CITY OF CUPERTINO CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR FISCAL YEARENDED
JUNE 30 2005
PREPARED BY
CITY OF CUPERTINO
FINANCE DEPARTMENT
CAROL A ATWOOD
DIRECTOR OF ADMINISTRATIVE SERVICES
NOTES
INTRODUCTORYSECTION
CITY OF CUPERTINO CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30 2005
Table of Contents
Page
INTRODUCTORY SECTION
Table ofContents
Letter ofTransmittal
Organization Chart
Commissions and Committees
City Council and Directory of City Officials
Certificate of Award for Excellence in Financial Reporting
I
IV
XIV
xv
XVI
XVII
FINANCIAL SECTION
Independent Asuditor Report on Basic Financial Statements
Msanagement Discussion and Analysis
Basic Financial Statements
3
4
Gwoveirdnmeent Financial Statements
Statement of Activities
20
21
Statement ofNet Assets
Fund Financial Statements
Major Governmental Funds
Balance Sheet 23
Reconciliation ofthe Governmental Funds Balance Sheet with the
Statement ofNet Assets 24
Statement ofRevenues Expenditures and Changes in Fund Balance 25
Reconciliation ofthe Net Change in Fund Balances Total Governmental
Funds with the Statement ofActivities 26
Statement ofRevenues Expenditures and Changes in Fund Balances
Budget and Actual
General Fund 27
Major Proprietary Funds
Statement ofNetAssets 29
Statement ofRevenue Expenses and Changes in Fund Net Assets 30
Statement of Cash Flows 31
CITY OF CUPERTINO CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30 2005
Table of Contents
Page
FINANCIAL SECTION Continued
Fiduciary Funds
Statement ofFiduciary Net Assets 33
Notes to Basic Financial Statements 35
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
mNaojonr Governmental Funds
62
Combining Balance Sheets 64
Combining Statements ofRevenues Expenditures and Changes in Fund Balance 66
Combining Schedule of Revenues Expenditures and Changes in Fund Balance
Budget and Actual 68
Internal Service Funds
Combining Statement ofNet Assets 73
Combining Statements ofRevenues Expenses and Changes in Net Assets 74
Combining Statements ofCash Flows 75
Fiduciary Funds
Combining Statement ofChanges in Assets and Liabilities All Agency Funds 77
ii
CITY OF CUPERTINO CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30 2005
Table of Contents
Page
STATISTICAL SECTION
General Governmental Expenditures by Function Last Ten Years Table 1 82
General Governmental Revenues by Source Last Ten Years Table 2 84
Assessed and Estimated Actual Values ofTaxable Property Last Ten Years Table 3 85
Property Tax Rates Direct and Overlapping Governments Last Ten Years Table 4 86
Principal Taxpayers Table 5 87
Computation ofLegal Debt Margin Table 6 88
Ratio of General Bonded Debt to Assessed Value and Bonded Debt Per Capita
Last Ten Years Table 7 89
Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total
General Governmental Expenditures Last Ten Years Table 8 90
Demographic Statistics Last Ten Fiscal Years Table 9 91
Property Values Construction and Bank Deposits Last Ten Years Table 10 92
Computation of Direct and Overlapping Bonded Debt Table 11 93
Community Profile 97
111
i1 tI
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ITV F
CUPEIQ1NO
December 1 2005
To the Citizens ofCupertino 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 2005 The Introductory Section includes
1 this transmittal letter 2 an organizational chart and 3 a list of principle officials The
Financial Section includes 1 the independent audit fsirm report 2 a narrative section referred
to as Msanagement Discussion and AnalysisMAD3 the basic financial statements and
related notes 4 required supplemental information and 5 the combining financial statements
fornmoajonr funds The Statistical Section includes several tables ofunaudited data depicting
the financial history ofthe City as well as miscellaneous statistics
The Csity annual report is prepared in accordance with Accounting Principles Generally
Accepted in the United States of America GAAP as promulgated by the Governmental
Accounting Standards Board GASB The report presents City information on an ewnitditey
basis and on amore detailed fund level basis The lfeuvnedl reports emphasize the Csity major
funds TheMADpresents 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 theMADand should therefore be read
in conjunction with it TheMADis required supplementary information and is found in the
Financial Section ofthe 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 established a comprehensive
internal control framework that is designed to protect the Csity 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 Csity
financial position Furthermore we believe that all disclosures necessary to enable the reader to
gain an understanding ofthe Csity financial activity have been included
IV
Printedon Recycled Paper
REPORTING ENTITY
This Comprehensive Annual Financial Report includes all component units funds and account
groups of the City It reports all activities for which the City is considered to be financially
accountable The general governmental funds provide a full range of services including
planning building parks and recreation public works engineering maintenance and general
administrative activities This financial report incorporates data for the City of Cupertino the
Cupertino Public Facilities Corporation and the Cupertino Redevelopment Agency
The City operates under a CCouintcyil Manager form of government There are five council
members including the Mayor who serve fyoeuarr 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 employees are appointed by the
City Manager
FACTORS AFFECTING 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 11 square miles and is bordered by the cities of San
Jose Saratoga Sunnyvale Santa Clara and Los Altos
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Fremont
CUPERTINV
Milpitas
Sunnyval
San
J
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 residential neighborhoods community
parks and public facilities The excellent reputation of
Csupertino 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 partnership with
the schools in many programs affecting education and
youth
Cupertino is the world headquarters for major
corporations such as Apple Computer Portal Software
and Syrnantec Key divisions ofPHaecwkalertdt and
Borland Software are also located in Cupertino
The City has eight large shopping centers including its own regional mall Vallco Fashion Park
which is undergoing a massive renovation
v
The July 2005 Employment Development Department monthly survey showed that the Bay Area
added 62060jobs led by the East Bay with 91050 jobs and the South Bay with 900 jobs The
gains are widespread and strong enough in the region to indicate sustainability of this through
2005 Construction finance and insurance telecommunications health care private education
and transportation have led the gains over the past year with software utilities and government
employment still showing weakness The long suffering manufacturing sector has even added
jobs especially in computers and electronics A quarter of the job growth for the year has come
from construction mostly in the commercial sector and the City saw related evidence of this
with a doubling of building permit planning and engineering monies coming to the City during
fiscal 200054 for recent and current development projects
However a September 2005 Field Poll indicated growing consumer pessimism in California Just
22 percent of registered voters in the State expected the economy to improve down from 44
percent almost a year ago with 30 percent of voters expecting a worsening of the economy up
from 14 percent a year ago Inflation and rising fuel prices worried survey respondents with
nearly half of them concerned that inflation will become a problem a level of concern not seen
since 1992 Economists are concerned that high gasoline prices could cause higher shipping costs
for retailers who would pass the costs onto consumers of food clothing and household products
Nationwide consumer inflation rose significantly by 09 percent in September 2005 led by
energy prices following a05percent increase in August 2005 September consumer spending
rose05percent from the previous month Nationwide personal income increased 17 percent in
September the biggest rise since December 2004 fueled by insurance payments from hurricanes
Katrina and Rita The overallUSeconomy grew at an upbeat 38 annual percent for the quarter
ending in September however analysts believe that high energy prices and a reduction in auto
sales due to the end of generous buying incentive programs will cause the growth rate to slow
down in the final three months ofthis calendar year
The housing market is showing some signs of coming off the torrid sales pace and price
appreciation of recent years The California Association of Realtors forecasts home sales in
California to decline2in 2006 with median home prices statewide to increase 10next year
which would be a falloff from the projected 16 percent increase of2005 This could affect future
property taxes and household sales driven by a strong housing market
vi
SALESTAX TREND
Locally sales taxes rose in 200054 breaking a tyhereaer period of decline Sales taxes rose
nearly 7led by increases in the btusoiness and iocfet equipment sector which
reached tyhereaer highs in tax receipts However the general retail and transportation sectors
endured tyhereaer lows in sales taxes As a result sales tax has become more concentrated in the
btusoiness at the expense of the general retail sector with btusoiness
mostly office equipment comprising almost 54 ofthe sales tax base
Mm
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8000
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II II ACTUAL I
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1997 1998 1999 2000 200 2002 2003 2004 2005
YEAR
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The renovation and expausion of Vallco Fashion Park is a key part of the future tax base With
the recent extension ofthe development agreement the securing ofthe Jmorlanchor tenants and
the possibility ofa new jronar hotel become more ofa reality for the complex The relocation ofa
major grocery store to a former auto dealer site along with the retail development of the former
Rosebow1 site next to Vallco are other major economic projects that will help the Csity revenue
base
General retall comes in second at25bBtuussommeessss has historically been a more volatile
sector that foUows the ups and downs of the economy more closely than cousumer sectors such
as retail Apple Computer headquartered in the City has become even more ofa driving force in
sales taxes with their hot roster of products such as theIPod definitely providing a benefit to
City revenues However the competitive and innovative environment ofproducts in that field and
the concentration of the tax base in that area brings up the need for the City to work on
diversiJY í ng its sales tabase mto other business sectors
Vll
MAJOR INITIATIVES
Current Year Projects
1 Foster a Sense of Community
Continue to offer opportunities and progrÆms to promote cultural understanding and
address the needs ofour diverse community
Continue to identifY translation needs in our community
Evaluate methods to communicating to Ennoglisnh speaking population regarding crime
prevention emergency preparedness civic activities and major capital projects
Pursue partnership opportunities with the three school districts
Hold aGolden Jubilee celebration
2 Ensure Land Use is Compatible with Community Character
Complete the General Plan update
Complete the Stevens Creek Corridor Master Plan and seek funding for it
Commence planning for a park in the Rancho Rinconada area
Explore possibility ofparks in the Homestead and Vallco areas
Implement a streetscape plan for the Crossroads block of Stevens Creek Boulevard
DeAnza Boulevard and Stelling Road
Have amuisxeed wa1kable plan for the new Town Center
Ensure that the walkable city concept is present in all City development and
redevelopment projects
3 Protect and Promote our Public Safety
Study implement or complete traffic safety issues such as those involving the Kim
Avenue area the Safe Routes to School program and the Streets Smarts Program
Continue emphasis and expansion of Neighborhood Watch
Continue emphasis on emergency response and preparedness including expansion of
CERT training improving community notification and coordination and providing
emergency response training for businesses and schools
4 Enhance Services
PursueEGovernment initiatives to allow residents businesses and job applicants to
move more ofthe permit licensing and application process loinne
Provide affordable housing opportunities for Cupertino workers and teachers
Review Below Market Rate Program criteria
Pursue an affordable housing project on Cleo Avenue
viii
5 Ensure the Financial Health of the Community
Encourage retain and support healthy environment for retail growth
Assist Vallco Fashion Park in their redevelopment efforts
Present a strategic plan to ensure theltoernmghealth ofthe City
Investigate a revenue enhancement incentive policy for new development and means to
supplement revenues on developments that are snaolens tax generating
6 Pursue Infrastructure Improvements
Complete grading for the Mary Avenue Bicycle Footbridge and award bids for the
construction phase ofthe project
Future Projects
The City is currently constructing several major capital improvements throughout the
community In addition to the Mary Avenue bridge Safe Routes to Schools and Stevens Creek
Corridor Plan projects mentioned above various pavement resurfacing curb gutter and sidewalk
