primary Government Program Revenues 1?,594,236 16,677,712 15,738,479 18,349,860 Net (Expense) Revenue Governmental Activities Business-Type Activities Total Primary Government Net Expense -3:,467,936 -25,590,137 -26,284,275 -28,203,288 754,357 753,741 -179,176 780,010 -$3],713,579 -$24,836,396 -$26,463,451 -$27,423,278 General Revenues and Transfers Governmental Activities: Taxes: Property Taxes Property Tax In Lieu of Motor Vehicle Fee (1) Incremental Property Tax Sales Taxes Transient Occupancy Tax Utility User Tax Franchise Tax Other Taxes Transfers Intergovernmental Investment Earnings Miscellaneous Gain on Sale of Land Total Government Activities Business-Type Activities: Investment Earnings Transfers Total Business-Type Activities Total Primary Government Change in Net Assets Government Activities Business-Type Activities Total Primary Government $x•,100,856 $3,944,459 $4,296,940 $4,728,811 --- --- 2,930,000 3,569,300 25,831 76,570 15,974 185,676 f~,843,792 8,654,185 9,224,661 10,671,642 1,679,225 1,632,514 1,790,917 2,054,904 ,566,265 2,636,264 2,705,888 2,809,587 :,175,913 2,194,651 2,217,313 2,353,575 1,110,545 1,248,437 3,146,516 2,534,393 225,000 175,000 1,388,000 800,000 ,215,866 2,460,137 978,059 -300,039 ],207,017 526,560 684,952 669,820 79,280 166,714 545,155 189,262 --- --- --- 1,222,849 25,229,590 23,715,491 29,924,375 31,489,780 211,093 95,127 215,769 201,159 -225,000 -175,000 -1,388,000 -800,000 106,496 -56,228 -1,172,231 -598,841 $2.x,336,086 $23,659,263 $28,752,144 $30,890,939 -$'x,238,346 -1,874,646 3,640,100 3,286,492 860,853 697,513 -1,351,407 181,169 -$ti,377,493 -$1,177,133 $2,288,693 $3,467,661 (1) Replaced the reduced motor vehicle license fee (an intergovernmental revenue) in 2005. 92 CITY OF CUPERTINO CHANGES IN NET ASSETS LAST SEVEN FISCAL YEARS (Accrual Basis of Accounting) 2007 2008 2009 14,343 14,309 14,471 8,112,815 7,008,629 6,808,438 20,855,523 20,442,645 20,999,078 -26,220,469 -27,679,442 -32,616,588 789,136 1,101,743 980,192 -$25,431,333 -$26,577,699 -$31,636,396 $6,529,772 $6,941,910 $7,491,965 3,652,509 3,894,502 4,299,902 187,276 220,267 1,211,128 l 1,252,341 13,154,749 14, l 39,190 2,511,184 2,711,590 2,140,274 3,011,755 3,175,724 3,205,073 2,537,018 2,547,439 2,618,125 2,661,449 1,709,892 1,317,767 500,000 992,150 --- 364,261 266,789 171,621 1,752,177 1,451,973 889,823 291,423 103,529 81,342 1, 510,410 --- --- 36,761,575 37,170,5]4 37,566,210 366,596 378,828 171,804 -500,000 -992,150 --- -133,404 -613,322 171,804 $36,628,171 $36,557,192 $37,738,014 10,541,106 9,491,072 4,949,622 655,732 488,421 1,151,996 $11,196,838 $9,979,493 6,101,618 93 CITY OF CUYERTINO FUND BALANCES OF GO~~ERNMENTAL FUNDS LAST SEVEN FISCAL YEARS (Modified Accrual Ba;~is of Accounting) :Fiscal Year Ended June 30 2003 2004 2005 2006 2007 General Fund Reserved Unreserved Total General Fund All Other Governmental Funds Reserved Unreserved, reported in: Special Revenue Funds Capital Project Funds Total All Other Governmental Funds $3,782,689 $3,897,270 $3,864,969 $2,931,046 $2,711,586 13,099,033 12,632,286 18,313,846 23,866,568 23,634,874 $16,881,722 $16,529,556 $22,178,815 $26,797,614 26,346,460 $20,891,656 $9,784,645 $2,701,067 $4,925,900 $8,555,042 3,976,517 3,736,446 3,618,814 6,249,004 6,844,632 6,576,208 2,236,730 1,663,033 -1,208,341 -472,405 $31,444,381 $15,757,821 $7,982,914 $9,966,563 $14,927,269 The City implemented GASB Statement 34 in fiscal year 2003 and has elected to show the above information from that date. 94 CITY OF CUI'ERTINO FUND BALANCES OF GO~~ERNMENTAL FUNDS LAST SEVEN FISCAL YEARS (Modified Accrual Ba:>is of Accounting) 2008 2009 $2,668,914 $2,325,283 16,997,569 19,871,574 $19,666,483 $22,196,857 $11,240,851 $4,180,483 7,270,331 3,692,187 7,631,866 968,077 $26,143,048 $8,840,747 95 CITY OF CUP'ERTINO CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS LAST SEVEN FISCAL YEARS (Modified Accrual Basis of Accounting) Fiscal Year Ended June 30 2003 2004 2005 2006 Revenues Taxes Use of Money and Property Intergovernmental Licenses and Permits Charges for Services Fines and Forfeitures Other Revenue $20,200,250 $21,004,405 $23,614,623 $25,616,553 1,910,503 940,963 1,119,399 1,607,837 6,318,523 7,236,955 5,567,266 5,896,167 1,410,572 1,540,760 2,896,000 3,614,953 855,844 930,050 1,568,935 2,143,729 550,377 723,748 559,791 629,586 59,219 1,009,260 1,792,795 245,176 Total Revenues Expenditures Current: Administration Law Enforcement Public Information Administrative Services Recreation Services Community Development Public Works Capital Outlay Debt Service Principal Repayment Interest and Fiscal Charges Total Expenditures Excess (deficiency) of Revenues Over (under)expenditures Other Financing Sources (Uses) Bond Proceeds Proceeds from Sale of Land Payment to Refunded Debt Escrow Agent Transfers In Transfers Out Total Other Financing Sources Net Change in Fund Balances Debt service as a percentage of noncapital expenditures 31,305,288 33,386,141 37,118,809 39,754,001 1,474,924 1,222,581 6,015,036 5,950,849 703,431 686,798 3,475,991 3,758,806 .2,104,167 2,141,431 3,177,406 2,563,242 10,440,335 9,322,086 5,812,856 20,246,237 1,162,096 6,144,695 758,314 3,671,303 2,121,366 3,156,908 9,637,314 10,025,935 1,236,390 6,499,911 853,484 4,103,497 2,302,995 4,467,655 10,386,055 2,771,502 5,925,948 1,220,000 1,245,000 1,270,000 2,939,757 2,317,837 2,289,526 2,262,913 4•I,069,851 49,429,867 40,212,457 36,154,402 -12,764,563 -16,043,726 -3,093,648 3,599,599 57,677,519 --- -3'x,208,286 2.x,775,538 -2.x,840,538 --- 2,422,849 4,765,307 7,904,763 8,364,084 -4,760,307 -6,936,763 -7,784,084 1 ~g,404,233 5,000 968,000 3,002,849 $:x,639,670 -$16,038,726 -$2,125,648 $6,602,448 25.3% 11.6% 11.4% 10.6% The City implemented GASB Statement 34 in fiscal year 2003. This calculation is included only for fiscal years from that date. 1) Noncapital expenditures is total expenditures less capital assets added each year to statement of net assets. 