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Cupertino council reviews proposed FY 2026–27 budget, flags sheriff contract and expiring UUT as major fiscal risks
Summary
Council members reviewed a proposed FY 2026–27 budget showing $150.6 million in revenues and $155.5 million in expenditures, discussed a small projected general‑fund surplus and long‑term deficit risk driven by the county sheriff contract and the utility tax expiration, and asked staff for several informational memos before final adoption on June 16.
Cupertino — The City Council on May 11 reviewed the city manager's proposed budget for fiscal year 2026'27 and heard staff warn that long‑term fiscal pressure remains despite a balanced operating plan for next year.
Acting Director of Administrative Services Jonathan Nosco presented an all‑funds summary showing $150.6 million in proposed revenues and $155.5 million in proposed expenditures, which would use about $4.9 million of fund balance; staff said the general fund itself shows a modest projected surplus of roughly $30,900 for FY 2026'27. "Our efforts have so far resulted in a reduction of more than a million dollars from earlier projections," Nosco said during the presentation.
Council members focused on two long‑range risks. Staff told the council the contract for sheriff services remains unsettled and is the largest single source of uncertainty in the forecast: the proposed budget reflects the county's latest proposal of roughly $25.5 million in annual sheriff costs, but long‑term forecasts use a CPI plus 2% assumption and the county has indicated it may not limit increases to that rate.
Vice Mayor Chow pressed staff about whether the forecast assumed the county's new proposal or CPI+2; Nosco said the proposed budget includes the county's current proposal while the longer range forecast retains CPI+2 assumptions because the long‑term contract escalation method remains unknown.
Council also asked about the utility user tax (UUT), a revenue source set to expire in fiscal year 2030–31 that currently brings in roughly $4 million a year. Staff said they have run scenarios showing that without renewal the city could face a $4.5 million to $5 million shortfall in the out years and agreed to provide an informational memo laying out renewal and no‑renewal scenarios.
Staff walked the council through reserve policy and fund classifications. Nosco said the city's projected total fund balance for FY 2026'27 is about $178 million, including a $62 million "future use" reserve converted from a prior sales‑tax repayment reserve, and an economic uncertainty reserve that staff budgeted at about $26.5 million for next year.
On near‑term budget detail, staff outlined $2.37 million in one‑time requests and $0.09 million in recurring requests (about $2.46 million total), including vehicle and equipment replacement, IT refreshes, traffic signal synchronization projects on Stevens Creek Boulevard and De Anza/Deanza, and smaller community funding recommendations. Staff said department requests were built into the proposed FY 2026'27 budget and would be funded by revenues and available balances if the council approves them.
Council members asked staff for several follow‑ups before final action: an informational memo about UUT renewal scenarios, a comparison or explanatory memo about the vehicle‑replacement policy and how Cupertino's replacement rhythm compares to peer cities, and verification whether OpenGov can be configured to show GL/account‑level detail for departmental budgets.
The council's study session does not adopt the budget; staff will return June 16 for a final hearing and formal adoption.
