South Pasadena City Council
June 15, 2022

Analysis
Assessments are computed based on the number of equivalent single-family dwelling units (EDU) in the LLMD. The equivalent dwelling unit calculation is adjusted for commercial, vacant, and multi-residential property in a manner detailed on pages eight and nine in the Engineer’s Report, provided in Attachment 2. Local benefits are divided into four zones depending upon the type of street lighting in the neighborhood. • Zone 1 - Properties adjacent to major thoroughfares, which are served by higher levels of lighting compared to residential areas.
• Zone 2 - Properties which are primarily residential and served by streetlights owned and maintained by the City.
• Zone 3 - Properties which are primarily residential and served by streetlights owned and maintained by Southern California Edison.
• Zone 4 - Properties in areas without local street lighting, and which pay no local benefit assessment.

The annual assessment rates for a single-family property in each of these zones are as follows:

Assessment ($/EDU)
Zone City Wide Local
Benefits
Total
1 $71.26 $25.85 $97.12
2 $71.26 $32.83 $104.09
3 $71.26 $7.66 $78.92
4 $71.26 None $71.26
Properties owned by the City (parks, municipal facilities, etc.), the South Pasadena Unified School District, the State (Caltrans properties), or the U.S. Government (post office) are exempt from LLMD assessments.

As a result of Proposition 218 (Prop 218), the City cannot increase the proposed assessments without going through a public ballot process. The City Council has supported staff’s recommendation to rely on an exemption to Prop 218, that allows the renewal of the LLMD assessments, provided the rates are not changed. If the assessment rates are changed, then the balloting requirements under Prop 218 must be fulfilled.

In January 2017, a ballot to increase assessments was performed. The final tally of the vote was 60.9% opposed and 39.1% in favor of the new assessments. As a result, assessment rates remained unchanged. In the FY 2022-2023 report, there is no proposed change to the assessments.
24 - 2
Approving LLMD Annual Levy and Collection of Assessments for FY 2022-2023 June 15, 2022

Next Steps
As shown in the Attachment 3 schedule, in August 2022, Harris & Associates will submit the assessments to the Los Angeles County (County) Auditor-Controller’s Office to include assessments in the property tax bills that are mailed to property owners in the Fall of 2022.

Fiscal Impact
On page five of the Preliminary Engineer’s Report, the LLMD estimated cost for FY 2022-2023 is $1,526,821. This has since been recalculated to $1,603,282 during the FY 2022-2023 annual budget adoption process. Annual LLMD revenue is approximately one million dollars, and therefore, funds from the City’s General Fund cover the shortfall between assessment revenue and LLMD costs as demonstrated in the FY 2022-2023 proposed annual budget (Attachment 4). The consulting services of Harris & Associates have been engaged to prepare the Engineer’s Report reflecting individual parcel assessments including recordation with the County.

Community Outreach
The public will have an opportunity to speak on this matter during tonight’s Public Hearing. A copy of the attached Engineer’s Report is available for viewing on the City’s website.

Public Notification of Agenda Item
The public was made aware that this item was to be considered this evening by Notice of Public Hearing posted in the Pasadena Star News.

Attachments:

1. LLMD Resolution to Confirm Annual Levy and Collection of Assessments for Fiscal Year 2022-2023

2. FY 2022-2023 Street Lighting and Landscaping Maintenance District Assessment Engineer’s Report

3. LLMD Proceedings Schedule

4. Proposed FY 2022-2023 Budget Page 18 – Demonstrating General Fund to LLMD Fund Transfer
24 - 3
Attachment 1
LLMD Resolution to Confirm Annual Levy and
Collection of Assessments for Fiscal Year 2022-2023
24 - 4
RESOLUTION NO. _____

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF SOUTH PASADENA, CALIFORNIA,
CONFIRMING THE FISCAL YEAR 2022-23 ANNUAL LEVY AND

COLLECTION OF ASSESSMENTS CERTAIN MAINTENANCE IN

AN EXISTING DISTRICT PURSUANT TO THE PROVISIONS OF
DIVISION 15, PART 2 OF THE STREETS AND HIGHWAYS

CODE OF THE STATE OF CALIFORNIA
WHEREAS, the City Council of the City of South Pasadena (City Council), California, has previously formed a Street Lighting and Landscaping Maintenance District pursuant to the terms and provision of the “Landscaping and Lighting Act of 1972,” Division 15, Part 2 of the Streets and Highways Code of the State of California, in what is known and designated as City of South Pasadena (City), Lighting and Landscaping Maintenance District (District) for Fiscal Year 2022-23; and
WHEREAS, on May 18, 2022, the City Council approved the Engineer’s Report and adopted the Resolution of Intention for the annual levy and collection of assessments for Fiscal Year 2022-23 to provide for the costs and expenses necessary for continued maintenance of improvements within said District to set a time and place for a Public Hearing on June 15, 2022 at 7:00 p.m.; and WHEREAS, the proposed assessment rates for Fiscal Year 2022-23 shall not increase over the assessments rates levied in Fiscal Year 2021-22; and WHEREAS, the City Clerk did proceed to give notice of the time and place for the Public Hearing on all matters relating to said annual levy of the proposed assessment; and
WHEREAS, at this time, this City Council has heard all testimony and evidence and is desirous of proceeding with said annual levy of assessments.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SOUTH

PASADENA, CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS:

SECTION 1. That the above recitals are all true and correct.

SECTION 2. That upon the conclusion of the Public Hearing, written protest filed, and not withdrawn, are overruled and denied.

SECTION 3. That the estimates of costs, the assessment diagram, the assessments, and all other matters, as set forth in the Engineer’s Report, 24 - 5
pursuant to said “Landscaping and Lighting Act of 1972,” as submitted, are hereby approved, adopted by this City Council and hereby confirmed.

SECTION 4. That the maintenance work of improvements contemplated by the Resolution of Intention shall be performed pursuant to law and the County Auditor shall enter on the County Assessment Roll the amount of the Assessment and said Assessment shall then be collected at the same time and in the same manner as the County taxes are collected.

SECTION 5. That the City has previously established a special fund known as:

CITY OF SOUTH PASADENA

LIGHTING AND LANDSCAPING MAINTENANCE DISTRICT
into which the City shall place all monies collected by the Tax Collector pursuant to the provisions of the resolution and the law and said transfer shall be made and accomplished as soon as said monies have been made available to the City.

SECTION 6. That the City Clerk is hereby ordered and directed to file a certified copy of the diagram and assessment roll with the County Auditor, together with a certified copy of this resolution upon its adoption.

SECTION 7. That a certified copy of the assessment and diagram shall be filed in the Office of the City Engineer, with a duplicate copy on file in the Office of the City Clerk and open for public inspection.

SECTION 8. The City Clerk of the City of South Pasadena shall certify to the passage and adoption of this resolution and its approval by the City Council and shall cause the same to be listed in the records of the City.

PASSED, APPROVED AND ADOPTED ON this 15th day of June, 2022.

Michael A. Cacciotti, Mayor
ATTEST: APPROVED AS TO FORM:

Christina A. Muñoz Andrew L. Jared, City Attorney
Deputy City Clerk
24 - 6
I HEREBY CERTIFY the foregoing Resolution No. XXXX was duly adopted by the City Council of the City of South Pasadena, California, at a regular meeting held on the 15th day of June, 2022, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAINED:
____
Christina A. Muñoz, Deputy City Clerk
24 - 7
Attachment 2
Fiscal Year 2022-23 Street Lighting and
Landscaping Maintenance District Assessment
Engineer’s Report
24 - 8
ENGINEER’S
REPORT

CITY OF SOUTH PASADENA

STREET LIGHTING AND

LANDSCAPING MAINTENANCE

DISTRICT
Fiscal Year 2022-23
24 - 9
Table of Contents

1. Certifications .................................................................................................. 1

2. Report ......................................................................................................... 2

3. Part A – Plans and Specifications ................................................................. 4

4. Part B – Estimate of Cost ............................................................................. 5 Estimate of Cost .................................................................................... 5 Fund Balance ........................................................................................ 6

5. Part C – Method of Apportionment ............................................................. 7 General ................................................................................................. 7 Impact of Proposition 218 ..................................................................... 7 Equivalent Dwelling Unit Assessment Methodology ............................. 8 EDU Rates by Land Use ......................................................................... 9 Inventory of Parcels .............................................................................. 9 District Benefits .................................................................................. 10 Types of Benefit .................................................................................. 10 Zones of Benefit .................................................................................. 11 EDUs Per Zone .................................................................................... 11 Citywide Benefit .................................................................................. 12 Citywide Benefit Per EDU .................................................................... 12 Local Benefit ...................................................................................... 12 Local Benefit Per EDU ........................................................................ 13 Assessment Summary ........................................................................ 13 Assessment Rates .............................................................................. 14

6. Part D – Assessment Diagram .................................................................... 15

7. Part E – Assessment Roll ........................................................................... 16 24 - 10
1 1. CERTIFICATIONS

ENGINEER'S REPORT

CITY OF SOUTH PASADENA

STREET LIGHTING AND LANDSCAPING MAINTENANCE DISTRICT
The undersigned acting on behalf of Harris & Associates, respectfully submits the enclosed Engineer’s Report as directed by City Council pursuant to the provisions of Section 4 of Article XIIID of the California Constitution, and provisions of the Landscaping and Lighting Act of 1972, Section 22500 et seq. of the California Streets and Highways Code. The undersigned certifies that she is a Professional Engineer, registered in the State of California.

DATED: May 18, 2022
BY: Alison Bouley, P.E.

R.P.E. No. C61383
I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Assessment Diagram thereto attached, was filed with me on the day of , 2022.

Christina Muñoz, Deputy City Clerk
City of South Pasadena
Los Angeles County, California
By
I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Assessment Diagram thereto attached, was approved and confirmed by the City Council of the City of South Pasadena, California, on the day of , 2022.

Christina Muñoz, Deputy City Clerk
City of South Pasadena
Los Angeles County, California
By
24 - 11
2 2. REPORT

CITY OF SOUTH PASADENA
FISCAL YEAR 2022-23

ENGINEER'S REPORT

PREPARED PURSUANT TO THE PROVISIONS OF THE
LANDSCAPING AND LIGHTING ACT OF 1972
SECTION 22500 THROUGH 22679

OF THE CALIFORNIA STREETS AND HIGHWAYS CODE,

ARTICLE XIIID OF THE CALIFORNIA CONSTITUTION, AND
THE PROPOSITION 218 OMNIBUS IMPLEMENTATION ACT
(GOVERNMENT CODE SECTION 53750 ET SEQ.)
Pursuant to Part 2 of Division 15 of the Streets and Highways Code of the State of California, Article XIIID of the California Constitution (Proposition 218), and the Proposition 218 Omnibus Implementation Act and in accordance with the Resolution of Initiation, adopted by the City Council of the City of South Pasadena, State of California, in connection with the proceedings for:

CITY OF SOUTH PASADENA

STREET LIGHTING AND LANDSCAPING MAINTENANCE DISTRICT
Hereinafter referred to as the "Assessment District" or the "District", I, Alison Bouley, P.E., the authorized representative of Harris & Associates, the duly appointed ENGINEER OF WORK, submit herewith the "Report" consisting of five (5) parts as follows:

PART A

PLANS AND SPECIFICATIONS
Plans and specifications for the improvements are as set forth on the lists thereof, attached hereto, and are on file in the Office of the City Engineer and are incorporated herein by reference.

PART B

ESTIMATE OF COST
An estimate of the costs of the proposed improvements, including incidental costs and expenses in connection therewith, is as set forth on the lists thereof, attached hereto, and are on file in the Office of the City Clerk and incorporated herein by reference.
24 - 12
3 PART C

METHOD OF APPORTIONMENT
The method of apportionment of assessments, indicating the proposed assessment of the net amount of the costs and expenses of the improvements to be assessed upon the several lots and parcels of land within the District, in proportion to the estimated benefits to be received by such lots and parcels.

PART D

ASSESSMENT DIAGRAM
The Diagram of the District Boundaries showing the exterior boundaries of the Assessment District and the lines and dimensions of each lot or parcel of land within the Assessment District. The lines and dimensions of each lot or parcel within the Assessment District are those lines and dimensions shown on the maps of the Assessor of the County of Los Angeles for the fiscal year to which this Report applies. The Assessor's maps and records are incorporated by reference herein and made part of this Report.

PART E

ASSESSMENT ROLL
A listing of the amounts to be assessed on each benefited lot or parcel of land within the District in Fiscal Year 2022-23.

24 - 13
4 3. PART A - PLANS AND SPECIFICATIONS
The facilities, which have been constructed within the City of South Pasadena, and those which may be subsequently constructed, will be operated, serviced and maintained as generally described as follows:

DESCRIPTION OF IMPROVEMENTS

FOR THE CITY OF SOUTH PASADENA

STREET LIGHTING AND LANDSCAPING MAINTENANCE DISTRICT
FISCAL YEAR 2022-23
The proposed improvements for Fiscal Year 2022-23 may be generally described as the continued maintenance and operation of streets and sidewalks within the Assessment District, including the construction, operation, servicing and maintenance of landscaping, lighting and appurtenant facilities, including but not limited to, personnel, electrical energy, utilities such as water, materials, contracting services, and other items necessary for the satisfactory operation of these services described as follows:
• Landscaping and Appurtenant Facilities. Landscaping, planting, shrubbery, trees, irrigation systems, hardscapes, fixtures, sidewalk and curb and gutter maintenance adjacent to street trees, and appurtenant facilities, in public street and sidewalk rights-of-way, including parkways, medians and dedicated easements within the boundary of said Assessment District. • Lighting and Appurtenant Facilities. Poles, fixtures, bulbs, conduits, equipment including guys, anchors, posts and pedestals, metering devices and appurtenant facilities as required to provide safety lighting and traffic signals in public street and sidewalk rights-of-way and easements within the boundaries of said Assessment District. Servicing of the Southern California Edison Companyowned lights shall be furnished by Southern California Edison Company or its successors or assignees and shall be adequate for the intended purpose. Rates for power and maintenance shall be authorized by the Public Utilities Commission, State of California.

Maintenance means the furnishing of services and materials for the ordinary and usual maintenance, operation and servicing of the landscaping, public lighting facilities and appurtenant facilities, including repair, removal or replacement of all or part of any of the landscaping, public lighting facilities or appurtenant facilities providing for the life, growth, health and beauty of the landscaping, including cultivation, irrigation, trimming, spraying, fertilizing and treating for disease or injury; the removal of trimmings, rubbish, debris and other solid waste; and the cleaning, sandblasting and painting of walls and other improvements to remove or cover graffiti.

Servicing means the furnishing of water for the irrigation of the landscaping and the maintenance of any of the public lighting facilities or appurtenant facilities and the furnishing of electric current or energy, gas or other illuminating agent for the public lighting facilities, or for the lighting or operation of landscaping or appurtenant facilities.

The plans and specifications for the improvements, showing the general nature, location, and the extent of the improvements, are on file in the office of the City Clerk and are incorporated herein by reference. 24 - 14
5 4. PART B – ESTIMATE OF COST
Estimate of Cost
Estimated costs for Fiscal Year 2022-23 for the construction, operation, servicing and maintenance of the landscaping and lighting facilities described in Part A are shown in the following table.

ESTIMATE OF COST
Land Use Category Local Citywide District Total
I. Landscape Maintenance
Street Tree Maintenance 1 $0 $556,171 $556,171
Street Tree Removal and
Replacement
$0 $150,000 $150,000
Median Landscape Maintenance $0 $138,750 $138,750
Landscape Maintenance Totals: $0 $844,921 $844,921
II. Street Lighting and Traffic Signals 2
Major Thoroughfare Street
Lighting 3
$52,635 $157,905 $210,540
City-Owned Street Lighting $87,725 $0 $87,725
Edison-Owned Street Lighting $52,635 $0 $52,635
Street Lighting Subtotal $192,995 $157,905 $350,900
Traffic Signals $0 $311,000 $311,000
Street Lighting and Traffic Signal
Totals:
$192,995 $468,905 $661,900
III. Other Costs
Capital Improvements $0 $0 $0
Damage to City Property $0 $0 $0
Administrative Costs 4 $0 $20,000 $20,000
Other Costs Totals: $0 $20,000 $20,000
TOTAL COSTS: $192,995 $1,333,826 $1,526,821
Revenue
Assessment Revenue FY 2022-23 $161,915 $734,370 $896,285 Non-Assessed Benefit Amount $31,080 $599,456 $630,536
TOTAL REVENUE: $192,995 $1,333,826 $1,526,821
1 Street tree maintenance costs include city staff costs and contracted costs for street tree maintenance and street tree related sidewalk repair. 2 Street lighting costs include city staff costs and electricity. The street lighting total ($350,900) is allocated 60% to Major Thoroughfare ($210,540), 25% to City-Owned ($87,725) and 15% to Edison-Owned ($52,635). 3 Major Thoroughfare street lighting costs ($210,540) are allocated 25% to Local Zone 1 ($52,635) and 75% to Citywide ($157,905). 4 Administrative costs include city staff costs and contracted costs to manage the District and process the annual assessment levy. 24 - 15
6 Fund Balance
The 1972 Act requires that a special fund be setup for the revenues and expenditures of the District. Funds raised by assessment shall be used only for the purpose as stated herein. A contribution to the District by the City may be made to reduce assessments or to fund costs which are greater than revenue from the assessments, as the City Council deems appropriate. Any balance or deficit remaining on July 1 must be carried over to the next fiscal year. Estimated beginning and ending fund balances for Fiscal Year 2022-23 are shown in the following table:

FUND BALANCE
Description Amount
Fiscal Year 2021-22
Beginning Balance (July 1, 2021) $294,946
FY 2021-22 Budget Surplus/(Deficit) ($331,596)
Contribution from Other Sources $4,800
Estimated Ending Balance (June 30, 2022): ($31,850)
Fiscal Year 2022-23
Estimated Beginning Balance (July 1, 2022) ($31,850)
Estimated FY 2022-23 Budget Surplus/(Deficit) ($630,536) Estimated Interest Earnings $4,800
Estimated Ending Balance (June 30, 2023): ($657,586)
24 - 16
7 5. PART C – METHOD OF APPORTIONMENT
General
Street and Highways Code Section 22573 requires that maintenance assessments be levied according to benefit rather than according to assessed value. This section states:
“
The net amount to be assessed upon lands within an assessment district may be apportioned by any formula or method which fairly distributes the net amount among all assessable lots or parcels in proportion to the estimated benefits to be received by each such lot or parcel from the improvements.
— Streets and Highways Code Section 22573
The 1972 Act permits the designation of areas of benefit within any individual assessment district if "by reason of variations in the nature, location, and extent of the improvements, the various areas will received different degrees of benefit from the improvements." (Sec. 22574). Thus, the 1972 Act requires the levy of a true "assessment" rather than a "special tax."
Impact of Proposition 218
In November 1996, the voters of California adopted Proposition 218, which has been codified as Articles XIIIC and XIIID of the California Constitution. Proposition 218 imposed a number of substantive and procedural requirements on taxes, assessments, and property-related fees imposed by local governments in California.
“Grandfathered” Assessments. Since the District Assessments were imposed prior to November 5, 1996, they are “grandfathered” under Article XIIID, Section 5(a) of the Constitution, which permits the continuation of assessments existing prior to the effective date of Proposition 218 so long as the assessments are imposed exclusively to finance the capital costs or maintenance and operation expenses for sidewalks, streets, sewers, water, flood control, drainage systems or vector control. Since 1997, the City elected to proceed with the “grandfathering” of the District which has allowed the annual renewal of the District Assessments at the rates that existed when Proposition 218 went into effect. Any increase above such rates must be in compliance with Proposition 218 and requires property-owner approval.

