CITY OF CUPERTINO CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR FISCAL YEAR ENDED
JUNE 30 2003
PREPARED BY
CITY OF CUPERTINO
FINANCE DEPARTMENT
CAROL A ATWOOD
DIRECTOR OF ADMINISTRATIVE SERVICES
INTRODUCTORY SECTION
CITYOF CUPERTINO CALIFORNIA
Comprehensive Annual Financial Report
For the Year Ended June 30 2003
Table of Contents
Page
INTRODUCTORY SECTION
Table of Contents i
Letter ofTransmittal iv
Organization Chart xiii
Commissions and Committees xiv
City Council and Directory of City Officials xv
Certificate of Award for Excellence in Financial Reporting xvi
FINANCIAL SECTION J
Independent Asuditor Report on Basic Financial Statements 3
Msanagement Discussion and Analysis 4
Basic Financial Statements
Gwoveirdnmeent Financial Statements
Statement of Net Assets 20
Statement of Activities 21
FundFinancial Statements
Major Governmental Funds
Balance Sheet 23
Reconciliation of the GovernmentalBFaulanndcse Sheet with the
Statement ofNet Assets 24
Statement of Revenues Expenditures and Changes in Fund Balance 25
Reconciliation of the Net Change in Fund Balances Total Governmental
Funds with the Statement of Activities 26
Statement of Revenues Expenditures and Changes in Fund Balances Budget and Actual
General Fund 27
CITY OF CUPERTINO
Comprehensive Annual Financial Report
For the Year Ended June 30 2003
Table of Contents
Page
FINANCIAL SECTION Continued
Major Proprietary Funds
Statement ofNet Assets 29
Statement ofRevenue Expenses and Changes in Fund Net Assets 30
Statement ofCash Flows 31
Fiduciary Funds
Statement ofFiduciary Net Assets 32
Notes to Basic Financial Statements 33
Supplemental Information
Major Governmental Funds Other Thanthe General Fundand Special Revenue Funds
Schedule oRevenues Expenditures and Changes in Fund Balances Budget and Actual
Public Facilities Corporation Debt Service Fund 56
mNaojonr Governmental Funds
Combining Balance Sheets 58
Combining Statements of Revenues Expenditures and Changes
in Fund Balance 60
Combining ScheduleoRevenues Expenditures and Changes
in Fund Balance Budget and Actual 62
Internal Service Funds
Combining Statement of Net Assets 67
Combining Statements ofRevenues Expenses and Changes in Net Assets 68
Combining Statements of Cash Flows 69
Fiduciary Funds
Combining Statement of Changes in Assets and Liabilities All Agency Funds 71
ii
CITY OF CUPERTINO CALIFORNIA
Comprehensive Annual Financial Report
For the Fiscal Year Ended June 30 2003
Table of Contents
Page
STATISTICAL SECTION
General Governmental Expenditures by function
Last Ten Fiscal Years Table 1 76
General Govemmemal Revenues by Source
Last Ten Fiscal Years Table 2 78
Assessed and Estimated Actual Values ofTaxable Property
Last Ten Fiscal Years Table 3 79
Property Tax Rates Direct and Overlapping Governments
Last Ten Fiscal Years Table 4 80
Principal Taxpayers Table 5 81
Computation of Legal Debt Margin Table 6 82
Ratio of General Bonded Debt to Assessed Value and Bonded Debt
Per Capita Last Ten Fiscal Years Table 7 83
Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total
General Governmental Expenditures Last Ten Fiscal Years Table 8 84
Demographic Statistics Last Ten Fiscal Years Table 9 85
Property Values Construction and Bank Deposits
Last Ten Fiscal Years Table 10 86
Community Profile 87
iii
CITY OF
cnuPoeP
November 1 2003
To the Citizens of Cupertino Honorable Mayor
Members of the City Council and City Manager
The Comprehensive Annual Financial Report CAFR for the City of Cupertino the City for the
fiscal year ended June 30 2003 is submitted herewith The Introductory Section includes 1
this transmittal letter 2 an organizational chart and 3 a list of principal officials The
Financial Section includes 1 a new narrative section referred to as Msanagement Discussion
and Analysis MAD 2 the basic financial statements and related notes 3 required
supplemental information 4 the combining financial statements for mnaojonr funds and 5 the
independent auditors report The Statistical Section includes several tables of unaudited data
depicting the financial history of the City as well as miscellaneous statistics
Although the Csity annual report has always been prepared in accordance with generally
accepted accounting principles for local governments as prescribed by the Governmental
Accounting Standards Board GASB this ysear report has been reformatted to comply with the
new financial reporting model established by GASB Statement 34 Basic Financial Statements
and Msanagement Discussion and Analysis for State and Local Governments effective for the
City July 1 2002 GASB 34 provides significant changes in the accounting and reporting of
governmental activities The new financial reporting model is intended to improve financial
reporting by supplying information not previously available in local government financial
statements much of it in gwoveirdnmeent formats In this first year of GASB 34
implementation financial statement users are guided through the new formats with introductions
and explanations to the new schedules We hope this effort will assist in the rseader transition
from the Csity previous financial reporting to the new GASB 34 formats
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 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 of the Csity financial activity have been included
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 all
functions set forth in the organization chart on page xiii This financial report incorporates data
for the City of Cupertino the Cupertino Public Facilities Corporation and the Cupertino
Redevelopment Agency
iv
Printedon Recycled Paper
The City operates under a CCouintycil 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
ECONOMIC CONDITIONS AND OUTLOOK
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
CUPERTINO
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
Cupertino is the world headquarters for major
corporations such as Apple Computer Portal
Software and Symantec Key divisions of Hewlett
Packard and Borland Software are also located in
Cupertino The City has eight large shopping centers
including its own regional mall Vallco Fashion Park
Developments at the national state and local level
continue to present fiscal challenges to all municipalities in the area On the national level the
costs of an inconclusive war in Iraq and maintenance of the csountry heightened state of security
serve to dampen hints of economic recovery As economists argue whether the national recovery
is sustainable it is clear that Csalifornia economy has not realized significant growth and
continues to operate under a massive State budget deficit California municipalities persist in
their efforts to protect local government revenues from the State Tsreasury reach but an ongoing
shift of local tax funding by the State has made further grabs seem inevitable
The Silicon Vsalley economy has been hardest hit with reduced demand in the electronics and
technology manufacturing industry and the highest unemployment rates in the country The City
of Cupertino experienced its third consecutive year of decline in sales tax revenue with most
other tax revenues falling behind as well Property taxes have grown at a very moderate pace as
property values have maintained healthy assessments throughout the economic downturn And
with declining yields and cash holdings the Csity investment income has fallen 50in the past
two years
V
However 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 economic recovery builds throughout the State and into the Silicon Valley the
City plans to increase it 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
SALES TAX TREND
Economic development has become a focal point for Cupertino This year the City will
implement programs specifically targeted to business retention expansion and attraction
including a policy for personal contact with local business leaders The Csity top 10 sales tax
producers will be asked to participate in a program of reporting timely sales tax information
directly to the City Because the Csity sales tax has been largely dependent on the success of the
rsegion high tech industry sales tax revenues have continued to decline from the exceptional
levels of 2109090 But as Northern California straggles to recover from the economic
downturn the City stands ready to tap the possibilities of its newly formed Redevelopment
Agency with the Vallco project area as the cornerstone The City will work towards enhancing
retail at this regional mall and pursue other opportunities to strengthen its economic position
01040
01020
01000
8000
600o
4000
2000
o
1994 1995 1996 1997 1998 1999 2000 2001 2002
mACTUAL
1ADJBYCPIJ
2OO3
In thousands
vi
MAJOR INITIATIVES
Current Year Projects
1 Foster a Sense of Community
Continue partnerships with area schools to add value to the quality of education and
recreational prospects in the City
Offer opportunities and programs to address the needs of our diverse community
Foster a better sense of community through recreation activities outreach programs and
expansion of community events and implementation of our Neighborhood Captains
Program
2 Ensure Land Use is Compatible with Community Character
Ensure that the walkable city concept is present trails paths public access in all
developmenffredevelopment projects
Develop a master plan for the City Center and Town Center including a full service
hotel park and new library
Implement the San STaormatoagsa Creek Plan and investigate feasibility of
opportunities of the Stevens Creek Trail
Optimize community benefit with the remaining office industrial and commercial
development approvals
Complete annexations of individual parcels of the Monta Vista areas
3 Protect and Promote our Public Safety
Continue to expand our safe routes to school program
Evaluate methods for communicating electronically and in writing to our Ennoglisnh
speaking population regarding crime prevention
Continue emphasis on our neighborhood watch and disaster preparedness programs
4 Enhance Services
Identify needs and provide affordable housing opportunities to Cupertino teachers and
other local workers
Expand quality municipal services to newly annexed regions ofthe City
Expand access to our City Council and Commission meetings by making them available
worldwide through the Csity website
Enhance responses to customer inquiries through our new Access Cupertino program
vii
5 Ensure the Financial Health ofthe Community
Encourage a healthy environment for retail growth
Add a revenue enhancement incentive policy component of review for new development
Monitor revenue trends and proactively adjust our expenditures to ensure a balanced
budget and preservation of customer service
6 Pursue Infrastructure Improvements
Design finance and construct a new Library and Civic Center Park
Redesign and upgrade the Cupertino Sports Center and Teen Center
Continue an active street improvement program
Future Projects
The City will continue to focus on a number of important ltoernmgissues These issues include
holding the line on City expenditures partnership opportunities with our schools and other
agencies continued automation funding of the capital improvement program and enhancing
economic development efforts
The City is currently constructing several major capital improvements throughout our
community As work progresses on our City Center which includes the new library and Sports
Center master plans will be implemented at the Blackberry Farm Golf and Picnic Facility and
transportation projects will remain a priority Such growth in capital spending will directly
impact our revenues service efforts and traffic configurations
viii
Department Focus Efforts and Accomplishments
Each year we feature a department in the city that has made notable contributions to the
organization or community This year the spotlight falls on the Emergency Preparedness
Division
The mission of the division is to facilitate disaster rpereapadriendenessss of residents
employees government businesses special districts and agencies within the City of Cupertino
This is done through public education training and information exchange Specific
accomplishments this year include
Expanded the Community Emergency Response Team training CERT from four to five
classes training approximately 35 citizens per class The City now has over 500 residents
trained
Expanded the Kaleidoscope Public Safety Camps for grades612 from two to three More
than 150 students have completed the training
Conducted five first aid and CPR classes which trained
over 200 citizens
Completed one EOC terrorism functional exercise with
County Fire twenty student volunteers Nova Care Clinic
and the Cupertino Amateur Radio Emergency System
CARES to improve communication and coordination
between groups
Provided soitne fire extinguisher service to Cupertino residents to encourage preparedness
and make it easier for residents to have extinguishers serviced
Participated in three School Outreach Career Days offered to elementary and middle school
students
