History of the Assessment District
The Point San Pedro Road Median Landscaping District was formed in 2011/12 to generate revenue to reconstruct, repair and maintain the 29 medians islands along Point San Pedro Road from Union Street to Biscayne Drive. Residents living within Assessment District boundaries voted to assess themselves an annual fee which is used to fund debt service on a loan with the City to pay for the initial capital improvements of reconstructing the medians and to fund the annual ongoing operations and maintenance of the medians.
Since the median improvements were completed, the Point San Pedro Road Coalition’s Roadway Committee has served as a “citizen’s oversight” committee, working with City staff to ensure the medians are properly maintained and to review and comment upon any planned changes to the annual assessment prior to presentation to the San Rafael City Council.
The new medians installed in 2012 were a significant aesthetic improvement over the previous medians which had fallen into a state of disrepair. However, since the creation of the Assessment District, there have been a number of maintenance issues with the medians, including oversight of the maintenance contractor, issues with the soil conditions affecting plant growth on some of the medians, broken or damaged irrigation lines affecting the appropriate levels of watering, delayed replacement and removal of dead or dying plants and litter removal.
In the last three years, the Roadway Committee has made considerable progress dealing with these issues, much of that due to a greatly improved working relationship with City staff. For example, last summer we worked with the City to have the contractor double the maintenance performed on the medians March – October to better meet the community’s standards for the medians. Additionally, in the past several months, because of the historic rainfall during the winter and early spring months there was a problem with weed growth in the medians. We are working with City staff to ensure that their contractor deals with this issue.
History of Assessment District Financing
All Point San Pedro Road Median Landscaping Assessment District fees collected are legally restricted for use on the medians and cannot be used for any other purpose. Revenues and expenses for the assessment district are maintained in their own, separated City fund. The annual assessment fee is comprised of two parts:
- the debt service part which pays for the initial construction costs of updating medians, installing the irrigation system and the initial plantings, and
- the annual cost to maintain the medians which includes City’s hiring of a weekly landscaping maintenance contractor, water and electrical costs and City and County fees.
The initial assessment to cover these costs was first implemented in 2011/12 fiscal year. The assessment amount was based on an engineer’s estimate at the time of the annual debt service for the median improvements cost ($46.06) and the cost for maintaining the medians ($28.94) for a total of $75. The annual debt service was adjusted in 2013/14 when the City decided to fund that expense as a loan rather to take on a bond obligation. The Annual Debt Service is based on the 20-year Debt Service schedule outlined in the Annual Engineer’s Report. The Annual Debt Service assessment is relatively constant and is set at approximately $52.77 annually per parcel with some minor $0.01-$0.04 fluctuations year-over-year. Note that this debt service is not assessed on those parcels that chose to prepay their debt obligation when the Assessment District was first formed.
The initial Operations and Maintenance portion of the assessment in fiscal year 2011/12 was $28.94 per parcel. By fiscal year 2018/19, it was set at $31.21 per parcel to attempt to keep up with costs of maintaining the medians that was outpacing the revenues generated annually from the Operations and Maintenance portion of the assessment. Thus, the total assessment for 2018/19 was $83.98. Note that for parcels that had chosen in 2011/12 to pre-pay their full debt service obligation, their assessment was $31.21. The applicable assessments for debt service and annual maintenance are placed on the parcel’s property tax bill each year.
Assessment District Rate Calculations
The voter-approved Assessment Agreement defines the “Combined Annual Assessment Rate” as the annual debt service plus operations and maintenance costs. This rate can be increased annually by the local consumer price index (LCPI) or three percent per year, whichever is higher. This is defined as the “Maximum Allowable Annual Assessment Rate”. The LCPI is determined by the Federal Bureau of Labor Statistics and can be found on their website for the San Francisco-Oakland-Hayward local area.
If the assessment is not increased by the maximum allowable amount, any remaining unused portion of that increase can be carried forward and used in future years. Each year, the Engineer’s Report states the maximum allowable rate (even if it is not the rate being levied the coming year). For example, in fiscal year 2018/19, the maximum allowable rate was $92.88, however the Annual Assessment Rate levied was $83.98. Thus, the difference of $8.90 can be carried forward and applied to some future fiscal year.
