REPORT TO COUNCIL
SUBJECT
Title
City Council Adoption of the Fiscal Year 2026/27 Budget, Fee Schedule and Appropriations Limit, and Sunnyvale Financing Authority Adoption of the Fiscal Year 2026/27 Budget
Report
BACKGROUND
The City Manager’s Fiscal Year (FY) 2026/27 Recommended Budget was provided to the City Council on May 6, 2026, and made publicly available on the City’s website on May 7, 2026.
On May 19, 2026, the City Council held a budget workshop to review the Recommended Budget and the twenty-year resource allocation plan in depth.
On June 2, 2026, the City Council held a public hearing on the FY 2026/27 Recommended Budget and Appropriations Limit, as well as a separate public hearing for the Fee Schedule. Notification of the hearing was sent to those who specifically requested notice of fee increases per the provisions of California Government Code section 66016(a).
On June 16, 2026, the City Council has the opportunity to adopt the FY 2026/27 Budget, Fee Schedule, and Appropriations Limit, which must be adopted by June 30 per the City Charter and state law.
The FY 2026/27 Recommended Budget also includes the annual budget for the Sunnyvale Financing Authority, the governing body established to provide debt service. The only appropriation for the Financing Authority is the annual debt service payment for the new Civic Center bond issuance. The Sunnyvale Financing Authority Board held a public hearing for the Authority’s FY 2026/27 Budget on June 2, 2026. On June 16, 2026, the Authority also has the opportunity to adopt its FY 2026/27 Budget.
EXISTING POLICY
The California Constitution Article XIIIB requires that the City annually adopt an appropriations limit for the upcoming fiscal year.
California Government Code Section 6508 requires that any annual budget of the agency to which the delegation is made must be approved by the governing body of the Joint Powers Agency (Sunnyvale Financing Authority).
City Charter, Section 1304 requires the City Council to adopt the budget for the upcoming fiscal year on or before June 30.
Section 4.2 of the Joint Exercise of Powers Agreement Creating the Sunnyvale Finance Authority requires that a budget be adopted prior to July 1 of each year.
Council Policy 7.1.1 Fiscal -Long Range Goals and Financial Policies:
I.: To make financial decisions over a twenty-year planning horizon to allow decision-makers to consider the long-range implications of short-range budgeting decisions.
7.1A.1.3: A balanced Twenty-Year Resource Allocation Plan shall be presented to the City Council annually.
7.1A.1.8: Boards and Commissions should review the annual budget as appropriate to their area of interest and make recommendations to the City Council.
7.1A.1.9: The City Council shall adopt the City Manager’s Recommended Budget, with any changes desired, by resolution before June 30th of each year.
7.1A.1.13: All competing requests for City resources should be weighed within the formal annual budget process.
7.1B.5.2: User fees should be reviewed and adjusted at least annually to avoid sharp
changes
7.1B.5.7: User fees should be adopted by Council resolution and included in the
Annual Fee Schedule.
7.1E.1.4: The Budget Stabilization Fund will be a minimum of 15% of projected
revenues for the first two years of the twenty-year planning period. Beyond
year two, the Budget Stabilization Fund will always have a balance of at least
zero.
ENVIRONMENTAL REVIEW
The adoption of the City of Sunnyvale and the Sunnyvale Finance Authority’s budgets FY 2026/27 Recommended Budget and the City’s FY 2026/27 Appropriations Limit (URL in Attachment 9) is a fiscal activity that does not require review under the Environmental Quality Act (CEQA Guidelines, Section 15378(b)(4)).
The adoption of the City’s FY 2026/27 Fee Schedule<(URL> in Attachment 9) is exempt from the California Environmental Quality Act pursuant to Public Resources Code Section 21080(b)(8), because the fees, rates and charges are for the purposes of (1) meeting operating expenses, including employee wage rates and fringe benefits; (2) purchasing or leasing supplies, equipment or materials; (3) meeting financial reserve needs and requirements; (4) obtaining funds for capital projects, necessary to maintain service within the existing service areas; and/or (5) obtaining funds necessary to maintain intra-city transfers.
DISCUSSION
To have spending authority and assess user fees in the upcoming fiscal year, the City Council must take three actions, and the Sunnyvale Financing Authority must take one. First, the Council must consider and take action on the proposed fee changes. The proposed FY 2026/27 Fee Schedule is presented as Exhibit A under Attachment 1 - FY 2026/27 Fees, Rates, and Charges Resolution.
Second, the Council must adopt the FY 2026/27 Budget by June 30, 2026. Traditionally, this has been accomplished by resolution. The Budget Resolution, including exhibits, presents the appropriations by fund, fund transfers, and reserve changes that are necessary to implement the budget as recommended in this report (Attachment 2). The full Recommended Budget is on the City’s website (URL in Attachment 9).
