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HomeMy WebLinkAbout081523-03.1 ss STUDY STUDY SESSION MEMORANDUM 3.1 TO: Mayor and Town Council August 15, 2023 SUBJECT: Review of Town Lighting and Landscape Assessment District 1983-1 BACKGROUND Since the Town’s incorporation in 1982, a portion of the Town’s maintenance budget has been funded through assessments levied by the Danville Street Lighting and Landscape Assessment District No. 1983-1 (the “LLAD”). High level maintenance of our extensively used community parks and facilities, landscaping in major roadside and median areas, and street lighting to enhance community safety have been identified as high priorities by our residents and Town Council. Every property in Danville is in the LLAD, which consists of four separate benefit zones: •Zones A and B pay for roadside landscape maintenance (properties are located in either A or B) •Zone C pays for street lighting (properties are included in Zone C if they specifically benefit from street lighting) •Zone D pays for fifty percent of park and community facilities maintenance (all properties in Town are in Zone D) The passage of Proposition 218 in 1996 created new procedural and substantive requirements for all LLADs in the state, the most significant being that any existing LLAD assessments and any future increases require approval by the majority of property owners participating in a mail out ballot process. In 1997, property owners in Town ratified the assessments existing at that time with more than 87% support. In 2003, property owners approved an increase in assessments to the current levels. The rates did not include any annual CPI or escalator, and the Town has not proposed any additional increases in assessments during the past 20 years. Current rates for a single-family residence are: •Zone A $40.20 •Zone B $179.50 •Zone C $58.50 •Zone D $67.80 LLAD 1983-1 2 August 15, 2023 Most commonly, single family owners will fall either within Zones A, C and D with a total annual assessment of $166.50, or Zones B, C and D with a total annual assessment of $305.80. Multi-family and non-residential properties are assessed based upon a formula that determines the “equivalent dwelling units” or EDUs represented by that use in comparison to single-family residential. DISCUSSION While LLAD revenues have not increased in 20 years, expenses have. Following is a summary of how LLAD revenues and expenditures have changed since the last rate adjustment in 2003. Audited year-end revenues and expenditures are available for fiscal years 2003/04 through 2021/22. Budgeted revenues and expenditures are shown for fiscal year 2023/24. Revenues Actual Actual Budget Zone 2003/04 2021/22 % Increase 2023/24 % Increase A $582,873 $604,323 3.68% $583,858 0.17% B $728,280 $745,059 2.30% $746,968 2.57% C $676,696 $683,606 1.02% $664,183 -1.85% D $1,028,419 $1,162,670 13.05% $1,134,741 10.34% $3,016,268 $3,195,658 5.95% $3,129,750 3.76% Operating Expenditures (Net of Capital) Actual Actual Budget Zone 2003/04 2021/22 % Increase 2023/24 % Increase A $582,972 $891,790 52.97% $1,123,688 92.75% B $613,789 $956,887 55.90% $1,084,257 76.65% C $593,997 $643,932 8.41% $795,031 33.84% D $936,192 $1,718,883 83.60% $1,863,138 99.01% $2,726,950 $4,211,492 54.44% $4,866,114 78.45% As noted previously, Zone D costs reflect the 50/50 cost split between the LLAD and the Town General Fund. Total Zone D (Park and Facilities Maintenance) costs are double the cost shown. Two additional points to make contextually are that: 1) the LLAD expenditures reflected above do not include capital expenditures that the Town makes to support the LLAD – i.e., these are operating expenses only; and, 2) between August 2003 and August 2022, inflation in the San Francisco Bay Area Region as reflected by the Consumer Price Index (CPI) for the region increased by 67.55%. Therefore, increases in LLAD operating expenses through fiscal year 2021/22 fall well within the overall CPI for the Bay Area. LLAD 1983-1 3 August 15, 2023 Had LLAD assessments been structured to adjust for CPI, by 2021/22 the rates that were originally set in 2003/04 would have adjusted as illustrated below to cover the operating portion of the LLAD costs net of any capital contribution. Further adjustment based upon budgeted 2023/24 expenses are reflected in the last two columns. Adjusted Rates Zone 2003/04 2021/22 % Increase 2023/24 % Increase A $40.20 $61.49 52.97% $77.49 92.75% B $179.50 $279.86 55.91% $317.09 76.65% C $58.50 $63.42 8.41% $78.30 33.84% D $67.80 $124.48 83.60% $134.93 99.01% Moving Forward During the recent study sessions to review the Town’s 2023/24 Operating Budget, the Town Council requested a study session discussion of the LLAD budget, a review of both substantive and procedural issues that would arise should the Town wish to propose an increase in the assessment rates and other potential options available to assist in funding some or all of these maintenance functions. Town staff has met with the Town’s long time LLAD District Engineers, Francisco and Associates, who have prepared the attached memorandum to address these topics. RECOMMENDATION Provide direction to Town staff on any additional information regarding the LLAD and maintenance funding. Prepared by: David Casteel Maintenance Services Director Robert B. Ewing City Attorney Attachments: A-Francisco and Associates Memo B-LLAD Map 1 MEMORANDUM July 20, 2023 TO: Dave Casteel, Maintenance Services Director, Town of Danville FROM: Francisco & Associates SUBJECT: Town of Danville Street Lighting and Landscape Assessment District No. 1983-1 Purpose The Town of Danville (the “Town”) established the Street Lighting and Landscape Assessment District No. 1983-1 (the “LLAD”) for the purpose of providing a mechanism to fund the annual cost to operate, maintain, service, and replace the Town’s public landscape, streetlight, and park improvements (the “Public Improvements”). The annual assessments generated by the LLAD are currently insufficient to fund the Public Improvements at the level to which the Town’s constituents are accustomed without an annual contribution