HomeMy WebLinkAbout05.26.2022 Finance Committee Agenda PacketCity Council Finance Committee Agenda May 26, 2022
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SARATOGA CITY COUNCIL
FINANCE COMMITTEE
May 26, 2022
3:30 P.M. REGULAR MEETING
Teleconference/Public Participation Information to Mitigate the Spread of COVID-19
This meeting will be held entirely by teleconference. All members of the Committee and staff
will only participate via the Zoom platform using the process described below. The meeting is
being conducted pursuant to recent amendments to the teleconference rules required by the
Ralph M. Brown Act allowing teleconferencing during a proclaimed state of emergency when
local officials have recommended social distancing. The purpose of the amendments is to
provide the safest environment for the public, elected officials, and staff while allowing for
continued operation of the government and public participation during the COVID-19
pandemic.
Members of the public can view and participate in the meeting by:
1. Using the Zoom website https://us02web.zoom.us/j/85189182306 Webinar ID:
851 8918 2306 and raising their hand to speak on an agenda item when directed by the
Mayor.
2. Calling 1.669.900.6833 or 1.408.638.0968 and pressing *9 to raise their hand to speak
on an agenda item when directed by the Mayor.
The public will not be able to participate in the meeting in person.
Written Communication
Members of the public can send written comments prior to the meeting by commenting
online at www.saratoga.ca.us/fc prior to the start of the meeting. These emails will be
provided to the members of the Council and will become part of the official record of the
meeting.
Public Comment
Members of the public may comment on any item for up to three (3) minutes. The amount of
time for public comment may be reduced by the Mayor.
Meeting Recording Information
In accordance with the Saratoga City Council’s Meeting Recording Policy, the City Council
Finance Committee Meetings are recorded and made available to the public following the meeting
on the City website.
City Council Finance Committee Agenda May 26, 2022
Page 2
CALL TO ORDER
ROLL CALL
ORAL COMMUNICATIONS ON NON-AGENDIZED ITEMS
Any member of the public may address the Committee about any matter not on the agenda
for this meeting for up to three (3) minutes. The law generally prohibits the Committee from
discussing or taking action on such items. The Committee may choose to place the topic on a
future agenda.
AGENDA ITEMS
1.Finance Committee Minutes
Recommended Action:
Review and approve the minutes for the April 28, 2022 meeting
Finance Committee Minutes
2.Fiscal Year 2023 Enabling Resolutions
A.Appropriations Limit
B.Arrowhead Community Facility District Tax Levy
C.General Obligation Bond Tax Levy
D.Investment Policy
Recommended Action:
Receive Report
Memo
Attachment A - Draft Gann Limit Staff Report and Resolution
Attachment B - Draft Arrowhead Staff Report and Resolution
Attachment C - Draft FY23 GO Bond Tax Levy and Resolution
Attachment D - Draft Investment Policy Staff Report
3.Summer Meeting Schedule
Recommended Action:
Approve meeting schedule for the summer months
Memo
ADJOURNMENT
CERTIFICATE OF POSTING OF THE AGENDA, DISTRIBUTION OF THE AGENDA PACKET,
COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
I, Gina Scott, Administrative Analyst for the City of Saratoga, declare that the foregoing agenda
for the meeting of the City Council Finance Committee of the City of Saratoga was posted and
City Council Finance Committee Agenda May 26, 2022
Page 3
I, Gina Scott, Administrative Analyst for the City of Saratoga, declare that the foregoing agenda
for the meeting of the City Council Finance Committee of the City of Saratoga was posted and
available for public review on May 23, 2022, at the City of Saratoga, 13777 Fruitvale Ave.,
Saratoga, CA 95070, and on the City’s website at www.saratoga.ca.us.
Signed this 23th day of May 2022 at Saratoga, California.
Gina Scott, Administrative Analyst
In accordance with the Ralph M. Brown Act, copies of the staff reports and other materials
provided to the Committee by City staff in connection with this agenda, copies of materials
distributed to the Committee concurrently with the posting of the agenda, and materials
distributed to the Committee by staff after the posting of the agenda are available on the City
website at www.saratoga.ca.us and are available for review in the office of the City Clerk at
13777 Fruitvale Avenue, Saratoga, California.
In compliance with the Americans with Disabilities Act and the Governor’s Executive Order, if
you need assistance to participate in this meeting, please contact the City Clerk at
bavrit@saratoga.ca.us or calling 408.868.1216 as soon as possible before the meeting. The
City will use its best efforts to provide reasonable accommodations to provide as much
accessibility as possible while also maintaining public safety.
[28 CFR 35.102-35.104 ADA title II]
City Council Finance Committee Minutes – April 28, 2022
Page 1
MINUTES
SARATOGA CITY COUNCIL FINANCE COMMITTEE
REGULAR MEETING
APRIL 28, 2022
CALL TO ORDER
The meeting was called to order at 3:32 p.m. via Zoom.
ROLL CALL
Present: Mayor Tina Walia, Vice Mayor Kookie Fitzsimmons, Council Members Mary-Lynne
Bernald
Also Present: James Lindsay, City Manager
Crystal Bothelio, Assistant City Manager
Nick Pegueros, Administrative Services Director
Agnes Pabis, Finance Manager
John Cherbone, Public Works Director
Debbie Pedro, Community Development Director
Gina Scott, Administrative Analyst
ORAL COMMUNICATIONS ON NON-AGENDIZED ITEMS
None
AGENDA ITEMS
1. Finance Committee Minutes
Recommended Action:
Review and approve the minutes for the March 24, 2022 meeting.
FITZSIMMONS/WALIA MOVED TO APPROVE THE MINUTES FOR THE MARCH 24, 2022
MEETING. MOTION PASSED BY VERBAL ROLL CALL. AYES: FITZSIMMONS, WALIA. NOES:
NONE. ABSTAIN: NONE.
2. FY 23 Budget Preview
Recommended Action:
Receive FY23 Budget Preview Information.
Administrative Services Director Nick Pegueros presented a preview on the budget
information for FY23.
