REPORT TO COUNCIL
SUBJECT
Title
Update on Sale Results of the First Series of Measure I General Obligation Bonds
Report
BACKGROUND
On November 5, 2024, voters in the City of Santa Clara approved Measure I, the Public Facilities and Infrastructure Bond Measure (RTC 24-672). Measure I authorizes the City to issue up to $400 million in general obligation bonds (the “GO Bonds”) to help address over $600 million in unfunded infrastructure needs, including aging fire stations, storm drain systems, and aquatic facilities. As part of the process for putting Measure I on the ballot, the City Council approved a bond expenditure plan (the “Expenditure Plan”) describing the categories of public improvements authorized to be financed by the GO Bonds.
City staff identified priority projects within the Expenditure Plan to be funded by the first sale of bonds under Measure I (the “2026 Bonds”). These projects are set forth in the project list (the “Project List”) approved by the City Council on September 16, 2025 (RTC 25-992) and total $96,634,500 in projected cost (Attachment 2).
As required by Measure I, the City has established a Bond Compliance Oversight Committee (the “Committee”) to ensure transparency and accountability in the implementation of Measure I projects. One responsibility of the Committee is to ensure that project implementation aligns with all bond measure requirements, including the Expenditure Plan. The Project List was presented, reviewed and approved unanimously by the Committee on August 27, 2025, prior to City Council approval. The Committee will review expenditures expected to be paid from proceeds of the 2026 Bonds to ensure compliance with Measure I and the Expenditure Plan.
On June 24, 2025, the City authorized an ad valorem property tax levy for FY 2025/26 for the repayment of debt service on the 2026 Bonds (RTC 25-722). The tax rate for FY2025/26 was set at $28.70 per $100,000 of assessed value to generate approximately $16.8 million to be used to pay the estimated first debt service payment due in FY 2026/27. Due to the timing of property tax receipts, the levy was assessed in FY 2025/26 to generate funds required to pay debt service in FY 2026/27.
The City approved the 2026 Bonds Resolution (RTC 26-1719) on January 13, 2026, authorizing the issuance of the first series of Measure I General Obligation Bonds in a maximum principal amount not to exceed $100 million.
DISCUSSION
On February 10, 2026, the City held two competitive bond sales, one for each series, and successfully priced $97,125,000 principal amount of 2026 Bonds, to fund the Project List and cost of issuance. In accordance with standard competitive sale procedures, each series was awarded to the underwriter offering the lowest True Interest Cost (TIC), respectively. TIC is the real borrowing interest rate, taking premiums and the time value of money (future payments to be made over maturity periods) into the calculation.
Based on the City’s solid financial performance and economic outlook, the 2026 Bonds were rated “AAA” by S&P Global and “Aaa” by Moody’s, the highest credit ratings, respectively.
The 2026 Bonds are structured in two series of tax-exempt bonds, the Series A Bonds and the Series B Bonds. The Series B Bonds are qualified 501(c)(3) for federal and state of California tax purposes. There was broad investor demand, with 12 investment banks providing bids on the Series A Bonds and 11 investment banks providing bids on the Series B Bonds. The broad demand for the 2026 Bonds ultimately resulted in lower than estimated interest rates and debt service cost.
The $71,645,000 of Series A Bonds have a 30-year final maturity in 2055 while the $25,480,000 of Series B Bonds have a shorter 2-year final maturity in 2027. The winning TICs were 3.81% for Series A Bonds and 1.75% for Series B Bonds, with the lower TIC on Series B reflecting the shorter borrowing term. The combined TIC for both series was 3.77%, compared to the preliminary estimated rate of 4.17%. This result will be approximately $7 million in net debt service savings below the original estimate.
Complete sale results can be viewed in Attachment 1.
ENVIRONMENTAL REVIEW
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 an administrative activity that will not result in direct or indirect physical changes in the environment.
FISCAL IMPACT
The 2026 Bonds were sold at a premium over its principal amount. As shown in the chart below, bond proceeds totaled $102,505,620. This figure includes project funding of $96.6 million that aligns with the budget for the Project List, issuance costs ($0.5 million), and capitalized interest ($5.4 million, using the premium to pay down interest expense).
|
Use of Bond Proceeds |
Series 2026A |
Series 2026B |
Total |
|
Project Funding |
71,284,500 |
$25,350,000 |
$96,634,500 |
|
Cost of Issuance |
$360,500 |
$130,000 |
$490,500 |
|
Sub-Total Principal Amount |
$71,645,000 |
$25,480,000 |
$97,125,000 |
|
Capitalized Interest/Premium |
$4,702,379 |
$678,241 |
$5,380,620 |
|
Total Bond Proceeds |
76,347,379 |
$26,158,241 |
102,505,620 |
The first net debt service payment will be $16,000,000 on August 1, 2026 with total FY 2026/27 debt service payments of $16,100,899, which will be incorporated into the FY 2026/27 budget currently under development.
The 2026 Bonds are not a debt or liability of the City or the City’s General Fund but rather are payable solely from ad valorem property taxes to be levied within the City. Ad valorem property taxes received by the City to date from the County of Santa Clara total $9.2 million, with a second installment to be received in April 2026 to fully fund the FY 2026/27 debt service payments.
COORDINATION
This report has been coordinated with the City Manager’s Office and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the meeting 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. 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 or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Note and file Sale Results of the First Series of Measure I General Obligation Bonds.
Staff
Prepared by: Kenn Lee, Director of Finance
Approved by: Jovan Grogan, City Manager
Attachments
1. Post-Pricing Summary and Pricing Results
2. Project List