The calculation of the allowable maximum annual assessment increase is based on the sum of the fixed Annual Debt Service and the previous year’s Maximum Allowable Annual Maintenance Rate. The amount that is calculated by multiplying that sum by 3% or the Local Consumer Price Index, whichever is higher, is added to any existing accrued previous years’ unused allowable increases. This total defines the actual maximum allowable increase that can be added to the previous year’s Maintenance Assessment.
Thus, the sum of the fixed Annual Debt Service and this maximum allowable Maintenance Assessment becomes the new Maximum Allowable Assessment amount. The actual assessment amount levied may be equal to, or less than, this amount. If it is less than this amount, the remainder becomes the carry-forward amount that can be applied to future annual assessments. This methodology has been utilized since the inception of the Medians Landscaping District and based on the language in the initial 2011/12 Engineer’s Report, the June 2011 San Rafael City Council Resolution, and subsequent documentation.
The spreadsheet at the end of this report documents the calculations that have been used in past years and will be used in this upcoming fiscal year 2019/20 and all future years. It demonstrates that all of the unused, accrued increases will be utilized in this fiscal year.
Current Assessment District Financial Situation
Since the re-setting of the assessment amount in 2013/14 and for the following four fiscal years, the Roadway Committee did not recommend that the annual assessment fee be raised because we wanted to work with the City to get a better handle on issues and actual costs associated with maintaining the medians to a standard that meets the community’s expectations. However, as the cost and frequency of maintenance has increased in the past several years to meet the community’s expectations, the annual assessment fee increasingly fell short of need expenses, and funds from the Operating Reserve Fund account were increasingly required to be used.
Last year, with our knowledge and experience in maintaining the medians at a standard acceptable to the community and the City, we adopted a strategy of applying an annual increase to the assessment fee so that revenues can begin to meet the actual costs of maintaining the medians. All raises were calculated so as not to exceed allowable maximum annual assessment rates permitted by the regulations of the Medians Assessment District as described earlier.
This month, the City received new contract bids for maintaining the medians for the coming fiscal year 2019/20. The low bid was $20,000 above what the City is paying its current median maintenance contractor. Because of this situation, the Roadway Committee and the City has had to reassess its financial plan for moving forward. In order to cover this additional cost, we are now proposing to reduce the landscaping rehabilitation and repair portion of the budget by 50% ($10,000) and increase the current assessment by $12.90. This entire increase is to be used to fund only maintenance activities. As a result, the proposal is for a debt service assessment of $52.78 (fixed and unchanged) and an annual maintenance assessment of $44.10.
It is important to note that the new maintenance contract is for one year with the City holding the option to extend the contract for an additional two two-year terms. This provision provides cost control over the next five years and avoids the situation where the contract is bid out at the end of each year and unexpectedly higher bids are received.
The Roadway Committee’s goal is to arrive at a point where the annual assessment fees cover the debt service and maintenance cost. Even with the increase in fees and the reduction in budgeted costs, Assessment District expenses will exceed revenues by about $11,000 this coming fiscal year which will be paid from the Operating Reserve Fund. As a result, it was decided to recommend the utilization of all previously carried-forward rate amounts and apply them to the 2019/20 assessment. Hence, the recommendation of the $12.90 increase.
For Fiscal Years 2020/21 and 2021/22 maintenance assessment fees would increase by three percent, $2.91 and $2.99, or slightly higher if the Local Consumer Price Index (LCPI) is above three percent. This is due to the fact that all previous carry-forward rate increase amounts were utilized in the 2019/20 rate increase.
Commencing in fiscal year 2022/23, with an annual increase of three percent or LCPI, the assessment is expected to cover the annual debt service and maintenance costs, and we will then be able to begin building a reserve that will allow the Assessment District to fund a capital replacement reserve to replace the irrigation equipment once they reach the end of their useful life.