REPORT TO COUNCIL
SUBJECT
Title
Authorize the City Manager, or Designee, to Execute the Regulatory Agreement Between the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) and the City of Sunnyvale for Sales Tax Exemption on Qualified Recycling Equipment for the SMaRT Station® NextGen Project
Report
REPORT IN BRIEF
Staff applied for and received a $2.13M sales tax exemption for the Sunnyvale Materials Recovery and Transfer (SMaRT) Station equipment procured under the NextGen Project. CAEATFA’s board of directors approved Sunnyvale’s application on December 9, 2025. This approval reduces the overall project cost, thereby lowering the financial impact on ratepayers in Sunnyvale and Mountain View.
BACKGROUND
The SMaRT Station is currently undergoing a $51 million capital improvement project known as the NextGen Project. The goal of this project is to identify, select, and install state-of-the-art systems to replace outdated and malfunctioning equipment, enhance overall processing efficiency, increase automation, and significantly expand the Station’s waste diversion. The project is funded by municipal bonds issued in November 2025 and a $6.575 M CalRecycle grant.
To further offset the capital costs, staff applied for and was granted a sales tax exemption through the CAEATFA program for qualified recycling equipment. As a result of this exemption, the City will only pay a 0.645% sales tax rate (instead of the normal 9.125%) to the selected equipment vendors.
The Regulatory Agreement associated with the exemption has a three-year term, aligning with the anticipated completion of the NextGen Project, which is expected to be completed by December 2026.
EXISTING POLICY
Council Policy 7.1C.2.3- Funding Policies: The City will seek out and use intergovernmental funding sources for capital improvements, as is consistent with City priorities and General Plan goals.
ENVIRONMENTAL REVIEW
The action is exempt from the California Environmental Quality Act (CEQA) under CEQA Guidelines Section 15061(b)(3) as it can be seen with certainty there is no possibility that entering into a regulatory agreement for a sales tax exemption to defray the cost of a previously approved project may have a significant effect on the environment.
DISCUSSION
The total cost of the recycling equipment eligible for the sales tax exemption is $25.136 million, resulting in an estimated sales tax exemption amount of $2.131 million. The SMaRT Station NextGen project vendors, Bulk Handling Systems (BHS) and Shredding Systems Incorporated (SSI), will manage the sales tax exemption process directly with the State. They will apply the 8.48% (9.125%- 8.48% = 0.645%) state sales tax exemption to their equipment invoices to the City, lowering the total project cost to the City by $2.13M.
In accordance with CAEATFA program regulations:
• At the time of application submission, the City paid an application fee of $10,000.
• The City will also pay an administrative fee of up to $100,545.32 over the term of the agreement.
• This fee is payable in increments and is submitted with semi-annual reports, based on the value of equipment invoiced during each reporting period.
• These payments will be credited toward the City’s total administrative fee, once the final amount of Qualified Property purchased is determined.
FISCAL IMPACT
Budget to fund the SMaRT Station NextGen Project is available in Fund 6143 - SMaRT Station Equipment Replacement under Project 828260 - SMaRT Post - 2021 Rebuild. This exemption will reduce the overall project cost by $2.131 million.
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.
RECOMMENDATION
Recommendation
Authorize the City Manager, or designee, to execute the Regulatory Agreement between the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) and the City of Sunnyvale for sales tax exemption on qualified recycling equipment for the SMaRT Station NextGen Project.
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
_X_ Contract between public agencies
___ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Prepared by: Deepti Jain, Environmental Programs Manager
Reviewed by: Ramana Chinnakotla, Director, Environmental Services
Reviewed by: Matt Paulin, Finance Director
Reviewed by: Sandra Lee, Senior Assistant City Attorney
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. Sales and Use Tax Exclusion Program Regulatory Agreement
2. Exhibit B - List of Qualified Property