3. Road and Facility Replacement Reserve Proposed Policy Update
2
City Council Finance Committee Minutes – April 28, 2022
Page 2
Recommended Action:
Receive and review updated policy and provide direction to staff.
Administrative Services Director Nick Pegueros acknowledged that the policy was updated
with the minor changes suggested by the Finance Committee at their last review and
confirmed that the policy will be going to Council for full Council review and discussion.
WALIA/FITZSIMMONS MOVED TO RECEIVE THE POLICY AND PROVIDED DIRECTION TO
STAFF TO BRING IT FORWARD TO THE COUNCIL. MOTION PASSED BY VERBAL ROLL CALL.
AYES: FITZSIMMONS, WALIA. NOES: NONE.
ADJOURNMENT
The meeting was adjourned at 4:38 p.m.
Minutes respectfully submitted:
Gina Scott, Administrative Analyst
City of Saratoga
3
ADMINISTRATIVE SERVICES
Memorandum
To: City Council Finance Committee
From: Nick Pegueros
Date: May 26, 2022
Subject: Fiscal Year 2023 Enabling Resolutions
Attached are four draft staff reports required by State law or the Santa Clara County Assessor for
financial operations in the upcoming fiscal year. These items are presented to the Finance Committee
for informational purposes before the resolutions appearing on the City Council’s June 15th consent
agenda for consideration and approval.
No Finance Committee action is required.
Attachment A – Fiscal Year 2023 Appropriations Limit, draft staff report
Attachment B – Fiscal Year 2023 Arrowhead Community Facility District Tax Levy, draft staff report
Attachment C – Fiscal Year 2023 General Obligation Bond Tax Levy, draft staff report
Attachment D – Fiscal Year 2023 Investment Policy, draft staff report
4
SARATOGA CITY COUNCIL
MEETING DATE: June 15, 2022
DEPARTMENT: Administrative Services
PREPARED BY: Nick Pegueros
SUBJECT: Resolution Establishing the Fiscal Year 2023 Appropriations Limit
RECOMMENDED ACTION:
Adopt resolution establishing the City of Saratoga’s Fiscal Year 2023 Appropriations (Gann)
Limit.
BACKGROUND:
California voters approved Proposition 4 in 1979 to establish Article XIIIB of the California State
Constitution, commonly referred to as the Gann Limit or Appropriations Limit (Limit.) Two additional
voter-approved initiatives, Proposition 98 in 1988 and Proposition 111 in 1990, modified the 1979 voter -
approved propositions. This report fulfills the annual requirements of the Limit as provided in State law.
The Limit establishes the maximum tax collections by every agency in California. The Limit adjusts
annually, with 1981 as the baseline year, using inflation and population factors provided by the State of
California's Department of Finance (Attachment B.) If an agency collects more taxes than authorized, State
law mandates the return of taxes above the Limit. For example, a taxing agency with a Limit of $98 million
collects $100 million in taxes in FY23. State law requires that agency refun ds the $2 million above the
Limit. An agency may temporarily seek voter approval to override the Limit as an alternative to a refund.
The City's FY23 Limit is $54.32 million, and the proposed budget includes proceeds from taxes subject to
the Limit of $19.26 million (Exhibit A to Attachment A.) The City's appropriations are below the Limit and
will continue to be under the Limit for the foreseeable future, given the City's revenue profile which is
predominately property tax revenue.
ATTACHMENT:
Attachment A – Resolution
Attachment B - California Department of Finance Price Factor and Population Information, May
2022
Attachment A
A - 1 5
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SARATOGA
ESTABLISHING THE FISCAL YEAR 2023 APPROPRIATIONS LIMIT
WHEREAS, the City of Saratoga established its base year Appropriations Limit as
$5,961,747 in Fiscal Year 1979; and
WHEREAS, the cumulative changes to population and to the California per capita
personal income since the base year totaled $50,679,074 in Fiscal Year 2022 ; and
WHEREAS, the California Department of Finance’s May 2022 memorandum specifies a
7.55 percent increase in per capita personal income for the twelve month period ended December
31, 2021; and
WHEREAS, the California Department of Finance’s May 2022 memorandum specifies a
0.34 percent decrease in the City of Saratoga’s population and a 0.69 percent decrease in the
County of Santa Clara’s population for the twelve month period ended December 31, 2021 ; and
WHEREAS, State law provides an adjustment to the prior year Appropriation Limit by
combining the change in per capita personal income, and either the city or county’s change in
population, at the discretion of the city or county’s governing board;
NOW, THEREFORE BE IT RESOLVED, the City of Saratoga’s fiscal year 2023
Appropriations Limit is $54,320,026 as calculated in conformity with A rticle XIIIB of the
Constitution of the State of California and detailed in Exhibit A.
The above and foregoing resolution was passed and adopted at a regular meeting of the Saratoga
City Council held on the 15 day of June 2022 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Tina Walia, Mayor
ATTEST:
Britt Avrit, MMC, City Clerk
A - 2 6
Exhibit A
For Beginning County City California Ending %
YE Population Population Per Capita Limit
June 30 Limit Factor Factor Income Δ Limit Increase
2013 31,907,666 1.0124 1.0070 1.0377 33,521,156 5.06%
2014 33,521,156 1.0157 1.0129 1.0512 35,790,667 6.77%
2015 35,790,667 1.0150 1.0066 0.9977 36,243,974 1.27%
2016 36,243,974 1.0113 1.0000 1.0382 38,053,696 4.99%
2017 38,053,696 1.0126 1.0053 1.0537 40,602,404 6.70%
2018 40,602,404 1.0081 1.0023 1.0369 42,441,648 4.53%
2019 42,441,648 1.0099 1.0052 1.0367 44,434,849 4.70%
2020 44,434,849 1.0033 1.0003 1.0385 46,297,871 4.19%
2021 46,297,871 1.0037 1.0009 1.0373 48,202,474 4.11%
2022 48,202,474 0.9944 0.9901 1.0573 50,679,074 5.14%
2023 50,679,074 0.9931 0.9966 1.0755 54,320,026 7.18%
% Increase in California FY22 FY23
City Per Capita Appropriations Appropriations Appropriations
Population Income Δ Factor Limit Limit
0.9966 X 1.0755 =1.0718 X 50,679,074$ =54,320,026$
FY23 FY23 Percentage
Tax Appropriations Over/(Under)
Revenues Limit Limit
19,260,000 /54,320,026$ =-65%
Percentage of Appropriations
AppropriationsAppropriations
City of Saratoga
Appropriations Limit Calculation
FY23 Calculation
A - 3 7
: http://leginfo.legislature.ca.gov/faces/codes.xhtml .
