HomeMy WebLinkAbout03-31-2015 C8 Annexation Tax Sharing AgreementCity of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number
FROM: Katie Lichtig, City Manager
Prepared by: Michael Codron, Assistant City Manager
Doug Davidson, Deputy Community Development Director
SUBJECT: ANNEXATION TAX EXCHANGE AGREEMENT FOR A .74 ACRE
PROPERTY LOCATED NEAR THE CORNER OF BROAD STREET AND
FARMHOUSE LANE (1146 FARMHOUSE LANE).
RECOMMENDATION
Adopt a resolution approving an annexation tax exchange agreement for a .74 acre property
located on 1146 Farmhouse Lane.
DISCUSSION
Background
On June 7, 2011, the City Council authorized a lot line adjustment and minor annexation for
property located in the Airport Area. The site address is 1146 Farmhouse Lane near the corner of
Broad Street and Farmhouse Lane (Attachment 1, Vicinity Map). The approved lot line
adjustment was between two parcels, one within the City and one outside of the City. The project
was needed to improve access to the property via Farmhouse Lane as vehicular access via Broad
Street is restricted due to its location on Highway 227 and proximity to an intersection.
On January 13, 2015, the Local Agency Formation Commission (LAFCO) approved the
annexation and directed the jurisdictions involved to negotiate the tax exchange agreement. The
County approved a similar tax exchange resolution on March 10, 2015 (Attachment 2).
Annexation Tax Exchange Joint Resolution
Jurisdictional changes such as this can change service area responsibilities and/or impact
operating expenses and revenues. The law requires affected jurisdictions (in this case, the County
and the City of San Luis Obispo) to negotiate an exchange of property tax revenue prior to
LAFCO approval of the proposed change. The agreement was negotiated between the County
Administrative Office and City Administration consistent with the standard tax sharing
agreement established by joint resolution between the County and many cities in the county in
1996 (Attachment 3).
The joint resolution provides for a standard tax exchange for raw commercial land, such as the
subject property. In these situations, the County keeps all of the existing property tax base plus
all of the future property tax increment. The City benefits from all of the sales tax that may be
generated from future site development. When developed land is annexed, negotiations take
place on a case by case basis.
The standard agreement was developed based on an extensive study of the impacts that
development within the boundaries of cities has on the County. The agreement is based on the
following two principles: (1) that the County should not profit from annexations, nor should
3/31/15
C8
C8-1
Annexation Tax Exchange (Farmhouse Lane) Page 2
annexations result in a net fiscal loss to the County; and (2) that tax exchange practices should
not undermine good land use planning by discouraging cities from pursuing logical and
appropriate annexations.
Proposed Tax Exchange
Consistent with the joint resolution, the tax exchange would provide for 100% of the current
property tax and 100% of the future property tax increment (increases in property tax over time)
to be collected by the County because the site is currently considered “raw land.” The City
would collect and retain 100% of the sales tax generated on the property after its development.
Adoption of the attached resolution will confirm the agreement (Attachment 4).
CONCURRENCES
The Community Development Department concurs with the recommended tax exchange.
Normally, a 60-day window applies to tax exchange negotiations. The Council meeting on
March 31 will take place outside of this negotiation period, however, LAFCO has indicated there
are no implications to approving the agreement outside the negotiation period in this case.
FISCAL IMPACT
The purpose of the joint resolution is to enable good land use planning by providing
predictability in the tax exchange process. The current tax exchange agreement is currently
valued at $989, and in the long run is expected to have an insignificant fiscal impact because the
annexation is consistent with the General Plan (which is fiscally balanced) and covers a .74 acre
area, which is very small compared to most annexations.
ALTERNATIVES
1. Deny the proposed tax exchange. This alternative is not recommended because the City
Council has already approved the lot line adjustment and annexation. The tax exchange is
required by LAFCO and is the final step in the annexation approval process.
2. Continue consideration of the item and provide direction to staff. This alternative is also
not recommended because annexation is consistent with the General Plan and will no
fiscal impact on the City. The County approved a similar tax exchange resolution on
March 10, 2015.
ATTACHMENTS
1. Vicinity Map
2. County Resolution Accepting Negotiated Tax Exchange
3. Joint Resolution No. 01-96 Between the County and Cities in the County
4. City Council Resolution Adopting Recommended Tax Exchange Agreement
t:\council agenda reports\2015\2015-03-31\annexation tax sharing agreement (codron)\council agenda report.docx
C8-2
Vicinity Map – Annexation No. 78 Attachment 1
C8-3
THIS PAGE IS INTENTIONALLY LEFT BLANK
ATTACHMENT 2
C8-4
ATTACHMENT 2
C8-5
ATTACHMENT 2
C8-6
THIS PAGE IS INTENTIONALLY LEFT BLANK
ATTACHMENT 3
C8-7
ATTACHMENT 3
C8-8
ATTACHMENT 3
C8-9
THIS PAGE IS INTENTIONALLY LEFT BLANK
Attachment 4
R ______
RESOLUTION NO. _____ (2015 Series)
A RESOLUTION OF THE CITY OF SAN LUIS OBISPO ACCEPTING A
NEGOTIATED EXCHANGE OF PROPERTY TAX REVENUE AND ANNUAL TAX
INCREMENT BETWEEN THE COUNTY OF SAN LUIS OBISPO AND THE CITY OF
SAN LUIS OBISPO
WHEREAS, the City of San Luis Obispo, a charter city and political subdivision of the
State of California, wishes to move forward with the annexation of a .74 acre property at the
corner of Broad Street and Farmhouse Lane; and
WHEREAS, the Revenue and Taxation Code Section 99(a)(1) requires the amount of
property tax revenue to be exchanged, if any, and the amount of the annual tax increment
exchanged, to be negotiated between the affected local agencies; and
WHEREAS, Revenue and Taxation Code Section 99(b)(6) 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
jurisdiction 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 the County Auditor who shall thereafter make the appropriate adjustment as
required by law; and
WHEREAS, the negotiations have taken place concerning the transfer of property tax
revenues and annual increments between the County of San Luis Obispo and the City of San
Luis Obispo pursuant to Section 99(a)(1) for the jurisdictional change designated as Annexation
No. 78 to the City of San Luis Obispo; and
WHEREAS, it is in the public interest that such negotiated exchange of property tax
revenues and annual tax increments be consummated.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows.
SECTION 1. Agreement. The City Council agrees to accept the following negotiated
exchange of base property tax revenues and annual tax increment.
1. No base property tax revenue shall be transferred from the County of San Luis Obispo to
the City of San Luis Obispo.
C8-10
Resolution No. _____ (2015 Series) Attachment 4
Page 2
2. County will retain the future property tax increment, after transfers to the Educational
Revenue Augmentation Fund (ERAF), in Fiscal Year 2016-17 and each fiscal year
thereafter.
3. All sales tax, base rate and local add-on tax, generated by future development of the
property will be retained by the City of San Luis Obispo.
SECTION 2. Transmittal. 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 _______________________, seconded by _______________________,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this _____ day of _____________________ 20xx.
____________________________________
Mayor Jan Marx
ATTEST:
____________________________________
Anthony Mejia
City Clerk
APPROVED AS TO FORM:
_____________________________________
J. Christine Dietrick
City Attorney
C8-11