Facilitated the organization of two new neighborhood CERT teams bringing the total to ten
We congratulate the Emergency Preparedness Department for their achievements in all of their
projects and wish them continued success in the implementation of their programs
ix
FINANCIAL INFORMATION SYSTEMS
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 am recognized when
susceptible to accrualie both 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 in conformance with GASB 34 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
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 functional level
Changes in Financial Reporting
In addition to providing for new gwoveirdnmeent financial statements and formatting GASB
34 requires a Msanagement Discussion and Analysis referred to asMADwith the intent of
giving readers an objective and easily readable analysis of the Csity financial performance for
the year Much of the information needed for the newMAD was previously provided in this
transmittal letter it includes a discussion of the basic financial statements some condensed
financial information an analysis of the Csity financial position and results of operations on
both awCiidtye and Fund basis Comparative figures are available only on the fund basis in this
first year of GASB 34 implementation The Management Discussion and Analysis begins on
page four
X
One of the most significant and rfeaachinrg new requirements of GASB 34 deal with the
reporting ofgeneral infrastructure assets GASB defines public infrastructure assets as lliovnegd
capital assets associated with Governmental Activities that normally are stationary in nature and
can be preservedfor a significantly greater number of years than most capital assets Therefore
the City needed to capture cost information for land roads bridges sidewalks streetlights storm
drains and traffic signal systems An inventory for each of these infrastructure systems existed
within the various asset management systems in place within the Public Works Department but
the data had to be updated and a valuation determined for each infrastructure item GASB 34
requires that infrastructure assets be reported at historical cost or deflated replacement cost
Some estimates had to be made drawing on lperviceel indices to the likely year of acquisition
These assets then were depreciated over their estimated useful lives The City already had
information regarding its general fixed assets however these assets had not previously been
capitalized outside of the those used for btuysipneess enterprise fund activities For proper
presentation of these assets accumulated depreciation was calculated cyuerreanrt capital
acquisitions and depreciation were determined by functional area and the book value of capital
assets disposed of during the year was calculated Utilizing these estimates and cost data the
City was able to report infrastructure and other capital asset inventories in compliance with
GASB Statement 34 as of July 1 2002
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 agencies and
instrumentalities 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 was approximately15 million
Risk Management
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 cimumstances 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
xi
CERTIFICATE OF ACHIEVEMENT
The Government Finance Officers Association of the United States and Canada GFOA awarded
a Certificate of Achievement for Excellence in Financial Reporting to the City of Cupertino for
its Comprehensive Annual Financial Report for the year ended June 30 2002
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
I would like to express my appreciation to the City employees City Manager and the members
of the City Council for their interest in conducting the financial operations of the City in a
responsible manner Special thanks go to the Finance staff Dixie Farley Tina Mao and Beth
Ebben for their continued support and dedication Special recognition goes to Dorothy Steenfott
for her efforts in the preparation and production of this report and to Jennifer Chang and Carol
Augustine who spent many hours to ensure the accurate implementation of GASB Statement
34 Compliance with the sstatement requirements in the reporting of infrastructure inventories
and historical valuations was also made possible through the efforts of the Public Works
Department
Respectfully submitted
Carol A Atwood
Director of Administrative Services
xii
xiii
CITY OF CUPERTINO CALIFORNIA
Fiscal Year 200032
COMMISSIONS AND COMMITTEES
AUDIT COMMITTEE PARKS RECREATION COMMISSION
Michael Chang
Gillian Enos
Tom Hall
Dolly Sandoval
Rod Brown
Jeanne Bradford
Frank Jelinch
Roger Peng
Kris Wang
HOUSING COMMISSION TELECOMMUNICATIONS COMMISSION
Julia Abdala
Richard Abdalah
Sarah HFatheawiaty
Mahesh Nihalani
Frances Seward
Salvatore Algeri
David Eggleston
LT Guttadauro
Steven Ting
Ernest Tsui
FINE ARTS COMMISSION LIBRARY COMMISSION
Nancy Canter
David Kim
Hema Kundargi
Shirley Lin Kinoshita
Janet Mohr
Carl Orr
Rita Young
Sheila Mohan
Janet Riddell
Eno Schmidt
Katherine Stakey
Yuhfen Diana Wu
PUBLIC SAFETY COMMISSION PLANNING COMMISSION
Barry Chang
Nolan Chen
Emma Darknell
Philippe Dor
Hugh Riddell
Angela Chen
Chuck Corr
Marry Miller
Taghi Saadati
Gilbert Wong
TEEN COMMISSION ECONOMIC DEVELOPMENT
Princess Castaneda
Akshita Deora
Patty Fang
Erin Gatley
Piyush Goyal
Christopher Haley
Zack Kolev
Alexander Lee
Kenny Lin
Emily Liu
Kevin Schroeder
Danh Trang
Angelica Zen
Carol Atwood
Jody Hansen
Sandra James
David Knapp
Richard Lowenthal
Orrin Mahoney
Mark McKenna
Steve Piasecki
Ralph Quails
Gilbert Wong
BICYCLE PEDESTRIAN COMMISSION
Hua Julia Fu
David Greenstein
Robert Levy
Geoffrey Paulsen
Joseph Walton
xiv
CITY OF CUPERTINO CALIFORNIA
Fiscal Year 200032
CITY COUNCIL
Michael Chang
Mayor
Sandra James
Vice Mayor
Richard LowenthaI
Councilmember
Patrick Kwok
Councilmember
Dolly Sandoval
Councilmember
DIRECTORY OF CITY OFFICIALS
DavidWKnapp City Manager
Charles T Kilian City Attorney
Carol Atwood Director of Administrative Services
Rick Kitson Public Information Officer
Steve Piasecki Director of Community Development
Ralph Qualls Director of Public Works
Kimberly Smith City Clerk
Therese Smith Director of Parks and Recreation
XV
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Cupertino
California
For its Comprehensive Annual
Financial Report
for the Fiscal YearEnded
June 30 2002
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports CAFRs achieve the highest
standards in government accounting
and financial reporting
President
Executive Director
xvi
NOTES
xvii
FINANCIAL SECTION
NOTES
2
SSOCIA TES
To the City Council
City of Cupertino California
INDEPENDENT ASUDITOR REPORT ON
BASIC FINANCIAL STATEMENTS
ACCOUNTANCY CORPORATION
1931 San Miguel Drive Suite 100
Walnut Creek California 94596
9250993002 FAX 9250913305
EMailmaze@ mazeassociatescom
iWteebwwwocmcoaizametae
We have audited the basic financial statements of the governmental activities the btuyspineess activities each major
fund and the aggregate remaining fund information ofthe City of Cupertino as ofand for the year ended June 30 2003
as listed in the Table of Contents These financial statements are the responsibility of the Csity management Our
responsibility is to express an opinion on these financial statements based on our audit
We conducted our audit in accordance with generally accepted auditing standards in the United States of America and
generally accepted government audit standards issued by the comptroller General of the United States of America
Those standards require 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
We have sao issued our report on the Csity internal controls and compliance with laws rules and regulations which is
dated January 22 2004
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 2003 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 of
America
The basic component unit financial statements referred to above follow the requirements ofthe Government Accounting
Standards Bsoard Statement No 34 Basic Financial Satatnemednts Management s Discussion andAfnoalysris State
and Local Governments No 36 Recipient Reporting for Certain eNxchoannge Revenues an Amendment of GASB
Statement No 33 No 37 Basic Financial SatatnemedntsMsanagement Discussion andAfnoalysris State andLocal
Governments Omnibus and No 38 Certain Financial Statement Note Disclosures as discussed in Note 1 to the basic
component unit financial statements
Msanagement Discussion and Analysis is required by the Government Accounting Standards Board but is not part
ofthe basic component unit financial statements We have applied certain limited procedures to this information
principally inquiries of management regarding the methods ofmeasurement and presentation of this 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 of Contents are presented for purposes of additional analysis and are not a
required part of the basic financial statements of the City of Cupertino Such information has been subjected to the
auditing procedures applied in our audit of the basic financial statements and in our opinion are fairly stated in all
material respects in relation to the basic financial statements taken as a whole
The statistical section listed in the Table of Contents was not audited by us and we do not express an opinion on this
information
January 22 2004
3
A Professional Corporation
CITY OF CUPERTINO
MSANAGEMENT DISCUSSION AND ANALYSIS
Fiscal 2003 is the first year the City is required to issue its financial statements in the format proscribed
by the provisions of Government Accounting Standards Board Statement 34 GASB 34 which requires
the City to provide this overviewMADof its financial activities for the fiscal year The MADis
intended to provide an objective and easily readable analysis of the Csity financial performance for the
year Please read it in conjunction with the accompanying Transmittal Letter and Basic Financial
Statements
FISCAL 2003 FINANCIAL HIGHLIGHTS
The City continued to be affected by another year of economic slowdown and the State of Csalifornia
escalating budgetary crisis After the economy declined dramatically in fiscal year 200021 City
revenues continued on a downward slide led by a16million decrease in Sales Tax the Csity largest
revenue source Growth in property tax slowed to 3 Investment earnings fell almost 20 in an
environment where yields on tsehromrt investments crawled below2and the tyeeanr Treasury yield
declined to a y4e5ar low A second year of decreases in revenues from charges for services hit the Csity
Enterprise funds hardest as consumer demand for recreational and other community services remained
tepid
Against this backdrop of declining revenues the City persisted in guarding its limited reserves which are
held to protect the City from economic fluctuations and catastrophic events In order to finance the
construction of a new library facility and other capital projects the City took advantage of historically
low interest rates to refinance its existing debt with a new COP issuance of over 566million The
transaction provided additional funding of 16 million and lowered the Csity annual debt service
payments by approximately12million per year
Financial highlights of the year include the following
The Csity total net assets decreased46million during the fiscal year At June 30 2003 net assets
totaled 1520 million
Total City revenues including program and general revenues were 309million while total
expenses were445 million
Net assets in Governmental funds were 1313 million while net assets in business activities were
73million
Governmental Program Revenues were36million Governmental Program Expenses were 378
million
Revenues from BTuysinpeess activities were47 million expenses associated with these same
activities were67million
General Fund revenues and expenditures were277million and265million respectively
The General Fund balance was196million at the 2003 fiscal year end
The City adopted Governmental Accounting Standards Board GASB Statement No 34 Basic Financial
Statements and Msanagements Discussion and Analysis for State and Local Governments effective
July 1 2002 In adopting this new financial reporting standard the City recorded certain adjustments as
described in Note 14 to the financial statements
4
OVERVIEW OF TIlE COMPREItENSIYE ANNUAL lZlNANEIAL REPORT
This Comprehensive Annual Financial Report is in six parts
1 Introductory section which includes the Transmittal Letter and general information
2 Msanagement Discussion and Analysis this part
3 The Basic Financial Statements which include the Gwoveirdnmeent and the Fund financial
statements along with the Notes to these financial statements
4 Required Supplemental Information
5 Combining statements for mNaojonr Governmental Funds and Fiduciary Funds
6 Statistical information
The Basic 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 ltoenrgmer view of the Csity activities as a whole and
comprise the Statement of Net Assets and the Statement of Activities The Statement of Net Assets
