DRPBID Management District Plan April 5, 2022 Page 2 Duration: The renewed DRPBID will have a seven (7) year life beginning January 1, 2023 to December 31, 2029. After the seven (7) year term, the DRPBID may be renewed again for up to ten (10) years if property owners support continuing the programs. Management: Richmond Main Street Initiative (RMSI) shall continue to serve as the Owners’ Association to provide improvements, maintenance, and activities for the DRPBID. The City of Richmond will enter into a contract with RMSI regarding the provision of improvements and services for the DRPBID. RMSI must provide an annual report on improvements, maintenance, and activities and expenditures to the City, which is also available to property owners.
DRPBID Management District Plan April 5, 2022 Page 3 II. BACKGROUND The International Downtown Association estimates that more than 1,500 Property and Business Improvement Districts (PBIDs) currently operate throughout the United States and Canada. PBIDs are a time-tested tool for property owners who wish to come together and obtain collective services which benefit their properties. PBIDs provide supplemental services in addition to those provided by local government. They may also finance physical and capital improvements. These improvements and activities are concentrated within a distinct geographic area and are funded by a special parcel assessment. Services and improvements are only provided to those who pay the assessment. Although funds are collected by the local government, they are then directed to a private nonprofit. The nonprofit implements services and provides day-to-day oversight. The nonprofit is managed by a Board of Directors representing those who pay the assessment, to help ensure the services meet the needs of property owners and are responsive to changing conditions within the PBID. PBIDs all over the globe have been proven to work by providing services that improve the overall viability of commercial districts, resulting in higher property values, lease rates, occupancy rates, and sales volumes. The DRPBID will be renewed pursuant to a state law that took effect in January of 1995. The “Property and Business Improvement District Law of 1994,” which was signed into law by Governor Pete Wilson, ushered in a new generation of Property and Business Improvement Districts in California. Key provisions of the law include: Ø Allows a wide variety of services which are tailored to meet specific needs of assessed properties in each individual PBID; Ø Requires property owner input and support throughout the renewal process; Ø Requires written support on both a petition and ballot from property owners paying 50% of proposed assessments; Ø Allows for a designated, private nonprofit corporation to manage funds and implement programs, with oversight from property owners and the City of Richmond (City); Ø Requires limits for assessment rates to ensure that they do not exceed the amount owners are willing to pay; and Ø Requires the PBID be renewed after a certain time period, making it accountable to property owners. The “Property and Business Improvement Business District Law of 1994” is provided in Appendix 2 of this document.
DRPBID Management District Plan April 5, 2022 Page 4 III. ACCOMPLISHMENTS From 2017 to 2020, RMSI accomplished significant efforts within the DRPBID, helping to establish long-term sustainability. Accomplishments are as follows: • Assisted Safety 1st in managing community liaisons: o 10,694 hospitality and maintenance service hours o 1,554 bags of trash and debris removed o 181 cases of graffiti abatement o 84 visitor and homeless “touches”; • Served as a leading partner in the design and unveiling of the Downtown Richmond Business Hub resulting in 3 new businesses. • Provided 518 hours of business assistance: o 19 workshops, total attendance 226; • Initiated and maintained a comprehensive “Community Resource Directory” providing access to current pandemic-related health orders, safety guidelines, employer obligations, and relief programs; • Instituted a new E-commerce program in partnership with Square and Renaissance Entrepreneurship Center resulting in: o 115 hours of one-on-one technical assistance including advising on business licensing, permitting, COVID-19 relief o Letters of recommendation and business equipment to 92 current and prospective businesses; • Unveiled the “Heart of Richmond” series, a robust multi-media digital storytelling and social media advertising campaign: o Showcased 12 diverse business owners, resulting in two businesses being featured in the July 2020 cover story of East Bay Express; • Partnered with Travis Credit Union to launch “Protecting Lives & Livelihoods” campaign in response to the COVID-19 pandemic featuring 4 Downtown vendors and benefitting 17 local businesses: o 140 Masks distributed, o 55 Face shields distributed, o 130 Hand Sanitizers; • Provided COVID-19 Response, Meal Giveaway Program: o Contributed 1876 hours of volunteer services and 82,500 meals to Richmond residents; • Hired 2 Richmond residents as Census 2020 phone bankers to encourage households to complete the census survey and ensure a complete count of our historically undercounted neighborhoods; and • Promoted and prominently featured 20 Downtown businesses in our Shop Local Safely for Small Business Saturday.
DRPBID Management District Plan April 5, 2022 Page 5 IV. BOUNDARIES The DRPBID generally includes parcels along portions of Macdonald Avenue from 6th Street (in the west) to the BART tracks (in the east); portions of 8th Street and Harbour Way from Barrett Avenue (in the north) to Bissell Avenue (in the south); portions of Marina Way from Nevin Avenue (in the north) to Bissell Avenue (in the south); and portions of 16th Street from Macdonald Avenue (in the north) to Bissell Avenue (in the south). The DRPBID includes approximately 81 parcels with 34 parcel owners. The DRPBID boundary is illustrated by the map below. This plan, including a copy of this map is on file with the Richmond City Clerk. A larger map is available on request by calling (916)437-4300 or (800)999-7781.
DRPBID Management District Plan April 5, 2022 Page 6 V. SERVICE PLAN & BUDGET A. Establishment Property and business owners in Downtown Richmond have been concerned about the need for coordinated supplemental services in the area for several years. City services and efforts in the area have been welcomed, but limited resources have not allowed for a more comprehensive approach to managing the commercial area. A service plan to provide special benefits to assessed properties was developed using several methods. A service plan to provide special benefits to assessed properties was developed using several methods. A series of property owner meetings and an analysis of current property conditions were conducted. The primary needs identified were: Maintenance, Safety and Nuisance Abatement; Marketing, Promotions and Business Development; and Capital Improvements. To meet those needs, the DRPBID shall provide related improvements, maintenance and activities to assessed parcels within its boundaries. B. Improvements, Maintenance and Activities The DRPBID will provide supplemental improvements, maintenance and activities that are above and beyond those provided by the City and other government agencies. None of the services to be provided by the DRPBID are provided by the City or other government agencies. The improvements and activities will be provided directly and only to assessed parcels; they will not be provided to parcels that are not assessed. Each and every service is unique to the DRPBID, thus the benefits provided are particular and distinct to each assessed parcel. 1. Maintenance, Safety, and Nuisance Abatement The maintenance program will make Downtown Richmond cleaner, more accessible, and more attractive to potential tenants and customers. Maintenance services may include litter and graffiti removal, sidewalk pressure washing, weed abatement, median maintenance, and communicating code violations by absentee property owners to the City. Safety services will focus on making Downtown Richmond a safer place to do business. Safety services may include security patrols, coordination with the police department and private security agencies operating within the DRPBID, space management improvements to encourage safety on assessed parcels, and dissemination of safety information to property owners and tenants. Nuisance abatement services will be deployed throughout the DRPBID to increase the usability of assessed parcels and address issues that discourage property owners, tenants, and customers from visiting assessed parcels within the DRPBID. Nuisance abatement services may include: an ambassador to provide additional services to mitigate the negative impacts of homeless individuals on assessed properties; establishment and maintenance of a radio network to ensure quick response times to incidents; working with property owners and local agencies to address blighted areas; and enhanced lighting and linkages to decrease that likelihood of nuisance activities from occurring. 2. Marketing, Promotions, and Business Development The DRPBID will have a unified marketing and promotions program that will collaborate with DRPBID businesses to market and promote the DRPBID to the public as a single destination with a rich collection of attractions, businesses, events and services. The marketing and promotions program may include the use of pole banners, wayfinding signage, visitor guides, press releases, e-newsletters, e-calendars, a DRPBID website, marketing research, special events,
DRPBID Management District Plan April 5, 2022 Page 7 and other similar projects to increase visitation and commerce on assessed parcels. Business development programs will seek to attract and retain tenants for the assessed parcels. The business development program may include retail and business recruitment activities to encourage businesses to locate on assessed parcels; market research and maintenance of a business databases; advocacy for business-friendly policies on behalf of assessed parcels; providing staff who will serve as a liaison between property owners, brokers, tenants, businesses, and government agencies to facilitate growth and retail development on assessed parcels; and creating an active evening and weekend environment to increase commerce on assessed parcels. 3. Capital Improvements The capital improvements program will use a multi-faceted approach to planning, design and management of public spaces in the DRPBID. DRPBID funds will be leveraged to create a unique sense of place. Capital improvements may include wayfinding signage/banners, seasonal banners and lighting, trash receptacles, and other public space improvements. 4. Administration The administration portion of the budget will be utilized for administrative costs associated with providing the services. Those costs may include rent, telephone charges, legal fees, accounting fees, postage, administrative staff, insurance, and other general office expenses. 5. Contingency/Reserve The budget includes a contingency line item to account for unanticipated program costs and uncollected assessments, if any. If there are contingency funds collected, they may be held in a reserve fund or utilized for other program, administration or renewal costs at the discretion of RMSI. Reserve funds may be used for program costs in any proportion deemed appropriate by RMSI. Policies relating to contributions to the reserve fund, the target amount of the reserve fund, and expenditure of money from the reserve fund shall be set by RMSI. 6. Collection Fees The budget includes a collection fees line item to account for City and County administrative fees for levying, collecting, forwarding the assessment to the Owners’ Association and accounting. C. Annual Assessment Budget A projected seven (7) year budget for the DRPBID is provided below. The overall assessment budget shall remain consistent with this Plan. In the event of a legal challenge, assessment funds may be used to defend the DRPBID. The annual assessment budget is based on the following assumptions and guidelines: 1. The cost of providing improvements, maintenance and activities may vary depending upon the market cost for those improvements, maintenance and activities. Expenditures may require adjustment up or down to continue the intended level of improvements, maintenance and activities. RSMI and their board shall have the authority to adjust budget allocations between the categories by no more than fifteen percent (15%) of the total budget per year. Any change will be approved by the RSMI and submitted with the Annual Report. 2. Funds not spent in any given year may be rolled over to the next year.
DRPBID Management District Plan April 5, 2022 Page 8
3. The assessment rate may be subject to annual increases that will not exceed three percent per year. Increases shall be determined by RMSI and will vary each year. 4. Each budget category includes all costs related to providing that improvements, maintenance and activities. For example, the maintenance budget includes the cost of staff time dedicated to overseeing and implementing the maintenance program. Staff time dedicated purely to administrative tasks is allocated to the administration portion of the budget. The staffing levels necessary to provide the services below shall be determined by RMSI on an as-needed basis. D. Service Budget The total improvement, maintenance and activity budget for 2022 that is funded by property assessments is $239,990.60. In addition to the assessment revenue, the programs will be supplemented by non-assessment funds. The total of non-assessment and assessment funds, and the determination of special and general benefits, are included in the Engineer’s Report. Following is a table of the estimated total assessment budget allocations for each category for the initial year of operations.
E. Annual Maximum Assessment Budget The budget below assumes the maximum annual increase of three percent (3%) is enacted and that there are no changes to the categorical budget allocations. Year Maintenance, Safety and Nuisance Abatement Marketing, Promotions and Business Development
Administration Contingency/Reserve Capital Improvements Collection Fees Total 2023 $119,995.30 $64,797.46 $35,998.59 $11,999.53 $4,799.81 $2,399.91 $239,990.60 2024 $123,595.16 $66,741.39 $37,078.55 $12,359.52 $4,943.81 $2,471.90 $247,190.32 2025 $127,303.01 $68,743.63 $38,190.90 $12,730.30 $5,092.12 $2,546.06 $254,606.03 2026 $131,122.10 $70,805.94 $39,336.63 $13,112.21 $5,244.88 $2,622.44 $262,244.21 Maintenance, Safety, and Nuisance Abatement, $119,995.30 , 50% Marketing, Promotions, and Business Development, $64,797.46 , 27% Administration, $35,998.59 , 15%
Contingency / Reserve, $11,999.53 , 5%
Capital Improvements, $4,799.81 , 2% Collection Fees, $2,399.91 , 1%Annual Assessment Budget-$239,990.60
DRPBID Management District Plan April 5, 2022 Page 9 2027 $135,055.77 $72,930.11 $40,516.73 $13,505.58 $5,402.23 $2,701.12 $270,111.53 2028 $139,107.44 $75,118.02 $41,732.23 $13,910.74 $5,564.30 $2,782.15 $278,214.88 2029 $143,280.66 $77,371.56 $42,984.20 $14,328.07 $5,731.23 $2,865.61 $286,561.33 Total $919,459.45 $496,508.10 $275,837.83 $91,945.94 $36,778.38 $18,389.19 $1,838,918.90
DRPBID Management District Plan April 5, 2022 Page 10 VI. ASSESSMENT RATE A. Assessment Formula Individual assessed parcels shall be assessed an assessment rate according to each assessed parcel’s proportionate special benefit derived from the services provided to each assessed parcel, as shown in the table below. Parcel type Assessment rate (per square foot) Commercial $0.15 Non-profit Housing $0.08 B. Changes in Zoning, Ownership, Building Square Footage, or Parcel Size If the zoning, ownership, building square footage, or size of a parcel within the DRPBID boundary changes during the term of the DRPBID the assessment amount may be modified according to the assessment methodology detailed in this Plan that is applicable to the parcel. These changes may be a result of land adjustments (including but not limited to lot splits, consolidations, right away setbacks, etc.), new construction, new ownership, or changes in zoning. C. Assessment Notice During the hearing process, an Assessment Ballot will be sent to owners of each parcel in the DRPBID. The Assessment Ballot provides an estimated assessment. The final individual assessment for any particular parcel may change, up or down, if the parcel square footage or type differ from those used to calculate the amount shown on the notice, which can be found in Appendix 4. D. Time and Manner for Collecting Assessments As provided by State Law, the DRPBID assessment will appear as a separate line item on annual property tax bills prepared by the County of Contra Costa. Alternatively, the DRPBID assessment may be collected by the City of Richmond if needed. Property tax bills are generally distributed in the fall, and payment is expected by lump sum or installment. The County of Contra Costa and City of Richmond shall distribute funds collected to RMSI. Existing laws for enforcement and appeal of property taxes, including penalties and interest, apply to the DRPBID assessments. E. Bonds Bonds shall not be issued.
DRPBID Management District Plan April 5, 2022 Page 11 VII. GOVERNANCE A. Owners’ Association The DRPBID shall continue to be governed by Richmond Main Street Initiative (RMSI), with oversight from the Richmond City Council. RMSI shall serve as the Owners’ Association described in Streets and Highways Code §36651. The Board of Directors of RMSI and its staff are charged with the day-to-day operations of the DRPBID. A majority of the Board of Directors of RMSI must be parcel owners paying the assessment. In addition, the Board of Directors must represent a variety of interests within the DRPBID and respond to the needs of all properties within the DRPBID. The Board of Directors shall act in the best interests of all the properties within the DRPIBD. The City Council or Board of Directors reserves the right to amend or modify the composition of the Board by a separate resolution without amending this Management District Plan. B. Brown Act & Public Records Act Compliance An Owners’ Association is a private entity and may not be considered a public entity for any purpose, nor may its board members or staff be considered to be public officials for any purpose. The Owners’ Association is, however, subject to government regulations relating to transparency, namely the Ralph M. Brown Act and the California Public Records Act. These regulations are designed to promote public accountability. The Owners’ Association must act as a legislative body under the Ralph M. Brown Act (Government Code §54950 et seq.). Thus, meetings of RMSI Board of Directors and certain committees must be held in compliance with the public notice and other requirements of the Brown Act. The Owners’ Association is also subject to the record keeping and disclosure requirements of the California Public Records Act. C. Annual Report RMSI shall present an annual report at the end of each year of operation to the City Council pursuant to Streets and Highways Code §36650 (see Appendix 2). The annual report is a prospective report for the upcoming year and must include: 1. Any proposed changes in the boundaries of the DRPBID or in any benefit zones or classification of property within the district; 2. The improvements, maintenance, and activities to be provided for that fiscal year; 3. The estimated cost of providing the improvements, maintenance, and activities to be provided for that fiscal year; 4. The method and basis of levying the assessment in sufficient detail to allow each real property owner to estimate the amount of the assessment to be levied against his or her property for that fiscal year; 5. The estimated amount of any surplus or deficit revenues to be carried over from a previous fiscal year; and 6. The estimated amount of any contributions to be made from sources other than assessments levied pursuant to this Plan.
DRPBID Management District Plan April 5, 2022 Page 12 VIII. ENGINEER’S REPORT The DRPBID’s parcel assessments will be imposed in accordance with the provisions of Article XIII D of the California Constitution. Article XIII D provides that “only special benefits are assessable,”1 and requires the City to “separate the general benefits from the special benefits conferred on a parcel.”2 Special benefits are a “particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public-at-large.”3 Conversely, a general benefit is “conferred on real property located in the district or to the public-at-large.”4 Assessment law also mandates that “no assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel.”5 The Engineer determined the total cost of the improvements and activities, quantified the general benefit accruing to the public-at-large and non-assessed parcels adjacent to and within the DRPBID, and separated that amount from the special benefit accruing to the assessed parcels. Then, the Engineer determined the proportional special benefit derived by each parcel and allocated the special benefit value of the improvements and activities accordingly. The Engineer’s determinations and detailed calculations are summarized in this report. A. Separation of General and Special Benefits Each of the improvements and activities, and the associated costs and assessments within the DRPBID, were reviewed, identified, and allocated based on special and general benefits pursuant to Article XIII D of the California Constitution. The assessment has been apportioned based on the proportional special benefits conferred to the assessed parcels located within the DRPBID boundaries as determined below. 1. General Benefits Unlike special benefits, which are conferred directly and only upon assessed parcels, a general benefit is conferred on the general public or non-assessed parcels. Existing City and other public services, which are provided to every person and parcel, everywhere within the City, are an example of a general benefit. Although the DRPBID’s boundaries have been narrowly drawn, programs have been carefully designed to provide special benefits, and activities and improvements will only be provided directly to assessed parcels, it is acknowledged that there will be general benefits as a result of the DRPBID’s activities and improvements. The California Constitution mandates that “only special benefits are assessable, and an agency shall separate the general benefits from the special benefits.”6 “Generally, this separation and quantification of general and special benefits must be accomplished by apportioning the cost of a service or improvement between the two and assessing property owners only for the portion of the cost representing special benefits.”7 The first step that must be undertaken to separate general and special benefits provided by the DRPBID’s activities and improvements is to identify and quantify the general 1 Cal. Const., art. XIII D, §4(a) 2 Cal. Const., art. XIII D, §4(a) 3 Id, §2(i) 4 Cal Const., art XIII D §2(i) 5 Cal. Const., art. XIII D, §4(a) 6 Cal. Const., art XIII D §4(a) 7 Golden Hill Neighborhood Association v. City of San Diego (2011) 199 Cal.App.4th 416
DRPBID Management District Plan April 5, 2022 Page 13 benefits. There are two bodies who can receive general benefits: the public-at-large within the DRPBID, and non-assessed parcels within and surrounding the DRPBID. a. General Benefit to the Public-at-Large Although the activities and improvements are narrowly designed and carefully implemented to specially benefit the assessed parcels, and only provided directly to assessed parcels, they will generate a general benefit to the public-at-large within the DRPBID. State law indicates that “Activities undertaken for the purpose of conferring special benefits upon property to be assessed inherently produce incidental or collateral effects that benefit property or persons not assessed.”8 However, “the mere fact that special benefits produce incidental or collateral effects that benefit property or persons not assessed does not convert any portion of those special benefits or their incidental or collateral effects into general benefits.”9 Further, “the value of any incidental or collateral effects that arise from the improvements, maintenance or activities of a property-based district and that benefit property or persons not assessed shall not be deducted from the entirety of the cost of any special benefit or affect the proportionate special benefit derived by each identified parcel.”10 Thus, although there may be some incidental benefit to persons engaged in business on the assessed parcels, that incidental benefit is not considered general benefit because it is inherently produced by activities and improvements that provide special benefits to the assessed parcels. There is, however, a general benefit to persons not engaged in business on the assessed parcels. Intercept surveys conducted in similar districts have found that approximately 97.3% of pedestrian traffic within PBID boundaries is engaged in business on assessed parcels, while the remaining approximately 2.7% is simply passing through and not engaging in business on the assessed parcels11. The 2.7% of traffic passing through does not have any connection to the assessed parcels, and therefore does not represent a special benefit to the assessed parcels. The 2.7% will, however, receive a derivative and indirect general benefit as a result of the activities and improvements being provided in the DRPBID. Therefore, it is estimated that 2.7% of the benefit created by the DRPBID’s services is general benefit provided to the public-at-large. To ensure that the assessment dollars do not fund general benefits to the public-at-large, that portion of the cost of activities and improvements will be paid for with funds not obtained through assessments. Using the 2.7% figure, based on the initial year activity and improvement budget, the value of this general benefit to the public-at-large is $6887.66 ($255,098.26*0.027). b. General Benefit to Non-Assessed Parcels Although they are only provided directly to the assessed parcels, the DRPBID’s activities and improvements may also confer general benefits upon non-assessed parcels within and surrounding the DRPBID. One study examining property values in PBID areas found “no evidence of spill-over impacts (either good or bad) on commercial properties located just outside the BID’s boundaries;”12 however, the California Court of Appeals has stated that “services specifically intended for assessed parcels concomitantly confer collateral general benefits to surrounding properties.”13 It is reasonable 8 Streets and Highways Code section 36601(h)(2) 9 Ibid 10 Streets and Highways Code Section 36622(k)(2) 11 Surveys conducted in: North Park, San Diego (January 2015); Mack Road, Sacramento (July 2014); and Sunrise MarketPlace, Citrus Heights (December 2013) 12 Furman Center for Real Estate & Urban Policy; The Impact of Business Improvement Districts on Property Values: Evidence from New York City (2007) p. 4 13 Beutz v. Riverside (2010) 184 Cal.App.4th 1516
DRPBID Management District Plan April 5, 2022 Page 14 to conclude that activities and improvements within the DRPBID will have an incidental impact on non-assessed parcels surrounding or within the DRPBID boundaries. Although the legislature has indicated that “the value of any incidental or collateral effects that arise from the improvements, maintenance, or activities of a property-based district and that benefit property or persons not assessed shall not be deducted from the entirety of the cost of any special benefit,”14 the California Court of Appeals has noted that “the characterization of a benefit may depend on whether the parcel receives a direct advantage from the improvement…or receives an indirect, derivative advantage resulting from the overall public benefits of the improvement.”15 Those derivative and indirect impacts are considered general benefits and will be quantified and separated. In this Engineer’s opinion, because activities and improvements are provided only within the DRPBID and on its perimeter, parcels separated from the DRPBID by either at least one intervening parcel or an impassable physical barrier such as a wall, freeway, or ditch will not receive spill over benefits. Parcels separated from the DRPBID will not benefit because they are physically removed from the actual location of activities and improvements provided, and do not face serviced parcels. Therefore, this analysis considers non-assessed parcels within the DRPBID’s boundaries and surrounding parcels that are immediately adjacent to and accessible from the DRPBID’s boundaries. The total DRPBID activity and improvement budget for the first year is $255,098.26. After reducing the activity and improvement budget by the general benefit to the public-at-large ($6,887.66), the remaining benefit to parcels is $248,210.60 . This benefit has been distributed to both assessed and non-assessed parcels using the following methodology. The general benefit to the public-at-large has been proportionally allocated to the DRPBID’s activity and improvement categories as shown in the following table. Category Benefit to Parcels Benefit to Public-at-Large Total Maintenance, Safety, and Nuisance Abatement $124,408.17 $3,452.23 $127,860.40 Marketing, Promotions and Business Development $66,701.87 $1,850.93 $68,552.80 Capital Improvements $4,976.32 $138.09 $5,114.41 Administration, Contingency/Reserve, & Collection Fees $52,124.24 $1446.41 $53,570.65 Total $248,210.60 $6887.66 $255,098.26 To determine the general benefit to parcels, the Engineer assigned each parcel group a benefit factor, determined the appropriate parcel characteristic to use in the calculation, multiplied the benefit factor by the benefit characteristic to determine the benefit units attributable to each parcel group, and 14 Streets and Highways Code section 36622(k)(2) 15 Tiburon v. Bonander (2009) 180 Cal.App.4th 1057, 1077