from the Town’s General Fund. The required annual General Fund contribution is not sustainable, and therefore not a viable long term funding source for the Public Improvements. For this reason, the Town is exploring options to fund the annual shortfall and to ensure there is an adequate and stable source of funding for the future. The purpose of this memorandum is to assist Town staff and the Town Council in determining how best to address the LLAD’s annual funding shortfall. To this end, provided in the following sections is an overview of the Town’s LLAD, an outline of the process required to increase LLAD assessments to a level that can sufficiently cover the annual maintenance costs of the Public Improvements as well as an outline of the process to establish either a general or special tax as alternative funding strategies. Additional considerations in evaluating funding strategies are also included. Background Upon incorporation, the Town inherited several street lighting districts from Contra Costa County. In 1983, these street lighting districts were consolidated into a single Town-wide Lighting and Landscape Assessment District, now known as the Town’s LLAD 1983-1. The LLAD was expanded in 1987 to authorize the use of funding for major roadside and median landscaping, and authorization was extended to include parks and related recreational facilities in 1990. In 1997, in order to comply with new legislation at the time (Proposition 218), the LLAD was confirmed by the Town’s property owners with overwhelming support, receiving more than 87% approval. ATTACHMENT A 2 Since formation, it has been the Town’s intent that the LLAD’s annual assessments will fully or, at minimum, significantly fund the maintenance, operation, and replacement of the Public Improvements. For this reason, in 2003 the Town’s property owners approved an increase in the assessments to provide the Town with the additional funding necessary at that time to maintain and operate the Public Improvements. The Town has been levying the assessment annually, but the LLAD’s assessment rates have remained unchanged since the 2003 increase. Despite the unchanged assessment rates, the costs to maintain and operate the Public Improvements have continued to rise, leading to a projected General Fund contribution of approximately $3.5 million dollars for Fiscal Year 2023-24. Unfortunately, this annual General Fund contribution is not sustainable in the long term. To maintain the current level of service in future years, the Town is exploring options to increase funding for the maintenance, operation, and replacement of the Public Improvements. If the current funding strategy remains unchanged, there may be a need to reduce services to align revenues with expenditures. There are currently two options identified to fund the annual shortfall: 1) An Increase of the LLAD Assessments, and 2) Establishment of a Local Tax. Outlined below are summaries of the process to increase the LLAD’s assessment rates and the process to establish a local tax, both of which are funding strategies available to the Town for consideration. Increasing LLAD Assessments In order to address the existing funding shortfall and the funding needs of tomorrow through an increase of the LLAD assessment rates, the Town will need to conduct a Proposition 218 proceeding. The process to conduct a Proposition 218 proceeding to increase LLAD assessments will take approximately six to nine months, and includes several steps which are summarized below: •Perform a benefit analysis of the relevant Public Improvements to determine the costs to maintain, operate, and replace the Public Improvements, as well asidentify the benefits to be conferred by the Public Improvements to property withinthe Town. •Determine proposed assessment rates based on the prepared benefit analysis. •The Town Council approves a resolution initiating the proceedings to establish anew LLAD and directs City staff to prepare an Engineer’s Report. •Prepare an Engineer’s Report that includes the benefit analysis and proposed assessment methodology and rates. •The Town Council receives and approves the Preliminary Engineer’s Report andsets a date and time to hold a public hearing on the matter. •Mail notices and ballots to all affected property owners a minimum of 45 days prior to the scheduled public hearing. •The Town Council conducts a Public Hearing and tabulates the returned ballots. Ifthere is no majority protest, the Town Council can adopt a resolution approving the 3 Final Engineer’s Report and confirming the increase in assessments. A majority protest exists if more than 50% of ballots returned, weighted by proposed assessment, oppose the increased assessment. It is important to note, the legal landscape has changed since the LLAD was initially formed in 1983 and since the assessment rates were last increased in 2003. For this reason, the benefit analysis will require a thorough review of the Public Improvements. This review will include identifying the location of existing and planned Public Improvements, identifying the costs to maintain, operate, and replace both the existing and future Public Improvements, and determining what benefits are conferred to property from the Public Improvements. The benefit analysis will be used to develop a new assessment methodology that equitably allocates the costs of the Public Improvements to each parcel within the Town, resulting in the proposed increased assessment rates that will fund the annual shortfall. Passing a Local Tax Another commonly utilized funding mechanism by local public agencies across the state involves passing a local tax to fund services. Pursuant to state law, agencies may consider placing either a general or special tax before local voters for their consideration. The following is a brief description of both options. General Taxes A general tax is one which is used to help pay for “general governmental services” so it would not be specifically earmarked for maintenance purposes. However, under current law, it is possible to place a general tax on the ballot along with a non-binding advisory