RESPONSE TO COUNCIL QUESTION
RE: January 27, 2026 AGENDA
Item 4 26-15610: Silicon Valley Power Bi-Annual Update
Question 1: Data centers now account for roughly 60 percent of SVP load and about $41M annually to the General Fund. Can staff provide a transparent breakdown of how this revenue has been reinvested in resident priorities over the past two to three years?
Response: All funds transferred from SVP to the General Fund support all City services that our residents and businesses receive including, but not limited to, police and fire response, parks and community services, libraries, street, right of way and traffic safety. Without this revenue stream, significant reductions to City services would be necessary to offset this revenue transfer to the General Fund.
Question 2: Can SVP consider dedicating a defined portion of data center-generated revenue to a climate or energy efficiency fund that provides direct, visible benefits to residential customers? This would be a great marketing campaign.
Response: All customer pay into the Public Goods Charge as mandated by the State of California. The Public Benefits Charge is a state required surcharge imposed on all sales of electricity and electrical services. It is used to fund public goods research, development, and demonstration, as well as, energy efficiency activities, and low income assistance programs. The surcharge is equal to the sum of the Customer Charge, Demand Charge, and Energy Charge, including adjustment for Power Factor and Primary Voltage, times 0.0285. Money collected is used per council defined resolution per the customer class that paid – residential and commercial & industrial.
If SVP revenue (net-the General Fund transfer) is desired to be used for climate or energy efficiency funding for residential customers, charging data centers to pay for such programs, or to divert Public Goods Charge funds, would need to be reviewed by legal to determine proposition 26 implications.
If any portion of the General Fund transfer from SVP is used for climate or energy efficiency funding for residential customers, such a decision is within the purview of the City Council.
Question 3: What portion of system expansion costs are funded by rate increases versus development fees or bonds, and what share of the recent cumulative 9 percent rate increase directly supports data center-related infrastructure? Technology Projects
Response: The three system expansion projects, KRS, NRS, and SRS total approximately $414 million.
These projects are funded 7.5% or $31m through Load Development Fees paid by our largest users and 93% or $383 million expected to be funded from bonds. We have issued the first tranche of bonds totaling $130 million. We expect to issue a second tranche/line of credit for the remaining bond portion of these projects. Once bonds are issued, the annual debt payments are funded through customer service charges paid for by all users including data centers.
The recent SVP rate increases covers the all of the additional costs of the utility including staff, natural resources, power purchases and capital infrastructure. Future rate increases are determined based on forecasts for all utility costs including what would be necessary to fund the annual debt payment of bonds once those are issued.
Question 4: What technology investments are currently reducing peak demand or optimizing existing capacity through smart grid tools or demand response, and what measurable capacity or cost savings 2 have resulted?
A. Response: SVP offers customer programs to data centers, large load and other customers to maximize energy efficiency thus reducing peak demand. These programs are available on our website for commercial customers. These measures are paid through the public goods charge on the customer’s bill as described above.
B. Typical data center energy efficiency measures
A. Adiabatic Precooling System
B. Airside Economizer Plant
C. Aisle Containment
D. Control System Update
E. Cooling Tower Media Replacement
F. Cooling Tower Replacement
G. CRAH Units Replacement
H. Direct Fluid Cooling System
I. Economizer Control System Update
J. High Efficiency Chillers
K. Rear Door Heat Exchangers
L. Temperature Sensors
M. VFD Implementation on CRAH Units
N. VFD Implementation on Water Pumps
O. Waterside Economizer Plant
P. Lighting Retrofits
Q. Advanced Lighting Controls
Energy Savings Claimed Per Year and Rebate Expenditures
See the attached spreadsheet for numbers. Note that the data center rebate program is performance- based and customers receive payments over 5 years. As new construction data centers ramp their load up, the savings from the efficiency measures also increases and we claim those incremental savings in our annual SB1037 report. SVP’s historical reports for program performance can be found on the California Municipal utilities Website at CMUA. We do not include previously achieved savings in the facility. The top table is what has already occurred and been paid. The bottom table are the projected energy savings and rebate payments over the remaining performance periods based on the ramp up schedules provided by the customers. This does not include any project that has not been pre-approved and is either in process (which has 5 payments remaining) or has been completed and has at least one payment already made.
This also excludes energy savings from projects we were unaware of prior to implementation. For example, one large data center who contacted us after construction will save an estimated 14 million kWh in first year energy savings over standard design but is not included in the totals because we were not made aware of the project until after the fact. This is not an isolated incident, as new construction data centers build as efficiently as practical to maximize the capacity we can provide to them. There is more opportunity in some of the legacy retrofit data centers than there is in new construction. We have found that data centers implement energy efficient cooling equipment that far exceeds code, so equipment that only meets code is no longer available on the market. Data centers are driving efficiency in their facilities more than Title 24.