repair storm drain improvement traffic signal and pedestrian safety projects will be undertaken
this year
ix
D Ú IiJllPJ1ilUt FOlJlls Efforts and AClJomplishments
Cupertino eRiveesl Helen Putnam Awards
In an effort to educate the community about the Csity budget the Parks and Recreation
Department developed a board game Balance or Bust to increase community awareness about
the budget process
Often times residents lack an
understanding ofwhat revenues come
to the city and what the city can do to
stTengthen its tax base There is also a
general lack of knowledge about
what it costs to deliver basic services
The challenge then was to design an
interactive exercise that would raise
the participants budget literacy and
engage more residents in the budget
process
Participants at a commnulty fonan
broke into groups and were faced with the challenge ofre ç ommending service cuts and balancing
the budget with decliulng revenues and increases in demand for services
At the conclusion ofthe forum residents had gained more insight into the challenges facing their
local government and the difficult choices city council has had tomake
The City also received an additional Putnam award i01125004 with the Wshat Your Vision
kits The community Was asked to answer this question as we worked toward conseusus on how
to program the last 60 acres ofpark property along Steveus Creek
The vision kits were created with the belief that giving participants appropriate tools and expert
support would allowthem to reach consensus on the best way to use the property
The cost to produce the kits was approximately 50 each and they were distributed nee Each kit
contained an aerial photo three 30 x 40 base maps scaled templates for a variety of park
amenities a circulation kit cousisting of liS ribbon yam and thread a ruler and background
information in printed and video form
Approximately 320 kits were distributed to individnals and groups 108 completed kits from 500
participants were returned
At the conclusion of the visioning process staff was able totake the best points nom the many
ideas received and craft a program for the park which eventually won community support
x
LONG TERM FINANCIALPLANNING
The City will continue to focus on a number of important ltoernmg issues These issues include
developing a ltoernmg economic strategic plan enhancing economic development efforts
looking at partnership opportunities with our schools and other agencies continued automation
funding ofthe capital improvement program and building up reserves for rising retirement and
insurance costs
In order to assure that the City can maintain capital facilities and infrastructure as they age and
can continue to conduct essential business while providing expected services to its residents the
City prepares a fyievaer forecast for all funds which is detailed in the annual budget The
General Fund forecast assumes operating revenues still not keeping pace with operating
expenditures and debt service obligations by approximately15 million per year with toimnee
revenues covering the shortfall in the next three years The resulting deficit spending could
deplete the Csity reserves by fiscal year200098 A strategic plan to address these issues will be
presented in January 2006 The plan will propose both revenue enhancements and expenditure
program reductions that will accomplish a balanced budget that can meet the Csity growing
facility maintenance needs determine appropriate staffing for unsurpassed customer service and
provide funding for future capital projects
Up to now the City has been able to maintain its fiscal stability through prudent use of reserves
proactive debt refinancing aggressive pursuit of available revenues and conservative fiscal
management As the economy shows mixed signals in terms of inflation employment the
housing market and economic growth the City plans to increase its efforts in the area of
economic development make the most of the Redevelopment Agency to improve utilization at
Vallco Mall and collaborate with other local agencies to maximize resources and funding for
regional programs As revenues are generated from additional muisxeed development they will
accelerate the Csity ability to avoid deficit spending replenish its Capita11mprovement Projects
funding and fund other ltoernmgreserves
ACCOUNTING SYSTEM AND BUDGETARY CONTROL
The Csity accounting records are maintained on a modified accrual basis of accounting for all
governmental fund types and agency funds Under this basis revenues are recognized when
susceptible to accrual ieboth measurable and available and expenditures other than interest
on ltoernmg obligations which is recorded when paid are recognized when the liability is
incurred The accrual basis of accounting is used by the proprietary fund types where revenues
are recognized when earned and expenses are recorded when incurred In compiling the
gwoveirdnmeent financial statements the accrual basis of accounting is used to report all of the
Csity financial activities Since the fund financial statements are still compiled using the
modified accrual method for governmental funds a reconciliation report is provided to show the
changes between the two reporting methods
Xl
In developing and evaluating the Csity accounting system consideration is given to the
adequacy of internal accounting controls Such 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 financial statements and
maintaining accountability of assets The concept of reasonable assurance recognizes 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 Csity internal
accounting controls adequately safeguard assets and provide reasonable assurance of the proper
recording of financial transactions
The Csity 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 The
level of budgetary control iethe level at which expenditures cannot legally exceed the
appropriated amount is the departmental level within the General and Special Revenue funds
and the project level within the Capital funds
Changes in Financial Reporting
The enclosed Notes to the Basic Financial Statements reflect the implementation of GASB 40
providing more investment information to help readers assess the credit quality of the Csity
investment portfolio to judge the psortfolio sensitivity to market interest rate changes and to
judge the Csity concentration of credit risk
Cash Management
The City maintains a cash and investment pool for all City funds The Csity funds are invested
by the City Treasurer according to the investment policy adopted by the City Council The
objectives of the policy are legality safety liquidity diversity and yield The policy addresses
soundness of financial institutions and the types of investments permitted by the California
government code
The City investments may include obligations of the US Treasury and Federal agencies
commercial paper bsanker acceptances corporate bonds repurchase agreements certificates of
deposit and the State Tsreasurer Local Agency Investment Fund Total investment earnings for
all funds were09million
Risk Management
Risk management issues factor substantially in the Csity long term financial planning Whether
through partnership or isnsueranlcfe 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 mitigate future losses
xii
The City maintains a program of commercial insurance combined with isnsueranlcfe for
substantially all of its governmental operations except for major construction projects and
csounptrpalcietodr services In such circumstances insurance to protect the City is provided by
each contractor
INDEPENDENT AUDIT
City Ordinance requires an annual audit of the financial records by an independent certified
public accounting firm selected by the City Council The Csity general purpose financial
statements were audited by Maze and Associates and their opinion thereon is included in the
Financial Section of this report
CERTIFICATE OF ACHIEVEMENT
The Government Finance Officers Association ofthe United States and Canada GFOA awarded
a Certificate of Achievement for Excellence in Financial Reporting to the City of Cupertino for
its Comprehensive Annual Financial Report for the year ended June 30 2004
In order to be awarded a Certificate of Achievement a governmental unit must publish an easily
readable and efficiently organized Comprehensive Annual Financial Report whose contents
conform to program standards Such reports must satisfy both generally accepted accounting
principles and applicable legal requirements A Certificate of Achievement is valid for a period
of one year only We believe our current report continues to meet the psrogram requirements
and we are submitting it to the GFOA to determine its eligibility for another certificate
ACKNOWLEDGMENTS
1 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 Dixie Farley Tina Mao Beth
Ebben and Yulia Rumalean for their continued support and dedication Special recognition
goes to David Woo Dorothy Steenfott and Jennifer Chang for their efforts in the preparation and
production ofthis report
Respectfully submitted
cof
Director ofAdministrative Services
xiii
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AUDIT COMMITTEE
Myoung Kang
Dolly Sandoval
Garrett Wade
Kris Wang
Jim Weber
CITY OF CUPERTINO CALIFORNIA
Fiscal Year 200054
COMMISSIONS AND COMMITTEES
HOUSING COMMISSION
Richard Abda1ah
Sarah HFatheawiaty
Kim Mosleh
Mahesh Nihalani
Frances Seward
FINE ARTS COMMISSION
Martha Bills
Nancy Canter
Robert Harrison
Hema Kundargi
Janet Mohr
PUBLIC SAFETY COMMISSION
Charles Caldwell
Jay Cena
Barry Chang
Nolan Chen
Hugh Riddell
TEEN COMMISSION
Nathaniel Fung
Andrew Grossman
Vrinda Gupta
Cordelia Jiang
Diane Keng
June Kim
Benjamin Lin
Natasha Pradhan
Roya Rahgozar
Apoorva Rajagopa1
Rukmani Sahay
Ana Yglesias
Sinan Zafar
BICYCLE PEDESTRIAN COMMISSION
avid C1reenstein
May Koski
Geoffrey Paulsen
Joseph Walton
James Wiant
PARKS RECREATION COMMISSION
Rod Brown
Jeanne Bradford
Cary Chien
Frank J elinch
Roger Peng
TELECOMMUNICATIONS COMMISSION
L TGuttadauro
Eric Klein
Charlon Mcintosh
Andrew Radle
Steven Ting
LIBRARY COMMISSION
Ronald Miller
Sheila Mohan
Janet Riddell
Katherine Stakey
Susanna Tsai
PLANNING COMMISSION
Angela Chen
Lisa Giefer
Marty Miller
Taghi Saadati
Gilbert Wong
ECONOMIC DEVELOPMENT
Carol Atwood
Angela Chen
Christine Giusiana
Shawna Holmes
Jack Hubby
Sandra James
David Knapp
Richard Lowenthal
Mark McKenna
Steve Piasecki
Ralph Qualls
SENIOR COMMISSION
Estelle lncociati
Christine Kennedy Pierce
Mavis Smith
Linda Walker
Frank Yap
xv
CITY OF CUPERTINO CALIFORNIA
Fiscal Year200054
CITY COUNCIL
Y
i º d J
i5 iF
v
Patrick Kwok
Mayor
Richard Lowenthal
Vice Mayor
Sandra James
Councilmember
Dolly Sandoval
Councilmember
Iris Wang
Councilmember
DIRECTORY OF CITY OFFICIALS
David WKnapp City Manager
Charles TKilian City Attorney
Carol Atwood Director ofAdministrative Services
Rick Kitson Public Information Officer
Steve Piasecki Director of Community Development
Ralph Qualls Director ofPublic Works
Kimberly Smith City Clerk
Therese Smith Director ofParks and eR1ateionl
xV
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 2004
A Certificale ofAchievemenl for Excellence in Financial
Reporting is presenled by the Government Finance Officers
Associalion ofthe Uniled Stales and Canada to
governmenl units and public employee retirement
systems whose comprehensive annual fmancial
reports CAFRs achieve the highest
standards in government accounting
and financial reporting
c
President
Executive Director
xvii
FINANCIAL SECTION
1
NOTES
2
AAAZE r ASSOCIA TES
INDEPENDENT ASUDITOR REPORT ON
BASIC FINANCIAL STATEMENTS
ACCOUNTANCY CORPORATION
1931 San Miguel Drive Suite 100
Walnut Creek California 94596
925 0993002FAX 925 0913305
MEailmcaze@ omazeamssociates
Website mcwazeoawssomciwates
To the City Council
City ofCupertino California
We have audited the basic financial statements ofthe governmental activities the btuysipneess activities each
major fund and the aggregate remaining fund information ofthe City ofCupertino as ofand for the year ended June
30 2005 which collectively comprise the Csity basic financial statements as listed in the Table of Contents These
basic financial statements are the responsibility of the Csity management Our responsibility is to express an
opinion on these basic financial statements based on our audits
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 that we plan and perform the audit to obtain reasonable assurance as to whether
the financial 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 financial statement
presentation We believe that our audit provides a reasonable basis for our opinion
In accordance with Government Auditing Standards we have also issued a report dated September 20 2005 on our
consideration ofthe Csity internal control structure and on its compliance with laws and regulations
In our opinion the basic financial statements referred to above present fairly in all material respects the respective
financial position of the governmental activities the btuysipneess activities each major fund and the aggregate
remaining fund information ofthe City ofCupertino at June 30 2005 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 year then ended in conformity with generally accepted accounting principles in the
United States ofAmerica
Msanagement 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 inquiries ofmanagement regarding the methods of measurement and presentation ofthis
information but we did not audit this information and we express no opinion on it
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 ofContents are presented for purposes of additional analysis and are