Maintenance Cost Inflation. There has been an increase of cost to provide services over the years which have increased the District expenditures. However, the revenues have stayed the same due to the Proposition 218 limitations. As a result, the street light, traffic signal, and tree maintenance have been deferred. In addition, due to combined drought and aging forestry, staff has observed a substantial number of dead and diseased trees along with an increase in the number of claims due to fallen tree branches. As District operations and maintenance costs have increased, either maintenance has been deferred or the City's General Fund has been used to subsidize a portion of the costs. For Fiscal Year 2022-23, it is estimated that the revenue shortfall for the District will be approximately $630,536. 24 - 17
8 Fiscal Year 2017/18 Proposed Assessment Rate Increase. In an attempt to generate additional revenues and eliminate the General Fund subsidy, the City proposed to form a new assessment District that would replace the existing assessment District if approved by property owners within the District by way of an assessment balloting procedure in compliance with Proposition 218. In January 2017, property owners were asked to vote in favor of, or against, the new District with increased rates that would be sufficient to cover District costs, as well as a built-in annual inflation factor to allow rate escalation to match up with cost inflation. The property owners did not vote in favor of the new District and the existing District remains in place.

Equivalent Dwelling Unit Assessment Methodology
The Equivalent Dwelling Unit method uses the single family home as the basic unit of assessment. A single family home equals one Equivalent Dwelling Unit (EDU). Every other land-use is converted to EDU's based on an assessment formula appropriate for the City. Multi-family and condominium parcels are converted to EDU's based on the number of dwelling units on each parcel of land. Commercial and Industrial parcels are converted to EDU's based on the lot size of each parcel of land.

Single Family Residential. The single family parcel has been selected as the basic unit for calculation of the benefit assessments. This basic unit shall be called an Equivalent Dwelling Unit (EDU). Parcels designated as single family residential per the Los Angeles County land-use code are assessed 1 EDU.

Multi-Family Residential. Multi-family uses, as well as condominiums, are given a factor of .80 EDU per dwelling unit. Based on data from representative cities in Southern California, the multi-family residential factor of 80 percent is determined by the statistical proportion of relative trip generation from various types of residential uses, in combination with population density per unit.

Commercial/Industrial. Commercial/Industrial properties are designated as commercial, industrial, recreational, institutional or miscellaneous uses per the Los Angeles County land-use codes. In converting improved Commercial/Industrial properties to EDUs, the factor used is the City of South Pasadena's average single family residential lot size of 7,500 square feet, or 5.808 dwelling units per acre. The Commercial/Industrial parcels will be assessed 5.808 EDU for the first acre or any portion thereof, and then 25% of 5.808 EDUs (1.452) for every additional acre or portion thereof, as the utilization of that portion of non-residential property greater than one acre is reduced and will be treated as vacant land. The minimum number of EDUs per parcel will be 1 EDU.

Vacant Property. Vacant property is described as parcels with no improved structures. Property values in a community increase when public infrastructure is in place, improved, operable, safe, clean and maintained, all properties, including vacant parcels, receive benefits as this is the basis of their value. Based upon the opinions of professional appraisers, appraising current market property values for real estate in Southern California, the land value portion of a property typically ranges from 20 to 30 percent; in South Pasadena, we find that the average is about 50 percent. Additionally, the utilization of vacant property is significantly less than improved property and vacant property has a traffic generation rate of 0. Therefore, vacant property will be assessed at the rate of 25 percent of improved property.

Vacant Residential. Parcels defined as single family residential parcels which do not have structures on the parcels are assessed 25% of a single family dwelling. The parcels will be assessed 0.25 EDU per parcel.

Vacant Non-Residential. Parcels defined as parcels which are not single family residential and which do not have structures on the parcel are assessed based upon the acreage of the parcel. The parcels 24 - 18
9 will be assessed at the rate of 25% of the developed non-residential properties, or 1.452 EDU per acre or any portion thereof, with a minimum of 0.25 EDU per parcel.

Landlocked parcels and small parcels are not assessed; nor are public streets, public properties, utility easements, right-of-way, public schools, public parks, and common areas. These are all exempt parcels.

EDU Rates by Land Use
The land-use category for each parcel has been based on the Los Angeles County Assessor's Roll. A summary of EDU Rates by Land Use is shown below:

EDU RATES BY LAND USE
Land Use Category Basic Unit x EDU Factor EDU Rates
0 Exempt 1 Dwelling Unit x 0.0 0.00 EDU per Dwelling Unit 1 Single Family Residential (SFR) 1 Dwelling Unit x 1.0 1.00 EDU per Dwelling Unit 2 Multi-Family Residential / Condominiums 1 Dwelling Unit x 0.8 0.80 EDU per Dwelling Unit 3 Commercial / Industrial
Based on the average size for SFR
lots in the City of 7,500 SF which
equals 5.805 Dwelling Units / Acre
1 Acre x 5.808
1 Acre x 1.452

5.808 EDU per Acre
(first acre, minimum 1.00 EDU per Parcel)

1.452 EDU per Acre
(after first acre)
4 Vacant – Residential 1 Parcel x 0.25 0.25 EDU per Parcel 5 Vacant – Non-Residential 1 Acre x 1.452 1.452 EDU per Acre (minimum 0.25 EDU per Parcel)
Inventory of Assessed Parcels
Information from the Los Angeles County Assessor's Roll, Assessor's Parcel Maps, and the City of South Pasadena's Planning Department was utilized to create the inventory of parcels in the District. The total number of assessed parcels; residential units; commercial, industrial and vacant acreage and calculated EDUs for each land use category are shown in the following table:

INVENTORY OF ASSSESSED PARCELS
Land Use Category No. of Parcels Dwelling Units Acres EDUs 1 Single Family Residential (SFR) 4,390 4,390 N/A 4,390.00 2 Multi-Family Residential / Condominiums 2,020 6,512 N/A 5,209.60 3 Commercial / Industrial 322 N/A 121.93 650.74
4 Vacant – Residential 185 N/A N/A 46.25
5 Vacant – Non-Residential 29 N/A 3.51 8.91
District Totals: 6,946 10,902 125.44 10,305.50
24 - 19
10 District Benefits
Parcels within the District receive benefit from the maintenance and operation of District improvements.

Benefits received by parcels within the District are described below:

Landscaping. All parcels in the City receive benefit from the landscaping maintenance funded by the District. The City maintains trees and miscellaneous shrubbery throughout the City. The trees and shrubbery are located within the public street and sidewalk rights-of-way, including in medians and parkways.

The trees and shrubbery provide an aesthetically pleasing environment, shade, beautification, air purification and sound attenuation. These positive attributes increase the desirability of, and are special and direct benefits to, all properties throughout the City. Furthermore, trees and landscaping, if well maintained, provide beautification, shade and enhancement of the desirability of the surroundings.

Lighting. The proper functioning of street lighting is imperative for the welfare and safety of the public and property throughout the City. Proper maintenance and servicing of the street lighting system benefits properties within the District by providing proper illumination for ingress and egress and safe traveling at night. Proper operation of the street light system is imperative to public convenience, orderly traffic flow, enhanced congestion management and safety.

Improved security, fuel conservation, protection of property from crime and vandalism, and reduction of traffic accidents, are special and direct benefits to all properties within the City; lighting benefits are directly related to public safety and property protection and therefore increase desirability.

The City costs to administer the maintenance and operations of the improvements, including administration of the District, also provide benefit to all properties in the District.

Types of Benefit
There are two types of benefits that parcels receive from the maintenance and operation of the improvements as described below.

Citywide Benefits. Benefits which are received by all parcels in the City are considered to be Citywide Benefits, and the associated costs of these benefits are spread equally, based on Equivalent Dwelling Units, to all parcels within the District.

The maintenance of street trees and leaf debris removal, sidewalk, curb and gutter repair adjacent to trees throughout the City, medians on Huntington Drive, Monterey Avenue and Fair Oaks are Citywide Benefits. All of the landscaping maintenance budget is attributed to Citywide Benefits and is assessed to all parcels in the District.

Street lighting on the major thoroughfares provide Citywide Benefits, as all property in the City derive benefit from the convenience, safety and protection of people and property they provide. 75% of the Major Thoroughfare Street Lighting budget is attributed to Citywide Benefits and is assessed to all parcels in the District.

Local Benefits. Benefits which are not received by all parcels in the City are considered to be Local Benefits, and the associated costs of these benefits are spread equally, based on Equivalent Dwelling Units, to only those parcels within the District receiving such benefits. 24 - 20
11 Parcels that receive their local street lighting from the Edison-owned street lights within the City receive the same amount of Local Benefit and the budget for the Edison street light system is assessed equally, based on Equivalent Dwelling Units, to those parcels only.

Similarly, parcels that receive their local street lighting from the City-owned street lights within the City receive the same amount of Local Benefit and the budget for the City street light system is assessed equally, based on Equivalent Dwelling Units, to those parcels only.

Parcels that receive their local street lighting from the major thoroughfare street lights receive the same amount of Local Benefit and 25% of the budget for the major thoroughfare street light system is allocated to such benefit, the amount of which is assessed equally, based on Equivalent Dwelling Units, to those parcels only.

Zones of Benefit
There are two types of benefits that parcels receive from the maintenance and operation of the improvements as described below.

Zone 1. This zone consists of all property which is adjacent to the major thoroughfares in the District.

Local Benefit received from the major thoroughfare street lights, equal to 25% of the major thoroughfare street lighting budget is allocated to Zone 1 parcels.

Zone 2. This zone consists primarily of residential property which is served by the City street lighting system. Local Benefit received from the City street lights, equal to 100% of the City street lighting budget is allocated to Zone 2 parcels.

Zone 3. This zone consists primarily of residential property which is served by the Edison street lighting system. Local Benefit received from the Edison street lights, equal to 100% of the Edison street lighting budget, is allocated to Zone 3 parcels.

Zone 4. This zone consists of parcels which do not have Local Benefits from street lighting and, therefore, receive only the Citywide Benefits.

EDUs Per Zone
Citywide Benefits are allocated to all assessable parcels in the City pro rata based on the total number of Citywide EDUs. Local Benefits are allocated to parcels in their respective Zones pro rata based on the total number of Zone EDUs. The distribution of EDUs per Zone is shown below.

EDUS PER ZONE
Benefit Zone EDUs
Zone 1 (Major Thoroughfare Parcels) 1,884.10
Zone 2 (Residential Property – City-Owned Lights) 2,056.16 Zone 3 (Residential Property – Edison- Owned Lights) 5,964.39 Zone 4 (No Local Benefits – Citywide Benefits Only) 400.85 Total EDUs: 10,305.50
24 - 21
12 Citywide Benefit
All parcels within the City receive Citywide Benefits. The total amount of Citywide Benefits is shown in the following table:

CITYWIDE BENEFIT
Budget Item Benefit Amount
Street Tree Maintenance $556,171
Street Tree Removal and Replacement $150,000
Median Landscape Maintenance $138,750
Major Thoroughfare Street Lighting $157,905
Traffic Signals $311,000
Capital Improvements $0
Damage to City Property $0
Administrative Costs $20,000
Total Citywide Benefit: $1,333,826
Citywide Benefit Per EDU
The calculated assessment rate and the maximum assessment rate for Citywide Benefits are shown below:

CITYWIDE BENEFIT PER EDU
Budget Item EDUs
Total Citywide Benefit $1,333,826
Divided by Total Citywide EDUs ÷ 10,305.50
Calculated Citywide Benefit Per EDU $129.43
Maximum Citywide Benefit Per EDU: $71.26
Local Benefit
Parcels located within each Zone receive Local Benefits for their specific Zone. The total amount of Local Benefits for each Zone are shown in the first table on the following page. 24 - 22
13 LOCAL BENEFIT
Budget Item Zone 1 Zone 2 Zone 3 Zone 4 Local Total
Major Thoroughfare $52,635 $0 $0 $0 $52,635
City-Owned Street
Lights
$0 $87,725 $0 $0 $87,725
Edison-Owned
Street Lights
$0 $0 $52,635 $0 $52,635
Total Local Benefit: $52,635 $87,725 $52,635 $0 $192,995 Local Benefit Per EDU
The calculated assessment rate and the maximum assessment rate for Local Benefits for each Zone are shown in the following table:

LOCAL BENEFIT PER EDU
Description Zone 1 Zone 2 Zone 3 Zone 4
Total Local Benefit $52,635.00 $87,725.00 $52,635.00 $0.00 Divided by Total Zone
EDUs
÷ 1,884.10 ÷ 2,056.16 ÷ 5,964.39 ÷ 400.85
Calculated Local Benefit
Per EDU
$27.94 $42.66 $8.82 $0.00
Maximum Local Benefit
Per EDU:
$25.86 $32.83 $7.66 $0.00
Assessment Summary
The calculated assessment amount and the maximum assessment amount for each Zone, including both Citywide Benefits and Local Benefits are shown in the following table:

ASSESSMENT SUMMARY
Description Zone 1 Zone 2 Zone 3 Zone 4 Local Total
Calculated Citywide Benefit Assessment $243,857 $266,125 $771,963 $51,881 $1,333,826 Calculated Local Benefit Assessment $52,635 $87,725 $52,635 $0 $192,995 Total Calculated Benefit Assessment: $296,492 $353,850 $824,598 $51,881 $1,526,821 Maximum Citywide Benefit Assessment $134,261 $146,522 $425,023 $28,565 $734,371 Maximum Local Benefit Assessment $48,724 $67,503 $45,687 $0 $161,914 Total Maximum Benefit Assessment: $182,985 $214,025 $470,710 $28,565 $896,285 Non-Assessed Benefit Amount: $113,507 $139,825 $353,888 $23,317 $630,536 24 - 23
14 Assessment Rates
The calculated assessment rates and the maximum assessment rate for each Zone, including both Citywide Benefits and Local Benefits, are shown in the following table.

ASSESSMENT RATES
Description Zone 1 Zone 2 Zone 3 Zone 4
Calculated Citywide Rate Per
EDU
$129.43 $129.43 $129.43 $129.43
Calculated Local Rate Per EDU $27.94 $42.66 $8.82 $0.00 Total Calculated Rate Per EDU: $157.36 $172.09 $138.25 $129.43 Maximum Citywide Rate Per
EDU
$71.26 $71.26 $71.26 $71.26
Maximum Local Rate Per EDU $25.86 $32.83 $7.66 $0.00
Total Maximum Rate Per EDU: $97.12 $104.09 $78.92 $71.26 Non-Assessed Rate Per EDU: $60.24 $68.00 $59.33 $58.17

24 - 24
15 6. PART D – ASSESSMENT DIAGRAM
The boundaries of the District are coterminous with the boundaries of the City of South Pasadena. A diagram showing the exterior boundaries of the District and the lines and dimensions of each lot or parcel of land within the District has been submitted to the office of the City Clerk of the City of South Pasadena, and is hereby made a part hereof by reference.

A copy of the assessment diagram for the District is shown below.

CITY OF SOUTH PASADENA

STREET LIGHTING AND LANDSCAPING MAINTENANCE DISTRICT

ASSESSMENT DISTRICT DIAGRAM
LEGEND
Map Date: May 2021
N
24 - 25
16 7. PART E – ASSESSMENT ROLL
The assessment set forth for each parcel is shown on the Assessment Roll for the District, submitted separately, as "Assessment Roll for City of South Pasadena, Street Lighting & Landscaping Maintenance District, Fiscal Year 2022-23”, which is incorporated by reference herein and is on file in the Office of the City Clerk.

The Assessment Roll lists all parcels within the boundaries of the District as shown on the Assessment Diagram, Part D herein, and on the last equalized roll of the Assessor of the County of Los Angeles, which is by reference made part of this report along with the proposed assessment amount for each benefiting parcel.

A list of names and addresses of the owners of all parcels within this District is shown on the last equalized Property Tax Roll of the Assessor of the County of Los Angeles, which by reference is hereby made a part of this report. This list is keyed to the Assessor's Parcel Numbers as shown on the Assessment Roll on file in the office of the City Clerk of the City of South Pasadena. www.WeAreHarris.com
Pat Perinich
Senior Project Analyst
[email protected]
P: 949.943.9709
24 - 26
Attachment 3
Landscaping Maintenance District Assessment
Proceedings Schedule
24 - 27
City of South Pasadena
Street Lighting and Landscaping Maintenance District
FY 2022/23 Assessment Levy Schedule as of March 3, 2022 MARCH 4
Harris to review City Council Meeting #1 Staff Report and Resolution and provide comments for council agenda
MARCH 15
City staff to begin developing annual budget and Harris to begin updating parcel database and preparing engineer’s report APRIL 1
City staff to provide Harris with annual budget information APRIL 6 - 7:00 pm
City Council Meeting #1 (Resolution of Initiation)
City Council Chambers, 1424 Mission Street
APRIL 27
Harris to review City Council Meeting #2 Staff Report and Resolution and provide comments for council agenda, Harris to provide engineer’s report for council agenda
MAY 18 - 7:00 pm
City Council Meeting #2 (Resolution of Intention)
City Council Chambers, 1424 Mission Street
MAY 26
Harris to review City Council Meeting #3 Staff Report and Resolution and provide comments for council agenda,
JUNE 3
Last Day for City to Publish Notice of Public Hearing
JUNE 15 - 7:00 pm
City Council Meeting #3 (Public Hearing)
City Council Chambers, 1424 Mission Street

MONTH OF JULY
Harris updates District database parcel changes and prepares levy files.

Harris works with City Staff to gather required levy submittal documentation.

AUGUST 9
Harris submit levy to County Auditor-Controller for collection. Harris then researches levy rejects, if any, and provides resubmittal information to the County. Upon acceptance of final levy by County, Harris provides levy confirmation to City .

