STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of April 23, 2024
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Mike Roberts, Public Works Director/City Engineer SUBJECT: 1) 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 2024/25 2) Update on Proposition 218 timeline to notice and ballot property owners within the Victoria by the Bay LLAD RECOMMENDED ACTION:
City staff is recommending City Council adopt the following resolutions:
a. A resolution for the preliminary approval of the Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2024/25 within the 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 June 25, 2024; b. A resolution for the preliminary approval of the Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2024/25 within the Victoria by the Bay Landscaping and Lighting Assessment District No. 2002-1 and setting a public hearing for June 25, 2024; c. A resolution for the preliminary approval of the Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2024/25 within the Hercules Village Landscaping and Lighting Assessment District No. 2002-2 and setting a public hearing for June 25, 2024; d. A resolution for the preliminary approval of the Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2024/25 within the Baywood Landscaping and Lighting Assessment District No. 2004-1 and setting a public hearing for June 25, 2024; and e. A resolution for the preliminary approval of the Engineer’s Report and declaring the City Council’s intention to levy and collect assessments for Fiscal Year 2024/25 within the Bayside Landscaping and Lighting Assessment District No. 2005-1 and setting a public hearing for June 25, 2024.
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. 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. The Victoria by the Bay Landscaping and Lighting Assessment District (Victoria by the Bay LLAD) is experiencing an operating and cumulative deficit, which is currently being covered by a de facto loan from the General Fund and needs to be addressed as part of the Fiscal Year (FY) 2024/25 LLAD annual approval process.
On April 9, 2024, City Council completed the first required Council action in the multi-step LLAD process by adopting resolutions initiating the FY 2024/25 annual approval for the City’s five LLADs and authorized Proposition 218 proceedings to notice and ballot property owners within the Victoria by the Bay LLAD to approve increasing its assessments commencing with FY 2024/25. If the assessment increase is not approved by Victoria by the Bay LLAD property owners, cost cutting measures for the in-tract residential parkway strips will be implemented during FY 2024/25 upon City Council direction. Also, City Council directed staff to prepare a job description for the previously recommended LLAD Supervisor position, now called an LLAD Coordinator position, to be considered for approval at a future Council meeting as part of the annual approval process. The LLAD Coordinator position is discussed in detail in the ANALYSIS section of this staff report.
The second required Council action in the multi-step LLAD process is approving the Preliminary Engineer’s Reports and setting a public hearing for the LLADs which is the subject of this Council agenda item. Upon adoption of the attached resolutions this evening, a public hearing will be conducted on June 25, 2024 for all five LLADs. On June 25, 2024, City Council will be asked to hold a public hearing; accept Victoria by the Bay LLAD ballots until conclusion of the public testimony portion of the Public Hearing; declare that the Victoria by the Bay LLAD ballots will be tabulated outside City Council Chambers upon conclusion of public testimony; declare the results of the Victoria by the Bay LLAD ballot tabulation; and approve the FY 2024/25 Final Engineer’s Reports and assessments for all five LLADs.
BACKGROUND:
The five LLADs in the City 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.
Findings from 5-year financial projections for the City’s five LLADs were presented to City Council on May 23, 2023 for review. In short, the 5-year financial projections 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. The Victoria by the Bay LLAD and Hercules Village Landscaping and Lighting Assessment District No. 2002-2 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).
In addition to the 5-year financial projections, an independent evaluation of the Victoria by the Bay LLAD presented to City Council in October 2023 confirmed that its funding shortfalls would not be self-correcting. On October 19, 2023, notices and ballots were mailed to Victoria by the Bay LLAD property owners, in accordance with Proposition 218, to approve a two-step $150 per year assessment increase for a total annual increase of $300. Results from the ballot tabulation conducted on December 5, 2023 confirmed property owners did not approve the proposed increase to their Victoria by the Bay LLAD assessments by a 77% to 23% margin.
Given all five of the City LLADs have been self-funded through LLAD assessments, balancing the operating budget and eliminating the fund deficit for the Victoria by the Bay LLAD requires either increasing assessment revenues or cutting cost by reducing levels of service. The financial status of the Victoria by the Bay LLAD was discussed in detail at the February 27, 2024 and March 26, 2024 City Council meetings. On April 9, 2024, City Council adopted resolutions initiating the FY 2024/25 annual approval process for the City’s five LLADs and authorized Proposition 218 proceedings to notice and ballot property owners within the Victoria by the Bay LLAD again to approve a two-step fixed assessment increase to be implemented in FY 2024/25 and FY 2025/26. If the assessment increase is not approved by Victoria by the Bay LLAD property owners, cost cutting measures for the in-tract residential parkway strips will be implemented during FY 2024/25 at a time directed by City Council.