DRPBID Management District Plan April 5, 2022 Page 15 apportioned the remaining service cost (service cost minus general benefit to the public) in accordance with the benefit units derived by each parcel group. i. Benefit Factors All parcels within and adjacent to the DRPBID have been assigned a benefit factor to mathematically represent the proportional special and general benefit and quantify the value of each. The determination of benefit factors for each type of activity and improvement follows. Improvements The improvements to be provided by the DRPBID provide two types of special benefits: • Improvement – The primary special benefit provided by the DRPBID’s improvements is the improvements themselves, which are available to tenants and customers of assessed parcels. • Proximity – The DRPBID’s improvements also provide the special benefit of being in proximity to a parcel that is benefitting from an improvement, as parcels will enjoy the spillover benefits of neighboring parcels utilizing the improvements. The majority of the benefit is the improvements themselves; proximity is a lesser benefit. It is this Engineer’s estimation that eighty-five percent (85%) of the special benefit from the DRPBID’s improvements is the improvement, while the proximity special benefit accounts for fifteen percent (15%) of the special benefit. Assessed parcels will receive both benefits; non-assessed parcels within and adjacent to the DRPBID will not be directly improved, and therefore only receive the general benefit of proximity. Tangible Activities The tangible activities (those that are physically provided via a person or people working throughout the district) to be provided by the DRPBID generate three types of special benefits: • Service – The primary special benefit provided by the DRPBID’s physical activities is the actual service. That is, the actual cleanliness and safety created by security and maintenance clean and safe personnel. • Presence – The DRPBID’s physical activities also provide the special benefit of an individual’s presence on the assessed parcel as the activities are provided, which can have a deterrent effect and creates a positive impression that the area is well-maintained and safe. The “Disneyland effect” is the benefit the parcels receive from the observation that parcels are being maintained. There are studies which link the perception of cleanliness to a perception of increased security. • Proximity – The DRPBID’s physical activities also provide the special benefit of being in proximity to a cleaner, safer parcel. Neighboring parcels enjoy the spillover benefits of being adjacent to increased safety and cleanliness. The majority of the benefit received by the parcels is the results of the DRPBID’s services; onsite presence and proximity are lesser benefits. It is this Engineer’s estimation that seventy-five percent (75%) of the special benefit from the DRPBID’s physical activities is the service, while the presence and proximity benefits each account for twelve and one-half percent (12.5% presence, 12.5% proximity) of the special benefit. Assessed parcels will receive all three benefits; non-assessed parcels
DRPBID Management District Plan April 5, 2022 Page 16 within and adjacent to the DRPBID will not be directly serviced and therefore only receive the general benefit of proximity. Intangible Activities Some of the DRPBID’s activities, such as marketing, are distinct in that they are not provided to a targeted area within the DRPBID, rather they are provided via internet, radio, and other forms of media and targeted at an audience outside the DRPBID in an effort to bring the audience into the DRPBID. These activities provide two types of special benefits: Direct Exposure – The primary special benefit provided by the DRPBID’s intangible activities is exposure. The intangible activities increase awareness of the DRPBID as a commercial and business destination and lead to increased patronage. Incidental Exposure – The DRPBID’s intangible activities will also have a secondary special benefit of incidental exposure, such as word-of-mouth exposure, that results from the direct exposure and increases awareness of the DRPBID as a commercial and business destination. The majority of the benefit from these activities is the direct exposure; the incidental exposure is a lesser benefit. It is this Engineer’s estimation that ninety percent (90%) of the special benefit from the intangible activities is direct exposure, while ten percent (10%) is incidental exposure. Assessed parcels will receive both as special benefits; non-assessed parcels within and adjacent to the DRPBID will not be directly marketed and therefore only receive the general benefit of incidental exposure. Factors Determined Based on the foregoing analysis, all assessed parcels within the DRPBID specially benefit from the DRPBID’s activities and improvements, and have been assigned a benefit factor of 1.0. Parcels that are not assessed have been assigned benefit factors based on the portion of the benefit they will receive, as described above. The non-assessed parcels will benefit from fifteen percent (15%) of the improvements, twelve and one-half percent (12.5%) of the tangible activities, and ten percent (10%) of the intangible activities; therefore they have been assigned benefit factors of 0.15, 0.125, and 0.10 respectively. ii. Non-Assessed Benefit Characteristics There are two types of parcels that are not assessed; those within the DRPBID and those immediately adjacent to and accessible from the DRPBID. Because they generally benefit in a differing manner, distinct parcel characteristics are used to quantify the general benefit to each type. • Inside – Non-assessed parcels inside of the DRPBID are surrounded by parcels that are assessed and receiving the full special benefits; they will, therefore, receive the general benefit of proximity. These parcels are impacted on more than one side by the DRPBID’s activities and improvements and activities and improvements are provided all around them. Because these parcels are surrounded by specially benefitted parcels, it is appropriate that parcel square footage be used to measure the general benefit they receive. • Adjacent – Adjacent parcels are those that are immediately adjacent to or directly across the street from specially benefitted parcels, and accessible from specially benefitted parcels. These parcels generally benefit differently than those inside the DRPBID, because these parcels are adjacent to, rather than surrounded by, specially benefitted parcels. Square footage is not an appropriate measure of benefit to these parcels. Because the parcels are not surrounded by serviced parcels, a long, shallow parcel with the same square footage as a deep, narrow parcel
DRPBID Management District Plan April 5, 2022 Page 17 will receive a different level of general benefit. Likewise, two parcels with the same depth but a different width adjacent to serviced parcels will benefit differently. To account for this difference, it is appropriate that parcel linear frontage be used to measure the general benefit the adjacent parcels receive. The linear footage is the length of parcels fronting public streets. The amount listed for “assessed linear feet” is the value for all assessed parcels within the DRPBID and the amount listed for “non-assessed linear feet” is the value for all non-assessed parcels adjacent to the district boundary. iii. Calculations To quantify and separate the general benefit to non-assessed parcels, the following calculations were undertaken for each budget category. 1. The total service budget for each category was determined and the amount of general benefit to the public-at-large was subtracted from the category budget. 2. The benefit factor applicable to each activity or improvement was multiplied by the parcel square footage or linear frontage of assessed and non-assessed parcels, to determine the number of benefit units received by each parcel group. 3. The benefit units for all parcel groups were summed, and the percentage of benefit units attributable to each parcel group was calculated. 4. The total remaining activity and improvement budget, less the amount already determined to be general benefit to the public-at-large, was allocated to general and special benefit categories for each parcel group using the calculated benefit percent and applicable benefit characteristic methodology. 5. The special and general benefit resulting from the administration and contingency / reserve portions of the budget were determined based on the proportional allocation of benefits derived from activities and improvements. Maintenance, Safety and Nuisance Abatement The maintenance, safety, and nuisance abatement budget, minus the amount of general benefit to the public-at-large, is $124,408.17. The calculations below determine the amount of general benefit to non-assessed parcels within the DRPBID. Parcel Type Square Footage Benefit Factor Benefit Units Benefit Percent Remaining Budget Assessed 1,721,854.00 1.000 1,721,854.00 99.387% $124,408.17 $123,645.35 Non-Assessed 84,983.00 0.125 110,622.88 0.613% $124,408.17 $762.82 The maintenance, safety, and nuisance abatement budget, minus the amount of general benefit to the public and non-assessed parcels within the DRPBID, is $123,645.35. The calculations below determine the amount of general benefit to parcels adjacent to the DRPBID. Parcel Type Linear Frontage Benefit Factor Benefit Units Benefit Percent Remaining Budget Inside 22,881.00 1.000 22,881.00 97.048% $123,645.35 $119,995.30 Adjacent 5,568.00 0.125 696.00 2.952% $123,645.35 $3,650.05
DRPBID Management District Plan April 5, 2022 Page 18 Therefore, the allocation of the maintenance, safety, and nuisance abatement budget is as follows: General Benefit – Public At Large $3,452.23 General Benefit – Inside Parcels $762.82 General Benefit – Adjacent Parcels $3,650.05 Special Benefit $119,995.30 Total $127,860.40 Marketing, Promotions and Business Development The marketing, promotions, and business development budget, minus the amount of general benefit to the public-at-large, is $66,701.87. The calculations below determine the amount of general benefit to non-assessed parcels within the DRPBID. Parcel Type Square Footage Benefit Factor Benefit Units Benefit Percent Remaining Budget Assessed 1,721,854.00 1.000 1,721,854.00 99.509% $66,701.87 $66,374.28 Non-Assessed 84,983.00 0.100 8,498.30 0.491% $66,701.87 $327.59 The marketing, promotions, and business development budget, minus the amount of general benefit to the public and non-assessed parcels within the DRPBID, is $66,374.28. The calculations below determine the amount of general benefit to parcels adjacent to the DRPBID. Parcel Type Linear Frontage Benefit Factor Benefit Units Benefit Percent Remaining Budget Inside 22,881.00 1.000 22,881.00 97.624% $66,374.28 $64,797.46 Adjacent 5,568.00 0.100 556.80 2.376% $66,374.28 $1,576.82 Therefore, the allocation of the marketing, promotions, and business development budget is as follows: General Benefit – Public At Large $1,850.93 General Benefit – Inside Parcels $327.59 General Benefit – Adjacent Parcels $1,576.82 Special Benefit $64,797.46 Total $68,522.80 Capital Improvements
DRPBID Management District Plan April 5, 2022 Page 19 The capital improvements budget, minus the amount of general benefit to the public-at-large, is $4,976.32. The calculations below determine the amount of general benefit to non-assessed parcels within the DRPBID. Parcel Type Square Footage Benefit Factor Benefit Units Benefit Percent Remaining Budget Assessed 1,721,854.00 1.000 1,721,854.00 99.387% $4,976.32 $4,945.81 Non-Assessed 84,983.00 0.125 10,622.88 0.613% $4,976.32 $30.51 The capital improvements budget, minus the amount of general benefit to the public and non-assessed parcels within the DRPBID, is $4,945.81. The calculations below determine the amount of general benefit to parcels adjacent to the DRPBID. Parcel Type Linear Frontage Benefit Factor Benefit Units Benefit Percent Remaining Budget Inside 22,881.00 1.000 22,881.00 97.048% $4,945.81 $4,799.81 Adjacent 5,568.00 0.125 696.00 2.952% $4,945.81 $146.00 Therefore, the allocation of the capital improvements budget is as follows: General Benefit – Public At Large $138.09 General Benefit – Inside Parcels $30.51 General Benefit – Adjacent Parcels $146.00 Special Benefit $4,799.81 Total $5,114.41 Administration, Contingency/Reserve, and Collection Fee The administration, contingency/reserve and collection fee budget line items relate to the activities and improvements provided. These costs have been allocated proportionally based on the special and general benefit provided by each category. Special Benefit to Parcels General Benefit to Parcels Maintenance, Safety, and Nuisance Abatement $119,995.30 $4,412.87 Marketing, Promotions and Business Development $64,797.46 $1,904.41 Capital Improvements $4,799.81 $176.51 Activity Totals $189,592.57 $6,493.79 Percent 96.688% 3.312% Administration, Contingency/Reserve, & Collection Fee $50,398.03 $1,726.21
DRPBID Management District Plan April 5, 2022 Page 20 Total Parcel Benefits $239,990.60 $8,220.00 iv. Total Benefits Based on the foregoing calculations, the total benefits to assessed parcels, non-assessed parcels, and the general public are:
Special Benefit to Parcels General Benefit to Parcels General Benefit to Public Total Maintenance, Safety, and Nuisance Abatement $119,995.30 $4,412.87 $3,452.23 $127,860.40 Marketing, Promotions and Business Development $64,797.46 $1,904.41 $1,850.93 $68,552.80 Capital Improvements $4,799.81 $176.51 $138.09 $5,114.41 Administration, Contingency/Reserve, & Collection Fees $50,398.03 $1,726.21 $1,446.41 $53,570.65 Total $239,990.60 $8,220.00 $6,887.66 255,098.26 c. Non-Assessment Funding The programs funded by the DRPBID receive additional non-assessment funding in the form of grants, corporate sponsorships, event income, and other miscellaneous funds. These funding sources are anticipated to equal or exceed the amount of general benefit conferred annually by the DRPBID’s activities and improvements, $15,107.66. These non-assessment funds will be used to pay for the general benefit provided by the DRPBID’s activities and improvements, ensuring that parcel assessments will only be used to provide special benefits and “any additional costs of providing general benefits [are] not included in the amounts assessed.”16 2. Special Benefit The activities and improvements to be provided by the DRPBID constitute and convey special benefits directly to the assessed parcels. Assessment law requires that “the proportionate special benefit derived by each identified parcel shall be determined in relationship to the entirety of the capital cost of a public improvement, the maintenance and operation expenses of a public improvement, or the cost of the property related service being provided.”17 Further, “no assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel.”18 Special benefit “includes incidental or collateral effects that arise from the improvements, maintenance, or activities of property-based districts even if those incidental or collateral effects benefit property or persons not assessed.”19 To determine the total special benefit value to be conveyed to the assessed parcels, we deduct the general benefit value ($15,107.66) from the total value of the activities and improvements ($255,098.26). The remaining $ is considered the special benefit to assessed parcels (the “Total Assessment”). The Total Assessment represents the total value of the special benefit to be provided 16 Streets and Highways Code section 36632(a) 17 Cal. Const., art XIII D §4(a) 18 Ibid 19 Streets and Highways Code section 36615.5
DRPBID Management District Plan April 5, 2022 Page 21 by the activities and improvements. The Total Assessment has been proportionally divided among the assessed parcels so that no assessment exceeds the reasonable cost of the proportional special benefit conferred on a parcel. The assessment rate has been designed to ensure that “properties that receive the same proportionate special benefit pay the same assessment.”20 Service Provided Total Benefit Value General Benefit Value to Public Benefit Value to Parcels (Special & General) Special Benefit to Assessed Parcels Maintenance, Safety, and Nuisance Abatement $127,860.40 $3,452.23 $124,408.17 $119,995.30 Marketing, Promotions and Business Development $68,552.80 $1,850.93 $68,552.80 $64,797.46 Capital Improvements $5,114.41 $138.09 $5,114,41 $4,799.81 Administration $38,264.74 $1,033.15 $37,231.59 $35,998.59 Contingency/Reserve $12,754.92 $344.38 $12,410.54 $11,999.53 Collection Fees $2,550.99 $68.88 $2,482.11 $2,399.91 TOTAL $255,098.26 $6,887.66 $248,210.60 $239,990.60 B. Assessment Methodology 1. Base Formula Each parcel will be assessed based on proportional special benefits received. The variables used for the annual assessment formula are parcel type and parcel square footage. These variables are appropriate measures of the proportional special benefit because the need for services, level of services, and quantity of services are all relative to these variables; thus the special benefit provided to each parcel by the services can be proportionally measured using these variables. Determination of Assessment Rates “Because not all parcels in the district are identical in size…some will receive more special benefit than others.”21 Each of the variables used relates directly to the service level and special benefit provided to each parcel. Parcel square footage is the size of the parcel, measured in square feet. Size is an appropriate measure of proportional special benefit because it relates directly to the quantity of services provided to the parcel, the highest and best use of a parcel, and reflects the long-term value implications of the DRPBID. The larger a parcel, the more services and benefit the parcel will receive. Because not all parcels in the DRPBID are identical in use, some will receive more special benefit than others. For example, a commercial parcel will benefit to a lesser degree than a retail trade use parcel, because it will not enjoy the benefits of increased commerce resulting from the services. Further detail on the benefit to each parcel type is in the following pages. To determine the assessment rates, the assessed parcels were classified by the estimated benefit each type of parcel receives, the estimated special benefit value of the activities and improvements provided to each type was determined based 20 Tiburon v. Bonander (2009) 180 Cal.App.4th 1057 21 Dahms v. Downtown Pomona (2009) 174 Cal.App.4th 708
DRPBID Management District Plan April 5, 2022 Page 22 on approximate cost of service provision, and an assessment rate that is proportional to the estimated proportional benefit received by each parcel type was determined. To determine the assessment rates, the estimated special benefit value for each parcel type was divided by the total assessable parcel square footage as shown in the tables below. Parcel Type Parcel types were categorized based on their typical amount of foot and vehicle traffic on the various parcels. Retail trade use parcels will receive the highest level of services because their owners aim to benefit from increased customers or increased use by visitors and receive the highest volume of foot and vehicle traffic. However, parcels with low traffic, such as private tax-exempt parcels, will receive a lower level of services, because their owners primarily aim to benefit from increased cleanliness and security and receive the lowest level of foot and vehicle traffic. The approximate cost of special benefit services by parcel type was determined. Then, the special benefit cost of services by type was divided by the frontage and square footage of those parcels to determine the assessment rates. Parcel Size The DRPBID’s services will benefit each assessed parcel as a whole. The service budget which, in this Engineer’s estimation, represents special benefits to the parcels, has been allocated based on parcel size and parcel frontage.
Parcel Type Initial Parcel Size Budget Parcel Square Footage Initial Parcel Assessment Rate ($/sqft/yr) Commercial 219,090.60 ÷ 1460604 = 0.15 Non-Profit Housing 20,900.00 ÷ 261250 = 0.08 Summary of Assessment Rates Therefore, for the initial year, the maximum annual assessment rates to parcels are as shown below and in Appendix 1. Maximum annual assessment rates may be subject to an increase of no more than three percent (3%) per year as shown in Appendix 1. Pursuant to Streets and Highways Code §36622(f) bonds shall not be issued. If you would like more information about parcel assessments, please call Civitas at (916)437-4300 or (800)999-7781. Parcel type Assessment rate (per square foot) Commercial $0.15 Non-Profit Housing $0.08 Sample assessment calculations are shown in Appendix 4.
DRPBID Management District Plan April 5, 2022 Page 23 Parcel Categorization Assessment categories for each parcel were determined based on the parcel’s land use code as shown in the Assessor’s Records and supplemented by other available information. In general, the assessment category for each parcel reflects the use of the parcel as described by its land use code. Parcels with multiple uses, such as strip malls with retail storefronts and commercial use buildings on the same parcel, are assessed at the rate applicable to the use that occupies the largest portion of the building square footage. In cases where the land use code and actual use differ, the actual use prevails for classification purposes. 1. Commercial Commercial parcels will receive and benefit from all DRPBID services, which are aimed to attract and increase customers and visitors to assessed parcels. These parcels have a commercial component because their owners aim to benefit from tenant rents, increased customers, or increased use by visitors. The primary purpose of the DRPBID is to provide property owner services which generate special benefits to parcels with commercial uses. 2. Non-Profit Housing Parcels owned and operated by non-profit housing agencies will receive and benefit from a portion of the DRPBID’s services. They will not, however, receive the same degree of special benefit that is received by commercial parcels as they are not used for commercial purposes. These parcels will receive and benefit from a portion of the DRPBID’s cleaning and maintenance programs. They will not receive nor benefit from marketing, promotions and business attraction services. Due to their lower pedestrian traffic and non-commercial nature, these parcels have a lower need for services; therefore, they will receive services less frequently and less intensively that commercial parcels. Thus, non-profit housing parcels will be assessed at a rate commensurate with the degree of special benefit. 3. Government-Owned Parcels The California Constitution, in Article XIII D, provides that “parcels within a district that are owned or used by any agency, the State of California or the United States shall not be exempt from assessment unless the agency can demonstrate by clear and convincing evidence that those publicly owned parcels in fact receive no special benefit.” No public agency owning parcels in the district has made such a demonstration. Government-owned parcels within the DRPBID will receive special benefit from the full range of DRPBID services and will therefore be assessed at the full commercial rate, commensurate with the degree of special benefit. There are thirty-one (31) City of Richmond parcels and one (1) County of Contra Costa parcel. 4. Exempted parcels/Non-Assessed There are sixty-eight (68) parcels within the DRPBID that will not be assessed. These parcels will not specially benefit from or directly receive the DRPBID’s activities and improvements. These parcels are accounted for in the analysis of general benefit provided to non-assessed parcels within the DRPBID. These parcels have the following use: • Residential Parcels: The state legislature has determined that “properties zoned exclusively for residential use…are conclusively presumed not to benefit from the improvements and services
DRPBID Management District Plan April 5, 2022 Page 24 funded through these assessments, and shall not be subject to any assessment.”22 The activities and improvements to be provided are designed to specially benefit commercial and parking parcels via increased commerce, occupancy, and lease rates. None of these benefits apply to residential parcels, which will not be serviced or benefit from the DRPBID’s activities. Residential parcels are those parcels with four family units or less, residential common areas, residential vacant lots, residential planned unit development, and residential condominiums. There are sixty-eight (68) residential parcels within the DRPBID that will not be assessed. 5. Changes in Data Every effort has been made to ensure each parcel included in the DRPBID is clearly identified and that all parcels included in the DRPBID are consistent in the boundary map and the assessment calculation table. However, errors in data can and may arise or data may change after formation of the DRPBID. Inconsistencies may include updated parcel sizes or parcel splits. If inconsistencies arise, the order of precedence shall be: 1) the assessment calculation table and 2) the boundary map. If the parcel size or type of a parcel changes during the term of the DRPBID, the assessment calculation may be modified accordingly. Categorization Appeals The category determined for each parcel is shown in Appendix 4. The use for each parcel is established at formation and may be updated upon each renewal. If a parcel owner believes their parcel has been mis-classified or has changed, they may appeal in writing to the City of Richmond for re-consideration. Appeals must be received by the City no later than June 1 of each year. Appeals must include the parcel number, current classification, requested classification, and the evidence upon which the appeal is based (for instance if a parcel is occupied by a retail store, but classified as commercial, a current photo of the retail store showing the building number). Appeals will not provide retroactive reductions. Appeals should be made to: Thomas Omolo Richmond City Manager’s Office, Economic Development [email protected] (510) 620-5560 A. Assessment Notice During the hearing process, an Assessment Ballot will be sent to owners of each parcel in the DRPBID. The Assessment Ballot provides an estimated assessment for each parcel. The final individual assessment for any particular parcel may change, up or down, if the parcel square footage, linear front footage, or type differ from those used to calculate the amount shown on the notice, which can be found in Appendix 4. B. Time and Manner for Collecting Assessments As provided by State Law, the DRPBID assessment will appear as a separate line item on annual property tax bills prepared by the County of Contra Costa. Alternatively, the DRPBID assessment may be collected by the City of Richmond if needed. Property tax bills are generally distributed in the fall, and payment is expected by lump sum or installment. The County of Contra Costa and City of Richmond shall distribute 22 Streets and Highways Code § 36632(c)
DRPBID Management District Plan April 5, 2022 Page 25 funds collected to RMSI. Existing laws for enforcement and appeal of property taxes, including penalties and interest, apply to the DRPBID assessments. C. Bonds Bonds will not be issued to finance services as a part of this DRPBID. D. Engineer’s Certification I hereby certify, to the best of my knowledge and experience, that each of the identified assessed parcels located within the Downtown Richmond Property and Business Improvement District will receive a special benefit over and above the general benefits conferred and that the amount of the assessment is no greater than the proportional special benefits conferred on each parcel, as described in this Engineer’s Report. Review of this Downtown Richmond Property and Business Improvement District Management District Plan and preparation of the Engineer’s Report was completed by: __________________________ Ross Peabody State of California April 6, 2022 Date This Engineer’s Report is intended to be distributed as part of the Management District Plan in its entirety, including the Assessment Calculation Table (Appendix 3) and the Boundary Map. Reproduction and distribution of only Section VII of this Management District Plan violates the intent of this stamp and signature.
DRPBID Management District Plan April 5, 2022 Page 26 APPENDIX 1 – MAXIMUM ANNUAL ASSESSMENT RATES Year Commercial Non-Profit Housing 2023/24 $0.150000 $0.080000 2024/25 $0.154500 $0.082400 2025/26 $0.159135 $0.084872 2026/27 $0.163909 $0.087418 2027/28 $0.168826 $0.090041 2028/29 $0.173891 $0.092742 2029/30 $0.179108 $0.095524
DRPBID Management District Plan April 5, 2022 Page 27 APPENDIX 2 – PBID LAW *** THIS DOCUMENT IS CURRENT THROUGH THE 2020 SUPPLEMENT *** (ALL 2019 LEGISLATION) STREETS AND HIGHWAYS CODE DIVISION 18. PARKING PART 7. PROPERTY AND BUSINESS IMPROVEMENT DISTRICT LAW OF 1994 CHAPTER 1. General Provisions ARTICLE 1. Declarations 36600. Citation of part This part shall be known and may be cited as the “Property and Business Improvement District Law of 1994.” 36601. Legislative findings and declarations; Legislative guidance The Legislature finds and declares all of the following: (a) Businesses located and operating within business districts in some of this state’s communities are economically disadvantaged, are underutilized, and are unable to attract customers due to inadequate facilities, services, and activities in the business districts. (b) It is in the public interest to promote the economic revitalization and physical maintenance of business districts in order to create jobs, attract new businesses, and prevent the erosion of the business districts. (c) It is of particular local benefit to allow business districts to fund business related improvements, maintenance, and activities through the levy of assessments upon the businesses or real property that receive benefits from those improvements. (d) Assessments levied for the purpose of conferring special benefit upon the real property or a specific benefit upon the businesses in a business district are not taxes for the general benefit of a city, even if property, businesses, or persons not assessed receive incidental or collateral effects that benefit them. (e) Property and business improvement districts formed throughout this state have conferred special benefits upon properties and businesses within their districts and have made those properties and businesses more useful by providing the following benefits: (1) Crime reduction. A study by the Rand Corporation has confirmed a 12-percent reduction in the incidence of robbery and an 8-percent reduction in the total incidence of violent crimes within the 30 districts studied. (2) Job creation. (3) Business attraction. (4) Business retention. (5) Economic growth. (6) New investments. (f) With the dissolution of redevelopment agencies throughout the state, property and business improvement districts have become even more important tools with which communities can combat blight, promote economic opportunities, and create a clean and safe environment. (g) Since the enactment of this act, the people of California have adopted Proposition 218, which added Article XIII D to the Constitution in order to place certain requirements and restrictions on the formation of, and activities, expenditures, and assessments by property-based districts. Article XIII D of the Constitution provides that property-based districts may only levy assessments for special benefits. (h) The act amending this section is intended to provide the Legislature’s guidance with regard to this act, its interaction with the provisions of Article XIII D of the Constitution, and the determination of special benefits in property-based districts.