MARCH

S M T W T F S
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31
APRIL

S M T W T F S
1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30
MAY

S M T W T F S
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31
JUNE

S M T W T F S
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30
JULY

S M T W T F S
1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30
31 AUGUST

S M T W T F S
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 20 31
ENGINEER’S
REPORT
CITY

COUNCIL
MEETING #1
LEVY

SUBMITTAL
CITY

COUNCIL
MEETING #2
CITY

COUNCIL
MEETING #3
24 - 28
Attachment 4
Proposed FY 2022-2023 Budget Page 18 -
Demonstrating General Fund to LLMD Fund
Transfer
24 - 29

CITY OF SOUTH PASADENA REVENUE DETAIL
PROPOSED BUDGET | FISCAL YEAR 2022-23 18
Actual Actual Unaudited
Actual Budgeted Estimated Proposed
Acct Account Title 2018/19 2019/20 2020/21 2021/22 2021/22 2022/23 5310-000 Sewer Service Charges 1,627,051 1,959,372 2,108,764 2,100,551 2,100,551 2,100,551 5315-000 Penalty - Sewer 5,978 3,071 - 5,000 5,000 5,000 5335-000 Water Impact Fees (160,907) - - - - -
Charges for Current Services 1,472,121 1,962,443 2,108,764 2,105,551 2,105,551 2,105,551 5505-000 Miscellaneous - - - - - -
5550-000 Prior Year Adjustment - - - - - -
Other Revenue - - - - - -
210 - SEWER TOTAL 1,625,491 2,148,137 2,133,163 2,165,551 2,165,551 2,165,551 5071-006 Federal Grant - Rogan HR 5394 108 - - - - -
Revenue From Other Agencies 108 - - - - -
9911-000 Transfers from Other Fund - - - 23 23 -
Transfers In - - - 23 23 -
108 - - 23 23 -
XXXX-000SB2 Planning Grant - - - - - 160,000
Revenue From Other Agencies - - - - - 160,000
213 - SB2 PLANNING GRANT TOTAL - - - - - -
4100-000 Street Light Assessments 893,205 890,461 892,903 900,000 900,000 900,000 Assessments & Special Taxes 893,205 890,461 892,903 900,000 900,000 900,000 4800-000 Interest Income 5,018 3,834 1,862 4,000 4,000 4,000 Use of Money & Property 5,018 3,834 1,862 4,000 4,000 4,000 5430-000 Damage to City Property - - - - - -
5501-012 Donations - Tree Dedications 4,476 11,727 13,536 10,000 5,000 5,000 Other Revenue 4,476 11,727 13,536 10,000 5,000 5,000
9911-000 Transfers from Other Fund 25,000 200,597 - 68,953 68,953 383,079 Transfers In 25,000 200,597 - 68,953 68,953 383,079
927,698 1,106,620 908,301 982,953 977,953 1,292,079
4800-000 Interest Income 2,811 2,398 822 1,000 1,000 1,000 Use of Money & Property 2,811 2,398 822 1,000 1,000 1,000 5250-000 PEG Fees 7,104 23,744 9,074 18,000 18,000 10,000 Revenue From Other Agencies 7,104 23,744 9,074 18,000 18,000 10,000 217 - PUBLIC, EDUC., & GOV'T. TOTAL 9,915 26,142 9,896 19,000 19,000 11,000 4800-000 Interest Income 3,621 3,285 1,697 1,500 1,500 1,500 4802-000 Gain / Loss on Investments 58 36 121 - - -
4805-000 Unrealized Gain / Loss 1,097 1,326 (1,224) - - - Use of Money & Property 4,776 4,646 594 1,500 1,500 1,500 5082-000 AB 2766 (SCAQMD) Fees 33,784 33,136 33,243 33,200 33,200 33,200 Revenue From Other Agencies 33,784 33,136 33,243 33,200 33,200 33,200 218 - CLEAN AIR ACT TOTAL 38,561 37,782 33,836 34,700 34,700 34,700 XXXX-000CalRecycle SB1383 Local Asst. Gr - - - - 35,000 - Revenue From Other Agencies - - - - 35,000 -
219 - CALRECYCLE GRANT TOTAL - - - - 35,000 -
4800-000 Interest Income 1,380 85 20 500 500 500
Use of Money & Property 1,380 85 20 500 500 500
5412-000 Business Improvement Tax 61,654 53,771 67,454 55,790 55,790 60,000 5412-001 BIT - Filming Permits 29,747 26,615 30,086 22,240 22,240 26,000 Other Revenue 91,401 80,386 97,540 78,030 78,030 86,000 92,781 80,471 97,560 78,530 78,530 86,500
4800-000 Interest Income 1,239 966 299 - - -
Use of Money & Property 1,239 966 299 - - -
1,239 966 299 - - -
211 - CTC TRAFFIC IMPROVEMENT
TOTAL
215 - STREET LIGHT & LANDSCAPE
TOTAL
220 - BUSINESS IMPROVEMENT TAX
TOTAL
223 - GOLD LINE MITIGATION FUND
TOTAL
24 - 30
25 - 1
25 Recommendation of FY22-23 Water Conservation Program & Stage 2 Water Shortage June 15, 2022

State Water Project (SWP) supplies. On May 11, 2022, the Upper San Gabriel Valley Municipal Water District (Upper District) Board of Directors also adopted an Emergency Water Conservation Program encouraging all of Upper District’s retail water agencies (including the City) to reduce water use by twenty percent (20%) and limit outdoor irrigation to two (2) days per week.

Analysis
Annually, the City Council has adopted a water conservation program that includes rebates, education/outreach, water conservation material, and projects to promote water conservation throughout the City.

With a total budget of $115,000 for the water conservation program, the following table shows the budgeted allocations for each program for the current fiscal year (2021- 2022). The table also includes expended funds for the MWD rebates as of April 30, 2022 and the expended funds for City rebates, water-use surveys, and water conservation promotion as of April 30, 2022. Lastly, the table includes the proposed budget allocations for Fiscal Year 2022-2023.

Given the low participation in rebates, especially for the commercial programs, Staff proposes to reduce the allocations for MWD Commercial and City Commercial rebates from $20,000 each to $10,000 each, and instead appropriate the funding to add a Greywater Pilot Program in the amount of $20,000.

Proposed FY 2022-23 vs. Budgeted and Expended FY 2021-22 Water Conservation Rebate and Program Funding
Water Conservation
Rebate/Program
FY 2021-22
Budgeted
FY 2021-
22 Expended
(July 1 –
April 30)
FY 2022-23
Proposed
Difference
from FY
2021-22 to
FY 2022-23
MWD Additional Rebate Funding
– Residential $25,000 $10,699.67 $25,000 -
MWD Additional Rebate Funding
– Commercial $20,000 $750 $10,000 ($10,000)
City Rebate Program -
Residential $20,000 $2,494.41 $20,000 -
City Greywater Rebate Pilot
Program – Residential Only - - $20,000 $20,000
City Rebate Program -
Commercial $20,000 $0.00 $10,000 ($10,000)
25 - 2
Recommendation of FY22-23 Water Conservation Program & Stage 2 Water Shortage June 15, 2022

Proposed FY 2022-23 vs. Budgeted and Expended FY 2021-22 Water Conservation Rebate and Program Funding
Water Conservation
Rebate/Program
FY 2021-22
Budgeted
FY 2021-
22 Expended
(July 1 –
April 30)
FY 2022-23
Proposed
Difference
from FY
2021-22 to
FY 2022-23
Water-Use Surveys $5,000 $0.00 $5,000 -
Water Conservation Promotion $25,000 $0.00 $25,000 -
TOTAL: $115,000 $13,944.08 $115,000 -
The following conservation programs are proposed for Fiscal Year 2022-23:

City Co-Funded Metropolitan Water District Rebates
The Metropolitan Water District (MWD) offers residential and commercial rebates on indoor and outdoor devices as well as turf removal through their SoCalWater$mart Program. In addition, the City adds supplemental funds to these rebates. Residents and business owners can apply for these rebates directly through the SoCalWater$mart website and receive rebate checks that include both the MWD rebate and City contributions. Per NREC’s analysis and recommendation, co-funding amounts for the 2022-23 fiscal year will be increased for several items. See Tables 1 and 2 in Attachment 1 for a complete list of MWD rebates and changes to the City co-funding amounts for Fiscal Year 2022-23.

City Rebate Program
In addition to the MWD rebates, the City of South Pasadena implements its own program that offers rebates on water conservation devices and landscaping that are not offered through MWD. The City rebates address local water conservation needs and further encourage South Pasadena residents and business owners to implement water saving practices and play an active role in conserving our water sources. The City currently offers rebates for water efficient plants, native trees, drip irrigation conversion, and rotating sprinkler nozzles. Per NREC’s analysis and recommendation, rebate amounts for the 2022-23 fiscal year will be increased, the rotating sprinkler nozzle rebate will be removed, and City rebates for high efficiency dishwashers and multi-family clothes washers will be added. See Table 3 in the attachment for a complete list of changes to the City rebates for Fiscal Year 2022-

23. 25 - 3
Recommendation of FY22-23 Water Conservation Program & Stage 2 Water Shortage June 15, 2022

Greywater Pilot Program
Greywater is relatively clean wastewater from baths, sinks, washing machines, and other kitchen appliances. Instead of flushing greywater down the sewer, systems can be installed in homes to divert greywater to be used for other purposes such as watering gardens or landscaping, thus conserving water. The Fiscal Year 2022-23 Water Conservation Program will include a budget for a Greywater Pilot Program in the amount of $20,000. The preliminary program plans include workshops on greywater systems with an emphasis on Laundry-to-Landscape systems, which drain used laundry washing machine greywater from the household plumbing system to an outdoor garden. The program would also include a rebate for materials used to install a Laundry to Landscape system in the amount of $300 per household.

Residential and Commercial Water-Use Assessments
The City has partnered with San Gabriel Valley Council of Governments (SGVCOG) to promote their ‘eSGV Program’ (formerly known as the EASY Program), which offers free energy and water assessments for homeowners as well as renters.

Assessments can be completed virtually or in person. Residents can expect to receive a report with a list of steps they can take to conserve energy and water. City staff are working with SGVCOG to promote this program in conjunction with the rebate program.

Water Conservation Promotional Materials and Activities Since the pandemic, promotion for the water conservation program has been mostly virtual via the City blog, e-newsletter, and the City website at limited cost. Staff expects to continue these virtual efforts and boost promotion through additional efforts with higher visibility. These efforts include updating the water bills to include information on rebates, water restrictions, and reporting water waste; creating a free water conservation kit for residents, which would include buckets, low-flow aerators, and hose nozzles; installing water conservation street banners in partnership with Upper District; working with local vendors to display point-of-sale signage; and other print media. Funds can also be used for events, programs, outreach, and community classes related to water conservation education.

Declaring Stage 2: Water Supply Shortage
According to the Department of Water Resources (DWR), the water year that ended Sept. 30, 2021 was the second driest on record. Although December 2021 brought substantial rain and snowfall, insufficient precipitation in early 2022, including the driest January and February in recorded history, has left California in extreme drought conditions.

On April 26, 2022, the MWD Board of Directors declared a Water Shortage Emergency Condition and adopted an Emergency Water Conservation Program for areas that are dependent on State Water Project (SWP) supplies. On May 11, 2022, the Upper San Gabriel Valley Municipal Water District (Upper District) Board of Directors also adopted 25 - 4
Recommendation of FY22-23 Water Conservation Program & Stage 2 Water Shortage June 15, 2022

an Emergency Water Conservation Program encouraging all of Upper District’s retail water agencies (including the City of South Pasadena) to reduce water use by 20 percent and limit outdoor irrigation to two days per week.

In response to these extreme drought conditions, staff recommends the City move from Stage 1: Moderate Water Supply Shortage to a Stage 2: Serious Water Supply Shortage per the South Pasadena Municipal Code:

Stage 1:

Moderate Water Supply Shortage
Stage 2:

Serious Water Supply Shortage
Limits on Watering Days
Overhead watering of lawn, landscape or
other vegetated areas is limited to three
(3) designated days per week.
• Addresses ending in an even
number:

Monday, Wednesday, and Friday
• Addresses ending in an odd
number:

Tuesday, Thursday, and Saturday
Limits on Watering Days
Overhead watering of lawn, landscape or
other vegetated areas is limited to two (2)
designated days per week.
• Addresses ending in an even
number:

Monday and Thursday
• Addresses ending in an odd
number:

Tuesday and Friday
Obligation to Fix Leaks, Breaks or
Malfunctions
All leaks, breaks or other malfunctions
shall be repaired within seventy-two (72)
hours of notification.

Obligation to Fix Leaks, Breaks or
Malfunctions
All leaks, breaks or other malfunctions
shall be repaired within forty-eight (48)
hours of notification.

Limits on Filling Ornamental Lakes or
Ponds
None.

Limits on Filling Ornamental Lakes or
Ponds
Filling or re-filling ornamental lakes or
ponds is prohibited, except to the extent
needed to sustain aquatic life.

Recommended ten percent (10%) water
reduction for all customers.

Recommended twenty percent (20%)
water reduction for all customers.*
*The 20% reduction shall be calculated on an annual consumption basis (total units used from July 1, 2022 through June 30, 2023 compared to same period in the prior year).
25 - 5
Recommendation of FY22-23 Water Conservation Program & Stage 2 Water Shortage June 15, 2022

Exceptions:

Stage 2 water restrictions apply to any person in the use of any potable water except for the following water uses:
(a) Water necessary for public health and safety including fire suppression (b) Any use of recycled water
(c) The use of water by commercial nurseries and commercial growers to sustain plants, trees, shrubs, crops or other vegetation intended for resale (d) Hillside areas recovering from fire
(e) Landscape irrigation zones that exclusively use low flow drip type irrigation systems where no emitter produces more than two gallons of water per hour (f) Watering or irrigating by use of a hand-held bucket or similar container (g) Watering for very short periods of time for the express purpose of adjusting or repairing an irrigation system; or for maintenance of vegetation, including vegetable gardens, fruit trees and shrubs, intended for consumption.

Permanent Water Conservation Requirements:

The following water conservation requirements are effective at all times regardless of what water supply stage the City is in:
(a) Watering between the hours of 9:00 a.m. and 5:00 p.m. is prohibited (b) Excessive water run-off from sprinklers/irrigation is prohibited (c) Watering during periods of rain and 48 hours after is prohibited (d) Washing down hard or paved surfaces is prohibited
(e) Vehicles must be washed with a hose equipped with a shut-off device (f) Watering is limited to 15 minutes
(g) Using water to clean, fill or maintain levels in decorative fountains, ponds or other similar aesthetic structures is prohibited unless the structure uses a recirculating water system
Reporting and Enforcement:

As is current practice, Public Works field staff will first issue door hangers to notify and educate residents and businesses of observed violations and water conservation regulations and will escalate enforcement to include fines for repeated violations as indicated in the next section. Residents and businesses can also report any observed violations by calling the Public Works Department at (626) 403-7240 or by emailing [email protected].

Stage 2 regulations will be effective immediately after the adoption of the resolution.

Enforcement will begin July 1, 2022 to allow the promotion of adequate outreach to residents and businesses, and will stay in effect until further announcement by the City Council.

Penalties:

Per South Pasadena Municipal Code Section 35.90-95, monetary penalties will be issued for water customers who violate any of the water conservation requirements.

Penalties are as follows:
25 - 6
Recommendation of FY22-23 Water Conservation Program & Stage 2 Water Shortage June 15, 2022

Fine:

Residential
customers +
water meters
less than two
inches
Fine:

Nonresidential
customers
with water
meters two
inches or
larger
Warning Customer will receive a door
hanger indicating violation
observed.
$0 $0
First Violation Customer will receive a mailed
written notice of violation
indicating violation observed.
$0 $0
Second Violation A second violation within the
preceding twelve months is
punishable by a fine. Customer
will receive a bill in the mail.
$100 $200
Third Violation A third violation within the
preceding twelve calendar
months is punishable by a fine.

Customer will receive a bill in
the mail.
$200 $400
Fourth and
Subsequent
Violations
After a fourth or subsequent
violation, the department may
elect to impose a fine and
disconnect a customer’s
service. Customer will receive a
bill in the mail.
$500; potential
service
disconnection
$1,000;
potential
service
disconnection
Conservation Efforts at City Facilities
The City is altering watering practices at facilities with non-functional turf, i.e. grassy areas that are ornamental and not used for human recreation. In South Pasadena, this includes medians and locations such as the South Pasadena Rock Sign, but excludes school fields, sports fields, and parks. Median irrigation system are currently being reconfigured to cease turf watering, and provide drip irrigation to trees and similar vegetation.

Fiscal Impact
The FY 2021-22 Budget included $115,000 under the City’s Water Conservation Fund (Account No. 503-6010-6713-8032) which can only pay for water conservation projects.

The water conservation budget for FY 2022-23 will remain the same as the previous fiscal year. The revenue for water conservation programs is collected through a water efficiency fee of $0.14 per unit of water billed to all city water customers. 25 - 7
Recommendation of FY22-23 Water Conservation Program & Stage 2 Water Shortage June 15, 2022

Community Outreach
Staff will continue to work diligently to educate the public on the importance of conserving water and inform them of the various conservation programs available. The following is a list of outreach efforts for the FY2022-23 Water Conservation Program and implementation of the Stage 2: Serious Water Supply Shortage.

Upon Approval • Promote water conservation program and regulations via City Blog, July Neighborhood Pulse, City Social
Media, and City website
July 1, 2022
July 15, 2022
• New city rebate amounts effective
• Enforcement for water regulations begins
• Street banner(s) to be installed
• Water bills to contain inserts with information on
rebates and new regulations
July & August, 2022 • New MWD rebate amounts effective (exact date to be determined)
• Install point-of-sale signage at local hardware stores • Tabling at community events including Farmer’s Market and Summer Concert Series
• Begin eSGV home assessments
• Provide free water conservation kits
• Begin Greywater Workshops
Fall 2022 • Host Compost & Mulch Giveaway Day
• 2nd Greywater Workshop
Winter 2022 • 3rd Greywater Workshop
Spring 2023 • 4th Greywater Workshop
Commission Review and Recommendation
This matter was reviewed by the Natural Resources and Environmental Commission.

The Commission recommends that the City Council approve the proposed water conservation program and supports the implementation of Stage 2: Serious Water Supply Shortage.

Attachments:

1. Proposed MWD and City Residential and Commercial Rebates FY 22-23

2. Resolution to Declare a Stage 2: Serious Water Supply Shortage

3. South Pasadena Municipal Code Chapter 35 Article IV & V 25 - 8
ATTACHMENT 1
Proposed FY 2022-23 Water Conservation
Rebates
25 - 9
Water Conservation Program Rebates
Table 1 and Table 2: The tables below summarize the proposed changes to the cofunding amounts for the FY 2022-23 MWD rebates.

Table 1: MWD Residential Rebates – FY 2022-23
Rebate MWD
Incentive
City’s
Incentive
Total
Customer
Incentive
High Efficiency Clothes Washer $85 $165 $415 $250 $500
Premium High-Efficiency Toilet
(1.1 gallon per flush) $40 $110 $260 $150 $300
Rotating Sprinkler Nozzles $2 $0 $2
Weather Based Irrigation
Controller
(less than one acre)
$80 $100 $170 $180 $250
Weather Based Irrigation
Controller
(one acre or more)
$35 per station $15 $65
per station
$50 $100
per station
Soil Moisture Sensor System
(less than one acre) $80 $70 $150
Soil Moisture Sensor System
(one acre or more) $35 per station $15 per station $50 per station Rain Barrel $35 $0 $35
Cistern (200-500 gallons) $250 $0 $250
Cistern (501-999 gallons) $300 $0 $300
Cistern (1000+ gallons) $350 $0 $350
Flow Monitor Device (Pilot) $100 $0 $100 $100 $200
Turf Removal $2 per ft2
(up to 5,000ft2)
$1 $2 per ft2
(up to 1,500ft2) $3 $4 per ft2
Note: The strikethrough values represent current funding amounts to be replaced with newly proposed funding amounts.
25 - 10
Table 2: MWD Commercial Rebates – FY 2022-23
Rebate MWD
Incentive
City’s
Incentive
Total
Customer
Incentive
Plumbing Flow Control Valve $5 $0 $5 $5 $10
Laminar Flow Restrictors $10 $0 $10 $10 $20
Premium High-Efficiency Toilet
(1.1 gallon per flush) -
Commercial
$40 $110 $260 $150 $300
Premium High-Efficiency Toilet
(1.1 gallon per flush) -
Multifamily
$40 $110 $260 $150 $300
Zero Water Urinals $200 $0 $100 $200 $300
Ultra Low Water Urinal $200 $0 $100 $200 $300
Weather Based Irrigation
Controller
(one acre or more)
$35 per station $15 $65
per station
$50 $100
per station
Central Computer Irrigation
Controller $35 per station $0 $35 $35 $70 per station
Soil Moisture Sensor System
(one acre or more) $35 per station $15 per station $50 per station Large Rotary Nozzles $13 per set $0 $13 $13 $26 per
set
Rotating Sprinkler Nozzles $2 $0 $2 $2 $4
In-Stem Flow Regulator $1 $0 $1 $1 $2
pH-Cooling Tower Controller $1,750 $0 $1,750
Cooling Tower Conductivity
Controller $625 $0 $625
Dry Vacuum Pump $125 per 0.5
HP $0 $125 per 0.5 HP
Connectionless Food Steamers $485 per
compartment $0 $485 $485 $970 per compartment
Ice-Making Machines $1,000 $0 $1,000 $1,000 $2,000
25 - 11
Turf Removal
$2 per ft2
(up to
50,000ft2)
$0.50 $2 per ft2
(up to 1,500ft2) $2.50 $4 per ft2
Note: The strikethrough values represent current funding amounts to be replaced with newly proposed funding amounts.

