STAFF REPORT
Meeting Date:
September 23, 2025
PUBLIC HEARING
NOT-APPEAL
27 SUBJECT: PUBLIC HEARING AND BALLOTING FOR PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2021-1 (WEST STREET)
NOTE: Past practice has been to have the Council bring this item to an earlier part of the Regular Meeting so that staff (and observers) can tally the ballots in time for a public report towards the latter part of the same meeting. This may occur on September 23, depending on Council direction. Persons interested in the vote, or who intend to submit their ballots to the City on or before the Public Hearing on September 23rd, should be prepared to drop ballots off not later than 5:00 p.m. in case this item is brought up soon after the meeting starts.
RECOMMENDATION: It is recommended that the City Council:
1. Receive and file the proposed Undergrounding Utility Assessment District 2021-1 report;
2. Open the public hearing for public comments;
3. Call for submittal of any final ballots, and close the public hearing;
4. Direct staff to proceed with tallying ballots in City Hall, Conference Room A, and invite the public to observe the tallying process;
5. Postpone the item until the ballot tally is complete and then resume the meeting on the item, asking staff to report the ballot results;
6. Review the balloting results, and if the majority of weighted ballots are in favor of the proposed assessment district, then:
a. Adopt the attached Resolution titled, “A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF LAGUNA BEACH, CALIFORNIA, DECLARING THE RESULTS OF
THE ASSESSMENT BALLOTING PROCEEDING, CONFIRMING ASSESSMENTS IN UNDERGROUND UTILITY ASSESSMENT DISTRICT NO. 2021-1, ORDERING THE
PROPOSED IMPROVEMENTS TO BE MADE, TOGETHER WITH
APPURTENANCES, APPROVING THE ENGINEER’S REPORT, AND DESIGNATING
THE FINANCE DIRECTOR OR THE CITY TREASURER TO COLLECT AND RECEIVE MONEY”;
b. Adopt the attached Resolution titled, “A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF LAGUNA BEACH, CALIFORNIA, AWARDING THE CONTRACT FOR
CONSTRUCTION OF IMPROVEMENTS IN UNDERGROUND UTILITY
ASSESSMENT DISTRICT NO. 2021-1 SUBJECT TO RECEIPT OF BOND PROCEEDS
AND FINDING THE SAME EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL QUALITY ACT,” awarding a construction contract to Hot Line Construction in the amount not to exceed $3,393,491;
PUBLIC HEARING AND BALLOTING FOR PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2021-1 (WEST STREET)
September 23, 2025
c. Contribute $707,536 for the General Benefit cost, and appropriate $578,200 from the Street Lighting and Utility Fund and $129,336 from the Wildfire Mitigation and Fire Safety Fund prior to bonds being sold;
d. Contribute $707,536 as an additional City contribution and appropriate that same amount from the Wildfire Mitigation and Fire Safety Fund prior to bonds being sold; e. Authorize the City Manager to approve project-related expenses and construction change orders for unforeseen circumstances for an amount not to exceed $339,350.
7. Determine that the action is exempt from the California Environmental Act pursuant to CEQA guidelines sections 15301(b), 15302(c) & (d), and 15303(d); in the alternative, determine the action is not a project as it is the creation of a government funding mechanism or other government fiscal activities (Public Resources Code Section 21065; CEQA Guidelines, section 15378(b)(4)), and further that this action implements the March 20, 2024 Planning Commission action, wherein the City previously conducted environmental review for the proposed undergrounding project and determined that the project was exempt and there are no changes to the project, no changed circumstances, and no new information that could not previously have been known, that would trigger the need for subsequent CEQA review.
OR
8. If there is not a majority of weighted ballots in favor of the proposed assessment district, then declare the proposed Underground Utility Assessment District 2021-1 (West Street) abandoned for lack of majority support.
Appropriation: $1,415,072
($578,200 + $836,872)
Fund: Street-Lighting and Utility Fund
Wildfire Mitigation & Fire Safety Fund
Submitted By: Mark McAvoy Approved: David A Kiff
Mark McAvoy, Director of Public
Works & Utilities
Dave Kiff, City Manager
SUMMARY OF THE MATTER
The purpose of the public hearing is to determine whether the proposed Underground Utility Assessment District 2021-1 (West Street) shall be either formed or abandoned.