96 CITY OF CLIPERTINO CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS LAST SEVEN Fl[SCAL YEARS (Modified Accrual Basis of Accounting) 2007 2008 2009 $28,903,993 $34,589,139 $36,395,950 2,169,977 2,490,444 1,300,508 8,200,519 8,285,280 6,896,394 3,325,844 2,656,017 2,740,463 2,062,067 1,728,099 1,707,533 926,310 722,087 761,320 154,235 95,388 80,835 45,742,945 50,566,454 49,883,003 1,287,101 6,975,517 1,121,437 3,715,994 2,403,296 3,969,837 10,477,727 4,292,169 1,351,273 7,456,661 1,169,247 3,797,156 3,745,244 3,931,055 11,137,935 8,334,093 1,336,921 8,133,168 1,486,443 3,634,043 3,789,260 5,841,428 11,914,584 22,262,369 1,295,000 1,355,000 1,415,000 2,239,657 2,183,403 2,118,714 37,777,735 44,461,067 61,931,930 7,965,210 6,105,387 -12,048,927 1,663,842 --- --- 9,658,000 19,136,165 5,035,925 -14,777,500 -20,705,750 -7,758,925 -3,455,658 -1,569,585 -2,723,000 4,509,552 4,535,802 -14,771,927 10.6% 9.8% 8.9% !~7 CITY OF CUPERTINO ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Total Estimated Direct Fiscal Total Assessed Ful] Market Tax Year Secured Unsecured Exemptions Valuation Valuation Rate 2000 56,046.604.382 5600.020,466 573,148.676 56.553.278, ] 1 ~ 56.553,278.11 ~ 0.06~/~ 2001 S6,986,833,011 5416,844,493 567,242,848 57,407,208,836 57,407,208,836 0.04~7~ 2002 57.836,349,904 5634,624,124 582,089.594 58,662,981.335 58,662,981,335 0.04% 2003 58.119,969.820 5565,212.987 576,795?94 58,685.515.766 58,685,515.766 0.069 2004 58,689.658,802 5530.097.614 580,704.482 59.219.879,996 59? 19,879,996 0.049 2006 59.159,184,070 5367.378,773 580,678.889 59,626.841379 S9,526,841,379 0.069 2006 59.942.314.167 5 350,391.447 588.612.732 5l 0.292,966,413 510,292,965,413 0.069 2007 510,794,991.704 5381,307.801 594.957.979 511,176,113.115 511.176,513,115 0.069c 2008 S1 ],612.949,962 5417,564,226 596,640,910 511,930.51-1,178 5] 1.930,514,178 0.069 2009 512.637.622,059 5133.413.208 599.910.894 513. ] 72.425.287 513, l 72,425,287 0.07% X14,000.000.000 -------------___-__ ----______.____.__ _.. _ s1?.oo0,000,000 X10.000,000.000 ~a,ooo,ooo.ooo ~s,ooo,ooo,ooo X4.000.000.000 s2.ooo.ooo.ooo ~o 3000 2001 2002 '_'003 2004 200> 2006 2007 2008 2009 ^ S:.'ured Propcn~ ^ Unsecured Ympem Source: HdL Companies 98 CITY OF CUPERTINO PROPERTY TAX RATES ALL OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Basic Levy 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1,00000 1.00000 1.00000 1.00000 County Library Retirement Lery 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 0.00240 County Retirement Levy 0.03190 0.03560 0.03640 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 0.03880 Cupertino 1995 (No. 10) 0.02540 0.02640 0.02640 0.02640 0.02530 0.02610 0.02590 0.02010 0.02270 0.02030 Cupertino 2001 0.00000 0.00000 0.02110 0.00650 0.01040 0.00990 0.00910 0.00880 0.01100 0.01030 El Camino Hopital 2003 0.00000 0.00000 0,00000 0.00000 0.00000 0.00000 0.00000 0.01290 0.01290 0.01290 Foothill College 2006 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.02360 0.00000 0.00170 Foothill/DeAnza College 1999 0.00000 0.01400 0.01150 0.01080 0.01100 0.01290 0.01 190 O.OI 100 0.01130 0.01060 Fremont High 1998 0.02180 0.02390 0.02040 0.02460 0.02490 0.02680 0.02600 0.02430 0.02410 0.02190 Fremont Uniori High 2008 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0,00000 0,01200 Los Gatos/Saratoga High 1998 0.02390 0.03200 0.02240 0.05300 0.04170 0.04090 0.03710 0.03510 0.03450 0.03300 Santa Clara Unified 1997 (No. 1) 0,02250 0.01740 0.03660 0.02520 0.02630 0.03440 0.03260 0.02970 0.02680 0.02320 Santa Clara Unified 2004 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.05350 0.05000 0.00030 0.05110 Saratoga 1997 (No. 3) 0.03730 0.03650 0.02850 0.03240 0.03300 0.03390 0.03160 0.03120 0.03220 0.03210 Saratoga 2002 0.00000 0.00000 0.00000 0.00630 0.00550 0.00220 0.00400 0.00390 0.00410 0.00420 Scvwd Zone W-1 Bond 0.00170 0.00160 0.00090 0.00090 0.00120 0.00060 0.00090 0.00020 0.00040 0.00020 Scvwd State Watei• Project 0.00680 0.00590 0.00530 0.00630 0.00750 0.00860 0.00690 0.00700 0.00670 0.00590 West Valle}~ College 2004 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.01400 0.01260 0,01180 0.00320 Total Direct & Overlapping Rates 1.17370 1.19570 1.21010 1.23360 1.22800 1.23750 1.29470 1.31160 1.24000 1.28380 City's Share of 1 % Levy 0.05725 0.05725 0.05725 0.05725 0.05725 0.05725 0.05725 0.05725 0.05725 0.0566 Redevelopment Rate 1.04500 1.04840 1.04990 1.05040 1.04900 ].04840 1,04830 1.04730 Total Direct Rate 0.01697 0.01694 0.02296 0.01694 0.01733 0.01673 0.01733 0.05740 0.05867 0.06268 Source: HdL, Coren & Cone 99 CITY OF CUPERTINO PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND NINE YEARS AGO 2009 Percentage of 2000 Percentage of Assessed Total Assessed Assessed