October 25, 2005

SUBJECT: Positions on State and Local Ballot Measures for the November 2005 Election

REPORT IN BRIEF

This report provides an opportunity for the City Council to take positions on state and local measures on the November 8^th Ballot.  The report summarizes each of these measures, provides the City’s adopted policy on the issues, the position of the League of California Cities (LCC) (if appropriate), and a staff recommendation. Generally, staff only recommends a position on a ballot measure if there is an existing City policy on the issue or significant impact on the City.

Staff recommends the following positions on the ballot measures discussed in this report:

State Ballot Measures:

Proposition 73:  No Position

“Waiting Period and Parental Notification Before Termination of Minor’s Pregnancy. Initiative Constitutional Amendment”

Proposition 74:  No Position

“Public School Teachers. Waiting Period for Permanent Status. Dismissal. Initiative Statute.”

Proposition 75:  No Position

“Public Employee Union Dues. Restrictions on Contributions. Employee Consent Requirement. Initiative Statute.”

Proposition 76:  No Position

“State Spending and School Funding Limits. Initiative Constitutional Amendment.”

Proposition 77:  No Position

“Redistricting. Initiative Constitutional Amendment.”

Proposition 78:  No Position

“Discounts on Prescription Drugs. Initiative Statute.”

Proposition 79:  No Position

“Prescription Drug Discounts. State-Negotiated Rebates. Initiative Statute”

Proposition 80:  Oppose

“Electric Service Providers. Regulation. Initiative Statute”

City of Sunnyvale Ballot Measures:       

Measure D:  Support

“Business License Tax – City of Sunnyvale”

Measure E:  Support

“Hotel Tax – City of Sunnyvale”

Measure F:  Support

“Term Limits – City of Sunnyvale”

Measure G:  Support  

“City Manager’s Residence – City of Sunnyvale”

Measure H:  Support

“Heritage Resource – City of Sunnyvale”

BACKGROUND

Staff is providing this report to afford the City Council an opportunity to take a public stand on state and local measures on the November 8^th 2005 ballot.  Staff’s recommendations are generally based on existing City policies from documents such as the General Plan and the Legislative Action Positions.  Past positions of the Council also guide staff recommendations.  New positions taken by the Council will become official policies of the City and will be added to the Legislative Action Policies. 

EXISTING POLICY

Legislative Management Sub-element, Goal 7.3C: Participate in intergovernmental activities, including national, state and regional groups, in order to represent the City's interest, influence policy and regulations, and enhance awareness.

Legislative Management Sub-element, Policy 7.3C.1: Represent adopted City policy in intergovernmental activities.

DISCUSSION

Proposition 73: Waiting Period and Parental Notification Before Termination of Minor’s Pregnancy.  Initiative Constitutional Amendment.

Summary: This is a constitutional amendment to bar abortion on unemancipated minors until 48 hours after physician notifies minor’s parent/legal guardian, except in medical emergency or with parental waiver; and permits judicial waiver of notice based on clear and convincing evidence of minor’s maturity or minor’s best interests. This constitutional amendment means a physician must report abortions performed on minors and that the State shall compile statistics. This constitutional amendment authorizes monetary damages for violation and minors must consent to abortion unless mentally incapable or in medical emergency. This constitutional amendment also permits judicial relief if minor’s consent to abortion is coerced.

Proponents:  Proponents argue that Proposition 73 would substantially reduce pregnancies and abortions in minors. Proponents also argue that Proposition 73 still gives a minor the right to obtain or refuse an abortion, but a parent can help her understand all options, obtain competent care, and provide medical records and history.

Opponents: Opponents argue that Proposition 73 would allow the government to mandate family communication and therefore put minors in troubled homes in danger. Opponents also argue that Proposition 73 would make vulnerable minors choose between talking with parents and having an illegal, unsafe abortion.

Fiscal Impact:     None

City Policy:        No relevant City policy

LCC Position:      No Position

Staff Recommendation:  No Position

Proposition 74: Public School Teachers. Waiting Period for Permanent Status. Dismissal. Initiative Statute.

Summary: This measure would increase the length of time required before a teacher may become a permanent employee from two consecutive school years to five complete consecutive school years; measure applies to teachers whose probationary period commenced during or after the 2003–2004 fiscal year. This measure would also authorize school boards to dismiss a permanent teaching employee who receives two consecutive unsatisfactory performance evaluations.

