Latest Cupertino Budget Updates: January 2024

The January 17, 2024 City Council meeting to discuss potential budget cuts (“Service-Level Reductions (SLRs)”) revealed a bloated budget, long-standing accounting errors, and further confirmed out-of-control spending. There were no significant staffing reductions or cutbacks for City employees.

A Closer Look at Service Level Reductions

Remarkably, over $2.2M of the proposed Service Level Reductions were actually just accounting adjustments. For example, Councilmember Kitty Moore expressed concern over calling a $160,000 reduction in extra library hours a “service level reduction”. The City has not had to pay for extra Library hours for years, as the costs are funded by the County. Other changes to the Sheriff’s Office, Public Works, and  City Attorney budget were also accounting adjustments to “align the budget with the actual hours provided.” These changes are now being presented to the community as “Potential Service Level Reductions,” when there are actually no associated service level reductions.

Council did advise on a few service reductions that may impact residents: Sidewalk and tree maintenance may now be the responsibility of the property owner. Community events, such as concerts, movies, and festivals, will also have reduced funding (most notably, the elimination of July 4th fireworks in 2024). And the Cupertino Scene will now be mailed quarterly instead of monthly.

While Cupertino attempts to cut costs, its proposed changes to employee headcount remain insubstantial. The latest budget report states that the city plans to eliminate only “3-4 vacant positions annually” over the next decade, “until the City reaches a staffing level of 180 positions, which is consistent with the levels in FY 2015-16”. The January 17th proposed service level reductions included elimination of an undisclosed number of part-time roles, for an undisclosed amount of savings. As of September 2023, the city had 195 full-time equivalent employees. Most notably, in the past five years, the budgeted headcount for Administration and Administrative Services ballooned from 30 to 40 employees.1 Meanwhile, as the City struggles with its finances, its finance head was paid nearly $300K in 2022.2

Questionable Budget Reduction Target

Currently, Cupertino has a $10M financial deficit. During the January 17th City Council Meeting, Councilmember Moore questioned why staff was attempting to make $15M in expenditure reductions or revenue generation efforts. Moore noted that the $15M financial deficit was anchored to a 2033 forecast, 10 years in the future, while for the next 4 years, the deficit was only anticipated to hover around $10M.

A Need for Greater Fiscal Accountability

Once again, City Council met behind closed doors on January 29, 2024 to discuss its appeal to the California Department of Tax and Fee Administration (CDTFA). As previously reported, the CDTFA has questioned whether Apple should direct all California online sales tax revenues to Cupertino. This lucrative arrangement accounts for about 63% of Cupertino’s sales tax revenue. The potential loss of this revenue, and repayment dating back to mid-2021, has shined a spotlight on Cupertino’s budgeting practices.

Meanwhile, last November, Staff acknowledged that it had stockpiled over $80M in unassigned funds. Currently, the unassigned fund balance sits at $47M, with an additional $56M set aside as a sales tax repayment reserve for Apple. Cupertino also has $149M sitting in an investment account with Chandler Asset Management.4 This begs the question of whether raising taxes, eliminating community services, or partnering with developers to turn City-owned land into housing, such as the Sports Center, is the appropriate course of action.

Particularly when it comes to evaluating the use of public funds, the role of our publicly-elected representatives is to make decisions based upon what is good for the community. Meanwhile, the current majority of Councilmembers Wei, Fruen, and Mohan have actively discouraged other Councilmembers, such as Moore, who spends her time on the dais pushing for transparency and accuracy regarding Cupertino’s true financial situation, and highlighting accounting errors.

Now, as Council considers tax increases and elimination of resident services, it is imperative that it makes decisions with a long-term community benefit, rather than simply rubber-stamping staff recommendations. And without true fiscal accountability, it is unclear whether residents will support a sales tax hike that is expected to be on November’s election ballot.

References

1 – Staffing Report. City of Cupertino’s Financial Reporting Platform. (n.d.). https://cupertino.opengov.com/transparency/#/33189/accountType=fteCount&embed=n&breakdown=28459e6a-563e-4695-97d4-8a0d97d881e1&currentYearAmount=cumulative&currentYearPeriod=years&graph=bar&legendSort=desc&proration=true&saved_view=103397&selection=3B47265EDAEBBD4AA92D700FE18A69B7&projections=null&projectionType=null&highlighting=null&highlightingVariance=null&year=2024&selectedDataSetInddex=null&fiscal_start=earliest&fiscal_end=latest. Accessed January 29, 2024.

2 – Salary information for Kristina Alfaro. Transparent California. (n.d.). https://transparentcalifornia.com/salaries/2022/cupertino/kristina-alfaro/. Accessed January 29, 2024.

3. Staffing Report. City of Cupertino. (19 December 2023). https://cupertino.legistar.com/LegislationDetail.aspx?ID=6475868&GUID=B089ABAD-726F-44B5-9596-A946A765AA0B&Options=&Search=. Accessed January 29, 2024.

4. FY 2023-24 Adopted Budget. City of Cupertino. (6 June 2023). https://apps.cupertino.org/pdf/FY_2023-24_Adopted_Budget.pdf. Accessed January 29, 2024.

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