May 18, 2004

SUBJECT:  Resolution of Intention to Levy and Collect Assessment for the Downtown Parking Maintenance District for Fiscal Years 2004/05 and 2005/06 and Approval of the Preliminary Engineer's Report

REPORT IN BRIEF

In 1951 downtown merchants and property owners joined with the City to study the parking situation, realizing that a healthy business community depends, in part, upon the availability of adequate, attractive and conveniently-located parking.  Parking District #1was established out of this collaboration.  Throughout the years two other parking districts were established in the downtown.  The three parking districts were combined into what today is called the Downtown Parking District.

Beginning in 1964, the City annually levied an assessment for the debt service requirements associated with the acquisition of land for parking facilities and for the maintenance and operation of the parking facilities. This assessment was ad valorem based on the value of each property within the Downtown Parking District boundaries.  Proposition 218, passed by voters in 1996, required a new methodology for assessment of the District’s operation and maintenance costs.  Because of Proposition 218, the City was required to create two assessments: (1) one for the bonded indebtedness as an ad valorem property tax, and (2) one for the operation and maintenance of the parking district facilities.  The area covered by the assessment for the maintenance and operation is called the Downtown Parking Maintenance District.  The bonded indebtedness portion of the assessment was completely retired in FY 2003/04.  Property owners with a parking deficit are now assessed for only the operations and maintenance costs of the parking lots.  Property within the parking maintenance district approved the current assessment on January 14, 2003.  This assessment was for Fiscal Years 2002-03 and 2003-04 and will expire on June 30, 2004. 

Staff is recommending that the Council take action to begin the process of giving the City the necessary authority to levy and collect the assessments for the Downtown Maintenance Parking District for Fiscal Years 2004-05 and 2005-06.  This action is only for the purpose of paying operation and maintenance costs of the parking facilities within the boundaries of the Downtown Parking Maintenance District.  The proposed assessment uses the same rate that was used for Fiscal Years 2002-03 and 2003-04.

BACKGROUND

The Downtown Parking Maintenance District consists of approximately 70 parcels in the downtown area.  Over 90% of the parking maintenance district consist of commercial uses.

Beginning in 1964, the City annually levied an assessment for the debt service requirements associated with the acquisition of land for parking facilities and for the maintenance and operation of the parking facilities.  All the lots in the District are owned in the name of the City of Sunnyvale.  This assessment was ad valorem based on the value of each property within the Downtown Parking District boundaries.  Proposition 218, passed by voters in 1996, required a new methodology for assessment of the District’s operation and maintenance costs.  Because of Proposition 218, the City was required to create two assessments: (1) one for the bonded indebtedness as an ad valorem property tax, and (2) one for the operation and maintenance of the parking district facilities. The area covered by the assessment for the maintenance and operation is called the Downtown Parking Maintenance District. The bonded indebtedness portion of the assessment was completely retired in FY 2003/04.  Property owners are now assessed for only the operations and maintenance costs.

Proposition 218 requires that all affected property owners be given the opportunity to vote either in favor or against the benefit assessment.  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.  This applies to any assessment made for the Parking Maintenance District after Fiscal Year 1997/98.  This benefit assessment affects only maintenance and operation and not any other functions.  Property owners within the parking district approved the current maintenance assessment on January 14, 2003.  This assessment was for Fiscal Years 2002-03 and 2003-04 and will expire on June 30, 2004.

Property owners within the Downtown Parking Maintenance District receive a special and direct benefit from the existence of the District parking facilities and the maintenance thereof.  It allows property owners to develop or redevelop their properties without providing on-site parking to support their development.  The district allows property owners to maximize development capabilities for their parcels (i.e. being able to construct additional building square footage rather than having this space allocated to on-site parking to support their development).  The ability to maximize a parcel’s development capabilities increases the value of these properties within the boundaries of the District.

Prior to FY 2001-02, the lot located at the corner of Charles Street and Evelyn Avenue was in the Parking District and was acquired with bond funds.  In FY 2001-02, the lot located at the corner of Charles Street and Evelyn Avenue was removed from the parking maintenance district. The removal was a result of discussions among City staff, business owners and property owners. During meetings, the business owners and parking district property owners expressed concern about paying for maintenance of the Charles Street parking lot when Caltrain riders primarily used it. During the construction activities at the Caltrain Station, riders were allowed to park their vehicles all day at the Charles Street parking lot without penalty. The removal of the Charles Street lot was approved through the process of the vote of the property owners in the District and the formal acceptance of the final engineer’s report by the City Council.

