TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Steve S. Charelian, Finance Director
Julie Bondarchuk, Financial Controller
SUBJECT:Title
Consideration of a Resolution Certifying the Results of Proposition 218 Special Mailed Ballot Election and Introducing an Ordinance to Adjust the Storm Drain Fees (Finance Director Charelian).
(Estimated Time: 30 Mins.)
A) ADOPT RESOLUTION NO. 24-0010
B) INTRODUCE ORDINANCE NO. 24-0003
Body
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RECOMMENDATION:
Staff recommends that the City Council adopt Resolution No. 24-0010 certifying the results of the Proposition 218 special mailed ballot election that concluded on January 17, 2024, and introduce Ordinance No. 24-0003 to adjust the storm drain fees.
FISCAL IMPLICATIONS:
The Stormwater Fund generates about $350,000 in revenue annually and currently operates at a deficit. By adjusting the storm drain fees, the Stormwater Fund is able to generate approximately $2.1 million in the first year with the option to increase fees by consumer price index (CPI) thereafter. This allows the Stormwater Fund to achieve a structurally balanced budget, alleviating the need for General Fund subsidies.
BACKGROUND:
On April 16, 1996, the City adopted Ordinance No. 1945, which created a separate enterprise fund (Stormwater Fund) for the storm drain program and established a storm drain fee in order to provide a secure funding source for storm water operations, maintenance, and capital improvements. The program includes flood management, compliance with clean water requirements, and design and construction of capital infrastructure. Storm drain fees are paid by property owners and have not been increased since the program’s inception in 1996. Single-family residential (SFR) property owners paid a fixed fee of $19.12 per year. The County of Los Angeles collects the storm drain fee each fiscal year on the consolidated property tax bill. Stormwater Fund revenues totaled $388,000 in FY 2022-2023 with estimated operating expenditures totaling $1.1 million, excluding capital projects.
On April 2, 2023, Finance staff presented a report on Revenue Enhancements to the Finance Subcommittee (FSC) as part of the City Council Work Plan. 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 $6.0 million of General Fund subsidies over the past five years. An additional $11.6 million of General Fund subsidies was projected for the next six years with $8.4 million attributed to capital projects.
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, transfers out were 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 staff 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 adopted Resolution No. 23-0118 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.
On November 7, 2023, City Council conducted a public hearing to tabulate the protest notices. To qualify as a majority protest, 6,506 protest notices were needed. Since only 1,628 protest notices were received, City Council adopted resolution 23-0149 calling for a special mailed ballot election, setting the ballot deadline to January 17, 2024, and adopting the Procedures for Conduct of Election.
On November 21, 2023, City Council adopted Resolution No. 23-0158 to finalize the special election ballot question to enhance transparency and simplify election procedures to remove the requirement of a signature line on the ballot envelope.
On December 19, 2023, City Council adopted Resolution No. 23-0555 in support of the storm drain measure. This resolution passed City Council with a vote of 5-0.
On January 16, 2024, City Council adopted Resolution No. 24-0055 delegating authority to the City Manager to execute ballots for City owned parcels in accordance with Resolution No. 23-0555. As a property owner, the City is not exempt from the storm drain fees; now that the voters have voted to increase storm drain fees, the City’s required fee is $73,949 in the first year.
DISCUSSION:
A total of 13,103 ballots were sent to every parcel owner as part of this special mailed ballot election. The City Clerk’s office received 5,368 ballots before the 5:00 pm deadline on January 17, 2024.
To ensure impartiality and transparency, the ballot tabulation was conducted by Harris and Associates on January 23 and January 24, 2024. The ballot count process took two days, with the final ballot count concluding with 52.65% (2,795) in support of the measure and 47.35% (2,514) opposed to the measure.
With the measure successfully passing, staff recommends that the City Council adopt Resolution No. 24-0010 to certify the results of the election and introduce Ordinance No. 24-0003 to adjust the storm drain fees.
Taxpayer Protection and Government Accountability Act
Please note that a measure titled the “Taxpayer Protection and Government Accountability Act,” also known as the “California Business Roundtable (CBRT) measure,” has qualified for the November 2024 election ballot. If adopted by California voters, it may have an impact on certain fees imposed or increased after January 1, 2022, including the increased storm drain fees.
In September 2023, California Governor Gavin Newsom and the State Legislature filed an Emergency Petition for Writ of Mandate with the California Supreme Court asserting that the CBRT measure is an unlawful attempt to revise the California Constitution and would impede the government’s ability to provide the essential functions of government. The writ seeks the removal of the CBRT measure from the November 2024 Statewide general election. On November 29, 2023, the California Supreme Court granted a hearing. At this time, a date for a hearing has not been set.
Additionally, the League of California Cities sponsored legislation titled Assembly Constitutional Amendment 13 (ACA 13) which has also qualified for the November 2024 election. ACA 13 would require future ballot measures that increase voter approval requirements to also pass by the same margin. Therefore, if ACA 13 is passed by voters and the CBRT measure does not garner a supermajority (two-thirds) vote at the November 2024 election, the CBRT measure would not pass.
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. 24-0010
2. Ordinance No. 24-0003
3. PowerPoint Presentation