REPORT TO COUNCIL AND SUNNYVALE FINANCING AUTHORITY
SUBJECT
Title
City Council Adoption of the Fiscal Year 2025/26 Budget, Fee Schedule and Appropriations Limit, and Sunnyvale Financing Authority Adoption of the Fiscal Year 2025/26 Budget and Approve Budget Modification No. 26 in the Amount of $215,659
Report
BACKGROUND
The City Manager’s Fiscal Year (FY) 2025/26 Recommended Budget was provided to the City Council on May 9, 2025, and made publicly available on the City’s website on May 10. On May 22, the City Council held an all-day budget workshop to review the Recommended Budget and the twenty-year resource allocation plan in greater depth. On June 3, the City Council held a public hearing on the FY 2025/26 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 17, 2025, the City Council has the opportunity to adopt the FY 2025/26 Budget, Fee Schedule, and Appropriations Limit, which must be adopted by June 30 per the City Charter.
The FY 2025/26 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 2025/26 Budget on June 3, 2025. On June 17, 2025, the Authority also has the opportunity to adopt its FY 2025/26 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 the adoption of a budget 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.
7.1E.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 and the City’s FY 2025/26 Appropriations Limit is a fiscal activity that does not require review under the Environmental Quality Act (CEQA Guidelines, Section 15378(b)(4)).
The adoption by the City’s FY 2025/26 Fee Schedule <https://www.sunnyvale.ca.gov/home/showpublisheddocument/5957/638829932309500000> 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
Three actions are required by the City Council, and the Sunnyvale Financing Authority requires one action.
First, the Council must consider and take action on the proposed fee changes. The proposed FY 2025/26 Fee Schedule is presented as Exhibit A under Attachment 1 - FY 2025/26 Fees, Rates, and Charges Resolution.
Second, the Council must adopt the FY 2025/26 Budget by June 30, 2025. 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).
Third, the Council must adopt, by resolution, the FY 2025/26 Gann 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 2025/26 Budget for Debt Service related to the new Civic Center bond issuance, which totals $7,509,475. 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 7.1.1 (Fiscal-Long Range Goals and Financial Policies). Staff made the necessary adjustments to the proposed Fee Schedule to ensure that fees and charges are aligned with the actual cost of providing each service. The only exceptions are those that are legally limited, market-based, or subsidized for public purposes, such as the Park Dedication In-Lieu Fee - Average Fair Market fee that was reduced due to a recent land sale survey. Certain new fees have been added to the Fee Schedule where appropriate, such as an administrative citation fine for denial of required City access for inspection sampling, and other data collection related to stormwater pollution control. Other details regarding newly added fees and the proposed fee changes are discussed in Report To Council 25-0173, presented to Council on June 3, 2025. During the June 3 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, additional details on civil penalties for parking violations, and details regarding passing along credit card service fees to customers. Those responses are included in Attachment 7.
Summary of FY 2025/26 Recommended Budget
The FY 2025/26 Recommended Budget <https://www.sunnyvale.ca.gov/your-government/governance/city-budget> provides for a balanced budget of approximately $779.8 million in total revenues and expenditures (including $75.1 million to reserves).
• $392.4 million for citywide operations
• $234.3 million for projects, project administration, and Council service level set-aside
• $78.1 million is for other expenditures, including employee benefit transfers, debt service, lease payments, and equipment
• $75.1 million in contribution to reserves, which factors in drawdowns and additions to reserves across funds.
The FY 2025/26 Recommended Budget is focused on the City’s projects budget, maintains a core level of service, and invests in key initiatives and City infrastructure with a diverse portfolio of projects in support of the community’s values and the Council’s strategic priorities:
• Critical City Facilities
• Utility Infrastructure
• Golf Infrastructure
• Transportation
• Special Projects
• Public Safety Recruitment
This year’s Recommended Budget also shows operations continued to “right-size” with added support staffing for various City functions. Furthermore, the FY 2025/26 Recommended Budget:
• Forecasts positive revenue trends for some of the City’s main sources - property tax, sales tax, and transient occupancy tax.
• Maintains project budget assumptions; base of 4% annual inflation across 20-year plan
• Includes targeted service level enhancements
• Continues long-term planning with investment in City infrastructure
• Strategically uses reserves over the planning period
Additionally, as part of the normal course of budget development, several operating adjustments are included in the FY 2025/26 Recommended Budget:
• Updates operating assumptions for:
o Salaries and benefits
o Internal service charges & utility rates
• Add $36,000 to the Information Technology Department (ITD) for the cost of cell phone upgrades for field staff.
• Add five ongoing positions and $244,000 for support of the City’s ERP system:
o One new Finance Analyst position in Finance
o One new Business System Analyst position in Human Resources
o Two new Senior Applications Analyst/Project Managers in ITD
o One new Applications Analyst 2 in ITD
• Add one new GIS Coordinator and one new GIS Specialist 2 in ITD for the establishment of the GIS Program.
• Add several positions to the Public Works Department:
o One new Transportation Planner to monitor and comply with Transit & Intercity Rail Capital Program grant requirements as well as establish the citywide shuttle program, which could include public outreach, partnership coordination, and outreach materials.
o One new part-time Traffic Engineer to expand the traffic calming program to include 48 residential collectors. The position will increase Stage 1 outreach to four times per year (total for residential collector and local residential streets); produce and print new pamphlets and handbooks, and develop and maintain a new webpage.
o One new Management Analyst to provide additional support for Labor Compliance, ensuring the administration of state and federal prevailing wage requirements for Public Works projects. This includes construction, design, on-call agreements, feasibility studies, site assessments, and maintenance and repair work.
o One new Parks Worker 3 to support the new parks coming online and the maintenance of the Community Center grounds.
