REPORT TO COUNCIL
SUBJECT
Title
Adoption of a Resolution of Necessity and Introduction of an Ordinance Ordering the Submission to Sunnyvale Voters at the November 5, 2024, General Municipal Election of a Proposition Incurring Bonded Indebtedness for the Purpose of Financing the Cost of Acquisition, Construction, and Improvement of Certain Municipal Improvement Projects (New Main Library)
Report
BACKGROUND
In 2017, City Council adopted the Civic Center Modernization Master Plan (RTC No. 17-0835). The Master Plan contains a long-term, multi-phased vision of the entire civic center campus.
The adopted Master Plan includes three phases. Phase 1 included a new City Hall, a Public Safety building renovation and addition that includes a new Emergency Operation Center (EOC), and site improvements. Phase 2 includes a new Main Library, playground, and site improvements. Phase 3 is a new Public Safety Headquarters building.
To move Phase 2 forward, Council awarded a contract on September 12, 2023 to Group 4 Architecture, Research + Planning, Inc. for Main Library design and community outreach. The consultant and staff presented Council with options during a study session on April 9, 2024, and Council narrowed the design options under consideration to two: a 2-story new 95,000 square foot library estimated to cost $240 million and a 3-story new 120,000 square foot library estimated to cost $290 million. Both options included LEED Platinum rating, achieved Net-Zero energy, and excluded underground parking. Council also directed staff to conduct public polling to gauge voter support for a potential ballot measure to fund the project.
The City retained the services of Fairbank, Maslin, Maullin, Metz & Associates (FM3) to conduct a voter opinion survey on a potential revenue ballot measure to approve a General Obligation (GO) Bond payable from ad valorem property taxes to fund the construction of a new Main Library. At the May 21, 2024 workshop, Council received an update on the library design and the results of the survey. The polling data also showed slightly greater support for a higher bond amount for the larger 120,000 square foot, three story library option. Also on May 21, 2024, , Council directed staff to return to Council with actions necessary to place a GO bond measure on the November 5, 2024 ballot seeking voter approval to issue $290 million in bonds for the construction of a 120,000 square foot, three story new library (RTC No. 24-0610).
EXISTING POLICY
Council Policy, Chapter 7, Planning and Management, Policy B.1.4 - When considering a new tax or revenue source or an increase in an existing tax or revenue source, the following criteria should be considered:
• Community/Voter Acceptance
• Competitiveness with surrounding communities
• Efficiency of revenue collection and enforcement
• Effectiveness in generating sufficient revenues in the short and long-term to justify its establishment
• Enhancement of revenue diversity to promote stability and provide protection from downturns in business cycles
• Equity/Fairness in distribution of the revenue burden on various segments of the community
Council Policy, Chapter 7, Planning and Management, Fiscal Policy 7.1.1., Long Range Goal XI. - To prudently utilize the issuance of debt to minimize costs, maximize cash flow, and/or ensure that future users are responsible for costs as appropriate.
Council Policy, Chapter 7, Planning and Management, Debt Management 7.1.8 - entire policy provides clear and comprehensive guidelines for the issuance and financial management of debt.
ENVIRONMENTAL REVIEW
Placing the Library GO Bond measure on the ballot is a fiscal and administrative activity that is exempt from California Environmental Quality Act (CEQA) review pursuant to CEQA Guidelines Sections 15378(b)(4) and (b)(5) because it involves fiscal and administrative activities that will not result in direct or indirect changes to the environment.
On September 25, 2018 (RTC No. 18-0799), the City Council certified a Draft and Final Environmental Impact Report (collectively, "EIR") (State Clearinghouse #2017092075), adopted a Statement of Overriding Considerations, and adopted a Mitigation Monitoring and Reporting Program for the Civic Center Master Plan. On July 14, 2020 (RTC No. 20-0505), the City Council approved changes to the Civic Center Master Plan project described in an Addendum to the EIR. The Civic Center Master Plan Environmental Impact Report (EIR) included analysis of a new or renovated library for Phase 2 of the Master Plan. The Council’s recently selected preferred design for the Library has some differences from the Phase 2 library project analyzed in the EIR, but those project changes are not expected to cause new or different significant environmental impacts. Therefore, an addendum to the EIR reflecting the design changes may be prepared pursuant to CEQA Guidelines section 15164 if the measure is approved by voters and the design and construction moves forward.
DISCUSSION
Consistent with Council direction, this report details the necessary steps required to place a GO Bond measure on the November 5, 2024, general election ballot.
The proposed GO Bond ballot measure is a special tax measure that requires voter approval. If approved by voters, the expenditure of proceeds of the GO Bonds, when issued, would be restricted to capital costs associated with the construction of a new Main Library. The revenue derived from the ad valorem property tax levy would be used solely to pay debt service on the GO Bonds.
The process for approving and issuing GO bonds is governed by the California Constitution and California law. The first steps of that process require the City to adopt a Resolution of Necessity and introduce an Ordinance approving and submitting to City voters the proposition incurring bonded indebtedness. If the City Council approves these two documents, staff will return on June 25, 2024, for the second reading and adoption of the ordinance and adoption of a resolution placing the library bond measure on the November 5, 2024 ballot.
Resolution of Necessity (Attachment 1)
The Resolution of Necessity is required by California Government Code section 43607. In adopting this resolution, the Council is finding and determining that the public interest or necessity demands the acquisition, construction, or completion of the proposed municipal improvements, and that the costs of the improvements will require an expenditure of the City greater than allowed by the City’s current annual levy. Adoption of the Resolution of Necessity requires a two-thirds vote of all Council members (five yes votes).
