REPORT TO COUNCIL
SUBJECT
Title
Resolution Authorizing an Ad Valorem Tax Levy to Finance the City’s 2026 General Obligation Bonds Debt Service for Fiscal Year 2026/27 In the Amount of $22.70 per $100,000 (0.0227%) of Assessed Value in FY 2026/27
Report
BACKGROUND
Measure I, which passed with more than two-thirds approval of City of Santa Clara (the “City”) voters at the November 5, 2024 General Election, authorizes the issuance of general obligation bonds by the City in the total principal amount of $400 million (the “Bonds”) for the purpose of providing funds for the municipal capital improvements listed in the bond expenditure plan (Attachment 2) approved by City Council. The first series of Bonds, in the principal amount of $97.125 million, was issued in February 2026 (RTC 26-87). The initial debt service payment on the first series of bonds is due August 1, 2026 and will be paid with property taxes authorized by Resolution 25-9455 (RTC 25-722) and collected by Santa Clara County (the “County”) in Fiscal Year 2025/26.
Staff is requesting City Council approval of the required property tax levy to be placed on the Fiscal Year 2026/27 County property tax roll to provide for debt service payments of principal and interest coming due on the Bonds in FY 2026/27 and first half of FY 2027/2028. Under the California Constitution and applicable provisions of the California Government Code, the City is required to annually levy an ad valorem property tax in an amount sufficient to pay principal and interest on voter-approved general obligation bonds as those payments become due. Once the Bonds have been issued, the City has an ongoing legal obligation to annually levy a property tax in an amount sufficient to pay debt service on the outstanding Bonds, requiring City Council approval each year of a tax levy resolution with the applicable tax rate until the final maturity of all issued Bonds.
DISCUSSION
City staff, working with the City’s municipal advisor, PFM Financial Advisors, has estimated the required FY 2026/27 ad valorem property tax rate as $22.70 per $100,000 (0.0227%) of assessed value. PFM Financial Advisors performs the annual debt service tax rate calculation by reviewing the scheduled principal and interest payments due during the applicable tax collection period, projected assessed valuation provided by the County, estimated collection rates, and any available debt service fund balances. Based on these factors, PFM determines the tax levy necessary to generate sufficient revenues to meet the City's debt service obligations while avoiding over-collection.
This rate is below the $28.70 per $100,000 (0.0287%) of assessed value levied in FY 2025/26, which was based on debt service estimates at that time. The FY 2026/27 rate is based on the actual results from the February 2026 debt issuance for the first series of Bonds.
The attached resolution (Attachment 1) includes these figures and authorizes City staff to provide the resolution and any related information to the appropriate County officials. Following City Council approval, the adopted levy will be certified to the County Controller-Treasurer, who is responsible for placing the tax on the annual property tax roll and collecting the levy from property owners.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of a California Environmental Quality Act (“CEQA”) pursuant to the CEQA Guidelines section 15378(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. Furthermore, the action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
The ad valorem property tax levy of $22.70 per $100,000 (0.0227%) of secured assessed value in FY 2026/27 is expected to generate approximately $13.8 million. This amount, combined with FY 2025/26 assessment (approximately $17.3 million), FY 2026/27 unsecured levy (approximately $2 million), and remaining Capitalized Interest resulting from bond sale premium (approximately $5.3 million, see RTC 26-87), is expected to be sufficient to make total debt service payment of $38.4 million for FY 2026/27 ($19.83 million) and the first payment of FY 2027/28 ($18.54 million due August 1, 2027) on the Bonds issued.
After unsecured tax roll collection and recording interest income earned on the funds are accounted for, staff will return to the City Council with budget amendments as part of the FY 2025/26 Budget Year End Report to reconcile revenue assumptions compared to actual receipts for the Measure I General Obligation Bond Debt Service Fund.
COORDINATION
This report has been coordinated with the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Adopt a Resolution Authorizing an Ad Valorem Tax Levy Based on a Debt Service Estimate to be Provided to Santa Clara County Respecting Unsold General Obligation Bonds for Fiscal Year 2026/27 In the amount of $22.70 per $100,000 (0.0227%) of assessed value.
Staff
Reviewed by: Linh Lam, Acting Director of Finance
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Draft Resolution Authorizing an Ad Valorem Tax Levy Based on a Debt Service Estimate to be Provided to Santa Clara County Respecting Unsold General Obligation Bonds for Fiscal Year 2026/27
2. Bond Expenditure Plan