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SR-04-28-2015-8A - 213-004-01 / 213-011Is Mom a, i Council Report City Santa Monica' City Council Meeting: April 28, 2015 Agenda Item: To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Subject: Lincoln Boulevard PBAD and Colorado Avenue Overlay Recommended Action Staff recommends that the City Council: 1. Accept petitions submitted in favor of establishment of the Lincoln Boulevard Property -Based Assessment District (PBAD) and the Colorado Avenue Overlay as meeting the 40 percent minimum threshold to initiate ballot proceedings. 2. Adopt a Resolution of Intention for the establishment of the Lincoln Boulevard PBAD and the Colorado Avenue Overlay and set a public hearing on the matter for June 23, 2015. 3. Accept the Engineer's Reports for each assessment area. 4. Authorize the mailing of ballots to the property owners within each assessment area. 5. Authorize the City Manager to cast the City's ballots as the property owner of two parcels within the proposed Colorado Avenue Overlay in favor of the overlay. Executive Summary Downtown Santa Monica Inc. has gathered support petitions signed by property owners representing more than 40 percent of the total assessments for both the Lincoln Boulevard PBAD and the Colorado Avenue Overlay. The attainment of the 40 percent minimum petition threshold allows Council to continue the procedural steps required under State Law to seek property owner ballots to establish the assessment districts. Council approval is required to adopt the attached Resolution of Intention for each assessment area, set a date for a public hearing, accept the Engineer's Reports for each assessment area, and authorize the City to prepare and mail out ballots to all property owners within the boundaries of each proposed assessment area. Council is also asked to authorize the City Manager to vote the City's ballots for City -owned properties on Colorado Avenue in favor of the establishment of the overlay. 1 Background On February 10 2015, Council reviewed and accepted the draft Management Plans and Engineer's Reports for the Lincoln Boulevard Property -Based Assessment District (PBAD) and Colorado Avenue Overlay. The draft documents recommended specific expanded and enhanced services in each of the respective areas and identified budgets, assessment methodology, and general benefit funding. The revised draft Engineer's Reports (attached) contain updated assessment and budget information. (Attachment 1: Draft Lincoln Boulevard Engineer's Report. Attachment 2: Draft Colorado Overlay Engineer's Report.) In concept, Council supported City funding for the payment of general benefits associated with the assessment areas and contracting for additional services for the Big Blue Bus properties which are outside of the proposed Colorado Avenue Overlay. Council authorized the City Manager to sign in support of the petitions relating to the City -owned parcels located within the proposed Colorado Avenue Overlay. On March 17, 2015, Council introduced for first reading an ordinance adopting local modifications to the requirements of the Property and Business Improvement District Law of 1994 which reinstated a 40 percent minimum petition threshold for consideration of establishing a property or business improvement district. On March 25, 2015, Council adopted the ordinance and it became effective on April 25, 2015. Discussion The establishment of a property -based assessment district under State Law is a multi -step process. First, a petition supporting the establishment of the district must be signed by the property owners representing not less than 40 percent of the assessments proposed to be levied. This requirement has been met and the petitions representing 53.17 percent for Lincoln and 62.85 percent for Colorado have been presented to the City Clerk for acceptance. The next step is for Council to adopt a Resolution of Intention (Attachment 3 and 4) for each district and set a public hearing for June 23, 2015. E Additionally, Council is also asked to accept the Engineer's Reports for each assessment area and authorize the mailing of ballots to all property owners within the boundaries of each proposed assessment area. In compliance with Proposition 218, a ballot vote with no less than 50 percent of the ballots received, weighted by assessment, must be in support of the assessment in order for the assessment area to be formed. Should each ballot measure pass with a majority of respondents, Council would be requested to approve a Resolution of Formation for each of the areas, and assessments on the benefitting parcels would be sent to the Los Angeles County Tax Assessor's Office to be levied on the property tax rolls for the 2015/16 tax year. City's Ballot Council is asked to authorize the City Manager to cast ballots on behalf of two City -owned parcels located within the proposed Colorado Overlay: 215 Colorado Avenue (Parking Structure Number Eight) and 402 Colorado Avenue (Expo terminus site). The proposed total assessment amount is $48,309.30 ($26,012.70 for 215 Colorado and $22,296.60 for 402 Colorado) for the first year, representing 16.56 percent of the total Colorado Overlay proposed assessments. It is expected that within the first year of the assessment period, Metro would take ownership of 402 Colorado Avenue and the assessment would be Metro's obligation thereafter. The City does not own any properties within the proposed Lincoln PBAD. K? Financial Impacts & Budget Actions There is no immediate financial impact or budget action necessary as a result of the recommended action. If 50 percent of the ballots received, weighted by assessment, are in support of the assessment and the assessment areas are formed, staff would return to Council when presenting the Resolution of Formation with specific budget actions as part of the FY15 -17 biennial budget. Prepared by: Elana Buegoff, Sr. Development Analyst roved: � tzi 2 iJ Andy %A le, Director Housing and Economic Development Attachments: Forwarded to Council: � r'- P� Elaine M. Polachek Interim City Manager Attachment 1. Draft Lincoln Boulevard Engineer's Report Attachment 2. Draft Colorado Overlay Engineer's Report Attachment 3. Resolution of Intention Lincoln Boulevard PBAD Attachment 4. Resolution of Intention Colorado Avenue PBAD Overlay Zone 12 Attachment 1 Lincoln Boulevard Property-Based IBM Santa Monica, California March 2015 Prepared by: Kristin Lowell Inc. Prepared pursuant to the State of California Property and Business Improvement District Law of 9994 And Article XIIID of the California Constitution to create a property based assessment district ENGINEER'S STATEMENT ........... ................................ ........ v....... ---- ..... ...1 SECTION A: Legislative and Judicial Review ................ ............................... 2 SECTION B: Improvements and Activities ...................... ..............................4 SECTION C: Benefitting Parcels ..................................... ............................... 6 SECTION D: Proportional Benefits ................................. ............................... 7 SECTION E: Special and General Benefits .................... ............................... 9 SECTION F: Cost Estimate .............................................. .............................13 SECTION G: Apportionment Method .............................. .............................14 SECTION H: Assessment Roll ......................................... .............................16 Lincoln Boulevard PBAD March 2015 Engineer's Report Page 1 of 17 i This Report is prepared pursuant to Article XIIID of the California State Constitution (Proposition 218) and the State of California Property and Business Improvement District Law of 1994 as amended. The Lincoln Boulevard Property -Based Assessment District (the "Lincoln PBAD ") will provide funding for enhanced maintenance, safety, and marketing activities, above and beyond those provided by the City of Santa Monica. Every individual assessed parcel within the Lincoln PBAD receives special benefit from the activities identified under Section B of this Report. Only those individual assessed parcels within the Lincoln PBAD receive the special benefit of the proposed activities; parcels contiguous to and outside the Lincoln PBAD and the public at large may receive a general benefit, as outlined in Section E. The cost to provide general benefits, if any, will be funded from sources other than special assessments. The duration of the proposed Lincoln PBAD is thirteen (13) years, commencing January 1, 2016 and continuing through December 31, 2028. This term will coincide with the existing Downtown PBAD allowing for the zone and the Downtown PBAD to explore formal consolidation of services in 2028. An estimated budget for the Lincoln PBAD improvements and activities is set forth in Section D. The annual budget may increase no more than 5% per year consistent with the increase in consumer price index (CPI) and increases in program costs. The determination of annual budget adjustments and assessment rates will be subject to the review and approval of the board of Downtown Santa Monica Inc. (DTSM). Funding for the Lincoln PBAD improvements and activities shall be derived from a property -based assessment of each specially benefitted parcel in the Lincoln PBAD. A detailed description of the methodology for determining the proportional special benefit each individual assessable parcel receives from the activities and the assessment for each parcel is set forth in Section F. I hereby certify to the best of my professional knowledge that each of the identified assessable parcels located within the Lincoln PBAD will receive a special benefit over and above the benefits conferred to those parcels outside of the Lincoln PBAD boundary and to the public at large and that the amount of the proposed special assessment is proportional to, and no greater than the special benefits received. / 0110ESs /0 Respectfully submitted, ��O NGE E. q< l 0 No. 13398 z W "I Exp. 3 -31 —17 Terrance E. Lowell, P.E. *T CIVIL �TF OF cp U. �� Lincoln Boulevard PBAD March 2015 Engineer's Report Page 2 of 17 The Property and Business Improvement District Law of 1994 (the "State Law ") is the legislation that authorizes the City to levy assessments upon real property for the purposes of providing improvements and activities that specially benefit each individual assessed parcel in the PBAD. The purpose of