SAN MATEO COUNTY NEW AGENCY PROPOSAL...Draft SAN MATEO COUNTY NEW AGENCY PROPOSAL Governance Matrix Technical Memorandum Prepared for October 2018 C/CAG Staff Advisory Team (SAT) 550

Final

SAN MATEO COUNTY – NEW AGENCY PROPOSAL

Governance Matrix Technical Memorandum

Prepared for October 2018

C/CAG Staff Advisory Committee (SAT)

Draft

SAN MATEO COUNTY NEW AGENCY PROPOSAL


Prepared for October 2018

C/CAG Staff Advisory Team (SAT)

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San Mateo County New Agency Proposal i ESA / 170206.02 Governance Matrix TM October 2018

TABLE OF CONTENTS


Page

1.0 Introduction..................................................................................................................... 5

2.0 Governance Criteria ....................................................................................................... 5

3.0 Governance Structures ................................................................................................. 5 3.1 Memorandum of Understanding ............................................................................. 7 3.2 Joint Powers Authority ............................................................................................ 9 3.3 New Special District .............................................................................................. 10

4.0 Expansion/Modification of Existing Agencies .......................................................... 12 4.1 C/CAG JPA Modification ....................................................................................... 12 4.2 San Mateo County Flood Control District ............................................................. 13 4.3 San Mateo County Public Works .......................................................................... 14 4.4 San Mateo County Office of Sustainability ........................................................... 14

5.0 Finance Mechanisms ................................................................................................... 15 5.1 County General Fund .............................................................................................. 4 5.2 Financing Districts and Impact Fees ....................................................................... 6 5.2.1 Special Assessment District .................................................................................... 6 5.2.2 Special Taxes Using Community Facilities District ................................................ 7 5.2.3 Property Related Fee .............................................................................................. 7 5.2.4 Enhanced Infrastructure Financing District ............................................................. 8

5.3 Decision Tree of Public Financing ........................................................................ 15

6.0 Governance Option Definition .................................................................................... 15

6.1 Baseline: Existing San Mateo County Flood Resiliency Program........................156.2 Proposal Option 1. Department in San Mateo County ........................................16 6.3 Proposal Option 2. Modification of Existing JPA: C/CAG.....

...............................16

6.4

Proposal Option 3. Creation of New JPA

............................................................16

6.5

Proposal Option 4. Modification of Existing Special District: SMC FloodControl..................................................................................................................17....

6.6

Proposal Option 5. New Agency: Special District................................................17

7.0

Recommended Option .................................................................................................18

Appendix

A. Supposal .................................................................................................................... A-1

Table of Contents

San Mateo County New Agency Proposal ii ESA / 170206.02 Governance Matrix TM October 2018

B. Financing Options ..................................................................................................... B-1

List of Tables

Table 1. NHA Advisors: Local and Regional Public Revenue Sources ................................... 6

List of Figures

Figure 1. Governance Comparative Matrix ............................................................................... 7

San Mateo County New Agency Proposal 1 ESA / 170206.02 Governance Matrix TM October 2018

EXECUTIVE SUMMARY

This Governance Matrix Technical Memorandum provides a comparative assessment of potential

governance and financing structures to support agency formation for the proposed new Flood and

Shoreline Protection Agency. Based upon this assessment and input from the SAT and City

Engagement Process, the following options have been identified for consideration of possible

endorsement by the SAT.

Baseline: Existing San Mateo County Flood Resiliency Program

Establishment. The Flood Resiliency Program was established by the County’s Public Works

Department in 2016 to begin to address flooding impacts in areas with cross-jurisdictional

challenges. As of September 2018, the Program is fully operational, leading three multi-beneficial

projects that address challenges that have been, in some cases, under discussion for decades. The

Flood Resilience Program resides in the County of San Mateo Public Works Department (DPW),

it is supported by Human Resources, IT, Accounting, and legal support from DPW and County

Counsel. The Program has a staff of two and all costs including office space, equipment and

office supplies and resources is funded from the County’s General Fund. However, the Program

is scheduled to terminate in June of FY 2019.

Funding/Financing. The program is funded by the San Mateo County General Fund under the

Public Works budget. No other funding or financing mechanisms are identified at this time.

Decision Making/Governance. The Program is governed as part of the Public Works

Department by the Board of Supervisors. The Program uses MOU agreements with 7 cities in 3

watersheds to share funding and collaborate on funding solutions.

Proposal Option 1. Department in San Mateo County

Establishment. Establish department in San Mateo County Public Works, Office or

Sustainability, or other County Division. This would require funding and hiring of staff and

management.

Funding/Financing. Proposal Option 1 would be funded by the County General Fund at the

direction of the Board of Supervisors. Based on a staff of 5, department costs are anticipated to

range between $1.5 and 2.0 million. In addition to General Fund, the County would be able to

implement any of the finance mechanisms identified in Section 5.0, within the limitations of the

voting requirements for each.

Governance Matrix TM


Decision Making/Governance. Proposal Option 1 would continue governance by the Board of

Supervisors. Cities would not have a specific governance role (except through MOUs).

Proposal Option 2. Modification of Existing JPA: C/CAG

Establishment. Proposal Option 2 would modify the existing C/CAG JPA to establish new roles

and authorities related to sea level rise, flooding and shoreline erosion. This would substantially

alter C/CAG’s existing roles and responsibilities.

Funding/Financing. JPAs are authorized by statute to impose fees and taxes consistent with

relevant procedural requirements. C/CAG JPA revision would need to identify allocation of

funding from participating agencies, and/or provide for mechanisms to raise funds through one of

the identified finance mechanisms identified in Section 5.0.

Decision Making/Governance. 21-member Board of elected officials representing the County

and 20 cities and towns. Governance modifications would need to be done through amending the

Joint Powers Authority.

Proposal Option 3. Creation of New JPA

Establishment. Drafting of JPA agreement for review and signature by participating agencies.


relevant procedural requirements. It is anticipated that participating agencies would contribute

funding from their General Funds, with the County providing a “baseload” funding amount and

the Cities providing an agreed upon funding amount equivalent to their participation. JPA

formation would need to provide for mechanisms to raise funds through one of the identified

finance mechanisms identified in Section 5.0.

Decision Making/Governance. Establishment of a new JPA would allow the opportunity to

establish a governance structure that would include both County and Cities. Governance could

include any combination of cities/County, but could include other entities.

Proposal Option 4. Modification of Existing Special District: SMC Flood Control District

See Draft “Supposal” for Option 4 contained in Appendix A.

Establishment. The SMC Flood Control District provides existing implementation and

governance structure, as well as pre-Proposition 13 tax revenue to support administrative

functions. Flood Control District has technical capability and authority to plan and carry out

capital projects. Would use MOUs to implement “building block” projects in the near term, which

provides mechanism for progress while legislation is drafted and carried to create a new board of

directors to provide County and City governance, as well as identification of additional funding

and finance mechanisms. MOUs could also provide for subscription services.



Funding/Financing. Participating agencies would fund project implementation on an individual

basis via MOUs. Legislation revision would need to provide for mechanisms to raise funds

through one of the identified finance mechanisms in Section 5.0. The initial concept would be for

the County to fund half of the costs of the core services provided by the agency and the

participating cities to fund the remaining half.

