Title
Recommendation to Authorize the City Manager to Execute a Two-Year Agreement with NBS for Audit Implementation Services for Alameda’s Landscape and Lighting District and Special Financing Districts, in an Amount Not to Exceed $101,750. (Public Works 27641530)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The City of Alameda (City) administers a variety of Special Financing Districts (District) throughout the City. The earliest District was formed in 1984. In 2016, staff began an audit process to ensure that Alameda’s Districts are following all current laws and best management practices. The audit process resulted in a variety of recommendations to bring the Districts into compliance. Staff recommends moving forward with the most critical findings with the support of Alameda’s Special Financing District consultant, NBS. Staff is seeking approval of a two-year contract in an amount not to exceed $101,750. The audit implementation work is only specific to the City’s non-bonded districts and will focus on these key priorities: Marina Cove Park Fiscal Impact Analysis, Annual Budget and Fund Balance Review, Updating District Resolutions and Engineer’s reports to include necessary general and special benefit analysis, and an Administrative and Operations Manual. Funding for this work was budgeted in the Public Works Department Fiscal Year (FY) 2021-23 Biennial Budget for Special Financing District Administration Fund (27641530).
BACKGROUND
Special Financing Districts are land secured funding mechanisms which are formed and operate under various sections of California law. Property owners are charged an assessment or tax to provide for services or infrastructure such as landscape and maintenance. This item focuses on Alameda’s non-bonded or service Districts. Alameda has several types of Districts: Non-bonded Maintenance Assessment Districts (MADs), the Island City Landscape and Lighting District (LLADs), and Community Facilities Districts (CFDs). The MADs and LLADs are special assessment districts and these districts provide for landscape maintenance, removal of litter and graffiti, the cleaning of sidewalks and public litter cans, and routine maintenance of bus shelters. The CFDs are special tax districts and these districts provided services that include landscape maintenance, public safety, street maintenance and upkeep of City parks. Staff administers these districts, and has contracted with NBS since FY 2011-12 for preparation of required Engineer’s Reports and levy submittals to the County of Alameda. Below is a summary of the districts in Alameda.
In 1984, the City Council formed the Island City Landscaping and Lighting District 84-2. This district provides enhanced landscaping and routine maintenance in six (6) zones throughout the City
In 2002, the City Council formed the Marina Cove Maintenance Assessment District 01-1. This district provides enhanced maintenance for the sidewalks, landscaping, and a City Park in the Marina Cove development.
In 2003, the City Council formed the Bayport Municipal Services CFD 03-01. This district provides landscape maintenance, public safety, maintenance and recreation and parks.
In 2013, the City Council formed the Alameda Landing Municipal Services CFD 13-2. This district provides for enhanced landscape maintenance, public safety, street maintenance, and upkeep of city parks.
In 2014, the City Council formed Marina Cove II CFD 14-1. This district provides maintenance for the sidewalks, landscaping, and a City Park in the Marina Cove development.
Lastly, in 2017, the City formed Alameda Point Municipal Services CFD 17-1. This district includes transportation, landscape maintenance, public safety, maintenance, and recreation and parks.
In 2016, staff engaged with NBS to complete an audit of the City’s Administration of Alameda’s Districts. The purpose of the audit was to provide the City with an evaluation and information regarding its current administrative and operational practices regarding the Districts. This engagement included on-site staff interviews, review of the City’s internal procedures and the City’s District-related data. The audit also included examination of formation documents, fund balances, applicable codes and statutes, and court rulings related to assessments and taxes. At the conclusion of the audit, the City was provided a detailed draft recommendation report that provides a summary of the areas of compliance/concern, potential solutions, recommendations for more detailed research of certain areas, and an implementation plan. A summary of these findings is attached to this report as Exhibit 2. NBS’s findings and recommendations fall within three general categories: Compliance, Information, and Procedures.
The City selected NBS for the systems audit work as NBS has been Alameda’s contracted administrator of the City’s special financing districts for the last ten plus years. NBS has years of satisfactory performance plus historical knowledge and experience through previous administration of Alameda’s Districts including preparation of Engineer’s Reports and submittal of the annual levy for each. NBS’s past work for the City and historical knowledge allowed for the most efficient audit as well as cost savings in gathering historical information.
Addressing the areas listed in the draft recommendation report will ensure the City’s Special Financing Districts will continue to operate with a strong, legally compliant foundation, will increase transparency and accountability within the Districts, enhance efficiency and effectives of District operations and will provide the City with the tools to implement industry best practices.
DISCUSSION
The first phase will consist of the four projects below:
1. Marina Cove Park Program Fiscal Impact Analysis: NBS and staff will work together to correctly identify the right funding methodology for park maintenance between Maintenance Assessment District 01-1 and Marina Cove II.