Third, the Council must adopt, by resolution, the FY 2026/27 Appropriations Limit. The calculations and detailed supporting information are contained in Attachment 3. A discussion regarding each of the three actions required by the Council is included below.
Lastly, the Sunnyvale Financing Authority must adopt, by resolution, the FY 2026/27 Budget for Debt Service related to the new Civic Center bond issuance, which totals $7,512,275. The Budget Resolution (Attachment 4) includes the appropriation for the debt service payment.
Fees, Rates, and Charges
The City’s current fees and charges have been reviewed in accordance with Council Policy, and staff have made the necessary adjustments to the proposed Fee Schedule to ensure that fees and charges align with the actual cost of providing each service. The only exceptions are those that are legally limited, market-based, or subsidized for public purposes. Certain new fees have been added to the Fee Schedule where appropriate, such as an initial planning application deposit to help with streamlining the application process and the new Rental of Vehicles for Human Habitation violation fee recently passed at the June 2, 2026 Council meeting (RTC 26-0486). Other details regarding newly added fees and the proposed fee changes are discussed in Report to Council 26-0207, presented to Council on June 2, 2026. During the June 2 public hearing, the Council solicited public input. No action was taken on the proposed fees.
At the public hearing, the Council requested follow-up information on golf participation, background on determining resident and non-resident rates and on dynamic pricing, and the feasibility of adding a senior weekday rate at Sunken Gardens. In addition, Council requested background on how massage establishment fees are determined. Those responses are included in Attachment 7.
Summary of FY 2026/27 Recommended Budget
The FY 2026/27 Recommended Budget provides for a balanced budget of approximately $717.1 million, including $425.1 million for citywide operations; $213.3 million in capital projects and project administration; and $79.3 million for other expenditures, including employee benefit transfers, debt service, lease payments, and equipment. Revenues total $648.3 million, with $69.4 million to be drawn from reserves across multiple funds, as part of the City’s twenty year financial planning for each fund.
The FY 2026/27 Recommended Budget review is focused on the City’s operations budget. The City alternates focus between operating and projects budgets each year; the FY 2027/28 budget will be focused on the project budget, including capital projects. The budget adjusts operations as needed to provide City services, including continuing to “right-size” with added support staffing for various City functions. The FY 2026/27 Recommended Budget includes:
• Current revenue projections from all sources
o Forecasts positive revenue trends for some of the City’s main sources - property tax, sales tax, and transient occupancy tax.
• Adjustments to the base operating budget for:
o Inflation factors for the rising cost of goods and services
o Recalculation of salaries, benefits, and internal service charges
o Citywide service level enhancements by adding a net total of 14.75 FTE across all departments
• Continued long-term planning with:
o Targeted service level enhancements
o Investment in City infrastructure
o Strategic use of reserves over the planning period
In addition to these reviews of the baseline budget, strategic Service Level Adjustments (SLA) were considered in response to current community demands and Council priorities. These SLAs are outlined in each department’s operating section. Brief descriptions of some of these enhancements are as follows:
• Public Safety - Adding 5.0 FTE to establish a Community Crime Reduction Team and reorganize the Office of Emergency Services; reclassifying 1.75 FTE to align with actual operational needs; and providing funding to establish a Public Safety Wellness Program.
• Human Resources - Adding 2.0 FTE to support Risk Management and Employee Development and address workload demands; providing additional funding for software and citywide staff training.
• Finance - Adding 1.0 FTE to support budget development, management and analysis as the City continues to grow.
• Information Technology - Adding 1.0 FTE to support network infrastructure, data center, and cybersecurity; providing additional funding for security consultants, cybersecurity enhancements, AI-enabled dispatch interpretation service and overtime in support of state law.
• Library and Recreation Services - Adding 1.0 FTE for the Adult Literacy Program.
• Office of the City Manager - Adding 1.0 FTE Community Engagement Coordinator and reclassifying a part-time Deputy City Clerk to a full-time position, providing additional funding for EAI program design and training, as well as community engagement events.
• Public Works - Adding a net of 4.0 FTE for fleet services, pavement and concrete maintenance, and parks maintenance; providing additional funding for Downtown power washing and security services at City Hall.
• Environment Services - Adding 1.0 FTE to oversee the Water Pollution Control Plant control system, and 1.0 FTE to assist managers in budget preparation, analysis, guide administrative staff and enhance department-wide initiatives; reclassifying 2.0 FTE to address specific increased workload and higher requirements.
The FY 2026/27 Recommended Budget General Fund highlights include the following. The General Fund Financial Plan is Attachment 6 to this report.
• Investmentss in enhancing service delivery and continued investments in City infrastructure.
• Moderate development activity assumptions in the short term.
• Strategic use of reserves to maintain service levels, preserving sufficient reserves to weather a downturn or unexpected event.