measure, which asks voters to express their preference for how the tax proceeds should be spent. However, a ballot initiative proposed by the California Business Roundtable (qualified for the November 2024 ballot) would specifically eliminate the use of advisory measures tied to general taxes if approved. General taxes must be placed on the ballot by a 2/3’s vote of the council and, absent an emergency, must be submitted to the voters at a regularly scheduled election for the council. General taxes can be approved by a simple majority vote. Special Taxes A special tax is one that is earmarked for a specific purpose(s), such as funding the maintenance, operation, servicing, and replacement of the Public Improvements. The process to establish a special tax requires two-thirds registered voter approval and can be submitted to the voters at any election. The process would take approximately seven to twelve months. The process is summarized below: 4 •Identify the relevant Public Improvements to be funded by the special tax anddetermine the costs to maintain, operate, and replace the Public Improvements. •Establish the proposed tax rate structure for property within the Town anddetermine the special tax rates needed to fund the costs of the PublicImprovements. •The Town Council approves a resolution establishing the ballot question, outliningthe special tax rates and rate structure, and directing the County Registrar to placea measure on the upcoming election’s ballot. •Registered voters (not property owners) within the Town’s boundaries will vote on the special tax measure at the upcoming primary or general election. If two-thirds of the voters support the special tax, the tax is approved and may be levied insubsequent years. •The Town Council adopts a resolution confirming the results of the election and authorizing the levy of the special tax. The upcoming primary and general elections are in March and November of 2024. To be eligible to place a ballot measure on the March 2024 ballot (which would have to be a special tax), the Town must complete the necessary steps of developing a rate structure and tax rates early enough for the Town Council to approve a resolution by the end of October 2023. Similarly, for inclusion on the November 2024 ballot (which could be a general or special tax), these steps must be finalized and approved by the Town Council by the end of July 2024. Additional Considerations It is recommended that two additional items be considered when evaluating funding strategies to address the existing LLAD’s funding shortfall: 1) the inclusion of an annual escalation factor, and 2) the type and level of public education and outreach efforts that may be required to educate property owners and/or the electorate about the LLAD’s purpose, the existing funding shortfall and the funding strategy the Town elects to pursue. 1.The inclusion of an annual escalation factor would allow any increase in LLADassessment rates or a newly established special tax to keep pace with annual inflationary increases in the costs to maintain and operate the Public Improvements. Typically, annual escalation factors are tied to a local index. A localindex commonly utilized by public agencies in the region is the U.S. Bureau ofLabor Statistics Consumer Price Index for All Urban Consumers or Urban WageEarners and Clerical Workers for the San Francisco, Oakland, Hayward Area of California. 2.Public outreach and education efforts ensure that the Town’s electorate iseducated and well informed of the issues and circumstances experienced by theTown as well as ensure that the electorate understands the proposed funding solution. Public education and outreach efforts includes community meetings and mailers informing the electorate of the Town’s funding situation and the avenueproposed to generate the needed funding to sustain the Public Improvements in 5 the future. These communication efforts lead to a more informed constituency and often increase the likelihood of the electorate approving the proposed funding strategy. Summary It has now been twenty years since the Town last asked property owners for an increase in assessment rates for LLAD 1983-1. Absent any CPI escalator and given that only minimal growth has occurred in Danville during this time, District revenue growth has fallen well short of increased District expenses. Based on the options outlined above, there are various matters to consider when determining how best to fund the annual shortfall associated with the Town’s Public Improvements. Below is a summary of the proposed funding strategies included herein to assist the Town Council and Town staff in determining how best to fund the Town’s Public Improvements. •The process to establish or increase the LLAD assessment will result in the property owners returning ballots in support or opposition to the proposedassessment. In order to move forward, a majority of the ballots returned (weightedby assessment amount) would need to support the increase of LLAD assessments.The process to increase the LLAD assessments typically takes approximately sixto nine months and can be initiated at the City’s discretion. •The process to establish a special tax will result in a registered voter election thatwill take approximately seven to twelve months and will likely need to be timed toalign with either a primary or general election. In order to move forward with the establishment of a special tax, two-thirds of the votes cast in the election wouldneed to support the establishment and levying of the special tax. When selecting a funding strategy, it is important to obtain the pulse of the community, determine how best to communicate with the Town’s constituents, to have a clear message, and that the constituents understand not only what is being asked of the community but also how the approval or failure of the proposed strategy may impact the Town and its constituents. DANVILLE STREET LIGHTING AND LANDSCAPE ASSESSMENT DISTRICT NO. 1983-1 0.0 0.3 0.6 0.9 1.2 1.5 mi ZONE C = NEIGHBORHOODS BENEFITING FROM STREET LIGHTS ZONE D = ZONE A + ZONE B ZONE A ZONE A ZONE B ATTACHMENT B