July 18, 2006

SUBJECT:     APPROVAL TO LEVY AND COLLECT AN ASSESSMENT FOR THE DOWNTOWN PARKING MAINTENANCE DISTRICT FOR FY 2006/07 and 2007/08 AND APPROVAL OF THE FINAL ENGINEER’S REPORT. 

REPORT IN BRIEF

On May 30, 2006, Council adopted Resolution No. 214-06 declaring its intention to levy and collect an assessment for the Downtown Parking Maintenance District (District) for Fiscal Years 2006/07and 2007/08, approved the Preliminary Engineer’s Report, and authorized 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.  Today is the last day property owners can submit their ballots for the assessment.

Staff is recommending that Council adopt a Resolution to levy and collect the assessment and approve the Final Engineer’s Report for the District for Fiscal Years 2006/07 and 2007/08.  By adopting the Resolution, Council will give the City the necessary authority to levy and collect the non-ad-valorem assessment from property owners within the District to operate and maintain the public parking lots.

BACKGROUND

The District consists of approximately 73 parcels in the downtown area.  Over 90% of the District consists of commercial uses. 

Beginning in 1964, the City annually levied an assessment for the debt service requirements associated with land acquisition 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 District lots.  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 operations and maintenance costs.

Proposition 218 requires that all affected property owners be given the opportunity to vote either in favor or against the 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.  The District assessment affects only maintenance and operation and not any other functions.  Property owners within the District approved the current maintenance assessment on July 13, 2004.  This assessment was for Fiscal Years 2004/05 and 2005/06 and expired on June 30, 2006.

Property owners within the 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 required 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.

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 retained the firm of Francisco & Associates, Inc. to assist in developing the assessment methodology.  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.  Sunnyvale’s Parking Demand Guidelines are based on the City’s Zoning Code requirements.  The calculation is based upon each parcel’s pro-rata share of the deficit parking spaces.  This methodology is considered the fairest and most equitable way to assess property owners for maintenance of the parking lots.

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.   

Because of the varying size and location of parking facilities located within the District, special benefit zones were established to track the operation and maintenance costs and assess only those properties that benefit from the parking lots located within their respective benefit zone.  All parcels within the boundaries of the District are located within Benefit Zone 1, 2, 3 or 4.  The total cost to operate and maintain the parking facilities within each benefit zone will be spread to each parcel within that benefit zone based upon their proportionate number of deficit parking spaces.  

With the exception of Zone 1 (primarily the Mall), the City will use the same geographically determined benefit zones used in the last four assessments (refer to District map in Attachment B).  Three property owners in Zone 1, with a parking deficit of 61 parking spaces, were not assessed due to the Mall owner maintaining the parking lots as part of the construction project.  Property owners in Zone 1 will be able to use the available lots, but the mall owner will pay for the maintenance and operation of those lots. 

Council approved the Preliminary Engineer’s Report and authorized the mailing of the Notice of Proposed Assessment and ballots to all Downtown Parking Maintenance District property owners.  Ballots were mailed on June 1, 2006 to each property owner explaining the assessment.  Property owners had 45 days to submit their ballots, with City Council final action to occur at the public hearing on July 18, 2006.

Specific information regarding the assessment methodology, the demand for onsite parking, the number of onsite parking spaces, and any respective deficit was provided to each property owner. 

Based upon the annual budget needed to operate and maintain the existing public parking lots for Fiscal Years 2006/07 and 2007/08 the assessment rate, approved by Council, per deficit parking space for each benefit zone is as follows:

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 accept or reject the proposed assessment.

The process for tabulating the District ballots is:

·        Open the public hearing and receive any ballots that were not sent in or hear any protests which have been filed with the City Clerk.

·        The engineer of record will begin tabulating the ballots at the beginning of the public hearing.  If the ballots are tabulated before the end of the public hearing, staff will be able to convey the outcome and Council will be able to take action.

·        If the ballots are not tabulated before the end of the public hearing, Council may take a short break (tabulation should take less than 5 minutes) or continue this item and move on to the next agenda item.  At the conclusion of the agenda item after the tabulation is complete, the Mayor will re-open the item and staff will then report the results of the ballot tabulation and Council can take action. 

