The primary benefit of a utility undergrounding assessment district is that the utility undergrounding improvements can be financed over time. The main drawback is that the process for undergrounding can take up to six years to complete. To facilitate the process, the City will assist in the formation of an assessment district by providing project management, administrative and financial coordination, and if necessary, advancing funds for assessment engineering and design. If sufficient interest exists to proceed with a district based on petition response, then the City will coordinate the project design, financing, and construction.

Assessment District Requirements
To initiate a utility undergrounding assessment district, the following minimum requirements must be satisfied:

• At least five parcels must be included.
• 600 linear feet of overhead wire or one block, whichever is less, must be placed underground.
• The owners of at least 60% of the properties within the proposed boundary and subject to the assessment for the proposed improvements must sign a written petition indicating support for the project. Additionally, the property owners must own lands constituting more than 50% of the area of all assessable lands within the proposed assessment district boundary.
• Property owners who sign the petition must deposit an initial fee of $500 to cover a portion of the assessment engineering and utility design costs. The deposit will be credited to the assessment if the district is ultimately formed.

Starting an Assessment District

One or more property owners (proponents) can initiate the investigation of an underground utility assessment district project. The proponents work closely with City staff and are responsible for sharing information with the property owners who would receive a special benefit from the proposed district and who would be included in the assessment district boundary. The proponents informally survey the property owners in the area to determine if there is sufficient support to create an assessment district. The City facilitates this process by providing preliminary GIS information and coordinating with the utility companies to create a preliminary boundary map for the project based on the proponents’ survey.

Defining the District Boundary

The boundary map defines which properties receive a special benefit from having the utility poles removed and wires placed underground. Once the boundary is defined, the City will verify the proposed boundary with the utility companies, including Southern California Edison (SCE), San Diego Gas & Electric Company (SDG&E), Cox Communications, and Frontier Communications.

Forming the Assessment District

PROJECT PLANNING: The first step in forming an assessment district is to determine which poles and wires the neighborhood is interested in placing underground. Typically, the project proponents will seek the assistance of other neighbors to gauge neighborhood interest and to identify potential boundaries for the project. An alternative would be to arrange a neighborhood meeting to present the project and receive input from meeting attendees. City staff can be available to attend community meetings to provide details and answer questions regarding the assessment district process.

BOUNDARY CONFIRMATION AND PETITIONING: The preliminary assessment district boundary is defined by the interest level of property owners who sign petitions. Ultimately, the boundary of the district will need to be coordinated with the requirements of the utility companies and the desires of the petitioners and adjusted accordingly. City staff will lead the coordination and development of the preliminary boundary.
Formal petitioning begins after the preliminary boundary is confirmed. Staff will provide the official petition for circulation by the property owners. Every property owner within the district boundary should be given the opportunity to sign the petition. In addition to signing the petition, each property owner who signs will be required to deposit a non-refundable fee of $500 to cover a portion of assessment engineering and design costs. The City will act as the collection agent after signatures from at least 60% of the property owners have been submitted. Upon final approval of the assessment district, the fees collected will be credited against the assessments of those who paid the $500 deposit. If the assessment district fails due to a majority protest through the balloting process, the fees will not be returned to the property owners.

ENGINEERING AND DESIGN: After the City Staff has confirmed a sufficient number of signatures have been filed and deposits have been received, staff will recommend that the City Council allocate funding for the engineering and design phase of the proposed district.

Following an approval from the City Council, staff will forward the boundary map to the utility companies, to initiate design of the proposed project. Southern California Edison or San Diego Gas & Electric, depending on which utility provides service to your neighborhood, will prepare the initial design of the underground system. Those plans are then forwarded to Frontier Communications and Cox Communications for their respective designs. This phase of the process can take two years or more to complete depending on the size of the project and the existing workload of the utility companies.

The locations of riser poles and other above ground components, where applicable, may have impacts to properties located outside of the district. The affected neighbors will be noticed and shall have the opportunity to provide input. Easements for above-ground capacitors and transformers and/or trenching may also be required. The locations of potential easements will be identified during the design phase of the project to allow for acquisition and coordination with the affected property owners.

The final step in the design process is for the project to be submitted to the Planning Commission for Design Review approval of above ground transformers, retaining walls, riser poles and guy wires, and other above ground structures. This process allows all property owners to provide input on the impacts of the project before the balloting process.

