CC 05-17-2022 Item No. 41. FY 2022-23 Proposed Budget Questions and Responses_Desk Item1
Proposed Budget Questions ................................................................................................................. 1
Notable Accomplishments Questions ........................................................................................... 1
New Initiatives Questions ................................................................................................................... 2
Budget Overview Questions ............................................................................................................. 3
Budget Terminology Questions ........................................................................................................ 4
Senior Center Questions .................................................................................................................... 5
Special Projects Questions ................................................................................................................ 6
Vehicles ...................................................................................................................................................... 9
Development Impact Fees and Construction Taxes ................................................................... 10
Proposed Budget Questions
1. What were the (historical) impacts of previous CDTFA audits?
a. The City was previously audited in FY 2012-13. When the City was informed of
the potential impact of the audit, it set aside funding to cover the losses in
assigned fund balance. The results of the audit were that taxes received by the
City were allocated appropriately, and the City did not need to return any sales
tax previously received. The assigned fund balance was released to unassigned
fund balance.
2. What has the impact of the approximately $9M Covid-19 relief funding?
a. On September 7, 2021, City Council approved the use of the American Rescue
Plan Act of 2021 funding allocation. Staff recommended and City Council
approved using the funding for Revenue Loss. Staff identified specific line items
within each department to be funded by the American Rescue Plan Act revenues.
They primarily included City Work Plan, special project items, and core services
such as law enforcement, library services, and street pavement maintenance.
The City's allocation of the American Rescue Plan Act of 2021 and the action to
direct the funding toward Revenue Loss are projected to increase the General
Fund's fund balance by $9.7 million.
Notable Accomplishments Questions
3. Page 22 - What are the results/recommendations derived from the "multimodal count
sensors"?
a. Public Works and Innovation Technology are currently collecting data and will
begin analysis later this month. Multimodal devices are installed at four
intersections along De Anza Blvd (Homestead Rd, 280N, 280S, & Mariani Ave).
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These devices distinguish and count various traffic types, e.g., pedestrian, car,
and bicycle.
4. Page 25 - What's "backflow device testing"?
a. Backflow devices are part of the water system and belong to the individual
property owners, including the City. They are typically located near the water
meter and prevent water from flowing backward into the water system. These
are regulated devices that require routine testing and reporting to document that
they are functioning properly. These devices keep water from flowing back into
the potable water system.
New Initiatives Questions
5. Page 26 - Adopt environmental protection standard conditions of approval (adopt
objective standards): Has this happened or is under way?
a. It was adopted and completed with the City Attorney's Office's (CAO) assistance
in October of 2021.
6. Page 27 - Video Capture Camera Expansion: Is the completed?
a. Video Capture Camera Expansion is a multi-year project. Cameras installed thus
far include:
i. Cameras at all locations where cash drawers are located.
ii. Cameras at all locations where safes are located
iii. Cameras at Service Center that cover all high-risk areas
iv. Future projects include City facilities, entry/exit points, public spaces (not
conference rooms) and high-risk areas.
7. Page 27 - Proactive Managed Risk and Security Monitoring: Where are the proactive
monitoring and management tools that scan and resolve security vulnerabilities?
a. These tools run 24/7. They are utilized on the City's computer network and assist
in preventing cybersecurity threats by defining potential vulnerabilities and
taking corrective action.
8. Page 29 - The current landfill agreement, established in 1989, expires in November 2023.
What is a new Landfill Agreement?
a. The City needs an agreement with a landfill to take the City's unrecyclable trash.
The City could create a new agreement with the existing landfill location or
explore other options, but the City always needs a place to take the trash. This
new agreement process will aim to consider all the available possibilities,
including the possibility of routing trash through a material recovery facility that
could "rescue" recyclables from the trash before the trash goes to the landfill. It
could also involve more than one service provider, so it is a complex process that
will have to take many factors into consideration
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Budget Overview Questions
9. I hope to understand a bit about how each department create their Budget. Let's take
Parks and Rec as an example.
a. The process for budget creation is similar for each department. The FY 2019-20
Adopted Budget was zero-based. Each department developed zero-based
budgets for all programs based on three years of prior year actual expenditures.
