Title
Public Hearing to Consider Collecting of the Water Quality and Flood Protection Fees on the Property Tax Bills; and
Adoption of Resolution Finding [No] Majority Protest and Approving the Continuation and Collection of the Existing 2019 Water Quality and Flood Protection Fee on the Property Tax Bills for Fiscal Year 2022-23. (Public Works 26441610)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The City of Alameda’s (City) 2019 Water Quality and Flood Protection Fee (Fee) establishes that the City Council shall, annually, determine any adjustments to the Fee and approve to have the Fee collected on the annual property tax bills. In addition to determining any adjustments to the Fee, a publicly-noticed hearing must be held each year before the City can use this Fee collection method. Property owners subject to this method of collection have a right to file a written protest, whereby a majority protest can block this method of collection. This hearing and the right to protest does not apply to the Fee itself; this process only applies to the method of collecting the Fee. If a majority protest is formed, the City would still be able to determine any adjustments to and collect the fee, but it would need to be done through an alternative method such as direct billing.
BACKGROUND
The City has had a stormwater fee (the Urban Runoff Fee) since the early 1990s, prompted by the onset of federal stormwater regulations directed at municipal separate storm/sewer system operations. Assessments showed that the stormwater fund (Fund 264) was running at a $1,000,000 annual deficit and the need for additional revenue for the stormwater fund was becoming more critical each year.
On July 16, 2019, the City Council initiated a Proposition 218 process to establish a new Water Quality and Flood Protection Fee to augment the existing revenue Urban Runoff Fee. At the conclusion of the ballot proceeding it was found that a majority (57%) of votes were in support of the proposed fees, thereby giving the City Council authority to levy the new fees. On December 17, 2019, the City Council approved Resolution No. 15598 finding that the Fee Ordinance, included as Exhibit 1, was approved and ordering the initial levying of the fees for fiscal year (FY) 2020-21.
The new Fee, initially based on a $78 annual fee for the average single-family home was increased by two percent (2%) for FY 2021-22, resulting in a fee of $79.56 for the average single-family home. The Fee’s anticipated revenue for FY 2021-22 is approximately $2.86 million. Collection of this Fee is in addition to the Urban Runoff Fee that the City has been collecting since 1992. The expected, approximate, annual revenue from the 1992 Urban Runoff Fee is $2.42M for FY 2021-22. Both fees will be combined to continue to fund the City’s stormwater maintenance and capital improvement programs as the Clean Water Program.
The Fee Ordinance authorizes the Fee to be increased each year in an amount equal to the Consumer Price Index (CPI) or three percent (3%), whichever is less, if approved by the City Council, and authorizes the City to collect the Fee on the property tax rolls. However, pursuant to Health and Safety Code section 5473, a public hearing must be held each year before the City can place the fees on the tax rolls and that a notice of the public hearing must be published in a local newspaper twice in a two-week period before the public hearing. Further, property owners subject to this method of collection have a right to file a written protest whereby a majority protest can block this method of collection.
The hearing and the right to protest does not apply to the Fee itself; this process only applies to the method of collecting the Fee. If a majority protest is formed, the City would still be able to set and collect the fee, but it would need to be done through an alternative method such as direct billing.
DISCUSSION
The Fee Ordinance establishes that the City Council shall, annually, determine any adjustments to the Fee and approve to have the Fee collected on the annual property tax bills. The Fee Ordinance provides the City Council with the authority to increase the Fee each year in an amount equal to the CPI or three percent (3%), whichever is less. The change in CPI from December 2020 to December 2021 was 4.24 percent (4.24%). Therefore, the maximum assessment rate for FY 2022-23 is the applied rate for FY 2021-22 ($79.56) increased by the three percent (3%), to $81.94, for the average single-family home. If the City Council approves the CPI increase of three percent (3%) for the Fee for FY 2022-23, the anticipated revenue from the Fee collected for FY 2022-23 would be approximately $2.94M. If City Council does not adjust the Fee rate by CPI, the previously adopted fee shall continue for FY 2021-22, with the anticipated revenue from the Fee collection remaining at approximately $2.86M. Staff is recommending that the City Council approve the allowed annual CPI increase of three percent (3%) for the Fee for FY 2022-23.
