My 8.15.23 Meeting Summary

Last night the Council discussed several significant items:

- We received a presentation from the Contra Costa Mosquito and Vector Control District regarding their scope of services and tips on reducing the risk that certain pest insects and animals present.  As part of the District, the City of Clayton is able to appoint one Trustee to sit on the Board of the District.  Currently that seat is vacant.  If any are interested in learning more or applying to be a Trustee, please contact the City Clerk.

- We received a quarterly update on the City's investment portfolio.  This was also discussed at our Budget and Audit Committee meeting the previous day.  We are experiencing higher yields with some of our more recent buys, however the portfolio continues to be weighted with lower yield CDs that were purchased years ago.  We will be doing an analysis whether it makes sense to sell those at a loss in order to utilize proceeds for higher yield products, but it is unlikely that the return would make that worthwhile.  Overall we still have opportunity to move more liquid cash  into higher yielding investments and the Budget and Audit Committee consisting of myself and Councilmember Trupiano directed staff to do so.

Our current practice has been to concentrate in CDs which are not a liquid product, and are limited to buys of $250K.  With an investment portfolio north of $16M, this means that staff needs to monitor a long list of investments.  The Committee asked Staff to prepare an investment plan that describes the laddering targets so that we can reduce the overall number of investments while still maximizing safety, liquidity, and yield. Overall the City recognized approximately double the investment earnings in FY23 than anticipated due to some of these moves.

- We held a public hearing to adopt an updated Master Fee Schedule. This concludes the process that began several months ago and updates our fees to ensure the City is recovering its costs when it performs certain services. In addition, when a portion of the City is being rented as a venue for an event, the City has the right to collect a fee in exchange for that use.

As large events in our downtown create a disproportionate use of staff time and resources that isn’t well captured in a line item fee schedule, a Special Events Fee was added to our Master Fee Schedule that is tiered based on the size of the event. This is analogous to a park or other facility rental on a larger scale. For many years, the City’s downtown has been the venue for many commercially successful events. And during that time, the City chose to waive substantially all fees associated with the rental of its facilities.  The updated fee schedule does offer a discount on Special Event Fees to non-profits in order to recognize the value they bring.

There were several speakers extolling the virtues of the CBCA at this meeting.  On that front, I agree.  The organization adds a tremendous amount of value to the community, and I commend the generosity of both the organization and its volunteers. These activities however, do not exempt anyone from have to pay for use of City facilities. Fee waivers or discounts represent taxpayer funded subsidies and should be made judiciously. To the extent that the City does not collect fees that it is able, taxes from residents must make up the difference.  

Earlier I made a proposal that could lower or waive fees even further in exchange for an arrangement where the CBCA and the City enter into a revenue sharing agreement.  This should be familiar to the CBCA since they also engage in a revenue sharing arrangement with the vendors that come to their events.  For example, a portion of gross revenue from food sales that take place at events like Art & Wine are paid to the CBCA from the food vendors themselves.  In addition, each vendor pays the CBCA for the privilege of renting space on City streets, those same streets that the CBCA has had their fees waived for the past 15 years.

Unfortunately this proposal was rejected by the Board of CBCA without discussion or any exploration on what was possible.  There was no counter proposal made.  It appears that the position of the organization is that the only acceptable option is to be able to continue to use City facilities for free.  That would not be a prudent position for the City to take and it would be unfair to the residents of this community.

Councilmember Cloven raised a question about the legality of charging a Special Event Fee.  This was addressed squarely by our City Attorney that in fact the Special Events Fee is permissible.  To add more context regarding that discussion, I made a post specifically about the laws surrounding municipal fees here: https://www.jeffwanforclaytoncitycouncil.net/2023/08/prop-26-and-218-and-municipal-fees.html

We adopted the updated fee schedule on a vote of 3-2 with Councilmembers Cloven and Tillman voting no.  The fee schedule becomes effective in 60 days.  Given events can be booked up to one year in advance, this means that should the organization choose, they can reserve events through 2024.  This would be 1.5 years after we terminated the MUA.

- We directed staff to include instructions with how to use ClearGov to review payment obligations (check register).  Traditionally payment detail has been on the consent calendar at each regularly scheduled Council meeting.  At the next meeting this will continue, with instructions on how to access ClearGov to view the same data.  After that a link to ClearGov will be included in each agenda packet.