provides information about the financial position of the City as a whole including all its capital assets and
ltoernmgliabilities on the full accrual basis similar to that used by corporations As such increases or
decreases in total net assets will over time reflect changes in the fiscal health of the City The Statement
of Activities provides information about all the Csity revenues and all its expenses also on the full
accrual basis with the emphasis on measuring net revenues or expenses of each the Csity programs The
Statement of Activities explains in detail the change in Net Assets for the year
All of the Csity activities am grouped into Govemment Activities and tByusipneess activities as
explained below All the amounts in the Statement of Net Assets and the Statement of Activities are
separated into Governmental Activities and tByuspineess Activities in order to provide a summary of
these two activities ofthe City as a whole
The Fund Financial Statements report the Csity operations in more detail than the gwoveirdnmeent
statements and focus primarily on the tsehromrt activities of the Csity General Fund and other Major
Funds The Fund Financial Statements measure only current revenues and expenditures and fund
balances they exclude capital assets ltoenrmg debt and otherltoenrmg amounts
Major Funds account for the major financial activities of the City and are presented individually while
the activities of mNaojonr funds are presented in summary with subordinate schedules presenting the
detail for each of these other funds Major Funds are explained below
The fiduciary statements provide financial information about the activities of the Special Assessment
Districts for which the City acts solely as agent
The Gwoveirdnmeent Financial Statements
The Statement of Net Assets and the Statement of Activities present information about the following
Governmental activities Most of 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 taxes and by specific program
revenues such as developer fees
5
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 ofltoenrmg debt is also included as a component unit
tByuspineess aActivitlieslof the 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 of the service they use
wCiidtye financial statements are prepared on the accrual basis which means they measure the flow of
all economic resourcesof the City as a whole
Fund Financial Statements
The Fund Financial Statements provide detailed information about each of the Csity most significant
funds called Major Funds The concept of major funds and the determination of which 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 mNaojonr Funds summarized
and presented only in a single column Subordinate schedules present the detail of these mNaojonr funds Major Funds present the major activities of the City for the year and may change from year to
year as a result ofchanges in the pattern ofCsity activities
Fund Financial Statements include governmental enterprise and internal service funds as discussed
below
Governmental Fund Financial Statements are prepared on the modified accrual basis which means they
measure only current financial resources and uses Capital assets and other lliovnegd assets along with
ltoernmgliabilities are not presented in the Governmental Fund Financial Statements
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
Since the Csity Internal Service Funds provide goods and services only to the Csity governmental and
btuysipneess 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
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
Comparisons of Budget and Actual financial information are presented only for the General Fund and
other Major funds that are Special Revenue Funds
Fiduciary Statements
The City is the agent for certain assessment districts holding amounts collected from property owners
which await transfer to these Districts bond trustees The Csity fiduciary activities are reported in the
separate Statements of Fiduciary 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
6
FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE
This analysis focuses on the net assets and changes in net assets of the Csity Governmental Activities
Tables 1 2 and 3 and BTuysinpeess Activities Tables 4and 5 presented in the wCiidtye Statement of
Net Assets and the Statement of Activities that follow
Governmental Activities
Table 1
Governmental Net Assets at June 30 2003
in millions
Cash and investments 582
Other assets 5
Capital assets 1518
Total assets 1876
tLeornmg debt outstanding
Other liabilities
584
87
Total liabilities 653
Net assets
Invested in capital assets net of debt 779
Restricted 91
Unrestricted 254
Total net assets 1313
Net assets of1313 million at June 30 2003 were comprised of the following elements
Unrestricted cash and investments of343million 35 million restricted for debt service and
195million of bond proceeds restricted for the construction of capital assets
16million loans issued in the administration of the Csity various sguprpaorntedthousing
programs and15million in conjunction with the Csity executive housing assistance program
Accrued revenues of1million primarily taxes and06in grants receivable
Capital assets of 118 million net of depreciation charges This net valuation includes 680
million in Land which is not depreciated 125 million in City facilities including Building
improvements machinery and equipment and 317 invested in the Csity major infrastructure
systems roads bridges storm drains etc In addition54 million of construction in progress
was also capitalized though not depreciated this year
Operational accounts payable of49million and accrued payroll of28million including17
million in vacation and sick leave payable
Refundable deposits of08million from developers and others in the community development
permitting process
Deferred revenue of02million most of which is associated with grant funds received but not
yet expended according to grant restrictions
tLeornmg debt of584million representing the principal balance outstanding at fiscal year end
Net assets invested in capital assets of779million the difference between net capital assets and
related long term debt
Restricted net assets of91 million the result of external restrictions placed upon special
revenue capital projects and debt service funds
Unrestricted net assets of 254 million which can be used to finance dtaoy operations
without constraints established by debt covenants or other legal requirements As in the past the
Council has elected to further restrict and designate general fund balances GASB Statement 34
does not permit the reporting of such designations on the face of the gwoveirdnmeent statement
of net assets but they are detailed in the notes to the financial statements These reserves and
designations reflect the Csouncil desire to set aside funds for economic and other uncertainties
and to be available for future capital needs
Table
Changes in Governmental Net Assets
in Millions
Revenues
Program revenues
Charges for services
Operating grants and contributions
Capital grants and contributions
29
24
10
General revenues
Property taxes 41
Sales and use taxes 89
Other taxes 75
Other 45
Transfers 02
Total revenues 351
Expenses
General government 131
Public safety 61
Law enforcement 157
Interest on long term debt 38
Total expenses 378
Change in net assets
Net Assets Beginning
Net Assets Ending
72
1520
1313
The main factor contributing to the decline in govermmental net assets can be found in the ltoernmg
refinancing debt issuance in October 2002 The refunded debt reserve funds 51 million that were
deposited into the escrow to payoff the old debt are required to be reflected as expenditures Expended
from the Csity Public Facilities Corporation this major expenditure is reflected as a Public Works
expense
In addition the cost of governmental activities outstripped the revenues made available from taxes and
other general revenues as discussed below Table 3 presents the net cost of each of the Csity major
pgreongrearmasl government police fire development and engineering public works parks and
recreation capital asset maintenance and preservation and interest on ltoernmgdebt Net cost is defined
as total program cost less the revenues generated by those specific activities and reflects the financial
burden that was placed on the Csity taxpayers by each of the programs
Governmental Activltle
in iUion
Cost of
Governmental Activities
Total Cost Net Cost
General government
Law Enforcement
Public Works
Community Development
Parks and Recreation
Interest ontLeornmg Debt
6O 57
60 53
157 154
32 12
2 20
38 38
Totals 378 352
The cost for all governmental activities this year was378million The Csity taxpayers paid for
approximately 73 percent of these costs through general revenues and charges for services Grants
and contributions funded the balance of the costs of governmental activities
General governmental costs comprise 145 percent of governmental services expenses and
include Administration City Council City Manager and City Attorney activities Public
Information and Administrative Services
The Csity costs for Law Enforcement procured by contract with the Santa Clara County
Ssheriff Office were partially offset by various fines 468 thousand and by state grants 218
thousand
Public Works expenses include transportation engineering environmental programs and the
maintenance of the Csity streets grounds and facilities Also included are capital improvements
Projects Offsetting revenues include state and county operating grants 802 thousand federal
capital grants 892 thousand and facility rental 233 thousand
Community Development programs include Planning Building and Housing Services
Development fees for plan checks and building permits make up the majority of the16million
revenues that offset the costs of these programs Housing mitigation fees along with Community
Development grants and loans provided revenues of 387 thousand for the Csity housing
services program
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 of charge The costs of
administering these general governmental activities are partially offset by facility rental fees
which amounted to 162 thousand in fiscal year 200032
10
tnulyepssesc3fivifies
Table 4
BTuysinpeess Net Assets
in Millions
BTuysinpeses Activities
2003 2002
Cash and investments 76 82
Other current assets 05 04
Capital assets 07 08
Total assets 8 93
Other liabilities 15 30
Total liabilities 15 30
Net assets
Invested in capital assets net of debt 07 08
Restricted
Unrestricted 6 56
Total net assets 73 64
The net assets ofbtuysipneess activities increased 861 thousand in fiscal 2003 primarily as the result of
net revenues over expenditures in the Resources Recovery Program and in the Csity Recreation
Programs as discussed below Investment and miscellaneous earnings contributed 331 thousand to the
increase in Net Assets while operating earnings contributed a net of 754 thousand 225 thousand was
transferred to the General Fund as provided for in the Operating Budget for the fiscal year
11
qable
Changes in BTuysinpeess Net Revenues
Net Revenues fromtByuspineess activities
Resources Recovery
Blackberry Farm
Cupertino Sports Center
Recreation Programs
Senior Center
tByusipneess Activities
2003 2002
254869 60549
9539 151907
22708 62201
131707 14657
88852 56817
TotaltByusipneess Activities 37547 480715
Program revenues oftByusipneess Activities increased 279 thousand in fiscal 2003 and although these
activities as a whole wereprofitable the relatively weak economy allowed only a slow growth in revenue
from charges for services in all of these funds Mild losses were incurred in the Blackberry Farm and
Senior Center Funds as increased operating revenues were not enough to offset increased expenses and
budgeted transfers out The Sports Center showed a profit only after inclusion of moderate interest
income
THE CSITY FUND FINANCIAL STATEMENTS
Governmental Funds
The general government functions are accounted for in the General Special Revenue Debt Service and
Capital Project funds At June 30 2003 the Csity governmental funds reported combined fund balances
of438million which is an increase of56million or 123compared with the prior year This
increase waslargely the result of a combined increase in the Library Construction and Debt Service Funds
of92million Anet decrease of57million in the General Fund offset these changes in fund balances
Other governmental funds mainly capital improvement funds increased over21 million These non
major funds accounted for 173million or 28of all fund balances at June 30 2003
The table on the following page presents governmental fund revenues by source and the related changes
for the prior year Revenues for these funds totaled approximately 331million in fiscal year 200032 a
decrease of 1624from the preceding fiscal year The General Fund accounted for 29 of this
decrease as sales tax revenues reflected the difficult economic environment with a16million drop