Table 3: The table below summarizes the current FY 2021-22 and proposed FY 2022- 23 City Rebate Program.

Table 3: City Rebate Program
Commercial and Residential
Rebate
Rebate Amount
(FY 2021-22)
Proposed Rebate
Amount (FY 2022-23)
Water Efficient (Drought Tolerant)
Plants Up to $600 Up to $1,200
Native Trees (10 trees maximum) $50 per tree $100 per tree Drip Irrigation Conversion Up to $150 Up to $300
Rotating Sprinkler Nozzles
(10-29 nozzles) $2 per nozzle removed
High Efficiency Dishwashers - Up to $500
High Efficiency Clothes Washer
(Multifamily) - Up to $500
Greywater Laundry to Landscape
Conversion - Up to $300
25 - 12
ATTACHMENT 2
Resolution to Declare a Stage 2:

Serious Water Supply Shortage
25 - 13

CITY OF SOUTH PASADENA
RESOLUTION NO. _____

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF SOUTH PASADENA, CALIFORNIA,
DECLARING A STAGE 2: SERIOUS WATER SUPPLY

SHORTAGE AS DETAILED IN THE SOUTH PASADENA
MUNICIPAL CODE (SPMC) CHAPTER 35
WHEREAS, on May 7, 2014, City Council adopted the Water Conservation and Supply Shortage Plans Ordinance No. 2268, which provides direction on “Water Conservation Provisions and Water Shortage Plans” for the City of South Pasadena (City) in case of drought or emergency; and WHEREAS, on March 28, 2022, Governor Gavin Newsom signed Executive Order N-7-22 requiring local water suppliers move to “Level 2” of their water shortage contingency plans, and prohibits watering of non-functional turf; and
WHEREAS, on April 26, 2022, the Metropolitan Water District (MWD) Board of Directors declared a Water Shortage Emergency Condition and adopted an Emergency Water Conservation Program for areas that are dependent on State Water Project (SWP) supplies.; and
WHEREAS, on May 11, 2022, the Upper San Gabriel Valley Municipal Water District (Upper District) Board of Directors adopted an Emergency Water Conservation Program encouraging all of Upper District’s retail water agencies (including the City of South Pasadena) to reduce water use by 20 percent and limit outdoor irrigation to two days per week.; and
WHEREAS, the City encourages all opportunities to conserve water and other natural resources throughout the South Pasadena community; and WHEREAS, the Natural Resources and Environmental Commission has recommended the City Council declare a Stage 2: Serious Water Supply Shortage as detailed in the South Pasadena Municipal Code (SPMC) Chapter 35; and
WHEREAS, a Stage 2: Serious Water Supply Shortage would limit watering days to two designated days per week, enforce repairing broken or leaking pipes in 48 hours, and recommend a 20% water reduction over the next year.
25 - 14

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SOUTH

PASADENA, CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS:

SECTION 1. The City declares a State 2: Serious Water Supply Shortage thereby reducing water consumption in the City as follows:

1. Limiting Landscape Irrigation: Overhead irrigation of lawn, landscape or other vegetated area is limited to two designated days per week, as follows:
a. Monday and Thursday for addresses ending in an even
number
b. Tuesday and Friday for addresses ending in an odd number

2. Obligation to Fix Leaks, Breaks, or Malfunctions: All leaks, breaks or other malfunctions shall be repaired within 48 hours of notification by the Public Works Department (also part of SPMC Chapter 35.46).

3. Limiting Filling of Ornamental Lakes or Ponds: Filling or re-filling ornamental lakes or ponds is prohibited, except to the extent needed to sustain aquatic life.

4. Requesting 20% water reduction for all customers. The 20% reduction shall be calculated on an annual consumption basis (total units used from July 1, 2022 through June 30, 2023 versus same period the prior year).

SECTION 2. The City Clerk of the City of South Pasadena shall certify to the passage and adoption of this resolution and its approval by the City Council and shall be effective immediately and shall cause the same to be listed in the records of the City.

PASSED, APPROVED AND ADOPTED ON this 15th day of June, 2022.

Michael A. Cacciotti, Mayor
ATTEST: APPROVED AS TO FORM:

Christina A. Muñoz Andrew L. Jared, City Attorney
Deputy City Clerk
25 - 15
I HEREBY CERTIFY the foregoing Resolution No. XXXX was duly adopted by the City Council of the City of South Pasadena, California, at a regular meeting held on the 15th day of June, 2022, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAINED:
____
Christina A. Muñoz, Deputy City Clerk
25 - 16
ATTACHMENT 3
South Pasadena Municipal Code:

Chapter 35 - Water
Article IV and Article V
25 - 17
CHAPTER 35
WATER
Article IV and Article V
ARTICLE IV. WATER CONSERVATION AND SUPPLY SHORTAGE PLANS

35.80 Policy and purpose.

35.81 Application.

35.82 Permanent water conservation requirements.

35.83 Water shortage plan implementation.

35.84 Stage 1: Moderate water supply shortage.

35.85 Stage 2: Serious water supply shortage.

35.86 Stage 3: Extreme water supply shortage.

35.87 Stage 4: Emergency water supply shortage.

35.88 Sudden catastrophic water supply shortage.

ARTICLE V. VIOLATIONS AND PENALTIES

35.90 Violations and penalties—Residential customers and all other customers with water meters less than two inches.

35.91 Violations and penalties—Nonresidential customers with water meters two inches or larger.

35.92 Notice.

35.93 Right to hearing and stay.

35.94 Reservation of rights.

35.95 Willful misrepresentation.
25 - 18
ARTICLE IV. WATER CONSERVATION AND SUPPLY SHORTAGE PLANS

35.80 Policy and purpose.

The purpose of this article is to establish a water conservation and supply shortage program that will reduce water consumption within the city of South Pasadena through conservation, enable effective water supply planning, assure reasonable and beneficial use of water, prevent waste of water, and maximize the efficient use of water within the city of South Pasadena to avoid and minimize the effect and hardship of water shortage to the greatest possible extent. (Ord. No. 2268, § 5, 2014.)

35.81 Application.

The provisions of this chapter apply to any person in the use of any potable water provided by the department except for the following water uses:
(a) Water necessary for water system or fire suppression system testing and maintenance, or fire suppression and other similar emergency services affecting public health and safety;
(b) Water necessary to protect public health and safety as determined in the sole discretion of the department;
(c) Any use of recycled water;
(d) The use of water by commercial nurseries and commercial growers to sustain plants, trees, shrubs, crops or other vegetation intended for resale; and (e) Hillside areas recovering from fire. To qualify for this exemption, a customer must obtain verification from the agency requiring erosion control measures. The duration of the exemption is limited to two years, or establishment of the vegetation, whichever is the lesser time period. (Ord. No. 2268, § 5, 2014.)

35.82 Permanent water conservation requirements.

The following water conservation requirements are effective at all times and are permanent. Violations of this section constitute waste and an unreasonable use of water.
(a) No Washing Hard or Paved Surfaces. Washing hard or paved surfaces, including, but not limited to, sidewalks, walkways, driveways, parking areas, tennis courts, patios or alleys, is prohibited except as follows: (1) where necessary to alleviate safety or 25 - 19
sanitary hazards and then only by use of a hand-held bucket or similar container, a hand-held hose equipped with a water shut-off nozzle or device; or (2) when using a low-volume high-pressure cleaning machine equipped to recycle any water used, or a low-volume, high-pressure water broom.
(b) Runoff. Except as permitted under the preceding subsection, it shall be unlawful for any reason to allow water to run in such a manner so as to have water migrate onto an adjoining sidewalk, driveway, street, alley, gutter or ditch. (c) Spray Irrigation Hours. Spray irrigation shall be scheduled between five p.m. and nine a.m. Operation of the spray irrigation system outside the normal watering window is allowed for testing and system maintenance and for thirty days following installation of new plants, trees or grass if necessary to prevent the plants, trees or grass from dying. (d) No Spray Irrigation During Periods of Rain. Spray irrigation of lawn, landscape or other vegetated area during periods of rain is prohibited. (e) Washing Vehicles. It shall be unlawful for anyone to wash any vehicle, trailer or boat by allowing any hose to run continuously. For the purpose of this section, continuously shall mean three minutes or more. Said hose shall be equipped with a position shutoff nozzle.
(f) Repair All Leaks. Loss or escape of water through breaks, leaks or other malfunctions in the water user’s plumbing or distribution system for any period of time after such escape of water should have reasonably been discovered and corrected and in no event more than seven days of receiving notice from the department is prohibited. (g) Serving Water in Restaurants. No restaurant or other public place where food is sold, served or offered for sale shall serve drinking water to any customer unless expressly requested by the customer.
(h) Restaurants Required to Use Water Conserving Dish Wash Spray Valves. Food preparation establishments, such as restaurants, cafÈs and cafeterias, are prohibited from using non-water conserving dish washing spray valves. (i) Decorative Structures. No water shall be used to clean, fill or maintain levels in decorative fountains, ponds or other similar aesthetic structures unless the structure uses a recirculating water system.
25 - 20
(j) No Installation of Non-Recirculating Equipment in Commercial Car Wash and Laundry Systems. Installation of non-recirculating water systems is prohibited in new commercial conveyor car washes and new commercial laundry systems. (k) No Installation of Single Pass Cooling Systems. Installation of single pass cooling systems is prohibited in buildings requesting new water service. (Ord. No. 2268, § 5, 2014.)

35.83 Water shortage plan implementation.

The department shall monitor and evaluate the projected supply and demand for water by its customers. In the event of a water shortage as determined below, the city manager or designee shall recommend that the city council make a determination that a water shortage exists and declare an appropriate stage be established to permit the department to prudently supply water to its customers. Prior to implementation of a water shortage stage as provided in this chapter, the city council shall hold a public hearing for the purposes of determining: (a) whether and to what extent a water shortage exists; and (b) which stage of water supply shortage is appropriate to address the water shortage. Notice of the time and place of said public hearing shall be published not less than ten days before the hearing on the city’s website and in a newspaper of general circulation within the city. The city council’s determination shall be made by public notice on the city’s website and in a newspaper of general circulation within the city and shall become effective immediately upon such publication. At any time during the water shortage period, the city council may discontinue any declared stage or may implement another stage in accordance with this chapter. Upon a finding by the city council that a water shortage no longer exists, any water shortage stage then in effect shall terminate.

A water shortage may be declared based upon, but not limited to, the following considerations: a call for extraordinary water conservation by a wholesale water provider to the city, planned or actual disruption to water system facility components for maintenance or construction, or planned or actual interruption to sources of the city’s water supply. (Ord. No. 2268, § 5, 2014.)

35.84 Stage 1: Moderate water supply shortage.
25 - 21
(a) A Stage 1 water supply shortage exists when the city council determines, in its sole discretion, that due to drought or other water supply conditions a water supply shortage or threatened shortage exists and demand reduction is necessary to make more efficient use of water and appropriately respond to existing water conditions. Upon the declaration by the city council of a Stage 1 moderate water supply shortage, the department shall implement the mandatory Stage 1 conservation measures identified in this section.
(b) Stage 1 Water Conservation Measures. The following water conservation requirements apply during a declared Stage 1 water supply shortage:
(1) Limits on Watering Days. Watering or irrigating of lawn, landscape or other vegetated area is limited to three designated days per week. This subsection does not apply to landscape irrigation zones that exclusively use low flow drip type irrigation systems where no emitter produces more than two gallons of water per hour. This subsection also does not apply to watering or irrigating by use of a hand-held bucket or similar container; watering for very short periods of time for the express purpose of adjusting or repairing an irrigation system; or for maintenance of vegetation, including vegetable gardens, fruit trees and shrubs, intended for consumption.
(2) Obligation to Fix Leaks, Breaks or Malfunctions. All leaks, breaks or other malfunctions in the water user’s plumbing or distribution system shall be repaired within seventy-two hours of notification by the department unless other arrangements are made with the department.
(3) Stage 1 includes a recommended ten percent water reduction for all customers. The ten percent reduction shall be calculated on an annual consumption basis. (Ord. No. 2268, § 5, 2014.)

35.85 Stage 2: Serious water supply shortage.
(a) A Stage 2 water supply shortage exists when the city council determines, in its sole discretion, that due to drought or other water supply conditions a water supply shortage or threatened shortage exists and demand reduction is necessary to make more efficient use of water and appropriately respond to existing water conditions. Upon the declaration by the city council of a Stage 2 water supply shortage, the department shall implement the mandatory Stage 2 conservation measures identified in this section. 25 - 22
(b) Stage 2 Water Conservation Measures. The following water conservation requirements apply during a declared Stage 2 water supply shortage:
(1) Limits on Watering Days. Watering or irrigating of lawn, landscape or other vegetated area with water is limited to two designated days per week. This subsection does not apply to landscape irrigation zones that exclusively use low flow drip type irrigation systems where no emitter produces more than two gallons of water per hour. This subsection also does not apply to watering or irrigating by use of a hand-held bucket or similar container; watering for very short periods of time for the express purpose of adjusting or repairing an irrigation system; or for maintenance of vegetation, including fruit trees and shrubs, intended for consumption.
(2) Obligation to Fix Leaks, Breaks or Malfunctions. All leaks, breaks or other malfunctions in the water user’s plumbing or distribution system shall be repaired within forty-eight hours of notification by the department unless other arrangements are made with the department.
(3) Limits on Filling Ornamental Lakes or Ponds. Filling or re-filling ornamental lakes or ponds is prohibited, except to the extent needed to sustain aquatic life. (4) Stage 2 includes a recommended twenty percent water reduction for all customers. The twenty percent reduction shall be calculated on an annual consumption basis. (Ord. No. 2268, § 5, 2014.)

35.86 Stage 3: Extreme water supply shortage.
(a) A Stage 3 water supply shortage exists when the city council determines, in its sole discretion, that due to drought or other water supply conditions, a water supply shortage or threatened shortage exists and demand reduction is necessary to make more efficient use of water and appropriately respond to existing water conditions. Upon the declaration by the city council of a Stage 3 water supply shortage, the department shall implement the mandatory Stage 3 conservation measures identified in this section. (b) Stage 3 Water Conservation Measures. The following water conservation requirements apply during a declared Stage 3 water supply shortage:
(1) Limits on Watering Days. Watering or irrigating of lawn, landscape or other vegetated area is limited to one designated day per week. This subsection does 25 - 23
not apply to the following categories of use, as determined by the department in its sole discretion:
(A) Landscape irrigation zones that exclusively use low flow drip type irrigation systems where no emitter produces more than two gallons of water per hour.
(B) Watering or irrigating by use of a hand-held bucket or similar container. (C) Watering for very short periods of time for the express purpose of adjusting or repairing an irrigation system.
(D) Maintenance of vegetation, including fruit trees and shrubs, intended for consumption.
(E) Maintenance of existing landscape necessary for fire protection. (F) Maintenance of existing landscape for soil erosion control. (G) Maintenance of plant materials identified to be rare or essential to the well-being of protected species.
(H) Maintenance of landscape within active public parks and playing fields, school grounds, golf course greens, cemeteries and day care centers, provided that such irrigation does not exceed two days per week, according to a schedule established and posted by the department.
(I) Actively irrigated habitat restoration or environmental mitigation projects. (2) Obligation to Fix Leaks, Breaks or Malfunctions. All leaks, breaks or other malfunctions in the water user’s plumbing or distribution system shall be repaired within thirty-six hours of notification by the department, unless other arrangements are made with the department.
(3) Limits on Filling Ornamental Lakes or Ponds. Filling or re-filling ornamental lakes or ponds is prohibited, except to the extent needed to sustain aquatic life. (4) Stage 3 includes a recommended thirty percent water reduction for all customers. The thirty percent reduction shall be calculated on an annual consumption basis. (Ord. No. 2268, § 5, 2014.)
25 - 24

35.87 Stage 4: Emergency water supply shortage.
(a) A Stage 4 condition exists when the city council declares a Stage 4 water supply shortage. Upon the declaration by the city council of a Stage 4 water supply shortage, the department will implement the mandatory Stage 4 conservation measures identified in this section.
(b) Stage 4 Water Conservation Measures. The following water conservation requirements apply during a declared Stage 4 water supply shortage:
(1) No Watering or Irrigating. Watering or irrigating of lawn, landscape or other vegetated area is prohibited. This restriction does not apply to the following categories of use, as determined by the department in its sole discretion:
(A) Maintenance of vegetation, including fruit trees and shrubs, intended for consumption.
(B) Maintenance of existing landscape necessary for fire protection. (C) Maintenance of existing landscape for soil erosion control. (D) Maintenance of plant materials identified to be rare or essential to the well-being of protected species.
(E) Maintenance of landscape within active public parks and playing fields, school grounds, golf course greens, and day care centers, provided that such irrigation does not exceed two days per week, according to a schedule established and posted by the department.
(F) Actively irrigated environmental mitigation projects. (2) Obligation to Fix Leaks, Breaks or Malfunctions. All leaks, breaks or other malfunctions in the water user’s plumbing or distribution system shall be repaired within twenty-four hours of notification by the department, unless other arrangements are made with the department.
(3) Limits on Filling Ornamental Lakes or Ponds. Filling or re-filling ornamental lakes or ponds is prohibited, except to the extent needed to sustain aquatic life. 25 - 25
(4) Limits on Filling Residential Swimming Pools and Spas. Refilling of more than one foot and initial filling of residential swimming pools or outdoor spas is prohibited.
(5) No New Potable Water Service. Upon declaration of a Stage 4 water supply shortage, no new potable water service will be provided, no new temporary meters or permanent meters will be provided, and no statements of immediate ability to service or provide potable water service will be issued, except under the following circumstances:
(A) A valid, unexpired building permit has been issued for the project; or (B) The project is necessary to protect the public health, safety and welfare; or
(C) The applicant provides substantial evidence of an enforceable commitment that water demands for the project will be offset prior to the provision of a new water meter(s) to the satisfaction of the department.

This subsection does not preclude the resetting or turn-on of meters to provide continuation of water service or the restoration of service that has been interrupted for a period of one year or less. (Ord. No. 2268, § 5, 2014.)