Total Assessed Taxpayer Valuation Valuation Valuation Valuation Apple Inc. $610,763,043 4.83% $77,486,088 1.17% Hewlett Packard 306,879,442 2.43% 390,949,067 6.37% Tandem Computer --- 0.00% 198,452,582 3.23% Cupertino Gateway Partners --- 0.00% 130,102,917 2.12% Symantec 134,991,638 1.07% --- 0.00% Cupertino City Center 208,000,000 1.65% 70,282,669 1.15% Teachers Insurance & Annuity --- 0.00% 87,309,541 1.42% Irvine Company LLC 69,693,491 0.55% 57,899,508 0.94% ECI Tvvo Results LLC 63,240,000 0.50% --- 0.00% GKK Cupertino Owner 89,777,290 0.71 % --- 0.00% Cupertino Village 68,042,160 0.54 --- 0.00% Villa Serra Apartments 58,335,514 0.46 --- 0.00% RP SCS Cupertino Hotel 54,280,444 0.43 --- 0.00% Compaq Computer --- 0.00% 109,501,504 1.65% RWC LLC --- 0.00% 57,037,674 93.00% Sumitomo Bank Leasing & Finance _ 0.00% 78,776,148 1.28% $1,664,003,022 11.74% $],257,797,698 112.33% Source: The HdL Companies 100 CITY OF CUPERTINO PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Percent of Percent Delinquent Total Total Tax Fiscal Total Current Tax of Levy Tax Tax Collections Year Tax Lew Collections Collected Collections Collections to Tax Lew 2000 $3,075,546 $3,075,546 100.00% $0 $3,075,546 100.00% 2001 $3,209,623 $3,209,623 100,00% $0 $3,209,623 100.00% 2002 $4,024,705 $4,024,705 100.00% $0 $4,024,705 100.00% 2003 $4,126,687 $4,126,687 100.00% $0 $4,126,687 100.00% 2004 $4,021,029 $4,021,029 100.00% $0 $4,021,029 100.00% 2005 $4,312,914 $4,312,914 100.00% $0 $4,312,914 100.00% 2006 $4,914,487 $4,914,487 100,00% $0 $4,914,487 100.00% 2007 $6,717,048 $6,717,048 100.00% $0 $6,717,048 100.00% 2008 $7, 162,177 $7,162,177 100.00% $0 $7,162,177 100.00% 2009 $8,703,093 $8,703,093 100.00% $0 $8,703,093 100.00% Source; County of Santa Clara, Department of Finance 101 CITY OF CUPERTINO RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Governmental Activities and Primary Government Percentage of Estimated % of Fiscal Certificates 1915 Actual Market Value Personal Year of Participation Act Bonds Total of Taxable Property Per Capita Income (1) 2000 47,005,000 --- 47,005,000 0.72% 904 --- 2001 44,745,000 --- 44,745,000 0.60% 885 --- 2002 42,370,000 --- 42,370,000 0.49% 838 --- 2003 54,770,000 --- 54,770,000 0.63% 1,053 --- 2004 53,550,000 --- 53,550,000 0.58% 1,018 --- 2005 52,305,000 --- 52,305,000 0.55% 994 --- 2006 51,035,000 --- 51,035,000 0.50% 948 --- 2007 49,740,000 --- 49,740,000 0.45% 902 --- 2008 48,385,000 --- 48,385,000 0.41% 877 1.53% 2009 46,970,000 --- 46,970,000 0.36% 841 1.58% (1) Not available prior to 2008 102 CITY OF CUPERTINO COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT JUNE 30, 2009 2008-09 Assessed Valuation: $13,172,425,287 Redevelopment Incremental Valuation: 81,393,204 Adjusted Assessed Valuation: $13,091,032,083 Total Debt City's Share of OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/09 % Applicable (1) Debt 6/30/09 Santa Clara County $350,000,000 4.832% $ 16,912,000 Santa Clara Valley Water District, Zone W-I 1,390,000 4.918 68,360 Foothill-DeAnza Community College District 482,349,288 13.999 67,524,077 West Valley Community College District 215,334,692 0.613 1,320,002 Santa Clara Unified School District 282,105,000 1.925 5,430,521 Fremont Union High School District 208,080,000 29.868 62,149,334 Cupertino Union School District 124,159,021 49.816 61,851,058 EI Camino Hospital District 145,820,000 1.4]2 2,058,978 Santa Clara Valley Water District Benefit Assessment 161,485,000 4.832 7,802,955 City of Cupertino 1915 Act Bonds 65,000 100. 65,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $225,182,285 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Santa Clara County General Fund Obligations $862,655,000 4.832% $ 41,683,490 Santa Clara County Pension Obligations 389,174,822 4.832 18,804,927 Santa Clara County Board of Education COP 14,530,000 4.832 702,090 Foothill-De Anza Community College District COP 25,605,000 13.999 3,584,444 Santa Clara Unified School District COP 12,980,000 1.925 249,865 Cupertino Union School District COP ],215,000 49.816 605,264 City of Cupertino Certificates of Participation 48,385,000 100. 48,385,000 Santa Clara County Vector Control District COP 4,125,000 4.832 199,320 Midpeninsula Regional Open Space Park District COP 116,673,031 7.788 9,086,496 TOTAL DIRECT AND OVERLAPPING GENERAL F UND DEBT $123,300,896 COMBINED TOTAL DEBT $348,483,181 (2) (1) Percentage of overlapping agency's assessed valuation located within boundaries of the city. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non- bonded capital lease obligations. Ratios to 2008-09 Assessed Valuation: Total Overlapping Tax and Assessment Debt ,1.71 Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($48,385,000) ..........0.37% Combined Total Debt .......................................2.66% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/09: $0 Source: Municipal Resource Consultants 103 CITY OF CUPERTINO COMPUTATION OF LEGAL BONDED DEBT MARGIN JUNE 30, 2008 Assessed Valuation: Secured property assessed value, net of exempt real property $12,637,622,059 Adjusted valuation - 25% of assessed valuation Debt limit - 15% of adjusted valuation Amount of Debt Subject to Limit: Total Bonded Debt $46,970,000 Less: Certificates of Participation not subject to debt limit - 46,970,000 Amount of debt subject to limit Legal Bonded