DRPBID Management District Plan April 5, 2022 Page 28 (1) The lack of legislative guidance has resulted in uncertainty and inconsistent application of this act, which discourages the use of assessments to fund needed improvements, maintenance, and activities in property-based districts, contributing to blight and other underutilization of property. (2) Activities undertaken for the purpose of conferring special benefits upon property to be assessed inherently produce incidental or collateral effects that benefit property or persons not assessed. Therefore, for special benefits to exist as a separate and distinct category from general benefits, the incidental or collateral effects of those special benefits are inherently part of those special benefits. The mere fact that special benefits produce incidental or collateral effects that benefit property or persons not assessed does not convert any portion of those special benefits or their incidental or collateral effects into general benefits. (3) It is of the utmost importance that property-based districts created under this act have clarity regarding restrictions on assessments they may levy and the proper determination of special benefits. Legislative clarity with regard to this act will provide districts with clear instructions and courts with legislative intent regarding restrictions on property-based assessments, and the manner in which special benefits should be determined. 36602. Purpose of part The purpose of this part is to supplement previously enacted provisions of law that authorize cities to levy assessments within property and business improvement districts, to ensure that those assessments conform to all constitutional requirements and are determined and assessed in accordance with the guidance set forth in this act. This part does not affect or limit any other provisions of law authorizing or providing for the furnishing of improvements or activities or the raising of revenue for these purposes. 36603. Preemption of authority or charter city to adopt ordinances levying assessments Nothing in this part is intended to preempt the authority of a charter city to adopt ordinances providing for a different method of levying assessments for similar or additional purposes from those set forth in this part. A property and business improvement district created pursuant to this part is expressly exempt from the provisions of the Special Assessment Investigation, Limitation and Majority Protest Act of 1931 (Division 4 (commencing with Section 2800)). 36603.5. Part prevails over conflicting provisions Any provision of this part that conflicts with any other provision of law shall prevail over the other provision of law, as to districts created under this part. 36604. Severability This part is intended to be construed liberally and, if any provision is held invalid, the remaining provisions shall remain in full force and effect. Assessments levied under this part are not special taxes. ARTICLE 2. Definitions 36606. “Activities” “Activities” means, but is not limited to, all of the following that benefit businesses or real property in the district: (a) Promotion of public events. (b) Furnishing of music in any public place. (c) Promotion of tourism within the district. (d) Marketing and economic development, including retail retention and recruitment. (e) Providing security, sanitation, graffiti removal, street and sidewalk cleaning, and other municipal services supplemental to those normally provided by the municipality. (f) Other services provided for the purpose of conferring special benefit upon assessed real property or specific benefits upon assessed businesses located in the district.
DRPBID Management District Plan April 5, 2022 Page 29 36606.5. “Assessment” “Assessment” means a levy for the purpose of acquiring, constructing, installing, or maintaining improvements and providing activities that will provide certain benefits to properties or businesses located within a property and business improvement district. 36607. “Business” “Business” means all types of businesses and includes financial institutions and professions. 36608. “City” “City” means a city, county, city and county, or an agency or entity created pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code, the public member agencies of which includes only cities, counties, or a city and county, or the State of California. 36609. “City council” “City council” means the city council of a city or the board of supervisors of a county, or the agency, commission, or board created pursuant to a joint powers agreement and which is a city within the meaning of this part. 36609.4. “Clerk” “Clerk” means the clerk of the legislative body. 36609.5. “General benefit” “General benefit” means, for purposes of a property-based district, any benefit that is not a “special benefit” as defined in Section 36615.5. 36610. “Improvement” “Improvement” means the acquisition, construction, installation, or maintenance of any tangible property with an estimated useful life of five years or more including, but not limited to, the following: (a) Parking facilities. (b) Benches, booths, kiosks, display cases, pedestrian shelters and signs. (c) Trash receptacles and public restrooms. (d) Lighting and heating facilities. (e) Decorations. (f) Parks. (g) Fountains. (h) Planting areas. (i) Closing, opening, widening, or narrowing of existing streets. (j) Facilities or equipment, or both, to enhance security of persons and property within the district. (k) Ramps, sidewalks, plazas, and pedestrian malls. (l) Rehabilitation or removal of existing structures. 36611. “Management district plan”; “Plan” “Management district plan” or “plan” means a proposal as defined in Section 36622. 36612. “Owners’ association”
DRPBID Management District Plan April 5, 2022 Page 30 “Owners’ association” means a private nonprofit entity that is under contract with a city to administer or implement improvements, maintenance, and activities specified in the management district plan. An owners’ association may be an existing nonprofit entity or a newly formed nonprofit entity. An owners’ association is a private entity and may not be considered a public entity for any purpose, nor may its board members or staff be considered to be public officials for any purpose. Notwithstanding this section, an owners’ association shall comply with the Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5 of the Government Code), at all times when matters within the subject matter of the district are heard, discussed, or deliberated, and with the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code), for all records relating to activities of the district. 36614. “Property” “Property” means real property situated within a district. 36614.5. “Property and business improvement district”; “District” “Property and business improvement district,” or “district,” means a property and business improvement district established pursuant to this part. 36614.6. “Property-based assessment” “Property-based assessment” means any assessment made pursuant to this part upon real property. 36614.7. “Property-based district” “Property-based district” means any district in which a city levies a property-based assessment. 36615. “Property owner”; “Business owner”; “Owner” “Property owner” means any person shown as the owner of land on the last equalized assessment roll or otherwise known to be the owner of land by the city council. “Business owner” means any person recognized by the city as the owner of the business. “Owner” means either a business owner or a property owner. The city council has no obligation to obtain other information as to the ownership of land or businesses, and its determination of ownership shall be final and conclusive for the purposes of this part. Wherever this part requires the signature of the property owner, the signature of the authorized agent of the property owner shall be sufficient. Wherever this part requires the signature of the business owner, the signature of the authorized agent of the business owner shall be sufficient. 36615.5. “Special benefit” “Special benefit” means, for purposes of a property-based district, a particular and distinct benefit over and above general benefits conferred on real property located in a district or to the public at large. Special benefit includes incidental or collateral effects that arise from the improvements, maintenance, or activities of property-based districts even if those incidental or collateral effects benefit property or persons not assessed. Special benefit excludes general enhancement of property value. 36616. “Tenant” “Tenant” means an occupant pursuant to a lease of commercial space or a dwelling unit, other than an owner. ARTICLE 3. Prior Law 36617. Alternate method of financing certain improvements and activities; Effect on other provisions
DRPBID Management District Plan April 5, 2022 Page 31 This part provides an alternative method of financing certain improvements and activities. The provisions of this part shall not affect or limit any other provisions of law authorizing or providing for the furnishing of improvements or activities or the raising of revenue for these purposes. Every improvement area established pursuant to the Parking and Business Improvement Area Law of 1989 (Part 6 (commencing with Section 36500) of this division) is valid and effective and is unaffected by this part. CHAPTER 2. Establishment 36620. Establishment of property and business improvement district A property and business improvement district may be established as provided in this chapter. 36620.5. Requirement of consent of city council A county may not form a district within the territorial jurisdiction of a city without the consent of the city council of that city. A city may not form a district within the unincorporated territory of a county without the consent of the board of supervisors of that county. A city may not form a district within the territorial jurisdiction of another city without the consent of the city council of the other city. 36621. Initiation of proceedings; Petition of property or business owners in proposed district (a) Upon the submission of a written petition, signed by the property or business owners in the proposed district who will pay more than 50 percent of the assessments proposed to be levied, the city council may initiate proceedings to form a district by the adoption of a resolution expressing its intention to form a district. The amount of assessment attributable to property or a business owned by the same property or business owner that is in excess of 40 percent of the amount of all assessments proposed to be levied, shall not be included in determining whether the petition is signed by property or business owners who will pay more than 50 percent of the total amount of assessments proposed to be levied. (b) The petition of property or business owners required under subdivision (a) shall include a summary of the management district plan. That summary shall include all of the following: (1) A map showing the boundaries of the district. (2) Information specifying where the complete management district plan can be obtained. (3) Information specifying that the complete management district plan shall be furnished upon request. (c) The resolution of intention described in subdivision (a) shall contain all of the following: (1) A brief description of the proposed improvements, maintenance, and activities, the amount of the proposed assessment, a statement as to whether the assessment will be levied on property or businesses within the district, a statement as to whether bonds will be issued, and a description of the exterior boundaries of the proposed district, which may be made by reference to any plan or map that is on file with the clerk. The descriptions and statements do not need to be detailed and shall be sufficient if they enable an owner to generally identify the nature and extent of the improvements, maintenance, and activities, and the location and extent of the proposed district. (2) A time and place for a public hearing on the establishment of the property and business improvement district and the levy of assessments, which shall be consistent with the requirements of Section 36623. 36622. Contents of management district plan The management district plan shall include, but is not limited to, all of the following: (a) If the assessment will be levied on property, a map of the district in sufficient detail to locate each parcel of property and, if businesses are to be assessed, each business within the district. If the assessment will be levied on businesses, a map that identifies the district boundaries in sufficient detail to allow a business owner
DRPBID Management District Plan April 5, 2022 Page 32 to reasonably determine whether a business is located within the district boundaries. If the assessment will be levied on property and businesses, a map of the district in sufficient detail to locate each parcel of property and to allow a business owner to reasonably determine whether a business is located within the district boundaries. (b) The name of the proposed district. (c) A description of the boundaries of the district, including the boundaries of benefit zones, proposed for establishment or extension in a manner sufficient to identify the affected property and businesses included, which may be made by reference to any plan or map that is on file with the clerk. The boundaries of a proposed property assessment district shall not overlap with the boundaries of another existing property assessment district created pursuant to this part. This part does not prohibit the boundaries of a district created pursuant to this part to overlap with other assessment districts established pursuant to other provisions of law, including, but not limited to, the Parking and Business Improvement Area Law of 1989 (Part 6 (commencing with Section 36500)). This part does not prohibit the boundaries of a business assessment district created pursuant to this part to overlap with another business assessment district created pursuant to this part. This part does not prohibit the boundaries of a business assessment district created pursuant to this part to overlap with a property assessment district created pursuant to this part. (d) The improvements, maintenance, and activities proposed for each year of operation of the district and the maximum cost thereof. If the improvements, maintenance, and activities proposed for each year of operation are the same, a description of the first year’s proposed improvements, maintenance, and activities and a statement that the same improvements, maintenance, and activities are proposed for subsequent years shall satisfy the requirements of this subdivision. (e) The total annual amount proposed to be expended for improvements, maintenance, or activities, and debt service in each year of operation of the district. If the assessment is levied on businesses, this amount may be estimated based upon the assessment rate. If the total annual amount proposed to be expended in each year of operation of the district is not significantly different, the amount proposed to be expended in the initial year and a statement that a similar amount applies to subsequent years shall satisfy the requirements of this subdivision. (f) The proposed source or sources of financing, including the proposed method and basis of levying the assessment in sufficient detail to allow each property or business owner to calculate the amount of the assessment to be levied against his or her property or business. The plan also shall state whether bonds will be issued to finance improvements. (g) The time and manner of collecting the assessments. (h) The specific number of years in which assessments will be levied. In a new district, the maximum number of years shall be five. Upon renewal, a district shall have a term not to exceed 10 years. Notwithstanding these limitations, a district created pursuant to this part to finance capital improvements with bonds may levy assessments until the maximum maturity of the bonds. The management district plan may set forth specific increases in assessments for each year of operation of the district. (i) The proposed time for implementation and completion of the management district plan. (j) Any proposed rules and regulations to be applicable to the district. (k) (1) A list of the properties or businesses to be assessed, including the assessor’s parcel numbers for properties to be assessed, and a statement of the method or methods by which the expenses of a district will be imposed upon benefited real property or businesses, in proportion to the benefit received by the property or business, to defray the cost thereof. (2) In a property-based district, the proportionate special benefit derived by each identified parcel shall be determined exclusively in relationship to the entirety of the capital cost of a public improvement, the maintenance and operation expenses of a public improvement, or the cost of the activities. An assessment shall not be imposed on any parcel that exceeds the reasonable cost of the proportional special benefit conferred on that parcel. Only special benefits are assessable, and a property-based district shall separate the general benefits, if any, from the special benefits conferred on a parcel. Parcels within a property-based district that are owned or used by any city, public agency, the State of California, or the United States shall not be exempt from assessment unless the governmental entity can demonstrate by clear and convincing evidence that those publicly owned parcels in fact receive no special benefit. The value of any incidental, secondary, or collateral effects that arise from the improvements, maintenance, or activities of a property-based district and that
DRPBID Management District Plan April 5, 2022 Page 33 benefit property or persons not assessed shall not be deducted from the entirety of the cost of any special benefit or affect the proportionate special benefit derived by each identified parcel. (l) In a property-based district, the total amount of all special benefits to be conferred upon the properties located within the property-based district. (m) In a property-based district, the total amount of general benefits, if any. (n) In a property-based district, a detailed engineer’s report prepared by a registered professional engineer certified by the State of California supporting all assessments contemplated by the management district plan. (o) Any other item or matter required to be incorporated therein by the city council. 36623. Procedure to levy assessment (a) If a city council proposes to levy a new or increased property assessment, the notice and protest and hearing procedure shall comply with Section 53753 of the Government Code. (b) If a city council proposes to levy a new or increased business assessment, the notice and protest and hearing procedure shall comply with Section 54954.6 of the Government Code, except that notice shall be mailed to the owners of the businesses proposed to be assessed. A protest may be made orally or in writing by any interested person. Every written protest shall be filed with the clerk at or before the time fixed for the public hearing. The city council may waive any irregularity in the form or content of any written protest. A written protest may be withdrawn in writing at any time before the conclusion of the public hearing. Each written protest shall contain a description of the business in which the person subscribing the protest is interested sufficient to identify the business and, if a person subscribing is not shown on the official records of the city as the owner of the business, the protest shall contain or be accompanied by written evidence that the person subscribing is the owner of the business or the authorized representative. A written protest that does not comply with this section shall not be counted in determining a majority protest. If written protests are received from the owners or authorized representatives of businesses in the proposed district that will pay 50 percent or more of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protests to less than 50 percent, no further proceedings to levy the proposed assessment against such businesses, as contained in the resolution of intention, shall be taken for a period of one year from the date of the finding of a majority protest by the city council. (c) If a city council proposes to conduct a single proceeding to levy both a new or increased property assessment and a new or increased business assessment, the notice and protest and hearing procedure for the property assessment shall comply with subdivision (a), and the notice and protest and hearing procedure for the business assessment shall comply with subdivision (b). If a majority protest is received from either the property or business owners, that respective portion of the assessment shall not be levied. The remaining portion of the assessment may be levied unless the improvement or other special benefit was proposed to be funded by assessing both property and business owners. 36624. Changes to proposed assessments At the conclusion of the public hearing to establish the district, the city council may adopt, revise, change, reduce, or modify the proposed assessment or the type or types of improvements, maintenance, and activities to be funded with the revenues from the assessments. Proposed assessments may only be revised by reducing any or all of them. At the public hearing, the city council may only make changes in, to, or from the boundaries of the proposed property and business improvement district that will exclude territory that will not benefit from the proposed improvements, maintenance, and activities. Any modifications, revisions, reductions, or changes to the proposed assessment district shall be reflected in the notice and map recorded pursuant to Section 36627. 36625. Resolution of formation (a) If the city council, following the public hearing, decides to establish a proposed property and business improvement district, the city council shall adopt a resolution of formation that shall include, but is not limited to, all of the following: (1) A brief description of the proposed improvements, maintenance, and activities, the amount of the proposed assessment, a statement as to whether the assessment will be levied on property,
DRPBID Management District Plan April 5, 2022 Page 34 businesses, or both within the district, a statement on whether bonds will be issued, and a description of the exterior boundaries of the proposed district, which may be made by reference to any plan or map that is on file with the clerk. The descriptions and statements need not be detailed and shall be sufficient if they enable an owner to generally identify the nature and extent of the improvements, maintenance, and activities and the location and extent of the proposed district. (2) The number, date of adoption, and title of the resolution of intention. (3) The time and place where the public hearing was held concerning the establishment of the district. (4) A determination regarding any protests received. The city shall not establish the district or levy assessments if a majority protest was received. (5) A statement that the properties, businesses, or properties and businesses in the district established by the resolution shall be subject to any amendments to this part. (6) A statement that the improvements, maintenance, and activities to be conferred on businesses and properties in the district will be funded by the levy of the assessments. The revenue from the levy of assessments within a district shall not be used to provide improvements, maintenance, or activities outside the district or for any purpose other than the purposes specified in the resolution of intention, as modified by the city council at the hearing concerning establishment of the district. Notwithstanding the foregoing, improvements and activities that must be provided outside the district boundaries to create a special or specific benefit to the assessed parcels or businesses may be provided, but shall be limited to marketing or signage pointing to the district. (7) A finding that the property or businesses within the area of the property and business improvement district will be benefited by the improvements, maintenance, and activities funded by the proposed assessments, and, for a property-based district, that property within the district will receive a special benefit. (8) In a property-based district, the total amount of all special benefits to be conferred on the properties within the property-based district. (b) The adoption of the resolution of formation and, if required, recordation of the notice and map pursuant to Section 36627 shall constitute the levy of an assessment in each of the fiscal years referred to in the management district plan. 36627. Notice and assessment diagram Following adoption of the resolution establishing district assessments on properties pursuant to Section 36625, the clerk shall record a notice and an assessment diagram pursuant to Section 3114. No other provision of Division 4.5 (commencing with Section 3100) applies to an assessment district created pursuant to this part. 36628. Establishment of separate benefit zones within district; Categories of businesses The city council may establish one or more separate benefit zones within the district based upon the degree of benefit derived from the improvements or activities to be provided within the benefit zone and may impose a different assessment within each benefit zone. If the assessment is to be levied on businesses, the city council may also define categories of businesses based upon the degree of benefit that each will derive from the improvements or activities to be provided within the district and may impose a different assessment or rate of assessment on each category of business, or on each category of business within each zone. 36628.5. Assessments on businesses or property owners The city council may levy assessments on businesses or on property owners, or a combination of the two, pursuant to this part. The city council shall structure the assessments in whatever manner it determines corresponds with the distribution of benefits from the proposed improvements, maintenance, and activities, provided that any property-based assessment conforms with the requirements set forth in paragraph (2) of subdivision (k) of Section 36622. 36629. Provisions and procedures applicable to benefit zones and business categories
DRPBID Management District Plan April 5, 2022 Page 35 All provisions of this part applicable to the establishment, modification, or disestablishment of a property and business improvement district apply to the establishment, modification, or disestablishment of benefit zones or categories of business. The city council shall, to establish, modify, or disestablish a benefit zone or category of business, follow the procedure to establish, modify, or disestablish a property and business improvement district. 36630. Expiration of district; Creation of new district If a property and business improvement district expires due to the time limit set pursuant to subdivision (h) of Section 36622, a new management district plan may be created and the district may be renewed pursuant to this part. CHAPTER 3. Assessments 36631. Time and manner of collection of assessments; Delinquent payments The collection of the assessments levied pursuant to this part shall be made at the time and in the manner set forth by the city council in the resolution levying the assessment. Assessments levied on real property may be collected at the same time and in the same manner as for the ad valorem property tax, and may provide for the same lien priority and penalties for delinquent payment. All delinquent payments for assessments levied pursuant to this part may be charged interest and penalties. 36632. Assessments to be based on estimated benefit; Classification of real property and businesses; Exclusion of residential and agricultural property (a) The assessments levied on real property pursuant to this part shall be levied on the basis of the estimated benefit to the real property within the property and business improvement district. The city council may classify properties for purposes of determining the benefit to property of the improvements and activities provided pursuant to this part. (b) Assessments levied on businesses pursuant to this part shall be levied on the basis of the estimated benefit to the businesses within the property and business improvement district. The city council may classify businesses for purposes of determining the benefit to the businesses of the improvements and activities provided pursuant to this part. (c) Properties zoned solely for residential use, or that are zoned for agricultural use, are conclusively presumed not to benefit from the improvements and service funded through these assessments, and shall not be subject to any assessment pursuant to this part. 36633. Time for contesting validity of assessment The validity of an assessment levied under this part shall not be contested in an action or proceeding unless the action or proceeding is commenced within 30 days after the resolution levying the assessment is adopted pursuant to Section 36626. An appeal from a final judgment in an action or proceeding shall be perfected within 30 days after the entry of judgment. 36634. Service contracts authorized to establish levels of city services The city council may execute baseline service contracts that would establish levels of city services that would continue after a property and business improvement district has been formed. 36635. Request to modify management district plan The owners’ association may, at any time, request that the city council modify the management district plan. Any modification of the management district plan shall be made pursuant to this chapter. 36636. Modification of plan by resolution after public hearing; Adoption of resolution of intention
DRPBID Management District Plan April 5, 2022 Page 36 (a) Upon the written request of the owners’ association, the city council may modify the management district plan after conducting one public hearing on the proposed modifications. The city council may modify the improvements and activities to be funded with the revenue derived from the levy of the assessments by adopting a resolution determining to make the modifications after holding a public hearing on the proposed modifications. If the modification includes the levy of a new or increased assessment, the city council shall comply with Section 36623. Notice of all other public hearings pursuant to this section shall comply with both of the following: (1) The resolution of intention shall be published in a newspaper of general circulation in the city once at least seven days before the public hearing. (2) A complete copy of the resolution of intention shall be mailed by first class mail, at least 10 days before the public hearing, to each business owner or property owner affected by the proposed modification. (b) The city council shall adopt a resolution of intention which states the proposed modification prior to the public hearing required by this section. The public hearing shall be held not more than 90 days after the adoption of the resolution of intention. 36637. Reflection of modification in notices recorded and maps Any subsequent modification of the resolution shall be reflected in subsequent notices and maps recorded pursuant to Division 4.5 (commencing with Section 3100), in a manner consistent with the provisions of Section 36627. CHAPTER 3.5. Financing 36640. Bonds authorized; Procedure; Restriction on reduction or termination of assessments (a)The city council may, by resolution, determine and declare that bonds shall be issued to finance the estimated cost of some or all of the proposed improvements described in the resolution of formation adopted pursuant to Section 36625, if the resolution of formation adopted pursuant to that section provides for the issuance of bonds, under the Improvement Bond Act of 1915 (Division 10 (commencing with Section 8500)) or in conjunction with Marks-Roos Local Bond Pooling Act of 1985 (Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code). Either act, as the case may be, shall govern the proceedings relating to the issuance of bonds, although proceedings under the Bond Act of 1915 may be modified by the city council as necessary to accommodate assessments levied upon business pursuant to this part. (b) The resolution adopted pursuant to subdivision (a) shall generally describe the proposed improvements specified in the resolution of formation adopted pursuant to Section 36625, set forth the estimated cost of those improvements, specify the number of annual installments and the fiscal years during which they are to be collected. The amount of debt service to retire the bonds shall not exceed the amount of revenue estimated to be raised from assessments over 30 years. (c) Notwithstanding any other provision of this part, assessments levied to pay the principal and interest on any bond issued pursuant to this section shall not be reduced or terminated if doing so would interfere with the timely retirement of the debt. CHAPTER 4. Governance 36650. Report by owners’ association; Approval or modification by city council (a) The owners’ association shall cause to be prepared a report for each fiscal year, except the first year, for which assessments are to be levied and collected to pay the costs of the improvements, maintenance, and activities described in the report. The owners’ association’s first report shall be due after the first year of operation of the district. The report may propose changes, including, but not limited to, the boundaries of the property and business improvement district or any benefit zones within the district, the basis and method of
DRPBID Management District Plan April 5, 2022 Page 37 levying the assessments, and any changes in the classification of property, including any categories of business, if a classification is used. (b) The report shall be filed with the clerk and shall refer to the property and business improvement district by name, specify the fiscal year to which the report applies, and, with respect to that fiscal year, shall contain all of the following information: (1) Any proposed changes in the boundaries of the property and business improvement district or in any benefit zones or classification of property or businesses within the district. (2) The improvements, maintenance, and activities to be provided for that fiscal year. (3) An estimate of the cost of providing the improvements, maintenance, and activities for that fiscal year. (4) The method and basis of levying the assessment in sufficient detail to allow each real property or business owner, as appropriate, to estimate the amount of the assessment to be levied against his or her property or business for that fiscal year. (5) The estimated amount of any surplus or deficit revenues to be carried over from a previous fiscal year. (6) The estimated amount of any contributions to be made from sources other than assessments levied pursuant to this part. (c) The city council may approve the report as filed by the owners’ association or may modify any particular contained in the report and approve it as modified. Any modification shall be made pursuant to Sections 36635 and 36636. The city council shall not approve a change in the basis and method of levying assessments that would impair an authorized or executed contract to be paid from the revenues derived from the levy of assessments, including any commitment to pay principal and interest on any bonds issued on behalf of the district. 36651. Designation of owners’ association to provide improvements, maintenance, and activities The management district plan may, but is not required to, state that an owners’ association will provide the improvements, maintenance, and activities described in the management district plan. If the management district plan designates an owners’ association, the city shall contract with the designated nonprofit corporation to provide services. CHAPTER 5. Renewal 36660. Renewal of district; Transfer or refund of remaining revenues; District term limit (a) Any district previously established whose term has expired, or will expire, may be renewed by following the procedures for establishment as provided in this chapter. (b) Upon renewal, any remaining revenues derived from the levy of assessments, or any revenues derived from the sale of assets acquired with the revenues, shall be transferred to the renewed district. If the renewed district includes additional parcels or businesses not included in the prior district, the remaining revenues shall be spent to benefit only the parcels or businesses in the prior district. If the renewed district does not include parcels or businesses included in the prior district, the remaining revenues attributable to these parcels shall be refunded to the owners of these parcels or businesses. (c) Upon renewal, a district shall have a term not to exceed 10 years, or, if the district is authorized to issue bonds, until the maximum maturity of those bonds. There is no requirement that the boundaries, assessments, improvements, or activities of a renewed district be the same as the original or prior district. CHAPTER 6. Disestablishment 36670. Circumstances permitting disestablishment of district; Procedure (a) Any district established or extended pursuant to the provisions of this part, where there is no indebtedness, outstanding and unpaid, incurred to accomplish any of the purposes of the district, may be disestablished by resolution by the city council in either of the following circumstances:
DRPBID Management District Plan April 5, 2022 Page 38 (1) If the city council finds there has been misappropriation of funds, malfeasance, or a violation of law in connection with the management of the district, it shall notice a hearing on disestablishment. (2) During the operation of the district, there shall be a 30-day period each year in which assessees may request disestablishment of the district. The first such period shall begin one year after the date of establishment of the district and shall continue for 30 days. The next such 30-day period shall begin two years after the date of the establishment of the district. Each successive year of operation of the district shall have such a 30-day period. Upon the written petition of the owners or authorized representatives of real property or the owners or authorized representatives of businesses in the district who pay 50 percent or more of the assessments levied, the city council shall pass a resolution of intention to disestablish the district. The city council shall notice a hearing on disestablishment. (b) The city council shall adopt a resolution of intention to disestablish the district prior to the public hearing required by this section. The resolution shall state the reason for the disestablishment, shall state the time and place of the public hearing, and shall contain a proposal to dispose of any assets acquired with the revenues of the assessments levied within the property and business improvement district. The notice of the hearing on disestablishment required by this section shall be given by mail to the property owner of each parcel or to the owner of each business subject to assessment in the district, as appropriate. The city shall conduct the public hearing not less than 30 days after mailing the notice to the property or business owners. The public hearing shall be held not more than 60 days after the adoption of the resolution of intention. 36671. Refund of remaining revenues upon disestablishment or expiration without renewal of district; Calculation of refund; Use of outstanding revenue collected after disestablishment of district (a) Upon the disestablishment or expiration without renewal of a district, any remaining revenues, after all outstanding debts are paid, derived from the levy of assessments, or derived from the sale of assets acquired with the revenues, or from bond reserve or construction funds, shall be refunded to the owners of the property or businesses then located and operating within the district in which assessments were levied by applying the same method and basis that was used to calculate the assessments levied in the fiscal year in which the district is disestablished or expires. All outstanding assessment revenue collected after disestablishment shall be spent on improvements and activities specified in the management district plan. (b) If the disestablishment occurs before an assessment is levied for the fiscal year, the method and basis that was used to calculate the assessments levied in the immediate prior fiscal year shall be used to calculate the amount of any refund.