Park dedication fees a much more variable revenue collected at the completion of major development
projects was short of the prior ysear peak by23million Revenue from use of money and property
also decreased significantly in 200032 due to falling interest rates on the Csity investment portfolio
The Local Agency Investment Fund LAIF which typically constitutes half of the portfolio was yielding
170at June 30 2003 as opposed to the269at the prior fiscal year end and578from two years
ago The Csity portfolio as a whole yielded724in June
Gas Tax Fund revenues were down 837 thousand An additional drop in intergovernmental revenues
was due in part to the cessation of reimbursement from the state for mandated programs and processes
128 thousand Revenues from charges for services also decreased somewhat this year although the
drop is not indicative of any significant trend In particular charges for plan checks dropped almost
08000 but only as a result of the checks being done hionuse The City was able to offset these reduced
revenues by avoiding the higher cost of contracting out this service
12
Table 6
Revenues Classified by Source
Governmental FundTypes
IDneccrreeaassee
from previous year
Revenues by Source Amount of Total Amount Percent
Taxes 220500 5634 1836848 I163
Use ofMoney Property 5910103 160 133529 1825
Intergovernmental 3561238 1208 377925 114
License s and Permits 4511702 541 1002 674
Charges for Services 84545 723 28912 2459
Fines and Forfeitures 355707 716 86550 1609
Other Revenue 25199 109 96677 4534
Total 23308158 10000 2356812 1624
Governmental fund expenditures increased 5 million this year to a new total of 414 million an
increase from the preceding fiscal year of 192 Expenditures by major service area and the related
changes from the prior fiscal year are shown in the following table
Table 7
Expenditures Classified by Major Service Area
Governmental Fund Types
IDneccrreeaassee
from previous year
Expenditures by Service Area Amount of Total Amount Percent
Administration 491274 335 71509 703
Law Enfomement 061356 1635 282489 343
Public Information 470313 610 4454 603
Administrative Services 4937915 879 014617 846
Recreation Services 120647 747 282459 123
Community Development 1430767 271 2318926 298
Public Works 34134005 2639 62349 757
Capital Outlay 861526 1456 0310767 2335
Debt Service
Principal 962458 1715 5944508 16921
Interest 7923579 667 377849 184
Total 08456419 010v0 1902
13
For the most part City departments were able to hold the llne on operational expenditures in this year of
declining tax revenues An effort to expand classes and programs that meet the needs of the Csity
culturally diverse senior population is reflected in higher costs in Parks and Recreation The 29 percent
drop in Community Development expenditures is the result of prior year funding16million of a major
fmamuilltyi rental housing development through a local pnroofnit organization largely with the use of
specific federal grants funding Capital spending varies widely from year to year and in 200032 several
large construction projects were initiated including the replacement of the municipal library and
surrounding civic plaza improvements Capital project spending increased by nearly14million
Although departmental expenditures stayed level principal outlays for debt service increased 45
million The near ftowldoincrease was the result of the recording of the 2002 Refinancing and Capital
Improvement Project COP issuance The issuance allowed the City to refinance its outstanding 43
million debt borrow an additional 16 million and realize an gooinng decrease in annual debt service
payments of approximately12million However the use of debt reserve funds51million to refund
the prior debt is required to be reported as current year expenditures
Proprietary Funds
Proprietary funds include the Csity enterprise funds and internal service funds Enterprise funds are used
to account for operations that are financed and operated in a manner similar to private business enterprise
where the intent is that the costs of providing goods or services to the general public on a continuing basis
be financed or recovered primarily through user charges Each fund is considered a major proprietary
fund and analysis of these operations is provided in the discussion of the Csity btuysipneess activities
earlier in this report
Enterprise fund net assets totaled73million at June 30 2003 an increase of 860 thousand Enterprise
operating revenues were47million this year up 365 thousand from last year while net onpeoratinng
revenues were down 85 thousand to a new total of 276 thousand this year This decrease was due
mainly to lower cash balances in the Resources Recovery fund which yielded less interest in income than
in the prior year 73 thousand Enterprise Fund operating expenses were6million in fiscal 2003 up
426 thousand from the prior year
Internal Service Funds are used to account for the financing of services provided by one department or
agency to other departments or agencies of the 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 citywide financial statements under GASB 34 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 of operations for the fiscal year ended June 30 2003
Table 8
Revenues Expenses and Results of Operations
Internal Service Funds
Fund
Management Information Systems
Workers Compensation
Equipment Revolving
LToenrmg Disability
Operating Operating Operating Net
Revenues Expenses Income ILncoosmse
78208 0612818 196928 89371
16565 255637 99072 85571
290401 384835 81957 65476
47620 48503 9793 8681
Totals 9015588 022451 1926862 79405
14
Resources are being accumulated in the Equipment Revolving fund and the Management Information
Systems fund to provide for future replacement ofexisting equipment
Major Governmental Funds
General Fund
General Fund revenues decreased approximately17million this fiscal year due mainly to decreased tax
revenues Property taxes increased slightly 144 thousand as assessed valuations rose34But sales
tax revenues slid almost16million15 after having fallen 12the previous year Utility user taxes
and franchise fees both declined 66 thousand25and 98 thousand43respectively from last
year With the addition of a new hotel in Cupertino for a total of four hotels transient occupancy tax
revenue increased 132 thousand5Permits for home construction contributed14million to General
Fund revenues up67from the prior year Return on investments decreased 266 thousand149as
a result of the decline in tsehromrt interest rates and lower cash balances
General Fund expenditures decreased overall and were less than budgeted Expenditures decreased 342
thousand in fiscal 2003 to a total of265million Community Development expenditures decreased the
most significantly from the prior year as construction of a major bmealrokewt rate housing project was
completed early in the fiscal year
Transfers out of the General Fund increased to 255million in Fiscal 2003 as a result of the transfer to
fund the Library Construction 146million project
Table 9
General Fund Budget and Actual Comparison
in millions
Budgeted Amounts
Original Final Actual Variance
Revenues amount available for appropriation 3601 2928 2727 210
Charges for Appropriation 0256 279 2556 713
Other Financing Sources 935 849 789 060
Excess Deficiency 479 686 573 113
General Fund revenue shortfalls became apparent early in the fiscal year and appropriate budget
adjustments were made at ymeiadr Cost cutting resulted in departmental savings offsetting the negative
variances of revenues that still fell short of the ymeiadrexpectations
At June 30 2003 the General Fund Balance comprised 113 million in unreserved undesignated
balances with38million reserved almost entirely for loans receivable affordable housing and public
access television Only the unreserved portion represents available liquid resources since the reserved
portion is represented bycnaosnhassets or by open purchase orders Council has specifically designated
amounts of unreserved balances for emergency preparedness capital projects and as a buffer in times of
further economic uncertainty
15
OtherMoarGovernmental Funds
mNaojonr funds are not presented separately in the Basic Financial statements but are individually
presented as Supplemental Information
Public Facilities Corporation
This fund accounts for the payments of principal and interest on certificates of participation COPs the
long term debt issued to provide for funding many of the Csity major parks and facilities This year the
fund activity reflects the refunding of all prior COP issues with the issuance of a COP principal amount
of0650460 The refinancing effectively consolidated the Csity ltoernmg debt through the Public
Facilities Corporation and provided addition funding of137 million for the library construction project
and other current capital improvements By extending the term ofdebt repayment to 30 years at the lower
interest rates available when issued the new debt configuration allows the City lower lease payments to
the Corporation on an annual basis going forward Part of the refinancing called for the release of
previously held debt reserve funds Expenditures of the Public Facilities Corporation fund reflected this
refunding of debt reserves increasing from49million in the prior year to almost9million in 2002
03 As a result fund balances decreased from51million to slightly over07million
Library Construction Fund
This fund accounts for the activities related to the demolition of the existing library facility and the
construction of a new public library at the Csity Civic Center Council reviewed and endorsed the
project in September 2002 The site was cleared and construction began in July 2003 The project is
expected to be completed in October 2004 In the 200043 fiscal year Library Construction Fund
revenues consisted of a transfer from the General Fund of146million Fund expenditures totaled28
million
Proprietary Funds
Resource Recovery Fund
The Resource Recovery Fund operating revenues increased 160 thousand this year to a total of25
million while operating expenses were19million an increase of01070 oNpeoratinng revenues in
the form of interest income 186 thousand was 72 thousand less than in the prior year Overall net
assets in the fund increased to nearly58million The Resource Recovery Fsund entire fiscal year end
Net Assets balance was unrestricted
Blackberry Farm Fund
Blackberry Farm incurred a slight operating loss 18 thousand in the current year in contrast with the
net operating income of 110 thousand in the prior year Revenues increased only 14 thousand to148
million while expenses increased 143 thousand this year After a07050 transfer to the General Fund
net assets ofthis Fund decreased a total of81 thousand
Much of the fsund 801 thousand total net assets are invested in capital assets A master plan for the
Blackberry Farm facilities is currently underway to determine the most effective use of these assets for
the community in the future
16
Cupertino Sports Center Fund
Net assets of the Cupertino Sports Center Fund remained the same as last year despite the closure of the
facility in May 2003 for renovation Activities of this fund generated essentially the same1million as
in 200021 while incurring only minor expenditure increases Almost the entire 437 thousand of fund
net assets are unrestricted although the major renovations should add to the undepreciated net assets next
year
Recreation Programs Fund
Net income for the Csity recreation programs grew to 233915 before transfers out this year compared
with 146734last year as charges for programs increased almost 11 to 19 million Expenditures
held steady thus creating increased net assets totaling 295926at yeenadr None of the Recreation
Programs Fsund net assets are restricted
Senior Center Fund
Although operating revenue at Csupertino Senior Center increased slightly 03020 to 040805
operating expenses also increased by 05060 compared with last year The Senior Trips program is a
large portion of thisfsund revenues and expenditures and is growing as one of the services most enjoyed
by Csupertino senior residents The negative ending net assets of01030should be lsivheodrt as
several new programs become more fully developed and ssupeportlinfg
CAPITAL ASSETS
At the end of fiscal 2003 the City had 1518 million net of depreciation invested in a broad range
capital assets used in governmental activities as shown in Table 10 below further detail may be found in
Note 5 to the financial statements
Table 10
Net Capital Assets at Yeenadr
in Millions
Governmental Activities
Land
Construction in progress
Buildings
Improvements other than buildings
Machinery and Equipment
Roads curbs gutters sidewalks medians and bridges
Storm rain structures and mains
Traffic signals
2003
680
54
82
48
2
295
190
03
2002
680
09
93
57
26
297
171
04
Totals 1518 1319
17
Table 10 cont
Net Capital Assets at Yeenadr
in Millions
tByusipneess Activities
Land
Improvements other than buildings
Machinery and equipment
2003 2002
O4 O4
02 03
01 01
Totals 07 08