the PBAD is to encourage commerce, investment, and business activities. In order to meet these goals PBADs typically fund activities and improvements, such as, enhanced safety and cleaning. Unlike other assessment districts which fund the construction of public capital improvements or maintenance thereof, PBADs provide activities and improvements "to promote the economic revitalization and physical maintenance of the business districts of its cities in order to create jobs, attract new businesses, and prevent the erosion of the business districts." (Streets and Highways Code Section 36601(b)). The improvements and activities funded through the PBAD are over and above those already provided by the City within the PBAD's boundaries. Each of the PBAD activities or improvements is intended to increase building occupancy and lease rates, to encourage new business development, attract businesses that serve the community, and improve the quality of life. Specifically, the State Law defines "Improvements" and "Activities" as follows: "Improvement" means the acquisition, construction, installation, or maintenance of any tangible property with an estimated useful life of five years... "' 'Activities" means, but is not limited to, all of the following: (a) Promotion of public events which benefit businesses or real property in the district. (b) Furnishing of music in any public place within the district. (c) Promotion of tourism within the district. (d) Marketing and economic development, including retail retention and recruitment. (e) Providing safety, sanitation, graffiti removal, street and sidewalk cleaning, and other municipal services supplemental to those normally provided by the municipality. (f) Activities which benefit businesses and real property located in the district.2 Article XIIID of the State Constitution In 1996, California voters approved Proposition 218, codified in part as Article XIIID of the State Constitution. Among other requirements, Article XIIID changes the way local agencies enact local taxes and levy assessments on real property. It states, in relevant part, that: (a) An agency which proposes to levy an assessment shall identify all parcels which will have a special benefit conferred upon them and upon which an assessment will be imposed. 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. No assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel. Only special benefits are assessable, and an agency shall separate the general benefits ' California Streets and Highways Code, Section 36610. 2 California Streets and Highways Code, Section 36613. Lincoln Boulevard PBAD March 2015 Engineer's Report Page 3 of 17 from the special benefits conferred on a parcel. 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. (b) All assessments shall be supported by a detailed engineer's report prepared by a registered professional engineer certified by the State of California.' "Special benefit" means a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public at large. General enhancement of property value does not constitute "special benefit. "' Judicial Guidance Since the enactment of Article XIIID, the courts have rendered opinions regarding various aspects of Article XIIID. The notable portions of cases that apply to assessment districts in general and this Lincoln PBAD in particular are noted below. "The engineer's report describes the services to be provided by the PBID (i.e. the PBAD], (1) security, (2) streetscape maintenance (e.g., street sweeping, gutter cleaning, graffiti removal), and (3) marketing, promotion, and special events. They are all services over and above those already provided by the City within the boundaries of the PBID. And they are particular and distinct benefits to be provided only to the properties within the PBID, not to the public at large—they 'affect the assessed property in a way that is particular and distinct from [their] effect on other parcels and that real property in general and the public at large do not share. "5 "...separating the general from the special benefits of a public improvement project and estimating the quantity of each in relation to the other is essential if an assessment is to be limited to the special benefits." "...the agency must determine or approximate the percentage of the total benefit conferred by the service or improvement that will be enjoyed by the general public and deduct that percentage of the total cost of the service or improvement from the special assessment levied against the specially benefitted property owners. "...even minimal general benefits must be separated from special benefits and quantified so that the percentage of the cost of services and improvements representing general benefits, however slight, can be deducted from the amount of the cost assessed against specially benefitting properties. " The contents of this Engineer's Report are prepared in compliance with the above noted authorizing legislation, the State Constitution and the judicial opinions. 3 Section 4, Article XIIID of the State Constitution. 4 Section 2 (1), Article XIIID of the State Constitution. 5 Dorms v. Downtown Pomona Property and Business Improvement District (2009) 174 Cal.App. 4th 708, 722. 6 Beutz v. County of Riverside (2010) 184 Cal. App. 4th 1516, 1532. 7 Golden Hill Neighborhood Association, Inc. v. City of San Diego (2011) 199 Cal.App. 4th 416, 438. 8 Golden Hill Neighborhood Association, Inc, v. City of San Diego (2011) 199 Cal.App. 4th 416, 439. Lincoln Boulevard PBAD March 2015 Engineer's Report Page 4 of 17 13 Will TUT I X The Lincoln Boulevard PBAD Steering Committee collectively determined the priority for improvements and activities to be delivered by the business improvement district. The primary needs as determined by the property owners are both Environmental Enhancements as well as Marketing activities. The Environmental Enhancements include activities such as maintenance, public safety, and beautification. Specifically, the Lincoln PBAD shall provide the following activities. Environmental Enhancements Maintenance. Safety & Hospitality Ambassadors Lincoln Boulevard's Maintenance and Safety & Hospitality Ambassador program was developed based upon services currently being provided in the Downtown PBAD and DTSM's contractor. It provides for a level of service that is comparable to the existing Downtown PBAD Zone 3 maintenance and safety coverage, plus enhancements given the higher vehicular and pedestrian frequencies along the Lincoln corridor. The Lincoln PBAD's maintenance and safety budget is based upon the following deployment: Maintenance Team Frequency Hours of Deployment per Week 56 Average Weekly Coverage 8 hours per day/7 days per week Litter Removal /Pan & Broom Dail Pressure Washing As needed Graffiti Removal Daily as needed Light LandscapeNVeeds Daily as needed Emergency Spot Cleaning As needed Maintenance of PBAD funded beautification elements As needed Safety & Hospitality Team Hours of Deployment per Week 112 Coverage 1 to 2 Ambassadors Monday thru Friday 7:00 a.m. to 9:30 p.m. 1 to 3 Ambassadors Saturday and Sunday 10:00 a.m. to 9:30 p.m. Foot Patrol Daily Visitor services, safety escorts, motorist assist, homeless outreach Daily Beautification Beautification funds support enhancements that improve the visual appearance of Lincoln Boulevard and may include: • Wayfinding signage • Seasonal decorations • Flower planters • Street furniture and amenities Lincoln Boulevard PBAD March 2015 Engineer's Report Page 5 of 17 Feasibility analyses and plans for design, streetscape and other physical improvements Other activities and improvements that visibly enhance the Lincoln Boulevard environment. Annual recommendations regarding the allocation of beautification will be developed by a Lincoln PBAD committee and then forwarded to the DTSM Board of Directors. The ENVIRONMENT activities account for 88% of the proposed PBAD budget. Economic Enhancements Marketing Activities aimed at working with property owners to improve Lincoln Boulevard's overall image, increase sales and building occupancies are part of the Lincoln PBAD Management Plan. Marketing programs and activities will aim to improve the overall image of Lincoln Boulevard with the goal of integrating Lincoln Boulevard into the overall marketing and promotion of Downtown Santa Monica, which will ultimately attract consumers, visitors and businesses to the Lincoln corridor. Examples of marketing activities include adding Lincoln Boulevard to downtown kiosks and directories and including Lincoln Boulevard businesses in applicable downtown promotions and events. The ECONOMIC activities account for 12% of the proposed PBAD budget. Administration An administrative cost of 10% has been included within the Lincoln PBAD budget. Examples of these costs include: • Accounting and annual financial reports, • Program support costs including supplies, equipment and rent, • Communications to keep all Lincoln Boulevard stakeholders informed of policies, issues, challenges and opportunities, • The City of Santa Monica's PBAD administration fee, • Other administration costs associated with the overhead and administrative support of programs. To reduce administrative costs, increase leveraging of funds and to avoid duplication of enhanced services, the Lincoln PBAD will be managed by DTSM to deliver day -to -day services. DTSM can leverage Lincoln PBAD assessments with additional revenues, including sponsorship revenues, contracts, grants and earned income. Lincoln Boulevard PBAD March 2015 Engineer's Report Page 6 of 17 PBAD Boundary Description The Lincoln PBAD will encompass approximately 5 blocks of the core of the Lincoln Boulevard corridor which includes properties along Lincoln Boulevard from Wilshire Boulevard to the Interstate 10 Freeway. A map of the proposed district boundary is below. = BID ASSESSED PROPERTIES DOWNTOWN SANTA MONICA, INC. NMI III ii 11 Lincoln Boulevard PBAD March 2015 Engineer's Report Page 7 of 17 friii I�, 11 11 0211 11 I'Viiii RUZ11111 11, P1 1" '11111111 1,4111k,19 Methodology Article XIIID Section 4(a) of the State Constitution states that "The proportionate special benefit derived by each identified parcel shall be determined in relationship to the entirety of the capital cost of the public improvement, the maintenance and operation expenses of a public improvement, or the cost of the property related service being provided." Determining the proportionate special benefit among the parcels of real property