DRPBID Management District Plan April 5, 2022 Page 39 APPENDIX 3 – MAP
DRPBID Management District Plan April 5, 2022 Page 40 APPENDIX 4 – PARCEL ASSESSMENT CALCULATIONS MAP KEY APN TYPE LOT SIZE ASSESSMENT 1 538111001 COM 223,462 $33,519.30 2 538131016 COM 81,598 $12,239.70 3 538132005 COM 6,124 $918.60 4 538132006 COM 2,710 $406.50 5 538132009 COM 2,710 $406.50 6 538132010 COM 2,710 $406.50 7 538132011 COM 2,710 $406.50 8 538132013 COM 46,950 $7,042.50 9 538132014 COM 5,420 $813.00 10 538142016 COM 76,702 $11,505.30 11 538250001 COM 5,625 $843.75 12 538250002 COM 2,812 $421.80 13 538250003 COM 8,437 $1,265.55 14 538250004 COM 2,812 $421.80 15 538250014 COM 16,875 $2,531.25 16 538260001 COM 5,625 $843.75 17 538260002 COM 2,817 $422.55 18 538260003 COM 3,187 $478.05 19 538260004 COM 2,437 $365.55 20 538260007 COM 32,390 $4,858.50 21 538260009 COM 9,135 $1,370.25 22 538260013 COM 52,110 $7,816.50 23 538440001 NPH 254,650 $20,372.00 24 538440002 COM 21,450 $3,217.50 25 540071011 COM 2,710 $406.50 26 540071016 COM 5,213 $781.95 27 540071017 COM 10,840 $1,626.00 28 540071018 COM 5,395 $809.25 29 540072018 COM 62,428 $9,364.20 30 540081001 COM 5,375 $806.25 31 540081002 COM 5,375 $806.25 32 540081003 COM 4,031 $604.65 33 540081004 COM 4,031 $604.65 34 540081005 COM 5,375 $806.25 35 540081020 COM 21,758 $3,263.70 36 540081021 COM 6,795 $1,019.25
DRPBID Management District Plan April 5, 2022 Page 41 37 540081024 COM 5,906 $885.90 38 540081025 COM 2,531 $379.65 39 540081026 COM 15,849 $2,377.35 40 540082030 COM 1,152 $172.80 41 540082032 COM 5,940 $891.00 42 540082033 COM 62,525 $9,378.75 43 540091008 COM 4,300 $645.00 44 540091010 COM 14,063 $2,109.45 45 540091011 COM 5,420 $813.00 46 540091012 COM 2,710 $406.50 47 540091013 COM 5,420 $813.00 48 540091014 COM 2,700 $405.00 49 540091015 COM 2,710 $406.50 50 540091016 COM 5,400 $810.00 51 540091017 COM 11,250 $1,687.50 52 540091018 COM 2,812 $421.80 53 540091019 COM 18,755 $2,813.25 54 540092016 COM 36,087 $5,413.05 55 540092017 COM 29,774 $4,466.10 56 540092018 COM 6,701 $1,005.15 57 540140001 COM 3,750 $562.50 58 540140002 COM 7,500 $1,125.00 59 540140003 COM 5,625 $843.75 60 540140004 COM 2,812 $421.80 61 540140005 COM 5,625 $843.75 62 540140020 RES 5,650 $0.00 63 540140021 RES 3,390 $0.00 64 540140022 RES 5,040 $0.00 65 540140023 RES 2,825 $0.00 66 540140024 RES 2,812 $0.00 67 540140025 COM 5,625 $843.75 68 540140026 COM 2,812 $421.80 69 540140027 COM 2,812 $421.80 70 540140028 COM 2,817 $422.55 71 540150001 COM 5,625 $843.75 72 540150002 COM 5,625 $843.75 73 540150006 COM 5,625 $843.75 74 540150008 COM 8,437 $1,265.55 75 540150026 COM 2,812 $421.80
DRPBID Management District Plan April 5, 2022 Page 42 76 540150029 COM 11,249 $1,687.35 77 540420003 NPH* 8,250 $775.50 78 540420004 COM 8,437 $1,265.55 79 540420005 COM 5,625 $843.75 80 540460008 COM 3,354 $503.10 81 540460048 COM 241,279 $36,191.85 82 540460049 COM 25,091 $3,763.65 83 540480024 RES 1,278 $0.00 84 540480025 RES 1,100 $0.00 85 540480026 RES 1,100 $0.00 86 540480027 RES 1,100 $0.00 87 540480028 RES 1,100 $0.00 88 540480029 RES 1,498 $0.00 89 540480030 RES 1,278 $0.00 90 540480031 RES 1,100 $0.00 91 540480032 RES 1,100 $0.00 92 540480033 RES 1,416 $0.00 93 540480056 RES 1,063 $0.00 94 540480057 RES 964 $0.00 95 540480058 RES 964 $0.00 96 540480059 RES 964 $0.00 97 540480060 RES 964 $0.00 98 540480061 RES 964 $0.00 99 540480062 RES 964 $0.00 100 540480063 RES 964 $0.00 101 540480064 RES 964 $0.00 102 540480065 RES 1,173 $0.00 103 540480066 RES 1,040 $0.00 104 540480067 RES 855 $0.00 105 540480068 RES 855 $0.00 106 540480069 RES 855 $0.00 107 540480070 RES 855 $0.00 108 540480071 RES 855 $0.00 109 540480072 RES 855 $0.00 110 540480073 RES 855 $0.00 111 540480074 RES 855 $0.00 112 540480075 RES 855 $0.00 113 540480076 RES 855 $0.00 114 540480077 RES 847 $0.00
DRPBID Management District Plan April 5, 2022 Page 43 115 540480083 RES 849 $0.00 116 540480084 RES 859 $0.00 117 540480085 RES 859 $0.00 118 540480086 RES 859 $0.00 119 540480087 RES 859 $0.00 120 540480088 RES 859 $0.00 121 540480089 RES 859 $0.00 122 540480090 RES 859 $0.00 123 540480091 RES 859 $0.00 124 540480092 RES 1,045 $0.00 125 540480093 RES 900 $0.00 126 540480094 RES 900 $0.00 127 540480095 RES 900 $0.00 128 540480096 RES 900 $0.00 129 540480097 RES 900 $0.00 130 540480098 RES 900 $0.00 131 540480099 RES 900 $0.00 132 540480100 RES 900 $0.00 133 540480101 RES 900 $0.00 134 540480102 RES 900 $0.00 135 540480124 RES 1,191 $0.00 136 540480125 RES 1,027 $0.00 137 540480126 RES 1,027 $0.00 138 540480127 RES 1,027 $0.00 139 540480128 RES 1,027 $0.00 140 540480129 RES 1,027 $0.00 141 540480130 RES 1,027 $0.00 142 540480131 RES 1,027 $0.00 143 540480132 RES 1,191 $0.00 144 540480133 COM 3,310 $496.50 145 540480134 COM 3,310 $496.50 146 540480135 COM 1,655 $248.25 147 540480138 RES 4,603 $0.00 148 540480144 RES 871 $0.00 149 540062012 COM 90,003 $13,500.45 COM: Commercial NPH: Non-Profit Housing RES: Residential (Not Assessed) * Mixed Used Parcel
DRPBID Management District Plan April 5, 2022 Page 44 APPENDIX 5 – TOTAL ESTIMATED MAXIMUM COST OF IMPROVEMENTS, MAINTENANCE, AND ACTIVITIES The estimated maximum cost of the line items below was developed based on the estimated costs of providing services in the proposed DRPBID. The costs below are estimated; the actual line item costs will fluctuate. The table below shows expenditures from assessment and non-assessed funds. Assessment funds are governed by Section VI. The total maximum budget may exceed the maximum listed in this table if parcel ownership changes results in parcels being assessed at a higher rate due to a higher estimated benefit. Year Maintenance, Safety and Nuisance Abatement Marketing, Promotions and Business Development
Capital Improvements Administration Contingency/Reserve Collection Fees Total 2023 $127,860.40 $68,552.80 $5,114.41 $38,264.74 $12,754.92 $2,550.99 $255,098.26 2024 $131,696.21 $70,609.38 $5,267.84 $39,412.68 $13,137.57 $2,627.52 $262,751.21 2025 $135,647.10 $72,727.67 $5,425.88 $40,595.06 $13,531.69 $2,706.35 $270,633.74 2026 $139,716.51 $74,909.50 $5,588.65 $41,812.91 $13,937.65 $2,787.54 $278,752.76 2027 $143,908.01 $77,156.78 $5,756.31 $43,067.30 $14,355.77 $2,871.16 $287,115.34 2028 $148,225.25 $79,471.48 $5,929.00 $44,359.32 $14,786.45 $2,957.30 $295,728.80 2029 $152,672.00 $81,855.63 $6,106.87 $45,690.10 $15,230.04 $3,046.02 $304,600.66 Total $979,725.48 $525,283.24 $39,188.97 $293,202.12 $97,734.09 $19,546.86 $1,954,680.77
July 19, 2022
Finance Department
DATE: July 19, 2022
TO: Mayor Butt and Members of the City Council
FROM:
Anil Comelo, Interim Deputy City Manager
Delmy Cuellar, Director of Finance
Antonio Banuelos, Accounting Manager
Subject:
Information Item on Issuance of Taxable Pension
Refunding Bonds, Series 2022 ("2022 Refunding Bonds")
FINANCIAL IMPACT: Potential increase in annual debt service required because of need to fund termination payment on an
interest rate swap. Potential future interim General Fund budget savings because of term extension.
PREVIOUS COUNCIL
ACTION:
April 6, 2021; October 5, 2021; December 7, 2021, June
7th, 2022, June 21, 2022
STATEMENT OF THE
ISSUE:
On June 21st, the City Council approved a resolution
authorizing the issuance of refunding bonds for the 2005 POBs. The City Council is being asked to consider
options for how this refinancing is to be structured,
including a potential term extension.
RECOMMENDED ACTION:
RECEIVE report, CONSIDER staff recommendations,
and PROVIDE guidance on structuring the 2005 Pension
Bond Refunding – Finance Department (Anil Comelo
620-6609/Delmy Cuellar 620-6790/Antonio Banuelos
620-6741).
AGENDA
REPORT
July 19, 2022
DISCUSSION:
Background. The City currently has the following outstanding two series of 2005 POBs:
(i) $17.899 million principal amount series maturing in 2023 (the "B-1 Bonds"), and (ii) $127.868 million principal amount series maturing in 2034 (the "B-2 Bonds"). The City is strongly recommended to refinance the B-1 and B-2 Bonds given existing outstanding challenges. The City is party to two interest rate swaps (the “Swaps”) associated with the 2005 POBs. However, the swap for the B-2 Bonds (the “B-2 Swap”) is subject to mandatory early termination on August 1, 2023, before which time the City will need to either (a) arrange financing to pay the market value of the B-2 Swap upon such early termination or (b) amend the B-2 Swap to remove, reduce, or delay the mandatory early termination. These and other reasons to refinance the 2005 POBs as soon as possible to accomplish these goals is described in more detail in the attached memorandum and slide deck presentation.
Recommendation on Term Extension. The City's finance team has made a preliminary determination that extending the amortization period for the 2022 Refunding Bonds beyond the current final maturity for the B-2 Bonds of August 1, 2034, is advisable. The City's finance team recommends an extension to August 1, 2044. Such an extension can reduce General Fund expenses needed to pay CalPERS costs from regular General Fund revenues by an average of approximately $7 million per year through 2034. Due to the term extension, the City would be paying debt service on the proposed refinancing bonds through 2044 instead of 2034. More detail on this recommendation is provided in the attached memorandum and slide deck presentation.
Optimizing Pension Tax Overri de ("PTO") Revenues. Bartel & Associates did an in - depth analysis of the eligibility of PTO revenues to pay current and future CalPERS related expenses for the City. A term extension on the 2022 Refunding Bonds would help the City leverage the PTO revenue in a more efficient way by re -aligning projected pension costs to projected revenues. The Bartel & Associates report is attached, with a brief summary of the findings on slide 6 of the attached presentation.
Next Steps . The City Council will likely be a sked to consider approval of other legal documents required for the 2022 Refunding Bonds at its meeting of July 26th. At that time, the City Council will need to make a final decision on whether or not to extend the term of the 2022 Refunding Bonds, and if so, by how much.
Assuming City Council approval of the other legal documents required by the 2022 Refunding Bonds, as well as the final recommendations on the financing plan, as described above, at its meeting of July 26th or in September 2022, the 2022 Refunding Bonds will be sold in late August. If the approval does not take place at the July 26th meeting, the selling of the 2022 Refunding Bonds may be delayed.
July 19, 2022
DOCUMENTS ATTACHED:
Attachment 1 – July 7, 2022 Memo from NHA Advisors on 2022 Refunding Bonds
Attachment 2 – Slide Deck Presentation by NHA Advisors on Proposed 2022 Refunding Bonds
Attachment 3 – Bartel Associates Pension Tax Override Study for Fiscal Years 20221- 22 and 2022-23
4040 Civic Center Drive, Suite 200
San Rafael, CA 94903
Office: 415.785.2025
www.NHAadvisors.com
MEMORANDUM
Date: July 14, 2022
To: Shasa Curl, Interim City Manager, City of Richmond
Anil Comelo, Interim Deputy City Manager, City of Richmond Anita Luck, Deputy City Attorney, City of Richmond
Delmy Cuellar, Director of Finance
From: Mark Northcross, Mike Meyer and Roy Kim
RE: Attachment 1 – July 7, 2022 Memo from NHA Advisors on 2022 Refunding Bonds.docx Addressing the Imminent Risks Facing the City : Over the past several months, the City’s financing team has worked diligently to develop a simple, easy-to-administer fixed rate refunding bond which will finance the RBC termination payment and accomplish the Council’s direction of removing swaps and reducing interest rate risk within the City’s debt profile . To re-iterate some of the challenges that this fixed rate refunding addresses, a summary of the current situation related to the 2005 POBs is below:
The 2005 B-2 POBs will convert from accretion mode to current interest mode on 8/1/23, at which time the Bonds will become variable rate Index Bonds
LIBOR will expire 6/30/23; Pursuant to the Adjustable Interest Rate (LIBOR) Act (S. 3779) passed by Congress this spring, the reference index mode will change from LIBOR to SOFR The Accreted Value of the B -2s at Conversion will be $ 128 million, which is $ 86 million g reater than the initial principal amount of $41 million
The City faces a ~$20mm Automatic Termination payment to RBC on 8/1/23
Bartel Report and Preliminary NHA Findings. The City's 2005 pension obligation bond ("2005 POB") refinancing team has reviewed the Bartel report projecting pension tax override ("PTO")-eligible expenses through FY 2042. Below is a short summary of the findings that the finance team believes should be considered by staff and City Council in determining the final bond term/structure for the proposed refinancing of the 2005 POBs, which will include amortizing the Automatic Termination cost of the 2016 RBC swap.
Based on current assumptions for CalPERS costs (Normal Costs and UAL) and 2% growth in assessed valuation for the City:
1) The portion of pension expenses (CalPERS UAL/Normal Cost and POB debt) that are legally eligible to be paid by the PTO (“PTO-eligible expenses”1) are currently anticipated to exceed projected PTO revenues through FY 203 4 by about $28 million per year on average. This means that the
1 PTO Eligible expenses are pension related costs that correlate to benefit levels in place for employees before 1978. These costs are summarized in the presentation and Bartel PTO Report .
Attachment 1 – July 7, 2022 Memo from NHA Advisors on 2022 Refunding Bonds.docx JULY 14, 2022
PAGE 2
General Fund will need to deliver significant supplemental funding for CalPERS expenses for the next 12 fiscal years; approximately $15 to $20 million in FY 2023, growing rapidly to over $30 million by the end of the decade. This is separate from the roughly $11 million (annually on average through FY 2034) in total non-PTO eligible pension expenses2 that will need to be covered by the City/General Fund over this period as well. Overall, the City (primarily General Fund) is projected to need to pay about $25 million in pension expenses from non -PTO revenues in FY 2023, which will grow to $48 million by FY 2031 – an increase of $23 million.
2) By FY 2045, all City CalPERS expenses are projected to be PTO-eligible, due to a combination of the CalPERS mandated UAL amortization schedule (on the City’s estimated $380 + million UAL) and an increasing portion of active employees in PEPRA Plans rather than Classic Plans.
3) By FY 2042, projected PTO revenues are anticipated to exceed projected PTO-eligible expenses.
Based on these assumptions, and as detailed further in the accompanying presentation, the City’s overall PTO revenues vs. overall pension expense (UAL + Normal Cost + POBs) profile may not be optimal from a fiscal sustainability and budget predictability standpoint. In the near term, t he City is scheduled to pay significantly more than is covered by the PTO (given that eligible expenses are much higher than the PTO revenue) but has significant projected capacity beyond FY 2042 to cover additional payments using PTO revenue (without any increase to the 0.14% levy). Without paying off any of the current $380 + million UAL with CalPERS, one tool that the City can use to better re-align pension costs to match PTO revenues is a term extension and restructuring for the 2005 POBs.
NHA's preliminary analysis shows that a term extension for the 2005 POBs between 2044 and 205 2 can result in significant benefit to the General Fund , especially over the next 1 2 years (over $80 million of reduction in pension expenses through FY 2034). This is done through the re -alignment of pension expenses to better match PTO revenues. Said another way, currently frontloaded pension costs can be shifted to later years by extending the term of the debt , reducing the burden on the General Fund and allowing more of the City’s total projected pension costs to be paid for by PTO revenues.
One downside for the City’s consideration is that the term extension options add significantly to the overall interest costs on the deb t – between $60 million (2044 term) and $130 million (2052 term) – vs. keeping the same 2034 term. It should be noted that if there is PTO revenue which would otherwise be unused in a future year, after 2032 (when a standard 10-year call provision would be active on the 2022 POBs), some of the 2022 POBs could be called (paid off early) with no penalty, thereby saving on future interest costs.
The policy decision of a term extension, and added interest costs, should be seriously considered by the City, however the projected General Fund benefits (through re-alignment of General Fund-paid pension costs to PTO-paid pension costs) currently appear to outweigh the cost of the extra interest. As shown on slide 10 of the presentation, the present value benefit (already factoring in the added interest costs) is projected between $11 million (2044 term) and $26 million (2052 term). Most importa ntly, over $80 million of reduced General Fund expenses through FY 2034 are projected, which may be a critical period of financial challenge for the City due to rising pension expenses.
2 Non-PTO eligible pension expenses include the portion of UAL, Normal Cost and Debt Service attributable to post 1978 benefit levels and the swap termination payment. These costs cannot legally be paid from PTO revenue.
Attachment 1 – July 7, 2022 Memo from NHA Advisors on 2022 Refunding Bonds.docx JULY 14, 2022
PAGE 3
Even with the extension, the City will face an escalating and chall enging repayment shape for overall pension expenses, though a term extension and reduction of $80 million of projected General Fund expenses through FY 2034 can make this burden more manageable and may reduce the need for the City to make large budget cuts and/or raise revenue through new taxes.
Since the structure/bond term will also drive the credit rating strategy, which will include communicating to S&P Global Ratings how the City intends to address this overall $500 million pension challenge, it is important for the financing team to receive direction from City staff and the Council on this extension concept, and preferred bond term, in the next couple of weeks.
While there is no right answer, NHA believes that a term extension should be strongly considered, given that the potential cash flow benefits of the term extension project to outweigh the added interest costs and may provide enhanced financial stability to City’s General Fund. The preliminary recommendation on the bond term is currently 2044. While the cash flow benefit through FY 2034 is lower than the 2052 term option ($84 million vs. $103 million), the added interest cost is over $70 million less than the 2052 option.
Pending further confirmation based on analysis of monthly CalPERS related cash flows through FY 2024, NHA's preliminary analysis indicates over $7 million per year (on average through 2035; $2 million in FY 2023, $7 million FY 2024, growing to over $10 million by FY 2031) in net cash flow benefit to the City, and primarily to the General Fund. This means that the City could spend $7 million per year less on PTO-eligible expenses than it does currently. This $7 million number is preliminary and subject to further revision pending a more detailed cash flow analysis with the City's Finance Department.
Next Steps.
1) An educational presentation will be made to City Council on July 19th
2) Council action approving the final bond structure and all legal documents for the 2005 POB refinancing would take place on July 26th.
3) Credit rating discussion with S&P and bond sale take place in the month of August.
4) Bond Closing and Swap Termination to take place in early September.
Attachment 1 – July 7, 2022 Memo from NHA Advisors on 2022 Refunding Bonds.docx JULY 14, 2022
PAGE 4
NHA Advisors, LLC is registered as a Municipal Advisor with the SEC and Municipal Securities Rulemaking Board (“MSRB”). As such, NHA Advisors, LLC has a Fiduciary duty to the public agency and must provide both a Duty of Care and a Duty of Loyalty that entails the following.
