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HomeMy WebLinkAbout2013/03/07 Additional Information~: ,,::. I-fcm I 31~ 113 Ar~diti of-la.l lvlfo. ~t~r, _~.___ CITY OF CHULA VISTA INFORMATION MEMORANDUM DATE: -March 7, 2013 TO: Honorable Mayor and City Council VIA: Jim Sandoval, City Manager FROM: 'Gary Halbert,-Assistant City Manager ' Mandy Mills, Assistant to the City Manager RE: INFRASTRUCTURE NEEDS IDENTIFICATION AND FINANCING Both the Chula Vista City Council and staff realize the significant Infrastructure needs in Chula Vista (e.g.,roads, storm drains, parks, and buildings). Our existing infrastructure need (replacement of failed infrastructure and deferred maintenance) may be as great as four hundred million dollars. The City Council directed the City Manager to provide a report on the best opportunity for. a successful Infrastructure ballot measure. This report presents alternative funding mechanisms, key factors from successful ballot measures, and short-term, as well as long-term steps that should be considered in order to achieve similar success in the City of Chula Vista. Challenge ., A significant part of a city's long-term financial and strategic planning includes Asset Management. An Asset Management program projects maintenance schedules and. requires investment in preserving and rehabilitating existing property and improvements.. However, adequately financing public infrastructure and continued maintenance has become increasingly difficult because of the limitations on raising taxes and fees (Propositions 13 and 218). New infrastructure demands coupled with maintenance/repair needs outpace increases in revenue. For example,. better fuel economy translates to fewer fills at the pump for individuals. Therefore fuel_taxes grow slower than the amount of vehicle miles traveled. Additionally, some funding sources can only. pay for new infrastructure as opposed to maintenance of existing assets. The table below depicts how operations and maintenance are funded for existing assets. „ rf +t Current Funding Sources :Asset _ ~ , . ..._ Fuii4dmg Sources ~~ ,-'; _ .. - - __._.v ,Options to Increase Ezistmg Resources` _ _ .. ..._ . _ .... Waste Water Sewer Fees Mechanism to increase fees Roads TransNet, Gas Tax ~~ ~-,' '' ' .' Drainage Storm Drain Fee, General Fund Mechanism to increase fees Buildings General Fund, occasional grants Fleet General Fund, occasional grants ~' Parks General Fund, occasional grants General Government GeneraLFund, occasional grants s ~„ ~,• >~ Open Space Assessment District Mechanism to increase fees Urban Forestry General Fund, occasional grants `'~""~~' `~ """` With scarce resources and growing demands for municipal services, most cities cannot address their backlog of infrastructure needs within their annual operating budgets. Some cities and districts have presented alternative funding mechanisms to voters in their respective communities that will assist them in addressing their public infrastructure needs. Below is a list of alternative funding mechanisms researched. Alternative funding mechanisms Sales Tax- Taxing jurisdictions (cities and districts) can establish a transaction (sales) and use tax rate that is added to the standard statewide rate of 7.25%. The additional tax can range from 0:10% to 1.00% per district: (voter approval required is a simple majority for a general purpose, or 2/3 for a special purpose) Parcel Tax- A taxing jurisdiction in California can raise revenues through imposing an additional tax called a parcel tax. The taxes are a form of property tax, which must be paid by the owners of parcels of real estate. However, unlike standard property taxes, which are based on the value of the property, a parcel tax can be a flat amount or an assessment based on other characteristics of the parcel, such as square footage or residential/non-residential. (2/3 voter approval required) Transfer Tax-Real Estate Transfer Taxes may be applied to residential sales or to all types of private real estate transactions including commercial and industrial sales. Revenue raised from a Real Estate Transfer Tax may be added to the jurisdiction's general fund or dedicated to specific uses. The amount of the tax is based on the value of the real property transferred. (voter approval required is'a simple majority for a general purpose, or 2/3 for a special purpose) Utility Users Tax (UUTJ •- A UUT is levied on consumption of utilities, such as natural gas, electricity, water, telephone or cable television. Chula Vista has had a UUT for a number of years. As you are aware, the City was unsuccessful in the attempt to'modernize the language, due to technological changes, to apply to cellular and wireless service. (voter approval required is a simple majority for a general purpose, or 2/3 for a special purpose) Utility User Fee-This fee for service is charged to property owners within the utility service area; directly related to demonstrated funding need' (i.e. stormwater Utility Fee for stormwater management services based on