HomeMy WebLinkAboutStaff Report 2507-4970CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, August 11, 2025
Council Chambers & Hybrid
5:30 PM
Agenda Item
6.Adoption of a Resolution Establishing Fiscal Year 2026 Property Tax Levy for General
Obligation Bonds (Measure N Libraries)
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: August 11, 2025
Report #:2507-4970
TITLE
Adoption of a Resolution Establishing Fiscal Year 2026 Property Tax Levy for General Obligation
Bonds (Measure N Libraries))
RECOMMENDATION
Staff recommends that the City Council approve a resolution approving the establishment of
the Fiscal Year 2026 property tax levy of $7.45 per $100,000 in Assessed Value for the secured
and utility tax roll and $7.61 per $100,000 in AV for the unsecured tax roll for the City of Palo
Alto's Measure N General Obligation Bond Library Bonds.
EXECUTIVE SUMMARY
In 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
(libraries). 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 the
property taxes.
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 and Moody's awarded their highest credit ratings, Triple A, to both series of Bonds which
was affirmed by Standard and Poor’s in May 2022 and Moody’s in December 2024.
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). 1In 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)2. 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.
3. The Series 2010A was refinanced as a tax-exempt bonds and Series 2013A was partially
refinanced as taxable bonds. The tax reform bill passed by Congress and signed into law on
December 22, 2017 prohibits the issuance of tax-exempt advance refunding bonds during the
(ten-year) call protection period. The call protection period had passed on the Series 2010A
Bonds, but it had not passed for the Series 2013A Bonds. The portions of the Series 2013A
bonds or $2.1 million in principal, that had realized savings were refinance. In total, net present
value savings of $4.5 million or 10.6 percent were realized. The cash savings is $6.4 million and
average annual debt service savings over 18 years is $356 thousand. There are three General
Obligation Bonds outstanding; the portion of the tax-exempt Series 2013A bonds that were not
refinanced, the tax-exempt Series 2022A bonds that refinanced the Series 2010A bonds, and
the taxable Series 2022B bonds that partially refinanced the Series 2013A bonds. Standard and
Poor's affirmed their highest credit ratings, Triple A, to both the issuer or City of Palo Alto’s
General Fund credit rating and the long-term rating on the City’s General Obligation Bonds
outstanding in May 2022.
ANALYSIS
1 City Council, March 21, 2016, CMR 6632: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2016/6632-mini-packet.pdf
2 City Council, June 6, 2016, CMR 6993: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2016/6993.pdf
3 City Council, May 2, 2022, CMR 13438: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/agendas-minutes/city-council-agendas-minutes/2022/20220502/20220502pccsmamended-linked.pdf
The assessment rate for FY 2026 is decreasing for both the secured and unsecured property
taxes. The rate decreases are attributable to the rise in the Secured AV for properties
throughout Palo Alto by 5.0 percent, an increase of $2.5 billion. In addition, the rise in AV
during FY 2025, due to property sales and new construction, resulted in excess collections
which further reduced the FY 2026 annual assessment.
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
Attachment A
Not Yet Approved
1
Resolution No.
Resolution of the Council of the City of Palo Alto Establishing Fiscal Year
2026 Property Tax Levy of $7.45 Per $100,000 of Secured and $7.61 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. In June 2022, the Series 2010A was refinanced with a tax‐exempt Series
2022A and the Series 2013A was partially refinanced with a taxable Series 2022B. As a
result, there are three general obligation bonds series outstanding, the Series 2013A
portion that wasn’t refinanced and the refinanced Series 2022A and 2022B bonds.
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 2025 in the amount of $0.00745 per $100 in assessed value for the secured and
utility tax roll and $0.00761 per $100 in assessed value for the unsecured tax roll based
Attachment A
Not Yet Approved
2
on the calculations set forth in the attached Exhibit "A".
SECTION 2. The City’s Director of Administrative Services shall cause a certified
copy of this Resolution to be delivered to the Auditor of the County of Santa Clara for entry
in the assessment book of the respective sums in dollars and cents, to be paid as
established by this Resolution.
SECTION 3. The Council finds that this is not a project under the California
Environmental Quality Act and, therefore, no environmental impact assessment is
necessary.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Administrative Services
A) Assessed Valuations (AV
1 ) 2025-26 Taxable Secured Assessed Valuation (AV) 51,809,035,097$
2 ) 2025-26 Taxable Unsecured A 2,365,273,961
3 ) Less: Estimated Delinquenc 0.00% -
4 ) Net Taxable Unsecured AV 2,365,273,961$
5 ) Total Assessed Valuation (AV 54,174,309,05$
B) Tax Levy Requiremen
5 ) 2026 Calendar Year Debt Service Payments
2013 (Tax-Exempt) GO Bonds - February 1,2026 211,425.00$
2013 (Tax-Exempt) GO Bonds - August 1, 2026 211,425.00 422,850.00
6 ) 2022A (Tax-Exempt) GO Bonds - February 1,2026 762,625.00$
7 ) 2022A (Tax-Exempt) GO Bonds - August 1, 2026 2,282,625.00 3,045,250.00
8 ) 2022B (Taxable) GO Bonds - February 1,2026 32,300.00$
9 ) 2022B (Taxable) GO Bonds - August 1, 2026 552,300.00 584,600.00
10 ) Total Calendar Year 2026 Debt Service Payments 4,052,700.00
11 ) Excess Funds on Hand Applied Toward Debt Service (25,000.00)
12 ) Sub-total 4,027,700.00
13 ) Santa Clara County Administration Fee (0.25% of Principal & Interest) 10,069.25
14 )Total 2025-26 Annual Debt Service Requirement 4,037,769.25
ecure an nsecure ax a e
15 )2025-26 Unsecured Tax Rate per $100 of Unsecured AV (Prior Year's Secured Tax Rate) 0.00761$
16 )2025-26 Unsecured Tax Rate per $100,000 of Unsecured AV 7.61$
17 ) 2025-26 Estimated Revenue from Unsecured AV (line 4 divide by 100 times by line 15) 179,997.35$
18 ) 2025-26 Estimated Revenue from Secured AV (line 14 minus line 17 3,857,771.9
19 ) Total 2025-26 Annual Debt Service Requirement 4,037,769.25$
20 )2025-26 Secured Tax Rate per $100 of Secured AV (line 18 divided by line 1 times 100) 0.00745$
21 )2025-26 Secured Tax Rate per $100,000 of Secured AV (line 18 divided by line 1 times 100,000) 7.45$
Exhibit
City of Palo Alto
General Obligation (GO) Bonds, Election of 2008, Series 2013, 2022A and 2022B
Tax Rate Calculation Based on 2025-26 Assessed Values