Attachment 3 2018-2027 R STREET PROPERTY AND BUSINESS IMPROVEMENT DISTRICT MANAGEMENT DISTRICT PLAN AND ENGINEER S REPORT Prepared pursuant to the Property and Business Improvement District Law of 1994, Streets and Highways Code section 36600 et seq.
R STREET PBID MANAGEMENT DISTRICT PLAN CONTENTS I. Overview... 1 II. Impetus... 3 III. Background... 4 IV. Boundaries... 5 V. Service Plan & Budget... 6 A. Improvements and Activities 6 B. Budget Guidelines 7 C. Zone Budgets 8 D. Annual Maximum Assessment Budget 8 VI. Governance... 9 A. Owners Association 9 B. Brown Act & Public Records Act Compliance 9 C. Annual Report 9 VII. Engineer s Report... 11 A. Separation of General and Special Benefits 11 B. Assessment Methodology 18 C. Assessment Notice 21 D. Time and Manner for Collecting Assessments 21 E. Engineer s Certification 22 Appendix 1 Maximum Annual Assessment Rates... 23 Appendix 2 PBID law... 24 Appendix 3 Map... 38 Appendix 4 Parcel Assessment Calculations... 39 Appendix 5 Services by Zone... 44 Prepared by Civitas www.civitasadvisors.com (800)999-7781 R Street PBID Management District Plan i
I. OVERVIEW Developed by a growing coalition of property owners, the R Street Property and Business Improvement District (RSPBID) is a benefit assessment district whose purpose is to provide improvements and activities which constitute and convey a special benefit to assessed parcels. As required by state law, property owners have created this Management District Plan (Plan) to renew the RSPBID. Location: Purpose: Budget: Cost: The RSPBID generally includes all parcels within the area bound by 7th Street in the west, Quill Alley and Whitney Avenue in the north, 18th Street in the east, and S Street in the south. The RSPBID also includes one adjacent block on the west side of 7th Street, bound by Rice Alley in the north, 7th Street in the east, 6th Street in the west, and S Street in the south. The RSPBID boundary is detailed on the map in Section IV. The purpose of the RSPBID is to provide activities and improvements which constitute and convey a special benefit to assessed parcels. The RSPBID will provide enhanced maintenance and security; marketing, events and advocacy; 10th St. - 18th St. maintenance and related administration directly and only to assessed parcels within its boundaries. The RSPBID annual assessment budget for the initial year of its ten (10) year operation is anticipated to be $248,751.62. The annual budget may be subject to an increase in assessment rates of no more than three percent (3%) per year. The assessment funds will be supplemented by non-assessment funds (such as grants and event income), so that the total budget for the initial year is estimated to be $269,675.37. The assessment rate (cost to the parcel owner) is based on parcel type, parcel size, parcel front footage along R Street between 10th St. and 18th St, and benefit zone. The initial annual rate applied to each parcel is shown in the table below. Assessment rates may be subject to an increase of no more than three percent (3%) per year. Zone 1 2 Initial Parcel Assessment Rate Parcel Size Parcel Frontage Flat Parcel Type (sq. ft.) (ln. ft.) Rate Commercial $0.130 N/A N/A Private Tax-Exempt $0.035 N/A N/A High Density Residential N/A N/A $52.00 Commercial $0.130 $4.00 N/A Private Tax-Exempt $0.035 $4.00 N/A High Density Residential N/A N/A $52.00 Renewal: RSPBID renewal requires submittal of petitions from property owners representing more than 50% of the total assessment. The California Constitution also requires a ballot vote in which more than 50% of ballots returned, weighted by assessment, support the RSPBID. R Street PBID Management District Plan Page 1
Duration: The RSPBID will have a ten (10)-year-life beginning on January 1, 2018 and ending December 31, 2027. Near the end of the term, the petition, ballot, and hearing processes must be repeated for the RSPBID to be renewed. Management: The R Street Sacramento Partnership (the Partnership) will continue to serve as the Owners Association for the RSPBID. R Street PBID Management District Plan Page 2
II. IMPETUS There are several reasons why now is the time to renew the RSPBID. The most compelling reasons are as follows. 1. The Need to be Proactive in Determining the Future of R Street. In order to protect their investment, parcel owners must be partners in the process that determines the level and frequency of services, and how new improvements and development projects are implemented. The RSPBID will continue to allow these owners to lead and shape future services and improvements through the RSPBID. 2. The Need to Attract New Business and Investment Throughout R Street. If R Street is to compete as a successful commercial district it must continue to develop its own wellfinanced, proactive strategy to retain businesses and tenants as well as attract new business and investment. The RSPBID provides the financial resources to develop and implement a focused strategy that will work to prevent and fill vacancies and attract new tenants to all areas of R Street. 3. An Opportunity to Create a Private/Public Partnership with a Unified Voice for R Street. Because parcel owners would be investing financial resources through the RSPBID, they will be looked upon as a strong partner in negotiations with the Capitol Area Development Authority Joint Powers Authority (CADA). This partnership will have the ability to leverage the parcel owner s investment with additional public investment on R Street. 4. An Opportunity to Establish Private Sector Management and Accountability. A non-profit, private organization formed for the sole purpose of improving R Street will continue to manage the services provided and the RSPBID. Annual RSPBID work plans and budgets are developed by a board composed of stakeholders that own property within the RSPBID boundaries. Improvements and activities provided by the RSPBID are subject to private sector performance standards, controls and accountability. R Street PBID Management District Plan Page 3
