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SR - LMD-86-2 - 2014-2015 ANNUAL ASSESSMENT ENGINEERS REPORTAGENDA ITEM June 10, 2014 TO: Honorable Mayor and Members of the City Council THRU: John W. Sibley City Manager FROM: Joe DeFrancesco, t Public Works Dir cXor Marie KnighT, / f/ G Community Servi es ReviewedNeri ed By: City Manager Finance Dire or To Be Present : Joe DeFrancesco Cons Calendar City Mgr Rpts Council Reports Legal Affairs Boards /Crates X Public Hrgs Admin Reports Plan /Environ 1. SUBJECT Resolution No. 10788; A Resolution of the City Council of the City of Orange approving the Engineer's Report and providing for the Annual Assessment for Landscape Maintenance Assessment District 86 -2 (Santiago Hills). 2. SUMMARY On May 13 ", Council adopted Resolution No. 10782 which approved the Preliminary Engineers Report for LMD 86 -2 and set June 10 as the date for the public hearing. Each year the process for setting the assessment of the Landscape Maintenance Districts is initiated. The process began on May 13 2014 with the City Council approval of the Resolution of Intent. The public hearing is the second step in the process. It is recommended that the City Council now hold the public hearing in accordance with the Lighting and Landscape Maintenance Act of 1972 as outlined in the "Order of Procedure ". At this time, property owners will have an opportunity to be heard on this issue. The proposed assessments for fiscal year 2014 -2015 will not increase and will remain the same as last year at $369.44 for each single family detached unit. This is the maximum allowable assessment. The total assessment to be levied in Landscape Maintenance District 86 -2 (Santiago Hills) will be $533,650.77, while expenses are estimated to be $620.000. Services will continue to be reduced to keep expenditures down. However, if expenditures continue to exceed the revenue from the maximum assessment, it will be necessary to completely eliminate some services or utilize District reserve funds in FY 14 -15 and FY 15 -16. 3. RECOMMENDED ACTION 1. Adopt Resolution No. 10788 approving the Engineer's Report for the Annual Assessment for Landscape Maintenance Assessment District 86 -2 (Santiago Hills). 2. Establish the assessment for fiscal year 2014/2015 for Landscape Maintenance Assessment District 86 -2 at $369.44 per single family unit per year. ITEM //, y 1 6/10/14 COPrinted on Recycled Paper 14. FISCAL IMPACT The Santiago Hills Landscape Maintenance District 86 -2 pays all costs of District administration and related activities. The City is a property owner within the District and pays $5,535 annually. The assessment revenue for Fiscal Year 2014/2015 will be placed in Fund Number 291. 15. STRATEGIC PLAN GOAL(S) 3a. Enhance and promote quality of life in the community — refurbish, maintain, develop and /or expand public use places and spaces. 6. GENERAL PLAN IMPLEMENTATION Land Use Element Goal 6.0 Advance development activity that is mutually beneficial to both the environment and the community. Policy 6.3 - Establish and maintain greenways, and pedestrian and bicycle connections that complement the residential, commercial and open space areas they connect. Policy 6.8 - Maximize landscaping along streetscapes and within development projects to enhance public health and environmental benefits. 17. DISCUSSION and BACKGROUND In 1987, Landscape Maintenance District 86 -2 was established to maintain the landscape improvements constructed by Assessment District 86 -1 in Santiago Hills. Annually, a detailed accounting of expenses is done and a new assessment is calculated for the benefiting property owners. This year's proposed assessment for a single family detached unit is $369.44. This is the same as last year and is at the highest assessment currently allowed. A ballot approval for a proposed increase above the maximum assessment was held in 2007 when increases in maintenance and utility costs had exceeded incoming revenue. The property owners in the District rejected the proposed increase. As a result, service reductions were imposed in the 2007/08 fiscal year and additional reductions annually thereafter to keep expenditures within the maximum assessment. In addition, District reserve funds were utilized in order to be able to make the service level reductions less severe and not all at once which is detrimental to the landscape and would have required significant future expenditures to replace damaged landscaping. Some of these funds had been earmarked for landscape redesign of the District in order to reduce future maintenance and water costs as well as capital improvements to the aging infrastructure. However, the rising costs of maintaining the District with no increase in the assessments has caused the use of these reserves. Further reductions will need to be imposed in the upcoming fiscal year to limit the impact to the remaining reserve fund balance. FY 2014 -2015 reductions will include the elimination of landscape areas, non - replacement of dead plant material, as well as reductions to landscape services and utilities as needed. Factors leading to the need for additional service reductions ITEM 2 6/10/14 1 0Printed on Recycled Paper include increased utility costs (primarily water); and major repairs to an aging infrastructure, including electrical and lighting systems and concrete paths and trails. In addition, the drought conditions this past winter prevented the usual winter practice of decreasing the irrigation schedules and required the use of more water than is traditional during these months. Moving forward, necessary reductions to water use will significantly impact the District landscapes. The maximum assessment total for FY 2014 -2015 is $533,650.77. Expenditures in FY 13 -14 were $78,000 over revenues. The proposed FY 14 -15 budget will exceed revenues by $45,000, based on budgeted expenditures of $620,000, even after significant service reductions and the reimbursement from Santiago Canyon College of approximately $42,000. The resulting deficit spending has caused and will continue to require the use of additional resources from the reserve fund balance, leaving the District extremely underfunded for capital improvements or major repairs. The remaining reserve fund balance has been targeted for use in installation of a new irrigation control system to help better manage water use and reduce utility expenditures, and to design and implement landscape revisions to reduce maintenance costs and water use. See the attached Final Engineer's Report for more detailed information about the assessment. Given the fact that expenditures, even at a significantly reduced and underfunded amount continue to exceed revenues, staff plans again to put forth a ballot approval for an increase above the maximum assessment for a vote for FY 15 -16. It should be noted that to maintain the District at the level prior to the reductions that began in 2007, the total cost for maintenance and utilities would be approximately $732,000, approximately $200,000 more than current incoming revenue amount. 18. ATTACHMENTS • Resolution No. 10788 • Final Engineers Report • Area Map FS:gl:ly N:\Public WorkM13MIN\LYoung \Council Items \COUNCIL \June - 2014 \86 -2 Agenda 1415.doc ITEM 3 6/10/14 O Printed on Recycled Paper RESOLUTION NO. 10788 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ORANGE APPROVING THE ENGINEERS REPORT AND PROVIDING FOR THE ANNUAL ASSESSMENT FOR LANDSCAPE MAINTENANCE DISTRICT 86 -2 (SANTIAGO HILLS). WHEREAS, the City Council of the City of Orange has previously formed a special maintenance district pursuant to the terms of the "Landscaping and Lighting Act of 1972" being part 2 of Division 15 of the Streets and Highways Code of the State of California, in what is known and designated as Landscape Maintenance District No. 86 -2 (hereinafter referred to as "Assessment District "); and WHEREAS, the City Council has initiated proceedings for the levy of the annual assessment for the Assessment District; and WHEREAS, at this time a public hearing has been held in the manner and form as required by law, and the City Council has considered all oral statements and written protests made or filed by all interested persons; and WHEREAS, this City Council is now satisfied with the assessment and diagram and all other matters as contained in the Engineer's Report as now submitted for final consideration and approval, and is now desirous of proceeding with the levy of the annual assessment. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Orange as follows: Section I• That the above recitals are all true and correct. Section II: That all protests and objections of every kind and nature by, and the same hereby are, overruled and denied. Section III: That the Final Engineer's Report consisting of the final submitted assessment and diagram for the proceedings, is hereby approved and confirmed and a copy of said Report is hereby filed with the City Clerk. Section IV• That the assessments for fiscal year 2014/2015 be established as approved by the City Council, and are hereby confirmed and levied upon the respective subdivisions of land in the Assessment District in the amounts as set forth in said final approved Engineer's Report. Section V• The City Clerk shall immediately accomplish the following: A. Deliver to the City Engineer the assessment, together with the diagram attached thereto and made a part thereof, as confirmed, with a Certificate of Confirmation attached and the date thereof. Said City Engineer shall then immediately place for a record said diagram and assessment in his office in a suitable book as a permanent record and attach a Certificate of Recordation. B. Cause to be filed a certified copy of a diagram and assessment with the County Auditor, said filing to be completed no later than the 3` Monday in August.