customer's impact to the stormwater system):, ' (2/3 voter approval within the utility service area required) Infrastructure Financing District- Cities and counties can place bond measures on the ballot to pay for public works projects. Infrastructure finance districts can utilize their own incremental` property tax revenue to finance water systems, sewer projects, flood control, libraries, parks, and solid' waste facilities. There is current legislation that would increase the term of a district from 30 to 40 years, and would allow a district to exist in a previous redevelopment area. (2/3 landowner approval required, proposed legislation may bring it down to 55%) ' Community Facilities District (CFDJ-A Mello-Roos District is an area where a special property tax on real estate, in addition to the regular property tax, is imposed on those real property owners within a Community Facilities District. These districts seek public financing through the sale of .bonds for the purpose of financing public improvements and services. The district includes all properties that will benefit from the improvements to be constructed or the services to be ,provided. Once approved, a Special Tax Lien is placed against each property in the CFD. Property. owners then pay a Special Tax that appears on their property tax bill each year. There, are. 12 CFD's in Chula Vista. They have been formed when new development has occurred. (2/3 landowner approval within the district required) , Examples of Successful Ballot Measures Establishing new revenue sources in California has become increasingly difficult due'to voter initiatives imposing stricter requirements on jurisdictions and taxing entities. City staff looked at several successful ballot measures in California that are providing new sources of revenues for a rJdressine public infrastructure needs. Several are summarized in the followine table. d " `"' .~ +d 3 Locale/ ~.S 'tF S' • 'Y L .' ~' ~! 2' 1 Revenue Source ~ = r~ ~` "~ ` 3 Year 'T 4 .Y in % ~ K •pW ~ '' 3 ~. %° stt ~e Tax n Entity' t 'fit A °~. °~~x..: ,s f~'1; ~ ,y^ t .QED°= ~ i ""` s• ~' ~~ • , n t tl ~ -~ J fl° Re wired 4 Achie"ved' i g ., ... .. ~ . °~-. .. , . ~. . ;; a . _ - SANDAG - 0.5%sales tax extension for transportation 2004 67%, 67.01% EI Cajon 0.5% sales tax increase for general use (20 years) 2008 50% +1 51.77% La Mesa 0.75%sales tax increase for general use (20 2008 50%+1 55.51% years) National City ' 1.0% sales tax increase for general use (10 years) 2006. 50% +1 .59.01% Vista 0.5% sales tax increase for general use (30 years) 2006 50%+1 53.97% -Santa Monica 0.5% sales tax increase for general use (no 2010 50% +1 60.87% sunset) Los Angeles 0.1% property tax increase for storm water 2004 67% 76.30% projects ` Challenges The following issues were identified as challenges for proposed ballot measures. Political Climate -The electorate's mood as it pertains to revenue increasing ballot measures in San Diego County remains poor. As seen in the SANDAG July, 2011 Quality.of Life Survey; 43% of respondents.thinkthings are heading down the wrong track and 24% strongly believe that. This makes for am~environment that is generally not conducive to building support for ballot measures. When 37% of respondents strongly agree with the statement, "I would not vote for a tax increase no matter what the money would be used for," that is not a hopeful sign for any tax measure requiring atwo-thirds vote at the polls. ~ Civic Finances -The same SANDAG survey shows,that voters want local officials focused on civic finances, with 84% of respondents wanting a large amount of effort going to "controlling finances" and,."balancing budgets". The economy is also a major focus, as nearly three-quarters of respondents want a large amount of attention paid to_"improving the employment outlook." The job creation that occurs with infrastructure and public works projects could be.a positive attribute for any infrastructure financing ballot measure. Distrust of government -Trust in government is an important factor in order for a measure to obtain. at least,two-thirds voter support. As seen in the SANDAG July, 2011 survey, 24%-43% of respondents do not trust the current direction their government is headed. However, this is a~ variable that is subject to the overall political environment. Those survey results show it is critical.. to. invest. in community engagement and build trust. Strong support from the political leadership is also important in garnering broad support from a diverse electorate. Issues/Conclusions from Case Studies . In the last decade, the overall passage rate of non-school local tax measures has been 66% of majority vote measures and 45% of 2/3 vote special tax measures. City staff looked at a dozen . case studies, some of which were listed above. The. following issues or conclusions were. common in the various case studies ofsuccessful revenue measures. , Operational/Fiscal ,Transparency - A common, theme found in successful. revenue ballot measures is communication and information