The City depreciates all its capital assets except for land and construction in progress This is the first
year that the City has reported infrastructure components as required by GASB 34 Afterposting a charge
for depreciation of54million for the fiscal year accumulated depreciation for governmental capital
assets totaled 125 million at June 30 2003
DEBT ADMINISTRATION
Each of the Csity debt issues is discussed in detail in Note 6 to the financial statements In October
2002 the City effectively consolidated all previous debt issues and procured additional bond financing of
17 million dollars for the construction of a new public library and other capital improvements projects As in the past the Csity debt comprises Certificates of Participation COPs issued by the Cupertino Public Facilities Corporation and is serviced by the City through lease payments to the corporation The
2002 issuance consists of fixed rate serial COPs bearing coupon interest at 20 to50maturing
annually through 2024 and two term bonds with a475rate maturing in 2027 and 2030 The total of
the outstanding issuance is0750740
SPECIAL ASSESSMENT DISTRICT DEBT
At June 30 2003 a total of010905in 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 ofthe assessment
ECONOMIC OUTLOOK ANDMAJOR INITIATIVES
The impact of the economic environment and a description of the Csity major initiatives for the coming
year are discussed in detail in the accompanying Transmittal Letter
CONTACTING THE CSITY FINANCIAL 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 should be directed
to the Finance Department at City Hall 10300 Torre Avenue in Cupertino
18
CITYOF CUPERTINO I
STATEMENT OF NET ASSETS AND
STATEMENT OF ACTIVITIES
The Statement of Net Assets and the Statement of Activities are entirely new statements required by
Government Accounting Standards Board Statement 34 Their purpose is to summarize the entire Csity
financial activities and mancial 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 ltoernmg debt The Statement of Net Assets
presents similar information to the old balance sheet format but presents it in a way that focuses the reader
on the composition of the Csity net assets by subtracting total liabilities from total assets
The Statement of Net Assets summarizes the financial position of all 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 format of the Statement of Activities differs considerably from those used in the past It presents the
Csity expenses first listed by program and follows these with the expenses of its btuysipneess activities
Program rtehvenauets is revenues which are generated directly by these parogmrams then deducted
from program expenses to arrive at the net expense of each governmental and btuysipneess 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 am component units of the City
because they am controlled by the City which is financially accountable for their activities
This is the first year in which the City ofCupertino has prepared its financial statements in accordance with
GASB Statement 34 These new financial statements along with the fund financial statements and footnotes
are called Basic financial Statements the term General Purpose Financial Statements is no longer used
19
CITY OF CUPERTINO
STATEMENT OF NET ASSETS
JUNE 30 2003
ASSETS
Cash and investments Note2
Receivables
Loans Note 3
Prepaid expenses
Other assets
Capital assets net of accumulated depreciation Note 5
Total Assets
iLiIEABSIL
Accounts payable and accruals
Accrued payroll and benefits
Deposits
Deferred revenue
tLeornmgdebt Note 6
Due within one year
Due inmore than one year
Total Liabilities
NET ASSETS Note 7
Invested in capital assets net of related debt
Restricted for
Special revenue projects
Capital projects
Affordable housing
Public access television
Debt service
Total Restricted Net Assets
Unrestricted
Total Net Assets
Goverranental BTuysinpeses
Activities Activities Total
17507207 6871207 39629004
1321415 341808 5720513
031901 031901
95776 32968 38744
3884 3884
15713048 363818 0121459
17807946 7983445 1574805
5941819 135948 2756839
0823405 016903 0130235
683418 120101 0713528
125812 72315 90836
021020 021020
0550530 0550530
5623335 041849 0661529
07704915 363818 3879023
0953869 0953869
01939 01939
484958 484958
087849 087849
670435 670435
079891 079891
4257412 561734 0934615
1215839 2874615 152018
See accompanying notes to financial statements
20
STATEMENT OFIATCITEI
THE YEAR ENDEDqJEL30 2003
PrPuancmrtioonss Expenses
Govenanental Activities
Administration 6813456
Law enforcement 086341
Public infommtion 275634
Administrative services 1532569
Recreation services 1925726
Community development 2433546
Public works 15123748
Interest on long term debt 4737926
rParmoRevenues
Operating Capital
Charges for Grants and Grants and
Services Contributions Contributions
Change in Net Assets
Governmental tByuspineess
Activities Aefivitie
6813456
141608 231648 35557
275634
257947 2535612
19619 02907 910746
1612814 372867 24570 1217959
390458 071162 91617 25105405
4737926
Total Governmental Activilies 07318889 7824927 1328989 92615l 3923A667
tByuspineess Activities
Resource ryecov 4812957 3423979 24792
Blackberry fam 412907 3411729 11629
iCnupoesports center 0113707 171099
Recreation programs 581354 0810724
Senior center 451702 453804
Total
6813456
35557
275634
2535612
910746
1217959
25105405
4737926
49336267
254869 254869
5939 5939
22708 22708
131707 131707
88852 88852
TotalButsyinpesesAotlvities 1665608 0374834 61A41 37547 37547
Total 23456569 28124006 26A4409 291615 49336267 37547 57317139
Pyrope taxes
Incremental pyrope ax
Sales taxes
Other taxes
Motor vehicle inlieu
Ittnmvearnings
Miscellaneous
Transfers Note4
Net sAestBsaening
1840506 1840506
82351 82351
7884923 7884923
5973418 5973418
2831656 2831656
021017 021913 141108
27890 140203 168939
020205 020205
25229509 14096 0323856
2373468 85603 3467937
14629079 4960902 16829168
1215839 2874615 152018
21
FUNDFINANCIAL STATEMENTS
GASB 34 revises the format of the Fund Financial Statements so that 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 No distinction is made between Fund types and
the practice of combining like funds and presenting their totals in separate columns Combined Financial
Statements has been discontinued along with the use of the General Fixed Assets and General tLeornmg
Debt Groups ofAccounts
The funds described below were determined to be Major Funds by the City for fiscal 2003 Individual
mnaojonr funds may be found in the Supplemental section
GENERAL FUND
The general fund is the general operating fund of the City It is used to account for all financial resources
except those that are required to be accounted for in another fund
PUBLIC FACILITIES CORPORATION FUND
This fund accounts for the payments of principal and interest on certificates of participation issued to
provide for the financing of the City LHibararlylWilson Park and Memorial Park and other City facilities
through the issuance of certificates ofparticipation
LIBRARY CONSTRUCTION FUND
This fund accounts for costs associated with demolition of an old library building and the design and
construction of a new library on that site
22
CITY OF CUPERTINO
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30 2003
ASSETS
Cash and investments Note 2
Receivables
Accounts
Loans Note 3
Prepaid expense
Advance to other funds Note 4
Other assets
Total Assets
LIABILITIES
Accounts payable and accruals
Accrued payroll and benefits
Deposits
Advance from other funds Note 4
Deferred revenue
Total Liabilities
Fundbalance Note 7
Reserved for
Encumbrances
Debt service
Advances to other funds
Prepaid expense
Capital projects
Loans receivable
Affordable housing
Low and moderate income housing
Public access television
Unreserved
Designated
Undesignated reported in
Special Revenue Funds
Capital Projects Funds
TOTAL FUND BALANCES
Total Liabilities and Fund Balances
General
Public
Facilities
Corporation
Library
Constraction
Other
Governmental
Funds
Total
eGmnovtaml
Funds
13106535 2842389
2715969
0921967
95776
140704
3884
13136768 37147318
581819
011734
0578037
1321415
031901
95776
140704
3884
3711958 2842389 13136768 05I28507 47556512
293767
48732I
683418
125812
1533845 191246 231527
12238
140704
482727
6845839
495959
683418
140704
0615739
4923936 1533845 191246 231362 3472559
670435
573658
39124547
6721705 5730229
670435
140704
95776
39124547
791714 7922718
484958
51357 51357
087849
134957
140704
95776
0921967
484958
087849
0139339 36383 3652837 59159803
5917909 5917909
12925 8921917 131806
78I28612 670435 04124703 36119358 13402836
3711958 2842389 13136768 05128507 47556512
See accompanymg notes to fmancialstatements
23
CITY OFECRTUINO
Reconciliation of the
GOVERNMENTAL FUNDS BALANCE SHEET
with the
STATEMENT OF NET ASSETS
JUNE 30 2003
Total fund balances reported on the governmental funds balance sheet
Amounts reported for Governmental Activities in the Statement of Net Assets
are different from those reported in the Governmental Funds above because of the following
CIAAlLIASSETS
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 govermnental 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 inthe Statement of Net Assets
Cash and investments
Capitalasets net of accumulated depreciation
Accounts payable and accruals
Accrued payroll and benefits
ACCRUAL OF CNURORENNT REVENUES ANDEXPENSES
Revenues which are deferred on the Fund Balance Sheets because they are not available currently
are taken intorevenue in the Statement of Activities
LONG TERMASSETS ANDLIABILITIES
The assets and liabilities below are not due and payable in the current peried and therefore are not
reported in the Funds
Longterm debt
cNurorennt portion of compensated absences
NET ASSETS OF GOVERNMENTALACTIYflIES
See accompanying notes to financial statements
13402836
1913668
0623807
516728
95070
274817
482727
0750740
571929
1215839
24
CITY OF CUPERTINO
GOVERNMENTALFUNDS
STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED JUNE 30 2003
REVENUES
Taxes
Use of money and property
Intergovernmental
Licenses and permits
Charges for services
Fines and forfeitures
Other revenue
EXPENDITURES
Cuxrent
iAstdrartniohn
Law enforcement
Public information
Administralive cseesr
Recreation services
Cmofnitmydevelopment
Public works
Capital outhy
Debt service
Principal
Interest and fiscal charges
Total Expenditures
EXCESS DEFICIENCY OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES USES
Bond proceeds Note6
Payment to refunded debt
escrow agent Note 6
Transfers inNote4
Tramfers out Note 4
Total Other Financing Sources Uses
NET CHANGE IN FUND BALANCES
BEGINNINGFUND BALANCES
As reported originally
GASB 34 ImplementationaedjunsmtNote 14
As adjusted
ENDING FIJND BALANCES
Public Other Total
Facilities Library Governmental Governmental
General pCoratoion Construction Funds Funds
15206029 69871 220500
411928 47439 363428 5910103
634846 6823737 3561238
4511702 4511702
50903 23524 84545
592403 4954 355707
11369 04830 25199
78219716 47439 5931448 23308158
491274 491274
061356 061356
470313 470313
43505 52356 4937915
120647 120647
0832318 155658 34A0767
1787928 1614623 34134005
91443 8920627 934946 861526
962458 962458
7923579 7923579
59268526 789065 8920627 1853938 08456419
1920535 2795926 8920627 2322435 5716234
23108745 23437025
2308968
341328 0240309
1520503
56517779
2308968
041060 1840204 57237558
34378 58234508
3877858 4950429 041060 4646826 24103834
4753713 340879 05139337 1421637 653709
26218126 0955904 3434867 04118146 39406179
3513709 84875 3416748
16219235 5910311 46438236
78128612 670435 04124703 36119358 13402836
See accompanying notes to mancial statements
25
CITY OF CUPERTINO
Re conciliation of the
NET CHANGE IN FUND BALANCES TOTAL GOVERNMENTAL FUNDS
with the
STATEMENT OF ACTIVITIES
FORTHE YEAR ENDED JUNE 30 2003
The sckedule below reconciles the NetChanges inFund Balances reported on the Ooverarcental FundsStatermnt of
Revenues Expenditures and Changes inFund Balance which measures only changes incurrent assets and current
liabilitieson thc modified accrual basis with the Change inNet Assets of GnovteararlaActivities reported inthe
Statenent of Activities whichis prepared on thefull accraal basi
NET CHANGE IN FUNDBALANCES TOTAL GOVERNMENTAL FUNDS
Amountsreported for governmental activities itt the Sntatetn of Activities
are different because of the following
CAPITAL ASSETS TRANSACTIONS
@ overramntnl Fundsreport capital outlays as expenditures However
inthe Statement of Activities the cost of those assets is capitalized and allocated over
their estirmted usehllives and reported as depreciation expense
The capital outlay expenditures are therefore added back to fundbalance
Net of internal service fundadditions of 250578
Depreciation expense is deducted fromthe fund balance
Depreciation expense is net of internal service fund depreciation
of 560527 which has already been allocated to serviced funds
Rtetisrerm of capital assets
LONG TE1LM DEBT PROCEEDS AND PAYMENTS
Bond proceeds provide current afnciiatl remurcesto governmental funds but
iaming debt increasesltoernmgliabilitiesinthe Statermnt of Net