Proponents:  Proponents argue that Proposition 74 would make sure that students have the best possible teachers by requiring teachers to perform well for five years instead of two, give teachers more of an opportunity to demonstrate expertise, make it easier to remove a tenured teacher after two consecutive unsatisfactory evaluations, and improve the quality of teachers by rewarding the best.

Opponents: Opponents argue that Proposition 74 would not improve student achievement and help reform public education. Opponents argue that existing state law already gives school districts the authority to dismiss teachers for unsatisfactory performance, and other activities not appropriate to teaching. Opponents also argue that Proposition 74 is unfair to teachers because it takes away their right to a hearing before they are fired.

Fiscal Impact:     None

City Policy:        No relevant City policy

LCC Position:      No Position

Staff Recommendation:  No Position

Proposition 75: Public Employee Union Dues. Restrictions on Political Contributions. Employee Consent Requirement. Initiative Statute.

Summary: The initiative prohibits public employee labor organizations from using dues or fees for political contributions unless the employee provides prior consent each year in a specified written form.  Prohibition does not apply to dues or fees collected for charitable organizations, health care insurance, or other purposes directly benefiting the public employee.  Requires labor organizations to maintain and submit to the Fair Political Practices Commission records concerning individual employees’ and organizations’ political contributions; those records are not subject to public disclosure.

Proponents:  Proponents argue that Proposition 75 would protect public employees from having political contributions taken and used without their permission. Proponents also argue that Proposition 75 would require public employee unions to obtain annual written consent from members before their dues are taken for political purposes and allow government employees to decide when, how, and if their wages are spent to support political candidates or campaigns.

Opponents: Opponents argue that Proposition 75 would only restrict public employees and not restrict corporations. Opponents also argue that Proposition 75 would take away union members’ right to make their own decisions concerning political contributions and violate employees’ privacy  by requiring members who want to participate to sign a personal disclosure form that could be circulated in the workplace.

Staff Analysis:  There is no clear existing policy on this issue and the measure does not materially impact the City.

Fiscal Impact:  The City could experience some increased cost to implement and enforce the consent requirements of the measure; however, it is considered that they would be minor.  Local government’s costs could be partially offset by fees that can be imposed to cover the costs of processing payroll deductions for union dues and fees.  Currently, City of Sunnyvale does not charge any payroll deduction fees to labor organizations.

City Policy: No relevant City policy

LCC Position: No Position

Staff Recommendation:  No Position

Proposition 76: State Spending and School Funding Limits.   Initiative Constitutional Amendment.

Summary: This initiative is also known as the “Live Within Our Means” measure, and is sponsored by Governor Schwarzenegger.  This Proposition would significantly amend the California Constitution relating to the State budget.  The main provisions are as follows:

• Limits State spending to prior year’s level plus the 3 previous year’s average growth;
• Changes the State’s minimum school funding requirements; eliminates repayment requirement when minimum funding is suspended;
• Excludes appropriations above the minimum from schools’ funding base;
• Directs excess General Fund revenues, currently directed to schools/tax relief, to a budget reserve, specified construction and debt repayment;
• Permits Governor, under specified circumstances, to reduce appropriations of Governor’s choosing, including employee compensation/state contracts;
• Continues prior year’s appropriation level if State budget enactment is delayed;
• Prohibits the State from borrowing from Special Funds; and
• Requires 5-year repayment of local government mandate reimbursement claims.

Proponents:  Proponents argue that Proposition 76 would control state spending and balance our budget without raising taxes. Proponents also argue that Proposition 76 would establish “checks and balances” to encourage the Governor and Legislature to work together, stabilize K-14 education spending, and guarantee that taxes dedicated for highways and roads are spent on those projects.

Opponents: Opponents argue that Proposition 76 would cut local funding for schools, health care, police and fire, overturn the minimum school funding protections approved by voters when they passed Proposition 98, give the Governor unchecked power over the state budget, and not prevent new, higher taxes.

Staff Analysis: This Proposition would enact major changes to the California Constitution relative to the State Budget process, would grant the Governor substantial new power to unilaterally reduce spending, and modifies the Proposition 98 funding guarantee for schools. 

