CITY OF CUPERTINO CALIFORNIA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR FISCAL YEAR ENDED
JUNE 30 2004
PREPARED BY
CITY OF CUPERTINO
FINANCE DEPARTMENT
CAROL A ATWOOD
DIRECTOR OF ADMINISTRATIVE SERVICES
INTRODUCTORY SECTION
CITY OF CUPERTINO
Comprehensive Annnal Financial Report
For the Year Ended June 30 2004
Table of Contents
Table ofContents
Letter ofTransmittal
Organization Chart
Commissions and Committees
City Council and Directory ofCity Officials
Certificate ofAward for Excellence in Financial Reporting
I FINANCIAL SECTION I
Independent Asuditor Report on Basic Financial Statements
Msanagement Discnssion and Analysis
Basic Financial Statements
Gwoveirdnmeent Financial Statements
Statement ofNet Assets
Statement ofActivities
FundFinancial Statements
Major Governmental Funds
Balance Sheet
Reconciliation ofthe Governmental BFaulanndcseSheet with the
Statement of Net Assets
Statement ofRevenues Expenditures and Changes in Fund Balance
Reconciliation ofthe Net Change in Fund Balances Total Governmental
Funds with the Statement ofActivities
Statement ofRevenues Expenditures and Changes in Fund Balances Budget and Actual
General Fund Page IV
XIV
XV
XVI
XVII
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4
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CITY OF CUPERTINO
Comprehensive Annual Financial Report
For the Year Ended June 302004
Table of Contents
I FINANCIAL SECTION Continued
Major Proprietary Funds
Statement ofNet Assets
Statement ofRevenue Expenses and Changes in Fund Net Assets
Statement ofCash Flows
Fiduciary Funds
Statement ofFiduciary Net Assets
Notes to Basic Financial Statements
Supplemental Information
Major Governmental Funds Other Thanthe General Fundand Special Revenne Fnnds
Schedule ofRevenues Expenditures and Changes in Fund Balances Budget and Actual
Public Facilities Corporation Debt Service Fund
mNaojonr Governmental Funds
Combining Balance Sheets
Combining Statements ofRevenues Expenditures and Changes
in Fund Balance
Combining Schedule ofRevenues Expenditures and Changes
in Fund Balance Budget and Actual
Internal Service Funds
Combining Statement ofNet Assets
Combining Statements ofRevenues Expenses and Changes in Net Assets
Combining Statements ofCash Flows
Fiduciary Funds
Combining Statement ofChanges in Assets and Liabilities All Agency Funds
ii
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CITYOF CUPERTINO
Comprehensive Annual Financial Report
For the Year Ended Jnne 30 2004
Table of Contents
Page
I STATISTICAL SECTION
General Governmental Expenditures by Function
Last Ten Fiscal Years Table I 76
General Governmental 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 ofLegal 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 ofAnnual 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
CommunityProfile 87
111
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 goverrunental funds provide a full range of services including
planning building parks and recreation public works engineering maintenance and general
administrative activities This financial report incorporates data for the City of Cupertino the
Cupertino Public Facilities Corporation and the Cupertino Redevelopment Agency
The City operates under a CCouintcyil Manager form of goverrunent There are five council
members including the Mayor who serve fyoeuarrterms The City Council appoints the City
Manager who is responsible for the daily administration of the City affairs The City Council
also appoints the City Attorney and the City Treasurer All other employees are appointed by the
City Manager
FACTORS AFFECTING ECONOMIC CONDITIONS
The City of Cupertino is located in Santa Clara County at the southern end of the San Francisco
Bay Peninsula The City is comprised of II square miles and is bordered by the cities of San
Jose Saratoga Sunnyvale Santa Clara and Los Altos
Hredvw
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Fremont
CjUPERTIN
MiJpitu
Sluennvv
San
Jose
Situated at the west end of Silicon Valley Cupertino
has earned the reputation of a balanced community
with a healthy climate for business and well
maintained residential neighborhoods community
parks and public facilities The excellent reputation of
Csupertino schools has been a major attraction for
families wishing to settle in close proximity to jobs in
the Santa Clara Valley The City recognizes the
importance of quality school facilities and programs to
all Cupertino residents and works in partnership with
the schools in many programs affecting education and
youth
Cupertino is the world headquarters for major
corporations such as Apple Computer Portal Software
and Symantec Key divisions ofPHaecwkalertdt and
Borland Software are also located in Cupertino
The City has eight large shopping centers including its own regional mall Vallco Fashion Park
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
v
As in the prior fiscal year economists argue whether the national recovery is sustainable Itis
clear that the economy has not realized significant growth particularly in northern California
Over the past few years 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 fourth consecutive year of decline in sales tax
revenue its largest revenue source As shown in the chart below sales tax has fallen279from
the exceptional levels of12090909 Many other tax revenues have falling behind as well
SALES TAX TREND
01040
01020
8000
ACTUAL ˘ ST
ADJ BY CPI
01000
6000
4000
2000
0
1996 1997 1998 1999 2000 2001 2002 2003 2004
In thousands
Property taxes however have continued to grow at avery moderate pace Cupertino is alnowo
property tax City which means that it is one of four in the State that receive alower percentage
share of the property tax dollar In 1978 when voters approved the passage of Proposition 13
Csupertino low rate was frozen at2ofevery property tax dollar The county agreed to pay an
additional2as a tax equity allocation but the rate to the City is still very low Property values
in the Silicon Valley have maintained healthy assessments throughout the economic downturn
despite the lack of job growth and relatively low mortgage rates have helped support these
values In addition Csupertino assessed value has grown with two residential annexations in
recent years
As for interest earnings lower interest rates have resulted in lower yields on investments Due to
these diminishing yields and decreased cash holdings the Csity investment income has fallen
over50from23 to1 million in the past twoyears alone
Of larger concern to the Csity financial bweeinlgl is the State goverrunent which continues to
operate under amassive budget deficit
vi
The recall of the governor in November 2003 led to the repeal of the increase in the Vehicle
License fees VLF a local goverrunent source Subsequently the State withheld or
borrowed12billion dollars from cities and counties786845 from Cupertino of200043
VLF funds to be repaid in 2006 As the 200054 state budget was balanced via extensive use
of deferrals deductions and debt California municipalities persisted in their efforts to protect
local goverrunent revenues from the State Tsreasury reach A campaign that culminated in a
November 2004 ballot initiative to prevent the continuing shift oflocal tax funding to other state
priorities proved successful But the ongoing deficit situation at the State level promises to be a
difficult one that could have an adverse impact on the Csity revenues going forward
MAJOR INITIATIVES
Current YearProjects
I Foster a Sense ofCommunity
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 ofour diverse community
Foster abetter sense of community through recreation activities outreach programs and
our Emergency Preparedness and Neighborhood Captains Programs
2 EnsureLand Use is Compatible with Community Character
Review and update the General Plan
Ensure that the walkable city concept is present trails paths public access in all
rdeedveeveloloppmmeennttprojects
Continue to develop a master plan for the City Center Town Center and Heart of City
projects
Investigate feasibility ofopportunities of the Stevens Creek Corridor Plan
Optimize community benefit with muisxeeddevelopment
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 disaster preparedness and school
resource officer programs
vii
4 Enhance Services
Identify needs and provide affordable housing opportunities in Cupertino
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
5 Ensure the Financial Health ofthe Community
Encourage ahealthy environment for retail growth
Add a revenue enhancement incentive policy component ofreview for new development
Monitor revenue trends and proactively adjust our expenditures to ensure a balanced
budget and preservation ofcustomer service
Complete the developmental fees analysis for implementation ofrevised fee schedule in
200054
6 Pursue Infrastructure Improvements
Advance construction ofa new Library and Civic Center Park
Redesign and upgrade the Cupertino Sports Center and Teen Center
Continue an active street improvement program
Design and construct Cali Mill Plaza at City Center
Future Projects
The City is currently constructing several major capital improvements throughout the
community With the completion of the City Center which includes the new library and Sports
Center projects 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 the Csity revenues service efforts and traffic configurations
Vlll
Department Focus Efforts and Accomplislunents
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 Public Works Department
This department consists of several divisions Engineering Environmental Programs
Transportation Facilities General Services Grounds and Streets The overall service objectives
are
To carry out their responsibilities in the most efficient and productive manner by
continuously assessing current programs
To provide response to the community on complaints and requests for service within 24
hours
To provide public education and information to residents businesses and schools
To represent the City on avariety ofcounty and regional issues
Renovation ofthe Cupertino Sports Center
Specific accomplislunents this year include
Construction and completion ofCali Mill Plaza
Construction ofa new Cupertino Library and
Community Hall opening in October 2004
Completion of Wolfe R2Io8a0d Safety
Improvements
Completion ofStevens Canyon Road Widening
Completion ofthe Safe Routes to School Cupertino High project
Completion of the Advanced Traffic Management System and Ramp Meter Interchange
Interconnect System traffic signal communication projects and the Cupertino Adaptive Signal
Timing traffic signal timing project
The above projects were accomplished with a 13 percent reduction III staff due to budget
constraints
We congratulate the Public Works Department for their achievements in all oftheir projects and
wish them continued success in the implementation oftheir programs
ix
LONG TERM FINANCIAL PLANNING
The City will continue to focus on a number ofimportant 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
In order to assure that the City can maintain capital facilities and infrastructure as they age and
can continue to conduct essential business while providing expected services to its residents the
City prepares a fyievaer forecast for all funds which is detailed in the annual budget The
General Fund forecast assumes a moderate rate of revenue growth in 2005 and beyond with a
conservative inflationary rate and sustained levels ofservice Even though the forecast assumes
that the State does not resort to additional local revenue grabs in three of the next five years a
number of factors mainly rising retirement and health care costs will create upward pressure
on the Csity operating expenditures The resulting deficit spending could deplete the Csity
reserves by fiscal year200098
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 its efforts in the area of economic development make the most of the
Redevelopment Agency to improve utilization at Vallco Mall and collaborate with other local
agencies to maximize resources and funding for regional programs As revenues are generated
from additional muisxeed development they will accelerate the Csity ability to avoid deficit
spending replenish its Capital Improvement Projects funding and fund other ltoernmgreserves
Accounting System and Budgetary Control
The Csity accounting records are maintained on a modified accrual basis of accounting for all
