City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: August 10, 2026
Report #:2512-5700
TITLE
Adoption of a Resolution Establishing the FY 2027 Property Tax Levy for City of Palo Alto General Obligation Bonds (2008 Measure N Library Projects); CEQA Status: Not a Project
RECOMMENDATION
Staff recommends that the City Council approve a resolution approving the establishment of the Fiscal Year 2027 property tax levy of $6.92 per $100,000 in Assessed Value for the secured and utility tax roll and $7.45 per $100,000 in Assessed Value for the unsecured tax roll for the City of Palo Alto’s Measure N General Obligation Library Bonds
BACKGROUND
On November 4, 2008, Palo Alto voters passed Measure N which gave the City authority to issue a maximum amount of $76 million of General Obligation bonds (the “Bonds”) for capital improvements to the Mitchell Park, Downtown, and Rinconada libraries and to construct the Mitchell Park community center. The City successfully sold the Bonds in two series to provide $76 million in funds for design and construction costs. Standard & Poor’s (S&P) and Moody’s awarded their highest credit ratings, Triple A, to both series of Bonds and these ratings were affirmed by S&P in May, 2022 and Moody’s in November, 2022. Annually, a property tax levy sufficient to pay debt service on the Bonds must be approved by the City Council and submitted to the County of Santa Clara for collection with property taxes.
On March 1, 2016, Council approved the decommissioning of the Library Bond Oversight Committee and accepted a financial report showing approximately $3.0 million in project savings1. In addition, bond premium of $3.1 million could be used to redeem and/or defease bonds.
1 Finance Committee, March 1, 2016:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=63617&dbid=0&repo=PaloAlto
On June 6, 2016, Council authorized the use of $6.1 million of the Series 2010A and 2013A Bonds to defease and/or retire a portion of outstanding bonds and to pay associated redemption costs3. To maximize savings to property owners the longest bonds were paid off; total savings of $11 million were realized which includes $4.9 million in interest savings over time. Of the $11 million, $5.4 million will be saved through FY 2040, while $5.6 million will be saved from FY 2041 through FY 2044.
On March 2, 20224, Council approved the refinancing of the Series 2010A and 2013A Bonds.
Respectively, the outstanding principal of the 2010A Bonds and the 2013A Bonds was $40.6 million and $13.6 million. The call protection period for the Series 2010A Bonds had lapsed and were refinanced with tax-exempt bonds (Series 2022A) while the call protection period for the Series 2013A Bonds had not lapsed and therefore were partially refinanced as taxable bonds (Series 2022B). Portions of the Series 2013A bonds, or $2.1 million in principal, that had realized savings were refinanced. In total, net present value savings of $4.5 million or 10.6% were realized. The cash savings was $6.4 million and the average annual debt service savings over 18 years is $356 thousand.
There are three General Obligation Bonds outstanding, as outlined in Table 1 below:
Table 1: General Obligation Bonds Outstanding (in millions) Bond Issuance
Principal Outstanding
as of 6/30/2026 FY 2027 Debt Service
2013 General Obligation Bonds, Series A
Tax-exempt, 2-5%, due 8/1/2041
$10.7 $0.4
2022 General Obligation Bonds, Series A
Refinanced 2010A GO Bonds
Tax-exempt, 5%, due 8/1/2040
$30.0 $3.1
2022 General Obligation Bonds, Series B
Partially refinanced 2013A GO Bonds
Taxable, 4%, due 8/1/2028
$2.1 $0.6
Totals $42.8 $4.1
3 City Council, June 6, 2016:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=79555&dbid=0&repo=PaloAlto&cr=1 4 City Council, May 2, 2022:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=81684&dbid=0&repo=PaloAlto&searchid=b673baf8 -cb40-4946-967b-842961e1f7fd&cr=1
ANALYSIS
Debt service payments of these Bonds are paid through ad valorem taxes on all taxable land and improvements (both secured and unsecured assessment roll) within the City. Staff is seeking Council approval of the attached resolution (Attachment A) which authorizes the placement of an ad valorem property tax levy in the amount of $0.00692 per $100 or $6.92 per $100,000 in assessed value for the secured tax roll; and $0.00745 per $100 or $7.45 per $100,000 in assessed value for the unsecured tax roll. In comparison, prior year’s secured and unsecured tax levy was $7.45 and $7.61 respectively, per $100,000 of assessed value.
The assessment rate for FY 2027 decreased for both the secured and unsecured property taxes.
The rate decreases are attributable to the rise in the secured assessed value for properties throughout Palo Alto by 5.47%, an increase of $3.0 billion.
For unsecured property tax, per the County of Santa Clara’s methodology, the prior year secured tax rate becomes the current year unsecured tax rate. As a result the unsecured rate won’t benefit from the current year’s assessed value increase until FY 2028. However, unsecured rate did benefit from the increase in secured assessed value that occurred in FY 2026.
As of the end of July 2026, the average sales price for a single-family household is $3.6 million.
Based on this, the annual assessment for FY 2027 is estimated to be $249 on their property tax bill. In comparison, in FY 2026, a $3.6 million single-family home had an assessment of $268.
FISCAL/RESOURCE IMPACT
FY 2027 Debt service for the three outstanding Bonds totals $4.1 million. The attached resolution will result in ad valorem tax levy revenue totaling $4.0 million, with the difference attributable to available funds on hand.
STAKEHOLDER ENGAGEMENT
Staff works with the County of Santa Clara, who provides the property assessed value for the coming fiscal year that is used to calculate the property tax levy to pay debt service of these Bonds. Measure N was approved by Palo Alto voters in 2008 with 69% support. Expenditures of bond proceeds were monitored by the Library Bond Oversight Committee, which was decommissioned in 2016.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by the California Environmental Quality Act because approval of the Measure N property tax levy is a government funding mechanisms or fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. CEQA Guidelines section 15378(b)(4).
ATTACHMENTS
Attachment A: Resolution Establishing the FY 2027 Property Tax Levy APPROVED BY:
Lauren Lai, Administrative Services Director