C. Additionally, SVP is working on a pilot program, to launch this year, to reduce customer peak load and optimize grid availability through a smart grid solution. More details to come as we continue to develop the program.
Question 5: With constrained capacity and competing requests exceeding available supply, what 3 transparent framework is used to prioritize power allocation, and will that framework be shared publicly?
Response: SVP recognizes constrained capacity and competing requests exceeding available supply coming through multiple avenues. SVP is finalizing an updated procedure that provides the framework for SVP to prioritize power allocation, customer requirements, and roles and responsibilities of different City Departments. As part of this exercise, SVP will also provide a public facing procedure complete with flow charts that illustrate processes and requirements.
SVP expects to meet with different City Departments in Q2 2026.
Item 5 26-16870: Public Hearing: Action to Terminate Two Historic Property Preservation Agreements (Mills Act Contracts) at 1711 Main Street and 906 Monroe Street / 1341 Homestead Road
Question 1: I understand that property owners are required to maintain the historic nature of their properties if they have Mills Act. Once the Mills Act is voided (with penalties), what obligation do the owners have to maintain the historic nature. Can they tear down, drastically remodel or move the properties?
Response: A Mills Act is a contract between the City and the property owner to restore and preserve a qualified historic building by providing an incentive. This is a voluntary program for a property owner, and a contract is entered by the property owner submitting an application which provides economic relief through a tax incentive. The Mills Act encourages older properties to maintain and improve those buildings to keep the communities overall historic character. Currently, any property that is over 50 years and on the HRI is required to submit improvements through a permitting process, which may include a Historic Landmarks Commission review, CEQA and permit process.
Question 2: Can staff summarize the 2024–25 audit outcomes for all 132 properties, including noncompliance rates, cure periods granted, and how this compares to the 2017 audit? Why are only these 2 (1.5%) recommended for termination - are we saying there was an exceptionally high compliance rate of 98.5%?
Response: There are currently 132 properties in the City of Santa Clara with a Mills Act Contract. 130 properties completed the audit. Of the 130, 129 were found to be in compliance, with one out of compliance. A total of 96 properties were identified with expired 10-year plans. Separate from the audit process, staff will work with these property owners to prepare updated plans, which will be agendized in batches to the HLC.
During the 2017 audit, 14 properties either did not participate or were found to be out of compliance.
Previous liaison did not move forward with any terminations.
Question 3: 1711 Main Street Process
Were the owners informed their submission was inadequate and given a defined opportunity to cure, and are documentation standards clearly written or determined at staff discretion?
Response: Yes, staff responded to the owners email correspondence that the two building permits on record, Reroof in 2019 (File No. BLD2019-56460) and a new water heater installed in 2020, were insufficient for compliance with their 10-year plan per their Mills Act Agreement.
Question 4: 906 Monroe Bank-Owned Property
What specific bank entity was contacted for this property, and do we have a distinct protocol for bank- owned or foreclosed properties versus owner-occupied homes?
Response: Correspondence was mailed to the site address and the owner address on record with the County Assessor’s office; 906 & 1341 Homestead Road, Santa Clara, CA and 535 Middlefield Road, 4 118 Menlo Park, CA
Question 5: If a property comes into full compliance after termination, is reapplication for Mills Act eligibility allowed or is termination permanent?
Response: Once the Mills Act contract is terminated through a City Council Action, a new property owner may re-apply and go through the process to enter into a new contract.
Question 6: What alternatives to immediate termination were considered, and what message does bypassing graduated enforcement send to the broader pool of compliant property owners?
Response: The audit allows for multiple ways for a homeowner to provide compliance. The compliance includes providing photos, invoices, receipts or even a onsite inspection.
A Mills Act agreement is a contract that provides an incentive for property owners to maintain and preserve their property. Unfortunately in the case of 1711 Main Street the property appears to be in disrepair, and the property at 906 Monroe Street is owned by the bank. These are not typical cases.
Item 6 26-60: Action on Approval of (1) First Amendment to the City Manager Employment Agreement, and (2) Resolution Approving and Adopting the Updated Salary Plan that includes the Classification of City Manager
Question 1: In lieu of staff feedback on this evaluation, I want to better understand the structure of the CM's office. How many positions exist in the City Manager’s Office now- what is the number of dedicated staff and subsequent aggregate salary compared to positions and salary in 2022? How many positions have vacated (termination, retirement, other) in the CM office and otherwise since the current CM started and does turnover in that office compare to citywide averages?
