Report Prepared by: Craig J. Cornwell, City Attorney
Title
SUBJECT: Approval of an Agreement Between the City of Merced and the Downtown Merced Property Owner’s Association to Administer the Downtown Merced Property-Based Improvement District and Authorizing the City Manager to Execute the Agreement
REPORT IN BRIEF
Considers approving the Agreement Between the City of Merced and the Downtown Merced Property Owner’s Association to Administer the Downtown Merced Property-Based Improvement District and Authorizing the City Manager to Execute the Agreement.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving the Agreement Between the City of Merced and the Downtown Merced Property Owner’s Association to Administer the Downtown Merced Property-Based Improvement District; and,
B. Authorizing the City Manager to Execute the Agreement Between the City of Merced and the Downtown Merced Property Owner’s Association to Administer the Downtown Merced Property-Based Improvement District in substantially the form on file with the City Clerk, with such changes thereto as may be approved as to form by the City Attorney.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Approve, subject to conditions other than as recommended by staff; or,
3. Deny; or,
4. Continue to a future meeting.
AUTHORITY
Property and Business Improvement District Law of 1994 (Streets and Highways Code Section 36600, et seq.)
City Council Resolution No. 2023-65.
DISCUSSION
The Property and Business Improvement District Law of 1994 (Streets and Highways Code Section 36600, et seq.) (the “Act”) authorizes cities to establish business improvement districts and levy assessments against benefitted properties to finance authorized improvements and activities. Proceedings to establish a district include receipt of a petition from the affected property owners, holding a noticed public hearing, conducting an assessment balloting proceeding in compliance with Proposition 218, and determining that a majority protest has not been filed. In the absence of a majority protest, the council may adopt a resolution establishing the district, and adoption of the resolution and the recordation of an assessment notice and diagram will constitute the levy of an assessment for each fiscal year during the term of the district.
The proceedings management district plan. The management district plan must, among other things, describe the district boundaries, the improvements and activities, the amount proposed to be expended for the improvements and activities in each year of operation of the district, and the specific number of years (to a maximum of 5 for a new district) in which assessments will be levied.
The management district plan may, but is not required to, state that an owners’ association will provide the improvements and activities described in the management district plan. If the management district plan designates an owner’s association, the city must contract with the owner’s association to provide the improvements and activities. An owner’s association may be an existing nonprofit entity or a newly formed nonprofit entity. An owners’ association is a private entity and may not be considered a public entity for any purpose, nor may its board members or staff be considered to be public officials for any purpose. However, an owners’ association must comply with the Brown Act at all times when matters within the subject matter of the district are heard, discussed or deliberated and with the Public Records Act for all documents relating to the activities of the district.
The owner's association must prepare a report for each fiscal year for which assessments will be levied, except the first year. Each annual report must contain, among other things, the improvements and activities to be provided for that fiscal year, an estimate of the cost of providing the improvements and activities for that year, and the amount of any surplus or deficit revenues to be carried over from a previous year. Each year, the council may approve the report as filed or may modify the report following a noticed public hearing.
Property owners in the Downtown Merced business community petitioned the City Council to form a property-based business improvement district pursuant to the Act, and on June 20, 2023, the City Council adopted a resolution declaring its intention to form the Downtown Merced Property Based Improvement District (the “PBID”). Following a noticed public hearing, the City Council adopted Resolution No. 2023-65 on October 6, 2023, forming the PBID, approving the Downtown Merced Property Based Business Improvement District Management District Plan (the “Management District Plan”) and levying assessments against the properties in the PBID for five fiscal years, starting with fiscal year 2023-24. The assessments will fund activities, maintenance and improvements which are designed to enhance safety, maintenance and beautification programs in Downtown Merced and are described in the Management District Plan.
The Management District Plan states that a nonprofit organization will act as the Owners’ Association for the PBID. The Downtown Merced Property Owner’s Association has incorporated as a California nonprofit mutual benefit corporation (the “Corporation”). The Corporation proposes to enter into an agreement with the City to administer the PBID. The Agreement to Administer the Downtown Merced Property-Based Improvement District includes the following key characteristics:
• Term. The term of the Agreement will commence when the Agreement is fully executed and will end on December 31, 2028 unless the Agreement is terminated earlier in accordance with the provisions of the Agreement.
• City and Corporation representatives. A representative appointed by the City Council shall serve as a member of the Board of Directors of the Corporation. The City will make best efforts to ensure that the City’s Representative will be reasonably available to attend and participate in meetings of the Board of Directors in person or by proxy when matters within the subject matter of the PBID are to be discussed. The Executive Director of the Corporation, or his or her duly appointed designee, shall act as the Corporation’s representative for the performance of the Agreement.
• Responsibilities of the Corporation include that the Corporation will:
undertake the authorized activities and improvements in accordance with the Management District Plan and all applicable federal, state and local laws and
procure all required goods and services, and pay for all necessary expenses;
conduct at least one annual public meeting of PBID members and distribute a quarterly newsletter to PBID members;
cooperate with the City in connection with the City’s annual submittal of the assessments to the County for collection on the property tax bills;
comply with Chapter 5.40 of Title 5 of the City’s Municipal Code if the Corporation elects to engage in any patrol watchman activities or otherwise act as a private watchman;
expend the funds it receives pursuant to the Agreement in accordance with the Management District Plan, subject to the right of the Board of Directors to reallocate up to 10% by line item of the budget allocation annually within the budgeted categories;
maintain complete records of all activities and improvements performed under the Agreement;
maintain the insurance required by the Agreement; and
indemnify the City in accordance with the Agreement.
• Rights and Responsibilities of the City include that the City:
may perform a contract compliance audit at least once annually at the City’s expense;
may request a financial statement at the City’s expense, and if an audit reveals any pattern of suspicious or questionable financial activity by the Corporation, the City may suspend future assessment disbursements until the City investigates such matter;
may inspect and copy the Corporation’s records during normal business hours;
will transmit the assessments annually to the County for collection on the property tax bills and will disburse the collected assessment revenues to the Corporation within 15 days of receipt, net of any County administration charges and up to $2,000 per fiscal year for City administrative costs;
will retain certain designated services within the PBID to the levels set forth in the Agreement, subject to confirmation by the City Council each year through the City’s annual budget process. The level and frequency of services may be reduced on a proportionate basis if similar services provided by the City in other parts of the City are reduced due to budgetary constraints; and indemnify the Corporation in accordance with the Agreement.
It is requested that the City Council authorize the City Manager to execute the Agreement Between the City of Merced and the Downtown Merced Property Owner’s Association to Administer the Downtown Merced Property-Based Improvement District.
IMPACT ON CITY RESOURCES
Except with respect to the City’s contribution for the general benefits conferred by the activities and improvements, net assessment revenues collected by the City are the only funds liable for payment of any obligations under the Agreement.
ATTACHMENTS
1. Proposed PBID Agreement
2. Management District Plan