HomeMy WebLinkAbout1997-05-01 City CouncilBUDGET 1997-98
City of Palo Alto
Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE
SERVICES
DATE:MAY 1, 1997 CMR:218:97
SUBJECT:1997-98 BUDGET ISSUES
REOUEST:
This is an informational report and no Council action is required:
The 1997-98 Budget Issues report provides a discussion of programs, projects and issues that
require resource commitments from the General Fund or the Utility Funds. By reviewing
these issues before budget hearings, Council will have additional insight as it makes policy
decisions on how to allocate City resources. .
Several of the items discussed in this report were identified in the 1997-98 Budget Guidelines
approved by the Council this Fall. They include two Council Priorities: traffic management
and safety, and infrastructure. In addition, during the discussion of Budget Guidelines,
Council directed staff to return with a proposal for the long-term financing of the Cubberley
Community Center, and a proposal for the creation of a Family Resource Center. Other areas
identified in the 1997-98 Budget Guidelines were: the impact of Proposition 218, the
implementation of recommendations related to the Utilities Organizational Review, and
funding for stranded costs in the Electric Fund.
This report provides information on programs and issues that merit Council consideration in
the 1997-98 budget process and in the near future. They are:
CM~:218:97
O T_~ortation andTraffic Management
- Local Shuttle System Study
-Bike Locker Improvements
-Depot Improvements and Bike Facility
o ~5.~tsonal Em~lovment ~
-Long-Term Proposal for Cubberley Community Center
-Downtown Urban Design Improvements
-Potential Impacts of Proposition 218
-Internet Master Plan
-Computer Replacement Fund
Issues Impacting the Utility Funds_
- Electric Deregulation
-Utilities Organizational Review
-Los Altos Treatment Plant Site
In addition, there ale.several items that are progressing on timelines which do not allow for
incorporation into the 1997-98 Budget and will be presented to Council during the next
two-year budget or outside of the budget process. These include:
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General Fund Infrastructure Management Plan
Library Master Plan
Public Safety Building
Comprehensive Plan
Downtown Parking Structure
Family Resource Center
~Emergency Management Plan
Certified Unified Program Agency Hazardous Materials Program
Paramedic Master Plan
CMR:218:97 Page 2 of 14
PROGRAMS INCLUDED IN THE CITY
INTEREVI BUDGET
MANAGER’SPROPOSED 1997-98
The following important programs and their associated costs are included in the City
Manager’s 1997-98 Proposed Interim Budget.
Transportation and Traffic Mana~
Loced Shuttle System Study
The 1997-98 proposed budget includes funding of $75,000 for the study of a local bus shuttle
system which would serve Palo Alto residential neighborhoods and other local area
destinations, including commercial areas, transit stations, schools, cultural and social centers.
The objective of the program is to provide Palo Alto residents with a convenient, user
friendly shuttle system that will provide improved mobility to individuals who do not have
access to an automobile and serve as an attractive alternative to the automobile. Working
with Stanford University, the study will examine options including the expansion and/or
extension of Stanford’s Marguerite shuttle service, through appropriate service delivery and
cost sharing arrangements. The study will also provide for the planning anddesign work that
is needed prior to initiating local shuttle service. The components of the study will include:
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A community and.user survey;
Market identification and segmentation;
Routing, frequency and service area alternatives; . ~,
Cost estimates;
Identification of potential funding sources;
Development of a comprehensive long-range plan as well as an initial start-up three
year demonstration plan; and
A list of actions needed to initiate service.
In addition, the study will include development of the necessary technical information and
procedural steps to insure that the results have community understanding and support.. While
the concept of a local shuttle system already enjoys such support, the relatively high
on-going costs associated with the provision ofsuch services will ultimately necessitate
incremental service development as well as trade-otis that will likely not meet all current
expectations.
Bike Loc~
The 1997-98 proposed budget includes $20,000 for a one-yeartrial program to improve the
use of bicycle lockers located throughout the City. The program will include inspecting and
inventorying all bike lockers, and repairing or replacing broken lockers. Inspections will be
¯ conducted on a quarterly basis to assess the condition of the bike lockers. This program will
CM~:218:97 Page 3 of 14.
attempt to improve the usage of bike lockers, thereby encouraging .bike travel as an
alternative method of transportation.
Depot Improvements and Bike Faeili .ty
The 1997-98 proposed budget includes minimal funding to undertake improvements to the
University Avenue Train Depot. These improvements include enhanced tunnel maintenance,
improved signage, and general improvements to landscaping and cleanliness. These
improvements would represent the City’s share of a joint maintenance and improvement
effort for the Depot. In the coming months, staffwill pursue additional ways in which the
City can cooperate with the other agencies involved in the Depot to make it a more
welcoming place.
Staffhas also begun to evaluate the establishment of a staffed bicycle storage facility at the
University Avenue. Depot. Such a facility would provide safe, convenient and reliable
bicycle storage. The goal in constructing the facility would be to increase mass transit
ridership and bicycle usage, which would lead to reductions in vehicle use and traffic
congestion. In addition, a bike storage facility would lend vitality and security to the Depot.
In February 1997, staffreeeived a proposal from a vendor who has successfully undertaken
a similar project in Long Beach. The proposed storage facility would store approximately
150 bicycles during regular commuting hours. The proposal included the provision of
bicycle maintenance, bike rentals and a changing room(s), The proposal estimated the cost
of providing this service would be $200,000. The 1997-98 proposed budget includes funding
of $20,000 as seed money for the City’s eontribntion to such a program. Staffwill pursue
some type of cooperative agreement on joint funding of this facility with other agencies and
the pdyate sector. . -
Seasonal Employment ~ram for the Homeless
Due to the success of the pilot program conducted in 1996-97 (CMR:148:97), staff is
requesting $47,631 in the 1997-98 proposed budget~to continue the Seasonal Employment.
Opportunity Program for the Homeless. This program will consist of two 12-week sessions,
Fall 1997 and Spring 1998, whereemployment will be supplied for low-income homeless
individuals. A total of five participants will be hired in each session. Each participant will
work a 32-hour week and be paid at a rate of $8.00 per hour. Food vouchers, clothing and
bicycle transportation will also be provided. Participants will assist with various
beautification and maintenance projects throughout the City and will be directly supervised
by City staff.
Through the continuation of this program, the City will provide homeless individuals with
opportunities to experience vocational success, increased self-esteem, and improved
prospects for an employable future. Moreover, during the next fiscal year, staffwill begin
CMR:218:97 Page 4 of 14
to develop partnerships with local businesses and the community at-large to provide
increased opportunities for this population. A committee will continue to review and modify
the program to fit the needs of the participants, along with monitoring its cost effectiveness.
