Four years ago, in response to the requirements of Proposition 218, staff developed and Council approved a new assessment methodology for the operation and maintenance component of the Downtown Parking Maintenance District. The methodology for calculating the assessment is based on the parking demand the property generates, less the existing number of off-street parking spaces that each parcel contains.

Staff is recommending that Council adopt a Resolution to levy and collect the assessment and approve the Final Engineer’s Report for the Downtown Parking Maintenance District for Fiscal Year 2002/2003. By adopting the Resolution, Council will give the City the necessary authority to levy and collect the non ad valorem assessments for public parking facilities from property owners within the Maintenance District.

Since 1964, the City Council has annually levied an assessment for the debt service requirements associated with the acquisition of land for parking facilities. A separate assessment is levied to cover operation, maintenance, and construction of improvements for the City’s Downtown Parking Maintenance District parking facilities. Both of these assessments have been ad valorem, based on the value of each property within the District boundaries. Proposition 218, passed by California voters in 1996, requires certain assessments to be based on specific benefit to the property and necessitated a change to the City’s methodology. This law applies to any assessments made for the Parking Maintenance District after FY 1997/1998.

Proposition 218 only affects the operation and maintenance component of the Parking District. The existing method of assessing for the bonded indebtedness component can legally continue as an ad valorem assessment, and will be brought to Council as a separate item. The bonded indebtedness portion of the assessment will be completely retired in FY 2003/2004. Once retired, property owners will be assessed for only the operations and maintenance costs by separate assessment.

Council Resolution 6643, dated September 1, 1964 authorized the City to levy an annual assessment on all lands and improvements within the Parking District to pay debt service, operations, maintenance, and improvement costs. Prior to the passage of Proposition 218, this assessment had been levied by means of an ad valorem assessment placed on the annual property tax bills.

On April 21, 1998, Council adopted Ordinance No. 2576-98 amending the City’s Improvement Procedure Code (Sunnyvale Municipal Code Title 14) which incorporates procedures for levying non ad valorem assessments for public parking facilities (the operations, maintenance, and improvement component). Ordinance No 2576-98 became effective on May 21, 1998.

This action is consistent with the City of Sunnyvale’s Fiscal Sub-Element Goal 7.1A.1i: "Establish user charges and fees at a level closely related to the cost of providing those services."

The Downtown Parking Maintenance District consists of approximately 70 parcels in Sunnyvale’s downtown area. Over 90% of the Parking Maintenance District consists of commercial businesses.

In response to the 1996 passage of Proposition 218 ("The Right to Vote on Taxes Act"), staff developed a plan to bring the Downtown Parking Maintenance District assessment into compliance with the new legal provisions. Proposition 218 requires assessments to be based on specific benefit to each property and to be supported by an engineer’s report prepared by a registered professional engineer certified by the State of California.

While the Downtown area is in a state of transition, City staff reviews the assessment methodology every year and establishes a one-year assessment. Staff retained the firm of Francisco & Associates, Inc. to assist in conducting the Parking Maintenance District assessment analysis. The proposed methodology for calculating the assessment is based on the parking demand the property generates, less the existing number of off-street parking spaces that each parcel contains. (Sunnyvale’s Parking Demand Guidelines are based on the City’s Zoning Code requirements.) The result of this calculation is based upon each parcel’s pro rata share of deficit parking spaces. This methodology appears to be the fairest and most equitable way to assess property owners for the operation and maintenance component of the parking facilities.

On April 10, 2002 an informational letter was mailed to each property owner explaining the proposed assessment methodology. Specific information pertaining to the demand for off-street parking, the number of off-street parking spaces, and any respective deficit was provided for each parcel within the district. Property owners were provided the opportunity to review the parcel information and report any inaccuracies to Francisco & Associates. Also, staff met with property owners and other interested parties on April 24, 2002 to discuss the Downtown Parking Maintenance District.

In addition, at the April 23, 2002 City Council meeting, the Council asked staff to work with downtown businesses to develop an overall parking management plan for the downtown. City staff has started discussions with property owners and tenants regarding both-short term and long-term options for parking management. (It is anticipated that options and recommendations from these discussions will be brought forward prior to the parking district assessment process next year.)

On May 14, 2002, the City Council adopted Resolution No. 134-02 declaring its intention to levy and collect an assessment for the Downtown Parking Maintenance District for FY 2002/2003, approving the Preliminary Engineer’s Report, and authorizing the mailing of the Notice of Proposed Assessment and ballots to all Downtown Parking Maintenance District property owners. Property owners had 45 days to submit their ballots, with City Council final action to occur at the public hearing. The public hearing on the proposed assessment is scheduled for tonight’s Council meeting.

The proposed method of determining the per space parking deficit assessment changed last year from prior years because of the new construction that is taking place within the Downtown Parking Maintenance District area. Previously, all property owners paid the same per space parking deficit assessment of approximately $55.00.

