City Council Meeting: March 25,
2008
Agenda Item: 7-H
To: Mayor and City Council
From: Andy Agle, Director of Housing and
Economic Development
Subject: Downtown Management Plan and Introduction
of an Ordinance Modifying State Requirements to Lower the Petition Threshold
and Extend the Term of the District
Recommended
Action
Staff
recommends the City Council and Redevelopment Agency:
1) Review and accept the
recommendations of the Downtown Management Plan;
2)
Authorize the City Manager and Executive Director to sign the petition on behalf of Agency and City-owned properties
within the District which represents 10.1% of the total proposed assessment.
3)
Introduce for first reading an Ordinance adopting local modifications to the
method of levying assessments pursuant to the Property and Business Improvement
District Law of 1994 to allow the Formation of a District for a maximum of 30
years.
Executive
Summary
On January 22, 2008, a study
session was held to update Council on the progress made in refining the
Downtown Management Framework originally considered by Council in April 2007, and to receive direction on
policy decisions pertaining to the establishment of a new property based
assessment district (PBAD). Following the input from Council at the study
session and a subsequent series of public workshops, the working group refined
the draft plan and tonight presents the final version of the Downtown Management
Plan for Council’s consideration and approval (Attachment 1).
If Council is supportive of the
finalized Downtown Management Plan and the working group’s recommendation to
form a new property based assessment district, Council is asked to authorize
the City Manager and Redevelopment Agency Executive Director to sign the
petition on behalf of the City and Agency owned-property in the district. The
signing of the petition is not a vote for the formation of the PBAD, but an
expression of support for placing the question of forming an assessment
district on a ballot for a vote by property owners. At least 50% of the ballots
cast, weighted by assessment, must be in support of the District in order for
the District to be formed. The petition
process is a prerequisite for a ballot vote.
On February 19, 2008, Council
directed the preparation of an ordinance altering the state law requirements as
to the threshold for initiating a petition and as to the duration of the
assessment term. The request was in support of the Working Group’s
recommendations at that time. The
attached Management Plan calls for a 20-year term with an affirmative vote
required at the tenth year, and maintaining a petition threshold of 50%.
Properties owned by the City and
Agency are estimated to be assessed approximately $362,797 per year which
represent approximately 10.1% of the total assessments in the proposed
District.
Background
On January 22, 2008 Council conducted a study session to discuss
“Managing the Future of Downtown Santa Monica Project Update”, prepared by
Progressive Urban Management Associates, Inc. and Kristin Lowell, Inc. The draft management plan recommended the
creation of a new Property Based Assessment District (PBAD); the elimination of
the Central Business District assessment; a new governance structure and
boundary of the district; and a change in the City’s practice of granting
operating revenues to the Bayside Improvement District. The draft Management
Plan also recommended that the PBAD would fund new initiatives including
enhanced maintenance of the downtown area, additional marketing, homeless
outreach, and the establishment of an Ambassador program.
Council provided feedback on the draft Management Plan, including
a discussion on board composition; the function of the Ambassadors; maintenance
programs and the City’s control of public space; methodology of determining
assessment for City/Agency-owned properties; potential impacts to residential
tenants; linkage of this process to the Land Use update; and the need for
additional input from residents and the community at large.
On February 19, 2008, Council directed the
City Attorney to return with the attached draft ordinance for Council
consideration that would (1) establish the threshold percentage of owners of
properties to initiate a ballot measure on the formation of a Property Based
Assessment District, and (2) establish the term of a Property Based Assessment
District. Council did not specify a
threshold percentage, or duration of the term. The
Management Plan endorsed by the Bayside Board and the working group calls for
maintaining the 50% petition threshold, and extending the duration to a twenty
year term with an affirmation vote at year ten. Staff
recommends extending the duration of an assessment district from five years
with a 10 year renewal to up to 30 years.
Council may modify this proposed ordinance. At the
February 19th meeting, Council also requested
additional information on assessments of non-profits within the district.
Discussion
Based
on the input provided by Council, the working group continued to refine the
Management Plan. The Bayside District Corporation staff conducted two
additional property owner and resident workshops on Feb 12th, met
with groups from the hospitality industry, non-profit corporations, and held
several one-on-one meetings with property owners and businesses to share the
draft plan and to receive feedback. An on-line survey was also launched asking
participants to rate what downtown programs and improvements they would find
most beneficial (Attachment 3).
Following
Council’s direction and input from the public, the working group has
incorporated the following revisions to the Management Plan:
·
Size
of Board: The working group endorsed reducing the number of board
members from 15 to 13 members. It is proposed that six members be appointed by
the City Council, six by the property owners and one by the City Manager. This
is similar to the CVB model of governance which was favored by Council at its
April 24, 2007 review of the Framework.