The major fiscal effects of this Proposition are to place additional limits on State spending, to “smooth out” State spending over time (through the prudent use of reserves set aside in good times), and to expand the Governor’s power to reduce State spending.  The State’s Legislative Analyst has estimated that approval of this Proposition would, over time, result in lower overall State spending relative to current law and lower minimum funding guarantees for K-14 education.

Additional fiscal effects of this Proposition include 1) the suspension of Proposition 42 transfers (the State suspended transfers from the General Fund to the Transportation Investment Fund (TIF) to offset its budget deficit and owes the TIF more than $2 billion) and the repayment of those suspended transfers within 15 years, 2) prohibition of other interfund loans to cover General Fund shortfalls, and 3) shortening the payment/repayment window on actual/deferred mandated cost claims to local governments from 15 to 5 years.     

From a local government perspective, there are both pros and cons to this proposal.  On the negative side, reductions in State spending could lead to reductions in funding provided to local governments, or the shifting of costs by the State to local units.  On the positive side, this Proposition would suspend Proposition 42 transfers and require repayment of the previous suspended amounts.  This would provide needed funding for local and regional transportation projects.  In addition, this Proposition would require a shorter repayment schedule to local governments for state mandated cost claims.     

Fiscal Impact: Between FY 2003/2004 and 2006/2007, the State will have suspended approximately $2 million in Transportation Congestion Relief Fund payments to Sunnyvale through the suspension of Proposition 42 transfers.  Passage of Proposition 76 would require repayment of this revenue over 15 years, beginning in FY 2007/2008. 

Over the past several years, the State has deferred the payment of at least $300,000 in reimbursements to Sunnyvale for mandated costs.  Though the repayments have begun, they would be accelerated under Proposition 76 such that Sunnyvale would receive reimbursement of this revenue within 5 years.  In future years, the reimbursement payments would have to be made within 5 years.

Potential Negative Fiscal Impacts

The passage of Proposition 76 could result in reduced funding to local governments and/or further cost shifting by the State as its expenditures are ratcheted down over time, or if the Governor exercises the broadened powers to reduce State spending.      

City Policy:

Legislative Action Positions

7. Planning and Management, 7.1 Fiscal Management, ii) State, (1): Protect the authority of charter cities to control local revenues.  Oppose the reconfiguration of revenue distribution formulas to take revenues away from local government to fund state programs.

7. Planning and Management, 7.1 Fiscal Management, ii) State, (9): Prohibit the state from borrowing to finance budgetary deficits.

7.3 Legislative/Management, Miscellaneous, (1): Support efforts to revise the California Constitution to enhance accountability, efficiency, and responsiveness for state and local government.

7.3 Legislative/Management, Miscellaneous, (2): Support long-term strategic planning by the state and balanced, multiple year budgets with a prudent reserve and outcome-based performance measures.

LCC Position: Support

Staff Recommendation: No Position

Proposition 77: Redistricting. Initiative Constitutional Amendment.

Summary: This is a constitutional amendment to change the process for redistricting the California’s Senate, Assembly, Congressional and Board of Equalization district. This constitutional amendment requires a three-member panel of retired judges, selected by legislative leaders, to adopt a new redistricting plan if the measure passes and again after each national census; panel must consider legislative, public proposals/comments and hold public hearings. The redistricting plan would become effective immediately when adopted by judges’ panel and filed with the Secretary of State. If voters subsequently reject the redistricting plan, the process repeats. This constitutional amendment also specifies the time for judicial review of adopted redistricting plan; if plan fails to conform to requirements, court may order new plan.

Proponents:  Proponents argue that Proposition 77 would guarantee fair, competitive elections by ensuring voters have the final say on voting districts. Proponents also argue that Proposition 77 would reduce special interest influence.

Opponents: Opponents argue that voters lose their right to reject redistricting before it becomes effective and that it will costs taxpayers millions.

Fiscal Impact:     None

City Policy:        No relevant City policy

LCC Position:      No Position

Staff Recommendation:  No Position

Proposition 78: Discounts on Prescription Drugs. Initiative Statute.

Summary: This measure would establish a discount prescription drug program, overseen by the Department of Health Services and would enable certain low – and moderate – income California residents to purchase prescription drugs at reduced prices. This measure would impose a $15 application fee, renewable annually and would require the Department’s prompt determination of residents’ eligibility, based on listed qualifications. This measure would authorize the Department to contract with pharmacies to sell prescription drugs at agreed-upon discounts negotiated in advance, and to negotiate rebate agreements with drug manufacturers. This measure would also permit outreach programs to increase public awareness; create a state fund for deposit of rebate payments from drug manufacturers and allows the program to be terminated under specified conditions. 

