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HomeMy WebLinkAbout11/17/1992, C-2 - BROAD STREET ANNEXATION �`�Illl�l�llllpl III "J T �r MEErING DATE l c� o san LUIS oBIspo //. %� X COUNCIL AGENDA REPORT �"'NUMBER: FROM: Ken Hampian, Assistant City Administrative Officer SUBJECT: Broad Street Annexation CAO RECOMMENDATION: Adopt a resolution approving a property tax exchange agreement with the County of San Luis Obispo for the Broad Street Annexation DISCUSSION: Background In its 1991 Work Program, the City Council designated the Broad Street Annexation as a top priority for the 1991-93 Financial Plan. Since that time, staff has worked extensively with the 12 separate property owners in the area to acquire their support for the annexation. On June 16, 1992, the City Council certified the Final EIR for the annexation. On July 21, 1992, the Council took the necessary actions related to amending the General Plan and prezoning the property. In addition, the Council approved a model pre-annexation agreement (which may be entered into between the City and interested property owners prior to final annexation) and authorized staff to submit to the Local Agency Formation Commission (LAFCo) the final annexation application for the Broad Street area. Property owners who testified at the July 21 meeting were in support of the annexation. LAFCo Process At this point the Broad Street Annexation is proceeding through LAFCo process. Prior to final LAFCo action, it is necessary for the City to enter into an agreement with the County relative to the exchange of property tax revenues. Over the last several months, the Assistant City Administrative Officer and the Finance Director have been in negotiations with the County's Assistant CAO, Lee Williams, and the LAFCo Executive Director, Paul Hood, to reach an exchange agreement. Recommended Exchange Agreement The standard property tax exchange model used over the years by the County includes the following key provisions: • The County retains their existing share of the property tax base within the area to be annexed. • In terms of any property tax increment (growth of property tax above and beyond the existing base),the County and the municipal jurisdiction share the property tax consistent with the average percent received by the City in all of its other tax rate areas. r ll7ti��IdllClllllll�' J� city or san Os oBispo MUNIVINNOWCOUNCIL AGENDA REPORT In addition to these two standard provisions, County negotiators were initially requesting an agreement based on "revenue neutrality". This means that they were proposing an agreement whereby the County would lose no existing revenues as a result of the annexation (most notably, approximately $42,000 in sales tax annually now received by the County from this area). The County staff stated that because the annexation would not significantly lower County costs, any revenue transferred to the City would impact the County as a true revenue "loss". The County pointed out that other than infrequent County police and fire service to the Broad Street area, they provide few other services and have virtually no maintenance responsibilities. They argued that any decrease in the demand on County police and fire services resulting from the annexation would be too small to decrease staffing in either public safety area. Thus, they would continue to carry the "cost", but would have less revenue to support that cost. i While City staff agreed that the County would probably not reduce staffing or significantly lower costs following annexation, we also felt that there must nevertheless be some incremental decrease in County service demand and costs which should be recognized in the exchange analysis. Therefore, City staff proposed that "cost neutrality"was a more appropriate basis for the exchange than "revenue neutrality". In other words, enough existing revenue should be retained by the County to assure that the annexation does not "cost" them; however, the precise amount will be less than all existing revenues and should be based on an estimate of "savings" the County will incur after annexation, even if this savings is less than an average "pro rata" share of existing police, fire and street maintenance levels. i Based on this concept, the County estimated cost savings of approximately $21,000 as a result of the annexation. This represents approximately 50% of the $42,000 in annual sales tax originally requested by the County, leaving another $21,000 to be passed through, in addition to the usual property tax exchange amount. Staff feels that this is a reasonable compromise. However, no sales tax will actually be shared as a result of this agreement. Instead, an adjustment will be made to the property tax "split" to recognize this additional amount, as outlined below and in the attached letter from the County Administrator. FISCAL IMPACT: To summarize, under the recommended negotiated agreement, the County will retain all of the existing property tax base (approximately$42,000). Any growth in property tax will be split between the jurisdictions in a manner consistent with what the City receives on average in all of our other tax rate areas (17.12%). In addition, our allocation percentage of property tax revenues in a single tax rate area within the City will be reduced by 1.8% (from 18.4%to 16.6% of total revenues) so that the County receives an additional$21,000 in property tax annually. The City will receive all of the existing sales tax (approximately $42,000 annually) and all future growth in sales tax from this area. l i���ii�lil►Illllllllli j��l�ll city Of San _ .as OBISPO COUNCIL AGENDA REPORT ALTERNATIVES: Council could reject the recommended property tax exchange agreement and direct staff to negotiate with the County for an exchange more favorable to the City. Staff believes that the County's desire to remain "whole" is reasonable, given the fiscal pressures imposed on all agencies at this time. Staff also feels that it is important to complete this annexation in a timely way so that the City can begin controlling land use in this area. One project approved under County standards is already being constructed in the area, and others are planned. Further delays may result in additional projects going forward which