Every December, staff reviews and updates the base budget. Staff removes any
expenses that are no longer needed and adds any ongoing expenses approved by
City Council since the last fiscal year. Salaries and benefits are budgeted based
on employee pay rates and benefit rates. The City budgets the costs for all
positions, including vacant positions. Materials are increased by the consumer
price index (CPI), and contracts are increased by CPI, or the negotiated contract
increase if that information is available. After the base is updated, departments
may request additional one-time or ongoing funding by submitting budget
requests. The City Manager has final approval for all requests included in the
Proposed Budget for Council consideration.
10. Page 34 - The Special Revenue Funds will increase from $28.4 million to $33.1 million:
Why does the Special Revenue Funds not spent? Does the City have a plan to spend the
Special Revenue Funds?
a. The increase from $28.4 million to $33.1 million represents fund balance. The
increase in fund balance is primarily due to revenue in the BMR Housing Fund
of $8 million but appropriation estimates of $1.2 million. This increase is offset by
the planned use of fund balance of $1.7 million in the Transportation Fund.
11. Also, some of the actuals have consistently been much lower than the budgeted
amounts. Is there some policy for the increases? Some look like they could be lowered.
a. The actuals in this expense category have fluctuated over the last five years, most
recently due to the pandemic. They have ranged from a high of $5 million (FY
2017-18) to a low of $3.2 million (FY 2013-14). FY 2019-20, affected by the onset of
the pandemic, had expenses of $4.9 million despite the shelter in place order that
when into effect mid-March, which likely impacted actual expenses that year. As
provided in the Proposed Budget briefing handout, the difference between FY
2020-21 actual and FY 2021-22 budgeted material costs is due primarily to
software, utility, fuel, irrigation replacement, and printing and general supplies
in Parks and Recreation.
The City does not have a policy on materials. However, it has instructions and
procedures describing how to budget for base budget materials. The FY 2019-20
Adopted Budget was zero-based; staff analyzed all functions for their needs and
costs and justified all expenses. Every December, staff reviews and updates the
base budget. Staff removes any expenses that are no longer needed and adds any
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ongoing expenses approved by City Council since the last fiscal year. Staff
updates materials costs by a CPI escalator. After the base budget is updated,
departments may request additional one-time or ongoing funding by submitting
budget requests. The Director of Administrative Services reviews those requests
for funding availability. The City Manager has final approval for all proposals
included in the Proposed Budget for Council consideration. Given the anomaly
of the last couple of years, staff will be reviewing the materials budget in the next
couple of years to see if an adjustment is necessary.
12. What is the unassigned fund balance in the General Fund, currently?
a. As of the FY 2021-22 Mid-Year Financial Report, unassigned fund balance in the
General Fund was $37.2 million. In the FY 2021-22 Third Quarter Financial
Report, which will be before Council on May 19, unassigned fund balance in the
General Fund is projected to be $46.1 million. The increase is due to projected
increases in sales tax revenue.
Budget Terminology Questions
13. Could you please more specifically define what falls under the budget category of
Materials.
a. The definition of materials can be found on page 46 in greater detail and page 54
of the Proposed Budget in summary but with the addition of conference and
training costs. Text from both those pages is included below:
i. Page 46: Materials and supplies represent items purchased for repair and
maintenance, operational activities such as books, uniforms and
recreation supplies, and office supplies.
ii. Page 54: All materials, conference, and training costs
iii. In addition, the detailed account name will provide greater transparency
to expenses being charged under materials. The detailed account name
can be found in Appendix B or the City's interactive financial
transparency portal, OpenGov.
14. What is Cost Allocation?
a. Beginning in FY 2013-14, the City allocated indirect and overhead costs based on
a Cost Allocation Plan (CAP). In FY 2015-16, Matrix Consulting Group
developed a full Cost Allocation Plan for the City. Matrix Consulting Group
developed the plan based on Generally Accepted Accounting Principles (GAAP)
and indirect cost allocation methods defined by the federal Office of
Management and Budget's (OMB) Circular A-87.
