City Council - Special Meeting

Members of the public are invited to provide public comment either in person or remotely via Zoom. The meeting is also available with live translation in more than 60 languages through Wordly. Translation is accessible by mobile phone, computer or video displays in the council chambers by scanning the QR code located in the upper right corner of the agenda title page. City staff, please verify that virtual participation is available and operating. With that...

It is available and operating. Thank you.

Thank you, Suzanne. With that, we'll move to today's business. City Clerk Gazzetta, please call the roll.

Council Member Chua? Here. Council Member Lam?

Here.

Council Member Lien?

Here.

Mayor Montano is absent, and Vice Mayor Barbadio?

Here. Before we adjourn to the closed session, City Attorney Curtis, please brief the public on the closed session items for today.

Thank you, Vice Mayor. There is one item on for closed session today, that is Conference with Labor Negotiator, pursuant to Government Code Section 54957.6. The agency's designated representative is Rick Bolanos, Liberty, Cassidy, Whitmore. The employee organizations are professional and technical employees, mid-management and confidential employees, Milpitas Employee Association, Milpitas Peace Officers Association, International Association of Firefighters, and the unrepresented employees.

Thank you. Before we adjourn to the closed session, any public comment on the closed session item? City Clerk, do we have any speakers from Zoom?

How long would you like closed session to be tonight?

We could have speakers speak about three minutes.

Thank you. We have no public speaker cards at this time. Now, if for those participating remotely via Zoom, please click the raise hand button if you wish to address the City Council. If you're participating by telephone, dial star nine to raise your hand. When the last four digits of your phone number are called, you would dial star six to unmute and provide your comments. Let us see if we have anyone via Zoom. We have no public speakers via Zoom.

Thank you, Suzanne. We now adjourn to the closed session.

Or I just, I sent you an email the other day.

How, what to, uh, what if I.

On to that. Instructions that were, they're not just necessary. I can say. Because it's a special meeting. Have a . You have to provide some. How do you require ? But just tell me what you . I emailed you a copy of the form.

Okay.

Just tell me. I'll resend you the. I'll resend. All right, that's fine. Yes, they're just publishers. I'll email you.

It's now about 5.31. We are coming back for order. We just came from a closed session. Is there anything that needs to be announced, Mr. City Attorney?

No, Vice Mayor. There is no reportable action at this time.

Thank you. Let us all rise for the Pledge of Allegiance. Anybody? Thank you. I pledge allegiance to the flag of the United States Thank you, Council Member Lien. Tonight's invocation will also be provided by Council Member Lien.

Thank you, Vice Mayor. With all the catastrophes and challenges facing community across our nation, I wish everyone safety, good health, and peace. May we continue to look out for one another, support those in need, work together with compassion, strength, and hope for the better days ahead. Thank you.

Thank you. For our public forum, we have allotted three minutes for each public speaker. Now, members of the public are invited to speak on any item that does not appear on today's agenda. Public comment may be provided both live and via Zoom. Any comment from the public?

Yes. Mr. Vice Mayor, we do have several public forum comments. The first is going to be Rob Means, followed by Karen Friedman, and then we have Kaveri Rangaraj.

Welcome, Mr. Means.

Good evening, Council, Mayor, or Vice Mayor, I guess now. I'm Rob Means. I'm representing the East Valley Democratic Club today. And in particular, you have received a questionnaire from the club. We intend to get responses from the candidates here in Milpitas for both council and mayor and then post those online so that people voters can really look into how you feel about a whole variety of issues that are of note, shall we say. I imagine that some of you will find some of the questions very similar to what's going on with the South Bay Labor Council. They also provide an in-depth questionnaire, I understand. So this shouldn't be something that's terribly new or difficult to fill out because you've probably already done it for one of the other questionnaires that's been happening. And we look forward to getting those. When we do get those responses, we'll be posting them online and letting people know where they can find them. Thank you. Thank you.

Next, we have Karen Friedman, and that will be followed by Kaveti.

Good afternoon. Good afternoon. Good afternoon, Council and staff. My name is Karen Friedman and I've lived in Milpitas for 43 years. I value my First and Fourth Amendment rights to speech and privacy. My topic is the use of flock safety automatic license plate reader cameras in our city. Flock cameras have been used in federal immigration enforcement and in cross-state reproductive health care investigations. And I appreciate that Mayor Montano has been listening to my concerns about flock. And I'm also grateful for Captain Matt Miller of the Milpitas Police Department. He explained carefully how flock cameras are used currently. and monitored in the city of Milpitas. However, my focus today is more on Flock's larger business plan to provide its cameras and AI-powered software to the federal government for a nationwide domestic surveillance network. The Chinese Communist Party does not allow dissent toward the government In China, there are 700 million cameras, one camera for every two persons. With AI-powered surveillance and facial recognition, the CCP can track and locate an individual in a matter of minutes. The surveillance plan in the US is not a conspiracy theory. It is happening now. Kash Patel's FBI issued a statement of work in May of this year. The FBI wants to contract with a company able to build a network of nationwide surveillance cameras. As the largest producer, Flock is the first in line to be awarded this contract. And Big Tech has already agreed to share AI technology with the federal government. Although FLOC contracts read as though all the data produced are the sole property of the participating jurisdictions, FLOC can access and share our data. Fortunately, there is much publicity on this topic, and jurisdictions all over the country are canceling contracts with FLOC. Locally, the Mercury just reported Stanford ditched its flock cameras and chose a different vendor.

Santa Clara County and Mountain View have ended their contracts, and Palo Alto is taking a serious look.

And there are many more. Captain Miller is diligent in conducting regular audits here And there have been no federal searches as of this point. To be clear, I support and trust our police department, and they do need effective tools for criminal investigation. Still, I don't want our city to be drawn into a system of nationwide surveillance by continuing its association with Flock. Am I out of time? May I just do one more sentence?

One more sentence would be fine.

My ask is for the council and staff to further educate themselves on this topic and along with Milpitas Police Department to find a suitable alternative to using flock in our city.

Thank you. Thank you. Next we have Kaveri.

Good evening, Vice Mayor and the manager and all the council members. I'm here following up about the small cell tower, what happened. And last time we had the meeting and we were told at the time by the city engineer, they're going to conduct an independent company to do the testing about the the radio frequency, and we want to know what is happening. And we haven't heard anything about it. So most probably we are as a group will be coming for the meeting to find out what is going on with that. And then still, it is a very unsettled among all of us, how close to the house it is and what is really happening to anybody's health. We don't know. So that's the small thing since I'm here.

i thought i'll bring it up thank you all thank you thank you for reminding us and hopefully we'll have a response soon that's the last of the public speaker cards in person now i will ask for any public speakers via zoom if you are participating remotely via zoom and wish to address the city council under public forum Please select the raise hand button. If you're participating by telephone, dial star 9 to raise your hand. When the last four digits of your phone number are called, dial star 6 to unmute and provide your comments. Is there anyone on Zoom that wishes to address the City Council? I have no hands raised. That is the end of public forum, Mr. Vice Mayor.

Thank you, Suzanne. So now we're moving on to the announcement of conflicts of interest and campaign contributions for both the meetings today. Mr. City Attorney.

Thank you, Vice Mayor. At this time, I would ask the Mayor and each council member whether he or she has any financial or personal conflict of interest related to any of the items on tonight's agenda.

Council Member Chua? None. Council Member Lam?

None.

Council Member Lien? None. Vice Mayor Barbadio?

None. And Mayor, I would also ask the Mayor, or sorry, Vice Mayor and the members of the Milpita City Council to please disclose any campaign contributions of $100 or more received within the last 12 months from any of the parties entering into contracts with the city on tonight's agenda or contributions received from development project applicants for development projects on tonight's agenda?

Council Member Chua? None. Council Member Lamb?

None.

Council Member Leigh-Anne? None. Vice Mayor Barbadio?

None. I would ask that the record reflect no reported conflicts.

The Milpitas City Council is guided by our own code of conduct. Would anyone from us read our conduct please? If none, I would volunteer to do that. The Nelpida City Code of Kanda. Be respectful and courteous. Model civility. Avoid surprises. Praise publicly and criticize privately. Focus on the issue and not on the person. Use electronic devices appropriately while on the council days. Disclose conflicts of interest and affiliations related to the agenda items. The council speaks with one voice after making policy on issues. respect the line between policy and administration, and Council will hold one another accountable to comply with this Code of Kandang. Moving on to the approval of agenda, I ask anyone if there are changes. Council?

Seeing none, move to approve the agenda.

Second. So that was a motion by Councilmember Chua, seconded by Councilmember Lien, and now the call for the vote. Councilmember Chua? Aye. Councilmember Lam?

Aye.

Councilmember Lien? Aye. Vice Mayor Barbadio?

Aye. Next on the item will be the consent calendar. Any comments from staff or changes? Okay, the city council.

Move to approve the consent calendar.

Second.

Before we take a vote, any public comment on the consent calendar?

I have no public speaker cards for the consent calendar. But I will also ask on zoom if anyone would like to address the count City Council on the consent calendar to please raise their hand now or if they're participating by phone to please press star nine. I have no comments for the consent calendar. We will call for the vote. That was my motion by Council Member Chua and a second by Council Member Lian. Council Member Chua. Aye. Council Member Lam.

Aye.

Council Member Lian. Aye. Vice Mayor Barbadio.

Aye. Moving on to the public. Okay. We have a unanimous approving the consent calendar as agendized. Now moving on to the public hearings. City Manager.

Mr. Vice Mayor, item number 13 is consider introducing an ordinance to amend the Milpitas Municipal Code, Title 8, Chapter B.6, B.8, C.10, and E.4, relating to the regulation of tobacco retailers. Our staff contact is Director Lee in the Planning Department. And our recommendation from this item is that the ordinance is to exempt from the California Environmental Quality Act pursuant to CEQA guidelines, section 15183. Director Lee.

Director Lee.

Good evening, Vice Mayor and council members. Yeah, we're here to present this item before you, and we have Lillian Van Hoa, a principal planner here to deliver the presentation.

