" 10/24/2023 Item 2
City Council Meeting
Item #2: Study Session
RTC 23-1259
CITY OF Overview of Unfunded Needs,
Presentation of Revenue
1852 Options and Workplan for
THE MISSION CIT November 2024 Ballot
Consideration
October 24, 2023
Agenda
1. Overview of City's Capital Improvement Program (CIP) Challenge • Pay as You Go Approach
• Unfunded Capital Needs - Why We Need a New CIP Approach
2. Overview of Revenue Options
3. Overview of Next Steps and Timelines
4. Council Feedback
City of
Santa Clara
POST MEETING MATERIAL
* 10/24/2023 Item 2
Overview of the City's
Capital Improvement Program
Challenge
City of
Santa Clara
Current CIP Approach - Pay as You Go
• For programs where General Fund is the primary
funding source, the City lacks a dedicated
revenue stream to support long-term
maintenance, repair or replacement of capital
facilities
• Capital Projects Reserve (CPR) balances are
insufficient and dependent on unknown surplus
funds at year-end
• Capital improvements are unplanned and urgent;
consequently, expensive and time-consuming
• Resources are re-directed from operations,
negatively impacting service delivery
City of
Santa Clara
The Center of Whats Rome
10/24/2023 Item 2
Current CIP Approach - Pay as You Go
• Current 5-year CIP has only $9.9 million to
fund General Fund CIP projects CITYWIDE
• Only the most critical projects can be funded
• Five-year CIP has identified at least 1/2
billion in infrastructure needs that do not
have identified source of funding
City of
Santa Clara
The Center of What's Possible
Funding the City's Capital
Infrastructure
Five-Year CIP Unfunded Needs = $571.4 M
• $571 M unfunded needs over
five years Community Convention
Facilities, $ 244.4 , Center,$ 12.7,
- Fire Stations 42.8% 2.2%
- Storm Sewer System
- Parks, Outdoor Spaces and Trails Parks and
- Community Facilities Trails,
$ 141.5,
- International Swim Center Administrative 24.8%
Facilities, $ 75.5,
- Streets and Roads Pavement 13.2%
Storm Drains,
- Traffic and Bicycle Safety $ 35.3, 6.2%
Transportation, Technology and
- City Buildings $ 58.5, 10.2%- Equipment,
- Historical Buildings $ 3.5, 0.6%
City of
/ Santa Clara
6 Tho Centero What madha
• 10/24/2023 Item 2
City Needs a New GF CIP Approach
• Current General Fund CIP approach is:
• Not sustainable
• Is reactive, not forward-thinking
• Decades long practice of deferred investment that requires infusion of significant investment to catch up and provide a dedicated revenue source to meet ongoing maintenance needs
• Not in the best interest of the City
City of
Santa Clara
Major Unfunded Capital Needs
Why we need a new CIP approach
City of
Santa Clara
10/24/2023 Item 2
Impact of 60+ Years Old Infrastructure
• Does not conform with current building
standards
• Health/safety concerns
• Facility closures
• Frustration from the community (service and
look)
• Exponential cost increases to replace assets
(e.g., maintenance vs. replacement)
• Inefficient facilities do not meet climate and
sustainability goals
City of
Santa Clara
The Center of What's Possible
Major Unfunded Capital Needs
Fire Department
City of
10 Santa Clara
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Station 1
LEONARDJ GEORGE
FIRE STATICH
City of
Santa Clara 11
ho Centero whss Postible
City of
Santa Clara 12
The Centerof What's Possible
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Lockens
City of
Santa Clara 13
The Center of What's Possible
Station 5
City of
Santa Clara
The Center of What's Possible
023 Item 2
MIDT
City of
Santa Clara
15 B
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Santa Clara
The Center of What's Possible 16
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Santa Clara
The Center of What's Possible 17
Station 7
Mys.