-_ ~ -~ -- ’_:r p ¯ _1 _.:__ Cubberley Comm ’maity~gfftt~
As discussed during the 1996-97 budget process, operation of the Cubberley Community
Center has traditionally been funded through the General Fund, primarily via utility users tax
revenues (UUT). In addition to Cubberley, the UUT has helped fund other General Fund
programs including: payments for the Lease and Covenant Not to Develop with the PAUSD;
augmentation of the street and sidewalk repair program; and child care programs. Expenses
traditionally funded by UUT have been growing at a faster rat~ than UUT revenues. With the
1996-97 budget, Council approved a one-year interim measure to deal with the shortfall in
UUT revenues. This included closure of several Cubberley capital projects and funding of
child care programs through other General Fund revenue sources. Staff intends to return
with a recommendation for the long-term operation of the Cubberley Community Center in
a separate staff report at the Community Service Department budget hearing.
Downtown Urban Desitm~
Funding for schematic design of downtown urban design improvements was included in the
1995-96 budget. The goal was to define downtown areas in need of improvement, prioritize
them, propose a schedule for undertaking the improvements, . and identify their costs. The
draft schematic design and priorities for improvements are currently being finalized by a
steering committee composed of representatives of downtown merchants, property owners
and City staff. Funding of $250,000 was included in the 1996-97 CIP and an additional
$500,000 is included in the City Manager’s Proposed Interim 1997-98 CIP. It is anticipated
that $250,000 of 1997-98 funding needs will be provided through outside contributions. The
schematic design will be forwarded to the Human Resources Board, Architectural Resources
Board, and Planning Commission for review, and recommendations will go to the City
Council. Council action is anticipated in the early summer and the project should begin later
this summer.
Attached-to this report is a report prepared by an outside consultant, titled "Financing
Options for the Downtown Urban Design Improvement Project" (Appendix A). This report
includes a survey of other cities that have made improvements to their downtowns and
describes a number of different financing options that could be used to make improvements
to the downtown. This report and the attached appendix will be forwarded to the Planning
Commission.
Proposition 218, the "Right to Vote on Taxes" initiative, was passed by voters in November
1996. It restricts the City’s flexibility to raise revenue. The impacts to the City in the future
are summarized below:
Taxes: No existing taxes are affected. The City, however would not be able to increase
existing taxes or institute new taxes without a direct vote of the citizens.
Special Assessments: Any proposed future assessments on property owners, including
construction of a new downtown parking garage, and, . potentially, increases in the storm
drainage charges, will require more rigorous calculations of "special benefits" (because
"general benefits" cannot now be assessed); mailed notice, including the basis for the
assessment calculation, to each affected property owner; and a protest ballot procedure.
There is some question as to whether some or all of the storm drainage charges may be
considered assessments under Proposition 218.
Prior to Proposition 218, a city council could override a majority protest and approve an
assessment, Under Proposition 218 the city must conduct a protest procedure akin to an
election; and the assessment cannot be approved if there is a majority protest of those land
owners voting. The vote is weighted according to the proportional share of the assessment
of all those landowners who actually vote.
A duly approved assessment could be repealed or.reduced by means of a citywide initiative.
This is a risk of any tax, fee or assessment subject to Proposition 218. However, the risk
appears to be less for limited-area assessments, where most city electors are not liable for
payment of the assessment. "
Fees and Charges: Electric and gas utilities are exempt from the provisions of Proposition218. Fees and charges for water, ~vastewater collection, and refuse may, in whole or in part,.
be considered "property related" as defined in the proposition. To the extent that they may
be considered "property-related fees" more precise cost of service (nexus) calculations for
each customer or customer class will berequired. Fut~ermore, each customer or class must
be charged only for the costs of service received; and the feescannot be calculated so that
one customer or class of customers is ~quired to subsidize another. This requirement could
prohibit inverted rates that encourage conservation by charging higher rates for excess usage.
It could also prohibit lifeline subsidies to low income or senior citizens (except for Electric
and Gas service). In addition to the requirement for more precise cost of service calculations,
additional administrative steps are required to "impose, extend or increase" a property-related
fee. Written notice must be mailed to each affected property owner, which must include the
amount of the fee or increase, the method by which it was calculated, a description of what
the fee or. increase will pay for, and the date., time and location of a public hearing on the
CMR:218:97 Page 6 of 14
proposed increase. At the public hearing, the agency must consider written protests, and
cannot enact the fee or increase if a majority protest is received.
Ifa "property-related"fee is for other than sewer, water or refuse collection, the agency must
also conduct an election on whether to enact the fee or increase. The agency selects either
of two options: (1) a majority vote of the affected property owners (one vote per parcel), or
(2) 2/3 vote of the electorate residing in the area where the fee is proposed to be imposed.
At this point, staff has not identified any current fees that it believes would require an
election.
Staffis working to determine what changes, if any, may be required to the rate structures in
the Water, Wastewater and Refuse Funds to ensure compliance with the requirements of 218.
Staffis not proposing any rate increases in these funds for the 1997-98 budget. Instead,staff
plans to use a combination of in-house resources and consultant services to analyze the
current cost of service and rate structures in 1997-98 to position the City for rate increases
that may be needed in 1998-99 or thereafter.
This report will be forwarded to the Utilities Advisory Commission (UAC) so that the
information regarding Proposition 218 is available to them as the budget is reviewed.
!nternet Master Plan_
Staff is currently preparing a draft Internet Master Plan to govern the City’s use of the
Intemet. Since the City was the first local government to establish a presence on the Interact,
staff had little guidance as to how this new tool could best be used by a public entity, and
what responsibilities City. stalTwould have with this technology. The Master Plan addresses
these issues, defines goals related to the City’s Intemet presence, specifies roles and
responsibilities of individual departments and staff related to the Internet, establishes policies
and procedures governing use of the Internet, and proposes a future vision and work plan for
City use of Intemet.capabilities. The Master Plan will be finalized over the next two months.
In order to carry out the Master Plan, the City Manager recommends adding a position
devoted to the City’s involvement in the Intemet. The proposed 1997-98 Administrative
Services: department budget includes a new position of Intemet Coordinator, requiring
approximately $100,000 for salary and benefits and one-time support costs. The position
will be responsible for the overall design and content of the City’s home pages; coordination
with staff, the community, and programmers working on City pages; and oversight of issues
relating to the Internet. The actual classification of this position is still under review.
C1VIR:218:97.Page 7 of 14
Computer Replacement Fund ~
The 1997-98 budget proposes the establishment of a Computer Replacement Fund. The
Fund will operate in the same manner as the Vehicle Replacement Fund. City departments
will contribute a yearly fee, based on the number of computers in each department. These
contributions will be transferred to the new fund to replace eo .mputers (personal computers,
monitors and mainframe computers) on a regular basis. The Fund will pay for the
replacement cost of computer systems valued at approximately $5.4 million. The creation
of this Fund will facilitate the long-term management of the City’s investment in computer
technology.
