Cupertino accepts midyear financial report after updates to 10-year forecast; council approves transfers to capital reserve

The Cupertino City Council accepted the city manager's midyear financial report for fiscal 2024-25 on March 4 and approved a set of midyear budget adjustments that move general-fund reserves and restore some capital transfers.

What changed since adoption: Staff presented an updated 10-year forecast showing that actions taken over the past two years and new revenue and expenditure adjustments reduced an earlier projected year-10 structural deficit. Director Christina Alfaro said the forecast moved from a roughly $7.2 million deficit in year 10 to a modest surplus after revenue adjustments and expenditure reductions.

Key numbers and actions presented: - Estimated general-fund revenues for the year remained at about $122.1 million (as shown in the midyear packet). - Staff requested approximately $4.1 million in general-fund expenditure adjustments and transfers; these included transfers to the capital reserve to bring it toward the city's funding policy level and to resume an annual capital transfer. - Staff requested an additional $2,070,000 transfer to the capital reserve to reach a policy target and another $2,000,000 to resume the annual transfer for future CIP projects; those moves were presented as council actions that provide cash availability for future appropriation through the CIP process. - Alfaro and budget staff reported overall fund balance decreasing from about $169.8 million to $150.8 million after the midyear adjustments; committed reserves include a portion of the sales-tax repayment reserve that council retained.

Pension payment and vacancy factor: Staff said the forecast incorporated a discretionary payment to CalPERS (an additional discretionary payment), funded in part by one-time fund-balance use, and increased the vacancy savings factor used in the forecast from 2% to 4% based on historical vacancy experience; those items were among the drivers improving the long-term outlook.

Council debate and votes: Council discussed whether to pause capital transfers or cut CIP projects instead; staff explained transfers return cash to a capital reserve for later appropriation through the CIP process. The council approved the midyear adjustments and the transfers; the motion carried with one member dissenting (Councilmember Ray Wong voted no on the final resolution approving the budget modification).

Next steps: Staff will return with a detailed CIP appropriation plan for council approval in the April/May CIP and proposed budget hearings. Council directed staff to continue providing quarterly updates and to include additional historical data in forecast materials.

Who spoke: Christina Alfaro (Director of Administrative Services) and Acting Budget Manager Tony Oase Anderson presented the report and answered detailed questions from council. Several community members raised separate concerns in public comment about related issues (see separate story on housing and fire-hazard comments).