Though the Fee and Fee Ordinance allows for the City to collect the fee on the property tax rolls, a publicly-noticed hearing must be held each year before the City can use this Fee collection method. The Fee Ordinance requires that a public hearing be held each year that the fees are to be collected in this manner. In conjunction with the public hearing, affected property owners can file a written protest against this manner of fee collection. If the owners of a majority of properties file written protests, then the City may not use this method of collection. The alternative would be a direct billing method where property owners would receive a separate bill from the City, which would require establishing a new administrative process along with the additional costs of printing and mailing. The Fee Ordinance and Health and Safety Code also require that notice of the hearing be published in a local newspaper twice in a two-week period prior to the hearing. The notification of this public hearing was published in a local newspaper the weeks of May 16 and May 23, 2022. A copy of the required text of the public hearing notice published prior to and in support of this public hearing is included as Exhibit 2.
The Fee Ordinance also requires that, in accordance with Health and Safety Code Section 5473, the Public Works Director file with the City Clerk, on or before June 15 of each year, a report describing each property subject to the fee along with its fee, excluding those properties whose fees will not be collected on the property tax rolls. That report of each property and the associated Fee, increased by three percent (3%) from the Fee amount for FY 2021-22, was transmitted to the City Clerk’s Office on May 9, 2022, a copy of which is included as Exhibit 3.
The public hearing pertains strictly to the tax-bill method of collection; it does not pertain to the fee itself. Previous hearings on the fee were also held on October 1, 2019 as part of the Proposition 218 process, and on June 1, 2021, as a part of this annual Fee process; there was not a majority protest at either of those times.
ALTERNATIVES
• Conduct a public hearing and approve this item finding no majority protest and directing the collection of fees on the property tax bills for FY 2022-23 with the voter-approved allowable CPI increase of three percent (3%).
• Conduct a public hearing and approve this item finding no majority protest and directing the collection of fees on the property tax bills for FY 2022-23 without the voter-approved allowable CPI increase of three percent (3%). The City Council could still direct staff to collect the previously adopted fee as noted above, which would result in approximately $85,000 less in revenue for FY 2022-23 to fund the Stormwater Program. The City Council would still need to conduct the hearing and allow for protest of the method of collection.
• Do not conduct a public hearing and do not proceed with the collection of fees on the property tax bills for FY 2022-23. The City would have to establish a new administrative process and incur the additional costs of printing and mailing to implement this alternative fee collection method.
FINANCIAL IMPACTS
Alameda County charges a minor fee (1.07% of fee submission) for using the tax-bill method of collection. For the Water Quality and Flood Protection Fee (as with the older stormwater fee), those costs have been incorporated into the City’s budget and are paid for from the Fee revenue.
By using the tax-bill method of collection, the fees will come to the City in three primary disbursements in December, April, and May of each fiscal year. This cash flow model is common to several other revenue sources and has been accommodated in the financial cycle. The Water Quality and Flood Protection Fees are collected into a separate revenue account as required by the Fee Ordinance, and the older Urban Runoff Fee is similarly collected into its own revenue account. The revenue for both fees is contained in Stormwater Fund 264.
The total anticipated revenue from collection of this Fee with the allowable CPI increase of three percent (3%) is $2.94M for FY 2022-2023.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Alameda Municipal Code, Chapter 18, Article III, Section 18-21, Storm Water Management and Discharge Control.
ENVIRONMENTAL REVIEW
Pursuant to California Environmental Quality Act (CEQA) Guidelines section 15378 (b)(4), this activity is not a project and therefore is not subject to further CEQA review because it involves governmental fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
CLIMATE IMPACTS
Although the continuing collection of the Water Quality and Flood Protection Fee will significantly enhance the City’s ability to meet the challenge of sea level rise and more frequent and intense storms, the method of fee collection has no impact in and of itself.
RECOMMENDATION
Conduct a public hearing to consider the collecting of the water quality and flood protection fees on the property tax bills; and, adoption of resolution finding [no] majority protest and approving the continuation and collection of the existing 2019 water quality and flood protection fee on the property tax bills for fiscal year 2022-23.
Respectfully submitted,
Erin Smith, Public Works Director
By,
Jim Barse, Clean Water Program Specialist
Financial Impact section reviewed,
Margaret L. O’Brien, Finance Director
Exhibits:
1. Water Quality and Flood Protection Fee Ordinance (Section 18-33)
2. Required Text of Published Public Hearing Notice
3. Parcels Subject to Tax-Bill Fee Collection
cc: Dirk Brazil, Interim City Manager