City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: MARCH 15, 2022 FROM: COMMUNITY & ECONOMIC DEVELOPMENT WARDS: ALL
DEPARTMENT
SUBJECT: REVISED RENTAL FEES FOR THE USE OF UNDEVELOPABLE RIVERSIDE
CANAL AND GAGE CANAL PARCELS
ISSUE:
The issue for City Council consideration is to approve the revised rental fees for the use of undevelopable Riverside Canal and Gage Canal parcels owned by the City.
RECOMMENDATIONS:
That the City Council:
Approve the proposed increased rental rates for the use of undevelopable Riverside Canal and Gage Canal parcels for Open Space or Single-Family Residential use at $0.17 per square foot annually, and all other uses, including Multi-Family, Commercial, Industrial, etc., at $0.66 per square foot annually; Approve the $300 annual fee charged to all utility companies with utility crossings on canal parcels; and Authorize the City Manager, or designee, to execute Canal Use License Agreements for undevelopable Canal Parcels under the terms set forth in this staff report.
BOARD OF PUBLIC UTILITIES RECOMMENDATION:
On February 14, 2022, the Board of Public Utilities (Board) unanimously recommended that the City Council approve the revised rental fees for the use of undevelopable Riverside Canal and Gage Canal parcels. The Board was unable to approve the $300 minimum annual fee charged to all utility companies with utility crossings on canal parcels because that approval had not been agendized. However, such approval is not required under City Charter Section 1202(b), which requires the Board to approve all expenditures in excess of $50,000, and the estimated collective amount of these fees is not expected to exceed $50,000 prior to the next five-year annual review of rental rates. If the collective amount does exceed $50,000, staff will seek Board and City Council approval.
BACKGROUND:
The Riverside Public Utilities Department’s (RPU) acquisition of the Riverside Canal in 1961 and the Gage Canal Company in 1965 included ownership of approximately 100+ Canal Parcels. Approximately 95% of the Canal Parcels are undevelopable and range between 25 and 66 feet in width and between 0.01 to 2.0 acres in size. Currently, there are active license agreements on some of the Riverside Canal and Gage Canal parcels (Canal Parcels) with permissible uses such as utility crossings by other utility companies/cities, vehicular ingress and egress, access to landlocked parcels, parking, bridge crossings, and landscaping.
Over the years, rental amounts for the active licenses were as low as $1.00 per year, with the only consideration that the licensee be responsible for property maintenance and weed abatement of the Canal Parcels. Rental rates were inconsistent, with some carrying a fixed rental rate and others having annual increases. In several cases, annual rents were waived in lieu of the licensee making major canal/waterline improvements and relocations to accommodate development at the licensee’s sole cost and expense. On April 10, 2017, the Board of Public Utilities (Board) recommended the approval of establishing a set and uniform rental fee for the issuance of Canal License Agreements for permitted uses for undevelopable Riverside Canal and Gage Canal parcels. City Council approved this item on May 9, 2017, and directed staff to return to City Council every five years to update the rental rates and fees.
DISCUSSION:
The integrity of the canal structures and protection of the City’s irrigation and domestic water is foremost. As a condition of approval for use of all Canal Parcels, canals, waterlines and their related City-owned or operated appurtenances must be always protected. No permanent structures of any kind are permitted on Canal Parcels, and City staff must always have 24/7 access. All improvements required and made by a licensee, at the licensee’s sole cost and expense, must be reviewed and approved by City/RPU staff prior to the proposed use and/or commencement of any work.
In 2017, a standardized and more equitable rental fee for the use of undevelopable Canal Parcels was approved at $0.15 per square foot annually for single-family residential and open space zones, and $0.60 per square foot annually for multi-family, commercial, and industrial zones with 2% annual escalations.
An update for the rental rates and fees for the Canal Parcel rates was directed to occur every five years. Since the last rental rates were approved, staff has successfully renegotiated six license agreements. Of the six renegotiated license agreements, only one did not meet the previously approved standard and was taken to the Board of Public Utilities and City Council for independent approval.
With consideration of increased property values over the past five years, staff recommends a 10% increase to the current rental fees which essentially provides for a 2% annual increase. For illustrative purposes:
Physical
Use
Current Rental Rate
Proposed Rental Rate
Minimum
Annual Fee
Annual Rent Increase
Open Space or Single-Family Residential
$0.15 PSF
$0.17 PSF
(rounded up)
$300
(unchanged)
2%
(unchanged)
All Other Uses
(Multi-Family, Commercial, Industrial, etc.)
$0.60 PSF
$0.66 PSF
$300
(unchanged)
2%
(unchanged)
The proposed new rate structure also clarifies rental rates by “physical use” rather than the adjacent zoning (as was done previously). For example, any licensee conducting commercial business on a canal parcel adjacent to a single-family residential zone will now be charged the appropriate all other use rate of $0.66 per square foot annually. Also, all utility companies with utility crossings on Canal Parcels shall only pay the minimum annual fee of $300.
All other previously approved terms shall remain the same. For example, all licensees will continue to be responsible for all property maintenance, weed abatement (at the licensee’s sole cost and expense), and any licensee’s use shall continue not to interfere with the primary function of the City’s use of the property.
All existing license agreements will continue at their current rental rate until their expiration. The renewals will be at the new rate as approved by Board and Council. Should any future license agreement fall outside of the parameters of this staff report, that license agreement would be presented to the Board of Public Utilities and City Council for consideration separately.
The Utilities General Manager has reviewed and concurs with this report.
STRATEGIC PLAN ALIGNMENT:
This item contributes to Strategic Priority 5 – High Performing Government and Goal 5.4 - by continuing to stimulate revenue through the licensing of City-owned Canal Parcels in a manner that promotes a consistent and uniformed payment structure.
This item aligns with each of the five Cross-Cutting Threads as follows:
Community Trust: Establishing new rental rates for all license agreements for Canal Parcels in an open session/community forum demonstrates that Riverside is committed to community trust and makes decisions based on the public’s best interest.
Equity: Establishing new rental rates for license agreements for Canal Parcels demonstrates that Riverside is committed to equality and fairness for all licenses of Canal Parcels.
Fiscal Responsibility: Establishing new rental rates for license agreements for Canal Parcels demonstrates that Riverside is committed to fiscal responsibility by creating a consistent level of licensing that will allow for greater revenue accountability/responsibility and good active partnerships.
Innovation: Establishing new rental rates for license agreements for Canal Parcels demonstrates that Riverside is innovative in creating community trust, equity, and fiscal responsibility for all licenses for Canal Parcels.
Sustainability and Resiliency: Establishing new rental rates for license agreements for Canal Parcels demonstrates that Riverside has the capacity to adapt to meet the changing needs of licensees across the City.
FISCAL IMPACT:
The fiscal impact is unknown at this point in time. This action will result in new and increased revenue upon approval of negotiated and renegotiated canal license agreements. Future proceeds will be deposited into Water Fund, Land and Building Rental, revenue account number 0000520-373100.
Prepared by: David Welch, Community & Economic Development Director Certified as to
availability of funds: Edward Enriquez, Chief Financial Officer/City Treasurer Approved by: Rafael Guzman, Assistant City Manager
Approved as to form: Phaedra A. Norton, City Attorney
Canal Parcel Rental Fees - Page 1