Finance Advisory Committee Agenda 12/12/2001 Finance, Advisory, Committee, Agenda, 2001, 2002 Five-Year Financial Model, Suggestion From City Council Regarding Dynamic Format And Content, The City of Rancho Palos Verdes is currently developing a procedure for the creation of assessment districts to finance the undergrounding of utilities. The City Council has requested a summary of the available mechanisms through which it can offer senior citizens, the disabled, and persons with limited income the opportunity to defer payment of assessments against their property. RPV Finance Advisory Committee Meeting Agenda for 12/12/2001 AGENDA



DECEMBER 12, 2001
7:00 P.M.


1.                  Roll Call.

2.                  Approval of Agenda.

3.                  Assessment Deferrals For Undergrounding Districts. (McLean)

4.                  Approval of Minutes for the meetings conducted August 15, 2001, August 22, 2001 and August 29, 2001.

5.                  Email policy – Finance Advisory Committee. (McLean)

6.                  Status report of economic trends that may have an impact on the City (if any). (Downs)

7.                  2002 Five-Year Financial Model – Suggestion From City Council Regarding Dynamic Format And Content. (McLean)

8.                  Public Comments.

9.                  Adjournment.

  DECEMBER 12, 2001

During the November 7th meeting of the City Council, the Director of Public Work’s presented the following staff report regarding programs that could allow property owners the opportunity to defer undergrounding assessments: 


On October 2, 2001 staff presented two reports regarding residential undergrounding program. The first report presented program guidelines in the form of a resolution. The second report was a part of a public hearing to establish the $100 fee on property owners wishing to establish a residential undergrounding district. During discussions on these two items, the City Council asked questions about, and requested staff to provide information on programs that allow property owners to defer undergrounding assessments in addition to the state deferral program discussed in the guidelines. The City Council also requested staff to provide additional information regarding the state deferral program, the bidding process, and Southern California Edison’s financial responsibility towards a residential undergrounding district.

This staff report presents that additional information. This evening staff is requesting direction from the City Council regarding deferral programs. Once that additional direction is provided, staff will bring a revised undergrounding program to the City Council for adoption.


The attached October 29, 2001 memorandum from the City Attorney provides detailed information regarding deferral programs available to the City Council. The characteristics, advantages, and disadvantages of each program are as follows:

State Program

·         Covers only assessment, not house connection

·         Available only to Senior Citizens, and disabled

·         Assessments are due when property is sold

·         If eligibility is met, the deferment is automatic, there is no hearing process

·         No program costs for City


1913 Act Funding

·         Covers only assessment, not house connection

·         City sets eligibility criteria

·         There is a cost to underwrite the bond

·         Assessments are due when property is sold or bonds mature


RDA low and moderate housing fund

·         Covers only house connection, not property assessments

·         Project must be within, or benefit, the redevelopment area

·         May be a loan or grant program

In addition the City Council raised the following issues:

Since Southern California Edison (SCE) ends up with new facilities, do they pay a portion of the cost?

>Yes. Southern California Edison pays a portion of the cost of the construction, in the form of a line equivalency, which is approximately $9 per foot. The amount is determined by the Public Utilities Commission and approximates the cost of a new overhead project.

If one meets the eligibility requirements for the State Program, is the deferral automatic?


Rather than SCE constructing the improvements, can the project be advertised and awarded like other Public Works projects?

Yes, however, if SCE does not perform the work they will charge a fee for inspection that they require. This would be in addition to the City’s public works inspector.



To finalize the guidelines for the neighborhood undergrounding program staff requires additional direction from the City Council regarding the assessment deferral programs. Once that additional direction is provided staff will bring the program guidelines back to the City Council for adoption.