within the proposed assessment district which benefit from the proposed improvements, services, and activities is the result of a four -step process: 1. Defining the proposed activities, 2. Determining which parcels specially benefit from the proposed activities, 3. Determining the amount of special benefit each parcel receives, 4. Determining the proportional special benefit a parcel receives in relation to the amount of special benefit all other parcels in the PBAD receive. Each identified parcel within the Lincoln PBAD will be assessed based upon each parcel's unique characteristics in relationship to all other specially benefitted parcels' characteristics. Due to the proportionate special benefits received by each parcel from the PBAD services, each parcel will be assessed a rate which is commensurate with the amount of special benefits received. Special Benefit Factor The method used to determine proportional special benefits are measured by each parcel's lot square footage or building square footage compared to the total assessable footages of all parcels in the district boundary. Building or Lot Square Footage: The greater of lot or building square footage for each parcel of real property are the primary assessment variables for all properties within the Lincoln PBAD. Benefits from all PBAD activities are designed to improve cleanliness, public safety, image, occupancy and sales, benefits that are distributed for all real property within the district. Developed parcels receive the greatest benefit from the proposed improvements and activities for the tenants, employees and pedestrians. For undeveloped parcels and parking lots, lot square footage acknowledges the benefits of these services to the ground level of property. Lincoln Boulevard PBAD March 2015 Engineer's Report Page 8 of 17 Property Use Considerations All parcels in the Lincoln PBAD benefit from the Environmental activities. However, parcels with residential and non - profit uses do not specially benefit from the Marketing activities. In order to ensure proportionality, these parcels will be assessed based on the following methodology: Treatment of Residential and Non- Profit Property: All residential and non - profit parcels receive the same level of service and special benefit from Environmental activities (i.e. clean and safety) as all other parcels in the Lincoln PBAD by making each of these parcels cleaner and safer. Specifically, these parcels specially benefit from PBAD activities, such as removing graffiti from their buildings, patrolling their sidewalks, cleaning up any debris and power washing their sidewalks. Thus, each of these parcels is assessed for the special benefits received from the Environmental activities services. However, these parcels will not receive special benefit from Marketing activities because those uses are not engaged in commercial or customer attraction activities, and will not specially benefit from the increased economic activities. Therefore, they will not be assessed for the Marketing activities. New assessments for a Change in Land Use: If any parcel within the Lincoln PBAD changes land use during the life of the Lincoln PBAD, it will be subject to the assessment rate consistent with the assessment methodology for the new land use. Lincoln Boulevard PBAD March 2015 Engineer's Report Page 9 of 17 State Law, Proposition 218, and judicial opinions require that assessments be levied according to the estimated special benefit each assessed parcel receives from the activities and improvements. Article XIIID Section 4(a) of the California Constitution in part states that "only special benefits are assessable," which requires that we separate the general benefits, if any, from the special benefits provided by the proposed activities and improvements. As of January 1, 2015, the State Legislature amended the State Law to clarify and define both special benefit and general benefit as they relate to the improvements and activities these districts provide. Specifically, the amendment (Section 36615.5 of the Streets and Highways Code) defines special benefit as follows: "`Special benefit' means, for purposes of a property -based district, a particular and distinct benefit over and above general benefits conferred on real property located in a district or to the public at large. 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." In addition, the amendment (Section 36609.5 of the Streets and Highways Code) defines general benefit as follows: "`General benefit' means, for purposes of a property -based district, any benefit that is not a'special benefit' as defined in Section 36615.5." Furthermore, the amendment (Section 36601(h)(2)) states: "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. Therefore, for special benefits to exist as a separate and distinct category from general benefits, the incidental or collateral effects of those special benefits are inherently part of those special benefits. 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." Special Benefit Analysis All special benefits derived from the assessments outlined in this Report are for property- related activities that are specifically intended for and directly benefiting each individual assessed parcel in the PBAD. The special benefit must affect the individual assessable parcel in a way that is particular and distinct from its effect on other parcels and that real property in general and the public at large do not share. No parcel's assessment shall be greater than the special benefits received. Streets and Highways Code Section 36601(e) states that "Property and business improvement districts formed throughout this state have conferred special benefits upon properties and businesses within their districts and have made those properties and businesses more useful by providing the following benefits: (1) Crime reduction. A study by the Rand Corporation has confirmed a 12- percent reduction in the incidence of robbery and an 8- percent reduction in the total incidence of violent crimes within the 30 districts studied. (2) Job creation. (3) Business attraction. (4) Business retention. (5) Economic growth. (6) New investments." Lincoln Boulevard PBAD March 2015 Engineer's Report Page 10 of 17 The Lincoln PBAD's goal is to fund activities and improvements to provide a cleaner, safer and more attractive and economically vibrant environment as outlined in Section B. The goal of improving the economic vitality is to improve the safety, cleanliness, marketing and appearance of each specially benefitted parcel in an effort to increase commerce, to increase building occupancy and lease rates and to attract more customers, employees, tenants and investors. Each parcel will specially benefit from: • Cleaner sidewalks, streets and common areas • Real and perceived public safety improvements • Greater pedestrian traffic • Enhanced rental incomes • Improved business climate • New business and investment • Well managed programs and services Specifically, each parcel benefits from each of the PBAD activities as defined below Safety The enhanced safety activities make the area more attractive for businesses, customers, and residents, and ultimately private investment. When business location decisions are made, "lower levels of public safety lead to increased uncertainty in decision making and can be perceived as a signal of a socio - institutional environment unfavorable for investment." Uncertainty affects the investment environment in general. But in particular, it increases the fear of physical damage to investment assets (or to people) or their returns... Almost universally, places with lower crime rates are perceived as more desirable. "9 Once economic investment occurs within the district, pedestrian traffic and commercial activity will increase. The special benefit to assessed parcels from these services is the likelihood of increased lease rates and tenant occupancy due to the increase of commercial activity and an increase in customers that follow from having a safer environment. In addition, each specially benefitted parcel benefits from: increased security patrol, removing graffiti from their buildings, connecting the homeless to available resources, reducing the number of trips and falls by repairing the grout in the sidewalks in front of their parcel, picking up trash that pedestrians leave behind, and power washing their sidewalks. Maintenance and Beautification The maintenance and beautification activities benefit each assessed parcel within the Lincoln PBAD by providing a clean and aesthetically appealing environment. This is achieved through sidewalk sweeping and power washing, removing litter and graffiti, and trash removal. In addition, the beautification activities benefit each assessed parcel by providing an aesthetically appealing environment through wayfinding signage, sidewalk benches, holiday decor, planters, etc. These activities create the environment needed to achieve the PBAD goals. 