The diagram depicting the boundaries and benefit zones for the Downtown Parking Maintenance District in FY 2001-02 Engineer’s Report does not include the Charles Street Lot, unlike the diagram depicting the boundaries in FY 2000-01Engineer’s Report.  FY 2001-02 was the first time that the District was divided into benefit zones and the amount assessed per deficit parking space varied with the benefit zone the property is located in. 

In the discussions for fiscal years 2004-05 and 2005-06, the businesses and property owners reaffirmed that they wanted the Charles Street lot excluded from the maintenance district because, in their opinion, it provides minimum benefit to the downtown businesses. The Engineer’s Report reflects this position.  Business and property owners in the District still have concerns that parking district bonds were used to purchase the lot and it no longer serves the needs of the parking district. The City Attorney is seeking a formal legal opinion from outside counsel specializing in this area about this concern.  

EXISTING POLICY

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.

Municipal Code Section 19.46.010: Areas and facilities required—Location: the owner or occupant of land or buildings used for any purpose in any zoning district, except uses within the boundaries of a parking district created by the action of the city council, shall provide off-street parking and loading areas and facilities which conform with the regulations set forth herein.

Municipal Code Section 14.26.070: The City Council may, in its resolution declaring its intention to order work done or improvements made or by separate resolution, declare its intention to order that the costs and expenses of maintaining and operating any or all public improvements of a local nature, including the cost of necessary repairs, replacements, fuel, power, electrical current, care supervision, and any and all other items necessary for the proper maintenance and operation thereof, shall be assessed, either partly or wholly, upon such district as the city council shall determine will be benefited by the maintenance and operation of the public improvements proposed to be maintained; the amounts so assessed to be collected in the same manner and by the same officers as taxes for city purposes are collected.

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."

DISCUSSION

Staff and downtown business and property owners met seven times (March 2003-March 2004) to try and identify a long-term plan for managing parking in the downtown.  The purpose of these meetings was to give property and business owners an opportunity to find long-term solutions for funding of the Downtown Parking Maintenance District.

The last meeting was held on March 16, 2004.  At that meeting, property and business owners recommended that the parking district vote be for a two-year period (Fiscal Years 2004-05 and 2005-06). They felt that the activity level will remain the same during the next two years and they would not have additional parking needs.  The parking maintenance district boundaries and benefit zones will be the same as Fiscal Years 2002-03 and 2003-04.  The lot located on the corner of Charles Street and Evelyn Avenue will not be included in the maintenance assessment and will not be maintained with parking maintenance district funds.  Although this lot was acquired with parking district bonds, it was removed from the Parking Maintenance District Assessment in FY 2001-02, because it was not effectively serving the properties within the parking district.  Therefore, the participants said that this lot does not provide a parking benefit to the parking district and therefore should not be maintained with parking district funds. They still have concerns that parking district bonds were used to purchase the lot and it no longer serves the needs of the parking district.

By keeping the boundaries and benefit zones the same as in the previous two assessments, the cost will remain at about the same level as Fiscal Year 2003-04.  The total assessment for FY 03/04 was about $148,000. There are enough reserves to keep the assessment at about $148,000 per year for Fiscal Years 2004/05 and 2005-06.

The downtown property and business owners have asked that parking enforcement not be included as part of the assessment, but that the City work with downtown merchants and the mall developer to develop a parking enforcement plan (primarily for construction workers) during construction of the mall.  The mall developer is expected to fund the implementation of the parking enforcement plan that is developed.

Downtown property and business owners that participated in the discussions expressed interest in forming a Business Improvement District (BID), but felt it was premature to pursue this matter at this time. The pursuit of a BID will be discussed further at Sunnyvale Downtown Association meetings.  If there is enough interest from the businesses, they will approach the City for assistance.  The type of assistance that they would need has not been identified.

Staff retained the firm of Francisco & Associates, Inc. to assist in developing the assessment methodology.  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 of the parking facilities.