III. BACKGROUND The International Downtown Association estimates that more than 1,500 Property and Business Improvement Districts (PBIDs) currently operate throughout the United States and Canada. PBIDs are a time-tested tool for property owners who wish to come together and obtain collective services which benefit their properties. PBIDs provide supplemental services in addition to those provided by local government. They may also finance physical and capital improvements. These improvements and activities are concentrated within a distinct geographic area and are funded by a special parcel assessment. Services and improvements are only provided to those who pay the assessment. Although funds are collected by the local government, they are then directed to a private nonprofit. The nonprofit implements services and provides day-to-day oversight. The nonprofit is managed by a Board of Directors representing those who pay the assessment to help ensure the services meet the needs of property owners and are responsive to changing conditions within the PBID. PBIDs all over the globe are proven to work by providing services that improve the overall viability of commercial districts, resulting in higher property values, lease rates, occupancy rates and sales volumes. The RSPBID will be renewed pursuant to a state law that took effect in January of 1995. The Property and Business Improvement District Law of 1994 ushered in a new generation of Property and Business Improvement Districts in California. Key provisions of the law include: Allows a wide variety of services which are tailored to meet specific needs of assessed properties in each individual PBID; Requires property owner input and support throughout the renewal process; Requires written support from property owners on both a petition and ballot; Allows for a designated, private nonprofit corporation to manage funds and implement programs, with oversight from property owners and the joint powers authority; Requires limits for assessment rates to ensure that they do not exceed the amount owners are willing to pay; and Requires the PBID expire after a certain time period, upon which it can be renewed - making it accountable to property owners. The Property and Business Improvement Business District Law of 1994 is provided in Appendix 2 of this document. R Street PBID Management District Plan Page 4
IV. BOUNDARIES The district includes approximately 171 parcels with 87 parcel owners. The RSPBID boundary is illustrated by the map below. A larger map is available on request by calling (916)437-4300 or (800)999-7781. R Street PBID Management District Plan Page 5
V. SERVICE PLAN & BUDGET A. Improvements and Activities The RSPBID will provide supplemental improvements and activities that are above and beyond those provided by the city and other government agencies. None of the services to be provided by the RSPBID are provided by the city or other government agencies. The improvements and activities will be provided directly and only to assessed parcels; they will not be provided to parcels that are not assessed. Each and every service is unique to the RSPBID, thus the benefits provided are particular and distinct to each assessed parcel. 1. Enhanced Maintenance & Security The enhanced maintenance and security program, built upon existing public services, will continue to be implemented. The enhanced maintenance program will include graffiti removal, regular litter pickup, leaf removal and sidewalk power washing. The security program will include coordination efforts between law enforcement and existing private security patrols. These services may include: a dispatch system and mobile application to report issues, proactive elimination of behaviors that could be viewed as harassing by RSPBID visitors and security proactively patrolling the RSPBID to ensure residents, visitors and properties are safe. New ideas to the program include a security customer service person to be available certain days and hours of the week. 2. Marketing, Events & Advocacy The marketing and events program will continue to be implemented to promote R Street as a vibrant commercial center. Special events on R Street combined with promotion and advertising of the area will keep people coming to the RSPBID. The RSPBID will continue to facilitate a strong and organized voice to represent the property and business owners in the commercial district. RSPBID staff will represent the RSPBID in front of public bodies, advocate for additional funding for the area, advocate for additional police presence and other services vital to the well-being of the RSPBID and work to expedite streetscape and development projects beneficial to the RSPBID. 3. 10th Street 18th Street Improvements Maintenance Maintenance will continue to be provided for capital improvements installed in the prior RSPBID term and for new capital improvements to be installed on R Street between 10th Street and 18th Street including electricity for lights on new art installations and entry features, and maintenance of benches, bike racks and decorative lighting. These services will be provided exclusively to parcels in Zone 2 fronting R Street between 10th Street and 18th Street. 4. Administration The administration portion of the budget will be utilized for administrative costs associated with providing the RSPBID services. Those costs may include rent, telephone charges, legal fees, accounting fees, annual report costs, postage, insurance, Capitol Area Development Authority repayment (if necessary), dues and subscriptions and other general office expenses. 5. Contingency/Reserve The budget includes a contingency line item to account for unanticipated program costs and uncollected assessments, if any. If there are contingency funds collected, they may be held in a reserve fund or utilized for other program, administration or renewal costs at the discretion of R Street PBID Management District Plan Page 6
