HomeMy WebLinkAboutStaff Report 2512-5700CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, August 10, 2026
Council Chambers & Hybrid
5:30 PM
Agenda Item
5.Adoption of a Resolution Establishing the FY 2027 Property Tax Levy for City of Palo Alto
General Obligation Bonds (2008 Measure N Library Projects); CEQA Status: Not a Project
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: August 10, 2026
Report #:2512-5700
TITLE
Adoption of a Resolution Establishing the FY 2027 Property Tax Levy for City of Palo Alto
General Obligation Bonds (2008 Measure N Library Projects); CEQA Status: Not a Project
RECOMMENDATION
Staff recommends that the City Council approve a resolution approving the establishment of
the Fiscal Year 2027 property tax levy of $6.92 per $100,000 in Assessed Value for the secured
and utility tax roll and $7.45 per $100,000 in Assessed Value for the unsecured tax roll for the
City of Palo Alto’s Measure N General Obligation Library Bonds
BACKGROUND
On November 4, 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 to the Mitchell Park, Downtown, and Rinconada 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 design and construction costs. Standard & Poor’s (S&P) and Moody’s
awarded their highest credit ratings, Triple A, to both series of Bonds and these ratings were
affirmed by S&P in May, 2022 and Moody’s in November, 2022. 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 property taxes.
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
savings1. In addition, bond premium of $3.1 million could be used to redeem and/or defease
bonds.
1 Finance Committee, March 1, 2016:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=63617&dbid=0&repo=PaloAlto
On June 6, 2016, Council authorized the use of $6.1 million of the Series 2010A and 2013A
Bonds to defease and/or retire a portion of outstanding bonds and to pay associated
redemption costs3. 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.
4, Council approved the refinancing of the Series 2010A and 2013A Bonds.
Respectively, the outstanding principal of the 2010A Bonds and the 2013A Bonds was $40.6
million and $13.6 million. The call protection period for the Series 2010A Bonds had lapsed and
were refinanced with tax-exempt bonds (Series 2022A) while the call protection period for the
Series 2013A Bonds had not lapsed and therefore were partially refinanced as taxable bonds
(Series 2022B). Portions of the Series 2013A bonds, or $2.1 million in principal, that had realized
savings were refinanced. In total, net present value savings of $4.5 million or 10.6% were
realized. The cash savings was $6.4 million and the average annual debt service savings over 18
years is $356 thousand.
Table 1: General Obligation Bonds Outstanding (in millions)
Bond Issuance
Principal Outstanding
as of 6/30/2026 FY 2027 Debt Service
Totals $42.8 $4.1
3 City Council, June 6, 2016:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=79555&dbid=0&repo=PaloAlto&cr=1
4 City Council, May 2, 2022:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=81684&dbid=0&repo=PaloAlto&searchid=b673baf8
-cb40-4946-967b-842961e1f7fd&cr=1
ANALYSIS
Debt service payments of 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 $0.00692 per $100 or $6.92 per
$100,000 in assessed value for the secured tax roll; and $0.00745 per $100 or $7.45 per
$100,000 in assessed value for the unsecured tax roll. In comparison, prior year’s secured and
unsecured tax levy was $7.45 and $7.61 respectively, per $100,000 of assessed value.
The assessment rate for FY 2027 decreased for both the secured and unsecured property taxes.
The rate decreases are attributable to the rise in the secured assessed value for properties
throughout Palo Alto by 5.47%, an increase of $3.0 billion.
For unsecured property tax, per the County of Santa Clara’s methodology, the prior year
secured tax rate becomes the current year unsecured tax rate. As a result the unsecured rate
won’t benefit from the current year’s assessed value increase until FY 2028. However,
unsecured rate did benefit from the increase in secured assessed value that occurred in FY
2026.
As of the end of July 2026, the average sales price for a single-family household is $3.6 million.
