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HomeMy WebLinkAbout2019-07-08; Lighting and Landscaping District History; |Moya, Jill | Rocha, Laura|To the members of the: , pi;'f COUNCIL Date !.1..fill9. CA \/ cc V' CM v COO V DCM (3) ✓ July 8, 2019 To: From: Via: Re: Council Memorandum Honorable Mayor Hall and Members of the City Council Jill Moya, Senior Accountant Laura Rocha, Deputy City Manager, Ad~nistrative Services Elaine Lu key, Chief Operations Officer · Lighting and Landscaping District Hist y {cityof Carlsbad Memo ID# 2019080 This memorandum provides history of the City of Carlsbad's Street Lighting and Landscaping District ("LLD") No. 1 and District No. 2 as well as explain replacement district options and the benefits and challenges associated with those options. Lighting and Landscaping District No. 1 History In 1983, the City of Carlsbad LLD No. 1 was formed as a citywide district according to the provisions of the California Streets and Highways Code, known as the Landscaping and Lighting Act of 1972. Since LLD No. l's formation, the cost of operating and maintaining the city's street lighting system has been funded through assessments from each parcel in the city based on special benefit. Special benefit is defined as a particular and distinct benefit conferred upon the properties located within the district. For example, proper maintenance and operation of the streetlights provides special benefit to adjacent properties by providing security, safety, and community character and vitality. Any share of the benefits received from an improvement that does not provide a special benefit to the assessed properties is considered to be a general benefit provided by the improvements. The cost of such general benefit is not to be assessed to the properties in the assessment district, but instead is contributed by the city from the city's General Fund. The Street Lighting Improvement Zone within LLD No. 1 is identified as a citywide zone formed with the intent for all assessable parcels within the city to pay benefiting assessments as the parcels are developed and streetlights are added. This zone was formed without an allowable inflater. On June 6, 1989, the City Council approved the addition of two landscaping zones to the original LLD No. 1. The two zones formed were a Street Tree Improvement Zone and a Median Landscaping Improvement Zone. These zones were also formed without an allowable inflater. Administrative Services Branch Finance Department 1635 Faraday Avenue I Carlsbad, CA 92008 I 760-602-2430 t I 760-602-8553 f Honorable Mayor Hall and Members of the City Council July 8, 2019 Page 2 The Street Tree Improvement Zone is not a citywide zone. This improvement zone includes only the properties within the city in which street trees exist within the public right-of-way areas. The maintenance program provides a programmed schedule of tree trimming, treatment of damaged trees, and emergency response to fallen trees within the public right-of-way. The Median Improvement Zone funds the cost of maintaining the street medians located throughout the city. This improvement zone is a citywide zone and includes plant and tree maintenance care and structural replacement of the medians when necessary. Proposition 218 Previous to Proposition 218, the annual assessments could be increased or decreased in-line with the funding requirements of each zone if approved during the Public Hearing. In November 1996, the voters of California approved Proposition 218 which added Article XIIID to the California Constitution. Article XIIID has a direct impact on the city's ability to levy assessments. Pursuant to Section S(d) of Article XIIID, "any assessment which previously received majority voter approval from the voters voting in an election on the issue of the assessment" is exempt from the requirements imposed through Proposition 218. LLD No. 1 was formed prior to November 1996 and is therefore exempt from the requirements imposed through Proposition 218. However, Pursuant to Section S(d) of Article XIIID, "subsequent increases in those assessments shall be subject to the procedures and approval process" of Proposition 218. As such, any proposed assessment increases above those set just prior to the passage of Proposition 218 would require a vote of those property owners being assessed. Per Proposition 218, a notice and ballot would be sent to each property owner assessed followed by a Public Hearing. If there was not a majority protest at the Public Hearing, assessment rates could be increased. Due to the restrictions imposed through Proposition 218, assessment rates for LLD No. 1 have not been adjusted/increased for the last 23 fiscal years; or since fiscal year (FY) 1996/1997. The assessment rates for a single-family residential parcel that benefits from the Street Lighting Improvement Zone, Street Tree Improvement Zone, and Median Landscaping Improvement Zone have remained at $70.44. Increased costs without a proportionate increase in revenues have created shortfalls in the Street Tree Improvement Zone and the Median Landscaping Improvement Zone, resulting in the need to transfer funds from the General Fund to subsidize operations. Refer to the graph below for the history of the transfers from the General Fund to the LLD No. 1 beginning in FY 2004-05. Honorable Mayor Hall and Members of the City Council July 8, 2019 Page 3 Lighting & Landscaping District No. 1 Subsidization History 800,000 Total Trees: $1.652M 700,000 -Total Medians: $6,026M 600,000 Total Subsidized to Date: $7,678_1'.1L_ 500,000 400,000 ------- 300,000 200,000 ' 100,000 ■ Medians ■ Street Trees Lighting and Landscaping District No. 2 History On Nov. 18, 2003, the City Council formed LLD No. 2. LLD No. 2 was formed for new, large developments in the city to pay for the costs of street lights, street trees and medians within those areas. Street lights, street trees and medians in the developed parts of the city are paid from assessments within LLD No. 1. Each development within LLD No. 2 is considered a separate zone with their own assessment based on the costs for that particular area of the city. There are currently 15 zones in LLD No. 2, including Calavera Hills II, Kelly Ranch, the Oaks South, Thompson/Tabata, Palomar Forum, Bressi Ranch, La Costa Greens, La Costa Ridge, the Oaks North Industrial, Robertson Ranch (East Village), the Oaks North Residential, La Costa Town Square, Fair Oaks Valley, Quarry Creek, and Robertson Ranch West Village developments. Each of these zones was formed with an allowable inflator (Consumer Price Index (CPI) for the San Diego County area). Every year actuals rates (assessment rates that are required to generate revenue equal to the annual actual costs) are calculated as well as maximum assessment rates (maximum amounts allowed to be collected as established during the formation/annexation of the zone into the District increased each year by CPI). The final assessment rate is the lesser of the budget rate and the maximum rate. Honorable Mayor Hall and Members of the City Council July 8, 2019 Page 4 Each zone within LLD No. 2 is fully funded and does not require General Fund support. For FY 2019-20 the proposed assessment rates for a single-family residential parcel within LLD No. 2 per year range from a low of $4.51 per parcel to a high of $165.00 per parcel. These assessments vary between developments depending on the density of each development, and the amount and types of improvements being maintained by each development's home owners' association. Replacement District Options and Challenges In the past staff has explored the possibility of replacing both LLD No. 1 and LLD No. 2 to create one unified city-wide district with a consistent and equitable allocation methodology. A replacement district has been attempted twice; first in FY 2006-07, then in FY 2010-11 and FY 2011-12. Each attempt had various challenges. For example, during the study conducted in FY 2011-12, it was estimated the general benefit (only special benefits are assessable in an LLD; the general benefit portion is contributed by the General Fund) would exceed the amount subsidized by the General Fund annually. Given the various challenges faced each time a replacement district was analyzed, the replacement district was not brought before the voters because the likelihood of a successful outcome was deemed small. Three potential solutions for creating a replacement district are a: 1. Landscaping and Lighting District (LLD), 2. Community Facilities District (CFD), and 3. Parcel Tax The pros and cons of each district type are summarized in the table on the following page: Honorable Mayor Hall and Members of the City Council July 8, 2019 Page 5 District Type Pros • Approval -Majority Protest • Election Process -Mail ballot LLD • No special benefit • 2/3 approval mirrors Council Policy No. 33's intent of receiving consent from not less than 65% of property owners CFD • Less costly to form • Election Process -Mail ballot • 100% of costs can be passed through • Voting from registered voters • No special benefit • 2/3 approval mirrors Council Policy's intent of receiving consent from not less than Parcel Tax 65% of property owners • Least .costly to form • 100% of costs can be passed through • Election Process -Mail ballot Cons • Prove special benefit • GF pays for general benefit • More costly to form • Voting by landowners • Approval -2/3 majority • Council Policy No. 33 doesn't allow on-going special taxes on residential parcels • Registrar of Voters services required • Approval -2/3 majority • Registrar of Voters services required Pursuing a replacement district can take approximately one year to complete. The successful outcome of forming a replacement district is not guaranteed. Forming a special financing district is an expensive process and its success is heavily dependent on public opinion. At this time, public sentiment regarding the current state of LLD No. 1 and the willingness to pay additional amounts for current levels of lighting and landscaping services is unknown. Aside from forming a special financing district, there are many other available options to address this matter. For example, the City Council could also choose to continue subsidizing LLD No. 1 or to dissolve both LLD No. 1 and LLD No. 2 altogether. Choosing to dissolve both LLD No. 1 and LLD No. 2 would result in an approximately $2.2 million annual impact to the General Fund. Another option would be to reduce services to decrease costs and minimize the impact to Honorable Mayor Hall and Members of the City Council July 8, 2019 Page 6 the General Fund, however, historically the City Council and residents haven't seen reducing services as an option they were willing to consider. Conclusion Staff will present a summarized report on the maintenance and operations procedures of LLD No. 1 and No. 2, as well as the proposed annual assessments, at the Public Hearing scheduled for July 9, 2019. Any questions can be answered at this time.