REPORT TO COUNCIL
SUBJECT
Title
Public Hearing: Action to Approve the Issuance of the First Series of Measure I General Obligation Bonds in a Maximum Principal Amount Not to Exceed $100,000,000
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 has identified priority projects within the Expenditure Plan to be funded by the first series of bonds under Measure I, which are anticipated to be issued in February 2026 (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).
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 related to the 2026 Bond proceeds to ensure compliance with Measure I and the Expenditure Plan.
On June 24, 2025, the City authorized an ad valorem 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 that would be used to support the estimated first debt service payment due in FY 2026/27. Due to the timing of property tax payments, the levy is needed in FY 2025/26 to generate the funds for the debt service payment in FY 2026/27.
DISCUSSION
Staff developed a financing plan with the assistance of PFM Financial Advisors (municipal advisor) and Jones Hall (bond and disclosure counsel) to fund the City’s needed infrastructure improvements.
Project List
Below is a summary of the projects on the approved Project List to be financed with the 2026 Bonds. The phase 1 projects total $96,634,500 and the cost of issuance is budgeted at $2,000,000 for a total of $98,634,500. The $2.0 million budget for the cost of issuance covers the bond issuances for the entire bond program. Only a portion of those funds would be used for the 2026 issuance.
Phase #1 Projects ($96,634,500)
1. Streets and Transportation - $27,370,000
Street Resurfacing and Rehabilitation - $16,000,000
ADA Improvements - $5,000,000
Creek Trail Rehabilitation - $2,500,000
Bicycle Wayfinding - $300,000
Contingency/Escalation/Administration - $3,570,000
2. Fire Stations and Emergency Response - $12,285,450
Fire Station 5 Replacement - $4,000,000
Fire Training Tower Renovation - $783,000
Fire Station Security Upgrade - $1,900,000
Fire Station 7 Replacement - $4,000,000
Contingency/Escalation/Administration - $1,602,450
3. Police Facilities - $805,000
Real Time Intelligence Center (RTIC) Feasibility - $150,000
Police Training Facility Feasibility & Assessment - $250,000
Police Department Drone First Responder Infrastructure - $50,000
Emergency Operations Center Infrastructure - $250,000
Contingency/Escalation/Administration - $105,000
4. Parks, Library, Senior Center, and Aquatics Facilities - $38,438,750
Community ISC Aquatic Facility Renovation/Replacement (Phase 1) - $22,200,000
Community ISC Aquatic Facility Renovation/Replacement (Phase 2) - $2,000,000
Warburton Park Playground Renovations - $3,000,000
Henry Schmidt Playground Renovations - $4,325,000
Central Library Restrooms Remodeling & Access Control Redesign - $250,000
Central Library Lighting Control System Replacement - $250,000
Central Library Entry Auto Door System Replacement - $200,000
Central, Mission, and Northside Libraries Renovation Designs - $1,200,000
Contingency/Escalation/Administration - $5,013,750
5. Storm Drain System Improvements - $16,585,300
Storm Drain System Improvements - $5,000,000
Green Storm Drain Infrastructure Design & Construction - $6,645,000
Bowers Ave Underpass SDPS Rehabilitation - $2,030,000
SDPS Motor and Control Replacement - $347,000
Storm Drain Pump Station Outfall Reconstruction Program - $250,000
Storm Drain Renovations - $150,000
Contingency/Escalation/Administration - $2,163,300
6. Historic Buildings and Beautification - $1,150,000
Triton Museum Renovation - $1,000,000
Contingency/Escalation/Administration - $150,000
Public Works: Project Delivery, Readiness, and Phasing
The Public Works Department staff has been working with internal stakeholders to develop project: feasibility, designs, and the sequencing in preparation for construction.