during all .phases of the proposal process. The creation of an oversight committee can help establish a sense of stewardship within the City, looking at both current and long range needs/resources. If a committee is not in existence prior to a ballot measure, often times the creation of a committee is a part of the ballot language. Don't over promise -Successful measures have strong engineering and financial data to support that the amount of revenue generated by the proposed tax will be adequate to cover the costs of the promised improvements. The `proposed projects/programs should be financially feasible and offered in a realistically deliverable timeframe. Broad Appeal is Important- A ballot measure has to appeal to a large majority of the voters. It is important to include~a variety of projects that will speak to the full spectrum of likely voters (ideology, socio-economic, geography). Early polling can provide proponents with an idea of desired items. Message - It is really important to know who the customer is, and to create a message that speaks to their needs. The message is, not just about building or maintaining infrastructure. A City's customer is its residents, and we are trying to improve their quality of life. Citizens want projects that will improve their quality of life. Again, early polling can help determine this.-How you phrase the question and ballot language is critical. Voter Turnout"- Case studies show that conservative voters are normally more inclined to disagree with a new tax than the general electorate. These same voters are more "reliable voters" as they tend to show up even in low turnout elections. Given the current climate, a measure for a new revenue source would have a better chance of approval in a high turnout election (2014, 2016). Campaign Limitations - A city is limited in its actions when it comes to proposing ballot measures. A city can only provide objective information without advocacy. While a city can provide informational pieces on the proposed measure, a city cannot spend resources (time dr funding) on campaign services/materials. A successful campaign requires advocacy. An outside committee will be critical to advocate and to fundraise for campaign costs. CEQA -Sometimes voters more favorably support ballot measures that ask for additional funds for specific .purposes or projects, as opposed to support general fund activities. You can be specific in targeting a purpose, but CEQA review must already be complete at a level consistent with the degree of specificity of the project/s. Inventory/Needs Assessment -Technical studies that define the problem in an objective manner. and evaluate. costs and ..benefits of alternative solutions provide credible data for the public. Unbiased, third party studies can provide the public with the data they need to make an informed decision. Costs/Funding -The old expression "you have to spend money to make money" is true in the case of ballot measures as well. The City will have to invest in some upfront costs such as: study of accurate inventory and condition. assessments ($900,000), and early polling to understand residents' priorities (up to $SO,000j: Also the investment of City staff time in community engagement will be important to build support in the community. The cost of placing a measure on the ballot is approximately $85,000-$190,000 depending on the number of pages in the .proposition. An Approach for Pursuing an Infrastructure Revenue Measure in Chula Vista If the City were to pursue a ballot measure to increase revenue for infrastructure, the following short- and long-term steps are recommended. Specific Steps in Next'6 Months • Early polling can identify community priorities. For example; voters may be willing to pay more for park maintenance, but not maintenance of the City's vehicle inventory. Similarly, voters may be willing to pay additional sales tax, but not an additional tax against their property. The polling should also assist in determining the appropriate timing for the measure. If a ballot measure is placed on the ballot for voter approval prematurely and fails, the City will face a greater challenge in its future efforts to create new revenue sources. • Identify stakeholders and their needs, priority issues and other public concerns. Potential stakeholders include: Community Groups Business Representatives OtherStakeho/ders Neighborhood groups Association of Realtors Environmental groups. Civic associations Chamber of Commerce Taxpayer associations , Faith Based organizations Business Associations. Civic non-profits (Rotary, Kiwanis) (such as Third Ave. Village Association) Economic Development Council Building Industry Assoc. It is imperative that Stakeholder communication be an ongoing process of relationship building. . ,- • Ih order to build trust and maintain Stakeholder communication we would recommend. creation of a Community Advisory Committee or use an existing committee (City °Manager's Economic Advisors) to serve as an oversight committee for technical