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Increases to Assessments Assessments in each of the Districts will remain unchanged this fiscal year. As stated in this report and in previous reports, assessments have not been increased in the LMDs since they were created. Therefore, the current assessments are based upon operation and maintenance costs, and capital replacement costs, that existed at the time the LMDs were created. The Districts (some to a greater degree) have operated year-to-year through a combination of reducing maintenance and depleting capital replacement reserves. This is due in large part to the complicated process required to increase assessments created by the passage of Proposition 218 in 1996. However, annual costs have continued to increase, and capital reserves have been depleted, to the point that this operational strategy is no longer sustainable. Revenue in some Districts, as detailed above, is no longer enough to cover operational costs. This strategy also resulted in depleting the reserves needed for eventual capital replacement. As managers of the LMDs, staff has hired a consultant that specializes in LMDs, SCI Consulting Group (SCI), to analyze the special benefit areas, the maintenance requirements, the capital replacement requirements, Proposition 218 compliance, and assessments paid by each property owner within the Districts. As a first step in the process, SCI reviewed previous Engineering Reports and produced the Engineering Report for each LMD this year. This coming year, SCI, with the assistance of the City's Landscape Architect, will be working to determine maintenance expectations and appropriate maintenance standards for each District, and determine the appropriate reserve amount to cover eventual capital replacements. When complete, the required assessment increases will be calculated. The goal of this effort will be to fully understand the funding required to implement a sustainable landscape maintenance program in accordance with PUD requirements and special assessment district residents' expectations, and grow the capital reserve with an annual contribution to fund eventual replacement based upon an anticipated replacement cycle, for each LMD. With this information, in the coming year SCI will assist the City with the public outreach and required Proposition 218-compliant voting process necessary to increase the assessments in the two Districts currently most underfunded: Windsor LMD and Bonde Ranch LMD. The results of these efforts will either be presented to City Council during the current fiscal year or when the fiscal year 2020-21 LMD Engineer's Report are presented for adoption next year. Over the course of the next two-to- three years, the intention is to go through the same process for all five LMDs so they are sustainable into the future. It is likely that an annual escalator, such as consumer price index related to construction activities, will be a component of each proposed Propositions 218-compliant vote. However, assessments will not be increased for this coming year's maintenance. The information contained within this report about the need to increase assessments, and the plan to have the residents in each special district consider assessing themselves Page 5 of 6