- We designated a voting delegate (Trupiano) and alternate (Diaz) for the upcoming September CalCities annual conference consistent with the committee assignments that were approved back in Dec-22.

Prop 26 and 218 and Municipal Fees

This is a longer post about the law surrounding municipal fees.  The short version is that our City Attorney confirmed that Special Event Fees are not subject to limitations of Prop 26 during our 8.15.23 meeting.  The long version is as follows:

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There is an argument being made that charging a Special Event fee is somehow prohibited based on Prop 26 and Prop 218.  For reference, here is the Cal Cities Prop 26 and 218 Implementation Guide (Guide).  The Guide describes several examples and details out the application of both propositions.

Essentially, CA voters passed propositions over the past several decades defining what is considered a tax, and requiring voter approval of such taxes.  Some of these requirements were added to the State constitution, specifically in Article XIII C.  Here is how a Tax is defined in that Article:

(e) As used in this article, “tax” means any levy, charge, or exaction of any kind imposed by a local government, except the following:

(1) A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege.

(2) A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product.

(3) A charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof.

(4) A charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property.

(5) A fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law.

(6) A charge imposed as a condition of property development.

(7) Assessments and property-related fees imposed in accordance with the provisions of Article XIII D.

If a local government is getting money in any way, it is a tax, unless it falls into one of the 7 exceptions above.

The argument some are making is two pronged and goes something like this:  Prong 1 - The Special Event Fee is a tax, and therefore subject to voter approval.  Prong 2 - Even if the Special Event Fee is not a tax, then a local government is limited to only recovering its costs, and since the Special Event Fee is greater than actual costs, it is somehow prohibited.

This argument is easily rebutted, and it is the CA constitution itself that rebuts it. Section (e)(4) above lists as an exception from the definition of "tax" to be "A charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property."  As the Special Event Fee is a charge for the use of government property (i.e. streets, parks, sidewalks, etc.), it clearly falls under the exception to the definition of a tax in (e)(4) above.  Therefore, Prong 1 fails.

To rebut Prong 2, we need to look at the other provisions of section (e) above.  Looking at (1) - (3), each contains the phrase 'reasonable costs'.   The Guide discusses that the language of this section of the State Constitution is from Prop 26, and mirrors previous language contained in Prop 13, which imposes a burden on local government to prove that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.  In other words, history and courts have essentially defined "reasonable costs" to be actual costs, with some leeway for calculation and distribution of the fees.

But if we look at item (e)(4), this exception to the definition of what constitutes a tax is different than the ones before it.  It does not contain the phrase "reasonable costs".  This is important because there is a canon of statutory interpretation that says, casus omissus pro omisso habendus est.  This generally means that if something is omitted, it is considered to be done intentionally.  SCOTUS's rules for statutory interpretation say that "Every word within a statue is there for a purpose and should be given its due significance."  "Where Congress includes particular language is one section of a statute but omits it in another ..., it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion."

Because the section in the Constitution from Prop 218 that talks about charges for the use of government property omits any reference to reasonable costs, courts have read this as the authors intended - renting government property is not subject to this limitation.  This is also described in the Guide, "in Howard Jarvis Taxpayers Association v. Bay Area Toll Authority (2020) 51 Cal.App.5th 435, review granted October 14, 2020, S263835, the Court of Appeal held that the reasonable cost limitation does not apply to charges imposed for entrance to or use of state property or the purchase, rental, or lease of state property. The California Supreme Court has granted review of both cases."  The Guide was published in Aug 2021.  Subsequent to that, the California Supreme Court let stand the case which means that the Court of Appeal's ruling stands.  As a result, Prong 2 of the argument fails.

Upcoming Meeting 8.15.23

There are several significant items we will be discussing at our next meeting:

- We will receive the quarterly report regarding the City's investment portfolio.

- We will hold a public hearing to update the City's Master Fee Schedule.

- We will provide direction to staff regarding the elimination of payment information from the regular  agenda packet.

- We will discuss the designation of a voting delegate for the Cal Cities annual conference.

If you have any thoughts or questions on the above, please let me know.

Common Ground and a Win/Win for Special Events

Recently the Council gave direction to staff regarding the proposed update to our Master Fee Schedule. As such, I wanted to share my thoughts on why this was an important action for the City to take. There were three main principals at play:

Ensure full recovery of costs – Historically the City did not recover the full cost of providing services or renting facilities. The rates for each did not include a fully burdened rate for staff charges, including administrative staff and police, and they hadn’t been updated beyond a perfunctory CPI increase in many many years. By focusing on a full recovery method, the City ensures it is recovering the actual cost it incurs for these services and facilities.