Response: Staff is preparing a response to this question and will provide a follow-up response.
Question 2: In light of the deadline triggering the automatic 2 percent COLA, who (if not the CM) is responsible for bringing the item back to Council before that deadline, and does missing it result in both the COLA and the proposed merit increase being applied? This year we instituted that for both the CM and CA, but there is uncertainty about who is responsible for this agendized discussion and it's timeliness.
Response: Human Resources and the City Attorney’s Office will work with the City Council and any formed subcommittee as well as the City Manager and City Attorney to agendize discussions.
Question 3: How does the City ensure equitable treatment when executive compensation adjustments are discretionary while union employees must negotiate increases through formal bargaining processes?
Response: With the exception of the City Council, City Manager, City Attorney, City Clerk, and Police Chief, all City employees are represented by a bargaining unit. Management employees (Units 9, 9A, and 9B), up to and including Directors and Assistant City Managers, are represented and receive cost- of-living adjustments (COLAs) through the collective bargaining process. In addition, management employees are eligible for merit-based increases within their approved salary ranges. For calendar year 2025, merit increases are capped at 4% and are tied to documented performance evaluations.
Classified (non-management) employees also receive negotiated COLAs through collective bargaining.
Their compensation structure is primarily governed by a step system rather than discretionary merit increases. Employees receive automatic annual step increases of 5% through Step 5, followed by 2.5% increases at Steps 6 and 7, which are contingent upon years of service.
For Council appointees, specifically the City Manager and City Attorney, any salary adjustments 5 approved by the City Council would generally follow a performance-based evaluation process that is consistent with the merit framework applied to unclassified employees. These adjustments are neither automatic nor discretionary.
These compensation systems are designed to ensure fairness and transparency while recognizing the differences that apply across these various employee groups.
Question 4: What specific changes are being made to the City Manager performance evaluation process, why were they necessary, and will similar standards apply to all employees?
Response: Specific changes to the City Manager performance evaluation process are within the purview of the City Council and any formed subcommittee. Such changes would apply only to the City Manager as other policies govern the performance evaluation process for unclassified and classified employees, and would be subject to the meet and confer process. Human Resources and the City Attorney’s Office would work with the City Council and any formed subcommittee to implement the performance evaluation process they decide upon.
Question 5: Given prior deficit warnings, how does the expansion of executive staffing align with fiscal discipline, particularly alongside vacancies and recruitment challenges in Police and Fire?
Response: The expansion of executive staffing has been limited, targeted, and aligned with the City’s fiscal oversight and operational priorities as part of the proposed biannual operating budget, which is reviewed and approved by the City Council.
For FY 2026–27, executive staffing additions are narrowly scoped and purpose-driven. An 18-month, limited-term Assistant City Manager position was added to support the operational demands associated with hosting major international events, including the Super Bowl and FIFA World Cup activities. This position is temporary and will sunset at the end of calendar year 2026. In addition, a Deputy City Manager (Program/Project Manager) was established to oversee voter-approved bond projects, ensuring accountability, schedule adherence, and fiscal control over large-scale capital investments. A Director of Economic Development position was also added to advance economic growth and sustainability efforts. These executive roles were added to address specific, time-bound or voter- mandated responsibilities and were evaluated within the context of overall budget constraints and long- term financial planning.
Separately, the City continues to prioritize recruitment and retention across the organization, including in Police and Fire. Active recruitment efforts are underway, and vacancy rates have been reduced.
Currently, the Fire sworn vacancy rate is 7.7%, and the Police sworn vacancy rate is 7.2%. Addressing public safety staffing remains a core operational focus.
Overall, the City’s approach balances fiscal discipline with the need for appropriate leadership and oversight to manage complex initiatives, deliver voter-approved projects, and maintain essential public safety services.
Fiscal Year Energy Savings Claimed Rebates Paid
FY 2020-2021 7,524,089 916,782.83$ FY 2021-2022 17,998,259 756,172.85$ FY 2022-2023 12,454,950 664,950.47$ FY 2023-2024 13,103,972 517,064.49$ FY 2024-2025 2,894,737 415,029.98$ Projected savings and rebate payments for future performance periods:
Fiscal Year Projected Energy Savings Projected Rebate Payments FY 2025-2026 8,546,726 371,191.08$
FY 2026-2027 11,564,941 378,315.45$ FY 2027-2028 19,150,491 573,615.00$ FY 2028-2029 28,606,451 858,194.00$ FY 2029-2030 38,092,411 1,142,772.00$
Note these are projects already implemented under the performance rebate or pre-approved and in process. It does not include projects not yet pre-approved.