not a required part ofthe basic financial statements ofthe City ofCupertino Such information has been subjected
to the auditing procedures applied in our audit ofthe 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 statistical section listed in the Table ofContents was not audited by us and we do not express an opinion on this
information
on
September 20 2005
3
A Professional Corporation
MSANAGEMENT DISCUSSION AND ANALYSISMAD
This is intended to provide an objective and easily readable analysis of the City of Csupertino financial
perfonnance for the year Please read it in conjunction with the accompanying Transmittal Letter and
Basic Financial Statements
FISCAL 200054FINANCIAL HIGHLIGHTS
A strong showing in building activities in the City brought in a healthy dose of development related
revenues to the City An early payback ofvehicle license fee VLF monies that the State had borrowed
from the City last year plus modest rises in sales and other taxes contributed to a healthy revenue picture
All major revenue sources were either better on consistent with last year Conversely the City maintained
a measured approach to restoring ongoing expenses that had been cutback in recent years prefening to
build up reserves that could be drawn upon for capital improvements future retirement costs insurance
increases State budget actions and potential downturns in the economy Financial highlights ofthe year
include the following
The Csity total net assets increased 23million during fiscal 200054 At June 30 2005 net assets
totaled 1721 million
Total City revenues including program and general revenues were 444million while total
expenses were 412million in fiscal 200054
Net assets in Governmental funds were 115 million while net assets in business activities were6
million
Governmental program revenues were18million compared with39million in fiscal200043
Governmental expenses were 344million in fiscal 200054 compared with 384 million in the
prior year
Revenues from tByuspineess activities were78million in current year compared with47million
from the prior year
Expenses oftByuspineess activities were78million in current year compared with56million in
the prior year
General Fund revenues of313 million represented an increase of 6 million from the prior year
General Fund expenditures increased from 283to 284million in fiscal 200054
Actual expenditures in the General Fund were36million less than the final fiscal 200054 budget
primarily because of significant expenditure reduction efforts by City departments and management
under the direction ofthe City Council
Unreserved General Fund balance of138 million at June 30 2005 compared favorably with the
budgeted fund balance of124million
OVERVIEW OF THE FINANCIAL STATEMENTS
The Basic Financial Statements comprise the wCiidtye Financial Statements and the Fund Financial
Statements these two sets of financial statements provide two different views of the Csity financial
activities and financial position
The WCiidtye Financial Statements provide a ltoenngenrview ofthe Csity activities as a whole and
comprise the Statement ofNet Assets and the Statement of Activities These statements are prepared on
the accrual basis which means they measure the flow ofall economic resources ofthe 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 infonnation about the financial position of the City as a whole
including all its capital assets and ltoennng liabilities The Statement ofActivities provides infonnation
about all the Csity revenues and all its expenses also on the full accrual basis with the emphasis on
measuring net revenues or expenses for each of the Csity programs The Statement of Activities explains
in detail the change in Net Assets for the year Over time increases or decreases in net assets can be
indicators ofwhether the financial condition ofthe City is improving or deteriorating
4
All of the Csity activities presented are grouped into Governmental activIties and tByuspineess
activities as explained below All the amounts in the Statement ofNet Assets and the Statement of
Activities are separated in order to provide a summary ofthese two types of activities for the City as a
whole
Governmental aMctiovitsiestof the Csity basic services are considered to be governmental
activities including general government community development public safety public works
rceucrletautiroen public improvements planning and zoning and general administration services
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 Csity 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 ofltoernmgdebt is also included as a component unit
tByuspineess aActivitlieslthe Csity enterprise activities are reported here including solid waste
collection and disposal and the recreational operations of each of the Csity various community
facilities Unlike governmental services these services are supported by charges paid by users based
on the amount ofthe service they use
The Fund Financial Statements report the Csity operations in more detail than the gwoveirdnmeent
statements and focus primarily on the tsehromrt activities ofthe Csity General Fund and other Major
Funds The Fund Financial Statements measure only current revenues and expenditures and fund
balances they exclude capital assets ltoernmg debt and other ltoernmg amounts Because these
statements focus on the tneeramr inflows and outflows of spendable resources such information may be
useful in evaluatingtneeramr financing requirements
The Fund Financial Statements provide detailed information about each of the Csity most significant
funds called Major Funds Csupertino Fund Financial Statements include governmental enterprise and
internal service funds as discussed below The concept ofmajor funds and the determination ofwhich
are major funds was established by GASB Statement 34 and replaces the concept of combining like
funds and presenting them in total Instead 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 the Financial Statements present the detail ofthese mNaojonr funds Major Funds present
the major activities ofthe City for the year and may change from year to year as a result of changes in the
pattern ofCsity activities and public interest For example the Capital Improvement Projects Fund may
or may not appear as a Major Fund depending on the volume ofconstruction activity in a certain year
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 gwoveirdnmeent financial statements However capital assets and
other lliovnegd assets along with ltoernmg liabilities are not presented in the Governmental Fund
Financial Statements Reconciliations are provided to facilitate a comparison between governmental
funds and governmental activities statements to allow abetter understanding ofthe ltoernmgimpact of
the gsovernmenttneeramr financial decisions
Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis as in
the past and include all their assets and liabilities current and ltoernmg Enterprise funds are used to
report the same functions presented as btuyspineess activities in the gwoveirdnmeent financial
statements and in more detail in the fund fmancial statements
Since the Csity Internal Service Funds provide goods and services only to the Csity governmental and
btuyspineess activities their activities are reported only in total at the Fund level Internal Service Funds
may not be Major Funds because their revenues are derived from other City Funds These revenues are
5
eliminated in the wCiidtye 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 Funds For the
City ofCupertino the internal service activities predominantly benefit governmental rather than business
type functions and are therefore included within governmental activities in the gwoveirdnmeent
financial statements
Comparisons of budget and actual financial information are required in the Major Governmental Fund
Financial Statements only for the General Fund and other Major funds that are Special Revenue Funds
Since none of the Csity Special Revenue funds are considered Major funds for financial statement
purposes budgetary comparison statements for these funds are included in this document as supplemental
statements only
Fiduciary Fund statements provide fmancial information about the activities of certain assessment
districts The City acts strictly as an agent for these districts holding amounts collected from property
owners which await transfer to the districts bond trustees The Csity fiduciary activities are reported in
the separate Statement ofFiduciary Net Assets and the Agency Funds Statement of Changes in Assets
and Liabilities These activities are excluded from the Csity other financial statements because the City
cannot use these assets to finance its own operations
Notes to the Financial Statements provide additional detail that is essential to a full understanding ofthe
information provided in the gwoveirdnmeent and fund financial statements
FINANCIAL ACTIVITIES OF THE CITY AS AWHOLE
This analysis focuses on the net assets and changes in net assets ofthe Csity Governmental Activities
Tables 12 and 3 and BTuysinpeess Activities Tables 45 and6 presented in thewCiidtye Statement
ofNet Assets and Statement ofActivities that follow
Governmental Activities
Table 1
Governmental Net Assets at Jnne 30
in Millions
Governmental Activities
2005 2004
Cash and investments 324 378
Other assets 56 52
Capital assets 1436 1232
Total assets 1276 1176
tLeornmg debt outstanding 532 563
Other liabilities 1L2 ill
Total liabilities 621 674
Net assets
Invested in capital assets net of debt 856 845
Restricted 73 74
Unrestricted 221
Total net assets lli5JI IDlA
6
The Csity net assets from govemmental activities increased36million or3from the prior year This
˝ 11crease is the Change in Net Assets reflected in the Statement ofActivities as shown ˝ 11 Table 2 and is
explained below
Cash and investments decreased45 ì moniprincipally as a result ofthe disbursement oftønds
to complete the new brary
Capits1 assets increased42minion primarily for the new library
Restricted net assets decreased 01 million as various street and bridge projects utilized the
capital funds asseidetfor this purpose
Payments on the 2002 certificates ofparticipation decreased ltoernmgdebt by13million
Other liabilities decreased2 million as large capital project bills outstanding at the end oflast
year were paid off
Net assets invested in capital assets net of related debt increased 1 million represent ˝ 11g
infrastructure improvements and City equipment purchases financed by govemment revenues and
reserves ratherthan by debt
Unrestricted net assets is the part ofnet assets that can be used to financedtayoperations
or reserved for certain purposes by the City Council without constraints established by debt
covenants or other legal requirements 221million ofunrestricted netassets existed at June 30
2005 26million higher than ayear ago
vI1@ n
cf ˝ TIQuICj1ru
VMcottitcwtc Z 1 vIi ç
1S
Û ll
11
A1mirJ1 í oo
14 Fiscal Year21011154 Govcmmental Activities
I n
1
VM m n vmn mn
v Nm mv m
I
mvnmm
Sources of Revenues FunctionalQEsXe
QSlpitalOraf1
tl ˙ iJ Ø uJMJit
6
yi1Ta
12
W
42
IAIfdamI Ì iI1I
11
rOTø1IuX
26
pting
QtC1rUmMII
n
I
I
I
n
CDmmumly
f11I1L
OI
SIsfx
nmmmn m
As the Sources of Revenue chart above shows 9 miUion or 26 of the Csity Fiscal 200054
revenues came from other taxes osvaertlaekinsg taxes as the leading source mrevenue Trus category
rose significantly2million from the prior year hecause this was the first year that the Csity received
property taxes that replaced the025portion of sales taxes that the State is using as security toward
repayment of its deficit recovery bonds which was passed hy the voters ˝ 11 2004 There was also a
significant increase in park dedication taxes Other taxes also conta ˝ 11 transient occupancy taxes utility
user taxes francruse fees and husiness J í censes In spite of the ioss of this025 sales taxes still rose
increasing from78million to 29 million in 2001514 due to growth in the btusinessand
high tech sectors It isthe second largest category of vrenules at25
7
The Functional Expenses Chart above includes only current year expenses which are discussed in detail
below It does not include capital outlays which are added to the Csity capital assets During fiscal
200504 the City added24million in governmental net capital assets as shown in detail at Table II
The Statement ofActivities presents program revenues expenses and general revenues in detail These
are all elements ofthe Changes in Governmental Net Assets summarized below
Table 2
Change in Governmental Net Assets
in Millions
Governmental Activities
200054 200043
43 40
92 87
9 7
39 25
7 5
5 2
258 263
366 392
2 f2
1A 1
3 Expenses Administration
Law Enforcement
Public Information
Administrative Services
Recreation Services
Community Development
Public Works
Interest on ltoernmgdebt
Total expenses
13
62
8
37
2
3
164
23
344
Revenues
Program revenues
Charges for services
Operating contributions and grants
Capital grants and contributions
Total program revenues
53
6
2
tl
General revenues
Taxes
Property taxes
Sales taxes
Other taxes
Motor vehicle in lieu other intergovernmental
Investment income
Miscellaneous
Total general revenues
Total revenues
dEexficcieenscsy of revenues over expenses before transfers
Transfers
Change in net assets
14
61
7
39
2
27
155
23
384
32
25
36
93
Table 2 shows that total government revenues increased37million during fiscal 200054 driven by the
27million increase in sales and other taxes discussed previously The rise in Motor vehicle liienu
