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HomeMy WebLinkAbout2012/01/04 - Agenda Packet - Special'_/~ANtyC~HC) C~UCAMONGA AGENDA CITY COUNCIL SPECIAL MEETING Wednesday, January 4, 2012 4:00 p.m. Tri-Communities Room 10500 Civic Center Drive ~ Rancho Cucamonga, CA 91730 A. CALL TO ORDER: A1. Pledge of Allegiance A2. Roll Call: Mayor Michael Mayor Pro Tem Spagnolo Council Members Alexander, Buquet and Williams B. COMMUNICATION FROM THE PUBLIC: This is the time and place for the general public to address the City Council on any item listed on the agenda. State law prohibits the Council from addressing any issue not previously included on the Agenda. The Council may receive testimony and set the matter for a subsequent meeting. Comments are to be limited to five minutes per individual or less, as deemed necessary by the Chair, depending upon the number of individuals desiring to speak. All communications are to be addressed directly to the City Council, not to the members of the audience. This is a professional business meeting and courtesy and decorum are expected. Please refrain from any debate between audience and speaker, making loud noises, or engaging in any activity which might be disruptive to the decorum of the meeting. C. ITEM OF DISCUSSION: C1. Update on Street Light Maintenance Districts SPECIAL MEETING -Wednesday, January 4, 2012- 4:00 p.m. Page 1 of 2 D. ADJOURNMENT I, Debra L. McKay, Assistant City Clerk/Records Manager, of the City of Rancho Cucamonga, hereby certify that a true, accurate copy of the foregoing agenda was posted on January 3, 2012 per Government Code 54954.2 at 10500 Civic Center Drive, Rancho Cucamonga, California. SPECIAL MEETING -Wednesday, January 4, 2012- 4:00 p.m. Page 2 of 2 STAFF REPORT CITY M~INAGER'S OFFICE ~~j-.~ L RAN~CHOI Date: January 4, 2012 CUCAMONGA To: Mayor and Members of the City Council John R. Gillison, City Manager From: Linda Daniels, Assistant City Manager By: Donna Finch, Redevelopment Analyst I Subject: Update on Street Light Maintenance Districts (SLDs) BACKGROUNDIANALYSIS A Street Light Maintenance District (SLD) is a financing vehicle that is used by local government agencies to fund the installation and maintenance of street lights and traffic signals within a designated geographic area so that the costs associated with new development do not burden the General Fund. Rancho Cucamonga currently has eight (8) Street Light Maintenance Districts that were formed in the 1980's and 1990's to establish a dedicated funding source for new development to pay for new street light infrastructure and the ongoing operation of street lights and traffic signals within each SLD. Each SLD was created through formation proceedings pursuant to the Landscaping and Lighting Act of 1972 (the "1972 Act") usually at the time a residential or commercial project was developed. The "1972 Act" allows a local agency to levy an annual assessment on each Equivalent Dwelling Unit (EDU) for the maintenance of the community improvements based on the specific benefits received by the property owners within the SLD. Assessments are paid by property owners on an annual basis as part of a line-item on their individual property tax bills and are used to support the SLD accounts. Beginning in 1996, any new or increase to an assessment rate must comply with the requirements of Proposition 218, the "Right to Vote on Taxes Act." Proposition 218 requires local government agencies to have a vote by the affected property owners before any changes in assessments can be imposed on the properties within a district. The assessment rates within Rancho Cucamonga's SLDs have remained unchanged since 1996 as a result of Proposition 218. The costs associated with operating and maintaining the SLDs have risen over the years, due primarily to recurring increases in energy rates, which have risen by more than 50% in the past 5 years. While utility fees are only a portion of the SLD expenditures, these increases have resulted in expenditures gradually exceeding revenues, creating a deficit in several SLD accounts. In FY 2000/01, the City began using limited amounts of money from individual SLD reserve accounts to meet the expenditure needs of the SLDs. This use of reserves has increased proportionately in recent years as energy expenses have risen. The reserves are typically set aside for unexpected costs and are used to provide a consistent cash flow for monthly SLD expenses until the accounts can be replenished by property tax revenues. The use of reserves have offered a temporary solution for filling the revenue gap in the deficient SLD accounts; however, continued reliance on the reserves will widen the gap between revenues and expenditures and create a structural deficit in the SLDs that will eventually deplete the reserve accounts entirely. UPDATE ON S11tIE1' LIGI-rr 1~UVNPGNANC6 DIS"IRICTS (BEDS) PAGI: 2 JANUARY 4, 2012 SLD EXPENDITURE REDUCTIONS Staff has identified several cuts that can be made to help manage the increasing SLD expenditures. These cuts, which will not affect baseline operations, will save between $150,000 and $300,000 in total expenses over all 8 SLDs. Staff will be implementing these savings in FY 2012/13. The greatest SLD expenditure is the utility bill from Southern California Edison (SCE), which is a cost that the City has no control over. In a recent meeting with SCE administrators, staff was informed that the actual energy costs are only approximately 25% of the SCE utility bill. The remaining 75% of the