Decision Making/Governance. Legislation would provide for new board to provide combined

County and City governance. Coast line areas could be grouped into specific reaches for potential

representation and project implementation.

Proposal Option 5. New Agency: Special District

Establishment. Would require new legislation (special act), LAFCo approval and possibly a

local election.

Financing. Enabling Legislation would need to provide for mechanisms to raise funds through

one of the identified finance mechanisms in Section 5.0.

Decision Making/Governance. Legislation would need to provide for new board for combined

County and City governance.

Recommended Proposal Option

Of the options reviewed, Option 4, Modification of San Mateo County Flood Control District

provides several distinct advantages:

Closest alignment of mission and technical capabilities to address sea level rise, flooding

and shoreline erosion.

Existing administrative, staffing and technical capabilities to implement capital

improvement projects.

Resource sharing and MOU management capability while the Agency’s mission is

modified by legislation and long-term funding strategies identified.

Existing enabling legislation that can be modified, as opposed to creating new Special

District legislation.

Potential limitations identified for Option 4 include governance and ease of implementation.

Because the SMC Flood Control District is governed by the Board of Supervisors, there is limited

governance opportunity for the Cities. Additionally, revision of the SMC Flood Control District’s

enabling legislation could require an extended timeframe of between 1 and 4 years, although

modification of the District’s enabling legislation is anticipated to be more streamlined than

establishing a new special district. The Supposal developed by the Executive Committee and

included in Appendix A addresses these potential limitations through the following:



The District’s enabling legislation could be modified to create a new governance board to

represent City and County interests. This legislation can also identify potential financing

mechanisms identified in Section 5.0.

Use of MOUs in the near term to support and implement “building block” projects. This

approach maintains local agency control of projects already under development, provides

the opportunity for collaboration and buy-in for Cities using the MOU structure, and

provides near term benefits while legislation is developed and carried for review by the

State legislature.



GOVERNANCE MATRIX TECHNICAL MEMORANDUM (TM)

1.0 Introduction

This Governance Matrix Technical Memorandum provides a comparative assessment of potential

governance and financing structures to support agency formation for the proposed new Flood and

Shoreline Protection Agency.

2.0 Governance Criteria

The following criteria were used to review each of the governance options included in this

analysis. Using these criteria, each of the governance options were rated using a comparative

matrix to establish a continuum ranging from “least ability” to “greatest ability” to accomplish.

This rating matrix is provided in Figure 1.

Ease of Establishment. These criteria reviewed the legal and political complexity, and the anticipated level of effort and timeframe necessary for each option.

Ability to Leverage Federal and State Funding. These criteria provided an assessment of each option’s ability to acquire and leverage Federal and State funding.

Legal Authority. These criteria provided an assessment of the legal authority provided by each option.

Funding/Financing. These criteria provided a review of the relative funding or financing ability (or limitations) under each option.

Decision Making/Governance. These criteria reviewed the relative decision making or governance ability under each option.

Ability to Expand. These criteria reviewed the ability of each option to expand, and identified any expansion limitations that might be associated with each option.

3.0 Governance Options

The following governance structures were reviewed relative to each of the criteria identified above.

For each governance option, the discussion includes: definition of the governance option,

assessment of each of the criteria, and a summary of advantages/disadvantages for each option.

3.1 Memorandum of Understanding (MOU)

Definition. A Memorandum of Understanding is an agreement between two or more parties that

often does not, but can, contain legally enforceable provisions. MOUs are typically utilized by



agencies to reflect statements of cooperation on policy issues or to recite an agreement to work

together to accomplish certain purposes common to their missions.

Criteria:

Ease of Establishment. Because an MOU represents an agreement between agencies to work to a common purpose, as opposed to establishment of a legal entity, use of a single or

multiple MOUs provides the easiest mechanism for agencies to cooperate regarding sea level

rise, flooding and shoreline erosion, both in terms of legal complexity, and anticipated

timeframe for establishment. It should be noted that the identified timeframe for MOU

negotiation and signature is very agreement specific, and dependent upon the political will of

the signatories. However, in comparison to Joint Powers Authority (JPA) and Special District

formation, use of a single or series of MOU agreements represents the governance

mechanism with the “greatest ability” to be established, both in terms of agreement

complexity, and in terms of implementation timeline. Additionally, it should be noted that the

other governance options examined can use MOUs as part of their governance structure,

similar to their current use by the Flood Resilience Program.

Leverage State/Federal Funding. An MOU does not establish a legal entity with legal authority to enter into contracts. Therefore, relative to other options reviewed, it has the least

ability to leverage state and federal funding.

Legal Authority. An MOU does not establish a legal entity with legal authority to enter into contracts. Of the options reviewed, an MOU has the least ability with respect to legal

authority. Input from the appointed Staff Advisory Team (SAT) indicates that a key function

of the agency would be the ability to design, contract for construction, and own and maintain

projects. In order to complete those functions, the new agency must be a legal entity.

Although several projects have been successfully implemented through the use of MOUs,

they rely on the legal authority of the participating agencies which actually carry out the

project.

Funding/Financing. An MOU would not have the ability to establish a tax or revenue stream other than contributions by the cooperating agencies. Because it is not a legal entity, it would

not be able to issue bonds to fund individual projects, although one of the participating

agencies could take on this function. Other than General Funds dedicated by signatory

agencies, an MOU could not support the financing mechanisms discussed in Section 5.0,

which require separate legal entity status.

Decision Making/Governance. Decision making and governance would be open to definition by the signatory agencies, and could include an appointed board or elected board,

as well as any range of representation (all entities, geographic representation). This could

include collaborative participation in governance by the Cities and County.

Ability to Expand. Expansion can occur through modification of the MOU. Similar to Ease of Establishment, revision to an MOU to add additional agencies can be implemented

relatively efficiently with agreement by the signatories.



Figure 1

Governance Comparative Matrix 10/16/2018



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Advantages. Based upon the criteria identified above, use of a single or multiple MOUs provides

the easiest and least complex mechanism for agencies to cooperate regarding sea level rise,

flooding and shoreline erosion, both in terms of legal complexity, and anticipated timeframe for

establishment. The identified timeframe for MOU negotiation and signature is very agreement

specific, and dependent upon the political will of the signatories. However, in comparison to a

JPA or Special District formation, it is fair to say that an MOU would be the most easily

established type of entity. MOUs may also be used as a part of all other governance options, and

can accessed as a mechanism for “subscription services” between willing parties.

Disadvantages. Because an MOU does not create a separate entity, entering into an MOU does

not give the cooperating parties the ability to act as one legal entity. This disadvantage is most

clear in the area of financing: there is no entity capable of creating a financing tool unique to the

MOU as discussed in Section 5.0.

Conclusion: Relative to the governance options reviewed, an MOU has the greatest ease of

establishment, flexibility for governance, and can be expanded over time. However, because it

does not create a legal entity, it generally has the least ability in the other criteria: Leverage

Federal and State Funding, Legal Authority, and Financing.

3.2 Joint Powers Authority

Definition. A joint powers authority (JPA) is created when two or more public agencies join to

form a new agency that jointly exercises powers common to its members. JPAs are governed by

Government Code sections 6500 et seq.

