Loading...
HomeMy WebLinkAbout2004-03-10 Packet - Special CITY OF UKIAH CITY COUNCIL AGENDA ADJOURNED MEETING FOR THE PURPOSE OF AN ANNEXATION WORKSHOP CIVIC CENTER COUNCIL CHAMBERS 300 Seminary Avenue Ukiah, CA 95482 MARCH 10, 2OO4 5:00 p.m.- 6:30 p.m. 1. ROLL CALL 2. AUDIENCE COMMENTS ON NON-AGENDA ITEMS The City Council welcomes input from the audience. If there is a matter of business on the agenda that you are interested in, you may address the Council when this matter is considered. If you wish to speak on a matter that is not on this agenda, you may do so at this time. In order for everyone to be heard, please limit your comments to three (3) minutes per person and not more than ten (10) minutes per subject. The Brown Act regulations do not allow action to be taken on audience comments in which the subject is not listed on the agenda. 3. ANNEXATION WORKSHOP 4. ADJOURNMENT I GATE ASSOCIATES, LLC · FOLSOM (SACRAMENTO) MANAGEMENT CONSULTANTS · STRATEGY FOR ANNEXATION REVENUE SHARING AND A SUCCESSFUL TAX EXCHANGE AGREEMENT FOR THE CITY OF UKIAH INTERIM REPORT AS OF 2/! 8/2004 · 705 Gold Lake Drive, Suite 100 · Foisom, CA 95630 (916) 355-1385 or (800) 275-2764 · Fax: (916) 355-1390 DRAFT TABLE OF CONTENTS Section Page I. INTRODUCTION ........................................................................................................... I-1 II. ANNEXATION PROCEDURES ................................................................................. II-1 A. Overview of City Annexation Procedures .......................................................... II-1 Step 1: City Pre-Zones the Annexation Area ...................................................... II-1 Step 2: Application to LAFCO ........................................................................... II-1 Step 3: Approval by LAFCO .............................................................................. II-2 Step 4: Protest Hearing (If Needed) .................................................................... II-2 B. Property Tax Allocation ...................................................................................... II-2 C. Transfer of Service Responsibilities ................................................................... II-3 D. Reallocation of Revenues ................................................................................... II-3 E. Property Tax Exchange ....................................................................................... II-4 F. Affect on Other Governmental Agencies ........................................................... II-5 III. ANNEXATION TO UKIAH ...................................................................................... III-1 A. Financing City of Ukiah Services ...................................................................... III-1 B. Recent History of City Annexations .................................................................. III-1 C. Potential Annexation Areas ............................................................................... III-2 IV. TAX EXCHANGE WITH COUNTY ........................................................................ IV-I V. RECOMMENDATIONS .............................................................................................. V-I ACKNOWLEDGEMENTS ....................................................................... Acknowledgements-I REFERENCES ........................................................................................................... References-I APPENDIX Appendix A: Appendix B: Revenue and Taxation Code 99 and 99.01 ......................................... Appendix A-! Allocations in Tax Rate Areas 154-003 and -006 ............................... Appendix B-I Table of Contents-i I, INTRODUCTION DRAFT This analysis has been prepared to assist the City of Ukiah in developing a strategy for a successful tax exchange agreement with the County of Mendocino to allow annexations of territory to the City. The City has not experienced expanding boundaries in several years, although unincorporated areas adjacent to the City are suitable for annexation, development and the provision of municipal services. The purposes of this report are to identify potential annexation areas, describe annexation procedures, including the property tax exchange agreement, review transfers of service responsibilities, costs and revenues that occur when land is annexed to a city and discuss impacts of annexations on other governmental agencies. The report also strives to identify a strategy or methodology for reaching a tax exchange agreement with the County government, whose approval is required before proposed annexations can proceed. This report is an informational document and does not substitute for discretionary decisions that can only be made by the City of Ukiah, County of Mendocino and Mendocino LAFCO. This Report is subject to reconsideration and revision as directed by the City staff or the City Council. I-1 II. ANNEXATION PROCEDURES DRAFT Annexation procedures in California are governed by State law, specifically the Cortese-Knox- Hertzberg Local Government Reorganization Act of 2000 (Government Code Section 56000 et seq) and the Revenue and Taxation Code (Section 99 et seq). While there is local discretion in reviewing and processing boundary changes, local procedures are required to be consistent with the provisions of the applicable State laws. A. OVERVIEW OF CITY ANNEXA TION PROCEDURES Annexations to cities involve a series of steps that are outlined briefly as follows: Step 1. City Pre-Zones the Annexation Area Cities are required to pre-zone, meaning apply a zoning designation prior to annexation, to all properties that are intended to be included within the city. This action makes the city the "lead agency" for compliance with environmental reporting and also puts landowners, the county, LAFCO and others on record of what the prospective land uses might be. Prezoning is required to be consistent with the city General Plan designation for the area, which implies that land to be annexed must be within the City General Plan area. Step 2. Application to LAFCO The Local Agency Formation Commission, or LAFCO, is an independent commission that exists in each county. The Commission is composed of two members of the Mendocino County Board of Supervisors, two Ukiah City Council members, two Special District members and one Public member. The Commission also has one alternate member in each category. LAFCO's purposes are to "discourage urban sprawl" and "encourage orderly governmental boundaries." It achieves these goals by reviewing and approving or denying, with or without modification, proposed annexations to cities or special districts or other governmental reorganizations such as formations, dissolutions and consolidations of local agencies. An application to LAFCO must include either a (1) resolution adopted by a local agency such as a city, the county or a special district or (2) petition