Debt Margin 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 2000 245,747,930 0 245,747,930 0 2001 277,770,332 0 277,770,332 0 2002 321,111,800 0 321,111,800 0 2003 325,706,841 0 325,706,841 0 2004 345,745,500 0 345,745,500 0 2005 357,745,500 0 357,256,552 0 2006 376,159,758 0 376,159,752 0 2007 408,373,114 0 408,373,114 0 2008 431,735,623 0 431,735,623 0 2009 473,910,827 0 473,910,827 0 $3;159,405,514 $473,910,827 0 $473,910,827 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 198 ] -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 tl~e State of California for local governments located within the state. Source: City Finance Department 104 CITY OF CUPERTINO RATIO OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Ratio of General Fiscal Assessed Genera] Bonded Debt Bonded Debt to Year Population Value Bonded Debt Per Capita Assessed Value 2000 52,000 $6,553,278,115 --- --- --- 2001 50,546 $7,407,208,836 --- --- --- 2002 50,546 $8,562,981,335 --- --- --- 2003 52,000 $8,685,515,766 --- --- --- 2004 52,628 $9,219,879,996 --- --- --- 2005 52,600 $9,526,841,379 --- --- --- 2006 52,600 $10,292,965,413 --- --- --- 2007 55,162 $1 ],176,513,] IS --- --- --- 2008 55,162 $11,512,949,952 --- --- --- 2009 55,840 $13,172,425,287 --- --- --- Source; (1) State of Ca lifornia, Department of Finance, Demographics Research Unit (2) County of S anta Clara and City Administrative Services 10~ CITY OF CUPERTINO DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Total Per Capita School Unemploy- Fiscal County Personal Personal Enrollment ment Year Population Population Income (4) Income (4) Grades 9-12 Rate 2000 52,000 1,682,585 ----- ----- 8,822 1.3% 2001 50,546 1,674,634 ----- ----- 8,822 2.4% 2002 50,546 1,668,309 ----- ----- 9,063 4.6% 2003 52,000 1,675,915 ----- ----- 9,108 5. I 2004 52,600 1,656,128 ----- ----- 9,147 3.7% 2005 52,600 1,759,585 ----- ----- 9,138 3.2% 2006 53,840 1,773,258 ----- ----- 9,875 2.9% 2007 55,162 1,794,522 ----- ----- 9,823 3.0% 2008 55,162 1,748,976 $3,153,407,456 $47,672 10,300 3.8% 2009 55,840 1,857,621 $2,960,056,852 $44,749 10,300 7.7% Source: (1) State of California, Department of Finance, Demograph ics Research Unit (2) Fremont Union High School District (3) Department of Employment Statistics (4) Not available prior to 2008 City Population of County 3.09% 3.02% 3.03% 3.10% 3.18% 2.99% 3.04% 3.07% 3.15% 3.01 106 CITY OF CUPERTINO PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO (1) 2008-09 1999-00 Percentage Percentage Number of of Total City Number of of Total City Employer Employees Employment (3) Employees Employment Apple, Inc. 21,600 ---(2) 3,000 11,45% Symantec 17,401 --- (2) 1,300 4.96% Oracle 8,000 --- (2) 0 0.00% Hewlett-Packard 3,000 13.33% 3,500 13.36% DeAnza College Not Avail. 0.00% 3,000 1 1,45% Fremont Union High School District Not Avail. 0.00% 722 2.76% Durect Corporation 171 0.76% 0 0.00% Arc Sight Inc. 400 1.78% 0 0,00% Chordiant Software 285 1.27% 0 0.00% Health Care Center at the Forum 250 I.11% 0 0.00% Trend Micro Inc. 250 I ,11 % 0 0.00% Target 220 0.98% 0 0.00% Tandem Computers 0 0.00% 3,000 11.45% Cupertino Union School District Not avail. 0.00% 1,400 5.34% Sears Not avail. 0.00% 294 1.12% JC Penney Not avail. 0.00% 280 1.07% Dakota Brothers 200 0.89% 0 0.00% (1) The City was able to obtain histori cal data only back to fiscal year 1999-00. (2) Because employees outside of the City are included, percentage of City employment is not included. (3) Total city labor force is 22,500 in 2009 accordi ng to the California Em ployment Deve lopment Dept. Other Source: InfoUSA.com 107 CITY OF CUPERTINO FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 80.00 70.00 60.00 ^ Council/Commissions 50.00 ^ Administration Public/Env. Affairs 40.00 ^ Administrative Services ^ Parks & Recreation 30.00 ^Community Development ^ Public Works 20.00 ^ Redevelopment Agency 10.00 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Function Council/Commissions Administration Public/Env. Affairs Administrative Services Parks & Recreation Community Development Public Works Redevelopment Agency 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0.50 0.50 0.50 0.80 0.80 0.80 1.40 1.40 1.40 1.47 4.85 4.85 4.60 4.70 4.65 4.70 4.30 4.30 4.85 4.90 4.15 4.15 4.15 4.40 4.40 4.40 5.55 6.50 7.32 6.95 18.90 17.90 19.90 20.30 20.30 20.35 21.63 21.83 22.33 22.33 24.65 28.65 35.15 32.63 33.13 32.13 31.96 28.76 30.77 30.78 18.95 18.95 19.95 20.75 20.75 19.34 20.47 23.68 23.78 21.86 66.00 69.00 70.00 70.22 70.22 71.22 71.13 71.13 72.30 72.59 0.00 0.00 0.00 0.00 0.00 0.32 0.92 1.42 1.92 1.87 Source: City of Cupertino Budget 108 NOTES 109 CITY OF CUPERTINO OPERATING INDICATORS BY FUNCTION/PROGRAM LAST FIVE FISCAL YEARS (1) Function/Pro~ram Public Information: Access Cupertino Public Safety Sheriff Response: Priority One Priority Two Priority Three Public Works: Street Sweeping Street Maintainence Culture & Recreation: Teen Center Memberships Teen Dances Sports Center Memberships Senior Center Memberships 2005 2006 2007 3 Days 3 Days 3 Days 5.37 Min. 4.94 Min. 4.94 Min. 8.61 Min. 8.09 Min. 7.15 Min. 18.92 Min. 16.74 Min. 15.82 Min. 696 Curb Miles 696 Curb Miles 696 Curb Miles 24 Hrs of Call 24 Hrs of Call 24 Hrs of Call 441 550 510 10 10 9 916 1,021 1,336 2,000 3,100 1,93 5 Community Development: Approved Building Plan Sets Discretionary Land Use Applications Public Notice of Upcoming Projects Administrative Services: Accounts Payable Processing Business License Renewal Certificates Duplication Requests Recruitments Within 5 Days Within 5 Days Within 5 Days Within 21 Days Within 21 Days Within 21 Days Within 10 Days Within 10 Days Within 10 Days 5 Days 5 Days 5 Days 3 Days 3 Days 3 Days 1 Day 1 Day 1 Day 60 Days 45 Days 45 Days (1) Statistical information was not tracked prior to 2005. 