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Page 6 of 11 maintenance of district areas to the level provided in previous years. Despite reductions in service levels, increased costs for water, maintenance, and repairs—combined with an aging irrigation system and maturing landscape—have depleted the district’s cash reserve. Over the past few years, multiple irrigation system failures have caused significant water loss, unusually high water bills, and costly emergency repairs. In addition, tree and limb failures have required extensive pruning and removal work. Despite efforts to limit maintenance, the district fund deficit is approximately $14,000 due to emergency irrigation repairs and necessary tree work. The majority of last year’s budget was used to address these high-priority issues. In early 2022, City staff initiated the process of increasing assessments in accordance with Proposition 218. At that time, Windsor homeowners expressed a preference for the Homeowners Association (HOA) to assume responsibility for routine plant maintenance and irrigation water costs. As of February 2024, the HOA had entered into an agreement with the City to do so, which reduces the district’s expenses by approximately $17,000 annually. While the HOA’s assumption of these responsibilities represents a significant cost-saving measure, the City remains responsible for maintaining other elements of the district, including: • Sound wall repairs • Irrigation infrastructure • Tree pruning and removal • Drainage maintenance, paving, furnishings, and other non-plant-related services Although the HOA agreement is a step toward restoring financial balance, long-term sustainability will still require an increase in the annual assessment. The current assessment amount of $265.11 per parcel (or $269.62 per parcel including the 1.7% county fee) remains unchanged, and no increase is proposed at this time; however, staff estimates that the assessment would need to increase to approximately $400 annually per parcel, with the implementation of an annual inflation escalator to support the district’s needs in the future. If the HOA relinquishes the payment for basic maintenance services and water, the assessment would need to rise to approximately $800 annually. Additionally, a Proposition 218-compliant process will be required to approve any increase beyond the current rate. The estimated cost of this process is $36,000. Assembly Bill 1572 also mandates the removal of non-functional turf. As a result, a portion of the district’s existing lawn areas will need to be replaced with low water-use plantings prior to January 1, 2027. The cost of this turf conversion is estimated at $175,000. Combined with other necessary long- term capital improvements and major maintenance costs, total projected expenses for the next ten years are estimated at approximately $700,000. Staff believes that although immediate assessment changes are not proposed, the financial outlook requires action. A future Proposition 218 process will be necessary to: • Increase annual assessments to a sustainable level • Add an inflation adjustment mechanism • Address upcoming state-mandated landscaping requirements • Rebuild depleted reserves to fund eventual system replacement and capital repairs Page 218 of 864