review of the City's needs and resources and recommendation of alternatives for revenue sources. The committee's close involvement can both help determine and validate funding recommendations. Recommended Steps Over the Next 2-3 Years If, after initial polling and consultation with stakeholders and an advisory committee, the City wants to pursue a ballot initiative, the next steps identified below provide a potential sequence for activities leading to a ballot measure. • It generally takes 2-3 years lead time for successful ballot measures. Two to three years gives Chula Vista enough time to prepare for and select an appropriate election with the voter turnout necessary for success. The General Election of 2016 (Presidential election) is an option to consider. • Develop a formal, well designed survey to understand the community's area's of interest. You must understand the public's priorities before you can propose a solution. farly'focus griiups, surveys, polling; and stakeholder meetings are all options that can be a guide. At this point the City is presenting the problem and asking questions, not proposing solutions yet. Results of the survey help craft solutions. • Engage the necessary consultant experts to do the needed technical studies in order to assess existing inventory, defines the needs/problem,' evaluates' costs, and addresses the benefits of alternative solutions. This will require more a great deal of asset management data. Many critics are cautious of internal studies and estimates. A third party study will state the problem in an independent mannerto provide objective information forthe public. • Package a solution that responds to 'community priorities. Develop projects/programs that address what voters care about: • Design solutions td accomplish multiple objectives. Public works projects can be designed to serve more than one purpose. Sometimes a more robust project, while costing more upfront, can add other benefits. For example, Housing & Conservation recently teamed up to buy and rehabilitate a foreclosed property which will end up being resold to a low income first time homebuyer. What was unique was that we made the house a sustainable showcase home, .providing education related to sustainability. While the sustainable improvements cost more than a standard rehab, the benefits include increased grant/funding opportunities for the City and lower utility costs and future maintenance/replacement needs for the homeowner. Develop and follow clearly explained public policies regarding expenditures and oversight if a ballot measure is approved. Many successful case studies had an outside body proposed in the measure to oversee administration. • Develop and timely achieve identified key deliverables. Residents may want specific projects and objectives that directly relate to their quality of life. Offer a plan to cover specific street segments in specific years, as opposed to "maintain streets in Chula Vista:' The proposed expenditure plan should be well researched in terms of cost and timeframe. After approval, deliver what is promised on time and within budget. • Work closely with the Community Advisory Committee in reviewing gaps/needs, recommending funding mechanisms and potential projects for an expenditure plan. Jointly present a proposal to City Council and provide public education and outreach. • Encourage the creation of an Independent Infrastructure Campaign Committee. Media and advocacy are key components in any campaign. An independent campaign committee needs to raise money and perform other campaign activities. And last; but certainly not least... • Educate, Educate, Educate. A city can provide objective information without advocacy. For example, City officials can attend community meetings to present facts on the item. A mailer with-key facts to enhance knowledge on the matter is allowed, but not to advocate passage of the measure. Proactive and continual education is important. Ensure that key' stakeholders have a good understanding of the facts. A lack of understanding can lead to the spread of misunderstanding. Conclusion Many jurisdictions are experiencing significant financial strain to provide necessary services and adequately address existing infrastructure deficits and ongoing maintenance needs. This report recommends an approach for pursuing a revenue measure in Chula Vista that could help the City meet current needs and provide the adequate public infrastructure needed to support a high quality of life for our current and future residents. The City of San Diego has already publicly called out the need to address their infrastructure gap through a revenue measure. Additionally, SANDAG` is also interested in pursuing an additional Quality of Life tax measure. The City of Chula Vista initiated the scheduling of a meeting with both City of San Diego and SANDAG officials to discuss the possibility of either a regional or sub- regional, multi-jurisdictional ballot measure. We will keep the City Council apprised of our, progress.