signed by landowners or registered voters within the affected territory. An application for annexation must also include a map describing the area to be annexed and other information needcd by LAFCO to review and process the proposal. The consent of all landowners or registered voters is not needed to process an annexation though in the final analysis consent by a majority of those being annexed is required to complete thc proceedings. Land can bc annexed to a city or special district only if it is within that agency's "sphere of influence," which is a plan, approved by LAFCO, that maps thc agency's "probable, physical boundaries and service area." II-I DRAFT Step 3. Approval by LAFCO The Commission has the legal authority and responsibility to review and approve or deny, with or without amendments or conditions, all local government boundary changes. Before the Commission staff can issue a Certificate of Filing and set a matter for hearing, there must be a property tax exchange agreement approved by the Board of Supervisors and the City Council. The Commission must consider several factors before rendering a decision, including, among others, the land area and land use, topography and natural boundaries, consistency with city or county general and specific plans, the likelihood of significant growth in the area and adjacent area, the need for organized community services and the probable effect of the proposed annexation on the cost and adequacy of services. If all of the affected landowners consent to the annexation and all of the agencies that will gain or lose territory concur, the Commission can approve the annexation without further notice or hearing and the LAFCO staff can record the proceeding. If these conditions do not exist, the Commission can approve the annexation but there must be another hearing held solely for the purpose of receiving any written protests from landowners or registered voters within the annexation area. Step 4 Protest Hearing (if Needed) The protest hearing, if one is needed, is conducted by LAFCO or its staff. The outcome is based entirely on the number of protests received. The outcome for annexations that contain fewer than 12 registered voters is determined by the landowners. The annexation is recorded unless a majority of the landowners who own a majority of the assessed value file protests. For those annexations that contain more than 12 registered voters, the outcome is determined by the voters. B. PROPERTY TAX ALLOCATION Prior to the enactment of Proposition 13, local agencies were able to independently levy, within statutory limits, property taxes on lands within their boundaries. The individual tax rates, in the aggregate, comprised the overall property tax rate that was applied to individual parcels. When property was annexed to a city the annexed property would become subject to the city's tax rate. In that system, the combination of separate tax rates comprised a "tax rate area" or TRA. Each TRA contained a unique list of local agencies and their individual tax rates. The tax rates of all those agencies were added together and levied on all the parcels with that TRA. The enactment of Proposition 13 changed that system. As a result of limiting property taxes to 1% of thc assessed value of property, with such taxes to bc apportioned "according to law," thc voters created a system wherein local agencies, in essence, "compete" for limited and finite property tax revenues. Property tax allocation factors in each TRA for agencies such as the county, cities and special districts are expressed as a percentage of the !% property tax levy. Tax apportionment factors, even for the County, differ from one TRA to another because different areas of a County contain a different "collection" of taxing entities and each agency is calculated in determining thc tax apportionment factors for that TRA. In Mendocino County approximately 63% of property tax dollars is allocated to education, about 30% goes to the County government, 5% to special districts and 2% to cities. 1I-2 DRAFT Under the current system, when the city annexes territory, the area is not subject to a separate and independent city tax levy. Rather the city is obligated to negotiate with the county to receive a portion of the 1% overall tax, all of which is currently allocated to other agencies in Revenue and Taxation Code, Section 99 (b) states that whenever an application is filed for a boundary change, the LAFCO staff shall not find the application is complete and issue a Certificate of Filing until local agencies included in the property tax exchange negotiation present resolutions whereby the city and the county agree to accept the exchange of tax revenues. Therefore, prior to the time that LAFCO can actually consider an annexation, the City Council and Board of Supervisors must agree on how the property taxes in the annexation area will be allocated following the boundary change. The County Auditor needs this is information to maintain the TRA system and ensure that revenues are properly apportioned. C. TRANSFER OF SERVICE RESPONSIBILITIES When land is annexed, some service responsibilities are transferred from the county to the city. County governments in California, as subdivisions of the State, typically provide a wide array of public services. Some of these services are provided to properties and residents throughout the county, both within and outside of cities. These include such services as the land/tax system, the courts and related criminal justice activities, public health and social services. In unincorporated areas, the county also provides "municipal-type" services, typical of those provided by cities within their boundaries. These include land use planning, zoning and regulation, law enforcement and the maintenance of public roads. When lands are annexed to a city, the county's service responsibilities for "municipal-type" services within the annexation area are transferred to the city and are no longer a county obligation. When considering annexations care must be taken to identify the specific types of services that are being transferred. One example is fire protection. Some counties provide fire protection throughout the entire county. In other instances county fire protection services are limited to the unincorporated area and cities are responsible for fire protection within their boundaries. In other areas, counties do not provide fire protection at all, it is provided by cities and special districts. The same may be true for other services such as animal regulation or street lighting. In many instances, annexation areas are undeveloped, with minimal existing service obligations for the county. This also means there is usually a fairly low assessed value, and the amount of tax revenue generated by that area is also low. D. REALLOCATION OF REVENUES Counties arc financed by a wide variety of revenue sources. "General revenues" can be used for any legitimate