Staffproposes utilizing surplus reserves from the Vehicle Replacement Fund as the primary
source of funding tostart the Computer Replacement Fund. The Vehicle Replacement Fund
is a logical source of funding since its excess reserves result from contributions made by City
departments. In addition to the funding from the Vehicle Replacement Fund; a one-time
contribution from the General Fund Budget Stabilization Reserve, and General Fund
department contributions of $500 per computer will provide for the initiation of the
Computer Replacement Fund. The ongoing charges to maintain the Fund will be
approximately $700,000 annually.
With the Computer Replacement Fund in place, the General Fund and Public Works
Enterprise Funds will no longer require capital improvement projects or operating budget
increases to fund the replacement of existing technology. However,-as new technology needs
are identified the initial request will be funded through the capital budget process. After the
initial request, ~eplaeement funding will be provided by the Computer Replaeeraent Fund.
The Eleetd.e, Gas, Water and Wastewater Collection Utilities have chosen to self-fund
computer replacement and therefore not participate in the personal computer replacement
portion of the Computer Replacement Fund. They will make annual contributions to the
City-wide mainframe computer component of the Computer Replacement Fund.
Issues Ira_ "n_"li _ n
The Electric Fund faces a number of challenges as deregulation approaches. Competition
among electric power producers will bring efficiency and lower prices to California
consumers. To provide Palo Alto businesses and residents the benefits of competition,
Council has approved a plan which will allow the Electric Utility ~customers the freedom to
choose their energy supplier. Customer choice will be phased in over a period of time,
beginning on January 1, 1998. Although the revenue impacts are not yet known, the City
anticipates some reductions in electricity sales to City customers resulting from this decision.
To offset this loss of market share and to mininuz" e the use of the City’s resources, staffplans
to expand its .marketing efforts to attract customers residing outside the City’s service
territory.
As a result of deregulation, staff has reviewed the Electric Utility’s exposure to stranded
costs from the Calaveras Hydroelectric Project. Debt obligations from this project would
result in power prices in excess of current market prices leading to non-competitive City
electric rates. Since the City has made a substantial investment in power generation facilities
and has committed itself to long-term power supply agreements to meet the power needs of
businesses and residents, it is equitable that all customers pay their share of these
investments, irrespective of who supplies their future power needs. Staff is, therefore~
recommending a charge to all Utility customers to recover the City’s stranded costs through
a charge that will begin in July 1997 and that will be adjusted annually. This will result in
arecommended system-wide rate increase of 4 percent for the Electric Utility in 199%98.
The increase will be spread differently among customer classes in order to more closely
match costs incurred within customer classes. The electric utility will be in better position
to compete in the electric market when it is unencumbered by a heavy debt. While Pale Alto
is better positioned than most municipal utilities, we do have the Calaveras debt, which now
rests at $130 million. The universal recommendation given to utilities preparing for
deregulation is to reduce debt. In order to reduce the Calaveras debt, it is prudent to raise
rates at this time, and to transfer $10.5 million to the Calaveras Reserve
-_-.-~. ,’._ ".__ _~ _"In December, 1996 Council received the final report on the Organizational Review of the
Utilities Department. Included in that report were thirty-nine recommendations to assist the
City’s efforts in positioning itself in an increasingly competitive utilities.market. Council
referred the report to the City Manager for staff analysis and response. Staff divided the
recommendations into two categories: organizational and operational.
On the organizational side, a review of staffing levels in the substations resulted in the
elimination of a 1.0 FTE Electrician and thd reallocation of 1.0 FTE to the Telecommunica-
tions Utility. This reallocation eliminated the need for a new Telecommunications
Technician as approved last year in concept byCouncil. Another organizational
recommendation resulted in the recommendation to reclassify several marketing positions,
providing public relations staff to enhance internal,and external communications. These
reclassifications are under review.
The report also called for the creation of three full-time positions. These include two project
managers, for the Utilities Geographical Information System (GIS) and the Utilities
Customer Information System (CIS), and a Utility Information Systems Manager. The
.proposed budget includes the two positions for the GIS and CIS functions. The classification
of thesepositions is presently under review. Rather than create a new Utility Information
Systems Manager position, the Utilities Department recommends reclassification of an
existing Information System Manager to create a Utility Information Systems Manager.
Reclassification of this position is currently under consideration.
Since many of theoperational recommendations address complicated and intricate issues
which impact other City departments, these will be presented to Council during 1997-98 and
included in the 1998-2000 budget. Two exceptions, which are ineorP0rated into the 1997-98
proposed budget, include: initial funding,for a series of Utility Business Plans, and an update
to electric charges based on the results of the cost-of-service study.
As part of the 1997-98 budget process, Utilities staffwill return to Council with a staffreport
detailing a comprehensive response to the organizational issues raised by the Organizational
Review. At a later date, Staff will prepare a Council report with analysis and implementation
recommendations related to operational issues.
Los Altos Treatment Plant Site
In December 1996, Council approved a consultant contract with CH2M Hill for development
services at the former Los Altos Treatment Plant Site at the end of San Antonio Road. The
project will include a corporation yard for the City’s refuse collection contractor, a permanent
household hazardous waste drop-off center, and a staging and storage yard for Utilities.
contractors. The City Manager’s Proposed 1997-98 Budget includes $3.0 million to develop
the facility. -
When this project has received all necessary approvals, staff will return to Council for
approval of funding to complete the purchase of the remaining 50 percent of the site from the.
City of Los Altos. If the necessary approvals and permits are received, the project is
currently scheduled to begin in June, 1998 and be completed by May, 1999.
PROGRAMS ON ALTERNATIVE TIMELINES.
Infrastructure Pi~ln ~
An Infrastructure Work Plan was presented to the Council in September 1996. This Work
Plan scheduled the presentation of four reports to the’Finance Committee and the Planning
Commission on the City’s Buildings and Facilities, Traffic and Transportation, Parks/Open
Space, Technology, and Miscellaneous infrastructure needs. The first.report on Buildings
and Facilities was delivered in November. 1996 and identified $31 million in infrastructure
needs over the next ten years. After the Traftie and Transportation, and Parks/Open Space
reports are presented .in the Summer of 1997, .it is staffs intent to incorporate proposed
infrastructure capital work and appropriate financing proposals in the 1998-2000. budget
process. The Traffic and Transportation module was originally scheduled for review in April
ClVlR:218:97 Page
I997. This module has been delayed due to .staffing changes and is now scheduled for
review by the Finance Committee and the Planning Commission in early Summer.
When the Buildings and Facilities portion of the report was reviewed by the Finance
Committee, the Committee gave staffdireetion that if capital projects could be debt financed
by Certificates of Participation and work could be accelerated to alleviate the existing
backlog, staffshould pursue such a financing option. Due to the fact that the 1997-98 Budget
is an interim budget, this option has been delayed until 1998-2000.
, In addition to discussions regarding financing methods, the Finance Committee also.
discussed the concept of an Infrastructure Sinking Fund that Could be used to fund some of
the City’s long-term infrastructure needs. This will be included in a proposed debt policy,
which Council will receive at the Administrative Services Department budget hearing.
