HomeMy WebLinkAbout10/20/1998, C2 - CITY ACCEPTANCE OF AGREEMENTS WITH THE COUNTY OF SAN LUIS OBISPO CONCERNING THE PROPERTY-TAX REVENUES AND ANNUAL PROPERTY-TAX INCREMENTS FOR THE FULLER ROAD AREA ANNEXATION (LAFCO APPLICATION NO. 53, CITY APPLICATION NO. 70-97), THE AERO council "°fing°� 10-20-98
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CITY OF SAN LUIS OBISPO
FROM: Amol B.Jonas, Community Development Director
Prepared By: Glen atteson,Associate Planner
SUBJECT: City acceptance of agreements with the County of San Luis Obispo concerning
the property-tax revenues and annual property-tax increments for the Fuller
Road Area Annexation (LAFCo application no. 53,City application no. 70-97),
the Aero Drive Annexation (LAFCo application no. 52,City application no. 12-
97),and the rest of the unincorporated Airport Area.
CAO RECOMMENDATION
Adopt a resolution accepting the negotiated exchange of property-tax revenues and annual
property-tax increments for the Fuller Road Area and Aero Drive annexations, and for the rest of
the unincorporated Airport Area, under which the County will receive all property taxes subject
to the negotiation and the City will receive all local sales taxes.
DISCUSSION
On May 5, 1998, Council approved a package of items supporting annexation of the Fuller Road
Area, which is that part of the Edna-Islay Specific Plan's secondary planning area that has not
already been annexed, and three adjacent parcels north of Aero Drive, which are within the
designated Airport Area. Council asked the Local Agency Formation Commission (LAFCo,
which has authority for cities' boundary changes) to approve the annexations. Council has
adopted zoning that is consistent with the General Plan, to take effect upon annexation.
California law requires the City and the County to agree on division of the property taxes from
the territory proposed for annexation, which otherwise would go to the County (Revenue and
Taxation Code, Section 99).
The City's filing the annexation applications with LAFCo resulted in action by the County Board
of Supervisors on September 1 to start a 60-day period for negotiating a division of property tax
revenues. City and County staff have negotiated draft agreements for presentation to the City
Council and to the Board of Supervisors, which is scheduled to consider these items on October
27. The LAFCo hearing for the subject annexations is tentatively set for November 19.
Sales taxes and property taxes are important revenue sources used by the County, the City, and
some special districts to fund public services. Property taxes are collected by the County and
distributed to the County, the school district, special districts, and for most incorporated areas,
the City. Most property tax revenues go to the County and the school district, though they are an
important revenue source for the City. Annexation alone does not increase the total amount of
property tax from a given parcel, nor does it affect the portion going to schools or most special
districts. Therefore, the City and the County must agree on a division of their portion. For
property taxes,the City and the County have previously approved general principles that provide
for the following.
Council Agenda Report-Fuller Road& Aero Drive annexations tax exchange
Page 2
• For residential properties, future revenues equal to revenues at the time of annexation are
retained by the County, as are two-thirds of increased revenue, while one third of
increased revenue(otherwise available to the County) goes to the City;
• For commercial or industrial property,the County receives all revenues.
Sales tax revenues are not subject to the State law concerning property tax divisions. Under the
previous, countywide tax-exchange agreement, the City receives all current and future sales tax
revenues due the local agency, though that agreement allows for negotiation when annexation
areas already generate sales tax. Annexing land to the City does not increase the total amount of
sales tax from a given location. Sales taxes are collected by the State. In our area, where there is
no voter-approved additional sales tax, the State keeps 6.25 cents per dollar of sales and sends
one cent per dollar of sales to the city or the county with jurisdiction over the point of sale. (The
City's business tax, which is based on gross receipts, is a separate matter that is not subject to
County agreement.)
The Fuller Road area is a mixture of fully developed, partly developed, and vacant properties,
some having residential use or designated for it, and some having commercial use or designated
for it. The Aero Drive properties are vacant and designated for commercial use. This is the first
proposed annexation in many years containing substantial existing commercial development
(including Familian Pipe & Supply, Cuesta Equipment, Wisberg Lumber, and some smaller
businesses). In consideration of these existing sources of sales tax, the agreement recommended
by City and County staff would assign all present and future increments of property taxes to the
County. The City would receive all current and future increments of sales tax.
Since the rest of the Airport Area also contains several sources of sales tax, the same provisions
would apply to that area. Annexation of the entire Airport Area was initiated several years ago,
but it will not be scheduled for LAFCo hearing until the City has adopted the Airport Area
Specific Plan,which is now being prepared. Several "interim"Airport Area annexation proposals
are pending or expected. The Airport Area does not contain, and is not planned to contain,
significant residential development.