purpose; these include property taxes, most sales taxes, motor vehicle in lieu fees and others. "Limited purpose revenues" can only be used for certain purposes. These include State subventions that can only be used for specific types of services, grants, charges for service and other revenues that arc used to support only that particular type of service. Annexing territory to a city affects the allocation of revenues received by the county. Typically, a portion of the County's property tax received in the annexation area is reallocated to the city. I1-3 DRAFT The purpose of a property tax exchange agreement is to determine what portion of the property tax generated within the annexation area will be reapportioned to the city when its boundaries are expanded to include that area. Most County revenues are unaffected by annexing land to a city because most County services continue to be provided by the County irrespective of whether land is within a city and the revenues related to those services continue to flow to the County. E. PROPERTY TAX EXCHANGE As stated earlier there is a general 1% property tax levy on parcels within California. Annually property owners pay up to 1% of the value of their property in taxes, plus any additional special taxes or assessments that might apply to that parcel. The assessed value of a parcel for taxation purposes is determined by the County Assessor and is reflected on the equalized assessment roll. Value is initially set at the time a property is purchased; without a subsequent purchase or modification of the property, the increase in assessed value for taxation purposes is limited to no more than 2% per year. Revenue and Taxation Code Section 99 identifies the following specific procedure for generating information that becomes the subject of the tax negotiation: a. The LAFCO staff gives notice of the receipt of an application to the County Assessor and County Auditor that specifies each local agency whose service area or service responsibility will be altered by the boundary change. b. The County Assessor provides to the County Auditor (within 30 days) a report that identifies the assessed values for the territory subject to the boundary change and the tax rate area in which that territory exists. c. The County Auditor estimates the amount of property tax revenue within the affected territory that is the subject of the jurisdictional change and estimates what proportion of that property tax revenue is attributable to each local agency that includes that property. d. The County Auditor, within 45 days from the time the application is submitted to LAFCO, must notify each local agency whose service area or service responsibility will be altered of the amount and the allocation factors with respect to property tax revenue that is subject to a negotiated exchange. e. Upon receipt of the estimates, the local agencies negotiate the amount of property tax revenue to be exchanged. There are some important rules that govern thc negotiation: · The negotiation period is limited to 60 days. The tax exchange may be limited to revenues from the "annual tax increment" within the area subject to the change and attributable to the local agencies whose service area or responsibility will bc altered. This means taxes resulting from future assessed value growth in the annexation area. if the jurisdictional change affects thc service area or responsibilities of any special districts the Board of Supervisors negotiates on behalf of those districts and is required to consult with the affected districts prior to the negotiation. 11-4 · - m · DRAFT The foregoing are the general procedures for negotiating property tax exchange agreements. There is a special provision in Revenue and Taxation Code Section 99.01 for those cases where a special district will annex land to provide a service that has not been previously pro;. property by any local agency. In that special circumstance, the definition of agencies whose service area or service responsibility will be altered is expanded to include all taxing entities within that TRA (except for schools). It enables the Board of Supervisors and the annexing district to agree on a tax exchange that provides property tax to the annexing district from all the other taxing entities that include the annexation area. A city and county may enter into a "master property tax exchange agreement" that applies to future annexations. Such agreements avoid the need to negotiate property tax exchanges for each individual annexation. Such agreements can be approved prior to submitting applications to LAFCO and can be revised from time to time by the affected parties. There is a procedure identified in Section 99 (e) that allows a city and county to select a third party consultant to perform a comprehensive, independent fiscal analysis funded equally by thc city and the county to assist in the negotiation process. If that does not result in an agreement, the city and county mutually select a mediator, funded equally by both agencies, to perform mediation. If that still does not result in a tax exchange agreement, the city and county mutually select an arbitrator. At the conclusion of the arbitration period, each party submits its last best offer with respect to a property tax exchange from which thc arbitrator recommends one of the offers to the city and county. If either the city or county reject the recommended offer it must make written findings of fact as to why the offer was not accepted. Revenue and Taxation Code Sections 99 and 99.01 are attached as Appendix A. One potential annexation area is identified as described below. It is located in two existing TRAs: 154-003 and -006. The tax apportionment factors for these TRAs are set forth as Appendix B. For comparison purposes tax allocation factors for two TRAs within the City are also set forth in Appendix B. F. AFFECT ON OTHER GOVERNMENTAL AGENCIES In a negotiated agreement, the exchange of property taxes is limited to those agencies whose service area or service responsibility will be affected by the change. When land is to be annexed to the City, these agencies include the County and the City. Other local agencies service area or responsibility may also be affected by the annexation. Their tax apportionment factors within thc annexation area arc also subject to negotiation and agreement. For example, if responsibility for fire protection services were transferred from thc Ukiah Valley Fire Protection District to the City, the District's tax allocation factor within thc annexation area would be transferred to the City. This is based on thc long-established practice that "taxes follow services." When service responsibilities are transferred related revenues to provide those services should also be transferred. An analysis could bc undertaken that would determine what portion of thc County General Fund's property tax revenue is devoted to supporting or providing municipal-typc scrvices in