Criteria:

Ease of Establishment. A JPA is a legal agreement that creates a new legal entity. As such, it typically requires definition of the new powers of the JPA, staffing, and financing, all of

which can require a more complex set of negotiations and legal review prior to signature. The

time needed for drafting, review, and signature of a JPA agreement varies greatly depending

upon the number of parties and their political will to participate. It is estimated that JPA

establishment would require between 6 to 12 months. Therefore, use of a JPA would have a

reduced ease of establishment relative to an MOU. Compared to a Special District, a JPA

would have a greater ease of establishment.

Leverage State/Federal Funding. A JPA establishes a new legal entity with legal authority to enter into contracts or administer grants. Therefore, relative to an MOU, it has a greater

ability to leverage state and federal funding, and would be legally able to contract for and

administer those funds.

Legal Authority. A JPA establishes a legal entity with legal authority to enter into contracts (based on its members’ legal authority). As such, it would meet a key function identified by

the SAT; the ability to design, contract for construction, own and maintain projects. JPAs are

similar to Special Districts in this regard, subject to any constraints based on member agency

authorities or special district laws.



Funding/Financing. As a legal entity, a JPA would have the ability to establish a revenue stream (based on its members’ legal authority) using any of the funding mechanisms

identified in Section 5.0 for the new agency.

Decision Making/Governance. Decision making and governance would be open to definition by the member agencies, and could include an appointed board or elected board, as

well as any range of representation (all entities, geographic representation). This could

include collaborative participation in governance by the Cities and County, as well as a wide

range of decision making structures. For example, decision makers could be appointed or

elected, and could represent all 21 cities, representative or member cities, or geographic

areas. This provides flexibility in the development and implementation of governance.

Ability to Expand. Expansion to add additional agencies can be implemented through revisions to the JPA and signature by members. Relative to a Special District, a JPA provides

more flexibility for future participation by individual agencies.

Advantages. Because a JPA is a separate legal entity, it can implement and own projects,

contract for services, receive grant funds, create funding mechanisms and leverage local, state and

federal funding in a way that benefits all of its members. It can also be structured to provide

Decision Making/Governance flexibility relative to the type, number and representation of a

board.

Disadvantages. A JPA takes more effort, both in the drafting of an agreement and in amassing

local support and political will of its members, than an MOU. Because it is a separate legal entity

that is a public agency, it must comply with the Brown Act for meetings, in addition to other laws

applicable to public agencies in California, and likely hire staff for administration of the entity.

Conclusion: The use of a JPA is a potential option for new agency implementation. As a legal

entity, the JPA can jointly exercise powers common to its members, including the ability to

design, contract for construction, own and maintain projects, and implement financing. This is

key differentiator from the use of an MOU as the only governance mechanism.

3.3 New Special District

Definition. California Special Districts are state agencies created for the local performance of a

specific governmental or proprietary function, unlike cities and counties that perform a wide

variety of functions for their citizenry. Special districts provide services and facilities within a

defined boundary and are governed by a board.

There are approximately 4,763 Special Districts in the State of California. The two major

categories of special district activities are (1) enterprise - similar to private business, their funding

is primarily derived from user charges and fees, or (2) non enterprise - functions are provided on

a funding basis derived primarily from property tax allocations. Independent Special Districts

have their own separate boards of directors elected by the districts' voters, and also include

districts where the appointed boards of directors serve for fixed terms. Dependent Special

Districts are governed by existing legislative bodies such as a city council or a county board of

supervisors. (http://guides.ll.georgetown.edu/california-in-depth/local-governments)

http://guides.ll.georgetown.edu/california-in-depth/local-governments



Criteria:

Ease of Establishment. A New Special District would require LAFCo approval and/or approval by the State Legislature. Special Districts are typically formed using enabling acts,

which are legislative statutes that serve as the framework for a district, outlining the legal

parameters for its governance and operation. These statutes specify the types of services

special districts can provide, the means by which the services may be funded, the governance

structure of the district, how the district may be created, and how it may expand its

boundaries through annexation.

There are two types of enabling acts: principal acts and special acts. Principal acts are

established for an entire category of special districts. The State Legislature has established 29

different principal acts for the different types of special districts. Special acts are created by

the Legislature when there is a specific need in a locale that cannot be met by the traditional

formation of a special district. There are 141 independent and dependent special districts

formed through special act legislation for specific purposes separate from the standard special

district principal acts. The advantage of forming under a principal act would be that the

process is already set forth in law. The advantage of a special act is that it can be more

tailored to a specific situation, with a more specific set of authorities and processes that are

tailored to a proposed agency. It is anticipated that a new special district to address sea level

rise, flooding and shoreline erosion would require a Special Act, which would allow for

establishment of specific services and how they would be funded.

Creation of a Special District through either the LAFCo or legislative process should start

with drafting of a feasibility study to review the nature, location, and extent of any functions

or classes of service to be provided, including review of available and needed facilities and

the capacity of existing facilities. The feasibility study would provide an estimate of the

operations and administrative costs, and proposed funding mechanisms, and mapping of the

district boundary. The process may require an election if LAFCo holds a protest hearing and

receives at least a 25 percent protest, or if an assessment or special tax included as a funding

source. Additionally, CEQA compliance is required to support the LAFCo approval.

Because establishment of a Special District can require approval by LAFCo, an act of the

state legislature, and/or potential local election, this governance structure could be harder to

establish. Therefore, establishment of a Special District would have the lowest “ease of

establishment”.

Leverage State/Federal Funding. Similar to a JPA, a Special District is a legal entity would have the ability to enter into contracts or administer grants. Therefore, relative to an MOU, it

has a greater ability to leverage state and federal funding, and would be legally able to

contract for and administer those funds.

Legal Authority. A Special District would have the legal authority, powers and functions provided by its LAFCo approval or enabling legislation; for principal acts, this would be

established by the legal framework governing the Special District, for example Ports and

Harbor Districts are governed by the Navigation Code 6200 et seq. If formed by special act,

the Special District’s powers would be established by the enabling legislation and could be

broad. A Special District establishes a legal entity with legal authority to enter into contracts.

As such, it would meet a key function identified by the SAT, the ability to design, contract

for construction, own and maintain projects.



Funding/Financing. As a legal entity, a Special District would have the ability to establish a revenue stream using any of the funding mechanisms identified for the potential agency and

discussed in Section 5.0. As previously noted, an MOU would not be able to implement these

funding mechanisms, and a JPA would have potentially equivalent financing capability,

depending upon the capabilities of its members.

Decision Making/Governance. A Special District is governed by a Board. Independent districts have autonomous boards that are elected by voters or appointed to fixed terms.

Dependent districts are governed by other governmental agencies, like cities or counties. This

may provide less flexibility in structuring governance among many existing agencies.

However, board election could be structured to be representative geographically.

Ability to Expand. A Special District would have the ability to expand its services, functions or geography through revisions to its enabling legislation and/or LAFCo processes. Relative

to a JPA, this process provides less flexibility for future modifications or participation by

individual agencies.

Advantages. Because a Special District is a separate legal entity, it can implement and own

projects, contract for services, receive grant funds, create funding mechanisms and leverage local,

state and federal funding in a way that benefits all of its members. It’s enabling legislation can

also be structured to provide Decision Making/Governance flexibility relative to the type, number

and representation of a board.