110 CITY OF CUPERTINO OPERATING INDICATORS BY FUNCTION/PROGRAM LAST FIVE FISCAL YEARS (1) 2008 2009 3 Days 3 Days 5.83 Min. 3.88 Min. 7.95 Min. 5.94 Min. 15.73 Min, 9.40 Min. 696 Curb Miles 696 Curb Miles 24 Hrs of Call 24 Hrs of Call 444 400 9 6 1,419 1,700 2,110 2,243 Within 5 Days Within 5 Days Within 21 Days Within 21 Days Within 10 Days Within 10 Days 5 Days 5 Days 3 Days 3 Days 1 Day 1 Day 45 Days 45 Days 111 CITY OF CUPERTINO CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program 2000 2001 2002 2003 2004 2005 2006 Public Works: Miles of Streets 450 450 450 450 450 450 450 Streetlights 3,250 3,250 3,250 3,250 3,250 3,250 3,250 Traffic Signals 39 39 39 39 39 39 39 Culture & Recreation: City Parks ] 5 15 15 15 15 15 15 City Pat•k Acreage (1) 150.8 150.8 150.8 150.8 150.8 150.8 150.8 City Trails 1 l 1 1 l 1 1 Golf Courses 1 l 1 1 1 1 ] Boathouse 1 1 1 1 1 1 1 Community Center 1 1 1 1 1 I 1 Community Hall 0 0 0 0 0 1 I Senior Center ] 1 1 1 I 1 1 Sports Center 1 1 1 1 1 l 1 Swimming Pools 1 1 1 1 I 1 I Tem~is Courts 17 17 17 17 17 17 17 Sports Fields 1 ] ] l I 1 1 City Library l 1 1 I 1 1 1 112 CITY OF CUPERTINO CAPITAL ASSET STATISTICS BY FUNCTIONlPROGRAM LAST TEN FISCAL YEARS 2007 2008 2009 450 450 450 3,250 3,250 3,250 39 39 39 IS IS l5 150.8 150.8 150.8 1 1 1 l 1 l i 1 1 1 1 1 1 1 1 1 1 1 1 l 1 1 1 1 l7 l7 17 1 1 1 1 ] 1 113 NOTES 114 COMMUNITY PROFILE 115 NOTES 116 ~stor~ Cupertino o~~,~es its name and earliest mention in recorded history to the 1776 expedition led by the Spaniard. Don Juan Bautista de Anza, from Sonora, Mexico to the Port of San Francisco to found the presidio of St. Francis. Leaving the majority of the party of men, ~~~omen, and children in Monterey to rest from their tra~~els. deAnza, his diarist and cartographer, PeU-us Font. and I8 other n~~en pressed on through the Santa Clara Valley in ]ate March to their San Francisco destination. With the expedition encamped in ~~.~hat is now Cupertino, Font christened the creek ^ext to the encampment the An-oyo San Joseph Cupertino in honor of his patron, San Guiseppe (San Joseph) of Cupertino, Italy. The arroyo is now kno~~,•n as Stevens Creek. The village of Cupertino sprang up at the crossroads of Saratoga- ~ ~ ~ '~ ~ ~= Sunntiwale Road (now DeAnza Boulevard) and Stevens Creek ~ ~.. ...__.'~ "* ~ ~~~. ,_a Boulevard. It ~~ as first kno« n as West Side: but by 1898 the post office at the Crossroads needed a ne~~~ name to distinguish it from other similarly named to~~ ns. John T. Doyle, a San Francisco lawyer and historian, had given the name Cupertino to his «inery in recognition of the name besto~~ed on the nearby creek b_y Petrus Font. )n 1904 the name ~~ as applied to the Crossroads and to the post office ~a~hen the Home Union Store incorporated under the name. The Cupertino Stores, Inc. Many of Cupertino's pioneer European settlers planted their land in grapes. Vineyards and wineries proliferated on Montebello Ridge, on the lower foothills. and on the flat lands below. After 1906 a lot more tha~~ grape gr0\~"lIlg «as going on in Cupertino. Orchards were thriving and new businesses ~~ere being started. In the late 1940's Cupertino ~~-as s~~~ept up in Santa Clara Valley's post«ar population explosion. Concerned by unplanned development, higher ta?;es, and piecemeal annexation to adjacent cities, Cupertino's COI7111lulllty leaders began a drive in 1954 for incorporation. Cupertino rancher Norman Nathanson, the Cupertino - Monta Vista Improvement Association, and the Fact Finding Comntittee played important roles in this movement. Incorporation was approved in the September 27, 1955 election. Cupertino officially became Santa Clara Count}''s 13`'' City on October 10, 1955. A major nulestone in Cupertino's development ~~as the creation by some of the city's largest landowners of Vallco Business and Industrial Park in the early 1960's. Of the 25 property owners, 17 decided to pool their land to form Vallco Park, six sold to Varian Associates. a thriving }'oung electronics firm, founded b}~ Russell Varian, and rivo opted for transplanting to farms else~~,~here. The name Vallco was derived from the names of the principal developers: Varian Associates and the Leonard, Lester, Craft, and Orlando families. 