May 2022
Dear Fiscal Officer:
Subject: Price Factor and Population Information
Appropriations Limit
California Revenue and Taxation Code section 2227 requires the Department of Finance to
transmit an estimate of the percentage change in population to local governments. Each local
jurisdiction must use their percentage change in population factor for January 1, 2022, in
conjunction with a change in the cost of living, or price factor, to calculate their appropriations
limit for fiscal year 2022-23.
income and an example for utilizing the price factor and population percentage change factor
to calculate the 2022-23 appropriations limit. Attachment B provides the city and unincorporated
county population percentage change. Attachment C provides the population percentage
change for counties and their summed incorporated areas. The population percentage change
data excludes federal and state institutionalized populations and military populations.
Population Percent Change for Special Districts
Some special districts must establish an annual appropriations limit. California Revenue and
Taxation Code section 2228 provides additional information regarding the appropriations limit.
Article XIII B, section 9(C) of the California Constitution exempts certain special districts from the
appropriations limit calculation mandate. The code section and the California Constitution can
be accessed at the following website
Special districts required by law to calculate their appropriations limit must present the calculation
as part of their annual audit. Any questions special districts have on this requirement should be
directed to their county, district legal counsel, or the law itself. No state agency reviews the local
appropriations limits.
Population Certification
The population certification program applies only to cities and counties. California Revenue and
Taxation Code section 11005.6 mandates Finance to automatically certify any population
Finance
will certify the higher estimate to the State Controller by June 1, 2022.
Please Note: The p The per capita personal
income change is based on historical data.
If you have any questions regarding this data, please contact the Demographic Research Unit at
(916) 323-4086.
KEELY MARTIN BOSLER
Director
By:
ERIKA LI
Chief Deputy Director
Attachment
A - 4 8
May 2022
Attachment A
A. Price Factor: Article XIII B specifies that local jurisdictions select their cost of living
factor to compute their appropriation limit by a vote of their governing body. The
cost of living factor provided here is per capita personal income. If the percentage
change in per capita personal income is selected, the percentage change to be
used in setting the fiscal year 2022-23 appropriation limit is:
Per Capita Personal Income
Fiscal Year Percentage change
(FY) over prior year
2022-23 7.55
B. Following is an example using sample population change and the change in
California per capita personal income as growth factors in computing a 2022-23
appropriation limit.
2022-23:
Per Capita Cost of Living Change = 7.55 percent
Population Change = -0.30 percent
Per Capita Cost of Living converted to a ratio: 7.55 + 100 = 1.0755
100
Population converted to a ratio: -0.30 + 100 = 0.997
100
Calculation of factor for FY 2022-23: 1.0755 x 0.997 = 1.0723
A - 5 9
Fiscal Year 2022-23
Attachment B
Annual Percent Change in Population Minus Exclusions*
January 1, 2021 to January 1, 2022 and Total Population, January 1, 2022
County
City
Percent Change
2021-2022
--- Population Minus Exclusions ---
1-1-21 1-1-22
Total
Population
1-1-2022
Santa Clara
Campbell
Cupertino
Gilroy
Los Altos
Los Altos Hills
Los Gatos
Milpitas
Monte Sereno
Morgan Hill
Mountain View
Palo Alto
San Jose
Santa Clara
Saratoga
Sunnyvale
Unincorporated
-0.59
-0.46
-0.21
-0.39
-0.17
-0.39
0.69
0.87
-0.38
0.89
0.07
-1.48
0.78
-0.34
0.58
-0.62
43,086
59,884
59,396
31,651
8,414
33,193
80,287
3,458
46,626
83,128
67,407
991,144
129,122
30,772
155,326
83,985
42,833
59,610
59,269
31,526
8,400
33,062
80,839
3,488
46,451
83,864
67,454
976,482
130,127
30,667
156,234
83,464
42,833
59,610
59,269
31,526
8,400
33,062
80,839
3,488
46,451
83,864
67,473
976,482
130,127
30,667
156,234
84,458
County Total -0.69 1,906,879 1,893,770 1,894,783
*Exclusions include residents on federal military installations and group quarters residents in state mental
institutions, state and federal correctional institutions and veteran homes.
A - 6 10
SARATOGA CITY COUNCIL
MEETING DATE: June 15, 2022
DEPARTMENT: Administrative Services Department
PREPARED BY: Gina Scott, Administrative Analyst
SUBJECT: Resolution Establishing the Fiscal Year 2023 Property Tax Levy for Debt Service
Payments on the Arrowhead Community Facility District 2018 Bond
RECOMMENDED ACTION:
Adopt the attached resolution that sets the Fiscal Year 2023 property tax levy rate for the Arrowhead
Community Facility District’s 2018 Bond's debt service payment at $6,000 per parcel for the remaining
nineteen (19) participating property owners.
BACKGROUND:
The Arrowhead Community Facilities District encompasses 39 homes located along the hillside between
Rolling Hills Road and Blue Hills Lane, off of Prospect Road. Since 1951, this neighborhood operated its
own private water company, known as Arrowhead Cooperative Company Inc. Over the years the number
of Arrowhead Cooperative residences and water service meters increased, to the extent that the water system
infrastructure was no longer sufficient for water and fire protection needs. Because the potential fire danger
situation was very alarming to the residents, the Arrowhead Board attempted to improve their water
infrastructure system. Tying into San Jose Water Company lines system was their preferred option, but the
private water cooperative was required to upgrade their water system with a new pump house, water line
connections, and water supply lines before they would be allowed to link into San Jose Water’s system. As
not all residents had funds immediately available for this construction expense, the Arrowhead Cooperative
Board asked the City to assist them with the issuance of a bond to finance the improvements.
