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HomeMy WebLinkAbout2024-05-14; City Council; ; Report Reevaluating Proposition H, Based on a Recommendation from the Carlsbad Tomorrow: Growth Management Citizens Committee and in Response to City Council MotionCA Review ___AF___ Meeting Date: May 14, 2024 To: Mayor and City Council From: Scott Chadwick, City Manager Cindie McMahon, City Attorney Staff Contact: Allegra Frost, Senior Assistant City Attorney allegra.frost@carlsbadca.gov, 442-339-2891 Zach Korach, Finance Director zach.korach@carlsbadca.gov, 442-339-2127 Subject: Report Reevaluating Proposition H, Based on a Recommendation from the Carlsbad Tomorrow: Growth Management Citizens Committee and in Response to City Council Motion Districts: All Recommended Action Receive a report addressing City Council’s July 18, 2023, motion to discuss reevaluating Proposition H, based on a recommendation from the Carlsbad Tomorrow: Growth Management Citizens Committee, and provide direction. Executive Summary In March 2022, the City Council formed a resident-led advisory committee to initiate work on the City Council’s goal to develop an updated approach to manage growth in Carlsbad. The group’s charge was to identify the key elements of a new plan to manage growth in Carlsbad in a way that maintains an excellent quality of life while also complying with newer state housing laws. The Carlsbad Tomorrow: Growth Management Citizens Committee presented its recommendations to the City Council on July 18, 2023. One of the recommendations was: Due to increased project costs since 1982, consider a ballot measure to increase the $1 million general fund expenditure limit, and index it to something like the Consumer Price Index so it can increase over time. This recommendation refers to Proposition H, which was adopted by the voters in 1982. It requires voter approval for real property purchases or improvement projects if the cost exceeds $1 million in city funds. Given inflation over the past 42 years, nearly all major improvement projects and land acquisitions not otherwise exempt from Proposition H would cost over $1 million today and would be subject to a public vote. The committee’s recommendation stems May 14, 2024 Item #12 Page 1 of 5 from a concern that Proposition H has become a hurdle, making it more difficult and time- consuming for the city to pursue projects to maintain Carlsbad’s quality of life. In response to the committee’s recommendation, the City Council approved a motion directing staff “to bring back to the City Council an agenda item to discuss options related to Proposition H, which could include a ballot measure.” Explanation & Analysis Proposition H history In 1982, the proponents of Proposition H explained that the passage of Proposition 13 in 1978, followed in 1979 by the Gann Initiative spending limitation,1 caused city resources to become more constrained. In response, Carlsbad voters decided to put Proposition H on the ballot to ensure the city did not spend large amounts of money to purchase or develop property without adequate review and input by the public. The measure, passed by the voters in 1982, requires voter approval for real property purchases or improvement projects if the cost exceeds $1 million in city funds.2 Proposition H states, in pertinent part: The city shall make no real property acquisition and/or no improvement to real property the cost of which exceeds one million dollars in city funds, unless the proposed acquisition and/or improvement project and the cost in city funds is first placed upon the ballot and approved by a majority of the voters voting therein at an election. Although many cities place bonds on the ballot to pay for projects, Proposition H’s expenditure limitation is unique because it asks for voter permission to spend money the city already has. City staff are not aware of other cities with a similar limitation. Proposition H was incorporated into the City Charter when the charter was adopted in 2008. Section 400 of the City Charter states, Subject to the expenditure limitation established by the citizens of Carlsbad Proposition H in 1982, the City shall have the power to utilize revenues from the general fund to encourage, support and promote economic and community development in the City. 1 The Gann initiative, a result of Proposition 13, imposed a cap on local government revenue that can be appropriated in any given fiscal year. 2 Proposition H is codified as Chapter 1.24 of the Carlsbad Municipal Code and allows the City Council to adopt reasonable guidelines to implement Proposition H. The City Council adopted guidelines implementing Proposition H in 1983 and 2005. May 14, 2024 Item #12 Page 2 of 5 l 2 3 4 5 It is the intent of this ordinance to provide the citizens and taxpayers of Carlsbad with an opportunity to express directly their preference by vote prior to major city expenditures for the purchase or development of land; It is not the intent of this ordinance to interfere with the normal day to day administration of the City or with routine ongoing capital expenditures; Implementing guidelines Following the passage of Proposition H, the City Council convened a citizens committee to recommend implementation guidelines to help clarify what projects require a