2. Annual budget and Fund Balance Review: NBS will work with staff to develop and establish fiscal goals and policies, including on-going revenue and cost projections, in accordance with current industry best practices to ensure the continued financial viability of the Districts.
3. Rewrite of District Resolutions and Engineer’s Report Including General and Special Benefit Analysis: NBS will review the improvements, maintenance, services, budgets, location and type of improvements, special benefit, general benefit, and recent case law with legal counsel. NBS will meet with staff and legal counsel to discuss appropriate and/or alternative approaches to the special and general benefit analysis sections of the Engineer’s report and associated City Council Resolutions.
4. Administrative and Operations Manual: NBS and staff will create an Administrative and Operational manual describing the current procedures necessary for comprehensive administrative and operational practices by all applicable staff to ensure compliance with requirements of the City’s Municipal Code and Proposition 218.
It is expected that this first phase of work will be completed in Fiscal Years 2022-23 and 2023-24.
This item and the associated contract are for the phase one work described above and detailed in Exhibit 2. Staff will update the City Council once phase one is completed and provide details regarding the recommended following phases; the anticipated scope of future work is summarized below.
Phase two will consist of:
• Boundary Line Audits, including GIS Maps of the districts.
• Updates to the special tax code and assessment code (includes updates to corresponding sections of the Alameda Municipal Code).
• Development of City policies and public outreach program for assessment increases/special taxes and an enhanced formation package.
Phase three will consist of:
• Reconciliation of actual revenues collected versus county submittals.
• Comprehensive capital plans.
• Improvement evaluations and use life.
• Benchmark metrics for maintenance.
Phase four will consist of:
• Create and enact a records retention policy.
• Annual report information on CFD Fund Balances incorporated into annual CFD Resolutions.
Staff recommends contracting with NBS to deliver the first phase of the audit implementation work. Ultimately, it is necessary to complete all four phases of the audit implementation work as these topics continue to be the subject of updated case law and lawsuits.
As the first phase of work is implemented, staff will report back to the City Council on the results as follows:
• Annual budget and Fund Balance Review:
During the Fiscal Year 2022-23 Annual Engineers Report Process
• Administrative and Operations Manual:
During the Fiscal Year 2022-23 Engineer’s Re Report Process
• Park Program Fiscal Impact Analysis:
During Fiscal Year 2023-24 Annual Engineers Report Process
• Rewrite of District Resolutions and Engineer’s Report Including General and Special Benefits: During the Fiscal Year 2023-24 Annual Engineers Report Process
Staff seeks City Council’s approval to award NBS a sole source contract for phase one of the audit implementation project based on their institutional knowledge of Alameda’s special tax districts, for a total expenditure not to exceed $101,750. NBS was also selected as the sole source provider to complete the Special Districts Audit in 2016 and has the historical knowledge and technical experience from working with Alameda’s Special Tax Districts since 2011 in various areas such as preparing the annual Engineer’s Reports any levy. The contract is attached as Exhibit 1.
ALTERNATIVES
• Award the agreement as presented.
• Direct staff to implement this work in-house. At this time, staff does not have the resources with specific expertise to execute these items. Although this can be acquired, it would result in implementation delays, likely until Fiscal Year 2023-24, and staff would need to come back to request additional resources.
• Direct staff to perform a competitive solicitation for these services before recommending a provider for award. This would result in implementation delays until Fiscal Year 2023-24.
• Do not move forward with implementation of the audit findings, resulting in the special assessment districts being out of compliance with current state law, which could result in exposure to lawsuit/legal challenges.
FINANCIAL IMPACT
Budget for the agreement is included in the Public Works Department FY 2021-23 Biennial Budget for Special Financing District Administration (27641530). The audit implementation services are funded with property owner assessments levied and collected annually.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
In accordance with California Environmental Quality Act (CEQA), this project is categorically exempt under CEQA Guidelines Section 15308, Actions by Regulatory Agencies for Protection of the Environment.
CLIMATE IMPACTS
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Authorize the City Manager to execute a two-year agreement with NBS for audit implementation services for Alameda’s landscape and lighting district and special financing districts, in an amount not to exceed $101,750.
CITY MANAGER RECOMMENDATION
The City Manager requests authorization to execute a two-year agreement with NBS for audit services for the lighting district and special financing districts.
Respectfully submitted,
Erin Smith, Public Works Director
By,
Amanda Eberhart, Management Analyst
Financial Impact section reviewed,
Annie To, Finance Director
Exhibits:
1. Agreement
2. Findings Summary
cc: Eric Levitt, City Manager