STAFF REPORT TO THE CITY COUNCIL
DATE: Special Meeting of December 5, 2023
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Mike Roberts, Public Works Director/City Engineer SUBJECT: Victoria by the Bay Landscaping and Lighting Assessment District – Hold Public Hearing regarding Balloted Proposed Assessment Increase to the Maximum Assessment Rate commencing Fiscal Year 2024/25 RECOMMENDED ACTIONS:
City staff is recommending City Council to complete the following actions:
Hold a Public Hearing to receive testimony regarding the proposed increase to the maximum assessment rate for City of Hercules LLAD No. 2002-1 (Victoria by the Bay LLAD) commencing with Fiscal Year (FY) 2024/25; and At the conclusion of the public testimony, request any remaining assessment ballots for Victoria by the Bay LLAD be delivered to the City Clerk, declare the balloting period closed, and any ballots received after that time shall be considered invalid and not counted; and Declare that the assessment ballots will be tabulated on December 5, 2023 outside City Council Chambers upon close of the balloting period and that any interested person may attend and watch the tabulation process; and Adopt a Resolution declaring the results of the ballot tabulation regarding the proposed increase to the maximum assessment rate for Victoria by the Bay LLAD commencing Fiscal Year 2024/25; and Adopt a Resolution Approving the Final Engineer’s Report, Confirming Diagram and Assessments and Ordering Levy of Assessments for FY 2024/25 for the Victoria by the Bay LLAD pursuant to the Landscaping and Lighting Act of 1972.
EXECUTIVE SUMMARY:
Victoria by the Bay LLAD is experiencing a funding shortfall primarily due to high-level tree pruning, water rate increases, and increased irrigation demand from more extreme weather patterns. A 5-year financial projection completed in May of 2023 and an operational and financial assessment of the Victoria by the Bay LLAD completed in October of 2023 outlined the need to undergo Proposition 218 proceedings to increase the maximum assessment rate for the Victoria by the Bay LLAD. At the October 10, 2023 City Council meeting, City Council directed City staff to proceed with Proposition 218 proceedings to obtain property owner approval to increase the maximum rates in the Victoria by the Bay LLAD. On October 19, 2023, notices and ballots were mailed to all affected property owners in Victoria by the Bay LLAD regarding the increase to their maximum assessment rate.
The recommendations in this staff report would have City Council hold a Public Hearing to receive testimony regarding the proposed increase in the maximum assessment rate, accept assessment ballots until conclusion of the public testimony portion of the Public Hearing, declare that the assessment ballots will be tabulated on December 5, 2023 outside City Council Chambers upon conclusion of the public testimony, declare the results of the ballot tabulation, and if a majority of the weighted ballots do not oppose the proposed assessment increase approve the Victoria by the Bay LLAD Final Engineer’s Report and assessments for FY 2024/25.
BACKGROUND:
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 ongoing maintenance, servicing, administration, and operations of various landscape, lighting, and park improvements benefiting parcels within each LLAD. Each property is assessed only for the cost of the improvements from which benefit is received.
The boundaries of the Victoria by the Bay LLAD encompass the residential areas adjacent to San Pablo Avenue located at the northernmost point of the City. The Victoria by the Bay LLAD provides for well-maintained, attractive landscaping and LED streetlighting located along the neighborhood streets, Arbor Park, and Victoria Park, as well as its share of funding for the maintenance of the landscape and streetlighting improvements associated with the City’s arterial roadways. 5-year financial projections presented to City Council on May 23, 2023 showed that the operating budget for the Victoria by the Bay LLAD is experiencing an annual operating deficit 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. City Council directed staff to evaluate options to address the annual operating deficit and cumulative fund deficit prior to the start of FY 2024/25.
City staff conducted a virtual community meeting on September 19, 2023 with the Victoria by the Bay LLAD property owners, which included informing them of the funding challenges the Victoria by the Bay LLAD is experiencing as well as actively listening to their concerns and providing responses when appropriate.
With City Council’s authorization, City staff also secured the services of Bakertilly, a management consulting firm, to comprehensively evaluate the means and methods by which the City is currently delivering services for the Victoria by the Bay LLAD. The consultant from Bakertilly presented findings and recommendations from their evaluation at the October 3, 2023 City Council meeting. The primary recommendation of the Bakertilly evaluation was that the City initiate proceedings pursuant to Proposition 218 for the Victoria by the Bay LLAD to obtain property owner approval to increase assessments with the objective of eliminating the current annual operating deficit and the cumulative fund deficit including the associated loan from the General Fund, and eventually restoring reserves.
