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CITY COUNCIL AGENDA REPORT
City of Anaheim
DEPARTMENT OF PUBLIC WORKS
DATE: JULY 11, 2023
FROM: DEPARTMENT OF PUBLIC WORKS
SUBJECT: SANTIAGO GEOLOGIC HAZARD ABATEMENT DISTRICT
PROPOSED ASSESSMENT
ATTACHMENT (Y/N): YES ITEM # 04
GOVERNMENT CODE § 84308 APPLIES: NO
RECOMMENDATION:
That the City Council, by Motion, direct and authorize the Director of Public Works, on behalf of the City, to vote in favor of the assessment proposed by the Board of the Santiago Geologic Hazard Abatement District (“SGHAD”), by signing and submitting the official ballot which allocates approximately 12.5% of the proposed assessment of $306,800 to the City ($39,135.66 for fiscal year 2023-2024 subject to CPI increases thereafter). While staff questions the legality of the proposed assessment on City streets, staff believes there are overriding policy reasons, discussed in this report, to vote for the proposed assessment.
DISCUSSION:
The Santiago Landslide, Formation of the SGHAD, and Funding Challenges The SGHAD was formed in 1999 as part of the settlement of multiple lawsuits filed against the City by approximately 350 homeowners in Anaheim Hills alleging damages from land movement which became known as the “Santiago Landslide.” A map of the SGHAD area is attached to this report. The land movement was brought to a halt by the City’s emergency actions whereby its geologists directed the drilling of numerous vertical and horizontal dewatering wells to remove ground water that had reached high levels, thereby destabilizing the hillside. One of the essential components of the settlement was the formation of the SGHAD and the City’s transfer to the SGHAD all of the dewatering wells, easements, and equipment, together with $3.5 million of the settlement funds to operate and maintain the dewatering system. The SGHAD has nearly expended the $3.5 million and is projected to run out of funds in early 2024.
Without funds, the SGHAD will not be able to continue to pump out groundwater, water levels will rise, and the likelihood of renewed ground movement will be high1. 1 Public Works is separately reviewing the potential of imposing significant irrigation restrictions within the areas tributary to the Santiago Landslide, which restrictions, if imposed, may reduce the danger of a rise in groundwater levels, but such restrictions are not a complete substitute for the operation of the dewatering system.
Santiago Geologic Hazard Abatement District Proposed Assessment July 11, 2023
Two assessments proposed by the SGHAD Board to raise funds to continue to operate the dewatering wells have failed, the latest attempt occurring in November 2022. The SGHAD Board is now trying a third time for an assessment based upon new circumstances.
As a result of the heavy rains that hit California, and the federal disaster declaration covering much of California, federal funds have become available for qualifying capital infrastructure projects, which could include 75% of the cost of a project to construct a permanent stabilization of the Santiago Landslide without the need to rely upon operation of dewatering wells. Such funding is available only to protect public infrastructure and is available only for new capital improvements, not operating costs2.
The SGHAD’s engineer (ENGEO) submitted a letter of intent to the California Office of Emergency Services (Cal OES) for a FEMA grant for such a project. Cal OES reacted favorably, agreeing to serve as the applicant, along with the SGHAD as a secondary applicant, for FEMA funds for the project.
The next step is for ENGEO to prepare and submit an independent stability analysis and 60% design of the project3. The cost of the analysis is $175,000 and it must be submitted by August 4, 2023. Because the SGHAD did not have sufficient funds to both pay for the analysis and continue to operate the dewatering system through the end of the year, the City agreed to reimburse SGHAD the costs paid for the analysis subject to certain conditions. One of those conditions is that the City’s reimbursement obligation will cease if an assessment is not put on the ballot and approved, which assessment would serve as a source to (i) fund 25% of the cost of the long-term capital improvements and (ii) fund the operation of the dewatering wells until the permanent solution is operational. The City has also agreed to reimburse a portion of the SGHAD’s costs of conducting the assessment, by reimbursing the cost of the update to the Engineer’s report, up to $12,500.
The Pending Assessment
It was always anticipated that the $3.5 million in initial SGHAD funding would eventually be depleted and that the SGHAD would have to levy an assessment to replenish operating funds.
An assessment requires a vote of those assessed, with each assessee’s vote proportional to the assessment that the assessee will bear. The amount any property is assessed must be based upon the proportion of “special benefit” that property will receive. An assessment will fail if a majority of the weighted vote rejects the assessment (those not voting are not factored in the percentages).
The City did not vote on the last proposed assessment that failed in November 2022 with over 90% of the weighed vote of those voting opposed to it. For that assessment, the SGHAD’s 2 The public infrastructure to be protected by the permanent stabilization would be City streets and utilities, while private property may be coincidentally protected as a result of the protection of public infrastructure.
3 The project involves slant drilling under the landslide area (within open space) and installing steel and concrete beams down to competent stable land below, which beams would be tensioned and anchored (“tie-back” system).