Bond Structure
Due to the anticipated high credit quality of the 2026 Bonds, staff proposes offering the 2026 Bonds via a competitive sale process, by which bond underwriters competitively bid on the bonds on the pricing date in order for the City to achieve the lowest overall interest rate (also known as true interest cost, TIC). Current market rates are anticipated to be approximately 4.17%, and the estimated original principal amount of the 2026 Bonds is $97,370,000. This would fund projects at $96,634,500 as well as issuance-related costs of $735,500.
The 2026 Bonds will be structured in two series of tax-exempt bonds, the Series A Bonds and the Series B Bonds. The Series A Bonds will be issued as tax-exempt bonds for federal and state of California tax purposes. The Series A bonds will mature in 2055 - the final year a debt service payment will be made. The Series B Bonds will be issued as qualified 501(c)(3) tax-exempt bonds for federal and state of California tax purposes and the proceeds of this series will be allocated to the renovation of two projects, the International Swim Center and the Triton Museum, that have substantial private use by qualified 501(c)(3) organizations. The qualified 501(c)(3) organizations must maintain their tax-exempt status throughout the entire term that the bonds are outstanding. Given this requirement, a much earlier maturity date in 2027 is planned for the Series B bonds.
With the short maturity period for the Series B bonds, the 2026 Bonds are structured with net debt service of approximately $16 million - $17 million in FY 2026/27 and FY 2027/28. The debt service would then decrease to $2.5 million in FY 2028/29 and level off at approximately $4.3 million annually through FY 2055/56. The amortization structure of the 2026 Bonds accommodates the debt service of a second bond issuance in FY 2027/2028, with those debt service payments starting in FY 2028/29.
Bond Resolution and Documentation
The attached Resolution authorizes the issuance of the 2026 Bonds and related legal, offering and sale documents, which are summarized below:
Resolution: The Resolution authorizes the issuance of the 2026 Bonds in two series and sets forth the maximum principal amount and maximum true interest cost for each series. These parameters are established as conservatively high to account for market fluctuations between Council approval and bond pricing. The Resolution approves as to form the documents described below, and delegates to specified City officers the authority to make necessary updates, finalize and execute each document, subject to the bond parameters established by the Resolution. The Resolution also includes an exhibit setting forth certain good faith estimates regarding the 2026 Bonds required to be disclosed in a meeting open to the public pursuant to the California Government Code, such as true interest cost of each series, finance charges of each series, amount of proceeds received by the City, and total payment amount.
Paying Agent Agreement: The Paying Agent Agreement is between the City and U.S. Bank Trust Company, a trustee bank that will act as paying agent for the 2026 Bonds. This agreement sets forth the terms of the 2026 Bonds, their security and payment mechanics, redemption terms, and the duties of the paying agent, which include holding certain funds and making semi-annual debt service payments to 2026 Bond owners.
Preliminary Official Statement: The Preliminary Official Statement (“POS”) is the document that will be circulated to potential bond underwriters and potential investors of the 2026 Bonds. The POS describes the terms of the 2026 Bonds and the security for the 2026 Bonds (Ad Valorem taxes levied and collected in the City in a sufficient amount to pay debt service coming due in each fiscal year), describes the City’s tax base, and presents financial information regarding the City to provide potential investors with information regarding the City’s overall financial health.
Note on Securities Law Responsibilities. The attached POS has been reviewed and approved for transmittal to the City Council by the City’s financing team. The distribution of the POS by the City is subject to the federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require the POS to include all facts that would be material to an investor in the 2026 Bonds. Information is “material information” if there is a substantial likelihood it would have actual significance in the deliberations of a reasonable investor when deciding whether to buy or sell securities. The Resolution approves the POS, and delegates to staff (a) the ability to make additional changes if needed, and (b) to sign a certificate on behalf of the City that deems the POS final for purposes of the federal securities laws.
The Securities and Exchange Commission (SEC), the federal agency with regulatory authority over compliance with the federal securities laws, has indicated that, if a member of a legislative body like the City Council has knowledge of any facts or circumstances that an investor would want to know about prior to investing in securities like the 2026 Bonds, whether relating to the City and its financial status, the City’s property tax base, undisclosed conflicts of interest with interested parties, or otherwise, he or she should endeavor to discover whether such facts are adequately disclosed in the POS. The steps that a member of the City Council could take to fulfill this obligation include becoming familiar with the POS and questioning staff and other members of the financing team about the disclosure of such facts.
