CITY OF RANCHO PALOS VERDES
FINANCE ADVISORY COMMITTEE
APRIL 13, 2005
Chair McLeod called the meeting to order at 7:03 PM at the City Hall Community Room, 30940 Hawthorne Boulevard, for the purpose of conducting business pursuant to the Agenda.
Roll call was answered as follows:
PRESENT: Clark, Grimme (Arrived at 7:10pm), McLeod, Nelson, Smith, and Wallace
Also present were Director of Finance and Information Technology McLean; Accounting Manager Downs; and Senior Administrative Analyst Gyves.
APPROVAL OF AGENDA
Chair McLeod motioned for approval of the agenda, and Vice-Chair Clark seconded. Hearing no objection, Chair McLeod ordered approval of the agenda.
APPROVAL OF DRAFT MINUTES FOR THE MEETINGS CONDUCTED JANUARY 26, 2005 AND FEBRUARY 23, 2005
Due to a lack of members present from the FAC meetings conducted January 26, 2005 and February 23, 2005, Chair McLeod postponed approval of the draft minutes.
INTRODUCTION OF NEW COMMITTEE MEMBER, BOB NELSON
Chair McLeod requested that all FAC members, including Member Nelson, give a brief introduction of themselves. Chair McLeod welcomed Member Nelson to the FAC.
WATER QUALITY AND FLOOD PROTECTION PROGRAM – USER FEE
Director McLean informed the FAC that the "Water Quality and Flood Protection Program – Proposed Storm Drain User Fee" Staff Report (Staff Report) presented to the FAC is identical to the one that will be presented to the City Council on April 19, 2005. Director McLean, with the assistance of a Power Point presentation, informed the FAC the following regarding the Water Quality and Flood Protection Program:
- The Power Point presentation being presented to the FAC will be similar to the one presented to the City Council on April 19, 2005.
- Staff will communicate to the City Council any comments, questions or recommendations the FAC may choose to make.
- Staff’s recommendations in the Staff Report include; (1) Accept and approve the Rate Analysis Report ($86/ERU) prepared by Harris & Associates; (2) Approve the establishment of a User Fee Assistance Program; (3) Adopt a resolution stating the City’s intent to establish a storm drain user fee, setting the date of the public hearing for June 21, 2005; (4) Introduce ordinance authorizing the use of mail ballot elections; and (5) Introduce ordinance establishing an annual storm drain user fee.
- As a result of the recent storms and their damage to public and private property, the City Council took the following actions at the March 15, 2005 City Council meeting:
- Approved a 16-month expenditure plan for the Water Quality & Flood Protection Program totaling in excess of $3 million;
- Established a Water Quality & Flood Protection Program Enterprise Fund for renewal and improvement of the City’s storm drain infrastructure;
- Approved a $2 million General fund equity transfer to the new Enterprise fund;
- Authorized the expenditure of $445,000 from the Capital Improvement Fund for FY04-05;
- Authorized the expenditure of $100,000 from the Water Quality and Flood Protection Enterprise Fund for FY04-05;
- Included approximately $600,000 for FY05-06 (subject to the budget process) for interim McCarrell Canyon and Palos Verdes Bay Club storm drain improvements; and
- Authorized expenditures from the Water Quality and Flood Protection Enterprise Fund for FY05-06 (subject to the budget process) of $500,000 for storm drain lining and $1.2 million for construction of the Sunnyside Ridge project.
- After the City Council authorized the spending plan on March 15, 2005, Staff developed Version 7 of the Rate Model ($86/ERU) with the following assumptions:
- Incorporation of the $3,050,000 spending plan, including acceleration of the McCarrell Canyon project;
- Priority 1 and 2 projects were spread over 30 years, compared with 20 years in Version 6; and
- An annual 2% increase was added to the initial Storm Drain User Fee, compared with use of a flat fee in Version 6.
- The Team is recommending Version 7 of the Rate Model ($86/ERU) as the preferred rate for the following reasons:
- The mail survey was conducted during a favorable time period (just following the recent storms, no organized opposition, during favorable press coverage, and prior to the press coverage related to the PVPUSD’s pending survey of needs);
- The majority of support for a fee under $88 was "soft" support (probably yes versus definitely yes); and
- In the mail survey, "hard" support (definitely yes) dropped from 30% to 20% at a fee greater than $88.
- Version 7 of the Rate Model ($86/ERU) does not provide financing for the following:
- Priority 3 projects (18 known projects with a total cost of about $4.5 million);
- Actual project costs that exceed original engineering estimates;
- Emergency projects with additional costs for property damage and slope failures; and
- New projects discovered when the storm drain master plan is updated.
- The Team is not recommending a Parcel Tax for the following reasons:
- A parcel tax vote would include all registered voters, not just the property owners who would pay the Parcel Tax; and
- Compared to the User Fee approach, a Parcel Tax that assessed a flat fee against all properties would shift 17% of the burden away from commercial properties to residential properties; and
- A Parcel Tax would require a two-thirds majority to pass. However, since nearly 20% of registered voters in the City are renters, potentially 20% of the voters would participate in a decision about a Parcel Tax that they would not directly pay.
- If the Storm Drain User Fee is established, the City must annually provide published notice and hold a public hearing to set the Storm Drain User Fee for every subsequent year. The proposed Storm Drain User Fee detailed in the Rate Analysis Report sets the maximum annual Storm Drain User Fee at $86 per ERU for FY06-07. The maximum annual rate per ERU shall be adjusted annually commencing with FY07-08 by an amount equal to the annual change in the Consumer Price Index, not to exceed a maximum increase of 2% per year.
- The Team recommends the establishment of a User Fee Assistance Program. The Team is recommending that the City reimburse 50% of the Storm Drain User Fee to eligible property owners with gross income under $35,000. Based on Version 7 of the Rate Model ($86/ERU) and an 80% program participation rate, Staff estimates a maximum annual General fund expenditure of $61,500 for this program.
QUESTIONS AND COMMENTS RELATED TO THE WATER QUALITY AND FLOOD PROTECTION PROGRAM – USER FEE:
Chair McLeod advised Staff to include in the presentation to the City Council that the City could borrow from the revenue stream created by an $86/ERU rate, if approved by voters.
Chair McLeod also advised Staff to reword the language relating to the Consumer Price Index (CPI) and the Maximum Fee Rate to account for decreases in the CPI.
Vice-Chair Clark advised Staff to prepare a graph to help explain the Maximum Fee Rate methodology.
Vice-Chair Clark asked if the City Attorney has determined if other government agencies will be required to pay the fee. Director McLean informed the FAC that the City has no method to enforce collection of fees levied upon government owned parcels. Director McLean also informed the FAC that based upon recent research by the Deputy City Attorney, the City will not be required to pay any charges on behalf of other government agencies.
FAC RECOMMENDATION REGARDING THE WATER QUALITY AND FLOOD PROTECTION PROGRAM – USER FEE:
Chair McLeod moved and Member Nelson seconded a motion to recommend the following statement to the City Council: "Support the recommendations in the staff report with concerns that the fee may be inadequate to pay for all storm drain costs in the future, potentially reducing General Fund Reserves below the Council’s established policy level". Hearing no objection, Chair McLeod ordered approval of the FAC recommendation.
No public comments were made.
Chair McLeod moved and Member Grimme seconded a motion to adjourn the meeting at 9:36 PM. Hearing no objection, Chair McLeod ordered the meeting adjourned.
Chair, Financial Advisory Committee
Gary Gyves, Recording Secretary