At the October 10, 2023 City Council meeting, City Council authorized Proposition 218 property owner ballot proceedings to increase the maximum rates in the Victoria by the Bay LLAD, preliminarily approved the Victoria by the Bay Engineer’s Report and proposed assessments, and adopted the Resolutions of Initiation and Intention. On October 19, 2023, notices and ballots were mailed to all affected property owners in the Victoria by the Bay LLAD, in accordance with Proposition 218, with instructions that ballots must be returned by mail by 5:00 PM on December 5, 2023, or in person by the conclusion of public testimony of the Public Hearing to be held at the December 5, 2023 City Council meeting.
City staff conducted another virtual community meeting on November 16, 2023 with the property owners of the Victoria by the Bay LLAD to provide details of the December 5th Public Hearing, information regarding the proposed assessment increase, and procedures for property owners to submit their ballot.
Ballots returned to the City will be tabulated outside City Council Chambers upon conclusion of public testimony on December 5, 2023. Any interested parties may attend and observe the tabulation. If a majority of ballots returned do not oppose the proposed assessment increase, City Council may approve the assessment increase. If a majority of ballots returned oppose the proposed assessment increase, the current Victoria by the Bay LLAD assessment will continue to be imposed. Ballots are weighted according to the proportional financial obligation of the affected property. This means one vote for each dollar of assessment. The results of the ballot tabulation are anticipated to be reported to City Council on December 5, 2023.
ANALYSIS:
The City is proposing a two-step fixed assessment increase to be implemented in FY 2024/25 and FY 2025/26 as outlined in the attached Victoria by the Bay LLAD Final Engineer’s Report to address the current annual operating deficit and cumulative fund deficit as well as provide a fair-share contribution toward funding a future LLAD Program Leader position, which was also recommended in the Bakertilly report.
The LLAD Program Leader position would be dedicated to and responsible for administering the City’s LLADs, including all of the public parks. Its highest priorities would be working with community members to resolve issues and providing quality assurance/quality control on the landscape maintenance contracts. Duties would include field inspection, monitoring water usage, overseeing extra work beyond the base landscaping contract, processing progress payments, monitoring the district budgets, performing streetlight audits, and overseeing streetlight contract work. Currently there is insufficient staffing to adequately perform these duties, which are spread across different positions, which creates inefficiencies and coordination challenges. All five of the City’s LLADs would contribute their fair share of cost to funding this position, which would be based upon the proportional benefit they receive. A detailed plan for fully funding the position, which could include contributions from other funding sources such as the General Fund/Capital Reserves, can be developed in time for the FY 2024/25 budget, if so desired. If the Program Leader position is not added in the future, this contribution could go towards paying off the cumulative fund deficit sooner.
If the proposed increase is approved by the affected property owners, the Victoria by the Bay LLAD maximum annual assessment for each single-family home would increase by $150 (or $12.50 per month) from $602.76 to $752.76 for FY 2024/25 and would increase again by $150 from $752.76 to $902.76 for FY 2025/26. The total $300 proposed annual assessment increase through FY 2025/26 is intended to be utilized as follows:
Increase needed to Eliminate Current Annual Operating Deficit:
$211.00
Contribution for LLAD Program Leader Position:
$5.00
Miscellaneous Capital Improvement Projects including Tree Mitigation:
$30.00
Increase needed to Eliminate Cumulative Fund Deficit over 10-year period: $54.00 Total annual VBTB LLAD assessment increase through FY 2025/26:
$300.00
Commencing in FY 2026/27, the maximum annual assessments would be increased annually by the change in the San Francisco Bay Region All Urban Consumers, Consumer Price Index (CPI) to keep up with inflationary increases in maintenance costs.
FISCAL IMPACT:
If the proposed increase is approved, the City will be able to generate additional annual revenues of approximately $125,000 and $250,000 for FY 2024/25 and FY 2025/26 respectively to eliminate the current annual operating deficit and begin restoring reserves, as well as provide a contribution toward funding the Program Leader position. More detailed information on this funding plan is included in the Final Engineer’s Report (Attachment No. 3, Page 8 – Table 1). If the proposed increase is not approved, the City will need to reduce levels of service to address the budget shortfall which could impact property values within the Victoria by the Bay LLAD.
ATTACHMENTS:
Resolution Declaring the Results of the Property Owner Protest Balloting Proceedings for Victoria by the Bay LLAD.
Resolution Approving the FY 2024/25 Final Engineer’s Report, Confirming Diagrams and Assessments and Ordering Levy of Assessments for Victoria by the Bay LLAD.
FY 2024/25 Final Engineer’s Report for Victoria by the Bay LLAD.