Duty of Care
a) exercise due care in performing its municipal advisory activities; b) possess the degree of knowledge and expertise needed to provide the public agency with informed advice; c) make a reasonable inquiry as to the facts that are relevant to the public agency ’s determination as to whether to proceed with a course of action or that form the basis for any advice provided to the public agency; and d) undertake a reasonable investigation to determine that NHA Advisors, LLC is not forming any recommen dation on materially inaccurate or incomplete information; NHA Advisors, LLC must have a reasonable basis for:
i. any advice provided to or on behalf of the public agency; ii. any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by the public agency, any other party involved in the municipal securities transaction or municipal financial product, or investors in the public agency securities; and
iii. any information provided to the public agency or other parties invol ved in the municipal securities transaction in connection with the preparation of an official statement.
Duty of Loyalty
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2022 POB RESTRUCTURING - PTO ACTUARIAL ANALYSIS UPDATE AND
PRELIMINARY RESTRUCTURING OPTIONS REVIEW
JULY 19, 2022
Table of Contents
2 Revisiting City’s Current Pension Situation
Update on PTO Actuarial Analysis
Preliminary Restructuring Options and Recommendation
NOTE: Restructuring analysis is preliminary; continues to be reviewed and updated by municipal advisor, underwriters and actuary
Why Your Finance Team Recommends Consideration of Extending the Term of the 2005 POB Refinancing
3 Since 2005, after the 2005 POBs fully funded the City’s Unfunded Actuarial Liability (“UAL”) with CalPERS, the City’s CalPERS’ UAL has grown to an estimated $380 million This UAL increase has placed an est. $20 million+ annual burden on the City (primarily General Fund) over and above the revenue generated by the City’s Pension Tax Override (PTO) levy
The City also faces an estimated $20 million automatic termination of the 2016 RBC swap on 8/1/23
Extending the term of the 2005 POBs through a refinancing presents the opportunity to better align the City’s future pension costs with its PTO revenues Provides significant annual pension cost reduction to the General Fund over the next 12 years
Imminent Risks Facing the City
4 The 2005 B-2 POBs are currently accreting but will convert to variable rate Index Bonds on 8/1/23
LIBOR, the underlying variable rate index for the 2005 POBs, will expire 6/30/23
The Accreted Value of the 2005 B-2 POBs at Conversion will be approximately $128 million, which is $86 million greater than the initial principal amount of $41 million
The City faces a currently estimated $20 million Automatic Termination Payment to RBC on 8/1/23
Background on the City’s Debt with CalPERS
5 The City’s CalPERS Unfunded Actuarial
Liability (UAL) is the City’s largest debt
obligation
Represents the shortfall in the City’s account with
CalPERS needed to fully fund its employees’
future retirement benefits
CalPERS annual UAL amortization payments
are now about $26 million, and are currently
estimated to escalate to $42 million by FY
2031
For comparison, debt service on the 2005 POBs is
currently about $12 million per year
Est. Balances as of July 1, 2022
1999 POBs $3 Million
2005B-1 POBs $18 Million
2005B-2 POBs* $128 Million
2016 Swap $20 Million
CalPERS UAL** $380 Million
OPEB UAL $90 Million
Lease Bonds/COPs $94 Million
Total $733 Million
*8/1/23 full accreted value
** Assumes -5% investment returns for FY 2022
Actuarial Analysis for Pension Tax Override (PTO)
Budgetary Challenge for General Fund
Bartel and Associates conducted a comprehensive actuarial study of the share of the City’s pension costs that can legally be paid by the City’s PTO (study attached to Staff Report)
The Challenge: $42 million of current annual pension costs (growing to $50M by FY 2025 and $60M by FY 2029) that could legally be paid for by PTO revenues
However, only $24 million of PTO revenue is being collected; this means that the City (primarily the General Fund) is paying for $20 million+ of pension costs that otherwise could be paid for by the PTO
The Finance Team has been analyzing tailored POB restructuring options (in concert with the City’s other pension expenses) with the goal of reducing the burden on City’s General Fund
6Page 1023 of 1089
What This Means for the 2005 POBs
The City’s CalPERS Debt is “Fixed,” But its POBs Can Be “Reshaped” 7 The combined cost of annual
payments on the UAL,
Normal Cost and 2005 POB
debt service is currently
about $50M
Grows to between $60-$70
million over the next 5 years
Expenses paid from non-PTO
General Fund revenues
(amount above teal line)
projected to grow from $25M
million to $48 million
7 $-
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2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 2051 Millions
Current Projected Pension Costs. Vs. Projected PTO Revenue Est. UAL Payments
Est. Normal Cost Payments
Restructuring the 2005 POBs
Macro Policy Goals
8 Consistent with the Council’s 6/21/22 action, the Finance Team’s developing Plan of Finance is intended to achieve:
Refinancing the 2005 B-1 and B-2 POBs
Terminating the 2016 Swap (funded through 2022 POB issuance) Defeasing the 1999 POBs
A simple/conventional fixed rate semi-annual debt service structure that will be easy to administer
To better align the City’s aggregate pension expenses with projected PTO revenues, the Finance Team has evaluated three preliminary restructuring options (1) No extension from the existing 2034 maturity; (2) 10-year extension; (3) Extension to 2052
$-
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2044 Term
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2034 Term
2005 POB Restructuring Options
Visual Depiction of “Re-Shaping”
9 Reshaping POB debt service (shown in royal
blue bars) through term extension allows the
City to more efficiently utilize PTO revenues
and reduce burden on General Fund through
FY 2034
Helps to “smooth” pension costs payable by
City; enhancing budget predictability & fiscal
sustainability
Est. Normal Cost Payments
Est. UAL Payments
POB Debt Service
Est. Normal Cost Payments
Est. UAL Payments
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2052 Term
Est. Normal Cost Payments
Est. UAL Payments
Note: All options assumes interest-only 2023-2025; 1st principal maturing January 1, 2026 with debt service modestly ascending at 2% annually thereafterPage 1026 of 1089 The Whole Picture: Status Quo vs. Potential Restructured Payments Projected Pension Expenses Paid by the City/General Fund (not covered by PTO) 10 Status Quo: City
payments growing
from $31M (2024)
to $48M
2034 Term: City
payments reduced
to $23M (2024) and
grow to $49M
2044 Term: City
payments reduced
to $24M (2024) and
grow to $39M
2052 Term: City
payments reduced
to $24M (2024) and
grow to $37M
Current (Status Quo)
1-Aug
City Payments Not Covered
by PTO
City Payments Not
Covered by PTO Cash Flow Benefit
City Payments Not
Covered by PTO Cash Flow Benefit
City Payments Not
Covered by PTO Cash Flow Benefit
2023 $25,211,587 $22,582,260 $2,629,326 $22,893,532 $2,318,054 $23,204,356 $2,007,230 2024 31,489,986 23,256,457 8,233,529 23,638,907 7,851,079 24,020,807 7,469,179 2025 33,606,558 25,520,751 8,085,807 25,903,201 7,703,357 26,285,101 7,321,457 2026 36,391,420 38,957,567 (2,566,147) 30,324,417 6,067,003 28,318,354 8,073,066 2027 38,090,318 41,092,244 (3,001,926) 32,289,863 5,800,455 30,247,419 7,842,899 2028 40,552,960 42,926,849 (2,373,889) 33,945,324 6,607,636 31,860,987 8,691,973 2029 44,020,988 46,736,509 (2,715,521) 37,573,091 6,447,897 35,446,997 8,573,991 2030 43,004,266 47,673,472 (4,669,207) 38,327,434 4,676,831 36,160,222 6,844,043 2031 48,140,734 48,573,835 (433,101) 39,041,610 9,099,124 36,829,560 11,311,174 2032 46,624,234 46,653,202 (28,968) 36,928,634 9,695,600 34,673,665 11,950,569 2033 46,143,324 45,617,654 525,670 35,697,123 10,446,201 33,396,786 12,746,538 2034 40,191,152 42,375,504 (2,184,352) 32,262,792 7,928,360 29,915,404 10,275,748 2035 17,014,672 17,014,672 0 30,353,610 (13,338,938) 27,963,116 (10,948,444) 2036 14,347,606 14,347,606 0 27,952,956 (13,605,350) 25,514,062 (11,166,456) 2037 10,263,914 10,263,914 0 24,141,214 (13,877,300) 21,654,520 (11,390,606) 2038 8,006,921 8,006,921 0 22,164,096 (14,157,175) 19,626,090 (11,619,169) 2039 5,432,819 5,432,819 0 19,875,044 (14,442,225) 17,283,238 (11,850,419) 2040 3,553,433 3,553,433 (0) 17,971,532 (14,418,099) 15,329,320 (11,775,887) 2041 3,118,373 3,118,373 (0) 16,065,866 (12,947,493) 13,372,516 (10,254,143) 2042 2,284,100 2,284,100 0 11,023,330 (8,739,230) 8,274,255 (5,990,155) 2043 1,716,180 1,716,180 0 6,025,284 (4,309,104) 4,907,033 (3,190,853) 2044 1,883,970 1,883,970 0 7,661,484 (5,777,514) 5,135,825 (3,251,855) 2045 0 0 0 0 0 3,313,156 (3,313,156)
2046 0 0 0 0 0 3,374,177 (3,374,177)
2047 0 0 0 0 0 3,438,017 (3,438,017)
2048 0 0 0 0 0 3,501,422 (3,501,422)
2049 0 0 0 0 0 3,567,420 (3,567,420)
2050 0 0 0 0 0 3,632,686 (3,632,686)
2051 0 0 0 0 0 3,700,174 (3,700,174)
2052 0 0 0 0 0 3,767,712 (3,767,712)
Total Est. City Payments Not Covered by PTO $541,089,515 $539,588,293 $572,060,344 $557,714,397 Est. Total Cash Flow Benefit / (Cost) to City (2) $1,501,222 ($30,970,829) ($16,624,882) Present Value of Cash Flow Benefit (3) $4,549,840 $11,308,888 $26,571,017 Est. Cash Flow Benefit from 2023 to 2034 $1,501,222 $84,641,598 $103,107,868 Added Debt Service from Term Extension $62,129,388 $129,843,062 (1) Benefit calculation accounts for added debt service from term extension; Cash flow benefit is positive given that a significantly larger portion of debt service is paid for by PTO under term extension scenarios instead of the City's General Fund (2) PV uses bond interest rate as discount factor
(3) Assumes interest-only 2023-2025; 1st principal maturing January 1, 2026 with debt service modestly ascending at 2% annually thereafter (4) Assumes fiscal year PTO revenue receipts fund bond year debt service payments 2034 Term (No Extension) 2044 Term 2052 Term
10Page 1027 of 1089
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2050
2051
2052
Millions
Current (Status Quo) 2034 Term (No Extension) 2044 Term 2052 Term Status Quo. Vs Restructuring Options (2034, 2044 & 2052) Projected Pension Payments by City/General Fund (not covered by PTO) 11 2044 & 2052 options create >$80M est. cash flow benefit through 2034, through reduced annual expenses
Takeaways and Preliminary Recommendation
12 Without a term extension on the POB refunding, the City is expected to pay between $25M to $48M from non-PTO revenues annually through 2034 for pension expenses
2044 and 2052 term options may provide over $80M of estimated cash flow benefit (reduced pension expenses) to the City over next 12 years 2044 is currently the preliminary recommended term for POB refinancing; Why?
$84 million of
projected pension
expense reduction
for next 12 years
Enhanced budget
predictability/
smoothing and
fiscal sustainability
Increased resources
for other City
priorities
More optimal re-
alignment of
expenses to
revenue
$70M of lower
interest costs vs.
the 2052 term
CalPERS Miscellaneous and Safety Plans
Pension Override Tax Study for
Fiscal Years 2021/22 and 2022/23
Bartel Associates, LLC
June 15, 2022
411 Borel Avenue, Suite 620 San Mateo, California 94402 main: 650/377-1600 web: www.bartel-associates.com
ACTUARIAL CERTIFICATION
This report presents our analysis of the City of Richmond CalPERS Miscellaneous and Safety Plans (“Plans”).
The purpose of this analysis is to calculate the portion of the City’s CalPERS employer contribution that can be paid through City property taxes for the 2021/22 and 2022/23 fiscal years. Future calculations may differ significantly if the Plan’s experience differs from our assumptions or if there are changes in plan design, actuarial methods or actuarial assumptions. The project scope did not include an analysis of this potential variation. Actuarial calculations for other purposes such as plan funding or financial reporting will differ from those shown in this report.
The analysis is based on our understanding of the benefit provisions, actuarial reports and benefit summaries prepared by CalPERS and provided by the City, and on the methodology detailed in this report. Alternative methods could produce different results. The project scope did not include alternate analyses.
The City previously issued Pension Obligation Bonds in 1999 and 2005. We believe the proportion of bond debt service payments in the future should always be the same as determined when the bonds were issued. Section 2 of our report details the methodology used.
We have reviewed CalPERS information for reasonableness, and have relied on that information as the basis of these calculations. We do not make any representation on the accuracy of CalPERS reports.
To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted actuarial principles and practices. As members of the American Academy of Actuaries, meeting Academy Qualification Standards, we certify the actuarial results and opinions herein.
We are available to answer any questions on this report.
Respectfully submitted,
DRAFT DRAFT
Mary Elizabeth Redding, FSA, EA, FCA, MAAA
Vice President & Actuary
June 15, 2022
Bianca Lin, FSA , EA, FCA, MAAA
Assistant Vice President & Actuary
June 15, 2022
O:\Clients\City of Richmond\Projects\CalPERS\6-30-20 POT\BA RichmondCi 2022-06-15 Pension Override Tax Report.docx
TABLE OF CONTENTS
SECTION P AGE
1. Summary of Results 1
2. Purpose and Methodology 2
3. Normal Cost Analysis 7
4. Unfunded Actuarial Accrued Liability
Analysis
15 5. Employer Contribution Analysis 17
6. Summary of Data Provided 24
7. Definitions 25
SECTION 1
SUMMARY OF RESULTS
Pension Override Tax Report Page 1
We understand the City of Richmond’s property tax can be used to pay for CalPERS retirement benefits effective or contracted before July 1, 1978. The purpose of this study is to estimate the portions of the CalPERS employer contributions for fiscal years 2021/22 and 2022/23, and the portion of the June 30, 2020 unfunded actuarial accrued liability, that are attributable to benefits in effect or contracted before July 1, 1978.
Using the actuarial assumptions and methodology described in this report, we have estimated the portions of the City’s 2021/22 and 2022/23 CalPERS required employer contributions for the Miscellaneous and Safety Plans attributable to pre-July 1, 1978 benefit levels and to subsequent benefit improvements. The following summarizes the results of our calculations.
Employer Contribution Attribution
June 30, 2020 Unfunded Actuarial Accrued Liability Attribution
2021/22 Fiscal Year 2022/23 Fiscal Year
Amounts
($000s)
Percent
of Total
Amounts
($000s)
Percent
of Total
Total Employer Contribution Attributable to
Pre-1978 Benefit Level
$33,805 83.8% $34,978 84.3%
Total Employer Contribution Attributable to
Post-1978 Benefit Level
6,555 16.2% 6,511 15.7%
Total 40,360 100.0% 41,489 100.0%
Miscellaneous
($millions)
Safety
($millions)
Total
($millions)
Percent
of Total
Total Unfunded Actuarial Accrued Liability
Attributable to Pre-1978 Benefit Level
$118.5 $201.6 $320.1 87.2%
Total Unfunded Actuarial Accrued Liability
Attributable to Post-1978 Benefit Level
19.2 27.7 46.8 12.8%
Total 137.7 229.3 366.9 100.0%
SECTION 2
PURPOSE AND METHODOLOGY
Pension Override Tax Report Page 2
The purpose of this study is to estimate the portions of the CalPERS employer contributions for fiscal years 2021/22 and 2022/23 that are attributable to benefits in effect or contracted before July 1, 1978.
CalPERS Miscellaneous Plan Benefits
The benefit formulas in effect on July 1, 1978 were:
Miscellaneous Plan: 2% @ 60 benefit formula, with final 3 year average compensation, post-retirement survivor allowance, and 2% COLA
The cost of benefit improvements effective after July 1, 1978 that affect the City’s CalPERS contribution rates must be separated. These improvements are:
Final 1 year average compensation, effective 9/1/1978 2% @ 55 benefit formula, effective 7/1/1992.
2.7% @ 55 benefit formula, effective 1/1/2003.
2% @ 62 benefit formula, effective 1/1/2013. This PEPRA benefit is a lower benefit than the pre-1978 2%@60 benefit for employees retiring at all ages younger than age 66, and so it is not considered a benefit improvement.
Retirement Age
Benefit Multiplier
SECTION 2
PURPOSE AND METHODOLOGY
Pension Override Tax Report Page 3
CalPERS Safety Police and Safety Fire Plans Benefits
The benefit formulas in effect on July 1, 1978 were:
Safety Police and Safety Fire Plans: 2% @ 50 benefit formula, with final 3 year average compensation, post-retirement survivor allowance, and 2% COLA
The cost of benefit improvements effective after July 1, 1978 that affect the City’s CalPERS contribution rates must be separated. These are:
Final 1 year average compensation, effective 7/1/1978 for Fire members and 12/1/1979 for Police members
3% @ 55 benefit formula for both Police and Fire members, effective 10/1/2002 3% @ 50 benefit formula for Police members, effective 3/1/2003 2.7% @ 57 benefit formula, effective 1/1/2013. This PEPRA benefit is a lower benefit than the pre-1978 2%@50 benefit and so it is not considered a benefit improvement.
Benefit Multiplier
Retirement Age
SECTION 2
PURPOSE AND METHODOLOGY
Pension Override Tax Report Page 4
Cost of Benefit Improvements
The actual costs of a defined benefit plan are determined by the amount of the benefit promise, the actual salaries and service of the plan participants, and how long they and their beneficiaries live to receive payments. The ultimate cost of the plan cannot be determined until all benefits have been paid.
There is no perfect way to evaluate the “true cost” of a benefit change. In part this is because all plan benefits have not yet been paid so the total plan cost is not yet known.
Two other important difficulties arise because:
Benefit changes typically cause changes in employee behavior, most typically retiring earlier or later than before the benefit change. This new behavior impacts both the cost of the original benefit and the benefit improvements. Salary negotiations might have been different if benefits had not been improved.
Different salary patterns impact both the cost of the original benefits as well as the cost of the improvements.
Following is an example illustrating how lower salaries negotiated in concert with a benefit increase can impact the perceived cost of a benefit improvement.
Illustrative Example for Sample Employee
Original
Benefit
Formula
2% @ 50
Improved
Benefit
Formula
3% @ 50
Unchanged
Final
Compensation
Improved
Benefit Formula
3% @ 50
Lower
Final
Compensation
Final compensation $ 100,000 $ 100,000 $ 95,000
Retirement age 55 55 55
Service at retirement 30 years 30 years 30 years
Benefit Factor for formula 2.70% 3.00% 3.00%
Annual Retirement Benefit
(compensation x service x
benefit factor)
$ 81,000 $ 90,000 $ 85,500
Apparent pension increase
due to benefit change 11.1% 5.6%
SECTION 2
PURPOSE AND METHODOLOGY
Pension Override Tax Report Page 5
Our calculations do not reflect any employee behavior changes or salary changes triggered by the benefit level change, except for differences by benefit level reflected in CalPERS actuarial assumptions.
Cost of CalPERS Benefit Improvements after July 1, 1978 We estimated the impact of benefit improvements effective after July 1, 1978 by estimating the increase in the Normal Cost (see Section 3) and the portion of the Unfunded Actuarial Accrued Liability (UAAL) (see Section 4) due to the benefit improvements. The cost of benefit improvements can change from time to time as CalPERS actuarial assumptions change. The biggest cost impacts are generally from changes in the discount rate or assumed future salary increases.
Cost of CalPERS Benefit in Effect on July 1, 1978
We estimated the cost of benefits in effect on July 1, 1978 by subtracting our estimate of the cost of benefit improvements effective after July 1, 1978 from the total CalPERS employer contribution rates for each year.
2005 Pension Obligation Bond Refunding
We understand the City of Richmond previously issued pension obligation bonds in 1999 and in 2005. During the 2005 bond issuance process, the City determined that 86.13% of the UAAL at that time was attributable to pre-1978 benefit levels.
The proportion of the plan’s unfunded actuarial accrued liability that is attributable to pre-1978 benefit levels will change over time as the mix of current employees with benefits above and below that level changes. However, the 2005 POB paid off the dollar amount of UAAL at that one point in time -- 2005. The amount of UAAL paid off does not change, and so we believe the proportion of that POB that relates to pre-1978 benefit levels also cannot change. Therefore, in our opinion as actuaries, the proportion of the 2005 POB’s debt service attributable to pre-1978 benefit levels will not change for the entire duration of that POB, even if the POB is refinanced and the dollar amount of the payments changes.
Similarly, if there are any debt service payments remaining that relate to the 1999 POB, the proportion of those debt service payment attributable to pre-1978 benefit levels also should not change.
Impact of Previous Pension Obligation Bonds
We estimate the 2005 POB funded 99.5% of the estimated UAAL at November 9, 2005.
For purposes of the calculations in this report, we have treated the 2005 POB as paying off 100% of the then-existing UAAL. Because the entire UAAL was paid off by adding assets to the CalPERS fund, there was no change in the proportion of the UAAL
SECTION 2
PURPOSE AND METHODOLOGY
Pension Override Tax Report Page 6
attributable to pre-1978 benefits and our methodology can be applied to the entire current UAAL.
The 2005 POB paid off all of the then-existing UAAL and the plans’ current UAAL has all arisen since 2005. However, the current UAAL is attributable to pre 1978 and post 1978 benefits.
SECTION 3
NORMAL COST ANALYSIS
Pension Override Tax Report Page 7
The following section summarizes the net employer (“ER”) normal cost change due to each benefit improvement after July 1, 1978 separately for each plan and tier.
Miscellaneous Tier 1 Plan
June 30, 2020
Benefit
Improvements
Effective
Date
Estimated
ER Cost as a
Percentage of
PERSable
Payroll
Basis for Estimate:
CalPERS June 30, 2020
Miscellaneous Risk Pool
Actuarial Valuation
Final One Year
Average
Compensation
9/1/1978 0.47% Current normal cost increase for
final one year average
compensation for 2%@60,
including adjustment for
demographic difference between
the City combined Miscellaneous
and the CalPERS risk pool
2%@55
Benefit Formula
7/1/1992 1.74% Current normal cost increase for
2%@55 over 2%@60 benefit
formula with final one year
average compensation, post-
retirement survivor allowance
and 2% COLA, including
adjustment for demographic
difference between the City
combined Miscellaneous and the
CalPERS risk pool
2.7%@55
Benefit Formula
1/1/2003 3.14% Current normal cost increase for
2.7%@55 over 2%@55 benefit
formula with final one year
average compensation, post-
retirement survivor allowance
and 2% COLA, including
adjustment for demographic
difference between the City
combined Miscellaneous and the
CalPERS risk pool
Total 5 . 3 5 %
SECTION 3
NORMAL COST ANALYSIS
Pension Override Tax Report Page 8
Miscellaneous PEPRA Plan
Miscellaneous is the PEPRA 2%@62 formula. It is a lower benefit than the pre-1978 benefit. Therefore, all PEPRA 2%@62 benefits can be paid from the Pension Override Tax.
SECTION 3
NORMAL COST ANALYSIS
Pension Override Tax Report Page 9
Safety Tier 1 Plans
June 30, 2020
Benefit
Improvements
Effective
Date
Estimated ER
Cost as a
Percentage of
PERSable
Payroll
Basis for Estimate:
CalPERS June 30, 2020
Safety Risk Pool
Actuarial Valuation
Final One Year
Average
Compensation
Police 12/1/1979
Fire 7/1/1978
1.03% Current normal cost increase
for final one year average
compensation for 2%@50
benefit formula including
adjustment for demographic
difference between the City
combined Safety and the
CalPERS risk pool
3%@55
Benefit Formula
Police 10/1/2002
Fire 10/1/2002
2.55% Current normal cost increase
for 3%@55 over 2%@50
benefit formula with final one
year average compensation,
post-retirement survivor
allowance, and 2% COLA,
including adjustment for
demographic difference
between the City combined
Safety and the CalPERS risk
pool
3%@50
Benefit Formula
Police 3/1/2003 1.21% Current normal cost increase
for 3%@50 over 3%@55
benefit formula with final one
year average compensation,
post-retirement survivor
allowance, and 2% COLA,
including adjustment for
demographic difference
between the City combined
Safety and the CalPERS risk
pool, as well as adjustment for
Police members only
Total 4 . 7 9 %
SECTION 3
NORMAL COST ANALYSIS
Pension Override Tax Report Page 10
Safety PEPRA Plans
Safety PEPRA is the PEPRA 2.7%@57 formula. It is a lower benefit than the pre-1978 benefit. Therefore, all PEPRA 2.7%@57 benefits can be paid from the Pension Override Tax.