thc unincorporated area. In so doing it can be determined what percentage of the General Fund property tax should bc allocated to a city upon annexation. II-5 III. ANNEXATIONS TO UKIAH DRAFT A. FINANCING CITY OF UKIAH SERVICES As a full-service municipal government the City of Ukiah provides a number of services for the benefit of its residents, land owners and visitors. The types of services provided by the City include: Community representation and advocacy Law enforcement and police services Fire prevention and suppression Land use planning and building regulation Water supply Sanitation collection, treatment and disposal Electrical power Ukiah Regional Airport Street lighting Public parks and recreation Refuse collection and recycling Street maintenance, street lighting and storm water disposal Transit services Wastewater collection and treatment. In addition, the City owns the land and maintains the grounds where a County of Mendocino library is located. Some of these City services are financed by revenues related to the service, such as water rates and sanitation charges, but others such law enforcement fire protection and park maintenance are dependent to a large degree on general revenues including property taxes. B. RECENT HISTORY OF CITY ANNEXATIONS There has been a recent increase in thc level of interest in annexing land to the City expressed by property owners in the vicinity of thc City who desire municipal services. There have been few significant annexations to the City since the 1980s. Factors that havc limited the number of annexations have included County approval of urban uses in the vicinity of the City, lack of agreement with the County on property tax exchanges, and past opposition by Pacific Gas and Electric fearing a loss of existing and potential electrical service customers to thc City's electric utility. Given thc currcnt dcrcgulation laws this should not longer bc an issuc for PG&E, III-1 DRAFT Annexations to the City have occurred sporadically and only to annex City-owned property or in response to specific requests by property owners seeking essential City services. There was an effort utilizing a subcommittee of two members of the City Council and two members of the Board of Supervisors to fashion a property tax exchange agreement; apparently, that effort was never successfully completed. There have also been efforts in recent years to adopt a unified City/County General Plan for the Ukiah Valley. The plan was adopted by the City Council but has not been acted upon by the Board of Supervisors. The inability to reach a property tax exchange agreement that would allow annexations to proceed inhibits not only the growth of the City but of the Ukiah region in general. It creates an even greater interest in ensuring that the property tax exchange agreement can be reached that would allow logical annexations to the City to occur thereby resulting in improved land uses and public services that would benefit the community, including City and County governments. C. POTENTIAL ANNEXATION AREAS One area that has been identified for possible annexation to the City consists of 77-acres near the District fairgrounds. It is located at the northern edge of the City and is bordered on the east by US 101, thc west by the railroad and the south generally by Brush Street. It consists of 18 Assessor parcels in four ownerships within TRAs 154-003 or 154-006. Six parcels have improvements and the remainder does not. There are several other areas that should be considered for annexation to the City. III-2 IV. TAX EXCHANGE WITH COUNTY DRAFT Mendocino County as a political subdivision of the State is responsible for providing a wide variety of programs and services. Its powers are derived from and are limited by the State; much of what counties do is determined by the State. Counties provide both Countywide or regional services such as the court system, public health, social services and the land-tax system, and "municipal-type" services including local law enforcement, land use planning and regulation and road maintenance only in unincorporated areas that are outside of cities. Cities are formed specifically to provide municipal services for the community and relieve the county government of the obligation to provide these types of urban services. Due to its demographics (approximately 16% of County residents reside below the poverty line, including of 20% of the children in the County), there is significant State and Federal revenue to assist the County, which are earmarked exclusively for these mandated programs. Excluding funds available for specific uses the County's discretionary revenue is $48.1 million, as compared to total revenues of $167.8 million. About half of the discretionary revenue comes from property taxes and 20% is from sales taxes. Over the last several years, the State has shifted property tax revenues to meet State needs and the County's share of property tax dollars has declined in a decade from about 41.7¢ to about 29.9¢ of each property tax dollar that is collected. All California counties are experiencing fiscal difficulties, resulting largely from State mandates and underfunded programs. These problems cannot and should not be solved by withholding revenues from cities in connection with logical annexations of territory. The County's fiscal year 2003-04 budget presents County services within "functional areas" but does not specifically allocate costs or revenues between (1) Countywide services and (2) "municipal-type" services that benefit the unincorporated area. Mitigating against a property tax exchange agreement is the fact that the State has over a period of years shifted of a larger amount of the 1% property tax revenue to education (and hence the State). Beginning several years ago, thc State, through tax shifts from local governments including counties, cities and special districts to the Education Resource Augmentation Fund (ERAF), has made property taxes unavailable for use by local governments. Nevertheless, it is incumbent upon city and county officials in Mendocino County to move beyond this condition and reach an agreement that to allow logical annexations and their resulting land usc changes to proceed. Without a workable agreement by thc City and County, thc impasse against city annexations will remain. Land use changes will be further delayed with adverse impacts on thc local economy and the ability of the City to implement its General Plan. To reach an agreement regarding thc transfer of a portion of property tax for City annexations, thc City and County need to reach an understanding that upon annexation the City is responsible for specific types of public services that now provided by thc County including law enforcement, street maintenance, public works and land usc regulation. Annexation reduces thc County's potential financial exposure if it were to remain responsible for providing such services in the future. While there