This report outlines the final steps in the Proposition 218 process for the proposed Underground Utility Assessment District 2021-1 (West Street), which would underground existing overhead utility lines in the West Street neighborhood. Property owners received ballots in July 2025. Any ballots not yet submitted may be delivered to the City Clerk during the public hearing. The public hearing also provides interested persons the opportunity to comment on the proposed district and assessments. At the close of the hearing, the City Clerk will tally all submitted ballots.
PUBLIC HEARING AND BALLOTING FOR PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2021-1 (WEST STREET)
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If a majority of the weighted ballots are in favor, staff recommends the City Council adopt two resolutions:
(1) confirming the assessments, ordering the improvements, and approving the final Engineer’s Report; and (2) awarding a construction contract to Hot Line Construction for $3,393,491, subject to receipt of bond proceeds. The project would be funded by property owner assessments, a General Benefit contribution of $707,536, and a separate and additional City contribution of $707,536, both funded through contributions from the Street Lighting and Utility Fund and the Wildfire Mitigation and Fire Safety Fund.
Based on prior experience with other underground utility assessment districts, staff recommends that any resulting bonds be issued through a public offering with a 25-year term, which is consistent with recent undergrounding projects in Diamond Street and Woods Cove.
Alternative: If a majority of weighted ballots are opposed, the City Council must declare the proposed district abandoned.
DISCUSSION
Background
On May 20, 2025, the City Council declared its intent to form the proposed assessment district for the undergrounding of existing overhead utility lines for portions of the West Street neighborhood. At the same time, the City Council approved the Preliminary Engineer’s Report for the proposed assessments and set a public hearing for September 23, 2025, to tally the cast assessment ballots.
On July 22, 2025, a Public Meeting was held to hear public comments on the project, provide an update on revised project costs, and present options on purchase methods of municipal bonds. Following that meeting, the Assessment Engineer mailed the Notice of Assessment and Assessment Ballot to each of the affected property owners in the proposed district, informing them of their assessment amount; the time and place for this Public Hearing for the tallying of the assessments; and how, when, and to whom the ballots should be returned. In accordance with Proposition 218, the ballots remain sealed until the Public Hearing is closed and staff is thereafter directed to tally the ballots.
The public hearing provides interested persons the opportunity to comment on the project and on the proposed assessments. At the conclusion of the public hearing, any ballots not yet submitted to the City Clerk will be collected and all ballots will thereafter be tallied. Members of the public may observe the tallying process following the conclusion of the Public Hearing. If the majority of weighted ballots are in favor of the proposed assessment district, then the City Council may proceed with the formation of the district. If there is a weighted majority in opposition, then the City Council cannot proceed with the proposed district and shall declare it abandoned for lack of majority support. The process for conducting the public hearing and taking final action is outlined below.
Process
In compliance with the provisions of Proposition 218 (The Right to Vote on Taxes Act), notices and official assessment ballots were mailed to the property owners of the assessable parcels (as shown on Attachment
PUBLIC HEARING AND BALLOTING FOR PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2021-1 (WEST STREET)
September 23, 2025
1, District Boundary Map) within the proposed district. The notice advised property owners of the proposed assessment amounts (as documented in Attachment 1, Assessment Roll) and of the date, time, and location for the public hearing. If, at the conclusion of the public hearing, it is determined that a majority of the assessment ballots returned, as weighted by the assessment amounts, are in favor of the district, the City Council may approve a resolution to confirm the assessments for the district (Attachment 2), and also approve a resolution awarding a construction contract for the work contingent on the sale of bonds and receiving the bond proceeds (Attachment 3). However, if the majority of the assessment ballots, as weighted by the assessment amounts, are in opposition to the project, then the City Council will be precluded from proceeding with the proposed district formation. Property owners have until the close of the public hearing to submit their ballots.
Construction Contract
If balloting is in favor of the assessment district, then a construction contract can be awarded, contingent on the sale of bonds and the receipt of bond proceeds. On October 18, 2024, construction bids were received from five bidders as follows:
Bidder Bid Amount
Hot Line Construction, Inc. $3,393,491
Asplundh Construction, LLC $3,693,040
Doty Bros. Equipment Co. $4,078,274
Pro Energy Services Group, LLC $5,730,730
Outsource Utility Contractor, LLC $8,982,224
The low bidder, Hot Line Construction, is properly licensed and qualified to perform the work. Hot Line Construction has performed similar utility undergrounding work in the City for Crestview Drive Underground Utility Assessment District 2014-1, Diamond Street Undergrounding Utility Assessment District 2013-2, and the in-progress Woods Cove Underground Utility Assessment District 2014-2. If the assessment district proceeds, then it is recommended that the City Council adopt the resolution awarding a contract to the lowest responsive and responsible bidder, Hot Line Construction, based on their original bid in the amount of $3,393,491. It is also recommended that the City Manager be authorized to approve projectrelated expenses and construction change orders for unforeseen circumstances in the amount not to exceed $339,350. Construction costs will be funded by assessments levied on the properties within the assessment district, from a General Benefit contribution of $707,536, and a separate contribution of $707,536 provided by the City.