Thank you director Lee good evening, vice mayor council members city manager and fellow staff. My name is Lillian Van Hoa principal planner with the city of Milpitas planning department next slide please. The application before you tonight is a city initiated zoning ordinance text amendment to modify and add regulations to limit the concentration of tobacco retailers within the city. and encourage responsible tobacco retailing. The proposed amendments would specifically prohibit new tobacco retailers from locating within a certain distance from existing tobacco retailers and youth sensitive areas or schools in this instance, and prohibit the sale of flavored tobacco products and adopt other local regulatory standards. Next slide, please. Tobacco is the number one preventable cause of death in California, nearly 40,000 deaths per year. In Santa Clara County, one in eight deaths annually is attributed to smoking-related illness. 25.3% of Santa Clara County high school students have used a tobacco product. And e-cigarettes are the most popular tobacco product, with 23% of high school students having used them. 93.1% of current teen tobacco users in current Santa Clara County report using a flavored tobacco product. And in 2019, more than 86% of tobacco retailers near schools sold flavored non-cigarette tobacco products. Next slide, please. And more than half of Santa Clara teens who vape reported purchasing their own products. Over one in five of those teens buy directly from a store. 71% of in-store purchases bought at a tobacco shop, smoke shop, or have been bought at a tobacco shop, smoke shop, or vape shop. And nearly 81% of youth ages 12 to 17 who use tobacco report their first product was flavored. And children are more likely to experiment with tobacco when retailers are located near homes and schools. Next slide, please. So the Santa Clara County Healthy Cities Program seeks to address tobacco-related health concerns by promoting policies and practices to provide tobacco-free and smoke-free communities. The Santa Clara County Public Health Department has provided funding to cities to support these tobacco prevention strategies known to have the highest impact on reducing tobacco-related disparities and inequities. So in June, or sorry, in July of 2020, following the city council's request to explore policies to discourage tobacco use and vaping by teens, the city executed a grant agreement with the county public health department to explore tobacco prevention policies shown to reduce youth access and exposure to tobacco products. In June 2021, the city adopted an ordinance to prohibit smoking in multi-unit residences and many outdoor areas to reduce exposure to secondhand smoke. And then in June 21 of 2022, the city council directed staff to develop a tobacco retail permitting program with the county. However, this was not ultimately executed due to county enforcement requirements and staffing constraints. And in March 29th, 2024, the city was awarded a grant of $22,997 from the county to reduce the density of tobacco retailers and their location near sensitive areas. And on June 10th of this year, in 2026, the planning commission held a public hearing and recommended that the city council approve the ordinance that is before the council tonight.

Next slide, please.

Next, I will highlight some recent state law on tobacco. SB 793 prohibits the sale of most flavored tobacco products statewide, and it allows for stricter local ordinances. And in November 2022, California voters voted to uphold SB 793 at the ballot box. And then AB 935 strengthened enforcement of the flavored tobacco retail law. It broadened the definition of retail location. AB 3218 requires creation of the unflavored tobacco list by the California Attorney General. And lastly, state law prohibits sale of tobacco to anyone under the age of 21. Next slide, please. So there were 38 tobacco retailers within the city on the map on the screen, and this was developed as of February 2026. The data is from a list that's maintained by the California Department of Tax and Fee Administration, also known as the CDTFA. However, when staff pulled the list from the CDTFA in August this month, there are now 40 tobacco retailers within the city. This list is updated on a monthly basis per the CDTFA. It's worth noting that the list and the map does not include any retailers that are not registered with the state or selling illegally. The majority of these tobacco retailers are liquor stores, gas stations, and grocery stores. Three of them are standalone smoke tobacco shops. And areas of high concentration shown on the map are North Milpitas Boulevard and Dixon Landing, West Calaveras Boulevard and I-680, and East Calaveras Boulevard and South Park Victoria. Next slide, please. So the proposed ordinance will specifically do the following things. It will establish a location buffer so no new tobacco retailers will be allowed to open within 1000 feet of a school both public and private. There will also be a retailer separation distance of 500 feet. The distances would be measured in a straight line from the nearest entrance to the nearest entrance or property line to the schools. It will also prohibit tobacco sales at pharmacies. And it will also codify the ban on flavored tobacco products, including flavored e-cigarettes, menthol cigarettes, flavored cigars, hookah, shisha, and e-liquids. And all accessory tobacco retail sales will require a minor conditional use permit, approvable at the staff level. The current MCUP fee is $1,500. $1,526. And all existing retailers that are within the buffers will become legally non-conforming uses. Next slide, please. Here's the proposed buffer overlaid onto the city zoning map. This is attachment C to the agenda report. The small triangles on the on the screen are the tobacco retailers and then the purple building with the flag are all of the private and public schools within the city. So the larger buffers are around the schools, and then there's smaller buffers for the retailers. So as you can see, a lot of the commercial areas where a new tobacco retailer could open, it's pretty limited now once we have this ordinance, if the council approves the ordinance tonight. Next slide, please. So here's a look at what other cities have done in Santa Clara County. The cities of Cupertino, Gilroy, Los Altos, Los Gatos, Palo Alto, Saratoga, and unincorporated Santa Clara County have codified the 1,000 foot school buffer. And the same jurisdictions previously mentioned, except for Gilroy, have also codified the 500 foot retailer separation. Los Gatos, Palo Alto, Saratoga, and unincorporated county have codified the pharmacy tobacco ban. Cupertino, Los Altos, Los Gatos, Morgan Hill, Palo Alto, Saratoga, Sunnyvale, and Santa Clara County have codified the flavored tobacco ban. And overall, more than 50 local governments in California restrict tobacco retail locations near schools. Next slide, please. The proposed zoning text amendment is exempt from CEQA pursuant to CEQA guidelines section 15061 common sense exemption, so there's no possibility of a significant environmental effect. And CEQA guidelines sections 15183, projects consistent with general plan for which an EIR has been certified. The ordinance does not affect densities or intensities of previously allowed uses. Next slide, please. An online community survey was conducted in July 15 to August 31, 2020. 125 responses were received. And during the outreach this spring, staff visited 38 tobacco retailers and distributed community meeting flyers during the month of April. The online community meeting was held on April 29, 2026. No community members participated. Three comments were received prior to the Planning Commission hearing, and there was one speaker at the Planning Commission hearing. The Planning Commission voted 6-0 to recommend that the City Council approve the ordinance, and a public hearing notice was published in the Milpitas Post on July 17th, 2026, and posted at City Hall and on the City website. Next slide, please. Staff has confirmed that the project meets the findings associated with zoning tax amendment for the proposed to back our retailer ordinance I set out in the LP dis municipal code. The project is consistent with the city's general plan goals and policies. It is consistent with the metro and gateway main street specific plan goals and policies. It will not be detrimental to public health, safety, convenience or general welfare. It is compliant with sequa. It does not reduce residential density and will not result in a net loss of potential housing units. And it is internally consistent with other applicable provisions of Title 13. And those findings have been discussed in the staff report and are addressed in the resolution.

Next slide, please.

In closing, staff recommends that the City Council open and close the public hearing and determine that the ordinance is exempt from CEQA pursuant to CEQA guidelines section 15183 and 15061 and introduced an ordinance adding a new section to Title 13 chapters B6, B8, C10, and E4 of the Milpitas Municipal Code relating to the regulation of tobacco retailers. That concludes staff's presentation. I'd be happy to answer any questions.

then decide them for a public hearing. Anybody from the public or from Zoom have any comments, Madam Clerk?

I have no public speaker cards in person. However, I do have a hand raised in Zoom. I will be calling on Chris Miller on Zoom. I will hit allow to talk and then you will have three minutes. You can unmute yourself now, Chris.

Thank you. Good evening, Council. My name is Chris Miller, lifelong Los Gatos resident. I enjoy visiting Milpitas, so thank you for making the community great. I am 99% support of the proposal. However, I have significant concern about the proposal that retailers are required to ask for IDs for individuals decades over the minimum purchase age. I did send an email over the weekend. Hopefully, you all received that. My question is, what is the purpose of requiring a citizen who is supposed age 90 to show identification that they are over 21? There is lack of research justification for requiring ID of older adults, or at least have been provided to me. There's possible consequence of additional work by law enforcement by enacting any age ID requirement. Federal law suggests an age of 30 as per the FDA in 2024. And most importantly, a staff member in District 5 Board of Supervisors is on record stating that they are looking to, when this comes back to the county, to add age next time the model policy is to be revised. Just earlier this summer, the City of Gilroy revised their tobacco retail permit process and included an appears to be language, which is in congruence with the FDA. I kindly ask that the Council add language to the proposed ordinance, something to the effect of appears to be under age 30. Thank you.

Anybody else?

If anyone else on Zoom would like to address the City Council, please raise your hand now, or if you are on phone, press star 9. I have no additional public speakers. Mr. Vice Mayor.

Thank you. So we're closing the public hearing. Let's move to any council discussions.

Mr. Vice Mayor, while the council is considering any questions or discussion, would it be all right if I were to introduce the ordinance via reading of the title at this time?

Yes, please, Mr. City Attorney.

Let's do that. Thank you, Vice Mayor. Before the council is an ordinance entitled an ordinance of the City Council of the City of Milpitas amending the Milpitas Municipal Code Title 13, Chapters B6, B8, C10, and E4 relating to the regulation of tobacco retailers.

Thank you. Going back to any council discussion? Council Member Chua.

Thank you, Vice Mayor. Director Lee or Senior Planner Vanua. Can you briefly explain, just briefly explain the sections that were added? So everybody can understand. It's B6, B8, C10, and E4, briefly. Thank you.

Sure. So we modified the use tables under the commercial zone use regulation. as well as the mixed use table regulation.

Is this B1, B6? Yeah. Go by different. Sure.

So B6 is the commercial zone use regulation table.

Okay.

And then table B, section B8 is the mixed use zone regulation table. And then we added a new subsection to chapter C10 specific to uses and titled it Smoke Tobacco Uses. So that outlines all of the performance standards that would apply to smoke tobacco uses and tobacco retailers. How about E4? E4 is the definition section of the zoning ordinance. And so we added definitions related to tobacco retail that weren't previously there. So they're further defined in this definition section.

Can you briefly explain those additional verbiage? Sure.

So for example, we added a definition for electronic smoking device because we previously did not have that definition.

What's the definition?