goverrunental fund types and agency funds Under this basis revenues are recognized when
susceptible to accrual ieboth measurable and available and expenditures other than interest
on ltoernmg obligations which is recorded when paid are recognized when the liability is
incurred The accrual basis of accounting is used by the proprietary fund types where revenues
are recognized when earned and expenses are recorded when incurred In compiling the
gwoveirdruneent 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 goverrunental 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 ofassets
x
The concept ofreasonable assurance recognizes that the costs of acontrol should not exceed the
benefits likely to be derived and that the evaluation ofcosts and benefits requires estimates and
judgments by management The Csity internal accounting controls adequately safeguard assets
and provide reasonable assurance ofthe 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 aprocess through which policy decisions are made implemented and controlled The
level of budgetary control ie the level at which expenditures cannot legally exceed the
appropriated amount is the departmental level within the General and Special Revenue funds
and the project level within the Capital funds
Changes in Financial Reporting
In addition to providing for new gwoveirdruneent 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 newMADwas 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 a wCiidtyeand 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
One of the most significant and rfeaachinrg new requirements of GASB 34 deals 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 ofyears than most capital assets Therefore
in fiscal year 200032 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 was drawn from the various asset management systems in place within the
Public Works Department The data was updated and a valuation determined for each
infrastructure item GASB 34 requires that infrastructure assets be reported at historical cost or
deflated replacement cost so 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 Csity general fixed assets which had not previously been capitalized outside ofthose
used for btuysipneess enterprise fund activities were also depreciated for proper presentation
Utilizing these estimates and cost data the City was able to report infrastructure and other capital
asset inventories in compliance with GASB 34 as of July I2002 In 200043 depreciation was
calculated by asset type cyuerreanrt capital acquisitions were determined completed projects
were transferred from Construction in Progress status to the proper asset group and the book
value ofcapital assets disposed ofduring the year was calculated
xi
As infrastructure and general fixed assets are accumulated with current cost values each year the
Csity reporting on capital assets will rely less heavily on the estimates made for prior year
assets and provide amore accurate picture ofthe Csity total investment in capital assets
Also in the current fiscal year GASB finalized its Statement 45 establishing standards for the
measurement recognition and display of Other Post Employment Benefit expenses OPEB
liabilities and note disclosures in the financial reports ofstate and local goverrunental employers
The standard requires that the cost of OPEB be accrued as an expense for financial reporting
purposes as benefits are earned by employees Although the reporting requirements are not
effective for Cupertino until fiscal year 2009 the City apctirveoly commissioned an actuarial
analysis ofits retiree medical benefit program an OPEB that the City has traditionally accounted
for and financed on aypagoasouybasis Council then approved a designation of the Csity
General fund balance to begin funding the estimated liability along with the current cost of this
program each year Reporting compliance for GASB 45 will be implemented prior to the
required effective date ofthe statement
Cash Management
The City maintains acash 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
goverrunent 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 approximately1million
Risk Management
Risk management issues factor substantially in the Csity long term financial planning Whether
through partnership or isnsueranlcfe programs the City strives to maintain sufficient assets to
pay expected losses maintain funding stability to avoid substantial fluctuation in annual expense
and monitor risk management policies and claim administration to mitigate future losses
The City maintains a program of commercial insurance combined with isnsueranlcfe for
substantially all of its goverrunental operations except for major construction projects and
csounptrpalcietodr services In such circumstances insurance to protect the City is provided by
each contractor
xii
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 ofthis report
CERTIFICATE OF ACHIEVEMENT
The Goverrunent Finance Officers Association ofthe United States and Canada GFOA awarded
a Certificate ofAchievement for Excellence in Financial Reporting to the City of Cupertino for
its Comprehensive Annual Financial Report for the year ended June 30 2003
In order to be awarded aCertificate of Achievement a goverrunental 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 Jennifer Chang Dixie Farley Tina
Mao and Beth Ebben for their continued support and dedication Special recognition goes to
Carol Augustine and Dorothy Steenfott for their efforts in the preparation and production ofthis
report
Respectfully submitted
ßlit7
Carol A Atwood
L41
Director ofAdministrative Services
xiii
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CITY OF CUPERTINO CALIFORNIA
Fiscal Year 200403
COMMISSIONS AND COMMITTEES
AUDIT COMMITTEE PARKS RECREATION COMMISSION
Gillian Enos
Myoung Kang
Dolly Sandoval
Garrett Wade
Kris Wang
Rod Brown
Jeanne Bradford
Cary Chien
Frank Jelinch
Roger Peng
HOUSING COMMISSION TELECOMMUNICATIONS COMMISSION
Richard Abdalah
Kim Dovel
Sarah HFatheawiaty
Mahesh Nihalani
Frances Seward
Salvatore Algeri
David Eggleston
1 T Guttadauro
Charlon McIntosh
Steven Ting
FINE ARTS COMMISSION LIBRARY COMMISSION
Nancy Canter
Hema Kundargi
Shirley Lin Kinoshita
Janet Mohr
Carl Orr
Sheila Mohan
Janet Riddell
Eno Schmidt
Katherine Stakey
Yuhfen Diana Wu
PUBLIC SAFETY COMMISSION PLANNING COMMISSION
Charles Caldwell
Jay Cena
Barry Chang
Nolan Chen
Hugh Riddell
TEEN COMMISSION
Angela Chen
Lisa Giefer
Marty Miller
Taghi Saadati
Gilbert Wong
ECONOMIC DEVELOPMENT
Princess Castaneda
Alexander Cohn
Page Dickson
Piyush Goyal
Christopher Haley
Cosmo Jiang
Alexander Lee
Irem Mertol
Raviv Rotem
Kevin Schroeder
Utsav Sohoni
Danh Trang
Katherine Weng
Carol Atwood
Jody Hansen
Sandra James
David Knapp
Richard Lowenthal
Orrin Mahoney
Mark McKenna
Steve Piasecki
Ralph Qualls
Gilbert Wong
BICYCLE PEDESTRIAN COMMISSION SENIOR COMMISSION
Hua Julia Fu
David Greenstein
Geoffiey Paulsen
Joseph Walton
Estelle Incociati
Christine Pierce
Mavis Smith
Linda Walker
Frank Yap
xv
CITY OF CUPERTINO CALIFORNIA
Fiscal Year200043
CITY COUNCIL
Sandra James
Mayor
Patrick Kwok
Vice Mayor
Richard Lowenthal
Councilmember
Dolly Sandoval
Councilmember
Kris Wang
Councilmember
DIRECTORY OF CITY OFFICIALS
David WKnapp City Manager
Charles T Kilian City Attorney
Carol Atwood Director ofAdministrative 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 ofParks and Recreation
XVI
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Cupertino
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30 2003
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association ofthe 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 manciaI reporting
l
President
Executive Director
xvii
FINANCIAL SECTION
AAAZE I r ASSOCIATES
u
INDEPENDENT ASUDITOR REPORT ON
BASIC FINANCIAL STATEMENTS
ACCOUNTANCY CORPORATION
1931 San Miguel Drive Suite 100
Walnut Creek California 94596
925 0993002 FAX 925 0913305
MEail mcaze@ omazeamssociates
To the City Council Website mcwazeowassomcwiates
City ofCupertino Califomia
We have audited the basic financial statements of the governmental activities the btuysipneess
activities each major fund and the aggregate remaining fund information ofthe City of Cupertino as of
and for the year ended June 30 2004 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 govemment 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 also issued our report on the Csity intemal controls and compliance with laws rules and
regulations which is dated September 1 2004
In our opinion the basic financial statements referred to above present fairly in all material respects the
respective financial position ofthe governmental activities the btuysipneess activities each major fund
and the aggregate remaining fund information ofthe City of Cupertino at June 302004 and the results
of its operations and the cash flows of its proprietary fund types thereof and the respective budgetary
comparisons listed as part of the basic financial statements for the year then ended in conformity with
generally accepted accounting principles in the United States ofAmerica
Msanagement Discussion and Analysis is required by the Government Accounting Standards Board
but is not part of the basic component unit financial statements We have applied certain limited
procedures to this information principally inquiries of management regarding the methods of
measurement 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 ofthe
basic financial statements and in our opinion are fairly stated in all material respects in relation to the
basic financial statements taken as a whole
The statistical section listed in the Table of Contents was not audited by us and we do not express an
opinion on this information
September 302004 Yi ì v
3
A Professional Corporation
MSANAGEMENT DISCUSSION ANDANALYSIS
Fiscal 2004 is only the second year that the City of Cupertino has issued its financial statements in the
format prescribed by the provisions of Government Accounting Standards Board Statement 34 GASB
34 GASB 34 requires that the City to provide this overviewMADofits 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 2004 FINANCIAL IDGHLIGHTS
Although the economy of Csalifornia Silicon Valley showed sporadic signs of recovery rrom the
slowdown ofthe last four years Cupertino continued to be affected by sluggish economic activity and the
Sstate budgetary crisis Financial highlights ofthe year include the following
The Csity total net assets decreased 12million during Fiscal 2004 At June 30 2004 net assets
totaled 1319 million
Total City revenues including program and general revenues were 430 million while total
expenses were451million in fiscal 2004
Net assets in Governmental funds were 1411 million while net assets in business activities were
80million
Governmental Program Revenues were94million compared with63million in fiscal 2003
Governmental Program Expenses were 394million in fiscal 2004 compared with 378million in
the prior year
Revenues rrom BTuysinpeess activities were37million in fiscal 2004 compared with47million
from the prior year
Expenses of BTuysinpeess Activities were6million in fiscal 2004 compared with67in the
prIor year
General Fund revenues of227million represented a decrease of5 million rrom the prior year
General Fund expenditures decreased rrom265to 283million in fiscal 2004
Actual expenditures in the General Fund were27million less than the final fiscal 2004 budget
primarily because of significant expenditure reduction efforts by City departments and management
under the direction ofthe City Council
General Fund fund balance of I65million at the 2004 fiscal year end compared favorably with the
budgeted fund balance of123million
OVERVIEW OF THE FINANCIAL STATEMENTS
The Basic Financial Statements comprise the wCiidtye Financial Statements and the Fund Financial
Statements these two sets of financial statements provide two different views of the Csity financial
activities and financial position
The WCiidtyeFinancial Statements provide a ltoenrgmerview ofthe Csity activities as awhole and
comprise the Statement ofNet Assets and the Statement ofActivities These statements are prepared on
the accrual basis which means they measure the flow ofall economic resources ofthe City as a whole
The accrual basis ofaccounting is similar to the accounting used by most private sector companies The
Statement of Net Assets provides information about the financial position of the City as a whole
