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PRELIMINARILY APPROVE THE FISCAL YEAR 2018-19 STOCKTON CONSOLIDATED LANDSCAPE MAINTENANCE ASSESSMENT DISTRICT NO. 96-2 ANNUAL ENGINEER’S REPORT, PROPOSED FISCAL YEAR 2018-19 BUDGET, AND SET A PUBLIC HEARING FOR JUNE 5, 2018
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Preliminarily approve the Stockton Consolidated Landscape Maintenance Assessment District No. 96-2 Annual Engineer’s Report for the fiscal year (FY) 2018-19.
2. Preliminarily approve the proposed FY 2018-19 budget.
3. Set a public hearing for June 5, 2018.
4. Authorize the City Clerk to publish notice of the public hearing.
It is further recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this resolution.
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Summary
The Stockton Consolidated Landscape Maintenance Assessment District No. 96-2 (Consolidated Landscape District) levies assessments to fund maintenance of landscaping, parks, and related improvements in 27 zones across the City (Attachment A). The Landscaping and Lighting Act of 1972 (Act), under which this District was formed, requires annual preliminary approval of the Consolidated Landscape District budget and the Annual Engineer’s Report, and requires an annual public hearing for final consideration of the budget and the Annual Engineer's Report.
The recommended resolution preliminarily approves the Consolidated Landscape District’s Annual Engineer’s Report and the FY 2018-19 budget (Attachment B), sets a public hearing for the June 5, 2018, City Council meeting for the final approval of the FY 2018-19 budget and the Annual Engineer’s Report, and authorizes the City Clerk to publish notice of the public hearing. All costs are funded by assessments levied on the properties in the zones of the Consolidated Landscape District (Attachment C). All funds generated from the assessments for each zone can only be used for specific work in that zone.
The assessments for seven zones of the Consolidated Landscape District are fixed and cannot be increased without approval by a majority of the property owners. For FY 2018-19, it is recommended the actual assessment remain the same as FY 2017-18 for the seven zones with fixed assessments.
The assessment formula for the remaining 20 zones where assessments are levied provide for an annual escalator to the maximum allowable assessment and for adjusting the actual assessment. It is recommended that the FY 2018-19 maximum assessment be increased per the formula. It is further recommended that the actual FY 2018-19 assessment remain the same as the FY 2017-18 assessment in seven zones, and be increased from the previous year in 13 zones. This recommendation is a result of a comprehensive review and evaluation of current maintenance expenditures, long term capital needs, and available reserves. The recommended assessments are the second phase of a five-year plan to adjust the rates to properly fund ongoing expenses and maintain appropriate reserves.
DISCUSSION
Background
On February 26, 1996, Council adopted Resolution No. 96-0084 that consolidated the eight Landscape Maintenance Districts that existed at that time into one Consolidated Landscape District. The City used the provisions of the Act to establish the original individual districts and the Consolidated Landscape District. The Act contains provisions for the City to form an assessment district, or annex territory to an existing district, for the maintenance and operation of improvements that impart a special benefit to an area. Though the title of the Act references landscaping and lighting, a district can be formed to maintain a variety of improvements. These improvements include, but are not limited to, landscaping, fountains, ornamental structures, public lighting (such as street lights and traffic signals), walls, irrigation, parks, and park equipment. The Consolidated Landscape District provides for the maintenance of these types of improvements in certain subdivisions throughout the City.
The Consolidated Landscape District sets annual assessments, collected by the County with annual property taxes, on each taxable parcel contained within the Consolidated Landscape District. These annual assessments provide funding for maintenance of the improvements, parks, inspection, repair and replacement of improvements, and other associated administrative costs, including preparing an Annual Engineer’s Report and assessment roll. The Annual Engineer’s Report contains the Consolidated Landscape District's budget. The budget details the maintenance and administrative costs for all affected zones. The property owners are responsible to fund only those improvements within their zone.
The assessments are apportioned in a manner to distribute the amounts among all assessable parcels in proportion to the special benefit conferred on each parcel. Each year all properties are evaluated to determine if they meet the criteria to be assessed. If they are to be assessed, a dwelling unit equivalent factor (dueF) is assigned to each parcel. The dueF is based on the parcel's use. A single-family residential lot is equivalent to one dueF. The dueF for other classifications of properties, such as multi-family or commercial, is determined by the Allocation of Costs and Method of Assessment Spread contained in the Annual Engineer’s Report.