Disadvantages. A Special District would likely require LAFCo approval, state legislation, and/or

a local election. As such, use of a Special District would take more effort, both in the drafting of

an agreement and in amassing local support and political will of its members, than an MOU.

Similar to a JPA, as a separate legal entity, it must hold meetings and likely hire staff for

administration of the entity.

Conclusion: The use of a Special District is a potential option for new agency implementation.

As a legal entity, a Special District would include appropriate powers, and would be able to

implement funding mechanisms identified. Due to the approvals necessary, including potentially

State legislature, LAFCo, and popular vote, a new Special District has the potential to be the most

complex governance structure; however, it has the ability to provide collaborative governance

with a new board.

4.0 Expansion/Modification of Existing Agencies

The following existing agencies have been identified as having some component or potential to

meet meet the SAT identified goals for the Agency.

4.1 C/CAG JPA Modification

The City/County Association of Governments (C/CAG) is a Joint Powers Agency composed of

the County of San Mateo and all twenty cities located within the County. C/CAG deals with

issues that are best addressed at a Countywide level. Its primary role is as the County’s

Congestion Management Agency. It also serves as the Airport Land Use Comission. It



administers a countywide stormwater program focused on supporting its member agencies in

meeting regulatory mandates related to stormwater management and works on various other

transportation issues, as well as air quality, solid waste, and energy issues. Through its 21-

member Board of Directors, C/CAG provides a unique forum for the cities and the County to

work together on common issues to develop cost-effective solutions.

How Modified. Would require modification of the existing JPA to define and expand powers

necessary to address sea level rise, flooding and shoreline erosion. This would include as

substantial re-direction of the C/CAG JPA in terms of its current mission.

Advantages. C/CAG is an existing JPA and its governance structure includes County and City

representation and has been effective at addressing regional transportation and stormwater issues

in a coordinated manner.

Disadvantages. A C/CAG governance structure that includes all 21 entities may not be nimble

enough for project implementation at the scale necessary to address sea level rise, flooding and

shoreline erosion. There would be a re-direction from current mission and technical capabilities,

and would require augmentation of staffing and funding. Decision making, while representative,

may be cumbersome for implementation of capital improvement projects.

4.2 San Mateo County Flood Control District

The San Mateo County Flood Control District is a Countywide Special District that was created

by State legislation in order to provide a mechanism to finance flood control projects. The

legislation requires that a flood control zone be formed over an entire watershed and a proposed

funding source be determined before a flood control project is undertaken. Recent changes in the

State Constitution require an election if a flood control zone is to be financed with property

assessments or taxes. There are currently three active flood control zones, including Colma

Creek, San Bruno Creek, and San Francisquito Creek. These 3 flood zones generate pre-

Proposition 13 tax revenue for the District’s administration and implementation of projects within

those flood zones.

Appendix A contains a “supposal” outlining how the San Mateo County Flood Control District

enabling legislation could be modified to include a governance board, with the use of existing

MOUs in the short term to continue project implementation.

How Modified. Would require modification of the legislation that created the Flood Control

District to extend its mission from existing flood zones to sea level rise, flooding and shoreline

erosion as well as expanded membership. Would need to also address funding/finance issues to

reflect the current constitutional definitions and restrictions.

Advantages. The District already exists and can be expanded to address sea level rise, flooding

and shoreline erosion. The District has technical staffing/skill set for planning and

implementation of capital projects (assuming staff resource sharing). It could use MOUs to

progress specific projects, and has the administrative and funding structure to allow for transition



from flood control to incorporation of sea level rise, flooding and shoreline erosion over time. It

has the advantage of resource sharing to support administrative functions.

Disadvantages. The District’s governance structure is currently the County Board of Supervisors.

If necessary, legislation could create a new board that is representative of cities.

4.3 San Mateo County Public Works

The Department of Public Works is a department in the County of San Mateo serving the

unincorporated areas of San Mateo County, providing public services and operating facilities that

benefit the community as well as County employees and clients of County agencies. The

Department of Public Works plans, designs, constructs, operates, and maintains facilities and

equipment that are safe and accessible to the clients of County agencies, the general public and

County employees. The Department advises the 5-member Board of Supervisors on all public

works issues and has a budget of approximately $200 million. There are over 300 employees

working in five divisions in the Department: Administrative Services and Airports, Engineering

and Resource Protection, Facility Services, and Road Services. The existing Flood Resiliency

Program is housed within Public Works.

Most of the Public Works budget is funded from sources other than the County’s general fund.

The budget includes federal and state funds earmarked for aviation and transportation, landfill

franchise fees for waste management programs, gas taxes to maintain 320 miles of County roads,

and property taxes and service charges to provide various services to the 46 special districts

governed by the Board of Supervisors and administered by the Department.

How Modified. The Board of Supervisors could expand the mission of the Public Works

Department to include sea level rise, flooding and shoreline erosion, including budget and

staffing expansion. Flood Resiliency Program has been successfully piloted within Public Works.

Advantages. Existing structure and skill set to plan and implement capital improvement projects.

Disadvantages. As a County Department, the governance structure is limited to the Board of

Supervisors, without City representation. There are staff, budget and technical expertise

limitations to address sea level rise, flooding and shoreline erosion, and maintain current and

future level of public works service within the County.

4.4 San Mateo County Office of Sustainability

The Office of Sustainability was formed in July 2014 as a part of the County Manager’s Office

for the County of San Mateo. The Office of Sustainability strives to improve the sustainability of

the County’s operations and the greater community through work in areas of renewable energy

and energy efficiency; resource conservation; alternative transportation; and greenhouse gas

emission reductions. The Office of Sustainability managed the San Mateo County Sea Level Rise

Vulnerability Assessment, and has implemented the public outreach program Sea Change San

Mateo County.



How Modified. The Board of Supervisors could expand the mission of the City Manager’s Office

to include sea level rise, flooding and shoreline erosion, including budget and staffing expansion.

Advantages. Has made substantial progress in vulnerability assessment, public

education/engagement and branding programs, and in acquiring grants and other funding

vehicles.

Disadvantages. As a County Department, the governance structure is limited to the Board of

Supervisors, without City representation. Does not currently have structure and technical skill set

to implement capital projects; does not have funding mechanism.

5.0 Finance Mechanisms

Detailed analysis of finance mechanisms for resilient infrastructure is provided in the Finance

Guide for Resilient by Design Bay Area Challenge Design Teams Final Version 2.0, Prepared by

NHA Advisors (August 2018), and a summary of that document as it related to new agency

formation is provided below. A summary of potential finance mechanisms is provided in

Appendix B, Table 1, including review of each mechanisms applicability to resilient

infrastructure, ability to secure debt financing, revenue potential and level of community

engagement necessary for authorization. Appendix B also contains a discussion of financing

districts and impact fees, including special assessments (Geologic Hazard Abatement Districts

(GHADs) and Community Facility Districts (CFDs)) and property tax increment (Enhanced

Infrastructure Financing Districts (EIFDs)), a brief discussion of advantages and disadvantages of

each mechanism, and a decision tree that identifies various financing scenarios developed by

NHA Advisors.

The appropriate near-term and long-term financing approach would be identified as part of the

New Agency Strategic Plan, as identified in Goal 3 of the New Agency Proposal Framework:

Goal 3: Optimize Funding Opportunities to Assist Member Agencies with Implementing

Successful Flood, Shoreline Erosion, Sea Level Rise and Management Strategies and Related

Programs (FY19 / Updated Annually).