It is any device that may be used to deliver an aerosolized or vaporized substance to the person inhaling from the device, including but not limited to an e-cigarette, e-cigar, e-pipe, vape pen, electronic heated tobacco products, or e-hookah. Do you want me to continue?

I just wanted to see if e-cigarette is there. And it is there.

Yeah, that's how we would define it. It's an electronic smoking device.

Okay. What else is the new terminology you said?

So we've revised the definition of smoke tobacco shop. So we already had that in our, Our definition section, but we revised it to say a retail establishment primarily engaged in the selling of smoking or tobacco products accessories or paraphernalia or any other products devices or components reasonably assumed to be used for smoking and or the inhalation or ingestion of any substance.

So it encompasses everybody. It is the whole yes included everybody on it, correct.

And then we also added the tobacco accessories or paraphernalia definition and tobacco product, as well as tobacco retailer those three definitions were not previously in our zoning ordinance.

Can you read that too, please? Sure.

So tobacco accessories or paraphernalia are devices or instruments for smoking, heating, chewing, absorbing, dissolving, inhaling, snorting, sniffing, or ingesting by any other means tobacco products or other controlled substances. And then tobacco product is any product containing, made of, or derived from nicotine or tobacco that is intended for human consumption or is likely to be consumed whether smoked, heated, chewed, absorbed, dissolved, inhaled, snorted, sniffed, or ingested by any other means, including but not limited to a cigarette, a cigar, pipe tobacco, chewing tobacco, snuff, or snus, snooze. I think that's how it's pronounced. And then any electronic, it also includes any electronic smoking device and any substances that may be aerosolized or vaporized. by such device and that contain nicotine or any component part or accessory of the first two, whether or not separately and whether or not they contain nicotine or tobacco, including but not limited to filters, rolling papers, blunt or hemp wrappers, hookahs, mouthpieces, and pipes.

Okay.

That's good. Okay.

Where was the addition or change to the 1,000 feet limitation within the school?

Where was that added? So it's under, I think it's C-10, under the smoke tobacco uses. So that's a performance standard that is specific to that use. So there's a separation requirement.

So it's in C-10, the 1,000 distance from school to any of the tobacco establishments.

Okay, sounds good.

Thank you. Thank you, Vice Mayor.

Thank you, Councilmember Chua. Anybody else? Councilmember Lee.

Thank you, Vice Mayor. Chief Hernandez.

Good evening, Vice Mayor and Council. Jared Hernandez serving as your Police Chief.

Thank you. Um, how often do we inspect these shops? And has there been any violations in our city?

I'll actually ask Captain Purdy to step to the microphone. We have had some enforcement action more recently, but I don't know the answer to how frequently we're going into the shops.

Thank you. Steve Prody, Captain of the Police Department. Primarily, it's complaint-based, so when a community member reaches out about illegal tobacco sales, we'll take a report and we'll look into it. Within this past year, we received a handful of reports and we conducted inspections with the state at specifically standalone smoke shops, two separate ones, which led to criminal charges. Outside of that, there's not many, we don't inspect grocery stores. That's usually done by a state organization.

Okay. And do you notice that there's one area that's more than others or how you don't inspect the shops that has no complaints?

Correct. The inspections are usually done by a separate state tax organization. And we respond when it comes to tobacco, we respond to criminal complaints of illegal sales, like to use or sales of illegal items such as flavor tobacco or marijuana.

Okay. And would you revisit that same store to see if there's any violations after that?

Yeah, we have several methods of investigation the two most recent ones that we looked into led to criminal search warrants being conducted there were illegal merchandise was confiscated and it was a criminal report to the district attorney's office in the past two that we have done this year okay thank you thank you chief of course thank you vice mayor thank you council member lian

Council Member Lam.

Thank you, Vice Mayor. My question is related to checking ID. Under the current municipal code, what is the law sets right now for checking IDs?

So the current, the ordinance before you tonight requires retailers to check ID for all individuals when they're purchasing tobacco.

So that means anyone who purchased tobacco, it doesn't matter if it's a grocery store, supermarket, or tobacco stores, they need to show ID.

yes okay thank you i also have a question oh if you're done a question or two so most of uh as the good captain reported uh the violations were mostly sale by retailers of flavored tobacco, and this ordinance is different. The question is, are the non-permitted or non-licensed sellers, not just retailers, covered by this ordinance? Let's say somebody have a box of something that we do not permit to be sold within a thousand feet from a school. And I'm talking about those particular situations.

so this this ordinance would apply to all tobacco retailers whether permitted or not it would just be more difficult to enforce if they haven't gone through any procedure because there would be no documentation but we would just follow our typical code enforcement processes for example if there was an unpermitted retailer within a thousand feet of a school

and they they wouldn't ever be able to be legalized so then we would take the appropriate code enforcement actions and they wouldn't be able to sell tobacco anymore okay good to know it's just an extra layer of uh trying to deter sellers if this ordinance includes not just the retailer that have permission to sell tobacco and those whether individual or retailers that didn't have

permit. If I may, this is structured as a land use ordinance. So if we're not talking about retail, sit room, safe, fixed location, like if you were talking about, say, a street vendor or something along those lines, I'm not sure it would fall under this particular ordinance. There are other laws that may be violated as part of that. Okay.

All right. So yes, probably they are. I just thought that this is an extra layer on that. But thank you for the clarification, city attorney. I think I'm fine with the ordinance. And what would be the pleasure of the council? All right, any motion? Council member Lien?

Motion.

Yes, please.

The motion also needs to include waiving beyond the reading of the title of the ordinance.

OK, that. Thank you.

Any second on that?

Yes.

Any second? I second. Council Member Lam. Thank you.

With Councilmember Lien making the motion in a second by Councilmember Lam, I'll now call for the vote. Councilmember Chua? Aye. Councilmember Lam? Aye. Councilmember Lien? Aye. Vice Mayor Barbadio?

Aye.

The motion passes.

Thank you. Coming to our last item for tonight, City Manager.

Mr. Vice Mayor and Council, under leadership and support services, item number 14 receives a presentation on Municipal Bond 101. Our staff contact is our finance director, The recommendation is to receive the presentation from the city municipal advisor on bond council, municipal bond financing, including the types of debt available to the city, the financing process and financing team role, the city council's disclosure and approval responsibilities, and an overview of the city's outstanding long-term debt obligations. Madam finance director.

Good evening, Vice Mayor Barbadeo, Council Members Tua, Leanne and Lam, Luz Cofresio-Hao, Finance Director for the City of Mopedas. Suzanne is walking around and handing out some small items. Before you, you have a concept presentation of we will be doing what's called a Municipal Bonds 101 today. Vice Mayor Barbadio, I know that you did 2015, and I also think you did 2020 with us. Yes. So you've gone through this before. And the mayor has also done it three times, so she's up on you one. But both of you were here for the 2015 bond refunding. So what this is essentially is just a training for what we are proposing and bringing back to this council for consideration on September 1st, and also to get us into the mode of what we need to do when we are, what we need to understand as far as responsibilities in the process of municipal bonds before municipal bonding and debt. We have with us today, and I'm going to defer to them, is our municipal advisor from Fieldman, and they'll introduce themselves, and also our bond counsel from Jones Hall. And what you have before you basically is a demonstration of how we finance, the steps to finance, and we're using Fire Station 2, which was financed through debt. And then on the back are the SEC rules, and we'll go into that in more detail in the presentation. And with that, and you also have a little token, a little gold money bags. So please take them with you. Please use them wisely. It's community money, so you should keep it somewhere and use them wisely. But with that, I'll turn it over and we'll start with Fieldman and Jim Fabian.

Thank you, Luce. Pleasure to be here tonight to be in front of the City Council to talk about Municipal Bonds 101. Jim Fabian, the City's Municipal Advisor. I've had the pleasure of working with the City going back to the 2015 tax allocation, refunding bonds, and all the debts since that point in time. I'm also joined by my colleague, Andrew Reardon, in the audience there, who helped and worked hard on the presentation in front of you tonight.

And good evening. James Warzyniak at Jones Hall. We are the Bond Council and Disclosure Council to the city, have worked on the prior financings for the city, and look forward to walking you through the presentation tonight.

Great. So if we could move to slide number four, please. Okay. Well, I'm sorry. Let's stop here real quick. So in terms of our agenda tonight in front of you, we're going to be talking about an overview of debt and why cities issue debt. We're going to talk about the type of debt and the tax status of that debt. We're going to walk through the finance team involved in a debt issuance and the process. This is a great demonstration of what a bond issuance process looks like that we did for the fire station. We're also going to talk about the duties and responsibility of you as a city council member, and then also touch upon the outstanding debt of the city of Milpitas. On the next slide, please. So again, we introduced ourselves. Please go to slide four. So when we think about why do public agencies use debt financing, really when you think about it, it's to spread the costs of a project that usually has a useful life of 30 years or more. uh over the years in which it serves the community so it's not just the current residents who pay that cost but it's also the future residents of the community that pay for the cost and the fire station is a great example of that where we spread the cost over a 20-year timeline and so current and future users who benefit from that fire station being built also pay for the cost of that Some of the purposes of why you issue debt are to acquire land, to construct a public building like the library, to construct utility infrastructure like you did for your water and sewer bonds that were issued. Sometimes cities also issue debt for working capital for cash flow purposes. You haven't done that. And then also to refinance outstanding debt, which we'll talk about a little bit more in the future. So if you could go to the next slide, please. So when you look at what is a municipal bond, it's a security that is sold to the public capital markets. It's not to a single investor. It's to many potential investors. Typically, it's either a 20-year or a 30-year repayment term. And you pay principal and interest over that 20 years or 30 years. You receive the money up front, so like for example on the fire station, you received the money to build the fire station and then you repaid it principal and interest over the next 20 years. Typically you match the term of the debt for the useful life of the asset. And for larger projects, it's the lowest cost financing to the city because it's exempt from taxes from both the federal and state level. So it's a very attractive way for people to invest their money and for you to borrow money. We're going to go to the next slide, please.