Library_ Master Plan_ "
A Library Master Plan that outlines the strategic development of Palo Alto libraries is in the
final stages of development. This plan, developed over a 12-month period, was designed
with the input of staff, residents and library users. There were 18 focus groups that had a
total of approximately 25 meetings, involving over 230 participants, to assist in the
development of the Master Plan. The plan will recommend short and long term changes to
library operations and facilities. The Plan is intended to be a vision for the next l0 years.
Although it is anticipated that there will be funding implications, these will .not be ready for
consideration-during the 1997-98 budget process.
Public Safety_ Building
Police and Fire Department staff are in the process of completing a needs analysis for a new
public safety building. The study will document current requirements and project needs over
the next 20 years based upon personnel, teehnology~ changes in services, work efficiency,
workplace safety, and state and local code regulations. Staff anticipates presenting Council
with detailed information and preliminary estimates for square footage needs and costs
estimates in the early summer of 1997.
The. draft Comprehensive Plan is currently under review by the Planning Commission. The
draft should be ready for City Council review this summer. It is anticipated that Council will
review the Plan in several sessions throughout the summer. After Council .review, the
Comprehensive Plan will be adopted as the blueprint for the City through 2010.
Staff is currently working on an implementation plan for the various elements that are
included in the Draft Comprehensive Plan. Once the Plan is finalized, staff will begin
integrating the policies outlined in the Plan with the City’s budget. A number of policies in
CMR:218:97 Page 11 of 14
the Draft Comprehensive Plan will have fiscal impacts. Staffis working to identify the range
of possible costs and the years in which such costs will need to be considered. New
programs proposed in the Final Comprehensive Plan would need to compete with other
priorities for funding as resources permit.
Downtown Parking.St~Jlfall~ "
Funding for the parking structure feasibility study was included in the t994-95 Capital
Improvement budget. The purpose of the study was to investigate the overall feasibility of
developing a new parking structure(s) on one or more sites located inthe University Avenue
Parking Assessment District. The consultant’s feasibility study report was completed in
January 1997. The study’s recommendations, were forwarded to the Policy and Services
Committee and Finance Committee in March and April, and will be reviewed by Council in
May. ’.
The recommendation is for construction of two multi-level parking structures on Lot R and
Lots S&L. The projects would add 729 parking spaces to the downtown assessmentdistriet.
The structure on Lot R would be four levels (3 elevated, 1 at grade), while the structure on
Lots S&L would be seven levels (4 elevated, 1 at grade, 2 below grade). If Council approves
moving forward with this project, the next step would be to begin the design phase and
pursue formation of an assessment district. The formation of an assessment district would
need to meet the guidelines established in Proposition 218.
Initial funding for the feasibility study was $80,000. -Th~ design, project management, and
legal hnd financial services required for the project have been divided into two phases: The
first phase would cost $1 million or less, and would be paid for primarily out of the Parking
In,Lieu Fund.. The second phase would be implemented only after the formation of an
assessment district and would cost an additional $1 million. The ultimate construction costs
would be approximately $19.1 million (1996 dollars).
Family Resource Center ’
An implementation plan for the Family Resource Center (FRC) is in the final stages-of
development.. Preliminary plans include loeat~g the FRC at the Mitchell Park Community
Center. The 1997-98 proposed budget includes a placeholder for the establishment of the
FRC, which will be supplemented by grant funds, assuming the plan will be ready during
1997-98. As the plan evolves, additional funding may be requested to support increases in
service demands.
The development of a Citywide Emergency Plan is currently under way. The plan will
define the City’s responsibilities for the preservation of life and property before, during and
after a disaster. The plan is being prepared in an effort to ensure the most effective and
economical use of resources (material and personnel) for the benefit and protection of the
City’s citizens in an emergency.
It is anticipated that the draft Emergency Plan will be presented to the City Council for
review early in 1997-98. After review, staffwill~eturn to Council with a schedule and
detailed costs for implementation. The proposal for~implementing the Emergency Plan will
be in two phases. The first phase will include a recommendation for additional personnel to
run the program, one-time startoup costs and ongoing costs of about $75,000 annually. The
first phase of implementation will inelude the initiation of neighborhood and City staff
training exercises, and the phased purchase of neighborhood disaster supply trailers. The
second phase will begin in 1998-99 and will include the expansion of training to the business
sector, the establishment of a neighborhood communications systemand additional training
for City staff and citizens.
Certified Unified Program Agency Hazardous Materials Program
In 1993, SB 1082 was enacted to establish a Certified Unified Program Agency (CUPA)
system to provide more streamlined, cost effective and efficient enforcement of six
hazardous materials programs at the local level. Rather than have the six hazardous materials
programs overseen by four separate agencies, a single CUPA system was envisioned to
¯ consolidate the programs and allow, local businesses to: deal with one agency, thus creating
less paperwork. Either a county or a city could apply for the CUPA designation. The City
- ofPalo Alto’s application to become a CUPA was preliminarily denied;~ and an appeal was
filed.
In its response to the City’s appeal, the California Environmental Protection Agency (CAL-
EPA) acknowledged that a City could become a CUPA, but that there was a "jurisdictional
overlap" issue between the County and the City of Palo Alto. Unless the County of Santa
Clara formally drops the City of Palo Alto from its own application to become a CUPA, the
City of Palo Alto cannot become an individual CUPA. The County has indicated it is
unwilling to allow cities to become individual CUPAs. Staff is working with the League of
California Cities and a local legislator to formulate legislation to address the "jurisdictional
overlap" issue.
Whether the City is an individual CUPA or is part of the County CUPA~ there will be new
responsibilities and new expenses. The legislation requires the City to issue consolidated
permits and invoices, prepare detailed annual reports and audits, show that performance
measures are met, and collect and transmit state-mandated fees to the California
Environmental Protection Agency. Increased costs to administer the program, such as
County administrative costs and potential internal staffing needs, will be fully recovered
through fees generated by the program.
CM~:218:97 ’Page i3 of 14
Once a decision is made on the City’s appeal, staff will return to Council with a program
implementation proposal that will require adjustments to the Fire Department’s operating
budget and the City’s MuniciPal Fee Schedule.
Paramedic Master Plan
The Paramedic Master Plan is currently being evaluated and updated. As part .of the
evaluation, an expansion in patient transports through the use of fire engines equipped with
transport equipment (currently on order) is contemplated. One target group for the expanded
program is patients currently served by private ambulance eomp~anies. The Fire Department
is in the process of developing a plan for implementation of the program. As in the past, the
basic assumption in activating the new program is that new patient volumes and revenues axe
in place to cover new expenses. When a plan is ready, staff will return to Council with a
proposal for activating the engines.
