Cupertino paid fees related to a recent housing lawsuit using more than $100,000 worth of funds earmarked for affordable housing, a mistake staffers are correcting, the city said.
Between 2023 and this year, Cupertino tapped into its below-market-rate housing fund, which is money allocated by the city for affordable housing units, to pay for a 2023 lawsuit filed by housing advocates Yes in My Backyard Law (YIMBY Law) and California Housing Defense Fund, as first reported by San Jose Spotlight.
The city paid between $100,00 and $150,000 to the Oakland-based law firm Goldfarb & Lipman LLP and other legal fees, confirmed Deputy City Manager Tina Kapoor, after Cupertino lost a judgment in January related to the city’s failure to submit a state-mandated housing plan by the January 2023 deadline. The Oakland-based law firm, which the city hired to fight the lawsuit, did not respond to requests for comment.
“We realized that this was not what we intended to do,” she said. “It was done mistakenly and was an error.”
Lawsuit-related fees are supposed to be paid by the City Attorney’s Office through the general fund, an account that supports most of the city’s entities and is funded through taxes. Each city account has a special number assigned to it, Kapoor said, and it is possible for the number to be entered incorrectly by staff, or “miscoded,” resulting in an item being paid from the wrong account.
Kapoor said the city is in the process of returning the money to the housing fund and taking it out of the general fund. Staff will also examine several years of transactions to check for other instances of miscoding. In the meantime, Kapoor said the city will put additional mechanisms in place, including training employees on the fund’s uses and implementing an additional approval requirement before money is taken out.
“It’s not a standard practice for us to miscode like that,” Kappoor said. “We’re making sure there are mechanisms in place so that doesn’t happen again.”
In 2023, pro-housing nonprofits YIMBY Law and the California Housing Defense Fund served 11 Bay Area cities, including Cupertino, with lawsuits over their failure to meet last year’s Jan. 31 state deadline for housing plans, known as housing elements. The state requires cities to detail how they plan to add a specific number of homes at a range of price points. The nine-county Bay Area is supposed to build more than 441,000 new homes by 2031 — including more than 4,000 in Cupertino.
Cupertino, along with surrounding cities like Palo Alto, Richmond and Daly City, missed that deadline, prompting the nonprofits to file suits to hold them accountable for complying with state law. The lawsuits also serve as a reminder to cities that they are subject to the “builder’s remedy,” a legal mechanism that allows developers to push through projects that are larger than local zoning laws would otherwise permit.
Sonja Trauss, executive director of YIMBY Law, said the misallocation of funds is a broader consequence of the the city not finalizing its housing element sooner.
“The real scandal here is that Cupertino did not create a compliant housing plan on time,” Trauss said in a statement. “If it had, the city would have avoided all of this while making it easier and faster to build affordable housing.”
She added that Cupertino, and the other cities, had plenty of time and resources from YIMBY Law and other housing groups before the missed Jan. 31 deadline.
“The lesson in all this is that cities should follow housing laws in the first place,” Trauss said. “That leaves less room for errors, and eliminates the need for consequences like a lawsuit from YIMBY Law.”