Continuing Disclosure Certificates. Under the Resolution, the City covenants to comply with the terms of the Continuing Disclosure Certificate for each series of the 2026 Bonds, which are attached as an appendix to the POS. This certificate imposes annual and significant events filing requirements on the City during the life of the 2026 Bonds in order to keep the bond market informed.
Official Notices of Sale. The Resolution authorizes the 2026 Bonds to be sold by competitive sale in accordance with each Official Notice of Sale, which sets forth all of the terms of the sale of the 2026 Bonds to potential bond underwriters. The Resolution also authorizes the City to sell the 2026 Bonds on a negotiated basis if market conditions or other factors result in a recommendation by the municipal advisor that it would be in the best interest of the City. Under the Resolution, the 2026 Bonds may be sold only if all conditions in the Resolution and bond parameters are met, as confirmed by bond counsel and the municipal advisor.
These documents have been presented for approval as to form and will contain certain blanks related to the terms that will be completed following the pricing of the 2026 Bonds (such as principal amount, interest rates, amortization, and redemption terms) because those amounts will be a function of market conditions on the day the 2026 Bonds are priced.
Bond Issuance Timeline
The anticipated timeline of remaining milestones is as follows:
• January 13, 2026 - City Council Consideration/Approval of Bond documents
• February 10, 2026 - Competitive sale and final pricing of 2026 Bonds
• February 24, 2026 - Closing and issuance of 2026 Bonds, and availability of funds for project reimbursement and implementation
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
Approval to proceed with the issuance of the 2026 Bonds will facilitate the projects on the approved Project List as the first tranche projects authorized under Measure I. 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.
Bond proceeds, cost of issuance, ad valorem property tax levies, and project costs are included in FY 2025/26 budget. The first-year debt service payment amount is estimated to be approximately $16 million, which will be included in the FY 2026/27 budget during its development cycle.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
On December 31 2025, notice of the public hearing was published in the Santa Clara Weekly as required by Section 147(f) of the Internal Revenue Code of 1986. 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
Approval by City Council of the Resolution which:
1. Authorizes the Issuance of the 2026 Bonds as the first tranche of bonds authorized under Measure I in a principal amount not to exceed $100,000,000;
2. Approves as to form the Paying Agent Agreement, in substantially the form attached to this Report to Council, and authorizes certain City officers or designees to execute the Paying Agent Agreement;
3. Approves the Preliminary Official Statement, in substantially the form attached to this Report to Council; and authorizing (i) certain City officers or designees to execute a certificate to deem the Preliminary Official Statement substantially final, and (ii) certain City officers or designees to execute a Final Official Statement;
4. Approves as to form the Continuing Disclosure Certificates, in substantially the forms included in the POS attached this Report to Council, and authorizes certain City officers or designees to execute the Continuing Disclosure Certificates;
5. Approves the competitive sale of the 2026 Bonds and approves as to form the Official Notices of Sale, in substantially the form attached to this Report to Council, and alternatively approves the negotiated sale of the 2026 Bonds if so, recommended by the municipal advisor, in each case subject to all conditions and bond parameters set forth in the Resolution being met; and
6. Authorizes certain other actions set forth in the Resolution in furtherance of the issuance of the 2026 Bonds, with the understanding that all required agreements and disclosure documents shall be subject to final approval as to form by the City Attorney.
Staff
Reviewed by: Marc Frietas, Deputy City Manager
Approved by: Jovan Grogan, City Manager
Attachments
1. Resolution
2. Paying Agent Agreement
3. Preliminary Official Statement and attached Continuing Disclosure Certificates
4. Official Notices of Sale Series A
5. Official Notices of Sale Series B