Appendix A - Financing.Options for Downtown Urban Design Improvements Project
PREPARED BY: Gigi Harrington, Budget Manager
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
.~s~sistant
Manager
CC: Planning Commission
Utilities Advisory Commission
MR:218:97 Page 14 of 14
APPENDIX A
FINANCING OPTIONS
DOWNTOWN URBAN DESIGN IMPROVEMENTS PROJECT
Palo Alto, California
February, 1997
Prepared by:
Pacific Group
2116 Eas|on Drive
Burlin(jame, Ca 9~10
S__ec t ion
Io INTRODUCTION
S m ES
Survey of Other Cities
Summary of Survey
II-i
II-9
III..POTENTIAL FINANCING VEHICLES
Special Taxes
Special Assessments
Fees And Extractions
Zoning Change Requirements
Capital Improvement Program
General Revenues
Donations
Tax Increment Financing
III-I
III-I
III-3
III-3
III-4
III-4
III-5
III-5
Section I
INTRODUCTION
The City of Palo Alto’s downtown core area has long been a major
commercial area for the City. Over twenty years ago the City
undertook an extensive program of improvements in the downtown
area. During the 1970’s the downtown experienced higher vacancies.
In the 1980’s the area became more healthy and in the 1990’s the
downtown has attracted several upscale restaurants and several
chain operations and has become a significant regional draw.
However, the City and local merchants and property owners also
recognize the need to maintain a high qualityimage and environment
in-today’s competitive retail market. Thus the City of Palo Alto
has retained Wallace Roberts and Todd to prepare a downtown
improvements plan. As part of that assignment, Pacific Group was
retained to evaluate the funding alternatives for theseimprovements.
The primary tasks undertaken in this assignment are:
i. Research other funding precedents including the
Downtown Parking Assessment district-and\Qther cities.
2. Obtain input from property owners, merchants and City
staff.
3. Summarize available funding mechanisms.
This report represents the findings of tasks 1 through 3.
Pacific Group wishes to thank the City staff,-and the merchants and
property owners who cooperated in providing information and ideas
for this study.
i
Section II
PRIMARY FUNDING SOURCES UTILIZED IN
SELECTED OTHER CITIES
SURVEY OF OTHER CITIE~
As part’of this assignment, Pacific Group has contacted’ numerous
cities which have recently financed public improvement projects.
These projects are similar in size and type to the downtown
improvement project in Palo Alto. A brief summary of the financing
approaches utilized in these cities is presented below.
Fremont, CA
The City of Fremont is currently undertaking a design study for the
Mission San Jose area. Included in this study is street
improvements (gutters, curbs, sidewalks), landscaping, furniture
and accessories. The anticipated costs is approximately $i.0
million.
Last year the City submitted an application for a Federal grant
under the ISTEA Transportation enhancement provision from the
Federal Highway Administration. The application was not successful.
Thus the funding for their improvement program has not been
finalized. However, they are anticipating using the following
sources:
City Capital Improvement Budget
Donations (service groups, etc.)
® Voluntary donations from property owners and merchants.
Property owners have indicated they do not want-~to use a
Local Improvement District.
Woodland, CA.
In 1992, the city undertook approximately $800,000 of improvements
in downtown. The total cost was covered by redevelopment funds. In
addition, the Downtown Specific Plan requires certain upgrades when
a new business moves in.
In the East Street corridor they are about to undertake a series of
improvements, including: Class I pedestrlan/bikeway within a
railroad right of way-and landscaping. The sources of-funding will
include:
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-An ISTEA grant for $300,000
-Redevelopment funds (total not determined).
In addition, the city has a Facade Loan Program. The RDA provided
a $120~000 pool-of funds to a local bank to guarantee low interest
loans up to $24,000 per building.
Redwood City, CA
Redwood City has undertake substantial downtown public improvements
in the past five .years, when they issue a $16.0 million
redevelopment bond. Significant projects include:
i. Sidewalks-replacement of tiles with bricks, furniture,
tree containers, for a total cost of $1.8 million.
2. Signs, entry features and landscaping, for .a total of
$1.3 million.
3. Parking structure for $4.0 million~
All of these projects are funded with redevelopment funds. All of
the maintenance is funded with city budgets-.
The downtown merchants established a BID in 1994 and assessed
themselves $100,000. However, one year later, a majority of the
merchants objected to the BID and it was dis-established by the
city council..
In 1991, the RDA established a matching grant program for
storefront improvements. In five years they have granted
approximately $500,000. The maximum matching.grant per building is
$55,000.
San Francisco, CA_
The City of San Francisco has only- recently authorized the
establishment of Business Improvement Districts in the City. The
City Center District is a Property Business Improvement District
which will cover the Union Square area. The original size of the
area has been reduced by half. Currently there are 1.6 million lot
square feet and ii.0 million building square feet in the district.
They expect to raise $i.0 million "annually. from the property
owners. Most of this money will go into a security and maintenanc~
program. None of the funds are currently planned for ’capital
improvements.
The PBID needs a vote of~ 51.1% of the assessed value in the
district. This petition process is going on now~ They hope to have
thedistrict established by early 1997. In the meantime, there is
a voluntary assessment program in place.
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Monterey, CA
In 1984 the City .undertook a capital improvement program on
Alvarado Street in Old Town. The total cost was $1.3 million, of
which the City paid~$900,000 from the capital budget. The property
owners paid the balance through a total assessment of $115.00 per
linear~ foot. The improvements included brick sidewalks, benches,
trees, curbs, and the like.
In addition, the same area has a separate maintenance assessment of
$1.44 per linear foot which covers any added costs (lighting costs,
plant maintenance, etc) above what was already provided.
Berkeley, CA
In 1995 the city Council adopted an $8.0 million Public Improvement
Plan for the commercial areas of the cit~, including traffic,
circulation, lighting, street furniture, landscaping and so forth.
Two small projects were completed for $75,000 from the capital
improvements budget. The city recently received a $750,000 ISTEA
grant for lighting, trees and landscaping in one zone. They have
submitted another application for $500,000 for lighting in another
zone. In November residents will vote on a.$49.0 million G.O. Bond.
issue to cover retrofitting the city hall and library as well as
$4.0 million for the public improvements plan. They have never had
an assessment district, because the-merchants do not feel they can
afford it.
Berkeley DowntownAssociation is expecting to have formed~a BID by
August. The BID will raise $185,000 per year for events and
promotion. The merchants will pay one half of this based on 0.044%
of gross sales. In addition, because the property owners also are
required to have a business license to record theirgross rents,.
they w~ll pay a percent of these rents togenerate the other half
of the BID budget.
Maintenance for all of the new public improvements will be through
city general funds.
Livermore, CA
Livermore recently undertook a major downtown improvement project.
The Total cost of $3.7 million was funded by redevelopment funds.
There is no BID. However, there is a downtown business association
which operates as a public benefit corporation501 (C)3. It has an
annual budget of $250,000 which is used for promot±on, special
events, and on-site services. They receive 22% of their budget, from
RDA, the balance from fundraising.
The city has a downtown landscaping program which employs two
people full time. There is also a Downtown Beautification Committee
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which writes grant applications for trees and related projects. ~
They also have a design ordinance which requires new buildings or
retrofit programs tO provide landscaping on 12% of the. property.