• Maintains a diverse portfolio of projects as adopted in FY 2025/26.
• A focus on long-term planning:
o Public Safety Recruitment: $12.2 million added over the first ten years.
o Balanced for ten and twenty-year periods.
o Reflects favorable, albeit more moderate, revenue trends for most major sources.
o The remaining General Fund Service Level Set Aside was used for continuing the microtransit service project funding starting FY 2030/31 and through the remainder of the 20-year plan and funding for Future Unhoused Services.
May 19, 2026 - Budget Workshop
Staff provided a detailed presentation on the City’s FY 2026/27 Recommended Budget at the Budget Workshop. At the workshop, the Council requested information and/or clarification regarding the Recommended Budget, and any pending follow-up information is provided in Attachment 7 of this report.
Council also reviewed and took action on the Budget Supplements.
Budget Supplements
For the FY 2026/27 Recommended Budget, two budget supplements were presented for Council consideration. A complete description of each budget supplement is included in Volume I of the FY 2026/27 Recommended Budget.
There are nine items included in Budget Supplement No.1 - Council Priority Projects. This Budget Supplement requests funding for seven of the nine Council Priority Projects that Council ranked at Council’s workshop on February 26, 2026. Council provided further direction at the Budget Workshop on May 19, 2026, regarding the two items not recommended for inclusion in the budget, requesting staff follow-up. On Project OCM 2026-18 regarding food co-ops, staff will not prepare a white paper, as resources for forming and managing food co-ops are readily available online. The City would welcome a discussion with any interested party, and a grant program could be part of a future Council priority project or budget. Staff will also monitor state legislation around this topic. On Project CDD 2026-14 regarding public sector workforce housing, staff plans to meet with other local agencies on opportunities to partner on employee housing and will return to Council if any viable options emerge.
Council also requested scope changes on Project OCM 2026-1 regarding neighborhood retail and Project CDD 2026-16 regarding nonresidential sign code standards. Staff modified those papers to reflect the requested scope changes, and redlined versions are included in Attachment 8 to this report.
|
Council Priority Project Number and Title |
FY 2026/27 Cost |
20-Year Cost |
Funding Source |
Recommended by Staff? |
|
OCM 2026-1 - Support Neighborhood-Serving Retail in Sunnyvale |
$25,000 |
$25,000 |
General Fund |
Yes |
|
DPW 2026-4 - Clearing the Sidewalk Maintenance Backlog |
$744,938 |
$10,413,103 |
Measure B |
Yes |
|
LRS 2026-6 - Establish a Community Funding Program for Sunnyvale Nonprofits |
$50,000 |
$100,000 |
General Fund |
Yes |
|
LRS 2026-11 - Expand the Roles of Age-Friendly, Accessibility, and Teen Staff Advisory Committees |
$30,000 |
$806,111 |
General Fund |
Yes |
|
DPS 2026-13 - Reinventing and Revitalizing Sunnyvale’s Safe Routes to School Program |
$100,000 |
$100,000 |
Measure B |
Yes |
|
CDD 2026-14 - Public Sector Workforce Housing Study |
$200,000 |
$200,000 |
General Fund |
No |
|
CDD 2026-16 - Re-evaluate Nonresidential Sign Code Standards for Improvements and Compliance with the First Amendment |
$200,000 |
$200,000 |
General Fund |
Yes |
|
OCM 2026-18 - Formal Analysis for Creation of a Food Co-Op, State-Sponsored Market or Commissary |
$0 |
$0 |
General Fund and State Grants |
No |
|
CDD 2026-22 - Streamlining the Permitting Process |
$200,000 |
$300,000 |
Development Enterprise Fund |
Yes |
|
Total Funding |
$1,549,938 |
$12,144,214 |
|
|
Budget Supplement No. 2 outlines potential additions or savings above what is included in the FY 2026/27 Recommended Budget. No action was required of Council, and none was taken on this supplement at the Budget Workshop on May 19, 2026.
Reserves
One of the key tools the City uses in its budget and financial planning is its 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 General Fund Budget Stabilization Fund Reserve (BSF) serves as the General Fund’s economic volatility and cash flow reserve. The BSF is projected to gradually decline to its low point of $21.5 million, or 5% of projected revenues, in FY 2035/36. It then gradually increases once the City’s pension liabilities incurred prior to pension reform are paid down.
The FY 2026/27 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.
The General Fund also maintains the Contingency Reserve, which is 15% of operations
expenditures. This is in addition to the BSF reserve, and is intended to maintain operations in the short-term during fiscal emergencies.