Yeah, so Mr. Fabian just touched on this, the difference between tax exempt and taxable. So in municipal financings, most of what we do is tax exempt financings. And that means the investor that's loaning you the money up front, they don't pay any taxes on the interest they receive. And because of that, they're willing to give you a lower tax. interest rate right which saves the city money so it's essentially a policy decision from the congress that says hey we want to support local governments in building infrastructure and because of that you can see on the slide there's some restrictions that go around tax exempt financing namely public capital improvements have to be financed not you know salaries operating budgets but you you build facilities with tax-exempt bonds. Also, there's certain time limits on the spending of those bonds. Basically, the Congress, the IRS, they want you to take those tax-exempt bonds and put the money to use right away. So that generally means for a new project, spend the money within three years, and for a refunding project, so you've got some existing debt, you're gonna refund for a lower rate of interest, you gotta do that within 90 days. Don't just sit on the money from the new bonds, but pay off the old bonds. In contrast, a taxable borrowing sometimes makes sense for cities. There were some pension refunding bonds issued by some cities a few years back there could be a situation where you can't spend money on a good capital project within three years. So maybe we do that on a taxable basis. What that means, of course, is the investor's gonna pay taxes on the interest, they're gonna demand a higher interest rate. So it's not the most advantageous, but sometimes it makes sense for local communities. Next slide. Now on this slide, there's actually a lot of information on this slide. Folks can digest it, members of the public can digest it afterward. But the crucial thing on this slide is showing the multiple different kinds of tax exempt municipal bonds. You have your general obligation bond, you have your tax increment bond, your lease revenue bond, your utility revenue bond, your land secured bond. And as the names of each of those securities says, what is the source of repayment? Is it coming from the utility system? Is it coming from a general obligation of the community, meaning an additional ad valorem? property tax and based on whatever source of repayment there is is a better or worse credit so again how much is the investor going to demand an interest rate depends on the quality of the credit and the various different types of bonds have different levels of credit so if you could go to the next slide please

So as James walked through, we have the different menu of types of debt available to a city. General obligation bonds is the first one that we wanted to talk about in a little bit more detail. This is secured by unlimited ad valorem property tax. So it is the best form of credit that a city can have. It provides the strongest security and the lowest borrowing cost. It requires, though, the citizens of the city to approve it at a 67% threshold. And typically, it's for a specific project that has been identified in a ballot with very specific language of what the money can be used for. Some of the advantages of a general obligation bond, I should mention the city does not have any general obligation bonds at the present time. But the advantages, as I mentioned, is the lower borrowing costs, no need for a debt service reserve fund. It's not repaid out of the general fund. It's a new revenue source available to pay the debt service on the bonds. Some of the downside of this program is it takes a long lead time. So when you think about it, you have to go to the voters. So you typically think about November elections. So it's pretty typical that you would say if you were planning to do a general obligation bond, it would be in November of 28 that you'd be looking for. So there's a long lead time associated with that. You also, as I mentioned, that 67% threshold has to be achieved to be able to get successfully the ability to issue general obligation bonds, and you have very limited flexibility. It has to be used for the identified project that was put into the ballot language.

And I might just add that you all might be familiar with general obligation bonds with the local school district. So the school districts are much more frequent issuers of general obligation bonds in California. Partly folks, voters like to support construction of new schools and school facilities, and partly the schools only need to get 55% voter approval. So the city of Milpitas needs two thirds, 66, but school district only needs 55%. And so for that reason, there are a lot more school district general obligation bonds in the state, very few city general obligation bonds.

If you could go to the next slide, please. So the next tool or type of debt is tax or increment financing or tax allocation bonds. This is when you think about what we used to be able to do with a redevelopment agency. You would issue bonds based upon the tax increment generated from a project area. That went away back in 2012, but you can now do refundings of the existing debt. For example, your 2015 tax allocation refunding bonds are coming up for the ability to be called to save money. And Luce had mentioned that we'll be coming back and talking about that on September 1st. This is not a general fund obligation. It's solely repaid by tax increment that's repaid through the ROPS process through the county. It has ability to be refinanced, as I mentioned, to lower debt service costs, which provides residual property taxes to other taxing entities, including the city. Again, it's not a general fund obligation. It's paid solely from the pledge tax increment within the project area. Some things to consider when you're looking at tax increment or tax allocation refunding bonds is the value of the project area. Excuse me. The value of the project area is really an important factor in the credit assessment that rating agencies do. Your project areas are in great shape. You have had enormous growth in your assessed value over the last 10 years. You have some really great property owners within the project area as well. It does require you to go to the County Oversight Board for approval after a successor agency approval and then to the Department of Finance to get their approval of a refunding. It is a little bit weaker credit because it is specific to a specific project area and the value of that project area. And then as I mentioned, since 2012, unless you're san francisco or i think it's the city of marina are the only two cities that can do new tax allocation refunding bonds all other cities within the state can only do refundings council council members this is your meeting this is your study session so if there's anywhere

that you want to pause or ask a question, we're certainly open to it. And you will also be getting from me in the next day or so, effectively a memorandum, and I'm sorry to inflict those on you, but I want to give you a history of what redevelopment agencies are, how they started in the state of California, how specifically the city of Milpitas has a redevelopment agency, how it was dissolved, and much other information about that, including the fact that our what a tax increment is, for example. And so I think back in 2014 or 2012, 2014, the value of our property was $800 million or something like that, and that's $11.8 billion. Is that roughly right?

When the project area was originally, it was 1976, I think, actually, when the project area was actually formed, and it was $800 million, and now it's $11 billion. Yeah, right. $800.

So our property values have increased, which means that the taxes from those property values come to us, and we get 16.3 cents of that dollar is the best way to explain it. But I'll let Jim go on, keep going on. But please feel free to stop. The memorandum will be very helpful to you in giving you much more information that you can also spend some time to look at. Vice Mayor, we have a question.

Not at this time.

Me?

Oh, sorry.

Thank you.

Yes, Council Member Lin, sorry.

Thank you. So I just heard that you say school districts get a 55%. Passing rate, right?

Voter approval threshold. Yeah, it's a little lower threshold for their general obligation bonds.

And for the city is 67%.

That's right. Yes.

Do you know why?

That is enshrined in the California constitution. So the 66% goes back to prop 13, 1978, you know, when the 1% ad valorem was established by prop 13, there's very few exceptions to that 1%. And, and one of those exceptions is two thirds voter approval. of a general obligation bond. Fast forward to about 20 years ago, and the Constitution was further amended to allow school districts to get their general obligation bonds approved by 55%. So they had special legislation approved. Again, the voters of the state approved school districts, but no other local agencies. So cities, water districts, sewer districts, counties, You know, everyone else still requires the two-thirds, the 67%. Okay.

You might recall back, I think it was in November of 2024, there was a measure on the ballot to lower the threshold for cities and other governmental agencies, and it failed.

It failed.

So until it gets resurrected and tried again, we'll be at that 67% threshold. All right. Thank you. Sure. Sure. OK, well, moving on, if you could go to the next slide, please. So we talked about general obligation bonds, tax increment bonds. The next tool is lease revenue bonds, also sometimes referred to as certificates of participation. They're the same thing, but a little different. approach to how they're issued and secured. Your fire station, for example, the financing we did was a lease revenue bond. It's secured by lease payments between the city and your financing authority. That city leases that asset to the authority, which then leases it back to the city. The lease payments then are used to pay the bondholders over that 20-year time frame for the principal and interest payment. It's a general fund obligation, and so there was not a new revenue created, but your existing revenues in the general fund pay the debt service on that particular lease revenue bond issue, and it is subject to abatement. If for whatever reason you could not have access and use of that building, you wouldn't be obligated to pay debt service on it. It's abated at that point in time. If there was some reason why, like say, for example, an earthquake and the building collapsed or something like that, that would be a situation where abatement would kick in. The advantages of lease revenue bonds or certificates of participation, it's you, the council, that votes to approve it. So it's just a majority vote of the city council to approve the issuance of this type of debt. It's very flexible in terms of the structure. It's widely used by California cities up and down the state to fund infrastructure. It is an obligation of the general fund, and it does encumber an essential city asset. So you have to secure the repayment by having property insurance against that and encumbering the asset. And as I mentioned, the abatement risk that is mitigated also because you pay for rental interruption insurance. But again, if you can't use the building, you can't pay debt service on it. So on the next slide, wanted to talk about the structure, and I'm going to turn it over to James.

Yeah, so this one, we get into the weeds here a little bit on the legal structure, because you might be asking, well, why do we need a lease? We're just trying to issue a bond. We're trying to raise money. If we do a tax increment financing, we can just issue a bond. If we do a general obligation bond financing, we issue a bond. But for the general fund, again, we're talking about general fund supported financing here. We need to use the lease back structure because again the California Constitution requires us to do so. The city, as you know, is not able to put a debt on the general fund that lasts longer than a year. In other words, you have to budget and appropriate each year amounts that are available. To the city council in that year, and this goes back to the foundation of the California as a state when city councils, local school districts might say, hey, we want to build a big project and we're going to issue a debt and let the future. citizens and let the future taxpayers you know bear the burden of that well california constitution says no you can't do that just spend your money this year that you have this year and you can't encumber the future generations with a long-term debt on the general fund again if you're in the utility fund the utility is paying for that if you're in the tax increment world the tax increment is paying for that that's okay but when we're in the general fund world You have to only spend what you have available that year. And so the way we are able to legally issue a general fund obligation is through the lease because those lease payments are due and payable each year. And as Mr. Fabian just described, if you don't have use and occupancy of the asset, you, the city, don't pay the lease payment. So it's what we call a contingent obligation. It's only payable if you have use and occupancy. and that puts us within the constitutional debt limitation permissible uses. And so this slide, again, just goes into some more of that detail. The city will take an essential asset such as city hall, such as a fire station, leases it to the financing authority, the members of whom are you as well as the city council, the members of the financing authority. So it's all in-house. Financing authority leases it back to the city. That generates that lease payment stream that is permissible under the Constitution. When it's given to the trustee, the trustee tanks it and hands it over to the investors who have, again, given you the money up front, and then they get their debt service over time.

Okay, if you could go to the... Oh, another question. Yes, please.

Council Member Lin.

Thank you. I don't know if this is appropriate to ask, but I will ask in any way. So you said if earthquake collapse or whatever, then we don't have to pay. What if the city has a deficit?

City has a deficit. You still have to pay because you have use and occupancy of that building. And so you're paying the lease payment.