including all its capital assets and ltoernmgliabilities The Statement ofActivities 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 ofeach the Csity programs The Statement of Activities explains in
detail the change in Net Assets for the year Over time increases or decreases in net assets can be
indicators ofwhether the financial condition ofthe City is improving or deteriorating
4
All ofthe Csity activities presented are grouped into Government Activities andtByusipneess activities
as explained below All the amounts in the Statement ofNet Assets and the Statement ofActivities are
separated in order to provide asummary ofthese two types ofactivities for the City as awhole
Governmental aMctiovitsiets 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 property sales and other taxes and by
specific program revenues such as developer fees and grants
The Csity governmental activities include the activities of a separate legal entity the Cupertino
Redevelopment Agency because the City is considered to be fmancially accountable for the Agency
The Cupertino Public Facilities Corporation Tom which the City leases its major facilities through the
paymenttoeflormng debt is also included as a component unit
tByusipneess aActivitliels 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 ofthe service they use
The Fund Financial Statements report the Csity operations in more detail than the gwoveirdnmeent
statements and focus primarily on the tsehromrt activities ofthe Csity General Fund and other Major
Funds The Fund Financial Statements measure only current revenues and expenditures and fund
balances they exclude capital assets ltoernmg debt and other ltoernmg amounts Because these
statements focus on the tneeramr inflows and outflows ofspendable resources such information may be
useful in evaluatingtneeramr financing requirements
The Fund Financial Statements provide detailed information about each of the Csity most significant
funds called Major Funds Csupertino Fund Financial Statements include governmental enterprise and
internal service funds as discussed below The concept ofmajor funds and the determination 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 Non
major Funds summarized and presented only in a single column Subordinate schedules which follow
the Notes to the Financial Statements present the detail ofthese mNaojonr funds Major Funds present
the major activities ofthe City for the year and may change Tom year to year as a result ofchanges in the
pattern ofCsity activities and public interest For example the Library Construction Fund is included in
both the current and prior year fund financial statements
Governmental Fund Financial Statements are prepared on the modified accrual basis which means they
measure only current financial resources and uses They present essentially the same functions reported
as governmental activities in the gwoveirdnmeent financial statements However capital assets and
other lliovnegd assets along with ltoenrmg liabilities are not presented in the Governmental Fund
Financial Statements Reconciliations are provided to facilitate a comparison between governmental
funds and governmental activities statements to allow a better understanding of the ltoernmgimpact of
the gsovernment tneeramr financial decisions
Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis as in
the past and include all their assets and liabilities current and ltoernmg Enterprise funds are used to
report the same functions presented as btuysipneess activities in the gwoveirdnmeent financial
statements and in more detail in the fund financial statements
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 Tom other City Funds These revenues are
eliminated in the wCiidtye financial statements and any related profits or losses are returned to the
5
Activities which created them along with any residual net assets of the Internal Service Funds For the
City of Cupertino the internal service activities predominantly benefit governmental rather than business
type functions and are therefore included within governmental activities in the gwoveirdnmeent
financial statements
Comparisons of Budget and Actual financial information are required in the Major Governmental Fund
Financial Statements only for the General Fund and other Major funds that are Special Revenue Funds
Since none of the Csity Special Revenue funds are considered Major funds for financial statement
purposes budgetary comparison statements for these funds are included in this document as supplemental
statements only
Fiduciary Fund statements provide financial information about the actiVIties of certain assessment
districts The City acts strictly as an agent for these districts holding amounts collected rrom property
owners which await transfer to the districts bond trustees The Csity fiduciary activities are reported in
the separate Statement ofFiduciary Net Assets and the Agency Funds Statement of Changes in Assets
and Liabilities These activities are excluded ITom the Csity other financial statements because the City
cannot use these assets to finance its own operations
Notes to the Financial Statements provide additional detail that is essential to a full understanding ofthe
information provided in the gwoveirdnmeentand fund financial statements
FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE
This analysis focuses on the net assets and changes in net assets ofthe Csity Governmental Activities
Tables 12 and 3 and BTuysinpeess Activities Tables 4 and5 presented in the wCiidtye Statement of
Net Assets and Statement ofActivities that follow
Governmental Activities
Table 1
Governmental Net Assets at June 30 2004
in Millions
Governmental Activities
2004 2003
Cash and investments 378 582
Other assets 52 5
Capital assets 1232 1518
Total assets 1176 1876
tLeornmg debt outstanding 563 584
Other liabilities 1lJ U
Total liabilities 674 653
Net assets
Invested in capital assets net ofdebt 845 779
Restricted 74 91
Unrestricted 1M 254
Total net assets llA SJ3l1
6
The Csity net assets from governmental activities decreased 19 million in 2004 or17from the prior
year This decrease is the Change in Net Assets reflected in the Statement ofActivities as shown in Table
2 and is explained below
Cash and investments decreased 114 million principally as a result of the disbursement of
123million ofbond proceeds or otherwise restricted funds for library construction and other
capital improvement projects
Capital assets increased173million as major construction projects neared completion
tLeornmg debt decreased12million as principal debt payments were paid partially from debt
reserves
Other liabilities increased24million primarily due to large outstanding payments reflecting
increased construction activity accrued at yeenadr
Net assets invested in capital assets net ofrelated debt increased57million primarily due to the
large volume of capital projects in process Though much ofthis capital investment was funded
by ltoernmgdebt capital projects previously funded from governmental appropriations were also
near completion In addition the City constructed street drainage grading curb and gutter
sidewalk and driveway approaches and purchased equipment costing19million
Restricted net assets increased64million largely as a result of the increased commitment of
capital funds at yeenadr reported as governmental fund encumbrances
Unrestricted net assets is the part of net assets that can be used to finance dtaoyoperations
without constraints established by debt covenants or other legal requirements Unrestricted net
assets of168million are available to finance dtaoy operations and other expenditures
approved by City Council
Fiscal Year 2004 Government Activities
Sources of Revenues Functional Expense
4
W
44
1000
eo
CtyDo
7
As the Sources ofRevenue Chart above shows slightly over68million or 236of the Csity Fiscal
2004 revenue came omsales tax the Csity largest single revenue source In Fiscal 2003 this revenue
was8million or 218 of that ysear total revenue Fiscal 2004 recorded the fourth consecutive year
of decline in sales tax revenue although the rate of decline slowed significantly in the most recent of
these years As a whole governmental revenues increased15million as a result in increased program
revenues
The Functional Expenses Chart above includes only current year expenses which are discussed in detail
below It does not include capital outlays which are added to the Csity capital assets In fiscal 2004 the
City added 173million in net capital assets as shown in detail at Table 6
The Statement ofActivities presents program revenues and expenses and general revenues in detail All
these are elements in the Changes in Governmental Net Assets summarized below
Table 2
Changes in Governmental Net Assets
in Millions
Governmental Activities
2004 2003
Expenses
Administration
Law Enforcement
Public Information
Administrative Services
Recreation Services
Community Development
Public Works
Interest onltoernmgdebt
Total expenses
14
61
7
39
2
27
155
23
394
Revenues
Program revenues
Charges for services
Operating contributions and grants
Capital grants and contributions
Total program revenues
32
25
36
93
General revenues
Taxes
Property taxes
Sales taxes
Othertaxes
Motor vehicle in lieu
Investment income
Miscellaneous
Transfers
Total general revenues
Total revenues
16
60
8
36
2
32
157
378
29
24
LQ
63
40 38
87 8
7 79
25 32
5 12
2 1
2 2
273 225
313 351
Change in net assets aJ
8
Table 2 shows that total government revenues increased16million in fiscal 2004 as a31 million
surge in program revenues largely for capital grants and contributions more than offset the decrease in
general revenues of15million Although property taxes increased almost68254 thousand most
other general revenues declined
Total governmental expenses decreased by38million from fiscal 2003 But despite wCiidtye efforts
to reduce governmental spending and increase program revenues in recent fiscal years the pressure of
decreasing general revenues taxes revenues ITom other governments income ITom property and
investments limited the possibility ofa positive change in net assets ITom governmental activities
The cost ofgovernmental activities continued to outstrip available revenue sources by19million The
main factor contributing to the much larger decline in net assets in the prior fiscal year was the accounting
treatment required for the 2002 Refinancing and Capital Improvement Project ClP issuance The use of
debt reserve funds51million to refund the prior debt wasreported as current year expenditures
Table 3 presents the net cost of each of the Csity largest pgreongrearmasl government public safety
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 it reflects the financial burden placed on the Csity taxpayers by
each function
Table 3
Governmental Activities
in MiUions
Net Cost Revenue
OfActivities
Administration
Law Enforcement
Public Information
Administrative Services
Recreation Services
Community Development
Public Works
Interest ontLeornmg Debt
2004
14
50
7
39
21
1
120
U
Totals 256
2003
16
54
8
3
20
12
154
3S2
The total cost for all governmental activities this year was 394 million The Csity taxpayers
paid for approximately 77 percent 296 million of these costs through general revenues and
charges for services Grants and contributions funded61million and the balance ofthe costs
ofgovernmental activities was drawn from reserves
Administrative costs comprise 41 percent of governmental services expenses and include
activities of the City Council City Manager and City Attorney Administrative Services
activities which include financial personnel information systems City Clerk Code enforcement
and emergency preparedness services accounts for 121percent ofall governmental services
9
The Csity costs for Law Enforcement procured by contract with the Santa Clara County
Ssheriff Office were partially offset by various fines and reimbursements 838 thousand and
by state grants 202 thousand Although public safety costs throughout the State continue to
grow with increased personnel costs the City reduced the scope of certain contract services and
aggressively sought reimbursement from other liable parties As a result the Csity net cost for
law enforcement activities in fiscal 2004 actually decreased by 306 thousand
Public Works expenses included transportation engineering environmental programs and the
