STAFF REPORT
Meeting Date:
January 27, 2026
BUSINESS
13 SUBJECT: PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2025-2 (TOP
OF THE WORLD)
RECOMMENDATION: It is recommended that the City Council:
1. Direct staff to establish a fund for proposed Underground Utility Assessment District 2025-2, as shown on the attached Boundary Map;
2. Appropriate $321,000 from the Wildfire Mitigation and Fire Safety Fund for assessment engineering, bid document preparation, and utility designs for the proposed assessment district;
3. Direct staff to request that utility companies proceed with design for the proposed assessment district and authorize the City Manager to enter into necessary utility company agreements and make advance payments to the utility companies for their designs;
4. Direct staff to solicit proposals for assessment engineering, bid document preparation, and street lighting design for the proposed assessment district; and
5. Determine that the action is exempt from the California Environmental Quality Act pursuant to CEQA guidelines section 15301(b), 15302(c) & (d), and 15303(d).
SUMMARY OF THE MATTER
This report recommends that the City Council initiate the formation process and fund preliminary design and engineering for Proposed Underground Utility Assessment District 2025-2 (Top of the World), which includes 81 parcels as shown in Attachment 1. The City has received petitions from 52 property owners, meeting the required 50% threshold under the revised 2025 Assessment District Formation Policy. he estimated upfront cost of $321,000 will be temporarily advanced from the Wildfire Mitigation and Fire Safety Fund and reimbursed if the district is formed by a weighted majority vote. The proposed action is exempt from CEQA under Guidelines Sections 15301(b), 15302(c) and (d), and 15303(d).
DISCUSSION
In 2025, the City Council adopted the revised Underground Utility Assessment District Formation Policy. Major changes to the policy included lowering the threshold of signed petitions by at least 60% of property owners with proposed district boundary to at least 50% and eliminating the requirement of a $500 deposit from each petitioner to be used toward startup costs. The revisions were made to ease the requirements for property owners to form underground utility districts.
The Top of the World assessment district consists of 87 parcels. The proponents submitted 52 signatures, representing nearly 60% percent of the affected property owners within the project boundary. The signed petitions do not include the following parcels owned by the City and Laguna Beach Unified School District:
1. 2900 Alta Laguna Boulevard – Fire Station #3
PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2025-2 (TOP OF THE WORLD)
January 27, 2026
2. 2900 Alta Laguna Boulevard – Wilcoxen Park
3. APN 641-163-41 – Open Space City Parcel
4. 21601 Treetop Lane – Top of the World Elementary School While the City has historically been supportive of underground utility projects, petitions for the City parcels are not included in the final tally of petitions.
Easement Requirements
This project will require the acquisition of easements over private property. Many parcels in the proposed district reside along Shady Lane, Ann’s Lane, Shady Place, and portions of Top of the World Drive. These streets are part of Lot B of Tract Number 888, which was never accepted by the City for public purposes and remain privately owned. The number and locations of easements needed cannot be determined until final designs have been completed. Easements will be acquired through informal discussions and negotiations. The necessary costs of easement acquisition would be included in the bonds issued for the assessment district.
If required easements cannot be acquired through informal negotiations, an eminent domain process will be considered to acquire the easements. City staff met with a group of property owners on August 13, 2025, to provide a high-level overview of the easement acquisition and eminent domain process. Staff will return to City Council at a later date with an update on the easement acquisition process and estimated costs should the eminent domain process be required to construct the underground utilities within the private streets.
Public Involvement and Notice
Most property owners in the proposed assessment district area are aware of the project through meetings with City staff, emailed notices, and personal visits from the project proponents and staff. The team of proponents have canvased the neighborhood to explain the project and associated benefits; however, to ensure all property owners were responsibly notified of the project and the January 27, 2026, City Council meeting, all of the property owners within the proposed assessment district were notified by mail on January 16, 2026.
Street Lighting Design
The Top of the World neighborhood does not have existing street lights except for three overhead-fed street lights along Alta Laguna Boulevard between Treetop Lane and 2817 Alta Laguna Boulevard. These lights will be replaced in-kind and connected to the new underground utility system. Staff conducted outreach to project proponents who are not in favor of adding new street lights within the neighborhood. Costs associated with design and construction of the street light system would be included in bonds issued for the assessment district.
FINANCIAL ANALYSIS
In accordance with the undergrounding policy, the City could fund upfront costs for underground utility assessment districts with a temporary cash advance of $321,000 from the Wildfire Mitigation and Fire Safety Fund. If the appropriation is approved, the Wildfire Mitigation and Fire Safety Fund will have PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2025-2 (TOP OF THE WORLD)
January 27, 2026
approximately $2.4 million remaining to fund future projects. Anticipated upfront costs are listed in the table below:
Assessment Engineering $70,000
Bid Document Preparation $10,000
SCE Design Fee $161,000
Cox Design Fee $15,000
Frontier Design Fee $15,000
Street Lighting Design $25,000
Entitlements $25,000
Total Expense $321,000
Once the design and assessment engineering has been completed and assessment amounts are known, property owners will then vote on the proposed district. Votes from each property owner within the district will be weighted based on the proposed assessment amount for each property. For example, a vote from a property with a high assessment will be weighted more than a vote from a property with a lower assessment amount. If a weighted majority approves the creation of the assessment district, then the City will be reimbursed its upfront costs from the newly formed district. If the formation of the district fails, then the City will not be refunded for money spent on design and assessment engineering.
In addition to the costs described above, utility undergrounding projects also provide a “general benefit” to the surrounding neighborhoods or the public at large and are paid by the City. The amount of the general benefit would be determined during the assessment engineering phase and could be approximately 10 percent of the total project cost. The general benefit contribution would be due at the time of formation.
ENVIRONMENTAL ANALYSIS
Actions related to the formation of an undergrounding district are 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 approximately 22 utility poles and undergrounding of approximately 2,260 linear feet of overhead wires and therefore constitutes conversion of overhead electric PROPOSED UNDERGROUND UTILITY ASSESSMENT DISTRICT 2025-2 (TOP OF THE WORLD)
January 27, 2026
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, vent standpipes, guy anchors, utility cabinets, pedestals, and street lights.
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 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.
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).)
ATTACHMENTS
1. Boundary Map (Pg. 5)
Submitted By: .Mark McAvoy Approved: .David A Kiff
Mark McAvoy, Director of Public
Works & Utilities
Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Pierre Sawaya, Capital Program Manager Thomas Perez, City Engineer Michelle Bannigan, Finance Director
Patrick Donegan, Assistant City Attorney