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HomeMy WebLinkAboutSR - LMD-15-1 - NEW LANDSCAPE MAINTENANCE DISTRICTAGENDA ITEM D� Date: April 14, 2015 TO: Honorable Mayor and Members of the City Council THRU: Rick Otto Igterim City Manager FROM: Community Joe De Francesco Public Works Div ReviewedNerified City Manager Finance Direc r To Be Presented By: Marie Knight Cons Calendar _ City Mgr Rpts Council Reports _ Legal Affairs Boards /Cmtes _ Public Hrgs X Admin Reports Plan/Environ 1. SUBJECT Resolutions 10857 and 10858 of the City Council of the City of Orange declaring intent to form Landscape Maintenance District No. 15 -1 to overlay the existing Landscape Maintenance District (LMD 86 -2), preliminarily approving the Engineer's Report, providing Notice of Public Hearing and mailing ballots, and adopting procedures for Proposition 218 proceedings. 2. SUMMARY The Santiago Hills neighborhood has had a Landscape Maintenance District in place since 1987 to levy assessments that pay for landscape maintenance of public areas in the neighborhood. The maximum levy rate, set in 1987, was frozen in 1996 with passage of Proposition 218, which henceforth required a vote of property owners to increase assessments. Since that time, District maintenance costs have continued to rise and unfortunately, now significantly outpace assessment revenue received. On March 10, 2015, the City Council adopted Resolution No. 10853 initiating proceedings for a Proposition 218 ballot proceeding to create a new District that would exactly overlay the original District with the effect of increasing the net assessments on the properties in the Santiago Hills neighborhoods. Resolutions 10857 and 10858 form the next step in the process of forming the new District. 3. RECOMMENDED ACTION Adopt the following resolutions: 1. Resolution No. 10857, "A Resolution of the City Council of the City of Orange declaring intention to form Landscape Maintenance District No. 15 -1 and levy assessments, ITEM 1. oC 04/14/15 preliminarily approving the Engineer's Report, providing Notice of Public Hearing and the mailing of the assessment ballots "; and 2. Resolution No. 10858, "A Resolution of the City Council of the City of Orange adopting Proposition 218 assessment ballot proceedings procedures." 4. FISCAL IMPACT If approved, LMD 15 -1 would generate approximately $328,840 in FY 15 -16. Combined with the estimated revenue from the existing LMD 86 -2 and revenue from Santiago Community College, the total revenue would be approximately $926,423 in FY 15 -16, which is adequate for the annual maintenance and servicing of the District improvements plus a gradual capital improvement program. 5. STRATEGIC PLAN GOAL(S) GOAL 3: Enhance and promote quality of life in the community a. Refurbish, maintain, develop and/or expand public -use places and spaces. 6. GENERAL PLAN IMPLEMENTATION Infrastructure Element Goal 3.0: Ensure adequate maintenance of public rights -of -way to enhance public safety and improve circulation. Policy 3.2: Provide sufficient levels of street sweeping, landscaping, graffiti abatement, shopping cart and bulk -item removal from streets, sidewalks, alleys, and other public rights -of -way. 7. DISCUSSION and BACKGROUND Background In 1987, Landscape Maintenance District 86 -2 (District) was established to maintain the landscape improvements constructed by Assessment District 86 -1 in Santiago Hills. The District comprises over 32 acres of landscape, lighting, and other infrastructure improvements maintained by the City. Funds supporting the maintenance of the District landscape and other infrastructure are derived from an annual assessment of 1,571 parcels within the District. Although located within the District boundaries, the following properties are not maintained by the assessments collected from the property owners: Santiago Hills Park, Chapman Elementary School, City of Orange Fire Station 7, and Santiago Canyon College. With respect to Santiago Canyon College, there are landscape improvements that were constructed adjacent to the College when the District was initially formed. The infrastructure for those improvements are connected to those of the surrounding District, and are maintained as part of the District; however, the College reimburses the District annually for the costs of that maintenance. 2 ITEM 4/14/15 Since the District was established in 1987, a detailed accounting of expenses would be performed annually and a new assessment would be calculated to fund the following year's projected budget expenses. In 1987, the Single Family assessment was set at $369.44 and had fluctuated from year to year, although the assessment never increased, it did occasionally decrease in response to changes in labor and materials. However, at the time the District was created, the intent was that when costs outpaced the revenues received from the property assessments, the City would be able to raise the assessment over $369.44 if needed. With the passage of Proposition 218 in 1996, the annual assessments were, in effect, frozen at the then - maximum rate set in 1987 of $369.44 for a typical single - family home. Any future increases could only be implemented by a majority vote of the property owners within the District. By 2005, the District reserves were dwindling and expenditures far outpaced the revenues. The City initiated a 218 Ballot Proceeding in 2007 to increase the annual assessment. The residents in the District overwhelmingly voted against the increase and the City was forced to make significant reductions to the service levels in the District. Since that time, reductions have continued as costs have increased, and the deterioration of the District has been exacerbated by increased repairs needed for an aging infrastructure, drought