maintenance ofthe Csity streets grounds and facilities Also included are the costs of capital
improvement projects Offsetting revenues this year include federal capital grants14million
capital contributions 637 thousand and facility rental 166 thousand Revenues from grants
and contributions for specific capital projects up a total of24million helped decrease net
public works expenses from fiscal year 2003
Community Development programs include Planning Building and Housing Services Expenses
in these programs decreased over 556 thousand in personnel costs and through the conservative
use ofoutside contractors Yet development fees for plan checks and building permit revenues
which offset the cost of community development activities increased 279 thousand from the
prior fiscal year Housing mitigation fees along with Community Development grants and loans
provided revenues of583 thousand for the Csity housing services program up 195 thousand
Most of the costs of the Csity Park and Recreation programs are reported as btuysipneess
activities for which fees are charged to recover the costs of the programs However many
community events programs and services are available to the public free ofcharge The costs of
administering these general governmental activities are partially offset by facility rental fees
which amounted to 148 thousand in fiscal year200043
Prior to the ltoernmgrefinancing debt issuance in October 2002 interest on ltoernmgdebt cost
the City approximately26million per year By extending the term ofthe debt repayment and
the favorable interest rates when the debt was issued the Csity total debt payments have been
reduced from49million to approximately35million annually
Business Type Activities
Table 4
BTuysinpeess Net Assets
in Millions
BTuysinpeses Activities
2004 2003
Cash and investments 79 76
Other current assets 10 04
Capital assets 07 07
Total assets 96 87
Total liabilities 16 1S
Net assets
Invested in capital assets net of debt 06 07
Unrestricted 1J 6
Total net assets ILI U
10
The net assets of btuysipneess activities increased 7million in fiscal 2004 primarily as the result ofnet
revenues overexpenditures in the Resources Recovery Program and in the Csity Recreation programs as
discussed below The fiscal 2004 increase in net assets about the same as the increase experienced in the
prIor year
Investinent earnings also contributed 95 thousand to the increase in Net Assets as opposed to the 331
thousand earned in the prior fiscal year Operating earnings contributed a net of 754 thousand 175
thousand was transferred to the general fund as provided for in the operating budget for fiscal year 2004
Table 5
Changes in BTuysinpeess Net Assets
in thousands
tByuspineess Activities
2004 2003
Net Revenues from tByusipneess activities
Resource Recovery
Blackberry Farm
Cupertino Sports Center
Recreation Programs
Senior Center
TotaltByusipneess Activities
690
52
168
320
1m
145
549
6
20
317
ill
145
Operating revenues ofbtuysipneess activities remained level with the prior year as these activities were
profitable as a whole But several of the funds incurred losses due to continued lack of consumer
demand Rates remained flat but no growth in volume was experienced Operating expenditures
decreased slightly but revenues also declined at both Blackberry Farm and the Senior Center Each of
the proprietary funds is discussed in more detail later in this report
The Csity Fund Financial Statements
Governmental Funds
At June 30 2004 the Csity governmental funds reported combined fund balances of332 million
which is a decrease of 106 million or 323compared with the prior year Much of this decrease
occurred in the Library Construction fund which accounted for 9 million while the Capital
Improvement Project fund decreased 3 million The remainder of the decrease was primarily in non
Major funds which accounted for 58million or 197of all fund balances at June 30 2004
The table below presents governmental fund revenues by source and the related changes for the prior
year Governmental fund revenues increased 12million this year to a new total of343million
Approximately half ofthis increase was government grants for capital improvement projects included as
intergovernmental revenues Donations to the Library Construction fund accounted for 963 thousand of
the increase in other revenue Park dedication fees a much more variable revenue collected at the
completion ofmajor development projects increase 231 thousand
Revenue from use ofmoney and property decreased significantly in 200043 due to tsehromrtinterest
rates that continued to drop through February 2004 and decreased cash and investinent balances The
Local Agency Investinent Fund LAlF which typically constitutes a third of the Csity investinent
portfolio was yielding147at June 30 2004 as opposed to the170at the prior fiscal year end and
629from two years ago The Csity portfolio as a whole yielded326in June Investinent holdings
dropped from 61 million to 47 million as bond proceeds were spent for the Library Civic Center and
other capital projects
11
Table 6
Revenues Classified by Source
Governmental Fund Types
in thousands
Total
IDneccrreeaassee
From previous vear
Amount ofTotal Amount Percent
02014 692 804 04
941 28 969 570
2737 271 919 154
1541 46 130 93
930 28 74 87
724 2 173 351
0109 03 950 61304
1UM 10000 M
Revenues bv Source
Taxes
Use ofMoney Property
Intergovernmental
Licenses and Permits
Charges for Services
Fines and Forfeitures
Other Revenue
Governmental fund expenditures increased 45million this year to a new total of 449million
Expenditures by major service area and the related changes ITom the prior fiscal year are shown in the
following table
Table 7
Expenditures Classified by Major Service Area
Governmental Fund Types
in thousands
Increase Decrease
ITom previous vear
Expenditures bv Service Area Amount ofTotal Amount Percent
Administration 2123 24 252 117
Law Enforcement 9551 102 64 1
Public Information 687 14 17 24
Administrative Services 3759 76 283 81
Recreation Services 2141 43 37 18
Community Development 5263 25 614 139
Public Works 3922 198 1118 170
Capital Outlay 22406 401 41333 1297
Debt Service
Principal 2120 25 7506 842
Interest 3271 47 623 221
Total l2dlQ 10000 126
Total expenditures rose as a result of accelerated capital spending a71million dollar increase in the
Library Construction Fund a36million increase in the Capital Improvement Fund and a27million
increase in other capital projectnmoajonr governmental funds The offsetting decrease of36million
in the Public Facilities Corporation fund debt service expenditures reflects the prior year accounting
treatment for the 2002 Refinancing and Capital Improvement debt the use of debt reserve funds51
million to refund debt is reported in the year of the refunding
12
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 ofproviding goods or services to the general public on a continuing basis
be financed or recovered primarily through user charges Enterprise activities are included as business
type activities in the wCiidtye Financial Statements and each fund is considered a major proprietary
fund in the Fund Financial Statements
Enterprise Fund net assets totaled 80million at June 30 2004 an increase of7million ITom the prior
year Enterprise operating revenues were74million this year a decline of about I percent ITom last
year while net onpeoratning revenues were down ITom 276 thousand to 95 thousand this year
Contributions and net transfers out declined to 175 thousand in fiscal 2004 down 50 thousand ITom
fiscal 2003 Enterprise Fund operating expenses were6million in fiscal 2004 up very slightly 68
thousand ITom the prior year
Internal Service Funds are used to account for the financing ofservices provided by one department or
agency to other departments or agencies ofthe City on a rceimobursesmentt basis Because the services
are provided primarily to the general government these operations are reported as part of government
activities in the citywide financial statements under GASB 34 In essence any income or losses that are
related to an internal service fund activity represent an adjusttnent ofthe 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 2004
Table 8
Revenues Expenses and Results of Operations
Internal Service Funds
in thousands
Operating Operating Operating Net
Fund Revenues Expenses Income ILncoosmse
Management Information Systems 774 906 132 49
Workers Compensation 153 650 497 481
Equipment Revolving 906 809 97 109
LToenrmg Disability 1Q 90 20 20
Totals l2U 2454 52 lli
Resources are being accumulated in the Management Information Systems fund which received a
budgeted 170 thousand transfer in ITom the General Fund for new hardware purchases and the
Equipment Revolving fund to provide for future replacement of existing equipment The Workers
Compensation fund expense for claims was determined by actuarial analyses and was much higher than
anticipated due to increases in recent year claim frequency and severity The Workers Compensation
fund net assets decreased ITom 490 thousand to 9thousand at fiscal year end
Maior Governmental Fnnds
General Fund
General fund revenues decreased approximately by 550 thousand this fiscal year mostly due to
decreases in intergovernmental revenues
13
Total Motor Veehic mLieu Fees MVLF decreased almost 756 thousand as aesult of the State budget
situation which triggered a repeal ofthe sstate offset ofvehicle license fees to California counties and
cities The State withheld MVLF revenues in the first quarter of the fiscal year an amount totaling
786845 for Cupertino Although the withheld amounts 13 billion statewide are to be repaid by
August 2006 the revenues will not be booked until they are received from the State Later in fiscal year
state vehicle license fees were permanently cut by tthwirdos but the Sstate offset to counties and cities
for the loss in revenues continued through June 2004
Most other general fund revenues increased to some extent Property taxes increased 2 million as
assessed valuations rose approximately 5percent Licenses and permits increased 92percent 130
thousand and charges for services were up 144 percent 73 thousand from the prior year General
fund investtnent earnings were down by 348 percent 429 thousand due to declined interest rates and
less investtnent holdings
Fiscal 2004 general fund expenditures decreased overall and were27million less than budgeted This
represents a1million decline over the previous year for a total of283million as City departments
tightly controlled operational expenditures and kept vacancies unfilled in this fourth year ofdeclining tax
revenues Transfers out ofthe General Fund decreased to43million in Fiscal 2004 Prior year transfers
included137million in bond proceeds to the debt service fund
At June 30 2004 the General Fund Balance comprised 162million in unreserved undesignated
balances and39million reserved almost entirely for loans encumbrances and advances to other funds
Only the unreserved portion represents available liquid resources since the reserved portion is
represented by cnaosnhassets or by open purchase orders
Table 9
General Fund Budget and Actual Comparison
in millions
Budgeted Amounts
Original Final Actual Variance
Revenues amount available for appropriation 279 266 217
Charges for Appropriation 246 266 283
Other Financing Sources Q Q1 Q1
Excess Deficiency m21 6 27
12
General Fund revenue shortfalls became apparent early in the fiscal year and appropriate budget
adjusttnents were made at ymeiadr The27million in departmental savings offset much ofthe decline
in revenues so that the impact to reserves was not as severe as projected totaling only 352 thousand
At June 30 2004 the Csity General Fund Balance reported combined ending fund balances of156
million down from 196million in the prior year Of this amount almost 39million is reserved
almost entirely for loans receivable affordable housing and the public access television program
The remainder ofthe fund balance is unreserved designated by the City Council to indicate that it is not
available for new spending because it has already been committedIfor future operating contingencies
2 to fund ltoernmg actuarial liabilities of the Csity retiree medical prograrn 3 for future capital
projects 4for fluctuations in the Csity CalPERS retirement rates and5as a buffer in times offurther
economic uncertainty These are detailed as with other govemmental fund balances in the Footnotes to