are not subject to City review. If this happens, property values and sales tax will increase to the advantage of the County, and not the City. The County would request recognition of these higher revenue amounts in future annexation negotiations. i ATTACHMENTS: 1. Letter from County 2. Property Tax Exchange Resolution kh\protax.rpt i I C-a-3 County of San Luis Obispo COUNTYGOVERNMENT CENTER,RM.370■S.1:\LUIS OBISPO. CALIFORNIA 93408■laosl sas-sola October 28, 1992 RECEIVED OFFICE Mr. John Dunn NOV O COUNTY ADMINISTRATOR �� City Administrative Officer 990 Palm Street/Post Office Box 8100 ADMiNiS1kAiQN San Luis Obispo, CA 93403-8100 SAN LUIS OBISPO,CA Re: Property Tax Exchange for the Broad Street Annexation Dear John: I am in receipt of your letter dated October 9, 1992, concerning a counter-offer to our most recent property tax exchange proposal for the Broad Street Annexation. In reviewing your counter-proposal, we find we are unable to agree to the terms because in an overall fiscal sense,the result would place the County in a negative position relative to lost revenues (sales tax) and our continued responsibility to provide services to the area. Instead, the County would propose the following: 1. The County will retain all of the existing property tax base in Tax Rate Areas 112-083 and 112-085 (Broad Street annexation area). 2. The County of San Luis Obispo will transfer 17.120965 percent in increment to the City of San Luis Obispo in the newly created Tax Rate Area. This represents the average increment received by the City in all of its other tax rate areas. 3. An adjustment will be made in Tax Rate Area 003-008 to transfer 1.87133 of base from the City of San Luis Obispo to the County of San Luis Obispo (equivalent to 50 percent of the sales tax loss or approximately $21,000). 4. The City of San Luis Obispo will receive all sales tax revenues after the effective date of the annexation. If you have any questions, or wish to discuss this further, please let me know. Sincerely, / ROBERT E. HENDRIX County Administrator c -. Lee Williams, Deputy County Administrator - Paul Hood, LAFCO Ken Hampien, Assistant City Administrative Officer Bill Statler, City Finance Director ATTACHMENT 1 RESOLUTION NO. (1992 SERIES) A RESOLUTION ACCEPTING NEGOTIATED EXCHANGE OF PROPERTY TAX REVENUE AND ANNUAL TAX INCREMENT BETWEEN THE CITY OF SAN LUIS OBISPO AND THE COUNTY OF SAN LUIS OBISPO WHEREAS, completion of the Broad Street Annexation is one of the City Council's highest priorities for Fiscal Years 1991-93; and WHEREAS, in the case of a jurisdictional change other than a city incorporation or district formation which will alter the service area or responsibility of a local agency, Revenue and Taxation Code Section 99(b) requires that the amount of property tax revenue to be exchanged among the affected local agencies shall be determined by negotiation; and WHEREAS, when a city is involved, the negotiations are conducted between the City Council and the Board of Supervisors of the County; and WHEREAS, Revenue and Taxation Code Section 99(b) requires that each local agency, upon completion of negotiations, adopt resolutions whereby said local agencies agree to accept the negotiated exchange of property tax revenues, if any, and annual tax increment and requires that each local agency transmit a copy of each such resolution to the Executive Officer of the Local Agency Formation Commission; and WHEREAS, no later than the date on which the certificate of completion of the jurisdictional change is recorded with the County Recorder, the Executive Officer shall notify the County Auditor of the exchange of property tax revenues by transmitting a copy of said resolutions to him and the County Auditor shall thereafter make the appropriate adjustments as required by law; and ATTAMENT 2 (. a.500 Page 2 RESOLUTION NO. (1992 SERIES) WHEREAS, the negotiations have taken place concerning the transfer of property tax revenues and annual tax increment between the County of San Luis Obispo and the City of San Luis Obispo pursuant to Section 99(b)for the jurisdictional change designated as Annexation No. 38 to the City of San Luis Obispo (Broad Street); and WHEREAS, the negotiating parties have negotiated the exchange of property tax revenue and annual tax increment between such entities as hereinafter set forth; and WHEREAS, it is in the public interest that such negotiated exchange of property tax revenues and annual tax increment be consummated. NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of San Luis Obispo as follows: 1. That the recitals set forth above are true, correct and valid. 2. That the City of San Luis Obispo agrees to accept the following negotiated exchange of property tax revenues and annual tax increment: a. The County will retain all of the existing property tax base in Tax Rate Area 112-083 and 112-085 (Broad Street Annexation area). b. The County of San Luis obispo will transfer 17.120965 percent in increments to the City of San Luis Obispo in the newly created Tax Rate Area. This represents the average increment received by the City in all of its other tax rate areas. C. An adjustment will be made in Tax Rate Area 003-008 to transfer from the City of San Luis Obispo to the County of San Luis Obispo a total base Page 3 RESOLUTION NO. (1992 SERIES) amount of $21,000. The allocation factor in this Tax Rate Area will be adjusted accordingly. d. The City of San Luis Obispo will receive all sales tax revenues after the effective date of the annexation. 3. Upon receipt of a certified copy of this resolution and a copy of the recorded certificate of completion, the County Auditor shall make the appropriate adjustments to property tax revenues and annual tax increments as set forth above. 4. That the City Clerk is authorized and directed to transmit a certified copy of the resolution to the Executive Officer of the San Luis Obispo Local Agency Formation Commission, who shall then distribute copies in the manner prescribed by law. Upon motion of Councilmember seconded by and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted this day of 1992. c-a- '7 ' I Page 4 RESOLUTION NO. (1992 SERIES) MAYOR-RON-DUNIN -- - -- -- ATTEST: CITY-CLERK^ - - - -- -- ARP 0V i CITY ADM _ISTRATIVE OFFICER O - - �-a-g