Pacific Grove
They have undertaken relatively small, improvement projects in the
recent past. The funding sources for these improvements are:
I. City General Fund.
2 A private Trust set up for.beautification.generates
$40,000 per year
3. A grant from the Regional Transportation Improvement
Program (RSTP) to replace downtown street lights with
historical lights. The purported purpose was to increase.
pedestrian traffic.
Paso Robles
In ~989 the city undertook a $600,000 renovation of the 2-block
park in downtown, including planters,’ fountains, benches, andbrick
sidewalks. These improvements were paid for.with redevelopment
funds.
In 1992, the city provided improvements to the main street in
downtown. (Spring Street)J, including new lights, planters and ~a
gateway. The total cost was $1.2~million. The source of funding was
the gas tax. -~ ~
The city also authorized a three year facade improvement program
which consisted of a no interest matching loan, with provisions.to
forgive repayment.
Sunnyvale~ CA
In 1978 Sunnyvale undertook street improvements along Murphy
Avenue. A .large part of the programconsisted of a CDBG funded loan
program for facade improvement and seismic retrofitting.0ver a ten
year period this program financed several mill-ion dollars in
improvements.
In the downtown area they have recen£1y completed a specific plan
which requires certain improvements and mitigation fees which are
expected to cover all of the public improvement costs if and when
new development occurs. The total costs of the planned improvements
is approximately $2.2 million.
Mountain View CA
The Castro Street area has undergone majqr redevelopment. The
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public improvements which were made include: utilities,
landscaping, street paving, curbs, gutters, benches, planters, a
median and other items. The total costs of these improvements was
$12.0 million.
The Redevelopment Agency financed~$6.0 million of this through a
bond. The balance was paid through:
Capital Improvement Plan’
¯ Five large developers paid¯a prorata share based on the
size of their developments
® A Small amount from the general fund.
The maintenance is provided through normal city budgets.
In 1992 the city undertook ~ Zheir last commercial assessment
district in the Alta Avenue area. The improvements includedlights,
landscaping, pavement and curbs. The total cost was ~1.36 million.
The city paid. $360,000 through the CIP reserve and some from
enterprise funds. The remaining $I.0 million was covered by an
assessment district.
Currently there is discussion of possibly utilizing an assessment
district to cover some of the city’s contribution to the Light Rail
corridor in downtown Mountain View. The City’s contribution will be
$15.0 million.
Los Gatos,C~_
Los Gatos completed a downtown streetscape plan in May, i996. The
area is in a redevelopment project area. The existing improvements
and amenities have become run-down. The improvements will include
sidewalk widening,-planters, benches, and curbs and gutters. The
total cost is estimated at $i.0 million.
The improvements will be paid for by redevelopment funds.
ongoing maintenance will be provided from normal city budgets.
.Santa Monicaj CA
The
In 1989¯ the Cityof Santa Monica undertook a major streetscape
program in the Third Street Promenade area, which included some
new parking facilities. The total cost was $12.0 million, of which
approximately half was for parking.
The total cost was covered by a¯tax exempt bond which was backed by
an assessment district. The-original assessments were as high as
$i.00 per year square foot. Currently the assessments are:
-Zone 1 $0.67 per sq ft-.
-Zone 2 $0.28 per sq ft.
-Zone 3 $0.21 per sq ft.
There is a separate assessment charged to merchants through the
business license tax for operation and maintenance. This fee is
$1,25 per thousand dollars of sales for retail, the same as their
business license tax. They could have had one fee, however bond
holders do not like to see capital and operating funds combined.
As a charter city they set up their own district, rather than use
the state enabling legislation for BIDs. Such a BID can..be
authorized for longer than the five year maximum under state laws.
~The money goes into the general funds and then the city provides
~the maintenance and also funds a non-profit promotion organization
with $400,000 per year. The total of these costs actually exceeds
what is collected in fees. The city council appoints theboard for
the management company (Bayside District Corporation).
The improvements have substantiallyincreased.property values. Land
in downtown in general is valued at $85 per sq ft. Lots on the
Promenade are valued at $200. per sq ft.
They ~also .have a program for future parking and improvements,
whereby new development in the downtown can pay $1.50 per sq ft..
per year in-lieu of providing on-site parking.
The city is currently undertaking a similar type of streetscape
program in the low-income area along Pico Boulevard. The cost is
being covered by a $3.1 million EDA Grant.
Sacramento, CA.
Historically, capital improvements in the downtown area have been
funded with .redevelopment funds. However, they have recently
received an ISTEA Grant $360,000. An additional $90,000 of tax
increment funds will cover the total cost of $450,000 for a
"pedestrian linkage" (underpass, improved access to parking, etc.)..
The city provides two layers of maintenance. The base line provides
trash collection and some cleaning. An increased level of
maintenance includes litter collection, pressure cleaning sidewalks
and alleys, etc. This level is paid for~by the local PBID.
The PBID has an annual budget of $1.2 million, Its programs include
cleaning, security, promotion, andbusiness retention. The highest
level of service costs $0.05 per sq ft of building plus $0.10 per
sq ft of land.
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San Carlos, CA
The city recently~completed a street beautification program along
San Carlos Avenue. This included a median and landscaping, curbs
and gutters, lights, bulb outs, entry ~signs and the like. The
sources of funds were:
-Gas Tax $270,000
-Redevelopment
-Assessment District
$270,000
Total $670,000
There were 26 property owners involved; all voted for the
assessment (1911 Act). The assessment was $25 per linear foot. The
assessment can be paid over i0 years. Maintenance will be doneby
the city.
They also improved a downtown park, with $75,000 from redevelopment
funds and $75~000 from donations.
The city also has a facade improvement fund which provides up to
$2,500 per building. So far 180 business have utilized these funds.
They had a BID for two years but it was deactivated because
merchants did not feel it was effective.
Lodi, CA
The city recently completed $6.0 million, in improvements in the
Cherokee Road area and in downtown. These included a median,
lighting, sidewalks, kiosks, and a gateway. Approximately $3.0
million was in the downtown area.
The improvements were financed 50% with city CIP funds and 50% with
an assessment district (1913 Act). The total assessments were:
$1.63 or $0.29 per sq ft plus $28 per linear foot. The bonds will
be 1915 Act Bonds for 15 years at 7%, which requires an annual
charge of approximately 10% of the total assessment.
Maintenance will be done by the city at no extra charge. They have
a voluntary downtown business association (1/3 participate) and are
considering a BID.
San Jose, CA
Historically, all downtown street improvements have been
accomplished through the redevelopment process. However, in the
downtown area they have recently completed a transit mall utilizing
a mix of fundingsources. This project also involved street trees,
antique lights, and pedestrian bridges.
The sources of funds included: ISTEA Grant; CDBG money; and
Redevelopment.