Dean E. Allison, Director of Public Works



Les Evans, City Manager


After the Director of Public Works completed his oral presentation, the City Attorney presented the following staff report regarding possible programs that could allow property owners the opportunity to defer undergrounding assessments: 



TO:                              Mayor Lyon and Members of the City Council
FROM:                 Carol Lynch and Mark Mandell
DATE:              October 29, 2001
SUBJECT:                   Assessment Deferrals for Senior Citizens, the Disabled and Persons with Limited Income


The City of Rancho Palos Verdes is currently developing a procedure for the creation of assessment districts to finance the undergrounding of utilities. The City Council has requested a summary of the available mechanisms through which it can offer senior citizens, the disabled, and persons with limited income the opportunity to defer payment of assessments against their property.

There essentially are two mechanisms available to the City for this purpose:

A. The City can encourage its residents to participate in the State Controller’s Office Property Tax Postponement Program. Advantages of this program are that it would be available to residents at no cost to the City and that program participants could transfer the amount of the deferral to a new home, should they move away from the home subject to the assessment. Disadvantages of this program are that it is only available to senior citizens and the disabled with household incomes of less than $24,000 and that it requires participants to file annual applications with the State.


B. The City can establish a deferral program pursuant to the Municipal Improvement Act of 1913. A major advantage of such a program is that it gives the City maximum flexibility in determining eligibility criteria. Disadvantages are that the amount of such a deferral may not be shifted to a new home, but must be repaid upon transfer of the property, and that such deferrals must be repaid by the final maturity date of bonds issued to finance the undergrounding project, even if no ownership change has occurred for the property. Such program could be either of two types:

>(i) A program where the City enters into year-to-year agreements with eligible homeowners to pay those homeowners’ annual assessments. An advantage of this type of program is that it would allow the City to make annual assessment payments rather than one large payment at the initiation of the program. A disadvantage is that the City cannot commit to making annual payments beyond the current year, but instead must have the right to stop making payments in any year, which may cause concern to any property owner who requests a deferral, or

(ii) A program where the City deposits into a deferral fund the full amount necessary to make future assessment payments. The advantage of this option is that the City would be able to commit to deferring future year assessment installments against eligible properties. The disadvantage is that it would require a large, up-front, cash commitment by the City.

Finally, the Rancho Palos Verdes Redevelopment Agency can establish a loan or grant program using moneys in its Low- and Moderate-Income Housing Fund. Loans or grants could be made for the purpose of assisting homeowners in paying only for their on-site connections to undergrounded utilities. This program is not listed as one of the basic funding options, since it does not cover the cost of undergrounding the improvements within the public right-of-way, which is the largest portion of the undergrounding expenditures. Advantages of such a program are that the Agency would have a high level of discretion with regard to loan or grant terms and that housing funds, rather than general funds, would be used. A disadvantage is that such a loan or grant may be made only to households meeting certain income criteria living in homes meeting certain affordability criteria. Another disadvantage is that the undergrounding either should be located within the Redevelopment Project Area or should benefit that area of the City.



The City is contemplating the formation of assessment districts pursuant to the Municipal Improvement Act of 1913 (Streets & Highways Code Section 10000 et. seq.) (the "1913 Act") to finance the undergrounding of overhead utilities in certain neighborhoods. The City desires to identify mechanisms by which property owners can defer such assessments.


There are two components to an undergrounding program: (i) work done in the public right of way to convert above ground utilities to underground locations (i.e. relocating transmission lines from poles to conduits) and (ii) work done on private property, including connections to individual homes and businesses. Work on private property is the responsibility of the property owner. However, if a property owner files a request, the City may include the costs of such work in the assessment and issue bonds to pay such costs. If such private costs were included within the assessment, then these costs would also be eligible for deferral under each of the deferral options discussed in this memorandum. If private costs are not included within the assessment, they still could be financed through a redevelopment loan or grant program, provided that all of the criteria for doing so can be satisfied.



Each of the programs discussed in this memorandum has separate limitations. The City may wish to consider establishing a deferral program in conjunction with a Redevelopment Agency loan program. Also, regardless of what programs the City wishes to establish on its own, the City may wish to consider publicizing the State’s Property Tax Postponement Program.