117 2009 C ' y ~"Gd-~rd-~'~!;~i,a~'d~ Cupe]ino, «ith a population of 55,000 and city limits stretching across 12 square miles, is considered to be one of the San Francisco Bay Area's most prestigious cities in ~~hich to live and work. Economic health is an essential component to maintaining a balanced environment, ~~'hich provides high-level opportunities, and ser~~ices that create and help sustain a sense of communlty and quality of life. Public and private interests must be mutual in that our success as a pa]tnership is a direct reflection of our success as a community. The cornerstone of this partnership is that of a cooperative and responsive government that provides an environment for business and residential prosperity and fosters strong ~~ orking relationships ~~'ith all sectors of the community. Our economic development strategies are tailored to address the specific needs of the community. As the City of Cupertino is a mature city ~~~ith over 909c buildout, our focus concentrates more on business retention and revitalization. Business recruitment is site specific and targeted to industries that enhance, rather than draw front, our existing business base. As home to many well-kno~~~n high-tech companies, Cupertino offers a dynamic and exciting business climate. Apple Inc., Symantec, ArcSight, and Chordiant Soft~a~are are headquartered in the city. Key divisions of He~~,lett-Packard, Oracle, Trend Micro and IBM are located here along «~ith the ~~~esteru region office of Insight.com. The City's proactive economic development efforts have resulted in a number of innovative, mutually beneficial partnerships ~~ith local companies. The City strives to retain and attract local companies tlu-ough policies of balanced growth and streamlined permitting. Cupertino Square includes Macy's, JCPenney, and Sears as anchors and features many excltlna entertainment and eating venues. Shoppers can enjoy the latest shoe-s at the ne~~,' AMC 16-screen theater, skating at the mall's full-size ice rink. and bo~~-ling at the chic and upscale Strike Cupertino. They can begin or top off the evening «'ith fine-dining at the critically-acclaimed Alexander's Steakhouse or enjoy more casual cuisine at TGI Friday's, D}malty Seafood Restaurant, Fresh Choice and the ne~~' food court. The city features mans' other restaurants and stores to serve the local w~orkforee and residents. Four hotels occupy the city, ~~~ith three of them operated by Hilton, Marriott, and Kimpton. The City of Cupertino has a history of providing high-level municipal services to complement the sense of comlllunity and quality of life enjoyed by our constituents. The Cit}' ~~ ill continue to enhance and promote a strong local economy to provide municipal services that make Cupertino a place that people are proud to cal] home. 118 zoo9 cry ~~a~;,~ The City of Cupertino operates as a general law city with a city council-cit}~ manager form of government. Five council members serve four year, overlapping terms, with elections held every two years. The council meets twice a month on the first and third Tuesday at 6:45 p.m. in the Community Hall. The City has 162 authorized full-time benefited emplo}gees. City departments include adnunistrative services (finance, human resources, IT, city clerk, neighborhood ~s~atch, emergency preparedness, code enforcement); community development (planning, building, and economic development); parks and recreation; public works (engineering, maintenance, transportation, and environmental); and public and environmental affairs. Police service is provided by the Santa Clara County Sheriff's Department, and fire service is provided through the Santa Clara County Fire District. Assisting the city council are several citizen advisory conunissions/conniuttees ~~-hich include housing, telecommunications, fine arts, library, planning, audit, parks and recreation, bicycle and pedestrian, teen, and public safety. Members of the volunteer boards are appointed by the city council and vacancies are announced so that interested residents may apply for the positions. Residents are kept informed about city services and programs thr-ouah the Cupertino Scene, a monthly newsletter; Cupertino's government access cable TV channel; The City Channel; and the city's ~~~ebsite. Housing As of May 2009, the average price of an existing single family home is x,1,037,664 and the average price of a condominium/townhouse is $575,500. Comnrrrnit)+ Healtlr Care Facilities Cupertino is served by the Cupertino Medical Clinic, NovaCare Occupational Health Services. Nearby hospitals include El Camino Hospital in Mountain View, O'Connor Hospital in San Jose, Community Hospital of Los Garos, Kaiser Permanente Medical Center in Santa Clara, Stanford Hospital in Palo Alto, and the Saratoga Walk-in Clinic in Saratoga. Utilities Gas Relectric - Pacific Gas and Electric, 800-743-5000. Pho~re - AT&T, residential service, 800-894-2355; business service, 800-750-2355. Cable - Comcast, 800- 945-2288. Garbage -Los Altos Garbage, 408-725-0420. Water -San Jose Water Company, 408-279-7900 and California Water, 650-917-0152. Se~~•er Sen~ice -Cupertino Sanitary District, 408-253-7071 Tax Rates acrd Government Sen~ices Residential, coirunercial, and industrial property is appraised at full market value, as it existed on March 1, 1975, with increases limited to a maximum of 2% annually. Property created or sold since March 1, 1975 will bear full cash value as of the time created or sold, plus the 2% annual increase, The basic tax rate is $1.00 per $100 full cash value plus any tax levied to cover bonded indebtedness for county, city, school, or other taxing agencies. Assessed valuations and tax rates are published annually after July l . Retail Sales Tax: Santa Clara County: 1.25%; City: 1%; State General Fund: 6%; State Local Public Safety Fund: 0.50%; State Local Revenue Fund: 0.25%; County Transportation Fund: 0.25%. Total: 9.25%. Assessed Valuation: (Secured and Unsecured) Cupertino: X13,172,425,287 (6130/09) County: $302,708,586.624 (6/30/09) Transportation Rail -Southern Pacific, San Jose to San Francisco. «~ith spur line in Cupertino. Air -Seven Holes north of San Jose li~ternational Airport; 32 miles south of San Francisco airport. Bus -Santa Clara County Transit Systems, Greyhound bus lines Highways -Interstate Route 280, State Route 85. 