The recommended resolution says that property tax divisions for other potential annexations
(such as the neighboring Margarita Area) will be consistent with the previously approved general
principles.
ALTERNATIVES
For the Fuller Road Area and Airport Drive annexations, Council must approve the
recommended resolution at this meeting to complete the property-tax division agreement within
the time specified by State law (November 1). Council may direct staff to pursue a different
revenue-division formula, or may continue action for other reasons. Not approving the agreement
would require re-filing the LAFCo applications and returning at some future meeting to resolve
the matter. The City and the County must agree on revenue divisions before the annexations can
C a- �
Council Agenda Report-Fuller Road & Aero Drive annexations tax exchange
Page 3
be completed. The provision covering the rest of the Airport Area need not be a part of the
resolution for the Fuller Road area and Aero Drive annexations, but it was part of the staff
negotiations and is being presented by County staff to the Board of Supervisors as part of the
agreement.
FISCAL IMPACT
A fiscal study for the General Plan update showed that the City's general fund can remain
fiscally healthy while annexing a combination of residential and commercial areas (Mundie &
Associates, 1994). A separate study for the Airport Area concluded that it would be fiscally
positive so long as capital improvement costs are recovered from property owners or developers
(Angus McDonald, updated by the City Finance Department June 1998). The assumptions for the
Airport Area fiscal study were consistent with the proposed agreement on property tax division.
The City will incur additional costs for services such as road maintenance and police and fire
protection when the subject areas are annexed. Those costs are expected to increase as further
development occurs. Costs for the Fuller Road area have not be quantified. That area generates
about $31,000 annually in sales tax, which is likely to increase with time. The County will have
costs such as health, courts and elections services, and libraries due to present and future workers
and residents in that area. For the Fuller Road area, the amount of property tax foregone by the
City under the proposed agreement is estimated to be less than $100 in the initial year, compared
with the amount the City would receive under the previously approved general principles for
property tax sharing. This foregone revenue will increase as the area develops.
Attachments
Draft resolution approving tax-sharing agreement
ci
RESOLUTION NO. (1998 Series)
A-RESOLUTION OF THE CITY COUNCIL 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,FOR ANNEXATIONS OF THE FULLER ROAD AREA
(LAFCO APPLICATION#53),AERO DRIVE (LAFCO APPLICATION#52),
AND THE REST OF THE UNINCORPORATED AIRPORT AREA
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(a)(1)requires that the amount of property tax revenue to be
exchanged, if any,and the amount of annual tax increment 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,when a special district is involved,the negotiations are conducted by the
Board of Supervisors of the County on behalf of the district or districts,unless olhawise requested
by said district or districts passant to Revenue and Taxation Code Section 99(b)(5); 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
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
resolution to the County Auditor, and the County Auditor shall thereafter make the appropriate
adjustments as required by law; and
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(a)(1), for the jurisdictional changes designated as
Annexation No. 53 to the City of San Luis Obispo (Fuller Road Area Annexation),Annexation
No. 52 to the City of San Luis Obispo (Aero Drive Annexation), and the anticipated annexation
of all or parts of the unincorporated Airport Area as designated on the City's General Plan; and
Resolution No. ( 8 Series)
Page 2
WHEREAS, the negotiating parties,to wit: Lee Williams,Deputy County Administrator,
County of San Luis Obispo,and Ken Hampian,Assistant City Administrative Officer,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 TT RESOLVED by the 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 base property tax revenues and annual tax increment:
(a) No base property tax revenue shall be transferred from the County of San
Luis Obispo to the City of San Luis Obispo.
(b) No annual tax increment shall be transferred from the County of San Luis
Obispo to the City of San Luis Obispo in the fiscal year 1999-2000 and each fiscal year
thereafter.
(c) All annual tax increment for the County Road Fund shall be transferred to
the County General Fund.
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. The City of San Luis Obispo agrees that all future annexations to the City of San
Luis Obispo associated with that area commonly referred to as the Airport Area, as shown on the
shaded areas on the attached map (exclusive of the Margarita Area), shall be governed as per the
following:
(a) No annual property tax increment shall be transferred from the County of
San Luis Obispo to the City of San Luis Obispo subsequent to said annexation; and
(b) All sales taxes accruing from areas within the Airport Area, as defined
above, shall, from the point in time of said annexation, accrue to the City of San Luis
Obispo.
(c) All other future annexations to the City of San Luis Obispo shall be
governed by the existing Countywide Property Tax Exchange agreement entered into
between the City and the County.
CZD,s
Resolution No. (19; series)
Page 3
5. 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.
On motion of seconded by .and on
the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was passed and adopted this_day of 1998.
Mayor Allen Settle
ATTEST:
Lee Price,City Clerk
APPROVED:
Jeffrey G.Jorgensen, City Attomey
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