What if we cannot come up with the money to pay?

it is an obligation to pay the lease payment, just like every other obligation you have to pay salaries and pay the heating bill and all that. It's co-equal with all those other obligations. Again, no different than any others.

Thank you. Yes.

Go ahead, Council Member. Thank you, Vice Mayor. Just following up with that question, What's the priority of paying the debt? Higher priority than paying salary? So how do you prioritize?

I mean, again, legally, it's all equal. All these are due each year in which you have the obligation to be due legally. There's no difference.

Council if we if we got into that situation which would be extraordinary we would have to look we would have to have some sort of overall plan for all of our expenses and this would be one of them one of them which is important to pay it still would have to be included in an overall plan to to solve whatever challenges have put the city in that situation obviously I don't think that situation is going to happen anytime soon with the city of Milpitas again we have sufficient reserves.

Yeah, not to scare you.

Nope. Thank you.

Thank you so much for the question. Yeah. Right. In addition to your question, do we, if a city has a deficit or projected one, and is it ordinary that we resort to this kind of bond, the lease revenue bonds, or because of that, based on some other factors like credit rating or whatnot, we do not opt for that kind of bond?

Yeah, the way I would think about that question is that when you think about issuance of a lease revenue bond, you're really not doing it to pay bills. You're using it to build a facility. And so that decision to build a facility through your capital improvement program is something that's needed and is a priority. And the lease revenue bonds is a mechanism to pay for it over a 20 or 30 year timeframe so that you would then have the ability to stretch that payment out over current residents and future residents.

Would it be usually after construction that the term of the payment starts or right after the issuance of the bond?

Typically six months after the issuance of the bond. Yes. Okay.

All right. Thank you. Yeah. And I actually think that the questions from the council are spot on and it highlights what Mr. Fabian said at the very beginning. in order to build that fire station that's going to cost you $30 million, you're not going to be able to afford it in one year. You can't write that $30 million check in one year because you have salaries, you have PERS, pension obligations. But if you spread it out over 20 or 30 years, then you're just paying a million dollars a year. And that is maybe more affordable. And again, the useful life of that asset's going to be there. So I think that's what's kind of highlighted by those questions. you can't afford to pay that much money in one year. So you spread it out.

One other point to make is that when you're spreading that debt, the people who are in, let's say, let's make an assumption that it's for 30 years. The people who are paying taxes for those 30 years are enjoying the benefits of that particular asset. So we built station number two a few years ago, and people are now, we are now using station number two. So folks who have have been using that station, have had the benefits of folks that are, of our employees, our public safety staff that serve the community from that station are enjoying the benefits. So if you want to talk about equity, it is fair for those persons who are enjoying the benefit of that asset to also contribute to its construction.

Okay, great. If we could go to the next slide, please. So this financing tool is water and sewer revenue bonds. You have used this in the past for improvements to your sewer conveyance system and then also for your contribution to the San Jose sewer plant. Also for water system improvements within the city as well. And this type of debt is secured by the repayment of the utilities net revenues. And so when you think about your water, your sewer system, you have your rates and charges that are paid by the residents and businesses. Those are your gross revenues. You subtract the maintenance and operational expenses of those utilities, and then you're left with your net revenues that are used to pay the debt service on outstanding bonds. This is not a general fund debt. It doesn't impact the capacity of the general fund to pay for other services. A Prop 218 process is required to adopt the rates for both your water and sewer system. It is a stronger credit because it's self-supporting and you have to drink water and you have to flush the toilet. So it's something that's an essential utility credit. And the bond market likes those type of credits. As I mentioned, you have two outstanding sewer revenue bonds and one water bond issue. From an investor's perspective, for every dollar of debt service you pay, you have to collect $1.15 of revenues. So you have a 1.15x coverage factor. And again, that just helps secure the credit, provides a buffer. for the potential bondholders to make sure that they're going to get their debt service paid each year. And then typically you have in these type of credits additional bonds tests that you have to meet to be able to issue more debt for either the water or the sewer system in the future.

Yeah, I mean, for example, the coverage part is interesting. For example, when we went through the most recent drought a few years back, people were encouraged to conserve water, and they did. But that meant the revenues available to the water system of the city of Milpitas went down. So, you know, you have to adjust your rates. Meanwhile, your costs are usually about the same. So you have that little coverage factor in there to assure the investors they'll get repaid.

As a reminder, we are starting the process of rate studies for our water and sewer services and that's going to kick off later this year that's roughly a two year process, because it requires a lot of outreach because effectively we're reaching out we're evaluating what our finances will need to be. to support the systems for the subsequent five years because our rates and sewer rates get studied every five years. So this is in collaboration with the finance and public works that'll be doing that work. And the supposition is we have to have those rates in place by July 1st, 2028. So we have some work in front of us. And so what you will see as part of that rate study is the amount of debt that there will be. Part of the rates has to cover this outstanding debt. So that will be part of the rates. So that will be coming to you in about a year. The first view.

Okay. Could you please go to the next slide? So the last financing tool are land secured bonds. And these are typically either community facility districts, commonly known as CFDs, or assessment districts, commonly known as ADs. They're secured by either special taxes for a community facilities district or assessments for an assessment district. They're approved by the property owners or voters within the boundaries of either of these districts. They're typically used to fund infrastructure like streets, sewer, storm drain. It's not an obligation of the city. Again, some of the advantages of this type of debt is it's not a general fund obligation, so it has no impact on your general fund. It can be tailored to the specifics of the project and phased over time. Because it's a vote, of specific people residing or owning property within the boundaries, it's a little bit easier to get accomplished than the GO bond process where you need 67% of all voters. It does allow you to, the repayment is dependent upon the value of the property within the boundaries of the district. They are a little bit complicated to set up. There's a process involved with forming either a community facilities district or an assessment district. It does require either approval of the property owners or the residents that live within the boundaries. There's a real specific strict nexus between the benefit received from an assessment to the property owners that has to be met, a high legal standard that is required, And then it does require either the landowner or the registered voters within the district to approve it. So this is typically done in new development areas where you potentially have like a raw piece of land where a property owner wants to do a development. They need a community facilities district or an assessment district to help fund the upfront infrastructure for land that has no infrastructure at that point in time, and so they would come to the city and ask for one of these districts to be set up. As far as I know, there are no CFDs or assessment districts within the city for bonded debt. Yeah, you have them for specific needs like landscape and lighting.

But there is no debt related to those districts?

Okay, if you could go to the next slide, please. I wanted to do a snapshot of your existing outstanding debt to just walk through. Starting at the top, we talked about the fire station previously. This is a general fund debt, lease revenue bonds. I'm proud to say it has a AA plus rating by S&P. It matures in 2041, June 1st of 2041, so it was a 20-year bond that we did. And it has roughly $16 million outstanding now. And then it's redeemable on June 1st, 2020 at 100%. That's the first call date where the bonds could be refunded. Then going into your utility systems, the water system first, the series 2019 bonds, again, AA plus credit rating reflecting the good, strong credit fundamentals of Milpitas. Those bonds were done for a 30-year time frame. We have roughly 15 million left of those. Those are coming up for their first call date on June 1, 2029. On the sewer system side, you have some bonds coming up for being paid off on November 1, 2026. Those are the 2017 bonds. So those will go away. And then you'll have the series 2019 bonds. Again, rated AA+, 30-year bonds. You have roughly $27 million outstanding on those, and those are callable on November 1, 2029. And then the last debt that you have are your tax increment bonds, the Series 2015 bonds. Those mature on September 1 of 2032. Those are rated AA by Standard & Poor's. There's roughly $47 million of bonds left. Those are now callable. And as Luz mentioned, we'll be talking about refunding those bonds on September 1st to provide lower debt service and keep money on Main Street and not going back to Wall Street. So that's a snapshot of your outstanding debt as of July 16th of this year.

Yes, sir.

My question is related to the buyer. If I'm the buyer, I'm looking at 30-year bond. Wouldn't it be a long time with the bank or the... What do you call those when you buy stocks? Well, would they repackage it in a different form so the buyer would not have to wait that long for the bond?

Well, look at it this way. So an investor of your bonds, they have a decision to make. So a 30-year bond has 30 different maturities. So for example, the sewer bonds, they were issued in 2019. So there's a 2019, 2020, 2030, 2040, 2049 security. So an individual investor decides, well, what maturity works for my investment portfolio? Is it short end of the yield curve, middle of the yield curve, or the long end of the yield curve? So that's an individual decision that an investor makes, whether it's a bond fund or a person who buys bonds. To you, you put out your bonds for that 30-year time frame and allow investors to decide which maturities they buy and which they don't buy. Bonds are sold all the time back and forth on the secondary market. So it's probably very unlikely that somebody is going to hold a bond for 30 years just because of their individual circumstances or the fund's circumstance as rates go up, go down, recessions, boom times. So the secondary market is very active in bonds, and it's very typical that somebody doesn't hold it until maturity.

Right. Well, council member, you're also correct that whoever is buying that 30 year maturity, they're going to get a higher interest rate than who's buying the two year maturity, right? Because there's more risk that the city of Milpitas may not pay in 30 years versus in two years or any local agency. And so, as Mr. Fabian described, because we have a different bond maturing every year, we don't pay the high interest rate, the 30-year high interest rate on all the bonds. We pay a lower interest rate shorter down the yield curve. We only pay the higher interest rate on that final couple of maturities, if that makes sense.

Yeah, that makes perfect sense. And we do have an example that we're going to walk through to demonstrate that for you. So it would be hopefully a little clearer on a hypothetical bond.

Okay, thank you.

Sure. If you could go to the next slide, please. Okay. In the bond world, they say it takes a village to issue a bond. And this is the members of the village. You're the issuer. You're in control. It's your bond, your debt. We all work for you. James, as I mentioned, is the bond counsel. His firm, Jones Hall, they also, in most cases like for you, they have also wore two hats, bond counsel and disclosure counsel. So not only do they prepare the legal documents, provide the tax-exempt legal opinion, but they also provide the disclosure documents so that investor can decide whether or not to buy your bond. We are your municipal advisor. We have a fiduciary duty to protect your financial interest and to advise on structure, timing, and pricing. We have an underwriter who actually buys your bonds from you and then resells them to the public. We have a rating agency. In your case, we have used Standard & Poor's to provide an independent credit rating. of the city's financial situation and bonds. We have a trustee. A trustee's job is to take the money from the city to pay the bondholders on either a semi-annual basis, a principal and interest, and then administer any other funds that are involved with the bond issuance. And sometimes we have a bond insurer Build America Mutual or Assured Guarantee that provide bond insurance. They're rated AA. That's not something you have because of your outstanding credit rating. So you don't have any bond insurance now on any of your bonds.