the Partnership. Reserve funds may be used for program costs in any proportion deemed appropriate by the Partnership. Policies relating to contributions to the reserve fund, the target amount of the reserve fund, and expenditure of money from the reserve fund shall be set by the Partnership. The reserve fund may be used for the costs of renewing the RSPBID. B. Budget Guidelines A projected ten (10)-year budget for the RSPBID follows. The overall budget shall remain consistent with this Plan. In the event of a legal challenge, any and all assessment funds may be used to defend the RSPBID. The annual budget is based on the following assumptions and guidelines: 1. The cost of providing improvements and activities may vary depending upon the market cost for those improvements and activities. Expenditures may require adjustment up or down to continue the intended level of improvements and activities. The Partnership shall annually have the ability to re-allocate up to fifteen percent (15%) of the budget allocation by line item within the budgeted categories. Any change will be approved by the Partnership and submitted with the Annual Report. 2. Funds not spent in any given year may be rolled over to the next year. 3. The assessment rate may be subject to annual increases that will not exceed three percent (3%) per year. Increases will be determined by the Partnership and could vary each year. 4. Each budget category includes all costs related to providing that service, in accordance with Generally Accepted Accounting Procedures (GAAP). For example, the enhanced maintenance and security budget includes the cost of staff time dedicated to overseeing and implementing the enhanced maintenance and security programs. Staff time dedicated purely to administrative tasks is allocated to the administration portion of the budget. The costs of an individual staff member may be allocated to multiple budget categories, as appropriate in accordance with GAAP. The staffing levels necessary to provide the services below will be determined by the Partnership on an as-needed basis. Initial Year Assessment Budget - $248,751.62 10th St. - 18th St. Maintenance, $21,143.89, 8.5% Administration, $17,412.61, 7% Contingency / Reserve, $4,975.03, 2% Marketing, Events & Advocacy, $41,044.02, 16.5% Enhanced Maintenance & Security, $164,176.07, 66% R Street PBID Management District Plan Page 7
C. Zone Budgets Other than funds spent on district-wide services that cannot be allocated to a specific zone, assessment funds collected in each benefit zone may only be used to provide services to parcels in that particular benefit zone, they may not be used to provide services in other benefit zones. There will be services provided to the district at large; those services will be paid for by revenue provided from each zone. The budget for 2018, broken down by zone, follows. Enhanced Maint. & Sec. Marketing, Events & Advocacy 10th St. 18th St. Maint. Contingency / Reserve Total Zone 1 $102,649.92 $25,662.48 N/A $10,887.11 $3,110.60 $142,310.12 2 $61,526.15 $15,381.54 $21,143.89 $6,525.50 $1,864.43 $106,441.50 Total $164,176.07 $41,044.02 $21,143.89 $17,412.61 $4,975.03 $248,751.62 D. Annual Maximum Assessment Budget The budget below assumes the maximum annual increase of three percent (3%) is enacted and that there are no changes to the categorical budget allocations. Enhanced Maint. & Sec. Marketing, Events & Advocacy 10th St. 18th St. Imp. Maint. Administration Administration Contingency / Reserve Year % 66.0% 16.5% 8.5%* 7.0% 2.0% 100.0% 2018 $164,176.07 $41,044.02 $21,143.89 $17,412.61 $4,975.03 $248,751.62 2019 $169,101.35 $42,275.34 $21,778.20 $17,934.99 $5,124.28 $256,214.17 2020 $174,174.39 $43,543.60 $22,431.55 $18,473.04 $5,278.01 $263,900.59 2021 $179,399.62 $44,849.91 $23,104.50 $19,027.23 $5,436.35 $271,817.61 2022 $184,781.61 $46,195.40 $23,797.63 $19,598.05 $5,599.44 $279,972.14 2023 $190,325.06 $47,581.27 $24,511.56 $20,185.99 $5,767.43 $288,371.30 2024 $196,034.81 $49,008.70 $25,246.91 $20,791.57 $5,940.45 $297,022.44 2025 $201,915.86 $50,478.96 $26,004.31 $21,415.32 $6,118.66 $305,933.12 2026 $207,973.33 $51,993.33 $26,784.44 $22,057.78 $6,302.22 $315,111.11 2027 $214,212.53 $53,553.13 $27,587.98 $22,719.51 $6,491.29 $324,564.44 Total $1,882,094.64 $470,523.66 $242,390.98 $199,616.10 $57,033.17 $2,851,658.55 *Actual amount allocated will match the funds raised by the Zone 2 frontage assessment. Total R Street PBID Management District Plan Page 8
VI. GOVERNANCE A. Owners Association The Capitol Area Development Authority Board of Directors, through adoption of this Management District Plan, has the right, pursuant to Streets and Highways Code 36651, to identify the body that shall implement the proposed program, which shall be the Owners Association of RSPBID as defined in Streets and Highways Code 36614.5. The Capitol Area Development Authority Board of Directors has determined that the R Street Sacramento Partnership will continue to serve as the Owners Association for the RSPBID. At least two-thirds of the Board of Directors of the R Street Sacramento Partnership must be parcel owners paying the assessment. In addition, the Board of Directors must represent a variety of interests within the RSPBID and respond to the needs of all properties within the RSPBID. The Board shall act in the best interests of all of the properties and businesses within the RSPBID. The diverse representation will continue to ensure that the interests of all properties and businesses in the RSPBID shall be fairly represented. The Board shall be composed of the following thirteen representatives. Category Seats Public Sector Property Owner 1 Commercial Property Owners 7 A Representative from the City of Sacramento 1 Capitol Area Development Authority 1 Restaurant Owner 1 Resident 1 Business Owner 1 B. Brown Act & Public Records Act Compliance An Owners Association is a private entity and may not be considered a public entity for any purpose, nor may its board members or staff be considered to be public officials for any purpose. The Owners Association is, however, subject to government regulations relating to transparency, namely the Ralph M. Brown Act and the California Public Records Act. These regulations are designed to promote public accountability. The Owners Association must act as a legislative body under the Ralph M. Brown Act (Government Code 54950 et seq.). Thus, meetings of the Partnership Board of Directors and certain committees must be held in compliance with the public notice and other requirements of the Brown Act. The Owners Association is also subject to the record keeping and disclosure requirements of the California Public Records Act. C. Annual Report The Partnership shall present an annual report at the end of each year of operation to the Capitol Area Development Authority Board of Directors pursuant to Streets and Highways Code 36650 (see Appendix 1). The annual report is a prospective report for the upcoming year and must include: 1. Any proposed changes in the boundaries of the RSPBID or in any benefit zones or classification of property within the district; 2. The improvements, maintenance, and activities to be provided for that fiscal year; R Street PBID Management District Plan Page 9