35.88 Sudden catastrophic water supply shortage.

When the city manager or designee determines that a sudden event has, or threatens to, significantly diminish the reliability or quality of the city’s water supply, the city manager or designee may declare a catastrophic water supply shortage and impose whatever emergency water allocation or conservation actions deemed necessary, in the professional judgment of the director of public works, to protect the reliability and quality of the city’s water supply, until the emergency passes or city council takes other action. (Ord. No. 2268, § 5, 2014.)
ARTICLE V. VIOLATIONS AND PENALTIES

35.90 Violations and penalties—Residential customers and all other customers with water meters less than two inches.
25 - 26
(a) Violation. A customer shall be responsible for all uses of water served by the customer’s water meter. Violation of any of the provisions of this chapter shall be the responsibility of the customer.
(b) Penalties. Monetary penalties imposed under this chapter shall be collected by adding the same to the customer’s water bill and shall be payable at the same time and in the same manner as such bills or by such other method of collection and payment as established by the department. Penalties for failure to comply are as follows:
(1) First Violation. The department will issue a written notice of violation. Said notice shall contain, in addition to the facts of the violation, a statement of the possible penalties for each violation and a statement informing the customer of his or her right to a hearing on the merits of the alleged violation. (2) Second Violation. A second violation within the preceding twelve calendar months is punishable by a fine of one hundred dollars.
(3) Third Violation. A third violation within the preceding twelve calendar months is punishable by a fine of two hundred dollars.
(4) Fourth and Subsequent Violations. After a fourth or subsequent violation, the department may elect to impose a fine of five hundred dollars and disconnect a customer’s service, in addition to the financial surcharges provided for herein.

Disconnection of service may be undertaken only after a public hearing held by the department in accordance with SPMC Section 35.93. All costs incurred to reconnect service shall be the responsibility of the customer. (Ord. No. 2268, § 6, 2014.)

35.91 Violations and penalties—Nonresidential customers with water meters two inches or larger.
(a) Violation. A customer shall be responsible for all uses of water served by the customer’s water meter. Violation of any of the provisions of this chapter shall be the responsibility of the customer.
(b) Penalties. Monetary penalties imposed under this chapter shall be collected by adding the same to the customer’s water bill and shall be payable at the same time and in the same manner as such bills or by such other method of collection and payment as established by the department. Penalties for failure to comply are as follows:
25 - 27
(1) First Violation. The department will issue a written notice of violation. Said notice shall contain, in addition to the facts of the violation, a statement of the possible penalties for each violation and a statement informing the customer of his or her right to a hearing on the merits of the alleged violation. Notice of violation shall be sent through regular mail to the address at which the customer is billed by the department.
(2) Second Violation. A second violation within the preceding twelve calendar months is punishable by a fine of two hundred dollars.
(3) Third Violation. A third violation within the preceding twelve calendar months is punishable by a fine of four hundred dollars.
(4) Fourth and Subsequent Violations. After a fourth or subsequent violation, the department may elect to impose a fine of one thousand dollars and disconnect a customer’s service, in addition to the financial surcharges provided for herein.

Disconnection of service may be undertaken only after a public hearing held by the department in accordance with SPMC Section 35.93. All costs incurred to reconnect service shall be the responsibility of the customer. (Ord. No. 2268, § 6, 2014.)

35.92 Notice.

The department shall give notice of each violation of this chapter to the customer committing such violation as follows:
(a) For any violation of said provisions the department may give written notice of the fact of such violation to the customer personally, by posting a notice at a conspicuous place on the customer’s premises, or by United States mail, first class, postage prepaid, addressed to the customer’s billing address.
(b) If the penalty assessed is, or includes, the termination of water service to the customer, notice of the violation shall be given in the following manner:
(1) By giving written notice thereof to the customer personally; or (2) If the customer is absent from or unavailable at either his or her place of residence or his or her place of business, by posting a notice at a conspicuous place on the customer’s premises, and sending a copy through the United States 25 - 28
mail, first class postage prepaid, addressed to the customer at his or her place of business, residence, or such other address provided by the customer for bills for water or electric service if such can be ascertained. (Ord. No. 2268, § 6, 2014.)

35.93 Right to hearing and stay.

Any customer receiving a notice of violation shall have a right to a hearing by the city manager or his/her designee on the merits of the alleged violation upon that customer’s written request to the department. Customer’s written request for a hearing must be received by the department within ten days of the date of notification of the violation or customer’s right to a hearing shall be deemed waived. The customer’s timely written request for a hearing shall automatically stay the imposition of penalty until the hearing officer renders a decision. No other or further stay shall be granted by the department.

Any customer dissatisfied with the hearing officer’s dispute determination may appeal that determination within ten days of issuance to the Natural Resources and Environmental Commission whose decision shall become final within fifteen days of its issuance unless appealed to city council. The city may issue regulations to govern the contents of the request for hearing and the manner in which such hearings may be conducted. (Ord. No. 2268, § 6, 2014.)

35.94 Reservation of rights.

The rights of the department hereunder shall be cumulative to any other right of the department to discontinue service. All monies collected pursuant to the penalty provisions of this chapter shall be deposited in the water fund. (Ord. No. 2268, § 6, 2014.)

35.95 Willful misrepresentation.

Notwithstanding any other provision of law, and in addition thereto, and not in lieu thereof, any willful misrepresentation of a material fact by any person to the department, made for the purpose of securing relief from the provisions of this chapter for any customer, is unlawful. A violation of this chapter shall be punishable by a fine not exceeding the sum of one thousand dollars. (Ord. No. 2268, § 6, 2014.) 25 - 29
City Council
Agenda Report
DATE: June 15, 2022
FROM: Armine Chaparyan, City Manager�
PREPARED BY: Cathy Billings, Library Director
ITEM NO.

SUBJECT: Direction Regarding Library Special Tax Renewal Options Recommendation
It is recommended that the City Council:

1. Approve a measure to be included on the ballot for the November 8, 2022 General Municipal Election, asking voters about continuing the existing Library Special Tax; and

2. Direct staff to return at the July 20, 2022 City Council Meeting with a resolution to place the question of continuing the existing Library Special Tax, and all resolutions pertinent to placing a measure on the ballot.

Background
On June 7, 1994, South Pasadena voters established the City of South Pasadena's Library Special Tax. The Library Special Tax has been in effect continuously for nearly 30 years. It was renewed by the voters in 1999, 2005, and 2009. On November 3, 2015, the voters again approved an extension of the Tax through June 30, 2024, with a 33% rate increase in Fiscal Year 2016-2017 and an increase in each of the subsequent years based on any increase in the Consumer Price Index for All Urban Consumers (CPI-U) for the Los Angeles-Riverside-Orange County Statistical Area. The Special taxes require two-thirds, or 66.66%, voter approval for passage.

The current tax is in effect until June 30, 2024. In order to place the question of extension before the voters at a General Municipal Election before the tax expires, Council must place the issue on the November 8, 2022 ballot. The deadline to submit the measure to the Los Angeles County Registrar-Recorder/County Clerk is August 12, 2022. For this reason, staff are recommending that the City Council give direction on the term of the renewal of the Library Special Tax now, and at the following meeting, on July 20, 2022, adopt a resolution to place the measure on the November 8, 2022 ballot.

If the measure is not placed on the November 8, 2022 ballot, it could be placed on a special election ballot prior to the Special Tax's expiration, however this would be costly as compared to placing it on the General Municipal Election ballot in November 2022.

Funding from the Special Tax, which in Fiscal Year 2021-2022 was approximately $365,000, or 20% of the Library's budget, enables the Library to provide a full range of 283965. v4
26 - 1
26 Direction Regarding Library Special Tax Renewal Options June 15, 2022

283965.v4
programs and services 7 days a week. Any revenue generated by the Library Special Tax can only be used for the maintenance, operation, and administrative costs of the Library.

In order to collect the tax, the City must budget a Required Amount toward Library maintenance, operations, and administration in a given year. “Required “Amount” is defined in the South Pasadena Municipal Code as “the minimum amount which must be budgeted in a fiscal year for maintenance and operating costs for the library, after deduction of the amount of the special tax, in order to levy a special tax in a fiscal year.” The amount is calculated by applying an annual adjustment based on any increase in the CPI-U for the Los Angeles-Riverside-Orange County Statistical Area to a base amount established in the first fiscal year of the tax (1994-1995).

The following types of property are exempt from the tax:

1. Parcels owned by charitable or community service organizations or churches that qualify for an exemption from ad valorem taxation under California law.

2. Vacant parcels.

3. Parcels owned by the federal, state or local government, or any state or local agency.

4. Any owner who has income, adjusted for family size, at or below eighty percent (80%) of the area median income as determined under the Section 8 Income Limits for Los Angeles County. (These limits are published by the U.S.

Department of Housing and Urban Development).

The Special Tax is collected by the Los Angeles County Assessor in the same manner as property taxes.

Analysis
There has been a level of confidence for the passage of previous renewals, based largely on the high level of support the tax has had over the years. This and other factors that can inform decision making about what term of renewal should be presented to the voters, and whether an “evergreen” tax will be palatable, are described in more detail below.

Historic Support
Historically, this Tax has received high support for its renewal over the years, as shown in the table below. Even at the tail end of the Great Recession in 2009, the Tax passed with nearly 80% of the vote. In 2015, when the term of renewal included a 33% increase to the base tax amount, and the addition of an ongoing annual adjustment based on any increase in the CPI-U, the tax passed with nearly 82% of the vote. In 2015 the voters also approved the longest term yet for the tax at 8 years.

Election Yes No % Approval Terms
June 7, 1994 3,653 1,662 68.73% First Adoption. 5-year term. 26 - 2
Direction Regarding Library Special Tax Renewal Options June 15, 2022

283965.v4
March 2, 1999 2,833 419 87.12% Extended. 6-year term.

March 8, 2005 3,717 728 83.62% Extended. 6-year term.

November 3, 2009 3,031 758 79.99% Extended. 5-year term.

November 3, 2015 2,933 653 81.79%
Extended with base increase and
annual inflation adjustment. 8-year
term.

Library Rates Extremely High in Satisfaction
An equally significant factor is the popularity of the Library among residents. This is demonstrated by usage and circulation statistics, and by the results of the survey conducted by the City in October of 2021 as part of its strategic planning process.

49.1% of registered respondents rated the Library as “excellent”—the highest excellence rating of all the specific quality of life measures included in the survey. An additional 41% rated the Library as “good” for a notable total positive rating of over 90%.

Utility Users Tax Extended in Perpetuity
The successful extension in perpetuity—until otherwise terminated by the voters—of the Utility User Tax (UUT) at the November 3, 2020 General Municipal Election is another indicator that voters might support an evergreen tax for the Library. 75.83% of voters voted in favor of extending the UUT in perpetuity.

Committed and Effective Community Organizers
The initial passage of the Library Special Tax, and its subsequent renewals, were heavily influenced by the community-based volunteer efforts of advocates who created committees to raise awareness and advocate for the passage of the Tax. For the current renewal, the South Pasadena Loves Our Library Committee for Measure L has already formed, launched a website, and received donations to support their efforts. If Council decides to propose a fixed term renewal to the voters instead of an evergreen tax, there is no guarantee that there will be such influential and committed individuals available and willing to organize and advocate for a library tax when it expires.

Other Legislation
There has been a statewide initiative (21-0042A1) circulating for signatures that would limit the ability of voters and state and local governments to raise revenues for government services. The “Taxpayer Protection and Government Accountability Act” filed that it had 25% of signatures as of March 16, 2022. The circulation deadline is August 2, 2022. On May 18, 2022, the League of California Cities e-newsletter stated that the California Business Roundtable (a supporter of the initiative) had announced on Friday, May 13 that it “failed to meet the minimum signature requirement to place the ‘Taxpayer Protection and Government Accountability Act’ on the November 2022 ballot and is now targeting the 2024 ballot.” If this proves to be correct, it eliminates a factor that might have negatively impacted the Special Tax measure. It could have potentially invalidated recently adopted evergreen taxes and it would also have been awkward to have an anti-tax measure on the same ballot as the Library Special Tax. 26 - 3
Direction Regarding Library Special Tax Renewal Options June 15, 2022

283965.v4
Economic and Socio-political Climate
The possibility of increasing inflation and a recession, along with the financial uncertainties causes by the pandemic may weigh on voters’ minds as they go to the polls. Concerns about the economy and the pandemic could make voters less comfortable with a permanent tax.

Other Library Taxes in Los Angeles County
Altadena Library District, the City of Pasadena, and the County of Los Angeles have active parcel taxes for the operation and maintenance of their libraries. The City of Monrovia has a special tax that was established for the purpose of funding a new library building, which sunsets in 2038 or when the costs are paid off, whichever is sooner. A 20-year renewal of the City of Monterey Park’s parcel tax, which had been in effect for the prior 20 years, was defeated at the March 7, 2017 election (a two-thirds vote in favor was required for passage; the measure received 60.44% in favor).

Agency Election Term Passage Rates
Altadena 11/3/2020 until repealed 72.35% $0.10/square foot for single-family residences
annually, with different
rates for other property
types
Pasadena 3/6/2007 15 years commencing
with fiscal year 2009
(preceded by a 15-year
tax that commenced in
1993)

80.4% adjusted annually by
change in the CPI; FY
2021: single-family
$40.51; multi-family
$26.60 (per unit?);
commercial $296.41
County 6/3/1997 commenced with fiscal
year 1998 (replaced
the County's
Community Facilities
District (CFD) No.8
assessment for library
services)
$22.00 per parcel adjusted
annually by 2% or the
percentage change in the
CPI, whichever is less
Fiscal Impact
In Fiscal Year 2021-2022 the Library Special Tax provided approximately $365,000 to the Library Budget to pay for the maintenance, operating, and administrative costs of the Library. If the Special Tax expires June 30, 2024 and is not renewed, all funding for the Library going forward would need to come from the City’s General Fund. Without the tax funding in place, impacts to Library hours, programs and services would be very likely.

The tax per residential parcel in Fiscal Year 2021-2022 ranged from $37.05 to $74.10, based on parcel size. The tax per multifamily dwelling unit was $18.52. The tax per non26 - 4 Direction Regarding Library Special Tax Renewal Options June 15, 2022

283965.v4
residential parcel ranged from $37.05 to $148.20. As these tax rates will increase annually in accordance with any increase in the CPI-U, the amounts collected will likely continue to make up approximately 20% of the Library’s budget.

In order to qualify to receive the Special Tax revenue in a given fiscal year, the City must budget and appropriate a minimum Required Amount to provide for all the elements of a foundation program of library services. The South Pasadena Municipal Code defines a foundation program as “those elements of library service which are basic to its function as a provider of information, education and cultural enrichment to all segments of the community, including, but not limited to, collection development and maintenance, lending services, information services, facility maintenance and administration and may include, but is not limited to, amounts paid or payable, from time to time, for books, periodicals, reference materials, research materials, subscription services or other information sources; the reasonable expenses of management and repair and other expenses necessary to maintain and preserve the library in good repair and working order; compensation of employees including, but not limited to salaries, wages and benefits; fees of auditors, accountants, attorneys or engineers; and insurance premiums.” The Required Amount is calculated by applying annual CPI-U increases to a base amount ($760,529) established in the first year of the Special Tax (1994). In Fiscal Year 2021-2022 the Required Amount was $1,453,457.95. The City budgeted $1,846,686 for the Library, exceeding the minimum Required Amount by more than $396,000.

If in any year the City Council does not budget and appropriate the minimum Required Amount as required by the ordinance, then the tax which may be levied in the immediately following fiscal year shall be decreased proportionally.

Any surplus amounts raised by the Special Tax in any one year may only be used for the purposes described in South Pasadena Municipal Code Section 2.89-4, and must be carried over to the following fiscal year. The existence of a surplus in one year must be considered by the City in levying the Special Tax for the next year.

Funds for the election have been accounted for in the Proposed Fiscal Year 2022-23 Budget. The Los Angeles County Registrar/ Recorder/ County Clerk will provide a final cost estimate in August 2022.

Alternatives
Historically, with regard to Library Special Tax renewals, the City has not engaged a firm to poll the electorate or to analyze how similar measures have fared on ballots elsewhere in the state. There has been a level of confidence for the passage of previous renewals, based largely on the high level of support the tax has had over the years. Upon Council’s direction, a consultant could be hired to conduct research into the viability of the Special Tax renewal, however the time in which to do research is limited by the August 12, 2022 deadline for submitting measures to the Los Angeles County Registrar-Recorder/County Clerk and the cancellation of the August 3, 2022 City 26 - 5
Direction Regarding Library Special Tax Renewal Options June 15, 2022

283965.v4
Council meeting.

Additionally, the Library Board of Trustees and City staff considered the option of asking the voters whether the Special Tax should be renewed for a limited term of between 5 and 10 years. This consideration was based on concern that a measure proposing a tax in perpetuity may not be palatable in the current economic climate, which is still disrupted by the pandemic and with residents facing projected increases in inflation.

Given that previous limited term renewals of the parcel tax have passed with between

79.99% and 87.12% of voters in favor, there is a high level of confidence that a limited term renewal would pass if presented to the voters this November. The longest term of renewal adopted by voters in the past 30 years was the 8-year term approved in 2015. If Council determined that a limited term renewal would be preferable to an evergreen tax, staff recommend selecting an odd number of years so that the tax expiration will be better aligned with the General Municipal Election cycle.

Community Outreach
The Library maintains a “Library Parcel Tax” webpage that provides information about the Tax, and will publish a FAQ about the Tax to be made available to the public online and in hardcopy. Other materials that educate the community about the programs and services the Library offers will be distributed to the public. Discussions on the term of renewal have been held at two public meetings of the Library Board of Trustees, and members of the public had the opportunity to comment.

The independent South Pasadena Loves Our Library Committee for Measure L 2022 is undertaking community outreach about the Library Special Tax renewal.

Commission Review and Recommendation
The Library Board of Trustees considered the question of the extension of the Library Special Tax at their regular meeting on May 12, 2022 and at a special meeting on May 26, 2022. They voted unanimously to recommend to City Council that a measure be placed on the November 8, 2022 General Municipal Election ballot asking the voters to adopt an ordinance continuing the duration of the South Pasadena Library Special Tax until terminated by a majority vote of the electorate in South Pasadena.

Attachment: Fiscal Year 2021-2022 Special Tax Rates
26 - 6
ATTACHMENT 1
Fiscal Year 2021-2022 Special Tax Rates
26 - 7
City of South Pasadena Library Special Tax Rates
Fiscal Year 2021-2022
Single Family Residential and Condominiums
0 sf - 2,000 sf home $37.05
2,001 sf - 4,000 sf home $55.57
>4,000 sf home $74.10
Multiple Family Residential (per Dwelling Unit) $18.52
Non-Residential
0 acre - ¼ acre lot $37.05
¼ acre - ½ acre lot $74.10
½ acre - ¾ acre lot $111.15
>¾ acre lot $148.20
Fiscal Year 2021-2022 Tax Levied
Single Family Residential $206,340.32
Condominium $40,551.14
Multi-Family Residential $100,405.50
Non-Residential $18,154.50
Other ($61.08)
TOTAL $365,390.38
26 - 8
27 - 1
27 Revised Public Review Draft Housing Element Presentation June 15, 2022

PlaceWorks, the consultants who are preparing South Pasadena’s housing element, responded to HCD’s comments with revisions and additional sections. This included extensive revisions to the Fair Housing Assessment and revised/additional programs in the Housing Plan. The Housing Plan (Section 6.8) is summarized in table format (Table VI-2) in the Executive Summary at the beginning of the document.