conditions and water rate increases. Since 2007, numerous residents have called to complain year after year about the reductions in maintenance and declining aesthetics of the District. In recent years, those calls and complaints have significantly increased. The impact of these service reductions have been more and more visible and clearly noted by many residents, who have indicated that further reductions in service levels and watering would be unacceptable. The City again began to explore the possibility of conducting a ballot proceeding to increase the assessments in the District. In the fall of 2014, the City hired SCI Consulting Group to assist with a ballot proceeding process and the necessary public outreach, including a public opinion survey. At the March 10, 2015 meeting, the City Council adopted Resolution No. 10853 initiating proceedings for a proposed new Landscape Maintenance District (LMD 15 -1). This Assessment District would be identical to the existing Landscape Maintenance District No. 86 -2 in its geographic boundaries, parcels to be assessed, and improvements to be serviced, maintained, or repaired, and budgeted cost centers. Discussion Public Outreach Efforts Multiple public outreach efforts have been undertaken by staff with the intent to inform the community of the history of the District, provide clarity regarding the assessment they pay, fully explain the need for the increased assessment, and gauge both the overall level of support for an increase as well as the range of an increase the community would be willing to support. 3 ITEM 4/14/15 Initially when the process began in August 2014, every property owner was mailed a postcard informing them of the City's intent to begin a ballot proceeding process and directed them to additional information on the City's website that contained answers to Frequently Asked Questions regarding the District. The next step was a public opinion survey conducted in January 2015 by the public finance firm hired by the City, SCI Consulting Group. The purpose of the survey was to help gauge the support for an increased assessment, as well as identify the District property owner priorities for their common improvements. The survey, mailed to every property owner, revealed that there is strong support for increasing assessments in order to bring services and maintenance back to previously high levels, and to launch a capital improvement program that would gradually include the following: • Replace dead, dying and outdated landscape elements with sustainable and drought - tolerant plants that can conserve water and require less maintenance in the long run; • Improve irrigation systems to be more efficient, keeping plants healthier and conserve water; • Replace and upgrade lighting and electrical panels to be more efficient and reliable. The majority of the comments received from the surveys fell into one of four areas: (1) Lack of understanding of what their assessment actually did and did not pay for; (2) Misunderstanding that their Mello Roos or HOA fees covered maintenance; (3) Questions /comments regarding fiscal controls; and (4) Comments related to the replacement of the current landscape with drought tolerant plants. Based on the comments received in the survey, staff worked with the local newspaper, The Foothill Sentry, who has been an advocate for the increased assessment, to publish three pieces in their February, March and April editions with information targeted to answer the questions posed in the surveys and provide clarity where there were misunderstandings. In addition, staff has used the City's website and the social media site Nextdoor.com, which reaches registered homeowners in the District, to also get the necessary information out to the community. Finally, every property owner in the District was mailed a postcard inviting them to one of two neighborhood meetings held in March to provide information and gather input. The meetings were held at Chapman Hills Elementary School in the District. The total attendance at the meetings was approximately 150 people. An informal "straw poll" was conducted as the attendees left the meetings, and those who stopped by the table indicated 60 were in favor of an increase and four who would not support the increase. Formation of Landscape Maintenance District No. 15 -1, Prop 218 Proceedings The formation of LMD No. 15 -1 stems from the need for additional funding above that provided by the existing district (LMD No. 86 -2), which was formed 28 years ago and which currently generates approximately $533,000 in assessment revenue per year. At the time of formation, cities had the authority to increase assessments as needed to keep pace with costs, so a "cost of living" 4 ITEM 4/14/15 mechanism was not typically built -in. However, Proposition 218, the "Right to Vote on Taxes Act" approved by California voters in 1996, required any increase in assessment be approved by a vote of property owners, thereby leaving many agencies without the ability to increase assessments on their own and without a built -in "cost of living" mechanism. The City has decided to create a new LMD No. 15 -1 that would supplement the existing LMD No. 86 -2, which must be approved by the affected community. It was decided to create a new District rather than simply increase the existing one for several reasons. If we increased the existing assessment, Prop 218 would also require us to also create an entirely new District and change the way we conducted the benefit analysis based on zones and the special vs general benefit by zone. In the original assessment there were no zones required and no general benefit assessed — all areas were treated equal, and all areas thought to have the same special benefit from the common