TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Steve S. Charelian, Finance Director
Julie Bondarchuk, Financial Controller
Marcelo Serrano, Budget and Financial Analyst
SUBJECT:Title
Conduct Public Hearing for the Storm Drain Fee Increase and Tabulate the Protest Notices (Finance Director Charelian).
(Estimated Time: 30 Mins.)
A) CONDUCT PUBLIC HEARING AND TABULATION
B) ADOPT RESOLUTION 23-0149 CALLING A SPECIAL MAIL BALLOT ELECTION, SET BALLOT DEADLINE TO JANUARY 5, 2024, AND ADOPT PROCEDURES FOR CONDUCT OF ELECTION
Body
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RECOMMENDATION:
Staff recommends that the City Council:
A. Conduct Public Hearing and tabulation of the protest notices;
B. Consider the protest notices submitted to the City Clerk to determine whether a majority protest exists; and
C. If a majority protest does not exist, then consider adopting resolution 23-0149 to:
1. Call a special mail ballot election;
2. Set the ballot deadline to Friday, January 5, 2024 with ballot tabulation to commence on Monday, January 8, 2024;
3. Adopt procedures for conduct of election.
FISCAL IMPLICATIONS:
The Stormwater Fund operates on a deficit and has required General Fund subsidies since Fiscal Year (FY) 2015-2016. Storm drain fees have not been increased since the program’s inception in 1996 with single-family residences paying a fixed rate of $19.12 annually. Stormwater Fund revenues totaled $388,000 in FY 2022-2023 with estimated operating expenditures totaling $1.07 million, excluding capital projects. With additional Stormwater and Safe Clean Water Program projects looming on the horizon, if no action is taken, then the General Fund will continue to subsidize the Stromwater Fund. The impact of the subsidies may result in a reduction of General Fund balance and resources available for services like Police, Fire, Parks and Recreation and other services.
A Proposition 218 process is required to increase storm drain fees. If passed, new fees for the average single-family resident will total approximately $129 annually and provide about $2.0 million of annual revenue to the Fund during the first year of implementation. Annual Consumer Price Index (CPI) adjustments will be applied to subsequent years ensuring that the fund balance will keep pace with inflationary pressures.
BACKGROUND:
On April 2, 2023, Finance staff presented a report on Revenue Enhancements to the Finance Subcommittee (FSC). The report identified the Stormwater Fund as an enterprise fund that requires attention. Ideally, enterprise funds should be self-sustaining, with incoming revenues covering outgoing costs. However, the Stormwater Fund has been operating at a deficit for many years and has required over $6 million of General Fund subsidies over the past five years. An additional $11.6 million of General Fund subsidies is projected for the next six years with $8.35 million attributed to capital projects. A list of capital projects in the Stormwater Fund is attached to this report.
While it is not unusual for cities to subsidize certain fees or operations, the amount of General Fund subsidies projected for the Stormwater Fund continues to increase annually and has the potential to crowd out funding for General Fund services. Although the General Fund is structurally balanced with reoccurring revenues covering reoccurring expenditures, the transfers out are projected to wipe out the unreserved General Fund balance in the next couple of years. Services funded by the General Fund may be impacted or the City may have to defer capital projects to balance future budget years. During the meeting, the Finance Subcommittee recommended staff move forward to City Council with a consideration for a proposed storm drain fee increase.
On May 16, 2023, staff presented a report to City Council on the status of the Stormwater Fund and its negative effect on the General Fund. The report also highlighted options for proceeding with a process to raise storm drain fees. City Council approved going forward with obtaining an engineer’s report with updated rates and conducting a survey to poll constituent sentiment on a proposed storm drain fee increase.
On September 5, 2023, staff presented a report with an engineer’s report with updated rates along with the results of a survey that measured citizen support for a potential increase to the City’s storm drain fees. City Council approved initiating a Proposition 218 process, authorizing the mailing of protest notices and setting a Public Hearing Date for the proposed storm drain fee for November 7, 2023.
DISCUSSION:
The purpose of tonight’s Public Hearing is to tabulate protests received during the set protest period and determine whether a majority protest exists. As of October 31, 2023, a total of 1,471 protests have been received. With 13,012 notices mailed to all Manhattan Beach parcel owners on record, more than 6,506 protest notices are needed to establish a majority protest. The updated number of protests will be provided at the end of the November 7, 2023, Public Hearing. At the time, if no majority protest exists, then City Council can consider adopting resolution 23-0149 to:
1. Call a special mail ballot election;
2. Set the ballot deadline to January 5, 2024, with ballot tabulation to commence January 8, 2024;
3. Adopt procedures for conduct of election.
The voting period requires a minimum of 45 days from this Public Hearing. Setting the ballot deadline to January 5, 2024, gives property owners approximately 60 days to consider their vote and submit a ballot. A majority vote (50% plus one) is required for the proposed storm drain fee increase to be successful. A resolution declaring the results of the special mailed ballot election will be brought to the Council for adoption at its January 16, 2024 meeting.
PUBLIC OUTREACH:
On September 22, 2023, notices of this Public Hearing were mailed to all property owners within the City of Manhattan Beach regarding a proposed increase to the City’s storm drain fee. The notices contained information about the proposed storm drain fee and the Public Hearing along with instructions on how to protest the proposed storm drain fee. A City webpage has been set-up for informational material about the proposed storm drain fee and the Communications Division sent out an E-notification with a link to the webpage on September 27, 2023. Additionally, notification of this hearing was published in The Beach Reporter on October 19 and 26, 2023.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. Resolution No. 23-0149
2. Procedures for Conduct of an Election - Increase of Storm Drain Fees
3. Stormwater Fund Projects
4. PowerPoint Presentation