During the design phase of the project, the City will solicit proposals and hire an assessment engineer to prepare the Engineer's Report. The assessment engineer is responsible for developing the methodology and a detailed breakdown of all costs associated with the formation of the assessment district. The report will list the estimated amounts proposed to be assessed to individual property owners. After the utility designs are complete, the City will advertise the project for competitive construction bids. The bid costs will be incorporated into the Final Engineer’s Report. The report will list the actual costs and individual assessments that will be used for the formal balloting. Petitioners will have the opportunity to review the methodology and the proposed assessment amounts and provide their input prior to the ballot process.

SPECIAL BENEFITS: Assessments vary substantially depending on the special benefit received from utility undergrounding as determined in the Assessment Engineer’s Report. The benefits for each district can be unique, but some typical special benefits include:

• Neighborhood Aesthetic: Enhanced aesthetics which include the removal of physical and visual impediments such as overhead lines and power poles.
• Safety: The threat to structures by downed overhead utility lines and poles caused by earthquakes, high winds, and interactions with vehicles and trees are reduced by undergrounding the utilities.
• Reliability: The underground facilities reduce the frequency of service interruptions due to acts of nature, traffic collisions with power poles, and interactions.

GENERAL BENEFITS: In many cases, parcels outside of the district would also receive safety and reliability benefits resulting from the undergrounding of the utilities. These benefits are general, and not specific to the properties within the district. Therefore, the costs for the general benefit are not included in the individual assessments and must be paid by other means.

CITY COUNCIL ACTION: State law (Proposition 218) requires that the City Council conduct a public hearing and balloting process for determining assessment district approval. The purpose of the hearing is to review the project and to provide affected property owners an opportunity to show support for, or to protest, the formation of the district.

All property owners who are subject to proposed assessments will be mailed a Notice of Public Hearing with an assessment ballot as required by Proposition 218. The mailed ballots allow all affected property owners to express their support for or opposition to the proposed assessment. The ballots will be weighted based on the assessment amount proposed to be paid by each property. If a weighted majority of the assessment ballots cast are in favor of the project, the City Council must proceed with formation of the assessment district. If a weighted majority of the ballots cast are in opposition to the project, then the district must be abandoned.

ASSESSMENTS: Assessments for a single-family dwelling in 2018 may range from $6,000 to $100,000 The wide range of cost is attributed to the variation of the special benefits listed above and construction variations such as steeply inclined roads and limited public right-of-way for staging and traffic control. The average assessment for projects constructed between 2015 and 2018 is $48,000.

PRIVATE PROPERTY WORK: Property owners must retain a contractor to connect their home to the underground system. There is a wide range for the conversion costs depending on the length of trenching required and construction obstacles such retaining walls and hardscape. The cost of this conversion work generally ranges from $5,000 to $15,000 and is not included in the assessment, but is the sole responsibility of individual property owners.

CASH PAY-OFF PERIOD: All costs relating to the district formation, design and construction are typically financed by the sale of municipal bonds that are paid off over a 15 or 20-year period through assessments included with property tax bills. After the City Council has acted to officially form the district, property owners will have an opportunity to pay off their assessment before it is placed on the property tax bill. The “Cash Collection” period is typically 30 days from the date of the Public Hearing. Paying the assessment during the cash collection period allows one to receive a discount of approximately 8% to 10% of the assessment amount, by avoiding costs associated with the issuance of bonds, bond interest over the period of the bonds, and bond administration costs.

BOND SALES AND EASEMENT ACQUISITION: Assessment districts are financed through the sale of municipal bonds. The sale of bonds can occur within two months after approval of the district. However, the sale of bonds will normally be delayed until all necessary easements have been acquired. If easements through private properties or private streets are needed, the easements must be obtained prior to the bond issuance.

CONSTRUCTION: The time frame for a typical utility undergrounding project, from initial planning to the end of construction, is four to six years. This range considers the size of the project and construction complexities. After the City Council has approved the project at the public hearing, awarded a construction contract, obtained all easements necessary to construct the facilities, and the bonds issued, then construction to convert the overhead facilities to underground facilities can begin. After the underground work has been completed, including private service undergrounding work by property owners (which are not included in individual assessments), the utilities will then install wires, transformers, cabinets and connect homes to the new underground facilities. After all this work has taken place and all homes are connected to the new underground systems, the poles and overhead wires can be removed.

DISTRICT CLOSEOUT: If there are any surplus funds after all work to remove the overhead utilities has been completed, then those funds will be refunded in cash to property owners who paid off their assessment during the cash collection period, or will be credited against future assessment obligations, thereby reducing the term of the improvement bonds.

UTILITY COMPANY CONTACTS:

Southern California Edison
14155 Bake Parkway
Irvine, CA 92718
(949) 458-4436

San Diego Gas & Electric
662 Camino de Los Mares
San Clemente, CA 92672
(949) 369-4721