119 c ~ y st~~~ Facts and Figures Population in City Limits Median Household huome Median Age Sales Tax Rate Registered Voters Democrats Republicans Independent Other Did Not State X5.840 S 179,000 38 9.2~°Ic 27.47 10,298 6226 379 34> 10.'~~ Top 40 Sales Ta~- Producers Second Quarter 2009 (In .alphabetical Order) Alexander's Steakhouse Apple Inc. Argonaut Windo~~~ & Door Benihana's BJ's Bar & Grill California Dental Arts Chevron Seri ice Stations Cypress Hotel/Park Place DeAnza College Campus Center Dynast}~ Restaurant Elephant Bar Granite Rock He~~ lett Packard Insight Direct JC Pennev Jov Luck Place LonQ's ?~'Iacy's Marina Foods Mervyn`s ?~'Iichael's Art; & Crafts Mirapath Outback Steakhouse Ranch 99 Market Rohde & Seh~~ arz Rotten Robbie Service Station Scandinavian Designs Scientific-Atlanta. Ir~c. Sears Shane Diamond Je~~~elers Shell Service Station Sodexho Man-iott Mana~e.ment Symantec Target TJ ?~9axx Union 76 Service Station Valero Service Station VeriQy Verizon ~'~'ireless \~%hole Foods Demographic Information White ~0. ] ~I~ Asian 44,4% Hispanic 4.0°Io Black 0.7% American Indian 0.29e I\Tative Ha~x~aiian 0.19c 120 C ' y ~r~z~/~e~c~ea~tc~-~vSe~v~~ BluckUerr~~ Farnt After tieing closed for nearly t~a~o years, Blackben-y Farm will --e-open on July 4. 2009. The park has been upgraded and restored to improve the natural habitat for native trees, animals, and fish. Improvements to the park include construction of a ne« ticket kiosk, re- plastered pools, a ne~~~ water slide, bocce ball, horseshoe courts, and numerous upgrades to the west bank picnic area. The park is located at 21979 San Fernando Avenue. Telephone: 408-777-3140. The Blackberry Faun golf course is located at 22100 Stevens Creek Boulez ard. Telephone: =I08-2S3-9200. The Quinlan Connnunih~ Center The City of Cupertino's Quinlan Community Center is a 27,000 square toot facility that provides a variety of recreational opportunities. Most prominent is the Cupertino Room - a multi- purpose room that ca~a accommodate 300 people in a banquet format. Telephone: 408-777-3 ] 20. Cupertino Sports Center The Sports Center is a great place to meet friends. The facility features ] 7 tennis courts, complete locker room facilities, and a full}' equipped fitness center featuring free weights, Cybex, and cardio equipment. .~ teen center is also included as ~~ ell as a child ~~ atcla cea~ter. The center is located at the cornea- of Stevens Creek Boulevard and Stelling Road. Telephone: 408-777- 3160. Cupertino Senior Center The Senior Center provides a welcome and friendly environment for adults over age ~0. There is a full calendar of opportunities for learning. volunteering, and enjoying life. There are exercise classes, a computer lab and classes, language instruction including English as a se-coed language, and cultural and special interest classes. The center also coordinates trips and socials. The Senior Center is located at 2l 2~ 1 Stevens Creek Boulevard and is open Monday through Friday 8 a.m. to p.m. Telephone: 408-777- 31 ~0. Civic Center and Librar}• The complex has a 6,000 square foot Community Hall, plaza with fountain. trees and seating areas. City Council meetings are no« held in the Convnunity Hall as well as Planning Commission and Parks and Recreation Commission. The 54.000 square foot library continues to be one of the busiest in the Santa Clara County Library system. For more information call -I08--f-I6-1677. AcClellan Ranch Park A horse ranch during the 1930'and 40•s, t1~is 18-acre park has the appearance of a ~~~orking ranch. Preserved on the property are the original ranch house, milk barn, livestock barn. and t~~o historic buildings: Baer's Blacksmith Shop. originally located at DeAnza and Stevens Creek. and the old ~~~ater to~~-er from the Parish Ranch, no~~~ the site of Memorial Park. Rolling Hills 4-H Club members raise rabbits, chickens, sheep sus-ine, and cattle and a Junior 1\ature Museum, ~~~hich features small live animal exhibits and dispenses information about bird, animal, and plant species of the area. McClellan Ranch is located at 22221 McClellan Road. Telephone: 408-777-3120. 121 ~ti~~ Winner of numerous state and national a\vards for excellence. our city's schools are widely acknowledged to be models of quality 1115(1UCh011. Cupertino Union School District serves over 17.000 students in a 26 square mile area that includes Cupertino and portions of five other cities. The district has ?0 elementar}~ schools and five middle schools, including several choice programs. Eighteen schools have recei\'ed state and/or national a\vards for educational excellence. Student achievement is exceptionally hi«h. Historical]}'. district test scores place Cupertino among the premier public school districts in California. The district is a leader in the development of a standards- based system of education and is nationally recognized for leadership in the use of technolog}~ as an effective too] for