Repayment of bond principal is an expenditure inthegnovtearnrlr funds but
intheS tatermnt of Net Assets thernepaytrc reducesltoernmgliabilifie
Proceeds from the issuance of debt are deducted from fundbalance
Payment to rethnded debt escrow agent net is added back to fund balance
Repayrmnt of debt principal is addedback to fund balance
ACCRUAL OFCNNUORTNPITEMS
The uanntsbelow included inthe Sntatetn ofActivities do notprovide orrequire the urof
current financial resources and therefore are notreported as revenueorexpenditures in
governnentnl funds net change
ALLOCATION OF INTERNALSERVICE FUND ACTIVITY
Internal Service Funds are used by xranagement to charge the costs of certain activities
such as equiptrent acquisition maintenance and iasuxanee to individual fund
7e1 portion of the net revenueexpense of these Internal Service Fundsaxising out
of their transactionswith gnovtearanlfunds is reported withgovernmental activities
because they service those activities
Change inNet Assets All Internal Service Funds
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES
653709
6943901
843729
570346
56517779
3535781
962458
231345
53119
79405
2373468
26
CITY OF CqUPOERT
GENERALFUND
STATEMENT OFREVENUES EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR TH YEAR ENDED JUNE 30 2003
Use ofmoney and property
Itergoverarnental
Licenses and permits
Charges for services
Fines and forfeitures
Other revenue
Amounts available for appropriation
Charges for appropriation outflows
Administration
Law enforcement
Public information
Administrative services
Recreation services
Community development
Public works
Capital outlay
Total charges for appropriations
EXCESS DEFICIENCY OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES USES
Bond Proceeds
Transfers in
Transfers out
Total other financing suosurecess
EXCESS DEFICIENCY OFREVENUES AND OTHER
SOURCES OVER EXPENDITURES AND OTHER USES
BEGiNNING FUND BALANCES
As reported originally
GASB 34 Implementation adjustment Note 14
As adjusted
ENDING FUND BALANCES
Variance with
Budgeted Amounts Final Budget
Positive
Original Final Actual Amounts Negative
0420730 04203105 15206029 341312
04100 031070 411928 141228
053002 7930959 634846 121559
011050 0110802 4511702 252728
030305 235801 50903 132402
0600 0600 592403 05797
01050 160502 11369 143616
0630007 79225805 78219716 2810634
0510109 5713768 491274 180123
060402 3461215 061356 31705
070408 670625 470313 16721
0530902 683729 43505 241279
032030 2921514 120647 174504
0720405 5732956 0832318 590538
090704 0194719 1787928 38709
91443 91443
020560 23249724 59268526 3713516
0540507 4611236 1920535 452927
06106505 0710603 23108745 260824
0710205 341328 341328
07204602 1520503 1520503
0390502 4686827 3877858 260824
0740905 2864619 4753713 1712769
26218126
3513709
16219235
78128612
See accompanying notes to financial statements
27
ifrcietrBPftRcsabdefopfcSabeptFsabgtFMm2bdfswGucmTiaThtanCv3ababoAadireosnsherLRhuEenoiricxnpuauohottmrcxeuhseUAiigoaSCOceohasu plrcamaAmtrse0eooonilosampbClcptAsonOaveneOtcanrhPvapsnvardnetoloinhialraocKetNeluieienonloropiRUtiVfvsanirnJcorraucvocusatrcdi BNtihouga0ehpoujsdsiadsmsIERfseS4enalertnEetstiiegnsyeeEOienonoriiDiideReusireCdtdiaeynsleteediaTnsdtrglvouonRetnwaeseitdssdyed YaEdes3nrsfsadyADeslsdmdegsBeRynprrntegSRstttnrhsRdersYrslltsryttY
FARMFUNDThisfundaccountsforactivitiesrelatedtooperatingthepicnicareaandgolfcourseCUPERTINOSPORTSCENTERFUNDThisfundaccountsforth operationandmaintenanceoftheCupertinoSportsFacilityRECREATIONPROGRAMSFUNDThisfundaccountsforactivitiesoftheCityscommunitycenter ENIORCENTERFUNDThisfundaccountsfortheactivitiesoftheCitysseniorcenter28
PROPRIETARy FUNDS
STATEMENT OF NET ASSETS
FORTHE YEAR ENDED JUNE 30 2003
ASSETS
Current assets
Cashaldinvestments Note 2
Accounts receivable
Prepaid expense
Total current assets
Capital assets net of
accunmlated depreciation Note 6
Total Assets
LIABILITIES
Current Liabilities
Accounts payable and accruals
Accrued payroll and benefits
Deposits
Deferred revenue
Total currere liabilities
Total LiabilRias
NET ASSETS
Invested in capital assets
net of related debt
Uestricted
Total Net Assets
tByuspineess AEctivnitietseaprise Funds Geonvetanml
iuCnpeox Activities
sRourcees Blackberry Sports Recreation Senior Internal Service
Recovery Faint Center rparmos Center Totals Funds
7851935 384907 160703 672518 125808 6871207 0623807
380336 57862 341808
32968 32968
0760417 384907 160703 280335 16786 0680537 0623807
238 167958 4428 4570 363818 516728
0963479 013756 66004I 280335 15826 7983445 2640489
283656 95026 82409 01500 5754 135948 95070
4512 15010 21835 74901 02732 016903 274817
181401 250 09190 120101
172338 352707 66352 72315
24727 24756 11637 251718 126958 041849 178979
24727 24756 11637 52718I 126958 041849 178979
238 167958 4428 4570 363818 516728
4755745 152924 043567 295926 51882 561734 814837
7625775 780809 44814 295926 11132
See oatecsctofommancpinaistnateynimnngts
2874615 432501
29
CITY OFCERTIN0
PROPRIETARY FUNDS
STATEMENT OF REVENUE EXPENSES
AND CHANGES IN FUND NET ASSETS
FORTHE YEARENDED JUN30 2003
OPERATING REVENUES
Charges for services
Otter
Total Operating Revexmes
OPERATING EXPENSES
Salaries and benefits
Materials and supplies
Operating Income Loss
Transfers out Note4
BetusinessEAnctteivrpitriiesseFunds Governmental
Cupertino Activities
Resources Blackber Sports Recreation Senior Internal Service
4723945 341581 0917867 081072 497803 272313 0915858
80549 182317 4426 679 3186 123819
5624503 3411729 041182 6817812 345856 471604 0915858
153705 260534 021279 475804 56073 151012 053459
9638 462449 17384 012423 490923 210926 45556
3711529 341808 676735 093527 4744 835926 26609
232825
600 18008 603 L563 88724 560527
4812957 412907 0113707 581354 451702 1665608 022451
262438 11088 64675 38147 08556 281406 296826
12486 11629 35421 4I474 4707 260757
12486 12 I69 35421 41474 4707 260757 78131
233915 67479 0815835 I29595
02090
0100 05000 020205
482749 9539 6476
O7O5O
78131
07050 0100 05000 020205 02090
482749 98309 6476 23915 162479 85603 79405
2941468 782818 480368 72011 151347 4960902 3635769
6757925 780809 44814 295926 11132 2874615 432501
30
CASlt FLOWSFROM OPERATING ACTIVITiES
Cash payments to suppliers
Net cash provided by operating activities
CASHOWSFROM NONCAPITAL
FINANCING ACTIVITIES
Cash Flows from Investing Activities
Net Cash Flows
Cash and inrnvtesst at begimfing of year
cRileiactimonof operating ixmome loss to
net cash provided by eper afing activities
Operating income los
Adjustments to reconcile operating iimome to
net cash provided by operating activities
Depreciation
Change iii assets atdliabilities
Accountsreceivable
Prepaid expense
Net cash provided by operating activities
CfFi OFCUPERTINO
PROPRIETARy FUNDS
STATEMENT OF CAStt FLOWS
FOR THE YEAR ENDED JUNE 30 2003
tByuspineess EAnctteivrpitriiesesFunds
Cupertino Activities
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Farm Center rPamros tCemr Totals Funds
4526838 0411816 0513978 28l2867 456938 5871417 5911637
393337 890409 691817 110415 050758 6765926 141208 11302 161904 292349 477979 06338 0511708 58403
587856 86757 03889 230837 57448 06159 230435
07050 0100
07050 0100
02090
05000 020205
05000 020205 02090
7954 7954 250578
7954 7954 250578
12486 11629 35420 41474 4708 260757 78131
12486 1i629 35420 41474 4708 260757 78131
364809 7608 21541 272301 11407 250768 346989
2460335 450448 592825 583907 242678 0182939 2621327
7851935 384907 160703 672518 125808 6871207 0623807
262438 11088 64675 38147 08556 281406 296826
600 18008 603 5163 88724 560527
84170 7104 5200 96281 2698 61009 4928
31988 31988
6322 561687 7867 21310 3L06I 7332 6910434 61610
463 9937 4078 2955 4465 2024 1199
3343 250 21037 11104
81735 48627 53139 182619
587856 86757 03889 230837 57448 06159 325073
31
CITY OF CUPERTINO
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30 2003
ASSETS
Cash and investments Note 2
Total Assets
Agency
Funds
012937
012937
012937
012937
LIABILITIES
Deposits
Total Liabilities
See accompanying notes to financial statements
32
CITY OF CUPERTINO CALIFORNIA
1
NOTES TOBASIC FINANCIAL STATEMENTS
June 230003
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a Reportin Entity
The City of Cupertino California the City was incorporated on October 3 1955 under
the laws of the State of California The City operates under a Council City Manager
form of government and provides services through the following departments
Administrative Services Community Development City Manager Parks and Recreation
Public Information and Public EWngionerekrinsg Fire services are provided by the
Santa Clara County Fire District and the City contracts with the Santa Clara County
Ssheriff 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 he financially accountable A blended component unit although a legally
separate entity is in substance part of the 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 formed in 2000 under the California Health Safety Code
to assist in the elimination of areas considered to be in a blighted condition The City
Council acts as the Board of Directors of the Corporation and the Agency The Mayor
and Vice Mayor of the City have been elected President and Vice President respectively
of the Corporation The City Clerk has been elected Secretary and the Csity Director of
Administrative Services has been appointed Treasurer of both entities
Separate financial statements for those component units that issue them are available
from the City at 10300 Torte Avenue Cupertino CA 935200124
b Measurement Focus Basis ofAccounting and Basis of Presentation
The Csity Basic Financial Statements are prepared in conformity 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
33
1
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
b Measurement Focus Basis of Accounting and Basis of Presentation continued
The accompanying financial statements are presented on the basis set forth in
Government Accounting Standards Board Statements No 34 Basic Financial
Satatnemednts Msanagement Discussion and Afnoalysris State and Local
Governments No 36 Recipient Reporting for Certain eNxchoannge Revenues an
Amendment of GASB Statement No 33 No 37 Basic Financial Satatnemednts
Msanagement Discussion andAfnoalysris State and Local Governments Omnibus and
No 38 Certain Financial Statement Note Disclosures
These Statements require that the financial statements described below be presented
Gwoveirdnmeent Statements The Statement of Net Assets and the Statement of
Activities display information 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 tByusipneess activities are financed in whole or in part by fees charged to
external parties
The Statement of Activities presents a comparison between direct expenses and program
revenues for each segment of the btuysipneess activities of the City and for each
function of the Csity governmental activities Direct expenses are those that are
specifically associated with a program or function and therefore are clearly identifiable
to a particular function Program revenues include a charges paid by the recipients of
goods or services offered by the programs b grants and contributions that are restricted
to meeting the operational needs of a particular program and c development fees and
permits all of which are 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 information about
the Csity funds including fiduciary funds and blended component units Separate
statements for each fund category governmental proprietary and fiduciary am
presented The emphasis of fund financial statements is on major individual
governmental and enterprise funds each of which is displayed in a separate column All
remaining governmental and enterprise funds are aggregated and reported as nonmajor
funds
Proprietary fund operating revenues such as charges for services result from exchange
transactions associated with the principal activity of the fund Exchange transactions are
those in which each party receives and gives up essentially equal values Nonoperating
revenues such as subsidies and investment earnings result from nonexchange
transactions or ancillary activities
34
1
CITY OF CUPERTINO CALIFORNIA
NOTES TOBASIC FINANCIAL STATEMENTS
June 30 2003
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
b Measurement Focus Basis of Accounting and Basis of Presentation 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 All other funds called mnaojonr funds are combined and
reported in a single column regardless of their ftuypnde
Major funds are defined as funds which have either ssets 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 and has selected the Library Construction
Fund to be treated as Major Fund in 2002
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 Fund accounts for the payments of principal and
interest on certificates of participation issued to provide for the advance refunding of the
City LHibararlylWilson Park and Memorial Park certificates of participation
The Library Construction Fund accounts for costs associated with demolition of an old
library building and the design and construction of a new library on that site