VLF and other intergovernmental revenues reflects the payback to the City of08million in VLF that
the State did not remit to the City in 200043 The rise was tempered by06million in new ERAF
Educational Revenue Augmentation Fund monies that the State has taken from the City the first oftwo
annual State takeaways that cities agreed to in exchange for the support and passage of Proposition IA in
8
November 2004 which protects cities from future state revenue raids Charges for services prospered
from active commercial and fmamuilltyi housing development in the City which helped bring in
noteworthy amounts of permit and plan check revenue
Total governmental spending decreased by04million from fiscal 200043 Because of the changing
nature of charges of services sales taxes and State fiscal actions the City maintained a conservative
approach to governmental expenses in spite of the rise in revenues and as a result the Csity
governmental revenues in excess of expenditures climbed to2million at June 30 2005 a turn around
from the19million deficiency a year ago After14million in transfers from btuysipneess activities
for reimbursement ofwaste cleanup costs debt payments on the 2002 debt issue and funding for the
Stevens Creek Corridor Park project overall net assets ofgovernmental activities increased36million
during 200504 compared to a decreaseo18fmillion during 200043
Table 3 presents the net cost ofeach ofthe Csity largest pgreongrearmasl government public safety
development and engineering public works parks and recreation capital asset maintenance and
preservation and interest on ltoernmg debt Net cost is defined as total program cost less the revenues
generated by those specific activities it reflects the financial burden placed on the Csity taxpayers by
each function
Table 3
Net Cost Revenue of Governmental Activities
iu Millious
Net Cost Revenue
Of Activities
200054 200043
Administration 13 14
Law Enforcement 5 50
Public Information 8 7
Administrative Services 37 39
Recreation Services 20 21
Community Development 27 1
Public Works 143 120
Interest on tLeornmg Debt 23 23
Totals 236 265
The total cost for all governmental activities this year was 334million The Csity taxpayers
more than paid for of these costs through general revenues and charges for services 374
million setting aside about04million to replenish operating reserves that were utilized in the
recent economic downturn Grants and contributions added 28million to the reserves for
upcoming capital projects
Administrative costs comprise 4percent ofgovernmental services expenses and include activities
ofthe City Council City Manager and City Attorney Administrative Services activities which
include Finance Human Resources Information Technology City Clerk Code Enforcement and
Emergency Preparedness services accounts for 11 percent of all governmental services Net
costs in these areas were relatively unchanged from prior year
The Csity costs for Law Enforcement procured by contract with the Santa Clara County
Sheriffs Office were partially offset by 07million in various fines and reimbursements
Because ofa decrease in parking citations fines and grants in 200504 partially due to some one
9
time corrections from the State received in 200043 the Csity net cost for law enforcement
increased by05million in fiscal200054
Public Works expenses included Transportation Engineering Environmental Programs and the
maintenance ofthe Csity streets grounds and facilities Also included are the costs of capital
improvement projects Offsetting revenues this year include state grants capital contributions
environmental fees facility rental damage restitutions and stonn drain fees of12million
Because ofthe completion of large capital projects in early 200504 the construction portion of
public works funded by capital grants and contributions decreased while the maintenance and
general engineering portion of public works remained funded by general revenues such as
gasoline taxes
Community Development programs include Planning Building and Housing Services Because
of the boom in development fees for plan checks building pennits and park dedication net
revenues of community development activities climbed from 01 million last year to 27
million this year
Most of the costs of the Csity Park and Recreation programs are reported as btuysipneess
activities for which fees are charged to recover the costs of the programs However many
community events programs and services are available to the public free ofcharge The costs of
administering these general governmental activities are partially offset by facility rental fees
which amounted to02million in fiscal year200054
Interest on the ltoennngdebt that was frinaenced in 2002 was unchanged at23million
Business Type Activities
Table 4
BTuysinpeess Net Assets at June 30
in Millions
BTuysinpeess Activities
2005 2004
Cash and investments 68 79
Other current assets 08 10
Capital assets 06 07
Total assets 82 96
Total liabilities 16 16
Net assets
Invested in capital assets net ofdebt 06 06
Unrestricted 60 73
Total net assets 6 80
The net assets ofbtuysipneess activities decreased14million in fiscal 200054 primarily in cash and
investments and other current assetstByuspineess activities as a whole operated on aberveeank basis
prior to a14million transfer to governmental activities to reimburse the general government for waste
cleanup debt service and the Stevens Creek Corridor Park capital project
10
Table 5
Change in Bnsiness Type Net Assets
in Millions
BTuysinpeess Activities
200054 200043
Expenses
Resource Recovery
Blackberry Farm
Sports Center
Recreation Programs
Senior Center
Total expenses
29
13
15
17
4
78
18
13
13
16
5
65
Revenues
Program revenues
Charges for services
Operating contributions and grants
Total program revenues
General revenues
Investment income
76 72
0 1
76 73
2 1
78 74
0 9
14 2
14 7
Total revenues
dEexficcieenscsy ofrevenues over expenses before transfers
Transfers
Change in net assets
Table 6
Net Cost Revenue ofBTuysinpeessActivities
in thousands
Net Cost Revenue
OfActivities
200054 200043
Resource Recovery 503 690
Blackberry Farm 122 52
Cupertino Sports Center 67 168
Recreation Programs 478 320
Senior Center 1m
TotaltByusipneess Activities Q121 ill
The implementation of a weekly recycling program which involved a12million purchase of new
recycling containers caused Resources Recovery program expenses and the associated net cost of
activities to rise by1 million Franchise fees remained unchanged The commencement of a half
dmoillliloanrpayback from Resources Recovery to the General Fund for waste cleanup plus Recreational
Programs higher contribution toward debt service on the 2002 financing for recreational facilities
brought about a significant increase in transfers to governmental activities
11
THE CSITYFUND FINANCIAL STATEMENTS
Governmental Funds
At June 30 2005 the Csity governmental funds reported combined fund balances of320 million
which is a decrease of21 million or 7compared with the prior year With the October 2004
completion and grand opening ofthe new library the Library Construction Fund exhausted its 8 million
fund balance while robust permit charges for services tax and intergovernmental revenues plus a one
time sale ofland combined with limited expenditure growth caused the General Fund balance to increase
by56million mNaojonr fund balances increased 276 thousand with the completion ofthe Civic
Center project and the kickoff ofthe Stevens Creek Corridor Park project
The table below presents governmental fund revenues by source and the related changes for the prior
year Governmental fund revenues rose37million or 121this year to a new total of317 million
20million of the increase came in licenses and permits and charges for services the outcome of a
banner year in building permit planning and development fees A26million increase in tax revenues
resulted from a14million growth in park dedication taxes from new City developments and increases
in sales property tax and transient occupancy tax receipts from an improving economy and booming
housing market Other revenues of17million in 200054 include a12million sale ofan Oak Valley
parcel the completion ofthe community fund raising effort for the new lsibrary furnishings and fixtures
and funding for other capital projects
These healthy results more than offset a17million decline in intergovernmental revenues tOimne
Proposition 12 CMAQ HES and State intergovernmental revenues declined due to the completion or
progression ofthe related capital project in fiscal 200043such as the PortallWilson Park improvement
the DeAnza traffic management system the adaptive traffic signal control system the Highway 28850
ramp meter signal and the Mary Ave bicycle footbridge This decline also reflects the first oftwo annual
State takeaways oftax dollars a loss ofwruch cities agreed to in exchange for the support and passage of
Proposition IA in 200504 which protects cities from future state revenue raids This decline would have
been worse had it not been for a repayment from the State ofvehicle license fee revenues that the State
had borrowed in200043
Table 7
Revenues Classified by Source
Governmental FundTypes
in thousands
IDneccrreeaassee
From previous vear
Revenues bv Source Amount ofTotal Amount Percent
Taxes 62135 673 6211 142
Use ofMoney Property 1119 03 178 198
Intergovernmental 5566 105 6171 213
Licenses and Permits 8296 78 3155 897
Charges for Services 5169 24 639 678
Fines and Forfeitures 560 15 164 272
Other Revenue 1793 48 784 777
Total lJZl lOOJ illl 121
Governmental fund expenditures decreased29million this year to 420million primarily from 120
million in less capital outlays due to the completion of the library and civic center projects during the
year Community development costs rose 594 thousand or 233because of the boom in building
permit and plan check rgeenveernatuineg work Expenditures by major service area and the related
changes from the prior fiscal year are shown in the following table
12
Table 8
Expenditures Classified by Major Service Area
Governmental Fund Types
in thousands
IncreaseDecrease
from previous vear
Expenditures bv Service Area Amount ofTotal Amount Percent
Administration 1162 29 61 49
Law Enforcement 1645 135 194 3
Public Information 758 19 71 130
Administrative Services 3671 91 87 23
Recreation Services 2121 53 20 09
Community Development 1357 79 594 233
Public Works 6937 204 315 34
Capital Outlay 01206 284 21201 550
Debt Service
Principal 1245 31 25 20
Interest 2290 57 ill 12
Total lQill 2918 ill ß
Proprietary Funds
Proprietary funds include the Csity enterprise and internal service funds Entetprise funds are used to
account for operations that are financed and operated in a manner similar to private business entetprise
where the intent is that the costs ofproviding goods or services to the general public on a continuing basis
be financed or recovered primarily through user charges Entetprise activities are included as business
type activities in the wCiidtye Financial Statements and each fund is considered a major proprietary
fund in the Fund Financial Statements
Entetprise fund net assets totaled 6million at June 30 2005 a decline of13million from the prior
year Entetprise operating revenues were7million this year a4increase 3olfl thousand over last
year while net onpeoratinng revenues more than doubled from 95 thousand to 216 thousand this year
Entetprise operating expenses were78million in 200504 up3million or 19ITom the prior year
Operating loss was 179 thousand in 200054 as opposed to an operating income of777 thousand in the
prior year Transfers out rose significantly to14million in fiscal 200504 up12million ITom fiscal
200043 Individual entetprise funds comprising this performance are discussed in the Entetprise Funds
portion ofthisMAD
Internal Service Funds are used to account for the financing of services provided by one department or
agency to other departments or agencies ofthe City on a rceimobursesmentt basis Because the services
are provided primarily to the general government these operations are reported as part of government
activities in the wCiidtye Financial Statements In essence any income or losses that are related to an
internal service fund activity represent an adjustment of the expenses recorded by the various
governmental functions The following table shows actual revenues expenses including depreciation
and results ofoperations for the fiscal year ended June 30 2005
13
Table 9
Revenues Expenses and Cbange in Net Assets
Internal Service Funds 200054
in thousands
Operating Operating Operating IDneccrr
Fund Revenues Expenses ILncoosmse Net Assets
Management Infonnation Systems 717 730 13 132
Workers Compensation 149 330 181 147
Equipment Revolving 892 831 61 97
LToengnDisability 44
Totals U LW 32 ill
Resources are being accumulated in the Management Infonnation Systems fund which received a
budgeted 120 thousand transfer in from the General Fund for new hardware purchases and the
Equipment Revolving fund to provide for future replacement of existing equipment The Workers
Compensation fund expense for future and current claims was subsidized by a transfer from the General
Fund resulting in net assets increasing from 9thousand to 156 thousand at fiscal year end
Maior Governmental Funds
General Fund
Revenues
General Fund revenues increased 6 million or 22to 313million this fiscal year due to a robust year
in pennit and building fee revenues gains in property sales and transient occupancy taxes and some one
time payments in intergovernmental revenues and from a sale of property The result exceeded the budget
by41million or 14