To issue the bond as a collective group, the 39 homeowners were required to establish their Water
Cooperative as a Community Facility District. This allowed for a special tax to be assessed for debt service.
The homeowners voted to move forward with this action, and at the December 21, 2016 City Council
Meeting, the City Council adopted a resolution to form Community Facilities District 2016-1 (Arrowhead)
and called for a special election within the district to consider allowing the City to incur bond indebtedness
on the Arrowhead CFD’s behalf, and to levy a Special Tax Lien to pay principal and interest on bonds
issued to finance water infrastructure improvements.
On May 2, 2017, a total of 50 registered landowner votes were cast, with 100% of the votes in support of
this measure. On June 21, 2017, City Council adopted an ordinance authorizing the levying of Special
Taxes on properties in the Arrowhead CFD for bonded debt service.
After several delays, the Community Facility District’s bond was finally issued on December 12, 2018.
Fifteen of the 39 property owners prepaid their share of the water infrastructure improvements, leaving only
24 property owners who participated in the bond issuance.
B - 1
Attachment B
11
The total bond amount of $2,498,848 was issued at an interest rate of 6.05% on December 12, 2018, with
a 30-year maturity date on September 1, 2048. Attachment A, Exhibit A, includes the current Debt Service
payment schedule (after bond debt adjustments discussed below).
Bond participants may choose to pay the parcel assessment as an added charge on their property tax
payments over the 30-year term, or they may buy out their share of the bond liability. If a participant buys
out of the debt, the debt payment schedule will be adjusted, and the remaining bond participants continue
to pay their debt service amount each year. A buy-out does not change the remaining participant’s share of
the debt obligation, however, the annual debt monitoring service costs do increase as the number of
participants who pay the shared annual service costs is reduced.
In early FY 2019/20, one bond participant chose to pay off their share of the bond, resulting in the advanced
maturity of a portion of the bonds on September 1, 2019 debt service payment date. A second participant
paid off their share of the bond in late FY 2019/20, so this payment went to reduce the outstanding debt on
the September 1, 2020 payment date. Three more property owners submitted payoff payments and those
funds were used to reduce debt for the September 1, 2021 payment date, leaving 19 active property owners.
Payoffs must be received no later than July 15th for the September 1st payoff schedule, to allow the bond
administrator time to prepare the upcoming year’s bond roll for submittal to the Santa Clara County
Assessor’s Office. To date, no other participants have submitted a request for an early payoff.
Arrowhead Project Fund Closeout
Almost $2.5 Million of Arrowhead Bond Issuance funds was added to the $1.5 Million from fifteen
Arrowhead property owners who chose to pay their share of the infrastructure improvement cost in cash.
This brought the total funding package to almost $4 Million.
Of the $4 Million, approximately $340,000 was for Bond Issuance Costs, $90,000 was held as a reserve to
ensure funding in case of payment default, and the remaining amount of $3,569,000 was put into the
construction account. The water infrastructure construction project was completed under-estimate,
bringing a refund from San Jose Water of $340,886. In addition, a total of $356,800 in excess funds
remained in the Project Improvement and Cost of Issuance funds. After final payments, cash participants
were refunded their share of excess funds, leaving almost $411,700 to buy down bond debt on September
1, 2020.
Under the terms of the bond issuance agreement, Prepaid Participants received their share of excess funds
back in cash. Bond Issuance Participants’ share of the excess could only be utilized to pay down bond debt.
The closeout of the improvement fund and the subsequent reduction of debt via surplus funds occurred in
2020.
REPORT DISCUSSION:
Bond Payments
There are two debt service payments each year: principal and interest in September, and interest only in
March. As the September payment is made prior to receiving the current year’s tax levy revenues, the prior
year-end Arrowhead Bond Fund Balance Reserve should provide enough funding to pay the September
debt service payment and the debt service monitoring service costs. The assessed property tax levy amount
received from the following January and June tax receipts is to provide funding for the March interest-only
payment, and then again leave a sufficient balance to pay the following September’s debt service payment.
The Arrowhead Community Facility District’s estimated ending fund balance for Fiscal Year 2022 is
$83,551.15 which includes the $1,000 administrative expense.
B - 2 12
The following schedule shows the Arrowhead Bond’s estimated annual debt service and administrative fees
for next fiscal year:
FY 2022/23 Debt Service
Debt Service – Principal $ 23,374
Debt Service – Interest 90,079
Administrative Fees 6,940
Total Annual Debt Service $ 120,393
Tax Levy Process
In order to assess a tax levy on the property owners, the County of Santa Clara requires local jurisdictions
to adopt a resolution each year to establish the annual tax levy. Attachment A is the annual resolution
establishing the Fiscal Year 2023 tax levy of $6,000 per parcel.
This levy will charge a total of $114,000 from the 19 participants. Santa Clara County will assess an
administration fee and then forward the remainder of the levy to the City for the bond’s debt service
expenditures. This total levied amount, together with excess reserve funds, will be sufficient for FY23 debt
service payments and leave sufficient funds for the following year’s payment. We anticipate being able to
continue the reserve fund credit in the following fiscal year as well. This will allow us to maintain a $6,000
special tax per property. Once the credit is no longer available, the projected special tax per property will
escalate to $6,500.
A certified copy of the adopted resolution setting the property tax levy for the Arrowhead CFD Bond will
be sent to the Santa Clara County Assessor’s Office no later than August 1st.