Proponents:  Proponents argue that Proposition 78 would deliver needed prescription drug discounts to seniors and low income, uninsured Californians. Proponents also are that Proposition 78 would make it easier for people to get access to new and existing free drug programs, meaning even more savings for consumers.

Opponents: Opponents argue that Proposition 78 would rely on drug manufacturers to voluntarily lower their prices and does not allow the state of California to enforce the program. Opponents also argue that Proposition 78 would not provide discounts to many uninsured Californians and that discounts would be based on the “lowest commercial price” set by the drug companies.

Fiscal Impact:    None

City Policy:        No relevant City policy

LCC Position:     No Position

Staff Recommendation:  No Position

Proposition 79: Prescription Drug Discounts. State-Negotiated Rebates. Initiative Statute

Summary: This measure would provide prescription drug discounts to Californians who qualify based on income-related standards, to be funded through rebates from participating drug manufacturers negotiated by the California Department of Health Services. Rebates would be deposited in the State Treasury fund, used only to reimburse pharmacies for discounts and to offset administration costs with at least 95% of rebates going to fund discounts. This measure would prohibit new Medi-Cal contracts with manufacturers not providing the Medicaid best price to this program, except for drugs without a therapeutic equivalent and would establish an oversight board. This measure would also make prescription drug profiteering, as defined, unlawful. 

Proponents:  Proponents argue that Proposition 79 would provide enforceable discounts on prescription drugs for millions of Californians, and would provide deeper discounts to more people that the drug industry’s “voluntary” Proposition 78. Proponents also argue that Proposition 79 would save taxpayers money by reducing prescription drug costs.

Opponents: Opponents argue that Proposition 79 would cost Californians millions and would change the state’s Medi-Cal program, making it unlikely that the federal administration would approve this proposition. Opponents also argue that Proposition 79 would not provide prescription drugs to help seniors, low-income, and disabled patients unless drug manufacturers provide higher discounts to higher income Californians.

Fiscal Impact:    None

City Policy:        No relevant City policy

LCC Position:     No Position

Staff Recommendation:  No Position

Proposition 80: Electric Service Providers. Regulation. Initiative Statute

Summary: The measure addresses a number of aspects of the state’s electricity market: the regulation of ESPs (Electric Service Providers) and the “direct access” electricity sales that ESPs provide; the electricity procurement process used by IOUs (Investor Owned Utilities, such as PG&E; resource adequacy requirements; the renewables portfolio standard; and the use of time-differentiated electricity rates. In general, the measure would provide the Public Utilities Commission with more power than it currently has and would turn a number of existing PUC policies and practices into legal requirements.

Regulation of ESPs. ESPs provide retail electricity service to customers who have chosen not to receive electricity service from the utility (PG&E in the case of Sunnyvale) that serves their area.  Proposition 80 would place the ESPs under the “jurisdiction, control and regulation” of the Public Utilities Commission (PUC). The measure specifies that the scope of this regulation includes the enforcement of requirements related to energy procurement, contracting standards, resource adequacy, energy efficiency, demand response, and the renewables portfolio standard. While the measure broadens the authority of the PUC to regulate the ESPs, it does not, however, specify the extent to which it would regulate ESP rates and terms of service.

Direct Access. In general, the measure bars any customer currently receiving electricity service from an IOU from switching to an ESP. Customers currently being served by direct access contracts with ESPs could continue to receive electricity service from ESPs, effectively “grand fathering” in their direct access service. Direct access customers could also return to IOU electricity service under specified conditions. The measure does not restrict current or future community choice aggregation.

Procurement Process. The measure requires that the PUC implement a long-term procurement process, and directs the PUC to consider a series of factors in evaluating the IOUs’ long-term procurement plans. While the PUC generally now considers the factors listed in the measure, current law does not specify that all of these factors be considered.

The measure also requires that the first priority for IOUs in procuring new electricity is to be from “cost-effective” energy efficiency and conservation programs, followed by “cost-effective” renewable resources, and then from traditional sources such as fossil fuel burning power plants. This “loading order,” as it is known, has been adopted by the PUC, but is not currently required by law.

