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HOLD PUBLIC HEARING FOR THE APPROVAL OF THE ENGINEER’S REPORTS, FY 2025-26 ANNUAL BUDGETS, AND ASSESSMENTS FOR INDUSTRIAL STORM DRAINAGE BASIN MAINTENANCE DISTRICTS
recommended action
RECOMMENDATION
It is recommended that the City Council conduct the public hearing called for at its meeting on April 15, 2025, to consider public comment and testimony regarding the approval and adoption of the annual budgets and assessment rolls for the six special districts listed below (each, a “District”).
At the conclusion of the public hearing, if less than fifty percent of the owners of the assessable lands within a District file a protest of the proposed levy of annual maintenance assessments, it is recommended that the City Council adopt resolutions to:
1. Overrule all public hearing protests or objections (including all written protests not withdrawn in writing before the conclusion of the public hearing) to the proposed levy of assessments in each District, provided, as to each District, no majority protest exists.
2. Approve and adopt the preliminary Fiscal Year (FY) 2025-26 annual budget for each District.
3. Confirm and levy FY 2025-26 assessments for each of the following six industrial storm drainage basin maintenance Assessment Districts (Districts):
1) Western Pacific Industrial Park Storm Drainage Basin Maintenance District, Project Number 81-1 (Western Pacific)
2) Charter Way Industrial Site Storm Drainage Basin Maintenance District, Project Number 86-4 (Charter Way)
3) Arch Road Industrial Park Storm Drainage Basin Maintenance District, Project Number 84-2 (Arch Road)
4) Airport Gateway Center Storm Drainage Basin Maintenance District, Project Number 96-03 (Airport Gateway)
5) Stockton Airport Business Center Storm Drainage Basin Maintenance District, Project Number 84-1 (Stockton Airport)
6) North Newcastle Storm Pump Station and Basin Maintenance District, Project Number 20-1 (North Newcastle)
4. Approve and adopt the Engineer’s Reports (Reports) showing the FY 2025-26 assessments and the adjusted drainage acres to be used in assessing the costs and expenses in connection therewith as the method of assessment to be used to pay the costs and expenses of the maintenance and operation.
5. Approve, confirm, and levy the assessments, as described in the Reports, of the annual amount of costs and expenses to maintain and operate the improvements upon the several subdivisions of land in each District, in proportion to the estimated benefits to be received by said subdivisions from the operation of said improvements and of the related incidental expenses as described in each respective Report.
It is further recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of these resolutions.
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Summary
The Municipal Utilities Department (MUD) encompasses the Water, Wastewater, and Stormwater Utilities, which are regulated for the protection of public health and the environment and supported by user fees. The Stormwater Utility consists of 77 pump stations, over 600 miles of pipeline, and 22,500 drain inlets that route stormwater from city streets into local basins and waterways. Regular system maintenance is necessary to prevent flooding from storm runoff. The Stormwater Utility is also responsible for oversight and compliance with the City’s National Pollutant Discharge Elimination System (NPDES) Municipal Separate Storm Sewer System (MS4) permit, which requires extensive monitoring and public outreach programs to promote water quality in the Sacramento San Joaquin River Delta.
In addition, the Stormwater Utility manages a consolidated storm drainage maintenance district and six industrial storm drainage basin maintenance districts throughout the City. These Districts were formed pursuant to State law and the Stockton Improvement Procedure Code. The Districts provide for the maintenance and operation of capital improvements that impart a special benefit to a designated area, including stormwater quality treatment and flood control.
Each special District requires an annual Engineer’s Report to identify the budgets, changes to boundaries and assessments for each parcel contained within each District. The budget for each District includes engineering fees for the preparation of the annual Engineer’s Report and tax rolls; attorney’s fees; estimated costs of maintenance work to the device(s); City administrative costs; San Joaquin County costs to collect the assessments on the tax rolls; replacement reserve costs; and contingency fees. City administrative costs include staff salary expenses to oversee the annual Engineer’s Reports and tax rolls, maintenance service contracts, coordinate device inspections, maintenance schedules, and management of District finances. The assessments are approved through a public hearing process.
If approved, this action will adopt the FY 2025-26 budgets and assessments for the six Districts listed above.
A copy of the FY 2025-26 Annual Engineer’s Reports is on file in the Office of the City Clerk and can also be found on the City of Stockton website at the following link: www.stocktonca.gov/stormwater.