Fairness to the Taxpayers – Money is fungible. As such, fee waivers or discounts represent taxpayer funded subsidies and should be made judiciously. We offer discounts in a variety of ways throughout the fee schedule - typically for those that reside in Clayton vs. those who do not, or to promote certain activity. Endeavor Hall offers a steep discount for residents and non-profits as the intent of Endeavor is to be a community meeting place of residents, and to support the Arts - the uses of which do not typically generate net income.

Generate revenue – The City’s tax base is relatively small, and somewhat inflexible. There are few opportunities for the City to generate additional revenue. As I stated during my campaign and multiple times afterwards, a tax increase should always be a last resort, and only after all other options are explored. It is appropriate that City’s charge a fee for use of City property. Many cities do this via rental charges or Special Event fees, and Clayton is no exception. The updated fee schedule recognizes that large events that generate significant revenue or support for event sponsors have the ability to pay for use of the City as a venue.

There has been a high level of interest in the updated fee schedule. This update that applies broadly to everyone needed to be in place prior to any discussion with the CBCA. The Council is setting policy for the City as a whole, not just for one organization. A baseline must be established that ensures the City is adequately compensated for staff time and use of its facilities. Now that we have given staff direction on how to move forward, with the actual update to the Master Fee Schedule targeted to be heard at a Public Hearing on August 15, it is appropriate that we renew discussion with the CBCA on ways we can continue to work together.

Under the prior Master Use Agreement (MUA) between the City and the CBCA that waived virtually all permitting fees and did not reimburse the City for actual costs incurred by staff, the interests of the two parties were not always aligned. The CBCA had an interest in successful events to further their mission. The City had an interest in generating greater revenue to support the financial health of the City. In this rubric, the City did not receive the full benefit from events as we were not recovering our full costs. The time spent by City staff (maintenance and police) was not fully invoiced, and staff were overall more burdened as there was a net increase in workload. Combine that with the waiver of fees for renting things like the streets and the Grove park, near $5K-$7K per event, and even the small amount of sales tax generated did not nearly make up for the burden to the City.

Recently I had a conversation with the President of the CBCA. I conveyed that because our interests were not always aligned, it could appear that activities between the two organizations were more adversarial than they actually were, or intended to be. In an effort to find what could be a win/win, I suggested that there may be a way that we could work together in partnership – come to terms so that when the CBCA is successful, so is the City. Depending on the details, I would be open to the idea of reduced or waived fees in exchange for a revenue sharing arrangement. This would be mutually beneficial for all parties, including the taxpayers of our City. The more financially successful the events are, the better it is for everyone. It would then be in the City’s interest to assist as much as possible, and the CBCA could have a predictable cost structure like any other cost of supplies. For the larger events the outcome could be about the same as what is in the current proposed update to the Master Fee Schedule, but for smaller events the fees would no longer be an impediment to their overall viability.

I hope that we could come to terms on an arrangement like this and I look forward to working with the CBCA on ways that we could continue working together.

My 7.18.23 Meeting Summary

Last night the Council met and discussed several significant items.  As we only had one meeting this month, and we will only have one meeting next month, this agenda was quite full and the meeting went till about midnight.

- There was a public hearing where the Council adopted the annual levy of real property tax assessments at the Diablo Estates Assessment District.  This is an annual process whereby the city administers certain functions for the group of homes similar to an HOA manager and the assessments cover those costs.  The City is allowed to raise the assessment each year by CPI, however this year due to the activities of the district the assessment was held flat.

- There was a public hearing where the Council adopted the East Contra Costa County Habitat Conservation Plan/Natural Community Conservation Plan Mitigation Fee Audit and nexus study and to update the related mitigation fees.  This study supports the calculation of developer impact fees associated with development in the region and their environmental impact to the area.

- We approved the new franchise agreement with Republic Services for solid waste collection.  Due to changes in state law, the cost for service has significantly risen and the new agreement incorporates the new state compliance requirements.  Fees for service will rise a little south of 20%, though the actual dollar increase will be between $6 and $10 per month, depending on the size of the garbage container residents use.  Most other provisions of our service agreement remain unchanged - residents will still be able to use multiple recycle and organic bins at no cost, there will still be the same number of "spring clean up" type events for recycling, garbage, and organics, and we are still able to have large items (appliances, furniture, mattresses) taken by Republic Services at no cost.