Licenses and pennits nearly doubled from 15inillion in 034to29million in 045It exceeded
budget expectations by09million Charges for services doubled from 06million to12million and
surpassed the budget by07million Implementation ofa cost recovery fee system along with aboom in
commercial and residential building activity caused building pennit inspection zoning planning and
engineering review revenues to come in strongly this year
The intergovernmental revenue surge was led by a 2 million increase in Motor Vehicle LIineu Fees
VLF over last year the result ofa repayment ofwhat the State had borrowed and withheld from the City
in fiscal year034plus an additional correcting payment unrelated to the borrowing These factors also
caused VLF to come in12million higher than budget
Overall taxes came in 9or17million over budget and 6or12million over last year Property
taxes were05million and03million over budget and last year respectively The real property roll
growth ended up at 9for the year Sales taxes were up09million or II from budget and06
million or7higher than last year The City had budgeted a4sales tax decrease from last year but the
btusoiness and high tech sector continued the growth that they were showing in recent years
Transient occupancy taxes were02million or 14 better than budget and increased02million and
10 from last year due to increased occupancy and room rates from increased business and leisure
travel
The sale ofone Oak Valley parcel plus a refund for the Csity withdrawal from the Silicon Valley Animal
Control Authority caused other revenues to increase by14million over last year
14
Use ofmoney and property rose slightly by01million up 14 from the previous year but was below
budget by02million or 20 Rising yields helped the portfolio but a relatively conservative approach
to investments due to a staffing vacancy in the Treasury function kept the return below budgeted
expectations
Expenditures
Fiscal 200054 overall expenditures at 284million were 1 million or 4higher than last ysear total
2o83fmillion However this result came in 13or36million under the final budget
Law enforcement was under budget by 08million or 12 due to the lower usage of general law
enforcement service and emergency calls patrol and investigations
Public works was13million under budget due to frozen vacant positions lower spending on facilities
maintenance and repairs and less than expected costs on library maintenance since the facility was closed
two days a week instead of being open all week Grounds and park maintenance utility materials and
supplies costs were down due to a more wetter than nonnal season which required less water fertilizer
and other supplies Street lighting costs were lower due to relief in utility rates fewer replacements of
light bulbs and the deferred removal and replacement ofsome older rousutedtlight fixtures
The completion of the civic center capital projects resulted in net operating transfers out ofthe General
Fund decreasing from37million last year to27million this year
Table 10
General FundBudget and Actual Comparison 200054
in millions
Budgeted Amounts
Original Final Actual Variance
m2
209
248
ß 2
mu
313
284
ß 2
56
41
36
Revenues amount available for appropriation
Expenditures ofappropriations
227
207
Net transfers out to other funds í W
Increase decrease in fund balance L1
Fund Balance
At June 30 2005 the Csity General Fund reported a combined ending fund balance of222million up
56million from the prior year Of the combined current year balance 61 million represented
unreserved undesignated balances 122million was designated for contingencies and future retirement
liabilities and39million was reserved for loans purchase order commitments advances to other funds
affordable housing and the public access television program
The 39million reserved portion is not available in liquid resources since it represents monies due the
City or specific future purchases The 122million designated by the City Council is not available for
new spending because it has already been committed forIoperating expense contingencies 2 long
tenn actuarial liabilities of the Csity retiree medical program 3 fluctuations in the Csity CalPERS
retirement rates and 4 a buffer in times of future economic uncertainty These are detailed as with
other govenunental fund balances in Note 7 to the Basic Financial Statements The unreserved
15
undesignated balance in the future may be designated for capital projects for augmenting the retirement
reserves or for building up the isnsueranlcfe reserves
Public Facilities Corporation
This fund accounts for the payments of principal and interest on the 2002 certificates ofparticipation
COPs the refinanced the ltoennngdebt that funded many ofthe Csity major parks and facilities As in
the previous year fund activity reflects General Fund and Proprietary Fund transfers that cover debt
service payments of35million
Library Construction Fund
This fund accounted for the completed construction and furnishing ofa new 21 million public library at
the Csity Civic Center The new 05040 square foot tswtoroy library had a grand opening in October
2004 The project was funded through the issuance of the 2002 Public Facilities Corporation debt
contributions from various residents and community groups and a 476 thousand advance from the
Csity Resource Recovery Fund 120 thousand ofthe advance waspoafidfby the General Fund this
year
Other Governmental Funds
mNaojonr funds are not presented separately in the Basic Financial statements but are individually
presented as Supplemental htfonnation They include all the Csity Special Revenue and Capital Project
funds which account for revenue sources that are legally restricted to expenditure for specific purposes
such as streets and roads parks housing stonn drainage and the Redevelopment Agency Street and
road expenditures ofthe Transportation fund this year was18million with an ending fund balance of
26million much of it eannarked for future capital projects such as the Mary Avenue pedestrian and
bikeway bridge over htterstate 280
Enterprise Funds
Resource Recovery Fund
The Resource Recovery fund incurred toimnee costs of12million in 200054 in order to implement a
weekly recycling pickup service A new fyoeuarr payback to the General Fund for waste cleanup costs
began in the same year Revenues were unchanged As a result of these actions the Recovery fund
experienced an 830 thousand decrease in net assets to57million which is entirely unrestricted
Blackberry Farm Fund
Blackberry Fann incurred an operating loss of 122 thousand in the current year compared to 48
thousand in the prior year Operating revenues were down to12million compared to13million in
200043 Operating expenses weremaintained at lastysear total of13million Net assets ofthis Fund
decreased 117 thousand to end the current fiscal year at 564 thousand with 553 thousand of this
invested in capital assets 11 thousand in unrestricted assets
16
Cupertino Sports Center Fund
Revenues rose 17or 200 thousand over 200043 mostly from increased memberships attracted by the
enhancements offered by the newly remodeled facility and from a fee increase in annual passes
Expenditures rose 100 thousand or 7over last year due to more instructors for the increased
enrollment in sports classes The center had an operating loss of67 thousand compared to 162 thousand
in 200043 After adding interest income onto the operating loss net assets decreased 58 thousand to
221 thousand at June 30 2005 with 203 thousand ofit unrestricted
Recreation Programs Fund
Charges for services increased 16 or 256 thousand over the prior year A robust offering and
enrollment of cultural youth classes and sports programs contributed to this improvement Operating
expenses rose about 100 thousand or only 6over last year for additional instructors to cover the
increased class attendance Income before transfers improved by nearly 176 thousand or 54over last
year ending up at 504 thousand for 200054 With a transfer out of888 thousand for 2002 COPs debt
service and Stevens Creek Corridor capital funding the fund ended up with a decrease in net assets of
384 thousand leaving an ending net asset balance of101 thousand nearly all of it unrestricted
Senior Center Fund
Expenses dropped 13or55 thousand to 438 thousand in 200054 while maintaining the same level of
service revenues from yteoar The csenter goal is to operate on an overall berveeank basis
Vacation packages memberships and educational classes must run at a profit in order to cover salaries
bingo the newsletter debt service overhead and certain other senior center services To achieve this the
center reduced staff newsletter costs recreational trip costs and computer classes
CAPITAL ASSETS
At June 30 2005 the City had 137 million net ofdepreciation invested in a broad range ofcapital assets
used in governmental and btuyspineess activities as shown in the table on the following page further
detail may be found in Note 5 to the Basic Financial Statements
17
Table 11
Capital Assets Net of Depreciation at June 30
in Millions
TotaltByuspineess Activities
2005 2004
620 680
3 139
381 130
90 45
15 17
252 224
49 110
J2 LJ
1436 1232
4 4
2 2
J
Q6 U
1037 1932
Governmental Activities
Land
Construction in progress
Buildings
Improvements other than buildings
Machinery and equipment
Roads curbs gutters sidewalks medians and bridges
Storm drain structures and mains
Traffic signals
Total Governmental Activities
tByuspineess Activities
Land
Improvements other than buildings
Machinery equipment
Total City
With the October 2004 grand opening ofthe Csity new library community hall and civic plaza 129
million ofconstruction in progress was crlasesed to buildings and improvements The Oak Valley land
parcel sold for12million this year had a cost of600 thousand removed from the capital asset list this
year
DEBT ADMINISTRATION
The Csity debt issues are discussed in detail in Note 6 to the Basic Financial Statements Unchanged
from last year except for scheduled debt service payments the Csity debt comprise Certificates of
Participation COPs issued by the Cupertino Public Facilities Corporation and is serviced by the City
through lease payments to the corporation The total outstanding issuance at June 30 2005 is 532
million
At June 30 2005 a total of150 thousand in special assessment district debt was outstanding issued by
one special assessment district This debt is secured by a traffic impact fee charged as a special
assessment on the real property in the district issuing the debt and is not the Csity responsibility The
City acts solely as the Dsistrict agent in the collection and remittance of the assessment
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The impact ofthe economic environment and a description ofthe Csity major initiatives for the coming
year are discussed in detail in the accompanying Transmittal Letter
CONTACTINGTHE CSITYFINANCIAL MANAGEMENT
This Comprehensive Annual Financial Report is intended to provide citizens taxpayers investors and
creditors with a general overview of the Csity finances Questions about this Report can be directed to
the Finance Department at City Hall 10300 Torre Avenue Cupertino CA95014 408 3727270
18
CITY OF CUPERTINO
STATEMENT OF NET ASSETS AND
STATEMENT OF ACTMTIES
The Statement ofNet Assets and the Statement ofActivities summarize the entire Csity financial activities
and financial position They are prepared on the same basis as is used by most businesses which means
they include all the Csity assets and all its liabilities as well as all its revenues and expenses This is
known as the full accrualtbhaseis effect of all the Csity 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 between the Csity total assets and the Csity total
liabilities including all the Csity capital assets and all its ltoennng debt The Statement ofNet Assets
presents similar infonnation to the old balance sheet fonnat but presents it in away that focuses the reader
on the composition of the Csity net assets by subtracting total liabilities from total assets
The Statement ofNet Assets summarizes the financial position ofall the Csity Governmental Activities in a
single column and the financial position of all the Csity BTuysinpeess Activities in a single column these
columns are followed by a Total column which presents the financial position ofthe entire City
The Csity Governmental Activities include the activities of its General Fund along with all its Special
Revenue Capital Projects and Debt Service Funds Since the Csity Internal Service Funds service these
Funds their activities are consolidated with Governmental Activities after eliminating ifnutnedr
transactions and balances The Csity Business Type Activities include all its Enterprise Fund activities
The Statement of Activities reports increases and decreases in the Csity net assets It is also prepared on the
full accrual basis which means it includes all the Csity 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 current liabilities available revenues and measurable expenditures
The fonnat of the Statement ofActivities presents the Csity expenses first listed by program and follows
these with the expenses of its btuyspineess 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 btuyspineess program The Csity general revenues are then listed in the
Governmental Activities or tByusipneess Activities column as appropriate and the Change in Net Assets
is computed and reconciled with the Statement ofNet Assets
Both these Statements include the financial activities ofthe City the Cupertino Redevelopment Agency and