the Financial Statements7
14
Pnblic Facilities Corporation
This fund accounts for the payments of principal and interest on certificates of participation COPs the
ltoenrmg debt issued to provide for funding many ofthe Csity major parks and facilities This year the
fund activity merely reflects the necessary funding transferred in from the General Fund in order to
complete total debt service payments of35million In the prior year the City issued a COP refunding
series in the amount of0650460 This issuance effectively consolidated the Csity ltoenrmg debt
through the Public Facilities Corporation and provided addition funding of137 million for the library
construction project and other current capital improvements
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 The site was cleared and construction
began in July 2003 with a temporary library established for use until the project completion in October
2004 The new Cupertino Library will be a 54 thousand square foot two story building constructed at a
cost 21 million The project was partially funded through the issuance ofthe 2002 Refinancing and
Capital Improvement Project debt In the fiscal 2004 Library Construction fund revenues consisted of
contributions from various residents and community groups An additional 476 thousand advance was
made from the Csity Resource Recovery fund to allow procurement ofnecessary shelving furniture and
equipment Most of the 8 million fund balance is encumbered for the completion of the contracts
associated with the remaining building construction and interior dØcor
Capital Improvement Projects
The Capital Improvement Projects Fund is reported as a major governmental fund in these financial
reports Included are tfwoeuntry projects for which funds have been approved by the City Council in
various stages ofcompletion The largest ofthese are the new Community Hall construction a6000
square foot 25million building connected to the new library by a covered arcade and the Civic Center
Plaza with a budget o1fmillion Both ofthese projects are set to be complete with the new library and
are reflected in the large increase in Construction in Progress for the City at fiscal 2004 yeenadr 34
million of the fsund total expenditures of25million were spent on the Community Hall and Civic
Center Plaza projects Another 1 million was spent this year on traffic signal projects reflected as
additions to the Csity capital assets and 500 thousand was paid out for animal control facilities under
contractual obligation to the City ofSan Jose
Other Governmental Fund
mNaojonr funds are not presented separately in the Basic Financial statements but are individually
presented as Supplemental Information They include all the Csity Special Revenue funds which
account for revenue sources that are legally restricted to expenditure for specific purpose Expenditures
ofthe Gas Tax fund for example are restricted exclusively for street and road purposes and account for
much of the Csity infrastructure improvements and maintenance Total expenditures this year exceeded
24million
The Housing Development fund accounts for Federal Housing and Community Development Grant
Program activities This ysear expenditures were less than 200 thousand leaving a fund balance o18f
million The Redevelopment Vallco fund which accounts for revenues and expenditures ofthe Cupertino
Redevelopment Agency is also included as a Special Revenue fund
15
Although it is a separate legal entity for which separate fmancial statements are aprreed the agency is
also included in this report as a component unit ofthe City
ProDrietarv Funds
Resource Recovery Fund
The Resource Recovery fsund total revenues decreased slightly this year due mainly to a drop in interest
income Operating income and expenses were consistent with the prior year however and the fund
experienced a 770 thousand increase in net assets to56million The Resource Recovery Fsund entire
fiscal year end Net Assets balance wasunrestricted
Blackberry Farm Fund
Blackberry Farm incurred a slight operating loss 48 thousand in the current year Revenues decreased
174 thousand 181 while expenses dropped only 144 thousand Added to a drop in interest
earnings and 75 thousand transfer to the General Fund net assets ofthis Fund decreased almost of 120
thousand to 681 thousand
Much of the fsund total net assets are invested in capital assets A master plan for Blackberry Farm
facilities has resulted in a project list The most effective use ofthese assets is for leveraging grant funds
to accomplish identified projects
Cupertino Sports Center Fund
Despite a 7month closure operating income at the Cupertino Sports Center Fund increased slightly over
100 thousand in fiscal 2004 Additional expenses associated with the orpeening ofthe newly renovated
fitness center in January resulted in operating expenses which were 223 thousand more than the prior
year Net assets decreased a total of162 thousand to 279 thousand at June 30 2004
Recreation Programs Fund
Net income for the Csity recreation programs was 320 thousand before transfers out comparable to last
ysear operating results After a budgeted transferIoOOfthousand to the General Fund the Recreation
Program fund posted an increase of net assets of 228 thousand for a total balance of almost 485
thousand Most ofthe Recreation Programs Fsundnet assets are unrestricted
Senior Center Fund
Although operating revenue at Csupertino Senior Center was comparable to the prior year operating
expenses were shaved by 153 to 493 thousand in fiscal 2004 Interest income was minimal Net
assets decreased 18 thousand as compared to the prior year decrease of128 thousand The result is a
negative balance in the fsund net assets 32 thousand
CAPITAL ASSETS
At the end offiscal 2004 the City had 1932million net ofdepreciation 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
16
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 drain structures and mains
Traffic signals
Government Activities
2004 2003
680 680
139 45
130 28
45 48
17 2
224 295
110 190
Ll J
1322 1518
04 04
2 2
J J
U 07
Totals
tByusipneess Activities
Land
Improvements other than buildings
Machinery Equipment
Totals
Included in Construction in Progress are the City new library community hall and Civic Plaza
scheduled to open October 2004
DEBT ADMINISTRATION
The Csity debt issues are discussed in detail in Note 6 to the financial statements Last year the City
effectively consolidated all previous debt issues and procured additional bond financing for the
construction ofa new public library and other capital improvements projects As in the past the Csity
debt comprises Certificates ofParticipation COPs issued by the Cupertino Public Facilities Corporation
and is serviced by the City through lease payments to the corporation The total outstanding issuance at
June 30 2004 is 5747million
SPECIAL ASSESSMENT DISTRICT DEBT
At June 30 2004 a total of 175 thousand in special assessment district debt was outstanding issued by
one special assessment district This debt is secured by a traffic impact fee charged as a special
assessment on the real property in the district issuing the debt and is not the Csity responsibility The
City acts solely as the Dsistrict agent in the collection and remittance of the assessment
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The impact ofthe economic environment and a description ofthe Csity major initiatives for the coming
year are discussed in detail in the accompanying Transmittal Letter
CONTACTINGTHE CSITYFINANCIAL MANAGEMENT
This Comprehensive Annual Financial Report is intended to provide citizens taxpayers investors and
creditors with a general overview ofthe Csity finances Questions about this Report should be directed
to the Finance Department at City Hall 10300 Torre Avenue in Cupertino
17
CITY OF CUPERTINO
STATEMENT OF NET ASSETS AND
STATEMENT OF ACTIVITIES
The Statement ofNet Assets and the Statement of Activities summarize the entire Csity financial activities
and financial position They are prepared on the same basis as is used by most businesses which means
they include all the Csity assets and all its liabilities as well as all its revenues and expenses This is
known as the full accrualtbhaseiseffect ofall 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 ofNet Assets
presents similar inforrn à tion to the old balance sheet format but presents it in away that focuses the reader
on the composition ofthe Csity net assets by subtracting total liabilities from total assets
The Statement ofNet Assets summarizes the financial position ofall the Csity Governmental Activities in a
single column and the financial position of all the Csity BTuysinpeess Activities in a single column these
columns are followed by a Total column whichpresents 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 ofActivities 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 ofwhen
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 prior to GASB Statement 34
implementation It presents the Csity expenses first listed by program and follows these with the expenses
of its btuysipneess activities Program revenues that is revenues which are generated directly by these
programs are then deducted from program expenses to arrive at the net expense of each governmental and
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 are component units ofthe City
because they are controlled by the City which is financially accountable for their activities
This is the second year in which the City of Cupertino 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 2004
Governmental BTuysinpeses
Activities Activities Total
ASSETS
Cash and investments Note2 6738823 0872514 58403646
Receivables
Accounts 6821569 564858 253045
Loans Note 3 0631527 0631527
Prepaid expenses and other asse1s 4446 51040 91486
Internal balances Note4 461736 461736
Capital assets net ofaccumulated depreciation Note5 1213926 264905 183425106
Total Assets 013078136 159039 146128025
LIABILITIES
Accounts payable and accruals 3964848 3624 3761427
Accrued payroll and benefits 08586 190536 093639
Deposits 0411736 142825 18198
Deferred revenue 153769 48199 095768
cNurorenntportion ofcompensated absences Note 1g 7912535 150135 0223616
cNurorenntportion of claimspayable 785949 785949
tLeornmgdebt Note6
Due within one year 0210405 0210405
Due inmore than one year 0350205 0350205
Tatal Liabilities 666946 5715719 24617667
NET ASSETS Note7
Invested in capital assets net ofrelated debt 47825535 264905 08761043
Restricted for
Special revenue projects 6854818 6854818
Affordable housing 467805 467805
Public access television 81547 81547
Debt service 9980 9980
Total Restricted Net Assets 4971306 4971306
Unrestricted 59145814 0371648 08225526
Total Net Assets 136138147 397589 139149359
See accompanying notes to financial statements
20
FunctionslPrograms
Governmental Activities
Administration
Law enforcement
Public infonnation
Administrative services
Recreation services
Community development
Public works
Interest on long tenndebt
Total Governmental Activities
tByuspineess Activities
Resource recovery
Blackberry fann
Cupertino sports center
Recre å tion programs
Senior center
Total tByuspineess Activities
ToW
General revenues
Taxes
Property taxes
Incremental property tax
Sales taxes
Other taxes
Motorvehicle in lieu
Investment earnings
Miscellaneous
Transfers Note 4
Expenses
4512303
063908
71504
3932737
2520349
1620789
45146516
382137
69303418
071893
315623
3510529
3510902
244934
560802
15401148
Change in Net Assets
Total general revenues and transfers
Net BAesgsinenitnsg
NetAEsnsdeintsg
CITY OF CUPERTlNO
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30 2004
Net Expense Revenue and
Program Revenues Changes in Net Assets
Operating Capital
Charges for Grants and Grants and Governmental tByuspineess
Services Contributions Contributions Activities Activities Total
4512303 4512303
483578 120326 045459 045459
71504 71504
61560 817 930105 930105
133478 590 052825 052825
2910737 567802 120708 98358 98358
392559 4711706 0330324 01127046 01127046
382137 382137
2633802 4628969 163012 15239507 15239507
3821989 68640 36906 36906
0310912 25720 25720
1816804 164679 164679
5911909 232907 232907
241516 03373 03373
257581 68640 74513 74513
24168014 3524819 163012 15239507 74513 3823946
4934549 4934549
57760 57760
1685845 1685845
7871616 7871616
1423607 1423607
52606 19257 62817
171646 62435 135909
010705 010705
47219315 25268 26256339