ATTACHMENT:
A.Resolution
B - 3 13
RESOLUTION NO. 22-___
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SARATOGA
ESTABLISHING THE FISCAL YEAR 2023 PROPERTY TAX LEVY
FOR THE ARROWHEAD COMMUNITY FACILITY DISTRICT BOND DEBT SERVICE
WHEREAS, the City Council conducted proceedings to form the City of Saratoga Community
Facilities District No. 2016-1 (the “Arrowhead District”), to authorize the levy of special taxes upon the
land within the Arrowhead District, and to issue bonds secured by the special taxes to finance water
infrastructure improvements; and
WHEREAS, an election was held within the District on May 2, 2017 and the qualified electors
approved the incurrence of the bonded debt, the establishment of the appropriations limit for the District,
and the levy of the special tax by unanimous vote; and
WHEREAS, On November 21, 2018, the City Council adopted a resolution authorizing issuance
of Special Tax Bonds for Arrowhead Community Facility District through a private placement sale; and
WHEREAS, a Private Placement Bond Sale was conducted on December 12, 2018 on behalf of
twenty-four participating property owners within the Arrowhead Community Facilities District; and
WHEREAS, five of the property parcel owners have paid off their share of the bond liability,
leaving nineteen properties participating in the bond liability, and;
WHEREAS, it is necessary for the City Council of the City of Saratoga to establish an annual
Property Tax Levy on the participating property owners to provide sufficient funds for the debt service
payments and administrative expenditures during the fiscal year;
NOW, THEREFORE, be it resolved by the City Council of the City of Saratoga hereby establishes the
Fiscal Year 2023 Property Tax Levy for debt service on the Arrowhead Community Facility District Bonds
at $6,000 per parcel.
The above and foregoing resolution was passed and adopted at a regular meeting of the Saratoga City
Council held on the 15th day of June 2022 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
______________________________
Tina Walia, Mayor
ATTEST:
DATE:
Britt Avrit, MMC, City Clerk
B - 4 14
B - 5 15
SARATOGA CITY COUNCIL
MEETING DATE: June 15, 2022
DEPARTMENT: Administrative Services
PREPARED BY: Nick Pegueros
SUBJECT: Resolution Establishing the Fiscal Year 2023 Tax Levy Rate for the Library
Series 2011 General Obligation Bonds Debt Service
RECOMMENDED ACTION:
Adopt resolution establishing the Fiscal Year 2023 Tax Levy Rate for the Library Series 2011
General Obligation Bonds Debt Service at $0.0044 per $100 of Secured Assessed Value.
BACKGROUND:
The recommended action maintains the current property tax levy rate approved by Saratoga voters
and collected by the County of Santa Clara. All funds collected under the voter-approved General
Obligation (GO) Bonds are exclusively used for debt service payments and administrative costs,
with the final payments due in Fiscal Year 2032.
FY23 GO bond expenditures total $840,185, requiring a tax levy rate on taxable secured property
in Saratoga of $0.0044 per $100, or $44.00 per $1.0 million, of assessed value. The County of
Santa Clara requires City Council to adopt a yearly resolution establishing the upcoming fiscal
year’s tax levy rate.
In May 2001, the City issued the Library Series 2001 GO Bonds with debt service payments
beginning in February 2002. At the time of issuance, competitive interest rates ranged between 5
and 6 percent. With interest rates falling to historic lows in 2011, the City refunded (refinanced)
the 2001 Series General Obligation Bonds saving the City’s residents $2,677,041 in interest over
the remaining bond term.
ATTACHMENT:
Attachment A – Resolution
Attachment B – Series 2011 General Obligation Bonds Debt Service Schedule
C - 1
Attachment C
16
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SARATOGA
ESTABLISHING THE FISCAL YEAR 2023 TAX LEVY RATE FOR THE LIBRARY
SERIES 2011 GENERAL OBLIGATION BONDS DEBT SERVICE
WHEREAS, in March 2000, the citizens of Saratoga approved an increase in their property tax
rate to pay for the debt service and other expenses of the general obligation bonds for the re-
construction of the library; and
WHEREAS, the general obligation bonds were originally sold on April 24, 2001; and
WHEREAS, the original general obligation bonds were refunded on August 1, 2011; and
WHEREAS, it is necessary for the City Council of the City of Saratoga to establish an annual property
tax levy rate to provide funds for the debt service payments and related expenditures during the fiscal
year;
NOW, THEREFORE BE IT RESOLVED, by the City Council of the City of Saratoga that the
General Obligation 2011 Library Bonds property tax levy rate be established at $0.0044 per $100 of
assessed valuation as calculated in Exhibit A.
The above and foregoing resolution was passed and adopted at a regular meeting of the Saratoga
City Council held on the 15th day of June 2022 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Tina Walia, Mayor
ATTEST:
Britt Avrit, MMC, City Clerk
C - 2 17
Exhibit A
A.Series 2011 General Obligation (GO) Bonds FY23 debt service requirements:
Principal 580,000$
Interest 258,185$
Paying Agent fees 1,000$
Other costs 1,000$
Total Requirements 840,185$
B.City of Saratoga Total Secured Assessed Value 18,981,266,493$
C.Total Secured Assessed Value per $100 of valuation 189,812,665$
D.Library Series 2011 General Obligation Bonds
Per $100 of secured assessed value
A.
B.
C.