6.0 Governance Option Definition

Based upon the above assessment and input from the SAT and City Engagement Process, the

following options have been identified for consideration of possible endorsement by the SAT.

6.1 Baseline: Existing San Mateo County Flood Resiliency Program

Establishment. The Flood Resiliency Program was established by the County’s Public Works

Department in 2016 to begin to address flooding impacts in areas with cross-jurisdictional

challenges. As of September 2018, the Program is fully operational, leading three multi-beneficial

projects that address challenges that have been, in some cases, under discussion for decades. The



Flood Resilience Program resides in the County of San Mateo Public Works Department (DPW)

and similar to C/CAG, it is supported by Human Resources, IT, Accounting, and legal support

from DPW and County Counsel. The Program has a staff of two and all costs including office

space, equipment and office supplies and resources is funded from the County’s General Fund.

However, the Program is scheduled to terminate in June of FY 2019.

Funding/Financing. The program is funded by the San Mateo County General Fund under the

Public Works budget. No other funding or financing mechanisms are identified at this time.

Decision Making/Governance. The Program is governed as part of the Public Works

Department by the Board of Supervisors. The Program uses MOU agreements with 7 cities in 3

watersheds to share funding and collaborate on funding solutions.

6.2 Proposal Option 1. Department in San Mateo County

Establishment. Establish department in San Mateo County Public Works, Office or

Sustainability, or other County Division. This would require funding and hiring of staff and

management.

Funding/Financing. Proposal Option 1 would be funded by the County General Fund at the

direction of the Board of Supervisors. Based on a staff of 5, department costs are anticipated to

range between $1.5 and 2.0 million. In addition to General Fund, the County would be able to

implement any of the finance mechanisms identified in Section 5.0, within the limitations of the

voting requirements for each.

Decision Making/Governance. Proposal Option 1 would continue governance by the Board of

Supervisors. Cities would not have a specific governance role (except through MOUs).

6.3 Proposal Option 2. Modification of Existing JPA: C/CAG

Establishment. Proposal Option 2 would modify the existing C/CAG JPA to establish new roles

and authorities related to sea level rise, flooding and shoreline erosion. This would substantially

alter C/CAG’s existing roles and responsibilities.


relevant procedural requirements. C/CAG JPA revision would need to identify allocation of

funding from participating agencies, and/or provide for mechanisms to raise funds through one of

the identified finance mechanisms identified in Section 5.0.

Decision Making/Governance. 21-member Board of elected officials representing the County

and 20 cities and towns. Governance modifications would need to be done through amending the

Joint Powers Authority.

6.4 Proposal Option 3. Creation of New JPA

Establishment. Drafting of JPA agreement for review and signature by participating agencies.




relevant procedural requirements. It is anticipated that participating agencies would contribute

funding from their General Funds, with the County providing a “baseload” funding amount and

the Cities providing an agreed upon funding amount equivalent to their participation. JPA

formation would need to provide for mechanisms to raise funds through one of the identified

finance mechanisms identified in Section 5.0.

Decision Making/Governance. Establishment of a new JPA would allow the opportunity to

establish a governance structure that would include both County and Cities. Governance could

include any combination of cities/County, but could include other entities.

6.5 Proposal Option 4. Modification of Existing Special District: SMC Flood Control District

See Draft “Supposal” for Option 4 contained in Appendix A.

Establishment. The SMC Flood Control District provides existing implementation and

governance structure, as well as pre-Proposition 13 tax revenue to support administrative

functions. Flood Control District has technical capability and authority to plan and carry out

capital projects. Would use MOUs to implement “building block” projects in the near term, which

provides mechanism for progress while legislation is drafted and carried to create a new board of

directors to provide County and City governance, as well as identification of additional funding

and finance mechanisms. MOUs could also provide for subscription services.

Funding/Financing. Participating agencies would fund project implementation on an individual

basis via MOUs. Legislation revision would need to provide for mechanisms to raise funds

through one of the identified finance mechanisms in Section 5.0. The initial concept would be for

the County to fund half of the costs of the core services provided by the agency and the

participating cities to fund the remaining half.

Decision Making/Governance. Legislation would provide for new board to provide combined

County and City governance. Coast line areas could be grouped into specific reaches for potential

representation and project implementation.

6.6 Proposal Option 5. New Agency: Special District

Establishment. Would require new legislation (special act), LAFCo approval and possibly a

local election.

Financing. Enabling Legislation would need to provide for mechanisms to raise funds through

one of the identified finance mechanisms in Section 5.0.

Decision Making/Governance. Legislation would need to provide for new board for combined

County and City governance.



7.0 Recommended Proposal Option

Of the options reviewed, Option 4, Modification of San Mateo County Flood Control District

provides several distinct advantages:

Closest alignment of mission and technical capabilities to address sea level rise, flooding

and shoreline erosion.

Existing administrative, staffing and technical capabilities to implement capital

improvement projects.

Resource sharing and MOU management capability while the Agency’s mission is

modified by legislation and long-term funding strategies identified.

Existing enabling legislation that can be modified, as opposed to creating new Special

District legislation.

Potential limitations identified for Option 4 include governance and ease of implementation.

Because the SMC Flood Control District is governed by the Board of Supervisors, there is limited

governance opportunity for the Cities. Additionally, revision of the SMC Flood Control District’s

enabling legislation could require an extended timeframe of between 1 and 4 years, although

modification of the District’s enabling legislation is anticipated to be more streamlined than

establishing a new special district. The Supposal developed by the Executive Committee and

included in Appendix A addresses these potential limitations through the following:

The District’s enabling legislation could be modified to create a new governance board to

represent City and County interests, and authorities for sea level rise and erosion work.

This legislation can also identify potential financing mechanisms identified in Section

5.0.

Use of MOUs in the near term to support and implement “building block” projects. This

approach maintains local agency control of projects already under development, provides

the opportunity for collaboration and buy-in for Cities using the MOU structure, and

provides near term benefits while legislation is developed and carried for review by the

State legislature.



References:

(http://guides.ll.georgetown.edu/california-in-depth/local-governments)

NHA Advisors LLC (2018). Finance Guide for Resilience By Design Bay Area Challenge Design

Teams, Final Version 2.0.

Legislative Analyst’s Office (March 2002). Water Special Districts: A Look at Governance and

Public Participation

http://guides.ll.georgetown.edu/california-in-depth/local-governments

San Mateo Stormwater Agency A-1 ESA / 170206.02 Governance Matrix TM October 2018

APPENDIX A

Supposal: October 2, 2018

Flood and Shoreline Protection Agency (Working name of agency; requires further discussion)

Draft “Supposal” October 2, 2018

Supposal Element Suggestion for Discussion

Mission and role of

Agency

Develop a flood control and resiliency plan for the Bayshore and the Coastside

to address 2100 sea level rise and shoreline erosion. This plan would be

implemented by designing and constructing existing and future “Building Block

Projects” in conjunction with participating cities under a MOU for each project.

The agency would secure grant funding for these projects and provide “core

services” as requested by the participating cities under each MOU. Core

service would consist of planning, engineering and design support. Based on

input from cities, it is likely that the mission of the agency will expand to

include maintenance of facilities once constructed as part of the Building Block

Projects.