6814746 561937 113737
1215839 2874615 152018
136138147 397589 139149359
See accompanying notes to financial statements
21
FUND FINANCIAL STATEMENTS
GASB 34 revises the format ofthe Fund Financial Statements so that only individual major funds are
presented whilenmoajonr 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 ofthe General Fixed Assets and General tLeornmg
Debt Groups ofAccounts
The funds described below were determined to be Major Funds by the City for fiscal 2004 Individual
mnaojonr funds may be found in the Supplemental section
GENERAL FUND
The general fund is the general operating fund ofthe City It is used to account for all financial resources
except those that are required to be accounted for in another fund
PUBLIC FACILITIES CORPORATION DEBT SERVICE FUND
This fund accounts for the payments ofprincipal and interest on certificates of participation issued to
provide for the financing of the Civic LCiebnrateryr Wilson Park and Memorial Park and other City
facilities through the issuance ofcertificates ofparticipation
CAPITAL IMPROVEMENT PROJECTS FUND
This fund accounts for activities related to the acquisition or construction ofmajor capital facilities
LIBRARY CONSTRUCTION FUND
This fund accounts for costs associated with demolition ofan old library building and the design and
construction ofanew library on that site
22
CITYOF CUPERTINO
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 302004
Public Capital Other Total
Facilities Improvement Library Governmental Governmental
General Corporation Projects Construction Funds Funds
ASSETS
Cash and investments Note2 0816745 0321867 0817848 8117019 4758978 48334556
Receivables
Accounts 0525679 41505 03070 02145 0625639
Loans Note 3 7914709 0911327 0631527
Prepaid items 562 562
Advance to other funds Note4 270289 270289
Other assets 3884 3884
TataI Assets 15115968 0321867 5813889 18178119 764505 3743101
LIABILITIES
Accounts payable and accruals 391901 0323767 362487 393745 376049
Accrued payroll and benefits 53615 93916 5613
Deposits 0411736 0411736
Advance from other funds Note4 461736 270289 364816
Deferred revenue 153701 364505 242716
Total Liabilities 0520827 0323767 0130204 391547 0394534
Fund balance Note 7
Reserved for
Encumbrances 193818 31358 3476802 2914608 2690168 Debt service 9980 9980
Advances to other funds 270289 270289
Prepaid items 562 562
Capital project
Loans receivable 7914709 270636 0620836
Affordable housing 467805 467805 Low and moderate income housing 73341 73341
Public access television 81547 81547
Unreserved reported in
General Fund 26138226 26138226
Special Revenue Funds 473346 473346
Capital Projects Funds 2512513 460859 07280 272306
TOTAL FUND BALANCES 5125669 9980 5813889 088675 4753913 2337827
Total Liabilities and Fund Balances 15115968 0321867 5813889 18178119 764505 3743101
See accompanying notes to financial statements
23
CITY OF CUPERTINO
Reconciliation of the
GOVERNMENTAL FUNDS BALANCE SHEET
with the
STATEMENT OF NET ASSETS
JUNE 30 2004
Total fund balances reported on the govenunental funds balance sheet
Amountsreported for Governmental Activities in the Statement ofNet Assets
are different from those reported in the Governmental Funds above because of the following
CAPITAL ASSETS
Capital assets used in GovernmentalActivities arenotcurrent assets orfinancial resources and
therefore are not reported in the Governmental Funds
ALLOCATION OF INlERNAL SERVICE FUNDNET ASSETS
Internal service funds are not govenunental 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 ofthe Internal Service Funds are therefore
included in Governmental Activities inthe following line items in the Statement ofNet Assets
Cash and investments
Accounts receivable
Capital assets net of accumulated depreciation
Accounts payabJe and accruals
Accrued payroll and benefits
Noncurrent portion of compensated absences
Noncurrent portion of claimspayable
ACCRUALOF CNURORENNT REVENUES AND EXPENSES
Revenues which are deferred on the Fund Balance Sheets because they arenot available currently
are taken into revenue inthe Statement ofActivities
LONG TERMASSETSAND LIABILITIES
The assets and liabilities below are not due and payable in the current period and therefore are not
reported in the Funds
tLeonnngdebt
cNurorenntportion of compensated absences
NET ASSETS OF GOVERNMENTAL ACTIVITIES
See accompanying notes to financial statements
24
2337827
0159036I
2933458
3750
0711959
17959
252925
76142
785949
363447
0550530
081191
136138147
CI1Y OF CUPERTINO
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES EXPENDITIJRES AND CHANGES IN FUND BAlANCES
FOR TIIE YEARENDED JUNE 30 2004
Public Capital Qth Total
Facilities Improvement Library Governmental Governmental
General Corporation Projects Construction Funds Funds
REVENUES
Taxes 68201078 358967 0420145 Use ofmoney and property 893429 817 111 09976 94603
Intergovernmental 8921614 020457 0322359 2973556
Licenses and permits 571460 571460
Charges for services 357826 365638 09350
Fines and forfeitures 470307 32131 72438
Other revenue 82690 795602 61560 0210609
Total Revenues 1206737 817 0121467 795602 2331512 13348316
EXPENDl1URES
Current
Administration 2512812 2512812
Law enforcement 8954509 8954509
Public information 678968 678968
Administrative services 7830568 7830568
Recreation services 142341 142341
Community development 232574 2888 2524623
Public works 0870479 0511339 0392826
Capital outlay 2550302 2994909 0453756 2234067
Debt service
Principal 021020 021020
Interest and fiscal charges 382137 382137
Total Expenditures 8246336 58337 2550302 2994909 3866737 48426979
EXCESS DEFICIENCY OF REVENUES
OVER EXPENDl1URES 2331419 0532307 133836 5984779 0631625 07124636
OTHER FINANCING SOURCES USES
Transfers in Note 4 693501 3824517 030609 090203 3740657
Transfers out Note 4 340537 195801 020705 3740607
Total Other Financing Sources Uses 4630717 3824517 015807 060408 0500
NET CHANGE IN FUND BALANCES 135626 66935 392396 5984779 03127 07123668
BEGINNING FUND BALANCES 78128612 670435 847845 04124703 4881403 13402836
ENDING FUND BALANCES 5125669 9980 51839 0886715 4753913 2337827
See accompanying notes to financial statements
25
CITY OF CUPERTINO
Reconciliation of the
NET CHANGE IN FUND BALANCES TOTAL GOVERNMENTAL FUNDS
with the
STATEMENT OF ACTIVITIES
FORTHE YEAR ENDED JUNE 30 2004
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of
Revenues Expenditures and Changes in Fund Balance which measures oruy changes incurrent assets and current
liabilities on the modified accrual basis withthe Change inNet Assets of Gvvemmental Activities reported in the
Statement ofActiyities which is prepared on the full accrual basis
NET CHANGE IN FUND BALANCES TOTAL GOVERNMENTAL FUNDS 07123668
Amounts reported for govenunental activities in the Statement of Activities
are different because of the following
CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures However
in the Statement ofActivities the cost of those assets is capitalized and allocated over
their estimated useful lives and reported as depreciation expense
The capital outlay expenditures are therefore added back to fund balance
Net of internal service fund additions of35949 96I528S4
Depreciation expense is deducted from the fund balance
Depreciation expense is net of internal scrvice fund depreciation
25o7I20fwhich has already been allocated to serviced funds 2843509
LONG TERMDEBT PROCEEDS AND PAYMENTS
Repayment of bond principal is an expenditure in the governmental funds but
in the Statement ofNet Assets the repayment reduces ltoenrmg liabilities
Repayment of debt principal is added back to fund balance 02020
ACCRUAL OFCNURORENNT ITEMS
The amounts belowincluded inthe Statement ofActivities do not provide orrequirethe use of
current flllancial resourcesand therefore are not reported as revenue or expenditures in
governmental funds net change
cNurorenntportion of compensated absences
Deferred revenue
21928
574725
ALLOCAnONOF INTERNAL SERVICE FUNDACTIVITY
Internal Service Funds are used by management to charge the costs of certain activities
such as equipment acquisition maintenance and insurance to individual funds
The portion of the net revenue expense of these Internal Service Funds arising out
of their transactions with governmental funds is reportedVith governmental activities
because they service those activities
Change in Net Assets AllInternal Service Funds 234938
CHANGE IN NET ASSETS OF GOVERNMENTALACTIVTTIES 6814746
See accompanying notes to financial statements
26
CITY OF CUPERTINO
GENERALFUND
STA1EMENT OFREVENUES EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET ANDACTUAL
FOR TIfE YEAR ENDED JUNE 30 2004
Original Final
Variance with
Final Budget
Positive
Actual Amounts Negative
Budgeted Amounts
Revenues
Taxes 01208205 04209005 68201078 18128
Use of money and property 05100 011010 893429 02617
Intergovernmental 033030 0620345 8926I4l 285779
Licenses and permits 061030 0210805 571460 275605
Charges for services 04010 04010 357826 136826
Fines and forfeitures 0600 06040 470307 46307
Other revenue 04000 04000 82690 11400
Amounts available for appropriation 06209905 05238645 1206737 05738
Charges for appropriation outflows
Administration 0310202 381015 2512812 27294
Law enforcement 0460503 366967 8954509 57467
Public information 070901 68868 678968 90
Administrative services 0930405 1241805 7830568 40219
Recreation services 0120609 0222301 142341 67080
Community development 0620801 820808 232574 461446
Public works 090409 578778 0870479 73618
Total charges for appropriations 0420160 59215623 8246336 0720479
EXCESS DEFICIENCY OF REVENUES
OVER EXPENDITURES 0230805 13221 2331419 1232807
OTHER FINANCING SOURCES USES
Transfers in 693501 693501
Transfers out 0940505 340537 340537
Total other financing sources uses 0940505 4630717 4630717
EXCESS DEFICIENCY OF REVENUES AND OTHER
SOURCES OVER EXPENDITURES AND OTHER USES 061070 2633869 135626 1232807
BEGINNING FUND BALANCES 78128612
ENDING FUND BALANCES 5125669
See accompanying notes to financial statements
27
MAJOR PROPRIETARY FUNDS
Proprietary funds account for City operations financed and operated in a manner similar to a private
business enterprise The intent ofthe City is that the cost of providing goods and services be financed
primarily through user charges
The concept ofmajor funds established by GASB Statement 34 extends to Proprietary Funds The City has
identified the funds below as major proprietary funds for fiscal 2004
GASB 34 does not provide for the disclosure of budget vs actual comparisons regarding proprietary funds
that are major funds
RESOURCES RECOVERY FUND
This fund accounts for activity related to the collection and disposal of solid waste A private company has
been issued an exclusive franchise to perform these services
BLACKBERRY FARMFUND
This fund accounts for activities related to operating the picnic area and golf course
CUPERTINO SPORTS CENTERFUND
This fund accounts for the operation and maintenance ofthe Cupertino Sports Facility
RECREATIONPROGRAMS FUND
This fund accounts for activities of the Csity community center
SENIORCENTERFUND
This fund accounts for the activities ofthe Csity senior center
28
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENf OFNET ASSETS
FORTIlE YEARENDED JUNE 30 2004
tByuspineessEAnctteivrpitriiesseFunds Governmental
Cupertino Activities
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fann Center Programs Center Totals Funds
ASSETS
Current assets
Cash and investments Note2 3955829 35347 142458 0910814 190836 0872514 2933458
Accounts receivable 37948 6864 2313 06580 39604 564858 7350
Prepaid expense 51040 51040
Advance to other fundsNote4 461736 461736
Total current assets 3861849 231416 34418 013713 281417 881939 2633989
Capital assets net of
accumulated depreciation Note6 670868 82139 7878 9307 264905 0711959
Total Assets 3861849 95947 146702 0810819 271545 159039 3441339
LIABILITIES
Current Liabilities
Accounts payable and accruals 25064 75482 22829 71544 0275 3624 17959
Accrued payroll and benefit 8377 53696 21318 44297 8245 190536 252925
Deposits 130205 250 88447 142825
Deferred revenue 15546 581329 12324 48199
Total current liabilities 236818 163938 133838 050907 28291 2413748 372647
cNurorenntLiabilities
Compensated absences Note 19 37950 6467 42556 150135 76142
Claims Payable Note 9 785949
Total Liabilities 236818 022734 010903 050907 2347 5715719 213902
NET ASSETS
Invested in capital assets
net of related debt 670868 82139 7878 9307 264905 0711959
