STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of June 27, 2023
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Mike Roberts, Public Works Director/City Engineer SUBJECT: Landscaping and Lighting Assessment Districts - Approval of Preliminary Engineer’s Reports and Declaring the City Council’s Intention to Levy and Collect Assessments for Fiscal Year 2023/24 RECOMMENDATION ACTION:
Staff recommends that the City Council:
Receive the staff report on this issue;
Ask any clarifying questions of staff; and
Take comments from the public; and
Adopt the following resolutions:
A resolution for the approval of the Preliminary Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2023/24 within the City of Hercules for Citywide Landscaping and Lighting Assessment District No. 83-2, which is comprised of Benefit Zone Nos. 1, 2, 3&4, 5A, 5B, 5C, 6, 7, 8, 9, and 10, and setting a public hearing for July 11, 2023; A resolution for the approval of the Preliminary Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2023/24 within the City of Hercules Victoria by the Bay Landscaping and Lighting Assessment District No. 2002-1 and setting a public hearing for July 11, 2023; A resolution for the approval of the Preliminary Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2023/24 within the City of Hercules for Hercules Village Landscaping and Lighting Assessment District No. 2002-2 and setting a public hearing for July 11, 2023; A resolution for the approval of the Preliminary Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2023/24 within the City of Hercules for Baywood Landscaping and Lighting Assessment District No. 2004-1 and setting a public hearing for July 11, 2023; and A resolution for the approval of the Preliminary Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2023/24 within the City of Hercules for Bayside Landscaping and Lighting Assessment District No. 2005-1 and setting a public hearing for July 11, 2023.
EXECUTIVE SUMMARY:
The City of Hercules (City) annually levies and collects special assessments to maintain certain improvements within the City’s five Landscaping and Lighting Assessment Districts (LLADs). Each LLAD provides continued maintenance, servicing, administration, and operations of various landscape and lighting improvements and other improvements benefitting parcels within each LLAD. Each property is assessed only for the cost of the improvements from which benefit is received.
The five LLADs in Hercules provide for well-maintained, attractive landscaping and serviceable streetlighting along public streets as well as fire breaks adjacent to open space. They also provide for the upkeep of playgrounds, fields, park furniture, tennis courts, graffiti abatement, lighting, landscaping, water features, and trails in City parks. The expenses associated with the maintenance of these LLADs include labor, material, equipment, utilities, repairs, and administration. City Council has followed a multi-step Council meeting process each year, including the preparation of annual Engineer’s Reports, to approve the levy of assessments on parcels within each respective LLAD in accordance with the Lighting and Landscaping Act of 1972.
On February 14, 2023, City Council adopted resolutions initiating the Fiscal Year (FY) 2023/24 annual approval process for the LLADs and authorized the preparation of 5-year financial projections for the City’s five LLADs to evaluate their long-term financial health by forecasting revenues and expenditures through FY 2027/28. Findings from the 5-year financial projections and recommendations for the FY 2023/24 assessment rates were presented to City Council on May 23, 2023 for review. City Council approved the recommended assessment rates for FY 2023/24 and directed staff to prepare the FY 2023/24 Engineer’s Reports for the LLADs accordingly.
The required second Council action approving the Preliminary Engineer’s Reports and setting a public hearing for the LLADs is the subject of this Council agenda item. Upon adoption of the attached resolutions this evening, a public hearing will be conducted on July 11, 2023. Following the close of the public hearing, City Council will be asked to provide final approval of the assessments and Engineer’s Reports for FY 2023/24 so the assessments for the LLADs can be submitted to the Contra Costa County’s Auditor’s Office prior to the August 10, 2023 deadline.
ANALYSIS:
In short, the 5-year financial projections presented to City Council on May 23rd showed that the operating budgets for LLAD No. 83-2 (comprised of eleven Benefit Zones), LLAD No. 2004-1 (Baywood), and LLAD No. 2005-1 (Bayside) are trending positively through FY 2027-28. This was in part due to successful Proposition 218 proceedings conducted between FY 2017/18 to FY 2021/22 that resulted in increased assessments for six (6) Benefit Zones of LLAD No. 83-2.
