CC 04-04-2023 Late Oral_Written CommunicationsCC 04-04-2023
Written Communications
Oral
Communications
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https://news.bloon'ibergtax.coxn/daily-tax-report-state/apple-taps-covid-shopping-boom-for-
record-tax-haul-in-hon'ietown
A Double Whammy: Our sales-tax income is at 'further risk due to an audit by the California
Department of Tax and Fee Administration (CDTFA). Our first warning came around May 2022,
and was mentioned iii the June 29, 2022 budget https://apps.culieitino.or(y/pdf/FYl2022-
23Adopted.Budget.pdf and the November 15 2022 budget: Due to the uncertainty around a
California Department of Tax and Fee Administration (CDTFA) sales tax audit of one of the
City's taxpayers, City staff is not recommending any transfers to reserves currently. The impact
of this audit is unknown but has the potential to significantly affect the City's sales tax revenues,
Staff anticipates bringing recommendations on the use offund balance to the City Council at
mid-year in March 2023 once more information regarding the sales tctx audit is available.
littps://www.cu)ieitino.org/liome/showpublisheddocuinent/32377/638041943093670000
Long story short, it looks like we might need to re-evaluate our spending habits. At the same
time, we need to secure the pensions of City employees as has been higl'ilighted by the State
auditor: l'ittps://wivw.ariditor.ca.gov/local liigl'irisl</daslibriard-esa.litml
Separately, at the March 27 Audit Committee meeting, I raised other concerns about the budget.
Can the City Council request more information on the following?
1. Please correct tlie multiple factual errors in the Aruiual Comprehensive Financial Report
(ACFR). For example, the ACFR mentions that council appoints the treasurer, to my
la'iowledge, this has not happened in at least 50 years. Infomiation on development within
the City is also woefully out of date.
2. The AFCFR indicates that adrnin cost has more than doubled between 2021 and 2022.
There is some explanation for some increases, but this does not explain entire increase. We
need an explanation.
3. In the past, we liad fiscal transparency of City programs that raii like businesses, such as
tlie Senior Center and Blackberry Farm pool/picnics. These were tracked in "Enterprise
Funds" which provide a separate accounting and reporting mechanism for fee-based
programs. We liave no idea as to the extent that these fee-based amenities are being
subsidized. To avoid confusion, the golf course is tracked in an Enterprise Fund called
Blackberry Farm; the name should be clianged to Blackberry Farm golf. Especially because
of Cupertino's economic uncertainties, we need more transparency.
First and foremost, I am asking you to provide greater transparency and accountability to our
community. Second, if needed, consider deferring Capital Improvement Programs and reducing
grants in order to preserve our summer community events. And finally, consider adopting
partnerships with local businesses and community members to assist in funding our community
events.
Thai* You,
Rhoda Fry
Reqriest for Fiscal Transparency aitd Accountability - Cupertino City Council Oral
Communications April 4, 2022
Dear City Council,
On March 21, 2023 during oral cominunications, Cupertino resident Peggy Griffin shared her
discovery that the City had received no sales (or use tax) income from the State in February
2023. This is alarming because in the previous 3 years, income for February averaged $8M. It is
also alarnning because by February 21, it would have been known to the City that we had no
money coming in; yet we, the public, have not been informed when tliere has been ample
opportunity to do so during these Council meetings: 2/21, 3/1, 3/7, 3/21, and 4/4, and during
tliese audit committee meetings: 2/27 and 3/27. Meanwhile, we have been malcing decisions
about :tuture expenditures, especially Capital Improvement Projects (CIP). Why weren't we
informed?
Each month, the State deposits estimated sales tax (and use tax) income into orir City's bank
account. In tlie second montli after the quarter ends, the State adjusts that deposit to reconcile the
actual income from the previous quartet; this is called a true-up. Although the 2022 Q4 deposits
were much lower than Q4 2021 and Q4 2020 (and somewhat lower than Q4 2019), the true-up
reduced February's deposit to zero. And there will be 'further deductions in March ($323K). We
will know how we fared in Ql on May 24.
Here is a chart that shows Cupertino sales arid use tax revenue by quarter from Q3 2018 to Ql
2023. This data was extracted from littps://www.cdtfa.ca.gov/
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Cupertino receives sales (and use) tax revenue from transactions that originate within the City.
Additionally, through a special revenue-sharing arrangement with Apple and Insight, Cupertino
also receives sales tax revenue from all online purcliases in our State and returns 35% of it to
those companies. For example, if someone in Los Angeles buys $1000 in Apple products online,
Cupertino receives $10 (1%) from the State and kicks back $3.50 (35%) of it to Apple. As
residents and businesses equipped their liome offices duriiig COVID, our sales-tax revenue
boomed. You can learn more about this airangement in this article: