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Home My Public Portal About16) 10A Funding options for Citywide Maintenance DistrictAGENDA ITEM 10.A. ADMINISTRATIVE SERVICES DEPARTM ENT MEMORANDUM DATE: February 5, 2019 TO: The Honorable City Council FROM: Bryan Cook, City Manager By: Susan Paragas, Administrative Services Director SUBJECT: FUNDING OPTIONS FOR CITYWIDE MAINTENANCE DISTRICT RECOMMENDATION: The City Council is requested to provide staff with direction as deemed appropriate. BACKGROUND: 1. On June 19, 1979, the City Council of Temple City adopted Resolution No. 79-1825 forming the Temple City Citywide Lighting and Maintenance District ("District") and confirmed assessments for the first time in FY 1979-80. 2 . On April 23, 1995, after giving direction to staff to analyze the assessment methodology, the City Council received an Executive Summary that explained the recommended methodology changes and provided examples of the effects of the different alternatives . The City Council directed staff to make the approved changes to the District for the FY 1995-96. Notices were mailed to all property owners outlining the changes to the methodology and stating the assessment amount proposed for each property and that a Consumer Price . Index (CPI) escalator was included in the District. The changes were approved after a formal public hearing . 3. On November 5, 1996, California voters approved Proposition 218 , also known as "The Right to Vote on Taxes Act". The City was able to continue to levy assessments at the current rate for the Citywide Lighting and Maintenance District since Proposition 218 allowed certain exemptions for existing assessments imposed for the maintenance streets (this was determined to include all improvements within the public right-of-way including street lights and street trees which are eligible improvements under the Landscaping and Lighting Act of 1972). However, any increase in the assessment, including the addition of ~ CPI escalator, would require a ballot be mailed to each property owner subject to the assessment , and that a majority of property owners returning their ballot must approve of the increased assessment. The exemptions under Prop 218 did not City Council February 5, 2019 Page 2 of 4 include existing assessments for Park maintenance and required that agencies obtain the approval of property owners for the continuation of any assessment for park maintenance. 4. On July 1, 1997, the City discontinued assessments for park maintenance operations. The park maintenance program is currently funded through the General Fund. 5. Pursuant to the 1972 State Lighting and Landscape Act, an engineer's report must be prepared for each fiscal year in which assessments are levied and collected for the District. The engineer's report identifies eligible program expenditures, establishes the District's operating budget, updates individual property assessments, and documents the City's compliance with all applicable laws. ANALYSIS: The Landscaping and Lighting Act of 1972 ("1972 Act") allows the establishment of assessment districts by cities for the purpose of providing certain public improvements which include construction, maintenance and servicing of street lights, traffic signals, landscaping, and park and recreation facilities. The 1972 Act also requires that maintenance assessments be levied according to direct benefit rather than according to assessed value. The City Council formed the Temple City Citywide Lighting and Maintenance District on June 19, 1979 and confirmed assessments beginning in FY 1979-80. Each fiscal year, the City Council considers a resolution to levy and collect assessments necessary to fund existing District programs. There are two types of property tax fundings received by the District: 1. The Ad Valorem property assessment (i.e., based on the calculated value of real estate or personal property) revenue ("AVPT") is used exclusively to fund the street lighting program, traffic signals, and related capital improvements. The AVPT is part of the regular 1% of property tax assessed by Los Angeles County ("County") to property owners. The revenues increase when the County increases property assessed values. The AVPT's available fund balance continues to grow each year as there is not enough expenditures that qualify due to its limited/restricted use. 2. The Assessment Revenue is assessed for landscaping maintenance of parkways, street trees and medians. This is a direct benefit assessment established in 1995. Since these assessments are at a fixed rate, each year, the City supplements the revenue generated to finance the full cost of providing maintenance and operation of a street lighting system and to cover the costs of City Council February 5, 2019 Page 3 of4 providing maintenance and operation of the traffic signals in the City. These assessments also cover the cost of maintaining the median and parkway landscaping in the City. These landscaping services benefit two zones in the City: -Rosemead/Las Tunas Medians (Zone C) -City Center Parkways (Zone D) In meetings with the City's property and sales tax consultants, Hdl Companies, it is anticipated that the two major revenue resources, property and sales taxes, for cities will remain flat over the next few years due to a prediction of a leveling off in home sales and prices as well as a slowdown in transactions related to sales taxes. Furthermore, increases in the City's operating costs will continue to grow annually in providing services at its current levels (i.e. public safety, City-wide maintenance and repairs, etc.). Therefore, the City should determine how to fully fund the annual deficits in landscaping services without an impact to the General Fund. One opportunity to lessen the burden on the General Fund is to review the City's available options in a Citywide maintenance district. Here is a summary of the available options: Potential Cost Reduction Options Description Required Action to General Fund I option 1: I Expand Use o;~~~:;~r-em~ ·rlegislative Ap~;~;:~T + $peor.6yemailrl*io~-... ········l I I Funds ! ! 1-"·-~----·-····-·------~ C-.~-----···-··········-.. -----. --. -·----··--·-·-···---.. ,-,_J_ ___________________________________________________ l I I I ! Option 2: I Option 1 and Formation of New I I 1 District I I ' ' I ! I Property Owner Approval I I 1 L----·----······------L~-~-···-···· ... ··········--···········--·----··-····· ···············-·····---~-----. - * Does not include existing Lighting (Ad Valorem) balance Between $0.7 million to over $1.5 million per year** ** $0.7 million includes $0.6 million from Option 1 plus approximately increase of $100K in assessment revenues (increases could be staged). $1.5 million represents 100% of the total GF contributions for Parks and Landscaping assessments. The annual General Benefit for both Parks and Landscaping of approximately $464K would be paid out of Lighting surplus revenue. A presentation will be given by Harris & Associates at the February 5, 2019 to the City Council that will review the District's funding issues and the available funding options in City Council February 5, 2019 Page 4 of4 more detail. At the conclusion of the presentation, it is requested that the City Council provide direction to staff regarding the presented options to reduce the costs to the General Fund. CITY STRATEGIC GOALS: Actions contained in this report align with the City's strategic goal of good governance. FISCAL IMPACT: The direction received from the City Council will result in various levels: • Option 1 -Over $600,000 per year of relief for the General Fund. • Option 2-Potentially over $1.5M per year of relief for the General Fund. ATTACHMENT: A. Presentation Slides REVIEW OF CITYWIDE MAINTENANCE DISTRICT PR ES ENTATION TO COUNCIL FEBRUARY 5, 2019 Harris a Associates s: m z -1 )> Background • Ad Valorem assessment was levied for street lighting prior to passage of Prop 13 in 1976 • Ad Valorem assessment for street lighting became part of 1% property tax following passage of Prop 13 • Temple City Street Lighting District was established in 1979 for street lighting under 1972 Act • Services provided by the District were expanded in 1991 to include street trees, parkways and parks • Following passage of Proposition 218 (Prop 218) • O&M assessments for streetscapes are grandfathered • Parks would require Prop 218 proceeding 2 1972 Act vs 1919 Ad Valorem 1972 Act Revenue: • Can be used for installation and maintenance of street lighting, streetscape decorations, landscaping, statues, fountains, recreational equipment, and parks {Streets & Highways §22500) • Assessment is based on the benefit to the property, not the value of the property • Revenue collected on the tax bill but as a Special Assessment and not part of the 1% 1919 Act (Ad Valorem) Revenue: • Can only be used for maintenance and operation of street lighting {Streets & Highways Code §18000) • Revenue based on the value of the property and part of the 1% {after passage of Prop 13, property owners do not see it on their tax bill) •IHIITka•P'dlbB 3 District Revenue • Lighting: Ad Valorem revenue fund costs associated with street lighting-fund balance continues to grow (currently over $2 Million -use limited to lighting} • Street Trees & Parkways: Assessment revenue collected for landscaping but covers less than half the cost at the current service levels (approx. $381K General Fund contribution currently required annually} • Parks: General Fund currently primary source of funding •I tlln15aA Ill• 4 1919 Lighting Revenue • Based on Tax Increment • Limited use of funds (street lighting only) • Currently funds all the City lighting needs and has a growing fund balance • May consider special legislation like the City of La Puente received in 2017 (SB-361}-now has authority to utilize the funds for any improvements authorized by the 1972 Act • Previously 19111mprovement Act Ad Valorem revenue (also limited to street lighting maintenance) •IHirrtJ·~ 5 Assessment Revenue Used for funding: • Citywide landscaping maintenance of parkways, street trees and medians • Two Benefit Zones: • Rosemead/Las Tunas Medians (Zone C) • City Center Parkways (Zone D) • Since rates have not been increased since 1996 (Prop 218}, current assessment revenue funds less than 50% of annual cost -• No funding for park maintenance 6 -Health of the District: Lighting Surplus vs Landscaping Deficit (FY 2018-19 ) $1,400,000 $1,200,000 $1,ooo,ooo --~I-$618,o~g_, __ Surplus 1 - $000,000 SEDO,OOO $400,000 $200,000 $0 Lighting- ($381,446) -----Deficit __ ,_ ---- 1--- ----:$7 0 9;9 32-- Landscaping •·cost • Revenue 7 00 I .. i <Pl''V • ~Q <".?''V ~Q .9 :t'V ~Q S'l''V ~Q ;> r'V ~Q c.01' 'V ~Q ~ l''V ~Q I' l''V ~Q ol''V ~Q ~ ... <?'V Q) ~Q .... "' ;: <1.1 0 & 3: QJ 0.. o'V 0 ~Q a. b.O bO r:: c +-' 'iii <"o'V 'iii ro ro ta ~Q .r:. .r:: ~ u ... -9. :::l a:: ::::s v'V a. 0.. ~Q c r:: <1.1 S) bO -c Q) o'V c b.O ~Q ro .r:. r:: u QJ ro ;>, I .r:: v'V u ~Q >< {; o'V ·-~Q LL ~ o'V \I- ~Q I'- 0 o'V ~Q Q +-' v'V ~Q u ~ ta (5''0 ~Q & 6''0 ~Q E <"6''0 ~Q -& (5''0 0 0 0 0 0 0 <;)Q N 0 oq 1.0 <:t N .J.. ..-i ..-i 0 c:i c:i c:i '(/} '(/} '(/} '(/} '\/). '\/). Landsca(!e Subsid)£ Projection 10-Yr Projection of Shortfall $700,000 $631,211 $600,000 $500,000 $381,446 $400,000 $300,000 $200,000 $100,000 $0 FY18 -19 FY19-20 FY20-21 FY21-22 FY22-23 FY23-24 FY24-25 FY25-26 FY26-27 FY27-28 9 What your Neighbors are Paying So Pasadena Zone 2 LLMD Alhambra -LLMD Monrovi a-LLMD West Covina LLMD Sierra Madre LLMD No.3 Baldwin Park Zone 4-LLMD Arca dia Citywide Lighting Temple City Rate Comparison to Neighboring Cities (for a Single Family Residence) •••••••••••• $67.17 $56.23 $53 .34 $45.00 $36.01 $34.17 •••• $25.03 $0 .00 $20.00 $40.00 $60.00 $80.00 I' I • $100.00 $120.00 •IHint5aA "'• 10 Option 1 • Pursue Legislation to free Ad Valorem fund use • No Changes to the Existing Pre-218 District • Current assessments would continue to be collected • Augment assessment revenues using Ad Valorem fund surplus as needed to reduce General Fund contributions (assuming legislation is passed) • Emergency median and tree work only, limit special projects • Monitor existing maintenance only • Continue to fund Parks using General Funds • How long would this work? (will work until surplus ad valorem funds are exhausted) 11 Option 2 • Pursue Legislation to free Ad Valorem funds use • Seek to form a New 1972 Act District to increase current assessment (Prop. 218 Process) and fund: • Lighting-update/add lights to bring current deficiencies previously identified up to standard • Medians and Street Trees-update levels and provide a staged plan for replacing tree vacancies • Parks-Separate Special from General Benefit and add assessment to properties proportionate to their benefit- allows for new enhancements •lt~mta:a• ... 12 - Benefit of Creating a New 1972 Act District AND pursuing Legislation for 1919 Act Surplus • Reduce current General Fund contribution using surplus 1919 funds • Add a Park Maintenance Zone: Two Neighbor Cities have Park Districts (Single Family pays $12 .18-$36 .53) • Can stage the increase along with the implementation of additional services such as: • Upgrading Lighting in areas with deficiencies • Funding Park Capital Projects • Replacing street trees and fund regular maintenance 13 General/Special Benefit Considerations for a New 1972 Act District Proposition 218 requires General Benefits to be separated from Special Benefit: • Can only assess for special benefits specific to the property • Properties/Tracts without street trees would be assessed a reduced rate • Public properties would now be assessed •lt~mt5aA Ww 14 Process for New 1972 Act District 1972 Act Landscaping and Lighting District Formation Procedure Engineer's Report Prepared Adopt Resolution of Intention -Set Public Hearing Mail Notice of Public Hearing and Ballot to each Property Owner r-Pub~i~;t;;n of noti;;·~-;-;,;;riri;--;,ust -: ! be completed once, at least 10 day ! ! prior to hearing date ! : ____ __. • If Majority is Against•, Abandon Proceedings 14-------0 ---------'~ ,---·---·-·-----------------. . . ! • Ballots are weighted by ! ! assessment amount. A majority ! ~ protest is achieved if more j ~ assessments are voted against the ~ 1 Assessment. Only retumed ballots j ! are counted. ; , ______________ . Would take 4-6 months If Majority of is in Favor•, Adopt Resolution Establishing the District and Levying Assessments 15 t .. i • 1.0 rl t .. i • l 0 .. ~ fij :! 1! lH :z -----.. .. J ·I I w t .. I • ·-..... t-1 0 0 N 00 rl I Harris a Assoc:iates THANK YOU KEYNOTE Dennis Klingelhofer PRESENTATION Harri s & Associates, In c . www.WeAreHa rris.com