Existing Block

Projects

There are three Building Block Projects now underway subject to existing

MOUs:

Bayfront Canal (Redwood City, Atherton, Menlo Park, Unincorporated SMC)

Belmont Creek (Belmont, San Carlos, Unincorporated SMC)

Navigable Slough (SSF, San Bruno, Unincorporated SMC) MOUs for each of these Building Block Projects spell out the role and

contribution of the participating cities and the County. Currently a total of

seven cities and the County participate in these MOUs. Additional MOUS

would be developed for other “stretches” of the Bayshore and the Coastside as

further described below.

Organization Type The County Flood Control District would be modified through State legislation

and moved out of the County to serve as the new agency. Legislation would

also define the powers of the agency including the ability to tax, issue bonds or

take other actions deemed necessary for the agency to implement its mission.

Governance The County Flood Control District, revised through legislation, would shift

governance from the Board of Supervisors to an independent Board with a

minimum of 5 and maximum of 7 members consisting of one member of the

Board of Supervisors and city council members from geographic districts

(North, Central, South, Coastal). Oversight of the Building Block Projects

would be the responsibility of the participating cities as defined by their MOU.


Minimum

Participation

The County and all cities party to one or more existing or future Building Block

Project MOU would be required to join the new agency.

Potential Expansion One or more Building Block Projects could be initiated under new MOU(s) to address 2100 sea level rise along the Bay shore. For example, Millbrae,

Burlingame, San Mateo and Foster City could initiate a Building Block

Project.

One or more Building Block Projects could be initiated under new MOU(s) to address shoreline erosion along the region (Daly City, Pacifica, Half

Moon Bay and Unincorporated County).

Other sea level rise or flood protection needs could be addressed through new MOUs.

Cities could also join the new agency voluntarily.

Functions Not

Included This “supposal” does not anticipate any change to the scope, purpose or

structure of the Office of Sustainability. Its work with sea level rise

vulnerability and adaptation would be essential to (but not part of) the new

agency.

Storm water quality and regulatory permit compliance efforts, including regional storm water projects, have not been included within the agency’s

functions but could be added at any time deemed appropriate by C/CAG.

Initial Agency

Funding

The initial concept is for the County to fund half of the costs of the core services

provided by the agency and the participating cities to fund the remaining half.

City contributions would be based on population (or other formula). The

estimated total costs of the core services range from $750,000 to $1.5 million

depending on the number of MOUs that are executed. Spread over a larger

number of cities, this should maintain city costs at a modest level (


APPENDIX B

Financing Options

5.1 County General Fund (Baseline)

Definition. A County’s General Fund is a basic operating fund that is used to account for money

that is not required legally or by sound financial management to be accounted for in another fund.

Use of the county general fund would require approval through the county budgeting process,

including identification of revenues sufficient to cover proposed expenditures.

Advantages. A general fund can be directed by Board of Supervisors through County budgeting

process. The current Flood Resiliency Program is funded from the General Fund

Disadvantages. The general fund does not contain funding at adequate scale to address sea level

rise, flooding and shoreline erosion with County obligations. The current Flood Resiliency

Program funding will expire June 2019 unless additional resources are identified by the Board.


TABLE 1 NHA ADVISORS: LOCAL AND REGIONAL PUBLIC REVENUE SOURCES

Revenue Source

Applicability to Resilient Infrastructure Systems

Security for Debt Financing

Revenue Potential

Community Engagement Required for Authorization

Financing Districts and Impact Fees

Special Assessments

NARROW: Must provide direct benefit to assessed parcels

Yes LIMITED: But critical to capture direct benefits of resilient infrastructure

MODERATE: Majority district landowner approval weighted by assessment

Special Tax (landowner)

MODEST: Wide range of facilities & services; but implicit benefit to assessed parcels

MODERATE: 2/3 district landowner or voter approval

Development Impact Fees

MODEST: Wide range of facilities; but must benefit new development

No LIMITED: majority board approval

Property Tax Increment

BROAD: Wide range of facilities & services, environmental mitigation, Private redevelopment

Yes NONE in the short run; MODERATE in the long run

LIMITED: Majority board approval

MODERATE: 55% district voter approval to issue debt

Public and Private Enterprises

Water, Sewer and Stormwater Rates and Charges

NARROW: Must support enterprise operations

Yes

MODERATE: To extent resilient infrastructure provides direct benefit to enterprise

LIMITED: Notice and protest hearing for rate increase; majority board approval to issue debt

Seaport or Airport Revenues

LIMITED: Majority board approval

Other Utilities and Railroads

LIMITED: Majority board approval; could involve CA Public Utilities Commission

Highway and Bridge Tolls

NARROW: Transportation Facilities and Services

MODERATE: To extent resilient infrastructure includes transportation

EXTENSIVE: Bridges: majority votes approval; expenditure plan Highways: state legislation

Cities, Counties, and Special Districts

Special Taxes (jurisdiction)

BROAD: Any use approved by tax measure

Yes SIGNIFICANT: Depending on size of tax base

EXTENSIVE: 2/3 vote approval by jurisdiction; expenditure plan Ad Valorem

Property Tax

BROAD: But fixed public improvements only

General Tax BROAD: Any government purpose

Noa EXTENSIVE: Majority voter approval

Gas Tax NARROW: Transportation Facilities and Services

Yes MODERATE: Tax base constrained

EXTENSIVE: 2/3 voter approval by county; expenditure plan

NOTES:

a Can use installment sale or lease agreement to fund facilities over multiple year, similar to debt financing. SOURCE: NHA Advisors, Finance Guide for Resilient by Design Bay Area Challenge Design Teams, Final Version 2.0, Figure 6, August 1, 2018.


5.2 Financing Districts and Impact Fees

5.2.1 Special Assessment District

Definition. Proposition 218 defines “assessment” as “any levy or charge upon real property by an

agency for a special benefit conferred upon the real property.” Cal. Const., art. XIIID, § 2(b). “...

[A] special assessment, sometimes described as a local assessment, is a charge imposed on

particular real property for a local public improvement of direct benefit to that property, as for

example a street improvement, lighting improvement, irrigation improvement, sewer connection,

drainage improvement, or flood control improvement. The rationale of special assessment is that

the assessed property has received a special benefit over and above that received by the general

public. The general public should not be required to pay for special benefits for the few, and the

few specially benefited should not be subsidized by the general public.” Solvang Municipal

Improvement District v. Board of Supervisors (1980) 112 Cal.App.3d 545. Pursuant to

Proposition 218, formation of an assessment requires a weighted vote based on the proposed

assessment of each parcel of 50+%).

One example of the application of a special assessment district to resilient infrastructure in

California is through a Geological Hazard Abatement District (GHAD). There are 35 GHADs in

the state formed primarily to finance and maintain erosion control improvements, including

improvements to protect beach front properties. GHADs are applicable where benefits are clearly

attributable to specific properties. As the scope and scale of the protected properties increases, the

separation of special from general benefit becomes more difficult. Large GHADs may have

difficulty arranging debt financing because bond counsel may be reluctant to opine on the general

versus special benefit allocation lacking clear standards in statute and case law (NHA, 2018).

Special taxes imposed through community facilities districts (CFDs, discussed below) have

advantages over GHADs because there is no need to distinguish special from general benefit.