Legal Process
The City Attorney has reviewed the attached resolutions. If the majority of weighted ballots are in favor of the proposed assessment district, the City Council may adopt the following resolutions:
• A Resolution of the City Council confirming assessments in Underground Utility Assessment District 2021-1 (West Street), ordering the proposed improvements to be made, and designating the Assistant City Manager or the City Treasurer to collect and receive money.
PUBLIC HEARING AND BALLOTING FOR PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2021-1 (WEST STREET)
September 23, 2025
• A Resolution of the City Council awarding the contract for construction of improvements in Underground Utility Assessment District 2021-1 (West Street), subject to receipt of bond proceeds.
If the majority of weighted ballots are in opposition to the proposed assessment district, the City Council should declare the proposal abandoned for lack of majority support.
Financing the District
Following the July 22 and August 12, 2025, meetings, the City Council directed staff to continue evaluating bond purchase methods and designated a working group to advise on the best financing approach. While the working group has met, a final recommendation has not yet been reached.
The working group is continuing to evaluate financing options and anticipates returning to the City Council on October 14, 2025, with a recommended bond purchase method. The forthcoming analysis will confirm policy options for the Council’s consideration, which include Table 1: Financing Options Under Evaluation
Option Description/Considerations
IBank Loan
Unlikely, as repayment would come from property owners
rather than City revenues - this may not be consistent with Infrastructure Bank eligible project parameters.
Private Placement
Challenging; these transactions are typically restricted to maturities of 15 years or less, making a 25-year term
unattractive to investors.
Assessment District Bonds (25-Year) Traditional financing method; bonds would be sold to outside investors. Successfully completed for past two districts.
City Purchase at Market Rate City purchases 100% of the bonds at current market rates, saving on issuance costs
City Purchase at Below-Market Rate
Staff is reviewing if the City can purchase all or some of the bonds at below-market rates, which would lower both interest and issuance costs. This could also lock the City into an investment – which, while solid – may generate less interest than would otherwise be generated via other City investments like Treasuries, Agencies, and Corporate Bonds.
Future Actions
If the City Council determines to form the assessment district, the City Clerk and the City Treasurer will prepare a Notice of Recording of Assessment and Cash Collection Period, which will be mailed to each property owner in the district. The notice will advise property owners that a lien will be placed on their property to cover the costs of the improvement, unless they choose to pay their assessment during the 30-
PUBLIC HEARING AND BALLOTING FOR PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2021-1 (WEST STREET)
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Day Cash Collection Period. Concurrently, staff will determine how many property owners apply and qualify for the Assessment Deferment Loan Program. After the cash collection period ends, and the number of applicants who qualify for the deferment loan program is known, the bond issuance process will commence. It is anticipated that the project would then return to City Council in December 2025 for consideration of bond sales and appropriations for the project. Construction would begin in February 2026.
As noted, the financing ad hoc working group hopes to return by October 14, 2025 with recommendations as to financing options.
FINANCIAL ANALYSIS
On May 20, 2025, the City Council approved a contribution of $1,415,072 if the project is approved at the public hearing and final balloting. It is recommended to appropriate:
• $578,200 from the Street Lighting and Utility Fund and • $836,872 from the Wildfire Mitigation and Fire Safety Fund If there is not a majority of weighted ballots in favor of the proposed assessment district, an appropriation will not be required, and the project will be abandoned.