And so additional members on the issuer side of our team, because it's not just finance, although finance is the is the leader very much in bonding. The city attorney's responsibility is to review the documents. And if Christian wants to speak a little bit to that, if our city attorney wants to speak to that, he certainly can. And we also collaborate with whomever department has an asset. For example, let's say that we were thinking about building a two-story sports center to replace our sports center. So Renee would be involved, the director of recreation would be involved in understanding what the needs are and what that would look like. Planning would be involved to figure out how we would be able to plan a building that would work in our community. Public works would be involved, not just looking at pricing out the asset and looking at how much it is, but also what are the operating maintenance costs so we're not just looking at the cost of the debt but we're also looking down the road. And so it's not just, it's a very, bonding is a complex issue that involves, and of course the city manager, and of course your role in the city council role, which is effectively say yay or nay to these initiatives that the staffing for you.

On the previous slide, one of the bonds is rated AA instead of AA+. Why would one bond rated AA and the rest of the bonds rated AA+.

Great question. So as James had talked about, when we looked at the tools that are available for issuance of debt, it really becomes an issue of the security pledge. And the AA rated bond is your tax allocation refunding bonds from 2015 because it's based upon property value and it's somewhat passive. You know, properties go up, properties go down. And so that's why that one is rated AA. That's an outstanding credit for a tax allocation bond. And, you know, I think it was, was it 24 that they were upgraded? Yeah. So those bonds were actually AA minus originally. S&P came in, Standard & Poor's came in, upgraded those to AA in 2024. So that's a very, very strong rating. But again, when you think about like your other types of debt where you have the rates and charges of your water fund and your sewer fund, those are viewed at a higher credit rating of AA plus. And your general fund, because of your strong management policy framework and wealth factors of the community, are also rated AA+. So in the minds of the rating agency, they're a stronger credit.

Okay. Thank you.

Okay. Next slide, please. Yes, we just went over the different team members. And as you won't be surprised to learn, there's also many steps in the process. So, you know, from kickoff to sizing, structuring, how much debt can the individual utility or can the general fund afford to pay, to the documentation and disclosure process to make sure we're telling investors all the material information regarding the credit and the source of repayment, going to S&P rating agency, getting that rating, coming back to you, the city council, with all those documents to actually authorize and say, yes, let's move forward with this bond financing, going to the marketplace with the underwriter, finding out what investors will demand, what interest rate the investors will demand. That's what we call the sale and the pricing, locking in the interest rates at that time. And then typically we'll close the financing two weeks later, meaning funds are in hand at closing. And not to gloss over the last part, which really falls onto city staff, all of us as financing team consultants, we help on the first side of things to get the deal closed, but then it's really city staff That's going to be administering the bond, continuing disclosure to bondholders, letting them know, hey, we're still okay. Milpitas is still doing good here. These bonds are still getting paid. Any other IRS audit inquiries, these kinds of things come up from time to time. So it really is not just the financing issuance timeline, but really you're living with that debt the entire life of the debt.

OK, if you could go to the next slide, please. So this gets back to the question of credit ratings again. So going left to right, you're looking at a AAA being the highest rating to CCC being basically not credit worthy, so to speak, non-investment grade credit. As we talked about, the city is in a very strong position. currently rated AAA as a city by Standard & Poor's. Your water, sewer, lease revenue bonds are AA+. And again, that's typically the way it works where you're a notch lower than your credit rating as a city because of the fact that you have the legal provisions and other matters of why a debt is rated a notch lower than what you are as a city. So the AAA rating of the city, AA plus on your outstanding credit, and as we mentioned, the AA on the tax allocation bonds. So some of the things that when S&P looks at your credit, they really look at the local economy, your tax base, your demographics, your wealth factors, per capita, effective buying income. They look at your financial results, whether you do have deficits or whether you have strong reserves. They look at your existing debt and your pension obligations to know how much liability that you have. I can't stress enough the importance of management and policy framework. and financial reporting to make sure that your annual audits are done on time. There's no management findings in the audits, that you have a very strong, effective policy framework to govern how things are done. And then stability and management is a very important thing too. Also, the governance and political environment is another factor that S&P looks at. Again, the credit rating is an independent external review. We help you present your story to them. But we really have no ability to challenge them on what they come up with in terms of their internal process of going to credit committee and coming back with the rating. But our job is to really make sure that we put together a presentation that really accentuates all the positive factors of the community.

I did want to ask you if you would talk a little bit about how we are always, when we are in public, we are always speaking to the market.

Yeah, I would definitely say that that's very important consideration to think about. And James will go in a little bit further. But, you know, it's really important as policymakers and stakeholders to really think about the benefit of the community, the community as a whole, to put a positive presentation forward about the community, how you're working together as policymakers for the benefit of the community, and how everything that is done is to really keep moving the city forward, both from a development perspective, but a financial perspective, and how you really have to be careful about what you say in a public meeting, public setting about the community, the financial health of the community, and just Just be cognizant of the fact that things get picked up on the internet by the rating agencies, by social media, and it's more now than ever before. James, anything you wanted to add?

Yeah, I mean, just to put it into dollars and cents, the better credit rating you have, the lower cost borrowing, right? And so obviously the city's done a very good job maintaining strong financial metrics. And as Mr. Fabian says, S&P, they do read the newspapers. You know, investors read the newspapers too. So we want to always put our best foot forward for the city.

Okay, we're going to go to the next slide, please. Okay, so in terms of the way bonds are sold, we have a couple different ways that we sell bonds. So we sell your bonds to the public. So anyone has the opportunity to buy a Milpitas bond, whether as an individual or through a mutual fund or another fund. So there's typically two ways that public offerings are done. A competitive sale is done where you say on this date, at this time, every underwriting desk has the opportunity to bid on your bonds, provide the best bid, and it's awarded to the bank that produces the best true interest cost to the city. For example, James and I both worked for the city of San Bruno across the bay. They actually were lucky to get a general obligation bond authorization by their community. On August 4th, we did a competitive sale. We got 10 bids. We awarded to the bank that provided the best bid to the city of San Bruno. So that's a competitive sale. On a negotiated sale, that's where a bank is selected based upon their ability to underwrite bonds, their expertise to underwrite bonds. And historically, the city has had a very good working relationship with Stiefel Nicholas as an underwriter who has assisted the city to underwrite the bonds going back to the 2015 tax allocation refunding bonds, the water and wastewater bonds, and then the lease revenue bonds that we talked about. And so under this situation, They're selected based upon that expertise. We, as your municipal advisor, work to make sure that they provide a cost, an underwriter's discount that is fair and representative of the current market situations. They are brought on early, and they help in the structuring of the debt. Where on a competitive sale, the underwriter basically is on that day given the information about the debt and they provide their bid. The basis of award, as I mentioned, on a competitive sale is the lowest true interest cost. On a negotiated sale, there's a little bit more flexibility because you can work with the underwriter to say on this day, it doesn't look so great, so let's wait. And you have a little bit more nimbleness to enter the market. Competitive sale is where your frequent issuer, like say the city of San Francisco, who's regularly in the market like pretty much every other month. So they have a very strong name in the bond market. Milpitas, you don't issue a lot of debt, so you're more of a story to talk to investors about, but you're a strong credit and that helps. So typically like on a negotiated sale, it's more competitive. complex or there's less familiarity with the credit. The other method on the right there is a private placement. Sometimes a bond might not be the best way to go because of a specific situation like say for like a energy efficiency project and you want to go directly to a bank to get a loan. And so that's what a private placement is where you direct and negotiate strictly with a bank to provide a bank loan. There's no public offering. That bank holds that credit for the 10 or 15-year term. Typically, it's a smaller borrowing amount and it's more efficient to do on a private placement basis. So those are the mechanisms of how bonds are sold.

Next slide, please. Jim just kind of went over this public offering versus private placement. Most of what we've been talking about tonight is just kind of assuming the public offering, you know, multiple investors, the disclosure documents so that the investors know what they're buying. Again, as Mr. Fabian just mentioned, the private placement, you're just working with one lender. Think about just going down the street to your mortgage lender, one bank. And so... Yeah, fast forward, next slide. Again, private placement versus public offering, just different ways to access the marketplace. Next slide.

Okay, so here, this is the example I wanted to walk through for you about like a hypothetical borrowing. And so under this case, what we did is we just assumed that you need $10 million for a project. And so you're gonna borrow a $10 million amount of bonds. Investors are gonna pay you a premium because they want higher coupons. So they're actually going to pay $500,000 to get a higher coupon to you. So that's an additional source of money. So you have $10.5 million as sources for you. You need $10 million for your project fund on this hypothetical project. You have a debt service reserve fund of $200,000 and cost of issuance of $300,000. And so the debt service reserve fund is for the benefit of the bondholders in case there was a nonpayment. And then the cost of issuance are the fixed cost of myself and James and the underwriter to actually sell the bonds. So sources on the left, uses on the right. If you could go to the next slide, please.

Before you do that, can you explain what coupons are in this context?

Sure. So coupons are the actual, in the old days, you actually would get a paper coupon and say, I would like to present this for payment, and it would say 4.25% on this bond. And so that's the coupon is the individual bond and then the amount of the interest for that individual bond. We still use the term, even though everything's electronic now. OK, so on the next slide. So this is the hypothetical debt service payment for that $10 million. And we're assuming a level of borrowing at 4% over 20 years. And so you can see here. that to repay that $10 million principal and interest over that 20-year period, it actually costs you $4.7 million in interest to repay that. And you can see the level of debt service on the bar on the graph on the right where you have your interest that's higher in the early years and then lower in the latter years because your principal, just like on your mortgage, you're paying more principal as the term comes to an end. And so you can see on the last year, it's almost all principal and little interest. And so those early years, you're definitely paying more interest. Typically, as we talked about, in year 10, the bonds can be called, and typically at 100%, so you have no prepayment penalty. And that's typically where you can, for the next 10 years, have a lower debt service amount because the interest rate would be lower in that 11th year through the 20th year. So we always, as your municipal advisor, look for those opportunities to refund debts when you get up to the call date. So this is just a hypothetical example that we thought might be helpful.