the Cupertino Public Facilities Corporation which are legally separate but are component units ofthe City
because they are controlled by the City which is financially accountable for their activities
19
CITY OF CUPERTINO
STATEMENT OF NET ASSETS
JUNE 30 2005
Governmental BTuysinpeses
Activities Activities Total
ASSETS
Cash and investments Note2 263140 4860501 041611
Receivables
Accounts 37274 14913 253657
Loans Note 3 3523439 3523439
Prepaid expenses and other assets 353402 26266 56968
Internal balances Note4 125607 125607
Capital assets net of accumulated depreciation Note5 143656 596728 0112347
Total Assets 12637156 1988978 14635848
LIABILITIES
Accounts payable and accruals 1831289 270416 0842704
Accrued payroll and benefits 781626 10147 892736
Deposits 1716869 174946 351363
Deferred revenue 191335 59439 0416756
cNurorennt portion of compensated absences Note 19 0121801 98386 0124706
cNurorenntportion of claims payable 285608 285608
tLeornmgdebt Note6
Due within one year 021070 021070
Due in more than one year 0503105 0503105
Total Liabilities 29613104 0513916 6802I 970
NET ASSETS Note7
Invested in capital assets net of related debt 05813607 596728 19807789
Restricted for
Special revenue projects 3650435 3650435
Affordable housing 281968 281968
Public access television 28015 28015
Debt service 12131 12131
Total Restricted Net Assets 2972915 2972915
Unrestricted 27209125 0962889 27238714
Total Net Assets 017123457 6960517 16238128
See accompanying notes to financial statements
20
FunctionslPrograms
Governmental Activities
Administration
Law enforcement
Public infonnation
Administrative services
Recreation services
Community development
Public works
Interest on long term debt
Expenses
23S3809I
1362769
381247
1735704
1923736
2436759
25138425
2522869
Total Governmental Activities 3325425
tByuspineess Activities
Resource recovery
Blackberry fann
Cupertino sports center
Recreation programs
Senior center
TotaltByuspineess Activities
Total
General revenues
Taxes
Property taxes
Incremental property tax
Sales taxes
Other taxes
Motorvehicle in lieu intergovernmental
Investment earnings
Miscellaneous
Transfers Note 4
Total general revenues and transfers
Change in NetAssets
Net BAesgsinenitnsg
NetAEsnsdeintsg
CITY OF CUPERTINO
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30 2005
Charges for
Services
S965924
14623
1746924
2806
3450869
Promm Revenues
Operating
Grants and
Contributions
3S8412
170913
44857
565937
82680
Capital
Grants and
Contributions
07S2503I
484517
1920647
19S06247
Seeaccompanying notes to financial statements
82680
0922607 2328925
3711412 291158
491527 3813857
4613869 1720657
43408 477837
6870459 5674619
29403201 09S5I215 S561272
21
S951082 590128
172524 172524
16270 16270
246789 246789
33457 33457
1769 1769
1769 4256613
2944906 2944906
91754 91754
2692614 2692614
6893604 6893604
0930589 0930589
695824 271659 790201
15455 15455
0310808 0310808
39227945 1213712 17245824
163040 3410517 2628938
136138147 397589 139149359
S07I231475 69S05617 S6I382281
Net Expense Revenue and
ChanRes in Net Assets
Governmental
Activities
tByuspineess
Activities
23S3809I
345784
381247
730937
0421704
1722528
46101309
2522869
2278645
2278645
Total
23S3809I
345784
381247
730937
0421704
1722528
46101309
2522869
2278645
FUND FINANCIAL STATEMENTS
hI the Fund Financial Statements only individual major funds are presented while mnaojonr 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 detennined to be Major Funds by the City for fiscal 2005 hIdividual
mnaojonr funds may be found in the Supplemental section
GENERAL FUND
The general fund is the general operating fund ofthe 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 LCiebnrateryr Wilson Park and Memorial Park and other City
facilities through the issuance ofcertificates ofparticipation
LmRARY CONSTRUCTION FUND
This fund accounts for costs associated with demolition of an old library building and the design and
construction ofa new library on that site
22
CITYOF CUPERTINO
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30 2005
Public Other Total
Facilities Library Governmental Governmental
General Corporation Construction Funds Funds
ASSETS
Cash and investments Note2 78215007 3421213 5213 127688 47379049
Receivables
Accounts 3621206 01548 37274
Loans Note3 561802 695609 3523439
Prepaid items 181227 181227
Advance to other funds Note4 271528 271528
Other assets 8384 0400 480834
Total Assets 14206514 3421213 5213 7980825 59309657
LIABILITIES
Accounts payable and accruals 1414636 2321828 714 255769 8930518
Accrued payroll and benefits 452424 73944 253569
Deposits 1716869 1716869
Advance ITom other funds Note 4 125607 271528 581689
Deferred revenue 150157 281746 33812
Total Liabilities 2332429 2321828 714 890214 146376
Fund ha1ance Note 7
Reserved for
Encumbrances 24824 6300 5614617 5811217
Debt service 12131 12131
Advances to other funds 271528 271528
Prepaid items and other assets 181227 0400 581227
Loans receivable 561802 266914 2924716
Affordable housing 281968 281968
Low and moderate income housing 43288 43288
Public access television 28015 28015
Unreserved reported in
General Fund 38114836 38114836
Special Revenue Funds 683148 683148
Capital Projects Funds 8101 681364 061363
TOTAL FUND BALANCES 18217258 213II 7199 0970548 17326019
Total Liabilities and Fund Balances 14206514 3421213 5213 7980825 59309657
See accompanying notes to financial statements
23
CITYOF CUPERTINO
Reconciliation ofthe
GOVERNMENTAL FUNDS BALANCE SHEET
with the
STATEMENT OF NET ASSETS
JUNE 30 2005
Total fund balances reported on the governmental funds balance sheet
Amounts reported for Governmental Activities in the Statement of Net Assets
are different ITom 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 ASSETS
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 assets 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
Prepaids
Capital assets net of accumulated depreciation
Accounts payable and accruals
Accrued payroll and benefits
Noncurrent portion of claimspayable
ACCRUAL OFCNURORENNT REVENUES AND EXPENSES
Revenues which are deferred on the Fund Balance Sheets because they are not available currently
are taken into revenue in the Statement of Activities
LONG TERMASSETS AND LIABILITIES
The assets and liabilities below are not due and payable in the current period and therefore are not
reported in the Funds
tLeonnngdebt
cNurorenntportion of compensated absences
NET ASSETS OF GOVERNMENTAL ACTIVITIES
See accompanying notes to financial statements
24
17326019
13434958
7831306
61304
892306
12607
340803
285608
236968
0350205
0121801
017123457
CITY OF CUPERTINO
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30 2005
Public Other Total
Facilities Library Governmental Governmental
General Corporation Construction Funds Funds
REVENUES
Taxes 28229128 3712925 6212334
Use of money and property 895879 657 18558 131199
Intergovernmental 3642419 2611457 255667
Licenses and pennits 0820906 0820906
Charges for services 2810937 034612 5913658
Fines and forfeitures 575919 575919
Other revenue 3611701 250706 164845 71925
Total Revenues 1323389 657 250706 573023 18301789
EXPENDITURES
Current
Administration 1J 06926 0116926
Law enforcement 1664945 1664945
Public nfonnaticn 371548 371548
Administrative services 3630713 3630713
Recreation services 1322616 1322616
Community development 682303 232756 1930568
Public works 0384716 5916703 3691347
Capital outlay 3584702 3616835 0912305
Debt service
Principal 0210405 0210405
Interest and fiscal charges 2522869 2522869
Total Expenditures 7246448 532346 3584702 53672J 1 24415027
EXCESS DEFICIENCY OF REVENUES
OVER EXPENDITURES 387813 5833639 086724 191302 0634938
OTHER FINANCING SOURCES USES
Transfers in Note4 4823789 0530407 8911857 7970634
Transfers out Note4 5I 06040 716723 7963636
Total Other Financing Sources Uses 172224 0530407 12425 090608
NET CHANGE IN FUND BALANCES 265459 11331 086724 023746 1622458
BEGINNING FUND BALANCES 5125669 9980 0886715 6977801 2337827
ENDING FUND BALANCES 22I87185 12131 7199 0970548 17326019
See accompanying notes to financial statements
25
CITYOF CUPERTINO
Reconciliation ofthe
NET CHANGE IN FUND BALANCES TOTAL GOVERNMENTAL FUNDS
with the
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30 2005
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 Net Assets of Governmental Activities reported in the
Statement ofActivities which is prepared on the full accrual basis
NET CHANGE IN FUND BALANCES TOTAL GOVERNMENTAL FUNDS 2I62458
Amounts reported for governmental activities in the Statement of Activities
are different because of the following
CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures 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 outlay expenditures are therefore added back to fund balance
Net of internal service fund additions of35949 2693457
Depreciation expense is deducted from the fund balance
Depreciation expense is net of internal service fund depreciation
of5I2270 which has already been allocated to serviced funds 7844915
LONG TERMDEBT PROCEEDS AND PAYMENTS
Repayment of bond principal is anexpenditure in the governmental funds but
in the Statement of Net Assets the repayment reduces ltoenrmg liabilities
Repayment of debt principal is added back to fund balance 0210405
ACCRUAL OF CNURORENNT 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
cNurorenntportion of compensated absences
Deferred revenue
01909
26489
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 Net Assets All nternal Service Funds 235727
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 3640I 00
See accompanying notes to financial statements
26
CITY OF CUPERTINO
GENERAL FUND
STATEMENT OF REVENUES EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30 2005
Budgeted Amounts
Variance with
Final Budget
Positive
Original Final Actual Amounts Negative
Revenues
Taxes 05107902 0206009 2I282928 I275938
Use of money and property 0110807 29100 895879 021413
Intergovernmental 0430404 292535 3642419 316948
Licenses and pennit5 06100 0200 0820906 080906
Charges for services 040902 460905 2810937 271923
Fines and forfeitures 0600 0600 575919 24009
Other revenue 03010 3610706 3611701 360859
Amounts available for appropriation 0220705 0925985 1323389 0144734
Charges for appropriation outflows
Administration 031060 3710478 0116926 16816 I
Law enforcement 0760203 096756 1664945 383801
Public information 070108 371548 371548
Administrative services 040905 3741416 3630713 463458
Recreation services 0220505 2821669 1322616 144535
Community development 0520906 0335906 682303 451657
Public works 0290709 3797925 0384716 2415946
Total charges for appropriations 0202706 45203815 7246448 6735703
EXCESS DEFICIENCY OF REVENUES
OVER EXPENDITURES 010709 5549 387813 871237
ORTHE FINANCING SOURCES USES
Transfers in 0720307 4823789 4823789
Transfers out 0840604 0150604 0150604
Total other financing sources uses 0120207 172224 172224
NET CHANGE IN FUND BALANCES I090408 152648 265459 871237
BEGINNINGFUND BALANCES 5125669
ENDING FUND BALANCES 18217258
See accompanying notes to financial statements
27
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 concept ofmajorfønds established by GASB Statement 34 extends to Proprietary Funds The City has
identified the funds below as major proprietary funds for fiscal 2005
GASB 34 does not provide for the disclosure ofbudget vs actual comparisons regarding proprietary funds
that are major funds
RESOURCES RECOVERY FUND
This fund accounts for activity related to the collection and disposal of solid waste A private company has
been issued an exclusive franchise to perfonn these services
BLACKBERRY FARM FUND
This fund accounts for activities related to operating the picnic area and golf course
CUPERTINO SPORTS CENTER FUND
This fund accounts for the operation and maintenance ofthe Cupertino Sports Facility
RECREATIONPROGRAMS FUND
This fund accounts for activities ofthe Csity community center
SENIOR CENTER FUND
This fund accounts for the activities ofthe Csity senior center
28
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
FOR THE YEAR ENDED JUNE 30 2005
tByuspineess EAnctteivrpitriieses Funds Governmental
Cupertino Activities
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fann Center Programs Center Totals Funds
ASSETS
Current assets
Cash and investments Note2 2357978 278903 356902 262527 14819 4860501 7831306
Accounts receivable 352945 4659 21 38513 77694 14913
Prepaid expense 972 26554 26266 61304
Advance to other funds Note4 125607 125607
Total current assets 1852839 230309 35593 67058 343949 067205 4732701
Capital assets netof
accumulated depreciation Note 6 54513 81675 2512 3244 596728 892306
Total Assets 1852839 785803 4118 78137 383436 1988978 2645908
LIABILITIES
Current Liabilities
Accounts payable and accruals 182629 23174 72418 91195 270416 12607
Accrued payroll and benefits 0452 84360 01711 14769 9575 10147 340803
Deposits 150168 28306 174946
Deferred revenue 194557 15147 244814 59439
Total current liabilities 186816 250502 176904 26113 363902 151002 362437
cNurorennt Liabilities
Compensated absences Note 1G 98386 98386
Claims payable Note 9 285608
Total Liabilities 186816 24889 176904 26113 363902 0513916 1911735
NET ASSETS
Invested in capital assets
net of related debt 54513 81675 2512 3244 596728 892306
Unrestricted 2751468 71501 270829 39954 8307 0962889 524557
Total Net Assets Deficit 2751468 256924 262504 16006 1651 6960517 3437845
See accompanying notes to financial statements
29
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF REVENUE EXPENSES
AND CHANGES IN FUND NET ASSETS
FORTHE YEAR ENDED JUNE30 2005
tByuspineess EAnctteivrpitriiesesFunds Governmental