I. Property Tax Postponement Program.

Pursuant to the Senior Citizens and Disabled Citizens Property Tax Postponement Law (Revenue & Taxation Code Section 20581 et seq.), the Office of the California State Controller administers a statewide property tax postponement program. While the City has no role in the administration of this program, it could play a role in ensuring that the City’s residents are aware of the existence of the program. This program allows homeowners to delay payment of their property taxes until they die, sell their home, cease to live in their home, or fail certain criteria. For the purposes of this program, property taxes include assessments against real property.

In order to qualify for postponement pursuant to this program, a homeowner and his or her home must meet all of the following criteria:

>•The homeowner must be 62 years of age or older, blind or disabled;

>•The homeowner’s household income cannot exceed a certain amount, which is adjusted annually for inflation (currently $24,000);

>•The home must be a residential dwelling occupied as the principal place of residence of the homeowner;

>•The homeowner must own the home, and meet certain ownership criteria (e.g. holding at least a 20% interest in the home);

>•The homeowner must receive the property tax bill for the home; and

>•Property taxes against the home must not be delinquent.

Additionally, if any portion of the home is used for rental or business, only a percentage of the property taxes equal to the percentage of the home devoted to the personal use of the claimant is eligible for postponement.

A homeowner must file a claim for each tax year he or she desires postponement. The Office of the Controller, after approving a homeowner’s claim, issues the homeowner a certificate of eligibility. This certificate may be submitted by the homeowner to the county tax collector as payment of eligible property taxes. Once the certificate has been used to pay taxes, the State records a lien against the property for the amount of taxes postponed. During the postponement period, interest (currently at a rate of six percent) accrues against the postponed tax amount.


Postponed property taxes need not be repaid to the State until the homeowner: (i) ceases to occupy the premises as a primary dwelling; (ii) dies; (iii) sells, conveys, or disposes of the interest in the home, or (iv) allows any non-postponed property taxes against the home to become delinquent. The surviving spouse of a homeowner need not repay the postponed taxes, so long as the surviving spouse continues to occupy the home as his or her primary dwelling. However, unless the surviving spouse would otherwise qualify for the postponement program, that surviving spouse must pay property taxes which come due in the years following the death of the eligible spouse.


If a homeowner sells his or her home, he or she may apply the amount of postponed property taxes towards the purchase of a new home, establishing a lien against that home and continuing to defer the postponed property taxes. Future year assessments against the original home would remain the obligation of the new owner of that property.

Claim forms and other information about the State postponement program may be found at


II. Deferral of Assessments Pursuant to the 1913 Act.

Chapter 8 of the 1913 Act authorizes the City to allow property owners to defer payment of an assessment levied pursuant to that act, so long as eighty percent or more of the area of the assessment district is developed for residential, commercial, or industrial use. Such a deferral program may be adopted by resolution of the City Council, and the City Council may establish both eligibility criteria for the deferral and a procedure for determining that property owners taking advantage of the deferral are eligible. The 1913 Act establishes no limitations on the criteria, which the City may establish, though, as with all governmental actions, the City must have a rational basis for any criteria it establishes.

The City has two options for financing a deferral pursuant to the 1913 Act:

•It can enter into annual agreements with individual homeowners, pursuant to which the City agrees to pay that homeowner’s assessment installment for the coming year. Such an agreement may not commit the City to make assessment payments beyond the current year; or

•It can create a deferral fund for the assessment district, depositing into such fund (from some other source of funds available to the City) the amount necessary to pay assessments against specific properties for a specific period of time (including the full term of the assessment).

Although there is a provision of the 1913 Act which purports to allow the City to issue additional bonds in order to fund a deferral fund, it is unlikely that this authorization survives Proposition 218. As has been noted, Proposition 218 requires that assessments be levied according to special benefit. It is unlikely that properties, other than properties receiving the deferral, could be found to benefit from such a program. Therefore, it would likely be impermissible under Proposition 218 to levy an assessment against all properties to service the debt on bonds financing a deferral program that only benefits certain   properties.