areas and improvement. In addition, establishing the new overlay District allows us to align the new assessment with what it is actually for: allowing us to improve the current conditions. If we chose to re -write the current assessment as a new one, the message becomes clouded with some of the fee paying for original maintenance levels and, some of it for improving the current conditions. Proposition 218 sets forth specific guidelines for the creation of a benefit assessment: • All special assessments are required to be supported by a detailed Engineer's Report prepared by a registered professional engineer. • Properties are assessed proportionate to the special benefit to each property. • Notice of the proposed assessment and ballots are mailed to all property owners subject to the proposed assessment at least forty -five (45) days prior to the date of the Public Hearing on the proposed assessment. • The City holds a Public Hearing at the end of the balloting period to receive public comment (currently scheduled for June 9, 2015). • At the conclusion of the Public Hearing, the ballots will be tabulated. In order for the assessments to be imposed, a majority of the returned ballots, weighted by their proposed assessment, must be in support. At the March 10, 2015 meeting, the Council also directed the preparation of the Engineer's Report which was completed by the City's assessment engineer, SCI Consulting Group, and is included in preliminary draft form as Attachment No. 3 to this report. Also attached are the Notice of Public Hearing (Attachment No. 4) and a sample ballot (Attachment No. 5). The Notice is an informational document which announces the time and place of the Public Hearing, describes the need for the proposed new District, explains the balloting process and provides additional information. Proposed Assessment The Engineer's Report describes the structure of the benefit assessment including cost estimates for the maintenance of the improvements and assessment rates for the various types of land uses. Those rates are based on the single - family residence (by far the most prevalent land use) by creating a single - family equivalent ( "SFE "), which is then applied to other land uses incorporating appropriate factors. For instance, commercial and industrial uses are converted using population 5 ITEM 4/14/15 and land coverage factors. Prop 218 requires a benefit assessment be performed by zones for this new assessment based on how parcels in each particular zone benefit from the landscape improvements in ways such as access, view, proximity, and land use rights. In performing the benefit assessment for the new LMD 15 -1, it showed that the property owners in the Hillsdale neighborhood of the District (Zone B) received 20% less special benefit from the landscape improvements than those properties in closer proximity, as outlined in the attached Engineer's Report. Therefore, the proposed increased assessment for the property owners in the Hillsdale neighborhood, Zone B, would be less than the assessment for the properties in Zone A. Based on the feedback received from the public outreach efforts, and the projected cost increases as well as capital improvements that will be necessary in the next five to ten years, staff developed a budget for the maintenance of the District. This budget would accomplish the following: restore higher maintenance levels to pre -2007 standards, keep pace with some of the anticipated increased costs of goods and services in the coming years, gradual replacement of landscape that has died and been removed, and funds for annual capital improvements that include a gradual transition to drought tolerant landscape and infrastructure repairs. The proposed assessment for LMD 15 -1 is then based on this overall budget. The total assessment for the proposed LMD No. 15 -1 is estimated to be $328,840 for FY 15 -16, based on the SFE rate ranging from $188.00 to $235.00 per year, depending on Zone. In Zone A (Santiago Hills neighborhood), assessments will be $235.00 for single - family homes, $166.85 for condominiums, and $979.17 per acre for commercial property. In Zone B (Hillsdale neighborhood), assessments will be $188.00 for single - family homes (there are no other types of properties). Combined with the estimated revenue from the existing LMD 86 -2 and revenue from Santiago Community College, which would also increase to meet the increased costs for the maintenance of their adjacent properties, the total revenue would be approximately $926,423 in FY 15 -16. The Engineer's Report also includes an annual escalation mechanism based on the Consumer Price Index ( "CPI ") for the District and is capped at three (3) percent per annum. The CPI would be applied only to the sum of the proposed new assessment LMD No. 15 -1 and not the existing assessment LMD No. 86 -2, and would affect assessments in FY 16 -17 and beyond. The CPI would allow some increases to the new District in order to keep pace with the increased costs of goods and services related to the maintenance of the improvements. Since there is no CPI on the existing LMD No. 86 -2, a CPI on the new LMD No. 15 -1 would be the only mechanism available to account for a portion of increases in costs of goods and services in the future without another ballot measure, therefore, staff is recommending the ballots include the CPI as indicated in the Engineer's Report. Upon approval of Resolutions 10857 and 10858, ballots will be mailed around April 23, 2015. Property owners will have 45 days (by June 9, 2015) to return the ballots. At the June 9, 2015 public hearing, the ballots will be counted. The results will reported at the July 14th City Council meeting. If the ballot measure is approved by the property owners, the new