has been a pattern in the past allowing urban lV-I DRAFT uses outside of cities (as evidenced by the large percentage of the County population residing in unincorporated areas), there are mutual advantages for the County and City for residents to live within the City. The advantages for residents, in addition to receiving municipal serviccs ~. ill Dc the ability to participate in both city and county elections and political life. The portion of the property tax actually transferred by the County to the City is a minor amount in comparison to the portion of the tax that the County would retain. Property tax revenues will actually increase significantly for the County and City with changes in assessed value that result from anticipated land use changes. It is incumbent upon City and County officials to reach a logical, reasonable and sustainable agreement for an exchange of property taxes to allow annexations to the City to proceed. Ideally there should be a "master" property tax exchange agreement that applies prospectively to all City annexations regardless of whether the annexation area is developed or undeveloped, intended for commercial, residential or other use, has been held under current ownership for some time or has recently changed hands. A master agreement would avoid the cost and delay of calculating and negotiating a separate tax agreement for each annexation. It would instead recognize that portion of property tax revenues that would be transferred to the City with public service responsibilities. IV-2 DRAFT V. RECOMMENDATIONS In consideration of information gathered and evaluated in this recommendations are provided for consideration by the City of Ukiah: study the following 1. The City Council receives a presentation on the procedures entailed in annexing property to the City. 2. The City identify and evaluate areas that would be appropriate for annexation to the City given their location, the City General Plan designation and the interests of the property owners. 3. The City Council consider appointing an ad hoc committee to meet with representatives of the County of Mendocino, including members of the Board of Supervisors, to propose a tax exchange agreement that would permit logical annexations to proceed. V-1 DIL4FT ACKNOWLEDGEMENTS This information to assist the City of Ukiah in developing a strategy for annexation revenue sharing and negotiations with the County of Mendocino was prepared at the direction of City Manager Candace Horsley. Other members of the City of Ukiah staff who have assisted by providing information and responding to questions include Charley Stump, Director of Planning and Community Development and Larry DeKnoblough, Community Services Director. Appreciation is also extended to Jeanette Kroppman in the County Assessor's Office for her help in providing tax rate area, assessed value and mapping assistance and to Frank McMichael, Executive Officer of the Mendocino LAFCO The responsibility for any errors or omissions rests with those who prepared the report, Citygate Associates LLC in conjunction with Braitman & Associates. Acknowledgements- 1 REFERENCES DRAFT DOCUMENTS · City of Ukiah Budget (Fiscal Year 2003--2004) · County of Mendocino Budget Report (Fiscal Year 2003-2004) · Assessor Parcel Maps and Printouts provided by the Mendocino County Assessor INTERVIEWS · Candace Horsley, City Manager, City of Ukiah · Charley Stump, City of Ukiah, Director of Planning & Community Development · Larry DeKnoblough, City of Ukiah, Community Services Director. · Jeanette Kroppman, Mendocino County Assessor's Office · Frank McMichael, Executive Officer of the Mendocino LAFCO References- 1 DRAFT APPENDIX A REVENUE AND TAXATION CODES 99 AND 99.01 APPENDIX A' REVENUE AND TAXATION CODE 99 AND 99.01 DRAFT REVENUE AND TAXATION CODE SECTION 99 (a) For the purposes of the computations required by this chapter: (1) In the case of a jurisdictional change, other than a city incorporation or a formation of a district as defined in Section 2215, the auditor shall adjust the allocation of property tax revenue determined pursuant to Section 96 or 96.1, or the annual tax increment determined pursuant to Section 96.5, for local agencies whose service area or service responsibility would be altered by the jurisdictional change, as determined pursuant to subdivision (b) or (c). (2) In the case of a city incorporation, the auditor shall assign the allocation of property tax revenues determined pursuant to Section 56810 of the Government Code and the adjustments in tax revenues that may occur pursuant to Section 56815 of the Government Code to the newly formed city or district and shall make the adjustment as determined by Section 56810 in the allocation of property tax revenue determined pursuant to Section 96 or 96.1 for each local agency whose service area or service responsibilities would be altered by the incorporation. (3) In the case of a formation of a district as defined in Section 2215, the auditor shall assign the allocation of property tax revenues determined pursuant to Section 56810 of the Government Code to the district and shall make the adjustment as determined by Section 56810 in the allocation of property tax revenue determined pursuant to Section 96 or 96.1 for each local agency whose service area or service responsibilities would be altered by the formation. (b) Upon the filing of an application or a resolution pursuant to the Cortese-Knox Local Government Reorganization Act of 1985 (Division 3 (commencing with Section 56000) of Title 5 of the Government Code), but prior to the issuance of a certificate of filing, the executive officer shall give notice of the filing to the assessor and auditor of each county within which the territory subject to the jurisdictional change is located. This notice shall specify each local agency whose service area or responsibility will be altered by the jurisdictional change. (1) (A) The county assessor shall provide to the county auditor, within 30 days of the notice of filing, a report which identifies the assessed valuations for the territory subject to the jurisdictional change and the tax rate area or areas in which the territory exists. (B) Thc auditor shall estimate the amount of property tax revenue generated within thc territory that is the subject of the jurisdictional change during the current fiscal year. (2) The auditor shall estimate what proportion of thc property tax revenue dctern~ined pursuant to paragraph (1) is attributable to each local agency pursuant to Section 96.1 and Section 96.5. (3) Within 45 days of notice of the filing of an application or resolution, the auditor shall notify the governing body of each local agency whose service area or service responsibility will be altered by the amount of, and allocation factors with respect to, property tax revenue estimated pursuant to paragraph (2) that is subject to a negotiated exchange. Appendix A-1 DRAFT (4) Upon receipt of the estimates