ENVIRONMENTAL ANALYSIS
The formation of an undergrounding district is exempt from CEQA pursuant to state CEQA Guidelines, section 15302 (Replacement or Reconstruction) as it consists of the possible formation of an undergrounding utility assessment district to fund the replacement or reconstruction of existing structures and facilities where the new structure will be located on the same site as the structure replaced and will have substantially the same purpose and capacity as the structure replaced, including but not limited to: (1) conversion of overhead electric utility distribution system facilities to underground including connection to existing overhead electric utility distribution lines where the surface is restored to the condition existing prior to the undergrounding; and (2) replacement or reconstruction of existing utility systems and/or facilities involving negligible or no expansion of capacity. Here, the formation of an undergrounding district involves the possible formation of an undergrounding utility assessment district to fund the reconstruction of an electric utility system by removing above ground utilities and reconstructing them below ground. The new undergrounding system will be located on the same site and will have substantially the same purpose and capacity (i.e., providing electricity to structures). The undergrounding district, if approved, involves the removal of 38 utility poles and undergrounding of approximately 4,700 linear feet of overhead wires and therefore constitutes conversion of overhead electric utility distribution system facilities to underground. Further the formation of an undergrounding district involves the following aboveground equipment to be installed to accommodate the undergrounding: riser poles, antenna pole, guy anchors, utility cabinets, pedestals, bollards, and retaining walls.
The formation of an undergrounding district is also categorically exempt from CEQA under the following State CEQA Guidelines, Sections 15301(b) and 15303(d). Section 15301(b) exempts projects that pertain to existing facilities of both investor and publicly owned utilities used to provide electric power, natural gas, sewerage, or other public utility services. Here, the formation of an undergrounding district is exempt
PUBLIC HEARING AND BALLOTING FOR PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2021-1 (WEST STREET)
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under Section 15301(b) because it consists of existing facilities providing electric power with no expansion of use. Section 15303(d) exempts projects that pertain to construction and location of limited new, small facilities or structures, including water main, sewage, electrical, gas, and other utility extensions, including street improvements, of reasonable length to serve such construction. Here, the formation of an undergrounding district is exempt under Section 15303(d) because it consists of new construction of small utility facilities or structures.
Further, none of the exceptions outlined in State CEQA Guidelines section 15300.2 apply. The location of the undergrounding district site does not contain any environmentally sensitive areas as a majority of the parcels are developed. There will be no cumulative impact resulting from successive projects of the same type in the same place, over time. Any future utility undergrounding projects would occur in areas outside of the Project area. There are no unusual circumstances resulting in a significant impact on the environment because trenching will occur in existing, paved roadways. There will be no damage to scenic resources, including trees, historic buildings, rock outcroppings or similar resources, within a highway officially designated as a state scenic highway; all trenching will occur in existing, paved roadways and the removal of the above ground utility systems will improve resources both in terms of safety and aesthetics. Further the undergrounding district is not near an officially designated state scenic highway and it is away from Coast Highway. It is not located on a hazardous waste site, or any other site included on a list compiled pursuant to Government Code Section 65962.5. The formation of an undergrounding district will not result in significant adverse impacts to historical resources as defined by CEQA as it is occurring in existing, paved roadways and not within a close proximity to any known historical resources. Consequently, additional environmental analysis is not necessary to meet the requirements of the CEQA. If the City Council agrees, staff will cause to be filed a Notice of Exemption (NOE) with the County Recorder’s Office and State Clearinghouse should the Project receive final approval.
In the alternative, the formation of an undergrounding district consists of the creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment and therefore does not constitute a “project” within the meaning of the California Environmental Quality Act. (Public Resources Code Section 21065; CEQA Guidelines, section 15378(b)(4).) Finally at the March 20, 2024 Planning Commission meeting, the City previously conducted environmental review for the proposed undergrounding project and determined that the project was exempt under the California Environmental Quality Act pursuant to CEQA Guidelines Section 15301(b), which authorizes an exemption for “existing facilities providing electric power with no expansion of use”; Sections 15302(c) and (d) for the “replacement or reconstruction of existing utility systems involving negligible or no expansion of capacity, and conversion of overhead electric utility distribution system facilities to underground”; and Section 15303(d) involving “new construction of small utility facilities or structures.” More detailed environmental analysis can be found in that March 20, 2024, Planning Commission approval.
There have been no changes to the Project, no changed circumstances, and no new information that could not previously have been known, that would trigger the need for subsequent CEQA review.
ATTACHMENTS
PUBLIC HEARING AND BALLOTING FOR PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2021-1 (WEST STREET)
September 23, 2025
1. Assessment District Information (Pgs. 8-10)
2. Resolution Confirming Assessments (Pgs. 11-20)
3. Resolution Awarding Construction Contract (Pgs. 21-25) Report Prepared By: Coordinated With:
Pierre Sawaya, Capital Program Manager Thomas Perez, City Engineer Michelle Bannigan, Finance Director
Laura Parisi, City Treasurer
Patrick Donegan, Assistant City Attorney