If the vote as tabulated is in support of the proposed assessment, the City Council may approve the recommended assessment.  If approved by Council, staff will direct the engineer to forward the assessment to Santa Clara County for collection on the property tax rolls.  

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 2006/07 and FY 2007/08.  Council has several options if the vote is not in favor of the proposed assessment.  Council can direct staff to:

·        Continue funding maintenance of the District with the reserves in the Parking District Fund while another source is identified and direct staff to return to Council with alternative funding sources.

·        Work with property and business owners to renegotiate a plan and return to Council to initiate a new assessment vote.

·        Investigate paid parking programs and return to Council with a paid parking plan

The options listed above will require additional research and will also have a fiscal impact depending on which option Council prefers.  Staff would need about 60 days to return to Council with an implementation plan prior to executing any option listed above. 

FISCAL IMPACT

Approval of the recommended assessment will generate approximately $167,000 in revenue per fiscal year. The budget for maintaining the parking lots is estimated at $196,400 for FY 2006/07 and $213,180 for FY 2007/08.  There are sufficient reserve funds in the Parking Maintenance District Fund to offset a shortfall for Fiscal Years 2006/07 and 2007/08.

If the assessment is not approved, there are not sufficient reserves to maintain the parking lots at the current level of service for FY 2006/07 and 2007/08.  If the vote is not in favor of the assessment, there will be additional costs to the City, including staff time to develop a new plan with paid parking or other revenue-generating options.  If an agreement with property and business owners can be reached for a new assessment, the City will have to hand bill the property owners instead of billing them through the County tax rolls.  Paid parking programs will require an initial investment for equipment.  Parking rates will have to be established to cover the costs for operation and maintenance of equipment in addition to the cost for maintenance of the parking lots. 

Conclusion

If the vote is in support of the assessment, Council will be able to take action to give the City the necessary authority to levy and collect the assessment.  

If the vote is not in support of the assessment, Council will not be able to take action to give the City the necessary authority to levy and collect the assessment.  In this case, staff seeks direction from Council as to how to proceed with funding the cost of maintaining the District parking lots. 

PUBLIC CONTACT

Property owners were notified of the public hearing with their ballot.  Public contact was also made through posting of the agenda on the City’s official notice bulleting 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. If the vote as tabulated is in support of the proposed assessment, adopt the Resolution to levy and collect the assessment for the District for FY 2006/07 and 2007/08, approve the Final Engineer’s Report, and direct staff to instruct engineer to forward the assessment to the County for inclusion on the property tax rolls.   
2. If the vote as tabulated is not in support of the proposed assessment, direct staff to continue maintaining the District lots with the reserves in the Parking District Fund and to investigate paid parking and return to Council with a paid parking plan.
3. If the vote as tabulated is not in support of the proposed assessment, direct staff to continue maintaining the District lots with the reserves in the Parking District Fund and work with property and business owners to renegotiate a plan and return to Council to initiate a new assessment vote. 

RECOMMENDATION

Upon a positive final tabulation of the ballots, staff recommends that Council approve alternative #1:  Adopt the Resolution to levy and collect the assessment for the District for FY 2006/07 and 2007/08, approve the Final Engineer’s Report, and direct staff to instruct engineer to forward the assessment to the County for inclusion on the property tax rolls.  The District lots will continue to be maintained for the next two fiscal years with the costs borne by the benefited property owners. 

Upon a negative result of the ballot tabulation, staff recommends that Council approve alternative #2:  Direct staff to investigate paid parking programs and direct staff to return to Council with a paid parking plan.  It is clearly the obligation of the downtown property owners to provide parking for their tenants.  The District was established as an inexpensive and cost-effective mechanism for those property owners 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 District.  Staff believes that paid parking is the only reasonable alternative if the benefited property owners are unwilling to bear the costs.  For these reasons, if the assessment is not approved, staff would recommend that Council direct staff to investigate paid parking programs to support the maintenance of all District lots.

Reviewed by:

Robert Paternoster Director, Community Development

 Prepared by: Connie Verceles, Business Development Manager

Reviewed by:

Mary Bradley Director, Finance

Approved by:


Amy Chan

City Manager

Attachments

1. Resolution to Levy and Collect the Assessment for the Downtown Parking Maintenance District for FY 2006/07 and 2007/08
2. Final Engineer’s Report