Resource Adequacy Requirement. The measure requires both the IOUs and ESPs to show that they are able to meet peak demand with adequate reserves to ensure system reliability. This puts into law current PUC practice.

Renewables Portfolio Standard. The measure accelerates to December 31, 2010, the deadline for the IOUs and ESPs to meet the 20 percent renewable resources requirement, consistent with a recent PUC decision. The measure also deletes a provision in existing law that explicitly provides that electricity providers are not required to increase their share of electricity from renewable sources once the 20 percent requirement has been reached.

Time-Differentiated Electricity Rates. Under the measure, residential and small commercial customers with electricity use under a specified amount and in a building built before January 2006 could not be required to pay time-differentiated electricity rates without their consent.

Amending the Measure. The measure states that the Legislature may amend the measure only to achieve its “purposes and intent” and would require a two-thirds vote of both legislative houses and signature of the Governor to do so. To the extent that the measure puts into law existing processes and policies of the PUC that are not currently required by law, the measure would make it more difficult for the state to modify these practices and policies when, for example, conditions in the electricity market change.

Proponents:  Proponents argue that Proposition 80 would lower electricity rates by requiring independent generators and utilities to compete against each other, require all electricity providers to have enough power and reserves to keep the lights on, and make sure that utilities know how many customers they will have to serve. Proponents also argue that Proposition 80 would ensure that all electricity providers are subject to regulation and control, speed up the shift to renewable energy, and give first priority to energy efficiency programs. 

Opponents: Opponents argue that Proposition 80 would restrict energy choice for all consumers, limit the market for increasing solar, wind, and geothermal energy resources, and threaten to increase the cost of energy for community colleges, the University of California and State University systems, hospitals, and local governments. Opponents also argue that Proposition 80 would discourage future jobs and business investment in California and destabilize the current progress toward a secure energy future.

Staff Analysis: The City “sees” the electricity market from three different perspectives:

• As an ordinary business customer that purchases power from the local utility;
• As a generator of self-provided electricity (the Power Generation Facility powers the Water Pollution Control Plant); and
• As a seller of excess electricity from the Power Generation Facility. 

As a business customer

Local governments are largely excluded from changes made by Proposition 80.  As a result, the City would be affected by the measure in essentially the same way as any other business or institution that purchases its electricity from the local utility, PG&E in this case.  As such, the City’s business interests would be primarily in the areas of electricity cost and reliability of supply.

It is difficult to predict how the various changes proposed in the measure would affect the overall cost of the City’s purchased electricity.  Acceleration of the 20% renewables requirement from 2017 to 2010 would be likely to increase electricity costs in the short term, as utilities and electricity providers will have to significantly accelerate their investments in wind and solar power generation facilities in order to meet the requirement.  The Superintendent of Facilities Maintenance estimates the increased cost to be $30,000 – $40,000 per year for each of the seven years between 2010 and 2017.

The measure’s phase out of direct access arrangements, which tend to single out large customers for low prices at the expense of the City and other smaller customers, could decrease City electricity costs if it continued in its current status as a regular customer with a number of separate PG&E accounts.  However, should the City wish in the future to take advantage of a direct access provider to reduce its costs, the direct access option would no longer be available.  The City would be able to use community choice aggregation to unhook from PG&E.  However, based on discussions with other cities that are working to implement it, community choice aggregation is a complex and lengthy process that does not assure cost savings.  In sum, the loss of the direct access option resulting from passage of Proposition 80 would take away a City option that has the potential to reduce electricity costs.

A concern with regard to both costs and system reliability is the measure’s approach to time-differentiated rates.  Time-differentiated rates are an effective method for reducing overall consumption at times of high electricity demand.  The power used to meet these short-term “spikes” in demand is very costly, and reducing the height of demand “spikes” is closely correlated with reducing overall rate payer costs.  By making participation voluntary, this aspect of Proposition 80 would allow customers in hot climates to continue to use air conditioning and other power-consuming devices at peak demand periods without a rate penalty.  Because peak power is by far the most expensive to generate, customers in milder climates such as Sunnyvale’s (who place less demand on the system at peak hours) will continue to subsidize those with large demand spikes at peak hours.  Spikes in demand also make the electricity grid less able to perform reliably and increase the risk of customer outages.