Ordinance (Attachment 2)
Government Code section 43610 requires adoption of an Ordinance that includes a description of the object and purpose of bonds, the estimated costs of the improvements, and the manner of holding the election. In addition, the Ordinance will be provided to voters as part of the voter information guide. Adoption of the Ordinance requires a two-thirds vote of all Council members (five yes votes).
Use of the Go Bond proceeds will be limited to capital costs for improvements associated with the construction of a new Sunnyvale Main Library to replace the existing library. In addition to construction costs, eligible costs include fees for design, engineering, architect and other professional services, inspections, site preparation, utilities, landscaping, construction management, planning and permitting, legal, accounting and similar costs; a customary construction contingency; demolition and disposal of existing structures; rental or construction of storage facilities and other space on an interim basis for materials and other equipment and furnishings displaced during construction (if needed); addressing unforeseen conditions revealed by construction or renovation, and other necessary improvements required to comply with existing building codes and other applicable law, including the Americans with Disabilities Act; costs of the bond election; bond issuance costs; project administration during the duration of such projects; and financing and interest costs on the bonds.
Under existing law, the measure will be approved only if 2/3 of the voters in the City voting on the proposition vote in favor. However, Assembly Constitutional Amendment No. 1 (“ACA1”) has qualified for the November 5, 2024, Statewide ballot. ACA1 would, among other things, change existing law related to the approval threshold to authorize issuing bonds if a measure is approved by 55% of the voters and otherwise meets specified accountability requirements set forth in ACA1. Therefore, if voters approve ACA1 in the November 5, 2024, statewide election, ACA1 will apply to the City’s GO Bond measure and approval of the GO Bonds for the Library project will require that 55% (not 2/3) of the voters in the City voting on the proposition vote in favor.
One of the specified accountability requirements from ACA1 is to have a citizens’ oversight committee. Under current law, citizen oversight is not a requirement, however if ACA1 and the City measure pass, citizen oversight will be required and staff will work with Council to establish an oversight committee that meets the requirements of ACA1.
Election Timing and Next Steps to Complete the Process Required to Place the Library Bond Measure on the Ballot
Council must act on or before the July 30, 2024, Council meeting to place a measure on the November 5, 2024 ballot. As noted above, placing a GO bond measure on the ballot is a multi-step process. If the Council approves the resolution and first reading of the ordinance as recommended in this report, Staff will return on June 25, 2024 for the second reading of the ordinance and adoption of a resolution approving the 75-word ballot question, placing the measure on the November 5, 2024 ballot, filing of a Tax Rate Statement and providing direction on administrative issues such as ballot arguments, the impartial analysis, and required filings with the County of Santa Clara.
FISCAL IMPACT
If the proposed measure enacting a $290 million GO Bond payable from ad valorem property taxes is passed by Sunnyvale voters, staff estimates that the tax will result in approximately $18.6 million in average annual revenue which would be used to pay for the debt service for the GO Bonds, based on assumptions of an average bond interest rate of 4% over 25 years.
The cost to place this Measure on the ballot Is estimated by the Registrar of Voters to be $117,887. The FY 2024/25 Recommended Budget includes the cost for up to two potential ballot measures in Project 835020: Sunnyvale Biennial Elections.
If the measure is placed on the ballot, staff will engage with an external consultant for public education, the cost of which is expected to be under the City Manager’s contract award authority. Funding for public education is available in Project 834710 - Civic Center Phase 2 Planning - Main Library. California law prohibits the use of City resources for any campaign activities for or against the GO Bond measure. Only objective information regarding facility needs, the existence of a pending ballot measure, and the use to which the revenues from a ballot measure would be put can be paid with City resources.
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 NOVA Workforce Services 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.
ALTERNATIVES
1. Adopt a Resolution Determining that the Public Interest and Necessity Demand the Acquisition, Construction and Improvement of Municipal Improvement Projects Constituting Public Infrastructure of the City, and Their Financing Through the Issuance of General Obligation Bonds; and Introduce an Ordinance Ordering the Submission of a Proposition Incurring Bonded Indebtedness to the Qualified Voters of the City of Sunnyvale at the General Municipal Election to be Held on November 5, 2024, for the Purpose of Financing the Cost of the Acquisition, Construction and Improvement of Certain Municipal Improvement Projects Constituting Public Infrastructure of the City.
2. Do not adopt the resolution and ordinance required to place the General Obligation bond measure on the ballot and provide staff with further direction on next steps.
STAFF RECOMMENDATION
Recommendation
Alternative 1: Adopt a Resolution Determining that the Public Interest and Necessity Demand the Acquisition, Construction and Improvement of Municipal Improvement Projects Constituting Public Infrastructure of the City, and Their Financing Through the Issuance of General Obligation Bonds; and Introduce an Ordinance Ordering the Submission of a Proposition Incurring Bonded Indebtedness to the Qualified Voters of the City of Sunnyvale at the General Municipal Election to be Held on November 5, 2024, for the Purpose of Financing the Cost of the Acquisition, Construction and Improvement of Certain Municipal Improvement Projects Constituting Public Infrastructure of the City.
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 $250 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.
A check or “Y” 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
_x_ General policy and legislative actions
Staff
Prepared by: Dennis Jaw, Assistant Director of Finance
Reviewed by: Timothy J. Kirby, Director of Finance
Reviewed by: Rebecca Moon, City Attorney
Reviewed by: Connie Verceles, Deputy City Manager
Approved by: Kent Steffens, City Manager
ATTACHMENTS
1. Resolution of Necessity
2. Ordinance Calling Election