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Santa Clara
The Centerof What's Possible 18
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OUT ON DRI
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Santa Clara
The Center of What's Possible- 19
Station 9
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Santa Clara
The Center of What's Possible 20
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REHA
City of
Santa Clara
21 The Centerof What's Possible
City of
Santa Clara
22 The Center of What's Possible
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Major Unfunded Capital Needs
Parks, Recreation & Open Space
City of
23 Santa Clara
City of
Santa Clara
The Center of What's Possible
2017 Facility Condition Assessment
Overall BCI Grades Overall PCI Grades
Critical 7% Critical 13 %
Poor 17% Poor 34%
Fair 24% Fair 17%
Good 52% Good 36%
65 Park Buildings 49 Park Sites
Avg. age = 32 Avg. age = 50
24 723 Item 2
Aged
Infrastructure
Affects
Service
Eleven bodies of water: 3 @ISC, 2 @ Warburton, 1@ Mary Gomez, City of 3 @ Senior Center and 2 @ Montague
Santa Clara
The Centerof What's Possible • Five of eleven are 50+ years old (ISC & Warburton) 25 City of
Santa Clara
The Center of What's Possible
Unfunded Park Needs
• Citywide Master Plan Implementation
• Central Park Master Plan Implementation
• Community Recreation Center Needs
• Future Senior Center Needs
• City/School Joint Use Agreements
• Trail Development
26 10/24/2023 Item 2
Major Unfunded Capital Needs
Streets
City of
27 Santa Clara
Bike & Pedestrian Improvements Traffic Signal Improvements Safe Street Improvements
City of
Santa Clara 28
The Center of What's Possible
•10/24/2023 Item 2
Overview of Revenue Options
City of
29 Santa Clara
Types of Measures
General Tax Measure
• Levied to be expended on any program, service, or capital need, at the discretion of the local government's governing body
• A simple majority vote (50 percent of voters plus one additional voter) is required for approval of a general tax
Special Purpose Tax Measure
• Dedicated to a specific purpose, including a special tax for a specific purpose that is deposited into a city's general fund
• Requires a 2/3 supermajority vote
City of
Santa Clara 30
The Center of What's Possible
10/24/2023 Item 2
Factors to Consider When Evaluating
Revenue Options
• Purpose - capital infrastructure, operational services • Votes Required - supermajority vs majority
• Likelihood of Voter Approval
- Number of measures (one vs. two
- Voter research results
• Revenue Potential
• Stability of Source and Duration - one-time, ongoing
• Financial impact to local community
City of
Santa Clara 31
How Do We Meet Our Need
Options to Consider for November 2024 Election
If one measure and priority is infrastructure:
• General Obligation Bond
If second measure is included for ongoing general purposes:
• Library/Community Services Parcel Tax
• Documentary Transfer Tax
• Sales Tax
City of
Santa Clara 32
The Center of Whats Possibl
10/24/2023 Item 2
General Obligation (GO) Bond
Key Features
• Used for long-term capital project financing
• Requires two-thirds supermajority vote
Swim Center Boiler
• One-time revenue, upfront
• Secured by levying ad valorem property taxes in
addition to the 1% general ad valorem property tax
Fire Training Tower
City of
33 Santa Clara
General Obligation (GO) Bond
Purpose Tax Type Votes Revenue Potential Revenue Basis
Capital N/A 2/3 majority Up to $600M Property
Benefits Drawbacks
• Stable revenue source • Funding not ongoing
• Can generate high dollar amounts • Higher voter threshold • Revenue is received upfront • Long term debt obligation (to : Intergenerational equity be paid by property owners)
Dedicated funding for critical capital
infrastructure
City of
34 Santa Clara
The Cantere What Possibe
10/24/2023 Item 2
Sample GO Bond Potential Components
$400 M GO Bond Measure
• Public Safety/Flood Protection (fire/police stations, stormwater, disaster preparedness)
• Community Facilities (parks, community centers, playgrounds, pools, open space, libraries)
• Streets/Transportation (pavement; traffic, pedestrian, and bicycle safety; ADA improvements)
• Sustainability (bicycle lanes, green building upgrades, solar, LED streetlights) For a bond issuance of $400 million, assuming a 30-year amortization, the estimated annual cost would be 26 cents per $1,000 of assessed value. The average assessed value of single- family residence and/or condos in Santa Clara is $655,000 resulting in a cost of approximately $14.00 per month.