bill are expenses charged by SCE, including the delivery and the generation charges of bringing the power to the pole. Included in the delivery charge is an administrative maintenance charge that ranges from $8.81 per pole to $10.10 per pole, depending on the size of the lamp. This constitutes the majority of the bill, which is used to help recover the installation costs associated with the street light poles and fund the ongoing maintenance costs of the poles. Even if a street light is turned off, SCE has indicated they would still charge the delivery maintenance per pole charge, which is 75% of the current bill. Therefore, turning off the street lights saves little in total expenditures due to SCE's billing practices. The need to reduce costs for SLDs and SCE street lights is not limited to only the City of Rancho Cucamonga. It has been noted by several other cities that there are various inequities associated with SCE's street lighting rates and SCE's cost-recovery policies related to the installation of street light poles. These inequities include an SCE reimbursement provided to developers for installing the marbelite poles instead of the standard wood pole, and the continued collection of a fixed delivery maintenance charge for light poles regardless of age or type. The City of Moreno Valley has filed for and has been granted Party Status in SCE's 2012 General Rate Case with the California Public Utilities Commission (CPUC) to discuss the street light issue from a municipality perspective. In September 2011, Rancho Cucamonga, along with nine other local communities, expressed an interest in joining Moreno Valley and their coalition to address the street light financing issues with the CPUC commissioners. This coalition is scheduled to meet with SCE and the California City- County Street Light Association (CAL-SEA) in January 2012 to address the challenges and concerns that Cities are facing with SCE street light costs. It is the goal of this group to work with SCE and the CPUC to go through a formal hearing process and persuade SCE to implement a change in its street lighting rates and policies to address these inequities and reduce or eliminate the per pole charge entirely. This would bring SCE into conformity with the billing practices of SDG&E and PG&E. ADDITIONAL REVENUE SOURCES Reducing City costs as noted above will provide some relief to the use of reserves, but it will not alleviate the long term structural deficit issue with the majority of the SLDs. Resolution of the SCE charges for pole and administrative charges should further assist in helping to balance the SLD revenues and expenditures, however staff cannot predict when this issue will be resolved and what degree of expenditure reductions will result because this situation has never been brought before the CPUC and there is no prior history to compare to. Until a resolution can be reached between SCE and the Moreno Valley coalition on the street lighting rates, staff requesting confirmation through the adoption of a policy that provides for a portion of the revenues from Gas Tax Funds to be utilized for SLD expenditures. UPllA'I'E ON $'1REE'I' LIGI~I'P MAINTENANCE DISTRICTS (BEDS) JANUARY 4, 2012 PAGE 3 Gas Tax revenues are used to fund expenditures for the maintenance and improvements of local and arterial City streets. Authorized Gas Tax expenditures include street pavement maintenance and rehabilitation projects, signal maintenance, marking and striping services, and street sweeping, to name a few. This revenue has supported the City's efforts to maintain an overall rating of "Good/Satisfactory" (79) for the Pavement Condition Index (PCI), which is above the State average. Redirecting up to 20% of Gas Tax revenues to supplement the SLD accounts will not adversely affect the PCI; however, increased utilization of Gas Tax revenues beyond 20% on uses other than direct street pavement improvements and maintenance will adversely impact the quality and condition of City streets over a prolonged period of time. The use of Gas Tax funds for SLD purposes is an eligible expenditure and a common municipal budgeting practice. Throughout the City's history, the use of Gas Tax for SLD expenditures has occurred on a limited basis. Based on current and projected SLD revenues and expenditures, staff has determined that a maximum of 20% of Gas Tax revenues may be needed by the SLD accounts to help meet the expenditure needs for the near future. A policy of appropriating up to 20% of Gas Tax revenues to the SLD accounts is a solution that is only intended to meet SLD expenditure needs in the short to medium term. If a positive resolution is reached with SCE on the street lighting rates, the gas tax use should be reduced. Ultimately, as SCE rates rise, a Proposition 218 election will be required at some point in the future to increase the SLD assessment rates. RECOMMENDATION Confirm staffs participation with Moreno Valley in filing a motion for Party Status in Southern California Edison's General Rate Case with the CPUC to address the challenges and concerns associated with the street light costs; Confirm the budget practice of allocating up to a total of 20% of Gas Tax revenues to supplement the SLD accounts in proportion to the appropriate General and Special benefit in each district. 3. Direct staff to monitor SLD accounts and notify Council in advance of the need for a Prop 218 election. Respectfully Submitted, p ~ ~~ . ~~`..""C_1 ind D. 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