Unrestricted 0560468 17828 234515 043716 53050 0371648 042078
Tutal NetAssets Deficit 0560468 697804 126709 480849 53913 397589 130237
See accompanying notes to financial statements
29
CITY OF CUPERTINO
PROPRIETARY FUNDS
STATEMENT OFREVENUE EXPENSES
AND CHANGES IN FUND NET ASSETS
FORTHE YEAR ENDED JUNE 30 2004
tByuspineess EAnctteivrpitriiesseFunds Governmental
Cupertino Activities
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fanns Center Programs Center Totals Funds
OPERATING REVENUES
Charges for services 4725638 1510629 141596 5911909 461735 1976758 4910326
Other 21376 173935 22476 550 94 191809
Total Operating Revenues 492859 231095 1714823 1911419 470739 3875849 4910326
OPERATING EXPENSES
Salaries and benefits 153509 671756 261467 4798 97688 4511508 35361
Materials and supplies 7661 02591 296817 193826 340546 11029 462736
Contractual services 5613446 366809 084648 92524 3659 5833459 282327
Insuranceand claims 27246
Depreciation 238 87565 8234 9118 5163 48038 251702
Total Operating Expenses 071893 315623 3510529 3510902 244934 560802 3423504
Operating Income Loss 690926 04687 17678 382407 51395 377847 585914
NONOPERATINGREVENUES EXPENSES
Interestincome 47170 2352 4643 9670 0154 19259 53986
Total Nonoperating Revenues Expenses 47170 2352 4643 9670 0154 19259 53986
Income LossBefore Contributions and Transfers 371706 84145 132624 38127 41881 581723 251938
Transfers in Note 4 01070
Transfers out Note 4 07050 0100 010705
Nettransfers 07050 0100 010705 01070
Change innet assets 371706 18159 132624 28127 41881 561937 234938
Net Assets BDeeginfincinigt 6757925 780809 44814 295926 11132 2874615 432501
Net Assets EDnedfiicnigt 0560468 697804 126709 480849 53913 397589 130237
See accompanying notesto financial statements
30
CITY OF CUPERTINO
PROPRIETARYFUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30 2004
tByuspineess EAnctteivrpitriiesseFunds
Governmental
Cupertino Activities
Resources Blackberry Sports Recreation Senior Internal Service
Recovery Fm Center Programs Center Totals Funds
CASHFLOWS FROM OPERATING ACTIVITIES
Cash received from customers 42041 2613916 2310526 1912305 454727 0371867 6818968
Cash payments to suppliers
for goods and services 612556 461606 1513809 0210825 141928 0941569 56736
Cash payments to employees 014815 361201 021256 484829 77339 0511312 394815
Net cash provided by operating activities 64904 91081 123639 035806 34549 083505 37289
CASHFLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Advance to other funds 461736 461736
Transfers in 01070
Transfers out 07050 0100 010705
Cash Flows from Noncapital
Financing Activities 461736 07050 0100 61513 01070
CASH FLOWS FROM CAPITAL ANDRELATED
AFGNICNINACTIVITIES
Purchase of capital assets 4746 22224 61906 1 34607 44097
Cash Flows from Capital and
Related Financing Activities 4746 22224 61906 I 34607 44097
CASH FLOWS FROMIGNVESTIN ACTIVITIES
Interest received 47170 2352 4642 9670 0155 19259 53986
Cash Flows from Investing Activities 47170 2352 4642 9670 0155 19259 53986
Net Cash Flows 244857 26903 01455 234606 34035 20334 59148
Cash and investments at beginning of year 7851935 384907 160703 672518 125808 6871207 0623807
Cash and investments at end of year 3955829 35347 142458 0910814 190836 0872514 2933458
Reconciliaßon of operaßng income loss to
net cash provided by operaßng acßvities
Operaßng income loss 690926 04687 17678 382407 51395 377847 585914
Adjustments to reconcile operaßng income to
net cash provided by operating activities
Depreciation 238 87565 8234 9118 5163 48038 251702
Change in assets and liabilities
Accounts receivable 54848 6864 2313 5832 39604 123978 7350
Prepaid expense 81918 81918
Accounts payable and accruals 3231 8536 4140 7404 4579 1470 21979
Accrued payroll and benefits 5135 97304 0247 6836 22207 18067 474628
Deposits 51115 11643 62758
Deferred revenue 82253 4549 46962 79674
Noncurrent portion of compensated absences 37950 6467 42556 150135 76142
Noncurrent portion of claims payable 785949
Net cash provided by operating IIcßvities 64904 91081 123639 035806 34549 083505 37289
Seeaccompanying notes to financial statements
31
CITY OF CUPERTINO
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30 2004
Agency
Funds
ASSETS
Cash and investments Note2 12304
Total Assets 12304
LIABILITIES
Deposits 12304
Total Liabilities 12304
See accompanying notes to fmanciaI statements
32
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a Reporting Entity
The City ofCupertino California the City was incorporated on October 3 1955 under
the laws ofthe State ofCalifornia 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
Sheriff s Department for police services and with the Los Altos Garbage Company for
garbage and recycling services
The accompanying basic financial statements include all funds account groups and
boards and commissions that are controlled by the City Council The basic financial
statements include the Csity blended component units entities for which the City is
considered to be financially accountable A blended component unit although a legally
separate entity is in substance part 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 ofpublic 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 ofthe City have been elected President and Vice President respectively
ofthe Corporation The City Clerk has been elected Secretary and the Csity Director of
Administrative Services has been appointed Treasurer ofboth entities
Separate financial statements for those component units that issue them are available
ITom the City at 10300 Torre Avenue Cupertino CA 935200124
b Measurement Focus Basis ofAccounting and Basis ofPresentation
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
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
b Measurement Focus Basis ofAccounting and Basis ofPresentation 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 AJnaolysirs State and Local
Governments No 36 Recipient Reporting Jor Certain eNxchoannge Revenues an
Amendment oj GASB Statement No 33 No 37 Basic Financial Satatnemednts
Msanagement Discussion and AJnaolysirs State and Local Governments Omnibus and
No 38 Certain Financial Statement NoteDisclosures
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 ofthe City Governmental activities generally
are financed through taxes intergovernmental revenues and other nonexchange
transactionstByuspineess 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 ofthe btuysipneess activities of the City and
for each function of the Csity goverrunental 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 ofwhich 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 are
presented The emphasis of fund financial statements is on major individual
governmental and enterprise funds each ofwhich is displayed in a separate column All
remaining governmental and enterprise funds are aggregated and reported as nonmajor
funds
34
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
b Measurement Focus Basis ofAccounting and Basis ofPresentation continued
Proprietary fund operating revenues such as charges for services result from exchange
transactions associated with the principal activity ofthe fund Exchange transactions are
those in which each party receives and gives up essentially equal values Nonoperating
revenues such as subsidies and investment earnings result from nonexchange
transactions or ancillary activities
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 oftheirftuypnde
Major funds are defined as funds which have either assets liabilities revenues or
expenditures equal to ten percent oftheir 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 2004
The City reported the following major governmental funds m the accompanying
financial statements
The General Fund is the general operating fund ofthe City It is used to account for all
fmancial resources except those that are required to be accounted for in another fund
The Public Facilities Corporation Debt Service Fund accounts for the payments of
principal and interest on certificates of participation issued to provide for the advance
refunding of the City LHibararlyl Wilson Park and Memorial Park certificates of
participation
The Capital Improvement Projects Fund accounts for activities related to the acquisition or
construction of major capital facilities
The Library Construction Fundaccounts for costs associated with demolition ofan old
library building and the design and construction ofa new library on that site
The City reports its enterprise funds as major funds in the accompanying financial
statements
The Resources Recovery Fundaccounts for activity related to the collection and disposal
ofsolid waste A private company has been issued an exclusive franchise to perform these
serVIces
35
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
1 SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES continued
b Measurement Focus Basis ofAccounting and Basis ofPresentation continued
The Blackberry Farm Fundaccounts for activities related to operating the picnic area and
golf course
The Cupertino Sports Center Fund accounts for the operation and maintenance ofthe
Cupertino Sports Facility
The Recreation Programs Fundaccounts for activities ofthe Csity community center
The Senior Center Fundaccounts for the activities ofthe Csity senior center
The City also reports the following fund types
Internal Service Funds These funds account for workers compensation management
information system maintenance and replacement equipment maintenance and
replacement and ltoernmg disability coverage all of which are provided to other
departments on a rceimobursesmenttbasis
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 rrom ltoenrmg debt and acquisitions under capital leases are reported as
otherfinancing sources
Property taxes utility taxes rranchise taxes interest and special assessments are
susceptible to accrual Sales taxes collected and held by the state at year end on behalf
ofthe City are also recognized as revenue Other receipts and taxes are recognized as
revenue when the cash is received
36
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
Jnne 30 2004
1 SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES continned
b Measurement Focus Basis ofAccounting and Basis ofPresentation continued
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 ifnecessary
The City follows statements and interpretations ofthe 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
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 ofthe City is a detailed operating plan which identifies estimated costs and
results in relation to estimated revenues The budget includesIthe programs projects
services and activities to be provided during the fiscal year 2 estimated revenue
available to finance the operating plan and 3 the estimated spending requirements of
the operating plan The budget represents a process through which policy decisions are
made implemented and controlled The City prohibits expending funds for which there
is no legal appropriation All appropriations lapse at fiscal year end
In May ofeach year the City Manager submits to the City Council a proposed budget for
the fiscal year beginning July 1 Public hearings on the proposed budget are held during
the month ofJune and the budgets for all fund types are legally adopted by Resolution
prior to June 30 Original budget amounts are presented on the accompanying budgetary
statements include these legally adopted amounts
37
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 302004
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
c Budgetary Practices continued
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
departmental or project level
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
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 ofoutstanding 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 conslstmg of roads bridges
curbs gutters streets sidewalks drainage and lighting systems are not capitalized
Current year infrastructure costs have been capitalized
38
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
e Capital Assets continued
Depreciation is recorded using the lsitrnaigeht method over the following useful lives
Buildings
Improvements
Vehicles
Street equipment
Water equipment
Office equipment
Road curbs gutters sidewalks medians and bridges
Streetlights
Storm drain structure and mains
Traffic signals
The City capitalizes fixed assets exceeding1000
Years
25
31
410
320
350
35
340
20
40