pursuant to paragraph (3) the local agencies shall commence negotiations to determine the amount of property tax revenues to be exchanged between and among the local agencies. This negotiation period shall not exceed 60 days. The exchange may be limited to an exchange of property tax revenues from the annual tax increment generated in the area subject to the jurisdictional change and attributable to the local agencies whose service area or service responsibilities will be altered by the proposed jurisdictional change. The final exchange resolution shall specify how the annual tax increment shall be allocated in future years. (5) In the event that a jurisdictional change would affect the service area or service responsibility of one or more special districts, the board of supervisors of the county or counties in which the districts are located shall, on behalf of the district or districts, negotiate any exchange of property tax revenues. Prior to entering into negotiation on behalf of a district for the exchange of property tax revenue, the board shall consult with the affected district. The consultation shall include, at a minimum, notification to each member and executive officer of the district board of the pending consultation and provision of adequate opportunity to comment on the negotiation. (6) Notwithstanding any other provision of law, the executive officer shall not issue a certificate of filing pursuant to Section 56658 of the Government Code until the local agencies included in the property tax revenue exchange negotiation, within the 60-day negotiation period, present resolutions adopted by each such county and city whereby each county and city agrees to accept the exchange of property tax revenues. (7) In the event that the commission modifies the proposal or its resolution of determination, any local agency whose service area or service responsibility would be altered by the proposed jurisdictional change may request, and the executive officer shall grant, 15 days for the affected agencies, pursuant to paragraph (4) to renegotiate an exchange of property tax revenues. Notwithstanding the time period specified in paragraph (4), if the resolutions required pursuant to paragraph (6) are not presented to the executive officer within the 15-day period, all proceedings of the jurisdictional change shall automatically be terminated. (8) In the case of a jurisdictional change that consists of a city' s qualified annexation of unincorporated territory, an exchange of property tax revenues between the city and the county shall be determined in accordance with subdivision (e) if that exchange of revenues is not otherwise determined pursuant to either of the following: (A) Negotiations completed within the applicable period or periods as prescribed by this subdivision. (B) A master property tax exchange agreement among those local agencies, as described in subdivision (d). For purposes of this paragraph, a qualified annexation of unincorporated territory means an annexation, as so described, for which proceedings before the relevant local agency formation commission are initiated, as provided in Section 56651 of the Government Code, on or after January 1, 1998, and on or before January 1. 2005. (9) 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 auditor or Appendix A-2 DRAFT auditors of the exchange of property tax revenues and the auditor or auditors shall make the appropriate adjustments as provided in subdivision (a). (c) Whenever a jurisdictional change is not required to be reviewed and approved by a local agency formation commission, the local agencies whose service area or service responsibilities would be altered by the proposed change, shall give notice to the State Board of Equalization and the assessor and auditor of each county within which the territory subject to the jurisdictional change is located. This notice shall specify each local agency whose service area or responsibility will be altered by the jurisdictional change and request the auditor and assessor to make the determinations required pursuant to paragraphs (1) and (2) of subdivision (b). Upon notification by the auditor of the amount of, and allocation factors with respect to, property tax subject to exchange, the local agencies, pursuant to the provisions of paragraphs (4) and (6) of subdivision (b), shall determine the amount of property tax revenues to be exchanged between and among the local agencies. Notwithstanding any other provision of law, no such jurisdictional change shall become effective until each county and city included in these negotiations agrees, by resolution, to accept the negotiated exchange of property tax revenues. The exchange may be limited to an exchange of property tax revenue from the annual tax increment generated in the area subject to the jurisdictional change and attributable to the local agencies whose service area or service responsibilities will be altered by the proposed jurisdictional change. The final exchange resolution shall specify how the annual tax increment shall be allocated in future years. Upon the adoption of the resolutions required pursuant to this section, the adopting agencies shall notify the auditor who shall make the appropriate adjustments as provided in subdivision (a). Adjustments in property tax allocations made as the result of a city or library district withdrawing from a county free library system pursuant to Section 19116 of the Education Code shall be made pursuant to Section 19116 of the Education Code, and this subdivision shall not apply. (d) With respect to adjustments in the allocation of property taxes pursuant to this section, a county and any local agency or agencies within the county may develop and adopt a master property tax transfer agreement. The agreement may be revised from time to time by the parties subject to the agreement. (e) (1) An exchange of property tax revenues that is required by paragraph (8) of subdivision (b) to be determined pursuant to this subdivision shall be determined in accordance with all of the following: (A) The city and thc county shall mutually select a third-party consultant to perform a comprehensive, independent fiscal analysis, funded in equal portions by the city and the county, that specifics estimates of all tax revenues that will be derived from the annexed territory and thc costs of city and county services with respect to the annexed territory. The analysis shall bc completed within a period not to exceed 30 days, and shall bc based upon the general plan or adopted plans and policies of thc annexing city and the intended uses for the annexed territory. If, upon thc completion of thc analysis period, no exchange of property tax revenues is agreed upon by the city and thc county, subparagraph (B) shall apply. (B) The city and thc county shall mutually select a mediator, funded in equal portions by those agencies, to perform mediation for a period of not to exceed 30 days. If, upon thc