LLAD No. 2002-1 (Victoria by the Bay) and LLAD No. 2002-2 (Promenade) are currently experiencing annual operating deficits primarily due to the need for higher-level tree pruning work, the need for increased irrigation watering due to climate change, and East Bay Municipal Utility District water rate increases which have far exceeded the maximum allowable increase to the annual LLAD assessments, which is based on the published Consumer Price Index (CPI). The applicable CPI for FY 2023/24 is 5.3%.
FY 2023/24 Assessment Rates
An assessment increase below the maximum allowable was approved for FY 2022-23 and therefore, the maximum allowable increase is 7.5% for FY 2023-24 for all LLADs/Zones, except LLAD No. 2004-1 (Baywood) which has a much higher maximum allowable increase. Based on the 5-year financial projections and direction from City Council on May 23rd, City staff is recommending proceeding with the LLAD assessments for FY 2023/24 as summarized in the table below. *The rates shown above are for single-family homes, which equal one Equivalent Residential Unit. Condominiums and Apartment Units are assessed at 75% and 64% the amount of a single-family home respectively.
Below is a summary table of the LLADs/Zones recommended to be assessed below their respective maximum assessment rates for FY 2023-24 and the assessment increase amount.
Below is a summary table of the LLADs/Zones recommended to be assessed at their respective maximum assessment rates of 7.5% for FY 2023-24.
Programmatic Evaluation and Proposition 218 for LLAD 2002-1 (Victoria by the Bay) Staff is committed to continuous improvement and providing the very best LLAD program possible to the residents of Hercules. Every effort is made to ensure the programs are run as efficiently and effectively as possible. With that in mind, given the LLADs have been administered on an annual basis for over 2 decades on average and now assess over $3M annually, staff believes it would be beneficial to secure the services of an outside 3rd party to complete a programmatic evaluation of the LLADs. In the coming months, City staff intends to secure the services of a management consulting firm to comprehensively evaluate the means and methods by which the City is currently delivering the program. This would include City staffing levels, management structure, overhead, and contracting services. It would also look into policy issues such as establishing reserve levels as well as evaluating potential efficiency and cost-reducing measures such as decreasing irrigation water usage by installing drought tolerant landscaping and implementing new irrigation system technologies. Council discussion and guidance could occur during the Proposition 218 efforts outlined below.
To address the annual operating deficit and cumulative fund deficit for LLAD No. 2002-1 (Victoria by the Bay), City Council directed staff on May 23rd to initiate Proposition 218 efforts and obtain approval from Victoria by the Bay property owners to increase their assessments. City staff is assembling a team to conduct Proposition 218 proceedings, which includes Francisco and Associates as the Assessment Engineer, Jarvis Fay as Proposition 218 legal counsel, and a public outreach firm.
The tentative schedule for the programmatic evaluation of the City’s LLADs and LLAD No. 2002-1 (Victoria by the Bay) Proposition 218 proceedings is as follows:
July/August 2023: Contract with management consulting firm and assemble Proposition 218 team.
August/September 2023: Programmatic LLADs evaluation and determine proposed assessment rates for LLAD No. 2002-1 (Victoria by the Bay).
September 2023: City Council workshops and Victoria by the Bay public outreach.
October 10, 2023: City Council approves Victoria by the Bay Preliminary Engineer’s Report and proposed assessment rates and adopts Resolution of Intention.
October 27, 2023: Deadline to mail required Proposition 218 notices and ballots to Victoria by the Bay property owners (minimum of 45 days prior to public hearing).
November 2023: Conduct additional public outreach in Victoria by the Bay if desired.
December 12, 2023: City Council to conduct a public hearing, close balloting period, tabulate ballots, declare results of ballot tabulation, and approve final Engineer’s Report and proposed assessments, assuming favorable results, commencing FY 2024/25.
FISCAL IMPACT:
If assessments for the LLADs are not levied, there would be an estimated revenue loss of $3.2 million for FY 2023/24 to fund the maintenance and operations associated with the City’s public parks, landscaping, street lighting, and open space areas. Adoption of the attached resolutions is the second required Council action to proceed with approval of FY 2023/24 LLAD assessments.
ATTACHMENTS:
1. LLAD No. 83-2 (11 Benefit Zones) Resolution
2. LLAD No. 2002-1 (Victoria by the Bay) Resolution
3. LLAD No. 2002-2 (Hercules Village) Resolution
4. LLAD No. 2004-1 (Baywood) Resolution
5. LLAD No. 2005-1 (Bayside) Resolution
6. Preliminary Engineer’s Reports