HomeMy WebLinkAboutStaff Report 12390
City of Palo Alto (ID # 12390)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 8/9/2021
City of Palo Alto Page 1
Summary Title: Establishing Library GO Bond Tax Levy for FY 2022
Title: Adoption of a Resolution Establishing Fiscal Year (FY) 2022 Secured and
Unsecured Property Tax Levy for the City of Palo Alto’s General Obligation
Bond Indebtedness (2008 Measure N - Library General Obligation Bonds)
From: City Manager
Lead Department: Administrative Services
Recommendation
Adopt a resolution (Attachments A) approving the establishment of the Fiscal Year (FY) 2022
property tax levy of $9.26 per $100,000 in Assessed Value (AV) for the secured and utility tax
roll and $9.56 per $100,000 in AV for the unsecured tax roll for the City of Palo Alto's Measure
N General Obligation (GO) Bond Library Bonds (First and Second Series).
Background
On November 4, 2008, City 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 (formerly Main) 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 the design and construction costs. Both Standard and
Poor's (S&P) and Moody's awarded their highest credit ratings, Triple A, to both series of Bonds
which they affirmed by Standard and Poor’s and Moody’s in March 2021.
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
savings (CMR: 6632). In addition, bond premium of $3.1 million could be used to redeem
and/or defease bonds. On June 6, 2016, Council authorized the use of $6.1 million of the Series
2010A & 2013A General Obligation (Measure N) Bonds to defease and/or retire a portion of
outstanding bonds and to pay associated redemption costs (CMR: 6993). 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.
As of July 1, 2021, principal amount of $57 million is outstanding on the Bonds.
City of Palo Alto Page 2
Discussion
Debt service payments on 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 $0.00926 per $100 or $9.26 per
$100,000 in AV for the secured tax roll; and $0.00956 per $100 or $9.56 per $100,000 in AV for
the unsecured tax roll. In comparison, prior year’s secured and unsecured tax levy was $9.56
and $10.62 respectively, per $100,000 of AV.
The assessment rate for FY 2022 is decreasing for both the secured and unsecured property
taxes. The rate decreases are attributable to the rise in the AV for properties throughout Palo
Alto by 3.8 percent, an increase of $1.6 billion. In addition, the rise in AV during FY 2022, due to
property sales and new construction, resulted in excess collections which further reduced the
FY 2022 annual assessment.
As for the unsecured property taxes, per the County of Santa Clara’s methodology, the prior
year’s secured tax rate becomes this year’s unsecured tax rate; as a result, this rate won’t
benefit from the coming year’s Assessed Value increase until FY 2023.
With the new assessment for FY 2022, a house with an assessed value of $1.0 million, for
example, would see an annual assessment of $92.60 on their property tax bill. In comparison,
in FY 2021, a $1.0 million home had an assessment of $95.60.
Resource Impact
The bond issuances result in a 2022 calendar year debt service expenditure of approximately
$4.5 million and Council approval of the attached resolution will result in ad valorem tax levy
revenue of $4.1 million with the $0.4 million difference attributable to available funds on hand.
Again, secured and unsecured property owners will see a levy of $9.26 and $9.56, respectively,
per $100,000 of AV on their FY 2022 property tax statement.
Stakeholder Engagement
This levy was reviewed and approved the voters in Palo Alto as part of the November 2008
election.
Environmental Review
There is no environmental review required for this report.
Attachments:
• Attachment A: Resolution Establishing FY 2022 Property Tax Levy with Exhibit A
Attachment A
Not Yet Approved
1
Resolution No.
Resolution of the Council of the City of Palo Alto Establishing Fiscal Year
2022 Property Tax Levy of $9.26 Per $100,000 of Secured and $9.56 Per
$100,000 of Unsecured Assessed Valuations for the City’s General
Obligation Bond Indebtedness
(Measure N Library Projects)
R E C I T A L S
A. At the City of Palo Alto’s (“City”) general election held on November 4, 2008,
more than two‐thirds of voters approved Measure N, authorizing the issuance of general
obligation bonds in the amount not to exceed $76,000,000 (the “Authorization”) to fund
construction of a new Mitchell Park Library and Community center and renovation and
improvements to Downtown and Main libraries.