Deferred assessments must be paid back to the City if: (i) the home is transferred; (ii) the bonds issued to finance the assessment district reach their final maturity, or (iii) other criteria established by the City, at its discretion, are met.


III. Redevelopment Loans and Grants

The Community Redevelopment Law (Health & Safety Code Section 33000 et. seq.) (The "CRL") requires that the Rancho Palos Verdes Redevelopment Agency (the "Agency") use not less than twenty percent of its tax increment funds for the purposes of increasing, improving and preserving the City’s supply of low- and moderate-income housing available at affordable housing cost to persons and families of low or moderate income and to very low income households. A person or family qualifies as being of low- or moderate-income when household income is below a level established by the State (currently $52,300 for a family of two living in Los Angeles County). Affordable housing cost is equivalent to various percentages of the area median income, adjusted for family size, income level, and type of housing (ownership or rental).


The Agency is authorized to use housing fund moneys to rehabilitate buildings or structures. Pursuant to this authorization, the Agency could consider establishing a program to lend or grant money to persons of low- or moderate-income to help defray the costs of converting their home’s utility connections in order to connect them to the new underground system.

f the Agency were to establish a loan program, it could set eligibility criteria and loan terms, so long as the loans are only available to persons owning the affordable housing that is occupied by low- or moderate-income residents, as defined above. Use of Redevelopment Funds typically is restricted to the redevelopment project area. In order to make a loan or grant for the rehabilitation of housing outside of a redevelopment project area, both the Agency and the City must find that the use of funds for the loan or grant will be of benefit to the project area.



There are programs that the City Council could choose to implement to assist low income households, senior citizens and persons with disabilities so that the assessments for the cost of the undergrounding of utilities can be deferred.


During its discussion of assessment deferrals for undergrounding districts, the City Council decided to assign the FAC with the following task:


“To investigate a structure that creates a revolving fund to allow people who meet criteria to delay fees, including the  $5,000 connection fee, with a lien placed on the home and funds repaid when house is sold, possibly funded initially by a securitized bond.”


Finance staff assumes that very few disabled, blind and low-income (i.e. annual household income less than $24,000) property owners exist in the City.  Based upon a discussion with the Director of Public Works, Finance Staff offers the following non-substantiated data to assist the FAC:


Finance Staff has not prepared any suggestions regarding assessment deferral programs.  Robin Harris, a municipal finance specialist from Richards, Watson & Gershon, and the Director of Public Works are present to provide an overview and assist Finance Staff and the FAC in the beginning of this assignment. 


Respectively Submitted,
 Dennis McLean

Finance Director

  DECEMBER 12, 2001


During the City Council meeting on December 4th, several members of the City Council expressed a desire to use real-time financial modeling for “what-if scenarios” during its decision making process.  As you may already know, the Five-Year Financial Model is prepared using Microsoft Excel and enables the immediate review of the cause and effect, resulting from changes of assumptions used in the preparation of the Model.  Since the December 4th meeting, Finance Staff has already brainstormed several ideas to enable improved “what-if scenarios” on the fly. 

 Knowing that the Finance Advisory Committee (the “FAC”) has reviewed both the 2000 and 2001 Five Year Financial Models and mid-year revisions thereof, Finance Staff welcomes the FAC’s suggestions to improve the Model and implement the suggestions requested by the City Council.  Although it is not anticipated that Finance Staff will begin its preparation of the 2002 Financial Model until March 2002; the project to improve the Model has already begun.  Therefore, the FAC’s immediate comments are welcomed this evening, followed by comments based upon each member’s review of the Model before the next meeting.  We have attached a copy of the most recent update of the 2001 Five-Year Financial Model for your convenience.


Respectfully submitted,
Dennis McLean

Finance Director