To: Honorable Mayor and City Council Date: March 4, 2026 From: Andrea Sanders, City Clerk
Subject: Desk Item 3.1 – Correspondence
The attached correspondence was received by Steve Saunders related to the March 5 Priority Setting meeting.
MEMORANDUM City of Campbell
City Clerk’s Office
Ordinance to Limit Measure O Ad Valorem Property Tax Rate Reductions I request that the council enact an ordinance, by July 1, 2026, limiting the year-to-year in the Measure O ad valorem property tax levy rate to be no more than 2% lower than the preceding year’s rate (2025 is 17.00, 2026 is >16.66).
The goal of enacting such an ordinance is capture the growth in Campbell’s real estate valuation to reduce the interest paid on the Measure O bonds, rather than letting that growth just drive down the tax rate.
BACKGROUND
On November 6, 2018, City of Campbell voters approved Measure O with a ‘Yes’ vote of 69.5% by the citizens that voted in the General Election. Bonds issued pursuant to Measure O were authorized to be issued in the aggregate amount of up to $50 million to construct and/or renovate City facilities to house Police and Library services, as described in the Measure O ballot materials. On August 5, 2021, the City issued $20,000,000 in the first series of Measure O Bonds. On June 22, 2022, the City issued the second and final series of bonds ($30,000,000). Annual debt service for both bonds is approximately $2,600,000 per year.
DISCUSSSION
The City has set ad valorem property tax levy rates necessary to support debt service payments on the Measure O bonds since tax year 2019-20; with historical rates shown in Table 1 below:
Table 1 – Measure O Tax Rate History
Year Tax Rate
2019-20 $10.00 per $100,000 (0.0100%)
2020-21 $10.00 per $100,000 (0.0100%)
2021-22 $17.50 per $100,000 (0.0175%)
2022-23 $20.00 per $100,000 (0.0200%)
2023-24 $17.50 per $100,000 (0.0175%)
2024-25 $17.00 per $100,000 (0.0170%)
It is anticipated that as the City’s total assessed value continues to increase and given level debt service payments (approximately 2.6 million every year), the tax rate will slowly decrease over time until all the bonds are paid off. The requested ordinance would limit that decrease to just counter balancing the automatic 2% valuation bump permitted by Prop 13. This would result in “excess” tax being collected being placed in Fund 348 (I believe). The buildup of “excess” funds would allow either calling bonds after 2030 and/or terminating the collection of taxes for Measure O before 2049/2050.
This would necessitate having the rate reduction restriction be waved in the final 2 years that taxes were collected.
Additionally (again I believe) the return on the funds held could be used as general revenue.
The graph “Measure O tax rates” illustrates what the effect of the ordinance would be with the assumption of constant 4.5% grow of the valuation base. The gap between the “Min Payment” and “rate reduction” rate curves yield the “accelerated collection” or “excess collection”. The “rate reduction” rate curve also illustrates that “accelerated collections’ would end sooner than “Min Payments”.
The graph “..no Calls” illustrates the structure of Measure O debt service when only the minimum payment (about 2.6m) is made each year. So that all the values in a row (for a debt service year) are summed to determine that year’s minimum payment. This can be described and pay interest of all outstanding bonds and payoff 2 bond series (1 each from 2020 & 2022 bond issuers).
The value, $25,684,600, at the end of the title is the total remaining interest payments to be made.
The graph “..500k Calls” illustrates to structure of Measure O debt service when the rate reduction follows the proposed ordinance, assumes constant 4% valuation growth, calls bonds when fund “excess” exceeds $500,000, and assumes 2x yearly interest premium for calling the bonds. The remaining interest payments (including premiums) total $23,193,800, a 9% saving for tax payers.
A few other scenarios were explored varying valuation growth, call threshold, premium, and fund earnings return rate. These yielded tax payer savings of 6-15% (on interest) and fund earnings totaling $500k-$3m in 2050, with Measure O tax collection ending in 2045-2047.
None of the bond calls or just save decisions fall to the current council members, but the requested ordinance lays the corner stone of making those decisions possible. And again, current property tax payers will not see any dollar amount increase for Measure O tax.