3. The estimated cost of providing the improvements, maintenance, and activities to be provided for that fiscal year; 4. The method and basis of levying the assessment in sufficient detail to allow each real property owner to estimate the amount of the assessment to be levied against his or her property for that fiscal year; 5. The estimated amount of any surplus or deficit revenues to be carried over from a previous fiscal year; and 6. The estimated amount of any contributions to be made from sources other than assessments levied pursuant to this Plan. R Street PBID Management District Plan Page 10
VII. ENGINEER S REPORT The District s parcel assessments will be imposed in accordance with the provisions of Article XIIID of the California Constitution. Article XIIID provides that only special benefits are assessable, 1 and requires the joint powers authority separate the general benefits from the special benefits conferred on a parcel. 2 Special benefits are a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public-at-large. 3 Conversely, a general benefit is conferred on real property located in the district or to the public-at-large. 4 Assessment law also mandates that no assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel. 5 The Engineer determined the total cost of the improvements and activities, quantified the general benefit accruing to the public-at-large and parcels adjacent to and within the District, and separated that amount from the special benefit accruing to the assessed parcels. Then, the Engineer determined the proportionate special benefit derived by each parcel and allocated the cost of the improvements and activities accordingly. The Engineer s determinations and detailed calculations are summarized in this report. A. Separation of General and Special Benefits Each of the improvements and activities, and the associated costs and assessments within the District, were reviewed, identified, and allocated based on special and general benefits pursuant to Article XIIID of the California Constitution. The assessment has been apportioned based on the proportional special benefits conferred to the assessed parcels located within the District boundaries as determined below. 1. General Benefits Unlike special benefits, which are conferred directly and only upon assessed parcels, a general benefit is conferred on the general public or non-assessed parcels. Existing joint powers authority, city, and other public services, which are provided to every person and parcel, everywhere within the city, are an example of a general benefit. Although the District s boundaries have been narrowly drawn and programs have been carefully designed to provide special benefits, and activities and improvements will only be provided directly to assessed parcels, it is acknowledged that there will be general benefits as a result of the District s activities and improvements. The California Constitution mandates that only special benefits are assessable, and an agency shall separate the general benefits from the special benefits. 6 Generally, this separation and quantification of general and special benefits must be accomplished by apportioning the cost of a service or improvement between the two and assessing property owners only for the portion of the cost representing special benefits. 7 The first step that must be undertaken to separate general and special benefits provided by the District s activities and improvements is to identify and quantify the general benefits. There are two bodies who can receive general benefits: the public-at-large within the District, and non-assessed parcels within and surrounding the District. 1 Cal. Const., art. XIII D, 4(a) 2 Cal. Const., art. XIII D, 4(a) 3 Id, 2(i) 4 Cal Const., art XIII D 2(i) 5 Cal. Const., art. XIII D, 4(a) 6 Cal. Const., art XIII D 4(a) 7 Golden Hill Neighborhood Association v. City of San Diego (2011) 199 Cal.App.4 th 416 R Street PBID Management District Plan Page 11
General Benefit to the Public-at-Large Although the programs are narrowly designed and carefully implemented to benefit the assessed parcels, and only provided directly to assessed parcels, they will generate a general benefit to the public-at-large within the District. State law indicates that Activities undertaken for the purpose of conferring special benefits upon property to be assessed inherently produce incidental or collateral effects that benefit property or persons not assessed. 8 However, the mere fact that special benefits produce incidental or collateral effects that benefit property or persons not assessed does not convert any portion of those special benefits or their incidental or collateral effects into general benefits. 9 Further, the value of any incidental or collateral effects that arise from the improvements, maintenance or activities of a propertybased district and that benefit property or persons not assessed shall not be deducted from the entirety of the cost of any special benefit or affect the proportionate special benefit derived by each identified parcel. 10 Thus, although there may be some incidental benefit to persons using the assessed parcels, that incidental benefit is not considered general benefit because it is inherently produced by activities and improvements that provide special benefits to the assessed parcels. Pedestrian surveys conducted in other districts have found that approximately 96.7% of pedestrian traffic within PBID boundaries in engaged in business on assessed parcels within the PBID, while approximately 3.3% of pedestrian traffic is simply passing through 11. The 3.3% of traffic passing through does not have any connection to the assessed parcels, and therefore does not represent a special benefit to the assessed parcels. The 3.3% will, however, receive a derivative and indirect general benefit as a result of the activities, improvements and maintenance being provided in the District that they are passing through. Therefore, it is estimated that 3.3% of the benefit created by the District s services is provided to the public-at-large. To ensure that the assessment dollars do not fund general benefits to the public-at-large, that portion of the cost of activities and improvements will be paid for with funds not obtained through assessments. Using the 3.3% figure, based on the initial year budget, the value of this general benefit to the public-at-large is $8,899.29 ($269,675.37 *0.033). Total General Benefit to the Public at Large To ensure that the assessment dollars do not fund general benefits to the public at large, that portion of the cost of activities and improvements attributable to general benefit to the public will be paid for with funds not obtained through assessments. General Benefit to Non-Assessed Parcels Although they are only provided directly to the assessed parcels, the District s activities and improvements may confer general benefits upon non-assessed parcels within and surrounding the District. One study examining property values in PBID areas found no evidence of spill-over impacts (either good or bad) on commercial properties located just outside the BID s boundaries; 12 however, the California Court of Appeals has stated that services specifically intended for assessed parcels concomitantly confer collateral general benefits to surrounding properties. 