On April 7, 2004, an informational letter was mailed to each property owner explaining the proposed assessment methodology.  Specific information pertaining to the demand for onsite parking, the number of onsite 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, Inc.

Staff is proposing that the City use the same geographically determined four benefit zones used in the last two assessments.  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. 

The engineer personally walked the District to verify the use of each parcel and to determine 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, the parcel is considered in deficit and is assessed for the number of deficit spaces multiplied by the rate per deficit parking space for the affected benefit zone.   

Based upon the annual budget needed to operate and maintain the existing public parking facilities for Fiscal Years 2004- 05 and 2005-06 the assessment rate per deficit parking space for each benefit zone is as follows:

Fiscal Year 2004-05
Assessment Rates per Benefit Zone
Benefit Zone No.	Total Deficit Parking Demand	Maintenance Budget	Reserve Fund Transfer	Assessment Revenue	Assessment Per Deficit Space
1	94.69	$2,085.17	$284.57	$1,800.60	$19.02
2	172.37	$19,283.61	$2,631.73	$16,651.88	$96.60
3	2,094.65	$133,679.93	$18,243.97	$115,435.96	$55.11
4	645.81	$22,436.29	$3,061.99	$19,374.30	$30.00
Total	3,007.52	$177,485.00	$24,222.26	$153,262.74

Fiscal Year 2005-06
Assessment Rates per Benefit Zone
Benefit Zone No.	Total Deficit Parking Demand	Maintenance Budget	Reserve Fund Transfer	Assessment Revenue	Assessment Per Deficit Space
1	94.69	$2,163.84	$363.24	$1,800.60	$19.02
2	172.37	$20,011.13	$3,359.25	$16,651.88	$96.60
3	2,094.65	$138,723.28	$23,287.32	$115,435.96	$55.11
4	645.81	$23,282.75	$3,908.45	$19,374.30	$30.00
Total	3,007.52	$184,181.00	$30,918.26	$153,262.74

Process

There are four recommended actions that the City Council must take to give the City the necessary authority to levy and collect the assessment for public parking facilities from property owners within the Downtown Parking Maintenance District:

1.    Adopt a Resolution of Intention to levy and collect the Parking Assessment (attachment A).

2.    Approve the Preliminary Engineer’s Report (attachment B).

3.    Set the July 13, 2004 City Council meeting for public hearing on the assessment.

4.    Authorize the mailing of a Notice of Proposed Assessment and ballots to all Downtown Parking Maintenance District property owners.

Should the City Council adopt the Resolution of Intention to levy and collect the assessment and approve the Preliminary Engineer’s Report, ballots will be mailed to property owners. Property owners will have a minimum of 45 days to submit their ballots and City Council action could occur at a public hearing on July 13, 2004.

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.

FISCAL IMPACT

Approval of the operation and maintenance component of the recommended assessment will generate approximately $153,000 in revenue per fiscal year. The budget for maintaining the parking lots is estimated at $177,485 for FY 2004-05 and $184,181 for FY 2005-06.  There are sufficient reserve funds in the Parking Maintenance District fund to offset a shortfall for Fiscal Years 2004-05 and 2005-06.

PUBLIC CONTACT

On May 4, 2004, a memorandum regarding the public hearing was sent to all property owners within the Parking District boundaries.  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, and the availability of the report in the Library and the City Clerk’s Office.

ALTERNATIVES

1.    Take four actions to give the City the necessary authority to levy and collect the assessment for public parking facilities from property owners within the Downtown Parking Maintenance District::

Ø        Adopt a Resolution of Intention

Ø        Approve the Preliminary Engineer’s report

Ø        Set the July 13, 2004 City Council meeting for the required public hearing

Ø        Authorize the mailing of Notice of Proposed Assessment and ballots

2.    Take no action.

RECOMMENDATION 

Staff recommends alternative #1.

Prepared by:

Connie Verceles
Business Development Manager 

Reviewed by:

Karen L. Davis
Economic Development Manager

Robert Paternoster
Director, Community Development

Reviewed by:

Mary Bradley
Director, Finance

Approved by:

Amy Chan
City Manager

Attachments

A. Resolution of intent to levy and collect the assessment for the Downtown Parking Maintenance District

B. Preliminary Engineer’s Report (pdf format)