9 "Accelerating economic growth and vitality through smarter public safety management" IBM Global Business Services Executive Report, September 2012, pg. 2 - Lincoln Boulevard PBAD March 2015 Engineer's Report Page 11 of 17 Marketing The Marketing activities are tied to and will specially benefit each commercial parcel by encouraging business development and investment that generates customer traffic, which directly relates to increases in commercial activity, filling of vacant storefronts and offices and ultimately, increased lease rates for retail and office space. Neither residential nor non - profit parcels will receive special benefit from the Marketing activities as they are not engaged in commercial or customer attraction activities. Therefore, they will not be assessed for the Marketing portion of the PBAD budget. Special Benefit Conclusion Based on the special benefits each assessed parcel receives from the PBAD activities we conclude that each of the proposed activities provides special benefits to the real property within the district and that each parcel's assessment is in direct relationship to and no greater than the special benefits received. The special benefit to parcels from the proposed PBAD activities and improvements described in this Report are equal to or exceeds the total amount of the proposed assessment. Each individual assessed parcel's assessment is no greater than the special benefit it receives from the PBAD activities. General Benefit Analysis As required by the State Constitution Article XIIID Section 4(a), the general benefits of an assessment district must be quantified and separated out so that the cost of the activities that are attributed to general benefit are deducted from the cost assessed against each specially benefitted parcel. General benefits are benefits from the PBAD activities and improvements that are not special in nature, are not "particular and distinct" and are not over and above the benefits that other parcels receive. This analysis will evaluate and determine the level of general benefits that (1) parcels outside of the Lincoln PBAD, and (2) the public at large may receive. General Benefit to Parcels Outside of the Lincoln PBAD All the PBAD activities and improvements are provided solely to each of the individual assessed parcels in the Lincoln PBAD boundary. Each of the PBAD activities is provided to the public rights -of -way (streets, sidewalks) adjacent to all specially benefitted parcels in the PBAD. In the case of the Lincoln Boulevard PBAD the surrounding parcels are either primarily residential or are parcels that are currently in the existing Downtown PBAD that already receive services. In either case, none of the surrounding parcels will directly receive any of the PBAD activities. Any benefits these parcels may receive are incidental to providing special benefits to the assessed parcels, and thus any cost associated to the incidental benefits are not reduced from the cost of providing special benefit. General Benefit to the Public At Large In addition to the general benefit analysis to the parcels outside of the Lincoln PBAD boundary, we also quantify the general benefits to the public at large, i.e., those people that are either in the Lincoln PBAD boundary and not specially benefitted from the activities or people outside of the Lincoln PBAD boundary that may benefit from the PBAD activities. In the case of the Lincoln PBAD the public at large are those people that are within the Lincoln PBAD boundary that do not pay an assessment and do not specially benefit from the PBAD activities. Lincoln Boulevard PBAD March 2015 Engineer's Report Page 12 of 17 To calculate the general benefit the public at large may receive we determine the percentage of each PBAD activity budget that may benefit the general public. In this case, the Safety activities may generally benefit the public as the general public may appreciate the enhanced level of security as it passes through the Lincoln PBAD. The Maintenance, Beautification and Marketing activities are tailored to benefit the physical characteristics of the parcels, buildings and sidewalks or the tenants of each parcel and are not intended to benefit the general public. If there are any public benefits, they are incidental and collateral to providing special benefits to the assessed parcels. The table below shows the budget for the Safety program and its respective percentage of the total PBAD budget. We then apply a Relative Benefit factor to this activity. The relative benefit factor is a basic unit of measure that compares the benefit the general public receives compared to the public that specially benefits (employees, tenants, customers) from each activity. Since the specially benefitted public receives 100% of the activities it is assigned a relative benefit factor of 1.0 for the Safety activity, and the general public is assigned a relative benefit factor of 0.25. This takes into consideration that this is a coastal community in which pedestrian traffic may be passing through the district onto another destination, e.g. 31 Street Promenade, the beach, or in the near future the Metro light rail station. The relative benefit factor is then multiplied by the PBAD activity's budget percentage to determine the overall benefit factor. The following table illustrates this calculation. A B C D E Budget % of General Benefit General Benefit General Benefit PBAD Activity Amount Budget Factor Percent (B x C) Allocation (A x D) Safety $157,667 34.54% 0.25 8.63% $13,614 This analysis indicates that 8.63% for Safety activities may be attributed to general benefit to the public at large, equaling a total of $13,614 that must be raised from sources other than special assessments. General Benefit Conclusion Using the sum of the two measures of general benefit described above we find that $13,614 may be general in nature and will be funded from sources other than special assessments. Lincoln Boulevard PBAD March 2015 Engineer's Report Page 13 of 17 2016 Operating Budget The Lincoln PBAD's operating budget takes into consideration: 1. The improvements and activities needed to provide special benefits to each individual parcel within the Lincoln PBAD boundary (Section B), 2. The parcels that specially benefit from said improvements and activities (Section C), and 3. The costs associated with the special and general benefits conferred (Section E). EXPENDITURES Budget Administration 10 % TOTAL BUDGET % of Bud e t Maintenance $121,667 $12,167 $133,833 29.32 % Safet & Hospitality $143,333 $14,333 $157,667 4.54% Beautification $100,000 $10,000 $110,000 24.10% Marketing $50,000 $5,000 $55,000 12.05% Total Expenditures $415,000 $41,500 $456,500 100.00% REVENUESt Assessment Revenues $442,886 97.02% Other Revenues (1 ) $13,614 2.98% Total Revenues $456,500 100.00% (1) Other non - assessment funding to cover the cost associated with general benefit. Budget Notations The annual budget may increase no more than 5% per year consistent with the increase in consumer price index (CPI) and increases in program costs. The determination of annual budget adjustments and assessment rates will be subject to the review and approval of the board of Downtown Santa Monica Inc. and the City Council. Lincoln Boulevard PBAD March 2015 Engineer's Report Page 14 of 17 A#MION, %��s • As previously discussed in Section D, the Lincoln PBAD is segregated and into three land use types that benefit differently from the PBAD activities. The table below summarizes the assessable lot or building square footage for each land use type. Land Use Lot or Building Sq. Ft.' Commercial 1,110, 000 Residential 66,500 Non - Profit 125,000 Calculation of Assessments Based on the land use type, assessable lot or building square footage and the proposed budget, all of which are discussed above, the first year's maximum annual assessment rate for each parcel follows: Estimated Rates of Assessment Lot or Building Sq'. Ft. Maintenance 0.108 Safety & Hospitality 0.116 Beautification 0.089 Marketing 0.050 0.363 $3,630.00 Total Commercial 0.363 Total Residential 0.313 Total Non - profit 0.157 The following example illustrates how the preceding rates are applied to parcels within the Lincoln PBAD. Property '; Characteristic Building Sq. Ft. Lot Sq. Ft. Greater of Rate annual Assessment Commercial 10,000 5000 10,000 0.363 $3,630.00 Residential 2500 1500 2500 0.313 $782.50 Non-profit 1500 3000 3000 0.157 $471.00 The assessment calculation is the same for every parcel in the Lincoln PBAD. Maximum Annual Assessment Adjustments The annual budget may increase no more than 5% per year consistent with the increase in consumer price index (CPI) and increases in program costs. The maximum assessment for each year of the district, based on a maximum 5% annual increase of the budget over the prior year, is shown in the following table. Lincoln Boulevard PBAD March 2015 Engineer's Report Page 15 of 17 Budget Adjustment Any annual budget surplus or deficit will be rolled into the following year's PBAD budget. The budget will be set accordingly, within the constraints of the management plan to adjust for surpluses or deficits that are carried forward. Future Development Based on new development in the Lincoln PBAD, the amount of assessable square footage in the Lincoln PBAD may change over time. These changes could modify the total square footage assessed for affected parcels. Therefore, in future years, the assessments levied against Lincoln PBAD parcels may change in accordance with the assessment methodology formula and rates in the Management District Plan and Engineer's Report. Changes to the assessment formula would require the approval of an amendment to the Management Plan. Commercial Residential Non- profit Year 1 0.363 0.313 0.157 Year 2 0.381 0.329 0.164 Year 3 0.400 0.345 0.173 Year 4 0.420 0.362 0.181 Year 5 0.441 0.381 0.190 Year 6 0.463 0.400 0.200 Year 7 0.486 0.420 0.210 Year 8 0.510 0.441 0.220 Year 9 0.536 0.463 0.231 Year 10 0.563 0.486 0.243 Year 11 0.591 0.510 0.255 Year 12 0.620 0.535 0.268 Year 13 0.651 0.562 0.281 Budget Adjustment Any annual budget surplus or deficit will be rolled into the following year's PBAD budget. The budget will be set accordingly, within the constraints of the management plan to adjust for surpluses or deficits that are carried forward. Future Development Based on new development in the Lincoln PBAD, the amount of assessable square footage in the Lincoln PBAD may change over time. These changes could modify the total square footage assessed for affected parcels. Therefore, in future years, the assessments levied against Lincoln PBAD parcels may change in accordance with the assessment methodology formula and rates in the Management District Plan and Engineer's Report. Changes to the assessment formula would require the approval of an amendment to the Management Plan. Lincoln Boulevard PBAD March 2015 Engineers Report Page 16 of 17 The total assessment amount for FY 2015 -16 is $442,886 apportioned to each individual assessed parcel, as follows. 