·
Maintenance: The City and Bayside will work
collaboratively to manage the existing and enhanced maintenance in Downtown in
a manner to be prescribed through an amendment to the Services Agreement
between the City and BDC. The City and BDC staff has worked with the working
group to consider in detail the established current level of services and how
the additional resources of $1.3 million from a new PBAD could supplement the
current base level of maintenance services in the PBAD area in a way that is
cost neutral to the City. Examples of
supplemental services include using PBAD funds to pay for deep cleaning of the
alleys, above what is already provided by the City. An earlier proposal for
dividing maintenance responsibility by geographic areas has been dropped.
Should private services be utilized in providing enhanced maintenance services
to public areas, the City will need to amend the indemnification relationship
between the City and BDC as set forth in the Services Agreement to address
liability issues as the City maintains control of the public space.
§
Duration
of the PBAD: There was consensus of the working group that
the term of the PBAD should exceed five years. The initial recommendation was
for a thirty (30) year term to provide property owners in the District the
potential to bond for fund future improvements. Following input from
stakeholders who were concerned about the term of the District, the working
group endorsed a twenty year (20) term, subject to property-owner
re-affirmation vote after ten years. The proposed ordinance would allow for
creation of districts for up to 30 years. A longer term allows the district to
sell bonds at some future time, subject to voter approval consistent with
Proposition 218.
§
Ambassadors: The
working group confirmed the Ambassadors’ role as hospitality providers and
‘eyes on the street’ and supports the City Council and Santa Monica Police
Department’s directive that the Ambassadors have no expressed or implied police
powers. Ambassadors would provide the public with
concierge/information services and would also include restroom attendants who
are currently funded by the City on a pilot basis. Costs to run an Ambassadors
Program seven days a week for approximately 15 hours per day is estimated to be
$1.2 million annually and would be funded exclusively by the PBAD.
§
Boundary: The
proposed PBAD boundary includes properties bounded by
§
Assessment
Formula: Assessment for Zone 1 (area receiving most benefit) is
estimated to be $0.80 per lot square foot or building square foot (whichever is
greater). Assessments in Zone 2 and Zone 3 would be $0.40 and $0.20
respectively per lot square foot or building square foot (whichever is
greater). The reduced rate reflects the differences in benefits and frequency of
services to the respective zones.
Residential, governmental and tax-exempt properties in Zone 1, 2 and
Zone 3 will pay only for maintenance and ambassador programs and will have an
adjusted annual assessment rate of $0.542, $0.271 and $0.135 respectively per
lot square foot or building square foot (whichever is greater). City-owned Parking Structures Nos. 1 through
10 will be assessed at the rate of $0.135 per square foot. There will be some
assessments on property the City leases from private property owners that may
be passed through to the City in accordance with individual lease
agreements. A listing of assessments for
City and Agency-owned properties is shown on Attachment 5.
§
Rent-Stabilized
Units: There are 22 properties with approximately 763 billable
units within the proposed district that have rent controlled units. Property owners of rent controlled units who
wanted to pass the assessment through to their tenants would need to apply to
the Rent Control Board. In making its decision, the Rent Control Board could
take into consideration that the tenants did not have a vote in formation of
the assessment district and could reject any request to pass-through the
assessment.
§
Other
Residential Units: There are other residential units in the district
that may not be subject to rent stabilization regulations including market rate
units, Inclusionary units and other deed restricted units. These properties
would be assessed at the residential/tax exempt rate of $0.542, $0.271 and
$0.135 in Zones 1, 2 and 3 respectively.
§
Non
Profit Organizations: There are approximately 20
non-profit/religious organizations that own property within the proposed
district, including the Salvation Army,
The following
is an overview of other recommendations not discussed above that have been
endorsed by the working group and previously reviewed by Council on January 22,
2008.
Proposed Annual Resources and
Expenditures
Currently, businesses in the Bayside
District pay a Mall Assessment equal to one times the business tax, not to
exceed $23,913.20. This assessment
currently generates about $1,000,000 per year and is revenue to the City’s
general fund which is currently allocated to Bayside in the form of a grant and
additional funding for enhanced contract maintenance services on the Promenade.
In addition, retail businesses
in the Central Business District pay an assessment equal to 1/15th
of 1% of gross sales, not to exceed $1,000. This assessment generates about
$200,000 per year. The City collects these funds and transfers the revenues to
the BDC for their marketing program.
The working group and Bayside
Board endorse:
§
Businesses
continue to pay the Mall Assessment, but that the City agrees to pass through
to the BDC the full amount collected (less administrative fees). Currently,
about 80 percent of the funds are transferred to the BDC via a City grant, with
the remaining 20 percent held by the City to use for supplemental Bayside
maintenance needs. Revenues from the Mall Assessment would continue to fund BDC
activities and programs, including administration.