• Add positions and funding to the Library and Recreation Services Department for the opening of the new Lakewood Branch Library, planning of City-run special events, and the continuation of the Adult Literacy Program in the main library:
o Seven positions to support the branch library’s operations under a 6-day, 48-hour weekly public schedule.
o Additionally, five positions that were pre-planned for the branch library’s operations upon completion were unfrozen.
o $875,934 for various non-salary costs associated with the branch library’s operations.
o $82,181 for the purchase of a new truck/van to facilitate book transportation to and from the Main Library.
o One new Recreation Services Manager to enhance oversight of the special events process and improve the planning of City-sponsored events and increase overtime expenses by $50,000 to provide additional support for special events.
o One new Senior Library Assistant Term-Limited position to oversee the planning, management, review, and evaluation of the library’s adult literacy program. This position is partially grant-funded.
Updates to FY 2025/26 Recommended Budget
The proposed amounts for adoption were updated following the public hearing. This is due to reconciling items, authorized position changes that occurred after the development of the Recommended Budget, project and operational budget adjustments, and to incorporate items from Budget Supplement No. 1 through 6.
FY 2024/25 budget modifications adopted after delivery of the Recommended Budget have also been included in long-term financial plans.
The most noteworthy updates between the FY 2025/26 Recommended and Adopted budgets:
• Incorporation of a position conversion of one Regulatory Programs Division Manager into one Assistant Director of Environmental Services, which is a difference of $30,951. The Council approved the Assistant Director classification on June 3, 2025 (RTC #25-0641).
• The addition of one Housing Specialist 2 position to address the City Council’s strategic priority of addressing unhoused needs. The term-limited position will assist in the administration of the unhoused program and support the preparation of new initiatives.
Budget Supplements
For the FY 2025/26 Recommended Budget, six budget supplements were presented for the Council’s 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 is 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 is 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 is 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 is 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.
May 22, 2025 - Budget Workshop
Staff presented an overview of the City’s FY 2025/26 Recommended Budget at the Budget Workshop. During the workshop, the Council asked for information and/or clarification on several issues. These items are listed in Attachment 7, with responses or follow-up action noted as appropriate.
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.
Appropriations Limit
The appropriations limit, required by Article XIIIB of the State Constitution, places a limit on the amount of revenue that can be spent by government entities and is set on an annual basis. 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. California Government Code Section 7910 requires the City to annually adopt an appropriations limit for the coming year.
The appropriations limit is dependent upon the change in population within the jurisdiction and the change 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 2025/26, the factors that lead to a more favorable appropriations limit are the California per capita income and the City population growth factor, which are the factors staff used to calculate this value.
As shown in Attachment 3, the appropriations limit for FY 2025/26 is $338.6 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 $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.
FISCAL IMPACT
The City Manager’s FY 2025/26 Recommended Budget presents a balanced allocation of resources designed to advance the policy priorities set by the Council. Project and operating costs have been updated to reflect the rising costs and level of effort required to provide exceptional service while continuing to meet the increasing demands of an evolving community, and to maintain a sustainable financial position for the City amid persistent economic uncertainty.
Budget Modification No. 26 has been prepared to appropriate $215,659 from the General Fund for City Council benefits to operating program 10201 - City Council Business and Support, which was overlooked from the original appropriation following the FY 2024/25 Budget Adoption. This modification serves as an administrative correction to properly align the budgeted salaries and benefits for the City Council with the intended amounts.
Budget Modification No. 26
FY 2024/25
|
|
Current |
Increase/ (Decrease) |
Revised |
|
General Fund |
|
|
|
|
Funding Source Category |
|
|
|
|
Budgetary Stabilization Fund |
$90,685,489 |
($215,659) |
$90,469,830 |
|
|
|
|
|
|
Funding Use Category |
|
|
|
|
Program 10200 Office of the City Manager |
$7,184,152 |
$215,659 |
$7,399,811 |
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.
On June 3, 2025, the City Council held a public hearing on the FY 2025/26 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 2025/26 Recommended Budget. The Sunnyvale Financing Authority received input from the public. No action affecting the FY 2025/26 Recommended Budget was taken.
Boards and Commissions Budget Review
The FY 2025/26 Recommended Budget was made available to boards and commissions on May 9, 2025. 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 review of the minutes by the boards and commissions, some of the minutes 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 2025/26 Fee Schedule, Budget, and Appropriations Limit and Approve Budget Modification No. 26 in the amount of $215,659.
2. Adopt the resolutions specified in Alternative 1 with amendments to the FY 2025/26 Budget, FY 2025/26 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 2025/26 Budget Resolution (Sunnyvale Financing Authority) presented as Attachment 4 to the report.
STAFF RECOMMENDATION
Recommendation
City Council:
Alternative 1: Adopt the resolutions presented as 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 for the adoption of the FY 2025/26 Fee Schedule, Budget, and Appropriations Limit, and Approve Budget Modification No. 26 in the amount of $215,659.
Sunnyvale Financing Authority:
Alternative 1: Adopt the FY 2025/26 Budget Resolution (Sunnyvale Financing Authority) 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
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 2025/26 Fees, Rates, and Charges Resolution
Exhibit A - FY 2025/26 Fee Schedule
2. FY 2025/26 Budget Resolution
Exhibit A - Appropriations - General Fund, Special Revenue 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 2025/26 Appropriations Limit Resolution
Exhibit A - Appropriations Limit
4. Sunnyvale Financing Authority FY 2025/26 Budget Resolution
Exhibit A
5. Draft Boards and Commissions Meeting Minutes for the FY 2025/26 Recommended Budget
6. Revised FY 2025/26 Recommended General Fund Financial Plan
7. Responses to Council Questions from May 22, 2025, Budget Workshop and June 3, 2025, Public Hearing