The Revised Public Review Draft Housing Element was submitted to HCD for review on May 10, 2022. HCD must provide its review comments to the City within 60 days (by Friday, July 8, 2022).

Analysis
A presentation of the revised housing element draft was provided to the Planning Commission at their May 10, 2022, meeting and is posted on-line at:
(https://www.spectrumstream.com/streaming/south_pasadena_pc/2022_05_10.cfm) .

A similar presentation to present the key changes and process timeline and to answer questions will be given to the Council at this meeting, June 15, 2022. This is an important opportunity to inform the Council and public of the proposed housing policy in compliance with State law prior to presenting a final draft for adoption.

The public may comment on the draft housing element throughout the State’s review period. Written comments are encouraged and should be emailed to:
[email protected].

Fiscal Impact
While there is no fiscal impact associated with receiving this presentation, future implementation of housing programs will require staff and funding resources, which will be reflected in the Annual Budget and incorporated in the Community Development Department’s work plan. The City Council will have opportunity to review and approve any additional funding allocations associated with Housing Element implementation as necessary within the eight-year cycle.
27 - 2
28 - 1
28 Community Services and Public Art Commission Ordinance June 15, 2022

The Report offers a number of findings, many of which have been remedied and addressed:
• Finance Policies and Procedures were reviewed and recommended for approval by the Finance Commission in May 2022, and the City Council reviewed and discussed the draft document at their June 1, 2022 meeting. Staff anticipates a final document to be approved in Summer 2022.
• The Finance Director together with the City Manager are working diligently to address areas of concern, including timely monthly investment reports, a commitment to a comprehensive and transparent budget process, Mid-Year budget review, timely annual audit and milestones, and timely financial reporting. • Other citywide improvements that include employee training and retention, as well as incorporation of better and best practices into our processes and service to the community
• The execution of the settlement agreement of the A. Smith legal matter Next Steps
The City Manager commits to ongoing improvements to internal controls. The Interim Finance Director will work closely with the City Manager in bringing timely and regular reporting to the City Council. Additionally, the City Manager is working with Management services to hire a recruiter to assist with efforts to hire a permanent Finance Director focused on carrying forward and building upon these efforts. It is under the City Council’s purview to direct staff on any further action in response to the findings or recommendations within the Report.

Fiscal Impact
There is no fiscal impact associated with receiving and reviewing this report.

Commission Review
The Finance Commission received and filed the 2022 Finance Ad Hoc Committee Final Report at their June 9, 2022 meeting.

Public Notification of Agenda Item
The public was made aware that this item was to be considered this evening by virtue of its inclusion on the legally publicly noticed agenda, posting of the same agenda and reports on the City’s website.

Attachment: 2022 Finance Ad Hoc Committee Final Report
28 - 2
ATTACHMENT 1
2022 Finance Ad Hoc Committee Final Report
28 - 3

June 4, 2022
FINAL REPORT AND RECOMMENDATIONS OF
THE FINANCE AD HOC COMMITTEE
I. HISTORY OF THE FORMATION OF THE AD HOC FINANCE COMMITTEE On September 28, 2020, the City Council voted unanimously to form the Finance Ad Hoc Committee (the “FAHC”). The FAHC was originally proposed to the City Council on September 2, 2020, and ultimately approved by the City Council, in response to concerns raised by residents, the Finance Commission, and a former City Finance Director about the proposed fiscal year 2020-2021 budget and the delayed Comprehensive Annual Financial Report (“CAFR”) for fiscal year 2018-2019.

A. Residents’ Discovery of Major Undisclosed Changes to the Proposed 2020-2021 City Budget A draft 2020-2021 budget was presented to the Finance Commission on May 26, 2020, by the then-acting Finance Director Karen Aceves. The commission voted 5-0 to recommend that the City Council approve the draft budget, and a presentation of the draft budget to the City Council was scheduled to occur at a City Council meeting on June 3, 2020.

However, the draft budget in the City Council agenda packet, posted online on May 29, 2021, was different from the budget originally presented to the Finance Commission 3 days earlier. Changes totaling approximately $14 million had been made to revenue and expenditure line items. The gross sum of changes made by Staff over the course of 3 days was an amount equal to 28% of the City’s total $51 million revenue budget.

Further, significant changes had also been made to various general fund reserve balances and special revenue fund balances. The breadth of the changes was neither disclosed nor explained in the agenda report for the June 3, 2020, City Council budget presentation.
1 The June 3, 2020 City Council meeting was continued, and, in the following days and weeks, irregularities in the draft budget and other concerns and questions about the City’s financial reporting were brought to the attention of City residents and leadership, largely through two reports, one authored by Sheila Rossi and FAHC member, Stephen Rossi, and the other by a former City Finance Director.

B. The Dispute Over the Adoption of a Resolution of Continuing Appropriations At this point, the City Council requested that the new draft budget be reviewed by the Finance Commission. On its review of the new draft budget, the Finance Commission voted 4-1 to recommend that the City Council adopt a resolution of continuing appropriations, with review of the draft 2020-2021 budget postponed until completion of delayed 2018-2019 Comprehensive Annual Financial Report (“CAFR”).2

Later, during a Special Meeting held on June 24, 2020, Staff presented the City Council with the Finance Commission’s recent recommendation to delay review of the 2020-2021 budget. The first item on the agenda included a Staff report recommending that the City Council approve Finance Commission’s proposal. However, citing a supposed $3.5 million revenue shortfall expected due to the Covid pandemic3 , Staff (led by Ms. Aceves and
the then-acting City Manager, Ms. Stephanie DeWolfe), along with Councilmembers Ms. Khubesrian and Ms.

Mahmud, spoke against the Staff’s recommendation, instead suggesting the City Council adopt the new draft budget.4

28 - 4

After stating the report’s characterization that the Finance Commission had “originally approved [the budget] unanimously” was a “misdirection” on the part of Staff, then-sitting City Councilmember Schneider commented further, “Let me remind you what the item on the agenda is. It says, ‘Approve a Resolution to Continue Appropriations of the FY 19/20 Budget…That is the Staff recommendation, and now they’re arguing against it.” 5 Following the City Attorney’s conclusion that adopting a new budget that evening would be a violation of the Brown Act, the City Council adopted the recommended resolution of continuing appropriations.

C. Councilmember Khubesrian’s Emails Utilizing False Identities and Intimidation to Quell Resident, Former Employee, and City Official Questions Regarding the Budget By way of additional background color leading to the formation of the FAHC, when the resolution of continuing appropriations was before the City Council for consideration, then-sitting City Councilmember Khubesrian not only dismissed residents who had raised questions regarding the budget, characterizing them as complainers “criticizing without looking for solutions,”6 but also submitted public comments via email under false identities. These emails advocated for adoption of the controversial draft budget; expressing support for the thenacting City Manager’s and Finance Director’s performance in connection with the 2020-2021 budget process; and making allegations of improprieties against the former City Finance Director who authored one of the critical reports.7
Furthermore, Ms. Khubesrian used these same false identities (also via emails) to pressure her colleague, Councilmember Cacciotti to stop asking questions about the City’s financials and claimed additional improprieties against yet another resident who had previously been critical of both Ms. Khubesrian and the 2020-2021 budget process.
8 After these inappropriate actions were discovered and exposed by a resident, Ms. Khubesrian admitted authoring the pseudonymous emails and resigned her position in mid-August 2020. The public fallout that followed these discoveries weighed heavily in the City Council’s decision to form the FAHC.

D. Formation of the FAHC to Assist Finance Department Staff and Make Recommendations On September 2, 2020, the FAHC was formed as an advisory committee to provide recommendations to, and consultation with, the City Finance Department on operational matters to promote the timeliness, accuracy, and transparency of the City’s financial reporting as well as to form a recommendation, based on the FAHC’s review, regarding whether a forensic audit would be warranted. The FAHC’s scope of work was limited to the following items:
9 (i) Ensuring the completion of the delayed fiscal year 2018-2019 Comprehensive Annual Financial Report (“CAFR”);
(ii) Ensuring the timely completion of the fiscal year 2019-2020 CAFR; (iii) Management and oversight of the fiscal year 2020-2021 budget; (iv) Updating the City’s financial policies and procedures; (v) Making a recommendation to the Finance Commission regarding the frequency and timing of financial reporting; and
(vi) Assess the necessity of, or scope of any additional audits, depending on the summation of the [FAHC’s] work, up to and including a forensic audit where the situation warrants additional review.

II. SUMMARY OF RESULTS OF OPERATIONAL CHANGES
As of the date of this summary report, the FAHC was comprised of six members – one Finance Commission member and five residents with various backgrounds in accounting, audit, business operations, finance, municipal finance, and restructuring – plus two City Council liaisons.10 From the date of the FAHC’s inception until approximately July 2021, the FAHC assisted Finance Department Staff in accomplishing the following. More detail on each of these items can be found in Exhibit A to this report. (i) On October 26, 2020, the City Council voted 4-1 to receive the final 20189/19 Comprehensive Annual Financial Report (“CAFR”), ahead of the November 3, 2020 election11; 28 - 5

(ii) On July 21, 2021, the City Council voted to receive the final 2019/20 Annual Comprehensive Financial Report (“ACFR”)12;
(iii) On April 27, 2021, the City Council voted 5-0 to receive the Annual Budget for 2020/21; (iv) Completed researching and make recommendations (through Staff) regarding best practices for financial policies and procedures; and
(v) Completed researching and make recommendations (through Staff) regarding best practices for monthly and quarterly reporting.

From approximately July 2021 until the date of this report, the FAHC focus has been the final remaining item included in the FAHC’s scope, as directed by the City Council:
(vi) Assess the necessity of, or scope of any additional audits, depending on the summation of the [FAHC’s] work, up to and including a forensic audit where the situation warrants additional review.

The remainder of this report, and the accompanying exhibits and endnotes (which are an integral part of the FAHC’s recommendations), provides highlights of the FAHC’s discussions and deliberations on whether conducting a forensic audit is recommended. With the delivery of this report, the FAHC’s work has been completed.

III. RECOMMENDATION REGARDING A FORENSIC AUDIT
Before providing a recommendation as to whether a forensic audit is warranted at this time, it was the determination of the FAHC members that both Staff and the casual reader be presented with the following information:
• What is the purpose of a forensic audit?
• What are the red flags that indicate a forensic audit is warranted? • A discussion of the relevant findings by the FAHC.

A. What is the Purpose of a Forensic Audit?
A forensic audit differs significantly from a regularly scheduled, annual audit like the CAFR. There are numerous whitepapers that explain in detail the scope and procedures contained within a typical forensic audit, however, a more simplified description can be found on Investopedia, “Forensic audits cover a wide range of investigative activities. A forensic audit is often conducted to prosecute a party for fraud, embezzlement, or other financial crimes.”13
Further, according to the American Journal of Business Education (“AJBE”), “Forensic accountants and auditors share some goals similar to traditional accountants and auditors. They have different roles, knowledge and skills. Forensic accountant investigations include identification of fraud. This is different from Certified Public Accountant (CPA) investigations that are not responsible for identifying fraud.”14 B. What are the Red Flags that Indicate a Forensic Audit is Warranted? The red flags highlighted by the AJBE include, but are not limited to, the following…” • Weak internal control processes; and
• Management style that pressured employees to take actions beyond financial statement management to manipulation to outright misrepresentation which is fraud.

The AJBE goes on to state, “Personnel-related practices allowing financial statement misrepresentation include low employee morale that is possibly due to inadequate compensation, high turnover and inexperienced 28 - 6

managers…An organization that loses financial records may have lost their financial records on purpose to hide fraud. Fraud is easier to commit when there is no strong accounting information system.” 15 Further, Investopedia highlights how fraud can manifest in actual practice16:
• Conflicts of Interest: “when a fraudster uses their influence for personal gains to the [City’s] detriment.”
• Extortion: “the wrongful use of actual or threatened force, violence, or intimidation…” • Asset Misappropriation: which can include, but is not limited to, activities such as embezzlement, providing contracts/not charging fees to third-parties due to personal relationships, and misuse of Staff time or other City resources,
• Financial Statement Fraud: “The goal of presenting fraudulent numbers may be to…ensure that Clevel executives continue to receive bonuses, or cope with the pressure to perform.” C. Findings of the FAHC
For the reader’s convenience, the relevant FAHC findings have been categorized according to the potential red flags indicating the possibility or threat of fraud outlined previously in this report.

1. Management failures in managing and hiring Finance Department personnel led to high staff turnover and new, relatively inexperienced and, in some cases, unqualified staff.

Finding 1.1 A Finance Department reorganization led to a significant reduction in Finance Department staffing levels: On November 7, 2018, then-acting City Manager, Ms. Stephanie DeWolfe initiated the reorganization of the Finance Department.17 This reorganization ultimately resulted in a 44% reduction in department staffing levels, from a historical level of 9 staff members to 5. The reductions included the elimination of two senior accounting clerk positions and the outsourcing of business licenses and payroll functions. Potential Red Flags: Low employee morale, high turnover, inexperienced managers, weak internal controls, and incomplete financial reporting.

Finding 1.2 The reorganized Finance Department had inexperienced leadership.

Departed staff were replaced with new, underqualified or inexperienced staff members.

Although then City Manager DeWolfe had received the recommendation to hire strong leadership for the Finance Direction position,18 the acting Finance Director did not have any management experience in finance department operations. It is important that City employment policies and job descriptions for all positions within the Finance Department, especially that of the Finance Director, adhere to appropriate educational or equivalent experience requirements during recruitment. Potential Red Flags: Low employee morale, high turnover, inexperienced managers, weak internal controls, and incomplete financial reporting.

2. The Finance Department reorganization and the procurement of the Citygate Report were undertaken in circumstances that give rise to questions about a possible lack of transparency, possible attempt to cover-up alleged asset misappropriation, and potential existence of a conflict of interest by City Manager DeWolfe.

Finding 2.1 Questionable circumstances surrounded the timing of, and the process undertaken, to engage Citygate: Of note, one of the main items used by Ms. DeWolfe to support the Finance Department reorganization, was a report (the “Citygate Report”) provided by Citygate Associates, LLC (“Citygate”).19 According to the staff report to the City Council recommending hiring Citygate, an organizational assessment report was needed to prepare for the retirement of the finance director who had been on leave of absence. The report was 28 - 7

initiated by City Manager DeWolfe while the City was actively recruiting for a new finance director. The stated purpose of the report was to provide an “organizational review” and “best practices” in a confidential report to be used as a “resource and management tool” for the new finance director. However, in the two years that followed the report, the City had completed only 1 of the 43 items that the report recommended be implemented within the first 12 months.

Further, the FAHC finds that the existence of allegations by Lauren Rubin going back to March 2018, approximately a month before City Manager DeWolfe entered into a contract with Citygate, and other circumstances, raise concerns which should be discussed:

DeWolfe Engages Citygate for an Organizational Review of the Finance Department: Starting in March 2018, Lauren Rubin, a member of the Finance Department staff, sent then-Human Resources Manager Miriam Lee Ko and Karen Aceves messages regarding “financial irregularities and mishandling of a substantial amount of government and public monies,”20 however no response was received by Rubin. Approximately one month later, on April 19, 2018, a consulting contract between Citygate and the City of South Pasadena was signed by Ms. DeWolfe, including a not-to-exceed contract total of $69,420.00. The proposal had been presented to, and approved by, the City Council the prior evening on April 18, 2018. 21 A review of the City Clerk files on the City’s website did not find any evidence of a competitive bidding process as per the City’s typical procedures. Further, it was not disclosed, either in the presentation to the City Council by Staff nor in the contract with Citygate itself, that the Senior Consultant who would be performing the organizational review was former Pasadena Finance Director, Mr. Andrew Green. Mr. Green had previously worked with Ms. DeWolfe in the City of Pasadena for three years (2009-2012) 22, but
later departed the City of Pasadena in January 2015 amidst an investigation into the embezzlement of $6.4 million from a city fund overseen by Mr. Green.23 Questionable Circumstances Regarding the Rubin Case and Citygate: The Citygate report became a central piece in the subsequent wrongful termination lawsuit by Lauren Rubin claiming that DeWolfe commissioned the Citygate report, through her personal relationship with Green and without any competitive bidding process, in an attempt to invent cause to terminate Rubin and hide Rubin’s claims of financial improprieties from the City Council. 24 Rubin was terminated by
the City in November 2018, three months after Citygate issued the final, August 16, 2018 report.

It is unclear to the members of the FAHC whether the prior messages alleging “financial irregularities and mishandling…of…monies,” sent by Rubin to Ko and Aceves, were ever disclosed to the City Council prior to the commissioning of the Citygate report, the dismissal of Rubin by the City, or the filing of Rubin’s legal claim.

Per Ms. DeWolfe’s LinkedIn profile, since June 2021, approximately 2 months after a final settlement was reached in the Rubin case and nine months after DeWolfe’s separation from her position as City Manager of South Pasadena, Citygate hired Ms. DeWolfe as a Management & Leadership Consultant.

Potential Red Flags: Conflict of interest, management style that pressured employees to take actions beyond financial statement management to manipulation to outright misrepresentation which is fraud, potential asset misappropriation…providing contracts to third-parties due to personal relationships, misuse of Staff time or other City resources, and specific claims of financial irregularities made by Rubin.

Finding 2.2 The City Council appeared to have used, extensively and inappropriately, closed session City Manager performance reviews to conduct other business unrelated to the City Manager: For reference, the position of the City Manager reports to the South Pasadena City Council, and periodic performance evaluations of the City Manager are conducted by the City Council in closed session. A summary analysis, based on a review of the City Council closed 28 - 8

session agendas from January 2018 through August 2020, of the various dates these closed session performance evaluations occurred is included in the chart below:

Most cities and companies provide at least one performance review annually. Some private companies even perform regular reviews on a quarterly basis. Therefore, the existence of 12 performance reviews over an approximate 2-year span (or one performance review every 2.1 months on average) seems unusual in the absence of a performance improvement plan.

However, upon closer inspection of the dates in question, it is clear that there was no regular cadence to the closed session performance reviews. Rather these reviews come in three main spurts with large gaps between each grouping, including one grouping which contained three separate closed session performance reviews within the same 28-day period.

Potential Red Flags: Conflicts of interest, weak internal control processes, potential Brown Act violations

3. The Finance Department did not have, and did not follow, important internal controls, policies, and processes.

Finding 3.1 The Finance Department failed to reconcile bank accounts timely. While it is best practice to reconcile bank accounts and close monthly financials within 30 days of each month end, the Finance Department was as much as twelve (12) months behind in reconciling the City’s bank accounts and closing monthly financials, directly leading to the delay in starting/completing the 2018/19 CAFR. Potential Red Flags: Weak internal control processes
Finding 3.2 The City lacked controls or procedures to alert management to the Department’s unreconciled accounts. The City’s failure to have “procedures in place to ensure that all relevant accounts are reconciled” at year end was a “material weakness” finding by the auditor in the 2018/19 CAFR audit letter. (As outlined in more detail in Exhibit A of this report, in conjunction with the delivery of the 2018-2019 CAFR, the City’s outside audit firm, RAMS, highlighted several “material weaknesses” in the City’s internal control processes that negatively affected the timely delivery of financial reporting. These included, but were not limited to, monthly bank reconciliations being as much as 12 months delayed; an inability to properly review numerous financial statement accounts and a failure to maintain an adequate 28 - 9

year end closing process; and (noted as a “significant deficiency”) the failure of the Finance Department to maintain an updated accounting policies and procedures manual for Staff to reference. RAMS also noted that the root cause of these issues was the City’s inability to maintain adequate Staffing levels in the Finance Department. Potential Red Flags: Weak internal control processes
Finding 3.3 The Finance Department failed to prepare forward looking projections of the City’s cash position nor was the Monthly Liquidity Report certified by the City Treasurer as required by the City’s Investment Policy. The City’s Investment Policy (as voted on by the City Council each year) requires the City Treasurer to certify “as to the availability of cash to meet the City’s expenditures over the next six months…. based on cash flow projections provided by the Finance Department.” As of the date this FAHC was created, the City Treasurer’s monthly report was the only interim financial report regularly presented directly to the City Council. The City’s Investment Policy required the City Treasurer to certify the City’s liquidity position based on the forward-looking projections of the Finance Department.

