April 21st Newsletter: Cupertino Braces for Budget Cuts, and What’s Next for Lehigh Cement

We also share updates on a topic that, directly or indirectly, affects many Cupertino residents: the future of Lehigh Cement Plant and Quarry, located on Stevens Creek Blvd in unincorporated Cupertino. The cement plant has been one of California’s worst air polluters. The quarry that feeds the plant limestone has forever altered our view of the mountains, and polluted water. Most noticeable is the truck traffic, dust and noise. 

As both of these situations are ongoing, we will continue providing updates to keep you informed.

On April 13th, the Cupertino City Council discussed the sobering budget impact of an anticipated 30% reduction in City revenue. The potential revenue reduction was first identified in December 2021, and repeatedly disclosed throughout 2022. Now, even cost-cutting of services and staff will not prevent the City from running in the red for at least a decade.

Cupertino’s press release attributes the decline to “the anticipated outcome of a California Department of Tax and Fee Administration (CDTFA) audit of one of the City’s taxpayers.” This taxpayer is most likely Apple. 

In the late 1990s, the City helped rescue Apple from failure by sharing its sales-tax revenues. As permitted by State law, Apple assigned its Cupertino headquarters as the point-of-sale location for all online sales of its products in California; Cupertino receives the sales-tax revenue and shares it with Apple.

The State is considering terminating this long-standing agreement, which could hobble the City. However, it is not clear what legal standing, if any, the State has if it were to end tax-sharing agreements between businesses and cities. An article from Bloomberg Tax provides more detail. 

In October 2022, the City Hall subcommittee, on which Councilmember Kitty Moore served, warned of the audit’s potential short and long-term funding impacts. The subcommittee advised against spending money on building a brand-new City Hall. 

Instead, it recommended a seismic retrofit and renovation of the existing City Hall and utilization of the recently-purchased annex building for the Emergency Operations Center (EOC) as the most efficient, economical solution. Additionally, to improve fiscal oversight, Councilmember Moore brought our Audit Committee into compliance. 

Disregarding the warning, in December 2022, Mayor Hung Wei, Vice Mayor Sheila Mohan, and Councilmember J.R. Fruen pushed for a new and larger $72 million City Hall. They also removed several fiduciary duties assigned to the Audit Committee, and reduced the number of times the Committee will meet each year. 

The worst-case scenario, yet to be modeled by the City’s finance department, would require Cupertino to refund past disbursements to the State. It is unclear what, if anything, the current Council majority is able to do about this situation, other than lodge a boilerplate appeal, given this majority’s demonstrated unwillingness to focus on fiscal details. 

Per a signed agreement, Apple will also help defend Cupertino in administrative proceedings regarding its status as the point-of-sale location. The State will reveal the outcome of its audit in 4 to 6 months. 

On Wednesday, April 26, at 6:30 PM at Cupertino Community Hall and on Zoom, various oversight agencies will give updates on the Lehigh Cement Plant and Permanente Quarry, along with an opportunity to ask questions. This meeting will also be recorded. Sign up here. 

Last week, the Santa Clara County Board of Supervisors unanimously approved two decisions regarding the Lehigh Cement Plant and Permanente Quarry: 

1. The County will ask Lehigh to enter a legally-binding agreement to permanently close its kiln at the cement plant. Following an industrial accident in 2019, the Bay Area Air Quality District (BAAQMD) received a plethora of phone calls reporting excessive pollution from the cement plant. It ceased operations in 2020 and instead became a distribution center for imported cement. In 2022, a representative testified that Lehigh would not rebuild its cement kiln because it would be too expensive to comply with modern pollution regulations, but would continue manufacturing and distributing cement. 
2. The County will create a policy framework guiding restoration and future development of portions of the 3,500-acre Lehigh site, in cooperation with the City of Cupertino. The only land that Lehigh can develop is in Cupertino. 

Supervisor Simitian announced three goals: close the cement plant, stop mining the quarry, and begin restoration and reclamation of the property. In March, the Santa Clara Valley Water District Water Storage Exploratory Committee rejected the idea of turning the quarry into a lake for water storage. Instead, the County is awaiting a new proposal that would transform the quarry into a for-profit waste-rock landfill with an estimated 600 truck trips per day for 30 years.