Proposition H vote. Based on this input, the City Council voted in 1983 to approve regulations implementing Proposition H. On July 19, 2005, the City Council approved an additional implementing regulation. Real property acquisitions and improvements to real property are subject to voter approval if the cost exceeds $1 million in city funds. “City funds” are defined as, City of Carlsbad general fund moneys; federal general revenue sharing moneys and all other moneys, but shall not include categorical federal and state grants available to the city for specific purposes. City funds shall not include special assessments. (Carlsbad Municipal Code Section 1.24.020.)3 The regulations clarify that “city funds” are tax monies, collected citywide, that are subject to the limitations of Proposition 13 and the Gann Initiative. Fees received from new development to provide additional facilities are exempt. For example, planned local drainage fees, park-in- lieu fees, public facilities fees, water funds and sewer connection funds are not considered city funds. Because of that, certain projects that cost more than $1 million may be exempt from the Proposition H voter approval requirement due to their funding sources. “Improvements to real property” are defined by the regulations as excluding replacement, repair, maintenance, routine refurbishment or upgrades of existing facilities, because they are considered to be routine ongoing capital expenditures necessary to carry out the normal, routine business of the city. That means that certain types of replacement or repair projects that cost more than $1 million may also be exempt from the Proposition H’s voter approval requirement. Ballot measures under Proposition H The City Council has placed several measures on the ballot since 1982 to obtain voter approval of projects exceeding $1 million in city funds, including the purchase of Hosp Grove, a golf course, a tennis complex, two multipurpose athletic fields, an enclosed soccer facility, a portion of Cannon Road (Reach 4), the Safety Training Center, Alga Norte Aquatic Center, Fire Station 2 and, most recently, the Monroe Street Pool renovation project. The cost to place the Monroe Street Pool renovation project on the ballot was $38,812. Future projects that may require voter approval include, Fire Station 7, Robertson Ranch Park and the Zone 5 Park. The cost of a ballot measure to obtain voter approval for these projects depends on the election date and the number of other items on the ballot. Information on the cost to place a measure on the November 2024 General Election ballot is provided in the Fiscal Analysis section below. 3 The city’s community facilities districts, which collect fees to pay for certain improvements, are a form of special assessment. May 14, 2024 Item #12 Page 3 of 5 In 2002, the City Council considered options to revise the Proposition H expenditure limitation and voted to place two items on the 2002 ballot: • Proposition B, repealing the $1 million expenditure limitation set forth in Proposition H, • Proposition C, authorizing the city to spend city funds in an amount over $1 million to construct capital facilities including a swimming pool complex, trails linkages and open space, the Public Safety Training Center and a portion of Cannon Road, east of College (Reach 4). Proposition B failed with a vote of 33.7 percent in favor. Proposition C passed with a vote of 59.7 percent in favor. As a result of Proposition C’s passage, construction of trail linkages and open space may also be exempt from the Proposition H voter approval requirement. Committee’s recommendation The Carlsbad Tomorrow: Growth Management Citizens Committee recommended the City Council consider a ballot measure to increase the $1 million General Fund expenditure limitation and index the amount so that it increases over time. The recommendation stemmed from a concern that the $1 million limit was hampering the city’s efforts to provide projects needed to ensure the city’s future quality of life. As noted above, after reviewing the committee’s recommendations at the July 18, 2023 City Council meeting, the City Council directed staff to return with an agenda item to discuss options related to Proposition H. Fiscal Analysis The cost for placing a measure on the November 2024 General Election ballot would likely cost between $135,000 and $170,000. Options To facilitate the City Council’s discussion, staff have developed the following options for consideration: 1. Propose an amendment to Proposition H To change the $1 million expenditure limitation enacted by Proposition H, the City Council could place an item on the ballot requesting voter approval to revise it. The city’s charter references the Proposition H spending limit established in 1982, so the city will also need to amend the City Charter. This amendment would clarify that the city’s powers to use General Fund revenues are subject to the expenditure limitation established in Proposition H, which may be amended from time to time by the voters. There are a variety of ways in which Proposition H could be amended by the voters to increase the expenditure limitation. For example, such changes could: • Increase the $1 million limit and tie it to an index, so that the limit increases over time to keep up with inflation (the Growth Management Citizens Committee’s recommendation). • Exempt categories of projects from the $1 million limit, such as: o Parks and recreational facilities, public safety facilities, libraries, etc. o Projects necessary to comply with the standards in the city’s Growth Management plan. o Renovations and expansions of existing facilities. May 14, 2024 Item #12 Page 4 of 5 2. Propose the repeal of Proposition H City Council could propose a ballot measure repealing Proposition H entirely, as was done in 2002. A repeal would require voter approval to amend the City Charter by removing the Proposition H limitation. 