Indirect costs are costs for services provided to multiple departments and
programs. Central service providers (e.g., City Manager's Office, City Attorney's
Office, Finance, Human Resources, Innovation Technology (IT), and City Hall
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building maintenance) provide services to multiple departments and programs.
For example, the full cost of the Quinlan Community Center includes its direct
costs (e.g., salaries, benefits, materials, and contracts) plus the indirect costs of
services received from central service providers (e.g., finance, human resources,
and IT). The Cost Allocation Plan allows the City to understand the full cost of
providing specific services to the community more accurately. For example, the
Cost Allocation Plan helps the City analyze the full cost of the Quinlan
Community Center as if it were a stand-alone business; a stand-alone business
would typically have costs for services such as finance, Human Resources, and
IT.
The Cost Allocation Plan follows the double step-down method, which uses two
steps to allocate costs fully. In the first step, the costs of central service programs
are allocated to other central service programs and receiving programs. In the
second step, the total costs (including costs allocated in the first step) of central
service programs are allocated to the receiving programs only.
The model allocates costs to receiving programs based on an allocation base,
which quantifies the use of each service. For example
• Human Resources benefits costs are allocated based on each program's
number of FTE.
• Accounting costs are allocated based on each program's number of
financial transactions.
• IT costs are allocated based on the number of computer and mobile
devices assigned to each program.
Revenues are allocated directly to the program providing the service.
The FY 2022-23 Cost Allocation Plan was prepared using data from the last fiscal
year (FY 2020-21).
Senior Center Questions
15. I wish to find out more about our Budget on senior center, including all the staffing.
That page has a row called "Cost Allocation", I wonder what that is.
a. Pages 343 and 347 of the FY 2022-23 Proposed Budget shows the staffing in the
Senior Center.
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100-62-608 (Page 343)
100-62-623 (Page 347)
Each program budget includes a staffing table showing all the full-time
benefitted staff in the program. Each department budget also presents a staffing
table in the Department Summary of each department budget.
Cost Allocation is described above under Glossary of Budget Terminology.
Special Projects Questions
16. Provide the status of (dollar amount spent) for each of the FY 21-22 Special Projects.
Please remove the duplicative drone item.
a. Two items are mentioned for Drone: Skydio Drone and Drone Deploy. The
actual drone (Skydio Drone) is procured out of Infrastructure hardware funds
(310), while the software (Drone Deploy) is procured out of GIS applications
funds (986). Drone deploy automates drone flights and allows for the capture,
analysis, and storage of drone data.
17. Why are Sidewalk Curb and Gutter and asphalt items showing up as Special Projects
when they are already in the Public Works Department Budget?
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a. Sidewalk curb and gutter are annual requests. They are shown as a special
project for enhanced transparency to show the cost of pavement maintenance.
18. There is some confusion as to what is a CIP item and what is a regular budget item. Don
Burnett Bridge LED lighting shows up on both.
a. Don Burnett Bridge LED lighting is a request for Streets Maintenance, not CIP.
There are City Bridge Maintenance Repairs and City Lighting LED Transition
Assessment projects in CIP, which are different projects.
19. Lawson Middle School Bikeway is showing ups as a Special Project for FY 22-23 when it
is not approved by Council, please remove. I believe it should be a CIP item as well.
Planned Transportation Project, FY 22-23 has $80k allocated to it and no description,
please remove.
a. The two requests in Transportation are for work plan items: Lawson Middle
School Bikeway Feasibility Study ($40K) and Vision Zero WP22-015 ($80K). They
are not CIP projects. The projects will be removed if Council does not approve
them as part of the City Work Program. The Final Budget will incorporate any
changes approved by City Council as part of the City Work Program.