Appropriations Limit
The appropriations limit, required by Article XIII B of the California Constitution, caps the amount of revenue that government entities may spend and is set annually. The purpose of the appropriations limit is to preclude state and local governments from retaining excess revenues, which must be redistributed to taxpayers and schools. To date, the City has not exceeded its appropriations limit in any year. California Government Code Section 7910 requires the City to annually adopt an appropriations limit for the coming year.
The appropriations limit depends on changes in population within the jurisdiction and in the cost of living, as determined by the state. State law requires the Council to select one factor by which the limit is calculated. The options available are as follows:
1. Inflation Factors
a) California per capita income
b) Increase in non-residential assessed valuation due to new construction
2. Population factors
a) City population growth
b) County population growth
For FY 2026/27, the factors that lead to a more favorable appropriations limit are California's per capita income and the City's population growth factor, which staff used to calculate this value.
As shown in Attachment 3, the appropriations limit for FY 2026/27 is $359.7 million. 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 $62.5 million for FY 2026/27, which means the City has an additional $62.5 million in capacity allowed by law before the limit is reached.
FISCAL IMPACT
The City Manager’s FY 2026/27 Recommended Budget presents a balanced allocation of resources designed to advance the policy priorities set by the Council. Operating costs have been updated to reflect rising costs and the level of effort required to provide exceptional service while meeting the increasing demands of an evolving community and maintaining a sustainable financial position for the City amid persistent economic uncertainty.
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.
On June 2, 2026, the City Council held a public hearing on the FY 2026/27 Recommended Budget and Resource Allocation Plan, the Appropriations Limit, and the proposed Fee Schedule. Simultaneously, the Sunnyvale Financing Authority held a public hearing on the FY 2026/27 Recommended Budget. The Sunnyvale Financing Authority received public input. No action was taken affecting the FY 2026/27 Recommended Budget.
Boards and Commissions Budget Review
The FY 2026/27 Recommended Budget was made available to boards and commissions on May 7, 2026. Meeting minutes from the boards and commissions that held meetings to discuss the budget prior to submission of this report are included in Attachment 5. Recommendations to the Council on the budget were voted on and are detailed in the minutes. Given the short timeframe available for boards and commissions to review the minutes, some may be draft minutes.
ALTERNATIVES
City Council:
1. Adopt the resolutions presented as Attachment 1 (including Exhibit A), Attachment 2 (including Exhibits A through D), and Attachment 3 (including Exhibit A) that provide for the adoption of the FY 2026/27 Fee Schedule, Budget, and Appropriations Limit.
2. Adopt the resolutions specified in Alternative 1 with amendments to the FY 2026/27 Budget, FY 2026/27 Fee Schedule, or revisions to the Appropriations Limit (e.g., identifying, in the case of increases in expenditures, any corresponding decreases in expenditures, draws from reserves, or increases in revenue to ensure there is no adverse effect on the City’s financial position).
Sunnyvale Financing Authority:
1. Adopt the FY 2026/27 Budget Resolution (Sunnyvale Financing Authority), including Exhibit A, presented as Attachment 4 to the report.
STAFF RECOMMENDATION
Recommendation
City Council:
Alternative 1: Adopt the resolutions presented in Attachment 1 to the report (including Exhibit A), Attachment 2 to the report (including Exhibits A through D), and Attachment 3 to the report (including Exhibit A) that provide the adoption of the FY 2026/27 Fee Schedule and Appropriations Limit.
Sunnyvale Financing Authority:
Alternative 1: Adopt the FY 2026/27 Budget Resolution (Sunnyvale Financing Authority), including Exhibit A, presented as Attachment 4 to the report.
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
Prepared by: Nancy Grove, Finance Manager
Reviewed by: Dennis Jaw, Assistant Director of Finance
Reviewed by: Matt Paulin, Director of Finance
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. FY 2026/27 Fees, Rates and Charges Resolution
Exhibit A - FY 2026/27 Fee Schedule
2. FY 2026/27 Budget Resolution
Exhibit A - Appropriations - General Fund, Special Revenues Funds, Enterprise Funds
Exhibit B - Appropriations - Internal Service Funds
Exhibit C - Transfers - To/From All Funds
Exhibit D - Appropriations To/Deductions From Reserves - All Funds
3. FY 2026/27 - Appropriations Limit Resolution
Exhibit A - Appropriations Limit
4. Sunnyvale Financing Authority FY 2026/27 Budget Resolution
Exhibit A
5. Boards and Commissions Meeting Minutes for the FY 2026/27 Recommended Budget
6. FY 2026/27 Recommended General Fund Financial Plan
7. Responses to Council Questions from Budget Workshop on May 19, 2026, and Public Hearing on June 2, 2026
8. FY 2026/27 Budget Supplement No. 1 Follow-up
Exhibit A - Council Priority Project 2026-14
Exhibit B - Council Priority Project 2026-18
9. Website link to the FY 2026/27 Recommended Budget and Fee Schedule