learning. Qualit}~• teaching and parent involvement are the keys to the district's success. The Fremont Unlon Hlah School DIStI"ICt serves over 10.000 students in a 42 square mile area covering all of Cuperino, most of Sunn}vale and portions of San Jose, Los altos, Saratoga, and Santa Clara. The five high schools of the district have garnered many avv ards and recognition based on both the achievement of students and the programs designed to support student achievement. Student achievement is at an all time high based on the state«~ideAcademic Performance hldex (.API). All five high schools in the district exceeded their state established achievement tar~zets for the 2000 .API. District students are encouraged to volunteer and/or provide service to or~Tanizations ~~ ithin the communit}~. During their senior year, if students complete SO hours of se-rvice to anon-profit commw~ity organization. they are recognized with a "Community Service Ava~ard" medal that ma}~ be vv~orn dw-ing their graduation ceremonies. Cupertino is served by four local irrstitzrtio»s of Iriglrer• education: DeAnza College, the University of San Francisco, 1~'atiorral University and the UCSC Extension. In addition to these schools, Cupertino's localiorr offers easy access to Stamford Urriver•sity, Santa Clara University amd Sam Jose State University. Building on its tradition of excellence and mno\'atlon, DeAnza College challenges students of every background to develop their intelle-ct, character and abilities; to achieve their educational goals; and to serve their community in a diverse and changing \vorld~ DeAnza College offers a wide range of qualit}~ programs and services to meet the \\ ork force development needs of our region. The college prepares cun"ent and future employees of Silicon Valley in traditional classroom settings and through customized training arranged by employers. Several DeAnza prog-I"ams encourage economic development through college credit courses, short-term programs. services for manufacturers. technical assistance, and/or recruitment and retention services. 122 Th,%vu~ to- d o- wv~.cL Sew ~ulrltrat :Vlrrseunr of Art The highly regarded Eupluat Museum of Ar-t adjacent to the Flint Center on the DeAnza College campus traditionally presents one-of-a-kind exhibitions, publications and events reflecting the rich diverse heritage of our area. The Museum prides itself on its changing exhibitions of national and intel7~ational statw-e, emphasizing Bay Area artists. Museum hours are 1 1 a.m. - -~ p.m. Tuesday. «~ednesday. Thursday: 6-8 p.m. Tuesday and 1 1 a.m. - 2 p.m. Saturday. Telepl3one: -X08-8G4-8836. - :llirrolta De.~rr<.a Plunetarrunr S1a1-gaZel'S ]laV'e a CUpel'hn0 raCllltV' catel-ing [O C}1e]]- ltltel'eSTS, the MlnOlta Plailetal-lUtn On 1.170 DeAI1Za College CaInpUS. It hosts a variety of planetarium shows and events, includin~a educational prog~ralns for school groups and fanu]ti~ ash'onomy evenings on Saturda}'s at 7:00 p.m. For more information and cwrent schedule of events, visit the ~~-ebsite at ~a ~~,-~y~.planetarium.deanza.fl~da ~r call 408-864-8814. Flint Center The cultural life of the Peninsula and .South Bay is enhanced by programs presented at the Flint Center for Performing Arts located at 21250 Stevens Creek Boulevard at DeAnza College campus. The center opened in 1971 and «~as named in honor of Calvin C. Flint, the first chancellor of the Foothill-DeAnza Conununity College District. The boa office is open ]0 a.m. - -~ p.m. A~onday through Friday and one and one half hours prior to al~y performance. Box office: 408-864- 8816; administratite office: 408-864-S820. Cupertino Historical Society On May 2, 1966, the Cupertino Historical Society ~~as founded as anon-profit organization by a Group of 177 longtime residents concerned about the rapid gro~a~th in the area and its impact on the quickly vanishing Cupertino heritage. On March 30. ] 990, the Society opened the Cupertino Historical ?~7useum dedicated to the preservation and exhibition of the city's history. Through its exhibits the museum attempts to develop and expand the learning opportunities that it offers to the ethnically diverse community of the Citti~ of Cupertino. The Society continues to build partnerships with the local school districts to ensure that the history of Cupertino is offered as paI-t of the educational curriculum. The Society is located at the Quinlan Community Center. ]0185 N. Stelling Road. Telephone: 4(18-9T-8049. Farmers' .'Market Residents and visitors can visit the farmers' market every Friday from 9:00 a.m. to 1:00 p.m. The market is located at the Va]]co Fashion Park behind 1\'facy's. California History Curter The California History Center is located on the DeAnza College campus. The center has published 39 volumes on California history and has a changing exhibit program. The center's Stocklmeir Library Archives boasts a large collection of books. a pamphlet file, oral history tapes, videotapes and a couple thousand student research papers. The library's collection is for reference only. Heritage events focusing on California's cultural or natural history are offered by the center e~aeh quarter. For more information. call 408-564-8712. The center is open September through .Tune 8:30 a.m. to noon and 1:00 p.m. to 4:30 p.m. Monday tlu-ough Thursday. 123 NOTES 124