SECTION 3
NORMAL COST ANALYSIS
Pension Override Tax Report Page 11
The following table separates the current employer (ER) portion of the normal cost rate for Miscellaneous and Safety plan tiers between amounts attributable to post-July 1, 1978 benefit improvements as calculated above, and the remaining normal cost which is attributable to benefit levels in effect at July 1, 1978.
Normal Cost rates for FY2021/22 are based on the following information in the June 30, 2019 actuarial valuation reports and the cost of benefit improvements from pages 6 to 9 of this report.
Miscellaneous FY 2021/22
Tier 1 PEPRA Total
Total employer normal cost rate as a
percentage of payroll 14.68% 7.42% 13.03%
ER Normal Cost attributable to Post-1978
Benefit Level (calculated on previous
pages)
5.35% 0.00% 4.17%
ER Normal Cost attributable to Pre-1978
Benefit Level 9.33% 7.42% 8.86%
FY 2021/22 projected payroll ($’000s) $30,710 $8,662 $39,372
FY 2021/22 FY 2022/23
Miscella-
neous Safety
Miscella-
neous Safety
Total ER normal cost rate (as a percentage
of PERSable payroll) for fiscal year 13.03% 21.83% 12.58% 21.07% ER Normal Cost attributable to Post-1978
Benefit Level 4.17% 3.85% 3.96% 3.63%
ER Normal Cost attributable to Pre-1978
Benefit Level 8.86% 17.98% 8.62% 17.44%
Safety FY 2021/22
Tier 1 PEPRA Total
Total employer normal cost rate as a
percentage of payroll 24.81% 10.28% 21.83%
ER Normal Cost attributable to Post-1978
Benefit Level (calculated on previous
pages)
4.79% 0.00% 3.85%
Normal Cost attributable to Pre-1978
Benefit Level 20.02% 10.28% 17.98%
FY 2021/22 projected payroll ($’000s) $30,469 $7,488 $37,957
SECTION 3
NORMAL COST ANALYSIS
Pension Override Tax Report Page 12
Normal Cost rates for FY2022/23 are based on the following information in the June 30, 2020 actuarial valuation reports and the cost of benefit improvements from pages 6 to 9 of this report.
Miscellaneous FY 2022/23
Tier 1 PEPRA Total
Total employer normal cost rate as a
percentage of payroll 14.52% 7.29% 12.58%
ER Normal Cost attributable to Post-1978
Benefit Level (calculated on previous
pages)
5.35% 0.00% 3.96%
ER Normal Cost attributable to Pre-1978
Benefit Level 9.17% 7.29% 8.62%
FY 2022/23 projected payroll ($’000s) $27,325 $9,626 $36,952
Safety FY 2022/23
Tier 1 PEPRA Total
Total employer normal cost rate as a
percentage of payroll 24.60% 10.50% 21.07%
ER Normal Cost attributable to Post-1978
Benefit Level (calculated on previous
pages)
4.79% 0.00% 3.63%
Normal Cost attributable to Pre-1978
Benefit Level 19.81% 10.50% 17.44%
FY 2022/23 projected payroll ($’000s) $27,461 $8,773 $36,234
SECTION 3
NORMAL COST ANALYSIS
Pension Override Tax Report Page 13
Projection of Future Normal Cost (for Illustrative Purposes Only)
Each year in the future, Miscellaneous and Safety classic members in Tier 1 will leave employment with the City and be replaced by employees in the classic Tier 1 (for certain lateral hires) or PEPRA tiers. As this happens, the portion of the City’s normal cost that is attributable to post-July 1, 1978 benefit improvements will decrease, since PEPRA members’ benefits are lower than the pre-July 1, 1978 benefit level. The following chart illustrates that anticipated change.
The chart is based on the following assumptions:
7.00% discount rate used in the 6/30/20 CalPERS valuation; does not reflect the 2021 discount rate change to 6.8% or the impact of future discount rate reductions anticipated from CalPERS’ Risk Mitigation policy. No other changes in CalPERS actuarial assumptions after the 6/30/20 valuations are included. The PEPRA benefit formula effective January 1, 2013 is lower than the pre-1978 benefit level.
Payroll for classic members decreases to zero in 2041/42 in a straight line.
Miscellaneous: Projection of Post-1978 Normal Cost
Conclusion: When all active Miscellaneous members are in the PEPRA tier, none of the normal cost will be attributable to post July 1, 1978 benefit increases.
SECTION 3
NORMAL COST ANALYSIS
Pension Override Tax Report Page 14
Safety: Projection of Post-1978 Normal Cost
Conclusion: When all active Safety members are in the PEPRA tier, none of the normal cost will be attributable to post July 1, 1978 benefit increases.
SECTION 4
UNFUNDED ACTUARIAL ACCRUED LIABILITY ANALYSIS
Pension Override Tax Report Page 15
Allocation of Current Unfunded Actuarial Accrued Liability The Plans’ current unfunded actuarial accrued liability (UAAL) must be analyzed to determine what portion of that UAAL is attributable to benefit increases after July 1, 1978. We have used the following assumptions in our analysis:
We used CalPERS actual investment returns from June 30, 1984 through June 30, 2021.
Actual returns before 1984 were not available. We estimated each year’s investment return from July 1, 1978 to June 30, 1984 as the average return from 1984 through 2021.
City PERSable Payrolls were estimated as:
• Miscellaneous 1995 – 2020, Safety 1995 – 2020: Based on CalPERS actuarial reports
• Prior to 1995: projected backward using 2.75% annual total payroll decrease No adjustment was made for prior retirement-allocated property taxes different from our model’s assumptions.
Methodology
We developed the UAAL allocation basis by calculating two amounts:
1) We applied the normal cost rate attributable to the pre-July 1, 1978 benefit level to the PERSable payroll for each year beginning in 1978/79. Normal cost amounts were accumulated to the present with the actual (or assumed, prior to 1984) investment return in each year
2) We applied the normal cost rate attributable to post-July 1, 1978 benefit increases to the PERSable payroll in each year after the increase was effective. These amounts were accumulated to the present with the actual (or assumed, prior to 1984) investment return in each year
3) The June 30, 2020 UAAL was then allocated to pre- and post-July 1, 1978 in proportion to the two accumulated balances (1) and (2) described above.
This methodology does not take into account any actions the City may have taken in regards to the pension override tax in prior years.
SECTION 4
UNFUNDED ACTUARIAL ACCRUED LIABILITY ANALYSIS
Pension Override Tax Report Page 16
The following tables show the resulting allocation of the UAAL at June 30, 2020.
Miscellaneous UAAL
June 30, 2020
Miscellaneous
($’000s) %
Unfunded Liability Attributable to Pre-1978 Benefit Level $118,511 86.1% Unfunded Liability Attributable to Post-1978 Benefit Level 19,156 13.9% Total 137,667 100.0%
Safety UAAL
June 30, 2020
Combined Miscellaneous & Safety UAAL
June 30, 2020
Total
($’000s) %
Unfunded Liability Attributable to Pre-1978 Benefit Level $320,115 87.2% Unfunded Liability Attributable to Post-1978 Benefit Level 46,831 12.8% Total 366,946 100.0%
Safety
($’000s) %
Unfunded Liability Attributable to Pre-1978 Benefit Level $201,604 87.9% Unfunded Liability Attributable to Post-1978 Benefit Level 27,675 12.1% Total 229,279 100.0%
SECTION 5
EMPLOYER CONTRIBUTION ANALYSIS
Pension Override Tax Report Page 17
Sections 3 and 4 of the report described how the normal cost and unfunded actuarial accrued liability were attributed to the pre-July 1, 1978 and post-July 1, 1978 benefit levels. The following pages detail how these allocations were used to attribute the total employer contributions for the 2021/22 and 2022/23 fiscal years to the pre-July 1, 1978 benefit level and post July 1, 1978 benefit improvements.
We have used a different attribution for Normal Cost and UAAL payments, as previously described
Normal Costs were allocated using the Normal Cost Percentages from Section 3 and projected PERSable payroll from the 6/30/19 and 6/30/20 actuarial valuation reports. UAAL amortization payments were allocated in proportion to the allocated UAAL calculated in Section 4 of this report
SECTION 5
EMPLOYER CONTRIBUTION ANALYSIS
Pension Override Tax Report Page 18
Employer Contributions for 2021/22 Fiscal Year
Employer Normal Cost - Miscellaneous
2021/22 Fiscal Year
Miscellaneous
($’000s) %
Employer Normal Cost attributable to Pre-1978 benefit level $3, 487 68.0% Employer Normal Cost attributable to Post-1978 benefit level 1, 643 32.0% Total 5,130 100.0%
UAAL Payments - Miscellaneous
2021/22 Fiscal Year
Miscellaneous
($’000s) %
UAAL Amortization Payments attributable to Pre-1978 benefit level $9,291 86.1% UAAL Amortization Payments attributable to Post-1978 benefit level 1,502 13.9% Total 10,793 100.0%
Total Miscellaneous
2021/22 Fiscal Year
Miscellaneous
($’000s) %
Total Employer Contributions attributable to Pre-1978 benefit level $12,779 80.3% Total Employer Contributions attributable to Post-1978 benefit level 3,144 19.7% Total 15,923 100.0%
SECTION 5
EMPLOYER CONTRIBUTION ANALYSIS
Pension Override Tax Report Page 19
Employer Contributions for 2021/22 Fiscal Year (Continued)
Employer Normal Cost – Safety
2021/22 Fiscal Year
Safety
($’000s) %
Employer Normal Cost attributable to Pre-1978 benefit level $6 ,826 82.4% Employer Normal Cost attributable to Post-1978 benefit level 1, 460 17.6% Total 8,286 100.0%
UAAL Payments – Safety
2021/22 Fiscal Year
Safety
($’000s) %
UAAL Amortization Payments attributable to Pre-1978 benefit level $14,201 87.9% UAAL Amortization Payments attributable to Post-1978 benefit level 1,950 12.1% Total 16,151 100.0%
Total Safety
2021/22 Fiscal Year
Safety
($’000s) %
Total Employer Contributions attributable to Pre-1978 benefit level $21,027 86.0% Total Employer Contributions attributable to Post-1978 benefit level 3,410 14.0% Total 24,437 100.0%
SECTION 5
EMPLOYER CONTRIBUTION ANALYSIS
Pension Override Tax Report Page 20
Employer Costs for 2021/22 Fiscal Year (Continued)
Employer Contribution Attribution – Grand Total
2021/22 Fiscal Year
Miscellaneous Safety Total
($’000s) % ($’000s) % ($’000s) %
Total Employer
Contributions
attributable to
Pre-1978 benefit
level
$12,779 80.3% $21,027 86.0% $33,805 83.8%
Total Employer
Contributions
attributable to
Post-1978 benefit
level
3,144 19.7% 3,410 14.0% 6,555 16.2%
Total 15,923 100.0% 24,437 100.0% 40,360 100.0%
SECTION 5
EMPLOYER CONTRIBUTION ANALYSIS
Pension Override Tax Report Page 21
Employer Costs for 2022/23 Fiscal Year
Employer Normal Cost - Miscellaneous
2022/23 Fiscal Year
Miscellaneous
($’000s) %
Employer Normal Cost attributable to Pre-1978 benefit level $3, 187 68.6% Employer Normal Cost attributable to Post-1978 benefit level 1, 462 31.4% Total 4,649 100.0%
UAAL Payments - Miscellaneous
2022/23 Fiscal Year
Miscellaneous
($’000s) %
UAAL Amortization Payments attributable to Pre-1978 benefit level $9,727 86.1% UAAL Amortization Payments attributable to Post-1978 benefit level 1,572 13.9% Total 11,299 100.0%
Total Miscellaneous
2022/23 Fiscal Year
Miscellaneous
($’000s) %
Total Employer Contributions attributable to Pre-1978 benefit level $12,914 81.0% Total Employer Contributions attributable to Post-1978 benefit level 3,034 19.0% Total 15,948 100.0%
SECTION 5
EMPLOYER CONTRIBUTION ANALYSIS
Pension Override Tax Report Page 22
Employer Costs for 2022/23 Fiscal Year (Continued)
Employer Normal Cost – Safety
2022/23 Fiscal Year
Safety
($’000s) %
Employer Normal Cost attributable to Pre-1978 benefit level $6, 319 82.8% Employer Normal Cost attributable to Post-1978 benefit level 1, 316 17.2% Total 7,635 100.0%
UAAL Payments – Safety
2022/23 Fiscal Year
Safety
($’000s) %
UAAL Amortization Payments attributable to Pre-1978 benefit level $15,745 87.9% UAAL Amortization Payments attributable to Post-1978 benefit level 2,161 12.1% Total 17,906 100.0%
Total Safety
2022/23 Fiscal Year
Safety
($’000s) %
Total Employer Contributions attributable to Pre-1978 benefit level $22,064 86.4% Total Employer Contributions attributable to Post-1978 benefit level 3,477 13.6% Total 25,541 100.0%
SECTION 5
EMPLOYER CONTRIBUTION ANALYSIS
Pension Override Tax Report Page 23
Employer Costs for 2022/23 Fiscal Year (Continued)
Employer Contribution Attribution – Grand Total
2022/23 Fiscal Year
Miscellaneous Safety Total
($’000s) % ($’000s) % ($’000s) %
Total Employer
Contributions
attributable to
Pre-1978 benefit
level
$12,914 81.0% $22,064 86.4% $34,978 84.3%
Total Employer
Contributions
attributable to
Post-1978 benefit
level
3,034 19.0% 3,477 13.6% 6,511 15.7%
Total 15,948 100.0% 25,541 100.0% 41,489 100.0%
SECTION 6
SUMMARY OF DATA PROVIDED
Pension Override Tax Report Page 24
The City provided the following information used in our calculation:
Miscellaneous Plan
• MyCalPERS benefit provisions and effective dates
• 1994 – 2020 CalPERS actuarial valuation reports
• June 30, 1990 contract amendment cost analysis for 2%@55 (not used) • June 30, 2000 contract amendment cost analysis for 2.7%@55 (not used) Safety Plan
• MyCalPERS benefit provisions and effective dates
• 1994 – 2020 CalPERS actuarial valuation reports
• June 30, 2000 contract amendment cost analysis for 3%@55 and 3%@50 (not used)
• June 30, 2000 contract amendment cost analysis for 3%@55 and 3%@50 (not used)
SECTION 7
DEFINITIONS
Pension Override Tax Report Page 25
Present Value of Benefits (PVB): An actuarial valuation begins with participant data (including active employees, former employees not in payment status, participants and beneficiaries in payment status) at the valuation date. Using this data and actuarial assumptions, the actuary projects future benefit payments. The assumptions model, among other things, when people will retire, terminate, die or become disabled, as well as what future benefits might be, depending on such things as future salary increases and cost of living. Those future benefit payments are discounted, using expected future investment return and the likelihood of receiving a benefit, back to the valuation date. This discounted present value is the plan's present value of benefits. It represents the amount the plan needs as of the valuation date to pay all future benefits – if all assumptions are met and no future contributions (employee or employer) are made.
Normal Cost (NC): The Present Value of Benefits is not funded immediately upon an employee’s hire. Instead it is treated as deferred compensation and funded over an employee’s working career. The Normal Cost represents the portion of the present value of benefits allocated to, or expected to be earned (on an actuarial, not actual, basis) in the coming year. The Normal Cost is paid by employees and the employer each year as a percentage of PERSable payroll.
Actuarial Accrued Liability (AAL): This represents the portion of the present value of benefits that participants have earned (on an actuarial, not actual, basis) through the valuation date, or allocated are considered to be allocated to periods of past service. This includes the full PVB for retirees and inactive participants, and a portion of the PVB for current active employees.
Plan Assets: This includes funds that have been accumulated in CalPERS’ trust fund so they can pay plan benefits and expenses. Amounts are attributable to contributions made by employees and the employer, and to past investment earnings. Unfunded Actuarial Accrued Liability (UAAL): If all actuarial assumptions had always been exactly met, the accumulated plan assets would equal the actuarial accrued liability. The difference between the actuarial accrued liability and plan assets is the UAAL. It represents the amount of the actuarial accrued liability that must still be funded.
Every year, during the actuarial valuation, the plan actuary calculates the increase or decrease in the UAAL from several sources including investment return and experience different than expected, and plan changes. Each of these is a new UAAL layer which is amortized – paid off over time by additional employer contributions.
The total UAAL amortization payment is paid monthly as a separate portion of the employer contribution.
July 19, 2022
City Council
DATE: July 19, 2022
TO: Mayor Butt and Members of the City Council
FROM:
Councilmember Gayle McLaughlin
Subject:
Rent Control Amendment for November 2022 Ballot
FINANCIAL IMPACT: City Clerk to determine cost of placing this on the ballot. The major cost driver for initiatives and referenda is the number of pages to be printed in the Sample Ballot Booklet (in the past, the City Clerk has said initiatives could cost between $4,000 and $10,000)
PREVIOUS COUNCIL
ACTION:
On Dec 20, 2016, the City Council declared the results of the November 8, 2016, election by Resolution 107-16
with those results reflecting the passage of the Richmond Fair Rent, Just Cause for Eviction and Homeowner
Protection Ordinance with 65.27 percent votes in favor of the initiative.
STATEMENT OF THE
ISSUE:
Rent increases on rent-controlled units in Richmond in
2022 will be 5.2 percent which is 100 percent CPI (as per our current rent ordinance). This is an exorbitant and
unprecedented rent increase. Last year’s CPI increase
was only 1.6 percent. The average CPI increase in the
last six (6) years was three (3) percent. We need to
adjust our rent ordinance to protect renters. This item proposes we ask voters to amend the ordinance to 60
percent of CPI or three (3) percent, whichever is lower.
This is the exact same adjustment made by the Oakland
City Council to their rent ordinance on May 26, 2022.
AGENDA
REPORT
July 19, 2022
RECOMMENDED ACTION:
DIRECT staff to prepare a resolution for the July 26,
2022, City Council agenda to submit to the City of
Richmond electorate at the general Municipal Election to be held on November 8, 2022, an initiative to adjust the maximum allowable rent increase on rent-controlled units to 60 percent of CPI or three (3) percent (whichever is lower) - Councilmember Gayle McLaughlin (510-620-
6636).
DISCUSSION:
The “Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance” was passed by the voters in 2016 with 65.27 percent of the votes. The current allowable rent increase for controlled rental units is 100 percent of the Consumer Price Index (CPI). In 2021, the CPI was 1.6 percent. However, it has jumped to 5.2 percent in 2022. This level of increase is beyond the capacity of many Richmond tenants to pay, especially given the impact of the pandemic on household finances and historic levels of inflation.
It is important to provide as much protection as possible to Richmond renters, who in total are more than 50 percent of Richmond’s overall population. Richmond renters have expressed grave concerns about impact of high increases on their ability to survive and thrive. See recent East Bay Times article here:
https://www.eastbaytimes.com/2022/07/08/richmond-tenants-are-pushing-back-against- rent-hikes-alleging-poor-living-conditions/
The proposed initiative would reduce the maximum allowable rent increase for rent- controlled units to 60 percent of CPI or three percent, whichever is lower. This proposed change would put the City of Richmond totally in line with the City of Oakland. Oakland recently adjusted their rent program to the same exact amount of allowable increases as this proposed Richmond initiative (60 percent of CPI or three percent, whichever is lower). Currently, San Francisco limits their annual CPI increase to 60 percent of the change in CPI and Berkeley limits their Annual General Adjustment to 65 percent of the change in CPI. So Richmond currently is the outlier with 100 percent CPI allowed.
The cost of shelter accounts for nearly a third of the Consumer Price Index, the largest component of the index. A report published by the Federal Reserve Bank of San Francisco assessing the relationship between the cost of housing and inflation finds that rising rents account for a significant portion of the inflation we are experiencing. https://www.frbsf.org/economic-research/publications/economic- letter/2022/february/will-rising-rents-push-up-future-inflation/
This system creates a vicious cycle in which a rise in rents drives up inflation and those inflationary numbers can then be used to further increase rents. Rent burdened tenants, who are already paying an exorbitant amount for gas, food, and other expenses are in
July 19, 2022
no position to contribute even more of their income towards housing costs. Reducing the allowable increase to 60 percent of CPI is important to reduce the financial burden our tenants face. Furthermore, placing a three (3) percent cap is necessary because even if the allowable increase is changed to 60 percent of the change in CPI, if inflation keeps going up, tenants may still face major hikes. The impact of the COVID-19 pandemic on low-income renters cannot be overstated and many residents struggling to pay rent have yet to receive State Emergency Rental Assistance Program funding (ERAP) support, despite applying. In addition, the ERAP stopped taking applications as of March 31, 2022.
Setting the CPI Rent Adjustment to 60 percent of the change in the CPI or three (3) percent appropriately balances protecting renters from large rent increases and providing owners a fair return. Owners’ operating expenses do not necessarily increase from year to year at the rate of inflation, while many Richmond residents cannot afford a historic rent increase at a time when most are living on limited income. The average for the allowable rent increase for covered units over the past six years (from 2016-2021) is three (3) percent, the highest increase being 3.6 percent. The impending increase of 5.2 percent is unprecedented and requires immediate action.
The proposed amendment is supported by many tenants and community groups. This amendment creates a more equitable framework for our tenant residents, disproportionately BIPOC residents, who are facing housing insecurity. We have a responsibility to our residents to limit the rate for increases as set forth in this initiative. Displacement and unstable neighborhoods will be the outcome if we do not act now. Our community deserves better.
As stated earlier in this agenda report, the action being sought is to “Direct staff to prepare a resolution for the July 26, 2022, City Council agenda to submit to the City of Richmond electorate at the general Municipal Election to be held on November 8, 2022, an initiative to adjust the maximum allowable rent increase on rent-controlled units to 60 percent of CPI or three (3) percent (whichever is lower).”
The question posed to the voters should be: Shall the City of Richmond amend its annual allowable rental adjustment on Richmond rent-controlled units to 60 percent of the local consumer price index or three (3) percent, whichever is lower?
The current ordinance and the proposed amendment to our current ordinance are attached.
DOCUMENTS ATTACHED:
Attachment 1 – Current Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance
Attachment 2 - Amendment to the Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance for the November 8, 2022, ballot
DATE:
TO:
FROM:
SUBJECT:
OFFICE OF THE CITY CLERK
MEMORANDUM
February 25, 2016
Bruce Reed Goodmiller, City Attorney
Pamela Christian, City Clerk ~
NOTICE OF INTENT TO CIRCULATE PETITIONS
FILED BY CLAUDIA JIMENEZ AND GAYLE
MCLAUGHLIN
Attached is a Notice of Intent to Circulate Petition, full text of the proposed measure , and Statement of Proponent that was filed February 25, 2016. The proposed initiative is entitled:
"Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance."
Section 9203 of the Elections Code states that within 15 days after a proposed measure is filed, the City Attorney must submit to the election official (City Clerk) a ballot title for and summary of the proposed measure. Therefore, please submit a ballot title and summary for the above referenced initiative to me by Friday, March 11, 2016.
pre
Attachments
February 23, 2016
Pamela Christian, City Clerk
City of Richmond
450 Civic Center Plaza
Richmond , CA 94804
RECE IVE.O
Cl rY CLERKS. OFFIC5
CITY OF RICHMOND
2016 F£8 25 PH 2= 51
Re: Request for Preparation of Ballot Title and Summary of Proposed Initiative
Dear Ms. Christian:.
Enclosed please find a Notice of Intent to Circulate an Initiative entitled the "Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance," the text of the proposed initiative, proponents' cettifications required by Elections Code section 9608, and a $200 filing fee.
Please immediately transmit a copy of this measure to the City Attorney for preparation of a ballot title and summary.
Please direct all questions and correspondence regarding this matter to me via e-mail at [email protected] or via telephone at (916) 442- 2952.
Very truly yours,
OLSON HAGEL & FISHBURN LLP
l(lLl~ . U!/~
RICHARD C. MIADICH
RCM/lp
Enclosures
www. olsonhag el.c om =C:,C.= ~ Page 1063 of 1089
Notice of Intent to Circulate Petition
Notice is hereby given by the persons whose names appear hereon of their intention to circulate the petition within the City of Richmond for the Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance.
Respectfully,
Claudia Jimenez
845 37th Street
Richmond, CA 94805
Gayle McLaughlin
6111 Orchard A venue
Richmond, 'CA 94804
2 . zs. \(o
Date
'/_/.., e ~ (,
~
CERTIFICATION
I, C.lacx::lb <=- \ \~"1!e2 , acknowledge that it is a misdemeanor under state law (Section 18650 of the Elections Code) to knowingly or willfully allow the signatures on an initiative petition to be used for any purpose other than qualification of the proposed measure for the ballot. I certify that I will not knowingly or willfully allow the signatures for this initiative to be used for any purpose other than qualification of the measure for the ballot. · (3Q \Iv\_~L
Claudia Jimenez
845 37th Street
Richmond, CA 94805
Dated this 25 day of February 2016
CERTIFICATION
I, 0-ar/e_ !Jf!Jaaqd)~ , acknowledge that it is a misdemeanor under state law (Section 18650 of the 'Elections Code) to knowingly or willfully allow the signatures on an initiative petition to be used for any purpose other than qualification of the proposed measure for the ballot. I certify that I will not knowingly or willfully allow the signatures for this initiative to be used for any purpose other than qualification of the measure for the ballot. 1i~i~£F
6111 Orchard A venue
Richmond, CA 94804
Dated this __dSday ofFebruary 2016
THE PEOPLE OF THE CITY OF RICHMOND ORDAIN AS FOLLOWS:
THE RICHMOND FAIR RENT, JUST CAUSE FOR EVICTION
AND HOMEOWNER PROTECTION ORDINANCE
Chapter 11.100
11.100.0 10 Title and Purpose.