The City reports its enterprise funds as major funds in the accompanying financial
statements
The Resource Recovery Fundaccounts for activity mlated to the collection and disposal of
solid waste A private company has been issued an exclusive franchise 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 Fundaccounts for activities of the Csity community center
The Senior Center Fundaccounts for the activities ofthe Csity senior center
The City also reports the following fund types
35
1
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 230003
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
b Measurement Focus Basis of Accounting and Basis of Presentation continued
Internal Service Funds These funds account for workers compensation management
information system maintenance and replacement equipment maintenance and
replacement and ltoernmg disability coverage all of which are provided to other
departments on a rceimobursesmentt basis
Fiduciary Fund This fund accounts for deposits held by the City as an agent
Basis of Accounting The gwoveirdnmeent proprietary and fiduciary fund financial
statements are reported using the economic resources measurement focus and the full
accrual basis of accounting Revenues are recorded when earned and expenses are
recorded at the time liabilities are incurred regardless of when the related cash flows
take place
Governmental funds are reported using the current financial resources measurement
focus and the 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 ltoernmg debt claims and judgments and
compensated absences which are recognized as expenditures to the extent they have
matured General capital asset acquisitions are reported as expenditures in governmental
funds Proceeds from ltoernmgdebt 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 terms of grant 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
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 btuysipneess activities unless they conflict with Government
Accounting Standards Board pronouncements
36
1
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIE continued
b Measurement Focus Basis of Accounting and Basis of Presentation continued
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 Budgetary Practices
The budget of the City is a detailed operating plan which identifies estimated costs and
results in relation to estimated revenues The budget includes 1 the programs projects
services and activities to be provided during the fiscal year 2 estimated revenue
available to finance the operating plan and 3 the estimated spending requirements of
the operating plan The budget represents a process through which policy decisions are
made implemented and controlled The City prohibits expending funds for which there
is no legal appropriation All appropriations lapse at fiscal year end
In May of each year the City Manager submits to the City Council a proposed budget for
the fiscal year beginning July 1 Public hearings on the proposed budget are held during
the month of June and the budgets for all fund types are legally adopted by Resolution
prior to June 30 Original budget amounts are presented on the accompanying budgetary
statements include these legally adopted amounts
The City Manager is responsible for controlling the 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 of budgetary control is at the
functional level
The City Council made 157539 in supplemental appropriations during the year as
follows general fund 1237912special revenue funds 2946817 Amended budget
amounts included in the accompanying budgetary statements include supplemental
appropriation
Budgets for governmental funds are adopted on a basis consistent with generally
accepted accounting principles Budget information is presented for the general special
revenue and debt service funds only Capital project funds are budgeted on altoernmg
pbrojeyct basis and hence budgets for these funds are not presented in the basic
financial statements
37
1
CITYOF CUPERTINO CALIFORNIA
NOTES TOIAIC FINANCIAL STATEMENTg
June 30 2003
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
d Cash and Investments
The City pools its cash resources consisting of cash and investments of all funds for
investment except for restricted funds generally held by an outside fiscal agent Cash
amounts are reported net of outstanding warrants
Investments are stated at fair value
e Capital Assets
Capital assets are recorded at cost or estimated historical cost if purchased or
constructed Donated fixed assets are recorded at their estimated fair value on the date
donated
Prior year public domain infrastructure capital assets consisting of roads bridges
curbs gutters streets sidewalks drainage and lighting systems are not capitalized
Current year infrastructure costs have been capitalized
Depreciation is recorded using the lsitrnaigeht method over the following useful lives
Years
Buildings 25
Improvements 31
Vehicles 410
Street equipment 320
Water equipment 350
Office equipment 35
Road curbs gutters sidewalks medians and 3040
bridges
Streetlights 20
Storm drain structure and mains 40
Traffic signals 20
e
The City capitalizes fixed assets exceeding1000
Capital Assets Continued
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 of the asset constructed net of interest earned on 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
38
CITY OF CUPERTINO CALIFORNIA
O
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
f Claims and Judgments Payable
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 andltoernmgdisability 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 determined
annually For all governmental funds amounts expected to be permanently liquidated
are recorded as fund liabilities the ltoenrmg portion is recorded in the Statement of Net
Assets
The changes in compensated absences were as follows
Governmental
Activities
Additions
Balance 5813812
698
56553
BTuysinpeess
Activities Total
10123 691484
92964 7205
02397 56827
Ending Balance
Current Portion
7910268 010619 891277
97138 i 97138
h Fund Equity
Reservations of fund balances represent those portions of fund balances which are not
available for appropriation or expenditure or are legally restricted for a specific future
use Designated fund balances represent msanagement tentative plans for future use of
financial resources
i Property Tax Calendar
All property taxes are levied and collected by the County of Santa Clara Secured taxes
are levied on July 1 are due in two installments on November 1 and March 1 and
become delinquent on December 10 and April 10 Unsecured taxes are due on July 1
and become delinquent on August 31 The lien date for secured and unsecured property
taxes is March 1
39
1
2
CITYOF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
i Property 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 of advances made by the
County during the year
j Interfund Transactions
Transactions constituting reimbursements to a fund for eexxppenednitsureess initially
made from it that are properly applicable to another fund are recorded as
eexxppenednitsureess in the reimbursing fund and as reductions of
eexxppenednitsureess in the fund that is reimbursed
k Statement of Cash 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 a mannersimilar to a demand deposit account
1 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 of the
debt using the obuotstnanddinsg method which approximates the effective interest
method
CASH AND INVESTMENTS
The Csity pooled idle funds are invested pursuant to investment policy guidelines adopted by
the City Council The objectives of the policy are to invest funds to the fullest extent possible
and to invest in accordance with provisions of California Government Code with the priority of
safety liquidity and yield The policy addresses the safekeeping of securities types of
investment instruments the percentage of the portfolio which may be invested terms to maturity
reporting requirements and policy renewal
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
40
2
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
CASH ANDINVESTMENTS continued
a Deposits
California law requires banks and 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 value of 150 of the deposit as collateral for these deposits
Under California law this collateral is held in the Csity name and places the City ahead
of general creditors of the institution The City has waived collateral requirements for
the portion of deposits covered by federal deposit insurance
Cash in banks is entirely insured Category 1 or collateralized by the institution holding
the deposit in the Csity name Category 2 as discussed above
The carrying amount of the Csity cash deposits was1315945 at June 30 2003 Bank
balances before reconciling items were481492 of which was 262579 insured
Category 1 and6811334was collateralized Category 2 at June 30 2003
b Investments
Investments made by the City are classified as to credit risk into three categories
Category 1 includes securities insured or registered or held by the City or its agent in the
Csity name Category 2 includes securities uninsured and unregistered and held by the
csounterparty trust department or agent in the Csity name Category 3 includes
securities uninsured and unregistered and held by the counterparty or by its trust
department or agent but not in the Csity name
The Csity investment portfolio is stated at fair value based on quotes obtained at June
30 It is generally the Csity intent to hold investments until maturity At yeenadr the
Csity investment balances were as follows
Category 1
USTreasur Notes
USGovernment A Securities
cNategoorizned investtn ents
Government SecuritiesMon Market
Mutual Funds
Investment Fund
Total Investments
osits with Banks
Certificates of D msit
Cash on hand
Funds Funds Total
521258 521258
27107902 27107902
1740546 i745046
9337202 I 9337202
34525936 I 34525936
395727 175858 111603
24315 24315
7199 7199
Total Cash and Investments 39629004 012937 5964807
Interest earned on pooled cash resources is allocated to funds which require interest to be
added based on the ratio ofthe individual funds monthly cash balance to the total pool
41
2
3
CITYOF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
CASH AND INVESTMENTS continued
b Investments continued
Cash and investments are classified in the financial statements as shown below based on
whether or not their use is restricted under the terms of City debt instruments or Agency
agreements
For purpose of the statement of cash flows the City considers all highly liquid
investments including restricted assets with a maturity of three months or less from the
original date of purchase to be cash equivalents
The City is a voluntary participant in the Local Agency Investment Fund LAIF that is
regulated by Califomia Government Code Section 16429 under the oversight of the
Treasurer of the State of California The fair value of the Csity investment in this pool
is reported in the accompanying financial statements at amounts based upon the Csity
rpartoa share of the fair value provided by LAIF for the entire LA1F portfolio in
relations to the amortized cost of that portfolio The balance available for withdrawal is
based on the accounting records maintained by LAP which are recorded on an
amortized cost basis Included in LsAIF investment portfolio are collateralized
mortgage obligations bmaorctgkaegde securities other baascskeedtsecurities loans to
certain state funds and floating rate securities issued by federal agencies government
sponsored enterprises and corporations
RELATED PARTY LOAN
In conjunction with the Csity executive housing assistance program loans totaling 5813605
have been provided to three executive managers These y4e0ar loans bear an interest rate equal
to the 11 district cost of funds at the time of the loan and require monthly principal and interest
payments In addition them is a two pement deferral on the interest rate for the first five years of
the loan At June 30 2003 the balance remaining on the three loans was3411556
42
4
CITYOF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 230003
INTERFUND TRANSACTIONS
Transfers between funds during the fiscal year ended June 30 2002 wereas follows
Fund Receiving T ran sfers t Fund Making Transfers Transferred
General Fund
Special Revenue Funds
Gas T ax
Leadership Development
Public Facilities Corporation Debt Service Fund
Capital Projects Funds
Capital Improvement Projects
Remodel
Four Seasons Park
orts Center Building
Internal Service Funds
Management Information Systems
Equipment Revolving
Total Interfund Transfers
Park Dedcat on Special Revenue Fund t 02050
Senmr Center Expansmn Capital ProJects Fg 46328
Senior Center Enterprise Fund 05000
Blackberry Farm Enterprise Fund i 07050
Recreation Programs Enterprise Fund i 100
General Fund 05001
General Fund 11060
General Fund
General Fund
General Fund
General Fund
Gas Tax Special Revenue Fund
General Fund
General Fund
General Fund
The reasons for these transfers are set forth