Appendix A-3 DRAFT completion of the mediation period, no exchange of property tax revenues is agreed upon by the city and the county, subparagraph (C) shall apply. (C) The city and the county shall mutually select an arbitrator, funded in equal portions by those agencies, to conduct an advisory arbitration with the city and the county for a period of not to exceed 30 days. At the conclusion of this arbitration period, the city and the county shall each present to the arbitrator its last and best offer with respect to the exchange of property tax revenues. The arbitrator shall select one of the offers and recommend that offer to the governing bodies of the city and the county. If the governing body of the city or the county rejects the recommended offer, it shall do so during a public hearing, and shall, at the conclusion of that hearing, make written findings of fact as to why the recommended offer was not accepted. (2) Proceedings under this subdivision shall be concluded no more than 150 days after the auditor provides the notification pursuant to paragraph (3) of subdivision (b), unless one of the periods specified in this subdivision is extended by the mutual agreement of the city and the county. Notwithstanding any other provision of law, except for those conditions that are necessary to implement an exchange of property tax revenues determined pursuant to this subdivision, the local agency formation commission shall not impose any fiscal conditions upon a city's qualified annexation of unincorporated territory that is subject to this subdivision. (f) Except as otherwise provided in subdivision (g), for the purpose of determining the amount of property tax to be allocated in the 1979-80 fiscal year and each fiscal year thereafter for those local agencies that were affected by a jurisdictional change which was filed with the State Board of Equalization after January 1, 1978, but on or before January 1, 1979. The local agencies shall determine by resolution the amount of property tax revenues to be exchanged between and among the affected agencies and notify the auditor of the determination. (g) For the purpose of determining the amount of property tax to be allocated in the 1979-80 fiscal year and each fiscal year thereafter, for a city incorporation that was filed pursuant to Sections 54900 to 54904 after January 1, 1978, but on or before January 1, 1979, the amount of property tax revenue considered to have been received by the jurisdiction for the 1978-79 fiscal year shall be equal to two-thirds of the amount of property tax revenue projected in the final local agency formation commission staff report pertaining to the incorporation multiplied by the proportion that the total amount of property tax revenue received by all jurisdictions within the county for the 1978-79 fiscal year bears to the total amount of property tax revenue received by all jurisdictions within the county for the 1977-78 fiscal year. Except, however, in the event that the final commission report did not specify the amount of property tax revenue projected for that incorporation, the commission shall by October 10, determine pursuant to Section 54790.3 of the Government Code the amount of property tax to be transferred to the city. The provisions of this subdivision shall also apply to the allocation of property taxes for the 1980-81 fiscal year and each fiscal year thereafter for incorporations approved by thc voters in June 1979. (h) For the purpose of the computations made pursuant to this section, in thc casc of a district formation that was filed pursuant to Sections 54900 to 54904, inclusive, of the Government Code after January 1, 1978, but before January 1, 1979, the amount of property tax to be allocated to the district for the 1979-80 fiscal year and each fiscal year thereafter shall be determined pursuant to Section 54790.3 of the Government Code. Appendix A-4 DRAFT (i) For the purposes of the computations required by this chapter, in the case of a jurisdictional change, other than a change requiring an adjustment by the auditor pursuant to subdivision (a), the auditor shall adjust the allocation of property tax revenue determined pursuant to Section 96 or 96.1 or its predecessor section, or the annual tax increment determined pursuant to Section 96.5 or its predecessor section, for each local school district, community college district, or county superintendent of schools whose service area or service responsibility would be altered by the jurisdictional change, as determined as follows: (1) The governing body of each district, county superintendent of schools, or county whose service areas or service responsibilities would be altered by the change shall determine the amount of property tax revenues to be exchanged between and among the affected jurisdictions. This determination shall be adopted by each affected jurisdiction by resolution. For the purpose of negotiation, the county auditor shall furnish the parties and the county board of education with an estimate of the property tax revenue subject to negotiation. (2) In the event that the affected jurisdictions are unable to agree, within 60 days after the effective date of the jurisdictional change, and if all the jurisdictions are wholly within one county, the county board of education shall, by resolution, determine the amount of property tax revenue to be exchanged. If the jurisdictions are in more than one county, the State Board of Education shall, by resolution, within 60 days after the effective date of the jurisdictional change, determine the amount of property tax to be exchanged. (3) Upon adoption of any resolution pursuant to this subdivision, the adopting jurisdictions or State Board of Education shall notify the county auditor who shall make the appropriate adjustments as provided in subdivision (a). (j) For purposes of subdivision (i), the annexation by a community college district of territory within a county not previously served by a community college district is an alteration of service area. The community college district and the county shall negotiate the amount, if any, of property tax revenues to be exchanged. In these negotiations, there shall be taken into consideration the amount of revenue received from the timber yield tax and forest reserve receipts by the community college district in the area not previously served. In no event shall the property tax revenue to be exchanged exceed the amount of property tax revenue collected prior to the annexation for the purposes of paying tuition expenses of residents enrolled in the community college district, adjusted each year by the percentage change in population and the percentage change in the cost of living, or per capita personal income, whichever is lower, less the amount of revenue received by the community college district in the annexed area from the timber yield tax and forest reserve receipts. (k) At any time after a jurisdictional change is effective, any