DISCUSSION
Background
The City Council, in accordance with Resolution Numbers 85-0416, 86-1059, 88-0492, 88-0552, 99-0400 and 2020-12-15-1501, authorized the formation of the six Districts (Attachment A). As a condition of their subdivision agreements, each developer was required to form a maintenance district to provide ongoing maintenance of the basins after construction was complete and the basins were turned over to the City. The formation of these Districts was based on the provisions of the Municipal Improvement Act of 1913 (Act) and the Stockton Improvement Procedure Code (Stockton Code). The Act and the Stockton Code contain provisions for the City to form assessment districts for the maintenance and operation of improvements that award a special benefit to an area.
The purpose of these Districts is to provide funding for the operations and maintenance of the storm drainage basins. The maintenance spraying of weeds, rodent control, maintenance of fences, removal of debris/trash, and general upkeep of the basin. The original Engineer’s Reports, which were approved by the landowners at the time of formation of each District, detail how the City can legally calculate the annual assessments. The original Engineer’s Reports for the Arch Road, Charter Way, and Western Pacific Districts did not allow for a Cost-of-Living Adjustment to be applied to increase the maximum allowable assessment over the years. Thus, these three basins will remain at the maximum allowable assessment.
The Stockton Airport Business Center District was similarly established, but parcels were annexed to the District in FY 2004-05. The annexed parcels of this district are subject to a Cost-of-Living Adjustment. Any changes to the formulas for the calculation of any of these assessments are subject to a vote by the impacted parcel owners as required by California Constitution Article 13(D) Section 6, commonly known as Proposition 218. Approved by taxpayers in 1996, Proposition 218 amended the California Constitution to require that property owners and tenants that pay for property related services directly to a public agency receive ample notice and have an opportunity to weigh in on the adoption of new or increased property related fees. The law provides that property owners subject to the assessment have an opportunity to weigh in on the adoption of each proposed annual assessment via a public hearing held by the City Council.
On April 15, 2025, the City Council preliminarily approved and confirmed the budgets and proposed assessments for each of the Districts and set a public hearing for June 3, 2025. Through this process, annual assessments are included on the San Joaquin County property tax roll for collection.
Present Situation
Attachment B provides a summary of the proposed FY 2025-26 budget and assessments for each district. Western Pacific Industrial Park, Charter Way Industrial Site, Arch Road Industrial Park, and Stockton Airport Business Center are the only districts of the FY 2025-26 assessments where the budget exceeds the established Maximum Annual Allowable Assessments contained in the original Engineers’ Reports that were approved either by landowner ballots or written consent of the landowners and approved by the Council as part of the district formation proceedings. The proposed budgets for the districts include engineering fees, attorney fees, estimated basin maintenance work, City administration costs and contingency.
The proposed FY 2025-26 annual and maximum assessments for the Western Pacific Industrial Park, Charter Way Industrial Site, and Arch Road Industrial Park Districts remain at the same level as the FY 2024-25 annual assessments due to no annual increases allowed within the original Engineer’s Reports approved by the landowners.
Operational costs of the three basin districts referenced as Western Pacific Industrial Park, Charter Way Industrial Site, and Arch Road Industrial Park are not projected to exceed their maximum allowable assessments in FY 2025-26 based on the contracted costs for preparation of the Engineer’s Reports and district maintenance.
Staff recommend approving the full operational budget. The FY 2024-25 Actual Assessments, FY 2025-26 Proposed Assessments, FY 2025-26 Proposed Amount to Transfer from Fund Balance, FY 2025-26 Operational Budgets, FY 2025-26 Projected Fund Balances, and FY 2025-26 Maximum Allowable Assessments are as follows:
|
District |
FY 2024-25 Actual Assessment |
FY 2025-26 Proposed Assessment |
FY 2025-26 Proposed Amount to Transfer from Fund Balance to Expenditure Account |
FY 2025-26 Operational Expenditure Budget |
FY 2025-26 Projected Fund Balance |
FY 2025-26 Maximum Allowable Assessment |
|
Western Pacific Industrial Park |
$17,319.58 |
$17,319.58 |
$7,308.00 |
$24,627.58 |
$56,523.12 |
$17,320.00 |
|
Charter Way Industrial Site |
$12,999.98 |
$12,999.98 |
$9,409.00 |
$22,408.98 |
$1958.29 |
$13,000.00 |
|
Arch Road Industrial Park |
$17,372.44 |
$17,372.44 |
$7,094.00 |
$24,466.44 |
$101,299.74 |
$17,373.00 |
The Engineer’s Reports for the Airport Gateway Center District, and the applicable parcels in the Stockton Airport Business Center District and North Newcastle District contain provisions for an annual Cost-of-Living Adjustment. Each year, the maximum annual assessments are increased in an amount equal to the greater of either 3.0 percent or the annual increase as shown in the Local Consumer Price Index (CPI) for the San Francisco-Oakland-San Jose All Items, All Urban Users, as published by the Bureau of Labor Statistics for a similar period.