B. Pursuant to the Authorization, the City issued two series (Series 2010A and
2013A) of general obligation bonds in June 2010 and June 2013 that yielded $75.8 million
for project needs.
C. The City is obligated to levy ad valorem taxes on all property within the City
subject to taxation by the City, without limitation on rate or amount (except with respect
to certain personal property which is taxed at limited rates), for the payment of the debt
service on the Bonds.
D. The City is obligated to direct the County of Santa Clara to collect such ad
valorem taxes in such amounts and at such times as is necessary to ensure the timely
payment of debt service on the Bonds.
E. The amount of the annual ad valorem tax levied by the City to repay the
Bonds is determined by the relationship between the assessed valuation of taxable
property in the City and the amount of debt service due on the bonds.
The Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. Pursuant to the Authorization, an ad valorem property tax is hereby
established to be levied on all land and improvements in the City of Palo Alto during Fiscal
Year 2022 in the amount of $0.00926 per $100 in assessed value for the secured and utility
tax roll and $0.00956 per $100 in assessed value for the unsecured tax roll based on the
calculations set forth in the attached Exhibit "A".
SECTION 2. The City’s Director of Administrative Services shall cause a certified
copy of this Resolution to be delivered to the Auditor of the County of Santa Clara for entry
in the assessment book of the respective sums in dollars and cents, to be paid as
established by this Resolution.
Attachment A
Not Yet Approved
2
SECTION 3. The Council finds that this is not a project under the California
Environmental Quality Act and, therefore, no environmental impact assessment is
necessary.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Administrative Services
A) Assessed Valuations (AV)
1 ) 2021-22 Taxable Secured Assessed Valuation (AV) 41,750,869,968$
2 ) 2021-22 Taxable Unsecured AV 2,232,482,077$
3 ) Less: Estimated Delinquency 0.00% -$
4 ) Net Taxable Unsecured AV 2,232,482,077$
5 ) Total Assessed Valuation (AV)43,983,352,045$
B) Tax Levy Requirement
5 ) 2021-22 Debt Service Payments
6 ) 2010 GO Bonds - February 1,2022 962,846.88$
7 ) 2010 GO Bonds - August 1, 2022 2,412,846.88 3,375,694
8 ) 2013 GO Bonds - February 1,2022 304,225.00$
9 ) 2013 GO Bonds - August 1, 2022 789,225.00 1,093,450.00
10 ) Total Calendar Year 2022 Debt Service Payments 4,469,143.76
11 ) Excess Funds on Hand Applied Toward Debt Service (400,000.00)
12 ) Sub-total 4,069,143.76
13 ) Santa Clara County Administration Fee (0.25% of Principal & Interest) 10,172.86
14 )Total 2021-22 Annual Debt Service Requirement 4,079,316.62
C) Secured and Unsecured Tax Rate
15 )2021-22 Unsecured Tax Rate per $100 of Unsecured AV (Prior Year's Secured Tax Rate) 0.00956$
16 )2021-22 Unsecured Tax Rate per $100,000 of Unsecured AV 9.56$
17 ) 2021-22 Estimated Revenue from Unsecured AV (line 4 divide by 100 times by line 12) 213,425.29$
18 ) 2021-22 Estimated Revenue from Secured AV (line 11 minus line 13) 3,865,891.33
19 ) Total 2021-22 Annual Debt Service Requirement 4,079,316.62$
20 )2021-22 Secured Tax Rate per $100 of Secured AV (line 14 divided by line 1*100) 0.00926$
21 )2021-22 Secured Tax Rate per $100,000 of Secured AV (line 14 divided by line 1 times 100,000) 9.26$
Exhibit A
City of Palo Alto
General Obligation (GO) Bonds, Election of 2008, Series 2010 and 2013
Tax Rate Calculation Based on 2021-22 Assessed Values