Santa Cruz, CA
After the Loma Prieta Earthquake, Santa Cruz reconstructed much of
their d0wntowninfrastructure including water, sewer, storm drains,
streets~ lighting and streetscape. The tbtal cost was $I0.0~
million. Approximately 50% came fromthe federal government (FEMA).
The remaining $5.0 million.was-financed by a county-wide i/2 cent
sales tax.
Chico, CA
This city is in the process of replacing the lights in downtown
with decorative lights. This project alsoincludes tree planting.
and bulb outs. The total cost is $500,000. These funds are being
provided by redevelopment. Maintenance will be through normal, city
budgets.
Trac~
Most downtown improvements have been done by redevelopment,
although they are now in the red because of declining property
values. They recently built a $i.0 million parking lot with RDA
funds. At the same time they established a PBID for a two block
area to fund ongoingmaintenance for the parking lots. The total
annual assessments are $27,000. They also recently received a
$150,000 CDBG based on a low income-census tract in downtown for
new lights. ~ ~.~
Long Beach, CA
In the Belmont Shores commercial area, they have provided
approximately $2.0 million in streets and sidewalks. This was paid
for with a parking meter revenue bond. The city’s treasurer bought
the bonds.
In Belmont Shores they also have a Mello-Roos districtfor parking.
Only the commercial parcels are assessed. The money is used on a
pay as you go basis to buy .lots as they become available. This
generates approximately $60,000 per year.
Long Beach is a CDBG entitlement community. In the waterfront area
they have used Section 108 Loan Program for parking and related
infrastructure. These loans wil! be paid back from parking revenues
and tax increment.
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In 1991 they formed an assessment district in downtown. However,
two years later it was dissolved because there was a decision to
retrofit all of the light in the city. The assessment bonds were
then paid off with capital improvement funds.
Menlo Park, CA.
In 1991, the city of Menlo Park made improvements along Santa Cruz
Avenue including changes tp circualtion and parking, islands, and
landscaping. The total cost was $331,000. The City paid 2/3 of this
from the capital improvements program. The property owners are
paying the city back for the other 1/3 with a i0 year assessment.
Menlo Park is also planning to resurface their downtown plazas and
add landscaping. The cost estimated~at $500,000 will be paid by the
city’s capital improvement budget and $200,000 from downtown
parking permit fees.
SUMMARY OF CASE STUDIES
While the 18 cities described¯ above are not a scientific random
sample, they are believed to be representative of the methods
utilized to finance downtown improvements in Californiacities in
the recent past. The primary conclusions of this-survey are
summarized in Table II-i and below:
i. In virtually all cases, more than one funding source
is used.-
2. Redevelopment funding is the most common source of
funding, although the survey sought to focus on cities
which used other sources.
3. Capital improvement programs and assessment districts
were used about equally (seven each in the 18 cities),
and in four cases, both sources were used.
4. Various other sources have beenutilized, but usually
where there were special circumstances, eg: FEMA after
the Loma Prieta earthquake, ISTEA grants where
transportation enhancements were constructed, private
trust where the capital.was donated.
5. Most of the cities indicated they do not have a
consistent policy, but rather utilize whichever funds are
appropriate in the circumstances.
6. Many of the cities indicated that they consciously
tried to use funding from various sources to achieve a
sense of buy in to the project.
7. Only three cities ’indicated that they used" an
City
Fremont
Woodland
Downtown
~ast Street
Table II- 1
SUMMARY OF FUNDING SOURCES UTLIZED BY CITIES FOR DOWNTOWN IMPROVEMENTS
Capital Sources Maintanance
Budget Date RDA CIP Assess ISTEA Other Source (1)
$1,000,000 1996 X X Donations
$800,000 1992 X .....X Specific Plan
$2,200,000 1996 X Specific Plan
Redwood City
Monterey
Berkeley
Project I
Project II
Livermore
Pacific Grove
Paso Robles
Spring Street
Sunnyvale/DT
Mountain View
Castro Street
Alta Ave
Los Oatos
Santa Monica
Sacramento
San Carlos
$3,100,000
$1~250,000
$3,700,000
$1,200,000
$2,200,000
$12/)oo,ooo
$1,360,000
$6,0O0,OO0
$450,000
$670,000
1990-95
1984
1992
1996
1990-95
1992
1~6
1989
1~6
1~5
X
X
X
X
X X
X
X X
X
X
X
X
O0 Bond
RSTP Grant
Private Trust
Gas Tax
Specific Plan
Miligation fees
Developer fees
Gas Tax
Assessment
Assessment
CityiPBID
General Fund
Lodi
San~ Cruz
Long Beach
Menlo Park
Santa Cruz At
Civic Center
$3,000,000 ’1995
$10~300,000 1989
$330,000 1991
$500,000 1996
X
X
X
FEMA
Sales Tax
Revenue Bond
Mello-Roos
Parking Permits
(1) General Fund unless otherwise noted.
Source: Pacific Group
assessment for maintenance of the down~own. All,of the
others use general funds for this.
The background information in this section will be one
consideration in establishing alternative funding scenarios later
in this report.
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Section III
POTENTIAL FINANCING VEHICLES
This section of the report briefly-describes the major sources of
funding which are available for downtown improvements. These
descriptions are general in nature and are intended for use in
preliminary discussions. Charter cities have the authority to
structure financing vehichles to meet their own needs. Naturally,
before proceeding further with any particular funding source, the
City Attorney and the City’s bond counsel should be consulted.
SPECIAL TAXES
Cities, counties and special districts may impose special taxes
with ~ two-thirds vote. The money collected is available only for
a specific program. Also because it is not an assessment, it is not
limited to the relative’benefit it provides to the taxpayer. These
taxes cannot be ad valorem. Typically they are per parcel or per
square foot of the parcel.
Mello:Roos Act
The 1982 Mello-Roos Community Facilities Act is one of the most
common vehicles for a specia~-:~tax. The proceeds can be used for
direct funding or tO pay off bonds. There is a precise procedure
for establishing a Mell-Roos district. One of the principal
requirements is, if there are fewer than 12 voters in the district,
then tlle owners of half or more of the property in the district
must give approval.
A Mell-Roos tax is not a special assessment, so there is no
requirement that the tax be apportioned on the basis of property
benefit. However, this can be done at local ~ption. It can be used
to pay for a wide range of publicfacilities. A Mell-Roos tax can
also pay for planning and design,, as well as certain services.
Some form of a special tax, similar to Mell-Roos, may be used in
the proposed Midtown assessment district. Current plans in this
area include parking, access, wall treatment,landscaping and the
like. The total estimated construction cost is $I.0 million.
SPECIAL ASSESSMENTS
A special assessment is a charge imposed on particular real
property for a local public improvement of direct benefit to that
property. The legislative body of a city may create a special
assessment.district that defines the properties that will pay for
" 1
the improvement. Thus special assessment districts are also
referred to as benefit assessment districts.
