Agenda Item #______
Meeting Date: 5-28-02

TO: MAYOR AND CITY COUNCIL
FROM: JAMES B. HENDRICKSON,  CITY MANAGER
SUBJECT: ESTABLISHMENT OF A CITIZENS' FINANCIAL ADVISORY COMMITTEE
DATE: MAY 16, 2002

Shall the City Council establish a Citizens' Financial Advisory Committee to examine major capital improvement financing options?

Effective May 1, 1983, the City Council enacted a 10% utility users tax on monthly bills for intrastate telephone communication service, electricity charges, natural gas charges, water service and cable television service.  The monies raised were to be used principally for the rebuilding of the City's bluff-top storm drains.  The impetus for the measure was the tremendous exposure and liability the City faced with the Bluff Cove landslide in the winter of 1982-83 (partially attributable to an inadequate corrugated metal pipe storm drain). 

The tax was initially enacted for a 10 year period (to sunset June 30, 1993), and then extended an additional 10 years to complete the storm drain rebuilding program.  It will expire on June 30, 2003.

In the past 19 years, the City has expended ~$29.2 million from the Capital Improvement Fund for various projects.  The lion's share has been derived from utility users taxes deposited in the General Fund and transferred to the Capital Fund.  The expenditures are broken down as follows...

With the impending expiration of the UUT, it is critical that we carefully examine the City's major capital improvement needs over the next 10 to 20 years, identify the resources available to fund them, and determine whether to seek a continuation of the UUT or turn to some other source of funding.  The Council has found the most effective means of undertaking such an examination is through the appointment of a Citizens' Financial Advisory Committee.  This process has been used successfully in the enactment of parcel taxes back in the early 1980's, the establishment of the Fire Suppression Benefit Assessment District in May 1991 (to fund the cost of our contract for fire suppression and paramedic services with the Los Angeles County Fire Department), the re-enactment of the FSBAD in May 1996, and the passage of the Special Tax for Fire and Paramedic Service by an 87% favorable vote in March 2001.  The CFAC was indispensable in bringing about the successful enactment of these measures.

Resolution 02-18 has been drafted to provide a "charge" and purpose for a Citizens' Financial Advisory Committee.  It is intended the Committee would submit its final report and recommendation to the City Council by no later than October 15, 2002.  This would give the Council sufficient time to adopt a tax ordinance for placement on the March 2003 Municipal Ballot – if such a recommendation was forthcoming from the Committee.

1. Adopt Resolution 02-18 and ask the Mayor to appoint 10 citizens to the Citizens' Financial Advisory Committee at the Council meeting on June 11, 2002.
2. Modify Resolution 02-18 and ask the Mayor to appoint 10 citizens to the Citizens' Financial Advisory Committee at its next meeting on June 11, 2002.   These modifications would be as specified by the Council.
3. Decline to adopt Resolution 02-18 and do not appoint a Citizens' Financial Advisory Committee to examine major capital improvement financing options.  The Council should delineate another process it would like to use in dealing with the loss of revenue through the expiration of the Utility Users Tax on June 30, 2003. 

It is recommended the City Council...

1. Adopt Resolution 02-18, establishing the charge and purpose for the Citizens Financial Advisory Committee to examine major capital improvement financing options; and
2. Ask the Mayor to appoint no more than 10 citizens to the Committee at the Council meeting on June 11, 2002, based on recommendations provided by the City Council.

The Utility Users Tax currently generates ~$2.5 million in revenue per year.  An amount equivalent to 100% of the annual proceeds is transferred to the Capital Improvement fund.  It is the bulwark of the City's infrastructure rebuilding and refurbishment program.

JBH:s

RESOLUTION R02-18

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PALOS VERDES ESTATES ESTABLISHING A CITIZENS'
FINANCIAL ADVISORY COMMITTEE TO EXAMINE
MAJOR CAPITAL IMPROVEMENT FINANCING OPTIONS

            WHEREAS, the City Council is desirous of providing a long-term, predictable means of financing its major capital improvement needs; and

            WHEREAS, the Utility Users Tax, first enacted in 1983 and renewed in 1990, has provided the lion's share of funds for storm drain rebuilding, street refurbishment and other infrastructure improvements for the past 19 years; and

            WHEREAS, the legal authority for the continuance of the Utility Users Tax, expires June 30, 2003; and

            WHEREAS, the City Council wishes to solicit the input of a representative Citizens' Committee to examine the major capital improvement needs, financing options, and receive recommendations on how best to address these over the long term.

            NOW, THEREFORE, be it resolved that the City Council does hereby establish a Citizens' Financial Advisory Committee:

SECTION 1.  The Committee shall examine and make recommendations on the following...

1. Identify and assess the City's major capital improvement needs over the next 10 to 20 years;
2. Identify and assess all resources available to fund the major capital improvement needs;
3. Determine if a continuation of the Utility Users Tax in some form is necessary to ensure the City has adequate resources to fund the identified needs;
4. If it is determined that a continuation of the Utility Users Tax is needed, make recommendations on what rate should be set, for what period of time, and whether it should be presented as a special tax or a general tax;
5. If it is determined that a continuation of the Utility Users Tax is not necessary, make recommendations on what other sources of funding should be utilized to finance the long-term capital improvement needs of the City.

SECTION 2.  The Committee shall consist of not more then ten (10) members, appointed by the Mayor on recommendations submitted by members of the City Council.

SECTION 3.  The Committee shall complete its work and submit its report and recommendations to the City Council by no later than October 15, 2002.

SECTION 4.  The City Clerk shall certify the adoption of this Resolution.

PASSED, APPROVED AND ADOPTED THIS ___ DAY OF__________, 2002.

_______________________________
ROSEMARY HUMPHREY, MAYOR

ATTEST:

________________________
JUDY SMITH, CITY CLERK

APPROVED AS TO FORM:

___________________________________
STEPHANIE SCHER, CITY ATTORNEY