City of 35
Santa Clara
Library / Community Parcel Tax
Key Features
• Could be used for operations and programs or infrastructure • Provide stable revenue stream to support consistent service levels in tough economic times and/or enhance services in good economic times • Ongoing or fixed term
• Levied on property owner's property tax bill - as a fixed amount or based on square footage (land or building)
City of
/ Santa Clara 36
The Center of What's Possible
• 10/24/2023 Item 2
Library / Community Parcel Tax
Purpose Tax Type Votes Revenue Potential Revenue Basis
Library/Community Special 2/3 majority Varies Property
Benefits Drawbacks
• Stable revenue source • Higher voter threshold
• Diversifies revenue base • Specied narov scumust be
• Can be ongoing funding
• Can be used to address both Does not provide sufficier Operating and Capital needs unds upfront for infrastructur City of
Santa Clara 37
Library / Community Parcel Tax
• Dedicated to library and/or parks
• Various options to structure parcel tax
- flat tax per parcel
- tax based on land size
- tax based on building size
- combined structure (example: per unit rate for single family residence/multi-family residence; per acre for commercial/industrial)
Flat rate of $50 per parcel per year would generate approx. $1.5 million annually to restore and maintain service levels at libraries and community centers City of 38
Santa Clara
The Center of What's Fossible
10/24/2023 Item 2
Sales Tax
ity of Santa Clara Sales Ta
reakdow Rate
Key Features CA Base State Rate 7.250%
Exempt from Cap 0.625%
• Can be used for any purpose County (Included in Cap)* 1.250% • 2% cap for county/city district taxes (certain items are exempt); Current Santa Clara Sales Tax 9.125% City has a 0.25% additional capacity
Total Included Under 2% Cap* 1.250%
• District sales taxes applied based on destination of the goods/location of the customer versus regular sales tax that is Remaining Available for Increase 0.250% applied based on point of sale
• Santa Clara is lower than Campbell, Los Gatos, Milpitas, San Jose whose sales tax is above the base countywide level
Increase of 1/8th of a cent to 9.250% increases revenues by approximately $6 million Increase of 1/4th of a cent to 9.375% increases revenues by approximately $12 million City of
Santa Clara 39
the Cantere Wasts Possible
Sales Tax
Purpose Tax Type Votes Revenue Potential Revenue Basis
General General 50% + 1 $6M - 12M annually Consumer
Benefits Drawbacks
• Flexible use (can be used for any • Less stable revenue source; purpose; operating/capital sensitive to economic
• Broad tax base - visitor contributions fluctuations
• Lower voter threshold Regressive tax
• Can be ongoing revenue source Threshold limit
City of
Santa Clara 40
10/24/2023 Item 2
Documentary Transfer Tax
Key Features
• Can be used for any purpose
• Imposed on the transfer of the title of real property from one person (or entity) to another within the jurisdiction based on the property's sale price • Current County Transfer Tax is $1.10 for each $1,000 sale amount - City receives $0.55 and the County receives $0.55
• Charter Cities may increase the rate; however, County must receive $1.10 base rate • Current revenue of approximately $1.6 million
Increase of $3.30 (for a total tax of $4.40 for each $1,000) would generate $8 million annually City of
Santa Clara
41 Documentary Transfer Tax
Purpose Tax Type Votes Revenue Potential Revenue Basis
General General 50% + 1 $8M annually Property Transaction Benefits Drawbacks
• Flexible use (can be used for any • Less stable revenue source; purpose; operating/capital sensitive to economic
• Can be a form of non-resident fluctuations
taxation • Increase to real estate costs
• Lower voter threshold
• Ongoing revenue source
• 50% of Charter cities in County are
above base rate
City of
Santa Clara