Had the City Treasurer report and certification highlighted the Finance Department’s failure to provide the forward-looking statements, the City Council would have been directly alerted to the issue. The City Council would have been on notice as to the issues within the Finance Department, potentially as much as a year prior to the contentious budget discussions that occurred in June 2020. Potential Red Flags: Weak internal control processes

4. The City did not comply with its own purchasing policy.

Finding 4.1 The prior City Manager used her authority to undermine the spirit of the City’s purchasing policy requiring City Council approvals of major contracts. City purchasing policies include various provisions outlining authority levels required by the total size of expenditure. These policies state, among other things, that any contract, amendment, or followon contract, that results in a cumulative possible expenditure more than $25,000.00 requires approval by the City Council.
25 Included in the sample selections reviewed by RAMS as part of the 2018-2019 CAFR, approximately 18 contracts (provided to the FAHC directly by RAMS) were found to be in potential violation of the City’s purchasing policies, including at least 2 contracts that, on their surface, should have gone to the City Council for approval. Both were executed by then-acting City Manager DeWolfe and then-acting City Attorney Highsmith (contracted through Colantuono, Highsmith, and Whatley).26 Potential Red Flags: Weak internal control processes, asset misappropriation

5. The City did not have policies or procedures for administering its legal liability reserve.

Finding 5.1 The City did not have a policy or practice of accruing an actual reserve against its legal liability. Based on the FAHC’s review of the October 26, 2020, City Council meeting and follow up discussions with staff, the City did not maintain a legal liability reserve and had no policies or procedures for doing so. First, the $500,000 “reserve” amount which appeared on the City’s balance sheet remained constant over years, without any accounting entries of expenditures or accruals to reflect activity in the liability. Second, as elicited by FAHC member Rossi in the question-and-answer session with the auditor representative at the October 26, 2020, City Council meeting, the account was for all practical purposes an inactive placeholder account within the larger general reserve and there was no true legal liability reserve accrual maintained within the City’s balance sheet. Third, there was no method of review utilized by the City to determine the City’s true, outstanding legal liability to be reflected in the annual audit and financial statements as required by GASB. Instead the City relied exclusively on the City Attorney’s general, but inaccurate, belief that all litigation claims are covered by the City’s 28 - 10

insurance risk pool and therefore not required to accrue for properly. Potential Red Flags:

Weak internal control processes, conflict of interest, asset misappropriation, financial statement fraud
Finding 5.2 Official representations that the litigation liability reserve was an actual accrual for anticipated liability expenses were based on inaccurate statements made by City Attorney Highsmith and Councilmember Mahmud with no internal review process by the Finance Department, Finance Committee, City Manager, City Council, or the City’s outside audit firm, resulting in the filing of a potentially inaccurate 2018-2019 CAFR. At the October 26, 2020 council meeting, City Attorney Highsmith and Councilmember Mahmud represented that the annual designation of a legal liability reserve was a reserve against reasonably anticipated legal expenses, and 100% of all litigation expenses beyond the policy’s deductible would be covered by the City’s insurance pool making further discussion on the topic unnecessary.

However, during the same council meeting,
27 the City’s outside auditor affirmed: 1) there was no actual accrual in the City’s financials for litigation expenses; 2) despite the CAFR being conducted for the period ending June 30, 2019, given the date the CAFR was being delivered to the City Council, October 26, 2020, a review of all existing, pending, or threatened litigation outstanding at any time from June 30, 2019 through effectively September 30, 2020 would be necessary in order for the CAFR to be correct28; and 3) the auditors’ sole source of information regarding potential litigation claims against the City was a letter provided by then-acting City Attorney, Ms.

Theresa Highsmith, a partner at Colantuono, Highsmith, and Whatley. The representations by City Attorney Highsmith are further in direct contradiction to notification previously received by the City’s insurance provider, and available to the City Attorney prior to the October 26, 2020 council meeting and finalization of the 2018-2019 CAFR as outlined in Finding 5.3 below. As such, no oversight or review of the City Attorney’s methodologies, analysis, or conclusions was conducted by any member of City Staff, Finance Commission, or the City Council prior to a vote to receive the CAFR. The City Council voted 4-1 to receive and file the 2018-2019 CAFR on October 26, 2020. Potential Red Flags: Weak internal control processes, conflict of interest, asset misappropriation, financial statement fraud
Finding 5.3 The City filed and received the 2018-2019 audit report containing a legal liability estimate without adequate due diligence. Even if most claims against the City are covered by the City’s risk pool coverage, the City is still required, for both the purpose of presenting accurate financial reports as well as ensuring proper accountability for, and execution of, the City’s fiduciary responsibilities, to accurately estimate the amount of reserve needed for claim liabilities and for legal expenditures exceeding its annual legal expense budget. In the context of the City Council adoption of the 2018-2019 CAFR on October 26, 2020, it should be noted, that per emails provided to this FAHC and included as Exhibit B to this report, both City staff and Colantuono, Highsmith, and Whatley were made aware, at least 5 months prior to the October 26, 2020 Council meeting, that the City had been notified by its insurance company that at least one ongoing litigation may not be covered under the policy (“Case 2”). On May 27, 2020, City staff attempted to raise an alarm to the City Council that additional funds would be required to cover potential litigation costs, stating, “We need to go to Council for sure, can we discuss ASAP.” Upon a review of subsequent City Council meeting agendas, this topic was never brought before the City Council. FAHC finds this course of action does not demonstrate a good faith effort to accurately reserve against the City’s liability position or accurately present the City’s financial position and performance to the public. FAHC recommends that the City determine its estimated legal liability position in accordance with GASB, as required by local and State regulation, and after a full review of a fulsome economic risk analysis of all existing, pending, or threatened litigation outstanding for the relevant time-period, prepared by the City Attorney and reviewed by the Finance Department, Finance Commission, City Manager, and the City Council prior to inclusion in any City budget or CAFR.
28 - 11

As of the October 26, 2020 City Council meeting, ”Case 2” was still being tried on behalf of the City by litigators employed by Colantuono, Highsmith, and Whatley. Notification of potential non-coverage by the City’s insurance company appears to be in direct contradiction to the information provided by then-acting City Attorney Highsmith, in writing to the City’s outside auditors, and directly to the City Council during open session, and may have negatively impacted the accuracy of the financial information included in the 2018-2019 CAFR. Potential Red Flags:

Weak internal control processes, conflict of interest, asset misappropriation, financial statement fraud
Finding 5.4 The City’s potentially inadequate due diligence or policies regarding litigation risk assessment and risk management led to approximately $600,000 of litigation and settlement costs born by taxpayers. Below is an example of a litigation issue with potential inadequate risk management. On May 20, 2022, the SouthPasadenan reported that the Hanscom Drive sewer litigation (referred to by the City as “Case 2”) had been settled for $200,000. This settlement was in regard to a two-day sewer overflow that occurred on January 11th and January 12th, 2018.29 Included in the settlement agreement is the City’s first public acknowledgement that the sewer blockage (found by work crews on January 12, 2018) actually resided in the City’s mainline sewer system. In January 2018, the resident initially requested approximately $40,000 to pay for environmental remediation of the soil as well as replacement of damaged personal property from the overflow caused by a blockage in the City’s sewer mainline. The City decided not to accept the request. The resident hired a lawyer in early 2018. In October 2019, the resident again made a settlement offer to the City through then Mayor Khubesrian for $80,000 to cover the environmental remediation, replacement of damaged personal property, and incurred legal costs through that date. The settlement offer was not accepted by the city.

Litigation continued until a final settlement offer was executed in mid-May 2022. Based on the legal billings presented in open session City council meetings plus third-party expert costs including but not limited to engineering, soil testing, Transtech inspections, and the final settlement cost itself, the City spent approximately $600,000 in hard costs regarding Case 2, not including soft costs associated with City staff and Council time as well. Please see below for additional detail on legal billings and timeline of key events:
28 - 12

Approximately $600,000 of litigation costs came after the resident’s initial request of $40,000.00.

The City Attorney at that time, Highsmith, is employed directly by Colantuono, Highsmith, and Whatley, the firm hired to litigate Case 2. As noted by the California League of Cities white paper on City Attorney ethics30, there is a potential conflict of interest for a partner in a law firm, serving as a contract city attorney, to advise a city council on litigation work conducted by other members of the same law firm. Potential Red Flags: Weak internal control processes, conflict of interest, asset misappropriation

6. The City decreased its financial transparency by reducing the detail and frequency of its financial reporting to Council.

Finding 6.1 The City discontinued its semi-annual report on expenses for attorneys, consultants, and lobbyists. Historically, and to track total expenditures more readily for each group by category, a consolidated summary of expenses spent during the year on attorneys, consultants, and lobbyists was provided twice a year to the City Council. Without the provided consolidation, it is difficult to track total expenses by category as expenses can be distributed across multiple departments and Fund accounts making it impossible for the City Council to trace the impact of litigation, staffing, or outsourcing decisions – and thereby significantly reducing the ability for oversight from both the City Council and residents. While this report was historically provided twice per year, at the time the FAHC was created, the last issuance of such a report was in February 2018. Please note that these legacy reports had been available online via the Finance Department website until sometime in mid to late 2020. They have since been removed.

Potential Red Flags: Weak internal control processes, conflict of interest, asset misappropriation, financial statement fraud
Finding 6.2 The City reduced the detail provided in its Legal Billing Disclosures amidst resident concerns regarding conflicts of interest regarding the City Attorney’s employment by Colantuono, Highsmith, and Whatley As far back as the 1990’s (the oldest available files archived in the City’s online document database) legal expenses included in the warrant register presented, and approved for payment by the City Council were summarized by matter with each matter assigned a specific identifier (either a matter name or case number).31 Starting with the legal expenses billed for the month of July 2021 by Colantuono, Highsmith, and Whatley (the firm which employs the City’s contract City Attorney among providing other legal services), and presented to the City Council for inclusion in the warrant register to be approved on October 6, 2021,32 these identifiers have been removed.

It should be noted that, while discussion by the City Council during the October 6th meeting concluded that the shift in billing practice was to mitigate any potential “advantage” that an 28 - 13

opposing council could gain by seeing the amount of billings incurred by the City on any particular case, this change in billing practices occurred just one month after various residents raised concerns to the City Council, via public comments, regarding what was perceived to be excessive litigation costs, specifically citing the billings by Colantuono, Highsmith, and Whatley associated with the ongoing “Case 2” litigation.33 That South Pasadena City Attorney, Andrew Jared, who recommended the change in the decades-long billings practice, is a contract City Attorney employed directly by Colantuono, Highsmith, and Whatley presents a conflict of interest vis a vis the recommendation to Council. Potential Red Flags: Weak internal control processes, conflict of interest, asset misappropriation, financial statement fraud Finding 6.3 If the City had maintained the frequency and detail of legal expense reporting, the disclosures would have alerted the public to large fluctuations in legal expenses from year to year. The 2018-2019 CAFR filed with the City Council on October 26, 2020, estimated legal liabilities of the City, outside of its budgeted legal expenses, at $500,000. On March 12, 2021, less than 5 months after the 2018-2019 CAFR was presented to the City Council, the SouthPasadenan reported34 that the City’s then-proposed 2020-2021 City budget included a litigation budget of “$1.15 million for 2021, nearly four times as much as for 2020...” The article also quotes then-acting Interim Assistant City Manager, Elaine Aguilar, as stating the “$1.15 million figures does not include potential costs for the still pending litigation over a sewer leak on Hanscom Dr. [Case 2]” FAHC recommends that increased financial reporting of highly fluctuating, cumulatively large legal expenses is an important step toward greater financial transparency, including an immediate return to providing semi-annual reports on expenses for all lawyers, consultants, and lobbyists. Potential Red Flags: Weak internal control processes, conflict of interest, asset misappropriation, financial statement fraud IV. RECOMMENDATION REGARDING A FORENSIC AUDIT
It was not within the scope of the FAHC to make any conclusions as to whether any inappropriate activities had occurred or the intentions behind any individual activities described in this report. The FAHC has not made, nor does it infer, any such conclusions. Rather, it was the task of the FAHC to investigate whether red flags existed that would indicate inappropriate activities may have occurred. It is the opinion of the FAHC that the red flags discussed throughout this report do, on their surface, warrant a further review by specialists via a forensic audit.

However, given the number of years that have transpired since the bulk of these actions took place, the significant financial cost associated with such an endeavor, and the prior removal/resignation of many then-acting City officials potentially involved, such a step may not be practical for the City at this time. The FAHC instead recommends the City take the additional actions outlined below to help ensure similar activities are not tolerated or allowed to exist in the future. This conclusion was based, in no small part, upon the assumption that City Staff, the Finance Commission, and the City Council will continue to implement the many recommendations provided in both this report and previously provided throughout the FAHC’s work. In the event the City does not follow through on the recommendations provided in the next 12 months, it is the belief of the FAHC that a forensic audit, designed to look into the numerous findings discussed in this report, is not only warranted, but necessary.

It is further recommended that City Staff:
• Review and prepare an analysis to the Finance Commission and City Council regarding the viability of instituting a new, independent internal auditor position within the City of South Pasadena. As discussed elsewhere in this report, the existing City policies and procedures, had they been properly followed, would have helped prevent or eliminate many of the FAHC’s findings. However, as the position of City Manager is the only City Staff member reporting directly to the City Council who is also under the Council’s direct and sole supervision, a potential for conflict of interest is created. An Internal Auditor, hired by, reporting to, and having compensation determined directly by the City Council, would act 28 - 14

independently of the City Manager and Finance Departments, helping to ensure ongoing compliance with stated City codes, policies, and procedures without fear of intimidation or retaliation by the City Manager.

This internal auditor could support the City Council in their responsibility for oversight by providing institutional knowledge and an additional level of security regarding stewardship of funds for the citizens of South Pasadena;
• In order to comply with best practices for contract attorneys as described by the League of California Cities and the City of South Pasadena’s own code of ethics requiring the elimination of even the “appearance” of a conflict of interest, it is recommended the City codify as policy that the City cannot retain one law firm to provide both (i) contract City Attorney services, and (ii) litigation services; • Immediately proceed with an RFP for a new contract City Attorney law firm (as already motioned by Councilmember Zneimer and seconded by Councilmember Cacciotti in open session during the September 1, 2021 council meeting) to be acted upon, and any awards determined, by the newly constituted City Council after the November 2022 elections;
• Determine its estimated legal liability position in accordance with GASB, as required by local and State regulation, and after a full review of a fulsome economic risk analysis of all existing, pending, or threatened litigation outstanding for the relevant time-period, prepared by the City Attorney and reviewed by the Finance Department, Finance Commission, City Manager, and the City Council prior to inclusion in any City budget or CAFR;
• Increase financial reporting of highly fluctuating, cumulatively large legal expenses, including an immediate return to providing semi-annual reports on expenses for all lawyers, consultants, and lobbyists; and
• Provide a quarterly update to the Finance Commission to update both that body and, in turn through Finance Commission and City Council Liaison reports, the City Council as to Staff’s progress on implementing the recommended actions.

The opinion is based on the FAHC’s work on the operational matters described above; its review of documents and other information provided by Staff during the FAHC’s work; agenda reports, presentations, and discussions at open meetings of the Finance Commission and City Council; and other related, publicly accessible materials – many of which have been cited throughout this report in support of the FAHC’s findings and recommendations.

The FAHC did not consider, and did not have access to, City Council closed session materials, or other information protected from disclosure to the public by the attorney-client or other privileges. Nevertheless, the FAHC believes that the current members of the City Council, in consultation with current City senior management, should conduct its own assessment of the necessity for and scope of any additional audits (including a forensic audit if deemed warranted), using relevant materials that may be outside the scope of the FAHC’s work or protected from public disclosure.

For the purpose of transparency to Staff, the City Council, and City residents, much of the FAHC’s discussions regarding the final scope item, to “Assess whether it is advisable for staff to recommend a forensic audit be conducted for the period of July 2019 through the current period [September 2020],” can be found in publicly available emails and Zoom meeting video recordings (for the final two meetings of the FAHC). Videos can be found on the City’s YouTube channel (https://youtu.be/EBod1BSaoQY and https://www.youtube.com/watch?v=qkCj65QccE). [Rest of this page left intentionally blank]
28 - 15

EXHIBIT A
COMPREHENSIVE ANNUAL FINANCIAL REPORT (“CAFR”) FOR FISCAL YEAR 2018-2019 On September 24, 2020, a draft Comprehensive Annual Financial Report (“CAFR”) for fiscal year 2018-2019 was presented to the Finance Commission for review, discussion, and a recommendation to City Council.

During its initial review of the draft 2018-2019 ACFR, the commission discovered discrepancies between the draft 2018-2019 ACFR and the 2018-2019 budget adopted by City Council on June 6, 2018.35 The commission further observed discrepancies between the 2018-2019 budget adopted by City Council and the 2018-2019 budget document posted on the City’s website.36
In other words, there were three different 2018-2019 budget documents, two of which were different from the budget document actually adopted by the City Council in 2018. The commission could not find evidence that the changes had been disclosed to or approved by the City Council.

In its initial meeting on October 13, 2020, the FAHC reviewed, discussed, and provided feedback to staff on the draft CAFR, on the variances identified by the Finance Commission, and on the adverse findings made by the City’s auditor in connection with the draft 2018-2019 CAFR. Among others, the auditor’s findings included:
• Non-Compliance with Budget Policy: While reviewing the DRAFT 2018/19 CAFR, members of the FAHC realized that the 2018/19 Budget referred to in the DRAFT CAFR was not consistent with the 2018/19 Budget approved by the City Council. Similar to the 2020/21 Budget variances described elsewhere in this report, subsequent to approval of the 2018/19 Budget by the City Council, errors within the Budget appear to have been discovered by members of the Finance Department and “corrected” without any notification to, review, or approval by the Finance Commission or City Council. As noted by RAMS and included in the 2018/19 CAFR Management Letter, this was in violation of stated City Financial Policy. • Non-Compliance with City Purchasing Policy: City purchasing policies include various provisions outlining authority levels required by the total size of expenditure. These policies state, among other things, that any contract, amendment, or follow-on contract, that results in a cumulative possible expenditure in excess of $25,000.00 requires approval by the City Council37. Included in the sample selections reviewed by RAMS as part of the 2018/19 CAFR, approximately eighteen (18) contracts were found to be in potential violation of the City’s purchasing policies, including at least two contracts that, on their surface, should have gone to the City Council for approval. Both were executed by then-acting City Manager DeWolfe and then-acting City Attorney Highsmith (contracted through Colantuono, Highsmith, and Whatley).
• Bank Reconciliations Not Prepared Timely: RAMS found that bank reconciliations had not been prepared, reviewed or approved in a timely manner, describing the cause as: “The City did not have controls in place to ensure bank reconciliations were performed in timely manner [i.e., monthly].” The auditor considered this deficiency to be a “material weakness.”38
• Year-End Closing Process: RAMS found that “many accounts were not properly reviewed and/or reconciled at year-end in preparation for the [2018-2019] audit.” The auditor described the cause as:
“The City did not maintain the appropriate staffing levels to allow for the proper year-end closing process.” The auditor considered this deficiency to be a material weakness. 28 - 16

• Accounting Procedures and Policies Manual: RAMS found that the Finance Department did not have “an updated accounting procedures and policies manual readily available for reference.” The auditor considered this deficiency a “significant deficiency.”39 A revised draft 2018-2019 CAFR was presented to the Finance Commission on October 15, 2020, with current staff disclosing and explaining the revisions made to the draft initially presented to the commission on September 24, 2020, in response to feedback received from the commission and from the FAHC. The commission voted to receive and file the 2018-2019 CAFR.