13 It is reasonable to conclude that increased enhanced maintenance and security; marketing, events and advocacy; 10th St. 18 th St. improvements maintenance; and related administration services within the District will have an 8 Streets and Highways Code section 36601(h)(2) 9 Ibid 10 Streets and Highways Code Section 36622(k)(2) 11 Surveys conducted in: North Park, San Diego (January 2015); Downtown Sacramento, Sacramento (September 2014); Midtown Sacramento, Sacramento (September 2015); and Downtown San Diego, San Diego (February 2014) 12 Furman Center for Real Estate & Urban Policy; The Impact of Business Improvement Districts on Property Values: Evidence from New York City (2007) p. 4 13 Beutz v. Riverside (2010) 184 Cal.App.4 th 1516 R Street PBID Management District Plan Page 12
impact on non-assessed parcels immediately adjacent to or within the District boundaries. Although the legislature has indicated that the value of any incidental or collateral effects that arise from the improvements, maintenance, or activities of a property-based district and that benefit property or persons not assessed shall not be deducted from the entirety of the cost of any special benefit, 14 the California Court of Appeals has noted that the characterization of a benefit may depend on whether the parcel receives a direct advantage from the improvement or receives an indirect, derivative advantage resulting from the overall public benefits of the improvement. Those derivative and indirect impacts are considered general benefits and will be quantified and separated. 15 In this Engineer s opinion, because activities and improvements are provided only within the District and on its perimeter, parcels separated from the District by at least one intervening parcel will not receive spill over benefits. Parcels separated by at least one intervening parcel will not benefit because they are physically removed from the actual location of services provided, and do not face serviced parcels. As mentioned above, the total District service budget for the first year is $269,675.37. After reducing the budget by the general benefit to the public ($8,899.29), the remaining benefit to parcels is $260,776.08. All parcels within and adjacent to the District have been assigned a benefit factor to mathematically represent the proportional special and general benefit and quantify the value of each. Since all assessed parcels within the District benefit from and receive all of the District s services, they have been assigned a benefit factor of 1.0. Parcels adjacent to the District have been assigned benefit factors as described in detail below. Because the activities and improvements are provided along streets throughout the District, parcel front footage is an appropriate measure of the relative general benefit received by adjacent parcels and will be used in the below calculations by category for all parcels. There are 6 parcels within the District boundaries that are not assessed. Non-assessed parcels are described in Section B paragraph 5. These parcels have been assigned a benefit factor as defined in each category below. Enhanced Maintenance & Security Enhanced maintenance and security activities will be provided directly and only to assessed parcels. Within the District boundaries, activities will be provided along both sides of each street, with parcels along each side receiving 50% of the benefit provided by the activities. Along the District perimeter, activities will only be provided to the side of the street that fronts assessed parcels within the District boundaries. It is, however, reasonable to conclude that parcels abutting the non-serviced side of the street will receive spill-over benefits. Since parcels along each side of the street receive 50% of the benefit provided by the activities and improvements, and the non-assessed side of the street will not be serviced, it is our professional estimation that parcels adjacent to the District will receive one-half of the standard benefit, or onequarter of the total benefit provided to similarly-zoned inside parcels (50% x 50% = 25%). Based on this calculation, adjacent and non-assessed inside parcels would have a benefit factor of 0.25 (1.00 x 25%). The following table calculates the amount of benefit provided to parcels by the enhanced maintenance and security activities and separates that benefit value between special benefits provided to the assessed parcels and general benefits indirectly received by adjacent parcels. 14 Streets and Highways Code section 36622(k)(2) 15 Tiburon v. Bonander (2009) 180 Cal.App.4 th 1057, 1077 R Street PBID Management District Plan Page 13
Enhanced Maintenance & Security Parcel Location & Use Front Footage 1 Benefit Factor 2 Benefit Units 3 Benefit Percent 4 Benefit Value 5 Special Benefit General Benefit Inside Commercial 20,966 1.00 20,966.00 91.83% $159,423.62 $159,423.62 $0.00 Inside Private Tax- Exempt 316 1.00 316.00 1.38% $2,402.84 $2,402.84 $0.00 Inside High Density Residential 309 1.00 309.00 1.35% $2,349.61 $2,349.61 $0.00 Inside Non- Assessed* 164 0.25 41.00 0.18% $311.76 $0.00 $311.76 Adjacent Commercial 3,568 0.25 892.00 3.91% $6,782.69 $0.00 $6,782.69 Adjacent Private Tax- Exempt 282 0.25 70.50 0.31% $536.08 $0.00 $536.08 Adjacent High Density Residential 799 0.25 199.75 0.87% $1,518.88 $0.00 $1,518.88 Adjacent Non- Assessed* 151 0.25 37.75 0.17% $287.05 $0.00 $287.05 Subtotal 26,555 22,832.00 100.00% $173,612.52 $164,176.07 $9,436.46 1 Parcel Front Footage = the total front footage for each parcel location & use fronting a serviced street. 