However, CFDs require two-thirds property owner or voter approval, whereas GHADs only

require a simple majority property owner approval (NHA, 2018).

Advantages. An assessment is tailored to benefits received by each parcel within an assessment

district, and where collected through a county property tax bill, it is a relatively reliable source of

revenue for a public agency.

Disadvantages. The primary disadvantage of an assessment district is the cost of the process

associated with preparing an assessment and the associated voting process. An agency must

prepare a detailed engineers report in support of an assessment, and run a ballot proceeding,

typically with an informational campaign where an assessment covers a large area. In addition,

assessments must be squared with property tax rolls annually to ensure that they reflect changes

in parcels occurring through each year, and may be perceived in competition with other financial

needs.


5.2.2. Special Taxes Using Community Facilities District

Special taxes in the context of a financing district are imposed through a Community Facilities

District (CFD). A CFD special tax is levied on parcels within the district, similar to a special

assessment; however, there is no need to distinguish special from general benefit. CFDs provide

the most flexible tool for channeling benefits that accrue to private landowners and their tenants

into funding resilient infrastructure (NHA, 2018).

If the CFD has 12 or more registered voters, then two-thirds of voters must authorize the special

tax on a one-person, one-vote basis. An advantage of CFDs compared to special assessment

districts is that parcels can annex into an existing CFD as long as the annexed parcels follow the

same approval requirements.

Advantage: The jurisdiction forming the district has as wide discretion to create the special tax

formula to maximize both revenue and landowner support, so long as the formula does not mimic

an ad valorem approach (percent of assessed value). To fund resilient infrastructure, the CFD can

levy special taxes on the basis of exposure to rising sea levels and amount of property protected

(e.g. building square footage). Furthermore, the special tax formula can subsidize lower income

households or senior citizens. This great flexibility makes CFDs an attractive compared to special

assessment districts, in spite of the higher approval hurdle (two-thirds versus simple majority)

(NHA, 2018).

Disadvantage: CFDs are typically formed by jurisdictions in cooperation with developers

seeking to finance infrastructure to support development of undeveloped property. For resilient

infrastructure this makes CFDs highly applicable to finance and maintain flood control projects

for vacant lands undergoing development (NHA, 2018). This may not be applicable for wide

stretches of San Mateo County coastline.

5.2.3 Property Related Fee

Definition. A property-related fee is a “levy . . . imposed on a parcel or upon a person as an

incident of property ownership including a user fee or charge for a property-related service.” Cal.

Const., art. XIIID, § 2(e). A classic example of a property-related fee is water service, fees for

which are “imposed ‘as an incident of property ownership’ because it requires nothing other than

normal ownership and use of property.” Richmond Community Services District v. Shasta Comm.

Serv. Dist. (2004)32 Cal.4th 409, 427.

Advantages. A property-related fee can be a reliable source of revenue for a district providing

services directly to parcels.

Disadvantages. There is some process involved in developing and imposing a property-related

fee, but it is not as onerous as for a special assessment. It is important to ensure that a property-

related fee is the proper financing tool for a given service. There have been a number of court

cases involving the distinction between a property-related fee and a benefit assessment.


5.2.4 Enhanced Infrastructure Financing District

Definition. A relatively new economic development tool permitted under SB 628 in 2014,

enhanced Infrastructure Financing Districts (EIFD) are intended to replace the function of

redevelopment agencies which no longer exist. An EIFD can be created by a city or county to

finance a variety of community-wide benefit projects. No voter approval is required to form an

EIFD, but a 55% voter approval is required for issuance of bonds by an EIFD.

Property tax increment is a common source of financing where the taxing jurisdiction segregates

into a special account the increment generated by increased assessed valuation over and above a

base year amount, within the boundaries of a “redevelopment area” designated by the jurisdiction.

In California, this was historically done to finance specified public facilities and affordable

housing, and occasionally public services, to support economic and social investment in the area.

California abolished tax increment funding in 2011 that allowed local redevelopment agencies to

capture the increment allocated to other taxing entities within the redevelopment area (NHA,

2018).

The State does allow limited use of tax increment funding and financing through EIFDs. An

EIFD is governed by a Public Finance Authority (PFA) to finance public facilities specified in the

Infrastructure Financing Plan (IFP) adopted by the PFA. The PFA may be a joint powers

authority to enable participation by multiple agencies, and contribution of revenue sources in

addition to the tax increment from participating agencies. Allocation of a participating agency’s

increment or any other revenue source to the EIFD is based on the PFA agreement. The

governing boards of participating agencies may form the PFA and EIFD and adopt the IFP, and

the PFA may expend funds on a pay-as-you-go basis, without any approval of landowners or

residents of the EIFD (NHA, 2018).

Tax increment funding for debt financing is limited to the current annual increment amount less a

coverage ratio for security. Issuance of bonds by the EIFD requires a 55 percent approval by

registered voters within the EIFD. The revenue potential of an EIFD depends on (1) the share of

increment that participating agencies allocate to the district, and (2) the subsequent growth in the

assessed value of property within the district. It will take more years before an EIFD in a

developed area with limited redevelopment potential can issue debt compared to an EIFD formed

on vacant lands that quickly undergo new development. For resilient infrastructure, EIFDs offer a

useful tool particularly for areas undergoing redevelopment or new development. However,

unlike special assessments and special taxes, tax increment funding is revenue that otherwise

would be available for general purposes. The usefulness of EIFDs depends directly on a potential

participating agency’s perceived need for future general-purpose revenue (NHA, 2018). EIFDs

are a long-term reimbursement mechanism; because of the long time it can take for property tax

increment to grow, they are not suitable for either predevelopment funding or project finance

(NHA, 2018).

Advantages. EIFDs can be used for a variety of community-wide benefits, including flood

control and storm water projects; it has the advantage of being able to be approved by City

Councils without popular vote, but allocates that future funding stream to a specific purpose.


Disadvantages. Because EIFDs are a relatively new financing tool under California law, and are

typically associated with former redevelopment agency financing, creating an EIFD could involve

a higher learning curve for municipal finance directors than other financing tools. EIFDs are a

long-term reimbursement mechanism; because of the long time it can take for property tax

increment to grow, they are not suitable for either predevelopment funding or project finance

(NHA, 2018).

5.3 Decision Tree for Public Financing Figure 2 on the following page provides a decision tree developed by NHA Advisors for the

public finance component of our three main sources of resilient infrastructure funding (public

finance, grants, and alternative finance). The purpose of this decision tree is to (1) identify and

consolidate the most likely scenarios for project finance for resilient infrastructure in the Bay

Area and (2) outline the project financing scenario that is most likely to be successful for each

scenario. Note that the decision tree does not address funding for predevelopment costs, but

solely addresses public finance options for long term project finance.

The decision tree turns on three main factors:

1. Type of revenue source (e. g. taxes on land, utility rates, etc.)

2. Number of registered voters (e. g. whether authorization is through land owner consent or voter

consent)

3. Number of jurisdictions involved (e. g. single jurisdiction or a legal aggregation of multiple

jurisdictions).

It is important to note that the decision tree identified by NHA Advisors does not include

consideration of governance structure to identify the most appropriate financing strategy. It is

assumed that all of these strategies would be available to the governance options reviewed in this

document, with the exception of an MOU, which does not create a legal entity. However, the

availability of specific financing mechanisms may depend on the specific governance model.