The 2018-2019 CAFR was presented to the City Council on October 26, 2020. The agenda report discussed and explained the variances identified by the Finance Commission and their review by the Finance Commission and by the FAHC. The City Council voted 4-1 to receive and file the 2018-2019 CAFR.40 In the FAHC’s view, a primary cause of the financial reporting crisis that led to the formation of the FAHC was insufficient staffing in the Finance Department. In addition to the “high turnover at the management level in the Finance Department” cited by the City’s auditor, an ill-conceived 2018 reorganization of the Finance Department, promoted by the then-acting City Manager, reduced department staff from a historical nine (9) to five (5), and outsourced business licenses and payroll functions.

Exacerbating the reduction in staff was the replacement of legacy staff with new staff who did not have institutional knowledge, and the hiring of a Finance Director who lacked the experience necessary to lead the department.

These conditions, compounded by a lack of controls (and the failure to follow existing controls), led to a delay in month-end bank reconciliations -- by as much as twelve (12) months -- which in turn led to a delay in the year-end closing process, which in turn led to a delay in commencing the audit process for the 2018-2019 CAFR.

The City’s former City Manager retired suddenly effective September 12, 2020, immediately subsequent a September 11, 2020 Special Agenda Closed Session performance evaluation with the City Council. The City’s former Finance Director left on an unspecified indefinite family leave in August 2020, and resigned on October 6, 2020, prior to returning from leave and one week after the formation of this FAHC was announced. 41 The committee credits the interim Assistant City Manager hired to lead the Finance Department and current department staff for their transparency and responsiveness to feedback from the Finance Commission and the FAHC, and for bringing the fiscal year 2018-2019 CAFR to completion.

ANNUAL COMPREHENSIVE FINANCIAL REPORT (“ACFR”) FOR FISCAL YEAR 2019-2020 Finance Department staff regularly updated the FAHC and the Finance Commission on the progress of the audit necessary to complete the Annual Comprehensive Financial Report (“ACFR”) for fiscal year 2019-2020, noting completion of tasks on the year-end audit schedule.

To assist staff with preparation for the 2019-2020 audit, the FAHC reviewed City Council agenda materials for the 2019-2020 fiscal year (July 1, 2019, through June 30, 2020) to identify City Council action that had the effect of adjusting or modifying the budget, such as authorizing contracts or contract amendments, or increasing contract amounts. The FAHC members assembled the relevant agendas, agenda reports, and minutes for use by staff in connection with the audit and completion of the 2019-2020 ACFR.

A draft 2019-2020 ACFR was presented to the Finance Commission on July 14, 2021, and to the City Council on July 21, 2021. Both bodies voted to receive and file the report. 28 - 17

ANNUAL BUDGET FOR FISCAL YEAR 2020-2021
A new, draft fiscal year 2020-2021 budget was presented to the Finance Commission on March 4, 2021, and to the City Council on April 27, 2021. The commission voted unanimously to recommend approval of the 2020-2021 budget, and the Council voted unanimously to adopt the budget.

With the 2018-2019 CAFR having been completed, year-end fund balances and fiscal year 2018-2019 revenue and expenditures reported in the 2020-2021 budget were tied to actual, audited numbers. Additionally, fiscal year 2019-2020 revenue and expenditures were tied to pre-audit, actual numbers.

UPDATING FINANCIAL POLICIES AND PROCEDURES
As part of the FAHC review, recommendations were made to Staff regarding updated financial policies in 2021- 2022 budget including: mid-year budget update, quarterly reports, GASB 10 / risk management accounting (revenues and expenditures are now accounted for through insurance internal service fund, instead of through general fund via transfer). The FAHC also discussed purchasing policies, the lack of a current policies and procedures manual, reviewed existing City policies as provided by staff, and also reviewed other the policies of other “case study” cities with the City of Irvine providing a model as to best practices. The City has since retained a consultant to draft an updated policies and procedures manual tailored to the City of South Pasadena based on the prior mentioned recommendations and reviews.
28 - 18

EXHIBIT B
From: Lucy Demirjian
Sent: Wednesday, May 27, 2020 9:37 AM
To: Stephanie DeWolfe <[email protected]>; Karen Aceves <[email protected]>
Cc: Tamara Binns <[email protected]>
Subject: RE: Legal Services Account
Importance: High
Not good news here…. We will need min $180K to get through the year. COVID expenses are less than $20K to date. And the ASmith reimbursement is not guaranteed, Mike doesn’t believe it will be approved.

We need to go to Council for sure, can we discuss ASAP.

From: Karen Aceves <[email protected]>
Sent: Wednesday, May 27, 2020, 9:11 AM
To: Tamara Binns; Lucy Demirjian
Subject: Legal Services Account
Hi All,

We need to go to council to request an increase for legal services of about $200,000 for the remainder of the year. It is already over by 21, 000 so we will need to go to council this meeting.

Let’s talk more.

Karen
From: Michael Casalou
To: Sean Joyce
Subject: RE: Risk Management
Date: Wednesday, November 4, 2020 3:59:13 PM
With respect to excess coverage, a final coverage determination is made at the conclusion of a claim and if deemed not covered, related defense costs are also not covered. However, PRISM staff, on behalf of the Claims Review Committee issues a coverage alert letter early on as a courtesy to members to provide preliminary notice of potentially uncovered exposure.

The Liabilities Claims Specialist and staff from PRISM make the determination. However, they do allow communication from a member to make an argument for coverage. I am aware of only one case (Smith case) where we were notified that we may have coverage issues. However, the City’s attorney (Jenni Pancake) on that case provided a detailed response to their initial coverage letter that seemed to resonate with the PRISM staff.

From: Sean Joyce <[email protected]>
Sent: Wednesday, November 4, 2020 3:48 PM
To: Michael Casalou <[email protected]>
28 - 19

Subject: Fwd: Risk Management
Begin forwarded message:

From: Stephen Rossi <[email protected]>
Date: November 4, 2020 at 3:37:20 PM PST
To: Sean Joyce <[email protected]>
Subject: Re: Risk Management
So the two follow up questions would be:
• When do we submit for reimbursement for expenses in excess of $100K? At the time of invoice, payment, or final judgement?
• "The Liability program works on a reimbursement basis, therefore, the City will be reimbursed for amounts spent above the SIR assuming the loss is a covered under the bylaws. " Who is looking at whats covered under the bylaws and has the insurance carrier acknowledged that all of the ongoing litigations are covered? From: Sean Joyce
Sent: Tuesday, November 3, 2020 1:33 PM
To: Stephen Rossi
Subject: FW: Risk Management
Steve,
See Mike’s explanation below.

Sean
From: Michael Casalou
Sent: Tuesday, November 3, 2020 1:24 PM
To: Sean Joyce <[email protected]>
Subject: Risk Management
Risk Management Overview
The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets, error and omissions; injuries to employees and natural disasters. The City utilizes a combination of self-insurance, Joint Powers Authority participation and excess insurance to address these concerns. The City’s primary coverage provider is Public Risk Innovation, Solutions and Management (PRISM formerly CSAC). The purpose of this organization is to provide a form of liability, workers compensation and property coverage whereby risks are transferred to the JPA to fund appropriately for its member agencies. General liability, Workers Compensation and Property losses are pooled among the member cities at certain levels, and coverage is jointly purchased in excess layers. The City pays an annual deposit based on a calculation of prior claims experience and payroll (or Total Insured Values for Property coverage). For Liability, the City has a self-insured retention of $100,000, losses exceeding the self-retention limit up to $5 million per claim are recovered from deposits paid by member cities.

Individual claims in excess of $5 million up to a maximum of $50 million are covered by private insurance carriers. The Liability program works on a reimbursement basis, therefore, the City will be reimbursed for amounts spent above the SIR assuming the loss is a covered under the bylaws. For Workers Compensation, the City has a self-insured retention of $125,000, losses exceeding the self-retention limit up to $5 million per claim are recovered from deposits paid by member cities. Individual claims in excess of $5 million are covered by private insurance carriers who provide ‘Statutory’ coverage. 28 - 20

EXHIBIT C
28 - 21

ENDNOTES
1 The agenda report also represented, incorrectly, that the different draft budget presented the City Council had been reviewed and recommended for approval by the Finance Commission. The agenda report begins at page 17-1 of the agenda packet for the Council’s June 3, 2020, meeting.
2 With respect to reserve and special revenue fund balances, both the former finance director who authored one of the critical reports and the Finance Commission observed that information from prior completed audits had been misapplied to prior adopted budgets.

Specifically, the adopted fiscal year 2018-2019 budget used estimated year-end balances from the adopted 2017-2018 budget, instead of actual, year-end balances from the relevant and available annual audit.

With the 2018-2019 CAFR delayed, fund balances in the original draft 2020-2021 budget presented to the Finance Commission could not have been tied to actual, audited numbers in the first instance. In light of this, the history of misapplication of audit information to prior adopted budgets, and the substantial changes made to the fund balances in the draft budget presented to the commission, the fund balances in the draft budget presented to City Council lacked reliability. 3 The $3.5 million “shortfall” referenced by Stephanie DeWolfe at the outset of the June 24, 2020 City Council meeting is actually referencing a projected revenue decline of $3.432 million from the prior “Pre-Covid” 2020-2021 General Fund revenue expectations to the revised “Post-Covid” revenue expectations (Pre- and Post-Covid budget projections by Staff were $30.893 million and $27.461 million respectively and can be found on page 17-24 of the June 3, 2020 City Council agenda meeting packet).

In reality, the Pre-Covid budget presents an increase in revenues over the 2019-2020 year. The 2019-2020 budget (approved well prior to start of Covid domestically in March 2020) includes General Fund revenue expectations of $28.601 million. As a result, the true revenue “shortfall” presented by the budget presented by Staff to the City Council in the June 3, 2020 agenda packet was not $3.5 million, but rather $1.140 million (the 2019-2020 budgeted revenues of $28.6 million less the Post-Covid budget proposal of $27.5 million).

However, it should be noted that the June 3, 2020 version of the proposed budget includes an $897 thousand reduction in property tax revenues from the draft budget provided to the Finance Commission only three days earlier ($14.825 million vs $15.722 million respectively). Were the property tax revenues held consistent with the draft previously sent to the Finance Commission, the true revenue “shortfall” provided in the Post-Covid budget would have only resulted in a $243 thousand differential from the adopted 2019/20 fiscal year budget – only 6.9% of the $3.5 million figure presented by DeWolfe and Aceves in the June 24, 2020 City Council meeting.

It should also be noted, that while the 2020-2021 fiscal year numbers are not yet finalized, on February 16, 2022, City Staff provided the City Council with a Mid-Year financial review for the 2021-2022 fiscal year. During that review, Staff presented the City Council with an updated estimate of General Fund revenues, including an estimated $16.4 million from property taxes – nearly $1.6 million HIGHER than the 2020-2021 budget proposed by DeWolfe/Aceves (these figures include both the Property Tax and Motor Vehicles in-Lieu line items in order to be consistent with the reporting presentation of the June 3, 2020 budget presentation which also included both line items).
4 The Staff report begins at 0:04:45 of the June 24, 2020 video recording available on the City’s website 5 Councilmember Schneider’s comments begin at approximately 1:04:49 of the June 24, 2020 video recording available on the City’s website
6 Councilmember Khubesrian’s comments can be found at approximately 1:23:00 of the June 24, 2020 video recording available on the City’s website

28 - 22

7 See public comments by “Emily Diaz-Vines” at page PC-2-13 and “Mel Trom” at page PC-2-15 in the additional document packet for the Council’s June 24, 2020, meeting, and https://southpasadenan.com/marina-khubesrian-admits-to-fraudulent-emails-south-pasadena-councilwoman-resigns/. 8 https://southpasadenan.com/strange-emails-sent-to-city-council-veiled-threats-to-cacciotti/ 9 Staff’s report and additional documents presented to the City Council outlining the scope of work for the FAHC, and approved 5-0 by the City Council, can be found on page 1-1 of the September 28, 2020 Special City Council Meeting Agenda located here:
https://www.southpasadenaca.gov/home/showpublisheddocument/24197/637366498690570000 and here:
https://www.southpasadenaca.gov/home/showpublisheddocument/24203/637369070841270000 10 While the FAHC originally included two (2) members from the Finance Commission, one of those members resigned from the FAHC prior to the final version of this report.
11 The October 26, 2020 vote is discussed in more detail later in this report. 12 What had previously been known as a Comprehensive Annual Financial Report (CAFR) was changed to being called an Annual Comprehensive Financial Report (ACFR)
13 https://www.investopedia.com/terms/f/forensic-audit.asp 14 American Journal of Business Education – Fourth Quarter 2008, Volume 1, Number 2, Pg 116 (https://files.eric.ed.gov/fulltext/EJ1052569.pdf)
15 American Journal of Business Education – Fourth Quarter 2008, Volume 1, Number 2, Pg 125 (https://files.eric.ed.gov/fulltext/EJ1052569.pdf)
16 https://www.investopedia.com/terms/f/forensic-audit.asp 17 City Council meeting video for November 7, 2018 (see time stamp 00:53:59):
http://www.spectrumstream.com/streaming/south_pasadena/2018_11_07.cfm 18 See City Gate Report, dated August 16, 2018, at Exec. Summary, p. 8 (https://www.southpasadenaca.gov/home/showpublisheddocument/21224/637280665975830000) 19 The Citygate report can be found on the Finance Department’s website here:
https://www.southpasadenaca.gov/government/departments/finance-department-resources 20 https://southpasadenan.com/former-city-clerk-files-retaliation-suit-alleges-cover-up-by-citymanagers/#:~:text=Lauren%20Rubin%2C%20a%20former%20long,a%20scandal%20over%20business%20licenses. 21 The April 18, 2018 Staff report along with the Citygate contract and proposal can be found here:
https://opengov.southpasadenaca.gov/WebLink/DocView.aspx?id=96147&searchid=3b9d901b-9e75-450b-a60baf5d9a48d0d6&dbid=0 22 Employment histories for Green and DeWolfe can be found on LinkedIn here https://www.linkedin.com/in/andrew-green27a96357/ and here https://www.linkedin.com/in/stephanie-dewolfe-96408062/, respectively 23 https://www.pasadenastarnews.com/2015/01/20/two-pasadena-department-heads-fired-amid-64m-embezzlementinvestigation/ 24 https://southpasadenan.com/former-city-clerk-files-retaliation-suit-alleges-cover-up-by-citymanagers/#:~:text=Lauren%20Rubin%2C%20a%20former%20long,a%20scandal%20over%20business%20licenses. 25 South Pasadena City Code Article XI Purchasing, Subsection 2.99-29 Purchasing system (11)(e):
https://www.codepublishing.com/CA/SouthPasadena/#!/SouthPasadena02.html#2.99-29 28 - 23

26 The relevant code section found at Title 2, South Pas Municipal Code Section 2.99-29 paragraph (12) states: “(12) Professional and Contractual Services. Contracts for services of specially trained and professional persons or businesses shall be exempt from bidding. If possible, quotes from three qualified vendors shall be obtained prior to the award of a contract. If the contract is equal to or below twenty-five thousand dollars, the contract shall require the approval of, and be executed by, the city manager. All contracts exceeding twenty-five thousand dollars must be approved by the city council.” 27 Comments and discussions regarding the City’s litigation accruals can be found from 0:59:59 to 1:04:33 and from 1:3217 to 1:56:25 of the October 26, 2020 City Council meeting video available on the City’s website. 28 Under GASB accounting standards, potential liabilities associated with litigation outstanding at June 30, 2019 would need to be reviewed for potential inclusion in a litigation accrual on the City balance sheet. Potential liabilities that presented subsequent to June 30, 2019 would be reviewed for potential inclusion in a subsequent event footnote. 29 https://southpasadenan.com/case-settled-city-settles-another-lawsuit/ 30 https://www.calcities.org/resource/practicing-ethics 31 e.g. legal billings generated by Kane, Ballmer, Berkman on page 32 of the November 17, 1999 City Council Agenda Packet:
https://opengov.southpasadenaca.gov/WebLink/0/doc/220/Page1.aspx 32 See legal billings generated by Colantuono, Highsmith and Whatley on page 10-9 of the October 6, 2021 City Council Agenda Packet: https://www.southpasadenaca.gov/home/showpublisheddocument/27166/637686044516370000 vs billings generated by the same firm on page 7-13 of the August 18, 2021 City Council Agenda Packet:
https://www.southpasadenaca.gov/government/city-council-meetings/2021-council-meetings 33 Specific public comments regarding this note can be found on page AD-69 here:
https://www.southpasadenaca.gov/home/showpublisheddocument/26854/637649025770770000; and pages AD-13 and AD29 here: https://www.southpasadenaca.gov/home/showpublisheddocument/26956/637661131074470000; and page 34 https://southpasadenan.com/59-million-south-pasadena-city-budget-saved-by-voter-support-cell-towerlease/#:~:text=The%20news%20comes%20as%20the,percent%20higher%20than%20fiscal%202020.&text=Including%20fund%2 0transfers%20such%20as,new%20capital%20spending%20being%20proposed. 35 The 2018-2019 budget adopted by City Council was labeled “DRAFT” and did not include a city manager’s budget message, the City’s financial policies for fiscal year 2018-2019, or an expenditure summary by fund. See agenda packet for the Council’s June 6, 2018, meeting, beginning at page 15-12. It should be noted that although a budget presentation was made to the Finance Commission at a May 22, 2018, meeting, this was a “receive and file” agenda item, and no recommendation was made to the City Council by the commission concerning adoption of the draft 2018-2019 budget. 36 Although the fiscal year 2018-2019 budget document posted on the City’s website did include a city manager’s budget message and statement of financial policies for fiscal year 2018-2019, these items had mainly been cut and pasted from the adopted 2017-2018 budget without change or update, including the same summary charts and graphics from the prior fiscal year.
37 South Pasadena City Code Article XI Purchasing, Subsection 2.99-29 Purchasing system (11)(e):
https://www.codepublishing.com/CA/SouthPasadena/#!/SouthPasadena02.html#2.99-29 38 “Material weakness” is defined as “a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.”
39 “Significant deficiency” is defined as “a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.” 40 The single vote against the receipt and file of the 2018-2019 CAFR has been discussed in more detail elsewhere in this report. 41 https://tigernewspaper.com/finance-director-karen-aceves-resigns-from-city-post/ 28 - 24