REPORT TO COUNCIL AND SUNNYVALE FINANCING AUTHORITY
SUBJECT
Title
Annual City Council Public Hearing on FY 2025/26 Budget and Resource Allocation Plan and Establishment of Appropriations Limit and Sunnyvale Financing Authority Public Hearing on FY 2025/26 Budget
Report
BACKGROUND
The City Charter requires a Public Hearing be held prior to the adoption of the City’s budget and resource allocation plan.
Additionally, Article XIIIB of the California Constitution established appropriations limits on government agencies within California. Originally enacted by Proposition 4 in 1979, the appropriations limit creates a ceiling for the appropriations of tax proceeds that can be made by the state, school districts, and local governments in California. The limit uses 1978-79 as the “base” year and is adjusted annually for population growth and cost of living factors. The purpose of the appropriations limit is to preclude state and local governments from retaining excess revenues, which are required to be redistributed back to taxpayers and schools. To date, the City has not exceeded its appropriations limit in any year. Section 7910 of the Government Code requires that the City annually adopt an appropriations limit for the coming year. The supporting documentation for the establishment of the limit must be available for public review at least 15 days prior to the adoption of the appropriations limit resolution. The required material that provides detailed information on the City’s appropriations limit has been available for public review since May 9, 2025, and is included in Volume I of the FY 2025/26 Recommended Budget. It is also provided as Attachment 1 to this report.
The FY 2025/26 Recommended Budget includes the annual budget for the Sunnyvale Financing Authority as well. The only appropriation for the Financing Authority is the annual debt service payment for the new Civic Center. The governing board of the Joint Powers Agency, the Sunnyvale Financing Authority, must also hold a public hearing for the Authority’s FY 2025/26 Budget.
EXISTING POLICY
In accordance with the City Charter, the California Constitution, and the California Government Code, a public hearing has been held annually for public comment on the budget and resource allocation plan and appropriations limit for the upcoming fiscal year.
Section 4.2 of the Joint Exercise of Powers Agreement Creating the Sunnyvale Finance Authority requires a public hearing of the Authority’s budget.
Council Policy 7.1.1 Fiscal -Long Range Goals and Financial Policies:
A.1.7: At least one public hearing shall be held after the City Manager’s recommended budget is presented to the Council in order to solicit public input before adoption.
A.1.8: Boards and Commissions should review the annual budget as appropriate to their area of interest and make recommendations to the City Council.
A.1.14: Final actions on study items with significant financial impacts should be withheld until they can be made in the full context of the annual budget process.
E.1.4: The Budget Stabilization Fund will be a minimum of 15% of projected revenues for the first two years of the 20-year planning period. Beyond year two, the Budget Stabilization Fund will always have a balance of at least zero.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
DISCUSSION
The purpose of the public hearing is to provide an opportunity for the public to voice its opinions on the City’s proposed budget and the appropriations limit. Legal ads for both the FY 2025/26 Recommended Budget and the Sunnyvale Financing Authority were published in the Sunnyvale Sun on May 23 and 30, as well as June 3, 2025. The FY 2025/26 Recommended Budget and Resource Allocation Plan is scheduled for adoption on June 17, 2025.
Appropriations Limit
The appropriations limit is set on an annual basis and is dependent upon the change in population within the jurisdiction and the change in the cost of living as determined by the State. As shown in Attachment 1, the appropriations limit for FY 2025/26 is $338,592,288. Expenditures subject to the appropriations limit exclude the Redevelopment Agency’s Successor Agency activity, enterprise and internal service activity, debt service payments, and capital outlay projects purchased with tax proceeds that have a useful life of ten years or more and a value that exceeds $100,000. Non-tax revenues, such as federal and state grants, fees for service, or revenues restricted for specific purposes are also excluded from the calculation. The City will be under the allowable appropriations limit by approximately $129.8 million for FY 2025/26, which means that the City has additional capacity allowed by law of approximately $129.8 million before the limit is reached.