Cupertino Activities
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fann Center Programs Center Totals Funds
OPERATING REVENUES
Charges forservices 482120 170617 312848 762076 477838 475934 8910126
Other 3332 11915 46419 19756
Total Operating Revenues 1422424 2911568 3813857 1720667 477838 4672709 8910126
OPERATING EXPENSES
Salaries and benefits 08765 6156 24315 561259 15332 5810826 681309
Materials and supplies 0571 276912 131616 152325 033707 790638 023889
Contractual services 8921345 3857 021507 071137 7615 2456808 2640
Insurance and claims 364508
Depreciation 47749 9553 5365 5163 58650 043727
Total Operating Expenses 0922607 3711412 491527 4613869 43408 6870459 291305
Operating Income Loss 590128 172526 16270 24708 33458 1769 131324
NONOPERATING REVENUES EXPENSES
Interest income 15738 0674 6814 52257 3296 271659 58696
Total Nonoperating Revenues Expenses 15738 0674 6814 52257 3296 271659 58696
Income LossBefore Contributions and Transfers 372609 161826 55086 570937 73474 53963 74428
Transfers inNote 4 04020
Transfers out Note 4 0500 080808 0310808
Net transfers 0500 080808 0310808 04020
Change in net assets 782609 161826 55086 230834 73474 3410517 235727
Net Assets BDeeginfincinigt 0560468 697804 126709 480849 53913 397589 130237
Net AssetsEDnedfiicnigt 2751468 256924 262504 16006 165 6960517 3437845
Seeaccompanying noles to financial statements
30
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30 2005
tByuspineess EAnctteivrpitriiesesFunds
Governmental
Cupertino Activities
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fann Center ParmoRsl Center Totals Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received ITom customers 4924726 121261 13I6928 1720618 582806 7875825 681066
Cash payments to suppliers
forgoods and services 6924602 695635 0211836 10I685I 32701 1361408 590712
Cash payments to employees 98050 58095 24605 581778 47558 3510156 566946
Net cash provided by operating activities 561518 63007 16813 474834 18002 57683 24399
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Advance to other funds 24156 24156
Transfers in 04020
Transfers out 0500 080808 0310808
Cash Flows from Noncapital
Financing Activities 254834 080808 51I474I 04020
CASH FLOWS FROM CAPITALAND RELATED
FINANCING ACTIVITIES
Purchase of capital assets 21394 21394 12747
Cash Flows from Capital and
Related Financing Activities 21394 21394 12747
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 15738 0674 6815 52258 3296 271715 58696
Cash Flows ITom Investing Activities 15738 0674 6815 52258 3296 271715 58696
Net Cash Flows 060624 74637 55628 372779 48928 0515703 487848
Cash and investments at beginning of year 3955829 35347 142458 0910814 190836 0872514 2933458
Cash and investments at end of year 2357978 278903 356902 262527 14819 4860501 7831306
Reconciliation of operating income loss to
net cash provided by operating activities
Operating income loss 590128 172526 16270 24708 33458 1769 131324
Adjustments to reconcile operating income to
net cash provided by operating activities
Depreciation 47749 9553 5365 5163 58650 043727
Change inassets and liabilities
Accounts receivable 85020 2205 1392 31033 61000 45954 7350
Prepaid expense 972 75504 75216 61304
Accounts payable and accruals 160715 52218 541 1561 0275 162508 05352
Accrued payroll and benefits 175 2764 I67 2348 1330 1754 91505
Deposits 11863 250 6411 31212
Deferred revenue 3389 21948 131527 013404
Noncurrent portion ofcompensated absences 51436 6467 42556 51767 76142
Noncurrent portion ofclaims payable 45104
Net cash provided by operating activities 561518 63007 16813 474834 18002 57683 24399
See accompanying notes 10 financial statements
31
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 unitsaonrdother funds
All Agency Funds representing all fiduciary funds ofthe City are custodial in nature and do not involve
measurement ofresults ofoperations Such funds have no equity since any assets are due to individuals
or other entities at some future time
32
ASSETS
CITY OF CUPERTINO
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30 2005
Cash and investments Nole 2
LIABILITIES
Deposits
Tolal Assets
Tolal Liabilities
See accompanying notes to financial statements
33
Agency
Funds
29327
29327
29327
29327
NOTES
34
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended Jnne 30 2005
I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a Reporting Entitv
The City ofCupertino Califomia the City was incorporated on October 3 1955 under
the laws of the State of California The City operates under a Council City Manager
fonn of government and provides services through the following departments
Administrative Services Community Development City Manager Parks and Recreation
Public Infonnation and Public WEongrinekerisng Fire services are provided by the
Santa Clara County Fire District and the City contracts with the Santa Clara County
Sheriffs Department for police services and with the Los Altos Garbage Company for
garbage and recycling services
The accompanying basic financial statements include all funds account groups and
boards and commissions that are controlled by the City Council The basic financial
statements include the Csity 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 ofthe Csity 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 May 1986 under the Nonprofit Public Benefit
Corporation Law of the State of California 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 fonned in 2000 under the Califomia Health Safety Code
to assist in the elimination of areas considered to be in a blighted condition The City
Council acts as the Board ofDirectors ofthe Corporation and the Agency The Mayor
and Vice Mayor of the City have been elected President and Vice President respectively
ofthe Corporation The City Clerk has been elected Secretary and the Csity Director of
Administrative Services has been appointed Treasurer ofboth entities
Separate financial statements for those component units that issue them are available
from the City at 10300 Torre Avenue Cupertino CA935200124
b Measurement Focus Basis ofAccounting and Basis ofPresentation
The Csity Basic Financial Statements are prepared in confonnity with accounting
principles generally accepted in the 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
USA
35
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30 200S
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
b Measurement Focus Basis ofAccounting and Basis ofPresentation continued
Gwoveirdnmeent Statements The Statement of Net Assets and the Statement of
Activities display infonnation about the primary government the City and its
component units These statements include the financial activities of the overall City
government except for fiduciary activities Eliminations have been made to minimize the
double counting of internal activities These statements distinguish between the
governmental and btuysipneess activities of the City Governmental activities generally
are financed through taxes intergovernmental revenues and other nonexchange
transactions tByuspineess activities are financed in whole or in part by fees charged to
external parties
The Statement of Activities presents a comparison between expenses and program
revenues for each segment of the btuysipneess activities of the City and for each
function of the Csity 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 infonnation technology insurance and equipment replacement are
included in expenses for individual activities and functions Program revenues include
acharges paid by the recipients of goods or services offered by the programs bgrants
and contributions that are restricted to 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 all taxes
are presented as general revenues
Fund Financial Statements The fund financial statements provide infonnation about
the Csity funds including fiduciary 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 each ofwhich is displayed in a separate column All
remaining governmental and enterprise funds are aggregated and reported as nonmajor
funds
Proprietary fund operating revenues such as charges for services result ITom exchange
transactions associated with the principal activity ofthe fund Exchange transactions are
those in which each party receives and gives up essentially equal values Nonoperating
revenues such as subsidies and investment earnings result from nonexchange
transactions or ancillary activities
36
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30 2005
I SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES continued
b Measurement Focus Basis ofAccounting and Basis ofPresentation continued
Major Funds GASB Statement 34 defines major funds and requires that the Csity
major governmental and btuysipneess funds be identified and presented separately in the
fund financial statements oAthelrlfunds called mnaojonr funds are combined and
reported in a single column regardless oftheir ftuypnde
Major funds are defined as funds which have either assets liabilities revenues or
expenditures equal to ten percent of their ftuypnde 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 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
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 LHibararlyl Wilson Park and Memorial Park certificates of
participation
The Library Construction Fund accounts for costs associated with demolition ofan old
library building and the design and construction ofa new library on that site
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 rranchise to perform these
services
The Blackberry Farm Fund accounts for activities related to operating the picnic area and
golf course
The Cupertino Sports Center Fund accounts for the operation and maintenance of the
Cupertino Sports Facility
The Recreation Programs Fund accounts for activities ofthe Csity community center
The Senior Center Fund accounts for the activities ofthe Csity senior center
37
CITY OFCUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended Jnne 30 2005
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continned
b Measurement Focus Basis ofAccounting and Basis ofPresentation continued
The City also reports the following fund types
Internal Service Funds These funds account for workers compensation management
infonnation system maintena Ì tce and replacement equipment maintenance and
replacement and ltoennng disability coverage all of which are provided to other
departments on arceimobursesmentt basis
Fiduciary Fund This fund accounts for deposits held by the City as an agent
Basis ofAccounting The gwoveirdnmeent proprietary and fiduciary fund financial
statements are reported using the economic resources measurementfocus 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 modified accrual basis of accounting Under this method revenues are
recognized when measurable and available The City considers all revenues reported in
the governmental funds to be available if the revenues are collected within sixty days
after yeenadr Expenditures are recorded when the related fund liability is incurred
except for principal and interest on ltoengn 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 ltoennng debt and
acquisitions under capital leases are reported as otherfinancing sources
Property 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
Grant revenues are recognized in the fiscal year in which all eligibility requirements are
met Under the tenns ofgrant agreements the City may fund certain programs with a
combination ofrceimobursesmentt grants categorical block grants and general revenue
Thus both restricted and unrestricted net assets may available to finance program
expenditures The Csity policy is to first apply restricted grant resources to such
programs followed by general revenues if necessary
38
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30 2005
I SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES continued
b Measurement Focus Basis ofAccounting aud Basis ofPresentation continued
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 btuyspineess activities unless they conflict with Government
Accounting Standards Board pronouncements
GASB 33 ENxchoannge Transaction eNxchoannge 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 entitlements and donations is recognized in the fiscal
year in which all eligibility requirements have been satisfied
c Budgetarv Practices
The budget ofthe City is a detailed operating plan which identifies estimated costs and
results in relation to estimated revenues The budget includesIthe 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 All appropriations lapse at fiscal year end
In May ofeach year the City Manager submits to the City Council a proposed budget for
the fiscal year beginning July IPublic hearings on the proposed budget are held during
the month ofJune 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 Csity 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 classifications 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 ofbudgetary control is at the
departmental or project level
Budgets for governmental funds are adopted on a basis consistent with generally
accepted accounting principles Budget infonnation is presented for the general special
revenue and debt service funds only Capital project funds are budgeted on altoennng
pbrojeyct basis and hence budgets for these funds are not presented in the basic
financial statements
39
CITY OFCUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30 2005
d Cash and Investments
The City pools its cash resources consisting ofcash and investments ofall funds for