Thank you. I'm trying to decide which way to go. Let's say, is there a certain amount? Let's say you want to raise $10 million or $15 million. But is there a point that you decide you want to be You want to borrow this amount or you want to have it issue bonds? Is there a clear cut which way, which direction you should go?

Yeah, I think it really goes back to when you think about the context of what the facility is you need, right? So you have a capital improvement program that you spend a lot of time putting together to define what your facility needs are or your infrastructure needs are. You identify whether it's a $10 million project or a $50 million project that you don't have $10 million or $50 million in the budget. So you want to stretch the repayment out over that 20 or 30 year. And so you have to decide, well, how much can I afford to pay in debt service? And so like the fire station, that was a general fund obligation. And so you had to have the wherewithal and the general fund to pay that annual debt service for the fire station. Same thing would apply here, whether it's a $10 million or $50 million. You'd have to determine that you have enough resources in your budget to pay the debt service because you're not getting a new revenue source to repay that debt, it has to come from existing resources.

If the interest rate is very low, would the loan be more attractive than issuing bond?

Typically, you're referring to like a private placement or a loan with a bank, right? Yes. Yeah. In most cases, with your credit rating of a AA+, that's the best way to borrow money. because that provides you with the lowest cost funds is by going out in the public and using that AA plus rating to borrow money versus going to a bank.

Part of the back office work, for lack of a better term, that we do before we bring anything to council is really looking at all the alternatives and which direction should we go and what's the best for the situation for the asset or assets that the city wants or the city's needs. for the reason for issuing the debt, as well as the mechanism to pay off that debt. So that was part of the evaluation. So when we come to you on September 1st, we'll be talking a little bit about why we chose to go one way versus another.

Okay. All right. Thank you. Thank you.

Okay. Next slide, please. Okay, I have a couple here and we're getting toward the end here. So thanks everyone for their patience. But these are important here. This is kind of on the disclosure side. So we touched on this earlier where when we sell a bond in the marketplace, we're speaking to investors, the federal securities laws apply. which means we have to provide all material information and make sure we're not omitting any material information when we're selling these bonds, because if there's a piece of material information, well, it could affect the interest rate. You know, it could affect whether a buyer wants to buy the Milpitas bonds or not. For example, what is the rating? You know, if it's a AA plus rating, that's what we're going to tell investors. We're not going to tell them it's AAA, right? That's an obvious error, you know, but on the omission side could be equally important. If we're financing a wastewater facility, we want to tell investors, do we have enough money to complete the whole project, for example? Or did the Prop 218 rate study get accomplished so that we have the revenues? Those kind of things. It's not just what we tell investors, but also what we don't omit to tell them. And so, as has already been alluded to, you have a whole team working for you, the city, to make sure we prepare a complete disclosure document. The disclosure coordinator in this case would be the finance director overseeing the rest of us on the team, working with city attorney, city manager's office, public works, whoever would have material information, you know, important information. as to the debt being issued. And again, as we alluded to earlier, that's the official statement that's prepared when we first issue and sell the bonds. But on a going forward basis, we're going to be speaking to the marketplace. We're going to be posting the audit financial statements of the city every year when they become available. We're going to be providing investors other statistical information that might be relevant again in a utility credit for example what is our net revenues available to pay debt service you know what is our gross revenues what's our operations and maintenance what's that coverage making sure we're we're meeting that 115 coverage ratio we talked about earlier Also material events, the ratings can change. As was alluded to, your tax allocation bond actually got a rating upgrade. That's material information. We post that to the marketplace so the investors know that and can trade in the bonds with that full information. Next slide, please. Again, bringing it back to the City Council as the governing body, as the issuer of these bonds, you are, just like all of us, subject to the federal securities laws, helping all of us make sure that we comply with that, providing all the material information regarding the bond that we collectively know about. The challenge with materiality is it's not a bright line test, right? What is important to a particular investor in a bond? Think about yourself when you make your investment decisions in a stock or a bond yourself, your individual portfolio. You want to have as much information as you can, but obviously it's hard to know what pieces are material. So we do our best. It's a reasonable judgment. kind of test. And we just, we talk about it on the right hand side, in particular, what the city council should be doing is just reading the documents that we bring before you, asking staff and all of us as your consultants, if you have questions or if there's something that's not clear, making sure there are disclosure policies and training, which this session is part of that training, making sure you're up to date on what's going on in the city. And if additional training is necessary, all of us are available. And again, making sure that we are disclosing any potential risks, seismic kinds of risk, litigation, material litigation that might be impacting a particular bond. Again, it can be all discussed internally as the financing team and then decide what is disclosed to the outside investors. Because obviously some things are privileged, but we need to strike that right balance of providing all material information. There's a footnote here, Orange County, as we all know, went bankrupt famously in 1990s. They had bonds, they got sued and they got in trouble. not just for going bankrupt because they didn't tell investors, hey, there was these risks of the bankruptcy. Hey, we're trading highly speculative securities in our investment portfolio. They got in trouble for that. San Diego 20 years later got in trouble, including elected officials for not accurately disclosing their pension liabilities. San Diego self-funded their pension. They told investors, it was in the whole $400 million. It was actually in the whole $2 billion. And so that was a problem. Investors needed to know that. And so again, those are, they're pretty egregious examples, you know, but they're just examples that are out there. If you know something, please bring it to staff attention. And I think we're onto our nearly last slide here. Yeah, again, we've talked about this. Everything comes through the City Council as the governing board approving any kind of bond financing and delegating to staff final pricing terms and conditions, reviewing that official statement before it's disseminated to potential investors, understanding what material means that a reasonable investor would consider important in their investment decision,

just working with city staff and your consultants next one that's it yeah so let's wrap things up here on policy framework and key takeaways you have an existing debt management policy that was adopted it's referenced there down below key key document to describe how a that will be issued within the city of Milpitas. You have existing reserve and investment policies that are very important for the rating agency and bond investors. You have and continue to provide continuing disclosure to the marketplace on an annual basis. You also are required to provide reports to CDAC, who tracks all debt issued within California by public agencies. Each, when you approve the audit, the audit contains footnotes and tables related to your outstanding debt. And there's a consistency between the debt management policy, the capital improvement program, and any applicable rate study. Some of the key takeaways that we wanted to leave you with is that When you think about debt, it's your debt. The city's debt must be actively managed to be able to understand exactly the profile of where the debt is and repayment of that debt. We, the finance team, work for the city. We answer to you. The security pledge, as we talked about, is a central question in any issue. Each of the financing tools that we talked about has a different security pledge. Accurate disclosure is a continuing legal duty of not only staff but the elected officials. The council approves all the documents related to a debt issuance with certain parameters that are put into the resolution to be the not to exceed amounts, whether that's the not to exceed interest rate, underwriter's discount, a true interest cost, or minimum savings requirement. A strong policy framework is absolutely essential to keep that strong credit rating that you have. And so I'm really proud of the fact that you have such a high credit rating and staff and the electives have worked real hard to maintain that over the years. And as we talked about, the council discussions are closely watched by the investment community and can influence the perception of the city's credit. So We really appreciate your time tonight. We hope we provided you with a comprehensive overview of debt, how it's issued, why it's issued, and answer any questions that you have related to debt.

I want to thank Jim and James both for coming to help us with this question. This is important to understand. This is a big responsibility. And this is one of the most significant responsibilities along with adopting the budget that the City Council has. And this is just another way of investing in the community and providing those services and those access that the community wants and needs. So again, if we have any other questions or concerns, I'm also available as well.

Hi. This is a follow-up question of my previous question. If I would ask for a guideline for deciding whether I should go with issuing bonds or borrowing money, what kind of guideline you could give me? Does it depend on interest rate? Or depending on the amount I'm borrowing, just give me some basic guidelines.

Well, as we talked about, you have debt policies that are the guidelines for how you issue debt, when you issue debt, and why you issue debt. So I would encourage everybody to look over those guidelines that you currently have. You know, when you think about issuance of debt, you really have to put it into the context of the capital improvement program, your current budget, and your current resources available to pay debt service. And when you factor all those things in, that's how you make a decision whether to borrow. Because as we talked about, that $10 million or $50 million project, you don't have that money sitting unencumbered and available to fund one project. project in one year, you have to stretch it out so that you have a manageable debt service payment each year, and that that cost is paid by not only your current residents, but the future residents. So it's really not like there's a fine. I could say these three things are factors in when you issue debt, but it's in the context of the larger picture of your financial situation.

I would suggest to you that it's an art, not a science. Because it's a given situation where the city is, what the city wants to do with that money, what benefit will it bring both in the short and the long term. So it is always an art, not a science. I would also say that we have links that are in the item themselves. The CDXCDIAC has really good training. They do it in a wonderful way in like 15-minute soundbites, which I like because it's like I can only listen for 15 minutes until I have to listen again. But they do have a really good training program. And if you want to just listen to it while you're in the car, you log in and you just listen to it ever again. These are complex issues. And along with budget, it's how you issue debt as a community, as a municipality. is an indication of what the community wants and what the council believes the community wants. Debt is a sort of, it's also an investment, because you're saying we want this asset, the committee has told us we want this asset, and we want this asset for the long term. So I look at debt really as one tool in the toolbox to basically improve the city on a long term basis.

I think another factor, too, when you think about a debt issuance, it's cheaper to build something in 2026 than it will be in 2029. And so when you factor in rising costs that we've been really dealing with on a significant basis since we had the COVID shutdown and inflation has come back, that if you can say, well, it'll be cheaper to build something now than wait. And that should be another factor in deciding whether or not to issue debt to build something now versus later. Because it's only going to be more expensive down later.

