Subject: MAINTENANCE DISTRICT BUDGET REPORTS FOR FISCAL YEAR 2001 - 2002

COUNCIL DISTRICT: 2, 4, & 8

SNI AREA: N/A

RECOMMENDATION

Adoption of resolutions approving, confirming, and adopting the Annual Budget Reports for Fiscal Year 2001-02 for City of San José Maintenance Districts 1, 2, 5, 8, 13, 15 and 18 and levying the assessments therein.

BACKGROUND

Beginning with the passage of Proposition 13 in 1978, limits have been imposed on local agency revenue sources. Limited general revenue does not allow cities to maintain the extensive special public landscaping and other amenities that are desired for many new developments. To satisfy these demands, many California cities form landscape and lighting districts (maintenance districts in San José) and community facilities districts.

The City of San José establishes special districts to maintain public landscaping and other amenities that provide a special benefit to the parcels served. Because the maintenance directly benefits the individual parcels within the district rather than the City as a whole, the maintenance costs are levied only upon those benefiting parcels.

On November 6, 1996, Proposition 218 was approved by California voters. It changed special district procedures and exposed public agencies to additional costs. Any actions resulting in new or increased levies are required to be in compliance with the new procedures, which includes a majority approval by those assessed.

Currently there are ten maintenance districts in San José. Three of the districts (4, 9, and 11) are subject to reauthorization this year by a vote of the property owners assessed, and therefore, are not included in this report. Of the seven districts included in this report, Districts 1, 2, and 15 were re-authorized in 1997 and Districts 5, 8, and 13 were re-authorized last year to meet the Proposition’s requirements. District 18 was formed in 1998 under the new requirements.

The Municipal Code requires City Council action approving the Annual Budget Reports, confirming the assessments in the reports, and directing that the assessments be collected with the County property taxes. The district budgets were included in the City Annual Operating Budget previously approved by Council in June.

ANALYSIS

Districts 1, 2, 5, 8, 13, 15 and 18 maintain landscaped street islands, landscaped easement areas or public right-of-ways.

The seven districts are shown on maps in Attachment A. Brief descriptions of the districts and discussions of any items of significance are in Attachment B. Each district’s Annual Budget Report for Fiscal Year 2001-02 will be on file in the City Clerk’s Office prior to the Council meeting. Each report will include:

1. the budget;

2. any property configuration related changes;

3. the annually adjusted assessments;

4. the assessment roll, and;

5. the assessment diagrams (maps).

Annual assessment adjustment formulas approved by the property owners for these districts allow adjustments that do not exceed the annual change in the Bay Area Consumer Price Index (CPI).

Under Proposition 218, if the City receives “general benefit”, it must contribute to the district from “generally available funds.” Since City standards would require minimally landscaped street islands on some of the streets in Maintenance District 2, 8, and 15, a contribution is required. The cost of the minimal landscape maintenance that would otherwise be provided at City expense is $2,784 for Maintenance District 2, $2,720 for Maintenance District 8, and $19,232 for Maintenance District 15. In Maintenance District 18, through the Parks, Recreation and Neighborhood Services maintenance budget, the City will pay the water bill (approximately $2,785 annually) for joint service to the central area of the district and the City’s Metzger Ranch. This will compensate the district for the general benefit landscape maintenance service it provides for the grounds around the Metzger ranch house and barn, preserved as a City of San José historical site.

Each City Council resolution to approve a district report will also:

1. correct, revise, and confirm the individual assessments;

2. direct that any required City contributions be made; and

3. direct the Director of Finance to deliver the assessments to the County for collection with the property taxes.

PUBLIC OUTREACH

When the assessments for districts 1,2,5,8,13 and 15 were reauthorized and proposed for District 18, property owners received notices of the City Council public hearings. The notices contained information on the districts, including the proposed assessments and the annual CPI adjustments. In addition to public notices and hearings, community information meetings were held. Those assessed voted to approve both the assessments and the annual CPI adjustment formulas.

Each year notices of assessments are recorded as public documents and City staff responds to any public inquiries. No additional mailed notices are provided, because the annual adjustment formulas were previously approved by those assessed.

COORDINATION

This memorandum and related documents and resolutions were prepared in cooperation with the Office of the City Attorney, the Department of Transportation, and the Budget Office.

COST IMPLICATIONS

This Council action only relates to the property assessments for FY 2001-02. The assessment revenue is shown in the source and use of funds for each district’s budget. The budgets are considered by the Council as a part of the City Operating Budget hearings.

1. Cost of Recommendation: All costs for the maintenance districts will be paid by the owners of property within the districts by a direct benefit assessment against each benefiting property with the exception of City general benefit contributions of $2,784 for Maintenance District 2, $2,720 for Maintenance District 8, $19,232 for Maintenance District 15, and approximately $2,785 for Maintenance District 18.

2. Cost for Current and Full Fiscal Year: For all maintenance districts the total FY 2001-02 budget is:

SOURCE OF FUNDS

Beginning Fund Balances $2,463,677

General Fund

MD 2 2,784

MD 8 2,720

MD 15 19,232

Revenue

Taxes and Special Assessments 1,399,376

Interest 108,700

TOTAL SOURCE OF FUNDS $3,996,489

USE OF FUNDS

Expenditures

Personal Services 239,129

Non Personal Services 1,551,185

Workers’ Comp Claims 3,500

Ending Fund Balances

Reserve for Encumbrances 267,553

Unrestricted 1,935,122

TOTAL USE OF FUNDS $3,996,489

Assessments are received from the County in January and May in approximately equal payments. Since the first revenue for each fiscal year is received seven months after the start of that fiscal year, ending fund balances must be large enough to cover the complete funding of encumbrances for maintenance contracts plus seven months of all other operating costs. All districts have infrequent but major maintenance needs, such as the repair or replacement of fountains or structures, so replacement funds are accumulated in the ending fund balance.

3. Starting Date: July 2001

4. Other Associated Costs: None

BUDGET REFERENCE

Fund names and numbers:

DISTRICT	FUND	FUND
NUMBER	NAME	NUMBER
1	Los Paseos	352
2	Foreign Trade Zone	354
5	Orchard Oarkway – Plumeria Drive	357
8	Zanker – Montague	361
13	Karina	366
15	Silver Creek Valley	368
18	The Meadowlands	372

RAJEEV BATRA

Acting Director, Public Works Department