investment except for restricted funds generally held by an outside fiscal agent Cash
amounts are reported net ofoutstanding warrants
Investments are stated at fair value
e Caoital Assets
Capital assets are recorded at cost or estimated historical cost if purchased or
constructed Donated fixed assets are recorded at their estimated fair value on the date
donated
Public domain infrastructure capital assets consisting ofroads bridges curbs gutters
medians sidewalks drainage and lighting systems have been capitalized and depreciated
Depreciation is recorded using thelsitrnaigeht method over the following useful lives
Buildings
Improvements
Vehicles
Street equipment
Water equipment
Office equipment
Road curbs gutters sidewalks medians and bridges
Streetlights
Storm drain structure and mains
Traffic signals
The City capitalizes fixed assets exceeding1000
Years
25
31
410
320
350
35
340
20
40
20
Major outlays for capital assets and improvements are capitalized as projects are
constructed Interest incurred during the construction phase is reflected in the capitalized
value ofthe asset constructed net ofinterest eamedon the invested proceeds over the
same period
Some capital assets may be acquired using federal and state grant funds or they may be
contributed by developers or other governments GASB Statement 34 requires that these
contributions be accounted for as revenues at the time the capital assets are contributed
40
CITY OFCUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30 2005
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
I Claims and IJDuendts Pavable
Claims and judgments payable are accrued when the liability is incurred and the amount
can be reasonably estimated Claims and judgments payable are recorded in an internal
service fund for workers compensation and ltoennngdisability General liability claims
and judgments are not material and are not accrued
g Compensated Absences
Compensated absences comprise vested accumulated vacation and sick leave The Csity
liability for compensated absences is recorded in Governmental Activities or various
Proprietary funds as appropriate The liability for compensated absences is detennined
annually For all governmental funds amounts expected to be pennanently liquidated
such as what is due to be paid because Of a realized employment action are recorded as
fund liabilities the ltoennngportion is recorded in the Statement ofNet Assets In prior
years the governmental fund associated with the ongoing salary and benefit cost ofthe
employee has liquidated theltoennng liability
The changes in compensated absences were as follows
Governmental BTuysinpeess
Activities Activities Total
Beginning Balance 6912904 150135 120303
Additions 293559 17631 13136
Payments 145634 32155 17789
Ending Balance 012181 13539 2423704
Current Portion 46243 46243
h FundEuitv
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 msanagement tentative plans for future use of
financial resources
i Propertv Tax Calendar
All property taxes are levied and collected by the County ofSanta Clara Secured taxes
are levied on July I are due in two installments on November 1 and March I and become
delinquent on December 10 and April 10 Unsecured taxes are due on July I and become
delinquent on August 31 The lien date for secured and unsecured property taxes is
March 1
41
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended Jnne 30 2005
1 SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES continued
i Propertv Tax Calendar continued
The City in fiscal year 199943 adopted 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 receives remittances as a series ofadvances made by the
County during the year
U Interfund Transactions
Transactions constituting reimbursements to a fund for eexxppenednitsureess initially
made from it that are properly applicable to another fund
eexxppenednitsureess in the reimbursing fund and as
eexxppenednitsureess in the fund that is reimbursed
are recorded as
reductions of
k Statement ofCash Flows
For purposes of reporting cash flows for the Csity proprietary funds pooled cash and
investments are considered cash equivalents as the proprietary funds can access pooled
cash and investments in amanner similar to a demand deposit account
I Bond Discounts and Issue Costs
Debt discounts and issuance costs are recognized in the current period Debt discounts
and issuance costs incurred by proprietary fund types are amortized over the term ofthe
debt using the obuotstnanddinsg method which approximates the effective interest
method
m 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 the service rendered or goods consumed
2 CASH AND INVESTMENTS
The Csity pooled idle funds are invested pursuant to investment policy guidelines adopted by the
City Council The objectives ofthe policy are to invest funds to the fullest extent possible and to
invest in accordance with the provisions ofthe California Government Code with the priority of
safety liquidity and yield The policy addresses the safekeeping ofsecurities types ofinvestment
instruments The City maintains a cash and investment pool that is available for use by all funds
Each fund tsype portion of this pool is displayed on the combined balance sheet as cash and
investments
42
CITY OFCUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended Jnne 30 2005
2 CASH ANDINVESTMENTS continned
a Policies
California Law requires banks imd savings and loan institutions to pledge government
securities with a market value of 110 of the Csity cash on deposit or first trust deed
mortgage notes with a market value of150 ofthe deposit as collateral for these deposits
Under California Law this collateral is held in a separate investment pool by another
institution in the Csity name and places the City ahead of general creditors of the
institution
The City and its fiscal agents invest in 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 ofthe 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 tenus ofa
custody agreement Individual investments are generally made by the City and its fiscal
agents
The Csity investments are carried at fair value as required by generally accepted
accounting principles The City adjusts the carrying value ofits investments to reflect their
fair value at each fiscal year end and it includes the effects ofthese adjustments in income
for that fiscal year
b cCalatiosns
The Csity total cash and investments at fair value are presented on the accompanying
statement ofnet assets in the following allocation
Statement ofNet Assets
Cash and investments
Cash and investments with fiscal agent
Subtotal
Fiduciary Funds
Cash and investments
2631801
3825919
041611
29327
Total Cash and investments 29449138
43
CITYOF CUPERTINO CALIFORNIA
NOTES TOBASIC FINANCIAL STATEMENTS
For the Year Ended June 30 2005
2 CASH ANDINVESTMENTS continued
c Authorized Investments bv the Citv
The Csity 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
Csity investments of debt proceeds held by fiscal agents that are governed by the
provisions ofdebt agreements ofthe City
Maximum
Maximum Minimum Percentage of
Authorized Investment Type Maturity Credit Quality Portfolio
USTreasury obligations 5 years NA None
Federal Agency securities A 5 years B NA None
Up to 40
California Local Agency Investment million per State
Fund NA NA law
nNegootiabnle Certificates of Deposit 5 years AN None
time deposits
State of Califomia registered state 5 years NA None
warrants treasury notes or bonds
California local agency bonds notes 5 years NA None
warrants or other obligations
Bonds issued by the local agency 5 years NA None
Bankers Acceptances 180 days NA 40
Commercial Paper 180 days AIPI25
Maximum Investment
In One Issuer
None
None
None
10of portfolio 5of
isssuer net worth
10
10
10
None
10of portfolio5of
isssuer net worth 10
of outstanding paper of
issuer
Negotiable Certificates of Deposit 5 years NA 30
Repurchase Agreements I year NA None
Medium Tetm Corporate Notes 5 years A or better 30
Money market mutual funds investing
inUSTreasury orGovernment NA NA 20
Agency securities
10of portfolio 5of
isssuer net worth
10of portfolio 5of
isssuer net worth
10ofportfolio 5of
isssuer net worth
10
ASecurities 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 FNMAthe Federal Home Loan Mortgage
Corporation FHLMC and the Federal Fann Credit Bank FFCB
BAs allowed by City investment policy the City Council approved an exception to the5year maturity limit with an investment in
1993 of three FHLMC securities with maturities in 2007 and 2008 Such investments have a maturity value2o66fmilJion
44
CITY OFCUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30 2005
2 CASH AND INVESTMENTS continued
d Authorized Investments bv Debt Agreements
The City must maintain required amounts ofcash and investments with trustees or fiscal
agents under the tenus ofcertain debt issues These funds are unexpended bond proceeds
or are pledged reserves to be used if the 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 bond indentures or State statutes The Csity
Investment Policy allows investments ofbond proceeds to be governed by provisions of
the related bond indentures The following identifies the investment types that are
authorized for investments held by fiscal agents under the tenus ofthe bond indentures of
the related debt issue
Authorized Investment Type
Money market mutual funds
California Local Agency Investment
Fund
USTreasury obligations
usFederal agency obligations A
rPefurndeed local agency municipal
obligations that are cnalolabnle or
irrevocably callable on a specified date
General obligations of states
US dollar denominated deposit
accounts federal funds and bankers
acceptances
Commercial paper
Time ordemand accounts orcertificates
of deposits collateralized
Investment agreements orother fanns of
investments including repurchase
agreements approved by the financial
guaranty insurance camer
Maximum
Maximum Minimum Credit Percentage of
Maturity Quality Portfolio
Aaam or
AN AGAAm None
Up to 40
million per
NA NA State law
NA NA None
NA NA None
Highest rating
NA category None
AN AA2 None
360 days PIAIAINone
270 days PlA1 None
NA NA None
NA NA None
ASecurities 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 FHLMC and the Federal Fann Credit Bank
FFCB
45
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30 2005
2 CASH ANDINVESTMENTS 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 ofits fair value to changes in market interest rates
Information about the sensitivity ofthe fair values of the Csity investments including
investments held by bond trustees to market interest rate fluctuations is provided by the
following table that shows the distribution of the Csity investments by maturity or
earliest call date
Investments with Fiscal Agent
12 Months
or less
13 to
24 Months
25 to
60 Months Total
090806
491806
879651
0940537
0923668
090806
us Treasury Securities
Federal Agency Obligations
Local Agency Invesnnent Fund
Government Securities Money Market Funds
nNegootiabnleCertificates of Deposit
491806
2721905
09105437
0923668
0675909 2596917
Total Investments 2 654711 7 659 090 10283561 35369927
Cash in banks and on hand
Total Cash and Investments
6351
4 248 993
The City is a participant in the Local Agency Investment Fund LAIF that is regulated
by Califomia Government Code Section 16429 under the oversight ofthe Treasurer of
the State ofCalifornia The City reports its investment in LAIF at the fair value amount
provided by LAIF which is the same as 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 amortized cost basis Included in LsAIF investment
portfolio are collateralized mortgage obligations bmaorctgkaegde securities other asset
backed securities loans to certain state funds and floating rate securities issued by
federal agencies gsopvoenmsmoreendt enterprises United States Treasury Notes and
Bills and corporations At June 30 2005 these investments matured in an average of
151 days
Money market funds are available for withdrawal on demand and at June 30 2005
matured in an average of15 days
46
CITY OFCUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 230005
2 CASH AND INVESTMENTS continued
f Credit Risk
Credit risk is the risk that an issuer ofan investment will not fulfill its obligation to the
holder ofthe investment This is measured by the assignment ofa rating by a nationally
recognized statistical rating organization Presented below is the actual rating as ofJune
30 2005 for each investment type including those with fiscal agents as provided by
Msoody ratings
Investment Type
Federal Agency Obligations
Government Securities Money Market Funds
Aaa
5611699
0923668
Total
5611699
0923668
Totals
Exempt Tom Credil Rating Disclosure
US Treasury Securities
Not Rated
Federal Agency Obligations
Local Agency Investment Fund
Certificates ofdeposil
56235257 56235257
491806
38422
09105437
090806
Total Investments 35369927
g Concentration ofCredit Risk
The Csity investment policy contains certain limitations on the amount that can be
invested in anyone issuer In certain categories these limitations are more restrictive
than those required by California Government Code Sections 53600 et seq Investments
in anyone issuer other than VS Treasury securities mutual funds and external
investment pools that represent 5or more of total Ewnidtitey investments are as
follows at June 30 2005
Issuer Investment Type Reported Amounl
Federal Home Loan Bank
Federal National Mortgage Association
Federal Home Loan Mortgage Corporation
Federal Agencies Obligation
Federal Agencies Obligation
Federal Agencies Obligation
36147036
095356
2344729
47
CITY OFCUPERTINO CALIFORNIA
NOTES