Cupertino gets budget surplus surprise after fiscal uncertainty

After more than a year of unprecedented fiscal uncertainty, Cupertino’s future could be flush with cash.

The unexpected turnaround in the city’s mid-year financial report projects a $4.5 million budget surplus in 2026. This comes on the heels of a $30 million loss, largely due to a depletion of sales tax revenue from tech giant Apple over the past year and a half. The city credits this reversal to an array of cost-cutting measures.

The city cut $23.8 million over the past two fiscal years in services such as road maintenance and staffing positions, including project managers. It also allocated $10 million toward the employee retirement benefits program, using money from the $74.5 million the city was allowed to keep in Apple sales tax revenue after settling with the state. It has a $217.4 million budget for the current fiscal year and is projecting an ongoing surplus through 2034. By that year, the extra funds are expected to drop to $500,000.

A state audit prevents Cupertino from receiving ongoing sales tax revenue from Apple, which created a multimillion-dollar budget shortfall last year that has since been resolved.

Councilmember J.R. Fruen said the projections are likely modest because they don’t account for the city’s growth with projects such as The Rise at the former Vallco Mall site. He said new housing in the pipeline will create a larger tax base later, but added the city needs this cushion.

“Having the breathing room is really important,” Fruen told San José Spotlight. “It gives us the opportunity to make better decisions about what we do as a city, in terms of what sort of services we offer and what kinds of projects we undertake and what we might build.”

The report states the city should remain cautious with its finances because its expenses are expected to outpace revenue, leaving smaller surpluses. The city relies on sales and property tax for revenue. Property tax and franchise fees are expected to increase by $1.9 million in fiscal year 2025-26, but the city’s sales tax revenue has plummeted 72% within a year to about $6.2 million as of the mid-year report due to the Apple sales tax revenue loss.

Councilmember R “Ray” Wang, who ran a large part of his political campaign on fiscal accountability last year, said the city has a money problem he wants to mitigate in upcoming budget discussions. He wants to save money by training staff on services the city could do itself rather than outsourcing.

“What I’m more worried about is the type of spending we’re doing,” Wang told San José Spotlight. “We have a lot of projects that we could probably stop, and a lot of consulting fees we could probably end.”

Residents such as Gerhard Eschelbeck are relieved after seeing the city’s financial forecast.
Eschelbeck, vice chair of the Bicycle Pedestrian Commission and resident of 10 years, said the key is to focus on strategic initiatives that benefit the community while remaining cost-effective. He said not all infrastructure projects require large investments, including education and awareness initiatives aimed at bike safety.

“I envision a world where many of the city services are a complete online experience, which would not only help with staff shortage, but also make these services more efficient,” Eschelbeck told San José Spotlight. “Any budget surplus and funds should directly benefit residents and (go) less into administrative areas.”

Contact Annalise Freimarck at [email protected] or follow @annalise_ellen on X.