3. Put both options on the ballot, with language indicating which one takes precedence if both are approved by voters 4. Take no action The City Council could take no action on the recommendation from the Carlsbad Tomorrow: Growth Management Citizens Committee. Future non-exempt real property acquisition and improvement projects that require expenditures of greater than $1 million in city funds would continue to require voter approval. Next Steps If the City Council chooses Options 1, 2, or 3 above, staff will return with a proposed ballot measure reflecting the City Council’s direction. The deadline to place an item on the ballot for the November 2024 General Election is August 9, 2024. Environmental Evaluation The City Planner has determined that this action is exempt from the requirements of the California Environmental Quality Act in accordance with Guidelines Section 15378(b)(5), in that receiving a report and providing direction to staff does not meet the definition of a project. The action constitutes organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment. Exhibits None May 14, 2024 Item #12 Page 5 of 5 Tammy Cloud -McMinn From: Sent: To: Manager Internet Email Monday, May 13, 2024 2:25 PM City Clerk All Re ceive -Agenda Item # J;;J,. For the Information of t he: CITY COUNCIL Date..</@,l,') CA v'" CC .,/ CM G AcM G PCM J3) / Subject: Attachments: FW: Slide presentations for 5/14/2024 City Council meeting Items 8 and 12 2024-05-14 CC Item 8 (2023 Slurry Seal Project) -Linke.pptx; 2024-05-14 CC Item 12 (Prop H) -Linke.pptx Importance: High Please include as correspondence received for Items 8 & 12 for tomorrow night's meeting. -----Original Message----- From: Steve Linke <splinke@gmail.com> Sent: Monday, May 13, 2024 11:30 AM To: Manager Internet Email <manager@carlsbadca.gov> Subject: Slide presentations for 5/14/2024 City Council meeting Items 8 and 12 City Manager's Office: I have attached PowerPoint presentations for Items 8 and 12 on the City Council's 5/14/2024 meeting agenda. I am not 100% sure I will be able to attend, but I request that you have them available if I can. Thanks, Steve Linke Ca rlsbad 760.944.7546 CAUTION: Do not open attachments or click on links unless you recognize the sender and know the content is safe. 1 1 2 Item 12 (Re-evaluation of Prop H) Steve Linke 5/14/2024 Carlsbad City Council meeting Original intent/spirit of Prop H • No votes on normal day-to-day administration or routine ongoing projects • City must seek voter approval of large, discretionary, capital improvement projects that use city funds 5/13/2024 1 3 4 Large • $1M (1982) ➔ $3.25M (2024) • CPI or other annual adjustment Discretionary vs. non-discretionary • Proposed exempt projects (non-discretionary) -Safety projects • E.g., fire stations -Routine capacity-increasing infrastructure projects that accommodate mandated growth • E.g., capacity-increasing water, sewer, and street projects 5/13/2024 2 5 6 Capital Improvements • Maintenance and direct replacement projects are exempt • However, do not all ow: -"Piggybac kin g" of signi ficant changes/cap ita l improve ments with t hese types of projects -"Piece-mea lin g/phasing " into small er chunks . City funds • Prop H sponsors were upset by city's narrow definition of "city funds" -Only general fund taxes subject to Prop 13 • Proposed exempt funds (examples) -External grants for specific projects -Fees/assessments collected for specific projects • Proposed non-exempt funds (examples) -Taxes subject to Prop 13 -Taxes and fees that are pooled (and used for large, discretionary projects) • Gas and sales taxes • Pooled developer impact fees 5/13/2024 3 I 7 Conc lusion • Honor original intent: Voter approval of large, discretionary, capital improvement projects that use city funds Stop using Prop H as an excuse not to consider doing certain projects -Stop creative shuffling of funds to get around Prop H votes • Ballot language must be worded very carefully to avoid shenanigans Defining "discretionary" vs. "non-discretionary" Defining "city funds" Banning inappropriate piggybacking and phasing 5/13/2024 4 Item 12 (Re-evaluation of Prop H) Steve Linke 5/14/2024 Carlsbad City Council meeting Original intent/spirit of Prop H •No votes on normal day-to-day administration or routine ongoing projects •City must seek voter approval of large, discretionary, capital improvement projects that use city funds Large •$1M (1982) $3.25M (2024) •CPI or other annual adjustment Discretionary vs. non-discretionary •Proposed exempt projects (non-discretionary) –Safety projects •E.g., fire stations –Routine capacity-increasing infrastructure projects that accommodate