The new law requires quite a bit of change around how organic materials are collected.  The state has seen fit to dictate what color everyone's bin needs to be, at least the lid portion.  As a result, over time the bin lids of residents will incorporate the new required color scheme whenever bins are replaced through attrition.  In addition, the state is now requiring that haulers (like Republic Services) examine what people are placing in their bin and document their findings, including noting when the non conforming materials are placed in certain bins.  The state requires their be provision for fines as an enforcement mechanism should this cross contamination occur too frequently.  There are also new rules for documentation and tracking, as well as forcing cities to purchase a certain level of recycled materials over time.

- We approved a funding agreement with CCTA in order to upgrade traffic signals at four locations along Clayton Rd: Washington Blvd, St. Bonaventure, El Camino, and Mitchell Canyon Rd.  CCTA is funding a regional effort to update to Smart Signals and was looking for a matching commitment of 11.47%, which amounts to approximately $56K from the City.  This amount was included in the most recent budget that was adopted.

The Smart Signals do a number of things some of which include safety enhancements.  By using a combination of cameras and radar, the signals are able to detect vehicle at a greater distance, and dynamically adjust timing of lights.  For example, if a light turns yellow and the signal detects a vehicle approaching at a certain speed, the length of yellow light could be extended to allow the vehicle to more safely cross the intersection.  In addition, the technology used is more cost effective than the physical cabling that is currently used beneath the streets for the same purpose.

Another aspect of the Smart Signals is that they allow CCTA or potentially another agency to remotely control the signals in order to smooth traffic flow during certain events.  It is unclear who has access to take control, who has access to the video, who has access to the data logs, and under what circumstances these things can be used.  All of these are intended to be defined in an Operating Agreement, but that has not yet been drafted.  I thought it was odd to ask for funding before the operating agreement which defines what we are signing up for was complete.

A concern I voiced that I have stated in the past, is that through traffic to and from east county on Clayton Rd. is an issue during commute hours.  To the extent greater traffic is routed through Clayton Rd. it has an impact on Clayton residents.  To the extent less traffic is routed through Clayton Rd. that has a benefit on Clayton residents.  If CCTA or another agency is allowed to make this route more appealing to drivers by utilizing signal control, that would not be in the interest of the City.

As a compromise, CCTA agreed to delay requiring any payment until June 2024.  This should give sufficient time to review the Operating Agreement after it is finalized and determine if we want to exercise the termination clause in the funding agreement.

- The Council also gave direction that staff may pursue opportunities for cell tower leases in the City as a source of additional revenue and increased service coverage for our residents.

- The Council renewed its service agreement for on-call tree service with Waraner Brothers Tree Service.

- We approved the acquisition and implementation of Granicus Agenda Management software which should add efficiency and streamline processes, while making access and usability easier for users.

-The GHAD Board met after the regular Council meeting and directed staff to pursue an additional levy of GHAD households in order to fund the scope of work that is in the controlling document.  The GHAD Plan of Control document describes what activities the GHAD should be doing, and how frequently.  Because the GHAD is severely underfunded, it does not have the ability to perform even a small portion of the work described in the Plan of Control.  I wrote about the challenges that the GHAD faces back in April:  https://www.jeffwanforclaytoncitycouncil.net/2023/03/32123-oakhurst-geological-hazard.html

This is a multi step process, including updating the Plan of Control, engaging in outreach with GHAD households, and ultimately preparing an analysis of what the GHAD should be doing and how much it takes to do that work.  The small amount of budget in the GHAD that was slated to be used for monitoring will be repurposed towards this effort.

Upcoming Meeting 7.18.23

There are several significant items we will discuss at our next meeting:

- There will be an informational presentation by Save Mount Diablo.

- A public Hearing on real property assessments for the Diablo Estates Assessment District.

- A resolution regarding the East Contra Costa County Habitat Conservation Plan/Natural Community Conservation Plan Mitigation Fee Audit.

- We will discuss an updated franchise agreement with Republic Services for solid waste collection.

- We will discuss the County wide Smart Signals project with CCTA

- We will discuss opportunities for cell tower leases within the City.

- We will discuss renewing the on-call service contract with Waraner Brothers Tree Service.

- We will discuss implementing Granicus Agenda Management software

- The GHAD Board will also meet to discuss direction on a future assessment increase on GHAD property owners in order to cover the scope of services as described in the GHAD operating agreement.