The Center of What Roadbe 42
10/24/2023 Item 2
Revenue Options
Revenue Tax Votes Revenue Revenue
Option Purpose Type Required Potential Duration Basis
GO Bond Capital N/A 2/3 majority Up to $600M One-Time Property Parcel Tax Library/ Special 2/3 majority Varies Ongoing or Property Community Fixed Term
Sales Tax General General 50% + 1 $6M - 12M Ongoing or Consumer Purpose annually Fixed Term
Documentary General General 50% + 1 $8M annually Ongoing Property Transfer Tax Purpose Transaction
City of 43
Santa Clara
Other Options
Revenue Source
Requires General Voter Approval
Utility Tax (gas, telephone, cable)
Parking Fees/Tax (Tax requires voter approval)
Entertainment/Admissions Tax
Long-Term Cemetery Maintenance Tax
Business Tax (more specific groups)
Construction Taxes
Does Not Require General Voter Approval
City-wide Stormwater Assessment
Assessment Districts/Impact Fees/Public Art Fees
Cannabis Tax Implementation
City of
Santa Clara
The Center of What's Possible
10/24/2023 Item 2
Pending Legislative Considerations
Legislation Description Timeline
Assembly Constitutional Lowers the approval threshold for new special taxes and bonds for affordable November 2024 Amendment (ACA) 1 housing and public infrastructure from two-thirds majority to 55%. ballot Assembly Constitutional Requires ballot measures that increase voter approval requirements to also Likely November Amendment (ACA) 13 pass by the same threshold. 2024 ballot Taxpayer Protection and Expands definition of 'taxes' to include certain regulatory fees, broadening November 2024 Government application of tax approval requirements. For new or increased state taxes ballot Accountability Act currently enacted by two-thirds vote of Legislature, also requires statewide election and majority voter approval. Limits voters' ability to pass voter- proposed local special taxes by raising vote requirement to two-thirds.
Senate Bill 335 - County Authorizes the County of Santa Clara to impose a district sales tax increase of Sales Tax Thresholds up to 0.625% that, in combination with other district sales taxes, would exceed (May 2023) and the combined rate limit of 2%. (If the County brings forward a measure at the Passed Assembly max 0.625%, Santa Clara would be limited to a 0.25% sales tax increase. (Sept 2023) City of
Santa Clara
Next Steps & Timelines
City of
46 Santa Clara
The Center of hars Pessick
10/24/2023 Item 2
Next Steps
• Retain consultant to conduct initial voter research
• Identify priorities of unfunded needs
• Develop educational campaign to communicate need for a new approach to CIP funding
• Based on voter research, determine viability of revenue options • Following completion of voter research in early 2024, seek Council direction on potential revenue measures for November 2024 ballot
City of
Santa Clara 47
The Center of What's Possible
Estimated Timeline for Ballot Measure
Tentative Actions Tentative Date
Council Study Session on Unfunded Needs & Revenue Options Oct 2023 Consultant performs voter research on community interest/potential measures Jan 2024 Review findings from Consultant Feb 2024
Conduct community outreach/engagement on City services/infrastructure Feb - May 2024 Follow-up voter research if needed May/June 2024
Evaluate options and make final determination June - July 2024 Submit final measure for Nov. 2024 ballot July 2024
Community mailer regarding what is on the ballot October 2024 Election Date November 2024
City of
48 Santa Clara
The Center What Foste
10/24/2023 Item 2
Recommendation
City of
49 Santa Clara
Recommendation
• Note and file study session report
• Provide general feedback on proposed work plan for the development of potential revenue measures for the November 2024 ballot
City of
Santa Clara 50
The Cantere what obe
"10/24/2023 Item 2
Council Feedback
City of
51 Santa Clara