ANALYSIS:
The Preliminary Engineer’s Reports provide that the maximum annual assessment per parcel may be increased each fiscal year by the prior year’s increase in the Consumer Price Index for San Francisco-Oakland-San Jose Area - All Urban Consumers (CPI). The prior year’s increase in the CPI was 2.36%. All other LLADs/Zones are proposed to be assessed at their current maximum assessment rates in FY 2024/25, except for Benefit Zone Nos. 2 (Foxboro), 5A (Business Park), 5B (Commercial Properties), 8 (Trees and Flowers) of LLAD No. 83-2, Baywood Landscaping and Lighting Assessment District No. 2004-1, and the Victoria by the Bay LLAD.
Below is a summary table of the LLADs/Zones recommended to be assessed below their respective maximum assessment rates for FY 2024-25.
The primary factors for the significant increase to the Baywood LLAD assessment are the following:
EBMUD water rate increase of 8.5%
Landscape contract increase of 10% (assumed)
Loan repayment to fund the tree replacement work
PG&E increases of 10% (assumed)
Need for routing tree trimming
Increases in City personnel costs due to 22% increase in CalPERS pension rate.
Similar assessment increases for FY 2024-25 for the Victoria by the Bay LLAD, Promenade LLAD, and Bayside LLAD would be recommended if not for the following:
The Victoria by the Bay LLAD and Promenade LLAD are currently experiencing annual operating deficits and already at their respective maximum assessment rate. Prop. 218 proceedings to increase Victoria by the Bay LLAD assessments are already underway and Prop. 218 proceedings for the Promenade LLAD will be needed in the near future.
The Bayside LLAD is proposed to be assessed at its maximum assessment rate for FY 2024-25 and does not fund landscaping improvements, only streetlights and their small neighborhood park.
For the Victoria by the Bay LLAD, the City is proposing a two-step fixed assessment increase to be implemented in FY 2024/25 and FY 2025/26 to address the current annual operating deficit and cumulative fund deficit. The Victoria by the Bay LLAD maximum annual assessment for each single-family home would increase by $150 for FY 2024/25 and would increase again by $150 for FY 2025/26. Assuming favorable results, commencing in FY 2026/27, the maximum annual assessments for the Victoria by the Bay LLAD would be increased annually by the change in CPI to keep up with inflationary increases in maintenance costs.
The current and proposed rates per Equivalent Residential Unit (ERU) for each LLAD and Zone are set forth in the table on the following page. *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. The current assessment for the Victoria by the Bay LLAD reflects the authorized maximum assessment for FY 2024/25.
LLAD Coordinator Position
Staff is recommending funding of an LLAD Coordinator position, primarily to provide better customer service to residents and higher-level oversight of the landscaping and tree trimming contracts. Enhanced oversight and customer service would be gained through increased operational efficiency by having primarily one person assigned to this function instead of multiple people that have other priorities related to buildings, sewers, and streets. Existing staff costs would be reallocated from the LLAD funds to the Facility Maintenance fund as there is a need to enhance the level of maintenance on public buildings. This reallocation will result in an approximate $106,000 increase to the Facility Maintenance fund, which the General Fund primarily funds, and that financial impact could be evaluated as part of the review of the operational budget. As a result of this reallocation, the addition of the LLAD Coordinator position will be cost-neutral for all LLADs, except for LLAD No. 83-2 (Zone 10), which will have an annual increase of approximately $70,000 given the need to improve and better maintain City Parks as identified in the recently-adopted Parks Master Plan. For further details on the responsibilities and qualifications of the LLAD Coordinator position, please refer to the attached job description.
Remaining Schedule for LLAD Annual Approval Process and Victoria by the Bay LLAD Proposition 218 The schedule for the Victoria by the Bay LLAD Proposition 218 proceedings will run concurrently with the annual approval process for all five of the City’s LLADs. The remaining schedule is as follows:
April 23, 2024: City Council preliminarily approves the Engineer’s Reports for all LLADs and adopts the Resolutions of Intention.
No Later than May 10, 2024: Mail required Proposition 218 notices and ballots to Victoria by the Bay LLAD property owners (must occur a minimum of 45 days prior to public hearing).
June 25, 2024: City Council conducts public hearing for all LLADs, closes balloting period and conducts ballot tabulation for the Victoria by the Bay LLAD, declares results of the ballot tabulation for the Victoria by the Bay LLAD, and approves the Final Engineer’s Reports and FY 2024/25 assessments for all LLADs.
FISCAL IMPACT:
If assessments for the LLADs are not levied, there would be an estimated revenue loss of $3.3 million for FY 2024/25 to fund the maintenance and operations associated with the City’s public parks, landscaping, streetlighting, and open space areas. Adoption of the attached resolutions is the second required Council action to proceed with approval of FY 2024/25 LLAD assessments.
For FY 2024/25, Baywood LLAD No. 2004-1 will make an installment payment to repay a 10-year loan borrowed for a tree replacement project. Also, Benefit Zone Nos. 1 (Hercules by the Bay), 3 & 4 (Gems/Birds), 6 (Village Parkway) and 7 (Heights) associated with LLAD No. 83-2 will continue to repay their respective 10-year loans borrowed to replace failing wooden streetlight poles with new energy-efficient LED streetlights on metal poles.
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
7. Draft LLAD Coordinator Job Description