All park dedication fees collected are transferred to the General Fund
B Close CIP project
0920304
041060
040102
02050
070101
02070
02000
05236658
eted enterprise funds transfer of excess earnings over expenditures for cost reimbursement to the General Fund2
tax projects budget and midyear adjustment
E To augment Leadership Cupertino program
FordebtservicecapitalprojectsbudgetandmidyearadjustmentsHToprovidebudgetednewtechnologyequipment
IToprovidebudgetednewequipmentforparksstreetandtreemaintenanceAsofJune302003thedeveloperoftheAgencysprimaryprojectareahadnotbeg ntoredevelopAsaresulttaxincrementrevenuesarenotyetsufficienttofinanceAgencyoperationsToassisttheAgencyuntilprojectredevelopment eneratesadditionaltaxincrementrevenuestheCityhasadvancedfundstotheAgencytofinanceoperationsAsofJune302003thebalanceoftheadvance s17440043
4
s
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
INTERFUND TRANSACTIONS continued
Internal Balances Internal balances are presented only in the wCiidtye financial statements
They represent the net interfund receivables and payables remaining after the elimination of all
such balances within governmental and btuysipneess activities
CAPITAL ASSETS
A summary of changes in general capital assets follows
Balance at
June 30 2002
Governmental activities
ICapital assets not being depreciated
i Land 08638005
Construction in progress 58151
Additions Retirements
594261I
Balance at
June 250003
08638005
345723
Total capital assets not being depreciated 56689116 594261
Capital assets being depreciated
Buildings 26114626
Improvements other than buildings 07167905
Machinery and Equipment 2850513 272724
Road curbs gutters sidewalks medians
and bridges 1d939557 45025
Streetllght s 05600
Storm drain structure and mains 02319115
Traffic signals 244501
Total capital assets being depreciated 1525748 26277
5611445 06109427
07167905
64955 026380
0590450
244501
35I0919 12417027
Less accumulated depreciation for
Buildings
Machinery and Equipment
Road curbs gutters sidewalks medians
and bridges
Streetlights
Storm drain structure and mains
Traffic sign als
Total accumulated depreciation
Net capital assets being depreciated
Governmental activity capital assets net
7965725 361415 0814708
35118315 084903 26102418
2831949 17145 64955 3834849
23616749 3423668 67635925
05600 05600
46145927 277807 29213079
2832414 24173 4835678
120 544 442 i 5430 441 1086 573 124 888 310
15518702 2741534
127016369 23513
570346 1352622
570346 15713048
44
s
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
CAPITAL ASSETS continued
lalanee at l aa anee at
June23j0Additions i LRetirements June 23000
tByusptneess acttvtttes l
Capital assets ing depreciated
Improvements other thannblgs 560305 560305
yajZcqa2D17 315375 7954 43367 268928
pj25pjpjjaa2Se 9s85o 7954 43367 192924
Less accumulated depreciation for
Improvements other thanbnl 344659 05036 41558
2yfcZj22q2eEL 290134 82698 43365 230357
Total accumulated depreciation 355739 88724 43367 672905
c s srjeSL 352712i 14
itBnyepses activity capital assets net 47561 713A20 I 363818
Depreciation expense was charged to functions and programs based on their usage of the related
assets The amounts allocated to each function or program wereas follows
iGovernmental Activities 7
t5iPn i 180367
tAradmtivme serwces i 54607
pteLrefdua I 560527
45
CITY OF CUPERTINO CALIFORNIA
NOTES TOBASIC FINANCIAL STATEMENTS
June 30 2003
5 CAPITAL ASSETS continued
BTuysinpeess Activities
Recover
Farms
Center
Senior Center
600
18008
603
6 LTOERNMGDEBT
a Cupertino Public Facilities Corporation Certificates of Participation
Certificates of Participation
1992Wmiolsfoianl fundlng B i
j023605rdef101102 510845
1993nOcSeRefnugn
2002 Refinancing and Capital j J
aoO5jooT3 06504001 bkls7oo2ofg72o6o6
118 700 000 3n720000 56640 000 44 240 5i4707
The Cupertino Public Facilities Corporation issued Certificates of Participation to
provide financing for the construction ofthe Community Center remodeling of City Hall
and the Library in July of 1986 to purchase Wilson Park in 1989 to finance Memorial
Park Expansion in 1990 and to purchase Blackberry Farm and Fremont Older site in
1991 Cupertino Public Facilities Corporation as lessor leased real property to the City
under the lease agreement with the lessee and assigned the base rental payments to the
trustee for the benefit of the owners of the certificates of participation The rental
payments are scheduled to be sufficient in both time and amount when the principal and
interest of the certificates are due
On October 1 20020650460 principal amount of 2002 Refinancing and Capital
Improvement Project Certificates of Participation 2002 COPs were issued to finance
the costs of acquiring and constructing a new public library and to refund the 1992A COPs
the 1992B COPS and the 1993A COPs Refunded COPS
46
6
CITY OF CUPERTINO CALIFORNIA
NOTES TOBASIC FINANCIAL STATEMENTS
June 30 2003
LTOERNMGDEBTcontinued
a Cupertino Public Facilities Corporation Certificates of Participation continued
A portion of the proceeds from the 2002 COPS were used along with moneys from the
Refunded COPS to advance refund the outstanding Refunded Bonds by pumhasingUS
government securities which weredeposited in an irrevocable trust with an escrow agent to
provide for all future debt service payments on the Refunded Bonds As a result the
Refunded Bonds were considered to be defeased and the liability for those obligations was
removed along with the trust assets from the Csity financial statements
The cash flow savings representing the difference between debt service on the Refunded
COPs and the portion of 2002 COPS debt service payments attributable to refunding
Refunded COPS amounted to 2782848 The economic gain representing the present
value ofthe cash flow saving amounted to 521214
In December 1992 the City issued 07108005of Certificates of Participation with the
effective interest rates ranging from2875 to575the 1992 Capital Improvement
Refunding A certificates to provide for the advance refunding of the City LHibararlyl
Certificates ofParticipation Series 1986
In December 1992 the City issued 05108405of Certificates of Participation with the
effective interest rates ranging from 3to 265 the 1992 MWeimlsoorinal Park
Refunding B certificates to provide for the advance refunding of the Wilson Park
Certificates of Participation Series 1989 the 1989 certificates and the Memorial Park
Expansion Certificates of Participation Series 1990 the 1990 certificates
In April 1993 the City issued 063060 of Certificates of Participation with the
effective interest rates ranging from325to575the 1993 Open Space Refunding A
certificates to provide for the advance refunding of the Open Space Certificates of
Participation Series the 1991 certificates The deferred debt was fully repaid on March
31 2001
47
6
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
LTOERNMGDEBT continued
a Cupertino Public Facilities Corporation Certificates of Participation continued
Annual debt service requirements for the Certificates ofParticipation are shown below
Governmental Activities
For the Year
Ending Stme 30 Principal
2004 1020200
2005 0210405
2006 123070
2007 1020905
2008 130505
Interest
0321328
2623887
2723682
232378
0126739
200139 057020 15145007
2014 2018 9000 000 I 8663 055
2024 2028 i14 045 1300 3621 412
2090 005600 047939
b 1915 Act Bonds Without City Commitment
The City acts as agent for the property owners of parcels upon which assessments were
made for local improvements The City collects the assessments and forwards the
collections to bond holders The City is not directly liable for the repayment of special
assessment district bonds as such bonds and interest payable are secured by fixed lien
assessments on real property however the City has determined that it is not probable
that the government would assume responsibility for all or part of the debt in the event of
default The amount of unmatured bond principal at June 30 2003 was010905
c Conduit Debt
On October 1 2001 the City authorized the issuance of the fmamuilltyi housing
revenue bonds in an amount up to16million to assist a developer in financing the cost
of site acquisition and construction of a 24 unit fmamuilltyirental housing project The
bonds are payable solely out of loan repayments received from the developer The City
has no legal or moral liability with respect to the payment of this debt
48
7
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
NET ASSETS AND FUND BALANCES
GASB Statement 34 adds the concept of Net Assets which is measured on the full accmal basis to
the concept of Fund Balance which is measured on the modified accrual basis
Net Assets Net Assets is the excess of all the Csity assets over all its liabilities regardless of
fund Net Assets am divided into three captions under GASB Statement 34 These captions
apply only to Net Assets which is determined only at the Gwoveirdnmeent level and are
described below
Invested in Capital Assets net of related debt describes the portion of Net Assets which is
represented by the current net book value ofthe Csity capital assets less the outstanding balance of
any debt issued to finance these assets
Restricted describes the portion of Net Assets which is restricted as to use by the terms and
conditions of agreements with outside parties governmental regulations laws or other restrictions
which the City cannot unilaterally alter These principally include developer fees received for use
on capital projects debt service requirements redevelopment funds restricted to low and moderate
income purposes
Governmental fund balances represent the net current assets of each fund Net current assets
generally represent a fsund cash and receivables less its liabilities Portions of a fsund balance
may be reserved or designated for future expenditure
Fund Balances Reserves and Designations In the Fund financial statements fund balances
represent the net current assets of each fund Net current assets generally represent a fsund cash
and receivables less its liabilities Portions of a fsund balance may be reserved or designated
for future expenditure
The udnerseigsneravteeddfund balances include amounts which have been internally designated
to be set aside and are not considered to be available for immediate appropriation The
components of the udnerseigsneravteedd fund balance for the Governmental Funds at June 30
2003 are as follows
I 2003
49
8
9
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
COMMITMENTS AND CONTINGENCIES
The City participates in a number of federal and state grant programs subject to financial and
compliance audits by the grantors or their representatives Audits of certain grant programs
including those for the year ended June 30 2001 have yet to be conducted The amount ifany
of expenditures that may be disallowed by the granting agencies cannot be determined at this
time Management believes that such disallowances if any would not have a material effect on
the financial statements
The City has an agreement expiring in 2019 to lease a building to the County of Santa Clara for
the purpose of providing library service to the Csity residents The lease requires a minimum
annual payment of 01020 adjusted annually for Csupertino portion of book circulation and
increase of assessed valuation This is an operating lease with a renewable option
The future minimum rentals from such leases are as follows
For the Year
2004 i 01020
2007 01020
2019 i 60 000
Total I 081060
The old library building was demolished during fiscal 200032 and the City is the process of
constructing a new public library The City expects to renegotiate the lease agreement with the
County of Santa Clara during fiscal 200043
LIABILITIES UNDERISNSEURALNCFE ANDRISK MANAGEMENT
The City is isnseureldffor the first 0500 of workers compensation claims per occurrence
The City provides for excess workers compensation insurance through an outside administrator
up to 01000 During the fiscal year 200021the City had a two year analysis performed of
its workers compensation program by an independent actuary This resulted in an increase in
the Csity reserve for unpaid claims of approximately 7156 There were no significant
reductions in insurance coverage from the prior year nor did settlements exceed insurance
coverage for the past four fiscal years In addition the City is isnseureldffor general and
automobile liability claims for the first 0100 per occurrence Excess coverage is provided by
the outside administrator up to 01000 Claims liability is based upon the asdministrator
estimate of ultimate loss payout
5O
9
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2003
LIABILITIES UNDERISNSEURALNFCE AND RISK MANAGEMENTcontinued
Changes in the balances of claim liabilities during the past two fiscal years are as follows
iClaims liability June 30 2001 39856
183568
10 OTHER POST EMPLOYMENT RETIREMENT BENEFITS
Permanent employees who retire under the Csity retirement plan PERS are pursuant to their
respective collective bargaining agreements eligible to have their medica