In summary, this proposition would take away City purchase options and has the potential to increase costs for the City in its role as a customer, although the complexity of the rate-setting process makes it impossible to be sure of the outcome.

As a generator of self-provided electricity

The measure does not appear to affect this City activity.  The PGF should be able to continue to supply the majority of the power needs of the WPCP at a net savings of over $800,000 per year compared to the cost of buying power from PG&E.

As a seller of excess electricity from the Power Generation Facility

The City currently sells a small amount of excess electricity through the Automated Power Exchange (APX).  This electricity is considered to be a New Renewable Resource because it is primarily derived from landfill gas from the Sunnyvale Landfill and sewage treatment digester gas from the Water Pollution Control Plant.

By accelerating to 2010 the requirement that utilities derive 20% of their power from renewable resources, Proposition 80 would increase demand for the type of renewable power sold by the PGF.  However, this would have no immediate fiscal impact on the City because it already earns an extra $1.75 per megawatt hour “green power” premium from its electricity sales under an agreement with 3 Phases Energy.  In addition, the amount of power sold is very small (50-100 megawatt hours per month), meaning that any incremental revenue due to future demand for the power’s “greenness” will also be very small.

Fiscal Impact: Proposition 80 is likely to increase City utility costs, but the technical and financial complexity of the electricity system and the number of changes proposed by the measure make it difficult to predict the magnitude of any increase.

City Policy: Legislative Action Policy 3.5(8) Energy: Support a review of electric utility deregulation to assure reliability, consistency and reasonable pricing.

LCC Position: No Position

Staff Recommendation: Oppose

Local Ballot Measures

The City of Sunnyvale has placed five measures on the ballot.  Consistent with other ballot measures, no public funds have been or will be used to endorse or oppose these measures.  Two of the measures are proposed tax increases, and

three are amendments to the City Charter.

Measure D:  Business License Tax – City of Sunnyvale

Summary: The passage of Measure D would amend the Sunnyvale Municipal Code to increase the business license tax, which supports basic City services, from its current amount of $10 for every 5 employee/rental units, to $30 for 1, $50 for 2 to 5, and $50 for each additional group of 5 employees/rental units, up to $9,500 for employees and $4,250 for rentals, with increases phased over three years and both tax/cap adjusted annually for inflation.

Staff Analysis:  With the adoption of the FY 2004/2005 Budget, the City Council approved for study a broad array of fiscal strategies to achieve cost savings or enhance revenues. Through a series of carefully planned actions including expenditure/service level reductions, cost saving measures and fee increases to more fully recover cost of service, the structural gap has been significantly reduced.  In keeping with prudent fiscal policy, additional strategies, including potential tax increases, are being considered to ensure that ongoing and long-term structural integrity of the City’s General Fund is secured and maintained.      

Among the opportunities for revenue generation is the potential to increase the Business License Tax (BLT). The BLT, which generates approximately $240,000 annually, is among the lowest in the area and is by far the General Fund’s lowest revenue generating tax.  A Fact Sheet explaining the Business License Tax is attached (Attachment B).

Fiscal Impact:  Once fully implemented, revenues to the City could increase by $800,000 per year to total annual revenue of $1.1 million

City Policy:   The Fiscal Management Sub-Element of Sunnyvale’s General Plan contains several goals, policies and action statements that address the City’s revenue base, including, but not limited to the following:

Goal 7.1A – Maintain and enhance the City’s revenue base

Policy 7.1A.1 – Maintain a diversified and stable revenue base for the City

Staff Recommendation:  Support

Measure E: Hotel Tax – City of Sunnyvale

Summary: The passage of Measure E would amend the Sunnyvale Municipal Code to increase the transient occupancy tax which is charged only on persons who occupy hotel or motel rooms in the City for 30 days or less, from the current 8.5% to 9.5% over a 2-year period, which is lower than that charged in San Jose, Palo Alto, Mountain View, Milpitas and Cupertino, in order to help maintain basic City services.

Staff Analysis: 

Sunnyvale’s Transient Occupancy Tax (TOT) rate is the lowest of cities in the surrounding area. The current 8.5 percent tax rate compares to 9.5 percent in the City of Santa Clara and 10 percent in most other South Bay cities. Elsewhere in the Bay Area, Berkeley’s tax rate is 12 percent and San Francisco’s is 14 percent.

