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Resolution Nos. 2021-13 and 2021-14: Proposed Assessment District No. 120 — <br />Area Along Santa Ana Avenue Between Old Newport Boulevard and Cliff Drive <br />February 23, 2021 <br />Page 2 <br />FUNDING REQUIREMENTS: <br />While there is no direct fiscal impact related to this item, the City Council approved Budget <br />Amendment No. 21-020 on November 24, 2020, appropriating $100,000 from the General <br />Fund to Account No. 66902-941006 (AD Assessment Engineering) for preliminary design <br />and assessment engineering costs. <br />In the event that formation of the district is successful, these costs will be reimbursed by <br />cash contributions and bond proceeds from property owners within the district. If the <br />district fails to be formed, funds advanced for preliminary work cannot be recovered from <br />the proposed district property owners. In such case, the General Fund will cover the <br />advance used for preliminary formation costs. <br />DISCUSSION: <br />Owners of property located in the proposed assessment district submitted a petition to <br />the City in October 2020, requesting the formation of a special assessment district to <br />underground overhead utilities. On November 5, 2020, the assessment engineer certified <br />that owners representing more than 60 percent of the assessable property area within <br />Proposed Assessment District No. 120 had signed a petition for undergrounding <br />overhead utilities. On November 24, 2020 the City Council approved Resolution <br />No. 2020-101 certifying the Petition for AD 120. <br />Assessment District No. 120 is being proposed for the conversion of existing overhead <br />utilities to underground locations. The property owners within the boundaries of the <br />proposed assessment district will bear the cost of the improvements and the associated <br />proceedings. <br />The Municipal Improvement Act of 1913 governs the procedures used to create the <br />assessment district. Bonds issued under the Improvement Bond Act of 1915 carry up to <br />a 40 -year term and are issued to finance assessments not paid in cash within 30 days <br />after confirmation of the assessment. Staff is recommending a 20 -year term for AD 120. <br />The Federal Income Tax Component of Contribution (ITCC) has been eliminated <br />pursuant to City Council direction. The ITCC is a tax assessed whenever private party <br />contributions in aid of construction (CIAC) are made. To date, underground utility districts <br />have not been assessed this tax as underground utility districts are viewed as providing <br />public benefit by increasing community aesthetics and public safety. <br />If following the public hearing and balloting AD 120 is formed, an assessment lien would <br />be recorded on the title of properties included in the district. Thereafter, a cash collection <br />period would take place to provide property owners with an opportunity to prepay their <br />assessment and remove the assessment lien. A second cash collection period is also <br />anticipated prior to the bond sale, which is anticipated to occur prior to construction and <br />after design is complete. <br />7-2 <br />