There are 34 zones in the Consolidated Landscape District. During the FY 2017-18, no new zones were formed, and no new territory was annexed to any existing zone. Assessments are levied in 27 zones (Attachment A). Assessments are not levied in the remaining seven zones as there are no improvements to maintain.
Of the 27 zones where assessments are levied, seven of the zones (A-1 Weber/Sperry, A-2 Morada West, B-1 Long Park, B-2 Weston Ranch, B-3 Weston Park, C-1 Spanos East, and D-1 Bridgeport Trails) do not have a provision for an annual increase to the assessment. The assessment in these districts is at the same level as when the zones were originally formed in the early 1990's. Any increase in the annual assessment would have to be approved by a majority of the affected property owners. Consequently not all of the current assessments collected are used for services. A portion of the current assessment collected is reserved to be able to afford future cost increases resulting from inflation.
Assessments in the remaining 20 zones were approved with an annual escalator. The escalator is the greater of three percent, or the increase in the San Francisco-Oakland-San Jose All Urban Consumers Price Index. The escalator allows the assessment, when necessary, to keep pace with inflation without having to go through the time and expense to ballot the property owners. The maximum allowable assessment annually adjusts by the Consumer Price Index, while the actual assessment needed to cover a zone's expenses is determined based on the estimated expenses for the fiscal year. The annual increase from 2016 to 2017 of the San Francisco-Oakland-San Jose All Urban Consumers Price Index was 3.2 percent. Therefore, the maximum escalator that can be applied to the maximum allowable assessment for FY 2018-19 is 3.2 percent.
Present Situation
Attachment B is a summary of the proposed FY 2018-19 budget for the Consolidated Landscape District, and includes the proposed per dueF/single-family dwelling assessment for each zone where an assessment is proposed to be levied. The budgeted expenditures include: contracted maintenance, utilities, administration, repair and replacement of plant material and infrastructure, allocation to the replacement reserve, and a contingency. The budgeted revenues are from assessments on the property owners. For the zones that have a provision for an annual escalator, it is proposed that the maximum allowable assessment be increased by 3.2 percent.
The overall budget for FY 2018-19 is based on current expenditure projections and is approximately $4.56 million. This is an increase of approximately $640,000 from the $3.92 million FY 2017-18 budget. The increase is mainly attributable to a $382,000 increase in contracted maintenance costs, $86,000 increase in water costs, $30,000 for wall repair in Zone A-2, $30,000 for landscape refurbishment in Zone E-4, and a $56,000 increase in the contingency.
For FY 2018-19, it is recommended the assessment remain the same for the seven zones with fixed assessments. For the 20 zones where the assessment formula provides for an escalator, it is recommended that the maximum assessment be increased per the formula from the previous fiscal year. It is further recommended that the actual FY 2018-19 assessment remain the same as the FY 2017-18 assessment in seven zones, and be increased in 13 zones. This recommendation is a result of a comprehensive review and evaluation of current maintenance expenditures, long term capital needs, and the Reserve for Continuing Appropriation fund balances.
The reserve funds accumulated over a number of years to fund eventual replacement of improvements such as turf, trees, shrubs, irrigation system components, masonry block and pre-cast concrete back-up walls, and park improvements such as park play equipment, picnic structures, and bathroom buildings when those improvements reach the end of their service life. In zones where street lighting is an improvement whose maintenance is funded, the annual assessment is set at a rate to fund re-lamping and knock-down repairs/replacement as needed.
The comprehensive review and evaluation was completed by staff, following completion of a capital needs analysis by Siegfried Engineering, Inc. This combined effort analyzed current maintenance tasks, long term capital replacement needs, and reserve fund balance for each zone. The analysis identified additional maintenance/service tasks that should be performed, quantified service life and replacement estimates for the various improvements eligible to be funded by the Consolidated Landscape District, and recommended the reserve amount to be set aside each year. The recommended reserve set aside is based on the current amount that is in reserve, the appropriate reserve balance for each zone (this number changes as the zone ages), and the recommended adjustment to each zone’s assessment to reach those levels (Attachment C).
