STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of April 22, 2025
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Jeff Brown, Interim Public Works Director 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 2025/26 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 2025/26 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 24, 2025; 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 2025/26 within the Victoria by the Bay Landscaping and Lighting Assessment District No. 2002-1 and setting a public hearing for June 24, 2025; 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 2025/26 within the Hercules Village Landscaping and Lighting Assessment District No. 2002-2 and setting a public hearing for June 24, 2025; 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 2025/26 within the Baywood Landscaping and Lighting Assessment District No. 2004-1 and setting a public hearing for June 24, 2025; 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 2025/26 within the Bayside Landscaping and Lighting Assessment District No. 2005-1 and setting a public hearing for June 24, 2025.
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. As previously discussed, the Victoria by the Bay Landscaping and Lighting Assessment District (Victoria by the Bay LLAD) is facing both 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) 2025/26 LLAD annual approval process.
On March 11, 2025, City Council completed the first required Council action in the multi-step LLAD process by adopting resolutions initiating the FY 2025/26 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 2025/26. If the assessment increase is not approved by Victoria by the Bay LLAD property owners, cost-cutting measures including reductions in maintenance services for in-tract residential parkway strips will be implemented on July 1, 2025.
The second required Council action 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 24, 2025 for all five LLADs. On June 24, 2025, 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 that evening 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 2025/26 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. In the fall of 2023 and spring of 2024, the City conducted Proposition 218 proceedings to increase assessments in the Victoria by the Bay LLAD. However, property owners in the district did not approve the proposed increases, with votes of 77% to 23% in the fall and 70.3% to 29.7% in the spring respectively. Since then, the Victoria by the Bay LLAD has incurred another year of operating deficit, bringing the projected beginning FY 2025/26 cumulative deficit to approximately $700,000.
On November 12, 2024, City Council adopted a resolution to add a Landscaping and Lighting Program Coordinator (LLAD Coordinator) position to the City’s Classification Plan. The LLAD Coordinator will address growing demands within the City’s five LLADs, which include extensive maintenance of parks, streetlighting, open space, and the urban forest. The position will centralize oversight of landscape and streetlight contracts, respond to citizen requests, manage tree and sidewalk issues, and support fire risk reduction in open space areas. By reallocating responsibilities from existing staff, the new role will be cost-neutral for most LLADs, except LLAD No. 83-2 Zone 10 – Citywide Parks, which will see a $70,000 increase to enhance park maintenance per the City’s Parks Master Plan. The costs for the LLAD Coordinator position have been included in the FY 2025/26 budgets within the Preliminary Engineer’s Reports.
Given all five of the City LLADs should be 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. On March 11, 2025, City Council adopted resolutions initiating the FY 2025/26 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 an assessment increase beginning in FY 2025/26 of $50 annually over a 10-year period ($500 total). This proposed increase will be in addition to the annual escalator equal to the change in CPI that is already in place for the Victoria by the Bay LLAD. Commencing FY 2035/36, the Victoria by the Bay LLAD annual assessments will increase by CPI only as they do now. If the proposed assessment increase is approved by the Victoria by the Bay LLAD property owners, it is projected that the cumulative deficit will be paid back in 15 years. 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 on July 1, 2025.
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 CPI. The prior year’s increase in the CPI was 2.69%. All LLADs/Zones are proposed to be assessed at their current maximum assessment rates in FY 2025/26, 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.
An assessment increase is not needed for Benefit Zone Nos. 2 (Foxboro), 5B (Commercial Properties), and 8 (Trees and Flowers) to cover their respective FY 2025/26 budgets. The FY 2025/26 assessment rates for Benefit Zone 5A (Business Park) and Baywood Landscaping and Lighting Assessment District No. 2004-1 are proposed to be increased by the 2.69% CPI to cover the projected budget. However, the proposed assessment rates for Benefit Zone 5A (Business Park) and Baywood Landscaping and Lighting Assessment District No. 2004-1 are still below their respective FY 2025/26 maximum rates.
For the Victoria by the Bay LLAD, the City is proposing an assessment increase beginning in FY 2025/26 of $50 annually over a 10-year period ($500 total). This proposed increase will be in addition to the annual CPI escalator that is already in place for the Victoria by the Bay LLAD. Commencing FY 2035/36, the Victoria by the Bay LLAD annual assessments will increase by CPI only as they do now.
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 2025/26.
Remaining Schedule for the LLAD Annual Approval Process and the 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 22, 2025: City Council preliminarily approves the Engineer’s Reports for all LLADs and adopts the Resolutions of Intention.
May 9, 2025: Deadline to mail the 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 24, 2025: 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 2025/26 assessments for all LLADs.
FISCAL IMPACT:
If assessments for the LLADs are not levied, there would be an estimated revenue loss of $3.4 million for FY 2025/26 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 2025/26 LLAD assessments.
For FY 2025/26, 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