2 Benefit Factor = The benefit ratio described in the paragraph above for each parcel location & use 3 Benefit Units = The front footage multiplied by the benefit factor for each parcel location & use 4 Benefit Percentage = The benefit units for each parcel location & use divided by the total benefit units for the District 5 Benefit Value = The total Enhanced Maintenance & Security budget less General Benefit to the Public-at-Large multiplied by the benefit percentage for each parcel location & use *Residential with four units or less Marketing, Events & Advocacy Unlike enhanced maintenance and security, marketing, events and advocacy activities are not provided via physical patrols or improvements within the District. Rather, the marketing, events and advocacy activities are focused on increasing business sales, in an effort to increase occupancy and rental rates. Although the programs will only feature assessed parcels, it is reasonable to conclude that there will be a minor, derivative and indirect benefit to parcels adjacent to and non-assessed parcels inside the District. Because these services are highly focused, and are not physically provided along streets, it is our estimation that the adjacent and non-assessed inside parcels will receive a general benefit equal to ten percent (10%) of the standard benefit. Based on this estimation, adjacent and non-assessed inside parcels would have a benefit factor of 0.10 (1.00 x 10%). Marketing, Events & Advocacy Parcel Front Benefit Benefit Benefit Special General Location & Use Footage 1 Factor 2 Benefit Units 3 Percent 4 Value 5 Benefit Benefit Inside Commercial 20,966 1.00 20,966.00 94.92% $39,855.91 $39,855.91 $0.00 Inside Private Tax- Exempt 316 1.00 316.00 1.43% $600.71 $600.71 $0.00 Inside High Density Residential 309 1.00 309.00 1.40% $587.40 $587.40 $0.00 Inside Non-Assessed* 164 0.10 16.40 0.07% $31.18 $0.00 $31.18 Adjacent Commercial 3,568 0.10 356.80 1.62% $678.27 $0.00 $678.27 Adjacent Private Tax- Exempt 282 0.10 28.20 0.13% $53.61 $0.00 $53.61 R Street PBID Management District Plan Page 14
Adjacent High Density Residential 799 0.10 79.90 0.36% $151.89 $0.00 $151.89 Adjacent Non-Assessed* 151 0.10 15.10 0.07% $28.70 $0.00 $28.70 Subtotal 26,555 22,087.40 100.00% $41,987.66 $ 41,044.02 $943.65 1 Parcel Front Footage = the total front footage for each parcel location & use fronting a serviced street. 2 Benefit Factor = The benefit ratio described in the paragraph above for each parcel location & use 3 Benefit Units = The front footage multiplied by the benefit factor for each parcel location & use 4 Benefit Percentage = The benefit units for each parcel location & use divided by the total benefit units for the District 5 Benefit Value = The total Marketing, Events & Advocacy budget less General Benefit to the Public-at-Large multiplied by the benefit percentage for each parcel location & use *Residential with less than four units 10th St. 18th St. Maintenance The 10th Street 18th Street maintenance activities will be provided directly and only to assessed parcels in Zone 2. Within the Zone boundaries, activities will be provided along both sides of the serviced street, with parcels along each side receiving 50% of the benefit provided by the activities. Along the Zone perimeter, activities will only be provided to the side of the street that fronts assessed parcels within Zone 2. It is, however, reasonable to conclude that parcels abutting the non-serviced side of the street will receive spill-over benefits. Since parcels along each side of the street receive 50% of the benefit provided by the activities, and the non-assessed side of the street will not be serviced, it is our professional estimation that parcels adjacent to the District will receive one-half of the standard benefit, or one-quarter of the total benefit provided to similarly-zoned inside parcels (50% x 50% = 25%). Based on this calculation, adjacent and non-assessed inside parcels would have a benefit factor of 0.25 (1.00 x 25%). 10th St. 18th St. Maintenance Parcel Front Benefit Benefit Benefit Special General Location & Use Footage 1 Factor 2 Benefit Units 3 Percent 4 Value 5 Benefit Benefit Inside Commercial 5,259.11 1 5,259.11 95.41% $20,710.70 $20,710.70 $0.00 Inside Private Tax- Exempt 0 1-0.00% $0.00 $0.00 $0.00 Inside High Density Residential 110 1 110.00 2.00% $433.19 $433.19 $0.00 Inside Non-Assessed* 0 0.25-0.00% $0.00 $0.00 $0.00 Adjacent Commercial 571 0.25 142.75 2.59% $562.16 $0.00 $562.16 Adjacent Private Tax- Exempt 0 0.25-0.00% $0.00 $0.00 $0.00 Adjacent High Density Residential 0 0.25-0.00% $0.00 $0.00 $0.00 Adjacent Non-Assessed* 0 0.25-0.00% $0.00 $0.00 $0.00 Subtotal 5,940.11 5,511.86 100.00% $21,706.05 $21,143.89 $562.16 1 Parcel Front Footage = the total front footage for each parcel location & use fronting a serviced street. 2 Benefit Factor = The benefit ratio described in the paragraph above for each parcel location & use 3 Benefit Units = The front footage multiplied by the benefit factor for each parcel location & use 4 Benefit Percentage = The benefit units for each parcel location & use divided by the total benefit units for the District 5 Benefit Value = The total 10th St. 18th St. Maintenance budget less General Benefit to the Public-at-Large multiplied by the benefit percentage for each parcel location & use *Residential with less than four units R Street PBID Management District Plan Page 15
Administration The administration budget item relates to the activities and improvements to be provided. These costs have been allocated proportionally based upon the special and general benefit provided by each category, as detailed in the table below. Administration Service Provided Special Benefit Value to Parcels General Benefit Value to Parcels Total Benefit to Parcels Enhanced Maintenance & Security $164,176.07 $9,436.46 $173,612.52 Marketing, Events & Advocacy $41,044.02 $943.65 $41,987.66 10th St. 18th St. Maintenance $21,143.89 $562.16 $21,706.05 TOTAL $226,363.97 $10,942.26 $237,306.23 % of Benefit to Parcels 95.39% 4.61% 100.00% Administration Budget $17,412.61 $841.71 $18,254.33 Contingency/Reserve The contingency/reserve budget item relates to the activities and improvements to be provided. These costs have been allocated proportionally based upon the special and general benefit provided by each category, as detailed in the table below. Contingency / Reserve Service Provided Special Benefit Value to Parcels General Benefit Value to Parcels Total Benefit to Parcels Enhanced Maintenance & Security $164,176.07 $9,436.46 $173,612.52 Marketing, Events & Advocacy $41,044.02 $943.65 $41,987.66 10th St. 18th St. Maintenance $21,143.89 $562.16 $21,706.05 Administration $17,412.61 $841.71 $18,254.33 TOTAL $243,776.59 $11,783.97 $255,560.56 % of Benefit to Parcels 95.39% 4.61% 100.00% Contingency/Reserve Budget $4,975.03 $240.49 $5,215.52 Total General Benefit to Parcels Based upon the above evaluations, the total value of the general benefit provided to non-assessed parcels adjacent to and within the District is shown in the following chart. TOTAL GENERAL BENEFITS TO PARCELS Service Provided General Benefit to Parcels Enhanced Maintenance & Security $9,436.46 Marketing, Events & Advocacy $943.65 10th St. 18th St. Maintenance $562.16 Administration $841.71 R Street PBID Management District Plan Page 16