mandated growth •E.g., capacity-increasing water, sewer, and street projects Capital Improvements •Maintenance and direct replacement projects are exempt •However, do not allow: –“Piggybacking” of significant changes/capital improvements with these types of projects –“Piece-mealing /phasing” into smaller chunks City funds •Prop H sponsors were upset by city’s narrow definition of “city funds” –Only general fund taxes subject to Prop 13 •Proposed exempt funds (examples) –External grants for specific projects –Fees/assessments collected for specific projects •Proposed non-exempt funds (examples) –Taxes subject to Prop 13 –Taxes and fees that are pooled (and used for large, discretionary projects) •Gas and sales taxes •Pooled developer impact fees Conclusion •Honor original intent: Voter approval of large, discretionary, capital improvement projects that use city funds –Stop using Prop H as an excuse not to consider doing certain projects –Stop creative shuffling of funds to get around Prop H votes •Ballot language must be worded very carefully to avoid shenanigans –Defining “discretionary” vs. “non-discretionary” –Defining “city funds” –Banning inappropriate piggybacking and phasing Report Reevaluating Proposition H, Based on a Recommendation from the Carlsbad Tomorrow: Growth Management Citizens Committee and in Response to City Council Motion Allegra Frost, Senior Assistant City Attorney Zach Korach, Finance Director May 14, 2024 { City of Carlsbad 2 BACKGROUND •Proposition H passed by the voters in 1982 •Requires voter approval for real property purchases or improvements to real property if the cost exceeds $1 million in city funds •In response to constrained city resources with the passage of Proposition 13 in 1978 and Gann Initiative Spending Limitation in 1979 •Ensuring the city did not spend large amounts of money to purchase or develop property without adequate review and input by the public ITEM 12: PROPOSITION H 3 BACKGROUND •City Council convened a citizens committee to recommend implementation guidelines •Based on this input, the City Council voted in 1983 to approve regulations implementing Proposition H. •On July 19, 2005, the City Council approved an additional implementing regulation. ITEM 12: PROPOSITION H 4 BACKGROUND •“City funds”are City of Carlsbad general fund moneys; federal general revenue sharing moneys and all other moneys, but shall not include categorical federal and state grants available to the city for specific purposes. City funds shall not include special assessments. •“Improvements to real property” exclude replacement,repair, maintenance, routine refurbishment or upgrades of existing facilities ITEM 12: PROPOSITION H 5 BACKGROUND Proposition H votes to date: •Hosp Grove, golf course, tennis complex, two multipurpose athletic fields, enclosed soccer facility, portion of Cannon road, Safety Training Center, Alga Norte, Fire Station 2, Monroe Street Pool renovation project. Future projects for Proposition H consideration: •Fire Station 7, Robertson Ranch, Zone 5 Park ITEM12: PROPOSITION H 6 BACKGROUND In 2002, the City Council considered options to revise Proposition H expenditure limitation •Proposition B repealing the $1 million limitation (33.7% - failed) •Proposition C authorizing spending over $1 million to construct facilities including a swimming pool complex, trails linkages and open space, the Public Safety Training Center and a portion of Cannon Road, east of College (Reach 4). (59.7% - passed) ITEM 12: PROPOSITION H 7 BACKGROUND The Carlsbad Tomorrow: Growth Management Citizens Committee recommended the City Council consider a ballot measure to increase the $1 million expenditure limitation and index the amount to increase over time. On July 18, 2023, the City Council directed staff to return with an agenda item to discuss options related to Proposition H. ITEM 12: PROPOSITION H 8 OPTION 1 •Propose an amendment to Proposition H Increase the $1 million limit and tie it to an index Exempt categories such as: Parks and recreational facilities, public safety facilities, libraries, etc., Projects necessary to comply with Growth Management standards Renovations and expansions of existing facilities ITEM 12: PROPOSITION H 9 OPTION 2 •Propose a repeal of Proposition H City Council may place measure on ballot requesting voter approval to repeal Proposition H entirely ITEM 12: PROPOSITION H 10 OPTION 3 •Put both a repeal and amendment on the ballot, with language indicating which one takes precedence if both are approved by voters ITEM 12: PROPOSITION H 11 OPTION 4 •Take no action Future non-exempt real property acquisition and improvement projects in excess of $1 million in city funds would continue to require voter approval ITEM 12: PROPOSITION H 12 FISCAL IMPACT The cost for placing a measure on the November 2024 General Election ballot would likely cost between $135,000 and $170,000 ITEM 12: PROPOSITION H { City of Carlsbad 13 NEXT STEPS If the City Council chooses Option 1, 2 or 3 staff will return with a proposed ballot measure reflecting the City Council’s direction. The deadline to place an item on the ballot is August 9, 2024 ITEM 12: PROPOSITION H { City of Carlsbad 14 SUMMARY: 1.Propose amendment 2.Propose repeal 3.Both 1 and 2 4.Take no action ITEM 12: PROPOSITION H { City of Carlsbad