D.Calculation (A./B.) rounded to 4 digits
County Assessor's FY23 Assessed Valuation (As of May 31, 2022 CAWF)
City of Saratoga
Library Series 2011 General Obligation Bonds
Fiscal Year 2023 (FY23) Property Tax Levy
Series 2011 GO Bond debt service schedule
FY23 secured assessed value (B) divided by $100
0.0044$
C - 3 18
Attachment B
August August February Fiscal Year Bond
Fiscal Interest Annual Interest Interest Annual Debt Principal
Year Rate Principal Payment Payment Interest Service Balance @ YE
Refunded Bond Issuance dated August 1, 2011 11,995,000
2011/12 2.00%- - 228,211 228,211 228,211 11,995,000
2012/13 2.00%455,000 208,518 203,968 412,485 867,485 11,540,000
2013/14 2.00%485,000 203,968 199,118 403,085 888,085 11,055,000
2014/15 2.00%495,000 199,118 194,168 393,285 888,285 10,560,000
2015/16 2.00%500,000 194,168 189,168 383,335 883,335 10,060,000
2016/17 3.00%475,000 189,168 182,043 371,210 846,210 9,585,000
2017/18 3.00%485,000 182,043 174,768 356,810 841,810 9,100,000
2018/19 4.00%500,000 174,768 164,768 339,535 839,535 8,600,000
2019/20 4.00%525,000 164,768 154,268 319,035 844,035 8,075,000
2020/21 4.00%545,000 154,268 143,368 297,635 842,635 7,530,000
2021/22 3.00%565,000 143,368 134,893 278,260 843,260 6,965,000
2022/23 4.00%580,000 134,893 123,293 258,185 838,185 6,385,000
2023/24 4.00%610,000 123,293 111,093 234,385 844,385 5,775,000
2024/25 4.00%630,000 111,093 98,493 209,585 839,585 5,145,000
2025/26 3.50%655,000 98,493 87,030 185,523 840,523 4,490,000
2026/27 3.50%685,000 87,030 75,043 162,073 847,073 3,805,000
2027/28 3.70%705,000 75,043 62,000 137,043 842,043 3,100,000
2028/29 4.00%730,000 62,000 47,400 109,400 839,400 2,370,000
2029/30 4.00%760,000 47,400 32,200 79,600 839,600 1,610,000
2030/31 4.00%790,000 32,200 16,400 48,600 838,600 820,000
2031/32 4.00%820,000 16,400 - 16,400 836,400 -
TOTAL PAYMENTS 11,995,000 2,601,993 2,621,686 5,223,678 17,218,678
Total Bond Principal payments 11,995,000
Total Bond Interest payments 5,223,678
Total Cost of Bond Issuance 17,218,678
City of Saratoga
Library Series 2011 General Obligation Bond
Debt Schedule
C - 4 19
SARATOGA CITY COUNCIL
MEETING DATE: June 15, 2022
DEPARTMENT: Administrative Services
PREPARED BY: Nick Pegueros
SUBJECT: Adopt the Fiscal Year 2023 Investment Policy
RECOMMENDED ACTION:
Adopt the Fiscal Year 2023 Investment Policy.
BACKGROUND:
California Government Code Section - 53600 et seq., City of Saratoga Municipal Code Section -
2-20.035, City of Saratoga Investment Policy - Section XVI require City Council adoption of an
investment policy to guide the investment of the City funds.
No substantive policy changes are recommended for Fiscal Year 2023 (FY23.) Attachment A
reflects all recommended changes.
ATTACHMENT:
Attachment A – Proposed FY23 Investment Policy
D - 1
Attachment D
20
POLICY TITLE: INVESTMENT POLICY – for Fiscal Year 2023
REGULATORY COMPLIANCE: California Government Code Section - 53600 et seq.,
City of Saratoga Municipal Code Section - 2-20.035,
City of Saratoga Investment Policy - Section XVI
POLICY EFFECTIVE DATE: July 1, 2022
AMENDMENTS: Annual adoption
CITY COUNCIL APPROVAL: June 15, 2022
I. POLICY:
It is the policy of the City of Saratoga to invest public funds in a manner which
will provide the maximum security with the highest investment return, while
meeting the daily cash flow demands of the City and conforming to all state
and local statutes governing the investment of public funds.
II. SCOPE:
This investment policy applies to all financial assets of the City of Saratoga.
These funds are accounted for in the City of Saratoga's Comprehensive Annual
Financial Report and include:
A. Funds
1. General Fund
2. Special Revenue Funds
3. Internal Service Funds
4. Capital Project Funds
5. Debt Service Funds
6. Trust and Agency Funds
7. Any new fund, unless specifically exempted
B. Exceptions
1. Deferred Compensation Plans – Investments are directed by the individual
plan participants.
2. Debt Service Funds held by trustees – Investments are placed in
accordance with bond indenture provisions.
3. Notes and Loans – Investments are authorized by separate agreements
approved by City Council.
III. PRUDENCE
Investments shall be made with judgment and care, under circumstances then
prevailing, with prudence, discretion and intelligence not for speculation, but for
D - 2 21
investments, considering the probable safety of capital as well as the probable
income to be derived.
A. The standard of prudence to be used by investment officials shall be applied
in the context of managing an overall portfolio. Investment officers acting in
accordance with written procedures and this investment policy and exercising
due diligence shall be relieved of personal responsibility for an individual
security's credit risk or market price changes, provided deviations from
expectations are reported in a timely fashion and appropriate action is taken
to control adverse developments.
IV. OBJECTIVES
The primary objectives, in priority order, of the City of Saratoga's investment
activities shall be:
A. Safety
Safety of principal is the foremost objective of the investment program.
Investments of the City of Saratoga shall be undertaken in a manner that
seeks to ensure the preservation of capital in the overall portfolio. The
objectives will be to mitigate credit risk and market risk.
1. Credit risk, defined as the risk of loss due to failure of the issuer of a
security, shall be mitigated by investing only in investment grade
securities and by diversifying the investment portfolio so that potential
losses on individual securities will have a minimal impact on the portfolio.
2. Market risk, defined as market value fluctuations due to overall changes
in the general level of interest rates, shall be mitigated by limiting the
average maturity of the City’s investment portfolio to two years and the
maximum maturity of any one security to five years, and by structuring
the portfolio based on cash flow analysis so as to avoid the need to sell
securities prior to maturity.
B. Liquidity
The City of Saratoga's investment portfolio will remain sufficiently liquid to
enable the City of Saratoga to meet all operating requirements, which might
be reasonably anticipated.
C. Return on Investments
The City of Saratoga's investment portfolio shall be designed with the
objective of attaining a rate of return throughout budgetary and economic
cycles, commensurate with the City of Saratoga's investment risk constraints
and the cash flow characteristics of the portfolio.