11.100.020 Findings.
11.100.030 Definitions.
11.100.040 Homeowner Protections.
11.100.050 Just Cause for Eviction Protection; Family Protections.
11.100.060 Richmond Rent Board.
11.100.070 Rent Control; Right of Reasonable Return for Landlords.
11.100.080 Non-waiverability.
11.100.090 Judicial Review.
11.100.100 Remedies.
11.100.110 Injunctive and Other Civil Relief.
11.100.120 Partial Invalidity.
11.100.130 Majority Approval, Effective Date, Execution.
11.100.010 Title and Purpose.
This Ordinance shall be known as The Richmond Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance. The purpose of this Ordinance is tD- promote neighborhood and community stability, healthy housing, and affordability for renters in the
City of Richmond by controlling excessive rent increases and arbitrary evictions to the greatest extent allowable under California law, while ensuring Landlords a fair and reasonable return on their investment and protecting homeowners.
11.100.020 Findings.
The People ofRichmond find and declare as follows:
(a) There is a shortage of decent, safe, affordable, and sanitary housing in the City of Richmond ("the City").
(b) Tenants who play by the rules should not have to worry constantly about losing their home for no reason. Common-sense protections against unfair evictions are needed in the City to protect long-time and low-income residents from landlords that try to game the system to take advantage of all-time high rents.
(c) The Haas Institute for a Fair and Inclusive Society at the University of California, Berkeley recently published a research brief entitled "Belonging and Community Health in Richmond: An Analysis of Changing Demographics and Housing." It found that displacement is a danger in the City; that median household income in the City has decreased by 15% from 2000 to 2013, twice the rate of Oakland and far more severe than El Cerrito and Berkeley; and that the decrease in homeownership in the City is only exceeded by two other local cities, Valiejo and Antioch.
(d) Given the increased housing cost burden and poverty faced by many Richmond residents, excessive rent increases threaten the public health, safety, and welfare of Richmond residents, including seniors, those on fixed incomes, those with very low, low, and moderate income levels, and those with other special needs, to the extent that such persons may be forced to choose between paying rent and providing food, clothing, and medical care for themselves and their families.
(e) According to RealFacts (March 20, 2015), the monthly rent and occupancy rates of market-rate units in apartment buildings of fifty or more units in the City have increased every year since 2010; the average asking rent of market-rate rental units has increased by 24.3% between 2010 and 2014.
(f) According to the U.S. Census Bureau, 2009-2013 American Community Survey,
15.6% of families in the City live below the poverty level, and the number ofpersons living below the poverty level in the City has increased since 2000. According to the same survey,
54.9% .of Richmond tenant households are "overpaying households," meaning the h.ousehold pays 30% or more of its income on housing costs. Nearly half of Richmond's residents are Tenants.
(g) The Haas Institute for a Fair and Inclusive Society memorandum entitled "Data on Richmond Rental Housing Issues," citing the American Community Survey, U.S. Census, found that during the 20 11-20 13 period, large portions of the City were made up of low income tenants; approximately 6,740 tenant households (37% of the total tenants) are low income, earn less than $35,000 annually, and spend more than 30% of their income on 2
housing; and certain central and southern Richmond areas have more than 80% rental households.
(h) The problem of rent increases has reached a crisis level, with examples of rents rising at rates more than ten (10) times that of inflation or average wage growth. (i) The City of Richmond currently does not restrict rental increases or grounds for eviction. Residents have been unfairly evicted so that landlords can take advantage of the current Bay Area housing shortage and raise rents. Tenants are provided little information regarding their rights in the case of eviction and how to get help if they believe their rights have been violated.
(j) In light of the numerous concerns noted herein, including, but not limited to, the current and immediate threat to the health, safety, and welfare of the City's residents and the adverse impacts that would result from a substantial decrease of affordable housing within the City, the People of Richmond determine that it is in the interest of immediately preserving the public health, safety and general welfare to adopt this Ordinance in order to put into place, among other things, regulations to protect homeownership, just cause for eviction, rent stabjJization, and a .simple process to ensure that Jandl ords continue to recejve a reasonable return on their investment.
11.100.030 Definitions.
The following words or phrases as used in this Ordinance shall have the following meanings:
(a)Annual Allowable Rental Adjustment: Annual Allowable Rental Adjustment refers to the limit on the Maximum Allowable Rent increase, which a Landlord may charge on any Controlled Rental Unit each year without order from a hearing officer. (b )Board: The term "Board" refers to the Richmond Rent Board established by this Chapter.
(c) Disabled: The term "Disabled" shall have the same meaning as in Section 12955.3 of the Government Code.
(d) Controlled Rental Units: All Residential Rental Units in the City ofRichmond, except those Rental Units exempt under one or more of the following provisions:
(1) Rental Units in hotels, motels, inns, tourist homes and rooming and boarding houses which are rented primarily to transient guests for a period of fewer than fourteen ( 14) days.
(2) Rental Units in any hospital, convent, monastery, extended medical care facility, asylum, non-profit home for the aged, or dormitory owned and operated by an accredited institution of higher education.
(3) Rental Units which a government unit, agency or authority owns, operates, manages, or in which governmentally subsidized Tenants reside only if applicable 3
federal or state law or administrative regulation specifically exempt such units from municipal rent control.
( 4) Rental Units exempt from rent control pursuant to the Costa-Hawkins Rental Housing Act (California Civil Code § 1954.52).
( 5) Any permitted small, second housing unit built in compliance with the Small, Second Unit Ordinance of the City of Richmond (Richmond Municipal Code §
15.04.810).
( 6) Any units exempted by the Homeowner Protections in Section 11.100.040. (e) Housing Services: Housing Services include, but are not limited to, repairs, maintenance, painting, providing light, hot and cold water, elevator service, window shades and screens, storage, kitchen, bath and laundry facilities and privileges, janitor services, utilities that are paid by landlord, refuse removal, furnishings, telephone, parking, the right to have a specified number of occupants, and any other benefit, privilege or facility connected with the use or occupancy of any Rental Unit. Housing Services to a Rental Unit shall include a proportionate part of servjces provided to common facjlities of the buiJding jn which the Rental Unit is contained.
(f) Landlord: An owner, lessor, sublessor or any other person entitled to receive rent for the use and occupancy of any Rental Unit, or an agent, representative or successor of any of the foregoing.
(g) Maximum Allowable Rent. The maximum allowable rent which may be charged on any Controlled Rental Unit covered by this chapter.
(h)Primary Residence: Occupancy of a Primary Residence does not require that the individual be physically present in the unit at all times or continuously, but the unit must be the individual's usual place of return. Indicia ofPrimary Residence include:
(1) the individual carries on basic living activities at the subject premises for extended periods;
(2) the subject premises are listed with other public agencies, including Federal, State and local taxing authorities as their primary residence; (3) Utilities are billed to and paid by the individual at the subject premises; { 4) Homeowner's tax exemption for the -individual has not been filed for a different property;
(5) The occupant is not registered to vote at any other location; (6) Ownership must be held in the name of the individual claiming Primary Residence and not held by a Limited Liability Corporation or other corporate structure;
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(7) Other relevant factors illustrating Primary Residence. (i) Property: All Rental Units on a parcel or lot or contiguous parcels or contiguous lots under common ownership.
(j) Rent: All periodic payments and all nonmonetary consideration including, but not limited to, the fair market value of goods, labor performed or services rendered to or for the benefit of the Landlord under a Rental Housing Agreement, as defined in this Section, concerning the use or occupancy of a Rental Unit and premises, including all payment and consideration demanded or paid for parking, utilities, pets, furniture, subletting and security deposits for damages and cleaning.
(k) Rental Housing Agreement: An agreement, oral, written or implied, between a Landlord and Tenant for use or occupancy of a Rental Unit and for Housing Services. (1) Rental Housing Fee: The fee described in Section 11.100.060(1)(1). (m) Rental Unit: Any building, structure, or part thereof, or land appurtenant thereto, or any -other rental property rented or -offered for rent for residential purposes, together with all Housing Services connected with use or occupancy of such property such as common areas and recreational facilities held out for use by the Tenant. (n)Recognized Tenant Organization: Any group of Tenants residing in Rental Units in the same building or in different buildings operated by the same management company, agent or Landlord, who choose to be so designated.
( o )Rounding: Numbers will be rounded using the "half away from zero" method. (p)Single-Family Home: A detached building containing a single residential dwelling unit separately alienable from any other dwelling unit. (q)Temporary Tenancy. The tenancy in a Single-Family Home, which is the primary residence of the Homeowner and does not last any longer than 12 consecutive months. A written contract must be provided to Tenant at the inception of the tenancy, which includes a notice that the tenancy shall terminate in no more than 12 months when the owner shall return to the Single Family Home to reoccupy.
(r) Tenant: A Tenant, subtenant, lessee, sublessee or any other person entitled under the tenns of a Rental Housing Agreement to the use or occupancy of any Rental Unit. (s) Utility Charges: Any charges for gas, electricity, water, gas, cable or internet.
11.100.040 Homeowner Protections.
(a) Homeownership is of great importance to the residents of the City ofRichmond. The following protections for Homeowners shall be part of this ordinance:
( 1) Temporary Rentals Allowed. A homeowner who is the Primary Resident of a single-family home may create a temporary tenancy. The temporary Tenant must be 5
provided, in writing at the inception of the tenancy, the length of the tenancy and a statement that the tenancy maybe terminated at the end of the temporary tenancy (pursuant to Section 11.100.050 (8) below) and relocation shall not be required. (2) Small, Second Units Unregulated. A unit that is lawful and in compliance with the Small Second Unit Ordinance of the City ofRichmond (Richmond Municipal Code§ 15.04.810.) will be exempt from this Chapter if the owner is the Primary Resident of the first, larger single-family home. (3) Renting of a Room Unregulated. The tenancy where the Tenant shares a bathroom or kitchen with the homeowner shall be exempt from this Chapter if the home is the Primary Residence of the homeowner.
11.100.050 Just Cause for Eviction Protections; Family Protections. (a) No Landlord shall take action to terminate any tenancy, including but not limited to making a demand for possession of a Rental Unit, threatening to terminate a tenancy verbally or in writing, serving any notice to quit or other eviction notice, or. bringing any action to recover possession or be granted recovery of possession of a Rental Unit unless:
(1) Failure to Pay Rent. The Tenant has failed to pay the Rent to which the Landlord is legally entitled under the Rental Housing Agreement, this Chapter, state and any other local law.
(2) Breach of Lease. The Tenant has continued, after written notice to cease, to substantially violate any of the material terms of the rental agreement, except the obligation to surrender possession on proper notice as required by law, and provided that such terms are reasonable and legal and have been accepted in writing by the Tenant or made part of the rental agreement; and provided further that, where such terms have been accepted by the Tenant or made part of the rental agreement subsequent to the initial creation of the tenancy, the Landlord shall have first notified the Tenant in writing that he or she need not accept such terms or agree to their being made part of the rental agreement.
(i) Notwithstanding any contrary provision in this Section, a Landlord shall not take any action to terminate a tenancy based on a Tenant's sublease of the unit if the following requirements are met:
a. The Tenant continues to reside in the Rental Unit as his, her m their primary residence.
b. The sublease replaces one or more departed Tenants under the Rental Housing Agreement on a one-for-one basis.
c. The Landlord has unreasonably withheld the right to
sublease following written request by the Tenant. If the Landlord fails-to respond to the Tenant in writing within fourteen (14) days of receipt of the Tenant's written request, the Tenant's request shall be deemed approved by the Landlord. A Landlord's reasonable refusal of the 6
Tenant's written request may not be based on the proposed additional occupant's lack of creditworthiness, if that person will not be legally obligated to. pay some or all of the Rent t.o the Landlord. A Landlord's reasonable refusal of the Tenant's written request may be based on, but is not limited to, the ground that the total number of occupants in a Rental Unit exceed the maximum number of occupants as determined under Section 503(b) of the Uniform Housing Code as incorporated by California Health & Safety Code Section 17922. (ii) Protections for Families. Notwithstanding any contrary provision in this Section, a Landlord shall not endeavor to recover possession of a Rental Unit as a result of the addition to the Rental Unit of a Tenant's child, parent, grandchild, grandparent, brother or sister, or the spouse or domestic partner (as defined in California Family Code Section 297) of such relatives, or as a result of the addition of the spouse or domestic patiner of a Tenant, so long as the number of occupants does not exceed the maximum number of occupants as determined under Section 503(b) of the Uniform Housing Code as incorporated by California Health & Safety Code 17922. The Rent Board shall promulgate regulations that will further protect families and promote stability for school-aged children. (3) Nuisance. The Tenant has continued, after the Landlord has served the Tenant with a written notice to cease, to commit or expressly permit a nuisance in, or cause substantial damage to the Rental Unit.
( 4) Failure to Give Access. The Tenant has continued to refuse without good cause, after the Landlord has served the Tenant with a written notice, to grant the Landlord reasonable access to the Rental Unit for the purposes of showing the unit to prospective purchasers or mortgagees or making necessary repairs or improvements required by the laws of the United States, the State of California or any subdivision thereof This shall include inspections by the Richmond Residential Rental Inspection Program .and .any other inspections needed so that the landlord may comply with such laws. The Board shall promulgate regulations for the repair and improvement of Rental Units to ensure the least amount of disruption for the Tenant.
Unless due to a documented emergency affecting a Tenant's health and/ or safety, all repair or improvement work will be scheduled in compliance with applicable Board regulations. To terminate a tenancy under this Subsection (a)(4), a Landlord must show that written notice was provided to the Tenant and all necessary repair or improvement work was scheduled in compliance with this Section and all applicable Board regulations. Landlords may not use lock boxes on occupied units. (5) Temporarily Vacate in Order to Undertake Substantial Repairs. (A) The Landlord, after having obtained all necessary permits from the City of Richmond, seeks in good faith to undertake substantial repairs which are necessary to bring the property into compliance with applicable codes and laws affecting the health and safety of Tenants of the building or where necessary under an outstanding notice of code violations affecting the health and safety of Tenants of the building, and where such repairs cannot be completed while the Tenant resides on the premises.
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(B) Where such repairs can be completed in a period of 60 or fewer days, and the Tenant, within 30 days after the service of a notice of termination of his or her tenancy, agrees in writing to vacate the premises during the period required to complete the repairs at no charge to the Landlord, other than abatement of the obligation to pay rent for the premises during the period required to complete the repairs, the Landlnrd _may Bot .recover .possession pur.suant to this subsection 5 unless the Tenant shall fail or refuse to vacate the premises in accordance with such agreement.
(C) Where the Landlord owns any other residential rental units in the City of Richmond, and any such unit is vacant and available at the time of service of the written notice terminating the tenancy, or at any time thereafter until the earlier of the Tenant's vacating the premises or the entry of a judgment by a court of competent jurisdiction awarding possession of the premises to the Landlord, the Landlord shall, as a condition of obtaining possession pursuant to this subsection 11.100.050 (a) (5) notify Tenant in writing of the existence and address of each such vacant rental unit and offer Tenant the right, at the tenant's option:
(i) To enter into a rental agreement (to be designated as a "temporary rental agreement") on any available rental unit which the Tenant may choose, at a rent not to exceed the lesser of the lawful rent which may be charged for such available rental unit or the lawful rent in effect, at the time of the notice of termination of tenancy, on the unit being vacated, said rental agreement to be for a term of the lesser of ninety days or until . completion of repairs. on the. rental unit being vacated by tenant; or
(ii) To enter into a new rental agreement or lease for such available rental unit at a rent not to exceed the lawful rent which may be charged for such available rental unit
(D) Where the Landlord recovers possession under this subsection
11.100.050 (a) (5) the Tenant must be given the right of first refusal to re-occupy the unit upon completion of the required work. In the event the Landlord files an application for an individual rent adjustment within six months following the completion of the work, the Tenant shall be a party to such proceeding the same as if he or she were still in possession, unless the Landlord shall submit, with such application, a written waiver by the Tenant of his or her right to re-occupy the premises pursuant to this subsection.
( 6) Owner Move-ln. The Landlord seeks to recover possession in good faith for use and occupancy as a Primary Residence by the Landlord, or the Landlord's spouse children, parents or grandparents.
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(A) Landlord, as used in this Subsection (a)(6), shall only include a Landlord that is a natural person who has at least a fifty (50} percent recorded ownership interest in the Property.
(B) No eviction may take place for an "owner move-in" if the same Landlord or enumerated relative already occupies a unit on the property, or if a vacancy already exists on the property. At all times a Landlord may request a reasonable accommodation if the Landlord or enumerated relative is Disabled and another unit in Richmond is necessary to accommodate the person's disability.
(C) The notice terminating tenancy shall contain the name, address and relationship tQ. the Landlord of the person. intended to occupy the Rental Unit.
(D) The Landlord or enumerated relative must intend in good faith to move into the Rental Unit within ninety (90) days after the Tenant vacates and to occupy the Rental Unit as a primary residence for at least Thirty-Six (36) consecutive months. The Board may adopt regulations governing the determination of good faith.
(E) If the Landlord or relative specified on the notice terminating tenancy fails to occupy the unit within ninety (90) days after the Tenant vacates, the Landlord shall:
1. Offer the unit to the Tenant who vacated it; and
n. Pay to said Tenant all reasonable expenses incurred in moving to and from the unit.
(F) Eviction Protection for Elderly or Disabled Tenant. A Landlord may not evict a Tenant pursuant to this Subsection if the Tenant (1) has resided in the Rental Unit for at least five ( 5) years and is either at least 62 years old or Disabled; or (2) is certified as being terminally ill by the Tenant's treating physician. For the purposes of this Subsection, Notwithstanding the above, a Landlord may evict a Tenant who qualifies for the exemption if the Landlord or enumerated relative who will occupy the unit also meets the criteria for this exemption and no other units are available.
(7) Withdrawal from Rental Market. The Landlord seeks in good faith to recover possession to withdraw all Rental Units of an entire property located in the City of Richmond. The Landlord has filed the documents with the Board initiating the procedure for withdrawing Units from rent or lease under Government Code Section 7060 et. seq. and all regulations passed by the Board, with the intention of completing the withdrawal process and going out of the rental business or demolition of the property. If demolition is the purpose of the withdrawal then the Landlord must have received all needed permits from the City of Richmond before serving any 9
notices Terminating a tenancy based on 11.100.50 (a) (7). Tenants shall be entitled to a 120-day notice or one (1) year in the case tenants are defined as senior or Disabled under Govt. Code Section 7060.4 (6). Tenants will also have a right of return if the unit is placed back on the market.
(8) Temporary Tenancy. A landlord or lessor seeks in good faith to recover possession of the Single-Family Home for his/her/their occupancy as a primary residence, where the landlord has previously occupied the rental unit as his/her/their principal residence and has the right to recover possession of the unit for his/her occupancy as a principal residence under an existing rental agreement with the current tenants for no more than twelve (12) consecutive months. No relocation is required. To be used only in reference to tenancies as listed in I 1.100.040 (a)(I).
(b) Relocation. A landlord seeking to recover possession under Sections
11.100.050(a)(5), (6) or (7) above shall make relocation payments to each Tenant. These amounts shall be-determined by the City Council through a Relocation Ordinance. (c) Right of Return and First Right of Refusal. All Tenants that are displaced based on Sections 11.100. 050( a)( 5), ( 6) or (7) shall have the first right of refusal to return to the unit if it should ever be returned to the market by the Landlord or successor Landlord. Rent shall be the Rent lawfully paid by the tenant at the time the Landlord gave notice of basis listed in Sections 11.100. 050( a)( 5), ( 6) or (7).
(d) Written Warning Notice Requirements. Any written notice as described in Subsections 11.100.050(a)(2), (3) or (4) shall be served by the Landlord within a reasonable period prior to serving a notice to terminate tenancy and shall inform the Tenant that a failure to cure may result in the initiation of eviction proceedings, of the right to request a reasonable accommodation and the contact number for the Board. The notice shall also include sufficient details allowing a reasonable person to comply. The notice shall also include any information necessary to determine the date, time, place, witnesses present and other circumstances concerning the reason for the notice.
(e) Retaliation is Barred. Notwithstanding the above provisions, possession shall not be granted if it is determined that the eviction is knowingly in retaliation for the Tenant reporting violations of this Chapter, for exercising rights granted under this Chapter, including the right to withhold Rent under common, state or local law or for forming a Recognized Tenant Organization with other Tenants.
(f) In any notice purporting to terminate a tenancy the Landlord shall state the cause for the termination, and in any action brought to recover possession of a Rental Unit, the Landlord shall allege and prove compliance with this Section. All notices described in Subsection 11.100.050(d) shall be attached to any notices that purport to terminate a tenancy for which they correspond.
(g) Failure to comply with any requirement of this Chapter may be asserted as an affirmative defense in an action brought by the Landlord to recover possession of the Unit.
Additionally, any attempt to recover possession of a Unit in violation of this Chapter shall 10
render the Landlord liable to the Tenant for actual damages, including damages for emotional distress, in a civil action for wrongful eviction. The Tenant or the Rent Board may seek injunctive relief and money damages for wrongful eviction. A Tenant prevailing in an action for wrongful eviction shall recover costs and reasonable attorney's fees.
11.100.060 Richmond Rent Board
(a) Composition. There shall be in the City of Richmond a Rent Board. The Board shall be made up ofRichrnond residents. The Board shall consist of five Board Members appointed by the City Council. The Board shall elect annually as chairperson one of its members to serve in that capacity.
(b) Eligibility. Duly qualified residents of the City of Richmond are eligible to serve as Members of the Board. There shall be no more than two members that own or manage any rental property or are realtors. Anyone nominated to this board must be in compliance with this Chapter and all other local, state and federal laws regulating the provision of housing. (c) Full Disclosure of Holdings. Nominees for the position of Board Member shall submit a verified statement listing all of their interests and dealings in real property,. including but not limited to its ownership, sale or management, during the previous three (3) years. The Board may promulgate additional regulations.
(d) Term of Office. Board Members shall serve terms of two (2) years and maybe reappointed for a total of four (4) full terms for a total of fewer than ten (10) years. (e) Powers and Duties. The Board shall have the following powers and duties:
(1) Establish a Base Rent under Section 11.100.070 (a). (2) Make adjustments ·in the Rent Increase and Decreases -in accordance with Section 11.100.070.
(3) Set Rents at fair and equitable levels in order to achieve the intent of this Chapter.
(4) Issue orders, rules and regulations, conduct hearings and charge fees as set forth below.
(5) Make such studies, surveys and investigations, conduct such hearings, and obtain such information as is necessary to carry out its powers and duties. (6) Report annually to the City Council of the City of Richmond on the status of rental housing covered by this chapter. Reports shall include a summary of the numbers of notices served, the basis upon which they were served, the amount of the Rent increases and the addresses for which they were served. (7) Charge and collect registration fees, including penalties for late payments. 11
(8) Collect and/or receive copies of notices of termination oftenancy and changes in terms of tenancy.
(9) A searchable database will be created so that service of notice may be detennined as well information for the reports described above. (10) Administer the withdrawal process for the removal of Rental Units from rental housingmarketunder sections 11.100,050 (a)(6)and(7).
(11) Administer oaths and affirmations and subpoena witnesses. (12) Establish rules and regulations for deducting penalties and settling civil claims under Section 11.100.100.
( 13) Refer violations of this Chapter to appropriate authorities for prosecution. (14) Seek injtmctive and other civil relief under Section 11.100.100- 110. (15) Any other duties necessary to administer and enforce this Chapter. (f) Rules and Regulations. The Board shall issue and follow such rules and regulations, including those which are contained in this Chapter, as will further the purposes of the Chapter. The Board shall publicize its rules and regulations prior to promulgation on its website and any other appropriate medium. All rules and regulations, internal staff memoranda, and written correspondence explaining the decisions, orders, and policies of the Board shall be kept in the Board's office and shall be available to the public for inspection and copymg.
(g) Community Education. The Board shall publicize this Chapter so that all residents of Richmond will have the opportunity to become informed about their legal rights and duties under this Chapter. The Board shall prepare a brochure which fully describes the legal rights and duties of Landlords and Tenants under The Fair Rent, Just Cause for Eviction and Homeowner Protection Ordinance. The brochure shall also include helpful information for homeowners. The brochure will be available to the public, and each Tenant of a Rental Unit shall receive a copy of the brochure from his, her or their Landlord. Landlords shall provide the brochure at the commencement of the tenancy and with each notice of rent increase. This brochure will be made available for download from the City ofRichmond website and/or other appropriate technology. Information about the Ordinance shall be made available in all other languages that are requested by the community.