The procedures for establishing assessment districts vary depending
on the statue being employed. The assessments constitute liens
against the specific parcels. A written protest by i0 percent of
the affected property owners can stop the project. Some of the most
commonly ~sed assessment acts are noted below.
Improvement Acts of 1911 and 1915
This act may be used for a long list of improvements, including
streets, ~sidewalks and landscaping, if assessments are not paid in
30 days a bond isissued. HoweVer, the city maintains no obligation
to ~the bondholder. The improvement Bond Act of 1915 does not
authorize .assessments, but. provides a vehicle for issuing
assessment bonds. Under this act, the city incurs a contingent
.liability for the bonds.
Integrated Financinq District Act
Assessments levied under thisact can be used to pay the~cost of
planning, designing and constructing capital facilities and to
reimburse a private investor in the project. It can levy an
assessment contingent on future development and allows
reimbursement for funds advanced by an investor. This vehicle is
mostsuited to situations where substantial new development is
anticipated.
Parking District Laws
The Parking District Laws of 1943 and 1951 provide for assessments
(and through the 1911, 1913 and 1915 acts for bonding) for
acquisition, construction, operations and maintenance of parking
facilities. District formation proceedings are-initiated based on
petition of the involved landowners. The parking facilities can
include a certain amount of related improvements such as
landscaping, pedestrian access, and so forth.
The Pedestrian Mall Law of 1960
This law authorizes cities to establish pedestrian malls (including
power of eminent domain), restrict auto’traffic within the mall,
and to levy benefit assessments for funding.
Parkinq andBusiness Improvement Area Law of 1989
This law enables cities to establish areas of benefit (Business
Improvement District-BID) and to levy assessments on businesses
within those areas to finance improvements (parking, parks,
fountains, benches, lights, etc) and for promotion, events and
other activities. Some cities have found it difficult to collect
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this assessment.
The assessment may be apportioned among different zones of benefit.
If written protest are received from the owners of businesses which
would pay 50%.or more of the assessment, the assessment must be set
aside for one year. Because of this provision, and because there is
no lien on property created, this type of BID is not commonly used
for capital improvements, but rather for promotion.
Currently there is no BID or PBID in Palo Alto. However, there has
been some very preliminary discussion of this concept in the
University Avenue area. The midtownarea is also considering a BID,
but formation may be a year away.
A BID assessment is normally collected as part of the business
license tax. It should be noted that currently there is no business
license tax in Palo Alto. This compares with the average city of
population between 50,000 and¯ i00,000 which receives 6% of its
revenues from a business license tax.
Property and Business Improvement District Law of 1994
This law is similar to the 1989 law except that it levies the
assessment on the property owners. The jurisdiction must first
receive a written petition signed by property owners who would pay
50% or more of the assessment. There are some addition improvements
which can be financed under this law. Also, these funds can be used
for economic development, security, sanitation, street cleaning,
etc. This is significant since most assessment districts cannot
provide maintenance.
It should be noted that most cities now consider commercial rental
properties to be "businesses" and thus commercial property owners
can be assessed under the provisions of a BID as described above.
In some cities, the city matches the funds which are secured via~a
BID_or PBID. _
FEES AND EXTRACTIONS
Fees and extractions are direct charges and dedications collected
on a one time basis for a service provided or as a condition of an
approval being granted. The purpose must relate to the needcreated
by the development. The amount must be proportional to the cost of
the service or improvement.
ZONING CHANGE REOUIREMENTS
Palo Alto has enacted a .zoning ordinance for PC Planned
Communities. It is intended to accommodate developments requiring
flexibility not otherwise attainable under other districts. It is
intended for comprehensively planned developments which are of
substantial public benefit. Prior to approval of any PC district
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the planning commission and the city council must make a finding
that "the district will result in public benefits not otherwise
attainable...and shall specifically cite the public benefits
expected.to result from use of the planned community district."
This zoning ordinance has been applied in 17 case in the downtown
area. Virtually all public..benefit packages have included
contributions to public improvementsin downtown. Selected examples
are presented in Appendix Table A-I and include:
I. 483 University $100,000 for street furniture
2. 531 Cowper $150,000 to child care fund.
3. 529. Bryant Street trees, grates,-alleys
4. 250 University Alley paving, lighting,
landscaping; public plaza
5~. 520 Webster
6. 525 University
(offered)
$150,000 downtown improvements
$150,000 downtown improvements;
$i00,000 to downtown parking
These projects have involved projects which have added from 3,000
to.50,000 square feet above the CD-C zoning. The amount and type
of future public benefits ~depends on the amount and type of
development-which will beproposed. It is difficult to project the
level of this activity into the future. However, this recent level
of public benefits is one indicator to consider in this regard.
CAPITAL IMPROVEMENT PROGRAM
The adopted 1996-97 budget includes $4.9 million of capital
expenditures. Of these expenditures, $150,000 is appropriated from
the General Fund for the.design, construction and installation of
signage, street furniture, newsracks, landscaping ~and other.
improvements. The General Fund appropriation for these improvements
is expected to be supplemented by $i00,000 fromdowntown business
contributions. The 1997-98 ~Interim~ CIP budget process is well
underway and a irecommendation ~rom the City Manager will be¯ reviewed by the F~nance Committee ~nMay. The Finance Committee has
reviewed, the Buildings and Facilities Module in-a series of
comprehensive infrastructure reports.and has directed staff to
bring back to Council a proposal to exp!ore early debt financing
for building projects. It is anticipated that recommendations and
priorities from the remaining three infrastructure module reports
will be incorporated in the 1998-2000 budget.
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GENERAL TAXES
General taxes can include excise taxes, .utility users taxes,
transient occupancy tax, and property tax. Each of these types of
taxes have substantial difficulties as a source of funding:
i. Prop 13 requires a 2/3 voter approval for property tax
increases or a special tax.
2. Excise tax related to use of property do not regulate
and are not a condition of permit. While not subject to
Prop 13, it ~is difficult to pass such a tax.
3. Prop 62-(1986) requires a two thirds vote on all
general taxes. While court decisions indicate it does not
apply to charter cities, many cities abide by this
requirement anyway.
This report assum~es that the proposed improvements for~the downtown
will not be financed through general taxes.
DONATIONS
AS described in the previous section of this report, some cities
have been successful in obtaining grants and donations from
individuals and service organizations for landscaping and
improvements in downtown.
/
TAX INCREMENT FINANCING
As noted in the previous section of this report, redevelopment
funding has become the predominant means of financing public
improvements in downtown areas in California. Palo Alto does not
have a redevelopment agency and such a program would in all
likelihood not provide substantial funding for a downtown which is
virtually fully built out and not blighted.
However, Infrastructure Financing. Districts are a new way for a
city to finance infrastructure improvements. It util~izes the
property tax through a variation on tax increment financing. The
IFD law provides that each other taxing agency must grant its
approval before any of its portion of the increment can be
collected by the IFD. Also the IFD has no power of eminent domain.
III-5