D - 3 22
V. DELEGATION OF AUTHORITY
Authority to manage the City of Saratoga's investment program is derived from
the following: California Government Code Section 53600 et seq. and Saratoga
Municipal Code Section 2-20.035. Management responsibility for the investment
program is hereby delegated to the City Manager who shall be responsible for
supervising all treasury activities of the Administrative Services Director and who
shall establish written procedures for the operation of the investment program
consistent with this investment policy. Procedures should include reference to:
safekeeping, delivery vs. payment, investment accounting, wire transfer
agreements, banking service contracts and collateral/depository agreements.
Such procedures shall include explicit delegations of authority to persons
responsible for investment transactions. No person may engage in investment
transactions except as provided under the terms of this policy and the procedures
established by the City Manager. The City Manager shall be responsible for all
transactions undertaken and shall establish a system of controls to regulate the
activities of subordinate officials.
VI. ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall refrain from
personal business activity that could conflict with proper execution of the
investment program, or which could impair their ability to make impartial
investment decisions. These officers and employees involved in the investment
process shall disclose to the City Manager any material financial interests in
financial institutions that conduct business with the City. Employees and
investment officials shall refrain from undertaking personal investment
transactions with individuals who conduct business on behalf of the City of
Saratoga.
VII. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City Manager will maintain a list of financial institutions authorized to provide
investment services to the City. In addition, a list will also be maintained of
approved security broker/dealers selected by credit worthiness and who are
authorized to provide investment services in the State of California. These may
include "primary" dealers or regional dealers that qualify under Securities &
Exchange Commission Rule 15C3-1 (uniform net capital rule). No public deposit
shall be made except in a qualified public depository as established by state laws.
All financial institutions and broker/dealers who desire to become qualified
bidders for investment transactions must supply the City Manager with the
following: personal interview, firm description and audited financial statements,
proof of National Association of Securities Dealers (NASD) certification, proof of
State of California registration, completed broker/dealer questionnaire and
certification of having read the City of Saratoga's investment policy and
D - 4 23
applicable depository contracts. An annual review of the financial condition and
registrations of qualified bidders will be conducted by the City Manager.
A current audited financial statement is required to be on file for each financial
institution and broker/dealer with which the City of Saratoga invests prior to any
transaction.
VIII. AUTHORIZED AND SUITABLE INVESTMENTS
The City of Saratoga is empowered by Government Code Section 53601, and
further limited by this investment policy, to invest in the following types of
securities:
Type Guarantee Limits
Term to
Maturity
LAIF State Fund $40,000,000 On Demand
U.S. Treasury Bills U.S.
Treasury
No Limit 1 Year
U.S. Treasury Notes U.S.
Treasury
No Limit 5 Years
U.S. Govt. Agency Issues
(e.g. FNMA, GNMA)
Federal
Agencies
No Limit 5 Years
Certificates of Deposit
(California Bank or Savings
& Loan Companies)
FDIC/FSLIC
and
Collateral
20% portfolio per
institution; 30%
total portfolio
3 Years
Negotiable Certificates of
Deposit
Issuing
Institution
20% portfolio per
institution; 30%
total portfolio
5 Years
Investment Grade
Obligations of California, or
Local Governments, or
Public Agencies
Public
Entity
20% portfolio per
institution; 30%
total portfolio
5 Years
Money Market Mutual
Funds
Fund 10% portfolio per
institution; 20%
total portfolio
On Demand
Passbook Savings Account
and Demand Deposit
Issuing
Bank
Minimum necessary
for current cash flow
On Demand
D - 5 24
The City shall not engage in leveraged investing, such as margin accounts, or
any form of borrowing for the purpose of investing.
The City shall not invest in instruments whose principal and interest could be at
risk contrary to Section IV.A of this policy. Examples of these instruments are
options and future contracts. Additionally, the City shall not invest in
"derivatives".
See Glossary for description of above securities.
IX. COLLATERALIZATION
Collateralization will be required on certificates of deposit and other deposit-type
securities. In order to anticipate market changes and provide a level of security
for all funds, the collateralization level will be 110% of market value of principal
and accrued interest, in accordance with California Government Code Section
53651 and 53652.
The City of Saratoga chooses to limit collateral to those listed in Section VIII.
Collateral will always be held by an independent third party with whom the entity
has a current custodial agreement. A clearly marked evidence of ownership
(safekeeping receipt) must be supplied to the City of Saratoga and retained.
The right of collateral substitution may be granted.
X. SAFEKEEPING AND CUSTODY
All security transactions entered into by the City of Saratoga shall be conducted
on a delivery-versus-payment (DVP) basis. Securities will be held by a third -
party custodian, in the City of Saratoga's name and control, designated by the
City Manager and evidenced by safekeeping receipts.
XI. DIVERSIFICATION
The City of Saratoga will diversify its investments by security type and institution.
Limits are provided for in Section VIII. With the exception of U.S. Treasury
securities and authorized pools, no more than 30% of the City of Saratoga's total
investment portfolio will be invested in a single security type or 20% with a single
financial institution.
XII. MAXIMUM MATURITIES
To the extent possible, the City of Saratoga will attempt to match its investments
with anticipated cash flow requirements. Unless matched to a specific cash flow,
D - 6 25
the City of Saratoga will not directly invest in securities maturing more than five
(5) years from the date of purchase. However, the City of Saratoga may
collateralize its certificates of deposits using longer-dated investments not to
exceed ten (10) years to maturity.
Debt reserve funds may be invested in securities exceeding five (5) years if the
maturities of such investments coincide as nearly as practicable with the
expected use of the funds.
The City of Saratoga will retain a general operating reserve adopted annually by
the City Council. The amount of active deposits and inactive investments with
maturity of one year or less shall always be equal to or greater than the required
general operating reserve. The report discussed in Section XV shall demonstrate
this policy is in effect.
XIII. INTERNAL CONTROL
The City of Saratoga is responsible for establishing and maintaining an internal
control structure designed to ensure that the assets of the City are protected
from loss, theft or misuse. The internal control structure shall be designed to
provide reasonable assurance that these objectives are met. The concept of
reasonable assurance recognizes that (1 the cost of a control should not exceed
the benefits likely to be derived, and (2 the valuation of costs and benefits
requires estimates and judgments by the City Manager and staff.