(h) Meetings. The Board shall hold such regularly scheduled meetings as are necessary to ensure the timely performance of its duties under this Chapter. All. regular and special meetings shall be called and conducted in accordance with state law. There shall be minimally one ( 1) meeting a year so that the Board may comply with 11.100.070. (i) Quorum. Three (3) Members shall constitute a quorum for the Board. (j) Voting. The affirmative vote of three (3) Members of the Board is required for a decision, including all motions, regulations, and orders of the Board. 12
(k) Dockets. The Board shall maintain and keep in its office all hearing dockets. (1) Financing. The Board shall finance its reasonable and necessary expenses by charging Landlords annual registration fees in amounts deemed reasonable by the Board. The Board is also empowered to request and receive funding when and if necessary from any available source for its reasonable and necessary expenses.
(1) Residential Rental Housing Fee. All Landlords shall pay a business license fee if required by Richmond Municipal Code plus a Residential Rental Housing Fee.
The City shall charge the Residential Rental Housing Fee at the same time as the business license fee. The amount will be determined by the City Council after a recommendation by the Board is provided to the City Council. The City Council will vote on the recommendation at the next regularly scheduled meeting. The budget shall be funded by the Rental Housing Fee.
(2) This fee shall become due within thirty (30) days of inception of new tenancy if no fee was paid the prior year. Ongoing tenancies shall have fees collected at the same time as the City business license each year.
(m) Integrity and Autonomy of Board. The Board shall be an integral part of the government of the City, but shall exercise its powers and duties under this Chapter independent from the City Council, City Manager, and City Attorney, except by request of the Board. The City shall provide infrastructural support on an ongoing basis as it would with any other department. Doing the transition period before the Board Members are appointed and an Executive Director is hired, the City shall take whatever steps necessary to perform the duties of the Board and implement the purpose of this Chapter. (n) Budget. The Board shall, prior to July 1 of each year, hold a public hearing on a proposed budget and adopt an annual budget for the ensuing fiscal year. At least thirty-five days prior to the beginning of each fiscal year, the Board's Executive Director shall submit to the Board the proposed budget as prepared by the Executive Director. After reviewing the same and making such revisions as it may deem advisable, the Board shall determine the time for the holding of a public hearing thereon and shall cause to be published a notice thereof not less than ten days prior to said hearing,_ by at least one insertion inthe official newspaper.
Copies of the proposed budget shall be available for inspection by the public in the office of the Board at least ten days prior to said hearing. The City Council and the City Manager shall have no authority to oversee, supervise, or approve this budget. Upon final adoption, the budget shall be in effect for the ensuing fiscal year and the amounts stated therein shall be and become appropriated by the Board for the respective objects and purposes therein specified. At any meeting after the adoption of the budget the Board may amend or supplement the budget by the affirmative votes of at least three members. Copies of the adopted budget and any amendments or supplements shall be filed with the City Clerk, and City Manager. Necessary adjustments to city administrative procedures shall be made. ( o) Personnel. The Board shall review and assess yearly that sufficient number of staff are employed, including an Executive Director, hearing examiners, housing counselors and legal staff, as may be necessary to perform its function efficiently in order to fulfill the purpose of this Chapter. The Executive Director shall be hired by the Board. All employees of 13
the Board shall be hired, terminated, suspended, and demoted in accordance with the Charter and implementing provisions of the Municipal Code.
(p) Board Legal Work. Legal staff hired by the Board shall represent and advise the Board, its Members, and its staff in any civil matters, actions, or proceedings in which the Board, its Members, or its staff, in or by reason of their official capacity, are concerned or are a party. The Board may, in its sole discretion, and without approval of the City Council, retain private attorneys to furnish legal advice or representation in particular matters, actions or proceedings.
( q) Contracts and Purchases. The Board shall procure goods and services as do other City agencies using existing support services within the City as would any other department, i.e. Finance, Information Technology, and Public Works among others. Provided, however, that the Board shall have sole and final authority to employ attorneys, legislative lobbyists, and other professionals, and to approve contracts for such professional services. (r) Conforming Regulations. If any portion of this Chapter is declared invalid or unenforceable by decision ofa.court. ofcompetentjurisdictiDn or rendered invalid m unenforceable by state or federal legislation, the Board and not the City Council shall have authority to enact replacement regulations consistent with the intent and purpose of the invalidated provision and applicable law. Such replacement regulations shall supersede invalidated or unenforceable provisions of this Chapter to the extent necessary to resolve any inconsistency .. The subject matter of such replacement regulations shall be limited to rent control matters as enumerated in this Chapter.
(s) Reporting and Fee Payment Requirements.
(1) Within sixty (60) days after the adoption of this Chapter, all Landlords shall be required to file a. copy of all rental increase notices, change of terms oftenancy and tenancy termination notices with the Board before serving the tenant the notice. A proof of service with time and date of service of notice shall be included with notice filed with the City.
(2) If the Board, after the Landlord has proper notice and after a hearing, determinesthataLandlordhaswillfully andknowingly failedto properly report, as described above, any rental increase notices, change of terms of tenancy or tenancy termination, or pay the Rental Housing fee, the Board may authorize the Tenant of such a non-reporting unit or where the Rent housing fee is unpaid to withhold all or a portion of the Rent for the Rental Unit until such time as the Rental Housing fee is paid or notice filed. After a notice is properly filed or fee paid, the Board .shaJJ determine what portion, if any, of the withheld Rent is owed to the Landlord for the period in which the notice was not properly filed or fee paid. Whether or not the Board allows such withholding, no Landlord who has failed to properly report or pay the fee shall at any time increase Rents for a Rental Unit until such fee or notice is reported. This shall go into effect thirty (30) days after determination of the Board. 14
(3) Further, failing to pay the fee or filing a copy of a notice before the filing of an unlawful detainer is a complete defense to an unlawful detainer. No Board action is required for defense to be alleged or litigated in an unlawful detainer. (t) In the event the establishment of the Board under this Section is adjudged to be invalid for any reason by a court of competent jurisdiction, the City Council shall designate one or more City departments, agencies, boards, or commissions to perform the duties ofthe Board prescribed by this Chapter.
11.100.070 Rent Control; Right of Reasonable Return for Landlords (a) Establishment of Base Rent. Beginning the effective date of this Chapter, no Landlord shall charge Rent for any Controlled Rental Units in an amount greater than the Rent in effect on July 21, 2015 except for increases expressly allowed under this Chapter. The Rent in effect on that date is the Base Rent. If there was no Rent in effect on July 21, 2015, the Base Rent shall be the Rent that was charged on the first date that Rent was charged following July 21, 2015. For tenancies commencing after the adoption of this Chapter, the Base Rent is the initial _rental xate .in .eftect on the date the tenancy commences. As used in this Subsection, the term "initial rental rate" means only the amount of Rent actually paid by the Tenant for the initial term of the tenancy. The Base Rent is the reference point from which the Maximum Allowable Rent shall be adjusted upward or downward in accordance with Section 11.100.070 (c).
(b)Annual General Adjustment. No later than June 30 each year, the Board shall announce the percentage by which Rent for eligible Rental Units will be generally adjusted effective September 1 of that year.
(1) The Annual General Adjustment shall be equal to one hundred (100%) percent of the .percentage .increase in. the Consumer Price Index ( All.Urban Consumers, San Francisco-Oakland-San Jose region, or any successor designation of that index that may later be adopted by the U.S. Bureau of Labor Statistics) as reported and published by the U.S. Department of Labor, Bureau of Labor Statistics, for the 12- month period ending as of March of the current year.
(2) Subparagraph 1 of this Subsection notwithstanding, in no event shall the Annual General Adjustment be less than zero percent (0%). (3) For the period between the effective date of this Charter and the first Annual General Adjustment announced September 1, the landlord may increase the Maximum Allowable Rent to include one Annual General Adjustment for September 2016.
(c) Petitions. Upon receipt of a petition by a Landlord and/or a Tenant, the Maximum Allowable Rent of individual Controlled Rental Units may be adjusted upward or downward in accordance with the procedures set forth elsewhere in this Section. The petition shall be on the form provided by the Board and shall include a declaration by the Landlord that the Rental Unit meets all requirements of this Chapter. Notwithstanding any other provision of this Section, the Board or hearing examiner may refuse to hold a hearing and/or grant a Rent 15
adjustment if an individual hearing has been held and decision made with regard to the Maximum Allowable Rentwithinthe previoustwelve (12) months, (d) Hearing Procedure. The Board shall enact rules and regulations governing hearings and appeals of individual adjustment ofMaximum Allowable Rents which shall include the following:
(1) Hearing Examiner. A hearing examiner appointed by the Board shall conduct a hearing to act upon the petition for individual adjustment of Maximum Allowable Rent and shall have the power to administer oaths and affirmations. (2) Notice. The Board shall notify the Landlord, if the petition was filed by the Tenant, or the Tenant; if the petition was filed by the Landlord; of the receipt ofsuch a petition and provide a copy thereof
(3) Time of Hearing. The hearing officer shall notify all parties as to the time, date and place of the hearing.
( 4) Records. The hearing examiner may require either party to a Rent adjustment hearing to provide it with any books, records and papers deemed pertinent in addition to that information contained in registration statements. The hearing examiner shall conduct a current building inspection and/or request the city to conduct a current building inspection if the hearing examiner finds good cause to believe the Board's current information does not reflect the current condition of the Controlled Rental Unit. The Tenant may request the hearing examiner to order such an inspection prior to the date of the hearing. All documents required under this Section shall be made available to the parties involved prior to the hearing at the office of the Board. In cases where information filed in a petition for Maximum Allowable Rent adjustment or in additional submissions filed at the request of the hearing examiner is inadequate or false, no action shall be taken on said petition until the deficiency is remedied. (5) Open Hearings. All Maximum Allowable Rent adjustment hearings shall be open to the public.
(6) Right of Assistance. AU parties to a hearing may have assistance in presenting evidence and developing their position from attorneys, legal workers, Recognized Tenant Organization representatives or any other persons designated by said parties. (7) Hearing Record. The Board shall make available for inspection and copying by any person an official. recor.d which shall constitute the exclusive record for decision on the issues at the hearing. The record of the hearing, or any part of one, shall be obtainable for the cost of copying. The record of the hearing shall include: all exhibits, papers and documents required to be filed or accepted into evidence during the proceedings; a list of participants present; a summary of all testimony accepted in the proceedings;. a statement of all materials. officially notice¢ all recommended decisions, orders and/or rulings; all final decisions, orders and/or rulings; and the reasons for each final decision, order and/or ruling. All hearings shall be recorded. 16
Any party may receive a copy of the audio that was made. Reasonable costs may be charged. The Board shall not be responsible for transcribing such audio. (8) Quantum of Proof and Notice of Decision. No individual adjustment shall be granted unless supported by the preponderance of the evidence submitted at the hearing. All parties to a hearing shall be sent a notice of the decision and a copy of the findings of fact and law upon which said decision is based. At the same time, parties to the proceeding shall also be notified of their right to any appeal allowed by the Board and/or to judicial review of the decision pursuant to this Section and Section 11.100.090 of this Chapter.
(9) Consolidation. All Landlord petitions pertaining to Tenants in the same building will be consolidated for hearing, and all petitions filed by Tenants occupying the same building shall be consolidated for hearing unless there is a showing of good cause not to consolidate such petitions.
(10) Appeal. Any person aggrieved by the decision of the hearing examiner may appeal to the Board. On appeal, the Board shall affirm, reverse or modify the decision ofthe hearing examiner.
( 11) Finality of Decision. The decision of the hearing examiner shall be the final decision of the Board in the event of no appeal to the Board. The decision of the hearing examiner shall not be stayed pending appeal; however, in the event that the Board on appeal reverses or modifies the decision of the hearing examiner, the Landlord, in the case of an upward adjustment in Rent, or the Tenant, in the case of a downward adjustment of Rent, shall be ordered to make retroactive payments to restore the parties to the position they would have occupied had the hearing examiner's decision been the same as that of the Board. (12) Time for Decision. The rules and regulations adopted by the Board shall provide for final action on any individual Rent adjustment petition within a reasonable time.
( 13) Decisions decreasing Rents shall remain in effect until the Board finds that the Landlord has corrected the defect warranting the decrease. The Board shall-, by regulation, establish procedures for making prompt compliance determinations. Upon a determination of compliance the Landlord shall be entitled to reinstatement of the prior Rent level, retroactive to the date that the Landlord corrected the defect which warranted the decrease. This shall be in compliance with California Civil Procedure Section 1942.4. Ifthe_LandlurdisJoundto bejn violation ofCalifomia Civil Pmcedure Section 1942.4 then no rent shall be charged for the period during which the Landlord was in violation.
(e)Individual Adjustment Rent Increase. In making individual adjustments of the Annual Adjustable Rent Increase, the Board shall consider the purposes of this Chapter and the requirements of law. In making an individual downward adjustment, the Board may consider decreases in living space, furniture, furnishings, equipment, or services; substantial deterioration of the Controlled Rental Unit other than as a result of ordinary wear and tear; or 17
failure on the part of the Landlord to provide adequate Housing Services or to comply substantially with applicable housing, healthandsafety codes, (f) The Landlord may not charge for utilities unless the utility is separately or individually metered.
(g) Landlords Have the Right to a Reasonable Return on Their Investment. In making individual adjustments of the rent ceiling, the Board or hearing examiner shall consider the purposes of this chapter and shall specifically consider all relevant factors, including (but not limited to):
( 1) Increases or decreases in property taxes;
(2) Unavoidable increases or any decreases in maintenance and operating expenses;
(3) The cost of planned or completed capital improvements to the rental unit (as distinguished from ordinary repair, replacement and maintenance) where such capital improvements are necessary to bring the property into compliance or maintain compliance with applicable local code requirements affecting health and safety, and where such capital improvement costs are properly amortized over the life of the improvement;
( 4) Increases or decreases in the number of tenants occupying the rental unit, living space, furniture, furnishings; equipment, or other housing services provided, or occupancy rules;
( 5) Substantial deterioration of the controlled rental unit other than as a result of normal wear and tear;
( 6) Failure on the part ofthe Landlord to provide adequate housing services, or to comply substantially with applicable state rental housing laws, local housing, health and safety codes, or the rental agreement;
(7) The pattern of recent rent increases or decreases;
(8) It is the intent of this chapter that individual upward adjustments in the rent ceilings on units be made only when the Landlord demonstrates that such adjustments are necessary to provide the landlord with a fair return on investment. (h)No upward adjustment of an individual rent ceiling shall be authorized by the Board under this Section if the Landlord:
( 1) Has continued to fail to comply, after order of the Board, with any provisions of this chapter and/or orders or regulations issued thereunder by the Board, or (2) Has failed to bring the rental unit into compliance with the implied warranty of habitability.
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(j) Allowable rent increases pursuant to an individual upward adjustment of the rent ceiling shall become effective only after the Landlord gives the Tenant at least a thirty (30} day written notice of such rent increase and the notice period expires. If the Board makes a downward individual adjustment of the rent ceiling, such rent decrease shall take effect no sooner than thirty (30) days after the effective date set by the Board for the downward adjustment.
{k) No provision of this chapter shall be applied so as to prohibit the Board from granting an individual rent adjustment that is demonstrated by the Landlord to be necessary to provide the Landlord with a fair return on investment. Necessity shall be defined in regulations promulgated by the Board. Limits on the total increase per month and length of monthly increase shall be promulgated by the Board through regulations.
11.100.080 Non-waiverability.
Any provision, whether oral or written in or pertaining to a Rental Housing Agreement whereby any provision of this Chapter for the benefit of the Tenant is waived, shall be deemed to be against public policy and shall be void.
11.100.090 Judicial Review.
A Landlord or Tenant aggrieved by any action or decision of the Board may seek judicial review by appealing to the appropriate court within the jurisdiction. No action or decision by the Board shall go into effect until thirty (30) days have expired to allow for such appeal.
11.100.100 Remedies.
(a) Any Landlord who demands, accepts, receives, or retains any payment of Rent in excess of the Maximum Allowable Rent, in violation of the provisions of this Chapter or any rule, regulation or order hereunder promulgated, including the provisions ensuring compliance with habitability standards and registration fee requirements, shall be liable in a civil action to the Tenant from whom such payments are demanded, accepted, received or retained, for reasonable attorney's fees and costs as determined by the court, plus damages in the amount by which the payment or payments demanded, accepted, received or retained exceeds the Maximum Allowable Rent. A civil penalty of treble the amount by which the payment or payments demanded, accepted, received or retained exceeds the Maximum Allowable Rent shall be awarded against the Landlord upon a showing that the Landlord has acted willfully or with oppression, fraud or malice. No administrative remedy need be exhausted prior to filing suit pursuant to this Subsection.
(b) In lieu of filing a civil action, a Tenant may file an administrative complaint. The Board shall establish by rule and regulation a hearing procedure similar to that set forth in Section 11.100.070.
(1) The rules and regulations adopted by the Board shall provide for final Board action on any complaint for excess Rent within one-hundred twenty (120) days following the date of filing of the complaint.
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(2) In any administrative hearing under this Section, a Landlord who demands, accepts, receives or retains any payment of Rent in excess of the Maximum Allowable Rent shall be liable for damages in the amount by which the payment or payments demanded, accepted, received or retained exceeds the Maximum Allowable Rent.
(3) If the Tenant from whom such excessive payment is demanded, accepted, received or retained in violation of the foregoing provisions -of this Chapter or any rule :or regulation or order hereunder promulgated fails to bring a civil or administrative action as provided for in Sections 11.100. 1 OO(b) within one hundred twenty (120) days from the date of occurrence of the violation, the Board may settle the claim arising out of the violation or bring such action. Thereafter, the Tenant on whose behalf the Board. acted is barred. from also bringing an action against the Landlord in regard to the same violation for which the Board has made a settlement or brought action. In the event the Board settles said claim, it shall be entitled to retain the costs it incurred in settlement thereof, and the Tenant against whom the violation has been committed shall be entitled to the remainder. (c) The appropriate court in the jurisdiction in which the Controlled Rental Unit affected is located shall have jurisdiction over all actions brought under this Section. (d) Any Landlord violating this Chapter shall be guilty of a misdemeanor and shall be punished in accordance with Section 1. 04.100 of the Richmond Municipal Code
11.100.110 Injunctive and Other Civil Relief.
The Board, and Tenants and Landlords of Rental Units, may seek relief from the appropriate court within the jurisdiction within which the affected Rental Unit is located to enforce any. provision -of this Chapter or-its implementing regulations. or to restrain or -enjoin any violation of this Chapter and of the rules, regulations, orders and decisions of the Board.
11.100.120 Partial Invalidity.
If any provision of this Chapter or application thereof to any person or circumstances is held invalid, this invalidity shall not affect other provisions or applications of this Chapter which can be given effect without the invalid provision or application, and to this end the provisions of this Chapter are declared to be severable. This Chapter shall be liberally construed to achieve the purposes of this Chapter and to preserve its validity.
11.100.130 Majority Approval, Effective Date, Execution.
This Ordinance shall be effective only if approved by a majority of the voters voting thereon and shall go into effect ten (10) days after the vote is declared by the City Council.
The Mayor and City Clerk are hereby authorized to execute this Ordinance to give evidence of its adoption by the voters.
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ORDINANCE NO. ______________________ N.S.
AN ORDINANCE OF THE PEOPLE OF THE CITY OF RICHMOND APPROVED AT THE GENERAL MUNICIPAL ELECTION HELD ON NOVEMBER 8, 2022 AMENDING THE
FAIR RENT, JUST CAUSE FOR EVICTION AND HOMEOWNER PROTECTION ORDINANCE TO LIMIT RENT INCREASES FOR REGULATED UNITS TO 3% OR 60%
OF THE CONSUMER PRICE INDEX, WHICHEVER IS LESS
The People of the City of Richmond do ordain as follows:
SECTION 1. Title and Purpose.
TITLE. This Ordinance may be cited as the RICHMOND ANNUAL ALLOWABLE RENTAL ADJUSTMENT ORDINANCE.
PURPOSE. In Richmond, certain residential rental units’ rental rates are controlled by Richmond’s Fair Rent, Just Cause For Eviction And Homeowner Protection Ordinance. As written, Landlords are entitled to an annual rent increase equivalent to “one hundred (100%) percent of the percentage increase in the Consumer Price Index (All Urban Consumers, San Francisco-Oakland-San Jose region, or any successor designation of that index that may later be adopted by the U.S. Bureau of Labor Statistics) as reported and published by the U.S.
Department of Labor, Bureau of Labor Statistics, for the 12-month period ending as of March of the current year.” The Annual General Adjustment for 2022 is five point two (5.2%) percent.
Due to historic levels of inflation, rent-controlled tenants in Richmond are set to receive an unprecedented rent increase. The historically high level of inflation has highlighted the need to ensure Richmond tenants are not forced to grapple with both rising prices of goods and services and rent increases that are inconsistent with the City’s goal of protecting residents from excessive rent increases. As Such, this Ordinance would cap rent increases for controlled units at three percent (3%) or sixty percent (60%) of the local consumer price index, whichever is lower.
SECTION 2. Findings.
This Ordinance is exempt from the California Environmental Quality Act, Public Resources Code section 21000 et seq. (“CEQA”), since in accordance with CEQA Guidelines Section 15061, subd. (b)(3), it can be seen with certainty that there is no possibility that the activity authorized herein may have significant effect on the environment. Additionally, CEQA review does not apply when a measure is placed on the ballot and approved by the voters.
SECTION 3. Conflicting Measures.
This measure is intended to be comprehensive. It is the intent of the people of City of Richmond that in the event this measure and one or more measures relating to the Fair Rent, Just Cause For Eviction And Homeowner Protection Ordinance appear on the same ballot, the provisions of the other measure or measures shall be deemed to be in conflict with this measure. In the event that this measure receives a greater number of affirmative votes, the provisions of this measure shall
prevail in their entirety, and all provisions of the other measure or measures shall be null and void. If this measure is approved by a majority of the voters but does not receive a greater number of affirmative votes than any other measure appearing on the same ballot regarding the Fair Rent, Just Cause for Eviction and Homeowner Protection Act, this measure shall take effect to the extent not in conflict with said other measure or measures.
SECTION 4. Liberal Construction.
This measure shall be liberally construed to effectuate its purpose.
SECTION 5. Effective Date.
This ordinance shall be effective only if approved by a majority of the voters at the November 2022 Statewide General Election and shall go into effect ten (10) days after the vote is declared by the City Council. The limitation on rent escalation stated in this Amendment shall be effective immediately upon the effective date. Over the phase-in period which extends through August 31, 2023, no tenant's rent on a controlled unit shall be higher than what it was on August 31, 2022 plus a 3% increase. After the partial year of phase-in, the regular provisions of this Amendment shall apply.
SECTION 6. Savings Clause.
If any provision, sentence, clause, section, or part of this ordinance is found to be unconstitutional, illegal, or invalid by a court of competent jurisdiction, such unconstitutionality, illegality, or invalidity shall affect only such provision, sentence, clause, section, or part of this ordinance and shall not affect or impair any of the remaining provisions, sentences, clauses, sections, or parts of this ordinance. It is declared that this ordinance would have been adopted had such unconstitutional, illegal, or invalid provision, sentence, clause, section, or part not been included.
SECTION 7. Fair Rent, Just Cause For Eviction And Homeowner Protection Ordinance Amendments.
Chapter 11.100.070 subdivision (b) of the Richmond Municipal Code is hereby amended as follows. Added text is shown as double underlined type; deleted text is shown as strikethrough type.
(b)Annual General Adjustment. No later than June 30 each year, the Board shall announce the percentage by which rent for eligible Rental Units will be generally adjusted effective September 1 of that year.
(1)The Annual General Adjustment shall be equal to one hundred sixty (1060%) percent of the percentage increase in the Consumer Price Index (All Urban Consumers, San Francisco-Oakland-San Jose region, or any successor designation of that index that may later be adopted by the U.S. Bureau of Labor Statistics) as reported and published by the U.S. Department of Labor, Bureau of Labor Statistics, for the 12-month period ending as of March of the current year, or three (3%) percent, whichever is lower.
(2)Subparagraph 1 of this Subsection notwithstanding, in no event shall the Annual General Adjustment be less than zero percent (0%).
(3)For the period between the effective date of this Charter and the first Annual General Adjustment announced September 1, the landlord may increase the Maximum Allowable Rent to include one Annual General Adjustment for September 2016. Notwithstanding any previously issued rent increase, the Annual General Adjustment for 2022 is three (3%) percent. In the event a landlord issued a rent increase on or after September 1, 2022 in excess of 3%, that tenant’s rent shall be adjusted to their Maximum allowable rent on August 31, 2022 plus three (3%) percent.