Sunnyvale’s long-term budget planning process has enabled the City to survive many of the up-and-down cycles typical of our economy. Since about 2000, however, the economy statewide has slumped, and the South Bay has been particularly hard hit. Two years ago, Sunnyvale faced a $14.9 million structural imbalance in its General Fund operating budget, dictating a reduction in some service levels and overall City staffing.

Through careful budgetary management, the City is slowly improving its fiscal position, but still faces a $1.75 million imbalance. While City staff continue to carefully monitor budgets, there is a need to increase revenues or further decrease services to correct this imbalance.

If voters approve increasing the Transient Occupancy Tax, once fully implemented, revenues to the City could increase by $600,000 per year to a total annual revenue of $5.8 million. If both the Transient Occupancy Tax and the Business License Tax increases are approved, Sunnyvale can expect a net increase of approximately $1.4 million annually. While this still leaves a structural budget gap of $400,000, the gap will be more manageable and will be unlikely to have a significant service impact on the community.

Attachment C is a fact sheet on the Transient Occupancy Tax.

Fiscal Impact:  Once fully implemented, revenues to the City could increase by $600,000 per year to total annual revenue of $5.8 million.

City Policy: The Fiscal Management Sub-Element of Sunnyvale’s General Plan contains several goals, policies and action statements that address the City’s revenue base, including, but not limited to the following:

Goal 7.1A – Maintain and enhance the City’s revenue base

Policy 7.1A.1 – Maintain a diversified and stable revenue base for the City

Staff Recommendation:  Support

Measure F: Term Limits – City of Sunnyvale

Summary: The passage of Measure F would amend the Charter of the City of Sunnyvale to standardize term limits for all city boards and commissions to two consecutive four-year terms and eliminate the two-year waiting period before a board or commission member may apply to serve on another board or commission.

Fiscal Impact:  No direct fiscal impact.

City Policy: The Charter currently differentiates between the length of time that can be served by members of the Planning Commission, Personnel Board, and Board of Building Code Appeals, on the one hand, and members of all other City boards and commissions on the other.  Members of the three listed boards may serve two four-year terms, but the Charter limits members of all other boards and commissions to one four-year term.  If a member is appointed to an unexpired term with less than two years remaining, that member can be reappointed to two full terms in the case of the Planning Commission, Personnel Board and Board of Building Code Appeals, and one full term in the case of other City boards. 

Staff Recommendation:  Support

Measure G:  City Manager’s Residence – City of Sunnyvale

Summary: The passage of Measure G would amend the Charter of the City of Sunnyvale to conform with state law by eliminating the requirement that the City Manager shall reside in the City of Sunnyvale.

Fiscal Impact:  No direct fiscal impact.

City Policy: Sunnyvale’s City Charter currently requires the city manager to live within the City limits.  This requirement, however, is prohibited by the state constitution and therefore is unenforceable.

Staff Recommendation:  Support

Measure H:  Heritage Resource – City of Sunnyvale

Summary: The passage of Measure H would amend the Charter of the City of Sunnyvale to include the term “heritage resource” in its list of topics reviewed by the Sunnyvale’s Heritage Preservation Commission, consistent with existing policy.

Staff Analysis:  After the Charter provision was adopted the City Council expanded the definitions in the heritage preservation ordinance to include a category of “heritage resources.”  For purposes of consistency and clarity, Charter Section 1016 (b) should be amended to insert the “heritage resources” into the list of historic resources considered by the heritage preservation commission, so that it would read as follows:

“(b) Exercise such functions with respect to any heritage resource, landmark site or landmark district as may be prescribed by ordinance.”

Fiscal Impact: No direct fiscal impact.

City Policy: The City Charter currently provides that the Heritage Preservation Commission may advise the City Council on “heritage resources”, landmark sites and landmark districts.”  It also allows Council to authorize the commission to take action with regard to “landmark sites and landmark districts.”  It does not specifically authorize the commission to take action on heritage resources.

Staff Recommendation:  Support

FISCAL IMPACT

Proposition 73:          None

Proposition 74:          None

Proposition 75:          None

Proposition 76:  Between FY 2003/2004 and 2006/2007, the State will have suspended approximately $2 million in Transportation Congestion Relief Fund payments to Sunnyvale through the suspension of Proposition 42 transfers.  Passage of Proposition 76 would require repayment of this revenue over 15 years, beginning in FY 2007/2008.  

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