Last year City staff proposed and Council approved that the City develop four benefit zones within the Downtown Parking Maintenance District area. The boundaries of each benefit zone were geographically determined. Each property located within each of the benefit zones will only be required to pay for the operation and maintenance of the parking facilities located within that benefit zone. The total cost to operate and maintain the parking facilities within each benefit zone will only be spread to each parcel within that benefit zone based upon their proportionate number of deficit parking spaces.

Under this method, City staff determines how much it will cost to operate and maintain the public parking facilities within the District for each benefit zone. City staff then identifies the use of each parcel and determines the number of required parking spaces needed to satisfy the City of Sunnyvale Parking Demand Guidelines. If the parcel has fewer parking spaces than that which is required under the parking guidelines, they are considered in deficit and are assessed for the number of deficit spaces multiplied by the rate per deficit parking space for the affected benefit zone.

Staff recommends that Council approve the same methodology as last year. In addition staff proposes that the district boundaries be redrawn to take the Murphy Square property out of the district based on the Simultaneous Like-kind Exchange Agreement between the City and Murphy Square. This agreement states that Murphy Square no longer pays any ad valorem or other taxes to the Sunnyvale Downtown Assessment District or the Sunnyvale Central Core Parking District.

The proposed change to the district boundary will result in a reduction of expenditures in maintaining the parking lot that was formerly in the parking district that now belongs to Murphy Square. This reduction in expenditures will be offset by a reduction in revenues because Murphy Square will no longer pay the Parking Maintenance District assessment.

Council may notice that the assessment for each deficit space is not sufficient to cover the operating expenses. Due to the continuing construction efforts taking place in the Downtown area, staff recommends that the assessment rate remain the same as last year. Sufficient reserves are available in the Parking Maintenance District fund to offset any shortfall created by the proposed assessment. The parking deficit assessment and reserve fund balances will be reviewed each year as part of this process.

Under Proposition 218, property owners have the opportunity to accept or reject the proposed assessment methodology by vote. A simple majority vote weighted by assessment obligation of over 50% is required to either pass or reject the proposed assessment.

If the vote is not in favor of the proposed assessment methodology, the City will not have the authority to levy and collect the assessment for FY 2002/2003. It is clearly the obligation of the downtown business owners to provide parking for their businesses, and the Parking Maintenance District was established as an inexpensive and cost-effective mechanism for those businesses that do not have adequate parking on their property to meet parking requirements. It is unlikely the individual property owners could do this as cheaply as the Parking Maintenance District. For these reasons, if the assessment methodology is not approved, staff would recommend that the City continue to maintain the parking lots within the Parking District while the parking plan is being developed. If the parking lots are maintained at current levels, the available reserves will be depleted within approximately one year. If a reduced maintenance level is implemented, the reserves will last proportionately longer and businesses will be notified that there will be impacts on the maintenance (landscaping, curbs, sweeping, painting, signage) of the parking lots within the parking district over the next several months while the longer term parking management plan is being developed.

Council may also direct staff to develop other options for providing parking in the downtown area (e.g. paid parking). Paid parking and other options will be reviewed in the development of a longer term parking management plan. Therefore, staff is not recommending this option at this time.

Community Development staff is working with a parking consultant (Bill Francis of Walker Parking Consultants) and representatives of the Downtown area to address the short and long term parking management issues of that area. They have identified the following steps to develop a comprehensive parking plan to bring forward to Council:

• Review and determine services to be included in the parking plan
• Determine the cost of those services
• Identify various options to pay for services, including a formula for the distribution of costs
• Identify factors that may trigger further review and possible amendment to the plan
• Include the Sunnyvale Downtown Association, property owners, tenants, and City staff in the discussion
• Provide a report with recommendations to Council before the assessment process begins again next year

Approval of the operation and maintenance component of the recommended assessment methodology will generate approximately $148,000 in revenue. Although the budget for maintaining the parking lots is estimated at $190,000 for FY 2002/2003, it is expected that expenses will be lower because of construction in the area. There are sufficient funds in the Parking Maintenance District fund to offset a shortfall for FY 2002/2003. If the assessment is not approved, there are sufficient reserves to maintain the parking lots at current levels for approximately one year.

Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, publication of the Council agenda in the San Jose Mercury News, and the availability of the report in the Library and the City Clerk’s Office. In addition, notification of the public hearing was mailed to the property owners with the assessment ballot.

1. If the vote as tabulated is in support of the proposed assessment, Council may adopt the Resolution to levy and collect the assessment for the Downtown Parking Maintenance District for FY 2002/2003.

2. If the vote as tabulated is in support of the proposed assessment, Council may elect to not levy the assessment for FY 2002/2003.

3. If the vote as tabulated is not in support of the proposed assessment, Council may not levy the assessment for FY 2002/2003 and must identify an alternative method for operating the parking lots.