Evaluation of New Revenue
Strategies to Fund New and
Increasing Service Demands and/or
Unfunded Capital Investments
Matt Paulin, Director of Finance
2City of Sunnyvale – Topic/Abbreviated Title – Month Year • Demand for both existing and new city services continues to increase • Aged infrastructure requires considerable investment
Fire Stations/Corporation Yard/Main Library
• Increasing regulatory requirements
• City requires a diversified and stable revenue base to support these needs
• Best options are those that are locally-controlled and can be readily implemented
Background
3City of Sunnyvale – Topic/Abbreviated Title – Month Year Partially Funded/Unfunded Projects
• Traffic and Transportation
Traffic Signals Replacement
Stevens Creek Trail
Grade Separations
• Administrative Facilities
Main Library Renovation or Replacement
Corporation Yard
Civic Center Phase 3 – Public Safety Building
• Stormwater Operations & Capital
4City of Sunnyvale – Topic/Abbreviated Title – Month Year Examples of Potential Revenues
• Real Property Transfer Tax
• Transient Occupancy Tax
• Sales Tax
• Parcel Tax
• Impact Fees
• Business License Tax
• Assessment Districts
• Special Taxes
• Fees
FY 2025/26 Revenues by Source
5City of Sunnyvale – Topic/Abbreviated Title – Month Year Approval Process
• Approval depends on the type of
revenue:
Staff
City Council
Voters
• Vote threshold (majority or 2/3)
depends on the type of measure
6City of Sunnyvale – Topic/Abbreviated Title – Month Year • User Fees
Council Policy authorizes Department
Director to set user fees
Example: Recreation Resident Fees vs.
Non-Resident Fees
• Under $200 – Non-Residents Pay a
25% Differential
• $200 and Above – Flat Rate of $50
• Total FY 2023/24 Revenue from User
fees was $4.7M
Approval Process – Staff
7City of Sunnyvale – Topic/Abbreviated Title – Month Year • Development Impact Fees
Park Dedication (FY 2024/25 = $7.3M)
Traffic Impact (FY 2024/25 = $2.6M)
Housing Mitigation (FY 2024/25 = $11.6M)
Community Benefits
• Franchise Fees
PG&E
Telecom
Solid Waste
Total Franchise Fees (FY 2024/25 = $8.4M)
Approval Process – Council
8City of Sunnyvale – Topic/Abbreviated Title – Month Year • Business License Tax (FY 2024/25 = $2.0M)
• Transient Occupancy Tax (FY2024/25 = $20.2M)
• Real Property Transfer Tax (FY 2024/25 = $1.1M)
• Sales Tax (FY 2024/25 = $40.8M)
• Construction Tax (FY 2024/25 = $3.0M)
• Parcel Tax
• Bond Measures
• Assessment Districts
Approval Process - Voters
9City of Sunnyvale – Topic/Abbreviated Title – Month Year • Real Property Transfer Tax
• Transient Occupancy Tax
• Sales Tax
• Stormwater Fee
• General Obligation Bond
Suggested Options for Consideration
10City of Sunnyvale – Topic/Abbreviated Title – Month Year • Last examined in 2024
• Existing Rate $1.10 per $1,000 sales price ($0.55 City, $0.55 County) • Charter cities can increase tax, but the existing County rate will still be assessed, and the City will lose $0.55 portion
• Santa Clara County Cities with higher RPTT:
Mountain View and Palo Alto - $4.40 per $1,000 ($3.30 City, $1.10 County) • MV added a $15/$1,000 tax on sales over $6M in 2024 (Measure G) San Jose – Tiered structure starting from $7.5 per $1,000 to $15 per $1,000, currently exempting under $2.3M
• Potential revenue increase depends on structure and is offset by loss of County rate • Polled well, but revenue will vary with real estate market/sales volume Real Property Transfer Tax
11City of Sunnyvale – Topic/Abbreviated Title – Month Year City Rate
Campbell 12%
Cupertino 12%
Gilroy 9%
Los Altos 14%
Los Gatos 12%
Milpitas 14%
Morgan Hill 11%
Mountain View 10%
Palo Alto 14%
San Jose 10%
Santa Clara 13.5% (effective January 2025)
Saratoga 10%
Sunnyvale 12.5% (effective January 2019)
County Average:
11.85%
1% increase = about
$1.65M revenue per
year
Transient Occupancy Tax
12City of Sunnyvale – Topic/Abbreviated Title – Month Year Sales Tax
• Existing Rate: 9.125%
• The City has .25% available to raise
due to statutory cap
• .25% would result in approximately
$6.4M annually
• County has a 5/8 cent measure on
November 2025 ballot, but does not
count against cap
• SB 63 ½ cent, 2026 ballot
13City of Sunnyvale – Topic/Abbreviated Title – Month Year • The City does not have a dedicated funding mechanism to support the permit requirements that drive stormwater operations and maintenance, regulatory compliance needs, or capital projects.
• While trash-related portions of the stormwater permit requirements are funded by the Solid Waste Fund, the majority are funded by the General Fund. • Staff is working with a consultant to evaluate options for a dedicated funding source and define program needs. This was prioritized in the FY 2020/21 Budget (Project 835470) and is nearing completion.
• The consultant will be looking at a property-related fee option that will require a Prop 218 hearing followed by a ballot proceeding.
Stormwater Fee
14City of Sunnyvale – Topic/Abbreviated Title – Month Year • Attempted in 2007 for $108M. Received 59.3% yes votes and did not pass.
• Attempted in 2024 for $290M.
Because Proposition 5 did not concurrently pass in 2024, required 2/3 of votes to pass (Measure E received 59.3% yes votes and did not pass) • Provide immediate funds for infrastructure needs beyond the library • Difficult to overcome 2/3 requirement
• Future measure could be more broadly-based to include other infrastructure (like fire stations) and/or with a different library concept.
General Obligation (GO) Bonds
15City of Sunnyvale – Topic/Abbreviated Title – Month Year • General Tax
50% Plus 1 Voter Approval
• RPTT, Sales Tax, Transient Occupancy Tax
• Special Tax
2/3 Voter Approval
• Parcel Tax, Bond Measure
• Competing Measures
• Statewide Initiatives
• Revenue Potential vs. Probability of Success
Voter Approval – Considerations
16City of Sunnyvale – Topic/Abbreviated Title – Month Year Revenue Type Threshold # of Jurisdictions # Passed % Passed Sales Tax 50%+1 95 81 85%
TOT 50%+1 28 23 82%
RPTT 50%+1 4 2 50%
GO Bonds 2/3 18 (non school) 9 50%
Parcel Tax 2/3 42 28 67%
Ballot Measure Statistics Statewide
2024 General (Presidential) Election
2022 General (Midterm) Election
Revenue Type Threshold # of Jurisdictions # Passed % Passed Sales Tax 50%+1 42 32 76%
TOT 50%+1 20 14 70%
RPTT 50%+1 6 4 67%
GO Bonds 2/3 6 (non school) 3 50%
Parcel Tax 2/3 29 14 48%
Source: CaliforniaCityFinance.com
17City of Sunnyvale – Topic/Abbreviated Title – Month Year Council Discussion/Direction
• Which revenue types would Council be interested in staff pursuing further?
• Timing considerations?
• If sales tax is among them, is Council interested in potentially increasing Sunnyvale's local limit to be able to generate more than the estimated $6.4M per year that a 0.25% tax would generate? • What are key spending priorities for revenue measures (as this may influence revenue types most conducive)?