Contingency/Reserve $240.49 TOTAL $12,024.46 Total General Benefit Based upon the previous evaluations, in this Engineer s professional estimation, the total value of the general benefit provided to the public-at-large, adjacent parcels, and non-assessed parcels within the District is shown below. TOTAL GENERAL BENEFITS Service Provided General Benefit to Public General Benefit to Parcels Total General Benefit Enhanced Maintenance & Security $5,924.73 $9,436.46 $ 15,361.18 Marketing, Events & Advocacy $1,432.88 $943.65 $ 2,376.52 10th St. 18th St. Maintenance $740.74 $562.16 $ 1,302.90 Administration $622.95 $841.71 $ 1,464.66 Contingency/Reserve $177.99 $240.49 $ 418.47 TOTAL $8,899.29 $12,024.46 $ 20,923.75 Non-Assessment Funding The programs funded by the District receive additional non-assessment funding in the form of grants, corporate sponsorships, event income, and other miscellaneous funds. Further, many of the activities and improvements provided by the District are a supplement to programs provided by the Capitol Area Development Authority and City, which programs are primarily funded by non-assessment funds. These funding sources are anticipated to equal or exceed the amount of general benefit conferred annually by the District s activities and improvements, $20,923.75. These non-assessment funds will be used to pay for the general benefit provided by the District s activities and improvements, ensuring that parcel assessments will only be used to provide special benefits and any additional costs of providing general benefits [are] not included in the amounts assessed. 16 2. Special Benefit The activities and improvements to be provided by the District constitute and convey special benefits directly to the assessed parcels. Assessment law requires that the proportionate special benefit derived by each identified parcel shall be determined in relationship to the entirety of the capital cost of a public improvement, the maintenance and operation expenses of a public improvement, or the cost of the property related service being provided. 17 Further, no assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel. 18 Special benefit includes incidental or collateral effects that arise from the improvements, maintenance, or activities of property-based districts even if those incidental or collateral effects benefit property or persons not assessed. 19 To determine the total special benefit value to be conveyed to the assessed parcels, we deduct the general benefit value ($20,923.75) from the total value of the activities and improvements 16 Streets and Highways Code section 36632(a) 17 Cal. Const., art XIII D 4(a) 18 Ibid 19 Streets and Highways Code section 36615.5 R Street PBID Management District Plan Page 17
($269,675.37). The remaining $248,751.62 is considered the special benefit to assessed parcels (the Total Assessment ). The Total Assessment represents the total value of the special benefit to be provided by the activities and improvements. The Total Assessment has been proportionally divided among the assessed parcels so that no assessment exceeds the reasonable cost of the proportional special benefit conferred on a parcel. The assessment rate has been designed to ensure that properties that receive the same proportionate special benefit pay the same assessment. 20 Service Provided Total Benefit Value General Benefit Value to Public Benefit Value to Parcels (Special & General) Special Benefit to Assessed Parcels Enhanced Maintenance & Security $179,537.25 $5,924.73 $173,612.52 $164,176.07 Marketing, Events & Advocacy $43,420.54 $1,432.88 $41,987.66 $41,044.02 10th St. 18th St. Maintenance $22,446.79 $740.74 $21,706.05 $21,143.89 Administration $18,877.28 $622.95 $18,254.33 $17,412.61 Contingency/Reserve $5,393.51 $177.99 $5,215.52 $4,975.03 TOTAL $269,675.37 $8,899.29 $260,776.08 $248,751.62 B. Assessment Methodology 1. Base Formula Each parcel will be assessed based on proportional special benefits received. The variables used for the annual assessment formula are parcel type, parcel size, parcel front footage along R Street between 10th St. and 18th St, and benefit zone. These variables are appropriate measures of the proportional special benefit because the need for services, level of services, and quantity of services are all relative to these variables; thus the special benefit provided to each parcel by the services can be proportionally measured using these variables. Determination of Assessment Rates Because not all parcels in the district are identical in size some will receive more special benefit than others. 21 Each of the variables used relates directly to the service level and special benefit provided to each parcel. Parcel square footage is the size of the parcel, measured in square feet. Size is an appropriate measure of proportional special benefit because it relates directly to the quantity of services provided to the parcel, the highest and best use of a parcel, and reflects the long-term value implications of the District. The larger a parcel, the more services and benefit the parcel will receive. Parcel front footage is the length of the parcel, measured in feet, along R Street between 10th Street and 18th Street. Front footage is an appropriate measure of proportional special benefit because it related directly to the level of services that will be provided to parcels fronting R Street between 10th Street and 18th Street. Because not all parcels in the District are identical in use, some will receive more special benefit than others. For example, a private tax-exempt parcel will benefit to a lesser degree than a commercial parcel because it will not enjoy the benefits of increased commerce resulting from the District services. Further detail on the benefit to each parcel type is in the following pages. To determine the assessment rates, the assessed parcels were classified by the estimated benefit each type of parcel receives, the 20 Tiburon v. Bonander (2009) 180 Cal.App.4 th 1057 21 Dahms v. Downtown Pomona (2009) 174 Cal.App.4 th 708 R Street PBID Management District Plan Page 18