4282009017 1231 LINCOLN NO 173 LLC 1233 LINCOLN BLVD $2,722.51 4282010047 1315 SANTA MONICA LLC 1307 LINCOLN BLVD $8,167.50 4291021003 1414 LINCOLN BLVD LLC 1414 LINCOLN BLVD $2,722.50 4291021005 1424 LINCOLN BLVD LLC 1424 LINCOLN BLVD $2,795.10 4282028009 1547 LINCOLN BLVD ASSOCIATES 1547 LINCOLN BLVD $2,722.50 4290002008 1650 LINCOLN NMS LLC 1650 LINCOLN BLVD $5,887.81 4290002007 1658 LINCOLN NMS LLC 1658 LINCOLN BLVD $2,722.50 4290002006 1660 LINCOLN NMS LLC 1660 LINCOLN BLVD $2,722.50 4291021012 ANDERSON, SUSAN J 1452 LINCOLN BLVD $2,722.50 4282027019 ARIAN, SYLVIATR 1431 LINCOLN BLVD $2,722.50 4282010020 ARYA LP 1323 LINCOLN BLVD $2,722.50 4282027021 BARCHESTER CALIFORNIA LP 1421 LINCOLN BLVD $2,722.50 4282027029 BARCHESTER CALIFORNIA LP 1411 LINCOLN BLVD $5,445.00 4291007024 BOYS CLUB OF SANTA MONICA 1238 LINCOLN BLVD $6,050.47 4291008008 BRADMORE LINCOLN LLC 1334 LINCOLN BLVD $2,722.50 4282009018 BRAND, CARMELLA TR ET AL 1227 LINCOLN BLVD $2,722.50 4291021015 BRENTWOOD COTTAGE LLC 719 BROADWAY $907.50 4283003010 CA SM NO ONE LP 1669 LINCOLN BLVD $21,065.25 4291007025 CENTENNIAL WILSHIRE L P 720 WILSHIRE BLVD $9,361.41 4282027026 CHECKER BOARD PROPERTIES INC 800 SANTA MONICA BLVD $5,445.00 4282009053 DOUGLAS EMMETT 1997 LLC 808 WILSHIRE BLVD $27,313.21 4290002010 DUNLAP, BRODERICK 1670 LINCOLN BLVD $8,111.09 4282028020 DURLEY PARK MANAGEMENT CORP 1515 LINCOLN BLVD $8,167.50 4291008012 EQUITY ASSOCIATES INC 1352 LINCOLN BLVD $1,996.50 4291008013 EQUITY ASSOCIATES INC 1352 LINCOLN BLVD $726.00 4291008014 EQUITY ASSOCIATES INC 717 SANTA MONICA BLVD $2,991.12 4282009014 FARZAM, MAURICE 1243 LINCOLN BLVD $2,722.50 4282009027 FARZAM, MAURICE AND NOOSHIN 1237 LINCOLN BLVD $2,347.50 4283001001 FSTAR 1601 LLC 1601 LINCOLN BLVD $12,094.98 4283001002 FSTAR 1613 LLC 1613 LINCOLN BLVD $11,702.58 4283002006 FSTAR 1637 LLC 1637 LINCOLN BLVD $13,312.58 4283003012 FSTAR 1641 LLC 1641 LINCOLN BLVD $7,574.27 4282028018 HAIEM LTD PTNSHP NO 2 1533 LINCOLN BLVD $2,722.50 4282028019 HAIEM LTD PTNSHP NO 2 1527 LINCOLN BLVD $2,722.50 4291008003 HAINE, GEORGE A TR 720 ARIZONA AVE $1,017.25 4281035025 HUNT SANTA MONICA PROPERTIES 805 WILSHIRE BLVD $5,445.00 4290001012 JIVANI, ABDULAZIZ AND SAKER 1624 LINCOLN BLVD $8,090.70 4291008015 KARAGHOSSIAN, OSKO 731 SANTA MONICA BLVD $3,630.00 4291008026 KIRKEBY TRUST PROPERTIES 1310 LINCOLN BLVD $10,122.98 4291021028 LINBRO PROPERTIES LLC 723 BROADWAY $3,380.00 4291008011 LINCOLN EQUITIES 1346 LINCOLN BLVD $2,722.50 Lincoln Boulevard PBAD March 2015 Engineer's Report Page 17 of 17 APN Owner Name Site Address Parcel Assmt 4291008027 LINCOLN EQUITIES 1340 LINCOLN BLVD $5,445.00 4282027033 LINCOLN WALK STUDIOS LP 1447 LINCOLN BLVD $18,463.40 4291021011 LINCOLNWAY PARTNERS LLC 1448 LINCOLN BLVD $2,722.50 4282027018 LUXE 1441 LINCOLN LLC 1437 LINCOLN BLVD $2,722.50 4282027028 LUXE 1441 LINCOLN LLC 1443 LINCOLN BLVD $4,537.50 4291007003 MAXSER AND CO 1218 1/2 LINCOLN BLVD $2,722.50 4282028010 MORGAN,KATIE P TR 1543 LINCOLN BLVD $2,722.50 4282028016 NAIMI, KAYVAN N AND FARINAZ S 1507 LINCOLN BLVD $2,722.50 4282028017 NAIMI, KAYVAN N AND FARINAZ S 804 BROADWAY $2,722.50 4290001016 NASON, FREDERICK N JR TR ET AL 700 COLORADO AVE $7,943.00 4291007008 NEW 725 ARIZONA AVENUE SM LLC 1260 LINCOLN BLVD $14,375.89 4291021007 NMS 1444 LINCOLN LLC 1432 LINCOLN BLVD $2,722.50 4291021008 NMS 1444 LINCOLN LLC 1438 LINCOLN BLVD $1,361.25 4291021009 NMS 1444 LINCOLN LLC 1440 LINCOLN BLVD $1,361.25 4291021010 NMS 1444 LINCOLN LLC 1444 LINCOLN BLVD $2,722.50 4291022024 NMS 1550 LINCOLN LLC 1560 LINCOLN BLVD $13,612.50 4291008025 NMS1318LINCOLN LLC 1318 LINCOLN BLVD $5,445.00 4291021006 NMS1430LINCOLN LLC 1430 LINCOLN BLVD $2,722.50 4282028011 PERLITER, HAROLD CO TR 1537 LINCOLN BLVD $2,722.50 4282009029 ROBERTS BUILDING WEST LLC 1255 LINCOLN BLVD $5,562.25 4282010024 ROBERTS BUILDING WEST LLC 1303 LINCOLN BLVD $2,722.50 4291022005 SAFEWAY INC 1526 LINCOLN BLVD $2,722.50 4291022006 SAFEWAY INC 1534 LINCOLN BLVD $2,722.50 4290001020 SANTA MONICA AUTO PLAZAS LLC 1626 LINCOLN BLVD $10,094.60 4291007004 SANTA MONICA BOY S CLUB INC 1222 LINCOLN BLVD $1,177.50 4282010015 SHERIDAN FAMILY PARTNERSHIP 801 SANTA MONICA BLVD $8,167.50 4282010016 SHERIDAN FAMILY PARTNERSHIP 1347 LINCOLN BLVD $4,937.53 4282010017 SHERIDAN FAMILY PARTNERSHIP 1343 LINCOLN BLVD $2,722.50 4282010018 SHERIDAN FAMILY PARTNERSHIP 1339 LINCOLN BLVD $2,722.50 4282010019 SHERIDAN FAMILY PARTNERSHIP 1335 LINCOLN BLVD $2,722.50 4290001023 SIEVERS, CHARLES AND CAROL J 718 COLORADO AVE $7,943.00 4291021004 SNYDER, BEVERLIE G AND 1418 LINCOLN BLVD $2,722.50 4282028802 SO CALIF EDISON CO LTD 801 COLORADO AVE $5,445.00 4282027020 SPOLIANSKY, GUSTAVO D TRUST 1427 LINCOLN BLVD $2,722.50 4282009013 SUSKO FAMILY PTNSHP 1247 LINCOLN BLVD $2,722.50 4290001900 U S POSTAL SERVICE 1637 7TH ST $1,524.31 4290001901 U S POSTAL SERVICE 1623 7TH ST $3,149.26 4290002900 U S POSTAL SERVICE 1653 7TH ST $7,805.73 4291022003 VONS COMPANIES INC 1500 LINCOLN BLVD $2,722.50 4291022004 VONS COMPANIES INC 1518 LINCOLN BLVD $2,722.50 4291022025 VONS COMPANIES INC 1500 LINCOLN BLVD $8,167.50 4291008005 WC DEVELOPMENT LLC 1312 LINCOLN BLVD $2,722.50 4291021001 ZUKIN, JEFREY G CO TR ET AL 718 SANTA MONICA BLVD $4,606.47 4291021002 ZUKIN, JEFREY G CO TR ET AL 1410 LINCOLN BLVD $2,722.50 TOTAL ASSESSMENT $442,886 Attachment 2 Assessment District Overlay % FINAL Engineer's Report Santa Monica, California March 2015 Prepared ,by. Kristin Lowell Inc. Prepared pursuant to the State of California Property and Business Improvement District Law of 9994 and Article XIIID of the California Constitution to create an overlay zone within the property -based assessment district ENGINEER'S STATEMENT ................................................. ..............................1 ENGINEER'S REPORT: SECTION A: Legislative and Judicial Review ................ ............................... 2 SECTION B: Improvements and Activities ..................... ............................... 5 SECTION C: Benefitting Parcels ..................................... ............................... 7 SECTION D: Proportional Benefits ................................. ............................... 9 SECTION E: Special and General Benefits .................... .............................10 SECTION F: Cost Estimate .............................................. .............................14 SECTION G: Apportionment Method .............................. .............................15 SECTION H: Assessment Roll ......................................... .............................17 F lorado Avenue PBAD Overlay Zone March 2015 gineer's Report Page 1 of 17 ENGINEER'S STATEMENT This Report is prepared pursuant to Article XIIID of the California State Constitution (Proposition 218) and the State of California Property and Business Improvement District Law of 1994 as amended. The Colorado Avenue Property -Based Assessment District PBAD Overlay Zone (the "PBAD Overlay Zone ") will provide funding for enhanced maintenance and safety, above and beyond those provided by both the City of Santa Monica and the underlying Downtown Santa Monica PBAD (the "Downtown PBAD "). Every individual assessed parcel within the PBAD Overlay Zone receives special benefit from the activities identified under Section B of this Report. To ensure that assessment levels are proportional to benefits received two benefit zones within the PBAD Overlay Zone are proposed to account for the different levels of service. Only those individual assessed parcels within the PBAD Overlay Zone receive the special benefit of the proposed activities; parcels contiguous to and outside the PBAD Overlay Zone and the public at large may receive a general benefit, as outlined in Section E. The cost to provide general benefits, if any, will be funded from sources other than special assessments. The duration of the proposed PBAD Overlay Zone is thirteen (13) years, commencing January 1, 2016, and continuing through December 31, 2028. This term will coincide with the existing Downtown PBAD allowing for the PBAD Overlay Zone and the Downtown PBAD to explore formal consolidation of services in 2028. An estimated budget for the PBAD Overlay Zone improvements and activities is set forth in Section D. The annual budget may increase no more than 5% per year consistent with the increase in consumer price index (CPI) and increases in program costs. The determination of annual budget adjustments and assessment rates will be subject to the review and approval of the board of Downtown Santa Monica, Inc., and the Santa Monica City Council. Funding for the PBAD Overlay Zone improvements and activities shall be derived from a property -based assessment of each specially benefitted parcel in the PBAD Overlay Zone. A detailed description of the methodology for determining the proportional special benefit each individual assessable parcel receives from the activities and the assessment for each parcel is set forth in Section F. I hereby certify to the best of my professional knowledge that each of the identified assessable parcels located within the PBAD Overlay Zone will receive a special benefit over and above the benefits conferred to those parcels outside of the PBAD Overlay Zone boundary and to the public at large and that the amount of the proposed special assessment is proportional to, and no greater than, the special benefits received. RnFESS /� P N Respectfully submitted, FO AGE E. � q< 0 No. 13398 z � m Exp. 3 -31 -17 - Terrance E. Lowell, P.E. STgT CIVIL ��\P F -F CP,0F Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 2 of 17 61 =101 0 t, NIM RACI bi WTV I LTJ Property and Business Improvement District Law of 1994 The Property and Business Improvement District Law of 1994 (the "State Law ") is the legislation that authorizes the City to levy assessments upon real property for the purposes of providing improvements and activities that specially benefit each individual assessed parcel in the PBAD Overlay Zone. Streets and Highways Code Section 36628 and 36629 allows the City Council to establish benefit zones based upon the benefit that assessed properties within each zone derives from the activities. The purpose of an assessment district or benefit zone (like the PBAD Overlay Zone) is to encourage commerce, investment, and business activities. In order to meet these goals, the assessment district or benefit zones typically fund activities and improvements, such as, enhanced safety and cleaning. Unlike other assessment districts which fund the construction of public capital improvements or maintenance thereof, the PBAD Overlay Zone provide activities and improvements "to promote the economic revitalization and physical maintenance of the business districts of its cities in order to create jobs, attract new businesses, and prevent the erosion of the business districts." (Streets and Highways Code Section 36601(b).) The improvements and activities funded through the PBAD Overlay Zone are over and above those already provided by the City of Santa Monica within the PBAD Overlay Zone's boundaries. Each of the PBAD Overlay Zone activities or improvements is intended to increase building occupancy and lease rates, to encourage new business development, attract businesses that serve the community, and improve the quality of life. Specifically, the State Law defines "Improvements" and "Activities" as follows: "Improvement" means the acquisition, construction, installation, or maintenance of any tangible property with an estimated useful life of five years... "' "Activities" means, but is not limited to, all of the following: (a) Promotion of public events which benefit businesses or real property in the district. (b) Furnishing of music in any public place within the district. (c) Promotion of tourism within the district. (d) Marketing and economic development, including retail retention and recruitment. (e) Providing safety, sanitation, graffiti removal, street and sidewalk cleaning, and other municipal services supplemental to those normally provided by the municipality. (f) Activities which benefit businesses and real property located in the district.' Article XIIID of the State Constitution In 1996, California voters approved Proposition 218, codified in part as Article XIIID of the State Constitution. Among other requirements, Article XIIID changes the way local agencies enact local taxes and levy assessments on real property. It states, in relevant part, that: (a) An agency which proposes to levy an assessment shall identify all parcels which will have a special benefit conferred upon them and upon which an assessment will be imposed. 