City Council Staff Report Page 1 of 4 September 9, 2025 Agenda Item No.
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DATE: September 9, 2025
TO: Honorable Mayor and Members of the City Council
FROM: Kristopher Kokotaylo, City Attorney
SUBJECT: Overview of Proposition 218 Procedure for an Increase in Assessment for the Citywide Landscape and Lighting District No. 3, and Other Revenue Options; Adoption of Resolution Forming a Revenue Review Ad Hoc Subcommittee and Approving Mayoral Appointments
EXECUTIVE SUMMARY
Staff recommends that the City Council receive this report, providing an overview of the legal process to modify or increase the assessment for the Citywide Landscape and Lighting Assessment District No. 3 (“LLAD No. 3”) and a high-level overview of other potential revenue options. After receiving the report, staff recommend that the City Council consider forming a Revenue Review Ad Hoc Subcommittee consisting of two Council Members to review revenue options and return with a recommendation for Council consideration.
STRATEGIC PLAN ALIGNMENT
This item is related to Strategic Plan Goal A. Financial Stability and Sustainability. Foster fiscal health through disciplined long-term planning, cost control, heightened efficiency, increased revenue, and cost recovery.
BACKGROUND
LLAD No. 3:
The passage of Proposition 218 in 1996 created new procedural and substantive requirements for all Landscaping and Lighting Assessment Districts (LLAD) in the state, the most significant being that any increase or modification to existing LLAD assessments requires notices and ballots to be mailed to all affected property owners.
Assessment increases or modifications to existing LLAD assessments can be implemented if a majority of ballots returned in favor of the proposed assessment, weighted by the proposed assessment, outweigh those that oppose the proposed assessment.
The City has not proposed any increases or modifications to the LLAD No. 3 assessments Agenda Item No. {{section.number}}.{{item.number}}
City Council Staff Report Page 2 of 4 September 9, 2025 since 1994. There have since been increases in population, new housing, streets, parks, streetlights, traffic signals, landscaped areas, bio-treatment areas, staff costs, and materials costs.
The services funded by LLAD No. 3 also include work done by outside contractors who maintain our streetlights, traffic signals, street trees, and other miscellaneous items. The cost of delivering such services has continued to rise over the past three decades.
As the City Council is aware, LLAD No. 3 is currently generating assessment revenue that is well below the amount required to fund basic maintenance activities adequately.
The revenue received from LLAD No. 3 is $2,661,687, and the expense associated with LLAD No.3 is $3,832,457.
Other Revenue Options:
The City Council authorized an agreement with TeamCivX and Godbe Research to assist with evaluating community interest in increasing LLAD No.3 and other revenue options.
A high-level summary of the other potential revenue options is identified below in the Discussion section of this report.
DISCUSSION
LLAD Increases:
Increasing assessments under LLAD No. 3 is a three-step process. The first step in the process is for staff to prepare an engineer’s report that calculates the maintenance costs and funding needed for permissible improvements, including landscaping, public lighting, and park maintenance, among others. The engineer’s report also includes a budget and the method for apportioning assessments to property owners based on special benefits received, as well as the proposed assessment rates.
Once the engineer’s report is completed, the second step is for staff to bring the report to the City Council for consideration and approval, as well as a Resolution of Intention to levy and collect assessments. The Resolution of Intention would include a general description of existing and proposed improvements, set a public hearing date, and provide at least 45 days’ notice for property owners to return their ballots. As part of this process, the ballots are mailed to the property owners located within the LLAD, which would likely align with the city limits.
The third step is for the City Council to hold a public hearing where it will receive testimony and tabulate the ballots to determine if a majority of those ballots submitted in favor of the increased assessment exceed those in opposition. The ballots are weighted based on the assessment amount. A majority protest exists if the ballots submitted in opposition of the increase exceed the amount of ballots submitted in favor. If there is a majority protest, the City cannot impose the increase.
If no majority protest exists, the City can impose the assessment for maintenance and improvements in the LLAD as outlined in the engineer’s report.