Accordingly, the City shall establish an annual process of independent review by
an external auditor. This review will provide internal control by assuring
compliance with policies and procedures. The internal controls shall address the
following points:
• Control of collusion.
• Separation of transaction authority from accounting and recordkeeping.
• Custodial safekeeping.
• Avoidance of physical delivery of securities.
• Clear delegation of authority to subordinate staff members.
• Written confirmation of transactions for investments and wire transfers.
• Development of a wire transfer agreement with the lead bank and third-
party custodian.
XIV. PERFORMANCE STANDARDS
The investment portfolio shall be designed with the objective of obtaining a
reasonable rate of return throughout budgetary and economic cycles,
commensurate with investment risk constraints and cash flow needs.
D - 7 26
A. Market Yield (Benchmark)
The City’s investment strategy is passive. Given this strategy, the benchmark
used by the City of Saratoga to determine whether market yields are being
achieved shall be the one-year U.S. Treasury Bill.
XV. REPORTING
The City Manager is charged with the responsibility of including a market report
on investment activity and returns in the City of Saratoga's Cash and Investment
Report. The report will be in compliance with California Government Code
Section 53646.
XVI. INVESTMENT POLICY ADOPTION
The City of Saratoga's Investment Policy shall be reviewed and adopted by
the City Council annually.
D - 8 27
GLOSSARY
Asset Allocation
Refers to the division of holdings in a portfolio by asset class. A common strategy is
to hold assets that perform or react differently with the objective to limit or reduce risk.
Benchmark
A point of reference that serves as a standard for performance to be measured against.
Broker
A person or entity registered with the National Association of Security Dealers and
provides investment services and/or execution of services in exchange for
compensation.
Annual Comprehensive Financial Report (ACFR)
The City’s annual financial statements and footnotes, along with an executive summary,
financial outlook, statistical information, and other financial information.
Certificates of Deposit
Commonly called time deposit certificates or time deposit open accounts. These are
nonnegotiable.
Collateralization
Process by which a borrower pledges securities, property or other deposits for the
purpose of securing the repayment of a loan and/or security. Also refers to securities
pledged by a bank to secure deposits of public monies.
Custodian
A bank or other financial institution that keeps custody of stock certificates and other
assets.
Dealer
Someone who acts as a principal in all transactions, including buying and selling from
his/her own account.
Delivery vs. Payment
The preferred method of delivering securities, with an exchange of money for the
securities.
Demand Deposits
A deposit of monies which are payable by the bank upon demand of the depositor.
D - 9 28
Derivative
Securities that are based on, or derived from, some underlying asset, reference date,
or index.
Dividend
A share of the income divided up amongst shareholders of a company.
FDIC
Federal Depository Insurance Corporation
FSLIC
Federal Savings and Loans Insurance Corporation
Index
A tool used to statistically measure the progress of a group of assets that share
characteristics. This can include a group of stocks, a group of bonds, or a group of
other assets.
Internal Rate of Return (IRR)
The discount rate at which the present value of future cash flows of an investment
equals the cost of the investment. It is determined when the net present value of the
cash outflows (the cost of the investment) and the cash inflows (returns on the
investment) equal zero, the rate of discount being used is the IRR
Liquidity
An asset that can easily and rapidly be converted into cash without significant loss of
value.
Local Agency Investment Fund (LAIF)
The LAIF was established by the State of California to enable treasurers to place funds
in a pool for investments. There is a limitation of $30 million per agency subject to a
maximum of ten (10) total transactions per month. The City uses this fund when
market interest rates are declining as well as for short-term investments and liquidity.
Money market mutual funds
Mutual funds that invest in short term securities and strive to maintain a share price
of $1.
Negotiable certificates of deposit
A bank deposit issued in negotiable form (i.e., one that can be bought or sold in the
open market).
Passive Investment Strategy
An approach to managing the investment portfolio, which entails a “buy and hold”
strategy in which investments are generally held until they mature.
D - 10 29
Portfolio
Combined holding of more than one stock, bond, commodity, cash equivalent or other
asset. The purpose of a portfolio is to reduce risk through diversification.
Primary Dealer
A group of government securities dealers that submit daily reports of market activity
and security positions held to the Federal Reserve Bank of New York and are subject
to its oversight.
Rate of Return
The total income received over a period of time, including interest income, accretion
of discount, amortization of premium, and change of market value; usually expressed
as a percentage or in decimal format.
Regional Dealer
A dealer who is not a primary dealer, and therefore not monitored by the Federal
Reserve, but is registered with the Securities and Exchange Commission.
Safekeeping
Offers storage and protection of assets provided by an institution serving as an agent
U.S. Treasury Bills
Commonly referred to as T-Bills these are short-term marketable securities sold as
obligations of the U.S. Government. They are offered in three-month, six-month and
one-year maturities. T-Bills do not accrue interest but are sold at a discount to pay face
value at maturity.
U.S. Treasury Notes
These are marketable, interest-bearing securities sold as obligations of the U.S.
Government with original maturities of one to ten years. Interest is paid semi-annually.
U.S. Government Agency Issues
Include securities, which fall into this category. Issues, which are unconditionally,
backed by the full faith and credit of the United States, e.g. Small Business
Administration Loans.
Yield
The yield refers to the interest on a bond or the dividends paid on a stock or mutual
fund. Yield also includes expected capital gain or loss.
D - 11 30
ADMINISTRATIVE SERVICES
Memorandum
To: City Council Finance Committee
From: Nick Pegueros
Date: May 26, 2022
Subject: Approve Summer Meeting Schedule
The City Council Finance Committee holds its regular meetings on the fourth Thursday of every month.
With City Council’s August recess and staff availability, I request consideration of canceling the
Committee’s June, July, and August meetings.
The September 22nd meeting agenda includes:
1. Draft Fiscal Year 2024 budget development process and calendar
2. Updates to financial reporting: Treasurer’s Report
31