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 California Streets and Highways Code, Section 36610. 2 California Streets and Highways Code, Section 36613. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 3 of 17 maintenance and operation expenses of a public improvement, or the cost of the property related service being provided. No assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel. Only special benefits are assessable, and an agency shall separate the general benefits from the special benefits conferred on a parcel. 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. (b) All assessments shall be supported by a detailed engineer's report prepared by a registered professional engineer certified by the State of California 3. "Special benefit" means a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public at large. General enhancement of property value does not constitute "special benefit.'" Judicial Guidance Since the enactment of Article XIIID, the courts have rendered opinions regarding various aspects of Article XIIID. The notable portions of cases that apply to assessment districts in general and this PBAD Overlay Zone in particular are noted below. "The engineer's report describes the services to be provided by the PBID [i.e. the PBAD Overlay Zone]: (1) security, (2) streetscape maintenance (e.g., street sweeping, gutter cleaning, graffiti removal), and (3) marketing, promotion, and special events. They are all services over and above those already provided by the City within the boundaries of the PBID. And they are particular and distinct benefits to be provided only to the properties within the PBID, not to the public at large —they 'affect the assessed property in a way that is particular and distinct from [their] effect on other parcels and that real property in general and the public at large do not share. "'S "...separating the general from the special benefits of a public improvement project and estimating the quantity of each in relation to the other is essential if an assessment is to be limited to the special benefits. "6 "...the agency must determine or approximate the percentage of the total benefit conferred by the service or improvement that will be enjoyed by the general public and deduct that percentage of the total cost of the service or improvement from the special assessment levied against the specially benefitted property owners. "7 "...even minimal general benefits must be separated from special benefits and quantified so that the percentage of the cost of services and improvements representing general benefits, however slight, can be deducted from the amount of the cost assessed against specially benefitting properties."' 3 Section 4, Article XIIID of the State Constitution. 4 Section 2 (1), Article XIIID of the State Constitution. 5 Dahmsv. Downtown Pomona Property and Business Improvement District (2009) 174 Cal.App.4th 708, 722. 6 Beutz v. County of Riverside (2010) 184 Cal.App.4th 1516, 1532. 7 Golden Hill Neighborhood Association, Inc. v. City of San Diego (201 1) 199 Cal.App.4th 416, 438. 8 Golden Hill Neighborhood Association, Inc. v. City of San Diego (201 1) 199 Cal.App.4th 416, 439. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 4 of 17 The contents of this Engineer's Report are prepared in compliance with the above noted authorizing legislation, the State Constitution and the judicial opinions. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 5 of 17 The Colorado Avenue PBAD Overlay Zone Steering Committee collectively determined the priority for improvements and activities to be delivered by the PBAD Overlay Zone. The primary needs as determined by the property owners are: ® Maintenance, and ® Public Safety Maintenance, Safety & Hospitality Ambassadors Colorado Avenue's PBAD Overlay Zone Maintenance and Safety & Hospitality Ambassador program was developed based upon services currently being provided in the Downtown PBAD and by DTSM's contractor. It provides for a level of service that is comparable to the existing Downtown PBAD Zone 1 maintenance and safety coverage, plus enhancements given the higher pedestrian frequencies expected along the corridor. The Colorado Avenue PBAD Overlay Zone's maintenance and safety Ambassadors deployment will be: Maintenance Team Hours of Deployment per Week 96 Average Daily Coverage 8 hours per weekday; 16 hours per weekend day Litter Removal /Pan & Broom Dail Pressure Washing As needed Graffiti Removal Daily as needed Light Landscape/Weeds Daily as needed Emergency Spot Cleaning As needed Safety & Hospitality Team Hours of Deployment per Week 112 1 -2 Ambassadors Monday thru Thursday 7:00 a.m. to 1:00 a.m. 1 -2 Ambassadors Sunday 10:00 a.m. to 1:00 a.m. 1 -2 Ambassadors Friday, Saturday 10:00 a.m. to 3:00 a.m. Foot Patrol Dail Visitor services, safety escorts, motorist assist, homeless outreach Daily Administration An administrative cost of 10% has been included within the PBAD Overlay Zone budget. Examples of these costs include: • Accounting and annual financial reports, • Program support costs including supplies, equipment and rent, • Communications to keep all Colorado Avenue stakeholders informed of policies, issues, challenges and opportunities, ® City of Santa Monica collection fee for PBAD assessments, Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 6 of 17 ® Other administration costs associated with the overhead and administrative support of programs. To reduce administrative costs, increase leveraging of funds and to avoid duplication of enhanced services, the PBAD Overlay Zone will be managed by DTSM to deliver day -to -day services. DTSM can leverage PBAD Overlay Zone assessments with additional revenues, including sponsorship revenues, contracts, grants and earned income. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 7 of 17 PBAD Overlay Zone Boundary Description The boundaries for the PBAD Overlay Zone include properties with frontage along Colorado Avenue from Ocean Avenue to 7m Court. The boundaries will coincide with the new Esplanade improvements and additional pedestrian activity along Colorado Avenue. Within the PBAD Overlay Zone there are two zones of benefit as described below. Benefit Zones The activities that the PBAD Overlay Zone will provide will be in accordance with the needs of different areas of the PBAD Overlay Zone. To ensure that assessment levels are proportional to benefits received two benefit zones are proposed to account for the different levels of service. They are those parcels that are west the 5tih Court/Colorado Avenue intersection and those that are east of the intersection. West of 5t' Court: The first benefit zone is the three block area from 51 Court to Ocean Avenue that experiences the most pedestrian traffic and has the highest intensity of land use. This area will have the highest demand of PBAD Overlay Zone services especially upon completion of the Esplanade improvements and the Los Angeles Metro Rail Expo Line. The Hospitality Ambassadors and clean team will have a higher concentration of services in this area compared to the area east of 51 Court. East of 5"' Court: The second benefit zone is the two and half block area from 5'h Court to 71h Court. This area has less pedestrian traffic and land use density, thus these parcels will receive less frequency of services than the parcels west of 5'h Court. Therefore, the assessments for parcels in this benefit zone will be 75% that of parcels west of 5'h Court. The assessment revenues generated from each benefit zone will be spent solely within that zone. The map of the PBAD Overlay Zone boundary and the two benefit zones is shown on the following page. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 8 of 17 Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 9 of 17 Methodology Article XIIID Section 4(a) of the State Constitution states that "The proportionate special benefit derived by each identified parcel shall be determined in relationship to the entirety of the capital cost of the public improvement, the maintenance and operation expenses of a public improvement, or the cost of the property related service being provided." Determining the proportionate special benefit among the parcels of real property within the proposed PBAD Overlay Zone which benefit from the proposed improvements, services, and activities is the result of a four -step process: 1. Defining the proposed activities, 2. Determining which parcels specially benefit from the proposed activities, 3. Determining the amount of special benefit each parcel receives, 4. Determining the proportional special benefit a parcel receives in relation to the amount of special benefit all other parcels in the PBAD Overlay Zone receive. Each identified parcel within the PBAD Overlay Zone will be assessed based upon each parcel's unique characteristics in relationship to all other specially benefitted parcels' characteristics. Due to the proportionate special benefits received by each parcel from the PBAD Overlay Zone services, each parcel will be assessed a rate which is commensurate with the amount of special benefits received. Special Benefit Factor The amount of special benefit a parcel receives is a function of each parcel's linear street frontage. The proportional special benefit for an individual parcel is determined by calculating the ratio of each parcel's linear street frontage in relation to the total linear street frontage of all parcels in the PBAD Overlay Zone boundary. Linear Street frontage is relevant to the amount of benefit each assessed parcel receives from the PBAD Overlay Zone activities that are delivered at the street level. This reflects the fact that services on the street will have the greatest benefit to properties in relationship to their exposure on the streets. That is to say that the more linear frontage a parcel has, the more benefit it will receive from the services. Linear street frontage is defined as the number of linear feet of each parcel that directly fronts on a street that will receive the PBAD Overlay Zone activities. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 10 of 17 State Law, Proposition 218, and judicial opinions require that assessments be levied according to the estimated special benefit each assessed parcel receives from the activities and improvements. Article XIIID Section 4(a) of the California Constitution in part states that "only special benefits are assessable," which requires that we separate the general benefits, if any, from the special benefits provided by the proposed activities and improvements. As of January 1, 2015, the State Legislature amended the State Law to clarify and define both special benefit and general benefit as they relate to the improvements and activities provided. Specifically, the amendment (Section 36615.5 of the Streets and Highways Code) defines special benefit as follows: "'Special benefit' means, for purposes of a property -based district, a particular and distinct benefit over and above general benefits conferred on real property located in a district or to the public at large. 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." In addition, the amendment (Section 36609.5 of the Streets and Highways Code) defines general benefit as follows: "'General benefit' means, for purposes of a property -based district, any benefit that is not a 'special benefit' as defined in Section 36615.5." Furthermore, the amendment (Section 36601(h)(2)) states: "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. Therefore, for special benefits to exist as a separate and distinct category from general benefits, the incidental or collateral effects of those special benefits are inherently part of those special benefits. 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." Special Benefit Analysis All special benefits derived from the assessments outlined in this Report are for property- related activities that are specifically intended for and directly benefiting each individual assessed parcel in the PBAD Overlay Zone. The special benefit must affect the individual assessable parcel in a way that is particular and distinct from its effect on other parcels and that real property in general and the public at large do not share. No parcel's assessment shall be greater than the special benefits received. Streets and Highways Code Section 36601(e) states that "Property and business improvement districts formed throughout this state have conferred special benefits upon properties and businesses within their districts and have made those properties and businesses more useful by providing the following benefits: (1) Crime reduction. A study by the Rand Corporation has confirmed a 12- percent reduction in the incidence of robbery and an 8- percent reduction in the total incidence of violent crimes within the 30 districts studied. (2) Job creation. (3) Business attraction. (4) Business retention. (5) Economic growth. (6) New investments." Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 11 of 17 The PBAD Overlay Zone's goal is to fund activities and improvements to provide a higher level of clean and safe activities than what is currently provided to parcels on Colorado Avenue between Ocean Avenue and 71h Court. The enhanced level of clean and safe activities are necessary with the expected additional pedestrian traffic on Colorado Avenue once the Los Angeles Metro Rail Expo Line is extended to Santa Monica with a station at Colorado and 5'h Court. The increased pedestrian traffic will require additional Ambassador services as well as enhanced maintenance services to keep the public rights -of -way and sidewalks clear of debris and trash. In addition, the new Esplanade improvements along Colorado and west of 5`h Court will require additional maintenance services than what is currently being provided. Each assessed parcel within the PBAD Overlay Zone will specially benefit from the enhanced activities by keeping each parcel cleaner and safer. Each parcel will benefit from: • Cleaner sidewalks, streets and common areas • Real and perceived public safety improvements • Greater pedestrian traffic • Enhanced rental incomes • Improved business climate • New business and investment • Well managed programs and services Specifically, each parcel benefits from each of the PBAD Overlay Zone activities as defined below. Safety The enhanced safety activities make the area more attractive for businesses, customers, and residents, and ultimately private investment. When business location decisions are made, "lower levels of public safety lead to increased uncertainty in decision making and can be perceived as a signal of a socio - institutional environment unfavorable for investment." Uncertainty affects the investment environment in general. But in particular, it increases the fear of physical damage to investment assets (or to people) or their returns... Almost universally, places with lower crime rates are perceived as more desirable."' Once economic investment occurs within the benefit zones, pedestrian traffic and commercial activity will increase. The special benefit to assessed parcels from these services is the likelihood of increased lease rates and tenant occupancy due to the increase of commercial activity and an increase in customers that follow from having a safer environment. Maintenance The enhanced maintenance activities benefit each assessed parcel within the PBAD Overlay Zone by providing a cleaner environment. This is achieved through sidewalk sweeping and power washing, removing litter and graffiti, and trash removal. These activities are provided to the public rights -of -way adjacent to each assessed parcel, thus protecting the capital investment of each assessed parcel in addition to maintaining the new Esplanade improvements west of 5th. 9 "Accelerating economic growth and vitality through smarter public safety management" IBM Global Business Services Executive Report, September 2012, pg. 2 Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 12 of 17 Special Benefit Conclusion Based on the special benefits each assessed parcel receives from the PBAD Overlay Zone activities we concluded that each of the proposed activities provides special benefits to the real property within the PBAD Overlay Zone and that each parcel's assessment is in direct relationship to and no greater than the special benefits received. The special benefit to parcels from the proposed PBAD Overlay Zone activities and improvements described in this Report are equal to or exceeds the total amount of the proposed assessment. Each individual assessed parcel's assessment is no greater than the special benefit it receives from the PBAD Overlay Zone activities. General Benefit Analysis As required by the State Constitution Article XIIID Section 4(a), the general benefits of an assessment district must be quantified and separated out so that the cost of the activities that are attributed to general benefit are deducted from the cost assessed against each specially benefitted parcel. General benefits are benefits from the PBAD Overlay Zone activities and improvements that are not special in nature, are not "particular and distinct" and are not over and above the benefits that other parcels receive. This analysis will evaluate and determine the level of general benefits that (1) parcels outside of the PBAD Overlay Zone, and (2) the public at large may receive. General Benefit to Parcels Outside of the PBAD Overlay Zone All the PBAD Overlay Zone activities and improvements are provided solely to each of the individual assessed parcels in the PBAD Overlay Zone boundary. Each of the enhanced activities is provided to the public rights -of -way (streets, sidewalks) adjacent to all specially benefitted parcels in the PBAD Overlay Zone. In the case of the PBAD Overlay Zone the surrounding parcels currently receive the base level of activities from the Downtown PBAD. However, due to the location of the Esplanade and the Metro Rail Expo Line station the parcels fronting Colorado Avenue require an enhanced level of activities above and beyond what they are currently receiving from the existing PBAD. None of the parcels, except for one (see discussion below) outside of the PBAD Overlay Zone will receive the enhanced activities. Any benefits these parcels may receive are incidental to providing special benefits to the assessed parcels, and thus any cost associated to the incidental benefits are not reduced from the cost of providing special benefit. There is one parcel on Colorado Avenue, the Big Blue Bus maintenance center, which is not included in the PBAD Overlay Zone and is outside the boundaries of the Downtown PBAD. This parcel is primarily used as a public bus maintenance center and bus parking. It is only for bus vehicles and employees and not intended for public access. Its use is not commerce driven and is not consistent with other uses in the PBAD Overlay Zone. The City, however, will contract with DTSM to receive these enhanced activities and shall pay this parcel's equivalent assessment had this parcel been included within the assessment area. Each parcel east of 511 Court within the PBAD Overlay Zone is being assessed $61.939 per linear foot along Colorado Avenue. The Blue Bus parcel has 318 linear feet along Colorado so shall by contract pay $19,696 ($61.939 x 318) to receive the enhanced activities. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 13 of 17 General Benefit to the Public At Large In addition to the general benefit analysis to the parcels outside of the PBAD Overlay Zone boundary, we also quantify the general benefits to the public at large, i.e., those people that are either in the PBAD Overlay Zone boundary and not specially benefitted from the activities or people outside of the PBAD Overlay Zone boundary that may benefit from the PBAD Overlay Zone activities. In the case of the PBAD Overlay Zone the public at large are those people that are within the PBAD Overlay Zone boundary that do not pay an assessment and do not specially benefit from the PBAD Overlay Zone activities. To calculate the general benefit the public at large may receive we determine the percentage of each PBAD Overlay Zone activity budget that may benefit the general public. In this case, the Safety activities may generally benefit the public as the general public may appreciate the enhanced level of security and ambassador activities as it passes through the PBAD Overlay Zone. The Maintenance activities are tailored to benefit the physical characteristics of the parcels, buildings and sidewalks of each parcel and are not intended to benefit the general public. If there are any public benefits, they are incidental and collateral to providing special benefits to the assessed parcels. The table below shows the budget for the Safety program and its respective percentage of the total PBAD Overlay Zone budget. We then apply a Relative Benefit factor to this activity. The relative benefit factor, is a basic unit of measure that compares the benefit the general public receives compared to the public that specially benefits (employees, tenants, customers) from each activity. Since the specially benefitted public receives 100% of the activities it is assigned a relative benefit factor of 1.0 for the Safety activity, and the general public is assigned a relative benefit factor of 0.50. This takes into consideration the expected increase in pedestrian traffic once the Metro light rail station is open that may travel outside of the PBAD Overlay Zone boundary. The additional pedestrian activity will require a higher level of Safety activities to keep the PBAD Overlay Zone consistently safe. The relative benefit factor is then multiplied by the PBAD Overlay Zone activity's budget percentage to determine the general benefit. The following table illustrates this calculation. This analysis indicates that approximately 25% of Safety activities may be attributed to general benefit to the public at large, equaling a total of $46,073 that must be raised from sources other than special assessments. General Benefit Conclusion Using the sum of the two measures of general benefit described above we find that $65,770 ($19,696 for Big Blue Bus and $46,073 for public at large) may be general in nature and will be funded from sources other than special assessments. A B C D E PBAD Overlay Budget % of General Benefit General Benefit General Benefit Zone Activity Amount Budget Factor Percent (B x C) Allocation (A x D) Safety $181,500 50.77% 0.50 25.38% $46,073 This analysis indicates that approximately 25% of Safety activities may be attributed to general benefit to the public at large, equaling a total of $46,073 that must be raised from sources other than special assessments. General Benefit Conclusion Using the sum of the two measures of general benefit described above we find that $65,770 ($19,696 for Big Blue Bus and $46,073 for public at large) may be general in nature and will be funded from sources other than special assessments. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 14 of 17 2016 Operating Budget The PBAD Overlay Zone's operating budget takes into consideration: The improvements and activities needed to provide special benefits to each individual parcel within the PBAD Overlay Zone boundary (Section B), The parcels that specially benefit from said improvements and activities (Section C), and The costs associated with the special and general benefits conferred (Section E). EXPENDITURES Budget Administration 106% TOTAL BUDGET % of Budget Maintenance $160,000 $16,000 $176,000 49.2% Safety & Hospitality $165,000 $16,500 $181,500 50.8% Total Expenditures $325,000 $357,500 100.00% REVENUES Assessment Revenues $291,730 81.6% Other Revenues(') $65,770 18.4% L. Total Revenues $357,500 100.00% (1) Other non - assessment funding to cover the cost associated with general benefit. Budget Notations The annual budget may increase no more than 5% per year consistent with the increase in consumer price index (CPI) and increases in program costs. The determination of annual budget adjustments and assessment rates will be subject to the review and approval of the board of Downtown Santa Monica Inc. and the City Council. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 15 of 17 As previously discussed in Section B, the PBAD Overlay Zone is segregated into two benefit zones based upon each zone's demand for services and improvements and the benefits received. The table below summarizes the assessable linear frontage within each benefit zone: Variable West of 6t4 Court East of Stn " Court Linear Footage 2,925 1,128 Calculation of Assessments Based on the special benefit factors, assessable linear frontage and the proposed budget, all of which are discussed above, the first year's maximum annual assessment rate for each parcel follows: Benefit Zone Assessment Rate per 'r Linear Foot East of 51^ Court $61.939 West of 51 Court $82.585 The following example illustrates how the preceding rates are applied to parcels in both benefit zones. Benefit Zone Fronta a Rate Annual Assessment East of 51h Court 150 $61.939 $9,290.78 West of 511 Court 150 $82.585 $12,387.71 The assessment calculation is the same for every parcel in the PBAD Overlay Zone. Government Assessments The PBAD Overlay Zone will provide all the improvements and activities to the City of Santa Monica and any other government -owned parcels within the PBAD Overlay Zone. All publicly - owned parcels will pay their proportional share of costs based on the special benefits conferred to those individual parcels. The special benefit to government assessed parcels from these services is an increased likelihood of attracting and retaining employees that follow from having a cleaner and safer area. Publicly -owned parcels will receive special benefit in the form of increased use of the public facilities, increased attraction and retention of employees, which directly relates to fulfilling their public service mission. Article XIII D of the California Constitution was added in November of 1996 to provide for these assessments. It specifically states in Section 4(a) that "Parcels within a district that are owned or used by any agency ... 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." Colorado Avenue PBAD Overlay Zone March 2015 Engineers Report Page 16 of 17 Maximum Annual Assessment Adjustments The annual budget may increase no more than 5% per year consistent with the increase in consumer price index (CPI) and increases in program costs. The maximum assessment for each year of the PBAD Overlay Zone, based on a maximum 5% annual increase of the budget over the prior year, is shown in the following table. Budget Adjustment Any annual budget surplus or deficit will be rolled into the following year's budget. The budget will be set accordingly, within the constraints of the management plan to adjust for surpluses or deficits that are carried forward. Future Development Based on new development in the PBAD Overlay Zone, the amount of assessable square footage in the PBAD Overlay Zone may change over time. These changes could modify the total square footage assessed for affected parcels. Therefore, in future years, the assessments levied against PBAD Overlay Zone parcels may change in accordance with the assessment methodology formula and rates in the Management District Plan and Engineer's Report. Changes to the assessment formula would require the approval of an amendment to the Management Plan. East of 5th Court West of 5th Court Year $61.94 $82.58 Year 2 $65.04 $86.71 Year 3 $68.29 $91.04 Year 4 $71.70 $95.60 Year 5 $75.29 $100.38 Year 6 $79.05 $105.40 Year 7 $83.01 $110.67 Year 8 $87.16 $116.20 Year $91.51 $122.01 Year 10 $96.09 $128.11 Year 11 $100.89 $134.51 Year 12 $105.94 $141.24 Year 13 $111.24 $148.30 Budget Adjustment Any annual budget surplus or deficit will be rolled into the following year's budget. The budget will be set accordingly, within the constraints of the management plan to adjust for surpluses or deficits that are carried forward. Future Development Based on new development in the PBAD Overlay Zone, the amount of assessable square footage in the PBAD Overlay Zone may change over time. These changes could modify the total square footage assessed for affected parcels. Therefore, in future years, the assessments levied against PBAD Overlay Zone parcels may change in accordance with the assessment methodology formula and rates in the Management District Plan and Engineer's Report. Changes to the assessment formula would require the approval of an amendment to the Management Plan. Colorado Avenue PBAD Overlay Zone March 2015 Engineer's Report Page 17 of 17 The total assessment amount for FY 2015 -16 is $291,730 apportioned to each individual assessed parcel, as follows. APN Owner Name Site Address Parcei Assmt 4291025011 1550 5TH STREET LLC 1554 5TH ST $12,387.00 4291023009 500 POUNDS OF DOG INC 631 COLORADO AVE $9,291.00 4291024030 501 COLORADO INVESTORS LLC 501 COLORADO AVE $12,387.00 4290010002 528 COLORADO LLC 528 COLORADO AVE $2,601.48 4290010001 532 COLORADO AVENUE LLC 532 COLORADO AVE $2,601.48 4291023010 601 COLORADO NMS LLC 609 COLORADO AVE $9,291.00 4291024014 BCP 525 COLORADO LLC 525 COLORADO AVE $9,291.00 4291022021 CHENOWETH, CHARLOTTE H TRUST 1557 7TH ST $4,645.50 4290011900 EXPOSITION METRO LINE 402 COLORADO AVE $4,129.00 4291026917 CITY OF SANTA MONICA 215 COLORADO AVE $26,012.70 4290010024 COMMUNITY CORP OF SANTA MONICA 502 COLORADO AVE $6,771.56 4290011907 CITY OF SANTA MONICA 430 COLORADO AVE $22,296.60 4290015026 FELCOR JPM HOSPITALITY SPE LLC 120 COLORADO AVE $41,702.90 4291025012 LLOYDS BANK CALIF 1555 4TH ST $12,387.00 4291026026 MACERICH SMP LP 395 SANTA MONICA $9,496.70 4291026023 MACERICH SMP LP LESSOR 315 COLORADO AVE $22,544.34 4290010005 MCMAHAN, JACQUELINE ET AL TRUST 516 COLORADO AVE $2,601.48 4291028017 PASEO DEL MAR GROUP LLC 1551 OCEAN AVE $12,387.00 4291028026 RBE 1540 SECOND STREET LLC 1540 002 ST $12,387.00 4291022012 ROBHANA INC 711 COLORADO AVE $4,645.50 4290012003 SEARS ROEBUCK AND CO 302 COLORADO AVE $46,657.70 4290010004 STEP UP ON COLORADO LP 520 COLORADO AVE $2,601.48 4290010003 TMJ MEDICAL PROPERTIES LLC 524 COLORADO AVE $2,601.48 TOTAL ASSESSMENT $291,718 ; Reference: Resolution No. 10872 (CCS) Resolution No. 10872 (CCS)