Title
Adoption of Resolution Determining that the Public Interest and Necessity Demand the Acquisition, Construction and Improvement of Municipal Improvement Projects Constituting Public Infrastructure of the City, and their Financing Through the Issuance of General Obligation Bonds; [Requires four affirmative votes] and
Introduction of Uncodified Ordinance Ordering the Submission of a Proposition Incurring Bonded Indebtedness to the Qualified Voters of the City of Alameda at the General Municipal Election to Be Held on November 5, 2024, for the Purpose of Financing the Cost of the Acquisition, Construction and Improvement of Certain Municipal Improvement Projects Constituting Public Infrastructure of the City. [Requires four affirmative votes]
This action is exempt from review under the California Environmental Quality Act (CEQA) because it is not a project as defined by the CEQA Guidelines, Section 15378 (b) (4). (City Manager 10021030)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
The City of Alameda (City) has identified nearly $800 million in deferred maintenance in public infrastructure citywide and is faced with climate-related challenges such as protecting our infrastructure and facilities from natural disasters, flooding, rising sea levels, erosion, winds, and earthquakes. As an island City, Alameda is especially vulnerable in areas on the west end near the tubes and on Bay Farm Island. The City has been careful with its maintenance dollars, but it’s not enough to address these critical needs.
The City’s adopted Strategic Plan includes exploring a general obligation bond or other revenue measure to fund deferred maintenance and new infrastructure needs. Considering the City’s significant needs, staff recommends placing a $150 million general obligation bond (sometimes referred to as an infrastructure bond or GO bond) on the November 5, 2024 ballot for voters to have the opportunity to decide. GO bonds, if approved by the voters, would be payable from a dedicated ad valorem property tax levied on taxable property in the City, not any other City funds.
Under existing law, passage of a GO bond requires two-thirds of those voting on the measure to vote in favor. However, Assembly Constitutional Amendment No. 1 (ACA 1) is being placed on the November ballot and, if adopted, would lower the necessary voter threshold to 55%. If ACA 1 is approved by the voters Statewide, this 55% threshold would apply to the City’s GO bond measure.
Placing a measure on the ballot for voters to consider requires City Council to adopt a Resolution indicating that public interest and necessity demand the issuance of the GO bond to finance authorized improvements and introduce an Ordinance submitting a GO Bond measure to voters. If these items are approved by City Council tonight, staff will return with the Ordinance adoption and 75-word ballot measure label for City Council’s consideration at its meeting on July 16.
BACKGROUND
In 2018, City Council was presented with revenue measure options to address a variety of identified local funding needs, including an infrastructure bond, and moved forward with a sales tax measure that was approved by 61.5% of voters.
In 2020, just prior to the COVID-19 pandemic, City Council was preparing to discuss a possible revenue measure for the November 2020 ballot to address a variety of identified local funding needs. While COVID-19 put those discussions on hold, growing demands on City revenues, unfunded pension and other post-employment benefits (OPEB) obligations, general economic uncertainty, looming state budget cuts, and funding needed for climate adaptation and other significant infrastructure needs makes this an important conversation to move forward.
The City’s Fiscal Year (FY) 2019-21 Capital Budget identified nearly $800 million in deferred maintenance in public infrastructure citywide. These infrastructure needs are above and beyond both current and projected funding and do not include implementing the City’s adopted Climate Action and Resiliency Plan, the City’s adopted Active Transportation Plan, and other City priorities, such as improving or constructing new facilities like a fire station and library at Alameda Point.
The City has over $57 million in deferred maintenance for pothole and street pavement, as identified in the most recent Pavement Management Program Update. The City receives transportation funds such as Measure B/BB, Gas Tax, and Vehicle Registration Fee, yet these funds are also needed to support traffic safety/congestion, sidewalks, and our urban forest, and there just isn’t enough for all infrastructure needs. Alameda’s extensive infrastructure needs are not a surprise. While the City’s average pavement condition index is 68, which is considered “Fair,” over 20% of City streets are in “Poor” or “Failed” condition. An investment of $57.5 million over the next five years would increase the Pavement Condition Index from 68 (Fair) to 73 (Good).
The City’s infrastructure needs were well witnessed during the severe winter storms in December 2022 and January 2023 that led the City to declare a State of Emergency. In 2024, Alameda experienced another round of severe storms in January and February causing residential flooding and damage to homes, City facilities, and businesses. Winter storms are more severe with King Tides and the City’s growing vulnerability to sea level rise.
While not related to infrastructure, Alameda voters showed their commitment to funding community needs at the March 5, 2024 election when 76.15% of Alameda voters approved Measure E, the highest percentage of yes votes an Alameda Unified School District parcel tax has ever received.