estimated special benefit value of the activities and improvements provided to each type was determined based on approximate cost of service provision, and an assessment rate that is proportional to the estimated proportional special benefit received by each parcel type was determined. To determine the assessment rates, the estimated special benefit value for each parcel type was divided by the total assessable parcel square footage and front footage by parcel type, as shown in the tables below. Parcel Type Parcel types were categorized based on the estimated special benefit, determined by the typical amount of foot and vehicle traffic on the various commercial, private tax-exempt, and high density residential parcels. Parcels with heavy traffic, such as commercial parcels, will receive the highest level of services. Parcels with low traffic, such as private tax-exempt parcels, will receive the lowest level of services. The approximate cost of services by parcel type was determined. Then, the cost of services by type was divided by the square footage and front footage of those parcels to determine the assessment rates. Lot Size, Lot Frontage, and High Density Residential The service budget which, in this Engineer s estimation, represents special benefits to the parcels as a whole has been allocated based on parcel size, parcel front footage, and a flat rate for high density residential parcels. A majority of the District s services will benefit each assessed parcel as a whole. Thus, the majority of parcels are assessed by parcel square footage. Because the 10th St. 18th St. maintenance services are provided along R Street between 10th Street and 18th Street, parcel front footage is an appropriate measure of the relative special benefit received by assessed parcels and will be used in the below calculations by category for all parcels. The primary purpose of the RSPBID is to provide property owner services which generate special benefits to parcels with commercial and highdensity residential uses, including condominiums. Parcels with residential uses of four units or more, including residential condominiums, shall receive and benefit from the District services and will therefore be assessed a flat rate assessment per year. Parcel Group Initial Parcel Size Budget Parcel Square Footage Initial Parcel Assessment Rate ($/sqft/yr) Commercial $226,191.68 1,739,936 = $0.130 Private Tax-Exempt $899.50 25,700 = $0.035 Parcel Group Initial Parcel Frontage Budget Parcel Front Footage Initial Parcel Assessment Rate ($/lnft/yr) Commercial $21,036.44 5259.11 = $4.00 Private Tax-Exempt 0 0 = 0 Parcel Group Initial High Density Residential Budget Number of Parcels Initial Parcel Assessment Rate (parcel/yr) High Density Residential $624.00 12 = $52.00 Summary of Assessment Rates Therefore, for the initial year, the maximum annual assessment rates to parcels are as shown on the following page and in Appendix 1. Maximum annual assessment rates may be subject to an increase R Street PBID Management District Plan Page 19
of no more than three (3%) percent per year as shown in Appendix 1. If you would like more information about parcel assessments, please call Civitas at (916) 437-4300 or (800)999-7781. Zone 1 2 Initial Parcel Assessment Rate Parcel Size Parcel Frontage Flat Parcel Type (sq. ft.) (ln. ft.) Rate Commercial $0.130 N/A N/A Private Tax-Exempt $0.035 N/A N/A High Density Residential N/A N/A $52.00 Commercial $0.130 $4.00 N/A Private Tax-Exempt $0.035 $4.00 N/A High Density Residential N/A N/A $52.00 Sample assessment calculations are shown in Appendix 3. 2. Commercial Commercial parcels will receive and benefit from all District services, which are aimed to attract and increase customers and visitors to assessed parcels. These parcels have a commercial component because their owners aim to benefit from tenant rents, increased customers, or increased use by visitors. As used herein, the term commercial also includes parcels owned by public agencies. The California Constitution, in Article XIII D, provides that parcels within a district that are owned or used by any agency, the State of California or the United States shall not be exempt from assessment unless the agency can demonstrate by clear and convincing evidence that those publicly owned parcels in fact receive no special benefit. No public agency owning parcels in the district has made such a demonstration, therefor all public parcels will be assessed at the commercial rate. 3. Private Tax-Exempt Because they do not have a commercial component, private parcels that are fully or partially taxexempt, as shown on the County Assessor s records will be assessed at a reduced rate commensurate to the benefits received. This rate was developed based on the estimated benefit to private tax-exempt parcels, which tend to have less foot traffic, shorter business hours, and do not make a profit - and therefore benefit to a lesser degree than commercial parcels. These parcels will benefit in that they will be cleaner and safer, but they benefit to a lesser degree than parcels occupied by for profit businesses. Parcels that are partially tax-exempt will be assessed the private tax exempt rate on the tax-exempt portion and the commercial rate on the remaining portion. The portion of a parcel that is tax-exempt for assessment purposes was determined based on County records. 4. High Density Residential The primary purpose of the RSPBID is to provide property owner services which generate special benefits to parcels with commercial and high density residential uses, including condominiums. Therefore, parcels with individually owned residential uses of four units or more, including residential condominiums, shall benefit from the District services and will therefore be assessed a flat rate of $52.00 per year. Parcels that contain apartments will be assessed at the commercial rate. 5. Mixed-Use Parcels The assessment on parcels that are occupied, in part, or in full, by commercial condominiums shall be apportioned between the individual commercial condominiums, as determined by the percent of building R Street PBID Management District Plan Page 20