Zones with Fixed Assessments
Zones A-1, A-2, B-1, B-2, B-3, C-1, and D-1 do not have a provision for an annual increase to the maximum allowable assessment. Any increase in the annual assessment in these zones would have to be approved by a majority of the affected property owners. In these seven zones, there is a request for an appropriation from the reserve to balance each zone's budget. Each zone’s budget anticipates contracted costs such as routine scheduled maintenance service and utilities, and also includes eventual but unscheduled expenditures such as wall repairs. If the eventual but unscheduled expenditure was not budgeted, a mid-year appropriation requiring City Council action would have to be processed. To avoid a mid-year appropriation, funds for this type of eventual but unscheduled expenditure are budgeted. If the funds are not used, they are returned to the zone at the end of the fiscal year and are available for the next year. An appropriation from the reserve is the only way to balance the budget and efficiently provide for these types of eventual but unscheduled expenditures. Ultimately, given increases in costs in future years, the reserves in each of the seven zones will be depleted, and the zones will become unable to fund maintenance at the level currently provided. Current projections are that the reserves in zones A-1, B-1, B-2, B-3, C-1, and D-1 will be adequate to continue the current service levels for at least five years.
In Zone A-2 there were two separate incidents of vehicles running into and damaging the masonry block wall. The first incident was at the northeasterly corner of Hammer Lane and Maranatha Drive. The motorist is insured and the repair costs will be recovered. The second incident was on the North State Route 99 West Frontage Road just southerly of Christian Life Way. Approximately 16 linear feet of 13-foot-high wall and one supporting column were destroyed and another support column was damaged. The estimated cost for demolition and repair is $30,000. The motorist is not insured and there is little chance of recovering the repair/rebuild cost. This repair will use a substantial portion of the reserve, leaving an estimated reserve of $2,500 after the repair is completed. This repair will potentially leave Zone A-2 insolvent starting in FY 2020-21.
The table below shows the FY 2017-18 actual assessment, the recommended FY 2018-19 actual assessment, and what the per dueF assessment would be for budgeted expenditures. The ‘Cost per dueF for Budgeted Expenditures’ does not include an amount to capitalize a replacement reserve or fund replacement of larger expense items such as extensive landscape rehabilitation or booster pump replacement.
Zone FY 2017-18 Actual FY 2018-19 Actual Cost per dueF for
(Fixed) (Fixed) Budgeted Expenditures
A-1 $46.90 $46.90 $114.18
A-2 $79.88 $79.88 $352.32
B-1 $84.00 $84.00 $115.09
B-2 $117.82 $117.82 $175.86
B-3 $24.00 $24.00 $27.29
C-1 $119.24 $119.24 $250.13
D-1 $85.00 $85.00 $151.99
Zones with No Change In Assessments
There is no change proposed in the assessments for Zones A-4, A-7, C-3, C-4, C-6, D-6, and E-4. The comprehensive review determined that the reserves for Zones A-4, A-7, C-3, C-4, C-6, D-6, and E-4 continue to exceed the recommended reserve balance. The recommended budget includes an appropriation from the reserve to fully fund the operating budget to draw down the reserve. The table below shows the FY 2017-18 actual assessment, the recommended FY 2018-19 actual assessment, and the FY 2018-19 recommended maximum assessment. Once target reserve levels are met, the appropriations will no longer be necessary and the assessment will revert to a level necessary to fund budgeted expenditures and maintain the reserve.