District will also be 6 ITEM 4/14/15 established at the July 14 City Council meeting, and the rate approved for inclusion on the FY 15 -16 property tax rolls. If LMD No. 15 -1 does not pass, LMD No. 86 -2 will remain in effect. Since the assessment revenues from LMD No. 86 -2 are not sufficient to cover the current maintenance costs for the District, further maintenance reductions will have to be implemented. Those reductions will be prioritized based on health and safety and would likely include: turning off irrigation for large turf areas; continued non - replacement of dead landscape, further reductions in trimming, edging and mowing, trash removal frequencies, non - repair of irrigation and other infrastructure, etc. The Engineer's Report for the existing District, LMD No. 86 -2, will also be put forth for approval at the June 9, 2015 City Council meeting. For the existing District, the annual fee will remain the same as it is at the top of the approved range. 8. ATTACHMENTS 1. Resolution No. 10857, "A Resolution of the City Council of the City of Orange declaring intention to form Landscape Maintenance District No. 15 -1 and levy assessments, preliminarily approval of the Engineer's Report, providing Notice of Public Hearing and the mailing of the assessment ballots." 2. Resolution No. 10858, "A Resolution of the City Council of the City of Orange adopting Proposition 218 assessment ballot proceedings procedures." 3. Engineer's Report, SCI Consulting Group, March 2015. 4. Draft Notice. 5. Draft Ballot. ITEM 4/14/15 RESOLUTION NO. 10857 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ORANGE DECLARING INTENTION TO FORM LANDSCAPE MAINTENANCE DISTRICT NO. 15 -1 AND LEVY ASSESSMENTS, PRELIMINARILY APPROVING THE ENGINEER'S REPORT, PROVIDING NOTICE OF PUBLIC HEARING AND THE MAILING OF THE ASSESSMENT BALLOT WHEREAS, by Resolution No. 10853, approved March 10, 2015, the City Council ordered the initiation of proceedings for the formation of a landscape maintenance district pursuant to the Landscaping and Lighting Act of 1972 (Part 2 of Division 15 of the California Streets and Highways Code (commencing with § 22500 thereof) ( "Act "); and WHEREAS, proposition 218 was adopted on November 6, 1996, adding Articles XIIIC and XIIID to the California Constitution; and WHEREAS, Articles XIIIC and XIED of the California Constitution and implementing statutes impose certain procedural and substantive requirements relating to assessments (as defined); and WHEREAS, an Engineer's Report ( "Report") has been prepared by SCI Consulting Group, registered, professional engineers ( "Assessment Engineer "), and submitted to the City Council, in which an assessment is proposed to fund the cost of the installation, maintenance and servicing of improvements within the District boundaries as described in § 3 below. The proposed landscaping maintenance assessment shall be described as "Landscape Maintenance District No. 15 -1" of the City of Orange (hereinafter the "Assessment District "). Articles XIIIC and XIIID of the California Constitution and implementing statutes impose certain procedural and substantive requirements relating to assessments (as defined). NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ORANGE DOES HEREBY RESOLVE AS FOLLOWS: 1. That the above recitals are all true and correct; and 2. Reference to Initiation. In accordance with direction from the City Council, SCI Consulting Group, ( "Engineer of Work "), prepared an Engineer's Report ( "Report") pursuant to the Act and Article XIIID of the California Constitution. The Report has been prepared, filed with the City Clerk, reviewed and duly considered by the City Council and is hereby deemed sufficient and RESOLUTION NO. 10858 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ORANGE ADOPTING PROPOSITION 218 ASSESSMENT BALLOT PROCEEDINGS PROCEDURES. WHEREAS, the City Council of the City of Orange, California ( "City ") hereby finds, determines, declares, and resolves as follows: WHEREAS, Proposition 218 was adopted on November 6, 1996, adding Articles XIIIC and XIIID to the California Constitution. WHEREAS, Article XIIID of the California Constitution imposes certain procedural and substantive requirements relating to assessments (as defined). WHEREAS, the City believes it to be in the best interests of the City and its property owners to confirm and memorialize the City's procedures and guidelines regarding implementation of the provisions of Proposition 218 and pertinent statutes relating to assessments. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ORANGE DOES HEREBY RESOLVE AS FOLLOWS: That the above recitals are all true and correct; and 2. Statement of Legislative Intent: In adopting this resolution, it is the City Council's intent to adopt assessment ballot proceedings, which are consistent and in compliance with Articles XIIIC and XIIID of the California Constitution and with Government Code §§ 53750 through 53754. It is not the intent of the City Council to vary in any way from the requirements of either the California Constitution or the laws of the State of California. If there is any inconsistency of each between a provision of this resolution and state law, state law will govern; and 3. Definition of Assessment: Proposition 218 defines "assessment" as "any levy or charge by an agency upon real property that is based upon the special benefit conferred upon the real property by a public improvement or services, that is imposed to pay the capital cost of the public improvement, the maintenance and operation expenses of the public improvement or the cost of the service being provided." "Assessment" includes, but is not limited to, "special assessment," "benefit assessment," "maintenance assessment," and "special assessment tax "; and