DISCUSSION
As part of its financial and infrastructure planning, the City has engaged the Alameda community in a number of ways, including a recently launched statistically relevant opinion poll on infrastructure priorities and Citywide mailers that contained a community engagement survey.
In early June, staff worked with FM3, a highly experienced opinion polling consulting firm the City has worked with for more than 16 years, to conduct a statistically relevant survey of likely voters on the need for infrastructure funding and their views on a proposed infrastructure bond measure. More than 400 dual-mode interviews were conducted by telephone, email, and text, in English, Spanish, and Chinese. This survey size presents a 4.9% margin of error at the 95% Confidence Level.
The majority of respondents approve of the job that City government is doing, which is consistent to what has been seen in recent years (post pandemic). The survey also reveals that 64% of respondents feel there is a great or some need for infrastructure funding in the City, which increased from 54% in 2023.
When asked specifically about a local funding measure dedicated to City infrastructure improvements, 68% of respondents were supportive or leaning in that direction.
In addition to conducting this statistically relevant public opinion research, staff produced two mailers sent to likely Alameda voters and a social media outreach effort with an online community engagement survey for individuals to share their feedback (Exhibit 1). This outreach resulted in more than 3,000 Alamedans sharing their priorities when it comes to Alameda’s public safety and community infrastructure, streets and roads, protecting our shorelines, and affordable housing.
The City’s most pressing infrastructure needs prioritized by the public include:
• Making our community safer by improving outdated police and fire stations and replacing aging infrastructure to prevent power outages, stormwater drainage, and sewer systems problems.
• Repairing potholes, repaving and maintaining roads, and improving pedestrian and bicycle safety with safe sidewalks and crosswalks.
• Protecting the shoreline including bridges, tunnels, homes, and wildlife that need protection from natural disasters such as flooding, rising sea and ground water levels, erosion, and earthquakes.
• Supporting the creation of affordable housing units, including repurposing vacant lots for residential development and providing shelter for the unhoused, all of which help address rising rental expenses.
On November 21, 2023, the City adopted its three-year Strategic Plan. Consistent with community concerns and priorities, the City’s Strategic Plan includes the following strategic priorities:
• Investing in transportation, infrastructure, economic opportunities, and historic resources.
• Building resilience to climate change and water level rise.
• Enhancing community safety and services.
• Housing all Alamedans and ending homelessness.
• Practicing fiscally responsible, equitable, and inclusive governance.
To address these priorities, the Strategic Plan includes project GOV15 to explore potential revenue measures that increase fiscal resilience and implement City Council’s strategic priorities and GOV15b to explore a general obligation bond or other revenue measure to fund deferred maintenance and new infrastructure needs.
Based on the City’s Strategic plan, recent polling and outreach efforts and growing infrastructure needs, staff recommends placing a GO bond of $150 million on the November 5, 2024 ballot. GO Bonds, if approved by the voters, would be payable from a dedicated ad valorem property tax levied on taxable property in the City, not any other City funds. Monies raised by such a measure could go to the following authorized improvements:
• Flooding-related improvements in and around the tubes, bridges, the shoreline, and Bay Farm Island.
• Improvements addressing sea level rise or climate change, such as levees, dikes, and seawalls and other improvements protecting natural areas along the shoreline.
• Upgrades to, including new construction of bridges, buildings, and other City infrastructure, including public safety, animal shelter, and library facilities, to withstand major earthquakes, meet applicable building codes, and otherwise meet current standards.
• Traffic- and safety-related improvements, such as repaving, reconstructing, and/or repairing streets, roads, alleys, and other infrastructure to prevent deterioration, fixing potholes, and improving curbs, gutters, sidewalks, and related infrastructure, including improvements addressing traffic flow, traffic congestion, and safety for people who walk or bike.
Placing a GO bond measure on the ballot requires the City Council to take the following legislative actions:
• Adoption of Resolution of Necessity - indicating the public interest and necessity demand issuance of the GO bond to finance the authorized improvements. [July 2, 2024 Council Meeting]
• Introduction and Adoption of Ordinance Submitting GO Bond Measure to Voters - identifying the objects and purposes of the bonds, the estimated cost of the improvements to be financed, accountability requirements applicable to the bonds, and related matters. [July 2, 2024 Council Meeting]
• Adoption of Resolution Placing Measure on Ballot - approving the 75-word ballot measure label and other particulars concerning the conduct of the election, which will be considered when the Ordinance returns for adoption. [July 16, 2024 Council Meeting, if previous actions adopted at July 2 Meeting]
Both the Resolution of Necessity and the Ordinance must be approved by City Council by four affirmative votes. If City Council votes to place the GO Bond measure on the ballot, City voters will have the ability to vote on the measure in November.