20. Infrastructure 610-34-310 has Special Projects related to parks: Internet Service to 3
parks, and Pilot digital signage to 1 park. This needs to be evaluated in terms of Park
equity. What parks are having these upgrades?
a. This project continues the FY 2021-22 project to add internet to Portal Park,
Wilson Park, and Creekside Park. These parks were selected due to their
proximity to City Hall – allowing staff easy access during implementation and
testing. For FY 2022-23, the project moves west to Memorial Park, Jollyman Park,
and finally Monte Vista. The below map may be helpful.
21. Fuse Fellow, under Economic Development should not be listed as a Special Project, in
my opinion, because it is hiring someone for an unknown purpose. Please remove.
a. As part of the FY 2022-23 budget proposal process, staff requested funding for a
Fuse Corps fellow to assist with the implementation of various economic
development initiatives. At the time, examples of these initiatives included
business outreach, small business support, and anticipated future work items for
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the Division. Having access to a seasoned private-sector executive without a
long-term financial commitment appeared to benefit the City.
Additionally, since the post-pandemic business recovery has not been uniform,
there is an interest in further enhancing economic prosperity by leveling the
playing field and implementing solutions to lower barriers for women and
minority-owned small businesses. The Fuse Corps organization is especially
interested in supporting equitable economic development approaches.
Subsequent to submitting this proposal, a key factor emerged that has led staff to
reassess this budget proposal, which was the updated cost-sharing model
parameters. Until recently, Fuse Corps supported a 50/50 cost-sharing model
over a two-year period. However, staff recently learned that Fuse Corps does not
guarantee this model and that the City may have to bear the full cost. This has
led staff to reconsider how best to move forward with Council prioritized work
items.
Alternatively, the same goal of adding bandwidth could be accomplished with a
two-year limited-term analyst to support the work of the Division for the same
Budget. If approved, this would expand staff's bandwidth, allowing for a
broader portfolio of Council priority items to be implemented during the next
fiscal year.
City Manager response – CC member Moore, please remember that individual
Council members may not give direction, or influence, staff. We would need the
full Council to decide on this item and any other items you have requested to be
removed.
22. What is the policy around adding these Special Projects to each department? Why are
these not part of the Work Program? There should be some policy regarding dollar
value, or ranked necessity, just as Council has to prioritize. Shouldn't there be a Study
Session just addressing the Special Projects, since many of us do not know what they
are, for instance the Fuse Fellow? If that cannot be done, then we really should not be
approving them at all and take them as an appropriations request after the Budget is
approved.
a. City Manager response – Special projects are essentially operational in nature,
rather than policy. These projects would be considered by the City Manager for
approval for the normal operations of the City. To bring such a list to Council
goes against the Council-Manager form of government. The City Manager is
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given the authority for the operations of the City, which these types of
items/projects fall under.
Departments, on an annual basis, as part of the budget process are asked to
evaluate operational needs, both one-time (special projects) and ongoing. If there
is a need for additional funds above their existing base budget the department
makes a proposed budget request. The Director of Administrative Services
reviews that request for funding availability. The City Manager has final
approval for all requests included in the Proposed Budget for Council
consideration. Council work program items are also added to the special project
list once approved.
Departments begin preparing the following year's base budgets in December and
their special project requests in February for the fiscal year starting July 1.
Sometimes requests come up between July and June that departments didn't
know about the previous February, so there may be special project requests at
Q1, Mid-year, or Q3.
If departments budget a special project in any given fiscal year and do not
complete the project, they are allowed to carry over the funds for one fiscal year.
Since the Budget has already been approved by Council, staff does not request it
again, but carryover requests are included in the First Quarter Financial Report
of the following year.
Attachment B shows FY 2021-22 special projects and their current status. The list
of FY 2022-23 special projects can be found on pages 36-37 of the Proposed
Budget document.
Vehicles
23. Provide a listing of all of the vehicles owned by the City and the year. Provide the
vehicle replacements/purchases for the past 5 years.
a. See Attachment C for a list of vehicles owned by the City. The vehicles
purchased within the past five years are noted.
