City to look into utility undergrounding

Community interest in city-wide utility undergrounding has energized the council to take a step forward on the issue.

Councilmembers voted to look for a consultant to prepare a report on the viability of such a project.

Utility companies recently indicated that roughly 40% of the city's 10,900 meters are already underground. The cost to underground the remaining 60% is estimated to be $125 million, not including Laguna Canyon Road, which is a separate project.

"This is something that has to be done," said resident Arnold Hano. "I think it would cost twice as much doing it piecemeal.

"Doing it now, doing it well and doing it fast will save money and save lives," he said.

City Manager John Pieitg was instructed to bring to the council at the Sept. 3 meeting a request for proposals from consultants on the preparation of a report to include cost estimates, funding options, evaluation of community support and a timeline. Proposals will also be sought from consultants to work with stake holders and utility companies to expedite undergrounding.

Pietig's report is also to include recommendations for funding the consulting services and maps of the utilities' inventories requested by Councilman Robert Whalen.

"When I first got back on the council, it was clear it would be a pro-active council, particularly on the big issues —- such as undergrounding," said Councilman Steve Dicterow, who co-sponsored the agenda item with Councilwoman Toni Iseman. "But the solution is not on the agenda tonight."

During a previous term on the council, Dicterow had addressed city-wide undergrounding as a safety issue, for which the city might be considered responsible.

Iseman said now is the time to take action, with property taxes on the upswing and savings of $400,000 a year that could be realized if the city takes over street light maintenance.

Possible funding sources identified by staff included the annual $100,000 allocated by Edison, and the $50,000-a-year allocated by San Diego Gas and Electric, which services South Laguna. However, those funds can only be used for undergrounding on arterial highways and major collector streets where there is an unusually high concentration of overhead utilities, and which are not generally used in residential neighborhoods.

The city could also continue to form a series of districts, the piecemeal approach objected to by Hano, which requires a vote of the participating property owners, with assessments determined by benefit to each property in the district.

Unfortunately, it is not unusual for a residential neighborhood district to take between six and 10 years to complete, which can be frustrating for many participants and described by Whalen as mind-boggling.

Taxes could be another funding source, according to the staff report. A voter-approved tax could be established as a basis for the sale of bonds. A general tax could be approved by a simple majority of the voters. A special tax would require a two-thirds vote. Various forms of taxes that could be used include sales, parcel and ad valorem —- a tax based on the assessed value of real estate or personal property.

The establishment of a single assessment district, i.e. city-wide, could also provide the revenue source for the sale of bonds.

"Neighborhoods that have already paid for undergrounding would need to get something back," said Dicterow.

A city staff member coordinates neighborhood undergrounding with the utilities and oversees the district formation and final construction. A fraction of those costs are recovered by charging the districts 2% of the construction costs, although the city cost is closer to 15%. An administrative fee is also charged for management of the bonded districts.

The city can lose as much as $150,000 to $200,000 paid for the initial design and engineering if a majority of property owners fail to approve a proposed district, which has happened rarely.

Most often, property owners approve the district and the city is reimbursed.

Public Works Director Steve May estimates that 22 neighborhood districts have been created in the past 25 years, involving 2,200 properties at a cost to property owners of $45 million in 2013 dollars.

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