of the local agencies party to thc agreement to exchange property tax revenue may renegotiate the agreement with respect to thc current fiscal year or subsequent fiscal years, subject to approval by all local agencies affected by thc renegotiation. REVENUE AND TAXATION CODE SECTION 99.01. (a) For the purposes of Section 99, in thc case of a jurisdictional change that will result in a special district providing one or more services to an area where those services have not been previously provided by any local agency, the following shall apply: Appendix A-5 DRAFT (1) The special district referred to in this subdivision and each local agency that receives an apportionment of property tax revenue from the area shall be considered local agencies whose service area or service responsibility will be altered by the jurisdictional change. (2) The exchange of property tax among those local agencies shall be limited to property tax revenue from the annual tax increment generated in the area subject to the jurisdictional change and attributable to those local agencies. (3) Notwithstanding the provisions of paragraph (5) of subdivision (b) of Section 99, any special district affected by the jurisdictional change may negotiate on its own behalf, if it so chooses. (4) If a special district involved in the negotiation (other than the district which will provide one or more services to the area where those services have not been previously provided) fails to adopt a resolution providing for the exchange of property tax revenue, the board of supervisors of the county in the area subject to the jurisdictional change is located shall determine the exchange of property tax revenue for that special district. (b) The provisions of subdivisions (a), (b), (c), (d), and (j) of Section 99 not in conflict with this section shall apply. The jurisdictional changes described in subdivisions (e), (f), (g), (h), and (i) of Section 99 shall not be affected by the provisions of this section. Appendix A-6 DRAFT APPENDIX B ALLOCATIONS IN TAX RATE AREAS 154-003 AND -006 Z X Z LU n I1. DRAFT DISCUSSION OF OTHER GOVERNMENTAL AGENCIES The TRAs within the prospective annexation areas lists funds and accounts that are apportioned part of the property tax revenue collected in that area. These are described as follows: · County General Fund This is the primary source of funds for the County of Mendocino and is governed by the County Board of Supervisors. It includes both unincorporated and incorporated territory. · Emergency Services CDF · Road · Accumulated Capital Outlay · Promotion The allocations for these accounts are combined and transferred to the County General Fund. Library This is an independently governed special district that owns and operated public library facilities. It includes both unincorporated and incorporated territory. · ERAF The Educational Resource Augmentation Fund (ERAF) is the account to which the County transfers property tax allocation factors from local taxing agencies for support of local public education. It includes both unincorporated and incorporated territory. · MCFC & WCID The Mendocino County Flood Control and Water Conservation Improvement District is governed by the Board of Supervisors and provides flood control and water conservation services. It includes both unincorporated and incorporated territory. · MCRRFC & WCID Thc Mendocino County Russian River Flood Control and Water Conservation Improvement District is an independent special district, meaning it is not governed by thc County. It includes both unincorporated and incorporated territory. · Russian River Cemetery District This is an independently governed special district that owns and operated a public cemetery. It includes both unincorporated and incorporated territory. Ukiah Valley Fire Protection District Appendix B-2 DRAFT This is independently governed special district that provides fire protection and emergency services for the unincorporated area in the vicinity of the City of Ukiah. Ukiah Valley Sanitation District Governed by a composite board of directors that consists of County Supervisors and Mayor of the City of Ukiah, this district is staffed by the City public works department. It includes territory both within and outside of the City boundaries. Appendix B-3 OVERVIEW OF ANNEXATION PROCEDURES To be Eligible for Annexation Territory Must be Located within the same county as the annexing city and Contiguous to the annexing city Tax Exchange Agreement Annexation cannot proceed until the City Council and Board of Supervisors agree on how to split the property taxes Only "affected agencies" are involved Assessor and Auditor provide assessed value and property tax data for negotiation City Planning Decisions General Plan & Required Prezoning Specific land use entitlements Compliance with CEQA Application to LAFCO Resolution of Application by City Council LAFCO Proposal Questionnaire and Data Map and Legal Description Processing Fee and SBE Fee LAFCO review and approval LAFCO staff report and recommendation Public headng to accept testimony LAFCO can approve, deny or modify LAFCO can waive protest hearing if 100% consent Protest Hearing, if needed Inhabited vs. Uninhabited Annexations Najority Protest Terminates Process Less than a majority, annexation proceeds Election only for inhabited annexations Recordation and Final Filing LAFCO staff records annexation LAFCO staff files with Board of Equalization LAFCO staff issues Notice of Completion Processing Costs to Annex Pre-zoning, entitlement fees Map and legal description expense LAFCO processing fee State Board of Equalization filing fee OVERVIEW OF ANNEXATION ISSUES Why People Choose to Annex · , To secure improved public services '. To participate in city affairs · o To obtain land use approvals · , To avoid being included elsewhere Transfer of Service Responsibilities City becomes responsible for providing municipal services, relieving the County County remains responsible for regional and countywide services (health care, court system, social services) Reallocation of Revenues Many revenue sources support city and county governments · .~ Annexation affects allocation of some revenues Most county revenues are unaffected Effects of Annexation on an Tndividual's Property Taxes Usually no change in property taxes paid Property tax is limited to 1% of assessed value, whether land is in a city or not Land is not re-assessed when it is annexed to a city Annexed areas is subject to fees and charges, similar to other properties in the city 15 Effects of Annexation of Other Governmental Agencies · . Tax exchange limited to agencies whose service area or responsibility will be affected by the change Principle is that taxes follow services Effect of Annexation on Voters After annexing to the city, voters are · Eligible to participate in City elections · Continue to participate in County elections · Are treated equally with all city residents and property owners I?