24. When our vehicles fully depreciate on the books, what happens to them? I would like to
see all records of sales or disposition of former City vehicles for the past seven years.
a. Nothing happens to the vehicles from a depreciation standpoint, assuming they
are still in good condition and usable. They would stay on the list of fixed assets
as the City would still own them. Once they are deemed past their useful life,
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they would be sold/auctioned and removed from the fixed assets. See
Attachment C for a list of depreciated, disposed/sold, and current vehicles.
Development Impact Fees and Construction Taxes
25. What would the future anticipated development impact be? Aren't the impact fees from
Vallco only for the actual impacts and that money cannot be reassigned, for example
wouldn't a park impact fee be only for parks, a BMR fee for BMR? And if this is true,
how in the Budget, or where is this money assigned? What other anticipated
development funds would there be?
a. Yes, revenues from impact fees cannot be reassigned. Revenues from Park
Dedication fees and BMR Housing Mitigation fees fund expenditures in the Park
Dedication Fund and BMR Housing Fund, respectively.
Park Dedication fee revenues are in Other Taxes (Accounts 406-409, 406-410, and
406-411) in the Park Dedication Fund (Fund 280). OpenGov views showing Park
Dedication fee revenues are now available in the Annual Actuals and Annual
Budget reports:
• Park Dedication Actual Revenues
• Park Dedication Budgeted Revenues
These views can also be created by filtering Funds to "Park Dedication" and
filtering Revenue Type to "Other Taxes."
BMR Housing Mitigation fee revenues are in Other Taxes (Account 406-404) in
the BMR Housing Fund (Fund 265). OpenGov views showing BMR Housing
Mitigation fee revenues are now available in the Annual Actuals and Annual
Budget reports:
• BMR Housing Mitigation Actual Revenues
• BMR Housing Mitigation Budgeted Revenues
When new development projects are approved and permitted, staff will update
Council on any additional revenues. In addition to impact fees, if a property is
redeveloped, the City will receive additional property tax revenues based on the
new assessed value. Sales, Property, and Transient Occupancy taxes may all be
impacted depending on the businesses included in the development.
26. What would the one-time construction tax be for Westport and Vallco? Where would
these funds be assigned?
a. The construction tax would be $304,810.57 for Westport and $10,273,731.40 for
Vallco. The actual construction tax will depend on the construction tax rates
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effective at the time of the submittal of the building permit application. The
current construction tax rates are attached (Attachment A) and are available
under Fees > Construction Tax at https://www.cupertino.org/our-
city/departments/community-development/building/building-forms-fees.
Westport Project
Project Description from Planning Website:
Development proposal to demolish a 71,250 square foot retail center (The Oaks),
remove and replace 74 protected trees, and construct a mixed-used development
consisting of 267 housing units (88 Rowhouse/Townhomes, 179 senior
apartments of which 48 are senior affordable apartments) 27 memory care rooms,
and 20,000 square feet of commercial space.
267 Units X $863.71 = $230,610.57
20,000 SF Commercial Space X $3.71 per SF = $74,200
Total Westport Construction Tax = $304,810.57
Vallco Project
Project Description from Planning Website:
Sand Hill Property Company filed an application with the City of Cupertino on
March 27, 2018 entitled "Vallco Town Center Project Application pursuant to
SB 35." The project is a mixed use development with 2,402 units of housing,
approximately 1.81 million square feet of office space and 400,000 square feet of
retail uses.
2,402 Units X $863.71 = 2,074,631.40
2.21 Million SF Commercial/Office Space X $3.71 per SF = $8,199,100.00
Total Vallco Construction Tax = $10,273,731.40
Revenues from construction taxes are in Other Taxes (Account 406-401) in the
General Fund (Fund 100). The revenues are in the General Fund.
OpenGov views showing Other Tax revenues are now available in the Annual
Actuals and Annual Budget reports:
• General Fund Other Taxes Actual Revenues
• General Fund Other Taxes Budgeted Revenues
27. Who updates the Construction Tax rates? How often are they updated?
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a. Construction Tax rates are updated quarterly by the Community Development
Department.