Under existing law, passage of a GO bond requires two-thirds of those voting on the measure to vote in favor. However, ACA 1 is being placed on the November ballot and, if adopted, would lower the necessary voter threshold to 55%. If ACA 1 is approved by the voters Statewide, this 55% threshold would apply to the City’s GO bond measure. If ACA 1 is not approved, the two-thirds supermajority threshold for the City’s GO bond measure will remain in effect. If City voters approve the GO bond measure by the requisite percentage, the City could tackle a significant amount of unfunded infrastructure needs. Bonds are likely to be issued in multiple phases and many of the improvements that could be funded by bond proceeds would last for many decades. Bond proceeds are restricted to capital projects, so there is no possibility that bond proceeds could fund operations, or for that matter any other purposes.
The proposed GO Bond measure requires transparency and accountability over and above the City’s existing budget requirements, including an annual, independent audit to ensure transparency, accountability, and proper disbursement of bond proceeds as promised to the public. In addition, the City Council would receive an annual report from the Finance Director on proper disbursement of the bond proceeds.
Any action taken by the City Council this evening to advance this measure to the November ballot is not a vote to support or oppose the measure. While City Council has the right to take a formal position on this measure if it chooses, tonight’s action is simply whether to advance the measure forward so that Alameda voters have the opportunity to consider it and decide in November. When the resolution placing the measure on the ballot is considered at the next meeting, the City Council can also decide about submitting arguments and rebuttal concerning the measure.
If the ballot measure is approved by Alameda’s voters, property owners can expect an average levy of $29 per $100,000 of assessed value per year while Bonds are outstanding. Given multiple series of 30-year bonds are contemplated, the levy is likely to exceed 30 years. If approved, the City will be able to address significant infrastructure needs before these costs increase further. Individual property owners may also benefit from savings from fewer automobile repairs, as Californians pay an estimated $800 per year in unexpected vehicle repairs required by damage from potholes and poorly maintained streets and roads.
The bonds are intended to fund capital projects that would not otherwise be addressed due to a shortage of funds and are not intended to be used to maintain spending levels previously supported by other revenue sources, including the General Fund. If the ballot measure is rejected, the City’s public infrastructure will continue to deteriorate over time and cause greater and more costly failures, ultimately costing the City and its taxpayers more in the long run.
The cost to hold this election is estimated to be approximately $35,000 depending on what other measures are placed on the November ballot by other agencies in the County.
ALTERNATIVES
• Upon determining that the public interest and necessity demand the acquisition, construction, and improvement of public infrastructure, adopt a resolution of necessity and introduce an ordinance ordering the submission of an infrastructure bond to the qualified voters of the City of Alameda at the General Municipal Election to be held on November 5, 2024.
• Provide alternative direction to staff regarding addressing the funding needed for Citywide infrastructure.
FINANCIAL IMPACT
The cost to hold this election is estimated to be approximately $35,000 depending on what other measures are placed on the November ballot by other agencies in the County. If there is a desire to place a measure on the ballot, staff will return to City Council to increase expenditure appropriations of the City Clerk’s election budget if necessary. GO Bonds, if approved by the voters, would be payable from a dedicated ad valorem property tax levied on taxable property in the City, not any other City funds.
The fiscal impact of this GO Bond, if approved by the voters, will provide the City the necessary funding to accomplish numerous necessary and important infrastructure improvements that the City would otherwise be unable to accomplish.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code and is included in the 2023-2026 Strategic Plan under GOV15, explore potential revenue measures that increase fiscal resilience and implement the City Council’s strategic priorities, and GOV15b, explore a general obligation bond or other revenue measure to fund deferred maintenance and new infrastructure needs.
ENVIRONMENTAL REVIEW
This action is exempt from prior CEQA review pursuant to CEQA Guidelines section 15378, subdivision (b)(4). For purposes of CEQA, a project does not include the creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant impact on the environment. Kaufman & Broad-South Bay, Inc. v. Morgan Hill Unified School Dist. (1992) 9 Cal.App.4th 464, 476.
CLIMATE IMPACT
The ability of the City to meet the challenge of reducing its greenhouse gas emissions, protect the shoreline from natural disasters such as flooding, rising sea and ground water levels, erosion, and earthquakes, and respond to more frequent and intense storms will require significant new funding source. This action is the first step in exploring a revenue measure that could significantly help support the City’s efforts to address climate change.
RECOMMENDATION
Adopt a resolution determining that the public interest and necessity demand the acquisition, construction and improvement of municipal improvement projects constituting public infrastructure of the City, and their financing through the issuance of GO Bonds; and introduce an uncodified ordinance ordering the submission of a proposition incurring bonded indebtedness to the qualified voters of the City of Alameda at the General Municipal Election to be held on November 5, 2024, for the purpose of financing the cost of the acquisition, construction and improvement of certain municipal improvement projects constituting public infrastructure of the City.
Respectfully submitted,
Sarah Henry, Communications Director
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibit:
1. Community Mailers