The following summaries outline the recommended long-term project financing approach for

each scenario identified in the decision tree. For the New Agency Proposal, Financing Scenarios

3, 6, 8, 10, 11 and 12 appear the most relevant within San Mateo County, and represent a

potential combination of financing districts and impact fees, public and private enterprises, and

tax revenues that could be used to generate long-term financing for the new agency. The

appropriate near-term and long-term financing approach would be identified as part of the New

Agency Strategic Plan, as identified in Goal 3 of the New Agency Proposal Framework: Goal 3:

Optimize Funding Opportunities to Assist Member Agencies with Implementing Successful

Flood, Shoreline Erosion, Sea Level Rise and Management Strategies and Related Programs

(FY19 / Updated Annually)


Figure 2. Decision Tree for Public Finance Strategies, NHA Advisors, 2018.


Scenario 1. Single private property owner – This scenario is perhaps the easiest financing plan to

implement. The key assumption is that a single property needs a resilient infrastructure

project to develop their property. California’s Mello-Roos law was adopted in 1986 to

address these kinds of needs. Consequently, in Scenario 1, the landowner would work with their

local land use entitlement authority to form a community facilities district to fund the resilient

infrastructure. The actual special tax mechanism would be custom designed to (1) meet the

business plan needs of the developer and (2) provide sufficient security for bond investors. As

noted earlier, with special tax authorizations, the actual project can benefit other parcels besides the original landowners. These other parcels can be required to annex into the community

facilities district in the future, should they seek entitlements for new or expanded development.

Scenario 2. Multiple private property owners within a single jurisdiction with 12 or more

registered voters within the proposed district – Where the proposed taxes for resilient

infrastructure would be levied only within one infrastructure, there is a clearer choice between

using a special tax measure or an ad valorem tax. In this case, the choice should be determined by

the relative likelihood of a “customized” special tax passing compared with an ad valorem tax.

Community engagement is crucial to this decision. For projects like resilient infrastructure, a

carefully designed special tax is more likely to pass than an ad valorem tax (NHA, 2018).

Scenario 3. Multiple private property owners within multiple jurisdictions with 12 or more

registered voters within the proposed district – This scenario is essentially what was done with

Measure AA for the San Francisco Bay Restoration Authority. There was a vote of all nine

counties in the Bay Area on whether to levy a $12 per parcel tax to pay for “greening” the Bay.

Although the board of supervisors for each of the nine counties had to authorize the vote, the

2/3rds vote requirement was for all nine counties as a whole, and was not a county by county

basis. Consequently, if the measured gain a 2/3rds vote in all nine counties as a whole, the

measure would be levied in all nine counties, regardless of how each county voted.

If Measure AA had been done as an ad valorem tax, as opposed to a “special tax” on each parcel,

the measure would have had to get a 2/3rds vote in each county. So, while both ad valorem and

special tax measures can be done for multi-jurisdiction tax measures where there are 12 or more

registered voters, we recommend using the special tax approach where multiple jurisdictions must

approve the vote.

Scenario 4. Multiple private property owners within a single jurisdiction with less than 12

registered voters – This is a possible scenario for undeveloped property with multiple parcel

owners. Again, as with Scenario 5, formation of a community facilities district for the multiple

owners is the best option.

Scenario 5. Multiple private property owners within multiple jurisdictions with less than 12

registered voters – This is not a likely scenario. This scenario envisions a tax measure for

many undeveloped parcels spread across multiple jurisdictions. In this case, a land owner

approved community facilities district would be the best alternative. Each of the overlapping

jurisdictions would need to approve the district, but one of them would need to take the official

role as sponsor for the community facilities district.


Scenario 6. Public water, sewer, or storm water utility customers within multiple jurisdictions –

This scenario is most likely for sewer utilities, or for new storm water utilities formed under SB

231. The revenue stream would be utility rates, approved under Prop 218. As noted earlier,

the Bay Area’s sewer utilities may have the rate capacity already to do some resilient

infrastructure financing. In California, multiple jurisdictions can jointly finance infrastructure

through what is called joint powers authority (“JPA”). This is a special purpose governmental

entity formed by each of the participating government entities. For debt financing, the member

entities can legally pledge their revenue, such as sewer or storm water service charges to the JPA.

The JPA can then in turn pledge this revenue as security for a bond issue. This would be a

realistic option for funding regional resilient infrastructure that directly benefits water, sewer, or

storm water utilities.

Scenario 7. Public water, sewer, or storm water utility customers within a single jurisdiction – As

with Scenario 6, the key revenue source here is utility service charges. Utility service charges are

a very strong revenue source, and the easiest new revenue source to authorize. The challenge is establishing a direct benefit between the resilient infrastructure project and the utility pledging the

service charges to debt used to fund the resilient infrastructure.

Scenario 8. Highway users within a single jurisdiction - Scenario 8 is much simpler than Scenario

9. If a resilient infrastructure project can be designed to benefit a roadway solely within one

jurisdiction, the community engagement process is more feasible. Only one jurisdiction, with a

presumably smaller number of stakeholders, needs to be brought into consensus on the project.

Scenario 9. Highway users within multiple jurisdictions - Scenario 9 is essentially what the

Highway 37 collaboration is trying to do—using multiple counties and the State of California

(since Highway 37 is a state highway), to set up a toll road authority to fund a $1 billion+

resilient infrastructure project. The challenge here is community engagement: developing

political consensus amongst multiple stakeholders to establish a toll on a highway that has never

had a toll on it before.

Scenario 10. Sales Tax, utility users tax or TOT payers with a majority vote - Scenario 10 reflects

a single jurisdiction that approves a sales tax increase with majority vote. As noted before, this

increase in sales tax cannot be formally pledged to debt, and the annual allocation of

revenues to pay debt service on a resilient infrastructure lease financing must compete with

all other public services funded by the General Fund of the taxing entity. Scenario 11’s scalability

is also limited by the need of the taxing entity to pledge real estate equal in value to the amount of

lease financing to be done. The resilient infrastructure itself may not be suitable for use as

collateral in a credit-worthy lease obligation.

Scenario 11. Sales Tax, utility users tax or TOT payers with a 2/3 vote - Scenario 11 reflects a

single jurisdiction that approves a sales tax increase by a 2/3 vote. Consequently, the increase in

sales tax revenues can be directly pledged to debt to fund resilient infrastructure without

the need for a lease financing. Most importantly, the sales tax revenues from the rate

increase can only be used for the purpose designated in the ballot measure, meaning that other

public service funding needs cannot compete for these funds.


Scenario 12. Seaport or airport users - This scenario is similar to Scenario 8. The ports and

airports within the Bay Area are generally considered strong credits and have some bonding

capacity. As noted earlier, the community engagement process for a seaport or an airport

comprises the management for the facility, but not the users. Again, the challenge is establishing

a direct benefit between the resilient infrastructure project and the seaport or airport.

Documents

SAN MATEO COUNTY NEW AGENCY PROPOSAL...Draft SAN MATEO COUNTY NEW AGENCY PROPOSAL Governance Matrix Technical Memorandum Prepared for October 2018 C/CAG Staff Advisory Team (SAT) 550