If you have any thoughts or questions on the above, please let me know.

My 6.26.23 Special Meeting Summary

Yesterday afternoon the Council met for a Special Meeting (off cycle) in order to address questions from Council regarding the Master Fee Schedule proposed update directed towards our consultant who was unable to attend the previous regular meeting when this item was agendized. Approval of the proposed fee schedule was not on the agenda as any change to our Master Fee schedule requires a regularly scheduled publicly noticed hearing at least 14 days in advance with the proposal more fully fleshed out. This meeting was for Council to ask questions, discuss, and provide direction to staff.  We are targeting the approval of the update to the fee schedule to take place on August 15.

Due to time constraints regarding retaining a quorum of the Council, public comment was limited to 1.5 minutes instead of the usual 3 minutes. In addition, because this meeting was off cycle, our regular meeting place was unavailable, therefore we met in City Hall.

Questions posed by Council were largely the same as had been asked previously. During our 6.6.23 meeting when we last discussed this, our City Manager stated multiple times that certain questions being asked were matters of policy that the Council sets, not questions of law or process, and that the consultant would largely give the same answer. That is in fact what happened and rather than focus on the actual policy, a significant amount of time was spent asking questions regarding who asked who to do what and who talked to whom, or why during edits of drafts did certain words change and who asked for those changes.

Ultimately the Council engaged a consultant to assess the adequacy of our Master Fee Schedule and propose changes to do two things:

1. Ensure the fees were based on a full recovery method, including direct costs such as salaries and benefits, indirect costs such as departmental administration costs, and citywide support costs such as accounting, personnel, data processing, vehicle maintenance, and insurance.

2. Bring forward a proposal for fees for Special Events including a discount for Clayton based non-profits. 

The proposed update to the Master Fee Schedule did both of these things.  Fees for various services like a tree removal permit, or a building permit were adjusted to reflect actual costs. In addition, a new category of fees for Special Events was created. This would be applicable for a large event that would require streets to be closed, such as Oktoberfest or a parade. For those types of events with 100 participants or greater, a daily Special Event Fee was proposed that would be based on the number of participants, with the smallest tier at $700 for up to 499 participants, and $10K for events with 5,000 participants or greater.  Based on our last  direction at the 6.6.23 meeting, staff also included in this proposal a Special Event discount suggested at 20% for Clayton based non-profits.

Any discount off of stated rates is a policy decision that Council can make.  Discounts represent taxpayer subsidies and should be made judiciously.  We offer discounts in a variety of ways throughout the fee schedule - typically for those that reside in Clayton vs. those who do not.  Endeavor Hall offers a steep discount as the intent of Endeavor is to be a meeting place of residents, and to support the Arts - the uses of which do not typically generate net income.

For the past 15 years, there has been a Master Use Agreement (MUA) between the City and the CBCA whereby virtually all fees for using public property and facilities were waived during Special Events.  Earlier this year the City terminated this MUA, effective July 1, 2023.  The City's regular practice allows permits and reservations to be made up to 1 year in advance locking in the fee method at that time.  Prior to the expiration of the MUA, the CBCA pulled permits for the next year's worth of events, locking in the waiver of virtually all City fees, as is their prerogative under the City's practice and the MUA that is set to expire in a few days.

As an example of the magnitude of figures that are relevant:  for Art and Wine 2022, BBQ 2022, Oktoberfest 2022, and Art and Wine 2023, this portion of direct staff charges paid to the City were $9,888, $6,676, $10,369, and $9,075, respectively.  The fees waived under the MUA for each event represented approximately $5K - $7K.  In comparison, the revenue for the first three events were $284K, $95K, and $281K, and after associated expenses inclusive of the staff time noted above, net income of $137K, $24K, and $115K.

During discussion, Vice Mayor Diaz suggested a two tier discount methodology offering a greater discount to Clayton based non-profits, and a smaller discount to non-Clayton based non profits.  Councilmember Cloven suggested a 50% discount which the majority of the Council felt was too large.  Councilmember Tillman suggested a 40% discount as a compromise which was higher than the majority of the Council was comfortable with.  Ultimately the Council directed staff to update the proposed fee schedule increasing the discount for Clayton based non-profits from 20% to 30%, and to add a 15% discount for non-Clayton based non-profits.  The vote was 3-2, with Councilmembers Cloven and Tillman voting no.