Any other questions? I have a question or two. So I'm looking at, well, thank you for the information and the education. I'm looking at the types of financings being discussed. And it looks like that we have currently, as you said, the water, sewer, and the general fund backed up by the lease revenue. The question is, regardless of the source of the financing, Is there a limitation on where to spend the proceeds of the loan? Or it depends on the kind of financing

Yes, each bond does have limitations. If it is the sewer bond, for example, that's paid from sewer rates, it's got to go for sewer infrastructure, water system, water infrastructure, general fund. Obviously, you have more flexibility, just like you do generally how you use your your general fund in that particular bond. We told investors we're going to use it for a fire station. But you could, you know, use your general fund to back projects otherwise available to the general fund. So it really depends on each bond.

Okay, I get that. So, for example, we can do a lease revenue financing if we build that proverbial station two. Right. But for other purpose, not limited to each kind of financing, we can do a general obligation funds and that's where we get funds for certain things that we need. Will it be necessarily to be an asset, whether built or purchased, or it can be for another purpose?

Well, again, that kind of brings in the tax exemption rules we talked about. If you want to borrow tax exempt, which is lowest cost borrowing, it's got to be a public capital facility. So that'd be some kind of structure, some kind of building you're building. But as Mr. Fabian mentioned, sometimes cities bond finance for other purposes, you know, cash flow financings, I mean, affordable housing, you know, anything that you can put your general fund toward is legally permissible. It's just a question of what's the interest rate, what's the, you know, sort of tax status of that.

All right. So a general obligation bond has more leeway on spending.

Well, remember, a general obligation bond requires funds 67 percent of the residents in the community to approve it so step one in that ballot measure you have to be very specific as to what you're going to spend that money on okay and so it has to be a clearly defined purpose of what the project is that that general obligation bond will fund so it's preset to be approved by the voters yes sir all right thank you

Council Member Lin.

Thank you. Thank you, gentlemen, for the presentation. And I want to thank Luz and your team for all the hard work. Every single time after the audit, I always ask, do we have good rating? Is it triple A plus plus? Because that demonstrates how strong we are and how fiscal responsible we are. So thanks again for all the effort in protecting our financial stability. And again, thank you gentlemen. I would like to take back my comment about if we have a deficit, how do we pay? That's not going to happen.

It's a hypothetical.

So thank you. Oh, with that, if no one else has any questions, I would like to move this motion to our doctors. There's no need for emotion.

This is just receiving a presentation. Okay, I try.

Thank you. Thank you. Thank you. Thank you for your time. detailed presentation. Now we turn to public comments. Anybody from public? Madam Clerk?

I have no public speaker cards for this item. I believe we do have Voltaire Montemayor that wants to provide public comment.

Welcome, Mr. Montemayor.

Voltaire Montemayor of Melpitas. Great presentation. I was kind of late, but I made it. Yeah, we have those, Nasdaq, Dow Jones, S&P. They're big companies. United States will be going up, won't go down. In other words, our hope is those business, they have markets. In other words, if we have those bonds and we will be like the bank, as long as we have strategies, we have help, then we should not be too worried. But of course, there's a risk. Now, having ownership in stock, as I was emphasizing, business like other big companies should be robustly growing and we will not lose hope we will gain thank you and there are no virtual attendees we have no additional public speakers thank you anything from the staff or

Thank you. So next, we'll move to our announcements and future agenda items. City Manager, any announcements?

No announcements at this time, Vice Mayor.

Thank you. Any announcement from my colleagues? Councilmember Chua.

Thank you. I would like to invite everybody this Saturday for the grand opening of our very own Milpitas Pickler over by Ranch Drive 128 between HL Restaurant and In-N-Out. Please come. Thank you.

Thank you.

Thank you, Vice Mayor.

Yes. I received a call today, and I don't know if this goes to staff, but right up on the hills where we have dry, very tall brown grass, I think we should take care of that because that would be dangerous. You know, really easily spark for fire. So please take care of that. Thank you.

All right. We take note of that. Thank you. Any other announcements? I have an announcement. And it's been a while. I believe this is the part where we can hold the council for a certain policy or an ordinance going forward.

To add to the priority list?

Yes.

Yeah.

Yes. You know, I drive around the city every day and I have noticed electronic bicycles and scooters. I would like to see if there's some policy or an ordinance that we can do to just regulate them. And coincidentally, I heard the news, I think somewhere in the Bay Area, that there was a fatal accident about an e-scooter, and I think it's timely to see if we have some issues with the numbers of electronic vehicles that drives in the city of Milpitas and develop a policy on ordinance. Yes, ma'am.

Oh, thank you. I thought I brought this up way back with on our announcement. And I think city attorney.

Yeah. So actually, that might have been my first meeting. I believe at that time. For my notes, the council said that you'd accept an info memo from PD to decide whether you want to bring this back up. We didn't get

You didn't get any info memo on that.

OK. I believe we can make sure that gets forwarded. But I think the intent was that if after seeing the info memo, you still wanted to pursue something, they could come back up at the announcements.

OK. Sounds good.

All right. We can use Councilmember Chua's initial thoughts to supplement what we could do as I proposed tonight. Secondly, I would want to, I think this goes to the planning department, if we can have a review. It's been a while. The percentage of, if there is a certain percentage regards to mixed-use developments and zoning. So, we have, you know, we have a projects anticipated projects with the development of the city if we can review that certain percentage of mixed use developments as to businesses and the residential portion of that i don't know if we need consensus we do require consensus for that so i'll call for consensus on the percentage a review of percentage of mixed use developments and zoning that's going to be council member chua

Can you clarify, please? I'm not clear on the request.

What is it?

I'll try to clarify it. talking about the mixed use in rezoning or in projects that comes to us. And I understand that the word mixed use as to residential and commercial component of a project that does not have a definite percentage or guidelines with regards to what percentage of a certain zone or what percentage of a certain developmental project is dedicated to the mixed use of either residential or commercial.

So you just want information on that?

Well, we may be deficient of, again, that's why we're trying to explore this, we may be deficient as to a specific guideline, as to a certain project that comes to us in trying to enforce a mixed-use policy with regards to their application.

I think that's addressed on the general plan and then through the zoning ordinance.

I remember, and you may be right, it's just that when a certain area in Milpitas comes to us and we rezone it, whether it's an amendment to the general plan or a specific plan, we just categorize it. I may be wrong. That's why I'm asking. We categorize it as let's rezone this to a mixed use. and we stop on the classification of mixed use without determining what kind of mixed use as to portion of the re-sown area is mixed use as to being commercial or mixed use the mixed use of commercial and residential portion of a certain area

If I could ask just for clarification, Vice Mayor, are you looking for staff to prepare something that would explain what standards in terms of the relative percentages apply under our different zoning types? Because I think we have multiple mixed use classifications. Yes. And then based on that, the council would have the ability, if you're unhappy with those requirements, to possibly agendize and prioritize an item. or modification of those those rules.

I think that's a fair way to start it. Let's see the different policies that we have with regard to mixed use. And if there is an interest later on to see if we need to change it, then it comes to the council.

Okay, thank you. Thank you. That would still require a consensus vote. That would still require consensus. That would still require consensus vote. Oh, okay. Aye. Council Member Lam? Aye. Council Member Lien?

I'm not ready for that because at this moment we don't want to restrict or, you know, discourage any of our development, so. All right.

And then Vice Mayor Barbadio?

That's fine. My vote is aye.

Thank you. With three affirmatives, that will move to our list.

Okay. I'm about to come with you, Chief. Just one last thing, please. So also in consonant to the last request I had, I would like to see and revisit, at least just for information for now, what is our tree ordinance? I did a little bit of digging on our tree ordinance. I believe it was last updated or amended in 2016. With the passage of 10 years, with the developments that we had, I would like to see what's going on with our trees. There's some types of trees on that ordinance, and let's see if there is need to change that ordinance to protect more trees, or it's still appropriate under the current development circumstances.

All right. For consensus, Council Member Chua? Aye. Council Member Lam?

Aye.

Council Member Lien?

No.

And Vice Mayor Barbadeo?

Aye.

uh with three affirmatives that does move forward to the list thank you madam clerk and uh chief i i believe that you have uh some information in regards to electric vehicles yes real briefly thank you sir there was a request from council member chua in april of 26 when i was on the dais as the uh or acting city manager And at that time, we committed to an information memo. That information memo was drafted. I was under the impression that it was sent to you originally back then. I found out at the end of July that it may not have been transmitted to you. I sent it to council members on July 30th through email. If you didn't receive it, I just sent it again from this seat. So it is in your email as of right now, at least it should be. Just to recap the main highlights from that information memo to summarize it for you. We don't have an ordinance. We currently rely on the vehicle code for enforcement efforts. For us, that's been sufficient. We don't experience the same level of issues that other cities do. We looked at the period of January 2024. to April 26, because the request was in April of 26. We had 1,211 traffic collisions involving vehicles. Only 13 traffic collisions, so a little over 1%, involved e-bikes. Of that, two involved juvenile riders. One of the juveniles was at fault. And the other nine were adults. I'm sorry, the other 11 were adults. And out of those, nine of the riders were not at fault. So we don't... I believe that we have an excessive issue of people driving too crazy on these electronic bikes and the adult collisions outnumber the juvenile collisions significantly. We believe that the vehicle code that we utilize now for enforcement is sufficient, but we're happy to have further discussions.

Would you believe that this could be a good preemptive strike or preemption, or we're good with the statistics that you presented, we're good just relying on our enforcement and the vehicle code?

Yeah, I think we could take a closer look and revisit the statistics of what's happened since April because they are becoming more prolific, and then I could have a better recommendation for council. It's really an assessment of how are these things being used, and in most cases it's already covered in the vehicle code.

Okay. Well, thank you.

I mean, I think the challenge is, you know, is to the statistics looks good. But a few of the residents that came to me, that's why I brought this up. It does not merge. This is the statistics is different from the perception of some of the residents. And how do we address that is the challenge.

Mr. Viceroy, I'm sorry, we're probably getting to that level of conversation that's going to be a little bit too much for an item that's off agenda. The question really at this stage will be, is this something council wants coming back or add to the priority list to consider coming back with potential action?

Yes, please. Then we'll call for consensus. Council Member Chua? Aye. Council Member Lam? Aye. Council Member Lien? Aye. Vice Mayor Barbadio?

am too thank you all right and that is a unanimous minus the absent mayor Montano for moving this to the list thank you and this meeting is adjourned