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 May 30, 2006

SUBJECT:     Resolution of Intention to Levy and Collect Assessment for the Downtown Parking Maintenance District and Approval of the Preliminary Engineer's Report.

REPORT IN BRIEF

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.  The district allows property owners to develop or redevelop their properties without providing on-site parking to support their development. 

Staff is recommending that 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 2006/07 and 2007/08.  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.    

BACKGROUND

The Downtown Parking Maintenance District consists of approximately 70 parcels in the downtown area.  Over 90% of the parking maintenance district consists of commercial uses.  The City is the legal owner of the parking lots.

On September 1, 1964, the City Council adopted Resolution No. 6643, which authorized the City of Sunnyvale to levy an ad-valorem assessment on all taxable properties within the boundaries of the Sunnyvale Downtown Parking Maintenance District.  This ad-valorem assessment was used to pay for the operation and maintenance of existing public parking facilities and the debt service payment associated with the acquisition and construction of various public-parking facilities within the boundaries of the Sunnyvale Downtown Parking Maintenance District.  The bonds for the debt service were completely retired in Fiscal Year (FY) 2003/04.  Property owners with a parking deficit are now assessed for only the maintenance costs of the parking lots.  

On November 5, 1996, California voters approved Proposition 218, entitled “Right to Vote on Taxes Act”.  While its title refers only to taxes, Proposition 218 established new procedural requirements for the formation and administration of assessment districts. The City can no longer levy an assessment, based upon each parcel’s assessed valuation (ad-valorem), to fund the annual operation and maintenance of parking facilities.  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 requirement applies to any assessment made for the Downtown Parking Maintenance District after FY 1997/98.  The benefit assessment affects only maintenance and operation and not any other functions. 

Property owners within the district receive a special and direct benefit from the existence of the district lots and the maintenance thereof.  The district allows property owners to maximize development capabilities for their parcels (e.g. 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 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 to 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

Historically, the City has held an assessment vote for a one-year or two-year period.  Property owners approved the current assessment on July 13, 2004.  This assessment was for FY 2004/05 and FY 2005/06 and will expire on June 30, 2006.  The City has been able to maintain the same level of service and not increase the assessment rate since FY 2001/02 by using the reserves in the Parking District Fund to augment the assessment levied to property owners.  The projected balance in the Parking District Fund will be about $311,559 at the beginning of Fiscal Year 2006/07. 

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 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), staff is proposing that the City use the same geographically determined benefit zones used in the last four assessments (refer to maps in Attachments B and C).  Three property owners, with a parking deficit of 61 parking spaces, in Zone 1 will not be assessed due to the Mall developer 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. 

Downtown business owners have completed a feasibility study to determine if   they want to pursue forming a Business Improvement District (BID).  Based on the workshops held for the feasibility study, participants felt that maintenance of the parking district should not be incorporated into the BID.  The participants felt that the BID should focus on promotion of the downtown, special events, and keeping Murphy Avenue attractive.  The Sunnyvale Downtown Association has reviewed the results of the feasibility study and has requested funding for formation of a BID.  Council will be hearing this request later in the year.

The Long Term Financial Plan for the Parking District Fund included in the recommended FY 2006/07 Budget assumed a Property based Business Improvement District (P/BID) would be formed and assumed that the reserves in the Parking District Fund would be rapidly drawn down.  If the district is not replaced by a P/BID by FY 2011/12, an increase of 50% in the assessment will be required at that time to maintain the current level of service.  Staff has since learned that business owners interested in forming a BID do not want to include maintenance of the district lots in a BID.  Therefore, staff revised the Long Term Financial Plan (see Attachment E) to extend the use of the district reserves over a 20 year period.  Staff was not able to share this scenario with the property owners prior to submitting this report. 

Based on the revised Long Term Financial Plan, the City will have to increase the assessment by approximately nine percent (9%) every two years beginning FY 2006/07 through FY 2021/22 and slightly less thereafter.  

Based on discussions with property owners, staff also prepared a version of the Long Term Financial Plan which includes the idea of a five-year assessment (see Attachment F). Based this Long Term Financial Plan, the City will have to increase the assessment by approximately six percent (6%) for FY 2006/07 through 2010/11 and about double thereafter.

If the City moves forward with multiple two-year assessments for FY 2006/07 through 2010/11, the projected cost to manage the district and do the assessment votes (every two years) would total about $95,200 over a five year period.  This includes $43,800 for the engineer to prepare reports needed for the assessment votes, verify the uses, and put the assessment on the County tax rolls.  It also includes $51,400 for administration costs to manage the assessment votes.  If however, the City was to do one five-year assessment for FY 2006/07 through 2010/11, the projected cost to manage the district and put the assessment on the County tax roll would be about $63,700 over a five year period.  This approach includes $31,200 for the engineer to put the assessment on the County tax rolls and $32,500 for administration costs.  A five-year assessment would realize a cost savings of $31,500 to property owners over a five year period. 

On March 17, 2006, staff mailed informational letters to each property owner explaining the proposed assessment methodology. Specific information regarding the assessment methodology, 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 directly to the parking engineer, Joe Francisco, of Francisco & Associates, Inc.  All 56 property owners were invited to attend a meeting on March 30, 2006.  Two property owners and one property manager (representing several properties) attended the meeting.  Staff presented historical information on the current two-year assessment.  The idea of doing a five-year assessment was also discussed; this would involve a 10% increase and the assessment rate would remain the same for five years.  

If Council approves a two-year assessment based on depleting the reserves in the Parking District Fund over the next 20 years, the assessment rates per deficit parking space for each benefit zone are summarized below in tables 1 and 2 respectively.

If Council approves a five-year assessment based on depleting the reserves in the Parking District Fund over the next 20 years, the assessment rates per deficit parking space per benefit zone are summarized below in tables 1 through 5 respectively.