For the calendar year 2024, the annual increase is approximately 2.38 percent. For FY 2025-26, the 3.00 percent adjustment has been applied to the calculation of the total maximum allowable assessment and the actual assessment for Airport Gateway Center, and the annexed portions of the Stockton Airport Business Center Districts and North Newcastle District. Proposition 218 provides cities with the latitude to approve the maximum allowable assessment, if warranted, based on estimated expenditures, or if estimated expenditures do not justify the maximum to collect a lesser amount.
Staff recommend that the City Council approve the increase in the maximum allowable assessment and the increase in the actual assessment that will set the base for upcoming fiscal year calculations. Staff also recommend approving the full operational budget and the transfer of funds needed from reserve balance to cover the gap in expenses in the Stockton Airport Business Center.
Sufficient fund balance exists in reserve to pay for the gap in costs not covered by the new assessment. The FY 2024-25 Actual Assessments, FY 2025-26 Proposed Assessments, FY 2025-26 Proposed Amount to Transfer from Fund Balance, FY 2025-26 Operational Budgets, FY 2025-26 Projected Fund Balances, and FY 2025-26 Maximum Allowable Assessments are as follows:
|
District |
FY 2024-25 Actual Assessment |
FY 2025-26 Proposed Assessment |
FY 2025-26 Proposed Amount to Transfer from Fund Balance to Expenditure Account |
FY 2025-26 Operational Expenditure Budget |
FY 2025-26 Projected Fund Balance |
FY 2025-26 Maximum Allowable Assessment |
|
Airport Gateway |
$32,704.66 |
$33,683.22 |
$0.00 |
$33,683.22 |
$376,806.63 |
$125,947.29 |
|
Stockton Airport Business Center* |
$14,988.30 |
$15,430.96 |
($3,263.96) |
$28,073.92 |
$310,337.57 |
$45,314.29 |
|
North Newcastle |
$72,680.84 |
$74,861.06 |
$0.00 |
$74,861.06 |
$166,554.03 |
$91,510.88 |
*The FY 2025-26 operational expenditure budget is $28,073.92, which includes $9,379.00 transferred from other districts and an additional $3,263.96 being pulled from the reserve.
Administrative and operational costs for the maintenance of the Stockton Airport Business Center basin are offset with transfers from the Little John Creek Landscape Maintenance District No. 94-1 and Seabreeze Landscape Maintenance District No. 96-2 ($6,626.00 and $2,753.00), respectively, as the basin landscaping is provided for in those districts. Due to these contributions, $9,379.00 will be deposited back into the reserve.
Fund balances are for infrastructure replacement accounts to fund construction of new facilities at the end of their operational life.
The tax rolls submitted for collection show the approved maximum assessment as well as the actual amount that will be submitted for collection on the San Joaquin County property taxes.
This public hearing provides any interested person an opportunity to protest the proposed budget, the proposed method and proportion of assessment or the maximum annual assessment, either in writing or orally, for each district. A majority protest exists if more than fifty percent of the owners of the area of assessable lands within a district file a written or verbal protest. The required notice of this public hearing was published in The Record on April 15, 2025, and May 5, 2025.
FINANCIAL SUMMARY
The proposed industrial storm drainage basin maintenance districts budget for FY 2025-26, anticipated budget transfers from fund balance, and the projected ending fund balance are detailed in Attachment B.
The City makes no financial contributions to any of the Districts. All fees, costs, and expenses incurred will be payable solely from the proceeds of the annual assessments to be levied and collected on the San Joaquin County property tax roll, or from each District’s reserve funds. The use of the funds collected within the various districts is restricted by Proposition 218 to pay only the expenses related to the maintenance and operation of the specific storm drainage basin for which they are collected.
The funds collected from the property owners of a district can only be used for the work on the basins in that district as it imparts special benefit restricted to the properties of that district. District funds are segregated and cannot be used to operate, maintain, or support the activities of the stormwater, or any other, utility at large.
Administrative and operational costs for the maintenance of the Stockton Airport Business Center Basin are offset with transfers from the Little John Creek Landscape Maintenance District No. 94-1 and Seabreeze Landscape Maintenance District No. 96-2 ($6,626.00 and $2,753.00, respectively) as the basin landscaping is provided for in those districts.
This action has no impact on the General Fund or any other unrestricted funds.
Attachment A - Storm Drainage Basin Districts Location Map
Attachment B - Storm Drainage Basin District Budgets and Fund Balance Projections