STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of July 11, 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 – Hold Public Hearings for LLAD Nos. 83-2, 2002-1, 2002-2, 2004-1, and 2005-1 and Adopt Resolutions Confirming Diagrams and Assessments for Fiscal Year 2023/24 RECOMMENDATION ACTION:
Staff recommends that the City Council:
Receive a report from staff regarding Landscaping and Lighting Assessments for Fiscal Year 2023/24; Ask staff clarifying questions, if any;
Conduct a Public Hearing on the item; and
Adopt the following resolutions:
A Resolution Confirming Diagram and Assessments for FY 2023/24 for Landscaping and Lighting Assessment District No. 83-2 pursuant to the Landscaping and Lighting Act of 1972; and A Resolution Confirming Diagram and Assessments for FY 2023/24 for the Victoria by the Bay Landscaping and Lighting Assessment District No. 2002-1 pursuant to the Landscaping and Lighting Act of 1972; and A Resolution Confirming Diagram and Assessments for FY 2023/24 for the Hercules Village Landscaping and Lighting Assessment District No. 2002-2 pursuant to the Landscaping and Lighting Act of 1972; and A Resolution Confirming Diagram and Assessments for FY 2023/24 for the Baywood Landscaping and Lighting Assessment District No. 2004-1 pursuant to the Landscaping and Lighting Act of 1972; and A Resolution Confirming Diagram and Assessments for FY 2023/24 for the Bayside Landscaping and Lighting Assessment District No. 2005-1 pursuant to the Landscaping and Lighting Act of 1972.
EXECUTIVE SUMMARY:
The City of Hercules (City) annually levies and collects special assessments to maintain certain improvements benefiting property 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. 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.
City Council completed the first step on February 14, 2023 by adopting a resolution ordering City staff to prepare the Preliminary Engineer’s Report for each LLAD 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 second step in levying the annual assessments for each LLAD, which consists of approving the Preliminary Engineer’s Reports, declaring the City’s intention to levy and collect assessments, and scheduling a public hearing for July 11th, was completed at the June 27, 2023 Council meeting.
This Council Agenda item, which consists of holding the public hearings and confirming the Engineer’s Reports and assessments for FY 2023/24, is the final step in the annual process to levy the LLAD assessments for LLAD No. 83-2, LLAD No. 2002-1 (Victoria by the Bay), LLAD No. 2002-2 (Hercules Village), LLAD No. 2004-1 (Baywood), and LLAD No. 2005-1 (Bayside). Proper notice of the public hearing has been provided by publishing the notice in the newspaper, at least ten days prior to the scheduled public hearing.
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 current FY 2022/23 and therefore, the maximum allowable increase is 7.5% for FY 2023/24 for all LLADs, except LLAD No. 2004-1 (Baywood) which has a much higher maximum allowable increase. Based on the 5-year financial projections and preliminary approval from City Council on June 27th, 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, including LLAD No. 83-2 benefit zones, recommended to be assessed below their respective maximum assessment rates for FY 2023-24.
Below is a summary table of the LLADs, including LLAD No. 83-2 benefit zones, recommended to be assessed at their respective maximum assessment rates 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 $3.2 million 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 intend 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. City Council discussion and guidance could occur during 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 preliminarily approves Victoria by the Bay 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 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, streetlighting, and open space areas. Conducting the public hearings and adoption of the attached resolutions is the third and final required Council action to approve the FY 2023/24 LLAD assessments.
ATTACHMENTS:
Resolutions Confirming Diagrams and FY 2023/24 Assessments for LLAD No. 83-2, LLAD No. 2002-1 (Victoria by the Bay), LLAD No. 2002-2 (Hercules Village), LLAD No. 2004-1 (Baywood), and LLAD No. 2005-1 (Bayside) FY 2023/24 Final Engineer’s Reports for LLAD No. 83-2, LLAD No. 2002-1 (Victoria by the Bay), LLAD No. 2002-2 (Hercules Village), LLAD No. 2004-1 (Baywood), and LLAD No. 2005-1 (Bayside)