Infrastructure: Santa Clara Needs $600M Today and New Income Streams Tomorrow

Santa Clara’s once-proud International Swim Center is Exhibit A for the urgency of the City’s unfunded infrastructure needs. For years, Santa Clara postponed needed maintenance and replacing aging facilities, and the bill now adds up to $571 million this year. It has been near this level for years, and the only thing that’s changed is that now, everything is older.

At an October study session, the city council looked at the details of Santa Clara’s unfunded needs and ways the City can finance municipal infrastructure going forward.

“Our current CIP [capital improvement project] approach is pay as you go,” said City Manager Jovan Grogan. “That works when you have cash.” But the city has no cash, and “as a result of how we fund our capital improvement projects…[they are] are often unplanned and urgent.

“We need dedicated funding for [infrastructure] as well as an infusion of cash to address our unfunded needs,” Grogan continued. “Our decades-long practice of deferring our infrastructure really needs to change. That’s what we’re here to begin the conversation with you about as we look forward and plan for November 24 [election].”

Anatomy of a Half-Billion Dollar Problem

“Much of our infrastructure is over 60 years old,” Grogan said. “It does not conform to current building standards. There are health and safety concerns. Many facilities sometimes have to be closed and we see that with our International Swim Center. Staff works really hard to keep ailing facilities up and running.

“Sometimes our challenge is that the facilities are so old,” Grogan continued. “Parts break, we have to have parts custom-made, or we have to send motors out to be refurbished because you can’t buy that motor anymore. We’re getting to the end of being able to keep some of our facilities open.”

Further, when maintenance is postponed, cost increases exponentially.

“If you don’t pave a road, it just deteriorates,” said Grogan. “Not only does the treatment that you need to apply get more expensive, if you could have done that project for a million dollars this year and you wait two years, you may have to pay 6% [$60,000] more. So it’s important to do projects as soon as you can because you’re actually saving taxpayers money.”

Parks & Recreation: Aging Buildings, Closed Swimming Pools

The average age of Santa Clara’s parks is over 50 years and nearly half of them are in critical or poor condition, reported Assistant City Manager Cynthia Bjorquez. The City’s 65 park buildings are, on average, 32 years old and a quarter of them are in poor or critical condition.

The situation with Santa Clara’s swimming pools is even worse.

“Our pools are so old and it’s hard to find parts,” said Bjorquez. “We have found that when we fix one thing, something else needs repair. Just this summer, the ISC [International Swim Center], the senior center natatorium and Mary Gomez [pool], were all closed for service.”

Streets: Plans in Place, Funding MIA

The City has plenty of plans to improve traffic safety and enhance multi-modal transportation, but not much money to move them beyond the planning stage.

“Over the last several years, we’ve done a great job identifying those needs,” explained Public Works Director Craig Mobeck. “We’ve improved on the bike master plan and updated that. We’ve also laid out an uncontrolled crosswalk plan — we have over 200 crosswalks in the City that are not controlled either by a signal or flashing beacons.

“We use a lot of grant funding when we get it,” Mobeck continued. “We use a little bit of local funding. But the cost of the high priority projects is in the tens of millions of dollars.”

Even the City’s streets, which Santa Clara has been justifiably proud of over the years, have dipped below the City’s goal of a pavement condition index of 75 (out of a possible 100).

“We’re in the low 70s right now,” said Mobeck. “However, we know that the further we defer maintenance, those numbers start to slip.”

SCFD’s Aging Infrastructure

Deferred maintenance has left Santa Clara’s fire department with deteriorating structures and inadequate ADA accessibility, said Deputy Fire Chief Jeremy Ray.

Fire Station No.1 doesn’t meet current seismic safety standards and isn’t ADA accessible. The station lacks proper storage space for personal protective equipment (PPE).

“It’s just not really equipped to be a modern fire station,” said Ray.

Fire Station No. 5, the oldest in the City, was built in 1961. It has limited space and accessibility for ladder trucks, and also lacks ADA compliance. The roof is in dire need of replacement.

“There was an assessment done that it needed a completely new roof in 2016,” said Ray. “That was postponed with the hope that we were going to replace the station. So now we have a very old roof, that would cost hundreds of thousands of dollars to replace, on a fire station that really does not meet our operational needs.”

Only Two Options: Debt and Taxes

The only options the City has for paying for these infrastructure needs are a bond for the $600 million in unfunded needs, and taxes for ongoing infrastructure and operations funding, explained Santa Clara Finance Director Kenn Lee. He laid out the options.

A general obligation (GO) bond would supply immediate cash, said Lee. GO bonds require 55% voter approval and can only be used for the stated uses. The bonds are repaid through add-on property taxes — parcel taxes — based on assessed value.

A general purpose tax can be used for any public program and only requires simple majority voter approval. It’s an increase on fees for property transfer (“documentary”), as well as hotel and business taxes. These are levied on the specific services. For example, an increase in the City’s documentary transfer tax from $1.10 per $1,000 to $4.40 per $1,000 would generate an additional $8 million.

A special purpose tax — for example, taxes to fund transportation, parks and libraries — require 67% voter approval and the revenue can only be used for the stated purpose. Special purpose taxes are also parcel taxes levied either per parcel or based on land size or square footage. A $50 per-parcel tax would raise $1.5 million annually for ongoing funding.

Another option is a sales tax, which requires simple majority approval and can be used for any purpose. Santa Clara could increase its sales tax by 0.25%, which would boost general fund revenue by $12 million.

What About SVP’s Contribution?

Council Member Suds Jain presented another alternative.

“Santa Clara has this incredibly unique asset and that is Silicon Valley Power,” Jain said.

“The city gets 5% off the top of the electricity sales, which are about $550 million a year. We generate $30 million for the general fund from Silicon Valley Power. So if we brought [the City’s share] up to 8%, we would generate an incredible amount of money and that could pay off a general obligation bond.”

Next Steps

The next step is gauging public sentiment.

“We intend to retain a consultant to conduct likely voter research,” said City Manager Grogan. “As you know, this typically begins with conducting statistically sound research to provide information on the viability of various measures.

“We’ve looked at four [ways to raise money] but there are potentially others that we will also do analysis on,” he continued.

Following that, city hall will establish priorities and roll out a community education program on the infrastructure needs.

Review the infrastructure presentation: unfunded infrastructure 2023 preso-min