§
Provided
that the PBAD is formed, it is the intention of the Management Plan that the
Mall Assessment be reduced and its boundary be expanded to include
§
The
City discontinue Central Business District assessment.
To replace the Central Business
District assessment and to generate additional revenue for enhanced services,
the working group recommends establishment of a new property-based assessment
from properties within an area shown on Attachment 4. This PBAD would generate
approximately $3.6 million for additional services in the expanded area, as
described below:
Enhanced
Maintenance $1,289,000
Ambassador
Program $1,228,000
Marketing
Enhancements $ 400,000
Special
Projects $ 350,000
Administration $ 336,700
Total $3,593,700
The Petition Process
The City/Agency properties represent
approximately 10.1% of the total assessments as currently proposed and are
estimated to be approximately $362,797 for the first year. Should Council adopt
an ordinance that provides for a lower petition threshold than 50%, staff
recommends that the City Manager be authorized to sign the petition only after
the threshold is reached by non City-owned properties. This will allow the
private sector to demonstrate their support of the PBAD petition. Should the
Council maintain the 50% threshold, and if Council is supportive of the
finalized Management Plan and the working group’s recommendation to form a new
property based assessment district, Council is asked to authorize the City
Manager and Executive Director of the Redevelopment Agency to sign the petition
on behalf of City and Agency owned properties within the District.
Ballot Vote
Under the proposed scenario, if the petition meets the requirements of
the ordinance to initiate the special assessment proceedings, the City will
prepare and mail out ballots to all property owners within the proposed
District to vote on whether to approve the formation of the PBAD. Proposition
218 requires a property owner ballot vote with no less than 50% of the ballots
received, weighted by assessment, to be in support of the District in order for the District to be formed.
Future Council Actions
With Council support of the
Management Plan, Bayside will initiate the petition process. The working group will gather signatures and
will continue to work to educate other stakeholders through workshops, meetings
and one-on-one discussions.
If the petition
process threshold is reached by early summer 2008, Council will be asked to
hold a public hearing and adopt a Resolution of Intention to form the
Assessment District. Ballots will be mailed to property owners and if approved
by the majority of property owners (at
least 50% weighted by assessment amount), Council will authorize the
creation of the district. Assessments
would be recorded and sent to the Los Angeles County Tax Assessors by its
August 2008 deadline. If the process is not completed in time, assessments will
be levied on the following year’s tax rolls.
Council will be asked to authorize the City Manager and Executive Director of the Redevelopment Agency to vote the City and Agency’s ballots.
Commission Action
The Management Plan was endorsed
by the Bayside District Corporation Board of Directors at its March 5, 2008
meeting.
Financial Impacts & Budget Actions
As
proposed in the Management Plan, the property-based assessment, if adopted,
would increase costs to the City for enhanced services in the District, as
follows:
The
property-based assessment proposes to raise $3.6 million from property-owners
within the District. The City and Redevelopment Agency would be assessed
annually approximately $362,797, or 10.1% of
the proposed assessment assessments will be adjusted somewhat as square
footages are verified. Parking
Structures Nos. 1-10 are owned by the Redevelopment Agency. Their assessments
could be paid for by increases in parking rates. The proposed assessment
represents approximately 3% of the gross revenues from the parking structures.
An amended rate structure will be part of the recommendations to be brought
back to Council as part of the analysis currently underway by Walker Parking
Consultants. Future rate increases to
transient, monthly and in-lieu parking fees are proposed to be used, not only
to fund the new assessment, but to generate funds for reinvestment in existing
structure operations and maintenance, as well as reconstruction and
construction of parking facilities.
The
transfer of 100% of the Mall Assessment of approximately $1,000,000 per year
would include the current $190,000 that is used for the annual supplemental
specialized contract services for maintenance on the Promenade currently
administered by the Community Maintenance Department. To ensure that this
proposal is cost neutral, the development of a cooperative maintenance service
agreement would provide an opportunity either to transfer these supplemental
contract services to the BDC who would fund them through the Mall Assessment,
or by having the City withhold the amount needed for supplemental specialized
contract services and remit the remainder to the BDC. The City would also
retain an administrative fee to cover collection and disbursement costs
associated with the district.
The
Report proposes the elimination of the Central Business District Assessment
(CBD) which currently generates about $200,000 per year which is transferred to
the Bayside District for marketing and promotions. There would be no financial impact to the
City as a result of this action.
Prepared by:
Elana
Buegoff, Sr. Administrative Analyst
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Approved: |
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Forwarded to Council: |
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Andy Agle, Director Housing
and Economic Development |
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P. City Manager |
Attachments:
Attachment 1.
Downtown Management Plan
Attachment 2.
Proposed Ordinance
Attachment 3.
Survey Results
Attachment 4.
Proposed Boundary
Attachment 5.
Estimated Assessment of City Properties