Santiago Geologic Hazard Abatement District Proposed Assessment July 11, 2023
Engineer allocated approximately 12.5% of the assessment to the City, based upon its analysis that that City streets (with City utilities) within the SGHAD area receive that proportion of the benefit from the continued operation of the dewatering system.
The current proposed assessment is essentially the same as the one that failed in November 2022, except that the total assessment is $306,800 (about 2/3 of the $466,900 budget for the proposed 2022 assessment); so each assessed property would bear a lesser annual cost. The assessment resolution (and ballot materials) (i) provide that if the City does not pay its share of the assessment each year, or alternative compensation acceptable to the SGHAD Board, the assessment would “sunset” and none of the homeowners would be responsible for paying their assessments, and ii) authorize the SGHAD Board to enter into an agreement with the City for an annual contribution different from (and in lieu of) the assessment. Moreover, the 2023 assessment provides that if funding is not obtained from FEMA for 75% of the long-term structural repair (which requires a 25% local match), the assessment would expire at the end of FY 2025 (June 30). If FEMA funding is secured along with funds for the 25% local match, the proposed assessment will continue unless replaced by another assessment that would include general management duties in addition to financing the community’s portion of the local 25% match. The permanent structural repair is still in the 60% design phase, so we don’t yet know the project feasibility or cost, but we hope the proposed assessment of $306,800 per year, increased by the CPI, will be sufficient to finance bonds to cover the 25% local share plus remaining SGHAD costs.
Whether and How the City Should Vote on the Proposed Assessment If the proposed assessment fails, the dewatering system is expected to cease operations in early 2024 due to lack of SGHAD funds, and there will be no substitute long-term structural repair.
The City could propose significant restrictions on irrigation within the areas tributary to the Santiago Landslide, but it is highly uncertain whether the reduction in irrigation will be an adequate substitute for the operation of the current dewatering system. Not only will numerous private homes be in danger of renewed landslide movement, resulting in displacement of residents and damage to homes and private property, but public infrastructure (City streets and utilities) will also be at significant risk and likely to trigger emergency response costs.
City staff questions the legality of the proposed assessment on City streets. The law governing the proposed assessment (Proposition 218) provides that land “parcels” owned by public entities must be assessed unless the entity can show that it derives no “special benefit” (benefit unique to that property) from the district. However, City streets are not assessor parcels and are not owned in fee by the City (the fee is owned by the owners of adjacent lots and the City’s right to use is an easement). Unlike assessor parcels, the City streets cannot be liened and foreclosed upon if an assessment is not paid. Moreover, the streets and utilities benefit the surrounding properties, so it is paradoxical to view the streets as “specially benefitted” from an assessment project. There is no case law addressing these issues.
Even though the City could challenge the assessment, staff does not believe doing so serves the City’s best interest. Staff believes it is in the City’s best interest for this assessment to pass, and the assessment is more likely to pass if the City votes in favor of it. It is also worth considering that if the residents within the SGHAD boundaries step up to approve the proposed new assessment, it makes sense for the City to assist them in helping themselves for the greater Santiago Geologic Hazard Abatement District Proposed Assessment July 11, 2023
good. While the City’s weighted vote represents approximately 12.5% of the total, not everyone will vote, so the impact of the City voting could be 20-25% of those actually voting.
In short, reasons for the staff recommendation include:
1. The assessment will provide funds for the continued operation of the dewatering system through at least June 30, 2025, whereas the SGHAD will otherwise run out of funds to operate the dewatering system in early 2024. Without operation of the dewatering system, the risk of renewed ground movement is high.
2. If the Santiago Landslide is reactivated, many million dollars of private property damage is likely, as well as damage to City streets and City utilities requiring an emergency response and resultant costs.
3. The residents within the SGHAD boundaries have voted down two prior proposed assessments to continue the operation of the dewatering system, however, if they step up to approve the new proposed assessment, staff believes that it makes sense for the City to assist them in helping themselves.
4. If the permanent structural repair is financially and structurally feasible, and the project is approved for FEMA funding, the assessment will provide a funding source for the 25% local match required.
5. If the permanent structural repair is not a feasible project, the assessment will at least “buy time” to explore other alternatives, one of which is the application of strict irrigation limits within the areas tributary to the Santiago Landslide and another of which is a replacement assessment. The worst time to stop operating the dewatering system is before the winter rainy season, which is exactly the likely timing if the assessment does not pass.
6. The City has the right and authority to expend funds in the public interest, even though it might otherwise have reasons to challenge the proposed assessment.
IMPACT ON BUDGET:
There is sufficient appropriation in the Public Works FY 2023/24 General fund budget for the proposed assessment.
Respectfully submitted, Concurred by,
Rudy Emami Robert Fabela
Public Works Director City Attorney
Attachments:
1. SGHAD Resolution
2. Map
3. Engineer’s Report
4. Ballot