Zone FY 2017-18 FY 2018-19 Dollar Percentage FY 2018-19
Actual Actual Difference Difference Maximum
A-4 $141.00 $141.00 $0.00 0.00% $249.71
A-7 $99.80 $99.80 $0.00 0.00% $728.78
C-3 $114.00 $114.00 $0.00 0.00% $200.73
C-4 $89.90 $89.90 $0.00 0.00% $265.77
C-6 $92.00 $92.00 $0.00 0.00% $184.96
D-6 $11.80 $11.80 $0.00 0.00% $472.46
E-4 $12.80 $12.80 $0.00 0.00% $281.44
Zones with Increasing Assessments
The comprehensive review determined that reserves for Zones A-3, A-6, B-4, B-5, C-2, C-7/7A, D-3, E-1, and E-3 are less than the recommended reserve balance, and that the reserves for Zones A-5, A-10, D-4, and E-5 exceed the recommended reserve balance. While the reserves for Zones A-5, A-10, D-4, and E-5 exceed the recommended reserve balance at this time, the proposed assessment does not fully fund the estimated expenditures. For Zones A-5, A-10, D-4, and E-5 there is an appropriation from the reserve that will bring the reserve balance to the appropriate level over the next four years. It is recommended that the assessments for Zones A-3, A-5, A-6, A-10, B-4, B-5, C-2, C-7/7A, D-3, D-4, E-1, E-3 and E-5 be increased. A gradual increase over the next three to four years will bring the assessment to a level that will fully fund expenditures and maintain the appropriate reserve level. The table below shows the FY 2017-18 actual assessment, the recommended FY 2018-19 actual assessment, the dollar amount and percentage of the increase, and the FY 2018-19 recommended maximum assessment.
Zone FY 2017-18 FY 2018-19 Dollar Percentage FY 2018-19
Actual Actual Difference Difference Maximum
A-3 $183.70 $220.40 $36.70 19.98% $255.00
A-5 $500.00 $550.00 $50.00 10.00% $1,385.26
A-6 $221.50 $265.80 $44.30 20.00% $595.47
A-10 $121.00 $140.80 $19.80 16.36% $388.63
B-4 $89.38 $92.24 $2.86 3.20% $92.24
B-5 $58.00 $68.00 $10.00 17.24% $174.79
C-2 $183.80 $220.60 $36.80 20.02% $233.10
C-7/7A $232.80 $283.70 $50.90 21.86% $434.51
D-3 $149.60 $178.80 $29.20 19.52% $242.79
D-4 $112.90 $114.80 $1.90 1.68% $1,156.46
E-1 $149.70 $176.60 $26.90 17.97% $246.01
E-3 $281.60 $336.00 $54.40 19.32% $792.63
E-5 $122.70 $133.60 $10.90 8.88% $488.33
The FY 2018-19 Annual Engineer’s Report for the Consolidated Landscape District, which contains the budget, assessment amounts, and a description of improvements eligible to be maintained, is on file with the City Clerk. The assessments fund maintenance of over four million square feet of street landscaping, 68+ acres of open space, 42+ miles of back-up walls, 10.5+ miles of bicycle/pedestrian paths, and 12 parks totaling over 114 acres. A brief summary of the improvements eligible to be maintained by each zone, and the proposed actual assessment and proposed maximum assessment per dueF for each zone is contained in Attachment C.
The recommended resolution will:
1. Preliminarily approve the Consolidated Landscape District’s Annual Engineer’s Report for the FY 2018-19.
2. Preliminarily approve the proposed FY 2018-19 budget.
3. Set a public hearing for June 5, 2018.
4. Authorize the City Clerk to publish notice of the public hearing.
Notice of the public hearing is required to be published a minimum of 10 days prior to the public hearing. The required notice will be published in The Record on May 24, 2018.
FINANCIAL SUMMARY
Total Proposed FY 2018-19 Assessments $3,362,231
Total Proposed FY 2018-19 Appropriation from Reserves $1,194,741
TOTAL PROPOSED FY 2018-19 BUDGET $4,556,972
TOTAL CURRENT FY 2017-18 BUDGET $3,920,297
INCREASE/(DECREASE) $636,675
The requested appropriation from the reserves will leave an estimated $9,778,068 in total reserve funds available for future programming. The reserve analysis recommends that there should be a total of $21,776,017 in reserve. Additional details for all zones are included in Attachment C.
There is no impact to the City’s General Fund or any other unrestricted fund as a result of taking the recommended actions. The City makes no financial contribution to the Consolidated Landscape District. All fees, costs, and expenses, including staff costs, are paid from the proceeds of the annual assessments to be levied.
Attachment A - Vicinity Map
Attachment B - Proposed Budget
Attachment C - Summary of Zones