In light of the required timing to prepare an engineer’s report and comply with the legal requirements for the balloting process, staff believes that it could complete the process in Agenda Item No. {{section.number}}.{{item.number}}
City Council Staff Report Page 3 of 4 September 9, 2025 approximately 4 months. This does not account for any outreach and communications with the residents and businesses that the City may seek to engage in advance.
Other Revenue Options:
Below are other revenue options that the City Council can consider. With the exception of an increase to the cannabis tax, all options require voter approval.
Cannabis Business Tax
Union City voters approved Measure DD, a cannabis business tax, in November 2018.
Measure DD passed with approximately 75% of voters voting in favor. The cannabis business tax established varying excise tax rates on the following cannabis business activities: cultivation, distribution, manufacturing, testing, and retail. The City currently only has cannabis retailers and generates approximately $450,000 annually in cannabis business tax revenues. The cannabis business tax established an initial tax rate of 4% of gross revenue on retail. Measure DD includes existing voter approval for the City Council to increase the tax rate to up to 6% of gross revenue on retail. This two percent increase may be achieved by the adoption of a City Council resolution.
Utility Users Tax
Union City voters approved Measure WW, a utility users tax (“UUT”), in November 2020.
Measure WW received approximately 57% of voters voting in favor. The UUT is a 5% tax on utility uses (telecommunications, video, electricity, and gas). The UUT is scheduled to expire on December 31, 2028. Still, the City Council should consider renewal of the UUT in the general election of November 2026, given that the next general election would not be until November 2028, approximately one month before its expiration. The City Council could consider proposing for voter consideration an increase to the UUT, which currently generates approximately $7 million annually in revenue.
Vacant Parcel Tax
Some cities have established vacant parcel taxes on property owners who leave their properties unoccupied or underdeveloped for a specified period of time. The tax amount can vary, though it is typically set at a fixed amount. Additionally, vacant parcel taxes typically include exemptions for circumstances such as properties undergoing renovation or that were recently inherited.
Other Parcel Taxes
The City could consider proposing for voter consideration a parcel tax, such as the prior public safety parcel tax. For 16 years, the City collected a voter-approved public safety parcel tax. The public safety parcel tax was a special tax that funded police, fire, and youth violence prevention services. In March 2020, voters rejected Measure U, which would have extended the public safety parcel tax for eight years beyond its 2021 expiration date. While approximately 63% of voters voted in favor of the measure, this is short of the 2/3 required for passage of a special tax.
Proposed Resolution Authorizing Formation of an Ad Hoc Subcommittee:
Agenda Item No. {{section.number}}.{{item.number}}
City Council Staff Report Page 4 of 4 September 9, 2025 When considering potential revenue options, the City Council has historically formed an ad hoc subcommittee to evaluate options with staff and City consultants. Should the City Council seek to continue with this historic practice, the City Attorney’s Office has prepared a proposed resolution for the formation of the Revenue Review Ad Hoc Subcommittee (the “Subcommittee”) to be appointed by the Mayor with approval of the City Council.
Members of the Subcommittee will work with the consultants and staff to understand the potential fiscal impacts of the revenue options identified above. The Subcommittee would, as appropriate, also assist in reviewing the proposed community survey that would help the City Council understand voter attitudes toward the proposed revenue options and make a recommendation to the City Council.
FISCAL IMPACT
There is no direct fiscal impact associated with receiving this report and forming the ad hoc subcommittee.
RECOMMENDATION
Staff recommends that the City Council receive this report providing an overview of the legal process to modify or increase the assessment for the Citywide Landscape and Lighting Assessment District No. 3 (“LLAD No. 3”) and a high-level overview of other potential revenue options. After receiving the report, staff recommend that the City Council consider forming a Revenue Review Ad Hoc Subcommittee consisting of two Council Members to review revenue options and return with periodic recommendations for City Council consideration.
Prepared by: Kristopher Kokotaylo, City Attorney
Submitted by: Kristopher Kokotaylo, City Attorney
Attachment
1. Draft Resolution