FY 2025/26 Recommended Budget
The FY 2025/26 Recommended Budget is focused on the City’s projects budget, maintains and improves core service levels, and invests in key initiatives and City infrastructure. This budget includes a diverse portfolio of projects in support of the community’s values and the Council’s strategic priorities. Projects include:
• Critical City Facilities
• Utility Infrastructure
• Park Infrastructure
• Transportation
• Special Projects
• Public Safety Recruitment
This year’s Recommended Budget also preserves sufficient reserves to weather a downturn or unexpected event. Furthermore, the FY 2025/26 Recommended Budget:
• Forecasts positive but slowing revenue growth for some of the City’s main sources - property tax, sales tax, and transient occupancy tax;
• Maintains project budget assumptions and includes over 7% inflation for projects entering construction in FY 2025/26 and 4% annual inflation across the 20-year plan;
• Includes targeted service level enhancements;
o Continues long-term planning by investing in infrastructure and maintaining the Service Level Set-Aside in the General Fund; and
• Strategically uses reserves over the planning period.
Additionally, while this year’s budget focus is on the project budget, and alternating years focus on the operating budget, some operating adjustments are included where needed this year. Highlights of FY 2025/26 operating changes include:
• Updates some operating assumptions for salaries, benefits, internal service charges, and utility rates.
• Adds seven library staff positions to operate and maintain the Lakewood Branch Library, scheduled to open in January 2026.
• Adds a term-limited Senior Library Assistant position to continue the coordination of the library’s adult literacy program.
• Adds a full-time Recreation Services Manager to accommodate the City’s growing demand for Special Events.
• Adds funding to solidify Information Technology support for the City’s crucial systems, including five positions and funding for consultant support to stabilize, maintain, and enhance the City’s foundational Enterprise Resource Planning System, and two positions to establish a Geographic Information System (GIS) program.
• Adds several positions in the Department of Public Works:
o One part-time Traffic Engineer position to enhance the City’s traffic calming program;
o One Management Analyst position to manage and monitor labor compliance for contracts and grants;
o One Transportation Planner position to manage and monitor a Citywide shuttle program and funding for a required local match for grant funding; and
o One additional Park Worker to help maintain the City’s recently added parks.
The FY 2025/26 Recommended Budget provides for a balanced budget of approximately $779.8 million in total revenues and expenditures (including $75.1 million in contributions to reserves). Of the expenditure total, $392.4 million is for operating; $234.3 million is for projects, project administration, and the Council service level set-aside; and $78.1 million is for other expenditures, including employee benefit transfers, debt service, lease payments, and equipment. Contributions to reserves total a net positive $75.1 million citywide, factoring in drawdowns and additions to reserves across funds.
Reserves
One of the key tools the City uses in its budget is reserves. Reserves are intended for various purposes, including emergencies, holding restricted funds, or balancing cash flow and economic volatility. Some of the major funds in which the budget assumes a planned drawdown of reserves include the General Fund, Water Fund, and Infrastructure Fund. Additions to reserves in other funds, including Housing, Park Dedication, Wastewater, and Solid Waste offset the use of reserves in those funds.
The Budget Stabilization Fund Reserve (BSF) in the General Fund serves as the General Fund’s economic volatility and cash flow reserve. The BSF is projected to gradually decline until it reaches its low point in FY 2036/37, at $18.9 million. It then gradually increases as the City’s pension liabilities decrease.
The FY 2025/26 BSF achieves the City Council policy requirements of being at a level of at least 15% of total revenues for the first two years, and a balance of at least zero for the remainder of the 20-year planning period.
May 22, 2025 - Budget Workshop
Staff provided a detailed presentation on the City’s FY 2025/26 Recommended Budget at the Budget Workshop. At the workshop, the Council asked for information and/or clarification related to the Recommended Budget and was asked to review and take action on Budget Supplements.
Budget Supplements
For the FY 2025/26 Recommended Budget, six budget supplements were presented for Council consideration. A complete description of each budget supplement is included in Volume I of the FY 2025/26 Recommended Budget.