20
Major outlays for capital assets and improvements are capitalized as projects are
constructed Interest incurred during the construction phase is reflected in the capitalized
value ofthe asset constructed net ofinterest earned on the invested proceeds overthe
same period
Some capital assets may be acquired using federal and state grant funds or they may be
contributed by developers or other govemments GASB Statement 34 requires that these
contributions be accounted for as revenues at the time the capital assets are contributed
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 and ltoernmgdisability General liability claims
and judgments are not material and are not accrued
39
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
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 ltoernmgportion is recorded in the Statement ofNet
Assets
The changes in compensated absences were as follows
Governmental BTuysinpeess
Activities Activities Total
Beginning Balance 7910268 010619 891277
Additions 43934 81423 343467
Payments 176816 3899 17805
Ending Balance 6912904 150135 2 100 133
Current Portion
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 ofSanta 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 I
and become delinquent on August 31 The lien date for secured and unsecured property
taxes is March 1
40
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
1 SUMMARY OFSIGNIFICANT 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 ofadvances 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
eexxppenednitsureess in the reimbursing fund and as
eexxppenednitsureess in the fund that is reimbursed
are recorded as
reductions of
k Statement ofCash Flows
For purposes of reporting cash flows for the Csity proprietary funds pooled cash and
investments are considered cash equivalents as the proprietary funds can access pooled
cash and investments in amannersimilar to a demand deposit account
I Bond Discounts and Issue Costs
Debt discounts and issuance costs are recognized in the current period Debt discounts
and issuance costs incurred by proprietary fund types are amortized over the term of the
debt using the obuotstnanddinsg method which approximates the effective interest
method
2 CASH ANDINVESTMENTS
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 ofthe 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
41
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
2 CASH AND INVESTMENTS 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 ofdeposits covered by federal deposit insurance
Cash in banks is entirely insured Category I 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 was59647at June 30 2004 Bank
balances before reconciling items were0111539 of which the entire amount was
insured Category I
b Investinents
Investinents made by the City are classified as to credit risk into three categories
Category I 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 investinent portfolio is stated at fair value based on quotes obtained at June
30 It is generally the Csity intent to hold investinents until maturity At yeenadr the
Csity investinent balances were as follows
City Fiduciary
Funds Funds Total
Category 1
USGovernment Agency Securities 0522305 0522305
cNategoorizned investments
Government Securities Money Market
Mutual Funds 3827867 3827867
Local Agency Investment Fund 38128935 38128935
Tolallnvestments 27429516 27429516
Cash Deposits with Banks 255626 147924 06902
Certificates of Deposit 090806 64516 0612567
Cash on hand 7149 7149
Total Cash and Investments 54366804 12304 46 770 934
42
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
2 CASH AND INVESTMENTS continued
b Investments continued
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
Cash and investments are classified in the financial statements as shown below based on
whether or not their use is restricted under the terms ofCity 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 ofthree months or less from the
original date ofpurchase to be cash equivalents
The City is a voluntary participant in the Local Agency Investment Fund LAIF that is
regulated by California Government Code Section 16429 under the oversight of the
Treasurer ofthe State ofCalifornia The fair value ofthe 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 LAIF portfolio in
relations to the amortized cost ofthat portfolio The balance available for withdrawal is
based on the accounting records maintained by LAlF 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
3 RELATED PARTY LOAN
In conjunction with the Csity executive housing assistance program loans totaling5813605
have been provided to three executive managers These y4e0ar loans bear an interest rate equal
to the IIth district cost offunds at the time ofthe loan and require monthly principal and interest
payments In addition there is a two percent deferral on the interest rate for the first five years of
the loan at which time the interest rate may be adjusted to the current cost ofdistrict funds for
the remainder of the loan At June 30 2004 the balance remaining on the three loans was
3413623
43
CITY OF CUPERTINO CALIFORNIA
NOTES TOBASIC FINANCIAL STATEMENTS
June 30 2004
4 INTERFUND TRANSACTIONS
Transfers between funds during the fiscal year ended June 30 2004 were as follows
General Fund Leadership Cupertino Special Revenue Fund
Gas Tax Special Revenue Fund
Public Facilities Corporation Debt Service Fund
Capital Improvements Projects Capital Projects Fund
Four Seasons Park Capital Projects Fund
Sports Center Building Capital Projects Fund
Management Information Systems Internal Service Fund
01080 E
060404 D
3824517 F
030609 G
010301 G
01030 G
01070 H
Special Revenue Funds
Park Dedication General Fund 020705 A
195801 B
07050 C
0100 C
4 935 307
Capital Improvement Projects
Capital Improvement Projects General Fund
Enterprise Funds
Blackberry Fann
Recreation Program
General Fund
General Fund
Total Interfund Transfers
The reasons for these transfers are set forth below
A All park dedication fees collected are transferred to the General Fund
B To close out ClP project Midyear Skate Park
C Budgeted enterprise funds transfer of excess earnings overexpenditures for cost reimbursement to the Genera Fund
D To fund gas tax projects budget and midyear adjustment
E To augment adership Cupertino program
F For debt service
G For capital projects budget and midyear adjustments
H Toprovide budgeted new technology equipment
As ofJune 30 2004 the owners of the Vallco redevelopment project area submitted plans to the
RDA and were in the process of securing letters ofintent and additional approvals for property
redevelopment As new building has not yet commenced tax increment revenues are not yet
sufficient to finance Agency operations To assist the Agency until project redevelopment generates
additional tax incrementrevenues the City has advanced funds to the Agency to finance operations
As of June 30 2004 the balance of the advance is 270289
In fiscal year 200021 City Council approved a budget of approximately 082000 for the
construction of a new library At that time the library community pledged to raise an additional
12million to pay for the furniture and fixtures in the new building which effectively increased the
size of the building As of June 30 2004 the campaign committee had fallen short of their
fundraising effort by461736 In order to keep the project on its construction schedule the City
Council approved a loan from the Resource Recovery Enterprise fund for this shortfall It is the
intent ofthe campaign committee to raise these funds and repay this interim loan during fiscal year
200054
Internal Balances Internal balances are presented only in the wCiidtye financial statements
They represent the net interfund receivables and payables remaining after the elimination ofall
such balances within governmental and btuysipneess activities
44
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
5 CAPITAL ASSETS
A summary of changes in general capital assets follows
Balance at Balance at
June 30 2003 Additions Retirements Transfers June30 2004
Governmental activities
Capital assets notbeing depreciated
Land 08638005 08638005
Construction in progress 345723 5106424 6844 12139903
Total capital assets not being depreciated 25605628 5106424 6844 12812008
Capital assets being depreciated
Buildings 06109427 362317 3786 0410275
Improvements other than buildings 07167905 263878 121235 5127936
Machinery and Equipment 026380 17342 230229 9212 854917
Road curbs gutters sidewalks medians
and bridges 0590450 36307 24567 25928637
Streetlights 05600 05600
Storm drain structure and mains 02319115 143678 26328138
Traffic signals 244501 69619 2950129
Tota capita assets being depreciated 12417027 4542448 230229 6844 169381
Less accumulated depreciation for
Buildings 2562369 055601 0777 299
Improvements other than buildings 26102418 180423 07107504
Machinery and Equipment 3834849 567969 23147 2742516
Road curbs gutters sidewalks medians
and bridges 67635925 3923569 06717212
Streetlights 05600 05600
Storm drain structure and mains 29213079 285728 0129125
Traffic signals 4835678 54703 0930309
Total accumulated depreciation 138128048 3552429 23147 16912359
Net capital assets being depreciated 1352622 080945 9495 6844 0506268
Governmental activity capital assets net 15713048 46179307 9495 1213926
45
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
5 CAPITAL ASSETS continued
Balance at
June 30 2003 Additions
Balance at
Retirements Transfers June30 2004
tByuspineess activities
Capital assets not being depreciated
Land and improvements 39289 39289
Total capital assets notbeing depreciated 39289 39289
Capita assets being depreciated
Improvements other than buildings
Machinery and Equipment
Total capital assets being depreciated
560305
268928
192924
54800
54800
21320
21320
2964
2964
463648
031748
59452
Less accumulated depreciation for
Improvements other than buildings
Machinery and Equipment
Total accumulated depreciation
241508 05636 341716
250407 53505 21320 28265
672905 68231 21320 168917
240928 04431 235615
363818 04431 264905
Netcapital assets being depreciated
tByuspineess activity capita assets net
Depreciation expense was charged to functions and programs based on their usage of the related
assets The amounts allocated to each function or program were as follows
Governmental Activities
Adnrinistration
Administrative Services
Recreation Services
Community Development
Public Works
Internal Service Funds
150415
14508
31464
576
4627 680
251702
5 342 529
46
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
5 CAPITAL ASSETS continued
Business Type Activities
Resource Recovery
Blackberry Farm
Cupertino Sports Center
Recreation Programs
Senior Center
238
77068
2834
1918
1563
am
6 LTOERNMGDEBT
a Cupertino Public Facilities Corporation Certificates ofParticipation
Original Balance Balance
Issue June 30 June 30 Current
Amount 2003 Retirements 2004 Portion
Governmental Activity Debt
2002 Refinancing and Capital
Improvement Project
0250due2003171 56 640 000 54 770 000 1 220000 55010050 1 245000
The Cupertino Public Facilities Corporation issued Certificates of Participation to provide
financing for the construction of the Community Center remodeling ofCity Hall and the Library
in July of1986 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 ofthe owners ofthe
certificates ofparticipation The rental payments are scheduled to be sufficient in both time and
amount when the principal and interest ofthe certificates are due
On October I 2002 0650460 principal amount of 2002 Refinancing and Capital
Improvement Project Certificates of Participation 2002 COPs wereissued 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
47
CITY OF CUPERTINO CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
June 30 2004
6 LTOERNMGDEBT continued
a CUDertino Public Facilities Corporation Certificates ofParticiDation continued
Annual debt service requirements for the Certificates ofParticipation are shown below
Governmental Activities
For the Year
Ending June 30 PrinciDal Interest
2005 0210405 2623878
2006 021070 2723628
2007 0210905 232378
2008 0310505 0126739
2009 0410105 1321946
20104 0770605 089945
20159 039080 2680835
20204 0710510 0951936
20259 0710405 6926704
2030 033070 016705
Total 5305050 23987812
b 1915 Act Bonds Without City Commitment
The City acts as agent for the property owners ofparcels upon which assessments were
made for local improvements The City