Based on this, the annual assessment for FY 2027 is estimated to be $249 on their property tax
bill. In comparison, in FY 2026, a $3.6 million single-family home had an assessment of $268.
FY 2027 Debt service for the three outstanding Bonds totals $4.1 million. The attached
resolution will result in ad valorem tax levy revenue totaling $4.0 million, with the difference
attributable to available funds on hand.
Staff works with the County of Santa Clara, who provides the property assessed value for the
coming fiscal year that is used to calculate the property tax levy to pay debt service of these
Bonds. Measure N was approved by Palo Alto voters in 2008 with 69% support. Expenditures of
bond proceeds were monitored by the Library Bond Oversight Committee, which was
decommissioned in 2016.
Council action on this item is not a project as defined by the California Environmental Quality
Act because approval of the Measure N property tax levy is a government funding mechanisms
or fiscal activity which does not involve any commitment to any specific project which may
result in a potentially significant physical impact on the environment. CEQA Guidelines section
15378(b)(4).
ATTACHMENTS
Attachment A: Resolution Establishing the FY 2027 Property Tax Levy
APPROVED BY:
Lauren Lai, Administrative Services Director
1
ATTACHMENT A
NOT YET APPROVED
Resolution No.
Resolution of the Council of the City of Palo Alto Establishing Fiscal Year
2027 Property Tax Levy of $6.92 Per $100,000 of Secured and $7.45 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 2027 in the amount of $0.00692 per $100 in assessed value for the secured and
utility tax roll and $0.00745 per $100 in assessed value for the unsecured tax roll based
2
ATTACHMENT A
NOT YET APPROVED
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 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
City of Palo Alto
General Obligation Bonds, Election of 2008, Series 2010
Tax Rate Calculation Based on Assessed Values
A) Assessed Valuations (AV)
1 ) Taxable Secured Assessed Valuation (AV) $54,387,073,467.00
2 ) Taxable Unsecured AV $2,691,820,156.00
3 ) Less: Estimated Delinquency 0.65% ($17,496,831.01)
4 ) Net Taxable Unsecured AV $2,674,323,324.99
B) Tax Levy Requirement
5 ) 2027 Calendar Year Debt Service Payments
2013 (Tax-Exempt) GO Bonds - February 1,2027 $211,425.00
2013 (Tax-Exempt) GO Bonds - August 1, 2027 $211,425.00 $422,850.00
2022A (Tax-Exempt) GO Bonds - February 1,2027 $724,625.00
2022A (Tax-Exempt) GO Bonds - August 1, 2027 $2,324,625.00 $3,049,250.00
2022B (Taxable) GO Bonds - February 1,2027 $21,900.00
2022B (Taxable) GO Bonds - August 1, 2027 $556,900.00 $578,800.00
Total Calendar Year 2027 Debt Service Payments $4,050,900.00
6 ) Excess Funds on Hand Applied Toward Debt Service ($100,000.00)
7 ) Sub-total $3,950,900.00
8 ) Santa Clara County Administration Fee (0.25% of Principal & Interest) & Consultant Fees $13,377.25
9 )Total Annual Debt Service Requirement $3,964,277.25
C) Secured and Unsecured Tax Rate
10 ) Unsecured Tax Rate per $100 of Unsecured AV (Prior Year's Secured Tax Rate) 0.007450$
11 ) Unsecured Tax Rate per $100,000 of Unsecured AV 7.45$
12 ) Estimated Revenue from Unsecured AV (line 4 divide by 100 times by line 12) 199,237.09$
13 ) Estimated Revenue from Secured AV (line 11 minus line 13) 3,765,040.16
14 ) Total Annual Debt Service Requirement 3,964,277.25$
15 ) Secured Tax Rate per $100 of Secured AV (line 14 divided by line 1*100) 0.00692$
16 ) Secured Tax Rate per $100,000 of Secured AV (line 14 divided by line 1 times 100,000) 6.92$
Exhibit A