There are four items from Budget Supplement No.1 - Funding for Study Issues for the FY 2025/26 Recommended Budget that are included in the Recommended Budget. The City Manager recommended four issues for study, which require funding of $510,000 from the General Fund.
Budget Supplement No. 2 outlines potential additions or savings above what is included in the FY 2024/25 Recommended Budget. No action was required of Council; however, the City Council had further discussion during the Budget Workshop on May 22 and moved to include one item: 2B.A - Explore the Benefits and Costs of Project Labor Agreements to Establish the Terms and Conditions of Employment for Specific City Construction Projects that adds a cost of $120,000 in the General Fund. The impact of this item will be incorporated into the FY 2025/26 Adopted Budget.
Budget Supplement No. 3 - Implement Homestead Road Full-Time Bike Lanes was approved at $415,000 as funding for Budget Proposal DPW 2025-02. It will be included in the General Fund FY 2025/26 Adopted Financial Plan.
Budget Supplement No. 4 - Safe Parking Program Community Capital Grant was approved to provide $100,000 in the General Fund to fund Budget Proposal DPW 2025-03. It will be included in the General Fund FY 2025/26 Adopted Financial Plan.
Budget Supplement No. 5 - Funding Sweeping and Maintenance of Class IV Bike Lanes was approved under the option to allocate $50,000 in overtime costs to address Budget Proposal DPW 2025-04 to clean the existing bike lanes. It will be included in the General Fund FY 2025/26 Adopted Financial Plan.
Budget Supplement No. 6 - Redesign of the Sunnyvale Website was not recommended by staff for funding, and the Council did not approve the Budget Supplement.
Boards and Commissions Budget Review
The City’s boards and commissions have had the opportunity to review the FY 2025/26 Recommended Budget, which was made available on May 9. Boards and commissions wishing to make comments, suggestions, or recommendations have the opportunity to testify at the public hearing. Meeting minutes from the boards and commissions that held meetings to discuss the budget before submission of this report are included in Attachment 3. Recommendations to the Council on the budget were voted on and are detailed in the minutes. Testimony from the hearing, as well as draft board and commission meeting minutes discussing the Budget, will be included in the Budget Adoption Report to Council.
Sunnyvale Financing Authority Budget
The Sunnyvale Financing Authority must hold a public hearing and adopt by resolution the FY 2025/26 budget for debt service related to the Civic Center bond issuance. This amount totals $7,509,4257.
FISCAL IMPACT
There is no fiscal impact to this public hearing. Budget adoption is scheduled for June 17, 2025.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the City Hall reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
Legal ads for both the FY 2025/26 Recommended Budget and the Sunnyvale Financing Authority were published in the Sunnyvale Sun on May 23 and 30. Finally, the City’s website has included the entire FY 2025/26 Recommended Budget and Resource Allocation Plan since May 9, 2025.
STAFF RECOMMENDATION
Recommendation
City Council:
Conduct a Public Hearing to obtain input from the public as required by City Charter Section 1303, the California Constitution, and the California Government Code. Council can also provide direction to staff on any issue requiring further review before the adoption of the FY 2025/26 Budget on June 17, 2025.
Sunnyvale Financing Authority:
Conduct a Public Hearing on the FY 2025/26 Budget. The Board can also provide direction to staff on any issue requiring further review before the adoption of the FY 2025/26 Budget on June 17, 2025.
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $500 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
An “X” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
___ Contract or franchise
EXEMPT FROM THE LEVINE ACT
___ Competitively bid contract*
___ Labor or personal employment contract
___ Contract under $50,000 or non-fiscal
___ Contract between public agencies
_X_ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Staff
Prepared by: Kurtis Mock, Budget Manager
Reviewed by: Dennis Jaw, Assistant Director of Finance
Reviewed by: Matt Paulin, Finance Director
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. FY 2025/26 Appropriations Limit
2. Draft Board and Commission Meeting Minutes for the FY 2025/26 Recommended Budget